Exhibit 10.1

 
COMMON STOCK PURCHASE AGREEMENT

COMMON STOCK PURCHASE AGREEMENT (the “Agreement”), dated as of July 6, 2010 by
and between BIONOVO, INC. a Delaware corporation (the “Company”), and ASPIRE
CAPITAL FUND, LLC, an Illinois limited liability company (the
“Buyer”).  Capitalized terms used herein and not otherwise defined herein are
defined in Section 10 hereof.

WHEREAS:

Subject to the terms and conditions set forth in this Agreement, the Company
wishes to sell to the Buyer, and the Buyer wishes to buy from the Company, up to
Fifteen Million Dollars ($15,000,000) of the Company's common stock, par value
$.0001 per share (the “Common Stock”).  The shares of Common Stock to be
purchased hereunder are referred to herein as the "Purchase Shares."

NOW THEREFORE, the Company and the Buyer hereby agree as follows:

1.            PURCHASE OF COMMON STOCK.

Subject to the terms and conditions set forth in this Agreement, the Company has
the right to sell to the Buyer, and the Buyer has the obligation to purchase
from the Company, Purchase Shares as follows:

(a)           Commencement of Purchases of Common Stock.  After the Commencement
Date (as defined below), the purchase and sale of Purchase Shares hereunder
shall occur from time to time upon written notices by the Company to the Buyer
on the terms and conditions as set forth herein following the satisfaction of
the conditions (the “Commencement”) as set forth in Sections 6 and 7 below  (the
date of satisfaction of such conditions, the "Commencement Date").

(b)           The Company’s Right to Require Purchases.  On any given Business
Day after the Commencement Date, the Company shall have the right but not the
obligation to direct the Buyer by its delivery to the Buyer of a Purchase Notice
from time to time to buy up to 300,000 Purchase Shares per Business Day (each
such purchase, a “Purchase”) at the Purchase Price on the Purchase Date.  The
Company may deliver multiple Purchase Notices to the Buyer from time to time so
long as the most recent Purchase has been completed.

(c)           Payment for Purchase Shares.  The Buyer shall pay to the Company
an amount equal to the Purchase Amount with respect to such Purchase Shares as
full payment for such Purchase Shares via wire transfer of immediately available
funds on the same Business Day that the Buyer receives such Purchase Shares if
they are received by the Buyer before 1:00 p.m. eastern time or if received by
the Buyer after 1:00 p.m. eastern time, the next Business Day.  All payments
made under this Agreement shall be made in lawful money of the United States of
America via wire transfer of immediately available funds to such account as the
Company may from time to time designate by written notice in accordance with the
provisions of this Agreement.  Whenever any amount expressed to be due by the
terms of this Agreement is due on any day that is not a Business Day, the same
shall instead be due on the next succeeding day that is a Business Day.

 

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(d)           Purchase Price Floor.  The Company and the Buyer shall not effect
any sales under this Agreement on any Purchase Date where the Closing Sale Price
would be less than the Floor Price.  “Floor Price” means $0.25, which shall be
appropriately adjusted for any reorganization, recapitalization, non-cash
dividend, stock split or other similar transaction.

(e)           Records of Purchases.  The Buyer and the Company shall each
maintain records showing the remaining Available Amount at any give time and the
dates and Purchase Amounts for each purchase or shall use such other method,
reasonably satisfactory to the Buyer and the Company.

(f)            Taxes.  The Company shall pay any and all transfer, stamp or
similar taxes that may be payable with respect to the issuance and delivery of
any shares of Common Stock to the Buyer made under this Agreement.

(g)           Compliance with Principal Market Rules.  Notwithstanding anything
in this Agreement to the contrary, and in addition to the limitations set forth
in Section 1(d), unless and until such time as the shareholders of the Company
approve the transaction contemplated by this Agreement, no Purchases shall be
made under Section 1(b) of this Agreement unless the Purchase Price thereunder
equals or exceeds the Base Price.  The “Base Price” is a price per share equal
to (x) the Signing Market Price plus (y) $0.026, which shall be appropriately
adjusted for any reorganization, recapitalization, non-cash dividend, stock
split, reverse stock split or other similar transaction.  “Signing Market Price”
shall mean $0.370, the consolidated closing bid price of the Common Stock on the
Principal Market immediately preceding the date of this Agreement.  The Company
hereby represents and warrants to the Buyer that the book value per share of
Common Stock as of the date hereof is less than the Signing Market Price.  The
Company shall not be required or permitted to issue any shares of Common Stock
under this Agreement if such issuance would breach the Company's obligations
under the rules or regulations of the Principal Market.
 
(h)           Beneficial Ownership Limitation.  The Company shall not issue and
the Buyer shall not purchase any shares of Common Stock under this
Agreement which, when aggregated with all other shares of Common Stock then
owned beneficially (as calculated pursuant to Section 13(d) of the Exchange Act
and Rule 13d-3 promulgated thereunder) by the Buyer and its affiliates, would
result in the beneficial ownership by the Buyer and its affiliates of more
than 19.99% of the then issued and outstanding shares of Common Stock.

 
2.            BUYER'S REPRESENTATIONS AND WARRANTIES.

The Buyer represents and warrants to the Company that as of the date hereof and
as of the Commencement Date:

(a)           Investment Purpose.  The Buyer is entering into this Agreement and
acquiring the Commitment Shares (as defined in Section 4(e) hereof) (the
Purchase Shares and the Commitment Shares are collectively referred to herein as
the "Securities"), for its own account for investment only and not with a view
towards, or for resale in connection with, the public sale or distribution
thereof; provided however, by making the representations herein, the Buyer does
not agree to hold any of the Securities for any minimum or other specific term.

(b)           Accredited Investor Status.  The Buyer is an "accredited investor"
as that term is defined in Rule 501(a)(3) of Regulation D.

(c)           Reliance on Exemptions.  The Buyer understands that the Securities
are being offered and sold to it in reliance on specific exemptions from the
registration requirements of United States federal and state securities laws and
that the Company is relying in part upon the truth and accuracy of, and the
Buyer's compliance with, the representations, warranties, agreements,
acknowledgments and understandings of the Buyer set forth herein in order to
determine the availability of such exemptions and the eligibility of the Buyer
to acquire the Securities.

 
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(d)           Information.  The Buyer has been furnished with all materials
relating to the business, finances and operations of the Company and materials
relating to the offer and sale of the Securities that have been reasonably
requested by the Buyer, including, without limitation, the SEC Documents (as
defined in Section 3(f) hereof).  The Buyer understands that its investment in
the Securities involves a high degree of risk.  The Buyer (i) is able to bear
the economic risk of an investment in the Securities including a total loss,
(ii) has such knowledge and experience in financial and business matters that it
is capable of evaluating the merits and risks of the proposed investment in the
Securities and (iii) has had an opportunity to ask questions of and receive
answers from the officers of the Company concerning the financial condition and
business of the Company and others matters related to an investment in the
Securities.  Neither such inquiries nor any other due diligence investigations
conducted by the Buyer or its representatives shall modify, amend or affect the
Buyer's right to rely on the Company's representations and warranties contained
in Section 3 below.  The Buyer has sought such accounting, legal and tax advice
as it has considered necessary to make an informed investment decision with
respect to its acquisition of the Securities.

(e)           No Governmental Review.  The Buyer understands that no United
States federal or state agency or any other government or governmental agency
has passed on or made any recommendation or endorsement of the Securities or the
fairness or suitability of the investment in the Securities nor have such
authorities passed upon or endorsed the merits of the offering of the
Securities.

(f)            Transfer or Sale.  The Buyer understands that except as provided
in the Registration Rights Agreement (as defined in Section 4(a) hereof): (i)
the Securities have not been and are not being registered under the 1933 Act or
any state securities laws, and may not be offered for sale, sold, assigned or
transferred unless (A) subsequently registered thereunder or (B) an exemption
exists permitting such Securities to be sold, assigned or transferred without
such registration; (ii) any sale of the Securities made in reliance on Rule 144
may be made only in accordance with the terms of Rule 144 and further, if Rule
144 is not applicable, any resale of the  Securities under circumstances in
which the seller (or the person through whom the sale is made) may be deemed to
be an underwriter (as that term is defined in the 1933 Act) may require
compliance with some other exemption under the 1933 Act or the rules and
regulations of the SEC thereunder; and (iii) neither the Company nor any other
person is under any obligation to register the Securities under the 1933 Act or
any state securities laws or to comply with the terms and conditions of any
exemption thereunder.

(g)           Validity; Enforcement.  This Agreement has been duly and validly
authorized, executed and delivered on behalf of the Buyer and is a valid and
binding agreement of the Buyer enforceable against the Buyer in accordance with
its terms, subject as to enforceability to general principles of equity and to
applicable bankruptcy, insolvency, reorganization, moratorium, liquidation and
other similar laws relating to, or affecting generally, the enforcement of
applicable creditors' rights and remedies.

(h)           Residency.  The Buyer is a resident of the State of Illinois.

 
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(i)            No Prior Short Selling.  The Buyer represents and warrants to the
Company that at no time prior to the date of this Agreement has any of the
Buyer, its agents, representatives or affiliates engaged in or effected, in any
manner whatsoever, directly or indirectly, any (i) "short sale" (as such term is
defined in Section 242.200 of Regulation SHO of the Securities Exchange Act of
1934, as amended (the "1934 Act")) of the Common Stock or (ii) hedging
transaction, which establishes a net short position with respect to the Common
Stock.

3.            REPRESENTATIONS AND WARRANTIES OF THE COMPANY.

The Company represents and warrants to the Buyer that as of the date hereof and
as of the Commencement Date:

(a)           Organization and Qualification.  The Company is a corporation duly
organized and validly existing in good standing under the laws of the State of
Delaware, and has the requisite corporate power and authority to own its
properties and to carry on its business as now being conducted.  As of the date
hereof, the Company does not have any Subsidiaries.  The Company is duly
qualified as a foreign corporation to do business and is in good standing in
every jurisdiction in which its ownership of property or the nature of the
business conducted by it makes such qualification necessary, except to the
extent that the failure to be so qualified or be in good standing could not
reasonably be expected to have a Material Adverse Effect.  As used in this
Agreement, "Material Adverse Effect" means any material adverse effect on any
of: (i) the business, properties, assets, operations, results of operations or
financial condition of the Company and its Subsidiaries, if any, taken as a
whole, or (ii) the authority or ability of the Company to perform its
obligations under the Transaction Documents (as defined in Section 3(b) hereof).

(b)           Authorization; Enforcement; Validity.  (i) The Company has the
requisite corporate power and authority to enter into and perform its
obligations under this Agreement, the Registration Rights Agreement and each of
the other agreements entered into by the parties on the Commencement Date and
attached hereto as exhibits to this Agreement (collectively, the "Transaction
Documents"), and to issue the Securities in accordance with the terms hereof and
thereof, (ii) the execution and delivery of the Transaction Documents by the
Company and the consummation by it of the transactions contemplated hereby and
thereby, including without limitation, the issuance of the Commitment Shares and
the reservation for issuance and the issuance of the Purchase Shares issuable
under this Agreement, have been duly authorized by the Company's Board of
Directors and no further consent or authorization is required by the Company,
its Board of Directors or its shareholders, except for approvals of the
Company’s Board of Directors or a committee thereof as may be required in
connection with any issuance and sale of Purchase Shares to the Buyer hereunder
pursuant to a specific Purchase Notice (which approvals shall be obtained prior
to the delivery of any Purchase Notice), (iii) this Agreement has been, and each
other Transaction Document shall be on the Commencement Date, duly executed and
delivered by the Company and (iv) this Agreement constitutes, and each other
Transaction Document upon its execution on behalf of the Company, shall
constitute, the valid and binding obligations of the Company enforceable against
the Company in accordance with their terms, except as such enforceability may be
limited by general principles of equity or applicable bankruptcy, insolvency,
reorganization, moratorium, liquidation or similar laws relating to, or
affecting generally, the enforcement of creditors' rights and remedies.  The
Board of Directors of the Company has approved the resolutions (the “Signing
Resolutions”) substantially in the form as set forth as Exhibit C-1 attached
hereto to authorize this Agreement and the transactions contemplated
hereby.  The Signing Resolutions are valid, in full force and effect and have
not been modified or supplemented in any respect other than by the resolutions
set forth in Exhibit C-2 attached hereto regarding the registration statement
referred to in Section 4 hereof.  The Company has delivered to the Buyer a true
and correct copy of a unanimous written consent adopting the Signing Resolutions
executed by all of the members of the Board of Directors of the Company.

 
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(c)           Capitalization.  As of the date hereof, the authorized capital
stock of the Company consists of (i) 190,000,000 shares of Common Stock, of
which as of the date hereof, 107,618,690 shares are issued and outstanding, no
shares of Common Stock are held as treasury shares, 9,496,788 shares are
reserved for future issuance pursuant to the Company's stock option plans of
which only approximately 3,180,567 shares remain available for future option
grants and 42,020,093 shares are issuable and reserved for issuance pursuant to
securities (other than stock options issued pursuant to the Company's stock
option plans) exercisable or exchangeable for, or convertible into, shares of
Common Stock and (ii) 10,000,000 shares of Preferred Stock, $0.0001 par value,
of which as of the date hereof no shares are issued and outstanding.   All of
such outstanding shares have been, or upon issuance will be, validly issued and
are fully paid and nonassessable.  Except as disclosed in Schedule 3(c), (i) no
shares of the Company's capital stock are subject to preemptive rights or any
other similar rights or any liens or encumbrances suffered or permitted by the
Company, (ii) there are no outstanding debt securities, (iii) there are no
outstanding options, warrants, scrip, rights to subscribe to, calls or
commitments of any character whatsoever relating to, or securities or rights
convertible into, any shares of capital stock of the Company or any of its
Subsidiaries, or contracts, commitments, understandings or arrangements by which
the Company or any of its Subsidiaries is or may become bound to issue
additional shares of capital stock of the Company or any of its Subsidiaries or
options, warrants, scrip, rights to subscribe to, calls or commitments of any
character whatsoever relating to, or securities or rights convertible into, any
shares of capital stock of the Company or any of its Subsidiaries, (iv) there
are no agreements or arrangements under which the Company or any of its
Subsidiaries is obligated to register the sale of any of their securities under
the 1933 Act (except the Registration Rights Agreement), (v) there are no
outstanding securities or instruments of the Company or any of its Subsidiaries
which contain any redemption or similar provisions, and there are no contracts,
commitments, understandings or arrangements by which the Company or any of its
Subsidiaries is or may become bound to redeem a security of the Company or any
of its Subsidiaries, (vi) there are no securities or instruments containing
anti-dilution or similar provisions that will be triggered by the issuance of
the Securities as described in this Agreement and (vii) the Company does not
have any stock appreciation rights or "phantom stock" plans or agreements or any
similar plan or agreement.  The Company has furnished or made available to the
Buyer via the SEC’s Electronic Data Gathering and Retrieval system (EDGAR) true
and correct copies of the Company's Certificate of Incorporation, as amended and
as in effect on the date hereof (the "Certificate of Incorporation"), and the
Company's By-laws, as amended and as in effect on the date hereof (the
"By-laws"), and copies of any documents containing the material rights of the
holders thereof in respect thereto.

(d)           Issuance of Securities.  The Commitment Shares have been duly
authorized and, upon issuance in accordance with the terms hereof, the
Commitment Shares shall be (i) validly issued, fully paid and non-assessable and
(ii) free from all taxes, liens and charges with respect to the issue thereof.
At least 20,000,000 shares of Common Stock have been duly authorized and
reserved for issuance upon purchase under this Agreement.  Upon issuance and
payment therefor in accordance with the terms and conditions of this Agreement,
the Purchase Shares shall be validly issued, fully paid and nonassessable and
free from all taxes, liens and charges with respect to the issue thereof, with
the holders being entitled to all rights accorded to a holder of Common Stock.

 
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(e)           No Conflicts.  Except as disclosed in Schedule 3(e) or in the SEC
Documents, the execution, delivery and performance of the Transaction Documents
by the Company and the consummation by the Company of the transactions
contemplated hereby and thereby (including, without limitation, the reservation
for issuance and issuance of 20,000,000 Purchase Shares will not (i) result in a
violation of the Certificate of Incorporation, any Certificate of Designations,
Preferences and Rights of any outstanding series of preferred stock of the
Company or the By-laws or (ii) conflict with, or constitute a default (or an
event which with notice or lapse of time or both would become a default) under,
or give to others any rights of termination, amendment, acceleration or
cancellation of, any agreement, indenture or instrument to which the Company or
any of its Subsidiaries is a party, or result in a violation of any law, rule,
regulation, order, judgment or decree (including federal and state securities
laws and regulations and the rules and regulations of the Principal Market
applicable to the Company or any of its Subsidiaries) or by which any property
or asset of the Company or any of its Subsidiaries is bound or affected, except
in the case of conflicts, defaults, terminations, amendments, accelerations,
cancellations and violations under clause (ii), which could not reasonably be
expected to result in a Material Adverse Effect.  Except as disclosed in
Schedule 3(e), neither the Company nor its Subsidiaries is in violation of any
term of or in default under its Certificate of Incorporation, any Certificate of
Designation, Preferences and Rights of any outstanding series of preferred stock
of the Company or By-laws or their organizational charter or by-laws,
respectively.  Except as disclosed in Schedule 3(e), neither the Company nor any
of its Subsidiaries is in violation of any term of or is in default under any
material contract, agreement, mortgage, indebtedness, indenture, instrument,
judgment, decree or order or any statute, rule or regulation applicable to the
Company or its Subsidiaries, except for possible conflicts, defaults,
terminations or amendments which could not reasonably be expected to have a
Material Adverse Effect.  The business of the Company and its Subsidiaries is
not being conducted, and shall not be conducted, in violation of any law,
ordinance, regulation of any governmental entity, except for possible
violations, the sanctions for which either individually or in the aggregate
could not reasonably be expected to have a Material Adverse Effect.  Except as
specifically contemplated by this Agreement and as required under the 1933 Act
or applicable state securities laws, the 1934 Act or the rules and regulations
of the Principal Market, the Company is not required to obtain any consent,
authorization or order of, or make any filing or registration with, any court or
governmental agency or any regulatory or self-regulatory agency in order for it
to execute, deliver or perform any of its obligations under or contemplated by
the Transaction Documents in accordance with the terms hereof or
thereof.  Except as disclosed in Schedule 3(e), all consents, authorizations,
orders, filings and registrations which the Company is required to obtain
pursuant to the preceding sentence shall be obtained or effected on or prior to
the Commencement Date.  Except as listed in Schedule 3(e) or in the SEC
Documents, since January 1, 2009 the Company has not received nor delivered any
notices or correspondence from or to the Principal Market.  The Principal Market
has not commenced any delisting proceedings against the Company.

 
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(f)            SEC Documents; Financial Statements. Except as disclosed in
Schedule 3(f), since January 1, 2009, the Company has timely filed all reports,
schedules, forms, statements and other documents required to be filed by it with
the SEC pursuant to the reporting requirements of the 1934 Act (all of the
foregoing filed prior to the date hereof and all exhibits included therein and
financial statements and schedules thereto and documents incorporated by
reference therein being hereinafter referred to as the "SEC Documents").  As of
their respective dates (except as they have been correctly amended), the SEC
Documents complied in all material respects with the requirements of the 1934
Act and the rules and regulations of the SEC promulgated thereunder applicable
to the SEC Documents, and none of the SEC Documents, at the time they were filed
with the SEC (except as they may have been properly amended), contained any
untrue statement of a material fact or omitted to state a material fact required
to be stated therein or necessary in order to make the statements therein, in
light of the circumstances under which they were made, not misleading.  As of
their respective dates (except as they have been properly amended), the
financial statements of the Company included in the SEC Documents complied as to
form in all material respects with applicable accounting requirements and the
published rules and regulations of the SEC with respect thereto.  Such financial
statements have been prepared in accordance with generally accepted accounting
principles, consistently applied, during the periods involved (except (i) as may
be otherwise indicated in such financial statements or the notes thereto or (ii)
in the case of unaudited interim statements, to the extent they may exclude
footnotes or may be condensed or summary statements) and fairly present in all
material respects the financial position of the Company as of the dates thereof
and the results of its operations and cash flows for the periods then ended
(subject, in the case of unaudited statements, to normal year-end audit
adjustments). Except as listed in Schedule 3(f), the Company has received no
notices or correspondence from the SEC since January 1, 2009.  The SEC has not
commenced any enforcement proceedings against the Company.

(g)           Absence of Certain Changes.  Except as disclosed in Schedule 3(g),
since March 31, 2010, there has been no material adverse change in the business,
properties, operations, financial condition or results of operations of the
Company or its Subsidiaries.  The Company has not taken any steps, and does not
currently expect to take any steps, to seek protection pursuant to any
Bankruptcy Law nor does the Company or any of its Subsidiaries have any
knowledge or reason to believe that its creditors intend to initiate involuntary
bankruptcy or insolvency proceedings.  The Company is financially solvent and is
generally able to pay its debts as they become due.

(h)           Absence of Litigation. There is no action, suit, proceeding,
inquiry or investigation before or by any court, public board, government
agency, self-regulatory organization or body pending or, to the knowledge of the
Company, threatened against or affecting the Company, the Common Stock or any of
the Company's officers or directors in their capacities as such, which could
reasonably be expected to have a Material Adverse Effect.   A description of
each action, suit, proceeding, inquiry or investigation before or by any court,
public board, government agency, self-regulatory organization or body which, as
of the date of this Agreement, is pending or threatened in writing against or
affecting the Company, the Common Stock or any of the Company's Subsidiaries or
any of the Company's or the Company's Subsidiaries' officers or directors in
their capacities as such, is set forth in Schedule 3(h).

(i)            Acknowledgment Regarding Buyer's Status.  The Company
acknowledges and agrees that the Buyer is acting solely in the capacity of arm's
length purchaser with respect to the Transaction Documents and the transactions
contemplated hereby and thereby.  The Company further acknowledges that the
Buyer is not 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 hereby and thereby and any advice given by the Buyer
or any of its representatives or agents in connection with the Transaction
Documents and the transactions contemplated hereby and thereby is merely
incidental to the Buyer's purchase of the Securities.  The Company further
represents to the Buyer that the Company's decision to enter into the
Transaction Documents has been based solely on the independent evaluation by the
Company and its representatives and advisors.

 
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 (j)           Intellectual Property Rights.  To the knowledge of the Company,
the Company owns or possesses adequate rights or licenses to use all material
trademarks, trade names, service marks, service mark registrations, service
names, patents, patent rights, copyrights, inventions, licenses, approvals,
governmental authorizations, trade secrets and rights necessary to conduct their
respective businesses as now conducted.  Except as set forth on Schedule 3(k),
to the knowledge of the Company, none of the Company's material trademarks,
trade names, service marks, service mark registrations, service names, patents,
patent rights, copyrights, inventions, licenses, approvals, government
authorizations, trade secrets or other intellectual property rights have expired
or terminated, or, by the terms and conditions thereof, could expire or
terminate within two years from the date of this Agreement.  The Company does
not have any knowledge of any infringement by the Company of any material
trademark, trade name rights, patents, patent rights, copyrights, inventions,
licenses, service names, service marks, service mark registrations, trade secret
or other similar rights of others, or of any such development of similar or
identical trade secrets or technical information by others and, except as set
forth on Schedule 3(k), there is no claim, action or proceeding being made or
brought against, or to the Company's knowledge, being threatened against, the
Company regarding trademark, trade name, patents, patent rights, invention,
copyright, license, service names, service marks, service mark registrations,
trade secret or other infringement, which could reasonably be expected to have a
Material Adverse Effect.

(k)           Environmental Laws.  To the knowledge of the Company, the Company
(i) is in compliance with any and all applicable foreign, federal, state and
local laws and regulations relating to the protection of human health and
safety, the environment or hazardous or toxic substances or wastes, pollutants
or contaminants (“Environmental Laws”), (ii) has received all permits, licenses
or other approvals required of it under applicable Environmental Laws to conduct
its business and (iii) is in compliance with all terms and conditions of any
such permit, license or approval, except where, in each of the three foregoing
clauses, the failure to so comply could not reasonably be expected to have,
individually or in the aggregate, a Material Adverse Effect.

(l)            Title.  The Company has good and marketable title in fee simple
to all real property and good and marketable title to all personal property
owned by it which is material to the business of the Company, in each case free
and clear of all liens, encumbrances and defects except such as are described in
Schedule 3(m), the SEC Documents or such as do not materially affect the value
of such property and do not interfere with the use made and proposed to be made
of such property by the Company.  To the knowledge of the Company, any real
property and facilities held under lease by the Company are held by it under
valid, subsisting and enforceable leases with such exceptions as are not
material and do not interfere with the use made and proposed to be made of such
property and buildings by the Company.

(m)          Insurance.  The Company is insured by insurers of recognized
financial responsibility against such losses and risks and in such amounts as
management of the Company believes to be prudent and customary in the businesses
in which the Company is engaged.  The Company has not been refused any insurance
coverage sought or applied for and the Company has no 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 at a cost that would not materially and
adversely affect the condition, financial or otherwise, or the earnings,
business or operations of the Company.

 
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(n)           Regulatory Permits.  To the knowledge of the Company, the Company
possesses all material certificates, authorizations and permits issued by the
appropriate federal, state or foreign regulatory authorities necessary to
conduct their respective businesses, and the Company has not received any notice
of proceedings relating to the revocation or modification of any such
certificate, authorization or permit.

(o)           Tax Status.  The Company has made or filed all federal and state
income and all other material tax returns, reports and declarations required by
any jurisdiction to which it is subject (unless and only to the extent that the
Company has set aside on its books provisions reasonably adequate for the
payment of all unpaid and unreported taxes) and has paid all taxes and other
governmental assessments and charges that are material in amount, shown or
determined to be due on such returns, reports and declarations, except those
being contested in good faith and has set aside on its books provision
reasonably adequate for the payment of all taxes for periods subsequent to the
periods to which such returns, reports or declarations apply.  There are no
unpaid taxes in any material amount claimed to be due by the taxing authority of
any jurisdiction, and the officers of the Company know of no basis for any such
claim.

(p)           Transactions With Affiliates.  Except as set forth on Schedule
3(q) and other than the grant or exercise of stock options disclosed on Schedule
3(c), none of the officers, directors, or employees of the Company is presently
a party to any transaction with the Company (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 corporation, partnership, trust or other entity in which any
officer, director, or any such employee has an interest or is an officer,
director, trustee or partner.

(q)           Application of Takeover Protections.  The Company and its board of
directors have taken or will take prior to the Commencement Date 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 Certificate of
Incorporation or the laws of the state of its incorporation which is or could
become applicable to the Buyer as a result of the transactions contemplated by
this Agreement, including, without limitation, the Company's issuance of the
Securities and the Buyer's ownership of the Securities.

4.            COVENANTS.

(a)           Filing of Form 8-K and Registration Statement.  The Company agrees
that it shall, within the time required under the 1934 Act file a Report on Form
8-K disclosing this Agreement and the transaction contemplated hereby.  The
Company shall also file within twenty (20) Business Days from the date hereof a
new registration statement covering the sale of the Commitment Shares
and  20,000,000 Purchase Shares in accordance with the terms of the Registration
Rights Agreement between the Company and the Buyer, dated as of the date hereof
(“Registration Rights Agreement”).

(b)           Blue Sky. The Company shall take such action, if any, as is
reasonably necessary in order to obtain an exemption for or to qualify (i) the
initial sale of the Commitment Shares and any Purchase Shares to the Buyer under
this Agreement and (ii) any subsequent sale of the Commitment Shares and any
Purchase Shares by the Buyer, in each case, under applicable securities or "Blue
Sky" laws of the states of the United States in such states as is reasonably
requested by the Buyer from time to time, and shall provide evidence of any such
action so taken to the Buyer.

 
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(c)           Listing.  The Company shall promptly secure the listing of at
least 20,000,000 Purchase Shares and all of the Commitment Shares upon each
national securities exchange and automated quotation system, if any, upon which
shares of Common Stock are then listed (subject to official notice of issuance)
and shall maintain, so long as any other shares of Common Stock shall be so
listed, such listing of all such securities from time to time issuable under the
terms of the Transaction Documents.  The Company shall maintain the Common
Stock's authorization for quotation on the Principal Market.  Neither the
Company nor any of its Subsidiaries shall take any action that would be
reasonably expected to result in the delisting or suspension of the Common Stock
on the Principal Market.  The Company shall promptly, and in no event later than
48 hours, provide to the Buyer copies of any notices it receives from the
Principal Market regarding the continued eligibility of the Common Stock for
listing on such automated quotation system or securities exchange.  The Company
shall pay all fees and expenses in connection with satisfying its obligations
under this Section.

(d)           Limitation on Short Sales and Hedging Transactions.  The Buyer
agrees that beginning on the date of this Agreement and ending on the date of
termination of this Agreement as provided in Section 11(k), the Buyer and its
agents, representatives and affiliates shall not in any manner whatsoever enter
into or effect, directly or indirectly, any (i) "short sale" (as such term is
defined in Section 242.200 of Regulation SHO of the 1934 Act) of the Common
Stock or (ii) hedging transaction, which establishes a net short position with
respect to the Common Stock.

(e)           Issuance of Commitment Shares.  Immediately upon the execution of
this Agreement, the Company shall issue to the Buyer as consideration for the
Buyer entering into this Agreement 1,395,349 shares of Common Stock (the
"Commitment Shares").  The  Commitment Shares shall be issued in certificated
form and (subject to Section 5 hereof) shall bear the following  restrictive
legend:

THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER
THE SECURITIES ACT OF 1933, AS AMENDED, OR APPLICABLE STATE SECURITIES LAWS. THE
SECURITIES HAVE BEEN ACQUIRED FOR INVESTMENT AND MAY NOT BE OFFERED FOR SALE,
SOLD, TRANSFERRED OR ASSIGNED IN THE ABSENCE OF AN EFFECTIVE REGISTRATION
STATEMENT FOR THE SECURITIES UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR
APPLICABLE STATE SECURITIES LAWS, UNLESS SOLD PURSUANT TO: (1) RULE 144 UNDER
THE SECURITIES ACT OF 1933, AS AMENDED, OR (2) AN OPINION OF HOLDER’S COUNSEL,
IN A CUSTOMARY FORM, THAT REGISTRATION IS NOT REQUIRED UNDER SAID ACT OR
APPLICABLE STATE SECURITIES LAWS.

(f)           Due Diligence.  The Buyer shall have the right, from time to time
as the Buyer may reasonably deem appropriate, to perform reasonable due
diligence on the Company during normal business hours.  The Company and its
officers and employees shall provide information and reasonably cooperate with
the Buyer in connection with any reasonable request by the Buyer related to the
Buyer's due diligence of the Company, including, but not limited to, any such
request made by the Buyer in connection with (i) the filing of the registration
statement described in Section 4(a) hereof and (ii) the Commencement.  Each
party hereto agrees not to disclose any Confidential Information of the other
party to any third party and shall not use the Confidential Information for any
purpose other than in connection with, or in furtherance of, the transactions
contemplated hereby.  Each party hereto acknowledges that the Confidential
Information shall remain the property of the disclosing party and agrees that it
shall take all reasonable measures to protect the secrecy of any Confidential
Information disclosed by the other party.

 
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5.            TRANSFER AGENT INSTRUCTIONS.

Immediately upon the execution of this Agreement, the Company shall deliver to
the Transfer Agent a letter in the form as set forth as Exhibit E attached
hereto with respect to the issuance of the  Commitment Shares. On the
Commencement Date, the Company shall cause any restrictive legend on the
Commitment Shares to be removed.  All of the Purchase Shares to be issued under
this Agreement shall be issued without any restrictive legend unless the Buyer
expressly consents otherwise.  The Company shall issue irrevocable instructions
to the Transfer Agent, and any subsequent transfer agent, to issue Purchase
Shares in the name of the Buyer for the Purchase Shares (the "Irrevocable
Transfer Agent Instructions").  The Company warrants to the Buyer that no
instruction other than the Irrevocable Transfer Agent Instructions referred to
in this Section 5, will be given by the Company to the Transfer Agent with
respect to the Purchase Shares and that the Commitment Shares, and the Purchase
Shares shall otherwise be freely transferable on the books and records of the
Company as and to the extent provided in this Agreement and the Registration
Rights Agreement and permitted under the 1933 Act and applicable state
securities laws.

 
6.
CONDITIONS TO THE COMPANY'S RIGHT TO COMMENCE SALES OF SHARES OF COMMON STOCK
UNDER THIS AGREEMENT.

The right of the Company hereunder to commence sales of the Purchase Shares is
subject to the satisfaction of each of the following conditions on or before the
Commencement Date (the date that the Company may begin sales):

(a)           The Buyer shall have executed each of the Transaction Documents
and delivered the same to the Company;

(b)           A registration statement covering the sale of the Commitment
Shares and Purchase Shares shall have been declared effective under the 1933 Act
by the SEC and no stop order with respect to the registration statement shall be
pending or threatened by the SEC.

(c)           The representations and warranties of the Buyer shall be true and
correct in all material respects as of the date when made and as of the
Commencement Date as though made at that time (except for representations and
warranties that speak as of a specific date, which shall be true and correct in
all material respects as of such specific date), and the Buyer shall have
performed, satisfied and complied in all material respects with the covenants,
agreements and conditions required by this Agreement to be performed, satisfied
or complied with by the Buyer at or prior to the Commencement Date.

 
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7.
CONDITIONS TO THE BUYER'S OBLIGATION TO MAKE PURCHASES OF SHARES OF COMMON
STOCK.

The obligation of the Buyer to buy Purchase Shares under this Agreement is
subject to the satisfaction of each of the following conditions on or before the
Commencement Date (the date that the Company may begin sales) and once such
conditions have been initially satisfied, there shall not be any ongoing
obligation to satisfy such conditions after the Commencement has occurred:

(a)           The Company shall have executed each of the Transaction Documents
and delivered the same to the Buyer;

(b)           The Company shall have issued to the Buyer the Commitment Shares
and shall have removed the restrictive transfer legend from the certificate
representing the Commitment Shares;

(c)           The Common Stock shall be authorized for quotation on the
Principal Market, trading in the Common Stock shall not have been within the
last 365 days suspended by the SEC or the Principal Market and at least
20,000,000 Purchase Shares and all of the Commitment Shares shall be approved
for listing upon the Principal Market;

(d)           The Buyer shall have received the opinions of the Company's legal
counsel dated as of the Commencement Date in form and substance substantially
similar to Exhibit A attached hereto;

(e)           The representations and warranties of the Company shall be true
and correct in all material respects (except to the extent that any of such
representations and warranties is already qualified as to materiality in Section
3 above, in which case, such representations and warranties shall be true and
correct without further qualification) as of the date when made and as of the
Commencement Date as though made at that time (except for representations and
warranties that speak as of a specific date, which shall be true and correct in
all material respects as of such specific date) and the Company shall have
performed, satisfied and complied in all material respects with the covenants,
agreements and conditions required by the Transaction Documents to be performed,
satisfied or complied with by the Company at or prior to the Commencement
Date.  The Buyer shall have received a certificate, executed by the CEO,
President or CFO of the Company, dated as of the Commencement Date, to the
foregoing effect in the form attached hereto as Exhibit B;

(f)           The Board of Directors of the Company shall have adopted
resolutions in the form attached hereto as Exhibit C which shall be in full
force and effect without any amendment or supplement thereto as of the
Commencement Date;

(g)           As of the Commencement Date, the Company shall have reserved out
of its authorized and unissued Common Stock, solely for the purpose of effecting
purchases of Purchase Shares hereunder, at least 20,000,000 shares of Common
Stock;

(h)           The Irrevocable Transfer Agent Instructions, in form acceptable to
the Buyer shall have been delivered to and acknowledged in writing by the
Company and the Company's Transfer Agent;

 
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(i)            The Company shall have delivered to the Buyer a certificate
evidencing the incorporation and good standing of the Company in the State of
Delaware issued by the Secretary of State of the State of Delaware as of a date
within ten (10) Business Days of the Commencement Date;

(j)            The Company shall have delivered to the Buyer a certified copy of
the Certificate of Incorporation as certified by the Secretary of State of the
State of Delaware within ten (10) Business Days of the Commencement Date;

(k)           The Company shall have delivered to the Buyer a secretary's
certificate executed by the Secretary of the Company, dated as of the
Commencement Date, in the form attached hereto as Exhibit D;

(l)           A registration statement covering the sale of all of the
Commitment Shares and Purchase Shares shall have been declared effective under
the 1933 Act by the SEC and no stop order with respect to the registration
statement shall be pending or threatened by the SEC.  The Company shall have
prepared and delivered to the Buyer a final and complete form of prospectus
dated and current as of the Commencement Date, to be used by the Buyer in
connection with any sales of any Commitment Shares or any Purchase Shares, and
to be filed by the Company with the SEC one Business Day after the Commencement
Date. The Company shall have made all filings under all applicable federal and
state securities laws necessary to consummate the issuance of the Commitment
Shares and the Purchase Shares pursuant to this Agreement in compliance with
such laws;

(m)          No Event of Default has occurred, or any event which, after notice
and/or lapse of time, would become an Event of Default has occurred;

(n)           On or prior to the Commencement Date, the Company shall take all
necessary action, if any, and such actions as reasonably requested by the Buyer,
in order to render inapplicable any control share acquisition, business
combination, shareholder rights plan or poison pill (including any distribution
under a rights agreement) or other similar anti-takeover provision under the
Certificate of Incorporation or the laws of the state of its incorporation which
is or could become applicable to the Buyer as a result of the transactions
contemplated by this Agreement, including, without limitation, the Company's
issuance of the Securities and the Buyer's ownership of the Securities; and

(o)           The Company shall have provided the Buyer with the information
reasonably requested by the Buyer in connection with its due diligence requests
made prior to, or in connection with, the Commencement, in accordance with the
terms of Section 4(f) hereof.

 
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8.
INDEMNIFICATION.

In consideration of the Buyer's execution and delivery of the Transaction
Documents and acquiring the Securities hereunder and in addition to all of the
Company's other obligations under the Transaction Documents, the Company shall
defend, protect, indemnify and hold harmless the Buyer and all of its
affiliates, shareholders, officers, directors, employees and direct or indirect
investors and any of the foregoing person's agents or other representatives
(including, without limitation, those retained in connection with the
transactions contemplated by this Agreement) (collectively, the "Indemnitees")
from and against any and all actions, causes of action, suits, claims, losses,
costs, penalties, fees, liabilities and damages, and expenses in connection
therewith (irrespective of whether any such Indemnitee is a party to the action
for which indemnification hereunder is sought), and including reasonable
attorneys' fees and disbursements (the "Indemnified Liabilities"), incurred by
any Indemnitee as a result of, or arising out of, or relating to (a) any
misrepresentation or breach of any representation or warranty made by the
Company in the Transaction Documents or any other certificate, instrument or
document contemplated hereby or thereby, (b) any breach of any covenant,
agreement or obligation of the Company contained in the Transaction Documents or
any other certificate, instrument or document contemplated hereby or thereby, or
(c) any cause of action, suit or claim brought or made against such Indemnitee
and arising out of or resulting from the execution, delivery, performance or
enforcement of the Transaction Documents or any other certificate, instrument
or  document contemplated hereby or thereby, other than (i) with respect to
Indemnified Liabilities which directly and primarily result from (A) a material
breach of any of the Buyer’s representations, warranties, covenants or
agreements contained in this Agreement or the Registration Rights Agreement or
(B) the fraud or gross negligence or willful misconduct of the Indemnitee, or
(ii) claims for indemnification within the scope of Section 6 of the
Registration Rights Agreement.  To the extent that the foregoing undertaking by
the Company may be unenforceable for any reason, the Company shall make the
maximum contribution to the payment and satisfaction of each of the Indemnified
Liabilities which is permissible under applicable law.

9.            EVENTS OF DEFAULT.

An "Event of Default" shall be deemed to have occurred at any time as any of the
following events occurs:

(a)           while any registration statement is required to be maintained
effective pursuant to the terms of the Registration Rights Agreement, the
effectiveness of such registration statement lapses for any reason (including,
without limitation, the issuance of a stop order) or is unavailable to the Buyer
for sale of all of the Registrable Securities (as defined in the Registration
Rights Agreement) in accordance with the terms of the Registration Rights
Agreement, and such lapse or unavailability continues for a period of twenty
(20) consecutive Business Days or for more than an aggregate of sixty (60)
Business Days in any 365-day period;

(b)           the suspension from trading or failure of the Common Stock to be
listed on the Principal Market for a period of ten (10) consecutive Business
Days;

 
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(c)           the delisting of the Common Stock from the Principal Market,
provided, however, that the Common Stock is not immediately thereafter trading
on the New York Stock Exchange, the Nasdaq Global Market, the Nasdaq Global
Select Market, the NYSE Amex Equities or the OTC Bulletin Board;

(d)           the failure for any reason by the Transfer Agent to issue Purchase
Shares to the Buyer within five (5) Business Days after the applicable Purchase
Date which the Buyer is entitled to receive;

(e)           the Company breaches any representation, warranty, covenant or
other term or condition under any Transaction Document if such breach could have
a Material Adverse Effect and except, in the case of a breach of a covenant
which is reasonably curable, only if such breach continues for a period of at
least five (5) Business Days;

(f)            if any Person commences a proceeding against the Company pursuant
to or within the meaning of any Bankruptcy Law;

(g)           if the Company pursuant to or within the meaning of any Bankruptcy
Law; (A) commences a voluntary case, (B) consents to the entry of an order for
relief against it in an involuntary case, (C) consents to the appointment of a
Custodian of it or for all or substantially all of its property, (D) makes a
general assignment for the benefit of its creditors, (E) becomes insolvent, or
(F) is generally unable to pay its debts as the same become due; or

(h)           a court of competent jurisdiction enters an order or decree under
any Bankruptcy Law that (A) is for relief against the Company in an involuntary
case, (B) appoints a Custodian of the Company or for all or substantially all of
its property, or (C) orders the liquidation of the Company or any Subsidiary.

In addition to any other rights and remedies under applicable law and this
Agreement, including the Buyer termination rights under Section 11(k) hereof, so
long as an Event of Default has occurred and is continuing, or if any event
which, after notice and/or lapse of time, would become an Event of Default, has
occurred and is continuing, or so long as the Closing Sale Price is below the
Floor Price, the Buyer shall not be obligated or permitted to purchase any
shares of Common Stock under this Agreement.  If pursuant to or within the
meaning of any Bankruptcy Law, the Company commences a voluntary case or any
Person commences a proceeding against the Company, a Custodian is appointed for
the Company or for all or substantially all of its property, or the Company
makes a general assignment for the benefit of its creditors, (any of which would
be an Event of Default as described in Sections 9(f), 9(g) and 9(h) hereof) this
Agreement shall automatically terminate without further action or notice by any
Person without any liability or payment to the Company.  No such termination of
this Agreement under Section 11(k)(i) shall affect the Company's or the Buyer's
obligations under this Agreement with respect to pending purchases and the
Company and the Buyer shall complete their respective obligations with respect
to any pending purchases under this Agreement.

10.          CERTAIN DEFINED TERMS.

For purposes of this Agreement, the following terms shall have the following
meanings:

 
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(a)           “1933 Act” means the Securities Act of 1933, as amended.

(b)           “Available Amount” means initially Fifteen Million Dollars
($15,000,000) in the aggregate which amount shall be reduced by the Purchase
Amount each time the Buyer purchases shares of Common Stock pursuant to Section
1 hereof.

(c)           “Bankruptcy Law” means Title 11, U.S. Code, or any similar federal
or state law for the relief of debtors.

(d)           “Business Day” means any day on which the Principal Market is open
for trading including any day on which the Principal Market is open for trading
for a period of time less than the customary time.

(e)           “Closing Sale Price” means, the last closing trade price for the
Common Stock on the Principal Market as reported by the Principal Market.

(f)           “Confidential Information” means any information disclosed by
either party to the other party, either directly or indirectly, in writing,
orally or by inspection of tangible objects (including, without limitation,
documents, prototypes, samples, plant and equipment), which is designated as
"Confidential," "Proprietary" or some similar designation. Information
communicated orally shall be considered Confidential Information if such
information is confirmed in writing as being Confidential Information within ten
(10) Business Days after the initial disclosure. Confidential Information may
also include information disclosed to a disclosing party by third parties.
Confidential Information shall not, however, include any information which (i)
was publicly known and made generally available in the public domain prior to
the time of disclosure by the disclosing party; (ii) becomes publicly known and
made generally available after disclosure by the disclosing party to the
receiving party through no action or inaction of the receiving party; (iii) is
already in the possession of the receiving party at the time of disclosure by
the disclosing party as shown by the receiving party’s files and records
immediately prior to the time of disclosure; (iv) is obtained by the receiving
party from a third party without a breach of such third party’s obligations of
confidentiality; (v) is independently developed by the receiving party without
use of or reference to the disclosing party’s Confidential Information, as shown
by documents and other competent evidence in the receiving party’s possession;
or (vi) is required by law to be disclosed by the receiving party, provided that
the receiving party gives the disclosing party prompt written notice of such
requirement prior to such disclosure and assistance in obtaining an order
protecting the information from public disclosure.

(g)           “Custodian” means any receiver, trustee, assignee, liquidator or
similar official under any Bankruptcy Law.

(h)           “Maturity Date” means the date that is 480 Business Days (24
Monthly Periods) from the Commencement Date.

(i)            “Monthly Period” means each successive 20 Business Day period
commencing with the Commencement Date.

 
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(j)            “Person” means an individual or entity including any limited
liability company, a partnership, a joint venture, a corporation, a trust, an
unincorporated organization and a government or any department or agency
thereof.

(k)           “Principal Market” means the Nasdaq Capital Market;  provided
however, that in the event the Company’s Common Stock is ever listed or traded
on the Nasdaq Global Market, the Nasdaq Global Select Market, the OTC Bulletin
Board, the New York Stock Exchange or the NYSE Amex Equities, than the
“Principal Market” shall mean such other market or exchange on which the
Company’s Common Stock is then listed or traded.

(l)            “Purchase Amount” means, with respect to any particular purchase
made hereunder, the portion of the Available Amount to be purchased by the Buyer
pursuant to Section 1 hereof as set forth in a valid Purchase Notice which the
Company delivers to the Buyer.

(m)          “Purchase Date” means with respect to any Purchase made hereunder,
the Business Day of receipt by the Buyer of a valid Purchase Notice that the
Buyer is to buy Purchase Shares pursuant to Section 1 hereof.

(n)           “Purchase Notice” shall mean an irrevocable written notice from
the Company to the Buyer directing the Buyer to buy Purchase Shares as specified
by the Company therein at the applicable Purchase Price on the Purchase Date.

(o)          “Purchase Price” means the lower of the (A) the lowest Sale Price
of the Common Stock on the Purchase Date and (B) the arithmetic average of the
three (3) lowest Closing Sale Prices for the Common Stock during the twelve (12)
consecutive Business Days ending on the Business Day immediately preceding such
Purchase Date (to be appropriately adjusted for any reorganization,
recapitalization, non-cash dividend, stock split or other similar transaction).

(p)           “Sale Price” means, any trade price for the shares of Common Stock
on the Principal Market as reported by the Principal Market.

(q)           “SEC” means the United States Securities and Exchange Commission.

(r)           “Transfer Agent” means the transfer agent of the Company as set
forth in Section 11(f) hereof or such other person who is then serving as the
transfer agent for the Company in respect of the Common Stock.

 
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11.          MISCELLANEOUS.

(a)           Governing Law; Jurisdiction; Jury Trial.  The corporate laws of
the State of Delaware shall govern all issues concerning the relative rights of
the Company and its shareholders. All other questions concerning the
construction, validity, enforcement and interpretation of this Agreement and the
other Transaction Documents shall be governed by the internal laws of the State
of Illinois, without giving effect to any choice of law or conflict of law
provision or rule (whether of the State of Illinois or any other jurisdictions)
that would cause the application of the laws of any jurisdictions other than the
State of Illinois.  Each party hereby irrevocably submits to the exclusive
jurisdiction of the state and federal courts sitting in the City of Chicago, for
the adjudication of any dispute hereunder or under the other Transaction
Documents or in connection herewith or therewith, or with any transaction
contemplated hereby or discussed herein, 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 brought in an inconvenient forum or that the venue of such
suit, action or proceeding is improper.  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 to such party at the
address for such notices to it under this Agreement and agrees that such service
shall constitute good and sufficient service of process and notice
thereof.  Nothing contained herein shall be deemed to limit in any way any right
to serve process in any manner permitted by law.  EACH PARTY HEREBY IRREVOCABLY
WAIVES ANY RIGHT IT MAY HAVE, AND AGREES NOT TO REQUEST, A JURY TRIAL FOR THE
ADJUDICATION OF ANY DISPUTE HEREUNDER OR IN CONNECTION HEREWITH OR ARISING OUT
OF THIS AGREEMENT OR ANY TRANSACTION CONTEMPLATED HEREBY.

(b)           Counterparts.  This Agreement may be executed in two or more
identical counterparts, all of which 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; provided that a facsimile signature
shall be considered due execution and shall be binding upon the signatory
thereto with the same force and effect as if the signature were an original, not
a facsimile signature.

(c)           Headings.  The headings of this Agreement are for convenience of
reference and shall not form part of, or affect the interpretation of, this
Agreement.

(d)           Severability.  If any provision of this Agreement shall be invalid
or unenforceable in any jurisdiction, such invalidity or unenforceability shall
not affect the validity or enforceability of the remainder of this Agreement in
that jurisdiction or the validity or enforceability of any provision of this
Agreement in any other jurisdiction.

(e)           Entire Agreement.  With the exception of the Mutual Nondisclosure
Agreement between the parties dated as of June 29, 2010, this Agreement
supersedes all other prior oral or written agreements between the Buyer, the
Company, their affiliates and persons acting on their behalf with respect to the
matters discussed herein, and this Agreement, the other Transaction Documents
and the instruments referenced herein contain the entire understanding of the
parties with respect to the matters covered herein and therein and, except as
specifically set forth herein or therein, neither the Company nor the Buyer
makes any representation, warranty, covenant or undertaking with respect to such
matters.  The Company acknowledges and agrees that is has not relied on, in any
manner whatsoever, any representations or statements, written or oral, other
than as expressly set forth in this Agreement.

(f)           Notices.  Any notices, consents or other communications required
or permitted to be given under the terms of this Agreement must be in writing
and will be deemed to have been delivered: (i) upon receipt when delivered
personally; (ii) upon receipt when sent by facsimile (provided confirmation of
transmission is mechanically or electronically generated and kept on file by the
sending party); or (iii) one Business Day after deposit with a nationally
recognized overnight delivery service, in each case properly addressed to the
party to receive the same. The addresses and facsimile numbers for such
communications shall be:

 
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If to the Company:
Bionovo, Inc.
5858 Horton Street, Suite 400
Emeryville, CA 94608
Phone: 510-601-2000
Fax: 510-601-5050
Attention:  Chief Financial Officer

With a copy to:
Greenberg Traurig, LLP
200 Park Avenue
New York, NY 10166
Telephone: 212-801-9200
Facsimile: 212-801-6400
Attention: Robert H. Cohen, Esq.

If to the Buyer:
Aspire Capital Fund, LLC
155 North Wacker Drive, Suite 1600
Chicago, IL 60606
 
Telephone:
312-658-0400

 
Facsimile:
312-658-4005

 
Attention:
Steven G. Martin

With a copy to:
O’Melveny & Myers LLP
1625 Eye Street, NW
Washington, DC 20006
 
Telephone:
202-383-5418

 
Facsimile:
202-383-5414

 
Attention:
Martin Dunn, Esq.

If to the Transfer Agent:
Colonial Stock Transfer
66 Exchange Place
Salt Lake City, UT 84111

 
Telephone:
801-355-5740Facsimile: 801-355-6505

 
Attention:
Kathy Carter

or at such other address and/or facsimile number and/or to the attention of such
other person as the recipient party has specified by written notice given to
each other party one (1) Business Day prior to the effectiveness of such
change.  Written confirmation of receipt (A) given by the recipient of such
notice, consent or other communication, (B) mechanically or electronically
generated by the sender's facsimile machine containing the time, date, and
recipient facsimile number or (C) provided by a nationally recognized overnight
delivery service, shall be rebuttable evidence of personal service, receipt by
facsimile or receipt from a nationally recognized overnight delivery service in
accordance with clause (i), (ii) or (iii) above, respectively.

 
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(g)           Successors and Assigns.  This Agreement shall be binding upon and
inure to the benefit of the parties and their respective successors and
assigns.  The Company shall not assign this Agreement or any rights or
obligations hereunder without the prior written consent of the Buyer, including
by merger or consolidation.  The Buyer may not assign its rights or obligations
under this Agreement.

(h)           No Third Party Beneficiaries.  This Agreement is intended for the
benefit of the parties hereto and their respective permitted successors and
assigns, and is not for the benefit of, nor may any provision hereof be enforced
by, any other person.

(i)            Publicity.  The Buyer shall have the right to approve before
issuance any press release, SEC filing or any other public disclosure made by or
on behalf of the Company whatsoever with respect to, in any manner, the Buyer,
its purchases hereunder or any aspect of this Agreement or the transactions
contemplated hereby; provided, however, that the Company shall be entitled,
without the prior approval of the Buyer, to make any press release or other
public disclosure (including any filings with the SEC) with respect to such
transactions as is required by applicable law and regulations so long as the
Company and its counsel consult with the Buyer in connection with any such press
release or other public disclosure prior to its release.  The Company agrees and
acknowledges that its failure to fully comply with this provision constitutes a
material adverse effect on its ability to perform its obligations under this
Agreement.

(j)            Further Assurances.  Each party shall do and perform, or cause to
be done and performed, all such further acts and things, and shall execute and
deliver all such other agreements, certificates, instruments and documents, as
the other party may reasonably request in order to carry out the intent and
accomplish the purposes of this Agreement and the consummation of the
transactions contemplated hereby.

(k)           Termination.  This Agreement may be terminated only as follows:

(i)           By the Buyer any time an Event of Default exists without any
liability whatsoever of any party to any other party under this Agreement.
However, if pursuant to or within the meaning of any Bankruptcy Law, the Company
commences a voluntary case or any Person commences a proceeding against the
Company, a Custodian is appointed for the Company or for all or substantially
all of its property, or the Company makes a general assignment for the benefit
of its creditors, (any of which would be an Event of Default as described in
Sections 9(f), 9(g) and 9(h) hereof) this Agreement shall automatically
terminate without any liability or payment to the Company (and the Buyer shall
in such case have no obligation to pay to the Company the Termination Fee) and
without further action or notice by any Person. No such termination of this
Agreement under this Section 11(k)(i) shall affect the Company's or the Buyer's
obligations under this Agreement with respect to pending purchases and the
Company and the Buyer shall complete their respective obligations with respect
to any pending purchases under this Agreement.

(ii)          In the event that the Commencement shall not have occurred, the
Company shall have the option to terminate this Agreement for any reason or for
no reason without any liability whatsoever of any party to any other party under
this Agreement.

 
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(iii)           In the event that the Commencement shall not have occurred on or
before October 1, 2010, due to the failure to satisfy any of the conditions set
forth in Sections 6 and 7 above with respect to the Commencement, any party
shall have the option to terminate this Agreement at the close of business on
such date or thereafter without liability of any party to any other party;
provided, however, that the right to terminate this Agreement under this Section
11(k)(iii) shall not be available to any party if such failure to satisfy any of
the conditions set forth in Sections 6 and 7 is the result of a breach of this
Agreement by such party or the failure of any representation or warranty of such
party included in this Agreement to be true and correct.

(iv)          At any time after the Commencement Date, the Company shall have
the option to terminate this Agreement for any reason or for no reason by
delivering notice (a “Company Termination Notice”) to the Buyer electing to
terminate this Agreement without any liability whatsoever of any party to any
other party under this Agreement.  The Company Termination Notice shall not be
effective until one (1) Business Day after it has been received by the Buyer.

(v)           This Agreement shall automatically terminate on the date that the
Company sells and the Buyer purchases the full Available Amount as provided
herein, without any action or notice on the part of any party and without any
liability whatsoever of any party to any other party under this Agreement.

(vi)          If by the Maturity Date for any reason or for no reason the full
Available Amount under this Agreement has not been purchased as provided for in
Section 1 of this Agreement, this Agreement shall automatically terminate on the
Maturity Date, without any action or notice on the part of any party and without
any liability whatsoever of any party to any other party under this Agreement
(other than the obligation of the Buyer to pay to the Company the Termination
Fee).

Upon any termination of this Agreement pursuant to Sections 11(k)(i) in the case
of an Event of Default as described in Section 9(e) hereof) or 11(k)(vi), the
Buyer shall be required to immediately pay to the Company a termination fee (the
“Termination Fee”), equal to the number of Commitment Shares multiplied by $0.43
multiplied by Unfunded Amount Percentage (as defined below).  The Termination
Fee may, at the election of the Buyer, be paid in cash or in shares of Common
Stock valued at $0.43 per share. “Unfunded Amount Percentage” means the
percentage of the Aggregate Amount that the Company did not receive from the
Buyer during the term of this Agreement.

Except as set forth in Sections 11(k)(i) (in respect of an Event of Default
under Sections 9(f), 9(g) and 9(h)) and 11(k)(vi), any termination of this
Agreement pursuant to this Section 11(k) shall be effected by written notice
from the Company to the Buyer, or the Buyer to the Company, as the case may be,
setting forth the basis for the termination hereof. The representations and
warranties of the Company and the Buyer contained in Sections 2, 3 and 5 hereof,
the indemnification provisions set forth in Section 8 hereof and the agreements
and covenants set forth in Section 11, shall survive the Commencement and any
termination of this Agreement.  No termination of this Agreement shall affect
the Company's or the Buyer's rights or obligations (i) under the Registration
Rights Agreement which shall survive any such termination or (ii) under this
Agreement with respect to pending purchases and the Company and the Buyer shall
complete their respective obligations with respect to any pending purchases
under this Agreement.

 
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(l)            No Financial Advisor, Placement Agent, Broker or Finder.  The
Company represents and warrants to the Buyer that it has not engaged any
financial advisor, placement agent, broker or finder in connection with the
transactions contemplated hereby.  The Buyer represents and warrants to the
Company that it has not engaged any financial advisor, placement agent, broker
or finder in connection with the transactions contemplated hereby.  The Company
shall be responsible for the payment of any fees or commissions, if any, of any
financial advisor, placement agent, broker or finder engaged by the Company
relating to or arising out of the transactions contemplated hereby.  The Company
shall pay, and hold the Buyer harmless against, any liability, loss or expense
(including, without limitation, attorneys' fees and out of pocket expenses)
arising in connection with any claim by any financial advisor, placement agent,
broker or finder engaged by the Company relating to or arising out of the
transactions contemplated hereby.

(m)          No Strict Construction.  The language used in this Agreement will
be deemed to be the language chosen by the parties to express their mutual
intent, and no rules of strict construction will be applied against any party.

(n)           Remedies, Other Obligations, Breaches and Injunctive Relief.  The
parties’ remedies provided in this Agreement shall be cumulative and in addition
to all other remedies available to the parties under this Agreement, at law or
in equity (including a decree of specific performance and/or other injunctive
relief), no remedy of any party contained herein shall be deemed a waiver of
compliance with the provisions giving rise to such remedy and nothing herein
shall limit any party’s right to pursue actual damages for any failure by the
other party to comply with the terms of this Agreement.  Each party hereto
acknowledges that a breach by it of its obligations hereunder will cause
irreparable harm to the other party and that the remedy at law for any such
breach may be inadequate.  Each party therefore agrees that, in the event of any
such breach or threatened breach, such party shall be entitled, in addition to
all other available remedies, to an injunction restraining any breach, without
the necessity of showing economic loss and without any bond or other security
being required.

(0)           [Intentionally Omitted.]

(p)           Failure or Indulgence Not Waiver.  No failure or delay in the
exercise of any power, right or privilege hereunder shall operate as a waiver
thereof, nor shall any single or partial exercise of any such power, right or
privilege preclude other or further exercise thereof or of any other right,
power or privilege.

*     *     *     *     *

 
-22-

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IN WITNESS WHEREOF, the Buyer and the Company have caused this Common Stock
Purchase Agreement to be duly executed as of the date first written above.

 
THE COMPANY:
     
BIONOVO, INC.
     
By:
/s/ Thomas C. Chesterman
 
Name: Thomas C. Chesterman
 
Title: Chief Financial Officer
     
BUYER:
     
ASPIRE CAPITAL FUND, LLC
 
BY: ASPIRE CAPITAL PARTNERS, LLC
 
BY: SGM HOLDINGS CORP.
     
By:
/s/ Steven G. Martin
 
Name: Steven G. Martin
 
Title: President

 
 
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SCHEDULES

Schedule 3(c)
Capitalization

Schedule 3(e)
Conflicts

Schedule 3(f)
1934 Act Filings

Schedule 3(g)
Material Changes

Schedule 3(h)
Litigation

Schedule 3(k)
Intellectual Property

Schedule 3(m)
Liens

Schedule 3(q)
Certain Transactions

EXHIBITS

Exhibit A
Form of Company Counsel Opinion

Exhibit B
Form of Officer’s Certificate

Exhibit C
Form of Resolutions of Board of Directors of the Company

Exhibit D
Form of Secretary’s Certificate

Exhibit E
Form of Letter to Transfer Agent

 
 

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DISCLOSURE SCHEDULES

Schedule 3(c) - Capitalization

Schedule 3(e) - No Conflicts

Schedule 3(f) - 1934 Act Filings

Schedule 3(g) - Absence of Certain Changes

Schedule 3(h) - Litigation

Schedule 3(k) - Intellectual Property Rights

Schedule 3(m) - Title

Schedule 3(q) - Transactions with Affiliates

 
 

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EXHIBIT A

FORM OF COMPANY COUNSEL OPINION

Capitalized terms used herein but not defined herein, have the meaning set forth
in the Common Stock Purchase Agreement.  Based on the foregoing, and subject to
the assumptions and qualifications set forth herein, we are of the opinion that:

1.      The Company is a corporation existing and in good standing under the
laws of the State of Delaware.  The Company is qualified to do business as a
foreign corporation and is in good standing in the State of California.
 
2.      The Company has the requisite corporate power to execute, deliver and
perform its obligations under, each Transaction Document to which it is a
party.  To our knowledge, the Company has the requisite corporate power to
conduct its business as it is now conducted and to own and use the properties
owned and used by it.
 
3.      The execution and delivery by the Company of the Transaction Documents
to which it is a party, the performance by the Company of its obligations
thereunder and the consummation by the Company of the transactions contemplated
therein have been duly authorized by all necessary corporate action on the part
of the Company.  The Transaction Documents to which the Company is a party have
been duly executed and delivered by the Company and (assuming the due
authorization, execution and delivery thereof by the Investor to the extent it
is a party thereto) constitute the valid and binding obligations of the Company,
enforceable against the Company in accordance with their terms, except as may be
limited by applicable bankruptcy, insolvency, liquidation, fraudulent
conveyance, reorganization, moratorium or similar laws relating to or affecting
creditors’ rights and remedies generally, or by general principles of equity,
including principles of materiality, commercial reasonableness, good faith,
conscionability and fair dealing (regardless of whether enforcement is sought in
a proceeding at law or in equity), and except that the enforceability of any
provision of the Transaction Documents releasing, exculpating or exempting a
party from, or requiring indemnification of a party for, liability for its own
action or inaction may be limited by applicable federal and state laws.
 
4.      The execution and delivery by the Company of the Transaction Documents
to which it is a party, and the consummation by the Company of the transactions
contemplated thereby, including the offering, sale and issuance of the
Commitment Shares and the Purchase Shares in accordance with the terms and
conditions of the Common Stock Purchase Agreement, do not: (i) conflict with the
Certificate of Incorporation or the Bylaws of the Company, (ii) violate or
result in a breach of or a default under any material agreement, note, lease,
mortgage, deed or other material instrument to which the Company is a party or
by which the Company is bound that is an exhibit to the SEC Documents
(collectively, the “Material Agreements”), (iii) violate the General Corporation
Law of the State of Delaware or any U.S. federal or New York state statute, law,
rule or regulation applicable to the Company and which in our experience is
generally applicable to transactions in the nature of those contemplated by the
Transaction Documents, (iv) require any consent, approval or authorization of,
or any registration, declaration or filing with, any U.S. federal or New York
state governmental body or regulatory agency, except (a) as contemplated by the
Transaction Documents or (b) for such of the foregoing as have been obtained or
made, or (v) violate any court or administrative order, writ, injunction or
decree which names the Company and is specifically directed to it or its
property and of which we have knowledge (which is based solely on a review of
our litigation docket and a certificate of the Company dated today and delivered
to you), except, in the case described in clause (ii) above, for such
violations, breaches or defaults as would not, individually or in the aggregate,
have a Material Adverse Effect.

 
 

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

 

5.      The issuance of the Purchase Shares and Commitment Shares pursuant to
the terms and conditions of the Transaction Documents has been duly authorized
and the Commitment Shares are validly issued, fully paid and non-assessable, to
our knowledge, free of all preemptive or other similar rights under the
Company’s Certificate of Incorporation or Bylaws as currently in effect, the
General Corporation Law of the State of Delaware, or any Material Agreement.
When issued and paid for in accordance with the Common Stock Purchase Agreement,
the Purchase Shares shall be validly issued, fully paid and non-assessable, to
our knowledge, free of all preemptive or other similar rights under the
Company’s Certificate of Incorporation or Bylaws as currently in effect, the
General Corporation Law of the State of Delaware, or any Material Agreement. To
our knowledge, the execution and delivery of the Registration Rights Agreement
do not, and the performance by the Company of its obligations thereunder shall
not, give rise to any rights under any Material Agreement of any other person
for the registration under the 1933 Act of any shares of Common Stock or other
securities of the Company which have not been waived.
 
6.      To our knowledge, except as disclosed on Schedule 3(h) in the Purchase
Agreement, there is no action, suit, proceeding or investigation pending (in
which service of process has been received by an employee or agent of the
Company or an agent for service of process) before any court, public board or
body, any governmental agency, any stock exchange or market, or self-regulatory
organization, or which has been threatened in writing, against the Company or
any of its officers or directors which (i) questions the validity of any of the
Transaction Documents or the transactions contemplated thereby or any action
taken or to be taken pursuant thereto or (ii) is required to be disclosed in any
SEC Document and has not been so disclosed. We call your attention to the fact
that, in connection with the delivery of this opinion, we have not ordered or
reviewed judgment, lien or any other searches of public or private records of
the Company or its properties.
 
In addition, we have participated in the preparation of the Registration
Statement (SEC File #________) covering the resale of the Purchase Shares and
the Commitment Shares, including the form of prospectus contained therein, and
in conferences with officers of the Company during which the Registration
Statement and related matters were discussed and reviewed and, although we are
not passing upon and do not assume any responsibility for the accuracy,
completeness or fairness of the statements contained in (i) the Registration
Statement or any amendment thereto, (ii) the form of prospectus contained
therein or any amendment or supplement thereto, or (iii) the documents
incorporated by reference in the Registration Statement, solely on the basis of
the information that was developed in the course of the performance of the
services referred to above, considered in the light of our understanding of the
applicable law, nothing came to our attention that caused us to believe that the
Registration Statement (other than the financial statements and schedules and
the other financial and statistical data, or exhibits, included or incorporated
by reference therein or omitted therefrom, as to which we express no belief), at
the time it became effective, contained any untrue statement of a material fact
or omitted to state any material fact necessary in order to make the statements
therein, in the light of the circumstances under which they were made, not
misleading.

 
 

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EXHIBIT B

FORM OF OFFICER’S CERTIFICATE

This Officer’s Certificate (“Certificate”) is being delivered pursuant to
Section 7(e) of that certain Common Stock Purchase Agreement dated as of
_________, 2010 (the “Common Stock Purchase Agreement”), by and between BIONOVO,
INC., a Delaware corporation (the “Company”), and ASPIRE CAPITAL FUND, LLC (the
“Buyer”). Terms used herein and not otherwise defined shall have the meanings
ascribed to them in the Common Stock Purchase Agreement.

The undersigned, Isaac Cohen, Chief Executive Officer of the Company, hereby
certifies as follows:

1.           I am the Chief Executive Officer of the Company and make the
statements contained in this Certificate;

2.           The representations and warranties of the Company set forth in
Section 3 of the Common Stock Purchase Agreement are true and correct in all
material respects (except to the extent that any of such representations and
warranties is already qualified as to materiality in Section 3 of the Common
Stock Purchase Agreement, in which case, such representations and warranties are
true and correct without further qualification) as of the date when made and as
of the Commencement Date as though made at that time (except for representations
and warranties that speak as of a specific date, which shall be true and correct
in all material respects as of such specific date); and

3.           The Company has performed, satisfied and complied in all material
respects with covenants, agreements and conditions required by the Transaction
Documents to be performed, satisfied or complied with by the Company at or prior
to the Commencement Date.

[signature page follows]

 
 

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

 

IN WITNESS WHEREOF, I have hereunder signed my name on this ___ day of _____
2010.

     
Name:  Isaac Cohen
 
Title: Chief Executive Officer

The undersigned as Secretary of the Company hereby certifies that Isaac Cohen is
the duly elected, appointed, qualified and acting Chief Executive Officer of the
Company and that the signature appearing above is his genuine signature.

   
Mary Tagliaferri, Secretary
 

 
 

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EXHIBIT C-1

FORM OF COMPANY RESOLUTIONS
FOR SIGNING PURCHASE AGREEMENT

UNANIMOUS WRITTEN CONSENT OF THE
BOARD OF DIRECTORS OF
BIONOVO, INC.

The undersigned, being all of the directors of Bionovo, Inc., a Delaware
corporation (the “Corporation”), pursuant to Section 2.8 of the Corporation’s
bylaws, do hereby consent to and adopt the following resolutions as the action
of the Board of Directors for and on behalf of the Corporation and hereby direct
that this Consent be filed with the minutes of the proceedings of the Board of
Directors:

WHEREAS, there has been presented to the Board of Directors of the Corporation a
draft of the Common Stock Purchase Agreement (the “Purchase Agreement”) by and
between the Corporation and Aspire Capital Fund, LLC (“Aspire”), providing for,
among other things, the purchase by Aspire of up to Fifteen Million Dollars
($15,000,000) of the Corporation’s common stock, par value $.0001 (the “Common
Stock”); and

WHEREAS, after careful consideration of the Purchase Agreement, the documents
incident thereto and other factors deemed relevant by the Board of Directors,
the Board of Directors has determined that it is advisable and in the best
interests of the Corporation to engage in the transactions contemplated by the
Purchase Agreement, including, but not limited to, the issuance of 1,395,349
shares of Common Stock to Aspire as a commitment fee (the “Commitment Shares”)
and the sale of shares of Common Stock to Aspire up to the available amount
under the Purchase Agreement (the "Purchase Shares").

Transaction Documents
 
NOW, THEREFORE, BE IT RESOLVED, that the transactions described in the Purchase
Agreement are hereby approved and each of the Chief Executive Officer, the
President and the Chief Financial Officer of the Company (the “Authorized
Officers”) are severally authorized to execute and deliver the Purchase
Agreement, and any other agreements or documents contemplated thereby including,
without limitation, a registration rights agreement (the “Registration Rights
Agreement”) providing for the registration of the shares of the Common Stock
issuable in respect of the Purchase Agreement on behalf of the Corporation, with
such amendments, changes, additions and deletions as the Authorized Officers may
deem to be appropriate and approve on behalf of, the Corporation, such approval
to be conclusively evidenced by the signature of an Authorized Officer thereon;
and
 
FURTHER RESOLVED, that the terms and provisions of the Registration Rights
Agreement by and between the Corporation and Aspire are hereby approved and the
Authorized Officers are authorized to execute and deliver the Registration
Rights Agreement (pursuant to the terms of the Purchase Agreement), with such
amendments, changes, additions and deletions as the Authorized Officer may deem
appropriate and approve on behalf of, the Corporation, such approval to be
conclusively evidenced by the signature of an Authorized Officer thereon; and

 
 

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

 

FURTHER RESOLVED, that the terms and provisions of the Form of Transfer Agent
Instructions (the “Instructions”) are hereby approved and the Authorized
Officers are authorized to execute and deliver the Instructions (pursuant to the
terms of the Purchase Agreement), with such amendments, changes, additions and
deletions as the Authorized Officers may deem appropriate and approve on behalf
of, the Corporation, such approval to be conclusively evidenced by the signature
of an Authorized Officer thereon; and
 
Issuance of Common Stock
 
FURTHER RESOLVED, that the Corporation is hereby authorized to issue 1,395,349
shares of Common Stock to Aspire as Commitment Shares and that upon issuance of
the Commitment Shares pursuant to the Purchase Agreement, the Commitment Shares
shall be duly authorized, validly issued, fully paid and nonassessable with no
personal liability attaching to the ownership thereof; and
 
FURTHER RESOLVED, that the Corporation is hereby authorized to issue shares of
Common Stock upon the purchase of Purchase Shares up to the available amount
under the Purchase Agreement in accordance with the terms of the Purchase
Agreement and that, upon issuance of the Purchase Shares pursuant to the
Purchase Agreement, the Purchase Shares will be duly authorized, validly issued,
fully paid and nonassessable; and
 
FURTHER RESOLVED, that the Corporation shall initially reserve [__________]
shares of Common Stock for issuance as Purchase Shares under the Purchase
Agreement.
 
General Authority
 
FURTHER RESOLVED, that, without limiting the foregoing, the Authorized Officers
are, and each of them hereby is, authorized and directed to proceed on behalf of
the Corporation and to take all such steps as deemed necessary or appropriate,
with the advice and assistance of counsel, to cause the Corporation to
consummate the agreements referred to herein and to perform its obligations
under such agreements; and
 
FURTHER RESOLVED, that the Authorized Officers be, and each of them hereby is,
authorized, empowered and directed on behalf of and in the name of the
Corporation, to take or cause to be taken all such further actions and to
execute and deliver or cause to be executed and delivered all such further
agreements, amendments, documents, certificates, reports, schedules,
applications, notices, letters and undertakings and to incur and pay all such
fees and expenses as in their judgment shall be necessary, proper or desirable
to carry into effect the purpose and intent of any and all of the foregoing
resolutions, and that all actions heretofore taken by any officer or director of
the Corporation in connection with the transactions contemplated by the
agreements described herein are hereby approved, ratified and confirmed in all
respects.

[signature page follows]

 
 

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

 

IN WITNESS WHEREOF, the Board of Directors has executed and delivered this
Consent effective as of ________, 2010.

   
Isaac Cohen
         
Mary Tagliaferri
         
Louis Drapeau
         
John D. Baxter
         
George C. Butler
 

Being all of the directors of the Corporation

 
 

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EXHIBIT C-2

FORM OF COMPANY RESOLUTIONS APPROVING REGISTRATION STATEMENT

UNANIMOUS WRITTEN CONSENT OF THE
BOARD OF DIRECTORS OF
BIONOVO, INC.

The undersigned, being all of the directors of Bionovo, Inc., a Delaware
corporation (the “Corporation”), pursuant to Section 2.8 of the Corporation’s
bylaws, do hereby consent to and adopt the following resolutions as the action
of the Board of Directors for and on behalf of the Corporation and hereby direct
that this Consent be filed with the minutes of the proceedings of the Board of
Directors:

WHEREAS, there has been presented to the Board of Directors of the Corporation a
Common Stock Purchase Agreement (the “Purchase Agreement”) by and between the
Corporation and Aspire Capital Fund, LLC (“Aspire”), providing for the purchase
by Aspire of up to Fifteen Million Dollars ($15,000,000) of the Corporation’s
common stock, par value $.0001 (the “Common Stock”); and

WHEREAS, after careful consideration of the Purchase Agreement, the documents
incident thereto and other factors deemed relevant by the Board of Directors,
the Board of Directors has approved the Purchase Agreement and the transactions
contemplated thereby and the Company has executed and delivered the Purchase
Agreement to Aspire; and

WHEREAS, in connection with the transactions contemplated pursuant to the
Purchase Agreement, the Company has agreed to file a registration statement with
the Securities and Exchange Commission (the “Commission”) registering the
Commitment Shares (as defined in the Purchase Agreement) and the Purchase Shares
(as herein defined in the Purchase Agreement) and to list the Commitment Shares
and Purchase Shares on the Nasdaq Capital Market;
 
WHEREAS, the management of the Corporation has prepared an initial draft of a
Registration Statement on Form S-1 (the “Registration Statement”) in order to
register the sale of the Purchase Shares and the Commitment Shares
(collectively, the “Shares”); and
 
WHEREAS, the Board of Directors has determined to approve the Registration
Statement and to authorize the appropriate officers of the Corporation to take
all such actions as they may deem appropriate to effect the offering.
 
NOW, THEREFORE, BE IT RESOLVED, that the officers and directors of the
Corporation be, and each of them hereby is, authorized and directed, with the
assistance of counsel and accountants for the Corporation, to prepare, execute
and file with the Commission the Registration Statement, which Registration
Statement shall be filed substantially in the form presented to the Board of
Directors, with such changes therein as the Chief Executive Officer, the
President or the Chief Financial Officer of the Corporation (the “Authorized
Officers”) shall deem desirable and in the best interest of the Corporation and
its shareholders (such officer’s execution thereof including such changes shall
be deemed to evidence conclusively such determination); and

 
 

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

 

FURTHER RESOLVED, that the Authorized Officers of the Corporation be, and each
of them hereby is, authorized and directed, with the assistance of counsel and
accountants for the Corporation, to prepare, execute and file with the
Commission all amendments, including post-effective amendments, and supplements
to the Registration Statement, and all certificates, exhibits, schedules,
documents and other instruments relating to the Registration Statement, as such
Authorized Officers shall deem necessary or appropriate (such officer’s
execution and filing thereof shall be deemed to evidence conclusively such
determination); and
 
FURTHER RESOLVED, that the execution of the Registration Statement and of any
amendments and supplements thereto by the officers and directors of the
Corporation be, and the same hereby is, specifically authorized either
personally or by the Authorized Officers as such officer’s or director’s true
and lawful attorneys-in-fact and agents; and
 
FURTHER RESOLVED, that the Authorized Officers are hereby designated as “Agent
for Service” of the Corporation in connection with the Registration Statement
and the filing thereof with the Commission, and the Authorized Officers hereby
are authorized to receive communications and notices from the Commission with
respect to the Registration Statement; and
 
FURTHER RESOLVED, that the Authorized Officers of the Corporation be, and each
of them hereby is, authorized and directed to pay all fees, costs and expenses
that may be incurred by the Corporation in connection with the Registration
Statement; and
 
FURTHER RESOLVED, that it is desirable and in the best interest of the
Corporation that the Shares be qualified or registered for sale in various
states; that the Authorized Officers of the Corporation be, and each of them
hereby is, authorized to determine the states in which appropriate action shall
be taken to qualify or register for sale all or such part of the Shares as they
may deem advisable; that said Authorized Officers be, and each of them hereby
is, authorized to perform on behalf of the Corporation any and all such acts as
they may deem necessary or advisable in order to comply with the applicable laws
of any such states, and in connection therewith to execute and file all
requisite papers and documents, including, but not limited to, applications,
reports, surety bonds, irrevocable consents, appointments of attorneys for
service of process and resolutions; and the execution by such officers of any
such paper or document or the doing by them of any act in connection with the
foregoing matters shall conclusively establish their authority therefor from the
Corporation and the approval and ratification by the Corporation of the papers
and documents so executed and the actions so taken; and
 
FURTHER RESOLVED, that if, in any state where the securities to be registered or
qualified for sale to the public, or where the Corporation is to be registered
in connection with the public offering of the Shares, a prescribed form of
resolution or resolutions is required to be adopted by the Board of Directors,
each such resolution shall be deemed to have been and hereby is adopted, and the
Secretary of the Corporation is hereby authorized to certify the adoption of all
such resolutions as though such resolutions were now presented to and adopted by
the Board of Directors; and
 
           FURTHER RESOLVED, that the Authorized Officers of the Corporation
with the assistance of counsel be, and each of them hereby is, authorized and
directed to take all necessary steps and do all other things necessary and
appropriate to effect the listing of the Shares on the Nasdaq Capital Market.

 
 

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General Authority
 
FURTHER RESOLVED, that, without limiting the foregoing, the Authorized Officers
are, and each of them hereby is, authorized and directed to proceed on behalf of
the Corporation and to take all such steps as are deemed necessary or
appropriate, with the advice and assistance of counsel, to cause the Corporation
to take all such action referred to herein and to perform its obligations
incident to the registration, listing and sale of the Shares; and
 
FURTHER RESOLVED, that the Authorized Officers be, and each of them hereby is,
authorized, empowered and directed on behalf of and in the name of the
Corporation, to take or cause to be taken all such further actions and to
execute and deliver or cause to be executed and delivered all such further
agreements, amendments, documents, certificates, reports, schedules,
applications, notices, letters and undertakings and to incur and pay all such
fees and expenses as in their judgment shall be necessary, proper or desirable
to carry into effect the purpose and intent of any and all of the foregoing
resolutions, and that all actions heretofore taken by any officer or director of
the Corporation in connection with the transactions contemplated by the
agreements described herein are hereby approved, ratified and confirmed in all
respects.

[signature page follows]

 
 

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IN WITNESS WHEREOF, the Board of Directors has executed and delivered this
Consent effective as of ___________, 2010.

   
Isaac Cohen
         
Mary Tagliaferri
         
Louis Drapeau
         
John D. Baxter
         
George C. Butler
 

Being all of the directors of the Corporation

 
 

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EXHIBIT D

FORM OF SECRETARY’S CERTIFICATE

This Secretary’s Certificate (“Certificate”) is being delivered pursuant to
Section 7(k) of that certain Common Stock Purchase Agreement dated as of
________, 2010 (the “Common Stock Purchase Agreement”), by and between BIONOVO,
INC., a Delaware corporation (the “Company”) and ASPIRE CAPITAL FUND, LLC (the
“Buyer”), pursuant to which the Company may sell to the Buyer up to Fifteen
Million Dollars ($15,000,000) of the Company’s Common Stock, par value $.0001
per share (the “Common Stock”).  Terms used herein and not otherwise defined
shall have the meanings ascribed to them in the Common Stock Purchase Agreement.

The undersigned, Mary Tagliaferri, Secretary of the Company, hereby certifies as
follows:

1.           I am the Secretary of the Company and make the statements contained
in this Certificate.

2.           Attached hereto as Exhibit A and Exhibit B are true, correct and
complete copies of the Company’s bylaws (“Bylaws”) and Certificate of
Incorporation (“Articles”), in each case, as amended through the date hereof,
and no action has been taken by the Company, its directors, officers or
shareholders, in contemplation of the filing of any further amendment relating
to or affecting the Bylaws or Articles.

3.           Attached hereto as Exhibit C are true, correct and complete copies
of the written consent duly adopted by the Board of Directors of the Company on
___________, 2010.  Such written consent has not been amended, modified or
rescinded and remains in full force and effect and such written consent is the
only written consent adopted by the Company’s Board of Directors, or any
committee thereof, or the shareholders of the Company relating to or affecting
(i) the entering into and performance of the Common Stock Purchase Agreement, or
the issuance, offering and sale of the Purchase Shares and the Commitment Shares
and (ii) and the performance of the Company of its obligation under the
Transaction Documents as contemplated therein.

4.           As of the date hereof, the authorized, issued and reserved capital
stock of the Company is as set forth on Exhibit D hereto.

[signature page follows]

 
 

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IN WITNESS WHEREOF, I have hereunder signed my name on this ___ day of ________
2010.

     
Name:  Mary Tagliaferri
 
Title: Secretary

The undersigned as Chief Executive Officer of the Company hereby certifies that
Mary Tagliaferri is the duly elected, appointed, qualified and acting Secretary
of the Company, and that the signature appearing above is her genuine signature.

   
Isaac Cohen, Chief Executive Officer
 

 
 
 

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EXHIBIT E

FORM OF LETTER TO THE TRANSFER AGENT FOR THE ISSUANCE OF THE COMMITMENTS SHARES
AT SIGNING OF THE PURCHASE AGREEMENT

[COMPANY LETTERHEAD]

 
_________, 2010

Colonial Stock Transfer
66 Exchange Place, Suite 100
Salt Lake City, Utah 84111
Attention: ____________

Re: Issuance of Commitment Shares to Aspire Capital Fund, LLC

 
Dear ________,

 
On behalf of Bionovo, Inc., (the “Company”), you are hereby instructed to issue
as soon as possible, a share certificate representing 1,395,349 shares of the
Company’s common stock, par value $0.0001 per share (the “Commitment Shares”) in
the name of Aspire Capital Fund, LLC (“Aspire”) pursuant to that certain Common
Stock Purchase Agreement, dated as of ___________, 2010, by and between the
Company and Aspire.  The share certificate should be dated __________,
2010.  Attached hereto as Exhibit A, I have included a true and correct copy of
a unanimous written consent executed by all of the members of the Board of
Directors of the Company adopting resolutions approving the issuance of the
Commitment Shares. The Commitment Shares should be issued bearing the following
restrictive legend:

THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER
THE SECURITIES ACT OF 1933, AS AMENDED, OR APPLICABLE STATE SECURITIES LAWS. THE
SECURITIES HAVE BEEN ACQUIRED FOR INVESTMENT AND MAY NOT BE OFFERED FOR SALE,
SOLD, TRANSFERRED OR ASSIGNED IN THE ABSENCE OF AN EFFECTIVE REGISTRATION
STATEMENT FOR THE SECURITIES UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR
APPLICABLE STATE SECURITIES LAWS, UNLESS SOLD PURSUANT TO: (1) RULE 144 UNDER
THE SECURITIES ACT OF 1933, AS AMENDED, OR (2) AN OPINION OF HOLDER’S COUNSEL,
IN A CUSTOMARY FORM, THAT REGISTRATION IS NOT REQUIRED UNDER SAID ACT OR
APPLICABLE STATE SECURITIES LAWS.

 
 

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The share certificate should be sent as soon as possible via overnight mail to
the following address:

Aspire Capital Fund, LLC
155 North Wacker Drive, Suite 1600
Chicago, IL 60606
Attention: Steven Martin

Thank you very much for your help.  Please call me at (510) 601-2000 if you have
any questions or need anything further.

BIONOVO, INC.
     
By:
   
Name:  Isaac Cohen
 
Title: Chief Executive Officer
 

 

 
 

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