Exhibit 10.4

SECURITIES PURCHASE AGREEMENT

This Securities Purchase Agreement (this “Agreement”) is dated as of December 5,
2006 among Ceragenix Pharmaceuticals, Inc., a Delaware corporation (the
“Company”), and each purchaser identified on the signature pages hereto (each,
including its successors and assigns, a “Purchaser” and collectively the
“Purchasers”).

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

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

ARTICLE I.

DEFINITIONS

1.1           DEFINITIONS.  IN ADDITION TO THE TERMS DEFINED ELSEWHERE IN THIS
AGREEMENT: (A) CAPITALIZED TERMS THAT ARE NOT OTHERWISE DEFINED HEREIN HAVE THE
MEANINGS GIVEN TO SUCH TERMS IN THE DEBENTURES (AS DEFINED HEREIN), AND (B) THE
FOLLOWING TERMS HAVE THE MEANINGS SET FORTH IN THIS SECTION 1.1:

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

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

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

“Class A Warrants” means those certain Class A Common Stock Purchase Warrants
issued by the Company to the Note Holders on November 28, 2005.

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

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“Closing Date” means the Trading Day when all of the Transaction Documents have
been executed and delivered by the applicable parties thereto, and all
conditions precedent to (i) the Purchasers’ obligations to pay the Subscription
Amount and (ii) the Company’s obligations to deliver the Securities have been
satisfied or waived.

“Commission” means the Securities and Exchange Commission.

“Common Stock” means the common stock of the Company, par value $0.0001 per
share, and any other class of securities into which such securities may
hereafter be reclassified or changed into.

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

“Company Counsel” means McKenna, Long & Aldridge LLP, with offices located at
1875 Lawrence Street, Suite 200, Denver, Colorado 80203.

“Conversion Price” shall have the meaning ascribed to such term in the
Debentures.

“Debentures” means, the 9% Secured Convertible Debentures due, subject to the
terms therein, 3 years from their date of issuance, issued by the Company to the
Purchasers hereunder, in the form of Exhibit A attached hereto.

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

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

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

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

“Exempt Issuance” means the issuance of (a) shares of Common Stock or options to
employees, officers or directors of the Company pursuant to any stock or option
plan duly adopted for such purpose by a majority of the non-employee members of
the Board of Directors of the Company or a majority of the members of a
committee of non-employee directors established for the purpose of administering
the Company’s stock and/or option plans including the Compensation Committee,
(b) securities upon the exercise or exchange of or conversion of any Securities
issued hereunder, (c) securities issued pursuant to acquisitions or strategic
transactions approved by a majority of the

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disinterested directors of the Company, provided any such issuance shall only be
to a Person which is, itself or through its subsidiaries, an operating company
in a business synergistic with the business of the Company and in which the
Company receives benefits in addition to the investment of funds, but shall not
include a transaction in which the Company is issuing securities primarily for
the purpose of raising capital or to an entity whose primary business is
investing in securities and (d) securities exercisable or exchangeable for or
convertible into shares of Common Stock issued and outstanding on the date of
this Agreement, provided that such securities have not been amended since the
date of this Agreement to increase the number of such securities or to decrease
the exercise, exchange or conversion price of such securities; provided,
however, the term “Exempt Issuance” for purposes of Section 5 of the Debentures
and Section 3 of the Warrants shall not include shares of Common Stock issued or
issuable upon conversion, exchange or exercise of the Notes, the Class A
Warrants or other Common Stock Equivalents outstanding as of the date hereof in
the event there is any adjustment to the conversion, exercise or exchange price
of such Notes, the Class A Warrants or other Common Stock Equivalents.  For
clarity, any such adjustment to the conversion, exercise or exchange price of
the Notes, the Class A Warrants or other Common Stock Equivalents shall be
subject to Section 5 of the Debentures and Section 3 of the Warrants.

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

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

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

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

“Intercreditor Agreement” means that certain Intercreditor Agreement in the Form
of Exhibit H attached hereto, dated as of the date hereof between the Purchasers
and Note Holders.

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

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

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

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

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

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“Note Holders” means Longview Equity Fund, LP, Longview Fund, LP, Alpha Capital
Aktiengesellschaft and Iroquois Capital.

“Notes” means those secured convertible notes issued by the Company to the Note
Holders on November 28, 2005 in the original aggregate principal amount of
$3,200,000.

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

“Permitted Lien” shall have the meaning set forth in the Debentures.

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

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

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

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

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

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

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

“Required Minimum” means, as of any date, the maximum aggregate number of shares
of Common Stock then issued or potentially issuable in the future pursuant to
the Transaction Documents, including any Underlying Shares issuable upon
exercise or conversion in full of all Warrants and Debentures (including
Underlying Shares issuable as payment of interest), ignoring any conversion or
exercise limits set forth therein, and assuming that the Conversion Price is at
all times on and after the date of determination 75% of the then Conversion
Price on the Trading Day immediately prior to the date of determination.

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

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

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

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

“Security Agreement” means the Amended and Restated Security Agreement, dated
the date hereof, among the Company, its Subsidiaries, the Note Holders and the
Purchasers, in the form of Exhibit E attached hereto.

“Security Documents” shall mean the Security Agreement, the Subsidiary
Guarantees and any other documents and filing required thereunder in order to
grant the Purchasers a security interest in the assets of the Company and the
Subsidiaries as provided in the Security Agreement, including all UCC-1 filing
receipts Collateral. The Purchasers and the Note Holders have agreed to hold
their respective security interests pari passu, pursuant to the terms of the
Intercreditor Agreement.

“Series A Stockholders” means those holders of the Company’s Series A
Convertible Preferred Stock.

“Short Sales” means all “short sales” as defined in Rule 200 of Regulation SHO
under the Exchange Act (but shall not be deemed to include the location and/or
reservation of borrowable shares of Common Stock).

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

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

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

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

“Subsidiary Guarantee” means the Subsidiary Guarantee, dated the date hereof, by
each Subsidiary in favor of the Purchasers, in the form of Exhibit F attached
hereto.

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“Trading Day” means a day on which the Common Stock is listed or quoted for
trading on a Trading Market and, if the Common Stock is not then listed or
quoted for trading on a Trading Market, “Trading Day” shall mean a Business Day.

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

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

“Transfer Agent” means Corporate Stock Transfer, with a mailing address of 3200
Cherry Creek Drive South, Suite 430, Denver, Colorado 80209, and a facsimile
number of (303) 777-3094, and any successor transfer agent of the Company.

“Underlying Shares” means the shares of Common Stock issued and issuable upon
conversion or redemption of the Debentures and upon exercise of the Warrants and
issued and issuable in lieu of the cash payment of interest on the Debentures in
accordance with the terms of the Debentures.

“Variable Rate Transaction” shall have the meaning ascribed to such term in
Section 4.14(b).

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

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

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

ARTICLE II.

PURCHASE AND SALE

2.1           CLOSING.  ON THE CLOSING DATE, UPON THE TERMS AND SUBJECT TO THE
CONDITIONS SET FORTH HEREIN, SUBSTANTIALLY CONCURRENT WITH THE EXECUTION AND
DELIVERY OF THIS AGREEMENT BY THE PARTIES HERETO, THE COMPANY AGREES TO SELL,
AND EACH PURCHASER, SEVERALLY AND NOT JOINTLY, AGREES TO PURCHASE, AN AGGREGATE
OF UP TO $5,000,000 IN PRINCIPAL AMOUNT OF THE DEBENTURES.  EACH PURCHASER SHALL
DELIVER TO THE COMPANY, VIA WIRE TRANSFER OR A CERTIFIED CHECK, IMMEDIATELY
AVAILABLE FUNDS EQUAL TO ITS SUBSCRIPTION AMOUNT AND THE COMPANY SHALL DELIVER
TO EACH PURCHASER ITS RESPECTIVE DEBENTURE AND A WARRANT, AS DETERMINED PURSUANT
TO SECTION 2.2(A), AND THE COMPANY AND EACH PURCHASER SHALL DELIVER THE OTHER
ITEMS SET FORTH IN SECTION 2.2 DELIVERABLE AT THE CLOSING.  UPON SATISFACTION OF
THE CONDITIONS SET FORTH IN SECTIONS 2.2 AND 2.3, THE CLOSING SHALL OCCUR AT THE
OFFICES OF FWS OR SUCH OTHER LOCATION AS THE PARTIES SHALL MUTUALLY AGREE.

2.2           Deliveries.

 

(A)           ON THE CLOSING DATE, THE COMPANY SHALL DELIVER OR CAUSE TO BE
DELIVERED TO EACH PURCHASER THE FOLLOWING:

(I)            THIS AGREEMENT DULY EXECUTED BY THE COMPANY;

(II)           A LEGAL OPINION OF COMPANY COUNSEL, IN THE FORM OF EXHIBIT D
ATTACHED HERETO;

(III)          A DEBENTURE WITH A PRINCIPAL AMOUNT EQUAL TO SUCH PURCHASER’S
SUBSCRIPTION AMOUNT, REGISTERED IN THE NAME OF SUCH PURCHASER;

(IV)          A WARRANT REGISTERED IN THE NAME OF SUCH PURCHASER TO PURCHASE UP
TO A NUMBER OF SHARES OF COMMON STOCK EQUAL TO 50% OF SUCH PURCHASER’S
SUBSCRIPTION AMOUNT DIVIDED BY $2.15107, WITH AN EXERCISE PRICE EQUAL TO $2.37,
SUBJECT TO ADJUSTMENT THEREIN;

(V)           THE SECURITY AGREEMENT, DULY EXECUTED BY THE COMPANY AND EACH
SUBSIDIARY, ALONG WITH ALL OF THE SECURITY DOCUMENTS, INCLUDING THE SUBSIDIARY
GUARANTEES, DULY EXECUTED BY THE PARTIES THERETO; AND

(VI)          THE REGISTRATION RIGHTS AGREEMENT DULY EXECUTED BY THE COMPANY.

(B)           ON THE CLOSING DATE, EACH PURCHASER SHALL DELIVER OR CAUSE TO BE
DELIVERED TO THE COMPANY THE FOLLOWING:

(I)            THIS AGREEMENT DULY EXECUTED BY SUCH PURCHASER;

(II)           SUCH PURCHASER’S SUBSCRIPTION AMOUNT BY WIRE TRANSFER TO THE

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ACCOUNT AS SPECIFIED IN WRITING BY THE COMPANY;

(III)          THE SECURITY AGREEMENT DULY EXECUTED BY SUCH PURCHASER; AND

(IV)          THE REGISTRATION RIGHTS AGREEMENT DULY EXECUTED BY SUCH PURCHASER.

2.3           CLOSING CONDITIONS.

(A)             THE OBLIGATIONS OF THE COMPANY HEREUNDER IN CONNECTION WITH THE
CLOSING ARE SUBJECT TO THE FOLLOWING CONDITIONS BEING MET:

(I)            THE ACCURACY IN ALL MATERIAL RESPECTS WHEN MADE AND ON THE
CLOSING DATE OF THE REPRESENTATIONS AND WARRANTIES OF THE PURCHASERS CONTAINED
HEREIN;

(II)           ALL OBLIGATIONS, COVENANTS AND AGREEMENTS OF THE PURCHASERS
REQUIRED TO BE PERFORMED AT OR PRIOR TO THE CLOSING DATE SHALL HAVE BEEN
PERFORMED; AND

(III)          THE DELIVERY BY THE PURCHASERS OF THE ITEMS SET FORTH IN SECTION
2.2(B) OF THIS AGREEMENT.

(B)             THE RESPECTIVE OBLIGATIONS OF THE PURCHASERS HEREUNDER IN
CONNECTION WITH THE CLOSING ARE SUBJECT TO THE FOLLOWING CONDITIONS BEING MET:

(I)            THE ACCURACY IN ALL MATERIAL RESPECTS WHEN MADE AND ON THE
CLOSING DATE OF THE REPRESENTATIONS AND WARRANTIES OF THE COMPANY CONTAINED
HEREIN;

(II)           ALL OBLIGATIONS, COVENANTS AND AGREEMENTS OF THE COMPANY REQUIRED
TO BE PERFORMED AT OR PRIOR TO THE CLOSING DATE SHALL HAVE BEEN PERFORMED;

(III)          THE DELIVERY BY THE COMPANY OF THE ITEMS SET FORTH IN SECTION
2.2(A) OF THIS AGREEMENT;

(IV)          THERE SHALL HAVE BEEN NO MATERIAL ADVERSE EFFECT WITH RESPECT TO
THE COMPANY SINCE THE DATE HEREOF;

(V)           THE NOTE HOLDERS SHALL HAVE EXECUTED AND DELIVERED THE SECURITY
AGREEMENT; AND

(VI)          FROM THE DATE HEREOF TO THE CLOSING DATE, TRADING IN THE COMMON
STOCK SHALL NOT HAVE BEEN SUSPENDED BY THE COMMISSION OR THE COMPANY’S PRINCIPAL
TRADING MARKET (EXCEPT FOR ANY SUSPENSION OF TRADING OF LIMITED DURATION AGREED
TO BY THE COMPANY, WHICH SUSPENSION SHALL BE TERMINATED PRIOR TO THE CLOSING),
AND, AT ANY TIME PRIOR TO THE CLOSING DATE, TRADING IN SECURITIES GENERALLY AS
REPORTED BY BLOOMBERG L.P. SHALL NOT HAVE BEEN SUSPENDED OR LIMITED, OR MINIMUM
PRICES SHALL NOT HAVE BEEN ESTABLISHED ON SECURITIES WHOSE TRADES ARE

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REPORTED BY SUCH SERVICE, OR ON ANY TRADING MARKET, NOR SHALL A BANKING
MORATORIUM HAVE BEEN DECLARED EITHER BY THE UNITED STATES OR NEW YORK STATE
AUTHORITIES NOR SHALL THERE HAVE OCCURRED ANY MATERIAL OUTBREAK OR ESCALATION OF
HOSTILITIES OR OTHER NATIONAL OR INTERNATIONAL CALAMITY OF SUCH MAGNITUDE IN ITS
EFFECT ON, OR ANY MATERIAL ADVERSE CHANGE IN, ANY FINANCIAL MARKET WHICH, IN
EACH CASE, IN THE REASONABLE JUDGMENT OF EACH PURCHASER, MAKES IT IMPRACTICABLE
OR INADVISABLE TO PURCHASE THE DEBENTURES AT THE CLOSING.

ARTICLE III.

REPRESENTATIONS AND WARRANTIES

3.1           REPRESENTATIONS AND WARRANTIES OF THE COMPANY.  EXCEPT AS SET
FORTH UNDER THE CORRESPONDING SECTION OF THE DISCLOSURE SCHEDULES DELIVERED TO
THE PURCHASERS CONCURRENTLY HEREWITH (THE “DISCLOSURE SCHEDULES”), WHICH
DISCLOSURE SCHEDULES SHALL BE DEEMED A PART HEREOF AND TO QUALIFY ANY
REPRESENTATION OR WARRANTY OTHERWISE MADE HEREIN TO THE EXTENT OF SUCH
DISCLOSURE, THE COMPANY HEREBY MAKES THE FOLLOWING REPRESENTATIONS AND
WARRANTIES TO EACH PURCHASER:

(A)           SUBSIDIARIES.  ALL OF THE DIRECT AND INDIRECT SUBSIDIARIES OF THE
COMPANY ARE SET FORTH ON SCHEDULE 3.1(A).  THE COMPANY OWNS, DIRECTLY OR
INDIRECTLY, ALL OF THE CAPITAL STOCK OR OTHER EQUITY INTERESTS OF EACH
SUBSIDIARY FREE AND CLEAR OF ANY LIENS, OTHER THAN PERMITTED LIENS, AND ALL OF
THE ISSUED AND OUTSTANDING SHARES OF CAPITAL STOCK OF EACH SUBSIDIARY ARE
VALIDLY ISSUED AND ARE FULLY PAID, NON-ASSESSABLE AND FREE OF PREEMPTIVE AND
SIMILAR RIGHTS TO SUBSCRIBE FOR OR PURCHASE SECURITIES.  IF THE COMPANY HAS NO
SUBSIDIARIES, ALL OTHER REFERENCES TO THE SUBSIDIARIES OR ANY OF THEM IN THE
TRANSACTION DOCUMENTS SHALL BE DISREGARDED.

(B)           ORGANIZATION AND QUALIFICATION.  THE COMPANY AND EACH OF THE
SUBSIDIARIES IS AN ENTITY DULY INCORPORATED OR OTHERWISE ORGANIZED, VALIDLY
EXISTING AND IN GOOD STANDING UNDER THE LAWS OF THE JURISDICTION OF ITS
INCORPORATION OR ORGANIZATION (AS APPLICABLE), WITH THE REQUISITE POWER AND
AUTHORITY TO OWN AND USE ITS PROPERTIES AND ASSETS AND TO CARRY ON ITS BUSINESS
AS CURRENTLY CONDUCTED.  NEITHER THE COMPANY NOR ANY SUBSIDIARY IS IN VIOLATION
OR DEFAULT OF ANY OF THE PROVISIONS OF ITS RESPECTIVE CERTIFICATE OR ARTICLES OF
INCORPORATION, BYLAWS OR OTHER ORGANIZATIONAL OR CHARTER DOCUMENTS.  EACH OF THE
COMPANY AND THE SUBSIDIARIES IS DULY QUALIFIED TO CONDUCT BUSINESS AND IS IN
GOOD STANDING AS A FOREIGN CORPORATION OR OTHER ENTITY IN EACH JURISDICTION IN
WHICH THE NATURE OF THE BUSINESS CONDUCTED OR PROPERTY OWNED BY IT MAKES SUCH
QUALIFICATION NECESSARY, EXCEPT WHERE THE FAILURE TO BE SO QUALIFIED OR IN GOOD
STANDING, AS THE CASE MAY BE, COULD NOT HAVE OR REASONABLY BE EXPECTED TO RESULT
IN (I) A MATERIAL ADVERSE EFFECT ON THE LEGALITY, VALIDITY OR ENFORCEABILITY OF
ANY TRANSACTION DOCUMENT, (II) A MATERIAL ADVERSE EFFECT ON THE RESULTS OF
OPERATIONS, ASSETS, BUSINESS, PROSPECTS OR CONDITION (FINANCIAL OR OTHERWISE) OF
THE COMPANY AND THE SUBSIDIARIES, TAKEN AS A WHOLE, OR (III) A MATERIAL ADVERSE
EFFECT ON THE COMPANY’S ABILITY TO PERFORM IN ANY MATERIAL RESPECT ON A TIMELY
BASIS ITS OBLIGATIONS UNDER ANY TRANSACTION DOCUMENT (ANY OF (I), (II) OR (III),
A “MATERIAL ADVERSE EFFECT”) AND NO PROCEEDING HAS BEEN INSTITUTED IN ANY SUCH
JURISDICTION REVOKING,

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LIMITING OR CURTAILING OR SEEKING TO REVOKE, LIMIT OR CURTAIL SUCH POWER AND
AUTHORITY OR QUALIFICATION.

(C)           AUTHORIZATION; ENFORCEMENT.  THE COMPANY HAS THE REQUISITE
CORPORATE POWER AND AUTHORITY TO ENTER INTO AND TO CONSUMMATE THE TRANSACTIONS
CONTEMPLATED BY EACH OF THE TRANSACTION DOCUMENTS AND OTHERWISE TO CARRY OUT ITS
OBLIGATIONS HEREUNDER AND THEREUNDER.  THE EXECUTION AND DELIVERY OF EACH OF THE
TRANSACTION DOCUMENTS BY THE COMPANY AND THE CONSUMMATION BY IT OF THE
TRANSACTIONS CONTEMPLATED HEREBY AND THEREBY HAVE BEEN DULY AUTHORIZED BY ALL
NECESSARY ACTION ON THE PART OF THE COMPANY AND NO FURTHER ACTION IS REQUIRED BY
THE COMPANY, ITS BOARD OF DIRECTORS OR ITS STOCKHOLDERS IN CONNECTION THEREWITH
OTHER THAN IN CONNECTION WITH THE REQUIRED APPROVALS.  EACH TRANSACTION DOCUMENT
HAS BEEN (OR UPON DELIVERY WILL HAVE BEEN) DULY EXECUTED BY THE COMPANY AND,
WHEN DELIVERED IN ACCORDANCE WITH THE TERMS HEREOF AND THEREOF, WILL CONSTITUTE
THE VALID AND BINDING OBLIGATION OF THE COMPANY ENFORCEABLE AGAINST THE COMPANY
IN ACCORDANCE WITH ITS TERMS EXCEPT (I) AS LIMITED BY GENERAL EQUITABLE
PRINCIPLES AND APPLICABLE BANKRUPTCY, INSOLVENCY, REORGANIZATION, MORATORIUM AND
OTHER LAWS OF GENERAL APPLICATION AFFECTING ENFORCEMENT OF CREDITORS’ RIGHTS
GENERALLY, (II) AS LIMITED BY LAWS RELATING TO THE AVAILABILITY OF SPECIFIC
PERFORMANCE, INJUNCTIVE RELIEF OR OTHER EQUITABLE REMEDIES AND (III) INSOFAR AS
INDEMNIFICATION AND CONTRIBUTION PROVISIONS MAY BE LIMITED BY APPLICABLE LAW.

(D)           NO CONFLICTS.  THE EXECUTION, DELIVERY AND PERFORMANCE OF THE
TRANSACTION DOCUMENTS BY THE COMPANY AND THE CONSUMMATION BY THE COMPANY OF THE
OTHER TRANSACTIONS CONTEMPLATED HEREBY AND THEREBY DO NOT AND WILL NOT: (I)
CONFLICT WITH OR VIOLATE ANY PROVISION OF THE COMPANY’S OR ANY SUBSIDIARY’S
CERTIFICATE OR ARTICLES OF INCORPORATION, BYLAWS OR OTHER ORGANIZATIONAL OR
CHARTER DOCUMENTS, OR (II) CONFLICT WITH, OR CONSTITUTE A DEFAULT (OR AN EVENT
THAT WITH NOTICE OR LAPSE OF TIME OR BOTH WOULD BECOME A DEFAULT) UNDER, RESULT
IN THE CREATION OF ANY LIEN, EXCEPT FOR PERMITTED LIENS, UPON ANY OF THE
PROPERTIES OR ASSETS OF THE COMPANY OR ANY SUBSIDIARY, OR GIVE TO OTHERS ANY
RIGHTS OF TERMINATION, AMENDMENT, ACCELERATION OR CANCELLATION (WITH OR WITHOUT
NOTICE, LAPSE OF TIME OR BOTH) OF, ANY AGREEMENT, CREDIT FACILITY, DEBT OR OTHER
INSTRUMENT (EVIDENCING A COMPANY OR SUBSIDIARY DEBT OR OTHERWISE) OR OTHER
UNDERSTANDING TO WHICH THE COMPANY OR ANY SUBSIDIARY IS A PARTY OR BY WHICH ANY
PROPERTY OR ASSET OF THE COMPANY OR ANY SUBSIDIARY IS BOUND OR AFFECTED, OR
(III) SUBJECT TO THE REQUIRED APPROVALS, CONFLICT WITH OR RESULT IN A VIOLATION
OF ANY LAW, RULE, REGULATION, ORDER, JUDGMENT, INJUNCTION, DECREE OR OTHER
RESTRICTION OF ANY COURT OR GOVERNMENTAL AUTHORITY TO WHICH THE COMPANY OR A
SUBSIDIARY IS SUBJECT (INCLUDING FEDERAL AND STATE SECURITIES LAWS AND
REGULATIONS), OR BY WHICH ANY PROPERTY OR ASSET OF THE COMPANY OR A SUBSIDIARY
IS BOUND OR AFFECTED; EXCEPT IN THE CASE OF EACH OF CLAUSES (II) AND (III), SUCH
AS COULD NOT HAVE OR REASONABLY BE EXPECTED TO RESULT IN A MATERIAL ADVERSE
EFFECT.

(E)           FILINGS, CONSENTS AND APPROVALS.  EXCEPT AS LISTED ON SCHEDULE
3.1(E), THE COMPANY IS NOT REQUIRED TO OBTAIN ANY CONSENT, WAIVER, AUTHORIZATION
OR ORDER OF, GIVE ANY NOTICE TO, OR MAKE ANY FILING OR REGISTRATION WITH, ANY
COURT OR OTHER FEDERAL, STATE, LOCAL OR OTHER GOVERNMENTAL AUTHORITY OR OTHER
PERSON IN CONNECTION WITH THE EXECUTION, DELIVERY AND PERFORMANCE BY THE COMPANY
OF THE TRANSACTION DOCUMENTS, OTHER THAN (I)

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FILINGS REQUIRED PURSUANT TO SECTION 4.6, (II) THE FILING WITH THE COMMISSION OF
THE REGISTRATION STATEMENT, (III) THE NOTICE AND/OR APPLICATION(S) TO EACH
APPLICABLE TRADING MARKET FOR THE ISSUANCE AND SALE OF THE SECURITIES AND THE
LISTING OF THE UNDERLYING SHARES FOR TRADING THEREON IN THE TIME AND MANNER
REQUIRED THEREBY AND (IV) THE FILING OF FORM D WITH THE COMMISSION AND SUCH
FILINGS AS ARE REQUIRED TO BE MADE UNDER APPLICABLE STATE SECURITIES LAWS
(COLLECTIVELY, THE “REQUIRED APPROVALS”).

(F)            ISSUANCE OF THE SECURITIES.  THE SECURITIES ARE DULY AUTHORIZED
AND, WHEN ISSUED AND PAID FOR IN ACCORDANCE WITH THE APPLICABLE TRANSACTION
DOCUMENTS, WILL BE DULY AND VALIDLY ISSUED, FULLY PAID AND NONASSESSABLE, FREE
AND CLEAR OF ALL LIENS IMPOSED BY THE COMPANY OTHER THAN RESTRICTIONS ON
TRANSFER PROVIDED FOR IN THE TRANSACTION DOCUMENTS.  THE UNDERLYING SHARES, WHEN
ISSUED IN ACCORDANCE WITH THE TERMS OF THE TRANSACTION DOCUMENTS, WILL BE
VALIDLY ISSUED, FULLY PAID AND NONASSESSABLE, FREE AND CLEAR OF ALL LIENS
IMPOSED BY THE COMPANY.  THE COMPANY HAS RESERVED FROM ITS DULY AUTHORIZED
CAPITAL STOCK A NUMBER OF SHARES OF COMMON STOCK FOR ISSUANCE OF THE UNDERLYING
SHARES AT LEAST EQUAL TO THE REQUIRED MINIMUM ON THE DATE HEREOF.

(G)           CAPITALIZATION.  THE CAPITALIZATION OF THE COMPANY IS AS SET FORTH
ON SCHEDULE 3.1(G).  THE COMPANY HAS NOT ISSUED ANY CAPITAL STOCK SINCE ITS MOST
RECENTLY FILED PERIODIC REPORT UNDER THE EXCHANGE ACT, OTHER THAN PURSUANT TO
THE EXERCISE OF EMPLOYEE STOCK OPTIONS UNDER THE COMPANY’S STOCK OPTION PLANS,
THE ISSUANCE OF SHARES OF COMMON STOCK TO EMPLOYEES PURSUANT TO THE COMPANY’S
EMPLOYEE STOCK PURCHASE PLAN AND PURSUANT TO THE CONVERSION OR EXERCISE OF
COMMON STOCK EQUIVALENTS OUTSTANDING AS OF THE DATE OF THE MOST RECENTLY FILED
PERIODIC REPORT UNDER THE EXCHANGE ACT.  NO PERSON HAS ANY RIGHT OF FIRST
REFUSAL, PREEMPTIVE RIGHT, RIGHT OF PARTICIPATION, OR ANY SIMILAR RIGHT TO
PARTICIPATE IN THE TRANSACTIONS CONTEMPLATED BY THE TRANSACTION DOCUMENTS. 
EXCEPT AS SET FORTH ON SCHEDULE 3.1(G) OR AS A RESULT OF THE PURCHASE AND SALE
OF THE SECURITIES, THERE ARE NO OUTSTANDING OPTIONS, WARRANTS, SCRIPT RIGHTS TO
SUBSCRIBE TO, CALLS OR COMMITMENTS OF ANY CHARACTER WHATSOEVER RELATING TO, OR
SECURITIES, RIGHTS OR OBLIGATIONS CONVERTIBLE INTO OR EXERCISABLE OR
EXCHANGEABLE FOR, OR GIVING ANY PERSON ANY RIGHT TO SUBSCRIBE FOR OR ACQUIRE,
ANY SHARES OF COMMON STOCK, OR CONTRACTS, COMMITMENTS, UNDERSTANDINGS OR
ARRANGEMENTS BY WHICH THE COMPANY OR ANY SUBSIDIARY IS OR MAY BECOME BOUND TO
ISSUE ADDITIONAL SHARES OF COMMON STOCK OR COMMON STOCK EQUIVALENTS. THE
ISSUANCE AND SALE OF THE SECURITIES WILL NOT OBLIGATE THE COMPANY TO ISSUE
SHARES OF COMMON STOCK OR OTHER SECURITIES TO ANY PERSON (OTHER THAN THE
PURCHASERS) AND WILL NOT RESULT IN A RIGHT OF ANY HOLDER OF COMPANY SECURITIES
TO ADJUST THE EXERCISE, CONVERSION, EXCHANGE OR RESET PRICE UNDER ANY OF SUCH
SECURITIES. ALL OF THE OUTSTANDING SHARES OF CAPITAL STOCK OF THE COMPANY ARE
VALIDLY ISSUED, FULLY PAID AND NONASSESSABLE, HAVE BEEN ISSUED IN COMPLIANCE
WITH ALL FEDERAL AND STATE SECURITIES LAWS, AND NONE OF SUCH OUTSTANDING SHARES
WAS ISSUED IN VIOLATION OF ANY PREEMPTIVE RIGHTS OR SIMILAR RIGHTS TO SUBSCRIBE
FOR OR PURCHASE SECURITIES. EXCEPT AS DISCLOSED IN SCHEDULE 3.1(G), NO FURTHER
APPROVAL OR AUTHORIZATION OF ANY STOCKHOLDER, THE BOARD OF DIRECTORS OF THE
COMPANY OR OTHERS IS REQUIRED FOR THE ISSUANCE AND SALE OF THE SECURITIES. 
THERE ARE NO STOCKHOLDERS AGREEMENTS, VOTING AGREEMENTS OR OTHER SIMILAR
AGREEMENTS WITH RESPECT TO THE COMPANY’S CAPITAL STOCK TO WHICH THE COMPANY IS A
PARTY OR, TO THE KNOWLEDGE OF THE COMPANY, BETWEEN OR AMONG ANY OF THE COMPANY’S
STOCKHOLDERS.

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(H)           SEC REPORTS; FINANCIAL STATEMENTS.  EXCEPT AS LISTED ON SCHEDULE
3.1(H), COMPANY HAS FILED ALL REPORTS, SCHEDULES, FORMS, STATEMENTS AND OTHER
DOCUMENTS REQUIRED TO BE FILED BY THE COMPANY UNDER THE SECURITIES ACT AND THE
EXCHANGE ACT, INCLUDING PURSUANT TO SECTION 13(A) OR 15(D) THEREOF, FOR THE TWO
YEARS PRECEDING THE DATE HEREOF (OR SUCH SHORTER PERIOD AS THE COMPANY WAS
REQUIRED BY LAW OR REGULATION TO FILE SUCH MATERIAL) (THE FOREGOING MATERIALS,
INCLUDING THE EXHIBITS THERETO AND DOCUMENTS INCORPORATED BY REFERENCE THEREIN,
BEING COLLECTIVELY REFERRED TO HEREIN AS THE “SEC REPORTS”) ON A TIMELY BASIS OR
HAS RECEIVED A VALID EXTENSION OF SUCH TIME OF FILING AND HAS FILED ANY SUCH SEC
REPORTS PRIOR TO THE EXPIRATION OF ANY SUCH EXTENSION.  AS OF THEIR RESPECTIVE
DATES, THE SEC REPORTS COMPLIED IN ALL MATERIAL RESPECTS WITH THE REQUIREMENTS
OF THE SECURITIES ACT AND THE EXCHANGE ACT, AS APPLICABLE, AND NONE OF THE SEC
REPORTS, WHEN FILED, CONTAINED ANY UNTRUE STATEMENT OF A MATERIAL FACT OR
OMITTED TO STATE A MATERIAL FACT REQUIRED TO BE STATED THEREIN OR NECESSARY IN
ORDER TO MAKE THE STATEMENTS THEREIN, IN THE LIGHT OF THE CIRCUMSTANCES UNDER
WHICH THEY WERE MADE, NOT MISLEADING.  THE FINANCIAL STATEMENTS OF THE COMPANY
INCLUDED IN THE SEC REPORTS COMPLY IN ALL MATERIAL RESPECTS WITH APPLICABLE
ACCOUNTING REQUIREMENTS AND THE RULES AND REGULATIONS OF THE COMMISSION WITH
RESPECT THERETO AS IN EFFECT AT THE TIME OF FILING.  SUCH FINANCIAL STATEMENTS
HAVE BEEN PREPARED IN ACCORDANCE WITH UNITED STATES GENERALLY ACCEPTED
ACCOUNTING PRINCIPLES APPLIED ON A CONSISTENT BASIS DURING THE PERIODS INVOLVED
(“GAAP”), EXCEPT AS MAY BE OTHERWISE SPECIFIED IN SUCH FINANCIAL STATEMENTS OR
THE NOTES THERETO AND EXCEPT THAT UNAUDITED FINANCIAL STATEMENTS MAY NOT CONTAIN
ALL FOOTNOTES REQUIRED BY GAAP, AND FAIRLY PRESENT IN ALL MATERIAL RESPECTS THE
FINANCIAL POSITION OF THE COMPANY AND ITS CONSOLIDATED SUBSIDIARIES AS OF AND
FOR THE DATES THEREOF AND THE RESULTS OF OPERATIONS AND CASH FLOWS FOR THE
PERIODS THEN ENDED, SUBJECT, IN THE CASE OF UNAUDITED STATEMENTS, TO NORMAL,
IMMATERIAL, YEAR-END AUDIT ADJUSTMENTS.

(I)            MATERIAL CHANGES.  SINCE THE DATE OF THE LATEST AUDITED FINANCIAL
STATEMENTS INCLUDED WITHIN THE SEC REPORTS, EXCEPT AS SPECIFICALLY DISCLOSED IN
A SUBSEQUENT SEC REPORT FILED PRIOR TO THE DATE HEREOF, (I) THERE HAS BEEN NO
EVENT, OCCURRENCE OR DEVELOPMENT THAT HAS HAD OR THAT COULD REASONABLY BE
EXPECTED TO RESULT IN A MATERIAL ADVERSE EFFECT, (II) THE COMPANY HAS NOT
INCURRED ANY LIABILITIES (CONTINGENT OR OTHERWISE) OTHER THAN (A) TRADE PAYABLES
AND ACCRUED EXPENSES INCURRED IN THE ORDINARY COURSE OF BUSINESS CONSISTENT WITH
PAST PRACTICE AND (B) LIABILITIES NOT REQUIRED TO BE REFLECTED IN THE COMPANY’S
FINANCIAL STATEMENTS PURSUANT TO GAAP OR DISCLOSED IN FILINGS MADE WITH THE
COMMISSION, (III) THE COMPANY HAS NOT ALTERED ITS METHOD OF ACCOUNTING, (IV)
EXCEPT AS SET FORTH ON SCHEDULE 3.1(I), THE COMPANY HAS NOT DECLARED OR MADE ANY
DIVIDEND OR DISTRIBUTION OF CASH OR OTHER PROPERTY TO ITS STOCKHOLDERS OR
PURCHASED, REDEEMED OR MADE ANY AGREEMENTS TO PURCHASE OR REDEEM ANY SHARES OF
ITS CAPITAL STOCK AND (V) THE COMPANY HAS NOT ISSUED ANY EQUITY SECURITIES TO
ANY OFFICER, DIRECTOR OR AFFILIATE, EXCEPT PURSUANT TO EXISTING COMPANY STOCK
OPTION PLANS. THE COMPANY DOES NOT HAVE PENDING BEFORE THE COMMISSION ANY
REQUEST FOR CONFIDENTIAL TREATMENT OF INFORMATION.  EXCEPT FOR THE ISSUANCE OF
THE SECURITIES CONTEMPLATED BY THIS AGREEMENT OR AS SET FORTH ON SCHEDULE
3.1(I), NO EVENT, LIABILITY OR DEVELOPMENT HAS OCCURRED OR EXISTS WITH RESPECT
TO THE COMPANY OR ITS SUBSIDIARIES OR THEIR RESPECTIVE BUSINESS, PROPERTIES,
OPERATIONS OR FINANCIAL CONDITION, THAT WOULD BE REQUIRED TO BE DISCLOSED BY THE
COMPANY UNDER APPLICABLE SECURITIES LAWS AT THE TIME THIS REPRESENTATION IS MADE
THAT HAS NOT BEEN

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PUBLICLY DISCLOSED AT LEAST ONE TRADING DAY PRIOR TO THE DATE THAT THIS
REPRESENTATION IS MADE.

(J)            LITIGATION.  THERE IS NO ACTION, SUIT, INQUIRY, NOTICE OF
VIOLATION, PROCEEDING OR INVESTIGATION PENDING OR, TO THE KNOWLEDGE OF THE
COMPANY, THREATENED AGAINST OR AFFECTING THE COMPANY, ANY SUBSIDIARY OR ANY OF
THEIR RESPECTIVE PROPERTIES BEFORE OR BY ANY COURT, ARBITRATOR, GOVERNMENTAL OR
ADMINISTRATIVE AGENCY OR REGULATORY AUTHORITY (FEDERAL, STATE, COUNTY, LOCAL OR
FOREIGN) (COLLECTIVELY, AN “ACTION”) WHICH (I) ADVERSELY AFFECTS OR CHALLENGES
THE LEGALITY, VALIDITY OR ENFORCEABILITY OF ANY OF THE TRANSACTION DOCUMENTS OR
THE SECURITIES OR (II) COULD, IF THERE WERE AN UNFAVORABLE DECISION, HAVE OR
REASONABLY BE EXPECTED TO RESULT IN A MATERIAL ADVERSE EFFECT.  NEITHER THE
COMPANY NOR ANY SUBSIDIARY, NOR ANY DIRECTOR OR OFFICER THEREOF, IS OR HAS BEEN
THE SUBJECT OF ANY ACTION INVOLVING A CLAIM OF VIOLATION OF OR LIABILITY UNDER
FEDERAL OR STATE SECURITIES LAWS OR A CLAIM OF BREACH OF FIDUCIARY DUTY.  THERE
HAS NOT BEEN, AND TO THE KNOWLEDGE OF THE COMPANY, THERE IS NOT PENDING OR
CONTEMPLATED, ANY INVESTIGATION BY THE COMMISSION INVOLVING THE COMPANY OR ANY
CURRENT OR FORMER DIRECTOR OR OFFICER OF THE COMPANY.  THE COMMISSION HAS NOT
ISSUED ANY STOP ORDER OR OTHER ORDER SUSPENDING THE EFFECTIVENESS OF ANY
REGISTRATION STATEMENT FILED BY THE COMPANY OR ANY SUBSIDIARY UNDER THE EXCHANGE
ACT OR THE SECURITIES ACT.

(K)           LABOR RELATIONS.  NO MATERIAL LABOR DISPUTE EXISTS OR, TO THE
KNOWLEDGE OF THE COMPANY, IS IMMINENT WITH RESPECT TO ANY OF THE EMPLOYEES OF
THE COMPANY WHICH COULD REASONABLY BE EXPECTED TO RESULT IN A MATERIAL ADVERSE
EFFECT.  NONE OF THE COMPANY’S OR ITS SUBSIDIARIES’ EMPLOYEES IS A MEMBER OF A
UNION THAT RELATES TO SUCH EMPLOYEE’S RELATIONSHIP WITH THE COMPANY, AND NEITHER
THE COMPANY OR ANY OF ITS SUBSIDIARIES IS A PARTY TO A COLLECTIVE BARGAINING
AGREEMENT, AND THE COMPANY AND ITS SUBSIDIARIES BELIEVE THAT THEIR RELATIONSHIPS
WITH THEIR EMPLOYEES ARE GOOD.  NO EXECUTIVE OFFICER, TO THE KNOWLEDGE OF THE
COMPANY, IS, OR IS NOW EXPECTED TO BE, IN VIOLATION OF ANY MATERIAL TERM OF ANY
EMPLOYMENT CONTRACT, CONFIDENTIALITY, DISCLOSURE OR PROPRIETARY INFORMATION
AGREEMENT OR NON-COMPETITION AGREEMENT, OR ANY OTHER CONTRACT OR AGREEMENT OR
ANY RESTRICTIVE COVENANT, AND THE CONTINUED EMPLOYMENT OF EACH SUCH EXECUTIVE
OFFICER DOES NOT SUBJECT THE COMPANY OR ANY OF ITS SUBSIDIARIES TO ANY LIABILITY
WITH RESPECT TO ANY OF THE FOREGOING MATTERS.  THE COMPANY AND ITS SUBSIDIARIES
ARE IN COMPLIANCE WITH ALL U.S. FEDERAL, STATE, LOCAL AND FOREIGN LAWS AND
REGULATIONS RELATING TO EMPLOYMENT AND EMPLOYMENT PRACTICES, TERMS AND
CONDITIONS OF EMPLOYMENT AND WAGES AND HOURS, EXCEPT WHERE THE FAILURE TO BE IN
COMPLIANCE COULD NOT, INDIVIDUALLY OR IN THE AGGREGATE, REASONABLY BE EXPECTED
TO HAVE A MATERIAL ADVERSE EFFECT.

(L)            COMPLIANCE.  NEITHER THE COMPANY NOR ANY SUBSIDIARY (I) IS IN
DEFAULT UNDER OR IN VIOLATION OF (AND NO EVENT HAS OCCURRED THAT HAS NOT BEEN
WAIVED THAT, WITH NOTICE OR LAPSE OF TIME OR BOTH, WOULD RESULT IN A DEFAULT BY
THE COMPANY OR ANY SUBSIDIARY UNDER), NOR HAS THE COMPANY OR ANY SUBSIDIARY
RECEIVED NOTICE OF A CLAIM THAT IT IS IN DEFAULT UNDER OR THAT IT IS IN
VIOLATION OF, ANY INDENTURE, LOAN OR CREDIT AGREEMENT OR ANY OTHER AGREEMENT OR
INSTRUMENT TO WHICH IT IS A PARTY OR BY WHICH IT OR ANY OF ITS PROPERTIES IS
BOUND (WHETHER OR NOT SUCH DEFAULT OR VIOLATION HAS BEEN WAIVED), (II) IS IN
VIOLATION OF ANY ORDER OF ANY COURT, ARBITRATOR OR GOVERNMENTAL BODY, OR (III)
IS OR HAS BEEN

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IN VIOLATION OF ANY STATUTE, RULE OR REGULATION OF ANY GOVERNMENTAL AUTHORITY,
INCLUDING WITHOUT LIMITATION ALL FOREIGN, FEDERAL, STATE AND LOCAL LAWS
APPLICABLE TO ITS BUSINESS AND ALL SUCH LAWS THAT AFFECT THE ENVIRONMENT, EXCEPT
IN EACH CASE AS COULD NOT HAVE OR REASONABLY BE EXPECTED TO RESULT IN A MATERIAL
ADVERSE EFFECT.

(M)          REGULATORY PERMITS.  THE COMPANY AND THE SUBSIDIARIES POSSESS ALL
CERTIFICATES, AUTHORIZATIONS AND PERMITS ISSUED BY THE APPROPRIATE FEDERAL,
STATE, LOCAL OR FOREIGN REGULATORY AUTHORITIES NECESSARY TO CONDUCT THEIR
RESPECTIVE BUSINESSES AS DESCRIBED IN THE SEC REPORTS, EXCEPT WHERE THE FAILURE
TO POSSESS SUCH PERMITS COULD NOT HAVE OR REASONABLY BE EXPECTED TO RESULT IN A
MATERIAL ADVERSE EFFECT (“MATERIAL PERMITS”), AND NEITHER THE COMPANY NOR ANY
SUBSIDIARY HAS RECEIVED ANY NOTICE OF PROCEEDINGS RELATING TO THE REVOCATION OR
MODIFICATION OF ANY MATERIAL PERMIT.

(N)           TITLE TO ASSETS.  THE COMPANY AND THE SUBSIDIARIES HAVE GOOD AND
MARKETABLE TITLE IN FEE SIMPLE TO ALL REAL PROPERTY OWNED BY THEM THAT IS
MATERIAL TO THE BUSINESS OF THE COMPANY AND THE SUBSIDIARIES AND GOOD AND
MARKETABLE TITLE IN ALL PERSONAL PROPERTY OWNED BY THEM THAT IS MATERIAL TO THE
BUSINESS OF THE COMPANY AND THE SUBSIDIARIES, IN EACH CASE FREE AND CLEAR OF ALL
LIENS, EXCEPT FOR PERMITTED LIENS OR FOR LIENS AS DO NOT MATERIALLY AFFECT THE
VALUE OF SUCH PROPERTY AND DO NOT MATERIALLY INTERFERE WITH THE USE MADE AND
PROPOSED TO BE MADE OF SUCH PROPERTY BY THE COMPANY AND THE SUBSIDIARIES AND
LIENS FOR THE PAYMENT OF FEDERAL, STATE OR OTHER TAXES, THE PAYMENT OF WHICH IS
NEITHER DELINQUENT NOR SUBJECT TO PENALTIES.  ANY REAL PROPERTY AND FACILITIES
HELD UNDER LEASE BY THE COMPANY AND THE SUBSIDIARIES ARE HELD BY THEM UNDER
VALID, SUBSISTING AND ENFORCEABLE LEASES WITH WHICH THE COMPANY AND THE
SUBSIDIARIES ARE IN COMPLIANCE.

(O)           PATENTS AND TRADEMARKS.  THE COMPANY AND THE SUBSIDIARIES HAVE, OR
HAVE RIGHTS TO USE, ALL PATENTS, PATENT APPLICATIONS, TRADEMARKS, TRADEMARK
APPLICATIONS, SERVICE MARKS, TRADE NAMES, TRADE SECRETS, INVENTIONS, COPYRIGHTS,
LICENSES AND OTHER INTELLECTUAL PROPERTY RIGHTS AND SIMILAR RIGHTS NECESSARY OR
MATERIAL FOR USE IN CONNECTION WITH THEIR RESPECTIVE BUSINESSES AS DESCRIBED IN
THE SEC REPORTS AND WHICH THE FAILURE TO SO HAVE COULD HAVE A MATERIAL ADVERSE
EFFECT (COLLECTIVELY, THE “INTELLECTUAL PROPERTY RIGHTS”).  NEITHER THE COMPANY
NOR ANY SUBSIDIARY HAS RECEIVED A NOTICE (WRITTEN OR OTHERWISE) THAT THE
INTELLECTUAL PROPERTY RIGHTS USED BY THE COMPANY OR ANY SUBSIDIARY VIOLATES OR
INFRINGES UPON THE RIGHTS OF ANY PERSON. TO THE KNOWLEDGE OF THE COMPANY, ALL
SUCH INTELLECTUAL PROPERTY RIGHTS ARE ENFORCEABLE AND THERE IS NO EXISTING
INFRINGEMENT BY ANOTHER PERSON OF ANY OF THE INTELLECTUAL PROPERTY RIGHTS.  THE
COMPANY AND ITS SUBSIDIARIES HAVE TAKEN REASONABLE SECURITY MEASURES TO PROTECT
THE SECRECY, CONFIDENTIALITY AND VALUE OF ALL OF THEIR INTELLECTUAL PROPERTIES,
EXCEPT WHERE FAILURE TO DO SO COULD NOT, INDIVIDUALLY OR IN THE AGGREGATE,
REASONABLY BE EXPECT TO HAVE A MATERIAL ADVERSE EFFECT.

(P)           INSURANCE.  THE COMPANY AND THE SUBSIDIARIES ARE INSURED BY
INSURERS OF RECOGNIZED FINANCIAL RESPONSIBILITY AGAINST SUCH LOSSES AND RISKS
AND IN SUCH AMOUNTS AS ARE PRUDENT AND CUSTOMARY IN THE BUSINESSES IN WHICH THE
COMPANY AND THE SUBSIDIARIES ARE ENGAGED, INCLUDING, BUT NOT LIMITED TO,
DIRECTORS AND OFFICERS INSURANCE COVERAGE AT

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LEAST EQUAL TO THE AGGREGATE SUBSCRIPTION AMOUNT.  NEITHER THE COMPANY NOR ANY
SUBSIDIARY HAS ANY REASON TO BELIEVE THAT IT WILL NOT BE ABLE TO RENEW ITS
EXISTING INSURANCE COVERAGE AS AND WHEN SUCH COVERAGE EXPIRES OR TO OBTAIN
SIMILAR COVERAGE FROM SIMILAR INSURERS AS MAY BE NECESSARY TO CONTINUE ITS
BUSINESS WITHOUT A SIGNIFICANT INCREASE IN COST.

(Q)           TRANSACTIONS WITH AFFILIATES AND EMPLOYEES.  EXCEPT AS SET FORTH
IN THE SEC REPORTS, NONE OF THE OFFICERS OR DIRECTORS OF THE COMPANY AND, TO THE
KNOWLEDGE OF THE COMPANY, NONE OF THE EMPLOYEES OF THE COMPANY IS PRESENTLY A
PARTY TO ANY TRANSACTION WITH THE COMPANY OR ANY SUBSIDIARY (OTHER THAN FOR
SERVICES AS EMPLOYEES, OFFICERS AND DIRECTORS), INCLUDING ANY CONTRACT,
AGREEMENT OR OTHER ARRANGEMENT PROVIDING FOR THE FURNISHING OF SERVICES TO OR
BY, PROVIDING FOR RENTAL OF REAL OR PERSONAL PROPERTY TO OR FROM, OR OTHERWISE
REQUIRING PAYMENTS TO OR FROM ANY OFFICER, DIRECTOR OR SUCH EMPLOYEE OR, TO THE
KNOWLEDGE OF THE COMPANY, ANY ENTITY IN WHICH ANY OFFICER, DIRECTOR, OR ANY SUCH
EMPLOYEE HAS A SUBSTANTIAL INTEREST OR IS AN OFFICER, DIRECTOR, TRUSTEE OR
PARTNER, IN EACH CASE IN EXCESS OF $60,000 OTHER THAN (I) FOR PAYMENT OF SALARY
OR CONSULTING FEES FOR SERVICES RENDERED, (II) REIMBURSEMENT FOR EXPENSES
INCURRED ON BEHALF OF THE COMPANY AND (III) FOR OTHER EMPLOYEE BENEFITS,
INCLUDING STOCK OPTION AGREEMENTS UNDER ANY STOCK OPTION PLAN OF THE COMPANY.

(R)            SARBANES-OXLEY; INTERNAL ACCOUNTING CONTROLS.  THE COMPANY IS IN
MATERIAL COMPLIANCE WITH ALL PROVISIONS OF THE SARBANES-OXLEY ACT OF 2002 WHICH
ARE APPLICABLE TO IT AS OF THE CLOSING DATE.  THE COMPANY AND THE SUBSIDIARIES
MAINTAIN A SYSTEM OF INTERNAL ACCOUNTING CONTROLS SUFFICIENT TO PROVIDE
REASONABLE ASSURANCE THAT (I) TRANSACTIONS ARE EXECUTED IN ACCORDANCE WITH
MANAGEMENT’S GENERAL OR SPECIFIC AUTHORIZATIONS, (II) TRANSACTIONS ARE RECORDED
AS NECESSARY TO PERMIT PREPARATION OF FINANCIAL STATEMENTS IN CONFORMITY WITH
GAAP AND TO MAINTAIN ASSET ACCOUNTABILITY, (III) ACCESS TO ASSETS IS PERMITTED
ONLY IN ACCORDANCE WITH MANAGEMENT’S GENERAL OR SPECIFIC AUTHORIZATION, AND (IV)
THE RECORDED ACCOUNTABILITY FOR ASSETS IS COMPARED WITH THE EXISTING ASSETS AT
REASONABLE INTERVALS AND APPROPRIATE ACTION IS TAKEN WITH RESPECT TO ANY
DIFFERENCES. THE COMPANY HAS ESTABLISHED DISCLOSURE CONTROLS AND PROCEDURES (AS
DEFINED IN EXCHANGE ACT RULES 13A-15(E) AND 15D-15(E)) FOR THE COMPANY AND
DESIGNED SUCH DISCLOSURE CONTROLS AND PROCEDURES TO ENSURE THAT INFORMATION
REQUIRED TO BE DISCLOSED BY THE COMPANY IN THE REPORTS IT FILES OR SUBMITS UNDER
THE EXCHANGE ACT IS RECORDED, PROCESSED, SUMMARIZED AND REPORTED, WITHIN THE
TIME PERIODS SPECIFIED IN THE COMMISSION’S RULES AND FORMS.  THE COMPANY’S
CERTIFYING OFFICERS HAVE EVALUATED THE EFFECTIVENESS OF THE COMPANY’S DISCLOSURE
CONTROLS AND PROCEDURES AS OF THE END OF THE PERIOD COVERED BY THE COMPANY’S
MOST RECENTLY FILED PERIODIC REPORT UNDER THE EXCHANGE ACT (SUCH DATE, THE
“EVALUATION DATE”).  THE COMPANY PRESENTED IN ITS MOST RECENTLY FILED PERIODIC
REPORT UNDER THE EXCHANGE ACT THE CONCLUSIONS OF THE CERTIFYING OFFICERS ABOUT
THE EFFECTIVENESS OF THE DISCLOSURE CONTROLS AND PROCEDURES BASED ON THEIR
EVALUATIONS AS OF THE EVALUATION DATE.  SINCE THE EVALUATION DATE, THERE HAVE
BEEN NO CHANGES IN THE COMPANY’S INTERNAL CONTROL OVER FINANCIAL REPORTING (AS
SUCH TERM IS DEFINED IN THE EXCHANGE ACT) THAT HAS MATERIALLY AFFECTED, OR IS
REASONABLY LIKELY TO MATERIALLY AFFECT, THE COMPANY’S INTERNAL CONTROL OVER
FINANCIAL REPORTING.

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(S)           CERTAIN FEES. EXCEPT AS SET FORTH ON SCHEDULE 3.1(S), NO BROKERAGE
OR FINDER’S FEES OR COMMISSIONS ARE OR WILL BE PAYABLE BY THE COMPANY TO ANY
BROKER, FINANCIAL ADVISOR OR CONSULTANT, FINDER, PLACEMENT AGENT, INVESTMENT
BANKER, BANK OR OTHER PERSON WITH RESPECT TO THE TRANSACTIONS CONTEMPLATED BY
THE TRANSACTION DOCUMENTS.  THE PURCHASERS SHALL HAVE NO OBLIGATION WITH RESPECT
TO ANY FEES OR WITH RESPECT TO ANY CLAIMS MADE BY OR ON BEHALF OF OTHER PERSONS
FOR FEES OF A TYPE CONTEMPLATED IN THIS SECTION THAT MAY BE DUE IN CONNECTION
WITH THE TRANSACTIONS CONTEMPLATED BY THE TRANSACTION DOCUMENTS.

(T)            PRIVATE PLACEMENT.  ASSUMING THE ACCURACY OF THE PURCHASERS’
REPRESENTATIONS AND WARRANTIES SET FORTH IN SECTION 3.2, NO REGISTRATION UNDER
THE SECURITIES ACT IS REQUIRED FOR THE OFFER AND SALE OF THE SECURITIES BY THE
COMPANY TO THE PURCHASERS AS CONTEMPLATED HEREBY. THE ISSUANCE AND SALE OF THE
SECURITIES HEREUNDER DOES NOT CONTRAVENE THE RULES AND REGULATIONS OF THE
TRADING MARKET.

(U)           INVESTMENT COMPANY. THE COMPANY IS NOT, AND IS NOT AN AFFILIATE
OF, AND IMMEDIATELY AFTER RECEIPT OF PAYMENT FOR THE SECURITIES, WILL NOT BE OR
BE AN AFFILIATE OF, AN “INVESTMENT COMPANY” WITHIN THE MEANING OF THE INVESTMENT
COMPANY ACT OF 1940, AS AMENDED.  THE COMPANY SHALL CONDUCT ITS BUSINESS IN A
MANNER SO THAT IT WILL NOT BECOME SUBJECT TO THE INVESTMENT COMPANY ACT OF 1940,
AS AMENDED.

(V)           REGISTRATION RIGHTS.  OTHER THAN EACH OF THE PURCHASERS AND AS
DISCLOSED ON SCHEDULE 3.1 (V), , NO PERSON HAS ANY RIGHT TO CAUSE THE COMPANY TO
EFFECT THE REGISTRATION UNDER THE SECURITIES ACT OF ANY SECURITIES OF THE
COMPANY.

(W)          LISTING AND MAINTENANCE REQUIREMENTS.  THE COMPANY’S COMMON STOCK
IS REGISTERED PURSUANT TO SECTION 12(B) OR 12(G) OF THE EXCHANGE ACT, AND THE
COMPANY HAS TAKEN NO ACTION DESIGNED TO, OR WHICH TO ITS KNOWLEDGE IS LIKELY TO
HAVE THE EFFECT OF, TERMINATING THE REGISTRATION OF THE COMMON STOCK UNDER THE
EXCHANGE ACT NOR HAS THE COMPANY RECEIVED ANY NOTIFICATION THAT THE COMMISSION
IS CONTEMPLATING TERMINATING SUCH REGISTRATION.  THE COMPANY HAS NOT, IN THE 12
MONTHS PRECEDING THE DATE HEREOF, RECEIVED NOTICE FROM ANY TRADING MARKET ON
WHICH THE COMMON STOCK IS OR HAS BEEN LISTED OR QUOTED TO THE EFFECT THAT THE
COMPANY IS NOT IN COMPLIANCE WITH THE LISTING OR MAINTENANCE REQUIREMENTS OF
SUCH TRADING MARKET. THE COMPANY IS, AND HAS NO REASON TO BELIEVE THAT IT WILL
NOT IN THE FORESEEABLE FUTURE CONTINUE TO BE, IN COMPLIANCE WITH ALL SUCH
LISTING AND MAINTENANCE REQUIREMENTS.

(X)            APPLICATION OF TAKEOVER PROTECTIONS.  THE COMPANY AND ITS BOARD
OF DIRECTORS HAVE TAKEN ALL NECESSARY ACTION, IF ANY, IN ORDER TO RENDER
INAPPLICABLE ANY CONTROL SHARE ACQUISITION, BUSINESS COMBINATION, POISON PILL
(INCLUDING ANY DISTRIBUTION UNDER A RIGHTS AGREEMENT) OR OTHER SIMILAR
ANTI-TAKEOVER PROVISION UNDER THE COMPANY’S CERTIFICATE OF INCORPORATION (OR
SIMILAR CHARTER DOCUMENTS) OR THE LAWS OF ITS STATE OF INCORPORATION THAT IS OR
COULD BECOME APPLICABLE TO THE PURCHASERS AS A RESULT OF THE PURCHASERS AND THE
COMPANY FULFILLING THEIR OBLIGATIONS OR EXERCISING THEIR RIGHTS UNDER THE
TRANSACTION DOCUMENTS, INCLUDING WITHOUT LIMITATION AS A RESULT OF THE COMPANY’S
ISSUANCE OF THE SECURITIES AND THE PURCHASERS’ OWNERSHIP OF THE SECURITIES.

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(Y)           DISCLOSURE.  EXCEPT WITH RESPECT TO THE MATERIAL TERMS AND
CONDITIONS OF THE TRANSACTIONS CONTEMPLATED BY THE TRANSACTION DOCUMENTS, THE
COMPANY CONFIRMS THAT NEITHER IT NOR ANY OTHER PERSON ACTING ON ITS BEHALF HAS
PROVIDED ANY OF THE PURCHASERS OR THEIR AGENTS OR COUNSEL WITH ANY INFORMATION
THAT IT BELIEVES CONSTITUTES OR MIGHT CONSTITUTE MATERIAL, NONPUBLIC
INFORMATION.  THE COMPANY UNDERSTANDS AND CONFIRMS THAT THE PURCHASERS WILL RELY
ON THE FOREGOING REPRESENTATION IN EFFECTING TRANSACTIONS IN SECURITIES OF THE
COMPANY.  ALL DISCLOSURE FURNISHED BY OR ON BEHALF OF THE COMPANY TO THE
PURCHASERS REGARDING THE COMPANY, ITS BUSINESS AND THE TRANSACTIONS CONTEMPLATED
HEREBY, INCLUDING THE DISCLOSURE SCHEDULES TO THIS AGREEMENT, IS TRUE AND
CORRECT AND DOES NOT CONTAIN ANY UNTRUE STATEMENT OF A MATERIAL FACT OR OMIT TO
STATE ANY MATERIAL FACT NECESSARY IN ORDER TO MAKE THE STATEMENTS MADE THEREIN,
IN LIGHT OF THE CIRCUMSTANCES UNDER WHICH THEY WERE MADE, NOT MISLEADING.   THE
PRESS RELEASES DISSEMINATED BY THE COMPANY DURING THE TWELVE MONTHS PRECEDING
THE DATE OF THIS AGREEMENT TAKEN AS A WHOLE DO NOT CONTAIN ANY UNTRUE STATEMENT
OF A MATERIAL FACT OR OMIT TO STATE A MATERIAL FACT REQUIRED TO BE STATED
THEREIN OR NECESSARY IN ORDER TO MAKE THE STATEMENTS, IN LIGHT OF THE
CIRCUMSTANCES UNDER WHICH THEY WERE MADE AND WHEN MADE, NOT MISLEADING.  THE
COMPANY ACKNOWLEDGES AND AGREES THAT NO PURCHASER MAKES OR HAS MADE ANY
REPRESENTATIONS OR WARRANTIES WITH RESPECT TO THE TRANSACTIONS CONTEMPLATED
HEREBY OTHER THAN THOSE SPECIFICALLY SET FORTH IN SECTION 3.2 HEREOF.

(Z)            NO INTEGRATED OFFERING. ASSUMING THE ACCURACY OF THE PURCHASERS’
REPRESENTATIONS AND WARRANTIES SET FORTH IN SECTION 3.2, NEITHER THE COMPANY,
NOR ANY OF ITS AFFILIATES, NOR ANY PERSON ACTING ON ITS OR THEIR BEHALF HAS,
DIRECTLY OR INDIRECTLY, MADE ANY OFFERS OR SALES OF ANY SECURITY OR SOLICITED
ANY OFFERS TO BUY ANY SECURITY, UNDER CIRCUMSTANCES THAT WOULD CAUSE THIS
OFFERING OF THE SECURITIES TO BE INTEGRATED WITH PRIOR OFFERINGS BY THE COMPANY
FOR PURPOSES OF THE SECURITIES ACT OR ANY APPLICABLE SHAREHOLDER APPROVAL
PROVISION OF ANY TRADING MARKET ON WHICH ANY OF THE SECURITIES OF THE COMPANY
ARE LISTED OR DESIGNATED.

(AA)         SOLVENCY.  BASED ON THE FINANCIAL CONDITION OF THE COMPANY AS OF
THE CLOSING DATE AFTER GIVING EFFECT TO THE RECEIPT BY THE COMPANY OF THE
PROCEEDS FROM THE SALE OF THE SECURITIES HEREUNDER, (I) THE FAIR SALEABLE VALUE
OF THE COMPANY’S ASSETS EXCEEDS THE AMOUNT THAT WILL BE REQUIRED TO BE PAID ON
OR IN RESPECT OF THE COMPANY’S EXISTING DEBTS AND OTHER LIABILITIES (INCLUDING
KNOWN CONTINGENT LIABILITIES) AS THEY MATURE; (II) THE COMPANY’S ASSETS DO NOT
CONSTITUTE UNREASONABLY SMALL CAPITAL TO CARRY ON ITS BUSINESS AS NOW CONDUCTED
AND AS PROPOSED TO BE CONDUCTED INCLUDING ITS CAPITAL NEEDS TAKING INTO ACCOUNT
THE PARTICULAR CAPITAL REQUIREMENTS OF THE BUSINESS CONDUCTED BY THE COMPANY,
AND PROJECTED CAPITAL REQUIREMENTS AND CAPITAL AVAILABILITY THEREOF; AND (III)
THE CURRENT CASH FLOW OF THE COMPANY, TOGETHER WITH THE PROCEEDS THE COMPANY
WOULD RECEIVE, WERE IT TO LIQUIDATE ALL OF ITS ASSETS, AFTER TAKING INTO ACCOUNT
ALL ANTICIPATED USES OF THE CASH, WOULD BE SUFFICIENT TO PAY ALL AMOUNTS ON OR
IN RESPECT OF ITS LIABILITIES WHEN SUCH AMOUNTS ARE REQUIRED TO BE PAID.  THE
COMPANY DOES NOT INTEND TO INCUR DEBTS BEYOND ITS ABILITY TO PAY SUCH DEBTS AS
THEY MATURE (TAKING INTO ACCOUNT THE TIMING AND AMOUNTS OF CASH TO BE PAYABLE ON
OR IN RESPECT OF ITS DEBT).  THE COMPANY HAS NO KNOWLEDGE OF ANY FACTS OR
CIRCUMSTANCES WHICH LEAD IT TO BELIEVE THAT IT WILL FILE FOR REORGANIZATION OR
LIQUIDATION UNDER THE BANKRUPTCY OR REORGANIZATION LAWS OF ANY

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JURISDICTION WITHIN ONE YEAR FROM THE CLOSING DATE.  SCHEDULE 3.1(AA) SETS FORTH
AS OF THE DATES THEREOF ALL OUTSTANDING SECURED AND UNSECURED INDEBTEDNESS OF
THE COMPANY OR ANY SUBSIDIARY, OR FOR WHICH THE COMPANY OR ANY SUBSIDIARY HAS
COMMITMENTS.  FOR THE PURPOSES OF THIS AGREEMENT, “INDEBTEDNESS” SHALL MEAN (A)
ANY LIABILITIES FOR BORROWED MONEY OR AMOUNTS OWED IN EXCESS OF $50,000 (OTHER
THAN TRADE ACCOUNTS PAYABLE INCURRED IN THE ORDINARY COURSE OF BUSINESS), (B)
ALL GUARANTIES, ENDORSEMENTS AND OTHER CONTINGENT OBLIGATIONS IN RESPECT OF
INDEBTEDNESS OF OTHERS, WHETHER OR NOT THE SAME ARE OR SHOULD BE REFLECTED IN
THE COMPANY’S BALANCE SHEET (OR THE NOTES THERETO), EXCEPT GUARANTIES BY
ENDORSEMENT OF NEGOTIABLE INSTRUMENTS FOR DEPOSIT OR COLLECTION OR SIMILAR
TRANSACTIONS IN THE ORDINARY COURSE OF BUSINESS; AND (C) THE PRESENT VALUE OF
ANY LEASE PAYMENTS IN EXCESS OF $50,000 DUE UNDER LEASES REQUIRED TO BE
CAPITALIZED IN ACCORDANCE WITH GAAP.  NEITHER THE COMPANY NOR ANY SUBSIDIARY IS
IN DEFAULT WITH RESPECT TO ANY INDEBTEDNESS.

(BB)         TAX STATUS.            EXCEPT FOR MATTERS THAT WOULD NOT,
INDIVIDUALLY OR IN THE AGGREGATE, HAVE OR REASONABLY BE EXPECTED TO RESULT IN A
MATERIAL ADVERSE EFFECT, THE COMPANY AND EACH SUBSIDIARY HAS FILED ALL NECESSARY
FEDERAL, STATE AND FOREIGN INCOME AND FRANCHISE TAX RETURNS AND HAS PAID OR
ACCRUED ALL TAXES SHOWN AS DUE THEREON, AND THE COMPANY HAS NO KNOWLEDGE OF A
TAX DEFICIENCY WHICH HAS BEEN ASSERTED OR THREATENED AGAINST THE COMPANY OR ANY
SUBSIDIARY.

(CC)         NO GENERAL SOLICITATION. NEITHER THE COMPANY NOR ANY PERSON ACTING
ON BEHALF OF THE COMPANY HAS OFFERED OR SOLD ANY OF THE SECURITIES BY ANY FORM
OF GENERAL SOLICITATION OR GENERAL ADVERTISING.  THE COMPANY HAS OFFERED THE
SECURITIES FOR SALE ONLY TO THE PURCHASERS AND CERTAIN OTHER “ACCREDITED
INVESTORS” WITHIN THE MEANING OF RULE 501 UNDER THE SECURITIES ACT.

(DD)         FOREIGN CORRUPT PRACTICES.  NEITHER THE COMPANY, NOR TO THE
KNOWLEDGE OF THE COMPANY, ANY AGENT OR OTHER PERSON ACTING ON BEHALF OF THE
COMPANY, HAS (I) DIRECTLY OR INDIRECTLY, USED ANY FUNDS FOR UNLAWFUL
CONTRIBUTIONS, GIFTS, ENTERTAINMENT OR OTHER UNLAWFUL EXPENSES RELATED TO
FOREIGN OR DOMESTIC POLITICAL ACTIVITY, (II) MADE ANY UNLAWFUL PAYMENT TO
FOREIGN OR DOMESTIC GOVERNMENT OFFICIALS OR EMPLOYEES OR TO ANY FOREIGN OR
DOMESTIC POLITICAL PARTIES OR CAMPAIGNS FROM CORPORATE FUNDS, (III) FAILED TO
DISCLOSE FULLY ANY CONTRIBUTION MADE BY THE COMPANY (OR MADE BY ANY PERSON
ACTING ON ITS BEHALF OF WHICH THE COMPANY IS AWARE) WHICH IS IN VIOLATION OF
LAW, OR (IV) VIOLATED IN ANY MATERIAL RESPECT ANY PROVISION OF THE FOREIGN
CORRUPT PRACTICES ACT OF 1977, AS AMENDED.

(EE)         ACCOUNTANTS.  THE COMPANY’S ACCOUNTING FIRM IS SET FORTH ON
SCHEDULE 3.1(EE) OF THE DISCLOSURE SCHEDULE.  TO THE KNOWLEDGE AND BELIEF OF THE
COMPANY, SUCH ACCOUNTING FIRM (I) IS A REGISTERED PUBLIC ACCOUNTING FIRM AS
REQUIRED BY THE EXCHANGE ACT AND (II) SHALL EXPRESS ITS OPINION WITH RESPECT TO
THE FINANCIAL STATEMENTS TO BE INCLUDED IN THE COMPANY’S ANNUAL REPORT ON FORM
10-KSB FOR THE YEAR ENDING DECEMBER 31, 2006.

(FF)           SENIORITY.  AS OF THE CLOSING DATE, EXCEPT AS SET FORTH ON
SCHEDULE 3.1(FF), NO INDEBTEDNESS OR OTHER CLAIM AGAINST THE COMPANY IS SENIOR
TO THE DEBENTURES IN RIGHT OF PAYMENT, WHETHER WITH RESPECT TO INTEREST OR UPON
LIQUIDATION OR DISSOLUTION, OR OTHERWISE, OTHER THAN INDEBTEDNESS SECURED BY
PURCHASE MONEY SECURITY INTERESTS (WHICH

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IS SENIOR ONLY AS TO UNDERLYING ASSETS COVERED THEREBY) AND CAPITAL LEASE
OBLIGATIONS (WHICH IS SENIOR ONLY AS TO THE PROPERTY COVERED THEREBY).

(GG)         NO DISAGREEMENTS WITH ACCOUNTANTS AND LAWYERS.  THERE ARE NO
DISAGREEMENTS OF ANY KIND PRESENTLY EXISTING, OR REASONABLY ANTICIPATED BY THE
COMPANY TO ARISE, BETWEEN THE COMPANY AND THE ACCOUNTANTS AND LAWYERS FORMERLY
OR PRESENTLY EMPLOYED BY THE COMPANY AND THE COMPANY IS CURRENT WITH RESPECT TO
ANY FEES OWED TO ITS ACCOUNTANTS AND LAWYERS.

(HH)         ACKNOWLEDGMENT REGARDING PURCHASERS’ PURCHASE OF SECURITIES.  THE
COMPANY ACKNOWLEDGES AND AGREES THAT EACH OF THE PURCHASERS IS ACTING SOLELY IN
THE CAPACITY OF AN ARM’S LENGTH PURCHASER WITH RESPECT TO THE TRANSACTION
DOCUMENTS AND THE TRANSACTIONS CONTEMPLATED THEREBY.  THE COMPANY FURTHER
ACKNOWLEDGES THAT NO PURCHASER IS ACTING AS A FINANCIAL ADVISOR OR FIDUCIARY OF
THE COMPANY (OR IN ANY SIMILAR CAPACITY) WITH RESPECT TO THE TRANSACTION
DOCUMENTS AND THE TRANSACTIONS CONTEMPLATED THEREBY AND ANY ADVICE GIVEN BY ANY
PURCHASER OR ANY OF THEIR RESPECTIVE REPRESENTATIVES OR AGENTS IN CONNECTION
WITH THE TRANSACTION DOCUMENTS AND THE TRANSACTIONS CONTEMPLATED THEREBY IS
MERELY INCIDENTAL TO THE PURCHASERS’ PURCHASE OF THE SECURITIES.  THE COMPANY
FURTHER REPRESENTS TO EACH PURCHASER THAT THE COMPANY’S DECISION TO ENTER INTO
THIS AGREEMENT AND THE OTHER TRANSACTION DOCUMENTS HAS BEEN BASED SOLELY ON THE
INDEPENDENT EVALUATION OF THE TRANSACTIONS CONTEMPLATED HEREBY BY THE COMPANY
AND ITS REPRESENTATIVES.

(II)           ACKNOWLEDGMENT REGARDING PURCHASERS TRADING ACTIVITY.  ANYTHING
IN THIS AGREEMENT OR ELSEWHERE HEREIN TO THE CONTRARY NOTWITHSTANDING (EXCEPT
FOR SECTIONS 3.2(F) AND 4.16 HEREOF), IT IS UNDERSTOOD AND ACKNOWLEDGED BY THE
COMPANY (I) THAT NONE OF THE PURCHASERS HAVE BEEN ASKED TO AGREE, NOR HAS ANY
PURCHASER AGREED, TO DESIST FROM PURCHASING OR SELLING, LONG AND/OR SHORT,
SECURITIES OF THE COMPANY, OR “DERIVATIVE” SECURITIES BASED ON SECURITIES ISSUED
BY THE COMPANY OR TO HOLD THE SECURITIES FOR ANY SPECIFIED TERM; (II) THAT PAST
OR FUTURE OPEN MARKET OR OTHER TRANSACTIONS BY ANY PURCHASER, INCLUDING SHORT
SALES, AND SPECIFICALLY INCLUDING, WITHOUT LIMITATION, SHORT SALES OR
“DERIVATIVE” TRANSACTIONS, BEFORE OR AFTER THE CLOSING OF THIS OR FUTURE PRIVATE
PLACEMENT TRANSACTIONS, MAY NEGATIVELY IMPACT THE MARKET PRICE OF THE COMPANY’S
PUBLICLY-TRADED SECURITIES; (III) THAT ANY PURCHASER, AND COUNTER-PARTIES IN
“DERIVATIVE” TRANSACTIONS TO WHICH ANY SUCH PURCHASER IS A PARTY, DIRECTLY OR
INDIRECTLY, PRESENTLY MAY HAVE A “SHORT” POSITION IN THE COMMON STOCK, AND (IV)
THAT EACH PURCHASER SHALL NOT BE DEEMED TO HAVE ANY AFFILIATION WITH OR CONTROL
OVER ANY ARM’S LENGTH COUNTER-PARTY IN ANY “DERIVATIVE” TRANSACTION.  THE
COMPANY FURTHER UNDERSTANDS AND ACKNOWLEDGES THAT (A) ONE OR MORE PURCHASERS MAY
ENGAGE IN HEDGING ACTIVITIES AT VARIOUS TIMES DURING THE PERIOD THAT THE
SECURITIES ARE OUTSTANDING, INCLUDING, WITHOUT LIMITATION, DURING THE PERIODS
THAT THE VALUE OF THE UNDERLYING SHARES DELIVERABLE WITH RESPECT TO SECURITIES
ARE BEING DETERMINED AND (B) SUCH HEDGING ACTIVITIES (IF ANY) COULD REDUCE THE
VALUE OF THE EXISTING STOCKHOLDERS’ EQUITY INTERESTS IN THE COMPANY AT AND AFTER
THE TIME THAT THE HEDGING ACTIVITIES ARE BEING CONDUCTED.  THE COMPANY
ACKNOWLEDGES THAT SUCH AFOREMENTIONED HEDGING ACTIVITIES DO NOT CONSTITUTE A
BREACH OF ANY OF THE TRANSACTION DOCUMENTS.

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(JJ)           REGULATION M COMPLIANCE.  THE COMPANY HAS NOT, AND TO ITS
KNOWLEDGE NO ONE ACTING ON ITS BEHALF HAS, (I) TAKEN, DIRECTLY OR INDIRECTLY,
ANY ACTION DESIGNED TO CAUSE OR TO RESULT IN THE STABILIZATION OR MANIPULATION
OF THE PRICE OF ANY SECURITY OF THE COMPANY TO FACILITATE THE SALE OR RESALE OF
ANY OF THE SECURITIES, (II) SOLD, BID FOR, PURCHASED, OR PAID ANY COMPENSATION
FOR SOLICITING PURCHASES OF, ANY OF THE SECURITIES OF THE COMPANY OR (III) PAID
OR AGREED TO PAY TO ANY PERSON ANY COMPENSATION FOR SOLICITING ANOTHER TO
PURCHASE ANY OTHER SECURITIES OF THE COMPANY, OTHER THAN, IN THE CASE OF CLAUSES
(II) AND (III), COMPENSATION PAID TO THE COMPANY’S PLACEMENT AGENT IN CONNECTION
WITH THE PLACEMENT OF THE SECURITIES

(KK)         FDA.  AS TO EACH PRODUCT SUBJECT TO THE JURISDICTION OF THE U.S.
FOOD AND DRUG ADMINISTRATION (“FDA”) UNDER THE FEDERAL FOOD, DRUG AND COSMETIC
ACT, AS AMENDED, AND THE REGULATIONS THEREUNDER (“FDCA”) THAT IS MANUFACTURED,
PACKAGED, LABELED, TESTED, DISTRIBUTED, SOLD, AND/OR MARKETED BY THE COMPANY OR
ANY OF ITS SUBSIDIARIES (EACH SUCH PRODUCT, A “PHARMACEUTICAL PRODUCT”), SUCH
PHARMACEUTICAL PRODUCT IS BEING MANUFACTURED, PACKAGED, LABELED, TESTED,
DISTRIBUTED, SOLD AND/OR MARKETED BY THE COMPANY IN COMPLIANCE WITH ALL
APPLICABLE REQUIREMENTS UNDER FDCA AND SIMILAR LAWS, RULES AND REGULATIONS
RELATING TO REGISTRATION, INVESTIGATIONAL USE, PREMARKET CLEARANCE, LICENSURE,
OR APPLICATION APPROVAL, GOOD MANUFACTURING PRACTICES, GOOD LABORATORY
PRACTICES, GOOD CLINICAL PRACTICES, PRODUCT LISTING, QUOTAS, LABELING,
ADVERTISING, RECORD KEEPING AND FILING OF REPORTS, EXCEPT WHERE THE FAILURE TO
BE IN COMPLIANCE WOULD NOT HAVE A MATERIAL ADVERSE EFFECT.  THERE IS NO PENDING,
COMPLETED OR, TO THE COMPANY’S KNOWLEDGE, THREATENED, ACTION (INCLUDING ANY
LAWSUIT, ARBITRATION, OR LEGAL OR ADMINISTRATIVE OR REGULATORY PROCEEDING,
CHARGE, COMPLAINT, OR INVESTIGATION) AGAINST THE COMPANY OR ANY OF ITS
SUBSIDIARIES, AND NONE OF THE COMPANY OR ANY OF ITS SUBSIDIARIES HAS RECEIVED
ANY NOTICE, WARNING LETTER OR OTHER COMMUNICATION FROM THE FDA OR ANY OTHER
GOVERNMENTAL ENTITY, WHICH (I) CONTESTS THE PREMARKET CLEARANCE, LICENSURE,
REGISTRATION, OR APPROVAL OF, THE USES OF, THE DISTRIBUTION OF, THE
MANUFACTURING OR PACKAGING OF, THE TESTING OF, THE SALE OF, OR THE LABELING AND
PROMOTION OF ANY PHARMACEUTICAL PRODUCT, (II) WITHDRAWS ITS APPROVAL OF,
REQUESTS THE RECALL, SUSPENSION, OR SEIZURE OF, OR WITHDRAWS OR ORDERS THE
WITHDRAWAL OF ADVERTISING OR SALES PROMOTIONAL MATERIALS RELATING TO, ANY
PHARMACEUTICAL PRODUCT, (III) IMPOSES A CLINICAL HOLD ON ANY CLINICAL
INVESTIGATION BY THE COMPANY OR ANY OF ITS SUBSIDIARIES, (IV) ENJOINS PRODUCTION
AT ANY FACILITY OF THE COMPANY OR ANY OF ITS SUBSIDIARIES, (V) ENTERS OR
PROPOSES TO ENTER INTO A CONSENT DECREE OF PERMANENT INJUNCTION WITH THE COMPANY
OR ANY OF ITS SUBSIDIARIES, OR (VI) OTHERWISE ALLEGES ANY VIOLATION OF ANY LAWS,
RULES OR REGULATIONS BY THE COMPANY OR ANY OF ITS SUBSIDIARIES, AND WHICH,
EITHER INDIVIDUALLY OR IN THE AGGREGATE, WOULD HAVE A MATERIAL ADVERSE EFFECT. 
THE PROPERTIES, BUSINESS AND OPERATIONS OF THE COMPANY HAVE BEEN AND ARE BEING
CONDUCTED IN ALL MATERIAL RESPECTS IN ACCORDANCE WITH ALL APPLICABLE LAWS, RULES
AND REGULATIONS OF THE FDA.  THE COMPANY HAS NOT BEEN INFORMED BY THE FDA THAT
THE FDA WILL PROHIBIT THE MARKETING, SALE, LICENSE OR USE IN THE UNITED STATES
OF ANY PRODUCT PROPOSED TO BE DEVELOPED, PRODUCED OR MARKETED BY THE COMPANY NOR
HAS THE FDA EXPRESSED ANY CONCERN AS TO APPROVING OR CLEARING FOR MARKETING ANY
PRODUCT BEING DEVELOPED OR PROPOSED TO BE DEVELOPED BY THE COMPANY.

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3.2           REPRESENTATIONS AND WARRANTIES OF THE PURCHASERS.    EACH
PURCHASER HEREBY, FOR ITSELF AND FOR NO OTHER PURCHASER, REPRESENTS AND WARRANTS
AS OF THE DATE HEREOF AND AS OF THE CLOSING DATE TO THE COMPANY AS FOLLOWS:

(A)           ORGANIZATION; AUTHORITY.  SUCH PURCHASER IS AN ENTITY DULY
ORGANIZED, VALIDLY EXISTING AND IN GOOD STANDING UNDER THE LAWS OF THE
JURISDICTION OF ITS ORGANIZATION WITH FULL RIGHT, CORPORATE OR PARTNERSHIP POWER
AND AUTHORITY TO ENTER INTO AND TO CONSUMMATE THE TRANSACTIONS CONTEMPLATED BY
THE TRANSACTION DOCUMENTS AND OTHERWISE TO CARRY OUT ITS OBLIGATIONS HEREUNDER
AND THEREUNDER. THE EXECUTION, DELIVERY AND PERFORMANCE BY SUCH PURCHASER OF THE
TRANSACTIONS CONTEMPLATED BY THIS AGREEMENT HAVE BEEN DULY AUTHORIZED BY ALL
NECESSARY CORPORATE OR SIMILAR ACTION ON THE PART OF SUCH PURCHASER.  EACH
TRANSACTION DOCUMENT TO WHICH IT IS A PARTY HAS BEEN DULY EXECUTED BY SUCH
PURCHASER, AND WHEN DELIVERED BY SUCH PURCHASER IN ACCORDANCE WITH THE TERMS
HEREOF, WILL CONSTITUTE THE VALID AND LEGALLY BINDING OBLIGATION OF SUCH
PURCHASER, ENFORCEABLE AGAINST IT IN ACCORDANCE WITH ITS TERMS, EXCEPT (I) AS
LIMITED BY GENERAL EQUITABLE PRINCIPLES AND APPLICABLE BANKRUPTCY, INSOLVENCY,
REORGANIZATION, MORATORIUM AND OTHER LAWS OF GENERAL APPLICATION AFFECTING
ENFORCEMENT OF CREDITORS’ RIGHTS GENERALLY, (II) AS LIMITED BY LAWS RELATING TO
THE AVAILABILITY OF SPECIFIC PERFORMANCE, INJUNCTIVE RELIEF OR OTHER EQUITABLE
REMEDIES AND (III) INSOFAR AS INDEMNIFICATION AND CONTRIBUTION PROVISIONS MAY BE
LIMITED BY APPLICABLE LAW.

(B)           OWN ACCOUNT.  SUCH PURCHASER UNDERSTANDS THAT THE SECURITIES ARE
“RESTRICTED SECURITIES” AND HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OR
ANY APPLICABLE STATE SECURITIES LAW AND IS ACQUIRING THE SECURITIES AS PRINCIPAL
FOR ITS OWN ACCOUNT AND NOT WITH A VIEW TO OR FOR DISTRIBUTING OR RESELLING SUCH
SECURITIES OR ANY PART THEREOF IN VIOLATION OF THE SECURITIES ACT OR ANY
APPLICABLE STATE SECURITIES LAW, HAS NO PRESENT INTENTION OF DISTRIBUTING ANY OF
SUCH SECURITIES IN VIOLATION OF THE SECURITIES ACT OR ANY APPLICABLE STATE
SECURITIES LAW AND HAS NO DIRECT OR INDIRECT ARRANGEMENT OR UNDERSTANDINGS WITH
ANY OTHER PERSONS TO DISTRIBUTE OR REGARDING THE DISTRIBUTION OF SUCH SECURITIES
(THIS REPRESENTATION AND WARRANTY NOT LIMITING SUCH PURCHASER’S RIGHT TO SELL
THE SECURITIES PURSUANT TO THE REGISTRATION STATEMENT OR OTHERWISE IN COMPLIANCE
WITH APPLICABLE FEDERAL AND STATE SECURITIES LAWS) IN VIOLATION OF THE
SECURITIES ACT OR ANY APPLICABLE STATE SECURITIES LAW.  SUCH PURCHASER IS
ACQUIRING THE SECURITIES HEREUNDER IN THE ORDINARY COURSE OF ITS BUSINESS.

(C)           PURCHASER STATUS.  AT THE TIME SUCH PURCHASER WAS OFFERED THE
SECURITIES, IT WAS, AND AT THE DATE HEREOF IT IS, AND ON EACH DATE ON WHICH IT
EXERCISES ANY WARRANTS OR CONVERTS ANY DEBENTURES IT WILL BE EITHER: (I) AN
“ACCREDITED INVESTOR” AS DEFINED IN RULE 501(A)(1), (A)(2), (A)(3), (A)(7) OR
(A)(8) UNDER THE SECURITIES ACT OR (II) A “QUALIFIED INSTITUTIONAL BUYER” AS
DEFINED IN RULE 144A(A) UNDER THE SECURITIES ACT.  SUCH PURCHASER IS NOT
REQUIRED TO BE REGISTERED AS A BROKER-DEALER UNDER SECTION 15 OF THE EXCHANGE
ACT.

(D)           EXPERIENCE OF SUCH PURCHASER.  SUCH PURCHASER, EITHER ALONE OR
TOGETHER WITH ITS REPRESENTATIVES, HAS SUCH KNOWLEDGE, SOPHISTICATION AND
EXPERIENCE IN BUSINESS AND FINANCIAL MATTERS SO AS TO BE CAPABLE OF EVALUATING
THE MERITS AND RISKS OF THE PROSPECTIVE INVESTMENT IN THE SECURITIES, AND HAS SO
EVALUATED THE MERITS AND RISKS OF SUCH

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INVESTMENT.  SUCH PURCHASER IS ABLE TO BEAR THE ECONOMIC RISK OF AN INVESTMENT
IN THE SECURITIES AND, AT THE PRESENT TIME, IS ABLE TO AFFORD A COMPLETE LOSS OF
SUCH INVESTMENT.

(E)           GENERAL SOLICITATION.  SUCH PURCHASER IS NOT PURCHASING THE
SECURITIES AS A RESULT OF ANY ADVERTISEMENT, ARTICLE, NOTICE OR OTHER
COMMUNICATION REGARDING THE SECURITIES PUBLISHED IN ANY NEWSPAPER, MAGAZINE OR
SIMILAR MEDIA OR BROADCAST OVER TELEVISION OR RADIO OR PRESENTED AT ANY SEMINAR
OR ANY OTHER GENERAL SOLICITATION OR GENERAL ADVERTISEMENT.

(F)            SHORT SALES AND CONFIDENTIALITY PRIOR TO THE DATE HEREOF.  OTHER
THAN THE TRANSACTION CONTEMPLATED HEREUNDER, SUCH PURCHASER HAS NOT DIRECTLY OR
INDIRECTLY, NOR HAS ANY PERSON ACTING ON BEHALF OF OR PURSUANT TO ANY
UNDERSTANDING WITH SUCH PURCHASER, EXECUTED ANY TRANSACTION, INCLUDING SHORT
SALES, IN THE SECURITIES OF THE COMPANY DURING THE PERIOD COMMENCING FROM THE
TIME THAT SUCH PURCHASER FIRST RECEIVED A TERM SHEET (WRITTEN OR ORAL) FROM THE
COMPANY OR ANY OTHER PERSON SETTING FORTH THE MATERIAL TERMS OF THE TRANSACTIONS
CONTEMPLATED HEREUNDER UNTIL THE DATE HEREOF (“DISCUSSION TIME”). 
NOTWITHSTANDING THE FOREGOING, IN THE CASE OF A PURCHASER THAT IS A
MULTI-MANAGED INVESTMENT VEHICLE WHEREBY SEPARATE PORTFOLIO MANAGERS MANAGE
SEPARATE PORTIONS OF SUCH PURCHASER’S ASSETS AND THE PORTFOLIO MANAGERS HAVE NO
DIRECT KNOWLEDGE OF THE INVESTMENT DECISIONS MADE BY THE PORTFOLIO MANAGERS
MANAGING OTHER PORTIONS OF SUCH PURCHASER’S ASSETS, THE REPRESENTATION SET FORTH
ABOVE SHALL ONLY APPLY WITH RESPECT TO THE PORTION OF ASSETS MANAGED BY THE
PORTFOLIO MANAGER THAT MADE THE INVESTMENT DECISION TO PURCHASE THE SECURITIES
COVERED BY THIS AGREEMENT.  OTHER THAN TO OTHER PERSONS PARTY TO THIS AGREEMENT,
SUCH PURCHASER HAS MAINTAINED THE CONFIDENTIALITY OF ALL DISCLOSURES MADE TO IT
IN CONNECTION WITH THIS TRANSACTION (INCLUDING THE EXISTENCE AND TERMS OF THIS
TRANSACTION).

ARTICLE IV.

OTHER AGREEMENTS OF THE PARTIES

4.1           TRANSFER RESTRICTIONS.

(A)           THE SECURITIES MAY ONLY BE DISPOSED OF IN COMPLIANCE WITH STATE
AND FEDERAL SECURITIES LAWS.  IN CONNECTION WITH ANY TRANSFER OF SECURITIES
OTHER THAN PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT OR RULE 144, TO THE
COMPANY OR TO AN AFFILIATE OF A PURCHASER OR IN CONNECTION WITH A PLEDGE AS
CONTEMPLATED IN SECTION 4.1(B), THE COMPANY MAY REQUIRE THE TRANSFEROR THEREOF
TO PROVIDE TO THE COMPANY AN OPINION OF COUNSEL SELECTED BY THE TRANSFEROR AND
REASONABLY ACCEPTABLE TO THE COMPANY, THE FORM AND SUBSTANCE OF WHICH OPINION
SHALL BE REASONABLY SATISFACTORY TO THE COMPANY, TO THE EFFECT THAT SUCH
TRANSFER DOES NOT REQUIRE REGISTRATION OF SUCH TRANSFERRED SECURITIES UNDER THE
SECURITIES ACT.  AS A CONDITION OF TRANSFER, ANY SUCH TRANSFEREE SHALL AGREE IN
WRITING TO BE BOUND BY THE TERMS OF THIS AGREEMENT AND SHALL HAVE THE RIGHTS OF
A PURCHASER UNDER THIS AGREEMENT AND THE REGISTRATION RIGHTS AGREEMENT.

(B)           THE PURCHASERS AGREE TO THE IMPRINTING, SO LONG AS IS REQUIRED BY
THIS SECTION 4.1, OF A LEGEND ON ANY OF THE SECURITIES IN THE FOLLOWING FORM:

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

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

(C)           CERTIFICATES EVIDENCING THE UNDERLYING SHARES SHALL NOT CONTAIN
ANY LEGEND (INCLUDING THE LEGEND SET FORTH IN SECTION 4.1(B) HEREOF): (I) WHILE
A REGISTRATION STATEMENT (INCLUDING THE REGISTRATION STATEMENT) COVERING THE
RESALE OF SUCH SECURITY IS EFFECTIVE UNDER THE SECURITIES ACT, OR (II) FOLLOWING
ANY SALE OF SUCH UNDERLYING SHARES PURSUANT TO RULE 144, OR (III) IF SUCH
UNDERLYING SHARES ARE ELIGIBLE FOR SALE UNDER RULE 144(K), OR (IV) IF SUCH
LEGEND IS NOT REQUIRED UNDER APPLICABLE REQUIREMENTS OF THE SECURITIES ACT
(INCLUDING JUDICIAL INTERPRETATIONS AND PRONOUNCEMENTS ISSUED BY THE STAFF OF
THE COMMISSION). THE COMPANY SHALL CAUSE ITS COUNSEL TO ISSUE A LEGAL OPINION TO
THE TRANSFER AGENT PROMPTLY AFTER THE EFFECTIVE DATE IF REQUIRED BY THE TRANSFER
AGENT TO EFFECT THE REMOVAL OF THE LEGEND HEREUNDER.  IF ALL OR ANY PORTION OF A
DEBENTURE OR

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WARRANT IS CONVERTED OR EXERCISED (AS APPLICABLE) AT A TIME WHEN THERE IS AN
EFFECTIVE REGISTRATION STATEMENT TO COVER THE RESALE OF THE UNDERLYING SHARES,
OR IF SUCH UNDERLYING SHARES MAY BE SOLD UNDER RULE 144(K) OR IF SUCH LEGEND IS
NOT OTHERWISE REQUIRED UNDER APPLICABLE REQUIREMENTS OF THE SECURITIES ACT
(INCLUDING JUDICIAL INTERPRETATIONS AND PRONOUNCEMENTS ISSUED BY THE STAFF OF
THE COMMISSION) THEN SUCH UNDERLYING SHARES SHALL BE ISSUED FREE OF ALL
LEGENDS.  THE COMPANY AGREES THAT FOLLOWING THE EFFECTIVE DATE OR AT SUCH TIME
AS SUCH LEGEND IS NO LONGER REQUIRED UNDER THIS SECTION 4.1(C), IT WILL, NO
LATER THAN THREE TRADING DAYS FOLLOWING THE DELIVERY BY A PURCHASER TO THE
COMPANY OR THE TRANSFER AGENT OF A CERTIFICATE REPRESENTING UNDERLYING SHARES,
AS APPLICABLE, ISSUED WITH A RESTRICTIVE LEGEND (SUCH THIRD TRADING DAY, THE
“LEGEND REMOVAL DATE”), DELIVER OR CAUSE TO BE DELIVERED TO SUCH PURCHASER A
CERTIFICATE REPRESENTING SUCH SHARES THAT IS FREE FROM ALL RESTRICTIVE AND OTHER
LEGENDS.  THE COMPANY MAY NOT MAKE ANY NOTATION ON ITS RECORDS OR GIVE
INSTRUCTIONS TO THE TRANSFER AGENT THAT ENLARGE THE RESTRICTIONS ON TRANSFER SET
FORTH IN THIS SECTION.  CERTIFICATES FOR UNDERLYING SHARES SUBJECT TO LEGEND
REMOVAL HEREUNDER SHALL BE TRANSMITTED BY THE TRANSFER AGENT TO THE PURCHASERS
BY CREDITING THE ACCOUNT OF THE PURCHASER’S PRIME BROKER WITH THE DEPOSITORY
TRUST COMPANY SYSTEM.

(D)           IN ADDITION TO SUCH PURCHASER’S OTHER AVAILABLE REMEDIES, THE
COMPANY SHALL PAY TO A PURCHASER, IN CASH, AS PARTIAL LIQUIDATED DAMAGES AND NOT
AS A PENALTY, FOR EACH $1,000 OF UNDERLYING SHARES (BASED ON THE VWAP OF THE
COMMON STOCK ON THE DATE SUCH SECURITIES ARE SUBMITTED TO THE TRANSFER AGENT)
DELIVERED FOR REMOVAL OF THE RESTRICTIVE LEGEND AND SUBJECT TO SECTION 4.1(C),
$10 PER TRADING DAY (INCREASING TO $20 PER TRADING DAY 5 TRADING DAYS AFTER SUCH
DAMAGES HAVE BEGUN TO ACCRUE) FOR EACH TRADING DAY AFTER THE LEGEND REMOVAL DATE
UNTIL SUCH CERTIFICATE IS DELIVERED WITHOUT A LEGEND.  NOTHING HEREIN SHALL
LIMIT SUCH PURCHASER’S RIGHT TO PURSUE ACTUAL DAMAGES FOR THE COMPANY’S FAILURE
TO DELIVER CERTIFICATES REPRESENTING ANY SECURITIES AS REQUIRED BY THE
TRANSACTION DOCUMENTS, AND SUCH PURCHASER SHALL HAVE THE RIGHT TO PURSUE ALL
REMEDIES AVAILABLE TO IT AT LAW OR IN EQUITY INCLUDING, WITHOUT LIMITATION, A
DECREE OF SPECIFIC PERFORMANCE AND/OR INJUNCTIVE RELIEF.

(E)           EACH PURCHASER, SEVERALLY AND NOT JOINTLY WITH THE OTHER
PURCHASERS, AGREES THAT THE REMOVAL OF THE RESTRICTIVE LEGEND FROM CERTIFICATES
REPRESENTING SECURITIES AS SET FORTH IN THIS SECTION 4.1 IS PREDICATED UPON THE
COMPANY’S RELIANCE THAT THE PURCHASER WILL SELL ANY SECURITIES PURSUANT TO
EITHER THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT, INCLUDING ANY
APPLICABLE PROSPECTUS DELIVERY REQUIREMENTS, OR AN EXEMPTION THEREFROM, AND THAT
IF SECURITIES ARE SOLD PURSUANT TO A REGISTRATION STATEMENT, THEY WILL BE SOLD
IN COMPLIANCE WITH THE PLAN OF DISTRIBUTION SET FORTH THEREIN.

4.2           ACKNOWLEDGMENT OF DILUTION.  THE COMPANY ACKNOWLEDGES THAT THE
ISSUANCE OF THE SECURITIES MAY RESULT IN DILUTION OF THE OUTSTANDING SHARES OF
COMMON STOCK, WHICH DILUTION MAY BE SUBSTANTIAL UNDER CERTAIN MARKET
CONDITIONS.  THE COMPANY FURTHER ACKNOWLEDGES THAT ITS OBLIGATIONS UNDER THE
TRANSACTION DOCUMENTS, INCLUDING WITHOUT LIMITATION ITS OBLIGATION TO ISSUE THE
UNDERLYING SHARES PURSUANT TO THE TRANSACTION DOCUMENTS, ARE UNCONDITIONAL AND
ABSOLUTE AND NOT SUBJECT TO ANY RIGHT OF SET OFF, COUNTERCLAIM, DELAY OR
REDUCTION, REGARDLESS OF THE EFFECT OF ANY SUCH DILUTION OR ANY CLAIM THE
COMPANY MAY HAVE AGAINST ANY PURCHASER AND REGARDLESS OF

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THE DILUTIVE EFFECT THAT SUCH ISSUANCE MAY HAVE ON THE OWNERSHIP OF THE OTHER
STOCKHOLDERS OF THE COMPANY.

4.3           FURNISHING OF INFORMATION.  AS LONG AS ANY PURCHASER OWNS
SECURITIES, THE COMPANY COVENANTS TO TIMELY FILE (OR OBTAIN EXTENSIONS IN
RESPECT THEREOF AND FILE WITHIN THE APPLICABLE GRACE PERIOD) ALL REPORTS
REQUIRED TO BE FILED BY THE COMPANY AFTER THE DATE HEREOF PURSUANT TO THE
EXCHANGE ACT.  AS LONG AS ANY PURCHASER OWNS SECURITIES, IF THE COMPANY IS NOT
REQUIRED TO FILE REPORTS PURSUANT TO THE EXCHANGE ACT, IT WILL PREPARE AND
FURNISH TO THE PURCHASERS AND MAKE PUBLICLY AVAILABLE IN ACCORDANCE WITH RULE
144(C) SUCH INFORMATION AS IS REQUIRED FOR THE PURCHASERS TO SELL THE SECURITIES
UNDER RULE 144.  THE COMPANY FURTHER COVENANTS THAT IT WILL TAKE SUCH FURTHER
ACTION AS ANY HOLDER OF SECURITIES MAY REASONABLY REQUEST, TO THE EXTENT
REQUIRED FROM TIME TO TIME TO ENABLE SUCH PERSON TO SELL SUCH SECURITIES WITHOUT
REGISTRATION UNDER THE SECURITIES ACT WITHIN THE REQUIREMENTS OF THE EXEMPTION
PROVIDED BY RULE 144.

4.4           INTEGRATION.  THE COMPANY SHALL NOT SELL, OFFER FOR SALE OR
SOLICIT OFFERS TO BUY OR OTHERWISE NEGOTIATE IN RESPECT OF ANY SECURITY (AS
DEFINED IN SECTION 2 OF THE SECURITIES ACT) THAT WOULD BE INTEGRATED WITH THE
OFFER OR SALE OF THE SECURITIES IN A MANNER THAT WOULD REQUIRE THE REGISTRATION
UNDER THE SECURITIES ACT OF THE SALE OF THE SECURITIES TO THE PURCHASERS OR THAT
WOULD BE INTEGRATED WITH THE OFFER OR SALE OF THE SECURITIES FOR PURPOSES OF THE
RULES AND REGULATIONS OF ANY TRADING MARKET.

4.5           CONVERSION AND EXERCISE PROCEDURES.  THE FORM OF NOTICE OF
EXERCISE INCLUDED IN THE WARRANTS AND THE FORM OF NOTICE OF CONVERSION INCLUDED
IN THE DEBENTURES SET FORTH THE TOTALITY OF THE PROCEDURES REQUIRED OF THE
PURCHASERS IN ORDER TO EXERCISE THE WARRANTS OR CONVERT THE DEBENTURES.  NO
ADDITIONAL LEGAL OPINION OR OTHER INFORMATION OR INSTRUCTIONS SHALL BE REQUIRED
OF THE PURCHASERS TO EXERCISE THEIR WARRANTS OR CONVERT THEIR DEBENTURES.  THE
COMPANY SHALL HONOR EXERCISES OF THE WARRANTS AND CONVERSIONS OF THE DEBENTURES
AND SHALL DELIVER UNDERLYING SHARES IN ACCORDANCE WITH THE TERMS, CONDITIONS AND
TIME PERIODS SET FORTH IN THE TRANSACTION DOCUMENTS.

4.6           SECURITIES LAWS DISCLOSURE; PUBLICITY.  THE COMPANY SHALL, BY 8:30
A.M. NEW YORK CITY TIME ON THE TRADING DAY FOLLOWING THE DATE HEREOF, ISSUE A
CURRENT REPORT ON FORM 8-K DISCLOSING THE MATERIAL TERMS OF THE TRANSACTIONS
CONTEMPLATED HEREBY AND ATTACHING THE TRANSACTION DOCUMENTS THERETO.  THE
COMPANY AND EACH PURCHASER SHALL CONSULT WITH EACH OTHER IN ISSUING ANY OTHER
PRESS RELEASES WITH RESPECT TO THE TRANSACTIONS CONTEMPLATED HEREBY, AND NEITHER
THE COMPANY NOR ANY PURCHASER SHALL ISSUE ANY SUCH PRESS RELEASE OR OTHERWISE
MAKE ANY SUCH PUBLIC STATEMENT WITHOUT THE PRIOR CONSENT OF THE COMPANY, WITH
RESPECT TO ANY PRESS RELEASE OF ANY PURCHASER, OR WITHOUT THE PRIOR CONSENT OF
EACH PURCHASER, WITH RESPECT TO ANY PRESS RELEASE OF THE COMPANY, WHICH CONSENT
SHALL NOT UNREASONABLY BE WITHHELD OR DELAYED, EXCEPT IF SUCH DISCLOSURE IS
REQUIRED BY LAW, IN WHICH CASE THE DISCLOSING PARTY SHALL PROMPTLY PROVIDE THE
OTHER PARTY WITH PRIOR NOTICE OF SUCH PUBLIC STATEMENT OR COMMUNICATION. 
NOTWITHSTANDING THE FOREGOING, THE COMPANY SHALL NOT PUBLICLY DISCLOSE THE NAME
OF ANY PURCHASER, OR INCLUDE THE NAME OF ANY PURCHASER IN ANY FILING WITH THE
COMMISSION OR ANY REGULATORY AGENCY OR TRADING MARKET, WITHOUT THE PRIOR WRITTEN
CONSENT OF SUCH PURCHASER, EXCEPT (I) AS REQUIRED BY FEDERAL SECURITIES LAW IN
CONNECTION WITH (A) ANY REGISTRATION STATEMENT

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CONTEMPLATED BY THE REGISTRATION RIGHTS AGREEMENT AND (B) THE FILING OF FINAL
TRANSACTION DOCUMENTS (INCLUDING SIGNATURE PAGES THERETO) WITH THE COMMISSION
AND (II) TO THE EXTENT SUCH DISCLOSURE IS REQUIRED BY LAW OR TRADING MARKET
REGULATIONS, IN WHICH CASE THE COMPANY SHALL PROVIDE THE PURCHASERS WITH PRIOR
NOTICE OF SUCH DISCLOSURE PERMITTED UNDER THIS SUBCLAUSE (II).

4.7           SHAREHOLDER RIGHTS PLAN.  NO CLAIM WILL BE MADE OR ENFORCED BY THE
COMPANY OR, WITH THE CONSENT OF THE COMPANY, ANY OTHER PERSON, THAT ANY
PURCHASER IS AN “ACQUIRING PERSON” UNDER ANY CONTROL SHARE ACQUISITION, BUSINESS
COMBINATION, POISON PILL (INCLUDING ANY DISTRIBUTION UNDER A RIGHTS AGREEMENT)
OR SIMILAR ANTI-TAKEOVER PLAN OR ARRANGEMENT IN EFFECT OR HEREAFTER ADOPTED BY
THE COMPANY, OR THAT ANY PURCHASER COULD BE DEEMED TO TRIGGER THE PROVISIONS OF
ANY SUCH PLAN OR ARRANGEMENT, BY VIRTUE OF RECEIVING SECURITIES UNDER THE
TRANSACTION DOCUMENTS OR UNDER ANY OTHER AGREEMENT BETWEEN THE COMPANY AND THE
PURCHASERS.

4.8           NON-PUBLIC INFORMATION.  EXCEPT WITH RESPECT TO THE MATERIAL TERMS
AND CONDITIONS OF THE TRANSACTIONS CONTEMPLATED BY THE TRANSACTION DOCUMENTS,
THE COMPANY COVENANTS AND AGREES THAT NEITHER IT NOR ANY OTHER PERSON ACTING ON
ITS BEHALF WILL PROVIDE ANY PURCHASER OR ITS AGENTS OR COUNSEL WITH ANY
INFORMATION THAT THE COMPANY BELIEVES CONSTITUTES MATERIAL NON-PUBLIC
INFORMATION, UNLESS PRIOR THERETO SUCH PURCHASER SHALL HAVE EXECUTED A WRITTEN
AGREEMENT REGARDING THE CONFIDENTIALITY AND USE OF SUCH INFORMATION.  THE
COMPANY UNDERSTANDS AND CONFIRMS THAT EACH PURCHASER SHALL BE RELYING ON THE
FOREGOING REPRESENTATIONS IN EFFECTING TRANSACTIONS IN SECURITIES OF THE
COMPANY.

4.9           USE OF PROCEEDS.  EXCEPT AS SET FORTH ON SCHEDULE 4.9 ATTACHED
HERETO, THE COMPANY SHALL USE THE NET PROCEEDS FROM THE SALE OF THE SECURITIES
HEREUNDER FOR WORKING CAPITAL PURPOSES AND SHALL NOT USE SUCH PROCEEDS FOR THE
SATISFACTION OF ANY PORTION OF THE COMPANY’S DEBT (OTHER THAN PAYMENT OF TRADE
PAYABLES IN THE ORDINARY COURSE OF THE COMPANY’S BUSINESS AND PRIOR PRACTICES),
OR REDEEM ANY COMMON STOCK, OR COMMON STOCK EQUIVALENTS OR TO SETTLE ANY
OUTSTANDING LITIGATION.

4.10         REIMBURSEMENT.  IF ANY PURCHASER BECOMES INVOLVED IN ANY CAPACITY
IN ANY PROCEEDING BY OR AGAINST ANY PERSON WHO IS A STOCKHOLDER OF THE COMPANY
(EXCEPT AS A RESULT OF SALES, PLEDGES, MARGIN SALES AND SIMILAR TRANSACTIONS BY
SUCH PURCHASER TO OR WITH ANY OTHER STOCKHOLDER), SOLELY AS A RESULT OF SUCH
PURCHASER’S ACQUISITION OF THE SECURITIES UNDER THIS AGREEMENT, THE COMPANY WILL
REIMBURSE SUCH PURCHASER FOR ITS REASONABLE LEGAL AND OTHER EXPENSES (INCLUDING
THE COST OF ANY INVESTIGATION PREPARATION AND TRAVEL IN CONNECTION THEREWITH)
INCURRED IN CONNECTION THEREWITH, AS SUCH EXPENSES ARE INCURRED.  THE
REIMBURSEMENT OBLIGATIONS OF THE COMPANY UNDER THIS PARAGRAPH SHALL BE IN
ADDITION TO ANY LIABILITY WHICH THE COMPANY MAY OTHERWISE HAVE, SHALL EXTEND
UPON THE SAME TERMS AND CONDITIONS TO ANY AFFILIATES OF THE PURCHASERS WHO ARE
ACTUALLY NAMED IN SUCH ACTION, PROCEEDING OR INVESTIGATION, AND PARTNERS,
DIRECTORS, AGENTS, EMPLOYEES AND CONTROLLING PERSONS (IF ANY), AS THE CASE MAY
BE, OF THE PURCHASERS AND ANY SUCH AFFILIATE, AND SHALL BE BINDING UPON AND
INURE TO THE BENEFIT OF ANY SUCCESSORS, ASSIGNS, HEIRS AND PERSONAL
REPRESENTATIVES OF THE COMPANY, THE PURCHASERS AND ANY SUCH AFFILIATE AND ANY
SUCH PERSON.  THE COMPANY ALSO AGREES THAT NEITHER THE PURCHASERS NOR ANY SUCH
AFFILIATES, PARTNERS, DIRECTORS, AGENTS, EMPLOYEES OR CONTROLLING PERSONS SHALL
HAVE ANY LIABILITY TO THE COMPANY OR ANY PERSON ASSERTING CLAIMS ON BEHALF OF OR
IN RIGHT OF THE COMPANY SOLELY AS A RESULT OF ACQUIRING THE SECURITIES UNDER
THIS AGREEMENT.

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4.11         INDEMNIFICATION OF PURCHASERS.   SUBJECT TO THE PROVISIONS OF THIS
SECTION 4.11, THE COMPANY WILL INDEMNIFY AND HOLD EACH PURCHASER AND ITS
DIRECTORS, OFFICERS, SHAREHOLDERS, MEMBERS, PARTNERS, EMPLOYEES AND AGENTS (AND
ANY OTHER PERSONS WITH A FUNCTIONALLY EQUIVALENT ROLE OF A PERSON HOLDING SUCH
TITLES NOTWITHSTANDING A LACK OF SUCH TITLE OR ANY OTHER TITLE), EACH PERSON WHO
CONTROLS SUCH PURCHASER (WITHIN THE MEANING OF SECTION 15 OF THE SECURITIES ACT
AND SECTION 20 OF THE EXCHANGE ACT), AND THE DIRECTORS, OFFICERS, SHAREHOLDERS,
AGENTS, MEMBERS, PARTNERS OR EMPLOYEES (AND ANY OTHER PERSONS WITH A
FUNCTIONALLY EQUIVALENT ROLE OF A PERSON HOLDING SUCH TITLES NOTWITHSTANDING A
LACK OF SUCH TITLE OR ANY OTHER TITLE) OF SUCH CONTROLLING PERSON (EACH, A
“PURCHASER PARTY”) HARMLESS FROM ANY AND ALL LOSSES, LIABILITIES, OBLIGATIONS,
CLAIMS, CONTINGENCIES, DAMAGES, COSTS AND EXPENSES, INCLUDING ALL JUDGMENTS,
AMOUNTS PAID IN SETTLEMENTS, COURT COSTS AND REASONABLE ATTORNEYS’ FEES AND
COSTS OF INVESTIGATION THAT ANY SUCH PURCHASER PARTY MAY SUFFER OR INCUR AS A
RESULT OF OR RELATING TO (A) ANY BREACH OF ANY OF THE REPRESENTATIONS,
WARRANTIES, COVENANTS OR AGREEMENTS MADE BY THE COMPANY IN THIS AGREEMENT OR IN
THE OTHER TRANSACTION DOCUMENTS OR (B) ANY ACTION INSTITUTED AGAINST A
PURCHASER, OR ANY OF THEM OR THEIR RESPECTIVE AFFILIATES, BY ANY STOCKHOLDER OF
THE COMPANY WHO IS NOT AN AFFILIATE OF SUCH PURCHASER, WITH RESPECT TO ANY OF
THE TRANSACTIONS CONTEMPLATED BY THE TRANSACTION DOCUMENTS (UNLESS SUCH ACTION
IS BASED UPON A BREACH OF SUCH PURCHASER’S REPRESENTATIONS, WARRANTIES OR
COVENANTS UNDER THE TRANSACTION DOCUMENTS OR ANY AGREEMENTS OR UNDERSTANDINGS
SUCH PURCHASER MAY HAVE WITH ANY SUCH STOCKHOLDER OR ANY VIOLATIONS BY THE
PURCHASER OF STATE OR FEDERAL SECURITIES LAWS OR ANY CONDUCT BY SUCH PURCHASER
WHICH CONSTITUTES FRAUD, GROSS NEGLIGENCE, WILLFUL MISCONDUCT OR MALFEASANCE). 
IF ANY ACTION SHALL BE BROUGHT AGAINST ANY PURCHASER PARTY IN RESPECT OF WHICH
INDEMNITY MAY BE SOUGHT PURSUANT TO THIS AGREEMENT, SUCH PURCHASER PARTY SHALL
PROMPTLY NOTIFY THE COMPANY IN WRITING, AND THE COMPANY SHALL HAVE THE RIGHT TO
ASSUME THE DEFENSE THEREOF WITH COUNSEL OF ITS OWN CHOOSING REASONABLY
ACCEPTABLE TO THE PURCHASER PARTY.  ANY PURCHASER PARTY SHALL HAVE THE RIGHT TO
EMPLOY SEPARATE COUNSEL IN ANY SUCH ACTION AND PARTICIPATE IN THE DEFENSE
THEREOF, BUT THE FEES AND EXPENSES OF SUCH COUNSEL SHALL BE AT THE EXPENSE OF
SUCH PURCHASER PARTY EXCEPT TO THE EXTENT THAT (I) THE EMPLOYMENT THEREOF HAS
BEEN SPECIFICALLY AUTHORIZED BY THE COMPANY IN WRITING, (II) THE COMPANY HAS
FAILED AFTER A REASONABLE PERIOD OF TIME TO ASSUME SUCH DEFENSE AND TO EMPLOY
COUNSEL OR (III) IN SUCH ACTION THERE IS, IN THE REASONABLE OPINION OF SUCH
SEPARATE COUNSEL, A MATERIAL CONFLICT ON ANY MATERIAL ISSUE BETWEEN THE POSITION
OF THE COMPANY AND THE POSITION OF SUCH PURCHASER PARTY, IN WHICH CASE THE
COMPANY SHALL BE RESPONSIBLE FOR THE REASONABLE FEES AND EXPENSES OF NO MORE
THAN ONE SUCH SEPARATE COUNSEL.  THE COMPANY WILL NOT BE LIABLE TO ANY PURCHASER
PARTY UNDER THIS AGREEMENT (I) FOR ANY SETTLEMENT BY A PURCHASER PARTY EFFECTED
WITHOUT THE COMPANY’S PRIOR WRITTEN CONSENT, WHICH SHALL NOT BE UNREASONABLY
WITHHELD OR DELAYED; OR (II) TO THE EXTENT, BUT ONLY TO THE EXTENT THAT A LOSS,
CLAIM, DAMAGE OR LIABILITY IS ATTRIBUTABLE TO ANY PURCHASER PARTY’S BREACH OF
ANY OF THE REPRESENTATIONS, WARRANTIES, COVENANTS OR AGREEMENTS MADE BY SUCH
PURCHASER PARTY IN THIS AGREEMENT OR IN THE OTHER TRANSACTION DOCUMENTS.

4.12         RESERVATION AND LISTING OF SECURITIES.

(A)           THE COMPANY SHALL MAINTAIN A RESERVE FROM ITS DULY AUTHORIZED
SHARES OF COMMON STOCK FOR ISSUANCE PURSUANT TO THE TRANSACTION DOCUMENTS IN
SUCH AMOUNT AS MAY BE REQUIRED TO FULFILL ITS OBLIGATIONS IN FULL UNDER THE
TRANSACTION DOCUMENTS.

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(B)           IF, ON ANY DATE, THE NUMBER OF AUTHORIZED BUT UNISSUED (AND
OTHERWISE UNRESERVED) SHARES OF COMMON STOCK IS LESS THAN THE REQUIRED MINIMUM
ON SUCH DATE, THEN THE BOARD OF DIRECTORS OF THE COMPANY SHALL USE COMMERCIALLY
REASONABLE EFFORTS TO AMEND THE COMPANY’S CERTIFICATE OR ARTICLES OF
INCORPORATION TO INCREASE THE NUMBER OF AUTHORIZED BUT UNISSUED SHARES OF COMMON
STOCK TO AT LEAST THE REQUIRED MINIMUM AT SUCH TIME, AS SOON AS POSSIBLE AND IN
ANY EVENT NOT LATER THAN THE 75TH DAY AFTER SUCH DATE.

(C)           THE COMPANY SHALL, IF APPLICABLE: (I) IN THE TIME AND MANNER
REQUIRED BY THE PRINCIPAL TRADING MARKET, PREPARE AND FILE WITH SUCH TRADING
MARKET AN ADDITIONAL SHARES LISTING APPLICATION COVERING A NUMBER OF SHARES OF
COMMON STOCK AT LEAST EQUAL TO THE REQUIRED MINIMUM ON THE DATE OF SUCH
APPLICATION, (II) TAKE ALL STEPS NECESSARY TO CAUSE SUCH SHARES OF COMMON STOCK
TO BE APPROVED FOR LISTING ON SUCH TRADING MARKET AS SOON AS POSSIBLE
THEREAFTER, (III) PROVIDE TO THE PURCHASERS EVIDENCE OF SUCH LISTING, AND (IV)
MAINTAIN THE LISTING OF SUCH COMMON STOCK ON ANY DATE AT LEAST EQUAL TO THE
REQUIRED MINIMUM ON SUCH DATE ON SUCH TRADING MARKET OR ANOTHER TRADING MARKET.

4.13         PARTICIPATION IN FUTURE FINANCING.

(A)           FROM THE DATE HEREOF UNTIL THE DATE THAT THE DEBENTURES ARE NO
LONGER OUTSTANDING, UPON ANY ISSUANCE BY THE COMPANY OR ANY OF ITS SUBSIDIARIES
OF COMMON STOCK OR COMMON STOCK EQUIVALENTS (A “SUBSEQUENT FINANCING”), EACH
PURCHASER SHALL HAVE THE RIGHT TO PARTICIPATE IN UP TO AN AMOUNT OF THE
SUBSEQUENT FINANCING EQUAL TO THE LESSER OF (A) 100% OF THE AGGREGATE AMOUNT OF
THE SUBSEQUENT FINANCING AND (B) THE AGGREGATE PRINCIPAL AMOUNT THEN OUTSTANDING
OF ALL DEBENTURES ISSUED PURSUANT TO THIS AGREEMENT AT THE CLOSING (THE
“PARTICIPATION MAXIMUM”) ON THE SAME TERMS, CONDITIONS AND PRICE PROVIDED FOR IN
THE SUBSEQUENT FINANCING.

(B)           AT LEAST 5 TRADING DAYS PRIOR TO THE CLOSING OF THE SUBSEQUENT
FINANCING, THE COMPANY SHALL DELIVER TO EACH PURCHASER A WRITTEN NOTICE OF ITS
INTENTION TO EFFECT A SUBSEQUENT FINANCING (“PRE-NOTICE”), WHICH PRE-NOTICE
SHALL ASK SUCH PURCHASER IF IT WANTS TO REVIEW THE DETAILS OF SUCH FINANCING
(SUCH ADDITIONAL NOTICE, A “SUBSEQUENT FINANCING NOTICE”).  UPON THE REQUEST OF
A PURCHASER, AND ONLY UPON A REQUEST BY SUCH PURCHASER, FOR A SUBSEQUENT
FINANCING NOTICE, THE COMPANY SHALL PROMPTLY, BUT NO LATER THAN 1 TRADING DAY
AFTER SUCH REQUEST, DELIVER A SUBSEQUENT FINANCING NOTICE TO SUCH PURCHASER. 
THE SUBSEQUENT FINANCING NOTICE SHALL DESCRIBE IN REASONABLE DETAIL THE PROPOSED
TERMS OF SUCH SUBSEQUENT FINANCING, THE AMOUNT OF PROCEEDS INTENDED TO BE RAISED
THEREUNDER AND THE PERSON OR PERSONS THROUGH OR WITH WHOM SUCH SUBSEQUENT
FINANCING IS PROPOSED TO BE EFFECTED AND SHALL INCLUDE A TERM SHEET OR SIMILAR
DOCUMENT RELATING THERETO AS AN ATTACHMENT.

(C)           ANY PURCHASER DESIRING TO PARTICIPATE IN SUCH SUBSEQUENT FINANCING
MUST PROVIDE WRITTEN NOTICE TO THE COMPANY BY NOT LATER THAN 5:30 P.M. (NEW YORK
CITY TIME) ON THE 5TH TRADING DAY AFTER ALL OF THE PURCHASERS HAVE RECEIVED THE
PRE-NOTICE THAT THE PURCHASER IS WILLING TO PARTICIPATE IN THE SUBSEQUENT
FINANCING, THE AMOUNT OF THE PURCHASER’S PARTICIPATION, AND THAT THE PURCHASER
HAS SUCH FUNDS READY, WILLING, AND AVAILABLE FOR INVESTMENT ON THE TERMS SET
FORTH IN THE SUBSEQUENT FINANCING NOTICE.  IF THE

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COMPANY RECEIVES NO NOTICE FROM A PURCHASER AS OF SUCH 5TH TRADING DAY, SUCH
PURCHASER SHALL BE DEEMED TO HAVE NOTIFIED THE COMPANY THAT IT DOES NOT ELECT TO
PARTICIPATE.

(D)           IF BY 5:30 P.M. (NEW YORK CITY TIME) ON THE 5TH TRADING DAY AFTER
ALL OF THE PURCHASERS HAVE RECEIVED THE PRE-NOTICE, NOTIFICATIONS BY THE
PURCHASERS OF THEIR WILLINGNESS TO PARTICIPATE IN THE SUBSEQUENT FINANCING (OR
TO CAUSE THEIR DESIGNEES TO PARTICIPATE) IS, IN THE AGGREGATE, LESS THAN THE
TOTAL AMOUNT OF THE SUBSEQUENT FINANCING, THEN THE COMPANY MAY EFFECT THE
REMAINING PORTION OF SUCH SUBSEQUENT FINANCING ON THE TERMS AND WITH THE PERSONS
SET FORTH IN THE SUBSEQUENT FINANCING NOTICE.

(E)           IF BY 5:30 P.M. (NEW YORK CITY TIME) ON THE 5TH TRADING DAY AFTER
ALL OF THE PURCHASERS HAVE RECEIVED THE PRE-NOTICE, THE COMPANY RECEIVES
RESPONSES TO A SUBSEQUENT FINANCING NOTICE FROM PURCHASERS SEEKING TO PURCHASE
MORE THAN THE AGGREGATE AMOUNT OF THE PARTICIPATION MAXIMUM, EACH SUCH PURCHASER
SHALL HAVE THE RIGHT TO PURCHASE THE GREATER OF (A) THEIR PRO RATA PORTION (AS
DEFINED BELOW) OF THE PARTICIPATION MAXIMUM AND (B) THE DIFFERENCE BETWEEN THE
PARTICIPATION MAXIMUM AND THE AGGREGATE AMOUNT OF PARTICIPATION BY ALL OTHER
PURCHASERS.  “PRO RATA PORTION” IS THE RATIO OF (X) THE SUBSCRIPTION AMOUNT OF
SECURITIES PURCHASED ON THE CLOSING DATE BY A PURCHASER PARTICIPATING UNDER THIS
SECTION 4.13 AND (Y) THE SUM OF THE AGGREGATE SUBSCRIPTION AMOUNTS OF SECURITIES
PURCHASED ON THE CLOSING DATE BY ALL PURCHASERS PARTICIPATING UNDER THIS SECTION
4.13.

(F)            THE COMPANY MUST PROVIDE THE PURCHASERS WITH A SECOND SUBSEQUENT
FINANCING NOTICE, AND THE PURCHASERS WILL AGAIN HAVE THE RIGHT OF PARTICIPATION
SET FORTH ABOVE IN THIS SECTION 4.13, IF THE SUBSEQUENT FINANCING SUBJECT TO THE
INITIAL SUBSEQUENT FINANCING NOTICE IS NOT CONSUMMATED FOR ANY REASON ON THE
TERMS SET FORTH IN SUCH SUBSEQUENT FINANCING NOTICE WITHIN 60 TRADING DAYS AFTER
THE DATE OF THE INITIAL SUBSEQUENT FINANCING NOTICE.

(G)           NOTWITHSTANDING THE FOREGOING, THIS SECTION 4.13 SHALL NOT APPLY
IN RESPECT OF (I) AN EXEMPT ISSUANCE OR (II) AN UNDERWRITTEN PUBLIC OFFERING OF
COMMON STOCK.

4.14         SUBSEQUENT EQUITY SALES.

(A)           FROM THE DATE HEREOF UNTIL 90 DAYS AFTER THE EFFECTIVE DATE,
NEITHER THE COMPANY NOR ANY SUBSIDIARY SHALL ISSUE SHARES OF COMMON STOCK OR
COMMON STOCK EQUIVALENTS; PROVIDED, HOWEVER, THE 90 DAY PERIOD SET FORTH IN THIS
SECTION 4.14 SHALL BE EXTENDED FOR THE NUMBER OF TRADING DAYS DURING SUCH PERIOD
IN WHICH (I) TRADING IN THE COMMON STOCK IS SUSPENDED BY ANY TRADING MARKET, OR
(II) FOLLOWING THE EFFECTIVE DATE, THE REGISTRATION STATEMENT IS NOT EFFECTIVE
OR THE PROSPECTUS INCLUDED IN THE REGISTRATION STATEMENT MAY NOT BE USED BY THE
PURCHASERS FOR THE RESALE OF THE UNDERLYING SHARES.

(B)           FROM THE DATE HEREOF UNTIL SUCH TIME AS NO PURCHASER HOLDS ANY OF
THE SECURITIES, THE COMPANY SHALL BE PROHIBITED FROM EFFECTING OR ENTERING INTO
AN AGREEMENT TO EFFECT ANY SUBSEQUENT FINANCING INVOLVING A “VARIABLE RATE
TRANSACTION” WITHOUT THE PRIOR WRITTEN CONSENT OF THE PURCHASERS.  THE TERM
“VARIABLE RATE TRANSACTION” SHALL

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MEAN A TRANSACTION IN WHICH THE COMPANY ISSUES OR SELLS (I) ANY DEBT OR EQUITY
SECURITIES THAT ARE CONVERTIBLE INTO, EXCHANGEABLE OR EXERCISABLE FOR, OR
INCLUDE THE RIGHT TO RECEIVE ADDITIONAL SHARES OF COMMON STOCK EITHER (A) AT A
CONVERSION, EXERCISE OR EXCHANGE RATE OR OTHER PRICE THAT IS BASED UPON AND/OR
VARIES WITH THE TRADING PRICES OF OR QUOTATIONS FOR THE SHARES OF COMMON STOCK
AT ANY TIME AFTER THE INITIAL ISSUANCE OF SUCH DEBT OR EQUITY SECURITIES, OR (B)
WITH A CONVERSION, EXERCISE OR EXCHANGE PRICE THAT IS SUBJECT TO BEING RESET AT
SOME FUTURE DATE AFTER THE INITIAL ISSUANCE OF SUCH DEBT OR EQUITY SECURITY OR
UPON THE OCCURRENCE OF SPECIFIED OR CONTINGENT EVENTS DIRECTLY OR INDIRECTLY
RELATED TO THE BUSINESS OF THE COMPANY OR THE MARKET FOR THE COMMON STOCK OR
(II) ENTERS INTO ANY AGREEMENT, INCLUDING, BUT NOT LIMITED TO, AN EQUITY LINE OF
CREDIT, WHEREBY THE COMPANY MAY SELL SECURITIES AT A FUTURE DETERMINED PRICE.

(C)           NOTWITHSTANDING THE FOREGOING, THIS SECTION 4.14 SHALL NOT APPLY
IN RESPECT OF AN EXEMPT ISSUANCE, EXCEPT THAT NO VARIABLE RATE TRANSACTION SHALL
BE AN EXEMPT ISSUANCE.

4.15         EQUAL TREATMENT OF PURCHASERS.  NO CONSIDERATION SHALL BE OFFERED
OR PAID TO ANY PERSON TO AMEND OR CONSENT TO A WAIVER OR MODIFICATION OF ANY
PROVISION OF ANY OF THE TRANSACTION DOCUMENTS UNLESS THE SAME CONSIDERATION IS
ALSO OFFERED TO ALL OF THE PARTIES TO THE TRANSACTION DOCUMENTS. FURTHER, THE
COMPANY SHALL NOT MAKE ANY PAYMENT OF PRINCIPAL OR INTEREST ON THE DEBENTURES IN
AMOUNTS WHICH ARE DISPROPORTIONATE TO THE RESPECTIVE PRINCIPAL AMOUNTS
OUTSTANDING ON THE DEBENTURES AT ANY APPLICABLE TIME.  FOR CLARIFICATION
PURPOSES, THIS PROVISION CONSTITUTES A SEPARATE RIGHT GRANTED TO EACH PURCHASER
BY THE COMPANY AND NEGOTIATED SEPARATELY BY EACH PURCHASER, AND IS INTENDED FOR
THE COMPANY TO TREAT THE PURCHASERS AS A CLASS AND SHALL NOT IN ANY WAY BE
CONSTRUED AS THE PURCHASERS ACTING IN CONCERT OR AS A GROUP WITH RESPECT TO THE
PURCHASE, DISPOSITION OR VOTING OF SECURITIES OR OTHERWISE.

4.16         SHORT SALES AND CONFIDENTIALITY AFTER THE DATE HEREOF. EACH
PURCHASER SEVERALLY AND NOT JOINTLY WITH THE OTHER PURCHASERS COVENANTS THAT
NEITHER IT NOR ANY AFFILIATE ACTING ON ITS BEHALF OR PURSUANT TO ANY
UNDERSTANDING WITH IT WILL EXECUTE ANY SHORT SALES DURING THE PERIOD COMMENCING
AT THE DISCUSSION TIME AND ENDING AT THE TIME THAT THE TRANSACTIONS CONTEMPLATED
BY THIS AGREEMENT ARE FIRST PUBLICLY ANNOUNCED AS DESCRIBED IN SECTION 4.6. 
EACH PURCHASER, SEVERALLY AND NOT JOINTLY WITH THE OTHER PURCHASERS, COVENANTS
THAT UNTIL SUCH TIME AS THE TRANSACTIONS CONTEMPLATED BY THIS AGREEMENT ARE
PUBLICLY DISCLOSED BY THE COMPANY AS DESCRIBED IN SECTION 4.6, SUCH PURCHASER
WILL MAINTAIN THE CONFIDENTIALITY OF ALL DISCLOSURES MADE TO IT IN CONNECTION
WITH THIS TRANSACTION (INCLUDING THE EXISTENCE AND TERMS OF THIS TRANSACTION). 
EACH PURCHASER UNDERSTANDS AND ACKNOWLEDGES, SEVERALLY AND NOT JOINTLY WITH ANY
OTHER PURCHASER, THAT THE COMMISSION CURRENTLY TAKES THE POSITION THAT COVERAGE
OF SHORT SALES OF SHARES OF THE COMMON STOCK “AGAINST THE BOX” PRIOR TO THE
EFFECTIVE DATE OF THE REGISTRATION STATEMENT WITH THE SECURITIES IS A VIOLATION
OF SECTION 5 OF THE SECURITIES ACT, AS SET FORTH IN ITEM 65, SECTION A, OF THE
MANUAL OF PUBLICLY AVAILABLE TELEPHONE INTERPRETATIONS, DATED JULY 1997,
COMPILED BY THE OFFICE OF CHIEF COUNSEL, DIVISION OF CORPORATION FINANCE. 
NOTWITHSTANDING THE FOREGOING, NO PURCHASER MAKES ANY REPRESENTATION, WARRANTY
OR COVENANT HEREBY THAT IT WILL NOT ENGAGE IN SHORT SALES IN THE SECURITIES OF
THE COMPANY AFTER THE TIME THAT THE TRANSACTIONS CONTEMPLATED BY THIS AGREEMENT
ARE FIRST PUBLICLY ANNOUNCED AS DESCRIBED IN SECTION 4.6 EXCEPT AS SPECIFICALLY
SET FORTH IN THE FOLLOWING SENTENCE.  UNTIL THE EARLIEST OF (I) MARCH 31, 2008,
(II) AS

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TO EACH PURCHASER, THE DATE SUCH PURCHASER’S DEBENTURE IS NO LONGER OUTSTANDING,
(III) THE DATE THE NOTES ARE NO LONGER OUTSTANDING OR (IV) THE DATE THE COMPANY
FILES ITS FORM 10-K (OR FORM 10-KSB) FOR THE YEAR ENDING DECEMBER 31, 2007, EACH
PURCHASER SEVERALLY AND NOT JOINTLY AGREES THAT IT WILL NOT ENGAGE IN ANY
RESTRICTED SHORT SALES (AS DEFINED BELOW) DURING A RESTRICTED PERIOD (AS DEFINED
BELOW).  AS USED HEREIN, “RESTRICTED SHORT SALES” MEANS SHORT SALES OF THE
COMMON STOCK ON A TRADING DAY DURING A RESTRICTED PERIOD (A) AT SALE PRICES LESS
THAN $2.05 (SUBJECT TO ADJUSTMENT FOR FORWARD AND REVERSE STOCK SPLITS, STOCK
DIVIDENDS, RECAPITALIZATIONS AND THE LIKE) AND (B) THAT ARE, IN THE AGGREGATE
DURING SUCH DAY, IN EXCESS OF 15% OF THE AVERAGE TRADING VOLUME OF THE COMMON
STOCK DURING THE FIVE TRADING DAYS IMMEDIATELY PRIOR TO THE DATE OF SUCH SHORT
SALE.  BY WAY OF AN EXAMPLE, IF A PURCHASER ENGAGES IN SHORT SALES OF THE COMMON
STOCK AT PRICES BELOW $2.05 (SUBJECT TO ADJUSTMENT FOR FORWARD AND REVERSE STOCK
SPLITS, STOCK DIVIDENDS, RECAPITALIZATIONS AND THE LIKE) ON A TRADING DAY DURING
A RESTRICTED PERIOD, SUCH SALES SHALL BE LIMITED TO 15% OF THE AVERAGE TRADING
VOLUME OF THE COMMON STOCK FOR THE FIVE TRADING DAYS IMMEDIATELY PRIOR TO THE
DATE OF SUCH SALES. AS USED HEREIN, RESTRICTED PERIOD MEANS THE FOLLOWING
PERIODS ONLY:  THE FIVE TRADING DAYS IMMEDIATELY PRIOR TO THE DATE THE COMPANY
IS REQUIRED TO FILE (WITHOUT EXTENSION) THE FOLLOWING PERIODIC REPORTS: (1) FORM
10-K OR FORM 10-KSB FOR THE YEAR ENDING DECEMBER 31, 2006, (2) FORM 10-Q OR FORM
10-QSB FOR THE QUARTER ENDING MARCH 31, 2007, (3) FORM 10-Q OR FORM 10-QSB FOR
THE QUARTER ENDING JUNE 30, 2007, (4) FORM 10-Q OR FORM 10-QSB FOR THE QUARTER
ENDING SEPTEMBER 30, 2007 AND (5) FORM 10-K OR FORM 10-KSB FOR THE YEAR ENDING
DECEMBER 31, 2007.  THE RESTRICTIONS IN THE PRECEDING FOUR SENTENCES SHALL NOT
APPLY IN THE EVENT THE COMPANY FILES AN APPLICABLE PERIODIC REPORT WITH THE
COMMISSION MORE THAN 5 TRADING DAYS PRIOR TO THE DATE SUCH REPORT IS REQUIRED TO
BE FILED WITH THE COMMISSION (WITHOUT EXTENSION).  NOTWITHSTANDING THE
FOREGOING, IN THE CASE OF A PURCHASER THAT IS A MULTI-MANAGED INVESTMENT VEHICLE
WHEREBY SEPARATE PORTFOLIO MANAGERS MANAGE SEPARATE PORTIONS OF SUCH PURCHASER’S
ASSETS AND THE PORTFOLIO MANAGERS HAVE NO DIRECT KNOWLEDGE OF THE INVESTMENT
DECISIONS MADE BY THE PORTFOLIO MANAGERS MANAGING OTHER PORTIONS OF SUCH
PURCHASER’S ASSETS, THE COVENANT SET FORTH ABOVE SHALL ONLY APPLY WITH RESPECT
TO THE PORTION OF ASSETS MANAGED BY THE PORTFOLIO MANAGER THAT MADE THE
INVESTMENT DECISION TO PURCHASE THE SECURITIES COVERED BY THIS AGREEMENT.

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

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

4.19         Partnership Agreement.  The Company agrees to use its best efforts
to enter into a partnership agreement for the sales, marketing and distribution
of its “EpiCeram” products as soon as practicable following the date hereof, and
in any event on or before June 30, 2007, with a

31

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nationally recognized pharmaceutical company with a minimum up front royalty
payment of $2,000,000 (a “Partnership Agreement”).  In addition, the Company
agrees to use its commercially reasonable best efforts to ensure that such
Partnership Agreement yields cash payments to the Company of at least an
additional $3,000,000 during the 6 month period immediately following the date
of such agreement (for a total of $5,000,000 when added with the up front
royalty payment).

ARTICLE V.

MISCELLANEOUS

5.1           TERMINATION.  THIS AGREEMENT MAY BE TERMINATED BY ANY PURCHASER,
AS TO SUCH PURCHASER’S OBLIGATIONS HEREUNDER ONLY AND WITHOUT ANY EFFECT
WHATSOEVER ON THE OBLIGATIONS BETWEEN THE COMPANY AND THE OTHER PURCHASERS, BY
WRITTEN NOTICE TO THE OTHER PARTIES, IF THE CLOSING HAS NOT BEEN CONSUMMATED ON
OR BEFORE DECEMBER 6, 2006; PROVIDED, HOWEVER, THAT SUCH TERMINATION WILL NOT
AFFECT THE RIGHT OF ANY PARTY TO SUE FOR ANY BREACH BY THE OTHER PARTY (OR
PARTIES).

5.2           FEES AND EXPENSES.  AT THE CLOSING, THE COMPANY HAS AGREED TO
REIMBURSE               (“        ”) THE NON-ACCOUNTABLE SUM OF $40,000, FOR ITS
LEGAL FEES AND EXPENSES, $20,000 OF WHICH HAS BEEN PAID PRIOR TO THE CLOSING.
THE COMPANY SHALL DELIVER TO EACH PURCHASER, PRIOR TO THE CLOSING, A COMPLETED
AND EXECUTED COPY OF THE CLOSING STATEMENT ATTACHED HERETO AS ANNEX A.  EXCEPT
AS EXPRESSLY SET FORTH IN THE TRANSACTION DOCUMENTS TO THE CONTRARY, EACH PARTY
SHALL PAY THE FEES AND EXPENSES OF ITS ADVISERS, COUNSEL, ACCOUNTANTS AND OTHER
EXPERTS, IF ANY, AND ALL OTHER EXPENSES INCURRED BY SUCH PARTY INCIDENT TO THE
NEGOTIATION, PREPARATION, EXECUTION, DELIVERY AND PERFORMANCE OF THIS
AGREEMENT.  THE COMPANY SHALL PAY ALL TRANSFER AGENT FEES, STAMP TAXES AND OTHER
TAXES AND DUTIES LEVIED IN CONNECTION WITH THE DELIVERY OF ANY SECURITIES TO THE
PURCHASERS.

5.3           ENTIRE AGREEMENT.  THE TRANSACTION DOCUMENTS, TOGETHER WITH THE
EXHIBITS AND SCHEDULES THERETO, CONTAIN THE ENTIRE UNDERSTANDING OF THE PARTIES
WITH RESPECT TO THE SUBJECT MATTER HEREOF AND SUPERSEDE ALL PRIOR AGREEMENTS AND
UNDERSTANDINGS, ORAL OR WRITTEN, WITH RESPECT TO SUCH MATTERS, WHICH THE PARTIES
ACKNOWLEDGE HAVE BEEN MERGED INTO SUCH DOCUMENTS, EXHIBITS AND SCHEDULES.

5.4           NOTICES.  ANY AND ALL NOTICES OR OTHER COMMUNICATIONS OR
DELIVERIES REQUIRED OR PERMITTED TO BE PROVIDED HEREUNDER SHALL BE IN WRITING
AND SHALL BE DEEMED GIVEN AND EFFECTIVE ON THE EARLIEST OF (A) THE DATE OF
TRANSMISSION, IF SUCH NOTICE OR COMMUNICATION IS DELIVERED VIA FACSIMILE AT THE
FACSIMILE NUMBER SET FORTH ON THE SIGNATURE PAGES ATTACHED HERETO PRIOR TO 5:30
P.M. (NEW YORK CITY TIME) ON A TRADING DAY, (B) THE NEXT TRADING DAY AFTER THE
DATE OF TRANSMISSION, IF SUCH NOTICE OR COMMUNICATION IS DELIVERED VIA FACSIMILE
AT THE FACSIMILE NUMBER SET FORTH ON THE SIGNATURE PAGES ATTACHED HERETO ON A
DAY THAT IS NOT A TRADING DAY OR LATER THAN 5:30 P.M. (NEW YORK CITY TIME) ON
ANY TRADING DAY, (C) THE 2ND TRADING DAY FOLLOWING THE DATE OF MAILING, IF SENT
BY U.S. NATIONALLY RECOGNIZED OVERNIGHT COURIER SERVICE, OR (D) UPON ACTUAL
RECEIPT BY THE PARTY TO WHOM SUCH NOTICE IS REQUIRED TO BE GIVEN.  THE ADDRESS
FOR SUCH NOTICES AND COMMUNICATIONS SHALL BE AS SET FORTH ON THE SIGNATURE PAGES
ATTACHED HERETO.

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5.5           AMENDMENTS; WAIVERS.  NO PROVISION OF THIS AGREEMENT MAY BE
WAIVED, MODIFIED, SUPPLEMENTED OR AMENDED EXCEPT IN A WRITTEN INSTRUMENT SIGNED,
IN THE CASE OF AN AMENDMENT, BY THE COMPANY AND EACH PURCHASER OR, IN THE CASE
OF A WAIVER, BY THE PARTY AGAINST WHOM ENFORCEMENT OF ANY SUCH WAIVED PROVISION
IS SOUGHT.  NO WAIVER OF ANY DEFAULT WITH RESPECT TO ANY PROVISION, CONDITION OR
REQUIREMENT OF THIS AGREEMENT SHALL BE DEEMED TO BE A CONTINUING WAIVER IN THE
FUTURE OR A WAIVER OF ANY SUBSEQUENT DEFAULT OR A WAIVER OF ANY OTHER PROVISION,
CONDITION OR REQUIREMENT HEREOF, NOR SHALL ANY DELAY OR OMISSION OF ANY PARTY TO
EXERCISE ANY RIGHT HEREUNDER IN ANY MANNER IMPAIR THE EXERCISE OF ANY SUCH
RIGHT.

5.6           HEADINGS.  THE HEADINGS HEREIN ARE FOR CONVENIENCE ONLY, DO NOT
CONSTITUTE A PART OF THIS AGREEMENT AND SHALL NOT BE DEEMED TO LIMIT OR AFFECT
ANY OF THE PROVISIONS HEREOF.

5.7           SUCCESSORS AND ASSIGNS.  THIS AGREEMENT SHALL BE BINDING UPON AND
INURE TO THE BENEFIT OF THE PARTIES AND THEIR SUCCESSORS AND PERMITTED ASSIGNS. 
THE COMPANY MAY NOT ASSIGN THIS AGREEMENT OR ANY RIGHTS OR OBLIGATIONS HEREUNDER
WITHOUT THE PRIOR WRITTEN CONSENT OF EACH PURCHASER (OTHER THAN BY MERGER).  ANY
PURCHASER MAY ASSIGN ANY OR ALL OF ITS RIGHTS UNDER THIS AGREEMENT TO ANY PERSON
TO WHOM SUCH PURCHASER ASSIGNS OR TRANSFERS ANY SECURITIES, PROVIDED SUCH
TRANSFEREE AGREES IN WRITING TO BE BOUND, WITH RESPECT TO THE TRANSFERRED
SECURITIES, BY THE PROVISIONS OF THE TRANSACTION DOCUMENTS THAT APPLY TO THE
“PURCHASERS”.

5.8           NO THIRD-PARTY BENEFICIARIES.  THIS AGREEMENT IS INTENDED FOR THE
BENEFIT OF THE PARTIES HERETO AND THEIR RESPECTIVE SUCCESSORS AND PERMITTED
ASSIGNS AND IS NOT FOR THE BENEFIT OF, NOR MAY ANY PROVISION HEREOF BE ENFORCED
BY, ANY OTHER PERSON, EXCEPT AS OTHERWISE SET FORTH IN SECTION 4.11.

5.9           GOVERNING LAW.  ALL QUESTIONS CONCERNING THE CONSTRUCTION,
VALIDITY, ENFORCEMENT AND INTERPRETATION OF THE TRANSACTION DOCUMENTS SHALL BE
GOVERNED BY AND CONSTRUED AND ENFORCED IN ACCORDANCE WITH THE INTERNAL LAWS OF
THE STATE OF NEW YORK, WITHOUT REGARD TO THE PRINCIPLES OF CONFLICTS OF LAW
THEREOF.  EACH PARTY AGREES THAT ALL LEGAL PROCEEDINGS CONCERNING THE
INTERPRETATIONS, ENFORCEMENT AND DEFENSE OF THE TRANSACTIONS CONTEMPLATED BY
THIS AGREEMENT AND ANY OTHER TRANSACTION DOCUMENTS (WHETHER BROUGHT AGAINST A
PARTY HERETO OR ITS RESPECTIVE AFFILIATES, DIRECTORS, OFFICERS, SHAREHOLDERS,
EMPLOYEES OR AGENTS) SHALL BE COMMENCED EXCLUSIVELY IN THE STATE AND FEDERAL
COURTS SITTING IN THE CITY OF NEW YORK.  EACH PARTY HEREBY IRREVOCABLY SUBMITS
TO THE EXCLUSIVE JURISDICTION OF THE STATE AND FEDERAL COURTS SITTING IN THE
CITY OF NEW YORK, BOROUGH OF MANHATTAN FOR THE ADJUDICATION OF ANY DISPUTE
HEREUNDER OR IN CONNECTION HEREWITH OR WITH ANY TRANSACTION CONTEMPLATED HEREBY
OR DISCUSSED HEREIN (INCLUDING WITH RESPECT TO THE ENFORCEMENT OF ANY OF THE
TRANSACTION DOCUMENTS), AND HEREBY IRREVOCABLY WAIVES, AND AGREES NOT TO ASSERT
IN ANY SUIT, ACTION OR PROCEEDING, ANY CLAIM THAT IT IS NOT PERSONALLY SUBJECT
TO THE JURISDICTION OF ANY SUCH COURT, THAT SUCH SUIT, ACTION OR PROCEEDING IS
IMPROPER OR IS AN INCONVENIENT VENUE FOR SUCH PROCEEDING.  EACH PARTY HEREBY
IRREVOCABLY WAIVES PERSONAL SERVICE OF PROCESS AND CONSENTS TO PROCESS BEING
SERVED IN ANY SUCH SUIT, ACTION OR PROCEEDING BY MAILING A COPY THEREOF VIA
REGISTERED OR CERTIFIED MAIL OR OVERNIGHT DELIVERY (WITH EVIDENCE OF DELIVERY)
TO SUCH PARTY AT THE ADDRESS IN EFFECT FOR NOTICES TO IT UNDER THIS AGREEMENT
AND AGREES THAT SUCH SERVICE SHALL CONSTITUTE GOOD AND SUFFICIENT SERVICE OF
PROCESS AND NOTICE THEREOF.  NOTHING CONTAINED HEREIN SHALL BE DEEMED TO LIMIT
IN ANY WAY ANY RIGHT TO SERVE PROCESS IN ANY OTHER MANNER PERMITTED BY LAW.  THE
PARTIES HEREBY WAIVE ALL RIGHTS TO A TRIAL BY JURY.  IF EITHER PARTY

33

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SHALL COMMENCE AN ACTION OR PROCEEDING TO ENFORCE ANY PROVISIONS OF THE
TRANSACTION DOCUMENTS, THEN THE PREVAILING PARTY IN SUCH ACTION OR PROCEEDING
SHALL BE REIMBURSED BY THE OTHER PARTY FOR ITS REASONABLE ATTORNEYS’ FEES AND
OTHER COSTS AND EXPENSES INCURRED WITH THE INVESTIGATION, PREPARATION AND
PROSECUTION OF SUCH ACTION OR PROCEEDING.

5.10         SURVIVAL.  THE REPRESENTATIONS AND WARRANTIES SHALL SURVIVE THE
CLOSING AND THE DELIVERY OF THE SECURITIES FOR THE APPLICABLE STATUE OF
LIMITATIONS.

5.11         EXECUTION.  THIS AGREEMENT MAY BE EXECUTED IN TWO OR MORE
COUNTERPARTS, ALL OF WHICH WHEN TAKEN TOGETHER SHALL BE CONSIDERED ONE AND THE
SAME AGREEMENT AND SHALL BECOME EFFECTIVE WHEN COUNTERPARTS HAVE BEEN SIGNED BY
EACH PARTY AND DELIVERED TO THE OTHER PARTY, IT BEING UNDERSTOOD THAT BOTH
PARTIES NEED NOT SIGN THE SAME COUNTERPART.  IN THE EVENT THAT ANY SIGNATURE IS
DELIVERED BY FACSIMILE TRANSMISSION OR BY E-MAIL DELIVERY OF A “.PDF” FORMAT
DATA FILE, SUCH SIGNATURE SHALL CREATE A VALID AND BINDING OBLIGATION OF THE
PARTY EXECUTING (OR ON WHOSE BEHALF SUCH SIGNATURE IS EXECUTED) WITH THE SAME
FORCE AND EFFECT AS IF SUCH FACSIMILE OR “.PDF” SIGNATURE PAGE WERE AN ORIGINAL
THEREOF.

5.12         SEVERABILITY. IF ANY TERM, PROVISION, COVENANT OR RESTRICTION OF
THIS AGREEMENT IS HELD BY A COURT OF COMPETENT JURISDICTION TO BE INVALID,
ILLEGAL, VOID OR UNENFORCEABLE, THE REMAINDER OF THE TERMS, PROVISIONS,
COVENANTS AND RESTRICTIONS SET FORTH HEREIN SHALL REMAIN IN FULL FORCE AND
EFFECT AND SHALL IN NO WAY BE AFFECTED, IMPAIRED OR INVALIDATED, AND THE PARTIES
HERETO SHALL USE THEIR COMMERCIALLY REASONABLE EFFORTS TO FIND AND EMPLOY AN
ALTERNATIVE MEANS TO ACHIEVE THE SAME OR SUBSTANTIALLY THE SAME RESULT AS THAT
CONTEMPLATED BY SUCH TERM, PROVISION, COVENANT OR RESTRICTION. IT IS HEREBY
STIPULATED AND DECLARED TO BE THE INTENTION OF THE PARTIES THAT THEY WOULD HAVE
EXECUTED THE REMAINING TERMS, PROVISIONS, COVENANTS AND RESTRICTIONS WITHOUT
INCLUDING ANY OF SUCH THAT MAY BE HEREAFTER DECLARED INVALID, ILLEGAL, VOID OR
UNENFORCEABLE.

5.13         RESCISSION AND WITHDRAWAL RIGHT.  NOTWITHSTANDING ANYTHING TO THE
CONTRARY CONTAINED IN (AND WITHOUT LIMITING ANY SIMILAR PROVISIONS OF) ANY OF
THE OTHER TRANSACTION DOCUMENTS, WHENEVER ANY PURCHASER EXERCISES A RIGHT,
ELECTION, DEMAND OR OPTION UNDER A TRANSACTION DOCUMENT AND THE COMPANY DOES NOT
TIMELY PERFORM ITS RELATED OBLIGATIONS WITHIN THE PERIODS THEREIN PROVIDED, THEN
SUCH PURCHASER MAY RESCIND OR WITHDRAW, IN ITS SOLE DISCRETION FROM TIME TO TIME
UPON WRITTEN NOTICE TO THE COMPANY, ANY RELEVANT NOTICE, DEMAND OR ELECTION IN
WHOLE OR IN PART WITHOUT PREJUDICE TO ITS FUTURE ACTIONS AND RIGHTS; PROVIDED,
HOWEVER, IN THE CASE OF A RESCISSION OF A CONVERSION OF A DEBENTURE OR EXERCISE
OF A WARRANT, THE PURCHASER SHALL BE REQUIRED TO RETURN ANY SHARES OF COMMON
STOCK DELIVERED IN CONNECTION WITH ANY SUCH RESCINDED CONVERSION OR EXERCISE
NOTICE.

5.14         REPLACEMENT OF SECURITIES.  IF ANY CERTIFICATE OR INSTRUMENT
EVIDENCING ANY SECURITIES IS MUTILATED, LOST, STOLEN OR DESTROYED, THE COMPANY
SHALL ISSUE OR CAUSE TO BE ISSUED IN EXCHANGE AND SUBSTITUTION FOR AND UPON
CANCELLATION THEREOF (IN THE CASE OF MUTILATION), OR IN LIEU OF AND SUBSTITUTION
THEREFOR, A NEW CERTIFICATE OR INSTRUMENT, BUT ONLY UPON RECEIPT OF EVIDENCE
REASONABLY SATISFACTORY TO THE COMPANY OF SUCH LOSS, THEFT OR DESTRUCTION.  THE
APPLICANT FOR A NEW CERTIFICATE OR INSTRUMENT UNDER SUCH CIRCUMSTANCES SHALL
ALSO PAY ANY REASONABLE THIRD-PARTY COSTS (INCLUDING CUSTOMARY INDEMNITY)
ASSOCIATED WITH THE ISSUANCE OF SUCH REPLACEMENT SECURITIES.

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5.15         REMEDIES.  IN ADDITION TO BEING ENTITLED TO EXERCISE ALL RIGHTS
PROVIDED HEREIN OR GRANTED BY LAW, INCLUDING RECOVERY OF DAMAGES, EACH OF THE
PURCHASERS AND THE COMPANY WILL BE ENTITLED TO SPECIFIC PERFORMANCE UNDER THE
TRANSACTION DOCUMENTS.  THE PARTIES AGREE THAT MONETARY DAMAGES MAY NOT BE
ADEQUATE COMPENSATION FOR ANY LOSS INCURRED BY REASON OF ANY BREACH OF
OBLIGATIONS CONTAINED IN THE TRANSACTION DOCUMENTS AND HEREBY AGREES TO WAIVE
AND NOT TO ASSERT IN ANY ACTION FOR SPECIFIC PERFORMANCE OF ANY SUCH OBLIGATION
THE DEFENSE THAT A REMEDY AT LAW WOULD BE ADEQUATE.

5.16         PAYMENT SET ASIDE. TO THE EXTENT THAT THE COMPANY MAKES A PAYMENT
OR PAYMENTS TO ANY PURCHASER PURSUANT TO ANY TRANSACTION DOCUMENT OR A PURCHASER
ENFORCES OR EXERCISES ITS RIGHTS THEREUNDER, AND SUCH PAYMENT OR PAYMENTS OR THE
PROCEEDS OF SUCH ENFORCEMENT OR EXERCISE OR ANY PART THEREOF ARE SUBSEQUENTLY
INVALIDATED, DECLARED TO BE FRAUDULENT OR PREFERENTIAL, SET ASIDE, RECOVERED
FROM, DISGORGED BY OR ARE REQUIRED TO BE REFUNDED, REPAID OR OTHERWISE RESTORED
TO THE COMPANY, A TRUSTEE, RECEIVER OR ANY OTHER PERSON UNDER ANY LAW
(INCLUDING, WITHOUT LIMITATION, ANY BANKRUPTCY LAW, STATE OR FEDERAL LAW, COMMON
LAW OR EQUITABLE CAUSE OF ACTION), THEN TO THE EXTENT OF ANY SUCH RESTORATION
THE OBLIGATION OR PART THEREOF ORIGINALLY INTENDED TO BE SATISFIED SHALL BE
REVIVED AND CONTINUED IN FULL FORCE AND EFFECT AS IF SUCH PAYMENT HAD NOT BEEN
MADE OR SUCH ENFORCEMENT OR SETOFF HAD NOT OCCURRED.

5.17         USURY.  TO THE EXTENT IT MAY LAWFULLY DO SO, THE COMPANY HEREBY
AGREES NOT TO INSIST UPON OR PLEAD OR IN ANY MANNER WHATSOEVER CLAIM, AND WILL
RESIST ANY AND ALL EFFORTS TO BE COMPELLED TO TAKE THE BENEFIT OR ADVANTAGE OF,
USURY LAWS WHEREVER ENACTED, NOW OR AT ANY TIME HEREAFTER IN FORCE, IN
CONNECTION WITH ANY CLAIM, ACTION OR PROCEEDING THAT MAY BE BROUGHT BY ANY
PURCHASER IN ORDER TO ENFORCE ANY RIGHT OR REMEDY UNDER ANY TRANSACTION
DOCUMENT.  NOTWITHSTANDING ANY PROVISION TO THE CONTRARY CONTAINED IN ANY
TRANSACTION DOCUMENT, IT IS EXPRESSLY AGREED AND PROVIDED THAT THE TOTAL
LIABILITY OF THE COMPANY UNDER THE TRANSACTION DOCUMENTS FOR PAYMENTS IN THE
NATURE OF INTEREST SHALL NOT EXCEED THE MAXIMUM LAWFUL RATE AUTHORIZED UNDER
APPLICABLE LAW (THE “MAXIMUM RATE”), AND, WITHOUT LIMITING THE FOREGOING, IN NO
EVENT SHALL ANY RATE OF INTEREST OR DEFAULT INTEREST, OR BOTH OF THEM, WHEN
AGGREGATED WITH ANY OTHER SUMS IN THE NATURE OF INTEREST THAT THE COMPANY MAY BE
OBLIGATED TO PAY UNDER THE TRANSACTION DOCUMENTS EXCEED SUCH MAXIMUM RATE.  IT
IS AGREED THAT IF THE MAXIMUM CONTRACT RATE OF INTEREST ALLOWED BY LAW AND
APPLICABLE TO THE TRANSACTION DOCUMENTS IS INCREASED OR DECREASED BY STATUTE OR
ANY OFFICIAL GOVERNMENTAL ACTION SUBSEQUENT TO THE DATE HEREOF, THE NEW MAXIMUM
CONTRACT RATE OF INTEREST ALLOWED BY LAW WILL BE THE MAXIMUM RATE APPLICABLE TO
THE TRANSACTION DOCUMENTS FROM THE EFFECTIVE DATE FORWARD, UNLESS SUCH
APPLICATION IS PRECLUDED BY APPLICABLE LAW.  IF UNDER ANY CIRCUMSTANCES
WHATSOEVER, INTEREST IN EXCESS OF THE MAXIMUM RATE IS PAID BY THE COMPANY TO ANY
PURCHASER WITH RESPECT TO INDEBTEDNESS EVIDENCED BY THE TRANSACTION DOCUMENTS,
SUCH EXCESS SHALL BE APPLIED BY SUCH PURCHASER TO THE UNPAID PRINCIPAL BALANCE
OF ANY SUCH INDEBTEDNESS OR BE REFUNDED TO THE COMPANY, THE MANNER OF HANDLING
SUCH EXCESS TO BE AT SUCH PURCHASER’S ELECTION.

5.18         INDEPENDENT NATURE OF PURCHASERS’ OBLIGATIONS AND RIGHTS.  THE
OBLIGATIONS OF EACH PURCHASER UNDER ANY TRANSACTION DOCUMENT ARE SEVERAL AND NOT
JOINT WITH THE OBLIGATIONS OF ANY OTHER PURCHASER, AND NO PURCHASER SHALL BE
RESPONSIBLE IN ANY WAY FOR THE PERFORMANCE OR NON-PERFORMANCE OF THE OBLIGATIONS
OF ANY OTHER PURCHASER UNDER ANY TRANSACTION DOCUMENT.  NOTHING CONTAINED HEREIN
OR IN ANY OTHER TRANSACTION DOCUMENT, AND NO ACTION TAKEN BY ANY

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PURCHASER PURSUANT THERETO, SHALL BE DEEMED TO CONSTITUTE THE PURCHASERS AS A
PARTNERSHIP, AN ASSOCIATION, A JOINT VENTURE OR ANY OTHER KIND OF ENTITY, OR
CREATE A PRESUMPTION THAT THE PURCHASERS ARE IN ANY WAY ACTING IN CONCERT OR AS
A GROUP WITH RESPECT TO SUCH OBLIGATIONS OR THE TRANSACTIONS CONTEMPLATED BY THE
TRANSACTION DOCUMENTS.  EACH PURCHASER SHALL BE ENTITLED TO INDEPENDENTLY
PROTECT AND ENFORCE ITS RIGHTS, INCLUDING WITHOUT LIMITATION THE RIGHTS ARISING
OUT OF THIS AGREEMENT OR OUT OF THE OTHER TRANSACTION DOCUMENTS, AND IT SHALL
NOT BE NECESSARY FOR ANY OTHER PURCHASER TO BE JOINED AS AN ADDITIONAL PARTY IN
ANY PROCEEDING FOR SUCH PURPOSE.  EACH PURCHASER HAS BEEN REPRESENTED BY ITS OWN
SEPARATE LEGAL COUNSEL IN THEIR REVIEW AND NEGOTIATION OF THE TRANSACTION
DOCUMENTS.  FOR REASONS OF ADMINISTRATIVE CONVENIENCE ONLY, PURCHASERS AND THEIR
RESPECTIVE COUNSEL HAVE CHOSEN TO COMMUNICATE WITH THE COMPANY THROUGH FWS.  FWS
DOES NOT REPRESENT ALL OF THE PURCHASERS BUT ONLY        .  THE COMPANY HAS
ELECTED TO PROVIDE ALL PURCHASERS WITH THE SAME TERMS AND TRANSACTION DOCUMENTS
FOR THE CONVENIENCE OF THE COMPANY AND NOT BECAUSE IT WAS REQUIRED OR REQUESTED
TO DO SO BY THE PURCHASERS.

5.19         LIQUIDATED DAMAGES.  THE COMPANY’S OBLIGATIONS TO PAY ANY PARTIAL
LIQUIDATED DAMAGES OR OTHER AMOUNTS OWING UNDER THE TRANSACTION DOCUMENTS IS A
CONTINUING OBLIGATION OF THE COMPANY AND SHALL NOT TERMINATE UNTIL ALL UNPAID
PARTIAL LIQUIDATED DAMAGES AND OTHER AMOUNTS HAVE BEEN PAID NOTWITHSTANDING THE
FACT THAT THE INSTRUMENT OR SECURITY PURSUANT TO WHICH SUCH PARTIAL LIQUIDATED
DAMAGES OR OTHER AMOUNTS ARE DUE AND PAYABLE SHALL HAVE BEEN CANCELED.

5.20         CONSTRUCTION. THE PARTIES AGREE THAT EACH OF THEM AND/OR THEIR
RESPECTIVE COUNSEL HAS REVIEWED AND HAD AN OPPORTUNITY TO REVISE THE TRANSACTION
DOCUMENTS AND, THEREFORE, THE NORMAL RULE OF CONSTRUCTION TO THE EFFECT THAT ANY
AMBIGUITIES ARE TO BE RESOLVED AGAINST THE DRAFTING PARTY SHALL NOT BE EMPLOYED
IN THE INTERPRETATION OF THE TRANSACTION DOCUMENTS OR ANY AMENDMENTS HERETO.

(SIGNATURE PAGES FOLLOW)

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IN WITNESS WHEREOF, THE PARTIES HERETO HAVE CAUSED THIS SECURITIES PURCHASE
AGREEMENT TO BE DULY EXECUTED BY THEIR RESPECTIVE AUTHORIZED SIGNATORIES AS OF
THE DATE FIRST INDICATED ABOVE.

CERAGENIX PHARMACEUTICALS, INC.

Address for Notice:

 

 

By:

 

 

 

Name:

 

Title:

 

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

 

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

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[PURCHASER SIGNATURE PAGES TO CGXP SECURITIES PURCHASE AGREEMENT]

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

Name of Purchaser:

 

 

 

 

Signature of Authorized Signatory of Purchaser:

 

 

 

 

Name of Authorized Signatory:

 

 

 

 

Title of Authorized Signatory:

 

 

 

 

Email Address of Purchaser:

 

 

 

 

Facsimile Number of Purchaser:

 

 

 

Address for Notice of Purchaser:

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

Subscription Amount:

 

 

 

 

 

Warrant Shares:

 

 

 

EIN Number:  [PROVIDE THIS UNDER SEPARATE COVER]

[SIGNATURE PAGES CONTINUE]

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Annex A

CLOSING STATEMENT

Pursuant to the attached Securities Purchase Agreement, dated as of the date
hereto, the purchasers shall purchase up to $5,000,000 of Debentures and
Warrants from Ceragenix Pharmaceuticals, Inc. (the “Company”).  All funds will
be wired into a trust account maintained by McKenna, Long & Aldridge LLP,
counsel to the Company.  All funds will be disbursed in accordance with this
Closing Statement.

Disbursement Date:    December     , 2006

I.       PURCHASE PRICE

 

 

 

 

 

 

 

Gross Proceeds to be Received in Trust

 

$

 

 

 

II.     DISBURSEMENTS

 

 

 

 

 

 

 

 

 

$

 

 

 

 

$

 

 

 

 

 

 

 

 

$

 

 

 

 

$

 

 

 

 

 

 

Total Amount Disbursed:

 

$

 

 

 

WIRE INSTRUCTIONS:

 

 

To:

 

 

 

 

 

 

 

 

To:

 

 

 

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