STOCK PURCHASE AGREEMENT

ANNEX I

TERMS AND CONDITIONS FOR PURCHASE OF SHARES

1.             Authorization and Sale of the Shares .  Upon the terms and subject to the conditions of this Agreement, the Company has authorized the sale of up to 3,186,389 Shares.  The Company reserves the right to increase or decrease this number.

2.             Agreement to Sell and Purchase the Shares; Subscription Date .

2.1           At the Closing (as defined in Section 3), the Company will sell to the Investor, and the Investor will purchase from the Company, upon the terms and subject to the conditions hereinafter set forth, the number of Shares set forth on the signature page hereto at the purchase price set forth on such signature page.

2.2           The Company is entering into this same form of Stock Purchase Agreement with certain other investors (the “ Other Investors ”) effective as of the date hereof (the “ Subscription Date ”) and expects to complete sales of Shares to them; provided that the Company may sell Shares to the Other Investors who are directors and officers at a price of $8.10 per share and to the remaining Other Investors at $7.20 per share.  (The Investor and the Other Investors are hereinafter sometimes collectively referred to as the “ Investors ,” and this Agreement and the Stock Purchase Agreements executed by the Other Investors are hereinafter sometimes collectively referred to as the “ Agreements .”)

3.             Delivery of the Shares at Closing .  The completion of the purchase and sale of the Shares (the “ Closing ”) shall occur (the “ Closing Date ”) on the third business day after the Subscription Date (or upon such earlier date as the Company and the Investors shall agree), at the offices of the Company’s counsel.  At the Closing, the Company shall deliver to the Investor one or more stock certificates representing the number of Shares set forth on the signature page hereto, each such certificate to be registered in the name of the Investor or, if so indicated on the signature page hereto, in the name of a nominee designated by the Investor.  The Company’s obligation to issue the Shares to the Investor shall be subject to the following conditions, any one or more of which may be waived by the Company: (a) receipt by the Company of a certified or official bank check or wire transfer of funds in the full amount of the purchase price for the Shares being purchased hereunder as set forth on the signature page hereto; provided , however , that any Investor subject to the Investment Company Act of 1940, as amended (the “ Investment Act ”), shall not be required to deliver the applicable purchase price prior to the physical delivery and review by Investor of the certificates representing the Shares purchased by such Investor, in compliance with the provisions of the Investment Act; (b) completion of the purchases and sales under the Agreements with the Other Investors; and (c) the accuracy of the representations and warranties made by the Investors and the fulfillment of those undertakings of the Investors to be fulfilled prior to the Closing.  The Investor’s obligation to purchase the Shares shall be subject to the following conditions, any one or more of which may be waived by the Investor (provided that no such waiver shall be deemed given unless in writing and executed by the Investor): (a) receipt by the Investor of a counter-signed copy of this Agreement executed by the Company; (b) receipt by the Investor of one or more stock certificates representing the number of Shares set forth on the signature page hereto; (c) receipt by the Investor of an opinion letter, dated as of the Closing Date, from Latham & Watkins LLP, counsel to the

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Company, in form and substance reasonably satisfactory to the Investor; (d) the accuracy of the representations and warranties made by the Company and the fulfillment of those undertakings of the Company to be fulfilled prior to the Closing; (e) on the Closing Date, no legal action, suit or proceeding shall be pending or threatened which seeks to restrain or prohibit the transactions contemplated by the Agreements; (f) the Company shall have delivered to the Investors its certificate, dated the Closing Date, duly executed by its Chief Executive Officer to the effect set forth in clause (d) above; (g) the receipt by the Investors of a certificate, dated the Closing Date, of the Secretary or Assistant Secretary of the Company certifying (i) the certificate of incorporation and bylaws of the Company as in effect on the Closing Date, (ii) all resolutions of the board of directors (and committees thereof) of the Company relating to the Agreements and the transactions contemplated thereby and (iii) the incumbency of all officers of the Company executing the Agreements and any other agreement or document contemplated thereby; and (h) a minimum investment at Closing of not less than $22,000,000.

4.             Representations, Warranties and Covenants of the Company .  The Company hereby represents and warrants to, and covenants with, the Investor as of the Closing Date, as follows:

4.1           Organization .  Each of the Company and its Subsidiaries (as defined in Rule 405 under the Securities Act of 1933, as amended (the “ Securities Act ”))  is duly organized and validly existing in good standing under the laws of the jurisdiction of its organization.  Each of the Company and its Subsidiaries has full power and authority to own, operate and occupy its properties and to conduct its business as presently conducted and is registered or qualified to do business and in good standing in each jurisdiction in which it owns or leases property or transacts business and where the failure to be so qualified would have a material adverse effect upon the financial condition or business, operations, assets or prospects of the Company and its Subsidiaries, considered as one enterprise, or a material adverse effect upon the Company’s ability to perform in any material respect its obligations under the Agreements, and no proceeding has been instituted in any such jurisdiction, revoking, limiting or curtailing, or seeking to revoke, limit or curtail, such power and authority or qualification.

4.2           Due Authorization .  The Company has all requisite power and authority to execute, deliver and perform its obligations under the Agreements, and the Agreements have been duly authorized and validly executed and delivered by the Company and constitute legal, valid and binding agreements of the Company enforceable against the Company in accordance with their terms, except as rights to indemnity and contribution may be limited by state or federal securities laws or the public policy underlying such laws, except as enforceability may be limited by applicable bankruptcy, insolvency, reorganization, moratorium or similar laws affecting creditors’ and contracting parties’ rights generally and except as enforceability may be subject to general principles of equity (regardless of whether such enforceability is considered in a proceeding in equity or at law).

4.3           Non-Contravention .  The execution and delivery of the Agreements, the issuance and sale of the Shares to be sold by the Company under the Agreements, the fulfillment of the terms of the Agreements and the consummation of the transactions contemplated thereby will not (A) conflict with or constitute a violation of, or default (with or without the giving of notice or the passage of time or both) under, (i) any material bond, debenture, note or other evidence of indebtedness, or under any material lease, indenture, mortgage, deed of trust, loan agreement, joint

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venture or other agreement or instrument to which the Company or any Subsidiary is a party or by which it or any of its Subsidiaries or their respective properties are bound, (ii) the charter, by-laws or other organizational documents of the Company or any Subsidiary, or (iii) any law, administrative regulation, ordinance or order of any court or governmental agency, arbitration panel or authority applicable to the Company or any Subsidiary or their respective properties, or (B) result in the creation or imposition of any lien, encumbrance, claim, security interest or restriction whatsoever upon any of the material properties or assets of the Company or any Subsidiary or an acceleration of indebtedness pursuant to any obligation, agreement or condition contained in any material bond, debenture, note or any other evidence of indebtedness or any material indenture, mortgage, deed of trust or any other agreement or instrument to which the Company or any Subsidiary is a party or by which any of them is bound or to which any of the property or assets of the Company or any Subsidiary is subject.  No consent, approval, authorization or other order of, or registration, qualification or filing with, any regulatory body, administrative agency, self-regulatory organization, stock exchange or market, or other governmental body in the United States is required for the execution and delivery of the Agreements and the valid issuance and sale of the Shares to be sold pursuant to the Agreements, other than such as have been made or obtained, and except for any securities filings required to be made under federal or state securities laws.  The Company and its Board of Directors have taken all necessary action, if any, in order to render inapplicable any control share acquisition, business combination, poison pill (including any distribution under a rights agreement) or other similar anti-takeover provision under the Company’s Certificate of Incorporation (or similar charter documents) or, except for Delaware General Corporate Law Section 203, the laws of its state of incorporation that is or could become applicable to the Investors as a result of the Investors and the Company fulfilling their obligations or exercising their rights under the Agreements, including without limitation the Company’s issuance of the Shares and the Investors’ ownership of the Shares.

4.4           Reporting Status .  The Company has filed in a timely manner all documents that the Company was required to file under the Securities Exchange Act of 1934, as amended (the “ Exchange Ac t”), during the 12 months preceding the date of this Agreement.  The following documents complied in all material respects with the SEC’s requirements as of their respective filing dates, and the information contained therein as of the date thereof did not contain 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 in light of the circumstances under where they were made not misleading, except to the extent that information contained in any such document has been revised or superseded by a later filed SEC Document (as defined below):

(i)                          The Company’s Annual Report on Form 10-K for the year ended December 31, 2004, including the exhibits thereto (the “ Form 10-K ”); and

(ii)                       all other documents, including the exhibits thereto, filed by the Company with the SEC since December 31, 2004 pursuant to the reporting requirements of the Exchange Act (together with the Form 10-K, the “ SEC Documents ”).

The SEC Documents (together with press releases and other documents made publicly available by the Company), when taken together as a whole, as of the date hereof, do not contain an untrue statement of a material fact or omit to state a material fact required to be stated

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therein or necessary to make the statements therein in light of the circumstances under which they were made not misleading.

4.5           Capitalization .  As of  June 30, 2005, the authorized capital stock of the Company consists of 50,000,000 shares of Common Stock and 3,000,000 shares of preferred stock, par value $.003 per share, of the Company (the “ Preferred Stock ”).  As of July 27, 2005, there were approximately (i)  25,703,311  shares of Common Stock issued and outstanding, (ii) no shares of Preferred Stock issued and outstanding, (iii)  7,360,000 shares of Common Stock reserved for issuance under the Company’s 2001 Equity Incentive Plan, 1993 Stock Plan and 1995 Directors’ Option Plan, including 3,599,216 shares issuable upon exercise of outstanding stock options issued by the Company to current or former employees, consultants and directors of the Company and its Subsidiaries, (iv) an aggregate of 100,779 shares of Common Stock reserved for issuance pursuant to the Company’s 1995 Employee Stock Purchase Plan, a portion of which are issued and outstanding, and (v) no other shares or options, warrants or other rights to acquire shares of capital stock of the Company or securities convertible into capital stock of the Company.  Since July 27, 2005, the Company has not issued any shares or options, warrants or other rights to acquire shares of capital stock of the Company or securities convertible into capital stock of the Company other than (i) pursuant to option exercises, (ii) the Shares, as contemplated by the Agreements, (iii) such securities as may be issued automatically to the new director elected to the Board, as contemplated by Section 8 hereof and shares of restricted stock granted to directors and (iv) ordinary course grants of options to non-management employees.  The Company is, directly or indirectly, the registered and beneficial owner of all of the outstanding shares of capital stock of each of its Subsidiaries.  All outstanding shares of Common Stock are duly authorized, validly issued, fully paid and nonassessable, free from any liens or any other encumbrances created by the Company with respect to the issuance and delivery thereof and not subject to preemptive rights.  Other than as disclosed in the SEC Documents, there are no outstanding rights, options, warrants, preemptive rights, rights of first refusal agreements, commitments or similar rights for the purchase or acquisition from the Company of any securities of the Company.  The Shares to be sold pursuant to the Agreements have been duly authorized, and when issued and paid for in accordance with the terms of the Agreements will be duly and validly issued, fully paid and nonassessable, free and clear of all pledges, liens, encumbrances and other restrictions (other than those arising under federal or state securities laws as a result of the private placement of the Shares to the Investors).  No preemptive right, co-sale right, right of first refusal or other similar right exists with respect to the Shares or the issuance and sale thereof.  No further approval or authorization of any stockholder, the Board of Directors of the Company or others is required for the issuance and sale of the Shares.  Except as set forth in the SEC Documents, no holder of any of the securities of the Company or any of its Subsidiaries has any rights (“demand,” “piggyback” or otherwise) to have such securities registered by reason of the intention to file, filing or effectiveness of a Registration Statement (as defined in Section 7.1 hereof).

4.6           Legal Proceedings .  There is no material legal or governmental proceeding pending or, to the knowledge of the Company, threatened to which the Company or any Subsidiary or any officer or director of the Company or any Subsidiary in their capacity as such officer or director is or may be a party or of which the business or property of the Company or any Subsidiary is subject that is not disclosed in the SEC Documents.  There is no action, suit, proceeding, inquiry or investigation before or by any court, public board or body (including, without limitation, the SEC) pending or, to the knowledge of the Company, threatened against or affecting the Company or any of

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its Subsidiaries wherein an unfavorable decision, ruling or finding could adversely affect the validity or enforceability of, or the authority or ability of the Company to perform its obligations under the Agreements.

4.7           No Violations .  Neither the Company nor any Subsidiary is in violation of its charter, bylaws, or other organizational document, or in violation of any law, administrative regulation, ordinance or order of any court or governmental agency, arbitration panel or authority applicable to the Company or any Subsidiary, which violation, individually or in the aggregate, would be reasonably likely to have a material adverse effect on the business, operations, assets or prospects or financial condition of the Company and its Subsidiaries, considered as one enterprise, or is in default (and there exists no condition which, with or without the passage of time or giving of notice or both, would constitute a default) in any material respect in the performance of any bond, debenture, note or any other evidence of indebtedness in any indenture, mortgage, deed of trust or any other material agreement or instrument to which the Company or any Subsidiary is a party or by which the Company or any Subsidiary is bound or by which the properties of the Company or any Subsidiary are bound, which would be reasonably likely to have a material adverse effect upon the business, operations, assets or prospects or financial condition of the Company and its Subsidiaries, considered as one enterprise.  The Company is in compliance with all provisions of the Sarbanes-Oxley Act and the rules and regulations promulgated thereunder and with all provisions of the NASD (as defined in Section 4.12 hereof), in each case as to which the Company is required to be in compliance.  The Company has established disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) for the Company and designed such disclosure controls and procedures to ensure that material information relating to the Company, including its Subsidiaries, is made known to the certifying officers by others within those entities, particularly during the period in which the Company’s most recently filed periodic report under the Exchange Act, as the case may be, is being prepared.  The Company’s certifying officers have evaluated the effectiveness of the Company’s disclosure controls and procedures as of the last day of the fiscal period (such date, the “ Evaluation Date ”) covered by the most recently filed periodic report under the Exchange Act.  The Company presented in its most recently filed periodic report under the Exchange Act the conclusions of the certifying officers about the effectiveness of the disclosure controls and procedures based on their evaluations as of the Evaluation Date.  Since the Evaluation Date, there have been no significant changes in the Company’s internal controls (as such term is defined in Item 307(b) of Regulation S-K under the Exchange Act) or, to the Company’s knowledge, in other factors that could significantly affect the Company’s internal controls.

4.8           Governmental Permits, Etc .  Each of the Company and its Subsidiaries has all necessary franchises, licenses, certificates and other authorizations from any foreign, federal, state or local government or governmental agency, department, or body that are currently necessary for the operation of the business of the Company and its Subsidiaries as currently conducted, except where the failure to currently possess could not reasonably be expected to have a material adverse effect upon the business, operations, assets or prospects or financial condition of the Company and its Subsidiaries, considered as one enterprise (the “ Material Permits ”), and neither the Company nor any Subsidiary has received any notice of proceedings relating to the revocation or modification of any Material Permit.

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4.9           Intellectual Property .  Each of the Company and its Subsidiaries owns or possesses sufficient rights to use all patents, patent rights, trademarks, copyrights, licenses, inventions, trade secrets, trade names and know-how (collectively, “ Intellectual Property ”) that are necessary for the conduct of its business as now conducted except where the failure to currently own or possess would not have a material adverse effect on the financial condition, business, operations, assets or prospects of the Company and its Subsidiaries considered as one enterprise, free and clear of any liens, encumbrances, claims, security interests or restrictions, except for such as do not materially interfere with the conduct of the Company’s business as presently conducted and as currently proposed to be conducted by the Company.  Except as set forth in the SEC Documents, (i) neither the Company nor any of its Subsidiaries has received any notice of, or has any knowledge of, any infringement of asserted rights of a third party with respect to any Intellectual Property that, individually or in the aggregate, would have a material adverse effect on the financial condition or business, operations, assets or prospects of the Company and its Subsidiaries considered as one enterprise and (ii) neither the Company nor any of its Subsidiaries has received any notice of any infringement rights by a third party with respect to any Intellectual Property that, individually or in the aggregate, would have a material adverse effect upon the business, operations, assets or prospects or financial condition of the Company and its Subsidiaries, considered as one enterprise.

4.10         Financial Statements .  The financial statements of the Company and the related notes thereto included in the SEC Documents present fairly, in accordance with generally accepted accounting principles, the financial position of the Company and its Subsidiaries as of the dates indicated, and the results of its operations and cash flows for the periods therein specified.  Such financial statements (including the related notes) have been prepared in accordance with generally accepted accounting principles applied on a consistent basis throughout the periods therein specified, except as set forth in the SEC Documents and subject in the case of unaudited financial statements, to normal year-end audit adjustments.

4.11         No Material Adverse Change .  Except as disclosed in the SEC Documents, since March 31, 2005 there has not been (i) any material adverse change, or any event, development or circumstance which could reasonably be expected to result in a material adverse change, in the financial condition, earnings or prospects of the Company and its Subsidiaries considered as one enterprise nor has any material adverse event occurred to the Company or its Subsidiaries, (ii) any material adverse event affecting the Company or any of its Subsidiaries, (iii) any obligation, direct or contingent, that is material to the Company and its Subsidiaries considered as one enterprise, incurred by the Company, except obligations incurred in the ordinary course of business, (iv) any dividend or distribution of any kind declared, paid or made on the capital stock of the Company or any of its Subsidiaries, (v) any loss or damage (whether or not insured) to the physical property of the Company or any of its Subsidiaries which has been sustained which has a material adverse effect on the condition (financial or otherwise), earnings, operations, business or business prospects of the Company and its Subsidiaries considered as one enterprise or (vi) any notice from or by the Securities and Exchange Commission and/or any other state or federal securities regulatory agency, the NASD and/or the Nasdaq with respect to (a) any investigation of the Company’s activities or financial results, (b) the Company’s compliance with applicable laws, rules or regulations or (c) issues regarding the continued trading of the Common Stock on the Nasdaq National Market.  Except as disclosed in the SEC Documents, neither the Company nor any of its Subsidiaries has (i) sold, assigned, transferred, abandoned, mortgaged, pledged or subjected to lien any of its material

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properties, tangible or intangible, or rights under any material contract, permit, license, franchise or other agreement or (ii) waived or cancelled any indebtedness or other obligations owed to the Company or any such Subsidiary.

4.12         NASDAQ Listing .  The Company’s Common Stock is registered pursuant to Section 12(g) of the Exchange Act and is listed on The Nasdaq Stock Market, Inc. National Market (the “ Nasdaq National Market ”), trading in the Common Stock has not been suspended, and the Company has taken no action designed to, or likely to have the effect of, terminating the registration of the Common Stock under the Exchange Act or de-listing the Common Stock from the Nasdaq National Market, nor to the Company’s knowledge is the National Association of Securities Dealers, Inc. (“ NASD ”) currently contemplating terminating such listing.  The Company and the Common Stock meet the criteria for continued listing and trading on the Nasdaq National Market.

4.13         Listing of the Shares .  The Company shall comply with all requirements of the National Association of Securities Dealers, Inc. with respect to the issuance of the Shares and the listing thereof on the Nasdaq National Market.  In furtherance thereof, the Company shall use its best efforts to take such actions as may be necessary and as soon as practicable and in no event later than 20 days after the Closing Date (if not filed prior to the Closing Date) to file with the Nasdaq National Market an application or other document required by the Nasdaq National Market and pay all applicable fees when due for the listing of the Shares with the Nasdaq National Market and shall provide evidence of such filing to the Investors.  The Company knows of no reason why the Shares will not be eligible for listing on the Nasdaq National Market.  Company stockholder approval for the transactions contemplated by this Agreement will not be required.

4.14         No Manipulation of Stock .  The Company has not taken and will not, in violation of applicable law, take, any action designed to or that might reasonably be expected to cause or result in stabilization or manipulation of the price of the Common Stock to facilitate the sale or resale of the Shares.

4.15         S-3 Status .  The Company meets the requirements for the use of Form S-3 for the registration of the resale of the Shares by the Investors and will use its best efforts to maintain S-3 status with the SEC during the Registration Period (as defined in Section 7.1(c)).

4.16         Insurance .  The Company maintains and will continue to maintain insurance against loss or damage by fire or other casualty and such other insurance, including, but not limited to, product liability insurance, in such amounts and covering such risks as is reasonably adequate consistent with industry practice for the conduct of its business and the value of its properties, all of which insurance is in full force and effect.

4.17         Tax Matters .  The Company has filed all material federal, state and local income and franchise and other tax returns required to be filed and has paid all taxes due in accordance therewith, and no tax deficiency has been determined adversely to the Company which has had (nor does the Company have any knowledge of any tax deficiency which, if determined adversely to the Company, might have) a material adverse effect on the condition (financial or otherwise), earnings, operations, business or prospects of the Company and its Subsidiaries considered as one enterprise.

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4.18         Investment Company .  The Company is not, and immediately after receipt of the payments for the Shares will not be, an “investment company” within the meaning of such term under the Investment Company Act of 1940 and the rules and regulations of the SEC thereunder.

4.19         No Registration .  Assuming the accuracy of the representations and warranties made by, and compliance with the covenants of, the Investors in Section 5 hereof, no registration of the Shares under the Securities Act is required in connection with the offer and sale of the Shares by the Company to the Investors as contemplated by the Agreements.  Other than the Investors, no Person has any right to cause the Company to effect the registration under the Securities Act of any securities of the Company on the Registration Statement (as defined in Section 7.1 below).

4.20         Internal Accounting Controls .  The Company and its Subsidiaries maintain a system of internal accounting controls sufficient, in the judgment of the Company’s board of directors, to provide reasonable assurance that (i) transactions are executed in accordance with management’s general or specific authorizations, (ii) transactions are recorded as necessary to permit preparation of financial statements in conformity with generally accepted accounting principles and to maintain asset accountability, (iii) access to assets is permitted only in accordance with management’s general or specific authorization and (iv) the recorded accountability for assets is compared with the existing assets at reasonable intervals and appropriate action is taken with respect to any differences.

4.21         Form D; General Solicitation .  The Company agrees to file one or more Forms D with respect to the Shares on a timely basis as required under Regulation D under the Securities Act to claim the exemption provided by Rule 506 of Regulation D and to provide a copy thereof to the Investors and their counsel promptly after such filing.  Neither the Company nor any person acting on behalf of the Company has offered or sold any of the Shares by any form of general solicitation or general advertising.  The Company has offered the Shares for sale only to the Investors and certain other “accredited investors” within the meaning of Rule 501 under the Securities Act.

4.22         Certain Future Financings and Related Actions .

(a)           The Company will not sell, offer to sell, solicit offers to buy or otherwise negotiate in respect of any “security” (as defined in the Securities Act) that is or could be integrated with the sale of the Shares in a manner that would require the registration of the Shares under the Securities Act.

(b)           The Company shall not offer, sell, contract to sell or issue (or engage any person to assist the Company in taking any such action) any equity securities or securities convertible into, exchangeable for or otherwise entitling the holder to acquire, any Common Stock until the later of (x) the 120 ^th day after the Closing Date, and (y) the 60 ^th day after the Registration Statement is declared effective; provided , however , that nothing in this Section 4.22(b) shall prohibit the Company from issuing securities (v) to employees, directors, officers, advisors or consultants of the Company; (w) upon exercise of conversion, exchange, purchase or similar rights issued, granted or given