Exhibit 10.1

SUBSCRIPTION AGREEMENT

THIS SUBSCRIPTION AGREEMENT (this “Agreement”) made as of the date set forth on
the signature page hereof between Manhattan Pharmaceuticals, Inc., a Delaware
corporation having a place of business at 810 Seventh Avenue, 4th Floor, New
York, New York 10019 (the “Company”), and the undersigned (the “Subscriber”).

WITNESSETH:

WHEREAS, the Company is offering (the “Offering”) to a limited number of
“accredited investors,” as that term is defined by Rule 501(a) of Regulation D
(“Regulation D”) of the Securities Act of 1933, as amended (the “Securities
Act”), units of its securities each consisting of one share (each, a “Share” and
collectively, the “Shares”) of its common stock, par value $0.001 per share
(“Common Stock”) and a warrant (each a “Warrant,” and collectively, the
“Warrants” and together with the Shares, the “Securities”) to purchase 35% of a
share of Common Stock (the “Warrant Shares”) on terms and conditions described
in this Agreement;

WHEREAS, the Offering is contingent upon the Company making sales of a number of
Securities which would provide the Company with aggregate gross proceeds of at
least $2,000,000 (the “Minimum Offering”), and the Company will sell a maximum
number of Securities which would result in aggregate gross proceeds of
$7,500,000 (the “Maximum Offering”), although the Company, in its discretion,
may increase the Maximum Offering by an additional $2,500,000 to cover
over-allotments (the “Over-Allotment”);

WHEREAS, Paramount BioCapital, Inc., is acting as exclusive placement agent (the
“Placement Agent”) for the Offering; and

WHEREAS, on the terms and conditions hereinafter set forth, the Subscriber
desires to purchase from the Company, and the Company desires to sell to the
Subscriber, a number of Shares and Warrants.

NOW, THEREFORE, in consideration of the promises and the mutual representations
and covenants hereinafter set forth, the parties hereto do hereby agree as
follows:

1.
PURCHASE AND SALE OF SECURITIES.

 
1.1  Offering. The Company is offering to a limited number of persons who
qualify as “accredited investors” as defined by Rule 501(a) of Regulation D, the
Securities on terms and conditions described in this Agreement. The Minimum
Offering will be offered on an “all or none, best efforts” basis. The Maximum
Offering and the Over-Allotment, if exercised, will be offered on a “best
efforts” basis. The Subscriber understands, however, that this purchase of the
Securities is contingent upon the Company making aggregate sales of Securities
equal to or exceeding the Minimum Offering. The Securities are being offered in
units, with each unit consisting of one Share and a Warrant to purchase 35% of
one Share (rounded down to the nearest whole share), at a purchase price per
unit equal to the lesser of (i) $0.84 and (ii) the average closing sale price of
the Common Stock as reported on the American Stock Exchange during the five
business days immediately preceding the Closing Date, rounded to the nearest
cent (the “Market Price”). Each Warrant shall be exercisable during the period
commencing on the six month anniversary of the Closing Date and ending on the
five-year anniversary of the Closing Date. The Warrant shall be exercisable at a
price per Warrant Share equal to 110% of the Market Price, but in no event less
than the last closing sale price of the Common Stock on the trading day
immediately preceding the Closing. Further, in the event that the closing sale
price of the Common Stock for any 30 consecutive trading days is at least 300%
of the Warrant exercise price, the Company shall be entitled to redeem not less
than all of the Warrants at a per Warrant redemption price of $0.01, by
providing 30 business days’ written notice to the holder. In the event that the
Company decides to redeem the Warrants pursuant to this Section 1.1, such
holders may exercise this Warrant during such 30-day period. The Warrant shall
be in substantially the form attached as an exhibit to the Memorandum (as
defined below).
 

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1.2  Closing. At each closing (each a “Closing,” and the date thereof, the
“Closing Date”), provided the Company has received subscriptions and proceeds
for the amount of the Minimum Offering, the Company shall issue and sell to the
Subscriber and the Subscriber shall purchase from the Company, (a) a number of
Shares resulting from dividing the Subscriber’s “Aggregate Purchase Price” set
forth on the signature page hereof (and as further described below) by the
Market Price (rounded down to the nearest whole Share) and (b) Warrants to
purchase a number of Warrant Shares equal to 35% of the Shares purchased by the
Subscriber; provided, however, that the Company and Placement Agent may, in
their sole discretion, accept a lesser amount of Aggregate Purchase Price from
the Subscriber. 
 
1.3  Closing Mechanics. The Closing shall be held at a date and time designated
by the Company and the Placement Agent prior to 11:59 p.m., New York City time,
on February 28, 2007 (subject to extension at the discretion of the Company and
the Placement Agent without notice to the Subscriber of up to 60 days), which
date shall be no later than five (5) Business Days (as defined in Article 5)
after satisfaction or waiver of the closing conditions set forth in Article 4
hereof. The Closing shall occur at the offices of the Placement Agent, located
at 787 Seventh Avenue, New York, New York 10019. Upon satisfaction or waiver of
all conditions to the Closing, the Placement Agent and the Company shall
instruct US Bank Trust National Association, as escrow agent (the “Escrow
Agent”), to release the proceeds of the Offering to the Company, less fees and
expenses due to the Placement Agent. Interest, if any, that has accrued with
respect to the Aggregate Purchase Price while in escrow shall also be
distributed to the Company at the Closing and the Subscriber will have no right
to such interest, even if there is no Closing.
 
1.4  Payment of Aggregate Purchase Price. Upon, or prior to, the execution of
this Agreement by the Subscriber, the Subscriber shall deposit the amount of
readily available funds equal to the Aggregate Purchase Price, as set forth on
the signature page hereof, in a segregated escrow account with the Escrow Agent
by check or wire transfer of immediately available funds pursuant to the
instructions provided below. Subject to the terms and conditions of this
Agreement (including, without limitation, the Company’s and the Placement
Agent’s option, each at its sole discretion, to refuse to accept subscriptions,
in whole or in part, from any Subscriber), the Subscriber hereby subscribes for
and agrees to purchase from the Company such number of Shares and Warrants, as
determined in accordance with Section 1.2 above, and the Company agrees to sell
such number of Shares and Warrants as accepted by the Company and the Placement
Agent.
 
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US Bank Trust National Association
ABA Routing Number: 091 000 022
US Bank and Trust Corp. Account Number: 180121167365
For: Manhattan/Paramount BioCapital
SEI Number: 108950000
Reference: [Investor Name]
Attn: Andrea Friesen
Tel: 651-495-3725
Fax: 651-495-8087

The Subscriber must complete and return a duly executed, unaltered copy of this
Agreement (including the completed Confidential Investor Questionnaire included
in Article 7 hereof (the “Confidential Investor Questionnaire”)) to the
Placement Agent at the Placement Agent’s address indicated in the Memorandum (as
defined below) on or before the date indicated to the Subscriber by the
Placement Agent to be eligible to participate in the Offering. The Company and
the Placement Agent retain complete discretion to accept or reject any
subscription unless and until the Company executes a counterpart to this
Agreement that includes such Subscriber’s signature.

1.5  Delivery of Certificates. The Company shall deliver, or cause to be
delivered, the certificates representing the Securities purchased by the
Subscriber hereunder as soon as practical after the Closing to the Subscriber’s
residential or business address indicated on the signature page hereto.
 

2.
REPRESENTATIONS AND WARRANTIES OF SUBSCRIBER.

The Subscriber hereby represents and warrants to the Company as of the date
hereof and the Closing Date as follows:

2.1 The Subscriber understands, acknowledges and agrees that the purchase of the
Securities involves a high degree of risk including, but not limited to, the
following: (i) an investment in the Company is highly speculative, and only
investors who can afford the loss of their entire investment should consider
investing in the Company and the Securities; (ii) the Subscriber may not be able
to liquidate its investment; (iii) transferability of the Securities is
extremely limited; (iv) in the event of a disposition of the Securities, the
Subscriber could sustain the loss of its entire investment; and (v) since the
Company has been a publicly-traded company, the Company has not paid any
dividends on its Common Stock and does not anticipate the payment of dividends
in the foreseeable future.

2.2 The Subscriber is an “accredited investor” as such term is defined in Rule
501 of Regulation D promulgated under the Securities Act, as indicated by the
Subscriber’s responses to the questions contained in the Confidential Investor
Questionnaire, which are true and correct as of the date hereof and shall be
true and correct as of the Closing Date, and that the Subscriber is able to bear
the economic risk of an investment in the Company. If the Subscriber is a
natural person, the Subscriber has reached the age of majority in the state or
other jurisdiction in which the Subscriber resides, has adequate means of
providing for the Subscriber’s current financial needs and contingencies, is
able to bear the substantial economic risks of an investment in the Securities
for an indefinite period of time, has no need for liquidity in such investment
and, at the present time, could afford a complete loss of such investment.
 
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2.3  The Subscriber understands, acknowledges and agrees that: (i) the
Subscriber is knowledgeable, sophisticated and has experience in making, and is
qualified to make, decisions with respect to investments representing an
investment decision like that involved in the purchase of the Securities and has
prior investment experience; (ii) the investment in the Securities is of a
highly speculative nature and involves a significant degree of risk, that the
market price of the Common Stock has been and continues to be volatile and that
Subscriber has carefully evaluated the risks of an investment in the Securities;
and (iii) the Subscriber is able to bear the economic risk of an investment in
the Securities and the potential loss of such investment, which risk the
Subscriber hereby assumes.

2.4  The Subscriber has received and carefully reviewed this Agreement, the
Company’s Confidential Offering Memorandum dated February 12, 2007 (together
with all exhibits, appendices, supplements or amendments thereto, the
“Memorandum”), including the following documents filed by the Company with the
Securities and Exchange Commission (the “SEC”, and such documents, the “SEC
Filings”) and included as exhibits to the Memorandum: Form 10-KSB for the year
ended December 31, 2005; Definitive Proxy Statement on Schedule 14-A filed on
November 17, 2006; Quarterly Reports on Form 10-QSB for the quarters ended March
31, 2006 (as amended), June 30, 2006 and September 30, 2006; and Current Reports
on Form 8-K filed on August 14, 2006, January 12, 2007 and February 5, 2007. The
Subscriber further represents that the Subscriber has been furnished by the
Company during the course of this transaction with all information regarding the
Company which the Subscriber, its investment advisor, attorney and/or accountant
has requested or desired to know or which is otherwise relevant to an investment
decision, has been afforded the opportunity to ask questions of and receive
answers from duly authorized officers or other representatives of the Company
concerning the terms and conditions of the Offering, and has received any
additional information which the Subscriber or its advisors or agents has
requested.

2.5 (a) The Subscriber has relied solely upon the information provided by the
Company in making the decision to invest in the Securities. The Subscriber is
familiar with and understands the terms of the Offering, including the rights to
which the Subscriber is entitled under this Agreement. In evaluating the
suitability of an investment in the Company, the Subscriber has not relied upon
any representation or other information (whether oral or written) from the
Company, or any agent, employee or Affiliate of the Company other than as set
forth in the Memorandum, in this Agreement or resulting from the results of the
Subscriber’s own independent investigation. The Subscriber understands and
acknowledges that nothing in this Agreement, the Memorandum or any other
materials provided to the Subscriber in connection with the subscription for the
Securities or sale of the Securities constitutes investment, tax or legal
advice. To the extent deemed necessary or advisable by the Subscriber in its
sole discretion, the Subscriber has retained, at its sole expense, and relied
upon appropriate professional advice regarding the investment, tax and legal
merits and consequences of this Agreement and its purchase of the Securities
hereunder.

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(b) No Securities were offered or sold to the Subscriber by means of any form of
general solicitation or general advertising, and in connection therewith the
Subscriber did not: (A) receive or review any advertisement, article, notice or
other communication published in a newspaper or magazine or similar media or
broadcast over television or radio whether closed circuit, or generally
available; or (B) attend any seminar meeting or industry investor conference
whose attendees were invited by any general solicitation or general advertising.

2.6 The Subscriber, either by reason of the Subscriber’s business or financial
experience or the business or financial experience of the Subscriber’s
professional advisors, has the capacity to protect the Subscriber’s own
interests in connection with the transaction contemplated hereby.

2.7 The Subscriber understands, acknowledges and agrees that the Offering has
not been reviewed, recommended or endorsed by the SEC or any state securities
regulatory authority or other governmental body or agency, since the Offering is
intended to be exempt from the registration requirements of Section 5 of the
Securities Act pursuant to Regulation D. The Subscriber shall not sell or
otherwise transfer the Securities unless such transfer is registered under the
Securities Act or unless an exemption from such registration is available. The
Subscriber understands that if required by the laws or regulations or any
applicable jurisdictions, the Offering contemplated hereby will be submitted to
the appropriate authorities of such state(s) for registration of exemption
therefrom.

2.8 The Subscriber understands, acknowledges and agrees that the Securities have
not been registered under the Securities Act in reliance upon a claimed
exemption under the provisions of the Securities Act which depends, in part,
upon the Subscriber’s investment intention and the truth and accuracy of, and
Subscriber’s compliance with, the representations, warranties, acknowledgments
and covenants of Subscriber set forth herein. In this connection, the Subscriber
hereby represents that the representations, warranties, acknowledgments and
covenants of Subscriber set forth herein are true and correct, Subscriber will
comply with the covenants set forth herein, and the Subscriber is purchasing the
Securities for the Subscriber’s own account for investment purposes only and not
with a view toward the resale or distribution to others and has no contract,
undertaking, agreement or other arrangement, in existence or contemplated, to
sell, pledge, assign or otherwise transfer the Securities to any other Person
(as defined in Article 5). The Subscriber, if an entity, also represents that it
was not formed for the purpose of purchasing the Securities. The Subscriber has
no current plans to effect a “change of control” of the Company, as such term is
understood in Rule 13d of the Exchange Act.

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2.9 The Subscriber understands that the Securities will not be registered or
available for sale in the public markets except as specifically provided herein,
and Rule 144 promulgated under the Securities Act (“Rule 144”) requires, among
other conditions, a one-year holding period prior to the resale (in limited
amounts) of securities acquired in a non-public offering (and a two-year holding
period for unlimited sales by non-Affiliates of the Company) without having to
satisfy the registration requirements under the Securities Act. The Subscriber
understands and hereby acknowledges that the Company is under no obligation to
register any of the Securities under the Securities Act or any state securities
or “blue sky” laws or assist the Subscriber in obtaining an exemption from
various registration requirements, other than as set forth in Article 5 herein.

2.10 The Subscriber consents to the placement of a legend on any certificate or
other document evidencing the Securities substantially as set forth below, that
such Securities have not been registered under the Securities Act or any state
securities or “blue sky” laws and setting forth or referring to the restrictions
on transferability and sale thereof contained in this Agreement. The Subscriber
is aware that the Company will make a notation in its appropriate records with
respect to the restrictions on the transferability of the Securities.

THE SECURITIES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED UNDER THE SECURITIES
ACT OF 1933, AS AMENDED (THE “SECURITIES ACT”), OR UNDER THE SECURITIES LAWS OF
ANY STATE. THESE SECURITIES ARE SUBJECT TO RESTRICTIONS ON TRANSFERABILITY AND
RESALE AND MAY NOT BE SOLD, TRANSFERRED OR ASSIGNED IN THE ABSENCE OF AN
EFFECTIVE REGISTRATION STATEMENT FOR THE SECURITIES UNDER THE SECURITIES ACT AND
APPLICABLE STATE SECURITIES LAWS, OR AN OPINION OF COUNSEL IN FORM, SUBSTANCE
AND SCOPE REASONABLY SATISFACTORY TO THE COMPANY, TO THE EFFECT THAT
REGISTRATION IS NOT REQUIRED UNDER THE SECURITIES ACT AND APPLICABLE STATE
SECURITIES LAWS.
 
2.11 The Subscriber agrees to supply the Company, within five (5) days after the
Subscriber receives the request therefor from the Company, with such additional
information concerning the Subscriber as the Company deems necessary or
advisable in order to establish or verify the Subscriber’s representations
contained herein.

2.12 The address of the Subscriber furnished by Subscriber on the signature page
hereof is the Subscriber’s principal residence if Subscriber is an individual or
its principal business address if it is a corporation or other entity.

2.13 The Subscriber has full power and authority (corporate or otherwise) to
execute, deliver, and perform this Agreement and to purchase the Securities and
has taken all action necessary to authorize the execution, delivery and
performance of this Agreement. This Agreement constitutes the legal, valid and
binding obligation of the Subscriber, enforceable against the Subscriber in
accordance with its terms, subject to laws of general application relating to
bankruptcy, insolvency and the relief of debtors and rules of law governing
specific performance, injunctive relief or other equitable remedies, and to
limitations of public policy.

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2.14 If the Subscriber is a corporation, partnership, limited liability company,
trust, employee benefit plan, individual retirement account, Keogh Plan, or
other entity (a) it is authorized and qualified to become an investor in the
Company and the Person signing this Agreement on behalf of such entity has been
duly authorized by such entity to do so and (b) it is duly organized, validly
existing and in good standing under the laws of the jurisdiction of its
organization.

2.15 The Subscriber acknowledges that if he or she is a Registered
Representative of an NASD member firm, he or she must give such firm the notice
required by NASD Rule 3050, receipt of which must be acknowledged by such firm
in Section 7.4 below in accordance with such rules.

2.16 The Subscriber understands, acknowledges and agrees that this subscription
may be rejected, in whole or in part, by the Company or the Placement Agent, in
each of their sole and absolute discretion, at any time before any Closing Date
notwithstanding prior receipt by the Subscriber of notice of acceptance of the
Subscriber’s subscription. The Subscriber hereby authorizes and directs the
Company to return, without interest, any funds for unaccepted subscriptions to
the same account from which the funds were drawn, including any customer account
maintained by the Subscriber with the Placement Agent.
 
2.17 The Subscriber understands, acknowledges and agrees with the Company that
except as otherwise set forth herein, the subscription hereunder is irrevocable
by the Subscriber, that, except as required by law, the Subscriber is not
entitled to cancel, terminate or revoke this Agreement or any agreements of the
Subscriber hereunder and that this Agreement and such other agreements shall
survive the death or disability of the Subscriber and shall be binding upon and
inure to the benefit of the parties and their heirs, executors, administrators,
successors, legal representatives and permitted assigns. If the Subscriber is
more than one Person, the obligations of the Subscriber hereunder shall be joint
and several and the agreements, representations, warranties and acknowledgments
herein contained shall be deemed to be made by and be binding upon each such
Person and its heirs, executors, administrators, successors, legal
representatives and permitted assigns.

2.18  The Subscriber understands, acknowledges and agrees with the Company that,
the Offering is intended to be exempt from registration under the Securities Act
by virtue of Section 4(2) of the Securities Act and the provisions of Regulation
D, and/or the provisions of Regulation S which is in part dependent upon the
truth, completeness and accuracy of the statements made by the Subscriber.

2.19  The Subscriber understands, acknowledges and agrees that there can be no
assurance that the Subscriber will be able to sell or dispose of the Securities.
It is understood than in order not to jeopardize the Offering’s exempt status
under Section 4(2) of the Securities Act and Regulation D, in addition to any
other restrictions on transfer set forth herein or in the Warrants, the Company
may, at a minimum, require any transferee to fulfill the Subscriber suitability
requirements thereunder and make the representations, warranties and covenants
of Subscriber hereunder.

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2.20  The Subscriber represents and warrants since the date that the Subscriber
was first contacted with respect to the Offering (the “First Date”) the
Subscriber has not, directly or indirectly, through related parties, Affiliates
or otherwise, sold “short” or “short against the box” (as such terms are
generally understood), and until the transactions contemplated by this Agreement
are publicly announced, will not sell “short” or “short against the box” any
equity security of the Company or take any action with respect to any equity
security of the Company which would violate the Securities Act or the rules and
regulations promulgated thereunder.

2.21 The Subscriber understands, acknowledges and agrees that the existence of
and information contained in this Agreement, the Memorandum or otherwise made
available to the Subscriber by the Company (collectively, the “Confidential
Information”) is to be used solely for the purpose of evaluating a possible
investment in the Securities and is confidential and non-public and agrees that
all such Confidential Information shall be kept in confidence by the Subscriber
and neither used by the Subscriber for the Subscriber’s personal benefit (other
than in connection with evaluating a possible investment in the Securities) nor
disclosed to any third party for any reason and in any manner, notwithstanding
that a Subscriber’s subscription may not be accepted by the Company; provided,
however, that this obligation shall not apply to any such Confidential
Information that (i) is part of the public knowledge or literature and readily
accessible at the date hereof (except as a result of a breach of this provision
by any party) or (ii) becomes part of the public knowledge or literature and
readily accessible by publication (except as a result of a breach of this
provision by any party).

2.22 If the Subscriber is purchasing the Securities in a fiduciary capacity for
another Person, including without limitation a corporation, partnership, trust
or any other entity, the Subscriber has been duly authorized and empowered to
execute this Agreement and all other subscription documents, and such other
Person fulfills all the requirements for purchase of the Securities as such
requirements are set forth herein, concurs in the purchase of the Securities and
agrees to be bound by the obligations, representations, warranties and covenants
contained herein. Upon request of the Company, the Subscriber will provide true,
complete and correct copies of all relevant documents creating the Subscriber,
authorizing its investment in the Company and/or evidencing the satisfaction of
the foregoing.

2.23  No authorization, approval, consent or license of any Person is required
to be obtained for the purchase of the Securities by the Subscriber, other than
as have been obtained and are in full force and effect. The execution and
delivery of this Agreement does not, and the consummation of the transactions
contemplated hereby will not, result in any violation of or constitute a default
under any material agreement or other instrument to which the Subscriber is a
party or by which the Subscriber or any of its properties are bound, or to the
best of the Subscriber’s knowledge, any permit, franchise, judgment, order,
decree, statute, rule or regulation to which the Subscriber or any of its
businesses or properties is subject.

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2.24  The Subscriber understands, acknowledges and agrees that the
representations, warranties and agreements of the Subscriber contained herein
(including the Confidential Investor Questionnaire), in the Registration
Questionnaire attached hereto as Appendix A (the “Registration Questionnaire”)
and in any other writing delivered in connection with the transactions
contemplated hereby shall be true and correct on the date hereof and as of the
Closing Date as if made on and as of such date (except for representations,
warranties and agreements as of a specific date, which shall be true and correct
as of such date) and shall survive the execution and delivery of this Agreement
and the purchase of the Securities. The Subscriber agrees that the Placement
Agent shall be entitled to rely on the representations, warranties and
agreements of the Subscriber contained herein as if such representations,
warranties and agreements were made or provided directly to the Placement Agent.

2.25  The Subscriber hereby covenants with the Company not to make any sale of
the Securities under the Registration Statement without effectively causing the
prospectus delivery requirements under the Securities Act to be satisfied, and
further agrees to comply with reasonable requests of the Company or its transfer
agent to provide additional information and representations concerning such
sale.

2.26  (a) The Subscriber agrees, acknowledges and understands that the Placement
Agent is acting as placement agent for the Securities being offered hereby and
will be compensated by the Company for acting in such capacity, including, but
not limited to, by: (i) placement fees in cash equal to up to seven percent (7%)
of the proceeds received by the Company at the Closing; and (ii) warrants (the
“Placement Warrants”) to purchase a number of shares of Common Stock (the
“Placement Warrant Shares”) equal to five percent (5%) of the number of Shares
actually sold by the Company in connection with the Offering (not including
shares of Common Stock issuable upon exercise or conversion of warrants or other
securities for which no cash consideration was received upon issuance); and (iv)
reimbursement of its reasonable, documented expenses (including reasonable legal
fees) incurred in connection with the Offering (which reimbursement shall not
exceed $50,000). The Placement Warrants shall have an exercise price per share
equal to 110% of the Purchase Price per share and will be in substantially the
same form as the Warrants issued to the Subscriber, except the Placement
Warrants will also provide for cashless exercise. The Subscriber shall not be
entitled to reimbursement of any expenses incurred by the Subscriber in
connection with the Offering. The Placement Agent will receive the commissions
and Placement Warrants discussed above on all subsequent investments in Company
securities made by investors introduced to the Company by the Placement Agent in
connection with this Offering for a period of twelve (12) months from the Final
Closing Date.

(b) The Subscriber agrees, acknowledges and understands that the Placement Agent
may engage other Persons, selected by it in its discretion, who are members of
the NASD or who are located outside the United States, to assist the Placement
Agent in connection with this Offering.

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3.
REPRESENTATIONS BY AND COVENANTS OF THE COMPANY.

The Company hereby represents and warrants to the Subscriber as of the date this
Agreement is accepted by the Company hereof and, if later, the Closing Date
that:

3.1 Organization, Good Standing and Qualification. The Company is a corporation
duly organized, validly existing and in good standing under the laws of the
State of Delaware and has full corporate power and authority to conduct its
business as currently conducted. The Company is duly qualified as a foreign
corporation to do business and is in good standing in every jurisdiction in
which the property owned or leased by it or the nature of the business conducted
by it makes such qualification necessary, except to the extent that the failure
to be so qualified or in good standing would not reasonably be expected to have,
individually or in the aggregate, a material adverse effect on the business,
operations, conditions (financial or otherwise), properties, assets,
liabilities, or results of operations of that entity individually or of the
Company and its Subsidiaries (as defined below) as a whole (a “Material Adverse
Effect”). For purposes of this Section, “Subsidiary” means any corporation,
partnership, limited liability company, association, or other business entity in
which the Company owns or controls, directly or indirectly, any interest,
including, without limitation, any joint venture, partnership, or similar
arrangement.

3.2 Capitalization. The authorized capital stock of the Company consists of
150,000,000 shares of Common Stock and 10,000,000 shares of preferred stock. As
of January 31, 2007, there were 60,147,814 shares of Common Stock issued and
outstanding, all of which are duly authorized, validly issued, fully paid and
non-assessable, and no shares of preferred stock outstanding. In addition, as of
such date, there are 13,839,895 shares of Common Stock reserved for issuance
pursuant to outstanding options and warrants. All of the securities issued by
the Company have been issued in accordance with all applicable federal and state
securities laws. Other than as set forth above, there are no other options,
warrants, calls, rights, commitments or agreements of any character to which the
Company is a party or by which the Company is bound or obligating the Company to
issue, deliver, sell, repurchase or redeem, or cause to be issued, delivered,
sold, repurchased or redeemed, any shares of the capital stock of the Company or
obligating the Company to grant, extend or enter into any such option, warrant,
call, right, commitment or agreement. Except as set forth in the Memorandum,
there are no preemptive rights or rights of first refusal or similar rights
which are binding on the Company permitting any Person to subscribe for or
purchase from the Company shares of its capital stock pursuant to any provision
of law, the Company’s Certificate of Incorporation as in effect on the date
hereof (the “Certificate of Incorporation”) or the Company’s By-laws, as in
effect on the date hereof (the “By-laws”) or by agreement or otherwise. Except
as set forth in the Memorandum, there are no securities or instruments
containing anti-dilution or similar provisions that will be triggered by the
issuance of the Securities as described in this Agreement. The Company has made
available to the Placement Agent true, correct and complete copies of the
Company’s Certificate of Incorporation and By-laws.

3.3 Authorization; Enforceability. The Company has all corporate right, power
and authority to enter into this Agreement and to consummate the transactions
contemplated hereby. All corporate action on the part of the Company, its
directors and stockholders necessary for the (i) authorization execution,
delivery and performance of this Agreement by the Company; and (ii)
authorization, sale, issuance and delivery of the Securities contemplated hereby
and the performance of the Company's obligations hereunder has been taken. This
Agreement has been duly executed and delivered by the Company and constitutes a
legal, valid and binding obligation of the Company, enforceable against the
Company in accordance with its terms, subject to laws of general application
relating to bankruptcy, insolvency and the relief of debtors and rules of law
governing specific performance, injunctive relief or other equitable remedies,
and to limitations of public policy. The Shares, when issued and fully paid for
in accordance with the terms of this Agreement, will be validly issued, fully
paid and non-assessable. The Warrant Shares, when issued in accordance with the
terms of the Warrants, will be validly issued, full paid and non-assessable. The
issuance and sale of the Securities contemplated hereby will not give rise to
any preemptive rights or rights of first refusal on behalf of any person which
have not been waived in connection with this Offering.

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3.4 No Conflict; Governmental Consents.

(a) Except as would not reasonably be expected to have a Material Adverse
Effect, the execution and delivery by the Company of this Agreement and the
consummation of the transactions contemplated hereby will not result in the
violation of any law, statute, rule, regulation, order, writ, injunction,
judgment or decree of any court or governmental authority to or by which the
Company is bound, or of any provision of the Certificate of Incorporation or
By-Laws of the Company, and will not conflict with, or result in a breach or
violation of, any of the terms or provisions of, or constitute (with due notice
or lapse of time or both) a default under, any lease, loan agreement, mortgage,
security agreement, trust indenture or other agreement or instrument to which
the Company is a party or by which it is bound or to which any of its properties
or assets is subject, nor result in the creation or imposition of any lien upon
any of the properties or assets of the Company.

(b) Other than the approval of the American Stock Exchange, no consent,
approval, authorization or other order of any governmental authority or other
third party is required to be obtained by the Company in connection with the
authorization, execution and delivery of this Agreement or with the
authorization, issue and sale of the Securities, except such filings as may be
required to be made with the SEC and with any state or foreign blue sky or
securities regulatory authority relating to an exemption from registration
thereunder.

3.5 Licenses. Except as otherwise set forth in the Memorandum or as would not
reasonably be expected to have a Material Adverse Effect, the Company has
sufficient licenses, permits and other governmental authorizations currently
required for the conduct of its business or ownership of properties and is in
all material respects complying therewith.

3.6 Litigation. There is no pending, or to the Company’s knowledge, threatened
legal or governmental proceedings against the Company which (i) adversely
questions the validity of this Agreement or any agreements related to the
transactions contemplated hereby or the right of the Company to enter into any
of such agreements, or to consummate the transactions contemplated hereby or
thereby or (ii) could, if there were an unfavorable decision, have a Material
Adverse Effect. There is no action, suit, proceeding or investigation by the
Company currently pending in any court or before any arbitrator or that the
Company intends to initiate.

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3.7 Investment Company The Company is not an “investment company” within the
meaning of such term under the Investment Company Act of 1940, as amended, and
the rules and regulations of the SEC thereunder.

3.8 Financial Statements. The financial statements of the Company included in
the SEC Filings (as amended) (the “Financial Statements”) fairly present in all
material respects the financial condition and position of the Company at the
dates and for the periods indicated; and have been prepared in conformity with
generally accepted accounting principles in the United States (“GAAP”)
consistently applied throughout the periods covered thereby, except as may be
otherwise specified in such Financial Statements or the notes thereto and except
that unaudited financial statements may not contain all footnotes required by
GAAP, and fairly present in all material respects the financial position of the
Company as of and for the dates thereof and the results of operations and cash
flows for the periods then ended, subject, in the case of unaudited statements,
to normal, immaterial, year-end audit adjustments. Since the date of the most
recent balance sheet included as part of the Financial Statements and except as
disclosed in the SEC Filings, there has not been: (i) any change in the
business, conditions (financial or otherwise), properties, assets, liabilities,
or results of operations of the Company from that reflected in the Financial
Statements, other than changes in the ordinary course of business, none of which
individually or in the aggregate would reasonably be expected to have a Material
Adverse Effect; or (ii) any other event or condition of any character that,
either individually or cumulatively, would reasonably be expected to have a
Material Adverse Effect, except for the expenses incurred in connection with the
transactions contemplated by this Agreement.

3.9 Title to Properties and Assets; Liens, Etc. The Company has good and
marketable title to its properties and assets, including the properties and
assets reflected in the most recent balance sheet included in the Financial
Statements, and good title to its leasehold estates, in each case subject to no
mortgage, pledge, lien, lease, encumbrance or charge, other than (a) those
resulting from taxes which have not yet become delinquent; (b) liens and
encumbrances which do not materially detract from the value of the property
subject thereto or materially impair the operations of the Company; (c) those
that have otherwise arisen in the ordinary course of business; and (d) those
that would not reasonably be expected to have a Material Adverse Effect. The
Company is in compliance with all material terms of each lease to which it is a
party or is otherwise bound.

3.10 Obligations to Related Parties. Except as disclosed in the Memorandum,
there are no obligations of the Company to officers, directors, stockholders, or
employees of the Company other than (a) for payment of salary or other
compensation for services rendered, (b) reimbursement for reasonable expenses
incurred on behalf of the Company, (c) standard indemnification provisions in
the certificate of incorporation and by-laws, and (d) for other standard
employee benefits made generally available to all employees (including stock
option agreements outstanding under any stock option plan approved by the Board
of Directors of the Company). Except as may be disclosed in the Financial
Statements, the Company is not a guarantor or indemnitor of any indebtedness of
any other person, firm or corporation.

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3.11 Employee Relations; Employee Benefit Plans. The Company is not a party to
any collective bargaining agreement or union contract. The Company believes that
its relations with its employees are good. No executive officer (as defined in
Rule 501(f) of the Securities Act) of the Company has notified the Company that
such officer intends to leave the Company or otherwise terminate such officer's
employment with the Company. The Company is in compliance with all federal,
state, local and foreign laws and regulations respecting employment and
employment practices, terms and conditions of employment and wages and hours,
except where failure to be in compliance would not, either individually or in
the aggregate, reasonably be expected to result in a Material Adverse Effect.
Except as disclosed in the Memorandum, the Company does not maintain any
compensation or benefit plan, agreement, arrangement or commitment (including,
but not limited to, “employee benefit plans”, as defined in Section 3(3) of the
Employee Retirement Income Security Act of 1974, as amended (“ERISA”) for any
present or former employees, officers or directors of the Company or with
respect to which the Company has liability or makes or has an obligation to make
contributions, other than any such plans, agreements, arrangements or
commitments made generally available to the Company’s employees.

3.12 Environmental Laws. The Company (i) is in compliance with any and all
Environmental Laws (as hereinafter defined), (ii) has received all permits,
licenses or other approvals required of it under applicable Environmental Laws
to conduct its business and (iii) is in compliance with all terms and conditions
of any such permit, license or approval where, in each of the foregoing clauses
(i), (ii) and (iii), the failure to so comply would reasonably be expected to
have, individually or in the aggregate, a Material Adverse Effect. The term
“Environmental Laws” means all federal, state, local or foreign laws relating to
pollution or protection of human health or the environment (including, without
limitation, ambient air, surface water, groundwater, land surface or subsurface
strata), including, without limitation, laws relating to emissions, discharges,
releases or threatened releases of chemicals, pollutants, contaminants, or toxic
or hazardous substances or wastes (collectively, “Hazardous Materials”) into the
environment, or otherwise relating to the manufacture, processing, distribution,
use, treatment, storage, disposal, transport or handling of Hazardous Materials,
as well as all authorizations, codes, decrees, demands or demand letters,
injunctions, judgments, licenses, notices or notice letters, orders, permits,
plans or regulations issued, entered, promulgated or approved thereunder.

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

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3.14 Proprietary Rights. The Company owns or possesses adequate and enforceable
rights to use all patents, patent applications, trademarks, trade names,
corporate names, copyrights, trade secrets, licenses, inventions, formulations,
technology and know-how and other intangible property used in the conduct of its
business as described in the Memorandum (the “Proprietary Rights”). The Company
has not received any notice of, and there are no facts known to the Company that
reasonably indicate the existence of (i) any infringement or misappropriation by
any third party of any of the Proprietary Rights or (ii) any claim by a third
party contesting the validity of any of the Proprietary Rights. The Company has
not received any notice of any infringement, misappropriation or violation by
the Company or any of its employees of any Proprietary Rights of third parties
 
3.15 Absence of Certain Changes. Except as set forth in the Memorandum, since
the date of the Memorandum, there has been no material adverse change in the
business, operations, conditions (financial or otherwise), prospects, assets or
results of operations of the Company or any of its Subsidiaries.
 
3.16 Disclosure. The information set forth in the Memorandum as of the date
hereof contains no untrue statement of a material fact nor omits to state a
material fact necessary in order to make the statements contained therein, in
light of the circumstances under which they were made, not misleading.

4.
CONDITIONS TO OBLIGATIONS OF EACH PARTY.

4.1  Conditions to Obligations of the Company. The Company’s obligation to
complete the sale and issuance of the Securities and deliver the Securities to
the Subscriber at the Closing is subject to the fulfillment on or prior to the
Closing of the following conditions, which conditions may be waived at the
option of the Company to the extent permitted by law:

(a) Representations and Warranties Correct. The representations and warranties
made by the Subscriber in Article 2 hereof shall be true and correct when made,
and shall be true and correct on and as of the Closing Date (except for any
representation or warranty that speaks as of a specific date, which shall be
true and correct as of such date).

(b) Covenants. All covenants, agreements and conditions contained in this
Agreement to be performed by the Subscriber on or prior to such sale and
issuance shall have been performed or complied with in all material respects.

(c) No Legal Order Pending. There shall not then be in effect any legal or other
order enjoining or restraining the transactions contemplated by this Agreement.

(d)  No Law Prohibiting or Restricting Such Sale. There shall not be in effect
any law, rule or regulation prohibiting or restricting the issuance and sale of
the Securities or requiring any consent or approval of any Person which shall
not have been obtained to issue or sell the Securities, or in either case to
otherwise consummate the transactions contemplated hereby (except as otherwise
provided in this Agreement).

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(e)  Payment of Consideration. The Company shall have received the full amount
of the Aggregate Purchase Price for the Units being purchased hereunder at the
Closing.

(f)  Questionnaires. The Subscriber shall have completed, executed and delivered
to the Company the Confidential Investor Questionnaire and the Registration
Questionnaire, which questionnaires shall be true and correct as of the Closing
and shall be satisfactory to the Placement Agent and the Company, each in their
sole discretion.

(g)  Minimum Offering. The Company shall have received duly executed
subscriptions and corresponding readily available funds shall have been
deposited into the Escrow Account from Subscribers equal to or in excess of the
Minimum Offering.
 
(h)  AMEX Listing. The American Stock Exchange shall have approved the Shares
and Warrant Shares for listing on such exchange.

4.2 The Subscriber’s obligation to purchase the Securities at the Closing is
subject to the fulfillment on or prior to the Closing of the following
conditions, which conditions may be waived at the option of each Subscriber to
the extent permitted by law:

(a) Representations and Warranties Correct. The representations and warranties
made by the Company in Article 3 hereof shall be true and correct when made, and
shall be true and correct on and as of the Closing Date (except for any
representation or warranty that speaks as of a specific date, which shall be
true and correct as of such date).

(b) Covenants. All covenants, agreements and conditions contained in this
Agreement to be performed by the Company on or prior to such purchase shall have
been performed or complied with in all material respects.

(c) No Legal Order Pending. There shall not then be in effect any legal or other
order enjoining or restraining the transactions contemplated by this Agreement.

(d)  No Law Prohibiting or Restricting Such Sale. There shall not be in effect
any law, rule or regulation prohibiting or restricting the issuance and sale of
the Securities or requiring any consent or approval of any Person which shall
not have been obtained to issue or sell the Securities, or in either case to
otherwise consummate the transactions contemplated hereby (except as otherwise
provided in this Agreement).

(e)  Minimum Offering. The Company shall have received duly executed
subscriptions and corresponding readily available funds in the Escrow Account
from Subscribers equal to or in excess of the Minimum Offering Amount.
 
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(f)  AMEX Listing. The American Stock Exchange shall have approved the Shares
and Warrant Shares for listing on such exchange.
 
(g)  Legal Opinion. The Subscribers shall have received an opinion of counsel to
the Company (which the Placement Agent may be permitted to rely on as if it were
addressed to it) substantially in the form attached hereto as Appendix B.

5.
REGISTRATION RIGHTS.

5.1 As used in this Agreement, the following terms shall have the following
meanings:

(a) “Affiliate” shall mean, with respect to any Person (as defined below), any
other Person controlling, controlled by or under direct or indirect common
control with such Person (for the purposes of this definition “control,” when
used with respect to any specified Person, shall mean the power to direct the
management and policies of such Person, directly or indirectly, whether through
ownership of voting securities, by contract or otherwise; and the terms
“controlling” and “controlled” shall have meanings correlative to the
foregoing).

(b) “Business Day” shall mean a day Monday through Friday on which banks are
generally open for business in New York, New York and on which the SEC is open.

(c) “Holders” shall mean the Subscribers and any Person holding Registrable
Securities or any Person to whom the rights under this Article 5 have been
transferred in accordance with Section 5.9 hereof.

(d) “Person” shall mean any person, individual, corporation, limited liability
company, partnership, trust or other nongovernmental entity or any governmental
agency, court, authority or other body (whether foreign, federal, state, local
or otherwise).

(e) The terms “register,” “registered” and “registration” refer to the
registration effected by preparing and filing a registration statement in
compliance with the Securities Act, and the declaration or ordering of the
effectiveness of such registration statement.

(f) “Registrable Securities” shall mean the Shares, the Warrant Shares and the
Placement Warrant Shares and any shares of Common Stock issued as a dividend or
distribution with respect to or in replacement of the Common Stock issued,
directly or indirectly, in connection with this Offering; provided, however,
that securities shall only be treated as Registrable Securities if and only for
so long as they (i) have not been sold (A) pursuant to a registration statement;
(B) to or through a broker, dealer or underwriter in a public distribution or a
public securities transaction; and/or (C) in a transaction exempt from the
registration and prospectus delivery requirements of the Securities Act under
Section 4(1) thereof so that all transfer restrictions and restrictive legends
with respect thereto, if any, are removed upon the consummation of such sale;
(ii) are not held by a Holder or a permitted transferee; and (iii) are not
eligible for sale pursuant to Rule 144(k) (or any successor thereto) under the
Securities Act.

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(g)  “Registration Expenses” shall mean all expenses incurred by the Company in
complying with Section 5.2 hereof, including, without limitation, all
registration, qualification and filing fees, printing expenses, escrow fees,
fees and expenses of counsel for the Company, blue sky fees and expenses and the
expense of any special audits incident to or required by any such registration
(but excluding the fees of legal counsel for any Holder).

(h)  “Selling Expenses” shall mean all underwriting discounts and selling
commissions applicable to the sale of Registrable Securities and, except to the
extent set forth in the definition of Registration Expenses, all fees and
expenses of legal counsel for any Holder.

(i)  “Subsidiary” shall mean, with respect to any Person, any other Person of
which more than fifty percent (50%) of the shares of stock or other interests
entitled to vote in the election of directors or comparable Persons performing
similar functions (excluding shares or other interests entitled to vote only
upon the failure to pay dividends thereon or other contingencies) are at the
time owned or controlled, directly or indirectly through one or more
Subsidiaries, by such Person.

5.2 Subject to the terms, conditions and limitations set forth herein, the
Company will use its reasonable best efforts to file a registration statement
with the SEC on the appropriate form (the “Initial Registration Statement”) on
or before the later of (A) forty-five (45) days following the final Closing
Date, or (B) ten (10) days following the date on which the Company’s Annual
Report on Form 10-KSB for the year ended December 31, 2006 is required to be
filed with the SEC (the “Filing Deadline”), to allow the resale of the
Registrable Securities under the Securities Act, and use its reasonable best
efforts to have such Initial Registration Statement declared effective by the
SEC on or before the date which is seventy-five (75) days after the Filing
Deadline (the “Registration Effective Date”); provided, however, in the event
the Filing Deadline or Registration Effective Date do not fall on a Business
Day, then the Filing Deadline or Registration Effective Date shall be deemed to
be the next Business Day thereafter. Notwithstanding the foregoing, in the event
the SEC informs the Company that all of the Shares and Warrant Shares cannot, as
a result of the application of Rule 415 under the Securities Act, be registered
for resale on a single Registration Statement, the Company agrees to (i)
promptly inform each of the holders thereof and use its best efforts to file
amendments to the Initial Registration Statement as required by the SEC or to
promptly withdraw the Initial Registration Statement and to file a registration
statement covering the maximum number of Shares and Warrant Shares permitted to
be registered by the SEC on Form S-3 or such other form available to register
for resale the Shares and the Warrant Shares (the “Additional Registration
Statement”) and (ii) in the event the Company files an Additional Registration
Statement, to file with the SEC as promptly as allowed one or more registration
statements on Form S-3 or such other form available to register for resale those
Shares and Warrant Shares that were not registered for resale on the Additional
Registration Statement (the “Remainder Registration Statements,” and
collectively with the Initial Registration Statement and Additional Registration
Statement, the “Registration Statements” and each, a “Registration Statement”).
The Company shall cause such Registration Statements to remain effective (the
“Registration Period”) until the earlier of (i) the date on which such
Registrable Securities are eligible for resale under Rule 144(k) of the
Securities Act; or (ii) such time as all Securities held by the Subscriber and
registered under the Registration Statements have been sold. To the extent
permissible, such Registration Statements also shall include, or subsequently be
amended to include, to the extent allowable under the Securities Act and the
rules promulgated thereunder (including Rule 416 under the Securities Act), such
indeterminate number of additional shares of Common Stock resulting from stock
splits, stock dividends or similar transactions with respect to the Registrable
Securities. In the event (x) the Company has not filed the Initial Registration
Statements by the Filing Deadline, or (y) the Initial Registration Statement has
not been declared effective by the Registration Effective Date, then in either
case the Company shall make compensatory payments to the Holder in an amount
equal to one percent (1%) of the Aggregate Purchase Price paid by the Subscriber
for each monthly period (or prorated portion thereof) in which the Company is in
default of its obligations under the first sentence of this Section 5.2.
Notwithstanding anything to the contrary contained herein, in no event shall the
amount of compensatory payments payable by the Company pursuant to this Section
5.2 exceed ten percent (10%) of the Aggregate Purchase Price paid by each
Subscriber.

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5.3 All Registration Expenses incurred in connection with any registration,
qualification, exemption or compliance pursuant to Section 5.2 shall be borne by
the Company. All Selling Expenses relating to the sale of securities registered
by or on behalf of Holders shall be borne by such Holders.

5.4 In the case of the registration, qualification, exemption or compliance
effected by the Company pursuant to this Agreement, the Company shall, upon
reasonable request, inform each Holder as to the status of such registration,
qualification, exemption and compliance. At its expense the Company shall:

(a) use reasonable best efforts to keep such registration, and any
qualification, exemption or compliance under state or federal securities laws
which the Company determines to obtain, continuously effective until the
termination of the Registration Period;

(b) advise the Holders as soon as practicable:

(i) when any Registration Statement or any post-effective amendment thereto has
become effective;

(ii) of any request by the SEC for amendments or supplements to the Registration
Statements or the prospectus included therein or for additional information;

(iii) of the issuance by the SEC of any stop order suspending the effectiveness
of the Registration Statements or the initiation of any proceedings for such
purpose;

(iv) of the receipt by the Company of any notification with respect to the
suspension of the qualification of the Registrable Securities included therein
for sale in any jurisdiction or the initiation or threatening of any proceeding
for such purpose; and

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(v) of the happening of any event that requires the making of any changes in the
Registration Statements or the prospectus so that, as of such date, the
statements therein are not misleading and do not omit to state a material fact
required to be stated therein or necessary to make the statements therein (in
the case of the prospectus, in the light of the circumstances under which they
were made) not misleading (which notice will be accompanied by an instruction to
suspend the use of the prospectus until such changes have been made);

(c) make every reasonable effort to obtain the withdrawal of any order
suspending the effectiveness of any Registration Statement at the earliest
possible time;

(d) during the Registration Period, deliver to each Holder, without charge, as
many copies of the prospectus included in such Registration Statements and any
amendment or supplement thereto as such Holder may reasonably request; and the
Company consents to the use, consistent with the provisions hereof, of the
prospectus or any amendment or supplement thereto by each of the selling Holders
of Registrable Securities in connection with the offering and sale of the
Registrable Securities covered by the prospectus or any amendment or supplement
thereto.

(e) prior to any public offering of Registrable Securities pursuant to the
Registration Statements, register or qualify or obtain an exemption for offer
and sale under the securities or blue sky laws of such jurisdictions as any such
Holders reasonably request in writing, provided that the Company shall not for
any such purpose be required to qualify generally to transact business as a
foreign corporation in any jurisdiction where it is not so qualified or to
consent to general service of process in any such jurisdiction, and do any and
all other acts or things reasonably necessary or advisable to enable the offer
and sale in such jurisdictions of the Registrable Securities covered by such
Registration Statements in the sole discretion of the Company;

(f) upon the occurrence of any event contemplated by Section 5.4(b)(v) above,
the Company shall promptly prepare a post-effective amendment to the applicable
Registration Statements or a supplement to the related prospectus, or file any
other required document so that, as thereafter promptly delivered to purchasers
of the Registrable Securities included therein, the prospectus will not include
any untrue statement of a material fact or omit to state any material fact
necessary to make the statements therein, in the light of the circumstances
under which they were made, not misleading; and

(g) use reasonable best efforts to comply with all applicable rules and
regulations of the SEC, and use commercially reasonable efforts to make
generally available to its security holders not later than 45 days (or 90 days
if the fiscal quarter is the fourth fiscal quarter) after the end of its fiscal
quarter in which the first anniversary date of the effective date of each
Registration Statement occurs, an earnings statement satisfying the provisions
of Section 11(a) of the Securities Act.

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Notwithstanding the foregoing, it shall be a condition precedent to the
obligations of the Company to take any action pursuant to paragraphs (a) through
(h) of this Section 5.4, that the Holder shall furnish to the Company such
information regarding itself, the Securities to be sold by the Holder and the
intended method of disposition of such Securities as shall be required to effect
the registration of the Securities, all of which information shall be furnished
to the Company in writing specifically for use in the Registration Statements.

5.5 The Holders shall have no right to take any action to restrain, enjoin or
otherwise delay any registration pursuant to Section 5.2 hereof as a result of
any controversy that may arise with respect to the interpretation or
implementation of this Agreement. 
 
5.6 (a) To the extent permitted by law, the Company shall indemnify each Holder
with respect to which any registration, qualification or compliance has been
effected pursuant to this Agreement, against all claims, losses, damages and
liabilities (or actions in respect thereof), including any of the foregoing
incurred in settlement of any litigation, commenced or threatened (subject to
Section 5.6(c) below), arising out of or based on any untrue statement (or
alleged untrue statement) of a material fact contained in the Registration
Statements, or any amendment or supplement thereof, incident to any such
registration, qualification or compliance, or based on any omission (or alleged
omission) to state therein a material fact required to be stated therein or
necessary to make the statements therein not misleading, in light of the
circumstances in which they were made, or (ii) any violation or alleged
violation by the Company of the Securities Act, the Exchange Act, or any rule or
regulation promulgated under the Securities Act, or the Exchange Act, and will
reimburse each Holder for reasonable legal and other expenses reasonably
incurred in connection with investigating or defending any such claim, loss,
damage, liability or action as incurred; provided, that the Company will not be
liable in any such case to the extent that any such claim, loss, damage,
liability or action arises out of, relates to or is based upon: (i) any untrue
statement or omission or allegation thereof is made in reliance upon and in
conformity with written information furnished to the Company by or on behalf of
such Holder and stated to be specifically for use in preparation of such
Registration Statement, prospectus or offering circular; or (ii) the failure of
the Holder to comply with the covenants and agreements contained in this
Agreement respecting sales of Registrable Securities. Notwithstanding the
foregoing, and except that the foregoing indemnity agreement is subject to the
condition that, insofar as it relates primarily to any such untrue statement or
alleged untrue statement or omission or alleged omission made in the preliminary
prospectus but eliminated or remedied in the amended prospectus on file with the
SEC at the time any Registration Statement becomes effective or in the amended
prospectus filed with the Commission pursuant to Rule 424(b) or in the
prospectus subject to completion under Rule 434 promulgated under the Securities
Act, which together meet the requirements of Section 10(a) of the Securities Act
(the “Final Prospectus”), such indemnity agreement shall not inure to the
benefit of any such Holder, any such underwriter or any such controlling Person,
if a copy of the Final Prospectus furnished by the Company to the Holder for
delivery was not furnished by the Holder to the Person or entity asserting the
loss, liability, claim, damage or at or prior to the time such furnishing is
required by the Securities Act and the Final Prospectus would have cured the
defect giving rise to such loss, liability, claim, damage or action.

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(b) Each Holder will severally, if Registrable Securities held by such Holder
are included in the securities as to which such registration, qualification or
compliance is being effected, indemnify the Company, each of its directors and
officers, each underwriter of the Registrable Securities and each Person who
controls the Company within the meaning of Section 15 of the Securities Act,
against all claims, losses, damages and liabilities (or actions in respect
thereof), including any of the foregoing incurred in settlement of any
litigation, commenced or threatened (subject to Section 5.6(c) below), arising
out of or based on any untrue statement (or alleged untrue statement) of a
material fact contained in any registration statement, prospectus or offering
circular, or any amendment or supplement thereof, incident to any such
registration, qualification or compliance, or based on any omission (or alleged
omission) to state therein a material fact required to be stated therein or
necessary to make the statements therein not misleading, in light of the
circumstances in which they were made, and will reimburse the Company, such
directors and officers, each underwriter of the Registrable Securities and each
Person controlling the Company for reasonable legal and any other expenses
reasonably incurred in connection with investigating or defending any such
claim, loss, damage, liability or action as incurred, in each case to the
extent, but only to the extent, that such untrue statement or omission or
allegation thereof is made in reliance upon and in conformity with written
information furnished to the Company by or on behalf of the Holder and stated to
be specifically for use in preparation of such registration statement,
prospectus or offering circular. Notwithstanding the foregoing, in no event
shall a Holder be liable for any such claims, losses, damages or liabilities in
excess of the net proceeds received by such Holder in the offering, except in
the event of fraud or intentional misrepresentation by such Holder.

(c) Each party entitled to indemnification under this Section 5.6 (the
“Indemnified Party”) shall give notice to the party required to provide
indemnification (the “Indemnifying Party”) promptly after such Indemnified Party
has actual knowledge of any claim as to which indemnity may be sought, and shall
permit the Indemnifying Party to assume the defense of any such claim or any
litigation resulting therefrom, provided that counsel for the Indemnifying
Party, who shall conduct the defense of such claim or litigation, shall be
approved by the Indemnified Party (whose approval shall not unreasonably be
withheld), and the Indemnified Party may participate in such defense at such
Indemnified Party’s expense, and provided further that the failure of any
Indemnified Party to give notice as provided herein shall not relieve the
Indemnifying Party of its obligations under this Agreement, unless such failure
is materially prejudicial to the Indemnifying Party in defending such claim or
litigation. An Indemnifying Party shall not be liable for any settlement of an
action or claim effected without its written consent (which consent will not be
unreasonably withheld).

(d) If the indemnification provided for in this Section 5.6 is held by a court
of competent jurisdiction to be unavailable to an Indemnified Party with respect
to any loss, liability, claim, damage or expense referred to therein, then the
Indemnifying Party, in lieu of indemnifying such Indemnified Party thereunder,
shall contribute to the amount paid or payable by such Indemnified Party as a
result of such loss, liability, claim, damage or expense in such proportion as
is appropriate to reflect the relative fault of the Indemnifying Party on the
one hand and of the Indemnified Party on the other in connection with the
statements or omissions which resulted in such loss, liability, claim, damage or
expense as well as any other relevant equitable considerations. The relative
fault of the Indemnifying Party and of the Indemnified Party shall be determined
by reference to, among other things, whether the untrue or alleged untrue
statement of a material fact or the omission to state a material fact relates to
information supplied by the Indemnifying Party or by the Indemnified Party and
the parties’ relative intent, knowledge, access to information and opportunity
to correct or prevent such statement or omission. The Company and the Holders
agree that it would not be just and equitable if contribution pursuant to this
Section 5.6(d) was based solely upon the number of entities from whom
contribution was requested or by any other method of allocation which does not
take account of the equitable considerations referred to above in this Section
5.6(d). The amount paid or payable by an Indemnified Party as a result of the
losses, claims, damages and liabilities (or actions in respect thereof) referred
to above in this Section 5.6(d) shall be deemed to include any legal or other
expenses reasonably incurred by such Indemnified Party in connection with
investigating or defending any such action or claim, subject to the provisions
of Section 5.6(d) hereof. The parties agree that it would not be just and
equitable if contributions pursuant to this Section 5.6 were determined by pro
rata allocation or by any other method of allocation which does not take account
of the equitable considerations as set forth in this Section 5.6.
Notwithstanding the provisions of this Section 5.6(d), in no event shall a
Holder be required to contribute any amount or make any other payments under
this Agreement which in the aggregate exceed the net proceeds received by such
Holder from the sale of Registrable Securities covered by such Registration
Statement. No Person guilty of fraudulent misrepresentation (within the meaning
of the Securities Act) shall be entitled to contribution from any Person who was
not guilty of such fraudulent misrepresentation.

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5.7 (a) Each Holder agrees that, upon receipt of any notice from the Company of
(i) the need for an amendment or supplement to the Registration Statement or the
prospectus forming a part thereof, (ii) that the Board of Directors has
determined in good faith that offers and sales pursuant to the prospectus
forming part of a Registration Statement should not be made by reason of the
presence of material undisclosed circumstances or developments with respect to
which the disclosure that would be required in a Registration Statement would be
premature or would have a Material Adverse Effect or (iii) in connection with a
primary underwritten offering of equity securities of the Company, each Holder
will forthwith discontinue disposition of Registrable Securities pursuant to a
Registration Statement contemplated by Section 5.2 until its receipt of copies
of the supplemented or amended prospectus from the Company or confirmation of
the filing of such report with the SEC by the Company, any such prospectus to be
forwarded promptly to the Holder by the Company, and, if so directed by the
Company, each Holder shall deliver to the Company all copies, other than
permanent file copies then in such Holder’s possession, of the prospectus
covering such Registrable Securities current at the time of receipt of such
notice; provided, that the Company, may suspend the disposition of Registrable
Securities pursuant to the Registration Statements pursuant to clause (ii) above
not more than one time (not to exceed 30 days) during any three month period,
nor more than two times (not to exceed 30 days each) in any twelve-month period.
 
(b) As a condition to the inclusion of its Registrable Securities, each Holder
shall furnish to the Company such information regarding such Holder and the
distribution proposed by such Holder as the Company may reasonably request in
writing or as shall be required in connection with any registration,
qualification or compliance referred to in this Article 5, including the
information required by the Registration Questionnaire attached hereto as
Appendix A.

22

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(c) Each Holder hereby covenants with the Company not to make any sale of the
Registrable Securities without effectively causing the prospectus delivery
requirements under the Securities Act to be satisfied.

(d) Each Holder acknowledges and agrees that the Registrable Securities sold
pursuant to the Registration Statements described in this Section are not
transferable on the books of the Company unless the stock certificate submitted
to the transfer agent evidencing such Registrable Securities is accompanied by a
certificate reasonably satisfactory to the Company to the effect that (i) the
Registrable Securities have been sold in accordance with such Registration
Statement and (ii) the requirement of delivering a current prospectus has been
satisfied.

(e) Each Holder agrees not to take any action with respect to any distribution
deemed to be made pursuant to such registration statement which would constitute
a violation of Regulation M under the Exchange Act or any other applicable rule,
regulation or law.

5.8 With a view to making available to the Holders the benefits of certain rules
and regulations of the SEC which at any time permit the sale of the Registrable
Securities to the public without registration, the Company shall use reasonable
best efforts to:

(a) make and keep public information available, as those terms are understood
and defined in Rule 144 under the Securities Act, at all times;

(b) file with the SEC in a timely manner all reports and other documents
required of the Company under the Exchange Act; and

(c) so long as a Holder owns any unregistered Registrable Securities, furnish to
such Holder, upon any reasonable request, a written statement by the Company as
to its compliance with Rule 144 under the Securities Act, and of the Exchange
Act, a copy of the most recent annual or quarterly report of the Company, and
such other reports and documents of the Company as such Holder may reasonably
request in availing itself of any rule or regulation of the SEC allowing a
Holder to sell any such securities without registration.

5.9 The right to cause the Company to register Registrable Securities granted to
the Holders by the Company under Section 5.2 may be assigned in full by a Holder
in connection with a transfer by such Holder of its Registrable Securities, but
only if: (i) such transfer may otherwise be effected in accordance with
applicable securities laws; (ii) such Holder gives prior written notice of the
proposed transfer to the Company including the name and address of such
transferee and a copy of the transfer documents and agreements; (iii) such
transferee agrees in writing with the Company to be bound by and comply with the
terms and provisions of this Agreement; (iv) the transferee is an “accredited
investor” as that term is defined in Rule 501 of Regulation D; and (v) such
transfer is otherwise in compliance with this Agreement. Except as specifically
permitted by this Section 5.9, the rights of a Holder with respect to
Registrable Securities as set out herein shall not be transferable to any other
Person, the Company may impose stop transfer orders with respect to any such
transfer or attempted transfer, and any such transfer or attempted transfer
shall be null and void.

23

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5.10 The Company shall use reasonable best efforts to cause all Registrable
Securities covered by a Registration Statement to be listed on each securities
exchange, interdealer quotation system or other market on which similar
securities issued by the Company are then listed.

5.11 With the written consent of the Company and the Holders holding at least
two-thirds of the Registrable Securities that are then outstanding, any
provision of this Article 5 may be waived (either generally or in a particular
instance, either retroactively or prospectively and either for a specified
period of time or indefinitely) or amended. Upon the effectuation of each such
waiver or amendment, the Company shall promptly give written notice thereof to
the Holders, if any, who have not previously received notice thereof or
consented thereto in writing.

5.12 The legend set forth in Section 2.10 above shall be removed and the Company
shall issue a certificate without such legend to the holder of the Securities
upon which it is stamped or issue to such holder by electronic delivery at the
applicable balance account at The Depository Trust Company (“DTC”), if (i) such
Securities are registered for resale under the Securities Act, (ii) such
Securities are sold or transferred pursuant to Rule 144 (assuming the transferor
is not an Affiliate of the Company) or Rule 144A, or (iii) such Securities are
eligible for sale under Rule 144(k). If any portion of a Warrant is exercised at
a time when there is an effective registration statement to cover the resale of
the Warrant Shares, or if such Warrant Shares may be sold under Rule 144(k),
then such Warrant Shares shall be issued free of all legends. Following the
effective date of the applicable Registration Statement covering the resale of
Securities, or at such earlier time as a legend is no longer required for
certain Securities, the Company will no later than three (3) Trading Days
following the delivery by a Subscriber to the Company or the Transfer Agent
(with notice to the Company) of (i) a legended certificate representing such
Shares or Warrant Shares (endorsed or with stock powers attached, signatures
guaranteed, and otherwise in form necessary to affect the reissuance and/or
transfer) or (ii) an exercise notice in the manner stated in the Warrants to
effect the exercise of such Warrant in accordance with its terms, deliver or
cause to be delivered to such Subscriber a certificate representing such
Securities that is free from all restrictive and other legends.

24

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6.
MISCELLANEOUS.

6.1 The Company reserves the right to reject the subscription made hereby in its
sole discretion. Unless terminated earlier in the Placement Agent’s or the
Company’s sole discretion, the Offering will expire on February 28, 2007, (as
such date may be extended by agreement of the Placement and the Company in their
sole discretion without notice to the Subscribers for an additional 60 days (the
“Termination Date”), if the conditions to closing set forth in Article 4 have
not been satisfied or waived by such time.

6.2 The Company’s agreement with each Subscriber is a separate agreement and
each sale of the Securities to each Subscriber is a separate sale.

6.3 All notices, requests and other communications under this Agreement shall be
in writing, and shall be sufficiently given if delivered to the addressees in
person or by recognized overnight courier, mailed by certified or registered
mail, return receipt requested, or by facsimile or e-mail transmission, as
follows:

25

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If to the Company:     Manhattan Pharmaceuticals, Inc.
810 Seventh Avenue, 4th Floor
New York, NY 10019
Facsimile: (212) 582-3957
Attn: Chief Financial Officer
Email: mgmcguinness@manhattanpharma.com 

With a copy to:           Maslon Edelman Borman & Brand, LLP
3300 Wells Fargo Center
90 South 7th Street
Minneapolis, Minnesota 55402
Facsimile: (612) 642-8343
Attn: Christopher J. Melsha, Esq.
Email: chris.melsha@maslon.com

If to a Subscriber, at such address as such Subscriber shall have provided in
writing to the Company or such other addresses as such Subscriber furnishes by
notice given in accordance with this Section 6.3 or such other address as may be
designated in writing hereafter, in the same manner, by such Person.

6.4 Except as provided in Section 5.11 above, this Agreement shall not be
changed, modified or amended except by a writing signed by the parties to be
charged, and this Agreement may not be discharged except by performance in
accordance with its terms or by a writing signed by the party to be charged.

6.5 Subject to the provisions of Section 5.9, this Agreement shall be binding
upon and inure to the benefit of the parties hereto and to their respective
heirs, legal representatives, successors and assigns. This Agreement sets forth
the entire agreement and understanding between the parties as to the subject
matter hereof and merges and supersedes all prior discussions, agreements and
understandings of any and every nature among them.

6.6 Upon the execution and delivery of this Agreement by the Subscriber, this
Agreement shall become a binding obligation of the Subscriber with respect to
the purchase of the Securities as herein provided; subject, however, to the
right hereby reserved to the Company to reject this subscription in accordance
with Section 2.16, enter into the same agreements with other subscribers and to
add and/or delete other Persons as subscribers.

6.7 Notwithstanding the place where this Agreement may be executed by any of the
parties hereto, the parties expressly agree that all the terms and provisions
hereof shall be construed in accordance with and governed by the laws of the
State of New York without regard to principles of conflicts of law.

6.8 The holding of any provision of this Agreement to be invalid or
unenforceable by a court of competent jurisdiction shall not affect any other
provision of this Agreement, which shall remain in full force and effect. If any
provision of this Agreement shall be declared by a court of competent
jurisdiction to be invalid, illegal or incapable of being enforced in whole or
in part, such provision shall be interpreted so as to remain enforceable to the
maximum extent permissible consistent with applicable law and the remaining
conditions and provisions or portions thereof shall nevertheless remain in full
force and effect and enforceable to the extent they are valid, legal and
enforceable, and no provisions shall be deemed dependent upon any other covenant
or provision unless so expressed herein.

26

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6.9 It is agreed that a waiver by either party of a breach of any provision of
this Agreement shall not operate, or be construed, as a waiver of any subsequent
breach by that same party.

6.10 The parties agree to execute and deliver all such further documents,
agreements and instruments and take such other and further action as may be
necessary or appropriate to carry out the purposes and intent of this Agreement.

6.11 This Agreement may be executed in two or more counterparts each of which
shall be deemed an original, but all of which shall together constitute one and
the same instrument.

6.12 (a) The Subscriber agrees not to issue any public statement with respect to
the Subscriber’s investment or proposed investment in the Company or the terms
of any agreement or covenant between them and the Company without the Company’s
prior written consent, except such disclosures as may be required under
applicable law or under any applicable order, rule or regulation.

(b) The Company agrees not to disclose the names, addresses or any other
information about the Subscriber, except as required by law or court order and
to satisfy its obligations under Article 5.

6.13 The Subscriber represents and warrants that it has not engaged, consented
to nor authorized any broker, finder or intermediary to act on its behalf,
directly or indirectly, as a broker, finder or intermediary in connection with
the transactions contemplated by this Agreement (other than the Placement
Agent). The Subscriber hereby agrees to indemnify and hold harmless the Company
from and against all fees, commissions or other payments owing to any such
Person (other than the Placement Agent) acting on behalf of the Subscriber
hereunder.
 
6.14 This Agreement (including all exhibits, schedules and amendments hereto)
(i) constitutes the entire Agreement and understandings of the parties hereto
and supersedes all prior agreements and understandings, both written and oral,
between the parties hereto with respect to the subject matter hereof and (ii) is
not intended to confer upon any other Person other than the parties hereto any
rights or remedies hereunder (except for the holders of Registrable Securities
as set forth in Article 5).
 
27

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7.
CONFIDENTIAL INVESTOR QUESTIONNAIRE.

7.1 The Subscriber represents and warrants that he, she or it comes within one
category marked below, and that for any category marked, he, she or it has
truthfully set forth, where applicable, the factual basis or reason the
Subscriber comes within that category. ALL INFORMATION IN RESPONSE TO THIS
SECTION WILL BE KEPT STRICTLY CONFIDENTIAL except as otherwise required by law
or as necessary for inclusion in the Registration Statement. The undersigned
agrees to furnish any additional information which the Company deems necessary
in order to verify the answers set forth below.

Category A___
The undersigned is an individual (not a partnership, corporation, etc.) whose
individual net worth, or joint net worth with his or her spouse, presently
exceeds $1,000,000.
     
Explanation: In calculating net worth you may include equity in personal
property and real estate, including your principal residence, cash, short-term
investments, stock and securities. Equity in personal property and real estate
should be based on the fair market value of such property less debt secured by
such property.
   
Category B___
The undersigned is an individual (not a partnership, corporation, etc.) who had
an income in excess of $200,000 in each of the two most recent years, or joint
income with his or her spouse in excess of $300,000 in each of those years (in
each case including foreign income, tax exempt income and full amount of capital
gains and losses but excluding any income of other family members and any
unrealized capital appreciation) and has a reasonable expectation of reaching
the same income level in the current year.
   
Category C___
The undersigned is a director or executive officer of the Company which is
issuing and selling the Securities.
   
Category D___
The undersigned is a bank; a savings and loan association; insurance company;
registered investment company; registered business development company; licensed
small business investment company (“SBIC”); or employee benefit plan within the
meaning of Title 1 of ERISA and (a) the investment decision is made by a plan
fiduciary which is either a bank, savings and loan association, insurance
company or registered investment advisor, or (b) the plan has total assets in
excess of $5,000,000 or (c) is a self directed plan with investment decisions
made solely by persons that are accredited investors. (describe entity)

 

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28

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Category E___
The undersigned is a private business development company as defined in section
202(a)(22) of the Investment Advisors Act of 1940. (describe entity)
           
Category F___
The undersigned is either a corporation, partnership, Massachusetts business
trust, or non-profit organization within the meaning of Section 501(c)(3) of the
Internal Revenue Code, in each case not formed for the specific purpose of
acquiring the Securities and with total assets in excess of $5,000,000.(describe
entity)
           
Category G___
The undersigned is a trust with total assets in excess of $5,000,000, not formed
for the specific purpose of acquiring the Securities, where the purchase is
directed by a “sophisticated investor” as defined in Regulation 506(b)(2)(ii)
under the Securities Act.
   
Category H___
The undersigned is an entity (other than a trust) in which all of the equity
owners are “accredited investors” within one or more of the above categories. If
relying upon this Category alone, each equity owner must complete a separate
copy of this Agreement. (describe entity)
       
Category I___
The undersigned is not within any of the categories above and is therefore not
an accredited investor.

 
The undersigned agrees that the undersigned will notify the Company at any time
on or prior to the Closing Date in the event that the representations and
warranties in this Agreement shall cease to be true, accurate and complete.

7.2 SUITABILITY (please answer each question)

(a)  For an individual Subscriber, please describe your current employment,
including the company by which you are employed and its principal business:
 

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29

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(b)  For an individual Subscriber, please describe any college or graduate
degrees held by you:
 

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

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

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(c) For all Subscribers, please state whether you have you participated in other
private placements before:

YES_______   NO_______

(d) If your answer to question (d) above was “YES”, please indicate frequency of
such prior participation in private placements of:

   
Public
 
Private
 
Public or Private
 
 
 
Companies
 
Companies
 
Biopharmaceutical Companies
                 
Frequently
                                                  
                                
Occasionally
                                                      
                            
Never
                                                                   

 
 (e)  For individual Subscribers, do you expect your current level of income to
significantly decrease in the foreseeable future:

YES_______   NO_______

(f)  For trust, corporate, partnership and other institutional Subscribers, do
you expect your total assets to significantly decrease in the foreseeable
future:

YES_______   NO_______

(g)  For all Subscribers, do you have any other investments or contingent
liabilities which you reasonably anticipate could cause you to need sudden cash
requirements in excess of cash readily available to you:

YES_______   NO_______

(h)  For all Subscribers, are you familiar with the risk aspects and the
non-liquidity of investments such as the securities for which you seek to
subscribe?

YES_______   NO_______

30

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(i)  For all Subscribers, do you understand that there is no guarantee of
financial return on this investment, that an investment in the Securities is
highly speculative and risky and that you run the risk of losing your entire
investment?

YES_______   NO_______

(j)  For all Subscribers, will you have sufficient readily available cash to
fund your obligation to purchase Securities at the Closing pursuant to your
subscription if and when the Closing occurs?

YES_______   NO_______

7.3 MANNER IN WHICH TITLE IS TO BE HELD. (circle one)

(a)   Individual Ownership
(b)   Community Property
(c)   Joint Tenant with Right of
Survivorship (both parties
must sign)
(d)   Partnership*
(e)   Tenants in Common
(f)    Corporation*
(g)   Trust*
(h)   Limited Liability Company*
(i)    Other

*If Securities are being subscribed for by an entity, the attached Certificate
of Signatory must also be completed.

7.4 NASD AFFILIATION.

Are you affiliated or associated with an NASD member firm (please check one):

Yes _________  No __________

If Yes, please describe:
_________________________________________________________
_________________________________________________________
_________________________________________________________

*If Subscriber is a Registered Representative with an NASD member firm, have the
following acknowledgment signed by the appropriate party:

31

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The undersigned NASD member firm acknowledges receipt of the notice required by
NASD Rule 3050.

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

Name of NASD Member Firm

By:

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

Authorized Officer

Date:

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7.5 The undersigned is informed of the significance to the Company of the
foregoing representations and answers contained in the Confidential Investor
Questionnaire contained in this Article 7 and such answers have been provided
under the assumption that the Company will rely on them.

Signature:  

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

 

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(If purchased jointly)

Print Name: 

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

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

(If purchased jointly)

Date:

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[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK
SIGNATURE PAGES TO FOLLOW]
 
32

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[Subscriber Signature Page]

Aggregate Purchase Price: $_________________ / Market Price =  _________ Shares
_________Warrant
                     Shares

     
Signature
 
Signature (if purchasing jointly)
     
Name Typed or Printed
 
Name Typed or Printed
     
Entity Name
 
Entity Name
     
Address
 
Address
     
City, State and Zip Code
 
City, State and Zip Code
     
Telephone-Business
 
Telephone--Business
     
Telephone-Residence
 
Telephone--Residence
     
Facsimile-Business
 
Facsimile--Business
     
Facsimile-Residence
 
Facsimile—Residence
     
Email Address
 
Email Address
     
Tax ID # or Social Security #
 
Tax ID # or Social Security #

Name in which securities should be issued:

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Dated:    __________________ , 2007

INVESTORS:
PLEASE COMPLETE THE REGISTRATION QUESTIONNAIRE ATTACHED HERETO AS APPENDIX A.

 
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[Company Signature Page]

This Subscription Agreement is agreed to and accepted by the Company as of
_____________, 2007.  

       
MANHATTAN PHARMACEUTICALS, INC.
 
   
   
  By:    

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Name:   Title:

34

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CERTIFICATE OF SIGNATORY

(To be completed if Securities are
being subscribed for by an entity)

I,____________________________, am the____________________________ of
__________________________________________ (the “Entity”).

I certify that I am empowered and duly authorized by the Entity to execute and
carry out the terms of the Subscription Agreement and to purchase and hold the
Securities, and certify further that the Subscription Agreement has been duly
and validly executed on behalf of the Entity and constitutes a legal and binding
obligation of the Entity.

IN WITNESS WHEREOF, I have set my hand this ______ day of _________________,
2007.
 

       

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(Signature)

 
35

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APPENDIX A

Manhattan Pharmaceuticals, Inc.

REGISTRATION QUESTIONNAIRE
FOR
SELLING STOCKHOLDERS

Name: ________________________________
(Please Print)

This questionnaire is intended to provide information for a registration
statement (the “Registration Statement”) to be filed by Manhattan
Pharmaceuticals, Inc. (the “Company”) covering the resale of the Shares and
Warrant Shares acquired by you as contemplated by the accompanying Subscription
Agreement. Please complete (attaching separate sheets if additional space is
needed), date and sign this questionnaire and return it together with your
completed subscription agreement.

PLEASE ANSWER EVERY QUESTION. If a question is inapplicable to you, please so
state by inserting “N/A.” If you are in doubt whether a particular question
requires an affirmative response from you, please furnish full particulars so
that those persons responsible for preparing the Registration Statement and
Prospectus can determine whether any disclosure based on your answer is
required. Information requested in this questionnaire is as of the date you
complete the questionnaire, unless otherwise indicated. Your furnishing such
information does not necessarily mean that such information will be disclosed.

DEFINITIONS

Your answers to this questionnaire should be made upon the basis of the
following definitions of terms used in this questionnaire:

The term “beneficial owner” of a security includes any Person who, directly or
indirectly, through any contract, arrangement, understanding, relationship or
otherwise has or shares (1) voting power, which includes the power to vote, or
direct the voting of, such security or (2) investment power, which includes the
power to dispose or direct the disposition of such security. A Person may be
regarded as having voting power of a security which is owned (i) by his spouse
or minor children or by any of his relatives or his spouse’s relatives who share
the same home with him, (ii) a partnership of which he is a partner or (iii) a
corporation of which he is a substantial shareholder. A Person is also deemed to
be the beneficial owner of shares which that Person has the right to acquire
within 60 days, including but not limited to any right to acquire through the
exercise of an option, through conversion of a security, pursuant to the power
to revoke a trust or pursuant to the automatic termination of a trust. Please
also disclose any other rights, which you have to acquire securities of the
Company on or before June 30, 2007.

A-1

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The term “material,” when used to qualify a requirement for the furnishings of
information as to any subject, limits the information required to those matters
about which the average prudent investor should reasonably be informed before
buying or selling the securities of the Company. If you are in doubt as to the
materiality of certain information, you should relate sufficient facts to enable
the Company and its advisors to reach a conclusion as to its materiality.

The term “Person” means any person, individual, corporation, limited liability
company, partnership, trust or other governmental agency, court, authority or
other body (whether foreign, federal, state, local or otherwise.

QUESTIONS

QUESTION 1:

State your present position or positions with the Company (if any), including
membership on any audit, personnel, compensation or similar committee or
committees; any positions with the Company held by you during the previous three
years; and any positions with the Company to which you have been elected or
appointed but the duties of which you have not yet assumed. For each position,
list the term or expected term of office.

ANSWER:

QUESTION 2:

Other than Shares and Warrant Shares that you will acquire in connection with
the Offering, provide below information regarding the equity securities of the
Company of which you are the “beneficial owner.” Please refer to the definition
of “beneficial owner,” above. Under the column “Nature of Ownership,” please
indicate amounts of securities for which you have (a) sole voting power, (b)
shared voting power, (c) sole investment power, or (d) shared investment power.
If your response covers any securities included because you have the right to
acquire them on or before June 30, 2007, please separately indicate the amount
of such securities. Also, if you hold more than 5% of the Company’s securities
pursuant to a voting trust or similar agreement, please separately state the
amount of such securities held or to be held pursuant to the trust or agreement,
the duration of the agreement and the names and addresses of the voting
trustees, outlining briefly their voting rights and other powers under the trust
or agreement.

ANSWER (attach additional pages if necessary):

Number of
 
Nature of
   
Shares
 
Ownership
 
Title of Securities

QUESTION 3:

If you plan to offer your shares of Common Stock through the selling efforts of
brokers or dealers, describe the terms (and attach copies) of any agreement,
arrangement, or understanding entered into with broker(s) or dealer(s),
including volume limitations on sales, parties to the agreement and the
conditions under which the agreement may be terminated. If known, identify the
broker(s) or dealer(s), which will participate in the offering and state the
amount to be offered through each.

A-2

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ANSWER:

QUESTION 4:

Describe below any information known to you, and if none state “none,”
pertaining to underwriting compensation and arrangements or any dealings between
any underwriter or related person, member of the NASD or a person associated
with a member of the NASD, and the Company or any controlling stockholder
thereof since January 1, 2005.
 
ANSWER:

QUESTION 5:

State below whether you or any of your associates are a member of NASD, a
controlling shareholder of a member, a person associated or affiliated with a
member or an underwriter or related person with respect to the proposed
offering. If you responded “yes,” describe such relationship:

ANSWER:

QUESTION 6:

Are you a broker-dealer?

ANSWER:  Yes ______ No______

QUESTION 7:

If you are not a broker-dealer, are you affiliated with a broker-dealer?

ANSWER:  Yes ______ No______

QUESTION 8:

If you are a broker-dealer or are affiliated with a broker-dealer, did you
purchase the securities in the ordinary course of business?

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ANSWER:  Yes ______ No______

QUESTION 9:

If you are a broker-dealer or are affiliated with a broker-dealer, did you have
any agreements or understandings, directly or indirectly, with any person to
distribute the securities at the time that you purchased the securities?

ANSWER:  Yes ______ No______

Please note that the SEC takes the position that if you are a broker-dealer, you
are to be identified in the Registration Statement as an underwriter. In the
“Plan of Distribution,” the Registration Statement will provide substantially as
follows:

“The selling stockholders and any broker-dealers, agents or underwriters that
participate with the selling stockholders in the distribution of the issued and
outstanding shares of common stock or the shares of stock issuable upon exercise
of warrants may be deemed to be “underwriters” within the meaning of the
Securities Act, in which event any commissions received by these broker-dealers,
agents or underwriters and any profits realized by the selling stockholders on
the resales of the securities may be deemed to be underwriting commissions or
discounts under the Securities Act. Selling stockholders who are broker-dealers
are deemed to be underwriters. If any selling stockholders are deemed to be
underwriters, the selling stockholders may be subject to certain statutory and
regulatory liabilities, including liabilities imposed pursuant to Sections 11,
12 and 17 of the Securities Act and Rule 10b-5 under the Exchange Act.”

 
QUESTION 10:
 
Are their specific individuals who have voting or investment control over the
securities? If you are an entity, you must answer “yes” to this question and
identify such individual(s) by name below.
 
ANSWER:  Yes ______ No______

If you answered “yes”, please list the names of such individuals:
 

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The answers to the foregoing questions are true and correct to the best of the
undersigned’s knowledge, information and belief. The undersigned agrees to
promptly notify the Company in writing in care of the Chief Financial Officer of
(a) any transfer by you of your Shares or Warrants, (b) sales of common stock of
the Company (giving the number of shares sold and the name of the broker-dealer
used) and (c) any other changes in the answers to this questionnaire that should
be made as a result of any material development occurring subsequent to the date
hereof.
 
Dated: ___________, 2007.

       

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Signature

 
A-5

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Appendix B
 
Form of Legal Opinion

1. The Company is a corporation duly incorporated, validly existing and in good
standing under the laws of the State of Delaware and has all requisite corporate
power and authority to carry on its business and to own its property as now
conducted and owned.

2. The Company has full power and authority, and all requisite corporate action
on the part of the Company has been taken, which is necessary for (a) the
authorization, execution and delivery of the Transaction Documents and (b) the
performance of all obligations of the Company under the Transaction Documents.

3. The Transaction Documents have been duly authorized, executed and delivered
on behalf of the Company and constitute the valid and binding obligations of the
Company, enforceable against it in accordance with their respective terms.

4. The Securities to be sold by the Company pursuant to the Subscription
Agreements, when issued and delivered in accordance with the provisions of the
Subscription Agreements, including payment by the investors therefor, will be
duly authorized, validly issued, fully paid and nonassessable and, to our
knowledge, none of them will have been issued in violation of any preemptive
right or any similar right. Upon delivery of and payment for the Securities in
accordance with the Subscription Agreements, each Purchaser will receive good
title to the Securities purchased by it, free and clear of all encumbrances and
restrictions, other than restrictions on transfer imposed by applicable
securities laws.

5. The Warrant Shares have been duly authorized and reserved for issuance and,
when issued and delivered upon exercise of the Warrants in accordance with the
terms thereof, will be duly authorized, validly issued, fully paid and
nonassessable and, to our knowledge, none of them will have been issued in
violation of any preemptive right or any similar right. Upon delivery of and
payment for the Warrant Shares in accordance with the terms of the Warrants,
each recipient of the respective Warrant Shares will receive good title to such
shares, free and clear of all encumbrances and restrictions, other than
restrictions on transfer imposed by applicable securities laws.

6. The Placement Warrant Shares (as defined in the Agency Agreement) have been
duly authorized and reserved for issuance and, when issued and delivered upon
exercise of the Placement Warrants (as defined in the Agency Agreement), will be
duly authorized, validly issued, fully paid and nonassessable and, to our
knowledge, none of them will have been issued in violation of any preemptive
right or any similar right. Upon delivery of and payment for the Placement
Warrant Shares in accordance with the Placement Warrants, each recipient of the
respective securities will receive good title to such shares, free and clear of
all encumbrances and restrictions, other than restrictions on transfer imposed
by applicable securities laws.

7. The execution, delivery and performance by the Company of the Subscription
Agreements and the offer, issuance and sale of the Securities and the Placement
Warrants require no consent of, action by or in respect of, or filing with, any
person, court, governmental body, agency, or official, other than filings (if
any) required to be made pursuant to applicable state securities laws and
post-sale filings pursuant to applicable state and federal securities laws.

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8. Subject to the Agent’s compliance with applicable securities laws and to the
accuracy of the representations and warranties of each Purchaser made in such
purchaser’s Subscription Agreement, the offer, issuance, sale and delivery of
the Shares and the Placement Warrants under the circumstances contemplated by
the Transaction Documents constitute exempt transactions under Rule 506 of
Regulation D under the Securities Act of 1933, as amended (the “Securities
Act”), and do not require registration under the Securities Act.

9. The execution, delivery and performance of the Subscription Agreements by the
Company and the issuance and sale of the Securities and Placement Warrants will
not result in a breach or violation of any of the terms and provisions of, or
constitute a default under (1) any statute, rule, regulation or, to our
knowledge, order of any governmental agency or body of any court, domestic or
foreign, having jurisdiction over the Company, or (2) the Certificate of
Incorporation or By-Laws of the Company.

10. Except as described in the Subscription Agreements or Memorandum, to our
knowledge, there are no legal or governmental proceedings pending or threatened
to which the Company is a party or to which the property of the Company is
subject, which singly or in the aggregate could have a material adverse effect
on the Company’s results of operations or condition (financial or otherwise).

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