SECURITIES PURCHASE AGREEMENT
 
THIS SECURITIES PURCHASE AGREEMENT (the “Agreement”), dated as of November 17,
2006 (the “Agreement Date”), by and among DYADIC INTERNATIONAL, INC., a Delaware
corporation with headquarters located at 140 Intracoastal Pointe Drive, Suite
404, Jupiter, Florida 33477 (the “Company”), and the investors listed on the
Schedule of Investors attached hereto as Exhibit A (individually, an “Investor”
and collectively, the “Investors”).
 
BACKGROUND
 
A. The Company and each Investor are executing and delivering this Agreement in
reliance upon the exemption from registration afforded by Section 4(2) of the
Securities Act of 1933, as amended (the “Securities Act”), and Rule 506 of
Regulation D (“Regulation D”) as promulgated by the United States Securities and
Exchange Commission (the “SEC”) under the Securities Act.
 
B. Each Investor, severally and not jointly, wishes to purchase, and the Company
wishes to sell, upon the terms and conditions stated in this Agreement, (i) that
aggregate number of shares of the Common Stock, par value $.001 per share, of
the Company (the “Common Stock”), set forth opposite such Investor’s name in
column two (2) on the Schedule of Investors in Exhibit A (which aggregate amount
for all Investors together shall be [INSERT FINAL SHARE NUMBER] shares of Common
Stock and shall collectively be referred to herein as the “Common Shares”) and
(ii) warrants, in substantially the form attached hereto as Exhibit F (the
“Warrants”) to acquire up to that number of additional shares of Common Stock
set forth opposite such Investor’s name in column three (3) on the Schedule of
Investors (the shares of Common Stock issuable upon exercise of or otherwise
pursuant to the Warrants, collectively, the “Warrant Shares”).
 
C. The Common Shares, the Warrants and the Warrant Shares issued pursuant to
this Agreement are collectively are referred to herein as the “Securities.”
 
NOW, THEREFORE, IN CONSIDERATION of the mutual covenants contained in this
Agreement, and for other good and valuable consideration the receipt and
adequacy of which are hereby acknowledged, the Company and the Investors agree
as follows:
 
    ARTICLE I  
 
DEFINITIONS
 
1.1  Definitions.
 
  In addition to the terms defined elsewhere in this Agreement, the following
terms have the meanings indicated:
 
“Abengoa” means Abengoa Bioenergy R&D, Inc.
 
“Abengoa Securities Purchase Agreement” means that certain Securities Purchase
Agreement dated as of October 26, 2006 by and among the Company and Abengoa.
 
 

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“Affiliate” means any Person that, directly or indirectly through one or more
intermediaries, controls or is controlled by or is under common control with a
Person, as such terms are used in and construed under Rule 144 under the
Securities Act.
 
“Agent” has the meaning set forth in Section 3.1(l).
 
“Agreement” has the meaning set forth in the Preamble.
 
“Best Efforts” means the efforts that a prudent person desirous of achieving a
result would use in similar circumstances to ensure that such result is achieved
as expeditiously as practical; provided, however, that an obligation to use Best
Efforts under this Agreement does not require the Company to dispose of or make
any change to its business, expend any material funds or incur any other
material burden.
 
“Business Day” means any day other than Saturday, Sunday or other day on which
commercial banks in The City of New York are authorized or required by law to
remain closed.
 
“Closing” has the meaning set forth in Section 2.1.
 
“Closing Date” means the date and time of the Closing, on the later of: (x) two
(2) Business Days following the Agreement Date or (y) two (2) Business Days
following the date of the approval of the listing of the Common Shares and
Warrant Shares by the Trading Market (or such other date and time as is mutually
agreed to by the Company and each Investor).
 
“Closing Price” means, for any date, the closing price per share of the Common
Stock for such date (or the nearest preceding date) on the American Stock
Exchange, or if the Common Stock is not then listed on the American Stock
Exchange, such other primary Eligible Market or exchange or quotation system on
which the Common Stock is then listed or quoted.
 
“Company” has the meaning set forth in the Preamble.
 
“Company Counsel” means Greenberg Traurig, LLP, counsel to the Company.
 
“Common Shares” has the meaning set forth in Recital B.
 
“Common Stock” has the meaning set forth in Recital B.
 
“Common Stock Equivalents” means, collectively, Options and Convertible
Securities.
 
“Contingent Obligation” has the meaning set forth in Section 3.1(aa).
 
“Convertible Securities” means any stock or securities (other than Options)
convertible into or exercisable or exchangeable for Common Stock.
 
“Disclosure Materials” has the meaning set forth in Section 3.1(g).
 
“Effective Date” means the date that the Registration Statement is first
declared effective by the SEC.
 
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“Effectiveness Period” has the meaning set forth in Section 6.1(b).
 
“8-K Filing” has the meaning set forth in Section 4.5.
 
“Eligible Market” means any of the New York Stock Exchange, the American Stock
Exchange, The Nasdaq National Market or The Nasdaq Capital Market.
 
“Environmental Laws” has the meaning set forth in Section 3.1(dd).
 
“Event” has the meaning set forth in Section 6.1(d).
 
“Event Payments” has the meaning set forth in Section 6.1(d).
 
“Exchange Act” means the Securities Exchange Act of 1934, as amended.
 
“Excluded Events” has the meaning set forth in Section 6.1(d)(ii).
 
“Excluded Investors” means Cowen and Company, LLC and its Affiliates.
 
“Filing Date” means forty-five (45) days after the Closing Date.
 
“GAAP” has the meaning set forth in Section 3.1(g).
 
“Hazardous Materials” has the meaning set forth in Section 3.1(dd).
 
“Indebtedness” has the meaning set forth in Section 3.1(aa).
 
“Indemnified Party” has the meaning set forth in Section 6.4(c).
 
“Indemnifying Party” has the meaning set forth in Section 6.4(c).
 
“Insolvent” has the meaning set forth in Section 3.1(h).
 
“Intellectual Property Rights” has the meaning set forth in Section 3.1(t).
 
“Investor” has the meaning set forth in the Preamble.
 
“Lien” means any lien, charge, claim, security interest, encumbrance, right of
first refusal or other restriction.
 
“Losses” means any and all losses, claims, damages, liabilities, settlement
costs and expenses, including, without limitation and reasonable attorneys’
fees.
 
“Material Adverse Effect” means (i) a material adverse effect on the results of
operations, assets, business or financial condition of the Company and the
Subsidiaries, taken as a whole on a consolidated basis, or (ii) an event or
occurrence that materially and adversely impairs the Company's ability to
perform its obligations under any of the Transaction Documents, provided, that
none of the following alone shall be deemed, in and of itself, to constitute a
Material Adverse Effect: (x) a change in the market price or trading volume of
the Common Stock or (y) changes in general economic conditions or changes
affecting the industry in which the Company operates generally (as opposed to
Company-specific changes) so long as such changes do not have a disproportionate
effect on the Company and its Subsidiaries taken as a whole.
 
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“Material Permits” has the meaning set forth in Section 3.1(v).
 
“Options” means any outstanding rights, warrants or options to subscribe for or
purchase Common Stock or Convertible Securities.
 
“Person” means any individual or corporation, partnership, trust, incorporated
or unincorporated association, joint venture, limited liability company, or
joint stock company.
 
“Proceeding” means an action, claim, suit, investigation or proceeding
(including, without limitation, or a partial proceeding, such as a deposition),
whether commenced or threatened in writing.
 
“Prospectus” means the prospectus included in the Registration Statement
(including, without limitation, a prospectus that includes any information
previously omitted from a prospectus filed as part of an effective registration
statement in reliance upon Rule 430A promulgated under the Securities Act), as
amended or supplemented by any prospectus supplement, with respect to the terms
of the offering of any portion of the Registrable Securities covered by the
Registration Statement, and all other amendments and supplements to the
Prospectus including post-effective amendments, and all material incorporated by
reference or deemed to be incorporated by reference in such Prospectus.
 
“Registrable Securities” means the Common Shares and the Warrant Shares issued
or issuable pursuant to the Transaction Documents, together with any securities
issued or issuable upon any stock split, dividend or other distribution,
recapitalization or similar event with respect to the foregoing.
 
“Registration Statement” means each registration statement required to be filed
under Article VI, including (in each case) the Prospectus, amendments and
supplements to such registration statement or Prospectus, including pre- and
post-effective amendments, all exhibits thereto, and all material incorporated
by reference or deemed to be incorporated by reference in such registration
statement.
 
“Regulation D” has the meaning set forth in Recital A.
 
“Related Person” has the meaning set forth in Section 4.6.
 
“Repurchase Notice” has the meaning set forth in Section 6.1.
 
“Repurchase Price” has the meaning set forth in Section 6.1.
 
“Required Effectiveness Date” means the date which is the earliest of (i) if the
Registration Statement does not become subject to review by the SEC, (a) one
hundred five (105) days after the Closing Date or (b) five (5) Trading Days
after the Company receives notification from the SEC that the Registration
Statement will not become subject to review and the Company fails to request to
accelerate the effectiveness of the Registration Statement, or (ii) if the
Registration Statement becomes subject to review by the SEC, one hundred
thirty-five (135) days after the Closing Date.
 
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“Rule 144,” “Rule 415,” and “Rule 424” means Rule 144, Rule 415 and Rule 424,
respectively, promulgated by the SEC pursuant to the Securities Act, as such
Rules may be amended from time to time, or any similar rule or regulation
hereafter adopted by the SEC having substantially the same effect as such Rule.
 
“SEC” has the meaning set forth in Recital A.
 
“SEC Reports” has the meaning set forth in Section 3.1(g).
 
“Securities” has the meaning set forth in Recital C.
 
“Securities Act” has the meaning set forth in Recital A.
 
“Shares” means shares of the Company’s Common Stock.
 
“Short Sales” has the meaning set forth in Section 3.2(h).
 
“Subsidiary” means any direct or indirect subsidiary of the Company.
 
“Trading Day” means (a) any day on which the Common Stock is listed or quoted
and traded on its primary Trading Market, (b) if the Common Stock is not then
listed or quoted and traded on any Eligible Market, then a day on which trading
occurs on the The Nasdaq National Market (or any successor thereto), or (c) if
trading ceases to occur on the The Nasdaq National Market (or any successor
thereto), any Business Day.
 
“Trading Market” means The American Stock Exchange or any other Eligible Market,
or any national securities exchange, market or trading or quotation facility on
which the Common Stock is then listed or quoted.
 
“Transaction Documents” means this Agreement, the schedules and exhibits
attached hereto, the Warrants and the Transfer Agent Instructions.
 
“Transfer Agent” means Continental Stock Transfer & Trust Company, or any
successor transfer agent for the Company.
 
“Transfer Agent Instructions” means, with respect to the Company, the
Irrevocable Transfer Agent Instructions, in the form of Exhibit E, executed by
the Company and delivered to and acknowledged in writing by the Transfer Agent.
 
“Warrants” has the meaning set forth in Recital B.
 
“Warrant Shares” has the meaning set forth in Recital B.
 
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    ARTICLE II  
 
PURCHASE AND SALE
 
2.1  Closing.
 
Subject to the terms and conditions set forth in this Agreement, at the Closing
the Company shall issue and sell to each Investor, and each Investor shall,
severally and not jointly, purchase from the Company, such number of Common
Shares and Warrants for the price set forth opposite such Investor's name on
Exhibit A hereto under the headings “Common Shares” and “Warrants”. The date and
time of the closing shall be 11:00 a.m., New York City Time, on the Closing Date
(the “Closing”). The Closing shall take place at the offices of the Company’s
Counsel.
 
2.2  Closing Deliveries.
 
(a)  At the Closing, the Company shall deliver or cause to be delivered to each
Investor the following:
 
(i)  one or more stock certificates (or copies thereof provided by the Transfer
Agent), free and clear of all restrictive and other legends (except as expressly
provided in Section 4.1(b) hereof), evidencing such number of Common Shares set
forth opposite such Investor’s name on Exhibit A hereto under the heading
“Common Shares,” registered in the name of such Investor;
 
(ii)  a Warrant, issued in the name of such Investor, pursuant to which such
Investor shall have the right to acquire such number of Warrant Shares set forth
opposite such Investor’s name on Exhibit A hereto under the heading “Warrant
Shares”;
 
(iii)  a legal opinion of Company Counsel, in the form of Exhibit C, executed by
such counsel and delivered to the Investors;
 
(iv)  duly executed Transfer Agent Instructions acknowledged by the Company’s
transfer agent; and
 
(v)  approval by the American Stock Exchange of an additional shares listing
application covering all of the Registrable Securities.
 
(b)  At the Closing, each Investor shall deliver or cause to be delivered to the
Company the purchase price set forth opposite such Investor’s name on Exhibit A
hereto under the heading “Purchase Price” in United States dollars and in
immediately available funds, by wire transfer to an account designated in
writing to such Investor by the Company for such purpose.
 
  ARTICLE III  
 
REPRESENTATIONS AND WARRANTIES
 
3.1  Representations and Warranties of the Company.
 
The Company hereby represents and warrants to the Investors as follows (which
representations and warranties shall be deemed to apply, where appropriate, to
each Subsidiary of the Company):
 
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(a)  Subsidiaries. The Company has no Subsidiaries other than those listed in
Schedule 3.1(a) hereto. Except as disclosed in Schedule 3.1(a) hereto, the
Company owns, directly or indirectly, all of the capital stock or comparable
equity interests of each Subsidiary free and clear of any Lien and all the
issued and outstanding shares of capital stock or comparable equity interest of
each Subsidiary are validly issued and are fully paid, non-assessable and free
of preemptive and similar rights.
 
(b)  Organization and Qualification. Each of the Company and the Subsidiaries is
an entity duly organized, validly existing and in good standing under the laws
of the jurisdiction of its incorporation or organization (as applicable), with
the requisite legal authority to own and use its properties and assets and to
carry on its business as currently conducted. Neither the Company nor any
Subsidiary is in violation of any of the provisions of its respective
certificate or articles of incorporation, bylaws or other organizational or
charter documents. Each of the Company and the Subsidiaries is duly qualified to
do business and is in good standing as a foreign corporation or other entity in
each jurisdiction in which the nature of the business conducted or property
owned by it makes such qualification necessary, except where the failure to be
so qualified or in good standing, as the case may be, would not, individually or
in the aggregate, have or reasonably be expected to result in a Material Adverse
Effect.
 
(c)  Authorization; Enforcement. The Company has the requisite corporate
authority to enter into and to consummate the transactions contemplated by each
of the Transaction Documents to which it is a party and otherwise to carry out
its obligations hereunder and thereunder. The execution and delivery of each of
the Transaction Documents to which it is a party by the Company and the
consummation by it of the transactions contemplated hereby and thereby have been
duly authorized by all necessary action on the part of the Company and no
further consent or action is required by the Company, its Board of Directors or
its stockholders. Each of the Transaction Documents to which it is a party has
been (or upon delivery will be) duly executed by the Company and is, or 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 may be limited by (i) applicable bankruptcy,
insolvency, reorganization or other laws of general application relating to or
affecting the enforcement of creditors rights generally, and (ii) the effect of
rules of law governing the availability of specific performance and other
equitable remedies.
 
(d)  No Conflicts. The execution, delivery and performance of the Transaction
Documents to which it is a party by the Company and the consummation by the
Company of the transactions contemplated hereby and thereby do not, and will
not, (i) conflict with or violate any provision of the Company’s or any
Subsidiary’s certificate or articles of incorporation, bylaws or other
organizational or charter documents, (ii) conflict with, or constitute a default
(or an event that 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 (with or without notice, lapse of time or both) of, any agreement,
credit facility, debt or other instrument (evidencing a Company or Subsidiary
debt or otherwise) or other understanding to which the Company or any Subsidiary
is a party or by which any property or asset of the Company or any Subsidiary is
bound, or affected, except to the extent that such conflict, default,
termination, amendment, acceleration or cancellation right would not reasonably
be expected to have a Material Adverse Effect, 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 or a
Subsidiary is subject (including, assuming the accuracy of the representations
and warranties of the Investors set forth in Section 3.2 hereof, federal and
state securities laws and regulations and the rules and regulations of any
self-regulatory organization to which the Company or its securities are subject,
including all applicable Trading Markets), or by which any property or asset of
the Company or a Subsidiary is bound or affected, except to the extent that such
violation would not reasonably be expected to have a Material Adverse Effect.
 
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(e)  The Securities. The Securities (including the Warrant Shares) are duly
authorized and, when issued and paid for in accordance with the Transaction
Documents, will be duly and validly issued, fully paid and nonassessable, free
and clear of all Liens except for restrictions on transfer imposed by applicable
federal and state securities laws and will not be subject to preemptive or
similar rights of stockholders (other than those imposed by the Investors). The
Company has reserved from its duly authorized capital stock the maximum number
of shares of Common Stock issuable upon exercise of the Warrants. The offer,
issuance and sale to the Investors of the Common Shares and the other Securities
are exempt from the registration requirements of the Securities Act.
 
(f)  Capitalization. The aggregate number of shares and type of all authorized,
issued and outstanding classes of capital stock, options and other securities of
the Company (whether or not presently convertible into or exercisable or
exchangeable for shares of capital stock of the Company) as of November 16 2006
is set forth in Schedule 3.1(f) hereto. All outstanding shares of capital stock
are duly authorized, validly issued, fully paid and nonassessable and have been
issued in compliance in all material respects with all applicable securities
laws. Except as disclosed in Schedule 3.1(f) hereto or disclosed in the SEC
Reports, the Company did not have outstanding at November 16, 2006 any other
options, warrants, script rights to subscribe to, calls or commitments of any
character whatsoever relating to, or securities, rights or obligations
convertible into or exercisable or exchangeable for, or entered into any
agreement giving any Person any right to subscribe for or acquire, any shares of
Common Stock, or securities or rights convertible or exchangeable into shares of
Common Stock. Except as set forth on Schedule 3.1(f) hereto or as disclosed in
the SEC Reports, and except for customary adjustments as a result of stock
dividends, stock splits, combinations of shares, reorganizations,
recapitalizations, reclassifications or other similar events, there are no
anti-dilution or price adjustment provisions contained in any security issued by
the Company (or in any agreement providing rights to security holders) and the
issuance and sale of the Securities will not obligate the Company to issue
shares of Common Stock or other securities to any Person (other than the
Investors) and will not result in a right of any holder of securities to adjust
the exercise, conversion, exchange or reset price under such securities. To the
knowledge of the Company, except as disclosed in the SEC Reports and any
Schedules filed with the SEC pursuant to Rule 13d-1 of the Exchange Act by
reporting persons or in Schedule 3.1(f) hereto, no Person or group of related
Persons beneficially owns (as determined pursuant to Rule 13d-3 under the
Exchange Act), or has the right to acquire, by agreement with or by obligation
binding upon the Company, beneficial ownership of in excess of 5% of the
outstanding Common Stock.
 
(g)  SEC Reports; Financial Statements. The Company has filed all reports
required to be filed by it under the Exchange Act, including pursuant to
Section 13(a) or 15(d) thereof, for the 12 months preceding the date hereof on a
timely basis or has received a valid extension of such time of filing and has
filed any such SEC Reports prior to the expiration of any such extension and has
filed all reports required to be filed by it under the Exchange Act, including
pursuant to Section 13(a) or 15(d) thereof, for the two years preceding the date
hereof. Such reports required to be filed by the Company under the Exchange Act,
including pursuant to Section 13(a) or 15(d) thereof, together with any
materials filed or furnished by the Company under the Exchange Act, whether or
not any such reports were required being collectively referred to herein as the
“SEC Reports” and, together with this Agreement and the Schedules to this
Agreement, the “Disclosure Materials”. As of their respective dates, the SEC
Reports filed by the Company complied in all material respects with the
requirements of the Securities Act and the Exchange Act and the rules and
regulations of the SEC promulgated thereunder, and none of the SEC Reports, when
filed by the Company, contained any untrue statement of a material fact or
omitted to state a material fact required to be stated therein or necessary in
order to make the statements therein, in the light of the circumstances under
which they were made, not misleading. The financial statements of the Company
included in the SEC Reports comply in all material respects with applicable
accounting requirements and the rules and regulations of the SEC with respect
thereto as in effect at the time of filing. Such financial statements have been
prepared in accordance with United States generally accepted accounting
principles applied on a consistent basis during the periods involved (“GAAP”),
except as may be otherwise specified in such financial statements, the notes
thereto and except that unaudited financial statements may not contain all
footnotes required by GAAP or may be condensed or summary statements, and fairly
present in all material respects the consolidated financial position of the
Company and its consolidated subsidiaries as of and for the dates thereof and
the results of operations and cash flows for the periods then ended, subject, in
the case of unaudited statements, to normal, year-end audit adjustments. All
material agreements to which the Company or any Subsidiary is a party or to
which the property or assets of the Company or any Subsidiary are subject are
included as part of or identified in the SEC Reports, to the extent such
agreements are required to be included or identified pursuant to the rules and
regulations of the SEC.
 
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(h)  Since the date of the latest audited financial statements included within
the SEC Reports, except as disclosed in the SEC Reports or in Schedule 3.1(h)
hereto, (i) there has been no event, occurrence or development that,
individually or in the aggregate, has had or that would result in a Material
Adverse Effect, (ii) the Company has not incurred any material liabilities other
than (A) trade payables and accrued expenses incurred in the ordinary course of
business consistent with past practice and (B) liabilities not required to be
reflected in the Company's financial statements pursuant to GAAP or required to
be disclosed in filings made with the SEC, (iii) the Company has not altered its
method of accounting or changed its auditors, except as disclosed in its SEC
Reports, (iv) the Company has not declared or made any dividend or distribution
of cash or other property to its stockholders, in their capacities as such, or
purchased, redeemed or made any agreements to purchase or redeem any shares of
its capital stock (except for repurchases by the Company of shares of capital
stock held by employees, officers, directors, or consultants pursuant to an
option of the Company to repurchase such shares upon the termination of
employment or services), and (v) the Company has not issued any equity
securities to any officer, director or Affiliate, except pursuant to existing
Company stock-based plans and Convertible Securities acquired and exercised by
the Chief Executive Officer of the Company and (vi) other than in the ordinary
course of business or as disclosed in Schedule 3.1(h) hereto or in the SEC
Reports, the Company has not sold, leased, licensed, transferred or assigned any
of its assets. The Company has not taken any steps to seek protection pursuant
to any bankruptcy law nor does the Company have any knowledge or reason to
believe that its creditors intend to initiate involuntary bankruptcy proceedings
or any actual knowledge of any fact which would reasonably lead a creditor to do
so. The Company is not as of the date hereof, and after giving effect to the
transactions contemplated hereby to occur at the applicable Closing, will not be
Insolvent (as defined below). For purposes of this Section 3.1(h), “Insolvent”
means (i) the present fair saleable value of the Company's assets is less than
the amount required to pay the Company's total Indebtedness (as defined in
Section 3.1(aa)), (ii) the Company is unable to pay its debts and liabilities,
subordinated, contingent or otherwise, as such debts and liabilities become
absolute and matured or (iii) the Company intends to incur or believes that it
will incur debts that would be beyond its ability to pay as such debts mature.
 
(i)  Absence of Litigation. Except as disclosed in the SEC Reports, there is no
action, suit, claim, or proceeding, or, to the Company's knowledge, inquiry or
investigation, before or by any court, public board, government agency,
self-regulatory organization or body pending or, to the knowledge of the
Company, threatened against or affecting the Company or any of its Subsidiaries
that could, individually or in the aggregate, have a Material Adverse Effect.
Neither the Company, nor any director or officer thereof, is or has been the
subject of any action involving a claim of violation of or liability under
federal or state securities laws or a claim of breach of fiduciary duty relating
to the Company. There has not been, and to the knowledge of the Company, there
is not pending or contemplated, any investigation by the SEC involving the
Company or any current or former director or officer of the Company. The Company
has not received any stop order or other order suspending the effectiveness of
any registration statement filed by the Company under the Exchange Act or the
Securities Act and, to the Company’s knowledge, the SEC has not issued any such
order. There are no material disagreements presently existing, or reasonably
anticipated by the Company to arise, between the accountants formerly or
presently employed by the Company.
 
(j)  Compliance. Except as described in Schedule 3.1(j), neither the Company nor
any Subsidiary, except in each case as would not, individually or in the
aggregate, reasonably be expected to have or result in a Material Adverse
Effect, (i) is in default under or in violation of (and no event has occurred
that has not been waived that, with notice or lapse of time or both, would
result in a default by the Company or any Subsidiary under), nor has the Company
or any Subsidiary received written notice of a claim that it is in default under
or that it is in violation of, any indenture, loan or credit agreement or any
other agreement or instrument to which it is a party or by which it or any of
its properties is bound (whether or not such default or violation has been
waived), (ii) is in violation of any order of any court, arbitrator or
governmental body, or (iii) is or has been in violation of any statute, rule or
regulation of any governmental authority.  
 
(k)  Title to Assets. The Company and the Subsidiaries have good and marketable
title to all real property owned and used in the conduct of their business as it
is presently conducted, and the Company and the Subsidiaries and good and
marketable title in all personal property owned and used in the conduct of their
business as it is presently conducted, in each case, other than the security
interest described in Schedule 3.1(aa), free and clear of all Liens, except for
Liens that do not, individually or in the aggregate, have or result in a
Material Adverse Effect. Any real property and facilities held under lease by
the Company and the Subsidiaries are held by them under valid, subsisting and
enforceable leases of which the Company and the Subsidiaries are in material
compliance.
 
 
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(l)  No General Solicitation; Placement Agent's Fees. Neither the Company, nor
any of its Affiliates, nor any Person acting on its or their behalf, has engaged
in any form of general solicitation or general advertising (within the meaning
of Regulation D) in connection with the offer or sale of the Securities. The
Company shall be responsible for the payment of any placement agent’s fees,
financial advisory fees, or brokers’ commission (other than for Persons engaged
by or on behalf of any Investor or its investment advisor) relating to or
arising out of the issuance of the Securities pursuant to this Agreement. The
Company shall pay, and hold each Investor harmless against, any liability, loss
or expense (including, without limitation, reasonable attorney's fees and
out-of-pocket expenses) arising in connection with any such claim for fees
arising out of the issuance of the Securities pursuant to this Agreement. The
Company acknowledges that is has engaged Cowen and Company, LLC as its exclusive
placement agent (the “Agent”) in connection with the sale of the Securities.
Other than the Agent, the Company has not engaged any placement agent or other
agent in connection with the sale of the Securities.
 
(m)  Private Placement. Neither the Company nor any of its Affiliates nor, any
Person acting on the Company’s behalf has, directly or indirectly, at any time
within the past six months, made any offer or sale of any security or
solicitation of any offer to buy any security under circumstances that would
(i) eliminate the availability of the exemption from registration under
Regulation D under the Securities Act in connection with the offer and sale by
the Company of the Securities as contemplated hereby or (ii) cause the offering
of the Securities pursuant to the Transaction Documents to be integrated with
prior offerings by the Company for purposes of any applicable law, regulation or
stockholder approval provisions, including, without limitation, under the rules
and regulations of any Trading Market. The Company is not required to be
registered as, and is not an Affiliate of, an “investment company” within the
meaning of the Investment Company Act of 1940, as amended. The Company is not
required to be registered as, a United States real property holding corporation
within the meaning of the Foreign Investment in Real Property Tax Act of 1980.
 
(n)  Form S-3 Eligibility. The Company is eligible to register the Common Shares
and the Warrant Shares for resale by the Investors using Form S-3 promulgated
under the Securities Act.
 
(o)  Listing and Maintenance Requirements. The Company has not, in the twelve
months preceding the date hereof, received notice (written or oral) from any
Trading Market on which the Common Stock is or has been listed or quoted to the
effect that the Company is not in compliance with the listing or maintenance
requirements of such Trading Market. The Company is in compliance with all such
listing and maintenance requirements.
 
(p)  Registration Rights. Except as described in Schedule 3.1(p) or as disclosed
in the SEC Reports, the Company has not granted or agreed to grant to any Person
any rights (including “piggy-back” registration rights) to have any securities
of the Company registered with the SEC or any other governmental authority that
have not been satisfied or waived.
 
 
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(q)  Application of Takeover Protections. There is no control share acquisition,
business combination, poison pill (including any distribution under a rights
agreement) or other similar anti-takeover provision under the Company’s charter
documents or the laws of its state of incorporation that is or could become
applicable to any of the Investors as a result of the Investors and the Company
fulfilling their obligations or exercising their rights under the Transaction
Documents, including, without limitation, as a result of the Company’s issuance
of the Securities and the Investors’ ownership of the Securities.
 
(r)  Disclosure. The Company confirms that neither it nor any officers,
directors or Affiliates, has provided any of the Investors (other than Excluded
Investors) or their agents or counsel with any information that constitutes or
might constitute material, nonpublic information (other than the existence and
terms of the issuance of Securities, as contemplated by this Agreement). The
Company confirms that neither it nor any officers, directors or Affiliates, has
provided any of the Investors (other than Excluded Investors) or their agents or
counsel with any information that constitutes or might constitute material,
nonpublic information (other than the existence and terms of the issuance of
Securities, as contemplated by this Agreement). The Company understands and
confirms that each of the Investors will rely on the foregoing representations
in effecting transactions in securities of the Company (other than Excluded
Investors). All disclosure provided by the Company to the Investors regarding
the Company, its business and the transactions contemplated hereby, including
the Schedules to this Agreement, furnished by or on the behalf of the Company
are true and correct in all material respects and do not contain any untrue
statement of a material fact or omit to state any material fact necessary in
order to make the statements made therein, in the light of the circumstances
under which they were made, not misleading. To the Company's knowledge, except
for the transactions contemplated by this Agreement, no event or circumstance
has occurred or information exists with respect to the Company or any of its
Subsidiaries or its or their business, properties, operations or financial
conditions, which, under applicable law, rule or regulation, requires public
disclosure or announcement by the Company but which has not been so publicly
announced or disclosed. The Company acknowledges and agrees that no Investor
(other than Excluded Investors) makes or has made any representations or
warranties with respect to the transactions contemplated hereby other than those
set forth in the Transaction Documents.
 
(s)  Acknowledgment Regarding Investors' Purchase of Securities. Based upon the
assumption that the transactions contemplated by this Agreement are consummated
in all material respects in conformity with the Transaction Documents, the
Company acknowledges and agrees that each of the Investors (other than Excluded
Investors) is acting solely in the capacity of an arm's length purchaser with
respect to the Transaction Documents and the transactions contemplated hereby
and thereby. The Company further acknowledges that no Investor (other than
Excluded Investors) is acting as a financial advisor or fiduciary of the Company
(or in any similar capacity) with respect to this Agreement and the transactions
contemplated hereby and any advice given by any Investor (other than Excluded
Investors) or any of their respective representatives or agents in connection
with the Transaction Documents and the transactions contemplated hereby and
thereby is merely incidental to the Investors’ purchase of the Securities. The
Company further represents to each Investor that the Company’s decision to enter
into this Agreement has been based solely on the independent evaluation of the
transactions contemplated hereby by the Company and its representatives.
 
 
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(t)  Patents and Trademarks. The Company and its Subsidiaries own, or possess
adequate rights or licenses to use, all trademarks, trade names, service marks,
service mark registrations, service names, patents, patent rights, copyrights,
inventions, licenses, approvals, governmental authorizations, trade secrets and
other intellectual property rights (“Intellectual Property Rights”) necessary to
conduct their respective businesses as now conducted. None of the Company's
Intellectual Property Rights have expired or terminated, or are expected to
expire or terminate, within three years from the date of this Agreement. The
Company does not have any knowledge of any infringement by the Company or its
Subsidiaries of Intellectual Property Rights of others. Except as disclosed in
the SEC Reports, there is no claim, action or proceeding being made or brought,
or to the knowledge of the Company, being threatened, against the Company or its
Subsidiaries regarding its Intellectual Property Rights.
 
(u)  Insurance. The Company and the Subsidiaries are insured by insurers of
recognized financial responsibility against such losses and risks and in such
amounts as are prudent and customary in the businesses and location in which the
Company and the Subsidiaries are engaged. The Company has not received any
written notice that the Company will not be able to renew its existing insurance
coverage as and when such coverage expires. The Company believes it will be able
to obtain similar coverage at reasonable cost from similar insurers as may be
necessary to continue its business as currently being conducted.
 
(v)  Regulatory Permits. The Company and the Subsidiaries possess all
certificates, authorizations and permits issued by the appropriate federal,
state, local or foreign regulatory authorities necessary to conduct their
respective businesses as described in the SEC Reports (“Material Permits”),
except where the failure to possess such permits does not, individually or in
the aggregate, have or reasonably be expected to result in a Material Adverse
Effect, and neither the Company nor any Subsidiary has received any written
notice of proceedings relating to the revocation or modification of any Material
Permit.
 
(w)  Transactions With Affiliates and Employees. Except as set forth or
incorporated by reference in the Company’s SEC Reports, none of the officers,
directors or employees of the Company is presently a party to any transaction
that would be required to be reported on Form 10-KSB with the Company or any of
its Subsidiaries (other than for ordinary course services as employees, officers
or directors), including any contract, agreement or other arrangement providing
for the furnishing of services to or by, providing for rental of real or
personal property to or from, or otherwise requiring payments to or from any
such officer, director or employee or, to the Company's knowledge, any
corporation, partnership, trust or other entity in which any such officer,
director, or employee has a substantial interest or is an officer, director,
trustee or partner.
 
(x)  Internal Accounting Controls. The Company and the Subsidiaries maintain a
system of internal accounting controls sufficient to provide reasonable
assurance that (i) transactions are executed in accordance with management’s
general or specific authorizations, (ii) transactions are recorded as necessary
to permit preparation of financial statements in conformity with generally
accepted accounting principles and to maintain asset accountability,
(iii) access to assets is permitted only in accordance with management’s general
or specific authorization, and (iv) the recorded accountability for assets is
compared with the existing assets at reasonable intervals and appropriate action
is taken with respect to any differences.
 
 
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(y)  Sarbanes-Oxley Act. The Company is in compliance in all material respects
with applicable requirements of the Sarbanes-Oxley Act of 2002 and applicable
rules and regulations promulgated by the SEC thereunder.
 
(z)  Foreign Corrupt Practices. Neither the Company nor any of its Subsidiaries
nor, to the knowledge of the Company, any director, officer, agent, employee or
other Person acting on behalf of the Company or any of its Subsidiaries has, in
the course of its actions for, or on behalf of, the Company (i) used any
corporate funds for any unlawful contribution, gift, entertainment or other
unlawful expenses relating to political activity; (ii) made any direct or
indirect unlawful payment to any foreign or domestic government official or
employee from corporate funds; (iii) violated or is in violation of any
provision of the U.S. Foreign Corrupt Practices Act of 1977, as amended; or (iv)
made any unlawful bribe, rebate, payoff, influence payment, kickback or other
unlawful payment to any foreign or domestic government official or employee.
 
(aa)  Indebtedness. Except as disclosed in Schedule 3.1(aa) or in the SEC
Reports, neither the Company nor any of its Subsidiaries (i) has any outstanding
Indebtedness (as defined below), (ii) is in violation of any term of or in
default under any contract, agreement or instrument relating to any
Indebtedness, except where such violations and defaults would not result,
individually or in the aggregate, in a Material Adverse Effect, or (iii) is a
party to any contract, agreement or instrument relating to any Indebtedness, the
performance of which, in the judgment of the Company's officers, has or is
expected to have a Material Adverse Effect. Schedule 3.1(aa) provides a detailed
description of the material terms of any such outstanding Indebtedness. For
purposes of this Agreement: (x) “Indebtedness” of any Person means, without
duplication (A) all indebtedness for borrowed money, (B) all obligations issued,
undertaken or assumed as the deferred purchase price of property or services
(other than trade payables entered into in the ordinary course of business), (C)
all reimbursement or payment obligations with respect to letters of credit,
surety bonds and other similar instruments, (D) all obligations evidenced by
notes, bonds, debentures or similar instruments, including obligations so
evidenced incurred in connection with the acquisition of property, assets or
businesses, (E) all indebtedness created or arising under any conditional sale
or other title retention agreement, or incurred as financing, in either case
with respect to any property or assets acquired with the proceeds of such
indebtedness (even though the rights and remedies of the seller or bank under
such agreement in the event of default are limited to repossession or sale of
such property), (F) all monetary obligations under any leasing or similar
arrangement which, in connection with generally accepted accounting principles,
consistently applied for the periods covered thereby, is classified as a capital
lease, (G) all indebtedness referred to in clauses (A) through (F) above secured
by (or for which the holder of such Indebtedness has an existing right,
contingent or otherwise, to be secured by) any mortgage, lien, pledge, charge,
security interest or other encumbrance upon or in any property or assets
(including accounts and contract rights) owned by any Person, even though the
Person which owns such assets or property has not assumed or become liable for
the payment of such indebtedness, and (H) all Contingent Obligations in respect
of indebtedness or obligations of others of the kinds referred to in clauses (A)
through (G) above; and (y) “Contingent Obligation” means, as to any Person, any
direct or indirect liability, contingent or otherwise, of that Person with
respect to any indebtedness, lease, dividend or other obligation of another
Person if the primary purpose or intent of the Person incurring such liability,
or the primary effect thereof, is to provide assurance to the obligee of such
liability that such liability will be paid or discharged, or that any agreements
relating thereto will be complied with, or that the holders of such liability
will be protected (in whole or in part) against loss with respect thereto.
 
 
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(bb)  Employee Relations. Neither Company nor any of its Subsidiaries is a party
to any collective bargaining agreement or employs any member of a union. The
Company believes that its relations with its employees are as disclosed in the
SEC Reports. Except as disclosed in the SEC Reports, during the period covered
by the SEC Reports, no executive officer of the Company or any of its
Subsidiaries (as defined in Rule 501(f) of the Securities Act) has notified the
Company or any such Subsidiary that such officer intends to leave the Company or
any such Subsidiary or otherwise terminate such officer's employment with the
Company or any such Subsidiary. To the knowledge of the Company or any such
Subsidiary, no executive officer of the Company or any of its Subsidiaries is in
violation of any material term of any employment contract, confidentiality,
disclosure or proprietary information agreement, non-competition agreement, or
any other contract or agreement or any restrictive covenant, and the continued
employment of each such executive officer does not subject the Company or any
such Subsidiary to any liability with respect to any of the foregoing matters.
 
(cc)  Labor Matters. The Company and its Subsidiaries are in compliance in all
material respects with all federal, state, local and foreign laws and
regulations respecting labor, employment and employment practices and benefits,
terms and conditions of employment and wages and hours, except where failure to
be in compliance would not, either individually or in the aggregate, reasonably
be expected to result in a Material Adverse Effect.
 
(dd)  Environmental Laws. The Company and its Subsidiaries (i) are in compliance
in all material respects with any and all Environmental Laws (as hereinafter
defined), (ii) have received all permits, licenses or other approvals required
of them under applicable Environmental Laws to conduct their respective
businesses and (iii) are in compliance in all material respects with all terms
and conditions of any such permit, license or approval where, in each of the
foregoing clauses (i), (ii) and (iii), the failure to so comply would be
reasonably expected to have, individually or in the aggregate, a Material
Adverse Effect. The term “Environmental Laws” means all federal, state, local or
foreign laws relating to pollution or protection of human health or the
environment (including, without limitation, ambient air, surface water,
groundwater, land surface or subsurface strata), including, without limitation,
laws relating to emissions, discharges, releases or threatened releases of
chemicals, pollutants, contaminants, or toxic or hazardous substances or wastes
(collectively, “Hazardous Materials”) into the environment, or otherwise
relating to the manufacture, processing, distribution, use, treatment, storage,
disposal, transport or handling of Hazardous Materials, as well as all
authorizations, codes, decrees, demands or demand letters, injunctions,
judgments, licenses, notices or notice letters, orders, permits, plans or
regulations issued, entered, promulgated or approved thereunder.
 
(ee)  Subsidiary Rights. The Company or one of its Subsidiaries has the
unrestricted right to vote, and (subject to limitations imposed by applicable
law) to receive dividends and distributions on, all capital securities of its
Subsidiaries as owned by the Company or such Subsidiary.
 
 
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(ff)  Tax Status. The Company and each of its Subsidiaries (i) has made or filed
all foreign, federal and state income and all other tax returns, reports and
declarations required by any jurisdiction to which it is subject, (ii) has paid
all taxes and other governmental assessments and charges that are material in
amount, shown or determined to be due on such returns, reports and declarations,
except those being contested in good faith and (iii) has set aside on its books
provision reasonably adequate for the payment of all taxes for periods
subsequent to the periods to which such returns, reports or declarations apply.
There are no unpaid taxes in any material amount claimed to be due by the taxing
authority of any jurisdiction, and the officers of the Company know of no basis
for any such claim.
 
3.2  Representations and Warranties of the Investors.
 
Each Investor hereby, as to itself only and for no other Investor, represents
and warrants to the Company as follows:
 
(a)  Organization; Authority. Such Investor is an entity duly organized, validly
existing and in good standing under the laws of the jurisdiction of its
organization with the requisite corporate, partnership or other power and
authority to enter into and to consummate the transactions contemplated by the
Transaction Documents and otherwise to carry out its obligations hereunder and
thereunder. The purchase by such Investor of the Securities hereunder has been
duly authorized by all necessary action on the part of such Investor. This
Agreement has been duly executed and delivered by such Investor and constitutes
the valid and binding obligation of such Investor, enforceable against it in
accordance with its terms, except as may be limited by (i) applicable
bankruptcy, insolvency, reorganization or other laws of general application
relating to or affecting the enforcement of creditors rights generally, and
(ii) the effect of rules of law governing the availability of specific
performance and other equitable remedies.
 
(b)  No Public Sale or Distribution. Such Investor is (i) acquiring the Common
Shares and the Warrants and (ii) upon exercise of the Warrants will acquire the
Warrant Shares issuable upon exercise thereof, in the ordinary course of
business for its own account and not with a view towards, or for resale in
connection with, the public sale or distribution thereof, except pursuant to
sales registered under the Securities Act or under an exemption from such
registration and in compliance with applicable federal and state securities
laws, and such Investor does not have a present arrangement to effect any
distribution of the Securities to or through any Person; provided, however, that
by making the representations herein, such Investor does not agree to hold any
of the Securities for any minimum or other specific term and reserves the right
to dispose of the Securities at any time in accordance with or pursuant to a
registration statement or an exemption under the Securities Act.
 
(c)  Investor Status. At the time such Investor was offered the Securities, it
was, and at the date hereof it is, an “accredited investor” as defined in Rule
501(a) under the Securities Act or a “qualified institutional buyer” as defined
in Rule 144A(a) under the Securities Act. Such Investor is not a registered
broker dealer registered under Section 15(a) of the Exchange Act, or a member of
the NASD, Inc. or an entity engaged in the business of being a broker dealer.
Except as otherwise disclosed in writing to the Company on Exhibit B-2 (attached
hereto) on or prior to the date of this Agreement, such Investor is not
affiliated with any broker dealer registered under Section 15(a) of the Exchange
Act, or a member of the NASD, Inc. or an entity engaged in the business of being
a broker dealer.
 
 
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(d)  Experience of Such Investor. Such Investor, either alone or together with
its representatives has such knowledge, sophistication and experience in
business and financial matters so as to be capable of evaluating the merits and
risks of the prospective investment in the Securities, and has so evaluated the
merits and risks of such investment. Such Investor understands that it must bear
the economic risk of this investment in the Securities indefinitely, and is able
to bear such risk and is able to afford a complete loss of such investment.
 
(e)  Access to Information. Such Investor acknowledges that it has reviewed the
Disclosure Materials and has been afforded: (i) the opportunity to ask such
questions as it has deemed necessary of, and to receive answers from,
representatives of the Company concerning the terms and conditions of the
offering of the Securities and the merits and risks of investing in the
Securities; (ii) access to information (other than material non-public
information) about the Company and the Subsidiaries and their respective
financial condition, results of operations, business, properties, management and
prospects sufficient to enable it to evaluate its investment; and (iii) the
opportunity to obtain such additional information that the Company possesses or
can acquire without unreasonable effort or expense that is necessary to make an
informed investment decision with respect to the investment. Neither such
inquiries nor any other investigation conducted by or on behalf of such Investor
or its representatives or counsel shall modify, amend or affect such Investor’s
right to rely on the truth, accuracy and completeness of the Disclosure
Materials and the Company’s representations and warranties contained in the
Transaction Documents. Such Investor acknowledges receipt of copies of the SEC
Reports.
 
(f)  No Governmental Review. Such Investor understands that no United States
federal or state agency or any other government or governmental agency has
passed on or made any recommendation or endorsement of the Securities or the
fairness or suitability of the investment in the Securities nor have such
authorities passed upon or endorsed the merits of the offering of the
Securities.
 
(g)  No Conflicts. The execution, delivery and performance by such Investor of
this Agreement and the consummation by such Investor of the transactions
contemplated hereby will not (i) result in a violation of the organizational
documents of such Investor or (ii) conflict with, or constitute a default (or an
event which with notice or lapse of time or both would become a default) under,
or give to others any rights of termination, amendment, acceleration or
cancellation of, any agreement, indenture or instrument to which such Investor
is a party, or (iii) result in a violation of any law, rule, regulation, order,
judgment or decree (including federal and state securities laws) applicable to
such Investor, except in the case of clauses (ii) and (iii) above, for such that
are not material and do not otherwise affect the ability of such Investor to
consummate the transactions contemplated hereby.
 
(h)  Illegal Transactions. No Investor, directly or indirectly, and no Person
acting on behalf of or pursuant to any understanding with any Investor, has
engaged in any transactions in the securities of the Company (including, without
limitation, any Short Sales involving any of the Company’s securities) since the
time that such Investor was first contacted by the Company, the Agent or any
other Person regarding an investment in the Securities of the Company. Such
Investor covenants that, except as contemplated by the provisions of Section 4.1
hereof, neither it nor any Person acting on its behalf or pursuant to any
understanding with such Investor will engage, directly or indirectly, in any
transactions in the securities of the Company (including Short Sales) through
the Closing Date. “Short Sales” include, without limitation, all “short sales”
as defined in Rule 200 promulgated under Regulation SHO under the Exchange Act
and all types of direct and indirect stock pledges, forward sale contracts,
options, puts, calls, short sales, swaps, derivatives and similar arrangements
(including on a total return basis), and sales and other transactions through
non-U.S. broker-dealers or foreign regulated brokers.
 
 
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(i)  Restricted Securities. The Investors understand that the Securities are
characterized as “restricted securities” under the U.S. federal securities laws
inasmuch as they are being acquired from the Company in a transaction not
involving a public offering and that under such laws and applicable regulations
such securities may be resold without registration under the Securities Act only
in certain limited circumstances.
 
(j)  Legends. It is understood that, except as provided in Section 4.1(b) of
this Agreement, certificates evidencing such Securities may bear the legend set
forth in Section 4.1(b)
 
(k)  No Legal, Tax or Investment Advice.
 
Such Investor understands that nothing in this Agreement or any other materials
presented by or on behalf of the Company to the Investor in connection with the
purchase of the Securities constitutes legal, tax or investment advice. Such
Investor 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. Such Investor understands that the Agent has acted
solely as the agent of the Company in this placement of the Securities, and that
the Agent makes no representation or warranty with regard to the merits of this
transaction or as to the accuracy of any information such Investor may have
received in connection therewith. Such Investor acknowledges that he has not
relied on any information or advice furnished by or on behalf of the Agent.
 
ARTICLE IV  
 
OTHER AGREEMENTS OF THE PARTIES
 
4.1  Transfer Restrictions.
 
(a)  The Investors covenant that the Securities will only be disposed of
pursuant to an effective registration statement under, and in compliance with
the requirements of, the Securities Act or pursuant to an available exemption
from the registration requirements of the Securities Act, and in compliance with
any applicable state securities laws. In connection with any transfer of
Securities other than pursuant to an effective registration statement or to the
Company, or pursuant to Rule 144(k), the Company may require the transferor to
provide to the Company an opinion of counsel reasonably satisfactory to the
Company, the form and substance of which opinion shall be reasonably
satisfactory to the Company, to the effect that such transfer does not require
registration under the Securities Act. Notwithstanding the foregoing, the
Company hereby consents to and agrees to register on the books of the Company
and with its transfer agent, without any such legal opinion, except to the
extent that the transfer agent requests such legal opinion, any transfer of
Securities by an Investor to an Affiliate of such Investor, provided that the
transferee certifies to the Company that it is an “accredited investor” as
defined in Rule 501(a) under the Securities Act and provided that such Affiliate
does not request any removal of any existing legends on any certificate
evidencing the Securities.
 
 
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(b)  Each Investor, on behalf of itself and any transferee contemplated by the
provisions of subsection (a), above, agrees to the imprinting, so long as is
required by this Section 4.1(b), of the following legend on any certificate
evidencing any of the Securities:
 
THESE SECURITIES HAVE NOT BEEN REGISTERED WITH THE SECURITIES AND EXCHANGE
COMMISSION OR THE SECURITIES COMMISSION OF ANY STATE IN RELIANCE UPON AN
EXEMPTION FROM REGISTRATION UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE
“SECURITIES ACT”), OR ANY APPLICABLE STATE SECURITIES LAWS AND, ACCORDINGLY, MAY
NOT BE OFFERED OR SOLD EXCEPT PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT
UNDER THE SECURITIES ACT OR PURSUANT TO AN AVAILABLE EXEMPTION FROM, OR IN A
TRANSACTION NOT SUBJECT TO, THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT
AND IN COMPLIANCE WITH APPLICABLE STATE SECURITIES LAWS OR BLUE SKY LAWS.
 
Certificates evidencing Common Shares shall not be required to contain such
legend or any other legend (i) while a registration statement (including the
Registration Statement) covering the resale of the Common Shares is effective
under the Securities Act, (ii) following any sale of such Common Shares pursuant
to Rule 144 if the holder provides the Company with a legal opinion (and the
documents upon which the legal opinion is based) reasonably acceptable to the
Company to the effect that the Common Shares can be sold under Rule 144, (iii)
if the holder provides the Company with documentation reasonably acceptable to
the Company to the effect that the Common Shares are eligible for sale under
Rule 144(k), or (iv) if the holder provides the Company with a legal opinion
(and the documents upon which the legal opinion is based) reasonably acceptable
to the Company to the effect that the legend is not required under applicable
requirements of the Securities Act (including controlling judicial
interpretations and pronouncements issued by the Staff of the SEC). The Company
shall cause its counsel to issue the legal opinion included in the Transfer
Agent Instructions to the Transfer Agent on the Effective Date. Following the
Effective Date, the Company will no later than five Trading Days following the
delivery by an Investor to the Company or the Transfer Agent of (i) a legended
certificate representing such Common Shares, and (ii) an opinion of counsel to
the extent required by Section 4.1(a), deliver or cause to be delivered to such
Investor a certificate representing such Common Shares that is free from all
restrictive and other legends. The Company may not make any notation on its
records or give instructions to the Transfer Agent that enlarge the restrictions
on transfer set forth in this Section.
 
If within five Trading Days after the Company’s receipt of a legended
certificate and the other documents as specified in Clauses (ii), (iii) and (iv)
of the paragraph immediately above, the Company shall fail to issue and deliver
to such Investor a certificate representing such Common Shares that is free from
all restrictive and other legends, and if on or after such Trading Day and prior
to the Company’s delivery of the certificate representing such Common Shares the
Investor purchases (in an open market transaction) shares of Common Stock to
deliver in satisfaction of a sale by the Investor of shares of Common Stock that
the Investor anticipated receiving from the Company without any restrictive
legend (the “Covering Shares”), then the Company shall, within five Trading Days
after the Investor’s request, pay cash (in lieu of delivering such certificate
without any restrictive legend) to the Investor in an amount equal to the excess
(if any) of the Investor’s total purchase price (including brokerage
commissions, if any) for the Covering Shares, over the product of (A) the number
of Covering Shares, times (B) the Closing Price on the date of delivery of such
certificate and the other documents as specified in Clauses (ii), (iii) and (iv)
of the paragraph immediately above.
 
 
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(c)  So long as a registration statement (including the Registration Statement)
covering the resale of the Securities is effective under the Securities Act, the
Company will not object to and shall permit (except as prohibited by law) an
Investor to pledge or grant a security interest in some or all of the Securities
in connection with a bona fide margin agreement or other loan or financing
arrangement secured by the Securities, and if required under the terms of such
agreement, loan or arrangement, the Company will not object to and shall permit
(except as prohibited by law) such Investor to transfer pledged or secured
Securities to the pledges or secured parties. Except as required by law, such a
pledge or transfer would not be subject to approval of the Company, no legal
opinion of the pledgee, secured party or pledgor shall be required in connection
therewith, and no notice shall be required of such pledge. Each Investor
acknowledges that the Company shall not be responsible for any pledges relating
to, or the grant of any security interest in, any of the Securities or for any
agreement, understanding or arrangement between any Investor and its pledgee or
secured party. At the appropriate Investor's expense, the Company will execute
and deliver such reasonable documentation as a pledgee or secured party of
Securities may reasonably request in connection with a pledge or transfer of the
Securities, including the preparation and filing of any required prospectus
supplement under Rule 424(b)(3) of the Securities Act or other applicable
provision of the Securities Act to appropriately amend the list of Selling
Stockholders thereunder. Provided that the Company is in compliance with the
terms of this Section 4.1(c), the Company’s indemnification obligations pursuant
to Section 6.4 shall not extend to any Proceeding or Losses arising out of or
related to this Section 4.1(c).
 
4.2  Furnishing of Information.
 
Until the date that any Investor owning Common Shares or Warrant Shares may sell
all of them under Rule 144(k) of the Securities Act (or any successor
provision), the Company covenants to use its Best Efforts to timely file (or
obtain extensions in respect thereof and file within the applicable grace
period) all reports required to be filed by the Company after the date hereof
pursuant to the Exchange Act.
 
4.3  Integration.
 
The Company shall not, and shall use its Best Efforts to ensure that no
Affiliate thereof 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
Securities in a manner that would require the registration under the Securities
Act of the sale of the Securities to the Investors. The Company agrees to timely
file a Form D with respect to the Securities as required under Regulation D and
to provide a copy thereof, promptly upon the written request of any Investor.
 
4.4  Reservation of Securities.
 
The Company shall maintain a reserve from its duly authorized shares of Common
Stock for issuance pursuant to the Transaction Documents in such amount as may
be required to fulfill its obligations to issue such Common Shares under the
Transaction Documents. In the event that at any time the then authorized shares
of Common Stock are insufficient for the Company to satisfy its obligations to
issue such Common Shares under the Transaction Documents, the Company shall
promptly take such actions as may be required to increase the number of
authorized shares.
 
 
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4.5  Securities Laws Disclosure; Publicity.
 
The Company shall, on or before 8:30 a.m., New York time, on the first Trading
Day following the Agreement Date, issue a press release reasonably acceptable to
the Investors disclosing all material terms of the transactions contemplated
hereby. Within four Business Days following the Agreement Date, the Company
shall file a Current Report on Form 8-K with the SEC (the “8-K Filing”)
describing the terms of the transactions contemplated by the Transaction
Documents and including as exhibits to such Current Report on Form 8-K the
Transaction Documents (including the schedules and the names, and addresses of
the Investors and the amount(s) of Securities respectively purchased) and the
form of Warrants, in the form required by the Exchange Act. Thereafter, the
Company shall timely file any filings and notices required by the SEC or
applicable law with respect to the transactions contemplated hereby and provide
copies thereof. Except as herein provided, the Company shall not publicly
disclose the name of any Investor, or include the name of any Investor in any
press release without the prior written consent of such Investor, unless
otherwise required by law. The Company shall not, and shall cause each of its
Subsidiaries and its and each of their respective officers, directors, employees
and agents not to, provide any Investor with any material nonpublic information
regarding the Company or any of its Subsidiaries from and after the issuance of
the above referenced press release without the express written consent of such
Investor.
 
4.6  Use of Proceeds.
 
The Company intends to use the net proceeds from the sale of the Securities for
working capital and general corporate purposes. The Company also may use a
portion of the net proceeds, currently intended for general corporate purposes,
to acquire or invest in technologies, products or services that complement its
business, although the Company has no present plans or commitments and is not
currently engaged in any material negotiations with respect to these types of
transactions. Pending these uses, the Company intends to invest the net proceeds
from this offering in short-term, interest-bearing, investment-grade securities,
or as otherwise pursuant to the Company's customary investment policies.
 
      ARTICLE V  
 
CONDITIONS
 
5.1  Conditions Precedent to the Obligations of the Investors.
 
The obligation of each Investor to acquire Securities at the Closing is subject
to the satisfaction or waiver by such Investor, at or before the Closing, of
each of the following conditions:
 
(a)  Representations and Warranties. The representations and warranties of the
Company contained herein shall be true and correct in all material respects as
of the date when made and as of the Closing as though made on and as of such
date;
 
(b)  Deliveries.The Company shall have delivered or caused to be delivered to
the Investors the Closing deliveries specified in Section 2.2(a); and
 
 
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(c)  Performance. The Company and each other Investor shall have performed,
satisfied or complied in all material respects with all covenants, agreements
and conditions required by the Transaction Documents to be performed, satisfied
or complied with by it at or prior to the Closing.
 
5.2  Conditions Precedent to the Obligations of the Company.
 
The obligation of the Company to sell the Securities at the Closing is subject
to the satisfaction or waiver by the Company, at or before the Closing, of each
of the following conditions:
 
(a)  Representations and Warranties. The representations and warranties of the
Investors contained herein shall be true and correct in all material respects as
of the date when made and as of the Closing Date as though made on and as of
such date;
 
(b)  Deliveries.Each Investor shall deliver or cause to be delivered to the
Company the purchase price set forth opposite such Investor’s name on Exhibit A
hereto under the heading “Purchase Price” in United States dollars and in
immediately available funds, by wire transfer to an account designated in
writing to such Investor by the Company for such purpose; and
 
(c)  Performance. The Investors shall have performed, satisfied and complied in
all material respects with all covenants, agreements and conditions required by
the Transaction Documents to be performed, satisfied or complied with by the
Investors at or prior to the Closing.
 
ARTICLE VI  
 
REGISTRATION RIGHTS
 
6.1  Registration Statement.
 
(a)  As promptly as possible, and in any event on or prior to the Filing Date,
the Company shall prepare and file with the SEC a Registration Statement
covering the resale of all Registrable Securities for an offering to be made on
a continuous basis pursuant to Rule 415. The Registration Statement shall be on
Form S-3 (except if the Company is not then eligible to register for resale the
Registrable Securities on Form S-3, in which case such registration shall be on
another appropriate form in accordance with the Securities Act and the Exchange
Act) and shall contain (except if otherwise directed by the Investors or
requested by the SEC) the “Plan of Distribution” in substantially the form
attached hereto as Exhibit D.
 
(b)  The Company shall use its commercially reasonable efforts to cause the
Registration Statement to be declared effective by the SEC as promptly as
possible after the filing thereof, but in any event prior to the Required
Effectiveness Date, and shall use its Best Efforts to keep the Registration
Statement continuously effective under the Securities Act until the earlier of
the date that all Common Shares and Warrant Shares covered by such Registration
Statement have been sold or can be sold publicly under Rule 144(k) (the
“Effectiveness Period”); provided that, upon notification by the SEC that a
Registration Statement will not be reviewed or is no longer subject to further
review and comments, the Company shall request acceleration of such Registration
Statement within five (5) Trading Days after receipt of such notice and request
that it becomes effective on 4:00 p.m. New York City time on the Effective Date.
 
 
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(c)  The Company shall notify the Investors in writing promptly (and in any
event within two Trading Days) after receiving notification from the SEC that
the Registration Statement has been declared effective.
 
(d)  Should an Event (as defined below) occur, then upon the occurrence of such
Event, and on every monthly anniversary thereof until the applicable Event is
cured, or until such time as the Common Shares shall have been disposed of by an
Investor or are saleable under Rule 144 in any three-month period, whichever
occurs earlier (each a “Cure Date”) the Company shall pay to such Investor an
amount in cash, as liquidated damages and not as a penalty, equal to one percent
(1.0%) of (i) the number of Common Shares held by such Investor as of the date
of such Event, multiplied by (ii) the purchase price paid by such Investor for
such Common Shares then held; provided, however, that the total amount of
payments pursuant to this Section 6.1(d) shall not exceed, when aggregated with
all such payments paid to all Investors, ten percent (10%) of the aggregate
purchase price paid by all Investors. The payments to which an Investor shall be
entitled pursuant to this Section 6.1(d) are referred to herein as “Event
Payments.” Any Event Payments payable pursuant to the terms hereof shall apply
on a pro rated basis for any portion of a month prior to the applicable Cure
Date, and shall be paid within five (5) Business Days of each monthly
anniversary of an Event. In the event the Company fails to make Event Payments
in a timely manner, such Event Payments shall bear interest at the rate of one
percent (1.0%) per month (prorated for partial months) until paid in full. All
pro rated calculations made pursuant to this paragraph shall be based upon the
actual number of days in such pro rated month.
 
For such purposes, each of the following shall constitute an “Event”:

(i)  the Registration Statement is not filed on or prior to the Filing Date or
is not declared effective on or prior to the Required Effectiveness Date (in
each instance other than due to the fault of any Investor);
 
(ii)  except as provided for in Section 6.1(e) (the “Excluded Events”), after
the Effective Date, an Investor is not permitted to sell Registrable Securities
under the Registration Statement (or a subsequent Registration Statement filed
in replacement thereof) for any reason (other than the fault of such Investor)
for five or more consecutive Trading Days in any ninety (90) Trading Day Period;
 
(iii)  except as a result of the Excluded Events, the Common Stock is not listed
or quoted, or is suspended from trading, on an Eligible Market for a period of
ten (10) consecutive Trading Days during the Effectiveness Period; or
 
(iv)  during the Effectiveness Period, except as a result of the Excluded
Events, the Company fails to have any Shares listed on an Eligible Market.
 
 
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(e)  Notwithstanding anything in this Agreement to the contrary, after 60
consecutive Trading Days of continuous effectiveness of the initial Registration
Statement filed and declared effective pursuant to this Agreement, the Company
may, by written notice to the Investors, suspend sales under a Registration
Statement after the Effective Date thereof and/or require that the Investors
immediately cease the sale of shares of Common Stock pursuant thereto and/or
defer the filing of any subsequent Registration Statement if the Company is
engaged in a material merger, acquisition or sale and the Board of Directors
determines in good faith, based on the advice of counsel, by appropriate
resolutions, that, as a result of such activity, (A) it would be materially
detrimental to the Company to maintain a Registration Statement at such time or
(B) it is in the best interests of the Company to suspend sales under such
registration at such time. Upon receipt of such notice, each Investor shall
immediately discontinue any sales of Registrable Securities pursuant to such
registration until such Investor is advised in writing by the Company that the
current Prospectus or amended Prospectus, as applicable, may be used. In no
event, however, shall this right be exercised to suspend sales beyond the period
during which (in the good faith determination of the Company’s Board of
Directors) the failure to require such suspension would be materially
detrimental to the Company. The Company’s rights under this Section 6(e) may be
exercised for a period of no more than 20 Trading Days at a time and not more
than two times in any twelve-month period, without such suspension being
considered as part of an Event Payment determination. Immediately after the end
of any suspension period under this Section 6(e), the Company shall take all
necessary actions (including filing any required supplemental prospectus) to
restore the effectiveness of the applicable Registration Statement and the
ability of the Investors to publicly resell their Registrable Securities
pursuant to such effective Registration Statement. Any notice delivered to
Investors under this Section 6.1(e) shall not contain material, non-public
information regarding the Company.
 
(f)  Except in connection with the registration rights of Abengoa under the
Abengoa Securities Purchase Agreement, the Company shall not, from the date
hereof until the Effective Date of the Registration Statement, prepare and file
with the SEC a registration statement relating to an offering for its own
account or the account of others under the Securities Act of any of its equity
securities, other than any registration statement or post-effective amendment to
a registration statement (or supplement thereto) relating to the Company’s
employee benefit plans registered on Form S-8.
 
6.2  Registration Procedures.
 
In connection with the Company’s registration obligations hereunder, the Company
shall:
 
(a)  Not less than three Trading Days prior to the filing of a Registration
Statement or any related Prospectus or any amendment or supplement thereto,
furnish via email to those Investors who have supplied the Company with email
addresses copies of all such documents proposed to be filed, which documents
(other than any document that is incorporated or deemed to be incorporated by
reference therein) will be subject to the review of such Investors. The Company
shall reflect in each such document when so filed with the SEC such comments
regarding the Investors and the plan of distribution as the Investors may
reasonably and promptly propose in writing no later than one Trading Day after
the Investors have been so furnished with copies of such documents as aforesaid.
 
 
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(b)  (i) Subject to Section 6.1(e), prepare and file with the SEC such
amendments, including post-effective amendments, to each Registration Statement
and the Prospectus used in connection therewith as may be necessary to keep the
Registration Statement continuously effective, as to the applicable Registrable
Securities for the Effectiveness Period and prepare and file with the SEC such
additional Registration Statements in order to register for resale under the
Securities Act all of the Registrable Securities; (ii) cause the related
Prospectus to be amended or supplemented by any required Prospectus supplement,
and as so supplemented or amended to be filed pursuant to Rule 424;
(iii) respond as promptly as reasonably possible, and in any event within 12
Trading Days (except to the extent that the Company reasonably requires
additional time to respond to accounting comments), to any comments received
from the SEC with respect to the Registration Statement or any amendment
thereto; and (iv) comply in all material respects with the provisions of the
Securities Act and the Exchange Act with respect to the disposition of all
Registrable Securities covered by the Registration Statement during the
applicable period in accordance with the intended methods of disposition by the
Investors thereof set forth in the Registration Statement as so amended or in
such Prospectus as so supplemented.
 
(c)  Notify the Investors as promptly as reasonably possible, and (if requested
by the Investors in writing confirm such notice in writing no later than two
Trading Days thereafter, of any of the following events: (i) the SEC notifies
the Company whether there will be a “review” of any Registration Statement;
(ii) the SEC comments in writing on any Registration Statement; (iii) any
Registration Statement or any post-effective amendment is declared effective;
(iv) the SEC or any other Federal or state governmental authority requests any
amendment or supplement to any Registration Statement or Prospectus or requests
additional information related thereto; (v) the SEC issues any stop order
suspending the effectiveness of any Registration Statement or initiates any
Proceedings for that purpose; (vi) the Company receives notice of any suspension
of the qualification or exemption from qualification of any Registrable
Securities for sale in any jurisdiction, or the initiation or threat of any
Proceeding for such purpose; or (vii) the financial statements included in any
Registration Statement become ineligible for inclusion therein or any
Registration Statement or Prospectus or other document contains any untrue
statement of a material fact or omits to state any material fact required to be
stated therein or necessary to make the statements therein, in the light of the
circumstances under which they were made, not misleading.
 
(d)  Use its reasonable Best Efforts to avoid the issuance of or, if issued,
obtain the withdrawal of (i) any order suspending the effectiveness of any
Registration Statement, or (ii) any suspension of the qualification (or
exemption from qualification) of any of the Registrable Securities for sale in
any jurisdiction, as soon as possible.
 
(e)  If requested by an Investor, provide such Investor, without charge, at
least one conformed copy of each Registration Statement and each amendment
thereto, including financial statements and schedules, and all exhibits to the
extent so requested by such Person in writing (including those previously
furnished or incorporated by reference) promptly after the filing of such
documents with the SEC.
 
(f)  Promptly deliver to each Investor, without charge, as many copies of the
Prospectus or Prospectuses (including each form of prospectus) and each
amendment or supplement thereto as such Persons may reasonably request. The
Company hereby consents to the use of such Prospectus and each amendment or
supplement thereto by each of the selling Investors in connection with the
offering and sale of the Registrable Securities covered by such Prospectus and
any amendment or supplement thereto to the extent permitted by federal and state
securities laws and regulations and in accordance with the terms and conditions
of this Agreement.
 
 
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(g)  (i) In the time and manner required by each Trading Market, prepare and
file with such Trading Market an additional shares listing application covering
all of the Registrable Securities; (ii) take all steps necessary to cause such
Common Shares to be approved for listing on each Trading Market as soon as
possible thereafter; (iii) provide to Investors evidence of such listing; and
(iv) except as a result of the Excluded Events, during the Effectiveness Period,
maintain the listing of such Common Shares on each such Trading Market or
another Eligible Market.
 
(h)  Prior to any public offering of Registrable Securities, use its reasonable
Best Efforts to register or qualify or cooperate with the selling Investors in
connection with the registration or qualification (or exemption from such
registration or qualification) of such Registrable Securities for offer and sale
under the securities or Blue Sky laws of such jurisdictions within the United
States as any Investor requests in writing, to keep each such registration or
qualification (or exemption therefrom) effective for so long as required, but
not to exceed the duration of the Effectiveness Period, and to do any and all
other acts or things reasonably necessary or advisable to enable the disposition
in such jurisdictions of the Registrable Securities covered by a Registration
Statement; provided, however, that the Company shall not be obligated to file
any general consent to service of process or to qualify as a foreign corporation
or as a dealer in securities in any jurisdiction in which it is not so qualified
or to subject itself to taxation in respect of doing business in any
jurisdiction in which it is not otherwise so subject.
 
(i)  Cooperate with the Investors to facilitate the timely preparation and
delivery of certificates representing Registrable Securities to be delivered to
a transferee pursuant to a Registration Statement, which certificates shall be
free, to the extent permitted by this Agreement and under law, of all
restrictive legends, and to enable such Registrable Securities to be in such
denominations and registered in such names as any such Investors may reasonably
request.
 
(j)  Upon the occurrence of any event described in Section 6.2(c)(vii), as
promptly as reasonably possible, prepare a supplement or amendment, including a
post-effective amendment, to the Registration Statement or a supplement to the
related Prospectus or any document incorporated or deemed to be incorporated
therein by reference, and file any other required document so that, as
thereafter delivered, neither the Registration Statement nor such Prospectus
will 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 the light of the circumstances under which they were made, not misleading.
 
(k)  Cooperate with any reasonable due diligence investigation undertaken by the
Investors in connection with the sale of Registrable Securities, including,
without limitation, by making available documents and information; provided that
the Company will not deliver or make available to any Investor material,
nonpublic information unless such Investor requests in advance in writing to
receive material, nonpublic information and agrees to keep such information
confidential.
 
 
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(l)  Comply in all material respects with all rules and regulations of the SEC
applicable to the registration of the Securities.
 
(m)  It shall be a condition precedent to the obligations of the Company to
complete the registration pursuant to this Agreement with respect to the
Registrable Securities of any particular Investor or to make any Event Payments
set forth in Section 6.1(c) to such Investor that such Investor furnish to the
Company the information specified in Exhibits B-1, B-2 and B-3 hereto and such
other information regarding itself, the Registrable Securities and other shares
of Common Stock held by it and the intended method of disposition of the
Registrable Securities held by it (if different from the Plan of Distribution
set forth on Exhibit D hereto) as shall be reasonably required to effect the
registration of such Registrable Securities and shall complete and execute such
documents in connection with such registration as the Company may reasonably
request.
 
(n)  The Company shall comply with all applicable rules and regulations of the
SEC under the Securities Act and the Exchange Act, including, without
limitation, Rule 172 under the Securities Act, file any final Prospectus,
including any supplement or amendment thereof, with the SEC pursuant to Rule 424
under the Securities Act, promptly inform the selling Investors in writing if,
at any time during the Effectiveness Period, the Company does not satisfy the
conditions specified in Rule 172 and, as a result thereof, the selling Investors
are required to make available a Prospectus in connection with any disposition
of Registrable Securities and take such other actions as may be reasonably
necessary to facilitate the registration of the Registrable Securities
hereunder.
 
6.3  Registration Expenses.
 
The Company shall pay all fees and expenses incident to the performance of or
compliance with Article VI of this Agreement by the Company, including without
limitation (a) all registration and filing fees and expenses, including without
limitation those related to filings with the SEC, any Trading Market and in
connection with applicable state securities or Blue Sky laws, (b) printing
expenses (including without limitation expenses of printing certificates for
Registrable Securities), (c) messenger, telephone and delivery expenses,
(d) fees and disbursements of counsel for the Company, (e) fees and expenses of
all other Persons retained by the Company in connection with the consummation of
the transactions contemplated by this Agreement, and (f) all listing fees to be
paid by the Company to the Trading Market.
 
6.4  Indemnification.
 
(a)  Indemnification by the Company. The Company shall, notwithstanding any
termination of this Agreement, indemnify and hold harmless each Investor, the
officers, directors, partners, members, agents and employees of each of them,
each Person who controls any such Investor (within the meaning of Section 15 of
the Securities Act or Section 20 of the Exchange Act) and the officers,
directors, partners, members, agents and employees of each such controlling
Person, to the fullest extent permitted by applicable law, from and against any
and all Losses, as incurred, arising out of or relating to (i) any
misrepresentation or breach of any representation or warranty made by the
Company in the Transaction Documents or any other certificate, instrument or
document contemplated hereby or thereby, (ii) any breach of any covenant,
agreement or obligation of the Company contained in the Transaction Documents or
any other certificate, instrument or document contemplated hereby or thereby,
(iii) any cause of action, suit or claim brought or made against such
Indemnified Party (as defined in Section 6.4(c) below) by a third party
(including for these purposes a derivative action brought on behalf of the
Company), arising out of or resulting from (x) execution, delivery, performance
or enforcement of the Transaction Documents or any other certificate, instrument
or document contemplated hereby or thereby or (y) the status of Indemnified
Party as holder of the Securities or (iv) any untrue or alleged untrue statement
of a material fact contained in the Registration Statement, any Prospectus or
any form of Company prospectus or in any amendment or supplement thereto or in
any Company preliminary prospectus, or arising out of or relating to any
omission or alleged omission of a material fact required to be stated therein or
necessary to make the statements therein (in the case of any Prospectus or form
of prospectus or supplement thereto, in the light of the circumstances under
which they were made) not misleading, except to the extent, but only to the
extent, that (A) such untrue statements, alleged untrue statements, omissions or
alleged omissions are based upon information regarding such Investor furnished
in writing to the Company by or on behalf of such Investor for use therein, or
to the extent that such information relates to such Investor or such Investor's
proposed method of distribution of Registrable Securities and was reviewed and
expressly approved by such Investor expressly for use in the Registration
Statement, or (B) with respect to any prospectus, if the untrue statement or
omission of material fact contained in such prospectus was corrected on a timely
basis in the prospectus, as then amended or supplemented, if such corrected
prospectus was timely made available by the Company to such Investor, and such
Investor seeking indemnity hereunder was advised in writing not to use the
incorrect prospectus prior to the use giving rise to Losses. The preceding to
the contrary notwithstanding: (I) the maximum liability to the Company under
clauses (i) through (iii) of this Section 6.4(a) shall in no event exceed the
aggregate sum of the purchase prices set forth opposite the Investors’ names on
Exhibit A hereto under the heading “Purchase Price”; and (II) other than the
obligations of the Company to the Investors the performance of which is to be
made or continue to be made by the Company on or after the first anniversary of
the Agreement Date, all of the other obligations of the Company under clauses
(i) through (iii) of this Section 6.4(a) shall terminate and be without further
force and effect on the first anniversary of the Closing Date. Each Investor
acknowledges and agrees the Company’s payment of liquidated damages to such
Investor under Section 6.1(d) hereof shall automatically preclude such Investor
and its related indemnified parties from seeking indemnity under this Section
6.4(a) for any Losses related to the Company’s registration obligations under
Section 6.1 hereof and automatically relieve the Company of any related
indemnification obligations hereunder in connection with such Losses.
 
 
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(b)  Indemnification by Investors. Each Investor shall, severally and not
jointly, indemnify and hold harmless the Company, its directors, officers,
agents and employees, each Person who controls the Company (within the meaning
of Section 15 of the Securities Act and Section 20 of the Exchange Act), and the
directors, officers, agents or employees of such controlling Persons, to the
fullest extent permitted by applicable law, from and against all Losses arising
out of or relating to (i) any misrepresentation or breach of any representation
or warranty made by such Investor in the Transaction Documents or any other
certificate, instrument or document contemplated hereby or thereby, (ii) any
breach of any covenant, agreement or obligation of such Investor contained in
the Transaction Documents or any other certificate, instrument or document
contemplated hereby or thereby, (iii) arising out of any untrue statement of a
material fact contained in the Registration Statement, any Prospectus, or any
form of prospectus, or in any amendment or supplement thereto, or arising out of
or relating to any omission of a material fact required to be stated therein or
necessary to make the statements therein (in the case of any Prospectus or form
of prospectus or supplement thereto, in the light of the circumstances under
which they were made) not misleading, but only to the extent that such untrue
statement or omission is contained in any information so furnished by or on
behalf of such Investor in writing to the Company specifically for inclusion in
such Registration Statement or such Prospectus or to the extent that such untrue
statements or omissions are based upon information regarding such Investor
furnished to the Company by or on behalf of such Investor in writing expressly
for use therein, or to the extent that such information relates to such Investor
or such Investor’s proposed method of distribution of Registrable Securities and
was reviewed and expressly approved by or on behalf of such Investor expressly
for use in the Registration Statement (it being understood that the information
provided by the Investor to the Company in Exhibits B-1, B-2 and B-3 and the
Plan of Distribution set forth on Exhibit D, as the same may be modified by or
on behalf of such Investor and other information provided by or on behalf of the
Investor to the Company in or pursuant to the Transaction Documents constitutes
information reviewed and expressly approved by such Investor in writing
expressly for use in the Registration Statement), such Prospectus or such form
of Prospectus or in any amendment or supplement thereto. In no event shall the
liability of any selling Investor hereunder be greater in amount than the dollar
amount of the net proceeds received by such Investor upon the sale of the
Registrable Securities giving rise to such indemnification obligation. The
preceding to the contrary notwithstanding: (I) the maximum liability of each
such Investor under clauses (i) and (ii) of this Section 6.4(b) shall in no
event exceed the purchase price set forth opposite such Investor’s name on
Exhibit A hereto under the heading “Purchase Price”; and (II) other than the
obligations of each such Investor to the Company the performance of which is to
be made or continue to be made by each such Investor on or after the first
anniversary of the Agreement Date, all of the other obligations of each such
Investor under clauses (i) and (ii) of this Section 6.4(b) shall terminate and
be without further force and effect on the first anniversary of the Closing
Date.
 
(c)  Conduct of Indemnification Proceedings. If any Proceeding shall be brought
or asserted against any Person entitled to indemnity hereunder (an “Indemnified
Party”), such Indemnified Party shall promptly notify the Person from whom
indemnity is sought (the “Indemnifying Party”) in writing, and the Indemnifying
Party shall assume the defense thereof, including the employment of counsel
reasonably satisfactory to the Indemnified Party and the payment of all fees and
expenses incurred in connection with defense thereof; provided, that the failure
of any Indemnified Party to give such notice shall not relieve the Indemnifying
Party of its obligations or liabilities pursuant to this Agreement, except (and
only) to the extent that it shall be finally determined by a court of competent
jurisdiction (which determination is not subject to appeal or further review)
that such failure shall have proximately and materially adversely prejudiced the
Indemnifying Party.
 
 
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An Indemnified Party shall have the right to employ separate counsel in any such
Proceeding and to participate in the defense thereof, but the fees and expenses
of such counsel shall be at the expense of such Indemnified Party or Parties
unless: (i) the Indemnifying Party has agreed in writing to pay such fees and
expenses; or (ii) the Indemnifying Party shall have failed promptly to assume
the defense of such Proceeding and to employ counsel reasonably satisfactory to
such Indemnified Party in any such Proceeding; or (iii) the named parties to any
such Proceeding (including any impleaded parties) include both such Indemnified
Party and the Indemnifying Party, and such Indemnified Party shall have been
advised by counsel that a conflict of interest is likely to exist if the same
counsel were to represent such Indemnified Party and the Indemnifying Party (in
which case, if such Indemnified Party notifies the Indemnifying Party in writing
that it elects to employ separate counsel at the expense of the Indemnifying
Party, the Indemnifying Party shall not have the right to assume the defense
thereof and the reasonable fees and expenses of separate counsel shall be at the
expense of the Indemnifying Party). It being understood, however, that the
Indemnifying Party shall not, in connection with any one such Proceeding
(including separate Proceedings that have been or will be consolidated before a
single judge) be liable for the fees and expenses of more than one separate firm
of attorneys at any time for all Indemnified Parties, which firm shall be
appointed by a majority of the Indemnified Parties. The Indemnifying Party shall
not be liable for any settlement of any such Proceeding effected without its
written consent, which consent shall not be unreasonably withheld. No
Indemnifying Party shall, without the prior written consent of the Indemnified
Party, which consent shall not be unreasonably withheld or delayed, effect any
settlement of any pending Proceeding in respect of which any Indemnified Party
is a party, unless such settlement includes an unconditional release of such
Indemnified Party from all liability on claims that are or could have been the
subject matter of such Proceeding.
 
All reasonable fees and expenses of the Indemnified Party (including reasonable
fees and expenses to the extent incurred in connection with investigating or
preparing to defend such Proceeding in a manner not inconsistent with this
Section) shall be paid to the Indemnified Party, as incurred, within 20 Trading
Days of written notice thereof to the Indemnifying Party, provided that the
Indemnifying Party may require such Indemnified Party to undertake to reimburse
all such fees and expenses to the extent it is finally judicially determined
that such Indemnified Party is not entitled to indemnification hereunder). 
 
(d)  Contribution. If a claim for indemnification under Section 6.4(a) or  (b)
is unavailable to an Indemnified Party (by reason of public policy or
otherwise), then each Indemnifying Party, 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, in such proportion as is
appropriate to reflect the relative fault of the Indemnifying Party and
Indemnified Party in connection with the actions, statements or omissions that
resulted in such Losses as well as any other relevant equitable considerations.
The relative fault of such Indemnifying Party and Indemnified Party shall be
determined by reference to, among other things, whether any action in question,
including any untrue or alleged untrue statement of a material fact or omission
or alleged omission of a material fact, has been taken or made by, or relates to
information supplied by or on behalf of, such Indemnifying Party or Indemnified
Party, and the parties’ relative intent, knowledge, access to information and
opportunity to correct or prevent such action, statement or omission. The amount
paid or payable by a party as a result of any Losses shall be deemed to include,
subject to the limitations set forth in Section 6.4(c), any reasonable
attorneys’ or other reasonable fees or expenses incurred by such party in
connection with any Proceeding to the extent such party would have been
indemnified for such fees or expenses if the indemnification provided for in
this Section was available to such party in accordance with its terms.
 
The parties hereto agree that it would not be just and equitable if contribution
pursuant to this Section 6.4(d) were determined by pro rata allocation or by any
other method of allocation that does not take into account the equitable
considerations referred to in the immediately preceding paragraph.
Notwithstanding the provisions of this Section 6.4(d), no Investor shall be
required to contribute, in the aggregate, any amount in excess of the amount by
which the proceeds actually received by such Investor from the sale of the
Registrable Securities subject to the Proceeding exceeds the amount of any
damages that such Investor has otherwise been required to pay by reason of such
untrue or alleged untrue statement or omission or alleged omission. No Person
guilty of fraudulent misrepresentation (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.
 
Except as expressly provided in the last sentence of Section 6.4(a), the
indemnity and contribution agreements contained in this Section  are in addition
to any liability that the Indemnifying Parties may have to the Indemnified
Parties.
 
 
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6.5  Dispositions.
 
Each Investor agrees that it will comply with the prospectus delivery
requirements of the Securities Act as applicable to it in connection with sales
of Registrable Securities pursuant to the Registration Statement and shall sell
its Registrable Securities in accordance with the Plan of Distribution set forth
in the Prospectus. Each Investor further agrees that, upon receipt of a notice
from the Company of the occurrence of any event of the kind described in
Sections 6.2(c)(v), (vi) or (vii), such Investor will discontinue disposition of
such Registrable Securities under the Registration Statement until such Investor
is advised in writing by the Company that the use of the Prospectus, or amended
Prospectus, as applicable, may be used. The Company may provide appropriate stop
orders to enforce the provisions of this paragraph.
 
6.6  No Piggyback on Registrations.
 
Neither the Company nor any of its security holders (other than the Investors in
such capacity pursuant hereto and Abengoa pursuant to the Abengoa Securities
Purchase Agreement) may include securities of the Company in the Registration
Statement other than the Registrable Securities and securities held by Abengoa
for which it has registration rights under the Abengoa Securities Purchase
Agreement.
 
6.7  Piggy-Back Registrations.
 
If at any time during the Effectiveness Period there is not an effective
Registration Statement covering all of the Registrable Securities and the
Company shall determine to prepare and file with the SEC a registration
statement relating to an offering for its own account or the account of others
under the Securities Act of any of its equity securities, other than on Form S-4
or Form S-8 (each as promulgated under the Securities Act) or their then
equivalents relating to equity securities to be issued solely in connection with
any acquisition of any entity or business or equity securities issuable in
connection with stock option or other employee benefit plans, then the Company
shall send to each Investor not then eligible to sell all of its Registrable
Securities under Rule 144 in a three-month period, written notice of such
determination and if, within ten days after receipt of such notice, any such
Investor shall so request in writing, the Company shall include in such
registration statement all or any part of such Registrable Securities such
Investor requests to be registered. Notwithstanding the foregoing, in the event
that, in connection with any underwritten public offering, the managing
underwriter(s) thereof shall impose a limitation on the number of shares of
Common Stock which may be included in the Registration Statement because, in
such underwriter(s)’ judgment, marketing or other factors dictate such
limitation is necessary to facilitate public distribution, then the Company
shall be obligated to include in such Registration Statement only such limited
portion of the Registrable Securities with respect to which such Investor has
requested inclusion hereunder as the underwriter shall permit; provided,
however, that (i) the Company shall not exclude any Registrable Securities
unless the Company has first excluded all outstanding securities, the holders of
which are not contractually entitled to inclusion of such securities in such
Registration Statement or are not contractually entitled to pro rata inclusion
with the Registrable Securities and (ii) after giving effect to the immediately
preceding proviso, any such exclusion of Registrable Securities shall be made
pro rata among the Investors seeking to include Registrable Securities and the
holders of other securities having the contractual right to inclusion of their
securities in such Registration Statement by reason of demand registration
rights, in proportion to the number of Registrable Securities or other
securities, as applicable, sought to be included by each such Investor or other
holder(s). If an offering in connection with which an Investor is entitled to
registration under this Section 6.7 is an underwritten offering, then each
Investor whose Registrable Securities are included in such Registration
Statement shall, unless otherwise agreed by the Company, offer and sell such
Registrable Securities in an underwritten offering using the same underwriter or
underwriters and, subject to the provisions of this Agreement, on the same terms
and conditions as other shares of Common Stock included in such underwritten
offering and shall enter into an underwriting agreement in a form and substance
reasonably satisfactory to the Company and the underwriter or underwriters. Upon
the effectiveness of the registration statement for which piggy-back
registration has been provided in this Section 6.7, any Event Payments payable
to an Investor whose Securities are included in such registration statement
shall terminate.
 
 
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     ARTICLE VII  
 
MISCELLANEOUS
 
7.1  Termination.
 
This Agreement may be terminated by the Company or any Investor, by written
notice to the other parties, if the Closing has not been consummated by the
twentieth Business Day following the date of this Agreement; provided that no
such termination will affect the right of any party to sue for any breach by the
other party (or parties).
 
7.2  Fees and Expenses.
 
Except as expressly set forth in the Transaction Documents to the contrary, each
party shall pay the fees and expenses of its advisers, counsel, accountants and
other experts, if any, and all other expenses incurred by such party incident to
the negotiation, preparation, execution, delivery and performance of this
Agreement and the other Transaction Documents. The Company shall pay all
Transfer Agent fees, stamp taxes and other taxes and duties levied in connection
with the sale and issuance of their applicable Securities.
 
7.3  Entire Agreement.
 
The Transaction Documents, together with the Exhibits and Schedules thereto,
contain the entire understanding of the parties with respect to the subject
matter hereof and supersede all prior agreements and understandings, oral or
written, with respect to such matters, which the parties acknowledge have been
merged into such documents, exhibits and schedules. At or after the Closing, and
without further consideration, each party will execute and deliver to the
parties such further documents as may be reasonably requested in order to give
practical effect to the intention of the parties under the Transaction
Documents.
 
7.4  Notices.
 
Any and all notices or other communications or deliveries required or permitted
to be provided hereunder shall be in writing and shall be deemed given and
effective on the earliest of (a) the date of transmission, if such notice or
communication is delivered via facsimile or email at the facsimile number or
email address specified in this Section  prior to 4:00 p.m. (New York City time)
on a Trading Day, (b) the next Trading Day after the date of transmission, if
such notice or communication is delivered via facsimile or email at the
facsimile number or email address specified in this Section on a day that is not
a Trading Day or later than 4:00 p.m. (New York City time) on any Trading Day,
(c) the Trading Day following the date of deposit with a nationally recognized
overnight courier service, or (d) upon actual receipt by the party to whom such
notice is required to be given. The addresses, facsimile numbers and email
addresses for such notices and communications are those set forth on the
signature pages hereof, or such other address or facsimile number as may be
designated in writing hereafter, in the same manner, by any such Person.
 
 
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7.5  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 the Company and each of the
Investors 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 subsequent default 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. Notwithstanding the foregoing, a waiver
or consent to depart from the provisions hereof with respect to a matter that
relates exclusively to the rights of Investors under Article VI may be given by
Investors holding at least a majority of the Registrable Securities to which
such waiver or consent relates.
 
7.6  Construction.
 
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. The language used in this Agreement will be deemed to be the language
chosen by the parties to express their mutual intent, and no rules of strict
construction will be applied against any party.
 
7.7  Successors and Assigns.
 
This Agreement shall be binding upon and inure to the benefit of the parties and
their successors and permitted assigns. The Company may not assign this
Agreement or any rights or obligations hereunder without the prior written
consent of the Investors. From and after the Closing Date, any Investor may
assign its rights under this Agreement to any Person to whom such Investor
assigns or transfers any Securities, provided (i) such transferor agrees in
writing with the transferee or assignee to assign such rights, and a copy of
such agreement is furnished to the Company after such assignment, (ii) the
Company is furnished with written notice of (x) the name and address of such
transferee or assignee and (y) the Registrable Securities with respect to which
such registration rights are being transferred or assigned, (iii) following such
transfer or assignment, the further disposition of such Securities by the
transferee or assignee is restricted under the Securities Act and applicable
state securities laws, (iv) such transferee agrees in writing to be bound, with
respect to the transferred Securities, by the provisions hereof that apply to
the “Investors” and (v) such transfer shall have been made in accordance with
the applicable requirements of this Agreement and with all laws applicable
thereto.
 
7.8  No Third-Party Beneficiaries.
 
This Agreement is intended for the benefit of the parties hereto and their
respective successors and permitted assigns and is not for the benefit of, nor
may any provision hereof be enforced by, any other Person, except that each
Indemnified Party is an intended third party beneficiary of Section 6.4 and (in
each case) may enforce the provisions of such Sections directly against the
parties with obligations thereunder.
 
 
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7.9  Governing Law.
 
THE CORPORATE LAWS OF THE STATE OF DELAWARE SHALL GOVERN ALL ISSUES CONCERNING
THE RELATIVE RIGHTS OF THE COMPANY AND ITS STOCKHOLDERS. ALL QUESTIONS
CONCERNING THE CONSTRUCTION, VALIDITY, ENFORCEMENT AND INTERPRETATION OF THIS
AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE
STATE OF NEW YORK.
 
7.10  Survival.
 
The representations and warranties, agreements and covenants contained herein
shall survive the Closing.
 
7.11  Execution.
 
This Agreement may be executed in two or more counterparts, all of which when
taken together shall be considered one and the same agreement and shall become
effective when counterparts have been signed by each party and delivered to the
other party, it being understood that both parties need not sign the same
counterpart. In the event that any signature is delivered by facsimile
transmission or email attachment, such signature shall create a valid and
binding obligation of the party executing (or on whose behalf such signature is
executed) with the same force and effect as if such facsimile or email-attached
signature page were an original thereof.
 
7.12  Severability.
 
If any provision of this Agreement is held to 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 that is a
reasonable substitute therefor, and upon so agreeing, shall incorporate such
substitute provision in this Agreement.
 
7.13  Rescission and Withdrawal Right.
 
Notwithstanding anything to the contrary contained in (and without limiting any
similar provisions of) the Transaction Documents, whenever any Investor
exercises a right, election, demand or option owed to such Investor by the
Company under a Transaction Document and the Company does not timely perform its
related obligations within the periods therein provided, then, prior to the
performance by the Company of the Company's related obligation, such Investor
may rescind or withdraw, in its sole discretion from time to time upon written
notice to the Company, any relevant notice, demand or election in whole or in
part without prejudice to its future actions and rights.
 
7.14  Replacement of Securities.
 
If any certificate or instrument evidencing any Securities is mutilated, lost,
stolen or destroyed, the Company shall issue or cause to be issued in exchange
and substitution for and upon cancellation thereof, or in lieu of and
substitution therefor, a new certificate or instrument, but only upon receipt of
evidence reasonably satisfactory to the Company of such loss, theft or
destruction and the execution by the holder thereof of a customary lost
certificate affidavit of that fact and an agreement to indemnify and hold
harmless the Company for any losses in connection therewith. The applicants for
a new certificate or instrument under such circumstances shall also pay any
reasonable third-party costs associated with the issuance of such replacement
Securities.
 
 
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7.15  Remedies.
 
In addition to being entitled to exercise all rights provided herein or granted
by law, including recovery of damages, each of the Investors and the Company
will be entitled to seek specific performance under the Transaction Documents.
The parties agree that monetary damages may not be adequate compensation for any
loss incurred by reason of any breach of obligations described in the foregoing
sentence and hereby agrees to waive in any action for specific performance of
any such obligation (other than in connection with any action for temporary
restraining order) the defense that a remedy at law would be adequate.
 
7.16  Payment Set Aside.
 
To the extent that the Company makes a payment or payments to any Investor
hereunder or any Investor enforces or exercises its rights hereunder or
thereunder, and such payment or payments or the proceeds of such enforcement or
exercise or any part thereof are subsequently invalidated, declared to be
fraudulent or preferential, set aside, recovered from, disgorged by or are
required to be refunded, repaid or otherwise restored to the Company by a
trustee, receiver or any other Person under any law (including, without
limitation, any bankruptcy law, state or federal law, common law or equitable
cause of action), then to the extent of any such restoration the obligation or
part thereof originally intended to be satisfied shall be revived and continued
in full force and effect as if such payment had not been made or such
enforcement or setoff had not occurred.
 
7.17  Adjustments in Share Numbers and Prices.
 
In the event of any stock split, subdivision, dividend or distribution affecting
the Company’s stockholders pro rata and payable in shares of Common Stock (or
other securities or rights convertible into, or entitling the holder thereof to
receive directly or indirectly shares of Common Stock), combination or other
similar recapitalization or event affecting the Company’s stockholders pro rata
and occurring after the date hereof and prior to the Closing, each reference in
any Transaction Document to a number of shares or a price per share shall be
amended to appropriately account for such event.
 
7.18  Independent Nature of Investors' Obligations and Rights.
 
The obligations of each Investor under any Transaction Document are several and
not joint with the obligations of any other Investor, and no Investor shall be
responsible in any way for the performance of the obligations of any other
Investor under any Transaction Document. The decision of each Investor to
purchase Securities pursuant to this Agreement has been made by such Investor
independently of any other Investor and independently of any information,
materials, statements or opinions as to the business, affairs, operations,
assets, properties, liabilities, results of operations, condition (financial or
otherwise) or prospects of the Company which may have been made or given by any
other Investor or by any agent or employee of any other Investor, and no
Investor or any of its agents or employees shall have any liability to any other
Investor (or any other person) relating to or arising from any such information,
materials, statements or opinions. Nothing contained herein or in any
Transaction Document, and no action taken by any Investor pursuant thereto,
shall be deemed to constitute the Investors as a partnership, an association, a
joint venture or any other kind of entity, or create a presumption that the
Investors are in any way acting in concert or as a group with respect to such
obligations or the transactions contemplated by the Transaction Document. Each
Investor acknowledges that no other Investor has acted as agent for such
Investor in connection with making its investment hereunder and that no other
Investor will be acting as agent of such Investor in connection with monitoring
its investment hereunder. Each Investor shall be entitled to independently
protect and enforce its rights, including without limitation the rights arising
out of this Agreement or out of the other Transaction Documents, and it shall
not be necessary for any other Investor to be joined as an additional party in
any proceeding for such purpose.
 
[SIGNATURE PAGES TO FOLLOW]

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IN WITNESS WHEREOF, the parties hereto have caused this Securities Purchase
Agreement to be duly executed by their respective authorized signatories as of
the date first indicated above.
 
DYADIC INTERNATIONAL, INC.
 
 
By:  /s/ Mark A. Emalfarb 
Name: Mark A. Emalfarb
Title: Chief Executive Officer
 
Address for Notice:
 
140 Intracoastal Pointe Drive,
Suite 404, Jupiter, Florida 33477
 
Facsimile No.: 561-743-8333
Telephone No.: 561-743-8513
Attn: Chief Executive Officer

With a copy to: 
 
Greenberg Traurig, P.A.
1221 Brickell Avenue
Miami, Florida 33131

 
Facsimile: 305-961-5642
Telephone: 305-579-0642
Attn: Andrew E. Balog, Esq.

Greenberg Traurig, LLP
77 West Wacker Drive, Suite 2500
Chicago, Illinois 60601

 
Facsimile: 312-899-0431
Telephone: 312-476-5015
Attn: Robert I. Schwimmer, Esq.
 
COMPANY SIGNATURE PAGE
 

 

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Investor Signature Page
 
By its execution and delivery of this signature page, the undersigned Investor
hereby joins in and agrees to be bound by the terms and conditions of the
Securities Purchase Agreement dated as of November 17, 2006 (the “Purchase
Agreement”) by and among Dyadic International, Inc. and the Investors (as
defined therein), as to the number of shares of Common Stock and Warrants set
forth below, and authorizes this signature page to be attached to the Purchase
Agreement or counterparts thereof.
 
Name of Investor:

T. Row Price Associates, Inc. Investment Adviser to the Funds and Accounts in
Attachment A

By:  /s/ Jay S. Markowitz
Name: Jay S. Markowitz
Title: Vice President

T. Rowe Price Associates, Inc.
Address: 100 East Pratt Street
                  Baltimore, MD 21202
Attention: Darrell N. Braman
Telephone No.:
Facsimile No.:
Email Address:

Number of Shares: 1,200,000 Aggregate
Number of Warrants: 240,000 Aggregate
Aggregate Purchase Price: $5,616,000.00
Exhibits:

A Schedule of Investors
B Instruction Sheet for Investors
B-1  Stock Certificate Questionnaire for Investors
B-2 Registration Statement Questionnaire for Investors
B-3 Certificate for Corporation, Partnership, Limited Liability Company,
       Trust, Foundation and Joint Investors
C Opinion of Company Corporate Counsel
D Plan of Distribution
E Company Transfer Agent Instructions
F Form of Warrant
 
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Investor Signature Page
 
By its execution and delivery of this signature page, the undersigned Investor
hereby joins in and agrees to be bound by the terms and conditions of the
Securities Purchase Agreement dated as of November 17, 2006 (the “Purchase
Agreement”) by and among Dyadic International, Inc. and the Investors (as
defined therein), as to the number of shares of Common Stock and Warrants set
forth below, and authorizes this signature page to be attached to the Purchase
Agreement or counterparts thereof.
 
Name of Investor:

Fort Mason Master, LP

By:  /s/ Dan German
Name: Dan German
Title: Managing Member
          Fort Mason Capital, LLC

Address: 4 Embarcadero Ctr., Ste 2050
                 San Francisco, CA 94111
Attention: KC Lynch & Marshall Jensen
Telephone No.:
Facsimile No.:
Email Address:

Number of Shares: 322,581
Number of Warrants: 64,516
Aggregate Purchase Price: $1,509,679.08
Exhibits:

A Schedule of Investors
B Instruction Sheet for Investors
B-1  Stock Certificate Questionnaire for Investors
B-2 Registration Statement Questionnaire for Investors
B-3 Certificate for Corporation, Partnership, Limited Liability Company,
       Trust, Foundation and Joint Investors
C Opinion of Company Corporate Counsel
D Plan of Distribution
E Company Transfer Agent Instructions
F Form of Warrant
 
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Investor Signature Page
 
By its execution and delivery of this signature page, the undersigned Investor
hereby joins in and agrees to be bound by the terms and conditions of the
Securities Purchase Agreement dated as of November 17, 2006 (the “Purchase
Agreement”) by and among Dyadic International, Inc. and the Investors (as
defined therein), as to the number of shares of Common Stock and Warrants set
forth below, and authorizes this signature page to be attached to the Purchase
Agreement or counterparts thereof.
 
Name of Investor:

Fort Mason Partners, LP

By:  /s/ Dan German
Name: Dan German
Title: Managing Member
          Fort Mason Capital, LLC

Address: 4 Embarcadero Ctr., Ste 2050
                  San Francisco, CA 94111
Attention: KC Lynch & Marshall Jensen
Telephone No.:
Facsimile No.:
Email Address:

Number of Shares: 20,919
Number of Warrants: 4,184
Aggregate Purchase Price: $97,900.92
Exhibits:

A Schedule of Investors
B Instruction Sheet for Investors
B-1  Stock Certificate Questionnaire for Investors
B-2 Registration Statement Questionnaire for Investors
B-3 Certificate for Corporation, Partnership, Limited Liability Company,
       Trust, Foundation and Joint Investors
C Opinion of Company Corporate Counsel
D Plan of Distribution
E Company Transfer Agent Instructions
F Form of Warrant
 

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Investor Signature Page
 
By its execution and delivery of this signature page, the undersigned Investor
hereby joins in and agrees to be bound by the terms and conditions of the
Securities Purchase Agreement dated as of November 17, 2006 (the “Purchase
Agreement”) by and among Dyadic International, Inc. and the Investors (as
defined therein), as to the number of shares of Common Stock and Warrants set
forth below, and authorizes this signature page to be attached to the Purchase
Agreement or counterparts thereof.
 
Name of Investor:

The Pinnacle Fund, L.P.

By:  /s/ Barry M. Kitt
Name: Barry M. Kitt
Title: Sole Member,
Pinnacle Fund Management, L.L.C., the General Partner of Pinnacle Advisers,
L.P., the General Partner of The Pinnacle Fund, L.P.

Address: 4965 Preston Park Blvd.
                  Suite 240
                  Plano, TX 75093
Attention:
Telephone No.:
Facsimile No.:
Email Address:

Number of Shares: 343,500
Number of Warrants: 68,700
Aggregate Purchase Price: $1,607,580
Exhibits:

A Schedule of Investors
B Instruction Sheet for Investors
B-1  Stock Certificate Questionnaire for Investors
B-2 Registration Statement Questionnaire for Investors
B-3 Certificate for Corporation, Partnership, Limited Liability Company,
       Trust, Foundation and Joint Investors
C Opinion of Company Corporate Counsel
D Plan of Distribution
E Company Transfer Agent Instructions
F Form of Warrant
 
Investor Signature Page
 
By its execution and delivery of this signature page, the undersigned Investor
hereby joins in and agrees to be bound by the terms and conditions of the
Securities Purchase Agreement dated as of November 17, 2006 (the “Purchase
Agreement”) by and among Dyadic International, Inc. and the Investors (as
defined therein), as to the number of shares of Common Stock and Warrants set
forth below, and authorizes this signature page to be attached to the Purchase
Agreement or counterparts thereof.
 
Name of Investor:

Emerson Partners

By:  /s/ J. Steven Emerson
Name: J. Steven Emerson
Title: 
 
Address:  1522 Ensley Avenue
                   Los Angeles, CA 90024
Attention:
Telephone No.:
Facsimile No.:
Email Address:

Number of Shares: 50,000
Number of Warrants: 10,000
Aggregate Purchase Price: $234,000
Exhibits:

A Schedule of Investors
B Instruction Sheet for Investors
B-1  Stock Certificate Questionnaire for Investors
B-2 Registration Statement Questionnaire for Investors
B-3 Certificate for Corporation, Partnership, Limited Liability Company,
       Trust, Foundation and Joint Investors
C Opinion of Company Corporate Counsel
D Plan of Distribution
E Company Transfer Agent Instructions
F Form of Warrant
 

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Investor Signature Page
 
By its execution and delivery of this signature page, the undersigned Investor
hereby joins in and agrees to be bound by the terms and conditions of the
Securities Purchase Agreement dated as of November 17, 2006 (the “Purchase
Agreement”) by and among Dyadic International, Inc. and the Investors (as
defined therein), as to the number of shares of Common Stock and Warrants set
forth below, and authorizes this signature page to be attached to the Purchase
Agreement or counterparts thereof.
 
Name of Investor:

Emerson Family Foundation

By:  /s/ J. Steven Emerson
Name: J. Steven Emerson
Title: 

Address:  1522 Ensley Avenue
Los Angeles, CA 90024
Attention:
Telephone No.:
Facsimile No.:
Email Address:

Number of Shares: 50,000
Number of Warrants: 10,000
Aggregate Purchase Price: $234,000
Exhibits:

A Schedule of Investors
B Instruction Sheet for Investors
B-1  Stock Certificate Questionnaire for Investors
B-2 Registration Statement Questionnaire for Investors
B-3 Certificate for Corporation, Partnership, Limited Liability Company,
       Trust, Foundation and Joint Investors
C Opinion of Company Corporate Counsel
D Plan of Distribution
E Company Transfer Agent Instructions
F Form of Warrant
 

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Investor Signature Page
 
By its execution and delivery of this signature page, the undersigned Investor
hereby joins in and agrees to be bound by the terms and conditions of the
Securities Purchase Agreement dated as of November 17, 2006 (the “Purchase
Agreement”) by and among Dyadic International, Inc. and the Investors (as
defined therein), as to the number of shares of Common Stock and Warrants set
forth below, and authorizes this signature page to be attached to the Purchase
Agreement or counterparts thereof.
 
Name of Investor:

Bear Stearns Sec. Corp FBO J. Steven Emerson Roth IRA

By:  /s/ J. Steven Emerson
Name: J. Steven Emerson
Title: 

Address:  1522 Ensley Avenue
                   Los Angeles, CA 90024
Attention:
Telephone No.:
Facsimile No.:
Email Address:

Number of Shares: 550,000
Number of Warrants: 110,000
Aggregate Purchase Price: $2,574,000
Exhibits:

A Schedule of Investors
B Instruction Sheet for Investors
B-1  Stock Certificate Questionnaire for Investors
B-2 Registration Statement Questionnaire for Investors
B-3 Certificate for Corporation, Partnership, Limited Liability Company,
       Trust, Foundation and Joint Investors
C Opinion of Company Corporate Counsel
D Plan of Distribution
E Company Transfer Agent Instructions
F Form of Warrant
 
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Investor Signature Page
 
By its execution and delivery of this signature page, the undersigned Investor
hereby joins in and agrees to be bound by the terms and conditions of the
Securities Purchase Agreement dated as of November 17, 2006 (the “Purchase
Agreement”) by and among Dyadic International, Inc. and the Investors (as
defined therein), as to the number of shares of Common Stock and Warrants set
forth below, and authorizes this signature page to be attached to the Purchase
Agreement or counterparts thereof.
 
Name of Investor:

Bear Stearns Sec. Corp FBO J. Steven Emerson IRA R/O II

By:  /s/ J. Steven Emerson
Name: J. Steven Emerson
Title: 

Address:  1522 Ensley Avenue 
                   Los Angeles, CA 90024
Attention:
Telephone No.:
Facsimile No.:
Email Address:

Number of Shares: 250,000
Number of Warrants: 50,000
Aggregate Purchase Price: $1,170,000
Exhibits:

A Schedule of Investors
B Instruction Sheet for Investors
B-1  Stock Certificate Questionnaire for Investors
B-2 Registration Statement Questionnaire for Investors
B-3 Certificate for Corporation, Partnership, Limited Liability Company,
       Trust, Foundation and Joint Investors
C Opinion of Company Corporate Counsel
D Plan of Distribution
E Company Transfer Agent Instructions
F Form of Warrant
 

 

41

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

Exhibit A
Schedule of Investors

Investor
 
Common Shares
 
Warrants
 
Warrant Shares
 
Purchase Price
 
T. Rowe Price Associates, Inc.
1,200,000
240,000
240,000
$5,616,000.00
         
Emerson Investment Group
900,000
180,000
180,000
$4,212,000.00
         
Fort Mason Capital, L.L.C.
343,500
68,700
68,700
$1,607,580.00
         
The Pinnacle Fund, L.P.
343,500
68,700
68,700
$1,607,580.00
                                         
 
     
TOTAL
2,787,000
557,400
557,400
$13,043,160.00

A-1

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

Exhibit B
INSTRUCTION SHEET FOR INVESTOR
(to be read in conjunction with the entire Securities Purchase Agreement)

A.
Complete the following items in the Securities Purchase Agreement:

 

 
1.
Complete and execute the Investor Signature Page. The Agreement must be executed
by an individual authorized to bind the Investor.

 

 
2.
Exhibit B-1 - Stock Certificate Questionnaire:

 
Provide the information requested by the Stock Certificate Questionnaire;
 

 
3.
Exhibit B-2 - Registration Statement Questionnaire:

 
Provide the information requested by the Registration Statement Questionnaire.
 

 
4.
Exhibit B-3 /B-4 - Investor Certificate:

 
Provide the information requested by the Certificate for Individual Investors
(B-3) or the Certificate for Corporate, Partnership, Trust, Foundation and Joint
Investors (B-4), as applicable.
 

 
5.
Return, via facsimile, the signed Securities Purchase Agreement including the
properly completed Exhibits B-1 through B-4, to:

 
Facsimile:
Telephone:
Attn:
 

 
6.
After completing instruction number five (5) above, deliver the original signed
Securities Purchase Agreement including the properly completed Exhibits  B-1
through B-4 to:

 
Facsimile:
Telephone:
Attn:
 
B.
Instructions regarding the wire transfer of funds for the purchase of the Shares
will be telecopied to the Investor by the Company at a later date.

 
C.
Upon the resale of any Shares by the Investor after the Registration Statement
covering any Shares is effective, as described in the Securities Purchase
Agreement, the Investor must send a letter in the form of Exhibit D to the
Company and the Company’s transfer agent so that the Shares may be properly
transferred.

 

B-1

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Exhibit B-1
DYADIC INTERNATIONAL, INC.
STOCK CERTIFICATE QUESTIONNAIRE

 
Please provide us with the following information:
 
 
1.
 
The exact name that the Securities are to be registered in (this is the name
that will appear on the stock certificate(s)). You may use a nominee name if
appropriate:
 
 
2.
 
The relationship between the Investor of the Securities and the Registered
Holder listed in response to item 1 above:
 
 
3.
 
The mailing address, telephone and telecopy number and email address of the
Registered Holder listed in response to item 1 above:
 
                         
4.
 
The Tax Identification Number of the Registered Holder listed in response to
item 1 above:
 
 

B-1-1

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

Exhibit B-2
DYADIC INTERNATIONAL, INC.
REGISTRATION STATEMENT QUESTIONNAIRE
 
In connection with the Registration Statement, please provide us with the
following information regarding the Investor.
 
1.
Please state your organization’s name exactly as it should appear in the
Registration Statement:

______________________________________________________________________
 
Except as set forth below, your organization does not hold any equity securities
of the Company on behalf of another person or entity.
 
State any exceptions here:
 
______________________________________________________________________
 
2. Address of your organization:
 
______________________________________________________
______________________________________________________
Telephone: __________________________
Fax: ________________________________
Contact Person: _______________________
 
3.
Have you or your organization had any position, office or other material
relationship within the past three years with the Company or its affiliates?
(Include any relationships involving you or your affiliates, officers,
directors, or principal equity holders (5% or more) that has held any position
or office or has had any other material relationship with the Company (or its
predecessors or affiliates) during the past three years.)

 
_______  Yes   _______  No
 
If yes, please indicate the nature of any such relationship below:
 
4.
Are you the beneficial owner of any other securities of the Company? (Include
any equity securities that you beneficially own or have a right to acquire
within 60 days after the date hereof, and as to which you have sole voting
power, shared voting power, sole investment power or shared investment power.)

 
_______  Yes   _______  No
 
If yes, please describe the nature and amount of such ownership as of a recent
date.
 

 

B-2-1

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

 
5.
Except as set forth below, you wish that all the shares of the Company’s common
stock beneficially owned by you or that you have the right to acquire from the
Company be offered for your account in the Registration Statement.

 
State any exceptions here:
 

 

 
6.
Have you made or are you aware of any arrangements relating to the distribution
of the shares of the Company pursuant to the Registration Statement?

 
_______  Yes   _______  No
 
If yes, please describe the nature and amount of such arrangements.
 
7.
NASD Matters

 
(a) State below whether (i) you or any associate or affiliate of yours are a
member of the NASD, a controlling shareholder of an NASD member, a person
associated with a member, a direct or indirect affiliate of a member, or an
underwriter or related person with respect to the proposed offering; (ii) you or
any associate or affiliate of yours owns any stock or other securities of any
NASD member not purchased in the open market; or (iii) you or any associate or
affiliate of yours has made any outstanding subordinated loans to any NASD
member. If you are a general or limited partnership, a no answer asserts that no
such relationship exists for you as well as for each of your general or limited
partners.
 
Yes: __________
No: __________

If “yes,” please identify the NASD member and describe your relationship,
including, in the case of a general or limited partner, the name of the partner:
 
If you answer “no” to Question 7(a), you need not respond to Question 7(b).
 
(b) State below whether you or any associate or affiliate of yours has been an
underwriter, or a controlling person or member of any investment banking or
brokerage firm which has been or might be an underwriter for securities of the
Corporation or any affiliate thereof including, but not limited to, the common
stock now being registered.
 
Yes: __________
No: __________
   

If “yes,” please identify the NASD member and describe your relationship,
including, in the case of a general or limited partner, the name of the partner.
 

B-2-2

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

ACKNOWLEDGEMENT
 
The undersigned hereby agrees to notify the Company promptly of any changes in
the foregoing information which should be made as a result of any developments,
including the passage of time. The undersigned also agrees to provide the
Company and the Company’s counsel any and all such further information regarding
the undersigned promptly upon request in connection with the preparation,
filing, amending, and supplementing of the Registration Statement (or any
prospectus contained therein). The undersigned hereby consents to the use of all
such information in the Registration Statement.
 
The undersigned understands and acknowledges that the Company will rely on the
information set forth herein for purposes of the preparation and filing of the
Registration Statement.
 
The undersigned understands that the undersigned may be subject to serious civil
and criminal liabilities if the Registration Statement, when it becomes
effective, either contains an untrue statement of a material fact or omits to
state a material fact required to be stated in the Registration Statement or
necessary to make the statements in the Registration Statement not misleading.
The undersigned represents and warrants that all information it provides to the
Company and its counsel is currently accurate and complete and will be accurate
and complete at the time the Registration Statement becomes effective and at all
times subsequent thereto, and agrees during the Effectiveness Period and any
additional period in which the undersigned is making sales of Shares under and
pursuant to the Registration Statement, and agrees during such periods to notify
the Company immediately of any misstatement of a material fact in the
Registration Statement, and of the omission of any material fact necessary to
make the statements contained therein not misleading.
 
Dated: __________
______________________________
Name
 
______________________________
Signature
 
______________________________
Name and Title of Signatory

B-2-3

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

Exhibit B-3
DYADIC INTERNATIONAL, INC.
 
CERTIFICATE FOR CORPORATION, PARTNERSHIP, LIMITED LIABILITY COMPANY,
TRUST, FOUNDATION AND JOINT INVESTORS

If the investor is a corporation, partnership, limited liability company, trust,
pension plan, foundation, joint Investor (other than a married couple) or other
entity, an authorized officer, partner, or trustee must complete, date and sign
this Certificate.
 
CERTIFICATE
 
The undersigned certifies that the representations and responses below are true
and accurate:
 
(a) The investor has been duly formed and is validly existing and has full power
and authority to invest in the Company. The person signing on behalf of the
undersigned has the authority to execute and deliver the Securities Purchase
Agreement on behalf of the Investor and to take other actions with respect
thereto.
 
(b) Indicate the form of entity of the undersigned:
 
____ Limited Partnership
____ General Partnership
____ Limited Liability Company
____ Corporation
____ Revocable Trust (identify each grantor and indicate under what
circumstances the trust is revocable by the grantor):
 
(Continue on a separate piece of paper, if necessary.)
 
____ Other type of Trust (indicate type of trust and, for trusts other than
pension trusts, name the grantors and beneficiaries):
 
(Continue on a separate piece of paper, if necessary.)
 
____ Other form of organization (indicate form of organization.)
 
(c) Indicate the approximate date the undersigned entity was formed:  
 
(d) In order for the Company to offer and sell the Units in conformance with
state and federal securities laws, the following information must be obtained
regarding your investor status. Please initial each category applicable to you
as an investor in the Company.
 

 

B-3-1

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

___ 1. A bank as defined in Section 3(a)(2) of the Securities Act, or any
savings and loan association or other institution as defined in Section
3(a)(5)(A) of the Securities Act whether acting in its individual or fiduciary
capacity;
 
___ 2. A broker or dealer registered pursuant to Section 15 of the Securities
Exchange Act of 1934;
 
___ 3. An insurance company as defined in Section 2(13) of the Securities Act;
 
___ 4. An investment company registered under the Investment Company Act of 1940
or a business development company as defined in Section  2(a)(48) of that Act;
 
___ 5. A Small Business Investment Company licensed by the U.S. Small Business
Administration under Section 301(c) or (d) of the Small Business Investment Act
of 1958;
 
___ 6. A plan established and maintained by a state, its political subdivisions,
or any agency or instrumentality of a state or its political subdivisions, for
the benefit of its employees, if such plan has total assets in excess of
$5,000,000;
 
___ 7. An employee benefit plan within the meaning of the Employee Retirement
Income Security Act of 1974, if the investment decision is made by a plan
fiduciary, as defined in Section 3(21) of such Act, which is either a bank,
savings and loan association, insurance company, or registered investment
advisor, or if the employee benefit plan has total assets in excess of
$5,000,000 or, if a self-directed plan, with investment decisions made solely by
persons that are accredited investors;
 
___ 8. A private business development company as defined in Section 202(a)(22)
of the Investment Advisers Act of 1940;
 
___ 9. Any partnership or corporation or any organization described in
Section 501(c)(3) of the Internal Revenue Code or similar business trust, not
formed for the specific purpose of acquiring the Shares, with total assets in
excess of $5,000,000;
 
___ 10. A trust, with total assets in excess of $5,000,000, not formed for the
specific purpose of acquiring the Shares, whose purchase is directed by a
sophisticated person as described in Rule  506(b)(2)(ii) of the Exchange Act;
 
___ 11. An entity in which all of the equity owners qualify under any of the
above subparagraphs. If the undersigned belongs to this investor category only,
list the equity owners of the undersigned, and the investor category which each
such equity owner satisfies:
 
 
(Continue on a separate piece of paper, if necessary.)
 

 

B-3-2

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

 
Please set forth in the space provided below the (i) states, if any, in the U.S.
in which you maintained your principal office during the past two years and the
dates during which you maintained your office in each state, (ii) state(s), if
any, in which you are incorporated or otherwise organized and (iii) state(s), if
any, in which you pay income taxes.
 
 
Dated:__________________________, 2006
 
Print Name of Investor
 
Name:
Title:
(Signature and title of authorized officer, partner or trustee)
 

 

B-3-3

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

SECURITIES DELIVERY INSTRUCTIONS
 
Please instruct us as to where you would like the Securities delivered to at
Closing:
 
Name:
 
Company:
 
Address:
 
 
 
Telephone:
 
Other Special Instructions:
 

B-3-4

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

Exhibit C
OPINION OF COMPANY CORPORATE COUNSEL
 

November ___, 2006

To the Investors Listed on the “Scedule of Investors”
to the Agreement referenced below
 
Re: Dyadic International, Inc.
 
Ladies and Gentlemen:
 
 
We have acted as special legal counsel for Dyadic International, Inc., a
Delaware corporation (the “Company”), in connection with its execution, delivery
and performance of the Securities Purchase Agreement, dated as of November ___,
2006 (the “Agreement”), by and among the Company and the investors listed on the
“Schedule of Investors” attached as Exhibit A to the Agreement (the “Investors”)
relating to the Company’s offer and sale, and the Investors’ purchase from the
Company, of the Securities. All capitalized terms used herein but not otherwise
defined herein shall have the meanings ascribed to them in the Agreement. This
letter is being furnished to you at the request of the Company pursuant to
Section 2.2(a) of the Agreement.
 
A. Basis of Opinion.
 
As the basis for the opinions expressed in this opinion letter, we have
examined, considered and relied upon the following:
 
1. The Agreement;
 
2. The form of Warrants;
 
3.  The Transfer Agent Instructions (and together with above items 1 and 2, the
“Transaction Documents”); 
 
4. The Amended and Restated Certificate of Incorporation certified by the
Secretary of State of the State of Delaware on November _____, 2006 (the
“Certificate”), Amended and Restated Bylaws (and together with the Certificate,
the “Organizational Documents”), and corporate minute books of the Company;
 
5. A certificate of good standing with respect to the Company issued by the
Secretary of State of the State of Delaware, as of a recent date;
 
6. The authorizing resolutions of the Board of Directors of the Company with
respect to the Agreement and the transactions contemplated thereby;
 
7. An officer’s certificate, dated the date hereof, of the Company confirming
that that (i) the representations and warranties of the Company contained in the
Agreement are true and correct in all material respects as of the date when made
and as of the date hereof as though made on and as of such date and (ii) the
Company has performed or satisfied and complied in all material respects with
all covenants, agreements and conditions required by the Transaction Documents
to be performed, satisfied or complied with by it at or prior to the date
hereof; and
 

 

C-1

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

8. Such other documents and such matters of law as we have considered necessary
or appropriate for the expression of the opinions contained herein.
 
For purposes of this opinion letter, the documents and information referred to
in this Section A are collectively referred to as the “Documents.”
 
B. Assumptions.
 
In rendering the opinions set forth in Section C below, we have assumed without
investigation (i) the genuineness of all signatures (other than signatures of
officers of the Company), (ii) the authenticity of all Documents submitted to us
as originals, (iii) the conformity to authentic original documents of all
Documents submitted to us as copies, (iv) the veracity of all Documents, (v) the
power and capacity of each of the parties to the Transaction Documents (other
than the Company) to enter into and perform their respective obligations
thereunder; (vi) the due authorization, execution and delivery of the
Transaction Documents by each of the parties thereto (other than the Company),
and (vii) that the Transaction Documents constitute or, when so duly executed
and delivered by the parties thereto, will constitute the valid and binding
agreement of each party thereto (other than the Company).
 
With respect to our opinions expressed below relating to good standing of the
Company, we have relied, without independent investigation, upon the certificate
of good standing referenced in item 5 of Section A, and our opinion is rendered
as of the date of such certificate. We express no opinion as to the tax good
standing of the Company in any jurisdiction. With respect to our opinion
expressed below in item 7 of Section C relating to the capitalization of the
Company, we have relied, without independent investigation, upon the officer’s
certificate of the Company referenced in item 7 of Section A and Schedule 3.1(f)
to the Agreement, as certified by such officer’s certificate, and our opinion is
rendered as of the date of such officer’s certificate. The preceding
notwithstanding, our opinion expressed in the second sentence of said item 7 of
Section C is not rendered upon reliance on the officer’s certificate of the
Company referenced in item 7 of Section A or Schedule 3.1(f) to the Agreement,
but is otherwise rendered based on and subject to the other comments,
assumptions, exceptions, qualifications and limitations set forth in Sections B
and D hereof.
 
As to questions of fact material to the opinions hereinafter expressed, we have
relied upon the respective representations and warranties of each of the parties
made in the Documents. We have made no examination or investigation to verify
the accuracy or completeness of any financial, accounting, statistical,
scientific or other factual information set forth in the Documents or otherwise
furnished to the Investors or material to the opinions expressed herein, and we
express no opinion with respect thereto.
 
C. Opinions.
 
Based solely upon our examination and consideration of the Documents, and in
reliance thereon, and subject to the comments, assumptions, exceptions,
qualifications and limitations set forth in Sections B and D hereof, we are of
the opinion that:
 

 

C-2

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

1. The Company is a corporation duly organized, validly existing and in good
standing under the laws of the jurisdiction of its incorporation with the
requisite legal authority to own and use its properties and assets and to carry
on its business as currently conducted. The Company is not in violation of any
of the provisions of the Organizational Documents. The Company is duly qualified
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, have or reasonably be expected to result in a Material Adverse
Effect.
 
2. The Company has the requisite corporate authority to enter into and to
consummate the transactions contemplated by each of the Transaction Documents to
which it is a party and otherwise to carry out its obligations thereunder. The
execution and delivery by the Company of each of the Transaction Documents to
which the Company is a party and the consummation by each of them of the
transactions contemplated thereby have been duly authorized by all necessary
action on the part of them and no further consent or action is required by the
Company, the Company’s Board of Directors or the Company’s stockholders. Each of
the Transaction Documents to which the Company is a party has been (or upon
delivery will be) duly executed by it and is, or when delivered in accordance
with the terms thereof, will constitute, the valid and binding obligation of the
Company enforceable against it in accordance with its terms.
 
3. The execution, delivery and performance by the Company of the Transaction
Documents to which the Company is a party and the consummation by the Company of
the transactions contemplated thereby do not, and will not, (i) conflict with or
violate any provision of the Company’s Organizational Documents, (ii) conflict
with, or constitute a default (or an event that 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 (with or without notice, lapse of time
or both) of, any agreement, credit facility, debt or other instrument
(evidencing a Company debt or otherwise) listed as an Exhibit on the Company’s
Annual Report on Form 10-KSB for the year ended December 31, 2005, except to the
extent that such conflict, default, termination, amendment, acceleration or
cancellation right would not reasonably be expected to have a Material Adverse
Effect, 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 (including, assuming the accuracy of
the representations and warranties of the Investors set forth in Section 3.2 of
the Agreement, federal and state securities laws and regulations and the rules
and regulations of any self-regulatory organization to which the Company or its
securities are subject, including all applicable Trading Markets), or by which
any property or asset of the Company is bound or affected, except to the extent
that such violation would not reasonably be expected to have a Material Adverse
Effect.
 

 

C-3

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

4. The Common Shares (including the Warrant Shares issuable upon the exercise of
the Warrants) are duly authorized and, when issued and paid for in accordance
with the Transaction Documents, will be duly and validly issued, fully paid and
nonassessable, free and clear of all Liens except for restrictions on transfer
imposed by applicable federal and state securities laws, and will not be subject
to preemptive or similar rights of stockholders (other than those imposed by the
Investors). The Company shall maintain a reserve from its duly authorized shares
of Common Stock the maximum number of shares of Common Stock issuable upon
exercise of the Warrants. The offer, issuance and sale to the Investors of the
Common Shares and other Securities are exempt from the registration requirements
of the Securities Act.
 
5. Except as disclosed in the SEC Reports, there is no action, suit, claim, or
proceeding, or, to our knowledge, inquiry or investigation, before or by any
court, public board, government agency, self-regulatory organization or body
pending or, to our knowledge, threatened against or affecting the Company that
could, individually or in the aggregate, have a Material Adverse Effect.
 
6. There is no control share acquisition, business combination, poison pill
(including any distribution under a rights agreement) or other similar
anti-takeover provision under the Company’s Organizational Documents of its
state of incorporation that is or could become applicable to any of the
Investors as a result of the Investors and the Company fulfilling their
obligations or exercising their rights under the Transaction Documents,
including, without limitation, as a result of the Company’s issuance of the
Securities and the Investors’ ownership of the Securities.
 
7. The aggregate number of shares issued and outstanding classes of capital
stock, options and other Securities of the Company (whether or not presently
convertible into or exercisable or exchangeable for shares of capital stock of
the Company) as of November 16, 2006 is as set forth in Schedule 3.1(f) to the
Agreement. The aggregate number of shares and the type of all authorized classes
of capital stock of the Company consists of 105,000,000 shares, of which
100,000,000 shares are common stock, par value $0.001 per share, and 5,000,000
shares are preferred stock, par value $0.0001 per share, and all outstanding
shares of capital stock are duly authorized, validly issued, fully paid and
nonassessable and have been issued in compliance in all material respects with
all applicable securities laws. Except as disclosed in Schedule 3.1(f) to the
Agreement or disclosed in the SEC Reports, the Company did not have outstanding
at November 16, 2006 any other options, warrants, script rights to subscribe to,
calls or commitments of any character whatsoever relating to, or securities,
rights or obligations convertible into or exercisable or exchangeable for, or
entered into any agreement giving any Person any right to subscribe for or
acquire, any shares of Common Stock, or securities or rights convertible or
exchangeable into shares of Common Stock. Except as set forth on Schedule 3.1(f)
to the Agreement and the SEC Reports, and except for customary adjustments as a
result of stock dividends, stock splits, combinations of shares,
reorganizations, recapitalizations, reclassifications or other similar events,
there are no anti-dilution or price adjustment provisions contained in any
security issued by the Company (or in any agreement providing rights to security
holders) and the issuance and sale of the Securities will not obligate the
Company to issue shares of Common Stock or other securities to any Person (other
than the Investors) and will not result in a right of any holder of securities
to adjust the exercise, conversion, exchange or reset price under such
securities.
 

 

C-4

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

8. Based on our discussions with the Company and the Company’s accountants, no
facts have come to our attention which lead us to believe that the SEC Reports
as of their respective dates contained any untrue statement of a material fact
or omitted to state a material fact necessary in order to make the statements
therein, in the light of the circumstances under which they were made, not
misleading (it being understood that we express no view with respect to the
financial statements and the notes and schedules thereto and other financial,
scientific and statistical data or information contained or incorporated by
reference therein or omitted therefrom).
 
D. Comments, Assumptions, Limitations, Qualifications and Exceptions.
 
The opinions expressed in Section C above are based upon and subject to, the
further comments, assumptions, limitations, qualifications and exceptions set
forth below:
 
1. As used in the opinions expressed herein, the phrase “to our knowledge” (and
phrases of similar import) refers only to the actual current knowledge of the
attorneys within our firm who have given substantive attention to the Company in
connection with the transactions contemplated by the Agreement and does not (a)
include constructive notice of matters or information, or (b) except for our
conversations with certain representatives of the Company and our review of the
Documents, imply that we have undertaken any independent investigation (i) with
any persons outside of our firm or (ii) as to the accuracy or completeness of
any factual representation, information or other matter made or furnished in
connection with the transactions contemplated by the Transaction Documents.
Furthermore, such reference means only that we do not know of any fact or
circumstance contradicting the statement that follows, and does not imply that
we know the statement to be correct or have any basis (other than the Documents
and such conversations) for that statement.
 
2. We are licensed to practice law in the States of Delaware and New York. The
Company is incorporated in Delaware. The Agreement is governed by the laws of
the State of New York. Accordingly, the opinions expressed herein are
specifically limited to the laws of the States of Delaware and New York, and the
federal law of the United States of America.
 
3. Our opinions above with respect to enforceability of the Company’ obligations
under the Transaction Documents to which it is a party are limited and qualified
to the extent that enforceability of the rights, obligations, agreements and
remedies thereunder are subject to, or affected or limited by: (i) applicable
liquidation, conservatorship, bankruptcy, insolvency, moratorium, fraudulent
conveyance, reorganization or similar debtor or creditor relief laws from time
to time in effect under state and/or federal law; (ii) general principles of
equity (whether considered in a proceeding in equity or at law); (iii) the
exercise of the discretionary powers of any court or other authority before
which may be brought any proceeding seeking equitable remedies, including,
without limitation, specific performance and injunctive relief; (iv) public
policy or other applicable limitations on indemnification or contribution under
the federal securities laws; or (v) other applicable laws (including rules and
regulations) and court decisions that may limit or render unenforceable certain
rights and remedies of the Investors (or any Person entitled to indemnification
and contribution under Section 6.4(a) of the Agreement or in any of the other
Transaction Documents) provided in the documents about which we opine but that
do not, in our judgment, make such documents inadequate for the ultimate
practical realization of the benefits intended to be
 

C-5

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

provided thereby, though they may result in delays (and we express no opinion as
to the economic consequences, if any, of such delays).
 
4. No opinion is expressed as to consents, approvals, authorizations or orders
required under state securities or blue sky laws or the by-laws and rules of the
American Stock Exchange in connection with the Securities or the other
transactions contemplated by the Agreement. We also express no opinion herein as
to any provision of the Transaction Documents (a) which may be deemed to or
construed to waive any right of the Company, (b) to the effect that rights and
remedies are not exclusive, that every right or remedy is cumulative and may be
exercised in addition to or with any other right or remedy and does not preclude
recourse to one or more other rights or remedies, (c) relating to the effect of
invalidity or unenforceability of any provision of any of the Transaction
Documents on the validity or enforceability of any other provision thereof,
(d) requiring the payment of penalties, consequential damages or liquidated
damages, (e) which is in violation of public policy, including, without
limitation, any provision relating to indemnification and contribution,
(f) purporting to indemnify any Person against his, her or its own negligence or
intentional misconduct, (g) which provides that the terms of any of the
Transaction Documents may not be waived or modified except in writing or
(h) relating to venue or consent to jurisdiction.
 
5. We have rendered no opinion herein with respect to any: (a) federal or state
tax laws or regulations, (b) any federal or state antitrust and unfair
competition laws and regulations, (c) any federal or state laws or regulations
concerning filing or notice requirements (e.g., Hart-Scott-Rodino and
Exon-Florio), or (d) any federal or state environmental laws.
 
6. Although we have acted as counsel to the Company in connection with certain
other matters, our engagement is limited to certain matters about which we have
been consulted. Consequently, there may exist matters of a legal nature
involving the Company in connection with which we have not been consulted and
have not represented them.
 
7. This opinion letter is limited to the matters stated herein and no opinions
may be implied or inferred beyond the matters expressly stated herein.
 
8. The opinions set forth herein are based in part upon the federal and state
authorities as they are currently compiled and reported on by customary
reporting services. It is possible that legislation affecting the opinions
expressed herein might have been enacted into law that are not reflected in such
reporting services. We are not currently aware of the passage of any such
legislation. However, it is not possible for us to know with certainty as of the
date of this opinion letter whether any such legislation may have been passed
into law.
 
9. The opinions expressed herein are as of the date hereof, and we assume no
obligation to update or supplement such opinions to reflect any facts or
circumstances that may hereafter come to our attention or any changes in law
that may hereafter occur.
 

 

C-6

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10. This opinion letter has been issued solely for the benefit of the Investors
and no other Person shall be entitled to rely hereon without the express written
consent of this firm. Without our prior written consent, this opinion letter may
not be quoted in whole or in part or otherwise referred to in any document or
report and may not be furnished to any Person.
 
Respectfully submitted,
 
Greenberg Traurig, LLP

C-7

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Exhibit D
PLAN OF DISTRIBUTION
 
The selling stockholders may, from time to time, sell any or all of their shares
of common stock on any stock exchange, market or trading facility on which the
shares are traded or in private transactions. These sales may be at fixed or
negotiated prices. The selling stockholders may use any one or more of the
following methods when selling shares:
 

·  
ordinary brokerage transactions and transactions in which the broker-dealer
solicits purchasers;

 

·  
block trades in which the broker-dealer will attempt to sell the shares as agent
but may position and resell a portion of the block as principal to facilitate
the transaction;

 

·  
purchases by a broker-dealer as principal and resale by the broker-dealer for
its account;

 

·  
an exchange distribution in accordance with the rules of the applicable
exchange;

 

·  
privately negotiated transactions;

 

·  
short sales;

 

·  
broker-dealers may agree with the selling stockholders to sell a specified
number of such shares at a stipulated price per share;

 

·  
a combination of any such methods of sale; and

 

·  
any other method permitted pursuant to applicable law.

 
The selling stockholders may also sell shares under Rule 144 under the
Securities Act, if available, rather than under this prospectus.
 
Broker-dealers engaged by the selling stockholders may arrange for other
brokers-dealers to participate in sales. Broker-dealers may receive commissions
or discounts from the selling stockholders (or, if any broker-dealer acts as
agent for the purchaser of shares, from the purchaser) in amounts to be
negotiated. The selling stockholders do not expect these commissions and
discounts to exceed what is customary in the types of transactions involved. Any
profits on the resale of shares of common stock by a broker-dealer acting as
principal might be deemed to be underwriting discounts or commissions under the
Securities Act. Discounts, concessions, commissions and similar selling
expenses, if any, attributable to the sale of shares will be borne by a selling
stockholder. The selling stockholders may agree to indemnify any agent, dealer
or broker-dealer that participates in transactions involving sales of the shares
if liabilities are imposed on that person under the Securities Act.
 

 

D-1

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The selling stockholders may from time to time pledge or grant a security
interest in some or all of the shares of common stock owned by them and, if they
default in the performance of their secured obligations, the pledgees or secured
parties may offer and sell the shares of common stock from time to time under
this prospectus after we have filed a supplement to this prospectus under Rule
424(b)(3) or other applicable provision of the Securities Act of 1933
supplementing or amending the list of selling stockholders to include the
pledgee, transferee or other successors in interest as selling stockholders
under this prospectus.
 
The selling stockholders also may transfer the shares of common stock in other
circumstances, in which case the transferees, pledgees or other successors in
interest will be the selling beneficial owners for purposes of this prospectus
and may sell the shares of common stock from time to time under this prospectus
after we have filed a supplement to this prospectus under Rule 424(b)(3) or
other applicable provision of the Securities Act of 1933 supplementing or
amending the list of selling stockholders to include the pledgee, transferee or
other successors in interest as selling stockholders under this prospectus.
 
The selling stockholders and any broker-dealers or agents that are involved in
selling the shares of common stock may be deemed to be “underwriters” within the
meaning of the Securities Act in connection with such sales. In such event, any
commissions received by such broker-dealers or agents and any profit on the
resale of the shares of common stock purchased by them may be deemed to be
underwriting commissions or discounts under the Securities Act.
 
We are required to pay all fees and expenses incident to the registration of the
shares of common stock. We have agreed to indemnify the selling stockholders
against certain losses, claims, damages and liabilities, including liabilities
under the Securities Act.
 
The selling stockholders have advised us that they have not entered into any
agreements, understandings or arrangements with any underwriters or
broker-dealers regarding the sale of their shares of common stock, nor is there
an underwriter or coordinating broker acting in connection with a proposed sale
of shares of common stock by any selling stockholder. If we are notified by any
selling stockholder that any material arrangement has been entered into with a
broker-dealer for the sale of shares of common stock, if required, we will file
a supplement to this prospectus. If the selling stockholders use this prospectus
for any sale of the shares of common stock, they will be subject to the
prospectus delivery requirements of the Securities Act.
 
The anti-manipulation rules of Regulation M under the Securities Exchange Act of
1934 may apply to sales of our common stock and activities of the selling
stockholders.
 

D-2

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Exhibit E
COMPANY TRANSFER AGENT INSTRUCTIONS
 
[TRANSFER AGENT NAME AND ADDRESS]
 
Attention:
Ladies and Gentlemen:
 
Reference is made to that certain Securities Purchase Agreement, dated as of
November XX, 2006 (the “Agreement”), by and among Dyadic International, Inc., a
Delaware corporation (the “Company”), and the investors named on the Schedule of
Investors attached thereto (collectively, the “Holders”), pursuant to which the
Company is issuing to the Holders shares (the “Common Shares”) of Common Stock
of the Company, par value $.001 per share (the “Common Stock”), and Warrants
(the “Warrants”), which are exercisable into shares of Common Stock.
 
This letter shall serve as our irrevocable authorization and direction to you
(provided that you are the transfer agent of the Company at such time):
 
(i)  to issue shares of Common Stock upon transfer or resale of the Common
Shares; and
 
(ii)  to issue shares of Common Stock upon the exercise of the Warrants (the
“Warrant Shares”) to or upon the order of a Holder from time to time upon
delivery to you of a properly completed and duly executed Exercise Notice, in
the form attached hereto as Exhibit I, which has been acknowledged by the
Company as indicated by the signature of a duly authorized officer of the
Company thereon.
 
You acknowledge and agree that so long as you have previously received
(a) written confirmation from the Company’s legal counsel that either (i) a
registration statement covering resales of the Common Shares and the Warrant
Shares has been declared effective by the Securities and Exchange Commission
(the “SEC”) under the Securities Act of 1933, as amended (the “Securities Act”)
and that resales of the Common Shares and the Warrant Shares may be made
thereunder, or (ii) sales of the Common Shares and the Warrant Shares may be
made in conformity with Rule 144 under the Securities Act (“Rule 144”), (b) if
applicable, a copy of such registration statement, and (c) notice from legal
counsel to the Company or any Holder that a transfer of Common Shares and/or
Warrant Shares has been effected either pursuant to the registration statement
(and a prospectus delivered to the transferee) or pursuant to Rule 144, then,
unless otherwise required by law, within three (3) business days of your receipt
of the notice referred to in (c), you shall issue the certificates representing
the Common Shares and the Warrant Shares so sold to the transferees registered
in the names of such transferees, and such certificates shall not bear any
legend restricting transfer of the Common Shares and the Warrant Shares thereby
and should not be subject to any stop-transfer restriction.
 
A form of written confirmation (to be used in connection with any sale) from the
Company’s outside legal counsel that a registration statement covering resales
of the Common Shares and the Warrant Shares has been declared effective by the
SEC under the Securities Act is attached hereto as Exhibit II.
 

E-1

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Please be advised that the Holders are relying upon this letter as an inducement
to enter into the Agreement and, accordingly, each Holder is a third party
beneficiary to these instructions.
 
Please execute this letter in the space indicated to acknowledge your agreement
to act in accordance with these instructions. Should you have any questions
concerning this matter, please contact me at 561-743-8333.
 
Very truly yours,
DYADIC INTERNATIONAL, INC.
 
By:
Name:
Title:

THE FOREGOING INSTRUCTIONS ARE
ACKNOWLEDGED AND AGREED TO
this day of ___________, 2006

[INSERT NAME OF TRANSFER AGENT]
 
By:
Name:
Title:
 
Enclosures

E-2

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Exhibit F
FORM OF WARRANT
 
NEITHER THESE SECURITIES NOR THE SECURITIES FOR WHICH THESE SECURITIES ARE
EXERCISABLE HAVE BEEN REGISTERED WITH THE SECURITIES AND EXCHANGE COMMISSION OR
THE SECURITIES COMMISSION OF ANY STATE IN RELIANCE UPON AN EXEMPTION FROM
REGISTRATION UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE “SECURITIES
ACT”), AND, ACCORDINGLY, MAY NOT BE OFFERED OR SOLD EXCEPT PURSUANT TO AN
EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT OR PURSUANT TO AN
AVAILABLE EXEMPTION FROM, OR IN A TRANSACTION NOT SUBJECT TO, THE REGISTRATION
REQUIREMENTS OF THE SECURITIES ACT AND IN ACCORDANCE WITH APPLICABLE STATE
SECURITIES LAWS. THESE SECURITIES AND THE SECURITIES ISSUABLE UPON EXERCISE OF
THESE SECURITIES MAY BE PLEDGED IN CONNECTION WITH A BONA FIDE MARGIN ACCOUNT OR
OTHER LOAN SECURED BY SUCH SECURITIES SO LONG AS A REGISTRATION STATEMENT IS
EFFECTIVE UNDER THE SECURITIES ACT COVERING THE RESALE OF THESE SECURITIES.
 
DYADIC INTERNATIONAL, INC.

FORM OF WARRANT

Warrant No. [__]Dated: November __, 2006

Dyadic International, Inc., a Delaware corporation (the “Company”), hereby
certifies that, for value received, ________________[Name of Holder] or its
registered assigns (the “Holder”), is entitled to purchase from the Company up
to a total of [_____]shares of common stock, $0.001 par value per share (the
“Common Stock”), of the Company (each such share, a “Warrant Share” and all such
shares issuable under the warrants, the “Warrant Shares”) at an exercise price
equal to $[_______] per share (as adjusted from time to time as provided in
Section 9, the “Exercise Price”), at any time after one hundred eighty (180)
days from the date hereof (the first calendar day following such 180-day period
on which this Warrant may be exercised is hereinafter referred to as the
“Initial Exercise Date”) and through and including the date that is three (3)
years from the Initial Exercise Date (the “Expiration Date”), and subject to the
following terms and conditions. This Warrant (“Warrant”) is one of a series of
similar warrants issued pursuant to that certain Securities Purchase Agreement,
dated as of the date hereof, by and among the Company and the Investors
identified therein (the “Purchase Agreement”). All such warrants are referred to
herein, collectively, as the “Warrants” and the holders thereof along with the
Holder named herein, the “Holders.”
 
1. Definitions. In addition to the terms defined elsewhere in this Warrant,
capitalized terms that are not otherwise defined herein have the meanings given
to such terms in the Purchase Agreement.
 
2. Registration of Warrant. The Company shall register this Warrant, upon
records to be maintained by the Company for that purpose (the “Warrant
Register”), in the name of the record Holder hereof from time to time. The
Company may deem and treat the registered Holder of this Warrant as the absolute
owner hereof for the purpose of any exercise hereof or any distribution to the
Holder, and for all other purposes, absent actual notice to the contrary.
 
F-1
 

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

 
3. Registration of Transfers. The Company shall register the transfer of any
portion of this Warrant in the Warrant Register, upon surrender of this Warrant,
with the Form of Assignment attached hereto duly completed and signed, to the
Transfer Agent or to the Company at its address specified herein. Upon any such
registration or transfer, a new warrant to purchase Common Stock, in
substantially the form of this Warrant (any such new warrant, a “New Warrant”),
evidencing the portion of this Warrant so transferred shall be issued to the
transferee and a New Warrant evidencing the remaining portion of this Warrant
not so transferred, if any, shall be issued to the transferring Holder. The
acceptance of the New Warrant by the transferee thereof shall be deemed the
acceptance by such transferee of all of the rights and obligations of a holder
of a Warrant.
 
4. Exercise and Duration of Warrants.
 
(a) This Warrant shall be exercisable by the registered Holder at any time and
from time to time commencing on the Initial Exercise Date to and including the
Expiration Date. At 6:30 P.M., New York City time on the Expiration Date, the
portion of this Warrant not exercised prior thereto shall be and become void and
of no value; provided that, if the average of the Closing Prices for the five
Trading Days immediately prior to (but not including) the Expiration Date
exceeds the Exercise Price on the Expiration Date, and provided further that, if
on the Expiration Date, there is no effective Registration Statement and current
prospectus available covering the resale of the Warrant Shares except as a
result of the Excluded Events, then this Warrant shall be deemed to have been
exercised in full (to the extent not previously exercised) on a “cashless
exercise” basis at 6:30 P.M. New York City time on the Expiration Date. A
“cashless exercise” means that in lieu of paying the aggregate purchase price
for the shares being purchased upon exercise of the Warrants in cash, the Holder
will forfeit a number of shares underlying the Warrants pursuant to Section 10
below.
 
(b) The Holder may exercise this Warrant by delivering to the Company (i) an
exercise notice, in the form attached hereto (the “Exercise Notice”),
appropriately completed and duly signed, and (ii) payment of the Exercise Price
for the number of Warrant Shares as to which this Warrant is being exercised
(which may take the form of a “cashless exercise” if so indicated in the
Exercise Notice only if a “cashless exercise” may occur at such time pursuant to
Section 10 below), and the date such items are delivered to the Company (as
determined in accordance with the notice provisions hereof) is an “Exercise
Date.” The Holder shall not be required to deliver the original Warrant in order
to effect an exercise hereunder. Execution and delivery of the Exercise Notice
shall have the same effect as cancellation of the original Warrant and issuance
of a New Warrant evidencing the right to purchase the remaining number of
Warrant Shares.
 
(c) Exercise Disputes. In the case of any dispute with respect to the number of
Warrant Shares to be issued upon exercise of this Warrant, the Company shall
promptly issue such number of Warrant Shares that is not disputed and shall
submit the disputed determinations or arithmetic calculations to the Holder via
facsimile within two (2) Business Days of receipt of the Holder's election to
purchase Warrant Shares. If the Holder and the Company are unable to agree as to
the determination of the Exercise Price within two (2) Business Days of such
disputed determination or arithmetic calculation being submitted to the Holder,
then the Company shall in accordance with this Section, submit via facsimile the
disputed determination to an independent reputable accounting firm of national
standing, selected jointly by the Company and the Holder. The Company shall
cause such accounting firm to perform the determinations or calculations and
notify the Company and the Holder of the results within forty-eight (48) hours
from the time it receives the disputed determinations of calculations. Such
accounting firm's determination shall be binding upon all parties absent
manifest error. The Company shall then on the next Business Day issue
certificate(s) representing the appropriate number of Warrant Shares of Common
Stock in accordance with such accounting firm's determination and this Section.
The prevailing party shall be entitled to reimbursement of all fees and expenses
of such determination and calculation.
 
F-2
 

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5. Delivery of Warrant Shares.
 
(a) Upon exercise of this Warrant, the Company shall promptly (but in no event
later than three Trading Days after the Exercise Date) issue or cause to be
issued and cause to be delivered to or upon the written order of the Holder and
in such name or names as the Holder may designate, a certificate for the Warrant
Shares issuable upon such exercise, free of restrictive legends unless a
registration statement covering the resale of the Warrant Shares and naming the
Holder as a selling stockholder thereunder is not then effective and the Warrant
Shares are not freely transferable without volume restrictions pursuant to Rule
144 under the Securities Act. The Holder, or any Person so designated by the
Holder to receive Warrant Shares, shall be deemed to have become holder of
record of such Warrant Shares as of the Exercise Date. Unless the Warrant Shares
are required to be certificated with restrictive legends in accordance with this
paragraph, the Company shall, upon request of the Holder, use its Best Efforts
to deliver Warrant Shares hereunder electronically through the Depository Trust
Corporation or another established clearing corporation performing similar
functions.
 
(b) This Warrant is exercisable, either in its entirety or, from time to time,
for a portion of the number of Warrant Shares. Upon surrender of this Warrant
following one or more partial exercises, the Company shall issue or cause to be
issued, at its expense, a New Warrant evidencing the right to purchase the
remaining number of Warrant Shares.
 
(c) In addition to any other rights available to a Holder, if the Company fails
to deliver to the Holder a certificate representing Warrant Shares by the fifth
Trading Day after the date on which delivery of such certificate is required by
this Warrant, and if after such fifth Trading Day and prior to the Company’s
delivery of such certificate representing the Warrant Shares the Holder
purchases (in an open market transaction) shares of Common Stock to deliver in
satisfaction of a sale by the Holder of the Warrant Shares that the Holder
anticipated receiving from the Company (a “Buy-In”), then the Company shall,
within five Trading Days after the Holder’s request and in the Holder’s
discretion, either (i) pay cash to the Holder in an amount equal to the Holder’s
total purchase price (including brokerage commissions, if any) for the shares of
Common Stock so purchased (the “Buy-In Shares” and the “Buy-In Price,”
respectively), at which point the Company’s obligation to deliver such
certificate (and to issue such Warrant Shares) shall terminate, or (ii) promptly
honor its obligation to deliver to the Holder a certificate or certificates
representing such Warrant Shares and pay cash to the Holder in an amount equal
to the excess (if any) of the Buy-In Price over the product of (A) such number
of Buy-In Shares, times (B) the average of the Closing Prices during the five
Trading Days after the date on which delivery of such certificate is required by
this Warrant.
 
(d) The Company’s obligations to issue and deliver Warrant Shares in accordance
with the terms hereof are absolute and unconditional, irrespective of any action
or inaction by the Holder to enforce the same, any waiver or consent with
respect to any provision hereof, the recovery of any judgment against any Person
or any action to enforce the same, or any setoff, counterclaim, recoupment,
limitation or termination, or any breach or alleged breach by the Holder or any
other Person of any obligation to the Company or any violation or alleged
violation of law by the Holder or any other Person, and irrespective of any
other circumstance which might otherwise limit such obligation of the Company to
the Holder in connection with the issuance of Warrant Shares. Nothing herein
shall limit a Holder’s right to pursue any other remedies available to it
hereunder, at law or in equity including, without limitation, a decree of
specific performance and/or injunctive relief with respect to the Company’s
failure to timely deliver certificates representing Warrant Shares upon exercise
of the Warrant as required pursuant to the terms hereof.
 
F-3
 

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

 
6. Charges, Taxes and Expenses. Issuance and delivery of certificates for
Warrant Shares upon exercise of this Warrant shall be made without charge to the
Holder for any issue or transfer tax, withholding tax, transfer agent fee or
other incidental tax or expense in respect of the issuance of such certificates,
all of which taxes and expenses shall be paid by the Company; provided, however,
that the Company shall not be required to pay any tax which may be payable in
respect of any transfer involved in the registration of any certificates for
Warrant Shares or Warrants in a name other than that of the Holder. The Holder
shall be responsible for all other tax liability that may arise as a result of
holding or transferring this Warrant or receiving Warrant Shares upon exercise
hereof.
 
7. Replacement of Warrant. If this Warrant is mutilated, lost, stolen or
destroyed, the Company shall issue or cause to be issued in exchange and
substitution for and upon cancellation hereof, or in lieu of and substitution
for this Warrant, a New Warrant, but only upon receipt of evidence reasonably
satisfactory to the Company of such loss, theft or destruction and customary and
reasonable bond or indemnity, if requested. Applicants for a New Warrant under
such circumstances shall also comply with such other reasonable regulations and
procedures and pay such other reasonable third-party costs as the Company may
prescribe.
 
8. Reservation of Warrant Shares. The Company covenants that it will at all
times reserve and keep available out of the aggregate of its authorized but
unissued and otherwise unreserved Common Stock, solely for the purpose of
enabling it to issue Warrant Shares upon exercise of this Warrant as herein
provided, 100% of the Warrant Shares which are then issuable and deliverable
upon the exercise of this entire Warrant, free from preemptive rights or any
other contingent purchase rights of persons other than the Holder (after giving
effect to the adjustments and restrictions of Section 9, if any). The Company
covenants that all Warrant Shares so issuable and deliverable shall, upon
issuance and the payment of the applicable Exercise Price in accordance with the
terms hereof, be duly and validly authorized, issued and fully paid and
non-assessable. The Company will take all such action as may be necessary to
assure that such Warrant Shares may be issued as provided herein without
violation of any applicable law or regulation, or of any requirements of any
securities exchange or automated quotation system upon which the Common Stock
may be listed.
 
9. Certain Adjustments. The Exercise Price and number of Warrant Shares issuable
upon exercise of this Warrant are subject to adjustment from time to time as set
forth in this Section 9.
 
(a) Stock Dividends and Splits. If the Company, at any time while this Warrant
is outstanding, (i) pays a stock dividend on its Common Stock or otherwise makes
a distribution on any class of capital stock that is payable in shares of Common
Stock, (ii) subdivides outstanding shares of Common Stock into a larger number
of shares, or (iii) combines outstanding shares of Common Stock into a smaller
number of shares, then in each such case the Exercise Price shall be multiplied
by a fraction of which the numerator shall be the number of shares of Common
Stock outstanding immediately before such event and of which the denominator
shall be the number of shares of Common Stock outstanding immediately after such
event. Any adjustment made pursuant to clause (i) of this paragraph shall become
effective immediately after the record date for the determination of
stockholders entitled to receive such dividend or distribution, and any
adjustment pursuant to clause (ii) or (iii) of this paragraph shall become
effective immediately after the effective date of such subdivision or
combination.
 
(b) Distributions Made Prior to Exercise. If the Company, at any time while this
Warrant is outstanding, distributes pro rata to holders of Common Stock (i)
evidences of its indebtedness, (ii) any security (other than a distribution of
Common Stock covered by Section 9(a)), (iii) rights or warrants to subscribe for
or purchase any security (except pursuant to a shareholder rights plan duly
adopted by the Company’s Board of Directors), or (iv) any other asset (in each
case, a “Distribution”), then, if, but only if, the Company fails to provide
written notice of any such Distribution to the Holder sufficiently in advance
thereof to permit the Holder to exercise this Warrant and be deemed a holder of
Common Stock at the record date fixed for the determination of holders of Common
Stock entitled to receive the Distribution (each a “Distribution Notice”), in
each such case any Exercise Price in effect immediately prior to the close of
business on the record date fixed for the determination of holders of Common
Stock entitled to receive the Distribution shall be reduced, effective as of the
close of business on such record date, to a price determined by multiplying such
Exercise Price by a fraction of which (i) the numerator shall be the Weighted
Average Price1  of the Common Stock on the Trading Day immediately preceding
such record date minus the value of the Distribution (as determined in good
faith by the Company's Board of Directors) applicable to one share of Common
Stock, and (ii) the denominator shall be the Weighted Average Price of the
Common Stock on the Trading Day immediately preceding such record date.
 
F-4
 

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

 
(c) Notwithstanding the provisions set forth in Section 9(b) above, if the
Company, at any time while this Warrant is outstanding, makes a Distribution to
the holders of Common Stock, and the Company fails to provide a Distribution
Notice to the Holder in accordance with Section 9(b) above, then in each such
case the Holder shall have the option to receive such Distribution which would
have been made to the Holder had such Holder been the holder of such Warrant
Shares on the record date for the determination of stockholders entitled to such
Distribution; provided, however, if the Holder elects to receive such
Distribution, it will not be entitled to receive the adjustment to the Exercise
Price specified in clause (b) above.
 
(d) Fundamental Transactions. (1) If, at any time while this Warrant is
outstanding, (i) the Company effects any merger or consolidation of the Company
with or into (whether or not the Company is the surviving corporation) another
Person, (ii) the Company effects any sale, assignment, transfer, conveyance or
other disposition of all or substantially all of its assets in one or a series
of related transactions; provided, however, that for avoidance of doubt, the
granting of a lien on all or substantially all of the Company's assets as
collateral shall not be deemed a Fundamental Transaction (as such term is
hereinafter defined) hereunder, (iii) the Company allows another Person to make
a purchase, tender or exchange offer that is not contested by the Company and is
accepted by the holders of more than the 50% of either the outstanding shares of
Common Stock (not including any shares of Common Stock held by the Person or
Persons making or party to, or associated or affiliated with the Persons making
or party to, such purchase, tender or exchange offer), (iv) the Company
consummates a stock purchase agreement or other business combination (including,
without limitation, a reorganization, recapitalization, spin-off or scheme of
arrangement) with another Person whereby such other Person acquires more than
the 50% of the outstanding shares of Common Stock (not including any shares of
Common Stock held by the other Person or other Persons making or party to, or
associated or affiliated with the other Persons making or party to, such stock
purchase agreement or other business combination), or (v) the Company effects
any reclassification of the Common Stock or any compulsory share exchange
pursuant to which the Common Stock is effectively converted into or exchanged
for other securities, cash or property (other than as a result of a subdivision
or combination of shares of Common Stock covered by Section 9(a) above) (in any
such case, a “Fundamental Transaction”), then the Holder shall have the right
thereafter to receive, upon exercise of this Warrant, the same amount and kind
of securities, cash or property as it would have been entitled to receive upon
the occurrence of such Fundamental Transaction if it had been, immediately prior
to such Fundamental Transaction, the holder of the number of Warrant Shares then
issuable upon exercise in full of this Warrant (the “Alternate Consideration”).
The aggregate Exercise Price for this Warrant will not be affected by any such
Fundamental Transaction, but the Company shall apportion such aggregate Exercise
Price among the Alternate Consideration in a reasonable manner reflecting the
relative value of any different components of the Alternate Consideration. If
holders of Common Stock are given any choice as to the securities, cash or
property to be received in a Fundamental Transaction, then the Holder shall be
given the same choice as to the Alternate Consideration it receives upon any
exercise of this Warrant following such Fundamental Transaction. At the Holder’s
request, any successor to the Company or surviving entity in such Fundamental
Transaction shall issue to the Holder a new warrant consistent with the
foregoing provisions and evidencing the Holder’s right to purchase the Alternate
Consideration for the aggregate Exercise Price upon exercise thereof. The terms
of any agreement pursuant to which a Fundamental Transaction is effected shall
include terms requiring any such successor or surviving entity to comply with
the provisions of this paragraph (d) and insuring that the Warrant (or any such
replacement security) will be similarly adjusted upon any subsequent transaction
analogous to a Fundamental Transaction.
 
(2) Notwithstanding the foregoing and the provisions of Section 9(b) above, in
the event of a Fundamental Transaction in which (i) the surviving entity in the
Fundamental Transaction is not a publicly traded company and (ii) the
consideration to be delivered to the holders of Common Stock upon the occurrence
of such Fundamental Transaction does not consist of publicly traded securities
representing at least eighty percent (80%) of the value of such consideration,
if the Holder has not exercised the Warrant in full prior to the consummation of
such Fundamental Transaction, then the Holder shall have the right to require
any successor to the Company or surviving entity in such Fundamental Transaction
to purchase this Warrant from the Holder by paying to the Holder, simultaneously
with the consummation of such Fundamental Transaction and in lieu of the warrant
referred to in Section 9(d)(1), cash in an amount equal to the value of the
remaining unexercised portion of this Warrant on the date of such consummation,
which value shall be determined by use of the Black and Scholes Option Pricing
Model reflecting (i) a risk-free interest rate corresponding to the U.S.
Treasury rate for a period equal to the remaining term of this Warrant as of
such date of request and (ii) an expected volatility equal to the lesser of 60%
and the 100 day volatility obtained from the HVT function on Bloomberg.
 
F-5
 

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(e) Adjustment Upon Issuance of Shares of Common Stock. If and whenever on or
after the issuance date of this Warrant through the first one hundred eighty
days (180) thereof, the Company issues or sells, or in accordance with this
Section 9 is deemed to have issued or sold, any shares of Common Stock
(including the issuance or sale of shares of Common Stock owned or held by or
for the account of the Company) for a consideration per share (the “New Issuance
Price”) less than a price (the “Applicable Price”) equal to the Exercise Price
in effect immediately prior to such issue or sale or deemed issuance or sale
(the foregoing a “Dilutive Issuance”), then immediately after such Dilutive
Issuance, the Exercise Price then in effect shall be reduced to an amount equal
to the New Issuance Price. If and whenever after such one hundred eightieth day,
the Company issues or sells, or in accordance with this Section 9 is deemed to
have issued or sold, any shares of Common Stock (including the issuance or sale
of shares of Common Stock owned or held by or for the account of the Company) in
a Dilutive Issuance, then immediately after such Dilutive Issuance, the Exercise
Price then in effect shall be reduced to an amount equal to the product of (A)
the Exercise Price in effect immediately prior to such Dilutive Issuance and (B)
the quotient determined by dividing (1) the sum of (I) the product derived by
multiplying the Exercise Price in effect immediately prior to such Dilutive
Issuance and the number of shares of Common Stock Deemed Outstanding immediately
prior to such Dilutive Issuance plus (II) the consideration, if any, received by
the Company upon such Dilutive Issuance, by (2) the product derived by
multiplying (I) the Exercise Price in effect immediately prior to such Dilutive
Issuance by (II) the number of shares of Common Stock Deemed Outstanding
immediately after such Dilutive Issuance. Upon each such adjustment of the
Exercise Price hereunder, the number of Warrant Shares shall be adjusted to the
number of shares of Common Stock determined by multiplying the Exercise Price in
effect immediately prior to such adjustment by the number of Warrant Shares
acquirable upon exercise of this Warrant immediately prior to such adjustment
and dividing the product thereof by the Exercise Price resulting from such
adjustment. For purposes of determining the adjusted Exercise Price under this
Section 9(e), the following shall be applicable:
 
(i) Issuance of Options. If the Company in any manner grants any Options and the
lowest price per share for which one share of Common Stock is issuable upon the
exercise of any such Option or upon conversion, exercise or exchange of any
Convertible Securities issuable upon exercise of any such Option is less than
the Applicable Price, then such share of Common Stock shall be deemed to be
outstanding and to have been issued and sold by the Company at the time of the
granting or sale of such Option for such price per share. For purposes of this
Section 9(e)(i), the “lowest price per share for which one share of Common Stock
is issuable upon exercise of such Options or upon conversion, exercise or
exchange of such Convertible Securities” shall be equal to the sum of the lowest
amounts of consideration (if any) received or receivable by the Company with
respect to any one share of Common Stock upon the granting or sale of the
Option, upon exercise of the Option and upon conversion, exercise or exchange of
any Convertible Security issuable upon exercise of such Option. No further
adjustment of the Exercise Price or number of Warrant Shares shall be made upon
the actual issuance of such shares of Common Stock or of such Convertible
Securities upon the exercise of such Options or upon the actual issuance of such
shares of Common Stock upon conversion, exercise or exchange of such Convertible
Securities.
 
(ii) Issuance of Convertible Securities. If the Company in any manner issues or
sells any Convertible Securities and the lowest price per share for which one
share of Common Stock is issuable upon the conversion, exercise or exchange
thereof is less than the Applicable Price, then such share of Common Stock shall
be deemed to be outstanding and to have been issued and sold by the Company at
the time of the issuance or sale of such Convertible Securities for such price
per share. For the purposes of this Section 9(e)(ii), the “lowest price per
share for which one share of Common Stock is issuable upon the conversion,
exercise or exchange” shall be equal to the sum of the lowest amounts of
consideration (if any) received or receivable by the Company with respect to one
share of Common Stock upon the issuance or sale of the Convertible Security and
upon conversion, exercise or exchange of such Convertible Security. No further
adjustment of the Exercise Price or number of Warrant Shares shall be made upon
the actual issuance of such shares of Common Stock upon conversion, exercise or
exchange of such Convertible Securities, and if any such issue or sale of such
Convertible Securities is made upon exercise of any Options for which adjustment
of this Warrant has been or is to be made pursuant to other provisions of this
Section 9(e), no further adjustment of the Exercise Price or number of Warrant
Shares shall be made by reason of such issue or sale.
 
(iii) Change in Option Price or Rate of Conversion. If the purchase price
provided for in any Options, the additional consideration, if any, payable upon
the issue, conversion, exercise or exchange of any Convertible Securities, or
the rate at which any Convertible Securities are convertible into or exercisable
or exchangeable for shares of Common Stock increases or decreases at any time,
the Exercise Price and the number of Warrant Shares in effect at the time of
such increase or decrease shall be adjusted to the Exercise Price and the number
of Warrant Shares which would have been in effect at such time had such Options
or Convertible Securities provided for such increased or decreased purchase
price, additional consideration or increased or decreased conversion rate, as
the case may be, at the time initially granted, issued or sold. For purposes of
this Section 9(e)(iii), if the terms of any Option or Convertible Security that
was outstanding as of the date of issuance of this Warrant are increased or
decreased in the manner described in the immediately preceding sentence, then
such Option or Convertible Security and the shares of Common Stock deemed
issuable upon exercise, conversion or exchange thereof shall be deemed to have
been issued as of the date of such increase or decrease. No adjustment pursuant
to this Section 9(e) shall be made if such adjustment would result in an
increase of the Exercise Price then in effect or a decrease in the number of
Warrant Shares.
 
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(iv) Calculation of Consideration Received. In case any Option is issued in
connection with the issue or sale of other securities of the Company, together
comprising one integrated transaction in which no specific consideration is
allocated to such Options by the parties thereto, the Options will be deemed to
have been issued for a consideration of $0.01. If any shares of Common Stock,
Options or Convertible Securities are issued or sold or deemed to have been
issued or sold for cash, the consideration received therefor will be deemed to
be the net amount received by the Company therefor. If any shares of Common
Stock, Options or Convertible Securities are issued or sold for a consideration
other than cash, the amount of such consideration received by the Company will
be the fair value of such consideration, except where such consideration
consists of securities which are listed on a securities exchange or stock
market, in which case the amount of consideration received by the Company will
be the Closing Sale Price of such security on the date of receipt. If any shares
of Common Stock, Options or Convertible Securities are issued to the owners of
the non-surviving entity in connection with any merger in which the Company is
the surviving entity, the amount of consideration therefor will be deemed to be
the fair value of such portion of the net assets and business of the
non-surviving entity as is attributable to such shares of Common Stock, Options
or Convertible Securities, as the case may be. The fair value of any
consideration other than cash or securities will be determined jointly by the
Board of Directors of the Company and the Required Holders. If such parties are
unable to reach agreement within ten (10) days after the occurrence of an event
requiring valuation (the “Valuation Event”), the fair value of such
consideration will be determined within five (5) Business Days after the tenth
day following the Valuation Event by an independent, reputable appraiser jointly
selected by the Company and the Required Holders. The determination of such
appraiser shall be final and binding upon all parties absent manifest error and
the fees and expenses of such appraiser shall be borne by the Company.
 
(v) Record Date. If the Company takes a record of the holders of shares of
Common Stock for the purpose of entitling them (A) to receive a dividend or
other distribution payable in shares of Common Stock, Options or in Convertible
Securities or (B) to subscribe for or purchase shares of Common Stock, Options
or Convertible Securities, then such record date will be deemed to be the date
of the issue or sale of the shares of Common Stock deemed to have been issued or
sold upon the declaration of such dividend or the making of such other
distribution or the date of the granting of such right of subscription or
purchase, as the case may be.
 
(vi) Notwithstanding the foregoing, no adjustment will be made under this
Section 9(e) upon the issuance of any Common Stock, Convertible Securities
and/or Options (a) in connection with employee benefit plans or other plans
approved by the Board of Directors of the Company for the benefit of employees,
consultants or directors of the Company or its subsidiaries, (b) stock dividends
or other events to which Section 9(a) applies, or in connection with Options or
Convertible Securities outstanding immediately prior to the Closing; provided
that the terms of such Options or Convertible Securities are not amended,
modified or changed after the date hereof except under the terms of the Abengoa
Securities Purchase Agreement, (c) issued under the Abengoa Securities Purchase
Agreement (as such term is hereinafter defined), (d) issued under the Purchase
Agreement, (e) in connection with a bona fide acquisition by the Company or to
strategic partners in a transaction the primary purpose of which is not to raise
equity funds, or (f) pursuant to a firm commitment underwritten public offering
with a nationally recognized underwriter which generates gross proceeds in
excess of $25 million.
 
(vii) For purposes of this Warrant, (A) “Common Stock Deemed Outstanding” means,
at any given time, the number of shares of Common Stock actually outstanding at
such time, plus the number of shares of Common Stock deemed to be outstanding
pursuant to Sections 9(e)(i) and 9(e)(ii) hereof regardless of whether the
Options or Convertible Securities are actually exercisable at such time, but
excluding any shares of Common Stock owned or held by or for the account of the
Company or issuable upon conversion and exercise, as applicable, of the
Warrants; (B) “Convertible Securities” means any stock or securities (other than
Options) directly or indirectly convertible into or exercisable or exchangeable
for shares of Common Stock; (C) “Options” means any rights, warrants or options
to subscribe for or purchase shares of Common Stock or Convertible Securities;
and (D) “Abengoa Securities Purchase Agreement” means that certain Securities
Purchase Agreement dated as of October 26, 2006 by and among the Company and
Abengoa Bioenergy R&D, Inc.
 
(f) Number of Warrant Shares. Simultaneously with any adjustment to the Exercise
Price pursuant to paragraph (a) of this Section, the number of Warrant Shares
that may be purchased upon exercise of this Warrant shall be increased or
decreased proportionately, as applicable, so that after such adjustment the
aggregate Exercise Price payable hereunder for the increased or decreased, as
applicable, number of Warrant Shares shall be the same as the aggregate Exercise
Price in effect immediately prior to such adjustment.
 
(g) Calculations. All calculations under this Section 9 shall be made to the
nearest cent or the nearest 1/100th of a share, as applicable. The number of
shares of Common Stock outstanding at any given time shall not include shares
owned or held by or for the account of the Company, and the disposition of any
such shares shall be considered an issue or sale of Common Stock.
 
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(h) Notice of Adjustments. Upon the occurrence of each adjustment pursuant to
this Section 9, the Company at its expense will promptly compute such adjustment
in accordance with the terms of this Warrant and prepare a certificate setting
forth such adjustment, including a statement of the adjusted Exercise Price and
adjusted number or type of Warrant Shares or other securities issuable upon
exercise of this Warrant (as applicable), describing the transactions giving
rise to such adjustments and showing in detail the facts upon which such
adjustment is based. Upon written request, the Company will promptly deliver a
copy of each such certificate to the Holder and to the Company’s Transfer Agent.
 
(i) Notice of Corporate Events. If the Company (i) declares a dividend or any
other distribution of cash, securities or other property in respect of its
Common Stock, including without limitation any granting of rights or warrants to
subscribe for or purchase any capital stock of the Company or any Subsidiary,
(ii) authorizes or approves, enters into any agreement contemplating or solicits
stockholder approval for any Fundamental Transaction or (iii) authorizes the
voluntary dissolution, liquidation or winding up of the affairs of the Company,
then the Company shall deliver to the Holder a notice describing the material
terms and conditions of such transaction, at least ten calendar days prior to
the applicable record or effective date on which a Person would need to hold
Common Stock in order to participate in or vote with respect to such
transaction, and the Company will take all steps reasonably necessary in order
to insure that the Holder is given the practical opportunity to exercise this
Warrant prior to such time so as to participate in or vote with respect to such
transaction; provided, however, that the failure to deliver such notice or any
defect therein shall not affect the validity of the corporate action required to
be described in such notice.
 
10. Payment of Exercise Price. The Holder shall pay the Exercise Price in
immediately available funds (a “cash exercise”); provided, however, that if
either (i) the provisions of the second sentence of Section 4(a) shall apply or
(ii) at any time after the date that is one (1) year after the date of this
Warrant (the “Required Effective Date”) neither a Registration Statement
covering the resale of the Warrant Shares is effective nor a current prospectus
is available due to the occurrence of an Event, the Holder may satisfy its
obligation to pay the Exercise Price through a “cashless exercise” prior to the
applicable Cure Date, in which event the Company shall issue to the Holder the
number of Warrant Shares determined as follows:
 

 
X = Y [(A-B)/A]
where:
   
X = the number of Warrant Shares to be issued to the Holder.
     
Y = the number of Warrant Shares with respect to which this Warrant is being
exercised (prior to cashless exercise).
     
A = the average of the Closing Prices for the five Trading Days immediately
prior to (but not including) the Exercise Date.
     
B = the Exercise Price.

For purposes of Rule 144 promulgated under the Securities Act, it is intended,
understood and acknowledged that the Warrant Shares issued in a cashless
exercise transaction shall be deemed to have been acquired by the Holder, and
the holding period for the Warrant Shares shall be deemed to have commenced, on
the date this Warrant was originally issued pursuant to the Purchase Agreement.
 
11. Call of Warrant. At any time from time to time after the date of issuance of
this Warrant (the “Effective Date”), the Company shall have the right, upon 15
Trading Days’ prior written notice to the Holder (the “Call Notice”), to call
all or any portion of this Warrant at a price equal to $.001 per Warrant Share
(the “Call Price”) at any time, provided that (i) the Warrant Shares are
registered for resale pursuant to the Securities Act and shall have been for at
least the 20-trading day period preceding the Call Notice, (ii) the prospectus
under which such Warrant Shares have been registered has not been suspended at
any time during the 20-trading day period preceding the Call Notice, (iii) the
Warrant Shares are currently listed (and have not been suspended from trading)
on a Trading Market as of the date the Call Notice is delivered to the Holder
through the effective date of such call and (iv) the average “VWAP” (as defined
below) for the Common Stock on a Trading Market for any period of at least 10
consecutive Business Days is equal to or greater than 150% of the Exercise Price
then in effect (the “Threshold Price”). The Company must exercise this right to
call the Warrant within 3 Trading Days after the satisfaction of the last of the
conditions in clauses (i) through (iv) of the immediately foregoing sentence to
be satisfied. At any time prior to the Effective Date of such call, the Holder
shall have the right to exercise this Warrant in accordance with its terms. As
soon as practicable after the Effective Date of such call, the Company shall
mail or deliver to the Holder a check in the amount of the Call Price times the
number of Warrant Shares remaining available for purchase under this Warrant at
the Effective Date. Upon receipt of such check, the Holder shall surrender, via
mail or delivery, this Warrant to the Company for cancellation. After the
Effective Date of such call, this Warrant shall no longer be exercisable. For
purposes of this Section 11, “VWAP” shall mean for any date, the price
determined by the first of the following clauses that applies: (a) if the Common
Stock is then listed or quoted on a Trading Market, other that the OTC Bulletin
Board, the daily volume weighted average trading price of the Common Stock for
such date on the primary Trading Market on which the Common Stock is then listed
or quoted as reported by Bloomberg Financial L.P. (based on a Trading Day from
9:30 a.m. Eastern Standard Time to 4:02 p.m. Eastern Standard Time) using the
AQR function; (b) if the Common Stock is not then listed or quoted on a Trading
Market other than the OTC Bulletin Board and if prices for the Common Stock are
then quoted on the OTC Bulletin Board, the volume weighted average trading price
of the Common Stock for such date on the OTC Bulletin Board or if there are no
trades on that date, then the average of the closing bid and ask prices of the
Common Stock as reported by the OTC Bulletin Board for that date; (c) if the
Common Stock is not then listed or quoted on a Trading Market or on the OTC
Bulletin Board and if prices for the Common Stock are then reported in the “Pink
Sheets” published by Pink Sheets, LLC (or a similar organization or agency
succeeding to its functions of reporting prices), the most recent bid price per
share of the Common Stock so reported for that date; or (d) in all other cases,
the fair market value of a share of Common Stock as determined by a nationally
recognized-independent appraiser selected in good faith by the Board of
Directors of the Company.
 
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12. Limitation on Exercise.
 
(a) Notwithstanding anything to the contrary contained herein, the number of
Warrant Shares that may be acquired by the Holder upon any exercise of this
Warrant (or otherwise in respect hereof) shall be limited to the extent
necessary to insure that, following such exercise (or other issuance), the total
number of shares of Common Stock then beneficially owned by such Holder and its
Affiliates and any other Persons whose beneficial ownership of Common Stock
would be aggregated with the Holder’s for purposes of Section 13(d) of the
Exchange Act, does not exceed 9.999% (the “Maximum Percentage”) of the total
number of issued and outstanding shares of Common Stock (including for such
purpose the shares of Common Stock issuable upon such exercise). For such
purposes, beneficial ownership shall be determined in accordance with Section
13(d) of the Exchange Act and the rules and regulations promulgated thereunder.
The Company’s obligation to issue shares of Common Stock in excess of the
limitation referred to in this Section shall be suspended (and shall not
terminate or expire notwithstanding any contrary provisions hereof) until such
time, if any, as such shares of Common Stock may be issued in compliance with
such limitation, but in no event later than the Expiration Date. By written
notice to the Company, the Holder may waive the provisions of this Section or
increase or decrease the Maximum Percentage to any other percentage specified in
such notice, but (i) any such waiver or increase will not be effective until the
61st day after such notice is delivered to the Company, and (ii) any such waiver
or increase or decrease will apply only to the Holder and not to any other
holder of Warrants.
 
13. Fractional Shares. The Company shall not be required to issue or cause to be
issued fractional Warrant Shares on the exercise of this Warrant. If any
fraction of a Warrant Share would, except for the provisions of this Section, be
issuable upon exercise of this Warrant, the number of Warrant Shares to be
issued will be rounded up to the nearest whole share.
 
14. Notices. Any and all notices or other communications or deliveries hereunder
(including without limitation any Exercise Notice) shall be in writing and shall
be deemed given and effective on the earliest of (i) the date of transmission,
if such notice or communication is delivered via facsimile at the facsimile
number specified in the Purchase Agreement prior to 6:30 p.m. (New York City
time) on a Trading Day, (ii) the next Trading Day after the date of
transmission, if such notice or communication is delivered via facsimile at the
facsimile number specified in the Purchase Agreement on a day that is not a
Trading Day or later than 6:30 p.m. (New York City time) on any Trading Day,
(iii) the Trading Day following the date of mailing, if sent by nationally
recognized overnight courier service, or (iv) upon actual receipt by the party
to whom such notice is required to be given. The address for such notices or
communications shall be as set forth in the Purchase Agreement.
 
15. Warrant Agent. The Company shall serve as warrant agent under this Warrant.
Upon 30 days' notice to the Holder, the Company may appoint a new warrant agent.
Any corporation into which the Company or any new warrant agent may be merged or
any corporation resulting from any consolidation to which the Company or any new
warrant agent shall be a party or any corporation to which the Company or any
new warrant agent transfers substantially all of its corporate trust or
stockholders services business shall be a successor warrant agent under this
Warrant without any further act. Any such successor warrant agent shall promptly
cause notice of its succession as warrant agent to be mailed (by first class
mail, postage prepaid) to the Holder at the Holder's last address as shown on
the Warrant Register.
 
16. Registration of Warrant Shares. The Holder is entitled to the benefits of
the Purchase Agreement with respect to the registration of the Warrant Shares
under the Securities Act.
 
17. Miscellaneous.
 
(a) Subject to the restrictions on transfer set forth on the first page hereof,
this Warrant may be assigned by the Holder. This Warrant may not be assigned by
the Company, except to a successor in the event of a Fundamental Transaction.
This Warrant shall be binding on and inure to the benefit of the parties hereto
and their respective successors and assigns. Subject to the preceding sentence,
nothing in this Warrant shall be construed to give to any Person other than the
Company and the Holder any legal or equitable right, remedy or cause of action
under this Warrant.
 
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(b) The Company will not, by amendment of its governing documents or through any
reorganization, transfer of assets, consolidation, merger, dissolution, issue or
sale of securities or any other voluntary action, seek to call or redeem this
Warrant or avoid or seek to avoid the observance or performance of any of the
terms of this Warrant, but will at all times in good faith assist in the
carrying out of all such terms and in the taking of all such action as may be
necessary or appropriate in order to protect the rights of the Holder against
dilution or other impairment. Without limiting the generality of the foregoing,
the Company (i) will not increase the par value of any Warrant Shares above the
amount payable therefor on such exercise, (ii) will take all such action as may
be reasonably necessary or appropriate in order that the Company may validly and
legally issue fully paid and non-assessable Warrant Shares, free from all taxes,
liens, security interests, encumbrances, preemptive or similar rights and
charges of stockholders (other than those imposed by the Investors), on the
exercise of the Warrant, and (iii) will not close its stockholder books or
records in any manner which interferes with the timely exercise of this Warrant.
 
(c) Remedies; Specific Performance. The Company acknowledges and agrees that
there would be no adequate remedy at law to the Holder of this Warrant in the
event of any default or threatened default by the Company in the performance of
or compliance with any of the terms of this Warrant and accordingly, the Company
agrees that, in addition to any other remedy to which the Holder may be entitled
at law or in equity, the Holder shall be entitled to seek to compel specific
performance of the obligations of the Company under this Warrant, without the
posting of any bond, in accordance with the terms and conditions of this Warrant
in any court of the United States or any State thereof having jurisdiction, and
if any action should be brought in equity to enforce any of the provisions of
this Warrant, the Company shall not raise the defense that there is an adequate
remedy at law. Except as otherwise provided by law, a delay or omission by the
Holder hereof in exercising any right or remedy accruing upon any such breach
shall not impair the right or remedy or constitute a waiver of or acquiescence
in any such breach. No remedy shall be exclusive of any other remedy. All
available remedies shall be cumulative.
 
(d) Amendments and Waivers. The Company may, without the consent of the Holders,
by supplemental agreement or otherwise, (i) make any changes or corrections in
this Agreement that are required to cure any ambiguity or to correct or
supplement any provision herein which may be defective or inconsistent with any
other provision herein or (ii) add to the covenants and agreements of the
Company for the benefit of the Holders (including, without limitation, reduce
the Exercise Price or extend the Expiration Date), or surrender any rights or
power reserved to or conferred upon the Company in this Agreement; provided
that, in the case of (i) or (ii), such changes or corrections shall not
adversely affect the interests of Holders of then outstanding Warrants in any
material respect. This Warrant may also be amended or waived with the consent of
the Company and the Holder. Further, the Company may, with the consent, in
writing or at a meeting, of the Holders (the “Required Holders”) of the then
outstanding Warrants exercisable for two-thirds (2/3) or greater of the Common
Stock eligible under such Warrants, amend in any way, by supplemental agreement
or otherwise, this Warrant and/or all of the outstanding Warrants; provided,
however, that (i) no such amendment by its express terms shall adversely affect
any Holder differently than it affects all other Holders, unless such Holder
consents thereto, and (ii) no such amendment concerning the number of Warrant
Shares or Exercise Price shall be made unless any Holder who will be affected by
such amendment consents thereto. If a new Warrant Agent is appointed by the
Company, it shall at the request of the Company, and without need of independent
inquiry as to whether such supplemental agreement is permitted by the terms of
this Section 16(d), join with the Company in the execution and delivery of any
such supplemental agreements, but shall not be required to join in such
execution and delivery for such supplemental agreement to become effective.
 
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(e) GOVERNING LAW; VENUE; WAIVER OF JURY TRIAL. THE CORPORATE LAWS OF THE STATE
OF NEW YORK SHALL GOVERN ALL ISSUES CONCERNING THE RELATIVE RIGHTS OF THE
COMPANY AND ITS STOCKHOLDERS. ALL QUESTIONS CONCERNING THE CONSTRUCTION,
VALIDITY, ENFORCEMENT AND INTERPRETATION OF THIS AGREEMENT SHALL BE GOVERNED BY
AND CONSTRUED AND ENFORCED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK.
THE COMPANY AND INVESTORS HEREBY IRREVOCABLY SUBMIT TO THE EXCLUSIVE
JURISDICTION OF THE STATE AND FEDERAL COURTS SITTING IN THE CITY OF NEW YORK,
BOROUGH OF MANHATTAN FOR THE ADJUDICATION OF ANY DISPUTE BROUGHT BY THE COMPANY
OR ANY INVESTOR HEREUNDER, IN CONNECTION HEREWITH OR WITH ANY TRANSACTION
CONTEMPLATED HEREBY OR DISCUSSED HEREIN, AND HEREBY IRREVOCABLY WAIVE, AND AGREE
NOT TO ASSERT IN ANY SUIT, ACTION OR PROCEEDING BROUGHT BY THE COMPANY OR ANY
INVESTOR, ANY CLAIM THAT IT IS NOT PERSONALLY SUBJECT TO THE JURISDICTION OF ANY
SUCH COURT, OR THAT SUCH SUIT, ACTION OR PROCEEDING IS IMPROPER. EACH PARTY
HEREBY IRREVOCABLY WAIVES PERSONAL SERVICE OF PROCESS AND CONSENTS TO PROCESS
BEING SERVED IN ANY SUCH SUIT, ACTION OR PROCEEDING BY MAILING A COPY THEREOF
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.
THE COMPANY AND INVESTORS HEREBY WAIVE ALL RIGHTS TO A TRIAL BY JURY.
 
(f) The headings herein are for convenience only, do not constitute a part of
this Warrant and shall not be deemed to limit or affect any of the provisions
hereof.
 
(g) In case any one or more of the provisions of this Warrant shall be invalid
or unenforceable in any respect, the validity and enforceability of the
remaining terms and provisions of this Warrant shall not in any way be affected
or impaired thereby and the parties will attempt in good faith to agree upon a
valid and enforceable provision which shall be a commercially reasonable
substitute therefor, and upon so agreeing, shall incorporate such substitute
provision in this Warrant.
 
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1“Weighted Average Price” means, for any security as of any date, the dollar
volume-weighted average price for such security on AMEX during the period
beginning at 9:30:01 a.m., New York Time (or such other time as AMEX publicly
announces is the official open of trading), and ending at 4:00:00 p.m., New York
Time (or such other time as AMEX publicly announces is the official close of
trading) as reported by Bloomberg (means Bloomberg Financial Markets) through
its “Volume at Price” functions, or, if the foregoing does not apply, the dollar
volume-weighted average price of such security in the over-the-counter market on
the electronic bulletin board for such security during the period beginning at
9:30:01 a.m., New York Time (or such other time as such Principal Market
publicly announces is the official open of trading), and ending at 4:00:00 p.m.,
New York Time (or such other time as such market publicly announces is the
official close of trading) as reported by Bloomberg, if no dollar
volume-weighted average price is reported for such security by Bloomberg for
such hours, the average of the highest closing bid price and the lowest closing
ask price of any of the market makers for such security as reported in the “pink
sheets” by Pink Sheets LLC (formerly the National Quotation Bureau, Inc.). If
the Weighted Average Price cannot be calculated for a security on a particular
date on any of the foregoing bases, the Weighted Average Price of such security
on such date shall be the fair market value as determined by the Company in good
faith. All such determinations shall be appropriately adjusted for any share
dividend, share split, share combination or other similar transaction during the
applicable calculation period.

F-11

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IN WITNESS WHEREOF, the Company has caused this Warrant to be duly executed by
its authorized officer as of the date first indicated above.
 

 
DYADIC INTERNATIONAL, INC.
   
By: 
Name: 
Title: 

F-12

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FORM OF EXERCISE NOTICE
 
(To be executed by the Holder to exercise the right to purchase shares of Common
Stock under the foregoing Warrant)
 
To: Dyadic International, Inc.
 
The undersigned is the Holder of Warrant No. _______ (the “Warrant”) issued by
Dyadic International, Inc., a Delaware corporation (the “Company”). Capitalized
terms used herein and not otherwise defined have the respective meanings set
forth in the Warrant.
 

 
(a)
The Warrant is currently exercisable to purchase a total of ______________
Warrant Shares.

 

 
(b)
The undersigned Holder hereby exercises its right to purchase _________________
Warrant Shares pursuant to the Warrant.

 

 
(c)
The Holder intends that payment of the Exercise Price shall be made as (check
one):

 
____ “Cash Exercise” under Section 10
____ “Cashless Exercise” under Section 10
 
(d) If the holder has elected a Cash Exercise, the holder shall pay the sum of
$____________ to the Company in accordance with the terms of the Warrant.
 
(e) Pursuant to this exercise, the Company shall deliver to the holder
_______________ Warrant Shares in accordance with the terms of the Warrant.
 
(f) Following this exercise, the Warrant shall be exercisable to purchase a
total of ______________ Warrant Shares.
 
(g) Notwithstanding anything to the contrary contained herein, this Exercise
Notice shall constitute a representation by the Holder that, after giving effect
to the exercise provided for in this Exercise Notice, the Holder (together with
its affiliates) will not have beneficial ownership (together with the beneficial
ownership of such Person's affiliates) of a number of shares of Common Stock
which exceeds the Maximum Percentage of the total outstanding shares of Common
Stock as determined pursuant to the provisions of Section 11(a) of the Warrant.
 
Dated: ,
 
Name of Holder:
   
(Print)
   
By:
   
Name:
   
Title:
   
(Signature must conform in all respects to name of holder as specified on the
face of the Warrant)

F-13

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FORM OF ASSIGNMENT

[To be completed and signed only upon transfer of Warrant]

FOR VALUE RECEIVED, the undersigned hereby sells, assigns and transfers unto
________________________________ the right represented by the within Warrant to
purchase ____________ shares of Common Stock of Dyadic International, Inc. to
which the within Warrant relates and appoints _____________________ attorney to
transfer said right on the books of Dyadic International, Inc. with full power
of substitution in the premises.
 

       
Dated: ,
           
(Signature must conform in all respects to name of holder as specified on the
face of the Warrant)
         
Address of Transferee
                       
In the presence of:
             

F-14

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Schedule 3.1(a)
SUBSIDIARIES
 
The Company has the following direct or indirect Subsidiaries:
 
Direct Subsidiaries of Company
 
Dyadic Real Estate Holdings Inc. (Florida) 100%
 
Dyadic International (USA), Inc. (Florida) 100%
 
Indirect Subsidiaries of the Company (Subsidiaries of Dyadic International
(USA), Inc.)
 
Geneva Investment Holdings Limited (British Virgin Islands) 100%
 
Dyadic Nederland BV (The Netherlands) 100%
 
Dyadic International Sp. z o.o. (Poland) 100%
 
Puridet (Asia), Ltd. (Hong Kong) 100%
 
Dongguan Puridet Softner Limited 100%
 

 

 

1

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Schedule 3.1(f)
CAPITALIZATION**
 

 
 
Authorized
 
Issued and Outstanding
 
Common Stock
 
100,000,000
 
26,942,856
 
Preferred Stock
 
5,000,000
 
0
 
Common Stock Warrants
 
(5,841,413 shares of Common Stock are reserved for issuance)
 
(warrant rights exercisable for up to 5,841,413 shares of Common Stock are
currently outstanding)
 
2001 Equity Compensation Plan (Options to Purchase Common Stock)
 
(4,478,475 shares of Common Stock are reserved for issuance)
 
(options exercisable for up to 3,045,911 shares of Common Stock are currently
outstanding)
 
2006 Stock Option Plan
 
(2,700,000 shares of Common Stock are reserved for issuance)
 
(options exercisable for up to 5,000 shares of Common Stock are currently
outstanding)
 
** Excludes Common Stock, Convertible Securities and Warrants that may be
issuable to Abengoa under the Abengoa Securities Purchase Agreement (as
disclosed in the Company’s Current Report on Form 8-K dated October 26, 2006, as
filed with the SEC on November 1, 2006)
 

2

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Schedule 3.1(h)
MATERIAL CHANGES
 
None.

3

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Schedule 3.1(p)
REGISTRATION RIGHTS
 
 
(1) TNO Quality of Life, The Netherlands
 

(2) Robert Smeaton

(3) Raymond Tsang

(4) To those Persons (and their successors and assigns) who are identified as
“Selling Stockholders” in the Company’s Prospectus dated August 12, 2005
included within Post-Effective Amendment No. 1 to the Registration Statement on
Form S-3 to the Registration Statement on Form SB-2 (Reg. No. 333-121738), as
supplemented by Prospectus Supplement No. 1 dated July 6, 2006, and deemed to be
the owners of the Common Shares and Common Shares issuable upon the exercise of
the Options covered by such Registration Statement, which represent in the
aggregate on an as converted basis 28,369,878 Common Shares. The Company has no
registration obligations to such Persons (including their successors and
assigns) beyond exerting reasonable best efforts to maintain the foregoing
Registration Statement effective until the Common Shares covered thereby are
saleable under Rule 144.

(5) To participants in the Company’s 2001 Equity Compensation Plan and 2006
Stock Option Plan, of which the aggregate 7,178,475 Common Shares reserved
thereunder are covered by the Company’s Registration Statements on Form S-8
(Registration Nos. 333-122339 and 333-136676).
 
(6) To Abengoa under the Abengoa Securities Purchase Agreement.
 
4

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Schedule 3.1(aa)
 
OUTSTANDING INDEBTEDNESS

Long Term Note Payable

Long term note payable to stockholder consisted of the following at September
30, 2006:
 
 
Loan payable with a rate of 8% as of September 30, 2006 to Mark A. Emalfarb
Trust (Bridge Loan), secured by all assets of the Company, in the original
principal amount of $3,000,000, principal and accrued interest due January 1,
2008. Accrued interest of $239,941 included in principal balance. Net of
unamortized beneficial conversion feature of $57,636.
 
$ 2,367,305

Bridge Loan

On May 29, 2003, the Company’s wholly-owned subsidiary, Dyadic International
(USA), Inc., a Florida corporation (formerly known as Dyadic International, Inc)
(“Dyadic-Florida), obtained a $3.0 million revolving loan (the “Bridge Loan”)
from a group of stockholders, including the Chief Executive Officer, who loaned
$2,185,000, and the rest of whom loaned Dyadic-Florida $815,000, bearing
interest at 8% per annum, with all unpaid principal and interest originally due
on January 2, 2004, and extended to January 1, 2005 on February 13, 2004.
Subsequent to a private placement of the Company’s common stock and warrants
through which the Company raised gross proceeds of approximately $25,405,000
(the “October 2004 Offering”), approximately $903,000 of the proceeds was used
to pay off the $815,000 of principal and approximately $88,000 of accrued
interest for the portion of the Bridge Loan from the group of other
Dyadic-Florida stockholders. The Bridge Loan is collateralized by a security
interest in all of the Company's assets.
Incident to the Bridge Loan, the Mark A. Emalfarb Trust and other lending
Dyadic-Florida stockholders in the aggregate, were also granted warrants to
purchase up to 1.5 million shares of the Company's common stock at the lesser of
$4.50 per share or the Series A Preferred conversion price, expiring ten years
from the date of grant (the “Bridge Loan Warrants”). In August 2004, the
exercise price of the Bridge Loan Warrants was reduced to $3.33 and the maturity
date was extended to January 1, 2007 in connection with the Merger (as described
in Item 2 - Management’s Discussion and Analysis or Plan of Operation - History
of Dyadic). As a result, approximately $343,000, representing the incremental
fair value of the modified Bridge Loan Warrants as compared to the fair value of
the original Bridge Loan Warrants immediately before the modification, will be
amortized to interest expense through the new maturity date. The remaining
unamortized portion of $57,636 is reflected as a reduction of notes payable to
stockholders in the accompanying condensed consolidated balance sheet as of
September 30, 2006.
On April 30, 2006, the maturity date of the Bridge Loan was extended from
January 1, 2007 to January 1, 2008. The remaining unamortized portion of $57,636
of the beneficial conversion feature related to the modified Bridge Loan
Warrants will be amortized through the new maturity date.

Capital Lease Payable

In August 2006, the Company executed a 36 month capital lease for the purchase
of an access router. The monthly payments total $5,207.76. The lease began once
the installation of the router was completed, which occurred on October 2, 2006.
The first and last payments were paid to the lessor in August 2006. At the end
of the lease term, the Company has a bargain purchase option to purchase the
equipment for $1.00.

Contingent Obligation
 
Under the Abengoa Securities Purchase Agreement, the Company has guaranteed to
Abengoa Dyadic International (USA), Inc.’s punctual payment and performance of
its obligations to Abengoa under the parties’ R&D Agreement.
 
179453467v7
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