Exhibit 10.1

CARDIUM THERAPEUTICS, INC.

DOCS® financing facility

Shares of Common Stock,

$0.0001 par value

SALES AGREEMENT

September 28, 2010

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THIS SALES AGREEMENT (the “Agreement”) dated as of September 28, 2010 is made
and entered into by and between Brinson Patrick Securities Corporation, having
its principal office at 1515 Broadway, 11th Floor, New York, New York 10036 (the
“Sales Manager”) and Cardium Therapeutics, Inc., a corporation organized and
existing under the laws of the State of Delaware (the “Company”).

WHEREAS, the Company desires to issue and sell through the Sales Manager, as
agent, shares of its Common Stock, $0.0001 par value (the “Stock”), on the terms
set forth in Article II below.

IN CONSIDERATION of the mutual covenants contained in this Agreement, the
Company and the Sales Manager agree as follows:

ARTICLE I

REPRESENTATIONS AND WARRANTIES

OF THE COMPANY

1.1 For purposes of this Agreement, unless the context requires to the contrary,
the term “Company” shall also include all significant subsidiaries (as defined
by Section 1-02 of Regulation S-X) of the Company. The Company represents and
warrants to, and agrees with, the Sales Manager that:

(a) The Company meets the requirements for use of Form S-3 under the Securities
Act of 1933, as amended (the “Act”), and the rules and regulations thereunder
(“Rules and Regulations”), and the Company is eligible to use Form S-3 for the
transactions contemplated by this Agreement. A registration statement on Form
S-3 (Registration No. 333-168693) with respect to, among other securities, the
Stock, including a form of prospectus, has been prepared by the Company in
conformity with the requirements of the Act and the Rules and Regulations, has
been filed with the Securities and Exchange Commission (the “Commission”) and
has been declared effective by the Commission. No stop order suspending the
effectiveness of such registration statement has been issued, and no proceeding
for that purpose has been instituted or, to the knowledge of the Company,
threatened by the Commission. Such registration statement, as it may have
heretofore been or may hereafter be amended, is referred to herein as the
“Registration Statement,” and the final form of prospectus included in the
Registration Statement for purposes of offers and sales of the Stock
contemplated herein, as amended or supplemented from time to time, is referred
to herein as the “Prospectus.” Any reference herein to the Registration
Statement, the Prospectus, or any amendment or supplement thereto shall be
deemed to refer to and include the documents incorporated (or deemed to be
incorporated) by reference therein, and any reference herein to the terms
“amend,” “amendment” or “supplement” with respect to the Registration Statement
or Prospectus shall be deemed to refer to and include the filing after the
execution hereof of any document with the Commission deemed to be incorporated
by reference therein.

(b) Each part of the Registration Statement, when such part became or becomes
effective, and the Prospectus and any amendment or supplement thereto, on the
date of filing thereof with the Commission and at each Settlement Date (as
hereinafter defined), conformed or will conform in all material respects with
the requirements of the Act and the Rules and Regulations; each part of the
Registration Statement, when such part became or becomes effective, did not or
will not contain an untrue statement of a material fact or omit to state a
material fact required to be stated therein or necessary to make the statements
therein not misleading; and the Prospectus and any amendment or supplement
thereto, on the date of filing thereof with the Commission and at each
Settlement Date, did not or will not include an untrue statement of a material
fact or omit to state a material fact necessary to make the statements therein,
in the light of the circumstances under which they were made, not misleading;
except that the foregoing shall not apply to statements in or omissions from any
such document in reliance upon, and in conformity with, written information
furnished to the Company by or on behalf of the Sales Manager, specifically for
use in the Registration Statement, the Prospectus or any amendment or supplement
thereto. There are no Commission comments to any part of the Registration
Statement, Prospectus or any amendment or supplement thereto, that have not been
resolved as of the date hereof.

 

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(c) The documents incorporated by reference in the Registration Statement or the
Prospectus, or any amendment or supplement thereto, when they were or are filed
with the Commission under the Securities Exchange Act of 1934, as amended (the
“Exchange Act”), conformed or will conform in all material respects with the
requirements of the Act or the Exchange Act, as applicable, and the rules and
regulations of the Commission thereunder.

(d) The financial statements of the Company, together with the related schedules
and notes thereto, set forth or included in the Registration Statement and
Prospectus, fairly present the financial condition of the Company as of the
dates indicated and the results of operations, changes in financial position,
stockholders’ equity, and cash flows for the periods therein specified, in
conformity with United States generally accepted accounting principles
consistently applied throughout the periods involved (except as otherwise stated
therein). The summary and selected financial and statistical data, if any,
included in the Registration Statement and the Prospectus present fairly the
information shown therein and, to the extent based upon or derived from the
financial statements, have been compiled on a basis consistent with the
financial statements presented therein. As of the date hereof, there are no
comments pending from the Commission that, if not resolved favourably to the
Company, could have the effect of requiring a restatement of financial
statements of the Company.

(e) The accountants who certified the financial statements and the supporting
schedules included in the Registration Statement are and, during the periods
covered by their reports, were qualified and independent public accountants as
required by Rule 2-01 of Regulation S-X and by the rules of the Public Company
Accounting Oversight Board.

(f) The Company has been duly organized and is validly existing as a corporation
in good standing under the laws of the State of Delaware. The Company is duly
qualified and in good standing as a foreign corporation in each jurisdiction in
which the character or location of its assets or properties (owned, leased or
licensed) or the nature of its business makes such qualification necessary
(including every jurisdiction in which it owns or leases real property), except
for such jurisdictions where the failure to so qualify would not have a Material
Adverse Effect on the Company. For purposes of this Agreement, “Material Adverse
Effect” means (i) any adverse effect on the assets or properties, business,
results of operations, financial condition of the Company that is material to
the Company, and/or (ii) any material adverse effect on the transactions
contemplated under this Agreement or any other agreement or document
contemplated hereby or thereby. Each of the Company’s significant subsidiaries
is validly existing and in good standing as a corporation, limited liability
company or partnership, as applicable, in its respective jurisdiction of
formation. Schedule 1.1(f) hereto identifies each of the Company’s subsidiaries
that is a significant subsidiary (as defined in Section 1-02 of Regulation S-X)
of the Company. Except as otherwise disclosed in the Registration Statement and
the Prospectus, all of the issued and outstanding capital stock, limited
liability company interests or partnership interests, as applicable, of each
significant subsidiary has been duly authorized and validly issued, is fully
paid and nonassessable and is owned by the Company, directly or indirectly, free
and clear of any security interest, mortgage, pledge, lien, encumbrance, claim
or equity. The Company has all requisite corporate power and authority and all
necessary authorizations, approvals, consents, orders, licenses, certificates
and permits of and from all governmental orders or regulatory bodies or any
other person or entity, to own, lease, license and operate its assets and
properties and conduct its business as now being conducted and as described in
the Registration Statement and the Prospectus; except for such authorizations,
approvals, consents, orders, licenses, certificates and permits the absence of
which would not have a Material Adverse Effect.

 

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(g) The Company has good and marketable title to, or leasehold interests in, all
properties and assets as described in the Registration Statement and the
Prospectus as owned by the Company, free and clear of all liens, charges,
encumbrances or restrictions, except such as are described in the Registration
Statement and the Prospectus and except such as would not have a Material
Adverse Effect on the Company.

(h) The Company has been subject to the requirements of Section 12 of the
Exchange Act during the period commencing 12 months preceding the filing of the
Registration Statement and ending on the date hereof (the “Reporting Period”)
and during such Reporting Period the Company has timely filed all material and
reports required under Sections 13(a), 14 and/or 15(d) of the Exchange Act,
except that the pro forma financial statements for the disposition of assets
reported in the Company’s current report on Form 8-K filed July 29, 2009 were
filed by amendment on Form 8-K/A on August 25, 2009. All such materials and
reports conformed in form and substance to the requirements of the Exchange Act
and the rules and regulations thereunder. As of the date hereof, either (A) the
aggregate market value of all securities sold by or on behalf of the Company
pursuant to General Instruction I.B.6. of Form S-3 under the Act during the
period of twelve calendar months immediately prior to, and including, the date
hereof (including without limitation any Stock sold prior to the date hereof or
to be sold on the date hereof pursuant to this Agreement, if applicable), in
each case calculated in accordance with Instruction 2 to General Instruction
I.B.6. of Form S-3, is not more than one-third of the aggregate market value of
the voting and non-voting “common equity” (as such term is defined in Rule 405
under the Act) held by non-affiliates of the Company calculated in accordance
with Instruction 1 to General Instruction I.B.6. of Form S-3 (the “Public
Float”) or (B) the Public Float is at least $75 million. The Company is not, and
has not previously been in the last 12 months, a “shell company” (as such term
is defined in Rule 405 under the Act).

(i) There is no litigation or governmental or other proceeding or investigation
before any court or before or by any public body or board pending or, to the
knowledge of the Company, threatened against, or involving the assets,
properties or businesses of the Company which, if resolved against the Company,
would have a Material Adverse Effect on the Company or the offering contemplated
by this Agreement, except as described in the Registration Statement.

 

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(j) The Company maintains insurance (issued by insurers of recognized financial
responsibility) of the types and in the amounts generally deemed adequate for
its businesses and, to the knowledge of the Company, consistent with insurance
coverage maintained by similar companies in similar businesses, including, but
not limited to, product liability insurance covering the Company’s products,
insurance covering real and personal property owned or leased by the Company
against theft, damage, destruction, acts of vandalism and all other risks
customarily insured against, all of which insurance is in full force and effect.

(k) Subsequent to the respective dates as of which information is given in the
Registration Statement and the Prospectus, except as described therein,
(i) there has not been any material adverse change in the assets or properties,
business, results of operations, or financial condition of the Company, whether
or not arising from transactions in the ordinary course of business; (ii) the
Company has not sustained any material loss or interference with its assets,
businesses or properties (whether owned or leased) from fire, explosion,
earthquake, flood or other calamity, whether or not covered by insurance, or
from any labor dispute or any court or legislative or other governmental action,
order or decree; (iii) the Company has not undertaken any liability or
obligation, direct or contingent, except such liabilities or obligations
undertaken in the ordinary course of business; and (iv) there has not been any
transaction that is material to the Company, except transactions in the ordinary
course of business or as otherwise disclosed in the Registration Statement and
the Prospectus.

(l) There is no document or contract of a character required to be described in
the Registration Statement or the Prospectus or to be filed as an exhibit to the
Registration Statement that is not described or filed in the manner and within
the time periods required under the Exchange Act. Each document, instrument,
contract and agreement of the Company described in the Registration Statement or
the Prospectus or incorporated by reference therein or listed as exhibits to the
Registration Statement is in full force and effect and is valid and enforceable
by and against the Company in accordance with their terms, assuming the due
authorization, execution and delivery thereof by each of the other parties
thereto, except as otherwise disclosed in the Registration Statement or
Prospectus. The Company is not, nor to the knowledge of the Company is any other
party, in default in the observance or performance of any term or obligation to
be performed by it under any such agreement, and no event has occurred which
with notice or lapse of time or both would constitute such a default, which
default or event would have a Material Adverse Effect. No default exists, and no
event has occurred which with notice or lapse of time or both would constitute a
default, in the due performance and observance of any term, covenant or
condition, by the Company of any other agreement or instrument to which the
Company is a party or by which it or its properties or business may be bound or
affected, which default or event would have a Material Adverse Effect.

(m) The Company is not in violation of any term or provision of its charter,
by-laws or operating agreement, as applicable. The Company is not in violation
of any franchise, license, permit, judgment, decree, order, statute, rule or
regulation, where the consequences of such violation would have a Material
Adverse Effect. The Company’s common stock is duly listed and registered on the
Trading Market (as defined below) and the Company is not in breach or violation
of, or in default under, any of the rules and regulations of the Trading Market.
The Company has not received any notice from the Trading Market regarding the
delisting or the potential delisting of the Company’s common stock from the
Trading Market except as disclosed in the Registration Statement.

 

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(n) Except as described in the Prospectus, neither the execution, delivery and
performance of this Agreement by the Company nor the consummation of any of the
transactions contemplated hereby (including, without limitation, the issuance
and sale by the Company of the Stock) will give rise to a right to terminate or
accelerate the due date of any payment due under, or conflict with or result in
the breach of any term or provision of, or constitute a default (or an event
which with notice or lapse of time or both would constitute a default) under, or
require any consent or waiver under, or result in the execution or imposition of
any lien, charge, encumbrance, claim, security interest, restriction or defect
upon any properties or assets of the Company pursuant to the terms of, any
indenture, mortgage, deed of trust or other agreement or instrument to which the
Company is a party or by which the Company is bound, or any of its properties
are bound, or any franchise, license, permit, judgment, decree, order, statute,
rule or regulation applicable to the Company or violate any provision of the
charter or by-laws of the Company, except for such consents or waivers which
have already been obtained and are in full force and effect.

(o) All of the outstanding shares of common stock of the Company have been duly
authorized and validly issued and are fully paid and nonassessable and none of
such shares were issued in violation of any pre-emptive or other similar right.
The Stock, when issued and sold pursuant to this Agreement, will be duly
authorized and validly issued, fully paid and nonassessable and will not be
issued in violation of any pre-emptive or other similar right. Except as
disclosed in the Registration Statement and the Prospectus, there is no
outstanding option, warrant or other right calling for the issuance of, and
there is no commitment or arrangement to issue, any capital stock of the Company
or any security convertible into or exercisable or exchangeable for such capital
stock, except for standard dividend reinvestment plans. The Stock conforms in
all material respects to all statements relating thereto contained in the
Registration Statement and the Prospectus. All stock options issued by the
Company have been issued in compliance with law; and the terms and provision of
such stock options were established in compliance with law.

(p) Subsequent to the respective dates as of which information is given in the
Registration Statement and the Prospectus, except as (x) described or referred
to therein, or (y) are not material (as to clauses (i) and (ii) only), are
consistent with past practice (as to clauses (i) and (ii) only), and are
publicly disclosed, the Company has not (i) issued any securities (except as
would have been permitted pursuant to the proviso contained in Section 3.1(k) of
this Agreement) or incurred any liability or obligation, direct or contingent,
except such liabilities or obligations incurred in the ordinary course of
business including, without limitation, debt financing to acquire and develop
properties, (ii) entered into any transaction not in the ordinary course of
business or (iii) declared or paid any dividend or made any distribution on any
shares of its capital stock or redeemed, purchased or otherwise acquired or
agreed to redeem, purchase or otherwise acquire any shares of its capital stock.

 

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(q) Except as disclosed in the Registration Statement and Prospectus, no holder
of any security of the Company has the right, which has not been waived, to have
any security owned by such holder included in the Registration Statement.

(r) All necessary corporate action has been duly and validly taken by the
Company to authorize the execution, delivery and performance of this Agreement
and the issuance and sale of the Stock by the Company. This Agreement has been
duly and validly authorized, executed and delivered by the Company and
constitutes and will constitute the legal, valid and binding obligation of the
Company, enforceable against the Company in accordance with its terms, except
insofar as enforceability may be limited by (i) applicable bankruptcy,
insolvency, reorganization, moratorium or other similar laws affecting the
rights of creditors generally or (ii) principles or rules of law governing
specific performance, injunctive relief or the availability of other equitable
remedies. Except for any “blue sky” filings or Trading Market (as defined below)
listing applications to be filed pursuant hereto), each approval, consent,
order, authorization, designation, declaration or filing by or with any
regulatory, administrative or other governmental body necessary in connection
with the execution and delivery by the Company of this Agreement and the
consummation of the transactions contemplated hereby and the issuance and sale
of the Stock by the Company has been obtained or made and is in full force and
effect. The Company will use commercially reasonable efforts to cause the Stock
to be listed for trading on the Trading Market. For purposes of this Agreement,
the “Trading Market” is (i) the NYSE Amex, and (ii) each other national
securities exchange or market on which the common stock of the Company trades or
is admitted for trading.

(s) The Company has not incurred any liability for a fee, commission or other
compensation on account of the employment of a broker or finder in connection
with the transactions contemplated by this Agreement other than as contemplated
hereby or as described in the Registration Statement.

(t) The Company is conducting its business in compliance with all applicable
laws, rules and regulations of the jurisdictions in which it is conducting
business, except where the failure to be so in compliance would not have a
Material Adverse Effect.

(u) No transaction has occurred between or among the Company and any of its
officers or directors or any affiliate or affiliates of any such officer or
director that is required to be described in and is not described in the
Registration Statement and the Prospectus.

(v) The Company has not taken, nor will it take, directly or indirectly, any
action designed to or which might reasonably be expected to cause or result in,
or which has constituted or which might reasonably be expected to constitute,
the stabilization or manipulation of the price of the common stock of the
Company to facilitate the sale or resale of any of the Stock.

(w) The Company has filed all federal, state, local and foreign tax returns that
are required to be filed through the date hereof (and will file all such tax
returns when and as required to be filed after the date hereof), or has received
extensions thereof, and has paid all taxes shown on such returns to be due on or
prior to the date hereof (and will pay all taxes shown on such returns to be due
after the date hereof) and all assessments received by it to the extent that the
same are material and have become due except where the failure to file such a
return or pay such amount would not have a Material Adverse Effect.

 

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(x) The Company owns or has valid, binding and enforceable licenses or other
rights to use the patents and patent applications, inventions, copyrights,
trademarks, service marks, trade names, service names, technology and know-how
(including without limitation trade secrets and other unpatented and/or
unpatentable proprietary rights but excluding generally commercially available
“off the shelf” software programs licensed pursuant to shrink wrap or “click and
accept” licenses) necessary to conduct the business of the Company in the manner
described in the Registration Statement and the Prospectus (collectively, the
“Company Intellectual Property”), except for any Company Intellectual Property
the absence of which, individually or in the aggregate, would not have a
Material Adverse Effect. Except as described in the Prospectus, the Company
Intellectual Property is free and clear of any pledge, lien, security interest,
encumbrance, claim or equitable interest, whether imposed by agreement,
contract, understanding, law, equity or otherwise, except for (i) liens for
taxes not yet due, (ii) mechanics liens and similar liens for labor, materials
or supplies incurred in the ordinary course of business for amounts that are not
delinquent and (iii) any liens that individually or in the aggregate are not
material (a “Permitted Liens”) or where any failure to have such adequate
licenses or other rights of use to such Intellectual Property, individually or
in the aggregate, would not reasonably be expected to have, individually or in
the aggregate, a Material Adverse Effect. The Company is not obligated to pay a
royalty, grant a license or provide other consideration to any third party in
connection with the Company Intellectual Property other than as disclosed in the
Registration Statement and the Prospectus. Except as disclosed in the
Registration Statement and the Prospectus or as would not have a Material
Adverse Effect, (i) the Company has not received any notice of infringement or
conflict with asserted rights of others with respect to any Company Intellectual
Property, (ii) the conduct of the business of the Company in the manner
described in the Registration Statement and the Prospectus does not and, to the
knowledge of the Company, will not, infringe, interfere or conflict with any
valid issued patent claim or other Intellectual Property right of any third
party and (iii) no third party, including without limitation any academic or
governmental organization, possesses or could obtain rights to the Company
Intellectual Property which, if exercised, could enable such party to develop
products competitive to those of the Company, other than rights arising under
applicable law in connection with government sponsorship of Company research
activities. Except as disclosed in the Registration Statement and the
Prospectus, the Company has not received any notice or has any knowledge of
(i) any potential infringement or misappropriation by others of the Company
Intellectual Property or (ii) any Intellectual Property of others that
potentially conflicts or interferes with the Company Intellectual Property, that
might reasonably be expected to have, individually or in the aggregate, a
Material Adverse Effect. To the Company’s knowledge, no claim of any patent or
patent application (assuming the claims of patent applications issue as
currently pending) included in the Company Intellectual Property is
unenforceable or invalid, except for such unenforceability or invalidity that
would not reasonably be expected to result, individually or in the aggregate, in
a Material Adverse Effect. Each former and current key employee and key
independent contractor of the Company has signed and delivered one or more
written contracts with the Company pursuant to which such employee or
independent contractor assigns to the Company all of his, her or its rights in
and to any inventions, discoveries, improvements, works of authorship, know-how
or information made, conceived, reduced to practice, authored or discovered in
the course of employment by or performance of services for the Company and any
and all patent rights, copyrights, trademark and other intellectual property
rights therein or thereto.

 

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(y) Except as described in the Registration Statement and the Prospectus, the
Company possesses all certificates, authorizations and permits issued by the
appropriate federal, state or foreign regulatory authorities necessary to
conduct their respective businesses as currently conducted, including without
limitation all such certificates, authorizations and permits required by the
United States Food and Drug Administration (the “FDA”) or any other federal,
state or foreign agencies or bodies engaged in the regulation of medical
devices, pharmaceuticals or biohazardous materials, except where the failure to
so possess such certificates, authorizations and permits, individually or in the
aggregate, would not result in a Material Adverse Effect. Except as described in
the Registration Statement and the Prospectus, the Company has not received any
notice of proceedings relating to the revocation or modification of any such
certificate, authorization or permit which, individually or in the aggregate, if
the subject of an unfavorable decision, ruling or finding, would have a Material
Adverse Effect.

(z) Except as described in the Registration Statement and the Prospectus, the
Company and the Subsidiaries and, to the Company’s knowledge, any third party
manufacturer of Company products are, and at all times have been, in material
compliance with all regulatory requirements applicable to the business,
including the registration and listing requirements set forth in 21 C.F.R. part
807. Except as described in the Registration Statement and the Prospectus, the
Company and the Subsidiaries are, and at all times have been, in compliance with
the written procedures, record-keeping, and FDA reporting requirements for
Medical Device Reporting set forth in 21 C.F.R. part 803 and similar adverse
event reporting requirements outside of the United States.

(aa) Except to the extent disclosed in the Registration Statement and the
Prospectus, the Company has not received any written notices or statements from
the FDA, the European Medicines Agency (“EMEA”) or any other governmental
agency, and otherwise has no knowledge or reason to believe, that (i) any
marketing authorization application for any medical device, drug candidate or
combination therapy of the Company described in the Registration Statement or
Prospectus (each a “Potential Product”) may or will be rejected or determined to
be non-approvable; (ii) a delay in time for review and/or approval of a
marketing authorization application or marketing approval application in any
jurisdiction for Potential Product is or may be required, requested or being
implemented; (iii) one or more clinical studies for Potential Product shall or
may be requested or required in addition to the clinical studies submitted to
the FDA prior to the date hereof as a precondition to or condition of issuance
or maintenance of a marketing approval for Potential Product; (iv) any license,
approval, permit or authorization to conduct any clinical trial of or market any
product or potential product of the Company has been, will be or may be
suspended, revoked, modified or limited, except in the cases of clauses (i),
(ii), (iii) and (iv) where such rejections, determinations, delays, requests,
suspensions, revocations, modifications or limitations might not reasonably be
expected to have, individually or in the aggregate, a Material Adverse Effect.

(bb) Except to the extent disclosed in the Registration Statement and the
Prospectus, to the Company’s knowledge, the preclinical and clinical testing,
application for marketing approval of, manufacture, distribution, promotion and
sale of the products and Potential Products of the Company is in compliance, in
all material respects, with all laws, rules and regulations applicable to such
activities, except for such non-compliance as would not, individually or in the
aggregate, have a Material Adverse Effect. The descriptions of the results of
such tests and trials contained in the Registration Statement and the Prospectus
are complete and accurate in all material respects such that there would be no
untrue statement of a material fact or an omission of a material fact necessary
to make the statements in the Registration Statement and Prospectus, in light of
the circumstances under which they are made, not misleading. The Company is not
aware of any studies, tests or trials the results of which reasonably call into
question the results of the tests and trials conducted by or on behalf of the
Company that are described or referred to in the Registration Statement or the
Prospectus. Except to the extent disclosed in the Registration Statement and the
Prospectus, the Company has not received notice of adverse finding, warning
letter or clinical hold notice from the FDA or any non-U.S. counterpart of any
of the foregoing, or any untitled letter or other correspondence or notice from
the FDA or any other governmental authority or agency or any institutional or
ethical review board alleging or asserting noncompliance with any law, rule or
regulation applicable in any jurisdiction, except notices, letters, and
correspondences and non-U.S. counterparts thereof alleging or asserting such
noncompliance as would not, individually or in the aggregate, have a Material
Adverse Effect. Except to the extent disclosed in the Registration Statement and
the Prospectus, the Company has not, either voluntarily or involuntarily,
initiated, conducted or issued, or caused to be initiated, conducted or issued,
any recall, field correction, market withdrawal or replacement, safety alert,
warning, “dear doctor” letter, investigator notice, or other notice or action
relating to an alleged or potential lack of safety or efficacy of any product or
potential product of the Company, any alleged product defect of any product or
potential product of the Company, or any violation of any material applicable
law, rule, regulation or any clinical trial or marketing license, approval,
permit or authorization for any product or potential product of the Company, and
the Company is not aware of any facts or information that would cause it to
initiate any such notice or action and has no knowledge or reason to believe
that the FDA, the EMEA or any other governmental agency or authority or any
institutional or ethical review board or other non-governmental authority
intends to impose, require, request or suggest such notice or action.

 

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(cc) The Company is not an “investment company” within the meaning of the
Investment Company Act of 1940, as amended.

(dd) The Company’s systems of internal accounting controls taken as a whole are
sufficient to meet the broad objectives of internal accounting control insofar
as those objectives pertain to the prevention or detection of errors or
irregularities in amounts that would be material in relation to the Company’s
financial statements; and, to the best of the Company’s knowledge, neither the
Company nor any employee or agent thereof has made any payment of funds of the
Company or received or retained any funds, and no funds of the Company have been
set aside to be used for any payment, in each case in violation of any law, rule
or regulation.

(ee) The Company is not involved in any labor dispute and, to the knowledge of
the Company, no such dispute has been threatened, except for such disputes as
would not have a Material Adverse Effect on the Company, or subject the Company
or its shareholders to any material liability or disability.

 

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(ff) Except as disclosed in the Registration Statement or the Prospectus,
(i) there has been no storage, disposal, generation, manufacture, refinement,
transportation, handling or treatment of toxic wastes, hazardous wastes or
hazardous substances by the Company (or to the knowledge of the Company, any of
their predecessors in interest) at, upon or from any of the property now or
previously owned or leased by the Company in violation of any applicable law,
ordinance, rule, regulation, order, judgment, decree or permit or which would
require remedial action under any applicable law, ordinance, rule, regulation,
order, judgment, decree or permit, except for any violation or remedial action
which would not have a Material Adverse Effect; (ii) there has been no material
spill, discharge, leak, emission, injection, escape, dumping or release of any
kind onto such property or into the environment surrounding such property of any
toxic wastes, solid wastes, hazardous wastes or hazardous substances due to or
caused by the Company, except for any such spill, discharge, leak emission,
injection, escape, dumping or release which would not have a Material Adverse
Effect; and (iii) the terms “hazardous wastes,” “toxic wastes” and “hazardous
substances” shall have the meanings specified in any applicable local, state,
federal and foreign laws or regulations with respect to environmental
protection.

(gg) There is and has been no failure on the part of the Company or any of the
Company’s directors or officers, in their capacities as such, to comply with any
provision of the Sarbanes-Oxley Act of 2002 and the rules and regulations
promulgated in connection therewith (the “Sarbanes-Oxley Act”), including
without limitation Section 402 related to loans and Sections 302 and 906 related
to certifications.

ARTICLE II

SALE AND DELIVERY OF SECURITIES

2.1 Sale and Delivery of Securities.

(a) On the basis of the representations, warranties and agreements herein
contained, but subject to the terms and conditions herein set forth, the Company
agrees to issue and sell through the Sales Manager, as agent, and the Sales
Manager agrees to sell, as agent for the Company, on a best efforts basis,
shares of the Stock during the term of this Agreement on the terms set forth
herein. The Stock will be sold from time to time, pursuant to the Registration
Statement and Prospectus and/or in any other manner permitted by law (including,
without limitation, privately negotiated transactions) at prices prevailing at
the time of sale and in such amounts as directed by the Company and as agreed to
by the Sales Manager.

(b) The Company or the Sales Manager may, upon notice to the other party hereto
by telephone (confirmed promptly by facsimile), at any time and from time to
time suspend the offering of shares of the Stock; provided, however, that such
suspension shall not affect or impair the parties’ respective obligations with
respect to the Stock sold hereunder prior to the giving of such notice.

(c) The compensation to the Sales Manager for sales of shares of the Stock shall
be at a fixed commission rate of four and one-half percent (4.5%) of the gross
sales price per share for the Stock sold under this Agreement, up to the first
Seven Million Dollars ($7,000,000) of aggregate gross offering proceeds, and
thereafter at a rate of three and one-half percent (3.5%) of the gross sales
price per share for all other sales of shares of the Stock sold under this
Agreement. The remaining proceeds, after further deduction for any transaction
fees imposed by any governmental or self-regulatory organization in respect to
such sale shall constitute the net proceeds to the Company for such Stock (the
“Net Proceeds”).

 

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(d) The Company shall open and maintain a trading account (the “Trading
Account”) at a clearing agent designated by the Sales Manager to facilitate the
transactions contemplated by this Agreement. The Company shall, with respect to
each sale of shares of the Stock, effect delivery of the applicable number of
shares of Stock to the Trading Account, on or before the third business day (or
such other day as is industry practice for regular-way trading) following each
sale of the Stock (each, a “Settlement Date”). The Net Proceeds from the sale of
the Stock shall be available in the Trading Account following the settlement of
the sale on the Settlement Date. The Sales Manager’s compensation shall be
withheld from the sales proceeds on each Settlement Date and shall be paid to
the Sales Manager.

(e) At each Settlement Date, the Company shall be deemed to have affirmed each
representation, warranty, covenant and other agreement contained in this
Agreement. Any obligation of the Sales Manager under this Agreement shall be
subject to the continuing accuracy of the representations and warranties of the
Company herein, to the performance by the Company of its obligations hereunder
and to the continuing satisfaction of the additional conditions specified in
Article IV below.

(f) If the Company shall default on its obligation to deliver Stock on any
Settlement Date, the Company shall (i) hold the Sales Manager harmless against
any loss, claim or damage arising from or as a result of such default by the
Company and (ii) pay the Sales Manager any commission to which it would
otherwise be entitled absent such default.

ARTICLE III

COVENANTS OF THE COMPANY

3.1 The Company covenants and agrees with the Sales Manager that:

(a) As promptly as practicable after the date of this Agreement, the Company
will file a supplement to the Prospectus under Rule 424(b) of the Act naming the
Sales Manager, as an underwriter, to permit sales of the Stock under the Act.

(b) During the period in which the Sales Agent has been requested to offer and
sell Stock, the Company will notify the Sales Manager promptly of the time when
any subsequent amendment to the Registration Statement has become effective or
any subsequent supplement to the Prospectus has been filed and of any request by
the Commission for any amendment or supplement to the Registration Statement or
the Prospectus or for additional information. The Company will prepare and file
with the Commission, promptly upon the Sales Manager’s reasonable request, any
amendments or supplements to the Registration Statement or Prospectus that, in
the Sales Manager’s reasonable opinion, may be necessary or advisable in
connection with the sale of the Stock pursuant to this Agreement. The Company
will not file any amendment or supplement to the Registration Statement or
Prospectus (other than a supplement to the Prospectus that (i) relates solely to
the issuance of securities other than the Stock of the Company pursuant to this
Agreement and (ii) does not materially change the information about the Company
or its business, operations, properties or financial condition disclosed in the
Registration Statement or Prospectus previously thereto (an “Excluded
Supplement”)) unless a copy thereof has been submitted to the Sales Manager a
reasonable period of time before the filing and the Sales Manager has not
reasonably objected thereto; and it will notify the Sales Manager at the time of
filing thereof of any document that, upon filing, is deemed to be incorporated
by reference in the Registration Statement or Prospectus (unless such document
is available on the SEC’s EDGAR database, in which case no notification shall be
required). The Company will cause each amendment to the Registration Statement
or supplement to the Prospectus, and each filing or report incorporated therein,
to be prepared in form and substance as required by the Act, the Rules and
Regulations, the Exchange Act and the rules and regulations thereunder, and to
be timely filed with the Commission. Any press releases or similar publicity by
the Company related to this offering that is not covered by the preceding
provisions of this Section 3(b) must be reasonably acceptable to the Sales
Manager.

 

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(c) The Company will advise the Sales Manager, promptly after it shall receive
notice or obtain knowledge thereof, of the issuance by the Commission of any
stop order suspending the effectiveness of the Registration Statement, of the
suspension of the qualification of the Stock for offering or sale in any
jurisdiction, or of the initiation or threatening of any proceeding for any such
purpose; and it will promptly use its commercially reasonable efforts to prevent
the issuance of any stop order or to obtain its withdrawal if such a stop order
should be issued.

(d) Within the time during which a prospectus relating to the Stock is required
to be delivered under the Act, the Company will comply with all requirements
imposed upon it by the Act and by the Rules and Regulations, as from time to
time in force, so far as necessary to permit the continuance of sales of or
dealings in the Stock as contemplated by the provisions hereof and the
Prospectus, including compliance with the requirement that the Company has not
sold within the twelve calendar months immediately prior to, and including, each
sale of shares of the Stock, securities with an aggregate market value in excess
of the amount allowed under General Instruction I.B.6. of Form S-3 under the
Act. If during such period any event occurs as a result of which the Prospectus,
as then amended or supplemented, would include an untrue statement of a material
fact or omit to state a material fact necessary to make the statements therein,
in the light of the circumstances then existing, not misleading, or if during
such period it is necessary to amend or supplement the Registration Statement or
Prospectus to comply with the Act, the Company will promptly notify the Sales
Manager to suspend the offering of shares of the Stock during such period and
the Company will amend or supplement the Registration Statement or Prospectus
(at the expense of the Company) so as to correct such statement or omission or
effect such compliance and will use commercially reasonable efforts to have any
amendment or supplement to the Registration Statement or Prospectus declared
effective as soon as possible, unless the Company has reasonable business
reasons to defer public disclosure of the relevant information.

(e) The Company will use commercially reasonable efforts to qualify the Stock
for sale under the securities laws of such jurisdictions as the Sales Manager
designates in writing and to continue such qualifications in effect so long as
required for the sale of the Stock, except that the Company shall not be
required in connection therewith to qualify as a foreign corporation or to
execute a general consent to service of process in any jurisdiction.

 

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(f) The Company will furnish to the Sales Manager and its legal counsel (at the
expense of the Company) copies of the Registration Statement and the Prospectus
during the period in which a prospectus relating to the Stock is required to be
delivered under the Act, in each case as soon as available and in such
quantities as the Sales Manager may from time to time reasonably request, and in
the case when the Trading Market is a national securities exchange, the Company
will also furnish copies of the Prospectus to such exchange in accordance with
Rule 153 under the Act.

(g) The Company will make generally available to its security holders as soon as
practicable, but in any event not later than 15 months after the end of the
Company’s current fiscal quarter, an earnings statement (which need not be
audited) covering a 12-month period that satisfies the provisions of
Section 11(a) of the Act and Rule 158 of the Rules and Regulations.

(h) The Company, whether or not the transactions contemplated hereunder are
consummated or this Agreement is terminated, will pay all of its expenses
incident to the performance of its obligations hereunder (including, but not
limited to, any transaction fees imposed by any governmental or self-regulatory
organization with respect to transactions contemplated by this Agreement and any
blue sky fees) and will pay the expenses of printing all documents relating to
the offering. The Company will reimburse the Sales Manager for its reasonable
out-of-pocket costs and expenses incurred in connection with entering into this
Agreement, including, without limitation, reasonable travel, reproduction,
printing and similar expenses, initial and ongoing due diligence, and reasonable
fees and disbursements of its legal counsel, up to an aggregate amount of
$50,000. In addition, without limiting the foregoing, the Company will pay, or
reimburse the Sales Manager for, any filing fees incurred by the Sales Manager
in connection with filings (if any) required to be made by the Sales Manager
with FINRA.

(i) The Company will use commercially reasonable efforts to maintain the
quotation of the Stock on the Trading Market and to file with the Trading Market
all documents and notices required by the Trading Market of companies quotations
for which are reported by the Trading Market.

(j) The Company will apply the Net Proceeds from the sale of the Stock as set
forth in the Prospectus.

(k) The Company will not, directly or indirectly, offer or sell any shares of
common stock (other than the Stock) or securities convertible into or
exchangeable for, or any rights to purchase or acquire, common stock, during the
period from the date of this Agreement through the final Settlement Date for the
sale of shares of the Stock hereunder without (i) giving the Sales Manager at
least eight hours prior written notice specifying the nature of the proposed
sale and the date of such proposed sale and (ii) suspending activity under this
program for such period of time as may reasonably be determined by agreement of
the Company and the Sales Manager; provided, however, that no such notice and
suspension shall be required in connection with the Company’s issuance or sale
of (i) shares of common stock pursuant to any employee or director stock option
or benefits plan, stock ownership plan, dividend reinvestment plan, as such
plans may be amended from time to time, (ii) common stock, options and
equity-based awards issued pursuant to the exception contained in Section 711(a)
of the NYSE Amex Company Guide, and (iii) common stock issuable upon conversion
of securities or the exercise of warrants, options or other rights in effect or
outstanding on the date hereof. Notwithstanding the foregoing, this paragraph
(k) shall not apply during periods that the Company is neither selling Stock
through the Sales Manager nor has requested the Sales Manager to sell Stock.

 

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(l) The Company will, at any time during the term of this Agreement, as
supplemented from time to time, advise the Sales Manager immediately after it
shall have received notice or obtained knowledge thereof, of any information or
fact that would materially alter or affect any opinion, certificate, letter and
other document provided to the Sales Manager pursuant to Article IV below.

(m) Each time that the Registration Statement or the Prospectus shall be amended
or supplemented (other than an Excluded Supplement) and on the dates specified
in Section 4.1(f) below, the Company shall (unless the Company is not then
selling Stock through the Sales Manager and has not requested the Sales Manager
to sell Stock) furnish or cause to be furnished to the Sales Manager forthwith a
certificate, in form and substance satisfactory to the Sales Manager, to the
effect that the statements contained in the certificates referred to in
Section 4.1(f) below that were last furnished to the Sales Manager are true and
correct at the time of such amendment, supplement, filing, as the case may be,
as though made at and as of such time (except that such statements shall be
deemed to relate to the Registration Statement and the Prospectus as amended and
supplemented to such time) or, in lieu of such certificates, certificates of the
same tenor as the certificates referred to in said Section 4.1(f) below,
modified as necessary to relate to the Registration Statement and the Prospectus
as amended and supplemented to the time of delivery of such certificate.

(n) Each time that a post-effective amendment to the Registration Statement is
declared effective or the Company files an Annual Report on Form 10-K, and at
such other times as may be reasonably requested by the Sales Manager, the
Company shall (unless the Company is not then selling Stock through the Sales
Manager and has not requested the Sales Manager to sell Stock) furnish or cause
to be furnished forthwith to the Sales Manager and to its legal counsel, a
written opinion of Sheppard, Mullin, Richter & Hamilton LLP (“Company Counsel”),
or other counsel reasonably satisfactory to the Sales Manager, dated the date of
effectiveness of such amendment or the date of filing with the Commission of
such document, as the case may be, in form and substance satisfactory to the
Sales Manager, of the same tenor as the opinion referred to in Section 4.1(d)
below, but modified as necessary to relate to the Registration Statement and the
Prospectus as amended and supplemented to the time of delivery of such opinion.
In addition, at each such time, the Company shall cause to be forwarded to the
Sales Manager such opinions of special counsel to the Company as may be
reasonably requested by the Sales Manager.

(o) Each time that a post-effective amendment to the Registration Statement is
declared effective or the Company files an Annual Report on Form 10-K, and at
such other times as may be reasonably requested by the Sales Manager, the
Company shall (unless the Company is not then selling Stock through the Sales
Manager and has not requested the Sales Manager to sell Stock) cause Marcum LLP,
or other independent accountants then retained by the Company, forthwith to
furnish to the Sales Manager a letter, dated the date of effectiveness of such
amendment, or the date of filing of such supplement or other document with the
Commission, as the case may be, in form and substance satisfactory to the Sales
Manager, of the same tenor as the letter referred to in Section 4.1(e) below but
modified to relate to the Registration Statement and the Prospectus, as amended
and supplemented to the date of such letter.

 

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(p) The Company represents and agrees that, unless it obtains the prior consent
of the Sales Manager, and the Sales Manager represents and agrees that, unless
it obtains the prior consent of the Company, it has not made and will not make
any offer relating to shares of the Stock to be sold pursuant to this Agreement
that would constitute an Issuer Free Writing Prospectus, or that would otherwise
constitute a “free writing prospectus” as defined in Rule 405, required to be
filed with the Commission. Any such free writing prospectus consented to by the
Company and the Sales Manager is hereinafter referred to as a “Permitted Free
Writing Prospectus.” The Company represents that it has treated and agrees that
it will treat each Permitted Free Writing Prospectus as an “issuer free writing
prospectus,” as defined in Rule 433 (“Rule 433”), and has complied and will
comply with the requirements of Rules 164 and 433, as applicable to any
Permitted Free Writing Prospectus, including timely Commission filings where
required, legending and record keeping.

For the purposes of this Section, “Issuer Free Writing Prospectus” means any
“issuer free writing prospectus,” as defined in Rule 433 under the Act, relating
to the Stock in the form filed or required to be filed with the Commission or,
if not required to be filed, in the form retained in the Company’s records
pursuant to Rule 433(g).

ARTICLE IV

CONDITIONS OF THE SALES MANAGER’S OBLIGATIONS

4.1 The obligations of the Sales Manager to sell the Stock as provided in this
Agreement shall be subject to the accuracy, as of the date hereof, and as of
each Settlement Date contemplated under this Agreement, of the representations
and warranties of the Company in this Agreement, to the performance by the
Company of its obligations in this Agreement and to the following additional
conditions:

(a) The Registration Statement has been declared effective. No stop order
suspending the effectiveness of the Registration Statement shall have been
issued and no proceeding for that purpose shall have been instituted or, to the
knowledge of the Company or the Sales Manager, threatened by the Commission, and
any request of the Commission for additional information (to be included in the
Registration Statement or the Prospectus or otherwise) shall have been complied
with to the Sales Manager’s reasonable satisfaction. The supplement to the
Prospectus contemplated by Section 3.1(a) above has been filed.

(b) The Sales Manager shall not have advised the Company that the disclosures in
the Registration Statement or the Prospectus are not reasonably acceptable to
the Sales Manager.

(c) Except as contemplated in the Prospectus, subsequent to the respective dates
as of which information is given in the Registration Statement and the
Prospectus, there shall not have been any material adverse change in the capital
stock of the Company, or any material adverse change, or any development that
may reasonably be expected to cause a material adverse change, in the condition
(financial or other), business, prospects, net worth or results of operations of
the Company, or any adverse change in the rating assigned to any debt securities
of the Company, if any.

 

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(d) The Sales Manager shall have received at the date of the first sale of
shares of the Stock hereunder (the “Commencement Date”) and at every other date
specified in Section 3.1(n) above, opinions of Company Counsel and special
counsel, dated as of the Commencement Date and dated as of such other date, in
form and substance reasonably acceptable to the Sales Manager.

(e) At the Commencement Date and at such other dates specified in Section 3.1(o)
above, the Sales Manager shall have received a “comfort letter” from Marcum LLP,
independent public accountants for the Company, or other independent accountants
then retained by the Company, dated the date of delivery thereof, in form and
substance satisfactory to the Sales Manager.

(f) The Sales Manager shall have received from the Company a certificate, or
certificates, signed by (i) the Chief Financial Officer and (ii) the President
and Chief Executive Officer or any Vice President of the Company, dated as of
the Commencement Date and (unless the Company is not then selling Stock through
the Sales Manager and has not requested the Sales Manager to sell Stock) dated
as of the first business day of each calendar month thereafter (each, a
“Certificate Date”), to the effect that, to the best of their knowledge based
upon reasonable investigation:

(i) The representations and warranties of the Company in this Agreement are true
and correct, as if made at and as of the Commencement Date or the Certificate
Date (as the case may be), and the Company has complied with all the agreements
and satisfied all the conditions on its part to be performed or satisfied at or
prior to the Commencement Date and each such Certificate Date (as the case may
be);

(ii) No stop order suspending the effectiveness of the Registration Statement
has been issued, and no proceeding for that purpose has been instituted or, to
the knowledge of such officer after due inquiry, is threatened, by the
Commission;

(iii) Since the date of this Agreement there has occurred no event required to
be set forth in an amendment or supplement to the Registration Statement or
Prospectus that has not been so set forth and there has been no document
required to be filed under the Exchange Act and the rules and regulations of the
Commission thereunder that upon such filing would be deemed to be incorporated
by reference in the Prospectus that has not been so filed; and

(iv) Since the date of this Agreement, there has not been any material adverse
change in the assets or properties, business, prospects, results of operations,
or condition (financial or otherwise) of the Company, which has not been
described in an amendment or supplement to the Registration Statement or
Prospectus (directly or by incorporation).

 

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(g) At the Commencement Date and on each Settlement Date, the Company shall have
furnished to the Sales Manager such appropriate further information, officers’
certificates and similar documents as the Sales Manager may reasonably request.

(h) At the Commencement Date and on each Settlement Date, the Company shall have
listed for quotation the Stock on the Trading Market.

All such opinions, certificates, letters and other documents will be in
compliance with the provisions hereof only if they are satisfactory in form and
substance to the Sales Manager. The Company will furnish the Sales Manager with
such conformed copies of such opinions, certificates, letters and other
documents, as the Sales Manager shall reasonably request.

ARTICLE V

INDEMNIFICATION AND CONTRIBUTION

5.1 The Company agrees to indemnify and hold harmless the Sales Manager and each
person, if any, who controls the Sales Manager within the meaning of Section 15
of the Act or Section 20 of the Exchange Act (collectively, the “Sales Manager
Indemnitees”), as follows:

(a) against any and all loss, liability, claim, damage and expense whatsoever,
as incurred, arising out of any untrue statement or alleged untrue statement of
a material fact contained in the Registration Statement (or any amendment
thereto), or the omission or alleged omission therefrom of a material fact
required to be stated therein or necessary to make the statements therein not
misleading or arising out of any untrue statement or alleged untrue statement of
a material fact contained in any preliminary prospectus or the Prospectus (or
any amendment or supplement thereto) or the omission or alleged omission
therefrom of a material fact necessary in order to make the statements therein,
in the light of the circumstances under which they were made, not misleading;

(b) against any and all loss, liability, claim, damage and expense whatsoever,
as incurred, to the extent of the aggregate amount paid in settlement of any
litigation, or any investigation or proceeding by any governmental agency or
body, commenced or threatened, or of any claim whatsoever based upon any such
untrue statement or omission, or any such alleged untrue statement or omission,
if such settlement is effected with the written consent of the Company; and

(c) against any and all expense whatsoever, as incurred (including, subject to
Section 5.3 below, the reasonable fees and disbursements of legal counsel chosen
by the Sales Manager), reasonably incurred in investigating, preparing or
defending against any litigation, or any investigation or proceeding by any
governmental agency or body, commenced or threatened, or any claim whatsoever
based upon any such untrue statement or omission, or any such alleged untrue
statement or omission, to the extent that any such expense is not paid under
(i) or (ii) above;

provided, however, that this indemnity agreement shall not apply to any loss,
liability, claim, damage or expense to the extent arising out of any untrue
statement or omission or alleged untrue statement or omission made in reliance
upon and in conformity with written information furnished to the Company by the
Sales Manager expressly for use in the Registration Statement (or any amendment
thereto) or any preliminary prospectus or the Prospectus (or any amendment or
supplement thereto).

 

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5.2 The Sales Manager agrees to indemnify and hold harmless the Company and its
directors and each officer of the Company who signed the Registration Statement,
and each person, if any, who controls the Company within the meaning of
Section 15 of the Act or Section 20 of the Exchange Act against any and all
loss, liability, claim, damage and expense described in the indemnity contained
in Section 5.1 above, as incurred, but only with respect to untrue statements or
omissions, or alleged untrue statements or omissions, made in the Registration
Statement (or any amendments thereto) or any preliminary prospectus or the
Prospectus (or any amendment or supplement thereto) in reliance upon and in
conformity with written information furnished to the Company by the Sales
Manager expressly for use in the Registration Statement (or any amendment
thereto) or such preliminary prospectus or the Prospectus (or any amendment or
supplement thereto). The total liability of the Sales Manager under this
Section 5.2 shall not exceed the Net Proceeds in respect of the Stock sold by
the Sales Manager that is the subject of the dispute.

5.3 Any indemnified party that proposes to assert the right to be indemnified
under this Article V will, promptly after receipt of notice of commencement of
any action against such party in respect of which a claim is to be made against
an indemnifying party or parties under this Article V, notify each such
indemnifying party of the commencement of such action, enclosing a copy of all
papers served, but the omission so to notify such indemnifying party will not
relieve the indemnifying party from any liability that it might have to any
indemnified party to the extent it is not materially prejudiced as a result
thereof. If any such action is brought against any indemnified party and it
notifies the indemnifying party of its commencement, the indemnifying party will
be entitled to participate in and, to the extent that it elects by delivering
written notice to the indemnified party promptly after receiving notice of the
commencement of the action from the indemnified party, jointly with any other
indemnifying party similarly notified, to assume the defense of the action, with
legal counsel reasonably satisfactory to the indemnified party, and after notice
from the indemnifying party to the indemnified party of its election to assume
the defense, the indemnifying party will not be liable to the indemnified party
for any legal or other expenses except as provided below. The indemnified party
will have the right to employ its own legal counsel in any such action, but the
fees, expenses and other charges of such legal counsel will be at the expense of
such indemnified party unless (1) the employment of legal counsel by the
indemnified party has been authorized in writing by the indemnifying party,
(2) the indemnified party has reasonably concluded (based on the written advice
of legal counsel) that there may be legal defenses available to it or other
indemnified parties that are different from or in addition to those available to
the indemnifying party, (3) a conflict or potential conflict exists (based on
the written advice of legal counsel to the indemnified party) between the
indemnified party and the indemnifying party (in which case the indemnifying
party will not have the right to direct the defense of such action on behalf of
the indemnified party) or (4) the indemnifying party has not in fact employed
legal counsel to assume the defense of such action within a reasonable time
after receiving notice of the commencement of the action, in each of which cases
the reasonable fees, disbursements and other charges of legal counsel will be at
the expense of the indemnifying party or parties. It is understood that the
indemnifying party or parties shall not, in connection with any proceeding or
related proceedings in the same jurisdiction, be liable for the reasonable fees,
disbursements and other charges of more than one separate firm (together with
associated local counsel, if any) at any one time for all such indemnified party
or parties. All such fees, disbursements and other charges will be reimbursed by
the indemnifying party promptly as they are incurred. An indemnifying party will
not be liable for any settlement of any action or claim effected without its
written consent (which consent will not be unreasonably withheld).

 

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5.4 In order to provide for just and equitable contribution in circumstances in
which the indemnification provided for in the foregoing paragraphs of this
Article V is applicable in accordance with its terms but for any reason is held
to be unavailable from the Company or the Sales Manager, the Company and the
Sales Manager will contribute to the total losses, claims, liabilities, expenses
and damages (including any investigative, legal and other expenses reasonably
incurred in connection with, and any amount paid in settlement of, any action,
suit or proceeding or any claim asserted, but after deducting any contribution
received by the Company from persons other than the Sales Manager, such as
persons who control the Company within the meaning of the Act, officers of the
Company who signed the Registration Statement and directors of the Company, who
also may be liable for contribution) to which the Company and the Sales Manager
may be subject in such proportion as shall be appropriate to reflect the
relative benefits received by the Company on the one hand and the Sales Manager
on the other. The relative benefits received by the Company on the one hand and
the Sales Manager on the other hand shall be deemed to be in the same proportion
as the total net proceeds from the offering (before deducting expenses) received
by the Company bear to the total compensation (before deducting expenses)
received by the Sales Manager from the sale of shares of the Stock on behalf of
the Company. If, but only if, the allocation provided by the foregoing sentence
is not permitted by applicable law, the allocation of contribution shall be made
in such proportion as is appropriate to reflect not only the relative benefits
referred to in the foregoing sentence but also the relative fault of the
Company, on the one hand, and the Sales Manager, on the other, with respect to
the statements or omission which resulted in such loss, claim, liability,
expense or damage, or action in respect thereof, as well as any other relevant
equitable considerations with respect to such offering. Such relative fault
shall be determined by reference to whether the untrue or alleged untrue
statement of a material fact or omission or alleged omission to state a material
fact relates to information supplied by the Company or the Sales Manager, the
intent of the parties and their relative knowledge, access to information and
opportunity to correct or prevent such statement or omission. The Company and
the Sales Manager agree that it would not be just and equitable if contributions
pursuant to this Section 5.4 were to be determined by pro rata allocation or by
any other method of allocation, which does not take into account, the equitable
considerations referred to herein. The amount paid or payable by an indemnified
party as a result of the loss, claim, liability, expense or damage, or action in
respect thereof, referred to above in this Section 5.4 shall be deemed to
include, for the purpose of this Section 5.4, any legal or other expenses
reasonably incurred by such indemnified party in connection with investigating
or defending any such action or claim. Notwithstanding the foregoing provisions
of this Section 5.4, the Sales Manager shall not be required to contribute any
amount in excess of the amount by which the total actual sales price at which
Stock sold by the Sales Manager exceeds the amount of any damages that the Sales
Manager has otherwise been required to pay by reason of such untrue or alleged
untrue statement or omission or alleged omission and no person found guilty of
fraudulent misrepresentation (within the meaning of Section 11(f) of the Act)
will be entitled to contribution from any person who was not guilty of such
fraudulent misrepresentation. For purposes of this Section 5.4, any person who
controls a party to this Agreement within the meaning of the Act will have the
same rights to contribution as that party, and each officer and director of the
Company who signed the Registration Statement will have the same rights to
contribution as the Company, subject in each case to the provisions hereof. Any
party entitled to contribution, promptly after receipt of notice of commencement
of any action against such party in respect of which a claim for contribution
may be made under this Section 5.4, will notify any such party or parties from
whom contribution may be sought, but the omission so to notify will not relieve
that party or parties from whom contribution may be sought from any other
obligation it or they may have under this Section 5.4. No party will be liable
for contribution with respect to any action or claim settled without its written
consent (which consent will not be unreasonably withheld).

 

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5.5 The indemnity and contribution provided by this Article V shall not relieve
the Company and the Sales Manager from any liability the Company and the Sales
Manager may otherwise have (including, without limitation, any liability the
Sales Manager may have for a breach of its obligations under Article II above).

ARTICLE VI

REPRESENTATIONS AND AGREEMENTS TO SURVIVE DELIVERY

6.1 All representations, warranties and agreements of the Company herein or in
certificates delivered pursuant hereto, and the agreements of the Sales Manager
contained in Article V above, shall remain operative and in full force and
effect regardless of any investigation made by or on behalf of the Sales Manager
or any controlling persons, or the Company (or any of their officers, directors
or controlling persons), and shall survive delivery of and payment for the
Stock.

ARTICLE VII

TERMINATION

7.1 The Company shall have the right, by giving notice as hereinafter specified,
to terminate this Agreement in its sole discretion at any time. Any such
termination shall be without liability of any party to any other party except
that the provisions of Section 3.1(h), Article V and Article VI above shall
remain in full force and effect notwithstanding such termination.

7.2 The Sales Manager shall have the right, by giving notice as hereinafter
specified, to terminate this Agreement in its sole discretion at any time. Any
such termination shall be without liability of any party to any other party
except that the provisions of Section 3.1(h), Article V and Article VI above
shall remain in full force and effect notwithstanding such termination.

7.3 This Agreement shall remain in full force and effect unless terminated
pursuant to Sections 7.1 or 7.2 above or otherwise by mutual agreement of the
parties; provided that any such termination by mutual agreement shall in all
cases be deemed to provide that Section 3.1(h), Article V and Article VI above
shall remain in full force and effect.

 

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7.4 Any termination of this Agreement shall be effective on the date specified
in such notice of termination; provided that such termination shall not be
effective until the close of business on the date of receipt of such notice by
the Sales Manager or the Company, as the case may be. If such termination shall
occur during a period when sales of shares of the Stock are being made pursuant
to this Agreement, any sales of shares of the Stock made prior to the
termination of this Agreement shall settle in accordance with the provisions of
this Agreement.

ARTICLE VIII

NOTICES

8.1 All notices or communications hereunder shall be in writing and if sent to
the Sales Manager shall be mailed, delivered or facsimiled and confirmed to the
Sales Manager at Brinson Patrick Securities Corporation, 1515 Broadway, 11th
Floor, New York, New York 10036, facsimile number (212) 453-5555, Attention:
Corporate Finance, or if sent to the Company, shall be mailed, delivered or
telecopied and confirmed to the Company at 12255 El Camino Real, Suite 250, San
Diego, California 92130, Attention: Tyler M. Dylan; facsimile number
(858) 436-1011. Each party to this Agreement may change such address for notices
by sending to the parties to this Agreement written notice of a new address for
such purpose.

ARTICLE IX

MISCELLANEOUS

9.1 This Agreement shall inure to the benefit of and be binding upon the Company
and the Sales Manager and their respective successors and the controlling
persons, officers and directors referred to in Article V above, and no other
person will have any right or obligation hereunder.

9.2 Indemnification pursuant to Section 5.1 hereof will not constitute the
exclusive remedy available to the Sales Manager Indemnitees for any breach or
alleged breach by the Company of any representation, warranty, covenant or
agreement contained in this Agreement.

9.3 This Agreement constitutes the entire agreement and supersedes all other
prior and contemporaneous agreements and undertakings, both written and oral,
between the parties hereto with regard to the subject matter hereof.

9.4 THIS AGREEMENT SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE
INTERNAL LAWS OF THE STATE OF NEW YORK WITHOUT REGARD TO THE PRINCIPLES OF
CONFLICTS OF LAWS.

9.5 This Agreement may be executed in two or more counterparts, each of which
shall be deemed an original, but all of which together shall constitute one and
the same instrument. The parties agree that this Agreement will be considered
signed when the signature of a party is delivered by facsimile transmission.
Such facsimile transmission shall be treated in all respects as having the same
effect as an original signature.

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IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly
executed by their respective authorized officers as of the date hereof.

 

CARDIUM THERAPEUTICS, INC. By:  

/s/ Tyler Dylan-Hyde

  Name: Tyler Dylan-Hyde   Title: Chief Business Officer BRINSON PATRICK
SECURITIES CORPORATION By:  

/s/ Todd Wyche

  Name: Todd Wyche   Title: Managing Director

 

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SCHEDULE 1.1(f)

List of Significant Subsidiaries

Tissue Repair Company

 

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