Document:

Exhibit 4.13 Form of Warrant

    
      
        
          
            
              
                
                  
                    

                  

                  
                    

                  

                  Exhibit 4.13 Form of Warrant

                  
                    
                      

                        EXHIBIT
                          C   

                         

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

                        

                        COMMON
                          STOCK PURCHASE WARRANT

                        

                        To
                          Purchase __________ Shares of Common Stock of

                         

                        CHEMBIO
                          DIAGNOSTICS, INC.

                         

                        THIS
                          COMMON STOCK PURCHASE WARRANT (the “Warrant”)
                          certifies that, for value received, _____________ (the
“Holder”),
                          is
                          entitled, upon the terms and subject to the limitations
                          on exercise and the
                          conditions hereinafter set forth, at any time on or after
                          the date hereof (the
“Initial
                          Exercise Date”)
                          and on
                          or prior to the close of business on the 5 year anniversary
                          of the Initial
                          Exercise Date (the “Termination
                          Date”)
                          but
                          not thereafter, to subscribe for and purchase from Chembio
                          Diagnostics, Inc., a
                          Nevada corporation (the “Company”),
                          up to
                          ______ shares (the “Warrant
                          Shares”)
                          of
                          Common Stock, par value $.01 per share, of the Company
                          (the “Common
                          Stock”).
                          The
                          purchase price of one share of Common Stock under this
                          Warrant shall be equal to
                          the Exercise Price, as defined in Section 2(b). 

                         

                        Section
                          1. Definitions.
                          Capitalized terms used and not otherwise defined herein
                          shall have the meanings
                          set forth in that certain Securities Purchase Agreement
                          (the “Purchase
                          Agreement”),
                          dated
                          June 29, 2006, among the Company and the purchasers signatory
                          thereto.

                         

                        Section
                          2. Exercise.

                         

                        a) Exercise
                          of Warrant.
                          Exercise of the purchase rights represented by this Warrant
                          may be made, in
                          whole or in part, at any time or times on or after the
                          Initial Exercise Date and
                          on or before the Termination Date by delivery to the Company
                          of a duly executed
                          facsimile copy of the Notice of Exercise Form annexed hereto
                          (or such other
                          office or agency of the Company as it may designate by
                          notice in writing to the
                          registered Holder at the address of such Holder appearing
                          on the books of the
                          Company);

                         

                        
                          
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                        and,
                          within 3 Trading Days of the date said Notice of Exercise
                          is delivered to the
                          Company, the Company shall have received payment of the
                          aggregate Exercise Price
                          of the shares thereby purchased by wire transfer or cashier’s check drawn on a
                          United States bank. Notwithstanding anything herein to
                          the contrary, the Holder
                          shall not be required to physically surrender this Warrant
                          to the Company until
                          the Holder has purchased all of the Warrant Shares available
                          hereunder and the
                          Warrant has been exercised in full, in which case, the
                          Holder shall surrender
                          this Warrant to the Company for cancellation within 3 Trading
                          Days of the date
                          the final Notice of Exercise is delivered to the Company.
                          Partial exercises of
                          this Warrant resulting in purchases of a portion of the
                          total number of Warrant
                          Shares available hereunder shall have the effect of lowering
                          the outstanding
                          number of Warrant Shares purchasable hereunder in an amount
                          equal to the
                          applicable number of Warrant Shares purchased. The Holder
                          and the Company shall
                          maintain records showing the number of Warrant Shares purchased
                          and the date of
                          such purchases. The Company shall deliver any objection
                          to any Notice of
                          Exercise Form within 1 Business Day of receipt of such
                          notice. In the event of
                          any dispute or discrepancy, the records of the Holder shall
                          be controlling and
                          determinative in the absence of manifest error. The Holder
                          and any assignee, by
                          acceptance of this Warrant, acknowledge and agree that,
                          by reason of the
                          provisions of this paragraph, following the purchase of
                          a portion of the Warrant
                          Shares hereunder, the number of Warrant Shares available
                          for purchase hereunder
                          at any given time may be less than the amount stated on
                          the face
                          hereof.

                         

                        b) Exercise
                          Price.
                          The
                          exercise price per share of the Common Stock under this
                          Warrant shall be
$0.75,
                          subject
                          to adjustment hereunder (the “Exercise
                          Price”).

                         

                        c) Cashless
                          Exercise.
                          If at
                          any time after one year from the date of issuance of this
                          Warrant there is no
                          effective Registration Statement registering, or no current
                          prospectus available
                          for, the resale of the Warrant Shares by the Holder, then
                          this Warrant may also
                          be exercised at such time by means of a “cashless exercise” in which the Holder
                          shall be entitled to receive a certificate for the number
                          of Warrant Shares
                          equal to the quotient obtained by dividing [(A-B) (X)]
                          by (A),
                          where:

                         

                        (A)
                          = the
                          VWAP on the Trading Day immediately preceding the date
                          of such
                          election;

                        

                        (B)
                          = the
                          Exercise Price of this Warrant, as adjusted; and 

                        

                        (X)
                          = the
                          number of Warrant Shares issuable upon exercise of this
                          Warrant in accordance
                          with the terms of this Warrant by means of a cash exercise
                          rather than a
                          cashless exercise.

                        

                        Notwithstanding
                          anything herein to the contrary, on the Termination Date,
                          this Warrant shall be
                          automatically exercised via cashless exercise pursuant
                          to this Section
                          2(c).

                        

                        
                          
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                        d) Holder’s
                          Restrictions.
                          The
                          Company shall not effect any exercise of this Warrant,
                          and a Holder shall not
                          have the right to exercise any portion of this Warrant,
                          pursuant to Section 2(c)
                          or otherwise, to the extent that after giving effect to
                          such issuance after
                          exercise as set forth on the applicable Notice of Exercise,
                          such Holder
                          (together with such Holder’s Affiliates, and any other person or entity acting
                          as a group together with such Holder or any of such Holder’s Affiliates), as set
                          forth on the applicable Notice of Exercise, would beneficially
                          own in excess of
                          the Beneficial Ownership Limitation (as defined below).  For purposes of
                          the foregoing sentence, the number of shares of Common
                          Stock beneficially owned
                          by such Holder and its Affiliates shall include the number
                          of shares of Common
                          Stock issuable upon exercise of this Warrant with respect
                          to which such
                          determination is being made, but shall exclude the number
                          of shares of Common
                          Stock which would be issuable upon (A) exercise of the
                          remaining, nonexercised
                          portion of this Warrant beneficially owned by such Holder
                          or any of its
                          Affiliates and (B) exercise or conversion of the unexercised
                          or nonconverted
                          portion of any other securities of the Company (including,
                          without limitation,
                          any other Debentures or Warrants) subject to a limitation
                          on conversion or
                          exercise analogous to the limitation contained herein beneficially
                          owned by such
                          Holder or any of its affiliates.  Except as set forth in the preceding
                          sentence, for purposes of this Section 2(d), beneficial
                          ownership shall be
                          calculated in accordance with Section 13(d) of the Exchange
                          Act and the rules
                          and regulations promulgated thereunder, it being acknowledged
                          by a Holder that
                          the Company is not representing to such Holder that such
                          calculation is in
                          compliance with Section 13(d) of the Exchange Act and such
                          Holder is solely
                          responsible for any schedules required to be filed in accordance
                          therewith. To
                          the extent that the limitation contained in this Section
                          2(d) applies, the
                          determination of whether this Warrant is exercisable (in
                          relation to other
                          securities owned by such Holder together with any Affiliates)
                          and of which a
                          portion of this Warrant is exercisable shall be in the
                          sole discretion of a
                          Holder, and the submission of a Notice of Exercise shall
                          be deemed to be each
                          Holder’s determination of whether this Warrant is exercisable
                          (in relation to
                          other securities owned by such Holder together with any
                          Affiliates) and of which
                          portion of this Warrant is exercisable, in each case subject
                          to such aggregate
                          percentage limitation, and the Company shall have no obligation
                          to verify or
                          confirm the accuracy of such determination. In addition,
                          a determination as to
                          any group status as contemplated above shall be determined
                          in accordance with
                          Section 13(d) of the Exchange Act and the rules and regulations
                          promulgated
                          thereunder. For purposes of this Section 2(d), in determining
                          the number of
                          outstanding shares of Common Stock, a Holder may rely on
                          the number of
                          outstanding shares of Common Stock as reflected in (x)
                          the Company’s most recent
                          Form 10-QSB or Form 10-KSB, as the case may be, (y) a more
                          recent public
                          announcement by the Company or (z) any other notice by
                          the Company or the
                          Company’s Transfer Agent setting forth the number of shares of
                          Common Stock
                          outstanding.  Upon the written or oral request of a Holder, the Company
                          shall within two Trading Days confirm orally and in writing
                          to such 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 conversion or exercise of securities of the Company,
                          including this Warrant,
                          by such Holder or its Affiliates since the date as of which
                          such number of
                          outstanding shares of Common Stock was reported. The “Beneficial
                          Ownership Limitation”
shall
                          be 4.99% of the number of shares of the 

                         

                        
                          
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                        Common
                          Stock outstanding immediately after giving effect to the
                          issuance of shares of
                          Common Stock issuable upon exercise of this Warrant. The
                          Beneficial Ownership
                          Limitation provisions of this Section 2(d) may be waived
                          by such Holder, at the
                          election of such Holder, upon not less than 61 days’ prior notice to the Company
                          to change the Beneficial Ownership Limitation to 9.99%
                          of the number of shares
                          of the Common Stock outstanding immediately after giving
                          effect to the issuance
                          of shares of Common Stock upon exercise of this Warrant,
                          and the provisions of
                          this Section 2(d) shall continue to apply. Upon such a
                          change by a Holder of the
                          Beneficial Ownership Limitation from such 4.99% limitation
                          to such 9.99%
                          limitation, the Beneficial Ownership Limitation may not
                          be further waived by
                          such Holder. The provisions of this paragraph shall be
                          construed and implemented
                          in a manner otherwise than in strict conformity with the
                          terms of this Section
                          2(d) to correct this paragraph (or any portion hereof)
                          which may be defective or
                          inconsistent with the intended Beneficial Ownership Limitation
                          herein contained
                          or to make changes or supplements necessary or desirable
                          to properly give effect
                          to such limitation. The limitations contained in this paragraph
                          shall apply to a
                          successor holder of this Warrant.

                         

                        e) Mechanics
                          of Exercise.
                          

                         

                        i. Authorization
                          of Warrant Shares.
                          The
                          Company covenants that all Warrant Shares which may be
                          issued upon the exercise
                          of the purchase rights represented by this Warrant will,
                          upon exercise of the
                          purchase rights represented by this Warrant, be duly authorized,
                          validly issued,
                          fully paid and nonassessable and free from all taxes, liens
                          and charges created
                          by the Company in respect of the issue thereof (other than
                          taxes in respect of
                          any transfer occurring contemporaneously with such issue).

                         

                        ii. Delivery
                          of Certificates Upon Exercise.
                          Certificates for shares purchased hereunder shall be transmitted
                          by the transfer
                          agent of the Company to the Holder by crediting the account
                          of the Holder’s
                          prime broker with the Depository Trust Company through
                          its Deposit Withdrawal
                          Agent Commission (“DWAC”)
                          system
                          if the Company is a participant in such system, and otherwise
                          by physical
                          delivery to the address specified by the Holder in the
                          Notice of Exercise within
                          3 Trading Days from the delivery to the Company of the
                          Notice of Exercise Form,
                          surrender of this Warrant (if required) and payment of
                          the aggregate Exercise
                          Price as set forth above (“Warrant
                          Share Delivery Date”).
                          This
                          Warrant shall be deemed to have been exercised on the date
                          the Exercise Price is
                          received by the Company. The Warrant Shares shall be deemed
                          to have been issued,
                          and Holder or any other person so designated to be named
                          therein shall be deemed
                          to have become a holder of record of such shares for all
                          purposes, as of the
                          date the Warrant has been exercised by payment to the Company
                          of the Exercise
                          Price (or by cashless exercise, if permitted) and all taxes
                          required to be paid
                          by the Holder, if any, pursuant to Section 2(e)(vii) prior
                          to the issuance of
                          such shares, have been paid. 

                         

                        
                          
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                        iii. Delivery
                          of New Warrants Upon Exercise.
                          If this
                          Warrant shall have been exercised in part, the Company
                          shall, at the request of
                          a Holder and upon surrender of this Warrant certificate,
                          at the time of delivery
                          of the certificate or certificates representing Warrant
                          Shares, deliver to
                          Holder a new Warrant evidencing the rights of Holder to
                          purchase the unpurchased
                          Warrant Shares called for by this Warrant, which new Warrant
                          shall in all other
                          respects be identical with this Warrant.

                         

                        iv. Rescission
                          Rights.
                          If the
                          Company fails to cause its transfer agent to transmit to
                          the Holder a
                          certificate or certificates representing the Warrant Shares
                          pursuant to this
                          Section 2(e)(iv) by the Warrant Share Delivery Date, then
                          the Holder will have
                          the right to rescind such exercise.

                         

                        v. Compensation
                          for Buy-In on Failure to Timely Deliver Certificates Upon
                          Exercise.
                          In
                          addition to any other rights available to the Holder, if
                          the Company fails to
                          cause its transfer agent to transmit to the Holder a certificate
                          or certificates
                          representing the Warrant Shares pursuant to an exercise
                          on or before the Warrant
                          Share Delivery Date, and if after such date the Holder
                          is required by its broker
                          to purchase (in an open market transaction or otherwise)
                          shares of Common Stock
                          to deliver in satisfaction of a sale by the Holder of the
                          Warrant Shares which
                          the Holder anticipated receiving upon such exercise (a
“Buy-In”),
                          then
                          the Company shall (1) pay in cash to the Holder the amount
                          by which (x) the
                          Holder’s total purchase price (including brokerage commissions,
                          if any) for the
                          shares of Common Stock so purchased exceeds (y) the amount
                          obtained by
                          multiplying (A) the number of Warrant Shares that the Company
                          was required to
                          deliver to the Holder in connection with the exercise at
                          issue times (B) the
                          price at which the sell order giving rise to such purchase
                          obligation was
                          executed, and (2) at the option of the Holder, either reinstate
                          the portion of
                          the Warrant and equivalent number of Warrant Shares for
                          which such exercise was
                          not honored or deliver to the Holder the number of shares
                          of Common Stock that
                          would have been issued had the Company timely complied
                          with its exercise and
                          delivery obligations hereunder. For example, if the Holder
                          purchases Common
                          Stock having a total purchase price of $11,000 to cover
                          a Buy-In with respect to
                          an attempted exercise of shares of Common Stock with an
                          aggregate sale price
                          giving rise to such purchase obligation of $10,000, under
                          clause (1) of the
                          immediately preceding sentence the Company shall be required
                          to pay the Holder
                          $1,000. The Holder shall provide the Company written notice
                          indicating the
                          amounts payable to the Holder in respect of the Buy-In
                          and, upon request of the
                          Company, evidence of the amount of such loss. Nothing herein
                          shall limit a
                          Holder’s right to pursue any other remedies available to it hereunder,
                          at law or
                          in equity including, without limitation, a decree of specific
                          performance and/or
                          injunctive relief with respect to the Company’s failure to timely deliver
                          certificates 

                         

                        
                          
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                        representing
                          shares of Common Stock upon exercise of the Warrant as
                          required pursuant to the
                          terms hereof.

                         

                        vi. No
                          Fractional Shares or Scrip.
                          No
                          fractional shares or scrip representing fractional shares
                          shall be issued upon
                          the exercise of this Warrant. As to any fraction of a share
                          which Holder would
                          otherwise be entitled to purchase upon such exercise, the
                          Company shall at its
                          election, either pay a cash adjustment in respect of such
                          final fraction in an
                          amount equal to such fraction multiplied by the Exercise
                          Price or round up to
                          the next whole share.

                         

                        vii. Charges,
                          Taxes and Expenses.
                          Issuance of certificates for Warrant Shares shall be made
                          without charge to the
                          Holder for any issue or transfer tax or other incidental
                          expense in respect of
                          the issuance of such certificate, all of which taxes and
                          expenses shall be paid
                          by the Company, and such certificates shall be issued in
                          the name of the Holder
                          or in such name or names as may be directed by the Holder;
provided,
                          however,
                          that in
                          the event certificates for Warrant Shares are to be issued
                          in a name other than
                          the name of the Holder, this Warrant when surrendered for
                          exercise shall be
                          accompanied by the Assignment Form attached hereto duly
                          executed by the Holder;
                          and the Company may require, as a condition thereto, the
                          payment of a sum
                          sufficient to reimburse it for any transfer tax incidental
                          thereto.

                         

                        viii. Closing
                          of Books.
                          The
                          Company will not close its stockholder books or records
                          in any manner which
                          prevents the timely exercise of this Warrant, pursuant
                          to the terms
                          hereof.

                         

                        Section
                          3. Certain Adjustments.

                         

                        a) Stock
                          Dividends and Splits.
                          If the
                          Company, at any time while this Warrant is outstanding:
                          (A) pays a stock
                          dividend or otherwise make a distribution or distributions
                          on shares of its
                          Common Stock or any other equity or equity equivalent securities
                          payable in
                          shares of Common Stock (which, for avoidance of doubt,
                          shall not include any
                          shares of Common Stock issued by the Company upon exercise
                          of this Warrant), (B)
                          subdivides outstanding shares of Common Stock into a larger
                          number of shares,
                          (C) combines (including by way of reverse stock split)
                          outstanding shares of
                          Common Stock into a smaller number of shares, or (D) issues
                          by reclassification
                          of shares of the Common Stock any shares of capital stock
                          of the Company, then
                          in each case the Exercise Price shall be multiplied by
                          a fraction of which the
                          numerator shall be the number of shares of Common Stock
                          (excluding treasury
                          shares, if any) outstanding immediately before such event
                          and of which the
                          denominator shall be the number of shares of Common Stock
                          outstanding
                          immediately after such event and the number of shares issuable
                          upon exercise of
                          this Warrant shall be proportionately adjusted. Any adjustment
                          made pursuant to
                          this Section 3(a) shall become effective immediately after
                          the record date for
                          the determination of stockholders entitled to receive such
                          dividend or

                         

                        
                          
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                        distribution
                          and shall become effective immediately after the effective
                          date in the case of a
                          subdivision, combination or re-classification.

                         

                        b) Subsequent
                          Equity Sales.
                          If the
                          Company or any Subsidiary thereof, as applicable, at any
                          time while this Warrant
                          is outstanding, shall sell or grant any option to purchase
                          or sell or grant any
                          right to reprice its securities, or otherwise dispose of
                          or issue (or announce
                          any offer, sale, grant or any option to purchase or other
                          disposition) any
                          Common Stock or Common Stock Equivalents entitling any
                          Person to acquire shares
                          of Common Stock, at an effective price per share less than
                          the then Exercise
                          Price (such lower price, the “Base
                          Share Price”
and
                          such issuances collectively, a “Dilutive
                          Issuance”)
                          (if
                          the holder of the Common Stock or Common Stock Equivalents
                          so issued shall at
                          any time, whether by operation of purchase price adjustments,
                          reset provisions,
                          floating conversion, exercise or exchange prices or otherwise,
                          or due to
                          warrants, options or rights per share which are issued
                          in connection with such
                          issuance, be entitled to receive shares of Common Stock
                          at an effective price
                          per share which is less than the Exercise Price, such issuance
                          shall be deemed
                          to have occurred for less than the Exercise Price on such
                          date of the Dilutive
                          Issuance), then (a) from the date hereof until the date
                          that is the 12 month
                          anniversary of the Closing Date, the Exercise Price shall
                          be reduced and only
                          reduced to equal the Base Share Price and the number of
                          Warrant Shares issuable
                          hereunder shall be increased such that the aggregate Exercise
                          Price payable
                          hereunder, after taking into account the decrease in the
                          Exercise Price, shall
                          be equal to the aggregate Exercise Price prior to such
                          adjustment and (b) from
                          the date that is the 12 month anniversary of the Closing
                          Date until the
                          Termination Date, the Exercise Price shall be reduced by
                          multiplying the
                          Exercise Price by a fraction, the numerator of which is
                          the number of shares of
                          Common Stock issued and outstanding immediately prior to
                          the Dilutive Issuance
                          plus the number of shares of Common Stock which the offering
                          price of such
                          Dilutive Issuance would purchase at the then Exercise Price
                          and the denominator
                          of which shall be the sum of the number of shares of Common
                          Stock issued and
                          outstanding immediately prior to the Dilutive Issuance
                          plus the number of shares
                          of Common Stock so issued or issuable in connection with
                          the Dilutive Issuance
                          and the number of Warrant Shares issuable hereunder shall
                          be increased such that
                          the aggregate Exercise Price payable hereunder, after taking
                          into account the
                          decrease in the Exercise Price, shall be equal to the aggregate
                          Exercise Price
                          prior to such adjustment. Such adjustment shall be made
                          whenever such Common
                          Stock or Common Stock Equivalents are issued. Notwithstanding
                          the foregoing, no
                          adjustments shall be made, paid or issued under this Section
                          3(b) in respect of
                          an Exempt Issuance. The Company shall notify the Holder
                          in writing, no later
                          than the Trading Day following the issuance of any Common
                          Stock or Common Stock
                          Equivalents subject to this section, indicating therein
                          the applicable issuance
                          price, or applicable reset price, exchange price, conversion
                          price and other
                          pricing terms (such notice the “Dilutive
                          Issuance Notice”).
                          For
                          purposes of clarification, whether or not the Company provides
                          a Dilutive
                          Issuance Notice pursuant to this Section 3(b), upon the
                          occurrence of any
                          Dilutive Issuance, after the date of such Dilutive Issuance
                          the Holder is
                          entitled to receive a number of Warrant Shares based upon
                          the Base Share Price
                          regardless of whether the Holder accurately refers to the
                          Base Share Price in
                          the Notice of Exercise.

                         

                        
                          
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                        c) Subsequent
                          Rights Offerings.
                          If the
                          Company, at any time while the Warrant is outstanding,
                          shall issue rights,
                          options or warrants to all holders of Common Stock (and
                          not to Holders)
                          entitling them to subscribe for or purchase shares of Common
                          Stock at a price
                          per share less than the VWAP at the record date mentioned
                          below, then the
                          Exercise Price shall be multiplied by a fraction, of which
                          the denominator shall
                          be the number of shares of the Common Stock outstanding
                          on the date of issuance
                          of such rights or warrants plus the number of additional
                          shares of Common Stock
                          offered for subscription or purchase, and of which the
                          numerator shall be the
                          number of shares of the Common Stock outstanding on the
                          date of issuance of such
                          rights or warrants plus the number of shares which the
                          aggregate offering price
                          of the total number of shares so offered (assuming receipt
                          by the Company in
                          full of all consideration payable upon exercise of such
                          rights, options or
                          warrants) would purchase at such VWAP. Such adjustment
                          shall be made whenever
                          such rights or warrants are issued, and shall become effective
                          immediately after
                          the record date for the determination of stockholders entitled
                          to receive such
                          rights, options or warrants. 

                         

                        d) Pro
                          Rata Distributions.
                          If the
                          Company, at any time prior to the Termination Date, shall
                          distribute to all
                          holders of Common Stock (and not to Holders of the Warrants)
                          evidences of its
                          indebtedness or assets (including cash and cash dividends)
                          or rights or warrants
                          to subscribe for or purchase any security other than the
                          Common Stock (which
                          shall be subject to Section 3(b)), then in each such case
                          the Exercise Price
                          shall be adjusted by multiplying the Exercise Price in
                          effect immediately prior
                          to the record date fixed for determination of stockholders
                          entitled to receive
                          such distribution by a fraction of which the denominator
                          shall be the VWAP
                          determined as of the record date mentioned above, and of
                          which the numerator
                          shall be such VWAP on such record date less the then per
                          share fair market value
                          at such record date of the portion of such assets or evidence
                          of indebtedness so
                          distributed applicable to one outstanding share of the
                          Common Stock as
                          determined by the Board of Directors in good faith. In
                          either case the
                          adjustments shall be described in a statement provided
                          to the Holder of the
                          portion of assets or evidences of indebtedness so distributed
                          or such
                          subscription rights applicable to one share of Common Stock.
                          Such adjustment
                          shall be made whenever any such distribution is made and
                          shall become effective
                          immediately after the record date mentioned above.

                         

                        e) Fundamental
                          Transaction.
                          If, at
                          any time while this Warrant is outstanding, (A) the Company
                          effects any merger
                          or consolidation of the Company with or into another Person,
                          (B) the Company
                          effects any sale of all or substantially all of its assets
                          in one or a series of
                          related transactions, (C) any tender offer or exchange
                          offer (whether by the
                          Company or another Person) is completed pursuant to which
                          holders of Common
                          Stock are permitted to tender or exchange their shares
                          for other securities,
                          cash or property, or (D) the Company effects any reclassification
                          of the Common
                          Stock or any compulsory share exchange pursuant to which
                          the Common Stock is
                          effectively converted into or exchanged for other securities,
                          cash or property
                          (in any such case, a “Fundamental
                          Transaction”),
                          then,
                          upon any subsequent exercise of this Warrant, the Holder
                          shall have the right to
                          receive, for each Warrant Share that would have been issuable
                          upon such exercise
                          immediately prior to the occurrence of such Fundamental
                          Transaction, at the
                          option of the Holder, (a) upon exercise of this Warrant,
                          the number of

                         

                        
                          
                            8

                          

                          
                            
                            

                            
                              

                            

                          

                          
                            
                            

                          

                        

                        shares
                          of
                          Common Stock of the successor or acquiring corporation
                          or of the Company, if it
                          is the surviving corporation, and any additional consideration
                          (the
“Alternate
                          Consideration”)
                          receivable upon or as a result of such reorganization,
                          reclassification, merger,
                          consolidation or disposition of assets by a Holder of the
                          number of shares of
                          Common Stock for which this Warrant is exercisable immediately
                          prior to such
                          event or (b) if the Company is acquired in an all cash
                          transaction, cash equal
                          to the value of this Warrant as determined in accordance
                          with the Black-Scholes
                          option pricing formula. For purposes of any such exercise,
                          the determination of
                          the Exercise Price shall be appropriately adjusted to apply
                          to such Alternate
                          Consideration based on the amount of Alternate Consideration
                          issuable in respect
                          of one share of Common Stock in such Fundamental Transaction,
                          and the Company
                          shall apportion the Exercise Price among the Alternate
                          Consideration in a
                          reasonable manner reflecting the relative value of any
                          different components of
                          the Alternate Consideration. If holders of Common Stock
                          are given any choice as
                          to the securities, cash or property to be received in a
                          Fundamental Transaction,
                          then the Holder shall be given the same choice as to the
                          Alternate Consideration
                          it receives upon any exercise of this Warrant following
                          such Fundamental
                          Transaction. To the extent necessary to effectuate the
                          foregoing provisions, any
                          successor to the Company or surviving entity in such Fundamental
                          Transaction
                          shall issue to the Holder a new warrant consistent with
                          the foregoing provisions
                          and evidencing the Holder’s right to exercise such warrant into Alternate
                          Consideration. The terms of any agreement pursuant to which
                          a Fundamental
                          Transaction is effected shall include terms requiring any
                          such successor or
                          surviving entity to comply with the provisions of this
                          Section 3(e) and insuring
                          that this Warrant (or any such replacement security) will
                          be similarly adjusted
                          upon any subsequent transaction analogous to a Fundamental
                          Transaction.

                         

                        f) Calculations.
                          All
                          calculations under this Section 3 shall be made to the
                          nearest cent or the
                          nearest 1/100th of a share, as the case may be. For purposes
                          of this Section 3,
                          the number of shares of Common Stock deemed to be issued
                          and outstanding as of a
                          given date shall be the sum of the number of shares of
                          Common Stock (excluding
                          treasury shares, if any) issued and outstanding.

                         

                        g) Voluntary
                          Adjustment By Company.
                          The
                          Company may at any time during the term of this Warrant
                          reduce the then current
                          Exercise Price to any amount and for any period of time
                          deemed appropriate by
                          the Board of Directors of the Company.

                         

                        h) Notice
                          to Holders.
                          

                         

                        i. Adjustment
                          to Exercise Price.
                          Whenever the Exercise Price is adjusted pursuant to any
                          provision of this
                          Section 3, the Company shall promptly mail to each Holder
                          a notice setting forth
                          the Exercise Price after such adjustment and setting forth
                          a brief statement of
                          the facts requiring such adjustment. If the Company issues
                          a variable rate
                          security, despite the prohibition thereon in the Purchase
                          Agreement, the Company
                          shall be deemed to have issued Common Stock or Common Stock
                          Equivalents at the
                          lowest possible conversion or exercise price at which such
                          securities

                         

                        
                          
                            9

                          

                          
                            
                            

                            
                              

                            

                          

                          
                            
                            

                          

                        

                        may
                          be
                          converted or exercised in the case of a Variable Rate Transaction
                          (as defined in
                          the Purchase Agreement).

                         

                        ii. Notice
                          to Allow Exercise by Holder.
                          If (A)
                          the Company shall declare a dividend (or any other distribution in
                          whatever
                          form) on the Common Stock; (B) the Company shall declare
                          a special nonrecurring
                          cash dividend on or a redemption of the Common Stock; (C)
                          the Company shall
                          authorize the granting to all holders of the Common Stock
                          rights or warrants to
                          subscribe for or purchase any shares of capital stock of
                          any class or of any
                          rights; (D) the approval of any stockholders of the Company
                          shall be required in
                          connection with any reclassification of the Common Stock,
                          any consolidation or
                          merger to which the Company is a party, any sale or transfer
                          of all or
                          substantially all of the assets of the Company, of any
                          compulsory share exchange
                          whereby the Common Stock is converted into other securities,
                          cash or property;
                          (E) the Company shall authorize the voluntary or involuntary
                          dissolution,
                          liquidation or winding up of the affairs of the Company;
                          then, in each case, the
                          Company shall cause to be mailed to the Holder at its last
                          address as it shall
                          appear upon the Warrant Register of the Company, at least
                          20 calendar days prior
                          to the applicable record or effective date hereinafter
                          specified, a notice
                          stating (x) the date on which a record is to be taken for
                          the purpose of such
                          dividend, distribution, redemption, rights or warrants,
                          or if a record is not to
                          be taken, the date as of which the holders of the Common
                          Stock of record to be
                          entitled to such dividend, distributions, redemption, rights
                          or warrants are to
                          be determined or (y) the date on which such reclassification,
                          consolidation,
                          merger, sale, transfer or share exchange is expected to
                          become effective or
                          close, and the date as of which it is expected that holders
                          of the Common Stock
                          of record shall be entitled to exchange their shares of
                          the Common Stock for
                          securities, cash or other property deliverable upon such
                          reclassification,
                          consolidation, merger, sale, transfer or share exchange;
                          provided that the
                          failure to mail such notice or any defect therein or in
                          the mailing thereof
                          shall not affect the validity of the corporate action required
                          to be specified
                          in such notice. The Holder is entitled to exercise this
                          Warrant during the
                          20-day period commencing on the date of such notice to
                          the effective date of the
                          event triggering such notice.

                         

                        Section
                          4. Transfer
                          of Warrant.

                         

                        a) Transferability.
                          Subject
                          to compliance with any applicable securities laws and the
                          conditions set forth
                          in Section 4(d) hereof and to the provisions of Section
                          4.1 of the Purchase
                          Agreement, this Warrant and all rights hereunder (including,
                          without limitation,
                          any registration rights) are transferable, in whole or
                          in part, upon surrender
                          of this Warrant at the principal office of the Company
                          or its designated agent,
                          together with a written assignment of this Warrant substantially
                          in the form
                          attached hereto duly executed by the Holder or its agent
                          or attorney and funds
                          sufficient to pay any transfer taxes payable upon the making
                          of such transfer.
                          Upon such surrender and, if required, 

                         

                        
                          
                            10

                          

                          
                            
                            

                            
                              

                            

                          

                          
                            
                            

                          

                        

                        such
                          payment, the Company shall execute and deliver a new Warrant
                          or Warrants in the
                          name of the assignee or assignees and in the denomination
                          or denominations
                          specified in such instrument of assignment, and shall issue
                          to the assignor a
                          new Warrant evidencing the portion of this Warrant not
                          so assigned, and this
                          Warrant shall promptly be cancelled. A Warrant, if properly
                          assigned, may be
                          exercised by a new holder for the purchase of Warrant Shares
                          without having a
                          new Warrant issued. 

                         

                        b) New
                          Warrants.
                          This
                          Warrant may be divided or combined with other Warrants
                          upon presentation hereof
                          at the aforesaid office of the Company, together with a
                          written notice
                          specifying the names and denominations in which new Warrants
                          are to be issued,
                          signed by the Holder or its agent or attorney. Subject
                          to compliance with
                          Section 4(a), as to any transfer which may be involved
                          in such division or
                          combination, the Company shall execute and deliver a new
                          Warrant or Warrants in
                          exchange for the Warrant or Warrants to be divided or combined
                          in accordance
                          with such notice.

                         

                        c) Warrant
                          Register.
                          The
                          Company shall register this Warrant, upon records to be
                          maintained by the
                          Company for that purpose (the “Warrant
                          Register”),
                          in
                          the name of the record Holder hereof from time to time.
                          The Company may deem and
                          treat the registered Holder of this Warrant as the absolute
                          owner hereof for the
                          purpose of any exercise hereof or any distribution to the
                          Holder, and for all
                          other purposes, absent actual notice to the contrary.

                         

                        d) Transfer
                          Restrictions.
                          If,
                          at the
time
                          of
                          the surrender of this Warrant in connection with any transfer
                          of this Warrant,
                          the transfer of this Warrant shall not be registered pursuant
                          to an effective
registration
                          statement under the Securities Act
                          and
under
                          applicable state securities or blue sky laws, the Company
                          may require, as a
                          condition of allowing such transfer (i) that the Holder
                          or transferee of this
                          Warrant, as the case may be, furnish to the Company a written
                          opinion of counsel
                          (which opinion shall be in form, substance and scope customary
                          for opinions of
                          counsel in comparable transactions) to the effect that
                          such transfer may be made
                          without
                          registration under
                          the
                          Securities Act and under applicable state securities or
                          blue sky laws, (ii) that
                          the holder or transferee execute and deliver to the Company
                          an investment letter
                          in form and substance acceptable to the Company and (iii)
                          that the transferee be
                          an “accredited
                          investor” as defined in Rule 501(a)(1), (a)(2), (a)(3), (a)(7), or
                          (a)(8)
                          promulgated under the Securities Act or a “qualified institutional buyer” as
                          defined in Rule 144A(a) under the Securities Act.

                         

                        Section
                          5. Miscellaneous.

                         

                        a) No
                          Rights as Shareholder Until Exercise.
                          This
                          Warrant does not entitle the Holder to any voting rights
                          or other rights as a
                          shareholder of the Company prior to the exercise hereof
                          as set forth in Section
                          2(e)(ii). 

                         

                        b) Loss,
                          Theft, Destruction or Mutilation of Warrant.
                          The
                          Company covenants that upon receipt by the Company of evidence
                          reasonably
                          satisfactory to it of the loss, theft, destruction or mutilation
                          of this Warrant
                          or any stock certificate relating to the Warrant Shares,
                          and in case of loss,
                          theft or destruction, of indemnity or security 

                         

                        
                          
                            11

                          

                          
                            
                            

                            
                              

                            

                          

                          
                            
                            

                          

                        

                        reasonably
                          satisfactory to it (which, in the case of the Warrant,
                          shall not include the
                          posting of any bond), and upon surrender and cancellation
                          of such Warrant or
                          stock certificate, if mutilated, the Company will make
                          and deliver a new Warrant
                          or stock certificate of like tenor and dated as of such
                          cancellation, in lieu of
                          such Warrant or stock certificate.

                         

                        c) Saturdays,
                          Sundays, Holidays, etc.
                          If the
                          last or appointed day for the taking of any action or the
                          expiration of any
                          right required or granted herein shall not be a Business
                          Day, then such action
                          may be taken or such right may be exercised on the next
                          succeeding Business
                          Day.

                         

                        d) Authorized
                          Shares.
                          

                         

                        The
                          Company covenants that during the period the Warrant is
                          outstanding, it will
                          reserve from its authorized and unissued Common Stock a
                          sufficient number of
                          shares to provide for the issuance of the Warrant Shares
                          upon the exercise of
                          any purchase rights under this Warrant. The Company further
                          covenants that its
                          issuance of this Warrant shall constitute full authority
                          to its officers who are
                          charged with the duty of executing stock certificates to
                          execute and issue the
                          necessary certificates for the Warrant Shares upon the
                          exercise of the purchase
                          rights under this Warrant. The Company will take all such
                          reasonable action as
                          may be necessary to assure that such Warrant Shares may
                          be issued as provided
                          herein without violation of any applicable law or regulation,
                          or of any
                          requirements of the Trading Market upon which the Common
                          Stock may be listed.

                         

                        Except
                          and to the extent as waived or consented to by the Holder,
                          the Company shall not
                          by any action, including, without limitation, amending
                          its certificate of
                          incorporation or through any reorganization, transfer of
                          assets, consolidation,
                          merger, 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, but will at all times in good faith assist in
                          the carrying out of all
                          such terms and in the taking of all such actions as may
                          be necessary or
                          appropriate to protect the rights of Holder as set forth
                          in this Warrant against
                          impairment. Without limiting the generality of the foregoing,
                          the Company will
                          (a) not increase the par value of any Warrant Shares above
                          the amount payable
                          therefor upon such exercise immediately prior to such increase
                          in par value, (b)
                          take all such action as may be necessary or appropriate
                          in order that the
                          Company may validly and legally issue fully paid and nonassessable
                          Warrant
                          Shares upon the exercise of this Warrant, and (c) use commercially
                          reasonable
                          efforts to obtain all such authorizations, exemptions or
                          consents from any
                          public regulatory body having jurisdiction thereof as may
                          be necessary to enable
                          the Company to perform its obligations under this Warrant.

                         

                        Before
                          taking any action which would result in an adjustment in
                          the number of Warrant
                          Shares for which this Warrant is exercisable or in the
                          Exercise Price, the
                          Company shall obtain all such authorizations or exemptions
                          thereof, or

                         

                        
                          
                            12

                          

                          
                            
                            

                            
                              

                            

                          

                          
                            
                            

                          

                        

                        consents
                          thereto, as may be necessary from any public regulatory
                          body or bodies having
                          jurisdiction thereof.

                         

                        e) Jurisdiction.
                          All
                          questions concerning the construction, validity, enforcement
                          and interpretation
                          of this Warrant shall be determined in accordance with
                          the provisions of the
                          Purchase Agreement.

                         

                        f) Restrictions.
                          The
                          Holder acknowledges that the Warrant Shares acquired upon
                          the exercise of this
                          Warrant, if not registered, will have restrictions upon
                          resale imposed by state
                          and federal securities laws.

                         

                        g) Nonwaiver
                          and Expenses.
                          No
                          course of dealing or any delay or failure to exercise any
                          right hereunder on the
                          part of Holder shall operate as a waiver of such right
                          or otherwise prejudice
                          Holder’s rights, powers or remedies, notwithstanding the fact
                          that all rights
                          hereunder terminate on the Termination Date. If the Company
                          willfully and
                          knowingly fails to comply with any provision of this Warrant,
                          which results in
                          any material damages to the Holder, the Company shall pay
                          to Holder such amounts
                          as shall be sufficient to cover any costs and expenses
                          including, but not
                          limited to, reasonable attorneys’ fees, including those of appellate
                          proceedings, incurred by Holder in collecting any amounts
                          due pursuant hereto or
                          in otherwise enforcing any of its rights, powers or remedies
                          hereunder.

                         

                        h) Notices.
                          Any
                          notice, request or other document required or permitted
                          to be given or delivered
                          to the Holder by the Company shall be delivered in accordance
                          with the notice
                          provisions of the Purchase Agreement.

                         

                        i) Limitation
                          of Liability.
                          No
                          provision hereof, in the absence of any affirmative action
                          by Holder to exercise
                          this Warrant to purchase Warrant Shares, and no enumeration
                          herein of the rights
                          or privileges of Holder, shall give rise to any liability
                          of Holder for the
                          purchase price of any Common Stock or as a stockholder
                          of the Company, whether
                          such liability is asserted by the Company or by creditors
                          of the
                          Company.

                         

                        j) Remedies.
                          Holder,
                          in addition to being entitled to exercise all rights granted
                          by law, including
                          recovery of damages, will be entitled to specific performance
                          of its rights
                          under this Warrant. The Company agrees that monetary damages
                          would not be
                          adequate compensation for any loss incurred by reason of
                          a breach by it of the
                          provisions of this Warrant and hereby agrees to waive and
                          not to assert the
                          defense in any action for specific performance that a remedy
                          at law would be
                          adequate.

                         

                        k) Successors
                          and Assigns.
                          Subject
                          to applicable securities laws, this Warrant and the rights
                          and obligations
                          evidenced hereby shall inure to the benefit of and be binding
                          upon the
                          successors of the Company and the successors and permitted
                          assigns of Holder.
                          The provisions of this Warrant are intended to be for the
                          benefit of all Holders
                          from time to time of this Warrant and shall be enforceable
                          by any such Holder or
                          holder of Warrant Shares.

                         

                        l) Amendment.
                          This
                          Warrant may be modified or amended or the provisions hereof
                          waived with the
                          written consent of the Company and the Holder.

                         

                        
                          
                            13

                          

                          
                            
                            

                            
                              

                            

                          

                          
                            
                            

                          

                        

                        m) Severability.
                          Wherever possible, each provision of this Warrant shall
                          be interpreted in such
                          manner as to be effective and valid under applicable law,
                          but if any provision
                          of this Warrant shall be prohibited by or invalid under
                          applicable law, such
                          provision shall be ineffective to the extent of such prohibition
                          or invalidity,
                          without invalidating the remainder of such provisions or
                          the remaining
                          provisions of this Warrant.

                         

                        n) Headings.
                          The
                          headings used in this Warrant are for the convenience of
                          reference only and
                          shall not, for any purpose, be deemed a part of this Warrant.

                         

                        

                        ********************

                        
                          
                            14

                          

                          
                            
                            

                            
                              

                            

                          

                          
                            
                            

                          

                        

                        

                        

                        IN
                          WITNESS WHEREOF, the Company has caused this Warrant to
                          be executed by its
                          officer thereunto duly authorized.

                         

                        

                        Dated:
                          June 29, 2006

                         

                        
                          	
                                  CHEMBIO
                                    DIAGNOSTICS, INC.

                                   

                                
	
                                  By:__________________________________________

                                  Name:

                                  Title:

                                

                        

                        

                         

                        

                        

                        

                        

                        

                        

                        

                        

                        
                          
                            15

                            
                            

                          

                          
                            
                            

                            
                              

                            

                          

                          
                            
                            

                            
                            

                          

                        

                        NOTICE
                          OF EXERCISE

                        

                        TO: [_______________________

                        

                        (1) The
                          undersigned hereby elects to purchase ________ Warrant
                          Shares of the Company
                          pursuant to the terms of the attached Warrant (only if
                          exercised in full), and
                          tenders herewith payment of the exercise price in full,
                          together with all
                          applicable transfer taxes, if any.

                         

                        (2) Payment
                          shall take the form of (check applicable box):

                         

                        [
                          ] in
                          lawful money of the United States; or

                         

                        [
                          ] [if
                          permitted] the cancellation of such number of Warrant Shares
                          as is necessary, in
                          accordance with the formula set forth in subsection 2(c),
                          to exercise this
                          Warrant with respect to the maximum number of Warrant Shares
                          purchasable
                          pursuant to the cashless exercise procedure set forth in
                          subsection
                          2(c).

                         

                        (3) Please
                          issue a certificate or certificates representing said Warrant
                          Shares in the name
                          of the undersigned or in such other name as is specified
                          below:

                         

                        _______________________________

                         

                        

                        The
                          Warrant Shares shall be delivered to the following DWAC
                          Account Number or by
                          physical delivery of a certificate to:

                        

                        _______________________________

                         

                        _______________________________

                         

                        _______________________________

                        

                        (4)
                          Accredited
                          Investor.
                          The
                          undersigned is an “accredited investor” as defined in Regulation D promulgated
                          under the Securities Act of 1933, as amended.

                        

                        [SIGNATURE
                          OF HOLDER]

                         

                        Name
                          of
                          Investing Entity:
                          ________________________________________________________________________

                        Signature
                          of Authorized Signatory of Investing Entity:
                          _________________________________________________

                        Name
                          of
                          Authorized Signatory:
                          ___________________________________________________________________

                        Title
                          of
                          Authorized Signatory:
                          ____________________________________________________________________

                        Date:
                          ________________________________________________________________________________________

                        

                        

                        

                        
                          
                            
                            

                          

                          
                            
                            

                            
                              

                            

                          

                          
                            
                            

                          

                        

                        

                         

                        ASSIGNMENT
                          FORM

                        

                        (To
                          assign the foregoing warrant, execute

                        this
                          form
                          and supply required information. 

                        Do
                          not
                          use this form to exercise the warrant.)

                        

                        

                        

                        FOR
                          VALUE
                          RECEIVED, [____] all of or [_______] shares of the foregoing
                          Warrant and all
                          rights evidenced thereby are hereby assigned to

                         

                        

                        _______________________________________________
                          whose address is

                        

                        _______________________________________________________________.

                        

                        

                        

                        _______________________________________________________________

                        

                        Dated:
                          ______________, _______

                        

                        

                        Holder’s
                          Signature: _____________________________

                        

                        Holder’s
                          Address: _____________________________

                         

                        _____________________________

                        

                        

                        

                        Signature
                          Guaranteed: ___________________________________________

                        

                        

                        NOTE:
                          The
                          signature to this Assignment Form must correspond with
                          the name as it appears on
                          the face of the Warrant, without alteration or enlargement
                          or any change
                          whatsoever, and must be guaranteed by a bank or trust company.
                          Officers of
                          corporations and those acting in a fiduciary or other representative
                          capacity
                          should file proper evidence of authority to assign the
                          foregoing
                          Warrant.Exhibit 10.14 Securities Purchase Agreement

    
      
        
          
            
              
                
                  
                    
                      

                    

                    
                      

                    

                    Exhibit
                      10.14 Securities Purchase Agreement

                    
                      
                        

                          

                          

                          SECURITIES
                            PURCHASE AGREEMENT

                           

                          This
                            Securities Purchase Agreement (this “Agreement”)
                            is
                            dated as of June 29, 2006 among Chembio Diagnostics,
                            Inc., a Nevada corporation
                            (the “Company”),
                            and
                            each purchaser identified on the signature pages hereto
                            (each, including its
                            successors and assigns, a “Purchaser”
and
                            collectively the “Purchasers”).

                           

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

                           

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

                           

                           

                          ARTICLE
                            I.

                          DEFINITIONS

                           

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

                           

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

                           

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

                           

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

                           

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

                           

                          “Closing
                            Date”
means
                            the Trading Day when all of the Transaction Documents
                            have been executed and
                            delivered by the applicable parties thereto, and all
                            conditions 

                           

                          
                            
                              
                              

                            

                            
                              1

                              
                                

                              

                            

                            
                              
                              

                            

                          

                          precedent
                            to (i) the Purchasers’ obligations to pay the Subscription Amount and (ii) the
                            Company’s obligations to deliver the Securities have been satisfied
                            or
                            waived.

                           

                          “Commission”
means
                            the Securities and Exchange Commission.

                           

                          “Common
                            Stock”
means
                            the common stock of the Company, par value $.01 per share,
                            and any other class
                            of securities into which such securities may hereafter
                            be reclassified or
                            changed into.

                           

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

                           

                          “Company
                            Counsel”
means
                            Patton Boggs LLP.

                           

                          “Debentures”
means
                            the Secured Debenture due, subject to the terms therein,
                            90 days from their date
                            of issuance, issued by the Company to the Purchasers
                            hereunder, in the form of
Exhibit
                            A
                            hereto.

                           

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

                           

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

                           

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

                           

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

                          

                          “Exempt
                            Issuance”
means
                            the issuance of (a) shares of Common Stock or options
                            to employees, officers,
                            directors, investor relations consultants or sales brokers
                            (provided that such
                            issuances to sales brokers shall not exceed 450,000 shares
                            (subject to
                            adjustment for reverse and forward stock splits and the
                            like) in any 12 month
                            period) of the Company pursuant to any stock or option
                            plan duly adopted by a
                            majority of the non-employee members of the Board of
                            Directors of the Company or
                            a majority of the members of a committee of non-employee
                            directors established
                            for such purpose, (b) securities upon the exercise or
                            exchange of or conversion
                            of any Securities issued hereunder and/or other securities
                            exercisable or
                            exchangeable for or convertible into shares of Common
                            Stock issued and
                            outstanding on the date of this Agreement, provided that
                            such securities have
                            not been amended since the date of this Agreement to
                            increase the number of such
                            securities or to decrease the exercise, exchange or conversion
                            price of any such
                            securities, (c) Common Stock or Series A Preferred Stock
                            as payment of regularly
                            scheduled dividends on the Series A Preferred Stock,
                            provided that the terms of

                           

                          
                            
                              
                              

                            

                            
                              2

                              
                                

                              

                            

                            
                              
                              

                            

                          

                          the
                            Series A Preferred Stock have not been amended since
                            the date hereof, (d) Common
                            Stock or Series B Preferred Stock as payment of regularly
                            scheduled dividends on
                            the Series B Preferred Stock, provided that the terms
                            of the Series B Preferred
                            Stock have not been amended since the date hereof and
                            (e) securities issued
                            pursuant to acquisitions or strategic transactions approved
                            by a majority of the
                            disinterested directors, provided any such issuance shall
                            only be to a Person
                            which is, itself or through its subsidiaries, an operating
                            company in a business
                            synergistic with the business of the Company and in which
                            the Company receives
                            benefits in addition to the investment of funds, but
                            shall not include a
                            transaction in which the Company is issuing securities
                            primarily for the purpose
                            of raising capital or to an entity whose primary business
                            is investing in
                            securities.

                           

                          “FWS”
means
                            Feldman Weinstein & Smith LLP with offices located at 420 Lexington Avenue,
                            Suite 2620, New York, New York 10170-0002.

                           

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

                           

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

                           

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

                           

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

                           

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

                           

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

                           

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

                           

                          “Participation
                            Maximum”
shall
                            have the meaning ascribed to such term in Section 4.13.

                           

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

                           

                          “Pre-Notice”
shall
                            have the meaning ascribed to such term in Section 4.13.

                           

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

                           

                          “Purchaser
                            Party”
shall
                            have the meaning ascribed to such term in Section 4.11.

                           

                          
                            
                              
                              

                            

                            
                              3

                              
                                

                              

                            

                            
                              
                              

                            

                          

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

                           

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

                           

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

                           

                          “Required
                            Minimum”
means,
                            as of any date, the maximum aggregate number of shares
                            of Common Stock then
                            issued or potentially issuable in the future pursuant
                            to the Transaction
                            Documents, including any Warrant Shares issuable upon
                            exercise in full of all
                            Warrants, ignoring any exercise limits set forth therein.

                           

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

                           

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

                           

                          “Security
                            Agreement”
means
                            the Security Agreement, dated the date hereof, among
                            the Company, Chembio
                            Diagnostic Systems, Inc. and the Purchasers, in the form
                            of Exhibit
                            E attached
                            hereto.

                          

                          “Security
                            Documents”
shall
                            mean the Security Agreement, the Subsidiary Guarantee
                            and any other documents
                            and filing required thereunder in order to grant the
                            Purchasers a security
                            interest in all assets of the Company as provided in
                            the Security Agreement,
                            including all UCC-1 filing receipts.

                           

                          “Securities”
means
                            the Debentures, the Warrants and the Warrant Shares.

                           

                          “Securities
                            Act”
means
                            the Securities Act of 1933, as amended, and the rules
                            and regulations
                            promulgated hereunder.

                           

                          “Series
                            A Preferred Stock”
means
                            the Series A Convertible Preferred Stock of the Company,
                            which has the rights
                            set forth on the amended and restated certificate of
                            designation filed on June
                            13, 2006 with the Secretary of State of the State of
                            Nevada.

                           

                          “Series
                            B Preferred Stock”
means
                            the Series B 9% Convertible Preferred Stock of the Company,
                            which has the rights
                            set forth on the amended and restated certificate of
                            designation filed on June
                            13, 2006 with the Secretary of State of the State of
                            Nevada.

                           

                          “Short
                            Sales”
shall
                            include all “short sales” as defined in Rule 200 of Regulation SHO under the
                            Exchange Act (but shall not be deemed to include the
                            location and/or

                           

                          
                            
                              
                              

                            

                            
                              4

                              
                                

                              

                            

                            
                              
                              

                            

                          

                          reservation
                            of borrowable shares of Common Stock). 

                           

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

                           

                          “Subsidiary
                            Guarantee”
means
                            the Subsidiary Guarantee, dated the date hereof, executed
                            by Chembio Diagnostic
                            Systems, Inc. in favor of the Purchasers, in the form
                            of Exhibit
                            F
                            attached
                            hereto.

                           

                          “Subsequent
                            Financing”
shall
                            have the meaning ascribed to such term in Section 4.13.

                           

                          “Subsequent
                            Financing Notice”
shall
                            have the meaning ascribed to such term in Section 4.13.

                           

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

                           

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

                           

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

                           

                          “Transaction
                            Documents”
means
                            this Agreement, the Debentures, the Warrants, the Registration
                            Rights Agreement,
                            the Security Agreement, the Subsidiary Guarantee and
                            any other documents or
                            agreements executed in connection with the transactions
                            contemplated
                            hereunder.

                           

                          “VWAP”
means,
                            for any date, the price determined by the first of the
                            following clauses that
                            applies: (a) if the Common Stock is then listed or quoted
                            on a Trading Market,
                            the daily volume weighted average price of the Common
                            Stock for such date (or
                            the nearest preceding date) on the Trading Market on
                            which the Common Stock is
                            then listed or quoted as reported by Bloomberg L.P. (based
                            on a Trading Day from
                            9:30 a.m. New York City time to 4:02 p.m. New York City
                            time); (b)  if the
                            OTC Bulletin Board is not a Trading Market, the volume
                            weighted average price of
                            the Common Stock for such date (or the nearest preceding
                            date) on the OTC
                            Bulletin Board; (c) if the Common Stock is not then listed
                            or quoted on the OTC
                            Bulletin Board and if prices for the Common Stock are
                            then reported in the “Pink
                            Sheets” published by Pink Sheets, LLC (or a similar organization
                            or agency
                            succeeding to its functions of reporting prices), the
                            most recent bid price per
                            share of the Common Stock so reported; or (d) in all other cases, the fair
                            market value of a share of Common Stock as determined
                            by an independent
                            appraiser selected in good faith by the Holder and reasonably
                            acceptable to the
                            Company.

                           

                          
                            
                              
                              

                            

                            
                              5

                              
                                

                              

                            

                            
                              
                              

                            

                          

                          “Warrants”
means
                            collectively the Common Stock purchase warrants, in the
                            form of Exhibit C
                            delivered to the Purchasers at the Closing in accordance
                            with Section 2.2(a)
                            hereof, which Warrants shall be exercisable immediately
                            and have a term of
                            exercise equal to 5 years.

                           

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

                           

                           

                          ARTICLE
                            II.

                          PURCHASE
                            AND SALE

                           

                          2.1 Closing.
                            On the
                            Closing Date, upon the terms and subject to the conditions
                            set forth herein,
                            substantially concurrent with the execution and delivery
                            of this Agreement by
                            the parties hereto, the Company agrees to sell, and each
                            Purchaser agrees to
                            purchase in the aggregate, severally and not jointly,
                            up to $1,800,000 principal
                            amount of the Debentures. Each Purchaser shall deliver
                            to the Company via wire
                            transfer or a certified check immediately available funds
                            equal to their
                            Subscription Amount and the Company shall deliver to
                            each Purchaser their
                            respective Debenture and Warrants as determined pursuant
                            to Section 2.2(a) and
                            the other items set forth in Section 2.2 issuable at
                            the Closing. Upon
                            satisfaction of the conditions set forth in Sections
                            2.2 and 2.3, the Closing
                            shall occur at the offices of FWS, or such other location
                            as the parties shall
                            mutually agree.

                           

                          2.2  Deliveries

                           

                          .

                           

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

                           

                          
                            	 	
                                    (i)

                                  	
                                    this
                                      Agreement duly executed by the
                                      Company;

                                  

                          

                           

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

                           

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

                           

                          (iv) a
                            Warrant
                            to purchase up to 400 shares of Common Stock for each
                            $1,000 in such Purchaser’s
                            Subscription Amount, with an exercise price equal to
                            $0.75,
                            subject
                            to adjustment therein, and a term of exercise of 5 years,
                            registered in the name
                            of such Purchaser;

                           

                          (v) the
                            Security Agreement, duly executed by the Company and
                            Chembio Diagnostic Systems,
                            Inc., along with all of the Security Documents, including
                            the Subsidiary
                            Guarantee, duly executed by the parties thereto; and

                           

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

                           

                          
                            
                              
                              

                            

                            
                              6

                              
                                

                              

                            

                            
                              
                              

                            

                          

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

                           

                          
                            	 	
                                    (i)
                                      

                                  	
                                     this
                                      Agreement duly executed by such
                                      Purchaser;

                                  

                          

                           

                          (ii) the
                            Security Agreement duly executed by such Purchaser;

                           

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

                           

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

                           

                          2.3 Closing
                            Conditions. 

                           

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

                           

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

                           

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

                           

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

                           

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

                           

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

                           

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

                           

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

                           

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

                           

                          (v) from
                            the
                            date hereof to the Closing Date, trading in the Common
                            Stock shall not have been
                            suspended by the Commission or the Company’s principal Trading Market (except
                            for any suspension of trading of limited duration agreed
                            to by the Company,
                            which suspension shall be terminated prior to the 

                           

                          
                            
                              
                              

                            

                            
                              7

                              
                                

                              

                            

                            
                              
                              

                            

                          

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

                           

                           

                          ARTICLE
                            III.

                          REPRESENTATIONS
                            AND WARRANTIES

                           

                          3.1 Representations
                            and Warranties of the Company.
                            Except
                            as set forth under the corresponding section of the disclosure
                            schedules
                            delivered to the Purchasers concurrently herewith (the
“Disclosure
                            Schedules”)
                            which
                            Disclosure Schedules shall be deemed a part hereof and
                            to qualify any
                            representation or warranty otherwise made herein to the
                            extent of such
                            disclosure, the Company hereby makes the representations
                            and warranties set
                            forth below to each Purchaser.

                           

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

                           

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

                           

                          
                            
                              
                              

                            

                            
                              8

                              
                                

                              

                            

                            
                              
                              

                            

                          

                          Adverse
                            Effect”)
                            and no
                            Proceeding has been instituted in any such jurisdiction
                            revoking, limiting or
                            curtailing or seeking to revoke, limit or curtail such
                            power and authority or
                            qualification.

                           

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

                           

                          (d) No
                            Conflicts.
                            The
                            execution, delivery and performance of the Transaction
                            Documents by the Company
                            and the consummation by the Company of the other transactions
                            contemplated
                            hereby and thereby do not and will not: (i) conflict
                            with or violate any
                            provision of the Company’s or any Subsidiary’s certificate or articles of
                            incorporation, bylaws or other organizational or charter
                            documents, or (ii)
                            conflict with, or constitute a default (or an event that
                            with notice or lapse of
                            time or both would become a default) under, result in
                            the creation of any Lien
                            upon any of the properties or assets of the Company or
                            any Subsidiary, or give
                            to others any rights of termination, amendment, acceleration
                            or cancellation
                            (with or without notice, lapse of time or both) of, any
                            agreement, credit
                            facility, debt or other instrument (evidencing a Company
                            or Subsidiary debt or
                            otherwise) or other understanding to which the Company
                            or any Subsidiary is a
                            party or by which any property or asset of the Company
                            or any Subsidiary is
                            bound or affected, or (iii) subject to the Required Approvals,
                            conflict with or
                            result in a violation of any law, rule, regulation, order,
                            judgment, injunction,
                            decree or other restriction of any court or governmental
                            authority to which the
                            Company or a Subsidiary is subject (including federal
                            and state securities laws
                            and regulations), or by which any property or asset of
                            the Company or a
                            Subsidiary is bound or affected; except in the case of
                            each of clauses (ii) and
                            (iii), such as could not have or reasonably be expected
                            to result in a Material
                            Adverse Effect.

                           

                          (e) Filings,
                            Consents and Approvals.
                            Except
                            as set forth on Schedule
                            3.1(e)
                            attached
                            hereto, the Company is not required to obtain any consent,
                            waiver, authorization
                            or order of, give any notice to, or make any filing or
                            registration with, any
                            court or other federal, state, local or other governmental
                            authority or other
                            Person in connection with 

                           

                          
                            
                              
                              

                            

                            
                              9

                              
                                

                              

                            

                            
                              
                              

                            

                          

                          the
                            execution, delivery and performance by the Company of
                            the Transaction Documents,
                            other than (i) filings required pursuant to Section 4.6,
                            (ii) the filing with
                            the Commission of the Registration Statement, (iii) the
                            notice and/or
                            application(s) to each applicable Trading Market for
                            the issuance and sale of
                            the Securities and the listing of the Warrant Shares
                            for trading thereon in the
                            time and manner required thereby and (iv) the filing
                            of Form D with the
                            Commission and such filings as are required to be made
                            under applicable state
                            securities laws (collectively, the “Required
                            Approvals”).

                           

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

                           

                          (g) Capitalization.
                            The
                            capitalization of the Company is as set forth on Schedule
                            3.1(g).
                            Except
                            as set forth on Schedule
                            3.1(g),
                            the
                            Company has not issued any capital stock since its most
                            recently filed periodic report under the Exchange Act,
                            other
                            than pursuant to the exercise of employee stock options
                            under the Company’s
                            stock option plans, the issuance of shares of Common
                            Stock to employees pursuant
                            to the Company’s employee stock purchase plan and pursuant to the conversion
                            or
                            exercise of Common Stock Equivalents outstanding as of
                            the date of the most
                            recently filed periodic report under the Exchange Act.
                            No Person has any right
                            of first refusal, preemptive right, right of participation,
                            or any similar right
                            to participate in the transactions contemplated by the
                            Transaction Documents.
                            Except as a result of the purchase and sale of the Securities,
                            there are no
                            outstanding options, warrants, script rights to subscribe
                            to, calls or
                            commitments of any character whatsoever relating to,
                            or securities, rights or
                            obligations convertible into or exercisable or exchangeable
                            for, or giving any
                            Person any right to subscribe for or acquire, any shares
                            of Common Stock, or
                            contracts, commitments, understandings or arrangements
                            by which the Company or
                            any Subsidiary is or may become bound to issue additional
                            shares of Common Stock
                            or Common Stock Equivalents. The issuance and sale of
                            the Securities will not
                            obligate the Company to issue shares of Common Stock
                            or other securities to any
                            Person (other than the Purchasers) and will not result
                            in a right of any holder
                            of Company securities to adjust the exercise, conversion,
                            exchange or reset
                            price under any of such securities. All of the outstanding
                            shares of capital
                            stock of the Company are validly issued, fully paid and
                            nonassessable, have been
                            issued in compliance with all federal and state securities
                            laws, and none of
                            such outstanding shares was issued in violation of any
                            preemptive rights or
                            similar rights to subscribe for or purchase securities.
                            No further approval or
                            authorization of any stockholder, the Board of Directors
                            of the Company or
                            others is required for the issuance and sale of the Securities.
                            There are no
                            stockholders agreements, voting agreements or other similar
                            agreements with
                            respect to the Company’s capital stock to 

                           

                          
                            
                              
                              

                            

                            
                              10

                              
                                

                              

                            

                            
                              
                              

                            

                          

                          which
                            the
                            Company is a party or, to the knowledge of the Company,
                            between or among any of
                            the Company’s stockholders.

                           

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

                           

                          (i) Material
                            Changes.
                            Since
                            the date of the latest audited financial statements included
                            within the SEC
                            Reports, except as specifically disclosed in a subsequent
                            SEC Report, (i) there
                            has been no event, occurrence or development that has
                            had or that could
                            reasonably be expected to result in a Material Adverse
                            Effect, (ii) the Company
                            has not incurred any liabilities (contingent or otherwise)
                            other than (A) trade
                            payables and accrued expenses incurred in the ordinary
                            course of business
                            consistent with past practice and (B) liabilities not
                            required to be reflected
                            in the Company’s financial statements pursuant to GAAP or disclosed
                            in filings
                            made with the Commission, (iii) the Company has not altered
                            its method of
                            accounting, (iv) except as set forth on Schedule
                            3.1(i)
                            attached
                            hereto, the Company has not declared or made any dividend
                            or distribution of
                            cash or other property to its stockholders or purchased,
                            redeemed or made any
                            agreements to purchase or redeem any shares of its capital
                            stock and (v) the
                            Company has not issued any equity securities to any officer,
                            director or
                            Affiliate, except pursuant to existing Company stock
                            option plans. The Company
                            does not have pending before the Commission any request
                            for confidential
                            treatment of information. Except for the issuance of
                            the Securities contemplated
                            by this Agreement or as set forth on Schedule
                            3.1(i),
                            no
                            event, liability or development has occurred or exists
                            with respect to the

                           

                          
                            
                              
                              

                            

                            
                              11

                              
                                

                              

                            

                            
                              
                              

                            

                          

                          Company
                            or its Subsidiaries or their respective business, properties,
                            operations or
                            financial condition, that would be required to be disclosed
                            by the Company under
                            applicable securities laws at the time this representation
                            is made that has not
                            been publicly disclosed at least one Trading Day prior
                            to the date that this
                            representation is made.

                           

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

                           

                          (k) Labor
                            Relations.
                            No
                            material labor dispute exists or, to the knowledge of
                            the Company, is imminent
                            with respect to any of the employees of the Company which
                            could reasonably be
                            expected to result in a Material Adverse Effect. None
                            of the Company’s or its
                            Subsidiaries’ employees is a member of a union that relates to such
                            employee’s
                            relationship with the Company, and neither the Company
                            or any of its
                            Subsidiaries is a party to a collective bargaining agreement,
                            and the Company
                            and its Subsidiaries believe that their relationships
                            with their employees are
                            good. No executive officer, 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 or
                            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. The Company and its Subsidiaries
                            are in compliance
                            with all U.S. federal, state, local and foreign laws
                            and regulations relating to
                            employment and employment practices, terms and conditions
                            of employment and
                            wages and hours, except where the failure to be in compliance
                            could not,
                            individually or in the aggregate, reasonably be expected
                            to have a Material
                            Adverse Effect.

                           

                          (l) Compliance.
                            Neither
                            the Company nor any Subsidiary (i) is in default under
                            or in violation of (and
                            no event has occurred that has not been waived that,
                            with notice or lapse of
                            time or both, would result in a default by the Company
                            or any Subsidiary under),
                            nor has the Company or any Subsidiary received notice
                            of a claim that it is in
                            default under or that it is in violation of, any indenture,
                            loan or credit
                            agreement or 

                           

                          
                            
                              
                              

                            

                            
                              12

                              
                                

                              

                            

                            
                              
                              

                            

                          

                          any
                            other
                            agreement or instrument to which it is a party or by
                            which it or any of its
                            properties is bound (whether or not such default or violation
                            has been waived),
                            (ii) is in violation of any order of any court, arbitrator
                            or governmental body,
                            or (iii) is or has been in violation of any statute,
                            rule or regulation of any
                            governmental authority, including without limitation
                            all foreign, federal, state
                            and local laws applicable to its business and all such
                            laws that affect the
                            environment, except in each case as could not have or
                            reasonably be expected to
                            result in a Material Adverse Effect.

                           

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

                           

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

                           

                          (o) Patents
                            and Trademarks.
                            The
                            Company and the Subsidiaries have, or have rights to
                            use, all patents, patent
                            applications, trademarks, trademark applications, service
                            marks, trade names,
                            trade secrets, inventions, copyrights, licenses and other
                            intellectual property
                            rights and similar rights necessary or material for use
                            in connection with their
                            respective businesses as described in the SEC Reports
                            and which the failure to
                            so have could have a Material Adverse Effect (collectively,
                            the “Intellectual
                            Property Rights”).
                            Neither the Company nor any Subsidiary has received a
                            notice (written or
                            otherwise) that the Intellectual Property Rights used
                            by the Company or any
                            Subsidiary violates or infringes upon the rights of any
                            Person. To the knowledge
                            of the Company, all such Intellectual Property Rights
                            are enforceable and there
                            is no existing infringement by another Person of any
                            of the Intellectual
                            Property Rights. The Company and its Subsidiaries have
                            taken reasonable security
                            measures to protect the secrecy, confidentiality and
                            value of all of their
                            intellectual properties, except where failure to do so
                            could not, individually
                            or in the aggregate, reasonably be expect to have a Material
                            Adverse
                            Effect.

                           

                          (p) Insurance.
                            The
                            Company and the Subsidiaries are insured by insurers
                            of recognized financial
                            responsibility against such losses and risks and in such
                            amounts as

                           

                          
                            
                              
                              

                            

                            
                              13

                              
                                

                              

                            

                            
                              
                              

                            

                          

                          are
                            prudent and customary in the businesses in which the
                            Company and the
                            Subsidiaries are engaged, including, but not limited
                            to, directors and officers
                            insurance coverage at least equal to the aggregate Subscription
                            Amount. Neither
                            the Company nor any Subsidiary has any reason to believe
                            that it will not be
                            able to renew its existing insurance coverage as and
                            when such coverage expires
                            or to obtain similar coverage from similar insurers as
                            may be necessary to
                            continue its business without a significant increase
                            in cost.

                           

                          (q) Transactions
                            With Affiliates and Employees.
                            Except
                            as set forth in the SEC Reports, none of the officers
                            or directors of the
                            Company and, to the knowledge of the Company, none of
                            the employees of the
                            Company is presently a party to any transaction with
                            the Company or any
                            Subsidiary (other than for services as employees, officers
                            and directors),
                            including any contract, agreement or other arrangement
                            providing for the
                            furnishing of services to or by, providing for rental
                            of real or personal
                            property to or from, or otherwise requiring payments
                            to or from any officer,
                            director or such employee or, to the knowledge of the
                            Company, any entity in
                            which any officer, director, or any such employee has
                            a substantial interest or
                            is an officer, director, trustee or partner, in each
                            case in excess of $60,000
                            other than (i) for payment of salary or consulting fees
                            for services rendered,
                            (ii) reimbursement for expenses incurred on behalf of
                            the Company and (iii) for
                            other employee benefits, including stock option agreements
                            under any stock
                            option plan of the Company.

                           

                          (r) Sarbanes-Oxley;
                            Internal Accounting Controls.
                            The
                            Company is in material compliance with all provisions
                            of the Sarbanes-Oxley Act
                            of 2002 which are applicable to it as of the Closing
                            Date. The
                            Company and the Subsidiaries maintain a system of internal
                            accounting controls
                            sufficient to provide reasonable assurance that (i) transactions
                            are executed in
                            accordance with management’s general or specific authorizations, (ii)
                            transactions are recorded as necessary to permit preparation
                            of financial
                            statements in conformity with GAAP and to maintain asset
                            accountability, (iii)
                            access to assets is permitted only in accordance with
                            management’s general or
                            specific authorization, and (iv) the recorded accountability
                            for assets is
                            compared with the existing assets at reasonable intervals
                            and appropriate action
                            is taken with respect to any differences. The Company
                            has established disclosure
                            controls and procedures (as defined in Exchange Act Rules
                            13a-15(e) and
                            15d-15(e)) for the Company and designed such disclosure
                            controls and procedures
                            to ensure that information required to be disclosed by
                            the Company in the
                            reports it files or submits under the Exchange Act is
                            recorded, processed,
                            summarized and reported, within the time periods specified
                            in the Commission’s
                            rules and forms. The Company’s certifying officers have evaluated the
                            effectiveness of the Company’s disclosure controls and procedures as of the end
                            of the period covered by the Company’s most recently filed periodic report under
                            the Exchange Act (such date, the “Evaluation
                            Date”).
                            The
                            Company presented in its most recently filed periodic
                            report under the Exchange
                            Act the conclusions of the certifying officers about
                            the effectiveness of the
                            disclosure controls and procedures based on their evaluations
                            as of the
                            Evaluation Date. Since the Evaluation Date, there have
                            been no changes in the
                            Company’s internal control over financial reporting (as such
                            term is defined in
                            the 

                           

                          
                            
                              
                              

                            

                            
                              14

                              
                                

                              

                            

                            
                              
                              

                            

                          

                          Exchange
                            Act) that has materially affected, or is reasonably likely
                            to materially affect,
                            the Company’s internal control over financial reporting.

                           

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

                           

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

                           

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

                           

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

                           

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

                           

                          (x) Application
                            of Takeover Protections.
                            The
                            Company and its Board of Directors have taken all necessary
                            action, if any, in
                            order to render inapplicable any control share acquisition,
                            business
                            combination, poison pill (including any distribution
                            under a rights agreement)
                            or other similar anti-takeover provision under the Company’s Certificate of
                            Incorporation (or similar charter documents) or the laws
                            of its state of
                            incorporation that is or could become applicable to the
                            Purchasers as a result
                            of the 

                           

                          
                            
                              
                              

                            

                            
                              15

                              
                                

                              

                            

                            
                              
                              

                            

                          

                          Purchasers
                            and the Company fulfilling their obligations or exercising
                            their rights under
                            the Transaction Documents, including without limitation
                            as a result of the
                            Company’s issuance of the Securities and the Purchasers’ ownership of the
                            Securities.

                           

                          (y) Disclosure.
                            Except
                            with respect to the material terms and conditions of
                            the transactions
                            contemplated by the Transaction Documents, the Company
                            confirms that neither it
                            nor any other Person acting on its behalf has provided
                            any of the Purchasers or
                            their agents or counsel with any information that it
                            believes constitutes or
                            might constitute material, nonpublic information. The
                            Company understands and
                            confirms that the Purchasers will rely on the foregoing
                            representation in
                            effecting transactions in securities of the Company.
                            All disclosure furnished by
                            or on behalf of the Company to the Purchasers regarding
                            the Company, its
                            business and the transactions contemplated hereby, including
                            the Disclosure
                            Schedules to this Agreement, with respect to the representations
                            and warranties
                            made herein are true and correct with respect to such
                            representations and
                            warranties and do not contain any untrue statement of
                            a material fact or omit to
                            state any material fact necessary in order to make the
                            statements made therein,
                            in light of the circumstances under which they were made,
                            not misleading. The
                            press releases disseminated by the Company during the
                            12 months preceding the
                            date of this Agreement taken as a whole do not 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
                            light of the circumstances
                            under which they were made and when made, not misleading.
                            The Company
                            acknowledges and agrees that no Purchaser makes or has
                            made any representations
                            or warranties with respect to the transactions contemplated
                            hereby other than
                            those specifically set forth in Section 3.2 hereof.

                           

                          (z) No
                            Integrated Offering.
                            Assuming
                            the accuracy of the Purchasers’ representations and warranties set forth in
                            Section 3.2, neither the Company, nor any of its affiliates,
                            nor any Person
                            acting on its or their behalf has, directly or indirectly,
                            made any offers or
                            sales of any security or solicited any offers to buy
                            any security, under
                            circumstances that would cause this offering of the Securities
                            to be integrated
                            with prior offerings by the Company for purposes of the
                            Securities Act or any
                            applicable shareholder approval provision of any Trading
                            Market on which any of
                            the securities of the Company are listed or designated.

                           

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

                           

                          
                            
                              
                              

                            

                            
                              16

                              
                                

                              

                            

                            
                              
                              

                            

                          

                          such
                            amounts are required to be paid. The Company does not
                            intend to incur debts
                            beyond its ability to pay such debts as they mature (taking
                            into account the
                            timing and amounts of cash to be payable on or in respect
                            of its debt). The
                            Company has no knowledge of any facts or circumstances
                            which lead it to believe
                            that it will file for reorganization or liquidation under
                            the bankruptcy or
                            reorganization laws of any jurisdiction within one year
                            from the Closing Date.
Schedule
                            3.1(aa)
                            sets
                            forth as of the dates thereof all outstanding secured
                            and unsecured Indebtedness
                            of the Company or any Subsidiary, or for which the Company
                            or any Subsidiary has
                            commitments. For the purposes of this Agreement, “Indebtedness”
shall
                            mean (a) any liabilities for borrowed money or amounts
                            owed in excess of $50,000
                            (other than trade accounts payable incurred in the ordinary
                            course of business),
                            (b) all guaranties, endorsements and other contingent
                            obligations in respect of
                            Indebtedness of others, whether or not the same are or
                            should be reflected in
                            the Company’s balance sheet (or the notes thereto), except guaranties
                            by
                            endorsement of negotiable instruments for deposit or
                            collection or similar
                            transactions in the ordinary course of business; and
                            (c) the present value of
                            any lease payments
                            in excess of $50,000 due under leases required to be
                            capitalized in accordance
                            with GAAP. Neither
                            the Company nor any Subsidiary is in default with respect
                            to any
                            Indebtedness.

                           

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

                           

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

                           

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

                           

                          (ee) Accountants.
                            The
                            Company’s accountants are set forth on Schedule
                            3.1(ee)
                            of the
                            Disclosure Schedule. To the knowledge of the Company,
                            such accountants, who the
                            Company expects will express their opinion with respect
                            to the financial
                            statements to be included in the Company’s Annual Report on Form 10-KSB

                           

                          
                            
                              
                              

                            

                            
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                          for
                            the
                            year ending December 31, 2006 are a registered public
                            accounting firm as
                            required by the Securities Act.

                           

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

                           

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

                           

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

                           

                          (ii) Acknowledgement
                            Regarding Purchasers’ Trading Activity.
                            Anything in this Agreement or elsewhere herein to the
                            contrary notwithstanding
                            (except for Sections 3.2(f) and 4.16 hereof), it is understood
                            and acknowledged
                            by the Company (i) that none of the Purchasers have been
                            asked to agree, nor has
                            any Purchaser agreed, to desist from purchasing or selling,
                            long and/or short,
                            securities of the Company, or “derivative” securities based on securities issued
                            by the Company or to hold the Securities for any specified
                            term; (ii) that past
                            or future open market or other transactions by any Purchaser,
                            including Short
                            Sales, and specifically including, without limitation,
                            Short Sales or
“derivative” transactions, before or after the closing of this or
                            future private
                            placement transactions, may negatively impact the market
                            price of the Company’s
                            publicly-traded securities; (iii) that any Purchaser,
                            and counter-parties in
“derivative” transactions to which any such Purchaser is a party,
                            directly or
                            indirectly, presently may have a “short” position in the Common Stock, and (iv)
                            that each Purchaser shall not be deemed to have any affiliation
                            with or control
                            over any arm’s length counter-party in any “derivative” transaction.
The
                            Company further understands and acknowledges that (a)
                            one or more Purchasers may
                            engage in hedging activities at various times during
                            the period that the

                           

                          
                            
                              
                              

                            

                            
                              18

                              
                                

                              

                            

                            
                              
                              

                            

                          

                          Securities
                            are outstanding, including, without limitation, during
                            the periods that the
                            value of the Warrant Shares deliverable with respect
                            to Securities are being
                            determined and (b) such hedging activities (if any) could
                            reduce the value of
                            the existing stockholders' equity interests in the Company
                            at and after the time
                            that the hedging activities are being conducted.  The Company acknowledges
                            that such aforementioned hedging activities do not constitute
                            a breach of any of
                            the Transaction Documents.

                           

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

                           

                          

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

                           

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

                           

                          (b) Own
                            Account.
                            Such
                            Purchaser understands that the Securities are “restricted securities” and have
                            not been registered under the Securities Act or any applicable
                            state securities
                            law and is acquiring the Securities as principal for
                            its own account and not
                            with a view to or for distributing or reselling such
                            Securities or any part
                            thereof in violation of the Securities Act or any applicable
                            state securities
                            law, has no present intention of distributing any of
                            such Securities in
                            violation of the Securities Act or any applicable state
                            securities law and has
                            no direct or indirect arrangement or 

                           

                          
                            
                              
                              

                            

                            
                              19

                              
                                

                              

                            

                            
                              
                              

                            

                          

                          understandings
                            with any other persons to distribute or regarding the
                            distribution of such
                            Securities (this representation and warranty not limiting
                            such Purchaser’s right
                            to sell the Securities pursuant to the Registration Statement
                            or otherwise in
                            compliance with applicable federal and state securities
                            laws) in violation of
                            the Securities Act or any applicable state securities
                            law. Such Purchaser is
                            acquiring the Securities hereunder in the ordinary course
                            of its
                            business.

                           

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

                           

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

                           

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

                           

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

                           

                          (g) Disclosure
                            of Information.
                            Such
                            Purchaser has had an opportunity to receive all information
                            related to the
                            Company requested by it and to ask questions of, 

                           

                          
                            
                              
                              

                            

                            
                              20

                              
                                

                              

                            

                            
                              
                              

                            

                          

                          and
                            receive answers from, the Company regarding the Company,
                            its business and the
                            terms and conditions of this offering of Securities.
                            Such Purchaser acknowledges
                            receipt of copies of the SEC Reports. Neither such inquiries
                            nor any other due
                            diligence investigation conducted by such Purchaser shall
                            modify, amend or
                            affect such Purchaser’s right to rely on the Company’s representations and
                            warranties contained in this Agreement or the other Transaction
                            Documents.

                           

                          

                           

                          ARTICLE
                            IV.

                          OTHER
                            AGREEMENTS OF THE PARTIES

                           

                          4.1 Transfer
                            Restrictions.

                           

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

                           

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

                           

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

                           

                          
                            
                              
                              

                            

                            
                              21

                              
                                

                              

                            

                            
                              
                              

                            

                          

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

                           

                          (c) Certificates
                            evidencing the Warrant Shares shall not contain any legend
                            (including the legend
                            set forth in Section 4.1(b) hereof): (i) while a registration
                            statement
                            (including the Registration Statement) covering the resale
                            of such security is
                            effective under the Securities Act, or (ii) following
                            any sale of such Warrant
                            Shares pursuant to Rule 144, or (iii) if such Warrant
                            Shares are eligible for
                            sale under Rule 144(k), or (iv) if such legend is not
                            required under applicable
                            requirements of the Securities Act (including judicial
                            interpretations and
                            pronouncements issued by the staff of the Commission).
                            The Company shall cause
                            its counsel to issue a legal opinion to the Company’s transfer agent promptly
                            after the Effective Date if required by the Company’s transfer agent to effect
                            the removal of the legend hereunder. If all or any portion
                            of a Warrant is
                            exercised at a time when there is an effective registration
                            statement to cover
                            the resale of the Warrant Shares, or if such Warrant
                            Shares may be sold under
                            Rule 144(k) or if such legend is not otherwise required
                            under applicable
                            requirements of the Securities Act (including judicial
                            interpretations and
                            pronouncements issued by the staff of the Commission)
                            then such Warrant Shares
                            shall be issued free of all legends. The Company agrees
                            that following the
                            Effective Date or at such time as such legend is no longer
                            required under this
                            Section 4.1(c), it will, no later than three Trading
                            Days following the delivery
                            by a Purchaser to the Company or the Company’s transfer agent of a certificate
                            representing Warrant Shares, as applicable, issued with
                            a restrictive legend
                            (such third Trading Day, the “Legend
                            Removal Date”),
                            deliver or cause to be delivered to such Purchaser a
                            certificate representing
                            such shares that is free from all restrictive and other
                            legends. The Company may
                            not make any notation on its records or give instructions
                            to any transfer agent
                            of the Company that enlarge the restrictions on transfer
                            set forth in this
                            Section. Certificates for Warrant Shares subject to legend
                            removal hereunder
                            shall be transmitted by the transfer agent of the Company
                            to the Purchasers by
                            crediting the account of the Purchaser’s prime broker with the Depository Trust
                            Company System.

                          

                          
                            
                              
                              

                            

                            
                              22

                              
                                

                              

                            

                            
                              
                              

                            

                          

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

                           

                          (e) Each
                            Purchaser, severally and not jointly with the other Purchasers,
                            agrees that the
                            removal of the restrictive legend from certificates representing
                            Securities as
                            set forth in this Section 4.1 is predicated upon the
                            Company’s reliance that the
                            Purchaser will sell any Securities pursuant to either
                            the registration
                            requirements of the Securities Act, including any applicable
                            prospectus delivery
                            requirements, or an exemption therefrom, and that if
                            Securities are sold
                            pursuant to a Registration Statement, they will be sold
                            in compliance with the
                            plan of distribution set forth therein.

                           

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

                           

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

                           

                          4.4 Integration.
                            The
                            Company shall not sell, offer for sale or solicit offers
                            to buy or otherwise
                            negotiate in respect of any security (as defined in Section
                            2 of the Securities
                            Act) that would be integrated with the offer or sale
                            of the Securities in a
                            manner that would require the 

                           

                          
                            
                              
                              

                            

                            
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                          registration
                            under the Securities Act of the sale of the Securities
                            to the Purchasers or that
                            would be integrated with the offer or sale of the Securities
                            for purposes of the
                            rules and regulations of any Trading Market.

                           

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

                           

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

                           

                          4.7 Shareholder
                            Rights Plan.
                            No
                            claim will be made or enforced by the Company or, with
                            the consent of the
                            Company, any other Person, that any Purchaser is an “Acquiring Person” under any
                            control share acquisition, business combination, poison
                            pill (including any
                            distribution under a rights agreement) or similar anti-takeover
                            plan or
                            arrangement in effect or hereafter adopted by the Company,
                            or that any Purchaser
                            could be deemed to trigger the provisions of any such
                            plan or arrangement, by
                            virtue of receiving Securities under the Transaction
                            Documents or under any
                            other agreement between the Company and the Purchasers.

                           

                          4.8 Non-Public
                            Information.
                            Except
                            with respect to the material terms and conditions of
                            the transactions
                            contemplated by the Transaction Documents, the Company
                            covenants and agrees that
                            neither it nor any other Person acting on its behalf
                            will provide any Purchaser
                            or its agents or counsel with any information that the
                            Company believes
                            constitutes material non-public information, unless prior
                            thereto such Purchaser
                            shall have executed a written agreement regarding the
                            confidentiality and use of
                            such information. The Company understands and 

                           

                          
                            
                              
                              

                            

                            
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                          confirms
                            that each Purchaser shall be relying on the foregoing
                            representations in
                            effecting transactions in securities of the Company.

                           

                          4.9 Use
                            of
                            Proceeds.
                            Except
                            as set forth on Schedule
                            4.9
                            attached
                            hereto, the Company shall use the net proceeds from the
                            sale of the Securities
                            hereunder for working capital purposes and not for the
                            satisfaction of any
                            portion of the Company’s debt (other than payment of trade payables in the
                            ordinary course of the Company’s business and prior practices), to redeem any
                            Common Stock or Common Stock Equivalents or to settle
                            any outstanding
                            litigation.

                           

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

                           

                          4.11 Indemnification
                            of Purchasers.
                            Subject
                            to the provisions of this Section 4.11, the Company will
                            indemnify and hold each
                            Purchaser and its directors, officers, shareholders,
                            members, partners,
                            employees and agents (and any other Persons with a functionally
                            equivalent role
                            of a Person holding such titles notwithstanding a lack
                            of such title or any
                            other title), each Person who controls such Purchaser
                            (within the meaning of
                            Section 15 of the Securities Act and Section 20 of the
                            Exchange Act), and the
                            directors, officers, shareholders, agents, members, partners
                            or employees (and
                            any other Persons with a functionally equivalent role
                            of a Person holding such
                            titles notwithstanding a lack of such title or any other
                            title) of such
                            controlling person (each, a “Purchaser
                            Party”)
                            harmless from any and all losses, liabilities, obligations,
                            claims,
                            contingencies, damages, costs and expenses, including
                            all judgments, amounts
                            paid in settlements, court costs and reasonable attorneys’ fees and costs of
                            investigation that any such Purchaser Party may suffer
                            or incur as a result of
                            or relating to (a) any breach of any of the representations,
                            warranties,
                            covenants or agreements made by the Company in this Agreement
                            or in the other
                            Transaction Documents or (b) any action instituted against
                            a Purchaser, or any
                            of them or their respective Affiliates, by any stockholder
                            of the Company who is
                            not an Affiliate of 

                           

                          
                            
                              
                              

                            

                            
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                          such
                            Purchaser, with respect to any of the transactions contemplated
                            by the
                            Transaction Documents (unless such action is based upon
                            a breach of such
                            Purchaser’s representations, warranties or covenants under the
                            Transaction
                            Documents or any agreements or understandings such Purchaser
                            may have with any
                            such stockholder or any violations by the Purchaser of
                            state or federal
                            securities laws or any conduct by such Purchaser which
                            constitutes fraud, gross
                            negligence, willful misconduct or malfeasance). If any
                            action shall be brought
                            against any Purchaser Party in respect of which indemnity
                            may be sought pursuant
                            to this Agreement, such Purchaser Party shall promptly
                            notify the Company in
                            writing, and the Company shall have the right to assume
                            the defense thereof with
                            counsel of its own choosing reasonably acceptable to
                            the Purchaser Party. Any
                            Purchaser Party shall have the right to employ separate
                            counsel in any such
                            action and participate in the defense thereof, but the
                            fees and expenses of such
                            counsel shall be at the expense of such Purchaser Party
                            except to the extent
                            that (i) the employment thereof has been specifically
                            authorized by the Company
                            in writing, (ii) the Company has failed after a reasonable
                            period of time to
                            assume such defense and to employ counsel or (iii) in
                            such action there is, in
                            the reasonable opinion of such separate counsel, a material
                            conflict on any
                            material issue between the position of the Company and
                            the position of such
                            Purchaser Party, in which case the Company shall be responsible
                            for the
                            reasonable fees and expenses of no more than one such
                            separate counsel. The
                            Company will not be liable to any Purchaser Party under
                            this Agreement (i) for
                            any settlement by a Purchaser Party effected without
                            the Company’s prior written
                            consent, which shall not be unreasonably withheld or
                            delayed; or (ii) to the
                            extent, but only to the extent that a loss, claim, damage
                            or liability is
                            attributable to any Purchaser Party’s breach of any of the representations,
                            warranties, covenants or agreements made by such Purchaser
                            Party in this
                            Agreement or in the other Transaction Documents.

                           

                          4.12 Reservation
                            and Listing of Securities.

                           

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

                           

                          (b) If,
                            on
                            any date, the number of authorized but unissued (and
                            otherwise unreserved)
                            shares of Common Stock is less than the Required Minimum
                            on such date, then the
                            Board of Directors of the Company shall use commercially
                            reasonable efforts to
                            amend the Company’s certificate or articles of incorporation to increase
                            the
                            number of authorized but unissued shares of Common Stock
                            to at least the
                            Required Minimum at such time, as soon as possible and
                            in any event not later
                            than the 95th day after such date.

                           

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

                           

                          
                            
                              
                              

                            

                            
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                          4.13 Participation
                            in Future Financing.
                            

                           

                          (a) From
                            the
                            date hereof until the date that is the 12 month anniversary
                            of the Effective
                            Date, upon any issuance by the Company or any of its
                            Subsidiaries of Common
                            Stock or Common Stock Equivalents (a “Subsequent
                            Financing”),
                            each
                            Purchaser shall have the right to participate in up to
                            an amount of the
                            Subsequent Financing equal to the lesser of (i) $2,000,000
                            or (ii) 40% of the
                            Subsequent Financing (the “Participation
                            Maximum”)
                            on the
                            same terms, conditions and price provided for in the
                            Subsequent Financing.

                           

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

                           

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

                           

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

                           

                          (e) If
                            by
                            5:30 p.m. (New York City time) on the 5th
                            Trading
                            Day after all of the Purchasers have received the Pre-Notice,
                            the Company
                            receives responses to a Subsequent Financing Notice from
                            Purchasers seeking to
                            purchase more than the aggregate amount of the Participation
                            Maximum, each such
                            Purchaser shall have the right to purchase the greater
                            of (a) their Pro Rata
                            Portion (as defined below) of the Participation Maximum
                            and (b) the difference
                            between the Participation Maximum and the aggregate amount
                            of participation by
                            all other Purchasers.  “Pro
                            Rata Portion”
is
                            the

                           

                          
                            
                              
                              

                            

                            
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                          ratio
                            of
                            (x) the Subscription Amount of Securities purchased on
                            the Closing Date by a
                            Purchaser participating under this Section 4.13 and (y)
                            the sum of the aggregate
                            Subscription Amounts of Securities purchased on the Closing
                            Date by all
                            Purchasers participating under this Section 4.13.

                           

                          (f) The
                            Company must provide the Purchasers with a second Subsequent
                            Financing Notice,
                            and the Purchasers will again have the right of participation
                            set forth above in
                            this Section 4.13, if the Subsequent Financing subject
                            to the initial Subsequent
                            Financing Notice is not consummated for any reason on
                            the terms set forth in
                            such Subsequent Financing Notice within 60 Trading Days
                            after the date of the
                            initial Subsequent Financing Notice. 

                           

                          (g) Notwithstanding
                            the foregoing, this Section 4.13 shall not apply in respect
                            of an Exempt
                            Issuance.

                           

                          4.14 Subsequent
                            Equity Sales.
                            

                           

                          (a) From
                            the
                            date hereof until 90 days after the Effective Date, neither
                            the Company nor any
                            Subsidiary shall issue shares of Common Stock or Common
                            Stock Equivalents;
provided,
                            however,
                            the 90
                            day period set forth in this Section 4.14 shall be extended
                            for the number of
                            Trading Days during such period in which (i) trading
                            in the Common Stock is
                            suspended by any Trading Market, or (ii) following the
                            Effective Date, the
                            Registration Statement is not effective or the prospectus
                            included in the
                            Registration Statement may not be used by the Purchasers
                            for the resale of the
                            Warrant Shares. 

                           

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

                           

                          (c) Notwithstanding
                            the foregoing, this Section 4.14 shall not apply in respect
                            of (i) an Exempt
                            Issuance, except that no Variable Rate Transaction shall
                            be an Exempt Issuance
                            or (ii) a private placement of at least $2,000,000 of
                            the Company’s securities
                            (but not including a Variable Rate Transaction) within
                            90 calendar days of the
                            date hereof, provided that any proceeds raised in connection
                            therewith shall be
                            first used, at 

                           

                          
                            
                              
                              

                            

                            
                              28

                              
                                

                              

                            

                            
                              
                              

                            

                          

                          the
                            option of each Purchaser in its sole discretion, for
                            the repayment in full of
                            the Debentures. 

                           

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

                           

                          4.16 Short
                            Sales and Confidentiality After The Date Hereof.
                            Each
                            Purchaser, severally and not jointly with the other Purchasers,
                            covenants that
                            neither it nor any Affiliate acting on its behalf or
                            pursuant to any
                            understanding with it will execute any Short Sales during
                            the period commencing
                            at the Discussion Time and ending at the time that the
                            transactions contemplated
                            by this Agreement are first publicly announced as described
                            in Section 4.6. Each
                            Purchaser, severally and not jointly with the other Purchasers,
                            covenants that
                            until such time as the transactions contemplated by this
                            Agreement are publicly
                            disclosed by the Company as described in Section 4.6,
                            such Purchaser will
                            maintain the confidentiality of all disclosures made
                            to it in connection with
                            this transaction (including the existence and terms of
                            this transaction). Each
                            Purchaser understands and acknowledges, severally and
                            not jointly with any other
                            Purchaser, that the Commission currently takes the position
                            that coverage of
                            short sales of shares of the Common Stock “against the box” prior to the
                            Effective Date of the Registration Statement with the
                            Securities is a violation
                            of Section 5 of the Securities Act, as set forth in Item
                            65, Section A, of the
                            Manual of Publicly Available Telephone Interpretations,
                            dated July 1997,
                            compiled by the Office of Chief Counsel, Division of
                            Corporation Finance.
                            Notwithstanding the foregoing, no Purchaser makes any
                            representation, warranty
                            or covenant hereby that it will not engage in Short Sales in
                            the
                            securities of the Company after the time that the transactions
                            contemplated by
                            this Agreement are first publicly announced as described
                            in Section 4.6.
                            Notwithstanding the foregoing, in the case of a Purchaser
                            that is a
                            multi-managed investment vehicle whereby separate portfolio
                            managers manage
                            separate portions of such Purchaser's assets and the
                            portfolio managers have no
                            direct knowledge of the investment decisions made by
                            the portfolio managers
                            managing other portions of such Purchaser's assets, the
                            covenant set forth above
                            shall only apply with respect to the portion of assets
                            managed by the portfolio
                            manager that made the investment decision to purchase
                            the Securities covered by
                            this Agreement.

                           

                          4.17 Form
                            D; Blue Sky Filings.
                            The
                            Company agrees to timely file a Form D with respect to
                            the Securities as
                            required under Regulation D and to provide a copy thereof,
                            promptly upon request
                            of any Purchaser. The Company shall take such action
                            as the Company shall
                            reasonably determine is necessary in order to obtain
                            an exemption for, or to
                            qualify the Securities for, sale to the Purchasers at
                            the Closing under
                            applicable securities or “Blue Sky” laws of the states of the United States, and
                            shall provide evidence of such actions promptly upon
                            request of any
                            Purchaser.

                           

                          
                            
                              
                              

                            

                            
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                          4.18 Capital
                            Changes.
                            Until
                            the one year anniversary of the Effective Date, the Company
                            shall not undertake
                            a reverse or forward stock split or reclassification
                            of the Common Stock without
                            the prior written consent of the Purchasers holding a
                            majority in principal
                            amount outstanding of the Debentures.

                           

                          4.19 Subsidiaries.
                            From
                            the date hereof until the Maturity Date of the Debentures,
                            the Company agrees
                            that each of Chembio Diagnostics Nigeria Limited and
                            Chembio Diagnostics
                            (Africa) Limited shall (i) own assets having
                            a
                            fair market value
                            of less
                            than $50,000 and (ii) shall incur no indebtedness; provided,
                            however,
                            that
                            either Chembio Diagnostics Nigeria Limited or Chembio
                            Diagnostics (Africa)
                            Limited may fail conditions (i) or (ii) above without
                            violating this convenant
                            if such entity has previously become a signatory to the
                            Security Agreement and
                            the Subsidiary Guarantee.

                           

                           

                          ARTICLE
                            V.

                          MISCELLANEOUS

                           

                          5.1 Termination. 
                            This Agreement may be terminated by any Purchaser, as
                            to such Purchaser’s
                            obligations hereunder only and without any effect whatsoever
                            on the obligations
                            between the Company and the other Purchasers, by written
                            notice to the other
                            parties, if the Closing has not been consummated on or
                            before June 30, 2006;
provided,
                            however,
                            that no
                            such termination will affect the right of any party to
                            sue for any breach by the
                            other party (or parties).

                           

                          5.2 Fees
                            and Expenses.
                            At the
                            Closing, the Company has agreed to reimburse Alpha Capital
                            AG (“Alpha”)
                            the
                            non-accountable sum of $15,000 for its legal fees and
                            expenses, $10,000 which
                            has been paid prior to the Closing. Accordingly, in lieu
                            of the foregoing
                            payments, the aggregate amount that Alpha is to pay for
                            the Securities at the
                            Closing shall be reduced by $5,000 in lieu thereof. The
                            Company shall deliver,
                            prior to the Closing, a completed and executed copy of
                            the Closing Statement,
                            attached hereto as Annex
                            A.
                            Except
                            as expressly set forth in the Transaction Documents to
                            the contrary, each party
                            shall pay the fees and expenses of its advisers, counsel,
                            accountants and other
                            experts, if any, and all other expenses incurred by such
                            party incident to the
                            negotiation, preparation, execution, delivery and performance
                            of this Agreement.
                            The Company shall pay all transfer agent fees, stamp
                            taxes and other taxes and
                            duties levied in connection with the delivery of any
                            Securities to the
                            Purchasers.

                           

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

                           

                          5.4 Notices.
                            Any and
                            all notices or other communications or deliveries required
                            or permitted to be
                            provided hereunder shall be in writing and shall be deemed
                            given and effective
                            on the earliest of (a) the date of transmission, if such
                            notice or communication
                            is delivered via facsimile at the facsimile number set
                            forth on the signature
                            pages attached hereto prior to 5:30 p.m. (New York City
                            time) on a Trading Day,
                            (b) the next Trading Day after the date of transmission,
                            if such notice or
                            communication is delivered via facsimile at the facsimile
                            number 

                           

                          
                            
                              
                              

                            

                            
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                          set
                            forth
                            on the signature pages attached hereto on a day that
                            is not a Trading Day or
                            later than 5:30 p.m. (New York City time) on any Trading
                            Day, (c) the
                            2nd
                            Trading
                            Day following the date of mailing, if sent by U.S. nationally
                            recognized
                            overnight courier service, or (d) upon actual receipt
                            by the party to whom such
                            notice is required to be given. The address for such
                            notices and communications
                            shall be as set forth on the signature pages attached
                            hereto.

                           

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

                           

                          5.6 Headings.
                            The
                            headings herein are for convenience only, do not constitute
                            a part of this
                            Agreement and shall not be deemed to limit or affect
                            any of the provisions
                            hereof.

                           

                          5.7 Successors
                            and Assigns.
                            This
                            Agreement shall be binding upon and inure to the benefit
                            of the parties and
                            their successors and permitted assigns. The Company may
                            not assign this
                            Agreement or any rights or obligations hereunder without
                            the prior written
                            consent of each Purchaser (other than by merger). Any
                            Purchaser may assign any
                            or all of its rights under this Agreement to any Person
                            to whom such Purchaser
                            assigns or transfers any Securities, provided such transferee
                            agrees in writing
                            to be bound, with respect to the transferred Securities,
                            by the provisions of
                            the Transaction Documents that apply to the “Purchasers”.

                           

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

                           

                          5.9 Governing
                            Law.
                            All
                            questions concerning the construction, validity, enforcement
                            and interpretation
                            of the Transaction Documents shall be governed by and
                            construed and enforced in
                            accordance with the internal laws of the State of New
                            York, without regard to
                            the principles of conflicts of law thereof. Each party
                            agrees that all legal
                            proceedings concerning the interpretations, enforcement
                            and defense of the
                            transactions contemplated by this Agreement and any other
                            Transaction Documents
                            (whether brought against a party hereto or its respective
                            affiliates, directors,
                            officers, shareholders, employees or agents) shall be
                            commenced exclusively in
                            the state and federal courts sitting in the City of New
                            York. Each party hereby
                            irrevocably submits to the exclusive jurisdiction of
                            the state and federal
                            courts sitting in the City of New York, borough of Manhattan
                            for the
                            adjudication of any dispute hereunder or in connection
                            herewith or with any
                            transaction contemplated hereby or discussed herein (including
                            with respect to
                            the enforcement of any of the Transaction Documents),
                            and hereby irrevocably
                            waives, and agrees not to assert in any suit, action
                            or proceeding, any claim
                            that it is not personally subject to the jurisdiction
                            of any such court, that
                            such suit, action or proceeding is improper or is an
                            inconvenient venue for such
                            proceeding. Each party hereby irrevocably waives personal
                            service 

                           

                          
                            
                              
                              

                            

                            
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                          of
                            process and consents to process being served in any such
                            suit, action or
                            proceeding by mailing a copy thereof via registered or
                            certified mail or
                            overnight delivery (with evidence of delivery) to such
                            party at the address in
                            effect for notices to it under this Agreement and agrees
                            that such service shall
                            constitute good and sufficient service of process and
                            notice thereof. Nothing
                            contained herein shall be deemed to limit in any way
                            any right to serve process
                            in any other manner permitted by law. The parties hereby
                            waive all rights to a
                            trial by jury. If either party shall commence an action
                            or proceeding to enforce
                            any provisions of the Transaction Documents, then the
                            prevailing party in such
                            action or proceeding shall be reimbursed by the other
                            party for its reasonable
                            attorneys’ fees and other costs and expenses incurred with the investigation,
                            preparation and prosecution of such action or proceeding.

                           

                          5.10 Survival.
                            The
                            representations and warranties contained herein shall
                            survive the Closing and
                            the delivery of the Securities for the applicable statue
                            of
                            limitations.

                           

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

                           

                          5.12 Severability.
                            If any
                            term, provision, covenant or restriction of this Agreement
                            is held by a court of
                            competent jurisdiction to be invalid, illegal, void or
                            unenforceable, the
                            remainder of the terms, provisions, covenants and restrictions
                            set forth herein
                            shall remain in full force and effect and shall in no
                            way be affected, impaired
                            or invalidated, and the parties hereto shall use their
                            commercially reasonable
                            efforts to find and employ an alternative means to achieve
                            the same or
                            substantially the same result as that contemplated by
                            such term, provision,
                            covenant or restriction. It is hereby stipulated and
                            declared to be the
                            intention of the parties that they would have executed
                            the remaining terms,
                            provisions, covenants and restrictions without including
                            any of such that may be
                            hereafter declared invalid, illegal, void or unenforceable.

                           

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

                           

                          5.14 Replacement
                            of Securities.
                            If any
                            certificate or instrument evidencing any Securities is
                            mutilated, lost, stolen
                            or destroyed, the Company shall issue or cause to be
                            issued in exchange and
                            substitution for and upon cancellation thereof (in the
                            case of mutilation), or
                            in lieu 

                           

                          
                            
                              
                              

                            

                            
                              32

                              
                                

                              

                            

                            
                              
                              

                            

                          

                          of
                            and
                            substitution therefor, a new certificate or instrument,
                            but only upon receipt of
                            evidence reasonably satisfactory to the Company of such
                            loss, theft or
                            destruction. The applicant for a new certificate or instrument
                            under such
                            circumstances shall also pay any reasonable third-party
                            costs (including
                            customary indemnity) associated with the issuance of
                            such replacement
                            Securities.

                           

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

                           

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

                           

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

                           

                          
                            
                              
                              

                            

                            
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                          5.18 Independent
                            Nature of Purchasers’ Obligations and Rights.
                            The
                            obligations of each Purchaser under any Transaction Document
                            are several and not
                            joint with the obligations of any other Purchaser, and
                            no Purchaser shall be
                            responsible in any way for the performance or non-performance
                            of the obligations
                            of any other Purchaser under any Transaction Document.
                            Nothing contained herein
                            or in any other Transaction Document, and no action taken
                            by any Purchaser
                            pursuant thereto, shall be deemed to constitute the Purchasers
                            as a partnership,
                            an association, a joint venture or any other kind of
                            entity, or create a
                            presumption that the Purchasers are in any way acting
                            in concert or as a group
                            with respect to such obligations or the transactions
                            contemplated by the
                            Transaction Documents. Each Purchaser shall be entitled
                            to independently protect
                            and enforce its rights, including without limitation
                            the rights arising out of
                            this Agreement or out of the other Transaction Documents,
                            and it shall not be
                            necessary for any other Purchaser to be joined as an
                            additional party in any
                            proceeding for such purpose. Each Purchaser has been
                            represented by its own
                            separate legal counsel in their review and negotiation
                            of the Transaction
                            Documents. For reasons of administrative convenience
                            only, Purchasers and their
                            respective counsel have chosen to communicate with the
                            Company through FWS. FWS
                            does not represent all of the Purchasers but only Alpha.
                            The Company has elected
                            to provide all Purchasers with the same terms and Transaction
                            Documents for the
                            convenience of the Company and not because it was required
                            or requested to do so
                            by the Purchasers.

                           

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

                           

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

                           

                          (Signature
                            Pages Follow)

                           

                          
                            
                              
                              

                            

                            
                              34

                              
                                

                              

                            

                            
                              
                              

                            

                          

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

                           

                          
                            	
                                    CHEMBIO
                                      DIAGNOSTICS, INC.

                                     

                                  	
                                    Address
                                      for Notice:

                                  
	
                                    By:__________________________________________

                                    Name:

                                    Title:

                                  	
                                    3661
                                      Horseblock Road

                                    Medford,
                                      New York 11763

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

                                     

                                    Robert
                                      M. Bearman

                                    Patton
                                      Boggs LLP

                                    1660
                                      Lincoln Street, Ste. 1900

                                    Denver,
                                      CO  80264

                                    tel: 
                                      (303) 894-6169

                                    fax: 
                                      (303) 894-9239

                                    E-Mail: 
                                      rbearman@pattonboggs.com

                                  	 

                          

                          

                          [REMAINDER
                            OF PAGE INTENTIONALLY LEFT BLANK

                          SIGNATURE
                            PAGE FOR PURCHASER FOLLOWS]

                           

                          
                            
                              
                              

                            

                            
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                          [PURCHASER
                            SIGNATURE PAGES TO CEMI SECURITIES PURCHASE AGREEMENT]

                          

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

                           

                          Name
                            of
                            Purchaser: ________________________________________________________

                          Signature
                            of Authorized Signatory of Purchaser:
                            __________________________________

                          Name
                            of
                            Authorized Signatory:
                            ____________________________________________________

                          Title
                            of
                            Authorized Signatory:
                            _____________________________________________________

                          Email
                            Address of Purchaser:
                            ________________________________________________

                          Facsimile
                            Number of Purchaser:
                            ________________________________________________

                          

                          Address
                            for Notice of Purchaser:

                          

                          

                          

                          

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

                          

                          

                          

                          

                          

                          Subscription
                            Amount:

                          Warrant
                            Shares:

                          

                          

                          

                          

                          EIN
                            Number: [PROVIDE
                            THIS UNDER SEPARATE COVER]

                          

                          [SIGNATURE
                            PAGES CONTINUE]

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