NOTE AND WARRANT PURCHASE

AGREEMENT

 
Dated as of September 26, 2007

 
by and among

 
DUSKA THERAPEUTICS, INC.

 
and

 
THE PURCHASERS LISTED ON EXHIBIT A

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TABLE OF CONTENTS
 
Page
 
ARTICLE I
Purchase and Sale of Notes and Warrants
1
Section 1.1
Purchase and Sale of Notes and Warrants.
1
Section 1.2
Purchase Price and Closing
2
Section 1.3
Conversion Shares / Warrant Shares
2
     
ARTICLE II
Representations and Warranties
3
Section 2.1
Representations and Warranties of the Company
3
Section 2.2
Representations and Warranties of the Purchasers
13
     
ARTICLE III
Covenants
15
Section 3.1
Securities Compliance
16
Section 3.2
Registration and Listing
15
Section 3.3
Inspection Rights
16
Section 3.4
Compliance with Laws
16
Section 3.5
Keeping of Records and Books of Account
16
Section 3.6
Reporting Requirements
16
Section 3.7
Other Agreements
17
Section 3.8
Use of Proceeds
17
Section 3.9
Reporting Status
17
Section 3.10
Disclosure of Transaction
17
Section 3.11
Disclosure of Material Information
18
Section 3.12
Pledge of Securities
18
Section 3.13
Amendments
18
Section 3.14
Distributions
18
Section 3.15
Reservation of Shares
18
Section 3.16
Transfer Agent Instructions
18
Section 3.17
Disposition of Assets
19
Section 3.18
Form SB-2 Eligibility
19
Section 3.19
Restrictions on Certain Issuances of Securities
19
Section 3.20
Increase in Authorized Shares of Common Stock
19
Section 3.21
Acquisition of Assets
20
Section 3.22
Subsequent Financings
20
     
ARTICLE IV
Conditions
22
Section 4.1
Conditions Precedent to the Obligation of the Company to Close and to Sell the
Securities
22
Section 4.2
Conditions Precedent to the Obligation of the Purchasers to Close and to
Purchase the Securities
23
     
ARTICLE V
Certificate Legend
25
Section 5.1
Legend
25
     
ARTICLE VI
Indemnification
26
Section 6.1
General Indemnity.
26
Section 6.2
Indemnification Procedure
26

 

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TABLE OF CONTENTS
(continued)
 
Page
 

     
ARTICLE VII
Miscellaneous
27
Section 7.1
Fees and Expenses
27
Section 7.2
Specific Performance; Consent to Jurisdiction; Venue.
27
Section 7.3
Entire Agreement; Amendment
28
Section 7.4
Notices
28
Section 7.5
Waivers
29
Section 7.6
Headings
29
Section 7.7
Successors and Assigns
29
Section 7.8
No Third Party Beneficiaries
29
Section 7.9
Governing Law
29
Section 7.10
Survival
30
Section 7.11
Counterparts
30
Section 7.12
Publicity
30
Section 7.13
Severability
30
Section 7.14
Further Assurances
30

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NOTE AND WARRANT PURCHASE AGREEMENT

This NOTE AND WARRANT PURCHASE AGREEMENT dated as of September 26, 2007 (this
“Agreement”) by and among Duska Therapeutics, Inc., a Nevada corporation (the
“Company”), and each of the purchasers of the senior secured convertible
promissory notes of the Company whose names are set forth on Exhibit A attached
hereto (each a “Purchaser” and collectively, the “Purchasers”).

The parties hereto agree as follows:
 
ARTICLE I
 
PURCHASE AND SALE OF NOTES AND WARRANTS
 
Section 1.1 Purchase and Sale of Notes and Warrants.
 
(a) Upon the following terms and conditions, the Company shall issue and sell to
the Purchasers, and the Purchasers shall purchase from the Company, (i) 10%
senior secured convertible promissory notes in the aggregate principal amount of
up to $5,750,000, convertible into shares of the Company’s common stock, par
value $0.001 per share (the “Common Stock”), in substantially the form attached
hereto as Exhibit B (the “Notes”). The Company and the Purchasers are executing
and delivering this Agreement in accordance with and in reliance upon the
exemption from securities registration afforded by Section 4(2) of the U.S.
Securities Act of 1933, as amended, and the rules and regulations promulgated
thereunder (the “Securities Act”), including Regulation D (“Regulation D”),
and/or upon such other exemption from the registration requirements of the
Securities Act as may be available with respect to any or all of the investments
to be made hereunder. All share numbers and per share, exercise and conversion
prices set forth in this Agreement and the Transaction Documents assume the
effectuation, prior to the date hereof, of the reverse split of the Company as
disclosed in the Company’s Information Statement filed with the Commission on
February 28, 2007; to the extent such reverse split was not effected prior to
the date hereof, appropriate and proportional adjustment shall be made to all
share numbers and per share, exercise and conversion prices set forth herein and
in the other Transaction Documents.
 
(b) Upon the following terms and conditions, the Purchasers shall be issued (i)
Warrants, in substantially the form attached hereto as Exhibit C (the “Long Term
Warrants”), to purchase a number of shares of Common Stock equal to one hundred
percent (100%) of the number of Conversion Shares issuable upon conversion of
such Purchaser’s Note at an exercise price per share equal to the Warrant Price
(as defined in the Long Term Warrants) for a term of five (5) years following
the Closing Date and (ii) Warrants, in substantially the form attached hereto as
Exhibit D (the “Short Term Warrants” and, together with the Long Term Warrants,
the “Warrants”), to purchase a number of shares of Common Stock equal to one
hundred percent (100%) of the number of Conversion Shares issuable upon
conversion of such Purchaser’s Note at an exercise price per share equal to the
Warrant Price (as defined in the Short Term Warrants) for a term that expires on
the later of (a) one (1) year following the Closing Date and (b) the date that
is the 90th continuous day of effectiveness of the Registration Statement
permitting the resale of all of the Warrant Shares pursuant to the Registration
Statement. The number of shares of Common Stock issuable upon exercise of the
Warrants issuable to each Purchaser is set forth opposite such Purchaser’s name
on Exhibit A attached hereto.
 

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Section 1.2 Purchase Price and Closing. Subject to the terms and conditions
hereof, the Company agrees to issue and sell to the Purchasers and, in
consideration of and in express reliance upon the representations, warranties,
covenants, terms and conditions of this Agreement, the Purchasers, severally but
not jointly, agree to purchase the Notes and Warrants for an aggregate purchase
price of up to $5,750,000 (the “Purchase Price”). The closing under this
Agreement (the “Closing”) shall take place on or before September 26, 2007 (the
“Closing Date”). The closing of the purchase and sale of the Notes and Warrants
to be acquired by the Purchasers from the Company under this Agreement shall
take place at the offices of Platinum Long Term Growth VI, LLC (the “Lead
Purchaser”), 152 West 57th Street, 54th Floor, New York, 10:00 a.m. New York
time; provided, that all of the conditions set forth in Article IV hereof and
applicable to the Closing shall have been fulfilled or waived in accordance
herewith. Subject to the terms and conditions of this Agreement, at the Closing
the Company shall deliver or cause to be delivered to each Purchaser (x) Notes
for the principal amount set forth opposite the name of such Purchaser on
Exhibit A hereto and (y) Warrants to purchase such number of shares of Common
Stock as is set forth opposite the name of such Purchaser on Exhibit A attached
hereto. At the Closing, each Purchaser shall deliver its Purchase Price by wire
transfer of immediately available funds to the Company.
 
Section 1.3 Conversion Shares / Warrant Shares. The Company has authorized and
has reserved and covenants to continue to reserve, free of preemptive rights and
other similar contractual rights of stockholders a total of 44,700,000 shares of
Common Stock to effect the conversion of the Notes and any interest accrued and
outstanding thereon and exercise of the Warrants. Within 90 days of the Closing
Date, the Company shall amend its Articles to increase the number of authorized
shares of Common Stock (the date of the effectiveness of such amendment, the
“Amendment Date”). On an after the Amendment Date, the Company shall reserve
(and hereby covenants to continue to reserve), free of preemptive rights and
other similar contractual rights, a number of its authorized but unissued shares
of Common Stock equal to one hundred twenty percent (120%) of the aggregate
number of shares of Common Stock to effect the conversion of the Notes and any
interest accrued and outstanding thereon and exercise of the Warrants. Any
shares of Common Stock issuable upon conversion of the Notes and any interest
accrued and outstanding on the Notes are herein referred to as the “Conversion
Shares”. Any shares of Common Stock issuable upon exercise of the Warrants (and
such shares when issued) are herein referred to as the “Warrant Shares”. The
Notes, the Warrants, the Conversion Shares and the Warrant Shares are sometimes
collectively referred to herein as the “Securities”.
 
 
ARTICLE II
 
REPRESENTATIONS AND WARRANTIES
 
Section 2.1 Representations and Warranties of the Company. The Company hereby
represents and warrants to the Purchasers, as of the date hereof and the Closing
Date (except as set forth on the Schedule of Exceptions attached hereto with
each numbered Schedule corresponding to the section number herein), as follows:
 

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(a) Organization, Good Standing and Power. The Company is a corporation duly
incorporated, validly existing and in good standing under the laws of the State
of Nevada and has the requisite corporate power to own, lease and operate its
properties and assets and to conduct its business as it is now being conducted.
The Company does not have any direct or indirect Subsidiaries (as defined in
Section 2.1(g)) or own securities of any kind in any other entity except as set
forth on Schedule 2.1(g) hereto. The Company and each such Subsidiary (as
defined in Section 2.1(g)) is duly qualified as a foreign corporation to do
business and is in good standing in every jurisdiction in which the nature of
the business conducted or property owned by it makes such qualification
necessary except for any jurisdiction(s) (alone or in the aggregate) in which
the failure to be so qualified will not have a Material Adverse Effect. For the
purposes of this Agreement, “Material Adverse Effect” means any material adverse
effect on the business, operations, properties, prospects, or financial
condition of the Company and its Subsidiaries and/or any condition,
circumstance, or situation that would prohibit or otherwise materially interfere
with the ability of the Company to perform any of its obligations under this
Agreement or any of the Transaction Documents in any material respect.
 
(b) Authorization; Enforcement. The Company has the requisite corporate power
and authority to enter into and perform this Agreement, the Notes, the Warrants,
the Registration Rights Agreement by and among the Company and the Purchasers,
dated as of the date hereof, substantially in the form of Exhibit E attached
hereto (the “Registration Rights Agreement”), the Security Agreement by and
among the Company and its wholly owned subsidiaries, on the one hand, and the
Agent (as defined in the Security Agreement), on the other hand, dated as of the
date hereof, substantially in the form of Exhibit F attached hereto (the
“Security Agreement”), the Patent, Trademark and Copyright Security Agreement by
and among the Company and its wholly owned subsidiaries, on the one hand, and
the Agent (as defined in the IP Security Agreement), on the other hand, dated as
of the date hereof, substantially in the form of Exhibit G attached hereto (the
“IP Security Agreement”) the Guarantee to be delivered by each of the
Subsidiaries, dated as of the date hereof, substantially in the form of Exhibit
H attached hereto (the “Guarantee”), the Officer’s Certificate to be delivered
by Duska Therapeutics, Inc., dated as of the Closing Date, substantially in the
form of Exhibit I attached hereto (the “Officer’s Certificate”) and the
Irrevocable Transfer Agent Instructions (as defined in Section 3.16 hereof)
(collectively, the “Transaction Documents”) and to issue and sell the Securities
in accordance with the terms hereof. The execution, delivery and performance of
the Transaction Documents by the Company and the consummation by it of the
transactions contemplated thereby have been duly and validly authorized by all
necessary corporate action, and, except as set forth on Schedule 2.1(b), no
further consent or authorization of the Company, its Board of Directors or
stockholders is required. When executed and delivered by the Company, each of
the Transaction Documents shall constitute a valid and binding obligation of the
Company enforceable against the Company in accordance with its terms, except as
such enforceability may be limited by applicable bankruptcy, reorganization,
moratorium, liquidation, conservatorship, receivership or similar laws relating
to, or affecting generally the enforcement of, creditor’s rights and remedies or
by other equitable principles of general application.
 

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(c) Capitalization. The authorized capital stock and the issued and outstanding
shares of capital stock of the Company as of the Closing Date is set forth on
Schedule 2.1(c) hereto. All of the outstanding shares of the Common Stock and
any other outstanding security of the Company have been duly and validly
authorized. Except as set forth in this Agreement, the Commission Documents (as
defined in Section 2.1(f)) or as set forth on Schedule 2.1(c) hereto, no shares
of Common Stock or any other security of the Company are entitled to preemptive
rights or registration rights and there are no outstanding options, warrants,
scrip, rights to subscribe to, call or commitments of any character whatsoever
relating to, or securities or rights convertible into, any shares of capital
stock of the Company. Furthermore, except as set forth in this Agreement and as
set forth on Schedule 2.1(c) hereto, there are no contracts, commitments,
understandings, or arrangements by which the Company is or may become bound to
issue additional shares of the capital stock of the Company or options,
securities or rights convertible into shares of capital stock of the Company.
Except for customary transfer restrictions contained in agreements entered into
by the Company in order to sell restricted securities or as provided on Schedule
2.1(c) hereto, the Company is not a party to or bound by any agreement or
understanding granting registration or anti-dilution rights to any person with
respect to any of its equity or debt securities. Except as set forth on Schedule
2.1(c), the Company is not a party to, and it has no knowledge of, any agreement
or understanding restricting the voting or transfer of any shares of the capital
stock of the Company.
 
(d) Issuance of Securities. The Notes and the Warrants to be issued at the
Closing have been duly authorized by all necessary corporate action and, when
paid for or issued in accordance with the terms hereof, the Notes shall be
validly issued and outstanding, free and clear of all liens, encumbrances and
rights of refusal of any kind. When the Conversion Shares and Warrant Shares are
issued and paid for in accordance with the terms of this Agreement and as set
forth in the Notes and Warrants, such shares will be duly authorized by all
necessary corporate action and validly issued and outstanding, fully paid and
nonassessable, free and clear of all liens, encumbrances and rights of refusal
of any kind and the holders shall be entitled to all rights accorded to a holder
of Common Stock.
 
(e) No Conflicts. The execution, delivery and performance of the Transaction
Documents by the Company, the performance by the Company of its obligations
under the Notes and the consummation by the Company of the transactions
contemplated hereby and thereby, and the issuance of the Securities as
contemplated hereby, do not and will not (i) violate or conflict with any
provision of the Company’s Articles of Incorporation (the “Articles”) or Bylaws
(the “Bylaws”), each as amended to date, or any Subsidiary’s comparable charter
documents, subject to the filing of an amendment to the Articles to increase the
authorized shares, (ii) conflict with, or constitute a default (or an event
which with notice or lapse of time or both would become a default) under, or
give to others any rights of termination, amendment, acceleration or
cancellation of, any agreement, mortgage, deed of trust, indenture, note, bond,
license, lease agreement, instrument or obligation to which the Company or any
of its Subsidiaries is a party or by which the Company or any of its
Subsidiaries’ respective properties or assets are bound, (iii) result in a
violation of any federal, state, local or foreign statute, rule, regulation,
order, judgment or decree (including federal and state securities laws and
regulations) applicable to the Company or any of its Subsidiaries or by which
any property or asset of the Company or any of its Subsidiaries are bound or
affected, or (iv) create or impose a lien, mortgage, security interest, charge
or encumbrance of any nature on any property or asset of the Company or its
Subsidiaries under any agreement or any commitment to which the Company or any
of its Subsidiaries is a party or by which the Company or any of its
Subsidiaries is bound or by which any of their respective properties or assets
are bound, except, in all cases, for such conflicts, defaults, terminations,
amendments, acceleration, cancellations and violations as would not,
individually or in the aggregate, have a Material Adverse Effect (other than
violations pursuant to clauses (i) or (iii) (with respect to federal and state
securities laws)). Neither the Company nor any of its Subsidiaries is required
under federal, state, foreign or local law, rule or regulation to obtain any
consent, authorization or order of, or make any filing or registration with, any
court or governmental agency in order for it to execute, deliver or perform any
of its obligations under the Transaction Documents or issue and sell the
Securities in accordance with the terms hereof (other than any filings, consents
and approvals which may be required to be made by the Company under applicable
state and federal securities laws, rules or regulations or any registration
provisions provided in the Registration Rights Agreement). The business of the
Company and its Subsidiaries is not being conducted in violation of any laws,
ordinances or regulations of any governmental entity.
 

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(f) Commission Documents, Financial Statements. The Common Stock of the Company
is registered pursuant to Section 12(b) or 12(g) of the Securities Exchange Act
of 1934, as amended (the “Exchange Act”), and the Company has timely filed all
reports, schedules, forms, statements and other documents required to be filed
by it with the Commission pursuant to the reporting requirements of the Exchange
Act (all of the foregoing including filings incorporated by reference therein
being referred to herein as the “Commission Documents”). At the times of their
respective filings, the Form 10-QSB for the fiscal quarters ended June 30, 2007,
June 30, 2007 and March 31, 2007 (collectively, the “Form 10-QSB”) and the Form
10-KSB for the fiscal year ended December 31, 2006 (the “Form 10-KSB”) complied
in all material respects with the requirements of the Exchange Act and the rules
and regulations of the Commission promulgated thereunder and other federal,
state and local laws, rules and regulations applicable to such documents, and
the Form 10-QSB and Form 10-KSB did not contain any untrue statement of a
material fact or omit to state a material fact required to be stated therein or
necessary in order to make the statements therein, in light of the circumstances
under which they were made, not misleading. As of their respective dates, the
financial statements of the Company included in the Commission Documents
complied as to form in all material respects with applicable accounting
requirements and the published rules and regulations of the Commission or other
applicable rules and regulations with respect thereto. Such financial statements
have been prepared in accordance with generally accepted accounting principles
(“GAAP”) applied on a consistent basis during the periods involved (except (i)
as may be otherwise indicated in such financial statements or the notes thereto
or (ii) in the case of unaudited interim statements, to the extent they may not
include footnotes or may be condensed or summary statements), and fairly present
in all material respects the financial position of the Company and its
Subsidiaries as of the dates thereof and the results of operations and cash
flows for the periods then ended (subject, in the case of unaudited statements,
to normal year-end audit adjustments).
 
(g) Subsidiaries. Schedule 2.1(g) hereto sets forth each Subsidiary of the
Company, showing the jurisdiction of its incorporation or organization and
showing the percentage of each person’s ownership of the outstanding stock or
other interests of such Subsidiary. For the purposes of this Agreement,
“Subsidiary” shall mean any corporation or other entity of which at least a
majority of the securities or other ownership interest having ordinary voting
power (absolutely or contingently) for the election of directors or other
persons performing similar functions are at the time owned directly or
indirectly by the Company and/or any of its other Subsidiaries. All of the
outstanding shares of capital stock of each Subsidiary have been duly authorized
and validly issued, and are fully paid and nonassessable. Except as set forth on
Schedule 2.1(g) hereto, there are no outstanding preemptive, conversion or other
rights, options, warrants or agreements granted or issued by or binding upon any
Subsidiary for the purchase or acquisition of any shares of capital stock of any
Subsidiary or any other securities convertible into, exchangeable for or
evidencing the rights to subscribe for any shares of such capital stock. Neither
the Company nor any Subsidiary is subject to any obligation (contingent or
otherwise) to repurchase or otherwise acquire or retire any shares of the
capital stock of any Subsidiary or any convertible securities, rights, warrants
or options of the type described in the preceding sentence except as set forth
on Schedule 2.1(g) hereto. Neither the Company nor any Subsidiary is party to,
nor has any knowledge of, any agreement restricting the voting or transfer of
any shares of the capital stock of any Subsidiary.
 

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(h) No Material Adverse Change. Since December 31, 2006, the Company has not
experienced or suffered any Material Adverse Effect, except as disclosed on
Schedule 2.1(h) hereto.
 
(i) No Undisclosed Liabilities. Except as disclosed on Schedule 2.1(i) hereto,
neither the Company nor any of its Subsidiaries has incurred any liabilities,
obligations, claims or losses (whether liquidated or unliquidated, secured or
unsecured, absolute, accrued, contingent or otherwise) other than those incurred
in the ordinary course of the Company’s or its Subsidiaries respective
businesses or which, individually or in the aggregate, are not reasonably likely
to have a Material Adverse Effect.
 
(j) No Undisclosed Events or Circumstances. Since December 31, 2006, except as
disclosed on Schedule 2.1(j) hereto, no event or circumstance has occurred or
exists with respect to the Company or its Subsidiaries or their respective
businesses, properties, prospects, operations or financial condition, which,
under applicable law, rule or regulation, requires public disclosure or
announcement by the Company but which has not been so publicly announced or
disclosed.
 
(k) Indebtedness. Schedule 2.1(k) hereto sets forth as of the date hereof all
outstanding secured and unsecured Indebtedness of the Company or any Subsidiary,
or for which the Company or any Subsidiary has commitments. For the purposes of
this Agreement, “Indebtedness” shall mean (a) any liabilities for borrowed money
or amounts owed in excess of $100,000 (other than trade accounts payable
incurred in the ordinary course of business), (b) all guaranties, endorsements
and other contingent obligations in respect of Indebtedness of others, whether
or not the same are or should be reflected in the Company’s balance sheet (or
the notes thereto), except guaranties by endorsement of negotiable instruments
for deposit or collection or similar transactions in the ordinary course of
business; and (c) the present value of any lease payments in excess of $100,000
due under leases required to be capitalized in accordance with GAAP. Neither the
Company nor any Subsidiary is in default with respect to any Indebtedness.
 

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(l) Title to Assets. Each of the Company and the Subsidiaries has good and valid
title to all of its real and personal property reflected in the Commission
Documents, free and clear of any mortgages, pledges, charges, liens, security
interests or other encumbrances, except for those indicated on Schedule 2.1(l)
hereto or such that, individually or in the aggregate, do not cause a Material
Adverse Effect. Any leases of the Company and each of its Subsidiaries are valid
and subsisting and in full force and effect.
 
(m) Actions Pending. There is no action, suit, claim, investigation,
arbitration, alternate dispute resolution proceeding or other proceeding pending
or, to the knowledge of the Company, threatened against the Company or any
Subsidiary which questions the validity of this Agreement or any of the other
Transaction Documents or any of the transactions contemplated hereby or thereby
or any action taken or to be taken pursuant hereto or thereto. Except as set
forth in the Commission Documents or on Schedule 2.1(m) hereto, there is no
action, suit, claim, investigation, arbitration, alternate dispute resolution
proceeding or other proceeding pending or, to the knowledge of the Company,
threatened against or involving the Company, any Subsidiary or any of their
respective properties or assets, which individually or in the aggregate, would
reasonably be expected, if adversely determined, to have a Material Adverse
Effect. There are no outstanding orders, judgments, injunctions, awards or
decrees of any court, arbitrator or governmental or regulatory body against the
Company or any Subsidiary or any officers or directors of the Company or
Subsidiary in their capacities as such, which individually or in the aggregate,
could reasonably be expected to have a Material Adverse Effect.
 
(n) Compliance with Law. The business of the Company and the Subsidiaries has
been and is presently being conducted in accordance with all applicable federal,
state and local governmental laws, rules, regulations and ordinances, except
such that, individually or in the aggregate, the noncompliance therewith could
not reasonably be expected to have a Material Adverse Effect. The Company and
each of its Subsidiaries have all franchises, permits, licenses, consents and
other governmental or regulatory authorizations and approvals necessary for the
conduct of its business as now being conducted by it unless the failure to
possess such franchises, permits, licenses, consents and other governmental or
regulatory authorizations and approvals, individually or in the aggregate, could
not reasonably be expected to have a Material Adverse Effect.
 
(o) Taxes. The Company and each of the Subsidiaries has accurately prepared and
filed all federal, state and other tax returns required by law to be filed by
it, has paid or made provisions for the payment of all taxes shown to be due and
all additional assessments, and adequate provisions have been and are reflected
in the financial statements of the Company and the Subsidiaries for all current
taxes and other charges to which the Company or any Subsidiary is subject and
which are not currently due and payable. Except as disclosed on Schedule 2.1(o)
hereto or in the Commission Documents, to the best of the Company’s knowledge,
none of the federal income tax returns of the Company or any Subsidiary have
been audited by the Internal Revenue Service. The Company has no knowledge of
any additional assessments, adjustments or contingent tax liability (whether
federal or state) of any nature whatsoever, whether pending or threatened
against the Company or any Subsidiary for any period, nor of any basis for any
such assessment, adjustment or contingency.
 

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(p) Certain Fees. Except as set forth on Schedule 2.1(p) hereto, the Company has
not employed any broker or finder or incurred any liability for any brokerage or
investment banking fees, commissions, finders’ structuring fees, financial
advisory fees or other similar fees in connection with the Transaction
Documents. The Company has amended any agreement existing prior to the date
hereof to provide that fees payable as a result of or in connection with this
transaction shall not exceed (i) 10% of the gross proceeds, plus (ii) $35,000 in
retainers and expense reimbursement, plus (iii) 10% warrant coverage (which
warrant shall contain a term no longer than 5 years and an exercise price not
lower than the Long Term Warrant exercise price).
 
(q) Disclosure. Except for the transactions contemplated by this Agreement, the
Company confirms that neither it nor any other person acting on its behalf has
provided any of the Purchasers or their agents or counsel with any information
that constitutes or might constitute material, nonpublic information. To the
best of the Company’s knowledge, neither this Agreement or the Schedules hereto
nor any other documents, certificates or instruments furnished to the Purchasers
by or on behalf of the Company or any Subsidiary in connection with the
transactions contemplated by this Agreement contain any untrue statement of a
material fact or omit to state a material fact necessary in order to make the
statements made herein or therein, in the light of the circumstances under which
they were made herein or therein, not misleading.
 
(r) Operation of Business. Except as set forth on Schedule 2.1(r) hereto, the
Company and each of the Subsidiaries owns or possesses the rights to all
patents, trademarks, domain names (whether or not registered) and any patentable
improvements or copyrightable derivative works thereof, websites and
intellectual property rights relating thereto, service marks, trade names,
copyrights, licenses and authorizations which are necessary for the conduct of
its business as now conducted without any conflict with the rights of others.
 
(s) Environmental Compliance. The Company and each of its Subsidiaries have
obtained all material approvals, authorization, certificates, consents,
licenses, orders and permits or other similar authorizations of all governmental
authorities, or from any other person, that are required under any Environmental
Laws. “Environmental Laws” shall mean all applicable laws relating to the
protection of the environment including, without limitation, all requirements
pertaining to reporting, licensing, permitting, controlling, investigating or
remediating emissions, discharges, releases or threatened releases of hazardous
substances, chemical substances, pollutants, contaminants or toxic substances,
materials or wastes, whether solid, liquid or gaseous in nature, into the air,
surface water, groundwater or land, or relating to the manufacture, processing,
distribution, use, treatment, storage, disposal, transport or handling of
hazardous substances, chemical substances, pollutants, contaminants or toxic
substances, material or wastes, whether solid, liquid or gaseous in nature. The
Company has all necessary governmental approvals required under all
Environmental Laws as necessary for the Company’s business or the business of
any of its subsidiaries. To the best of the Company’s knowledge, the Company and
each of its subsidiaries are also in compliance with all other limitations,
restrictions, conditions, standards, requirements, schedules and timetables
required or imposed under all Environmental Laws. Except for such instances as
would not individually or in the aggregate have a Material Adverse Effect, there
are no past or present events, conditions, circumstances, incidents, actions or
omissions relating to or in any way affecting the Company or its Subsidiaries
that violate or may violate any Environmental Law after the Closing Date or that
may give rise to any environmental liability, or otherwise form the basis of any
claim, action, demand, suit, proceeding, hearing, study or investigation (i)
under any Environmental Law, or (ii) based on or related to the manufacture,
processing, distribution, use, treatment, storage (including without limitation
underground storage tanks), disposal, transport or handling, or the emission,
discharge, release or threatened release of any hazardous substance.
 

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(t) Books and Records; Internal Accounting Controls. The records and documents
of the Company and its Subsidiaries accurately reflect in all material respects
the information relating to the business of the Company and the Subsidiaries,
the location and collection of their assets, and the nature of all transactions
giving rise to the obligations or accounts receivable of the Company or any
Subsidiary. The Company is in material compliance with all provisions of the
Sarbanes-Oxley Act of 2002 which are applicable to it as of the Closing Date.
The Company and its subsidiary maintain a system of internal accounting controls
sufficient to provide reasonable assurance that (i) transactions are executed in
accordance with management’s general or specific authorizations, (ii)
transactions are recorded as necessary to permit preparation of financial
statements in conformity with GAAP and to maintain asset accountability, (iii)
access to assets is permitted only in accordance with management’s general or
specific authorization, and (iv) the recorded accountability for assets is
compared with the existing assets at reasonable intervals and appropriate action
is taken with respect to any differences. The Company has established disclosure
controls and procedures (as defined in Exchange Act Rules 13a-15(e) and
15d-15(e)) for the Company and designed such disclosure controls and procedures
to ensure that information required to be disclosed by the Company in the
reports it files or submits under the Exchange Act is recorded, processed,
summarized and reported, within the time periods specified in the Commission’s
rules and forms. The Company’s certifying officers have evaluated the
effectiveness of the Company’s disclosure controls and procedures as of the end
of the period covered by the Company’s most recently filed periodic report under
the Exchange Act (such date, the “Evaluation Date”). The Company presented in
its most recently filed periodic report under the Exchange Act the conclusions
of the certifying officers about the effectiveness of the disclosure controls
and procedures based on their evaluations as of the Evaluation Date. Since the
Evaluation Date, there have been no changes in the Company’s internal control
over financial reporting (as such term is defined in the Exchange Act) that has
materially affected, or is reasonably likely to materially affect, the Company’s
internal control over financial reporting.
 
(u) Material Agreements. Except as disclosed in the Commission Documents or as
set forth on Schedule 2.1(u) hereto, or as would not be reasonably likely to
have a Material Adverse Effect, (i) the Company and each of its Subsidiaries
have performed all obligations required to be performed by them to date under
any written or oral contract, instrument, agreement, commitment, obligation,
plan or arrangement, filed or required to be filed with the Commission (the
“Material Agreements”), (ii) neither the Company nor any of its Subsidiaries has
received any notice of default under any Material Agreement and, (iii) to the
best of the Company’s knowledge, neither the Company nor any of its Subsidiaries
is in default under any Material Agreement now in effect.
 
(v) Transactions with Affiliates. Except as set forth on Schedule 2.1(v) hereto
or in the Commission Documents, there are no loans, leases, agreements,
contracts, royalty agreements, management contracts or arrangements or other
continuing transactions between (a) the Company, any Subsidiary or any of their
respective customers or suppliers on the one hand, and (b) on the other hand,
any officer, employee, consultant or director of the Company, or any of its
Subsidiaries, or any person owning at least 5% of the outstanding capital stock
of the Company or any Subsidiary or any member of the immediate family of such
officer, employee, consultant, director or stockholder or any corporation or
other entity controlled by such officer, employee, consultant, director or
stockholder, or a member of the immediate family of such officer, employee,
consultant, director or stockholder which, in each case, is required to be
disclosed in the Commission Documents or in the Company’s most recently filed
definitive proxy statement on Schedule 14A, that is not so disclosed in the
Commission Documents or in such proxy statement.
 

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(w) Securities Act of 1933. The Company has complied and will comply with all
applicable federal and state securities laws in connection with the offer,
issuance and sale of the Securities hereunder. Neither the Company nor anyone
acting on its behalf, directly or indirectly, has or will sell, offer to sell or
solicit offers to buy any of the Securities or similar securities to, or solicit
offers with respect thereto from, or enter into any negotiations relating
thereto with, any person, or has taken or will take any action so as to bring
the issuance and sale of any of the Securities under the registration provisions
of the Securities Act and applicable state securities laws, and neither the
Company nor any of its affiliates, nor any person acting on its or their behalf,
has engaged in any form of general solicitation or general advertising (within
the meaning of Regulation D under the Securities Act) in connection with the
offer or sale of any of the Securities.
 
(x) Employees. Neither the Company nor any Subsidiary has any collective
bargaining arrangements or agreements covering any of its employees, except as
set forth on Schedule 2.1(x) hereto. Except as set forth on Schedule 2.1(x)
hereto or in the Commission Documents, neither the Company nor any Subsidiary
has any employment contract, agreement regarding proprietary information,
non-competition agreement, non-solicitation agreement, confidentiality
agreement, or any other similar contract or restrictive covenant, relating to
the right of any officer, employee or consultant to be employed or engaged by
the Company or such Subsidiary required to be disclosed in the Commission
Documents that is not so disclosed. No officer, consultant or key employee of
the Company or any Subsidiary whose termination, either individually or in the
aggregate, would be reasonably likely to have a Material Adverse Effect, has
terminated or, to the knowledge of the Company, has any present intention of
terminating his or her employment or engagement with the Company or any
Subsidiary.
 
(y) Absence of Certain Developments. Except as set forth in the Commission
Documents or provided on Schedule 2.1(y) hereto, since December 31, 2006,
neither the Company nor any Subsidiary has:

(i) issued any stock, bonds or other corporate securities or any right, options
or warrants with respect thereto;
 
(ii) borrowed any amount in excess of $100,000 or incurred or become subject to
any other liabilities in excess of $100,000 (absolute or contingent) except
current liabilities incurred in the ordinary course of business which are
comparable in nature and amount to the current liabilities incurred in the
ordinary course of business during the comparable portion of its prior fiscal
year, as adjusted to reflect the current nature and volume of the business of
the Company and its Subsidiaries;
 

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(iii) discharged or satisfied any lien or encumbrance in excess of $100,000 or
paid any obligation or liability (absolute or contingent) in excess of $100,000,
other than current liabilities paid in the ordinary course of business;
 
(iv) declared or made any payment or distribution of cash or other property to
stockholders with respect to its stock, or purchased or redeemed, or made any
agreements so to purchase or redeem, any shares of its capital stock, in each
case in excess of $50,000 individually or $100,000 in the aggregate;
 
(v) sold, assigned or transferred any other tangible assets, or canceled any
debts or claims, in each case in excess of $250,000, except in the ordinary
course of business;
 
(vi) sold, assigned or transferred any patent rights, trademarks, trade names,
copyrights, trade secrets or other intangible assets or intellectual property
rights in excess of $100,000, or disclosed any proprietary confidential
information to any person except to customers in the ordinary course of business
or to the Purchasers or their representatives;
 
(vii) suffered any material losses or waived any rights of material value,
whether or not in the ordinary course of business, or suffered the loss of any
material amount of prospective business;
 
(viii) made any changes in employee compensation except in the ordinary course
of business and consistent with past practices;
 
(ix) made capital expenditures or commitments therefor that aggregate in excess
of $100,000;
 
(x) entered into any material transaction, whether or not in the ordinary course
of business;
 
(xi) made charitable contributions or pledges in excess of $10,000;
 
(xii) suffered any material damage, destruction or casualty loss, whether or not
covered by insurance;
 
(xiii) experienced any material problems with labor or management in connection
with the terms and conditions of their employment; or
 
(xiv) entered into an agreement, written or otherwise, to take any of the
foregoing actions.
 

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(z) Investment Company Act Status. The Company is not, and as a result of and
immediately upon the Closing will not be, an “investment company” or a company
“controlled” by an “investment company,” within the meaning of the Investment
Company Act of 1940, as amended.
 
(aa) [Reserved]
 
(bb) Independent Nature of Purchasers. The Company acknowledges that the
obligations of each Purchaser under the Transaction Documents are several and
not joint with the obligations of any other Purchaser, and no Purchaser shall be
responsible in any way for the performance of the obligations of any other
Purchaser under the Transaction Documents. The Company acknowledges that the
decision of each Purchaser to purchase Securities pursuant to this Agreement has
been made by such Purchaser independently of any other purchase and
independently of any information, materials, statements or opinions as to the
business, affairs, operations, assets, properties, liabilities, results of
operations, condition (financial or otherwise) or prospects of the Company or of
its Subsidiaries which may have made or given by any other Purchaser or by any
agent or employee of any other Purchaser, and no Purchaser or any of its agents
or employees shall have any liability to any Purchaser (or any other person)
relating to or arising from any such information, materials, statements or
opinions. The Company acknowledges that nothing contained herein, or in any
Transaction Document, and no action taken by any Purchaser pursuant hereto or
thereto, shall be deemed to constitute the Purchasers as a partnership, an
association, a joint venture or any other kind of entity, or create a
presumption that the Purchasers are in any way acting in concert or as a group
with respect to such obligations or the transactions contemplated by the
Transaction Documents. The Company acknowledges that for reasons of
administrative convenience only, the Transaction Documents have been prepared by
counsel for one of the Purchasers and such counsel does not represent all of the
Purchasers but only such Purchaser and the other Purchasers have retained their
own individual counsel with respect to the transactions contemplated hereby. 
The Company acknowledges that it has elected to provide all Purchasers with the
same terms and Transaction Documents for the convenience of the Company and not
because it was required or requested to do so by the Purchasers. The Company
acknowledges that such procedure with respect to the Transaction Documents in no
way creates a presumption that the Purchasers are in any way acting in concert
or as a group with respect to the Transaction Documents or the transactions
contemplated hereby or thereby. The Company acknowledges that each Purchaser
shall be entitled to independently protect and enforce its rights, including
without limitation, the rights arising out of this Agreement or out of the other
Transaction Documents, and it shall not be necessary for any other Purchaser to
be joined as an additional party in any proceeding for such purpose.
 
(cc) No Integrated Offering. Neither the Company, nor any of its affiliates, nor
any person acting on its or their behalf, has directly or indirectly made any
offers or sales of any security or solicited any offers to buy any security
under circumstances that would cause the offering of the Securities pursuant to
this Agreement to be integrated with prior offerings by the Company for purposes
of the Securities Act which would prevent the Company from selling the
Securities pursuant to Regulation D and Rule 506 thereof under the Securities
Act, or any applicable exchange-related stockholder approval provisions, nor
will the Company or any of its affiliates or subsidiaries take any action or
steps that would cause the offering of the Securities to be integrated with
other offerings if to do so would prevent the Company from selling Securities
pursuant to Regulation D and Rule 506 thereof under the Securities Act or
otherwise prevent a completed offering of Securities hereunder. The Company does
not have any registration statement pending before the Commission or currently
under the Commission’s review and except as set forth on Schedule 2.1(cc)
hereto, since January 1, 2007, the Company has not offered or sold any of its
equity securities or debt securities convertible into shares of Common Stock.
 

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(dd) Dilutive Effect. The Company understands and acknowledges that its
obligation to issue Conversion Shares upon conversion of the Notes in accordance
with this Agreement and the Notes and its obligations to issue the Warrant
Shares upon the exercise of the Warrants in accordance with this Agreement and
the Warrants, is, in each case, absolute and unconditional regardless of the
dilutive effect that such issuance may have on the ownership interest of other
stockholders of the Company.
 
(ee) DTC Status. Except as set forth on Schedule 2.1(ff) hereto, the Company’s
transfer agent is a participant in and the Common Stock is eligible for transfer
pursuant to the Depository Trust Company Automated Securities Transfer Program.
The name, address, telephone number, fax number, contact person and email of the
Company transfer agent is set forth on Schedule 2.1(ee) hereto.
 
(ff) Governmental Approvals. Except for the filing of any notice prior or
subsequent to the Closing that may be required under applicable state and/or
federal securities laws (which if required, shall be filed on a timely basis)
and the declaration of the effectiveness of any registration statements filed by
the Company pursuant to the Transaction Documents, no authorization, consent,
approval, license, exemption of, filing or registration with any court or
governmental department, commission, board, bureau, agency or instrumentality,
domestic or foreign, is or will be necessary for, or in connection with, the
execution or delivery of the Preferred Shares and the Warrants, or for the
performance by the Company of its obligations under the Transaction Documents.
 
Section 2.2 Representations and Warranties of the Purchasers. Each of the
Purchasers hereby represents and warrants to the Company with respect solely to
itself and not with respect to any other Purchaser as follows as of the date
hereof and as of the Closing Date:
 
(a) Organization and Standing of the Purchasers. If the Purchaser is an entity,
such Purchaser is a corporation, limited liability company or partnership duly
incorporated or organized, validly existing and in good standing under the laws
of the jurisdiction of its incorporation or organization.
 
(b) Authorization and Power. Each Purchaser has the requisite power and
authority to enter into and perform the Transaction Documents and to purchase
the Securities being sold to it hereunder. The execution, delivery and
performance of the Transaction Documents by each Purchaser and the consummation
by it of the transactions contemplated hereby have been duly authorized by all
necessary corporate or partnership action, and no further consent or
authorization of such Purchaser or its Board of Directors, stockholders, or
partners, as the case may be, is required. When executed and delivered by the
Purchasers, the other Transaction Documents shall constitute valid and binding
obligations of each Purchaser enforceable against such Purchaser in accordance
with their terms, except as such enforceability may be limited by applicable
bankruptcy, insolvency, reorganization, moratorium, liquidation,
conservatorship, receivership or similar laws relating to, or affecting
generally the enforcement of, creditor’s rights and remedies or by other
equitable principles of general application.
 

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(c) Acquisition for Investment. Each Purchaser is purchasing the Securities
solely for its own account and not with a view to or for sale in connection with
distribution. Each Purchaser does not have a present intention to sell any of
the Securities, nor a present arrangement (whether or not legally binding) or
intention to effect any distribution of any of the Securities to or through any
person or entity; provided, however, that by making the representations herein,
such Purchaser does not agree to hold the Securities for any minimum or other
specific term and reserves the right to dispose of the Securities at any time in
accordance with Federal and state securities laws applicable to such
disposition. Each Purchaser acknowledges that it (i) has such knowledge and
experience in financial and business matters such that Purchaser is capable of
evaluating the merits and risks of Purchaser’s investment in the Company, (ii)
is able to bear the financial risks associated with an investment in the
Securities and (iii) has been given full access to such records of the Company
and the Subsidiaries and to the officers of the Company and the Subsidiaries as
it has deemed necessary or appropriate to conduct its due diligence
investigation.
 
(d) Rule 144. Each Purchaser understands that the Securities must be held
indefinitely unless such Securities are registered under the Securities Act or
an exemption from registration is available. Each Purchaser acknowledges that
such person is familiar with Rule 144 of the rules and regulations of the
Commission, as amended, promulgated pursuant to the Securities Act (“Rule 144”),
and that such Purchaser has been advised that Rule 144 permits resales only
under certain circumstances. Each Purchaser understands that to the extent that
Rule 144 is not available, such Purchaser will be unable to sell any Securities
without either registration under the Securities Act or the existence of another
exemption from such registration requirement.
 
(e) General. Each Purchaser understands that the Securities are being offered
and sold in reliance on a transactional exemption from the registration
requirements of federal and state securities laws and the Company is relying
upon the truth and accuracy of the representations, warranties, agreements,
acknowledgments and understandings of such Purchaser set forth herein in order
to determine the applicability of such exemptions and the suitability of such
Purchaser to acquire the Securities. Each Purchaser understands that no United
States federal or state agency or any government or governmental agency has
passed upon or made any recommendation or endorsement of the Securities.
Commencing on the date that the Purchasers were initially contacted regarding an
investment in the Securities, none of the Purchasers has engaged in any short
sale of the Common Stock and will not engage in any short sale of the Common
Stock prior to the consummation of the transactions contemplated by this
Agreement.
 
(f) No General Solicitation. Each Purchaser acknowledges that the Securities
were not offered to such Purchaser by means of any form of general or public
solicitation or general advertising, or publicly disseminated advertisements or
sales literature, including (i) any advertisement, article, notice or other
communication published in any newspaper, magazine, or similar media, or
broadcast over television or radio, or (ii) any seminar or meeting to which such
Purchaser was invited by any of the foregoing means of communications. Each
Purchaser, in making the decision to purchase the Securities, has relied upon
independent investigation made by it and has not relied on any information or
representations made by third parties.
 

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(g) Accredited Investor. Each Purchaser is an “accredited investor” (as defined
in Rule 501 of Regulation D), and such Purchaser has such experience in business
and financial matters that it is capable of evaluating the merits and risks of
an investment in the Securities. Such Purchaser is not required to be registered
as a broker-dealer under Section 15 of the Exchange Act and such Purchaser is
not a broker-dealer. Each Purchaser acknowledges that an investment in the
Securities is speculative and involves a high degree of risk.
 
(h) Certain Fees. The Purchasers have not employed any broker or finder or
incurred any liability for any brokerage or investment banking fees,
commissions, finders’ structuring fees, financial advisory fees or other similar
fees in connection with the Transaction Documents.
 
(i) Independent Investment. No Purchaser has agreed to act with any other
Purchaser for the purpose of acquiring, holding, voting or disposing of the
Securities purchased hereunder for purposes of Section 13(d) under the Exchange
Act, and each Purchaser is acting independently with respect to its investment
in the Securities.
 
ARTICLE III
 
COVENANTS
 
Unless otherwise specified in this Section, for so long as any Notes have not
been paid in full or converted in full, the Company covenants with each
Purchaser as follows, which covenants are for the benefit of each Purchaser and
their respective permitted assignees.
 
Section 3.1 Securities Compliance. The Company shall notify the Commission in
accordance with its rules and regulations, of the transactions contemplated by
any of the Transaction Documents and shall take all other necessary action and
proceedings as may be required and permitted by applicable law, rule and
regulation, for the legal and valid issuance of the Securities to the
Purchasers, or their respective subsequent holders.
 
Section 3.2 Registration and Listing. The Company shall cause its Common Stock
to continue to be registered under Sections 12(b) or 12(g) of the Exchange Act,
to comply in all respects with its reporting and filing obligations under the
Exchange Act, to comply with all requirements related to any registration
statement filed pursuant to this Agreement, and to not take any action or file
any document (whether or not permitted by the Securities Act or the rules
promulgated thereunder) to terminate or suspend such registration or to
terminate or suspend its reporting and filing obligations under the Exchange Act
or Securities Act, except as permitted herein. The Company will take all action
necessary to continue the listing or trading of its Common Stock on the OTC
Bulletin Board or other exchange or market on which the Common Stock is trading.
If required, the Company will promptly file the “Listing Application” for, or in
connection with, the issuance and delivery of the Shares and the Warrant Shares.
Subject to the terms of the Transaction Documents, the Company further covenants
that it will take such further action as the Purchasers may reasonably request,
all to the extent required from time to time to enable the Purchasers to sell
the Securities without registration under the Securities Act within the
limitation of the exemptions provided by Rule 144 promulgated under the
Securities Act. Upon the request of the Purchasers, the Company shall deliver to
the Purchasers a written certification of a duly authorized officer as to
whether it has complied with such requirements.
 

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Section 3.3 Inspection Rights. Provided same would not be in violation of
Regulation FD, the Company shall permit, during normal business hours and upon
reasonable request and reasonable notice, each Purchaser or any employees,
agents or representatives thereof, so long as such Purchaser shall be obligated
hereunder to purchase the Notes or shall beneficially own any Conversion Shares
or Warrant Shares, for purposes reasonably related to such Purchaser’s interests
as a stockholder, to examine the publicly available, non-confidential records
and books of account of, and visit and inspect the properties, assets,
operations and business of the Company and any Subsidiary, and to discuss the
publicly available, non-confidential affairs, finances and accounts of the
Company and any Subsidiary with any of its officers, consultants, directors, and
key employees.
 
Section 3.4 Compliance with Laws. The Company shall comply, and cause each
Subsidiary to comply, with all applicable laws, rules, regulations and orders,
noncompliance with which would be reasonably likely to have a Material Adverse
Effect.
 
Section 3.5 Keeping of Records and Books of Account. The Company shall keep and
cause each Subsidiary to keep adequate records and books of account, in which
complete entries will be made in accordance with GAAP consistently applied,
reflecting all financial transactions of the Company and its Subsidiaries, and
in which, for each fiscal year, all proper reserves for depreciation, depletion,
obsolescence, amortization, taxes, bad debts and other purposes in connection
with its business shall be made.
 
Section 3.6 Reporting Requirements. If the Company ceases to file its periodic
reports with the Commission, or if the Commission ceases making these periodic
reports available via the Internet without charge, then the Company shall
furnish the following to each Purchaser so long as such Purchaser shall be
obligated hereunder to purchase the Securities or shall beneficially own Notes:
 
(a) Quarterly Reports filed with the Commission on Form 10-QSB as soon as
practical after the document is filed with the Commission, and in any event
within five (5) days after the document is filed with the Commission;
 
(b) Annual Reports filed with the Commission on Form 10-KSB as soon as practical
after the document is filed with the Commission, and in any event within five
(5) days after the document is filed with the Commission; and
 
(c) Copies of all notices, information and proxy statements in connection with
any meetings, that are, in each case, provided to holders of shares of Common
Stock, contemporaneously with the delivery of such notices or information to
such holders of Common Stock.
 

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Section 3.7 Other Agreements. The Company shall not enter into any agreement in
which the terms of such agreement would restrict or impair the right or ability
to perform of the Company or any Subsidiary under any Transaction Document.
 
Section 3.8 Use of Proceeds. The proceeds from the sale of the Securities
hereunder shall be used by the Company for: (a) the completion of preparation of
and filing with the FDA a New Drug Application for ATPace; (b) the preparation
of the ATPace Phase II data report, on the basis of which request the approval
of the FDA for the commencement of Phase III clinical trials with ATPace as a
diagnostic tool in the management of patients with neurally-mediate syncope or
syncope of unknown cause; (c) the development of in-license additional clinical
stage drug candidates; (d) to hire James S. Kuo, M.D., MBA as Chief Executive
officer as well as additional clinical and regulatory support personnel; (e) to
purchase capital equipment and materials to support the development and
manufacturing activities; or (f) the payment of outstanding accounts payable and
the expenses of this offering. In addition to (a) through (e) above, the Company
shall segregate at least $250,000 of the proceeds received on Closing into a
separate designated bank account to be used only as payment to third-party
entities acceptable to the holders of a majority in principal amount of the
Notes for carrying out investor relations services (“IR Purposes”). The Company
shall use at least $150,000 of such amount for IR Purposes during the first 12
months after the Closing Date, with the remainder to be used for IR Purposes by
the second anniversary of the Closing Date. In no event shall the proceeds be
used to redeem any Common Stock or securities convertible, exercisable or
exchangeable into Common Stock or to settle any outstanding litigation.

Section 3.9 Reporting Status. So long as a Purchaser beneficially owns any of
the Securities, the Company shall timely file all reports required to be filed
with the Commission pursuant to the Exchange Act, and the Company shall not
terminate its status as an issuer required to file reports under the Exchange
Act even if the Exchange Act or the rules and regulations thereunder would
permit such termination.

Section 3.10 Disclosure of Transaction. The Company shall issue a press release
describing the material terms of the transactions contemplated hereby (the
“Press Release”) on the day of the Closing but in no event later than one hour
after the Closing; provided, however, that if such Closing occurs after 4:00
P.M. Eastern Time on any Trading Day, the Company shall issue the Press Release
no later than 9:00 A.M. Eastern Time on the first Trading Day following the
Closing Date. The Company shall also file with the Commission a Current Report
on Form 8-K (the “Form 8-K”) describing the material terms of the transactions
contemplated hereby (and attaching as exhibits thereto this Agreement, each form
of Note, the Registration Rights Agreement, the Security Agreement, each series
of Warrant and the Press Release) as soon as practicable following the Closing
Date but in no event more than two (2) Trading Days following the Closing Date,
which Press Release and Form 8-K shall be subject to prior review and comment by
the Purchasers. “Trading Day” means any day during which the principal exchange
on which the Common Stock is traded shall be open for trading.
 
Section 3.11 Disclosure of Material Information. The Company covenants and
agrees that neither it nor any other person acting on its behalf has provided or
will provide any Purchaser or its agents or counsel with any information that
the Company believes constitutes material non-public information, unless prior
thereto such Purchaser shall have executed a written agreement regarding the
confidentiality and use of such information.  The Company understands and
confirms that each Purchaser shall be relying on the foregoing representations
in effecting transactions in securities of the Company. In the event of a breach
of the foregoing covenant by the Company, or any of its Subsidiaries, or any of
its or their respective officers, directors, employees and agents, in addition
to any other remedy provided herein or in the Transaction Documents, the Company
shall publicly disclose any material, non-public information in a Form 8-K
within five (5) Business Days of the date that it discloses such information to
any Purchaser. In the event that the Company discloses any material, non-public
information to a Purchaser and fails to publicly file a Form 8-K in accordance
with the above, a Purchaser shall have the right to make a public disclosure, in
the form of a press release, public advertisement or otherwise, of such
material, nonpublic information without the prior approval by the Company, its
Subsidiaries, or any of its or their respective officers, directors, employees
or agents. No Purchaser shall have any liability to the Company, its
Subsidiaries, or any of its or their respective officers, directors, employees,
stockholders or agents, for any such disclosure.
 

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Section 3.12 Pledge of Securities. The Company acknowledges that the Securities
may be pledged by a Purchaser in connection with a bona fide margin agreement or
other loan or financing arrangement that is secured by the Securities. The
pledge of Securities shall not be deemed to be a transfer, sale or assignment of
the Securities hereunder, and no Purchaser effecting a pledge of the Securities
shall be required to provide the Company with any notice thereof or otherwise
make any delivery to the Company pursuant to this Agreement or any other
Transaction Document; provided that a Purchaser and its pledgee shall be
required to comply with the provisions of Article V hereof in order to effect a
sale, transfer or assignment of Securities to such pledgee. At the Purchasers’
expense, the Company hereby agrees to execute and deliver such documentation as
a pledgee of the Securities may reasonably request in connection with a pledge
of the Securities to such pledgee by a Purchaser.
 
Section 3.13 Amendments. The Company shall not amend or waive any provision of
the Articles or Bylaws of the Company in any way that would adversely affect
exercise rights, voting rights, conversion rights, prepayment rights or
redemption rights of the holder of the Notes or the Warrants.
 
Section 3.14 Distributions. So long as any Notes or Warrants remain outstanding,
the Company agrees that it shall not, and shall not permit any Subsidiary to,
(i) declare or pay any dividends or make any distributions to any holder(s) of
Common Stock (or security convertible into or exercisable for Common Stock) or
(ii) purchase or otherwise acquire for value, directly or indirectly, any Common
Stock or other equity security of the Company.
 
Section 3.15 Reservation of Shares. So long as any of the Notes or Warrants
remain outstanding, on and after the Amendment Date, the Company shall take all
action necessary to at all times have authorized and reserved for the purpose of
issuance, one hundred twenty percent (120%) of the aggregate number of shares of
Common Stock needed to provide for the issuance of the Conversion Shares and the
Warrant Shares.
 
Section 3.16 Transfer Agent Instructions. The Company shall issue irrevocable
instructions to its transfer agent, and any subsequent transfer agent, to issue
certificates, registered in the name of each Purchaser or its respective
nominee(s), for the Conversion Shares and the Warrant Shares in such amounts as
specified from time to time by each Purchaser to the Company upon conversion of
the Notes or exercise of the Warrants in the form of Exhibit J attached hereto
(the “Irrevocable Transfer Agent Instructions”). Prior to registration of the
Conversion Shares and the Warrant Shares under the Securities Act, all such
certificates shall bear the restrictive legend specified in Section 5.1 of this
Agreement. The Company warrants that no instruction other than the Irrevocable
Transfer Agent Instructions referred to in this Section 3.16 will be given by
the Company to its transfer agent and that the Conversion Shares and Warrant
Shares shall otherwise be freely transferable on the books and records of the
Company as and to the extent provided in this Agreement and the Registration
Rights Agreement. Nothing in this Section 3.16 shall affect in any way each
Purchaser’s obligations and agreements set forth in Section 5.1 to comply with
all applicable prospectus delivery requirements, if any, upon resale of the
Conversion Shares and the Warrant Shares. If a Purchaser provides the Company
with an opinion of counsel, in a generally acceptable form, to the effect that a
public sale, assignment or transfer of the Conversion Shares or Warrant Shares
may be made without registration under the Securities Act or the Purchaser
provides the Company with reasonable assurances that the Conversion Shares or
Warrant Shares can be sold pursuant to Rule 144 without any restriction as to
the number of securities acquired as of a particular date that can then be
immediately sold, the Company shall permit the transfer, and, in the case of the
Conversion Shares and the Warrant Shares, promptly instruct its transfer agent
to issue one or more certificates in such name and in such denominations as
specified by such Purchaser and without any restrictive legend. The Company
acknowledges that a breach by it of its obligations under this Section 3.16 will
cause irreparable harm to the Purchasers by vitiating the intent and purpose of
the transaction contemplated hereby. Accordingly, the Company acknowledges that
the remedy at law for a breach of its obligations under this Section 3.16 will
be inadequate and agrees, in the event of a breach or threatened breach by the
Company of the provisions of this Section 3.16, that the Purchasers shall be
entitled, in addition to all other available remedies, to an order and/or
injunction restraining any breach and requiring immediate issuance and transfer,
without the necessity of showing economic loss and without any bond or other
security being required.
 

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Section 3.17 Form SB-2 Eligibility; Opinions. The Company currently meets, and
will take all necessary action to continue to meet, the “registrant eligibility”
and transaction requirements set forth in the general instructions to Form SB-2
applicable to “resale” registrations on Form SB-2 during the Effectiveness
Period (as defined in the Registration Rights Agreement) and the Company shall
file all reports required to be filed by the Company with the Commission in a
timely manner so as to maintain such eligibility for the use of Form SB-2. The
Company will provide, at the Company’s expense, such legal opinions in the
future as are reasonably necessary for the issuance and resale of the Common
Stock issuable upon conversion of the Notes and exercise of the Warrants
pursuant to an effective registration statement, Rule 144 under the 1933 Act or
an exemption from registration. In the event that Common Stock is sold in a
manner that complies with an exemption from registration, the Company will
promptly instruct its counsel (at its expense) to issue to the transfer agent an
opinion permitting removal of the legend (indefinitely, if pursuant to Rule
144(k) of the 1933 Act, or to permit sale of the shares if pursuant to the other
provisions of Rule 144 of the 1933 Act).
 
Section 3.18 Acquisition of Assets. In the event the Company or any Subsidiary
acquires any assets or other properties, such assets or properties shall
constitute a part of the Collateral (as defined in the Security Agreement) and
the Company shall take all action necessary to perfect the Purchasers’ security
interest in such assets or properties pursuant to the Security Agreement.
 

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Section 3.19 Subsequent Financings.
 
(a) For so long as the Notes remain outstanding, the Company covenants and
agrees to promptly notify (in no event later than five (5) days after making or
receiving an applicable offer) in writing (a “Rights Notice”) the Purchasers of
the terms and conditions of any proposed offer or sale to, or exchange with (or
other type of distribution to) any third party (a “Subsequent Financing”), of
Common Stock or any securities convertible, exercisable or exchangeable into
Common Stock, including convertible debt securities (collectively, the
“Financing Securities”). The Rights Notice shall describe, in reasonable detail,
the proposed Subsequent Financing, the names and investment amounts of all
investors participating in the Subsequent Financing, the proposed closing date
of the Subsequent Financing, which shall be within twenty (20) calendar days
from the date of the Rights Notice, and all of the terms and conditions thereof
and proposed definitive documentation to be entered into in connection
therewith. The Rights Notice shall provide each Purchaser an option (the “Rights
Option”) during the ten (10) Trading Days following delivery of the Rights
Notice (the “Option Period”) to inform the Company whether such Purchaser will
purchase securities in such Subsequent Financing equal to up to 50% of the
Purchase Price paid by such Purchaser hereunder, up to its pro rata portion of
the securities being offered in such Subsequent Financing on the same, absolute
terms and conditions as contemplated by such Subsequent Financing. If any
Purchaser elects not to participate in such Subsequent Financing, the other
Purchasers may participate on a pro-rata basis so long as such participation in
the aggregate does not exceed the total Purchase Price hereunder. For purposes
of this Section, all references to “pro rata” means, for any Purchaser electing
to participate in such Subsequent Financing, the percentage obtained by dividing
(x) the principal amount of the Notes purchased by such Purchaser at the Closing
by (y) the total principal amount of all of the Notes purchased by all of the
participating Purchasers at the Closing. Delivery of any Rights Notice
constitutes a representation and warranty by the Company that there are no other
material terms and conditions, arrangements, agreements or otherwise except for
those disclosed in the Rights Notice, to provide additional compensation to any
party participating in any proposed Subsequent Financing, including, but not
limited to, additional compensation based on changes in the Purchase Price or
any type of reset or adjustment of a purchase or conversion price or to issue
additional securities at any time after the closing date of a Subsequent
Financing. If the Company does not receive notice of exercise of the Rights
Option from the Purchasers within the Option Period, the Company shall have the
right to close the Subsequent Financing on the scheduled closing date with a
third party; provided that all of the material terms and conditions of the
closing are substantially the same as those provided to the Purchasers in the
Rights Notice. If the closing of the proposed Subsequent Financing does not
occur on that date, any closing of the contemplated Subsequent Financing or any
other Subsequent Financing shall be subject to all of the provisions of this
Section 3.22(a), including, without limitation, the delivery of a new Rights
Notice. The provisions of this Section 3.19(a) shall not apply to issuances of
securities in a Permitted Financing or with respect to any Purchaser that holds
less than 10% of the Notes issued to it upon the Closing. 
 

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(b) For purposes of this Agreement, a Permitted Financing (as defined
hereinafter) shall not be considered a Subsequent Financing. A “Permitted
Financing” shall mean (1) issuances of shares of Common Stock or options to
employees, officers, directors or consultants of the Company pursuant to any
stock or option plan duly adopted by a majority of the non-employee members of
the Board of Directors of the Company or a majority of the members of a
committee of non-employee directors established for such purpose; (2) issuances
of securities upon the exercise or exchange of or conversion of any securities
exercisable or exchangeable for or convertible into shares of Common Stock
issued and outstanding on the date of this Agreement, provided that such
securities have not been amended since the date of this Agreement to increase
the number of such securities or to decrease the exercise, exchange or
conversion price of any such securities (including the Notes and Warrants issued
to the Purchasers pursuant to this Agreement); (3) securities issued pursuant to
acquisitions or strategic transactions approved by a majority of the
disinterested directors, but not including a transaction with an entity whose
primary business is investing in securities or a transaction, the primary
purpose of which is to raise capital; (4) securities issued in any transaction
that is approved in writing by the holders of more than two-thirds of the
principal amount of the Notes; and (5) up to _______________ shares of Common
Stock (to be equal to 8% of the fully diluted capitalization of the Company
after giving effect to this offering) issuable pursuant to stock options issued
to James Kuo pursuant to the terms of the employment agreement entered into, and
as in effect, on the date hereof (and at the exercise prices and vesting
schedule set forth therein), so long as such agreement, or options issued
pursuant thereto, are not amended or modified after the date hereof.

(c) So long as the Notes are outstanding, if the Company enters into any
Subsequent Financing on terms more favorable than the terms governing the Notes,
then each Purchaser in its sole discretion may exchange its Note, valued at
their stated value, together with accrued but unpaid interest (which interest
payments shall be payable, at the sole option of such Purchaser, in cash or in
the form of the new securities to be issued in the Subsequent Financing), for
the securities issued or to be issued in the Subsequent Financing. The Company
covenants and agrees to promptly notify in writing the Purchasers of the terms
and conditions of any such proposed Subsequent Financing. Neither an exchange
pursuant to this provision nor any repayment or conversion of the Note shall
have any effect on a Purchaser’s Warrants. The Warrants constitute a separate,
detachable security from the Notes. Notwithstanding any such exchange, repayment
or conversion, the Purchasers shall retain all of the outstanding Warrants which
they received upon Closing, or otherwise, that have not been exercised by the
Purchasers.
.
Section 3.20 Number of Directors. For so long as the Notes remain outstanding,
the Company covenants and agrees to maintain the number of directors comprising
the Board of Directors of the Company at no more seven (7).
 
Section 3.21 Variable Rate Securities. For so long as any Notes have not been
paid in full or converted in full, notwithstanding whether or not an issuance of
securities is an Permitted Financing, the Company shall not issue or sell, or
agree to issue or sell Variable Equity Securities (as defined below) (the
“Variable Equity Securities Lock-Up”), without obtaining the prior written
approval of each of the Purchasers, with the exception of any such agreements or
transactions that (x) exist as of the date hereof and (y) are not amended or
modified after the date hereof. For purposes hereof, the following shall be
collectively referred to herein as, the “Variable Equity Securities”: (A) any
debt or equity securities which are convertible into, exercisable or
exchangeable for, or carry the right to receive additional shares of Common
Stock either (1) at any conversion, exercise or exchange rate or other price
that is based upon and/or varies with the trading prices of or quotations for
Common Stock at any time after the initial issuance of such debt or equity
security, or (2) with a fixed conversion, exercise or exchange price that is
subject to being reset at some future date at any time after the initial
issuance of such debt or equity security due to a change in the market price of
the Company’s Common Stock since date of initial issuance, or (B) any amortizing
convertible security which amortizes prior to its maturity date, where the
Company is required to or has the option to (or the investor in such transaction
has the option to require the Company to) make such amortization payments in
shares of Common Stock (whether or not such payments in stock are subject to
certain equity conditions), or (C) any transaction involving a written agreement
between the Company and an investor or underwriter whereby the Company has the
right to “put” its securities to the investor or underwriter over an agreed
period of time and at an agreed price or price formula (each, an “Equity Line”
transaction). For purposes of the above, the “Market Price” shall mean the
volume weighted average price, as reported by Bloomberg, for the Company’s
common stock for the 5 trading day period immediately preceding the date in
question. It is expressly agreed and understood that the Variable Equity
Securities Lock-Up shall apply in respect of a Permitted Financing and that no
issuance of Variable Equity Securities shall be a Permitted Financing.
 

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3.22 IP Assignments. The Company will record, or cause to be recorded, in the
United States Patent and Trademark Office the assignment of Patent # 5474890 by
the holder thereof to the Company’s Subsidiary within 90 days of the Closing
Date.
 
ARTICLE IV
 
CONDITIONS
 
Section 4.1 Conditions Precedent to the Obligation of the Company to Close and
to Sell the Securities. The obligation hereunder of the Company to close and
issue and sell the Securities to the Purchasers at the Closing is subject to the
satisfaction or waiver, at or before the Closing of the conditions set forth
below. These conditions are for the Company’s sole benefit and may be waived by
the Company at any time in its sole discretion.
 
(a) Accuracy of the Purchasers’ Representations and Warranties. The
representations and warranties of each Purchaser shall be true and correct in
all material respects as of the date when made and as of the Closing Date as
though made at that time, except for representations and warranties that are
expressly made as of a particular date, which shall be true and correct in all
material respects as of such date.
 
(b) Performance by the Purchasers. Each Purchaser shall have performed,
satisfied and complied in all material respects with all covenants, agreements
and conditions required by this Agreement to be performed, satisfied or complied
with by the Purchasers at or prior to the Closing Date.
 
(c) No Injunction. No statute, rule, regulation, executive order, decree, ruling
or injunction shall have been enacted, entered, promulgated or endorsed by any
court or governmental authority of competent jurisdiction which prohibits the
consummation of any of the transactions contemplated by this Agreement.
 

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(d) Delivery of Purchase Price. The Purchase Price for the Securities shall have
been delivered to the Company on the Closing Date.
 
(e) Delivery of Transaction Documents. The Transaction Documents shall have been
duly executed and delivered by the Purchasers to the Company.
 

Section 4.2 Conditions Precedent to the Obligation of the Purchasers to Close
and to Purchase the Securities. The obligation hereunder of the Purchasers to
purchase the Securities and consummate the transactions contemplated by this
Agreement is subject to the satisfaction or waiver, at or before the Closing, of
each of the conditions set forth below. These conditions are for the Purchasers’
sole benefit and may be waived by the Purchasers at any time in their sole
discretion.
 
(a) Accuracy of the Company’s Representations and Warranties. Each of the
representations and warranties of the Company in this Agreement and the other
Transaction Documents shall be true and correct in all material respects as of
the Closing Date, except for representations and warranties that speak as of a
particular date, which shall be true and correct in all material respects as of
such date.
 
(b) Performance by the Company. The Company shall have performed, satisfied and
complied in all material respects with all covenants, agreements and conditions
required by this Agreement to be performed, satisfied or complied with by the
Company at or prior to the Closing Date.
 
(c) No Suspension, Etc. Trading in the Common Stock shall not have been
suspended by the Commission or the OTC Bulletin Board, and, at any time prior to
the Closing Date, trading in securities generally as reported by Bloomberg
Financial Markets (“Bloomberg”) shall not have been suspended or limited, or
minimum prices shall not have been established on securities whose trades are
reported by Bloomberg, or on the New York Stock Exchange, nor shall a banking
moratorium have been declared either by the United States or New York State
authorities, nor shall there have occurred any material outbreak or escalation
of hostilities or other national or international calamity or crisis of such
magnitude in its effect on, or any material adverse change in any financial
market which, in each case, in the judgment of such Purchaser, makes it
impracticable or inadvisable to purchase the Securities.
 
(d) No Injunction. No statute, rule, regulation, executive order, decree, ruling
or injunction shall have been enacted, entered, promulgated or endorsed by any
court or governmental authority of competent jurisdiction which prohibits the
consummation of any of the transactions contemplated by this Agreement.
 
(e) No Proceedings or Litigation. No action, suit or proceeding before any
arbitrator or any governmental authority shall have been commenced, and no
investigation by any governmental authority shall have been threatened, against
the Company or any Subsidiary, or any of the officers, directors or affiliates
of the Company or any Subsidiary seeking to restrain, prevent or change the
transactions contemplated by this Agreement, or seeking damages in connection
with such transactions.
 

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(f) Opinion of Counsel. The Purchasers shall have received an opinion of counsel
to the Company, dated the date of the Closing, substantially in the form of
Exhibit K hereto, with such exceptions and limitations as shall be reasonably
acceptable to counsel to the Purchasers.
 
(g) Notes and Warrants. At or prior to the Closing, the Company shall have
delivered to the Purchasers the Notes (in such denominations as each Purchaser
may request) and the Warrants (in such denominations as each Purchaser may
request).
 
(h) Secretary’s Certificate. The Company shall have delivered to the Purchasers
a secretary’s certificate, dated as of the Closing Date, as to (i) the
resolutions adopted by the Board of Directors approving the transactions
contemplated hereby, (ii) the Articles, (iii) the Bylaws, each as in effect at
the Closing, and (iv) the authority and incumbency of the officers of the
Company executing the Transaction Documents and any other documents required to
be executed or delivered in connection therewith.
 
(i) Officer’s Certificate. On the Closing Date, the Company shall have delivered
to the Purchasers a certificate signed by an executive officer on behalf of the
Company, dated as of the Closing Date, confirming the accuracy of the Company’s
representations, warranties and covenants as of such Closing Date and confirming
the compliance by the Company with the conditions precedent set forth in
paragraphs (a)-(e) and (k) of this Section 4.2 as of the Closing Date (provided
that, with respect to the matters in paragraphs (d) and (e) of this Section 4.2,
such confirmation shall be based on the knowledge of the executive officer after
due inquiry).
 
(j) Registration Rights Agreement. As of the Closing Date, the Company shall
have executed and delivered the Registration Rights Agreement to each Purchaser.
 
(k) Material Adverse Effect. No Material Adverse Effect shall have occurred.
 
(l) Transfer Agent Instructions. The Irrevocable Transfer Agent Instructions, in
the form of Exhibit J attached hereto, shall have been delivered to and executed
by the Company’s transfer agent, and delivered to the Lead Purchaser’s counsel
to be held in escrow pending the Closing.
 
(m) Security Agreement. At the Closing, the Company shall have executed and
delivered the Security Agreement and the IP Security Agreement to each
Purchaser.
 
(n) UCC Financing Statements. The Company shall have authorized the filing of
all UCC financing statements in form and substance satisfactory to the
Purchasers at the appropriate offices to create a valid and perfected security
interest in the Collateral (as defined in the Security Agreement), which filings
are to be made promptly following Closing.
 
(o) Kuo Employment Agreement. James S. Kuo shall have entered into an employment
agreement with the Company on terms and conditions deemed satisfactory to the
Purchasers, pursuant to which Kuo will serve, on Closing, as Chief Executive
Officer of the Company and as Chairman of the Board of Directors.
 

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ARTICLE V
 
CERTIFICATE LEGEND
 
Section 5.1 Legend. Each certificate representing the Securities shall be
stamped or otherwise imprinted with a legend substantially in the following form
(in addition to any legend required by applicable state securities or “blue sky”
laws):
 
THE SECURITIES REPRESENTED BY THIS CERTIFICATE (THE “SECURITIES”) HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE “SECURITIES ACT”)
OR ANY STATE SECURITIES LAWS AND MAY NOT BE SOLD, TRANSFERRED OR OTHERWISE
DISPOSED OF UNLESS REGISTERED UNDER THE SECURITIES ACT AND UNDER APPLICABLE
STATE SECURITIES LAWS OR DUSKA THERAPEUTICS, INC. SHALL HAVE RECEIVED AN OPINION
OF COUNSEL THAT REGISTRATION OF SUCH SECURITIES UNDER THE SECURITIES ACT AND
UNDER THE PROVISIONS OF APPLICABLE STATE SECURITIES LAWS IS NOT REQUIRED.
 
The Company agrees to issue or reissue certificates representing any of the
Conversion Shares and the Warrant Shares, without the legend set forth above if
at such time, prior to making any transfer of any such Conversion Shares or
Warrant Shares, such holder thereof shall give written notice to the Company
describing the manner and terms of such transfer and removal as the Company may
reasonably request, and (x) such Conversion Shares and/or Warrant Shares have
been registered for sale under the Securities Act and the holder is selling such
shares and is complying with its prospectus delivery requirement under the
Securities Act, (y) the holder is selling such Conversion Shares and/or Warrant
Shares in compliance with the provisions of Rule 144 or (z) the provisions of
paragraph (k) of Rule 144 apply to such Shares.
 
 
ARTICLE VI
 
INDEMNIFICATION
 
Section 6.1 General Indemnity. The Company agrees to indemnify and hold harmless
the Purchasers (and their respective directors, officers, affiliates, agents,
successors and assigns) from and against any and all losses, liabilities,
deficiencies, costs, damages and expenses (including, without limitation,
reasonable attorneys’ fees, charges and disbursements) incurred by the
Purchasers as a result of any inaccuracy in or breach of the representations,
warranties or covenants made by the Company herein.
 

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Section 6.2 Indemnification Procedure. Any party entitled to indemnification
under this Article VI (an “indemnified party”) will give written notice to the
indemnifying party of any matter giving rise to a claim for indemnification;
provided, that the failure of any party entitled to indemnification hereunder to
give notice as provided herein shall not relieve the indemnifying party of its
obligations under this Article VI except to the extent that the indemnifying
party is actually prejudiced by such failure to give notice. In case any such
action, proceeding or claim is brought against an indemnified party in respect
of which indemnification is sought hereunder, the indemnifying party shall be
entitled to participate in and, unless in the reasonable judgment of the
indemnifying party a conflict of interest between it and the indemnified party
exists with respect to such action, proceeding or claim (in which case the
indemnifying party shall be responsible for the reasonable fees and expenses of
one separate counsel for the indemnified parties), to assume the defense thereof
with counsel reasonably satisfactory to the indemnified party. In the event that
the indemnifying party advises an indemnified party that it will contest such a
claim for indemnification hereunder, or fails, within thirty (30) days of
receipt of any indemnification notice to notify, in writing, such person of its
election to defend, settle or compromise, at its sole cost and expense, any
action, proceeding or claim (or discontinues its defense at any time after it
commences such defense), then the indemnified party may, at its option, defend,
settle or otherwise compromise or pay such action or claim. In any event, unless
and until the indemnifying party elects in writing to assume and does so assume
the defense of any such claim, proceeding or action, the indemnified party’s
costs and expenses arising out of the defense, settlement or compromise of any
such action, claim or proceeding shall be losses subject to indemnification
hereunder. The indemnified party shall cooperate fully with the indemnifying
party in connection with any negotiation or defense of any such action or claim
by the indemnifying party and shall furnish to the indemnifying party all
information reasonably available to the indemnified party which relates to such
action or claim. The indemnifying party shall keep the indemnified party fully
apprised at all times as to the status of the defense or any settlement
negotiations with respect thereto. If the indemnifying party elects to defend
any such action or claim, then the indemnified party shall be entitled to
participate in such defense with counsel of its choice at its sole cost and
expense. The indemnifying party shall not be liable for any settlement of any
action, claim or proceeding effected without its prior written consent.
Notwithstanding anything in this Article VI to the contrary, the indemnifying
party shall not, without the indemnified party’s prior written consent, settle
or compromise any claim or consent to entry of any judgment in respect thereof
which imposes any future obligation on the indemnified party or which does not
include, as an unconditional term thereof, the giving by the claimant or the
plaintiff to the indemnified party of a release from all liability in respect of
such claim. The indemnification obligations to defend the indemnified party
required by this Article VI shall be made by periodic payments of the amount
thereof during the course of investigation or defense, as and when bills are
received or expense, loss, damage or liability is incurred, so long as the
indemnified party shall refund such moneys if it is ultimately determined by a
court of competent jurisdiction that such party was not entitled to
indemnification. The indemnity agreements contained herein shall be in addition
to (a) any cause of action or similar rights of the indemnified party against
the indemnifying party or others, and (b) any liabilities the indemnifying party
may be subject to pursuant to the law. 
 

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ARTICLE VII
 
MISCELLANEOUS
 
Section 7.1 Fees and Expenses. Each party shall pay the fees and expenses of its
advisors, counsel, accountants and other experts, if any, and all other
expenses, incurred by such party incident to the negotiation, preparation,
execution, delivery and performance of this Agreement; provided, however, that
the Company shall pay all actual attorneys’ fees and expenses (including
disbursements and out-of-pocket expenses) incurred by the Lead Purchasers in
connection with (i) the preparation, negotiation, execution and delivery of the
Transaction Documents and the transactions contemplated thereunder, which
payment shall be made at Closing and shall not exceed $40,000 (plus
disbursements and out-of-pocket expenses) (which payment may be withheld from
the amount delivered to the Company by the Lead Purchaser on Closing), and (ii)
any amendments, modifications or waivers of this Agreement or any of the other
Transaction Documents. In addition, the Company shall pay all reasonable fees
and expenses incurred by the Purchasers in connection with the enforcement of
this Agreement or any of the other Transaction Documents, including, without
limitation, all reasonable attorneys’ fees and expenses.
 
Section 7.2 Specific Performance; Consent to Jurisdiction; Venue.
 
(a) The Company and the Purchasers acknowledge and agree that irreparable damage
would occur in the event that any of the provisions of this Agreement or the
other Transaction Documents were not performed in accordance with their specific
terms or were otherwise breached. It is accordingly agreed that the parties
shall be entitled to an injunction or injunctions to prevent or cure breaches of
the provisions of this Agreement or the other Transaction Documents and to
enforce specifically the terms and provisions hereof or thereof, this being in
addition to any other remedy to which any of them may be entitled by law or
equity.
 
(b) The parties agree that venue for any dispute arising under this Agreement
will lie exclusively in the state or federal courts located in New York County,
New York, and the parties irrevocably waive any right to raise forum non
conveniens or any other argument that New York is not the proper venue. The
parties irrevocably consent to personal jurisdiction in the state and federal
courts of the state of New York. The Company and each Purchaser consent to
process being served in any such suit, action or proceeding by mailing a copy
thereof to such party at the address in effect for notices to it under this
Agreement and agrees that such service shall constitute good and sufficient
service of process and notice thereof. Nothing in this Section 7.2 shall affect
or limit any right to serve process in any other manner permitted by law. The
Company and the Purchasers hereby agree that the prevailing party in any suit,
action or proceeding arising out of or relating to the Securities, this
Agreement or the other Transaction Documents, shall be entitled to reimbursement
for reasonable legal fees from the non-prevailing party. The parties hereby
waive all rights to a trial by jury.
 
Section 7.3 Entire Agreement; Amendment. This Agreement and the Transaction
Documents contain the entire understanding and agreement of the parties with
respect to the matters covered hereby and, except as specifically set forth
herein or in the other Transaction Documents, neither the Company nor any
Purchaser make any representation, warranty, covenant or undertaking with
respect to such matters, and they supersede all prior understandings and
agreements with respect to said subject matter, all of which are merged herein.
No provision of this Agreement may be waived or amended other than by a written
instrument signed by the Company and the Purchasers holding at least a majority
of the principal amount of the Notes then held by the Purchasers. Any amendment
or waiver effected in accordance with this Section 7.3 shall be binding upon
each Purchaser (and their permitted assigns) and the Company.
 
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Section 7.4 Notices. Any notice, demand, request, waiver or other communication
required or permitted to be given hereunder shall be in writing and shall be
effective (a) upon hand delivery by telecopy or facsimile at the address or
number designated below (if delivered on a business day during normal business
hours where such notice is to be received), or the first business day following
such delivery (if delivered other than on a business day during normal business
hours where such notice is to be received) or (b) on the second business day
following the date of mailing by express courier service, fully prepaid,
addressed to such address, or upon actual receipt of such mailing, whichever
shall first occur. The addresses for such communications shall be:
 

If to the Company:   Duska Therapeutics, Inc.      
Two Bala Plaza
      Suite 300       Bala Cynwyd, PA  

 
with copies (which copies
shall not constitute notice
to the Company) to:      
  Sichenzia Ross Friedman Ference LLP       61 Broadway      
New York, New York 10006
      Tel: (212) 930-9700       Fax: (212) 930-9725           If to any
Purchaser:  
At the address of such Purchaser set forth on Exhibit A to this Agreement, with
copies to Purchaser’s counsel as set forth on Exhibit A or as specified in
writing by such Purchaser with copies to:
                  Shane W. McCormack, Esq.       Burak Anderson & Melloni, PLC  
    30 Main Street, PO Box 787       Burlington, VT 05402-0787      
Tel: (802) 862-0500Fax: (802) 862-8176
 

 

Any party hereto may from time to time change its address for notices by giving
written notice of such changed address to the other party hereto.
 

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Section 7.5 Waivers. No waiver by either party of any default with respect to
any provision, condition or requirement of this Agreement shall be deemed to be
a continuing waiver in the future or a waiver of any other provision, condition
or requirement hereof, nor shall any delay or omission of any party to exercise
any right hereunder in any manner impair the exercise of any such right accruing
to it thereafter. No consideration shall be offered or paid to any Purchaser to
amend or consent to a waiver or modification of any provision of any of the
Transaction Documents unless the same consideration is also offered to all of
the parties to the Transaction Documents. This provision constitutes a separate
right granted to each Purchaser by the Company and shall not in any way be
construed as the Purchasers acting in concert or as a group with respect to the
purchase, disposition or voting of Securities or otherwise.
 
Section 7.6 Headings. The article, section and subsection headings in this
Agreement are for convenience only and shall not constitute a part of this
Agreement for any other purpose and shall not be deemed to limit or affect any
of the provisions hereof.
 
Section 7.7 Successors and Assigns. This Agreement shall be binding upon and
inure to the benefit of the parties and their successors and assigns. After the
Closing, the assignment by a party to this Agreement of any rights hereunder
shall not affect the obligations of such party under this Agreement. The
Purchasers may assign the Securities and its rights under this Agreement and the
other Transaction Documents and any other rights hereto and thereto without the
consent of the Company.
 
Section 7.8 No Third Party Beneficiaries. This Agreement is intended for the
benefit of the parties hereto and their respective permitted successors and
assigns and is not for the benefit of, nor may any provision hereof be enforced
by, any other person.
 
Section 7.9 Governing Law. This Agreement shall be governed by and construed in
accordance with the internal laws of the State of New York, without giving
effect to any of the conflicts of law principles which would result in the
application of the substantive law of another jurisdiction. This Agreement shall
not be interpreted or construed with any presumption against the party causing
this Agreement to be drafted.
 
Section 7.10 Survival. The representations and warranties of the Company and the
Purchasers shall survive the execution and delivery hereof and the Closing until
the third anniversary of the Closing Date, except the agreements and covenants
set forth in Articles I, III, V, VI and VII of this Agreement shall survive the
execution and delivery hereof and such Closing hereunder.
 
Section 7.11 Counterparts. This Agreement may be executed in any number of
counterparts, all of which taken together shall constitute one and the same
instrument and shall become effective when counterparts have been signed by each
party and delivered to the other parties hereto, it being understood that all
parties need not sign the same counterpart.
 
Section 7.12 Publicity. The Company agrees that it will not disclose, and will
not include in any public announcement, the names of the Purchasers without the
consent of the Purchasers, which consent shall not be unreasonably withheld or
delayed, or unless and until such disclosure is required by law, rule or
applicable regulation, including without limitation any disclosure pursuant to
the Registration Statement, and then only to the extent of such requirement.
Notwithstanding the foregoing, the Purchasers consent to being identified in any
filings the Company makes with the Commission to the extent required by law or
the rules and regulations of the Commission.
 

29

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Section 7.13 Severability. The provisions of this Agreement are severable and,
in the event that any court of competent jurisdiction shall determine that any
one or more of the provisions or part of the provisions contained in this
Agreement shall, for any reason, be held to be invalid, illegal or unenforceable
in any respect, such invalidity, illegality or unenforceability shall not affect
any other provision or part of a provision of this Agreement and this Agreement
shall be reformed and construed as if such invalid or illegal or unenforceable
provision, or part of such provision, had never been contained herein, so that
such provisions would be valid, legal and enforceable to the maximum extent
possible.
 
Section 7.14 Further Assurances. From and after the date of this Agreement, upon
the request of the Purchasers or the Company, the Company and each Purchaser
shall execute and deliver such instruments, documents and other writings as may
be reasonably necessary or desirable to confirm and carry out and to effectuate
fully the intent and purposes of this Agreement and the other Transaction
Documents
 
Section 7.15 Collateral Agent.
 
(a)  Appointment. Each Purchaser hereby appoints the Lead Purchaser as the
Collateral Agent under the Security Agreement and the IP Security Agreement
(collectively, the “Security Documents”) and each Purchaser authorizes the
Collateral Agent to take such action as agent on its behalf and to exercise such
powers under the Security Documents as are delegated to the Collateral Agent
under such agreements and to exercise such powers as are reasonably incidental
thereto. Without limiting the foregoing, each Secured Party hereby authorizes
the Collateral Agent to execute and deliver, and to perform its obligations
under, each of the documents to which the Collateral Agent is a party relating
to security for the obligations under the Notes, to exercise all rights, powers
and remedies that the Collateral Agent may have under such Security Documents
and, in the case of the Security Documents, to act as agent for the Purchasers
under such Transaction Documents.

(b)  Instructions of Purchasers. The Collateral Agent shall not be required to
exercise any discretion or take any action, but shall be required to act or to
refrain from acting (and shall be fully protected in so acting or refraining
from acting) upon the instructions of the Purchasers holding at least 51% of the
aggregate amount of the Notes then outstanding, and such instructions shall be
binding upon all Purchasers; provided, however, that the Collateral Agent shall
not be required to take any action that (i) the Collateral Agent in good faith
believes exposes it to personal liability unless the Collateral Agent receives
an indemnification satisfactory to it from the Purchasers with respect to such
action or (ii) is contrary to this Agreement or applicable law.

(c)  Duties are Administrative in Nature. In performing its functions and duties
under the Security Documents and the other documents required to be executed or
delivered in connection therewith, the Collateral Agent is acting solely on
behalf of the Purchasers and its duties are entirely administrative in nature.
The Collateral Agent does not assume and shall not be deemed to have assumed any
obligation other than as expressly set forth herein. The Collateral Agent may
perform any of its duties under any Security Document by or through its agents
or employees.

30

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(d)  No Liability. None of the Collateral Agent, any of its affiliates or any of
their respective directors, officers, agents or employees shall be liable for
any action taken or omitted to be taken by it, him, her or them under or in
connection with the Security Documents, except for its, his, her or their own
gross negligence or willful misconduct.

(e)  Investigation. Each Secured Party acknowledges that it shall, independently
and without reliance upon the Collateral Agent or any other Secured Party
conduct its own independent investigation of the financial condition and affairs
of the Company and its Subsidiaries in connection with the issuance of the
Securities. Each Secured Party also acknowledges that it shall, independently
and without reliance upon the Collateral Agent or any other Secured Party and
based on such documents and information as it shall deem appropriate at the
time, continue to make its own credit decisions in taking or not taking action
under this Agreement and other Transaction Documents.

(f)  Indemnification. Each Purchaser agrees to indemnify the Collateral Agent
and each of its affiliates, and each of their respective directors, officers,
employees, agents and advisors (to the extent not reimbursed by the Company),
from any and all liabilities, obligations, losses, damages, penalties, actions,
judgments, suits, costs, expenses and disbursements (including fees, expenses
and disbursements of financial and legal advisors) of any kind or nature
whatsoever that may be imposed on, incurred by, or asserted against, the
Collateral Agent or any of its affiliates, directors, officers, employees,
agents and advisors in any way relating to or arising out of the Security
Documents or any action taken or omitted by the Collateral Agent under the
Security Documents or the document related thereto; provided, however, that no
Purchaser shall be liable for any portion of such liabilities, obligations,
losses, damages, penalties, actions, judgments, suits, costs, expenses or
disbursements resulting from the Collateral Agent’s or such Affiliate’s gross
negligence or willful misconduct.

(g) Resignation. The Collateral Agent may resign at any time by giving written
notice thereof to the Purchasers and the Company. Upon any such resignation, the
Purchasers shall have the right to appoint a successor Collateral Agent. If no
successor Collateral Agent shall have been so appointed by the Purchasers, and
shall have accepted such appointment, within 30 days after the retiring
Collateral Agent’s giving of notice of resignation, then the retiring Collateral
Agent may, on behalf of the Purchasers, appoint a successor Collateral Agent,
selected from among the Purchasers. Upon the acceptance of any appointment as
Collateral Agent by a successor Collateral Agent, such successor Collateral
Agent shall succeed to, and become vested with, all the rights, powers,
privileges and duties of the retiring Collateral Agent, and the retiring
Collateral Agent shall be discharged from its duties and obligations under this
Agreement, the Transaction Documents and any other documents required to be
executed or delivered in connection therewith. Prior to any retiring Collateral
Agent’s resignation hereunder as Collateral Agent, the retiring Collateral Agent
shall take such action as may be reasonably necessary to assign to the successor
Collateral Agent its rights as Collateral Agent under the Transaction Documents.
After such resignation, the retiring Collateral Agent shall continue to have the
benefit of this Agreement as to any actions taken or omitted to be taken by it
while it was Collateral Agent under this Agreement, the Security Documents and
any other documents required to be executed or delivered in connection
therewith.

31

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(h) Binding. Each Purchaser agrees that any action taken by the Collateral Agent
in accordance with the provisions of this Agreement or of the other document
relating thereto, and the exercise by the Collateral Agent or the Purchasers of
the powers set forth herein or therein, together with such other powers as are
reasonably incidental thereto, shall be authorized and binding upon all of the
Purchasers.

(i) Releases. Each of the Purchasers hereby directs, in accordance with the
terms hereof, the Collateral Agent to release (or in the case of clause (ii)
below, release or subordinate) any Lien held by the Collateral Agent for the
benefit of the Purchasers against any of the following: (i) all of the
Collateral upon payment and satisfaction in full of all obligations under the
Notes and all other obligations under the Transaction Documents that the
Collateral Agent has been notified in writing are then due and payable; (ii) any
assets that are subject to a Lien; and (iii) any part of the Collateral sold or
disposed of by the Company or any Subsidiary if such sale or disposition is
permitted by this Agreement and the other Transaction Documents (or permitted
pursuant to a waiver or consent of a transaction otherwise prohibited by this
Agreement and the other Transaction Documents). Each of the Purchasers hereby
directs the Collateral Agent to execute and deliver or file such termination and
partial release statements and do such other things as are necessary to release
Liens to be released pursuant to this Section 7.15 promptly upon the
effectiveness of any such release.

Section 7.16 Representation of Lead Purchaser. It is acknowledged by each
Purchaser that the Lead Purchaser has retained Burak Anderson & Melloni, PLC to
act as its counsel in connection with the transactions contemplated by the
Transaction Documents and that Burak Anderson & Melloni, PLC has not acted as
counsel for any Purchaser, other than the Lead Purchaser, in connection with the
transactions contemplated by the Transaction Documents and that none of such
Purchasers has the status of a client for conflict of interest or any other
purposes as a result thereof.
 

[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]

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

  DUSKA THERAPEUTICS, INC.           By:   /s/ Amir
Pelleg________________________     Name:  Amir Pelleg     Title: President      
      PLATINUM LONG TERM GROWTH VI, LLC             By:    /s/ Mark
Nordlicht                                                        Name: Mark
Nordlicht     Title:  
Managing Member
            PLATINUM MONTAUR LIFE SCIENCES, LLC             By:    /s/ Mark
Nordlicht                                                       Name: Mark
Nordlicht     Title:  Managing Member             BRIDGEPOINTE MASTER FUND LTD.
            By:  /s/ Eric S.
Swartz                                                            Name: Eric S.
Swartz     Title:   Director             FIREBIRD GLOBAL MASTER FUND LTD.      
      By:    /s/ James
Passin                                                             Name: James
Passin     Title:  Director             FIREBIRD GLOBAL MASTER FUND II LTD.    
        By:     /s/ James
Passin                                                               Name: James
Passin     Title:   
Director
         

 
i

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EXHIBIT A
LIST OF PURCHASERS

       
Names and Addresses of Purchasers
 
Investment Amount and Number of
 Warrants Purchased
Platinum Long Term Growth VI, LLC
152 West 57th Street, 54th Floor
New York, NY 10019
 
$1,326,923.08 Principal Amount of Notes
Long Term Warrant: 3,317,308 shares
Short Term Warrant: 3,317,308 shares
Platinum Montaur Life Sciences, LLC
152 West 57th Street, 54th Floor
New York, NY 10019
 
$1,326,923.08 Principal Amount of Notes
Long Term Warrant: 3,317,308 shares
Short Term Warrant: 3,317,308 shares
Bridgepoint Master Fund Ltd.
1120 Sanctuary Parkway, Suite 325
Alpharetta , Georgia 30004
 
$1,326,923.08 Principal Amount of Notes
Long Term Warrant: 3,317,308shares
Short Term Warrant: 3,317,308 shares
Firebird Global Master Fund Ltd.
c/o Trident Trust Company (Cayman) Limited
1 Capital Place, P.O. Box 847
Grand Cayman, Cayman Islands
 
$884,615.38 Principal Amount of Notes
Long Term Warrant: 2,211,539 shares
Short Term Warrant: 2,211,539 shares
Firebird Global Master Fund II Ltd.
c/o Trident Trust Company (Cayman) Limited
1 Capital Place, P.O. Box 847
Grand Cayman, Cayman Islands
 
$884,615.38 Principal Amount of Notes
Long Term Warrant: 2,211,539 shares
Short Term Warrant: 2,211,539 shares
     

 
ii

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EXHIBIT B
FORM OF 10% NOTE
 
iii

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EXHIBIT C
FORM OF LONG TERM WARRANT
 
iv

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

EXHIBIT D
FORM OF SHORT TERM WARRANT

v

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EXHIBIT E
FORM OF REGISTRATION RIGHTS AGREEMENT
 
vi

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EXHIBIT F
FORM OF SECURITY AGREEMENT
 
vii

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EXHIBIT G
FORM OF IP SECURITY AGREEMENT
 
viii

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EXHIBIT H
FORM OF GUARANTEE
 
ix

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EXHIBIT I
FORM OF OFFICER’S CERTIFICATE
 
x

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EXHIBIT J
FORM OF IRREVOCABLE TRANSFER AGENT INSTRUCTIONS

DUSKA THERAPEUTICS, INC.
 
as of September __, 2007
 
[Name and address of Transfer Agent]
Attn: _____________

Ladies and Gentlemen:
 
Reference is made to that certain Note and Warrant Purchase Agreement (the
“Purchase Agreement”), dated as of September 26, 2007, by and among Duska
Therapeutics, Inc., a Nevada corporation (the “Company”), and the purchasers
named therein (collectively, the “Purchasers”) pursuant to which the Company is
issuing to the Purchasers senior secured convertible promissory notes (the
“Notes”) and warrants (the “Warrants”) to purchase shares of the Company’s
common stock, par value $0.001 per share (the “Common Stock”). This letter shall
serve as our irrevocable authorization and direction to you (provided that you
are the transfer agent of the Company at such time) to issue shares of Common
Stock upon conversion of the Notes (the “Conversion Shares”) and exercise of the
Warrants (the “Warrant Shares”) to or upon the order of a Purchaser from time to
time upon (i) surrender to you of a properly completed and duly executed
Conversion Notice or Exercise Notice, as the case may be, in the form attached
hereto as Exhibit I and Exhibit II, respectively, (ii) in the case of the
conversion of Notes, a copy of the Note (with the original delivered to the
Company) representing the Notes being converted or, in the case of Warrants
being exercised, a copy of the Warrants (with the original Warrants delivered to
the Company) being exercised (or, in each case, an indemnification undertaking
with respect to such Notes or the Warrants in the case of their loss, theft or
destruction), and (iii) delivery of a treasury order or other appropriate order
duly executed by a duly authorized officer of the Company. So long as you have
previously received (x) written confirmation from counsel to the Company that a
registration statement covering resales of the Conversion Shares or Warrant
Shares, as applicable, has been declared effective by the Securities and
Exchange Commission (the “SEC”) under the Securities Act of 1933, as amended
(the “1933 Act”), and no subsequent notice by the Company or its counsel of the
suspension or termination of its effectiveness and (y) a copy of such
registration statement, and if the Purchaser represents in writing that the
prospectus delivery requirements have been or will be met, the Conversion Shares
or the Warrant Shares, as the case may be, were sold pursuant to the
Registration Statement, then certificates representing the Conversion Shares and
the Warrant Shares, as the case may be, shall not bear any legend restricting
transfer of the Conversion Shares and the Warrant Shares, as the case may be,
thereby and should not be subject to any stop-transfer restriction. Provided,
however, that if you have not previously received (i) written confirmation from
counsel to the Company that a registration statement covering resales of the
Conversion Shares or Warrant Shares, as applicable, has been declared effective
by the SEC under the 1933 Act, and (ii) a copy of such registration statement,
then the certificates for the Conversion Shares and the Warrant Shares shall
bear the following legend:
 
“THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER
THE SECURITIES ACT OF 1933, AS AMENDED (THE SECURITIES ACT”), OR ANY STATE
SECURITIES LAWS AND MAY NOT BE SOLD, TRANSFERRED OR OTHERWISE DISPOSED OF UNLESS
REGISTERED UNDER THE SECURITIES ACT OR APPLICABLE STATE SECURITIES LAWS, OR
DUSKA THERAPEUTICS, INC. SHALL HAVE RECEIVED AN OPINION OF ITS COUNSEL THAT
REGISTRATION OF SUCH SECURITIES UNDER THE SECURITIES ACT AND UNDER THE
PROVISIONS OF APPLICABLE STATE SECURITIES LAWS IS NOT REQUIRED.”
 
xi

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and, provided further, that the Company may from time to time notify you to
place stop-transfer restrictions on the certificates for the Conversion Shares
and the Warrant Shares in the event a registration statement covering the
Conversion Shares and the Warrant Shares is subject to amendment for events then
current.
 
A form of written confirmation from counsel to the Company that a registration
statement covering resales of the Conversion Shares and the Warrant Shares has
been declared effective by the SEC under the 1933 Act is attached hereto as
Exhibit III.
 
Please be advised that the Purchasers are relying upon this letter as an
inducement to enter into the Purchase Agreement and, accordingly, each Purchaser
is a third party beneficiary to these instructions.
 
Notwithstanding anything to the contrary contained herein, you are not to issue
any Warrant Shares (i) after September 26, 2012 or (ii) upon exercise in full of
the Warrants (as evidenced in written instructions from the Company). Further,
you are instructed not to issue any Conversion Shares after you are informed in
writing by the Company that the applicable Note has been paid in full and
satisfied or that all of the applicable Note Shares have been issued.
 
Please execute this letter in the space indicated to acknowledge your agreement
to act in accordance with these instructions. Should you have any questions
concerning this matter, please contact me at ___________.
 
Very truly yours,
 
DUSKA THERAPEUTICS, INC.
 

 
By:                                                                          
      
 
Name:                                                                  
Title:                                                                    
 
ACKNOWLEDGED AND AGREED:
 
[TRANSFER AGENT]
 
By:                                                                                  
       
Name:                                                                             
       
Title:                                                                               
       
Date:                                     
 
xii

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EXHIBIT K
OPINION OF COUNSEL TO COMPANY
 
xiii

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EXHIBIT I
 
DUSKA THERAPEUTICS, INC.
CONVERSION NOTICE
 
(To be Executed by the Registered Holder in order to Convert the Note)
 
The undersigned hereby irrevocably elects to convert $ ________________ of the
principal amount of the above Note No. ___ into shares of Common Stock of DUSKA
THERAPEUTICS, INC. (the “Maker”) according to the conditions hereof, as of the
date written below.
 
Date of Conversion _________________________________________________________
 
Applicable Conversion Price __________________________________________________
 
Number of shares of Common Stock beneficially owned or deemed beneficially owned
by the Holder on the Date of Conversion: _________________________

Signature___________________________________________________________________
 
[Name]
 
Address:__________________________________________________________________
 
_______________________________________________________________________
 
xiv

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EXHIBIT II
 
FORM OF EXERCISE NOTICE
 
EXERCISE FORM
 
DUSKA THERAPEUTICS, INC.
 
The undersigned _______________, pursuant to the provisions of the within
Warrant, hereby elects to purchase _____ shares of Common Stock of Duska
Therapeutics, Inc. covered by the within Warrant.
 

Dated: ________________   Signature   ___________________________       Address 
  _____________________                                                  

 
Number of shares of Common Stock beneficially owned or deemed beneficially owned
by the Holder on the date of Exercise: _________________________

ASSIGNMENT

FOR VALUE RECEIVED, _________________ hereby sells, assigns and transfers unto
__________________ the within Warrant and all rights evidenced thereby and does
irrevocably constitute and appoint _____________, attorney, to transfer the said
Warrant on the books of the within named corporation.

Dated:_________________   Signature   ___________________________       Address 
  _____________________                                                  

PARTIAL ASSIGNMENT

FOR VALUE RECEIVED, _________________ hereby sells, assigns and transfers unto
__________________ the right to purchase _________ shares of Warrant Stock
evidenced by the within Warrant together with all rights therein, and does
irrevocably constitute and appoint ___________________, attorney, to transfer
that part of the said Warrant on the books of the within named corporation.

Dated: ________________   Signature   ___________________________       Address 
  _____________________                                                  

 
FOR USE BY THE ISSUER ONLY:

This Warrant No. W-_____ canceled (or transferred or exchanged) this _____ day
of ___________, _____, shares of Common Stock issued therefor in the name of
_______________, Warrant No. W-_____ issued for ____ shares of Common Stock in
the name of _______________.

xv

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EXHIBIT III
 
FORM OF NOTICE OF EFFECTIVENESS
OF REGISTRATION STATEMENT
 
[Name and address of Transfer Agent]
Attn: _____________

Re: Duska Therapeutics, Inc.
 
Ladies and Gentlemen:
 
We are counsel to Duska Therapeutics, Inc., a Nevada corporation (the
“Company”), and have represented the Company in connection with that certain
Note and Warrant Purchase Agreement (the “Purchase Agreement”), dated as of
September __, 2007, by and among the Company and the purchasers named therein
(collectively, the “Purchasers”) pursuant to which the Company issued to the
Purchasers senior secured convertible promissory notes (the “Notes”) and
warrants (the “Warrants”) to purchase shares of the Company’s common stock, par
value $0.001 per share (the “Common Stock”). Pursuant to the Purchase Agreement,
the Company has also entered into a Registration Rights Agreement with the
Purchasers (the “Registration Rights Agreement”), dated as of September __,
2007, pursuant to which the Company agreed, among other things, to register the
Registrable Securities (as defined in the Registration Rights Agreement),
including the shares of Common Stock issuable upon conversion of the Notes and
exercise of the Warrants, under the Securities Act of 1933, as amended (the
“1933 Act”). In connection with the Company’s obligations under the Registration
Rights Agreement, on ________________, 2007, the Company filed a Registration
Statement on Form SB-2 (File No. 333-________) (the “Registration Statement”)
with the Securities and Exchange Commission (the “SEC”) relating to the resale
of the Registrable Securities which names each of the present Purchasers as a
selling stockholder thereunder.
 
In connection with the foregoing, we advise you that a member of the SEC’s staff
has advised us by telephone that the SEC has entered an order declaring the
Registration Statement effective under the 1933 Act at [ENTER TIME OF
EFFECTIVENESS] on [ENTER DATE OF EFFECTIVENESS] and we have no knowledge, after
telephonic inquiry of a member of the SEC’s staff, that any stop order
suspending its effectiveness has been issued or that any proceedings for that
purpose are pending before, or threatened by, the SEC and accordingly, the
Registrable Securities are available for resale under the 1933 Act pursuant to
the Registration Statement.
 
Very truly yours,
 
[COMPANY COUNSEL]
 
By:                                                                                       
 
cc: [LIST NAMES OF PURCHASERS]
 
xvi

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Schedules

2.1(g) Direct and Indirect Subsidiaries
Duska Scientific Co.

2.1(b) Further consent or authorization of the Company, its Board of Directors
or stockholders
None

Schedule 2.1(c) Authorized, Issued and Outstanding Capital Stock, Options,
Warrants, and other
Securities; Registration Rights
[see cap table and your schedule on reg rights]

2.1 (h) Material Adverse Changes
None

2.1(i) Undisclosed Liabilities
None

2.1(j) Undisclosed Events or Circumstances
None

2.1(k) Indebtedness
$250,000 Convertible notes issued in September, 2006, which will be converted to
common stock and warrants upon completion of this financing.

2.1 (l) Title to Assets Clouded
None

2.1 (m) Claims or Actions Pending
A claim has been asserted by Troy & Gould, P.C. for collection action of their
outstanding accounts payable.

2.1 (o) Returns under Examination
None

2.1(p) Fees in connection with Transaction

Placement agent fee
$575,000 and 10% warrant coverage as set forth in the Purchase Agreement
Placement agent retainer and expenses
$35,000
Legal fees for Duska Therapeutics
$47,500
Due diligence fees for Roswell Capital
$5,000
Legal fees for Platinum Partners
$40,000

2.1 (r ) Patents not owned
None
 
xvii

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2.1 (u) Material Agreements
None

2.1 (v) Transactions with Affiliates
See schedule attached

2.1 (x) Collective Bargaining Agreements, Employment agreements
None

2.1 (y) Subsequent Events
None
 
xviii

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