Document:

NONFUNDED DEFERRED COMPENSATION AND UNIT AWARD PLAN FOR

EXHIBIT 10.1      

 

NONFUNDED DEFERRED COMPENSATION AND UNIT AWARD PLAN FOR

NON--EMPLOYEE DIRECTORS

          1.          Each member of the Board of Directors of Minerals Technologies Inc. (the
"Company") who is not an employee of the Company or of any of its subsidiaries (an
"Independent Director") may elect on or before the last business day of any calendar month to have payment of all or a specified part of all fees payable to him or her for services as a director during the following calendar month and thereafter paid in cash on a current basis or deferred until he or she ceases to be a director of the Company. The form of any such deferral may be either in cash or in units that are valued by reference to, or otherwise based on, or related to, the Company's Common Stock, as described in paragraph 3 ("Units"). An election as to cash or deferral and form of deferral shall be made by written notice to the Secretary of the Company. Any such election may be terminated, or may be modified as to amount of deferral or form of deferral, with regard to fees to be paid
during the following calendar month and thereafter by written notice to the Secretary of the Company on or before the last business day of the calendar month preceding the calendar month in which such fees would otherwise be payable. Modifying the form of deferral of fees previously deferred may be done as of the first day of any calendar month by giving written instructions to the Secretary of the Company before such date. No more than two modifications of the form of deferral, whether as to fees previously deferred or as to fees to be paid, may be made in any calendar year. Units awarded pursuant to paragraph 2 shall not be affected by any such election.

          2. In addition, each Independent Director shall be awarded Units pursuant to the following schedule:

	Each director upon joining the Board shall be awarded 500 Units.
 
	Each director who continues in office on the date of any annual meeting of stockholders shall be awarded 500 Units, effective as of such date.
 
	A director who serves as the chair of the Audit Committee of the Board shall be awarded annually a number of Units valued at $12,000, in quarterly installments of Units valued at $3,000 on the first business day of each calendar quarter.
 
	A director who serves as the chair of the Compensation Committee or of the Corporate Governance Committee of the Board shall be awarded annually a number of Units valued at $9,000, in quarterly installments of Units valued at $2,250 on the first business day of each calendar quarter.
 
	A director who serves as a member of the Audit Committee of the Board shall be awarded annually a number of Units valued at $9,000, in quarterly installments of Units valued at $2,250 on the first business day of each calendar quarter.
 
	A director who serves as a member of the Compensation Committee or of the Corporate Governance Committee of the Board shall be awarded annually a number of Units valued at $6,000, in quarterly installments of Units valued at $1,500 on the first business day of each calendar quarter.
 

          3.          As fees are deferred by each director and as Units are awarded to him or her pursuant to paragraph 2, they shall be credited to a general ledger account (the
"Deferred Directors Fees Account") established for such purpose on the Company's books. At the director's election, the credit for deferred fees shall be in the form of either (a) the dollar amount of the fees deferred or (b) a number of Units, calculated to the nearest thousandth of a Unit, determined by dividing the dollar amount of fees deferred by the closing market price of the Company's Common Stock on the date such fees accrue, as published in The Wall Street Journal in its report of New York Stock Exchange Composite Transactions. In the case of Units awarded pursuant to paragraph 2, the director's account shall be credited with the number of Units so awarded on the date specified in said paragraph.
 

          Dollar balances in a director's account shall be credited with interest at a rate equal to the rate of return for Fund I in the Minerals Technologies Inc. Savings and Investment Plan, compounded monthly. Units in a director's account shall be marked to market monthly.
 

          Whenever a dividend is declared, the number of units in the director's account shall be increased by the result of the following calculations: (i) the number of Units in the director's account multiplied by any cash dividend declared by the Company on a share of its Common Stock, divided by the closing market price of such Common Stock on the date such dividends would otherwise have been paid, as published in The Wall Street Journal in its report of New York Stock Exchange Composite Transactions; and (ii) the number of Units in the director's account multiplied by any stock dividend declared by the Company on a share of its Common Stock. In the event of any change in the number or kind of outstanding shares of Common Stock of the Company including, but not limited to a stock split or splits, other than a stock dividend as provided above, an appropriate adjustment shall be made in the number of units credited to the director's account.

          4.          At least one year before a director ceases to be a director of the Company, the director may elect, or may modify an election previously made, to receive payment of the director's interest in the Deferred Directors Fees Account in a lump sum or in annual installments, and may elect to have such lump sum payment made or annual installment payments begin either in (a) the year in which the electing director ceases to be a director of the Company, or (b) the year following the year in which the electing director ceases to be a director of the Company. Such payment or payments shall be valued as of the first business day of the month in which they are to be made. In the absence of an election, such payments will begin in January of the year following the director's ceasing to be a director of the Company and will be made in five annual installments, valued as of the first business day of each applicable January. In the event a director ceases to be a director of the Company within one year of the director's election or most recent modification of the election provided for herein, then the most recent previous election made by such director at least one year prior to the director's termination of service shall be deemed to remain in effect.

          With respect to all Units in the Deferred Directors Fees Account, the amount payable to the director in each instance shall be determined by multiplying the number of Units by the closing market price of the Company's Common Stock on the valuation date, as provided above in this paragraph 4.

          If the director receives the balance of his or her account in annual installments, the first annual installment shall be a fraction of the value of the balance of the director's account on the valuation prior to the date of such payment, the numerator of which fraction is one (1) and the denominator of which is the total number of installments remaining to be paid at that time. Each subsequent annual installment shall be calculated in the same manner except that the denominator shall be reduced by the number of annual installments that have been previously paid.

          5.          If a director should die before full payment of all amounts credited to his or her account, such amounts shall be paid to the director's designated beneficiary or beneficiaries or to the director's estate, in a single sum payment to be made as soon as practicable following the first valuation date after the director's death. A director may designate one or more beneficiaries (which may be an entity other than a natural person) to receive any payments to be made upon the director's death. At any time, and from time to time, any such designation may be changed or canceled by the director without the consent of any beneficiary. Any such designation, change or cancellation must be by written notice submitted to the Secretary of the Company and shall not be effective until received by the Secretary. If a director designates more than one beneficiary, any payments to such beneficiaries shall be made in equal shares unless the director has designated otherwise. If the director has named no beneficiary, or if all of the designated beneficiaries have predeceased the director, the beneficiary shall be the director's estate.

          6.          A director's election to defer fees shall continue until the director ceases to be a director unless the director earlier terminates the election with respect to future fees by written notice delivered to the Secretary of the Company. Any such notice shall become effective as of the end of the calendar month in which the notice is received by the Secretary. Amounts credited to the account of a director prior to the effective date of the notice shall not be affected thereby and shall be paid to the director in accordance with paragraph 4 (or paragraph 5 in the event of his death) above. The Units awarded to the director pursuant to paragraph 2 shall not be affected by any such election.

          7.          The right of a director to any fees or Units credited to his or her account shall not be subject to assignment by the director. If a director does assign his or her right to any fees or Units credited to his or her account, the Company shall disregard such assignment and discharge its obligation hereunder by making payment as though no such assignment had been made.

          8.           In no event shall any payment of fees deferred pursuant to this Plan or of Units be made with the Company's Common stock.

          9.          This Minerals Technologies Inc. Nonfunded Deferred Compensation and Unit Award Plan for Non-Employee Directors shall be governed and construed in accordance with the laws of the state of Delaware.

 

 

 

(July 1, 2004)Exhibit 10.1

                          SECURITIES PURCHASE AGREEMENT

      This Securities  Purchase Agreement (this "Agreement") is dated as of July
30,  2004,  among  Hemispherx  Biopharma,  Inc.,  a  Delaware  corporation  (the
"Company"), and the purchasers identified on the signature pages hereto (each, a
"Purchaser" and collectively, the "Purchasers").

      WHEREAS,  subject to the terms and  conditions set forth in this Agreement
and pursuant to Section 4(2) of the  Securities  Act (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 certain  securities of the Company,  as more fully described in
this Agreement.

      NOW, THEREFORE, IN CONSIDERATION of the mutual covenants contained in this
Agreement,  and for  other  good and  valuable  consideration  the  receipt  and
adequacy of which are hereby acknowledged,  the Company and the Purchasers agree
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 shall have
the meanings indicated in this Section 1.1:

            "Action"  means any  action,  suit,  inquiry,  notice of  violation,
proceeding   (including  any  partial   proceeding  such  as  a  deposition)  or
investigation pending or threatened in writing against or affecting the Company,
any  Subsidiary or any of their  respective  properties  before or by any court,
arbitrator,   governmental  or  administrative   agency,   regulatory  authority
(federal,  state,  county,  local or foreign),  stock market,  stock exchange or
trading facility.

            "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.

            "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
Securities pursuant to Article II.

            "Closing Date" means the Business Day immediately following the date
on which  all the  conditions  set  forth in  Sections  5.1 and 5.2  hereof  are
satisfied.

<PAGE>

            "Commission" means the Securities and Exchange Commission.

            "Common  Stock"  means the common  stock of the  Company,  $.001 par
value per share,  and any securities  into which such common stock may hereafter
be reclassified.

            "Disclosure Materials" has the meaning set forth in Section 3.1(h).

            "Effective  Date"  means  the date that the  Registration  Statement
required by Section 2(a) of the Registration  Rights Agreement is first declared
effective by the Commission.

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

            "Investment  Amount"  means,  with  respect to each  Purchaser,  the
investment amount indicated below such Purchaser's name on the signature page of
this Agreement.

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

            "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.

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

            "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  Registrable  Securities  (as  defined  in the
Registration Rights Agreement).

            "Registration   Rights  Agreement"  means  the  Registration  Rights
Agreement,  dated as of the date of this  Agreement,  among the  Company and the
Purchasers, in the form of Exhibit B.

            "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.

            "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 to the  Purchasers
at the Closing,  at a purchase price of $2.08 per share (the "Purchase Price Per
Share").

                                       2
<PAGE>

            "Subsidiary" means any subsidiary of the Company that is required to
be listed in Schedule 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 in 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 Pink  Sheets  LLC (or any  similar
organization  or  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 whichever of the New York Stock Exchange, the
American  Stock  Exchange,  the NASDAQ  National  Market or the NASDAQ  SmallCap
Market, on which the Common Stock is listed or quoted for trading on the date in
question.

            "Transaction  Documents"  means this  Agreement,  the Warrants,  the
Registration Rights Agreement, 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 A, which are issuable to the Purchasers at the Closing.

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

                                  ARTICLE II.
                                PURCHASE AND SALE

      2.1  Closing.  Subject  to the  terms  and  conditions  set  forth in this
Agreement,  at the Closing the Company  shall issue and sell to each  Purchaser,
and each Purchaser shall, severally and not jointly,  purchase from the Company,
the Shares and the Warrants representing such Purchaser's  Investment Amount, up
to an aggregate  purchase  price of $7,524,000 for all  Purchasers.  The Closing
shall take place at the  offices of Morgan,  Lewis & Bockius  LLP,  1701  Market
Street, Philadelphia,  PA 19103 on the Closing Date or at such other location or
time as the parties may agree.

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

            (i) a  certificate  evidencing  a  number  of  Shares  equal to such
Purchaser's   Investment  Amount  divided  by  the  Purchase  Price  Per  Share,
registered in the name of such Purchaser;

                                       3
<PAGE>

            (ii) a Warrant,  registered in the name of such Purchaser,  pursuant
to which such Purchaser  shall have the right to acquire the number of shares of
Common Stock equal to 30% of the number of Shares  issuable to such Purchaser in
accordance with Section 2.2(a)(i);

            (iii) the legal  opinion of  Silverman,  Sclar,  Shin & Byrne  PLLC,
counsel to the Company, in agreed form, addressed to the Purchasers;

            (iv) a  certificate  from a duly  authorized  officer  certifying on
behalf of the Company that each of the  conditions  set forth in Section 5.1 has
been satisfied; and

            (v) 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 Investment Amount in United States dollars and
in immediately  available  funds,  by wire transfer to an account  designated in
writing by the Company for such purpose; and

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

                                  ARTICLE III.
                         REPRESENTATIONS AND WARRANTIES

      3.1  Representations  and  Warranties of the Company.  The Company  hereby
makes the following  representations and warranties to each Purchaser and to the
Placement Agent:

            (a) Subsidiaries. The Company has no direct or indirect Subsidiaries
other than those set forth in the SEC Reports listed in Schedule 3.1(a).  Except
as disclosed in the SEC Reports and Schedule 3.1(a), the Company owns,  directly
or indirectly, all of the capital stock of each Subsidiary free and clear of any
and all 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 each
Subsidiary  is an entity  duly  incorporated  or  otherwise  organized,  validly
existing  and in  good  standing  under  the  laws  of the  jurisdiction  of its
incorporation  or  organization  (as  applicable),  with the requisite power and
authority to own and use its  properties and assets and to carry on its business
as currently  conducted.  Neither the Company nor any Subsidiary is in violation
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 each Subsidiary is duly qualified

                                       4
<PAGE>

to conduct  business and is in good standing as a foreign  corporation  or other
entity in each  jurisdiction  in which the nature of the  business  conducted or
property  owned by it makes  such  qualification  necessary,  except  where  the
failure to be so qualified or in good  standing,  as the case may be, could not,
individually  or in the  aggregate,  have or reasonably be expected to result in
(i) an  adverse  effect  on the  legality,  validity  or  enforceability  of any
Transaction  Document,  (ii) a material  and  adverse  effect on the  results of
operations, assets, prospects, business or condition (financial or otherwise) of
the  Company  and the  Subsidiaries,  taken  as a whole,  or  (iii)  an  adverse
impairment to the Company's ability to perform 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 corporate action
on the part of the  Company and no further  corporate  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 as rights to indemnity and contribution may be limited by state or
federal  securities laws or the public policy  underlying  such laws,  except as
enforceability   may  be   limited   by   applicable   bankruptcy,   insolvency,
reorganization,  moratorium or similar laws affecting creditors' and contracting
parties' rights generally and except as enforceability may be subject to general
principles of equity (regardless of whether such enforceability is considered in
a proceeding in equity or at law).

            (d) No  Conflicts.  Except as  disclosed  in  Schedule  3.1(d),  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 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  could  not,
individually or in the aggregate,  have or reasonably be expected to result in a
Material Adverse Effect.

                                       5
<PAGE>

            (e) Filings,  Consents and Approvals. The Company is not required to
obtain any consent,  waiver,  authorization  or order of, give any notice to, or
make any filing or registration  with, any court or other federal,  state, local
or  other  governmental  authority  or  other  Person  in  connection  with  the
execution, delivery and performance by the Company of the Transaction Documents,
other  than:  (i) the filing  with the  Commission  of one or more  Registration
Statements  in  accordance  with the  requirements  of the  Registration  Rights
Agreement, (ii) the filings required by state securities laws, (iii) the filings
required in accordance  with Sections 4.4 and 4.8, and (iv) those that have been
made or obtained prior to the date of this Agreement.

            (f) Issuance of the Securities.  The Securities shall have been 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 shall have reserved from its duly authorized
capital stock the maximum number of shares of Common Stock issuable  pursuant to
this  Agreement  and the  Warrants  in order to issue the Shares and the Warrant
Shares.

            (g) Capitalization. The number of shares and type of all authorized,
issued and  outstanding  capital  stock of the Company as of July 28, 2004 is as
described in the Company's  Quarterly  Report on Form 10-Q for the Quarter ended
March 31, 2004, plus additional  securities disclosed in Schedule 3.1(g). Except
as set forth in Schedule 3.1(g)(i), no securities of the Company are entitled to
preemptive  or similar  rights,  and 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 as disclosed in Schedule
3.1(g)(ii),  there  are  no  outstanding  options,  warrants,  scrip  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,  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. Except under the Transaction Documents or as set forth in Schedule
3.1(g)(iii),  the issue and sale of the Securities will not, immediately or with
the passage of time,  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.  Except  as set  forth  on
Schedule  3.1(h),  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) thereof for the twelve months  preceding the date hereof (or such
shorter  period as the  Company was  required  by law to file such  reports)(the
foregoing  materials  including  all  exhibits  and  schedules  thereto,   being
collectively  referred to herein as the "SEC  Reports"  and,  together  with the
Schedules to this Agreement,  the  "Disclosure  Materials") on a timely basis or
has timely filed a valid extension of

                                       6
<PAGE>

such time of filing and has filed any such SEC Reports  prior to the  expiration
of any such extension. As of their respective dates, the SEC Reports complied in
all  material  respects  with the  requirements  of the  Securities  Act and the
Exchange  Act  and the  rules  and  regulations  of the  Commission  promulgated
thereunder,  and none of the SEC  Reports,  when  filed,  contained  any  untrue
statement of a material  fact or omitted to state a material fact required to be
stated therein or necessary in order to make the statements therein, in 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 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 or as otherwise disclosed in the SEC Reports.

            (i) Material Changes. Since the date of the latest audited financial
statements included within the SEC Reports,  except as specifically disclosed in
the SEC Reports, (i) there has been no event, occurrence or development that has
had or is reasonably  likely 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,  (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  and (C)  Debentures  from the
exercise of Additional Investment Rights (as defined in the SEC Reports),  (iii)
the  Company has not altered  its method of  accounting  or the  identity of its
auditors, (iv) the Company has not declared or made any dividend or distribution
of cash or other property to its stockholders or purchased, redeemed or made any
agreements  to purchase or redeem any shares of its capital  stock,  and (v) the
Company  has not  issued any  equity  securities  to any  officer,  director  or
Affiliate,  except  pursuant to existing  Company stock option or stock purchase
plans. Except as specified in the SEC Reports, 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, (i) there is
no Action which (A) adversely  affects or challenges  the legality,  validity or
enforceability  of any of the  Transaction  Documents or the  Securities  or (B)
could, if there were an unfavorable decision,  individually or in the aggregate,
have or  reasonably  be expected to result in a Material  Adverse  Effect,  (ii)
neither the Company nor any Subsidiary,  nor any director or officer thereof, is
or has been the  subject  of any Action  involving  a claim of  violation  of or
liability  under  federal  or  state  securities  laws or a claim of  breach  of
fiduciary  duty,  and  (iii)  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

                                       7
<PAGE>

registration statement filed by the Company or any Subsidiary under the Exchange
Act or the Securities Act.

            (k)  Employment  Matters.  The Company and the  Subsidiaries  are in
compliance  with all  federal,  state,  local and foreign  laws and  regulations
respecting  employment  and  employment  practices,   terms  and  conditions  of
employment  and wages and hours except where failure to be in  compliance  would
not have a Material  Adverse  Effect.  Neither the Company nor any Subsidiary is
bound by or subject to (and none of the  Company's  or any of its  Subsidiaries'
assets or properties are bound by or subject to) any written or oral, express or
implied, contract,  commitment or arrangement with any labor union, and no labor
union has requested or, to the Company's knowledge,  has sought to represent any
of the employees,  representatives or agents of the Company or the Subsidiaries.
There is no strike or other material labor dispute  involving the Company or the
Subsidiaries pending, or to the Company's knowledge, threatened, that could have
a Material  Adverse  Effect nor is the Company  aware of any labor  organization
activity involving its or its Subsidiaries'  employees. The Company is not aware
that any officer or key employee intends to terminate his or her employment with
the  Company,  nor does the Company have a present  intention  to terminate  the
employment of any officer or key employee.

            (l) Compliance.  Except as disclosed in Schedule 3.1(l), neither the
Company nor any  Subsidiary  (i) is in default  under or in violation of (and no
event has occurred  that has not been waived that,  with notice or lapse of time
or both, would result in a default by the Company or any Subsidiary  under), nor
has the  Company  or any  Subsidiary  received  notice of a claim  that it is in
default  under or that it is in  violation  of,  any  indenture,  loan or credit
agreement  or any other  agreement  or  instrument  to which it is a party or by
which it or any of its  properties  is bound  (whether  or not such  default  or
violation  has been  waived),  (ii) is in  violation  of any order of any court,
arbitrator  or  governmental  body,  or (iii) is or has been in violation of any
statute,  rule or regulation of any governmental  authority,  including  without
limitation  all  foreign,  federal,  state and  local  laws  relating  to taxes,
environmental  protection,  occupational health and safety,  product quality and
safety and employment,  labor matters and gaming matters, except in each case as
could not,  individually or in the aggregate,  have or reasonably be expected to
result in a Material  Adverse  Effect.  The  Company is in  compliance  with the
applicable  requirements  of the  Sarbanes-Oxley  Act of 2002 and the  rules and
regulations  thereunder  promulgated  by  the  Commission,   except  where  such
noncompliance  could 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 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,  individually  or in the  aggregate,  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.

                                       8
<PAGE>

            (n) Title to Assets.  Except as  disclosed in Schedule  3.1(n),  the
Company and the  Subsidiaries  have good and  marketable  title in all  personal
property owned by them that is material to their respective businesses,  in each
case free and clear of all Liens,  except for Liens as do not materially  affect
the value of such property and do not materially interfere with the use made and
proposed to be made of such  property by the Company and the  Subsidiaries.  Any
real  property  and  facilities   held  under  lease  by  the  Company  and  the
Subsidiaries  are held by them under  valid,  subsisting  and, to the  Company's
knowledge,  enforceable  leases of which the Company and the Subsidiaries are in
compliance,  except as could  not,  individually  or in the  aggregate,  have or
reasonably be expected to result in a Material Adverse Effect.

            (o) Patents and Trademarks.  The Company and the Subsidiaries  have,
or have rights to use, all patents, patent applications,  trademarks,  trademark
applications, service marks, trade names, copyrights, licenses and other similar
rights  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,  individually or in the aggregate, have or reasonably be expected
to result in a Material Adverse Effect (collectively, the "Intellectual Property
Rights").  Except as set forth in the SEC  Reports,  neither the Company nor any
Subsidiary has received a written notice that the  Intellectual  Property Rights
used by the Company or any  Subsidiary  violates or infringes upon the rights of
any Person.  Except as set forth in the SEC  Reports,  to the  knowledge  of the
Company,  all such Intellectual  Property Rights are enforceable and there is no
existing  infringement  by another  Person of any of the  Intellectual  Property
Rights.

            (p)  Insurance.  The  Company  and the  Subsidiaries  are insured by
insurers of recognized  financial  responsibility  against such losses and risks
and in such amounts as are prudent and customary in the  businesses in which the
Company and the Subsidiaries  are engaged.  The Company does not believe that it
will be  unable  to renew  its  existing  insurance  coverage  as and when  such
coverage  expires or to obtain similar  coverage from similar insurers as may be
necessary to continue its business without a material increase in cost.

            (q) Transactions With Affiliates and Employees.  Except as set forth
in the SEC Reports or on Schedule  3.1(q),  none of the officers or directors of
the Company and, to the  knowledge of the Company,  none of the employees of the
Company  is  presently  a party  to any  transaction  with  the  Company  or any
Subsidiary  (other than for  services as  employees,  officers  and  directors),
including  any  contract,  agreement  or  other  arrangement  providing  for the
furnishing  of  services  to or by,  providing  for  rental of real or  personal
property to or from,  or  otherwise  requiring  payments to or from any officer,
director or such  employee or, to the  knowledge  of the Company,  any entity in
which any officer,  director, or any such employee has a substantial interest or
is an officer, director, trustee or partner.

            (r) Internal Accounting  Controls.  The Company and the Subsidiaries
maintain  a  system  of  internal  accounting  controls  sufficient  to  provide
reasonable  assurance  that (i)  transactions  are executed in  accordance  with
management's general or specific authorizations,  (ii) transactions are recorded
as necessary to permit  preparation of financial  statements in conformity  with
generally accepted accounting  principles and to maintain asset  accountability,
(iii) access to assets is permitted only in accordance with management's general
or specific

                                       9
<PAGE>

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.

            (s) Solvency.  Based on the financial condition of the Company as of
the Closing (and assuming that the Closing shall have occurred), (i) the Company
will be solvent;  and (ii) the Company will have sufficient  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.  The Company does not intend to
incur debts  beyond its ability to pay such debts as they  mature  (taking  into
account  the  timing  and  amounts of cash to be payable on or in respect of its
debt).

            (t) Certain  Fees.  Except for  dealings  with the  Placement  Agent
(defined  below),  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  (other than
such fees or  commissions  owed by a Purchaser  pursuant  to written  agreements
executed  by  such  Purchaser  which  fees  or  commissions  shall  be the  sole
responsibility of such Purchaser) 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.

            (u)  Certain  Registration  Matters.  Assuming  the  accuracy of the
Purchasers'  representations  and warranties set forth in Section 3.2(b) to (e),
no  registration  under the Securities Act is required for the offer and sale of
the Securities by the Company to the Purchasers under the Transaction Documents.
The Company is eligible to register the resale of its Common Stock for resale by
the  Purchasers  under  Form  S-1  promulgated  under  the  Securities  Act and,
commencing  September 1, 2004, it will be eligible to register the resale of its
Common Stock for resale by the Purchasers  under Form S-3 promulgated  under the
Securities  Act.  Except as set forth in  Schedule  3.1(u),  the Company has not
granted  or agreed to grant to any Person  any  rights  (including  "piggy-back"
registration  rights) to have any securities of the Company  registered with the
Commission or any other governmental authority that have not been satisfied.

            (v) Listing and Maintenance Requirements. Except as specified in the
SEC Reports,  the Company has not, in the two years  preceding  the date hereof,
received notice from any Trading Market on which the Common Stock is or has been
listed or quoted for trading to the effect that the Company is not in compliance
with the listing or maintenance requirements thereof. Except as specified in the
SEC  Reports,  the Company is, and has no reason to believe  that it will not in
the  foreseeable  future  continue  to be, in  compliance  with the  listing and
maintenance  requirements  for  continued  listing  of the  Common  Stock on the
American  Stock  Exchange.  The  issuance and sale of the  Securities  under the
Transaction  Documents  does not  contravene  the rules and  regulations  of the
Trading Market on which the Common Stock is currently  listed or quoted,  and no
approval of the  stockholders  of the  Company  thereunder  is required  for the
Company to issue and deliver to the  Purchasers the maximum number of Securities
contemplated  by  Transaction  Documents,  including  such  as may  be  required
pursuant

                                       10
<PAGE>

to American  Stock  Exchange  Company Guide Section 713  concerning  stockholder
approval  requirements  when  officers and directors  participate  in discounted
private placements.

            (w) 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.

            (x) Application of Takeover  Protections.  The Company has 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  reasonably  be  expected  to  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.

            (y)  No  Additional  Agreements.  The  Company  does  not  have  any
agreement or  understanding  with any Purchaser with respect to the transactions
contemplated  by the  Transaction  Documents  other  than as  specified  in this
Agreement.

            (z) Taxes.  The  Company  and the  Subsidiaries  have timely made or
filed all federal,  state and foreign income and all other tax returns,  reports
and  declarations  required  by any  jurisdiction  to which the  Company or such
Subsidiaries are subject (unless and only to the extent that the Company or such
Subsidiaries  have set aside on their books provisions  reasonably  adequate for
the payment of all unpaid and  unreported  taxes) and have timely paid all taxes
and other  governmental  assessments  and charges  that are  material in amount,
shown or determined to be due on such returns, reports and declarations,  except
those  being  contested  in good  faith,  and  have set  aside  on  their  books
provisions  reasonably  adequate  for  the  payment  of all  taxes  for  periods
subsequent to the periods to which such returns,  reports or declarations apply.
To the  Company's  knowledge,  there are no unpaid  taxes of the Company and the
Subsidiaries in any material amount claimed to be due by the taxing authority of
any  jurisdiction.  Neither  the Company nor the  Subsidiaries  have  executed a
waiver with respect to the statute of limitations  relating to the assessment or
collection of any foreign, federal, state or local tax. None of the Company's or
any of its  Subsidiaries'  tax returns is presently  being audited by any taxing
authority.

            (aa)  Disclosure.  The Company  confirms that neither it, nor to its
knowledge,  any  other  Person  acting on its  behalf  has  provided  any of the
Purchasers  or their  agents or counsel  with any  information  that the Company
believes constitutes 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,  furnished  by or on behalf  of the  Company
(including  the  Company's  representations  and  warranties  set  forth in this
Agreement) are true and correct in all

                                       11
<PAGE>

material  respects 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.

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

            (a)  Organization;  Authority.  Such  Purchaser  is an  entity  duly
organized,  validly  existing  and  in  good  standing  under  the  laws  of the
jurisdiction  of its  organization  with the requisite  corporate or partnership
power  and  authority  to  enter  into  and  to  consummate   the   transactions
contemplated by the applicable  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,  if  such  Purchaser  is  not  a
corporation,  such  partnership,  limited  liability company or other applicable
like  action,  on the part of such  Purchaser.  Each of this  Agreement  and the
Registration Rights Agreement has been duly executed by such Purchaser, and when
delivered by such Purchaser in accordance with terms hereof, will constitute the
valid and legally binding obligation of such Purchaser,  enforceable  against it
in accordance with its terms, except as rights to indemnity and contribution may
be limited by state or federal  securities laws or the public policy  underlying
such laws,  except as  enforceability  may be limited by applicable  bankruptcy,
insolvency, reorganization,  moratorium or similar laws affecting creditors' and
contracting  parties'  rights  generally  and  except as  enforceability  may be
subject  to  general   principles   of  equity   (regardless   of  whether  such
enforceability  is  considered  in a  proceeding  in  equity  or at  law).  Such
Purchaser  was  not  organized  for  the  specific   purpose  of  acquiring  the
Securities.

            (b) Investment Intent. Such Purchaser 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, without
prejudice, however, to such Purchaser's right, subject to the provisions of this
Agreement  and  the  Registration  Rights  Agreement,  at all  times  to sell or
otherwise dispose of all or any part of such Securities pursuant to an effective
registration  statement under the Securities Act or under an exemption from such
registration  and in compliance  with  applicable  federal and state  securities
laws. Subject to the immediately  preceding  sentence,  nothing contained herein
shall be deemed a  representation  or  warranty  by such  Purchaser  to hold the
Securities  for any period of time.  Such  Purchaser is acquiring the Securities
hereunder in the ordinary  course of its business.  Such Purchaser does not have
any  agreement  or  understanding,  directly or  indirectly,  with any Person to
distribute any of the Securities.

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

                                       12
<PAGE>

            (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.

            (e) General Solicitation. No Securities were offered or sold to such
Purchaser by means of any form of general  solicitation or general  advertising,
and in connection  therewith  such  Purchaser did not: (A) receive or review any
advertisement,  article,  notice or other communication published in a newspaper
or magazine or similar  media or  broadcast  over  television  or radio  whether
closed  circuit,  or generally  available;  or (B) attend any seminar meeting or
industry  investor  conference  whose  attendees  were  invited  by any  general
solicitation or general advertising.

            (f) Access to Information.  Such Purchaser  acknowledges that it has
reviewed the Disclosure  Materials and has been afforded (i) the  opportunity to
ask such questions as it has deemed  necessary of, and to receive  answers from,
representatives  of the  Company  concerning  the  terms and  conditions  of the
offering  of the  Securities  and the  merits  and  risks  of  investing  in the
Securities;  (ii) access to information  about the Company and the  Subsidiaries
and their  respective  financial  condition,  results of  operations,  business,
properties,  management  and  prospects  sufficient to enable it to evaluate its
investment; and (iii) the opportunity to obtain such additional information that
the Company possesses or can acquire without unreasonable effort or expense that
is  necessary  to make an  informed  investment  decision  with  respect  to the
investment.  Neither such inquiries nor any other investigation  conducted by or
on behalf of such  Purchaser or its  representatives  or counsel  shall  modify,
amend or  affect  such  Purchaser's  right to rely on the  truth,  accuracy  and
completeness of the Disclosure  Materials and the Company's  representations and
warranties contained in the Transaction Documents.

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

            (h) Residency.  Such Purchaser is a resident of the jurisdiction set
forth immediately below such Purchaser's name on the signature pages hereto.

            (i) Certain Trading  Activities.  Such Purchaser has not directly or
indirectly,  nor  has  any  Person  acting  on  behalf  of or  pursuant  to  any
understanding  with such  Purchaser,  engaged  in (i) any Short  Sales  (defined
below)  involving  the  Company's   securities   during  the  30  calendar  days
immediately preceding the date hereof or (ii) any transactions in any securities
of the  Company  following  the date on which such  Purchaser  was aware of this
Transaction (other than this Transaction and other than transfers by a Purchaser
to its  affiliated  funds  which

                                       13
<PAGE>

affiliated  funds have not engaged in any such  transactions).  For  purposes of
this Section, "Short Sales" include, without limitation, all types of direct and
indirect stock pledges,  forward sale contracts,  options,  puts,  calls,  short
sales, swaps and similar  arrangements  (including on a total return basis), and
sales and other transactions  through non-US broker dealers or foreign regulated
brokers  having the effect of hedging the  securities or  investment  made under
this Agreement.

            (j)  Acknowledgements  Regarding  Placement  Agent.  Such  Purchaser
acknowledges that Jefferies & Company, Inc. (the "Placement Agent") is acting as
the  Company's  placement  agent for the sale of the  securities  being  offered
hereby and will be  compensated  as set forth in Schedule  3.2(j)  solely by the
Company for action in such capacity.

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 (a)  Securities  may only be  disposed  of  pursuant  to an  effective
registration  statement  under the Securities Act, to the Company or pursuant to
an available  exemption from or in a transaction not subject to the registration
requirements of the Securities Act, and in compliance with any applicable  state
securities  laws. In connection  with any transfer of the 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.

            (b)   Certificates   evidencing  the  Securities  will  contain  the
following  legend,  so long as is  required  by this  Section  4.1(b) or Section
4.1(c):

            [NEITHER THESE SECURITIES NOR THE SECURITIES  ISSUABLE UPON EXERCISE
            OF THESE SECURITIES HAVE BEEN REGISTERED] [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
            TRANSACTION  NOT SUBJECT TO, THE  REGISTRATION  REQUIREMENTS  OF THE
            SECURITIES ACT AND IN ACCORDANCE  WITH APPLICABLE  STATE  SECURITIES
            LAWS AS EVIDENCED BY A

                                       14
<PAGE>

            LEGAL  OPINION OF  COUNSEL TO THE  TRANSFEROR  TO SUCH  EFFECT,  THE
            SUBSTANCE OF WHICH SHALL BE  REASONABLY  ACCEPTABLE  TO THE COMPANY.
            [THESE SECURITIES AND THE SECURITIES ISSUABLE UPON EXERCISE OF THESE
            SECURITIES]  [THESE  SECURITIES] MAY BE PLEDGED IN CONNECTION WITH A
            BONA FIDE MARGIN ACCOUNT SECURED BY SUCH SECURITIES.

            The Company  acknowledges  and agrees that a Purchaser may from time
to  time  pledge,  and/or  grant  a  security  interest  in  some  or all of the
Securities,  in accordance with applicable  securities laws,  pursuant to a bona
fide margin  agreement  in  connection  with a bona fide margin  account and, if
required  under the terms of such  agreement  or  account,  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 or consent of the Company
and no legal opinion of legal  counsel to the pledgee,  secured party or pledgor
shall be required in connection  with the pledge,  but such legal opinion may be
required in  connection  with a  subsequent  transfer  following  default by the
Purchaser  transferee of the pledge. No notice shall be required of such pledge.
At the  appropriate  Purchaser's  expense,  the Company will execute and deliver
such  reasonable  documentation  as a pledgee or secured party of Securities may
reasonably  request in  connection  with a pledge or transfer of the  Securities
including the preparation and filing of any required prospectus supplement under
Rule  424(b)(3)  of the  Securities  Act or other  applicable  provision  of the
Securities  Act  to  appropriately  amend  the  list  of  Selling   Stockholders
thereunder.

            (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 Shares and Warrant Shares is effective  under the Securities Act,
or (ii)  following  any sale of such Shares or Warrant  Shares  pursuant to Rule
144, or (iii) while such Shares or Warrant  Shares are  eligible  for sale under
Rule  144(k),   or  (iv)  if  such  legend  is  not  required  under  applicable
requirements  of the  Securities  Act (including  judicial  interpretations  and
pronouncements  issued by the Staff of the Commission).  The Company shall cause
its counsel to issue any legal opinion or instruction  required by the Company's
transfer  agent to  comply  with the  requirements  set  forth in this  Section.
Following  the  Effective  Date or at such earlier time as a legend is no longer
required  for the Shares and  Warrant  Shares  under this  Section  4.1(c),  the
Company  will,  no later than three  Trading  Days  following  the delivery by a
Purchaser  to the  Company  or the  Company's  transfer  agent of a  certificate
representing Shares or Warrant Shares containing a restrictive  legend,  deliver
or cause to be  delivered  to such  Purchaser a  certificate  representing  such
Shares or Warrant  Shares that is free from all  restrictive  and other legends.
The Company may not make any notation on its records or give instructions to any
transfer  agent of the Company  that  enlarge the  restrictions  on transfer set
forth in this Section  except as it may  reasonably  determine  are necessary or
appropriate to comply or to ensure  compliance  with those  applicable laws that
are enacted or modified after the Closing.

                                       15
<PAGE>

      4.2  Furnishing  of  Information.  As  long  as  any  Purchaser  owns  the
Securities,  the  Company  covenants  to timely  file (or obtain  extensions  in
respect  thereof  and file  within the  applicable  grace  period)  all  reports
required  to be filed by the  Company  after  the date  hereof  pursuant  to the
Exchange Act. As long as any Purchaser  owns  Securities,  if the Company is not
required to file reports  pursuant to such laws,  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 Shares and Warrant
Shares  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 Shares and
Warrant  Shares  without  registration  under  the  Securities  Act  within  the
limitation of the exemptions provided by Rule 144.

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

      4.4 Securities Laws Disclosure;  Publicity. The morning after the Closing,
the Company shall issue a press release reasonably  acceptable to the Purchasers
disclosing the consummation of the transactions  contemplated  hereby and file a
Current  Report on Form 8-K  disclosing  the  consummation  of the  transactions
contemplated  hereby. In addition,  the Company will make such other filings and
notices in the manner and time required by the Commission and the Trading Market
on which the Common Stock is listed.  Notwithstanding the foregoing, the Company
shall not publicly  disclose the name of any  Purchaser,  or include the name of
any  Purchaser in any filing with the  Commission  (other than the  Registration
Statement  and any  exhibits to filings made in respect of this  transaction  in
accordance  with  periodic  filing  requirements  under the Exchange Act) or any
regulatory  agency or Trading Market,  without the prior written consent of such
Purchaser,  except to the extent such  disclosure  is required by law or Trading
Market regulations,  in which case the Company shall provide the Purchasers with
prior notice of such disclosure.

      4.5  Indemnification of Purchasers.  In addition to the indemnity provided
in the Registration  Rights  Agreement,  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  (collectively,  "Losses") that any
such  Purchaser  Party may  suffer or incur as a result  of or  relating  to any
misrepresentation,   breach  or  inaccuracy  of  any  representation,  warranty,
covenant  or  agreement  made by the  Company in any  Transaction  Document.  In
addition to the indemnity  contained  herein,  the Company will  reimburse  each
Purchaser Party for its reasonable legal and other expenses  (including the cost
of any

                                       16
<PAGE>

investigation,  preparation  and travel in  connection  therewith)  incurred  in
connection therewith, as such expenses are incurred.

      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  (including  agreement  not to  trade  Company  securities  while in
possession 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 research and  development,  clinical trials and
other  general  working  capital  purposes.  In addition,  a portion of such net
proceeds  may also be used to  reduce  the  Company's  outstanding  indebtedness
pursuant to its outstanding Senior Convertible Debentures that have not yet been
converted.  As of July 28, 2004, the outstanding  indebtedness  pursuant to such
Debentures that have not been converted was $8,307,806.

      4.8 Listing of Securities.  The Company shall:  (i) in the time and manner
required by each Trading Market on which the Common Stock is listed, prepare and
file with such Trading Market an additional shares listing application  covering
the Shares  and  Warrant  Shares,  (ii) take all steps  necessary  to cause such
shares to be  approved  for listing on each  Trading  Market on which the Common
Stock is listed as soon as possible thereafter,  (iii) provide to each Purchaser
evidence of such  listing,  and (iv) maintain the listing of such shares on each
such Trading Market or another eligible securities market.

                                   ARTICLE V.
                               CLOSING CONDITIONS

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

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

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

                                       17
<PAGE>

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

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

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

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

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

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

                                   ARTICLE VI.
                                  MISCELLANEOUS

      6.1 Fees and Expenses.  At the Closing,  the Company  shall  reimburse the
Placement  Agent up to $50,000 of reasonable fees and  disbursements  of Morgan,
Lewis &  Bockius  LLP in  connection  with the  preparation  of the  Transaction
Documents, it being understood that Morgan, Lewis & Bockius LLP has not rendered
any legal advice to the Company in connection with the transactions contemplated
hereby and that the Company has relied for such matters on the advice of its own
counsel. Except as specified above or in the Registration Rights 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,

                                       18
<PAGE>

execution,  delivery and performance of the Transaction  Documents.  The Company
shall pay all stamp and other  taxes and duties  levied in  connection  with the
sale of the Securities.

      6.2  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.

      6.3 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 in this Section  prior to 5:00 p.m. (New York time) on a Business Day,
(b) the next  Business  Day after the date of  transmission,  if such  notice or
communication  is delivered via facsimile at the facsimile  number  specified in
this  Section on a day that is not a Business  Day or later than 5:00 p.m.  (New
York time) on any date and earlier than 11:59 p.m. (New York time) on such date,
(c) the Business 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 follows:

            If to the Company:

                  Hemispherx Biopharma, Inc.
                  1617 JFK Boulevard
                  Suite 660
                  Philadelphia, PA 19103
                  Telephone: (215) 998-8000
                  Facsimile: (215) 998-1739
                  Attention: Chief Executive Officer

            With a copy to:

                  Ransom W. Etheridge, Esq.
                  2610 Potters Road
                  Suite 200
                  Virginia Beach, VA  23452
                  Telephone: (757-486-0599
                  Facsimile: (757) 486-0792

                                       19
<PAGE>

      If to a Purchaser:    To the address set forth under such Purchaser's name
                            on the signature pages hereof;

or such other  address as may be designated  in writing  hereafter,  in the same
manner, by such Person.

      6.4 Amendments;  Waivers.  No provision of this Agreement may be waived or
amended except in a written  instrument  signed by the Company and Purchasers of
not less than a majority of the Shares issued or issuable under this  Agreement.
No waiver of any default with respect to any provision, condition or requirement
of this Agreement  shall be deemed to be a continuing  waiver in the future or a
waiver of any subsequent  default or a waiver of any other provision,  condition
or  requirement  hereof,  nor  shall any delay or  omission  of either  party to
exercise  any right  hereunder  in any manner  impair the  exercise  of any such
right.  Notwithstanding the foregoing,  the Company may agree to sell Securities
under this Agreement to one or more additional  purchasers (each, an "Additional
Purchaser").  Each  Additional  Purchaser shall execute and deliver prior to the
Closing a counterpart  signature page to this Agreement and specify therein such
additional  purchaser's  Investment  Amount.  Upon execution of the  counterpart
signature page by such Additional Investor,  each such purchaser shall be deemed
a  "Purchaser"  for  purposes  of, and shall  become a party to this  Agreement,
without the need for an amendment hereto.

      6.5  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. This Agreement
shall be construed as if drafted  jointly by the parties,  and no presumption or
burden of proof shall arise favoring or  disfavoring  any party by virtue of the
authorship  of any  provisions  of  this  Agreement  or  any of the  Transaction
Documents.

      6.6 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 the  Purchasers.  Any Purchaser may assign
any or all of its  rights  under  this  Agreement  to any  Person  to whom  such
Purchaser  assigns or transfers any Securities,  provided such transferee agrees
in  writing to be bound,  with  respect to the  transferred  Securities,  by the
provisions  hereof  that apply to the  "Purchasers"  and such  transferee  is an
accredited investor.

      6.7 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.

      6.8 Governing Law. All questions  concerning the  construction,  validity,
enforcement  and  interpretation  of this  Agreement  shall be  governed  by and
construed  and enforced in  accordance  with the  internal  laws of the State of
Delaware,  without  regard to the  principles of

                                       20
<PAGE>

conflicts of law thereof. Each party agrees that all 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, employees or agents) may be commenced
in the state and federal  courts sitting in the State of Delaware (the "Delaware
Courts").  Each party hereto  hereby  irrevocably  submits to the  non-exclusive
jurisdiction  of the  Delaware  Courts  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 the any of the
Transaction Documents),  and hereby irrevocably waives, and agrees not to assert
in  any  Proceeding,  any  claim  that  it is  not  personally  subject  to  the
jurisdiction  of any such  Delaware  Court,  or that  such  Proceeding  has been
commenced  in an  improper  or  inconvenient  forum.  Each party  hereto  hereby
irrevocably  waives  personal  service of process and consents to process  being
served in any such  Proceeding  by  mailing a copy  thereof  via  registered  or
certified  mail or overnight  delivery (with evidence of delivery) to such party
at the address in effect for notices to it under this  Agreement and agrees that
such service shall constitute good and sufficient  service of process and notice
thereof.  Nothing contained herein shall be deemed to limit in any way any right
to serve  process in any manner  permitted  by law.  Each  party  hereto  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 a Proceeding to enforce any provisions of a Transaction Document,  then
the prevailing  party in such Proceeding  shall be reimbursed by the other party
for its  attorney's  fees  and  other  costs  and  expenses  incurred  with  the
investigation, preparation and prosecution of such Proceeding.

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

      6.10   Execution.   This   Agreement  may  be  executed  in  two  or  more
counterparts,  all of which when taken  together shall be considered one and the
same agreement and shall become effective when  counterparts have been signed by
each party and  delivered  to the other  party,  it being  understood  that both
parties need not sign the same  counterpart.  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.

      6.11  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 therefor,  and upon so
agreeing, shall incorporate such substitute provision in this Agreement.

      6.12   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 therefor, a new certificate
or instrument,  but only upon receipt of evidence reasonably

                                       21
<PAGE>

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.  If a
replacement certificate or instrument evidencing any Securities is requested due
to a  mutilation  thereof,  the Company may require  delivery of such  mutilated
certificate  or  instrument  as a  condition  precedent  to  any  issuance  of a
replacement.

      6.13  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.

      6.14 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 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.

      6.15  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  obligations  of any  other
Purchaser  under any  Transaction  Document.  The decision of each  Purchaser to
purchase Securities pursuant to the Transaction  Documents has been made by such
Purchaser  independently of any other Purchaser.  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  acknowledges  that no other  Purchaser  has  acted as agent  for such
Purchaser  in  connection  with  making  its  investment  hereunder  and that no
Purchaser  will  be  acting  as  agent  of such  Purchaser  in  connection  with
monitoring  its  investment in the  Securities or enforcing its rights under the
Transaction Documents. Each Purchaser shall be entitled to independently protect
and enforce its rights,  including without  limitation the rights arising out of
this Agreement or out of the other  Transaction  Documents,  and it shall not be
necessary  for any other  Purchaser to be joined as an  additional  party in any
proceeding for such purpose.

                                       22
<PAGE>

                   [REMAINDER OF PAGE INTENTIONALLY LEFT BLANK
                             SIGNATURE PAGES FOLLOW]

                                       23
<PAGE>

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

                                      Hemispherx Biopharma, Inc.

                                      By:_______________________________________
                                      Name:
                                      Title:

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

                  SIGNATURE PAGE TO HEMISPHERX BIOPHARMA, INC.
                          SECURITIES PURCHASE AGREEMENT

<PAGE>

            IN WITNESS  WHEREOF,  the  parties  have  executed  this  Securities
Purchase Agreement as of the date first written above.

                                      [______________________]

                                      By:_______________________________________
                                      Name:
                                      Title:

                                      Address for Notice:

                                                [___________________]
                                                [___________________]
                                                [___________________]

                                                Facsimile No.:  [_____________]

                                                Attn.:

                                      With a copy to: [___________________]
                                                      [___________________]
                                                      [___________________]

                                      Facsimile No.: [___________________]

                                                      Attn:

                                      Jurisdiction: [___________________]

                                      Investment Amount: $[________]

                  SIGNATURE PAGE TO HEMISPHERX BIOPHARMA, INC.
                          SECURITIES PURCHASE AGREEMENT

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