Exhibit 10.11

SUBSCRIPTION AGREEMENT

THIS SUBSCRIPTION AGREEMENT (this “Agreement”) made as of March     , 2007
between Chelsea Therapeutics International, Ltd., a Delaware corporation having
a place of business at The Richardson Building, 13950 Ballantyne Corporate,
Place Suite 325, Charlotte, NC 28277 (the “Company”), and the undersigned (the
“Subscriber”).

RECITALS

WHEREAS, each of the Company and the Subscriber is executing and delivering this
Agreement in reliance upon the exemption from securities registration afforded
by Section 4(2) of the Securities Act of 1933, as amended (the “Securities
Act”), and Rule 506 of Regulation D (“Regulation D”) as promulgated by the
United States Securities and Exchange Commission (the “Commission”) under the
Securities Act;

WHEREAS, the Company desires to raise gross proceeds of up to $12,500,000
pursuant to the issuance and sale (the “Offering”) of (i) shares of the common
stock, par value $0.0001 per share (the “Common Stock”), of the Company (which
shares of Common Stock shall be collectively referred to herein as the
“Shares”), and (ii) and warrants, in substantially the form attached hereto as
Exhibit A (the “Warrants”);

WHEREAS, the Company and each of the other subscribers to this Offering are
entering into this same form of Subscription Agreement on the date hereof;

WHEREAS, the Subscriber wishes to purchase, and the Company wishes to sell, upon
the terms and conditions stated in this Agreement, (i) up to that number of
Shares that may be purchased for the Subscription Amount set forth below the
Subscriber’s name on the signature page of this Agreement, and (ii) Warrants to
acquire up to that number of additional shares of Common Stock equal to 30% of
the number of Shares purchased by the Subscriber (rounded up to the nearest
whole share) (the shares of Common Stock issuable upon exercise of or otherwise
pursuant to the Warrants, collectively, the “Warrant Shares,” and the Shares,
the Warrants and the Warrant Shares, collectively, the “Securities”); and

WHEREAS, Leerink Swann & Company (“Leerink”) is acting as placement agent (the
“Placement Agent”) for the offer and sale of the Securities on a “best efforts”
basis.

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

ARTICLE I

DEFINITIONS

1.1 Definitions. In addition to terms defined in the introductory paragraph and
the recitals to this Agreement, the following terms shall have the meanings
indicated in this Section 1.1:

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

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“Business Day” shall mean a day Monday through Friday on which banks are
generally open for business in New York, New York.

“Closing” means the closing of the purchase and sale of Shares and Warrants
pursuant to this Agreement.

“Closing Date” shall have the meaning set forth in Section 2.1(c).

“Company Deliverables” shall have the meaning set forth in Section 2.2.

“Disclosure Materials” shall have the meaning set forth in Section 3.5.

“Environmental Laws” shall have the meaning set forth in Section 4.22.

“ERISA” shall have the meaning set forth in Section 4.23.

“Escrow Account” shall have the meaning set forth in Section 2.1(b).

“Escrow Agent” shall mean Mellon Trust of New England, N.A.

“Exchange Act” shall have the meaning set forth in Section 3.2.

“Final Prospectus” shall have the meaning set forth in Section 6.6(a).

“Hazardous Materials” shall have the meaning set forth in Section 4.22.

“Holders” shall mean the Subscribers and any Person holding Registrable
Securities or any Person to whom the rights under Article 6 have been
transferred in accordance with Section 6.9 hereof.

“Indemnified Party” shall have the meaning set forth in Section 6.6(c).

“Indemnifying Party” shall have the meaning set forth in Section 6.6(c).

“Material Adverse Effect” shall have the meaning set forth in Section 4.1.

“Material Permits” shall have the meaning set forth in Section 4.13.

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

“Proprietary Rights” shall have the meaning set forth in Section 4.8.

“Purchase Price” shall mean the last sale price of the Company’s Common Stock,
as listed on the NASDAQ Capital Market, on the last trading day ended prior to
the execution of this Agreement.

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

 

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

“Registration Expenses” shall mean all expenses incurred by the Company in
complying with Section 6.1 hereof, including, without limitation, all
registration, qualification and filing fees, printing expenses, escrow fees,
fees and expenses of counsel for the Company, blue sky fees and expenses and the
expense of any special audits incident to or required by any such registration
(but excluding the fees of legal counsel for any Holder).

“Registration Period” shall have the meaning set forth in Section 6.1.

“Registration Statement” shall have the meaning set forth in Section 6.1.

“SEC Filings” shall have the meaning set forth in Section 3.5.

“Selling Expenses” shall mean all underwriting discounts and selling commissions
applicable to the sale of Registrable Securities and all fees and expenses of
legal counsel for any Holder.

“Subscriber Deliverables” shall have the meaning set forth in Section 2.3.

“Subscription Amount” has the meaning set forth in Section 2.1.

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

ARTICLE II

PURCHASE AND SALE

2.1 Closing.

(a) Subject to the terms and conditions set forth in this Agreement, at the
Closing, the Company shall issue and sell to the Subscriber, and the Subscriber
shall purchase from the Company, such number of Shares of Common Stock equal to
the quotient resulting from dividing (i) the aggregate purchase price for the
Subscriber, as indicated below the Subscriber’s name on the signature page of
this Agreement (the “Subscription Amount”) by (ii) the Purchase Price, rounded
to the nearest whole Share. In addition, the Subscriber shall receive a Warrant
to purchase a number of Warrant Shares equal to 30% of the number of Shares
purchased by the Subscriber, as indicated below the Subscriber’s name on the
signature page of this Agreement. The Warrants shall have an exercise price
equal to 120% of the last sale price of the Company’s Common Stock, as listed on
the NASDAQ Capital Market, on the date prior to the date of this Agreement, and
shall be exercisable at any time prior to the fifth anniversary of the date of
issuance; provided that the Warrants shall be callable by the Company prior to
the fifth anniversary of

 

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the date of issuance if the volume weighted average price per share of the
Common Stock exceeds $12.00, as adjusted for stock splits or combinations, for a
period of 20 consecutive trading days.

(b) The Subscriber must complete and return a duly executed, unaltered copy of
this Agreement (including without limitation the completed Accredited Investor
Questionnaire and the Registration Rights Questionnaire included as Exhibits B-1
and B-2 hereto, respectively) to the Placement Agent. The Company and the
Placement Agent shall each retain complete discretion to accept or reject any
subscription unless and until the Company executes a counterpart to this
Agreement that includes the Subscriber’s signature. On or before the Closing
Date, the Subscriber shall deposit the amount of readily available funds equal
to the Subscriber’s Subscription Amount in a segregated escrow account (the
“Escrow Account”) with the Escrow Agent by wire transfer of immediately
available funds pursuant to the instructions provided on Exhibit D attached
hereto.

(c) The Closing shall be held on the date three Business Days after the date of
this Agreement or any other date and time designated by the Company, the
Subscribers and the Placement Agent (such date being the “Closing Date”). The
Closing shall occur at the offices of the Edwards, Angell, Palmer & Dodge, LLP,
counsel to the Placement Agent, or at such other locations or remotely by
facsimile transmission or other electronic means as the parties may mutually
agree. Upon satisfaction or waiver of all conditions to the Closing, the
Placement Agent and the Company shall instruct the Escrow Agent to release the
proceeds held in the Escrow Account to the Company, less fees and expenses due
to the Placement Agent. Interest, if any, that has accrued with respect to the
Subscription Amount while in escrow shall also be distributed to the Company at
the Closing. In the event that a Subscriber’s Subscription Amount is returned
for any reason, including if such subscription is rejected or there is no
Closing, then the Subscriber will receive any interest actually accrued on the
funds such Subscriber submitted.

(d) Promptly after Closing, the Company shall deliver, or cause to be delivered,
a certificate or certificates, registered in such name or names as the
Subscriber may designate, representing the Shares and Warrants purchased by the
Subscriber hereunder, to the Subscriber’s mailing address indicated on the
Accredited Investor Questionnaire included as Exhibit B-1 hereto.

2.2 Company Closing Deliveries. On or prior to the Closing, the Company shall
issue, deliver or cause to be delivered to the Subscriber the following (the
“Company Deliverables”):

(a) this Agreement, duly executed by the Company; and

(b) a legal opinion of counsel to the Company, in substantially the form
attached hereto as Exhibit C, executed by such counsel and addressed to the
Subscriber (together with all other subscribers in the Offering) and the
Placement Agent;

(c) a copy of the irrevocable instructions to the Company’s transfer agent to
deliver, as soon as practicable but in any event within three Business Days of
the Closing Date, a certificate evidencing the number of Shares purchased by the
Subscriber hereunder; and

(d) a certificate in form satisfactory to the Placement Agent executed by the
chief executive officer or chief financial officer of the Company as to the
Company’s representations and warranties and covenants.

2.3 Subscriber Closing Deliveries. On or prior to the Closing, the Subscriber
shall deliver or cause to be delivered to the Company the following (the
“Subscriber Deliverables”):

 

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(a) this Agreement, duly executed by the Subscriber;

(b) its Subscription Amount, in United States dollars and in immediately
available funds, in the amount indicated below the Subscriber’s name on the
signature page hereto by wire transfer to an account designated in writing by
the Company for such purpose, as set forth on Exhibit D attached hereto; and

(c) a fully completed and duly executed Accredited Investor Questionnaire and
Registration Rights Questionnaire attached as Exhibits B-1 and B-2.

ARTICLE III

REPRESENTATIONS AND WARRANTIES OF SUBSCRIBER

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

3.1 Organization; Authority; No Conflicts.

(a) The Subscriber has full power and authority (corporate or otherwise) to
execute, deliver, and perform this Agreement and to purchase the Securities and
has taken all action necessary to authorize the execution, delivery and
performance of this Agreement. This Agreement constitutes the legal, valid and
binding obligation of the Subscriber, enforceable against the Subscriber in
accordance with its terms, subject to laws of general application relating to
bankruptcy, insolvency and the relief of debtors and rules of law governing
specific performance, injunctive relief or other equitable remedies, and to
limitations of public policy. If the Subscriber is a corporation, partnership,
limited liability company, trust, employee benefit plan, individual retirement
account, Keogh Plan, or other entity (i) it is authorized and qualified to
become an investor in the Company and the Person signing this Agreement on
behalf of such entity has been duly authorized by such entity to do so and
(ii) it is duly organized, validly existing and in good standing under the laws
of the jurisdiction of its organization.

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

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

3.2 Investment Intent. The Subscriber understands, acknowledges and agrees that
the Securities have not been registered under the Securities Act in reliance
upon a claimed exemption under the provisions of the Securities Act which
depends, in part, upon the Subscriber’s investment intention

 

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and the truth and accuracy of, and Subscriber’s compliance with, the
representations, warranties, acknowledgments and covenants of Subscriber set
forth herein. Accordingly, the Subscriber hereby represents that the
representations, warranties, acknowledgments and covenants of Subscriber set
forth herein are true and correct, the Subscriber will comply with the covenants
set forth herein, and the Subscriber is purchasing the Securities for the
Subscriber’s own account for investment purposes only and not with a view toward
the resale or distribution to others and has no contract, undertaking, agreement
or other arrangement, in existence or contemplated, to sell, pledge, assign or
otherwise transfer the Securities to any other Person in violation of the
Securities Act. The Subscriber, if an entity, also represents that it was not
formed for the purpose of purchasing the Securities. The Subscriber has no
current plans to effect a “change of control” of the Company, as such term is
understood in Rule 13d-1 of the Securities Exchange Act of 1934 (the “Exchange
Act”).

3.3 Subscriber Status and Qualifications.

(a) The Subscriber understands, acknowledges and agrees that the purchase of the
Securities involves a high degree of risk including, but not limited to, the
following: (i) an investment in the Company is highly speculative, and only
investors who can afford the loss of their entire investment should consider
investing in the Company and the Securities; (ii) the Subscriber may not be able
to liquidate its investment; (iii) in the event of a sale, transfer, assignment,
shorting, hedging, or other “put equivalent position” or other disposition of
the Securities, the Subscriber could sustain the loss of substantially all of
its investment; (iv) since the Company has been a publicly traded company, the
Company has not paid any dividends on its Common Stock and does not anticipate
the payment of dividends in the foreseeable future; and (v) the other risks set
forth under “Risk Factors” and elsewhere in the SEC Filings.

(b) At the time the Subscriber was contacted by the Company or the Placement
Agent with respect to the Offering, the Subscriber was an “accredited investor”
as such term is defined in Rule 501(a) of Regulation D promulgated under the
Securities Act. In addition, as indicated by the Subscriber’s responses to the
questions contained in the Accredited Investor Questionnaire attached hereto as
Exhibit B-1, the Subscriber is an “accredited investor” as of the date hereof
and shall be as of the Closing Date.

(c) The Subscriber understands, acknowledges and agrees that: (i) the Subscriber
is knowledgeable, sophisticated and has experience in making, and is qualified
to make, decisions with respect to investments representing an investment
decision like that involved in the purchase of the Securities and has prior
investment experience; (ii) the Subscriber has carefully evaluated the risks of
an investment in the Securities; and (iii) the Subscriber is able to bear the
economic risk of an investment in the Securities and the potential loss of such
investment.

3.4 Exempt Transaction.

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

(b) The Subscriber understands, acknowledges and agrees that the Offering has
not been reviewed, recommended or endorsed by the Commission or any state
securities regulatory authority or other governmental body or agency, and that
the Offering is intended to be exempt from the

 

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registration requirements of Section 5 of the Securities Act pursuant to
Regulation D promulgated under the Securities Act. The Subscriber shall not sell
or otherwise transfer the Securities unless such transfer is registered under
the Securities Act or unless an exemption from such registration is available.
The Subscriber understands that if required by the laws or regulations or any
applicable jurisdictions, the Offering contemplated hereby will be submitted to
the appropriate authorities of such state(s) for registration or exemption
therefrom.

3.5 Access to Information.

(a) The Subscriber acknowledges that it has had an opportunity to review all
registration statements, prospectuses and prospectus supplements, reports,
schedules, forms, statements and other documents required to be filed by the
Company pursuant to the Securities Act and the Exchange Act, including pursuant
to Section 13(a) or 15(d) thereof, for the two years preceding the date hereof
(the foregoing materials, including the exhibits thereto and documents
incorporated by reference therein, being collectively referred to herein as the
“SEC Filings” and together with this Agreement and the Schedules to this
Agreement (if any), the “Disclosure Materials”). In addition, the Subscriber
acknowledges that it has been afforded (i) the opportunity to ask such questions
as it has deemed necessary of, and to receive answers from, representatives of
the Company concerning the terms and conditions of the Offering of the
Securities and the merits and risks of investing in the Securities, (ii) access
to information about the Company and its financial condition, results of
operations, business, properties, management and prospects sufficient to enable
it to evaluate its investment, and (iii) the opportunity to obtain such
additional information that the Company possesses or can acquire without
unreasonable effort or expense that is necessary to make an informed investment
decision with respect to the investment.

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

3.6 Restrictions on Securities.

(a) The Subscriber understands that until such time as the Securities are
registered pursuant to Article 6 hereof, the Securities will not be registered
or available for sale in the public markets. The Subscriber understands and
hereby acknowledges that the Company is under no obligation to assist the
Subscriber in obtaining an exemption from various registration requirements,
except as provided for in this Agreement, and that except as set forth in
Article 6 hereof, the Company is under no obligation to register any of the
Securities under the Securities Act or any state securities or “blue sky” laws.

(b) The Subscriber consents to the placement of a legend on any certificate or
other document evidencing the Securities substantially as set forth below, that
such Securities have not been registered under the Securities Act or any state
securities or “blue sky” laws and setting forth or referring to the restrictions
on transferability and sale thereof contained in this Agreement. The Subscriber
is

 

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aware that the Company will make a notation in its appropriate records with
respect to the restrictions on the transferability of the Securities.

THE SECURITIES REPRESENTED HEREBY HAVE BEEN ACQUIRED FOR INVESTMENT AND HAVE NOT
BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE “SECURITIES
ACT”), OR UNDER THE SECURITIES LAWS OF ANY STATE. THESE SECURITIES ARE SUBJECT
TO RESTRICTIONS ON TRANSFERABILITY AND RESALE AND MAY NOT BE SOLD, TRANSFERRED
OR ASSIGNED IN THE ABSENCE OF AN EFFECTIVE REGISTRATION STATEMENT FOR THE
SECURITIES UNDER THE SECURITIES ACT AND APPLICABLE STATE SECURITIES LAWS, OR AN
OPINION OF COUNSEL IN FORM, SUBSTANCE AND SCOPE REASONABLY SATISFACTORY TO THE
COMPANY, TO THE EFFECT THAT REGISTRATION IS NOT REQUIRED UNDER THE SECURITIES
ACT AND APPLICABLE STATE SECURITIES LAWS.

3.7 Offering Procedures; Restrictions.

(a) The Subscriber understands, acknowledges and agrees that this subscription
may be rejected, in whole or in part, by the Company or the Placement Agent, in
each of their sole and absolute discretion, at any time before the Closing Date
notwithstanding prior receipt by the Subscriber of notice of acceptance of the
Subscriber’s subscription. The Subscriber hereby authorizes and directs the
Company to return, with any interest actually accrued, any funds for unaccepted
subscriptions to the same account from which the funds were drawn, including any
customer account maintained by the Subscriber with the Placement Agent.

(b) The Subscriber understands, acknowledges and agrees with the Company that
except as otherwise set forth herein, the subscription hereunder is irrevocable
by the Subscriber, that, except as required by law, the Subscriber is not
entitled to cancel, terminate or revoke this Agreement or any agreements of the
Subscriber hereunder and that this Agreement and such other agreements shall
survive the death or disability of the Subscriber and shall be binding upon and
inure to the benefit of the parties and their heirs, executors, administrators,
successors, legal representatives and permitted assigns. If the Subscriber is
more than one Person, the obligations of the Subscriber hereunder shall be joint
and several and the agreements, representations, warranties and acknowledgments
herein contained shall be deemed to be made by and be binding upon each such
Person and its heirs, executors, administrators, successors, legal
representatives and permitted assigns.

(c) The purchase by the Subscriber of the Securities issuable to it at the
Closing will not result in the Subscriber (individually or together with other
Person with whom the Subscriber has identified, or will have identified, itself
as part of a “group” in a public filing made with the Commission involving the
Company’s securities) acquiring, or obtaining the right to acquire, in excess of
19.99% of the outstanding shares of Common Stock or the voting power of the
Company on a post transaction basis that assumes that the Closing shall have
occurred. The Subscriber does not presently intend to, alone or together with
others, make a public filing with the Commission to disclose that it has (or
that it together with such other Persons have) acquired, or obtained the right
to acquire, as a result of the Closing (when added to any other securities of
the Company that it or they then own or have the right to acquire), in excess of
19.99% of the outstanding shares of Common Stock or the voting power of the
Company on a post transaction basis that assumes that the Closing shall have
occurred.

(d) The Subscriber is not (nor an Affiliate of) an employee, consultant, officer
or director of the Company.

 

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3.8 Subscriber Information; Agreements.

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

(b) The Subscriber understands, acknowledges and agrees that the
representations, warranties and agreements of the Subscriber contained in this
Agreement (including all exhibits and schedules hereto) and in any other writing
delivered in connection with the transactions contemplated hereby shall be true
and correct on the date hereof and as of the Closing Date as if made on and as
of such date and shall survive the execution and delivery of this Agreement and
the purchase of the Securities. The Subscriber agrees that the Placement Agent
shall be entitled to rely on the representations, warranties and agreements of
the Subscriber contained herein as if such representations, warranties and
agreements were made or provided directly to the Placement Agent.

(c) The Subscriber acknowledges and agrees that if he or she is a natural person
and is a Registered Representative of a National Association of Securities
Dealers, Inc. (“NASD”) member firm, he or she must give such firm the notice
required by the NASD Rules of Fair Practice.

3.9 Certain Trading Activity. Other than with respect to the transactions
contemplated herein, since the earlier to occur of (i) the time that the
Subscriber was first contacted by the Company, the Placement Agent or any other
Person regarding the transactions contemplated hereby and (ii) the tenth
(10th) day prior to the date of this Agreement, neither the Subscriber nor any
Affiliate of the Subscriber which (x) had knowledge of the transactions
contemplated hereby, (y) has or shares discretion relating to the Subscriber’s
investments or trading or information concerning the Subscriber’s investments,
including in respect of the Securities, and (z) is subject to the Subscriber’s
review or input concerning investments or trading (collectively, “Trading
Affiliates”) has directly or indirectly, nor has any Person acting on behalf of
or pursuant to any understanding with the Subscriber or Trading Affiliate,
effected or agreed to effect any transactions in the securities of the Company
(including, without limitation, any “short sales” involving the Company’s
securities). Notwithstanding the foregoing, if the Subscriber and/or Trading
Affiliate is, individually or collectively, a multi-managed investment vehicle
whereby separate portfolio managers manage separate portions of the Subscriber
‘s or Trading Affiliate’s assets and the portfolio managers have no direct
knowledge of the investment decisions made by the portfolio managers managing
other portions of the Subscriber’s or Trading Affiliate’s assets, the
representation set forth above shall apply only with respect to the portion of
assets managed by the portfolio managers that have knowledge about the financing
transaction contemplated by this Agreement. The Subscriber has maintained the
confidentiality of all disclosures made to it in connection with this
transaction (including the existence and terms of this transaction).

3.10 Placement Agent; Fees. The Subscriber agrees, acknowledges and understands
that the Placement Agent is acting as placement agent for the Securities being
offered hereby and will be compensated by the Company for acting in such
capacity. The Company will be using a portion of the proceeds of the Offering
equal to 6.125% of the proceeds received by the Company at each Closing to pay
for placement agent fees to the Placement Agent equal to 75% of such amount, and
to pay others for other advisory services over time. The Placement Agent will
also receive reimbursement of the reasonable, documented expenses (including
reasonable legal fees) of the Placement Agent incurred in connection with the
Offering (which reimbursement shall not exceed $75,000 in the aggregate). The
Placement Agent will receive the commissions discussed above on all subsequent
private financing transactions (other than by the Company) for a period of six
months from the Closing Date.

 

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3.11 No Commissions; No Reimbursement of Expenses. No Person will have, as a
result of the transactions contemplated by this Agreement, any valid right,
interest or claim against or upon the Company or the Subscriber for any
commission, fee or other compensation pursuant to any agreement, arrangement or
understanding entered into by or on behalf of the Subscriber. The Subscriber
shall not be entitled to reimbursement of any expenses incurred by the
Subscriber in connection with the Offering.

3.12 ERISA Plans. To the extend the Subscriber is an ERISA Plan (the “Plan”),
the fiduciary Plan represents that such fiduciary has been informed of and
understands the Company’s investment objectives, policies and strategies, and
that the decision to invest “plan assets” (as such term is defined in ERISA) in
the Company is consistent with the provisions of ERISA that require
diversification of plan assets and impose other fiduciary responsibilities. The
Subscriber fiduciary or Plan (a) is responsible for the decision to invest in
the Company; (b) is independent of the Company or any of its affiliates; (c) is
qualified to make such investment decision; and (d) in making such decision, the
Subscriber fiduciary or Plan has not relied primarily on any advice or
recommendation of the Company or any of its affiliates.

3.13 Foreign Asset Control. The Subscriber should check the Office of Foreign
Assets Control (“OFAC”) website at http://www.treas.gov/ofac before making the
following representations.

(a) The Subscriber represents that the amounts invested by it in the Company in
the Offering were not and are not directly or indirectly derived from activities
that contravene federal, state or international laws and regulations, including
anti-money laundering laws and regulations. Federal regulations and Executive
Orders administered by OFAC prohibit, among other things, the engagement in
transactions with, and the provision of services to, certain foreign countries,
territories, entities and individuals. The lists of OFAC prohibited countries,
territories, persons and entities can be found on the OFAC website at
http://www.treas.gov/ofac. In addition, the programs administered by OFAC (the
“OFAC Programs”) prohibit dealing with individuals1 or entities in certain
countries regardless of whether such individuals or entities appear on the OFAC
lists.

(b) To the best of the Subscriber’s knowledge, none of: (1) the Subscriber,
(2) any person controlling or controlled by the Subscriber, (3) if the
Subscriber is a privately-held entity, any person having a beneficial interest
in the Subscriber, or (4) any person for whom the Subscriber is acting as agent
or nominee in connection with this investment is a country, territory,
individual or entity named on an OFAC list, or a person or entity prohibited
under the OFAC Programs. Please be advised that the Company may not accept any
amounts from a prospective investor if such prospective investor cannot make the
representation set forth in the preceding paragraph. The Subscriber agrees to
promptly notify the Company should the Subscriber become aware of any change in
the information set forth in these representations. The Subscriber understands
and acknowledges that, by law, the Company may be obligated to “freeze the
account” of the Subscriber, either by prohibiting additional subscriptions from
the Subscriber, declining any redemption requests and/or segregating the assets
in the account in compliance with governmental regulations. The Subscriber
further acknowledges that the Company may, by written notice to the Subscriber,
suspend the redemption rights, if any, of the Subscriber if the Company
reasonably deems it necessary to do so to comply with anti-money laundering
regulations applicable to the Company or any of the Company’s other service
providers. These individuals include specially designated nationals, specially
designated narcotics traffickers and other parties subject to OFAC sanctions and
embargo programs.

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1

These individuals include specially designated nationals, specially designated
narcotics traffickers and other parties subject to OFAC sanctions and embargo
programs.

 

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(c) To the best of the Subscriber’s knowledge, none of: (1) the Subscriber,
(2) any person controlling or controlled by the Subscriber, (3) if the
Subscriber is a privately-held entity, any person having a beneficial interest
in the Subscriber, or (4) any person for whom the Subscriber is acting as agent
or nominee in connection with this investment is a senior foreign political
figure2, or any immediate family3 member or close associate4 of a senior foreign
political figure, as such terms are defined in the footnotes below.

(d) If the Subscriber is affiliated with a non-U.S. banking institution (a
“Foreign Bank”), or if the Subscriber receives deposits from, makes payments on
behalf of, or handles other financial transactions related to a Foreign Bank,
the Subscriber represents and warrants to the Company that: (1) the Foreign Bank
has a fixed address, other than solely an electronic address, in a country in
which the Foreign Bank is authorized to conduct banking activities, (2) the
Foreign Bank maintains operating records related to its banking activities,
(3) the Foreign Bank is subject to inspection by the banking authority that
licensed the Foreign Bank to conduct banking activities, and (4) the Foreign
Bank does not provide banking services to any other Foreign Bank that does not
have a physical presence in any country and that is not a regulated affiliate.

ARTICLE IV

REPRESENTATIONS AND WARRANTIES OF THE COMPANY

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

4.1 Organization, Good Standing and Qualification. The Company is a corporation
duly organized, validly existing and in good standing under the laws of its
jurisdiction of organization and has full corporate power and authority to
conduct its business as currently conducted. The Company is duly qualified as a
foreign corporation to do business and is in good standing in every jurisdiction
in which such qualification is necessary, except to the extent that the failure
to be so qualified or in good standing would not reasonably be expected to
individually or in the aggregate, (a) adversely affect the legality, validity or
enforceability of the Offering, (b) have a material adverse effect on the
business, operations, conditions (financial or otherwise), assets, prospects or
results of operations of the Company and its Subsidiaries (as defined below) as
a whole or (c) adversely impair the Company’s ability to perform fully on a
timely basis its obligations under this Subscription Agreement (any of (a),
(b) or (c), a “Material Adverse Effect”).

4.2 Capitalization.

(a) The authorized capital stock of the Company consists of 50,000,000 shares of
capital stock, of which 45,000,000 are designated Common Stock and 5,000,000 of
which are designated preferred stock. As of March 2, 2007, there were 19,712,057
shares of Common Stock issued and outstanding, all of which are duly authorized,
validly issued, fully paid and non-assessable, and no shares of preferred stock
outstanding. In addition, as of such date there were 5,929,049 shares of Common

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2

A “senior foreign political figure” is defined as a senior official in the
executive, legislative, administrative, military or judicial branches of a
foreign government (whether elected or not), a senior official of a major
foreign political party, or a senior executive of a foreign government-owned
corporation. In addition, a “senior foreign political figure” includes any
corporation, business or other entity that has been formed by, or for the
benefit of, a senior foreign political figure.

 

3

“Immediate family” of a senior foreign political figure typically includes the
figure’s parents, siblings, spouse, children and in-laws.

 

4

A “close associate” of a senior foreign political figure is a person who is
widely and publicly known to maintain an unusually close relationship with the
senior foreign political figure, and includes a person who is in a position to
conduct substantial domestic and international financial transactions on behalf
of the senior foreign political figure.

 

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Stock reserved for issuance pursuant to outstanding options and warrants. All of
the securities issued by the Company have been issued in accordance with all
applicable federal and state securities laws. Other than as set forth above,
there are no other options, warrants, calls, rights, commitments or agreements
of any character to which the Company is a party or by which the Company is
bound or obligating the Company to issue, deliver, sell, repurchase or redeem,
or cause to be issued, delivered, sold, repurchased or redeemed, any shares of
the capital stock of the Company or obligating the Company to grant, extend or
enter into any such option, warrant, call, right, commitment or agreement. There
are no securities or instruments containing anti-dilution or similar provisions
that will be triggered by the issuance of the Securities as described in this
Agreement that have not been complied with by the Company. The issuance and sale
of the Securities will not result in a right of any holder of Company securities
to adjust the exercise, conversion, exchange or reset price under such
securities. Except as set forth in the SEC Filings, the Company does not own,
directly or indirectly, any stock, partnership interest, joint venture interest
or any other equity interest in, or security issued by, any Person.

(b) The Securities have been duly authorized and, when issued, delivered and
paid for in the manner set forth in this Agreement or upon exercise of the
Warrants, will be duly authorized, validly issued, fully paid and
non-assessable. Assuming the accuracy of the Subscriber’s representations and
warranties set forth in Section 3, no registration under the Securities Act is
required for the offer and sale of the Securities by the Company to the
Subscriber as contemplated hereby. The Company has reserved from its duly
authorized capital stock the maximum number of shares of Common Stock issuable
pursuant to this Agreement and the Warrants.

4.3 Authorization; Enforceability. The Company has all power and authority
(corporate or otherwise) to enter into this Agreement and to consummate the
transactions contemplated hereby. All corporate action on the part of the
Company, its directors and stockholders necessary for the authorization,
execution, delivery and performance of this Agreement by the Company, the
authorization, sale, issuance and delivery of the Securities contemplated herein
and the performance of the Company’s obligations hereunder has been taken, and
no further consent or action is required to be taken. This Agreement has been
duly executed and delivered by the Company and constitutes a legal, valid and
binding obligation of the Company, enforceable against the Company in accordance
with its terms, subject to laws of general application relating to bankruptcy,
insolvency and the relief of debtors and rules of law governing specific
performance, injunctive relief or other equitable remedies, and to limitations
of public policy.

4.4 No Conflict; Governmental and Other Consents.

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

(b) No material consent, approval, authorization or other order of any
governmental authority or other third party is required to be obtained by the
Company or any Subsidiary thereof in connection with the authorization,
execution and delivery of this Agreement or with the authorization,

 

12

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issue and sale of the Securities, except such filings as may be required to be
made with the Commission, the NASD, any stock exchange or quotation service and
with any state or foreign blue sky or securities regulatory authority.

4.5 Litigation. There is no pending, or to the knowledge of the Company,
threatened, legal or governmental proceedings to which the Company is a party
which is reasonably expected to result in a Material Adverse Effect.

4.6 Accuracy of SEC Filings; No Material Misstatements. Since January 1, 2005,
all registration statements, prospectuses and prospectus supplements, reports,
schedules, forms, statements and other documents filed and/or required to be
filed by the Company pursuant to the Securities Act and the Exchange Act,
including pursuant to Section 13(a) or 15(d) thereof, have been duly and timely
filed with the Commission, complied at the time of filing in all material
respects with the requirements of their respective forms and the rules and
regulations thereunder, except to the extent updated or superseded by any
subsequently filed report, were complete and correct in all material respects as
of the dates at which the information was furnished, and such reports did not
contain (as of their respective dates) any untrue statements of a material fact
nor omitted to state any material fact necessary in order to make the statements
contained therein, in light of the circumstances under which they were made, not
misleading, or if amended, as so amended. Since the date of the Company’s last
SEC Filing there has occurred no event likely to have a Material Adverse Effect
on the business or financial condition of the Company. The financial statements
of the Company included in the SEC Filings comply in all material respects with
applicable accounting requirements and the rules and regulations of the
Commission with respect thereto as in effect at the time of filing. Such
financial statements have been prepared in accordance with accounting principles
generally accepted in the United States of America applied on a consistent basis
during the periods involved (“GAAP”), except as may be otherwise specified in
such financial statements or the notes thereto and except that unaudited
financial statements may not contain all footnotes required by GAAP, and fairly
present in all material respects the financial position of the Company as of and
for the dates thereof and the results of operations and cash flows for the
periods then ended, subject, in the case of unaudited statements, to normal,
immaterial, year-end audit adjustments.

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

4.8 Proprietary Rights. To the best of the Company’s knowledge, the Company owns
or possesses adequate and enforceable rights to use all patents, patent
applications, trademarks, trade names, corporate names, copyrights, trade
secrets, licenses, inventions, formulations, technology and know-how and other
intangible property used in the conduct of its business (the “Proprietary
Rights”). Except as described in the SEC Filings, to the best of the Company’s
knowledge, the Company has not received any notice of, and there are no facts
known to the Company that reasonably indicate the existence of (i) any
infringement or misappropriation by any third party of any of the Proprietary
Rights or (ii) any claim by a third party contesting the validity of any of the
Proprietary Rights. The Company has not received any notice of any infringement,
misappropriation or violation by the Company or any of its employees of any
Proprietary Rights of third parties, and, to the best of the Company’s
knowledge, neither the Company nor any of its employees has infringed,
misappropriated or otherwise violated any Proprietary Rights of any third
parties. To the best of the Company’s knowledge, no infringement, illicit
copying, misappropriation or violation of any intellectual property rights of
any third party has occurred with respect to any products currently under
development by the Company or with respect to the conduct of the Company’s
business as currently contemplated, unless such infringement, illicit copying,
misappropriation or violation would not result in a Material Adverse Effect. The
Company is not aware that any of its employees are obligated under any contract
(including licenses, covenants or commitments of any nature) or other

 

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agreement, or subject to any judgment, decree or order of any court or
administrative agency, that would interfere with the use of the employee’s best
efforts to promote the interests of the Company or that would conflict with the
Company’s business as presently conducted or as proposed to be conducted.

4.9 Taxes. The Company (i) has accurately and timely prepared and filed all
foreign, federal and state income and all other tax returns, reports and
declarations required by any jurisdiction to which it is subject, (ii) has paid
all taxes and other governmental assessments and charges that are material in
amount, shown or determined to be due on such returns, reports and declarations,
except those being contested in good faith, with respect to which adequate
reserves have been set aside on the books of the Company and (iii) has set aside
on its books provisions reasonably adequate for the payment of all taxes for
periods subsequent to the periods to which such returns, reports or declarations
apply, except, in the case of clauses (i) and (ii) above, where the failure to
so pay or file any such tax, assessment, charge or return would not result in a
Material Adverse Effect. There are no unpaid taxes in any material amount
claimed to be due by the Company by the taxing authority of any jurisdiction.

4.10 No Integration. To the Company’s knowledge, there exists no fact or set of
facts which may cause the Offering to be integrated with any other offering of
the Company’s securities or which would cause this Offering to lose its
exemption under Regulation D.

4.11 Labor Relations. No material labor dispute exists or, to the knowledge of
the Company, is imminent with respect to any of the employees of the Company or
any Subsidiary which could reasonably be expected to result in a Material
Adverse Effect.

4.12 Compliance. Neither the Company nor any Subsidiary (i) is in default under
or in violation of (and no event has occurred that has not been waived that,
with notice or lapse of time or both, would result in a default by the Company
or any Subsidiary under), nor has the Company or any Subsidiary received notice
of a claim that it is in default under or that it is in violation of, any
indenture, loan or credit agreement or any other agreement or instrument to
which it is a party or by which it or any of its properties is bound (whether or
not such default or violation has been waived), (ii) is in violation of any
order of any court, arbitrator or governmental body, or (iii) is or has been in
violation of any statute, rule or regulation of any governmental authority,
including without limitation all foreign, federal, state and local laws
applicable to its business except in each case as is not expected to have a
Material Adverse Effect.

4.13 Regulatory Permits. The Company and the Subsidiaries possess all
certificates, authorizations and permits issued by the appropriate federal,
state, local or foreign regulatory authorities necessary to conduct its
business, except where the failure to possess such permits would not,
individually or in the aggregate, have or reasonably be expected to result in a
Material Adverse Effect (“Material Permits”), and the Company has not received
any notice of proceedings relating to the revocation or modification of any
Material Permit. This representation does not extend to approvals by regulatory
agencies, such as the Food and Drug Administration, relating to the sale of
Company’s product candidates.

4.14 Title to Assets. The Company and the Subsidiaries have good and marketable
title to all real and personal property owned by them that is material to the
business of the Company and the Subsidiaries, in each case free and clear of any
material liens, encumbrances or other restrictions. Any real property and
facilities held under lease by the Company and the Subsidiaries are held by them
under valid, subsisting and enforceable leases as to which the Company and the
Subsidiaries are in material compliance.

 

14

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4.15 Insurance. The Company and the Subsidiaries are insured by insurers of
recognized financial responsibility against such losses and risks and in such
amounts as are prudent and customary in the businesses in which the Company and
the Subsidiaries are engaged, including directors and officers insurance.

4.16 Transactions with Affiliates and Employees. Except as set forth in the SEC
Filings, none of the officers or directors of the Company or, to the knowledge
of the Company, none of the employees of the Company is presently a party to any
transaction with the Company or any Subsidiary, including any contract,
agreement or other arrangement providing for the furnishing of services to or
by, providing for rental of real or personal property to or from, or otherwise
requiring payments to or from any officer, director or such employee or, to the
knowledge of the Company, any entity (other than the Placement Agent) in which
any officer, director, or any such employee has a substantial interest or is an
officer, director, trustee or partner, in each case in excess of $120,000 other
than (i) for payment of salary or consulting fees for services rendered,
(ii) reimbursement for expenses incurred on behalf of the Company and (iii) for
other employee benefits, including stock option agreements under any stock
option plan of the Company.

4.17 Internal Accounting Controls. Each of the Company and the Subsidiaries is
in material compliance with all provisions of the Sarbanes Oxley Act of 2002
that are presently applicable to it. The Company maintains a system of internal
accounting controls that the Company reasonably believes are sufficient to
provide reasonable assurance that (i) transactions are executed in accordance
with management’s general or specific authorization; (ii) transactions are
recorded as necessary to permit preparation of financial statements in
conformity with GAAP and to maintain accountability for assets; (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
existing assets at reasonable intervals and appropriate action is taken with
respect to any differences.

4.18 No General Solicitation. Neither the Company nor any Person acting on
behalf of the Company has offered or sold any of the Securities by any form of
general solicitation or general advertising. The Company has offered the
Securities for sale only to the Subscriber and certain other “accredited
investors” within the meaning of Rule 501(a) under the Securities Act.

4.19 Foreign Corrupt Practices. Neither the Company, nor to the knowledge of the
Company, any agent or other Person acting on behalf of the Company, has
(i) directly or indirectly, used any funds for unlawful contributions, gifts,
entertainment or other unlawful expenses related to foreign or domestic
political activity, (ii) made any unlawful payment to foreign or domestic
government officials or employees or to any foreign or domestic political
parties or campaigns from corporate funds, (iii) failed to disclose fully any
contribution made by the Company (or made by any Person acting on its behalf of
which the Company is aware) that is in violation of law, or (iv) violated in any
material respect any provision of the Foreign Corrupt Practices Act of 1977, as
amended.

4.20 Indebtedness. The Company has not materially increased its indebtedness
from that disclosed in its latest SEC Filings, except debt incurred in the
ordinary course of business.

4.21 Additional Covenants of the Company. Until the earlier of the Closing Date
and the termination of this Agreement, the Company will not issue or sell any
securities to any party, other than (i) the issuances and sales contemplated by
this Agreement, and (ii) pursuant to the Company’s 2004 Stock Plan and
previously issued warrants, options and convertible securities.

4.22 Environmental Laws. The Company (i) is in compliance with any and all
Environmental Laws (as hereinafter defined), (ii) has received all permits,
licenses or other approvals required of it under

 

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

4.23 Employee Relations; Employee Benefit Plans. The Company is not a party to
any collective bargaining agreement nor does it employ any member of a union.
The Company believes that its relations with its employees are good. No
executive officer of the Company (as defined in Rule 501(f) of the Securities
Act) has notified the Company that such officer intends to leave the Company or
otherwise terminate such officer’s employment with the Company. The Company is
in compliance with all federal, state, local and foreign laws and regulations
respecting employment and employment practices, terms and conditions of
employment and wages and hours, except where failure to be in compliance would
not, either individually or in the aggregate, reasonably be expected to result
in a Material Adverse Effect. Except as disclosed in the SEC Filings, the
Company does not maintain any compensation or benefit plan, agreement,
arrangement or commitment (including, but not limited to, “employee benefit
plans”, as defined in Section 3(3) of the Employee Retirement Income Security
Act of 1974, as amended (“ERISA”)) for any present or former employees, officers
or directors of the Company or with respect to which the Company has liability
or makes or has an obligation to make contributions, other than any such plans,
agreements, arrangements or commitments made generally available to the
Company’s employees. The Company is in compliance with ERISA in all material
respects with all its employee benefits plans.

4.24 Application of Takeover Protections. The Company and its Board of Directors
have taken all necessary action, if any, in order to render inapplicable any
control share acquisition, business combination, poison pill (including any
distribution under a rights agreement) or other similar anti-takeover provision
under the Company’s charter or the laws of its state of incorporation that is or
could become applicable to the Subscribers as a result of the Subscribers and
the Company fulfilling their obligations or exercising their rights under the
Transaction Documents, including without limitation as a result of the Company’s
issuance of the Securities and the Subscribers’ ownership of the Securities.

ARTICLE V

CONDITIONS TO CLOSING

5.1 Conditions Precedent to Obligations of the Company and the Subscriber. The
obligations of the Company and the Subscriber to the complete the transactions
contemplated by this Agreement are subject to the fulfillment on or prior to
Closing of the following conditions:

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

 

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

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

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

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

(c) Subscriber Deliverables. The Company shall have received the Subscriber
Deliverables in accordance with Section 2.3.

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

(a) Representations and Warranties Correct. The representations and warranties
made by the Company in Article 4 hereof shall be true and correct when made, and
shall be true and correct on and as of the Closing Date (except for any
representation or warranty that speaks as of a specific date, which shall be
true and correct as of such date).

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

(c) Company Deliverables. The Subscriber shall have received the Company
Deliverables in accordance with Section 2.2.

ARTICLE VI

REGISTRATION RIGHTS

6.1 Required Registration. Subject to the terms, conditions and limitations set
forth herein, the Company will use its best efforts to (i) file a registration
statement (the “Registration Statement”) covering the resale of all of the
Registrable Securities with the Commission on Form S-3 (unless the Company is
not then eligible to register for resale the Registrable Securities on Form S-3,
in which case such registration shall be on another appropriate form in
accordance herewith) within 30 days following the Closing Date, (ii) use its
best efforts to have such Registration Statement declared effective by the
Commission as promptly as possible after the filing thereof, but in any event
prior to the date which is

 

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120 days after the Closing Date, and (iii) cause such Registration Statement to
remain effective until the earliest of (A) the date on which the Subscriber may
sell all the Shares and the Warrant Shares then held by the Subscriber without
restriction pursuant to Rule 144(k) of the Securities Act and (B) such time as
all Securities held by the Subscriber and registered under the Registration
Statement have been sold (1) pursuant to a registration statement, (2) to or
through a broker, dealer or underwriter in a public distribution or a public
securities transaction, and/or (3) in a transaction exempt from the registration
and prospectus delivery requirements of the Securities Act under Section 4(1)
thereof so that all transfer restrictions and restrictive legends with respect
thereto, if any, are removed upon the consummation of such sale (the
“Registration Period”). To the extent permissible, such Registration Statement
also shall include, or subsequently be amended to include, to the extent
allowable under the Securities Act and the rules promulgated thereunder
(including Rule 416 under the Securities Act), such indeterminate number of
additional shares of Common Stock resulting from stock splits, stock dividends
or similar transactions with respect to the Registrable Securities.

6.2 Damages. In the event the Company has not filed the Registration Statement
within 30 days of the Closing Date, then in addition to any other rights the
Holders may have hereunder or under applicable law: (x) within five business
days after the 30-day anniversary of the Closing Date, the Company shall pay to
the Holder an amount in cash, as partial liquidated damages and not as a
penalty, equal to 1.0% of the aggregate purchase price paid by such Holder
pursuant to this Agreement for any Registrable Securities then held by such
Holder (but excluding any amount paid upon the exercise of Warrants); and
(y) within five business days of each monthly anniversary thereof (if the
Company has not filed the Registration Statement) until the Registration
Statement is filed, the Company shall pay to the Holder an amount in cash, as
partial liquidated damages and not as a penalty, 1.0% of the aggregate purchase
price paid by such Holder pursuant to the Purchase Agreement for any Registrable
Securities then held by such Holder. If the Company fails to pay any partial
liquidated damages pursuant to this Section in full within seven days after the
date payable, the Company will pay interest thereon at a rate of 10% per annum.
The partial liquidated damages pursuant to the terms hereof shall apply on a
daily pro-rata basis for any portion of a month prior to the filing of the
Registration Statement, and shall be limited to an aggregate maximum of 10% of
the aggregate purchase price paid by the Holder pursuant to this Agreement.

6.3 Expenses. All Registration Expenses incurred in connection with any
registration, qualification, exemption or compliance pursuant to Section 6.1
shall be borne by the Company. All Selling Expenses relating to the sale of
securities registered by or on behalf of Holders shall be borne by such Holders.

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

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

(b) advise the Holders as soon as practicable

(i) when the Registration Statement or any amendment thereto has been filed with
the Commission and when the Registration Statement or any post-effective
amendment thereto has become effective,

 

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(ii) of the issuance by the Commission of any stop order suspending the
effectiveness of the Registration Statement or the initiation of any proceedings
for such purpose,

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

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

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

(d) furnish to each Holder, without charge, at least one copy of such
Registration Statement and any post-effective amendment thereto, including
financial statements, all exhibits (including those incorporated by reference)
and schedules, if the Holder so requests in writing;

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

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

(g) to the extent permitted under applicable rules and regulations promulgated
under the Securities Act, cooperate with the Holders to facilitate the timely
preparation and delivery of certificates representing Registrable Securities to
be sold pursuant to any Registration Statement free of any restrictive legends
to the extent not required at such time and in such denominations and registered
in such names as Holders request;

(h) upon the occurrence of any event contemplated by Section 6.4(b)(iv) above,
the Company shall promptly prepare a post-effective amendment to the
Registration Statement or a supplement to the related prospectus, or file any
other required document so that, as thereafter promptly delivered to holders of
the Registrable Securities included therein, the prospectus will not include any
untrue statement of a material fact or omit to state any material fact necessary
to make the statements therein, in the light of the circumstances under which
they were made, not misleading; and

(i) use its best efforts to comply with all applicable rules and regulations of
the Commission.

 

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Notwithstanding the foregoing, it shall be a condition precedent to the
obligations of the Company to take any action pursuant to paragraphs (a) through
(i) of this Section 6.4, that the Holder shall furnish to the Company such
information regarding itself, the Securities to be sold by the Holder and the
intended method of disposition of such Securities as shall be requested in
writing by the Company or the Placement Agent and required to effect the
registration of the Securities, all of which information shall be furnished to
the Company in writing specifically for use in the Registration Statement.

6.5 No Right to Action. The Holders shall have no right to take any action to
restrain, enjoin or otherwise delay any registration pursuant to Section 6.1
hereof as a result of any controversy that may arise with respect to the
interpretation or implementation of this Agreement.

6.6 Indemnification.

(a) To the fullest extent permitted by law, the Company shall indemnify each
Holder, the officers, directors, agents and employees of each of them, each
Person who controls any such Holder (within the meaning of Section 15 of the
Securities Act or Section 20 of the Exchange Act) and the officers, directors,
agents and employees of each such controlling Person, with respect to (i) any
registration, qualification or compliance effected pursuant to this Agreement
against all claims, losses, damages and liabilities (or actions in respect
thereof), including any of the foregoing incurred in settlement of any
litigation, commenced or threatened (subject to Section 6.6(c) below), arising
out of or based on any untrue statement (or alleged untrue statement) of a
material fact contained in the Registration Statement, or any amendment or
supplement thereof, any Prospectus or any form of prospectus or in any amendment
or supplement thereto or in any preliminary prospectus, or based on any omission
(or alleged omission) to state therein a material fact required to be stated
therein or necessary to make the statements therein not misleading, in light of
the circumstances in which they were made, or (ii) any violation or alleged
violation by the Company of the Securities Act, the Exchange Act, or any rule or
regulation promulgated under the Securities Act or the Exchange Act, and will
reimburse each Holder for reasonable legal and other expenses reasonably
incurred in connection with investigating or defending any such claim, loss,
damage, liability or action as incurred; provided, that the Company will not be
liable in any such case to the extent (but only to the extent) that any such
claim, loss, damage, liability or action arises out of, relates to or is based
upon: (A) any untrue statement or omission or allegation thereof is made in
reliance upon and in conformity with written information furnished to the
Company by or on behalf of such Holder and stated to be specifically for use in
preparation of such Registration Statement or prospectus; or (B) the failure of
the Holder to comply with the covenants and agreements contained in this
Agreement respecting sales of Registrable Securities. Notwithstanding the
foregoing, the Company will not be liable in any such case where the claim,
loss, damage, liability or action arises out of or is related to the failure of
the Holder to comply with the covenants and agreements contained in this
Agreement respecting sales of Registrable Securities, and except that the
foregoing indemnity agreement is subject to the condition that, insofar as it
relates primarily to any such untrue statement or alleged untrue statement or
omission or alleged omission made in the preliminary prospectus but eliminated
or remedied in the amended prospectus on file with the Commission at the time
the Registration Statement becomes effective or in the amended prospectus filed
with the Commission pursuant to Rule 424(b) or in the prospectus subject to
completion under Rule 434 promulgated under the Securities Act, which together
meet the requirements of Section 10(a) of the Securities Act (the “Final
Prospectus”), such indemnity agreement shall not inure to the benefit of any
such Holder, any such underwriter or any such controlling Person, if a copy of
the Final Prospectus furnished by the Company to the Holder for delivery was not
furnished by the Holder to the Person or entity asserting the loss, liability,
claim, damage or at or prior to the time such furnishing is required by the
Securities Act and the Final Prospectus would have cured the defect giving rise
to such loss, liability, claim, damage or action.

 

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(b) Each Holder will, if Registrable Securities held by such Holder are included
in the securities as to which such registration, qualification or compliance is
being effected, indemnify the Company, each of its directors and officers, each
underwriter of the Registrable Securities and each Person who controls the
Company within the meaning of Section 15 of the Securities Act, against all
claims, losses, damages and liabilities (or actions in respect thereof),
including any of the foregoing incurred in settlement of any litigation,
commenced or threatened (subject to Section 6.6(c) below), arising out of or
based on any untrue statement (or alleged untrue statement) of a material fact
contained in any registration statement or prospectus, or any amendment or
supplement thereof, incident to any such registration, qualification or
compliance, or based on any omission (or alleged omission) to state therein a
material fact required to be stated therein or necessary to make the statements
therein not misleading, in light of the circumstances in which they were made,
and will reimburse the Company, such directors and officers, each underwriter of
the Registrable Securities and each Person controlling the Company for
reasonable legal and any other expenses reasonably incurred in connection with
investigating or defending any such claim, loss, damage, liability or action as
incurred, in each case to the extent, but only to the extent, that such untrue
statement or omission or allegation thereof is made in reliance upon and in
conformity with written information furnished to the Company by or on behalf of
such Holder and stated to be specifically for use in preparation of such
registration statement or prospectus. Notwithstanding the foregoing, in no event
shall a Holder be liable for any such claims, losses, damages or liabilities in
excess of the net proceeds received by such Holder from the sale of its
Registrable Securities, except in the event of fraud by such Holder or
intentional misrepresentation by such Holder.

(c) Each party entitled to indemnification under this Section 6.6 (the
“Indemnified Party”) shall give notice to the party required to provide
indemnification (the “Indemnifying Party”) promptly after such Indemnified Party
has actual knowledge of any claim as to which indemnity may be sought, and shall
permit the Indemnifying Party to assume the defense of any such claim or any
litigation resulting therefrom, provided that counsel for the Indemnifying
Party, who shall conduct the defense of such claim or litigation, shall be
approved by the Indemnified Party (whose approval shall not unreasonably be
withheld), and the Indemnified Party may participate in such defense at such
Indemnified Party’s expense, and provided further that the failure of any
Indemnified Party to give notice as provided herein shall not relieve the
Indemnifying Party of its obligations under this Agreement, unless such failure
is materially prejudicial to the Indemnifying Party in defending such claim or
litigation. An Indemnifying Party shall not be liable for any settlement of an
action or claim effected without its written consent (which consent will not be
unreasonably withheld).

(d) If the indemnification provided for in this Section 6.6 is held by a court
of competent jurisdiction to be unavailable to an Indemnified Party with respect
to any loss, liability, claim, damage or expense referred to therein, then the
Indemnifying Party, in lieu of indemnifying such Indemnified Party thereunder,
shall contribute to the amount paid or payable by such Indemnified Party as a
result of such loss, liability, claim, damage or expense in such proportion as
is appropriate to reflect the relative fault of the Indemnifying Party on the
one hand and of the Indemnified Party on the other in connection with the
statements or omissions which resulted in such loss, liability, claim, damage or
expense as well as any other relevant equitable considerations. The relative
fault of the Indemnifying Party and of the Indemnified Party shall be determined
by reference to, among other things, whether the untrue or alleged untrue
statement of a material fact or the omission to state a material fact relates to
information supplied by the Indemnifying Party or by the Indemnified Party and
the parties’ relative intent, knowledge, access to information and opportunity
to correct or prevent such statement or omission. The Company and the Holders
agree that it would not be just and equitable if contribution pursuant to this
Section 6.6(d) was based solely upon the number of entities from whom
contribution was requested or by any other method of allocation which does not
take account of the equitable considerations referred to above in this
Section 6.6(d). The amount paid or payable by an Indemnified

 

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Party as a result of the losses, claims, damages and liabilities (or actions in
respect thereof) referred to above in this Section 6.6(d) shall be deemed to
include any legal or other expenses reasonably incurred by such Indemnified
Party in connection with investigating or defending any such action or claim,
subject to the provisions of Section 6.6(d) hereof. Notwithstanding the
provisions of this Section 6.6(d), in no event shall a Holder be required to
contribute any amount or make any other payments under this Agreement which in
the aggregate exceed the net proceeds received by such Holder from the sale of
Registrable Securities covered by such Registration Statement. No Person guilty
of fraudulent misrepresentation (within the meaning of the Securities Act) shall
be entitled to contribution from any Person who was not guilty of such
fraudulent misrepresentation.

6.7 Suspension of Registration Rights.

(a) Each Holder agrees that, upon receipt of any notice from the Company of
(i) the need for an amendment or supplement to the Registration Statement or the
prospectus forming a part thereof or (ii) that the Board of Directors has
determined in good faith that offers and sales pursuant to the prospectus
forming part of the Registration Statement should not be made by reason of the
presence of material undisclosed circumstances or developments with respect to
which the disclosure that would be required in the Registration Statement would
be premature or would have a Material Adverse Effect, each Holder will forthwith
discontinue disposition of Registrable Securities pursuant to the Registration
Statement contemplated by Section 6.2 until its receipt of copies of the
supplemented or amended prospectus from the Company or confirmation of the
filing of such report with the Commission by the Company, any such prospectus to
be forwarded promptly to the Holder by the Company, and, if so directed by the
Company, each Holder shall destroy or deliver to the Company all copies, other
than permanent file copies then in such Holder’s possession, of the prospectus
covering such Registrable Securities current at the time of receipt of such
notice; provided, that the Company may suspend the disposition of Registrable
Securities pursuant to the Registration Statement pursuant to clause (ii) above
for the shortest reasonable period in the circumstances, not more than one time
(not to exceed 45 days) during any six-month period, nor more than two times
(not to exceed 90 days each) in any twelve-month period.

(b) As a condition to the inclusion of its Registrable Securities, each Holder
shall furnish to the Company such information regarding such Holder and the
distribution proposed by such Holder as the Company may reasonably request in
writing or as shall be required in connection with any registration,
qualification or compliance referred to in this Article 6, including the
information required by the Registration Rights Questionnaire attached hereto as
Exhibit B-2.

(c) Each Holder covenants and agrees that it will comply with the prospectus
delivery requirements under the Securities Act as applicable to it in connection
with sale of Registrable Securities pursuant to a Registration Statement.

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

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

 

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(f) At the end of the Registration Period, the Holders of Registrable Securities
included in the Registration Statement shall discontinue sales of shares
pursuant to such Registration Statement upon receipt of notice from the Company
of its intention to remove from registration the shares covered by such
Registration Statement that remain unsold, and such Holders shall notify the
Company of the number of shares registered that remain unsold immediately upon
receipt of such notice from the Company.

6.8 Company Information; Filings. With a view to making available to the Holders
the benefits of certain rules and regulations of the Commission that at any time
permit the sale of the Registrable Securities to the public without
registration, the Company shall use commercially reasonable efforts to:

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

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

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

6.9 Assignment. The right to cause the Company to register Registrable
Securities granted to the Holders by the Company under Section 6.1 may be
assigned in full by a Holder in connection with a transfer by such Holder of its
Registrable Securities, but only if: (i) such transfer may otherwise be effected
in accordance with applicable securities laws; (ii) such Holder gives prior
written notice of the proposed transfer to the Company including the name and
address of such transferee and a copy of the transfer documents and agreements;
(iii) such transferee agrees in writing with the Company to be bound by and
comply with the terms and provisions of this Agreement; (iv) the transferee is
an “accredited investor” as that term is defined in Rule 501 of Regulation D;
and (v) such transfer is otherwise in compliance with this Agreement. Except as
specifically permitted by this Section 6.9, the rights of a Holder with respect
to Registrable Securities as set out herein shall not be transferable to any
other Person, any such transfer or attempted transfer, and any such transfer or
attempted transfer shall be null and void.

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

6.11 Rights of Third Parties. Neither the Company nor any of its security
holders (other than the Holders in such capacity pursuant hereto) may include
securities of the Company in the Registration Statement other than the
Registrable Securities.

6.12 Piggyback Rights. If at any time during the period during which the Company
is required to maintain the effectiveness of the Registration Statement, there
is not an effective Registration Statement covering all of the Registrable
Securities and the Company shall determine to prepare and file with the
Commission a registration statement relating to an offering for its own account
or the account of others under the Securities Act of any of its equity
securities, other than on Form S-4 or Form S-8 (each

 

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as promulgated under the Securities Act) 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 the stock
option or other employee benefit plans, then the Company shall send to each
Holder a written notice of such determination and, if within 15 days after the
date of such notice, any such Holder shall so request in writing, the Company
shall include in such registration statement all or any part of such Registrable
Securities such Holder requests to be registered, subject to customary
underwriter cutbacks applicable to all holders of registration rights.

6.13 Waiver; Amendment. With the written consent of the Company and the Holders
holding at least 80% of the Registrable Securities that are then outstanding,
any provision of this Article 6 may be waived (either generally or in a
particular instance, either retroactively or prospectively and either for a
specified period of time or indefinitely) or amended. Upon the effectuation of
each such waiver or amendment, the Company shall promptly give written notice
thereof to the Holders, if any, who have not previously received notice thereof
or consented thereto in writing.

ARTICLE VII

MISCELLANEOUS

7.1 Right to Reject Subscription. The Company and the Placement Agent reserve
the right to reject the subscription made hereby in whole or in part in each of
their sole discretion. Unless terminated earlier in the Placement Agent or the
Company’s sole discretion, the Offering will expire on April 30, 2007 (as such
date may be extended by agreement of the Placement and the Company in their sole
discretion without notice to the Subscribers for an additional 60 days), if the
conditions to closing set forth in Article 5 have not been satisfied or waived
by such time.

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

 

If to the Company:    Chelsea Therapeutics International, Ltd.    The Richardson
Building    13950 Ballantyne Corporate Place    Suite 325    Charlotte, NC 28277
   Facsimile: (704) 752-1479    Attn: Chief Financial Officer    Email:
Nick.Riehle@ChelseaRx.com With a copy to:    Wyrick Robbins Yates & Ponton LLP
  

4101 Lake Boone Trail

Suite 300

Raleigh, NC 27607-7506

   Facsimile: (919)781-4865    Attn: Jeffrey M. Smith, Esq.    Email:
jsmith@wyrick.com

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

 

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7.3 Amendment. Except as provided in Section 6.11 above, this Agreement shall
not be changed, modified or amended except by a writing signed by the parties to
be charged, and this Agreement may not be discharged except by performance in
accordance with its terms or by a writing signed by the party to be charged.

7.4 Successors; Assigns. Subject to the provisions of Section 6.9, this
Agreement shall be binding upon and inure to the benefit of the parties hereto
and to their respective heirs, legal representatives, successors and permitted
assigns. This Agreement sets forth the entire agreement and understanding
between the parties as to the subject matter hereof and merges and supersedes
all prior discussions, agreements and understandings of any and every nature
among them.

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

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

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

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

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

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

7.11 Public Disclosures.

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

 

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(b) The Company agrees not to disclose the names, addresses or any other
information about the Subscriber, except as required by law or court order and
to satisfy its obligations under Article 6.

7.12 Brokers. The Subscriber represents and warrants that it has neither
engaged, consented to nor authorized any broker, finder or intermediary to act
on its behalf, directly or indirectly, as a broker, finder or intermediary in
connection with the transactions contemplated by this Agreement. The Subscriber
hereby agrees to indemnify and hold harmless the Company from and against all
fees, commissions or other payments owing to any such Person acting on behalf of
the Subscriber hereunder.

7.13 Entire Agreement. This Agreement (including all exhibits, schedules and
amendments hereto) (i) constitutes the entire Agreement and understandings of
the parties hereto and supersedes all prior agreements and understandings, both
written and oral, between the parties hereto with respect to the subject matter
hereof and (ii) is not intended to confer upon any other Person other than the
parties hereto any rights or remedies hereunder (except for the holders of
Registrable Securities as set forth in Article 6).

[SIGNATURE PAGE FOLLOWS]

 

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

 

Name of Subscriber:_________________________ By:      Name:      Title:     
Subscription Amount: $____________________

 

Acknowledged and Accepted: CHELSEA THERAPEUTICS INTERNATIONAL, LTD. By:     
Name:      Title:     

[Signature page to Subscription Agreement]

 

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EXHIBIT A

THIS WARRANT AND THE SECURITIES ISSUABLE UPON EXERCISE HEREOF HAVE BEEN ACQUIRED
FOR INVESTMENT AND HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS
AMENDED (THE “SECURITES ACT”), OR UNDER THE SECURITIES LAWS OF ANY STATE. THIS
WARRANT AND SUCH SECURITIES ARE SUBJECT TO RESTRICTIONS ON TRANSFERABILITY AND
RESALE AND MAY NOT BE SOLD, TRANSFERRED OR ASSIGNED IN THE ABSENCE OF AN
EFFECTIVE REGISTRATION STATEMENT FOR THE SECURITIES UNDER THE SECURITIES ACT AND
APPLICABLE STATE SECURITIES LAWS, OR AN OPINION OF COUNSEL IN FORM, SUBSTANCE
AND SCOPE REASONABLY SATISFACTORY TO THE COMPANY, TO THE EFFECT THAT
REGISTRATION IS NOT REQUIRED UNDER THE SECURITIES ACT AND APPLICABLE STATE
SECURITIES LAWS.

CHELSEA THERAPEUTICS INTERNATIONAL, LTD.

Warrant for the Purchase of Shares of

Common Stock

 

No. 2007 - [    ]    __________Shares

FOR VALUE RECEIVED, CHELSEA THERAPEUTICS INTERNATIONAL, LTD., a Delaware
corporation (the “Company”), hereby certifies that
[                                                             ], its designee or
its permitted assigns is entitled to purchase from the Company, at any time or
from time to time commencing on March [    ], 2007 and prior to 5:00 P.M., New
York City time, on March [    ], 2012 (the “Exercise Period”),
[                                    ] fully paid and non-assessable shares of
common stock, $0.0001 par value per share, of the Company for a purchase price
per share of $[            ] [**120% of Purchase Price**]. Hereinafter, (i) said
common stock, $0.0001 par value per share, of the Company, is referred to as the
“Common Stock”; (ii) the shares of the Common Stock (subject to adjustment as
set forth herein) purchasable hereunder or under any other Warrant (as
hereinafter defined) are referred to as the “Warrant Shares”; (iii) the
aggregate purchase price payable for the Warrant Shares purchasable hereunder is
referred to as the “Aggregate Warrant Price”; (iv) the price payable (initially
$[        ] per share subject to adjustment as set forth herein) for each of the
Warrant Shares hereunder is referred to as the “Per Share Warrant Price”;
(v) this Warrant, all similar Warrants issued on the date hereof and all
warrants hereafter issued in exchange or substitution for this Warrant or such
similar Warrants are referred to as the “Warrants”; (vi) the holder of this
Warrant is referred to as the “Holder” and the holders of this Warrant and all
other Warrants and Warrant Shares are referred to as the “Holders” and Holders
of more than fifty percent (50%) of the Warrant Shares then issuable upon
exercise of then outstanding Warrants are referred to as the “Majority of the
Holders”; and (vii) the then Current Market Price per share of the Common Stock
(the “Current Market Price”) shall be deemed to be the average closing sale
price of the Common Stock for the ten (10) Trading Days (as defined below)
immediately prior to such date or, in case no such reported sales take place on
such days, the average of the last reported bid and asked prices of the Common
Stock on such days, in either case on the principal national securities exchange
on which the Common Stock is admitted to trading or listed, or if not listed or
admitted to trading on any such exchange, the representative closing sale prices
of the Common Stock as reported by NASDAQ, or other similar organization if
NASDAQ is no longer reporting such information,

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or, if the Common Stock is not reported on NASDAQ, the closing share prices for
the Common Stock in the over-the-counter market as reported by the National
Quotation Bureau or similar organization, or if not so available, the fair
market value of the Common Stock as determined in good faith by the Company’s
Board of Directors. A “Trading Day” shall mean any day on which shares of the
Company’s Common Stock are sold on the respective exchange.

This Warrant is one in a series of related warrants constituting in the
aggregate Warrants to purchase [                    ] Warrant Shares, which were
originally issued pursuant to a Subscription Agreement (the “Subscription
Agreement”) between the Company and the investor named therein in connection
with a private placement by the Company of its securities completed on March
[__], 2007. The Aggregate Warrant Price is not subject to adjustment. Terms used
but not otherwise defined herein shall have the meanings set forth in the
Subscription Agreement.

1. Exercise of Warrant.

(a) This Warrant may be exercised in whole at any time, or in part from time to
time, by the Holder during the Exercise Period.

(i) by the surrender of this Warrant (with the subscription form at the end
hereof duly executed) at the address set forth in subsection 10(a) hereof,
together with proper payment of the Aggregate Warrant Price, or the
proportionate part thereof if this Warrant is exercised in part, with payment
for the Warrant Shares made by certified or official bank check payable to the
order of, or wire transfer of immediately available funds to, the Company.

(ii) If at the time of the exercise of this Warrant there is no effective
registration statement (that the Holder may use) covering the resale of the
Warrant Shares, then this Warrant may also be exchanged at such time, in whole
or in part, by the surrender of this Warrant (with the cashless exercise form at
the end hereof duly executed) (a “Cashless Exercise”) at the address set forth
in subsection 10(a) hereof. Such presentation and surrender shall extinguish the
Holder’s obligation to pay the Aggregate Warrant Price, or the proportionate
part thereof if this Warrant is exercised in part. In the event of a Cashless
Exercise, the Holder shall exchange its Warrant for that number of Warrant
Shares subject to such Cashless Exercise multiplied by a fraction, the numerator
of which shall be the difference between the then Current Market Price and the
Per Share Warrant Price, and the denominator of which shall be the then Current
Market Price.

(b) If this Warrant is exercised in part, this Warrant must be exercised for a
number of whole shares of the Common Stock and the Holder is entitled to receive
a new Warrant covering the Warrant Shares that have not been exercised and
setting forth the proportionate part of the Aggregate Warrant Price applicable
to such Warrant Shares. Upon surrender of this Warrant in connection with the
exercise of this Warrant pursuant to the terms hereof, the Company will
(i) issue a certificate or certificates in the name of the Holder for the number
of whole shares of the Common Stock to which the Holder shall be entitled upon
such exercise and, in lieu of any fractional share of the Common Stock to which
the Holder shall be entitled, pay to the Holder cash in an amount equal to the
fair value of such fractional share (determined in such reasonable manner as the
Board of Directors of the Company shall determine), and (ii) deliver the other
securities and properties receivable upon the exercise of this Warrant, or the
proportionate part thereof, if this Warrant is exercised in part, pursuant to
the provisions of this Warrant.

 

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2. Reservation of Warrant Shares; Listing. The Company agrees that, prior to the
expiration of this Warrant, the Company shall at all times (a) have authorized
and in reserve, and shall keep available, solely for issuance and delivery upon
the exercise of this Warrant, the shares of the Common Stock and other
securities and properties as from time to time shall be receivable upon the
exercise of this Warrant, free and clear of all restrictions on sale or
transfer, other than under Federal or state securities laws, and free and clear
of all preemptive rights and rights of first refusal and (b) use its
commercially reasonable efforts to keep the Warrant Shares authorized for
listing on the Nasdaq Capital Market and any other national securities exchange
upon which the Company hereafter lists its Common Stock.

3. Certain Adjustments.

(a) If, at any time or from time to time after the date of this Warrant, the
Company shall issue or distribute to all holders of shares of Common Stock by
reason of their ownership thereof evidence of its indebtedness, any other
securities of the Company or any cash, property or other assets (excluding a
subdivision, combination or reclassification, or dividend or distribution
payable in shares of Common Stock, referred to in subsection 3(b) (any such
non-excluded event being herein called a “Special Dividend”)), the Per Share
Warrant Price shall be adjusted (effective immediately prior to such issuance or
distribution but after the record date for such issuance or distribution) by
multiplying the Per Share Warrant Price then in effect by a fraction, the
numerator of which shall be the Current Market Price in effect on the record
date for such issuance or distribution less the fair market value (as determined
in good faith by the Company’s Board of Directors) of the evidence of
indebtedness, cash, securities or property, or other assets issued or
distributed in such Special Dividend applicable to one share of Common Stock and
the denominator of which shall be the Current Market Price in effect on the
record date for such issuance or distribution. An adjustment made pursuant to
this subsection 3(a) shall become effective immediately prior to the payment
date but after the record date of any such Special Dividend. If such evidence of
indebtedness, cash, securities or property, or other assets issued or
distributed in such Special Dividend is not consummated in full, the Per Share
Warrant Price shall be readjusted accordingly.

(b) In case the Company shall hereafter (i) pay a dividend or make a
distribution on its Common Stock in shares of Common Stock, (ii) subdivide its
outstanding shares of Common Stock into a greater number of shares or
(iii) combine or reverse-split its outstanding shares of Common Stock into a
smaller number of shares, then the Per Share Warrant Price and the number of
Warrant Shares shall forthwith be proportionately decreased and increased,
respectively, in the case of a subdivision, distribution or stock dividend, or
proportionately increased and decreased, respectively, in the case of a
combination or reverse stock split. The Aggregate Warrant Price payable for the
then total number of Warrant Shares available for exercise under this Warrant
shall remain the same. Adjustments made pursuant to this subsection 3(b) shall
become effective on the record date in the case of a dividend or distribution,
and shall become effective immediately after the effective date in the case of a
subdivision or combination. If such dividend, distribution, subdivision or
combination is not consummated in full, the Per Share Warrant Price and Warrant
Shares shall be readjusted accordingly.

(c) In case of any capital reorganization or reclassification of capital stock
of the Company, or any consolidation or merger to which the Company is a party
other than a merger or consolidation in which the Company is the continuing
corporation (and the Company shall not be deemed the survivor if the
stockholders of the Company prior to the transaction do not own a majority of
the voting securities of the Company after such transaction), or in case of any
sale, transfer, conveyance or other disposition to another entity of all or
substantially all of the assets of the Company, the Holder of this Warrant shall
have the right thereafter to receive on the exercise of this Warrant the kind
and amount of securities, cash or other property which the Holder would have
owned or have been entitled to receive immediately after such reorganization,
reclassification, consolidation, merger, statutory exchange, sale, conveyance or
other disposition had this Warrant been exercised immediately prior to the
effective date of such reorganization,

 

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reclassification, consolidation, merger, statutory exchange, sale or conveyance
and in any such case, if necessary, appropriate adjustment shall be made in the
application of the provisions set forth in this Section 3 with respect to the
rights and interests thereafter of the Holder of this Warrant to the end that
the provisions set forth in this Section 3 shall thereafter correspondingly be
made applicable, as nearly as may reasonably be, in relation to any shares of
stock or other securities or property thereafter deliverable on the exercise of
this Warrant. The above provisions of this subsection 3(c) shall similarly apply
to successive reorganizations, reclassifications, consolidations, mergers,
statutory exchanges, sales or conveyances. The Company shall require the issuer
of any shares of stock or other securities or property thereafter deliverable on
the exercise of this Warrant to be responsible for all of the agreements and
obligations of the Company hereunder. Notice of any such reorganization,
reclassification, consolidation, merger, statutory exchange, sale or conveyance
and of said provisions so proposed to be made, shall be mailed to the Holders of
the Warrants not less than twenty (20) days prior to such event. A sale of all
or substantially all of the assets of the Company for a consideration consisting
primarily of securities shall be deemed a consolidation or merger for the
foregoing purposes.

(d) No adjustment in the Per Share Warrant Price shall be required unless such
adjustment would require an increase or decrease of at least $0.0001; provided,
however, that any adjustments which by reason of this subsection 3(d) are not
required to be made shall be carried forward and taken into account in any
subsequent adjustment; provided, further, however, that adjustments shall be
required and made in accordance with the provisions of this Section 3 (other
than this subsection 3(d)) not later than such time as may be required in order
to preserve the tax-free nature of a distribution, if any, to the Holder of this
Warrant or Common Stock issuable upon the exercise hereof. All calculations
under this Section 3 shall be made to the $0.0001 or to the nearest 1/100th of a
share, as the case may be. Anything in this Section 3 to the contrary
notwithstanding, the Company shall be entitled to make such reductions in the
Per Share Warrant Price, in addition to those required by this Section 3, as it
in its discretion shall deem to be advisable in order that any stock dividend,
subdivision of shares or distribution of rights to purchase stock or securities
convertible or exchangeable for stock hereafter made by the Company to its
stockholders shall not be taxable.

(e) Whenever the Per Share Warrant Price or the number of Warrant Shares is
adjusted as provided in this Section 3 and upon any modification of the rights
of a Holder of Warrants in accordance with this Section 3, the Company shall
promptly prepare a brief statement of the facts requiring such adjustment or
modification and the manner of computing the same and cause copies of such
statement to be mailed to the Holders of the Warrants. The Company may, but
shall not be obligated to unless requested in writing by a Majority of the
Holders, obtain, at its expense, a certificate of a firm of independent public
accountants of recognized standing selected by the Board of Directors (who may
be the regular auditors of the Company) setting forth the Per Share Warrant
Price and the number of Warrant Shares in effect after such adjustment or the
effect of such modification, a brief statement of the facts requiring such
adjustment or modification and the manner of computing the same and cause copies
of such certificate to be mailed to the Holders of the Warrants.

(f) If the Board of Directors of the Company shall declare any dividend or other
distribution with respect to the Common Stock, the Company shall mail notice
thereof to the Holders of the Warrants not less than ten (10) days prior to the
record date fixed for determining stockholders entitled to participate in such
dividend or other distribution.

(g) If, as a result of an adjustment made pursuant to this Section 3, the Holder
of any Warrant thereafter surrendered for exercise shall become entitled to
receive shares of two or more classes of capital stock or shares of Common Stock
and other capital stock of the Company, the Board of Directors (whose
determination shall be conclusive and shall be described in a written notice to
the Holder of any Warrant promptly after such adjustment) shall determine, in
good faith, the allocation of the adjusted Per Share Warrant Price between or
among shares of such classes of capital stock or shares of Common Stock and
other capital stock.

 

4

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(h) In case any event shall occur as to which the other provisions of this
Section 3 are not strictly applicable but as to which the failure to make any
adjustment would not fairly protect the purchase rights represented by this
Warrant in accordance with the essential intent and principles of the
adjustments set forth in this Section 3 then, in each such case, the Board of
Directors of the Company shall in good faith determine the adjustment, if any,
on a basis consistent with the essential intent and principles established
herein, necessary to preserve the purchase rights represented by the Warrants.
Upon such determination, the Company will promptly mail a copy thereof to the
Holder of this Warrant and shall make the adjustments described therein.

4. Fully Paid Stock; Taxes. The shares of the Common Stock represented by each
and every certificate for Warrant Shares delivered on the exercise of this
Warrant shall, subject to compliance by the Holder with the terms hereof, at the
time of such delivery, be duly authorized, validly issued and outstanding, fully
paid and nonassessable, and not subject to preemptive rights or rights of first
refusal imposed by any agreement to which the Company is a party, and the
Company will take all such actions as may be necessary to assure that the par
value, if any, per share of the Common Stock is at all times equal to or less
than the then Per Share Warrant Price. The Company shall pay, when due and
payable, any and all Federal and state stamp, original issue or similar taxes
which may be payable in respect of the issue of any Warrant Share or any
certificate thereof to the extent required because of the issuance by the
Company of such security.

5. Registration Under Securities Act.

(a) The Holder shall have the right to participate in the registration rights
granted to purchasers of the securities of the Company pursuant to Article 6 of
the Subscription Agreement with respect to any Warrant Shares held by the
Holder. By acceptance of this Warrant, the Holder agrees to comply with the
provisions in Article 6 of the Subscription Agreement to same extent as if it
were a party thereto.

(b) Until all of the Warrant Shares have been sold under a Registration
Statement or pursuant to an exemption from registration under the Securities
Act, including pursuant to Rule 144, so long as the Company’s Common Stock
remains registered under the Exchange Act, the Company shall use its
commercially reasonable best efforts to file with the Securities and Exchange
Commission all current reports and the information as may be necessary to enable
the Holder to effect sales of its shares in reliance upon Rule 144 promulgated
under the Securities Act.

6. Investment Intent; Limited Transferability.

(a) By accepting this Warrant, the Holder represents to the Company that it
understands that this Warrant and any securities obtainable upon exercise of
this Warrant have not been registered for sale under Federal or state securities
laws and are being offered and sold to the Holder pursuant to one or more
exemptions from the registration requirements of such securities laws. In the
absence of an effective registration of such securities or an exemption
therefrom, any certificates for such securities shall bear the legend set forth
on the first page hereof. The Holder understands that it must bear the economic
risk of its investment in this Warrant and any securities obtainable upon
exercise of this Warrant for an indefinite period of time, as this Warrant and
such securities have not been registered under Federal or state securities laws
and therefore cannot be sold unless subsequently registered under such laws,
unless an exemption from such registration is available. The Holder further
represents to the Company, by accepting this Warrant, that it has full power and
authority to accept this Warrant and make the representations set forth herein.

 

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(b) The Holder, by its acceptance of this Warrant, represents to the Company
that it is acquiring this Warrant and will acquire any securities obtainable
upon exercise of this Warrant for its own account for investment and not with a
view to, or for sale in connection with, any distribution thereof in violation
of the Securities Act. The Holder agrees, by acceptance of this Warrant, that
this Warrant and any such securities issuable under this Warrant will not be
sold or otherwise transferred unless (i) a registration statement with respect
to such transfer is effective under the Securities Act and any applicable state
securities laws or (ii) such sale or transfer is made pursuant to one or more
exemptions from the registration requirements of the Securities Act.

(c) In addition to the limitations set forth in Section 1 and in accordance with
the legend on the first page hereof, this Warrant may not be sold, transferred,
assigned or hypothecated by the Holder except in compliance with the provisions
of the Securities Act and the applicable state securities “blue sky” laws, and
is so transferable only upon the books of the Company which the Company shall
cause to be maintained for such purpose. The Company may treat the registered
Holder of this Warrant as it appears on the Company’s books at any time as the
Holder for all purposes. The Company shall permit any Holder of a Warrant or its
duly authorized attorney, upon written request during ordinary business hours,
to inspect and copy or make extracts from its books showing the registered
Holder of this Warrant. All Warrants issued upon the transfer or assignment of
this Warrant will be dated the same date as this Warrant, and all rights of the
holder thereof shall be identical to those of the Holder unless, in each case,
otherwise prohibited by applicable law.

(d) The Holder has been afforded (i) the opportunity to ask such questions as it
has deemed necessary of, and to receive answers from, representatives of the
Company concerning the terms and conditions of the Warrants or the exercise of
the Warrants; and (ii) the opportunity to request such additional information
which the Company possesses or can acquire without unreasonable effort or
expense.

(e) The Holder did not (i) receive or review any advertisement, article, notice
or other communication published in a newspaper or magazine or similar media or
broadcast over television or radio, whether closed circuit, or generally
available; or (ii) attend any seminar, meeting or investor or other conference
to which the Holder was invited by any general solicitation or general
advertising.

(f) The Holder is an “accredited investor” within the meaning of Regulation D
under the Securities Act. Such Holder is acquiring the Warrants for its own
account and not with a present view to, or for sale in connection with, any
distribution thereof in violation of the registration requirements of the
Securities Act, without prejudice, however, to such Holder’s right, subject to
the provisions of the Subscription Agreement and this Warrant, at all times to
sell or otherwise dispose of all or any part of such Warrants and Warrant
Shares.

(g) Either by reason of such Holder’s business or financial experience or the
business or financial experience of its professional advisors (who are
unaffiliated with and who are not compensated by the Company or any affiliate,
finder or selling agent of the Company, directly or indirectly), such Holder has
the capacity to protect such Holder’s interests in connection with the
transactions contemplated by this Warrant and the Subscription Agreement. The
Holder, by its acceptance of this Warrant, represents to the Company that it is
able to fend for itself, can bear the economic risk of its investment and has
such knowledge and experience in financial or business matters that it is
capable of evaluating the merits and risks of the investment in this Warrant.
Holder also represents it has not been organized for the purpose of acquiring
this Warrant.

 

6

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7. Optional Redemption.

(a) In the event that the volume weighted average price of the Company’s Common
Stock as reported on Nasdaq for any twenty (20) consecutive Trading Days is at
least $12.00 per share (subject to adjustment for any stock splits,
combinations, or similar events with respect to the Common Stock after the
original issuance date of this Warrant) (the “Redemption Price”), the Company
shall be entitled to redeem all, but not less than all, of the Warrants at a per
Warrant redemption price of $0.0001, by providing sixty (60) business days’
written notice (the “Notice Period”) to the Holders. For the avoidance of doubt,
this Warrant may be exercised in whole at any time, or in part from time to
time, by the Holder during the Notice Period in accordance with Section 1
hereof. The Holder agrees to return the certificate representing the redeemed
Warrants to the Company upon their redemption (or evidence reasonably
satisfactory to the Company of the loss, theft, destruction or mutilation of
this Warrant in accordance with Section 8 hereof).

(b) Notwithstanding Section 7(a) hereof, for so long as any Warrant Shares are
not subject to a registration statement declared effective by the Commission or
are not otherwise permitted to be immediately sold, in whole, pursuant to an
exemption to registration for such resale, including pursuant to Rule 144 of the
Securities Act, the Company shall not be entitled to exercise its redemption
rights pursuant to Section 7(a) above.

8. Loss, etc., of Warrant. Upon receipt of evidence reasonably satisfactory to
the Company of the loss, theft, destruction or mutilation of this Warrant, and
of indemnity reasonably satisfactory to the Company, if lost, stolen or
destroyed, and upon surrender and cancellation of this Warrant, if mutilated,
the Company shall execute and deliver to the Holder a new Warrant of like date,
tenor and denomination.

9. Warrant Holder Not Stockholder. This Warrant does not confer upon the Holder
any right to vote on or consent to or receive notice as a stockholder of the
Company, as such, in respect of any matters whatsoever, nor any other rights or
liabilities as a stockholder, prior to the exercise hereof; this Warrant does,
however, require certain notices to Holders as set forth herein.

10. Communication. No notice or other communication under this Warrant shall be
effective or deemed to have been given unless, the same is in writing and is
mailed by first-class mail, postage prepaid, or via recognized overnight courier
with confirmed receipt, addressed to:

(a) the Company at Chelsea Therapeutics International, Ltd., 13950 Ballantyne
Corporate Place Suite 325, Charlotte, NC 28277, Attn: Chief Financial Officer,
or other such address as the Company has designated in writing to the Holder; or

(b) the Holder at the address of the Holder set forth in the Subscription
Agreement, or other such address as the Holder has designated in writing to the
Company.

11. Headings. The headings of this Warrant have been inserted as a matter of
convenience and shall not affect the construction hereof.

12. Applicable Law. This Warrant shall be governed by and construed in
accordance with the law of the State of Delaware without giving effect to the
principles of conflicts of law thereof.

13. No Impairment. The Company will not avoid or seek to avoid the observance or
performance of any of the terms of this Warrant, but will at all times in good
faith assist in the carrying out of all such

 

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terms and in the taking of all such action as may be necessary or appropriate in
order to protect the rights of the Holder against impairment.

* * * * *

 

8

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IN WITNESS WHEREOF, the Company has caused this Warrant to be signed by the
undersigned duly authorized officer, this             day of March 2007.

 

CHELSEA THERAPEUTICS

INTERNATIONAL, LTD.

By:      Name:     J. Nick Riehle Title:     Chief Financial Officer

 

9

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SUBSCRIPTION (cash)

The undersigned,                                         
                                        , pursuant to the provisions of the
foregoing Warrant, hereby agrees to subscribe for and purchase
                             shares of the Common Stock, par value $0.0001 per
share, of Chelsea Therapeutics International, Ltd. covered by said Warrant, and
makes payment therefor in full at the price per share provided by said Warrant.

 

Dated:                        By:          Name:         Title:        Address:
                        

CASHLESS EXERCISE

(Please first confirm if cashless exercise is available pursuant to Section 1(a)
of the Warrant)

The undersigned,                                         
                                        , pursuant to the provisions of the
foregoing Warrant, hereby elects to exchange that portion of its Warrant
necessary to receive                              shares of Common Stock, par
value $0.0001 per share, of Chelsea Therapeutics International, Ltd. pursuant to
the Cashless Exercise provisions of the Warrant.

 

Dated:                        By:          Name:         Title:        Address:
                        

 

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ASSIGNMENT

FOR VALUE RECEIVED                                         
                                              (“Assignor”) hereby sells, assigns
and transfers unto                                         
                                         (“Transferee”) the foregoing Warrant
and all rights evidenced thereby, and does irrevocably constitute and appoint
                                        
                                        , attorney, to transfer said Warrant on
the books of Chelsea Therapeutics International, Ltd. By acceptance of the
foregoing Warrant, Transferee shall become a Holder under said Warrant and
subject to the rights, obligations and representations of Holder set forth in
said Warrant.

- OR -

PARTIAL ASSIGNMENT

FOR VALUE RECEIVED                                         
                                              (“Assignor”) hereby assigns and
transfers unto                                         
                                              (“Transferee”) the right to
purchase                      shares of Common Stock, par value $0.0001 per
share, of Chelsea Therapeutics International, Ltd. covered by the foregoing
Warrant, and a proportionate part of said Warrant and the rights evidenced
thereby, and does irrevocably constitute and appoint
                                        
                                             , attorney, to transfer such part
of said Warrant on the books of Chelsea Therapeutics International, Ltd. By
acceptance of the proportionate part of foregoing Warrant, Transferee shall
become a Holder under said proportionate part of said Warrant and subject to the
rights, obligations and representations of Holder set forth in said Warrant.

ASSIGNOR:

 

Dated:                        By:          Name:         Title:        Address:
                        

TRANSFEREE:

 

Dated:                        By:          Name:         Title:        Address:
                        

 

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EXHIBIT B-1

Chelsea Therapeutics International, Ltd.

ACCREDITED INVESTOR QUESTIONNAIRE

To: Chelsea Therapeutics International, Ltd.

This Accredited Investor Questionnaire (“Questionnaire”) must be completed by
each potential investor in connection with the offer and sale of the Securities
of Chelsea Therapeutics International, Ltd., a Delaware corporation (the
“Company”). Capitalized terms used but not otherwise defined herein shall have
the meanings set forth in the Subscription Agreement to which this Questionnaire
is an exhibit. The Securities are being offered and sold by the Company without
registration under the Securities Act, and the securities laws of certain
states, in reliance on the exemptions contained in Section 4(2) of the
Securities Act and regulations promulgated thereunder and in reliance on similar
exemptions under applicable state laws. The purpose of this Questionnaire is to
assure the Company that each investor will meet the applicable suitability
requirements before offering or selling Securities to such investor. The
information supplied by you will be used in determining whether you meet such
criteria, and reliance upon the private offering exemptions from registration is
based in part on the information herein supplied.

Your answers will be kept strictly confidential. However, by signing this
Questionnaire, you will be authorizing the Company to provide a completed copy
of this Questionnaire to such parties as the Company deems appropriate in order
to ensure that the offer and sale of the Securities will not result in a
violation of the Act or the securities laws of any state and that you otherwise
satisfy the suitability standards applicable to purchasers of the Securities.
All potential investors must answer all applicable, questions and complete, date
and sign this Questionnaire. Please print or type your responses and attach
additional sheets of paper if necessary to complete your answers to any item.

 

PART A. BACKGROUND INFORMATION

 

Name of Beneficial Owner of the
Securities:       Name of Record Holder that Securities are to be registered in
(if different from Beneficial Owner):      

Business Address:          (Number and Street)

           

(City)

   (State)    (Zip Code)

Telephone

Number:

   (         )      

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If a corporation, partnership, limited liability company, trust or other entity:

Type of entity:

            State of formation:      

Approximate date of

formation:

Tax ID:

        

Set forth in the space provided below the (i) state(s), if any, in the United
States in which you maintained your principal office during the past two years
and the dates during which you maintained your office in each state, and
(ii) state(s), if any, in which you pay income taxes:

Were you formed for the purpose of investing in the securities being offered?

Yes  ¨    No  ¨

 

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If an individual:

 

Residence Address:        (Number and Street)                    

 

(City)

  (State)    (Zip Code)

 

Telephone Number:   (         ) SSN:                

Age:                    Citizenship:                                            
Where registered to vote                                             

Set forth in the space provided below the state(s), if any, in the United States
in which you maintained your residence during the past two years and the dates
during which you resided in each state:

 

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PART B. ACCREDITED INVESTOR INFORMATION

US INVESTORS - The undersigned further represents and warrants as indicated
below by the undersigned’s initials:

 

A. Individual investors: (Please initial one or more of the following
statements)

 

1.         I certify that I am an accredited investor because I have had
individual income (exclusive of any income earned by my spouse) of more than
$200,000 in each of the most recent two years and I reasonably expect to have an
individual income in excess of $200,000 for the current year.

 

2.         I certify that I am an accredited investor because I have had joint
income with my spouse in excess of $300,000 in each of the most recent two years
and reasonably expect to have joint income with my spouse in excess of $300,000
for the current year.

 

3.         I certify that I am an accredited investor because I have an
individual net worth, or my spouse and I have a joint net worth, in excess of
$1,000,000.

 

4.         I am a director or executive officer of Chelsea Therapeutics
International, Ltd.

 

B.         Partnerships, corporations, trusts or other entities: (Please initial
one of the following seven statements). The undersigned hereby certifies that it
is an accredited investor because it is:

 

1.         an employee benefit plan whose total assets exceed $5,000,000;

 

2.         an employee benefit plan whose investments decisions are made by a
plan fiduciary which is either a bank, savings and loan association or an
insurance company (as defined in Section 3(a) of the Securities Act) or an
investment adviser registered as such under the Investment Advisers Act of 1940;

 

3.         a self-directed employee benefit plan, including an Individual
Retirement Account, with investment decisions made solely by persons that are
accredited investors;

 

4.         an organization described in Section 501(c)(3) of the Internal
Revenue Code of 1986, as amended, not formed for the specific purpose of
acquiring the Units, with total assets in excess of $5,000,000;

 

5.         a corporation, partnership, limited liability company, limited
liability partnership, other entity or similar business trust, not formed for
the specific purpose of acquiring the Units, with total assets excess of
$5,000,000;

 

6.         a trust, not formed for the specific purpose of acquiring the Units,
with total assets exceed $5,000,000, whose purchase is directed by a person who
has such knowledge and experience in financial and business matters that he is
capable of evaluating the merits and risks of an investment in the Units; or

 

7.         an entity (including a revocable grantor trust but other than a
conventional trust) in which each of the equity owners qualifies as an
accredited investor.

 

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NON-US INVESTORS - The undersigned further represents and warrants as indicated
below by the undersigned’s initials:

 

A. Please initial the following statement:

 

1.         I certify that I am not a “U.S. person” (as defined in Regulation S)
or purchasing for the account or benefit of a “U.S. person” and am purchasing
Units in an “offshore transaction” in accordance with Regulation S and am a
“qualified investor” as defined in the European Union Prospectus Directive.

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

 

(a) Individual Ownership

 

(b) Community Property

 

(c) Joint Tenant with Right of Survivorship (both parties must sign)

 

(d) Partnership*

 

(e) Tenants in Common

 

(f) Corporation*

 

(g) Limited Liability Company*

 

(h) Trust*

 

(i) Other

 

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

PART D. NASD AFFILIATION.

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

Yes                              No             

 

If Yes, please describe:                     

 

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

The undersigned NASD member firm acknowledges receipt of the notice required by
Article 3, Sections 28(a) and (b) of the Rules of Fair Practice.

 

   Name of NASD Member Firm By:        Authorized Officer Date:     

 

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The undersigned is informed of the significance to the Company of the foregoing
representations and answers contained in this Questionnaire and such answers
have been provided under the assumption that the Company will rely on them. The
undersigned agrees that the undersigned will notify the Company at any time on
or prior to the Closing Date in the event that the representations and
warranties in this Questionnaire or the Subscription Agreement shall cease to be
true, accurate and complete.

Name of Subscriber:                                         
                                                 

 

By:      Name:      Title:     

 

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EXHIBIT B-2

Chelsea Therapeutics International, Ltd.

REGISTRATION RIGHTS QUESTIONNAIRE

Name of Subscriber:                                         
                                                             

(Please Print)

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

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

DEFINITIONS

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

The term “beneficial owner” of a security includes any Person who, directly or
indirectly, through any contract, arrangement, understanding, relationship or
otherwise has or shares (1) voting power, which includes the power to vote, or
direct the voting of, such security or (2) investment power, which includes the
power to dispose or direct the disposition of such security. A Person may be
regarded as having voting power of a security which is owned (i) by his spouse
or minor children or by any of his relatives or his spouse’s relatives who share
the same home with him, (ii) a partnership of which he is a partner or (iii) a
corporation of which he is a substantial shareholder. A Person is also deemed to
be the beneficial owner of shares which that Person has the right to acquire
within 60 days, including but not limited to any right to acquire through the
exercise of an option, through conversion of a security, pursuant to the power
to revoke a trust or pursuant to the automatic termination of a trust. Please
also disclose any other rights, which you have to acquire securities of the
Company on or before the ninetieth (90th) day following the Closing Date.

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

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

Capitalized terms used but not otherwise defined herein shall have the meanings
set forth in the Subscription Agreement to which this Questionnaire is an
exhibit

QUESTIONS

QUESTION 1: Please list the specific individuals who have voting or investment
control over the Securities.

ANSWER:

 

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QUESTION 2: Other than Shares and Warrant Shares that you will acquire in
connection with the Offering, provide below information regarding the equity
securities of the Company of which you are the “beneficial owner.” Please refer
to the definition of “beneficial owner,” above. Under the column “Nature of
Ownership,” please indicate amounts of securities for which you have (a) sole
voting power, (b) shared voting power, (c) sole investment power, or (d) shared
investment power. If your response covers any securities included because you
have the right to acquire them on or before the ninetieth (90th) day following
the Closing Date, please separately indicate the amount of such securities.
Also, if you hold more than 5% of the Company’s securities pursuant to a voting
trust or similar agreement, please separately state the amount of such
securities held or to be held pursuant to the trust or agreement, the duration
of the agreement and the names and addresses of the voting trustees, outlining
briefly their voting rights and other powers under the trust or agreement.

ANSWER (attach additional pages if necessary):

 

Number of
Shares

   Nature of
Ownership    Title of Securities      

 

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QUESTION 3: If you plan to offer your shares of Common Stock through the selling
efforts of brokers or dealers, describe the terms (and attach copies) of any
agreement, arrangement, or understanding entered into with broker(s) or
dealer(s), including volume limitations on sales, parties to the agreement and
the conditions under which the agreement may be terminated. If known, identify
the broker(s) or dealer(s), that will participate in the offering and state the
amount to be offered through each.

 

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ANSWER:

 

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QUESTION 4: Describe below any information known to you, and if none state
“none,” pertaining to underwriting compensation and arrangements or any dealings
between any underwriter or related person, member of the NASD or a person
associated with a member of the NASD, and the Company or any controlling
stockholder thereof since January 1, 2004.

ANSWER:

 

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QUESTION 5: State below whether you or any of your associates are a member of
NASD, a controlling shareholder of a member, a person associated or affiliated
with a member or an underwriter or related person with respect to the proposed
offering. If you responded “yes,” describe such relationship:

ANSWER:

 

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QUESTION 6: Are you a broker-dealer?

ANSWER: Yes  ¨    No  ¨

 

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QUESTION 7:

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

ANSWER: Yes  ¨    No  ¨

 

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QUESTION 8:

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

ANSWER: Yes  ¨    No  ¨

 

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QUESTION 9:

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

ANSWER: Yes  ¨    No  ¨

Please note that the Commission might take the position that you are to be
identified in the Registration Statement as an underwriter. In the “Plan of
Distribution,” the Registration Statement will provide substantially as follows:

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

 

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

Dated:                     , 2007.

 

   Name of Subscriber:     

 

By:      Name:      Title:     

 

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EXHIBIT C

March [        ], 2007

To the Purchasers

As identified on Exhibit A hereto

____________________________

____________________________

Ladies and Gentlemen:

We have acted as counsel for Chelsea Therapeutics International, Ltd., a
Delaware corporation (the “Company”), in connection with the issuance and sale
of [                    ] shares of common stock, $0.0001 par value per share,
of the Company (the “Shares”), and warrants to purchase Company Common Stock
(the “Warrants”), pursuant to those certain Subscription Agreements, dated as of
March [        ], 2007 (the “Subscription Agreements”), between the Company and
each of the subscribers listed therein (the “Subscribers”). Capitalized terms
not otherwise defined in this opinion have the meaning given them in the
Subscription Agreements. This opinion is furnished to you pursuant to
Section 2.2(b) of the Subscription Agreements.

In rendering this opinion, we have examined originals or copies of such
documents that we deemed relevant to render the opinions provided herein,
including, but not limited to, the following documents:

 

  1. The Subscription Agreements, including the representations of the Company
contained therein (the “Representations”);

 

  2. The certificate of incorporation of the Company, as in effect on the date
hereof;

 

  3. The Company’s bylaws, as in effect on the date hereof;

 

  4. The resolutions adopted by the Board of Directors of the Company on March
[        ], 2007 with respect to, among other things, the Subscription
Agreements and the transactions contemplated thereby; and

 

  5. The Warrants (and together with the Subscription Agreements, the
“Transaction Documents”).

In connection with the opinions expressed herein we have made such examination
of matters of law and of fact, as we considered appropriate or advisable for
purposes hereof. As to matters of fact material to the opinions expressed
herein, we have relied upon the Representations and upon certificates and
statements of governmental officials and of officers of the Company. We have
also examined originals or copies of such corporate documents or records of the
Company as we have considered appropriate for the opinions expressed herein. We
have assumed for the purposes of this opinion that the signatures on documents
and instruments examined by us are authentic, that each document is what it
purports to be, and that all documents submitted to us as copies conform with
the originals, which facts we have not independently verified.

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In rendering this opinion we have also assumed: (i) that the Subscription
Agreements have been duly and validly executed and delivered by each of the
Subscribers or on their behalf and constitute a valid, binding and enforceable
obligation upon each of the Subscribers; (ii) that the representations and
warranties made in the Subscription Agreements by each of the Subscribers are
true and correct; (iii) that each of the Subscribers will make payment of the
purchase price required pursuant to the Subscription Agreements and that any
wire transfers tendered by any of the Subscribers will be honored; (iv) if a
Subscriber is a corporation or other entity, that such Subscriber has filed any
required state franchise, income or similar tax returns and have paid any
required state franchise, income of similar taxes; (v) that there are no
extrinsic agreements or understandings among the parties to the Subscription
Agreements that would modify or interpret the terms of the Subscription
Agreements or the respective rights or obligations of the parties thereunder;
and (vi) each Subscriber has all requisite power and authority and have taken
all necessary action to effect the transactions mentioned above, and we do not
render an opinion upon the application of any federal or state law or regulation
to the Subscribers’ power or authority.

As used in this opinion, the phrases “to our knowledge” or “we are not aware”
means as to matters of fact that, based on the actual knowledge of individual
attorneys within the firm who have worked on the Subscription Agreements and the
transactions contemplated thereby and after such inquiries as we deemed
appropriate, including an examination of documents referred to herein and
inquiries of senior management of the Company, we find no reason to believe that
the opinions expressed are factually incorrect; but beyond that, we have made no
factual investigation for the purposes of rendering this opinion. Specifically,
but without limitation, we have made no inquiries of securities holders of the
Company.

This opinion relates solely to the laws of the State of North Carolina, the
General Corporation Law of the State of Delaware and the federal securities laws
of the United States and the securities laws of the State of New York, and we
express no opinion with respect to the effect or application of any other laws.
Special rulings of authorities administering such laws or opinions of other
counsel have not been sought or obtained.

Based upon our examination of and reliance upon the foregoing and subject to the
limitations, exceptions, qualifications and assumptions set forth below and
except as set forth in the Subscription Agreements, we are of the opinion that
as of the date hereof:

1. The Company has been duly incorporated and, based solely on a certificate
dated [                    ], 2007, from the Secretary of State of the State of
Delaware, is validly existing as a corporation and in good standing in the State
of Delaware, with the requisite corporate power and authority to own and use its
properties and assets and to carry on its business as currently conducted. Based
solely on a Certificate of Authorization dated [                    ], 2007,
from the Secretary of State of the State of North Carolina, the Company is
qualified to do business as a foreign corporation in the State of North
Carolina.

2. The Company has all requisite corporate power and authority to (a) execute,
deliver and perform the Transaction Documents, (b) issue, sell and deliver the
Shares and Warrants and, upon exercise of the Warrants in accordance with the
terms thereof, the shares of Common Stock underlying the Warrants pursuant to
the Transaction Documents and (c) carry out and perform its obligations under
the Transaction Documents and consummate the transactions contemplated thereby.

3. The Transaction Documents have been duly executed and delivered by the
Company and the consummation by the Company of the transactions contemplated
thereby have been duly authorized

 

2

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by all necessary action on the part of the Company. The Transaction Documents
constitute legal, valid and binding obligations of the Company, enforceable
against the Company according to their terms.

4. Except for such consents, approvals, authorizations, orders for filing as
have been or we believe will be made or obtained in a timely manner, no
approval, authorization, waiver, consent, registration, filing, qualification,
license or permit of or with any court, regulatory, administrative or other
governmental body is required for the execution and delivery of the Transaction
Documents or the consummation of the transactions contemplated thereby.

5. The Securities have been duly authorized and, when paid for and issued in
accordance with the Subscription Agreements and the Warrants, the Shares and the
shares of Common Stock underlying the Warrants will be validly issued, fully
paid and non-assessable. The shares of Common Stock underlying the Warrants have
been duly authorized and reserved for issuance.

6. Based in part upon the representations made by each of the Subscribers in the
Subscription Agreements, the offer and sale of the Securities to the Subscribers
in accordance with the terms of the Subscription Agreements is exempt from the
registration requirements of Section 5 of the Securities Act and from the
securities registration and qualification requirements of all applicable state
securities laws.

7. The authorized capital stock of the Company consists of 50,000,000 shares of
capital stock, of which 45,000,000 are designated Common Stock and 5,000,000 of
which are designated preferred stock.

8. The execution, delivery and performance by the Company, and the compliance by
the Company with the terms of the Transaction Documents and the issuance, sale
and delivery of the Shares and Warrants pursuant to the Transaction Documents
and, upon exercise of the Warrants in accordance with the terms thereof, the
shares of Common Stock underlying the Warrants will not (a) violate any
provision of The Certificate of Incorporation or By-laws of the Company or
(b) result in a breach of or constitute a default (or an event which with notice
or lapse of time or both would become a default) under, or result in or permit
the termination or modification of, any agreement or instrument that is included
as an exhibit to the Public Filings, or (c) violate any order, writ, judgment or
decree known to us to which the Company is a party or is subject.

Notwithstanding any other provision of this opinion letter, the opinions
hereinabove expressed are specifically subject to the following limitations,
exceptions, qualifications and assumptions:

A. No opinion is given, either express or implied, as to any document,
agreement, instrument or certificate delivered or to be delivered in connection
with the Subscription Agreements other than the documents specifically
enumerated above and, with respect to such documents, only as expressly set
forth and qualified and limited herein.

B. The enforceability of any instrument, document or agreement is subject to
(i) applicable bankruptcy, reorganization, insolvency, moratorium, fraudulent
conveyance and other federal and state laws affecting the rights and remedies of
creditors generally, and (ii) general principles of equity limiting the
availability of equitable remedies (including, but not limited to, the remedy of
specific performance), whether considered in a proceeding at law or in equity.

C. Certain rights, remedies and waivers contained in the Subscription Agreements
may be limited or rendered ineffective by applicable laws, public policy or
judicial decisions; however, such laws and judicial decisions do not render the
Subscription Agreements invalid as a whole. Provisions that

 

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might be unenforceable due to public policy or other concerns or reasons
include, but are not limited to, issues related to the waiver of procedural or
substantive rights or other legal or equitable rights, including, without
limitation, the consent by the Company to the jurisdiction or venue of any court
or to service of process in any particular manner, disclaimers or limitations of
liabilities or defenses, the waiver of notice requirements, and choice of law
provisions.

D. No opinion is given with respect to any income, sales, withholding, personal
property or other tax, assessment, penalty, charge or levy that may result from
the transactions contemplated by the Subscription Agreements or any other
agreement, from the payment of any sum, or from the performance of any
obligation of the Company under the Subscription Agreements.

E. Certain provisions of the Subscription Agreements impose indemnification
obligations on the parties thereto. Courts might apply public policy
considerations in limiting the rights of parties seeking to obtain
indemnification under circumstances where the conduct of such parties in the
circumstances in question is determined to have constituted negligence.

F. We express no opinion as to the Company’s compliance or noncompliance with
applicable federal or state anti-fraud statutes, laws, rules and regulations.

G. We express no opinion as to the effect of court decisions, invoking statutes
or principles of equity, which have held that certain covenants and provisions
of agreements are unenforceable where enforcement of such covenants or
provisions under the circumstances would violate the enforcing party’s implied
covenant of good faith and fair dealing.

H. The following are excluded from the scope of our opinion:

 

  •  

Federal Reserve Board margin regulations;

 

  •  

pension and employee benefits laws and regulations (ERISA);

 

  •  

federal and state antitrust and unfair competition laws and regulations;

 

  •  

local ordinances;

 

  •  

federal and state environmental laws and regulations;

 

  •  

federal and state tax laws and regulations;

 

  •  

federal patent, copyright and trademark, state trademark, and other federal and
state intellectual property laws and regulations;

 

  •  

federal and state racketeering laws and regulations;

 

  •  

federal and state health, safety, and labor laws and regulations;

 

  •  

federal and state food and drug administration laws and regulations;

 

  •  

federal and state laws, regulations, and policies concerning (i) national and
local emergencies, (ii) possible judicial deference to acts of sovereign states,
and (iii) criminal and civil forfeiture laws and regulations; and

 

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  •  

other federal and state statutes of general application to the extent they
provide for criminal prosecution (e.g., mail fraud and wire fraud statutes).

This opinion is rendered as of the date first written above solely for your
benefit in connection with the Subscription Agreements and may not be delivered
to, quoted or relied upon by any person other than you, or for any other
purpose, without our prior written consent, provided however, that it is
expressly acknowledged that this opinion is also rendered for the benefit of
LeerinkSwann & Company, Inc. and its affiliates (“Leerink”) and that Leerink may
rely on his opinion. Our opinion is expressly limited to the matters set forth
above and we render no opinion, whether by implication or otherwise, as to any
other matters relating to the Company. We assume no obligation to advise you of
facts, circumstances, events or developments which hereafter may be brought to
our attention and which may alter, affect or modify the opinions expressed
herein.

Very truly yours,

 

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EXHIBIT D

WIRE INSTRUCTIONS

 

ABA:

   011 001 234

Bank:

   Mellon Trust of New England, NA

Account Number:

   001-6551

Account Name:

   Escrow Deposit Clearing Account

Attn:

   Darci Buchanan / Matt Romero

Ref:

   Chelsea Pharmaceutical