Exhibit 10.1

 

 

 

 

 

 

 

 

 

COMMON STOCK PURCHASE AGREEMENT

Dated August 31, 2006

by and between

ACUSPHERE, INC.

and

AZIMUTH OPPORTUNITY LTD.

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TABLE OF CONTENTS

 

 

 

Page

Article I PURCHASE AND SALE OF COMMON STOCK

 

1

Section 1.1

 

Purchase and Sale of Stock

 

1

Section 1.2

 

Effective Date; Settlement Dates

 

1

Section 1.3

 

The Shares

 

2

Section 1.4

 

Current Report; Prospectus Supplement

 

2

 

 

 

 

 

Article II FIXED REQUEST TERMS; OPTIONAL AMOUNT

 

2

Section 2.1

 

Fixed Request Notice

 

2

Section 2.2

 

Fixed Requests

 

3

Section 2.3

 

Share Calculation

 

4

Section 2.4

 

Limitation of Fixed Requests

 

5

Section 2.5

 

Reduction of Commitment

 

5

Section 2.6

 

Below Threshold Price

 

5

Section 2.7

 

Settlement

 

5

Section 2.8

 

Reduction of Pricing Period

 

5

Section 2.9

 

Optional Amount

 

7

Section 2.10

 

Calculation of Optional Amount Shares

 

7

Section 2.11

 

Exercise of Optional Amount

 

7

Section 2.12

 

Aggregate Limit

 

7

 

 

 

 

 

Article III REPRESENTATIONS AND WARRANTIES OF THE INVESTOR

 

8

Section 3.1

 

Organization and Standing of the Investor

 

8

Section 3.2

 

Authorization and Power

 

8

Section 3.3

 

No Conflicts

 

8

Section 3.4

 

Information

 

9

 

 

 

 

 

Article IV REPRESENTATIONS AND WARRANTIES OF THE COMPANY

 

9

Section 4.1

 

Organization, Good Standing and Power

 

9

Section 4.2

 

Authorization, Enforcement

 

9

Section 4.3

 

Capitalization

 

10

Section 4.4

 

Issuance of Shares

 

10

Section 4.5

 

No Conflicts

 

10

Section 4.6

 

Commission Documents, Financial Statements

 

11

Section 4.7

 

Subsidiaries

 

12

Section 4.8

 

No Material Adverse Effect

 

12

Section 4.9

 

Indebtedness

 

13

Section 4.10

 

Title To Assets

 

13

Section 4.11

 

Actions Pending

 

13

Section 4.12

 

Compliance With Law

 

13

Section 4.13

 

Certain Fees

 

13

Section 4.14

 

Operation of Business

 

14

 

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Section 4.15

 

Environmental Compliance

 

16

Section 4.16

 

Material Agreements

 

17

Section 4.17

 

Transactions With Affiliates

 

17

Section 4.18

 

Securities Act; NASD Conduct Rules

 

17

Section 4.19

 

Employees

 

19

Section 4.20

 

Use of Proceeds

 

19

Section 4.21

 

Public Utility Holding Company Act and Investment Company Act Status

 

19

Section 4.22

 

ERISA

 

19

Section 4.23

 

Taxes

 

20

Section 4.24

 

Insurance

 

20

Section 4.25

 

Acknowledgement Regarding Investor’s Purchase of Shares

 

20

 

 

 

 

 

Article V COVENANTS

 

21

Section 5.1

 

Securities Compliance; NASD Filing

 

21

Section 5.2

 

Registration and Listing

 

22

Section 5.3

 

Compliance with Laws.

 

22

Section 5.4

 

Keeping of Records and Books of Account; Foreign Corrupt Practices Act

 

22

Section 5.5

 

Limitations on Holdings and Issuances

 

23

Section 5.6

 

Other Agreements and Other Financings.

 

23

Section 5.7

 

Stop Orders

 

24

Section 5.8

 

Amendments to the Registration Statement; Prospectus Supplements; Free Writing
Prospectuses

 

25

Section 5.9

 

Prospectus Delivery

 

26

Section 5.10

 

Selling Restrictions.

 

26

Section 5.11

 

Effective Registration Statement

 

27

Section 5.12

 

Non-Public Information

 

27

Section 5.13

 

Broker/Dealer

 

27

Section 5.14

 

Update of Disclosure Schedule

 

27

 

 

 

 

 

Article VI OPINION OF COUNSEL AND CERTIFICATE; CONDITIONS TO THE SALE AND
        PURCHASE OF THE SHARES

 

28

Section 6.1

 

Opinion of Counsel and Certificate

 

28

Section 6.2

 

Conditions Precedent to the Obligation of the Company

 

28

Section 6.3

 

Conditions Precedent to the Obligation of the Investor

 

29

 

 

 

 

 

Article VII TERMINATION

 

32

Section 7.1

 

Term, Termination by Mutual Consent

 

32

Section 7.2

 

Other Termination

 

32

Section 7.3

 

Effect of Termination

 

33

 

 

 

 

 

Article VIII INDEMNIFICATION

 

33

Section 8.1

 

General Indemnity.

 

33

Section 8.2

 

Indemnification Procedures

 

35

 

 

 

 

 

Article IX MISCELLANEOUS

 

36

Section 9.1

 

Fees and Expenses.

 

36

Section 9.2

 

Specific Enforcement, Consent to Jurisdiction, Waiver of Jury Trial

 

37

 

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Section 9.3

 

Entire Agreement; Amendment

 

38

Section 9.4

 

Notices

 

38

Section 9.5

 

Waivers

 

39

Section 9.6

 

Headings

 

39

Section 9.7

 

Successors and Assigns

 

39

Section 9.8

 

Governing Law

 

39

Section 9.9

 

Survival

 

39

Section 9.10

 

Counterparts

 

39

Section 9.11

 

Publicity

 

39

Section 9.12

 

Severability

 

40

Section 9.13

 

Further Assurances

 

40

 

 

 

 

 

Annex A.

 

Definitions

 

 

 

iii

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COMMON STOCK PURCHASE AGREEMENT

This COMMON STOCK PURCHASE AGREEMENT, made and entered into on this 31st day of
August 2006 (this “Agreement”), by and between Azimuth Opportunity Ltd., an
international business company incorporated under the laws of the British Virgin
Islands (the “Investor”), and Acusphere, Inc., a corporation organized and
existing under the laws of the State of Delaware (the “Company”).

RECITALS

WHEREAS, the parties desire that, upon the terms and subject to the conditions
contained herein, the Company may issue and sell to the Investor and the
Investor shall thereupon purchase from the Company up to $30,000,000 worth of
newly issued shares of the Company’s common stock, $.01 par value (“Common
Stock”), subject, in all cases, to the Trading Market Limit;

WHEREAS, the offer and sale of the shares of Common Stock hereunder have been
registered by the Company in the Registration Statement, which has been declared
effective by order of the Commission under the Securities Act;

NOW, THEREFORE, the parties hereto, intending to be legally bound, hereby agree
as follows:

ARTICLE I
PURCHASE AND SALE OF COMMON STOCK

Section 1.1            Purchase and Sale of Stock.   Upon the terms and subject
to the conditions of this Agreement, during the Investment Period the Company in
its discretion may issue and sell to the Investor up to $30,000,000 (the “Total
Commitment”) worth of duly authorized, validly issued, fully paid and
non-assessable shares of Common Stock (subject in all cases to the Trading
Market Limit, the “Aggregate Limit”), by (i) the delivery to the Investor of not
more than 24 separate Fixed Request Notices (unless the Investor and the Company
mutually agree in writing that a different number of Fixed Request Notices may
be delivered) as provided in Article II hereof and (ii) the exercise by the
Investor of Optional Amounts, which the Company may in its discretion grant to
the Investor and which may be exercised by the Investor, in whole or in part, as
provided in Article II hereof.  The aggregate of all Fixed Request Amounts and
Optional Amount Dollar Amounts shall not exceed the Aggregate Limit.

Section 1.2            Effective Date; Settlement Dates.   This Agreement shall
become effective and binding upon delivery of counterpart signature pages of
this Agreement executed by each of the parties hereto, and by delivery of an
opinion of counsel and a certificate of the Company as provided in Section 6.1
hereof, to the offices of Greenberg Traurig, LLP, 200 Park Avenue, New York, New
York 10166, at l0:00 a.m., New York time, on the Effective Date.  In
consideration of and in express reliance upon the representations, warranties
and covenants, and otherwise upon the terms and subject to the conditions, of
this Agreement, from and after the Effective Date and during the Investment
Period (i) the Company shall issue and sell to the Investor, and the Investor
agrees to purchase from the Company, the Shares in respect of each Fixed Request
and (ii) the Investor may in its discretion elect to purchase Shares in respect
of

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each Optional Amount.  The issuance and sale of Shares to the Investor pursuant
to any Fixed Request or Optional Amount shall occur on the applicable Settlement
Date in accordance with Sections 2.7 and 2.9 (or on such Trading Day in
accordance with Section 2.8, as applicable), provided in each case that all of
the conditions precedent thereto set forth in Article VI theretofore shall have
been fulfilled or (to the extent permitted by applicable law) waived.

Section 1.3            The Shares.   The Company has duly authorized and
reserved for issuance, and covenants to continue to reserve for issuance, free
of all preemptive and other similar rights, at all times during the Investment
Period, the requisite aggregate number of authorized but unissued shares of its
Common Stock to timely effect the issuance, sale and delivery in full to the
Investor of all Shares to be issued in respect of all Fixed Requests and
Optional Amounts under this Agreement.

Section 1.4            Current Report; Prospectus Supplement.   Within four
business days after the Effective Date, the Company shall file with the
Commission a report on Form 8-K relating to the transactions contemplated by,
and briefly describing the material terms and conditions of, this Agreement and,
to the extent not included in a Prospectus Supplement, disclosing all
information relating to the transactions contemplated hereby required to be
disclosed in the Registration Statement and the Base Prospectus (but which
permissibly has been omitted therefrom in accordance with the Securities Act),
including, without limitation, information required to be disclosed in the
section captioned “Plan of Distribution” in the Base Prospectus (the “Current
Report”).  The Current Report may include a copy of this Agreement as an
exhibit.  To the extent applicable, the Current Report shall be incorporated by
reference in the Registration Statement in accordance with the provisions of
Rule 430B under the Securities Act.  Prior to filing the Current Report with the
Commission, the Company shall provide the Investor a reasonable opportunity to
comment on a draft of such Current Report and shall give due consideration to
such comments.

If required under the Securities Act, the Company shall file a final Base
Prospectus pursuant to Rule 424(b) under the Securities Act on or prior to the
first Fixed Request Exercise Date.  Pursuant to Section 5.9 and subject to the
provisions of Section 5.8, on the first Trading Day immediately following the
end of each Pricing Period, the Company shall file with the Commission a
Prospectus Supplement disclosing the number of Shares to be issued and sold to
the Investor thereunder, the total purchase price therefor and the net proceeds
to be received by the Company therefrom and, to the extent required by the
Securities Act, identifying the Current Report.

ARTICLE II
FIXED REQUEST TERMS; OPTIONAL AMOUNT

Subject to the satisfaction of the conditions set forth in this Agreement, the
parties agree (unless otherwise mutually agreed upon by the parties in writing)
as follows:

Section 2.1            Fixed Request Notice.   Upon three Trading Days’ prior
written notice to the Investor, the Company may, from time to time in its sole
discretion, provide a notice to the Investor of a Fixed Request before 9:30 a.m.
(New York time) on the first Trading Day of the Pricing Period (the “Fixed
Request Notice”), substantially in the form attached hereto as Exhibit

2

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A.  The Fixed Request Notice shall specify the Fixed Amount Requested, establish
the Threshold Price for such Fixed Request, designate the first Trading Day of
the Pricing Period and specify the Optional Amount, if any, that the Company
elects to grant to the Investor during the Pricing Period and the applicable
Threshold Price for such Optional Amount (the “Optional Amount Threshold
Price”).  The Threshold Price and the Optional Amount Threshold Price
established by the Company in a Fixed Request Notice may be the same or
different, in the Company’s sole discretion.  Upon the terms and subject to the
conditions of this Agreement, the Investor is obligated to accept each Fixed
Request Notice prepared and delivered in accordance with the provisions of this
Agreement.

Section 2.2            Fixed Requests.  From time to time during the Investment
Period, the Company may in its sole discretion deliver to the Investor a Fixed
Request Notice for a specified Fixed Amount Requested, and the applicable
discount price (the “Discount Price”) shall be determined, in accordance with
the price and share amount parameters as set forth below or such other
parameters mutually agreed upon in writing by the Investor and the Company, and
upon the terms and subject to the conditions of this Agreement, the Investor
shall purchase from the Company the Shares subject to such Fixed Request Notice;
provided, however, that the Company may not deliver any single Fixed Request
Notice for a Fixed Amount Requested in excess of the lesser of: (i) the amount
in the applicable Fixed Amount Requested column below and (ii) 2.5% of the
Market Capitalization:

Threshold Price

 

Fixed Amount Requested

 

Discount Price

Equal to or greater than $18.00

 

Not to exceed $6,250,000

 

96.125% of the VWAP

Equal to or greater than $17.00 and less than $18.00

 

Not to exceed $6,000,000

 

95.875% of the VWAP

Equal to or greater than $16.00 and less than $17.00

 

Not to exceed $5,750,000

 

95.875% of the VWAP

Equal to or greater than $15.00 and less than $16.00

 

Not to exceed $5,550,000

 

95.625% of the VWAP

Equal to or greater than $14.00 and less than $15.00

 

Not to exceed $5,250,000

 

95.625% of the VWAP

Equal to or greater than $13.00 and less than $14.00

 

Not to exceed $5,000,000

 

95.375% of the VWAP

Equal to or greater than $12.00 and less than $13.00

 

Not to exceed $4,750,000

 

95.375% of the VWAP

Equal to or greater than $11.00 and less than $12.00

 

Not to exceed $4,500,000

 

95.125% of the VWAP

Equal to or greater than $10.00 and less than $11.00

 

Not to exceed $4,250,000

 

94.875% of the VWAP

Equal to or greater than $9.00 and less than $10.00

 

Not to exceed $4,000,000

 

94.875% of the VWAP

Equal to or greater than $8.00 and less than $9.00

 

Not to exceed $3,750,000

 

94.625% of the VWAP

Equal to or greater than $7.50 and less than $8.00

 

Not to exceed $3,500,000

 

94.625% of the VWAP

Equal to or greater than $7.00 and less than $7.50

 

Not to exceed $3,250,000

 

94.625% of the VWAP

Equal to or greater than $6.50 and less than $7.00

 

Not to exceed $3,000,000

 

94.625% of the VWAP

Equal to or greater than $6.00 and less than $6.50

 

Not to exceed $2,750,000

 

94.525% of the VWAP

Equal to or greater than $5.50 and less than $6.00

 

Not to exceed $2,500,000

 

94.425% of the VWAP

Equal to or greater than $5.00 and less than $5.50

 

Not to exceed $2,250,000

 

94.325% of the VWAP

Equal to or greater than $4.50 and less than $5.00

 

Not to exceed $2,000,000

 

94.225% of the VWAP

Equal to or greater than $4.00 and less than $4.50

 

Not to exceed $1,750,000

 

94.125% of the VWAP

Equal to or greater than $3.50 and less than $4.00

 

Not to exceed $1,500,000

 

94.125% of the VWAP

Equal to or greater than $3.00 and less than $3.50

 

Not to exceed $1,250,000

 

94.125% of the VWAP

Equal to or greater than $2.50 and less than $3.00

 

Not to exceed $1,000,000

 

94.125% of the VWAP

 

3

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Anything to the contrary in this Agreement notwithstanding, at no time shall the
Investor be required to purchase more than $6,250,000 worth of Common Stock in
respect of any Pricing Period (not including Common Stock subject to any
Optional Amount).  The date on which the Company delivers any Fixed Request
Notice in accordance with this Section 2.2 hereinafter shall be referred to as a
“Fixed Request Exercise Date”.

Section 2.3            Share Calculation.   Subject to Section 2.6, the number
of Shares to be issued by the Company to the Investor pursuant to a Fixed
Request shall equal the aggregate sum of each quotient (calculated for each
Trading Day during the applicable Pricing Period for which the VWAP equals or
exceeds the Threshold Price) determined pursuant to the following equation
(rounded to the nearest whole Share):

N

=

(A x B)/C, where:

N

=

the number of Shares to be issued by the Company to the Investor in respect of a
Trading Day during the applicable Pricing Period for which the VWAP equals or
exceeds the Threshold Price,

A

=

0.10 (the “Multiplier”); provided, however, that if the number of Trading Days
constituting a Pricing Period is decreased as set forth in Section 2.8 hereof,
then the Multiplier correspondingly shall be increased to equal the decimal
equivalent (in 10-millionths) of a fraction, the numerator of which is one and
the denominator of which equals the number of Trading Days in the Pricing Period
as so decreased,

B

=

the Fixed Amount Requested, and

C

=

the applicable Discount Price.

 

4

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Section 2.4            Limitation of Fixed Requests.   The Company shall not
make more than one Fixed Request in each Pricing Period.  Not less than five
Trading Days shall elapse between the end of one Pricing Period and the
commencement of any other Pricing Period during the Investment Period.  There
shall be permitted a maximum of 24 Fixed Requests during the Investment Period. 
Each Fixed Request automatically shall expire immediately following the last
Trading Day of each Pricing Period.

Section 2.5            Reduction of Commitment.   On the Settlement Date in
respect of each Pricing Period, the Investor’s Total Commitment under this
Agreement automatically (and without the need for any amendment to this
Agreement) shall be reduced, on a dollar-for-dollar basis, by the total amount
of the Fixed Request Amount and the Optional Amount Dollar Amount, if any, for
such Pricing Period.

Section 2.6            Below Threshold Price.   If the VWAP on any Trading Day
in a Pricing Period is lower than the Threshold Price, then for each such
Trading Day the total amount of the Fixed Amount Requested shall be reduced, on
a dollar-for-dollar basis, by an amount equal to the product of (x) the
Multiplier and (y) the original Fixed Amount Requested, and no Shares shall be
purchased or sold with respect to such Trading Day, except as provided below. 
If trading in the Common Stock on NASDAQ (or any national securities exchange on
which the Common Stock is then listed) is suspended for any reason for more than
three hours on any Trading Day, the Investor may at its option deem the price of
the Common Stock to be lower than the Threshold Price for such Trading Day and,
for each such Trading Day, the total amount of the Fixed Amount Requested shall
be reduced as provided in the immediately preceding sentence, and no Shares
shall be purchased or sold with respect to such Trading Day, except as provided
below.  For each Trading Day during a Pricing Period on which the VWAP is (or is
deemed to be) lower than the Threshold Price, the Investor may in its sole
discretion elect to purchase such U.S. dollar amount of Shares equal to the
amount by which the Fixed Amount Requested has been reduced in accordance with
this Section 2.6, at the Threshold Price multiplied by the applicable percentage
determined in accordance with the price and share amount parameters set forth in
Section 2.2.  The Investor shall inform the Company via facsimile transmission
not later than 8:00 p.m. (New York time) on the last Trading Day of such Pricing
Period as to the number of Shares, if any, the Investor elects to purchase as
provided in this Section 2.6.

Section 2.7            Settlement.   The payment for, against simultaneous
delivery of, Shares in respect of each Fixed Request shall be settled on the
second Trading Day next following the last Trading Day of each Pricing Period
(the “Settlement Date”).  On each Settlement Date, the Company shall deliver the
Shares purchased by the Investor to the Investor or its designees via DTC’s
Deposit Withdrawal Agent Commission (DWAC) system, against simultaneous payment
therefor to the Company’s designated account by wire transfer of immediately
available funds, provided that if the Shares are received by the Investor later
than 1:00 p.m. (New York time), payment therefor shall be made with next day
funds.  As set forth in Section 9.1(ii), a failure by the Company to deliver
such Shares shall result in the payment of liquidated damages by the Company to
the Investor.

Section 2.8            Reduction of Pricing Period.   If during a Pricing Period
the Company elects to reduce the number of Trading Days in such Pricing Period
(and thereby amend its

5

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previously delivered Fixed Request Notice), the Company shall so notify the
Investor before 9:00 a.m. (New York time) on any Trading Day during a Pricing
Period (a “Reduction Notice”) and the last Trading Day of such Pricing Period
shall be the Trading Day immediately preceding the Trading Day on which the
Investor received such Reduction Notice; provided, however, that if the Company
delivers the Reduction Notice later than 9:00 a.m. (New York time) on a Trading
Day during a Pricing Period, then the last Trading Day of such Pricing Period
instead shall be the Trading Day on which the Investor received such Reduction
Notice.

Upon receipt of a Reduction Notice, the Investor (i) shall purchase the Shares
in respect of each Trading Day in such reduced Pricing Period for which the VWAP
equals or exceeds the Threshold Price in accordance with Section 2.3 hereof;
(ii) may elect to purchase the Shares in respect of any Trading Day in such
reduced Pricing Period for which the VWAP is (or is deemed to be) lower than the
Threshold Price in accordance with Section 2.6 hereof; and (iii) may elect to
exercise all or any portion of an Optional Amount on any Trading Day during such
reduced Pricing Period in accordance with Sections 2.10 and 2.11 hereof.

In addition, upon receipt of a Reduction Notice, the Investor may elect to
purchase such U.S. dollar amount of additional Shares equal to the quotient
determined pursuant to the following equation:

D

=

A x 1/B x (B – C), where:

D

=

the U.S. dollar amount of additional Shares to be purchased,

A

=

the Fixed Amount Requested,

B

=

10 or, for purposes of this Section 2.8, such lesser number of Trading Days as
the parties may mutually agree to in writing, and

C

=

the number of Trading Days in the reduced Pricing Period,

 

at a per Share price equal to (x) the Fixed Amount Requested attributable to the
reduced Pricing Period divided by (y) the number of Shares to be purchased
during such reduced Pricing Period pursuant to clause (i) of the immediately
preceding paragraph.

The Investor may also elect to exercise any portion of the applicable Optional
Amount which was unexercised during the reduced Pricing Period by issuing an
Optional Amount Notice to the Company not later than 10:00 a.m. (New York time)
on the first Trading Day next following the last Trading Day of the reduced
Pricing Period. The number of Shares to be issued upon exercise of such Optional
Amount shall be calculated pursuant to the equation set forth in Section 2.10
hereof, except that “C” shall equal the greater of (i) the VWAP for the Common
Stock on the last Trading Day of the reduced Pricing Period or (ii) the Optional
Amount Threshold Price.

The payment for, against simultaneous delivery of, Shares to be purchased and
sold in accordance with this Section 2.8 shall be settled on the second Trading
Day next following the Trading Day on which the Investor receives a Reduction
Notice.

6

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Section 2.9            Optional Amount.   With respect to any Pricing Period,
the Company may in its sole discretion grant to the Investor the right to
exercise, from time to time during the Pricing Period (but not more than once on
any Trading Day), all or any portion of an Optional Amount.  The maximum
Optional Amount Dollar Amount and the Optional Amount Threshold Price shall be
set forth in the Fixed Request Notice. Each daily Optional Amount exercise shall
be aggregated during the Pricing Period and settled on the next Settlement
Date.  The Optional Amount Threshold Price designated by the Company in its
Fixed Request Notice shall apply to each Optional Amount during the applicable
Pricing Period.

Section 2.10         Calculation of Optional Amount Shares.   The number of
shares of Common Stock to be issued in connection with the exercise of an
Optional Amount shall be the quotient determined pursuant to the following
equation (rounded to the nearest whole Share):

O

=

A/(B x C), where:

O

=

the number of shares of Common Stock to be issued in connection with such
Optional Amount exercise,

A

=

the Optional Amount Dollar Amount with respect to which the Investor has
delivered an Optional Amount Notice,

B

=

the applicable percentage determined in accordance with the price and shares
amount parameters set forth in Section 2.2 (with the Optional Amount Threshold
Price serving as the Threshold Price for such purposes), and

C

=

the greater of (i) the VWAP for the Common Stock on the day the Investor
delivers the Optional Amount Notice or (ii) the Optional Amount Threshold Price.

 

Section 2.11         Exercise of Optional Amount.   If granted by the Company to
the Investor with respect to a Pricing Period, all or any portion of the
Optional Amount may be exercised by the Investor on any Trading Day during the
Pricing Period, subject to the limitations set forth in Section 2.9.  As a
condition to each exercise of an Optional Amount pursuant to this Section 2.11,
the Investor shall issue an Optional Amount Notice to the Company no later than
8:00 p.m. (New York time) on the day of such Optional Amount exercise.  If the
Investor does not exercise an Optional Amount in full by 8:00 p.m. (New York
time) on the last Trading Day of the applicable Pricing Period, such unexercised
portion of the Investor’s Optional Amount with respect to that Pricing Period
automatically shall lapse and terminate.

Section 2.12         Aggregate Limit.   Notwithstanding anything to the contrary
contained in this Agreement, in no event may the Company issue a Fixed Request
Notice or grant an Optional Amount to the extent that the sale of Shares
pursuant thereto and pursuant to all prior Fixed Request Notices or Optional
Amounts issued hereunder would cause the Company to sell or the Investor to
purchase Shares which in the aggregate are in excess of the Aggregate Limit.  If
the Company issues a Fixed Request Notice or Optional Amount that otherwise
would permit the Investor to purchase shares of Common Stock which would cause
the aggregate purchases by Investor hereunder to exceed the Aggregate Limit,
such Fixed Request Notice or Optional Amount shall be void ab initio to the
extent of the amount by which the dollar value of shares or number of shares, as
the case may be, of Common Stock otherwise issuable pursuant to such

7

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Fixed Request Notice or Optional Amount together with the dollar value of shares
or number of shares, as the case may be, of all other Common Stock purchased by
the Investor pursuant hereto would exceed the Aggregate Limit.  The Company
hereby represents and warrants that neither it nor any of its Subsidiaries (i)
has effected any transaction or series of transactions, or (ii) is a party to
any pending transaction or series of transactions which, in any of such cases,
may be integrated with the transactions contemplated by this Agreement for
purposes of determining whether approval of the Company’s stockholders is
required under any bylaw, listed securities maintenance standards or other rules
of the Trading Market.

ARTICLE III
REPRESENTATIONS AND WARRANTIES OF THE INVESTOR

The Investor hereby makes the following representations and warranties to the
Company:

Section 3.1            Organization and Standing of the Investor.   The Investor
is an international business company duly organized, validly existing and in
good standing under the laws of the British Virgin Islands.

Section 3.2            Authorization and Power.  The Investor has the requisite
corporate power and authority to enter into and perform its obligations under
this Agreement and to purchase the Shares in accordance with the terms hereof. 
The execution, delivery and performance of this Agreement by the Investor and
the consummation by it of the transactions contemplated hereby have been duly
authorized by all necessary corporate action, and no further consent or
authorization of the Investor, its Board of Directors or stockholders is
required.  This Agreement has been duly executed and delivered by the Investor. 
This Agreement constitutes a valid and binding obligation of the Investor
enforceable against it in accordance with its terms, except as such
enforceability may be limited by applicable bankruptcy, insolvency,
reorganization, moratorium, liquidation, conservatorship, receivership, or
similar laws relating to, or affecting generally the enforcement of, creditor’s
rights and remedies or by other equitable principles of general application.

Section 3.3            No Conflicts.   The execution, delivery and performance
by the Investor of this Agreement and the consummation by the Investor of the
transactions contemplated herein do not and shall not (i) result in a violation
of such Investor’s charter documents, bylaws or other applicable organizational
instruments, (ii) conflict with, constitute a default (or an event which, with
notice or lapse of time or both, would become a default) under, or give rise to
any rights of termination, amendment, acceleration or cancellation of, any
material agreement, mortgage, deed of trust, indenture, note, bond, license,
lease agreement, instrument or obligation to which the Investor is a party or is
bound, (iii) create or impose any lien, charge or encumbrance on any property of
the Investor under any agreement or any commitment to which the Investor is
party or under which the Investor is bound or under which any of its properties
or assets are bound, or (iv) result in a violation of any federal, state, local
or foreign statute, rule, or regulation, or any order, judgment or decree of any
court or governmental agency applicable to the Investor or by which any of its
properties or assets are bound or affected, except, in the case of clauses (ii),
(iii) and (iv), for such conflicts, defaults, terminations, amendments,
acceleration, cancellations and violations as would not, individually or in the
aggregate, prohibit or otherwise interfere with the ability of the Investor to
enter into and perform its obligations under this Agreement in any

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material respect.  The Investor is not required under federal, state, local or
foreign law, rule or regulation to obtain any consent, authorization or order
of, or make any filing or registration with, any court or governmental agency in
order for it to execute, deliver or perform any of its obligations under this
Agreement or to purchase the Shares in accordance with the terms hereof.

Section 3.4            Information.   The Company has furnished or made
available to the Investor and its advisors all materials relating to the
business, financial condition, management and operations of the Company and
materials relating to the offer and sale of the Shares which have been requested
by the Investor.  The Investor and its advisors have been afforded the
opportunity to ask questions of representatives of the Company.  The Investor
has sought such accounting, legal and tax advice as it has considered necessary
to make an informed investment decision with respect to its acquisition of the
Shares.  The Investor understands that it (and not the Company) shall be
responsible for its own tax liabilities that may arise as a result of this
investment or the transactions contemplated by this Agreement.

ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF THE COMPANY

Except as set forth in the disclosure schedule delivered by the Company to the
Investor (which is hereby incorporated by reference in, and constitutes an
integral part of, this Agreement) (the “Disclosure Schedule”), the Company
hereby makes the following representations and warranties to the Investor:

Section 4.1            Organization, Good Standing and Power.   The Company is a
corporation duly organized, validly existing and in good standing under the laws
of the State of Delaware and has the requisite corporate power and authority to
own, lease and operate its properties and assets and to conduct its business as
it is now being conducted.  The Company and each such Subsidiary is duly
qualified as a foreign corporation to do business and is in good standing in
every jurisdiction in which the nature of the business conducted or property
owned by it makes such qualification necessary, except for any jurisdiction in
which the failure to be so qualified would not have a Material Adverse Effect.

Section 4.2            Authorization, Enforcement.   The Company has the
requisite corporate power and authority to enter into and perform this Agreement
and to issue and sell the Shares in accordance with the terms hereof.  Except
for approvals of the Company’s Board of Directors or a committee thereof as may
be required in connection with any issuance and sale of Shares to the Investor
hereunder (which approvals shall be obtained prior to the delivery of any Fixed
Request Notice), the execution, delivery and performance by the Company of this
Agreement and the consummation by it of the transactions contemplated hereby
have been duly and validly authorized by all necessary corporate action and no
further consent or authorization of the Company or its Board of Directors or
stockholders is required  This Agreement has been duly executed and delivered by
the Company and constitutes a valid and binding obligation of the Company
enforceable against the Company in accordance with its terms, except as such
enforceability may be limited by applicable bankruptcy, insolvency,
reorganization, moratorium, liquidation, conservatorship, receivership or
similar laws relating to, or affecting generally the enforcement of, creditor’s
rights and remedies or by other equitable principles of general application.

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Section 4.3            Capitalization.   The authorized capital stock of the
Company and the shares thereof issued and outstanding as of the Effective Date
are as set forth in the Company’s Form 10-Q for the fiscal quarter ended June
30, 2006, except for issued and outstanding shares of capital stock resulting
from the issuance of equity awards under the Company’s benefit and equity plans
and arrangements or the exercise or conversion, as the case may be, of
exercisable or convertible securities outstanding as of the Effective Date or
issued in connection with an Acceptable Financing.  All of the outstanding
shares of Common Stock have been duly authorized and validly issued, and are
fully paid and nonassessable.  Except as set forth in the Commission Documents,
as of the Effective Date, no shares of Common Stock were entitled to preemptive
rights or registration rights and there were no outstanding options, warrants,
scrip, rights to subscribe to, call or commitments of any character whatsoever
relating to, or securities or rights convertible into or exchangeable for, any
shares of capital stock of the Company.  Except as set forth in the Commission
Documents, there were no contracts, commitments, understandings, or arrangements
by which the Company is or may become bound to issue a substantial number of
additional shares of the capital stock of the Company or options, securities or
rights convertible into or exchangeable for any shares of capital stock of the
Company other than in connection with the issuance of equity awards under the
Company’s benefit and equity plans and arrangements existing on the date hereof
or other than in connection with an Acceptable Financing.  Except for customary
transfer restrictions contained in agreements entered into by the Company to
sell restricted securities or as set forth in the Commission Documents, as of
the Effective Date, the Company was not a party to, and it had no knowledge of,
any agreement restricting the voting or transfer of any shares of the capital
stock of the Company.  Except as set forth in the Commission Documents, the
offer and sale of all capital stock, convertible or exchangeable securities,
rights, warrants or options of the Company issued prior to the Effective Date
complied with all applicable federal and state securities laws, and no
stockholder has any right of rescission or damages or any “put” or similar right
with respect thereto which would have a Material Adverse Effect.  The Company
has furnished or made available to the Investor true and correct copies of the
Company’s Certificate of Incorporation as in effect on the Effective Date (the
“Charter”), and the Company’s Bylaws as in effect on the Effective Date (the
“Bylaws”), and true and correct copies (redacted as appropriate) of all executed
resolutions of the Company’s Board of Directors (and committees thereof)
relating to the capital stock of the Company (and transactions in respect
thereof) since December 31, 2004 (except with respect to issuances of shares of
capital stock of the Company to directors or employees of the Company as fees or
compensation that were duly approved by the Company’s Board of Directors or a
committee thereof).

Section 4.4            Issuance of Shares.   The Shares to be issued under this
Agreement have been or will be duly authorized by all necessary corporate action
and, when paid for or issued in accordance with the terms hereof, the Shares
shall be validly issued and outstanding, fully paid and nonassessable, and the
Investor shall be entitled to all rights accorded to a holder and beneficial
owner of Common Stock.

Section 4.5            No Conflicts.   The execution, delivery and performance
by the Company of this Agreement and the consummation by the Company of the
transactions contemplated herein do not and shall not (i) result in a violation
of any provision of the Company’s Charter or Bylaws, (ii) conflict with,
constitute a default (or an event which, with notice or lapse of time or both,
would become a default) under, or give rise to any rights of termination,
amendment,

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acceleration or cancellation of, any material agreement, mortgage, deed of
trust, indenture, note, bond, license, lease agreement, instrument or obligation
to which the Company or any of its Significant Subsidiaries is a party or is
bound (including, without limitation, any listing agreement with the Trading
Market), (iii) create or impose a lien, charge or encumbrance on any property of
the Company or any of its Significant Subsidiaries under any agreement or any
commitment to which the Company or any of its Significant Subsidiaries is a
party or under which the Company or any of its Significant Subsidiaries is bound
or under which any of their respective properties or assets are bound, or (iv)
result in a violation of any federal, state, local or foreign statute, rule,
regulation, order, judgment or decree applicable to the Company or any of its
Subsidiaries or by which any property or asset of the Company or any of its
Subsidiaries are bound or affected, except, in the case of clauses (ii), (iii)
and (iv), for such conflicts, defaults, terminations, amendments, acceleration,
cancellations and violations as would not, individually or in the aggregate,
have a Material Adverse Effect.  The Company is not required under federal,
state, local or foreign law, rule or regulation to obtain any consent,
authorization or order of, or make any filing or registration with, any court or
governmental agency in order for it to execute, deliver or perform any of its
obligations under this Agreement, or to issue and sell the Shares to the
Investor in accordance with the terms hereof (other than any filings which may
be required to be made by the Company with the Commission, the National
Association of Securities Dealers, Inc. (the “NASD”) or the Trading Market
subsequent to the Effective Date, including but not limited to a Prospectus
Supplement under Sections 1.4 and 5.9 of this Agreement, the NASD Filing under
Section 5.1 of this Agreement and any registration statement, prospectus or
prospectus supplement which has been or may be filed pursuant to this
Agreement).

Section 4.6            Commission Documents, Financial Statements.   (a)  The
Common Stock is registered pursuant to Section 12(b) or 12(g) of the Exchange
Act and, except as disclosed in the Commission Documents, as of the Effective
Date the Company had timely filed (giving effect to permissible extensions in
accordance with Rule 12b-25 under the Exchange Act) all Commission Documents. 
The Company has delivered or made available to the Investor true and complete
copies of the Commission Documents filed with the Commission prior to the
Effective Date (including, without limitation, the 2005 Form 10-K) and has
delivered or made available to the Investor true and complete copies of all of
the Commission Documents heretofore incorporated by reference in the
Registration Statement and the Prospectus.  The Company has not provided to the
Investor any information which, according to applicable law, rule or regulation,
should have been disclosed publicly by the Company but which has not been so
disclosed, other than with respect to the transactions contemplated by this
Agreement.  As of its filing date, each Commission Document filed with the
Commission and incorporated by reference in the Registration Statement and the
Prospectus (including, without limitation, the 2005 Form 10-K) complied in all
material respects with the requirements of the Securities Act or the Exchange
Act, as applicable, and other federal, state and local laws, rules and
regulations applicable to it, and, as of its filing date, such Commission
Document did not contain any untrue statement of a material fact or omit to
state a material fact required to be stated therein or necessary in order to
make the statements therein, in light of the circumstances under which they were
made, not misleading.  Each Commission Document to be filed with the Commission
after the Effective Date and incorporated by reference in the Registration
Statement, the Prospectus and any Prospectus Supplement required to be filed
pursuant to Sections 1.4 and 5.9 hereof during the Investment Period (including,
without limitation, the Current Report), when such document becomes effective or
is filed with the Commission, as the case may be, shall comply in

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all material respects with the requirements of the Securities Act or the
Exchange Act, as applicable, and other federal, state and local laws, rules and
regulations applicable to it, and shall not contain any untrue statement of a
material fact or omit to state a material fact required to be stated therein or
necessary in order to make the statements therein, in light of the circumstances
under which they were made, not misleading.

(b)           The financial statements, together with the related notes and
schedules, of the Company included in the Commission Documents comply as to form
in all material respects with all applicable accounting requirements and the
published rules and regulations of the Commission and all other applicable rules
and regulations with respect thereto.  Such financial statements, together with
the related notes and schedules, have been prepared in accordance with GAAP
applied on a consistent basis during the periods involved (except (i) as may be
otherwise indicated in such financial statements or the notes thereto or (ii) in
the case of unaudited interim statements, to the extent they may not include
footnotes or may be condensed or summary statements), and fairly present in all
material respects the financial condition of the Company and its consolidated
Subsidiaries as of 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).

(c)           The Company has timely filed with the Commission and made
available to the Investor all certifications and statements required by (x) Rule
13a-14 or Rule 15d-14 under the Exchange Act or (y) 18 U.S.C. Section 1350
(Section 906 of the Sarbanes-Oxley Act of 2002 (“SOXA”)) with respect to all
relevant Commission Documents.  The Company is in compliance in all material
respects with the provisions of SOXA applicable to it as of the date hereof. 
The Company maintains disclosure controls and procedures required by Rule 13a-15
or Rule 15d-15 under the Exchange Act; such controls and procedures are
effective to ensure that all material information concerning the Company and its
Subsidiaries is made known on a timely basis to the individuals responsible for
the timely and accurate preparation of the Company’s Commission filings and
other public disclosure documents.  As used in this Section 4.6(c), the term
“file” shall be broadly construed to include any manner in which a document or
information is furnished, supplied or otherwise made available to the
Commission.

(d)           Deloitte & Touche LLP, who have expressed their audit opinions on
the Company’s audited financial statements and, to the extent required, have
reviewed the related schedules included or incorporated by reference in the
Registration Statement and the Base Prospectus is, with respect to the Company,
an independent registered public accounting firm as required by the rules of the
Public Company Accounting Oversight Board.

Section 4.7            Subsidiaries.   The 2005 Form 10-K sets forth each
Subsidiary of the Company as of the Effective Date, showing its jurisdiction of
incorporation or organization and the percentage of the Company’s ownership of
the outstanding capital stock or other ownership interests of such Subsidiary,
and the Company does not have any other Subsidiaries as of the Effective Date.

Section 4.8            No Material Adverse Effect.   Since December 31, 2005,
the Company has not experienced or suffered any Material Adverse Effect, and
there exists no current state of facts, condition or event which would have a
Material Adverse Effect, except (i) as disclosed in

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any Commission Documents filed since December 31, 2005 or (ii) continued losses
from operations.

Section 4.9            Indebtedness.   The Company’s Quarterly Report on Form
10-Q for the fiscal quarter ended June 30, 2006 sets forth, as of June 30, 2006,
all outstanding secured and unsecured Indebtedness of the Company or any
Subsidiary, or for which the Company or any Subsidiary has commitments through
such date and the Company’s Commission Documents describe any material
Indebtedness from that date to the Effective Date.  For the purposes of this
Agreement, “Indebtedness” shall mean (a) any liabilities for borrowed money or
amounts owed in excess of $10,000,000 (other than trade accounts payable
incurred in the ordinary course of business), (b) all guaranties, endorsements,
indemnities and other contingent obligations in respect of Indebtedness of
others in excess of $10,000,000, whether or not the same are or should be
reflected in the Company’s balance sheet (or the notes thereto), except
guaranties by endorsement of negotiable instruments for deposit or collection or
similar transactions in the ordinary course of business; and (c) the present
value of any lease payments in excess of $10,000,000 due under leases required
to be capitalized in accordance with GAAP.  There is no existing or continuing
default or event of default in respect of any Indebtedness of the Company or any
of its Subsidiaries.

Section 4.10         Title To Assets.   Each of the Company and its Subsidiaries
has good and marketable title to all of their respective real and personal
property reflected in the Commission Documents, free of mortgages, pledges,
charges, liens, security interests or other encumbrances, except for those
indicated in the Commission Documents or those that would not have a Material
Adverse Effect.  All real property leases of the Company are valid and
subsisting and in full force and effect in all material respects.

Section 4.11         Actions Pending.   There is no action, suit, claim,
investigation or proceeding pending, or to the knowledge of the Company
threatened, against the Company or any Subsidiary which questions the validity
of this Agreement or the transactions contemplated hereby or any action taken or
to be taken pursuant hereto or thereto.  Except as set forth in the Commission
Documents, there is no action, suit, claim, investigation or proceeding pending,
or to the knowledge of the Company threatened, against or involving the Company,
any Subsidiary or any of their respective properties or assets, or involving any
officers or directors of the Company or any of its Subsidiaries, including,
without limitation, any securities class action lawsuit or stockholder
derivative lawsuit, in each case which, if determined adversely to the Company,
its Subsidiary or any officer or director of the Company or its Subsidiaries,
would have a Material Adverse Effect.

Section 4.12         Compliance With Law.   The business of the Company and the
Subsidiaries has been and is presently being conducted in compliance with all
applicable federal, state, local and foreign governmental laws, rules,
regulations and ordinances, except as set forth in the Commission Documents and
except for such non-compliance which, individually or in the aggregate, would
not have a Material Adverse Effect.

Section 4.13         Certain Fees.   Except for the placement fee payable by the
Company to Reedland Capital Partners, an Institutional Division of the Financial
West Group, Member NASD/SIPC (“Reedland”), which shall be set forth in a
separate placement agency agreement

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between the Company and Reedland (a true and complete fully executed copy of
which has heretofore been provided to the Investor), no brokers, finders or
financial advisory fees or commissions shall be payable by the Company or any
Subsidiary (or any of their respective affiliates) with respect to the
transactions contemplated by this Agreement. Except as set forth in this Section
4.13 or as disclosed in Section 4.13 of the Disclosure Schedule or in the
Registration Statement, the Prospectus or the Current Report, there are no
contracts, agreements or understandings between the Company and any person that
would give rise to a valid claim against the Company, the Investor or the
Broker-Dealer for a brokerage commission, finder’s fee or other like payment in
connection with the transactions contemplated by this Agreement or, to the
Company’s knowledge, any arrangements, agreements, understandings, payments or
issuance with respect to the Company or any of its Subsidiaries that may affect
the NASD’s determination of the amount of compensation to be received by any
NASD member (including, without limitation, those NASD members set forth on
Schedule 4.13 of the Disclosure Schedule) or person associated with any NASD
member in connection with the transactions contemplated by this Agreement. 
Except as set forth in this Section 4.13 or as disclosed in Section 4.13 of the
Disclosure Schedule or in the Registration Statement, the Prospectus or the
Current Report, no “items of value” (within the meaning of Rule 2710 of the
NASD’s Conduct Rules) have been received, and no arrangements have been entered
into for the future receipt of any items of value, from the Company or any of
its Subsidiaries by any NASD member (including, without limitation, those NASD
members set forth on Schedule 4.13 of the Disclosure Schedule) or person
associated with any NASD member, during the period commencing 180 days
immediately preceding the Effective Date and ending on the date this Agreement
is terminated in accordance with Article VII, that may affect the NASD’s
determination of the amount of compensation to be received by any NASD member or
person associated with any NASD member in connection with the transactions
contemplated by this Agreement.  The Company hereby acknowledges and agrees that
in connection with its preparation of the NASD Filing, the Investor may directly
rely on (i) the representations and warranties of the Company contained in this
Section 4.13 and elsewhere in this Agreement and (ii) the Company’s Directors’
and Officers’ NASD Questionnaires completed by each of the Company’s directors
and executive officers, true and correct copies of which are included in Section
4.13 of the Disclosure Schedule.

Section 4.14         Operation of Business.   (a)  The Company or one or more of
its Subsidiaries possesses such permits, licenses, approvals, consents and other
authorizations (including licenses, accreditation and other similar
documentation or approvals of any local health departments) (collectively,
“Governmental Licenses”) issued by the appropriate federal, state, local or
foreign regulatory agencies or bodies, including, without limitation, the United
States Food and Drug Administration (“FDA”), necessary to conduct the business
now operated by it, except where the failure to possess such Governmental
Licenses, individually or in the aggregate, would not have a Material Adverse
Effect.  The Company and its Subsidiaries are in compliance with the terms and
conditions of all such Governmental Licenses and all applicable FDA rules and
regulations, guidelines and policies, and all applicable rules and regulations,
guidelines and policies of any governmental authority exercising authority
comparable to that of the FDA (including any non-governmental authority whose
approval or authorization is required under foreign law comparable to that
administered by the FDA), except where the failure to so comply, individually or
in the aggregate, would not have a Material Adverse Effect.  All of the
Governmental Licenses are valid and in full force and effect, except where the
invalidity of such

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Governmental Licenses or the failure of such Governmental Licenses to be in full
force and effect, individually or in the aggregate, would not have a Material
Adverse Effect.  As to each product that is subject to FDA regulation or similar
legal provisions in any foreign jurisdiction that is developed, manufactured,
tested, packaged, labeled, marketed, sold, distributed and/or commercialized by
the Company or any of its Subsidiaries, each such product is being developed,
manufactured, tested, packaged, labeled, marketed, sold, distributed and/or
commercialized in compliance with all applicable requirements of the FDA (and
any non-governmental authority whose approval or authorization is required under
foreign law comparable to that administered by the FDA), including, but not
limited to, those relating to investigational use, investigational device
exemption, premarket notification, premarket approval, good clinical practices,
good manufacturing practices, record keeping, filing of reports, and patient
privacy and medical record security, except where such non-compliance,
individually or in the aggregate, would not have a Material Adverse Effect.  As
to each product or product candidate of the Company or any of its Subsidiaries
subject to FDA regulation or similar legal provision in any foreign
jurisdiction, all manufacturing facilities of the Company and its Subsidiaries
which are currently in operation are operated in compliance with the FDA’s
Quality System Regulation requirements at 21 C.F.R. Part 820, as applicable,
except where such non-compliance, individually or in the aggregate, would not
have a Material Adverse Effect.  Except as set forth in or contemplated by the
Commission Documents or as disclosed in Section 4.14 of the Disclosure Schedule,
neither the Company nor any of its Subsidiaries has received any notice of
proceedings relating to the revocation or modification of any such Governmental
Licenses or relating to a potential violation of, failure to comply with, or
request to produce additional information under, any FDA rules and regulations,
guidelines or policies which, if the subject of any unfavorable decision, ruling
or finding, individually or in the aggregate, would have a Material Adverse
Effect.  Except as set forth in the Commission Documents, neither the Company
nor any of its Subsidiaries has received any correspondence, notice or request
from the FDA, including, without limitation, notice that any one or more
products or product candidates of the Company or any of its Subsidiaries failed
to receive approval from the FDA for use for any one or more indications.  This
Section 4.14 does not relate to environmental matters, such items being the
subject of Section 4.15.

(b)           The Company or one or more of its Subsidiaries owns or possesses
adequate patents, patent rights, licenses, inventions, copyrights, know-how
(including trade secrets and other unpatented and/or unpatentable proprietary or
confidential information, systems or procedures), trademarks, service marks,
trade names, trade dress, logos, copyrights and other intellectual property,
including, without limitation, all of the intellectual property described in the
Commission Documents as being owned or licensed by the Company (collectively,
“Intellectual Property”), necessary to carry on the business now operated by
it.  Except as set forth in the Commission Documents, there are no actions,
suits or judicial proceedings pending, or to the Company’s knowledge threatened,
relating to patents or proprietary information to which the Company or any of
its Subsidiaries is a party or of which any property of the Company or any of
its Subsidiaries is subject, and, except as set forth in the Commission
Documents, neither the Company nor any of its Subsidiaries has received any
notice or is otherwise aware of any infringement of or conflict with asserted
rights of others with respect to any Intellectual Property or of any facts or
circumstances which could render any Intellectual Property invalid or inadequate
to protect the interest of the Company and its Subsidiaries therein, and which
infringement or conflict (if the subject of any unfavorable decision, ruling or
finding)

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or invalidity or inadequacy, individually or in the aggregate, would have a
Material Adverse Effect.

(c)           All pre-clinical and clinical trials conducted by the Company or
any of its Subsidiaries or in which the Company or any of its Subsidiaries has
participated that are described in the Commission Documents, or the results of
which are referred to in the Commission Documents, if any, are the only
pre-clinical and clinical trials currently being conducted by or on behalf of
the Company and its Subsidiaries.  All such pre-clinical and clinical trials
conducted, supervised or monitored by the Company or any of its Subsidiaries
have been conducted in compliance with all applicable federal, state, local and
foreign laws, and the regulations and requirements of any applicable
governmental entity, including, but not limited to, FDA good clinical practice
and good laboratory practice requirements.  Except as set forth in the
Commission Documents or the Disclosure Schedule, neither the Company nor any of
its Subsidiaries has received any notices or correspondence from the FDA or any
other governmental agency expressly requiring the termination, suspension, delay
or material modification of any pre-clinical or clinical trials conducted by, or
on behalf of, the Company or any of its Subsidiaries or in which the Company or
any of its Subsidiaries has participated that are described in the Commission
Documents, if any, or the results of which are referred to in the Commission
Documents.  All pre-clinical and clinical trials previously conducted by or on
behalf of the Company or any of its Subsidiaries while conducted by or on behalf
of the Company or any of its Subsidiaries, were conducted in compliance with all
applicable federal, state, local and foreign laws, and the regulations and
requirements of any applicable governmental entity, including, but not limited
to, FDA good clinical practice and good laboratory practice requirements.

Section 4.15         Environmental Compliance.   Except as disclosed in the
Commission Documents, the Company and each of its Subsidiaries have obtained all
material approvals, authorization, certificates, consents, licenses, orders and
permits or other similar authorizations of all governmental authorities, or from
any other person, that are required under any Environmental Laws, except for any
approvals, authorization, certificates, consents, licenses, orders and permits
or other similar authorizations the failure of which to obtain does not or would
not have a Material Adverse Effect.  “Environmental Laws” shall mean all
applicable laws relating to the protection of the environment including, without
limitation, all requirements pertaining to reporting, licensing, permitting,
controlling, investigating or remediating emissions, discharges, releases or
threatened releases of hazardous substances, chemical substances, pollutants,
contaminants or toxic substances, materials or wastes, whether solid, liquid or
gaseous in nature, into the air, surface water, groundwater or land, or relating
to the manufacture, processing, distribution, use, treatment, storage, disposal,
transport or handling of hazardous substances, chemical substances, pollutants,
contaminants or toxic substances, material or wastes, whether solid, liquid or
gaseous in nature.  Except for such instances as would not, individually or in
the aggregate, have a Material Adverse Effect, to the best of the Company’s
knowledge, there are no past or present events, conditions, circumstances,
incidents, actions or omissions relating to or in any way affecting the Company
or its Subsidiaries that violate or could reasonably be expected to violate any
Environmental Law after the Effective Date or that could reasonably be expected
to give rise to any environmental liability, or otherwise form the basis of any
claim, action, demand, suit, proceeding, hearing, study or investigation (i)
under any Environmental Law, or (ii) based on or related to the manufacture,
processing, distribution, use,

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treatment, storage (including without limitation underground storage tanks),
disposal, transport or handling, or the emission, discharge, release or
threatened release of any hazardous substance.

Section 4.16         Material Agreements.   Except as set forth or described in
the Commission Documents, neither the Company nor any Subsidiary of the Company
is a party to any written or oral contract, instrument, agreement commitment,
obligation, plan or arrangement, a copy of which would be required to be filed
with the Commission as an exhibit to an annual report on Form 10-K
(collectively, “Material Agreements”).  The Company and each of its Subsidiaries
have performed in all material respects all the obligations required to be
performed by them under the Material Agreements, have received no notice of
default or an event of default by the Company or any of its Subsidiaries
thereunder and are not aware of any basis for the assertion thereof, and neither
the Company or any of its Subsidiaries nor, to the best knowledge of the
Company, any other contracting party thereto are in default under any Material
Agreement now in effect, the result of which would have a Material Adverse
Effect.  Each of the Material Contracts is in full force and effect, and
constitutes a legal, valid and binding obligation enforceable in accordance with
its terms against the Company and/or any of its Subsidiaries and, to the best
knowledge of the Company, each other contracting party thereto, except as such
enforceability may be limited by applicable bankruptcy, insolvency,
reorganization, moratorium, liquidation, conservatorship, receivership or
similar laws relating to, or affecting generally the enforcement of, creditor’s
rights and remedies or by other equitable principles of general application.

Section 4.17         Transactions With Affiliates.   Except as set forth in the
Commission Documents, there are no loans, leases, agreements, contracts, royalty
agreements, management contracts, service arrangements or other continuing
transactions exceeding $120,000 between (a) the Company or any Subsidiary, on
the one hand, and (b) any person or entity who would be covered by Item 404(a)
of Regulation S-K, on the other hand.  Except as disclosed in the Commission
Documents, there are no outstanding amounts payable to or receivable from, or
advances by the Company or any of its Subsidiaries to, and neither the Company
nor any of its Subsidiaries is otherwise a creditor of or debtor to, any
beneficial owner of more than 5% of the outstanding shares of Common Stock, or
any director, employee or affiliate of the Company or any of its Subsidiaries,
other than (i) reimbursement for reasonable expenses incurred on behalf of the
Company or any of its Subsidiaries or (ii) as part of the normal and customary
terms of such persons’ employment or service as a director with the Company or
any of its Subsidiaries.

Section 4.18         Securities Act; NASD Conduct Rules.   The Company has
complied with all applicable federal and state securities laws in connection
with the offer, issuance and sale of the Shares hereunder.

(i)            The Company has prepared and filed with the Commission in
accordance with the provisions of the Securities Act the Registration Statement,
including the Base Prospectus, relating to the Shares.  The Registration
Statement was declared effective by order of the Commission on June 1, 2006.  On
August 9, 2006, the Company filed with the Commission a post-effective amendment
to the Registration Statement, which post-effective amendment was declared
effective by order of the Commission on August 18, 2006.  As of the date hereof,
no stop order suspending the effectiveness of the Registration Statement has
been issued by the Commission or is continuing in effect under the Securities
Act and no proceedings therefor are

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pending before or, to the Company’s knowledge, threatened by the Commission.  No
order preventing or suspending the use of the Prospectus or any Permitted Free
Writing Prospectus has been issued by the Commission.

(ii)           The Company meets the requirements for the use of Form S-3 under
the Securities Act.  The Commission has not notified the Company of any
objection to the use of the form of the Registration Statement.  The
Registration Statement complied in all material respects on the date on which
the post-effective amendment thereto was declared effective by the Commission
and on the Effective Date of this Agreement, and will comply in all material
respects on each applicable Fixed Request Exercise Date and on each applicable
Settlement Date, with the requirements of the Securities Act and the
Registration Statement (including the documents incorporated by reference
therein) did not as of the Effective Date and shall not on each applicable Fixed
Request Exercise Date and on each applicable Settlement Date contain an untrue
statement of a material fact or omit to state a material fact required to be
stated therein or necessary to make the statements therein not misleading;
provided that this representation and warranty does not apply to statements in
or omissions from the Registration Statement made in reliance upon and in
conformity with information relating to the Investor furnished to the Company in
writing by or on behalf of the Investor expressly for use therein. The
Registration Statement, as of the Effective Date, meets the requirements set
forth in Rule 415(a)(1)(x) under the Securities Act.  The Base Prospectus
complied in all material respects on its date and on the Effective Date, and
will comply in all material respects on each applicable Fixed Request Exercise
Date and on each applicable Settlement Date, with the requirements of the
Securities Act and did not as of the Effective Date and shall not on each
applicable Fixed Request Exercise Date and on each applicable Settlement Date
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;
provided that this representation and warranty does not apply to statements in
or omissions from the Base Prospectus made in reliance upon and in conformity
with information relating to the Investor furnished to the Company in writing by
or on behalf of the Investor expressly for use therein.

(iii)          Each Prospectus Supplement required to be filed pursuant to
Sections 1.4 and 5.9 hereof, when filed with the Commission under Rule 424(b)
under the Securities Act and on the applicable Settlement Date, shall comply in
all material respects with the provisions of the Securities Act and shall not
when filed or on the Settlement Date 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 are made, not misleading, except that this representation and warranty does
not apply to statements in or omissions from any Prospectus Supplement made in
reliance upon and in conformity with information relating to the Investor
furnished to the Company in writing by or on behalf of the Investor expressly
for use therein.

(iv)          At the earliest time after the filing of the Registration
Statement that the Company or another offering participant made a bona fide
offer (within the meaning of Rule 164(h)(2) under the Securities Act) relating
to the Shares, the Company was not and is not an Ineligible Issuer (as defined
in Rule 405 under the Securities Act), without taking account of any
determination by the Commission pursuant to Rule 405 that it is not necessary
that the Company be considered an Ineligible Issuer.  Each Permitted Free
Writing Prospectus (a) shall conform in

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all material respects to the requirements of the Securities Act on the date of
its first use, (b) when considered together with the Prospectus on each
applicable Fixed Request Exercise Date and on each applicable Settlement Date,
shall not contain an untrue statement of a material fact or omit to state a
material fact required to be stated therein or necessary to make the statements
therein, in the light of the circumstances under which they are made, not
misleading, and (c) shall not include any information that conflicts with the
information contained in the Registration Statement, including any document
incorporated by reference therein and any Prospectus Supplement deemed to be a
part thereof that has not been superseded or modified.  The immediately
preceding sentence does not apply to statements in or omissions from any
Permitted Free Writing Prospectus made in reliance upon and in conformity with
information relating to the Investor furnished to the Company in writing by or
on behalf of the Investor expressly for use therein.

(v)           Prior to the Effective Date, the Company has not distributed any
offering material in connection with the offering and sale of the Shares.  From
and after the Effective Date and prior to the completion of the distribution of
the Shares, the Company shall not distribute any offering material in connection
with the offering and sale of the Shares, other than the Registration Statement,
the Base Prospectus as supplemented by any Prospectus Supplement or a Permitted
Free Writing Prospectus.

Section 4.19         Employees.   As of the Effective Date, neither the Company
nor any Subsidiary of the Company has any collective bargaining arrangements or
agreements covering any of its employees, except as set forth in the Commission
Documents.  As of the Effective Date, except as disclosed in the Registration
Statement or the Commission Documents, no officer, consultant or key employee of
the Company or any Subsidiary whose termination, either individually or in the
aggregate, would reasonably be expected to have a Material Adverse Effect, has
terminated or, to the knowledge of the Company, has any present intention of
terminating his or her employment or engagement with the Company or any
Subsidiary.

Section 4.20         Use of Proceeds.   The proceeds from the sale of the Shares
shall be used by the Company and its Subsidiaries as set forth in the Base
Prospectus and any Prospectus Supplement filed pursuant to Sections 1.4 and 5.9.

Section 4.21         Public Utility Holding Company Act and Investment Company
Act Status.   The Company is not a “holding company” or a “public utility
company” as such terms are defined in the Public Utility Holding Company Act of
1935, as amended. The Company is not, and as a result of the consummation of the
transactions contemplated by this Agreement and the application of the proceeds
from the sale of the Shares as set forth in the Base Prospectus and any
Prospectus Supplement shall not be, an “investment company” or a company
“controlled” by an “investment company,” within the meaning of the Investment
Company Act of 1940, as amended.

Section 4.22         ERISA.   No liability to the Pension Benefit Guaranty
Corporation has been incurred with respect to any Plan by the Company or any of
its Subsidiaries which has had or would have a Material Adverse Effect.  No
“prohibited transaction” (as defined in Section 406 of ERISA or Section 4975 of
the Code) or “accumulated funding deficiency” (as defined in Section 203 of
ERISA) or any of the events set forth in Section 4043(b) of ERISA has occurred

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with respect to any Plan which has had or would have a Material Adverse Effect,
and the execution and delivery of this Agreement and the issuance and sale of
the Shares hereunder shall not result in any of the foregoing events.  Each Plan
is in compliance in all material respects with applicable law, including ERISA
and the Code; the Company has not incurred and does not expect to incur
liability under Title IV of ERISA with respect to the termination of, or
withdrawal from, any Plan; and each Plan for which the Company would have any
liability that is intended to be qualified under Section 401(a) of the Code is
so qualified in all material respects and nothing has occurred, whether by
action or failure to act, which would cause the loss of such qualifications.  As
used in this Section 4.22, the term “Plan” shall mean an “employee pension
benefit plan” (as defined in Section 3 of ERISA) which is or has been
established or maintained, or to which contributions are or have been made, by
the Company or any Subsidiary or by any trade or business, whether or not
incorporated, which, together with the Company or any Subsidiary, is under
common control, as described in Section 414(b) or (c) of the Code.

Section 4.23         Taxes.   The Company (i) has filed all necessary federal,
state and foreign income and franchise tax returns or has duly requested
extensions thereof, except for those the failure of which to file would not have
a Material Adverse Effect, (ii) has paid all federal, state, local and foreign
taxes due and payable for which it is liable, except to the extent that any such
taxes are being contested in good faith and by appropriate proceedings, except
for such taxes the failure of which to pay would not have a Material Adverse
Effect, and (iii) does not have any tax deficiency or claims outstanding or
assessed or, to the best of the Company’s knowledge, proposed against it which
would have a Material Adverse Effect.

Section 4.24         Insurance.   The Company carries, or is covered by,
insurance in such amounts and covering such risks as is adequate for the conduct
of its and its Subsidiaries’ businesses and the value of their respective
properties and as is customary for companies engaged in similar businesses in
similar industries.

Section 4.25         Acknowledgement Regarding Investor’s Purchase of Shares.  
The Company acknowledges and agrees that the Investor is acting solely in the
capacity of an arm’s length purchaser with respect to this Agreement and the
transactions contemplated hereunder. The Company further acknowledges that the
Investor is not acting as a financial advisor or fiduciary of the Company (or in
any similar capacity) with respect to this Agreement and the transactions
contemplated hereunder, and any advice given by the Investor or any of its
representatives or agents in connection with this Agreement and the transactions
contemplated hereunder is merely incidental to the Investor’s purchase of the
Shares.

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ARTICLE V
COVENANTS

The Company covenants with the Investor, and the Investor covenants with the
Company, as follows, which covenants of one party are for the benefit of the
other party, during the Investment Period:

Section 5.1            Securities Compliance; NASD Filing.

(i)            The Company shall notify the Commission and the Trading Market,
as applicable, in accordance with their respective rules and regulations, of the
transactions contemplated by this Agreement, and shall take all necessary
action, undertake all proceedings and obtain all registrations, permits,
consents and approvals for the legal and valid issuance of the Shares to the
Investor in accordance with the terms of this Agreement.

(ii)           As promptly as practicable, the Investor shall prepare and, no
later than 24 hours after the Effective Date, file with the NASD’s Corporate
Financing Department via CobraDesk all documents and information required to be
filed with the NASD pursuant to Rule 2710 of the NASD’s Conduct Rules with
regard to the transactions contemplated by this Agreement (the “NASD Filing”). 
In connection therewith, on the Effective Date, the Company shall pay to the
NASD by wire transfer of immediately available funds the applicable filing fee,
if any is then due, with respect to the NASD Filing, and the Company shall be
solely responsible for payment of such fee.  The Company hereby agrees to
provide the Investor all requisite information reasonably requested and
otherwise to assist the Investor in a timely fashion in order for the Investor
to complete the preparation and submission of the NASD Filing in accordance with
this Section 5.1(ii) and to promptly respond to any inquiries or requests from
NASD or its staff.  Each party hereto shall (A) promptly notify the other party
of any communication to that party or its affiliates from the NASD, including,
without limitation, any request from the NASD or its staff for amendments or
supplements to or additional information in respect of the NASD Filing and
permit the other party to review in advance any proposed written communication
to the NASD and (B) furnish the other party with copies of all written
correspondence, filings and communications between them and their affiliates and
their respective representatives and advisors, on the one hand, and the NASD or
members of its staff, on the other hand, with respect to this Agreement or the
transactions contemplated hereby.  Each of the parties hereto agrees to use its
commercially reasonable efforts to take, or cause to be taken, all actions, and
to do, or cause to be done, and to assist and cooperate with the other party in
doing, all things necessary, proper or advisable to obtain as promptly as
practicable (but in no event later than 60 days after the Effective Date)
written confirmation from the NASD to the effect that the NASD’s Corporate
Financing Department has determined not to raise any objection with respect to
the fairness and reasonableness of the terms of this Agreement or the
transactions contemplated hereby; provided, however, that neither the Investor
nor the Company shall be required to (x) disclose to the NASD or to any other
governmental agency, person or entity any business, financial or other
information that the Investor deems, in its sole and absolute discretion, to be
proprietary, confidential or otherwise sensitive information, (y) amend, modify
or change any of the terms or conditions of this Agreement or (z) otherwise take
any other action, including, without limitation, modifying the Discount Price
thresholds referred to in Section 2.2 or the amount of fees and commissions to
be paid to the Broker-Dealer in connection with the transactions contemplated by
this Agreement, in each case, in such a manner that would, in such party’s sole
and absolute discretion, render the terms and conditions of this Agreement and
the transactions contemplated hereby to be no longer advisable to such party. 
Notwithstanding anything to the contrary contained in this Agreement, the
Company shall not be permitted to deliver any Fixed Request Notice to the
Investor, and the Investor shall not be obligated to purchase any Shares
pursuant to a Fixed Request Notice, unless and until the parties hereto shall
have received written confirmation from the NASD to the effect that the NASD’s
Corporate Financing Department has determined not to raise any objection with
respect to the fairness and reasonableness of the terms of this Agreement or the
transactions contemplated hereby.

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Section 5.2            Registration and Listing.  The Company shall take all
action necessary to cause the Common Stock to continue to be registered as a
class of securities under Sections 12(b) or 12(g) of the Exchange Act, shall
comply with its reporting and filing obligations under the Exchange Act, and
shall not take any action or file any document (whether or not permitted by the
Securities Act) to terminate or suspend such registration or to terminate or
suspend its reporting and filing obligations under the Exchange Act or
Securities Act, except as permitted herein. The Company shall take all action
necessary to continue the listing and trading of its Common Stock and the
listing of the Shares purchased by Investor hereunder on the Trading Market, and
shall comply with the Company’s reporting, filing and other obligations under
the bylaws, listed securities maintenance standards and other rules of the
Trading Market.

Section 5.3            Compliance with Laws.

(i)            The Company shall comply, and cause each Subsidiary to comply,
(a) with all laws, rules, regulations and orders applicable to the business and
operations of the Company and its Subsidiaries except as would not have a
Material Adverse Effect and (b) with all applicable provisions of the Securities
Act, the Exchange Act, the rules and regulations of the NASD and the listing
standards of the Trading Market.  Without limiting the generality of the
foregoing, neither the Company nor any of its officers, directors or affiliates
has taken or will take, directly or indirectly, any action designed or intended
to stabilize or manipulate the price of any security of the Company, or which
caused or resulted in, or which would in the future reasonably be expected to
cause or result in, stabilization or manipulation of the price of any security
of the Company.

(ii)           The Investor shall comply with all laws, rules, regulations and
orders applicable to the performance by it of its obligations under this
Agreement and its investment in the Shares, except as would not, individually or
in the aggregate, prohibit or otherwise interfere with the ability of the
Investor to enter into and perform its obligations under this Agreement in any
material respect. Without limiting the foregoing, the Investor shall comply with
all applicable provisions of the Securities Act and the Exchange Act.

Section 5.4            Keeping of Records and Books of Account; Foreign Corrupt
Practices Act.

(i)            The Company shall keep and cause each Subsidiary to keep adequate
records and books of account, in which complete entries shall be made in
accordance with GAAP consistently applied, reflecting all financial transactions
of the Company and its Subsidiaries, and in which, for each fiscal year, all
proper reserves for depreciation, depletion, obsolescence, amortization, taxes,
bad debts and other purposes in connection with its business shall be made.  The
Company shall maintain a system of internal accounting controls which are
sufficient to provide reasonable assurance that (a) transactions are executed
with management’s authorization; (b) transactions are recorded as necessary to
permit preparation of the consolidated financial statements of the Company and
to maintain accountability for the Company’s consolidated assets; (c) access to
the Company’s assets is permitted only in accordance with management’s
authorization; and (d) the reporting of the Company’s assets is compared with
existing assets at regular intervals.

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(ii)           Neither the Company, nor any of its Subsidiaries, nor to the
knowledge of the Company, any of their respective directors, officers, agents,
employees or any other persons acting on their behalf shall, in connection with
the operation of their respective businesses, (a) use any corporate funds for
unlawful contributions, payments, gifts or entertainment or to make any unlawful
expenditures relating to political activity to government officials, candidates
or members of political parties or organizations, (b) pay, accept or receive any
unlawful contributions, payments, expenditures or gifts, or (c) violate or
operate in noncompliance with any export restrictions, anti-boycott regulations,
embargo regulations or other applicable domestic or foreign laws and
regulations.

(iii)          From time to time from and after the period beginning with the
third Trading Day immediately preceding the each Fixed Request Exercise Date
through and including the applicable Settlement Date, the Company shall make
available for inspection and review by the Investor, customary documentation
allowing the Investor and/or its appointed counsel or advisors to conduct due
diligence.

Section 5.5            Limitations on Holdings and Issuances.  At no time during
the term of this Agreement shall the Investor directly or indirectly own more
than 9.9% of the then issued and outstanding shares of Common Stock. The Company
shall not be obligated to issue and the Investor shall not be obligated to
purchase any shares of Common Stock which would result in the issuance under
this Agreement to the Investor at any time of Shares which, when aggregated with
all other shares of Common Stock then owned beneficially by the Investor, would
result in the beneficial ownership by the Investor of more than 9.9% of the then
issued and outstanding shares of the Common Stock.

Section 5.6            Other Agreements and Other Financings.

(i)            The Company shall not enter into, announce or recommend to its
stockholders any agreement, plan, arrangement or transaction in or of which the
terms thereof would restrict, materially delay, conflict with or impair the
ability or right of the Company or any Subsidiary to perform its obligations
under this Agreement, including, without limitation, the obligation of the
Company to deliver Shares to the Investor in respect of a Fixed Request on the
applicable Settlement Date.

(ii)           The Company shall notify the Investor, within 48 hours, if it
enters into any agreement, plan, arrangement or transaction with a third party,
the principal purpose of which is to obtain during a Pricing Period an Other
Financing not constituting an Acceptable Financing (a “Pricing Period Other
Financing Notice”); provided, however, that the Company shall notify the
Investor immediately (an “Integration Notice”) if it enters into any agreement,
plan, arrangement or transaction with a third party, the principal purpose of
which is to obtain an Other Financing which, based on advice from the relevant
Trading Market, would likely be integrated with the transactions contemplated by
this Agreement for purposes of determining whether approval of the Company’s
stockholders is required under any bylaw, listed securities maintenance
standards or other rules of the Trading Market and, if required under applicable
law, including, without limitation, Regulation FD promulgated by the Commission,
or under the applicable rules and regulations of the Trading Market, the Company
shall simultaneously publicly disclose such information in accordance with
Regulation FD and the applicable rules

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and regulations of the Trading Market. For purposes of this Section 5.6(ii), any
press release issued by, or Commission Document filed by, the Company shall
constitute sufficient notice, provided that it is issued or filed, as the case
may be, within the time requirements set forth in the first sentence of this
Section 5.6(ii) for a Pricing Period Other Financing Notice or an Integration
Notice, as applicable.  During any Pricing Period in which the Company is
required to provide a Pricing Period Other Financing Notice pursuant to clause
(A) of the first sentence of this Section 5.6(ii), the Investor shall (i) have
the option to purchase the Shares subject to the Fixed Request at (x) the price
therefor in accordance with the terms of this Agreement or (y) the third party’s
per share purchase price in connection with the Other Financing, net of such
third party’s discounts, Warrant Value and fees, or (ii) the Investor may elect
to not purchase any Shares subject to the Fixed Request for that Pricing
Period.  An “Other Financing” shall mean (x) the issuance of Common Stock for a
purchase price less than, or the issuance of securities convertible into or
exchangeable for Common Stock at an exercise or conversion price (as the case
may be) less than, the then Current Market Price of the Common Stock (in each
case, after all fees, discounts, Warrant Value and commissions associated with
the transaction) (a “Below Market Offering”); (y) the implementation by the
Company of any mechanism in respect of any securities convertible into or
exchangeable for Common Stock for the reset of the purchase price of the Common
Stock to below the then Current Market Price of the Common Stock (including,
without limitation, any antidilution or similar adjustment provisions in respect
of any Company securities, but specifically excluding customary adjustments for
stock splits, stock dividends, stock combinations and similar events); or (z)
the issuance of options, warrants or similar rights of subscription in each case
not constituting an Acceptable Financing. “Acceptable Financing” shall mean the
issuance by the Company of: (1) shares of Common Stock, preferred stock or
securities convertible into or exchangeable for Common Stock other than in
connection with a Below Market Offering; (2) shares of Common Stock or
securities convertible into or exchangeable for Common Stock in connection with
awards under the Company’s benefit and equity plans and arrangements and the
issuance of shares of Common Stock upon the conversion, exercise or exchange
thereof; (3) shares of Common Stock issuable upon the conversion or exchange of
equity awards or convertible or exchangeable securities outstanding as of the
Effective Date; (4) shares of Common Stock and/or warrants or similar rights to
subscribe for the purchase of shares of Common Stock in connection with
technology sharing, licensing, research and joint development agreements (or
amendments thereto) with third parties, including any such securities paid to
the Company’s advisors in connection with any such transactions, and the
issuance of shares of Common Stock upon the exercise thereof; and (5) shares of
Common Stock and/or warrants or similar rights to subscribe for the purchase of
shares of Common Stock issued in connection with equipment financings and/or
real property leases (or amendments thereto) and the issuance of shares of
Common Stock upon the exercise thereof.

Section 5.7            Stop Orders.  The Company shall advise the Investor
immediately and shall confirm such advice in writing: (i) of the Company’s
receipt of notice of any request by the Commission for amendment of or a
supplement to the Registration Statement, the Prospectus, any Permitted Free
Writing Prospectus or for any additional information with respect thereto; (ii)
of the Company’s receipt of notice of the issuance by the Commission of any stop
order suspending the effectiveness of the Registration Statement or of the
suspension of qualification of the Shares for offering or sale in any
jurisdiction or the initiation of any proceeding for such purpose; and (iii) of
the Company becoming aware of the happening of any event, which makes any
statement of a material fact made in the Prospectus or any Permitted Free
Writing Prospectus

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untrue or which requires the making of any additions to or changes to the
statements then made in the Prospectus or any Permitted Free Writing Prospectus
in order to state a material fact required by the Securities Act to be stated
therein or necessary in order to make the statements then made therein, in light
of the circumstances under which they were made, not misleading, or of the
necessity to amend the Registration Statement or supplement the Prospectus or
any Permitted Free Writing Prospectus to comply with the Securities Act or any
other law. If at any time the Commission shall issue any stop order suspending
the effectiveness of the Registration Statement, the Company shall use
commercially reasonable efforts to obtain the withdrawal of such order at the
earliest possible time. The Company shall also advise the Investor immediately
and shall confirm such advice in writing of the Company becoming aware of the
happening of any event, which makes any statement made in the NASD Filing untrue
or which requires the making of any additions to or changes to the statements
then made in the NASD Filing in order to comply with Rule 2710 of the NASD’s
Conduct Rules.

Section 5.8            Amendments to the Registration Statement; Prospectus
Supplements; Free Writing Prospectuses.

(i)            Except as provided in this Agreement and other than periodic
reports required to be filed pursuant to the Exchange Act, the Company shall not
file with the Commission any amendment to the Registration Statement that
relates to the Investor, the Agreement or the transactions contemplated hereby
or file with the Commission any Prospectus Supplement that relates to the
Investor, this Agreement or the transactions contemplated hereby with respect to
which (a) the Investor shall not previously have been advised, (b) the Company
shall not have given due consideration to any comments thereon received from the
Investor or its counsel, or (c) the Investor shall reasonably object after being
so advised, unless it is necessary to amend the Registration Statement or make
any supplement to the Prospectus to comply with the Securities Act or any other
applicable law or regulation, in which case the Company shall immediately so
inform the Investor, the Investor shall be provided with a reasonable
opportunity to review and comment upon any disclosure relating to the Investor
and the Company shall expeditiously furnish to the Investor an electronic copy
thereof. In addition, for so long as, in the reasonable opinion of counsel for
the Investor, the Prospectus (or in lieu thereof, the notice referred to in Rule
173(a) under the Securities Act) is required to be delivered in connection with
any purchase of Shares by the Investor, the Company shall not file any
Prospectus Supplement with respect to the Shares without delivering or making
available a copy of such Prospectus Supplement, together with the Base
Prospectus, to the Investor promptly.

(ii)           The Company agrees that, unless it obtains the prior written
consent of the Investor, it has not made and will not make an offer relating to
the Shares that would constitute an Issuer Free Writing Prospectus or that would
otherwise constitute a Free Writing Prospectus required to be filed by the
Company or the Investor with the Commission or retained by the Company or the
Investor under Rule 433 under the Securities Act.  The Investor agrees that,
unless it obtains the prior written consent of the Company, it has not made and
will not make an offer relating to the Shares that would constitute a Free
Writing Prospectus required to be filed by the Company with the Commission or
retained by the Company under Rule 433 under the Securities Act.  Any such
Issuer Free Writing Prospectus or other Free Writing Prospectus consented to by
the Investor or the Company is referred to in this Agreement as a “Permitted
Free Writing Prospectus.”  The Company agrees that (x) it has treated and will
treat, as the case

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may be, each Permitted Free Writing Prospectus as an Issuer Free Writing
Prospectus and (y) it has complied and will comply, as the case may be, with the
requirements of Rules 164 and 433 under the Securities Act applicable to any
Permitted Free Writing Prospectus, including in respect of timely filing with
the Commission, legending and record keeping.

Section 5.9            Prospectus Delivery.  The Company shall file with the
Commission a Prospectus Supplement on the first Trading Day immediately
following the end of each Pricing Period.  The Company shall provide the
Investor a reasonable opportunity to comment on a draft of each such Prospectus
Supplement and any Issuer Free Writing Prospectus (and shall give due
consideration to all such comments) and, subject to the provisions of Section
5.8 hereof, shall deliver or make available to the Investor, without charge, an
electronic copy of each form of Prospectus Supplement, together with the Base
Prospectus, and any Permitted Free Writing Prospectus on each applicable
Settlement Date.  The Company consents to the use of the Prospectus (and of any
Prospectus Supplement thereto) in accordance with the provisions of the
Securities Act and with the securities or “blue sky” laws of the jurisdictions
in which the Shares may be sold by the Investor, in connection with the offering
and sale of the Shares and for such period of time thereafter as the Prospectus
(or in lieu thereof, the notice referred to in Rule 173(a) under the Securities
Act) is required by the Securities Act to be delivered in connection with sales
of the Shares. If during such period of time any event shall occur that in the
judgment of the Company and its counsel is required to be set forth in the
Prospectus or any Permitted Free Writing Prospectus or should be set forth
therein in order to make the statements made therein, in the light of the
circumstances under which they were made, not misleading, or if it is necessary
to supplement or amend the Prospectus or any Permitted Free Writing Prospectus
to comply with the Securities Act or any other applicable law or regulation, the
Company shall forthwith prepare and, subject to Section 5.8 above, file with the
Commission an appropriate Prospectus Supplement to the Prospectus (or supplement
to the Permitted Free Writing Prospectus) and shall expeditiously furnish or
make available to the Investor an electronic copy thereof.

Section 5.10         Selling Restrictions.

(i)            The Investor covenants that from and after the date hereof
through and including the 90th day next following the termination of this
Agreement (the “Restricted Period”), neither the Investor nor any of its
affiliates (within the meaning of the Exchange Act) nor any entity managed by
the Investor shall, directly or indirectly, sell any securities of the Company,
except the Shares that it owns or has the right to purchase as provided in a
Fixed Request Notice.  During the Restricted Period, neither the Investor or any
of its affiliates nor any entity managed by the Investor shall sell any shares
of Common Stock of the Company it does not “own” or have the unconditional right
to receive under the terms of this Agreement (within the meaning of Rule 200 of
Regulation SHO promulgated by the Commission under the Exchange Act), including
Shares in any account of the Investor or in any account directly or indirectly
managed by the Investor or any of its affiliates or any entity managed by the
Investor.  Without limiting the generality of the foregoing, prior to and during
the Restricted Period, neither the Investor nor any of its affiliates nor any
entity managed by the Investor or any of its affiliates shall enter into a short
position with respect to shares of Common Stock of the Company, including in any
account of the Investor’s or in any account directly or indirectly managed by
the Investor or any of its Affiliates or any entity managed by the Investor,
except that the Investor may sell Shares that it is obligated to purchase under
a pending Fixed Request

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Notice but has not yet taken possession of so long as the Investor (or the
Broker-Dealer, as applicable) covers any such sales with the Shares purchased
pursuant to such Fixed Request Notice; provided, however, that the Investor (or
the Broker-Dealer, as applicable) shall not be required to cover any such sales
with the Shares purchased pursuant to such Fixed Request Notice if (a) the Fixed
Request is terminated by mutual agreement of the Company and the Investor and,
as a result of such termination, no Shares are delivered to the Investor under
this Agreement or (b) the Company otherwise fails to deliver such Shares to the
Investor on the applicable Settlement Date upon the terms and subject to the
provisions of this Agreement.  Prior to and during the Restricted Period, the
Investor shall not grant any option to purchase or acquire any right to dispose
or otherwise dispose for value of any shares of Common Stock or any securities
convertible into or exercisable or exchangeable for, or warrants to purchase,
any shares of Common Stock, or enter into any swap, hedge or other agreement
that transfers, in whole or in part, the economic risk of ownership of the
Common Stock, except for such sales expressly permitted by this Section 5.10(i).

(ii)           In addition to the foregoing, in connection with any sale of the
Company’s securities (including any sale permitted by paragraph (i) above), the
Investor shall comply in all respects with all applicable laws, rules,
regulations and orders, including, without limitation, the requirements of the
Securities Act and the Exchange Act.

Section 5.11         Effective Registration Statement.  During the Investment
Period, the Company shall use its best efforts to maintain the continuous
effectiveness of the Registration Statement under the Securities Act.

Section 5.12         Non-Public Information.  Neither the Company nor any of its
directors, officers or agents shall disclose any material non-public information
about the Company to the Investor, unless a simultaneous public announcement
thereof is made by the Company in the manner contemplated by Regulation FD.

Section 5.13         Broker/Dealer.  The Investor shall use one or more
broker-dealers to effectuate all sales, if any, of the Shares that it may
purchase from the Company pursuant to this Agreement which (or whom) shall be
unaffiliated with the Investor and not then currently engaged or used by the
Company (collectively, the “Broker-Dealer”).  The Investor will provide the
Company with all information regarding the Broker-Dealer reasonably requested by
the Company.  The Investor shall be solely responsible for all fees and
commissions of the Broker-Dealer.

Section 5.14         Update of Disclosure Schedule.  During the Investment
Period, the Company shall from time to time update the Disclosure Schedule as
may be required to satisfy the condition set forth in Section 6.3(i).  For
purposes of this Section 5.14, any disclosure made in a schedule to the
Compliance Certificate shall be deemed to be an update of the Disclosure
Schedule.  Notwithstanding anything in this Agreement to the contrary, no update
to the Disclosure Schedule pursuant to this Section 5.14 shall cure any breach
of a representation or warranty of the Company contained in this Agreement and
shall not affect any of the Investor’s remedies with respect thereto.

 

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ARTICLE VI
OPINION OF COUNSEL AND CERTIFICATE; CONDITIONS TO THE SALE AND
PURCHASE OF THE SHARES

Section 6.1            Opinion of Counsel and Certificate.  Simultaneously with
the execution and delivery of this Agreement, the Investor has received and
relied upon (i) an opinion of outside counsel to the Company, dated the
Effective Date, in the form of Exhibit C hereto, and (ii) a certificate from the
Company, dated the Effective Date, in the form of Exhibit D hereto.

Section 6.2            Conditions Precedent to the Obligation of the Company. 
The obligation hereunder of the Company to issue and sell the Shares to the
Investor under any Fixed Request Notice or Optional Amount is subject to the
satisfaction or (to the extent permitted by applicable law) waiver of each of
the conditions set forth below. These conditions are for the Company’s sole
benefit and (to the extent permitted by applicable law) may be waived by the
Company at any time in its sole discretion.

(i)            Accuracy of the Investor’s Representations and Warranties.  The
representations and warranties of the Investor contained in Article III of this
Agreement (i) that are not qualified by “materiality” shall have been true and
correct in all material respects when made and shall be true and correct in all
material respects as of the applicable Fixed Request Exercise Date and the
applicable Settlement Date with the same force and effect as if made on such
dates, except to the extent such representations and warranties are as of
another date, in which case, such representations and warranties shall be true
and correct in all material respects as of such other date and (ii) that are
qualified by “materiality” shall have been true and correct when made and shall
be true and correct as of the applicable Fixed Request Exercise Date and the
applicable Settlement Date with the same force and effect as if made on such
dates, except to the extent such representations and warranties are as of
another date, in which case, such representations and warranties shall be true
and correct as of such other date.

(ii)           Registration Statement.  The Registration Statement is effective
and neither the Company nor the Investor shall have received notice that the
Commission has issued or intends to issue a stop order with respect to the
Registration Statement.  The Company shall have a maximum dollar amount certain
of Shares registered under the Registration Statement which are in an amount (A)
as of the Effective Date, not less than the maximum dollar amount worth of
Shares issuable pursuant to all Fixed Request Notices and Optional Amounts
during the Investment Period and (B) as of the applicable Fixed Request Exercise
Date, not less than the maximum dollar amount worth of Shares issuable pursuant
to the applicable Fixed Request Notice and applicable Optional Amount, if any. 
The Current Report shall have been filed with the Commission, as required
pursuant to Section 1.4, and all Prospectus Supplements shall have been filed
with the Commission, as required pursuant to Sections 1.4 and 5.9 hereof, to
disclose the sale of the Shares prior to each Settlement Date, as applicable. 
Any other material required to be filed by the Company or any other offering
participant pursuant to Rule 433(d) under the Securities Act shall have been
filed with the Commission within the applicable time periods prescribed for such
filings by Rule 433 under the Securities Act.

(iii)          Performance by the Investor.  The Investor shall have performed,
satisfied and complied in all material respects with all covenants, agreements
and conditions

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required by this Agreement to be performed, satisfied or complied with by the
Investor at or prior to the applicable Fixed Request Exercise Date and the
applicable Settlement Date.

(iv)          No Injunction.  No statute, regulation, order, decree, writ,
ruling or injunction shall have been enacted, entered, promulgated, threatened
or endorsed by any court or governmental authority of competent jurisdiction
which prohibits the consummation of or which would materially modify or delay
any of the transactions contemplated by this Agreement.

(v)           No Suspension, Etc.  Trading in the Common Stock shall not have
been suspended by the Commission or the Trading Market (except for any
suspension of trading of limited duration agreed to by the Company, which
suspension shall be terminated prior to the applicable Fixed Request Exercise
Date and applicable Settlement Date), and, at any time prior to the applicable
Fixed Request Exercise Date and applicable Settlement Date, none of the events
described in clauses (i), (ii) and (iii) or the last sentence of Section 5.7
shall have occurred, trading in securities generally as reported on the Trading
Market shall not have been suspended or limited, nor shall a banking moratorium
have been declared either by the United States or New York State authorities,
nor shall there have occurred any material outbreak or escalation of hostilities
or other national or international calamity or crisis of such magnitude in its
effect on, or any material adverse change in, any financial market which, in
each case, in the reasonable judgment of the Company, makes it impracticable or
inadvisable to issue the Shares.

(vi)          No Proceedings or Litigation.  No action, suit or proceeding
before any arbitrator or any court or governmental authority shall have been
commenced or threatened, and no inquiry or investigation by any governmental
authority shall have been commenced or threatened, against the Company or any
Subsidiary, or any of the officers, directors or affiliates of the Company or
any Subsidiary, seeking to restrain, prevent or change the transactions
contemplated by this Agreement, or seeking damages in connection with such
transactions.

(vii)         Aggregate Limit.  The issuance and sale of the Shares issuable
pursuant to such Fixed Request Notice or Optional Amount shall not violate
Sections 2.2, 2.12 and 5.5 hereof.

(viii)        No Unresolved NASD Objection.   There shall not exist any
unresolved objection raised by the NASD’s Corporate Financing Department with
respect to the fairness and reasonableness of the terms of this Agreement or the
transactions contemplated hereby, and the parties hereto shall have obtained
written confirmation thereof from the NASD.

Section 6.3            Conditions Precedent to the Obligation of the Investor. 
The obligation hereunder of the Investor to accept a Fixed Request or Optional
Amount grant and to acquire and pay for the Shares is subject to the
satisfaction or (to the extent permitted by applicable law) waiver, at or before
each Fixed Request Exercise Date and each Settlement Date, of each of the
conditions set forth below. These conditions are for the Investor’s sole benefit
and (to the extent permitted by applicable law) may be waived by the Investor at
any time in its sole discretion.

(i)            Accuracy of the Company’s Representations and Warranties.  The
representations and warranties of the Company contained in Article IV of this
Agreement (i) that are not qualified by “materiality” or “Material Adverse
Effect” shall have been true and correct in all material respects when made and
shall be true and correct

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in all material respects as of the applicable Fixed Request Exercise Date and
the applicable Settlement Date with the same force and effect as if made on such
dates, except to the extent such representations and warranties are as of
another date, in which case, such representations and warranties shall be true
and correct in all material respects as of such other date and (ii) that are
qualified by “materiality” or “Material Adverse Effect” shall have been true and
correct when made and shall be true and correct as of the applicable Fixed
Request Exercise Date and the applicable Settlement Date with the same force and
effect as if made on such dates, except to the extent such representations and
warranties are as of another date, in which case, such representations and
warranties shall be true and correct as of such other date.

(ii)           Registration Statement. The Registration Statement is effective
and neither the Company nor the Investor shall have received notice that the
Commission has issued or intends to issue a stop order with respect to the
Registration Statement. The Company shall have a maximum dollar amount certain
of Shares registered under the Registration Statement which are in an amount (A)
as of the Effective Date, not less than the maximum dollar amount worth of
Shares issuable pursuant to all Fixed Request Notices and Optional Amounts
during the Investment Period and (B) as of the applicable Fixed Request Exercise
Date, not less than the maximum dollar amount worth of Shares issuable pursuant
to the applicable Fixed Request Notice and applicable Optional Amount, if any. 
The Current Report shall have been filed with the Commission, as required
pursuant to Section 1.4, and all Prospectus Supplements shall have been filed
with the Commission, as required pursuant to Sections 1.4 and 5.9 hereof, to
disclose the sale of the Shares prior to each Settlement Date, as applicable,
and an electronic copy of each such Prospectus Supplement together with the Base
Prospectus shall have been delivered or made available to the Investor in
accordance with Section 5.9 hereof.  Any other material required to be filed by
the Company or any other offering participant pursuant to Rule 433(d) under the
Securities Act shall have been filed with the Commission within the applicable
time periods prescribed for such filings by Rule 433 under the Securities Act.

(iii)          No Suspension.  Trading in the Common Stock shall not have been
suspended by the Commission or the Trading Market (except for any suspension of
trading of limited duration agreed to by the Company, which suspension shall be
terminated prior to the applicable Fixed Request Exercise Date and applicable
Settlement Date), and, at any time prior to the applicable Fixed Request
Exercise Date and applicable Settlement Date, none of the events described in
clauses (i), (ii) and (iii) or the last sentence of Section 5.7 shall have
occurred, trading in securities generally as reported on the Trading Market
shall not have been suspended or limited, nor shall a banking moratorium have
been declared either by the United States or New York State authorities, nor
shall there have occurred any material outbreak or escalation of hostilities or
other national or international calamity or crisis of such magnitude in its
effect on, or any material adverse change in, any financial market which, in
each case, in the reasonable judgment of the Investor, makes it impracticable or
inadvisable to purchase the Shares.

(iv)          Performance of the Company.  The Company shall have performed,
satisfied and complied in all material respects with all covenants, agreements
and conditions required by this Agreement to be performed, satisfied or complied
with by the Company at or prior to the applicable Fixed Request Exercise Date
and the applicable Settlement Date and shall

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have delivered to the Investor on the applicable Settlement Date the Compliance
Certificate substantially in the form attached hereto as Exhibit E.

(v)           No Injunction. No statute, rule, regulation, order, decree, writ,
ruling or injunction shall have been enacted, entered, promulgated, threatened
or endorsed by any court or governmental authority of competent jurisdiction
which prohibits the consummation of or which would materially modify or delay
any of the transactions contemplated by this Agreement.

(vi)          No Proceedings or Litigation.  No action, suit or proceeding
before any arbitrator or any court or governmental authority shall have been
commenced or threatened, and no inquiry or investigation by any governmental
authority shall have been commenced or threatened, against the Company or any
Subsidiary, or any of the officers, directors or affiliates of the Company or
any Subsidiary, seeking to restrain, prevent or change the transactions
contemplated by this Agreement, or seeking damages in connection with such
transactions.

(vii)         Aggregate Limit.  The issuance and sale of the Shares issuable
pursuant to such Fixed Request Notice or Optional Amount shall not violate
Sections 2.2, 2.12 and 5.5 hereof.

(viii)        Shares Authorized.  The Shares issuable pursuant to such Fixed
Request Notice or Optional Amount shall have been duly authorized by all
necessary corporate action of the Company.

(ix)           Notification of Listing of Shares.  The Company shall have
submitted to the Trading Market a notification form of listing of additional
shares related to the Shares issuable pursuant to such Fixed Request or Optional
Amount in accordance with the bylaws, listed securities maintenance standards
and other rules of the Trading Market.

(x)            Opinions of Counsel; Bring-Down.  Subsequent to the filing of the
Current Report pursuant to Section 1.4 and prior to the first Fixed Request
Exercise Date, the Investor shall have received an opinion from outside counsel
to the Company in the form of Exhibit F hereto.  On each Settlement Date, the
Investor shall have received an opinion “bring down” from outside counsel to the
Company in the form of Exhibit G hereto.

(xi)           No Unresolved NASD Objection.   There shall not exist any
unresolved objection raised by the NASD’s Corporate Financing Department with
respect to the fairness and reasonableness of the terms of this Agreement or the
transactions contemplated hereby, and the parties hereto shall have obtained
written confirmation thereof from the NASD.

(xii)          Payment of Investor’s Counsel Fees; Due Diligence Expenses.  On
the Effective Date, the Company shall have paid by wire transfer of immediately
available funds to an account designated by the Investor’s counsel, the fees and
expenses of the Investor’s counsel in accordance with the proviso to the first
sentence of Section 9.1(i) of this Agreement.  On the 30th day of the third
month in each calendar quarter during the Investment Period, the Company shall
have paid by wire transfer of immediately available funds (a) to an account
designated by the Investor, the due diligence expenses incurred by the Investor
and (b) to an account designated by the Investor’s counsel, the fees and
expenses of the Investor’s counsel, in each case, in accordance with the
provisions of the second sentence of Section 9.1(i) of this Agreement.

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ARTICLE VII
TERMINATION

Section 7.1            Term, Termination by Mutual Consent.  Unless earlier
terminated as provided hereunder, this Agreement shall terminate automatically
on the earliest of (i) the first day of the month next following the 18-month
anniversary of the Effective Date (the “Investment Period”), (ii) the date that
the entire dollar amount of Shares registered under the Registration Statement
have been issued and sold and (iii) the date the Investor shall have purchased
the Total Commitment of shares of Common Stock (subject in all cases to the
Trading Market Limit). The Company may terminate this Agreement effective upon
three Trading Days’ prior written notice to the Investor under Section 9.4;
provided, however, that such termination shall not occur during a Pricing Period
or prior to a Settlement Date. This Agreement may be terminated at any time (A)
by the mutual written consent of the parties, effective as of the date of such
mutual written consent unless otherwise provided in such written consent, it
being hereby acknowledged and agreed that the Investor may not consent to such
termination during a Pricing Period or prior to a Settlement Date in the event
the Investor has instructed the Broker-Dealer to effect an open-market sale of
Shares which are subject to a pending Fixed Request Notice but which have not
yet been physically delivered by the Company (and/or credited by book-entry) to
the Investor in accordance with the terms and subject to the conditions of this
Agreement, or (B) by either the Company or the Investor effective upon written
notice to the other party under Section 9.4, if the NASD’s Corporate Financing
Department has raised any objection with respect to the fairness and
reasonableness of the terms of this Agreement or the transactions contemplated
hereby, or has otherwise failed to confirm in writing that it has determined not
to raise any such objection, and such objection shall not have been resolved, or
such confirmation of no objection shall not have been obtained, prior to (1) the
60th day immediately following the Effective Date, in the case of an objection
raised or confirmation failure occurring prior to the first Fixed Request
Exercise Date, or (2) prior to the 60th day immediately following the receipt by
the Company or the Investor of notice of such objection, in the case of an
objection raised after the first Fixed Request Exercise Date; provided however,
that (x) the party seeking to terminate this Agreement pursuant to this clause
(B) of Section 7.1 shall have used its commercially reasonable efforts to
resolve such objection and/or to obtain such confirmation of no objection in
accordance with and subject to the provisions of Section 5.1(ii) of this
Agreement and (y) the right to terminate this Agreement pursuant to this clause
(B) of Section 7.1 shall not be available to any party whose action or failure
to act has been a principal cause of, or has resulted in, such objection or
confirmation failure and such action or failure to act constitutes a breach of
this Agreement.

Section 7.2            Other Termination.  If the Company provides the Investor
with a Pricing Period Other Financing Notice (other than in respect of an
underwritten public offering of equity securities of the Company (including
warrants to purchase shares of Common Stock) or an Acceptable Financing) or an
Integration Notice, the Investor shall have the right to terminate this
Agreement within the subsequent 30-day period (the “Event Period”), effective
upon one Trading Day’s prior written notice delivered to the Company in
accordance with Section 9.4 at any time during the Event Period.  The Company
shall notify the Investor and the Investor shall have the right to terminate
this Agreement at any time if: (i) any condition, occurrence, state of facts or
event constituting a Material Adverse Effect has occurred and is continuing;
(ii) a Material Change in Ownership has occurred; or (iii) a default or event of
default has occurred and is continuing under the terms of any agreement,
contract, note or other instrument to which

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the Company or any of its Subsidiaries is a party with respect to any
indebtedness for borrowed money representing more than 10% of the Company’s
consolidated assets, in any such case, upon one Trading Day’s prior written
notice delivered to the Company in accordance with Section 9.4 hereof.

Section 7.3            Effect of Termination.  In the event of termination by
the Company or the Investor, written notice thereof shall forthwith be given to
the other party as provided in Section 9.4 and the transactions contemplated by
this Agreement shall be terminated without further action by either party. If
this Agreement is terminated as provided in Section 7.1 or 7.2 herein, this
Agreement shall become void and of no further force and effect, except as
provided in Section 9.9 hereof. Nothing in this Section 7.3 shall be deemed to
release the Company or the Investor from any liability for any breach under this
Agreement, or to impair the rights of the Company and the Investor to compel
specific performance by the other party of its obligations under this Agreement.

ARTICLE VIII
INDEMNIFICATION

Section 8.1            General Indemnity.

(i)            Indemnification by the Company.  The Company shall indemnify and
hold harmless the Investor, the Broker-Dealer, each affiliate, employee,
representative and advisor of and to the Investor and the Broker-Dealer, and
each person, if any, who controls the Investor or the Broker-Dealer within the
meaning of Section 15 of the Securities Act or Section 20(a) of the Exchange Act
from and against all losses, claims, damages, liabilities and expenses
(including reasonable costs of defense and investigation and all attorneys’
fees) to which the Investor, the Broker-Dealer and each such other person may
become subject, under the Securities Act or otherwise, insofar as such losses,
claims, damages, liabilities and expenses (or actions in respect thereof) arise
out of or are based upon (i) any violation of law (including United States
federal securities laws) in connection with the transactions contemplated by
this Agreement by the Company or any of its Subsidiaries, affiliates, officers,
directors or employees, (ii) any untrue statement or alleged untrue statement of
a material fact contained, or incorporated by reference, in the Registration
Statement or any amendment thereto or any omission or alleged omission to state
therein, or in any document incorporated by reference therein, a material fact
required to be stated therein or necessary to make the statements therein not
misleading, (iii) any untrue statement or alleged untrue statement of a material
fact contained, or incorporated by reference, in the Prospectus, any Issuer Free
Writing Prospectus, or in any amendment thereof or supplement thereto, or in any
“issuer information” (as defined in Rule 433 under the Securities Act) of the
Company, which “issuer information” is required to be, or is, filed with the
Commission or otherwise contained in any Free Writing Prospectus, or any
amendment or supplement thereto, or any omission or alleged omission to state
therein, or in any document incorporated by reference therein, a material fact
required to be stated therein or necessary to make the statements therein, in
light of the circumstances under which they were made, not misleading, or (iv)
any untrue statement or alleged untrue statement contained in the NASD Filing,
or any amendment thereof or supplement thereto, or any omission or alleged
omission to state therein a fact necessary in order to comply with Rule 2710 of
the NASD’s Conduct Rules, but only to the extent the untrue statement, alleged
untrue statement, omission or alleged

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omission was made in reliance upon, and in conformity with, information
furnished by the Company to the Investor expressly for inclusion in the NASD
Filing, or any amendment thereof or supplement thereto; provided, however, that
(A) the Company shall not be liable under this Section 8.1(i) to the extent that
a court of competent jurisdiction shall have determined by a final judgment
(from which no further appeals are available) that such loss, claim, damage,
liability or expense resulting directly and solely from any such acts or
failures to act, undertaken or omitted to be taken by the Investor or such
person through its bad faith or willful misconduct, (B) the foregoing indemnity
shall not apply to any loss, claim, damage, liability or expense to the extent,
but only to the extent, arising out of or based upon any untrue statement or
alleged untrue statement or omission or alleged omission made in reliance upon
and in conformity with written information furnished to the Company by the
Investor expressly for use in the Current Report or any Prospectus Supplement or
Permitted Free Writing Prospectus, or any amendment thereof or supplement
thereto, and (C) with respect to the Prospectus, the foregoing indemnity shall
not inure to the benefit of the Investor or any such person from whom the person
asserting any loss, claim, damage, liability or expense purchased Common Stock,
if copies of all Prospectus Supplements required to be filed pursuant to Section
1.4 and 5.9, together with the Base Prospectus, were timely delivered or made
available to the Investor pursuant hereto and a copy of the Base Prospectus,
together with a Prospectus Supplement (as applicable), was not sent or given by
or on behalf of the Investor or any such person to such person, if required by
law to have been delivered, at or prior to the written confirmation of the sale
of the Common Stock to such person, and if delivery of the Base Prospectus,
together with a Prospectus Supplement (as applicable), would have cured the
defect giving rise to such loss, claim, damage, liability or expense.

The Company shall reimburse the Investor, the Broker-Dealer and each such
controlling person promptly upon demand (with accompanying presentation of
documentary evidence) for all legal and other costs and expenses reasonably
incurred by the Investor, the Broker-Dealer or such indemnified persons in
investigating, defending against, or preparing to defend against any such claim,
action, suit or proceeding with respect to which it is entitled to
indemnification.

(ii)           Indemnification by the Investor. The Investor shall indemnify and
hold harmless the Company, each of its directors and officers, and each person,
if any, who controls the Company within the meaning of Section 15 of the
Securities Act or Section 20(a) of the Exchange Act from and against all losses,
claims, damages, liabilities and expenses (including reasonable costs of defense
and investigation and all attorneys fees) to which the Company and each such
other person may become subject, under the Securities Act or otherwise, insofar
as such losses, claims, damages, liabilities and expenses (or actions in respect
thereof) arise out of or are based upon (i) any violation of law (including
United States federal securities laws) in connection with the transactions
contemplated by this Agreement by the Investor or any of its affiliates,
officers, directors or employees, (ii) any untrue statement or alleged untrue
statement of a material fact contained in the Current Report or any Prospectus
Supplement or Permitted Free Writing Prospectus, or in any amendment thereof or
supplement thereto, or any omission or alleged omission to state therein a
material fact required to be stated therein or necessary to make the statements
therein, in light of the circumstances under which they were made, not
misleading, in each case, to the extent, but only to the extent, the untrue
statement, alleged untrue statement, omission or alleged omission was made in
reliance upon, and in conformity with, written information furnished by the
Investor to the Company expressly for inclusion in the

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Current Report or such Prospectus Supplement or Permitted Free Writing
Prospectus, or any amendment thereof or supplement thereto, or (iii) any untrue
statement or alleged untrue statement contained in the NASD Filing, or any
amendment thereof or supplement thereto, or any omission or alleged omission to
state therein a fact necessary in order to comply with Rule 2710 of the NASD’s
Conduct Rules; provided, however, that the foregoing indemnity for statements or
omissions referred to in clause (iii) above shall not apply to any loss, claim,
damage, liability or expense to the extent, but only to the extent, arising out
of or based upon any untrue statement or alleged untrue statement or omission or
alleged omission made in reliance upon and in conformity with written
information furnished to the Investor by the Company expressly for use in the
NASD Filing, or any amendment thereof or supplement thereto.

The Investor shall reimburse the Company and each such director, officer or
controlling person promptly upon demand for all legal and other costs and
expenses reasonably incurred by the Company or such indemnified persons in
investigating, defending against, or preparing to defend against any such claim,
action, suit or proceeding with respect to which it is entitled to
indemnification.

Section 8.2            Indemnification Procedures.  Promptly after a person
receives notice of a claim or the commencement of an action for which the person
intends to seek indemnification under Section 8.1, the person will notify the
indemnifying party in writing of the claim or commencement of the action, suit
or proceeding; provided, however, that failure to notify the indemnifying party
will not relieve the indemnifying party from liability under Section 8.1, except
to the extent it has been materially prejudiced by the failure to give notice. 
The indemnifying party will be entitled to participate in the defense of any
claim, action, suit or proceeding as to which indemnification is being sought,
and if the indemnifying party acknowledges in writing the obligation to
indemnify the party against whom the claim or action is brought, the
indemnifying party may (but will not be required to) assume the defense against
the claim, action, suit or proceeding with counsel satisfactory to it.  After an
indemnifying party notifies an indemnified party that the indemnifying party
wishes to assume the defense of a claim, action, suit or proceeding, the
indemnifying party will not be liable for any legal or other expenses incurred
by the indemnified party in connection with the defense against the claim,
action, suit or proceeding except that if, in the opinion of counsel to the
indemnifying party, one or more of the indemnified parties should be separately
represented in connection with a claim, action, suit or proceeding, the
indemnifying party will pay the reasonable fees and expenses of one separate
counsel for the indemnified parties.  Each indemnified party, as a condition to
receiving indemnification as provided in Section 8.1, will cooperate in all
reasonable respects with the indemnifying party in the defense of any action or
claim as to which indemnification is sought.  No indemnifying party will be
liable for any settlement of any action effected without its prior written
consent.  Notwithstanding the foregoing sentence, if at any time an indemnified
party shall have requested (by written notice provided in accordance with
Section 9.4) an indemnifying party to reimburse the indemnified party for fees
and expenses of counsel, such indemnifying party agrees that it shall be liable
for any settlement of the nature contemplated hereby effected without its
written consent if (i) such settlement is entered into more than 45 days after
receipt by such indemnifying party of the aforesaid request, (ii) such
indemnifying party shall have received written notice of the terms of such
settlement at least 30 days prior to such settlement being entered into and
(iii) such indemnifying party shall not have reimbursed such indemnified party
in accordance with such request prior to the date of such settlement.  No

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indemnifying party will, without the prior written consent of the indemnified
party, effect any settlement of a pending or threatened action with respect to
which an indemnified party is, or is informed that it may be, made a party and
for which it would be entitled to indemnification, unless the settlement
includes an unconditional release of the indemnified party from all liability
and claims which are the subject matter of the pending or threatened action.

If for any reason the indemnification provided for in this Agreement is not
available to, or is not sufficient to hold harmless, an indemnified party in
respect of any loss or liability referred to in Section 8.1 as to which such
indemnified party is entitled to indemnification thereunder, each indemnifying
party shall, in lieu of indemnifying the indemnified party, contribute to the
amount paid or payable by the indemnified party as a result of such loss or
liability, (i) in the proportion which is appropriate to reflect the relative
benefits received by the indemnifying party, on the one hand, and by the
indemnified party, on the other hand, from the sale of Shares which is the
subject of the claim, action, suit or proceeding which resulted in the loss or
liability or (ii) if the allocation provided by clause (i) is not permitted by
applicable law, in such proportion as is appropriate to reflect not only the
relative benefits referred to in clause (i) above, but also the relative fault
of the indemnifying party, on the one hand, and the indemnified party, on the
other hand, with respect to the statements or omissions which are the subject of
the claim, action, suit or proceeding that resulted in the loss or liability, as
well as any other relevant equitable considerations.

The remedies provided for in Section 8.1 and this Section 8.2 are not exclusive
and shall not limit any rights or remedies which may otherwise be available to
any Indemnified Person at law or in equity.

ARTICLE IX
MISCELLANEOUS

Section 9.1            Fees and Expenses.

(i)            Each party shall bear its own fees and expenses related to the
transactions contemplated by this Agreement; provided, however, that the Company
shall pay, on the Effective Date, by wire transfer of immediately available
funds (A) to the NASD, the applicable filing fee with respect to the NASD
Filing, if any is then due, and (B) to an account designated by the Investor’s
counsel, all reasonable attorneys’ fees and expenses (exclusive of disbursements
and out-of-pocket expenses) incurred by the Investor, up to $35,000, in
connection with the preparation, negotiation, execution and delivery of this
Agreement, legal due diligence of the Company and review of the Registration
Statement, the Base Prospectus, the Current Report, any Permitted Free Writing
Prospectus and preparation of the NASD Filing. In addition, the Company shall
pay, on the 30th day of the third month in each calendar quarter during the
Investment Period, not to exceed $12,500, representing (x) the due diligence
expenses incurred by the Investor during the Investment Period and (y) the
attorneys’ fees and expenses incurred by the Investor in connection with ongoing
legal due diligence of the Company and in connection with any amendments,
modifications or waivers of this Agreement, any amendments of or supplements to
the NASD Filing and review of Prospectus Supplements, Permitted Free Writing
Prospectuses, opinion “bring downs” and all other related documents to be
delivered by the Company and its counsel in connection with a Fixed Request
Exercise Date and the

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applicable Settlement Date. The Company shall pay all U.S. federal, state and
local stamp and other similar transfer and other taxes and duties levied in
connection with issuance of the Shares pursuant hereto.  Notwithstanding the
foregoing, the Company shall not be responsible for any such amounts based on
the income or capital gains of the Investor.

(ii)           If the Company issues a Fixed Request Notice and fails to deliver
the Shares to the Investor on the applicable Settlement Date and such failure
continues for 10 Trading Days, the Company shall pay the Investor, in cash (or,
at the option of the Investor, in shares of Common Stock which have not been
registered under the Securities Act), as liquidated damages for such failure and
not as a penalty, an amount equal to 2.0% of the payment required to be paid by
the Investor on such Settlement Date (i.e., the sum of the Fixed Amount
Requested and the Optional Amount Dollar Amount) for the initial 30 days
following such Settlement Date until the Shares have been delivered, and an
additional 2.0% for each additional 30-day period thereafter until the Shares
have been delivered, which amount shall be prorated for such periods less than
thirty 30 days.

Section 9.2            Specific Enforcement, Consent to Jurisdiction,  Waiver of
Jury Trial.  (i)  The Company and the Investor acknowledge and agree that
irreparable damage would occur in the event that any of the provisions of this
Agreement were not performed in accordance with their specific terms or were
otherwise breached. It is accordingly agreed that either party shall be entitled
to an injunction or injunctions to prevent or cure breaches of the provisions of
this Agreement by the other party and to enforce specifically the terms and
provisions hereof this being in addition to any other remedy to which either
party may be entitled by law or equity.

(i)            Each of the Company and the Investor (a) hereby irrevocably
submits to the jurisdiction of the United States District Court and other courts
of the United States sitting in the State of New York for the purposes of any
suit, action or proceeding arising out of or relating to this Agreement, and (b)
hereby waives, and agrees not to assert in any such suit, action or proceeding,
any claim that it is not personally subject to the jurisdiction of such court,
that the suit, action or proceeding is brought in an inconvenient forum or that
the venue of the suit, action or proceeding is improper. Each of the Company and
the Investor consents to process being served in any such suit, action or
proceeding by mailing a copy thereof 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 in this
Section 9.2 shall affect or limit any right to serve process in any other manner
permitted by law.

(ii)           Each of the Company and the Investor hereby waives to the fullest
extent permitted by applicable law, any right it may have to a trial by jury in
respect to any litigation directly or indirectly arising out of, under or in
connection with this Agreement or the transactions contemplated hereby or
disputes relating hereto. Each of the Company and the Investor (a) certifies
that no representative, agent or attorney of any other party has represented,
expressly or otherwise, that such other party would not, in the event of
litigation, seek to enforce the foregoing waiver and (b) acknowledges that it
and the other parties hereto have been induced to enter into this Agreement by,
among other things, the mutual waivers and certifications in this Section 9.2.

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Section 9.3            Entire Agreement; Amendment.  This Agreement, together
with the exhibits referred to herein and the Disclosure Schedule, represents the
entire agreement of the parties with respect to the subject matter hereof, and
there are no promises, undertakings, representations or warranties by either
party relative to subject matter hereof not expressly set forth herein. No
provision of this Agreement may be amended other than by a written instrument
signed by both parties hereto.  The Disclosure Schedule and all exhibits to this
Agreement are hereby incorporated by reference in, and made a part of, this
Agreement as if set forth in full herein.

Section 9.4            Notices.  Any notice, demand, request, waiver or other
communication required or permitted to be given hereunder shall be in writing
and shall be effective (a) upon hand delivery or facsimile (with facsimile
machine confirmation of delivery received) at the address or number designated
below (if delivered on a business day during normal business hours where such
notice is to be received), or the first business day following such delivery (if
delivered other than on a business day during normal business hours where such
notice is to be received) or (b) on the second business day following the date
of mailing by express courier service, fully prepaid, addressed to such address,
or upon actual receipt of such mailing, whichever shall first occur. The address
for such communications shall be:

If to the Company:

Acusphere, Inc.

 

500 Arsenal Street

 

Watertown, Massachusetts 02472

 

Telephone Number: (617) 648-8800

 

Fax: (617) 926-3605

 

Attention: Chief Financial Officer

 

 

With copies to:

Goodwin Procter LLP

 

53 State Street

 

Boston, Massachusetts 02472

 

Telephone Number: (617) 570-1000

 

Fax: (617) 523-1231

 

Attention:

Lawrence S. Wittenberg, Esq.

 

 

Michael H. Bison, Esq.

 

 

If to the Investor:

Azimuth Opportunity Ltd.

 

c/o Fortis Prime Fund Solutions (BVI) Limited

 

P.O. Box 761, 1st Floor

 

James Frett Building

 

Road Town, Tortola

 

British Virgin Islands

 

Telephone Number: (284) 494-6046

 

Fax: (284) 494-6898

 

Attention: Peter O’Connell

 

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With copies to:

Greenberg Traurig, LLP

 

The MetLife Building

 

200 Park Avenue

 

New York, NY 10166

 

Telephone Number: (212) 801-9200

 

Fax: (212) 801-6400

 

Attention:

Clifford E. Neimeth, Esq.

 

 

Anthony J. Marsico, Esq.

 

Either party hereto may from time to time change its address for notices by
giving at least 10 days advance written notice of such changed address to the
other party hereto.

Section 9.5            Waivers.  No waiver by either party of any default with
respect to any provision, condition or requirement of this Agreement shall be
deemed to be a continuing waiver in the future or a waiver of any other
provisions, condition or requirement hereof nor shall any delay or omission of
any party to exercise any right hereunder in any manner impair the exercise of
any such right accruing to it thereafter. No provision of this Agreement may be
waived other than in a written instrument signed by the party against whom
enforcement of such waiver is sought.

Section 9.6            Headings.  The article, section and subsection headings
in this Agreement are for convenience only and shall not constitute a part of
this Agreement for any other purpose and shall not be deemed to limit or affect
any of the provisions hereof.

Section 9.7            Successors and Assigns.  The Investor may not assign this
Agreement to any person without the prior consent of the Company, in the
Company’s sole discretion. This Agreement shall be binding upon and inure to the
benefit of the parties and their successors and assigns. The assignment by a
party to this Agreement of any rights hereunder shall not affect the obligations
of such party under this Agreement.

Section 9.8            Governing Law.  This Agreement shall be governed by and
construed in accordance with the internal procedural and substantive laws of the
State of New York, without giving effect to the choice of law provisions of such
state.

Section 9.9            Survival.  The representations and warranties of the
Company and the Investor contained in Articles III and IV and the covenants
contained in Article V shall survive the execution and delivery hereof until the
termination of this Agreement, and the agreements and covenants set forth in
Article VIII of this Agreement shall survive the execution and delivery hereof.

Section 9.10         Counterparts.  This Agreement may be executed in
counterparts, all of which taken together shall constitute one and the same
original and binding instrument and shall become effective when all counterparts
have been signed by each party and delivered to the other parties hereto, it
being understood that all parties hereto need not sign the same counterpart. In
the event any signature is delivered by facsimile transmission, the party using
such means of delivery shall cause four additional executed signature pages to
be physically delivered to the other parties within five days of the execution
and delivery hereof.

Section 9.11         Publicity.  On or after the Effective Date, the Company may
issue a press release or otherwise make a public statement or announcement with
respect to this Agreement or the transactions contemplated hereby or the
existence of this Agreement (including, without

39

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limitation, by filing a copy of this Agreement with the Commission); provided,
however, that prior to issuing any such press release, or making any such public
statement or announcement, the Company shall consult with the Investor on the
form and substance of such press release or other disclosure.

Section 9.12         Severability.  The provisions of this Agreement are
severable and, in the event that any court of competent jurisdiction shall
determine that any one or more of the provisions or part of the provisions
contained in this Agreement shall, for any reason, be held to be invalid,
illegal or unenforceable in any respect, such invalidity, illegality or
unenforceability shall not affect any other provision or part of a provision of
this Agreement, and this Agreement shall be reformed and construed as if such
invalid or illegal or unenforceable provision, or part of such provision, had
never been contained herein, so that such provisions would be valid, legal and
enforceable to the maximum extent possible.

Section 9.13         Further Assurances.  From and after the date of this
Agreement, upon the request of the Investor or the Company, each of the Company
and the Investor shall execute and deliver such instrument, documents and other
writings as may be reasonably necessary or desirable to confirm and carry out
and to effectuate fully the intent and purposes of this Agreement.

[Signature Page Follows]

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IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly
executed by their respective authorized officer as of the date first above
written.

ACUSPHERE, INC.:

 

 

 

 

 

By:

/s/ Sherri C. Oberg

 

 

Name: Sherri C. Oberg

 

 

Title: President and Chief Executive Officer

 

 

 

AZIMUTH OPPORTUNITY LTD.:

 

 

 

 

 

By:

/s/ Deirdre M. McCoy

 

 

Name: Deirdre M. McCoy

 

 

Title: Corporate Secretary

 

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ANNEX A TO THE
COMMON STOCK PURCHASE AGREEMENT
DEFINITIONS

(a)           “Acceptable Financing” shall have the meaning assigned to such
term in Section 5.6(ii) hereof.

(b)           “Aggregate Limit” shall have the meaning assigned to such term in
Section 1.1 hereof.

(c)           “Base Prospectus” shall mean the Company’s prospectus, dated
August 31, 2006, a preliminary form of which is included in the Registration
Statement.

(d)           “Below Market Offering” shall have the meaning assigned to such
term in Section 5.6(ii) hereof.

(e)           “Broker-Dealer” shall have the meaning assigned to such term in
Section 5.13 hereof.

(f)            “Bylaws” shall have the meaning assigned to such term in Section
4.3 hereof.

(g)           “Charter” shall have the meaning assigned to such term in Section
4.3 hereof.

(h)           “Code” shall mean the Internal Revenue Code of 1986, as amended.

(i)            “Commission” shall mean the Securities and Exchange Commission or
any successor entity.

(j)            “Commission Documents” shall mean (1) all reports, schedules,
registrations, forms, statements, information and other documents filed by the
Company with the Commission pursuant to the reporting requirements of the
Exchange Act, including all material filed pursuant to Section 13(a) or 15(d) of
the Exchange Act, which have been filed by the Company since the Form 10-K filed
by the Company for its fiscal year ended December 31, 2005 (the “2005 Form
10-K”) and which hereafter shall be filed by the Company during the Investment
Period, including, without limitation, the Current Report and the Company’s
Quarterly Report on Form 10-Q for its fiscal quarter ended June 30, 2006, (2)
the Registration Statement, as the same may be amended from time to time, the
Prospectus and each Prospectus Supplement, and each Permitted Free Writing
Prospectus and (3) all information contained in such filings and all documents
and disclosures that have been and heretofore shall be incorporated by reference
therein.

(k)           “Common Stock” shall have the meaning assigned to such term in the
Recitals.

(l)            “Current Market Price” means, with respect to any particular
measurement date, the closing price of a share of Common Stock as reported on
the Trading Market for the Trading Day immediately preceding such measurement
date.

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(m)          “Current Report” shall have the meaning assigned to such term in
Section 1.4 hereof.

(n)           “Discount Price” shall have the meaning assigned to such term in
Section 2.2 hereof.

(o)           “Effective Date” shall mean August 31, 2006.

(p)           “Environmental Laws” shall have the meaning assigned to such term
in Section 4.15 hereof.

(q)           “ERISA” shall mean the Employee Retirement Income Security Act of
1974, as amended.

(r)            “Event Period” shall have the meaning assigned to such term in
Section 7.2 hereof.

(s)           “Exchange Act” shall mean the Securities Exchange Act of 1934, as
amended, and the rules and regulations of the Commission thereunder.

(t)            “FDA” shall have the meaning assigned to such term in Section
4.14(a) hereof.

(u)           “Fixed Amount Requested” shall mean the amount of a Fixed Request
requested by the Company in a Fixed Request Notice delivered pursuant to Section
2.1 hereof.

(v)           “Fixed Request” means the transactions contemplated under Sections
2.1 through 2.8 of this Agreement.

(w)          “Fixed Request Amount” means the actual amount of proceeds received
by the Company pursuant to a Fixed Request under this Agreement.

(x)            “Fixed Request Exercise Date” shall have the meaning assigned to
such term in Section 2.2 hereof.

(y)           “Fixed Request Notice” shall have the meaning assigned to such
term in Section 2.1 hereof.

(z)            “Free Writing Prospectus” shall mean a “free writing prospectus”
as defined in Rule 405 promulgated under the Securities Act.

(aa)         “GAAP” shall mean generally accepted accounting principles in the
United States of America as applied by the Company.

(bb)         “Governmental Licenses” shall have the meaning assigned to such
term in Section 4.14(a) hereof.

(cc)         “Indebtedness” shall have the meaning assigned to such term in
Section 4.9 hereof.

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(dd)         “Integration Notice” shall have the meaning assigned to such term
in Section 5.6(ii) hereof.

(ee)         “Intellectual Property” shall have the meaning assigned to such
term in Section 4.14(b) hereof.

(ff)           “Investment Period” shall have the meaning assigned to such term
in Section 7.1 hereof.

(gg)         “Issuer Free Writing Prospectus” shall mean an “issuer free writing
prospectus” as defined in Rule 433 promulgated under the Securities Act.

(hh)         “Market Capitalization” shall be calculated on the Trading Day
preceding the applicable Pricing Period and shall be the product of (x) the
number of shares of Common Stock outstanding and (y) the closing bid price of
the Common Stock, both as determined by Bloomberg Financial LP using the DES and
HP functions.

(ii)           “Material Adverse Effect” shall mean any condition, occurrence,
state of facts or event having, or insofar as reasonably can be foreseen would
likely have, any effect on the business, operations, properties or condition
(financial or otherwise) of the Company that is material and adverse to the
Company and its Subsidiaries, taken as a whole, and/or any condition,
occurrence, state of facts or event that would prohibit or otherwise materially
interfere with or delay the ability of the Company to perform any of its
obligations under this Agreement.

(jj)           “Material Agreements” shall have the meaning assigned to such
term in Section 4.16 hereof.

(kk)         “Material Change in Ownership” shall mean the occurrence of any one
or more of the following: (i) the acquisition by any person, including any
syndicate or group deemed to be a “person” under Section 13(d)(3) of the
Exchange Act, of beneficial ownership, directly or indirectly, through a
purchase, merger or other acquisition transaction or series of transactions, of
shares of capital stock or other securities of the Company entitling such person
to exercise, upon an event of default or default or otherwise, 50% or more of
the total voting power of all series and classes of capital stock and other
securities of the Company entitled to vote generally in the election of
directors, other than any such acquisition by the Company, any Subsidiary of the
Company or any employee benefit plan of the Company; (ii) any consolidation or
merger of the Company with or into any other person, any merger of another
person into the Company, or any conveyance, transfer, sale, lease or other
disposition of all or substantially all of the properties and assets of the
Company to another person, other than (a) any such transaction (x) that does not
result in any reclassification, conversion, exchange or cancellation of
outstanding shares of capital stock of the Company and (y) pursuant to which
holders of capital stock of the Company immediately prior to such transaction
have the entitlement to exercise, directly or indirectly, 50% or more of the
total voting power of all shares of capital stock of the Company entitled to
vote generally in the election of directors of the continuing or surviving
person immediately after such transaction or (b) any merger which is effected
solely to change the jurisdiction of incorporation of the Company and results in
a reclassification, conversion or exchange of outstanding shares of Common Stock
solely into shares of common stock of the surviving entity; (iii) during any

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consecutive two-year period, individuals who at the beginning of that two-year
period constituted the Board of Directors (together with any new directors whose
election to the Board of Directors, or whose nomination for election by the
stockholders of the Company, was approved by a vote of a majority of the
directors then still in office who were either directors at the beginning of
such period or whose elections or nominations for election were previously so
approved) cease for any reason to constitute a majority of the Board of
Directors then in office; or (iv) the Company is liquidated or dissolved or a
resolution is passed by the Company’s stockholders approving a plan of
liquidation or dissolution of the Company. Beneficial ownership shall be
determined in accordance with Rule 13d-3 promulgated by the SEC under the
Exchange Act. The term “person” shall include any syndicate or group which would
be deemed to be a “person” under Section 13(d)(3) of the Exchange Act.

(ll)           “Multiplier” shall have the meaning assigned to such term in
Section 2.3 hereof.

(mm)       “NASD” shall have the meaning assigned to such term in Section 4.5
hereof.

(nn)         “NASD Filing” shall have the meaning assigned to such term in
Section 5.1 hereof.

(oo)         “NASDAQ” means the NASDAQ Global Market or any successor thereto.

(pp)         “Optional Amount” means the transactions contemplated under
Sections 2.9 through 2.11 of this Agreement.

(qq)         “Optional Amount Dollar Amount” shall mean the actual amount of
proceeds received by the Company pursuant to the exercise of an Optional Amount
under this Agreement.

(rr)           “Optional Amount Notice” shall mean a notice sent to the Company
with regard to the Investor’s election to exercise all or any portion of an
Optional Amount, as provided in Section 2.11 hereof and substantially in the
form attached hereto as Exhibit B.

(ss)         “Optional Amount Threshold Price” shall have the meaning assigned
to such term in Section 2.1 hereof.

(tt)           “Other Financing” shall have the meaning assigned to such term in
Section 5.6(ii) hereof.

(uu)         “Permitted Free Writing Prospectus” shall have the meaning assigned
to such term in Section 5.8(ii) hereof.

(vv)         “Plan” shall have the meaning assigned to such term in Section 4.22
hereof.

(ww)       “Pricing Period shall mean a period of 10 consecutive Trading Days
commencing on the day of delivery of a Fixed Request Notice (or, if the Fixed
Request Notice is delivered after 9:30 a.m. (New York time), on the next Trading
Day), or such other period mutually agreed upon in writing by the Investor and
the Company.

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(xx)          “Pricing Period Other Financing Notice” shall have the meaning
assigned to such term in Section 5.6(ii) hereof.

(yy)         “Prospectus” shall mean the Base Prospectus, together with any
final prospectus filed with the Commission pursuant to Rule 424(b), as
supplemented by any Prospectus Supplement.

(zz)          “Prospectus Supplement” shall mean any prospectus supplement to
the Base Prospectus filed with the Commission pursuant to Rule 424(b) under the
Securities Act.

(aaa)       “Reduction Notice” shall have the meaning assigned to such term in
Section 2.8 hereof.

(bbb)      “Registration Statement” shall mean the registration statement on
Form S-3, Commission File Number 333-134263, filed by the Company with the
Commission under the Securities Act for the registration of the Shares, as such
Registration Statement may be amended and supplemented from time to time.

(ccc)       “Restricted Period” shall have the meaning assigned to such term in
Section 5.10 hereof.

(ddd)      “Securities Act” shall mean the Securities Act of 1933, as amended,
and the rules and regulations of the Commission thereunder.

(eee)       “Settlement Date” shall have the meaning assigned to such term in
Section 2.7 hereof.

(fff)         “Shares” shall mean shares of Common Stock issuable to the
Investor upon exercise of a Fixed Request and shares of Common Stock issuable to
the Investor upon exercise of an Optional Amount.

(ggg)      “Significant Subsidiary” means any Subsidiary of the Company that
would constitute a Significant Subsidiary of the Company within the meaning of
Rule 1-02 of Regulation S-X of the Commission.

(hhh)      “SOXA” shall have the meaning assigned to such term in Section 4.6(c)
hereof.

(iii)          “Subsidiary” shall mean any corporation or other entity of which
at least a majority of the securities or other ownership interest having
ordinary voting power (absolutely or contingently) for the election of directors
or other persons performing similar functions are at the time owned directly or
indirectly by the Company and/or any of its other Subsidiaries.

(jjj)          “Total Commitment” shall have the meaning assigned to such term
in Section 1.1 hereof.

(kkk)       “Threshold Price” is the lowest price (except to the extent
otherwise provided in Section 2.6) at which the Company may sell Shares during
the applicable Pricing Period as set forth in a Fixed Request Notice (not taking
into account the applicable percentage discount

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during such Pricing Period determined in accordance with Section 2.2); provided,
however, that at no time shall the Threshold Price be lower than $2.50 per share
unless the Company and the Investor mutually shall otherwise agree in writing.

(lll)          “Trading Day” shall mean a full trading day (beginning at 9:30
a.m., New York City time, and ending at 4:00 p.m., New York City time) on the
NASDAQ.

(mmm)    “Trading Market” means the following markets or exchanges on which the
Common Stock is listed or quoted for trading on the date in question: the
American Stock Exchange, the New York Stock Exchange or the NASDAQ.

(nnn)      “Trading Market Limit” means that number of shares which is one less
than 20.0% of the issued and outstanding shares of the Company’s Common Stock as
of the Effective Date.

(ooo)      “VWAP” shall mean the daily volume weighted average price (based on a
Trading Day from 9:30 p.m. to 4:00 p.m. (New York time)) of the Company on the
NASDAQ as reported by Bloomberg Financial L.P. using the AQR function.

(ppp)      “Warrant Value” shall mean the fair value of all warrants, options
and other similar rights issued to a third party in connection with an Other
Financing, determined by using a standard Black-Scholes option-pricing model
assuming an expected volatility percentage as shall be mutually agreed by the
Investor and the Company.  In the case of a dispute relating to such expected
volatility assumption, the Investor shall obtain applicable volatility data from
three investment banking firms of nationally recognized reputation, and the
parties hereto shall use the average thereof for purposes of determining the
expected volatility percentage in connection with the Black-Scholes calculation
referred to in the immediately preceding sentence.”

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