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Proc-Type: 2001,MIC-CLEAR
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<SEC-DOCUMENT>0000355019-01-500017.txt : 20010605
<SEC-HEADER>0000355019-01-500017.hdr.sgml : 20010605
ACCESSION NUMBER:		0000355019-01-500017
CONFORMED SUBMISSION TYPE:	8-K
PUBLIC DOCUMENT COUNT:		6
CONFORMED PERIOD OF REPORT:	20010525
ITEM INFORMATION:		
FILED AS OF DATE:		20010604

FILER:

	COMPANY DATA:	
		COMPANY CONFORMED NAME:			FONAR CORP
		CENTRAL INDEX KEY:			0000355019
		STANDARD INDUSTRIAL CLASSIFICATION:	SERVICES-SPECIALTY OUTPATIENT FACILITIES, NEC [8093]
		IRS NUMBER:				112464137
		STATE OF INCORPORATION:			DE
		FISCAL YEAR END:			0630

	FILING VALUES:
		FORM TYPE:		8-K
		SEC ACT:		
		SEC FILE NUMBER:	000-10248
		FILM NUMBER:		1653193

	BUSINESS ADDRESS:	
		STREET 1:		110 MARCUS DR
		CITY:			MELVILLE
		STATE:			NY
		ZIP:			11747
		BUSINESS PHONE:		5166942929

	MAIL ADDRESS:	
		STREET 1:		110 MARCUS DRIVE
		CITY:			MELVILLE
		STATE:			NY
		ZIP:			11747
</SEC-HEADER>
<DOCUMENT>
<TYPE>8-K
<SEQUENCE>1
<FILENAME>form8k.txt
<TEXT>

                        SECURTIES AND EXCHANGE COMMISSION

                                   FORM 8 - K

                                 CURRENT REPORT

     Pursuant to Section 13 or 15 (d) of the Securities Exchange Act of 1934

         Date of Report (Date of earliest event reported): May 25, 2001

                                FONAR CORPORATION
 ------------------------------------------------------------------------------
             (Exact name of registrant as specified in its charter)

    Delaware                        0-10248                      11-2464137

(State or other                 (Commission File            (I.R.S. Employer
jurisdiction of                     Number)                 Identification No.)
incorporation)

                                110 Marcus Drive
                            Melville, New York 11747
                                 (631) 694-2929
 ------------------------------------------------------------------------------
                   (Address, including zip code, and telephone
               number of registrant's principal executive offices)

               Item 5. Other Events and Regulation FD Disclosure

              Fonar Obtains New Financing from Tail Wind Fund Ltd.

     Fonar  Corporation  and Tail  Wind  Fund  Ltd on May 25,  2001  executed  a
Purchase   Agreement  pursuant  to  which  Fonar  has  issued  convertible  debt
instruments  to Tail Wind Fund Ltd. in the  aggregate  principal  amount of $4.5
million.

     According to the Agreement,  FONAR has issued 4% Convertible Debentures due
June 30, 2002 to Tail Wind Fund Ltd. in the aggregate  principal  amount of $4.5
million.  The  Debentures  have a conversion  price of $2.047 per share.  In the
event the holder does not elect to convert, Fonar still would have the option to
repay the Debentures in shares of common stock; in such case, however, the stock
would be  valued  at the  lesser  of a) 90% of the  average  of the four  lowest
closing bid prices during the preceding  calendar  month or b) said average less
$0.125.

     In connection with the Debentures,  Fonar also has issued to Tail Wind Fund
Ltd.  Purchase  Warrants  for 659,501  shares of common stock having an exercise
price of $1.801 per share and Callable Warrants to purchase  2,000,000 shares of
common stock.  The exercise  price for the Callable  Warrants will vary,  and be
equal to the  average  closing  bid  price of Fonar  common  stock  for the full
calendar month immediately preceding the date of exercise,  subject to a maximum
of $6.00 per share and a minimum  of $2.00 per  share.  Fonar has the  option to
redeem the  Callable  Warrants  at a  redemption  price of $0.01 per  underlying
warrant share, up to 200,000 underlying shares per month, if the average closing
bid price of Fonar's  common stock is greater than 115% of the warrant  exercise
price in effect for five  consecutive  trading days in any calendar month.  Upon
the giving of notice, Fonar may reduce the warrant exercise price then in effect
to any lower warrant  exercise price under the Callable  Warrants  previously in
effect.

     The Debentures and Warrants include  provisions for adjustment of price and
number of shares in the event of stock splits,  stock  dividends,  reverse stock
splits,  and the like, and stock issuances at prices below the warrant  exercise
or debenture  conversion prices.  There are also certain  limitations on Fonar's
right  to  issue  or sell  securities  during  the  period  the  Debentures  are
outstanding.

     The  Company  is  required  under  the  Agreement  to  file a  registration
statement with the United States Securities and Exchange  Commission to register
the shares of common stock underlying the Debentures and Warrants.  In the event
the registration  statement does not become  effective within certain  specified
time  periods the Company will be required to pay  liquidated  damages of 2% per
month of the outstanding principal balance of the Debentures.

     Fonar  received the funds on May 25, 2001.  Tail Wind Inc. was paid $45,000
as  reimbursement  for legal and due  diligence  expenses.  A  placement  fee of
$157,000  plus  Purchase  Warrants for 300,000  shares of Fonar common stock was
paid to Fonar's broker.


Exhibits

         4.1      4% Convertible Debentures due June 30, 2002

         4.2      Purchase Warrants

         4.3      Callable Warrants

         10.1     Purchase Agreement

         10.2     Registration Rights Agreement
<PAGE>
                                   SIGNATURES


         Pursuant to the  requirements  of the Securities  Exchange Act of 1934,
the  registrant  has duly  caused  this report to be signed on its behalf by the
undersigned hereunto duly authorized.


                                                   FONAR CORPORATION
                                                   (Registrant)

                                                   By:  /s/ Raymond V. Damadian
                                                        ----------------------
                                                        Raymond V. Damadian
                                                        President and Chairman

Dated:   June 1, 2001
</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-4
<SEQUENCE>2
<FILENAME>ex041.txt
<TEXT>

     Exhibit 4.1

NEITHER THESE  SECURITIES  NOR THE  SECURITIES  INTO WHICH THESE  SECURITIES ARE
CONVERTIBLE HAVE BEEN REGISTERED WITH THE SECURITIES AND EXCHANGE  COMMISSION 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.

THIS DEBENTURE DOES NOT REQUIRE PHYSICAL SURRENDER OF THE DEBENTURE IN THE EVENT
OF A PARTIAL REDEMPTION OR CONVERSION.  AS A RESULT, FOLLOWING ANY REDEMPTION OR
CONVERSION OF ANY PORTION OF THIS DEBENTURE,  THE OUTSTANDING  PRINCIPAL  AMOUNT
REPRESENTED BY THIS DEBENTURE MAY BE LESS THAN THE PRINCIPAL  AMOUNT AND ACCRUED
INTEREST SET FORTH BELOW.


                   4% CONVERTIBLE DEBENTURE DUE JUNE 30, 2002

                                       OF

                                FONAR CORPORATION


Debenture No.:  1                          Original Principal Amount: $4,500,000
Issuance Date:  May 24, 2001               New York, New York


     THIS  DEBENTURE  ("Debenture")  is  one  of  a  duly  authorized  issue  of
debentures of FONAR CORPORATION, a corporation duly organized and existing under
the laws of the State of Delaware (the  "Company"),  designated as the Company's
4% Convertible  Debentures Due June 30, 2002  ("Maturity  Date") in an aggregate
principal amount (when taken together with the original principal amounts of all
other  Debentures) which does not exceed Four Million Five Hundred Thousand U.S.
Dollars (U.S. $4,500,000) (the "Debentures").

     FOR VALUE RECEIVED,  the Company hereby promises to pay to the order of The
Tail  Wind  Fund,  Ltd.  or its  registered  assigns  or  successors-in-interest
("Holder") the principal sum of Four Million Five Hundred Thousand Dollars (U.S.
$4,500,000),  together with all accrued but unpaid interest thereon,  if any, on
the Maturity Date, to the extent such principal amount and interest has not been
repaid or converted into the Company's Common Stock, $0.0001 par value per share
(the "Common  Stock"),  in  accordance  with the terms  hereof.  Interest on the
unpaid  principal  balance  hereof shall accrue at the rate of 4% per annum from
the date of  original  issuance  hereof  (the  "Issuance  Date")  until the same
becomes  due and  payable  on the  Maturity  Date,  or such  earlier  date  upon
acceleration  or by conversion or redemption in accordance with the terms hereof
or of the other  Agreements.  Interest  on this  Debenture  shall  accrue  daily
commencing  on the Issuance Date and shall be computed on the basis of a 360-day
year,  30-day  months and actual days elapsed and shall be payable in accordance
with Section 1 hereof. Notwithstanding anything contained herein, this Debenture
shall bear  interest on the due and unpaid  Principal  Amount from and after the
occurrence and during the continuance of an Event of Default pursuant to Section
4(a),  at the rate  (the  "Default  Rate")  equal to the  lower of  sixteen  and
one-half  percent (16.5%) per annum or the highest rate permitted by law. Unless
otherwise  agreed or required by applicable law,  payments will be applied first
to any  unpaid  collection  costs,  then to  unpaid  interest  and  fees and any
remaining amount to principal.

     All payments of principal and interest on this  Debenture  shall be made in
lawful  money of the United  States of America by wire  transfer of  immediately
available funds to such account as the Holder may from time to time designate by
written notice in accordance with the provisions of this Debenture or by Company
check. This Debenture may not be prepaid in whole or in part except as otherwise
provided herein or in the Transaction  Documents.  Whenever any amount expressed
to be due by the  terms  of  this  Debenture  is due on any day  which  is not a
Business  Day (as  defined  below),  the same  shall  instead be due on the next
succeeding day which is a Business Day.

     Capitalized  terms used  herein and not  otherwise  defined  shall have the
meanings set forth in the Purchase Agreement dated on or about the Issuance Date
pursuant  to  which  the  Debentures  were  originally   issued  (the  "Purchase
Agreement").  For purposes  hereof the  following  terms shall have the meanings
ascribed to them below:

     "Business Day" shall mean any day other than a Saturday, Sunday or a day on
which commercial banks in the City of New York are authorized or required by law
or executive order to remain closed.

     "Change in Control Transaction" will be deemed to exist if (i) there occurs
any consolidation,  merger or other business  combination of the Company with or
into any other corporation or other entity or person (whether or not the Company
is  the  surviving  corporation),  or  any  other  corporate  reorganization  or
transaction or series of related transactions in which in any of such events the
voting  stockholders of the Company prior to such event cease to own 50% or more
of the voting power, or corresponding voting equity interests,  of the surviving
corporation after such event (including  without  limitation any "going private"
transaction under Rule 13e-3 promulgated  pursuant to the Exchange Act or tender
offer by the Company under Rule 13e-4  promulgated  pursuant to the Exchange Act
for 20% or more of the Company's  Common Stock),  (ii) any person (as defined in
Section 13(d) of the Exchange Act),  together with its affiliates and associates
(as such terms are defined in Rule 405 under the Act),  beneficially  owns or is
deemed to  beneficially  own (as  described in Rule 13d-3 under the Exchange Act
without regard to the 60-day exercise  period) in excess of 50% of the Company's
voting power,  (iii) there is a replacement of more than one-half of the members
of the Company's Board of Directors  which is not approved by those  individuals
who are members of the Company's Board of Directors on the date thereof, (iv) in
one or a series of related  transactions,  there is a sale or transfer of all or
substantially  all of the assets of the Company,  determined  on a  consolidated
basis,  or (v) the execution by the Company of an agreement to which the Company
is a party or which it is bound  providing for an event set forth in (i),  (ii),
(iii) or (iv) above.

     "Conversion  Ratio" means, at any time, a fraction,  of which the numerator
is the entire  outstanding  Principal  Amount of this Debenture (or such portion
thereof that is being redeemed or repurchased),  and of which the denominator is
the  lesser of the  Conversion  Price and the  Market  Price as of the date such
ratio is being determined.

     "Conversion Price" shall equal 125% of the average closing bid price of the
Common  Stock as reported by the  Principal  Market  over the  twenty-five  (25)
Trading Days  immediately  preceding  the Closing Date (which  Conversion  Price
shall be subject to adjustment  as set forth herein,  and the closing bid prices
used to determine  the  Conversion  Price shall be  appropriately  and equitably
adjusted for any stock splits, stock dividends, recapitalizations and the like).

     "Convertible  Securities"  means  any  convertible  securities,   warrants,
options or other rights to subscribe for or to purchase or exchange for,  shares
of Common Stock.

     "Effective Date" means the date on which a Registration  Statement covering
all the Underlying  Shares and other  Registrable  Securities (as defined in the
Registration Rights Agreement) is declared effective by the SEC.

     "Effective  Registration"  shall have the meaning set forth in the Purchase
Agreement.

     "Exchange Act" shall mean the Securities Exchange Act of 1934, as amended.

     "Market Price" shall equal the lesser of (i) 90% of the average of the four
(4) lowest  closing bid prices of the Common Stock as reported by the  Principal
Market during the full calendar  month  immediately  preceding the date on which
such Market Price is being  determined  (such average referred to as the "Lowest
Average"), and (ii) the Lowest Average less $0.125.

     "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  (the  "MFN  Offering")  which  grants  to the  investor  (the "MFN
Investor") the right to receive additional  securities based upon future capital
raising  transactions  of the Company on terms more favorable than those granted
to the MFN Investor in the MFN Offering.

     "Per Share Selling  Price" shall include the amount  actually paid by third
parties for each share of Common Stock in a sale or issuance by the Company.  In
the event a fee is paid by the  Company  in  connection  with  such  transaction
directly or indirectly to such third party or its affiliates, any such fee shall
be  deducted  from  the  selling  price  pro  rata  to all  shares  sold  in the
transaction to arrive at the Per Share Selling Price. A sale of shares of Common
Stock  shall  include  the sale or  issuance  of rights,  options,  warrants  or
convertible,  exchangeable or exercisable  securities under which the Company is
or  may  become  obligated  to  issue  shares  of  Common  Stock,  and  in  such
circumstances  the Per Share Selling  Price of the Common Stock covered  thereby
shall also  include the  exercise,  exchange  or  conversion  price  thereof (in
addition to the consideration received by the Company upon such sale or issuance
less the fee amount as provided above). In case of any such security issued in a
Variable Rate  Transaction  or an MFN  Transaction,  the Per Share Selling Price
shall be deemed to be the  lowest  conversion  or  exercise  price at which such
securities  are converted or exercised or might have been converted or exercised
in the case of a Variable Rate  Transaction,  or the lowest  adjustment price in
the case of an MFN Transaction,  over the life of such securities. If shares are
issued for a consideration other than cash, the Per Share Selling Price shall be
the fair value of such  consideration as determined in good faith by independent
certified  public  accountants  mutually  acceptable  to  the  Company  and  the
Purchaser.  In the event the Company directly or indirectly  effectively reduces
the conversion,  exercise or exchange price for any Convertible Securities which
are  currently  outstanding,  then the Per Share  Selling Price shall equal such
effectively reduced conversion, exercise or exchange price.

     "Principal  Amount"  shall refer to the sum of (i) the  original  principal
amount of this Debenture,  (ii) all accrued but unpaid interest  hereunder,  and
(iii) any default payments owing under the Agreements but not previously paid or
added to the Principal Amount.

     "Principal  Market"  shall mean the NASDAQ  Small-Cap  Market or such other
principal  market or  exchange  on which the  Common  Stock is then  listed  for
trading.

     "Registration   Statement"   shall  have  the  meaning  set  forth  in  the
Registration Rights Agreement.

     "Securities Act" shall mean the Securities Act of 1933, as amended.

     "Trading  Day" shall mean a day on which there is trading on the  Principal
Market.

     "Underlying  Shares"  means  the  shares  of Common  Stock  into  which the
Debentures  are  convertible  (including  repayment in Common Stock as set forth
herein) in accordance with the terms hereof and the Purchase Agreement.

     "Variable Rate  Transaction"  shall mean a transaction in which the Company
issues or sells (a) 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 (x) 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 Common Stock at any time after the initial  issuance of such
debt or equity securities, or (y) with a fixed 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  (but  excluding  standard  stock  split
anti-dilution  provisions),  or (b) any securities of the Company pursuant to an
"equity  line"  structure  which  provides for the sale,  from time to time,  of
securities  of the  Company  which are  registered  for resale  pursuant  to the
Securities Act.

     The following terms and conditions shall apply to this Debenture:

Section 1. Payments of Principal and Interest.

(a)  Monthly Payments. Subject to the terms of this Section 1, the Company shall
     repay ten percent (10%) of the original principal amount of this Debenture,
     together  with  interest  accrued to date on such  portion of the  original
     principal  amount  plus  any and  all  default  payments  owing  under  the
     Agreements but not previously paid  (collectively,  "Monthly  Amount"),  in
     accordance  with  subsection  1(b) below, on the first business day of each
     consecutive calendar month (each a "Repayment Date") beginning on the first
     such day which occurs following the third full calendar month following the
     Issuance Date.

(b)  Cash or Common Stock.  Subject to the terms hereof,  the Company shall have
     the  right  to  satisfy  payment  of the  Monthly  Amount  in  full on each
     Repayment  Date either in cash or in shares of Common  Stock (but not both)
     at the  Company's  option.  The Company shall deliver to all the holders of
     Debentures a written  irrevocable  notice in the form of Exhibit B attached
     hereto  electing to pay such Monthly  Amount in full on such Repayment Date
     in  either  cash  or  Common  Stock  ("Repayment  Election  Notice").  Such
     Repayment Election Notice shall be delivered at least four (4) Trading Days
     prior to the applicable Repayment Date but no more than twenty (20) Trading
     Days  prior  to  such  Repayment  Date  (the  date  of  such  notice  being
     hereinafter  referred to as the "Notice Date"). If such Repayment  Election
     Notice is not  delivered  within  the  prescribed  period  set forth in the
     preceding  sentence,  then the  repayment  shall be made in either  cash or
     shares of Common Stock on the same terms  hereunder  at the  Holder's  sole
     option. If the Company elects or is required to repay any Monthly Amount in
     cash on a Repayment Date, then on such Repayment Date the Company shall pay
     to the Holder an amount equal to such  Monthly  Amount in  satisfaction  of
     such obligation.  If the Company elects or is required to repay any Monthly
     Amount in shares of Common  Stock,  the number of such  shares to be issued
     for such Repayment Date shall be the number  determined by dividing (x) the
     Monthly  Amount,  by (y) the Market Price as of such Repayment  Date.  Such
     shares  shall be  issued  and  delivered  within  three  (3)  Trading  Days
     following such Repayment Date and shall be duly authorized, validly issued,
     fully  paid,  non-assessable  and  free  and  clear  of  all  encumbrances,
     restrictions  and  legends.  If any Holder does not  receive the  requisite
     number of shares of Common  Stock in the form  required  above  within such
     three  Trading Day period,  the Holder  shall have the option of either (a)
     requiring  the Company to issue and deliver all or a portion of such shares
     or (b) canceling  such  election  (whether by the Company or Holder) to pay
     the Monthly Amount in Common Stock (in whole or in part), in which case the
     Company shall immediately pay in cash the full Monthly Amount due hereunder
     or such  portion as the Holder  specifies  is to be paid in cash instead of
     Common Stock.  Except as otherwise  provided in this Section 1, all holders
     of Debentures  must be treated  equally with respect to such payment of the
     Monthly Amount in shares of Common Stock.

(c)  No Effective Registration. Notwithstanding anything to the contrary herein,
     the Company  shall be  prohibited  from  exercising  its right to repay the
     Monthly  Amount in shares of Common Stock (and must deliver cash in respect
     thereof) on the  applicable  Repayment  Date if at any time from the Notice
     Date until the time at which the Holders receive such shares there fails to
     exist  Effective  Registration  (defined  below)  or an  Event  of  Default
     hereunder  exists or  occurs,  unless  otherwise  waived in  writing by the
     Holder in whole or in part at the Holder's option. "Effective Registration"
     shall mean:  (i) the Company has  complied  with its  material  obligations
     under all the  Agreements  in all  material  respects  and has not made any
     material  misrepresentations under any of the Agreements or under any other
     agreements between the Company and the Purchaser, except for those breaches
     or defaults  which are capable of being cured and have been so cured within
     a reasonable time following notice of such breach or default (not to exceed
     5 business days); (ii) the resale of all Registrable Securities (as defined
     in  the  Registration   Rights   Agreement)  is  covered  by  an  effective
     registration  statement in  accordance  with the terms of the  Registration
     Rights  Agreement  and such  registration  statement  is not subject to any
     suspension or stop orders; (iii) the resale of such Registrable  Securities
     may be effected  pursuant to a current and  deliverable  prospectus that is
     not subject to any blackout or similar circumstance;  (iv) such Registrable
     Securities  are listed,  or approved for listing  prior to issuance,  on an
     Approved  Market and are not subject to any trading  suspension  (nor shall
     trading generally have been suspended on such exchange or market),  and the
     Company  shall  not  have  been  notified  of  any  pending  or  threatened
     proceeding  or other  action to delist or suspend  the Common  Stock on the
     Approved Market on which the Common Stock is then traded or listed; (v) the
     requisite  number of shares of Common Stock shall have been duly authorized
     and reserved for issuance as required by the terms of the  Agreements;  and
     (vi) none of the  Company  or any  direct  or  indirect  subsidiary  of the
     Company  is  subject  to  any  Bankruptcy   Event.   For  purposes  hereof,
     "Bankruptcy  Event" means any of the following  events:  (a) the Company or
     any subsidiary  commences a case or other  proceeding under any bankruptcy,
     reorganization,   arrangement,  adjustment  of  debt,  relief  of  debtors,
     dissolution,  insolvency or liquidation or similar law of any  jurisdiction
     relating to the Company or any subsidiary  thereof;  (b) there is commenced
     against the Company or any subsidiary  any such case or proceeding  that is
     not  dismissed  within 60 days after  commencement;  (c) the Company or any
     subsidiary is  adjudicated  insolvent or bankrupt or any order of relief or
     other order  approving  any such case or  proceeding  is  entered;  (d) the
     Company or any subsidiary  suffers any  appointment of any custodian or the
     like for it or any substantial  part of its property that is not discharged
     or stayed within 60 days; (e) the Company or any subsidiary makes a general
     assignment for the benefit of creditors;  (f) the Company or any subsidiary
     fails to pay, or states  that it is unable to pay or is unable to pay,  its
     debts generally as they become due; (g) the Company or any subsidiary calls
     a  meeting  of its  creditors  with  a view  to  arranging  a  composition,
     adjustment  or  restructuring  of its  debts;  or (h)  the  Company  or any
     subsidiary,  by any act or failure to act, expressly  indicates its consent
     to,  approval  of or  acquiescence  in any of the  foregoing  or takes  any
     corporate  or  other  action  for  the  purpose  of  effecting  any  of the
     foregoing.

(d)  Ownership/Issuance  Limitations.  Notwithstanding  anything to the contrary
     herein,  the Company shall be prohibited from exercising its right to repay
     the  Monthly  Amount in shares of Common  Stock (and must  deliver  cash in
     respect thereof) on the applicable  Repayment Date to the extent,  and only
     to the extent,  that such  repayment in shares of Common Stock would result
     in the Holder hereof  exceeding the  limitations  contained in Section 3(i)
     below.  In such  event,  then (i) the Company on the  Repayment  Date shall
     repay such  portion of the Monthly  Amount in shares of Common Stock as may
     be effected without exceeding such limitations, (ii) the Repayment Date for
     the balance of the Monthly Amount shall be extended until such time as such
     stock payment can be made without violating Section 3(i),  provided that if
     such stock  payment  cannot be made only because it would  violate  Section
     3(i)(C)  below,  then at the Holder's  option the Company shall redeem such
     Monthly  Amount  portion of this  Debenture at a redemption  price equal to
     120% of such Monthly  Amount.  If any portion of any Monthly Amount remains
     unpaid as of the Maturity Date hereof,  such amount shall be repaid in cash
     on the Maturity Date (unless  accelerated  hereunder  pursuant to Section 4
     below).

(e)  Deemed Conversions. Any repayment of the Monthly Amount in shares of Common
     Stock  pursuant  to the  terms  hereof  shall  constitute  and be  deemed a
     conversion  of such portion of the Principal  Amount of this  Debenture for
     all purposes  under this  Debenture and the other  Agreements  (except that
     such  conversion  shall be at the  Market  Price and  except  as  otherwise
     provided herein).

Section 2. [INTENTIONALLY OMITTED]

Section 3. Conversion.

(a)  Conversion  Right.  Subject  to  the  terms  hereof  and  restrictions  and
     limitations  contained  herein,  the Holder  shall have the right,  at such
     Holder's  option,  at any  time  and  from  time  to time  to  convert  the
     outstanding  Principal  Amount under this  Debenture in whole or in part by
     delivering to the Company a fully executed notice of conversion in the form
     of  conversion  notice  attached  hereto  as  Exhibit  A  (the  "Conversion
     Notice"),  which may be transmitted by facsimile.  Notwithstanding anything
     to the contrary herein, this Debenture and the outstanding Principal Amount
     hereunder  shall not be  convertible  into Common  Stock to the extent that
     such conversion would result in the Holder hereof exceeding the limitations
     contained in, or otherwise violating the provisions of, Section 3(i) below.
     For clarification  purposes,  any conversions of the outstanding  Principal
     Amount under this Debenture in part pursuant to this Section 3(a) shall not
     affect the Company's  obligation to repay the Monthly Amount as provided in
     Section 1 above.

(b)  Common Stock Issuance Upon Conversion.

(i)  Conversion Date Procedures.  Upon conversion of this Debenture  pursuant to
     Section 3(a) above,  the outstanding  Principal  Amount  hereunder shall be
     converted into such number of fully paid, validly issued and non-assessable
     shares of Common Stock, free of any liens,  claims and encumbrances,  as is
     determined by dividing the outstanding  Principal Amount being converted by
     the then applicable  Conversion  Price.  The date of any Conversion  Notice
     hereunder  and any  Repayment  Date  shall be  referred  to  herein  as the
     "Conversion  Date". If a conversion under this Debenture cannot be effected
     in full for any reason, or if the Holder is converting less than all of the
     outstanding Principal Amount hereunder pursuant to a Conversion Notice, the
     Company  shall  promptly  deliver  to the  Holder  (but no later  than five
     Trading Days after the  Conversion  Date) a Debenture for such  outstanding
     Principal  Amount  as has not been  converted  if this  Debenture  has been
     surrendered to the Company for partial conversion.  The Holder shall not be
     required to  physically  surrender  this  Debenture to the Company upon any
     conversion  or payment for the  Monthly  Amount  hereunder  unless the full
     outstanding  Principal  Amount  represented  by  this  Debenture  is  being
     converted  or repaid.  The Holder and the Company  shall  maintain  records
     showing the  outstanding  Principal  Amount so converted and repaid and the
     dates of such  conversions  or  repayments  or shall use such other method,
     reasonably satisfactory to the Holder and the Company, so as not to require
     physical   surrender  of  this  Debenture  upon  each  such  conversion  or
     repayment.

(ii) Stock  Certificates  or DWAC.  The Company  will  deliver to the Holder not
     later than three (3) Trading Days after the Conversion  Date, a certificate
     or  certificates  which  shall be free of  restrictive  legends and trading
     restrictions,  representing  the  number of shares  of Common  Stock  being
     acquired  upon the  conversion  of this  Debenture.  In lieu of  delivering
     physical certificates representing the shares of Common Stock issuable upon
     conversion  of this  Debenture,  provided the Company's  transfer  agent is
     participating  in the  Depository  Trust  Company  ("DTC")  Fast  Automated
     Securities  Transfer  ("FAST")  program,  upon  request of the Holder,  the
     Company  shall use  commercially  reasonable  efforts to cause its transfer
     agent to  electronically  transmit such shares  issuable upon conversion to
     the Holder (or its designee),  by crediting the account of the Holder's (or
     such designee's) prime broker with DTC through its Deposit Withdrawal Agent
     Commission  system (provided that the same time periods herein as for stock
     certificates shall apply). If in the case of any conversion hereunder, such
     certificate  or  certificates  are not  delivered  to or as directed by the
     Holder by the third Trading Day after the Conversion Date, the Holder shall
     be entitled  by written  notice to the Company at any time on or before its
     receipt of such  certificate or  certificates  thereafter,  to rescind such
     conversion,  in which  event the  Company  shall  immediately  return  this
     Debenture  tendered for conversion.  If the Company fails to deliver to the
     Holder such certificate or certificates (or shares through DTC) pursuant to
     this Section 3(b) (free of any restrictions on transfer or legends, if such
     shares have been  registered)  in accordance  herewith,  prior to the sixth
     Trading Day after the Conversion Date, the Company shall pay to the Holder,
     in cash, an amount equal to 2% of the Principal Amount per month.

(c)  Conversion Price Adjustments.

(i)  Stock  Dividends,  Splits and  Combinations.  If the  Company or any of its
     subsidiaries,  at any time while the Debentures are  outstanding  (A) shall
     pay a stock dividend or otherwise make a distribution or  distributions  on
     any equity securities (including instruments or securities convertible into
     or exchangeable for such equity  securities) in shares of Common Stock, (B)
     subdivide  outstanding  Common Stock into a larger number of shares, or (C)
     combine outstanding Common Stock into a smaller number of shares, then each
     Affected  Conversion  Price (as defined  below)  shall be  multiplied  by a
     fraction,  the  numerator  of which shall be the number of shares of Common
     Stock  outstanding  before such event and the denominator of which shall be
     the number of shares of Common  Stock  outstanding  after such  event.  Any
     adjustment  made pursuant to this Section  3(c)(i)  shall become  effective
     immediately  after the record date for the  determination  of  stockholders
     entitled  to  receive  such  dividend  or  distribution  and  shall  become
     effective immediately after the effective date in the case of a subdivision
     or combination.

As   used herein, the Affected  Conversion Prices (each an "Affected  Conversion
     Price") shall refer to: (i) the Conversion  Price; (ii) each reported daily
     closing bid price of the Common Stock on the Principal  Market occurring on
     any Trading Day  included  in the period  used for  determining  the Market
     Price or Conversion  Price,  as the case may be, which Trading Day occurred
     before the record  date in the case of events  referred to in clause (A) of
     this subparagraph  3(c)(i) and before the effective date in the case of the
     events referred to in clauses (B) and (C) of this subparagraph 3(c)(i).

(ii) Distributions. If the Company or any of its subsidiaries, at any time while
     the Debentures are  outstanding,  shall distribute to all holders of Common
     Stock evidences of its indebtedness or assets or cash or rights or warrants
     to  subscribe  for or  purchase  any  security of the Company or any of its
     subsidiaries  (excluding those referred to in Section 3(c)(i) above),  then
     concurrently  with such  distributions  to  holders  of Common  Stock,  the
     Company shall  distribute to holders of the  Debentures  the amount of such
     indebtedness,  assets,  cash or rights or  warrants  which the  holders  of
     Debentures would have received had all their Debentures been converted into
     Common Stock at the lower of the Conversion  Price and the then  applicable
     Market Price immediately prior to the record date for such distribution.

(iii)Common  Stock  Issuances.  In the  event  that  the  Company  or any of its
     subsidiaries  (A) issues or sells any Common Stock or securities  which are
     convertible  into or  exercisable or  exchangeable  for Common Stock (other
     than issuances of Debentures, Warrants and of Underlying Shares pursuant to
     Debentures or Warrants  issued under the Purchase  Agreement and other than
     issuances  described in and  permitted  under  Section  7.2(b)(iii)  of the
     Purchase  Agreement  and other than  issuances  of Common  Stock  under the
     Company's  duly  adopted  stock  option and bonus plans for  employees  and
     directors), or any warrants or other rights to subscribe for or to purchase
     or any options  for the  purchase  of its Common  Stock or (B)  directly or
     indirectly  effectively reduces the conversion,  exercise or exchange price
     for any Convertible  Securities which are currently outstanding (other than
     pursuant to terms  existing on the date hereof),  at or to an effective Per
     Share Selling Price which is less than:

(A)  the  closing  sale  price per share of the  Common  Stock on the  Principal
     Market on the Trading Day next preceding such issue or sale or, in the case
     of  issuances  to  holders  of its  Common  Stock,  the date  fixed for the
     determination of stockholders entitled to receive such warrants, rights, or
     options  ("Fair  Market  Price"),  then in each  such  case,  the  Affected
     Conversion  Price in  effect  immediately  prior  to such  issue or sale or
     record  date,  as  applicable,  shall be  automatically  reduced  effective
     concurrently with such issue or sale to an amount determined by multiplying
     the  Affected  Conversion  Price  then in  effect  by a  fraction,  (x) the
     numerator  of which  shall be the sum of (1) the number of shares of Common
     Stock  outstanding  immediately  prior to such issue or sale,  plus (2) the
     number of shares of Common Stock which the aggregate consideration received
     by the  Company  for such  additional  shares  would  purchase at such Fair
     Market  Price,  and (y) the  denominator  of which  shall be the  number of
     shares of Common Stock of the Company  outstanding  immediately  after such
     issue or sale; or

(B)  the  Conversion  Price,  then in each such case,  the  Conversion  Price in
     effect  immediately  prior  to  such  issue  or  sale or  record  date,  as
     applicable, shall be automatically reduced effective concurrently with such
     issue or sale to an amount equal to such Per Share Selling Price.

     The foregoing  provision of this subsection shall not apply to issuances or
sales  pursuant to the  Company's  duly adopted  employee or director  bona fide
options plans and/or compensation arrangements.

     For the purposes of the foregoing adjustments,  in the case of the issuance
of any  Convertible  Securities,  the maximum  number of shares of Common  Stock
issuable upon exercise,  exchange or conversion of such  Convertible  Securities
shall be deemed to be outstanding,  provided that no further adjustment shall be
made upon the  actual  issuance  of Common  Stock  upon  exercise,  exchange  or
conversion of such Convertible Securities.

     For purposes of this Section  3(c)(iii),  if an event occurs that  triggers
more than one of the above adjustment provisions, then only one adjustment shall
be made and the calculation method which yields the greatest downward adjustment
in the Affected Conversion Price shall be used.

(iv) Rounding of Adjustments. All calculations under this Section 3 or Section 1
     shall be made to the nearest cent or the nearest 1/100th of a share, as the
     case may be.

(v)  Notice of Adjustments.  Whenever any Affected  Conversion Price is adjusted
     pursuant  to  Section  3(c)(i),  (ii) or (iii)  above,  the  Company  shall
     promptly  deliver to each holder of the Debentures,  a notice setting forth
     the Affected  Conversion  Price after such  adjustment  and setting forth a
     brief statement of the facts requiring such  adjustment,  provided that any
     failure to so provide such notice shall not affect the automatic adjustment
     hereunder.

(vi) Change  in  Control  Transactions.   In  case  of  any  Change  in  Control
     Transaction,  the Holder shall have the right thereafter to, at its option,
     (A)  convert  this  Debenture,  in whole or in  part,  at the  lower of the
     Conversion  Price and the then  applicable  Market Price into the shares of
     stock and other securities,  cash and/or property receivable upon or deemed
     to be held by  holders of Common  Stock  following  such  Change in Control
     Transaction,  and the Holder  shall be entitled  upon such event to receive
     such  amount of  securities,  cash or  property as the shares of the Common
     Stock of the Company into which this  Debenture  could have been  converted
     immediately  prior to such  Change in Control  Transaction  would have been
     entitled  if such  conversion  were  permitted,  subject  to  such  further
     applicable  adjustments  set  forth in this  Section 3 or (B)  require  the
     Company or its successor to redeem this Debenture,  in whole or in part, at
     a redemption  price equal to the greater of (i) the  outstanding  Principal
     Amount  being  redeemed and (ii) the product of (x) the average of the Fair
     Market  Price  for the five (5)  Trading  Days  immediately  preceding  the
     Holder's  election to have its  Debentures  redeemed and (y) the Conversion
     Ratio.  The terms of any such Change in Control  Transaction  shall include
     such terms so as to  continue  to give to the  Holders the right to receive
     the amount of  securities,  cash and/or  property  upon any  conversion  or
     redemption  following such Change in Control  Transaction to which a holder
     of the number of shares of Common Stock  deliverable  upon such  conversion
     would  have been  entitled  in such  Change  in  Control  Transaction,  and
     interest payable  hereunder shall be in cash or such new securities  and/or
     property,  at the Holder's option.  This provision shall similarly apply to
     successive reclassifications,  consolidations, mergers, sales, transfers or
     share exchanges.

(vii) Notice of Certain Events. If:

     A.   the Company  shall declare a dividend (or any other  distribution)  on
          its Common Stock; or

     B.   the Company shall declare a special nonrecurring cash dividend on or a
          redemption of its Common Stock; or

     C.   the Company shall  authorize the granting to all holders of the Common
          Stock  rights or warrants to  subscribe  for or purchase any shares of
          capital stock of any class or of any rights; or

     D.   the approval of any  stockholders  of the Company shall be required in
          connection  with  any  reclassification  of the  Common  Stock  of the
          Company,  any consolidation or merger to which the Company is a party,
          any sale or transfer of all or substantially  all of the assets of the
          Company,  of any compulsory share of exchange whereby the Common Stock
          is converted into other securities, cash or property; or

     E.   the Company shall authorize the voluntary or involuntary  dissolution,
          liquidation or winding up of the affairs of the Company;

     then  the  Company  shall  cause  to be  filed  at each  office  or  agency
     maintained for the purpose of conversion of this Debenture, and shall cause
     to be mailed to the Holder at its last  address as it shall appear upon the
     books of the  Company,  on or prior to the  date  notice  to the  Company's
     stockholders  generally is given,  a notice stating (x) the date on which a
     record  is to be taken  for the  purpose  of such  dividend,  distribution,
     redemption, rights or warrants, or if a record is not to be taken, the date
     as of which the  holders of Common  Stock of record to be  entitled to such
     dividend,   distributions,   redemption,  rights  or  warrants  are  to  be
     determined or (y) the date on which such  reclassification,  consolidation,
     merger, sale, transfer or share exchange is expected to become effective or
     close, and the date as of which it is expected that holders of Common Stock
     of record  shall be entitled to exchange  their  shares of Common Stock for
     securities,  cash or other property deliverable upon such reclassification,
     consolidation, merger, sale, transfer or share exchange.

(d)  Reservation and Issuance of Underlying  Securities.  The Company  covenants
     that it will at all times reserve and keep  available out of its authorized
     and  unissued  Common  Stock  solely  for  the  purpose  of  issuance  upon
     conversion of this  Debenture  (including  repayments in stock),  free from
     preemptive rights or any other actual contingent purchase rights of persons
     other than the  holders  of the  Debentures,  not less than such  number of
     shares of Common Stock as shall (subject to any additional  requirements of
     the  Company as to  reservation  of such  shares set forth in the  Purchase
     Agreement)  be issuable  (taking  into account the  adjustments  under this
     Section 3 but without regard to any ownership limitations contained herein)
     upon the conversion of this Debenture  hereunder in Common Stock (including
     repayments in stock). The Company covenants that all shares of Common Stock
     that shall be so issuable shall,  upon issue, be duly  authorized,  validly
     issued, fully paid, nonassessable and freely tradeable.

(e)  No Fractions. Upon a conversion hereunder the Company shall not be required
     to issue  stock  certificates  representing  fractions  of shares of Common
     Stock,  but may if otherwise  permitted,  make a cash payment in respect of
     any final  fraction  of a share  based on the  closing  price of a share of
     Common Stock at such time. If the Company elects not, or is unable, to make
     such a cash  payment,  the Holder shall be entitled to receive,  in lieu of
     the final fraction of a share, one whole share of Common Stock.

(f)  Charges, Taxes and Expenses.  Issuance of certificates for shares of Common
     Stock upon the conversion of this Debenture  (including repayment in stock)
     shall be made without charge to the holder hereof for any issue or transfer
     tax or  other  incidental  expense  in  respect  of the  issuance  of  such
     certificate,  all of which taxes and expenses shall be paid by the Company,
     and such certificates  shall be issued in the name of the Holder or in such
     name or names as may be directed by the Holder; provided,  however, that in
     the event  certificates  for  shares of Common  Stock are to be issued in a
     name other than the name of the Holder, this Debenture when surrendered for
     conversion  shall  be  accompanied  by an  assignment  form;  and  provided
     further,  that the  Company  shall not be  required to pay any tax or taxes
     which may be payable in respect of any such transfer.

(g)  Cancellation.  After all of the  Principal  Amount  (including  accrued but
     unpaid  interest and default  payments at any time owed on this  Debenture)
     have been paid in full or converted into Common Stock, this Debenture shall
     automatically  be deemed  canceled and the Holder shall promptly  surrender
     the Debenture to the Company at the Company's principal executive offices.

(h)  Notices  Procedures.  Any  and  all  notices  or  other  communications  or
     deliveries  to be  provided  by the Holder  hereunder,  including,  without
     limitation,  any  Conversion  Notice,  shall be in  writing  and  delivered
     personally, by confirmed facsimile, or by a nationally recognized overnight
     courier service to the Company at the facsimile telephone number or address
     of the  principal  place of  business  of the  Company  as set forth in the
     Purchase  Agreement.  Any  and  all  notices  or  other  communications  or
     deliveries to be provided by the Company  hereunder shall be in writing and
     delivered personally, by facsimile, or by a nationally recognized overnight
     courier service  addressed to the Holder at the facsimile  telephone number
     or address of the Holder  appearing on the books of the  Company,  or if no
     such facsimile  telephone number or address appears, at the principal place
     of business of the Holder. Any notice or other  communication or deliveries
     hereunder  shall be  deemed  delivered  (i) upon  receipt,  when  delivered
     personally,  (ii) when sent by  facsimile,  upon  receipt if  received on a
     Business Day prior to 5:00 p.m.  (Eastern  Time),  or on the first Business
     Day  following  such  receipt if received on a Business Day after 5:00 p.m.
     (Eastern  Time) or (iii) upon  receipt,  when  deposited  with a nationally
     recognized overnight courier service.

(i)  Conversion Limitations.

(A)  9.9% Limitation. Notwithstanding anything to the contrary contained herein,
     the  number of shares of Common  Stock that may be  acquired  by the Holder
     upon  conversion  pursuant  to the terms  hereof  shall not exceed a number
     that,  when  added to the total  number of  shares of Common  Stock  deemed
     beneficially owned by such Holder (other than by virtue of the ownership of
     securities or rights to acquire securities  (including the Debentures) that
     have  limitations  on the Holder's  right to convert,  exercise or purchase
     similar to the limitation  set forth  herein),  together with all shares of
     Common Stock deemed  beneficially  owned at such time (other than by virtue
     of the ownership of securities  or rights to acquire  securities  that have
     limitations  on the right to convert,  exercise or purchase  similar to the
     limitation set forth herein) by the holder's  "affiliates" at such time (as
     defined  in Rule  144 of the Act)  ("Aggregation  Parties")  that  would be
     aggregated for purposes of determining  whether a group under Section 13(d)
     of the  Securities  Exchange Act of 1934 as amended,  exists,  would exceed
     9.9% of the total  issued and  outstanding  shares of the Common Stock (the
     "Restricted Ownership Percentage"). Each holder shall have the right (w) at
     any  time  and  from  time to  time  to  reduce  its  Restricted  Ownership
     Percentage  immediately  upon  notice to the  Company  and (x)  (subject to
     waiver)  at any time and from  time to time,  to  increase  its  Restricted
     Ownership  Percentage  immediately  in the  event  of the  announcement  as
     pending or planned, of a Change in Control Transaction.

(B)  Limitation  Covenants.  The Holder covenants at all times on each day (each
     such day being  referred  to as a "Covenant  Day") as  follows:  During the
     balance of such Covenant Day and the  succeeding  sixty-one  (61) days (the
     balance of such Covenant Day and the  succeeding 61 days being  referred to
     as the  "Covenant  Period")  such Holder will not acquire  shares of Common
     Stock pursuant to any right (including  conversion of Debentures)  existing
     at the  commencement  of the  Covenant  Period to the  extent the number of
     shares so acquired by such Holder and its Aggregation Parties (ignoring all
     dispositions) would exceed:

(x)  the Restricted Ownership Percentage of the total number of shares of Common
     Stock outstanding at the commencement of the Covenant Period, minus

(y)  the number of shares of Common Stock  actually owned by such Holder and its
     Aggregation Parties at the commencement of the Covenant Period.

     A new and independent  covenant will be deemed to be given by the Holder as
of each moment of each  Covenant Day. No covenant  will  terminate,  diminish or
modify any other covenant.  The Holder agrees to comply with each such covenant.
This  Section  3(i)(B)  controls  in the case of any  conflict  with  any  other
provision of the Purchase  Agreement or any agreement entered into in connection
therewith.

     The Company's obligation to issue shares of Common Stock which would exceed
such limits  referred to in this  Section  3(i) shall be suspended to the extent
necessary  until such time,  if any, as shares of Common  Stock may be issued in
compliance with such restrictions.

(C)  Overall Limit on Common Stock Issuable.  Notwithstanding anything contained
     herein to the  contrary,  the number of shares of Common Stock  issuable by
     the  Company and  acquirable  by the Holders of  Debentures,  together  the
     number of shares issued under the  Warrants,  shall not exceed 19.9% of the
     number of shares of Common Stock  outstanding on the Closing Date,  subject
     to  appropriate  adjustment  for stock splits,  stock  dividends,  or other
     similar  recapitalizations  affecting the Common Stock (the "Maximum Common
     Stock Issuance"),  unless the issuance of shares hereunder in excess of the
     Maximum  Common  Stock  Issuance  shall first be approved by the  Company's
     shareholders in accordance with applicable law and the By-laws and Articles
     of Incorporation  of the Company.  If at any point in time and from time to
     time (each a "Trigger Date") the number of Common Shares issued pursuant to
     conversion of the  Debentures  and exercise of the Warrants,  together with
     the number of Common  Shares  that would then be issuable by the Company in
     the event of  conversion  of all the  Debentures  and  exercise  of all the
     Warrants then  outstanding,  would exceed the Maximum Common Stock Issuance
     but for this Section  3(i)(C),  then the Company  shall,  at the  Company's
     election,  either  (A)  promptly  call a  shareholders  meeting  to  obtain
     shareholder  approval for the issuance of Common Shares hereunder in excess
     of the Maximum Common Stock Issuance, which such shareholder approval shall
     be obtained  within 60 days of the Trigger  Date,  or (B) purchase from the
     holders of  Debentures  and  Warrants  on a pro rata  basis such  Principal
     Amount of  Debentures  and number of Warrants  which cannot be converted or
     exercised   due  to  such   Maximum   Common  Stock   Issuance   limitation
     ("Shortfall")  at a  redemption  price equal to the  "Mandatory  Repurchase
     Price"  (as  defined  in the  Registration  Rights  Agreement),  which such
     redemption  price  shall be paid  within  three (3)  Trading  Days  after a
     Trigger  Date if this  clause (B) is elected.  The Company  shall make such
     election  with two (2) days  following  the Trigger Date by giving  written
     notice to all holders of Debentures  and Warrants.  If the Company fails to
     timely make such  election,  or elects  clause (A) but then fails to obtain
     such  shareholder  approval within 60 days following the Trigger Date, then
     the Company shall purchase the Shortfall at the Mandatory  Repurchase Price
     within three (3) Trading Days following any such failure.

Section 4. Defaults and Remedies.

(a)  Events of Default.  An "Event of  Default"  is: (i) a default in payment of
     the Principal  Amount or accrued but unpaid interest  thereon of any of the
     Debentures  on or after the date such  payment is due (to the  extent  such
     principal  and/or  amount  has not  been  converted  into  Common  Stock in
     accordance with the terms hereof),  which default  continues for 5 business
     days after  written  notice of such  non-payment  has been  received by the
     Company;  (ii) a default in the timely  issuance of Underlying  Shares upon
     and in  accordance  with terms  hereof,  which  default  continues for five
     business days after the Company has received  written notice  informing the
     Company  that it has failed to issue shares or deliver  stock  certificates
     within the fifth day following the  Conversion  Date;  (iii) failure by the
     Company for thirty (30) days after written  notice has been received by the
     Company to comply with any material provision of any of the Debentures, the
     Purchase  Agreement,  the  Registration  Rights  Agreement  or the Warrants
     (including  without limitation the failure to issue the requisite number of
     shares of Common  Stock upon  conversion  hereof and the  failure to redeem
     Debentures  upon  the  Holder's  request  following  a  Change  in  Control
     Transaction  pursuant to Section  3(c)(vi),  (iv) a material  breach by the
     Company of its  representations  or warranties  in the Purchase  Agreement,
     Registration  Rights Agreement or Warrants;  (v) any default after any cure
     period under, or acceleration prior to maturity of, any mortgage, indenture
     or  instrument  under  which  there may be issued or by which  there may be
     secured or evidenced any indebtedness for money borrowed by the Company for
     in excess of $1 million or for money  borrowed  the  repayment  of which is
     guaranteed  by the  Company  for in  excess  of $1  million,  whether  such
     indebtedness or guarantee now exists or shall be created hereafter; or (vi)
     if the Company is subject to any Bankruptcy Event.

(b)  Remedies.  If an Event of Default occurs and is continuing  with respect to
     any of the Debentures,  the Holder may declare all of the then  outstanding
     Principal  Amount of this  Debenture and all other  Debentures  held by the
     Holder,  including  any  interest  due  thereon,  to  be  due  and  payable
     immediately,  except that in the case of an Event of Default  arising  from
     events  described in clauses (v) and (vi) of Section 4(a),  this  Debenture
     shall become due and payable without further action or notice. In the event
     of such  acceleration,  the amount due and owing to the Holder shall be the
     greater of (1) 125% of the outstanding  Principal  Amount of the Debentures
     held by the Holder (plus all accrued and unpaid  interest,  if any) and (2)
     the product of (A) the highest  closing price for the five (5) Trading days
     immediately  preceding  the Holder's  acceleration  and (B) the  Conversion
     Ratio. In either case the Company shall pay interest on such amount in cash
     at the Default  Rate to the Holder if such amount is not paid within 7 days
     of Holder's request. The remedies under this Debenture shall be cumulative.

Section 5. General.

(a)  Payment of Expenses.  The Company agrees to pay all reasonable  charges and
     expenses,  including attorneys' fees and expenses, which may be incurred by
     the Holder in successfully  enforcing this Debenture and/or  collecting any
     amount due under this Debenture.

(b)  Savings Clause.  In case any provision of this Debenture is held by a court
     of competent  jurisdiction to be excessive in scope or otherwise invalid or
     unenforceable,  such  provision  shall be adjusted  rather than voided,  if
     possible, so that it is enforceable to the maximum extent possible, and the
     validity and  enforceability of the remaining  provisions of this Debenture
     will not in any way be affected or impaired thereby.  In no event shall the
     amount of interest  paid  hereunder  exceed the maximum rate of interest on
     the unpaid principal balance hereof allowable by applicable law. If any sum
     is collected in excess of the applicable maximum rate, the excess collected
     shall be applied to reduce the  principal  debt.  If the interest  actually
     collected  hereunder is still in excess of the applicable maximum rate, the
     interest  rate shall be reduced so as not to exceed the  maximum  allowable
     under law. (c) Amendment. Neither this Debenture nor any term hereof may be
     amended,  waived,   discharged  or  terminated  other  than  by  a  written
     instrument signed by the Company and Holders of 75% of the Principal Amount
     of all Debentures.

(d)  Assignment,  Etc. The Holder may assign or transfer  this  Debenture to any
     transferee  only with the prior written  consent of the Company,  which may
     not be unreasonably  withheld or delayed,  provided that (i) the Holder may
     assign  or  transfer  this  Debenture  to any of such  Holder's  affiliates
     without the consent of the Company and (ii) upon any Event of Default,  the
     Holder may assign or  transfer  this  Debenture  without the consent of the
     Company.  The Holder  shall  notify the Company of any such  assignment  or
     transfer promptly. This Debenture shall be binding upon the Company and its
     successors  and shall inure to the benefit of the Holder and its successors
     and permitted assigns.

(e)  No Waiver.  No failure on the part of the Holder to exercise,  and no delay
     in  exercising  any right,  remedy or power  hereunder  shall  operate as a
     waiver thereof,  nor shall any single or partial  exercise by the Holder of
     any right,  remedy or power hereunder preclude any other or future exercise
     of any other right,  remedy or power. Each and every right, remedy or power
     hereby granted to the Holder or allowed it by law or other  agreement shall
     be cumulative  and not exclusive of any other,  and may be exercised by the
     Holder from time to time.

(f)  Governing Law; Jurisdiction.

(i)  Governing  Law.  THIS  DEBENTURE  WILL  BE  GOVERNED  BY AND  CONSTRUED  IN
     ACCORDANCE  WITH THE LAWS OF THE  STATE OF NEW YORK  WITHOUT  REGARD TO ANY
     CONFLICTS  OF LAWS  PROVISIONS  THEREOF  THAT WOULD  OTHERWISE  REQUIRE THE
     APPLICATION OF THE LAW OF ANY OTHER JURISDICTION.

(ii) Jurisdiction. The Company irrevocably submits to the exclusive jurisdiction
     of any State or Federal Court  sitting in the State of New York,  County of
     New York, or San Jose,  California,  over any suit,  action,  or proceeding
     arising  out of or  relating to this  Debenture.  The  Company  irrevocably
     waives,  to the fullest extent permitted by law, any objection which it may
     now or hereafter have to the laying of the venue of any such suit,  action,
     or proceeding  brought in such a court and any claim that suit,  action, or
     proceeding has been brought in an inconvenient forum.

     The Company  agrees that the service of process upon it mailed by certified
     or registered mail (and service so made shall be deemed complete three days
     after the same has been posted as aforesaid)  or by personal  service shall
     be deemed in every respect effective service of process upon it in any such
     suit or  proceeding.  Nothing  herein shall affect  Holder's right to serve
     process in any other manner  permitted  by law.  The Company  agrees that a
     final  non-appealable  judgement  in any such suit or  proceeding  shall be
     conclusive  and may be  enforced  in  other  jurisdictions  by suit on such
     judgment or in any other lawful manner.

(iii)No Jury Trial. The COMPANY hereto knowingly and voluntarily  waives any and
     all rights it may have to a trial by jury with  respect  to any  litigation
     based on, or arising out of, under, or in connection with, this Debenture.

(g)  Replacement  Debentures.  This  Debenture may be exchanged by Holder at any
     time and from time to time for a Debenture  or  Debentures  with  different
     denominations representing an equal aggregate outstanding Principal Amount,
     as reasonably  requested by Holder,  upon surrendering the same. No service
     charge will be made for such  registration  or exchange.  In the event that
     Holder  notifies the Company that this  Debenture has been lost,  stolen or
     destroyed,  a  replacement  Debenture  identical  in  all  respects  to the
     original Debenture (except for registration number and Principal Amount, if
     different  than that shown on the original  Debenture),  shall be issued to
     the Holder,  provided that the Holder  executes and delivers to the Company
     an  agreement  reasonably  satisfactory  to the  Company to  indemnify  the
     Company from any loss incurred by it in connection with the Debenture.

                            [Signature Page Follows]

<PAGE>

     IN WITNESS  WHEREOF,  the  Company  has caused  this  Debenture  to be duly
executed on the day and in the year first above written.


                                             FONAR CORPORATION

                                    By:    /s/
                                           ---------------------------
                                    Name:
                                           ---------------------------
                                    Title:
                                           ---------------------------

Attest: /s/

Sign:
        Print Name:
                    ---------------------------

<PAGE>

                                    EXHIBIT A

                            FORM OF CONVERSION NOTICE

(To be executed by the Holder
in order to convert a Debenture)

Re:  Debenture (this  "Debenture")  issued by FONAR  CORPORTION to THE TAIL WIND
     FUND,  LTD. on or about May 24, 2001 in the  original  principal  amount of
     $4,500,000.

     The  undersigned  hereby  elects  to  convert  the  aggregate   outstanding
     Principal  Amount (as  defined in the  Debenture)  indicated  below of this
     Debenture  into  shares of Common  Stock,  $0.0001 par value per share (the
     "Common Stock"),  of FONAR  CORPORATION.  (the "Company")  according to the
     conditions hereof, as of the date written below. If shares are to be issued
     in the name of a person other than  undersigned,  the undersigned  will pay
     all transfer taxes payable with respect thereto and is delivering  herewith
     such  certificates  and opinions as reasonably  requested by the Company in
     accordance  therewith.  No fee  will  be  charged  to the  holder  for  any
     conversion,  except  for  such  transfer  taxes,  if any.  The  undersigned
     represents  as of  the  date  hereof  that,  after  giving  effect  to  the
     conversion  of this  Debenture  pursuant  to this  Conversion  Notice,  the
     undersigned will not exceed the "Restricted Ownership Percentage" contained
     in Section  3(i)(A) of this  Debenture and will remain in  compliance  with
     Section 3(i)(B) of this Debenture.

Conversion information:
                       Date to Effect Conversion

                       Aggregate Principal Amount of Debenture Being Converted

                       Number of Shares of Common Stock to be Issued

                       Applicable Conversion Price

                                       Signature

                                       Name

                                       Address

<PAGE>

                                    EXHIBIT B

                        FORM OF REPAYMENT ELECTION NOTICE

To:      [Holder at Holder's Address]

     Pursuant to Section 1(b) of Debenture  No. of FONAR  CORPORATION  issued to
you (or your  assignor or  predecessor-in-interest)  on May --, 2001,  we hereby
notify you that we are  irrevocably  electing to repay the  outstanding  Monthly
Amount (as defined in the  Debenture)  due on the Repayment  Date (as defined in
the Debenture) which occurs on ---------, 200- (check one):

     In full in cash on such Repayment Date.

     In full in shares of the  Company's  Common  Stock within three (3) Trading
Days following such Repayment Date.

                                           FONAR CORPORATION

                                        By:
                                           ---------------------
                                      Name:
                                           ---------------------
                                     Title:
                                           ---------------------
</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-4
<SEQUENCE>3
<FILENAME>ex042.txt
<TEXT>

     Exhibit 4.2

     THIS SECURITY HAS NOT BEEN REGISTERED  UNDER THE SECURITIES ACT OF 1933, AS
AMENDED  (THE  "ACT"),  OR UNDER ANY STATE  SECURITIES  LAWS,  IN RELIANCE  UPON
EXEMPTIONS FROM REGISTRATION FOR NON-PUBLIC OFFERINGS.  THIS SECURITY MAY NOT BE
SOLD OR TRANSFERRED  UNLESS IT IS REGISTERED  UNDER THE ACT AND UNDER APPLICABLE
STATE  SECURITIES  LAWS OR UNLESS  THE  ISSUER  RECEIVES  AN  OPINION OF COUNSEL
REASONABLY SATISFACTORY TO IT THAT AN EXEMPTION FROM REGISTRATION IS AVAILABLE.

Issuance Date: May 24, 2001

                                FONAR CORPORATION

                                PURCHASE WARRANT

                    WARRANT ("WARRANT") TO PURCHASE SHARES OF
                    COMMON STOCK, $0.0001 PAR VALUE PER SHARE

     This is to certify  that,  for VALUE  RECEIVED,  THE TAIL WIND  FUND,  LTD.
("Warrantholder"),  is entitled to purchase,  subject to the  provisions of this
Warrant,  from Fonar  Corporation,  a  corporation  organized  under the laws of
Delaware ("Company"),  at any time after the date of the issuance hereof but not
later than 5:00 P.M.,  Eastern  time,  on the fifth  (5th)  anniversary  of such
issuance date ("Expiration  Date"),  659,501 shares ("Warrant Shares") of Common
Stock,  $0.0001 par value ("Common Stock"), of the Company, at an exercise price
per  share  equal to $1.801  (the  exercise  price in  effect  from time to time
hereafter being herein called the "Warrant Price"). The number of Warrant Shares
purchasable upon exercise of this Warrant and the Warrant Price shall be subject
to adjustment from time to time as described herein.

     This  Warrant  has  been  issued  pursuant  to the  terms  of the  Purchase
Agreement  ("Purchase  Agreement") dated on or about the date hereof between the
Company  and the  Warrantholder.  Capitalized  terms used herein and not defined
shall have the meaning specified in the Purchase Agreement.

Section 1.  Registration.  The Company shall maintain books for the transfer and
     registration of the Warrant.  Upon the initial issuance of the Warrant, the
     Company   shall  issue  and  register  the  Warrant  in  the  name  of  the
     Warrantholder.

Section 2. Transfers.  As provided herein,  this Warrant may be transferred only
     pursuant to a  registration  statement  filed under the  Securities  Act of
     1933,  as amended  ("Securities  Act") or an  exemption  from  registration
     thereunder.  Subject to such restrictions,  the Company shall transfer this
     Warrant from time to time,  upon the books to be  maintained by the Company
     for that purpose,  upon surrender hereof for transfer  properly endorsed or
     accompanied  by  appropriate   instructions  for  transfer  upon  any  such
     transfer,  and a new  Warrant  shall be  issued to the  transferee  and the
     surrendered Warrant shall be canceled by the Company.

Section 3.

(a)  Exercise of Warrant.  Subject to the provisions  hereof,  the Warrantholder
     may exercise  this Warrant in whole or in part at any time and from time to
     time after the date of  issuance  hereof  upon  surrender  of the  Warrant,
     together with delivery of the duly executed  Warrant exercise form attached
     hereto (the  "Exercise  Agreement")  (which may be by fax),  to the Company
     during normal business hours on any business day at the Company's principal
     executive  offices (or such other office or agency of the Company as it may
     designate by notice to the holder hereof),  and upon payment to the Company
     in cash,  by certified or official  bank check or by wire  transfer for the
     account  of the  Company  of the  Warrant  Price  for  the  Warrant  Shares
     specified in the Exercise Agreement.  The Warrant Shares so purchased shall
     be deemed to be issued to the holder hereof or such holder's  designee,  as
     the record owner of such shares, as of the close of business on the date on
     which the completed  Exercise  Agreement  shall have been  delivered to the
     Company (or such later date as may be specified in the Exercise Agreement).
     Certificates  for  the  Warrant  Shares  so  purchased,   representing  the
     aggregate  number of shares specified in the Exercise  Agreement,  shall be
     delivered to the holder  hereof  within a reasonable  time,  not  exceeding
     three (3) business  days,  after this Warrant shall have been so exercised.
     The  certificates  so delivered  shall be in such  denominations  as may be
     requested by the holder  hereof and shall be registered in the name of such
     holder or such other name as shall be  designated  by such holder.  If this
     Warrant shall have been exercised only in part,  then,  unless this Warrant
     has expired,  the Company  shall  (subject to Section  3(b) below),  at its
     expense,  at the time of  delivery  of such  certificates,  deliver  to the
     holder a new  Warrant  representing  the number of shares  with  respect to
     which this Warrant shall not then have been exercised.

(b)  Book-Entry. Notwithstanding anything to the contrary set forth herein, upon
     exercise  of any  portion  of this  Warrant  in  accordance  with the terms
     hereof,  the  Warrantholder  shall not be required to physically  surrender
     this  Warrant to the  Company  unless such  holder is  purchasing  the full
     amount of Warrant Shares represented by this Warrant. The Warrantholder and
     the Company shall maintain  records showing the number of Warrant Shares so
     purchased hereunder and the dates of such purchases or shall use such other
     method, reasonably satisfactory to the Warrantholder and the Company, so as
     not to require physical  surrender of this Warrant upon each such exercise.
     The Warrantholder and any assignee,  by acceptance of this Warrant or a new
     Warrant,  acknowledge  and agree that, by reason of the  provisions of this
     paragraph, following exercise of any portion of this Warrant, the number of
     Warrant  Shares which may be purchased upon exercise of this Warrant may be
     less than the number of Warrant Shares set forth on the face hereof.

Section 4. Compliance with the Securities Act of 1933.  Neither this Warrant nor
     the Common Stock issued upon exercise  hereof nor any other security issued
     or issuable  upon exercise of this Warrant may be offered or sold except as
     provided in this Warrant and in conformity with the Securities Act of 1933,
     as amended, and then only against receipt of an agreement of such person to
     whom  such  offer of sale is made to  comply  with the  provisions  of this
     Section 4 with respect to any resale or other disposition of such security.
     The  Company  may cause  the  legend  set  forth on the first  page of this
     Warrant to be set forth on each  Warrant or similar  legend on any security
     issued or issuable upon  exercise of this Warrant until the Warrant  Shares
     have been registered for resale under the Registration  Rights Agreement or
     until  Rule 144 is  available,  unless  counsel  for the  Company is of the
     opinion as to any such security that such legend is unnecessary.

Section 5. Payment of Taxes.  The Company will pay any  documentary  stamp taxes
     attributable  to the initial  issuance of Warrant Shares  issuable upon the
     exercise of the Warrant;  provided,  however, that the Company shall not be
     required  to pay any tax or taxes  which may be  payable  in respect of any
     transfer  involved in the  issuance or  delivery  of any  certificates  for
     Warrant Shares in a name other than that of the  registered  holder of this
     Warrant in respect of which such  shares are  issued.  The holder  shall be
     responsible  for income  taxes due under  federal or state law, if any such
     tax is due.

Section 6.  Mutilated  or  Missing  Warrants.  In case  this  Warrant  shall  be
     mutilated,  lost, stolen, or destroyed, the Company shall issue in exchange
     and substitution of and upon cancellation of the mutilated  Warrant,  or in
     lieu of and substitution for the Warrant lost,  stolen or destroyed,  a new
     Warrant  of like  tenor and for the  purchase  of a like  number of Warrant
     Shares,  but only upon receipt of evidence  reasonably  satisfactory to the
     Company of such loss, theft or destruction of the Warrant, and with respect
     to a lost, stolen or destroyed Warrant,  reasonable  indemnity or bond with
     respect thereto, if reasonably requested by the Company.

Section 7.  Reservation  of Common  Stock.  The Company  hereby  represents  and
     warrants  that  there  have been  reserved,  and the  Company  shall at all
     applicable  times keep reserved,  out of the authorized and unissued Common
     Stock,  a number of shares  sufficient  to provide for the  exercise of the
     rights of purchase  represented  by the Warrant in full (without  regard to
     any  restrictions  on  beneficial  ownership  contained  herein),  and  the
     transfer agent for the Common Stock,  including every  subsequent  transfer
     agent for the Common Stock or other shares of the  Company's  capital stock
     issuable  upon  the  exercise  of any of the  right of  purchase  aforesaid
     ("Transfer  Agent"),  shall be  irrevocably  authorized and directed at all
     times to reserve such number of  authorized  and unissued  shares of Common
     Stock as shall be requisite for such purpose.  The Company  agrees that all
     Warrant  Shares issued upon exercise of the Warrant in accordance  with its
     terms  shall  be,  at the time of  delivery  of the  certificates  for such
     Warrant  Shares,   duly   authorized,   validly  issued,   fully  paid  and
     non-assessable shares of Common Stock of the Company. The Company will keep
     a  conformed  copy of this  Warrant on file with its  Transfer  Agent.  The
     Company will supply from time to time the Transfer Agent with duly executed
     stock certificates required to honor the outstanding Warrant.

Section 8. Warrant Price.  The Warrant Price,  subject to adjustment as provided
     in Section 9, shall,  if payment is made in cash or by certified  check, be
     payable in lawful money of the United States of America.

Section 9.  Adjustments.  Subject and pursuant to the provisions of this Section
     9, the Warrant Price and number of Warrant  Shares  subject to this Warrant
     shall be subject to adjustment from time to time as set forth hereinafter.

(a)  If the Company or any of its subsidiaries shall at any time or from time to
     time  while  the  Warrant  is  outstanding,   pay  a  dividend  or  make  a
     distribution on its capital stock in shares of Common Stock,  subdivide its
     outstanding  shares of  Common  Stock  into a  greater  number of shares or
     combine its outstanding  shares into a smaller number of shares or issue by
     reclassification  of its  outstanding  shares of Common Stock any shares of
     its capital stock (including any such reclassification in connection with a
     consolidation   or  merger  in  which  the   Company   is  the   continuing
     corporation),  then the number of Warrant Shares  purchasable upon exercise
     of the  Warrant and the Warrant  Price in effect  immediately  prior to the
     date upon which such change  shall become  effective,  shall be adjusted by
     the Company so that the  Warrantholder  thereafter  exercising  the Warrant
     shall be entitled to receive the number of shares of Common  Stock or other
     capital  stock which the  Warrantholder  would have received if the Warrant
     had been exercised  immediately  prior to such event. Such adjustment shall
     be made successively whenever any event listed above shall occur.

(b)  If any capital reorganization, reclassification of the capital stock of the
     Company,  consolidation or merger of the Company with another  corporation,
     or sale,  transfer or other  disposition of all or substantially all of the
     Company's  assets to another  corporation  shall be  effected,  then,  as a
     condition of such reorganization, reclassification,  consolidation, merger,
     sale, transfer or other disposition, lawful and adequate provision shall be
     made whereby each Warrantholder shall thereafter have the right to purchase
     and  receive  upon the  basis  and upon the  terms  and  conditions  herein
     specified  and  in  lieu  of the  Warrant  Shares  immediately  theretofore
     issuable upon exercise of the Warrant, such shares of stock,  securities or
     assets  as would  have been  issuable  or  payable  with  respect  to or in
     exchange  for a number of  Warrant  Shares  equal to the  number of Warrant
     Shares immediately  theretofore  issuable upon exercise of the Warrant, had
     such  reorganization,   reclassification,   consolidation,   merger,  sale,
     transfer  or other  disposition  not  taken  place,  and in any  such  case
     appropriate  provision  shall  be  made  with  respect  to the  rights  and
     interests  of each  Warrantholder  to the end  that the  provisions  hereof
     (including,  without  limitations,  provision for adjustment of the Warrant
     Price) shall  thereafter  be  applicable,  as nearly  equivalent  as may be
     practicable  in relation to any shares of stock,  securities  or properties
     thereafter  deliverable  upon the exercise  hereof.  The Company  shall not
     effect any such consolidation,  merger, sale, transfer or other disposition
     unless  prior  to or  simultaneously  with  the  consummation  thereof  the
     successor  corporation  (if other  than the  Company)  resulting  from such
     consolidation  or  merger,  or  the  corporation  purchasing  or  otherwise
     acquiring  such assets or other  appropriate  corporation  or entity  shall
     assume, by written  instrument  executed and delivered to the Company,  the
     obligation  to deliver to the holder of the  Warrant  such shares of stock,
     securities or assets as, in accordance with the foregoing provisions,  such
     holder may be  entitled to purchase  and the other  obligations  under this
     Warrant.  The  provisions of this  paragraph (b) shall  similarly  apply to
     successive  reorganizations,  reclassifications,  consolidations,  mergers,
     sales, transfers or other dispositions.

(c)  In  case  the  Company  shall  fix  a  record  date  for  the  making  of a
     distribution   to  all  holders  of  Common  Stock   (including   any  such
     distribution made in connection with a consolidation or merger in which the
     Company is the  continuing  corporation)  of evidences of  indebtedness  or
     assets or  subscription  rights or  warrants,  the  Warrant  Price to be in
     effect  after such  record  date shall be  determined  by  multiplying  the
     Warrant  Price  in  effect  immediately  prior  to  such  record  date by a
     fraction,  the  numerator  of which shall be the total  number of shares of
     Common Stock  outstanding  multiplied by the Fair Market Value per share of
     Common Stock (as defined below), less the fair market value (on a per share
     basis) (as determined by the Company's Board of Directors in good faith) of
     said  assets  or  evidences  of  indebtedness  so  distributed,  or of such
     subscription rights or warrants,  and the denominator of which shall be the
     total  number  of shares of Common  Stock  outstanding  multiplied  by such
     current Fair Market Value per share of Common Stock.  Such adjustment shall
     be made  successively  whenever  such a record date is fixed.  "Fair Market
     Value" of the Common  Stock shall be the closing  price of the Common Stock
     as  reported  by the Nasdaq  Stock  Market (or other  exchange or market on
     which  the  Common  Stock  is  principally   traded)  on  the  trading  day
     immediately preceding the date on which such value is being determined.

(d)  For the  duration  of the  term  of this  Warrant,  if the  Company  or any
     subsidiary  shall at any time or from time to time issue or sell securities
     (other than  issuances of  Underlying  Shares  pursuant to  Debentures  and
     Warrants  under the Purchase  Agreement,  shares or options issued or which
     may be issued pursuant to the Company's current employee or director option
     plans or  shares  issued  upon  exercise  of  options,  warrants  or rights
     outstanding  on the date of the  Agreement  and listed in the Company's SEC
     Filings  and  other  than  issuances   described  in  and  permitted  under
     7.2(b)(iii) of the Purchase  Agreement) at an effective a Per Share Selling
     Price (as defined below) which is less than:

(A)  the  closing  sale  price per share of the  Common  Stock on the  Principal
     Market on the Trading Day next preceding such issue or sale or, in the case
     of  issuances  to  holders  of its  Common  Stock,  the date  fixed for the
     determination of stockholders entitled to receive such warrants, rights, or
     options ("Fair Market Price"), then in each such case, the Warrant Price in
     effect  immediately  prior  to  such  issue  or  sale or  record  date,  as
     applicable, shall be automatically reduced effective concurrently with such
     issue or sale to an amount determined by multiplying the Warrant Price then
     in effect by a fraction, (x) the numerator of which shall be the sum of (1)
     the number of shares of Common Stock outstanding  immediately prior to such
     issue or sale,  plus (2) the  number of shares  of Common  Stock  which the
     aggregate  consideration received by the Company for such additional shares
     would purchase at such Fair Market Price,  and (y) the denominator of which
     shall be the number of shares of Common  Stock of the  Company  outstanding
     immediately after such issue or sale; or

(B)  the Warrant  Price,  then in each such case,  the  Warrant  Price in effect
     immediately  prior to such  issue or sale or record  date,  as  applicable,
     shall be automatically  reduced  effective  concurrently with such issue or
     sale to an amount equal to such Per Share Selling Price.

     The foregoing  provision of this subsection shall not apply to issuances or
sales  pursuant to the  Company's  duly adopted  employee or director  bona fide
options plans and/or  compensation  arrangements.  For purposes of the preceding
paragraph,  in the event that the effective purchase price is less than both the
Fair Market  Value and the Warrant  Price,  then the  calculation  method  which
yields the greatest downward adjustment in the Warrant Price shall be used.

     For the purposes of the foregoing  adjustment,  in the case of the issuance
of any convertible  securities,  warrants,  options or other rights to subscribe
for or to  purchase  or  exchange  for,  shares  of Common  Stock  ("Convertible
Securities"),  the  maximum  number  of shares of  Common  Stock  issuable  upon
exercise,  exchange or conversion of such Convertible Securities shall be deemed
to be outstanding,  provided that no further  adjustment  shall be made upon the
actual  issuance of Common Stock upon  exercise,  exchange or conversion of such
Convertible Securities.

     For the  purposes of this Section  9(d),  "Per Share  Selling  Price" shall
include  the  amount  actually  paid by third  parties  for each share of Common
Stock.  In the  event a fee is paid  by the  Company  in  connection  with  such
transaction,  any such fee shall be deducted  from the selling price pro rata to
all shares sold in the  transaction  to arrive at the Per Share Selling Price. A
sale of shares of Common  Stock  shall  include  the sale or issuance of rights,
options,  warrants or convertible,  exchangeable or exercisable securities under
which the Company is or may become  obligated to issue  shares of Common  Stock,
and in such  circumstances  the Per  Share  Selling  Price of the  Common  Stock
covered  thereby shall also include the exercise,  exchange or conversion  price
thereof (in addition to the consideration received by the Company upon such sale
or issuance less the fee amount as provided above). In case of any such security
issued in a  Variable  Rate  Transaction  or an MFN  Transaction,  the Per Share
Selling Price shall be deemed to be the lowest  conversion or exercise  price at
which such securities are converted or exercised or might have been converted or
exercised in the case of a Variable Rate  Transaction,  or the lowest adjustment
price in the case of an MFN Transaction,  over the life of such  securities.  If
shares are issued for a  consideration  other than cash,  the Per Share  Selling
Price shall be the fair value of such  consideration as determined in good faith
by independent  certified public accountants  mutually acceptable to the Company
and the Purchaser.

(e)  An adjustment shall become effective  immediately  after the record date in
     the  case of each  dividend  or  distribution  and  immediately  after  the
     effective date of each other event which requires an adjustment.

(f)  In the event that, as a result of an adjustment made pursuant to Section 9,
     the holder of this Warrant  shall become  entitled to receive any shares of
     capital stock of the Company other than shares of Common Stock,  the number
     of such other shares so  receivable  upon exercise of this Warrant shall be
     subject thereafter to adjustment from time to time in a manner and on terms
     as nearly  equivalent as practicable to the provisions  with respect to the
     Warrant Shares contained in this Warrant.

(g)  In the event of any  adjustment  in the number of Warrant  Shares  issuable
     hereunder   upon   exercise,   the  Warrant   Price   shall  be   inversely
     proportionately  increased or decreased,  as the case may be, such that the
     aggregate  purchase  price for Warrant  Shares  upon full  exercise of this
     Warrant shall remain the same. Similarly, in the event of any adjustment in
     the Warrant  Price,  the number of Warrant Shares  issuable  hereunder upon
     exercise shall be inversely  proportionately increased or decreased, as the
     case may be, such that the aggregate purchase price for Warrant Shares upon
     full exercise of this Warrant shall remain the same.

Section 10.  Fractional  Interest.  The  Company  shall not be required to issue
     fractions  of Warrant  Shares  upon the  exercise  of the  Warrant.  If any
     fraction  of a Warrant  Share  would,  except  for the  provisions  of this
     Section,  be  issuable  upon the  exercise  of the  Warrant  (or  specified
     portions thereof),  the Company shall round such calculation to the nearest
     whole number and disregard the fraction.

Section 11.  Benefits.  Nothing in this  Warrant  shall be construed to give any
     person,  firm or corporation (other than the Company and the Warrantholder)
     any legal or equitable  right,  remedy or claim,  it being agreed that this
     Warrant shall be for the sole and exclusive  benefit of the Company and the
     Warrantholder.

Section 12. Notices to Warrantholder.  Upon the happening of any event requiring
     an  adjustment  of the Warrant  Price,  the Company  shall  forthwith  give
     written notice thereof to the Warrantholder at the address appearing in the
     records of the Company, stating the adjusted Warrant Price and the adjusted
     number of Warrant  Shares  resulting  from such event and setting  forth in
     reasonable  detail the method of calculation  and the facts upon which such
     calculation  is based.  In the event of a dispute  with respect to any such
     calculation,  the certificate of the Company's independent certified public
     accountants  shall  be  conclusive  evidence  of  the  correctness  of  any
     computation made, absent manifest error. Failure to give such notice to the
     Warrantholder  or any  defect  therein  shall not affect  the  legality  or
     validity of the subject  adjustment.  At the Warrantholder's  request,  the
     Company shall deliver to the  Warrantholder as of a requested date a notice
     specifying  the Warrant  Price and the number of Warrant  Shares into which
     this Warrant is exercisable as of such date.

Section 13.  Identity of Transfer  Agent.  The  initial  Transfer  Agent for the
     Common Stock is:

                  Computershare (f/k/a Securities Transfer Trust, Inc.)
                  12039 W. Alameda Parkway
                  Lakewood, Colorado 80228

     Forthwith upon the  appointment  of any  subsequent  transfer agent for the
Common Stock or other shares of the Company's  capital  stock  issuable upon the
exercise of the rights of purchase  represented by the Warrant, the Company will
fax to the  Warrantholder a statement setting forth the name and address of such
transfer agent.

Section 14.  Notices.  Any  notice  pursuant  hereto  to be given or made by the
     Warrantholder  to or on the Company shall be sufficiently  given or made if
     delivered  personally  or by  facsimile  or if sent  by an  internationally
     recognized courier, addressed as follows:

                  Fonar Corporation
                  110 Marcus Drive
                  Melville, New York 11747
                  Telephone:        (631) 694-2929
                  Fax:              (631) 249-3734

     or such other  address as the  Company  may specify in writing by notice to
     the  Warrantholder  complying as to delivery with the terms of this Section
     14.

          Any notice pursuant hereto to be given or made by the Company to or on
     the  Warrantholder  shall  be  sufficiently  given  or made  if  personally
     delivered or if sent by an  internationally  recognized  courier service by
     overnight or two-day service,  to the address set forth on the books of the
     Company or, as to each of the Company and the Warrantholder,  at such other
     address as shall be designated by such party by written notice to the other
     party complying as to delivery with the terms of this Section 14.

          All  such   notices,   requests,   demands,   directions   and   other
     communications shall, when sent by courier, be effective two (2) days after
     delivery to such courier as provided and addressed as aforesaid.  All faxes
     shall be effective upon receipt.

Section 15. Registration  Rights. The initial holder of this Warrant is entitled
     to the  benefit of certain  registration  rights in respect of the  Warrant
     Shares as provided in the Registration Rights Agreement.

Section 16.  Successors.  All the covenants and provisions  hereof by or for the
     benefit of the  Warrantholder  shall  bind and inure to the  benefit of its
     respective successors and assigns hereunder.

Section 17.  Governing  Law.  This Warrant shall be deemed to be a contract made
     under  the laws of the  State of New  York,  without  giving  effect to its
     conflict of law  principles,  and for all  purposes  shall be  construed in
     accordance with the laws of said State.

Section 18. 9.9% and 19.9% Limitations.

(a)  Notwithstanding  anything to the contrary  contained herein,  the number of
     shares of Common  Stock that may be acquired  by the holder  upon  exercise
     pursuant to the terms hereof shall not exceed a number that,  when added to
     the total  number of shares of Common Stock  deemed  beneficially  owned by
     such  holder  at such  time  (other  than by  virtue  of the  ownership  of
     securities or rights to acquire  securities  (including the Warrant Shares)
     that  have  limitations  on the  holder's  right to  convert,  exercise  or
     purchase  similar to the limitation  set forth  herein),  together with all
     shares of Common Stock deemed  beneficially  owned (other than by virtue of
     the  ownership  of  securities  or rights to acquire  securities  that have
     limitations  on the right to convert,  exercise or purchase  similar to the
     limitation set forth herein) by the  Warrantholder's  "affiliates"  at such
     time (as defined in Rule 144 of the Act) ("Aggregation Parties") that would
     be  aggregated  for purposes of  determining  whether a group under Section
     13(d) of the  Securities  Exchange Act of 1934, as amended,  exists,  would
     exceed 9.9% of the total issued and outstanding  shares of the Common Stock
     (the "Restricted Ownership  Percentage").  Each holder shall have the right
     (x) at any time and from time to time to reduce  its  Restricted  Ownership
     Percentage  immediately  upon  notice to the  Company  and (y)  (subject to
     waiver)  at any time and from  time to time,  to  increase  its  Restricted
     Ownership  Percentage  immediately  in the  event  of the  announcement  as
     pending or planned, of a change of control  transaction  (including without
     limitation a  transaction  that would result in a transfer of more than 50%
     of the Company's voting power or equity,  or a sale of all or substantially
     all of the Company's assets, or a transaction that would result in a person
     or  "group"  being  deemed  the  beneficial  owner  of 50% or  more  of the
     Company's voting power or equity).

(b)  The holder covenants at all times on each day (each such day being referred
     to as a "Covenant Day") as follows: during the balance of such Covenant Day
     and the  succeeding  sixty-one  (61) days (the balance of such Covenant Day
     and the succeeding 61 days being referred to as the "Covenant Period") such
     holder  will not  acquire  shares of  Common  Stock  pursuant  to any right
     (including  exercise  of  Warrants)  existing  at the  commencement  of the
     Covenant  Period to the  extent the  number of shares so  acquired  by such
     holder  and its  Aggregation  Parties  (ignoring  all  dispositions)  would
     exceed:

(x)  the Restricted Ownership Percentage of the total number of shares of Common
     Stock outstanding at the commencement of the Covenant Period, minus

(y)  the number of shares of Common Stock  actually owned by such holder and its
     Aggregation Parties at the commencement of the Covenant Period.

     A new and independent  covenant will be deemed to be given by the holder as
of each moment of each  Covenant Day. No covenant  will  terminate,  diminish or
modify any other covenant.  The holder agrees to comply with each such covenant.
The  Warrantholder  may therefore  from time to time be subject to multiple such
covenants,  each one having been made at a  different  Covenant  Time,  and some
possibly being more restrictive than others.  The Warrantholder must comply with
all such covenants  then in effect.  This Section 18 controls in the case of any
conflict  with any other  provision of the Purchase  Agreement or any  agreement
entered into in connection therewith.

     The  Company's  obligation  to issue  Common  Stock which would exceed such
limits referred to in this Section 18 shall be suspended to the extent necessary
until such time,  if any, as shares of Common Stock may be issued in  compliance
with such restrictions.

(c)  Notwithstanding   anything   contained   herein,  in  the  event  that  the
     Warrantholder  has timely exercised this Warrant and the issuance of all or
     a portion of the  Warrant  Shares to be issued  pursuant  to such  exercise
     would constitute a breach of the Company's  obligations  under the rules or
     regulations of the Nasdaq Stock Market as they apply to the Company, or any
     other principal  securities  exchange or market  ("Principal  Market") upon
     which the Common Stock is or becomes traded (the "Cap  Regulations"),  then
     the Company shall not be obligated to issue any such Warrant  Shares to the
     extent such shares are in excess of the maximum  permissible  amount  under
     such Cap Regulations ("Excess Shares").  Within five (5) days following any
     occurrence  of  Excess  Shares,  the  Company  shall  promptly  pay  to the
     Purchaser,  in lieu of the Purchaser's right to receive such Excess Shares,
     an amount equal to 120% of the difference  between (a) the number of Excess
     Shares  multiplied  by the closing  sale price per share of Common Stock on
     the Principal  Market on the trading day immediately  preceding the date of
     the exercise of this Warrant, and (b) the aggregate exercise price for such
     Excess  Shares.  Only  shares  of Common  Stock  acquired  pursuant  to the
     Purchase Agreement (including Underlying Shares and Warrant Shares) will be
     included in determining  whether the limitation  contained  herein would be
     exceeded for purposes of this Section 18(c).

Section 19.  Replacement  Warrants.  The  Company  agrees  that  within ten (10)
     business days after any request from time to time of the Warrantholder,  it
     shall deliver to such holder a new Warrant in  substitution of this Warrant
     which is identical in all respects except that the then Warrant Price shall
     be  appropriately  specified in the Warrant,  and the Warrant shall specify
     the fixed  number  of  Warrant  Shares  into  which  this  Warrant  is then
     exercisable. Such changes are intended not as amendments to the Warrant but
     only as  clarification of the foregoing  numbers for convenience  purposes,
     and such changes shall not affect any provisions concerning  adjustments to
     the Warrant Price or number of Warrant Shares contained herein.

Section  20.  Absolute   Obligation  to  Issue  Warrant  Shares.  The  Company's
     obligations  to issue and deliver  Warrant  Shares in  accordance  with the
     terms hereof are absolute and unconditional,  irrespective of any action or
     inaction by the holder  hereof to enforce  the same,  any waiver or consent
     with respect to any provision hereof,  the recovery of any judgment against
     any Person or any action to enforce the same, or any setoff,  counterclaim,
     recoupment,  limitation or termination,  or any breach or alleged breach by
     the holder  hereof or any other Person of any  obligation to the Company or
     any  violation  or  alleged  violation  of law by the  holder  or any other
     Person,  and irrespective of any other  circumstance  which might otherwise
     limit such  obligation  of the Company to the holder  hereof in  connection
     with the issuance of Warrant Shares.  The Company will at no time close its
     shareholder books or records in any manner which interferes with the timely
     exercise of this Warrant.

Section 21.  Assignment,  Etc.  The  Warrantholder  may assign or transfer  this
     Warrant  to any  transferee  only with the  prior  written  consent  of the
     Company,  which may not be unreasonably withheld or delayed,  provided that
     (i) the  Warrantholder  may assign or transfer  this Warrant to any of such
     Warrantholder's affiliates without the consent of the Company and (ii) upon
     any Event of Default (as defined in the Debentures),  the Warrantholder may
     assign or transfer  this Warrant  without the consent of the  Company.  The
     Warrantholder  shall notify the Company of any such  assignment or transfer
     promptly. This Warrant shall be binding upon the Company and its successors
     and shall inure to the benefit of the  Warrantholder and its successors and
     permitted assigns.


     IN WITNESS WHEREOF, the Company has caused this Warrant to be duly executed
as of the date first written above.

<PAGE>


                            FONAR CORPORATION
                     By:    /s/
                            ------------------------
                     Name:
                            ------------------------
                     Title:
                            ------------------------

Attest:

      Sign: /s/
           ------------------------

Print Name:
           ------------------------


                                FONAR CORPORATION
                              WARRANT EXERCISE FORM
Fonar Corporation
110 Marcus Drive
Melville, New York 11747
Telephone:        (631) 694-2929
Fax:              (631) 249-3734
Attention:        President

     This  undersigned  hereby  irrevocably  elects  to  exercise  the  right of
purchase  represented  by the within  Warrant  ("Warrant")  for, and to purchase
thereunder  ----------  shares of Common Stock* ("Warrant  Shares") provided for
therein,  and requests  that  certificates  for the Warrant  Shares be issued as
follows:

                           -------------------------------
                           Name
                           -------------------------------
                           Address
                           ===============================

and,  if the  number  of  Warrant  Shares  shall not be all the  Warrant  Shares
purchasable upon exercise of the Warrant,  that a new Warrant for the balance of
the Warrant Shares.

     The  undersigned  hereby  represents  that  all  the   representations  and
warranties  contained  in Sections  5.3 through 5.8 of the  Securities  Purchase
Agreement  dated on or about May ---,  2001 between  Fonar  Corporation  and the
Purchasers named therein are true and correct in all material respects as of the
date hereof and as if the undersigned  were the Purchaser stated therein (if the
undersigned is not such Purchaser).

     In lieu of delivering physical certificates representing the Warrant Shares
purchasable upon exercise of this Warrant, provided the Company's transfer agent
is  participating  in  the  Depository  Trust  Company  ("DTC")  Fast  Automated
Securities  Transfer ("FAST") program,  upon request of the Holder,  the Company
shall  use its  best  efforts  to cause  its  transfer  agent to  electronically
transmit  the  Warrant  Shares  issuable  upon  conversion  or  exercise  to the
undersigned, by crediting the account of the undersigned's prime broker with DTC
through its Deposit Withdrawal Agent Commission ("DWAC") system.

Dated:
      ------------------------

                                          Signature:
                                                    ---------------------------

                                Name (please print):
                                                    ---------------------------

                                            Address:
                                                    ---------------------------

*    NOTE:  If exercise of the Warrant is made by  surrender  of the Warrant and
     the number of shares  indicated  exceeds  the  maximum  number of shares to
     which a holder is entitled,  the Company will issue such maximum  number of
     shares  purchasable upon exercise of the Warrant  registered in the name of
     the  undersigned  Warrantholder  or the  undersigned's  assignee  as  below
     indicated and deliver same to the address stated below.
</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-4
<SEQUENCE>4
<FILENAME>ex043.txt
<TEXT>

         Exhibit 4.3

     THIS SECURITY HAS NOT BEEN REGISTERED  UNDER THE SECURITIES ACT OF 1933, AS
AMENDED  (THE  "ACT"),  OR UNDER ANY STATE  SECURITIES  LAWS,  IN RELIANCE  UPON
EXEMPTIONS FROM REGISTRATION FOR NON-PUBLIC OFFERINGS.  THIS SECURITY MAY NOT BE
SOLD OR TRANSFERRED  UNLESS IT IS REGISTERED  UNDER THE ACT AND UNDER APPLICABLE
STATE SECURITIES LAWS OR UNLESS FONAR RECEIVES AN OPINION OF COUNSEL  REASONABLY
SATISFACTORY  TO IT THAT AN EXEMPTION  FROM  REGISTRATION  IS AVAILABLE  (UNLESS
WAIVED).

     VOID AFTER 5:00 P.M. EASTERN TIME ON MAY 24, 2004 ("EXPIRATION DATE").

                                FONAR CORPORATION

                                CALLABLE WARRANT

                    WARRANT ("WARRANT") TO PURCHASE SHARES OF
                    COMMON STOCK, $0.0001 PAR VALUE PER SHARE

     This is to certify  that,  for VALUE  RECEIVED,  The Tail Wind  Fund,  Ltd.
("Warrantholder"),  is entitled to purchase,  subject to the  provisions of this
Warrant,  from Fonar  Corporation,  a  corporation  organized  under the laws of
Delaware ("Company"),  at any time after the issuance hereof, but not later than
5:00 P.M.,  Eastern time, on the third (3rd)  anniversary  of such issuance date
("Expiration  Date"),  2,000,000  shares  ("Warrant  Shares")  of Common  Stock,
$0.0001 par value  ("Common  Stock"),  of the Company,  at an exercise price per
share  equal  to the  average  closing  bid  price  of the  Common  Stock on the
Principal Market for the full calendar month  immediately  preceding the date of
exercise,  provided that such exercise  price shall be no less than $2.00 and no
more than $6.00 (as such figures,  shall be appropriately and equitably adjusted
as provided  herein) (the exercise  price in effect from time to time  hereafter
being  herein  called  the  "Warrant  Price").  The  number  of  Warrant  Shares
purchasable upon exercise of this Warrant and the Warrant Price shall be subject
to adjustment from time to time as described herein.

     This  Warrant  has  been  issued  pursuant  to the  terms  of the  Purchase
Agreement  ("Purchase  Agreement") dated on or about the date hereof between the
Company  and the  Warrantholder.  Capitalized  terms used herein and not defined
shall have the meaning specified in the Purchase Agreement.

Section 1.  Registration.  The Company shall maintain books for the transfer and
     registration of the Warrant.  Upon the initial issuance of the Warrant, the
     Company   shall  issue  and  register  the  Warrant  in  the  name  of  the
     Warrantholder.

Section 2. Transfers.  As provided herein,  this Warrant may be transferred only
     pursuant to a  registration  statement  filed under the  Securities  Act of
     1933,  as amended  ("Securities  Act") or an  exemption  from  registration
     thereunder.  Subject to such restrictions,  the Company shall transfer this
     Warrant from time to time,  upon the books to be  maintained by the Company
     for that purpose,  upon surrender thereof for transfer properly endorsed or
     accompanied  by  appropriate   instructions  for  transfer  upon  any  such
     transfer,  and a new  Warrant  shall be  issued to the  transferee  and the
     surrendered Warrant shall be canceled by the Company.

Section 3.

(a)  Exercise of Warrant.  Subject to the provisions  hereof,  the Warrantholder
     may exercise this Warrant in whole or in part, at any time and from time to
     time after the issuance hereof,  upon delivery of the duly executed Warrant
     exercise form attached  hereto (the  "Exercise  Agreement")  to the Company
     during normal business hours on any business day at the Company's principal
     executive  offices (or such other office or agency of the Company as it may
     designate by notice to the holder hereof),  and upon payment to the Company
     in cash,  by certified or official  bank check or by wire  transfer for the
     account  of the  Company  of the  Warrant  Price  for  the  Warrant  Shares
     specified in the Exercise Agreement.  The Warrant Shares so purchased shall
     be deemed to be issued to the holder hereof or such holder's  designee,  as
     the record owner of such shares, as of the close of business on the date on
     which this  Warrant (or  evidence of loss,  theft or  destruction  thereof)
     shall have been surrendered,  the completed  Exercise  Agreement shall have
     been  delivered.   Certificates   for  the  Warrant  Shares  so  purchased,
     representing  the  aggregate  number of shares  specified  in the  Exercise
     Agreement,  shall be  delivered  to the holder  hereof  within a reasonable
     time, not exceeding three (3) business days,  after this Warrant shall have
     been  so  exercised.  The  certificates  so  delivered  shall  be  in  such
     denominations  as may be  requested  by the  holder  hereof  and  shall  be
     registered  in the  name of such  holder  or such  other  name as  shall be
     designated by such holder.  If this Warrant shall have been  exercised only
     in part, then,  unless this Warrant has expired,  the Company shall, at its
     expense,  at the time of  delivery  of such  certificates,  deliver  to the
     holder a new  Warrant  representing  the number of shares  with  respect to
     which this Warrant shall not then have been exercised.

     Book-Entry. Notwithstanding anything to the contrary set forth herein, upon
exercise or  redemption  of any portion of this Warrant in  accordance  with the
terms hereof,  the Warrantholder  shall not be required to physically  surrender
this Warrant to the Company  unless such holder is purchasing the full amount of
Warrant Shares  represented by this Warrant.  The  Warrantholder and the Company
shall  maintain  records  showing the number of Warrant  Shares so  purchased or
redeemed  hereunder  and the dates of such  purchases  or shall  use such  other
method,  reasonably satisfactory to the Warrantholder and the Company, so as not
to  require  physical  surrender  of this  Warrant  upon each such  exercise  or
redemption. The Warrantholder and any assignee, by acceptance of this Warrant or
a new Warrant,  acknowledge  and agree that, by reason of the provisions of this
paragraph,  following  exercise  of any portion of this  Warrant,  the number of
Warrant  Shares which may be purchased upon exercise of this Warrant may be less
than the number of Warrant Shares set forth on the face hereof.

(b)  Redemption of Warrant. Subject to the Purchase Agreement, in the event that
     the average closing bid price of the Company's Common Stock (as reported by
     the  Nasdaq  Stock  Market)  is  greater  than 115% of the then  applicable
     Warrant Price  hereunder for a five (5)  consecutive  trading day period in
     any  calendar  month  (i.e.,  June 1 to June 30,  July 1 to July 31,  etc.)
     ("Pre-Call  Period"),  the Company shall have the right, upon at least five
     (5) trading days' prior written  notice to the  Warrantholder  ("Redemption
     Notice"),  to redeem up to 200,000  shares  underlying  this  Warrant  (not
     previously  exercised),  at a  redemption  price  equal to $.01 per Warrant
     Share issuable  hereunder for the portion hereof being  redeemed,  provided
     that (1) the Company may not exercise such redemption  right more than once
     in any calendar  month,  and (2) the Company may reduce the then applicable
     Warrant Price to any lower Warrant Price  hereunder which was previously in
     effect hereunder, by delivering to the Warrantholder an irrevocable written
     notice  ("Reduction  Notice")  at least  five  (5)  days  prior to any such
     reduction.  Any such Reduction  Notice shall specify a reduction date which
     is on or prior to the twentieth day of such calendar  month (but at least 5
     days after such  notice) and shall  specify the new reduced  Warrant  Price
     hereunder.  For clarification purposes, (a) the Pre-Call Period (or the new
     Pre-Call Period if there was a prior redemption during such calendar month)
     shall commence as of the date of such reduction,  (b) the aggregate  number
     of shares  that may be  redeemed  in any  calendar  month  shall not exceed
     200,000 shares  regardless of any such reduction,  (c) any Warrant Price so
     reduced by the Company  shall remain at such reduced  Warrant Price for the
     remainder  of such  calendar  month for all purposes  hereunder,  including
     without limitation for purchases of shares of Common Stock hereunder by the
     Warrantholder  upon  exercise  hereof,  and (d) the  Company  may deliver a
     Redemption Notice following a Warrant Price reduction  hereunder only after
     the  applicable  Pre-Call  Period has expired with the average  closing bid
     price of the Company's Common Stock for such Pre-Call Period exceeding 115%
     of the new reduced Warrant Price.

     Any  redemption  hereunder  shall  occur  on  the  date  specified  in  the
Redemption Notice  ("Redemption  Date"),  provided that such Redemption Date may
not occur until at least five (5) trading days  following  the date on which the
Warrantholder received the Redemption Notice (the "Redemption Notice Date"). The
Company  may not  deliver  the  Redemption  Notice  unless and until the average
closing bid price of the Company's Common Stock (as reported by the Nasdaq Stock
Market) is greater than 115% of the applicable  Warrant Price (as may be reduced
hereunder) over a five (5) consecutive  trading day period  occurring in any one
calendar  month.  The period from the  Redemption  Notice Date to the Redemption
Date shall be referred to herein as the "Post-Call  Period".  The  Warrantholder
may exercise this Warrant, including any portion subject to a Redemption Notice,
at any time and from time to time during the period from the  Redemption  Notice
Date through the date on which the redemption price for such Warrants is paid by
the Company  (and  thereafter  if such  redemption  price is not paid),  and the
Company shall honor all tendered  Exercise  Agreements  during such period.  Any
Redemption  Notice  under this  Section  shall be  irrevocable.  If the  Company
intends (or is only  permitted) to redeem less than all of the then  outstanding
Warrants issued to Purchasers under the Purchase Agreement,  it shall do so on a
pro rata basis among such holders in accordance  with this  Section.  Failure by
the  Company  to redeem  this  Warrant  on a timely  basis  after  delivering  a
Redemption  Notice shall result in the Company being  prohibited from exercising
such right pursuant to this Section again.

     Notwithstanding  anything to the  contrary  herein,  the  Company  shall be
prohibited  from  exercising  its right to redeem this Warrant  pursuant to this
Section unless at all times during the Pre-Call Period and Post-Call  Period (i)
all the Warrant  Shares with respect to this Warrant are covered by an effective
registration  statement  under the Securities Act and a deliverable  prospectus,
(ii) the Warrant  Shares with  respect to this  Warrant are listed and traded on
the Nasdaq Stock Market, (iii) the Company is not in breach of any provisions of
this Warrant or the other Agreements,  and (iv) the average closing bid price of
the  Company's  Common Stock (as reported by the Nasdaq Stock Market) is greater
than 115% of the applicable Warrant Price (as may be reduced hereunder).

Section 4. Compliance with the Securities Act of 1933.  Neither this Warrant nor
     the Common Stock issued upon exercise  hereof nor any other security issued
     or issuable  upon exercise of this Warrant may be offered or sold except as
     provided in this  agreement and in conformity  with the  Securities  Act of
     1933,  as amended,  and then only  against  receipt of an agreement of such
     person to whom such offer of sale is made to comply with the  provisions of
     this  Section 4 with  respect  to any resale or other  disposition  of such
     security.  The  Company may cause the legend set forth on the first page of
     this  Warrant  to be set forth on each  Warrant  or  similar  legend on any
     security issued or issuable upon exercise of this Warrant until the Warrant
     Shares  have been  registered  for  resale  under the  Registration  Rights
     Agreement or until Rule 144 is available, unless counsel for the Company is
     of the opinion as to any such security that such legend is unnecessary.

Section 5. Payment of Taxes.  The Company will pay any  documentary  stamp taxes
     attributable  to the initial  issuance of Warrant Shares  issuable upon the
     exercise of the Warrant;  provided,  however, that the Company shall not be
     required  to pay any tax or taxes  which may be  payable  in respect of any
     transfer  involved in the  issuance or  delivery  of any  certificates  for
     Warrant Shares in a name other than that of the  registered  holder of this
     Warrant in respect of which such shares are issued,  and in such case,  the
     Company  shall not be  required  to issue or deliver  any  certificate  for
     Warrant Shares or any Warrant until the person requesting the same has paid
     to the Company the amount of such tax or has  established  to the Company's
     satisfaction  that such tax has been paid.  The holder shall be responsible
     for income taxes due under federal or state law, if any such tax is due.

Section 6.  Mutilated  or  Missing  Warrants.  In case  this  Warrant  shall  be
     mutilated,  lost, stolen, or destroyed, the Company shall issue in exchange
     and substitution of and upon cancellation of the mutilated  Warrant,  or in
     lieu of and substitution for the Warrant lost,  stolen or destroyed,  a new
     Warrant  of like  tenor and for the  purchase  of a like  number of Warrant
     Shares,  but only upon receipt of evidence  reasonably  satisfactory to the
     Company of such loss, theft or destruction of the Warrant, and with respect
     to a lost, stolen or destroyed Warrant,  reasonable  indemnity or bond with
     respect thereto, if requested by the Company.

Section 7.  Reservation  of Common  Stock.  The Company  hereby  represents  and
     warrants  that  there  have been  reserved,  and the  Company  shall at all
     applicable  times keep reserved,  out of the authorized and unissued Common
     Stock,  a number of shares  sufficient  to provide for the  exercise of the
     rights of purchase  represented by the Warrant,  and the transfer agent for
     the Common Stock ("Transfer  Agent"),  and every subsequent  transfer agent
     for the  Common  Stock or  other  shares  of the  Company's  capital  stock
     issuable upon the exercise of any of the right of purchase aforesaid, shall
     be irrevocably  authorized and directed at all times to reserve such number
     of authorized and unissued shares of Common Stock as shall be requisite for
     such  purpose.  The  Company  agrees that all  Warrant  Shares  issued upon
     exercise  of  the  Warrant  shall  be,  at  the  time  of  delivery  of the
     certificates  for such Warrant  Shares,  duly  authorized,  validly issued,
     fully paid and  non-assessable  shares of Common Stock of the Company.  The
     Company  will  keep a  conformed  copy of this  Warrant  on file  with  the
     Transfer  Agent and with  every  subsequent  transfer  agent for the Common
     Stock or other shares of the  Company's  capital  stock  issuable  upon the
     exercise of the rights of purchase  represented by the Warrant. The Company
     will supply from time to time the Transfer  Agent with duly executed  stock
     certificates required to honor the outstanding Warrant.

Section 8. Warrant Price.  The Warrant Price,  subject to adjustment as provided
     in Section 9, shall,  if payment is made in cash or by certified  check, be
     payable in lawful money of the United States of America.

Section 9.  Adjustments.  Subject and pursuant to the provisions of this Section
     9, the Warrant Price and number of Warrant  Shares  subject to this Warrant
     shall be subject to adjustment from time to time as set forth  hereinafter.
     For purposes hereof, the term Warrant Price shall include the $2.00 minimum
     and $6.00  maximum  exercise  prices and the  closing  bid  prices  used in
     determining the Warrant Price which occurred prior to the applicable event.

(a)  If the Company  shall at any time or from time to time while the Warrant is
     outstanding,  pay a dividend or make a distribution  on its Common Stock in
     shares of Common Stock,  subdivide its  outstanding  shares of Common Stock
     into a greater  number of shares or combine its  outstanding  shares into a
     smaller number of shares or issue by  reclassification  of its  outstanding
     shares of Common Stock any shares of its capital stock  (including any such
     reclassification  in connection with a consolidation or merger in which the
     Company is the continuing  corporation),  then the number of Warrant Shares
     purchasable  upon  exercise of the Warrant and the Warrant  Price in effect
     immediately  prior  to  the  date  upon  which  such  change  shall  become
     effective,  shall be  adjusted  by the  Company  so that the  Warrantholder
     thereafter  exercising  the Warrant shall be entitled to receive the number
     of shares of Common Stock or other  capital  stock which the  Warrantholder
     would have received if the Warrant had been exercised  immediately prior to
     such event. Such adjustment shall be made  successively  whenever any event
     listed above shall occur.

(b)  If any capital reorganization, reclassification of the capital stock of the
     Company,  consolidation or merger of the Company with another  corporation,
     or sale,  transfer or other  disposition of all or substantially all of the
     Company's  assets to another  corporation  shall be  effected,  then,  as a
     condition of such reorganization, reclassification,  consolidation, merger,
     sale, transfer or other disposition, lawful and adequate provision shall be
     made whereby each Warrantholder shall thereafter have the right to purchase
     and  receive  upon the  basis  and upon the  terms  and  conditions  herein
     specified  and  in  lieu  of the  Warrant  Shares  immediately  theretofore
     issuable upon exercise of the Warrant, such shares of stock,  securities or
     assets  as would  have been  issuable  or  payable  with  respect  to or in
     exchange  for a number of  Warrant  Shares  equal to the  number of Warrant
     Shares immediately  theretofore  issuable upon exercise of the Warrant, had
     such  reorganization,   reclassification,   consolidation,   merger,  sale,
     transfer  or other  disposition  not  taken  place,  and in any  such  case
     appropriate  provision  shall  be  made  with  respect  to the  rights  and
     interests  of each  Warrantholder  to the end  that the  provisions  hereof
     (including,  without  limitations,  provision for adjustment of the Warrant
     Price) shall  thereafter  be  applicable,  as nearly  equivalent  as may be
     practicable  in relation to any shares of stock,  securities  or properties
     thereafter  deliverable  upon the exercise  hereof.  The Company  shall not
     effect any such consolidation,  merger, sale, transfer or other disposition
     unless  prior  to or  simultaneously  with  the  consummation  thereof  the
     successor  corporation  (if other  than the  Company)  resulting  from such
     consolidation  or  merger,  or  the  corporation  purchasing  or  otherwise
     acquiring  such assets or other  appropriate  corporation  or entity  shall
     assume, by written  instrument  executed and delivered to the Company,  the
     obligation  to deliver to the holder of the  Warrant  such shares of stock,
     securities or assets as, in accordance with the foregoing provisions,  such
     holder may be  entitled to purchase  and the other  obligations  under this
     Warrant.  The  provisions of this  paragraph (b) shall  similarly  apply to
     successive  reorganizations,  reclassifications,  consolidations,  mergers,
     sales, transfers or other dispositions.

(c)  In  case  the  Company  shall  fix  a  record  date  for  the  making  of a
     distribution   to  all  holders  of  Common  Stock   (including   any  such
     distribution made in connection with a consolidation or merger in which the
     Company is the  continuing  corporation)  of evidences of  indebtedness  or
     assets  (other than cash  dividends  or cash  distributions  payable out of
     consolidated  earnings  or earned  surplus or  dividends  or  distributions
     referred to in Section  9(a)),  or  subscription  rights or  warrants,  the
     Warrant Price to be in effect after such record date shall be determined by
     multiplying  the Warrant Price in effect  immediately  prior to such record
     date by a fraction,  the  numerator  of which shall be the total  number of
     shares of Common Stock outstanding  multiplied by the Fair Market Value per
     share of Common  Stock (as defined  below),  less the fair market value (as
     determined  by the  Company's  Board of  Directors  in good  faith) of said
     assets or evidences of indebtedness so distributed, or of such subscription
     rights or warrants,  and the denominator of which shall be the total number
     of shares of Common  Stock  outstanding  multiplied  by such  current  Fair
     Market  Value per  share of Common  Stock.  Such  adjustment  shall be made
     successively  whenever such a record date is fixed.  For this purpose,  the
     "Fair Market  Value" of the Common Stock shall be the closing  price of the
     Common  Stock as  reported by the Nasdaq  Stock  Market for the thirty (30)
     trading days immediately preceding the date of the Exercise Agreement.

(d)  For the duration of the term of this  Warrant,  if the Company shall at any
     time or from time to time issue or sell  securities for a Per Share Selling
     Price (as such term is defined  in the  Debentures)  less than the  Warrant
     Price (other than issuances of Underlying Shares pursuant to Debentures and
     Warrants under the Purchase Agreement, issuances described in and permitted
     under  Section  7.2(b)(iii)  of  the  Purchase  Agreement  and  other  than
     issuances of Common Stock under the Company's duly adopted stock option and
     bonus plans for employees and  directors),  then the Warrant Price shall be
     automatically  reset (if it would result in a reduction of such price) to a
     price equal to such Per Share Selling Price.  For  clarification  purposes,
     the foregoing reset only applies to adjustment of the $2.00 minimum Warrant
     Price and the $6.00  maximum  Warrant  Price (as such figures may have been
     previously  adjusted  hereunder).  The  number of Warrant  Shares  shall be
     proportionally  increased in the event of any adjustments  pursuant to this
     paragraph.  Such adjustments shall be made successively whenever such sales
     are made.  If an  adjustment  (the  "Adjustment")  of the Warrant  Price is
     required pursuant hereto,  the Company shall deliver to the  Warrantholder,
     within eight business days of the closing of the transaction giving rise to
     the Adjustment  ("Delivery Date"), a notice  ("Adjustment  Notice") stating
     that such Warrant Price has been automatically  adjusted as of the Delivery
     Date, and such notice shall constitute an amendment to this Warrant. In the
     event the Company fails to deliver the Adjustment  Notice by the applicable
     Delivery Date, the Company shall be liable to the Warrantholder for a delay
     payment,  as liquidated  damages,  equal to 2% of (x) the number of Warrant
     Shares issuable  hereunder  times (y) the Fair Market Value per share,  per
     month  payable in Common  Stock or cash,  at the  Warrantholder's  election
     (provided,   that  such  failure  to  notify  shall  not  affect  automatic
     adjustment  of  the  Warrant   Price).   The  Company  shall  give  to  the
     Warrantholder  written  notice of any such sale of Common  Stock  within 24
     hours of the closing of any such sale and shall  within such 24 hour period
     issue a press release announcing such sale.

(e)  An adjustment shall become effective  immediately  after the record date in
     the  case of each  dividend  or  distribution  and  immediately  after  the
     effective date of each other event which requires an adjustment.

(f)  In the event that, as a result of an adjustment made pursuant to Section 9,
     the holder of this Warrant  shall become  entitled to receive any shares of
     capital stock of the Company other than shares of Common Stock,  the number
     of such other shares so  receivable  upon exercise of this Warrant shall be
     subject thereafter to adjustment from time to time in a manner and on terms
     as nearly  equivalent as practicable to the provisions  with respect to the
     Warrant Shares contained in this Warrant.

(g)  In the event of any  adjustment  in the number of Warrant  Shares  issuable
     hereunder   upon   exercise,   the  Warrant   Price   shall  be   inversely
     proportionately  increased or decreased,  as the case may be, such that the
     aggregate  purchase  price for Warrant  Shares  upon full  exercise of this
     Warrant shall remain the same. Similarly, in the event of any adjustment in
     the Warrant  Price,  the number of Warrant Shares  issuable  hereunder upon
     exercise shall be inversely  proportionately increased or decreased, as the
     case may be, such that the aggregate purchase price for Warrant Shares upon
     full exercise of this Warrant shall remain the same.

Section 10.  Fractional  Interest.  The  Company  shall not be required to issue
     fractions  of Warrant  Shares  upon the  exercise  of the  Warrant.  If any
     fraction  of a Warrant  Share  would,  except  for the  provisions  of this
     Section,  be  issuable  upon the  exercise  of the  Warrant  (or  specified
     portions thereof),  the Company shall round such calculation to the nearest
     whole number and disregard the fraction.

Section 11.  Benefits.  Nothing in this  Warrant  shall be construed to give any
     person,  firm or corporation (other than the Company and the Warrantholder)
     any legal or equitable  right,  remedy or claim,  it being agreed that this
     Warrant shall be for the sole and exclusive  benefit of the Company and the
     Warrantholder.

Section 12. Notices to Warrantholder.  Upon the happening of any event requiring
     an  adjustment  of the Warrant  Price,  the Company  shall  forthwith  give
     written notice thereof to the Warrantholder at the address appearing in the
     records of the Company, stating the adjusted Warrant Price and the adjusted
     number of Warrant  Shares  resulting  from such event and setting  forth in
     reasonable  detail the method of calculation  and the facts upon which such
     calculation  is based.  In the event of a dispute  with respect to any such
     calculation,  the certificate of the Company's independent certified public
     accountants  shall  be  conclusive  evidence  of  the  correctness  of  any
     computation made, absent manifest error. Failure to give such notice to the
     Warrantholder  or any  defect  therein  shall not affect  the  legality  or
     validity of the subject  adjustment.  At the Warrantholder's  request,  the
     Company shall deliver to the  Warrantholder as of a requested date a notice
     specifying  the Warrant  Price and the number of Warrant  Shares into which
     this Warrant is exercisable as of such date.

Section 13. Identity of Transfer Agent.  The Transfer Agent for the Common Stock
     is:

                  Computershare (f/k/a Securities Transfer Trust, Inc.)
                  12039 W. Alameda Parkway
                  Lakewood, Colorado 80228

     Forthwith upon the  appointment  of any  subsequent  transfer agent for the
Common Stock or other shares of the Company's  capital  stock  issuable upon the
exercise of the rights of purchase  represented by the Warrant, the Company will
fax to the  Warrantholder a statement setting forth the name and address of such
transfer agent.

Section  14.Notices.  Any  notice  pursuant  hereto  to be  given or made by the
     Warrantholder  to or on the  Company  shall be  sufficiently  given or made
     personally or if sent by an internationally  recognized courier by next day
     or two day delivery service, addressed as follows:

                  Fonar Corporation
                  110 Marcus Drive
                  Melville, New York 11747
                  Telephone:        (631) 694-2929
                  Fax:              (631) 249-3734
                  Attention:        President

     or such other  address as the  Company  may specify in writing by notice to
     the  Warrantholder  complying as to delivery with the terms of this Section
     14.

     Any notice  pursuant hereto to be given or made by the Company to or on the
Warrantholder shall be sufficiently given or made if personally  delivered or if
sent by an  internationally  recognized  courier service by overnight or two-day
service,  to the address set forth on the books of the Company or, as to each of
the Company and the Warrantholder,  at such other address as shall be designated
by such party by written notice to the other party complying as to delivery with
the terms of this Section 14.

     All such notices,  requests,  demands,  directions and other communications
shall,  when sent by courier,  be effective two (2) days after  delivery to such
courier as provided and addressed as aforesaid.

Section 15. Registration  Rights. The initial holder of this Warrant is entitled
     to the  benefit of certain  registration  rights in respect of the  Warrant
     Shares as provided in the Registration Rights Agreement.

Section 16.  Successors.  All the covenants and provisions  hereof by or for the
     benefit of the  Warrantholder  shall  bind and inure to the  benefit of its
     respective successors and assigns hereunder.

Section 17.  Governing  Law.  This Warrant shall be deemed to be a contract made
     under  the laws of the  State of New  York,  without  giving  effect to its
     conflict of law  principles,  and for all  purposes  shall be  construed in
     accordance with the laws of said State.

Section 18. 9.9% and 19.9% Limitations.

(a)  Notwithstanding  anything to the contrary  contained herein,  the number of
     shares of Common  Stock that may be acquired  by the holder  upon  exercise
     pursuant to the terms hereof shall not exceed a number that,  when added to
     the total  number of shares of Common Stock  deemed  beneficially  owned by
     such holder  (other than by virtue of the ownership of securities or rights
     to acquire securities  (including the Warrant Shares) that have limitations
     on the  holder's  right to convert,  exercise  or  purchase  similar to the
     limitation  set forth  herein),  together  with all shares of Common  Stock
     deemed  beneficially  owned  (other  than by  virtue  of the  ownership  of
     securities or rights to acquire  securities  that have  limitations  on the
     right to convert,  exercise or purchase similar to the limitation set forth
     herein) by the  holder's  "affiliates"  (as defined in Rule 144 of the Act)
     ("Aggregation   Parties")   that  would  be  aggregated   for  purposes  of
     determining  whether a group under Section 13(d) of the Securities Exchange
     Act of 1934 as amended,  exists,  would exceed 9.9% of the total issued and
     outstanding   shares  of  the  Common  Stock  (the  "Restricted   Ownership
     Percentage").  Each  holder  shall  have the right (w) at any time and from
     time to time to reduce its Restricted Ownership Percentage immediately upon
     notice to the  Corporation and (x) (subject to waiver) at any time and from
     time to time, to increase its Restricted Ownership  Percentage  immediately
     in the event of the  announcement  as  pending or  planned,  of a change of
     control transaction  (including without limitation a transaction that would
     result in a  transfer  of more than 50% of the  Company's  voting  power or
     equity,  or a  transaction  that would result in a person or "group"  being
     deemed the beneficial owner of 50% or more of the Company's voting power or
     equity).

(b)  The holder covenants at all times on each day (each such day being referred
     to as a "Covenant Day") as follows: During the balance of such Covenant Day
     and the  succeeding  sixty-one  (61) days (the balance of such Covenant Day
     and the succeeding 61 days being referred to as the "Covenant Period") such
     holder  will not  acquire  shares of  Common  Stock  pursuant  to any right
     (including  exercise  of  Warrants)  existing  at the  commencement  of the
     Covenant  Period to the  extent the  number of shares so  acquired  by such
     holder  and its  Aggregation  Parties  (ignoring  all  dispositions)  would
     exceed:

(x)  the Restricted Ownership Percentage of the total number of shares of Common
     Stock outstanding at the commencement of the Covenant Period, minus

(y)  the number of shares of Common Stock  actually owned by such holder and its
     Aggregation Parties at the commencement of the Covenant Period.

     A new and independent  covenant will be deemed to be given by the holder as
of each moment of each  Covenant Day. No covenant  will  terminate,  diminish or
modify any other covenant.  The holder agrees to comply with each such covenant.
This Section 18 controls in the case of any conflict with any other provision of
the Purchase Agreement or any agreement entered into in connection therewith.

     The Corporation's  obligation to issue Common Stock which would exceed such
limits referred to in this Section 18 shall be suspended to the extent necessary
until such time,  if any, as shares of Common Stock may be issued in  compliance
with such restrictions.

(c)  Notwithstanding   anything   contained   herein,  in  the  event  that  the
     Warrantholder  has timely exercised this Warrant and the issuance of all or
     a portion of the  Warrant  Shares to be issued  pursuant  to such  exercise
     would constitute a breach of the Company's  obligations  under the rules or
     regulations of the Nasdaq Stock Market as they apply to the Company, or any
     other principal  securities  exchange or market  ("Principal  Market") upon
     which the Common Stock is or becomes traded (the "Cap  Regulations"),  then
     the Company shall not be obligated to issue any such Warrant  Shares to the
     extent such shares are in excess of the maximum  permissible  amount  under
     such Cap Regulations ("Excess Shares").  Within five (5) days following any
     occurrence  of  Excess  Shares,  the  Company  shall  promptly  pay  to the
     Purchaser,  in lieu of the Purchaser's right to receive such Excess Shares,
     an amount equal to 120% of the difference  between (a) the number of Excess
     Shares  multiplied  by the closing  sale price per share of Common Stock on
     the Principal  Market on the trading day immediately  preceding the date of
     the exercise of this Warrant, and (b) the aggregate exercise price for such
     Excess  Shares.  Only  shares  of Common  Stock  acquired  pursuant  to the
     Purchase Agreement (including Underlying Shares and Warrant Shares) will be
     included in determining  whether the limitation  contained  herein would be
     exceeded for purposes of this Section 18(c).

Section 19.  Replacement  Warrants.  The  Company  agrees  that  within ten (10)
     business days after any request from time to time of the Warrantholder,  it
     shall deliver to such holder a new Warrant in  substitution of this Warrant
     which is identical in all respects except that the then Warrant Price shall
     be  appropriately  specified in the Warrant,  and the Warrant shall specify
     the fixed  number of  Warrant  Shares  into  which  the  Warrants  are then
     exercisable. Such changes are intended not as amendments to the Warrant but
     only as  clarification of the foregoing  numbers for convenience  purposes,
     and such changes shall not affect any provisions concerning  adjustments to
     the Warrant Price or number of Warrant Shares contained herein.

Section  20.  Absolute   Obligation  to  Issue  Warrant  Shares.  The  Company's
     obligations  to issue and deliver  Warrant  Shares in  accordance  with the
     terms hereof are absolute and unconditional,  irrespective of any action or
     inaction by the holder  hereof to enforce  the same,  any waiver or consent
     with respect to any provision hereof,  the recovery of any judgment against
     any Person or any action to enforce the same, or any setoff,  counterclaim,
     recoupment,  limitation or termination,  or any breach or alleged breach by
     the holder  hereof or any other Person of any  obligation to the Company or
     any  violation  or  alleged  violation  of law by the  holder  or any other
     Person,  and irrespective of any other  circumstance  which might otherwise
     limit such  obligation  of the Company to the holder  hereof in  connection
     with the issuance of Warrant Shares.  The Company will at no time close its
     shareholder books or records in any manner which interferes with the timely
     exercise of this Warrant.

Section 21.  Assignment,  Etc.  The  Warrantholder  may assign or transfer  this
     Warrant  to any  transferee  only with the  prior  written  consent  of the
     Company,  which may not be unreasonably withheld or delayed,  provided that
     (i) the  Warrantholder  may assign or transfer  this Warrant to any of such
     Warrantholder's affiliates without the consent of the Company and (ii) upon
     any Event of Default (as defined in the Debentures),  the Warrantholder may
     assign or transfer  this Warrant  without the consent of the  Company.  The
     Warrantholder  shall notify the Company of any such  assignment or transfer
     promptly. This Warrant shall be binding upon the Company and its successors
     and shall inure to the benefit of the  Warrantholder and its successors and
     permitted assigns.


                            [Signature Page Follows]


<PAGE>


     IN WITNESS WHEREOF, the Company has caused this Warrant to be duly executed
as of May 24, 2001.


                                                     FONAR CORPORATION



                                                By:     /s/
                                                        -----------------------
                                                Name:
                                                        -----------------------
                                                Title:
                                                        -----------------------

Attest:

      Sign: /s/
            -----------------------
Print Name:
            -----------------------


                                FONAR CORPORATION
                              WARRANT EXERCISE FORM

Fonar Corporation
110 Marcus Drive
Melville, New York 11747
Telephone:        (631) 694-2929
Fax:              (631) 249-3734
Attention:        President

     This  undersigned  hereby  irrevocably  elects  to  exercise  the  right of
purchase  represented  by the within  Warrant  ("Warrant")  for, and to purchase
thereunder  payment by cash, wire transfer or certified  check,  ---------------
shares of Common Stock* ("Warrant  Shares")  provided for therein,  and requests
that certificates for the Warrant Shares be issued as follows:

                           Name
                                   -------------------------------

                           Address
                                   -------------------------------

and,  if the  number  of  Warrant  Shares  shall not be all the  Warrant  Shares
purchasable upon exercise of the Warrant,  that a new Warrant for the balance of
the Warrant Shares (subject to book-entry).

     In lieu of delivering physical certificates representing the Warrant Shares
purchasable upon exercise of this Warrant, provided the Company's transfer agent
is  participating  in  the  Depository  Trust  Company  ("DTC")  Fast  Automated
Securities  Transfer ("FAST") program,  upon request of the Holder,  the Company
shall  use its  best  efforts  to cause  its  transfer  agent to  electronically
transmit  the  Warrant  Shares  issuable  upon  conversion  or  exercise  to the
undersigned, by crediting the account of the undersigned's prime broker with DTC
through its Deposit Withdrawal Agent Commission ("DWAC") system.

Dated:                                     Signature:
       ------------------------                        ------------------------



                           Name
                                   -------------------------------
                                     Name (please print)

                           Address
                                   -------------------------------



*    NOTE:  If exercise of the Warrant is made by  surrender  of the Warrant and
     the number of shares  indicated  exceeds  the  maximum  number of shares to
     which a holder is entitled,  the Company will issue such maximum  number of
     shares  purchasable upon exercise of the Warrant  registered in the name of
     the  undersigned  Warrantholder  or the  undersigned's  Assignee  as  below
     indicated and deliver same to the address stated below.
</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-10
<SEQUENCE>5
<FILENAME>ex101.txt
<TEXT>

     Exhibit 10.1

                               PURCHASE AGREEMENT


     THIS PURCHASE  AGREEMENT  ("Agreement")  is made as of the 24th day of May,
2001 by and among fonar corporation, a Delaware corporation (the "Company"), and
the  Purchasers  set  forth  on  the  signature  page  affixed  hereto  (each  a
"Purchaser" and collectively the "Purchasers").

                                    Recitals

A.   The Company and the Purchasers are executing and delivering  this Agreement
     in reliance upon the exemption from securities registration afforded by the
     provisions of Regulation D  ("Regulation  D"), as  promulgated  by the U.S.
     Securities and Exchange  Commission (the "SEC") under the Securities Act of
     1933, as amended;

B.   The Purchasers  wish to purchase,  and the Company wishes to sell and issue
     to the Purchasers,  upon the terms and subject to the conditions  stated in
     this Agreement, (i) an aggregate of $4.5 million in principal amount of the
     Company's 4% Convertible  Debentures in the form attached hereto as Exhibit
     A (the "Debentures"),  which Debentures shall be convertible into shares of
     common  stock of the  Company,  $0.0001  par value per share  (the  "Common
     Stock"),  in  accordance  with the  terms of the  Debentures,  (ii)  3-year
     callable warrants  ("Callable  Warrants") to purchase an aggregate of up to
     2,000,000 shares of Common Stock, in the form attached hereto as Exhibit B,
     and (iii) 5-year warrants ("Purchase Warrants") to purchase an aggregate of
     up to such  aggregate  number of shares of Common  Stock as is equal 30% of
     the  Purchase  Price  divided by the  Conversion  Price (as  defined in the
     Debenture) as of the Closing  Date, in the form attached  hereto as Exhibit
     C, in each case as are set forth on the signature page attached  hereto and
     executed by each such  Purchaser  for an aggregate  purchase  price of $4.5
     million; and

C.   Contemporaneous  with the  execution  and delivery of this  Agreement,  the
     parties  hereto  are  executing  and   delivering  a  Registration   Rights
     Agreement,  in the form  attached  hereto as  Exhibit D (the  "Registration
     Rights  Agreement"),  pursuant  to which the  Company has agreed to provide
     certain  registration  rights under the Securities Act of 1933, as amended,
     and the rules and regulations promulgated thereunder,  and applicable state
     securities laws;

     In  consideration of the mutual promises made herein and for other good and
valuable  consideration,   the  receipt  and  sufficiency  of  which  is  hereby
acknowledged, the parties hereto agree as follows:

1.   Definitions. In addition to those terms defined above and elsewhere in this
     Agreement,  for the purposes of this  Agreement,  the following terms shall
     have the meanings here set forth:

1.1  "Affiliate"  means,  with  respect to any Person,  any other  Person  which
     directly or  indirectly  controls,  is  controlled  by, or is under  common
     control with, such Person.

1.2  "Agreements" means this Agreement,  the Registration Rights Agreement,  the
     Debentures and the Warrants.

1.3  "Callable  Warrants"  shall have  meaning set forth in the recitals to this
     Agreement.

1.4  The "Company" shall refer to the Company (as defined in the first paragraph
     hereof)  together  with its  subsidiaries  wherever  applicable  (including
     without  limitation  with  respect to all  representations  of the  Company
     unless the context otherwise requires).

1.5  "Closing" means the consummation of the  transactions  contemplated by this
     Agreement, and "Closing Date" means the date of such Closing.

1.6  "Control" means the possession,  direct or indirect, of the power to direct
     or cause the direction of the management and policies of a Person,  whether
     through the ownership of voting securities, by contract or otherwise.

1.7  "Debentures"  shall  have  meaning  set  forth  in  the  recitals  to  this
     Agreement.

1.8  "Market Price" shall have the meaning set forth in the Debentures.

1.9  "Material  Adverse  Effect"  means a  material  adverse  effect  on the (i)
     condition (financial or otherwise),  business, assets, prospects or results
     of operations of the Company; (ii) ability of the Company to perform any of
     its material obligations under the terms of the Agreements; or (iii) rights
     and remedies of a Purchaser under the terms of the Agreements.

1.10 "MFN Transaction"  means a transaction in which the Company issues or sells
     any  securities  in a capital  raising  transaction  or  series of  related
     transactions  (the "New  Offering")  which grants to the investor (the "New
     Investor")  the right to receive  additional  securities  based upon future
     capital  raising  transactions  of the Company on terms more favorable than
     those granted to the New Investor in the New Offering.

1.11 "Person" means an individual,  corporation,  partnership, limited liability
     company trust,  business  trust,  association,  joint stock company,  joint
     venture, pool, syndicate, sole proprietorship, unincorporated organization,
     governmental  authority or any other form of entity not specifically listed
     herein.

1.12 "Purchase  Warrants"  shall have  meaning set forth in the recitals to this
     Agreement.

1.13 "SEC" means the U.S. Securities and Exchange Commission.

1.14 "SEC  Filings"  means the  Company's  Annual  Report on Form 10-K/A for the
     fiscal year ended June 30, 2000 and all other  reports filed by the Company
     pursuant  to the 1934 Act since the  filing  of the  Annual  Report on Form
     10-K/A for the fiscal year ended June 30, 2000.

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

1.16 "Underlying  Shares"  means the shares of Common  Stock  issued or issuable
     upon  conversion  of, as payment for  interest or  repayment  of  principal
     under, or otherwise pursuant to, the Debentures.

1.17 "Variable Rate Transaction" means a transaction in which the Company issues
     or sells  (a) 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 (x) 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 Common Stock at any time after the initial
     issuance of such debt or equity securities, or (y) with a fixed 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 (but
     excluding  standard  stock  split  anti-dilution  provisions),  or (b)  any
     securities  of the Company  pursuant to an "equity  line"  structure  which
     provides  for the sale,  from time to time,  of  securities  of the Company
     which are registered for sale or resale pursuant to the 1933 Act.

1.18 "Warrants" means collectively the Callable Warrants and Purchase Warrants.

1.19 "Warrant Shares" means the shares of Common Stock issuable upon exercise of
     or otherwise pursuant to the Warrants.

1.20 "1933 Act" means the Securities Act of 1933, as amended,  and the rules and
     regulations promulgated thereunder.

1.21 "1934 Act" means the Securities  Exchange Act of 1934, as amended,  and the
     rules and regulations promulgated thereunder.

2.   Purchase and Sale of the Debentures and Warrants.  Subject to the terms and
     conditions of this Agreement,  each of the Purchasers hereby severally, and
     not jointly,  agrees to purchase, and the Company hereby agrees to sell and
     issue to each of the  Purchasers,  the principal  amount of Debentures  and
     Warrants to purchase the number of shares of Common Stock set forth on such
     Purchaser's  signature page attached hereto and as indicated  herein.  Each
     Purchaser's  aggregate  purchase  price  (the  "Purchase  Price")  for  the
     Debentures  and  Warrants to be  purchased  hereunder  is set forth on such
     Purchaser's signature page attached hereto.

3.   Closing.

3.1  Initial Closing. The Company shall promptly deliver to Purchasers' counsel,
     in  trust,  Debentures  and  Warrants,  registered  in  the  names  of  the
     Purchasers  as  indicated  on  the  signature   pages  to  this  Agreement,
     representing  all  of  the  Debentures  and  all  of  the  Warrants,   with
     instructions that such Debentures and Warrants are to be held in escrow for
     release to the  Purchasers  only upon payment of the Purchase  Price to the
     Company and  confirmation  of receipt by the Company or its  counsel.  Upon
     receipt  by counsel  to the  Purchasers  of the  Debentures  and  Warrants,
     subject  to  the  execution   and/or   delivery  of  such  other  documents
     contemplated  hereby on or prior to the Closing,  Purchaser  shall promptly
     cause a wire  transfer  in same day funds to be sent to the  account of the
     Company as instructed in writing by the Company,  in an amount representing
     the  Purchase  Price.  On the date the Company  receives  such  funds,  the
     Debentures and the Warrants  shall be released to the Purchasers  (and such
     date shall be deemed the "Closing Date").

4.   Representations   and  Warranties  of  the  Company.   The  Company  hereby
     represents and warrants to the Purchasers that:

4.1  Organization, Good Standing and Qualification. The Company is a corporation
     duly incorporated,  validly existing and in good standing under the laws of
     the jurisdiction of its incorporation and has all requisite corporate power
     and  authority  to  carry  on its  business  as now  conducted  and own its
     properties.  The  Company is duly  qualified  to do  business  as a foreign
     corporation  and is in good  standing  in each  jurisdiction  in which  the
     conduct of its business or its ownership or leasing of property  makes such
     qualification or licensing necessary unless the failure to so qualify would
     not be reasonably likely to result in a Material Adverse Effect. All of the
     Company's  subsidiaries are listed by name and jurisdiction on Schedule 4.1
     attached hereto.

4.2  Authorization.  The Company has full corporate  power and authority and has
     taken  all  requisite  action  on the part of the  Company,  its  officers,
     directors and stockholders  necessary for (i) the authorization,  execution
     and delivery of the Agreements,  (ii)  authorization  of the performance of
     all  obligations  of the Company  hereunder and  thereunder,  and (iii) the
     authorization,  issuance (or  reservation for issuance) and delivery of the
     Securities.   The  Agreements  constitute  the  legal,  valid  and  binding
     obligations of the Company,  enforceable  against the Company in accordance
     with their terms, subject to bankruptcy,  insolvency,  fraudulent transfer,
     reorganization,  moratorium  and  similar  laws of  general  applicability,
     relating to or affecting creditors' rights generally.

4.3  Capitalization.  Set forth on  Schedule  4.3  hereto is (a) the  authorized
     capital  stock of the Company on the date hereof;  (b) the number of shares
     of capital stock issued and outstanding on the date hereof;  (c) the number
     of shares of capital stock issuable  pursuant to the Company's stock plans;
     and (d) the number of shares of capital  stock  issuable  and  reserved for
     issuance  pursuant  to  securities  (other  than  the  Debentures  and  the
     Warrants)  exercisable  for, or convertible  into or  exchangeable  for any
     shares of capital stock.  All of the issued and  outstanding  shares of the
     Company's  capital stock have been duly  authorized  and validly issued and
     are fully paid,  nonassessable and free of preemptive rights. Except as set
     forth on  Schedule  4.3, no Person is  entitled  to  preemptive  or similar
     statutory  or  contractual  rights with  respect to any  securities  of the
     Company.  Except as set forth on  Schedule  4.3,  there are no  outstanding
     warrants,  options,  convertible securities or other rights,  agreements or
     arrangements  of  any  character  under  which  the  Company  is or  may be
     obligated  to  issue  any  equity  securities  of any kind  and  except  as
     contemplated by this Agreement or set forth on Schedule 4.3, the Company is
     not currently in negotiations for the issuance of any equity  securities of
     any kind. Except as set forth on Schedule 4.3, the Company has no knowledge
     of any voting  agreements,  buy-sell  agreements,  option or right of first
     purchase  agreements  or  other  agreements  of any kind  among  any of the
     securityholders  of the Company  relating to the  securities of the Company
     held by them.  Except as set forth on  Schedule  4.3,  the  Company has not
     granted  any Person  the right to  require  the  Company  to  register  any
     securities of the Company under the 1933 Act,  whether on a demand basis or
     in connection  with the  registration  of securities of the Company for its
     own account or for the account of any other Person.

4.4  Valid  Issuance.  As of the Closing,  the Company has reserved a sufficient
     number of shares of Common Stock for the issuance  upon  conversion  of, as
     payment  for  interest  on or  repayment  of  principal  of, and  otherwise
     pursuant  to,  the  Debentures,  and upon  exercise  of the  Warrants.  The
     Debentures and Warrants are duly  authorized,  and such  Securities,  along
     with the Underlying  Shares and Warrant Shares  issuable upon conversion of
     or payment of interest or repayment of principal on the Debentures and upon
     exercise of the Warrants,  respectively, when issued in accordance herewith
     and with the terms of the Debentures and Warrants, will be duly authorized,
     validly  issued,  fully  paid,  non-assessable  and free  and  clear of all
     encumbrances and restrictions,  except for restrictions on transfer imposed
     by  applicable  securities  laws.  The  number  of  shares  to be  reserved
     hereunder  shall  be  determined  without  regard  to any  restrictions  on
     beneficial ownership contained in the Agreements.

4.5  Consents.  The  execution,  delivery and  performance by the Company of the
     Agreements and the offer,  issuance and sale of the  Securities  require no
     consent  of,  action  by or in  respect  of, or filing  with,  any  Person,
     governmental  body,  agency,  or official other than filings that will have
     been made  pursuant  to  applicable  state  securities  laws and  post-sale
     filings  pursuant to applicable  state and federal  securities laws and the
     additional  listing  application  requirements  of the Nasdaq Stock Market,
     which the Company undertakes to file within the applicable time periods.

4.6  Delivery of SEC Filings;  Business.  The SEC Filings  represent all filings
     required of the Company  pursuant to the 1934 Act since June 30, 2000.  The
     SEC  Filings  complied  as to  form  in  all  material  respects  with  the
     requirements of the 1934 Act and did not contain any untrue  statement of a
     material fact or omit to state any material fact necessary in order to make
     the statements made therein,  in the light of the circumstances under which
     they were made, not misleading. The Company is engaged only in the business
     described  in the SEC Filings and the SEC  Filings  contain a complete  and
     accurate  description  of the  business  of  the  Company  in all  material
     respects. The Company has not provided to any Purchaser (i) any information
     required  to be filed under the 1934 Act that has not been so filed or (ii)
     any non-public information.

4.7  Use of  Proceeds.  The  proceeds  of the  sale  of the  Debentures  and the
     Warrants   hereunder  shall  be  used  by  the  Company  only  for  legally
     permissible working capital and general corporate purposes.

4.8  No Material  Adverse Change.  Since the filing of the Company's most recent
     Annual  Report on Form 10-K/A or as otherwise  identified  and described in
     the Company's  Form 10-Q filed with the SEC for the fiscal  quarter  ending
     March 31, 2001 or any other reports filed by the Company subsequent to such
     Form 10-K/A pursuant to the 1934 Act and filed at least ten (10) days prior
     to the date hereof, there has not been:

(i)  any  material  adverse  change  in the  consolidated  assets,  liabilities,
     financial condition or operating results of the Company from that reflected
     in the financial statements included in the Company's most recent Quarterly
     Report on Form 10-Q,  except  changes in the  ordinary  course of  business
     which have not had, in the aggregate, a Material Adverse Effect;

(ii) any declaration or payment of any dividend, or any authorization or payment
     of any  distribution,  on any of the capital  stock of the Company,  or any
     redemption  or  repurchase  of any  securities  of the Company  (other than
     required  dividends  on  non-voting  preferred  stock of the  Company up to
     $400,000);

(iii)any  material  damage,  destruction  or loss,  whether  or not  covered  by
     insurance,  to  any  assets  or  properties  of the  Company  or any of its
     subsidiaries;

(iv) any waiver by the Company of a material right or of a material debt owed to
     it;

(v)  any  satisfaction or discharge of any lien, claim or encumbrance or payment
     of any obligation by the Company, except in the ordinary course of business
     and which is not material to the assets,  properties,  prospects  financial
     condition,  operating  results or business of the Company  taken as a whole
     (as such  business  is  presently  conducted  and as it is  proposed  to be
     conducted);

(vi) any material  change or amendment to a material  contract or arrangement by
     which the Company or any of its assets or properties is bound or subject;

(vii)any material labor  difficulties or labor union organizing  activities with
     respect to employees of the Company;

(viii) any  transaction  entered into by the Company  other than in the ordinary
     course of business; or

(ix) any other  event or  condition  of any  character  that may have a Material
     Adverse Effect.

4.9  Registration Statements; Material Contracts.

(a)  During  the  preceding  two  years,  each  registration  statement  and any
     amendment  thereto filed by the Company pursuant to the 1933 Act, as of the
     date such statement or amendment became  effective,  complied as to form in
     all  material  respects  with the 1933 Act and did not  contain  any untrue
     statement of a material fact or omit to state any material fact required to
     be  stated  therein  or  necessary  in order to make  the  statements  made
     therein,  in light of the  circumstances  under  which they were made,  not
     misleading;  and each  prospectus  filed  pursuant to Rule 424(b) under the
     1933  Act,  as of its  issue  date  and as of the  closing  of any  sale of
     securities  pursuant  thereto  did not contain  any untrue  statement  of a
     material  fact or omit to state any  material  fact  required  to be stated
     therein or necessary in order to make the statements  made therein,  in the
     light of the circumstances under which they were made, not misleading.

(b)  Except as set forth on Schedule  4.3  hereto,  there are no  agreements  or
     instruments  currently  in force and  effect  that  constitute  a  warrant,
     option,  convertible  security or other right,  agreement or arrangement of
     any  character  under which the Company is or may be obligated to issue any
     material  amounts of any equity  security of any kind,  or to transfer  any
     material amounts of any equity security of any kind.

4.10 Form S-3  Eligibility.  The Company is  currently  eligible to register the
     resale of its Common  Stock on a  registration  statement on Form S-3 under
     the 1933 Act.

4.11 No Conflict, Breach, Violation or Default. (a) The execution,  delivery and
     performance  of the  Agreements by the Company and the issuance and sale of
     the Securities will not conflict with or result in a breach or violation of
     any of the terms and  provisions  of, or constitute a default under (i) the
     Company's  Certificate  of  Incorporation  (including any  certificates  of
     designation) or the Company's Bylaws,  both as in effect on the date hereof
     (copies  of which  have been  provided  to the  Purchasers  before the date
     hereof) and the date of issuance of such  securities,  or (ii) except where
     it  would  not have a  Material  Adverse  Effect,  (A) any  statute,  rule,
     regulation  or  order  of any  governmental  agency  or body or any  court,
     domestic or  foreign,  having  jurisdiction  over the Company or any of its
     properties,  or (B) any  agreement or  instrument to which the Company is a
     party or by which the Company is bound or to which any of the properties of
     the Company is subject.

(b)  Except where it would not have a Material  Adverse Effect,  the Company (i)
     is not in violation of any statute,  rule or  regulation  applicable to the
     Company or its assets,  (ii) is not in violation of any judgment,  order or
     decree applicable to the Company or its assets,  and (iii) is not in breach
     or violation of any agreement, note or instrument to which it or its assets
     are a party or are bound or subject.  The Company has not  received  notice
     from  any  Person  of  any  claim  or  investigation   that,  if  adversely
     determined, would render the preceding sentence untrue or incomplete.

4.12 Tax  Matters.  The  Company has timely  prepared  and filed all tax returns
     required  to  have  been  filed  by  the  Company   with  all   appropriate
     governmental  agencies  and timely paid all taxes owed by it. The  charges,
     accruals  and  reserves on the books of the Company in respect of taxes for
     all fiscal periods are adequate in all material respects,  and there are no
     material  unpaid  assessments  against the Company nor, to the knowledge of
     the  Company,  any  basis  for  the  assessment  of any  additional  taxes,
     penalties or interest for any fiscal period or audits by any federal, state
     or local taxing  authority except such as which are not material and except
     as set  forth on  Schedule  4.12  hereto.  All  material  taxes  and  other
     assessments  and levies  that the  Company is  required  to  withhold or to
     collect for payment have been duly  withheld and  collected and paid to the
     proper  governmental entity or third party when due. There are no tax liens
     or  claims  pending  or  threatened  against  the  Company  or  any  of its
     respective  assets  or  property.  There  are no  outstanding  tax  sharing
     agreements  or other such  arrangements  between  the Company and any other
     corporation or entity.

4.13 Title to  Properties.  Except as disclosed in the SEC Filings,  the Company
     has  good  and  marketable  title  to all  real  properties  and all  other
     properties  and  assets  owned  by  it,  in  each  case  free  from  liens,
     encumbrances and defects that would materially  affect the value thereof or
     materially  interfere  with the use made or  currently  planned  to be made
     thereof by them;  and except as disclosed  in the SEC Filings,  the Company
     holds any leased real or  personal  property  under  valid and  enforceable
     leases with no exceptions that would materially interfere with the use made
     or currently planned to be made thereof by them.

4.14 Certificates,  Authorities  and  Permits.  The Company  possesses  adequate
     certificates,  authorities or permits  issued by  appropriate  governmental
     agencies or bodies necessary to conduct the business now operated by it and
     has not received any notice of  proceedings  relating to the  revocation or
     modification  of  any  such  certificate,  authority  or  permit  that,  if
     determined adversely to the Company, would individually or in the aggregate
     have a Material Adverse Effect.

4.15 No Labor  Disputes.  No material  labor  dispute with the  employees of the
     Company exists or, to the knowledge of the Company, is imminent.

4.16 Intellectual  Property.  The Company owns or possesses  adequate  rights or
     licenses to the  inventions,  know-how,  patents,  copyrights,  trademarks,
     trade  names,  confidential  information  and other  intellectual  property
     (collectively,  "Intellectual  Property  Rights"),  free  and  clear of all
     liens,  security  interests,  charges,  encumbrances,  equities  and  other
     adverse  claims,  necessary  to conduct the business now operated by it, or
     presently employed by it, and presently  contemplated to be operated by it,
     and the Company has not received any notice of  infringement of or conflict
     with asserted  rights of others with respect to any  Intellectual  Property
     Rights  except as  disclosed in the SEC  Filings.  To the  knowledge of the
     Company,  the Company's patents and other Intellectual  Property Rights and
     the  present  activities  of  the  Company  do  not  infringe  any  patent,
     copyright,  trademark,  trade name or other proprietary rights of any third
     party where such  infringement  may cause a Material  Adverse Effect on the
     Company.

4.17 Environmental  Matters.  The Company is not in  violation  of any  statute,
     rule,  regulation,  decision or order of any governmental agency or body or
     any court, domestic or foreign, relating to the use, disposal or release of
     hazardous or toxic  substances or relating to the protection or restoration
     of the  environment  or human  exposure to  hazardous  or toxic  substances
     (collectively,  "Environmental  Laws"),  does not own or  operate  any real
     property   contaminated   with  any  substance   that  is  subject  to  any
     Environmental   Laws,   is  not  liable  for  any   off-site   disposal  or
     contamination pursuant to any Environmental Laws, and is not subject to any
     claim relating to any Environmental  Laws, which violation,  contamination,
     liability or claim would  individually  or in the aggregate have a Material
     Adverse Effect;  and the Company is not aware of any pending  investigation
     that might lead to such a claim.

4.18 Litigation.  Except as disclosed  in the SEC Filings,  there are no pending
     actions,  suits or  proceedings  against or affecting the Company or any of
     its  properties  that,  if  determined  adversely  to  the  Company,  would
     individually  or in the aggregate  have a Material  Adverse Effect or would
     materially  and adversely  affect the ability of the Company to perform its
     obligations  under the Agreements,  or which are otherwise  material in the
     context of the sale of the Securities;  and to the Company's knowledge,  no
     such actions, suits or proceedings are threatened or contemplated.

4.19 Financial Statements.  The financial statements included in each SEC Filing
     present  fairly and  accurately in all material  respects the  consolidated
     financial   position  of  the  Company  as  of  the  dates  shown  and  its
     consolidated  results of operations  and cash flows for the periods  shown,
     and such  financial  statements  have  been  prepared  in  conformity  with
     generally  accepted  accounting  principles  applied on a consistent basis.
     Except as set forth in the financial  statements of the Company included in
     the SEC  Filings  filed  prior  to the  date  hereof,  the  Company  has no
     liabilities, contingent or otherwise, except those which individually or in
     the  aggregate  are not  material to the  financial  condition or operating
     results of the Company.

4.20 Insurance  Coverage.  The  Company  maintains  in  full  force  and  effect
     insurance  coverage that the Company  reasonably  believes  such  insurance
     coverage to be adequate against all  liabilities,  claims and risks against
     which it is customary for comparably situated companies to insure.

4.21 Compliance with Nasdaq Continued  Listing  Requirements.  The Company is in
     compliance with all applicable  Nasdaq Small-Cap  Market continued  listing
     requirements  and is in  good  standing  on  such  exchange.  There  are no
     proceedings  pending or to the Company's  knowledge  threatened against the
     Company relating to the continued  listing of the Company's Common Stock on
     the Nasdaq Small-Cap Market and the Company has not received any notice of,
     nor to the  knowledge of the Company is there any basis for, the  delisting
     of the Common Stock from the Nasdaq Small-Cap Market.

4.22 Acknowledgement of Dilution.  The number of shares of Common Stock issuable
     pursuant to the  Debentures  and Warrants may increase  substantially.  The
     Company's   executive   officers  and  directors  have  studied  and  fully
     understand the nature of the transactions being contemplated  hereunder and
     recognize that they have a potential dilutive effect.

4.23 Brokers  and   Finders.   The   Purchasers   shall  have  no  liability  or
     responsibility  for the payment of any  commission  or finder's  fee to any
     third party in  connection  with or  resulting  from this  agreement or the
     transactions  contemplated  by this Agreement by reason of any agreement of
     or action taken by the Company.

4.24 No General  Solicitation.  Neither the Company nor any Person acting on its
     behalf has conducted any general  solicitation  or general  advertising (as
     those terms are used in Regulation D) in connection  with the offer or sale
     of any of the Securities.

4.25 No Integrated Offering.  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 adversely affect reliance by the
     Company on Section 4(2) of the 1933 Act for the exemption from registration
     for the transactions  contemplated hereby or would require  registration of
     the Securities under the 1933 Act; or would require the integration of this
     offering with any other  offering of securities for purposes of determining
     the need to obtain  stockholder  approval of the transactions  contemplated
     hereby under the rules of the Nasdaq Stock Market.

4.26 Disclosures.   For  purposes  of  this   Agreement  and  the   transactions
     contemplated  hereby, none of the representations or warranties made by the
     Company under any of the  Agreements  and no  information  furnished by the
     Company pursuant hereto, or in any other document, certificate or statement
     furnished by the Company to the Purchaser or any authorized  representative
     of the Purchaser,  pursuant to the  Agreements or in connection  therewith,
     contain any untrue statement of a material fact or omit to state a material
     fact  necessary  in order  to make  the  statements  contained  herein  and
     therein,  in light of the  circumstances  under  which they were made,  not
     misleading.

5.   Representations  and  Warranties of the  Purchaser.  Each of the Purchasers
     hereby severally,  and not jointly,  represents and warrants to the Company
     as to itself only that:

5.1  Organization   and   Existence.   The  Purchaser  is  a  validly   existing
     corporation, partnership or limited liability company and has all requisite
     corporate,  partnership or limited liability company power and authority to
     invest in the Securities pursuant to this Agreement.

5.2  Authorization.  The execution, delivery and performance by the Purchaser of
     this  Agreement  and the  Registration  Rights  Agreement  have  been  duly
     authorized and this Agreement and the  Registration  Rights  Agreement will
     each constitute the valid and legally binding  obligation of the Purchaser,
     enforceable  against the Purchaser in accordance with their terms,  subject
     to bankruptcy, insolvency, fraudulent transfer, reorganization,  moratorium
     and  similar  laws  of  general  applicability,  relating  to or  affecting
     creditors' rights generally.

5.3  Purchase  Entirely for Own Account.  The  Securities  to be received by the
     Purchaser  hereunder will be acquired for the Purchaser's own account,  not
     as nominee or agent,  and not with a view to the resale or  distribution of
     any part thereof in violation of securities  laws, and the Purchaser has no
     present  intention of selling,  granting any participation in, or otherwise
     distributing the same in violation of securities laws.

5.4  Investment  Experience.  The  Purchaser  acknowledges  that it can bear the
     economic risk and complete loss of its investment in the Securities and has
     such knowledge and  experience in financial or business  matters that it is
     capable of  evaluating  the merits and risks of the  purchase  contemplated
     hereby  and has been  represented  by  counsel  in the  negotiation  of the
     Agreements.

5.5  Disclosure of Information.  The Purchaser has had an opportunity to receive
     documents  related  to the  Company  and to ask  questions  of and  receive
     answers from the Company regarding the Company,  its business and the terms
     and  conditions of the offering of the  Securities.  Neither such inquiries
     nor any other due diligence  investigation conducted by the Purchaser shall
     modify,  amend or affect  the  Purchaser's  right to rely on the  Company's
     representations and warranties contained in this Agreement or made pursuant
     to this Agreement.

5.6  Restricted  Securities.  The Purchaser  understands that the Securities are
     characterized as "restricted  securities" under the U.S. federal securities
     laws inasmuch as they are being  acquired from the Company in a transaction
     not involving a public offering and that under such laws,  applicable state
     laws and  applicable  regulations  such  securities  may be resold  without
     registration under the 1933 Act only in certain limited circumstances.

5.7  Legends.  It is understood that, until  registration for resale pursuant to
     the  Registration  Rights  Agreement  or  until  sales  under  Rule 144 are
     permitted,  certificates  evidencing  the Securities may bear one or all of
     the following legends or legends substantially similar thereto:

(a)  "The shares represented by this certificate may not be transferred  without
     (i) the opinion of counsel  reasonably  satisfactory to the corporation (if
     reasonably  requested)  that such  transfer  may  lawfully be made  without
     registration  under  the  Securities  Act of  1933 or  qualification  under
     applicable   state   securities   laws;  or  (ii)  such   registration   or
     qualification."

(b)  If required by the authorities of any state in connection with the issuance
     of sale of the Securities, the legend required by such state authority.

     Upon registration for resale pursuant to the Registration  Rights Agreement
or upon Rule 144(k) under the 1933 Act  becoming  available,  the Company  shall
promptly cause certificates  evidencing the Underlying Shares and Warrant Shares
previously  issued  to be  replaced  with  certificates  which do not bear  such
restrictive  legends,  and all Underlying Shares and Warrant Shares subsequently
issued shall not bear such restrictive legends.

5.8  Accredited Investor.  The Purchaser is an "accredited  investor" as defined
     in Rule 501(a) of Regulation D, as amended, under the 1933 Act.

5.9  No General  Solicitation.  The Purchaser did not learn of the investment in
     the   Securities  as  a  result  of  any  public   advertising  or  general
     solicitation.

5.10 Residency of  Purchaser.  The Purchaser is a resident of the state or other
     jurisdiction  indicated next to the Purchaser's  name on the signature page
     hereto.

6.   Registration Rights Agreement and Certificate.

6.1  Registration Rights Agreement.  The parties acknowledge and agree that part
     of the  inducement  for the  Purchasers to enter into this Agreement is the
     Company's execution and delivery of the Registration Rights Agreement.  The
     parties  acknowledge  and  agree  that  simultaneously  with the  execution
     hereof,  the  Registration  Rights  Agreement  is being duly  executed  and
     delivered by the parties thereto.

7.   Covenants and Agreements of the Company.

7.1  19.9% Cap; Rule 144.

(a)  19.9% Cap. In the event that at any time the Company  would be obligated to
     issue an amount of shares of Common Stock upon conversion of, or in payment
     of interest or repayment of principal on, the Debentures,  or upon exercise
     of the Warrants,  which,  when  aggregated  with all shares of Common Stock
     issued to the  Purchaser(s),  would  constitute  a breach of the  Company's
     obligations  under the rules or  regulations  of the Nasdaq Stock Market as
     they apply to the Company,  or any other principal  securities  exchange or
     market  ("Principal  Market")  upon  which the  Common  Stock is or becomes
     traded (the "Cap Regulations"), the Company shall not be obligated to issue
     any such shares of Common  Stock to the extent such shares are in excess of
     the  maximum  permissible  amount  under  such  Cap  Regulations   ("Excess
     Shares").  In such case, the provisions  relating to Cap Regulations in the
     Debentures and Warrants  shall apply.  Only shares of Common Stock acquired
     pursuant to this Agreement (including Underlying Shares and Warrant Shares)
     will be included in  determining  whether the limitation  contained  herein
     would be exceeded for purposes of this Section 7.1(a).

(b)  Rule 144.  The Company  agrees to take the position  that,  for purposes of
     determining  the  holding  period  under  Rule  144 of  the  1933  Act  for
     Underlying  Shares issued upon  conversion of, or in payment of interest or
     repayment  of  principal  on, the  Debentures,  the holding  period of such
     Underlying Shares shall be tacked to the holding period of the Debentures.

7.2  Limitation on Transactions.

(a)  [INTENTIONALLY OMITTED]

(b)  So long as at least 30% of the original  principal amount of the Debentures
     remains outstanding,  without the prior written consent of the holders of a
     majority-in-interest  of Debentures  (which consent may be withheld in such
     holders'  discretion),  the Company shall not (i) issue or sell or agree to
     issue or sell any securities in a MFN  Transaction,  or (ii) issue or sell,
     or agree to issue or sell, any  securities in a Variable Rate  Transaction.
     So long as any  Debentures  remain  outstanding,  without the prior written
     consent  of the  holders of a  majority-in-interest  of  Debentures  (which
     consent may be withheld in such holders' discretion), the Company shall not
     (iii) issue any  securities in payment or  satisfaction  of, or in exchange
     for,  any  outstanding  debt,  except for up to  2,000,000  shares (as such
     number  may be  adjusted  for  stock  splits,  reverse  splits,  and  stock
     dividends) of Common Stock  registered under the 1933 Act in the aggregate;
     provided that: (A) no more than 133, 333 of such shares (as such number may
     be adjusted for stock splits,  reverse  splits and stock  dividends) may be
     sold  during a calendar  month,  if the  average  closing  bid price of the
     Common Stock for the prior  calendar month is at least $1.50 (as such price
     may  be  adjusted  to  reflect  stock  splits,  reverse  splits  and  stock
     dividends)  and (B) no more than 104,167 of such shares (as such number may
     be adjusted for stock splits,  reverse  splits and stock  dividends) may be
     sold  during a calendar  month,  if the  average  closing bid price for the
     Common Stock for the prior calendar month is less than $1.50 (as such price
     may  be  adjusted  to  reflect  stock  splits,  reverse  splits  and  stock
     dividends).

(c)  Subject to any consent or approval rights of the Purchasers  hereunder,  in
     the  event the  Company  contemplates  an  offering  of its  equity or debt
     securities  within six months of the date hereof,  the Company agrees that,
     upon the  reasonable  request of the  Purchasers,  the Company  shall first
     disclose the terms and conditions and other relevant facts of such proposed
     transaction  to Nasdaq  and obtain  from  Nasdaq  its  assurance  that such
     transaction  will not be integrated  with the offering which is the subject
     of this  Agreement for purposes of the Nasdaq rules  requiring  shareholder
     approval of the issuance of 20% or more of an issuer's  outstanding  common
     stock.  In the event the Company  fails to seek or obtain such  assurances,
     then, at the election of a Purchaser,  the Company shall redeem within five
     (5) days the Debentures purchased by such Purchaser at 120% of the original
     per share Purchase Price paid by the Purchaser for all such Debentures then
     held by such Purchaser.

7.3  Right of the Purchasers to Participate in Future Transactions.

(a)  Until December 31, 2002, the Purchasers will have a right to participate in
     any  sales  of  any  of  the  Company's  securities  in a  capital  raising
     transaction  on the terms and  conditions  set forth in this  Section  7.3.
     During such period,  the Company  shall give ten (10) business days advance
     written notice to the Purchaser  prior to any  non-public  offer or sale of
     any of the Company's equity  securities or any securities  convertible into
     or  exchangeable  or exercisable  for such  securities in a capital raising
     transaction  by providing  to the  Purchasers  a  comprehensive  term sheet
     containing all significant  business terms of such a proposed  transaction.
     The  Purchasers  shall  have the  right  (pro rata in  accordance  with the
     Purchasers'   participation  in  this  offering,  or  together  with  other
     investors  selected by the  Purchasers  and  reasonably  acceptable  to the
     Company) to purchase, within twenty (20) days following the consummation of
     such  transaction,  an amount of the  identical  securities  issued in such
     transaction  equal to 50% of the amount  purchased by such other  investors
     (or 100% of such  transaction  if it is a Variable Rate  Transaction or MFN
     Transaction)  for  the  same  consideration  and  on  the  same  terms  and
     conditions as such  third-party  sale. The  Purchaser(s)'  rights hereunder
     must be exercised in writing by the  Purchaser(s)  within ten (10) business
     days following the consummation of such transaction.  If, subsequent to the
     Company  giving notice to a Purchaser  hereunder but prior to the Purchaser
     exercising  its  rights   hereunder,   the  terms  and  conditions  of  the
     third-party sale are changed from that disclosed in the comprehensive  term
     sheet provided to such Purchaser,  the Company shall be required to provide
     a new notice to the Purchaser  hereunder and the Purchasers  shall have the
     right to  exercise  their  rights  to  purchase  the  identical  securities
     following  consummation  of such  transaction  on such  changed  terms  and
     conditions  as  provided  hereunder.  The  rights and  obligations  of this
     Section  7.3 shall in no way  diminish  the other  rights of the  Purchaser
     pursuant to this Section 7.

(b)  Limitation on Right of First Refusal.

(i)  Notwithstanding  anything to the contrary  contained herein,  the number of
     shares of Common  Stock that may be acquired by any  Purchaser  pursuant to
     any capital raising  transaction as described in subsection (a) above shall
     not  exceed a number  that,  when  added to the  total  number of shares of
     Common Stock deemed  beneficially  owned by such  Purchaser  (other than by
     virtue of the  ownership  of  securities  or rights to  acquire  securities
     (including  the  Debentures  and  Warrants)  that have  limitations  on the
     Purchaser's  right  to  convert,   exercise  or  purchase  similar  to  the
     limitation  set forth herein (the  "Excluded  Shares")),  together with all
     shares of  Common  Stock  deemed  beneficially  owned  (not  counting  such
     affiliate's  Excluded  Shares) by the Purchaser's  "affiliates" (as defined
     Rule 144 of the 1933 Act) ("Aggregation  Parties") that would be aggregated
     for purposes of determining whether a group under Section 13(d) of the 1934
     Act, exists,  would exceed 9.9% of the total issued and outstanding  shares
     of the Company's Common Stock (the "Restricted Ownership Percentage"). Each
     holder shall have the right (x) at any time and from time to time to reduce
     its Restricted Ownership Percentage  immediately upon notice to the Company
     and (y) at any time  and from  time to time,  to  increase  its  Restricted
     Ownership  Percentage  immediately  in the  event  of the  announcement  as
     pending or planned of any Change in Control  Transaction (as defined in the
     Debentures).

(ii) The  Purchaser  covenants  at all  times on each day  (each  such day being
     referred  to as a "Covenant  Day") as  follows:  During the balance of such
     Covenant Day and the  succeeding  sixty-one  (61) days (the balance of such
     Covenant Day and the  succeeding 61 days being referred to as the "Covenant
     Period") such Purchaser will not acquire shares of Common Stock pursuant to
     any capital  raising  transaction as described in subsection (a) (including
     convertible  securities  which  are  convertible  or  exchangeable  into or
     exercisable  for Common Stock within 61 days only if such securities do not
     contain the limitations on beneficial  ownership similar to those contained
     herein)  existing at the  commencement of the Covenant Period to the extent
     the number of shares so acquired by such holder and its Aggregation Parties
     (ignoring all dispositions) would exceed:

(1)  the Restricted Ownership Percentage of the total number of shares of Common
     Stock outstanding at the commencement of the Covenant Period,

                                      minus

(2)  the  number  of  shares of Common  Stock  owned by such  Purchaser  and its
     Aggregation Parties at the commencement of the Covenant Period.

     A new and independent  covenant will be deemed to be given by the Purchaser
as of each moment of each Covenant Day. No covenant will terminate,  diminish or
modify  any other  covenant.  The  Purchaser  agrees  to  comply  with each such
covenant.  This Section  7.3(b)  controls in the case of any  conflict  with any
other provision of the Agreements.

     The Company's  obligation to issue  securities  under  subsection (a) above
which would  exceed such limits  referred  to in this  Section  7.3(b)  shall be
suspended to the extent  necessary  until such time, if any, as shares of Common
Stock may be issued in compliance with such restrictions.

7.4  Opinion of Counsel.  On or prior to the  Closing  Date,  the  Company  will
     deliver to the Purchasers  the opinion of legal counsel to the Company,  in
     form and  substance  reasonably  acceptable to the  Purchasers,  addressing
     those legal matters set forth in Schedule 7.4 hereto.

7.5  Reservation  of Common Stock  issuable upon  Conversion  of Debentures  and
     Exercise of Warrants. The Company hereby agrees at all times to reserve and
     keep available out of its  authorized but unissued  shares of Common Stock,
     solely for the purpose of providing  for the full  conversion of Debentures
     (including payment and repayment of interest and principal thereon) and the
     exercise of the  Warrants,  such number of shares of Common  Stock as shall
     from time to time equal 200% of the number of shares  sufficient  to permit
     the full  conversion  of  Debentures  (including  payment and  repayment of
     interest and principal  thereon) and 100% of the number of shares necessary
     to permit the full exercise of the Warrants in accordance with the terms of
     the Warrants.  All  calculations  pursuant to this paragraph  shall be made
     without regard to restrictions on beneficial ownership.

7.6  Reports.  For  so  long  as  the  Purchasers  beneficially  own  any of the
     Securities,  the  Company  will  furnish to the  Purchasers  the  following
     reports,  each of which shall be provided to the  Purchasers by air mail or
     reputable international courier (within one week of filing with the SEC, in
     the case of SEC filings):

(a)  Quarterly Reports.  The Company's  quarterly report on Form 10-Q or, in the
     absence of such report,  consolidated  balance  sheets of the Company as at
     the  end  of  such  period  and  the  related  consolidated  statements  of
     operations, stockholders' equity and cash flows for such period and for the
     portion of the Company's fiscal year ended on the last day of such quarter,
     all in reasonable detail and certified by the Company to have been prepared
     in accordance with generally  accepted  accounting  principles,  subject to
     year-end and audit adjustments.

(b)  Annual Reports.  The Company's Form 10-K or, in the absence of a Form 10-K,
     consolidated  balance  sheets of the  Company as at the end of such  fiscal
     year and the related  consolidated  statements  of earnings,  stockholders'
     equity  and  cash  flows  for  such  year,  all in  reasonable  detail  and
     accompanied by the report on such consolidated  financial  statements of an
     independent  certified  public  accountant  selected  by  the  Company  and
     reasonably satisfactory to the Purchaser.

(c)  Securities Filings. Copies of (i) all notices, proxy statements,  financial
     statements,  reports  and  documents  as the  Company  shall  send  or make
     available generally to its stockholders or to financial analysts,  promptly
     after providing same to the  stockholders and (ii) all periodic and special
     reports,  documents and  registration  statements  (other than on Form S-8)
     which the  Company  furnishes  or files,  or any officer or director of the
     Company (in such  person's  capacity as such)  furnishes  or files with the
     SEC.

(d)  Other Information.  Such other information  relating to the Company as from
     time to time may  reasonably  be  requested by any  Purchaser  provided the
     Company produces such  information in its ordinary course of business,  and
     further provided that the Company, solely in its own discretion, determines
     that such  information is not  confidential in nature and disclosure to the
     Purchaser would not be harmful to the Company.

(e)  Rule 144. The Company  agrees to make publicly  available on a timely basis
     the  information  necessary  to  enable  Rule 144  under the 1933 Act to be
     available for resale.

7.7  Press  Releases.  Any press  release  or other  publicity  concerning  this
     Agreement  or the  transactions  contemplated  by this  Agreement  shall be
     submitted  to the  Purchasers  for comment at least two (2)  business  days
     prior to  issuance,  unless the release is  required to be issued  within a
     shorter  period of time by law or pursuant to the rules of the NASDAQ Stock
     Market or a national securities  exchange.  The Company shall issue a press
     release concerning the fact and material terms of this Agreement within one
     business day of the Closing.

7.8  No Conflicting Agreements. The Company will not take any action, enter into
     any agreement or make any  commitment  that would  conflict or interfere in
     any  material  respect with the  obligations  to the  Purchasers  under the
     Agreements.

7.9  Insurance.  For so  long  as any  Purchaser  beneficially  owns  any of the
     Securities,  the Company shall, and shall cause each active  subsidiary to,
     have in full force and  effect (a)  insurance  reasonably  believed  by the
     Company to be  adequate  on all assets and  activities,  covering  property
     damage  and loss of income  by fire or other  casualty,  and (b)  insurance
     reasonably  believed to be  adequate  protection  against all  liabilities,
     claims and risks  against  which it is customary  for  companies  similarly
     situated as the Company and the subsidiaries to insure.

7.10 Compliance  with  Laws.  So long  as the  Purchasers  beneficially  own any
     Securities,  the  Company  will use  reasonable  efforts to comply with all
     applicable laws, rules, regulations, orders and decrees of all governmental
     authorities, except to the extent non-compliance (in one instance or in the
     aggregate) would not have a Material Adverse Effect.

7.11 Listing of  Underlying  Shares and  Related  Matters.  The  Company  hereby
     agrees, promptly following the Closing of the transactions  contemplated by
     this Agreement,  to take such action to cause the Underlying Shares and the
     Warrant Shares to be listed on the Nasdaq  Small-Cap  Market as promptly as
     possible  but  no  later  than  the  effective  date  of  the  registration
     contemplated  by the  Registration  Rights  Agreement.  The Company further
     agrees  that if the  Company  applies  to have  its  Common  Stock or other
     securities  traded on any other principal stock exchange or market, it will
     include in such  application  the Underlying  Shares and Warrant Shares and
     will take such other  action as is  necessary to cause such Common Stock to
     be so listed. For so long as any Debentures remain outstanding, the Company
     will take all action  necessary  to continue the listing and trading of its
     Common  Stock on the  Nasdaq  Small-Cap  Market or on the  Nasdaq  National
     Market,  the  New  York  Stock  Exchange  or the  American  Stock  Exchange
     (collectively,  "Approved  Markets"),  and will comply in all respects with
     the Company's  reporting,  filing and other obligations under the bylaws or
     rules of such exchange or market,  as  applicable,  to ensure the continued
     eligibility  for trading of the  Underlying  Shares and the Warrant  Shares
     thereon.  Neither  the Company  nor any of its  Affiliates,  nor any Person
     acting on its or their behalf, shall directly or indirectly make any offers
     or sales of any  security or solicit any offers to buy any  security  which
     may cause the integration of the offering hereunder with any other offering
     of securities  for purposes of determining  the need to obtain  stockholder
     approval of the  transactions  contemplated  hereby  under the rules of the
     Nasdaq Stock Market.  The Company shall notify the Purchasers in advance if
     it intends to make any private placement of securities within the six month
     period following the date hereof, and at the Purchasers' reasonable request
     the  Company  shall  request a ruling  from the NASD in  advance  that such
     private placement will not be integrated with the transactions contemplated
     hereunder as described in the preceding sentence.

7.12 Corporate  Existence.   So  long  as  any  Debentures  or  Warrants  remain
     outstanding,  the Company shall maintain its corporate existence, except in
     the event of a merger, consolidation or sale of all or substantially all of
     the Company's  assets, as long as the surviving or successor entity in such
     transaction (a) assumes the Company's  obligations  hereunder and under the
     agreements and instruments entered into in connection herewith,  regardless
     of whether or not the Company would have had a sufficient  number of shares
     of Common Stock  authorized  and available for issuance in order to fulfill
     its obligations  hereunder and effect the conversion (including payment on)
     and exercise in full of all Debentures  and Warrants  outstanding as of the
     date  of  such  transaction;   (b)  has  no  legal,  contractual  or  other
     restrictions  on its  ability to perform  the  obligations  of the  Company
     hereunder  and  under  the  agreements  and  instruments  entered  into  in
     connection  herewith;  and (c)(i) is a publicly  traded  corporation  whose
     common stock and the shares of capital stock  issuable upon  conversion and
     exercise of the  Debentures  and  Warrants  are (or would be upon  issuance
     thereof)  listed for  trading on an  Approved  Market or (ii) if not such a
     publicly  traded  corporation,  then the buyer agrees that it will,  at the
     election of the Purchasers, purchase such Purchasers' Securities at a price
     equal to the greater of (a) 120% of the Purchase  Price of such  Securities
     or (b) the fair market  value of such  Securities  on an  as-converted  and
     as-exercised  basis based on the closing price  immediately  preceding such
     transaction or the redemption date, whichever is greater.

8.   Survival.  All  representations,   warranties,   covenants  and  agreements
     contained  in  this  Agreement  shall  be  deemed  to  be  representations,
     warranties,  covenants  and  agreements  as of the date  hereof  and  shall
     survive the execution and delivery of this Agreement.

9.   Miscellaneous.

9.1  Successors  and  Assigns.  This  Agreement  may not be  assigned by a party
     hereto  without the prior  written  consent of the other party hereto which
     consent may not be  unreasonably  withheld or delayed,  except that without
     the prior written  consent of the Company,  but after notice duly given,  a
     Purchaser may assign its rights and delegate its duties  hereunder in whole
     or in part to an affiliate  or to any  Purchaser  of  Securities  from such
     Purchaser.  The terms and conditions of this  Agreement  shall inure to the
     benefit of and be binding  upon the  respective  permitted  successors  and
     assigns of the parties.  Nothing in this Agreement,  express or implied, is
     intended to confer  upon any party  other than the parties  hereto or their
     respective  successors and assigns any rights,  remedies,  obligations,  or
     liabilities  under or by reason  of this  Agreement,  except  as  expressly
     provided in this Agreement.

9.2  Counterparts.  This Agreement may be executed in two or more  counterparts,
     each of which shall be deemed an original,  but all of which together shall
     constitute one and the same instrument.

9.3  Titles and  Subtitles.  The titles and subtitles used in this Agreement are
     used for  convenience  only and are not to be  considered  in construing or
     interpreting this Agreement.

9.4  Notices.  Unless otherwise provided, any notice required or permitted under
     this  Agreement  shall be given in writing and shall be deemed  effectively
     given only upon  delivery  to each  party to be  notified  by (i)  personal
     delivery,  (ii)  telex or  telecopier,  upon  receipt  of  confirmation  of
     complete transmittal,  or (iii) an internationally recognized overnight air
     courier,  addressed  to the party to be notified at the address as follows,
     or at such other  address as such party may  designate by ten days' advance
     written notice to the other party:

                           If to the Company:

                           Fonar Corporation
                           110 Marcus Drive
                           Melville, New York 11747
                           Telephone:  (631) 694-2929
                           Fax:  (631) 249-3734
                           Attention:  President

                           If to the  Purchasers,  to the addresses set forth on
                           the signature pages hereto.

9.5  Expenses.  The  parties  hereto  shall pay their own costs and  expenses in
     connection herewith, except that the Company shall pay to Tail Wind, Inc. a
     non-refundable sum equal to 1% of the Purchase Price paid by each Purchaser
     as and for reimbursement  for legal and due diligence  expenses incurred in
     connection  herewith  and such amount  shall be paid at Closing  from gross
     proceeds of the  offering.  The Company  shall pay all fees and expenses of
     any  placement  agents  or  finders  in  connection  with the  transactions
     contemplated  by this Agreement  pursuant to a separate  agreement  between
     such parties.  Without limiting the foregoing,  a cash fee equal to 3.5% of
     the gross proceeds  received by the Company  hereunder from Purchasers will
     be paid by the  Company to Roan  Meyers  Inc.  ("RMI")  at Closing  (to the
     extent not already paid).  Such amount may be paid on the Company's account
     directly  by the  Purchasers  out  of  proceeds  to be  received  from  the
     Purchasers  as an offset from the  Purchase  Price.  The Company  will also
     issue to RMI a warrant  (the "RMI  Warrant")  for the  purchase  of 300,000
     shares  of  Common  Stock  in the  identical  form  as  Exhibit  B to  this
     Agreement, with the same term and exercise price thereunder.  The shares of
     Common Stock underlying the RMI Warrant shall be included in the definition
     of "Registrable Securities" under the Registration Rights Agreement and RMI
     shall be made a party thereto.

9.6  Amendments  and Waivers.  Any term of this Agreement may be amended and the
     observance of any term of this Agreement may be waived (either generally or
     in a particular instance and either  retroactively or prospectively),  only
     with the written consent of the Company and a  majority-in-interest  of the
     Purchasers,  provided,  however, that any such amendment or waiver effected
     in accordance  with this paragraph shall be binding upon each holder of any
     Securities  purchased  under this Agreement at the time  outstanding,  each
     future holder of all such securities, and the Company.

9.7  Severability.  If one or more  provisions of this  Agreement are held to be
     unenforceable  under  applicable law, such provision shall be excluded from
     this Agreement and the balance of this Agreement shall be interpreted as if
     such provision were so excluded and shall be enforceable in accordance with
     its terms.

9.8  Entire  Agreement.  This  Agreement,  including  the Exhibits and Schedules
     hereto, and the Registration Rights Agreement,  the Debentures and Warrants
     and other documents  contemplated  hereby  constitute the entire  agreement
     among the parties  hereof with  respect to the  subject  matter  hereof and
     thereof and supersede all prior  agreements and  understandings,  both oral
     and written,  between the parties with respect to the subject matter hereof
     and thereof.

9.9  Further Assurances.  The parties shall execute and deliver all such further
     instruments and documents and take all such other actions as may reasonably
     be  required  to carry  out the  transactions  contemplated  hereby  and to
     evidence the fulfillment of the agreements herein contained.

9.10 Applicable  Law.  This  Agreement  shall be governed  by, and  construed in
     accordance  with,  the  laws of the  State of New York  without  regard  to
     principles of conflicts of laws.

9.11 Remedies.

(i)  The Purchasers  shall be entitled to specific  performance of the Company's
     obligations under the Agreements.

(ii) The Company on the one hand, and each  Purchaser  severally and not jointly
     on the other hand,  shall indemnify the other and hold it harmless from any
     loss,  cost,  expense  or fees  (including  attorneys'  fees and  expenses)
     arising  out of any breach of any  representation,  warranty,  covenant  or
     agreement in any of the  Agreements,  or arising out of the  enforcement of
     this Section 9.11.

9.12 Jurisdiction.  The parties  hereby  agree that all  actions or  proceedings
     arising directly or indirectly from or in connection with this Agreement or
     the other  Agreements  shall be litigated  only in the Supreme Court of the
     State of New York or the  United  States  District  Court for the  Southern
     District  of New York  located in New York  County,  New York.  The parties
     consent to the  jurisdiction  and venue of the foregoing courts and consent
     that any process or notice of motion or other application to either of said
     courts or a judge  thereof may be served inside or outside the State of New
     York or the  Southern  District  of New  York by  registered  mail,  return
     receipt  requested,  directed to the party being  served at its address set
     forth in this Agreement (and service so made shall be deemed complete three
     (3) days  after  the same has been  posted  as  aforesaid)  or by  personal
     service or in such other  manner as may be  permissible  under the rules of
     said  courts.  The  Company  hereby  waives  any  right to a jury  trial in
     connection  with any  litigation  pursuant to this  Agreement  or the other
     Agreements.

                      [This page intentionally left blank]

<PAGE>
                  IN WITNESS  WHEREOF,  the parties have executed this Agreement
as of the date first above written.

                                           The Company:

                                           FONAR CORPORATION

                                    By:    /s/
                                           ----------------------------
                                    Name:
                                           ----------------------------
                                    Title:
                                           ----------------------------


                                           The Purchasers

                                           THE TAIL WIND FUND, LTD.

                                    By:    /s/
                                           ----------------------------
                                    Name:
                                           ----------------------------
                                    Title:
                                           ----------------------------


Aggregate Purchase Price:                   $4,500,000
Principal Amount:                           $4,500,000
No. of Purchase Warrants:                   659,501
No. of Callable Warrants:                   2,000,000
Initial Conversion Price of Debentures:     $2.047

Address for Notices:

                                The Tail Wind Fund Ltd.
                                MeesPierson (Bahamas) Ltd.
                                Attn:  Ngaire Rolle
                                Windemere House, 404 East Bay Street
                                P.O. Box SS 5539, Nassau, Bahamas
                                Tel:  242/393-8777   Fax:  242/393-9021
                                (Resident:  Bahamas)

                                with a copy to:

                                David Crook, Esq.
                                c/o EASI
                                1st Floor, No. 1 Regent Street
                                London, SW1Y 4NS UK
                                Telephone:  44-171-468-7660
                                Facsimile:   44-171-468-7657

                                with a copy to:

                                Kleinberg, Kaplan, Wolff & Cohen, P.C.
                                551 Fifth Avenue, 18th Flr.
                                New York, New York  10176
                                Attn:  Peter J. Weisman, Esq.
                                Telephone:  (212) 986-6000
                                Facsimile:  (212) 986-8866
</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-10
<SEQUENCE>6
<FILENAME>ex102.txt
<TEXT>

          Exhibit 10.2

                          REGISTRATION RIGHTS AGREEMENT

     This Registration  Rights Agreement (this  "Agreement") is made and entered
into as of this 24th day of May, 2001 by and among FONAR CORPORATION, a Delaware
corporation (the "Company"),  and the persons identified as Purchasers  pursuant
to that  certain  Purchase  Agreement  of even  date  herewith  by and among the
Company and such Purchasers (the "Purchase Agreement").

         The parties hereby agree as follows:

1.   Certain Definitions.

     As used in this  Agreement,  the  following  terms shall have the following
meanings:

     "Additional  Registrable  Securities" shall mean any shares of Common Stock
which are included  within the  definition  of  Registrable  Securities  but not
included in any Registration Statement filed pursuant to Section 2(a)(i) below.

     "Common Stock" shall mean the Company's Common Stock, $0.0001 par value per
share.

     "Conversion Price" shall have the meaning set forth in the Debentures.

     "Prospectus"  shall  mean  the  prospectus  included  in  any  Registration
Statement, as amended or supplemented by any prospectus supplement, with respect
to the terms of the  offering of any portion of the  Registrable  Securities  or
Additional  Registrable Securities covered by such Registration Statement and by
all other amendments and supplements to the prospectus, including post-effective
amendments and all material incorporated by reference in such prospectus.

     "Purchasers" shall mean the purchasers identified in the Purchase Agreement
and any subsequent holder of any Debentures, Warrants, Registrable Securities or
Additional  Registrable  Securities as a result of a permitted  transfer  (which
shall include without limitation any transfer to any affiliate of a Purchaser).

     "Register," "registered" and "registration" refer to a registration made by
preparing and filing a registration  statement or similar document in compliance
with the  1933 Act (as  defined  below),  and the  declaration  or  ordering  of
effectiveness of such registration statement or document.

     "Registrable  Securities" shall mean (i) the Underlying Shares, the Warrant
Shares,  and the  shares of  Common  Stock  issuable  upon  exercise  of the RMI
Warrants,  and the shares of Common Stock or other securities issued or issuable
to each  Purchaser or its permitted  transferee or designee (a) upon  conversion
of, or payment of interest or repayment of principal  under the  Debentures  and
upon the exercise of the Warrants, or (b) upon any distribution with respect to,
any exchange for or any replacement of such Debentures or Warrants,  or (c) upon
any conversion, exercise or exchange of any securities issued in connection with
any such  distribution,  exchange  or  replacement;  (ii)  securities  issued or
issuable upon any stock split, stock dividend, recapitalization or similar event
with respect to such shares of Common Stock; and (iii) any other security issued
as a dividend or other  distribution  with  respect  to, in exchange  for, or in
replacement of, the securities referred to in the preceding clauses.

     "Registration  Statement"  shall  mean any  registration  statement  of the
Company  filed  under  the  1933  Act  that  covers  the  resale  of  any of the
Registrable  Securities or  Additional  Registrable  Securities  pursuant to the
provisions of this Agreement,  amendments and  supplements to such  Registration
Statement,  including post-effective  amendments,  all exhibits and all material
incorporated by reference in such Registration Statement.

     "SEC" means the U.S. Securities and Exchange Commission.

     "1933 Act" means the Securities Act of 1933, as amended,  and the rules and
regulations promulgated thereunder.

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

     Capitalized  terms used  herein but not  otherwise  defined  shall have the
meaning ascribed thereto in the Purchase Agreement.

2. Registration.

(a)  Registration Statements.

(i)  Registrable Securities.  Promptly following the closing of the purchase and
     sale of Debentures and Warrants contemplated by the Purchase Agreement (the
     "Closing  Date")  (but no later than  thirty  (30) days  after the  Closing
     Date),  the Company  shall  prepare and file with the SEC one  Registration
     Statement  on Form  S-3  (or,  if Form  S-3 is not  then  available  to the
     Company,  on such form of  registration  statement as is then  available to
     effect a registration for resale of the Registrable Securities,  subject to
     the Purchasers' consent), covering the resale of the Registrable Securities
     in an amount equal to 200% of the number of Underlying Shares issuable upon
     full  conversion of the Debentures at the lower of the Conversion  Price or
     Market  Price as of the  filing  date plus 100% of the  number of shares of
     Common  Stock  necessary to permit the exercise in full of the Warrants (in
     each case without regard to any restrictions on beneficial ownership). Such
     Registration  Statement also shall cover, to the extent allowable under the
     1933 Act and the Rules  promulgated  thereunder  (including Rule 416), such
     indeterminate  number of additional  shares of Common Stock  resulting from
     stock splits,  stock dividends or similar  transactions with respect to the
     Registrable Securities. No securities shall be included in the Registration
     Statement  without the consent of the Purchasers other than the Registrable
     Securities.  The  Registration  Statement (and each amendment or supplement
     thereto)  shall  be  provided  in  accordance  with  Section  3(c)  to  the
     Purchasers and their counsel prior to its filing or other submission.

(ii) Additional Registrable  Securities.  At any time and from time to time upon
     the  written  demand  of  any  Purchaser  following  the  existence  of any
     Additional  Registerable  Securities,  and in any event within  thirty (30)
     days following such demand, the Company shall prepare and file with the SEC
     one  Registration  Statement  on Form  S-3  (or,  if Form  S-3 is not  then
     available to the Company, on such form of registration statement as is then
     available to effect a registration for resale of the Additional Registrable
     Securities) covering the resale of the Additional Registrable Securities in
     an amount equal to the number of Additional  Registrable  Securities.  Such
     Registration  Statement also shall cover, to the extent allowable under the
     1933 Act and the rules  promulgated  thereunder  (including Rule 416), such
     indeterminate  number of additional  shares of Common Stock  resulting from
     stock splits,  stock dividends or similar  transactions with respect to the
     Additional  Registrable  Securities.  The Registration  Statement (and each
     amendment  or  supplement  thereto)  shall be provided in  accordance  with
     Section 3(c) to the  Purchaser and its counsel prior to its filing or other
     submission.

(b)  Expenses.   The  Company  will  pay  all  expenses   associated  with  each
     registration,  including the Purchasers'  reasonable  expenses up to $5,000
     for such Purchasers'  expenses  (including  reasonable  attorneys fees), in
     connection with the registration but excluding discounts, commissions, fees
     of  underwriters,  selling brokers,  dealer managers or similar  securities
     industry professionals.

(c)  Effectiveness.

(i)  The Company shall use its best efforts to have each Registration  Statement
     declared  effective  as  soon  as  practicable.  If  (A)  the  Registration
     Statement covering Registrable  Securities is not declared effective by the
     SEC within two (2) months  following the Closing Date, or the  Registration
     Statement  covering  Additional  Registrable  Securities  is  not  declared
     effective by the SEC within two (2) months  following demand of a Purchaser
     relating to the Additional  Registrable  Securities to be covered  thereby,
     provided  that if either of such  Registration  Statements  is  subject  to
     review by the SEC staff (x)  solely  as a "plain  English"  or  "screening"
     review, then such effective date shall be within three (3) months following
     the Closing  Date or demand,  as the case may be, and (y) for a regular SEC
     review  (which may  include in part a "plain  English"  review),  then such
     effective date shall be within six (6) months following the Closing Date or
     demand,  as  the  case  may  be  (each  of  the  foregoing   deadlines,   a
     "Registration Date"), (B) after a Registration  Statement has been declared
     effective by the SEC,  sales cannot be made  pursuant to such  Registration
     Statement for any reason (including  without limitation by reason of a stop
     order, or the Company's  failure to update the Registration  Statement) but
     except as excused pursuant to subparagraph (ii) below, (C) the Common Stock
     generally  or  the  Registrable   Securities  (or  Additional   Registrable
     Securities after issuance and registration)  specifically are not listed or
     included for quotation on the Nasdaq  National  Market  System,  the Nasdaq
     Small  Cap  Market,  the New York  Stock  Exchange  or the  American  Stock
     Exchange  (each an  "Approved  Market")  or trading of the Common  Stock is
     suspended  or halted  thereon,  or (D) the  Company  fails,  refuses  or is
     otherwise  unable to timely  issue  Underlying  Shares upon  conversion  of
     Debentures or Warrant  Shares upon exercise of the Warrants,  in accordance
     with the terms of the Debentures and Warrants,  or unlegended  certificates
     as  required  under  the  Agreements,  in each  case  within  ten (10) days
     following the  Purchaser's  written demand for issuance of such  Underlying
     Shares  or  Warrant  Shares or  certificates,  then the  Company  will make
     pro-rata  payments  to the  Purchaser  as  liquidated  damages and not as a
     penalty,  in an amount  equal to 2% of the sum of the  aggregate  principal
     amount then  outstanding  under the  Debentures  for each month (or portion
     thereof)  following  the  Registration  Date during which any of the events
     described  in (A),  (B),  (C) or (D) above  occurs and is  continuing  (the
     "Blackout Period").  Each such payment shall be due and payable within five
     (5)  days of the end of each  month  (or  ending  portion  thereof)  of the
     Blackout Period until the termination of the Blackout Period. Such payments
     shall  be  in  partial  compensation  to  the  Purchasers,  and  shall  not
     constitute the Purchasers'  exclusive remedy for such events.  The Blackout
     Period  shall  terminate  upon  (w)  the  effectiveness  of the  applicable
     Registration  Statement  in the case of (A) and (B) above;  (x)  listing or
     inclusion  and/or trading of the Common Stock on an Approved  Market in the
     case of (C) above;  (y)  delivery  of such shares in the case of (D) above;
     and (z) in the  case  of the  events  described  in (A) or (B)  above,  the
     earlier  termination of the Registration Period (as defined in Section 3(a)
     below).  The  amounts  payable  as  liquidated  damages  pursuant  to  this
     paragraph  shall be  payable,  at the option of the  Purchasers,  in lawful
     money of the United States or in shares of Common Stock at the lower of the
     Conversion Price or Market Price, and amounts payable as liquidated damages
     shall be paid monthly within five (5) business days of the last day of each
     month  following  the   commencement  of  the  Blackout  Period  until  the
     termination of the Blackout Period.  Amounts payable as liquidated  damages
     hereunder  shall  cease  when  a  Purchaser  no  longer  holds  Debentures,
     Warrants,  Registrable Securities or Additional Registrable Securities,  as
     applicable.

(ii) For not more than five (5)  consecutive  trading days or for a total of not
     more than twenty (20)  trading  days in any  consecutive  twelve (12) month
     period,  the  Company  may  delay the  disclosure  of  material  non-public
     information   concerning   the  Company,   by   terminating  or  suspending
     effectiveness  of  any  registration  contemplated  by  this  Section,  the
     disclosure  of which at the time is not,  in the good faith  opinion of the
     Company,  in the  best  interests  of the  Company  (an  "Allowed  Delay");
     provided,  that the Company  shall  promptly (a) notify the  Purchasers  in
     writing of the  existence  of (but in no event,  without the prior  written
     consent of a Purchaser, shall the Company disclose to such Purchaser any of
     the  facts or  circumstances  regarding)  material  non-public  information
     giving rise to an Allowed  Delay,  and (b) advise the Purchasers in writing
     to cease all sales under the  Registration  Statement  until the end of the
     Allowed Delay.

(d)  Underwritten Offering. If any offering pursuant to a Registration Statement
     pursuant to Section  2(a) hereof  involves an  underwritten  offering,  the
     Company shall have the right to select an investment  banker and manager to
     administer  the  offering,  which  investment  banker or  manager  shall be
     reasonably satisfactory to the Purchasers.

3.   Company  Obligations.  The Company  will use its best efforts to effect the
     registration  of the  Registrable  Securities  and  Additional  Registrable
     Securities in accordance  with the terms hereof,  and pursuant  thereto the
     Company will, as expeditiously as possible:

(a)  use its best  efforts  to  cause  such  Registration  Statement  to  become
     effective  and  to  remain   continuously   effective  for  a  period  (the
     "Registration Period") that will terminate upon the earlier of (i) the date
     on which all Registrable  Securities or Additional  Registrable  Securities
     have been sold (and no Debentures or Warrants remain outstanding), (ii) the
     date  on  which  all  Registrable   Securities  or  Additional  Registrable
     Securities, as the case may be, may be sold pursuant to Rule 144(k) (and no
     Debentures or Warrants remain outstanding), and (iii) the fifth anniversary
     of the Closing Date.

(b)  prepare and file with the SEC such amendments and post-effective amendments
     to the  Registration  Statement  and the  Prospectus as may be necessary to
     keep the  Registration  Statement  effective  for the period  specified  in
     Section 3(a) and to comply with the provisions of the 1933 Act and the 1934
     Act with respect to the  distribution  of all  Registrable  Securities  and
     Additional  Registrable  Securities;  provided  that, at a time  reasonably
     prior to the  filing of a  Registration  Statement  or  Prospectus,  or any
     amendments  or  supplements  thereto,  the  Company  will  furnish  to  the
     Purchasers  copies of all documents  proposed to be filed,  which documents
     will be subject to the comments of the Purchasers;

(c)  permit  counsel  designated by the  Purchasers to review each  Registration
     Statement and all  amendments and  supplements  thereto no fewer than seven
     (7)  business  days  prior  to their  filing  with the SEC and not file any
     document to which such counsel reasonably objects;

(d)  furnish to the  Purchasers  and their legal counsel (i) promptly  after the
     same is prepared and publicly distributed,  filed with the SEC, or received
     by the Company,  one copy of any  Registration  Statement and any amendment
     thereto,  each preliminary  prospectus and Prospectus and each amendment or
     supplement thereto,  and each letter written by or on behalf of the Company
     to the SEC or the staff of the SEC,  and each item of  correspondence  from
     the SEC or the staff of the SEC, in each case relating to such Registration
     Statement (other than any portion of any thereof which contains information
     for which the Company  has sought  confidential  treatment),  and (ii) such
     number of copies of a Prospectus,  including a preliminary prospectus,  and
     all amendments  and  supplements  thereto and such other  documents as each
     Purchaser may reasonably  request in order to facilitate the disposition of
     the Registrable  Securities and Additional  Registrable Securities owned by
     such Purchaser;

(e)  in the event the  Company  selects an  underwriter  for the  offering,  the
     Company shall enter into and perform its  reasonable  obligations  under an
     underwriting  agreement,  in usual and customary form,  including,  without
     limitation,  customary indemnification and contribution  obligations,  with
     the underwriter of such offering;

(f)  if required by the  underwriter,  or if any  Purchaser  is described in the
     Registration Statement as an underwriter, the Company shall furnish, on the
     effective date of the Registration  Statement, on the date that Registrable
     Securities  or  Additional  Registrable  Securities,  as  applicable,   are
     delivered  to an  underwriter,  if any,  for  sale in  connection  with the
     Registration  Statement and at periodic  intervals  thereafter from time to
     time on request,  (i) an opinion,  dated as of such date, from  independent
     legal counsel  representing  the Company for purposes of such  Registration
     Statement,  in form,  scope and  substance  as is  customarily  given in an
     underwritten  public  offering,  addressed to the  underwriter and any such
     Purchaser  and  (ii)  a  letter,   dated  such  date,  from  the  Company's
     independent  certified  public  accountants  in form  and  substance  as is
     customarily   given  by  independent   certified   public   accountants  to
     underwriters  in  an  underwritten   public  offering,   addressed  to  the
     underwriter and any such Purchaser;

(g)  make effort to prevent the  issuance of any stop order or other  suspension
     of effectiveness and, if such order is issued, obtain the withdrawal of any
     such order at the earliest possible moment;

(h)  furnish  to  each  Purchaser  at  least  five  copies  of the  Registration
     Statement and any  post-effective  amendment thereto,  including  financial
     statements and schedules by air mail or reputable  courier within three (3)
     business days of the effective date thereof;

(i)  prior to any  public  offering  of  Registrable  Securities  or  Additional
     Registrable  Securities,  use its best  efforts to  register  or qualify or
     cooperate  with the  Purchasers  and their counsel in  connection  with the
     registration or qualification of such Registrable  Securities or Additional
     Registrable  Securities,  as  applicable,  for  offer  and sale  under  the
     securities  or  blue  sky  laws  of  such  jurisdictions  requested  by the
     Purchaser and do any and all other  reasonable acts or things  necessary or
     advisable  to  enable  the  distribution  in  such   jurisdictions  of  the
     Registrable  Securities or Additional Registrable Securities covered by the
     Registration Statement;

(j)  cause all  Registrable  Securities  or  Additional  Registrable  Securities
     covered  by a  Registration  Statement  to be  listed  on  each  securities
     exchange,  interdealer  quotation  system or other market on which  similar
     securities issued by the Company are then listed;

(k)  immediately notify the Purchasers,  at any time when a Prospectus  relating
     to the  Registrable  Securities  or  Additional  Registrable  Securities is
     required to be delivered  under the 1933 Act, upon discovery  that, or upon
     the happening of any event as a result of which, the Prospectus included in
     such  Registration  Statement,  as  then  in  effect,  includes  an  untrue
     statement of a material  fact or omits to state any material  fact required
     to be stated  therein  or  necessary  to make the  statements  therein  not
     misleading  in the light of the  circumstances  then  existing,  and at the
     request of any such holder,  promptly  prepare and furnish to such holder a
     reasonable  number of copies of a  supplement  to or an  amendment  of such
     Prospectus  as may be necessary  so that,  as  thereafter  delivered to the
     purchasers  of  such  Registrable   Securities  or  Additional  Registrable
     Securities,  as  applicable,  such  Prospectus  shall not include an untrue
     statement of a material  fact or omit to state a material  fact required to
     be  stated  therein  or  necessary  to  make  the  statements  therein  not
     misleading in the light of the circumstances then existing; and

(l)  otherwise  use its best  efforts to comply  with all  applicable  rules and
     regulations of the SEC under the 1933 Act and the 1934 Act, take such other
     actions as may be reasonably  necessary to facilitate the  registration  of
     the  Registrable  Securities  and  Additional  Registrable  Securities,  if
     applicable,  hereunder; and make available to its security holders, as soon
     as reasonably  practicable,  but not later than the  Availability  Date (as
     defined below), an earnings  statement covering a period of at least twelve
     months,  beginning after the effective date of each Registration Statement,
     which earnings  statement  shall satisfy the provisions of Section 11(a) of
     the 1933 Act (for the purpose of this subsection 3(l),  "Availability Date"
     means the 45th day  following  the end of the fourth  fiscal  quarter  that
     includes the effective date of such Registration Statement, except that, if
     such fourth  fiscal  quarter is the last  quarter of the  Company's  fiscal
     year,  "Availability  Date" means the 90th day after the end of such fourth
     fiscal quarter).

4.   Due Diligence Review; Information. The Company shall make available, during
     normal business hours,  for inspection and review by the Purchasers who may
     be  deemed  an  underwriter,   advisors  to  and  representatives  of  such
     Purchasers  (who may or may not be affiliated  with the  Purchasers and who
     are   reasonably   acceptable   to  the  Company),   and  any   underwriter
     participating  in  any  disposition  of  Common  Stock  on  behalf  of  the
     Purchasers  pursuant  to  the  Registration   Statement  or  amendments  or
     supplements  thereto or any blue sky, NASD or other  filing,  all financial
     and other  records,  all SEC  Documents and other filings with the SEC, and
     all other  corporate  documents  and  properties  of the  Company as may be
     reasonably  necessary  for the  purpose  of  establishing  a due  diligence
     defense  under  applicable   securities  laws  and  such  other  reasonable
     purposes, and cause the Company's officers, directors and employees, within
     a  reasonable  time  period,  to  supply  all such  information  reasonably
     requested  by  such  Purchasers  or any  such  representative,  advisor  or
     underwriter  in connection  with such  Registration  Statement  (including,
     without  limitation,  in  response  to all  questions  and other  inquiries
     reasonably  made or  submitted  by any of them),  prior to and from time to
     time after the filing and  effectiveness of the Registration  Statement for
     the sole  purpose of enabling  such  Purchasers  and such  representatives,
     advisors and underwriters and their respective accountants and attorneys to
     conduct  initial and ongoing due diligence  with respect to the Company and
     the accuracy of the Registration Statement.

     The  Company  shall not  disclose  material  nonpublic  information  to the
Purchasers, or to advisors to or representatives of the Purchasers, unless prior
to disclosure of such  information the Company  identifies  such  information as
being material nonpublic information and provides the Purchasers,  such advisors
and  representatives  with the  opportunity  to accept or refuse to accept  such
material  nonpublic  information for review.  The Company may, as a condition to
disclosing any material nonpublic information hereunder, require the Purchasers'
advisors  and   representatives  to  enter  into  a  confidentiality   agreement
(including an agreement with such advisors and representatives  prohibiting them
from  trading  in  Common  Stock  during  such  period  of time  as they  are in
possession of material nonpublic information) in form reasonably satisfactory to
the Company and the  Purchasers.  Nothing  herein  shall  require the Company to
disclose material  nonpublic  information to the Purchasers or their advisors or
representatives.

5.   Obligations of the Purchasers.

(a)  Each  Purchaser  shall  furnish in writing to the Company such  information
     regarding  itself,  the  Registrable  Securities or Additional  Registrable
     Securities,  as  applicable,   held  by  it  and  the  intended  method  of
     disposition  of  the  Registrable   Securities  or  Additional  Registrable
     Securities,  as applicable,  held by it, as shall be reasonably required to
     effect  the  registration  of such  Registrable  Securities  or  Additional
     Registrable Securities, as applicable,  and shall execute such documents in
     connection with such registration as the Company may reasonably request. At
     least fifteen (15) business days prior to the first anticipated filing date
     of any Registration  Statement,  the Company shall notify each Purchaser of
     the information the Company  requires from such Purchaser if such Purchaser
     elects to have any of the Registrable  Securities or Additional Registrable
     Securities included in the Registration Statement.

(b)  Each  Purchaser,  by its  acceptance  of  the  Registrable  Securities  and
     Additional  Registrable  Securities,  if any,  agrees to cooperate with the
     Company as  reasonably  requested  by the  Company in  connection  with the
     preparation and filing of a Registration  Statement hereunder,  unless such
     Purchaser  has  notified  the Company in writing of its election to exclude
     all of its Registrable Securities or Additional Registrable Securities,  as
     applicable,  from the  Registration  Statement.  Each  Purchaser  agrees to
     comply with the applicable  prospectus delivery requirements under the 1933
     Act in connection  with any resales of Registrable  Securities  pursuant to
     the Registration Statement.

(c)  In  the  event  the  Company  determines  to  engage  the  services  of  an
     underwriter  which  engagement is reasonably  acceptable to the Purchasers,
     each Purchaser  agrees to enter into and perform its  obligations  under an
     underwriting  agreement,  in usual and customary form,  including,  without
     limitation,  customary indemnification and contribution  obligations,  with
     the managing  underwriter  of such  offering and take such other actions as
     are reasonably required in order to expedite or facilitate the dispositions
     of the  Registrable  Securities or Additional  Registrable  Securities,  as
     applicable.

(d)  Each Purchaser  agrees that, upon receipt of any notice from the Company of
     the  happening of any event  rendering a  Registration  Statement no longer
     effective,  such  Purchaser  will  immediately  discontinue  disposition of
     Registrable Securities or Additional Registrable Securities pursuant to the
     Registration  Statement covering such Registrable  Securities or Additional
     Registrable Securities,  until the Purchaser's receipt of the copies of the
     supplemented  or  amended  prospectus  filed  with  the  SEC  and  declared
     effective and, if so directed by the Company,  the Purchaser  shall deliver
     to the Company (at the expense of the Company) or destroy all copies in the
     Purchaser's   possession  of  the  prospectus   covering  the   Registrable
     Securities or Additional Registrable Securities, as applicable,  current at
     the time of receipt of such notice.

(e)  No Purchaser may participate in any third party  underwritten  registration
     hereunder  unless  it (i)  agrees  to sell the  Registrable  Securities  or
     Additional Registrable Securities,  as applicable, on the basis provided in
     any  underwriting  arrangements in usual and customary form entered into by
     the Company,  (ii)  completes  and executes all  questionnaires,  powers of
     attorney,   indemnities,   underwriting   agreements  and  other  documents
     reasonably required under the terms of such underwriting arrangements,  and
     (iii) agrees to pay its pro rata share of all  underwriting  discounts  and
     commissions  and any  expenses  in excess of those  payable by the  Company
     pursuant to the terms of this Agreement.

6.   Indemnification.

(a)  Indemnification  by  Company.  The  Company  agrees to  indemnify  and hold
     harmless,  to the fullest extent permitted by law, the Purchasers,  each of
     their  officers,  directors,  partners  and  employees  and each person who
     controls  the  Purchasers  (within the meaning of the 1933 Act) against all
     losses, claims, damages, liabilities, costs (including, without limitation,
     reasonable  attorney's  fees) and expenses imposed on such person caused by
     (i) any untrue or alleged untrue  statement of a material fact contained in
     any Registration Statement, Prospectus or any preliminary prospectus or any
     amendment  or  supplement  thereto or any  omission or alleged  omission to
     state therein a material fact required to be stated therein or necessary to
     make the statements therein not misleading,  except insofar as the same are
     based upon any  information  furnished  in  writing to the  Company by such
     Purchasers, expressly for use therein, or (ii) any violation by the Company
     of any federal,  state or common law, rule or regulation  applicable to the
     Company in connection with any  Registration  Statement,  Prospectus or any
     preliminary  prospectus,  or any amendment or supplement thereto, and shall
     reimburse in accordance with  subparagraph (c) below, each of the foregoing
     persons  for any  legal  and any  other  expenses  reasonably  incurred  in
     connection with  investigating or defending any such claims.  The foregoing
     is subject to the  condition  that,  insofar as the  foregoing  indemnities
     relate to any untrue  statement,  alleged  untrue  statement,  omission  or
     alleged  omission made in any preliminary  prospectus or Prospectus that is
     eliminated  or  remedied  in any  Prospectus  or  amendment  or  supplement
     thereto, the above indemnity  obligations of the Company shall not inure to
     the benefit of any indemnified party if a copy of such corrected Prospectus
     or amendment or supplement  thereto had been  provided to such  indemnified
     party  and was not sent or given by such  indemnified  party at or prior to
     the time such action was required of such indemnified party by the 1933 Act
     and if delivery of such Prospectus or amendment or supplement thereto would
     have  eliminated  (or been a sufficient  defense to) any  liability of such
     indemnified  party with respect to such  statement  or omission.  Indemnity
     under this Section 5(a) shall remain in full force and effect regardless of
     any  investigation  made by or on behalf of any indemnified party and shall
     survive the permitted transfer of the Registrable Securities and Additional
     Registrable Securities.

(b)  Indemnification by Holder. In connection with any registration  pursuant to
     the terms of this Agreement,  each Purchaser will furnish to the Company in
     writing such information as the Company reasonably  requests concerning the
     holders of Registrable  Securities and Additional Registrable Securities or
     the  proposed  manner  of  distribution  for  use in  connection  with  any
     Registration Statement or Prospectus and agrees, severally but not jointly,
     to indemnify and hold harmless, to the fullest extent permitted by law, the
     Company, its directors,  officers, employees,  stockholders and each person
     who controls  the Company  (within the meaning of the 1933 Act) against any
     losses,  claims,  damages,  liabilities and expense  (including  reasonable
     attorney's  fees) resulting from any untrue statement of a material fact or
     any omission of a material fact  required to be stated in the  Registration
     Statement  or  Prospectus  or   preliminary   prospectus  or  amendment  or
     supplement  thereto  or  necessary  to  make  the  statements  therein  not
     misleading,  to the  extent,  but  only  to the  extent  that  such  untrue
     statement or omission is contained in any information  furnished in writing
     by  such  Purchaser  to the  Company  specifically  for  inclusion  in such
     Registration Statement or Prospectus or amendment or supplement thereto and
     that such  information  was  substantially  relied  upon by the  Company in
     preparation of the Registration Statement or Prospectus or any amendment or
     supplement  thereto.  In no event shall the  liability  of a  Purchaser  be
     greater  in  amount  than the  dollar  amount of the  proceeds  (net of all
     expenses  paid by such  Purchaser and the amount of any damages such holder
     has otherwise  been  required to pay by reason of such untrue  statement or
     omission)  received  by such  Purchaser  upon the  sale of the  Registrable
     Securities   or   Additional   Registrable   Securities   included  in  the
     Registration Statement giving rise to such indemnification obligation.

(c)  Conduct   of   Indemnification   Proceedings.   Any  person   entitled   to
     indemnification  hereunder shall (i) give prompt notice to the indemnifying
     party of any claim with respect to which it seeks  indemnification and (ii)
     permit  such  indemnifying  party to assume the  defense of such claim with
     counsel reasonably satisfactory to the indemnified party; provided that any
     person entitled to indemnification hereunder shall have the right to employ
     separate  counsel and to participate in the defense of such claim,  but the
     fees and  expenses of such  counsel  shall be at the expense of such person
     unless (a) the indemnifying  party has agreed to pay such fees or expenses,
     or (b) the  indemnifying  party  shall have failed to assume the defense of
     such claim and employ counsel reasonably satisfactory to such person or (c)
     in the reasonable judgment of any such person, based upon written advice of
     its  counsel,  a conflict of interest  exists  between  such person and the
     indemnifying  party with  respect to such  claims  (in which  case,  if the
     person notifies the  indemnifying  party in writing that such person elects
     to employ separate  counsel at the expense of the  indemnifying  party, the
     indemnifying  party  shall not have the right to assume the defense of such
     claim on behalf of such person); and provided, further, that the failure of
     any  indemnified  party to give notice as provided herein shall not relieve
     the indemnifying party of its obligations  hereunder,  except to the extent
     that such  failure to give notice  shall  materially  adversely  affect the
     indemnifying  party in the defense of any such claim or  litigation.  It is
     understood  that the  indemnifying  party shall not, in connection with any
     proceeding in the same jurisdiction, be liable for fees or expenses of more
     than one separate  firm of  attorneys at any time for all such  indemnified
     parties.  No  indemnifying  party  will,  except  with the  consent  of the
     indemnified  party,  consent  to entry of any  judgment  or enter  into any
     settlement  that does not  include as an  unconditional  term  thereof  the
     giving by the claimant or plaintiff to such indemnified  party of a release
     from all liability in respect of such claim or litigation.

(d)  Contribution.  If for any reason the  indemnification  provided  for in the
     preceding  paragraphs (a) and (b) is unavailable to an indemnified party or
     insufficient  to hold  it  harmless,  other  than  as  expressly  specified
     therein, then the indemnifying party shall contribute to the amount paid or
     payable by the indemnified party as a result of such loss, claim, damage or
     liability  in such  proportion  as is  appropriate  to reflect the relative
     fault of the indemnified  party and the indemnifying  party, as well as any
     other  relevant  equitable  considerations.  No person guilty of fraudulent
     misrepresentation within the meaning of Section 11(f) of the 1933 Act shall
     be entitled to  contribution  from any person not guilty of such fraudulent
     misrepresentation.  In no event  shall  the  contribution  obligation  of a
     holder of Registrable  Securities or Additional  Registrable  Securities be
     greater  in  amount  than the  dollar  amount of the  proceeds  (net of all
     expenses  paid by such holder and the amount of any damages such holder has
     otherwise  been required to pay by reason of such untrue or alleged  untrue
     statement or omission or alleged omission)  received by it upon the sale of
     the Registrable Securities or Additional Registrable Securities giving rise
     to such contribution obligation.

7.   Miscellaneous.

(a)  Amendments  and Waivers.  This  Agreement  may be amended only by a writing
     signed by the  parties  hereto.  The  Company  may take any  action  herein
     prohibited,  or omit to perform any act herein  required to be performed by
     it, only if the Company  shall have  obtained  the written  consent to such
     amendment,  action or omission to act, of the  Purchasers  affected by such
     amendment, action or omission to act.

(b)  Notices.  All notices and other  communications  provided  for or permitted
     hereunder  shall  be made  as set  forth  in  Section  9.4 of the  Purchase
     Agreement.

(c)  Assignments and Transfers by Purchasers.  This Agreement and all the rights
     and  obligations of any Purchaser  hereunder may be assigned or transferred
     to any  transferee or assignee of the  Debentures,  Warrants or Registrable
     Securities,  except  as  set  forth  herein.  A  Purchaser  may  make  such
     assignment  or transfer  to any  transferee  or assignee of any  Debenture,
     Warrant,  Registrable  Securities  or  Additional  Registrable  Securities,
     provided that (i) such transfer is made expressly subject to this Agreement
     and  the  transferee  agrees  in  writing  to be  bound  by the  terms  and
     conditions hereof, (ii) the Company is provided with written notice of such
     assignment,  and (iii) such  transfer is to an  affiliate of a Purchaser or
     such transfer is otherwise  approved by the Company (not to be unreasonably
     withheld).

(d)  Assignments  and  Transfers  by the  Company.  This  Agreement  may  not be
     assigned  by  the  Company   without  the  prior  written  consent  of  the
     Purchasers,  but after  notice duly given,  the  Company  shall  assign its
     rights and  delegate  its  duties  hereunder  to any  successor-in-interest
     corporation,  and such  successor-in-interest  shall assume such rights and
     duties,  in the event of a merger or  consolidation  of the Company with or
     into another  corporation  or the sale of all or  substantially  all of the
     Company's  assets  (and  it  shall  be a  condition  to  any  such  merger,
     consolidation or sale that such successor-in-interest assume in writing all
     obligations hereunder).

(e)  Benefits of the Agreement. The terms and conditions of this Agreement shall
     inure  to the  benefit  of and be  binding  upon the  respective  permitted
     successors and assigns of the parties.  Nothing in this Agreement,  express
     or  implied,  is  intended  to confer upon any party other than the parties
     hereto or their  respective  successors  and assigns any rights,  remedies,
     obligations, or liabilities under or by reason of this Agreement, except as
     expressly provided in this Agreement.

(f)  Counterparts.  This Agreement may be executed in two or more  counterparts,
     each of which shall be deemed an original,  but all of which together shall
     constitute one and the same instrument.

(g)  Titles and  Subtitles.  The titles and subtitles used in this Agreement are
     used for  convenience  only and are not to be  considered  in construing or
     interpreting this Agreement.

(h)  Severability.  If one or more  provisions of this  Agreement are held to be
     unenforceable  under  applicable law, such provision shall be excluded from
     this Agreement and the balance of this Agreement shall be interpreted as if
     such provision were so excluded and shall be enforceable in accordance with
     its terms to the fullest extent permitted by law.

(i)  Further Assurances.  The parties shall execute and deliver all such further
     instruments and documents and take all such other actions as may reasonably
     be  required  to carry  out the  transactions  contemplated  hereby  and to
     evidence the fulfillment of the agreements herein contained.

(j)  Entire  Agreement.  This Agreement,  together with the Purchase  Agreement,
     Debentures and Warrants and documents  contemplated thereby, is intended by
     the parties as a final  expression of their  agreement and intended to be a
     complete and exclusive  statement of the agreement and understanding of the
     parties  hereto in respect of the subject  matter  contained  herein.  This
     Agreement,  together with the Purchase  Agreement,  Debentures and Warrants
     and documents  contemplated  thereby,  supersedes all prior  agreements and
     understandings between the parties with respect to such subject matter.

(k)  Applicable  Law.  This  Agreement  shall be governed  by, and  construed in
     accordance  with,  the  laws of the  State of New York  without  regard  to
     principles of conflicts of law.

                            [Signature Page Follows]

<PAGE>

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

                                  THE COMPANY:

                                                     FONAR CORPORATION


                                                     By:/s/
                                                        -----------------------
                                                   Name:
                                                        -----------------------
                                                  Title:
                                                        -----------------------

                                 THE PURCHASER:

                                                     THE TAIL WIND FUND, LTD.


                                                     By:/s/
                                                        -----------------------
                                                   Name:
                                                        -----------------------
                                                  Title:
                                                        -----------------------


                                                     PLACEMENT AGENT:

                                                     ROAN MEYERS INC.

                                                     By:/s/
                                                        -----------------------
                                                   Name:
                                                        -----------------------
                                                  Title:
                                                        -----------------------
</TEXT>
</DOCUMENT>
</SEC-DOCUMENT>
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