EXHIBIT 10.2

REGISTRATION RIGHTS AGREEMENT

REGISTRATION RIGHTS AGREEMENT (this “AGREEMENT”), dated as of March 30, 2007, by
and between AVICENA GROUP, INC., a Delaware corporation (the “COMPANY”), and
each buyer identified on the signature pages hereto (collectively, the “BUYERS”
and each individually, the “BUYER”).

WHEREAS:

A. In connection with the Securities Purchase Agreement by and among the parties
hereto of even date herewith (the “SECURITIES PURCHASE AGREEMENT”), the Company
has agreed, upon the terms and subject to the conditions contained therein, to
issue and sell to the Buyer the following (as each capitalized term not
otherwise defined herein shall have the meaning ascribed to it in the Securities
Purchase Agreement):

(i) Series B Preferred Stock of the Company (the “PREFERRED STOCK”) issued
pursuant to the Securities Purchase Agreement and the Certificate of Designation
of Rights and Preferences of Series B Preferred Stock of Avicena Group, Inc.
(the “Certificate of Designation”), and

(ii) Warrants in the amount described in the Securities Purchase Agreement,

where the Preferred Stock is convertible into shares of the Company’s common
stock, par value $0.001 per share (the “COMMON STOCK”), upon the terms and
subject to the limitations and conditions set forth in the Certificate of
Designation and where each of the Warrants is exercisable into shares of the
Company’s common stock, par value $0.001 per share, each upon the terms and
conditions and subject to the limitations and conditions set forth in the
Warrants, all subject to the terms and conditions of the Securities Purchase
Agreement; and

B. To induce the Buyer to execute and deliver the Securities Purchase Agreement,
the Company has agreed to provide certain registration rights under the
Securities Act of 1933, as amended, and the rules and regulations thereunder, or
any similar successor statute (collectively, the “1933 ACT”), and applicable
state securities laws;

NOW, THEREFORE, In consideration of the premises and the mutual covenants
contained herein and other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the Company and the Buyer hereby
agree as follows:

1. DEFINITIONS.

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

(i) “BUYER” means the purchaser of Preferred Stock and Warrants pursuant to the
Securities Purchase Agreement specified on the signature page hereof, and any
transferee or assignee who agrees to become bound by the provisions of this
Agreement in accordance with Section 9 hereof.

 

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(ii) “FILING DEADLINE,” for the initial Registration Statement required to be
filed hereunder, shall mean June 23, 2007.

(iii) “REGISTRATION DEADLINE” shall mean the earlier of (i) the date that is
ninety (90) days after the date that the initial Registration Statement is
actually filed or (ii) the date that is ninety (90) days after the Filing
Deadline.

(iv) “WARRANTS” means the warrants issued by the Company in conjunction with the
Preferred Stock issued by the Company.

(v) “REGISTER,” “REGISTERED,” and “REGISTRATION” refer to a registration
effected by preparing and filing a Registration Statement or Statements in
compliance with the 1933 Act and pursuant to Rule 415 under the 1933 Act or any
successor rule providing for offering securities on a continuous basis (“RULE
415”), and the declaration or ordering of effectiveness of such Registration
Statement by the United States Securities and Exchange Commission (the “SEC”).

(vi) “REGISTRABLE SECURITIES,” for a given Registration, means (a) the shares of
Common Stock (the “CONVERSION SHARES”) issued or issuable upon full conversion
of the Preferred Stock or otherwise pursuant to the Certificate of Designation
for which such Registration is being effected (including, without limitation,
any shares issued or issuable as “Payment Shares” or otherwise pursuant to the
Securities Purchase Agreement), (b) any shares of Common Stock (the “WARRANT
SHARES”) issued or issuable upon exercise of or otherwise pursuant to the
Warrant(s), and (c) any shares of capital stock issued or issuable as a dividend
on or in exchange for or otherwise with respect to any of the foregoing, (d) any
additional shares of Common Stock issuable in connection with any anti-dilution
provisions in the Certificate of Designation or the Warrants (in each case,
without giving effect to any limitations on conversion set forth in the
Certificate of Designation or limitations on exercise set forth in the Warrant),
and (e) any other shares of common stock issued pursuant to the terms of the
Securities Purchase Agreement, the Certificate of Designation, the Warrants,
this Registration Rights Agreement or any other Transaction Document (as defined
in the Securities Purchase Agreement), and (f) any securities issued or issuable
upon any stock split, dividend or other distribution, recapitalization or
similar event with respect to the foregoing.

(vii) “REGISTRATION STATEMENT(S)” means a registration statement(s) of the
Company under the 1933 Act.

b. Capitalized terms used herein and not otherwise defined herein shall have the
respective meanings set forth in the Securities Purchase Agreement.

 

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2. REGISTRATION.

a. MANDATORY REGISTRATION. Following the Closing of any Preferred Stock pursuant
to the Securities Purchase Agreement and the Certificate of Designation, the
Company shall prepare, and, on or prior to the applicable Filing Deadline (as
defined above) file with the SEC a Registration Statement (the “Mandatory
Registration Statement”) on Form S-3 or Form SB-2 (or, if Form S-3 and Form SB-2
are not then available, on such form of Registration Statement as is then
available to effect a registration of the Registrable Securities, subject to the
consent of the Buyer, which consent will not be unreasonably withheld) covering
the resale of the Registrable Securities which Registration Statement, to the
extent allowable under the 1933 Act and the rules and regulations promulgated
thereunder (including Rule 416), shall state that such Registration Statement
also covers such indeterminate number of additional shares of Common Stock as
may become issuable upon conversion of or otherwise pursuant to the Certificate
of Designation and exercise of or otherwise pursuant to the Warrants to prevent
dilution resulting from stock splits, stock dividends or similar transactions.
The number of shares of Common Stock initially included in such Registration
Statement shall be no less than one and one-half (1.5) times the aggregate
number of Conversion Shares that are then issuable upon conversion of the
Preferred Stock or otherwise pursuant to the Certificate of Designation (based
on the Conversion Price [as defined in the Certificate of Designation] then in
effect) plus the aggregate number of Warrant Shares that are then issuable upon
exercise of or otherwise pursuant to the Warrants, without regard to any
limitation on the Buyer’s ability to convert the Preferred Stock or exercise the
Warrants. The Company acknowledges that the number of shares initially included
in each Registration Statement represents a good faith estimate of the maximum
number of shares issuable upon conversion of the Preferred Stock or otherwise
pursuant to the Certificate of Designation and exercise of or otherwise pursuant
to the Warrants and shall be amended if not sufficient. Each Registration
Statement (and each amendment or supplement thereto, and each request for
acceleration of effectiveness thereof) shall be provided to (and subject to the
approval of) the Buyer and its counsel prior to its filing or other submission.
The Company may include in the Mandatory Registration Statement (and any
amendments and supplements thereto) the shares of Common Stock issuable upon the
conversion of the Series A Preferred Stock and upon exercise of the warrants
issued to the holders of Series A Preferred Stock or their assignees, the shares
of Common Stock issuable upon conversion of preferred stock issued as a
Preferred Stock Lock-Up Exception (as defined in the Securities Purchase
Agreement) and upon exercise of any warrants issued to the holders of such
preferred stock or their assignees, and the shares of Common Stock referenced in
SCHEDULE 3(c-2)(ii). (b), (c) and (e) of the Securities Purchase Agreement.

b. PIGGY-BACK REGISTRATIONS. If at any time prior to the expiration of the
Registration Period (as hereinafter defined) the Company shall determine to file
with the SEC a Registration Statement relating to an offering for its own
account or the account of others under the 1933 Act of any of its equity
securities (other than on Form S-4 or Form S-8 or their then equivalents
relating to equity securities to be issued solely in connection with any
acquisition of any entity or business or equity securities issuable in
connection with stock option or other employee benefit plans), the Company shall
send to Buyer written notice of such determination and, if within fifteen
(15) days after the effective date of such notice, the Buyer shall so request in
writing, the Company shall include in such Registration Statement all or any
part of the

 

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Registrable Securities the Buyer requests to be registered, except that if, in
connection with any underwritten public offering for the account of the Company,
the managing underwriter(s) thereof shall impose a limitation on the number of
shares of Common Stock which may be included in the Registration Statement
because, in such underwriter(s)’ judgment, marketing or other factors dictate
such limitation is necessary to facilitate public distribution, then the Company
shall be obligated to include in such Registration Statement only such limited
portion of the Registrable Securities with respect to which the Buyer has
requested inclusion hereunder as the underwriter shall permit;

PROVIDED, HOWEVER, that the Company shall not exclude any Registrable Securities
unless the Company has first excluded all outstanding securities, the holders of
which are not entitled by contract to inclusion of such securities in such
Registration Statement or are not entitled to pro rata inclusion with the
Registrable Securities; and

PROVIDED, FURTHER, HOWEVER, that, after giving effect to the immediately
preceding proviso, any exclusion of Registrable Securities shall be made pro
rata with holders of other securities having the contractual right to include
such securities in the Registration Statement other than holders of securities
entitled to inclusion of their securities in such Registration Statement by
reason of demand registration rights. No right to registration of Registrable
Securities under this Section 2(b) shall be construed to limit any registration
required under Section 2(a) hereof. If an offering in connection with which the
Buyer is entitled to registration under this Section 2(d) is an underwritten
offering, then the Buyer shall, unless otherwise agreed by the Company, offer
and sell such Registrable Securities in an underwritten offering using the same
underwriter or underwriters and, subject to the provisions of this Agreement, on
the same terms and conditions as other shares of Common Stock included in such
underwritten offering. Notwithstanding anything to the contrary set forth
herein, the registration rights of the Buyer pursuant to this Section 2(b) shall
only be available in the event the Company fails to timely file, obtain
effectiveness or maintain effectiveness of any Registration Statement to be
filed pursuant to Section 2(a) in accordance with the terms of this Agreement.

3. OBLIGATIONS OF THE COMPANY. In connection with the registration of the
Registrable Securities, the Company shall have the following obligations:

a. The Company shall prepare promptly, and file with the SEC as soon as
practicable after the date of the Closing under the Securities Purchase
Agreement (the “CLOSING DATE”) (but no later than the Filing Deadline),
Registration Statements with respect to the number of Registrable Securities
provided in Section 2(a), and thereafter use its best efforts to cause each such
Registration Statement relating to Registrable Securities to become effective as
soon as possible after such filing, but in any event shall cause each such
Registration Statement relating to Registrable Securities to become effective no
later than the Registration Deadline, and shall keep the Registration Statement
current and effective pursuant to Rule 415 at all times until such date as is
the earlier of (i) the date on which all of the Registrable Securities for such
Registration Statement have been sold and (ii) the date on which all of the
Registrable Securities for such Registration Statement (in the opinion of
counsel to the Buyer) may be immediately sold to the public without registration
or restriction (including without limitation as to volume by each holder
thereof) under the 1933 Act (the “REGISTRATION PERIOD”), which

 

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Registration Statement (including any amendments or supplements thereto and
prospectuses contained therein) shall not contain any untrue statement of a
material fact or omit to state a material fact required to be stated therein, or
necessary to make the statements therein not misleading.

b. The Company shall prepare and file with the SEC such amendments (including
post-effective amendments) and supplements to each Registration Statements and
the prospectus used in connection with the Registration Statements as may be
necessary to keep the Registration Statements current and effective at all times
during the Registration Period, and, during such period, comply with the
provisions of the 1933 Act with respect to the disposition of all Registrable
Securities of the Company covered by the Registration Statements until such time
as all of such Registrable Securities have been disposed of in accordance with
the intended methods of disposition by the seller or sellers thereof as set
forth in the Registration Statements. In the event that on any Trading Day (as
defined in the Certificate of Designation) (the “REGISTRATION TRIGGER DATE”) the
number of shares available under a Registration Statement filed pursuant to this
Agreement is insufficient to cover all of the Registrable Securities issued or
issuable upon conversion of the Certificate of Designation or otherwise pursuant
to the Certificate of Designation (based on the Conversion Price [as defined in
the Certificate of Designation] then in effect), exercise of or otherwise
pursuant to the Warrants, and otherwise issuable pursuant to the Transaction
Documents, in each case without giving effect to any limitations on the Buyer’
ability to convert the Preferred Stock, exercise the Warrants or otherwise
receive shares of Common Stock pursuant to the Transaction Documents, the
Company shall amend the Registration Statement, or file a new Registration
Statement (on the short form available therefore, if applicable), or both, so as
to cover one and one-half (1.5) times the total number of Registrable Securities
so issued or issuable (without giving effect to any limitations on conversion
contained in the Certificate of Designation, limitations on exercise contained
in the Warrants or limitations on conversion or exercise or other payment of
shares contained in the Securities Purchase Agreement) as of the Registration
Trigger Date, in each case, as soon as practicable, but in any event within
twenty (20) days after the Registration Trigger Date (based on the Conversion
Prices of the Preferred Stock, the Exercise Prices of the Warrants, and other
relevant factors on which the Company reasonably elects to rely). The Company
shall use its best efforts to cause such amendment and/or new Registration
Statement to become effective as soon as practicable following the filing
thereof, but in any event the Company shall cause such amendment and/or new
Registration Statement to become effective within sixty (60) days of the
Registration Trigger Date or as promptly as practicable in the event the Company
is required to increase its authorized shares.

c. The Company shall furnish to the Buyer and its legal counsel (i) promptly
after the same is prepared and publicly distributed, filed with the SEC, or
received by the Company, one copy of each Registration Statement and any
amendment thereto, each preliminary prospectus and prospectus and each amendment
or supplement thereto, and, in the case of the Registration Statement referred
to in Section 2(a), each letter written by or on behalf of the Company to the
SEC or the staff of the SEC, and each item of correspondence from the SEC or the
staff of the SEC, in each case relating to such Registration Statement (other
than any portion of any thereof which contains information for which the Company
has sought confidential treatment), and (ii) such number of copies of a
prospectus, including a preliminary prospectus,

 

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and all amendments and supplements thereto and such other documents as the Buyer
may reasonably request in order to facilitate the disposition of the Registrable
Securities owned by the Buyer. The Company will immediately notify the Buyer by
facsimile of the effectiveness of each Registration Statement or any
post-effective amendment. The Company will promptly respond to any and all
comments received from the SEC, with a view towards causing each Registration
Statement or any amendment thereto to be declared effective by the SEC as soon
as practicable and shall file an acceleration request as soon as practicable,
but no later than three (3) business days (the “ACCELERATION REQUEST DEADLINE”),
following the resolution or clearance of all SEC comments or, if applicable,
following notification by the SEC that any such Registration Statement or any
amendment thereto will not be subject to review.

d. The Company shall use reasonable efforts to (i) register and qualify the
Registrable Securities covered by the Registration Statements under such other
securities or “blue sky” laws of such jurisdictions in the United States as the
Buyer shall reasonably request, (ii) prepare and file in those jurisdictions
such amendments (including post-effective amendments) and supplements to such
registrations and qualifications as may be necessary to maintain the
effectiveness thereof during the Registration Period, (iii) take such other
actions as may be necessary to maintain such registrations and qualifications in
effect at all times during the Registration Period, and (iv) take all other
actions reasonably necessary or advisable to qualify the Registrable Securities
for sale in such jurisdictions;

e. As promptly as practicable after becoming aware of such event, the Company
shall notify the Buyer of the happening of any event, of which the Company has
knowledge, as a result of which the prospectus included in any Registration
Statement, as then in effect, includes an untrue statement of a material fact or
omits to state a material fact required to be stated therein or necessary to
make the statements therein not misleading, and use its best efforts promptly to
prepare a supplement or amendment to any Registration Statement to correct such
untrue statement or omission, and deliver such number of copies of such
supplement or amendment to the Buyer as the Buyer may reasonably request;
provided that, for not more than twenty (20) consecutive days (or a total of not
more than sixty (60) days in any twelve (12) month period), the Company may
delay the disclosure of material non-public information concerning the Company
(as well as prospectus or Registration Statement updating) the disclosure of
which at the time is not, in the good faith opinion of the Company, in the best
interests of the Company (an “ALLOWED DELAY”); provided, further, that the
Company shall promptly (i) notify the Buyer in writing of the existence of (but
in no event, without the prior written consent of the Buyer, shall the Company
disclose to the Buyer any of the facts or circumstances regarding) material
non-public information giving rise to an Allowed Delay and (ii) advise the Buyer
in writing to cease all sales under such Registration Statement until the end of
the Allowed Delay, provided the above actions are consistent with the
requirements of the 1933 Act and/or 1934 Act or other applicable law. Upon
expiration of the Allowed Delay, the Company shall again be bound by the first
sentence of this Section 3(e) with respect to the information giving rise
thereto. Nothing herein relieves the obligations set forth in the Certificate of
Designation or the Warrants relative to Failure Payments or payments of the
Default Amount pursuant to Events of Default.

 

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f. The Company shall use its best efforts to prevent the issuance of any stop
order or other suspension of effectiveness of any Registration Statement, and,
if such an order is issued, to obtain the withdrawal of such order at the
earliest possible moment and to notify the Buyer who holds Registrable
Securities being sold (or, in the event of an underwritten offering, the
managing underwriters) of the issuance of such order and the resolution thereof.

g. The Company shall permit a single firm of counsel designated by the Buyer to
review such Registration Statement and all amendments and supplements thereto
(as well as all requests for acceleration or effectiveness thereof), at Buyer’s
own cost, a reasonable period of time prior to their filing with the SEC (not
less than three (3) business days but not more then five (5) business days) and
not file any document in a form to which such counsel reasonably objects and
will not request acceleration of such Registration Statement without prior
notice to such counsel.

h. The Company shall hold in confidence and not make any disclosure of
information concerning the Buyer provided to the Company unless (i) disclosure
of such information is necessary to comply with federal or state securities
laws, (ii) the disclosure of such information is necessary to avoid or correct a
misstatement or omission in any Registration Statement, (iii) the release of
such information is ordered pursuant to a subpoena or other order from a court
or governmental body of competent jurisdiction, or (iv) such information has
been made generally available to the public other than by disclosure in
violation of this or any other agreement. The Company agrees that it shall, upon
learning that disclosure of such information concerning the Buyer is sought in
or by a court or governmental body of competent jurisdiction or through other
means, give prompt notice to the Buyer prior to making such disclosure, and
allow the Buyer, at its expense, to undertake appropriate action to prevent
disclosure of, or to obtain a protective order for, such information.

i. The Company shall use its best efforts to cause all the Registrable
Securities covered by the Registration Statement to be listed on each securities
exchange on which securities of the same class or series issued by the Company
are then listed, if any, if the listing of such Registrable Securities is then
permitted under the rules of such exchange, and, if listed on a national
exchange, to arrange for at least two market makers to register with the
National Association of Securities Dealers, Inc. (“NASD”) as such with respect
to such Registrable Securities.

j. The Company shall provide a transfer agent and registrar, which may be a
single entity, for the Registrable Securities not later than the effective date
of the Registration Statement.

k. The Company shall cooperate with the Buyer who holds Registrable Securities
being offered and the managing underwriter or underwriters, if any, to
facilitate the timely preparation and delivery of certificates (not bearing any
restrictive legends) representing Registrable Securities to be offered pursuant
to such Registration Statement and enable such certificates to be in such
denominations or amounts, as the case may be, as the managing underwriter or
underwriters, if any, or the Buyer may reasonably request and registered in such
names as the managing underwriter or underwriters, if any, or the Buyer may
request, and,

 

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within three (3) business days after a Registration Statement which includes
Registrable Securities is ordered effective by the SEC, the Company shall
deliver, and shall cause legal counsel selected by the Company to deliver, to
the transfer agent for the Registrable Securities (with copies to the Buyer) an
appropriate instruction and an opinion of such counsel in the form required by
the transfer agent in order to issue the Registrable Securities free of
restrictive legends.

l. At the request of the holders of a majority-in-interest of the Registrable
Securities, the Company shall prepare and file with the SEC such amendments
(including post-effective amendments) and supplements to a Registration
Statement and any prospectus used in connection with the Registration Statement
as may be necessary in order to change the plan of distribution set forth in
such Registration Statement.

m. The Company shall not, and shall not agree to, allow the holders of any
securities of the Company to include any of their securities in any Registration
Statement under Section 2(a) hereof or any amendment or supplement thereto under
Section 3(b) hereof without the consent of the Required Holders (as defined in
the Certificate of Designation), except for securities which have contractual
piggyback registration rights in effect at the time of the Initial Closing (as
defined in the Securities Purchase Agreement) and except with respect to the
shares of Common Stock underlying the Series A Preferred Stock and the Warrants
issued to the holders of Series A Preferred Stock or their assignees. In
addition, the Company shall not offer any securities for its own account or the
account of others in any Registration Statement under Section 2(a) hereof or any
amendment or supplement thereto under Section 3(b) hereof without the consent of
the Required Holders.

n. The Company shall take all other reasonable actions necessary to expedite and
facilitate disposition by the Buyer of Registrable Securities pursuant to a
Registration Statement.

o. The Company shall comply with all applicable laws related to a Registration
Statement and offering and sale of securities and all applicable rules and
regulations of governmental authorities in connection therewith (including
without limitation the 1933 Act and the 1934 Act and the rules and regulations
promulgated by the SEC).

p. Further Registration Statements. Except for a registration statement filed on
behalf of the Buyer pursuant to Section 2 of this Agreement, and except for
(1) an underwritten public offering, (2) a registration statement covering the
shares of Common Stock underlying the shares of Series A Preferred Stock and the
warrants issued to the holders of the Series A Preferred Stock or their
assignees, (3) the current Registration Statement on Form SB-2, and (4) any
registration statements covering the shares of Common Stock issued as Common
Stock Lock-Up Exceptions and shares of Common Stock underlying the Preferred
Stock Lock-Up Exceptions and any warrants issued in conjunction therewith, the
Company will not file any registration statements or amend any already filed
registration statement with the Commission or with state regulatory authorities
without the consent of the Required Holders until the expiration of the
“EXCLUSION PERIOD,” which shall be defined as the sooner of (i) the date that
the Registration Statement shall have been current and available for use in
connection with the resale of the Registrable Securities for a period of 180
days, or (ii) until all the Shares and Warrant

 

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Shares have been resold or transferred by the Subscribers pursuant to the
Registration Statement or are eligible for immediate unrestricted resale
pursuant to Rule 144(k), without volume limitations. The Exclusion Period will
be tolled during the pendency of an Event of Default as defined in the
Certificate of Designation or an Event of Default as defined in the Warrants.

q. NASD Rule 2710 Filing; Broker Compensation. If required by the National
Association of Securities Dealers, Inc. (“NASD”) Corporate Financing Department,
the Company shall promptly effect a filing with the NASD pursuant to NASD Rule
2710 with respect to the public offering contemplated by resales of securities
under the Registration Statement (an “ISSUER FILING”), and pay the filing fee
required by such Issuer Filing. The Company shall use commercially reasonable
efforts to pursue the Issuer Filing until the NASD issues a letter confirming
that it does not object to the terms of the offering contemplated by the
Registration Statement.

4. OBLIGATIONS OF THE BUYER. In connection with the registration of the
Registrable Securities, the Buyer shall have the following obligations:

a. It shall be a condition precedent to the obligations of the Company to
complete the registration pursuant to this Agreement with respect to the
Registrable Securities of the Buyer that the Buyer shall furnish to the Company
such information regarding itself, the Registrable Securities held by it and the
intended method of disposition of the Registrable Securities held by it as shall
be reasonably required to effect the registration of such Registrable Securities
and shall execute such documents in connection with such registration as the
Company may reasonably request. At least three (3) business days prior to the
first anticipated filing date of the Registration Statement, the Company shall
notify the Buyer of the information the Company requires from each Buyer.

b. The Buyer, by the Buyer’s acceptance of the Registrable Securities, agrees to
cooperate with the Company as reasonably requested by the Company in connection
with the preparation and filing of the Registration Statements hereunder, unless
the Buyer has notified the Company in writing of the Buyer’s election to exclude
all of the Buyer’s Registrable Securities from the Registration Statements.

c. In the event of an underwritten offering pursuant to Section 2(b) in which
any Registrable Securities are to be included, the Buyer agrees to enter into
and perform the Buyer’s obligations under an underwriting agreement, in usual
and customary form, including, without limitation, customary indemnification and
contribution obligations, with the managing underwriter of such offering and
take such other actions as are reasonably required in order to expedite or
facilitate the disposition of the Registrable Securities, unless the Buyer has
notified the Company in writing of the Buyer’s election to exclude all of the
Buyer’s Registrable Securities from such Registration Statement.

d. The Buyer agrees that, upon receipt of any notice from the Company of the
happening of any event of the kind described in Section 3(e) or 3(f), the Buyer
will immediately discontinue disposition of Registrable Securities pursuant to
the Registration Statement covering such Registrable Securities until the
Buyer’s receipt of the copies of the supplemented or

 

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amended prospectus contemplated by Section 3(e) or 3(f) and, if so directed by
the Company, the Buyer shall deliver to the Company (at the expense of the
Company) or destroy (and deliver to the Company a certificate of destruction)
all copies in the Buyer’s possession, of the prospectus covering such
Registrable Securities current at the time of receipt of such notice.

e. No Buyer may participate in any underwritten registration hereunder unless
the Buyer (i) agrees to sell the Buyer’s Registrable Securities on the basis
provided in any underwriting arrangements in usual and customary form entered
into by the Company, (ii) completes and executes all questionnaires, powers of
attorney, indemnities, underwriting agreements and other documents reasonably
required under the terms of such underwriting arrangements, and (iii) agrees to
pay its pro rata share of all underwriting discounts and commissions and any
expenses in excess of those payable by the Company pursuant to Section 5 below.

5. EXPENSES OF REGISTRATION. All reasonable expenses, other than underwriting
discounts and commissions, incurred in connection with registrations, filings or
qualifications pursuant to Sections 2 and 3, including, without limitation, all
registration, listing and qualification fees, printers and accounting fees, the
fees and disbursements of counsel for the Company shall be borne by the Company.

6. INDEMNIFICATION. In the event any Registrable Securities are included in a
Registration Statement under this Agreement:

a. To the extent permitted by law, the Company will indemnify, hold harmless and
defend (i) the Buyer, (ii) the directors, officers, partners, managers, members,
employees, agents and each person who controls any Buyer within the meaning of
the 1933 Act or the Securities Exchange Act of 1934, as amended (the “1934
ACT”), if any, (iii) any underwriter (as defined in the 1933 Act) for the Buyer
in connection with an underwritten offering pursuant to Section 2(b) hereof, and
(iv) the directors, officers, partners, employees and each person who controls
any such underwriter within the meaning of the 1933 Act or the 1934 Act, if any
(each, an “INDEMNIFIED PERSON”), against any joint or several losses, claims,
damages, liabilities or expenses (collectively, together with actions,
proceedings or inquiries by any regulatory or self-regulatory organization,
whether commenced or threatened, in respect thereof, “CLAIMS”) to which any of
them may become subject insofar as such Claims arise out of or are based upon:
(i) any untrue statement or alleged untrue statement of a material fact in a
Registration Statement or the omission or alleged omission to state therein a
material fact required to be stated or necessary to make the statements therein
not misleading; (ii) any untrue statement or alleged untrue statement of a
material fact contained in any preliminary prospectus if used prior to the
effective date of such Registration Statement, or contained in the final
prospectus (as amended or supplemented, if the Company files any amendment
thereof or supplement thereto with the SEC) or the omission or alleged omission
to state therein any material fact necessary to make the statements made
therein, in light of the circumstances under which the statements therein were
made, not misleading; or (iii) any violation or alleged violation by the Company
of the 1933 Act, the 1934 Act, any other law, including, without limitation, any
state securities law, or any rule or regulation thereunder relating to the offer
or sale of the Registrable Securities (the matters in the foregoing clauses
(i) through (iii) being, collectively, “VIOLATIONS”). Subject to the

 

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restrictions set forth in Section 6(c) with respect to the number of legal
counsel, the Company shall reimburse the Indemnified Person, promptly as such
expenses are incurred and are due and payable, for any reasonable legal fees or
other reasonable expenses incurred by them in connection with investigating or
defending any such Claim. Notwithstanding anything to the contrary contained
herein, the indemnification agreement contained in this Section 6(a): (i) shall
not apply to a Claim arising out of or based upon a Violation which occurs in
reliance upon and in conformity with information furnished in writing to the
Company by any Indemnified Person or underwriter for such Indemnified Person
expressly for use in connection with the preparation of such Registration
Statement or any such amendment thereof or supplement thereto; (ii) shall not
apply to amounts paid in settlement of any Claim if such settlement is effected
without the prior written consent of the Company, which consent shall not be
unreasonably withheld; and (iii) with respect to any preliminary prospectus,
shall not inure to the benefit of any Indemnified Person if the untrue statement
or omission of material fact contained in the preliminary prospectus was
corrected on a timely basis in the prospectus, as then amended or supplemented,
such corrected prospectus was timely made available by the Company pursuant to
Section 3(c) hereof, and the Indemnified Person was promptly advised in writing
not to use the incorrect prospectus prior to the use giving rise to a Violation
and such Indemnified Person, notwithstanding such advice, used it. Such
indemnity shall remain in full force and effect regardless of any investigation
made by or on behalf of the Indemnified Person and shall survive the transfer of
the Registrable Securities by the Buyer pursuant to Section 9.

b. [Intentionally Omitted].

c. Promptly after receipt by an Indemnified Person under this Section 6 of
notice of the commencement of any action (including any governmental action),
such Indemnified Person shall, if Claim in respect thereof is to be made against
any the Company under this Section 6, deliver to the Company a written notice of
the commencement thereof, and the Company shall have the right to participate
in, and, to the extent the Company so desires, to assume control of the defense
thereof with counsel mutually satisfactory to the Company and the Indemnified
Person, as the case may be.

PROVIDED, HOWEVER, that an Indemnified Person shall have the right to retain its
own counsel with the reasonable fees and expenses to be paid by the Company, if,
in the reasonable opinion of counsel retained by the Company, the representation
by such counsel of the Indemnified Person and the Company would be inappropriate
due to actual or potential differing interests between such Indemnified Person
and any other party represented by such counsel in such proceeding. The Company
shall pay for only one separate legal counsel for the Indemnified Persons, and
such legal counsel shall be selected by Buyer, if the Buyer is entitled to
indemnification hereunder. The failure to deliver written notice to the Company
within a reasonable time of the commencement of any such action shall not
relieve the Company of any liability to the Indemnified Person under this
Section 6, except to the extent that the Company is actually prejudiced in its
ability to defend such action. The indemnification required by this Section 6
shall be made by periodic payments of the amount thereof during the course of
the investigation or defense, as such expense, loss, damage or liability is
incurred and is due and payable.

 

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d. To the extent permitted by law, the Buyer will indemnify, hold harmless and
defend (i) the Company, and (ii) the directors, officers, partners, managers,
members, employees, or agents of the Company, if any (each, a “COMPANY
INDEMNIFIED PERSON”), against any joint or several losses, claims, damages,
liabilities or expenses (collectively, together with actions, proceedings or
inquiries by any regulatory or self-regulatory organization, whether commenced
or threatened, in respect thereof, “CLAIMS”) to which any of them may become
subject insofar as such Claims arise out of or are based upon a Claim arising
out of or based upon any violation or alleged violation by the Company of the
1933 Act, the 1934 Act, any other law, including, without limitation, any state
securities law, or any rule or regulation thereunder relating to the offer or
sale of the Registrable Securities, which occurs due to the inclusion by the
Company in a Registration Statement of false or misleading information about the
Buyer, where such information was furnished in writing to the Company by the
Buyer for the purpose of inclusion in such Registration Statement.

7. CONTRIBUTION. To the extent any indemnification by the Company is prohibited
or limited by law, the Company agrees to make the maximum contribution with
respect to any amounts for which it would otherwise be liable under Section 6 to
the fullest extent permitted by law, based upon a comparative fault standard.

8. REPORTS UNDER THE 1934 ACT. With a view to making available to the Buyer the
benefits of Rule 144 promulgated under the 1933 Act or any other similar rule or
regulation of the SEC that may at any time permit the Buyer to sell securities
of the Company to the public without registration (“RULE 144”), the Company
agrees to:

a. make and keep public information available, as those terms are understood and
defined in Rule 144;

b. file with the SEC in a timely manner all reports and other documents required
of the Company under the 1933 Act and the 1934 Act so long as the Company
remains subject to such requirements (it being understood that nothing herein
shall limit the Company’s obligations under Section 4(c) of the Securities
Purchase Agreement) and the filing of such reports and other documents is
required for the applicable provisions of Rule 144; and

c. furnish to the Buyer so long as the Buyer owns Registrable Securities,
promptly upon request, (i) a written statement by the Company that it has
complied with the reporting requirements of the 1933 Act and the 1934 Act as
required for applicable provisions of Rule 144, (ii) a copy of the most recent
annual or quarterly report of the Company and such other reports and documents
so filed by the Company, and (iii) such other information as may be reasonably
requested to permit the Buyers to sell such securities pursuant to Rule 144
without registration.

9. ASSIGNMENT OF REGISTRATION RIGHTS. The rights under this Agreement shall be
automatically assignable by the Buyers to any transferee of all or any portion
of Registrable Securities as authorized by the Securities Purchase Agreement if:
(i) the Buyer agrees in writing with the transferee or assignee to assign such
rights, and a copy of such agreement is furnished to the Company within a
reasonable time after such assignment, (ii) the Company is, within a reasonable
time after such transfer or assignment, furnished with written

 

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notice of (a) the name and address of such transferee or assignee, and (b) the
securities with respect to which such registration rights are being transferred
or assigned, (iii) following such transfer or assignment, the further
disposition of such securities by the transferee or assignee is restricted under
the 1933 Act and applicable state securities laws, (iv) at or before the time
the Company receives the written notice contemplated by clause (ii) of this
sentence, the transferee or assignee agrees in writing with the Company to be
bound by all of the provisions contained herein, and (v) such transfer shall
have been made in accordance with the applicable requirements of the Securities
Purchase Agreement. In the event that the Buyer transfers all or any portion of
its Registrable Securities pursuant to this Section, the Company shall have at
least ten (10) days to file any amendments or supplements necessary to keep the
Registration Statement current and effective pursuant to Rule 415, and the
commencement date of any Event of Failure or Event of Default under the
Certificate of Designation or the Warrants caused thereby will be extended by
ten (10) days.

10. AMENDMENT OF REGISTRATION RIGHTS. Provisions of this Agreement may be
amended and the observance thereof may be waived (either generally or in a
particular instance and either retroactively or prospectively), only with
written consent of the Company, the Buyer (to the extent such Buyer still owns
Registrable Securities) and the Required Holders. Any amendment or waiver
effected in accordance with this Section 10 shall be binding upon the Buyer and
the Company.

11. MISCELLANEOUS.

a. A person or entity is deemed to be a holder of Registrable Securities
whenever such person or entity owns of record such Registrable Securities. If
the Company receives conflicting instructions, notices or elections from two or
more persons or entities with respect to the same Registrable Securities, the
Company shall act upon the basis of instructions, notice or election received
from the registered owner of such Registrable Securities.

b. Any notices required or permitted to be given under the terms hereof shall be
sent by certified or registered mail (return receipt requested) or delivered
personally or by courier (including a recognized overnight delivery service) or
by facsimile and shall be effective five days after being placed in the mail, if
mailed by regular United States mail, or upon receipt, if delivered personally
or by courier (including a recognized overnight delivery service) or by
facsimile, in each case addressed to a party. The addresses for such
communications shall be:

If to the Company: To the address set forth immediately below such

Company’s name on the signature pages hereto.

 

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With copy to:

 

  After May 25, 2007, address changes to:

Lance R. Rodgers, Esq.

Barack Ferrazzano Kirschbaum

Perlman & Nagelberg LLP

 

333 West Wacker Drive, Suite 2700

Chicago, Illinois 60606

 

200 West Madison Street, Suite 3900

Chicago, IL 60606

Phone: (312) 984-3100

Fax: (312) 984-3150

 

If to a Buyer: To the address set forth immediately below such Buyer’s name on
the signature pages hereto.

Each party shall provide notice to the other party of any change in address.

c. Failure of any party to exercise any right or remedy under this Agreement or
otherwise, or delay by a party in exercising such right or remedy, shall not
operate as a waiver thereof.

d. Governing Law. All questions concerning the construction, validity,
enforcement and interpretation of this Agreement shall be governed by and
construed and enforced in accordance with the internal laws of the State of New
York, without regard to the principles of conflicts of law thereof. Each party
agrees that all legal proceedings concerning the interpretations, enforcement
and defense of the transactions contemplated by this Agreement (whether brought
against a party hereto or its respective affiliates, directors, officers,
shareholders, employees or agents) shall be commenced exclusively in the state
and federal courts sitting in the City of New York. Each party hereby
irrevocably submits to the exclusive jurisdiction of the state and federal
courts sitting in the City of New York, borough of Manhattan for the
adjudication of any dispute hereunder or in connection herewith or with any
transaction contemplated hereby or discussed herein (including with respect to
the enforcement of any of the Transaction Documents), and hereby irrevocably
waives, and agrees not to assert in any suit, action or proceeding, any claim
that it is not personally subject to the jurisdiction of any such court, that
such suit, action or proceeding is improper or is an inconvenient venue for such
proceeding. Each party hereby irrevocably waives personal service of process and
consents to process being served in any such suit, action or proceeding by
mailing a copy thereof via registered or certified mail or overnight delivery
(with evidence of delivery) to such party at the address in effect for notices
to it under this Agreement and agrees that such service shall constitute good
and sufficient service of process and notice thereof. Nothing contained herein
shall be deemed to limit in any way any right to serve process in any other
manner permitted by law. The parties hereby waive all rights to a trial by jury.
If either party shall commence an action or proceeding to enforce any provisions
of the this Agreement, then the prevailing party in such action or proceeding
shall be reimbursed by the other party for its reasonable attorneys’ fees and
other costs and expenses incurred with the investigation, preparation and
prosecution of such action or proceeding.

 

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e. This Agreement and the Securities Purchase Agreement (including all schedules
and exhibits thereto) constitute the entire agreement among the parties hereto
with respect to the subject matter hereof and thereof. There are no
restrictions, promises, warranties or undertakings, other than those set forth
or referred to herein and therein. This Agreement and the Securities Purchase
Agreement supersede all prior agreements and understandings among the parties
hereto with respect to the subject matter hereof and thereof.

f. Subject to the requirements of Section 9 hereof, this Agreement shall inure
to the benefit of and be binding upon the successors and assigns of each of the
parties hereto.

g. The headings in this Agreement are for convenience of reference only and
shall not limit or otherwise affect the meaning hereof.

h. This Agreement may be executed in two or more counterparts, each of which
shall be deemed an original but all of which shall constitute one and the same
agreement. This Agreement, once executed by a party, may be delivered to the
other party hereto by facsimile transmission of a copy of this Agreement bearing
the signature of the party so delivering this Agreement.

i. Each party shall do and perform, or cause to be done and performed, all such
further acts and things, and shall execute and deliver all such other
agreements, certificates, instruments and documents, as the other party may
reasonably request in order to carry out the intent and accomplish the purposes
of this Agreement and the consummation of the transactions contemplated hereby.

j. Except as otherwise provided herein, all consents and other determinations to
be made by the Buyer pursuant to this Agreement shall be made the Required
Holders.

k. The Company acknowledges that a breach by it of its obligations hereunder
will cause irreparable harm to the Buyer by vitiating the intent and purpose of
the transactions contemplated hereby. Accordingly, the Company acknowledges that
the remedy at law for breach of its obligations hereunder will be inadequate and
agrees, in the event of a breach or threatened breach by the Company of any of
the provisions hereunder, that the Buyer shall be entitled, in addition to all
other available remedies in law or in equity, to an injunction or injunctions to
prevent or cure breaches of the provisions of this Agreement and to enforce
specifically the terms and provisions hereof, without the necessity of showing
economic loss and without any bond or other security being required.

l. The language used in this Agreement will be deemed to be the language chosen
by the parties to express their mutual intent, and no rules of strict
construction will be applied against any party.

m. In the event that any provision of this Agreement is invalid or unenforceable
under any applicable statute or rule of law, then such provision shall be deemed
inoperative to the extent that it may conflict therewith and shall be deemed
modified to conform with such statute or rule of law. Any provision hereof which
may prove invalid or unenforceable under any law shall not affect the validity
or enforceability of any other provision hereof.

 

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n. The initial number of Registrable Securities included in any Registration
Statement and each increase to the number of Registrable Securities included
therein shall be allocated pro rata among the Buyers based on the number of
Registrable Securities held by the Buyer at the time of such establishment or
increase, as the case may be. In the event a Buyer shall sell or otherwise
transfer any of such holder’s Registrable Securities, each transferee shall be
allocated a pro rata portion of the number of Registrable Securities included in
a Registration Statement for such transferor. Any shares of Common Stock
included in a Registration Statement and which remain allocated to any person or
entity which does not hold any Registrable Securities shall be allocated to the
remaining Buyers, pro rata based on the number of shares of Registrable
Securities then held by the Buyers. For the avoidance of doubt, the number of
Registrable Securities held by a Buyer shall be determined as if all the
Preferred Stock and Warrants then outstanding and held by a Buyer were converted
into or exercised for Registrable Securities, without regard to any limitation
on the Buyer’s ability to convert the Preferred Stock or exercise the Warrants.

o. There shall be no oral modifications or amendments to this Agreement. This
Agreement may be modified or amended only in writing.

IN WITNESS WHEREOF, the undersigned Buyer and the Company have caused this
Agreement to be duly executed as of the 30th day of March, 2007.

 

COMPANY:     BUYER: AVICENA GROUP, INC.     BRIDGEPOINTE MASTER FUND LTD. By:  

Belinda Tsao Nivaggioli

    By:  

/s/ Eric S. Swartz

  Belinda Tsao Nivaggioli,       Eric S. Swartz, Director   Chief Executive
Officer      

 

ADDRESS:     ADDRESS:   228 Hamilton Avenue, 3rd floor     1125 Sanctuary
Parkway, Suite 275 Palo Alto, CA 94301     Alpharetta, GA 30004 Phone:  
415-397-2880     Telephone:   770-640-8130 Fax:   415-397-2898     Fax:   (770)
777-5844        

 

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