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Exhibit 10.11
 
SECURITIES PURCHASE AGREEMENT

THIS SECURITIES PURCHASE AGREEMENT (this “Agreement”) is made as of the 15th day
of August, 2007, by and among HEALTH DISCOVERY CORPORATION, a Georgia
corporation (the “Company”), the investors listed on Schedule A hereto (the
“Cash Purchasers”), and the investors listed on Schedule B hereto (the “Lender
Purchasers” and with the Cash Purchasers, the “Purchasers”).
 
WHEREAS, the Company and the Purchasers are executing and delivering this
Agreement in reliance upon the exemption from securities registration afforded
by Rule 506 under Regulation D as promulgated by the United States Securities
and Exchange Commission (the “Commission”) under Section 4(2) of the Securities
Act of 1933, as amended (the “Securities Act”);
 
WHEREAS, subject to the terms and conditions set forth in this Agreement, the
Company desires to issue and sell to the Purchasers, and the Purchasers desire
to purchase from the Company, (i) shares (the “Shares”) of the common stock of
the Company, no par value (the “Common Stock”), (ii) warrants to purchase shares
of Common Stock at an exercise price of $0.14 per share (the “Tranche 1
Warrants”), and (iii) warrants to purchase shares of Common Stock at an exercise
price of $0.19 per share (the “Tranche 2 Warrants” and together with the Tranche
1 Warrants, the “Warrants”);
 
WHEREAS, this Agreement and the sale of the securities to the Purchasers is a
part of a private offering (the “Offering”) with an aggregate minimum gross
proceeds of at least $1,500,000.00 (the “Minimum Amount”); and
 
WHEREAS, as a condition precedent to the obligations of the Cash Purchasers
hereunder, holders of at least $1,500,000 in principal amount of outstanding
indebtedness of the Company must convert such indebtedness into equity
securities of the Company.
 
NOW, THEREFORE, in consideration of the promises and mutual covenants and
agreements herein, the Company and the Purchasers hereby agree as follows:
 
ARTICLE I. 
PURCHASE AND SALE
 
1.1  Purchase and Sale. Subject to the terms and conditions set forth herein,
the Company shall issue and sell to each Purchaser, and each Purchaser,
severally and not jointly, agrees to purchase from the Company, at the Closing
(as defined below) that number of Shares, Tranche 1 Warrants and Tranche 2
Warrants set forth opposite such Purchaser’s name on Schedule A or Schedule B,
as appropriate, for the amount set forth on such Schedule (the “Purchase
Price”). Not withstanding the foregoing sentence, at any time prior to the
Closing Date, the Lead Investor may increase, in its sole discretion, the amount
of its investment under this Agreement (provided that such investment is not
more than $700,000) and the number of Shares, Tranche 1 Warrants and Tranche 2
Warrants set forth opposite the Lead Investor's name on Schedule A shall be
proportionately increased. Any such increase shall not decrease or otherwise
change the amounts set forth opposite the other Purchasers' names on Schedule A
and Schedule B.
 
1.2  Closing.
 
a.  The Closing. The initial closing (the “Initial Closing” or the “Closing”) of
the purchase and sale of the Shares and the Warrants shall take place on
September 7, 2007, or such other time as the Company and the Purchasers shall
otherwise agree (the “Closing Date”). If there is more than one closing, the
term “Closing” shall apply to each such closing unless otherwise specified.
 
b.  Purchaser Deliveries at Closing. At the closing, each Purchaser must deliver
to the Company the following:
 
(i)  a copy of this Agreement, each duly executed by such Purchaser,
 

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(ii)  a completed Purchaser Questionnaire in the form of Exhibit A, attached
hereto; and
 
(iii)  the Purchase Price (A) for the Cash Purchasers to be paid by personal
check, wire transfer, bank check or money order and (B) for the Lender
Purchasers to be paid by conversion of the indebtedness and all accrued interest
under the promissory note(s) previously issued by the Company to such Purchaser.
 
c.  Company Deliveries at Closing. Upon Closing, the Company shall deliver to
each Purchaser (at the Purchasers’ address listed on the signature page of this
Agreement):
 
(i)  one copy of this Agreement, duly executed by the Company,
 
(ii)  an opinion of the Company’s counsel in form, scope and substance in the
form of Exhibit B, attached hereto;
 
(iii)  copies of duly executed Lock-Up Agreements from all executive officers of
the Company in form, scope and substance substantially in the form of Exhibit C,
attached hereto;
 
(iv)  a certificate evidencing the Shares in the applicable amount set forth on
Schedule A hereto, registered in the books and records of the Company in the
name of the Purchaser or the Purchaser’s nominee, and
 
(v)  Warrants in the form attached hereto as Exhibit E, duly executed on behalf
of the Company and representing the Purchaser’s right to acquire shares of
Common Stock, registered in the books and records of the Company in the name of
the Purchaser.
 
1.3  Sale of Additional Shares and Warrants.
 
            (a) After the Initial Closing, the Company may sell, on the same
terms and conditions as those contained in this Agreement (subject to equitable
and proportional adjustment in the event of any stock dividend, stock split,
reverse stock dividend or reverse stock split, or any capital reorganization or
recapitalization or similar event affecting the Common Stock, which becomes
effective after the date of this Agreement and on or before the Closing Date),
additional shares of Common Stock (the “Additional Shares”) together with
corresponding Warrants (the “Additional Warrants”), to one or more purchasers
(the “Additional Purchasers”), in one or more subsequent closings provided that
(a) such subsequent sales, together with the sales to the Cash Purchasers, do
not result in gross proceeds to the Company of greater than $2,500,000 (the
“Maximum Amount”), (b) such subsequent sales are consummated on or prior to
October 31, 2007, and (c) each Additional Purchaser shall become a party to this
Agreement, as defined below, by executing and delivering a counterpart signature
page to this Agreement. Schedule A or Schedule B, as appropriate, to this
Agreement shall be updated to reflect the number of Additional Shares purchased
at each such Closing and the parties purchasing such Additional Shares and
Additional Warrants. The term “Shares” and “Warrants” shall include the
Additional Shares and Additional Warrants unless otherwise specified.
 
                            (b) Prior to the Initial Closing, additional Cash
Purchasers or Lender Purchasers may, with the written consent of the Company,
become a party to this Agreement by executing and delivering a counterpart
signature page to this Agreement, in which event (i) such Additional Purchasers
will purchase their Additional Shares and Additional Warrants at the Initial
Closing, and (ii) Schedule A or Schedule B, as appropriate, to this Agreement
shall be updated to reflect the number of Additional Shares purchased, and the
parties purchasing such Additional Shares and Additional Warrants. 
Notwithstanding the foregoing, any additional Cash Purchaser or Lender Purchaser
may not become a party to this Agreement to the extent that his, her or its
purchase of Common Stock and Warrants at the Initial Closing would result in an
aggregate Purchase Price for total sales of Common Stock and Warrants to all
Cash Purchasers in the Offering in an amount exceeding the Maximum Amount.
 
ARTICLE II.  
REPRESENTATIONS AND WARRANTIES
 
2.1  Representations and Warranties of the Company. The Company represents and
warrants to the Purchasers that, to its knowledge, the statements contained in
this Section 2.1 are true, correct and complete, in all material respects, as of
the date of this Agreement, and will be true correct and complete, in all
material respects, as of the Closing Date.
 
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a.  Organization and Qualification. The Company is duly incorporated, validly
existing and in good standing under the laws of the State of Georgia, with the
requisite corporate power and authority to carry on its business as currently
conducted. The Company is duly qualified as a foreign corporation to do business
and is in good standing as a foreign corporation in each jurisdiction in which
the nature of the business conducted or property owned by it makes such
qualification necessary, except where the failure to be so qualified or in good
standing, as the case may be, would not, individually or in the aggregate,
(x) adversely affect the legality, validity or enforceability of this Agreement
or any of the transactions contemplated hereby, (y) have or result in a material
adverse effect on the condition (financial or otherwise), business, operations,
results of operations, assets, capitalization, financial condition, licenses,
permits, rights or privileges (whether contractual or otherwise) or prospects of
the Company, taken as a whole, or (z) impair the Company’s ability to perform
fully on a timely basis its obligations hereunder (an effect caused by or change
resulting from any event or circumstance described in clause (x), (y) or (z),
being a “Material Adverse Effect”). The Company has made available to the
Purchasers true and correct copies of the Company’s Articles of Incorporation,
as in effect on the date of this Agreement (the “Articles of Incorporation”),
and the Company’s Bylaws, as in effect on the date of this Agreement (the
“Bylaws”).
 
b.  Authorization; Enforcement. The Company has the requisite corporate power
and authority to enter into and to consummate the transactions contemplated by
this Agreement and otherwise to carry out its obligations hereunder. The
execution and delivery of this Agreement by the Company and the consummation by
it of the transactions contemplated hereby have been duly authorized by all
necessary corporate action by the Company. This Agreement has been duly executed
by the Company and when delivered in accordance with the terms hereof will
constitute the valid and binding obligation of the Company enforceable against
the Company in accordance with its terms, except as such enforceability may be
limited by applicable bankruptcy, insolvency, reorganization, moratorium,
liquidation or similar laws relating to, or affecting generally the enforcement
of, creditors’ rights and remedies or by other equitable principles of general
application and except that rights to indemnification and contribution may be
limited by federal or state securities laws or public policy relating thereto.
 
c.  Capitalization. As of the date of this Agreement, the authorized capital
stock of the Company consists of 300,000,000 shares of Common Stock, of which
117,468,384 shares are issued and outstanding, 30,000,000 shares of preferred
stock, of which no shares are issued and outstanding, and options and warrants
to acquire 73,296,250 shares of Common Stock have been granted, and 4,376,598
shares of Common Stock may be issued upon the conversion of convertible notes
issued in connection with the acquisition of interests in the support vector
machine patents and other assets formerly owned by BioWulf Technologies LLC (the
“Acquisition”). All of such shares of capital stock have been, or upon issuance
will be, duly authorized and validly issued, fully paid and nonassessable. The
sellers in the Acquisition were granted the right to participate pro rata in all
future fundraising efforts until the notes issued in the Acquisition have been
fully paid, and the Company has fully complied with such rights in connection
with the execution, delivery and performance of this Agreement. Except as
described in this Section 2.1(c), no Person (as hereinafter defined) has any
right of first refusal, preemptive right, right of participation, or any similar
right to participate in the transactions contemplated by this Agreement. Other
than with respect to the Placement Agent engaged by the Company to assist in the
sale of the securities pursuant to this Agreement, the issuance and sale of the
Shares and the Warrants will not obligate the Company to issue shares of Common
Stock or other securities to any Person (other than the Purchasers) and will not
result in a right of any holder of Company securities to adjust the exercise,
exchange, conversion or reset price under such securities. Other than as set
forth in this Section 2.1(c) and except as may be granted pursuant to this
Agreement, there are no outstanding options, warrants, rights (including
conversion or preemptive rights, rights of first refusal and phantom stock
rights), or proxy, voting, transfer restriction or shareholder agreements with
respect to the Company’s capital stock or agreements of any kind for the
purchase or acquisition from the Company of any of its securities.
 
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d.  Authorization and Validity; Issuance of Shares. The Shares, the shares of
Common Stock issuable upon exercise of the Warrants (the “Warrant Shares”), and
the Subsequent Shares (collectively with the Shares and the Warrant Shares, the
“Securities”) are and will at all times hereafter continue to be duly authorized
and, when issued and paid for in accordance with this Agreement or the
applicable warrant agreement, will be validly issued, fully paid and
non-assessable, free and clear of all liens.
 
e.  No Conflicts. The execution, delivery and performance of this Agreement by
the Company and the consummation by the Company of the transactions contemplated
hereby do not and will not (i) conflict with or violate any provision of the
Articles of Incorporation, Bylaws or other organizational documents of the
Company, (ii) subject to obtaining the consents referred to in Section 2.1(f),
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, patent, patent license or instrument to which the Company is a party
or by which any property or asset of the Company is bound or affected, or
(iii) result in a violation of any law, rule, regulation, order, judgment,
injunction, decree or other restriction of any court or governmental authority
to which the Company is subject or by which any material property or asset of
the Company is bound.
 
f.  Consents and Approvals. The Company is not required to obtain any consent,
waiver, authorization or order of, give any notice to, or make any filing or
registration with, any court or other federal, state, local or other
governmental authority, regulatory or self regulatory agency, or other Person in
connection with the execution, delivery and performance by the Company of this
Agreement, other than (i)  any required application(s) or any letter(s)
acceptable to the Over-the-Counter Bulletin Board (“OTCBB”), and (ii) any
filings, notices or registrations under applicable federal or state securities
laws (the “Required Approvals”), except where failure to do so has not resulted
or would not reasonably result, individually, or in the aggregate, in a Material
Adverse Effect. “Person” means an individual or corporation, partnership, trust,
incorporated or unincorporated association, joint venture, limited liability
company, joint stock company, government (or an agency or subdivision thereof)
or other entity of any kind.
 
g.  Litigation; Proceedings. Except as specifically set forth on in the SEC
Documents (hereinafter defined) there is no action, suit, notice of violation,
proceeding or investigation pending or threatened against or affecting the
Company or any of its subsidiaries or any of their respective properties before
or by any court, governmental or administrative agency or regulatory authority
(collectively, an “Action”) which (i) adversely affects or challenges the
legality, validity or enforceability of any of this Agreement, or (ii) would
reasonably be expected to, individually or in the aggregate, have a Material
Adverse Effect. There has not been, and there is not pending or contemplated,
any investigation by the Commission involving the Company or any current or
former director that was a director of the Company at any time during the last
three years or officer of the Company. The Commission has not issued any stop
order or other order suspending the effectiveness of any registration statement
filed by the Company or any subsidiary under the Exchange Act of 1934, as
amended (the “Exchange Act”) or the Securities Act.
 
h.  No Default or Violation. The Company (i) is not in default under or in
violation of any indenture, loan or other credit agreement or any other
agreement or instrument to which it is a party or by which it or any of its
properties is bound and which is required to be included as an exhibit to any
SEC Document, other than with respect to the promissory notes currently held by
Memorial Health Trust, Inc., Julian Stern, James Roberts, Joseph McKenzie, Jules
Paderewski, and Curtis Anderson where the Company currently does not have the
requisite cash balance required by the terms of the promissory notes (and with
respect to which the Company is being released from each such default by such
Persons pursuant to Section 2.2(n) hereof), (ii) is not in violation of any
order of any court, arbitrator or governmental body applicable to it, (iii) is
not in violation of any statute, rule or regulation of any governmental
authority to which it is subject, (iv) is not in default under or in violation
of its Articles of Incorporation, Bylaws or other organizational documents,
respectively in the case of (i), (ii) and (iii), except where such violations
have not resulted or would not reasonably result, individually or in the
aggregate, in a Material Adverse Effect.
 
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i.  SEC Documents; Financial Statements. Since January 1, 2005, the Company has
filed all reports, schedules, forms, statements and other documents required to
be filed by it, with the Commission, pursuant to Section 13, 14 or 15(d) of the
Exchange Act (collectively referred to herein as the “SEC Documents”). As of
their respective dates, the SEC Documents complied in all material respects with
the requirements of the Securities Act and the Exchange Act and the rules and
regulations of the Commission promulgated thereunder applicable to such SEC
Document. Except to the extent that information contained in any SEC Document
filed and publicly available prior to the date of this Agreement has been
revised or superseded by a later filed SEC Document, which later filed SEC
Document was filed prior to the date of this Agreement, none of the SEC
Documents, when filed, contained any untrue statement of a material fact or
omitted to state a material fact required to be stated therein or necessary in
order to make the statements therein, in light of the circumstances under which
they were made, not misleading. The financial statements of the Company included
in the SEC Documents comply as to form in all material respects with applicable
accounting requirements and the published rules and regulations of the
Commission with respect thereto as in effect at the time of filing. Such
financial statements fairly present in all material respects the financial
position of the Company as of and for the dates thereof and the results of
operations and cash flows for the periods then ended, subject, in the case of
unaudited statements, to normal, year-end audit adjustments.
 
j.  Material Changes. Since the date of the latest audited financial statements
included within the SEC Documents, except as specifically disclosed in the SEC
Documents, (i) there has been no event, occurrence or development that has had
or that could result in a Material Adverse Effect, (ii) the Company has not
incurred any liabilities other than (A) trade payables and accrued expenses
incurred in the ordinary course of business consistent with past practice, (B)
liabilities not required to be reflected in the Company’s financial statements
pursuant to GAAP or required to be disclosed in filings made with the
Commission, and (C) in connection with the termination of Robert Braswell's
employment with the Company and in lieu of the cash payment by the Company under
his employment agreement, the grant to Mr. Braswell of 300,000 options for
Common Stock with an exercise price of $0.08 per share and the issuance to Mr.
Braswell of 575,000 shares of Common Stock (collectively, the "Braswell
Securities"), (iii) the Company has not altered its method of accounting or the
identity of its auditors, and (iv) the Company has not declared or made any
dividend or distribution of cash or other property to its shareholders or
purchased, redeemed or made any agreements to purchase or redeem any shares of
its capital stock.
 
k.  Listing and Maintenance Requirements. The Company has not, in the two years
preceding the date of this Agreement, received notice from the OTCBB or any
other exchange or market on which the Common Stock is or has been listed or
quoted to the effect that the Company is not in compliance with the listing or
maintenance requirements of such exchange or market. The Company is, and has no
reason to believe that it will not in the foreseeable future continue to be, in
compliance with all such listing and maintenance requirements of the OTCBB. The
issuance and sale of the Shares and Warrants hereunder does not contravene the
rules and regulations of the OTCBB and approval of the shareholders of the
Company is not required for the Company to issue and deliver to the Purchasers
the number of Shares and Warrant Shares contemplated by this Agreement.
 
l.  Broker’s Fees. The Purchasers shall have no obligation with respect to any
fees or with respect to any claims made by or on behalf of other Persons for
fees of any broker, finder or other intermediary retained by the Company that
may be due in connection with the transactions contemplated by this Agreement.
 
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m.  Intellectual Property.
 
(i)  For purposes hereof, “Patents” means rights arising from or in respect to
patents and patent applications, including continuation, divisional,
continuation-in-part, reissue or reexamination patent applications and patents
issuing therefrom, patent disclosures and inventions, draft patent applications
and foreign versions of the foregoing whether protected, created or arising
under the laws of the United States or any other jurisdiction. For purposes
hereof, “Trademarks” means rights arising from or in respect to trademarks,
service marks, trade names, logos, internet domain names and corporate names
(whether registered or unregistered, including any applications for registration
of the foregoing), trade dress rights and general intangibles of a like nature,
industrial or product designs together with all of the goodwill associated
therewith, and foreign versions of the foregoing, whether protected, created or
arising under the laws of the United States or any other jurisdiction. For
purposes hereof, “Copyrights” means rights arising from or in respect to
copyrights and copyrightable works and registrations, applications and renewals
for registration thereof, mask works and registrations and applications for
registration or renewals thereof, computer software, data, databases and
documentation including copies and tangible embodiments (in whatever form or
medium) thereof whether protected, created or arising under the laws of the
United States or any other jurisdiction. For purposes hereof, “Trade Secrets”
means rights arising from or in respect to trade secrets and other confidential
information (including, without limitation, ideas, formulas, compositions,
inventions (whether patentable or unpatentable and whether or not reduced to
practice), know-how, concepts, manufacturing and production processes and
techniques, research and development information, drawings, specifications,
designs, plans, proposals, technical data, financial and marketing plans and
customer and supplier lists and information whether protected, created or
arising under the laws of the United States or any other jurisdiction. For
purposes hereof, the “Lucent License” means that certain patent license
agreement by and between the Company and Lucent Technologies GRL Corporation
(“Lucent”) effective September 26, 2004, pursuant to which the Company received
a license to use a hyperplane patent (Pat. No. 5,649,068) from Lucent. The
Patents, Trademarks, Copyrights, and Trade Secrets that the Company owns or
otherwise has the right to use (including, but not limited to, Patent No.
6,996,549 and those other patents listed in the Company’s Annual Report on Form
10-KSB for the fiscal year ended December 31, 2006 and filed on March 30, 2007
other than Patent No. 6,996,542, which is not owned by the Company) and the
Lucent License are referred to herein as the “Intellectual Property” or “Company
Intellectual Property”.
 
(ii)  The Company owns all right, title and interest in and to or possesses
exclusive rights to use all of the Company Intellectual Property, subject to the
terms of the applicable agreement, free and clear of all Liens or claims of
others. For purposes of this Section 2.1(m), “Lien” means (a) any encumbrance,
mortgage, pledge, lien, charge or other security interest of any kind upon any
property or assets of any character, or upon the income or profits therefrom;
(b) any acquisition of or agreement to have an option to acquire any property or
assets upon conditional sale or other title retention agreement, device or
arrangement (including a capitalized lease); or (c) any sale, assignment, pledge
or other transfer for security of any accounts, general intangibles or chattel
paper, with or without recourse.
 
(iii)  The Company has not received any notice, written or otherwise, or claim
challenging the complete and exclusive ownership or possession of its rights to
use the Company Intellectual Property by the Company, or suggesting that any
other Person has any claim of legal or beneficial ownership with respect
thereto. Similarly, the Company has not received any notice, written or
otherwise, challenging, terminating, amending, or affecting the interest of the
Company in the Company Intellectual Property.
 
(iv)  The Company has taken all necessary and reasonable actions to procure and
maintain the Company Intellectual Property that it owns or licenses, including,
if and when applicable and required, the secrecy or confidentiality thereof,
which action may be taken by the Company and the Company, the Company
Intellectual Property is currently in compliance with all applicable legal
requirements (including timely payment of filing, examination, maintenance and
legal fees) necessary to maintain the Company Intellectual Property.
 
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(v)  The Company has not received any notice, written or otherwise, of a claim
that any of the Company Intellectual Property is invalid, unenforceable, or
misused.
 
(vi)  No Company Intellectual Property owned by the Company and no Company
Intellectual Property owned by a third party, is involved in any interference,
reissue, reexamination, opposition or cancellation proceeding or any other
litigation or proceeding of any kind in the United States or in any other
jurisdiction.
 
(vii)  The transactions contemplated by this Agreement shall have no adverse
effect on the right, title and interest of the Company in and to Company
Intellectual Property.
 
(viii)  The Company has not received any communications, written or otherwise,
from any other Person alleging that it has infringed or, by conducting its
Business as currently conducted or proposed to be conducted, would infringe the
intellectual property rights of any Person.
 
(ix)  It is not necessary to the Business, as currently conducted, to utilize
any Intellectual Property of any of its employees of the Company made prior to
their employment by the Company, except for inventions, trade secrets or
proprietary information that have been assigned to the Company.
 
(x)  Since the date of this Agreement, there has not been any sale, assignment
or transfer of any Intellectual Property or other material intangible assets of
the Company, except for licenses entered into in the ordinary course of
business.
 
(xi)  All former and current Employees and Consultants of the Company have
signed agreements containing confidentiality provisions and invention assignment
provisions.
 
(xii)  The Company Intellectual Property is sufficient to permit the operation
of the Company’s business as currently conducted and as proposed to be conducted
as described in the SEC Documents.
 
2.2  Representations, Warranties and Covenants of the Purchasers.
 
a.  Purchaser Status. Each Purchaser, severally and not jointly, represents and
warrants to, and covenants with, the Company that: (i) the Purchaser is an
“accredited investor” as defined in Regulation D under the Securities Act, and
the Purchaser is also knowledgeable, sophisticated and experienced in making,
and is qualified to evaluate the risks and merits and make decisions with
respect to investments in securities presenting an investment decision like that
involved in the purchase of the Securities, including investments in securities
issued by the Company and investments in comparable companies, and has
requested, received, reviewed and considered all information it deemed relevant
in making an informed decision to purchase the Securities and is able to bear
the risks of this investment; (ii) the Purchaser is acquiring the Securities in
the ordinary course of its business and for its own account for investment only
and not with a view to, or for resale in connection with, any distribution
thereof within the meaning of the Securities Act; (iii) the Purchaser will not,
directly or indirectly, offer, sell, pledge, transfer or otherwise dispose of
(or solicit any offers to buy, purchase or otherwise acquire or take a pledge
of) any of the Securities (including the Warrant Shares) except in compliance
with the Securities Act, applicable state securities laws and the respective
rules and regulations promulgated thereunder; (iv) the Purchaser has answered
all questions on the Investor Questionnaire for use in preparation of the
Registration Statement and the answers thereto are true, correct and complete in
all material respects as of the date hereof and will be true, correct and
complete in all material respects as of the Closing Date; (v) the Purchaser has
delivered to the Company the Investor Questionnaire; (vi) the Purchaser will
notify the Company immediately of any material change in any of such information
until such time as the
 
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Purchaser has sold all of its Shares and Warrant Shares or until the Company is
no longer required to keep the Registration Statement effective; and (vii) the
Purchaser has, in connection with its decision to purchase the Securities,
relied only upon the SEC Documents and the representations and warranties of the
Company contained herein. Each Purchaser understands that its acquisition of the
Shares, the Warrants and the Warrant Shares has not been registered under the
Securities Act or registered or qualified under any state securities law in
reliance on specific exemptions therefrom, which exemptions may depend upon,
among other things, the bona fide nature of the Purchasers’ investment intent as
expressed herein.
 
b.  Foreign Offering. Each Purchaser acknowledges, represents and agrees that no
action has been or will be taken in any jurisdiction outside the United States
by the Company that would permit an offering of the Securities, or possession or
distribution of offering materials in connection with the issuance of the
Securities, in any jurisdiction outside the United States where legal action by
the Company for that purpose is required. Each Purchaser outside the United
States will comply with all applicable laws and regulations in each foreign
jurisdiction in which it purchases, offers, sells or delivers the Securities or
has in its possession or distributes any offering material, in all cases at its
own expense.
 
c.  Resale Restrictions. Each Purchaser hereby covenants with the Company not to
make any sale of the Shares, the Warrants or the Warrant Shares without
complying with the provisions of this Agreement and without satisfying all
requirement of an applicable exemption under the Securities Act for such sale.
Each Purchaser acknowledges that there may occasionally be times when the
Company determines that it must suspend the use of the Prospectus forming a part
of the Registration Statement, as set forth in Section 3.2(c). Each Purchaser
acknowledges that the Shares, the Warrants and the Warrant Shares will be
imprinted with the following legend that prohibits their transfer except in
accordance therewith:
 
THE SECURITIES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED WITH THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION IN RELIANCE UPON AN
EXEMPTION FROM REGISTRATION UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE
“SECURITIES ACT”), AND, ACCORDINGLY, MAY NOT BE OFFERED OR SOLD EXCEPT PURSUANT
TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT OR AN AVAILABLE
EXEMPTION FROM, OR IN A TRANSACTION NOT SUBJECT TO, THE REGISTRATION
REQUIREMENTS OF THE SECURITIES ACT AND IN ACCORDANCE WITH APPLICABLE STATE
SECURITIES LAWS AS EVIDENCED BY A LEGAL OPINION OF COUNSEL TO THE TRANSFEROR TO
SUCH EFFECT, THE SUBSTANCE OF WHICH SHALL BE REASONABLY ACCEPTABLE TO THE
COMPANY.
 
d.  Short Positions. Each Purchaser hereby covenants with the Company not to use
any of the Shares or the Warrant Shares, acquired pursuant to this Agreement, to
cover any short position in the Common Stock of the Company if doing so would be
in violation of applicable securities laws.
 
e.  No Advice. Each Purchaser understands that nothing in the SEC Documents,
this Agreement or any other materials presented to the Purchasers in connection
with the purchase and sale of the Securities constitutes legal, tax or
investment advice. Each Purchaser has consulted such legal, tax and investment
advisors as it, in its sole discretion, has deemed necessary or appropriate in
connection with its purchase of the Securities.
 
f.  Organization; Authority. Each Purchaser is either an individual residing in
the state as set forth on the signature page of this Agreement, or a
corporation, limited liability company or limited partnership duly formed,
validly existing and in good standing under the laws of the jurisdiction of its
incorporation or formation in either case with the requisite power and
authority, corporate or otherwise, to enter into and to consummate the
transactions contemplated by this Agreement and to carry out the obligations
hereunder. The purchase by each Purchaser of the Shares and the Warrants
hereunder has been duly authorized by all necessary action on the part of the
Purchaser. This Agreement
 
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has been duly executed and delivered by the Purchaser and constitutes the valid
and legally binding obligation of each Purchaser, enforceable against each
Purchaser in accordance with its terms, subject to bankruptcy, insolvency,
fraudulent transfer, reorganization, moratorium and similar laws of general
applicability relating to or affecting creditors’ rights generally and to
general principles of equity and except that rights to indemnification and
contribution may be limited by federal or state securities laws or public policy
relating thereto.
 
g.  Risk. Each Purchaser has carefully reviewed and understands the risks of,
and other considerations relating to, the purchase of the Shares and the
Warrants, and an investment in the Company. Each Purchaser has adequate means of
providing for its current needs and possible future contingencies, and each
Purchaser has no need, and anticipates no need in the foreseeable future, to
sell or otherwise transfer the Shares, the Warrants or the Warrant Shares. Each
Purchaser is able to bear the economic risks of this investment and,
consequently, without limiting the generality of the foregoing, each Purchaser
is able to hold the Shares, the Warrants or the Warrant Shares for an indefinite
period of time and has sufficient net worth to sustain a loss of its entire
investment in the Company if such loss should occur. Each Purchaser understands
that each of the Shares, the Warrants and the Warrant Shares is a highly
speculative investment, which involves a high degree of risk of loss of the
Purchaser’s entire investment therein.
 
h.  Reliance. Each Purchaser understands and acknowledges that (i) the Shares,
the Warrants and the Warrant Shares are being offered and sold to the Purchasers
without registration under the Securities Act in a private placement that is
exempt from the registration provisions of the Securities Act under Section 4(2)
of the Securities Act or Regulation D promulgated thereunder, and (ii) the
availability of such exemption depends in part on, and the Company will rely
upon the accuracy and truthfulness of, the representations set forth in this
Section 2.2, including, without limitation, the accredited investor status and
the investment intent of the Purchasers, and each Purchaser hereby consents to
such reliance.
 
i.  Information. Each Purchaser and its advisors, if any, have 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 Shares and the
Warrants which have been requested by such Purchaser or its advisors. Each
Purchaser and its advisors, if any, have been afforded the opportunity to ask
questions of the Company and receive answers concerning the terms and conditions
of the offering and obtain any additional information, which the Company
possesses or can acquire without unreasonable effort or expense, that is
necessary to verify the accuracy of any representations or information set forth
in any such material. Representatives of the Company have adequately answered
all inquiries that the Purchasers has made of them concerning the Company or any
other matters relating to the operation of the Company and sale of the Shares
and Warrants.
 
j.  Taxes. Each Purchaser is aware that the Company and its representatives
assume no responsibility for the tax consequences to the Purchasers of any
investment in the Company.
 
k.  No Representation or Promise. No one has ever represented or promised
expressly or by implication, any of the following: (i) the approximate or exact
length of time that Purchasers will be required to remain as owner of the Shares
or Warrant Shares, (ii) the amount or type of profit, or loss (including tax
write-offs and/or tax benefits) to be realized, if any, as a result of the
Purchaser’s investment, or (iii) that the past performance or experience of the
officers or directors of the Company or any affiliate, their associates, agents,
or employees or of any other person gives any assurance that the Company will be
a success.
 
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l.  Offering Literature; No Advertisement. No Purchaser has not been furnished
any offering literature other than, and has relied only on the information
contained in, (i) the Company’s public SEC Documents, and (ii) this Agreement,
including the exhibits and schedules thereto. No Purchaser is purchasing the
Shares or the Warrants as a result of, or subsequent to, any advertisement,
article, notice or other communication published in any newspaper, magazine or
similar media or broadcast over television or radio or presented at any seminar
or meeting in which representatives of the Company were in attendance.
 
m.  Governmental Review. Each Purchaser understands that no United States
federal or state agency or any other government or governmental agency has
passed upon or made any recommendation or endorsement of the Common Stock or the
Warrants.
 
n.  Lender Purchaser. Each Lender Purchaser unconditionally and irrevocably
agrees to accept the number of Shares specified under the caption “Shares
Purchased” adjacent to the name of such Lender Purchaser on Schedule B in full
payment and satisfaction of the note(s) issued to such Lender Purchaser,
including principal, accrued interest, fees, and all other rights of such Lender
Purchaser and all other obligations of the Company under the note(s). At the
Closing, each Lender Purchaser shall deliver to the Company the original note(s)
for cancellation by the Company; provided that the failure of a Lender Purchaser
to do so shall not affect the cancellation of such note(s) pursuant to this
Section 2.2(n). Effective at the Closing, upon delivery of the Shares and
Warrants to a Lender Purchaser pursuant to this Agreement, all liens and
encumbrances securing the note(s) owned by such Lender Purchaser shall be
terminated and discharged, the Company shall be authorized to file such
termination statements and other filings as may be necessary, convenient, or
appropriate to evidence the satisfaction and discharge of all obligations of the
Company under the note(s) owned by such Lender Purchaser, and the Company shall
thereupon be released and discharged from any and all liability to the Lender
Purchasers that may have arisen by virtue of any defaults under the note(s).  
 
ARTICLE III.  
REGISTRATION OF THE SHARES AND WARRANT SHARES;
COMPLIANCE WITH THE SECURITIES ACT
 
3.1  Registration Procedures and Other Matters. The Company shall:
 
a.  subject to receipt of necessary information from the Purchasers after prompt
request from the Company to the Purchasers to provide such information, (i)
prepare and file with the SEC, within 45 days after the filing of the Company’s
Form 10-KSB for the year ended December 31, 2007, a registration statement on
Form SB-2 (the “Registration Statement” and the date of filing of the
Registration Statement, the “Filing Date”) to enable the public, unrestricted
resale of the Shares and the Warrant Shares (and shall include in the
Registration Statement or promptly file an amendment to the Registration
Statement to register any Additional Shares or Warrant Shares issued pursuant to
Section 1.3, shares of Common Stock issued pursuant to this Section 3.1(a), and
shares of Common Stock (or other securities convertible into Common Stock)
issued pursuant to Section 4.6 (collectively, the “Subsequent Shares”)) by the
Purchasers from time to time, and shall use its best efforts to ensure that the
Registration Statement is declared effective by the earlier of July 29, 2008 or
120 days after the Filing Date if the Securities and Exchange Commission (the
“SEC”) does not undertake a review of the Registration Statement (a “Review”) or
by the earlier of August 28, 2008 or 150 days after the Filing Date if the SEC
does undertake a Review (the applicable date by which effectiveness is to be
achieved being herein referred to as the “Effectiveness Due Date”), and (ii) if
the Registration Statement is not declared effective by the Effectiveness Due
Date, then the number of Shares sold to the Purchasers pursuant to this
Agreement shall be increased by one percent (1%) for the 30-day period beginning
on the day after the Registration Statement was to be declared effective and two
percent (2%) for each 30-day period thereafter until the Registration Statement
is declared effective; provided, however, that the maximum number of shares to
be issued under this Section 3.1(a) shall be 10% of the number originally
purchased pursuant to this Agreement. All Shares to effect Section 3.1(a)(ii)
will be delivered to the Purchasers within ten days of each delinquency.
 
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b.  use its reasonable efforts to prepare and file with the SEC such amendments
and supplements to the Registration Statement and the prospectus used in
connection therewith (the “Prospectus”) as may be necessary to keep the
Registration Statement current, effective and free from any material
misstatement or omission to state a material fact for a period not exceeding,
with respect to each Purchaser’s Shares, Warrant Shares and Subsequent Shares,
the earlier of (i) the date on which the Purchasers may sell all Shares, Warrant
Shares and Subsequent Shares then held by the Purchasers under Rule 144(k) under
the Securities Act, or (ii) such time as all Shares, Warrant Shares and
Subsequent Shares have been sold by the Purchasers;
 
c.  furnish to the Purchasers with respect to the Shares, Warrant Shares and
Subsequent Shares registered under the Registration Statement such number of
copies of the Registration Statement, Prospectuses and preliminary Prospectuses,
if applicable, in conformity with the requirements of the Securities Act and
such other documents as the Purchasers may reasonably request in light of then
existing securities laws, rules and regulations, in order to facilitate the
public sale or other disposition of all or any of the Shares, Warrant Shares or
Subsequent Shares by the Purchasers; provided, however, that the obligation of
the Company to deliver copies of Prospectuses or preliminary Prospectuses, if
applicable, to the Purchasers shall be subject to the receipt by the Company of
reasonable assurances from the Purchasers that the Purchasers will comply with
the applicable provisions of the Securities Act and of such other securities or
blue sky laws as may be applicable in connection with any use of such
Prospectuses or preliminary Prospectuses;
 
d.  file documents required of the Company for normal blue sky clearance in
states specified in writing by the Purchasers and use its best efforts to
maintain such blue sky qualifications during the period the Company is required
to maintain the effectiveness of the Registration Statement pursuant to
Section 3.1(b); provided, however, that the Company shall not be required to
qualify to do business or consent to service of process in any jurisdiction in
which it is not now so qualified or has not so consented;
 
e.  bear all expenses in connection with the procedures in paragraph (a) through
(d) of this Section 3.1 and the registration of the Shares, Warrant Shares and
Subsequent Shares pursuant to the Registration Statement; and
 
f.  advise the Purchasers promptly after it shall receive notice or obtain
knowledge of the issuance of any stop order by the SEC delaying or suspending
the effectiveness of the Registration Statement or of the initiation or threat
of any proceeding for that purpose; and it will promptly use its reasonable best
efforts to prevent the issuance of any stop order or to obtain its withdrawal at
the earliest possible moment if such stop order should be issued.
 
The Company understands that each Purchaser disclaims being an underwriter, but
that any Purchaser being deemed an underwriter by the SEC shall not relieve the
Company of any obligations it has hereunder; provided, however that if the
Company receives notification from the SEC that any Purchaser is deemed an
underwriter, then the period by which the Company is obligated to submit an
acceleration request to the SEC shall be extended to the earlier of (i) the 90th
day after such SEC notification, or (ii) 120 days after the initial filing of
the Registration Statement with the SEC.
 
3.2  Transfer of Shares, Warrant Shares and Subsequent Shares After
Registration; Suspension.
 
a.  Each Purchaser agrees that it will not effect any disposition of the Shares,
the Warrants, the Warrant Shares or the Subsequent Shares that would constitute
a sale within the meaning of the Securities Act except as contemplated in the
Registration Statement referred to in Section 3.1 (with respect to the Shares,
Warrant Shares and Subsequent Shares) and as described below or as otherwise
permitted by law, and that it will promptly notify the Company of any material
changes in the information set forth in the Registration Statement regarding
itself or its plan of distribution.
 
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b.  Except in the event that paragraph (c) below applies, the Company shall (i) 
prepare and file from time to time with the SEC a post-effective amendment to
the Registration Statement or a supplement to the related Prospectus or a
supplement or amendment to any document incorporated therein by reference or
file any other required document so that such Registration Statement will not
contain an untrue statement of a material fact or omit to state a material fact
required to be stated therein or necessary to make the statements therein not
misleading, and so that, as thereafter delivered to purchasers of the Shares,
Warrant Shares or Subsequent Shares being sold thereunder, such Prospectus will
not contain an untrue statement of a material fact or omit to state a material
fact required to be stated therein or necessary to make the statements therein,
in light of the circumstances under which they were made, not misleading; and
(ii) inform each Purchaser if the Company files a post-effective amendment to
the Registration Statement which has not yet been declared effective, and will
use its reasonable efforts to secure the effectiveness of such post-effective
amendment as promptly as reasonably possible and will promptly notify the
Purchasers pursuant to Section 7.2 hereof when the amendment has become
effective.
 
c.  Subject to paragraph (d) below, in the event (i) of any request by the SEC
or any other federal or state governmental authority during the period of
effectiveness of the Registration Statement for amendments or supplements to the
Registration Statement or related Prospectus or for additional information;
(ii) of the issuance by the SEC or any other federal or state governmental
authority of any stop order suspending the effectiveness of the Registration
Statement or the initiation of any proceedings for that purpose; (iii) of the
receipt by the Company of any notification with respect to the suspension of the
qualification or exemption from qualification of any of the Shares, Warrant
Shares or Subsequent Shares for sale in any jurisdiction or the initiation or
threatening of any proceeding for such purpose; or (iv) of any event or
circumstance which necessitates the making of any changes, or in the good faith
judgment of the Board of Directors of the Company, it would be seriously
detrimental to the Company or any plan or proposal of the Company with respect
to its corporate development, financing or other activities to make such
changes, in the Registration Statement or Prospectus, or any document
incorporated or deemed to be incorporated therein by reference, so that, in the
case of the Registration Statement, it will not contain any untrue statement of
a material fact or any omission to state a material fact required to be stated
therein or necessary to make the statements therein not misleading, and that in
the case of the Prospectus, it will not contain any untrue statement of a
material fact or any omission to state a material fact required to be stated
therein or necessary to make the statements therein, in light of the
circumstances under which they were made, not misleading; then the Company shall
deliver a certificate in writing to each Purchaser (the “Suspension Notice”) to
the effect of the foregoing and, upon receipt of such Suspension Notice, the
Purchasers will refrain from selling any Shares, Warrant Shares or Subsequent
Shares pursuant to the Registration Statement (a “Suspension”) until the
Purchaser is advised in writing by the Company that the then current Prospectus
may be used; provided, however, that there may be no more than one Suspension in
any 12-month period. In the event of any Suspension, the Company will use its
reasonable efforts to cause the use of the Prospectus so suspended to be resumed
and the Registration Statement to be effective as soon as reasonably
practicable, and in any event within 90 days after the delivery of a Suspension
Notice to the Purchasers.
 
d.  Provided that a Suspension is not then in effect, the Purchasers may sell
the Shares, the Warrant Shares and the Subsequent Shares under the Registration
Statement once effective, provided that it arranges for any required delivery of
a current Prospectus to the transferee of such shares.
 
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e.  In the event of a sale of the Shares, the Warrant Shares or the Subsequent
Shares by the Purchasers pursuant to the Registration Statement, the Purchasers
must also deliver to the Company’s transfer agent, with a copy to the Company, a
Certificate of Subsequent Sale substantially in the form attached hereto as
Exhibit D, so that the Shares, the Warrant Shares and the Subsequent Shares may
be properly transferred.
 
3.3  Termination of Conditions and Obligations. The conditions precedent imposed
by Section 2.2 or this Article III upon the transferability of the Shares, the
Warrant Shares and the Subsequent Shares shall cease and terminate as to any
particular number of Shares, Warrant Shares and Subsequent Shares when such
shares shall have been effectively registered under the Securities Act and sold
or otherwise disposed of in accordance with the intended method of disposition
set forth in the Registration Statement covering such shares or at such time as
an opinion of counsel reasonably satisfactory to the Company shall have been
rendered to the effect that such conditions are not necessary in order to comply
with the Securities Act.
 
ARTICLE IV.  
OTHER AGREEMENTS
 
4.1  Reservation of Warrant Shares. If at any time the number of authorized but
unissued shares of Common Stock is insufficient to cover the number of Warrant
Shares issuable upon exercise of the Warrants without regard to any limitation
on exercises and a Purchaser indicates that it desires to exercise a Warrant,
the Company will pursue best efforts to acquire the authority for issuance
sufficient for the exercise of such Warrant. If any Investors have indicated an
intention to exercise Warrants but the Company has not acquired the authority
for sufficient shares to honor the election, such Investors’ Warrants shall not
expire until the exercise of those Warrants has been honored.
 
4.2  Furnishing of Information. Until the earlier of the second anniversary of
the Closing Date or the date upon which no Purchaser owns any Shares, Warrants
or Warrant Shares, the Company covenants to timely file (or obtain extensions in
respect thereof and file within the applicable grace period) all reports
required to be filed by the Company after the date of this Agreement pursuant to
the Exchange Act.
 
4.3  Integration. The Company shall not and shall use its best efforts to ensure
that no affiliate of the Company shall sell, offer for sale or solicit offers to
buy or otherwise negotiate in respect of any security (as defined in Section 2
of the Securities Act) that would be integrated with the offer or sale of the
shares of Common Stock hereunder in a manner that would require the registration
under the Securities Act of the sale of the shares Common Stock to the
Purchasers.
 
4.4  Best Efforts. Both of the parties hereto shall use its best efforts to
satisfy each of the conditions to be satisfied by it as provided in Article IV
of this Agreement.
 
4.5  Confidential Information.
 
a.  Each Purchaser represents to the Company that, at all times during the
Company’s offering of the Securities, the Purchaser has maintained in confidence
and has not used except in connection with its purchase of the Securities
pursuant hereto, all non-public information regarding the Company received by
the Purchaser from the Company or its agents, and covenants that it will
continue to maintain in confidence such information until such information (i)
becomes generally publicly available other than through a violation of this
provision by the Purchaser or its agents or (ii) is required to be disclosed in
legal proceedings (such as by deposition, interrogatory, request for documents,
subpoena, civil investigation demand, filing with any governmental authority or
similar process), provided, however, that before making any use or disclosure in
reliance on this subparagraph (ii) the Purchasers shall give the Company at
least fifteen (15) days prior written notice (or such shorter period as required
by law) specifying the circumstances giving rise thereto and will furnish only
that portion of the non-public information which is legally required and will
exercise its best efforts to obtain reliable assurance that confidential
treatment will be accorded any non-public information so furnished.
 
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b.  The Company shall on or as soon as practicable following the date of this
Agreement issue a press release disclosing the material terms of the
transactions contemplated hereby (including at least the amount of Securities
sold and proceeds therefrom).
 
4.6  Issuances of Additional Shares of Common Stock.
 
                        a. If, at any time prior to the Anti-Dilution End Date,
the Company shall issue or sell any shares of Common Stock (or other New
Securities) at an effective price per share of Common Stock of less than $0.08
(after giving effect to the conversion, exchange or exercise of all convertible,
exchangeable and exercisable New Securities), as adjusted pursuant to the terms
of this Agreement (a “Discounted Price”), then each Purchaser shall, within 30
days of each sale or issuance of Common Stock (or other New Securities) at a
Discounted Price (each, a “Discounted Price Transaction”) be issued by the
Company (the “Anti-Dilution Issuance”), for no additional consideration, a
number of additional shares of Common Stock so that the sum of the number of
shares of Common Stock issued to them in the Offering and in the Anti-Dilution
Issuance shall, collectively, be equal to the number of shares of Common Stock
which is:
 
(i) $0.08, divided by
 
(ii) the effective per share sale price for the Common Stock in the Discounted
Price Transaction, with such quotient then being multiplied by
 
(iii) the number of shares issued to such Purchaser in the Offering.
 
                b. The provisions of paragraph (a) of this Section 4.6 shall not
apply to any issuance of shares of Common Stock for which an adjustment is
provided under Section 4 of the Warrant.
 
                c. No additional shares of Common Stock will be issued under
paragraph (a) above due to, or as a result of, any Permitted Issuances.
“Permitted Issuances” shall mean (i) Common Stock issued pursuant to a stock
split or subdivision, (ii) Common Stock issued or issuable upon conversion of
the Warrants or any other securities exercisable or exchangeable for, or
convertible into shares of Common Stock, outstanding as of the date hereof.
 
                d. All references to $0.08 or $0.01 in this Section 4.6 shall be
subject to equitable and proportional adjustment in the event of any stock
dividend, stock split, reverse stock dividend or reverse stock split, or any
capital reorganization or recapitalization or similar event affecting the Common
Stock, which becomes effective after the date of this Agreement.
 
                e. If, any time prior to the three year anniversary of the
Closing Date, the Company re-prices any warrants or options (whether or not such
warrants or options are outstanding as of the date hereof) or extends the
exercise period of any such warrant or option, then each such warrant and option
shall be deemed, for purposes of this Section 4.6 to be an issue or sale of a
number of shares of Common Stock equal to the number of shares that may be
acquired upon exercise of such warrant or option at an effective price per share
of Common Stock equal to $0.01.
 
                f. The "Anti-Dilution End Date" shall mean (i) for purposes of
this Section 4.6 other than Section 4.6(e), the date that is eighteen months
after the Closing Date, and (ii) for purposes of Section 4.6(e), the date that
is three years after the Closing Date.
 
4.7  Competing Registration Statement. Until the Registration Statement required
to be filed pursuant to Section 3.1 is declared effective by the SEC, the
Company shall not file any other registration statement attempting to register
any other shares of Common Stock under the Securities Act for sale to the public
for its own account or for the account of other shareholders (except with
respect to registration statements on Form S-4 or S-8 or another form not
available for registering the shares of Common Stock issued in the Offering for
sale to the public or registration statements used otherwise in connection with
bona fide acquisitions, mergers, technology licenses or purchases, corporate
partnering agreements, joint ventures or similar transactions, the terms of
which are approved by the Board of Directors of the Company; provided, however,
that if any Form S-8 attempts to register shares of Common Stock in excess of 1%
of the number of the then outstanding shares of Common Stock, the Company must
obtain the prior written approval of the Purchasers).
 
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4.8  Right of Participation. Within thirty (30) days after the issuance of New
Securities (a “Financing”), the Company shall give notice to Prime Mover Capital
Partners, LP (the “Lead Purchaser”), which notice shall describe the type,
price, and terms of the New Securities (as defined below). The Lead Purchaser
shall have twenty (20) days from the date of receipt of such notice to elect to
purchase up to 10% of the number of New Securities that were sold in the
Financing. The closing of such sale shall occur within sixty (60) days of the
date of notice to the Lead Purchaser consisting of the same type, price, and
terms of the New Securities that were issued in the Financing. The Lead
Purchaser’s rights under this Section 4.8 shall expire on the fifth anniversary
of the Closing Date. The Lead Purchaser shall be entitled to apportion the right
granted to it by this Section 4.8 among itself and its partners, members, and
affiliates in such proportions as it deems appropriate. For purposes of this
Agreement, a Financing shall exclude the issuance of: (i) compensatory grants of
shares of Common Stock or options or warrants to acquire shares of Common Stock
issued or deemed issued to employees or directors of, or consultants to, the
Company or any of its subsidiaries pursuant to a compensation plan, agreement,
or arrangement approved by the Board of Directors of the Company; provided that
such grants are not made in connection with a capital raising transaction or as
compensation for services in connection with the promotion or maintaining of a
market for the Company's securities; (ii) securities pursuant to the conversion
or exercise of convertible or exercisable securities outstanding on the date
hereof; (iii) securities issued in connection with any stock split or stock
dividend of the Company; (iv) securities in connection with a bona fide business
acquisition of or by the Company, whether by merger, consolidation, sale of
assets, sale or exchange of stock, or otherwise; (v) stock, warrants, or other
securities or rights to persons with which the Company has business
relationships provided such issuances are for other than capital raising
purposes and provided that at the time of any such issuance, the aggregate of
such issuance and similar issuances in the preceding twelve month period do not
exceed 2% of the then outstanding shares of Common Stock. For purposes of this
Agreement, “New Securities” shall mean equity securities of the Company, whether
now authorized or not, or rights, options, or warrants to purchase said equity
securities, or securities of any type whatsoever that are, or may become,
convertible into or exchangeable into or exercisable for said equity securities.
 
4.9  Matters Related to the Board of Directors. Upon the Closing, the Company
shall take all acts necessary to effect an increase in the size of the Board of
Directors to facilitate the election of two individuals reasonably acceptable to
the Company and the Lead Investor, and shall support the appointment of each to
serve until the next meeting of the shareholders. Promptly after the Closing,
the Board of Directors shall evaluate a reverse stock split of at least 15 to 1
and up to 100 to 1.
 
4.10    Limitation on Issuance of Options and Warrants. Except with the consent
of the Lead Purchaser, until the third anniversary of the Closing Date, the
Company will not issue (a) warrants to any director, employee or consultant
other than Hong Zhang or the members of the Company's Scientific Advisory Board;
(b) in any single calendar year options to directors, employees and consultants
of the Company and warrants to Hong Zhang or the members of the Company's
Scientific Advisory Board (issued in accordance with Section 4.10(a)) in an
aggregate amount greater than 2.5% of the primary shares outstanding; and (c)
any warrants to acquire shares of Common Stock other than in a future financing.
For purposes of this Section 4.10, the Braswell Securities shall be deemed to
have been issued prior to the Closing Date.
 
411.    Debt Payments. All amounts of debt owed by the Company to Timothy P.
O'Hayer at the Closing Date (whether or not then payable) shall be paid in full
within three months following the Closing Date. The Company will use its best
efforts to, within three months following the Closing Date, either (i) pay in
full all amounts of debt owed by the Company to each of the DIP Financers at the
Closing Date (whether or not then payable), or (ii) have each of the DIP
Financers convert such debt into an equity interest in the Company. The "DIP
Financers" shall mean Dr. Glynn A. Bergaron, John E. Matthews, K. Russell
Simpson, Julian Stern, Curtis Anderson, James Tobey Roberts, Dr. Jules
Paderewski, Memorial Health Trust and Dr. Joseph McKenzie.
 
4.12    Right of First Refusal for Warrants. Subject to Section 7.5, if a
Purchaser (the “Transferring Purchaser”) proposes to transfer any Warrant(s)
(the "Transfer Warrants"), then the Transferring Purchaser shall promptly give
written notice (the "Transfer Notice") of such proposed transfer to the Lead
Purchaser pursuant to Section 7.2 hereof. The Transfer Notice shall set forth
the terms and conditions of the proposed transfer, including, without
limitation, the number of Warrant Shares issuable upon exercise of each Transfer
Warrant, the cash consideration to be paid per warrant (or, in the event that
the consideration is other than cash, the value of the consideration as
determined in good faith by the Transferring
 
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Purchaser) (the "Purchase Price Per Warrant"), and the name and address of each
prospective purchaser or transferee (each, a "Proposed Transferee"). The
Transferring Purchaser shall enclose with the Transfer Notice a copy of any
written offer, letter of intent or other written document signed by the Proposed
Transferee(s) setting forth the proposed terms and conditions of the transfer.
For a period of three (3) days following the date (the "Transfer Notice Date")
on which the Transfer Notice is given to the Lead Purchaser (the "Lead Purchaser
Acceptance Period"), the Lead Purchaser shall have the right to purchase such
Warrant(s) on the same terms and conditions as set forth in the Transfer Notice.
If the Lead Purchaser desires to exercise its right to purchase all or any
portion of such Transfer Warrants, it shall give written notice (the "Lead
Investor Notice") to the Transferring Purchaser, with a copy to the Company, no
later than the expiration of the Lead Investor Acceptance Period. The Lead
Investor Notice shall state that the Lead Investor desires to purchase all of
the Transfer Warrants or, if the Lead Investor desires to purchase less than all
of the Transfer Warrants, the number of Transfer Warrants the Lead Investor
desires to purchase. If the Transferring Purchaser fails or refuses to deliver
on a timely basis a certificate or certificates representing such Transfer
Warrants properly endorsed for transfer, the Company shall effect the transfer
of the Transfer Warrants to the Lead Purchaser in accordance with this Section
4.12 and thereafter the Transferring Purchaser shall look only to the Lead
Purchaser for payment. 
 
ARTICLE V.
CONDITIONS
 
5.1  Closing.
 
a.  Conditions Precedent to the Obligation of the Company to Sell the Shares and
the Warrants. The obligation of the Company to sell the Shares and the Warrants
is subject to the satisfaction or waiver by the Company, at or before the
Closing Date, of each of the following conditions:
 
(i)  the representations and warranties of the Purchasers in this Agreement
shall be true and correct in all material respects as of the date when made and
as of the Closing Date;
 
(ii)  the Purchasers shall have performed, satisfied and complied in all
material respects with all covenants, agreements and conditions required by this
Agreement to be performed, satisfied or complied with by the Purchasers at or
before the Closing Date; and
 
(iii)  no statute, rule, regulation, executive order, decree, ruling or
injunction shall have been enacted, entered, promulgated or endorsed by any
court or governmental authority of competent jurisdiction which prohibits the
consummation of any of the transactions contemplated by this Agreement.
 
b.  Conditions Precedent to the Obligation of the Purchasers to Purchase the
Shares and Warrants at the Closing. The obligation of the Purchasers hereunder
to acquire and pay for the Shares and the Warrant at the Closing shall be
several and not joint and is subject to the satisfaction or waiver by the
Purchasers, at or before the Closing Date, of each of the following conditions:
 
(i)  the representations and warranties of the Company set forth in this
Agreement shall be true and correct in all material respects as of the date when
made and as of the Closing Date;
 
(ii)  the Company shall have performed, satisfied and complied in all material
respects with all covenants, agreements and conditions required by this
Agreement to be performed, satisfied or complied with by the Company at or
before the Closing Date;
 
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(iii)  no statute, rule, regulation, executive order, decree, ruling or
injunction shall have been enacted, entered, promulgated or endorsed by any
court or governmental authority of competent jurisdiction which prohibits the
consummation of any of the transactions contemplated by this Agreement;
 
(iv)     all Required Approvals shall have been obtained;
 
(v)  the Minimum Amount shall have been subscribed for;
 
(vi)     execution and delivery by each of the managers and employees of the
Company of the Management Lockup Agreement in the form attached hereto as
Exhibit C;
 
(vii)     the sales to the Purchasers hereunder shall not result in gross cash
proceeds to the Company of greater than the Maximum Amount;
 
(viii)    delivery of all items deliverable under Section 1.2(c);

(ix)       no Material Adverse Effect shall have occurred or been threatened
(and no condition, event or development shall have occurred or been threatened
involving a prospective Material Adverse Effect) in respect of the Company or
any of its subsidiaries between the date of this Agreement and the Closing Date;
and

(x)        from the date hereof to the Closing Date, trading in the Common Stock
shall not have been suspended by the Commission or the Company’s principal
trading market (except for any suspension of trading of limited duration agreed
to by the Company, which suspension shall be terminated prior to the Closing),
and, at any time prior to the Closing Date, trading in securities generally as
reported by Bloomberg L.P. shall not have been suspended or limited, or minimum
prices shall not have been established on securities whose trades are reported
by such service, or on any trading market, nor shall a banking moratorium have
been declared either by the United States or New York State authorities nor
shall there have occurred any material outbreak or escalation of hostilities or
other national or international calamity of such magnitude in its effect on, or
any material adverse change in, any financial market which, in each case, in the
reasonable judgment of each Purchaser, makes it impracticable or inadvisable to
purchase the Shares and the Warrants at the Closing.

ARTICLE VI.
INDEMNIFICATION
 
6.1  Indemnification.
 
a.  By the Company. The Company will indemnify and hold each Purchaser harmless
from any and all losses, liabilities, obligations, claims, contingencies,
damages, costs and expenses, including all judgments, amounts paid in
settlements, court costs and reasonable attorneys’ fees and costs of
investigation that such Purchaser may suffer or incur as a result of or relating
to any misrepresentation, breach or inaccuracy, or any allegation by a third
party that, if true, would constitute a breach or inaccuracy, of any of the
representations, warranties, covenants or agreements made by the Company in this
Agreement; provided, however, that any and all payments, in the aggregate, made
or due by the Company as a result of the obligations of this Section 6.1 shall
be limited to, and in no case shall exceed, the Purchase Price paid by such
Purchaser, as stated in Section 1.1 herein.
 
b.  By the Purchasers. Each Purchaser will indemnify and hold the Company
harmless from any and all losses, liabilities, obligations, claims,
contingencies, damages, costs and expenses, including all judgments, amounts
paid in settlements, court costs and reasonable attorneys’ fees and costs of
investigation that the Company may suffer or incur as a result of or relating to
any misrepresentation, breach or inaccuracy, or any allegation by a third party
that, if true, would constitute a breach or inaccuracy, of any
 
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of the representations, warranties, covenants or agreements made by such
Purchaser in this Agreement; provided, however, that any and all payments, in
the aggregate, made or due by such Purchaser as a result of the obligations of
this Section 6.1 shall be limited to, and in no case shall exceed, the amount of
the Purchase Price (but no credit shall be granted for such payment for any
obligation of the Purchasers pursuant to this Section 6.1) paid by such
Purchaser, as stated in Section 1.1 herein.
 
c.  Registration-Related Indemnification.
 
(i)  For purposes of this Section 6.1(c):
 
(a)  “Equity Securities” shall mean (i) the Shares and the Warrant Shares, and
(ii) any equity securities issued as a distribution with respect to or in
exchange for or in replacement for any of the shares referred to in clause (i).
 
(b)  “Registrable Securities” shall mean any Equity Securities until the earlier
of the date on which (i) a registration statement covering such Equity
Securities has been declared effective by the Commission and such Equity
Securities have been disposed of pursuant to such effective registration
statement, (ii) such Equity Securities are sold under circumstances in which all
the applicable conditions of Rule 144 (or any similar provisions then in force)
under the Securities Act are met, or such Equity Securities may be sold in a
single transaction under Rule 144(k) (or any similar provision then in force)
under the Securities Act, and are freely tradable after such sale by the
transferee, (iii) the Company has delivered a new certificate or other evidence
of ownership for such Equity Securities not bearing a legend restricting further
transfer and such Equity Securities may be resold without registration under the
Equity Securities Act or (iv) such Securities shall have been sold or otherwise
disposed of by the Purchasers (other than as permitted under Section 7.5 or to
the Lead Purchaser pursuant to Section 4.12).
 
 
(c)  A person shall be deemed to be a holder of such Registrable Securities
(each a “Holder”) whenever such Person is the registered holder of such
Registrable Securities on the Company’s books and records.
 
(ii)  The Company agrees, to the maximum extent permitted by law, to indemnify
and hold harmless (i) each Holder covered by any Registration Statement, (ii)
each other Person who participates as an underwriter in the offering or sale of
such securities, (iii) each person, if any, who controls (within the meaning of
Section 15 of the Securities Act or Section 20 of the Exchange Act) any such
Holder or underwriter (any of the persons referred to in this clause (iii) being
hereinafter referred to as a “controlling person”) and (iv) the respective
officers, directors, partners, employees, representatives and agents of any such
Holder or underwriter or any controlling person (any person referred to in
clause (i), (ii), (iii) or (iv) may hereinafter be referred to as an
“Indemnified Person”), from and against any and all losses, claims, damages,
liabilities, judgments or expenses, joint or several (or actions or proceedings,
whether commenced or threatened, in respect thereof), including, without
limitation, interest, penalties, and attorneys’ fees and disbursements, asserted
against, resulting to, imposed upon or incurred by such Indemnified Person
(collectively, “Claims”), to which such Indemnified Person may become subject,
directly or indirectly, under either Section 15 of the Securities Act or Section
20 of the Exchange Act or otherwise, insofar as such Claims arise out of or are
based upon, or are caused by any untrue statement or alleged untrue statement of
a material fact contained in any Registration Statement or Prospectus (or any
amendment or supplement thereto), or any omission or alleged omission to state
therein a material fact required to be stated therein or necessary to make the
statements therein not misleading, or a violation by the Company of the
Securities Act or any state securities law, or any rule or regulation
promulgated under the Securities Act or any state securities law, or any other
law applicable to the Company relating to any
 
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such registration or qualification, except insofar as such losses, claims,
damages, liabilities, judgments or expenses of any such Indemnified Person; (x)
are caused by any such untrue statement or omission or alleged untrue statement
or omission that is based upon information relating to such Indemnified Person
furnished in writing to the Company by or on behalf of any of such Indemnified
Person expressly for use therein; or (y) with respect to the preliminary
Prospectus, result from the fact that such Holder sold Equity Securities to a
person to whom there was not sent or given, at or prior to the written
confirmation of such sale, a copy of the Prospectus, as amended or supplemented,
if the Company shall have previously furnished copies thereof to such Holder in
accordance with this Agreement and said Prospectus, as amended or supplemented,
would have corrected such untrue statement or omission. Such indemnity shall
remain in full force and effect regardless of any investigation made by or on
behalf of any Indemnified Person and shall survive the transfer of such
securities by such Holder.
 
(iii)  In case any action shall be brought or asserted against any of the
Indemnified Persons with respect to which indemnity may be sought against the
Company, such Indemnified Person shall promptly notify the Company and the
Company shall assume the defense thereof with counsel reasonably satisfactory to
the Indemnified Persons. Such Indemnified Person shall have the right to employ
separate counsel in any such action and to participate in the defense thereof,
but the fees and expenses of such counsel shall be at the expense of the
Indemnified Person unless (i) the employment of such counsel shall have been
specifically authorized in writing by the Company, (ii) the Company shall have
failed to assume the defense and employ counsel or (iii) the named parties to
any such action (including any implied parties) include both the Indemnified
Person and the Company and the Indemnified Person shall have been advised in
writing by its counsel that there may be one or more legal defenses available to
it which are materially different from or additional to those available to the
Company, it being understood, however, that the Company shall not, in connection
with such action or similar or related actions or proceedings arising out of the
same general allegations or circumstances, be liable for the reasonable fees and
expenses of more than one separate firm of attorneys (in addition to any local
counsel) at any time for all the Indemnified Persons, which firm shall be (x)
designated by such Indemnified Persons and (y) reasonably satisfactory to the
Company. The Company shall not be liable for any settlement of any such action
or proceeding effected without the Company’s prior written consent, which
consent shall not be withheld unreasonably, and the Company agrees to indemnify
and hold harmless any Indemnified Person from and against any loss, claim,
damage, liability, judgment or expense by reason of any settlement of any action
effected with the written consent of the Company. The Company shall not, without
the prior written consent of each Indemnified Person, which shall not be
unreasonably withheld, settle or compromise or consent to the entry of judgment
on or otherwise seek to terminate any pending or threatened action, claim,
litigation or proceeding in respect of which indemnification or contribution may
be sought hereunder (whether or not any Indemnified Person is a party thereto),
unless such settlement, compromise, consent or termination includes an
unconditional release of each Indemnified Person from all liability arising out
of such action, claim litigation or proceeding.
 
(iv)  Each Holder of Registrable Securities covered by any Registration
Statement agrees, severally and not jointly, to indemnify and hold harmless the
Company and its directors, officers and any person controlling (within the
meaning of Section 15 of the Securities Act or Section 20 of the Exchange Act)
the Company, and the respective officers, directors, partners, employees,
representatives and agents of each person, to the same extent as the foregoing
indemnity from the Company to each of the Indemnified Persons, but only (i) (x)
with respect to actions based on information relating to such Holder furnished
in writing by or on behalf of such Holder expressly for use in any Registration
Statement or Prospectus, or (y) with respect to the preliminary Prospectus, any
matters which result from the fact that such Holder sold Equity Securities to a
person to whom there was not sent or given, at or prior to the written
confirmation of such sale, a copy of the Prospectus, as amended or supplemented,
if the Company shall have previously furnished copies thereof to such Holder in
accordance with this Agreement and said Prospectus, as amended or supplemented,
would have corrected such untrue statement or
 
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omission, and (ii) to the extent of the net cash proceeds, if any, received by
such Holder from the sale or other disposition of his or its Registrable
Securities covered by such Registration Statement. In case any action or
proceeding shall be brought against the Company or its directors or officers or
any such controlling person in respect of which indemnity may be sought against
a Holder of Registrable Securities covered by any Registration Statement, such
Holder shall have the rights and duties given the Company in Section 6.1(c)(ii),
and the Company or its directors or officers or such controlling person shall
have the rights and duties given to each Holder by Section 6.1(c)(ii). Such
indemnity shall remain in full force and effect regardless of any investigation
made by or on behalf of any the Company or any other Indemnified Person and
shall survive the transfer of securities by any applicable Holder.
 
(v)  If the indemnification provided for in this Section 6.1(c) is unavailable
to an indemnified party under Section 6.1(c)(ii), (iii) or (iv) (other than by
reason of exceptions provided in those Sections) in respect of any losses,
claims, damages, liabilities, judgments or expenses referred to therein, then
each applicable indemnifying party (in the case of the Holders severally and not
jointly), in lieu of indemnifying such indemnified party, shall contribute to
the amount paid or payable by such indemnified party as a result of such losses,
claims damages, liabilities, judgments or expenses (i) in such proportion as is
appropriate to reflect the relative benefits received by the Company on the one
hand and the Holder on the other hand from sale of Registrable Securities or
(ii) if such allocation provided by clause (i) above is not permitted by
applicable law, in such proportion as is appropriate to reflect not only the
relative benefits referred to in clause (i) above but also the relative fault of
the Company and such Holder in connection with the statements or omissions which
resulted in such losses, claims, damages, liabilities, judgments or expenses, as
well as any other relevant equitable considerations. The relative fault of the
Company on the one hand and of such Holder on the other shall be determined by
reference to, among other things, whether the untrue or alleged untrue statement
of a material fact or the omission or alleged omission to state a material fact
relates to information supplied by the Company or by such Holder and the parties
relative intent, knowledge, access to information and opportunity to correct or
prevent such statement or omission. The amount paid to a party as a result of
the losses, claims, damages, liabilities judgments and expenses referred to
above shall be deemed to include, subject to the limitations set forth in
Section 6.1(c)(iii) and Section 6.1(c)(iv), any legal or other fees or expenses
reasonably incurred by such party in connection with investigating or defending
any action or claim.
 
(vi)  The Company and each Holder of Registrable Securities covered by any
Registration Statement agree that it would not be just and equitable if
contribution pursuant to this Section 6.1(c)(vi) were determined by pro rata
allocation (even if the Holders were treated as one entity for such purpose) or
by any other method of allocation which does not take into account the equitable
considerations referred to in the immediately preceding paragraph.
Notwithstanding the provisions of this Section 6.1(c)(vi), no Holder (and none
of its related Indemnified Persons) shall be required to contribute, in the
aggregate, any amount in excess of the amount by which the dollar amount of
proceeds received by such Holder upon the sale of the Registrable Securities
exceeds the amount of any damages which such Holder has otherwise been required
to pay by reason of such untrue statement or omission or alleged omission. No
person guilty of fraudulent misrepresentations (within the meaning of Section
11(f) of the Securities Act) shall be entitled to contribution from any person
who was not guilty of such fraudulent misrepresentation.
 
(vii)  The indemnity and contribution provisions contained in this Section
6.1(c) are in addition to any liability which the indemnifying person may
otherwise have to the Indemnified persons referred to above.
 
ARTICLE VII.
MISCELLANEOUS
 

7.1  Entire Agreement. This Agreement, together with the Schedules and Exhibits
hereto, contain the entire understanding of the parties with respect to the
subject matter hereof and supersedes all prior agreements and understandings,
oral or written, with respect to such matters.
 
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7.2  Notices. Whenever it is provided herein that any notice, demand, request,
consent, approval, declaration or other communication shall or may be given to
any of the parties by another, or whenever any of the parties desires to give
another any such communication with respect to this Agreement, each such notice,
demand, request, consent, approval, declaration or other communication shall be
in writing, and shall be delivered in person with receipt acknowledged or by
registered or certified mail, return receipt requested, postage prepaid, or by
telecopy and confirmed by telecopy answerback addressed as follows:
 
If to the Company:  
With a Copy to: 
   
Health Discovery Corporation
2 East Bryan Street, Suite #601
Savannah, GA 31401
Attn: Daniel R. Furth
Facsimile: (912) 443-1989
Powell Goldstein LLP
1201 W. Peachtree Street, N.E.
14th Floor
Atlanta, Georgia 30309
Attn: Todd Wade, Esq.
Facsimile: (404) 572-6999
   
If to the Purchasers:
     
To the addresses listed on the
                signature page of this Agreement
 

or at such other address as may be substituted by notice given as herein
provided. The giving of any notice required hereunder may be waived in writing
by the party entitled to receive such notice. Every notice, demand, request,
consent, approval, declaration or other communication hereunder shall be deemed
to have been duly given and effective on the earliest of (a) the date of
transmission, if such notice or communication is delivered via facsimile prior
to 5:30 p.m. (New York City time) on a business day, (b) the next business day
after the date of transmission, if such notice or communication is delivered via
facsimile on a day that is not a business day or later than 5:30 p.m. (New York
City time) on any business day, (c) the business day following the date of
mailing, if sent by a U.S. nationally recognized overnight courier service, or
(d) upon actual receipt by the party to whom such notice is required to be
given. As used herein, a “business day” means any day except Saturday, Sunday or
a day which is a federal legal holiday or a day on which banking institutions in
the State of New York are authorized or required by law or other governmental
action to close.
 
7.3  Amendments; Waivers. No provision of this Agreement may be waived or
amended except in a written instrument signed, in the case of an amendment, by
both the Company and each of the Purchasers or, in the case of a waiver, by the
party against whom enforcement of any such waiver is sought. No waiver of any
default with respect to any provision, condition or requirement of this
Agreement shall be deemed to be a continuing waiver in the future or a waiver of
any other provision, condition or requirement hereof, nor shall any delay or
omission of either party to exercise any right hereunder in any manner impair
the exercise of any such right accruing to it thereafter.
 
7.4  Headings. The headings herein are for convenience only, do not constitute a
part of this Agreement, and shall not be deemed to limit or affect any of the
provisions hereof.
 
7.5  Successors and Assigns; Assignability; No Third-Party Beneficiaries.
Neither this Agreement nor any right, remedy, obligation or liability arising
hereunder, or by reason hereof, shall be assignable by the Purchasers without
the prior written consent of the Company; provided, however, that each Purchaser
may assign any of its rights under this Agreement to any of its affiliates. In
the event that this Agreement is assigned, all covenants contained herein shall
bind and inure to the benefit of the parties hereto and their respective
successors and assigns. 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.  
 
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7.6  Governing Law; Waiver of Jury Trial. All questions concerning the
construction, validity, enforcement and interpretation of this Agreement shall
be governed by and construed and enforced in accordance with the internal laws
of the State of Georgia, without regard to the principles of conflicts of law
thereof. Each party agrees that all proceedings concerning the interpretations,
enforcement and defense of the transactions contemplated by this Agreement
(whether brought against a party hereto or its respective affiliates, directors,
officers, shareholders, employees or agents) (each a “Proceeding”) shall be
commenced exclusively in the state and federal courts sitting in the Atlanta,
Georgia. Each party hereto hereby irrevocably submits to the exclusive
jurisdiction of the state and federal courts sitting in the Atlanta, Georgia for
the adjudication of any dispute hereunder or in connection herewith or with any
transaction contemplated hereby or discussed herein, and hereby irrevocably
waives, and agrees not to assert in any Proceeding, any claim that it is not
personally subject to the jurisdiction of any such court, that such Proceeding
is improper. Each party hereto hereby irrevocably waives personal service of
process and consents to process being served in any such Proceeding by mailing a
copy thereof via registered or certified mail or overnight delivery (with
evidence of delivery) to such party at the address in effect for notices to it
under this Agreement and agrees that such service shall constitute good and
sufficient service of process and notice thereof. Nothing contained herein shall
be deemed to limit in any way any right to serve process in any manner permitted
by law. Each party hereto hereby irrevocably waives, to the fullest extent
permitted by applicable law, any and all right to trial by jury in any legal
proceeding arising out of or relating to this Agreement or the transactions
contemplated hereby. If either party shall commence a Proceeding to enforce any
provisions of this Agreement, then the prevailing party in such Proceeding shall
be reimbursed by the other party for its attorney’s fees and other costs and
expenses incurred with the investigation, preparation and prosecution of such
Proceeding.
 
7.7  Survival. The representations, warranties, agreements and covenants
contained herein shall survive following the Closing.
 
7.8  Counterparts; Execution. This Agreement may be executed in any number of
counterparts, each of which shall be deemed to be an original and all of which
together shall be deemed to be one and the same instrument. In the event that
any signature is delivered by facsimile transmission, such signature shall
create a valid and binding obligation of the party executing (or on whose behalf
such signature is executed) with the same force and effect as if such facsimile
signature page were an original thereof.
 
7.9  Publicity. The Purchasers shall not issue any press release or make any
public disclosure regarding the transactions contemplated hereby unless such
press release or public disclosure is approved by the Company in advance.
Notwithstanding the foregoing, each of the parties hereto may, in documents
required to be filed by it with the SEC or other regulatory bodies, make such
statements with respect to the transactions contemplated hereby as each may be
advised by counsel is legally necessary or advisable, and may make such
disclosure as it is advised by its counsel is required by law.
 
7.10    Severability. In case any one or more of the provisions of this
Agreement shall be invalid or unenforceable in any respect, the validity and
enforceability of the remaining terms and provisions of this Agreement shall not
in any way be affected or impaired thereby and the parties will attempt to agree
upon a valid and enforceable provision which shall be a reasonable substitute
thereof, and upon so agreeing, shall incorporate such substitute provision in
this Agreement.
 
7.11    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.
 
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7.12    Remedies. In addition to being entitled to exercise all rights provided
herein or granted by law, including recovery of damages, the Purchasers and the
Company will be entitled to specific performance under this Agreement. The
parties agree that monetary damages will not be adequate compensation for any
loss incurred by reason of any breach of obligations described in the foregoing
sentence and hereby agree to waive in any action for specific performance of any
such obligation the defense that a remedy at law would be adequate.
 
7.13    Fees and Expenses. If the Closing occurs or if the Closing does not
occur at the election of the Company, the Company will pay the reasonable legal
fees of the Lead Purchaser in an aggregate amount not to exceed $25,000.00.
Except as provided herein, each Party shall pay the fees and expenses of its own
advisers, accountants and other experts.
 
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IN WITNESS WHEREOF, the parties hereto have caused this Securities Purchase
Agreement to be duly executed by their respective authorized persons as of the
day and year below.

                    HEALTH DISCOVERY CORPORATION

                    By:                        
                   Name:                                                 
          
                                       Title:                  
                                           
 
                    Date: __________________________, 2007
 

IN MAKING AN INVESTMENT DECISION, THE PURCHASER MUST RELY ON ITS OWN EXAMINATION
OF THE COMPANY AND THE TERMS OF THE SALE OF THE SHARES AND WARRANT, INCLUDING
THE MERITS AND RISKS INVOLVED. THESE SECURITIES HAVE NOT BEEN RECOMMENDED BY ANY
FEDERAL OR STATE SECURITIES COMMISSION OR REGULATORY AUTHORITY. FURTHERMORE, THE
FOREGOING AUTHORITIES HAVE NOT CONFIRMED THE ACCURACY OR DETERMINED THE ADEQUACY
OF THIS DOCUMENT. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.

                    PURCHASER

                    Print
Name:                                                              
 
                    Signature:                              
                                 

                     Date: __________________________, 2007

                    Address:                                                          
       

                                                                         
                            
 
                                                                                                      

 
                                              
                                                       
 

                    Resident of the State
of                                         
 
 
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SCHEDULE A

Schedule of Cash Purchasers

Name
Purchase Price
Number of Shares
Purchased
Number of Tranche 1
Warrants Purchased
Number of Tranche 2
Warrants Purchased

 
 
 
 
 

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SCHEDULE B

Schedule of Lender Purchasers

Name
Purchase Price
(Principal +
Accrued Interest)
Number of Shares
Purchased
Number of Tranche 1
Warrants Purchased
Number of Tranche 2
Warrants Purchased

 
 
 
 
 
 
26