Document:

Exhibit 10.8

SECURITIES PURCHASE AGREEMENT

        SECURITIES PURCHASE AGREEMENT (this "Agreement"),
dated as of June 28, 2005, by and among Minrad International, Inc., a Delaware
corporation (the "Company"), and the investors listed on the Schedule of
Buyers attached hereto as a buyer subsequent to June 21, 2005 (individually, a "Buyer"
and collectively, the "Buyers").

        WHEREAS:

        A.    The Company and each Buyer is executing and delivering this
Agreement in reliance upon the exemption from securities registration afforded
by Section 4(2) of the Securities Act of 1933, as amended (the "1933 Act"),
and Rule 506 of Regulation D ("Regulation D") as promulgated by the
United States Securities and Exchange Commission (the "SEC") under the
1933 Act.

        B.    Each Buyer wishes to purchase, and the Company wishes to
sell, upon the terms and conditions stated in this Agreement, (i) that aggregate
number of shares of the Company's Series A Convertible Preferred Stock, $0.25
par value per share (the "Preferred Stock") set forth opposite such
Buyer's name in column (3) on the Schedule of Buyers (the "Shares"),
convertible into that number of additional shares of the Company's Common Stock,
$0.01 par value per share (the "Common Stock") set forth opposite such
Buyer's name in column (3a) on the Schedule of Buyers attached hereto (which
aggregate number for all Buyers shall be 612,500 shares of Common Stock) (as
converted, collectively, the "Conversion Shares"), having the rights,
restrictions, privileges and preferences as set forth in the form of the
Certificate of Designations, Preferences and Rights of Series A Convertible
Preferred Stock (the "Certificate of Designations") attached hereto as 
Exhibit G and (ii) Series R Warrants, in substantially the form attached
hereto as Exhibit A (the "Warrants"), to acquire up to that number
of additional shares of Common Stock set forth opposite such Buyer's name in
column (4) on the Schedule of Buyers attached hereto (which aggregate number for
all Buyers shall be 306,500 shares of Common Stock) (as exercised, collectively,
the "Warrant Shares"). As indicated on the Schedule of Buyers, certain of
the other buyers have purchased Preferred Stock on June 10, 2005 and on June 21,
2005.

        C.    The Shares may be entitled to dividends, which at the option
of the Company, subject to certain conditions, may be paid in shares of Common
Stock (the "Dividend Shares").

        D.

   On or prior to the Closing, the parties hereto shall execute
and deliver a Registration Rights Agreement, substantially in the form attached
hereto as Exhibit B (as amended or modified from time to time in
accordance with its terms, the "Registration Rights Agreement"), pursuant
to which the Company has agreed to provide certain registration rights with
respect to the Shares, Warrant Shares under the 1933 Act and the rules and
regulations promulgated thereunder, and applicable state securities laws.

        E.    The Shares, the Conversion Shares, the Warrants and the
Warrant Shares collectively are referred to herein as the "Securities".

        NOW, THEREFORE, the Company and each Buyer hereby agree
as follows:

        1. PURCHASE AND SALE OF SHARES AND
WARRANTS.

            (a) Purchase of Shares and Warrants.

                (i) Shares and Warrants. Subject to the satisfaction
(or waiver) of the conditions set forth in Sections 6 and 7 below, the Company
shall issue and sell to each Buyer, and each Buyer severally, but not jointly,
agrees to purchase from the Company on the Closing Date (as defined below), (A)
that number of Shares as is set forth opposite such Buyer's name in column (3)
on the Schedule of Buyers and (B) one or more Series R Warrants to acquire up to
that number of Warrant Shares as is set forth opposite such Buyer's name in
column (4) on the Schedule of Buyers.

                (ii) Purchase Price. The aggregate purchase price for
the Shares and the Warrants to be purchased by each Buyer at the Closing (the "Purchase
Price") shall be the amount set forth opposite such Buyer's name in column
(6) of the Schedule of Buyers.

            (b) Form of Payment. On the
Closing Date, (i) each Buyer shall pay its Purchase Price to the Company for the
Shares and the Warrants to be issued and sold to such Buyer at the Closing, by
wire transfer of immediately available funds in accordance with the Company's
written wire instructions, and (ii) the Company shall deliver to each Buyer (A)
the Shares (represented by one or more certificates in the number and
denominations as such Buyer shall request) which such Buyer is then purchasing,
(B) the Warrants (allocated in the amounts as such Buyer shall request) such
Buyer is purchasing, in each case duly executed on behalf of the Company and
registered in the name of such Buyer or its designee and (C) the Closing
Exercise Shares (represented by one or more certificates in the number and
denominations as such Buyer shall request) such Buyer is purchasing, in each
case duly executed on behalf of the Company and registered in the name of such
Buyer or its designee.

            (c) Closing. The date and time (the "Closing Date")
of the consummation of the transactions contemplated by Section 1(a)(ii) above
for Subsequent Buyers (the "Closing") shall be on or before July 1, 2005,
after notification of satisfaction (or waiver) of the conditions to the Closing
set forth in Sections 6 and 7 below (or such other date as is mutually agreed to
by the Company and holders of at least a majority of the Shares issued and,
prior to the Closing, issuable hereunder (the "Majority Buyers"), KeyBanc
Capital Markets, a division of McDonald Investments Inc. ("KeyBanc"), and
Chadbourn Securities, Inc. ("Chadbourn"), in their capacity as agents of
the Company in connection with the sale of the Shares and Warrants contemplated
hereby (each a "Co-Placement Agent" and collectively, the "Co-Placement Agents")
at the offices of Hodgson Russ LLP. For purposes of this Agreement, "Business
Day" means any day other than Saturday, Sunday or other day on which the
Commission is closed or commercial banks in the City of New York are authorized
or required by law to remain closed.

        2. BUYERS' REPRESENTATIONS AND
WARRANTIES.

                Each Buyer represents and warrants with respect to only
itself that:

                (a) No Sale or Distribution.
Such Buyer (i) is acquiring the Shares, (ii) upon conversion of the Shares owned
by it, will acquire the Conversion Shares then issuable, (iii) upon payment of
any Dividend Shares (as defined in the Certificate of Designations), will

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 acquire such Dividend Shares, (iv) is acquiring the Warrants and, (v) upon
exercise of the Warrants, will acquire the Warrant Shares issuable upon exercise
of the Warrants, in each case for its own account for investment only, not as
nominee or agent, and not with a view towards, or for resale in connection with,
the sale or distribution thereof, except pursuant to sales registered or
exempted under the 1933 Act; provided, however, that by making the
representations herein, such Buyer does not agree to hold any of the Securities
for any minimum or other specific term and reserves the right to dispose of the
Securities at any time in accordance with or pursuant to a registration
statement or an exemption under the 1933 Act. Such Buyer is acquiring the
Securities hereunder in the ordinary course of its business. Such Buyer does not
presently have any agreement or understanding, directly or indirectly, with any
Person to distribute any of the Securities. For the purpose of this
Agreement, "Person" shall mean any individual, corporation, partnership
(general or limited), limited liability company, firm, joint venture,
association, joint-stock company, trust, estate, unincorporated organization or
government or any department or agency thereof.

                (b) Accredited Investor Status.
Such Buyer is an "accredited investor" as that term is defined in Rule 501(a) of
Regulation D.

                (c) Reliance on Exemptions.
Such Buyer understands that the Securities are being offered and sold to it in
reliance on specific exemptions from the registration requirements of United
States federal and state securities laws and that the Company is relying in part
upon the truth and accuracy of, and such Buyer's compliance with, the
representations, warranties, agreements, acknowledgments and understandings of
such Buyer set forth herein in order to determine the availability of such
exemptions and the eligibility of such Buyer to acquire the Securities.

                (d) Information. Such Buyer and
its advisors, if any, have been furnished with all materials relating to the
business, finances and operations of the Company and materials relating to the
offer and sale of the Securities, which have been requested by such Buyer. Such
Buyer and its advisors, if any, have been afforded the opportunity to ask
questions of the Company. Neither such inquiries nor any other due diligence
investigations conducted by such Buyer or its advisors, if any, or its
representatives shall modify, amend or affect such Buyer's right to rely on the
Company's representations and warranties contained herein. Such Buyer
understands that its investment in the Securities involves a high degree of
risk. Such Buyer has sought such accounting, legal and tax advice as it has
considered necessary to make an informed investment decision with respect to its
acquisition of the Securities.

                (e) No Governmental Review.
Such Buyer understands that no United States federal or state agency or any
other government or governmental agency has passed on or made any recommendation
or endorsement of the Securities or the fairness or suitability of the
investment in the Securities nor have such authorities passed upon or endorsed
the merits of the offering of the Securities.

                (f) Transfer or Resale. Such
Buyer understands that except as provided in the Registration Rights Agreement:
(i) the Securities have not been and are not being registered under the 1933 Act
or any state securities laws, and may not be offered for sale, sold, assigned or
transferred unless (A) offered for sale, sold, assigned or transferred to an
affiliate of such Buyer,  

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 (B) subsequently registered thereunder, (C) such Buyer
shall have delivered to the Company an opinion of counsel, in a generally
acceptable form, to the effect that such Securities to be sold, assigned or
transferred may be sold, assigned or transferred pursuant to an exemption from
such registration, or (D) such Buyer provides the Company with reasonable
assurance that such Securities can be sold, assigned or transferred pursuant to
Rule 144 or Rule 144A promulgated under the 1933 Act, as amended, (or a
successor rule thereto) (collectively, "Rule 144"); (ii) any sale of the
Securities made in reliance on Rule 144 may be made only in accordance with the
terms of Rule 144 and further, if Rule 144 is not applicable, any resale of the
Securities under circumstances in which the seller (or the Person through whom
the sale is made) may be deemed to be an underwriter (as that term is defined in
the 1933 Act) may require compliance with some other exemption under the 1933
Act or the rules and regulations of the SEC thereunder; and (iii) neither the
Company nor any other Person is under any obligation to register the Securities
under the 1933 Act or any state securities laws or to comply with the terms and
conditions of any exemption thereunder.

                (g) Legends. Such Buyer
understands that, until such time as the resale of the Securities have been
registered under the 1933 Act as contemplated by the Registration Rights
Agreement, the certificates or other instruments representing the Securities,
except as set forth below, shall bear any legend as required by the "blue sky"
laws of any state and a restrictive legend in substantially the following form
(and a stop-transfer order may be placed against transfer of such instruments):

        
        
          
        [NEITHER THE ISSUANCE AND SALE OF THE SECURITIES
        REPRESENTED BY THIS CERTIFICATE NOR THE SECURITIES INTO WHICH THESE
        SECURITIES ARE [EXERCISABLE] [CONVERTIBLE] HAVE BEEN][THE
        SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN]
        REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR APPLICABLE
        STATE SECURITIES LAWS. THE SECURITIES MAY NOT BE OFFERED FOR SALE, SOLD,
        TRANSFERRED OR ASSIGNED (I) IN THE ABSENCE OF (A) AN EFFECTIVE
        REGISTRATION STATEMENT FOR THE SECURITIES UNDER THE SECURITIES ACT OF
        1933, AS AMENDED, OR (B) AN OPINION OF COUNSEL, IN A GENERALLY
        ACCEPTABLE FORM, THAT REGISTRATION IS NOT REQUIRED UNDER SAID ACT OR
        (II) UNLESS SOLD PURSUANT TO RULE 144 OR RULE 144A UNDER SAID ACT.
        NOTWITHSTANDING THE FOREGOING, THE SECURITIES MAY BE PLEDGED IN
        CONNECTION WITH A BONA FIDE MARGIN ACCOUNT OR OTHER LOAN OR FINANCING
        ARRANGEMENT SECURED BY THE SECURITIES.

          

The legend set forth above shall be removed and the Company
shall issue a certificate without such legend to the holder of the Securities
upon which it is stamped, if, unless otherwise required by state securities
laws, (i) such Securities are registered for resale under the 1933 Act, (ii) in
connection with a sale, assignment or other transfer, such holder provides the
Company with an opinion of counsel, in a generally acceptable form, to the
effect that such sale, assignment or transfer of the Securities may be made
without registration under the applicable requirements of 

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the 1933 Act, or (iii) such holder provides the Company with
reasonable assurance that the Securities will be sold, assigned or transferred
pursuant to Rule 144 or Rule 144A.

                (h) Validity; Enforcement. This
Agreement and the Registration Rights Agreement have been duly and validly
authorized, executed and delivered on behalf of such Buyer and shall constitute
the legal, valid and binding obligations of such Buyer enforceable against such
Buyer in accordance with their respective terms, except as such enforceability
may be limited by general principles of equity or to applicable bankruptcy,
insolvency, reorganization, moratorium, liquidation and other similar laws
relating to, or affecting generally, the enforcement of applicable creditors'
rights and remedies.

                (i) No Conflicts. The
execution, delivery and performance by such Buyer of this Agreement and the
Registration Rights Agreement and the consummation by such Buyer of the
transactions contemplated hereby and thereby will not (i) result in a violation
of the organizational documents of such Buyer or (ii) conflict with, or
constitute a default (or an event which with notice or lapse of time or both
would become a default) under, or give to others any rights of termination,
amendment, acceleration or cancellation of, any agreement, indenture or
instrument to which such Buyer is a party, or (iii) result in a violation of any
law, rule, regulation, order, judgment or decree (including federal and state
securities laws) applicable to such Buyer, except in the case of clauses (ii)
and (iii) above, for such conflicts, defaults, rights or violations which would
not, individually or in the aggregate, reasonably be expected to have a material
adverse effect on the ability of such Buyer to perform its obligations
hereunder.

                (j) Residency. Such Buyer is a
resident of that jurisdiction specified below its address on the Schedule of
Buyers.

                (k) Transfers to Company Employees. As of the date
hereof, such Buyer does not have any agreement or arrangement to transfer any of
the Securities to any of the Company's officers, directors, employees or
consultants or any affiliate entities of such Person. 

                (l) Agent Fees. That no fees, commissions, or other
payments are or will be payable to any broker, finder, placement agent, or
intermediary acting on behalf of such Buyer for actions relating to or arising
out of the transactions contemplated by this Agreement, including, without
limitation, any fees or commissions payable to such Buyer's agents.

        3. REPRESENTATIONS AND WARRANTIES
OF THE COMPANY.

                The Company represents and warrants to each of the Buyers
that:

                (a) Organization and Qualification.

                    (i) The Company and its "Subsidiaries" (which for
purposes of this Agreement means any entity in which the Company, directly or
indirectly, owns outstanding capital stock or holds an equity or similar
interest representing the outstanding equity or similar interest of such entity)
are entities duly organized and validly existing in good standing under the laws
of the jurisdiction in which they are formed, and have the requisite power and
authorization to own their properties and to carry on their business as now
being conducted. Each of the Company and its Subsidiaries is duly qualified as a
foreign entity to do business and is in good

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 standing in every jurisdiction in
which its ownership of property or the nature of the business conducted by it
makes such qualification necessary, except to the extent that the failure to be
so qualified or be in good standing would not have a Material Adverse Effect.
The Company has no Subsidiaries except as set forth on Schedule 3(a). 
Schedule 3(a) sets forth the nature and percentage ownership of the Company
in each Subsidiary. As used in this Agreement, "Material Adverse Effect"
means any material adverse effect on the business, properties, assets,
operations, results of operations, prospects or condition (financial or
otherwise) of the Company and its Subsidiaries, taken as a whole, or on the
transactions contemplated hereby and in the Transaction Documents (as defined
below) or by the agreements and instruments to be entered into in connection
herewith or therewith, or on the authority or ability of the Company to perform
its obligations under the Transaction Documents.

                (b) Authorization; Enforcement;
Validity. The Company has the requisite power and authority to enter into
and perform its obligations under this Agreement, the Warrants, the Registration
Rights Agreement, the Irrevocable Transfer Agent Instructions (as defined in
Section 5(b)), the Certificate of Designations and any other certificate,
instrument or document contemplated hereby or thereby (collectively, the "Transaction
Documents") and to issue the Securities in accordance with the terms hereof
and thereof. The execution and delivery of the Transaction Documents by the
Company and the consummation by the Company of the transactions contemplated
hereby and thereby, including, without limitation, the issuance of the Shares
and the Warrants, the reservation for issuance and issuance of the Conversion
Shares issuable upon conversion thereof, the reservation for issuance and the
issuance of the Dividend Shares issuable thereon, and the Warrant Shares
issuable upon exercise of the Warrants, respectively, have been duly authorized
by the Company's Board of Directors and, other than the filings specified in
Section 3(e), no further filing, consent, or authorization is required by the
Company, its Board of Directors or its stockholders. This Agreement and the
other Transaction Documents of even date herewith have been duly executed and
delivered by the Company, and constitute the legal, valid and binding
obligations of the Company, enforceable against the Company in accordance with
their respective terms, except as such enforceability may be limited by general
principles of equity or applicable bankruptcy, insolvency, reorganization,
moratorium, liquidation or similar laws relating to, or affecting generally, the
enforcement of applicable creditors' rights and remedies. Any other
Transaction Documents dated after the date herewith upon execution shall have
been duly executed and delivered by the Company, and constitute the legal, valid
and binding obligations of the Company, enforceable against the Company in
accordance with their respective terms, except as such enforceability may be
limited by general principles of equity or applicable bankruptcy, insolvency,
reorganization, moratorium, liquidation or similar laws relating to, or
affecting generally, the enforcement of applicable creditors' rights and
remedies. The Certificate of Designations has been filed on or prior to the
Closing Date with the Secretary of the State of Delaware and will be in full
force and effect, enforceable against the Company in accordance with its terms
and shall not be amended unless in compliance with its terms.

                (c) Issuance of Securities. 
The issuance of the Shares and the Warrants are duly authorized, and upon
issuance in accordance with the terms hereof, shall be validly issued and free
from all taxes, liens and charges with respect to the issue thereof (other than
transfer restrictions imposed by the 1933 Act), and the Shares shall be entitled
to the rights and preferences as set forth in the Certificate of Designations.
As of the Closing, a number of shares  

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of Common Stock shall have been duly
authorized and reserved for issuance which equals or exceeds (i) 130% of the
aggregate of the maximum number of shares of Common Stock issuable upon
conversion of the Shares (assuming a Conversion Price (as defined in the
Certificate of Designations) equal to the arithmetic average of the Weighted
Average Price (as defined in the Certificate of Designations) of the Common
Stock over the five (5) consecutive Trading Days ending on the Trading Day
immediately preceding the Closing Date), (ii) 130% of the number of Dividend
Shares issuable pursuant to the terms of the Certificate of Designations and
(iii) 130% of the number of shares of Common Stock issuable upon exercise of the
Warrants. Upon issuance, conversion or exercise in accordance with the Shares or
the Warrants, as the case may be, the Conversion Shares, the Dividend Shares and
the Warrant Shares, respectively, will be validly issued, fully paid and
nonassessable and free from all preemptive or similar rights, taxes, liens and
charges with respect to the issue thereof (other than transfer restrictions
imposed by the 1933 Act), with the holders being entitled to all rights accorded
to a holder of Common Stock. Assuming the accuracy of each of the
representations and warranties set forth in Section 2 of this Agreement, the
offer and issuance by the Company of the Securities is exempt from registration
under the 1933 Act.

                (d) No Conflicts. Except as set
forth in Schedule 3(d), the execution, delivery and performance of the
Transaction Documents by the Company and the consummation by the Company of the
transactions contemplated thereby (including, without limitation, the issuance
of the Shares and the Warrants, and reservation for issuance and issuance of the
Conversion Shares, the Dividend Shares and the Warrant Shares, without regard to
the limitation on issuance thereof) will not (i) result in a violation of any
certificate of incorporation, certificate of formation, any certificate of
designations, bylaws or other constituent documents of the Company or any of is
Subsidiaries, any capital stock of the Company or any of its Subsidiaries or
bylaws of the Company or any of its Subsidiaries or (ii) conflict with, or
constitute a default (or an event which with notice or lapse of time or both
would become a default) under, or give to others any rights of termination,
amendment, acceleration or cancellation of, any agreement, indenture or
instrument to which the Company or any of its Subsidiaries is a party, or (iii)
result in a violation of any law, rule, regulation, order, judgment or decree
(including federal and state securities laws and regulations and the rules and
regulations of the OTC Bulletin Board (the "Principal Market"))
applicable to the Company or any of its Subsidiaries or by which any property or
asset of the Company or any of its Subsidiaries is bound or affected, except in
the case of (ii) and (iii) to the extent that such violation, conflict, default
or right would not have a Material Adverse Effect.

                (e) Consents. Except as set
forth in Schedule 3(e), the Company is not required to obtain any
consent, authorization or order of, or make any filing or registration with, any
court, governmental agency or any regulatory or self-regulatory agency or any
other Person in order for it to execute, deliver or perform any of its
obligations under or contemplated by the Transaction Documents, in each case in
accordance with the terms thereof. All consents, authorizations, orders, filings
and registrations which the Company is required to obtain pursuant to the
preceding sentence shall have been obtained or effected on or prior to the
Closing Date, and the Company and its Subsidiaries are unaware of any facts or
circumstances which might prevent the Company from obtaining or effecting any of
the registration, application or filings pursuant to the preceding sentence.
Except as set forth in Schedule 3(e), the Company is not in violation of
the listing requirements of the Principal Market and has no knowledge of any
facts  

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 which would reasonably lead to delisting or suspension of the Common Stock
in the foreseeable future. As used in this Agreement, "knowledge"
of the Company and its Subsidiaries (as hereafter defined) means to the
knowledge of the principal executive officers of the Company identified in the
SEC Documents (as hereafter defined) after due inquiry.

                (f) Acknowledgment Regarding
Buyer's Purchase of Securities. The Company acknowledges and agrees that
each Buyer is acting individually and solely in the capacity of an arm's length
purchaser with respect to the Transaction Documents and the transactions
contemplated hereby and thereby and that no Buyer is: (i) an officer or director
of the Company, (ii) an "affiliate" of the Company (as defined in Rule 144) or
(iii) to the knowledge of the Company, a "beneficial owner" of more than 10% of
the shares of Common Stock (as defined for purposes of Rule 13d-3 promulgated
under the Securities Exchange Act of 1934, as amended (the "1934 Act")).
The Company further acknowledges that no Buyer is acting as a financial advisor
or fiduciary of the Company (or in any similar capacity) with respect to the
Transaction Documents and the transactions contemplated hereby and thereby, and
any advice given by a Buyer or any of its representatives or agents in
connection with the Transaction Documents and the transactions contemplated
hereby and thereby is merely incidental to such Buyer's purchase of the
Securities. The Company further represents to each Buyer that the Company's
decision to enter into the Transaction Documents has been based solely on the
independent evaluation by the Company and its representatives.

                (g) No General Solicitation;
Agent's Fees. Neither the Company, nor any of its affiliates, nor any Person
acting on its or their behalf, has engaged in any form of general solicitation
or general advertising (within the meaning of Regulation D) in connection with
the offer or sale of the Securities. The Company shall be responsible for the
payment of any placement agent's fees, financial advisory fees, or brokers'
commissions (other than for Persons engaged by any Buyer or its investment
advisor) relating to or arising out of the transactions contemplated hereby. 
Except as set forth on Schedule 3(g) hereto, the Company has not engaged
any investment advisor, placement agent or other agent in connection with the
sale of the Securities.

                (h) No Integrated Offering.
None of the Company, its Subsidiaries, any of their affiliates, and any Person
acting on their behalf has, directly or indirectly, made any offers or sales of
any security or solicited any offers to buy any security, under circumstances
that would require registration of any of the Securities under the 1933 Act or
cause this offering of the Securities to be integrated with prior offerings by
the Company for purposes of the 1933 Act or any applicable stockholder approval
provisions, including, without limitation, under the rules and regulations of
any exchange or automated quotation system on which any of the securities of the
Company are listed or designated. None of the Company, its Subsidiaries, their
affiliates and any Person acting on their behalf will take any action or steps
referred to in the preceding sentence that would require registration of any of
the Securities under the 1933 Act or cause the offering of the Securities to be
integrated with other offerings.

                (i) Dilutive Effect. The
Company understands and acknowledges that the number of Warrant Shares issuable
upon exercise of the Warrants and the number of Conversion Shares issuable upon
conversion of the Shares may increase in certain circumstances. The Company
further acknowledges that its obligation to issue Warrant Shares upon exercise
of the 

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 Warrant and Conversion Shares upon
conversion of the Shares in accordance with this Agreement and the Certificate
of Designations, and the Warrant is absolute and unconditional regardless of the
dilutive effect that such issuance may have on the ownership interests of other
stockholders of the Company.

                (j) Application of Takeover
Protections; Rights Agreement. 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
Certificate of Incorporation or the laws of the jurisdiction of its formation
which is or could become applicable to any Buyer as a result of the transactions
contemplated by this Agreement, including, without limitation, the Company's
issuance of the Securities and any Buyer's ownership of the Securities. The
Company has not adopted a stockholder rights plan or similar arrangement
relating to accumulations of beneficial ownership of Common Stock or a change in
control of the Company (each "Rights Plan").

                (k) SEC Documents; Financial Statements. During the
two (2) years prior to the date hereof, the Company has filed all reports,
schedules, forms, statements and other documents required to be filed by it with
the SEC pursuant to the reporting requirements of the 1934 Act (all of the
foregoing filed prior to the date hereof and all exhibits included therein and
financial statements, notes and schedules thereto and documents incorporated by
reference therein being hereinafter referred to as the "SEC Documents").
Except for those portions of exhibits to documents filed with the Commission
with respect to which the Company requested confidential treatment under the
rules of the Commission, the Company has delivered to the Buyers or their
respective representatives true, correct and complete copies of the SEC
Documents not available on the EDGAR system. As of their respective dates, the
SEC Documents complied in all material respects with the requirements of the
1934 Act and the rules and regulations of the SEC promulgated thereunder
applicable to the SEC Documents, and none of the SEC Documents, at the time they
were filed with the SEC, or as of the date of the last amendment thereof, if
amended after filing, contained any untrue statement of a material fact or
omitted to state a material fact required to be stated therein or necessary in
order to make the statements therein, in the light of the circumstances under
which they were made, not misleading. As of their respective dates, the
financial statements of the Company included in the SEC Documents complied as to
form in all material respects with applicable accounting requirements and the
published rules and regulations of the SEC with respect thereto. All such
financial statements filed with the Commission subsequent to December 16, 2005
have been prepared in accordance with generally accepted accounting principles,
consistently applied, during the periods involved (except (i) as may be
otherwise indicated in such financial statements or the notes thereto, or (ii)
in the case of unaudited interim statements, to the extent they may exclude
footnotes or may be condensed or summary statements) and fairly present in all
material respects the financial position of the Company as of the dates thereof
and the results of its operations and cash flows for the periods then ended
(subject, in the case of unaudited statements, to normal year-end audit
adjustments). All such financial statements filed with the Commission prior to
December 16, 2004 have been prepared in accordance with generally accepted
accounting principles, consistently applied, during the period involved (except
(i) as may be otherwise indicated in such financial statements or the notes
thereto, (ii) in the case of unaudited interim statements, to the extent they
may exclude footnotes or may be condensed or 

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summary statements) and fairly
present in all material respects the financial position of the Company as of the
dates thereof and the results of its operations and cash flows for the periods
then ended (subject, in the case of unaudited statements, to normal year-end
audit adjustments) except to the extent that any failure to meet the
requirements of generally accepted accounting principles or fairly present the
financial position or results of operations of the Company will not have a
Material Adverse Effect. 

                (l) Absence of Certain Changes.
Other than as set forth in the SEC Documents or as set forth in Schedule 3(l),
since the date of the Company's most recent SEC Documents, there has been no
material adverse change and no material adverse development, which constitutes a
Material Adverse Effect. Since December 31, 2004, the Company has not (i)
declared or paid any dividends, (ii) sold any assets, individually or in the
aggregate, in excess of $100,000 outside of the ordinary course of business or
(iii) had capital expenditures, individually or in the aggregate, in excess of
$500,000 outside of the ordinary course of business. The Company has not taken
any steps to seek protection pursuant to any bankruptcy law nor does the Company
have any knowledge or reason to believe that its creditors intend to initiate
involuntary bankruptcy proceedings or any actual knowledge of any fact which
would reasonably lead a creditor to do so. The Company and its Subsidiaries,
individually and on a consolidated basis, are not as of the date hereof, and
after giving effect to the transactions contemplated hereby to occur at the
Closing, will not be Insolvent. For purposes of this Section 3(l), "Insolvent"
means, with respect to any Person, (i) the present fair saleable value of such
Person's assets is less than the amount required to pay such Person's total
Indebtedness (as defined in Section 3(s)) (other than any future lease
liabilities as such exist on the date hereof), (ii) the Person is unable to pay
its debts and liabilities (other than any future lease liabilities as such exist
on the date hereof), subordinated, contingent or otherwise, as such debts and
liabilities become absolute and matured, (iii) such Person intends to incur or
believes that it will incur debts (other than any future lease liabilities as
such exist on the date hereof) that would be beyond its ability to pay as such
debts mature or (iv) such Person has unreasonably small capital with which to
conduct the business in which it is engaged as such business is now conducted.

                (m) No Undisclosed Events,
Liabilities, Developments or Circumstances. No event, liability, development
or circumstance has occurred or exists, or is contemplated to occur with respect
to the Company or its Subsidiaries or their respective business, properties,
prospects operations or financial condition, that would be required to be
disclosed by the Company under applicable securities laws on a registration
statement on Form SB-2 filed with the SEC relating to an issuance and sale by
the Company of its Common Stock and which has not been publicly announced.

                (n) Conduct of Business; Regulatory
Permits. Neither the Company nor its Subsidiaries is in violation of any
term of or in default under its Certificate of Incorporation, any Certificate of
Designations, Preferences and Rights of any outstanding series of preferred
stock in the Company or Bylaws or their organizational charter or certificate of
incorporation or bylaws, respectively. Neither the Company nor any of its
Subsidiaries is in violation of any judgment, decree or order or any statute,
ordinance, rule or regulation applicable to the Company or its Subsidiaries, and
neither the Company nor any of its Subsidiaries will conduct its business in
violation of any of the foregoing, except for possible violations which would
not, individually or in the aggregate, have a Material Adverse Effect. Except as
set forth in Schedule 3(n),  

-10-

 without limiting the generality of the
foregoing, the Company is not in violation of any of the rules, regulations or
requirements of the Principal Market and has no knowledge of any facts or
circumstances which would reasonably lead to delisting or suspension of the
Common Stock by the Principal Market in the foreseeable future. Since December
31, 2004, (i) the Common Stock has been designated for quotation on the
Principal Market, (ii) except as provided in Schedule 3(n), trading in
the Common Stock has not been suspended by the SEC or the Principal Market and
(iii) except as provided in Schedule 3(n), the Company has received no
communication, written or oral, from the SEC or the Principal Market regarding
the suspension or delisting of the Common Stock from the Principal Market. The
Company and its Subsidiaries possess all certificates, authorizations and
permits issued by the appropriate regulatory authorities necessary to conduct
their respective businesses, as presently operated, except where the failure to
possess such certificates, authorizations or permits would not have,
individually or in the aggregate, a Material Adverse Effect, and neither the
Company nor any such Subsidiary has received any notice of proceedings relating
to the revocation or modification of any such certificate, authorization or
permit.

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

                (p) Sarbanes-Oxley Act. Except
as set forth in Schedule 3(p), the Company is in compliance with any and
all applicable requirements of the Sarbanes-Oxley Act of 2002 that are effective
as of the date hereof, and any and all applicable rules and regulations
promulgated by the SEC thereunder that are effective as of the date hereof,
except where such noncompliance would not have, individually or in the
aggregate, a Material Adverse Effect.

                (q) Transactions With Affiliates.
Except as set forth in the SEC Documents filed at least ten days prior to the
date hereof or not required to be disclosed under the rules of the Commission,
and other than the grant of stock options or restricted stock disclosed on 
Schedule 3(q), none of the officers, directors or employees of the Company
is presently a party to any transaction with the Company or any of its
Subsidiaries (other than for ordinary course services as employees, officers or
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 such
officer, director or employee or, to the knowledge of the Company, any
corporation, partnership, trust or other entity in which any such officer,
director, or employee has a substantial interest or is an officer, director,
trustee or partner.

                (r) Equity Capitalization. As
of the date hereof, the authorized capital stock of the Company consists of
100,000,000 shares of Common Stock, of which as of the date hereof, 28,334,040
are issued and outstanding, 7,220,500 shares are reserved for issuance  

-11-

 pursuant
to the Company's stock option plan and Director Compensation Plan, and 5,550,392
shares are reserved for issuance upon exercise of warrants (other than the
Warrants), and 1,428,571 are reserved for issuance pursuant to securities (other
than the aforementioned options, shares, warrants, the Shares and the Warrants)
exercisable or exchangeable for, or convertible into, shares of Common Stock,
and (ii) 5,000,000 shares of preferred stock, $0.25 par value per share, of
which as of the date hereof none of which is issued and outstanding (other than
the Preferred Stock as indicated on the attached Schedule of Buyers). All of
such outstanding shares have been, or upon issuance will be, validly issued and
are fully paid and nonassessable. Except as disclosed in Schedule 3(r): (i)
none of the Company's share capital is subject to preemptive rights or any other
similar rights or any liens or encumbrances suffered or permitted by the
Company; (ii) there are no outstanding options, warrants, scrip, rights to
subscribe to, calls or commitments of any character whatsoever relating to, or
securities or rights convertible into, or exercisable or exchangeable for, any
share capital of the Company or any of its Subsidiaries, or contracts,
commitments, understandings or arrangements by which the Company or any of its
Subsidiaries is or may become bound to issue additional share capital of the
Company or any of its Subsidiaries or options, warrants, scrip, rights to
subscribe to, calls or commitments of any character whatsoever relating to, or
securities or rights convertible into, or exercisable or exchangeable for, any
share capital of the Company or any of its Subsidiaries; (iii) there are no
material outstanding debt securities, notes, credit agreements, credit
facilities or other agreements, documents or instruments evidencing Indebtedness
(as defined in Section 3(s)) of the Company or any of its Subsidiaries or by
which the Company or any of its Subsidiaries is or may become bound; (iv) there
are no financing statements securing obligations in any material amounts, either
singly or in the aggregate, filed in connection with the Company; (v) there are
no agreements or arrangements under which the Company or any of its Subsidiaries
is obligated to register the sale of any of their securities under the 1933 Act;
(vi) there are no outstanding securities or instruments of the Company or any of
its Subsidiaries which contain any redemption or similar provisions, and there
are no contracts, commitments, understandings or arrangements by which the
Company or any of its Subsidiaries is or may become bound to redeem a security
of the Company or any of its Subsidiaries; (vii) there are no securities or
instruments containing anti-dilution or similar provisions that will be
triggered by the issuance of the Securities; (viii) the Company does not have
any stock appreciation rights or "phantom stock" plans or agreements or any
similar plan or agreement; and (ix) the Company and its Subsidiaries have no
liabilities or obligations required to be disclosed in the SEC Documents but not
so disclosed in the SEC Documents other than those incurred in the ordinary
course of the Company's or its Subsidiaries' respective businesses and which,
individually or in the aggregate, do not or would not have a Material Adverse
Effect. The Company has furnished to the Buyer true, correct and complete copies
of the Company's Certificate of Incorporation, as amended and as in effect on
the date hereof (the "Certificate of Incorporation"), and the Company's
Bylaws, as amended and as in effect on the date hereof (the "Bylaws"),
and the terms of all securities convertible into, or exercisable or exchangeable
for, shares of Common Stock and the material rights of the holders thereof in
respect thereto to the extent not available on the Edgar System.

                (s) Indebtedness and Other
Contracts. Except as disclosed in Schedule 3(s), neither the Company
nor any of its Subsidiaries: (i) has any material outstanding Indebtedness (as
defined below), (ii) is a party to any contract, agreement or instrument, the
violation of which, or default under which, by the other party(ies) to such
contract, agreement or instrument would result in a Material Adverse Effect,
(iii) is in violation of any term of or in default under  

-12-

 any contract, agreement
or instrument relating to any Indebtedness, except where such violations and
defaults would not result, individually or in the aggregate, in a Material
Adverse Effect, or (iv) is a party to any contract, agreement or instrument
relating to any Indebtedness, the performance of which, in the judgment of the
Company's officers, has or is expected to have a Material Adverse Effect. 
Schedule 3(s) provides a detailed description of the material terms of any
such outstanding Indebtedness. For purposes of this Agreement: (x) "Indebtedness"
of any Person means, without duplication (A) all indebtedness for borrowed
money, (B) all obligations issued, undertaken or assumed as the deferred
purchase price of property or services (other than trade payables entered into
in the ordinary course of business), (C) all reimbursement or payment
obligations with respect to letters of credit, surety bonds and other similar
instruments, (D) all obligations evidenced by notes, bonds, debentures or
similar instruments, including obligations so evidenced incurred in connection
with the acquisition of property, assets or businesses, (E) all indebtedness
created or arising under any conditional sale or other title retention
agreement, or incurred as financing, in either case with respect to any property
or assets acquired with the proceeds of such indebtedness (even though the
rights and remedies of the seller or bank under such agreement in the event of
default are limited to repossession or sale of such property), (F) all monetary
obligations under any leasing or similar arrangement which, in connection with
generally accepted accounting principles, consistently applied for the periods
covered thereby, is classified as a capital lease, (G) all indebtedness referred
to in clauses (A) through (F) above secured by (or for which the holder of such
Indebtedness has an existing right, contingent or otherwise, to be secured by)
any mortgage, lien, pledge, charge, security interest or other encumbrance upon
or in any property or assets (including accounts and contract rights) owned by
any Person, even though the Person which owns such assets or property has not
assumed or become liable for the payment of such indebtedness, and (H) all
Contingent Obligations in respect of indebtedness or obligations of others of
the kinds referred to in clauses (A) through (G) above; and (y) "Contingent
Obligation" means, as to any Person, any direct or indirect liability,
contingent or otherwise, of that Person with respect to any indebtedness, lease,
dividend or other obligation of another Person if the primary purpose or intent
of the Person incurring such liability, or the primary effect thereof, is to
provide assurance to the obligee of such liability that such liability will be
paid or discharged, or that any agreements relating thereto will be complied
with, or that the holders of such liability will be protected (in whole or in
part) against loss with respect thereto.

                (t) Absence of Litigation.
Except as set forth in Schedule 3(t), there is no action, suit,
proceeding, inquiry or investigation before or by the Principal Market, any
court, public board, government agency, self-regulatory organization or body
pending or, to the knowledge of the Company, threatened against the Company, the
Common Stock or any of the Company's Subsidiaries or any of the Company's or the
Company's Subsidiaries' officers or directors. Schedule 3(t) sets
forth the details of any such litigation.

                (u) Insurance.
The Company and each of its Subsidiaries are insured by insurers of recognized
financial responsibility against such losses and risks and in such amounts as
management of the Company believes to be prudent and customary for companies of
a similar size in the businesses in which the Company and its Subsidiaries are
engaged. Neither the Company nor any such Subsidiary has been refused any
insurance coverage sought or applied for and neither the Company nor any such
Subsidiary has any reason to believe that it will not be able to renew its
existing insurance coverage as and when such coverage expires or to obtain

-13-

 similar coverage from similar
insurers as may be necessary to continue its business at a cost that would not
have a Material Adverse Effect.

                (v) Employee Relations.
(i) Neither
the Company nor any of its Subsidiaries is a party to any collective bargaining
agreement or employs any member of a union. Except as set forth on Schedule
3(v), the Company and its Subsidiaries believe that their relations with
their employees are good. Except as set forth on Schedule 3(v), no
executive officer of the Company (as defined in Rule 501(f) promulgated under
the 1933 Act) has notified the Company that such officer intends to leave the
Company or otherwise terminate such officer's employment with the Company. No
executive officer of the Company, to the knowledge of the Company, is, or is now
expected to be, in violation of any material term of any employment contract,
confidentiality, disclosure or proprietary information agreement,
non-competition agreement, or any other contract or agreement or any restrictive
covenant, and the continued employment of each such executive officer does not
subject the Company or any of its Subsidiaries to any liability with respect to
any of the foregoing matters except a would not, either individually or in the
aggregate, reasonably be expected to result in a Material Adverse Effect.

                        (ii) The Company and its Subsidiaries are in compliance with
all federal, state, local and foreign laws and regulations respecting labor,
employment and employment practices and benefits, terms and conditions of
employment and wages and hours, except where failure to be in compliance would
not, either individually or in the aggregate, reasonably be expected to result
in a Material Adverse Effect.

                (w) Title. Except as set forth
in Schedule 3(w), the Company and its Subsidiaries have good and
marketable title to all real property and good and marketable title to all
personal property owned by them which is material to the business of the Company
and its Subsidiaries taken as a whole, in each case free and clear of all liens,
encumbrances and material defects except such as would not materially affect the
value of such property to, or materially interfere with the use made and
proposed to be made of such property by, the Company and its Subsidiaries taken
as a whole. Any real property and facilities held under lease by the Company and
any of its Subsidiaries are held by them under valid, subsisting and enforceable
leases with such exceptions as are not material and do not interfere with the
use made and proposed to be made of such property and buildings by the Company
and its Subsidiaries.

                (x) Intellectual Property Rights.
Except as set forth in Schedule 3(x), the Company and its Subsidiaries
own or possess adequate rights or licenses to use (A) patents (and any renewals
and extensions thereof), patent rights (and any applications therefor), rights
of priority and other rights in inventions; (B) trademarks, service marks, trade
names and trade dress, and all registrations and applications therefor and all
legal and common-law equivalents of any of the foregoing; (C) copyrights and
rights in mask works (and any applications or registrations for the foregoing,
and all renewals and extensions thereof), common-law copyrights and rights of
authorship including all rights to exploit any of the foregoing in any media and
by any manner and means now known or hereafter devised; (D) industrial design
rights, and all registrations and applications therefor; (E) rights in data,
collections of data and databases, and all legal or common-law equivalents
thereof; (F) rights in domain names and domain name reservations; (G) rights in
trade secrets, proprietary information and know-how (collectively, "Intellectual
Property Rights"), collectively with all licenses and other agreements
providing  

-14-

 the Company or its Subsidiaries the Intellectual Property Rights
material to the operation of their businesses as now conducted and as described
in the SEC Documents. Except as set forth in Schedule 3(x), none of the
Company or any of its Subsidiaries has knowledge that any of them has infringed
on any of the Intellectual Property Rights of any Person or has knowledge that
the Company or any of its Subsidiaries is infringing on any of the Intellectual
Property Rights of any Person. There is no action, suit, hearing, claim, notice
of violation, arbitration or other proceeding, hearing or investigation that is
pending, or to the Company's knowledge, is threatened against, the Company
regarding the infringement of any of the Intellectual Property Rights. The
Company is not, to its knowledge, making unauthorized use of any confidential
information or trade secrets of any third party, and the Company has not
received any notice of any asserted infringement (nor is the Company aware of
any reasonable basis for any third party asserting an infringement) by the
Company of, any rights of a third party with respect to any Intellectual
Property Rights that if proven would have a Material Adverse Effect. The Company
and its Subsidiaries have taken reasonable security measures to protect the
secrecy, confidentiality and value of all of their Intellectual Property Rights.

                (y) Environmental Laws. The
Company and its Subsidiaries (i) are in compliance with any and all
Environmental Laws (as hereinafter defined), (ii) have received all permits,
licenses or other approvals required of them under applicable Environmental Laws
to conduct their respective businesses and (iii) are in compliance with all
terms and conditions of any such permit, license or approval where, in each of
the foregoing clauses (i), (ii) and (iii), the failure to so comply could be
reasonably expected to have, individually or in the aggregate, a Material
Adverse Effect. The term "Environmental Laws" means all federal, state,
local or foreign laws relating to pollution or protection of human health or the
environment (including, without limitation, ambient air, surface water,
groundwater, land surface or subsurface strata), including, without limitation,
laws relating to emissions, discharges, releases or threatened releases of
chemicals, pollutants, contaminants, or toxic or hazardous substances or wastes
(collectively, "Hazardous Materials") into the environment, or
otherwise relating to the manufacture, processing, distribution, use, treatment,
storage, disposal, transport or handling of Hazardous Materials, as well as all
authorizations, codes, decrees, demands or demand letters, injunctions,
judgments, licenses, notices or notice letters, orders, permits, plans or
regulations issued, entered, promulgated or approved thereunder.

                (z) Subsidiary Rights. The
Company or one of its Subsidiaries has the unrestricted right to vote, and
(subject to limitations imposed by applicable law) to receive dividends and
distributions on, all capital securities of its Subsidiaries as owned by the
Company or such Subsidiary.

                (aa) Tax Status. The Company
and each of its Subsidiaries (i) has made or filed all foreign, federal and
state income and all other tax returns, reports and declarations required by any
jurisdiction to which it is subject when and as due, except where applicable
extensions have duly filed, (ii) has 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 (iii) has set aside on its books provision reasonably adequate
for the payment of all taxes for periods subsequent to the periods to which such
returns, reports or declarations apply. There are no unpaid taxes in any
material 

-15-

 amount claimed to be due by the
taxing authority of any jurisdiction, and the Company has no knowledge of a
valid basis for any such claim.

                (bb) Internal Accounting and
Disclosure Controls. The Company and each of its Subsidiaries maintain a
system of internal accounting controls sufficient to provide reasonable
assurance that (i) transactions are executed in accordance with management's
general or specific authorizations, (ii) transactions are recorded as necessary
to permit preparation of financial statements in conformity with generally
accepted accounting principles and to maintain asset and liability
accountability, (iii) access to assets or incurrence of liabilities is permitted
only in accordance with management's general or specific authorization and (iv)
the recorded accountability for assets and liabilities is compared with the
existing assets and liabilities at reasonable intervals and appropriate action
is taken with respect to any difference. Except as set forth in Schedule
3(bb), the Company maintains disclosure controls and procedures (as such term is
defined in Rule 13a-14 promulgated under the 1934 Act) that are effective in
ensuring that information required to be disclosed by the Company in the reports
that it files or submits under the 1934 Act is recorded, processed, summarized
and reported, within the time periods specified in the rules and forms of the
SEC, including, without limitation, controls and procedures designed in to
ensure that information required to be disclosed by the Company in the reports
that it files or submits under the 1934 Act is accumulated and communicated to
the Company's management, including its principal executive officer or officers
and its principal financial officer or officers, as appropriate, to allow timely
decisions regarding required disclosure.

                (cc) Form SB-2 Eligibility. The
Company is eligible to register the Shares, the Conversion Shares, Warrants and
the Warrant Shares for resale by the Buyers using Form SB-2 promulgated under
the 1933 Act. 

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

                (ee) Disclosure.
All disclosure provided to the Buyers regarding the Company, its business and
the transactions contemplated hereby, including the Schedules to this Agreement,
taken as a whole, furnished by or on behalf of the Company, including, without
limitation, the Amended and Restated Private Placement Memorandum of the Company
dated May 6, 2005, is true and correct in all material respects and does not
contain any untrue statement of a material fact or omit to state any material
fact necessary in order to make the statements made therein, in the light of the
circumstances under which they were made, not misleading. Each press release
issued by the Company during the twelve (12) months preceding the date of this
Agreement did not at the time of release contain any untrue statement of a
material fact or omit to state a material fact required to be stated therein or
necessary in order to make the statements therein, in the light of the
circumstances under which they were made, not misleading. No event or
circumstance has occurred or information exists with respect to the Company or
any of its Subsidiaries or its or their business, properties, prospects,
operations or 

-16-

 financial conditions, which, under
applicable law, rule or regulation, requires public disclosure or announcement
by the Company but which has not been so publicly announced or disclosed.

                (ff) Independent Accountants. Freed Maxick & Battaglia,
CPAs, PC, who have certified the consolidated financial statements of the
Company as of December 31, 2004, are independent public accountants within the
meaning of the 1933 Act, the 1934 Act and the standards and rules of the Public
Company Accounting Oversight Board.

                (gg) Investment Company. Neither the Company nor its
Subsidiaries is or, after giving effect to the offering and sale of the
Securities and the application of the proceeds thereof, will become an
"investment company" or an "affiliated person" of, or "promoter" or "principal
underwriter" for an investment company, within the meaning of the Investment
Company Act of 1940, as amended.

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

                (ii) The Company and each of the Subsidiaries are conducting
their business in compliance with the rules and regulations of the United States
Food and Drug Administration (the "FDA") and all applicable federal,
state and local laws, orders, rules, regulations, directives, decrees and
judgments of each of the jurisdictions in which it is conducting business,
including, without limitation, all applicable local, state and federal laws and
regulations governing health, sanitation, safety, zoning and land use, except
where the failure to be so in compliance would not have a Material Adverse
Effect. To the Company's knowledge, there are no pending or threatened
administrative, regulatory or judicial actions, suits, demands, demand letters,
claims, liens, notices of noncompliance or violation, investigation or
proceedings before the FDA or any other federal, state, local or foreign
governmental bodies that involve or effect the Company or any of the
Subsidiaries which, individually or in the aggregate, if the subject of an
unfavorable decision, ruling or finding, would be reasonably likely to result in
a Material Adverse Effect.

-17-

        4. COVENANTS

                (a) Best Efforts; Conversion
Cooperation. Each party shall use its best efforts timely to satisfy each of
the conditions to be satisfied by it as provided in Sections 6 and 7 of this
Agreement.

                (b) Form D and Blue Sky. The
Company agrees to file a Form D with respect to the Securities as required under
Regulation D and to provide a copy thereof to each Buyer promptly after such
filing. The Company shall, on or before the Closing Date, take such action as is
necessary in order to obtain an exemption for or to qualify the Securities for
sale to the Buyers at the Closing pursuant to this Agreement under applicable
securities or "Blue Sky" laws of the states of the United States, and shall
provide evidence of any such exemption or qualification so taken to the Buyers
on or prior to the Closing Date. The Company shall make all filings and reports
relating to the offer and sale of the Securities required under applicable
securities or "Blue Sky" laws of the states of the United States following the
Closing Date.

                (c) Reporting Status. From the
Closing Date until the date when no individual Investor (as defined in the
Registration Rights Agreement) shall continue to hold at least one million
shares of Common Stock held directly and with respect to the Shares on an as
converted basis (the "Reporting Period"), the Company shall timely file
all reports required to be filed with the SEC pursuant to the 1934 Act, and the
Company shall continue to timely file reports under the 1934 Act even if the
1934 Act or the rules and regulations thereunder would otherwise no longer
require such filings, except that the Reporting Period shall terminate upon the
approval of a Fundamental Transaction (as defined in the Warrants).

                (d) Use of Proceeds. The
Company will use the net proceeds from the sale of the Securities (after payment
of all placement agent fees and other costs and expenses of the offering) (1) to
expand its anesthesia and analgesia plant in Bethlehem, Pennsylvania, (2) to
launch and support its new real-time image guidance products, (3) to develop its
conscious sedation system, (4) to repay $1.1 million of demand notes issued to
Wachovia Bank, N.A. and bearing interest at the lender's monthly LIBOR rate,
plus 1.25%, (5) to repay $500,000 of other outstanding obligations and (6) for
other working capital and general corporate purposes. The Company will not use
the proceeds from the sale of the Securities for the redemption or repurchase of
any of its equity securities.

                (e) Financial Information. 
The Company agrees to send the following to each Investor during the Reporting
Period provided that the following does not constitute material, nonpublic
information, unless the following are filed with the SEC through EDGAR and are
available to the public through the EDGAR system, within one (1) Business Day
after the filing thereof with the SEC, a copy of its Annual Reports on Form 10-K
or 10-KSB, any interim reports or any consolidated balance sheets, income
statements, stockholders' equity statements and/or cash flow statements for any
fiscal quarter, any Current Reports on Form 8-K and any registration statements
(other than on Form S-8) or amendments filed pursuant to the 1933 Act.

                (f) Listing. The Company shall
promptly secure the listing of all of the Conversion Shares, the Dividend Shares
and Warrant Shares upon each national securities exchange and automated
quotation system, if any, upon which the Common Stock is then listed  

-18-

 (subject to
official notice of issuance) and shall maintain such listing of all Conversion
Shares and Warrant Shares from time to time issuable under the terms of the
Transaction Documents. The Company shall maintain the Common Stock's
authorization for quotation on the Principal Market. Neither the Company nor any
of its Subsidiaries shall take any action which would be reasonably expected to
result in the delisting or suspension of the Common Stock on the Principal
Market.

                (g) Fees. Whether or not the
transactions contemplated in this Agreement are consummated or this Agreement is
terminated, the Company shall pay or cause to be paid all costs and expenses
incident to the performance of its obligations hereunder, including without
limitation, all fees, costs and expenses (A) incident to the preparation,
issuance, execution, authentication and delivery of the Securities, including
any expenses of any trustee or warrant agent, (B) incurred in connection with
the registration or qualification and determination of eligibility for
investment of the Securities, (C) in connection with the admission for trading
of the Conversion Shares and Warrant Shares on any securities exchange or
inter-dealer quotation system, (D) related to any filing with the National
Association of Securities Dealers, Inc. ("NASD"), (E) the satisfaction of
the conditions set forth in Sections 6 and 7, in each case whether or not the
Closing Date occurs or this Agreement is terminated, and (F) otherwise in
connection with satisfying its obligations hereunder. The Company shall be
responsible for the payment of any placement agent's fees, financial advisory
fees, or broker's commissions (other than for Persons engaged by any Buyer)
relating to or arising out of the transactions contemplated hereby, including,
without limitation, any fees or commissions payable to any agents. The Company
shall pay, and hold each Buyer harmless against, any liability, loss or expense
(including, without limitation, reasonable attorney's fees and out of pocket
expenses) arising in connection with any claim relating to any such payment.

                (h) Pledge of Securities.
The Company acknowledges and agrees that the Securities may be pledged by an
Investor (as defined in the Registration Rights Agreement) in connection with a
bona fide margin agreement or other loan or financing arrangement that is
secured by the Securities. The pledge of Securities shall not be deemed to be a
transfer, sale or assignment of the Securities hereunder, and no Investor
effecting a pledge of Securities shall be required to provide the Company with
any notice thereof or otherwise make any delivery to the Company pursuant to
this Agreement or any other Transaction Document, including, without limitation,
Section 2(f) hereof; provided that an Investor and its pledgee shall be required
to comply with the provisions of Section 2(f) hereof in order to effect a sale,
transfer or assignment of Securities to such pledgee. The Company hereby agrees
to execute and deliver such documentation as a pledgee of the Securities may
reasonably request in connection with a pledge of the Securities to such pledgee
by an Investor.

                (i) Disclosure of Transactions and
Other Material Information. If required by the rules of the SEC, on or
before 8:30 a.m., New York time, on the fourth Business Day following the
date of this Agreement, the Company shall file a Current Report on Form 8-K
describing the terms of the transactions contemplated by the Transaction
Documents in the form required by the 1934 Act and attaching the material
Transaction Documents (including, without limitation, this Agreement, the
Certificate of Designations, the form of each of the Warrants and the
Registration Rights Agreement) as exhibits to such filing, which Form 8-K shall
be in form and substance reasonably acceptable to the Majority Buyers (including
all attachments, the  

-19-

"Initial 8-K Filing"). If required by the rules of
the SEC, on or before 8:30 a.m., New York time, on the second Business
Day following the date of any material amendment to the terms set forth in this
Agreement as described in the Initial 8-K Filing, the Company shall file a
Current Report on Form 8-K describing the terms of such amendment or
modification in the form required by the 1934 Act and attaching any material
transaction documents, as entered into, prepared, modified or amended, as
exhibits to such filing (including all attachments, an "Amending 8-K Filing").
If required by the rules of the SEC, on or before 8:30 a.m., New York time, on
the second Business Day following the Closing Date, the Company shall file a
Current Report on Form 8-K describing the Closing and disclosing any previously
undisclosed material, nonpublic information in the form required by the 1934 Act
and attaching any material transaction documents not previously filed as
exhibits to such filing (including all attachments, the "Final 8-K Filing",
and collectively with the Initial 8-K Filing and all Amending 8-K Filings, the "8-K
Filings"). If an Initial 8-K Filing has not yet been filed when a Final 8-K
Filing may be made, the Initial 8-K Filing and the Final 8-K Filing may be
combined in one filing. From and after the filing of the Final 8-K Filing with
the SEC (or, if such a filing is not required, the date when such a filing would
have been required), no Buyer shall be in possession of any material, nonpublic
information received from the Company, any of its Subsidiaries or any of its
respective officers, directors, employees or agents, that is not disclosed in
the 8-K Filings. The Company shall not, and shall cause each of its Subsidiaries
and its and each of their respective officers, directors, employees and agents,
not to, provide any Buyer with any material, nonpublic information regarding the
Company or any of its Subsidiaries from and after the filing of the Initial 8-K
Filing with the SEC without the express written consent of such Buyer. Subject
to the foregoing, neither the Company nor any Buyer shall issue any press
releases or any other public statements with respect to the transactions
contemplated hereby; provided, however, that the Company shall be
entitled, without the prior approval of any Buyer, to make any press release or
other public disclosure with respect to such transactions (i) in substantial
conformity with the 8-K Filings and contemporaneously therewith and (ii) as is
required by applicable law and regulations (provided that in the case of clause
(i) the Majority Buyers shall be consulted by the Company in connection with any
such press release or other public disclosure prior to its release and provided
that in any case the Company shall not disclose the identity of any Buyer
without such Buyer's express written consent unless required by applicable law
and regulations).

                (j) Additional Shares; Variable
Securities; Dilutive Issuances. So long as any Buyer beneficially owns any
Shares the Company will not issue any Shares other than to the Buyers as
contemplated hereby or in accordance with Section 4(n) regarding the sale and
the Company shall not issue any other securities that would cause a breach or
default under the Certificate of Designations. For so long as 25% or more of the
Shares or Warrants (including all Shares and Warrants related to Preferred Stock
as contemplated by Section 4(n)) remain outstanding the Company shall not, in
any manner, issue or sell any rights, warrants or options to subscribe for or
purchase Common Stock or directly or indirectly convertible into or exchangeable
or exercisable for Common Stock at a price which varies or may vary with the
market price of the Common Stock, including by way of one or more reset(s) to
any fixed price unless the conversion, exchange or exercise price of any such
security cannot be less than the then applicable Conversion Price (as defined in
the Certificate of Designations) with respect to the Common Stock into which any
Share is convertible or the then applicable Exercise Price (as defined in the
Warrants) with respect to the Common Stock into which any Warrant is
exercisable. For so long as any Shares or Warrants remain outstanding, the
Company shall not, 

-20-

 in any manner, enter into or affect any Dilutive Issuance (as
defined in the Certificate of Designations) if the effect of such Dilutive
Issuance is to cause the Company to be required to issue upon conversion of any
Share or exercise of any Warrant any shares of Common Stock in excess of that
number of shares of Common Stock which the Company may issue upon conversion of
the Shares, and exercise of the Warrants without breaching the Company's
obligations under the rules or regulations of the Principal Market.

                (k) Corporate Existence.
So long as any Buyer beneficially owns Shares and Warrants, the Company shall
not be party to any Fundamental Transaction (as defined in the Certificate of
Designations and Warrants) unless the Company is in compliance with the
applicable provisions governing Fundamental Transactions set forth in the
Certificate of Designations and Warrants.

                (l) Reservation of Shares. 
The Company shall take all action necessary to at all times have authorized, and
reserved for the purpose of issuance, no less than the sum of (1) 130% of the
number of shares of Common Stock issuable upon conversion of the issued and
outstanding Shares, (2) 130% of the number of Dividend Shares issuable pursuant
to the terms of the Shares and (3) 130% of the number of shares of Common Stock
issuable upon exercise of the issued and outstanding Warrants.

                (m) Conduct of Business. 

                    (i) Except as described in the SEC Documents, unless set
forth in Schedule 4(m) or the Company shall otherwise agree in writing
with the Majority Buyers (such agreement not to be unreasonably withheld) and
except as expressly contemplated by the Transaction Documents, during the period
from the date of this Agreement to the Closing Date, the Company shall conduct,
and it shall cause its Subsidiaries to conduct, its or their businesses in the
ordinary course and consistent with past practice, and the Company shall, and it
shall cause its Subsidiaries to, use its or their reasonable best efforts to
preserve intact its business organization, to keep available the services of its
officers and employees and to maintain satisfactory relationships with all
Persons with whom it does business and 

                    (ii) without limiting the generality of the foregoing,
neither the Company nor any of its Subsidiaries will:

                (1) amend or propose to amend its Certificate of
    Incorporation or Bylaws (or comparable governing instruments) in any
    material respect;

    

                (2) authorize for issuance, issue, grant, sell, pledge,
    dispose of or propose to issue, grant, sell, pledge or dispose of any shares
    of, or any options, warrants, commitments, subscriptions or rights of any
    kind to acquire or sell any shares of, the capital stock or other securities
    of the Company or any of its Subsidiaries including, but not limited to, any
    securities convertible into or exchangeable for shares of stock of any class
    of capital stock of the Company or any of its Subsidiaries, except for the
    issuance of shares pursuant to the exercise of either incentive or
    non-qualified stock options, including management stock options, outstanding
    on the date of this Agreement in accordance with their present terms;

    -21-

    
    

                (3) hire any executive officer of the Company;

    

                (4) split, combine or reclassify any shares of its
    capital stock or declare, pay or set aside any dividend or other
    distribution (whether in cash, stock or property or any combination thereof)
    in respect of its capital stock, other than dividends or distributions to
    the Company or a Subsidiary, or directly or indirectly redeem, purchase or
    otherwise acquire or offer to acquire any shares of its capital stock or
    other securities;

    

                (5) (a) create, incur or assume any debt, except
    refinancings of existing obligations on terms that are no less favorable to
    the Company or its Subsidiaries than the existing terms; (b) assume,
    guarantee, endorse or otherwise become liable or responsible (whether
    directly, indirectly, contingently or otherwise) for the obligations of any
    Person; (c) make any capital expenditures or make any loans, advances or
    capital contributions to, or investments in, any other Person (other than to
    a Subsidiary); (d) acquire the stock or assets of, or merge or consolidate
    with, any other Person; (e) voluntarily incur any material liability or
    obligation (absolute, accrued, contingent or otherwise), other than in the
    ordinary course of business consistent with past practice; or (f) other than
    in the ordinary course of business consistent with past practice, sell,
    transfer, mortgage, pledge or otherwise dispose of, or encumber, or agree to
    sell, transfer, mortgage, pledge or otherwise dispose of or encumber, any
    assets or properties, real, personal or mixed material to the Company and
    its Subsidiaries taken as a whole other than to secure debt permitted under
    (a) of this clause (v);

    

                (6) increase in any manner the compensation of any of its
    officers or employees or enter into, establish, amend or terminate any
    employment, consulting, retention, change in control, collective bargaining,
    bonus or other incentive compensation, profit sharing, health or other
    welfare, stock option or other equity, pension, retirement, vacation,
    severance, deferred compensation or other compensation or benefit plan,
    policy, agreement, trust, fund or arrangement with, for or in respect of,
    any stockholder, officer, director, other employee, agent, consultant or
    affiliate other than as required pursuant to the terms of agreements in
    effect on the date of this Agreement and such as are in the ordinary course
    of business consistent with past practice;

    

                (7) enter into or commit to enter into any material
    transaction, material monetary commitment or capital expenditure or enter
    into, amend, modify or terminate any material agreement (including real
    estate leases that are material in the aggregate);

    

                (8) acquire or agree to acquire, by merging or
    consolidating with, by purchasing an equity interest in or a portion of the
    securities of, or by any other manner, any Person, or otherwise acquire or
    agree to acquire all or substantially all of the assets of any other Person
    (other than the purchase of assets from suppliers or vendors in the ordinary
    course of the business of the Company);

    -22-

    
    

                (9) settle or compromise any litigation, proceeding,
    action or claim that could reasonably be expected to result in payments (to
    the extent not covered by insurance) that exceed $250,000 in the aggregate;

    

                (10) fail to use its commercially reasonable efforts to
    comply in all material respects with any law, rule, regulation, order,
    judgment or decree (including federal and state securities laws) applicable
    to it or any of its properties, assets or business and maintain in full
    force and effect all the Company permits necessary for, or otherwise
    material to, such business; or

    

                (11) agree or commit to do any of the foregoing.

  

                    (iii) Notwithstanding the forgoing, to the extent that any of
the foregoing shall constitute material, nonpublic information, before seeking
the Buyers' consent hereunder, the Company shall first confirm with such Buyer
that it desires to receive such information (without disclosing the nature of
any information that may constitute material, nonpublic information) and if the
Buyer agrees to receive such information, then such information shall constitute
Disclosed Information for all purposes hereof.

                (n) Additional Issuances of
Securities. The Company agrees not to, directly or indirectly, sell,
offer to sell, solicit offers to buy, dispose of, loan, pledge or grant any
right with respect to any shares of Common Stock or Preferred Stock of the
Company, or any securities convertible into or exercisable or exchangeable for,
Common Stock of the Company until the date on which the Registration Statement
(as defined in the Registration Rights Agreement) is declared effective by the
Commission, except for (1) the issuance and sale of Warrant Shares upon the
exercise of Warrants, (2) grants of options to purchase Common Stock under the
Company's current stock option plans and shares of Common Stock issued upon the
exercise of stock options issued under such stock option plans, (3) shares of
Common Stock to be issued under the Company's 2005 Directors Compensation Plan,
as described in the Company's 2005 Proxy Statement, (4) warrants to purchase
50,000 shares of Common Stock to be issued to Kevin Kimberlin Partners L.P. on
the first day of each month that its guarantee of a note payable to Wachovia
Bank, NA, is in effect, (5) shares of Common Stock issuable upon conversion of
up to $2.5 million of outstanding convertible promissory notes at $1.75 per
share, and (6) the issuance and sale of (A) additional shares of Preferred Stock
at a price of $1,000 per share and at an aggregate purchase price not to exceed
the amount, if any, by which $15,000,000 exceeds the aggregate Purchase Price
paid by all Investors under this Agreement together with the Purchase Price of
all other Buyers indicated on the attached Schedule of Buyers, (B) warrants to
purchase an amount of Common Stock equal to 250% of the aggregate amount of
Preferred Stock issued in any transaction described in (6)(A) above, upon the
same terms as the Warrants, and (C) any shares of Common Stock issued upon the
exercise of the warrants described in (6)(B) above. The Company will use
reasonable efforts to cause each of its directors and executive officers to
enter into similar agreements with the Co-Placement Agents.

                (o) General Solicitation. None of the Company, any of
its affiliates (as defined in Rule 501(b) promulgated under the 1933 Act) or any
person acting on behalf of the Company or such affiliate will solicit any offer
to buy or offer or sell the Securities by means of any form of general
solicitation or general advertising within the meaning of Regulation D,

-23-

 including: (i) any advertisement, article, notice or other communication
published in any newspaper, magazine or similar medium or broadcast over
television or radio; and (ii) any seminar or meeting whose attendees have been
invited by any general solicitation or general advertising.

                (p) Integration. None of the
Company or any of its Subsidiaries will offer, sell or solicit offers to buy or
otherwise negotiate in respect of any security (as defined in the 1933 Act) in a
manner that would cause the offer and sale of the Securities to fail to be
entitled to the exemption from registration afforded by Rule 506 of Regulation D
and Section 4(2) of the 1933 Act.

                (q) Notification of Certain Matters.
The Company shall give prompt notice to each Buyer if any of the following occur
after the date of this Agreement: (i) receipt of any notice or other
communication in writing from any third party alleging that the consent of such
third party is or may be required in connection with the transactions
contemplated by this Agreement, provided that such consent would have been
required to have been disclosed in this Agreement; (ii) receipt of any material
notice or other communication from any Person (including, but not limited to,
the SEC, NASD or any securities exchange) in connection with the transactions
contemplated by this Agreement; (iii) the occurrence of an event which would be
reasonably likely to have a Material Adverse Effect; or (iv) the commencement or
threat of any litigation involving or affecting the Company or any of its
Subsidiaries, or any of their respective properties or assets, or, to its
knowledge, any employee, agent, director or officer, in his or her capacity as
such, of the Company or any of its Subsidiaries which, if pending on the date
hereof, would have been required to have been disclosed in this Agreement or
which relates to the consummation of the transactions contemplated by the
Transaction Documents; provided, however, that to the extent
that any of the foregoing shall constitute material, nonpublic information, the
Company shall first confirm with such Buyer that it desires to receive such
information (without disclosing the nature of any information that may
constitute material, nonpublic information) and if the Buyer agrees to receive
such information, then such information shall constitute Disclosed Information
for all purposes hereof.

                (r) Access and Information.
Between the date of this Agreement and the Closing Date, the Company will give,
and shall direct its accountants and legal counsel to give, each Buyer and their
respective authorized representatives (including, without limitation, its
financial advisors, accountants, consultants and legal counsel), at all
reasonable times, access as reasonably requested to all offices and other
facilities and to all contracts, agreements, commitments, books and records of
or pertaining to the Company and its Subsidiaries, will permit the foregoing to
make such reasonable inspections as they may require and will cause its officers
and other employees promptly to furnish such Buyer with (a) such financial and
operating data and other information with respect to the business and properties
of the Company and its Subsidiaries as such Buyer may from time to time
reasonably request, and (b) a copy of each material report, schedule and other
document filed or received by the Company or any of its Subsidiaries pursuant to
the requirements of applicable securities laws or the NASD; provided, 
however, that to the extent that any of the foregoing shall constitute
material, nonpublic information, the Company shall first confirm with such Buyer
that it desires to receive such access or information (without disclosing the
nature of any information that may constitute 

-24-

 material, nonpublic information) and
if the Buyer agrees to receive such information, then such information shall
constitute Disclosed Information for all purposes hereof.

                (s) Sales by Officers and Directors. Until 180 Trading
Days after the Closing Date, the Company shall not, directly or indirectly,
permit any officer or director of the Company or any of its Subsidiaries to sell
any Common Stock pursuant to a contract, instruction or plan in accordance with
Rule 10b5-1 of the 1934 Act.

                (t) Regulation M. The Company will not take any action
prohibited by Regulation M under the 1934 Act, in connection with the
distribution of the Securities contemplated hereby.

        5. REGISTER; TRANSFER AGENT
INSTRUCTIONS.

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

                (b) Transfer Agent Instructions.
The Company shall issue irrevocable instructions to its transfer agent, and any
subsequent transfer agent, to issue certificates or credit shares to the
applicable balance accounts at The Depository Trust Company ("DTC"),
registered in the name of each Buyer or its respective nominee(s) or transferee,
for the Securities issued at the Closing, upon conversion of the Shares, or upon
exercise of the Warrants or transfer of the Warrants, in such amounts as
specified from time to time by each Buyer to the Company upon exercise or
transfer of the Warrants in the form of Exhibit C attached hereto (the "Irrevocable
Transfer Agent Instructions"). The Company warrants that no instruction
other than the Irrevocable Transfer Agent Instructions referred to in this
Section 5(b), and stop transfer instructions to give effect to Section 2(g)
hereof, will be given by the Company to its transfer agent, and that the
Securities shall otherwise be freely transferable on the books and records of
the Company as and to the extent provided in this Agreement and the other
Transaction Documents. If a Buyer effects a sale, assignment or transfer of the
Securities in accordance with Section 2(f), the Company shall permit the
transfer and, in the case of the Conversion Shares, promptly instruct its
transfer agent to issue one or more certificates or credit shares to the
applicable balance accounts at DTC in such name and in such denominations as
specified by such Buyer to effect such sale, transfer or assignment. In the
event that such sale, assignment or transfer involves Securities sold, assigned
or transferred pursuant to an effective registration statement or pursuant to
Rule 144, the transfer agent shall issue such Securities to the Buyer, assignee
or transferee, as the case may be, without any restrictive legend. The Company
acknowledges that a breach by it of its obligations hereunder will cause
irreparable harm to a Buyer. Accordingly, the Company acknowledges that the
remedy at law for a breach of its obligations under this Section 5(b) will be
inadequate and agrees, in the event of a breach or threatened breach by the
Company of the provisions of this Section 5(b), that a Buyer shall be 

-25-

 entitled, in addition to all other
available remedies, to an order and/or injunction restraining any breach and
requiring immediate issuance and transfer, without the necessity of showing
economic loss and without any bond or other security being required.

        6. CONDITIONS TO THE COMPANY'S
OBLIGATION TO SELL.

            (a) Shares and the Warrants.
The obligation of the Company hereunder to issue and sell the Shares and the
Warrants to each Buyer at the Closing is subject to the satisfaction, at or
before the Closing Date, of each of the following conditions, provided that
these conditions are for the Company's sole benefit and may be waived by the
Company at any time in its sole discretion by providing each Buyer with prior
written notice thereof:

                (i) Such Buyer shall have executed this Agreement and the
Registration Rights Agreement and delivered the same to the Company.

                (ii) Such Buyer and each other Buyer shall have delivered to
the Company the Purchase Price for the Shares and the related Warrants being
purchased by such Buyer at the Closing by wire transfer of immediately available
funds pursuant to the wire instructions provided by the Company.

                (iii) The representations and warranties of such Buyer shall
be true and correct in all material respects as of the date when made and as of
the Closing Date as though made at that time (except for representations and
warranties that speak as of a specific date), and such Buyer shall have
performed, satisfied and complied in all material respects with the covenants,
agreements and conditions required by this Agreement to be performed, satisfied
or complied with by such Buyer at or prior to the Closing Date.

                (iv) Each Buyer shall have delivered to the Company such
other documents relating to the transactions contemplated by this Agreement as
the Company or its counsel may reasonably request.

        7. CONDITIONS TO EACH BUYER'S
OBLIGATION TO PURCHASE.

            (a) Closing Date. The
obligation of each Buyer hereunder to purchase the Shares and the Warrants at
the Closing is subject to the satisfaction, at or before the Closing Date, of
each of the following conditions, provided that these conditions are for each
Buyer's sole benefit and may be waived by such Buyer at any time in its sole
discretion by providing the Company with prior written notice thereof:

                (i) The Company and, to the extent it is a party thereto,
each of its Subsidiaries, shall have executed and delivered to such Buyer
(1) each of the Transaction Documents, (2) one or more certificates representing
the Shares (in such number and denominations as such Buyer shall request) being
purchased by such Buyer at the Closing pursuant to this Agreement, and (3) the
Warrants (in such amounts as such Buyer shall request) being purchased by such
Buyer at the Closing pursuant to this Agreement,.

                (ii) The Company shall have delivered to such Buyer a copy of
the Irrevocable Transfer Agent Instructions, in the form of Exhibit C
attached hereto, which 

-26-

instructions shall have been delivered to and acknowledged in
writing by the Company's transfer agent.

                (iii) Each Buyer shall have received the opinions of Hodgson
Russ LLP, the Company's outside counsel, dated as of the Closing Date,
substantially covering the matters set forth in Exhibit D-1 attached
hereto.

                (iv) This section is intentionally omitted.

                (v) The Company shall have delivered to such Buyer a
certificate evidencing the formation and good standing of the Company and of
Minrad Inc. in their respective jurisdictions of formation issued by the
Secretary of State (or comparable office) of such jurisdiction, as of a date
within 20 days of the Closing Date.

                (vi) The Company shall have delivered to such Buyer a
certificate evidencing the Company's and Minrad Inc.'s qualification as a
foreign corporation and good standing issued by the Secretary of State (or
comparable office) of each jurisdiction in which the Company and Minrad Inc.
conducts business, as of a date within 30 days of the Closing Date.

                (vii) The Company shall have delivered to such Buyer a
certified copy of the Certificate of Incorporation as certified by the Secretary
of State of the State of Delaware within 15 days of the Closing Date.

                viii) The Company shall have delivered to such Buyer a
certificate, executed by the Secretary of the Company and dated as of the
Closing Date, as to (x) the resolutions consistent with Section 3(b) as adopted
by the Company's Board of Directors in a form reasonably acceptable to such
Buyer, (y) the Certificate of Incorporation, as amended and (z) the Bylaws, each
as in effect at the Closing, in the form attached hereto as Exhibit E.

                (ix) The representations and warranties of the Company shall
be true and correct in all material respects (other than representations and
warranties that are already qualified by materiality or Material Adverse Effect
which shall be true and correct in all respects and other than as affected by
the sale of Shares to Buyers on June 10, 2005 and June 21, 2005) as of the date
when made and as of the Closing Date as though made at that time (except for
representations and warranties that speak as of a specific date) and the Company
shall have performed, satisfied and complied in all material respects with the
covenants, agreements and conditions required by the Transaction Documents to be
performed, satisfied or complied with by the Company at or prior to the Closing
Date. Such Buyer shall have received a certificate, executed by a duly
authorized executive officer of the Company, dated as of the Closing Date, to
the foregoing effect, certifying as to the fulfillment of the conditions
specified in Section 7 of this Agreement and as to such other matters as may be
reasonably requested by such Buyer in the form attached hereto as Exhibit F.

                (x) No event, circumstances or fact shall have occurred which
has resulted in, would result in or could reasonably be expected to result in,
individually or in the aggregate, a Material Adverse Effect.

-27-

                (xi) The Company shall have delivered to such Buyer a letter
from the Company's transfer agent certifying the number of shares of Common
Stock outstanding as of a date within 15 days of the Closing Date. 

                (xii) The Common Stock (i) shall be designated for quotation
or listed on the Principal Market and (ii) shall not have been suspended, as of
the Closing Date, by the SEC or the Principal Market from trading on the
Principal Market nor shall suspension by the SEC or the Principal Market have
been threatened, as of the Closing Date, either (A) in writing by the SEC or the
Principal Market or (B) by falling below the minimum listing maintenance
requirements of the Principal Market.

                (xiii) The Certificate of Designations in the form attached
as Exhibit A shall have been filed on or prior to the Closing Date with
the Secretary of State of the State of Delaware and shall be in full force and
effect, enforceable against the Company in accordance with its terms and shall
not have been amended.

                (xiv) The Company shall have obtained all other governmental,
regulatory or third party consents and approvals, if any, necessary to be
obtained for the sale of the Securities.

                (xv) The Company shall have delivered to such Buyer such
other documents relating to the transactions contemplated by this Agreement as
such Buyer or its counsel may reasonably request.

        8. TERMINATION.

            This Agreement may be terminated at any time prior to the
Closing:

            (a) by mutual written agreement of the Company and the
Majority Buyers;

            (b) by the Majority Buyers, if the Company executes an
agreement, letter of intent, memorandum of understanding or otherwise accepts a
proposal or offer from any Person (other than the Majority Buyers) regarding any
Competing Transaction;

            (c) by either the Company or the Majority Buyers if any
Person shall have issued an order, decree, or ruling that permanently restrains,
enjoins, or otherwise prohibits consummation of the transactions contemplated
hereby;

            (d) by the Company, (A) upon a material breach of any
covenant or agreement on the part of the Majority Buyers set forth in this
Agreement or if any representation or warranty of the Majority Buyers set forth
in this Agreement shall not be true and correct, except to the extent that such
breach of a covenant or agreement or untrue or incorrect representation or
warranty does not affect the fulfillment of the conditions set forth in Section
7 or cause the representations and warranties of the Majority Buyers not to have
been have been true and correct in all material respects on the date hereof and
the Closing Date (a "Terminating Buyer Breach"); provided, that such
Terminating Buyer Breach shall not have been waived by the Company or, to the
extent curable, cured within the earlier of 30 days after written notice of such
Terminating Buyer Breach is given to such breaching Buyers by the Company or the
Drop 

-28-

Dead Date (as defined below); or (B) if any condition to the
Company's obligations to close at the Closing set forth in Section 6 is or
becomes impossible to fulfill (other than because of the failure of the Company
to comply with its obligations under this Agreement or any Transaction
Document), and the Company has not waived such condition;

            (e) by the Majority Buyers, upon a material breach of any
covenant or agreement on the part of the Company set forth in this Agreement or
if any representation or warranty of the Company set forth in this Agreement
shall not be true and correct, except to the extent that such breach of a
covenant or agreement or untrue or incorrect representation or warranty does not
constitute a Material Adverse Effect, such that the conditions set forth in
Section 7 would not be satisfied or the representations and warranties of the
Company shall not have been true and correct in all material respects on the
date hereof (a "Terminating Company Breach"); provided, that such
Terminating Company Breach shall not have been waived by the Majority Buyers or,
to the extent curable, cured within the earlier of 30 days after written notice
of such Terminating Company Breach is given to the Company by the Majority
Buyers or the Drop Dead Date; or (B) if any condition to the Majority Buyers'
obligations to close at the Closing set forth in Section 7 is or becomes
impossible to fulfill (other than because of the failure of any such Buyer to
comply with its obligations under this Agreement or any Transaction Document),
and the Majority Buyers have not waived such condition;

            (f) by the Majority Buyers, upon any Voluntary Bankruptcy or
Involuntary Bankruptcy of the Company or its Subsidiaries or any action in
furtherance of any Voluntary Bankruptcy or Involuntary Bankruptcy. For the
purpose of this Agreement:

                (i) "Voluntary Bankruptcy" shall mean, with
    respect to any Person, (a) an admission in writing by such Person of its
    inability to pay its debts generally or a general assignment by such Person
    for the benefit of creditors, (b) the filing of any petition or answer by
    such Person seeking to adjudicate it bankrupt or insolvent or seeking for
    itself any liquidation, winding up, reorganization, arrangement, adjustment,
    protection, relief or composition of such Person or its debts under any law
    relating to bankruptcy, insolvency, reorganization or relief of debtors, or
    seeking, consenting to or acquiescing in the entry of an order for relief or
    the appointment of a receiver, trustee, custodian or other similar official
    for such Person or for any substantial part of its property, or (c)
    corporate action taken by such Person to authorize any of the actions set
    forth above; and

    

                (ii) "Involuntary Bankruptcy" shall mean, with
    respect to any Person, without the consent or acquiescence of such Person,
    the entering of an order for relief or approving a petition for relief or
    reorganization or any other petition seeking any reorganization,
    arrangement, composition, readjustment, liquidation, dissolution or other
    similar relief under any present or future bankruptcy, insolvency or similar
    statute, law or regulation or the filing of any such petition against such
    Person which order or petition shall not be dismissed within 30 days or,
    without the consent or acquiescence of such Person, the entering of an order
    appointing a trustee, custodian, receiver or liquidator of such Person or of
    all or any substantial part of the property of such Person which order shall
    not be dismissed within 30 days; and

    -29-

    
  

            (g) by either the Company or the Majority Buyers, if the
Closing Date has not occurred by June 30, 2005 (the "Drop Dead Date").

        9. Effect of Termination. If this Agreement is
terminated by any party pursuant to Section 8 and the transactions contemplated
hereby are not consummated, this Agreement shall become null and void and of no
further force and effect and there shall be no liability on the part of any
party hereto (or any shareholder, director, officer, partner, employee, agent,
consultant or representative of such party), except as set forth in this Section
9; provided, however, that any termination of this Agreement shall not relieve
any party hereto from any liability for any breach of any provisions of this
Agreement. This Section 9 shall survive termination of this Agreement in
accordance with its terms. 

        10. MISCELLANEOUS.

            (a) Governing Law; Jurisdiction;
Jury Trial. All questions concerning the construction, validity, enforcement
and interpretation of this Agreement shall be governed by the internal laws of
the State of New York, without giving effect to any choice of law or conflict of
law provision or rule (whether of the State of New York or any other
jurisdictions) that would cause the application of the laws of any jurisdictions
other than the State of New York. Each party hereby irrevocably submits to the
exclusive jurisdiction of the state and federal courts sitting in The City of
New York, Borough of Manhattan, for the adjudication of any dispute hereunder or
in connection herewith or with any transaction contemplated hereby or discussed
herein, and hereby irrevocably waives, and agrees not to assert in any suit,
action or proceeding, any claim that it is not personally subject to the
jurisdiction of any such court, that such suit, action or proceeding is brought
in an inconvenient forum or that the venue of such suit, action or proceeding is
improper. Each party hereby irrevocably waives personal service of process and
consents to process being served in any such suit, action or proceeding by
mailing a copy thereof to such party at the address for such notices to it under
this Agreement and agrees that such service shall constitute good and sufficient
service of process and notice thereof. Nothing contained herein shall be deemed
to limit in any way any right to serve process in any manner permitted by law.
EACH PARTY HEREBY IRREVOCABLY WAIVES ANY RIGHT IT MAY HAVE, AND AGREES NOT TO
REQUEST, A JURY TRIAL FOR THE ADJUDICATION OF ANY DISPUTE HEREUNDER OR IN
CONNECTION WITH OR ARISING OUT OF THIS AGREEMENT OR ANY TRANSACTION CONTEMPLATED
HEREBY. 

            (b) Counterparts. This
Agreement may be executed in two or more identical counterparts, all of which
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;
provided that a facsimile signature shall be considered due execution and shall
be binding upon the signatory thereto with the same force and effect as if the
signature were an original, not a facsimile signature.

            (c) Headings. The headings of
this Agreement are for convenience of reference and shall not form part of, or
affect the interpretation of, this Agreement.

-30-

            (d) Severability. If any
provision of this Agreement shall be invalid or unenforceable in any
jurisdiction, such invalidity or unenforceability shall not affect the validity
or enforceability of the remainder of this Agreement in that jurisdiction or the
validity or enforceability of any provision of this Agreement in any other
jurisdiction.

            (e) Entire Agreement; Amendments.
This Agreement supersedes all other prior oral or written agreements between the
Buyers, the Company, their affiliates and Persons acting on their behalf with
respect to the matters discussed herein and this Agreement and the instruments
referenced herein contain the entire understanding of the parties with respect
to the matters covered herein and therein and, except as specifically set forth
herein or therein, neither the Company nor any Buyer makes any representation,
warranty, covenant or undertaking with respect to such matters. No provision of
this Agreement may be amended other than by an instrument in writing signed by
the Company and the Majority Buyers, and any amendment to this Agreement made in
conformity with the provisions of this Section 10(e) shall be binding on all
Buyers and holders of Securities, as applicable. No provision hereof may be
waived other than by an instrument in writing signed by the party against whom
enforcement is sought. No such amendment shall be effective to the extent that
it applies to less than all of the holders of the applicable Securities then
outstanding. No consideration shall be offered or paid to any Person to amend or
consent to a waiver or modification of any provision of any of the Transaction
Documents unless the same consideration also is offered to all of the parties to
the Transaction Documents, holders of Shares or holders of the Warrants, as the
case may be. The Company has not, directly or indirectly, made any agreements
with any Buyers relating to the terms or conditions of the transactions
contemplated by the Transaction Documents except as set forth in the Transaction
Documents.

            (f) Notices. Any notices,
consents, waivers or other communications required or permitted to be given
under the terms of this Agreement must be in writing and will be deemed to have
been delivered: (i) upon receipt, when delivered personally; (ii) upon receipt,
when sent by facsimile (provided confirmation of transmission is mechanically or
electronically generated and kept on file by the sending party); or (iii) one
Business Day after deposit with an overnight courier service, in each case
properly addressed to the party to receive the same. The addresses and facsimile
numbers for such communications shall be:

            

                        If to the Company:

            
              
                
                Minrad International, Inc.

                847 Main Street

                Buffalo, New York 14203

                Attention: Chief Executive Officer

                Fax: (716) 855-1078

                

              

            

                        With a copy (for informational purposes only) to:

            
              
                
                Hodgson Russ LLP

                One M&T Plaza

                Suite 2000

                Buffalo, New York 14203

                -31-

                  
                

                Attention: Ward Hinkle, Esq.

                Fax: (716) 849-0349

                

              

            

                        If to the Transfer Agent:

            
              
                
                American Stock Transfer and Trust Company

                59 Maiden Lane

                New York, New York 10038

                Telephone: 718-921-8116

                Facsimile: 718-921-8143

                Attention: Anthony Foti

                

                

              

        If to a Buyer, to its address and facsimile number set forth on the Schedule
of Buyers. with copies to such Buyer's representatives as set forth on the
Schedule of Buyers,or to such other address and/or facsimile number and/or to
the attention of such other Person as the recipient party has specified by
written notice given to each other party five (5) days prior to the
effectiveness of such change. Written confirmation of receipt (A) given by the
recipient of such notice, consent, waiver or other communication, (B)
mechanically or electronically generated by the sender's facsimile machine
containing the time, date, recipient facsimile number and an image of the first
page of such transmission or (C) provided by an overnight courier service shall
be rebuttable evidence of personal service, receipt by facsimile or receipt from
an overnight courier service in accordance with clause (i), (ii) or (iii) above,
respectively.

            (g) Successors and Assigns.
This Agreement shall be binding upon and inure to the benefit of the parties and
their respective successors and assigns, including any subsequent purchasers of
the Shares or the Warrants or, upon the exercise of the Warrants, the Warrant
Shares, other than pursuant to an effective registration statement with respect
thereto. The Company shall not assign this Agreement or any rights or
obligations hereunder without the prior written consent of the Majority Buyers,
including by way of a Fundamental Transaction (unless the Company is in
compliance with the applicable provisions governing Fundamental Transactions set
forth in the Warrants). A Buyer may assign some or all of its rights hereunder
without the consent of the Company in connection with a transfer by such Buyer
of any of the Securities, in which event such assignee shall be deemed to be a
Buyer hereunder with respect to such assigned rights. In addition to the
foregoing, the Company acknowledges that any of the Buyers may assign and
transfer some of the rights and obligations in connection with the purchase of
the Securities prior to Closing to other Buyers, which Buyers shall become party
hereto by execution of a signature to this Agreement and by updating of the
Schedule of Buyers hereto in which case such assignee shall be deemed a Buyer
for all purposes hereunder as if such assignee executed this Agreement on the
date hereof. 

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

            (i) Survival.
Unless this Agreement is terminated under Section 8, the representations and
warranties of the Company and the Buyers contained in Sections 2 and 3 and 

-32-

the agreements and covenants set forth in Sections 4, 5 and
10 shall survive the Closing. Each Buyer shall be responsible only for its own
representations, warranties, agreements and covenants hereunder.

            (j) Further Assurances. Each
party shall do and perform, or cause to be done and performed, all such further
acts and things, and shall execute and deliver all such other agreements,
certificates, instruments and documents, as any other party may reasonably
request in order to carry out the intent and accomplish the purposes of this
Agreement and the consummation of the transactions contemplated hereby.

            (k) Indemnification. In
consideration of each Buyer's execution and delivery of the Transaction
Documents and acquiring the Securities thereunder and in addition to all of the
Company's other obligations under the Transaction Documents, the Company shall
defend, protect, indemnify and hold harmless each Buyer and each other holder of
the Securities and all of their stockholders, partners, members, officers,
directors, employees and direct or indirect investors and any of the foregoing
Persons' agents or other representatives (including, without limitation, those
retained in connection with the transactions contemplated by this Agreement)
(collectively, the "Indemnitees") from and against any and all actions,
causes of action, suits, claims, losses, costs, penalties, fees, liabilities and
damages, and expenses in connection therewith (irrespective of whether any such
Indemnitee is a party to the action for which indemnification hereunder is
sought), and including reasonable attorneys' fees and disbursements (the "Indemnified
Liabilities"), incurred by any Indemnitee as a result of, or arising out of,
or relating to (a) any misrepresentation or breach of any representation or
warranty made by the Company in the Transaction Documents, (b) any breach of any
covenant, agreement or obligation of the Company contained in the Transaction
Documents or (c) any cause of action, suit or claim brought or made against such
Indemnitee by a third party (including for these purposes a derivative action
brought on behalf of the Company) and arising out of or resulting from (i) the
execution, delivery, performance or enforcement of the Transaction Documents,
(ii) any transaction financed or to be financed in whole or in part, directly or
indirectly, with the proceeds of the issuance of the Securities or (iii) the
status of such Buyer or holder of the Securities as an investor in the Company
pursuant to the transactions contemplated by the Transaction Documents. To the
extent that the foregoing undertaking by the Company may be unenforceable for
any reason, the Company shall make the maximum contribution to the payment and
satisfaction of each of the Indemnified Liabilities which is permissible under
applicable law. Except as otherwise set forth herein, the mechanics and
procedures with respect to the rights and obligations under this Section 10(k)
shall be the same as those set forth in Section 6 of the Registration Rights
Agreement.

            (l) No Strict Construction. The
language used in this Agreement will be deemed to be the language chosen by the
parties to express their mutual intent, and no rules of strict construction will
be applied against any party.

            (m) Remedies; Rescission and
Withdrawal. Each Buyer and each holder of the Securities shall have all
rights and remedies set forth in the Transaction Documents and all of the rights
which such holders have under any law. Any Person having any rights under any
provision of this Agreement shall be entitled to enforce such rights
specifically (without posting a bond or other security), to recover damages by
reason of any breach of any provision of this  

-33-

 Agreement and to exercise all
other rights granted by law. Furthermore, the Company recognizes that in the
event that it fails to perform, observe, or discharge any or all of its
obligations under the Transaction Documents, any remedy at law may prove to be
inadequate relief to the Buyers. The Company therefore agrees that the Buyers
shall be entitled to seek temporary and permanent injunctive relief in any such
case without the necessity of proving actual damages and without posting a bond
or other security. Notwithstanding anything to the contrary contained in
(and without limiting any similar provisions of) the Transaction Documents,
whenever any Buyer exercises a right, election, demand or option under a
Transaction Document and the Company does not timely perform its related
obligations within the periods therein provided, then such Buyer may rescind or
withdraw, in its sole discretion from time to time upon written notice to the
Company, any relevant notice, demand or election in whole or in part, in
accordance with the terms of the Transaction Documents, without prejudice to its
future actions and rights.

            (n) Payment Set Aside. To the
extent that the Company makes a payment or payments to the Buyers hereunder or
pursuant to any of the other Transaction Documents or the Buyers enforce or
exercise their rights hereunder or thereunder, and such payment or payments or
the proceeds of such enforcement or exercise or any part thereof are
subsequently invalidated, declared to be fraudulent or preferential, set aside,
recovered from, disgorged by or are required to be refunded, repaid or otherwise
restored to the Company, a trustee, receiver or any other Person under any law
(including, without limitation, any bankruptcy law, foreign, 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.

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

[Signature Page Follows]

-34-

        IN WITNESS WHEREOF, each Buyer and the Company have
caused their respective signature page to this Securities Purchase Agreement to
be duly executed as of the date first written above.

	 	COMPANY:
	 	 
	 	MINRAD INTERNATIONAL, INC.
	 	 
	 	By: 	 
	 	 	Name: 

    Title:

 

 

        IN WITNESS WHEREOF, each Buyer and the Company have
caused their respective signature page to this Securities Purchase Agreement to
be duly executed as of the date first written above.

	 	SDS CAPITAL GROUP SPC, LTD.
	 	 
	 	By: 	 
	 	 	Name: Steve Derby

    Title: Managing Director

 

        IN WITNESS WHEREOF, each Buyer and the Company have
caused their respective signature page to this Securities Purchase Agreement to
be duly executed as of the date first written above.

	 	CAMOFI MASTER LDC
	 	 
	 	By: 	 
	 	 	Name: 

    Title:

 

        IN WITNESS WHEREOF, each Buyer and the Company have
caused their respective signature page to this Securities Purchase Agreement to
be duly executed as of the date first written above.

	 	 
	 	 
	 	 	 
	 	 	Name: Eric McAfee

 

        IN WITNESS WHEREOF, each Buyer and the Company have
caused their respective signature page to this Securities Purchase Agreement to
be duly executed as of the date first written above.

	 	 
	 	 
	 	 	 
	 	 	Name: Laird Cagan

 

        IN WITNESS WHEREOF, each Buyer and the Company have
caused their respective signature page to this Securities Purchase Agreement to
be duly executed as of the date first written above.

	 	CORSAIR CAPITAL PARTNERS, LP.
	 	 
	 	By: 	 
	 	 	Name: 

    Title:

 

        IN WITNESS WHEREOF, each Buyer and the Company have
caused their respective signature page to this Securities Purchase Agreement to
be duly executed as of the date first written above.

	 	CORSAIR CAPITAL INVESTORS, LTD.
	 	 
	 	By: 	 
	 	 	Name: 

    Title:

 

        IN WITNESS WHEREOF, each Buyer and the Company have
caused their respective signature page to this Securities Purchase Agreement to
be duly executed as of the date first written above.

	 	CORSAIR CAPITAL PARTNERS 100, LP
	 	 
	 	By: 	 
	 	 	Name: 

    Title:

SCHEDULE OF BUYERS

	
    (1)
	
    (2)
	
    (3)
	
    (3a)
	
    (4)
	
    (6)
	
    (7)

	
     
	
     
	
     
	
     
	
     
	
     
	
     

	
    Buyer
	
    Address and

    Facsimile Number
	
    Aggregate Number of Shares
	
    Number of Conversion Shares
	
    Number

    of

    Series R

    Warrant

    Shares
	
    Purchase 

    Price
	
      
      Legal Representative's Address and Facsimile Number

    
	
    Rubicon Master Fund
	
    c/o Rubicon Fund
    Management LLP

    103 Mount St.

    London W1K2TJ

    United Kingdom

    Facsimile No.: +44 207-074 4280

    Telephone No.: +44 207 074 4299

    Attn: William Callanan
	
    4,000
	
    2,000,000
	
    1,000,000
	
    $4,000,000
	
      
      Schulte Roth & Zabel LLP

      919 Third Avenue

      New York, New York 10022

      Attention: Peter J. Halasz, Esq.

      Facsimile: (212) 593-5955

      Telephone: (212) 756-2238

    
	
    Crestview Capital Master LLC
	
    95 Revere Drive,
    Suite A

    Northbrook, IL 60062

    Facsimile: 847.559.5807

    Attn: Adam Blonsky
	
    2,000
	
    1,000,000
	
    500,000
	
    $2,000,000
	
    
      N.A.

    
    
	
    Enable Growth Partners LP
	
    One Ferry Building

    
    Suite 255

    San Francisco, CA 94111

    Facsimile No.: (416) 677-1580

    Attn: Brendan O'Neil
	
    370
	
    185,000
	
    92,500
	
    $370,000
	
    
      N.A.

    
    
	
    Enable Opportunities Partners LP
	
    One Ferry Building

    
    Suite 255

    San Francisco, CA 94111

    Facsimile No.: (416) 677-1580

    Attn: Brendan O'Neil
	
    65
	
    32,500
	
    16,250
	
    $65,000
	
    
      N.A.

    
    
	
    Spencer Trask Illumination Fund,
    LLC
	
    535 Madison Avenue

    
    18th Floor

    New York, NY 10022

    Facsimile No.: (212) 888-9103
	
    250
	
    125,000
	
    62,500
	
    $250,000
	
      
      William P. Dioguardi

      535 Madison Avenue

      18th Floor

      New York, NY 10022

      Facsimile No.: (212) 888-9103

      Telephone: (212) 418-8552

    
	
    International Capital Advisory,
    Inc.
	
    40 Bassano Road

    
    Toronto, ON

    Canada

    M2N2K1

    Facsimile No.: (416) 222-0236

    Attn: Morrie Tobin
	
    140
	
    70,000
	
    35,000
	
    $140,000
	
    
      N/A

    
    

	
    
(1)
	
    (2)
	(3)	(3a)	(4)	
    (6)	
    (7)
	 	 	 	 	 	 	
     
	
    Buyer	
    Address and

    Facsimile Number	
    Aggregate

    Number of

    Shares	
    Number of

    Conversion

    Shares	
    Number

    of

    Series R

    Warrant

    Shares	
    Purchase

    Price	
    Legal Representative's

    Address and Facsimile

    Number
	
    Laird Cagan
	
    10600 North DeAnza
    Blvd.

    Suite 250

    Cupertino, CA 95014

    Facsimile No.: (408) 904-6085
	
    105
	
    52,500
	
    26,250
	
    $105,000
	
    
      N/A

    
    
	
    Eric McAfee
	
    10600 North DeAnza
    Blvd.

    Suite 250

    Cupertino, CA 95014

    Facsimile No.: (408) 904-6085
	
    105
	
    52,500
	
    26,250
	
    $105,000
	
    
      N/A

    
    
	
    
	
    TOTAL
    for June 10, 2005 Buyers
	
    7,035
	
    3,517,500
	
    1,758,750
	
    $7,035,000
	
    

	
    Buyers on June 21,
    2005:
	
     
	
     
	
     
	
     
	
     
	
     

	
    Michael Toibb
	
    6355 Topanga Canyon Blvd

    Suite
    335

    Woodland Hills, CA 91367

    Fax no. (818) 883-0858
	
    50
	
    25,000
	
    12,500
	
    $50,000
	
      
      Stutman, Treister & Glatt Professional Corporation

      1901 Avenue of the Stars

      Suite 1200

      Los Angeles, CA 90067

      Attention: Ronald L. Fein

      Fax No. (310) 228-5788

    
	
    Gail Toibb Carrier
	
    656 26th Street

    
    Manhattan Beach, CA 90266

    (310) 796-9419
	
    50
	
    25,000
	
    12,500
	
    $50,000
	
      
      Stutman, Treister & Glatt Professional Corporation

      1901 Avenue of the Stars

      Suite 1200

      Los Angeles, CA 90067

      Attention: Ronald L. Fein

      Fax No. (310) 228-5788

    
	
    Scott M. & Cheryl L.
    Hergott Living Trust 2003
	
    209 Satin Mist Court

    Las
    Vegas, NV 89144

    Fax no. (702) 360-7306
	
    50
	
    25,000
	
    12,500
	
    $50,000

    
	
      
      Stutman, Treister & Glatt Professional Corporation

      1901 Avenue of the Stars

      Suite 1200

      Los Angeles, CA 90067

      Attention: Ronald L. Fein

      Fax No. (310) 228-5788

    
	
    Howard Smuckler
	
    7530 Graystone Drive

    West
    Hills, CA 91304

    Fax no. (818) 884-6197
	
    25
	
    12,500
	
    6,250
	
    $25,000
	
      
      Stutman, Treister & Glatt Professional Corporation

      1901 Avenue of the Stars

      Suite 1200

      Los Angeles, CA 90067

      Attention: Ronald L. Fein

      Fax No. (310) 228-5788

    
	
    HLTGT LLC
	
    6355 Topanga Canyon Blvd

    Suite
    335

    Woodland Hills, CA 91367

    Fax no. (818) 883-0858
	
    300
	
    150,000
	
    75,000
	
    $300,000

    
	
      
      Stutman, Treister & Glatt Professional Corporation

      1901 Avenue of the Stars

      Suite 1200

      Los Angeles, CA 90067

      Attention: Ronald L. Fein

      Fax No. (310) 228-5788

    

	(1)	(2)	(3)	(3a)	(4)	(6)	(7)
	 	 	 	 	 	 	 
	
    Buyer	
    Address and

    Facsimile Number	
    Aggregate

    Number of Shares	
    Number of Conversion Shares	
    Number

 of

 Series R Warrant Shares	
    Purchase Price	
    Legal Representative's

    Address and Facsimile

    Number
	Toibb Investment LLC	
    6355 Topanga
    Canyon Blvd

    Suite 335

    Woodland Hills, CA 91367

    Fax no. (818) 883-0858 
    
 
	
    2,525
 
	
    1,262,500
 
	
    631,250
 
	
    $2,525,000
 
	
      
      Stutman, Treister & Glatt
      Professional Corporation

      1901 Avenue of the Stars

      Suite 1200

      Los Angeles, CA 90067

      Attention: Ronald L. Fein

      Fax No. (310) 228-5788

    
     

	
    
 
	
    TOTAL for Buyers on June 21,
    2005
	
    3,000
	
    1,500,000
	
    750,000
	
    $3,000,000
	
     

	
    Buyers subsequent
    to June 21, 2005:
	
     
	
     
	
     
	
     
	
     
	
     

	
    SDS Capital Group
    SPC, Ltd.

     

     

     

     

     
	
    c/o SDS Management LLC

    53
    Forest Avenue, 2nd Floor

    Old Greenwich, CT 06870

    Attn: Steve Derby

    Facsimile No,: (203) 967-5851
	
    250
	
    125,000
	
    62,500
	
    $250,000
	
     

	
    Laird Cagen

     

     

     

     
	
    10600 North DeAnza Blvd.

    
    Suite 250

    Cupertino, CA 95014

    Facsimile No.: (408) 904-6085
	
    63
	
    31,500
	
    15,750
	
    $63,000
	
     

	
    Eric McAfee

     

     

     

     
	
    10600 North DeAnza Blvd.

    
    Suite 250

    Cupertino, CA 95014

    Facsimile No.: (408) 904-6085
	
    62
	
    31,000
	
    15,500
	
    $62,000
	
     

	
    CAMOFI Master LDC

     

     

     

     

     

     

     

     

     

     

     

     
	
    Registered Address:
    

    P.O. Box 32021

    SMB Anchorage Centre

    2nd Floor

    Grand Cayman, Cayman, BWI

    Local (certificate delivery):

    c/o Centrecourt Asset Management

    830 Third Ave, 14th Fl.

    NY, NY 1022

    Attn: Jeffrey M. Haas

    Facsimile No.: (212) 922-2081 
	
    350
	
    175,000
	
    87,500
	
    $350,000
	
     

	
    Corsair Capital
    Partners, L.P.

     

     
	
    350 Madison Ave., 9th
    Fl.

    New York, NY 10017

    Facsimile No. (212) 389-8259
	
    425
	
    212,500
	
    106,250
	
    $425,000
	
     

	
    Corsair Capital
    Investors, Ltd.

     
	
    350 Madison Ave., 9th
    Fl.

    New York, NY 10017

    Facsimile No. (212) 389-8259
	
    58
	
    29,000
	
    14,500
	
    58,000
	
     

	
    Corsair Capital
    Partners

    100, L.P.

     
	
    350 Madison Ave., 9th
    Fl.

    New York, NY 10017

    Facsimile No: (212) 389-8259
	
    17
	
    8,500
	
    4,250
	
    17,000
	
     

	
     
	
    TOTAL for Buyers subsequent
    to June 21, 2005:
	
    1,225
	
    612,500
	
    306,250
	
    $1,225,000
	
     

 

 

EXHIBITS

Exhibit A Form of Series R Warrants 

Exhibit B Registration Rights Agreement

Exhibit C Form of Irrevocable Transfer Agent Instructions

Exhibit D-1 Form of Outside Company Counsel Opinion

Exhibit E Form of Secretary's Certificate

Exhibit F Form of Officer's Certificate

Exhibit G Certificate of Designations

 

EXHIBIT D-1

OPINION OF COUNSEL TO THE COMPANY

        The opinion of Hodgson Russ LLP, counsel to the Company, to be delivered
pursuant to Section 7(a)(iii) of this Agreement shall be substantially to the
effect that:

	1.	The Company is a corporation validly existing under the General
    Corporation Law of the State of Delaware and is in good standing. 
	 	 
	2.	The Company has the requisite corporate power under the General
    Corporation Law of the State of Delaware and the Certificate of
    Incorporation and the By-Laws of the Company to own its properties and to
    conduct its business as described in the Exchange Act Documents and the
    Amended and Restated Private Placement Memorandum and to execute, deliver
    and to perform its obligations under the Agreement.
	 	 
	3.	Minrad Inc. is a corporation validly existing under the General
    Corporation Law of the State of Delaware and is in good standing.
	 	 
	4.	Minrad Inc. has the corporate power under the General Corporation Law of
    the State of Delaware and the Certificate of Incorporation and the By-Laws
    of Minrad Inc. to own its properties and to conduct its business as
    described in the Exchange Act Documents and the Amended and Restated Private
    Placement Memorandum.
	 	 
	5.	The Company is duly qualified to transact business as a foreign
    corporation in and is in good standing in the States of [·]. To such
    counsel's knowledge, there is no other state in which the ownership or lease
    by the Company of property or the conduct by the Company of business would,
    if such state applied the principles applied under the General Corporation
    Law of the State of Delaware to determine whether a corporation organized
    under the law of another state must qualify to transact business as a
    foreign corporation in the State of Delaware, require the Company to qualify
    to transact business as a foreign corporation.
	 	 
	6.	Minrad Inc. is duly qualified to transact business as a foreign
    corporation in and is in good standing in the States of [·]. To such
    counsel's knowledge, there is no other state in which the ownership or lease
    by Minrad Inc. of property or the conduct by Minrad Inc. of business would,
    if such state applied the principles applied under the General Corporation
    Law of the State of Delaware to determine whether a corporation organized
    under the law of another state must qualify to transact business as a
    foreign corporation in the State of Delaware, require Minrad Inc. to qualify
    to transact business as a foreign corporation. 
	 	 
	7.	The authorized capital stock of the Company consists of 100,000,000
    shares of common stock, par value $0.01 per share, and 5,000,000 shares of
    preferred stock, par value $0.25 per share, of which 15,000 are designated
    Series A Convertible Preferred Stock. 
	 	 
	8.	The Shares to be received by the Investors pursuant to the Agreement have
    been duly authorized and, upon issuance and delivery against payment
    therefor in accordance with the terms of the Agreement, will be validly
    issued, fully paid and nonassessable, and free and clear of any and all
    liens, charges, 

 

	 	and preemptive or similar rights contained in the Company's
    Certificate of Incorporation or Bylaws or any Exchange Act Report Agreement.
	 	 
	9.	The Warrant Shares have been duly authorized and, upon the issuance and
    delivery against payment therefor in accordance with the terms of the
    Warrants, will be validly issued, fully paid and nonassessable and free and
    clear of any and all liens, charges, and preemptive or similar rights
    contained in the Company's Certificate of Incorporation or Bylaws or any
    Exchange Act Report Agreement. A number of shares of Common Stock sufficient
    to meet the Company's obligations to issue Warrant Shares upon full exercise
    of the Warrants have been duly reserved by the Company.
	 	 
	10.	The Conversion Shares have been duly authorized and, upon the issuance
    and delivery against payment therefor in accordance with the terms of the
    Certificate of Designations, will be validly issued, fully paid, and non
    assessable, and free and clear of any and all liens, charges, and preemptive
    or similar rights contained in the Company's Certificate of Incorporation or
    Bylaws or any Exchange Act Report Agreement. A number of shares of Common
    Stock sufficient to meet the Company's obligations to issue Conversion
    Shares upon full exercise of the Shares have been duly reserved by the
    Company.
	 	 
	11.	The outstanding shares of capital stock of Minrad Inc. have been duly
    authorized and validly issued, are fully paid and non-assessable and are
    owned of record and, to the knowledge of such counsel, beneficially by the
    Company free and clear, to the knowledge of such counsel, of any lien,
    encumbrance, equity or claim. 
	 	 
	12.	The Merger Agreement and Plan of Exchange dated July 16, 2004, as amended
    August 24, 2004, among Technology Acquisition Corporation, a Nevada
    corporation, Technology Acquisition Subsidiary, Inc., a Delaware
    corporation, and Minrad Inc. was duly authorized and approved by Minrad Inc.
    
	 	 
	13.	To the knowledge of such counsel, there is no outstanding right
    (including, but not limited to, any preemptive right), warrant or option to
    acquire, and no instrument convertible into or exchangeable for, any
    unissued shares of capital stock or other equity interest in Minrad Inc. and
    no contract, commitment, agreement, understanding or arrangement of any kind
    to which the Company or Minrad Inc. is a party and that provides for the
    issuance or sale of any capital stock of Minrad Inc., any such convertible
    or exchangeable instrument or any such right, warrant or option.
	 	 
	14.	The Transaction Documents have been duly authorized by all necessary
    corporate action by the Company and have been executed and delivered by the
    Company, and the Certificate of Designations has been properly filed with
    the Secretary of State of the State of Delaware and has become effective
    under the DGCL. The rights, preferences and privileges of the Shares are as
    stated in the Certificate of Designations.
	 	 
	15.	The Transaction Documents constitute valid and binding obligations of the
    Company, enforceable against the Company in accordance with their respective
    terms.
	 	 
	16.	To the knowledge of such counsel, except as set forth in the Agreement or
    the Exchange Act Documents there is no (a) outstanding warrant or option to
    acquire, and no instrument convertible into or exchangeable for, any
    unissued shares of capital stock or other equity interest in the Company and
    no contract, commitment, agreement, understanding or arrangement of any kind
    to which the 

 

	 	Company is a party and that provides for the issuance or
    sale of any capital stock of the Company, any such convertible or
    exchangeable instrument or any such warrant or option, or (b) preemptive
    right, co-sale right, registration right, right of first refusal or similar
    right with respect to the issuance and sale of the Shares, Conversion
    Shares, Warrants or Warrant Shares and the registration of the Shares and
    Warrant Shares. Neither the sale of the Shares and Warrants pursuant to the
    Agreement nor the registration of the sale of Shares and Warrant Shares
    violates any such rights.
	 	 
	17.	The execution and delivery of the Agreement and the Warrants and the
    consummation of the transactions contemplated thereby (including, but not
    limited to, the issuance of the Shares, the sale of the Shares and the
    Warrants, and the fulfillment of the terms of the Agreement and Warrants)
    will not (a) violate (i) any statute, rule or regulation of the State of New
    York, or any United States federal statute, rule or regulation, normally
    applicable to transactions of the type contemplated by the Agreement or (ii)
    to the knowledge of such counsel, any order of any court, regulatory body,
    administrative agency or other governmental body applicable to the Company,
    any Subsidiary or any of the properties of the Company or any Subsidiary,
    (b) conflict with, breach or constitute a default under any contract,
    indenture, mortgage, deed of trust or other agreement or instrument
    identified in the Exchange Act Reports as one to which the Company or any
    Subsidiary is a party, by which the Company or any Subsidiary is bound or to
    which any of the properties of the Company or any Subsidiary is subject, or
    (c) result in or require the creation of any lien, security interest or
    other charge or encumbrance under the Exchange Act Report Agreements.
	 	 
	18.	To the knowledge of such counsel, there is no approval, consent, order,
    authorization, designation, declaration or filing by or with any court,
    regulatory body, administrative agency or other governmental body necessary
    in connection with the execution and delivery by the Company of the
    Agreement and the consummation of the transactions contemplated thereby that
    has not been obtained and is not in full force and effect, except any such
    approval, consent, authorization, designation, declaration, or filing
    required by any securities or Blue Sky statute of any state in connection
    with the offer and sale of the Shares, Conversion Shares, Warrants or
    Warrant Shares, or by any United States federal or securities statute with
    respect to the Company's obligations under Sections 8 and 10 of the
    Agreement.
	 	 
	19.	The offer and sale of the Shares and the Warrants to the Investors in
    accordance with the Agreement and the Certificate of Designations, as
    applicable, and the issuance of the Conversion Shares and the Warrant Shares
    in accordance with the Transaction Documents constitute transactions exempt
    .from the registration requirements of the Securities Act.
	 	 
	20.	To our knowledge, there is not pending against the Company before any
    court or administrative agency or overtly threatened in writing any action,
    proceeding or investigation that questions the validity of the Agreement or
    any of the transactions contemplated thereby.
	 	 
	21.	The Company is not, and will not become as a result of the consummation
    of the transactions contemplated by the Agreement and the application of the
    net proceeds of the sale of the Shares and Warrants thereunder, an
    "investment company" as defined in Section 3(a) of the Investment Company
    Act of 1940, as amended, and the rules and regulations promulgated
    thereunder.
	 	 
	22.	The conditions for use by the Company of a registration statement on Form
    SB-2, set forth in the General Instructions thereto, have been satisfied.

 

	23.	The Exchange Act Documents, when filed, complied as to form in all
    material respects with the Exchange Act and the applicable rules and
    regulations of the Commission thereunder.

In addition to the matters set forth above, such opinion shall also include a
confirmation to the effect that, although such counsel is not passing upon, has
not undertaken to verify independently, and does not assume any responsibility
for, the accuracy, completeness or fairness of any statement contained in any of
the Exchange Act Documents or the Amended and Restated Private Placement
Memorandum, nothing has come to the attention of such counsel that would cause
such counsel to believe that the Exchange Act Documents and the Amended and
Restated Private Placement Memorandum, taken as a whole, as of the Closing Date,
contained an untrue statement of a material fact or omitted to state a material
fact necessary to make the statements therein, in light of the circumstances
under which they were made, not misleading (except that such counsel need not
express any view as to the financial statements therein).

SCHEDULES TO SECURITIES PURCHASE AGREEMENT

Schedule 3(a)

Minrad International, Inc. - Subsidiaries

 

Minrad Inc., a Delaware corporation ( 100.0% owned by Minrad
International, Inc.)

Minrad EU, a corporation under the law of France (100.0%
owned subsidiary of Minrad Inc.)

 

 

Schedule 3(e)

Minrad International, Inc.

Consents

None.

 

Schedule 3(g)

Minrad International, Inc.

Placement Agents, Finders and Fees

Chadbourne Securities, Inc.

 

	
    -
	
    A cash fee equal to the difference between (X) 10% of the
    aggregate purchase price paid by all investors who purchase securities in
    the current offering, and (Y) the placement agent fee payable by Minrad to
    KeyBanc under the KeyBanc Agreement.

	
     
	
     

	
    -
	
    Investment warrants for an amount of common stock equal
    to 10% of the number of shares sold in the current offering, exercisable at
    a price equal to the per share price paid by investors in the current
    offering, for seven years from the date of the closing of the current
    offering and shall contain a cashless or net exercise provision.

    

	
     
	
     

KeyBanc Capital Markets (KCM)

 

	
    -
	
    Placement Agent fee paid in cash at Closing equal to 9%
    of the aggregate purchase price paid by all investors. In addition, Minrad
    shall reimburse KCM for all reasonable travel, legal and other out of pocket
    expenses incurred in fund raising. The aggregate amount shall not exceed
    $225,000 without prior Minrad approval.

	
     
	
     

Biscayne Capital Markets, Inc.(BCMI)

 

	
    -
	
    BCMI will act solely as a finder and be paid the cash sum
    equal to 5% of all funds raised through any buyer introduced to Minrad. In
    addition to the cash fee, 

	
     
	
     

	
    -
	
    BCMI shall be granted common stock purchase warrants in
    an amount equal to 5% of the amount granted to investors. found by BCMI.

	
     
	
     

	
    -
	
    The cash fees and warrants paid to BCMI will be deleted
    from the portion of cash fees and warrants earned by Chadbourne Securities,
    Inc.

Schedule 3(l)

Minrad International, Inc.

SEC - Absence of Certain Changes

Since the date of Minrads most recent SEC document filing
(Form 10-QSB for the quarter ended March 31, 2005 filed on May 13, 2005) there
has been no material adverse change and no material adverse development which
constitutes a Material Adverse Effect.

Schedule 3(n)

Minrad International, Inc.

SEC - Conduct of Business: Regulatory Permits

On or about February 15, 2005, the Company's stock was
temporarily suspended from OTC Bulletin Board trading based on the mistaken
belief that Company was required to file a Form 10-QSB quarterly report for the
period ending December 31, 2005. When the NASD was shown that the Company had
announced the change of its fiscal year under Item 5.03 of its Form 8-K/A filed
on January 19, 2005, the NASD promptly reinstated the Company to OTC Bulletin
Board trading.

Minrad is not currently in violation of any rules,
regulations or requirements of the Principal Market, nor any violation listed in
section 3(n).

Schedule 3(p)

Minrad International, Inc.

Sarbanes-Oxley Act

Minrad is in compliance with all applicable requirements of
the Sarbanes-Oxley Act of 2002 that are effective as of the date hereof, and all
applicable rules and regulations promulgated by the SEC thereunder that are
effective as of the date hereof, except where such noncompliance would not have,
individually or in the aggregate, a material adverse effect.

Schedule 3(q)

MINRAD International, Inc.

Transactions With Affiliates

 

DUE TO AFFILIATES:

	
    (Current Balance as of 4/30/05 in thousands of dollars)            
    
	
    Current Balance

	
     
	
     

	
    1) BioSight, Inc.                              
	
    $ 160

     As per an agreement dated January 3, 2005, MINRAD INC
would repay BioSight Inc. in 14 monthly payments of $11,395 beginning 5/01/2005.
As of this date no monthly payments have been made.

 

	
    2) BioVision Inc.                              
	
    $ 92

      As per an agreement dated
January 3, 2005, MINRAD INC would repay BioVision Inc. in 4 monthly payments of
$22,150 beginning 1/01/2005. As of this date no monthly payments have been
made.  

   

	
    3) Kevin Kimberlin Partners LLC.
	
    $ 28

Refer to attached schedule for Affiliated stock options and
restricted stock.

Schedule 3(r)

Minrad International, Inc.

Equity Capitalization

(i) - None.

(ii) (a) Summary of Shares Reserved for Options and Director
Shares as of 05/25/2005

		
    Vested Options as of 5/25/05
	
    1,072,997

		
    Unvested Options as of 5/25/05
	
    1,864,920

			
    TOTAL GRANTED
	
    2,937,917

			
    TOTAL EXERCISED
	
    35,000

			
    DIRECTED (MILESTONE) OPTIONS 
	
    1,690,000

				
			
    OPEN FOR POSSIBLE FUTURE ISSUANCE
	
    2,507,583

		
    TOTAL OPTIONS RESERVED- EMPLOYEES 
	
    7,170,500

	 	
     	
     
		
    SHARES RESERVED FOR DIRECTORS
	
    50,000

				
		
    SHARES RESERVED -OPTIONS & DIRECTORS
	
    7,220,500

     (b) Warrants:

Minrad

 

Summary of Warrants

As of 6/1/05

 

				
    Expiration
					
    Extended

			Date Issued	
    Date
	
    Price 
	
    Warrant
	
    Total
		
    Value

									
	Bill
    Dioguardi	
    5/2/00
	
    5/2/10
	
    $1.15 
	
    1
	
    19,323
		
    $22,221.45 

	
    SpencerTrask Specialty	
    5/2/00
	
    5/2/10
	
    $1.15 
	
    8
	
    22,500
		
    $25,875.00 

	ST
    Holdings	
    5/2/00
	
    5/2/10
	
    $1.15 
	
    15
	
    64,999
		
    $74,748.85 

	Bill
    Dioquardi	
    5/2/00
	
    5/2/10
	
    $1.15 
	
    16
	
    26,175
		
    $30,101.25 

	Don Farley		
    5/2/00
	
    5/2/10
	
    $1.15 
	
    18
	
    19,630
		
    $22,574.50 

	ST
    Holdings	
    5/2/00
	
    5/2/10
	
    $1.15 
	
    30
	
    64,999
		
    $74,748.85 

	ST
    Holdings	
    5/2/00
	
    5/2/10
	
    $1.15 
	
    33
	
    60,630
		
    $69,724.50 

	Bill
    Dioquardi	
    5/2/00
	
    5/2/10
	
    $1.15 
	
    41
	
    4,207
		
    $4,838.05 

	Don Farley		
    5/2/00
	
    5/2/10
	
    $1.15 
	
    43
	
    2,442
		
    $2,808.30 

	ST
    Securities Inc.	
    5/2/00
	
    5/2/10
	
    $1.15 
	
    47
	
    19,278
		
    $22,169.70 

	ST
    Specialty	
    5/2/00
	
    5/2/10
	
    $1.15 
	
    59
	
    260,870
		
    $300,000.50 

	ST
    Specialty- Duplicate Voided	
    5/2/00
	
    5/2/10
	
    $1.15 
	
    60
	
    0
		
    $0.00 

	ST
    Private Equity I	
    5/2/00
	
    5/2/10
	
    $1.15 
	
    61
	
    182,609
		
    $210,000.35 

	ST
    Private Equity I	
    5/2/00
	
    5/2/10
	
    $1.15 
	
    62
	
    78,261
		
    $90,000.15 

	ST
    Specialty	
    5/2/00
	
    5/2/10
	
    $1.15 
	
    63
	
    434,783
		
    $500,000.45 

	ST
    Specialty	
    5/2/00
	
    5/2/10
	
    $1.15 
	
    64
	
    21,739
		
    $24,999.85 

	ST
    Specialty	
    5/2/00
	
    5/2/10
	
    $1.15 
	
    65
	
    6,522
		
    $7,500.30 

	Various
    other Individuals 	
    5/2/00
	
    5/2/10
	
    $1.15 
	Various	
    50,620
		
    $58,213.00 

	Sub
    Total @ $1.15					
    1,339,587
		
									
	New
    England Partners Capital, L.P.	
    12/17/04
	
    12/17/07
	
    $1.00 
	
    80
	
    475,000
		
    $475,000.00 

									
	K
    Kimberlin Partners LP.	
    8/10/01
	
    8/9/08
	
    $1.00 
	
    53
	
    1,000,000
		
    $1,000,000.00 

	K
    Kimberlin Partners LP.	
    11/2/01
	
    8/9/08
	
    $1.00 
	
    57
	
    1,000,000
		
    $1,000,000.00 

	K
    Kimberlin Partners LP.	
    12/20/01
	
    8/9/08
	
    $1.00 
	
    58
	
    500,000
		
    $500,000.00 

									
									
	K
    Kimberlin Partners LP.	
    10/1/04
	
    9/30/09
	
    $0.75 
	
    86
	
    50,000
		
    $37,500.00 

	K
    Kimberlin Partners LP.	
    11/1/04
	
    10/30/09
	
    $0.75 
	
    87
	
    50,000
		
    $37,500.00 

	K
    Kimberlin Partners LP.	
    12/1/04
	
    11/30/09
	
    $0.75 
	
    88
	
    50,000
		
    $37,500.00 

	K
    Kimberlin Partners LP.	
    1/1/05
	
    12/30/09
	
    $0.75 
	
    89
	
    50,000
		
    $37,500.00 

	K
    Kimberlin Partners LP.	
    2/1/05
	
    1/31/10
	
    $0.75 
	
    90
	
    50,000
		
    $37,500.00 

	K
    Kimberlin Partners LP.	
    3/1/05
	
    2/28/10
	
    $0.75 
	
    93
	
    50,000
		
    $37,500.00 

	K
    Kimberlin Partners LP.	
    4/1/05
	
    3/31/10
	
    $0.75 
	
    94
	
    50,000
		
    $37,500.00 

	K
    Kimberlin Partners LP.	
    5/1/05
	
    4/30/10
	
    $0.75 
	
    95
	
    50,000
		
    $37,500.00 

	K
    Kimberlin Partners LP.	
    6/1/05
	
    5/31/10
	
    $0.75
	
    96
	
    50,000
		
    $37,500.00

									
	CMCP
    Investment Warrants @ $1.25	
    12/15/04
	
    12/15/11
	
    $1.25 
	
    66 thru 75
	
    320,108
		
    $400,135.00 

									
	CMCP
    Invt W @ $1.75 pre-merger	
    12/15/04
	
    12/15/11
	
    $1.75 
	
    76 thru 79
	
    58,526
		
    $102,420.50 

									
	CMCP
    Invt W @ $1.75post-merger	
    1/31/05
	
    1/31/12
	
    $1.75 
	
    81 thru 85
	
    32,171
		
    $56,299.25 

									
	Bridge
    Notes of $2.5M 	
    2/8/05
	
    1/31/10
	
    $1.75 
	
    91 & 92
	
    375,000
		
    $656,250.00 

									
	Total
    O/S Warrants					
    5,550,392
		
    $6,068,129.80 

(iii) See Schedule 3(s) for full list

(iv) Financing - see Schedule 3(s) and 10-KSB Note 7 as of
12/31/04, See Schedule 3(t)

(v) Registration Rights:

					
    Minrad
		
			
							
					
    Shares To Be
		
					
    Registered
		
	
    Officers & Directors						
	
    
    William Burns
				
    3,334
		
	
    
    Robert Lifeso
				
    29,151
		
	
    
    Donald Farley
				
    146,667
		
	
    John
    McNeirney
				
    889
		
	
    Kirk
    Kamsler
				
    1,556
		
	
    
    Subtotal
				
    181,597
		
							
	
    Related Parties						
	
    
    Lincoln Partners
				
    294,195
		
	
    New
    England Partners
				
    3,505,392
		
	
    
    Tobin Family Trust
				
    500,000
		
	
    
    Laird Cagan
				
    786,358
		
	
    ICA
				
    0
		
	
    Eric
    McAfee
				
    250,000
		
	
    CMCP
				
    0
		
	
    
    Subtotal
				
    5,335,945
		
							
	
    
    $1.25 Investors
				
    3,201,084
		
	
    
    $1.75 Investors
				
    906,960
		
	
    
    Options Excercised 
				
    25,000
		
	
    
    Others Converted
				
    314,101
		
	
    
    Total Shares to be Registered
			
    9,964,686
		
							
	
    Underlying Current Warrants (B)					
	CMCP
    & all associated				
    365,152
		
	
    Tobin Trust & ICA				
    420,653
		
	
    Total Shares Underlying Warrants to be
    Registered	
    785,805
		
							
	
    Total Shares To be Registered - before
    conversion	
    10,750,491
		
							
	
    Possible Conversion of $2.5 Notes @ $1.75 
    		
    1,428,571
		
							
	
    Total Shares To be Registered 
    			
    12,179,012
		

Note: In addition, Chadbourn Securities, Inc. will have the
right to have registered a number of shares of Common Stock equal to 10% of the
Shares to be sold in this offering, which shares of Common Stock are issuable
upon the exercise of warrants to by issued by the Company to Chadbourn
Securities, Inc. upon consummation of the offering.

(vi) None

(vii) None

(viii) None

(ix) None 

Schedule 3(s)

MINRAD International, Inc.

Indebtedness & Contracts

There have been no material changes to the "Indebtedness"
since the filing of the 10-QSB as of 3/31/2005.

	
    DEMAND NOTES PAYABLE:
			
	
    (Current Balance as of 4/30/05 in thousands of dollars)
		
    Current Balance

	
    1) Convertible Promissory Note - Laird Cagan
			
	
        (refer to 10-QSB, Note 4 as of 3/31/2005 for detailed
    material terms) 
	
    Original Note
	
    $1,000 

		
    Note Discount
	
    (262)

		
    Net Note Balance
	
    $738 

				
    

	
    2) Convertible Promissory Note -Tobin Family Trust
			
    

	
         (refer to 10-QSB, Note 4 as of 3/31/2005 for detailed
    material terms) 
	
    Original Note
	
    $1,500 

		
    Note Discount
	
    (393)

		
    Net Note Balance
	
    $1,107 

				
    

	
    3) Wachovia Bank, N.A.
			
    $998 

	
         (refer to 10-KSB, Note 6 as of 12/31/2005 for detailed
    material terms)

 

	
    LONG TERM DEBT:
	
	
    (Current Balance as of 4/30/05 in thousands of
    dollars)            
	
    Current Balance
	
    4) Bayview Loan Servicing                         
	
     

	
       (refer to 10-KSB, Note 7 as of 12/31/2005 for detailed
    material terms)
	
    $794

		
	
    5) Buffalo and Erie County Regional Development Corp. 
	
    $43

	
        (refer to 10-KSB, Note 7 as of 12/31/2005 for detailed
    material terms)                             
    

		
	
    Above excludes MINRAD Inc. note payable of $1,322,500.00
    at 6% per annum interest, to it's parent, MINRAD International, Inc. which
    is eliminated in the Consolidated Balance Sheet.

 

Schedule 3(t)

Minrad International, Inc.

Litigation

 

H.T. Lyons Inc. (Lyons)

     On December 10, 2004 a Notice of Mechanics Lien claim for
$86,902 was filed on behalf of H.T. Lyons in the Court of Common Pleas of
Northhampton County, Pennsylvania. This claim relates to process-piping work
performed by Lyons at Minrad's manufacturing plant in Bethlehem, PA. Minrad's
position is that the work was never fully completed as agreed to in the contract
signed by the parties. Subsequently a Civil Action against Minrad was filed by
Lyons on February 1, 2005. The parties have recently verbally agreed to a
$75,000.00 settlement which has not yet been formalized nor paid. Minrad has
fully recorded the $75,000.00 settlement in accounts payable and it is reflected
in the Balance Sheet of our 10-QSB for the quarter ended March 31, 2005.

Schedule 3(x)

Minrad International

Intellectual Property

     Reference is made to the information contained in "Item
1.     Description of Business" under the caption "United States Approvals for
our Business" in the Minrad International, Inc. Form 10-KSB Report for the
period ended December 31, 2005, for disclosure of all of the Company's U.S.
acceptances, approvals and patents.

 

 

Schedule 3(w)

Minrad International, Inc.

Liens on Real and Personal Property

 

          (1)     Mortgage and Security Agreement, dated
October __, 2001, between Minrad Inc. and Interbay Funding, LLC, relating to
3950 Schelden Circle, Bethlehem, PA 18017-936 and all personal property located
there.

 

          (2)     Second Mortgage and Security Agreement, to be entered into between Minrad Inc. and Laird Cagan and the Tobin Family Trust as holders of Convertible
Promissory Notes of Minrad International, Inc., relating to 3950 Schelden
Circle, Bethlehem, PA 18017-936 and all personal property located there/

 

Schedule 4(m)

Minrad International, Inc.

 

         The Company currently has outstanding an offer of
employment to a candidate to fulfill the position of Vice President of
Regulatory Affairs, which may be accepted during the period prior to the
Closing.Exhibit 10.9

referred to thereinEXHIBIT A

FORM OF WARRANT

NEITHER THE ISSUANCE AND SALE OF THE SECURITIES REPRESENTED
BY THIS CERTIFICATE NOR THE SECURITIES INTO WHICH THESE SECURITIES ARE
EXERCISABLE HAVE BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED,
OR APPLICABLE STATE SECURITIES LAWS. THE SECURITIES MAY NOT BE OFFERED FOR SALE,
SOLD, TRANSFERRED OR ASSIGNED (I) IN THE ABSENCE OF (A) AN EFFECTIVE
REGISTRATION STATEMENT FOR THE SECURITIES UNDER THE SECURITIES ACT OF 1933, AS
AMENDED, OR (B) AN OPINION OF COUNSEL, IN A GENERALLY ACCEPTABLE FORM, THAT
REGISTRATION IS NOT REQUIRED UNDER SAID ACT OR (II) UNLESS SOLD PURSUANT TO RULE
144 OR RULE 144A UNDER SAID ACT. NOTWITHSTANDING THE FOREGOING, THE SECURITIES
MAY BE PLEDGED IN CONNECTION WITH A BONA FIDE MARGIN ACCOUNT OR OTHER LOAN OR
FINANCING ARRANGEMENT SECURED BY THE SECURITIES.

MINRAD INTERNATIONAL, INC.

WARRANT TO PURCHASE COMMON STOCK

Warrant No.: ________

Number of Shares of Common Stock:_____________

Date of Issuance: June_, 2005 ("Issuance Date")

                Minrad International, Inc., a Delaware corporation (the "Company"),
hereby certifies that, for good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, [NAME OF BUYER], the registered
holder hereof or its permitted assigns (the "Holder"), is
entitled, subject to the terms set forth below, to purchase from the Company, at
the Exercise Price (as defined below) then in effect, upon surrender of this
Warrant to Purchase Common Stock (including any Warrants to Purchase Common
Stock issued in exchange, transfer or replacement hereof, the "Warrant"),
at any time after the date hereof, but not after 11:59 p.m., New York Time, on
the Expiration Date (as defined below), (___________) fully paid nonassessable
shares of Common Stock (as defined below) (the "Warrant Shares"). Except
as otherwise defined herein, capitalized terms in this Warrant shall have the
meanings set forth in Section 15. This Warrant is one of the Warrants to
Purchase Common Stock (the "SPA Warrants") issued pursuant to Section 1
of that certain Securities Purchase Agreement, dated as of June 28, 2005 (the "Subscription
Date"), by and among the Company and the investors (the "Buyers")
referred to therein (the "Securities Purchase Agreement").

____________________________

INSERT HOLDER'S PORTION OF SERIES R WARRANTS SET FORTH IN COLUMN (4) ON THE
SCHEDULE OF BUYERS TO THE SECURITIES PURCHASE AGREEMENT, EXERCISABLE FOR AN
AGGREGATE OF [         ] SHARES OF COMMON STOCK

                1. EXERCISE OF WARRANT.

                    (a) Mechanics of Exercise. Subject to the terms and conditions
hereof (including, without limitation, the limitations set forth in Section
1(f)), this Warrant may be exercised by the Holder on any day on or after
the date hereof in whole or in part, by (i) delivery of a written notice, in the
form attached hereto as Exhibit A (the "Exercise Notice"), of the
Holder's election to exercise this Warrant and (ii) (A) payment to the Company
of an amount equal to the applicable Exercise Price multiplied by the number of
Warrant Shares as to which this Warrant is being exercised (the "Aggregate
Exercise Price") in cash or wire transfer of immediately available funds to
an account designated by the Company or (B) by notifying the Company that this
Warrant is being exercised pursuant to a Cashless Exercise (as defined in 
Section 1(d)). The Holder shall not be required to deliver the original
Warrant or the new Warrant, as applicable, in order to effect an exercise
hereunder. Execution and delivery of the Exercise Notice with respect to less
than all of the Warrant Shares shall have the same effect as cancellation of the
original Warrant and issuance of a new Warrant of like tenor evidencing the
right to purchase the remaining number of Warrant Shares. On or before the first
Business Day following the date on which the Company has received each of the
Exercise Notice and the Aggregate Exercise Price (or notice of a Cashless
Exercise) (the "Exercise Delivery Documents"), the Company shall transmit
by facsimile an acknowledgment of confirmation of receipt of the Exercise
Delivery Documents to the Holder and the Company's transfer agent (the "Transfer
Agent"). On or before the third Business Day following the date on which the
Company has received all of the Exercise Delivery Documents (the "Share
Delivery Date"), the Company shall (X) provided that the Transfer Agent is
participating in The Depository Trust Company ("DTC") Fast Automated
Securities Transfer Program, upon the request of the Holder, credit such
aggregate number of shares of Common Stock to which the Holder is entitled
pursuant to such exercise to the Holder's or its designee's balance account with
DTC through its Deposit Withdrawal Agent Commission system, or (Y) if the
Transfer Agent is not participating in the DTC Fast Automated Securities
Transfer Program, issue and dispatch by overnight courier to the address as
specified in the Exercise Notice, a certificate, registered in the Company's
share register in the name of the Holder or its designee, for the number of
shares of Common Stock to which the Holder is entitled pursuant to such
exercise. Upon delivery by the Holder of the Exercise Notice and Aggregate
Exercise Price referred to in clause (ii)(A) above or notification to the
Company of a Cashless Exercise referred to in Section 1(d), the Holder
shall be deemed for all corporate purposes to have become the holder of record
of the Warrant Shares with respect to which this Warrant has been exercised,
irrespective of the date of delivery of the certificates evidencing such Warrant
Shares. If this Warrant is submitted in connection with any exercise pursuant to
this Section 1(a) or Section 1(d) and the number of Warrant Shares
represented by this Warrant submitted for exercise is greater than the number of
Warrant Shares being acquired upon an exercise, then the Company shall void the
existing Warrant and as soon as practicable and in no event later than three
Business Days after any exercise and at its own expense, issue a new Warrant (in
accordance with Section 7(d)) representing the right to purchase the
number of Warrant Shares purchasable immediately prior to such exercise under
this Warrant, less the number of Warrant Shares with respect to which this
Warrant is exercised. No fractional shares of Common Stock are to be issued upon
the exercise of this Warrant, but rather the number of shares of Common Stock to
be issued shall be rounded up to the nearest whole number. The Company
shall pay any and all taxes which may be payable with respect to 

-2-

the issuance and delivery of Warrant Shares upon exercise of this Warrant
other than income taxes of the Holder resulting from the exercise of this
Warrant. 

                    (b) Exercise Price. For purposes of this Warrant, "Exercise
Price" means US $3.85, subject to adjustment as provided herein.

                    (c) Company's Failure to Timely Deliver Securities. Subject to
Section 1(f), if the Company shall fail for any reason or for no reason
to issue to the Holder within three (3) Business Days of receipt of the Exercise
Delivery Documents, a certificate for the number of shares of Common Stock to
which the Holder is entitled and register such shares of Common Stock on the
Company's share register or to credit the Holder's balance account with DTC for
such number of shares of Common Stock to which the Holder is entitled upon the
Holder's exercise of this Warrant, then, in addition to all other remedies
available to the Holder, the Company shall pay in cash to the Holder on each day
after such third Business Day that the issuance of such shares of Common Stock
is not timely effected an amount equal to 0.5% of the product of (A) the sum of
the number of shares of Common Stock not issued to the Holder on a timely basis
and to which the Holder is entitled and (B) the Closing Sale Price of the shares
of Common Stock on the Trading Day immediately preceding the last possible date
which the Company could have issued such shares of Common Stock to the Holder
without violating Section 1(a). In addition to the foregoing, if within
three (3) Trading Days after the Company's receipt of the facsimile copy of a
Exercise Notice and the Aggregate Exercise Price (or notice of a Cashless
Exercise) the Company shall fail to issue and deliver a certificate to the
Holder and register such shares of Common Stock on the Company's share register
or credit the Holder's balance account with DTC for the number of shares of
Common Stock to which the Holder is entitled upon such holder's exercise
hereunder, and if on or after the third Trading Day the Holder purchases (in an
open market transaction or otherwise) shares of Common Stock to deliver in
satisfaction of a sale by the Holder of shares of Common Stock issuable upon
such exercise that the Holder anticipated receiving from the Company (a "Buy-In"),
then the Company shall, within three (3) Business Days after the Holder's
request and in the Holder's discretion, either (i) pay cash to the Holder in an
amount equal to the Holder's total purchase price (including brokerage
commissions, if any) for the shares of Common Stock so purchased (the "Buy-In
Price"), at which point the Company's obligation to deliver such certificate
(and to issue such shares of Common Stock) shall terminate, or (ii) promptly
honor its obligation to deliver to the Holder a certificate or certificates
representing such shares of Common Stock and pay cash to the Holder in an amount
equal to the excess (if any) of the Buy-In Price over the product of (A) such
number of shares of Common Stock, multiplied by (B) the Closing Bid Price on the
date of exercise.

                    (d) Cashless Exercise. Notwithstanding anything contained
herein to the contrary, if a Registration Statement (as defined in the
Registration Rights Agreement) covering the Warrant Shares that are the subject
of the Exercise Notice (the "Unavailable Warrant Shares") is not
available for the resale of such Unavailable Warrant Shares, the Holder may, in
its sole discretion, exercise this Warrant in whole or in part and, in lieu of
making the cash payment otherwise contemplated to be made to the Company upon
such exercise in payment of the Aggregate Exercise Price, elect instead to
receive upon such exercise the "Net

-3-

 Number" of shares of Common Stock determined
according to the following formula (a "Cashless Exercise"):

Net Number = (A x B) - (A x C)

B

                            
                          
                        
                      
                    
                  
                
              
            
          
        
      
    
  

                                                                For purposes of the foregoing formula:

A= the total number of shares with respect to which this
                Warrant is then being exercised.

                B= the Closing Sale Price of the shares of Common Stock (as
                reported by Bloomberg) on the date immediately preceding the
                date of the Exercise Notice.

                C= the Exercise Price then in effect for the applicable
                Warrant Shares at the time of such exercise. 

              
            
          
        
      
    
  

The Holder will be solely responsible for all income taxes of any kind
whatsoever imposed on the Holder by any federal, state, local or foreign
governmental or taxing authority resulting from a cashless exercise of the
Warrant pursuant to this Section 1(d).

                    (e) Disputes. In the case of a dispute as to the determination
of the Exercise Price or the arithmetic calculation of the Warrant Shares, the
Company shall promptly issue to the Holder the number of Warrant Shares that are
not disputed and resolve such dispute in accordance with Section 12.

                    (f) Limitations on Exercises.

                                (i) Beneficial Ownership. The Company shall not effect the
exercise of this Warrant, and the Holder shall not have the right to exercise
this Warrant, to the extent that after giving effect to such exercise, such
Person (together with such Person's affiliates) would beneficially own in excess
of 9.99% (the "Conversion Limitation") of the shares of Common Stock
outstanding immediately after giving effect to such exercise. For purposes of
the foregoing sentence, the aggregate number of shares of Common Stock
beneficially owned by such Person and its affiliates shall include the number of
shares of Common Stock issuable upon exercise of this Warrant with respect to
which the determination of such sentence is being made, but shall exclude shares
of Common Stock which would be issuable upon (i) exercise of the remaining,
unexercised portion of this Warrant beneficially owned by such Person and its
affiliates and (ii) exercise or conversion of the unexercised or unconverted
portion of any other securities of the Company beneficially owned by such Person
and its affiliates (including, without limitation, any convertible notes or
convertible preferred stock or warrants) subject to a limitation on conversion
or exercise analogous to the limitation contained herein. Except as set forth in
the preceding sentence, for purposes of this paragraph, beneficial ownership
shall be calculated in accordance with Section 13(d) of the Securities
Exchange Act of 1934, as amended. For purposes of this Warrant, in determining
the number of outstanding shares of Common Stock, the Holder may rely on the
number of outstanding shares 

-4-

of Common Stock as reflected in (1) the Company's
most recent Form 10-K or 10-Q or any Current Report on Form 8-K filed subsequent
thereto or other public filing with the Securities and Exchange Commission, (2)
a more recent public announcement by the Company or (3) any other notice by the
Company or the Transfer Agent setting forth the number of shares of Common Stock
outstanding. For any reason at any time, upon the written or oral request of the
Holder, the Company shall within three (3) Business Days confirm orally and in
writing to the Holder the number of shares of Common Stock then outstanding. In
any case, the number of outstanding shares of Common Stock shall be determined
after giving effect to the issuance of the SPA Securities and the conversion or
exercise of securities of the Company, including the SPA Warrants, by the Holder
and its affiliates since the date as of which such number of outstanding shares
of Common Stock was reported. By prior written notice to the Company, any Holder
may increase or decrease the Conversion Limitation to any other percentage not
in excess of 19.99% specified in such notice; provided that (i) any such
increase will not be effective until the 61st day after such notice is delivered
to the Company, and (ii) any such increase or decrease will apply only to the
Holder sending such notice and not to any other holder of SPA Warrants. 

                                (ii) Principal Market Regulation. The Company shall not be
obligated to issue any shares of Common Stock upon exercise of this Warrant if
the issuance of such shares of Common Stock would exceed that number of shares
of Common Stock which the Company may issue upon exercise of this Warrant
(including, as applicable, any shares of Common Stock issued upon exercise of
the SPA Securities) without breaching the Company's obligations under the rules
or regulations of the Principal Market (the "Exchange Cap"), except that
such limitation shall not apply in the event that the Company (A) obtains the
approval of its shareholders as required by the applicable rules of the
Principal Market for issuances of shares of Common Stock in excess of such
amount or (B) obtains a written opinion from outside counsel to the Company that
such approval is not required, which opinion shall be reasonably satisfactory to
the Required Holders. Until such approval or written opinion is obtained, no
Buyer shall be issued, upon exercise of any SPA Warrants, shares of Common Stock
in an amount greater than the product of the Exchange Cap multiplied by a
fraction, the numerator of which is the total number of shares of Common Stock
issued to such Buyer pursuant to the Securities Purchase Agreement on the
Issuance Date and the denominator of which is the aggregate number of shares of
Common Stock issued to the Buyers pursuant to the Securities Purchase Agreement
on the Issuance Date (with respect to each Buyer, the "Exchange Cap
Allocation"). In the event that any Buyer shall sell or otherwise transfer
any of such Buyer's SPA Warrants, the transferee shall be allocated a pro rata
portion of such Buyer's Exchange Cap Allocation, and the restrictions of the
prior sentence shall apply to such transferee with respect to the portion of the
Exchange Cap Allocation allocated to such transferee. In the event that any
holder of SPA Warrants shall exercise all of such holder's SPA Warrants into a
number of shares of Common Stock which, in the aggregate, is less than such
holder's Exchange Cap Allocation, then the difference between such holder's
Exchange Cap Allocation and the number of shares of Common Stock actually issued
to such holder shall be allocated to the respective Exchange Cap Allocations of
the remaining holders of SPA Warrants on a pro rata basis in proportion to the
shares of Common Stock underlying the SPA Warrants then held by each such
holder. In the event that the Company is prohibited from issuing any Warrant
Shares for which an Exercise Notice has been received as a result of the
operation of this Section 1(f)(ii), the Company shall pay cash in
exchange for cancellation of such Warrant Shares, at a price per Warrant Share
equal 

-5-

to the difference between the Closing Sale Price and the Exercise Price as of
the date of the attempted exercise. 

                2. ADJUSTMENT OF EXERCISE PRICE AND NUMBER OF WARRANT SHARES.
The Exercise Price and the number of Warrant Shares shall be adjusted from time
to time as follows:

                    (a) Adjustment upon Issuance of shares of Common Stock. With
respect to the original or new Warrant held only by the original Holder and not
any transferee (whether by assignment or operation of law), if and whenever on
or after the Subscription Date the Company issues or sells, or in accordance
with this Section 2 is deemed to have issued or sold, any shares of
Common Stock (including the issuance or sale of shares of Common Stock owned or
held by or for the account of the Company, but excluding shares of Common Stock
deemed to have been issued by the Company in connection with the exercise of
Options issued under the Company's 2004 Stock Option Plan (the "2004 Options"),
the exercise of warrants issued prior to the Subscription Date as disclosed on
Schedule 3(r) of the Securities Purchase Agreement (the "Existing Warrants")
or the exercise of warrants to purchase 50,000 shares of Common Stock to be
issued to Kevin Kimberlin Partners L.P. on the first day of each month that its
guarantee of a note payable to Wachovia Bank, NA, is in effect (the "KKP
Warrants" and together with the 2004 Options and the Existing Warrants, the
"Excluded Securities") for a consideration per share less than a price
(the "Applicable Price") equal to the lesser of $1.85 (subject to
appropriate adjustments for stock splits, stock dividends, stock combinations
and other similar transactions on or after the Subscription Date) or Exercise
Price in effect immediately prior to such issue or sale or deemed issuance or
sale (the foregoing a "Dilutive Issuance"), then immediately after such
Dilutive Issuance, the Exercise Price then in effect shall be reduced to an
amount equal to the product of (A) the Exercise Price in effect immediately
prior to such Dilutive Issuance and (B) the quotient determined by dividing
(1) the sum of (I) the product derived by multiplying the Exercise Price in
effect immediately prior to such Dilutive Issuance and the number of shares of
Common Stock Deemed Outstanding immediately prior to such Dilutive Issuance plus
(II) the consideration, if any, received by the Company upon such Dilutive
Issuance, by (2) the product derived by multiplying (I) the Exercise Price in
effect immediately prior to such Dilutive Issuance by (II) the number of shares
of Common Stock Deemed Outstanding immediately after such Dilutive Issuance. "Common
Stock Deemed Outstanding" means, at any given time, the number of shares
of Common Stock issued and outstanding at such time plus all shares of Common
Stock deemed outstanding pursuant to Sections 2(a)(i), 2(a)(ii)
and 2(a)(iii) regardless of whether such securities are actually
exercisable at such time, but excluding any shares of Common Stock owned or held
by or for the account of the Company or issuable upon conversion or exercise, as
applicable, of the SPA Warrants. For purposes of determining the adjusted
Exercise Price under this Section 2(a), the following shall be
applicable:

                                (i) Issuance of Options. If the Company in any manner grants
any Options other than the Excluded Securities and the lowest price per share
for which one share of Common Stock is issuable upon the exercise of any such
Option or upon conversion, exercise or exchange of any Convertible Securities
issuable upon exercise of any such Option is less than the Applicable Price,
then such share of Common Stock shall be deemed to be  

-6-

outstanding and to have
been issued and sold by the Company at the time of the granting or sale of such
Option for such price per share. For purposes of this Section 2(a)(i),
the "lowest price per share for which one share of Common Stock is issuable upon
exercise of such Options or upon conversion, exercise or exchange of such
Convertible Securities" shall be equal to the sum of the lowest amounts of
consideration (if any) received or receivable by the Company with respect to any
one share of Common Stock upon the granting or sale of the Option, upon exercise
of the Option and upon conversion, exercise or exchange of any Convertible
Security issuable upon exercise of such Option. Except as provided in Section
2(a)(ii), no further adjustment of the Exercise Price shall be made upon the
actual issuance of such shares of Common Stock or of such Convertible Securities
upon the exercise of such Options or upon the actual issuance of such shares of
Common Stock upon conversion, exercise or exchange of such Convertible
Securities.

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

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

-7-

                                (iv) Calculation of Consideration Received. In case any Option
is issued in connection with the issue or sale of other securities of the
Company, together comprising one integrated transaction in which no specific
consideration is allocated to such Options by the parties thereto, the Options
will be deemed to have been issued for a consideration of $0.01. If any shares
of Common Stock, Options or Convertible Securities are issued or sold or deemed
to have been issued or sold for cash, the consideration received therefor will
be deemed to be the net amount received by the Company therefor. If any shares
of Common Stock, Options or Convertible Securities are issued or sold for a
consideration other than cash, the amount of such consideration received by the
Company will be the fair value of such consideration, except where such
consideration consists of securities, in which case the amount of consideration
received by the Company will be the Closing Sale Price of such security on the
date of receipt. If any shares of Common Stock, Options or Convertible
Securities are issued to the owners of the non-surviving entity in connection
with any merger in which the Company is the surviving entity, the amount of
consideration therefor will be deemed to be the fair value of such portion of
the net assets and business of the non-surviving entity as is attributable to
such shares of Common Stock, Options or Convertible Securities, as the case may
be. The fair value of any consideration other than cash or securities will be
determined jointly by the Company and the Required Holders. If such parties are
unable to reach agreement within ten (10) days after the occurrence of an event
requiring valuation (the "Valuation Event"), the fair value of such
consideration will be determined within five (5) Business Days after the tenth
day following the Valuation Event by an independent, reputable appraiser jointly
selected by the Company and the Required Holders. The determination of such
appraiser shall be final and binding upon all parties absent manifest error. The
reasonable expenses of such appraiser in making such determination shall be paid
by the Company in the event the Holder's calculation was correct, or by the
Holder in the event the Company's calculation was correct, or equally by the
Company and the Holder in the event that neither the Company's or the Holder's
calculation was correct.

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

                    (b) Adjustment upon Subdivision or Combination of shares of Common
Stock. If the Company at any time on or after the Subscription Date
subdivides (by any stock split, stock dividend, recapitalization or otherwise)
one or more classes of its outstanding shares of Common Stock into a greater
number of shares, the Exercise Price in effect immediately prior to such
subdivision will be proportionately reduced and the number of Warrant Shares
will be proportionately increased. If the Company at any time on or after the
Subscription Date combines (by combination, reverse stock split or otherwise)
one or more classes of its outstanding shares of Common Stock into a smaller
number of shares, the Exercise Price in effect immediately prior to such
combination will be proportionately increased and the  

-8-

number of Warrant Shares
will be proportionately decreased. Any adjustment under this Section 2(b)
shall become effective at the close of business on the date the subdivision or
combination becomes effective.

                    (c) Other Events. With respect to the original or new Warrant
held only by the original Holder and not any transferee (whether by assignment
or operation of law), if any event occurs of the type contemplated by the
provisions of this Section 2 but not expressly provided for by such
provisions (including, without limitation, the granting of stock appreciation
rights, phantom stock rights or other rights with equity features), then the
Company's Board of Directors will make an appropriate adjustment in the Exercise
Price and, if the event is of the type contemplated by Section 2(b), the
number of Warrant Shares so as to protect the rights of the Holder; provided
that no such adjustment pursuant to this Section 2(c) will increase the
Exercise Price or, if the event is of the type contemplated by Section 2(b),
decrease the number of Warrant Shares as otherwise determined pursuant to this
Section 2.

                3. RIGHTS UPON DISTRIBUTION OF ASSETS. If the Company shall
declare or make any dividend or other distribution of its assets (or rights to
acquire its assets) to holders of shares of Common Stock, by way of return of
capital or otherwise (including, without limitation, any distribution of cash,
stock or other securities, property or options by way of a dividend, spin off,
reclassification, corporate rearrangement, scheme of arrangement or other
similar transaction) (a "Distribution"), at any time after the issuance
of this Warrant, then, in each such case:

                    (a) any Exercise Price in effect immediately prior to the close of
business on the record date fixed for the determination of holders of shares of
Common Stock entitled to receive the Distribution shall be reduced, effective as
of the close of business on such record date, to a price determined by
multiplying such Exercise Price by a fraction of which (i) the numerator shall
be the Closing Bid Price of the shares of Common Stock on the Trading Day
immediately preceding such record date minus the value of the Distribution (as
determined in good faith by the Company's Board of Directors) applicable to one
share of shares of Common Stock, and (ii) the denominator shall be the Closing
Bid Price of the shares of Common Stock on the Trading Day immediately preceding
such record date; and

                    (b) the number of Warrant Shares shall be increased to a number of
shares equal to the number of shares of Common Stock obtainable immediately
prior to the close of business on the record date fixed for the determination of
holders of shares of Common Stock entitled to receive the Distribution
multiplied by the reciprocal of the fraction set forth in the immediately
preceding paragraph (a); provided that in the event that the Distribution is of
shares of Common Stock (or common stock) ("Other Shares of Common Stock")
of a company whose common shares are traded on a national securities exchange or
a national automated quotation system, then the Holder may elect to receive a
warrant to purchase Other Shares of Common Stock in lieu of an increase in the
number of Warrant Shares, the terms of which shall be identical to those of this
Warrant, except that such warrant shall be exercisable into the number of shares
of Other Shares of Common Stock that would have been payable to the Holder
pursuant to the Distribution had the Holder exercised this Warrant immediately
prior to such record date and with an aggregate exercise price equal to the
product of the amount by which the 

-9-

exercise price of this Warrant was decreased with respect to the Distribution
pursuant to the terms of the immediately preceding paragraph (a) and the number
of Warrant Shares calculated in accordance with the first part of this paragraph
(b).

                4. PURCHASE RIGHTS; FUNDAMENTAL TRANSACTIONS.

                    (a) Purchase Rights. In addition to any adjustments pursuant to
Section 2 above, if at any time the Company grants, issues or sells any
Options, Convertible Securities or rights to purchase stock, warrants,
securities or other property pro rata to the record holders of any class of
shares of Common Stock other than pursuant to the Company's 2004 Stock Option
Plan or the KKP Warrants (the "Purchase Rights"), then the Holder
will be entitled to acquire, upon the terms applicable to such Purchase Rights,
the aggregate Purchase Rights which the Holder could have acquired if the Holder
had held the number of shares of Common Stock acquirable upon complete exercise
of this Warrant (without regard to any limitations on the exercise of this
Warrant) immediately before the date on which a record is taken for the grant,
issuance or sale of such Purchase Rights, or, if no such record is taken, the
date as of which the record holders of shares of Common Stock are to be
determined for the grant, issue or sale of such Purchase Rights.

                    (b) Fundamental Transactions. The Company shall not enter into
or be party to a Fundamental Transaction unless (i)  the Successor Entity
assumes in writing all of the obligations of the Company under this Warrant and
the other Transaction Documents in accordance with the provisions of this 
Section (4)(b) pursuant to written agreements in form and substance
reasonably satisfactory to the Required Holders and approved by the Required
Holders prior to such Fundamental Transaction, including agreements to deliver
to each holder of Warrants in exchange for such Warrants a security of the
Successor Entity evidenced by a written instrument substantially similar in form
and substance to this Warrant, including, without limitation, an adjusted
exercise price equal to the value for the shares of Common Stock reflected by
the terms of such Fundamental Transaction, and exercisable for a corresponding
number of shares of capital stock equivalent to the shares of Common Stock
acquirable and receivable upon exercise of this Warrant (without regard to any
limitations on the exercise of this Warrant) prior to such Fundamental
Transaction, and reasonably satisfactory to the Required Holders and (ii) the
Successor Entity (including its Parent Entity) is a publicly traded corporation
whose common stock is quoted on or listed for trading on an Eligible Market.
Upon the occurrence of any Fundamental Transaction, the Successor Entity shall
succeed to, and be substituted for (so that from and after the date of such
Fundamental Transaction, the provisions of this Warrant referring to the
"Company" shall refer instead to the Successor Entity), and may exercise every
right and power of the Company and shall assume all of the obligations of the
Company under this Warrant with the same effect as if such Successor Entity had
been named as the Company herein. Upon consummation of the Fundamental
Transaction, the Successor Entity shall deliver to the Holder confirmation that
there shall be issued upon exercise of this Warrant at any time after the
consummation of the Fundamental Transaction, in lieu of the shares of the Common
Stock (or other securities, cash, assets or other property) purchasable upon the
exercise of the Warrant prior to such Fundamental Transaction, such shares of
stock, securities, cash, assets or any other property whatsoever (including
warrants or other purchase or subscription rights) which the Holder would have
been entitled to receive upon the happening of such Fundamental  

-10-

Transaction had
this Warrant been converted immediately prior to such Fundamental Transaction,
as adjusted in accordance with the provisions of this Warrant. In addition to
and not in substitution for any other rights hereunder, prior to the
consummation of any Fundamental Transaction pursuant to which holders of shares
of Common Stock are entitled to receive securities or other assets with respect
to or in exchange for shares of Common Stock (a "Corporate Event"), the
Company shall make appropriate provision to insure that the Holder will
thereafter have the right to receive upon an exercise of this Warrant at any
time after the consummation of the Fundamental Transaction
but prior to the Expiration Date, in lieu of the
shares of the Common Stock (or other securities, cash, assets
or other property) purchasable upon the exercise of
the Warrant prior to such Fundamental Transaction,
such shares of stock, securities, cash, assets or any other property whatsoever
(including warrants or other purchase or subscription rights) which the Holder
would have been entitled to receive upon the happening of such Fundamental
Transaction had the Warrant been exercised immediately prior to such Fundamental
Transaction. Provision made pursuant to the preceding sentence shall be in a
form and substance reasonably satisfactory to the Required Holders. The
provisions of this Section shall apply similarly and equally to successive
Fundamental Transactions and Corporate Events and shall be applied without
regard to any limitations on the exercise of this Warrant.

                5. NONCIRCUMVENTION. The Company hereby covenants and agrees
that the Company will not, by amendment of its Certificate of Incorporation,
By-laws or through any reorganization, transfer of assets, consolidation,
merger, scheme of arrangement, dissolution, issue or sale of securities, or any
other voluntary action, avoid or seek to avoid the observance or performance of
any of the terms of this Warrant, and will at all times in good faith carry out
all the provisions of this Warrant and take all action as may be required to
protect the rights of the Holder. Without limiting the generality of the
foregoing, the Company (i) shall not increase the par value of any shares of
Common Stock receivable upon the exercise of this Warrant above the Exercise
Price then in effect, and (ii) shall take all such actions as may be necessary
or appropriate in order that the Company may validly and legally issue fully
paid and nonassessable shares of Common Stock upon the exercise of this Warrant.
The Company shall, so long as any of the SPA Warrants are outstanding, take all
action necessary to reserve and keep available out of its authorized and
unissued shares of Common Stock, solely for the purpose of effecting the
exercise of the SPA Warrants, 130% of the number of shares of Common Stock as
shall from time to time be necessary to effect the exercise of the SPA Warrants
then outstanding (without regard to any limitations on exercise).

                6. WARRANT HOLDER NOT DEEMED A STOCKHOLDER. Except as otherwise
specifically provided herein, the Holder, solely in such Person's capacity as a
holder of this Warrant, shall not be entitled to vote or receive dividends or be
deemed the holder of share capital of the Company for any purpose, nor shall
anything contained in this Warrant be construed to confer upon the Holder,
solely in such Person's capacity as the Holder of this Warrant, any of the
rights of a shareholder of the Company or any right to vote, give or withhold
consent to any corporate action (whether any reorganization, issue of stock,
reclassification of stock, consolidation, merger, conveyance or otherwise),
receive notice of meetings, receive dividends or subscription rights, or
otherwise, prior to the issuance to the Holder of the Warrant Shares which such
Person is then entitled to receive upon the due exercise of this Warrant. In
addition, nothing contained in this Warrant shall be construed as imposing any
liabilities on the  

-11-

Holder to purchase any securities (upon exercise of this
Warrant or otherwise) or as a shareholder of the Company, whether such
liabilities are asserted by the Company or by creditors of the Company.
Notwithstanding this Section 6, the Company shall provide the Holder with
copies of the same notices and other information given to the shareholders of
the Company generally, contemporaneously with the giving thereof to the
shareholders.

                7. REISSUANCE OF WARRANTS.

                    (a) Transfer of Warrant. If this Warrant is to be transferred,
the Holder shall surrender this Warrant to the Company, whereupon the Company
will forthwith issue and deliver upon the order of the Holder a new Warrant (in
accordance with Section 7(d)), registered as the Holder may request,
representing the right to purchase the number of Warrant Shares being
transferred by the Holder and, if less than the total number of Warrant Shares
then underlying this Warrant is being transferred, a new Warrant (in accordance
with Section 7(d)) to the Holder representing the right to purchase the
number of Warrant Shares not being transferred.

                    (b) Lost, Stolen or Mutilated Warrant. Upon receipt by the
Company of evidence reasonably satisfactory to the Company of the loss, theft,
destruction or mutilation of this Warrant, and, in the case of loss, theft or
destruction, of any indemnification or security undertaking by the Holder to the
Company in customary form and, in the case of mutilation, upon surrender and
cancellation of this Warrant, the Company shall execute and deliver to the
Holder a new Warrant (in accordance with Section 7(d)) representing the
right to purchase the Warrant Shares then underlying this Warrant.

                    (c) Exchangeable for Multiple Warrants. This Warrant is
exchangeable, upon the surrender hereof by the Holder at the principal office of
the Company, for a new Warrant or Warrants (in accordance with Section 7(d))
representing in the aggregate the right to purchase the number of Warrant Shares
then underlying this Warrant, and each such new Warrant will represent the right
to purchase such portion of such Warrant Shares as is designated by the Holder
at the time of such surrender; provided, however, that no Warrants for
fractional shares of Common Stock shall be given.

                    (d) Issuance of New Warrants. Whenever the Company is required
to issue a new Warrant pursuant to the terms of this Warrant, such new Warrant (i)
shall be of like tenor with this Warrant, (ii) shall represent, as indicated on
the face of such new Warrant, the right to purchase the Warrant Shares then
underlying this Warrant (or in the case of a new Warrant being issued pursuant
to Section 7(a) or Section 7(c), the Warrant Shares designated by
the Holder which, when added to the number of shares of Common Stock underlying
the other new Warrants issued in connection with such issuance, does not exceed
the number of Warrant Shares then underlying this Warrant), (iii) shall have an
issuance date, as indicated on the face of such new Warrant which is the same as
the Issuance Date, and (iv) shall have the same rights and conditions as this
Warrant.

                8. NOTICES. Whenever notice is required to be given under this
Warrant, unless otherwise provided herein, such notice shall be given in
accordance with Section 10(f) of  

-12-

the Securities Purchase Agreement. The
Company shall provide the Holder with prompt written notice of all actions taken
pursuant to this Warrant, including in reasonable detail a description of such
action and the reason therefor. Without limiting the generality of the
foregoing, the Company will give written notice to the Holder (i) immediately
upon any adjustment of the Exercise Price, setting forth in reasonable detail,
and certifying, the calculation of such adjustment and (ii) at least fifteen
days prior to the date on which the Company closes its books or takes a record
(A) with respect to any dividend or distribution upon the shares of Common
Stock, (B) with respect to any grants, issuances or sales of any Options,
Convertible Securities or rights to purchase stock, warrants, securities or
other property to holders of shares of Common Stock or (C) for determining
rights to vote with respect to any Fundamental Transaction, dissolution or
liquidation, provided in each case that such information shall be made known to
the public prior to or in conjunction with such notice being provided to the
Holder.

                9. AMENDMENT AND WAIVER. Except as otherwise provided herein,
the provisions of this Warrant may be amended and the Company may take any
action herein prohibited, or omit to perform any act herein required to be
performed by it, only if the Company has obtained the written consent of the
Required Holders; provided that no such action may increase the exercise price
of any SPA Warrant or decrease the number of shares or class of stock obtainable
upon exercise of any SPA Warrant without the written consent of the Holder. No
such amendment shall be effective to the extent that it applies to less than all
of the holders of the SPA Warrants then outstanding.

                10. GOVERNING LAW. This Warrant shall be governed by and
construed and enforced in accordance with, and all questions concerning the
construction, validity, interpretation and performance of this Warrant shall be
governed by, the internal laws of the State of New York, without giving effect
to any choice of law or conflict of law provision or rule (whether of the State
of New York or any other jurisdictions) that would cause the application of the
laws of any jurisdictions other than the State of New York.

                11. CONSTRUCTION; HEADINGS. This Warrant shall be deemed to be
jointly drafted by the Company and all the Buyers and shall not be construed
against any person as the drafter hereof. The headings of this Warrant are for
convenience of reference and shall not form part of, or affect the
interpretation of, this Warrant.

                12. DISPUTE RESOLUTION.
In the case of a dispute as to the determination of the Exercise Price or the
arithmetic calculation of the Warrant Shares, the Company shall submit the
disputed determinations or arithmetic calculations via facsimile within two
Business Days of receipt of the Exercise Notice giving rise to such dispute, as
the case may be, to the Holder. If the Holder and the Company are unable to
agree upon such determination or calculation of the Exercise Price or the
Warrant Shares within three Business Days of such disputed determination or
arithmetic calculation being submitted to the Holder, then the Company shall,
within two Business Days thereafter submit via facsimile (a) the disputed
determination of the Exercise Price to an independent, reputable investment bank
selected by the Company and approved by the Holder or (b) the disputed
arithmetic calculation of the Warrant Shares to the Company's independent,
outside accountant. The Company shall cause at its expense the investment bank
or the accountant, as the case may be, to perform the 

-13-

determinations or calculations and notify the Company and the Holder of the
results no later than ten Business Days from the time it receives the disputed
determinations or calculations. Such investment bank's or accountant's
determination or calculation, as the case may be, shall be binding upon all
parties absent demonstrable error.

                13. REMEDIES, OTHER OBLIGATIONS, BREACHES AND INJUNCTIVE RELIEF.
The remedies provided in this Warrant shall be cumulative and in addition to all
other remedies available under this Warrant and the other Transaction Documents,
at law or in equity (including a decree of specific performance and/or other
injunctive relief), and nothing herein shall limit the right of the Holder right
to pursue actual damages for any failure by the Company to comply with the terms
of this Warrant. The Company acknowledges that a breach by it of its obligations
hereunder will cause irreparable harm to the Holder and that the remedy at law
for any such breach may be inadequate. The Company therefore agrees that, in the
event of any such breach or threatened breach, the holder of this Warrant shall
be entitled, in addition to all other available remedies, to an injunction
restraining any breach, without the necessity of showing economic loss and
without any bond or other security being required.

                14. TRANSFER. This Warrant may be offered for sale, sold,
transferred or assigned without the consent of the Company, except as may
otherwise be required by Section 2(f) of the Securities Purchase
Agreement.

                15. CERTAIN DEFINITIONS. For purposes of this Warrant, the
following terms shall have the following meanings:

                    (a) "Bloomberg" means Bloomberg Financial Markets.

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

                    (c) "Common Stock" means (i) the Company's shares of Common
Stock, par value $0.10 per share, and (ii) any share capital into which such
Common Stock shall have been changed or any share capital resulting from a
reclassification of such Common Stock.

                    (d) "Closing Bid Price" and "Closing Sale Price" means,
for any security as of any date, the last closing bid price and last closing
trade price, respectively, for such security on the Principal Market, as
reported by Bloomberg, or, if the Principal Market begins to operate on an
extended hours basis and does not designate the closing bid price or the closing
trade price, as the case may be, then the last bid price or last trade price,
respectively, of such security prior to 4:00:00 p.m., New York Time, as reported
by Bloomberg, or, if the Principal Market is not the principal securities
exchange or trading market for such security, the last closing bid price or last
trade price, respectively, of such security on the principal securities exchange
or trading market where such security is listed or traded as reported by
Bloomberg, or if the foregoing do not apply, the last closing bid price or last
trade price, respectively, of such security in the over-the-counter market on
the electronic bulletin board for such security as reported by Bloomberg, or, if
no closing bid price or last trade price, respectively, is reported for  

-14-

such
security by Bloomberg, the average of the bid prices, or the ask prices,
respectively, of any market makers for such security as reported in the "pink
sheets" by Pink Sheets LLC (formerly the National Quotation Bureau, Inc.). If
the Closing Bid Price or the Closing Sale Price cannot be calculated for a
security on a particular date on any of the foregoing bases, the Closing Bid
Price or the Closing Sale Price, as the case may be, of such security on such
date shall be the fair market value as mutually determined by the Company and
the Holder. If the Company and the Holder are unable to agree upon the fair
market value of such security, then such dispute shall be resolved pursuant to
Section 12. All such determinations to be appropriately adjusted for any
stock dividend, stock split, stock combination or other similar transaction
during the applicable calculation period.

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

                    (f) "Eligible Market" means the Principal Market, The New York
Stock Exchange, Inc., the American Stock Exchange, The Nasdaq National Market or
The Nasdaq SmallCap Market.

                    (g) "Expiration Date" means June 8, 2008 or, if such date falls
on a day other than a Business Day or on which trading does not take place on
the Principal Market (a "Holiday"), the next date that is not a Holiday.

                    (h) "Fundamental Transaction" means that the Company shall,
directly or indirectly, in one or more related transactions, (i) consolidate or
merge with or into (whether or not the Company is the surviving corporation)
another Person, or (ii) sell, assign, transfer, convey or otherwise dispose of
all or substantially all of the properties or assets of the Company to another
Person, or (iii) allow another Person to make a purchase offer, tender offer or
exchange offer that is accepted by the holders of more than 50% of the Company's
outstanding voting securities (but excluding any voting securities held by the
Person or Persons making or party to, or any Person(s) associated or affiliated
with such Person or Persons making or party to, such purchase offer, tender
offer or exchange offer), or (iv) enter into a stock purchase agreement or other
agreement to effect any other business combination (including, without
limitation, a reorganization, recapitalization or spin-off) with another Person
or Persons, whereby more than 50% of the Company's outstanding voting securities
are acquired by such Person or Persons (excluding any voting securities of the
Company held by such Person or Persons making or party to, or any Person(s)
associated or affiliated with such Person or Persons making or party to, such
stock purchase agreement or other agreement to effect such other business
combination), or (v) change the members constituting its Board of Directors such
that the individuals who constituted the Board of Directors on the Subscription
Date or other governing body of the Company (together with any new directors
whose election to such Board of Directors or whose nomination for election by
the stockholders of the Company was approved by a vote of 662/3%
of the directors then still in office who were either directors on the
Subscription Date or whose election or nomination for election was previously so
approved), cease for any reason to constitute a majority of such Board of
Directors then in office or (vi) reorganize, recapitalize or reclassify
its Common Stock.

-15-

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

                    (j) "Parent Entity" of a Person means an entity that, directly
or indirectly, controls the applicable Person and whose common stock or
equivalent equity security is quoted or listed on an Eligible Market, or, if
there is more than one such Person or Parent Entity, the Person or Parent Entity
with the largest public market capitalization as of the date of consummation of
the Fundamental Transaction.

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

                    (l) "Principal Market" means the OTC Bulletin Board.

                    (m) "Registration Rights Agreement" means that certain
registration rights agreement by and among the Company and the Buyers, as may be
amended or modified from time to time.

                    (n) "Required Holders" means the holders of the SPA Warrants
representing at least a majority of shares of Common Stock underlying the SPA
Warrants then outstanding.

                    (o) "SPA Securities" means the Shares, as defined in and issued
pursuant to the Securities Purchase Agreement.

                    (p) "Successor Entity" means the Person (or, if so elected by
the Required Holders, the Parent Entity) formed by, resulting from or surviving
any Fundamental Transaction or the Person (or, if so elected by the Required
Holders, the Parent Entity) with which such Fundamental Transaction shall have
been entered into.

                    (q) "Trading Day" means any day on which the Common Stock are
traded on the Principal Market, or, if the Principal Market is not the principal
trading market for the Common Stock, then on the principal securities exchange
or securities market on which the Common Stock are then traded; provided that
"Trading Day" shall not include any day on which the Common Stock are scheduled
to trade on such exchange or market for less than 4.5 hours or any day that the
Common Stock are suspended from trading during the final hour of trading on such
exchange or market (or if such exchange or market does not designate in advance
the closing time of trading on such exchange or market, then during the hour
ending at 4:00:00 p.m., New York Time).

[Signature Page Follows]

-16-

                IN WITNESS WHEREOF, the Company has caused this Warrant to Purchase Common
Stock to be duly executed as of the Issuance Date set out above.

	 	

    Minrad International, Inc.
	 	 
	 	By:

    	 
	 	Name: 
	 	Title: 

EXHIBIT A

EXERCISE NOTICE

TO BE EXECUTED BY THE REGISTERED HOLDER TO EXERCISE THIS

WARRANT TO PURCHASE COMMON STOCK

MINRAD INTERNATIONAL, INC.

                    The undersigned holder hereby exercises the right to
purchase _______________ of the shares of Common Stock ("Warrant Shares") of
Minrad International, Inc., a Delaware corporation (the "Company"), evidenced by
the attached Warrant to Purchase Common Stock (the "Warrant"). Capitalized terms
used herein and not otherwise defined shall have the respective meanings set
forth in the Warrant.

                    1. Form of Exercise Price. The Holder intends that
payment of the Exercise Price shall be made as:

                                        ____________ a "Cash Exercise"
with respect to _________________ Warrant Shares; and/or

                                        ____________ a "Cashless Exercise"
with respect to _______________ Warrant Shares.

                    2. Payment of Exercise Price. In the event that the
holder has elected a Cash Exercise with respect to some or all of the Warrant
Shares to be issued pursuant hereto, the holder shall pay the Aggregate Exercise
Price in the sum of $___________________ to the Company in accordance with the
terms of the Warrant.

                    3. Delivery of Warrant Shares. The Company shall deliver
to the holder __________ Warrant Shares in accordance with the terms of the
Warrant.

                    4. Conversion Limitation. The Holder represents and
warrants that after giving effect to the exercise of the Warrant, such Person
(together with such Person's affiliates) would not beneficially own in excess of
the Conversion Limitation of the shares of Common Stock outstanding immediately
after giving effect to such exercise determined in accordance with Section
1(f)(i) of the Warrant.

Date: _______________ __, ______

_____________________________

     Name of Registered Holder

 

	
    By:
	 	 
	 	
    Name:
	 
	 	
    Title:
	 
	 	
    Address:
	 	 
			
	 	 	 
	 	 	 
	 	Employer Identification Number, 

    Social Security Number or other identifying number:	 
	 	 	 

 

ACKNOWLEDGMENT

                    The Company hereby acknowledges this Exercise Notice and
hereby directs American Stock Transfer & Trust Company to issue the above
indicated number of shares of Common Stock in accordance with the Transfer Agent
Instructions dated June __, 2005 from the Company and acknowledged and agreed to
by American Stock Transfer & Trust Company.

	
     
	
    MINRAD INTERNATIONAL, INC.

    
	 	
    By:
	 
	 	 	
    Name:

	 	 	
    Title:

 

ASSIGNMENT FORM

(To Be Executed Upon Transfer of Warrant)

FOR VALUE RECEIVED, ______________________________ hereby sells, assigns and
transfers to the transferee named below the rights to purchase _____ of the
number of Warrant Shares under this Warrant, together with all rights, title and
interest therein. The rights to purchase the remaining Warrant Shares shall
remain the property of the undersigned. This includes a transfer of the
registration rights.

	 	 	 	[NAME OF HOLDER]
     

	 	 	 	By:	 
	 	 	 	 	
    Signature           

	 	 	 	 	 
	 	 	 	Name:	 
	 	 	 	 	
    (Please Print)          

	 	 	 	 	 
	 	 	 	Title:	 

	 	 	 	Address:	 
	 	 	 	 	 
	 	 	 	 	 
	 	 	 	 	 
	 	 	 	
    Employer Identification Number,
    

    Social Security Number or other 

    identifying number:__________________

 

TRANSFEREE:

Name:_____________________________________

                                      (Please Print)

Address:__________________________________

             __________________________________

             __________________________________

 

Employer Identification Number,

Social Security Number or other

identifying number:_______________________

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