Exhibit 10.1

SECURITIES PURCHASE AGREEMENT

SECURITIES PURCHASE AGREEMENT (the “Agreement”), dated as of March 16, 2006, by
and among Unigene Laboratories Inc., a Delaware corporation, with headquarters
located at 110 Little Falls Road, Fairfield, New Jersey 07004 (the “Company”),
and the investors listed on the Schedule of Buyers attached hereto
(individually, a “Buyer” and collectively, the “Buyers”).

WHEREAS:

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

B. Each Buyer wishes to purchase, and the Company wishes to sell, upon the terms
and conditions stated in this Agreement (the “Offering”) , (i) that aggregate
number of shares of the Common Stock, par value $0.01 per share, of the Company
(the “Common Stock”), set forth opposite such Buyer’s name in column (3) on the
Schedule of Buyers (which aggregate amount for all Buyers together shall be
4,000,000 shares of Common Stock and shall collectively be referred to herein as
the “Common Shares”) and (ii) a warrant to acquire up to that number of
additional shares of Common Stock set forth opposite such Buyer’s name in column
(4) on the Schedule of Buyers (the “Warrants”), in substantially the form
attached hereto as Exhibit A (such shares of Common Stock issued upon exercise
of the Warrants, collectively, the “Warrant Shares”).

C. Contemporaneously with the execution and delivery of this Agreement, the
parties hereto are executing and delivering a Registration Rights Agreement,
substantially in the form attached hereto as Exhibit B (the “Registration Rights
Agreement”) pursuant to which the Company has agreed to provide certain
registration rights with respect to the Common Shares, and the Warrant Shares
under the 1933 Act and the rules and regulations promulgated thereunder, and
applicable state securities laws.

D. The Common Shares, the Warrants and the Warrant Shares collectively are
referred to herein as the “Securities”.

NOW, THEREFORE, the Company and each Buyer hereby agree as follows:

1. PURCHASE AND SALE OF COMMON SHARES AND WARRANTS.

(a) Purchase of Common Shares and Warrants. Subject to the satisfaction (or
waiver) of the conditions set forth in Sections 6 and 7 below, the Company shall
issue and sell to each Buyer, and each Buyer severally, but not jointly, agrees
to purchase from the Company on the Closing Date (as defined below), the number
of Common Shares as is set forth opposite such Buyer’s name in column (3) on the
Schedule of Buyers, along with the Warrants to acquire up to that number of
Warrant Shares as is set forth opposite such Buyer’s name in column (4) on the
Schedule of Buyers (the “Closing”). The Closing shall occur on the Closing Date
at the offices of Schulte Roth & Zabel LLP, 919 Third Avenue, New York, New York
10022.

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(b) Purchase Price. The purchase price for the Common Shares and related
Warrants to be purchased by each Buyer at the Closing shall be the amount set
forth opposite such Buyer’s name in column (5) of the Schedule of Buyers (the
“Purchase Price”) which shall be equal to the amount of $3.25 per Common Share
(the “Purchase Price Per Common Share”).

(c) Closing Date. The date and time of the Closing (the “Closing Date”) shall be
10:00 a.m., New York City Time, on the date immediately following the date
hereof (or such other date and time as is mutually agreed to by the Company and
each Buyer).

(d) Form of Payment. On the Closing Date, (i) each Buyer shall pay its
respective Purchase Price to the Company for the Common Shares and Warrants to
be issued and sold to such Buyer at the Closing, by wire transfer of immediately
available funds in accordance with the Company’s written wire instructions, and
(ii) the Company shall deliver to each Buyer (A) one or more stock certificates,
free and clear of all restrictive and other legends (except as expressly
provided in Section 2(g) hereof), evidencing the number of Common Shares such
Buyer is purchasing as is set forth opposite such Buyer’s name in column (3) of
the Schedule of Buyers and (B) a Warrant pursuant to which such Buyer shall have
the right to acquire such number of Warrant Shares as is set forth opposite such
Buyer’s name in column (4) of the Schedule of Buyers, in all cases duly executed
on behalf of the Company and registered in the name of such Buyer.

2. BUYER’S REPRESENTATIONS, WARRANTIES AND COVENANTS.

Each Buyer represents and warrants with respect to only itself that:

(a) No Public Sale or Distribution. Such Buyer is (i) acquiring the Common
Shares and the Warrants and (ii) upon exercise of the Warrants will acquire the
Warrant Shares issuable upon exercise thereof, in the ordinary course of
business for its own account and not with a view towards, or for resale in
connection with, the public sale or distribution thereof, except pursuant to
sales registered or exempted under the 1933 Act and such Buyer does not have a
present arrangement to effect any distribution of the Securities to or through
any person or entity; provided, however, that by making the representations
herein, such Buyer does not agree to hold any of the Securities for any minimum
or other specific term and reserves the right to dispose of the Securities at
any time in accordance with or pursuant to a registration statement or an
exemption under the 1933 Act. Such Buyer is acquiring the Securities hereunder
in the ordinary course of its business. Such Buyer does not presently have any
agreement or understanding, directly or indirectly, with any Person to
distribute any of the Securities.

(b) Accredited Investor Status. Such Buyer is an “accredited investor” as that
term is defined in Rule 501(a) of Regulation D.

(c) Reliance on Exemptions. Such Buyer understands that the Securities are being
offered and sold to it in reliance on specific exemptions from the registration
requirements of United States federal and state securities laws and that the
Company is relying in part upon the

 

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truth and accuracy of, and such Buyer’s compliance with, the representations,
warranties, agreements, acknowledgments and understandings of such Buyer set
forth herein in order to determine the availability of such exemptions and the
eligibility of such Buyer to acquire the Securities.

(d) Information. Such Buyer and its advisors, if any, have been furnished with
all materials relating to the business, finances and operations of the Company
and materials relating to the offer and sale of the Securities which have been
requested by such Buyer. Such Buyer and its advisors, if any, have been afforded
the opportunity to ask questions of the Company. Neither such inquiries nor any
other due diligence investigations conducted by such Buyer or its advisors, if
any, or its representatives shall modify, amend or affect such Buyer’s right to
rely on the Company’s representations and warranties contained herein. Such
Buyer understands that its investment in the Securities involves a high degree
of risk and is able to afford a complete loss of such investment. Such Buyer has
sought such accounting, legal and tax advice as it has considered necessary to
make an informed investment decision with respect to its acquisition of the
Securities. Such Buyer understands that the market price of the Common Stock has
been volatile and that no representation is being made as to the future value of
the Common Stock. Such Buyer further understands that nothing in this Agreement,
any other Transaction Document (as defined below) or any other materials
presented to the Investor in connection with the purchase and sale of the
Securities constitutes legal, tax or investment advice by the Company.

(e) No Governmental Review. Such Buyer understands that no United States federal
or state agency or any other government or governmental agency has passed on or
made any recommendation or endorsement of the Securities or the fairness or
suitability of the investment in the Securities nor have such authorities passed
upon or endorsed the merits of the offering of the Securities.

(f) Transfer or Resale. Such Buyer understands that except as provided in the
Registration Rights Agreement: (i) the Securities have not been and are not
being registered under the 1933 Act or any state securities laws, and may not be
offered for sale, sold, assigned or transferred unless (A) subsequently
registered thereunder, (B) such Buyer shall have delivered to the Company an
opinion of counsel, in form and substance reasonably acceptable to the Company,
to the effect that such Securities to be sold, assigned or transferred may be
sold, assigned or transferred pursuant to an exemption from such registration,
or (C) such Buyer provides the Company with reasonable assurance that such
Securities can be sold, assigned or transferred pursuant to Rule 144 or Rule
144A promulgated under the 1933 Act, as amended, (or a successor rule thereto)
(collectively, “Rule 144”); (ii) any sale of the Securities made in reliance on
Rule 144 may be made only in accordance with the terms of Rule 144 and further,
if Rule 144 is not applicable, any resale of the Securities under circumstances
in which the seller (or the Person (as defined in Section 3(s)) through whom the
sale is made) may be deemed to be an underwriter (as that term is defined in the
1933 Act) may require compliance with some other exemption under the 1933 Act or
the rules and regulations of the SEC thereunder; and (iii) neither the Company
nor any other Person is under any obligation to register the Securities under
the 1933 Act or any state securities laws or to comply with the terms and
conditions of any exemption thereunder. Notwithstanding the foregoing, the
Securities may be pledged in connection with a bona fide margin account secured
by the Securities and such pledge of

 

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Securities shall not be deemed to be a transfer, sale or assignment of the
Securities hereunder, and no Buyer effecting such a pledge of Securities shall
be required to provide the Company with any notice thereof or otherwise make any
delivery to the Company pursuant to this Agreement or any other Transaction
Document, including, without limitation, this Section 2(f); provided, that in
order to make any sale, transfer or assignment of Securities, such Buyer and its
pledgee makes such disposition in accordance with or pursuant to a registration
statement or an exemption under the 1933 Act.

(g) Legends. Such Buyer understands that the certificates or other instruments
representing the Common Shares and the Warrants and, until such time as the
resale of the Common Shares and the Warrant Shares have been registered under
the 1933 Act as contemplated by the Registration Rights Agreement, the stock
certificates representing the Warrant Shares, except as set forth below, shall
bear any legend as required by the “blue sky” laws of any state and a
restrictive legend in substantially the following form (and a stop-transfer
order may be placed against transfer of such stock certificates):

[NEITHER THE ISSUANCE AND SALE OF THE SECURITIES REPRESENTED BY THIS CERTIFICATE
NOR THE SECURITIES INTO WHICH THESE SECURITIES ARE EXERCISABLE HAVE BEEN][THE
SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN] REGISTERED UNDER THE
SECURITIES ACT OF 1933, AS AMENDED, OR APPLICABLE STATE SECURITIES LAWS. THE
SECURITIES MAY NOT BE OFFERED FOR SALE, SOLD, TRANSFERRED OR ASSIGNED (I) IN THE
ABSENCE OF (A) AN EFFECTIVE REGISTRATION STATEMENT FOR THE SECURITIES UNDER THE
SECURITIES ACT OF 1933, AS AMENDED, OR (B) AN OPINION OF COUNSEL REASONABLY
SATISFACTORY TO THE COMPANY, IN A GENERALLY ACCEPTABLE FORM, THAT REGISTRATION
IS NOT REQUIRED UNDER SAID ACT OR (II) UNLESS SOLD PURSUANT TO RULE 144 OR RULE
144A UNDER SAID ACT. NOTWITHSTANDING THE FOREGOING, THE SECURITIES MAY BE
PLEDGED IN CONNECTION WITH A BONA FIDE MARGIN ACCOUNT SECURED BY THE SECURITIES.

The legend set forth above shall be removed and the Company shall issue a Common
Stock certificate or Warrant, as applicable, without such legend to the holder
of the Securities upon which it is stamped or issue to such holder by electronic
delivery at the applicable balance account at DTC, if, unless otherwise required
by state securities laws, (i) a Registration Statement covering the resale of
such Securities is effective under the 1933 Act, (ii) in connection with a sale,
assignment or other transfer, such holder provides the Company with an opinion
of counsel reasonably satisfactory to the Company, in a generally acceptable
form, to the effect that such sale, assignment or transfer of the Securities may
be made without registration under the applicable requirements of the 1933 Act
and that such legend is no longer required, or (iii) such holder provides the
Company with reasonable assurance that the Securities can be sold, assigned or
transferred pursuant to Rule 144 or Rule 144A. If the Company shall fail for any
reason or for no reason to issue to the holder of the Securities within five
(5) Trading Days after the occurrence of (A) any of (i) through (iii) above and
(B) with respect to the removal of the legend from Common Shares, the delivery
of such legended Common Shares to the Company or

 

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its transfer agent, a certificate without such legend to the holder or to issue
such Securities to such holder by electronic delivery at the applicable balance
account at DTC, and if on or after such Trading Day the holder purchases (in an
open market transaction or otherwise) shares of Common Stock to deliver in
satisfaction of a sale by the holder of such Securities that the holder
anticipated receiving without legend from the Company (a “Buy-In”), then the
Company shall, within five (5) Business Days after the holder’s request and in
the holder’s discretion, either (i) pay cash to the holder in an amount equal to
the holder’s total purchase price (including brokerage commissions, if any) for
the shares of Common Stock so purchased (the “Buy-In Price”), at which point the
Company’s obligation to deliver such unlegended Securities shall terminate, or
(ii) promptly honor its obligation to deliver to the holder such unlegended
Securities as provided above and pay cash to the holder in an amount equal to
the excess (if any) of the Buy-In Price over the product of (A) such number of
shares of Common Stock, times (B) the Closing Bid Price on the date of exercise.

(h) Validity; Enforcement. Such Buyer has the requisite corporate, partnership
or limited company power and authority to enter into and perform its obligations
under this Agreement and the Registration Rights Agreement. This Agreement and
the Registration Rights Agreement have been duly and validly authorized,
executed and delivered on behalf of such Buyer and shall constitute the legal,
valid and binding obligations of such Buyer enforceable against such Buyer in
accordance with their respective terms, except as such enforceability may be
limited by general principles of equity or to applicable bankruptcy, insolvency,
reorganization, moratorium, liquidation and other similar laws relating to, or
affecting generally, the enforcement of applicable creditors’ rights and
remedies. No further consent or authorization is required by such Buyer, its
Board of Directors or stockholders, partners or members, as applicable.

(i) No Conflicts. The execution, delivery and performance by such Buyer of this
Agreement and the Registration Rights Agreement and the consummation by such
Buyer of the transactions contemplated hereby and thereby will not (i) result in
a violation of the organizational documents of such Buyer or (ii) conflict with,
or constitute a default (or an event which with notice or lapse of time or both
would become a default) under, or give to others any rights of termination,
amendment, acceleration or cancellation of, any agreement, indenture or
instrument to which such Buyer is a party, or (iii) result in a violation of any
law, rule, regulation, order, judgment or decree (including federal and state
securities laws) applicable to such Buyer, except in the case of clauses
(ii) and (iii) above, for such conflicts, defaults, rights or violations which
would not, individually or in the aggregate, reasonably be expected to have a
material adverse effect on the ability of such Buyer to perform its obligations
hereunder.

(j) Residency. Such Buyer is a resident of that jurisdiction specified below its
address on the Schedule of Buyers.

(k) Manipulation of Price; Certain Trading Limitations. Such Buyer has not, and
to its knowledge no one acting on its behalf has, (i) taken, directly or
indirectly, any action designed to cause or to result in the stabilization or
manipulation of the price of any security of the Company, (ii) sold, bid for,
purchased, or paid any compensation for soliciting purchases of, any of the
Securities, or (iii) paid or agreed to pay to any person any compensation for
soliciting another to purchase any other securities of the Company. Such Buyer
(A) represents that on and

 

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from the date such Buyer first became aware of the Offering until the date
hereof he, she or it has not and (B) covenants that for the period commencing on
the date hereof and ending on the filing of the 2005 10-K, he, she or it will
not, nor will any Affiliates, engage in any hedging or other transaction which
is designed to or could reasonably be expected to lead to or result in, or be
characterized as, a sale, an offer to sell, a solicitation of offers to buy,
disposition of, loan, pledge or grant of any right with respect to
(collectively, a “Disposition”) the Common Stock of the Company by the Investor
or any other person or entity in violation of the 1933 Act. Such prohibited
hedging or other transactions would include without limitation effecting any
short sale or having in effect any short position (whether or not such sale or
position is against the box and regardless of when such position was entered
into) or any purchase, sale or grant of any right (including without limitation
any put or call option) with respect to the Common Stock of the Company or with
respect to any security (other than a broad-based market basket or index) that
includes, relates to or derives any significant part of its value from the
Common Stock of the Company. Notwithstanding anything contained herein, for
avoidance of doubt, nothing contained herein shall constitute a representation
or warranty, or preclude any actions, with respect to the identification of the
availability of available shares to borrow in order to effect any Disposition,
short sale or similar transactions in the future.

(l) No Offer or Sale of Securities. Such Buyer hereby covenants that it will
not, directly or indirectly, offer, sell, pledge (except a pledge in connection
with a bona fide margin account secured by the Securities), transfer or
otherwise dispose of (or solicit any offers to buy, purchase or otherwise
acquire or take a pledge of) any of the Securities, nor will such Buyer engage
in a short sale that results or may result in a disposition of the securities,
without (i) complying with the provisions of this Agreement, including but not
limited to Sections 2(f) and 2(g) hereof, or (ii) satisfying the requirements of
the 1933 Act and the rules and regulations promulgated thereunder, including,
without limitation, causing the prospectus delivery requirement under the 1933
Act to be satisfied, if applicable. Such Buyer acknowledges that there may
occasionally be times when the Company, based on the advice of its counsel,
determines that, subject to any limitations imposed by the Registration Rights
Agreement, it must suspend the use of the prospectus forming a part of the
Registration Statement (as defined in the Registration Rights Agreement) until
such time as an amendment to the Registration Statement has been filed by the
Company and declared effective by the SEC or until the Company has amended or
supplemented such prospectus.

(m) SEC Reports. Such Buyer has had access to the draft of the 2005 10-K and all
reports, schedules, forms, statements and other documents filed by the Company
with the SEC pursuant to the reporting requirements of the 1934 Act during the
year prior to the date hereof, including but not limited to the Company’s Annual
Report on Form 10-K for the year ended December 31, 2004 (and any amendments
thereto), the Company’s Proxy Statement for its 2005 Annual Meeting of
Shareholders (and any amendments thereto) and each of the Company’s Current
Reports on Form 8-K, filed since the date one year before the date hereof (and
any amendments thereto).

 

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3. REPRESENTATIONS AND WARRANTIES OF THE COMPANY.

The Company represents and warrants to each of the Buyers that:

(a) Organization and Qualification. Each of the Company and its “Subsidiary”
(which for purposes of this Agreement means any entity in which the Company,
directly or indirectly, owns capital stock or holds an equity or similar
interest) are corporations duly organized and validly existing in good standing
under the laws of the jurisdiction in which they are incorporated, and have the
requisite corporate power and authorization to own their properties and to carry
on their business as now being conducted. Each of the Company and its Subsidiary
is duly qualified as a foreign corporation to do business and is in good
standing in every jurisdiction in which its ownership of property or the nature
of the business conducted by it makes such qualification necessary, except to
the extent that the failure to be so qualified or be in good standing would not
have a Material Adverse Effect. As used in this Agreement, “Material Adverse
Effect” means any material adverse effect on the business, properties, assets,
operations, results of operations, condition (financial or otherwise) or
prospects of the Company and its Subsidiary, taken as a whole, or on the
authority or ability of the Company to substantially perform its obligations
under the Transaction Documents (as defined below). The Company has no
Subsidiaries except as set forth on Schedule 3(a).

(b) Authorization; Enforcement; Validity. The Company has the requisite
corporate power and authority to enter into and perform its obligations under
this Agreement, the Registration Rights Agreement, the Irrevocable Transfer
Agent Instructions (as defined in Section 5), the Warrants and each of the other
agreements executed by the parties hereto in connection with the transactions
contemplated by this Agreement (collectively, the “Transaction Documents”) and
to issue the Securities in accordance with the terms hereof and thereof. The
execution and delivery of the Transaction Documents by the Company and the
consummation by the Company of the transactions contemplated hereby and thereby,
including, without limitation, the issuance of the Common Shares and the
Warrants and the reservation for issuance and the issuance of the Warrant Shares
issuable upon exercise of the Warrant have been duly authorized by the Company’s
Board of Directors and no further consent or authorization is required by the
Company, its Board of Directors or its stockholders. This Agreement and the
other Transaction Documents have been duly executed and delivered by the
Company, and constitute the legal, valid and binding obligations of the Company,
enforceable against the Company in accordance with their respective terms,
except as such enforceability may be limited by general principles of equity or
applicable bankruptcy, insolvency, reorganization, moratorium, liquidation or
similar laws relating to, or affecting generally, the enforcement of applicable
creditors’ rights and remedies.

(c) Issuance of Securities. The Common Shares and the Warrants are duly
authorized and, upon issuance in accordance with the terms hereof, shall be
validly issued and free from all taxes, liens and charges with respect to the
issue thereof and the Common Shares shall be fully paid and nonassessable with
the holders being entitled to all rights accorded to a holder of Common Stock.
As of the Closing Date, the Company shall have duly authorized and reserved for
issuance a number of shares of Common Stock which equals the number of Warrant
Shares. The Company shall, so long as any of the Warrants are outstanding, take
all action necessary to reserve and keep available out of its authorized and
unissued Common Stock, solely

 

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for the purpose of effecting the exercise of the Warrants, at least 100% of the
number of shares of Common Stock issuable upon exercise of the Warrants. Upon
exercise in accordance with the Warrants, the Warrant Shares will be validly
issued, fully paid and nonassessable and free from all taxes, liens and charges
with respect to the issue thereof, with the holders being entitled to all rights
accorded to a holder of Common Stock. Assuming the truth and accuracy of, and
each Buyer’s compliance with, the representations, warranties, agreements,
acknowledgments and understandings of each Buyer set forth in this Agreement
(including but not limited to Section 2(c), the issuance by the Company of the
Securities is exempt from registration under the 1933 Act.

(d) No Conflicts. The execution, delivery and performance of the Transaction
Documents by the Company and the consummation by the Company of the transactions
contemplated hereby and thereby (including, without limitation, the issuance of
the Common Shares and Warrants and reservation for issuance and issuance of the
Warrant Shares) will not (i) result in a violation of the Certificate of
Incorporation (as defined below) or Bylaws (as defined below) of the Company or
its Subsidiary or (ii) conflict with, or constitute a default (or an event which
with notice or lapse of time or both would become a default) under, or give to
others any rights of termination, amendment, acceleration or cancellation of,
any material agreement, indenture or instrument to which the Company or its
Subsidiary is a party, or (iii) result in a violation of any law, rule,
regulation, order, judgment or decree (including federal and state securities
laws and regulations and the rules and regulations of the NASD OTC Bulletin
Board (the “Principal Market”) applicable to the Company or its Subsidiary or by
which any property or asset of the Company or its Subsidiary is bound or
affected except in the case of the foregoing clauses (ii) or (iii) for such
conflicts, defaults or violations which would not, individually or in the
aggregate, reasonably be expected to have a Material Adverse Effect.

(e) Consents. The Company is not required to obtain any consent, authorization
or order of, or make any filing or registration with, any court, governmental
agency or any regulatory or self-regulatory agency or any other Person in order
for it to execute, deliver or perform any of its obligations under or
contemplated by the Transaction Documents, in each case in accordance with the
terms hereof or thereof. All consents, authorizations, orders, filings and
registrations which the Company is required to obtain pursuant to the preceding
sentence have been obtained or effected on or prior to the Closing Date. The
Company and its Subsidiary are unaware of any facts or circumstances that might
prevent the Company from obtaining or effecting any of the registration,
application or filings pursuant to the preceding sentence. The Company is not in
violation of any listing requirements of the Principal Market which exist and
are applicable to it and has no knowledge of any facts that would reasonably
lead to delisting or involuntary suspension of the Common Stock by the Principal
Market or the SEC in the foreseeable future.

(f) Acknowledgment Regarding Buyer’s Purchase of Securities. The Company
acknowledges and agrees that each Buyer is acting solely in the capacity of
arm’s length purchaser with respect to the Transaction Documents and the
transactions contemplated hereby and thereby and that no Buyer is (i) an officer
or director of the Company, (ii) an “Affiliate” of the Company (as defined in
Rule 144) or (iii) to the knowledge of the Company, a “beneficial owner” of more
than 10% of the shares of Common Stock (as defined for purposes of Rule 13d-3 of
the Securities Exchange Act of 1934, as amended (the “1934 Act”)). The

 

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Company further acknowledges that no Buyer is acting as a financial advisor or
fiduciary of the Company (or in any similar capacity) with respect to the
Transaction Documents and the transactions contemplated hereby and thereby, and
any advice given by a Buyer or any of its representatives or agents in
connection with the Transaction Documents and the transactions contemplated
hereby and thereby is merely incidental to such Buyer’s purchase of the
Securities. The Company further represents to each Buyer that the Company’s
decision to enter into the Transaction Documents has been based solely on the
independent evaluation by the Company and its representatives.

(g) No General Solicitation; Placement Agent’s Fees. Neither the Company, nor
any of its Affiliates, nor any Person acting on its or their behalf, has engaged
in any form of general solicitation or general advertising (within the meaning
of Regulation D) in connection with the offer or sale of the Securities. The
Company shall be responsible for the payment of any placement agent’s fees,
financial advisory fees, or brokers’ commissions (other than for persons engaged
by any Buyer or its investment advisor) relating to or arising out of the
transactions contemplated hereby. The Company shall pay, and hold each Buyer
harmless against, any liability, loss or expense (including, without limitation,
attorney’s fees and out-of-pocket expenses) arising in connection with any such
claim. The Company has not engaged any placement agent or other agent in
connection with the sale of the Securities.

(h) No Integrated Offering. None of the Company, its Subsidiary, any of their
Affiliates, and any Person acting on their behalf has, directly or indirectly,
made any offers or sales of any security or solicited any offers to buy any
security, under circumstances that would require registration of any of the
Securities under the 1933 Act or cause this offering of the Securities to be
integrated with prior offerings by the Company for purposes of the 1933 Act or
any applicable stockholder approval provisions, including, without limitation,
under the rules and regulations of any exchange or automated quotation system on
which any of the securities of the Company are listed or designated. Except
pursuant to the terms of this Agreement or any other Transaction Document, none
of the Company, its Subsidiary, their Affiliates and any Person acting on their
behalf will take any action or steps referred to in the preceding sentence that
would require registration of any of the Securities under the 1933 Act or cause
the offering of the Securities to be integrated with other offerings.

(i) Dilutive Effect. The Company understands and acknowledges that the number of
Warrant Shares issuable upon exercise of the Warrants will increase in certain
circumstances. The Company further acknowledges that its obligation to issue the
Warrant Shares upon exercise of the Warrants in accordance with this Agreement
and the Warrants is absolute and unconditional regardless of the dilutive effect
that such issuance may have on the ownership interests of other stockholders of
the Company.

(j) Application of Takeover Protections; Rights Agreement. No control share
acquisition, business combination, poison pill (including any distribution under
a rights agreement) or other similar anti-takeover provision under the
Certificate of Incorporation or the laws of the State of Delaware or any
shareholder rights plan or similar arrangement will be triggered as a result of
the transactions contemplated by this Agreement, including, without limitation,
the Company’s issuance of the Securities and any Buyer’s ownership of the
Securities.

 

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(k) SEC Documents; Financial Statements. Except as set forth on Schedule 3(k),
during the two years prior to the date hereof, the Company has timely filed all
reports, schedules, forms, statements and other documents required to be filed
by it with the SEC pursuant to the reporting requirements of the 1934 Act (all
of the foregoing filed prior to the date hereof or prior to the date of the
Closing, and all exhibits included therein and financial statements and
schedules thereto and documents incorporated by reference therein being
hereinafter referred to as the “SEC Documents”). The Company has delivered to
the Buyers or their respective representatives true, correct and complete copies
of the SEC Documents not available on the EDGAR system. As of their respective
dates, the form and substance of the SEC Documents complied in all material
respects with the requirements of the 1934 Act and the rules and regulations of
the SEC promulgated thereunder applicable to the SEC Documents, and none of the
SEC Documents, at the time they were filed with the SEC, contained any untrue
statement of a material fact or omitted to state a material fact required to be
stated therein or necessary in order to make the statements therein, in the
light of the circumstances under which they were made, not misleading. As of
their respective dates, the financial statements of the Company included in the
SEC Documents complied as to form in all material respects with applicable
accounting requirements and the published rules and regulations of the SEC with
respect thereto. Such financial statements have been prepared in accordance with
generally accepted accounting principles, consistently applied, during the
periods involved (except (i) as may be otherwise indicated in such financial
statements or the notes thereto, or (ii) in the case of unaudited interim
statements, to the extent they may exclude footnotes or may be condensed or
summary statements) and fairly present in all material respects the financial
position of the Company as of the dates thereof and the results of its
operations and cash flows for the periods then ended (subject, in the case of
unaudited statements, to normal year-end audit adjustments). No other
information provided by or on behalf of the Company to the Buyers which is not
included in the SEC Documents, including, without limitation, information
referred to in Section 2(d) of this Agreement, contains any untrue statement of
a material fact or omits to state any material fact necessary in order to make
the statements therein, in the light of the circumstance under which they are or
were made, not misleading.

(l) Absence of Certain Changes. Since December 31, 2005, there has been no
material adverse change and no material adverse development in the business,
properties, operations, condition (financial or otherwise), results of
operations or prospects of the Company or its Subsidiary. Since December 31,
2005, the Company has not (i) declared or paid any dividends, (ii) sold any
assets, individually or in the aggregate, in excess of $100,000 outside of the
ordinary course of business or (iii) had capital expenditures, individually or
in the aggregate, materially inconsistent with its capital expenditures in 2005.
The Company has not taken any steps to seek protection pursuant to any
bankruptcy law nor does the Company have any knowledge or reason to believe that
its creditors intend to initiate involuntary bankruptcy proceedings or any
actual knowledge of any fact which would reasonably lead a creditor to do so.

(m) No Undisclosed Events, Liabilities, Developments or Circumstances. Except as
disclosed in the Company’s Annual Report on Form 10-K for the year ended
December 31, 2005 in the form attached hereto as Exhibit H, which the Company
will file without any material revisions or modifications (the “2005 10-K”), no
event, liability, development or circumstance has occurred or exists, or is
contemplated to occur, with respect to

 

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the Company or its Subsidiary or their respective business, properties,
prospects, operations or financial condition, that would be required to be
disclosed by the Company under applicable securities laws on a registration
statement on Form S-1 filed with the SEC relating to an issuance and sale by the
Company of its Common Stock and which has not been publicly announced; provided,
that no revision or modification made to the draft 2005 10-K prior to the time
it is filed shall change the foregoing representation.

(n) Conduct of Business; Regulatory Permits. Neither the Company nor its
Subsidiary is in violation of any term of or in default under the Certificate of
Incorporation or Bylaws or their organizational charter or bylaws, respectively.
Neither the Company nor any Subsidiary is in violation of any judgment, decree
or order or any statute, ordinance, rule or regulation applicable to the Company
or its Subsidiary, except for violations or possible violations which would not,
individually or in the aggregate, have a Material Adverse Effect. Without
limiting the generality of the foregoing, the Company has not been notified that
it is currently in violation of any of the rules, regulations or requirements of
the Principal Market and has no knowledge of any facts or circumstances that
would reasonably lead to delisting or suspension of the Common Stock by the
Principal Market in the foreseeable future. Since December 31, 2004, (i) the
Common Stock has been designated for quotation or listed on the Principal
Market, (ii) trading in the Common Stock has not been suspended by the SEC or
the Principal Market and (iii) the Company has received no communication,
written or oral, from the SEC or the Principal Market regarding the suspension
or delisting of the Common Stock from the Principal Market. The Company and its
Subsidiary possess all certificates, authorizations and permits issued by the
appropriate federal, state or foreign regulatory authorities necessary to
conduct their respective businesses, except where the failure to possess such
certificates, authorizations or permits would not have, individually or in the
aggregate, a Material Adverse Effect, and neither the Company nor any such
Subsidiary has received any notice of current or pending proceedings relating to
the revocation or modification of any such certificate, authorization or permit.

(o) Foreign Corrupt Practices. Neither the Company, nor its Subsidiary, nor any
director, officer, agent, employee or other Person acting on behalf of the
Company or its Subsidiary has, in the course of its actions for, or on behalf
of, the Company (i) used any corporate funds for any unlawful contribution,
gift, entertainment or other unlawful expenses relating to political activity;
(ii) made any direct or indirect unlawful payment to any foreign or domestic
government official or employee from corporate funds; (iii) violated in any
material respect or is in violation in any material respect of any provision in
of the U.S. Foreign Corrupt Practices Act of 1977, as amended; or (iv) made any
unlawful bribe, rebate, payoff, influence payment, kickback or other unlawful
payment to any foreign or domestic government official or employee.

(p) Sarbanes-Oxley Act. The Company is in compliance with any and all applicable
requirements of the Sarbanes-Oxley Act of 2002 that are effective as of the date
hereof, and any and all applicable rules and regulations promulgated by the SEC
thereunder that are effective as of the date hereof, except where such
noncompliance would not have, individually or in the aggregate, a Material
Adverse Effect.

 

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(q) Transactions With Affiliates. Except as set forth in any SEC Document filed
since the date one year prior to the date hereof, none of the officers,
directors or employees of the Company is presently a party to any transaction
with the Company or its Subsidiary (other than for ordinary course services as
employees, officers or directors), including any contract, agreement or other
arrangement providing for the furnishing of services to or by, providing for
rental of real or personal property to or from, or otherwise requiring payments
to or from any such officer, director or employee or, to the knowledge of the
Company, any corporation, partnership, trust or other entity in which any such
officer, director, or employee has a substantial interest or is an officer,
director, trustee or partner.

(r) Capitalization. As of the date hereof, the authorized capital stock of the
Company consists of (x) 100,000,000 shares of Common Stock, of which as of the
close of business on March 15, 2006, 83,447,565 shares are issued and
outstanding, 770,610 shares are reserved for issuance pursuant to the Company’s
employee and directors stock option plans, 4,774,336 shares are reserved for
issuance pursuant to other options and warrants outstanding (other than the
Warrants) and no shares are reserved for issuance pursuant to securities (other
than the Warrants and the aforementioned options and warrants) exercisable or
exchangeable for, or convertible into, shares of Common Stock. All of such
outstanding shares have been, or upon issuance will be, validly issued and are
fully paid and nonassessable. Except as set forth above in this Section 3(r) or
on Schedule 3(r): (i) no shares of the Company’s capital stock are subject to
preemptive rights or any other similar rights or any liens or encumbrances
suffered or permitted by the Company; (ii) there are no outstanding options,
warrants, scrip, rights to subscribe to, calls or commitments of any character
whatsoever relating to, or securities or rights convertible into, or exercisable
or exchangeable for, any shares of capital stock of the Company or its
Subsidiary, or contracts, commitments, understandings or arrangements by which
the Company or its Subsidiary is or may become bound to issue additional shares
of capital stock of the Company or its Subsidiary or options, warrants, scrip,
rights to subscribe to, calls or commitments of any character whatsoever
relating to, or securities or rights convertible into, or exercisable or
exchangeable for, any shares of capital stock of the Company or its Subsidiary;
(iii) there are no outstanding debt securities, notes, credit agreements, credit
facilities or other agreements, documents or instruments evidencing Indebtedness
(as defined in Section 3(s)) of the Company or its Subsidiary or by which the
Company or its Subsidiary is or may become bound; (iv) there are no agreements
or arrangements under which the Company or its Subsidiary is obligated to
register the sale of any of their securities under the 1933 Act (except the
Registration Rights Agreement); (v) there are no outstanding securities or
instruments of the Company or its Subsidiary which contain any redemption or
similar provisions, and there are no contracts, commitments, understandings or
arrangements by which the Company or its Subsidiary is or may become bound to
redeem a security of the Company or its Subsidiary; (vi) there are no securities
or instruments containing anti-dilution or similar provisions that will be
triggered by the issuance of the Securities; (vii) the Company does not have any
stock appreciation rights or “phantom stock” plans or agreements or any similar
plan or agreement; and (viii) the Company and its Subsidiary have no liabilities
or obligations required to be disclosed in the SEC Documents (as defined herein)
but not so disclosed in the SEC Documents, other than those incurred in the
ordinary course of the Company’s or any Subsidiary’s respective businesses and
which, individually or in the aggregate, do not or would not have a Material
Adverse Effect. The Company has furnished or made available to the Buyer upon
such Buyer’s request, true, correct and complete copies of the Company’s
Certificate of Incorporation, as amended and as in effect on the date hereof
(the “Certificate of Incorporation”), and the Company’s Bylaws, as amended and
as in effect on the date hereof (the “Bylaws”).

 

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(s) Indebtedness and Other Contracts. Except as disclosed in Schedule 3(s),
neither the Company nor its Subsidiary (i) has any outstanding Indebtedness (as
defined below), (ii) is a party to any contract, agreement or instrument, the
violation of which, or default under which, by the other party(ies) to such
contract, agreement or instrument would result in a Material Adverse Effect,
(iii) is in violation of any term of or in default under any contract, agreement
or instrument relating to any Indebtedness, except where such violations and
defaults would not result, individually or in the aggregate, in a Material
Adverse Effect, or (iv) is a party to any contract, agreement or instrument
relating to any Indebtedness, the performance of which, in the judgment of the
Company’s officers, has or is expected to have a Material Adverse Effect. For
purposes of this Agreement: (x) “Indebtedness” of any Person means, without
duplication (A) all indebtedness for borrowed money, (B) all obligations issued,
undertaken or assumed as the deferred purchase price of property or services
(other than trade payables entered into in the ordinary course of business),
(C) all reimbursement or payment obligations with respect to letters of credit,
surety bonds and other similar instruments, (D) all obligations evidenced by
notes, bonds, debentures or similar instruments, including obligations so
evidenced incurred in connection with the acquisition of property, assets or
businesses, (E) all indebtedness created or arising under any conditional sale
or other title retention agreement, or incurred as financing, in either case
with respect to any property or assets acquired with the proceeds of such
indebtedness (even though the rights and remedies of the seller or bank under
such agreement in the event of default are limited to repossession or sale of
such property), (F) all monetary obligations under any leasing or similar
arrangement which, in connection with generally accepted accounting principles,
consistently applied for the periods covered thereby, is classified as a capital
lease, (G) all indebtedness referred to in clauses (A) through (F) above secured
by (or for which the holder of such Indebtedness has an existing right,
contingent or otherwise, to be secured by) any mortgage, lien, pledge, charge,
security interest or other encumbrance upon or in any property or assets
(including accounts and contract rights) owned by any Person, even though the
Person which owns such assets or property has not assumed or become liable for
the payment of such indebtedness, and (H) all Contingent Obligations in respect
of indebtedness or obligations of others of the kinds referred to in clauses
(A) through (G) above; (y) “Contingent Obligation” means, as to any Person, any
direct or indirect liability, contingent or otherwise, of that Person with
respect to any indebtedness, lease, dividend or other obligation of another
Person if the primary purpose or intent of the Person incurring such liability,
or the primary effect thereof, is to provide assurance to the obligee of such
liability that such liability will be paid or discharged, or that any agreements
relating thereto will be complied with, or that the holders of such liability
will be protected (in whole or in part) against loss with respect thereto; and
(z) “Person” means an individual, a limited liability company, a partnership, a
joint venture, a corporation, a trust, an unincorporated organization and a
government or any department or agency thereof.

(t) Absence of Litigation. Except as set forth on Schedule 3(t) or the 2005
10-K, there is no action, suit, proceeding, inquiry or investigation before or
by the Principal Market, any court, public board, government agency,
self-regulatory organization or body pending or, to the knowledge of the
Company, threatened (in writing) against the Company, the Common Stock or its
Subsidiary or any of the Company’s or the Company’s Subsidiary’s officers or
directors, whether of a civil or criminal nature or otherwise wherein an
unfavorable decision, ruling or finding would reasonably be expected to have a
Material Adverse Effect.

 

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(u) Insurance. The Company and its Subsidiary are insured by insurers of
recognized financial responsibility against such losses and risks and in such
amounts as management of the Company believes to be prudent and customary in the
businesses in which the Company and its Subsidiary are engaged. Neither the
Company nor any Subsidiary has been refused any insurance coverage sought or
applied for. Neither the Company nor any Subsidiary has any reason to believe
that it will not be able to renew its existing insurance coverage as and 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.

(v) Employee Relations. (i) Neither the Company nor its Subsidiary is a party to
any collective bargaining agreement or employs any member of a union. No
executive officer of the Company (as defined in Rule 501(f) of the 1933 Act) has
notified the Company that such officer intends to leave the Company or otherwise
terminate such officer’s employment with the Company. No executive officer of
the Company, to the knowledge of the Company, is, or is now expected to be, in
violation of any material term of any employment contract, confidentiality,
disclosure or proprietary information agreement, non-competition agreement, or
any other contract or agreement or any restrictive covenant, and to the
knowledge of the Company the continued employment of each such executive officer
does not subject the Company or its Subsidiary to any liability with respect to
any of the foregoing matters.

(ii) The Company and its Subsidiary are in compliance with all federal, state,
local and foreign laws and regulations respecting labor, employment and
employment practices and benefits, terms and conditions of employment and wages
and hours, except where failure to be in compliance would not, either
individually or in the aggregate, reasonably be expected to result in a Material
Adverse Effect.

(w) Title. The Company and its Subsidiary have good and marketable title in fee
simple to all real property and good and marketable title to all personal
property owned by them which is material to the business of the Company and its
Subsidiary, in each case free and clear of all liens, encumbrances and defects
except for (i) such liens and encumbrances pursuant to Indebtedness described on
Schedule 3(s) or (ii) for such liens, encumbrances and defects such as do not
materially affect the value of such property and do not interfere with the use
made and proposed to be made of such property by the Company and its Subsidiary.
Any real property and facilities held under lease by the Company and its
Subsidiary are held by them under valid, subsisting and enforceable leases with
such exceptions as are not material and do not interfere with the use made and
proposed to be made of such property and buildings by the Company and its
Subsidiary.

(x) Intellectual Property Rights. The Company and its Subsidiary own or possess
adequate rights or licenses to use all trademarks, trade names, service marks,
service mark registrations, service names, patents, patent rights, copyrights,
inventions, licenses, approvals, governmental authorizations, trade secrets and
other intellectual property rights (“Intellectual Property Rights”) necessary to
conduct their respective businesses as now conducted. None of the Company’s
material Intellectual Property Rights have expired or

 

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terminated, or are expected to expire or terminate within three years from the
date of this Agreement. The Company does not have any knowledge of any
infringement by the Company or its Subsidiary of Intellectual Property Rights of
others. There is no claim, action or proceeding being made or brought with
respect to which the Company has received written notice, or to the knowledge of
the Company, threatened (in writing), against the Company or its Subsidiary
regarding its Intellectual Property Rights. The Company and its Subsidiary have
taken reasonable security measures to protect the secrecy, confidentiality and
value of all of their Intellectual Property Rights.

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

(z) Subsidiary Rights. The Company or its Subsidiary has the unrestricted right
to vote, and (subject to limitations imposed by applicable law) to receive
dividends and distributions on, all capital securities of its Subsidiary as
owned by the Company or such Subsidiary.

(aa) Tax Status. The Company and its Subsidiary (i) has made or filed all
federal and state income and all other tax returns, reports and declarations
required by any jurisdiction to which it is subject, (ii) has paid all taxes and
other governmental assessments and charges that are material in amount, shown or
determined to be due on such returns, reports and declarations, except those
being contested in good faith and (iii) has set aside on its books provision
reasonably adequate for the payment of all taxes for periods subsequent to the
periods to which such returns, reports or declarations apply, except in the case
of any of the foregoing clauses (i), (ii) or (iii) where a failure to so file,
pay or set aside would not be likely to have a Material Adverse Effect. There
are no unpaid taxes in any material amount claimed to be due by the taxing
authority of any jurisdiction, and the executive officers of the Company know of
no basis for any such claim.

(bb) Internal Accounting and Disclosure Controls. The Company and its Subsidiary
maintain a system of internal accounting controls sufficient to provide
reasonable assurance that (i) transactions are executed in accordance with
management’s general or specific

 

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authorizations, (ii) transactions are recorded as necessary to permit
preparation of financial statements in conformity with generally accepted
accounting principles and to maintain asset and liability accountability,
(iii) access to assets or incurrence of liabilities is permitted only in
accordance with management’s general or specific authorization and (iv) the
recorded accountability for assets and liabilities is compared with the existing
assets and liabilities at reasonable intervals and appropriate action is taken
with respect to any difference. The Company maintains disclosure controls and
procedures (as such term is defined in Rule 13a-14 under the 1934 Act) that are
effective in ensuring that information required to be disclosed by the Company
in the reports that it files or submits under the 1934 Act is recorded,
processed, summarized and reported, within the time periods specified in the
rules and forms of the SEC, including, without limitation, controls and
procedures designed in to ensure that information required to be disclosed by
the Company in the reports that it files or submits under the 1934 Act is
accumulated and communicated to the Company’s management, including its
principal executive officer or officers and its principal financial officer or
officers, as appropriate, to allow timely decisions regarding required
disclosure.

(cc) Off Balance Sheet Arrangements. There is no transaction, arrangement, or
other relationship between the Company and an unconsolidated or other off
balance sheet entity that is required to be disclosed by the Company in its
Exchange Act filings and is not so disclosed or that otherwise would be
reasonably likely to have a Material Adverse Effect.

(dd) Manipulation of Price. The Company has not, and to its knowledge no one
acting on its behalf has, (i) taken, directly or indirectly, any action designed
to cause or to result in the stabilization or manipulation of the price of any
security of the Company to facilitate the sale or resale of any of the
Securities, (ii) sold, bid for, purchased, or paid any compensation for
soliciting purchases of, any of the Securities, or (iii) paid or agreed to pay
to any person any compensation for soliciting another to purchase any other
securities of the Company.

(ee) Transfer Taxes. On the Closing Date, all stock transfer or other taxes
(other than income or similar taxes) which are required to be paid in connection
with the sale and transfer of the Securities to be sold to each Buyer hereunder
will be, or will have been, fully paid or provided for by the Company, and all
laws imposing such taxes will be or will have been complied with.

(ff) Disclosure. Except for the draft 2005 10-K, the Company confirms that
neither it nor any other Person acting on its behalf has provided any of the
Buyers or their respective agents or counsel with any information that
constitutes or could reasonably be expected to constitute material, nonpublic
information. The Company understands and confirms that each of the Buyers will
rely on the foregoing representations in effecting transactions in securities of
the Company. All disclosure provided to the Buyers regarding the Company, its
business and the transactions contemplated hereby, including the Schedules to
this Agreement, furnished by or on behalf of the Company are true and correct
and do not contain any untrue statement of a material fact or omit to state any
material fact necessary in order to make the statements made therein, in the
light of the circumstances under which they were made, not misleading. Each
press release issued by the Company during the twelve (12) months preceding the
date of this Agreement did not at the time of release contain any untrue
statement of a material fact or omit to state a material fact required to be
stated therein or necessary in order to

 

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make the statements therein, in the light of the circumstances under which they
are made, not misleading. Except as disclosed in the 2005 10-K, no event or
circumstance has occurred or information exists with respect to the Company or
any Subsidiary or either of its or their respective business, properties,
prospects, operations or financial conditions, which, under applicable law, rule
or regulation, requires public disclosure or announcement by the Company but
which has not been so publicly announced or disclosed (assuming for this purpose
that the Company’s reports filed under the Exchange Act of 1934, as amended, are
being incorporated into an effective registration statement filed by the Company
under the 1933 Act); provided, that no revision or modification made to the
draft 2005 10-K prior to the time it is filed shall change the foregoing
representation. The Company acknowledges and agrees that no Buyer makes or has
made any representations or warranties with respect to the transactions
contemplated hereby other than those specifically set forth in Section 2.

4. COVENANTS.

(a) Best Efforts. Each party shall use its best efforts timely to satisfy each
of the covenants and the conditions to be satisfied by it as provided in
Sections 5, 6 and 7 of this Agreement.

(b) Form D and Blue Sky. The Company agrees to file a Form D with respect to the
Securities as required under Regulation D and to provide a copy thereof to each
Buyer promptly after such filing. The Company, on or before the Closing Date,
shall take such action as the Company shall reasonably determine is necessary in
order to obtain an exemption for or to qualify the Securities for sale to the
Buyers at the Closing pursuant to this Agreement under applicable securities or
“Blue Sky” laws of the states of the United States (or to obtain an exemption
from such qualification), and shall provide evidence of any such action so taken
to the Buyers on or prior to the Closing Date. The Company shall make all
filings and reports relating to the offer and sale of the Securities required
under applicable securities or “Blue Sky” laws of the states of the United
States following the Closing Date.

(c) Reporting Status. Until the date on which the Investors (as defined in the
Registration Rights Agreement) shall have sold all the Common Shares and Warrant
Shares and none of the Warrants is outstanding (the “Reporting Period”), the
Company shall use its reasonable best efforts to timely file all reports
required to be filed with the SEC pursuant to the 1934 Act, and the Company
shall not terminate its status as an issuer required to file reports under the
1934 Act even if the 1934 Act or the rules and regulations thereunder would
otherwise permit such termination.

(d) Use of Proceeds. The Company will use the proceeds from the sale of the
Securities for (i) working capital and general corporate purposes and (ii) the
repayment of certain existing Indebtedness of the Company or its Subsidiary. The
Company will not use the proceeds from the sale of the Securities to redeem or
repurchase of any of its equity securities.

(e) Financial Information. The Company agrees to send the following to each
Investor during the Reporting Period (i) unless the following are filed with the
SEC through EDGAR and are available to the public through the EDGAR system,
within one (1) Business Day after the filing thereof with the SEC, a copy of its
Annual Reports on Form 10-K, its

 

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Quarterly Reports on Form 10-Q, any Current Reports on Form 8-K and any
registration statements (other than on Form S-8) or amendments filed pursuant to
the 1933 Act, (ii) unless the following is either (x) filed with the SEC through
EDGAR as an exhibit to a Current Report on Form 8-K and is made available to the
public through the EDGAR system or (y) made available on the Company’s website
on the same day as the release thereof, facsimile copies of all press releases
issued by the Company or its Subsidiary, and (iii) copies of any notices and
other information made available or given to the stockholders of the Company
generally, contemporaneously with the making available or giving thereof to the
stockholders. As used herein, “Business Day” means any day other than Saturday,
Sunday or other day on which commercial banks in The City of New York are
authorized or required by law to remain closed.

(f) Listing. The Company shall promptly secure the listing of all of the
Registrable Securities (as defined in the Registration Rights Agreement) upon
each national securities exchange and automated quotation system, if any, upon
which shares of Common Stock are then listed (subject to official notice of
issuance) and shall maintain, so long as any other shares of Common Stock shall
be so listed, such listing of all Registrable Securities from time to time
issuable under the terms of the Transaction Documents. The Company shall use its
reasonable best efforts to maintain the Common Stock’s authorization for listing
on the Principal Market. The Company shall pay all fees and expenses in
connection with satisfying its obligations under this Section 4(f).

(g) Fees. The Company shall reimburse Magnetar Capital Master Fund, Ltd. (a
Buyer) or its designee(s) (in addition to any other expense amounts paid to any
Buyer prior to the date of this Agreement) for all reasonable costs and
expenses, not to exceed $50,000, incurred in connection with the transactions
contemplated by the Transaction Documents (including all reasonable legal fees
and disbursements in connection therewith, documentation and implementation of
the transactions contemplated by the Transaction Documents and due diligence in
connection therewith), which amount shall be supported by an invoice provided to
the Company by Magnetar Capital Master Fund, Ltd. within seven (7) days after
the Closing, shall be withheld by such Buyer from its Purchase Price at the
Closing. To the extent Magnetar Capital Master Fund, Ltd.’s actual costs and
expenses are less than $50,000, the difference shall be returned by Magnetar
Capital Master Fund, Ltd. to the Company. The Company shall be responsible for
the payment of any placement agent’s fees, financial advisory fees, or broker’s
commissions (other than for Persons engaged by any Buyer) relating to or arising
out of the transactions contemplated hereby. The Company shall pay, and hold
each Buyer harmless against, any liability, loss or expense (including, without
limitation, reasonable attorney’s fees and out-of-pocket expenses) arising in
connection with any claim relating to any such payment.

(h) Pledge of Securities. The Company acknowledges and agrees that the
Securities may be pledged by an Investor (as defined in the Registration Rights
Agreement) in connection with a bona fide margin agreement that is secured by
the Securities. The pledge of Securities shall not be deemed to be a transfer,
sale or assignment of the Securities hereunder, and no Investor effecting a
pledge of Securities shall be required to provide the Company with any notice
thereof or otherwise make any delivery to the Company pursuant to this Agreement
or any other Transaction Document. The Company hereby agrees to execute and
deliver such documentation as a pledgee of the Securities may reasonably request
in connection with a pledge of the Securities to such pledgee by an Investor.

 

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(i) Disclosure of Transactions and Other Material Information. The Company
shall, on or before 8:30 a.m., New York City Time, on the first Business Day
after the date of this Agreement, issue a press release (the “Press Release”) in
the form attached hereto as Exhibit G. On or before 9:30 a.m., New York City
Time, on the third Business Day following the Closing Date, the Company shall
file a Current Report on Form 8-K describing the terms of the transactions
contemplated by the Transaction Documents in the form required by the 1934 Act,
and attaching the material Transaction Documents (including, without limitation,
this Agreement, the form of Warrant and the Registration Rights Agreement) as
exhibits to such filing (including all attachments, the “8-K Filing”). From and
after the filing of the 2005 10-K, no Buyer shall be in possession of any
material, nonpublic information received from the Company, its Subsidiary or any
of its respective officers, directors, employees or agents, that is not
disclosed in the Press Release. The Company shall not, and shall cause its
Subsidiary and each of their respective officers, directors, employees and
agents, not to, provide any Buyer with any material, nonpublic information
regarding the Company or its Subsidiary from and after the filing of the Press
Release without the express written consent of such Buyer. Subject to the
foregoing, neither the Company nor any Buyer shall issue any press releases or
any other public statements with respect to the transactions contemplated
hereby; provided, however, that the Company shall be entitled, without the prior
approval of any Buyer, to make any press release or other public disclosure with
respect to such transactions (i) in substantial conformity with the 8-K Filing
and contemporaneously therewith and (ii) as is required by applicable law and
regulations, including the applicable rules and regulations of the Principal
Market (provided that in the case of clause (i) each Buyer shall be consulted by
the Company in connection with any such press release or other public disclosure
prior to its release).

(j) Additional Registration Statements. Except with respect to any registration
statement(s) related to securities issued in connection with the Company’s
raising up to any additional $12 million in capital (the “Additional
Registration Statement”), until the date that is 90 calendar days from the date
the Registration Statement (as defined in the Registration Rights Agreement) is
first declared effective by the SEC (the “Effective Date”), the Company will not
file a registration statement under the 1933 Act relating to securities that are
not the Securities. Notwithstanding the foregoing, no such Additional
Registration Statement (i) shall be filed before the Filing Date (as defined in
the Registration Rights Agreement) nor (ii) shall become effective before the
Effective Date; provided, however, that such restriction shall not apply to a
registration statement filed on Form S-8 with respect to Common Stock or options
issued to employees of the Company pursuant to the Company’s stock option plan,
which does not exceed 3,000,000 shares.

(k) Reservation of Shares. The Company shall take all action necessary to at all
times have authorized, and reserved for the purpose of issuance at least 100% of
the number of shares of Common Stock issuable upon exercise of the Warrants.

(l) Additional Issuances of Securities.

(i) For purposes of this Section 4(m), the following definitions shall apply.

 

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(1) “Approved Stock Plan” means any employee benefit plan which has been
approved by the Board of Directors of the Company, pursuant to which the
Company’s securities may be issued to any employee, consultant, officer or
director for services provided to the Company.

(2) “Common Stock Equivalents” means, collectively, Options and Convertible
Securities.

(3) “Convertible Securities” means any stock or securities (other than Options)
convertible into or exercisable or exchangeable for Common Shares.

(4) “Excluded Securities” means Common Shares issued or issuable: (i) in
connection with any Approved Stock Plan (ii) upon exercise of the Warrants,
(iii) upon conversion of any Options or Convertible Securities which are
outstanding on the day immediately preceding the Closing Date, provided that the
terms of such Options or Convertible Securities are not amended, modified or
changed on or after the Closing Date, and (iv) in connection with a strategic
alliance, joint venture, collaboration, strategic relationship, licensing
transactions or leasing transactions customary for the industry of the Company
and (v) in connection with any acquisition by the Company, whether through an
acquisition of stock or a merger of any business, assets or technologies the
primary purpose of which is not to raise equity capital in an amount not to
exceed, in the aggregate, 10% of the outstanding shares of Common Stock in any
calendar year.

(5) “Options” means any rights, warrants or options to subscribe for or purchase
Common Stock or Convertible Securities.

(6) “Required Holders” means the holders of at least a majority of the
Registrable Securities.

(7) “Trading Day” means any day on which the Common Stock is traded on the
Principal Market, or, if the Principal Market is not the principal trading
market for the Common Stock, then on the principal securities exchange or
securities market on which the Common Stock is then traded; provided that
“Trading Day” shall not include any day on which the Common Stock is scheduled
to trade on such exchange or market for less than 4.5 hours or any day that the
Common Stock is suspended from trading during the final hour of trading on such
exchange or market (or if such exchange or market does not designate in advance
the closing time of trading on such exchange or market, then during the hour
ending at 4:00 p.m., New York City Time).

 

  (ii) Without the consent of the Required Holders, from the date hereof until
the Effective Date (as defined in the Registration Rights Agreement) (the
“Trigger Date”), the Company will not, directly or indirectly, offer, sell,
grant any option to purchase, or otherwise dispose of (or announce any offer,
sale, grant or any option to purchase or other disposition of) any of its or its
Subsidiary’s debt, equity or

 

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equity equivalent securities, including without limitation any debt, preferred
stock or other instrument or security that is, at any time during its life and
under any circumstances, convertible into or exchangeable or exercisable for
shares of Common Stock or Common Stock Equivalents (any such offer, sale, grant,
disposition or announcement being referred to as a “Subsequent Placement”);
provided, that the foregoing restriction shall not apply with respect to a
Subsequent Placement up to $12,000,000.

 

  (iii) From the date hereof until the date that is 120 days following the
Effective Date, the Company will not, directly or indirectly, effect any
Subsequent Placement unless the Company shall have first complied with this
Section 4(m)(iii).

(1) The Company shall deliver to each Buyer a written notice (the ”Offer
Notice”) of any proposed or intended issuance or sale or exchange (the ”Offer”)
of the securities being offered (the “Offered Securities”) in a Subsequent
Placement, which Offer Notice shall (w) identify and describe the Offered
Securities, (x) describe the price and other terms upon which they are to be
issued, sold or exchanged, and the number or amount of the Offered Securities to
be issued, sold or exchanged, (y) identify the persons or entities (if known) to
which or with which the Offered Securities are to be offered, issued, sold or
exchanged and (z) offer to issue and sell to or exchange with such Buyers all of
the Offered Securities, allocated among such Buyers (a) based on such Buyer’s
pro rata portion of Common Shares purchased hereunder (the “Basic Amount”), and
(b) with respect to each Buyer that elects to purchase its Basic Amount, any
additional portion of the Offered Securities attributable to the Basic Amounts
of other Buyers as such Buyer shall indicate it will purchase or acquire should
the other Buyers subscribe for less than their Basic Amounts (the
“Undersubscription Amount”).

(2) To accept an Offer, in whole or in part, such Buyer must deliver a written
notice to the Company prior to the end of the third (3rd) Business Day after
such Buyer’s receipt of the Offer Notice (the “Offer Period”), setting forth the
portion of such Buyer’s Basic Amount that such Buyer elects to purchase and, if
such Buyer shall elect to purchase all of its Basic Amount, the
Undersubscription Amount, if any, that such Buyer elects to purchase (in either
case, the “Notice of Acceptance”). If the Basic Amounts subscribed for by all
eligible Buyers are less than the total of all of the Basic Amounts, then each
Buyer who has set forth an Undersubscription Amount in its Notice of Acceptance
shall be entitled to purchase, in addition to the Basic Amounts subscribed for,
the Undersubscription Amount it has subscribed for; provided, however, that if
the Undersubscription Amounts subscribed for exceed the difference between the
total of all the Basic Amounts and the Basic Amounts subscribed for (the
“Available Undersubscription Amount”), each Buyer who has subscribed for any
Undersubscription Amount shall be entitled to purchase only that portion of the
Available Undersubscription Amount as the Basic Amount of such Buyer bears to
the total Basic Amounts of all eligible Buyers that have subscribed for
Undersubscription Amounts, subject to rounding by the Company to the extent its
deems reasonably necessary.

 

21

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(3) The Company shall have thirty (30) days from the expiration of the Offer
Period above to offer, issue, sell or exchange all or any part of such Offered
Securities as to which a Notice of Acceptance has not been given by the eligible
Buyers (the “Refused Securities”), but only to the offerees described in the
Offer Notice (if so described therein) and only upon terms and conditions
(including, without limitation, unit prices and interest rates) that are not
more favorable to the acquiring person or persons or less favorable to the
Company than those set forth in the Offer Notice.

(4) In the event the Company shall propose to sell less than all the Refused
Securities (any such sale to be in the manner and on the terms specified in
Section 4(m)(iii)(3) above), then each Buyer may, at its sole option and in its
sole discretion, reduce the number or amount of the Offered Securities specified
in its Notice of Acceptance to an amount that shall be not less than the number
or amount of the Offered Securities that such Buyer elected to purchase pursuant
to Section 4(m)(iii)(2) above multiplied by a fraction, (i) the numerator of
which shall be the number or amount of Offered Securities the Company actually
proposes to issue, sell or exchange (including Offered Securities to be issued
or sold to Buyers pursuant to Section 4(m)(iii)(3) above prior to such
reduction) and (ii) the denominator of which shall be the original amount of the
Offered Securities. In the event that any Buyer so elects to reduce the number
or amount of Offered Securities specified in its Notice of Acceptance, the
Company may not issue, sell or exchange more than the reduced number or amount
of the Offered Securities unless and until such securities have again been
offered to the Buyers in accordance with Section 4(m)(iii)(1) above.

(5) Upon the closing of the issuance, sale or exchange of all or less than all
of the Refused Securities, the Buyers shall acquire from the Company, and the
Company shall issue to the Buyers, the number or amount of Offered Securities
specified in the Notices of Acceptance, as reduced pursuant to
Section 4(m)(iii)(3) above if the Buyers have so elected, upon the terms and
conditions specified in the Offer. The purchase by the Buyers of any Offered
Securities is subject in all cases to the preparation, execution and delivery by
the Company and the Buyers of a purchase agreement relating to such Offered
Securities reasonably satisfactory in form and substance to the Buyers and their
respective counsel.

(6) Any Offered Securities not acquired by the Buyers or other persons in
accordance with Section 4(m)(iii)(3) above may not be issued, sold or exchanged
until they are again offered to the eligible Buyers under the procedures
specified in this Agreement.

 

  (iv) The restrictions contained in subsection (iii) of this Section 4(m) shall
not apply to any Buyer, if at the time of the Subsequent Placement, such Buyer
owns less than 75% of such Buyer’s aggregate amount of Common Shares purchased
hereunder.

 

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  (v) The restrictions contained in subsections (ii) and (iii) of this
Section 4(m) shall not apply in connection with the issuance of any Excluded
Securities.

(m) The Company covenants and agrees not to issue any Common Stock or Common
Stock Equivalents in connection with any current Indebtedness or any
Indebtedness that succeeds hereto until the date that is 120 days following the
Effective Date.

(n) The Company hereby covenants and agrees to use its reasonable best efforts
to file the 2005 10-K with the SEC on or prior to March 16, 2006, but in no
event shall the Company file the 2005 10-K later than March 21, 2006.

(o) The Company hereby covenants and agrees to deliver to the Buyers the Common
Shares as specified in the Schedule of Buyers as soon as practicable after the
Closing, but in no event later than three (3) Business Days after the Closing;
provided, however, that the Common Shares shall be deemed issued to the
applicable Buyers, regardless of whether stock certificates have been issued or
delivered to the Buyers.

5. REGISTER; TRANSFER AGENT INSTRUCTIONS.

(a) Register. The Company shall maintain at its principal executive offices (or
such other office or agency of the Company as it may designate by notice to each
holder of Securities), a register for the Common Shares and the Warrants, in
which the Company shall record the name and address of the Person in whose name
the Common Shares and the Warrants have been issued (including the name and
address of each transferee), the face amount of Common Shares held by such
Person, the number of Warrant Shares issuable upon exercise of the Warrants held
by such Person and the number of Common Shares held by such Person. The Company
shall keep the register open and available during business hours for inspection
upon reasonable notice by any Buyer or its legal representatives.

(b) Transfer Agent Instructions. The Company shall issue irrevocable
instructions to its transfer agent, and any subsequent transfer agent, to issue
certificates or credit shares to the applicable balance accounts at The
Depository Trust Company (“DTC”), registered in the name of each Buyer or its
respective nominee(s), for the Common Shares, and the Warrant Shares issued at
the Closing or exercise of the Warrants in such amounts as specified from time
to time by each Buyer to the Company upon exercise of the Warrants in the form
of Exhibit C attached hereto (the “Irrevocable Transfer Agent Instructions”).
The Company warrants that no instruction other than the Irrevocable Transfer
Agent Instructions referred to in this Section 5(b), and stop transfer
instructions to give effect to Section 2(g) hereof, will be given by the Company
to its transfer agent, and that the Securities shall otherwise be freely
transferable on the books and records of the Company as and to the extent
provided in this Agreement and the other Transaction Documents. If a Buyer
effects a sale, assignment or transfer of the Securities in accordance with
Section 2(g), the Company shall permit the transfer and shall promptly instruct
its transfer agent to issue one or more certificates or credit shares to the
applicable balance accounts at DTC in such name and in such denominations as
specified by such Buyer to effect such sale, transfer or assignment. In the
event that such sale, assignment or transfer involves Common Shares or Warrant
Shares sold, assigned or transferred pursuant to an effective

 

23

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registration statement or pursuant to Rule 144, the transfer agent shall issue
such Securities to the Buyer, assignee or transferee, as the case may be,
without any restrictive legend. The Company acknowledges that a breach by it of
its obligations hereunder will cause irreparable harm to a Buyer. Accordingly,
the Company acknowledges that the remedy at law for a breach of its obligations
under this Section 5(b) will be inadequate and agrees, in the event of a breach
or threatened breach by the Company of the provisions of this Section 5(b), that
a Buyer shall be entitled, in addition to all other available remedies, to an
order and/or injunction restraining any breach and requiring immediate issuance
and transfer, without the necessity of showing economic loss and without any
bond or other security being required.

6. CONDITIONS TO THE COMPANY’S OBLIGATION TO SELL.

The obligation of the Company hereunder to issue and sell the Common Shares and
the related Warrants to each Buyer at the Closing is subject to the
satisfaction, at or before the Closing Date, of each of the following
conditions, provided that these conditions are for the Company’s sole benefit
and may be waived by the Company at any time in its sole discretion by providing
each Buyer with prior written notice thereof:

(i) Such Buyer shall have executed each of the Transaction Documents to which it
is a party and delivered the same to the Company.

(ii) Such Buyer shall have delivered to the Company the Purchase Price (less, in
the case of Magnetar Capital Master Fund, Ltd., the amounts withheld pursuant to
Section 4(g)) for the Common Shares and the related Warrants being purchased by
such Buyer and each other Buyer at the Closing by wire transfer of immediately
available funds pursuant to the wire instructions provided by the Company.

(iii) The representations and warranties of such Buyer shall be true and correct
in all material respects as of the date when made and as of the Closing Date as
though made at that time (except for representations and warranties that speak
as of a specific date), and such Buyer shall have performed, satisfied and
complied in all material respects with the covenants, agreements and conditions
required by this Agreement to be performed, satisfied or complied with by such
Buyer at or prior to the Closing Date.

7. CONDITIONS TO EACH BUYER’S OBLIGATION TO PURCHASE.

The obligation of each Buyer hereunder to purchase the Common Shares and the
related Warrants at the Closing is subject to the satisfaction, at or before the
Closing Date, of each of the following conditions, provided that these
conditions are for each Buyer’s sole benefit and may be waived by such Buyer at
any time in its sole discretion by providing the Company with prior written
notice thereof:

(i) The Company shall have executed and delivered to such Buyer (i) each of the
Transaction Documents and (ii) the Warrants (in such amounts as such Buyer shall
request) being purchased by such Buyer at the Closing pursuant to this
Agreement.

(ii) Such Buyer shall have received the opinion of Dechert LLP, the Company’s
outside counsel (“Company Counsel”), dated as of the Closing Date, in
substantially the form of Exhibit D attached hereto.

 

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(iii) The Company shall have delivered to such Buyer a copy of the Irrevocable
Transfer Agent Instructions, in the form of Exhibit C attached hereto, which
instructions shall have been delivered to and acknowledged in writing by the
Company’s transfer agent.

(iv) The Company shall have delivered to such Buyer a certificate evidencing the
incorporation and good standing of the Company and each of its operating
Subsidiaries in such corporation’s state of incorporation issued by the
Secretary of State of such state of incorporation as of a date within 10 days of
the Closing Date.

(v) The Common Stock (I) shall be listed on the Principal Market and (II) shall
not have been suspended, as of the Closing Date, by the SEC or the Principal
Market from trading on the Principal Market nor shall suspension by the SEC or
the Principal Market have been threatened, as of the Closing Date, either (A) in
writing by the SEC or the Principal Market or (B) by falling below the minimum
listing maintenance requirements of the Principal Market.

(vi) The Company shall have delivered to such Buyer a certified copy of the
Certificate of Incorporation as certified by the Secretary of State of the State
of Delaware within 10 days of the Closing Date.

(vii) The Company shall have delivered to such Buyer a certificate, executed by
the Secretary of the Company and dated as of the Closing Date, as to (i) the
resolutions consistent with Section 3(b) as adopted by the Company’s Board of
Directors in a form reasonably acceptable to such Buyer, (ii) the Certificate of
Incorporation and (iii) the Bylaws, each as in effect at the Closing, in the
form attached hereto as Exhibit E.

(viii) The representations and warranties of the Company shall be true and
correct in all material respects (except for representations and warranties that
are qualified by materiality or Material Adverse Effect, which shall be true and
correct in all respects) as of the date when made and as of the Closing Date as
though made at that time (except for representations and warranties that speak
as of a specific date) and the Company shall have performed, satisfied and
complied in all material respects with the covenants, agreements and conditions
required by the Transaction Documents to be performed, satisfied or complied
with by the Company at or prior to the Closing Date. Such Buyer shall have
received a certificate, executed by the Chief Executive Officer of the Company,
dated as of the Closing Date, to the foregoing effect and as to such other
matters as may be reasonably requested by such Buyer in the form attached hereto
as Exhibit F.

(ix) The Company shall have delivered to such Buyer a letter from the Company’s
transfer agent certifying the number of shares of Common Stock outstanding as of
a date within five Business Days of the Closing Date.

(x) The Company shall have obtained all governmental, regulatory or third party
consents and approvals, if any, necessary for the sale of the Common Shares and
the Warrants.

 

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(xi) The Company shall have delivered to such Buyer such other documents
relating to the transactions contemplated by this Agreement as such Buyer or its
counsel may reasonably request.

8. TERMINATION. In the event that the Closing shall not have occurred with
respect to a Buyer on or before one (1) Business Day from the date hereof due to
the Company’s or such Buyer’s failure to satisfy the conditions set forth in
Sections 6 and 7 above (and the nonbreaching party’s failure to waive such
unsatisfied condition(s)), the nonbreaching party shall have the option to
terminate this Agreement with respect to such breaching party at the close of
business on such date without liability of any party to any other party.

9. MISCELLANEOUS.

(a) Governing Law; Jurisdiction; Jury Trial. All questions concerning the
construction, validity, enforcement and interpretation of this Agreement shall
be governed by the internal laws of the State of New York, without giving effect
to any choice of law or conflict of law provision or rule (whether of the State
of New York or any other jurisdictions) that would cause the application of the
laws of any jurisdictions other than the State of New York. Each party hereby
irrevocably submits to the exclusive jurisdiction of the state and federal
courts sitting in The City of New York, Borough of Manhattan for the
adjudication of any dispute hereunder or in connection herewith or with any
transaction contemplated hereby or discussed herein, and hereby irrevocably
waives, and agrees not to assert in any suit, action or proceeding, any claim
that it is not personally subject to the jurisdiction of any such court, that
such suit, action or proceeding is brought in an inconvenient forum or that the
venue of such suit, action or proceeding is improper. Each party hereby
irrevocably waives personal service of process and consents to process being
served in any such suit, action or proceeding by mailing a copy thereof to such
party at the address for such notices to it under this Agreement and agrees that
such service shall constitute good and sufficient service of process and notice
thereof. Nothing contained herein shall be deemed to limit in any way any right
to serve process in any manner permitted by law. EACH PARTY HEREBY IRREVOCABLY
WAIVES ANY RIGHT IT MAY HAVE, AND AGREES NOT TO REQUEST, A JURY TRIAL FOR THE
ADJUDICATION OF ANY DISPUTE HEREUNDER OR IN CONNECTION WITH OR ARISING OUT OF
THIS AGREEMENT OR ANY TRANSACTION CONTEMPLATED HEREBY.

(b) Counterparts. This Agreement may be executed in two or more identical
counterparts, all of which shall be considered one and the same agreement and
shall become effective when counterparts have been signed by each party and
delivered to the other party; provided that a facsimile signature shall be
considered due execution and shall be binding upon the signatory thereto with
the same force and effect as if the signature were an original, not a facsimile
signature.

(c) Headings. The headings of this Agreement are for convenience of reference
and shall not form part of, or affect the interpretation of, this Agreement.

(d) Severability. If any provision of this Agreement shall be invalid or
unenforceable in any jurisdiction, such invalidity or unenforceability shall not
affect the validity or enforceability of the remainder of this Agreement in that
jurisdiction or the validity or enforceability of any provision of this
Agreement in any other jurisdiction.

 

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(e) Entire Agreement; Amendments. This Agreement supersedes all other prior oral
or written agreements between the Buyers, the Company, their Affiliates and
Persons acting on their behalf with respect to the matters discussed herein, and
this Agreement and the instruments referenced herein contain the entire
understanding of the parties with respect to the matters covered herein and
therein and, except as specifically set forth herein or therein, neither the
Company nor any Buyer makes any representation, warranty, covenant or
undertaking with respect to such matters. No provision of this Agreement may be
amended other than by an instrument in writing signed by the Company and the
holders of Common Shares representing at least a majority of the amount of the
Common Shares, or, if prior to the Closing Date, the Buyers listed on the
Schedule of Buyers as being obligated to purchase at least a majority of the
amount of the Common Shares. No provision hereof may be waived other than by an
instrument in writing signed by the party against whom enforcement is sought. No
such amendment shall be effective to the extent that it applies to less than all
of the holders of the Common Shares then outstanding. No consideration shall be
offered or paid to any Person to amend or consent to a waiver or modification of
any provision of any of the Transaction Documents unless the same consideration
also is offered to all of the parties to the Transaction Documents, holders of
Common Shares or holders of the Warrants, as the case may be. The Company has
not, directly or indirectly, made any agreements with any Buyers relating to the
terms or conditions of the transactions contemplated by the Transaction
Documents except as set forth in the Transaction Documents.

(f) Notices. Any notices, consents, waivers or other communications required or
permitted to be given under the terms of this Agreement must be in writing and
will be deemed to have been delivered: (i) upon receipt, when delivered
personally; (ii) upon receipt, when sent by facsimile (provided confirmation of
transmission is mechanically or electronically generated and kept on file by the
sending party); or (iii) one Business Day after deposit with an overnight
courier service, in each case properly addressed to the party to receive the
same. The addresses and facsimile numbers for such communications shall be:

If to the Company:

Unigene Laboratories, Inc.

110 Little Falls Road

Fairfield, New Jersey 07004

Telephone: (973) 882-0860

Facsimile:

Attention:

with a copy (for informational purposes only) to:

Dechert LLP

Princeton Pike Corporate Center

P.O. Box 5218

Princeton, NJ 08543-5218

Telephone: (609)620-3200

Facsimile: (609) 620-3259

Attention: James J. Marino, Esq.

 

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If to the Transfer Agent:

Registrar & Transfer Co.

10 Commerce Drive

Cranford, NJ 07016

Telephone: (800)866-1340

Facsimile: (908)497-2310

Attention: Michael Lasichak

If to a Buyer, to its address and facsimile number set forth on the Schedule of
Buyers, with copies to such Buyer’s representatives as set forth on the Schedule
of Buyers,

with a copy (for informational purposes only) to:

Schulte Roth & Zabel LLP

919 Third Avenue

New York, New York 10022

Telephone: (212) 756-2000

Facsimile: (212) 593-5955

Attention: Eleazer N. Klein, Esq.

or to such other address and/or facsimile number and/or to the attention of such
other Person as the recipient party has specified by written notice given to
each other party five (5) days prior to the effectiveness of such change.
Written confirmation of receipt (A) given by the recipient of such notice,
consent, waiver or other communication, (B) mechanically or electronically
generated by the sender’s facsimile machine containing the time, date, recipient
facsimile number and an image of the first page of such transmission or
(C) provided by an overnight courier service shall be rebuttable evidence of
personal service, receipt by facsimile or receipt from an overnight courier
service in accordance with clause (i), (ii) or (iii) above, respectively.

(g) Successors and Assigns. This Agreement shall be binding upon and inure to
the benefit of the parties and their respective successors and assigns,
including any purchasers of the Common Shares or the Warrants; provided,
however, that the provisions of Section 4(j) and Section 4(l) of this Agreement
shall be null and void with respect to any successor or assign (by assignment,
purchase, sale, merger, consolidation or otherwise) except with respect to any
successor or assign that is an Affiliate of a Buyer. The Company shall not
assign this Agreement or any rights or obligations hereunder without the prior
written consent of the holders of Common Shares representing at least a majority
of the number of the Common Shares (except in connection with a merger or
consolidation approved by the holders of a majority of the Common Stock of the
Company). No Buyer shall be permitted to assign this Agreement or any rights or
obligations hereunder, except to a Permitted Transferee (as defined below). With
respect to transfers that are not made pursuant to the Registration Statement
(or Rule 144 but are otherwise

 

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made in accordance with all applicable laws and the terms of this Agreement),
the rights and obligations of a Buyer under this Agreement shall be
automatically assigned by such Buyer to any transferee of all or any portion of
such Buyer’s Securities who is a Permitted Transferee; provided, however, that
such Transferee agrees in writing to be bound by the terms of this Agreement as
if such transferee were the Buyer. (For purposes of this Agreement, a “Permitted
Transferee” shall mean any Person who (a) is an “accredited investor,” as that
term is defined in Rule 501(a) of Regulation D under the Securities Act,
(b) receives the Securities in a transaction which is in compliance with the
Federal and applicable state securities law and (c) the Company shall be
entitled to request from such Buyer transferor an opinion of counsel reasonably
satisfactory in form and substance to the Company to the effect that such a
transaction is in compliance with the Federal and applicable state securities
law; provided, that no such opinion of counsel shall be required for a transfer
to an Affiliate of such Buyer ).

(h) No Third Party Beneficiaries. This Agreement is intended for the benefit of
the parties hereto and their respective permitted successors and assigns, and is
not for the benefit of, nor may any provision hereof be enforced by, any other
Person.

(i) Survival. Unless this Agreement is terminated under Section 8, the
representations and warranties of the Company and the Buyers contained in
Sections 2 and 3, the agreements and covenants set forth in Sections 4, 5 and 9
shall survive the Closing and the delivery and exercise of Securities, as
applicable. Each Buyer shall be responsible only for its own representations,
warranties, agreements and covenants hereunder.

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

(k) Indemnification. In consideration of each Buyer’s execution and delivery of
the Transaction Documents and acquiring the Securities thereunder and in
addition to all of the Company’s other obligations under the Transaction
Documents, the Company shall defend, protect, indemnify and hold harmless each
Buyer and each Affiliate of such Buyer that holds such Securities, all of their
stockholders, partners, members, officers, directors, employees and direct or
indirect investors and any of the foregoing Persons’ agents or other
representatives (including, without limitation, those retained in connection
with the transactions contemplated by this Agreement) (collectively, the
“Indemnitees”) from and against any and all actions, causes of action, suits,
claims, losses, costs, penalties, fees, liabilities and damages, and expenses in
connection therewith (irrespective of whether any such Indemnitee is a party to
the action for which indemnification hereunder is sought), and including
reasonable attorneys’ fees and disbursements (the “Indemnified Liabilities”),
incurred by any Indemnitee as a result of, or arising out of, or relating to
(a) any misrepresentation or breach of any representation or warranty made by
the Company in the Transaction Documents or any other certificate, instrument or
document contemplated hereby or thereby, (b) any breach of any covenant,
agreement or obligation of the Company contained in the Transaction Documents or
any other certificate, instrument or document contemplated hereby or thereby or
(c) any cause of action, suit or claim brought or made against such Indemnitee
by a third party (including for these purposes a

 

29

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derivative action brought on behalf of the Company) and arising out of or
resulting from (i) the execution, delivery, performance or enforcement of the
Transaction Documents or any other certificate, instrument or document
contemplated hereby or thereby, (ii) any transaction financed or to be financed
in whole or in part, directly or indirectly, with the proceeds of the issuance
of the Securities, or (iii) the status of such Buyer or holder of the Securities
as an investor in the Company. To the extent that the foregoing undertaking by
the Company may be unenforceable for any reason, the Company shall make the
maximum contribution to the payment and satisfaction of each of the Indemnified
Liabilities which is permissible under applicable law. Except as otherwise set
forth herein, the mechanics and procedures with respect to the rights and
obligations under this Section 9(k) shall be the same as those set forth in
Section 6 of the Registration Rights Agreement.

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

(m) Remedies. Each Buyer and each holder of the Securities shall have all rights
and remedies set forth in the Transaction Documents and all rights and remedies
which such holders have been granted at any time under any other agreement or
contract and all of the rights which such holders have under any law. Any Person
having any rights under any provision of this Agreement shall be entitled to
enforce such rights specifically (without posting a bond or other security), to
recover damages by reason of any breach of any provision of this Agreement and
to exercise all other rights granted by law. Furthermore, the Company recognizes
that in the event that it fails to perform, observe, or discharge any or all of
its obligations under the Transaction Documents, any remedy at law may prove to
be inadequate relief to the Buyers. The Company therefore agrees that the Buyers
shall be entitled to seek temporary and permanent injunctive relief in any such
case without the necessity of proving actual damages and without posting a bond
or other security.

(n) Rescission and Withdrawal Right. Notwithstanding anything to the contrary
contained in (and without limiting any similar provisions of) the Transaction
Documents, whenever any Buyer exercises a right, election, demand or option
under a Transaction Document and the Company does not timely perform its related
obligations within the periods therein provided, then such Buyer may rescind or
withdraw, in its sole discretion from time to time upon written notice to the
Company, any relevant notice, demand or election in whole or in part without
prejudice to its future actions and rights

(o) Payment Set Aside. To the extent that the Company makes a payment or
payments to the Buyers hereunder or pursuant to any of the other Transaction
Documents or the Buyers enforce or exercise their rights hereunder or
thereunder, and such payment or payments or the proceeds of such enforcement or
exercise or any part thereof are subsequently invalidated, declared to be
fraudulent or preferential, set aside, recovered from, disgorged by or are
required to be refunded, repaid or otherwise restored to the Company, a trustee,
receiver or any other Person under any law (including, without limitation, any
bankruptcy law, state or federal law, common law or equitable cause of action),
then to the extent of any such restoration the obligation or part thereof
originally intended to be satisfied shall be revived and continued in full force
and effect as if such payment had not been made or such enforcement or setoff
had not occurred.

 

30

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(p) Independent Nature of Buyers’ Obligations and Rights. The obligations of
each Buyer under any Transaction Document are several and not joint with the
obligations of any other Buyer, and no Buyer shall be responsible in any way for
the performance of the obligations of any other Buyer under any Transaction
Document. Nothing contained herein or in any other Transaction Document, and no
action taken by any Buyer pursuant hereto or thereto, shall be deemed to
constitute the Buyers as a partnership, an association, a joint venture or any
other kind of entity, or create a presumption that the Buyers are in any way
acting in concert or as a group with respect to such obligations or the
transactions contemplated by the Transaction Documents and the Company
acknowledges that the Buyers are not acting in concert or as a group with
respect to such obligations or the transactions contemplated by the Transaction
Documents. Each Buyer confirms that it has independently participated in the
negotiation of the transaction contemplated hereby with the advice of its own
counsel and advisors. Each Buyer shall be entitled to independently protect and
enforce its rights, including, without limitation, the rights arising out of
this Agreement or out of any other Transaction Documents, and it shall not be
necessary for any other Buyer to be joined as an additional party in any
proceeding for such purpose.

[Signature Page Follows]

 

31

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IN WITNESS WHEREOF, each Buyer and the Company have caused its respective
signature page to this Securities Purchase Agreement to be duly executed as of
the date first written above.

 

COMPANY: UNIGENE LABORATORIES, INC.

By:

 

/s/ Warren P. Levy

Name:

  Warren P. Levy

Title:

  President and Chief Executive Officer

[Signature Page to Securities Purchase Agreement]

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

IN WITNESS WHEREOF, each Buyer and the Company have caused their respective
signature page to this Securities Purchase Agreement to be duly executed as of
the date first written above.

 

BUYERS:

MAGNETAR CAPITAL MASTER

FUND, LTD.

By: Magnetar Financial LLC,

Its Investment Manager

By:

 

/s/ Paul Smith

Name:

  Paul Smith

Title:

  General Counsel

[Signature Page to Securities Purchase Agreement]

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

SCHEDULE OF BUYERS

 

(1)

Buyer

  

(2)

Address and Facsimile

Number

 

(3)

Number of

Common

Shares

  

(4)

Number of

Warrant Shares

  

(5)

Purchase Price

  

(6)

Legal Representative’s

Address and Facsimile Number

Magnetar Capital Master Fund, Ltd.    1603 Orrington Avenue
Evanston, IL 60201
Attn: Richard Levy and
Matthew Ray
Facsimile:
(847) 905-5603
Telephone:
(847) 905-4707   4,000,000    1,000,000    $ 13,000,000   
Schulte Roth & Zabel LLP
919 Third Avenue
New York, New York 10022
Attention: Eleazer Klein, Esq.
Facsimile:
(212) 593-5955
Telephone:
(212) 756-2000

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

EXHIBITS

 

Exhibit A    Form of Warrants Exhibit B    Form of Registration Rights Agreement
Exhibit C    Form of Irrevocable Transfer Agent Instructions Exhibit D    Form
of Company Counsel Opinion Exhibit E    Form of Secretary’s Certificate Exhibit
F    Form of Officer’s Certificate Exhibit G    Form of Press Release Exhibit H
   2005 10-K

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

SCHEDULES

 

Schedule 3(a) - List of Subsidiaries

Schedule 3(k) - SEC Documents

Schedule 3(r) - Capitalization

Schedule 3(s) - Indebtedness and Other Contracts

Schedule 3(t) - Absence of Litigation

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

Schedules to Securities Purchase Agreement

Schedule 3(a)

Unigene UK Limited

Schedule 3(k)

The Company’s Quarterly Report on Form 10-Q for the quarterly period ended
June 30, 2005 was due to be filed (pursuant to an extension) on August 22, 2005,
but was not filed until August 26, 2005.

Schedule 3(r)

(ii)

A summary of options outstanding and exercisable as of December 31, 2005,
follows:

 

     Options Outstanding    Options Exercisable

Range of Exercise Price

  

Number

Outstanding

  

Weighted Ave.

Remaining

Life (years)

  

Weighted Ave.

Exercise Price

  

Number

Exercisable

  

Weighted Ave.

Exercise Price

$ 0.28-0.49

   1,899,700    6.2    $ .40    1,658,224    $ .41

$ 0.50-0.99

   552,750    4.7      .69    475,750      .65

$ 1.00-1.99

   669,865    5.8      1.82    466,788      1.88

$ 2.00-2.99

   502,000    6.2      2.47    263,500      2.61

$ 3.00-4.36

   23,000    9.9      3.59    10,000      3.32                       3,647,315
         2,874,262                      

As of December 31, 2005, options to purchase 179,000 shares and 638,610 shares
of Common Stock were available for grant under the 1999 and 2000 Plans,
respectively.

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

A summary of warrants outstanding (all but 20,000 of which are exercisable) as
of December 31, 2005 follows:

 

          Warrants Outstanding     

Exercise Price

  

Number

Outstanding

  

Weighted Ave.

Remaining Life

(years)

  

Weighted Ave.

Exercise Price

$0.90

   250,000    2.8    $ .90

$1.77

   1,061,571    4.3      1.77

$2.00

   20,000    9.4      2.00                   1,331,571       $ 1.61             
 

On December 30, 2002, pursuant to a rights agreement, we distributed common
stock purchase rights to stockholders of record as a dividend at the rate of one
right for each share of common stock. Each right entitles the holder to purchase
from us one ten-thousandth of a share of common stock at an exercise price of
$4.00 per right. Initially the rights are attached to the common stock and are
not exercisable. There is one right outstanding for every share of common stock
outstanding.

The rights become exercisable and will separate from the common stock ten
calendar days after a person or group acquires beneficial ownership of fifteen
percent or more of our common stock, or ten business days (or a later date
following such announcement as determined by our Board of Directors) after the
announcement of a tender offer or an exchange offer to acquire fifteen percent
or more of our outstanding common stock.

The rights are redeemable for $.00001 per right at the option of the Board of
Directors at any time prior to the close of business on the tenth calendar day
after a person or group acquires beneficial ownership of fifteen percent or more
of our common stock. If not redeemed, the rights will expire on December 30,
2012. Prior to the date upon which the rights would become exercisable under the
rights agreement, our outstanding stock certificates will represent both the
shares of common stock and the rights, and the rights will trade only with the
shares of common stock.

(iii)

We have a number of future payment obligations under various agreements. They
are summarized at December 31, 2005, as follows:

 

Contractual Obligations

   Total    2006    2007    2008    2009    2010    Thereafter

Chinese joint ventures (SPG & Qingdao)

   $ 877,500    $ 382,500    $ —      $ 495,000    $ —      $ —      $ —  

Notes payable – stockholders

     10,105,000      10,105,000      —        —        —        —        —  

Capital leases

     188,951      73,429      71,154      42,506      1,862      —        —  

Operating leases

     1,639,852      210,241      203,646      201,990      201,438      201,438
     621,099

Executive compensation

     549,625      549,625      —        —        —        —     

Accrued interest-stockholders

     6,549,215      6,549,215      —        —        —        —        —       
                                           

Total Contractual Obligations

   $ 19,910,143    $ 17,870,010    $ 274,800    $ 739,496    $ 203,300    $
201,438    $ 621,099

 

2

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

To satisfy our short-term liquidity needs, Jay Levy, our Chairman of the Board
and an officer, Warren Levy and Ronald Levy, each a director and executive
officer of Unigene, and another Levy family member, from time to time have made
loans to us. We have not made principal and interest payments on certain of
these loans when due. However, the Levys waived all default provisions,
including additional interest penalties due under these loans through
December 31, 2000. Beginning January 1, 2001, interest on loans originated
through March 4, 2001 increased an additional 5% per year and is calculated on
both past due principal and interest. This additional interest was approximately
$853,000, and total interest expense on all Levy loans was approximately
$1,516,000, $1,309,000 and $1,294,000, respectively, for the years ended
December 31, 2005, 2004 and 2003. As of December 31, 2005, total accrued
interest on all Levy loans was approximately $6,549,000 and the outstanding
loans by these individuals to us, classified as short-term debt, totaled
$10,105,000 at December 31, 2005 and $10,553,000 at December 31, 2004. In 2005
and 2004, we repaid an aggregate of $448,000 and $720,000, respectively, in
principal on certain of these loans. In addition, in 2005, we repaid an
aggregate of $817,000 in accrued interest in certain of these loans.

Outstanding stockholder loans consisted of the following at December 31, 2005
and 2004 (in thousands):

 

     2005    2004

Jay Levy term loans (1)

   $ 1,870    $ 1,870

Jay Levy demand loans (2)

     8,225      8,225

Warren Levy demand loans (3)

     5      235

Ronald Levy demand loans (4)

     5      223                    10,105      10,553

Accrued interest

     6,549      5,850              

Total loans and interest due to stockholders

   $ 16,654    $ 16,403

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

(1) Loans from Jay Levy in the aggregate principal amount of $1,870,000
evidenced by term notes that matured January 2002, and bear interest at the
fixed rate of 11% per year. These loans were originally at 6%. These loans are
secured by a security interest in all of our equipment and a mortgage on our
real property. The terms of the notes required us to make installment payments
of principal and interest beginning in October 1999 and ending in January 2002
in an aggregate amount of $72,426 per month. No installment payments have been
made to date. Accrued interest on these loans at December 31, 2005 was
approximately $1,646,000 and was approximately $1,282,000 at December 31, 2004.

 

3

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(2) Loans from Jay Levy in the aggregate principal amount of $2,525,000, which
are evidenced by demand notes bearing a floating interest rate equal to the
Merrill Lynch Margin Loan Rate plus 5.25% (13% at December 31, 2005 and 11% at
December 31, 2004) that are classified as short-term debt. These loans were
originally at the Merrill Lynch Margin Loan Rate plus .25%. These loans are
secured by a security interest in our equipment and real property. Accrued
interest on these loans at December 31, 2005 was approximately $3,421,000 and
was approximately $2,752,000 at December 31, 2004.

(2) Loans from Jay Levy in 2001 and 2002 in the aggregate principal amount of
$5,700,000 which are evidenced by demand notes bearing a floating interest rate
equal to the Merrill Lynch Margin Loan Rate plus .25%, (7.5% at December 31,
2005 and 5.5% at December 31, 2004) and are classified as short-term debt and
which are secured by a security interest in certain of our patents. Accrued
interest on these loans at December 31, 2005 was approximately $1,479,000 and
was approximately $1,113,000 at December 31, 2004. On February 15, 2005, Jay
Levy transferred these $5,700,000 of demand notes to the Jaynjean Levy Family
Limited Partnership in exchange for partnership units. Warren Levy and Ronald
Levy are general partners of that partnership.

(3) Loan from Warren Levy in the amount of $5,000 bears interest at the Merrill
Lynch Loan Rate plus .25% (7.5% at December 31, 2005 and 5.5% at December 31,
2004) and is classified as short-term debt. This loan is secured by a secondary
security interest in our equipment and real property. Accrued interest on this
loan at December 31, 2005 was approximately $1,500 and was approximately $1,100
at December 31, 2004. An additional loan in the aggregate principal amount of
$230,000 was repaid in full in October 2005.

(4) Loan from Ronald Levy in the amount of $5,000 bears interest at the Merrill
Lynch Margin Loan Rate plus .25% (7.5% at December 31, 2005 and 5.5% at
December 31, 2004) and is classified as short-term debt. This loan is secured by
a secondary security interest in our equipment and real property. Accrued
interest on this loan at December 31, 2005 was approximately $1,500 and was
approximately $1,100 at December 31, 2004. An additional loan in the aggregate
principal amount of $218,323 was repaid in full in October 2005.

We entered into various lease arrangements which qualify as capital leases. The
future years’ minimum lease payments under the capital leases, together with the
present value of the net minimum lease payments, as of December 31, 2005 were as
follows:

 

2006

   $ 87,883  

2007

     84,499  

2008

     50,499  

2009

     2,297           

Total minimum lease payments

     225,178  

Less amount representing interest

     (36,227 )         

Present value of net minimum lease payments

     188,951  

Less current portion

     (73,429 )         

Obligations under capital leases, excluding current portion

   $ 115,522           

The interest rates on these leases vary from 9% to 13%.

 

4

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We were obligated under a 10-year net-lease, which began in February 1994, for
our manufacturing facility located in Boonton, New Jersey. That lease was
renewed in 2003 and now expires in 2014. We have a 10-year renewal option as
well as an option to purchase the facility. In addition, we lease laboratory,
production, and office equipment under various operating leases expiring in 2006
through 2008. Total future minimum rentals under these noncancelable operating
leases are as follows:

 

2006

   $ 210,000

2007

     204,000

2008

     202,000

2009

     201,000

2010

     201,000

2011 and thereafter

     622,000           $ 1,640,000       

(iv)

Registration Rights Agreement, dated April 7, 2005, between Unigene and Fusion
Capital Fund II, LLC (incorporated by reference to Exhibit 10.2 of Registrant’s
Current Report on Form 8-K, dated April 7, 2005).

Registration Rights Agreement, dated October 9, 2003 between the Registrant and
Fusion Capital Fund II, LLC (incorporated by reference to Exhibit 10.50 to
Registrant’s Registration Statement No. 333-109655, filed October 10, 2003).

Registration Rights Agreement, dated April 23, 2001, between the Registrant and
Fusion Capital Fund II, LLC (incorporated by reference to Exhibit 10.36 to the
Registrant’s Registration Statement No. 333-60642 on Form S-1, filed May 10,
2001).

Schedule 3(s)

(i)

See Schedule 3(q)(iii) listing outstanding Indebtedness as of as of December 31,
2005.

(ii)

See list of material contracts filed pursuant to Item 601(b)(10) of Regulation
S-K in the Company’s Annual Report on Form 10-K for the year ended December 31,
2004 (or in any more recently filed current report on Form 8-K or Quarterly
Report on Form 10-Q filed with the Securities and Exchange Commission) as
exhibits for contracts with respect to which a violation or default thereunder
could have a Material Adverse Effect.

 

5

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(iii)

See Schedule 3(q)(iii).

Schedule 3(t)

None.

 

6