Exhibit 10.1

Execution Copy

3,745,645 Shares

Warrants to Purchase 1,872,823 Shares

CYTORI THERAPEUTICS, INC.

Common Stock

PLACEMENT AGENCY AGREEMENT

February 23, 2007

Piper Jaffray & Co.

U.S. Bancorp Center

800 Nicollet Mall

Minneapolis, Minnesota  55402

Ladies and Gentlemen:

Cytori Therapeutics, Inc., a Delaware corporation (the “Company”), proposes,
subject to the terms and conditions stated herein, to issue and sell to certain
investors located by you or set forth on Schedule II attached hereto (each an
“Investor” and, collectively, the “Investors”), (i) up to 3,745,645 shares (the
“Shares”) of the Company’s common stock, $0.001 par value per share (the “Common
Stock”) and (ii) warrants to purchase up to 1,872,823 shares of Common Stock
(the “Warrants” and together with the Shares, the “Securities”).  The shares of
Common Stock issuable upon exercise of the Warrants are hereinafter referred to
as the “Warrant Shares”.  The Company desires to engage Piper Jaffray & Co. as
its exclusive placement agent (the “Placement Agent”) in connection with such
issuance and sale.  The Securities are more fully described in the Registration
Statement (as hereinafter defined).

The Company has prepared and filed in conformity with the requirements of the
Securities Act of 1933, as amended (the “Securities Act”), and the published
rules and regulations thereunder (the “Rules and Regulations”) adopted by the
Securities and Exchange Commission (the “Commission”) a Registration Statement
on Form S-3 (No. 333-134129), relating to the Securities and the offering
thereof from time to time in accordance with Rule 415 of the Rules and
Regulations, and such amendments thereof as may have been required. The
Registration Statement includes a prospectus dated June 5, 2006 (the “Base
Prospectus”). The Company has filed the Base Prospectus with the Commission and
has filed with, or transmitted for filing to, or shall promptly hereafter file
with or transmit for filing to the Commission, a prospectus supplement relating
to the Securities in accordance with Rule 424(b) under the Act (the “Final
Prospectus Supplement”). The term “Registration Statement” as used in this
Agreement means the initial registration statement (including all exhibits,
financial schedules and all documents and information deemed to be a part of the
Registration Statement (through incorporation by reference or otherwise)), as
amended, at the time and on the date it became effective (the “Effective Date”),
including the information (if any) contained in the form of final prospectus
filed with the Commission pursuant to Rule 424(b) of the Rules and Regulations
and deemed to be part thereof at the time of effectiveness pursuant to Rule 430A
of the Rules and Regulations. The term “Prospectus” as used in this Agreement
means the Base Prospectus together with the Final Prospectus Supplement. Any
preliminary prospectus or prospectus subject to completion included in the
Registration Statement or filed with the Commission

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pursuant to Rule 424 under the Securities Act is hereafter called a “Preliminary
Prospectus.” As used herein, the terms “Base Prospectus,” “Prospectus,”
“Registration Statement,” “Preliminary Prospectus” and “Final Prospectus
Supplement” shall include any documents incorporated by reference therein; and
any reference to any amendment or supplement to the Registration Statement or
the Prospectus shall be deemed to refer to and include any document filed under
the Securities Exchange Act of 1934, as amended (the “Exchange Act”), after the
date of the Base Prospectus by the Company with the Commission and on or before
the last to occur of the Effective Date, the date of the Preliminary Prospectus,
or the date of the Prospectus; and any reference herein to the terms “amend,”
“amendment,” or “supplement” with respect to the Registration Statement, any
Preliminary Prospectus or the Prospectus shall be deemed to refer to and include
the filing of any document under the Exchange Act before or after the Effective
Date, the date of such Preliminary Prospectus or the date of the Prospectus, as
the case may be, which is incorporated by reference into such amendment or
supplement, but excluding any documents or information furnished to the
Commission under Item 2.02 or Item 7.01 of any Current Report on Form 8-K.  If
the Company has filed an abbreviated registration statement to register
additional Shares and Warrants pursuant to Rule 462(b) under the Rules and
Regulations (the “Rule 462(b) Registration Statement”), then any reference
herein to the term “Registration Statement” shall also be deemed to include such
Rule 462(b) Registration Statement.  The Company hereby confirms that the
Placement Agent, in connection with its duties in such capacity, is authorized
to distribute or cause to be distributed the Prospectus (as from time to time
amended or supplemented if the Company furnishes amendments or supplements
thereto to such Placement Agent).

All references in this Agreement to financial statements and schedules and other
information which is “contained,” “included” or “stated” in the Registration
Statement or the Prospectus (or other references of like import) shall be deemed
to mean and include all such financial statements and schedules and other
information which is incorporated by reference in the Registration Statement or
the Prospectus, as the case may be; and all references in this Agreement to
amendments or supplements to the Registration Statement or the Prospectus shall
be deemed to mean and include the filing of any document under the Exchange Act
on or before the Closing Date (as defined herein), which is incorporated by
reference in the Registration Statement or the Prospectus, as the case may be.

For purposes of this Agreement, all references to the Registration Statement,
the Rule 462(b) Registration Statement, the Base Prospectus, any Preliminary
Prospectus, the Prospectus or any amendment or supplement to any of the
foregoing shall be deemed to include the copy filed with the Commission pursuant
to its Electronic Data Gathering, Analysis and Retrieval System (“EDGAR”).

1.             Agreement to Act as Placement Agent; Delivery and Payment.  On
the basis of the representations, warranties and agreements of the Company
herein contained, and subject to the terms and conditions set forth in this
Agreement:

(a)           The Company hereby engages the Placement Agent to act as its
exclusive placement agent in connection with the issuance and sale, by the
Company, of Securities to the Investors and the Placement Agent hereby agrees,
as an agent of the Company, to use its best efforts to solicit offers to
purchase all or part of the Securities from the Company upon the terms and
conditions set forth in the Prospectus. The Company expressly acknowledges and
agrees that this Agreement shall not give rise to a commitment by the Placement
Agent or any of its affiliates to underwrite or purchase any of the Securities
or otherwise provide any financing, and the Placement Agent shall have no
authority to bind (and agrees not to purport to bind) the Company in respect of
the sale of any Securities.

(b)           Concurrently with the execution and delivery of this Agreement,
the Company, the Placement Agent and JP Morgan Chase, as escrow agent (the
“Escrow Agent”), shall enter into an escrow agreement, dated as of the date
hereof (the “Escrow Agreement”) pursuant to which an escrow

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account will be established, at the Company’s expense, for the benefit of the
Company and the Investors who desire to settle their purchase through the
facilities of The Depository Trust Company’s DWAC system (the “Escrow Account”).
Prior to the Closing Date, (i) each such Investor will deposit in the Escrow
Account an amount equal to $5.74 per unit (each unit consisting of one Share and
0.5 Warrants) multiplied by the number of units to be purchased by such Investor
(the “Purchase Amount”), and (ii) the Escrow Agent will notify the Company and
the Placement Agent in writing of the amount of funds deposited in the Escrow
Account.

(c)           Upon the occurrence of the Closing (as hereinafter defined), the
Company shall pay to the Placement Agent, by wire transfer of immediately
available funds payable to the order of the Placement Agent, to an account
designated by the Placement Agent, an aggregate of six and one-half percent
(6.5%) of the gross proceeds received by the Company from its sale of the
Securities at such Closing (the “Agency Fee”) provided, however, that with
respect to Securities sold in the offering to those Investors whose names are
set forth on Schedule II attached hereto, the fee to be paid to the Placement
Agent shall equal five percent (5.0%) of the gross proceeds received by the
Company at Closing from its sale of such Securities to such Investors.

(d)           Payment of the purchase price for, and delivery of, the Securities
shall be made at a closing (the “Closing”) at the offices of Heller Ehrman LLP,
counsel for the Company, located at 4350 La Jolla Village Drive, 7th Floor, San
Diego, California at 10:00 a.m., local time, on February 28, 2007 or at such
other time and date as the Placement Agent and the Company determine pursuant to
Rule 15c6-1(a) under the Exchange Act (such date of payment and delivery being
herein referred to as the “Closing Date”), and upon satisfaction of the
conditions set forth in this Agreement and the Subscription Agreements (as
defined below), the Company shall deliver the Securities, which shall be
registered in the name or names and shall be in such denominations as the
Placement Agent may request at least one business day before the Closing Date,
to the Investors, which delivery, with respect to the Shares, may be made
through the facilities of the Depository Trust Company, and the Escrow Agent
will disburse the aggregate funds in the Escrow Account to the Company reduced
by an amount equal to the sum of the aggregate Agency Fee payable to the
Placement Agent and the Placement Agent’s bona fide estimate of the amount, if
any, of expenses for which the Placement Agent is entitled to reimbursement
pursuant hereto, with such amounts being delivered to the Placement Agent, by
wire in federal (same day) funds, as provided in the Escrow Agreement. All such
actions taken at the Closing shall be deemed to have occurred simultaneously. 
Each of the Company and the Placement Agent hereby agree to deliver to the
Escrow Agent a Closing Notice in the form attached as Exhibit C to the Escrow
Agreement at least one day prior to the Closing Date.  At least one day prior to
the Closing Date, the Placement Agent shall submit to the Company its bona fide
estimate of the amount, if any, of expenses for which such Placement Agent is
entitled to reimbursement pursuant hereto. If the Company shall default in its
obligations to deliver Securities to an Investor whose offer it has accepted,
the Company shall indemnify and hold the Placement Agent harmless against any
loss, claim or damage arising from or as a result of such default by the
Company.

(e)           The sale of the Securities shall be made pursuant to subscription
agreements in the form included as Exhibit A hereto (the “Subscription
Agreements”). The Company shall have the sole right to accept offers to purchase
the Securities and may reject any such offer in whole or in part, and, except as
set forth in Section 4 hereof, in no event shall fees be payable on any proposed
purchase which is rejected for any reason or which otherwise does not close for
any reason.

(f)            Prior to the earlier of (i) the date on which this Agreement is
terminated and (ii) the Closing Date, the Company shall not, without the prior
written consent of the Placement Agent, solicit or accept offers to purchase
Securities of the Company (other than pursuant to the exercise of options or

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warrants to purchase shares of Common Stock that are outstanding at the date
hereof) otherwise than through the Placement Agent in accordance herewith.

(g)           Any Investor not settling its purchase of Securities pursuant to
Section 1(b) above shall deposit its respective Purchase Amount into an account
or accounts established with the Placement Agent.  On the Closing Date, the
Placement Agent shall, with respect to each such Investor, cause the Purchase
Amount for such Securities to be wired from such accounts to an account
designated by the Company in exchange for the release of such Investor’s
Securities.

2.             Representations and Warranties of the Company.  The Company
represents and warrants to the Placement Agent as of the date hereof and as of
the Closing Date, and agrees with the Placement Agent, as follows:

(a)           Registration Statement and Prospectus.        The Company and the
transactions contemplated by this Agreement meet the requirements and comply
with the conditions for the use of Form S-3 under the Securities Act.  The
offering of the Securities by the Company complies with the applicable
requirements of Rule 415 under the Securities Act.  The Company has complied to
the Commission’s satisfaction with all requests of the Commission for additional
or supplemental information. The Registration Statement has become effective
under the Securities Act.  No stop order preventing or suspending use of the
Registration Statement or the Prospectus or the effectiveness of the
Registration Statement, has been issued by the Commission, and no proceedings
for such purpose have been instituted or are pending or, to the Company’s
knowledge, are contemplated or threatened by the Commission.

(b)           Compliance with Registration Requirements.  Each part of the
Registration Statement and any post-effective amendment thereto, at the time
such part became effective (including each deemed effective date with respect to
the Placement Agent pursuant to Rule 430B under the Securities Act) and as of
the Closing Date, complied and will comply, in all material respects, with the
requirements of the Securities Act, the Rules and Regulations and the Exchange
Act and did not and will not contain any untrue statement of a material fact or
omit to state a material fact required to be stated therein or necessary to make
the statements therein not misleading. The Prospectus (or any amendment or
supplement to the Prospectus), at the time of filing or the time of first use
within the meaning of the Rules and Regulations and as of the Closing Date,
complied and will comply, in all material respects, with the requirements of the
Securities Act, the Rules and Regulations and the Exchange Act and did not and
will not contain an untrue statement of a material fact or omit to state a
material fact necessary in order to make the statements therein, in the light of
the circumstances under which they were made, not misleading; provided, that the
Company makes no representations or warranty in this paragraph with respect to
any Placement Agent Information (as defined in Section 7).

(c)           Disclosure Package.  As of the Time of Sale (as hereinafter
defined) and as of the Closing Date, neither (A) any Issuer General Use Free
Writing Prospectus(es)(as defined below), if any, issued at or prior to the Time
of Sale, the Statutory Prospectus (as hereinafter defined), all considered
together (collectively, the “Disclosure Package”), nor (B) any individual Issuer
Limited-Use Free Writing Prospectus (as hereinafter defined), when considered
together with the Disclosure Package, included or will include any untrue
statement of a material fact or omitted or will omit to state any material fact
necessary in order to make the statements therein, in the light of the
circumstances under which they were made, not misleading; provided, that the
Company makes no representations or warranty in this paragraph with respect to
statements in or omissions from the Disclosure Package in reliance upon, and in
conformity with any Placement Agent Information.  No statement of material fact
included in the Prospectus has been omitted from the Disclosure Package and no
statement of material fact included in the Disclosure Package that is required
to be included in the Prospectus has been omitted therefrom. As used in this
paragraph and elsewhere in this Agreement:

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(1)           “Time of Sale” with respect to any Investor, means 12:55 p.m.
Pacific Standard Time on the date of this Agreement.

(2)           “Statutory Prospectus” means the Preliminary Prospectus, if any,
and  the Base Prospectus, each as amended and supplemented as of immediately
prior to the Time of Sale, including any document incorporated by reference
therein and any prospectus supplement deemed to be a part thereof.  For purposes
of this definition, information contained in a form of prospectus that is deemed
retroactively to be a part of the Registration Statement pursuant to Rule 430B
under the Securities Act shall be considered to be included in the Statutory
Prospectus as of the actual time that form of prospectus is filed with the
Commission pursuant to Rule 424(b) under the Securities Act.

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

(4)           “Issuer General Use Free Writing Prospectus” means any Issuer Free
Writing Prospectus that is intended for general distribution to prospective
investors as identified on Schedule I hereto, and does not include a “bona fide
electronic road show” as defined in Rule 433.

(5)           “Issuer Limited-Use Free Writing Prospectus” means any Issuer Free
Writing Prospectus that is not an Issuer General Free Writing Prospectus,
including any “bona fide electronic road show” as defined in Rule 433, that is
made available without restriction pursuant to Rule 433(d)(8)(ii), even though
not required to be filed with the Commission.

(d)           Conflict with Registration Statement.    Each Issuer Free Writing
Prospectus, as of its issue date and at all subsequent times through the
completion of the offering and sale of the Securities or until any earlier date
that the Company notified or notifies the Placement Agent, did not, does not and
will not include any information that conflicted, conflicts or will conflict
with the information contained in the Registration Statement, any Statutory
Prospectus or the Prospectus including any document incorporated by reference
therein and any prospectus supplement deemed to be a part thereof that has not
been superseded or modified or included or would include an untrue statement of
a material fact or omitted or would omit to state a material fact required to be
stated therein or necessary in order to make the statements therein not
misleading; provided, that the Company makes no representations or warranty in
this paragraph with respect to any Placement Agent Information.

(e)           Distributed Materials.        The Company has not, directly or
indirectly, distributed and will not distribute any prospectus or other offering
material in connection with the offering and sale of the Securities other than
the Disclosure Package or the Prospectus, and other materials, if any, permitted
under the Securities Act to be distributed and consistent with Section 3 below.
The Company will file with the Commission all Issuer Free Writing Prospectuses
required to be filed in the time required under Rule 433(d) under the Securities
Act. The Company has satisfied or will satisfy the conditions in Rule 433 under
the Securities Act to avoid a requirement to file with the Commission any
electronic road show. The parties hereto agree and understand that the content
of any and all “road shows” related to the offering of the Securities
contemplated hereby is solely the property of the Company.

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(f)            Not an Ineligible Issuer.  (1) At the earliest time after the
filing of the Registration Statement that the Company or another offering
participant made a bona fide offer (within the meaning of Rule 164(h)(2) under
the Securities Act) of the Securities and (2) at the date hereof, the Company
was not and is not an “ineligible issuer,” as defined in Rule 405 under the
Securities Act, without taking account of any determination by the Commission
pursuant to Rule 405 that it is not necessary that the Company be considered an
ineligible issuer, including, without limitation, for purposes of Rules 164 and
433 under the Securities Act with respect to the offering of the Securities as
contemplated by the Registration Statement.

(g)           Incorporated Documents.  The documents incorporated by reference
in the Disclosure Package and in the Prospectus, when they became effective or
were filed with the Commission, as the case may be, conformed in all material
respects to the requirements of the Securities Act or the Exchange Act, as
applicable, and were filed on a timely basis with the Commission and none of
such documents contained an untrue statement of a material fact or omitted to
state a material fact necessary to make the statements therein, in the light of
the circumstances under which they were made, not misleading.

(h)           Due Incorporation.  The Company has been duly incorporated and is
validly existing as a corporation in good standing under the laws of its
jurisdiction of incorporation, with the corporate power and authority to own its
properties and to conduct its business as currently being carried on and as
described in the Registration Statement, the Disclosure Package and the
Prospectus and is duly qualified to transact business as a foreign corporation
in good standing under the laws of each other jurisdiction in which its
ownership or leasing of property or the conduct of its business requires such
qualification, except where the failure to be so qualified and in good standing
(i) would not, individually or in the aggregate, result in any material adverse
effect upon, or change in, the general affairs, business, operations, prospects,
properties, financial condition, or results of operations of the Company taken
as a whole or (ii) would not impair in any material respect the ability of the
Company to perform its obligations under this Agreement or to consummate any
transactions contemplated by this Agreement, the Disclosure Package or the
Prospectus (any such effect as described in clauses (i) or (ii), a “Material
Adverse Effect”).

(i)            Capitalization.  All of the issued and outstanding shares of
capital stock of the Company, including the outstanding shares of Common Stock,
have been duly authorized and validly issued and are fully paid and
nonassessable, have been issued in compliance with all federal and state
securities laws, were not issued in violation of or subject to any preemptive
rights or other rights to subscribe for or purchase or acquire any securities of
the Company that have not been waived in writing.

(j)            The Securities.  The Shares have been duly and validly authorized
by the Company and, when issued, delivered and paid for in accordance with the
terms of this Agreement and the Subscription Agreements, will have been duly and
validly issued and will be fully paid and nonassessable and will not be subject
to any statutory or contractual preemptive rights or other rights to subscribe
for or purchase or acquire any shares of Common Stock of the Company, which have
not been waived or complied with and will conform in all material respects to
the description thereof contained in the Disclosure Package and the Prospectus
and such description conforms in all material respects to the rights set forth
in the instruments defining the same.  The Warrants conform, or when issued will
conform, to the description thereof contained in the Disclosure Package and the
Prospectus and have been duly and validly authorized by the Company and upon
delivery to the Investors at the Closing Date will be valid and binding
obligations of the Company, enforceable in accordance with their terms, except
as such enforceability may be limited by bankruptcy, insolvency, reorganization,
moratorium or similar laws affecting the rights and remedies of creditors
generally or subject to general principles of equity. The

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Warrant Shares initially issuable upon exercise of the Warrants conform, or when
issued will conform, to the description thereof contained in the Disclosure
Package and the Prospectus and have been duly authorized and reserved for
issuance and when issued in accordance with the terms thereof will be validly
issued, fully paid and nonassessable.

(k)           Description of Capital Stock.   The capital stock of the Company,
including the Common Stock, conforms as to legal matters to the description
thereof, if any, contained in the Registration Statement, the Statutory
Prospectus and the Prospectus, and as of the date thereof, the Company had
authorized capital stock as set forth therein.  The Securities are in due and
proper form and the holders of the Securities will not be subject to personal
liability by reason of being such holders.

(l)            No Registration Rights.   Except as otherwise described in the
Disclosure Package, there are no preemptive rights or other rights to subscribe
for or to purchase, or any restriction upon the voting of transfer of, any
shares of Common Stock pursuant to the Company’s charter, by-laws or any
agreement or other instrument to which the Company is a party or by which the
Company is bound.  There are no contracts, agreements or understandings between
the Company and any person granting such person the right (other than rights
which have been waived in writing in connection with the transactions
contemplated by this Agreement or otherwise satisfied) to require the Company to
file a registration statement under the Securities Act with respect to any
securities of the Company owned or to be owned by such person or to require the
Company to include such securities in the securities registered pursuant to the
Registration Statement or in any securities being registered pursuant to any
other registration statement filed by the Company under the Securities Act.

(m)          Subsidiaries.   The Company has no significant subsidiaries (as
such term is defined in Rule 1-02(w) of Regulation S-X promulgated by the
Commission).

(n)           Due Authorization and Enforceability.    The Company has the full
right, power and authority to enter into this Agreement, each of the
Subscription Agreements and the Escrow Agreement, and to perform and discharge
its obligations hereunder and thereunder; and each of this Agreement, the Escrow
Agreement and each Subscription Agreement has been duly authorized, executed and
delivered by the Company, and constitutes a valid, legal and binding obligation
of the Company, enforceable against the Company in accordance with its terms,
except as rights to indemnity hereunder may be limited by federal or state
securities laws and except as such enforceability may be limited by applicable
bankruptcy, insolvency, reorganization or similar laws affecting the rights of
creditors generally and subject to general principles of equity.

(o)           No Conflict.  The execution, delivery and performance by the
Company of this Agreement each Subscription Agreement and the Escrow Agreement
and the consummation of the transactions herein contemplated, including the
issuance and sale by the Company of the Securities and the issuance of the
Warrant Shares upon due exercise of the Warrants in accordance with their terms,
will not conflict with or result in a breach or violation of, or constitute a
default under (nor constitute any event which with notice, lapse of time or both
would result in any breach or violation of or constitute a default under) (i)
the provisions of the charter or by-laws of the Company, (ii) any material
indenture, mortgage, deed of trust, bank loan or credit agreement or other
evidence of indebtedness, or any license, lease, contract or other agreement or
instrument to which the Company is a party or by which it or any of its
properties may be bound or affected, or (iii) any federal, state, local or
foreign law, regulation or rule or any decree, judgment or order applicable to
the Company.

(p)           No Consents Required.  No approval, authorization, consent or
order of or filing with any federal, state, local or foreign governmental or
regulatory commission, board, body, authority or agency, or of or with any
self-regulatory organization or other non-governmental regulatory authority

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(including, without limitation, the National Association of Securities Dealers
Automated Quotation (“Nasdaq”) Global Market, or approval of the stockholders of
the Company (including such as may be required pursuant to Rule 4350 of the
Nasdaq Marketplace Rules), is required in connection with the execution,
delivery and performance of this Agreement, the Subscription Agreements and the
Escrow Agreement by the Company, the issuance and sale of the Securities and the
issuance of the Warrant Shares upon due exercise of the Warrants in accordance
with their terms, or the consummation by the Company of the transactions
contemplated hereby other than (i) as may be required under the Securities Act,
(ii) any necessary qualification of the Securities under the securities or blue
sky laws of the various jurisdictions in which the Securities are being offered
by the Placement Agent and (iii) under the rules and regulations of the National
Association of Securities Dealers, Inc. (“NASD”).

(q)           No Violation.  The Company is not in breach or violation of or in
default (nor has any event occurred which with notice, lapse of time or both
would result in any breach or violation of, or constitute a default) (i) under
the provisions of its charter or bylaws or (ii) in the performance or observance
of any term, covenant, obligation, agreement or condition contained in any
indenture, mortgage, deed of trust, bank loan or credit agreement or other
evidence of indebtedness, or any license, lease, contract or other agreement or
instrument to which the Company is a party or by which it or any of its
properties may be bound or affected, or (iii) in the performance or observance
of any statute, law, rule, regulation, ordinance, judgment, order or decree of
any court, regulatory body, administrative agency, governmental body, arbitrator
or other authority having jurisdiction over the Company or any of its
properties, as applicable (including, without limitation, those administered by
the Food and Drug Administration of the U.S. Department of Health and Human
Services (the “FDA”) or by any foreign, federal, state or local governmental or
regulatory authority performing functions similar to those performed by the
FDA), except, with respect to clauses (ii) and (iii) above, to the extent any
such contravention has been waived or would not result in a Material Adverse
Effect.

(r)            Absence of Material Changes. Subsequent to the respective dates
as of which information is given in the Disclosure Package (and taking into
account any updates included within the Disclosure Package), (a) the Company has
not sustained any loss or interference with its business from fire, explosion,
flood or other calamity, whether or not covered by insurance, or from any labor
dispute or court or governmental action, order or decree, (b) the Company has
not incurred any material liability or obligation, direct or contingent, or
entered into any material transaction not in the ordinary course of business;
(c) the Company has not purchased any of the Company’s outstanding capital
stock, or declared, paid or otherwise made any dividend or distribution of any
kind on the Company’s capital stock; and (d) there has not been any change in
the capital stock (other than a change in the number of outstanding shares of
Common Stock due to the issuance of shares upon the exercise of outstanding
options or warrants or the conversion of convertible indebtedness), or material
change in the short-term debt or long-term debt of the Company (other than upon
conversion of convertible indebtedness) or any issue of options, warrants,
convertible securities or other rights to purchase the capital stock (other than
grants of stock options under the Company’s stock option plans existing on the
date hereof) of the Company, or any Material Adverse Effect.

(s)           Permits.  The Company possesses, and is operating in compliance in
all material respects with, all necessary franchises, licenses, grants, permits,
easements, authorizations, consents, certificates and orders of any governmental
or self-regulatory body required for the conduct of its business and all such
franchises, licenses, grants, permits, easements, authorizations, consents,
certificates and orders are valid and in full force and effect.  The Company has
made all necessary filings required under any federal, state, local or foreign
law, regulation or rule (including, without limitation, those from the FDA, and
any other foreign, federal, state or local government or regulatory authorities
performing functions similar to those performed by the FDA), in order to conduct
its business.  The Company has not received notice of any proceedings relating
to revocation or modification of, any such franchise, license,

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grant, permit, easement, authorization, consent, certificate and order except
where such violation, default or proceeding would not, individually or in the
aggregate, have a Material Adverse Effect.

(t)            Legal Proceedings. There are no legal or governmental proceedings
pending or, to the Company’s knowledge, threatened or contemplated to which the
Company is or would be a party or of which any of its properties is or would be
subject at law or in equity, before or by any federal, state, local or foreign
governmental or regulatory commission, board, body, authority or agency, or
before or by any self-regulatory organization or other non-governmental
regulatory authority (including, without limitation, Nasdaq), except (i) as
described in the Registration Statement, the Prospectus, and the Disclosure
Package, (ii) any such proceeding, which if resolved adversely to the Company,
would not result in a judgment, decree or order having, individually or in the
aggregate, a Material Adverse Effect or (iii) any such proceeding that would not
prevent or materially and adversely affect the ability of the Company to
consummate the transactions contemplated hereby. The Disclosure Package contains
in all material respects the same description of the foregoing matters contained
in the Prospectus.

(u)           Statutes; Contracts.  There are no statutes or regulations
applicable to the Company or contracts or other documents of the Company which
are required to be described in the Registration Statement, the Disclosure
Package or the Prospectus or filed as exhibits to the Registration Statement by
the Securities Act or by the Rules and Regulations which have not been so
described or filed.

(v)           Good Title to Property.  The Company has good and valid title to
all property (whether real or personal) described in the Registration Statement,
the Disclosure Package and the Prospectus as being owned by it, in each case
free and clear of all liens, claims, security interests, other encumbrances or
defects except such as are described in the Registration Statement, the
Disclosure Package and the Prospectus and those that would not, individually or
in the aggregate materially affect the value of such property and do not
materially interfere with the use made and proposed to be made of such property
by the Company.  All of the property described in the Registration Statement,
the Disclosure Package and the Prospectus as being held under lease by the
Company is held thereby under valid, subsisting and enforceable leases, without
any liens, restrictions, encumbrances or claims, except those that, individually
or in the aggregate, are not material and do not materially interfere with the
use made and proposed to be made of such property by the Company.

(w)          Intellectual Property Rights.  The Company owns, or has obtained
valid and enforceable licenses for, or other rights to use, the inventions,
patent applications, patents, trademarks (both registered and unregistered),
tradenames, copyrights, trade secrets and other proprietary information
described in the Registration Statement, the Disclosure Package and the
Prospectus as being owned or licensed by it or which are necessary for the
conduct of its business, except where the failure to own, license or have such
rights would not, individually or in the aggregate, result in a Material Adverse
Effect (collectively, “Intellectual Property”); except as described in the
Registration Statement, the Disclosure Package and the Prospectus (i) there are
no third parties who have or, to the Company’s knowledge, will be able to
establish rights to any Intellectual Property, except for the ownership rights
of the owners of the Intellectual Property which is licensed to the Company;
(ii) to the Company’s knowledge, there is no infringement by third parties of
any Intellectual Property; (iii) there is no pending or, to the Company’s
knowledge, threatened action, suit, proceeding or claim by others challenging
the Company’s rights in or to, or the validity, enforceability, or scope of, any
Intellectual Property owned by or licensed to the Company, and the Company is
unaware of any facts which could form a reasonable basis for any such claim;
(iv) there is no pending or, to the Company’s knowledge, threatened action,
suit, proceeding or claim by others that the Company infringes or otherwise
violates any patent, trademark, copyright, trade secret or other proprietary
rights of others, and the Company is unaware of any facts which could form a
reasonable basis for any such claim; (v) to the Company’s knowledge, there is no
patent or patent

9

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application that contains claims that interfere with the issued or pending
claims of any of the Intellectual Property; and (vi) to the Company’s knowledge,
each issued patent was validly issued under the laws of the country that issued
it.

(x)            Financial Statements.  The financial statements of the Company,
together with the related schedules and notes thereto, set forth or incorporated
by reference in the Registration Statement, the Disclosure Package and the
Prospectus comply in all material respects with the applicable requirements of
the Securities Act and the Exchange Act, as applicable, and present fairly in
all material respects (i) the financial condition of the Company, taken as a
whole, as of the dates indicated and (ii) the consolidated results of
operations, stockholders’ equity and changes in cash flows of the Company, taken
as a whole, for the periods therein specified; and such financial statements and
related schedules and notes thereto have been prepared in conformity with United
States generally accepted accounting principles, consistently applied throughout
the periods involved (except as otherwise stated therein and subject, in the
case of unaudited financial statements, to the absence of footnotes and normal
year-end adjustments).  There are no other financial statements (historical or
pro forma) that are required to be included in the Registration Statement, the
Disclosure Package and the Prospectus; and the Company does not have any
material liabilities or obligations, direct or contingent (including any
off-balance sheet obligations), not disclosed in the Registration Statement, the
Disclosure Package and the Prospectus; and all disclosures contained in the
Registration Statement, the Disclosure Package and the Prospectus regarding
“non-GAAP financial measures” (as such term is defined by the rules and
regulations of the Commission) comply with Regulation G of the Exchange Act and
Item 10(e) of Regulation S-K of the Commission, to the extent applicable, and
present fairly the information shown therein and the Company’s basis for using
such measures.

(y)           Independent Accountants.  To the Company’s knowledge, KPMG LLP,
who have certified certain of the financial statements of the Company, is (i) an
independent public accounting firm within the meaning of the Securities Act and
the Rules and Regulations, (ii) a registered public accounting firm (as defined
in Section 2(a)(12) of the Sarbanes-Oxley Act of 2002 (the “Sarbanes-Oxley
Act”)), and (iii) not in violation of the auditor independence requirements of
the Sarbanes-Oxley Act.

(z)            Taxes.  The Company has timely filed all federal, state, local
and foreign income and franchise tax returns (or timely filed applicable
extensions therefore) that have been required to be filed and are not in default
in the payment of any taxes which were payable pursuant to said returns or any
assessments with respect thereto, other than any which the Company is contesting
in good faith and for which adequate reserves have been provided and reflected
in the Company’s financial statements included in the Registration Statement,
the Disclosure Package and the Prospectus.  The Company does not have any tax
deficiency that has been or, to the knowledge of the Company, might be asserted
or threatened against it that would result in a Material Adverse Effect.

(aa)         Nasdaq; Exchange Act Registration.  The Common Stock  is registered
pursuant to Section 12(b) or 12(g) of the Exchange Act and is accepted for
quotation on the Nasdaq Global Market, and the Company has taken no action
designed to, or likely to have the effect of, termination the registration of
the Common Stock under the Exchange Act or delisting the Common Stock from the
Nasdaq Global Market, nor has the Company received any notification that the
Commission or the NASD is contemplating terminating such registration or
listing. The Company has complied in all material respects with the applicable
requirements of the Nasdaq Global Market for maintenance of inclusion of the
Common Stock thereon.  The Company has filed an application to include the
Shares and Warrant Shares on the Nasdaq Global Market.

(bb)         Accounting Controls.  The Company maintains a system of internal
accounting controls sufficient to provide reasonable assurances that
(i) transactions are executed in accordance with

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management’s general or specific authorization; (ii) transactions are recorded
as necessary to permit preparation of financial statements in conformity with
generally accepted accounting principles 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.  Except as described in the
Registration Statement, in the Disclosure Package and in the Prospectus, since
the most recent audit of the effectiveness of the Company’s internal control
over financial reporting, there has been (i) no material weakness in the
Company’s internal control over financial reporting (whether or not remediated)
and (ii) no change in the Company’s internal control over financial reporting
that has materially affected, or is reasonably likely to materially affect, the
Company’s internal control over financial reporting.

(cc)         Disclosure Controls.  The Company has established, maintains and
evaluates “disclosure controls and procedures” (as such term is defined in
Rule 13a-15(e) and 15d-15(e) under the Exchange Act), which (i) are designed to
ensure that material information relating to the Company is made known to the
Company’s principal executive officer and its principal financial officer by
others within those entities, particularly during the periods in which the
periodic reports required under the Exchange Act are being prepared, (ii) have
been evaluated for effectiveness as of the end of the last fiscal period covered
by the Registration Statement; and (iii) such disclosure controls and procedures
are effective to perform the functions for which they were established. There
are no significant deficiencies and material weaknesses in the design or
operation of internal controls which could adversely affect the Company’s
ability to record, process, summarize, and report financial data to management
and the Board of Directors. The Company is not aware of any fraud, whether or
not material, that involves management or other employees who have a role in the
Company’s internal controls; and since the date of the most recent evaluation of
such disclosure controls and procedures, there have been no significant changes
in internal controls or in other factors that could significantly affect
internal controls, including any corrective actions with regard to significant
deficiencies and material weaknesses.

(dd)         Sarbanes-Oxley Act.  The Company, and to its knowledge after due
inquiry, all of the Company’s directors or officers, in their capacities as
such, is in compliance in all material respects with all applicable effective
provisions of the Sarbanes-Oxley Act and any related rules and regulations
promulgated by the Commission.

(ee)         Minute Books.      The minute books of the Company and each
Subsidiary have been made available to the Placement Agent and counsel for the
Placement Agent, and such books (i) contain a complete summary of all meetings
and actions of the board of directors (including each board committee) and
shareholders of the Company (or analogous governing bodies and interest holders,
as applicable), and each Subsidiary since the time of its respective
incorporation or organization through the date of the latest meeting and action,
and (ii) accurately in all material respects reflect all transactions referred
to in such minutes.

(ff)           Not an Investment Company.  The Company is not, nor after giving
effect to the offering and sale of the Securities and the application of the
proceeds thereof as described in the Prospectus, will be, (i) required to
register as an “investment company” as defined in the Investment Company Act of
1940, as amended (the “ Investment Company Act “), and the rules and regulations
of the Commission thereunder or (ii) a “business development company” (as
defined in Section 2(a)(48) of the Investment Company Act).

(gg)         Insurance.  The Company maintains insurance in such amounts and
covering such risks as is reasonably considered to be adequate for the conduct
of its business and the value of its properties and as is customary for
companies engaged in similar businesses in similar industries.  All such
insurance is fully in force on the date hereof and will be fully in force as of
the Closing Date.  The Company has no reason to believe that it will not be able
to renew its existing insurance coverage as and

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when such coverage expires or to obtain similar coverage from similar insurers
as may be necessary to continue its business at a cost that would not have a
Material Adverse Effect.

(hh)         Brokers Fees.  Except as set forth on Schedule 2(hh) attached
hereto, the Company is not a party to any contract, agreement or understanding
with any person (other than this Agreement) that would give rise to a valid
claim against the Company or the Placement Agent for a brokerage commission,
finder’s fee or other like payment in connection with the offering and sale of
the Securities.

(ii)           Integration.          The Company has not sold or issued any
securities that would be integrated with the offering of the Securities
contemplated by this Agreement pursuant to the Securities Act, the Rules and
Regulations or the interpretations thereof by the Commission.

(jj)           Corrupt Practices.  Neither the Company nor, to the Company’s
knowledge, any other person associated with or acting on behalf of the Company,
including without limitation any director, officer, agent or employee of the
Company has, directly or indirectly, while acting on behalf of the Company (i)
used any corporate funds for unlawful contributions, gifts, entertainment or
other unlawful expenses relating to political activity, (ii) made any unlawful
payment to foreign or domestic government officials or employees or to foreign
or domestic political parties or campaigns from corporate funds, (iii) violated
any provision of the Foreign Corrupt Practices Act of 1977, as amended or (iv)
made any other unlawful payment.

(kk)         Critical Accounting Policies.           The section entitled
“Management’s Discussion and Analysis of Financial Condition and Results of
Operations—Critical Accounting Policies” in the Company’s most recent Annual
Report on Form 10-K and Quarterly Report on Form 10-Q accurately and fully
describes (A) the accounting policies that the Company believes are the most
important in the portrayal of the Company’s financial condition and results of
operations and that require management’s most difficult, subjective or complex
judgments (“Critical Accounting Policies”); and (B) the judgments and
uncertainties affecting the application of Critical Accounting Policies.

(ll)           No Price Stabilization.  Neither the Company nor, to the
Company’s knowledge, any of its officers, directors, affiliates or controlling
persons has taken or will take, directly or indirectly, any action designed to
cause or result in, or which has constituted or which might reasonably be
expected to constitute the stabilization or manipulation of the price of any
security of the Company to facilitate the sale or resale of the Securities.

(mm)       No Undisclosed Relationships.  No relationship, direct or indirect,
exists between or among the Company on the one hand and the directors, officers,
stockholders, customers or suppliers of the Company on the other hand which is
required to be described in the Registration Statement, the Disclosure Package
and the Prospectus which has not been so described.

(nn)         Exchange Act Requirements. The Company has filed in a timely manner
all reports required to be filed pursuant to Sections 13(a), 13(e), 14 and 15(d)
of the Exchange Act during the preceding 12 months (except to the extent that
Section 15(d) requires reports to be filed pursuant to Sections 13(d) and 13(g)
of the Exchange Act, which shall be governed by the next clause of this
sentence); and the Company has filed in a timely manner all reports required to
be filed pursuant to Sections 13(d) and 13(g) of the Exchange Act since January
1, 2003, except where the failure to timely file could not reasonably be
expected individually or in the aggregate to have a Material Adverse Effect.

(oo)         NASD Affiliations.  To the Company’s knowledge, there are no
affiliations or associations between (i) any member of the NASD and (ii) the
Company or any of the Company’s

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officers, directors or 5% or greater securityholders (other than Neil Gagnon and
Gagnon Securities LLC) or any beneficial owner of the Company’s unregistered
equity securities that were acquired from the Company at any time on or after
the one hundred eightieth (180th) day immediately preceding the date the
Registration Statement was initially filed with the Commission, except as set
forth in the Registration Statement, the Disclosure Package and the Prospectus.

(pp)         Compliance with Environmental Laws.  The Company (a) is in
compliance with any and all applicable foreign, federal, state and local laws,
orders, rules, regulations, directives, decrees and judgments relating to the
protection of human health and safety, the environment or hazardous or toxic
substances or wastes, pollutants or contaminants (“Environmental Laws”), (b) has
received all permits, licenses or other approvals required of them under
applicable Environmental Laws to conduct its business and (c) is in compliance
with all terms and conditions of any such permit, license or approval, except
where such noncompliance with Environmental Laws, failure to receive required
permits, licenses or other approvals or failure to comply with the terms and
conditions of such permits, licenses or approvals would not, individually or in
the aggregate, result in a Material Adverse Effect.  There are no costs or
liabilities associated with Environmental Laws (including, without limitation,
any capital or operating expenditures required for clean-up, closure of
properties or compliance with Environmental Laws or any permit, license or
approval, any related constraints on operating activities and any potential
liabilities to third parties) which would, individually or in the aggregate,
result in a Material Adverse Effect.

(qq)         No Labor Disputes.  The Company is not engaged in any unfair labor
practice; except for matters that would not, individually or in the aggregate,
result in a Material Adverse Effect  (i) there is (A) no unfair labor practice
complaint pending or, to the Company’s knowledge after due inquiry, threatened
against the Company before the National Labor Relations Board, and no grievance
or arbitration proceeding arising out of or under collective bargaining
agreements is pending or threatened, (B) no strike, labor dispute, slowdown or
stoppage pending or, to the Company’s knowledge after due inquiry, threatened
against the Company and (C) no union representation dispute currently existing
concerning the employees of the Company, and (ii) to the Company’s knowledge
(A) no union organizing activities are currently taking place concerning the
employees of the Company and (B) there has been no violation of any federal,
state, local or foreign law relating to discrimination in the hiring, promotion
or pay of employees or any applicable wage or hour laws concerning the employees
of the Company.

(rr)           ERISA.  The Company is in compliance in all material respects
with all presently applicable provisions of the Employee Retirement Income
Security Act of 1974, as amended, including the regulations and published
interpretations thereunder (“ERISA”); no “reportable event” (as defined in
ERISA) has occurred with respect to any “pension plan” (as defined in ERISA) for
which the Company would have any liability; the Company has not incurred and
does not expect to incur liability under (i) Title IV of ERISA with respect to
termination of, or withdrawal from, any “pension plan” or (ii) Sections 412 or
4971 of the Internal Revenue Code of 1986, as amended, including the regulations
and published interpretations thereunder (the “Code”); and each “pension plan”
for which the Company would have any liability that is intended to be qualified
under Section 401(a) of the Code is so qualified in all material respects and
nothing has occurred, whether by action or by failure to act, which would cause
the loss of such qualification.

(ss)         Statistical or Market-Related Data.  Any statistical,
industry-related and market-related data included or incorporated by reference
in the Registration Statement, the Disclosure Package and the Prospectus, are
based on or derived from sources that the Company reasonably and in good faith
believes to be reliable and accurate, and such data agree with the sources from
which they are derived.

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(tt)           Clinical Studies.  The clinical, pre-clinical and other studies
and tests conducted by or on behalf of or sponsored by the Company or in which
the Company or products or product candidates have participated that are
described in the Registration Statement, the Disclosure Package and the
Prospectus were and, if still pending, are being conducted in accordance in all
material respects with all statutes, laws, rules and regulations, as applicable
(including, without limitation, those administered by the FDA or by any foreign,
federal, state or local governmental or regulatory authority performing
functions similar to those performed by the FDA) and with standard medical and
scientific research procedures.  The descriptions in the Registration Statement,
the Disclosure Package and the Prospectus of the results of such studies and
tests are accurate and complete in all material respects and fairly present the
published data derived from such studies and tests.  The Company has not
received any notices or other correspondence from the FDA or any other foreign,
federal, state or local governmental or regulatory authority performing
functions similar to those performed by the FDA with respect to any ongoing
clinical or pre-clinical studies or tests requiring the termination, suspension
or material modification of such studies or tests, which such termination,
suspension or material modification would reasonably be expected to result in a
Material Adverse Effect.  The Company is in compliance with all applicable
federal, state, local and foreign laws, regulations, orders and decrees
governing its business as prescribed by the FDA, or any other federal, state or
foreign agencies or bodies, including those bodies and agencies engaged in the
regulation of pharmaceuticals or biohazardous substances or materials, except
where noncompliance would not, singly or in the aggregate, result in a Material
Adverse Effect.

Any certificate signed by any officer of the Company and delivered to the
Placement Agent or to counsel for the Placement Agent in connection with the
offering of the Securities shall be deemed a representation and warranty by the
Company to the Placement Agent and the Investors as to the matters covered
thereby.

3.             Covenants.         The Company covenants and agrees with the
Placement Agent as follows:

(a)           Reporting Obligations; Exchange Act Compliance.  The Company will
(i) prepare the Prospectus in a form approved by the Placement Agent containing
information previously omitted at the time of effectiveness of the Registration
Statement in reliance on Rules 430A, 430B and 430C and to file such Prospectus
with the Commission within the time periods specified by Rule 424(b) and Rules
430A and 430B, as applicable under the Securities Act, (ii) not file any
amendment to the Registration Statement or distribute an amendment or supplement
to the Disclosure Package or the Prospectus or document incorporated by
reference therein of which the Placement Agent shall not previously have been
advised and furnished with a copy or to which the Placement Agent shall have
reasonably objected in writing or which is not in compliance with the Rules and
Regulations and (iii) promptly file all reports and any definitive proxy or
information statements required to be filed by the Company with the Commission
pursuant to Section 13(a), 13(c), 14 or 15(d) of the Exchange Act subsequent to
the date of the Prospectus and during such period as the Prospectus would be
required by law to be delivered  (whether physically or through compliance with
Rule 172 under the Securities Act or any similar rule) (the “Prospectus Delivery
Period”).

(b)           Abbreviated Registration Statement.  If the Company elects to rely
upon Rule 462(b) under the Securities Act, the Company shall file a registration
statement under Rule 462(b) with the Commission in compliance with Rule 462(b)
by 8:00 a.m., Washington, D.C. time, on the business day next succeeding the
date of this Agreement, and the Company shall at the time of filing either pay
to the Commission the filing fee for such Rule 462(b) registration statement or
give irrevocable instructions for the payment of such fee pursuant to the Rules
and Regulations.

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(c)           Issuer Free Writing Prospectuses.  The Company will (i) not make
any offer relating to the Securities that would constitute an Issuer Free
Writing Prospectus or that would otherwise constitute a “free writing
prospectus” (as defined in Rule 405 under the Securities Act) required to be
filed by the Company with the Commission under Rule 433 under the Securities Act
unless the Placement Agent approves its use in writing prior to first use (each,
a “Permitted Free Writing Prospectus”); provided that the prior written consent
of the Placement Agent hereto shall be deemed to have been given in respect of
the Issuer Free Writing Prospectus(es) included in Schedule I hereto, (ii) treat
each Permitted Free Writing Prospectus as an Issuer Free Writing Prospectus,
(iii) comply with the requirements of Rules 164 and 433 under the Securities Act
applicable to any Issuer Free Writing Prospectus, including the requirements
relating to timely filing with the Commission, legending and record keeping and
(iv) not take any action that would result in a Placement Agent or the Company
being required to file with the Commission pursuant to Rule 433(d) under the
Securities Act a free writing prospectus prepared by or on behalf of such
Placement Agent that such Placement Agent otherwise would not have been required
to file thereunder. The Company will satisfy the conditions in Rule 433 under
the Securities Act to avoid a requirement to file with the Commission any
electronic road show.

(d)           Final Term Sheet. The Company has prepared or will prepare a final
term sheet (the “Final Term Sheet”) reflecting the final terms of the
Securities, in form and substance satisfactory to the Placement Agent, and shall
file such Final Term Sheet as an Issuer Free Writing Prospectus pursuant to Rule
433 under the Securities Act prior to the close of business two business days
after the date hereof; provided that the Company shall provide the Placement
Agent with copies of any such Final Term Sheet within a reasonable amount of
time prior to such proposed filing and will not use or file any such document to
which the Placement Agent or counsel to the Placement Agent shall reasonably
object.

(e)           Notice to Placement Agent.  The Company will notify the Placement
Agent promptly, and will, if requested, confirm such notification in writing:
(i) of the receipt of any comments of, or requests for additional or
supplemental information from, the Commission; (ii) of the time and date of any
filing of any post-effective amendment to the Registration Statement or any
amendment or supplement to any Preliminary Prospectus, the Disclosure Package or
the Prospectus, (iii) the time and date when any post-effective amendment to the
Registration Statement becomes effective, but only during the Prospectus
Delivery Period; (iv) of the issuance by the Commission of any stop order
suspending the effectiveness of the Registration Statement, or any
post-effective amendment thereto or any order preventing or suspending the use
of any Preliminary Prospectus, the Disclosure Package, the Prospectus or any
Issuer Free Writing Prospectus, or the initiation of any proceedings for that
purpose or pursuant to Section 8A of the Securities Act or the threat thereof,
but only during the Prospectus Delivery Period; (v) of receipt by the Company of
any notification with respect to any suspension or the approval of the Shares
and Warrant Shares from any securities exchange upon which it is listed for
trading or included or designated for quotation, or the initiation or
threatening of any proceeding for such purpose.   The Company will use its
reasonable best efforts to prevent the issuance or invocation of any such stop
order or suspension by the Commission and, if any such stop order or suspension
is so issued or invoked, to obtain as soon as possible the withdrawal or removal
thereof.

(f)            Filing of Amendments or Supplements. If, during the Prospectus
Delivery Period, any event shall occur or condition exist as a result of which,
in the judgment of the Company or in the reasonable opinion of the Placement
Agent, it becomes necessary to amend or supplement the Prospectus (or, if the
Prospectus is not yet available to prospective purchasers, the Disclosure
Package) in order to make the statements therein, in the light of the
circumstances when the Prospectus (or, if the Prospectus is not yet available to
prospective purchasers, the Disclosure Package) is delivered to an Investor, not
misleading, or if it is necessary to amend or supplement the Prospectus (or, if
the Prospectus is not yet available to prospective purchasers, the Disclosure
Package) to comply with applicable law, forthwith to prepare, file with the
Commission and furnish, at its own expense, to the Placement Agent, either

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amendments or supplements to the Prospectus (or, if the Prospectus is not yet
available to prospective purchasers, the Disclosure Package) so that the
statements in the Prospectus (or, if the Prospectus is not yet available to
prospective purchasers, the Disclosure Package) as so amended or supplemented
will not, in the light of the circumstances when the Prospectus (or, if the
Prospectus is not yet available to prospective purchasers, the Disclosure
Package) is delivered to an Investor, be misleading or so that the Prospectus
(or, if the Prospectus is not yet available to prospective purchasers, the
Disclosure Package), as amended or supplemented, will comply with law.

(g)           Conflicting Issuer Free Writing Prospectus.  If at any time
following issuance of an Issuer Free Writing Prospectus there occurred or occurs
an event or development as a result of which such Issuer Free Writing Prospectus
conflicted or would conflict with the information contained in the Registration
Statement relating to the Securities or included or would include an untrue
statement of a material fact or omitted or would omit to state a material fact
necessary in order to make the statements therein, in the light of the
circumstances prevailing at that subsequent time, not misleading, the Company
promptly will notify the Placement Agent and will promptly amend or supplement,
at its own expense, such Issuer Free Writing Prospectus to eliminate or correct
such conflict, untrue statement or omission.

(h)           Delivery of Copies.  The Company will deliver promptly to the
Placement Agent and its counsel such number of the following documents as the
Placement Agent shall reasonably request:  (i) conformed copies of the
Registration Statement as originally filed with the Commission and each
amendment thereto (in each case excluding exhibits), (ii) copies of each
Preliminary Prospectus, if any; (iii) any Issuer Free Writing Prospectus, (iv)
during the Prospectus Delivery Period, copies of the Prospectus (or any
amendments or supplements thereto); (v) any document incorporated by reference
in the Prospectus (other than any such document that is filed with the
Commission electronically via EDGAR or any successor system) and (vi) all
correspondence to and from, and all documents issued to and by, the Commission
in connection with the registration of the Securities under the Securities Act.

(i)            Blue Sky Laws.  The Company will promptly take or cause to be
taken, from time to time, such actions as the Placement Agent may reasonably
request to qualify the Securities for offering and sale under the state
securities, or blue sky, laws of such states or other jurisdictions as the
Placement Agent may reasonably request and to maintain such qualifications in
effect so long as the Placement Agent may request for the distribution of the
Securities, provided, that in no event shall the Company be obligated to qualify
as a foreign corporation in any jurisdiction in which it is not so qualified or
to file a general consent to service of process in any jurisdiction or subject
itself to taxation as doing business in any jurisdiction.  The Company will
advise the Placement Agent promptly of the suspension of the qualification or
registration of (or any exemption relating to) the Securities for offering, sale
or trading in any jurisdiction or any initiation or threat of any proceeding for
any such purpose, and in the event of the issuance of any order suspending such
qualification, registration or exemption, the Company shall use its best efforts
to obtain the withdrawal thereof at the earliest possible moment.

(j)            Earnings Statement.  As soon as practicable, but in any event not
later than 18 months after the effective date of the Registration Statement (as
defined in Rule 158(c) under the Securities Act), the Company will make
generally available to holders of its securities and deliver to the Placement
Agent, an earnings statement of the Company (which need not be audited) that
will satisfy the provisions of Section 11(a) of the Securities Act and Rule 158
of the Rules and Regulations.

(k)           Use of Proceeds.  The Company will apply the net proceeds from the
sale of the Securities in the manner set forth in the Disclosure Package and the
Prospectus under the heading “Use of Proceeds”.

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(l)            Lock-Up Period.  Beginning on the date hereof and continuing for
a period of 90 days after the date of the Prospectus (the “Lock-Up Period”), the
Company will not (1) offer to sell, hypothecate, pledge, announce the intention
to sell, sell, contract to sell, sell any option or contract to purchase,
purchase any option or contract to sell, grant any option, right or warrant to
purchase or otherwise transfer or dispose of, directly or indirectly, or
establish or increase a put equivalent position or liquidate or decrease a call
equivalent position within the meaning of Section 16 of the Exchange Act, with
respect to, any shares of Common Stock, any securities convertible into or
exercisable or exchangeable for Common Stock; (2) file or cause to become
effective a registration statement under the Securities Act relating to the
offer and sale of any shares of Common Stock or securities convertible into or
exercisable or exchangeable for Common Stock except for a registration statement
on Form S-8 relating to employee benefit plans or (3) enter into any swap or
other agreement that transfers, in whole or in part, any of the economic
consequences of ownership of the Common Stock, whether any such transaction
described in clause (i), (ii) or (iii) above is to be settled by delivery of
Common Stock or such other securities, in cash or otherwise, without the prior
written consent of the Placement Agent (which consent may be withheld in its
sole discretion), other than (i) the Securities to be sold hereunder, (ii) the
issuance of employee stock options pursuant to stock option plans described in
the Registration Statement (excluding the exhibits thereto), the Disclosure
Package and the Prospectus, (iii) issuances of Common Stock upon the exercise of
options or warrants (either upon current terms thereof or upon subsequently
amended terms but excluding a general repricing) disclosed as outstanding in the
Registration Statement (excluding the exhibits thereto), the Disclosure Package
and the Prospectus or upon the conversion or exchange of convertible or
exchangeable securities outstanding as of the date of this Agreement; (iv) the
issuance by the Company of any shares of Common Stock as consideration for
mergers, acquisitions, other business combinations, or strategic alliances,
occurring after the date of this Agreement; provided that each recipient of
shares pursuant to this clause (iv) agrees that all such shares remain subject
to restrictions substantially similar to those contained in this Section 3(l);
or (v) the purchase or sale of the Company’s securities pursuant to a plan,
contract or instruction that satisfies all of the requirements of Rule
10b5-1(c)(1)(i)(B) that was in effect prior to the date hereof.  Notwithstanding
the foregoing, for the purpose of allowing the Placement Agent to comply with
NASD Rule 2711(f)(4), if (1) during the last 17 days of the Lock-Up Period, the
Company releases earnings results or publicly announces other material news or a
material event relating to the Company occurs or (2) prior to the expiration of
the Lock-Up Period, the Company announces that it will release earnings results
during the 16 day period beginning on the last day of the Lock-Up Period, then
in each case the Lock-Up Period will be extended until the expiration of the 18
day period beginning on the date of release of the earnings results or the
public announcement regarding the material news or the occurrence of the
material event, as applicable, unless the Placement Agent waives, in writing,
such extension.  The Company agrees not to accelerate the vesting of any option
or warrant or the lapse of any repurchase right prior to the expiration of the
Lock-Up Period.

(m)          Lock-Up Agreements.  The Company will cause each of its executive
officers and directors whose names are set forth on Exhibit C hereto to furnish
to the Placement Agent, on the date hereof, a letter, substantially in the form
of Exhibit B hereto (the “Lock-Up Agreement”).  The Company will enforce the
terms of each Lock-Up Agreement and issue stop transfer instructions to the
transfer agent for the Common Stock with respect to any transaction or
contemplated transaction that would constitute a breach or default under the
applicable Lock-Up Agreement.

(n)           Public Communications.  Prior to the Closing Date, the Company
will not issue any press release or other communication directly or indirectly
or hold any press conference with respect to the Company, its condition,
financial or otherwise, or its earnings, business, operations or prospects, or
the offering of the Securities, without the prior written consent of the
Placement Agent, unless in the reasonable judgment of the Company and its
counsel, and after notification to the Placement Agent, such press release or
communication is required by law or by Nasdaq rules, in which case the Company
shall

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use its reasonable best efforts to allow the Placement Agent reasonable time to
comment on such release or other communication in advance of such issuance.

(o)           Stabilization.  The Company will not take, directly or indirectly,
any action designed, or that might reasonably be expected to cause or result in,
or that will constitute, stabilization or manipulation of the price of any
security of the Company to facilitate the sale or resale of any of the
Securities.

(p)           Transfer Agent.  The Company shall engage and maintain, at its
expense, a transfer agent and, if necessary under the jurisdiction of
incorporation of the Company, a registrar for the Shares and Warrant Shares.

(q)           Listing.  The Company shall use its commercially reasonable
efforts to cause the Shares and Warrant Shares to be listed for quotation on the
Nasdaq Global Market at the Closing Date and to maintain such listing.

(r)            Investment Company Act.  The Company shall not invest, or
otherwise use the proceeds received by the Company from its sale of the
Securities in such a manner as would require the Company to register as an
investment company under the Investment Company Act.

(s)           Broker’s Fee. The Company will not incur any liability for any
finder’s or broker’s fee or agent’s commission in connection with the execution
and delivery of this Agreement or the consummation of the transactions
contemplated hereby (other than as set forth in this Agreement and as set forth
on Schedule 2(hh) attached hereto).

(t)            Interim Financial Statements. Prior to the Closing Date, the
Company will furnish to the Placement Agent, as soon as practicable after they
have been prepared, copies of any unaudited interim consolidated financial
statements of the Company for any periods subsequent to the periods covered by
the financial statements appearing in the Registration Statement and the
Prospectus.

(u)           Reservation of Warrant Shares.  The Company shall reserve and keep
available at all times a sufficient number of shares of Common Stock for the
purpose of enabling the Company to issue the Warrant Shares.

(v)           Performance. The Company shall use its best efforts to do and
perform all things required to be done or performed under this Agreement by the
Company prior to the Closing Date and to satisfy all conditions precedent to the
delivery of the Securities.

4.             Costs and Expenses.  The Company, whether or not the transactions
contemplated hereunder are consummated or this Agreement is terminated, will pay
or reimburse if paid by the Placement Agent all reasonable costs and expenses
incident to the performance of the obligations of the Company under this
Agreement and in connection with the transactions contemplated hereby, including
but not limited to costs and expenses of or relating to (i) the preparation,
printing, filing, delivery and shipping of the Registration Statement, any
Issuer Free Writing Prospectus, each Preliminary Prospectus, the Disclosure
Package and the Prospectus, and any amendment or supplement to any of the
foregoing and the printing and furnishing of copies of each thereof to the
Placement Agent and dealers (including costs of mailing and shipment), (ii) the
registration, issue, sale and delivery of the Securities including any stock or
transfer taxes and stamp or similar duties payable upon the sale, issuance or
delivery of the Securities and the printing, delivery, and shipping of the
certificates representing the Securities, (iii) the registration or
qualification of the Securities for offer and sale under the securities or Blue
Sky laws of

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such jurisdictions designated pursuant to Section 3(i), (including the
reasonable legal fees and filing fees, and other disbursements of counsel to the
Placement Agent in connection therewith), and, if reasonably requested by the
Placement Agent, the preparation and printing and furnishing of copies of any
blue sky surveys to the Placement Agent and to dealers,  (iv) the fees and
expenses of any transfer agent or registrar for the Shares and Warrant Shares,
(v) any filings required to be made by the Placement Agent or the Company with
the NASD, and the reasonable fees, disbursements and other charges of counsel
for the Placement Agent in connection with the NASD’s review and approval of the
Placement Agent’s participation in the offering (including all COBRADesk fees),
(vi) fees, disbursements and other charges of counsel to the Company, (vii)
listing fees, if any, for the listing or quotation of the Shares and Warrant
Shares on the Nasdaq Global Market, (viii) fees and disbursements of the
Company’s auditor incurred in delivering the letter(s) described in Sections
5(j) and (k) of this Agreement, (ix) fees of the Escrow Agent, (x) fees,
disbursements and other charges of counsel to the Placement Agent (in addition
to (iii) and (v) above) in an amount not to exceed $75,000, and (xi) the costs
and expenses of the Company and the Placement Agent in connection with the
marketing of the offering and the sale of the Securities to prospective
investors including, but not limited to, those related to any presentations or
meetings undertaken in connection therewith including, without limitation,
expenses associated with the production of road show slides and graphics, fees
and expenses of any consultants engaged with the written consent of the Company
in connection with the road show presentations, travel, lodging and other
expenses incurred by the officers of the Company and any such consultants, and
the cost of any aircraft or other transportation chartered in connection with
the road show.  If this Agreement shall be terminated by the Placement Agent
pursuant to Section 8 hereof, the Company will, in addition to paying the
amounts described in Section 4 hereof, reimburse the Placement Agent for all of
its reasonable out-of-pocket disbursements (including, but not limited to, the
fees and disbursements of its counsel) incurred by the Placement Agent in
connection with its investigation, preparing to market and marketing of the
Securities or in contemplation of performing its obligations hereunder.

5.             Conditions of Placement Agent’s Obligations.  The obligations of
the Placement Agent hereunder and the Investors under the Subscription
Agreements are subject to the following conditions:

(a)           Filings with the Commission.  The Preliminary Prospectus (if any),
Prospectus and any Issuer Free Writing Prospectus required to be filed under the
Securities Act or the Rules and Regulations shall have been filed with the
Commission pursuant to Rule 424(b) or Rule 164, as the case may be, in the
manner and within the time period so required.

(b)           Abbreviated Registration Statement.  If the Company has elected to
rely upon Rule 462(b), the registration statement filed under Rule 462(b) shall
have become effective under the Securities Act by 8:00 a.m., Washington, D.C.
time, on the business day next succeeding the date of this Agreement.

(c)           No Stop Orders.  Prior to the Closing: (i) no stop order
suspending the effectiveness of the Registration Statement or any part thereof,
preventing or suspending the use of any Base Prospectus, any Preliminary
Prospectus, the Prospectus or Permitted Free Writing Prospectus or any part
thereof shall have been issued under the Securities Act and no proceedings for
that purpose or pursuant to Section 8A under the Securities Act shall have been
initiated or threatened by the Commission, (ii) no order suspending the
qualification or registration of the Securities under the securities or blue sky
laws of any jurisdiction shall be in effect and (iii) all requests for
additional information on the part of the Commission (to be included or
incorporated by reference in the Registration Statement, the Disclosure Package,
the Prospectus or any Issuer Free Writing Prospectus or otherwise) shall have
been complied with to the reasonable satisfaction of the Placement Agent.

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(d)           Action Preventing Issuance.  No action shall have been taken and
no statute, rule, regulation or order shall have been enacted, adopted or issued
by any governmental agency or body which would, as of the Closing Date, prevent
the issuance or sale of the Securities or materially and adversely affect or
reasonably be believed to potentially materially and adversely affect the
business or operations of the Company; and no injunction, restraining order or
order of any other nature by any federal or state court of competent
jurisdiction shall have been issued as of the Closing Date which would prevent
the issuance or sale of the Securities or materially and adversely affect or
reasonably be believed to potentially materially and adversely affect the
business or operations of the Company.

(e)           Objection of Placement Agent.  No Prospectus or amendment or
supplement to the Registration Statement shall have been filed to which the
Placement Agent shall have objected in writing, which objection shall not be
unreasonable.  The Placement Agent shall not have in good faith advised the
Company on or prior to the Closing Date that the Registration Statement or any
amendment thereof or supplement thereto contains an untrue statement of fact
which, in its opinion, is material, or omits to state a fact which, in its
opinion, is material and is required to be stated therein or necessary to make
the statements therein not misleading, or that the Disclosure Package or any
Issuer Free Writing Prospectus or the Prospectus or any amendment thereof or
supplement thereto contains an untrue statement of fact which, in its opinion,
is material, or omits to state a fact which, in its opinion, is material and is
required to be stated therein or necessary to make the statements therein, in
light of the circumstances under which they were made, not misleading.

(f)            No Material Adverse Change.  Prior to the Closing, there shall
not have occurred any change, or any development involving a prospective change,
in the condition, financial or otherwise, or in the earnings, business,
operations or prospects of the Company, taken as a whole, from that set forth in
the Disclosure Package and the Prospectus that, in the Placement Agent’s
judgment, is material and adverse and that makes it, in the Placement Agent’s
judgment, impracticable to market the Securities on the terms and in the manner
contemplated in the Disclosure Package.

(g)           Representations and Warranties.  Each of the representations and
warranties of the Company contained herein shall be true and correct in all
material respects (except for those representations and warranties which are
qualified by materiality, in which case such representations and warranties
shall be true and correct in all respects) when made and on and as of the
Closing Date, as if made on such date (except that those representations and
warranties that address matters only as of a particular date shall remain true
and correct in all material respects (except for those representations and
warranties which are qualified by materiality, in which case such
representations and warranties shall be true and correct in all respects) as of
such date), and all covenants and agreements herein contained to be performed on
the part of the Company and all conditions herein contained to be fulfilled or
complied with by the Company at or prior to the Closing Date shall have been
duly performed, fulfilled or complied with in all material respects.

(h)           Opinion of Counsel to the Company.  The Placement Agent shall have
received from Heller Ehrman LLP, counsel to the Company, such counsel’s written
opinion, addressed to the Placement Agent and the Investors and dated the
Closing Date, in form and substance as is set forth on Exhibit D attached
hereto.  Such counsel shall also have furnished to the Placement Agent a written
statement (“Negative Assurance”), addressed to the Placement Agent and dated the
Closing Date, in form and substance as set forth in Exhibit E attached hereto.

(i)            Opinion of Counsel to the Placement Agent.  The Placement Agent
shall have received from Lowenstein Sandler PC, counsel to the Placement Agent,
such opinion or opinions (including Negative Assurance), dated the Closing Date
and addressed to the Placement Agent, covering such matters as are customarily
covered in transactions of this type.

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(j)            Accountant’s Comfort Letter.  The Placement Agent shall have
received on the date of the Time of Sale, a letter dated the date hereof, (the
“Original Letter”), addressed to the Placement Agent and in form and substance
reasonably satisfactory to the Placement Agent and its counsel, from KPMG LLP,
which letter shall cover, without limitation, the various financial disclosures,
if any, contained in the Disclosure Package and shall contain statements and
information of the type customarily included in accountants’ “comfort letters”
to underwriters, delivered according to Statement of Auditing Standards No. 72
and Statement of Auditing Standard No. 100 (or successor bulletins), with
respect to the audited and unaudited financial statements and certain financial
information contained in or incorporated by reference into the Registration
Statement, the Disclosure Package and the Prospectus.

(k)           Bring-Down Letter.  At the Closing Date, the Placement Agent shall
have received from KPMG LLP a letter (the “Bring-Down Letter”), dated the
Closing Date, addressed to the Placement Agent, which shall confirm, as of the
date of the Bring-Down Letter (or, with respect to matters involving changes or
developments since the respective dates as of which specified financial
information is given in the Disclosure Package and the Prospectus, as the case
may be, as of a date nor more than three (3) business days prior to the date of
the Bring-Down Letter) that on the basis of a review in accordance with the
procedures set forth in the Original Letter, that nothing has come to their
attention during the period from the date of the Original Letter referred to in
the prior sentence to a date (specified in the letter) not more than three days
prior to the Closing Date which would require any change in the Original Letter
if it were required to be dated and delivered at the Closing Date.

(l)            Officer’s Certificate.  The Placement Agent shall have received
on the Closing Date a certificate, addressed to the Placement Agent and dated
the Closing Date, of the chief executive or chief operating officer and the
chief financial officer or chief accounting officer of the Company to the effect
that:

(i)            each of the representations, warranties and agreements of the
Company in this Agreement were true and correct in all material respects (except
for those representations and warranties which are qualified by materiality, in
which case such representations and warranties shall be true and correct in all
respects) when originally made and are true and correct in all material respects
(except for those representations and warranties which are qualified by
materiality, in which case such representations and warranties shall be true and
correct in all respects) as of the Time of Sale and the Closing Date; and the
Company has complied in all material respects with all agreements and satisfied
all the conditions on its part required under this Agreement to be performed or
satisfied at or prior to the Closing Date;

(II)           SUBSEQUENT TO THE RESPECTIVE DATES AS OF WHICH INFORMATION IS
GIVEN IN THE DISCLOSURE PACKAGE (TAKING INTO ACCOUNT ANY UPDATES INCLUDED WITHIN
THE DISCLOSURE PACKAGE), THERE HAS NOT BEEN (A) A MATERIAL ADVERSE CHANGE OR ANY
DEVELOPMENT INVOLVING A PROSPECTIVE MATERIAL ADVERSE CHANGE IN THE GENERAL
AFFAIRS, BUSINESS, PROSPECTS, PROPERTIES, MANAGEMENT, FINANCIAL CONDITION OR
RESULTS OF OPERATIONS OF THE COMPANY, TAKEN AS A WHOLE, (B) ANY TRANSACTION THAT
IS MATERIAL TO THE COMPANY, TAKEN AS A WHOLE, EXCEPT TRANSACTIONS ENTERED INTO
IN THE ORDINARY COURSE OF BUSINESS, (C) ANY OBLIGATION, DIRECT OR CONTINGENT,
THAT IS MATERIAL TO THE COMPANY, TAKEN AS A WHOLE, INCURRED BY THE COMPANY,
EXCEPT OBLIGATIONS INCURRED IN THE ORDINARY COURSE OF BUSINESS, (D) ANY CHANGE
IN THE CAPITAL STOCK (OTHER THAN A CHANGE IN THE NUMBER OF OUTSTANDING SHARES OF
COMMON STOCK DUE TO THE ISSUANCE OF SHARES UPON THE EXERCISE OF OUTSTANDING
OPTIONS OR WARRANTS) OR ANY MATERIAL CHANGE IN THE SHORT TERM OR LONG TERM
INDEBTEDNESS OF THE COMPANY, TAKEN AS A WHOLE, (E) ANY DIVIDEND OR DISTRIBUTION
OF ANY KIND DECLARED, PAID OR MADE ON THE CAPITAL STOCK OF THE COMPANY OR (F)
ANY LOSS OR DAMAGE (WHETHER OR NOT INSURED) TO THE PROPERTY OF THE COMPANY WHICH
HAS BEEN SUSTAINED OR WILL HAVE BEEN SUSTAINED WHICH HAS HAD OR IS REASONABLY
LIKELY TO RESULT IN A MATERIAL ADVERSE EFFECT.

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(III)          NO STOP ORDER SUSPENDING THE EFFECTIVENESS OF THE REGISTRATION
STATEMENT OR ANY PART THEREOF OR ANY AMENDMENT THEREOF OR THE QUALIFICATION OF
THE SECURITIES FOR OFFERING OR SALE, NOR SUSPENDING OR PREVENTING THE USE OF THE
DISCLOSURE PACKAGE, THE PROSPECTUS OR ANY ISSUER FREE WRITING PROSPECTUS SHALL
HAVE BEEN ISSUED, AND NO PROCEEDINGS FOR THAT PURPOSE OR PURSUANT TO SECTION 8A
UNDER THE SECURITIES ACT SHALL BE PENDING OR TO THEIR KNOWLEDGE, THREATENED BY
THE COMMISSION OR ANY STATE OR REGULATORY BODY; AND

(IV)          THE SIGNERS OF SAID CERTIFICATE HAVE REVIEWED THE REGISTRATION
STATEMENT, THE DISCLOSURE PACKAGE, ANY PERMITTED FREE WRITING PROSPECTUS AND THE
PROSPECTUS, AND ANY AMENDMENTS THEREOF OR SUPPLEMENTS THERETO (AND ANY DOCUMENTS
FILED UNDER THE EXCHANGE ACT AND DEEMED TO BE INCORPORATED BY REFERENCE INTO THE
DISCLOSURE PACKAGE AND THE PROSPECTUS), AND (A) (I) EACH PART OF THE
REGISTRATION STATEMENT AND ANY AMENDMENT THEREOF DO NOT AND DID NOT CONTAIN WHEN
THE REGISTRATION STATEMENT (OR SUCH AMENDMENT) BECAME EFFECTIVE, ANY UNTRUE
STATEMENT OF A MATERIAL FACT OR OMIT TO STATE, AND DID NOT OMIT TO STATE WHEN
THE REGISTRATION STATEMENT (OR SUCH AMENDMENT) BECAME EFFECTIVE, ANY MATERIAL
FACT REQUIRED TO BE STATED THEREIN OR NECESSARY TO MAKE THE STATEMENTS THEREIN
NOT MISLEADING, (II) AS OF THE TIME OF SALE, NEITHER THE DISCLOSURE PACKAGE NOR
ANY INDIVIDUAL ISSUER FREE WRITING PROSPECTUS, WHEN CONSIDERED TOGETHER WITH THE
DISCLOSURE PACKAGE, CONTAINED ANY UNTRUE STATEMENT OF MATERIAL FACT OR OMITS TO
STATE ANY MATERIAL FACT NECESSARY TO MAKE THE STATEMENTS THEREIN, IN LIGHT OF
THE CIRCUMSTANCES UNDER WHICH THEY WERE MADE, NOT MISLEADING AND (III) THE
PROSPECTUS, AS AMENDED OR SUPPLEMENTED, DOES NOT CONTAIN, AS OF THE CLOSING
DATE, AND DID NOT CONTAIN, AS OF ITS ISSUE DATE, ANY UNTRUE STATEMENT OF
MATERIAL FACT OR OMIT TO STATE AND DID NOT OMIT TO STATE AS OF SUCH DATE, A
MATERIAL FACT NECESSARY TO MAKE THE STATEMENTS THEREIN, IN LIGHT OF THE
CIRCUMSTANCES UNDER WHICH THEY WERE MADE, NOT MISLEADING, AND (B) SINCE THE TIME
OF SALE, THERE HAS OCCURRED NO EVENT REQUIRED TO BE SET FORTH IN AN AMENDMENT OR
SUPPLEMENT TO THE REGISTRATION STATEMENT, THE DISCLOSURE PACKAGE OR THE
PROSPECTUS WHICH HAS NOT BEEN SO SET FORTH AND THERE HAS BEEN NO DOCUMENT
REQUIRED TO BE FILED UNDER THE EXCHANGE ACT THAT UPON SUCH FILING WOULD BE
DEEMED TO BE INCORPORATED BY REFERENCE IN TO THE DISCLOSURE PACKAGE AND INTO THE
PROSPECTUS THAT HAS NOT BEEN SO FILED.

(m)          Secretary’s Certificate.  On the Closing Date, the Company shall
have furnished to the Placement Agent a Secretary’s Certificate of the Company.

(n)           The Nasdaq Global Market.  The Shares and Warrant Shares shall
have been listed and authorized for trading on the Nasdaq Global Market.

(o)           Other Filings with the Commission.  The Company shall have
prepared and filed with the Commission a Current Report on Form 8-K with respect
to the transactions contemplated hereby, and filed with the Commission including
as an exhibit thereto this Agreement and any other material documents relating
thereto.

(p)           No NASD Objection.  The NASD shall not have raised any unresolved
objection with respect to the fairness and reasonableness of the placement
agency terms and arrangements relating to the issuance and sale of the
Securities.

(q)           Lock-Up Agreements.  The Placement Agent shall have received
copies of the executed Lock-Up Agreements executed by each person listed on
Exhibit C hereto, and such Lock-Up Agreements shall be in full force and effect
on the Closing Date.

(r)            Subscription Agreements.  The Placement Agent shall have entered
into the Subscription Agreements with each of the Investors, and such agreements
shall be in full force and effect on the Closing Date.

 

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(s)           Escrow Agreement.  The Placement Agent shall have entered into the
Escrow Agreement, and such agreement shall be in full force and effect on the
Closing Date.

(t)            Additional Documents.  Prior to the Closing Date, the Company
shall have furnished to the Placement Agent such further information,
certificates or documents as the Placement Agent shall have reasonably
requested.

All opinions, letters, evidence and certificates mentioned above or elsewhere in
this Agreement shall be deemed to be in compliance with the provisions hereof
only if they are in form and substance reasonably satisfactory to counsel for
the Placement Agent.

6.             INDEMNIFICATION AND CONTRIBUTION.

(a)           Indemnification of the Placement Agent.  The Company agrees to
indemnify, defend and hold harmless the Placement Agent, its directors and
officers, and each person, if any, who controls the Placement Agent within the
meaning of either Section 15 of the Securities Act or Section 20 of the Exchange
Act, and the successors and assigns of all of the foregoing persons, from and
against any loss, damage, claim or liability, which, jointly or severally, the
Placement Agent or any such person may become subject under the Securities Act,
the Exchange Act, or other federal or state statutory law or regulation, the
common law or otherwise, (including in settlement of any litigation, if such
settlement is effected with the written consent of the Company), insofar as such
loss, damage, claim or liability (or actions in respect thereof as contemplated
below) arises out of or is based upon: (i) any untrue statement or alleged
untrue statement of a material fact contained in the Registration Statement, or
any amendment thereto (including the information deemed to be a part of the
Registration Statement at the time of effectiveness and at any subsequent time
pursuant to Rules 430A and 430B of the Rules and Regulations, if applicable) or
the omission or alleged omission to state a material fact required to be stated
therein or necessary to make the statements therein not misleading; (ii) any
untrue statement or alleged untrue statement of a material fact contained in the
Base Prospectus, any Preliminary Prospectus, any Issuer Free Writing Prospectus,
any “issuer information” filed or required to be filed pursuant to Rule 433(d)
of the Rules and Regulations or the Prospectus (or any amendment or supplement
thereto including any documents filed under the Exchange Act and deemed to be
incorporated by reference into the Prospectus), or in any materials or
information provided to investors by, or with the approval of, the Company in
connection with the marketing of the offering of the Common Stock (“Marketing
Materials”), including any roadshow or investor presentations made to investors
by the Company (whether in person or electronically) or the omission or alleged
omission to state therein a material fact required to be stated therein or
necessary to make the statements made therein, in light of the circumstances
under which they were made, not misleading; and, in the case of (i) and (ii)
above, to reimburse the Placement Agent and each such controlling person for any
and all reasonable expenses (including reasonable fees and disbursements of
counsel) as such expenses are incurred by the Placement Agent or such
controlling person in connection with investigating, defending, settling,
compromising or paying any such loss, claim, damage, liability, expense or
action, (iii) any untrue statement or alleged untrue statement made by the
Company in Section 3 hereof or the failure by the Company to perform when and as
required any agreement or covenant contained herein or (iv) any untrue statement
or alleged untrue statement of any material fact contained in any audio or
visual materials provided to Investors by or with the approval of the Company or
based upon written information furnished by or on behalf of the Company
including, without limitation, slides, videos, films or tape recordings used in
any road show or investor presentations made to investors by the Company
(whether in person or electronically) or in connection with the marketing of the
Securities; provided, however, that the foregoing indemnity shall not apply to
any loss, claim, damage, liability or expense to the extent, but only to the
extent, it arises out of or is based upon any untrue statement or alleged untrue
statement of a material fact contained in or omitted from the Registration
Statement, the Base Prospectus, any Preliminary Prospectus, the Prospectus, or
any such amendment or

 

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supplement, any Issuer Free Writing Prospectus, any “issuer information” filed
or required to be filed pursuant to Rule 433(d) of the Rules and Regulations or
in any Marketing Materials, in reliance upon and in conformity with information
concerning the Placement Agent furnished in writing by or on behalf of the
Placement Agent to the Company expressly for use therein, which information the
parties hereto agree is limited to the Placement Agent Information.

(b)           Indemnification of the Company.  The Placement Agent agrees to
indemnify, defend and hold harmless the Company, its directors and officers, and
any person, if any, who controls the Company within the meaning of either
Section 15 of the Securities Act or Section 20 of the Exchange Act, and the
successors and assigns of all of the foregoing persons, from and against any
loss, claim, damage, liability or expense, as incurred to which, jointly or
severally, the Company or any such person may become subject under the
Securities Act, the Exchange Act, or other federal or state statutory law or
regulation, the common law or otherwise (including in settlement of any
litigation, if such settlement is effected with the written consent of the
Placement Agent), insofar as such loss, claim, damage, liability or expense (or
actions in respect thereof as contemplated below) arises out of or is based upon
(i) any untrue statement or alleged untrue statement of a material fact
contained in the Registration Statement, or any amendment thereto, or the
omission or alleged omission therefrom to state a material fact required to be
stated therein or necessary to make the statements therein not misleading; (ii)
any untrue statement or alleged untrue statement of a material fact contained in
any Preliminary Prospectus, the Disclosure Package, the Prospectus, or any
amendment or supplement thereto or any Issuer Free Writing Prospectus, or the
omission or alleged omission to state therein a material fact required to be
stated therein or necessary to make the statements made therein, in light of the
circumstances under which they were made, not misleading, in the case of each of
(i) and (ii) above, to the extent but only to the extent, that such untrue
statement or alleged untrue statement or omission or alleged omission was made
in the Registration Statement, the Disclosure Package, the Prospectus (or any
amendment or supplement thereto) or any Issuer Free Writing Prospectus in
reliance upon and in conformity with information concerning the Placement Agent
furnished in writing by or on behalf of the Placement Agent to the Company
expressly for use therein, which information the parties hereto agree is limited
to the Placement Agent Information and shall reimburse the Company, or any such
director, officer or controlling person for any legal and other expense
reasonably incurred by the Company, or any such director, officer or controlling
person in connection with investigating, defending, settling, compromising or
paying any such loss, claim, damage, liability, expense or action. 
Notwithstanding the provisions of this Section 6(b), in no event shall any
indemnity by the Placement Agent under this Section 6(b) exceed the total
compensation received by such Placement Agent in accordance with Section 1(c).

(c)           Notice and Procedures.  If any action, suit or proceeding (each, a
“Proceeding”) is brought against a person (an “indemnified party”) in respect of
which indemnity may be sought against the Company or the Placement Agent (as
applicable, the “indemnifying party”) pursuant to subsection (a) or (b),
respectively, of this Section 6, such indemnified party shall promptly notify
such indemnifying party in writing of the institution of such Proceeding and
such indemnifying party shall assume the defense of such Proceeding, including
the employment of counsel reasonably satisfactory to such indemnified party and
payment of all fees and expenses; provided, however, that the omission to so
notify such indemnifying party shall not relieve such indemnifying party from
any liability which such indemnifying party may have to any indemnified party or
otherwise, except to the extent the indemnifying party does not otherwise learn
of the Proceeding and such failure results in the forfeiture by the indemnifying
party of substantial rights or defenses. The indemnified party or parties shall
have the right to employ its or their own counsel in any such case, but the fees
and expenses of such counsel shall be at the expense of such indemnified party
or parties unless (i) the employment of such counsel shall have been authorized
in writing by the indemnifying party in connection with the defense of such
Proceeding, (ii) the indemnifying party shall not have, within a reasonable
period of time in light of the circumstances, employed counsel to defend such
Proceeding or (iii) such indemnified party or parties shall have

 

24

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reasonably concluded that there may be one or more legal defenses available to
it or them which are different from, additional to or in conflict with those
available to such indemnifying party (in which case such indemnifying party
shall not have the right to direct the defense of such Proceeding on behalf of
the indemnified party or parties ), in any of which events such reasonable fees
and expenses shall be borne by such indemnifying party and paid as incurred (it
being understood, however, that such indemnifying party shall not be liable for
the expenses of more than one separate counsel (in addition to any local
counsel) in any one Proceeding or series of related Proceedings in the same
jurisdiction representing the indemnified parties who are parties to such
Proceeding). An indemnifying party shall not be liable for any settlement of any
Proceeding effected without its written consent but, if settled with its written
consent or if there be a final judgment for the plaintiff, such indemnifying
party agrees to indemnify and hold harmless the indemnified party or parties
from and against any loss or liability by reason of such settlement or judgment.
Notwithstanding the foregoing sentence, if at any time an indemnified party
shall have requested an indemnifying party to reimburse the indemnified party
for fees and expenses of counsel as contemplated by the second sentence of this
Section 6(c), then the indemnifying party agrees that it shall be liable for any
settlement of any Proceeding effected without its written consent if (i) such
settlement is entered into more than 60 days after receipt by such indemnifying
party of the aforesaid request, (ii) such indemnifying party shall not have
fully reimbursed the indemnified party in accordance with such request prior to
the date of such settlement and (iii) such indemnified party shall have given
the indemnifying party at least 30 days’ prior notice of its intention to
settle. No indemnifying party shall, without the prior written consent of the
indemnified party, effect any settlement, compromise or consent to the entry of
judgment in any pending or threatened Proceeding in respect of which any
indemnified party is or could have been a party and indemnity could have been
sought hereunder by such indemnified party, unless such settlement includes an
unconditional release of such indemnified party from all liability on claims
that are the subject matter of such Proceeding and does not include an admission
of fault or culpability or a failure to act by or on behalf of such indemnified
party.

(d)           Contribution.  If the indemnification provided for in this
Section 6 is unavailable to an indemnified party under subsections (a) or (b) of
this Section 6 or insufficient to hold an indemnified party harmless in respect
of any losses, claims, damages, liabilities or expenses referred to therein,
then each applicable indemnifying party shall, in lieu of indemnifying such
indemnified party, shall contribute to the amount paid or payable by such
indemnified party as a result of the losses, claims, damages, liabilities or
expenses referred to in subsection (a) or (b) above, (i) in such proportion as
is appropriate to reflect the relative benefits received by the indemnifying
party or parties on the one hand and the indemnified party or parties on the
other from the offering of the Securities or (ii) if the allocation provided by
clause (i) above is not permitted by applicable law, in such proportion as is
appropriate to reflect not only the relative benefits referred to in clause (i)
above but also the relative fault of the indemnifying party or parties on the
one hand and the indemnified party or parties on the other hand in connection
with the statements or omissions that resulted in such losses, claims, damages,
liabilities or expenses, as well as any other relevant equitable
considerations.  The relative benefits received by the Company on the one hand
and the Placement Agent on the other hand shall be deemed to be in the same
respective proportions as the total net proceeds from the offering of the
Securities (before deducting expenses) received by the Company and the total
placement agent commissions received by the Placement Agent, in each case as set
forth on the cover of the Prospectus, bear to the aggregate public offering
price of the Securities.  The relative fault of the Company on the one hand and
the Placement Agent on the other hand shall be determined by reference to, among
other things, whether the untrue or alleged untrue statement of a material fact
or the omission or alleged omission to state a material fact relates to
information supplied by the Company, on the one hand, or by the Placement Agent,
on the other hand, and the parties’ relevant intent, knowledge, access to
information and opportunity to correct or prevent such untrue statement,
omission, act or failure to act; provided that the parties hereto agree that the
written information furnished to the Company by the Placement Agent for use in
any Preliminary Prospectus, any Registration Statement or the Prospectus, or in
any amendment or supplement thereto, consists solely of the Placement Agent
Information.  The Company and the Placement Agent agree

 

25

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THAT IT WOULD NOT BE JUST AND EQUITABLE IF CONTRIBUTION PURSUANT TO THIS
SUBSECTION (D) WERE TO BE DETERMINED BY PRO RATA ALLOCATION OR BY ANY OTHER
METHOD OF ALLOCATION WHICH DOES NOT TAKE ACCOUNT OF THE EQUITABLE CONSIDERATIONS
REFERRED TO IN THE FIRST SENTENCE OF THIS SECTION 6(D).  THE AMOUNT PAID OR
PAYABLE BY AN INDEMNIFIED PARTY AS A RESULT OF THE LOSSES, CLAIMS, DAMAGES OR
LIABILITIES REFERRED TO IN THE FIRST SENTENCE OF THIS SECTION 6(D) SHALL BE
DEEMED TO INCLUDE ANY LEGAL OR OTHER EXPENSES REASONABLY INCURRED BY SUCH
INDEMNIFIED PARTY IN CONNECTION WITH INVESTIGATING OR DEFENDING AGAINST ANY
ACTION OR CLAIM WHICH IS THE SUBJECT OF THIS SECTION 6(D).  NOTWITHSTANDING THE
PROVISIONS OF THIS SECTION 6(D), THE PLACEMENT AGENT SHALL NOT BE REQUIRED TO
CONTRIBUTE ANY AMOUNT IN EXCESS OF THE TOTAL COMMISSIONS RECEIVED BY SUCH
PLACEMENT AGENT IN ACCORDANCE WITH SECTION 1(C).  NO PERSON GUILTY OF FRAUDULENT
MISREPRESENTATION (WITHIN THE MEANING OF SECTION 11(F) OF THE SECURITIES ACT)
SHALL BE ENTITLED TO CONTRIBUTION FROM ANY PERSON WHO WAS NOT GUILTY OF SUCH
FRAUDULENT MISREPRESENTATION.

(e)           Representations and Agreements to Survive Delivery.  The
obligations of the Company under this Section 6 shall be in addition to any
liability which the Company may otherwise have.  The indemnity and contribution
agreements contained in this Section 6 and the covenants, agreements, warranties
and representations of the Company contained in this Agreement shall remain
operative and in full force and effect regardless of (i) any termination of this
Agreement, (ii) any investigation made by or on behalf of the Placement Agent,
any person who controls the Placement Agent within the meaning of either
Section 15 of the Securities Act or Section 20 of the Exchange Act or any
affiliate of the Placement Agent, or by or on behalf of the Company, its
directors or officers or any person who controls the Company within the meaning
of either Section 15 of the Securities Act or Section 20 of the Exchange Act,
and (iii) the issuance and delivery of the Securities. The Company and the
Placement Agent agree promptly to notify each other of the commencement of any
Proceeding against it and, in the case of the Company, against any of the
Company’s officers or directors in connection with the issuance and sale of the
Securities, or in connection with the Registration Statement, the Disclosure
Package or the Prospectus.

7.             INFORMATION FURNISHED BY PLACEMENT AGENT. THE COMPANY
ACKNOWLEDGES THAT THE STATEMENTS SET FORTH IN (A) THE FIRST SENTENCE OF THE
EIGHTH PARAGRAPH AND (B) THE ELEVENTH PARAGRAPH UNDER THE HEADING “PLAN OF
DISTRIBUTION” IN THE PROSPECTUS (THE “PLACEMENT AGENT INFORMATION”) CONSTITUTE
THE ONLY INFORMATION RELATING TO THE PLACEMENT AGENT FURNISHED IN WRITING TO THE
COMPANY BY THE PLACEMENT AGENT AS SUCH INFORMATION IS REFERRED TO IN SECTIONS 2
AND 6 HEREOF.

8.             TERMINATION.  (A)  THE PLACEMENT AGENT SHALL HAVE THE RIGHT TO
TERMINATE THIS AGREEMENT BY GIVING NOTICE AS HEREINAFTER SPECIFIED AT ANY TIME
AT OR PRIOR TO THE CLOSING DATE, WITHOUT LIABILITY ON THE PART OF THE PLACEMENT
AGENT TO THE COMPANY, IF (I) PRIOR TO DELIVERY AND PAYMENT FOR THE SECURITIES
(A) TRADING IN SECURITIES GENERALLY SHALL HAVE BEEN SUSPENDED ON OR BY THE NEW
YORK STOCK EXCHANGE, THE AMERICAN STOCK EXCHANGE, THE NASDAQ GLOBAL MARKET OR IN
THE OVER-THE-COUNTER MARKET, (EACH, A “TRADING MARKET”), (B) TRADING IN THE
COMMON STOCK OF THE COMPANY SHALL HAVE BEEN SUSPENDED ON ANY SUCH EXCHANGE, IN
THE OVER-THE-COUNTER MARKET OR BY THE COMMISSION, (C) A GENERAL MORATORIUM ON
COMMERCIAL BANKING ACTIVITIES SHALL HAVE BEEN DECLARED BY FEDERAL OR NEW YORK
STATE AUTHORITIES OR A MATERIAL DISRUPTION SHALL HAVE OCCURRED IN COMMERCIAL
BANKING OR SECURITIES SETTLEMENT OR CLEARANCE SERVICES IN THE UNITED STATES,
(D) THERE SHALL HAVE OCCURRED ANY OUTBREAK OR MATERIAL ESCALATION OF HOSTILITIES
OR ACTS OF TERRORISM INVOLVING THE UNITED STATES OR THERE SHALL HAVE BEEN A
DECLARATION BY THE UNITED STATES OF A NATIONAL EMERGENCY OR WAR, (E) THERE SHALL
HAVE OCCURRED ANY OTHER CALAMITY OR CRISIS OR ANY MATERIAL CHANGE IN GENERAL
ECONOMIC, POLITICAL OR FINANCIAL CONDITIONS IN THE UNITED STATES OR ELSEWHERE,
IF THE EFFECT OF ANY SUCH EVENT SPECIFIED IN CLAUSE (D) OR (E), IN THE JUDGMENT
OF THE PLACEMENT AGENT, IS MATERIAL AND ADVERSE AND MAKES IT IMPRACTICAL OR
INADVISABLE TO PROCEED WITH THE COMPLETION OF THE SALE OF AND PAYMENT FOR THE
SECURITIES ON THE CLOSING DATE ON THE TERMS AND IN THE MANNER CONTEMPLATED BY
THIS AGREEMENT, THE DISCLOSURE PACKAGE AND THE PROSPECTUS, (II) SINCE THE TIME
OF EXECUTION OF THIS AGREEMENT OR THE EARLIER RESPECTIVE DATES AS OF WHICH
INFORMATION IS GIVEN IN THE

 

26

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DISCLOSURE PACKAGE OR INCORPORATED BY REFERENCE THEREIN, THERE HAS BEEN ANY
MATERIAL ADVERSE EFFECT OR THE COMPANY SHALL HAVE SUSTAINED A LOSS OR
INTERFERENCE WITH ITS BUSINESS BY STRIKE, FIRE, FLOOD, EARTHQUAKE, ACCIDENT OR
OTHER CALAMITY, WHETHER OR NOT COVERED BY INSURANCE, OF SUCH CHARACTER THAT IN
THE JUDGMENT OF THE PLACEMENT AGENT WOULD, INDIVIDUALLY OR IN THE AGGREGATE,
RESULT IN A MATERIAL ADVERSE EFFECT AND WHICH WOULD, IN THE JUDGMENT OF THE
PLACEMENT AGENT, MAKE IT IMPRACTICABLE OR INADVISABLE TO PROCEED WITH THE
OFFERING OR THE DELIVERY OF THE SECURITIES ON THE TERMS AND IN THE MANNER
CONTEMPLATED IN THE DISCLOSURE PACKAGE, (III) THE COMPANY SHALL HAVE FAILED,
REFUSED OR BEEN UNABLE TO COMPLY WITH THE TERMS OR PERFORM ANY AGREEMENT OR
OBLIGATION OF THIS AGREEMENT OR ANY SUBSCRIPTION AGREEMENT, OTHER THAN BY REASON
OF A DEFAULT BY THE PLACEMENT AGENT, OR (IV) ANY CONDITION OF THE PLACEMENT
AGENT’S OBLIGATIONS HEREUNDER IS NOT FULFILLED.  ANY SUCH TERMINATION SHALL BE
WITHOUT LIABILITY OF ANY PARTY TO ANY OTHER PARTY EXCEPT THAT THE PROVISIONS OF
SECTION 4, SECTION 6, AND SECTION 11 HEREOF SHALL AT ALL TIMES BE EFFECTIVE
NOTWITHSTANDING SUCH TERMINATION.

9.             NOTICES.  ALL STATEMENTS, REQUESTS, NOTICES AND AGREEMENTS
HEREUNDER SHALL BE IN WRITING OR BY FACSIMILE, AND:

(a)           if to the Placement Agent, shall be delivered or sent by mail or
facsimile transmission to :

Piper Jaffray & Co.

U.S. Bancorp Center

800 Nicollet Mall

Minneapolis, Minnesota 55402

Attention: James Martin, Esq.

Facsimile No.: 612-303-1410

with a copy (which shall not constitute notice) to:

Lowenstein Sandler PC

1251 Avenue of the Americas

New York, New York 10020

Attention: Michael D. Maline, Esq.

Facsimile No.: 973-422-6873

(b)           if to the Company shall be delivered or sent by mail or facsimile
transmission to: Cytori Therapeutics, Inc., 3020 Callan Road, San Diego,
California 92121, Attention: Chief Executive Officer, (Facsimile No.:
858-458-0995), with a copy (which shall not constitute notice) to: Heller Ehrman
LLP, 4350 La Jolla Village Drive, 7th Floor, San Diego, California 92122,
Attention:  Hayden J. Trubit, Esq., (Facsimile No.: 858-587-5903). Any such
statements, requests, notices or agreements shall be effective only upon
receipt.  Any party to this Agreement may change such address for notices by
sending to the parties to this Agreement written notice of a new address for
such purpose.

10.           PERSONS ENTITLED TO BENEFIT OF AGREEMENT.  THIS AGREEMENT SHALL
INURE TO THE BENEFIT OF AND SHALL BE BINDING UPON THE PLACEMENT AGENT, THE
COMPANY AND THEIR RESPECTIVE SUCCESSORS AND ASSIGNS.  NOTHING EXPRESSED OR
MENTIONED IN THIS AGREEMENT IS INTENDED OR SHALL BE CONSTRUED TO GIVE ANY PERSON
OTHER THAN THE PERSONS MENTIONED IN THE PRECEDING SENTENCE, ANY LEGAL OR
EQUITABLE RIGHT, REMEDY OR CLAIM UNDER OR IN RESPECT OF THIS AGREEMENT, OR ANY
PROVISIONS HEREIN CONTAINED, EXCEPT THAT (I) THE REPRESENTATIONS, WARRANTIES,
COVENANTS, AGREEMENTS AND INDEMNITIES OF THE COMPANY CONTAINED IN THIS AGREEMENT
SHALL ALSO BE FOR THE BENEFIT OF THE CONTROLLING PERSONS, OFFICERS AND DIRECTORS
REFERRED TO IN SECTION 6(A) AND THE INDEMNITIES OF THE PLACEMENT AGENT SHALL
ALSO BE FOR THE BENEFIT OF THE CONTROLLING PERSONS, OFFICERS AND DIRECTORS
REFERRED TO IN SECTION 6(B)  AND (II) THE INVESTORS ARE RELYING ON THE

 

27

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REPRESENTATIONS MADE BY THE COMPANY UNDER, AND ARE INTENDED THIRD PARTY
BENEFICIARIES OF, THIS AGREEMENT..  THE TERM “SUCCESSORS AND ASSIGNS” AS HEREIN
USED SHALL NOT INCLUDE ANY PURCHASER OF THE SECURITIES BY REASON MERELY OF SUCH
PURCHASE.

11.           GOVERNING LAW.  THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED
IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK, WITHOUT GIVING EFFECT TO
THE CONFLICTS OF LAWS PROVISIONS THEREOF.

12.           NO FIDUCIARY RELATIONSHIP. THE COMPANY HEREBY ACKNOWLEDGES AND
AGREES THAT THE PLACEMENT AGENT IS ACTING SOLELY AS A PLACEMENT AGENT IN
CONNECTION WITH THE OFFERING OF THE COMPANY’S SECURITIES. THE COMPANY FURTHER
ACKNOWLEDGES THAT THE PLACEMENT AGENT IS ACTING PURSUANT TO A CONTRACTUAL
RELATIONSHIP CREATED SOLELY BY THIS AGREEMENT ENTERED INTO ON AN ARM’S LENGTH
BASIS AND IN NO EVENT DO THE PARTIES INTEND THAT THE PLACEMENT AGENT ACT OR BE
RESPONSIBLE AS A FIDUCIARY TO THE COMPANY, ITS MANAGEMENT, STOCKHOLDERS,
CREDITORS OR ANY OTHER PERSON IN CONNECTION WITH ANY ACTIVITY THAT THE PLACEMENT
AGENT MAY UNDERTAKE OR HAS UNDERTAKEN IN FURTHERANCE OF THE OFFERING OF THE
COMPANY’S SECURITIES, EITHER BEFORE OR AFTER THE DATE HEREOF. THE PLACEMENT
AGENT HEREBY EXPRESSLY DISCLAIMS ANY FIDUCIARY OR SIMILAR OBLIGATIONS TO THE
COMPANY, EITHER IN CONNECTION WITH THE TRANSACTIONS CONTEMPLATED BY THIS
AGREEMENT OR ANY MATTERS LEADING UP TO SUCH TRANSACTIONS, AND THE COMPANY HEREBY
CONFIRMS ITS UNDERSTANDING AND AGREEMENT TO THAT EFFECT. THE PRICE OF THE
SECURITIES SET FORTH IN THIS AGREEMENT WAS ESTABLISHED BY THE COMPANY FOLLOWING
DISCUSSIONS AND ARMS-LENGTH NEGOTIATIONS WITH THE INVESTORS AND THE PLACEMENT
AGENT, AND THE COMPANY IS CAPABLE OF EVALUATING AND UNDERSTANDING, AND
UNDERSTANDS AND ACCEPTS, THE TERMS, RISKS AND CONDITIONS OF THE TRANSACTIONS
CONTEMPLATED BY THIS AGREEMENT.  THE COMPANY HAS BEEN ADVISED THAT THE PLACEMENT
AGENT AND ITS AFFILIATES ARE ENGAGED IN A BROAD RANGE OF TRANSACTIONS WHICH MAY
INVOLVE INTERESTS THAT DIFFER FROM THOSE OF THE COMPANY AND THAT THE PLACEMENT
AGENT HAS NO OBLIGATION TO DISCLOSE SUCH INTERESTS AND TRANSACTIONS TO THE
COMPANY BY VIRTUE OF ANY FIDUCIARY, ADVISORY OR AGENCY RELATIONSHIP.  THE
COMPANY AND THE PLACEMENT AGENT AGREE THAT THEY ARE EACH RESPONSIBLE FOR MAKING
THEIR OWN INDEPENDENT JUDGMENTS WITH RESPECT TO ANY SUCH TRANSACTIONS. THE
COMPANY HEREBY WAIVES AND RELEASES, TO THE FULLEST EXTENT PERMITTED BY LAW, ANY
CLAIMS THAT THE COMPANY MAY HAVE AGAINST THE PLACEMENT AGENT WITH RESPECT TO ANY
BREACH OR ALLEGED BREACH OF ANY FIDUCIARY OR SIMILAR DUTY TO THE COMPANY IN
CONNECTION WITH THE TRANSACTIONS CONTEMPLATED BY THIS AGREEMENT OR ANY MATTERS
LEADING UP TO SUCH TRANSACTIONS AND AGREES THAT THE PLACEMENT AGENT SHALL HAVE
NO LIABILITY (WHETHER DIRECT OR INDIRECT) TO THE COMPANY IN RESPECT OF SUCH A
FIDUCIARY DUTY CLAIM TO ANY PERSON ASSERTING A FIDUCIARY DUTY CLAIM ON BEHALF OF
THE COMPANY.

13.           HEADINGS.  THE SECTION HEADINGS IN THIS AGREEMENT HAVE BEEN
INSERTED AS A MATTER OF CONVENIENCE OF REFERENCE AND ARE NOT A PART OF THIS
AGREEMENT.

14.           AMENDMENTS AND WAIVERS.    NO SUPPLEMENT, MODIFICATION OR WAIVER
OF THIS AGREEMENT SHALL BE BINDING UNLESS EXECUTED IN WRITING BY THE PARTY TO BE
BOUND THEREBY. THE FAILURE OF A PARTY TO EXERCISE ANY RIGHT OR REMEDY SHALL NOT
BE DEEMED OR CONSTITUTE A WAIVER OF SUCH RIGHT OR REMEDY IN THE FUTURE. NO
WAIVER OF ANY OF THE PROVISIONS OF THIS AGREEMENT SHALL BE DEEMED OR SHALL
CONSTITUTE A WAIVER OF ANY OTHER PROVISION HEREOF (REGARDLESS OF WHETHER
SIMILAR), NOR SHALL ANY SUCH WAIVER CONSTITUTE A CONTINUING WAIVER UNLESS
OTHERWISE EXPRESSLY PROVIDED.

15.           SUBMISSION TO JURISDICTION. EXCEPT AS SET FORTH BELOW, NO
PROCEEDING MAY BE COMMENCED, PROSECUTED OR CONTINUED IN ANY COURT OTHER THAN THE
COURTS OF THE STATE OF NEW YORK LOCATED IN THE CITY AND COUNTY OF NEW YORK OR IN
THE UNITED STATES DISTRICT COURT FOR THE SOUTHERN DISTRICT OF NEW YORK, WHICH
COURTS SHALL HAVE JURISDICTION OVER THE ADJUDICATION OF SUCH MATTERS, AND THE
COMPANY AND THE PLACEMENT AGENT EACH HEREBY CONSENTS TO THE JURISDICTION OF SUCH
COURTS AND PERSONAL SERVICE WITH RESPECT THERETO.  THE COMPANY HEREBY WAIVES ALL
RIGHT TO TRIAL BY JURY IN ANY PROCEEDING (WHETHER BASED UPON CONTRACT, TORT OR
OTHERWISE) IN ANY WAY ARISING OUT OF OR RELATING TO THIS AGREEMENT. THE COMPANY
AGREES THAT A FINAL AND NO-LONGER-APPEALABLE JUDGMENT IN ANY SUCH PROCEEDING
BROUGHT IN ANY SUCH COURT SHALL BE

 

28

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CONCLUSIVE AND BINDING UPON THE COMPANY AND MAY BE ENFORCED IN ANY OTHER COURTS
IN THE JURISDICTION OF WHICH THE COMPANY IS OR MAY BE SUBJECT, BY SUIT UPON SUCH
JUDGMENT.

16.           COUNTERPARTS.  THIS AGREEMENT MAY BE EXECUTED IN ONE OR MORE
COUNTERPARTS AND, IF EXECUTED IN MORE THAN ONE COUNTERPART, THE EXECUTED
COUNTERPARTS SHALL EACH BE DEEMED TO BE AN ORIGINAL AND ALL SUCH COUNTERPARTS
SHALL TOGETHER CONSTITUTE ONE AND THE SAME INSTRUMENT.  DELIVERY OF AN EXECUTED
COUNTERPART BY FACSIMILE SHALL BE EFFECTIVE AS DELIVERY OF A MANUALLY EXECUTED
COUNTERPART THEREOF.

17.           RESEARCH ANALYST INDEPENDENCE. THE COMPANY ACKNOWLEDGES THAT THE
PLACEMENT AGENT’S RESEARCH ANALYSTS AND RESEARCH DEPARTMENT ARE REQUIRED TO BE
INDEPENDENT FROM ITS INVESTMENT BANKING DIVISION AND IS SUBJECT TO CERTAIN
REGULATIONS AND INTERNAL POLICIES, AND THAT SUCH PLACEMENT AGENT’S RESEARCH
ANALYSTS MAY HOLD VIEWS AND MAKE STATEMENTS OR INVESTMENT RECOMMENDATIONS AND/OR
PUBLISH RESEARCH REPORTS WITH RESPECT TO THE COMPANY AND/OR THE OFFERING THAT
DIFFER FROM THE VIEWS OF ITS INVESTMENT BANKING DIVISION. THE COMPANY HEREBY
WAIVES AND RELEASES, TO THE FULLEST EXTENT PERMITTED BY LAW, ANY CLAIMS THAT THE
COMPANY MAY HAVE AGAINST THE PLACEMENT AGENT WITH RESPECT TO ANY CONFLICT OF
INTEREST THAT MAY ARISE FROM THE FACT THAT THE VIEWS EXPRESSED BY ITS
INDEPENDENT RESEARCH ANALYSTS AND RESEARCH DEPARTMENT MAY BE DIFFERENT FROM OR
INCONSISTENT WITH THE VIEWS OR ADVICE COMMUNICATED TO THE COMPANY BY SUCH
PLACEMENT AGENT’S INVESTMENT BANKING DIVISION. THE COMPANY ACKNOWLEDGES THAT THE
PLACEMENT AGENT IS A FULL SERVICE SECURITIES FIRM AND AS SUCH FROM TIME TO TIME,
SUBJECT TO APPLICABLE SECURITIES LAWS, RULES AND REGULATIONS, MAY EFFECT
TRANSACTIONS FOR ITS OWN ACCOUNT OR THE ACCOUNT OF ITS CUSTOMERS AND HOLD LONG
OR SHORT POSITIONS IN DEBT OR EQUITY SECURITIES OF THE COMPANY; PROVIDED,
HOWEVER, THAT NOTHING IN THIS SECTION 17 SHALL RELIEVE THE PLACEMENT AGENT OF
ANY RESPONSIBILITY OR LIABILITY THAT IT MAY OTHERWISE BEAR IN CONNECTION WITH
ACTIVITIES IN VIOLATION OF APPLICABLE SECURITIES LAWS, RULES AND REGULATIONS.

18.           ENTIRE AGREEMENT. THIS AGREEMENT, TOGETHER WITH THAT CERTAIN
ENGAGEMENT LETTER DATED FEBRUARY 14, 2007, CONSTITUTES THE ENTIRE AGREEMENT OF
THE PARTIES TO THIS AGREEMENT AND SUPERSEDES ALL PRIOR WRITTEN OR ORAL AND ALL
CONTEMPORANEOUS ORAL AGREEMENTS, UNDERSTANDINGS AND NEGOTIATIONS WITH RESPECT TO
THE SUBJECT MATTER HEREOF.

19.           PARTIAL UNENFORCEABILITY. THE INVALIDITY OR UNENFORCEABILITY OF
ANY SECTION, PARAGRAPH, CLAUSE OR PROVISION OF THIS AGREEMENT SHALL NOT AFFECT
THE VALIDITY OR ENFORCEABILITY OF ANY OTHER SECTION, PARAGRAPH, CLAUSE OR
PROVISION HEREOF.

[Signature Page Follows]

29

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If the foregoing is in accordance with your understanding of the agreement
between the Company and the Placement Agent, kindly indicate your acceptance in
the space provided for that purpose below.

Very truly yours,

 

 

CYTORI THERAPEUTICS, INC

 

 

 

 

By:

/s/ Mark E. Saad

 

 

Name: Mark E. Saad

 

 

Title: Chief Financial Officer

 

 

 

 

 

 

Accepted as of the date first above written:

 

 

 

 

 

PIPER JAFFRAY & CO.

 

 

 

 

 

By:

/s/ David W. Stadinsky

 

 

Name: David W. Stadinsky

 

 

Title: Managing Director

 

 

30

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Schedules and Exhibits

Schedule I:

 

Permitted Free Writing Prospectuses

 

 

 

Schedule II:

 

Certain Investors

 

 

 

Schedule 2(hh):

 

Brokers Fees

 

 

 

Exhibit A:

 

Form of Subscription Agreement

 

 

 

Exhibit B:

 

Form of Lock-Up Agreement

 

 

 

Exhibit C:

 

List of Directors and Executive Officers Executing Lock-Up Agreements

 

 

 

Exhibit D:

 

Matters To Be Covered In The Opinion Of Counsel To The Company

 

 

 

Exhibit E:

 

Form of Written Statement of Corporate Counsel to the Company

31

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Schedule I

 

Permitted Free Writing Prospectuses

Final Term Sheet dated February 23, 2007

 

32

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Schedule II

Certain Investors

Gagnon Securities

Schwartzberg, Aranoff & Menard, LLC and affiliates

Quintiles Transnational - NovaQuest

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

Schedule 2(hh)

Brokers Fees

WBB Securities, LLC shall be entitled to a fee of 1.5% of the gross proceeds
raised in connection with this Placement Agency Agreement for a period of 30
days beginning on February 16, 2007 (including  any mutually agreed extensions
thereof ) due to the Financial Advisory Services Agreement between the Company
and WBB Securities.

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

Exhibit A

Form of Subscription Agreement

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

Exhibit B

Form of Lock-Up Agreement

                      , 2007

Piper Jaffray & Co.

U.S. Bancorp Center

800 Nicollet Mall

Minneapolis, Minnesota  55402

Ladies and Gentlemen:

The undersigned understands that you, as Placement Agent, propose to enter into
the Placement Agency Agreement (the “Placement Agreement”) with Cytori
Therapeutics, Inc., a Delaware corporation (the “Company”), providing for the
offering (the “Offering”) of shares (the “Shares”) of common stock, par value
$0.001 per share (the “Common Stock”), of the Company. Capitalized terms used
herein and not otherwise defined shall have the meanings set forth in the
Placement Agreement.

In consideration of the foregoing, and in order to induce you to participate in
the Offering, and for other good and valuable consideration receipt of which is
hereby acknowledged, the undersigned hereby agrees that, without your prior
written consent (which consent may be withheld in your sole discretion), the
undersigned will not, during the period (the “Lock-Up Period”) beginning on the
date hereof and ending on the date 90 days after the date of the final
prospectus (including the final prospectus supplement) to be used in confirming
the sale of the Shares, (1) offer, pledge, announce the intention to sell, sell,
contract to sell, sell any option or contract to purchase, purchase any option
or contract to sell, grant any option, right or warrant to purchase, or
otherwise transfer or dispose of, directly or indirectly, or file (or
participate in the filing of) a registration statement with the Securities and
Exchange Commission in respect of, any shares of Common Stock or any securities
convertible into or exercisable or exchangeable for Common Stock (including
without limitation, Common Stock which may be deemed to be beneficially owned by
the undersigned in accordance with the rules and regulations of the Securities
and Exchange Commission and securities which may be issued upon exercise of a
stock option or warrant), (2) enter into any swap or other agreement that
transfers, in whole or in part, any of the economic consequences of ownership of
the Common Stock, whether any such transaction described in clause (1) or
(2) above is to be settled by delivery of Common Stock or such other securities,
in cash or otherwise, (3) make any demand for or exercise any right with respect
to, the registration of any shares of Common Stock or any security convertible
into or exercisable or exchangeable for Common Stock, or (4) publicly announce
an intention to effect any transaction specific in clause (1), (2) or (3) above.

Notwithstanding the foregoing, the restrictions set forth in clause (1) and
(2) above shall not apply to (a) transfers (i) as a bona fide gift or gifts,
provided that the donee or donees thereof agree to be bound in writing by the
restrictions set forth herein, (ii) to any trust for the direct or indirect
benefit of the undersigned or the immediate family of the undersigned, provided
that the trustee of the trust agrees to be bound in writing by the restrictions
set forth herein, and provided further that any such transfer shall not involve
a disposition for value, (iii) with your prior written consent or (iv) effected
pursuant to any exchange of “underwater” options with the Company, (b) the
acquisition or exercise of any stock option issued pursuant to the Company’s
existing stock option plan, including any exercise effected by the

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delivery of Shares of the Company held by the undersigned, or (c) the purchase
or sale of the Company’s securities pursuant to a plan, contract or instruction
that satisfies all of the requirements of Rule 10b5-1(c)(1)(i)(B) that was in
effect prior to the date hereof.  For purposes of this Lock-Up Agreement,
“immediate family” shall mean any relationship by blood, marriage or adoption,
not more remote than first cousin.  None of the restrictions set forth in this
Lock-Up Agreement shall apply to Common Stock acquired in open market
transactions.

For the purpose of allowing you to comply with NASD Rule 2711(f)(4), if (1)
during the last 17 days of the Lock-Up Period, the Company releases earnings
results or publicly announces other material news or a material event relating
to the Company occurs or (2) prior to the expiration of the Lock-Up Period, the
Company announces that it will release earnings results during the 16 day period
beginning on the last day of the Lock-Up Period, then in each case the Lock-Up
Period will be extended until the expiration of the 18 day period beginning on
the date of release of the earnings results or the public announcement regarding
the material news or the occurrence of the material event, as applicable, unless
you waive, in writing, such extension.  The undersigned hereby acknowledges that
the Company has agreed not to accelerate the vesting of any option or warrant or
the lapse of any repurchase right prior to the expiration of the Lock-Up
Period.  In furtherance of the foregoing, the Company, and any duly appointed
transfer agent for the registration or transfer of the securities described
herein, are hereby authorized to decline to make any transfer of securities if
such transfer would constitute a violation or breach of this Lock-Up Agreement.

The foregoing restrictions are expressly agreed to preclude the undersigned from
engaging in any hedging or other transaction which is designed to or reasonably
expected to lead to or result in a sale or disposition of the Common Stock even
if such Common Stock would be disposed of by someone other than the
undersigned.  Such prohibited hedging or other transactions would include
without limitation any short sale or any purchase, sale or grant of any right
(including without limitation any put option or put equivalent position or call
option or call equivalent position) with respect to any of the Common Stock or
with respect to any security that includes, relates to, or derives any
significant part of its value from such Common Stock.

The undersigned hereby represents and warrants that the undersigned has full
power and authority to enter into this Lock-Up Agreement.  All authority herein
conferred or agreed to be conferred and any obligations of the undersigned shall
be binding upon the successors, assigns, heirs or personal representatives of
the undersigned.

The undersigned also agrees and consents to the entry of stop transfer
instructions with the Company’s transfer agent and registrar against the
transfer of the undersigned’s shares of Common Stock except in compliance with
the foregoing restrictions.

The undersigned understands that, if the Placement Agreement does not become
effective, or if the Placement Agreement (other than the provisions thereof
which survive termination) shall terminate or be terminated prior to payment for
and delivery of the Shares to be sold thereunder, the undersigned shall be
released from all obligations under this Lock-Up Agreement.

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This Lock-Up Agreement shall be governed by and construed in accordance with the
laws of the State of New York, without regard to the conflict of laws principles
thereof.

Very truly yours,

 

 

 

Print Name:

 

 

 

 

Print Title:

 

 

 

 

Signature:

 

 

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Exhibit C

List of Directors and Executive Officers
Executing Lock-Up Agreements

Marshall G. Cox

Christopher J. Calhoun

Marc H. Hedrick, MD

Mark E. Saad

Bruce A. Reuter

Seijiro Shirahama

Douglas Arm, Ph.D.

Alexander M. Milstein, MD

John T. Ransom, Ph.D.

Paul W. Hawran

Ronald D. Henriksen

E. Carmack Holmes, MD

David M. Rickey

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Exhibit D

Matters To Be Covered In The

Opinion Of Counsel To The Company

In form and substance reasonably satisfactory to the Placement Agent and
delivered by Heller Ehrman LLP at Closing

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Exhibit E

Form of Written Statement of

Corporate Counsel to the Company

In form and substance reasonably satisfactory to the Placement Agent and
delivered by Heller Ehrman LLP at Closing

 

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