MEDIALINK WORLDWIDE INC
<DOCUMENT>
<TYPE>EX-10.1
<SEQUENCE>5
<FILENAME>ex10-1.txt
<TEXT>

                          SECURITIES PURCHASE AGREEMENT

      This Securities Purchase Agreement (this "Agreement") is dated as of
November 8, 2004, among Medialink Worldwide Incorporated, a Delaware 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 agrees
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.

            "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 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.
<PAGE>

            "Common Stock" means the common stock of the Company, par value
$0.01 per share, and any securities into which such common stock shall
hereinafter have been reclassified 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
exchangeable for, or otherwise entitles the holder thereof to receive, Common
Stock.

            "Company Counsel" means Tashlik, Kreutzer, Goldwyn & Crandell P.C
with offices at 40 Cuttermill Road, Great Neck, New York 11021.

            "Debentures" means, the Variable Rate Convertible Debentures due,
subject to the terms therein, 5 years from their date of issuance, issued by the
Company to the Purchasers hereunder, in the form of Exhibit A.

            "Disclosure Schedules" shall have the meaning ascribed to such term
in Section 3.1 hereof.

            "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.

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

            "Exempt Issuance" means the issuance of (a) shares of Common Stock
or options to employees, officers or directors 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 of or conversion of any securities issued hereunder, (c)
convertible securities, options or warrants 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, (d) securities
issued to Persons with whom the Company is entering into a joint venture,
strategic alliance or other commercial relationship in connection with the
operation of the Company's business and not in connection with 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, the
primary purpose of which is to raise equity capital, or (e) shares of Common
Stock or options issued to creditors of the Company to pay off a debt issued to
a Person in connection with the settlement of a dispute or as part of a judgment
rendered by a court of competent jurisdiction; provided, however, that the
number of shares of Common Stock issuable pursuant to this clause (e) shall not
exceed 250,000, in the aggregate, in any 12 month period.

                                      -2-
<PAGE>

            "FW" means Feldman Weinstein LLP with offices at 420 Lexington
Avenue, Suite 2620, New York, New York 10170-0002, legal counsel to Omicron
Master Trust.

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

            "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) hereof.

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

            "Merrill" shall mean Merrill Lynch Business Financial Services Inc.

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

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

            "Registration 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 Underlying 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 Underlying Shares
issuable upon exercise or conversion in full of all Warrants and Debentures,
ignoring any conversion or exercise limits set forth therein, and assuming that
the Set Price is at all times on and after the date of determination 75% of the
then Set Price on the Trading Day immediately prior to the date of
determination.

            "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.

                                      -3-
<PAGE>

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

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

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

            "Set Price" shall have the meaning ascribed to such term in the
Debentures.

            "Shareholder Approval" means such approval as may be required by the
applicable rules and regulations of the Trading Market (or any successor entity)
from the shareholders of the Company with respect to the transactions
contemplated by the Transaction Documents, including the issuance of all of the
Underlying Shares and shares of Common Stock issuable upon exercise of the
Warrants in excess of 19.99% of the issued and outstanding Common Stock on the
Closing Date.

            "Subordination Agreement" shall mean the Subordination Agreement as
between Merrill, the Company and each Purchaser, and any replacement
subordination agreement pursuant to Section 4.16, in the form of Exhibit E,
attached hereto.

            "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.

            "Subsequent Financing" 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 SmallCap Market, the American Stock Exchange, the New York Stock Exchange
or the Nasdaq National Market.

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

            "Underlying Shares" means the shares of Common Stock issuable upon
conversion of the Debentures and upon exercise of the Warrants.

                                      -4-
<PAGE>

            "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 Financial L.P.
(based on a Trading Day from 9:30 a.m. Eastern Time to 4:02 p.m. Eastern Time);
(b) if the Common Stock is not then listed or quoted on a Trading Market and if
prices for the Common Stock are then quoted on the OTC Bulletin Board, 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 the National Quotation
Bureau Incorporated (or a similar organization or agency succeeding to its
functions of reporting prices), the most recent bid price per share of the
Common Stock so reported; or (c) 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 Purchasers and reasonably acceptable to the Company.

            "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 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, 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, $5,000,000
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 Section 2.2, the Closing shall occur
at the offices of FW, 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;

                                      -5-
<PAGE>

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

            (iii) a Warrant registered in the name of such Purchaser to purchase
                  up to a number of shares of Common Stock equal to 38% of such
                  Purchaser's Subscription Amount divided by the average of the
                  20 consecutive VWAPs immediately prior to the date hereof,
                  with an exercise price equal to $3.99, subject to adjustment
                  therein;

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

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

            (vi)  the Subordination Agreement duly executed by the Company.

      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)  such Purchaser's Subscription Amount by wire transfer to the
                  account as specified in writing by the Company;

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

            (iv)  the Subordination 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:

                                      -6-
<PAGE>

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

                                      -7-
<PAGE>

      (b) Organization and Qualification. Each of the Company and the
Subsidiaries is an entity duly incorporated or otherwise organized, validly
existing and in good standing under the laws of the jurisdiction of its
incorporation or organization (as applicable), with the requisite 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 financial condition of the Company
and the Subsidiaries, taken as a whole, or (iii) a material adverse effect on
the Company's ability to perform in any material respect on a timely basis its
obligations under any Transaction Document (any of (i), (ii) or (iii), a
"Material Adverse Effect") 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 thereunder. The execution and delivery of each of the Transaction
Documents by the Company and the consummation by it of the transactions
contemplated thereby have been duly authorized by all necessary action on the
part of the Company and no further action is required by the Company in
connection therewith. Each Transaction Document has been (or upon delivery will
have been) duly executed by the Company and, when delivered in accordance with
the terms hereof, will constitute the valid and binding obligation of the
Company enforceable against the Company in accordance with its terms except (i)
as limited by applicable bankruptcy, insolvency, reorganization, moratorium and
other laws of general application affecting enforcement of creditors' rights
generally and (ii) as limited by laws relating to the availability of specific
performance, injunctive relief or other equitable remedies.

      (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 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) subject to the Required Approvals, 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, or (iv) subject to the Required Approvals, conflict with
or violate the terms of any agreement by which the Company or any Subsidiary is
bound or to which any property or asset of the Company or any 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.

                                      -8-
<PAGE>

      (e) Filings, Consents and Approvals. The Company is not required to
obtain, other than those that have been obtained, any consent, waiver,
authorization or order of, give any notice to, or make any filing or
registration with, any court or other federal, state, local or other
governmental authority or other Person in connection with the execution,
delivery and performance by the Company of the Transaction Documents, other than
(i) 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 Debentures
and Warrants and the listing of the Underlying 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 Underlying 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 Underlying
Shares at least equal to the Required Minimum on the date hereof.

      (g) Capitalization. The capitalization of the Company is as described in
the Company's most recent periodic report filed with the Commission. The Company
has not issued any capital stock since such filing other than pursuant to the
exercise of employee stock options under the Company's stock option plans, 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
outstanding Common Stock Equivalents. 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
exchangeable for, or giving any Person any right to subscribe for or acquire,
any shares of Common Stock, or contracts, commitments, understandings or
arrangements by which the Company or any Subsidiary is or may become bound to
issue additional shares of Common Stock, or securities or rights convertible or
exchangeable into shares of Common Stock. 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 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. Other than the Required Approvals, 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. Except as
disclosed in the SEC Reports, there are no stockholders agreements, voting
agreements or other similar agreements with respect to the Company's capital
stock to which the Company is a party or, to the knowledge of the Company,
between or among any of the Company's stockholders.

                                      -9-
<PAGE>

      (h) SEC Reports; Financial Statements. The Company has filed all reports
required to be filed by it under the Securities Act and the Exchange Act,
including pursuant to Section 13(a) or 15(d) thereof, for the two years
preceding the date hereof (or such shorter period as the Company was required by
law to file such material) (the foregoing materials, including the exhibits
thereto, being collectively referred to herein as the "SEC Reports") on a timely
basis or has received a valid extension of such time of filing and has filed any
such SEC Reports prior to the expiration of any such extension. As of their
respective dates, the SEC Reports complied in all material respects with the
requirements of the Securities Act and the Exchange Act and the rules and
regulations of the Commission promulgated thereunder, and none of the SEC
Reports, when filed, contained any untrue statement of a material fact or
omitted to state a material fact required to be stated therein or necessary in
order to make the statements therein, in light of the circumstances under which
they were made, not misleading. The financial statements of the Company included
in the SEC Reports comply in all material respects with applicable accounting
requirements and the rules and regulations of the Commission with respect
thereto as in effect at the time of filing. Such financial statements have been
prepared in accordance with 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
the SEC Reports, (i) there has been no event, occurrence or development that has
had or that could reasonably be expected to result in a Material Adverse Effect,
(ii) the Company has not incurred any liabilities (contingent or otherwise)
other than (A) trade payables and accrued expenses incurred in the ordinary
course of business consistent with past practice and (B) liabilities not
required to be reflected in the Company's financial statements pursuant to GAAP
or required to be disclosed in filings made with the Commission, (iii) the
Company has not altered its method of accounting, (iv) the Company has not
declared or made any 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.

                                      -10-
<PAGE>

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

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

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

                                      -11-
<PAGE>

      (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 of 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, copyrights, licenses and other 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 written notice
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 of others.

      (p) Insurance. The Company and the Subsidiaries are insured by insurers of
recognized financial responsibility against such losses and risks and in such
amounts as are prudent and customary in the businesses in which the Company and
the Subsidiaries are engaged. To the best of Company's knowledge, such insurance
contracts and policies are accurate and complete. 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.

                                      -12-
<PAGE>

      (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 material
information relating to the Company, including its subsidiaries, is made known
to the certifying officers by others within those entities, particularly during
the period in which the Company's most recently filed periodic report under the
Exchange Act, as the case may be, is being prepared. The Company's certifying
officers have evaluated the effectiveness of the Company's controls and
procedures as of the date prior to the filing date of the 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 significant
changes in the Company's internal controls (as such term is defined in Item
307(b) of Regulation S-K under the Exchange Act) or, to the Company's knowledge,
in other factors that could significantly affect the Company's internal
controls.

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

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

                                      -13-
<PAGE>

      (u) Investment Company. The Company is not, and is not an Affiliate of,
and immediately after receipt of payment for the Shares, 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. 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(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 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. 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 constitutes or might constitute material,
nonpublic information. The Company understands and confirms that the Purchasers
will rely on the foregoing representations and covenants in effecting
transactions in securities of the Company. All written statements provided to
the Purchasers regarding the Company, its business and the transactions
contemplated hereby, including the Disclosure Schedules to this Agreement,
furnished by or on behalf of the Company 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 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.

                                      -14-
<PAGE>

      (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
provisions, including, without limitation, under the rules and regulations of
any exchange or automated quotation system on which any of the securities of the
Company are listed or designated.

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

      (bb) Form S-3 Eligibility. The Company is eligible to register the resale
of the Underlying Shares for resale by the Purchaser on Form S-3 promulgated
under the Securities Act.

      (cc) 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.

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

                                      -15-
<PAGE>

      (ee) 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 corrupt 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.

      (ff) Accountants. The Company's accountants are set forth on Schedule
3.1(ff) of the Disclosure Schedule. To the Company's knowledge, 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-K for the year ended December 31, 2004 are independent accountants as
required by the Securities Act.

      (gg) Seniority. As of the Closing Date, no indebtedness of 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).

      (hh) 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 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.

      (ii) Acknowledgment Regarding Purchasers' Purchase of Securities. To the
Company's knowledge, each of the Purchasers is acting solely in the capacity of
an arm's length purchaser with respect to the Transaction Documents and the
transactions contemplated hereby. To the Company's knowledge, no Purchaser is
acting as a financial advisor or fiduciary of the Company (or in any similar
capacity) with respect to this Agreement and the transactions contemplated
hereby and any advice given by any Purchaser or any of their respective
representatives or agents in connection with this Agreement and the transactions
contemplated hereby is merely incidental to the Purchasers' purchase of the
Securities. Other than the representations and warranties contained in Section
2.2, the Company further represents to each Purchaser that the Company's
decision to enter into this Agreement has been based solely on the independent
evaluation of the transactions contemplated hereby by the Company and its
representatives.

      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:

                                      -16-
<PAGE>

      (a) Organization; Authority. Such Purchaser is an entity duly organized,
validly existing and in good standing under the laws of the jurisdiction of its
organization with full right, corporate or partnership power and authority to
enter into and to consummate the transactions contemplated by the Transaction
Documents and otherwise to carry out its obligations thereunder. The execution,
delivery and performance by such Purchaser of the transactions contemplated by
this Agreement 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) Purchaser Representation. 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, has no present
intention of distributing any of such Securities and has no arrangement or
understanding with any other persons regarding the distribution of such
Securities (this representation and warranty not limiting such Purchaser's right
to sell the Securities pursuant to the Registration Statement or otherwise in
compliance with applicable federal and state securities laws). Such Purchaser is
acquiring the Securities hereunder in the ordinary course of its business. Such
Purchaser does not have any agreement or understanding, directly or indirectly,
with any Person to distribute any of the Securities.

      (c) Purchaser Status. At the time such Purchaser was offered the
Securities, it was, and at the date hereof it is, and on each date on which it
exercises any Warrants or converts any Debentures 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.

                                      -17-
<PAGE>

      (f) Short Sales. Each Purchaser represents that from the date it first
learned of the transaction contemplated hereby to the execution of this
Agreement, neither it nor any Person over which the Purchaser has direct
control, have made any net short sales of, or granted any option for the
purchase of or entered into any hedging or similar transaction with the same
economic effect as a net short sale, in the Common Stock nor encouraged or
solicited other Persons to enter into any such transactions.

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

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

                                  ARTICLE IV.

                         OTHER AGREEMENTS OF THE PARTIES

4.1 Transfer Restrictions.

      (a) The Securities may only be disposed of in compliance with state and
federal securities laws. In connection with any transfer of Securities other
than pursuant to an effective registration statement 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(b), of a legend on any of the Securities in the following form:

[NEITHER] THESE SECURITIES [NOR THE SECURITIES INTO WHICH THESE SECURITIES ARE
[EXERCISABLE] [CONVERTIBLE]] 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 REASONABLY ACCEPTABLE TO THE COMPANY TO SUCH EFFECT, THE
SUBSTANCE OF WHICH SHALL BE REASONABLY ACCEPTABLE TO THE COMPANY. THESE
SECURITIES AND THE SECURITIES ISSUABLE UPON EXERCISE OF THESE SECURITIES MAY BE
PLEDGED IN CONNECTION WITH A BONA FIDE MARGIN ACCOUNT OR OTHER LOAN SECURED BY
SUCH SECURITIES.

                                      -18-
<PAGE>

      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 Underlying Shares shall not contain any legend
(including the legend set forth in Section 4.1(b)): (i) while a registration
statement (including the Registration Statement) covering the resale of such
security is effective under the Securities Act, or (ii) following any sale of
such Securities pursuant to Rule 144, or (iii) while such Securities are
eligible for sale under Rule 144(k), or (iv) if such legend is not required
under the applicable requirements of the Securities Act (including judicial
interpretations and pronouncements issued by the Staff of the Commission);
provided, however, in connection with the issuance of the Underlying Shares,
each Purchaser, severally and not jointly with the other Purchasers, hereby
agrees to adhere to and abide by all prospectus delivery requirements under the
Securities Act and rules and regulations 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 Debenture
or Warrant is converted or exercised (as applicable) at a time when there is an
effective registration statement to cover the resale of the Underlying Shares,
or if such Underlying 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 thereof) then such Underlying 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 Underlying 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.

                                      -19-
<PAGE>

      (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 Underlying 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 this Section
4.1(c), $5 per Trading Day for each Trading Day after 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.

      (f) Until the 6 month 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.

      4.2 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 Underlying
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.

                                      -20-
<PAGE>

      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, all to the extent required from time to time
to enable such Person to sell such Securities without registration under the
Securities Act within the limitation of the exemptions provided by Rule 144.

      4.4 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 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 Conversion and Exercise Procedures. The form of Notice of Exercise
included in the Warrants and the form of Notice of Conversion included in the
Debentures set forth the totality of the procedures required of the Purchasers
in order to exercise the Warrants or convert the Debentures. No additional legal
opinion or other information or instructions shall be required of the Purchasers
to exercise their Warrants or convert their Debentures. The Company shall honor
exercises of the Warrants and conversions of the Debentures and shall deliver
Underlying 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.
Eastern time on the Trading Day following the date hereof, issue a press release
or file a Current Report on Form 8-K, in each case reasonably acceptable to each
Purchaser disclosing the material terms of the transactions contemplated hereby.
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 without the prior consent of the
Company, with respect to any press release of any Purchaser, or without the
prior consent of each Purchaser, with respect to any press release of the
Company, which consent shall not unreasonably be withheld, except if such
disclosure is required by law, in which case the disclosing party shall promptly
provide the other party with prior notice of such public statement or
communication. Notwithstanding the foregoing, the Company shall not publicly
disclose the name of any Purchaser, or include the name of any Purchaser in any
filing with the Commission or any regulatory agency or Trading Market, without
the prior written consent of such Purchaser, except (i) as required by federal
securities law in connection with the registration statement contemplated by the
Registration Rights Agreement and (ii) to the extent such disclosure is required
by law or Trading Market regulations, in which case the Company shall provide
the Purchasers with prior notice of such disclosure permitted under subclause
(i) or (ii).

                                      -21-
<PAGE>

      4.7 Shareholders Rights Plan. No claim will be made or enforced by the
Company or, to the knowledge of the Company, any other Person that any Purchaser
is an "Acquiring Person" under any shareholders rights plan or similar plan or
arrangement in effect or hereafter adopted by the Company, or that any Purchaser
could be deemed to trigger the provisions of any such plan or arrangement, by
virtue of receiving Securities under the Transaction Documents or under any
other agreement between the Company and the Purchasers. The Company shall
conduct its business in a manner so that it will not become subject to the
Investment Company Act.

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

      4.9 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 Company equity or
equity-equivalent securities or to settle any outstanding litigation; provided,
however, notwithstanding anything herein to the contrary, the Company shall use
such proceeds for the repayment of the credit line with Merrill within 60 days
of the date hereof to the extent that the aggregate indebtedness to Merrill, or
any of its assignees, exceeds, in the aggregate, $3,000,000.

      4.10 Intentionally Omitted.

      4.11 Indemnification of Purchasers. Subject to the provisions of this
Section 4.11, the Company will indemnify and hold the Purchasers and their
directors, officers, shareholders, partners, employees and agents (each, a
"Purchaser Party") harmless from any and all losses, liabilities, obligations,
claims, contingencies, damages, costs and expenses, including all judgments,
amounts paid in settlements, court costs and reasonable attorneys' fees and
costs of investigation that any such Purchaser Party may suffer or incur as a
result of or relating to (a) any 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 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 representation, 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. 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. The Company will not be liable to any Purchaser Party under this
Agreement (i) for any settlement by an 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 the Purchasers
in this Agreement or in the other Transaction Documents.

                                      -22-
<PAGE>

      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 75th day after such date.

      (c) The Company shall, if applicable: (i) in the time and manner required
by the 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 the 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.

      4.13 Participation in Future Financing. From the date hereof until the one
year anniversary of the date hereof, upon any financing 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 the
greater of (i) 25% of the Subsequent Financing and (ii) an amount equal to the
aggregate principal amount of all Debentures then outstanding (the
"Participation Maximum"); provided, however, that in no event shall the Company
be required to increase the amount of the Subsequent Financing; provided,
further, this Section 4.13 shall not apply if it shall cause the Company to
violate Section 4.4 herein. At least 10 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 with whom such Subsequent Financing is
proposed to be effected, and attached to which shall be a term sheet or similar
document relating thereto. If by 5:30 p.m. (New York City time) on the 10th
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 total amount of the Participation Maximum, then the
Company may effect the remaining portion of such Participation Maximum on the
terms and to the Persons set forth in the Subsequent Financing Notice. If the
Company receives no notice from a Purchaser as of such 10th Trading Day, such
Purchaser shall be deemed to have notified the Company that it does not elect to
participate. 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 15 Trading Days after
the date of the initial Subsequent Financing Notice. In the event the Company
receives responses to Subsequent Financing Notices from Purchasers seeking to
purchase more than the aggregate amount of the Participation Maximum, each such
Purchaser shall have the right to purchase their Pro Rata Portion (as defined
below) of the Participation Maximum. "Pro Rata Portion" is the ratio of (x) the
Subscription Amount of Securities purchased by a participating Purchaser and (y)
the sum of the aggregate Subscription Amount of all participating Purchasers.
Notwithstanding the foregoing, this Section 4.13 shall not apply in respect of
(i) an Exempt Issuance and (ii) issuances of up to, in the aggregate, 75,000
shares of Common Stock in any 12-month period.

                                      -23-
<PAGE>

      4.14 Subsequent Equity Sales.

      (a) 90 Day Prohibition. 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(a) shall be extended for the number of Trading
Days during such period in which (y) trading in the Common Stock is suspended by
any Trading Market, or (z) 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 Underlying
Shares. Notwithstanding the foregoing, this Section 4.14(a) shall not apply in
respect of an Exempt Issuance. In addition to the limitations set forth herein,
from the date hereof until such time as no Purchaser holds any of the
Securities, the Company shall be prohibited from effecting or enter into an
agreement to effect any Subsequent Financing involving a "Variable Rate
Transaction" or an "MFN Transaction" (each as defined below). 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. The term "MFN Transaction" shall mean a transaction in which
the Company issues or sells any securities in a capital raising transaction or
series of related transactions which grants to an investor the right to receive
additional shares based upon future transactions of the Company on terms more
favorable than those granted to such investor in such offering.

      (b) Prohibition on Dilutive Issuances. Unless Shareholder Approval has
been obtained and deemed effective, the Company shall not make any issuance
whatsoever of Common Stock or Common Stock Equivalents for an effective per
share purchase price of less than the then Set Price of the Debentures or then
Exercise Price of the Warrants (including any resets or adjustments less than
such price). Any Purchaser shall be entitled to obtain injunctive relief against
the Company to preclude any such issuance, which remedy shall be in addition to
any right to collect damages. Notwithstanding the foregoing, this Section
4.14(b) shall not apply in respect of (i) an Exempt Issuance, except that no
Variable Rate Transaction or MFN Transaction shall be an Exempt Issuance or (ii)
issuances of up to, in the aggregate, 75,000 shares of Common Stock in any
12-month period.

                                      -24-
<PAGE>

      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 to
treat for the Company the Debenture holders 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 Merrill Replacement Lender and Subordination Agreement. If the
Company obtains a replacement lender for Merrill, each Purchaser, severally and
not jointly with the other Purchasers, agrees to (a) consent to such replacement
provided such lender is a reputable, commercial lender whose primary business is
not investing in securities and (b) within 5 Trading Days of delivery, enter
into a subordination agreement with such replacement lender provided such
agreement is identical to the Subordination Agreement entered into with Merrill,
mutatis mutandis, and concurrently with the execution of said agreement the
Subordination Agreement with Merrill is terminated.

                                   ARTICLE V.

                                  MISCELLANEOUS

      5.1 Termination. This Agreement may be terminated by any Purchaser, by
written notice to the other parties, if the Closing has not been consummated on
or before November 10, 2004; provided that no such termination will affect the
right of any party to sue for any breach by the other party (or parties).

                                      -25-
<PAGE>

      5.2 Fees and Expenses. At the Closing, the Company has agreed to reimburse
Omicron Master Trust ("Omicron") up to $35,000, $20,000 of which has previously
been delivered to Omicron, for its actual, reasonable, out-of-pocket legal fees
and expenses. Accordingly, in lieu of the foregoing payments, the Company, on
the Closing Date, will direct that the aggregate amount that Omicron is to pay
for the Debentures and the Warrants at the Closing, be reduced by $15,000. 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 issuance of any Securities.

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

                                      -26-
<PAGE>

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

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

      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 inconvenient venue for such proceeding. Each party hereby irrevocably waives
personal service of process and consents to process being served in any such
suit, action or proceeding by mailing a copy thereof via registered or certified
mail or overnight delivery (with evidence of delivery) to such party at the
address in effect for notices to it under this Agreement and agrees that such
service shall constitute good and sufficient service of process and notice
thereof. Nothing contained herein shall be deemed to limit in any way any right
to serve process in any manner permitted by law. 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 attorneys' fees and other costs and expenses incurred with the
investigation, preparation and prosecution of such action or proceeding.

                                      -27-
<PAGE>

      5.10 Survival. The representations and warranties contained herein shall
survive the Closing and the delivery, exercise and/or conversion of the
Securities, as applicable 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, such signature shall create a valid and
binding obligation of the party executing (or on whose behalf such signature is
executed) with the same force and effect as if such facsimile signature page
were an original thereof.

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

      5.13 Rescission and Withdrawal Right. Notwithstanding anything to the
contrary contained in (and without limiting any similar provisions of) the
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 a conversion of a Debenture or exercise
of a Warrant, the Purchaser shall be required to return any shares of Common
Stock subject to any such rescinded conversion or 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, or in lieu 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 and customary and reasonable
indemnity, if requested. The applicants for a new certificate or instrument
under such circumstances shall also pay any reasonable third-party costs
associated with the issuance of such replacement Securities.

      5.15 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 described in the foregoing sentence and hereby agrees to waive in
any action for specific performance of any such obligation the defense that a
remedy at law would be adequate. Without limiting the generality of the
foregoing, the Company expressly agrees that its breach of the next to last
sentence of Section 4.14 would cause each Purchaser irreparable harm, and
consents to granting of injunctive relief by any court having jurisdiction to
preclude any such issuance of securities.

                                      -28-
<PAGE>

      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.

      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 of the obligations of any other
Purchaser under any Transaction Document. Nothing contained herein or in any
Transaction Document, and no action taken by any Purchaser pursuant thereto,
shall be deemed to constitute the Purchasers as a partnership, an association, a
joint venture or any other kind of entity, or create a presumption that the
Purchasers are in any way acting in concert or as a group with respect to such
obligations or the transactions contemplated by the Transaction Document. Each
Purchaser shall be entitled to independently protect and enforce its rights,
including without limitation the rights arising out of this Agreement or out of
the other Transaction Documents, and it shall not be necessary for any other
Purchaser to be joined as an additional party in any proceeding for such
purpose. Each Purchaser has been represented by its own separate legal counsel
in their review and negotiation of the Transaction Documents. For reasons of
administrative convenience only, Purchasers and their respective counsel have
chosen to communicate with the Company through FW. FW does not represent all of
the Purchasers but only Omicron. 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.

                                      -29-
<PAGE>

      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.

                            (Signature Pages Follow)


                                      -30-
<PAGE>

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

MEDIALINK WORLDWIDE INCORPORATED                  Address for Notice:
                                                 -------------------------------

By: /s/ Graeme McWhirter                          708 Third Avenue
    ----------------------------                  New York, New York 10017
    Name: Graeme McWhirter                        Attn: Chief Financial Officer
    Title: Executive Vice President and Chief
    Financial Officer


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

Tashlik, Kreutzer,Goldwyn & Crandell
40 Cuttermill Road, Suite 200
Great Neck, New York 11021
Attn:  Theodore Wm. Tashlik, Esq.

                   [REMAINDER OF PAGE INTENTIONALLY LEFT BLANK
                      SIGNATURE PAGE FOR PURCHASER FOLLOWS]


                                      -31-
<PAGE>


        [PURCHASER SIGNATURE PAGES TO MDLK 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 Investing Entity:  Omicron Master Trust
Signature of Authorized Signatory of Investing Entity: /s/ Bruce Bernstein
Name of Authorized Signatory:  Bruce Bernstein
Title of Authorized Signatory:  Managing Partner
Email Address of Authorized Entity:  bb@omicroncapital.com

Address for Notice of Investing Entity:

650 Fifth Avenue, 24th Floor
New York, NY 10019
Attn:  Brian Daly
Tel:  (212) 258-2302
email:  bd@omicroncapital.com


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



Subscription Amount:  $1,500,000
Warrant Shares:  174,879
EIN Number:  [PROVIDE THIS UNDER SEPARATE COVER]

                           [SIGNATURE PAGES CONTINUE]

<PAGE>


        [PURCHASER SIGNATURE PAGES TO MDLK 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 Investing Entity:  Smithfield Fiduciary LLC
Signature of Authorized Signatory of Investing Entity: /s/ Adam J. Chill
Name of Authorized Signatory:  Adam J. Chill
Title of Authorized Signatory:  Authorized Signatory
Email Address of Authorized Entity:  ari.storch@hcmny.com/adam.chill@hcmny.com

Address for Notice of Investing Entity:

c/o Highbridge Capital Management, LLC
9 West 57th Street, 27th Floor
New York, NY 10019
Tel:  (212) 287-4720
Fax:  (212) 751-0755
Attn:  Ari J. Storch/Adam J. Chill


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



Subscription Amount:  $1,500,000
Warrant Shares:  174,879
EIN Number:  [PROVIDE THIS UNDER SEPARATE COVER]

                           [SIGNATURE PAGES CONTINUE]

<PAGE>

        [PURCHASER SIGNATURE PAGES TO MDLK 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 Investing Entity:  Iroquois Capital LP
Signature of Authorized Signatory of Investing Entity:  /s/ Joshua Silverman
Name of Authorized Signatory:  Joshua Silverman
Title of Authorized Signatory:  Partner
Email Address of Authorized Entity:  jsilverman@Icfund.com

Address for Notice of Investing Entity:

641 Lexington Avenue, 26th Floor
New York, NY 10022


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


Subscription Amount:  $1,500,000
Warrant Shares:  174,879
EIN Number:  [PROVIDE THIS UNDER SEPARATE COVER]

                           [SIGNATURE PAGES CONTINUE]


<PAGE>


        [PURCHASER SIGNATURE PAGES TO MDLK 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 Investing Entity:  Bluegrass Growth Fund, LP
Signature of Authorized Signatory of Investing Entity:  /s/ Brian Shatz
Name of Authorized Signatory:  Brian Shatz
Title of Authorized Signatory:  Managing Member,
                                Bluegrass Growth Fund Partners LLC
Email Address of Authorized Entity:  brian@bluegrassfund.com

Address for Notice of Investing Entity:

122 East 42nd Street, Suite 2606
New York, NY


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




Subscription Amount:  $250,000
Warrant Shares:  29,146
EIN Number:  [PROVIDE THIS UNDER SEPARATE COVER]

                           [SIGNATURE PAGES CONTINUE]

<PAGE>



        [PURCHASER SIGNATURE PAGES TO MDLK 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 Investing Entity:  Bluegrass Growth Fund, Ltd.
Signature of Authorized Signatory of Investing Entity: /s/ Brian Shatz
Name of Authorized Signatory:  Brian Shatz
Title of Authorized Signatory:  Director
Email Address of Authorized Entity:  brian@bluegrassfund.com

Address for Notice of Investing Entity:

122 East 42nd Street, Suite 2606
New York, NY 10168


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



Subscription Amount:  $250,000
Warrant Shares:  29,146
EIN Number:  [PROVIDE THIS UNDER SEPARATE COVER]


                           [SIGNATURE PAGES CONTINUE]




<PAGE>

                                                                         Annex A

                                CLOSING STATEMENT

Pursuant to the attached Securities Purchase Agreement, dated as of the date
hereto, the purchasers shall purchase up to $[______________ of Debentures and
Warrants from Medialink Worldwide Incorporated, (the "Company"). All funds will
be wired into a trust account maintained by ____________, counsel to the
Company. All funds will be disbursed in accordance with this Closing Statement.

Disbursement Date:    November  ____, 2004
--------------------------------------------------------------------------------

I.   PURCHASE PRICE

                    Gross Proceeds to be Received in Trust                     $

II.  DISBURSEMENTS


                                                                               $
                                                                               $
                                                                               $
                                                                               $
                                                                               $

Total Amount Disbursed:                                                        $

WIRE INSTRUCTIONS:

To: _____________________________________


To: _____________________________________


                                      -33-


</TEXT>
</DOCUMENT>
