Exhibit 10.1

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Mr. Christopher J. Reinhard    February 16, 2010 President and CEO    Cardium
Therapeutics, Inc.    12255 El Camino Real, Suite 250    San Diego, CA 92130   

Dear Mr. Reinhard:

The purpose of this letter agreement (“Agreement”) is to confirm the engagement
of Dawson James Securities, Inc. (“DJS” or the “Placement Agent”) by Cardium
Therapeutics, Inc. (the “Company”) to act, subject to the terms of this
Agreement, as the exclusive Placement Agent for the Company, on a “reasonable
best efforts” basis, in connection with the proposed placement (the “Placement”)
of up to $10 million of the Company’s registered securities (the “Securities”).
The terms of such Placement and the Securities shall be mutually agreed upon by
the Company and the purchasers (each, a “Purchaser” or an “Investor” and
collectively, the “Purchasers” or the “Investors”) and nothing herein
constitutes that DJS would have the power or authority to bind the Company or
any Purchaser or an obligation for the Company to issue any Securities or
complete the Placement. This Agreement and the documents executed and delivered
by the Company and the Purchasers in connection with the Placement shall be
collectively referred to herein as the “Transaction Documents.” The date of the
closing of the Placement shall be referred to herein as the “Closing Date.” The
Company expressly acknowledges and agrees that DJS’s obligations hereunder are
on a reasonable best efforts basis only and that the execution of this Agreement
does not constitute a commitment by DJS to purchase the Securities and does not
ensure the successful placement of the Securities or any portion thereof or the
success of DJS with respect to securing any other financing on behalf of the
Company.

1. Appointment.

(a) Subject to the terms and conditions of this Agreement, the Company hereby
retains DJS, and DJS hereby agrees to act, as the Company’s exclusive Placement
Agent in connection with the placement of Securities during the term of this
Agreement. As Placement Agent, DJS will advise and assist the Company in
identifying investors to purchase Securities. The Company acknowledges and
agrees that DJS’s obligations hereunder are on a “reasonable best efforts” basis
only and this Agreement does not constitute a commitment by DJS to purchase the
Securities or any other securities of the Company.

(b) During the term of this Agreement, except as set forth below, neither the
Company nor any of its subsidiaries will, directly or indirectly, solicit or
otherwise encourage the submission of any proposal or offer from any person or
entity relating to any issuance of the Company’s or any of its subsidiaries’
equity securities (including, but not limited to, debt securities with any
equity feature) (“Offering”) or participate in any discussions regarding the
purchase and sale of Securities. The Company will immediately cease all
contacts, discussions and negotiations with third parties regarding any such
offerings and further agree to refer any inquiries regarding a potential
financing transaction promptly to DJS.

Members FINRA & SIPC

415 Madison Avenue 15th Floor  *  New York, NY 10017  *  Tel (866) 928-0928  *  
Fax (646) 673-8423  *  www.dawsonjames.com

Boca Raton, FL  *  New York, NY  *  Manasquan, NJ

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Cardium Therapeutics, Inc.

February 16, 2010

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(c) Subject to the other requirements set forth in this Agreement, the Placement
Agent may introduce investors to the Offering directly or through other FINRA
member broker-dealers. If the Placement Agent utilizes any intermediaries, the
Placement Agent shall be the Company’s point of contact, not the intermediary,
and the Placement Agent, not the Company, shall be responsible for any
compensation arrangement with the intermediary. The Company’s sole compensation
arrangement, responsibility and obligation are with the Placement Agent. The
Placement Agent will disclose the identity and compensation arrangements with
all of its intermediaries in order to allow the Company to adequately disclose
such arrangements, where necessary.

2. Compensation and Expenses. In consideration of the services rendered by DJS
in connection with the services provided by DJS hereunder, the Company agrees to
pay to DJS the following compensation:

 

  (i) A cash fee payable out of escrow established for the closing (or
immediately upon receiving proceeds from the sale of the Securities) to an
account or accounts designated by DJS (or other means acceptable to DJS) equal
to 7.0% of the gross proceeds raised from the sale of the Securities to the
Investors, less any upfront payment made pursuant to clause (iii) below (the
“DJS Cash Fee”).

 

  (ii) At any time upon the issuance of any Securities to an Investor, the
Company will issue to DJS or its designees common stock purchase warrants (the
“Warrants”) to purchase a number of shares of Common Stock equal to 5.0% of the
shares of Common Stock issued or issuable pursuant to the Placement (the “DJS
Warrants”). The DJS Warrants shall have a term of exercise of 5 years, include
cashless exercise, if there is no effective registration statement registering
the underlying shares of Common Stock at the time of exercise, and otherwise
include terms and conditions identical to those provided to the Investors. The
DJS Warrants shall not be transferable for six months from the date of the
Offering except as permitted by Financial Industry Regulatory Authority
(“FINRA”) Rule 5110, and further, the number of shares underlying the DJS
Warrants shall be reduced if necessary to comply with FINRA rules or
regulations.

 

  (iii) Subject to compliance with FINRA Rule 5110(f)(2)(D), the Company hereby
agrees to pay $30,000 to DJS (or as designated by DJS directly to its counsel)
immediately upon execution of this Agreement in order to commence definitive
documentation, which amounts shall be non-refundable to the extent DJS provides
the Company with supporting invoices/receipts of actual expenses incurred. Any
request for reimbursement shall be accompanied by supporting invoices/receipts
of actual expenses paid. The $30,000 reimbursable expense retainer paid to DJS
pursuant to this Section 2(iii) shall be deducted from the 7% cash fee payable
pursuant to Section 2(i) at the closing.

 

Members FINRA & SIPC

415 Madison Avenue 15th Floor  *  New York, NY 10017  *  Tel (866) 928-0928  *  
Fax (646) 673-8423  *  www.dawsonjames.com

Boca Raton, FL  *  New York, NY  *  Manasquan, NJ

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Cardium Therapeutics, Inc.

February 16, 2010

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3. Registration Statement. The Company hereby represents and warrants to, and
agrees with, the Placement Agent that:

(a) The Company has filed with the Securities and Exchange Commission (the
“Commission”) a registration statement on Form S-3 (Registration File
No. 333-147947) under the Securities Act of 1933, as amended (the “Securities
Act”), which became effective on December 19, 2007 for the registration under
the Securities Act of the Securities. At the time of such filing, the Company
met the requirements of Form S-3 under the Securities Act. Such registration
statement meets the requirements set forth in Rule 415(a)(1)(x) under the
Securities Act and complies with said Rule. The Company will file with the
Commission pursuant to Rule 424(b) under the Securities Act, and the rules and
regulations (the “Rules and Regulations”) of the Commission promulgated
thereunder, a supplement to the form of prospectus included in such registration
statement relating to the placement of the Securities and the plan of
distribution thereof and has advised the Placement Agent of all further
information (financial and other) with respect to the Company required to be set
forth therein. Such registration statement, including the exhibits thereto, as
amended at the date of this Agreement, is hereinafter called the “Registration
Statement”; such prospectus in the form in which it appears in the Registration
Statement is hereinafter called the “Base Prospectus”; and the supplemented form
of prospectus, in the form in which it will be filed with the Commission
pursuant to Rule 424(b) (including the Base Prospectus as so supplemented) is
hereinafter called the “Prospectus Supplement.” Any reference in this Agreement
to the Registration Statement, the Base Prospectus or the Prospectus Supplement
shall be deemed to refer to and include the documents incorporated by reference
therein (the “Incorporated Documents”) pursuant to Item 12 of Form S-3 which
were filed under the Securities Exchange Act of 1934, as amended (the “Exchange
Act”), on or before the date of this Agreement, or the issue date of the Base
Prospectus or the Prospectus Supplement, as the case may be; and any reference
in this Agreement to the terms “amend,” “amendment” or “supplement” with respect
to the Registration Statement, the Base Prospectus or the Prospectus Supplement
shall be deemed to refer to and include the filing of any document under the
Exchange Act after the date of this Agreement, or the issue date of the Base
Prospectus or the Prospectus Supplement, as the case may be, deemed to be
incorporated therein by reference. All references in this Agreement to financial
statements and schedules and other information that is “contained,” “included,”
“described,” “referenced,” “set forth” or “stated” in the Registration
Statement, the Base Prospectus or the Prospectus Supplement (and all other
references of like import) shall be deemed to mean and include all such
financial statements and schedules and other information that is or is deemed to
be incorporated by reference in the Registration Statement, the Base Prospectus
or the Prospectus Supplement, as the case may be. No stop order suspending the
effectiveness of the Registration Statement or the use of the Base Prospectus or
the Prospectus Supplement has been issued, and no proceeding for any such
purpose is pending or has been initiated or, to the Company’s knowledge, is
threatened by the Commission. For purposes of this Agreement, “free writing
prospectus” has the meaning set forth in Rule 405 under the Securities Act and
the “Time of Sale Prospectus” means the preliminary prospectus, if any, together
with the free writing prospectuses, if any, used in connection with the
Placement, including any documents incorporated by reference therein.

 

Members FINRA & SIPC

415 Madison Avenue 15th Floor  *  New York, NY 10017  *  Tel (866) 928-0928  *  
Fax (646) 673-8423  *  www.dawsonjames.com

Boca Raton, FL  *  New York, NY  *  Manasquan, NJ

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Cardium Therapeutics, Inc.

February 16, 2010

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(b) The Registration Statement (and any further documents to be filed with the
Commission) contains all exhibits and schedules as required by the Securities
Act. Each of the Registration Statement and any post-effective amendment
thereto, at the time it became effective, complied in all material respects with
the Securities Act and the Exchange Act and the applicable Rules and Regulations
and did not and, as amended or supplemented, if applicable, will not, contain
any untrue statement of a material fact or omit to state a material fact
required to be stated therein or necessary to make the statements therein not
misleading. The Base Prospectus, the Time of Sale Prospectus, if any, and the
Prospectus Supplement, each as of its respective date, comply in all material
respects with the Securities Act and the Exchange Act and the applicable Rules
and Regulations. Each of the Base Prospectus, the Time of Sale Prospectus, if
any, and the Prospectus Supplement, as amended or supplemented, did not and will
not contain as of the date thereof any untrue statement of a material fact or
omit to state a material fact necessary in order to make the statements therein,
in light of the circumstances under which they were made, not misleading. The
Incorporated Documents, when they were filed with the Commission, conformed in
all material respects to the requirements of the Exchange Act and the applicable
Rules and Regulations, and none of such documents, when they were filed with the
Commission, contained any untrue statement of a material fact or omitted to
state a material fact necessary to make the statements therein (with respect to
Incorporated Documents incorporated by reference in the Base Prospectus or
Prospectus Supplement), in light of the circumstances under which they were made
not misleading; and any further documents so filed and incorporated by reference
in the Base Prospectus, the Time of Sale Prospectus, if any, or Prospectus
Supplement, when such documents are filed with the Commission, will conform in
all material respects to the requirements of the Exchange Act and the applicable
Rules and Regulations, as applicable, and will not contain any untrue statement
of a material fact or omit to state a material fact necessary to make the
statements therein, in light of the circumstances under which they were made,
not misleading. No post-effective amendment to the Registration Statement
reflecting any facts or events arising after the date thereof which represent,
individually or in the aggregate, a fundamental change in the information set
forth therein is required to be filed with the Commission. There are no
documents required to be filed with the Commission in connection with the
transaction contemplated hereby that (x) have not been filed as required
pursuant to the Securities Act or (y) will not be filed within the requisite
time period. There are no contracts or other documents required to be described
in the Base Prospectus, the Time of Sale Prospectus, if any, or Prospectus
Supplement, or to be filed as exhibits or schedules to the Registration
Statement, that have not been described or filed as required.

(c) The Company is eligible to use free writing prospectuses in connection with
the Placement pursuant to Rules 164 and 433 under the Securities Act. Any free
writing prospectus that the Company is required to file pursuant to Rule 433(d)
under the Securities Act has been, or will be, filed with the Commission in
accordance with the requirements of the Securities Act and the applicable rules
and regulations of the Commission thereunder. Each free writing prospectus that
the Company has filed, or is required to file, pursuant to Rule 433(d) under the
Securities Act or that was prepared by or behalf of or used by the Company
complies or will comply in all material respects with the requirements of the
Securities Act and the applicable rules and regulations of the Commission
thereunder. The Company will not, without the prior consent of the Placement
Agent, prepare, use or refer to, any free writing prospectus.

(d) The Company has delivered, or will as promptly as practicable deliver, to
the Placement Agent complete conformed copies of the Registration Statement and
of each consent and certificate of experts, as applicable, filed as a part
thereof, and conformed copies of the Registration Statement (without exhibits),
the Base Prospectus, the Time of Sale Prospectus, if any, and the Prospectus
Supplement, as amended or supplemented, in such quantities and at such places as
the Placement Agent reasonably requests. Neither the Company nor any of its
directors and officers has distributed and none of them will distribute, prior
to the Closing Date, any offering material in connection with the offering and
sale of the Securities other than the Base Prospectus, the Time of Sale
Prospectus, if any, the Prospectus Supplement, the Registration Statement,
copies of the documents incorporated by reference therein and any other
materials permitted by the Securities Act.

 

Members FINRA & SIPC

415 Madison Avenue 15th Floor  *  New York, NY 10017  *  Tel (866) 928-0928  *  
Fax (646) 673-8423  *  www.dawsonjames.com

Boca Raton, FL  *  New York, NY  *  Manasquan, NJ

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Cardium Therapeutics, Inc.

February 16, 2010

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(e) The representations and warranties set forth on Exhibit B to DJS are true
and correct.

4. Term of Engagement. Unless terminated in writing by the parties hereto in
accordance with the provisions hereof or by either party upon five (5) business
day’s written notice, this Agreement will remain in effect until the Termination
Date of March 15, 2010, unless extended for 7 day periods with the mutual
consent of the parties (the “Termination Date”). Notwithstanding anything herein
to the contrary, the obligation to pay the compensation and expenses described
in Section 2 if any and the provisions concerning confidentiality,
indemnification and contribution contained herein and the Company’s obligations
contained in the Indemnification Provisions will survive the termination or
expiration of this Agreement. DJS is in no way the legal representative or agent
of the Company for any purpose whatsoever and has no right or authority to
assume or create, in writing or otherwise, any obligation of any kind, expressed
or implied, in the name of or on behalf of the Company.

5. Information.

(a) The Company recognizes that, in completing its engagement hereunder, DJS
will be using and relying on publicly available information and on data,
material and other information furnished to DJS by the Company or the Company’s
affiliates and agents. The Company will promptly provide DJS with all relevant
information about the Company (to the extent reasonably available to the Company
and not the subject of confidentiality restrictions through third party
agreements) that is reasonably requested by DJS, which information will be
accurate in all material respects. It is understood and agreed that in
performing under this engagement, DJS will be relying upon the accuracy and
completeness of, and is not assuming any responsibility for independent
verification of, such publicly available information and the other information
so furnished.

(b) DJS will keep all information obtained from the Company strictly
confidential except: (i) information which is otherwise publicly available, or
previously known to, or obtained by DJS independently of the Company and without
breach of DJS’s agreement with the Company; (ii) DJS may disclose such
information to its employees and attorneys, and to its other advisors and
Investors on a need to know basis only and will ensure that all such employees,
attorneys, advisors and Investors will keep such information strictly
confidential and agree to be bound and obligated by the provisions of
confidentiality contained herein; and (iii) DJS may disclose such information
pursuant to any order of a court of competent jurisdiction or other governmental
body or as may otherwise be required by law, provided that DJS shall promptly
provide notice of such order or process to the Company in order that it may have
every reasonable opportunity to intervene in such process to contest such
disclosure. Upon expiration or termination, DJS shall return to the Company all
information (and copies thereof in whatever media they exist) previously
received from the Company in its possession or control or under the possession
or control of any party DJS discloses such information to under this Agreement.
Except as set forth in this Section 5(b), DJS shall not without the prior
written consent of Company, in its sole and absolute discretion, disclose any
information obtained from the Company to any other party.

6. Representations and Warranties of DJS. It has full right, power and authority
to enter into this Agreement and to perform all of its obligations hereunder.

 

Members FINRA & SIPC

415 Madison Avenue 15th Floor  *  New York, NY 10017  *  Tel (866) 928-0928  *  
Fax (646) 673-8423  *  www.dawsonjames.com

Boca Raton, FL  *  New York, NY  *  Manasquan, NJ

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Cardium Therapeutics, Inc.

February 16, 2010

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(a) This Agreement has been duly authorized and executed and constitutes a
legal, valid and binding agreement of such party enforceable in accordance with
its terms.

(b) The execution and delivery of this Agreement and the consummation of the
transactions contemplated hereby does not conflict with or result in a breach of
(i) such party’s certificate of incorporation or by-laws or (ii) any agreement
to which such party is a party or by which any of its property or assets is
bound.

7. Closing. The obligations of the Placement Agent and the Purchasers, and the
closing of the sale of the Securities hereunder are subject to the accuracy,
when made and on the Closing Date, of the representations and warranties on the
part of the Company and its Subsidiaries contained herein, to the accuracy of
the statements of the Company and its Subsidiaries made in any certificates
pursuant to the provisions hereof, to the performance by the Company and its
Subsidiaries of their obligations hereunder, and to each of the following
additional terms and conditions:

(a) No stop order suspending the effectiveness of the Registration Statement
shall have been issued and no proceedings for that purpose shall have been
initiated or threatened by the Commission, and any request for additional
information on the part of the Commission (to be included in the Registration
Statement, the Base Prospectus or the Prospectus Supplement or otherwise) shall
have been complied with to the reasonable satisfaction of the Placement Agent.

(b) The Placement Agent shall not have discovered and disclosed to the Company
on or prior to the Closing Date that the Registration Statement, the Base
Prospectus or the Prospectus Supplement or any amendment or supplement thereto
contains an untrue statement of a fact which, in the opinion of counsel for the
Placement Agent, is material or omits to state any fact which, in the opinion of
such counsel, is material and is required to be stated therein or is necessary
to make the statements therein not misleading.

(c) All corporate proceedings and other legal matters incident to the
authorization, form, execution, delivery and validity of each of this Agreement,
the Securities, the Registration Statement, the Base Prospectus and the
Prospectus Supplement and all other legal matters relating to this Agreement and
the transactions contemplated hereby shall be reasonably satisfactory in all
material respects to counsel for the Placement Agent, and the Company shall have
furnished to such counsel all documents and information that they may reasonably
request to enable them to pass upon such matters.

(d) The Placement Agent shall have received from outside counsel to the Company
such counsel’s written opinion, addressed to the Placement Agent and the
Purchasers dated as of the Closing Date, in form and substance reasonably
satisfactory to the Placement Agent. Additionally, the Company shall furnish to
the Placement Agent a “comfort” letter, in form and substance reasonably
satisfactory to the Placement Agent, as to the Registration Statement and SEC
Reports filed within the last 12 months that are incorporated by reference
therein.

 

Members FINRA & SIPC

415 Madison Avenue 15th Floor  *  New York, NY 10017  *  Tel (866) 928-0928  *  
Fax (646) 673-8423  *  www.dawsonjames.com

Boca Raton, FL  *  New York, NY  *  Manasquan, NJ

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Cardium Therapeutics, Inc.

February 16, 2010

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(e) Neither the Company nor any of its Subsidiaries shall have sustained since
the date of the latest audited financial statements included or incorporated by
reference in the Base Prospectus, any loss or interference with its business
from fire, explosion, flood, terrorist act or other calamity, whether or not
covered by insurance, or from any labor dispute or court or governmental action,
order or decree, otherwise than as set forth in or contemplated by the Base
Prospectus and (ii) since such date there shall not have been any change in the
capital stock or long-term debt of the Company or any of its Subsidiaries or any
change, or any development involving a prospective change, in or affecting the
business, general affairs, management, financial position, stockholders’ equity,
results of operations or prospects of the Company and its Subsidiaries,
otherwise than as set forth in or contemplated by the Base Prospectus, the
effect of which, in any such case described in clause (i) or (ii), is, in the
judgment of the Placement Agent, so material and adverse as to make it
impracticable or inadvisable to proceed with the sale or delivery of the
Securities on the terms and in the manner contemplated by the Base Prospectus,
the Time of Sale Prospectus, if any, and the Prospectus Supplement.

(f) The Common Stock is registered under the Exchange Act and, as of the Closing
Date, the Securities shall be listed and admitted and authorized for trading on
American Stock Exchange, and satisfactory evidence of such actions shall have
been provided to the Placement Agent. The Company shall have taken no action
designed to, or likely to have the effect of terminating the registration of the
Common Stock under the Exchange Act or delisting or suspending from trading the
Common Stock from American Stock Exchange, nor has the Company received any
information suggesting that the Commission or American Stock Exchange is
contemplating terminating such registration or listing.

(g) Subsequent to the execution and delivery of this Agreement, there shall not
have occurred any of the following: (i) trading in securities generally on the
New York Stock Exchange, the Nasdaq National Market or the NYSE AMEX or in the
over-the-counter market (the primary exchange or trading market, the “Trading
Market”), or trading in any securities of the Company on any exchange or in the
over-the-counter market, shall have been suspended or minimum or maximum prices
or maximum ranges for prices shall have been established on any such exchange or
such market by the Commission, by such exchange or by any other regulatory body
or governmental authority having jurisdiction, (ii) a banking moratorium shall
have been declared by federal or state authorities or a material disruption has
occurred in commercial banking or securities settlement or clearance services in
the United States, (iii) the United States shall have become engaged in
hostilities in which it is not currently engaged, the subject of an act of
terrorism, there shall have been an escalation in hostilities involving the
United States, or there shall have been a declaration of a national emergency or
war by the United States, or (iv) there shall have occurred any other calamity
or crisis or any change in general economic, political or financial conditions
in the United States or elsewhere, if the effect of any such event in clause
(iii) or (iv) makes it, in the sole judgment of the Placement Agent,
impracticable or inadvisable to proceed with the sale or delivery of the
Securities on the terms and in the manner contemplated by the Base Prospectus
and the Prospectus Supplement.

(h) No action shall have been taken and no statute, rule, regulation or order
shall have been enacted, adopted or issued by any governmental agency or body
which would, as of the Closing Date, prevent the issuance or sale of the
Securities or materially and adversely affect or potentially and adversely
affect the business or operations of the Company; and no injunction, restraining
order or order of any other nature by any federal or state court of competent
jurisdiction shall have been issued as of the Closing Date which would prevent
the issuance or sale of the Securities or materially and adversely affect or
potentially and adversely affect the business or operations of the Company.

 

Members FINRA & SIPC

415 Madison Avenue 15th Floor  *  New York, NY 10017  *  Tel (866) 928-0928  *  
Fax (646) 673-8423  *  www.dawsonjames.com

Boca Raton, FL  *  New York, NY  *  Manasquan, NJ

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Cardium Therapeutics, Inc.

February 16, 2010

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(i) The Company shall have prepared and filed with the Commission a Current
Report on Form 8-K with respect to the Placement, including as an exhibit
thereto this Agreement.

(j) FINRA shall have raised no objection to the fairness and reasonableness of
the terms and arrangements of this Agreement. In addition, the Company shall, if
requested by the Placement Agent, make or authorize Placement Agent’s counsel to
make on the Company’s behalf, an Issuer Filing with FINRA pursuant to FINRA Rule
5110 with respect to the Registration Statement and pay all filing fees required
in connection therewith.

(k) Prior to the Closing Date, the Company shall have furnished to the Placement
Agent such further information, certificates and documents as the Placement
Agent may reasonably request.

All opinions, letters, evidence and certificates mentioned above or elsewhere in
this Agreement shall be deemed to be in compliance with the provisions hereof
only if they are in form and substance reasonably satisfactory to counsel for
the Placement Agent.

8. [INTENTIONALLY DELETED]

9. Confidentiality. The Company will not provide or release any information with
respect to this Agreement or the sale of the Securities except as the Company
determines is required by law, the rules and regulations of the Securities and
Exchange Commission, is otherwise publicly available, or with the consent of the
Placement Agent.

10. Indemnification. The Company agrees to the indemnification and other
agreements set forth in the Indemnification Provisions (the “Indemnification”)
attached hereto as Exhibit A, the provisions of which are incorporated herein by
reference and shall survive the termination or expiration of this Agreement.
Such indemnification shall be limited to the gross proceeds paid to DJS in
connection with the transaction contemplated by this Agreement.

11. Parties; Assignment. This Agreement has been and is made solely for the
benefit of DJS and the Company and each of the persons, agents, employees,
officers, directors and controlling persons referred to in Exhibit A and their
respective heirs, executors, personal representatives, successors and assigns,
and nothing contained in this Agreement will confer any rights upon, nor will
this Agreement be construed to create any rights in, any person who is not party
to such Agreement, other than as set forth in this paragraph. The rights and
obligations of either party under this Agreement may not be assigned without the
prior written consent of the other party hereto and any other purported
assignment will be null and void.

12. Validity. In case any term of this Agreement will be held invalid, illegal
or unenforceable, in whole or in part, the validity of any of the other terms of
this Agreement will not in any way be affected thereby.

 

Members FINRA & SIPC

415 Madison Avenue 15th Floor  *  New York, NY 10017  *  Tel (866) 928-0928  *  
Fax (646) 673-8423  *  www.dawsonjames.com

Boca Raton, FL  *  New York, NY  *  Manasquan, NJ

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Cardium Therapeutics, Inc.

February 16, 2010

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13. Waiver of Breach. The failure of any party hereto to insist upon strict
performance of any of the covenants and agreements herein contained, or to
exercise any option or right herein conferred in any one or more instances, will
not be construed to be a waiver or relinquishment of any such option or right,
or of any other covenants or agreements, and the same will be and remain in full
force and effect.

14. Counterparts. This Agreement may be executed in counterparts and each of
such counterparts will for all purposes be deemed to be an original, and such
counterparts will together constitute one and the same instrument.

15. Governing Law; Jurisdiction; Arbitration. This Agreement will be governed as
to validity, interpretation, construction, effect and in all other respects by
the internal law of the State of New York. Any controversy or claim arising out
of this Agreement, or the breach thereof, shall be settled by arbitration
administered by the American Arbitration Association in accordance with its
Commercial Arbitration Rules and judgment on the award may be rendered by the
arbitrator may be entered in any court having jurisdiction thereof. The
arbitration shall take place in the County of New York before a single
arbitrator. The arbitrator shall be a retired judge. The prevailing party shall
be entitled to recover their reasonable costs and attorneys fees incurred in
connection with the arbitration.

16. Entire Agreement; Modification. This Agreement together with the attached
Exhibit A constitutes the entire understanding and agreement between the parties
with respect to its subject matter and there are no agreements or understandings
with respect to the subject matter hereof which are not contained in this
Agreement. This Agreement may be modified only in writing signed by the party to
be charged hereunder.

 

Members FINRA & SIPC

415 Madison Avenue 15th Floor  *  New York, NY 10017  *  Tel (866) 928-0928  *  
Fax (646) 673-8423  *  www.dawsonjames.com

Boca Raton, FL  *  New York, NY  *  Manasquan, NJ

--------------------------------------------------------------------------------

Cardium Therapeutics, Inc.

February 16, 2010

Page 10 of 13

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17. Notices. All notices will be in writing and will be effective when delivered
in person or sent via facsimile (as evidenced by an electronically stamped
confirmation of successful transmission) and confirmed by letter (delivered via
overnight delivery), to the party to whom it is addressed at the following
addresses or such other address as such party may advise the other in writing:

 

To the Company:    Mr. Christopher J. Reinhard    Cardium Therapeutics Inc.   
12255 El Camino Real, Suite 250    San Diego, CA 92130    Telephone: (858)
414-1477    Facsimile: (858) 436-1011 To DJS:    Dawson James Securities, Inc.
   925 S. Federal Highway, 6th floor    Boca Raton, FL 33432    Attention:
Albert Poliak    Telephone: (561) 208-2907    Facsimile: (561) 208-2969

 

Members FINRA & SIPC

415 Madison Avenue 15th Floor  *  New York, NY 10017  *  Tel (866) 928-0928  *  
Fax (646) 673-8423  *  www.dawsonjames.com

Boca Raton, FL  *  New York, NY  *  Manasquan, NJ

--------------------------------------------------------------------------------

Cardium Therapeutics, Inc.

February 16, 2010

Page 11 of 13

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If the foregoing correctly sets forth our agreement, please confirm this by
signing and returning to us the duplicate copy of this letter

We appreciate this opportunity to be of service and are looking forward to
working with you on this matter.

 

Very truly yours, DAWSON JAMES SECURITIES, INC. By:  

/s/ Albert Poliak

Name:   Mr. Albert Poliak Title:   President

CARDIUM THERAPEUTICS, INC.

 

By:  

/s/ Christopher J. Reinhard

Name:   Mr. Christopher J. Reinhard Title:   President & CEO

 

Members FINRA & SIPC

415 Madison Avenue 15th Floor  *  New York, NY 10017  *  Tel (866) 928-0928  *  
Fax (646) 673-8423  *  www.dawsonjames.com

Boca Raton, FL  *  New York, NY  *  Manasquan, NJ

--------------------------------------------------------------------------------

Cardium Therapeutics, Inc.

February 16, 2010

Page 12 of 13

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EXHIBIT A

In connection with the engagement of Dawson James Securities, Inc. (“DJS”) by
Cardium Therapeutics Inc. (the “Company”), the Company hereby agrees as follows:

 

  1. To the extent permitted by law, the Company will indemnify DJS and its
affiliates, stockholders, directors, officers, employees and controlling persons
(within the meaning of Section 15 of the Securities Act of 1933, as amended, or
Section 20 of the Securities Exchange Act of 1934, as amended) (each of the
foregoing, an “Indemnified Party”) against all losses, claims, damages,
reasonable expenses and liabilities, as the same are incurred (including the
reasonable fees and expenses of counsel), relating to or arising out of its
activities hereunder or pursuant to the Agreement, except to the extent that any
losses, claims, damages, expenses or liabilities (or actions in respect thereof)
are found in a final judgment (not subject to appeal) by a court of law to have
resulted primarily or directly from an Indemnified Party’s willful misconduct,
gross negligence or criminal acts.

 

  2. Promptly after receipt by DJS of notice of any claim or the commencement of
any action or proceeding with respect to which DJS is entitled to indemnity
hereunder, DJS will notify the Company in writing of such claim or of the
commencement of such action or proceeding, and the Company will have the right
to assume the defense of such action or proceeding and agrees to, if it
exercises such right, employ counsel reasonably satisfactory to DJS and pay the
fees and expenses of such counsel. Notwithstanding the preceding sentence, DJS
will be entitled to employ counsel separate from any counsel for the Company and
from any other party in such action or proceeding if (a) the Company does not
elect to assume the defense of such action or proceeding or (b) counsel for DJS
reasonably determines that it would be inappropriate under the applicable rules
of professional responsibility for the same counsel to represent both the
Company and DJS. In such event, the reasonable fees and disbursements of no more
than one such separate counsel will be paid by the Company. The Company will
have the exclusive right to settle any claim, action or proceeding of which it
has assumed the defense provided that the Company will not settle any such
claim, action or proceeding without the prior written consent of DJS, which will
not be unreasonably withheld. For any claim, action or proceeding of which the
Company has not assumed the defense, DJS shall not settle any such claim, action
or proceeding without the prior written consent of the Company, which will not
be unreasonably withheld.

 

  3. The Company agrees to notify DJS promptly of the assertion against it or
any other person of any claim or the commencement of any action or proceeding
relating to a transaction contemplated by the Agreement.

 

Members FINRA & SIPC

415 Madison Avenue 15th Floor  *  New York, NY 10017  *  Tel (866) 928-0928  *  
Fax (646) 673-8423  *  www.dawsonjames.com

Boca Raton, FL  *  New York, NY  *  Manasquan, NJ

--------------------------------------------------------------------------------

Cardium Therapeutics, Inc.

February 16, 2010

Page 13 of 13

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  4. If for any reason the foregoing indemnity is unavailable to DJS or
insufficient to hold DJS harmless (except by reason of the willful misconduct,
gross negligence or criminal acts of an Indemnified Party), then the Company
shall contribute to the amount paid or payable by DJS as a result of such
losses, claims, damages or liabilities in such proportion as is appropriate to
reflect not only the relative benefits received by the Company on the one hand
and DJS on the other, but also the relative fault of the Company on the one hand
and DJS on the other that resulted in such losses, claims, damages or
liabilities, as well as any relevant equitable considerations. The amounts paid
or payable by a party in respect of losses, claims, damages and liabilities
referred to above shall be deemed to include any reasonable legal or other fees
and expenses incurred in defending any litigation, proceeding or other action or
claim. Notwithstanding the provisions hereof, DJS’s share of the liability
hereunder shall not be in excess of the amount of fees actually received, or to
be received, by DJS under the Agreement (excluding any amounts received as
reimbursement of expenses incurred by DJS).

These Indemnification Provisions shall remain in full force and effect whether
or not the transaction contemplated by the Agreement is completed and shall
survive the termination of the Agreement, and shall be in addition to any
liability that the Company might otherwise have to any indemnified party under
the Agreement or otherwise.

 

Members FINRA & SIPC

415 Madison Avenue 15th Floor  *  New York, NY 10017  *  Tel (866) 928-0928  *  
Fax (646) 673-8423  *  www.dawsonjames.com

Boca Raton, FL  *  New York, NY  *  Manasquan, NJ

--------------------------------------------------------------------------------

Exhibit B

Company Representations and Warranties

Except as are or will be set forth in the Prospectus Supplement, the
Incorporated Documents or Disclosure Schedules, which Disclosure Schedules shall
be deemed a part hereof and shall qualify any representations and warranties
made herein, the Company hereby makes the following representations and
warranties to the Placement Agent:

(a) Subsidiaries. All of the direct and indirect subsidiaries of the Company are
set forth in the Incorporated Documents (the “Subsidiaries”). The Company owns,
directly or indirectly, all of the capital stock or other equity interests of
each Subsidiary free and clear of any lien, 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.

(b) Organization and Qualification. The Company and each of the Subsidiaries is
an entity validly existing and in good standing under the laws of the
jurisdiction of its incorporation or organization, with the requisite power and
authority to own and use its properties and assets and to carry on its business
as currently conducted. To the Company’s knowledge, neither the Company nor any
Subsidiary is in violation nor 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 the Agreement,
(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 the Agreement (any of (i), (ii) or (iii), a “Material Adverse
Effect”) and, to the Company’s knowledge, no Proceeding has been instituted in
any such jurisdiction revoking, limiting or curtailing or seeking to revoke,
limit or curtail such power and authority or qualification.

(c) Authorization; Enforcement. The Company has the requisite corporate power
and authority to enter into and to consummate the transactions contemplated by
the Agreement and otherwise to carry out its obligations hereunder and
thereunder. The execution and delivery of the Agreement 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, the Board of Directors or the
Company’s stockholders in connection therewith other than in connection with the
Required Approvals (as defined below). The Agreement 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.

 

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(d) No Conflicts. The execution, delivery and performance by the Company of the
Agreement, the issuance and sale of the Securities and the consummation by it of
the transactions contemplated hereby and thereby to which it is a party do not
and will not (i) conflict with or violate any provision of the Company’s or any
Subsidiary’s certificate or articles of incorporation, bylaws or other
organizational or charter documents, or (ii) conflict with, or constitute a
default (or an event that with notice or lapse of time or both would become a
default) under, result in the creation of any Lien upon any of the properties or
assets of the Company or any Subsidiary, or give to others any rights of
termination, amendment, acceleration or cancellation (with or without notice,
lapse of time or both) of, any agreement, credit facility, debt or other
instrument (evidencing a Company or Subsidiary debt or otherwise) or other
understanding to which the Company or any Subsidiary is a party or by which any
property or asset of the Company or any Subsidiary is bound or affected, or
(iii) subject to the Required Approvals, to the knowledge of the Company,
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. 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 or entity in connection with the
execution, delivery and performance by the Company of the Agreement, other than:
(i) the filing with the Commission of the Prospectus Supplement,
(ii) application(s) to each applicable Trading Market for the listing of the
Securities for trading thereon in the time and manner required thereby and
(iii) such filings as are required to be made under applicable state securities
laws (collectively, the “Required Approvals”).

 

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(f) Issuance of the Securities; Registration. The Securities are duly authorized
and, when issued and paid for in accordance with the Agreement, will be duly and
validly issued, fully paid and nonassessable, free and clear of all liens
imposed by the Company. The Warrant Shares, when issued in accordance with the
terms of the Warrants, will be validly issued, fully paid and nonassessable,
free and clear of all lien imposed by the Company. The Company has reserved from
its duly authorized capital stock the maximum number of shares of Common Stock
issuable pursuant to this Agreement and the Warrants. The Company has prepared
and filed the Registration Statement in conformity with the requirements of the
Securities Act, which became effective on December 19, 2007 (the “Effective
Date”), including the Prospectus, and such amendments and supplements thereto as
may have been required to the date of this Agreement. The Registration Statement
is effective under the Securities Act and no stop order preventing or suspending
the effectiveness of the Registration Statement or suspending or preventing the
use of the Prospectus has been issued by the Commission and no proceedings for
that purpose have been instituted or, to the knowledge of the Company, are
threatened by the Commission. The Company, if required by the rules and
regulations of the Commission, proposes to file the Prospectus, with the
Commission pursuant to Rule 424(b). At the time the Registration Statement and
any amendments thereto became effective, at the date of this Agreement and at
the Closing Date, the Registration Statement and any amendments thereto
conformed and will conform in all material respects to the requirements of the
Securities Act and did not and will not contain any untrue statement of a
material fact or omit to state any material fact required to be stated therein
or necessary to make the statements therein not misleading; and the Prospectus
and any amendments or supplements thereto, at time the Prospectus or any
amendment or supplement thereto was issued and at the Closing Date, conformed
and will conform in all material respects to the requirements of the Securities
Act and did not and will not contain an untrue statement of a material fact or
omit to state a material fact necessary in order to make the statements therein,
in light of the circumstances under which they were made, not misleading.

(g) Capitalization. The capitalization of the Company is as set forth on
Incorporated Documents. 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 plans and pursuant to the conversion and/or
exercise of Common Stock Equivalents outstanding as of the date of the most
recently filed periodic report under the Exchange Act. No person or entity has
any right of first refusal, preemptive right, right of participation, or any
similar right to participate in the transactions contemplated by the Agreement.
Except as a result of the purchase and sale of the Securities, there are no
outstanding options, warrants, scrip 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 or entity 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 or entity (other than the Purchasers) and will
not result in a right of any holder of Company securities to adjust the
exercise, conversion, exchange or reset price under any of such securities. All
of the outstanding shares of capital stock of the Company are validly issued,
fully paid and nonassessable, have been issued in compliance with all federal
and state securities laws, and none of such outstanding shares was issued in
violation of any preemptive rights or similar rights to subscribe for or
purchase securities. No further approval or authorization of any stockholder,
the Board of Directors 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. The 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, together with the Prospectus and
the Prospectus Supplement, 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; Undisclosed Events, Liabilities or Developments. 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) 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 in the
Incorporated Documents, no event, liability, fact, circumstance, occurrence or
development has occurred or exists or is reasonably expected to occur or exist
with respect to the Company or its Subsidiaries or their respective business,
prospects, properties, operations, assets or financial condition that would be
required to be disclosed by the Company under applicable securities laws at the
time this representation is made or deemed made that has not been publicly
disclosed at least 1 business day prior to the date that this representation is
made.

 

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(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 Agreement 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 or such Subsidiary, and
neither the Company nor 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 in favor of any third party,
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 except where such violations or continued employment could
not, individually or in the aggregate, reasonably be expected to have a Material
Adverse Effect. To the Company’s knowledge, 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
judgment, decree or order of any court, arbitrator or governmental body or
(iii) is or has been in violation of any statute, rule, ordinance 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.

 

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

(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 any of the
Intellectual Property Rights used by the Company or any Subsidiary violates or
infringes upon the rights of any person or entity. To the knowledge of the
Company, all such Intellectual Property Rights are enforceable and there is no
existing infringement by another person or entity 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 expected 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 reasonably prudent and customary in the businesses in which the
Company and the Subsidiaries are engaged, including, but not limited to,
directors and officers insurance coverage at least equal to the aggregate
Subscription Amount. Neither the Company nor any Subsidiary has knowledge of any
facts or circumstances which would cause the Company or such Subsidiary 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.

 

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(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 $120,000 other than for (i) payment of salary or consulting
fees for services rendered, (ii) reimbursement for expenses incurred on behalf
of the Company and (iii) 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.

(s) Certain Fees. Except for fees and expenses payable to DJS, 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 or entity with respect to the transactions
contemplated by the Agreement.

(t) 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 an “investment company” subject to
registration under the Investment Company Act of 1940, as amended.

 

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(u) Registration Rights. No person or entity has any right to cause the Company
to effect the registration under the Securities Act of any securities of the
Company.

(v) Listing and Maintenance Requirements. The 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.

(w) Application of Takeover Protections. The Company and the 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 Agreement, including without
limitation as a result of the Company’s issuance of the Securities and the
Purchasers’ ownership of the Securities.

(x) Disclosure. The press releases disseminated by the Company during the twelve
months preceding the date of this Agreement do not contain any untrue statement
of a material fact or omit to state a material fact required to be stated
therein or necessary in order to make the statements therein, in light of the
circumstances under which they were made and when made, not misleading.

(y) No Integrated Offering. Neither the Company, nor any of its Affiliates, nor
any person or entity 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 any
applicable shareholder approval provisions of any Trading Market on which any of
the securities of the Company are listed or designated.

 

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(z) Solvency. Based on the consolidated 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 jurisdiction
within one year from the Closing Date. The Incorporated Documents sets forth as
of the date hereof 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” means (x) 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), (y) 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 (z) 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.

(aa) 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.

(bb) 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.

(cc) Accountants. To the knowledge and belief of the Company, the Company’s
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 for the year ending
December 31, 2009.

 

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(dd) 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, or (iii) paid or agreed to pay
to any person or entity 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.

(ee) FINRA Affiliations. There are no affiliations with any FINRA member firm
among the Company’s officers, directors or, to the knowledge of the Company, any
five percent (5%) or greater stockholder of the Company, except as set forth in
the Base Prospectus.

 

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