Exhibit
10.13

    


    [FORM
OF] SECURITIES PURCHASE AND REGISTRATION RIGHTS AGREEMENT

     

    This
SECURITIES PURCHASE AND REGISTRATION RIGHTS AGREEMENT (this “Agreement”) is
entered into as of September 3, 2010, by and among Arno Therapeutics, Inc., a
Delaware corporation (the “Company”), Pontifax
(Cayman) II L.P. (“Pontifax Cayman”),
Pontifax (Israel) II L.P. (“Pontifax Israel I”),
and Pontifax (Israel) II - Individual Investors L.P. (“Pontifax Israel II,”
together with Pontifax Cayman and Pontifax Israel I, collectively referred to as
“Pontifax”),
UTA Capital LLC, a Delaware limited liability company (“UTA”), Commercial Street
Capital, LLC, a Delaware limited liability company (“CSC,” together with
Pontifax and UTA, each a “Co-Lead Investor”
and, collectively, the “Co-Lead Investors”),
FCC Ltd, an Israeli limited company, Uzi Zucker, an individual and each of the
purchasers listed or to be listed on Schedule 1 attached
to this Agreement (each a “Purchaser,” and
collectively, the “Purchasers”).

     

    WITNESSETH:

     

    WHEREAS,
the Company desires to issue and sell to each Purchaser, and each Purchaser
desires to purchase from the Company, an aggregate of not less than 10,000,000
shares and up to 20,000,000 shares of the Company’s Series A Convertible
Preferred Stock, par value $.0001 per share (the “Series A Preferred
Stock”), having the rights, privileges, preferences and restrictions set
forth in the Certificate of Designation attached hereto as Exhibit A (the
“Certificate of
Designation”), at a price per share of $1.00, for an aggregate purchase
price of up to $20,000,000 (the “Maximum Amount”) in
accordance with the terms and provisions hereof; and

     

    WHEREAS,
to induce each Purchaser to purchase the Series A Preferred Stock, the Company
has agreed to issue to each Purchaser a two-and-one-half year warrant to
purchase a number of additional shares of Series A Preferred Stock equal to 8%
of the number of shares of Preferred Stock purchased by each such Purchaser
pursuant to this Agreement (or following the automatic conversion of the Series
A Preferred Stock, a number of shares of Common Stock as determined pursuant to
the terms of the Warrant), at an initial exercise price equal to $1.00 per share
and upon such other terms and conditions set forth in the form of warrant
certificate substantially in the form of Exhibit B-1 attached
hereto (each a “Class
A Warrant,” and collectively, the “Class A Warrants”);
and

     

    WHEREAS,
to induce each Purchaser to purchase the Series A Preferred Stock, the Company
has agreed to issue to each Purchaser a five year warrant to purchase a number
of additional shares of Series A Preferred Stock equal to 42% of the number of
shares of Preferred Stock purchased by each such Purchaser pursuant to this
Agreement (or following the automatic conversion of the Series A Preferred
Stock, a number of shares of Common Stock as determined pursuant to the terms of
the Warrant), at an initial exercise price equal to $1.15 per share and upon
such other terms and conditions set forth in the form of warrant certificate
substantially in the form of Exhibit B-2 attached
hereto (each a “Class
B Warrant,” and collectively, the “Class B Warrants”;
together with the Class A Warrants, the “Warrants”).


    
      
         


      

      
         


        
          

        

      

      
         


      

    


    NOW,
THEREFORE, in consideration of the mutual covenants and agreements hereinafter
set forth herein and for other good and valuable consideration, the receipt and
sufficiency of which are hereby mutually acknowledged, the parties agree as
follows:

     

    1.           
Sale and
Purchase of the Preferred Stock and Warrants.

     

    1.1   Sale and Issuance of
Preferred Stock.  Subject to the terms and conditions of this
Agreement, each Purchaser agrees to purchase at the Closing Date (as defined
below), and the Company agrees to sell and issue to each Purchaser that number
of shares of Series A Preferred Stock, as specified with respect to such
Purchaser on Schedule
1 attached to this Agreement (the “Preferred Shares”),
at the aggregate purchase price set forth opposite each such Purchaser’s name on
Schedule 1 (the
“Purchase
Price”).

     

    1.2   Issuance of
Warrants.  Subject to the terms and conditions of this
Agreement, the Company shall issue a Class A Warrant and a Class B Warrant to
purchase that number of shares of the Series A Preferred Stock as specified with
respect to such Purchaser on Schedule 1 attached to this Agreement to each
Purchaser at the Closing.

     

    1.3   Defined Terms Used in this
Agreement.  In addition to the terms defined above, the
following terms used in this Agreement shall be construed to have the meanings
set forth or referenced below:

     

    “Affiliate” means, with respect
to any specified Person, any other Person who, directly or indirectly, controls,
is controlled by, or is under common control with such Person, including,
without limitation, any general partner, managing member, officer or director of
such Person.

    


    “Code” means the Internal
Revenue Code of 1986, as amended.

    


    “Common Stock” means the
common stock of the Company, par value of $.0001 per share.

    


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

    


    “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.

    


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

    


    “Conversion Shares” shall have
the meaning specified in Section 3.5 herein.


    
      
         


      

      
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    “Current Financial
Statements”  shall have the meaning specified in Section 3.7
herein.

    


    “Disclosure Materials” means,
collectively, the SEC Reports, the Company’s Confidential Offering Memorandum
dated June 15, 2010 (the “Offering
Memorandum”), and, this Agreement together with the schedules and
exhibits hereto.

    


    “Effective Date” means the date
and time that a Registration Statement required by Section 9 of this Agreement
is first declared effective by the SEC.

    


    “Eligible Market” means any of
the New York Stock Exchange, the American Stock Exchange, the NASDAQ Global
Select Market, the NASDAQ Global Market, the NASDAQ Capital Market, OTC Bulletin
Board or Pink Sheets LLC.

    


    “Escrow Agent” shall mean U.S.
Bank National Association.

    


    “Governmental Authority” means
the U.S. Food and Drug Administration or any other federal, state or foreign
governmental authority having authority over the Company.

    


    “Holder” or “Holders” means the holder or
holders, as the case may be, from time to time of Registrable
Securities.

    


    “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
Company 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.

    


    “Insolvent” means (i) the
present fair saleable value of the Company’s assets is less than the amount
required to pay the Company’s total Indebtedness, (ii) the Company is unable to
pay its debts and liabilities, subordinated, contingent or otherwise, as such
debts and liabilities become absolute and matured, or (iii) the Company intends
to incur or believes that it will incur debts that would be beyond its ability
to pay as such debts mature.


    
      
         


      

      
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    “Investor
Director”  shall have the meaning specified in Section 5.1(c)
herein.

    


    “Knowledge,” including the
phrase “to the Company’s
knowledge,” shall mean the actual knowledge of any particular fact or
matter of any executive officer of the Company and the knowledge of a particular
fact or matter that would be acquired after a due and diligent investigation by
any of them. 

    


    “Lien” shall have the meaning
specified in Section 3.4 herein.

    


     “Material Adverse Effect” shall
have the meaning specified in Section 3.2 herein.

    


    “Options” means any rights,
warrants or options to subscribe for or purchase shares of Common Stock or
Convertible Securities.

    


    “Person” means an individual
or corporation, partnership, trust, incorporated or unincorporated association,
joint venture, limited liability company, joint stock company or a government or
any department or agency thereof.

    


    “Placement
Agent”  means Riverbank Capital Securities, Inc.

    


    “Proceeding” means an action,
claim, suit, investigation or proceeding (including, without limitation, a
partial proceeding, such as a deposition), whether commenced or threatened in
writing.

    


    “Prospectus” means the
prospectus included in the Registration Statement (including, without
limitation, a prospectus that includes any information previously omitted from a
prospectus filed as part of an effective registration statement in reliance upon
Rule 430A promulgated under the Securities Act), as amended or supplemented by
any prospectus supplement, with respect to the terms of the offering of any
portion of the Registrable Securities covered by the Registration Statement, and
all other amendments and supplements to the Prospectus including post-effective
amendments, and all material incorporated by reference or deemed to be
incorporated by reference in such Prospectus.

    


    “Publicly Available Software”
means each of (i) any software that contains, or is derived in any manner (in
whole or in part) from, any software that is distributed as free software, open
source software (e.g.,
Linux), or similar licensing and distribution models; and (ii) any software that
requires as a condition of use, modification, and/or distribution of such
software that such software or other software incorporated into, derived from,
or distributed with such software (A) be disclosed or distributed in source code
form; (B) be licensed for the purpose of making derivative works; or (C) be
redistributable at no or minimal charge.  Publicly Available Software
includes, without limitation, software licensed or distributed under any of the
following licenses or distribution models similar to any of the following: (a)
GNU General Public License (GPL) or Lesser/Library GPL (LGPL), (b) the Artistic
License (e.g. PERL), (c) the Mozilla Public License, (d) the Netscape Public
License, (e) the Sun Community Source License (SCSL), the Sun Industry Source
License (SISL), and the Apache Server License.


    
      
         


      

      
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    “Registrable Securities” means
the Conversion Shares and the Warrant Shares issued or issuable pursuant to the
Transaction Documents, including without limitation those issuable to the
Purchasers under the Warrants, together with any securities issued or issuable
upon any stock split, dividend or other distribution, recapitalization or
similar event with respect to the foregoing.

    


    “Registration Statement” means
each registration statement (which shall be on Form S-1 or such other applicable
form then available to the Company to register the resale of the Registrable
Securities) required to be filed under Section 9 hereof, including (in each
case) the Prospectus, amendments and supplements to such registration statement
or Prospectus, including pre- and post-effective amendments, all exhibits
thereto, and all material incorporated by reference or deemed to be incorporated
by reference in such registration statement.

    


    “Restricted Shares” shall have
the meaning specified in Section 8.1 herein.

    


    “SEC Reports” means the
reports filed by the Company under the Exchange Act, including pursuant to
Section 13(a) or 15(d) thereof, together with any materials filed or
furnished by the Company under the Exchange Act, from the period commencing on
June 2, 2008 through April 30, 2009.

    


    “Securities” shall have the
meaning specified in Section 3.5 herein.

    


    “Securities Act” means the
Securities Act of 1933, as amended, and the rules and regulations promulgated
thereunder.

    


    “Subsidiary” means a
partnership, joint-stock company, corporation, limited liability company, trust,
unincorporated organization or other entity of which a Person owns, directly or
indirectly, more than 50% of the stock or other interests the holder of which is
generally entitled to vote for the election of the board of directors or other
governing body of such entity.

    


    “Taxes” means all
(i) United States federal, state or local or foreign taxes, assessments,
charges, duties, fees, levies or other similar governmental charges of any
nature, including all income, franchise, profits, capital gains, capital stock,
transfer, sales, use, occupation, property, excise, severance, windfall profits,
stamp, stamp duty reserve, license, payroll, withholding, ad valorem, value
added, alternative minimum, environmental, customs, social security (or
similar), unemployment, sick pay, motor vehicle, unclaimed property, escheat,
disability, registration and other taxes, assessments, charges, duties, fees,
levies or other similar governmental charges of any kind whatsoever, whether
disputed or not, together with all estimated taxes, deficiency assessments,
additions to tax, penalties and interest; (ii) any liability for the
payment of any amount of a type described in clause (i) arising as a result
of being or having been a member of any consolidated, combined, unitary or other
group or being or having been included or required to be included in any tax
return related thereto; and (iii) any liability for the payment of any
amount of a type described in clause (i) or clause (ii) as a result of any
obligation to indemnify or otherwise assume or succeed to the liability of any
other Person.


    
      
         


      

      
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    “Trading Day” means (i) a day
on which the Common Stock is traded or is eligible to be traded on a Trading
Market (other than the OTC Bulletin Board), or (ii) if the Common Stock is not
listed on a Trading Market (other than the OTC Bulletin Board), a day on which
the Common Stock is traded or is eligible to be traded in the over-the-counter
market, as reported by the OTC Bulletin Board, or (iii) if the Common Stock is
not quoted on any Trading Market, a day on which the Common Stock is quoted in
the over-the-counter market as reported by the Pink Sheets LLC (or any similar
organization or agency succeeding to its functions of reporting prices);
provided, that in the event that the Common Stock is not listed or quoted as set
forth in (i), (ii) and (iii) hereof, then Trading Day shall mean a Business
Day.

    


    “Trading Market” shall have
the meaning specified in Section 3.4 herein.

    


    “Transaction Documents” means
this Agreement, the Certificate of Designation, the Warrants, and any other
agreements, instruments or documents entered into in connection with this
Agreement.

    


    “Warrant Shares” shall have
the meaning specified in Section 3.5 herein.

    


    2. 
           Closing.

     

    2.1   Initial
Closing.  Subject to the terms and conditions of this
Agreement, the initial closing of the sale and purchase of the Preferred Shares
and Warrants under this Agreement (the “Initial Closing”)
shall take place at the offices of Seyfarth Shaw LLP, 620 Eighth Avenue, New
York, NY 10018, or remotely via the exchange of documents and signatures, at
11:00 a.m., local time on the date of this Agreement, but not before all
conditions to the parties respective obligations to complete the Initial Closing
have been satisfied or waived, or at such later time or date as the Purchasers
and the Company may mutually agree (the “Closing
Date”).  In the event there are more than one closing of the
purchase and sale of the Securities (each a “Subsequent Closing”),
the term “Closing” shall apply to the Initial Closing and each such subsequent
closing unless otherwise specified.  At the Closing, the Company will
deliver to each Purchaser certificates for the number of Preferred Shares and
Warrants being purchased by such Purchaser registered in such Purchaser’s name
(or its nominee), against transfer of funds to the account of the Company by
wire transfer representing full payment of the Purchase Price, less any
deductions or offsets specifically provided for in this Agreement. On the
Closing Date, each Purchaser shall pay to the Company the Purchase Price via
federal funds wire transfer(s) of immediately available funds, in accordance
with written instructions provided to Purchasers prior to the date
hereof.

     

    2.2   Sale of Additional
Shares.  After the Initial Closing, the Company may sell, on
the same terms and conditions as those contained in this Agreement, a number of
additional Preferred Shares and Warrants (the “Additional
Securities”) equal to the Maximum Amount less the amount sold to
Purchasers in the Initial Closing, to one or more Purchasers (the “Additional
Purchasers”), provided that (i) each such subsequent sale is consummated
prior to the date that is 30 days after the Initial Closing, subject to
extension by the Company with the approval of all three Co-Lead Investors for up
to an additional 30 days and (ii) each Additional Purchaser shall become a party
to this Agreement by executing and delivering a counterpart signature page
hereto.  Schedule I to this
Agreement shall be updated to reflect the number of Additional Securities
purchased at each such Closing and the parties purchasing such Additional
Securities.


    
      
         


      

      
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    3.            Representations
and Warranties of the Company.  The Company
hereby represents and warrants to the Purchasers as follows as of the Closing
Date:

     

    3.1   Subsidiaries.  The
Company has no Subsidiaries.

     

    3.2   Organization and
Qualification.  The Company is an entity duly organized,
validly existing and in good standing under the laws of the jurisdiction of its
incorporation or organization (as applicable), with the requisite legal
authority to own and use its properties and assets and to carry on its business
as currently conducted and as proposed to be conducted.  The Company
is not in violation of any of the provisions of its certificate of
incorporation, bylaws or other organizational or charter
documents.  The Company is duly qualified to do business and is in
good standing as a foreign corporation or other entity in each jurisdiction in
which the nature of the business conducted or property owned by it makes such
qualification necessary, except where the failure to be so qualified or in good
standing, as the case may be, would not, individually or in the aggregate, have
or reasonably be expected to result in a (a) a material adverse effect on the
results of operations, assets, prospects, business condition (financial or
otherwise) of the Company, taken as a whole, (b) a material and adverse
impairment the Company’s ability to perform its obligations under any of the
Transaction Documents, or (c) a material and adverse effect on the legality,
validity or enforceability of any of the Transaction Documents (a “Material Adverse
Effect”).

     

    3.3   Authorization;
Enforcement.  The Company has the requisite corporate authority
to enter into and to consummate the transactions contemplated by each of the
Transaction Documents to which it is a party and otherwise to carry out its
obligations hereunder and thereunder.  The filing of the Certificate
of Designation and the execution and delivery of each of the other Transaction
Documents to which it is a party by the Company and the consummation by it of
the transactions contemplated hereby and thereby have been duly authorized by
all necessary corporate action on the part of the Company and no further consent
or action is required by the Company, its Board of Directors or its
stockholders.  Each of the Transaction Documents to which it is a
party has been duly executed by the Company and is, or when delivered in
accordance with the terms hereof, will constitute, the valid and binding
obligation of the Company enforceable against the Company in accordance with its
terms, except as may be limited by (a) applicable bankruptcy, insolvency,
reorganization or other laws of general application relating to or affecting the
enforcement of creditors rights generally, and (b) the effect of rules of law
governing the availability of specific performance and other equitable
remedies.


    
      
         


      

      
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    3.4   No
Conflicts.  The filing and effectiveness of the Certificate of
Designation and the execution, delivery and performance of the other Transaction
Documents to which the Company is a party and the consummation by the Company of
the transactions contemplated hereby and thereby do not, and will not, (a)
conflict with or violate any provision of the Company’s certificate of
incorporation, bylaws or other organizational or charter documents, (b) conflict
with, or constitute a default (or an event that 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 (with or without notice, lapse of time
or both) of, any agreement, credit facility, debt or other instrument
(evidencing a Company debt or otherwise) or other understanding to which the
Company is a party or by which any property or asset of the Company is bound, or
affected, except to the extent that such conflict, default, termination,
amendment, acceleration or cancellation right would not reasonably be expected
to have a Material Adverse Effect, (c) result in any lien, charge, claim,
security interest, encumbrance, right of first refusal or other restriction
(each, a “Lien”) on assets or
on property of the Company, or (d) result in a violation of any law, rule,
regulation, order, judgment, injunction, decree or other restriction of any
court or governmental authority to which the Company is subject (including,
assuming the accuracy of the representations and warranties of the Purchasers
set forth in Section 4
hereof, federal and state securities laws and regulations and the rules and
regulations of any self-regulatory organization to which the Company or its
securities are or are expected to be subject, including the OTC Bulletin Board
or Pink Sheets LLC on which the Common Stock is quoted for trading on the date
in question, as applicable (the “Trading Markets”)),
or by which any property or asset of the Company is bound or affected, except to
the extent that such violation would not reasonably be expected to have a
Material Adverse Effect.

     

    3.5   The Securities. The
Preferred Shares, the Warrants and the equity securities issuable upon
conversion or exercise thereof (collectively,
the “Securities”) are duly
authorized and, when issued and paid for in accordance with the Transaction
Documents, will be duly and validly issued, fully paid and nonassessable, free
and clear of all Liens and will not be subject to preemptive or similar rights
of stockholders (other than those imposed by the Purchasers).  The
Company has reserved from its duly authorized capital stock the maximum number
of shares of Common Stock issuable upon conversion of the Preferred Shares (the
“Conversion
Shares”) and reserved from its duly authorized capital stock the maximum
number of shares of Series A Preferred Stock or Common Stock, as applicable,
issuable upon exercise of the Warrants (the “Warrant
Shares”).  Assuming the accuracy of the Purchaser’s
representations contained in Section 4 hereof, the offer, issuance and sale of
the Preferred Shares, the Conversion Shares, the Warrants and the Warrant Shares
pursuant to the Transaction Documents are exempt from the registration
requirements of the Securities Act.


    
      
         


      

      
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    3.6   Capitalization.  Schedule 3.6 hereto
sets forth, as of the date of this Agreement, (a) the aggregate number of shares
and type of all authorized, issued and outstanding classes of capital stock,
options and other securities of the Company (whether or not presently
convertible into or exercisable or exchangeable for shares of capital stock of
the Company) and (b) the aggregate number of issued and outstanding shares of
each class that are currently evidenced by certificates bearing restrictive
legends or subject to transfer stop orders with the Company’s transfer
agent.  None of its outstanding shares of capital stock are
transferable pursuant to SEC Rule 144.  All outstanding shares of
capital stock are duly authorized, validly issued, fully paid and nonassessable
and have been issued in compliance in all material respects with all applicable
securities laws.  The Company has outstanding only those options,
script rights to subscribe to, calls or commitments of any character whatsoever
relating to, or securities, rights or obligations convertible into or
exercisable or exchangeable for, or entered into any agreement giving any Person
any right to subscribe for or acquire, any shares of Common Stock, or securities
or rights convertible or exchangeable into shares of Common Stock as set forth
on Schedule
3.6.  Except as specifically described on Schedule 3.6 hereto,
and except for customary adjustments as a result of stock dividends, stock
splits, combinations of shares, reorganizations, recapitalizations,
reclassifications or other similar events, there are no anti-dilution or price
adjustment provisions contained in any security issued by the Company (or in any
agreement providing rights to security holders) and the issuance and sale of the
Securities will not obligate the Company to issue shares of Common Stock or
other securities to any Person (other than the Purchasers) and will not result
in a right of any holder of securities to adjust the exercise, conversion,
exchange or reset price under such securities.  To the knowledge of
the Company, except as disclosed in Schedule 3.6 hereto,
as of the date of this Agreement and prior to giving effect to the transactions
contemplated hereby, no Person or group of related Persons beneficially owns (as
determined pursuant to Rule 13d-3 under the Securities Exchange Act of 1934, as
amended (the “Exchange
Act”)), or has the right to acquire, by agreement with or by obligation
binding upon the Company, beneficial ownership of in excess of 5% of the
outstanding Common Stock.

     

    3.7   SEC Reports; Financial
Statements; No Material Adverse Effect; Solvency.  Except as
set forth on Schedule
3.7 or as specifically disclosed in the Disclosure Material, as of their
respective dates, the SEC Reports filed by the Company complied in all material
respects with the requirements of the Securities Act and the Exchange Act and
the rules and regulations of the U.S. Securities and Exchange Commission (the
“SEC”)
promulgated thereunder, and none of the SEC Reports, when filed by the Company,
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.  The financial statements of the Company included in the
SEC Reports comply in all material respects with applicable accounting
requirements and the rules and regulations of the SEC with respect thereto as in
effect at the time of filing, and the financial statements of the Company for
the year ended December 31, 2009 attached as Exhibit A to the Offering
Memorandum and for the calendar quarter ended March 31, 2010 attached as Exhibit
B to the Offering Memorandum (the “Current Financial
Statements”) comply in all material respects with applicable accounting
requirements and the rules and regulations of the SEC with respect thereto as in
effect at the date of this Agreement. Such financial statements have been
prepared in accordance with United States generally accepted accounting
principles applied on a consistent basis during the periods involved (“GAAP”), except as may
be otherwise specified in such financial statements, the notes thereto and
except that unaudited financial statements may not contain all footnotes
required by GAAP or may be condensed or summary statements, and fairly present
in all material respects the consolidated financial position of the Company as
of and for the dates thereof and the results of operations and cash flows for
the periods then ended, subject, in the case of unaudited statements, to normal,
year-end audit adjustments.


    
      
         


      

      
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    Since the
date of the latest audited financial statements included in the Current
Financial Statements, except as otherwise disclosed in the Disclosure Material
or in Schedule
3.7 hereto, (i) there has been no event, occurrence or development that,
individually or in the aggregate, has had or that would result in a Material
Adverse Effect, (ii) the Company has not incurred any material liabilities other
than (A) trade payables and accrued expenses incurred in the ordinary course of
business consistent with past practice and (B) liabilities not required to be
reflected in the Company’s financial statements pursuant to GAAP or required to
be disclosed in filings made with the SEC, (iii) the Company has not altered its
method of accounting or changed its auditors, (iv) the Company has not declared
or made any dividend or distribution of cash or other property to its
stockholders, in their capacities as such, or purchased, redeemed or made any
agreements to purchase or redeem any shares of its capital stock (except for
repurchases by the Company of shares of capital stock held by employees,
officers, directors, or consultants pursuant to an option of the Company to
repurchase such shares upon the termination of employment or services), and (v)
the Company has not issued any equity securities to any officer, director or
affiliate.  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.  The Company is not as of the date hereof, and
after giving effect to the transactions contemplated hereby to occur at the
Closing, will not be Insolvent.

     

    3.8   Absence of
Litigation.  Except as described in Schedule 3.8 or
as specifically disclosed in the Disclosure Material, there is no action, suit,
claim, or Proceeding, or, to the Company’s knowledge, inquiry or investigation,
before or by any court, public board, government agency, self-regulatory
organization or body pending or, to the knowledge of the Company, threatened
against or affecting the Company that could, individually or in the aggregate,
have a Material Adverse Effect.

     

    3.9   Compliance.  Except
as described in Schedule 3.9,
the Company is not, except in each case as would not, individually or in the
aggregate, reasonably be expected to have or result in a Material Adverse Effect
(a) in default under or in violation of (and no event has occurred that has not
been waived that, with notice or lapse of time or both, would result in a
default by the Company thereunder), nor has the Company received written notice
of a claim that it is in default under or that it is in violation of, any
indenture, loan or credit agreement or any other agreement or instrument to
which it is a party or by which it or any of its properties is bound (whether or
not such default or violation has been waived), (b) in violation of any order of
any court, arbitrator or governmental body, or (c) in violation, nor has it been
in violation, of any statute, rule or regulation of any governmental
authority.

     

    3.10 Title to
Assets.  The Company owns no real property except as described
in Schedule 3.10.  The
Company has good and marketable title in all personal property owned by them
that is material to the business of the Company, free and clear of all Liens,
except for Liens that do not, individually or in the aggregate, have or result
in a Material Adverse Effect.  Any real property and facilities held
under lease by the Company is held under valid, subsisting and enforceable
leases of which the Company is in material compliance.

     

    3.11 No General Solicitation;
Placement Agent’s Fees.  Neither the Company, nor, to the
Company’s knowledge after due inquiry, 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 of the Securities
Act) in connection with the offer or sale of the Securities.  The
Company shall be responsible for the payment of any fees to the Placement Agent,
financial advisory fees, or brokers’ commission, together with any out of pocket
expenses incurred by such parties, relating to or arising out of the issuance of
the Securities pursuant to this Agreement.  The Company shall pay, and
hold each Purchaser harmless against, any liability, loss or expense (including,
without limitation, reasonable attorney’s fees and out-of-pocket expenses)
arising in connection with any such claim for fees arising out of the issuance
of the Securities pursuant to this Agreement.


    
      
         


      

      
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    3.12 Private
Placement.  Neither the Company nor, to the Company’s knowledge
after due inquiry, any of its Affiliates nor, any Person acting on the Company’s
behalf has, directly or indirectly, made any offer or sale of any security or
solicitation of any offer to buy any security under circumstances that would (i)
eliminate the availability of the exemption from registration under Regulation D
under the Securities Act in connection with the offer and sale by the Company of
the Securities as contemplated hereby, or (ii) cause the offering of the
Securities pursuant to the Transaction Documents to be integrated with prior
offerings by the Company for purposes of any applicable law, regulation or
stockholder approval provisions, including, without limitation, under the rules
and regulations of any Trading Market.  The sale and issuance of the
Securities hereunder does not contravene the rules and regulations of any
Trading Market on which the Common Stock is, or is currently proposed to be,
listed or quoted.  The Company is not required to be registered as,
and is not an Affiliate of, an “investment company” within the meaning of the
Investment Company Act of 1940, as amended (the “Investment Company
Act”).  The Company is not required to be registered as, a
United States real property holding corporation within the meaning of the
Foreign Investment in Real Property Tax Act of 1980.

     

    3.13 Form S-1
Eligibility.  The Company is eligible to register all the
Conversion Shares and the Warrant Shares for resale by the Purchasers using Form
S-1 promulgated under the Securities Act.

     

    3.14 Existing Registration
Rights.  Except as described in Schedule 3.14 or
as specifically disclosed in the SEC Reports and the registration rights
included herein for the benefit of the Purchasers, the Company has not granted
or agreed to grant to any Person any rights (including “piggy-back”
registration rights) to have any securities of the Company registered with the
SEC or any other governmental authority that have not been satisfied or waived.
There are no registration rights described in Schedule 3.14 or
specifically disclosed in the SEC Reports having priority over or conflicting
with the registration rights included herein for the benefit of the Purchasers
which have not been validly waived or terminated in writing by the
holders.

     

    3.15 Application of Takeover
Protections.  Except as described in Schedule 3.15 or
as specifically disclosed in the SEC Reports, there is no control share
acquisition, business combination, poison pill (including any distribution under
a rights agreement) or other similar anti-takeover provision under the Company’s
charter documents or the laws of its state of incorporation that is or could
become applicable to any of the Purchasers as a result of the Purchasers and the
Company fulfilling their obligations or exercising their rights under the
Transaction Documents, including, without limitation, as a result of the
Company’s issuance of the Securities and the Purchasers’ ownership of the
Securities.


    
      
         


      

      
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    3.16 Material
Disclosure.  The representations, warranties and disclosures
made or  provided by the Company to the Purchasers regarding the
Company, its business and the transactions contemplated hereby, including the
schedules to this Agreement, furnished by or on the behalf of the Company are
true and correct in all material respects 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, false or misleading.  The Disclosure
Materials are true and correct in all material respects 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, false or misleading. The Company acknowledges and
agrees that no Purchaser makes or has made any representations or warranties
with respect to the transactions contemplated hereby other than those set forth
in the Transaction Documents.

     

    3.17 Acknowledgment Regarding
Purchasers’ Purchase of Securities.  Based upon the assumption
that the transactions contemplated by this Agreement are consummated in all
material respects in conformity with the Transaction Documents, the Company
acknowledges and agrees that each of the Purchasers is acting solely in the
capacity of an arm’s length purchaser with respect to the Transaction Documents
and the transactions contemplated hereby and thereby.  The Company
further acknowledges that no Purchaser is acting as a financial advisor or
fiduciary of the Company (or in any similar capacity) with respect to this
Agreement and the transactions contemplated hereby and any advice given by any
Purchaser or any of their respective representatives or agents in connection
with the Transaction Documents and the transactions contemplated hereby and
thereby is merely incidental to the Purchasers’ purchase of the
Securities.  The Company further represents to each Purchaser that the
Company’s decision to enter into this Agreement has been based solely on the
independent evaluation of the transactions contemplated hereby by the Company
and its representatives.

     

    3.18 Patents and
Trademarks.  Schedule 3.18 lists
all material patents and patent rights owned by or licensed to the
Company.  Except as described in Schedule 3.18 or
as specifically disclosed in the SEC Reports, (a) the Company owns or possesses
sufficient rights to conduct its business in the ordinary course, including,
without limitation, rights to use all material patents, patent rights, industry
standards, trademarks, copyrights, licenses, inventions, trade secrets, trade
names and know-how (collectively, “Intellectual Property
Rights”) as owned or possessed by it or that are necessary for the
conduct of its business as now conducted or as proposed to be conducted except
where the failure to currently own or possess such rights would not have a
Material Adverse Effect, (b) to the Company’s knowledge, no third party
currently owns or possesses any Intellectual Property Rights that the Company is
or will be required to acquire (by exclusive or non-exclusive license or
otherwise) in order to conduct its business as now conducted or proposed to be
conducted, except in either case where the failure to acquire such rights would
not have a Material Adverse Effect, (c) to the Company’s knowledge, there is no
Proceeding that challenges the rights of the Company with respect to its
Intellectual Property Rights, (d) the Company is not infringing any rights of a
third party with respect to any Intellectual Property Rights that, individually
or in the aggregate, would have a Material Adverse Effect, (e) the Company has
not received any notice of, nor does it have any knowledge of, any asserted
infringement by the Company of, any rights of a third party with respect to any
Intellectual Property Rights that, individually or in the aggregate, would have
a Material Adverse Effect, (f) the Company has not received any notice of, nor
does it have any knowledge of, infringement by a third party with respect to any
Intellectual Property Rights of the Company that, individually or in the
aggregate, would have a Material Adverse Effect, (g) the Company has not used
Publicly Available Software in whole or in part in the development of any part
of its Intellectual Property Rights in a manner that would be reasonably likely
to subject the Company or its Intellectual Property Rights in whole or in part,
to all or part of the license obligations of any Publicly Available Software
that, individually or in the aggregate, would have a Material Adverse Effect on
the Company and (h) there are no licenses or other agreements under which the
Company has granted rights to others in its Intellectual Property
Rights.


    
      
         


      

      
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    3.19 Insurance.  The
Company is insured by insurers of recognized financial responsibility against
such losses and risks and in such amounts as are prudent and customary in the
businesses and locations in which the Company is engaged.  The Company
has had such coverage on a continuous basis during the 24 months preceding the
date of this Agreement and has no reason to believe it will not be able to renew
its current insurance coverage in the same amounts or obtain new insurance
coverage in amounts not less than it currently has with carriers of equal or
better ratings.  The Company maintains Directors and Officers
Liability Insurance as described in Schedule 3.19.

     

    3.20 Regulatory
Authorizations.  The Company holds, and is operating in
compliance in all material respects with all franchises, grants, authorizations,
licenses, permits, easements, consents, certificates and orders of any
Governmental Authority or self-regulatory body required for the conduct of its
business (“Material
Permits”), all such Material Permits are valid and in full force and
effect; and the Company has not received notice of any revocation or
modification of any such Material Permits or has reason to believe that any such
Material Permits will be revoked, modified, or not be renewed in the ordinary
course; and the Company is in compliance in all respects with all applicable
federal, state, local and foreign laws, regulations, orders and decrees, except
as could not, individually or in the aggregate, reasonably be expected to result
in Material Adverse Effect.


    
      
         


      

      
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    3.21 Regulatory
Compliance.  The Company (a) is and at all times has been in
material compliance with all statutes, rules, regulations, or guidance
applicable to Company and the ownership, testing, development, manufacture,
packaging, processing, use, distribution, marketing, labeling, promotion, sale,
offer for sale, storage, import, export or disposal of any product or services
manufactured or distributed by the Company (the “Applicable Laws”),
except as could not, individually or in the aggregate, reasonably be expected to
result in a Material Adverse Effect; (ii) has not received any notice of adverse
finding, untitled letter or other correspondence or notice from any Governmental
Authority alleging or asserting noncompliance with any Applicable Laws or any
licenses, certificates, approvals, clearances, authorizations, permits and
supplements or amendments thereto required by any such Applicable Laws (“Authorizations”) nor
any warning letter from the U.S. Food and Drug Administration containing any
unresolved issues concerning noncompliance with any Applicable Laws or
Authorizations that could reasonably be expected to result in a Material Adverse
Effect; (iii) possesses all material Authorizations and such Authorizations
are valid and in full force and effect and are not in violation of any term of
any such Authorizations; (iv) has not received notice of any claim, action,
suit, proceeding, hearing, enforcement, investigation, arbitration or other
action from any Governmental Authority or third party alleging that any product
operation or activity is in violation of any Applicable Laws or Authorizations
and have no knowledge that any such Governmental Authority or third party is
considering any such claim, litigation, arbitration, action, suit, investigation
or proceeding; (v) has not received notice that any Governmental Authority
has taken, is taking or intends to take action to limit, suspend, modify or
revoke any Authorizations and the Company has no knowledge that any such
Governmental Authority is considering such action; and (vi) has filed,
obtained, maintained or submitted all material reports, documents, forms,
notices, applications, records, claims, submissions and supplements or
amendments as required by any Applicable Laws or Authorizations and that all
such reports, documents, forms, notices, applications, records, claims,
submissions and supplements or amendments were complete and correct in all
material respects on the date filed (or were corrected or supplemented by a
subsequent submission).  To the Company’s knowledge, any studies,
tests and preclinical and clinical trials conducted by or on behalf of the
Company were and, if still pending, are, in all material respects, being
conducted in accordance with experimental protocols, procedures and controls
pursuant to accepted professional scientific standards and all Applicable Laws
and Authorizations; the descriptions of the results of such studies, tests and
trials contained in the Disclosure Materials are accurate and complete in all
material respects and fairly present the data derived from such studies, tests
and trials; the Company is not aware of any studies, tests or trials the results
of which the Company reasonably believes call into question the study, test, or
trial results described or referred to in the Disclosure Materials when viewed
in the context in which such results are described and the clinical state of
development; and the Company has not received any notices or correspondence from
any Governmental Authority requiring the termination, suspension or material
modification of any studies, tests or preclinical or clinical trials conducted
by or on behalf of the Company.

     

    3.22 Workplace
Safety.  The Company (i) is in compliance, in all material
respects, with any and all applicable foreign, federal, state and local laws,
rules, regulations, treaties, statutes and codes promulgated by any and all
governmental authorities (including pursuant to the Occupational Health and
Safety Act) relating to the protection of human health and safety in the
workplace (“Occupational Laws”);
(ii) has received all material permits, licenses or other approvals
required of it under applicable Occupational Laws to conduct its business as
currently conducted; and (iii) is in compliance, in all material respects,
with all terms and conditions of such permit, license or approval.  No
action, proceeding, revocation proceeding, writ, injunction or claim is pending
or, to the Company’s knowledge, threatened against the Company relating to
Occupational Laws, and the Company does not have knowledge of any facts,
circumstances or developments relating to its operations or cost accounting
practices that could reasonably be expected to form the basis for or give rise
to such actions, suits, investigations or proceedings.

     

    3.23 Transactions With Affiliates
and Employees.  Except as described on Schedule 3.23 or as
specifically disclosed in the Disclosure Material, none of the officers,
directors or employees of the Company is presently a party to any transaction
with the Company (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 Company’s knowledge, 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.


    
      
         


      

      
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    3.24 Internal Accounting
Controls.  Except as specifically disclosed in the Disclosure
Material, the Company maintains a system of internal accounting controls
sufficient to provide reasonable assurance that (a) transactions are executed in
accordance with management’s general or specific authorizations, (b)
transactions are recorded as necessary to permit preparation of financial
statements in conformity with generally accepted accounting principles and to
maintain asset accountability, (c) access to assets is permitted only in
accordance with management’s general or specific authorization, and (d) the
recorded accountability for assets is compared with the existing assets at
reasonable intervals and appropriate action is taken with respect to any
differences. Neither the Company’s board of directors nor the audit committee
has been informed, nor is any director of the Company or the Company aware, of
(i) any “significant deficiencies” or “material weaknesses” (each as defined by
the Public Company Accounting Oversight Board) in the design or operation of the
Company’s internal controls which could adversely affect the Company’s ability
to record, process, summarize and report financial data; or (ii) any fraud,
whether or not material, that involves management or other employees of the
Company who have a significant role in the Company’s internal
controls.

     

    3.25 Sarbanes-Oxley
Act.  The Company will be in compliance in all material
respects with currently applicable requirements of the Sarbanes-Oxley Act of
2002 and applicable rules and regulations promulgated by the SEC thereunder no
later than the effective date of the Registration Statement (as defined
below).

     

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

     

    3.27 Indebtedness.  Except
as disclosed in Schedule 3.27 or
as specifically disclosed in the SEC Reports, the Company (i) has no outstanding
Indebtedness, (ii) is not 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 (iii) is not 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.  Schedule 3.27
provides a detailed description of the material terms of any such outstanding
Indebtedness.


    
      
         


      

      
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    3.28 Employee
Relations.  The Company is not a party to any collective
bargaining agreement or employs any member of a union.  The Company
maintains good relations with its employees.  Except as described in
the Disclosure Material, no current executive officer of the Company (as defined
in Rule 501(f) of the Securities Act) has notified the Company that such officer
intends to leave the Company or otherwise terminate such officer’s employment
with the Company.  To the knowledge of the Company, no executive
officer of the Company is 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 the continued employment of each such executive officer does not
subject the Company to any liability with respect to any of the foregoing
matters.  Except as set forth on Schedule 3.28, each
of the Company’s directors, officers and employees who have access to the
Company’s proprietary information, have entered into or are otherwise subject to
non-solicitation (as to employees and any customers), confidentiality and
invention assignment agreements.  The Company has entered into
employment agreements with its key employees, copies of which have been made
available to the Co-Lead Investors.

     

    3.29 Labor
Matters.  The Company is in compliance in all material respects
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.

     

    3.30 Environmental
Laws.  The Company (i) is in compliance in all material
respects with any and all Environmental Laws (as hereinafter defined), (ii) has
received all permits, licenses or other approvals required of them under
applicable Environmental Laws to conduct their respective businesses and (iii)
is in compliance in all material respects with all terms and conditions of any
such permit, license or approval where, in each of the foregoing clauses (i),
(ii) and (iii), the failure to so comply would 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.

     

    3.31 Tax
Status.  Except as specifically disclosed in the Company’s
financial statements, the Company (i) has made or filed all foreign, federal and
state income and all other tax returns, reports and declarations required by any
jurisdiction to which it is subject, (ii) has paid all taxes and other
governmental assessments and charges that are material in amount, shown or
determined to be due on such returns, reports and declarations, except those
being contested in good faith 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.  There
are no unpaid taxes in any material amount claimed to be due by the taxing
authority of any jurisdiction, and the officers of the Company know of no basis
for any such claim.

     

    3.32 No Manipulation of
Stock.  The Company has not taken and will not, in violation of
applicable law, take any action designed to or that would reasonably be expected
to cause or result in manipulation of the price of the Common Stock, in
violation of applicable law or regulation, in order to facilitate the sale or
resale of the Conversion Shares or the Warrant Shares.


    
      
         


      

      
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    3.33 Company not an “Investment
Company”.  The Company has been advised of the rules and
requirements under the Investment Company Act.  The Company is not,
and immediately after receipt of payment for the Preferred Shares and Warrants
will not be, an “investment company,” an “affiliated person” of, “promoter” for
or “principal underwriter” for, or an entity “controlled” by an “investment
company,” within the meaning of the Investment Company Act and shall conduct its
business in a manner so that it will not become subject to the Investment
Company Act.

     

    3.34 Accountants.  To
the Company’s knowledge, Crowe Horwath LLP, which the Company expects will
consent to the inclusion of their report with respect to the consolidated
financial statements of the Company for the year ended December 31, 2009 in the
Registration Statement (as defined below) and the prospectus which forms a part
thereof, is an independent registered public accounting firm as required by the
Securities Act and the rules and regulations promulgated
thereunder.

     

    3.35 Material
Agreements.  Schedule 3.35 sets
forth a true and complete list of any and all material agreements to which the
Company is a party or is otherwise bound, and which the Company, were it deemed
to be a reporting company under Section 13(a) or 15(d) of the Exchange Act,
would be required to file as an exhibit to its periodic annual and quarterly
filings made under the Exchange Act.  The contracts listed on Schedule
3.35 are in full force and effect on the date hereof, and neither the Company
nor, to the Company’s knowledge, any other party to such contracts is in breach
of or default under any of such contracts which would have a Material Adverse
Effect.

     

    3.36 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.

     

    3.37 U.S. Real Property Holding
Corporation.  The Company is not, nor has it ever been, as U.S.
real property holding corporation within the meaning of Section 897 of the
Internal Revenue Code of 1986, as amended, and the Company shall so certify upon
any Purchaser’s request.

     

    4.            Representations
and Warranties of the Purchasers. Each Purchaser hereby, as to
itself only and for no other Purchaser, represents, warrants and agrees to the
Company as follows, as of the date hereof and as of the Closing:

     

    4.1   Organization;
Authority.  Such Purchaser, if a corporation or other legal
entity, is an entity duly organized, validly existing and in good standing under
the laws of the jurisdiction of its organization with the requisite corporate,
partnership or other power and authority to enter into and to consummate the
transactions contemplated by the Transaction Documents and otherwise to carry
out its obligations hereunder and thereunder.  The purchase by such
Purchaser of the Preferred Shares and Warrants hereunder has been duly
authorized by all necessary corporate, partnership or other action on the part
of such Purchaser.  This Agreement has been duly executed and
delivered by such Purchaser and constitutes the valid and binding obligation of
such Purchaser, enforceable against it in accordance with its terms, except as
may be limited by (i) applicable bankruptcy, insolvency, reorganization or other
laws of general application relating to or affecting the enforcement of
creditors rights generally, and (ii) the effect of rules of law governing the
availability of specific performance and other equitable
remedies.


    
      
         


      

      
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    4.2   No Public Sale or
Distribution.  Such Purchaser (i) is acquiring the Preferred
Shares and the Warrants, (ii) upon conversion of the Preferred Shares will
acquire the Conversion Shares issuable upon conversion thereof, and (iii) 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 under the Securities Act or under
an exemption from such registration and in compliance with applicable federal
and state securities laws, and such Purchaser 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 Purchaser 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 Securities Act.

     

    4.3   Purchaser
Status.  At the time such Purchaser was offered the Securities,
it was, and at the date hereof it is, an “accredited investor”
as defined in Rule 501(a) under the Securities Act or a “qualified institutional
buyer” as defined in Rule 144A(a) under the Securities
Act.  Such Purchaser is not a registered broker dealer registered
under Section 15(a) of the Exchange Act, or a member of the Financial
Industry Regulatory Authority, Inc. (“FINRA”) or an entity engaged in the
business of being a broker dealer.  Except as otherwise disclosed in
writing to the Company on or prior to the date of this Agreement, such Purchaser
is not affiliated with any broker dealer registered under Section 15(a) of
the Exchange Act, or a member of  ̈FINRA or an entity engaged in the business of
being a broker dealer. The foregoing representations are based upon the answers
furnished by each Purchaser in the form of Confidential Investor Questionnaire
attached hereto as Exhibit G (the “Investor
Questionnaire”).

     

    4.4   Experience of Such
Purchaser.  Such Purchaser, either alone or together with its
representatives has such knowledge, sophistication and experience in business
and financial matters so as to be capable of evaluating the merits and risks of
the prospective investment in the Securities, and has so evaluated the merits
and risks of such investment.  Such Purchaser understands that it must
bear the economic risk of this investment in the Securities indefinitely, and is
able to bear such risk and is able to afford a complete loss of such
investment.

     

    4.5   Access to
Information.  Such Purchaser acknowledges that it has had the
opportunity to review the Disclosure Materials and has been afforded: (i) the
opportunity to ask such questions as it has deemed necessary of, and to receive
answers from, representatives of the Company concerning the terms and conditions
of the offering of the Securities and the merits and risks of investing in the
Securities; (ii) access to information about the Company and its financial
condition, results of operations, business, properties, management and prospects
sufficient to enable it to evaluate its investment; and (iii) the opportunity to
obtain such additional information that the Company possesses or can acquire
without unreasonable effort or expense that is necessary to make an informed
investment decision with respect to the investment.  Neither such
inquiries nor any other investigation conducted by or on behalf of such
Purchaser or its representatives or counsel shall modify, amend or affect such
Purchaser’s right to rely on the truth, accuracy and completeness of the
Disclosure Materials and the Company’s representations and warranties contained
in the Transaction Documents.


    
      
         


      

      
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    4.6   No Governmental
Review.  Such Purchaser 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.

     

    4.7   No
Conflicts.  The execution, delivery and performance by such
Purchaser of this Agreement and the consummation by such Purchaser of the
transactions contemplated hereby will not (i) result in a violation of the
organizational documents of such Purchaser, (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 Purchaser 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 Purchaser, except in the case of clauses (ii) and (iii)
above, that do not otherwise affect the ability of such Purchaser to consummate
the transactions contemplated hereby.

     

    4.8   Prohibited
Transactions.  Each Purchaser covenants that neither it nor any
Person acting on its behalf or pursuant to any understanding with such Purchaser
will engage, directly or indirectly, in any transactions in the securities,
including derivatives, of the Company including, without limitation, any Short
Sales (a “Transaction”)
involving any of the Company’s securities prior to the time the transactions
contemplated by this Agreement are publicly disclosed.  “Short Sales” include,
without limitation, all “short sales” as defined in Rule 200 promulgated under
Regulation SHO under the Exchange Act and all types of direct and indirect stock
pledges, forward sale contracts, options, puts, calls, short sales, swaps,
derivatives and similar arrangements (including on a total return basis), and
sales and other transactions through non-U.S. broker-dealers or foreign
regulated brokers.

     

    4.9   Restricted
Securities.  The Purchaser understand that the Securities are
characterized as “restricted securities” under the U.S. federal securities laws
inasmuch as they are being acquired from the Company in a transaction not
involving a public offering and that under such laws and applicable regulations
such securities may be resold without registration under the Securities Act only
in certain limited circumstances.

     

    4.10 Legends.  It
is understood that certificates evidencing such Securities may bear the legend
set forth in Section
8.1 of this Agreement.


    
      
         


      

      
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    4.11 No Legal, Tax or Investment
Advice.  Such Purchaser understands that nothing in this
Agreement or any other materials presented by or on behalf of the Company to the
Purchaser in connection with the purchase of the Securities constitutes legal,
tax or investment advice.  Such Purchaser has consulted such legal,
tax and investment advisors as it, in its sole discretion, has deemed necessary
or appropriate in connection with its purchase of the Securities.

     

    5.         
   Covenants
and Agreements.

     

    5.1   Pre-Closing Covenants and
Agreements.  The parties hereto covenant and agree to perform
or take any and all such actions to effectuate the following from the date
hereof until the earlier of the Closing Date or the termination of this
Agreement:

     

    (a)           Further
Assurances.  Each of the parties shall, prior to or at the
Closing, as may be appropriate, execute such documents and other papers and take
such other further actions as may be reasonably required to carry out the
provisions hereof and effectuate the transactions contemplated hereby and by the
terms of the Warrants.  Each party shall use its best efforts to
fulfill or obtain the fulfillment of the conditions to its obligation to effect
the Closing, including promptly obtaining any consents required in connection
herewith.

     

    (b)          Additional
Disclosure.  The Company shall promptly notify Purchasers of,
and furnish Purchasers with, any information it may reasonably request with
respect to the occurrence of any event or condition or the existence of any fact
that would cause any of the conditions to Purchaser’s obligation to consummate
the transactions contemplated by this Agreement not to be
fulfilled.

     

    (c)           Investor Directors; Majority
of Independent Directors.  The Company shall take all necessary
actions to ensure that (i) one (1) designee of each of the Co-Lead Investors
shall be nominated and appointed to serve on its Board of Directors, which shall
be comprised of not more than seven (7) directors, with such appointment to take
effect on such date as requested by the Co-Lead Investors, but in no event later
than the date after the last Closing for the purchase of Securities takes place
under this Agreement (each such elected director hereinafter referred to as an
“Investor
Director”), and (ii) from and after the date after the last Closing
hereunder, a majority of the directors on the Board of Directors shall be either
Investor Directors or otherwise “independent” as defined under the NASDAQ
listing requirements. Subject to the foregoing, and subject to the terms of the
voting agreement contemplated in Section 6.1(n), the Board of Directors shall
have the right to appoint such other individuals as directors.

     

    5.2   Post-Closing Covenants and
Agreements.

     

    5.2.1       At
all times prior to the Effective Date, the Company shall provide to any
Purchaser holding at least five percent (5%) of the issued and outstanding
capital stock of the Company, calculated on an as-converted basis:

     

    (a)           within
sixty (60) days after the end of each fiscal year of the Company, the balance
sheet, income statement and statement of cash flows for the prior fiscal year;
such financial statements to be in reasonable detail, prepared in accordance
with GAAP and audited and certified by independent public
accountants;


    
      
         


      

      
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    (b)  
        within forty-five (45) days
after the end of the first three (3) quarters of each fiscal year, the unaudited
balance sheet, income statement and statement of cash flows for the end of each
respective quarter; such financial statements to be in reasonable detail,
prepared in accordance with GAAP and reviewed by independent public
accountants;

     

    (c)           within
sixty (60) days prior to the beginning of a year covered by a Company’s annual
business plan or budget, copies of such annual business plan or budget;
and

     

    (d)           such
other financial information as may be reasonably requested by the Purchasers
entitled to receive financial information hereunder.

     

    In the
event that the Company fails to comply with the obligations pursuant to this
Section 5.2.1, the Co-Lead Investors shall have the right, at the Company’s
expense, to engage an independent auditor to assist the Company with compliance
under such section.  Without limiting the foregoing, until the
Effective Date, the Co-Lead Investors shall have the right, once per calendar
year, at the expense of the Co-Lead Investor electing to exercise its rights
hereunder, to engage an independent auditor to audit any portion of the
Company’s financial information or internal controls.

     

    5.2.2       The
Company shall grant Co-Lead Investors, at reasonable times and upon reasonable
notice, the right to inspect all books, records and information of the Company,
and shall be entitled to inspect Company property and consult with management of
the Company and other personnel, subject to the undertaking of confidentiality
by the Co-Lead Investors seeking to exercise the rights granted
hereunder.

     

    5.2.3       The
Company will use the proceeds from the sale of the Preferred Shares for the
purposes set forth in Exhibit D attached
hereto.   A vote of a majority of the Company’s Board of
Directors, which majority shall include the affirmative vote of all three
Investor Directors, shall be required to amend the use of proceeds description
set forth on Exhibit
D.

     

    5.2.4       The
Company will enter into an appropriate confidentiality, non-solicitation (as to
employees and any customers) and invention assignment agreements with each of
its officers and employees who are hired or appointed following the Initial
Closing and who have access to the Company’s proprietary
information.

     

    5.2.5       The
Company shall use its commercially reasonable efforts to ensure that each of the
Co-Lead Investors continue to have the right to appoint one (1) Investor
Director as long as such Co-Lead Investor together with its nominated Investor
Director beneficially owns at least fifty percent (50%) of the number of shares
of Common Stock issued or issuable upon the conversion of all the Preferred
Shares purchased by such Co-Lead Investor pursuant to this
Agreement.  For the avoidance of doubt, Warrant Shares shall be
excluded for purposes of computing the ownership threshold referenced in the
preceding sentence.  The Company agrees to reimburse each Investor
Director for reasonable out-of-pocket expenses incurred in connection with their
participation in the meetings of the Board of Directors.

     

    5.2.6       The
Investor Directors shall have the right to serve and participate in any
committee of the Board of Directors.


    
      
         


      

      
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    5.2.7       At
any time prior to the Effective Date, while 1,000,000 shares of Series A
Preferred Stock remain outstanding and held by Pontifax or affiliate of
Pontifax, the Company shall not, either directly or indirectly, by amendment,
merger, consolidation or otherwise, do any of the following without (in addition
to any other vote required by law or Company’s charter documents) the prior
written consent of Pontifax, take any action that:

     

    (a)           amends
or otherwise modifies the Certificate of Designation or any of the Company’s
charter documents;

     

    (b)          creates
or issues any class or series of shares or other securities of the Company
ranking senior to the Series A Preferred Stock as to dividends or
liquidation;

     

    (c)           effects
a sale of the Company, merger, disposition of all or substantially all of the
Company’s assets, or an acquisition of shares or assets of the Company or other
Company or business entity;

     

    (d)           increases
the size of the Board of Directors above seven (7) members;

     

    (e)           declares
or pays any dividend or other distribution to stockholders of cash, shares, or
other assets;

     

    (f)           creates
any mortgage, pledge or other security interest in any material asset of
the Company;

     

    (g)          effects
a liquidation or the cessation of all or substantially all of the business of
the Company;

     

    (h)          approves
or materially amends the business plan or budget of the Company;

     

    (i)           effects
any related party transaction (including without limitation any transaction with
an officer, director or stockholder of the Company);

     

    (j)           authorizes
or incurs an obligation of the Company whether actual or contingent, in an
amount exceeding $250,000 (except for obligations and transfers of salary
payments, and payments to governmental and tax authorities);

     

    (k)          changes
the signatory rights of the Company;

     

    (l)           effects
a share combination or subdivision, distribution of bonus shares or any other
similar reclassification, reorganization or recapitalization of the Company's
share capital where the Company's stockholders retain their proportionate
holdings in the Company;

     

    (m)          effects
any transaction out of the ordinary course of business;

     

    (n)           involves
the appointment, removal, or modification of the terms of any existing
employment or engagement agreement with any of the Company's executive
management staff;

     

    (o)           results
in the repurchase of any shares or other securities by the Company;

     

    (p)           results
in any proprietary information of the Company being licensed outside of the
ordinary course of business;

     

    (q)           results
in a material change in the business or strategic direction of the
Company;

     

    
      
         


      

      
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    (r)           results
in the adoption of or amendment to any employee stock option plan or other
similar incentive arrangement, including the increase of the number of shares
reserved for allocation thereunder;

     

    (s)          creates
any committee of the Board of Directors;

     

    (t)           results
in the grant, cancellation or guarantee by the Company of debt owed by or to the
Company's officers, directors, employees, consultants or
stockholders;

     

    (u)          results
in the appointment of or release of the Company's independent auditors or any
change in the accounting principles or internal controls previously adopted by
the Company;

     

    (v)          results
in the appointment of or release of the Company's legal advisors;
and

     

    (w)          results
in the grant of registration rights to any person or entity other than the
Investors that are superior or equal to those rights granted to the
Investors.

     

    5.2.8       Following
the date on which the last Closing for the purchase of Securities takes place
under this Agreement, the Company shall diligently search for a candidate to
serve as its Chief Executive Officer, to commence no later than the termination
of the Consulting Agreement with Two River Consulting, LLC (referred to in
Section 6.1(l) below). A vote of a majority of the Company’s Board of Directors,
which majority shall include the affirmative vote of all three Investor
Directors, shall be required to approve the appointment and the respective terms
his or her engagement, which terms may include, without limitation, the length
and scope of employment, amount of compensation, and types of fringe benefits
offered.

     

    5.2.9       In
addition to complying with its reporting and other obligations under U.S.
federal securities laws as a consequence of its registration obligations under
this Agreement, the Company will, within 180 days following the Initial Closing,
satisfy the corporate governance requirements under NASDAQ Marketplace Rule 5605
(relating to Board and Board committee composition, process and
decision-making), except to the extent the Company is unable to satisfy such
rule as a result of any Investor Director’s presence on the Board or any
committee thereof, Rule 5610 (relating to codes of conduct) and Rule 5630
(relating to the review and approval of related-party transactions) as if the
Common Stock was listed on NASDAQ; provided however, that in the absence of an
actual NASDAQ listing, nothing in this Section 5.2.9 (a) shall (i) impair any
Co-Lead Investor’s right to designate any individual as an Investor Director,
(ii) be deemed to require Company compliance with the stockholder approval
requirements of NASDAQ Marketplace Rule 5635, or (iii) be deemed to provide any
rights to any stockholder or person other than the Co-Lead Investors, and (b)
may be waived with the consent of all Co-Lead Investors. The Company’s
obligations under this Section 5.2.9 shall terminate upon the date on which each
of the Co-Lead Investors’ rights under Section 5.2.5 terminate.


    
      
         


      

      
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    5.2.10     Effective
upon the Initial Closing, without the affirmative vote or consent of each
Investor Director then in office, the Company shall not enter into any
transaction that would be reportable under Item 404(a) of Regulation S-K
promulgated by the SEC, but without regard to whether the amount involved
exceeds any minimum that may be provided from time to time in such Item 404, and
without regard to Instructions 4, 5 and 6 to Item
404(a).  Notwithstanding the foregoing, nothing in this Section 5.2.10
shall be construed to require the Company to obtain the affirmative vote or
consent of any Investor Director with respect to any currently
effective  transaction or agreement described on Schedule 3.23 hereto,
or with respect to any future compensation matter specifically presented to and
approved by a Compensation Committee of the Board of Directors composed
exclusively of independent directors, and thereafter approved or ratified by a
majority of the Board of Directors.  The Company's obligations under
this Section 5.2.10 shall terminate upon the date on which each of the Co-Lead
Investor's rights under Section 5.2.5 terminate.

     

    6.       
     Conditions
Precedent to the Obligation of Purchaser to Close.

     

    6.1   Closing Conditions Upon
Initial Closing.  The obligation of the Purchaser to complete
the Initial Closing is subject to the fulfillment on or prior to the Closing
Date of the Initial Closing of all of the following conditions, any one or more
of which may be waived by Purchaser in writing:

     

    (a)          Representations and
Warranties.  The representations and warranties of the Company
contained in Section
3 shall be true on and as of the Closing.

     

    (b)          Agreements and
Conditions.  On or before the Closing Date, the Company shall
have complied with and duly performed and satisfied in all material respects all
agreements and conditions on its part to be complied with and performed by such
date pursuant to this Agreement.

     

    (c)           Absence of Certain Lending
Arrangements.  The Company shall not have any outstanding
loans, or other forms of indebtedness, from or to its founders, directors,
officers, management, consultants or service providers, except with respect to
consultants and service providers who are not affiliates of the Company, to the
extent that such indebtedness was incurred in the ordinary course of
business.

     

    (d)          No Excess
Liabilities. The amount of the Company’s outstanding liabilities as of
the Closing Date, shall not exceed the projected amount of such liabilities as
set forth in the Company’s annual budget, a copy of which was delivered or made
available to the Co-Lead Investors prior to Closing.

     

    (e)           No Material Adverse
Change. No material adverse change shall have occurred in the business or
conditions (financial or otherwise) or prospects of the Company and no other
event, loss, damage, condition or state of facts of any kind shall exist which
has a Material Adverse Effect or can reasonably be expected to have a Material
Adverse Effect.

     

    (f)           Minimum Funding. The
aggregate minimum investment amount equal to $10,000,000 (the “Minimum Funding”),
which amount excludes the amount to be invested by Pontifax pursuant to this
Agreement, shall have been, or shall be, fully paid to the Company prior to or
contemporaneously with the Closing or deposited into Escrow pursuant to Section
7.1(c).

     

    
      
         


      

      
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    (g)          Consents.  The
Company shall have obtained any consents necessary to effectuate this Agreement
and to consummate the transactions contemplated hereby and delivered copies
thereof to the Purchasers.

     

    (h)          Opinion of Company
Counsel.  Each Purchaser shall have received from Fredrikson
& Byron, P.A., as counsel for the Company, an opinion, dated as of the
Closing, in substantially the form of Exhibit H attached
hereto.

     

    (i)           Preferred
Shares.  The Certificate of Designation shall have been
executed, filed with and accepted by the Secretary of State of the State of
Delaware, and the Company shall have duly executed and delivered to Purchasers
certificates evidencing the Preferred Shares being sold at the
Closing.

     

    (j)           Warrant
Agreement.  The Company shall have duly executed and delivered
to Purchasers the Warrants being issued at the Closing.

     

    (k)           Lock-Up
Agreements.  The Company shall have delivered to Purchasers,
lock-up agreements, substantially in the form attached hereto as Exhibit E, executed
by Peter Kash, Joshua Kazam, David Tanen, and Dr. Arie Belldegrun (the “Existing
Stockholders”), pursuant to which the Existing Stockholders agree in
connection with the transactions contemplated by this Agreement to not sell or
transfer any shares of Common Stock owned by them (other than securities
purchased by the Existing Stockholders in the transaction contemplated herein)
for a period of up to eighteen (18) months following the Closing
Date.

     

    (l)           Termination of Consulting
Agreement.  The Company and Two River Consulting, LLC shall
have agreed, without any form of termination fee or other financial penalty for
termination payable by the Company, to terminate the services agreement by and
between the Company and Two River Consulting, LLC as of April 2011, unless
otherwise extended by an affirmative vote of the Board of Directors, which vote
shall include the affirmative votes of all three Investor
Directors.  Without limiting the foregoing, from and after the Initial
Closing, and subject to approval by the Board of Directors and all three
Investor Directors, the Company shall engage or pay Two River Consulting, LLC
under the existing services agreements to perform such management related
services as may be approved by the Board of Directors from time to
time.

     

    (m)          Affiliate
Investment.  The Placement Agent and co-placement agent, the
Company’s officers and directors, and their respective affiliates, shall
purchase a number of shares of Series A Preferred Stock and Warrants, pursuant
to the terms of this Agreement,  for an aggregate purchase price equal
to no less than 80% of the cash compensation paid, or to be paid, to the
Placement Agent for services rendered by Placement Agent in connection with the
sale of Securities to Investors hereunder.  Such purchase shall be
included in determining whether the Minimum Funding requirement has been
satisfied.

     

    (n)           Voting
Agreement.  The Company shall have delivered to Co-Lead
Investors, a voting agreement, substantially in the form attached hereto as
Exhibit F,
executed by the Company, Peter Kash, Joshua Kazam, David Tanen, and Dr. Arie
Belldegrun, and their family members and/or trusts under their control, pursuant
to which such parties agree to vote all shares beneficially owned for the
election of the Investor Director nominees designated by the Co-Lead
Investors.


    
      
         


      

      
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    (o)          Director and Officer
Insurance.  The Company shall have obtained director and
officer liability insurance from a financially sound and reputable insurer with
a coverage amount of at least $3,000,000.

     

    (p)          Compliance
Certificate.  The President of the Company shall deliver to the
Purchasers at the Closing a certificate certifying that the conditions specified
in Section 6.1(a)
through Section 6.1(g), and Section 6.1(i) through
Section 6.1(o) have been fulfilled.

     

    (q)          Applicable Board and
Stockholder Resolutions.  The Company shall deliver to
the  Purchasers copies of (i) the resolutions duly adopted by the
Board of the Directors of the Company authorizing the execution, delivery and
performance of the applicable Transaction Documents by the Company and (ii) to
the extent required by law or agreement, the resolutions duly adopted by the
stockholders of the Company as may be required to authorize the execution,
delivery and performance of the applicable Transaction Documents by the Company,
in each case certified  by the Secretary of the Company.

     

    (r)           Participation of Certain
Co-Lead Investors.  Both UTA and Pontifax shall be parties to
and shall have consummated the transactions contemplated by this Agreement,
pursuant to which each such Co-Lead Investor shall invest $2,000,000 and
$3,000,000, respectively.

     

    6.2   Closing Conditions Upon
Subsequent Closing.  The obligation of the Purchaser to
complete a Subsequent Closing is subject to the fulfillment on or prior to the
Closing Date of the Subsequent Closing of all of the following conditions, any
one or more of which may be waived by Purchaser in writing:

     

    (a)           Representations and
Warranties.  The representations and warranties of the Company
contained in Section
3 shall be true on and as of the Subsequent Closing.

     

    (b)           Agreements and
Conditions.  On or before the Closing Date of the Subsequent
Closing, the Company shall have complied with and duly performed and satisfied
in all material respects all agreements and conditions on its part to be
complied with and performed by such date pursuant to this
Agreement.

     

    (c)           Absence of Certain Lending
Arrangements.  The Company shall not have any outstanding
loans, or other forms of indebtedness, from or to its founders, directors,
officers, management, consultants or service providers, except with respect to
consultants and service providers who are not affiliates of the Company, to the
extent that such indebtedness was incurred in the ordinary course of
business.

     

    (d)           No Material Adverse
Change. No material adverse change shall have occurred in the business or
conditions (financial or otherwise) or prospects of the Company and no other
event, loss, damage, condition or state of facts of any kind shall exist which
has a Material Adverse Effect or can reasonably be expected to have a Material
Adverse Effect.


    
      
         


      

      
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    (e)           Preferred
Shares.  The Company shall have duly executed and delivered to
Purchasers certificates evidencing the Preferred Shares being sold at the
Closing.

     

    (f)           Warrant
Agreement.  The Company shall have duly executed and delivered
to Purchasers the Warrants being issued at the Subsequent Closing.

     

    (g)           Affiliate
Investment.  The Placement Agent and co-placement agent, the
Company’s officers and directors, and their respective affiliates, shall
purchase a number of shares of Series A Preferred Stock and Warrants, pursuant
to the terms of this Agreement,  for an aggregate purchase price equal
to no less than 80% of the cash compensation paid, or to be paid, to the
Placement Agent for services rendered by Placement Agent in connection with the
sale of Securities sold at the Subsequent Closing.  Such purchase
shall not be included in determining whether the Maximum Amount has been
sold.

     

    (h)           Compliance
Certificate.  The President of the Company shall deliver to the
Purchasers at the Closing a certificate certifying that the conditions specified
in Section 6.2(a)
through Section 6.2(g) have been fulfilled.

     

    7.     
       Conditions
Precedent to the Obligation of the Company  to
Close.

     

    7.1   Closing.  The
obligation of the Company to complete the Closing is subject to the fulfillment
on or prior to the Closing Date of all of the following conditions, any one or
more of which may be waived by the Company in writing:

     

    (a)           Representations and
Warranties.  The representations and warranties of each
Purchaser contained in Section 4 shall be
true on and as of the Closing.

     

    (b)           Agreements and
Conditions.  Upon the Closing Date, each Purchaser shall have
complied with and performed and satisfied in all material respects all
agreements and conditions to be complied with and performed by such date
pursuant to this Agreement.

     

    (c)           Payment of Purchase
Price.  Each Purchaser shall have deposited the applicable
Purchase Price with the Escrow Agent, in accordance with the instructions set
forth on Exhibit
I hereto, but less any fees and expenses amounts required to be
reimbursed and not yet reimbursed by the Company pursuant to Section
12.2.

     

    8.        
    Restrictions
on Transferability; Compliance with the Securities Act.

     

    8.1   Restrictive
Legend.  Purchaser understands that, until such time as a
registration statement pursuant to the Securities Act has been declared
effective or the Conversion Shares may be sold pursuant to Rule 144(b) under the
Securities Act without any restriction as to the number of securities as of a
particular date that can then be immediately resold, the certificate(s)
representing the Conversion Shares and Warrants Shares (collectively, the “Restricted Shares”)
shall bear a restrictive legend in substantially the following form (and a
stop-transfer order may be placed against transfer of the certificates for the
securities comprising the Restricted Shares):


    
      
         


      

      
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    THE
SECURITIES REPRESENTED HEREBY HAVE BEEN ISSUED WITHOUT REGISTRATION UNDER THE
SECURITIES ACT OF 1933, AS AMENDED, OR UNDER ANY STATE SECURITIES LAWS, AND MAY
NOT BE SOLD, TRANSFERRED OR PLEDGED IN THE ABSENCE OF AN EFFECTIVE REGISTRATION
STATEMENT UNDER APPLICABLE FEDERAL AND STATE SECURITIES LAWS OR AN OPINION OF
COUNSEL REASONABLY SATISFACTORY TO ISSUER THAT THE TRANSFER IS EXEMPT FROM
REGISTRATION UNDER APPLICABLE FEDERAL AND STATE SECURITIES LAWS.

     

    8.2   Restrictions on
Transferability.  Purchaser hereby covenants with the Company
not to effect any resale or other disposition of any of the Restricted Shares
without complying with the provisions of this Agreement, and without effectively
causing any prospectus delivery requirement under the Securities Act to be
satisfied, and Purchaser acknowledges and agrees that such Restricted Shares are
not transferable on the books of the Company unless (a) the Restricted Shares
have been sold in accordance with an effective registration statement or valid
exemptions from registration under the Securities Act and any applicable state
securities or “blue sky” laws, (b) prior to such time that a registration
statement shall have become effective under the Securities Act, Purchaser shall
have furnished the Company with an opinion of counsel, reasonably satisfactory
to the Company, that such disposition will not require registration of the
Restricted Shares under the Securities Act and (c) if applicable, the
requirement of delivering a current prospectus has been
satisfied.  Purchaser acknowledges that there is no assurance that a
registration statement shall be declared effective by the SEC.

     

    9.            Registration
Statement.

     

    9.1   Registration.

     

    (a)           On
or prior to the date (the “Filing Date”) that is
no later than sixty (60) calendar days following the Closing Date, and in any
event prior to the filing of a Registration Statement with the SEC for the
holders of any other shares of the Company’s capital stock (each, an “Other Registration
Statement”), the Company shall prepare and file with the SEC a
Registration Statement covering the resale of the Registrable Securities for an
offering to be made on a continuous basis pursuant to Rule 415.  The
initial Registration Statement to be filed under this Section shall be
filed to include all of the Registrable Securities.  Such Registration
Statement shall contain (except if otherwise required pursuant to written
comments received from the SEC upon a review of such Registration Statement) the
“Plan of
Distribution” attached hereto as Exhibit C.  The
Company shall use its reasonable best efforts to cause such Registration
Statement to be declared effective under the Securities Act as soon as possible
but, in any event, no later than 180 calendar days following the Closing Date,
and in any event, at least 20 Trading Days prior to the effectiveness of any
Other Registration Statement (the “Effectiveness Date”),
and shall use its reasonable best efforts to keep the Registration Statement
continuously effective under the Securities Act until the date which is the
earliest of (i) such time as all of the Registrable Securities covered by such
Registration Statement have been publicly sold by the Holders, or (ii) such time
as all of the Registrable Securities covered by such Registration Statement may
be sold by the Holders in a single transaction by each Holder pursuant to Rule
144(b) as determined by the counsel to the Company pursuant to a written opinion
letter to such effect, addressed and acceptable to the Company’s Transfer Agent
(the “Effectiveness
Period”).  By 5:00 p.m. (New York City time) on the Business
Day immediately following the Effective Date of such Registration Statement, the
Company shall file with the SEC in accordance with Rule 424 under the Securities
Act the final prospectus to be used in connection with sales pursuant to such
Registration Statement (if such filing is required under such
Rule).


    
      
         


      

      
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    (b)           If
all of the Registrable Securities to be included in the Registration Statement
filed pursuant to Section 9.1(a) cannot
be so included because the SEC staff informs the Company that all of the
Registrable Securities cannot, as a result of the application of Rule 415 or
other reason, be registered for resale as a secondary offering on a single
registration statement, the Company agrees to promptly (i) inform each of the
holders thereof, (ii) use its reasonable best efforts to file amendments to the
initial Registration Statement as required by the SEC staff and/or (iii)
withdraw the initial Registration Statement and file a new registration
statement, in either case covering the maximum number of Registrable Securities
permitted to be registered by the SEC staff, on Form S-1; provided, however, that prior
to filing such amendment or new registration statement, the Company shall be
obligated to use its reasonable best efforts to advocate with the then
prevailing SEC guidance, including without limitation, the Manual of Publicly
Available Telephone Interpretations D.29.  In the event the Company
amends the initial Registration Statement or files a new registration statement,
as the case may be, under clauses (ii) or (iii) above, then the Company shall
prepare and file such number of additional Registration Statements as may be
necessary in order to ensure that all Registrable Securities are covered by an
existing and effective Registration Statement.  Accordingly, if for
example, an additional Registration Statement is filed under this Section 9.1(b) to
register shares taken off a Registration Statement filed under Section 9.1(a) due to
SEC staff comments and SEC staff comments again require shares to be removed for
such newly filed Registration Statement under this Section 9.1(b), then
the Company will prepare and file additional Registration Statements until such
time as all such removed shares are covered by effective Registration
Statements.  Any Registration Statements to be filed under this Section
9.1(b) shall be for an offering to be made on a continuous basis
pursuant to Rule 415, on Form S-1.  Such Registration Statement shall
contain (except if otherwise required pursuant to written comments received from
the SEC staff upon a review of such Registration Statement) the “Plan of Distribution”
in substantially similar form attached hereto as Exhibit
C.  The Company shall cause such Registration Statement(s) to
be declared effective under the Securities Act as soon as possible but, in any
event, by its Effectiveness Date, and shall use its reasonable best efforts to
keep such Registration Statement continuously effective under the Securities Act
during the entire Effectiveness Period.  By 5:00 p.m. (New York City
time) on the Business Day immediately following the Effective Date of such
Registration Statement, the Company shall file with the SEC in accordance with
Rule 424 under the Securities Act the final prospectus to be used in connection
with sales pursuant to such Registration Statement (if such filing is required
under such Rule).

     

    (c)           In
the event that the Company receives SEC staff comments limiting the amount of
shares of Common Stock which may be included in any Registration Statement (such
number of shares of Common Stock which the Company may include in such
Registration Statement in accordance with the SEC staff comments, the “Allowable Maximum”),
the number of Registrable Securities sought to be included in any such
Registration Statement shall be cutback and removed from such Registration
Statement until the aggregate number of such Registrable Securities to be
included in such Registration Statement equals the Allowable
Maximum.  Such cutbacks will be in the following order: (i) any
securities of the Company included or to be included in such Registration
Statement pursuant to piggyback or demand registration rights (other than those
of the Purchasers), (ii) the Warrant Shares issuable upon exercise of the
Warrants issued to the Purchasers and (iii) the Conversion
Shares.  Any required cutbacks of Conversion Shares or Warrant Shares
shall be applied to the Purchasers pro rata in accordance with
the number of such Conversion Shares or Warrant Shares sought to be included in
such Registration Statement.


    
      
         


      

      
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    (d)           If:
(i) a Registration Statement is not filed on or prior to its Filing Date
covering the Registrable Securities required under this Agreement to be included
therein, or (ii) a Registration Statement is not declared effective by the SEC
on or prior to its Effectiveness Date or if by the Business Day immediately
following the Effective Date the Company shall not have filed a “final” prospectus for
the Registration Statement with the SEC under Rule 424(b) (if such a prospectus
filing is required by such Rule) and notify the Purchasers of the Effectiveness
Date, or (iii) after its Effective Date, without regard for the reason
thereunder or efforts therefore, such Registration Statement ceases for any
reason to be effective and available to the Purchasers as to the Registrable
Securities to which it is required to cover at any time prior to the expiration
of its Effectiveness Period for more than an aggregate of 30 Trading Days (which
need not be consecutive), or (iv) the Common Stock is not listed or quoted, or
is suspended from trading, on an Eligible Market for a period of three Trading
Days (which need not be consecutive Trading Days) during the Effectiveness
Period, or (v) with respect to any Purchaser, the Company fails for any reason
to deliver a certificate evidencing any securities to the Purchaser within five
Trading Days after delivery of such certificate as required pursuant to any
Transaction Document, or (vi) during the Effectiveness Period the Company fails
to have any of the Common Shares listed on an Eligible Market (any such failure
or breach specified in clauses (i) to (vi) above being referred to as an “Event,” and for purposes of clauses
(i) or (ii) the date on which such Event occurs, or for purposes of clauses
(iii) to (v) the date which such period is exceeded, being referred to as “Event Date”), then on
each such Event or Event Date, and on each monthly anniversary of each such
Event or Event Date (if the applicable Event shall not have been cured by such
date) until the applicable Event is cured, the Company shall pay to each Holder
an amount in cash, as partial liquidated damages and not as a penalty, equal to
1.0% of the aggregate amount paid pursuant to this Agreement by the Purchaser of
the Preferred Shares and Warrants to which such Registrable Securities relate
(“Investment
Amount”); provided, however, that the
total amount of partial liquidated damages payable by the Company pursuant to
all Events under this Section shall be capped at an aggregate of 12% of the
aggregate Investment Amount paid to the Company under this Agreement; provided further,
however, that
notwithstanding anything to the contrary contained herein, the Company’s
obligation to pay liquidated damages, that have not yet been incurred pursuant
to this Section, to any Holder shall cease at such time as such Holder may
resell or otherwise dispose of all of such Holder’s Registrable Securities in a
single transaction by such Holder pursuant to Rule 144.  The partial
liquidated damages pursuant to the terms hereof shall apply on a daily pro rata basis for any
portion of a month prior to the cure of an Event, except in the case of the
first Event Date.

     

    (i)           In
no event will the Company be liable for liquidated damages under this Agreement
in excess of 1.0% of the aggregate Investment Amount in any 30-day
period.


    
      
         


      

      
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    (ii)           In
addition, the Company shall not be liable for liquidated damages under this
Agreement as to any Registrable Securities which are not permitted by the SEC to
be included in Registration Statements due solely to SEC staff comments until
the provisions of this Agreement as to the next applicable Registration
Statement required to be filed hereunder are triggered, in which case the
provisions of this Section 9.1(d) shall apply, if applicable.

     

    (iii)         The
partial liquidated damages pursuant to this Section 9 shall be the exclusive
monetary remedy of the Purchasers in the event that the Company fails to satisfy
its obligation to file or to have an effective Registration Statement on file
with the SEC pursuant to the terms of this Agreement.

     

    (e)           If
at any time the Registration Statements required by this Section 9 are not filed
on Form S-3, and the Company, subsequent to the filing or effectiveness thereof,
becomes eligible to file a Registration Statement on Form S-3 for the resale of
the Registrable Securities as required by this Section 9, then the Company as
soon as  practical will file a Registration Statement on Form S-3 in
satisfaction of the registration rights provided in this Section 9; provided further that the
Company shall use its reasonable best efforts to maintain the effectiveness of
the Registration Statement then in effect until such time as a Registration
Statement on Form S-3 covering the Registrable Securities has been declared
effective by the SEC.

     

    (f)           The
Company shall notify the Purchasers, in writing, immediately after the
Effectiveness Date of any Registration Statement, of the effectiveness of a
Registration Statement.

     

    (g)           Each
Purchaser agrees to furnish to the Company a completed Questionnaire in the form
attached to this Agreement as Exhibit C-1 (a
“Selling Holder
Questionnaire”) within five Trading Days after the written request by the
Company, if not previously provided.  The Company shall have no
obligation to include the Registrable Securities of a Purchaser in a
Registration Statement and shall not be required to pay any liquidated or other
damages to any Purchaser who fails to furnish to the Company a fully completed
Selling Holder Questionnaire at least two Trading Days prior to the Filing Date,
provided the written request by the Company has been made as provided
above.

     

    (h)           Notwithstanding
anything in this Agreement to the contrary, after 80 consecutive Trading Days of
continuous effectiveness of the initial Registration Statement filed and
declared effective pursuant to this Agreement, the Company may, by written
notice to the Holders, suspend sales under a Registration Statement after the
Effective Date thereof and/or require that the Holders immediately cease the
sale of shares of Common Stock pursuant thereto and/or defer the filing of any
subsequent Registration Statement if the Company is engaged in a material
merger, acquisition or sale and the Board of Directors of the Company determines
in good faith, by appropriate resolutions, that, as a result of such activity,
(i) it would be materially detrimental to the Company (other than as relating
solely to the price of the Common Stock) to maintain a Registration Statement at
such time or (ii) it is in the best interests of the Company to suspend sales
under such registration at such time.  Upon receipt of such notice,
each Holder shall immediately discontinue any sales of Registrable Securities
pursuant to such registration until such Holder is advised in writing by the
Company that the current Prospectus or amended Prospectus, as applicable, may be
used.  In no event, however, shall this right be exercised to suspend
sales beyond the period during which (in the good faith determination of the
Company’s Board of Directors) the failure to require such suspension would be
materially detrimental to the Company.  The Company’s rights under
this Section
9.1(h) may be exercised for a period of no more than 20 Trading Days at a
time and not more than twice in any twelve-month period, without such suspension
being considered as part of an Event.  Immediately after the end of
any suspension period under this Section 9.1(h), the
Company shall take all necessary actions (including filing any required
supplemental prospectus) to restore the effectiveness of the applicable
Registration Statement and the ability of the Holders to publicly resell their
Registrable Securities pursuant to such effective Registration
Statement.  The events described in this Section 9.1(h) are
“Excluded
Events.”


    
      
         


      

      
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    9.2   Registration
Procedures.  In connection with the Company’s registration
obligations hereunder, the Company shall:

     

    (a)           Not
less than five (5) Trading Days prior to the filing of a Registration Statement
or any related Prospectus or any amendment or supplement thereto, furnish via
email to those Purchasers who have supplied the Company with email addresses
copies of all such documents proposed to be filed, which documents (other than
any document that is incorporated or deemed to be incorporated by reference
therein) will be subject to the reasonable review of such
Purchasers.  The Company shall reflect in each such document when so
filed with the SEC such comments regarding the Holders and the plan of
distribution as the Holders may reasonably and promptly propose no later than
two (2) Trading Days after the Holders have been so furnished with copies of
such documents as aforesaid.

     

    (b)           Subject
to Section
9.1(g), (i) prepare and file with the SEC such amendments, including
post-effective amendments, to each Registration Statement and the Prospectus
used in connection therewith as may be necessary to keep the Registration
Statement continuously effective, as to the applicable Registrable Securities
for the Effectiveness Period and prepare and file with the SEC such additional
Registration Statements in order to register for resale under the Securities Act
all of the Registrable Securities; (ii) cause the related Prospectus to be
amended or supplemented by any required Prospectus supplement, and as so
supplemented or amended to be filed pursuant to Rule 424; (iii) respond as
promptly as reasonably possible, and in any event within 10 Trading Days (except
to the extent that the Company reasonably requires additional time to respond to
the SEC’s comments), to any comments received from the SEC with respect to the
Registration Statement or any amendment thereto; and (iv) comply in all material
respects with the provisions of the Securities Act and the Exchange Act with
respect to the disposition of all Registrable Securities covered by the
Registration Statement during the applicable period in accordance with the
intended methods of disposition by the Purchasers thereof set forth in the
Registration Statement as so amended or in such Prospectus as so
supplemented.

     


    
      
         


      

      
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    (c)           Notify
the Holders as promptly as reasonably possible, and (if requested by the Holders
confirm such notice in writing no later than two Trading Days thereafter), of
any of the following events: (i) the SEC notifies the Company whether there will
be a “review”
of any Registration Statement; (ii) any Registration Statement or any
post-effective amendment is declared effective; (iii) the SEC or any other
Federal or state governmental authority requests any amendment or supplement to
any Registration Statement or Prospectus or requests additional information
related thereto; (iv) the SEC issues any stop order suspending the effectiveness
of any Registration Statement or initiates any Proceedings for that purpose; (v)
the Company receives notice of any suspension of the qualification or exemption
from qualification of any Registrable Securities for sale in any jurisdiction,
or the initiation or threat of any Proceeding for such purpose; or (vi) the
financial statements included in any Registration Statement become ineligible
for inclusion therein or any Registration Statement or Prospectus or other
document contains any untrue statement of a material fact or omits to state any
material fact required to be stated therein or necessary to make the statements
therein, in the light of the circumstances under which they were made, not
misleading.  In addition, the Company will notify each Holder that
individually or in the aggregate with all affiliates, holds at least 1,000,000
shares of Series A Preferred Stock, as promptly as reasonably possible of the
receipt by the Company of written comments from the staff of the SEC relating to
any Registration Statement.

     

    (d)           Use
its reasonable best efforts to avoid the issuance of or, if issued, obtain the
withdrawal of (i) any order suspending the effectiveness of any Registration
Statement, or (ii) any suspension of the qualification (or exemption from
qualification) of any of the Registrable Securities for sale in any
jurisdiction, as soon as possible.

     

    (e)           If
requested by a Holder, provide such Purchaser without charge, at least one
conformed copy of each Registration Statement and each amendment thereto,
including financial statements and schedules, and all exhibits to the extent
requested by such Person (including those previously furnished or incorporated
by reference) promptly after the filing of such documents with the
SEC.

     

    (f)           Promptly
deliver to each Holder, without charge, as many copies of the Prospectus or
Prospectuses (including each form of prospectus) and each amendment or
supplement thereto as such Persons may reasonably request.  The
Company hereby consents to the use of such Prospectus and each amendment or
supplement thereto by each of the Holders in connection with the offering and
sale of the Registrable Securities covered by such Prospectus and any amendment
or supplement thereto to the extent permitted by federal and state securities
laws and regulations.

     

    (g)           (i)
In the time and manner required by each Trading Market, prepare and file with
such Trading Market an additional shares listing application covering all of the
Registrable Securities; (ii) take all steps necessary to cause such Registrable
Securities to be approved for listing on a Trading Market as soon as possible
thereafter; (iii) provide to each Purchaser evidence of such listing; and (iv)
except as a result of the Excluded Events, during the Effectiveness Period,
maintain the listing of such Registrable Securities on such Trading Market or
another Eligible Market.

     


    
      
         


      

      
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    (h)           Prior
to any public offering of Registrable Securities and to the extent required by
applicable law, use its reasonable best efforts to register or qualify or
cooperate with the Holders in connection with the registration or qualification
(or exemption from such registration or qualification) of such Registrable
Securities for offer and sale under the securities or Blue Sky laws of such
jurisdictions within the United States as any Holder requests in writing, to
keep each such registration or qualification (or exemption therefrom) effective
for so long as required, but not to exceed the duration of the Effectiveness
Period, and to do any and all other acts or things reasonably necessary or
advisable to enable the disposition in such jurisdictions of the Registrable
Securities covered by a Registration Statement; provided, however, that the
Company shall not be obligated to file any general consent to service of process
or to qualify as a foreign corporation or as a dealer in securities in any
jurisdiction in which it is not so qualified or to subject itself to taxation in
respect of doing business in any jurisdiction in which it is not otherwise so
subject.

     

    (i)           
Cooperate with the Holders to facilitate the timely preparation and delivery of
certificates representing Registrable Securities to be delivered to a transferee
pursuant to a Registration Statement, which certificates shall be free, to the
extent permitted by this Agreement and under law, of all restrictive legends,
and to enable such certificates to be in such denominations and registered in
such names as any such Holders may reasonably request.

     

    (j)
           Upon
the occurrence of any event described in Section 9.2(c)(vii),
as promptly as reasonably possible, prepare a supplement or amendment, including
a post-effective amendment, to the Registration Statement or a supplement to the
related Prospectus or any document incorporated or deemed to be incorporated
therein by reference, and file any other required document so that, as
thereafter delivered, neither the Registration Statement nor such Prospectus
will contain an untrue statement of a material fact or omit to state a material
fact required to be stated therein or necessary to make the statements therein,
in the light of the circumstances under which they were made, not
misleading.

     

    (k)           Cooperate
with any reasonable due diligence investigation undertaken by the Purchasers in
connection with the sale of Registrable Securities, including, without
limitation, by making available documents and information; provided that the
Company will not deliver or make available to any Holder material, nonpublic
information unless such Holder requests in advance in writing to receive
material, nonpublic information and agrees to keep such information confidential
and to refrain from trading in the Company’s securities while in possession
thereof.

     

    (l)        
   Comply with all rules and regulations of the SEC applicable to
the registration of the Securities.

     

    (m)          The
Company shall comply with all applicable rules and regulations of the SEC under
the Securities Act and the Exchange Act, including, without limitation, Rule 172
under the Securities Act, file any final Prospectus, including any supplement or
amendment thereto, with the SEC pursuant to Rule 424 under the Securities Act,
promptly inform the Holders in writing if, at any time during the Effectiveness
Period, the Company does not satisfy the conditions specified in Rule 172 and,
as a result thereof, the Purchasers are required to make available a Prospectus
in connection with any disposition of Registrable Securities and take such other
actions as may be reasonably necessary to facilitate the registration of the
Registrable Securities hereunder.


    
      
         


      

      
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    9.3   Registration
Expenses.  The Company shall pay all fees and expenses incident
to the performance of or compliance with Section 9 of this Agreement by the
Company, including without limitation (a) all registration and filing fees and
expenses, including without limitation those related to filings with the SEC,
any Trading Market and in connection with applicable state securities or Blue
Sky laws, (b) printing expenses (including without limitation expenses of
printing certificates for Registrable Securities), (c) messenger, telephone and
delivery expenses, (d) fees and disbursements of counsel for the Company, (e)
fees and expenses of all other Persons retained by the Company in connection
with the consummation of the transactions contemplated by this Agreement, (f)
all listing fees to be paid by the Company to the Trading Market; and (g) up to
$10,000 of the fees and expenses of one counsel to Purchasers related to its
review of the initial Registration Statement.

     

    9.4   Rule 144 Reporting.
With a view to making available to Purchasers the benefits of certain rules and
regulations of the SEC, which may permit the resale of the Registrable
Securities to the public without registration, the Company agrees after the date
hereof to:

     

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

     

    (b)           file
with the SEC all reports and other documents required of the Company under the
Securities Act and the Exchange Act (it being expressly acknowledged by the
parties hereto that if any such report or document is not filed with the SEC
within thirty (30) days of the date required under the rules and regulations of
the SEC (after giving effect to any Rule 12b-25 extensions under the Exchange
Act) it shall be deemed a material breach of this Agreement); and

     

    (c)           so
long as a Purchaser owns any Registrable Securities, to furnish to such
Purchaser forthwith upon request a written statement by the Company as to its
compliance with the reporting requirements of said Rule 144, and of the
Securities Act and the Exchange Act, a copy of the most recent annual or
quarterly report of the Company, and such other reports and documents so filed
by the Company as the Purchaser may reasonably request in writing in complying
with any rule or regulation of the SEC allowing the Purchaser to sell any such
securities without registration.

     

    9.5   Dispositions.  Each
Purchaser agrees that it will comply with the prospectus delivery requirements
of the Securities Act as applicable to it in connection with sales of
Registrable Securities pursuant to the Registration Statement and shall sell its
Registrable Securities in accordance with the Plan of Distribution set forth in
the Prospectus.  Each Holder further agrees that, upon receipt of a
notice from the Company of the occurrence of any event of the kind described in
Section 9.1(h),
such Holder will discontinue disposition of such Registrable Securities under
the Registration Statement until such Holder is advised in writing by the
Company that the use of the Prospectus, or amended Prospectus, as applicable,
may be resumed.  The Company may provide appropriate stop orders to
enforce the provisions of this paragraph.


    
      
         


      

      
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    9.6   Piggy-Back
Registrations.  If at any time during the Effectiveness Period
there is not an effective Registration Statement covering all of the Registrable
Securities and the Company shall determine to prepare and file with the SEC a
registration statement relating to an offering for its own account or the
account of others under the Securities Act of any of its equity securities,
other than on Form S-4 or Form S-8 (each as promulgated under the Securities
Act) or their then equivalents relating to equity securities to be issued solely
in connection with any acquisition of any entity or business or equity
securities issuable in connection with stock option or other employee benefit
plans, then the Company shall send to each Holder not then eligible to sell all
of their Registrable Securities under Rule 144 in a three-month period, written
notice of such determination and if, within ten days after receipt of such
notice, any such Holder shall so request in writing, the Company shall include
in such registration statement all or any part of any Registrable Securities
that the Holder requests to be registered.  Notwithstanding the
foregoing, in the event that, in connection with any underwritten public
offering, the managing underwriter(s) thereof shall impose a limitation on the
number of shares of Common Stock which may be included in the Registration
Statement because, in such underwriter(s)’ judgment, marketing or other factors
dictate such limitation is necessary to facilitate public distribution, then the
Company shall be obligated to include in such Registration Statement only such
limited portion of the Registrable Securities with respect to which such Holder
has requested inclusion hereunder as the underwriter shall permit; provided, however, that (i) the
Company shall not exclude any Registrable Securities unless the Company has
first excluded all outstanding securities, the holders of which are not
contractually entitled to inclusion of such securities in such Registration
Statement or are not contractually entitled to pro rata inclusion with the
Registrable Securities and (ii) after giving effect to the immediately preceding
proviso, any such exclusion of Registrable Securities shall be made pro rata
among the Holders seeking to include Registrable Securities and the holders of
other securities having the contractual right to inclusion of their securities
in such Registration Statement by reason of demand registration rights, in
proportion to the number of Registrable Securities or other securities, as
applicable, sought to be included by each such Holder or other
holder.  If an offering in connection with which a Holder is entitled
to registration under this Section 9.6 is an
underwritten offering, then each Holder whose Registrable Securities are
included in such Registration Statement shall, unless otherwise agreed by the
Company, offer and sell such Registrable Securities in an underwritten offering
using the same underwriter or underwriters and, subject to the provisions of
this Agreement, on the same terms and conditions as other shares of Common Stock
included in such underwritten offering and shall enter into an underwriting
agreement in a form and substance reasonably satisfactory to the Company and the
underwriter or underwriters.  Upon the effectiveness of the
registration statement for which piggy-back registration has been provided in
this Section 9.6, any partial liquidated damages payable to a Holder whose
Registrable Securities are included in such piggy-back registration statement
shall cease to accrue with respect to the number of the Holder’s shares that are
included in such piggy-back registration statement (provided, for purposes of
clarity, any outstanding liquidated damages payments that had accrued prior to
the effectiveness of such piggy-back registration statement shall remain
payable).


     

    
      
        
        

      

      
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    10.           Indemnification.

     

    10.1 Indemnification
Procedures.

     

    (a)           Indemnification by the
Company.  The Company shall, notwithstanding any termination of
this Agreement, indemnify and hold harmless each Purchaser, the officers,
directors, partners, members, agents and employees of each of them, each Person
who controls any such Purchaser (within the meaning of Section 15 of the
Securities Act or Section 20 of the Exchange Act) and the officers,
directors, partners, members, agents and employees of each such controlling
Person, to the fullest extent permitted by applicable law, from and against any
and all losses, claims, damages, liabilities, settlement costs and expenses,
including, without limitation, reasonable attorneys’ fees (collectively, “Losses”), as
incurred, arising out of or relating to: (i) any material misrepresentation or
material 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; (ii) 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; (iii) any
cause of action, suit or claim brought or made against such Indemnified Party
(as defined in Section
10.1(c) hereof) by a third party (including for these purposes a
derivative action brought on behalf of the Company), arising out of or resulting
from (x) the execution, delivery, performance or enforcement of the Transaction
Documents or any other certificate, instrument or document contemplated hereby
or thereby, (y) 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
(z) the status of Indemnified Party as holder of the Securities, provided that
such third-party claim did not result primarily from the gross negligence or
willful malfeasance of the Purchasers; or (iv) any untrue or alleged untrue
statement of a material fact contained in the Registration Statement, any
Prospectus or any form of Company prospectus or in any amendment or supplement
thereto or in any Company preliminary prospectus, or arising out of or relating
to any omission or alleged omission of a material fact required to be stated
therein or necessary to make the statements therein (in the case of any
Prospectus or form of prospectus or supplement thereto, in the light of the
circumstances under which they were made) not misleading, except to the extent,
but only to the extent, that (A) such untrue statements, alleged untrue
statements, omissions or alleged omissions are based solely upon information
regarding such Purchaser furnished in writing to the Company by such Purchaser
for use therein, or to the extent that such information relates to such
Purchaser or such Purchaser’s proposed method of distribution of Registrable
Securities and was reviewed and expressly approved by such Purchaser expressly
for use in the Registration Statement, or (B) with respect to any prospectus, if
the untrue statement or omission of material fact contained in such prospectus
was corrected on a timely basis in the prospectus, as then amended or
supplemented, if such corrected prospectus was timely made available by the
Company to the Purchaser, and the Purchaser seeking indemnity hereunder was
advised in writing not to use the incorrect prospectus prior to the use giving
rise to Losses.


    
      
         


      

      
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    (b)           Indemnification by
Purchaser.  Each Purchaser shall, severally and not jointly,
indemnify and hold harmless the Company, its directors, officers, agents and
employees, each Person who controls the Company (within the meaning of
Section 15 of the Securities Act and Section 20 of the Exchange Act),
and the directors, officers, agents or employees of such controlling Persons, to
the fullest extent permitted by applicable law, from and against all Losses (as
determined by a court of competent jurisdiction in a final judgment not subject
to appeal or review) arising solely out of (i) any material misrepresentation or
material breach of any representation or warranty made by such Purchaser in the
Transaction Documents or any other certificate, instrument or document
contemplated hereby or thereby; (ii) breach by Purchaser of any covenant,
agreement or obligation set forth in Section 9.5; or (iii) any untrue statement
of a material fact contained in the Registration Statement, any Prospectus, or
any form of prospectus, or in any amendment or supplement thereto, or arising
out of or relating to any omission of a material fact required to be stated
therein or necessary to make the statements therein (in the case of any
Prospectus or form of prospectus or supplement thereto, in the light of the
circumstances under which they were made) not misleading, but only to the extent
that such untrue statement or omission is contained in any information so
furnished by such Holder in writing to the Company specifically for inclusion in
such Registration Statement or such Prospectus or to the extent that such untrue
statements or omissions are based solely upon information regarding such Holder
furnished to the Company by such Purchaser in writing expressly for use therein,
or to the extent that such information relates to such Purchaser  or
such Purchaser ’s proposed method of distribution of Registrable Securities and
was reviewed and expressly approved by such Purchaser expressly for use in the
Registration Statement (it being understood that the information provided by the
Purchaser to the Company in response to Exhibit C-1 and
the Plan of Distribution set forth on Exhibit C, as the
same may be modified by such Purchaser and other information provided by the
Purchaser to the Company in or pursuant to the Transaction Documents constitutes
information reviewed and expressly approved by such Purchaser in writing
expressly for use in the Registration Statement), such Prospectus or such form
of prospectus or in any amendment or supplement thereto.  In no event
shall the liability of any selling Holder hereunder be greater in amount than
the amount of the Purchase Price paid by such Purchaser hereunder, or with
respect to a Loss arising under clause (iii) of this Section 10.1(b) or Section
9.5, if greater, the net proceeds from any sale of such Purchaser’s Registrable
Securities giving rise to such indemnification obligation.

     

    (c)           Conduct of Indemnification
Proceedings.  If any Proceeding shall be brought or asserted
against any Person entitled to indemnity hereunder (an “Indemnified Party”),
such Indemnified Party shall promptly notify the Person from whom indemnity is
sought (the “Indemnifying Party”)
in writing, and the Indemnifying Party shall assume the defense thereof,
including the employment of counsel reasonably satisfactory to the Indemnified
Party and the payment of all fees and expenses incurred in connection with
defense thereof; provided, that the failure of any Indemnified Party to give
such notice shall not relieve the Indemnifying Party of its obligations or
liabilities pursuant to this Agreement, except (and only) to the extent that it
shall be finally determined by a court of competent jurisdiction (which
determination is not subject to appeal or further review) that such failure
shall have proximately and materially adversely prejudiced the Indemnifying
Party.

     

    An
Indemnified Party shall have the right to employ separate counsel in any such
Proceeding and to participate in the defense thereof, but the fees and expenses
of such counsel shall be at the expense of such Indemnified Party or Parties
unless: (i) the Indemnifying Party has agreed in writing to pay such fees and
expenses; (ii) the Indemnifying Party shall have failed promptly to assume the
defense of such Proceeding and to employ counsel reasonably satisfactory to such
Indemnified Party in any such Proceeding; or (iii) the named parties to any such
Proceeding (including any impleaded parties) include both such Indemnified Party
and the Indemnifying Party, and such Indemnified Party shall have been advised
by counsel that a conflict of interest is likely to exist if the same counsel
were to represent such Indemnified Party and the Indemnifying Party (in which
case, if such Indemnified Party notifies the Indemnifying Party in writing that
it elects to employ separate counsel at the expense of the Indemnifying Party,
the Indemnifying Party shall not have the right to assume the defense thereof
and the reasonable fees and expenses of separate counsel shall be at the expense
of the Indemnifying Party).  It shall be understood, however, that the
Indemnifying Party shall not, in connection with any one such Proceeding
(including separate Proceedings that have been or will be consolidated before a
single judge) be liable for the fees and expenses of more than one separate firm
of attorneys at any time for all Indemnified Parties, which firm shall be
appointed by a majority of the Indemnified Parties.  The Indemnifying
Party shall not be liable for any settlement of any such Proceeding effected
without its written consent, which consent shall not be unreasonably
withheld.  No Indemnifying Party shall, without the prior written
consent of the Indemnified Party, effect any settlement of any pending
Proceeding in respect of which any Indemnified Party is a party, unless such
settlement includes an unconditional release of such Indemnified Party from all
liability on claims that are the subject matter of such
Proceeding.


    
      
         


      

      
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    All
reasonable fees and expenses of the Indemnified Party (including reasonable fees
and expenses to the extent incurred in connection with investigating or
preparing to defend such Proceeding in a manner not inconsistent with this
Section 10.1(c) shall be paid to the Indemnified Party, as incurred, within 20
Trading Days of written notice thereof to the Indemnifying Party (regardless of
whether it is ultimately determined that an Indemnified Party is not entitled to
indemnification hereunder; provided, that the Indemnifying Party may require
such Indemnified Party to undertake to reimburse all such fees and expenses to
the extent it is finally judicially determined that such Indemnified Party is
not entitled to indemnification hereunder).

     

    (d)           Contribution.  If
a claim for indemnification under Section 10(a) or (b) is unavailable to an
Indemnified Party (by reason of public policy or otherwise), then each
Indemnifying Party, in lieu of indemnifying such Indemnified Party, shall
contribute to the amount paid or payable by such Indemnified Party as a result
of such Losses, in such proportion as is appropriate to reflect the relative
fault of the Indemnifying Party and Indemnified Party in connection with the
actions, statements or omissions that resulted in such Losses as well as any
other relevant equitable considerations.  The relative fault of such
Indemnifying Party and Indemnified Party shall be determined by reference to,
among other things, whether any action in question, including any untrue or
alleged untrue statement of a material fact or omission or alleged omission of a
material fact, has been taken or made by, or relates to information supplied by,
such Indemnifying Party or Indemnified Party, and the parties’ relative intent,
knowledge, access to information and opportunity to correct or prevent such
action, statement or omission.  The amount paid or payable by a party
as a result of any Losses shall be deemed to include, subject to the limitations
set forth in Section
10.1(c), any reasonable attorneys’ or other reasonable fees or expenses
incurred by such party in connection with any Proceeding to the extent such
party would have been indemnified for such fees or expenses if the
indemnification provided for in this Section 10.1(d) was
available to such party in accordance with its terms.

     

    The
parties hereto agree that it would not be just and equitable if contribution
pursuant to this Section 10.1(d) were
determined by pro rata
allocation or by any other method of allocation that does not take into
account the equitable considerations referred to in the immediately preceding
paragraph.  Notwithstanding the provisions of this Section 10.1(d), no
Purchaser shall be required to contribute, in the aggregate, any amount in
excess of the amount by which the proceeds actually received by such Purchaser
from the sale of the Registrable Securities subject to the Proceeding exceed the
amount of any damages that such Purchaser has otherwise been required to pay by
reason of such untrue or alleged untrue statement or omission or alleged
omission.  No Person guilty of fraudulent misrepresentation (within
the meaning of Section
10(f) of the Securities Act) shall be entitled to contribution from any
Person who was not guilty of such fraudulent misrepresentation.


    
      
         


      

      
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    The
indemnity and contribution agreements contained in this Section 10.1(d) are
in addition to any liability that the Indemnifying Parties may have to the
Indemnified Parties.

     

    11.           Participation
Rights.

     

    11.1 Participation Rights
Procedures.

     

    (a)           Other
than an Exempt Issuance (as defined in the Certificate of Designation), any
offer, sale, grant, disposition or announcement of offer or sale by the Company
with respect to its Common Stock or Common Stock Equivalents in a manner that is
not required to be registered under the Securities Act is hereinafter referred
to as a “Subsequent
Placement.”

     

    (b)           From
and after the Closing Date and until the third anniversary of such Closing Date,
the Company will not, directly or indirectly, effect any Subsequent Placement
unless the Company shall have first complied with this Section
11.

     

    (i)           The
Company shall deliver to each Purchaser who purchased Preferred Shares and
Warrants pursuant to this Agreement an irrevocable 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 Purchasers the Offered Securities, allocated to the Purchasers as a group
based on the ratio of (I) the number of Conversion Shares and Warrant Shares
held by or issuable to all Purchasers as a group at the time of the Offer Notice
to (II) the number of shares of the Company’s Common Stock then issued and
outstanding, and allocated among such Purchasers based on such Purchaser’s pro rata portion of the
number of Conversion Shares and Warrant Shares held by or issuable to such
Purchaser at the time of the Offer Notice (the “Proportionate
Share”).

     

    (ii)          To
accept an Offer, in whole or in part, such Purchaser must deliver a written
notice to the Company prior to the end of the tenth (10th)
Business Day after such Purchaser’s receipt of the Offer Notice (the “Offer Period”), setting forth the portion
of such Purchaser’s Proportionate Share that such Purchaser elects to purchase
(the “Notice of
Acceptance”).

     

    (iii)         The
Company shall have sixty (60) Business Days from the expiration of the Offer
Period above (i) 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
Purchasers (the “Refused
Securities”), but
only to the offerees or class of offerees described in the Offer Notice (if so
described therein) and only upon terms and conditions (including, without
limitation, unit prices) that are no more favorable to offerees than those set
forth in the Offer Notice and (ii) to publicly announce (a) the execution of a
definitive agreement relating to such Subsequent Placement (the “Subsequent Placement
Agreement”), and (b) either (x) the consummation of the transactions
contemplated by such Subsequent Placement Agreement or (y) the termination of
such Subsequent Placement Agreement, which shall be filed with the SEC on a
Current Report on Form 8-K with such Subsequent Placement Agreement and any
documents contemplated therein filed as exhibits thereto to the extent required
by the rules and regulations of the SEC.  The Company may, in its
complete and absolute discretion, abandon a Subsequent Placement at any time
prior to the execution of a Subsequent Placement Agreement.


    
      
         


      

      
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    (iv)         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 11.1 (b)(i)
above), then each Purchaser 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 Purchaser elected to purchase pursuant to Section 11.1(b)(ii)
above multiplied by a fraction, (A) 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 Purchasers
pursuant to Section
11.1(b)(i) above prior to such reduction) and (B) the denominator of
which shall be the original amount of the Offered Securities.  In the
event that any Purchaser 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
Purchasers in accordance with Section 11.1(b)(i)
above.

     

    (v)         Upon
the closing of the issuance, sale or exchange of all or an amount of the Refused
Securities, the Purchasers shall acquire from the Company, and the Company shall
issue to the Purchasers, the number or amount of Offered Securities specified in
the Notices of Acceptance, as reduced pursuant to Section 11.1(b)(iv)
above if the Purchasers have so elected, upon the terms and conditions specified
in the Offer.  The purchase by the Purchasers of any Offered
Securities is subject in all cases to the preparation, execution and delivery by
the Company and the Purchasers of a Subsequent Placement Agreement reasonably
satisfactory in form and substance to the Purchasers and their respective
counsel.

     

    (vi)         Any
Offered Securities not acquired by the Purchasers or other persons in accordance
with Section
11.1(b)(iii) above may not be issued, sold or exchanged until they are
again offered to the Purchasers under the procedures specified in this
Agreement.

     

    (vii)        Notwithstanding
anything to the contrary in this Section 11 and unless
otherwise agreed to by the Purchasers and the Company, the Company shall either
confirm in writing to the Purchasers that the transaction with respect to the
Subsequent Placement has been abandoned or shall publicly disclose its intention
to issue the Offered Securities, in either case in such a manner such that the
Purchasers will not be in possession of material non-public information, by the
60th Business Day following the expiration of the Offer Period.  If by
the 60th Business Day following the expiration of the Offer Period no public
disclosure regarding a transaction with respect to the Offered Securities has
been made, and no notice regarding the abandonment of such transaction has been
received by the Purchasers, such transaction shall be deemed to have been
abandoned and the Purchasers shall not be deemed to be in possession of any
material, non-public information with respect to the Company.  Should
the Company decide to pursue such transaction with respect to the Offered
Securities, the Company shall provide each Purchaser with another Offer Notice
and each Purchaser will again have the right of participation set forth in this
Section
11.1(b).


    
      
         


      

      
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    (viii)       The
restrictions contained in subsections (ii) and (iii) of this Section 11.1(b) shall
not apply in connection with any Exempt Issuance (as defined in the Certificate
of Designation).

     

    12.           Miscellaneous.

     

    12.1 Termination.  This
Agreement may be terminated by the Company or any Purchaser, by written notice
to the other parties, if the Initial Closing has not been consummated by 11:00
a.m. on August 15, 2010; provided that no such termination will affect the right
of any party to sue for any breach by the other party (or parties).

     

    12.2 Fees and
Expenses.  Except as expressly set forth in the Transaction
Documents to the contrary, each party shall pay the fees and expenses of its
advisers, counsel, accountants and other experts, if any, and all other expenses
incurred by such party incident to the negotiation, preparation, execution,
delivery and performance of this Agreement.  In addition to its
obligations pursuant to Section 9.3 hereof, upon the consummation of the
transactions contemplated by this Agreement, the Company agrees to reimburse (i)
UTA an aggregate amount of up to $65,000 for (a) documented out-of-pocket
expenses for scientific due diligence services relating to the transactions
contemplated herein, and (b) legal fees of UTA’s counsel, other due diligence
expenses and reasonable expenses incurred for services relating to the
transactions contemplated herein, which amount (net of any amounts previously
advanced by the Company) may, at the option of the UTA, be paid by offset
against the cash Purchase Price payable by UTA for the Preferred Shares
purchased at the Closing and (ii) Pontifax an aggregate amount of $35,000 for
legal fees of Pontifax’s counsel, other due diligence expenses and reasonable
expenses incurred for services relating to the transactions contemplated herein,
which amount (net of any amounts previously advanced by the Company) may, at the
option of the Pontifax, be paid by offset against the cash Purchase Price
payable by Pontifax for the Preferred Shares purchased at the
Closing.  Without limiting the foregoing, in the event the parties
fail to consummate the transactions contemplated by this Agreement, for any
reason whatsoever, UTA shall remain entitled to reimbursement from the Company
in the amount of (a) $10,000 of the aforementioned scientific due diligence
services and (b) $25,000 ($40,000 should the Company elect not to proceed with
the Closing) for any of the other aforementioned expenses.

     

    12.3 Entire
Agreement.  The Transaction Documents, together with the
exhibits and schedules thereto, contain the entire understanding of the parties
with respect to the subject matter hereof and supersede all prior agreements and
understandings, oral or written, with respect to such matters, which the parties
acknowledge have been merged into such documents, exhibits and
schedules.  At or after the Closing Date, and without further
consideration, the Company will execute and deliver to the Purchasers such
further documents as may be reasonably requested in order to give practical
effect to the intention of the parties under the Transaction
Documents.


    
      
         


      

      
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    12.4 Notices.  Any
and all notices or other communications or deliveries required or permitted to
be provided hereunder shall be in writing and shall be deemed given and
effective on the earliest of (a) the date of transmission, if such notice or
communication is delivered via facsimile or email at the facsimile number or
email address specified in this Section 12.4 prior to 6:30 p.m. (New York City
time) on a Trading Day, (b) the next Trading Day after the date of transmission,
if such notice or communication is delivered via facsimile or email at the
facsimile number or email address specified in this Section 12.4 on a day that
is not a Trading Day or later than 6:30 p.m. (New York City time) on any Trading
Day, (c) the Trading Day following the date of deposit with a nationally
recognized overnight courier service, or (d) upon actual receipt by the party to
whom such notice is required to be given.  The addresses, facsimile
numbers and email addresses for such notices and communications are those set
forth on the signature pages hereof, or such other address or facsimile number
as may be designated in writing hereafter, in the same manner, by any such
Person.

     

    12.5 Amendments;
Waivers.  No provision of this Agreement may be waived or
amended except in a written instrument signed, in the case of an amendment, by
the Company and each of the Purchasers or, in the case of a waiver, by the party
against whom enforcement of any such waiver is sought.  No waiver of
any default with respect to any provision, condition or requirement of this
Agreement shall be deemed to be a continuing waiver in the future or a waiver of
any subsequent default or a waiver of any other provision, condition or
requirement hereof, nor shall any delay or omission of any party to exercise any
right hereunder in any manner impair the exercise of any such right.
Notwithstanding the foregoing, a waiver or consent to depart from the provisions
hereof with respect to a matter that relates exclusively to the rights of
Purchasers under Section 9 may be given by Purchasers holding at least 75% of
the Registrable Securities.  Any amendment to this Agreement,
including, but not limited to, an amendment to Section 5.2.7 hereof, which
adversely affects the rights and/or obligations of Pontifax in a manner that is
disproportionate to the effects on the rights and/or obligations of other
Purchasers, shall also require the consent of Pontifax.

     

    12.6 Construction.  The
headings herein are for convenience only, do not constitute a part of this
Agreement and shall not be deemed to limit or affect any of the provisions
hereof.  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.

     

    12.7 Successors and
Assigns.  This Agreement shall be binding upon and inure to the
benefit of the parties and their successors and permitted
assigns.  The Company may not assign this Agreement or any rights or
obligations hereunder without the prior written consent of the
Purchasers.  Any Purchaser may assign its rights under this Agreement
to any Person to whom such Purchaser assigns or transfers or will assign or
transfer (including by way of distribution to its members, partners or
stockholders) any Securities, provided (i) such transferor agrees in writing
with the transferee or assignee to assign such rights, and a copy of such
agreement is furnished to the Company after such assignment, (ii) the Company is
furnished with written notice of (x) the name and address of such transferee or
assignee and (y) the Registrable Securities with respect to which such
registration rights are being transferred or assigned, (iii) following such
transfer or assignment, the further disposition of such securities by the
transferee or assignee is restricted under the Securities Act and applicable
state securities laws, (iv) such transferee agrees in writing to be bound, with
respect to the transferred Securities, by the provisions hereof that apply to
the “Purchasers” and (v) such transfer shall have been made in accordance with
the applicable requirements of this Agreement and with all laws applicable
thereto.


    
      
         


      

      
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    12.8 No Third-Party
Beneficiaries.  This Agreement is intended for the benefit of
the parties hereto and the Placement Agent, and their respective successors and
permitted assigns and is not for the benefit of, nor may any provision hereof be
enforced by, any other Person, except that each Indemnified Party is an intended
third-party beneficiary of Section 10.1 and (in each case) may enforce the
provisions of such section directly against the parties with obligations
thereunder.

     

    12.9 Governing Law; Venue; Waiver
of Jury Trial. ALL QUESTIONS CONCERNING THE CONSTRUCTION, VALIDITY,
ENFORCEMENT AND INTERPRETATION OF THIS AGREEMENT SHALL BE GOVERNED BY AND
CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK.  THE
COMPANY AND PURCHASERS HEREBY IRREVOCABLY SUBMIT TO THE NON-EXCLUSIVE
JURISDICTION OF THE STATE AND FEDERAL COURTS SITTING IN THE CITY OF NEW YORK,
BOROUGH OF MANHATTAN FOR THE ADJUDICATION OF ANY DISPUTE BROUGHT BY THE COMPANY
OR ANY PURCHASER HEREUNDER, IN CONNECTION HEREWITH OR WITH ANY TRANSACTION
CONTEMPLATED HEREBY OR DISCUSSED HEREIN (INCLUDING WITH RESPECT TO THE
ENFORCEMENT OF ANY OF THE TRANSACTION DOCUMENTS), AND HEREBY IRREVOCABLY WAIVE,
AND AGREE NOT TO ASSERT IN ANY SUIT, ACTION OR PROCEEDING BROUGHT BY THE COMPANY
OR ANY PURCHASER, ANY CLAIM THAT IT IS NOT PERSONALLY SUBJECT TO THE
JURISDICTION OF ANY SUCH COURT, OR THAT 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 VIA REGISTERED OR CERTIFIED MAIL OR
OVERNIGHT DELIVERY (WITH EVIDENCE OF DELIVERY) TO SUCH PARTY AT THE ADDRESS IN
EFFECT FOR NOTICES TO IT UNDER THIS AGREEMENT AND AGREES THAT SUCH SERVICE SHALL
CONSTITUTE GOOD AND SUFFICIENT SERVICE OF PROCESS AND NOTICE
THEREOF.  NOTHING CONTAINED HEREIN SHALL BE DEEMED TO LIMIT IN ANY WAY
ANY RIGHT TO SERVE PROCESS IN ANY MANNER PERMITTED BY LAW.  THE
COMPANY AND PURCHASERS HEREBY WAIVE ALL RIGHTS TO A TRIAL BY JURY.

     

    12.10              Survival.  The
representations and warranties, agreements and covenants contained herein shall
survive the Closing.

     

    12.11              Execution.  This
Agreement may be executed in two or more counterparts, all of which when taken
together 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, it being understood that both parties need not sign the same
counterpart.  In the event that any signature is delivered by
facsimile transmission or email attachment, such signature shall create a valid
and binding obligation of the party executing (or on whose behalf such signature
is executed) with the same force and effect as if such facsimile or
email-attached signature page were an original thereof.


    
      
         


      

      
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    12.12              Severability.  If
any provision of this Agreement is held to be invalid or unenforceable in any
respect, the validity and enforceability of the remaining terms and provisions
of this Agreement shall not in any way be affected or impaired thereby and the
parties will attempt to agree upon a valid and enforceable provision that is a
reasonable substitute therefor, and upon so agreeing, shall incorporate such
substitute provision in this Agreement.

     

    12.13              Rescission and Withdrawal
Right.  Notwithstanding anything to the contrary contained in
(and without limiting any similar provisions of) the Transaction Documents,
whenever any Purchaser exercises a right, election, demand or option owed to
such Purchaser by the Company under a Transaction Document and the Company does
not timely perform its related obligations within the periods therein provided,
then, prior to the performance by the Company of the Company’s related
obligation, such Purchaser 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.

     

    12.14              Replacement of
Securities.  If any certificate or instrument evidencing any
Securities is mutilated, lost, stolen or destroyed, the Company shall issue or
cause to be issued in exchange and substitution for and upon cancellation
thereof, or in lieu of and substitution therefor, a new certificate or
instrument, but only upon receipt of evidence reasonably satisfactory to the
Company of such loss, theft or destruction and the execution by the holder
thereof of a customary lost certificate affidavit of that fact and an agreement
to indemnify and hold harmless the Company  and its transfer agent for
any losses in connection therewith.  The applicants for a new
certificate or instrument under such circumstances shall also pay any reasonable
third-party costs associated with the issuance of such replacement Securities,
including, without limitation, the costs of any indemnity bond required by the
transfer agent for such Securities.

     

    12.15              Remedies.  In
addition to being entitled to exercise all rights provided herein or granted by
law, including recovery of damages, each of the Purchasers will be entitled to
seek specific performance under the Transaction Documents.

     

    12.16              Adjustments in Share Numbers
and Prices.  In the event of any stock split, subdivision,
dividend or distribution payable in shares of Common Stock (or other securities
or rights convertible into, or entitling the holder thereof to receive directly
or indirectly shares of Common Stock), combination or other similar
recapitalization or event occurring after the date hereof, each reference in any
Transaction Document to a number of shares or a price per share shall be amended
to appropriately account for such event.


    
      
         


      

      
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    12.17              Independent Nature of
Purchasers’ Obligations and Rights.  The obligations of each
Purchaser under any Transaction Document are several and not joint with the
obligations of any other Purchaser, and no Purchaser shall be responsible in any
way for the performance of the obligations of any other Purchaser under any
Transaction Documents.  The decision of each Purchaser to purchase
Securities pursuant to this Agreement has been made by such Purchaser
independently of any other Purchaser and independently of any information,
materials, statements or opinions as to the business, affairs, operations,
assets, properties, liabilities, results of operations, condition (financial or
otherwise) or prospects of the Company which may have been made or given by any
other Purchaser or by any agent or employee of any other Purchaser, and no
Purchaser or any of its agents or employees shall have any liability to any
other Purchaser (or any other person) relating to or arising from any such
information, materials, statements or opinions.  Nothing contained
herein or in any Transaction Document, and no action taken by any Purchaser
pursuant thereto, shall be deemed to constitute the Purchaser as a partnership,
an association, a joint venture or any other kind of entity, or create a
presumption that the Purchasers are in any way acting in concert or as a group
with respect to such obligations or the transactions contemplated by the
Transaction Document.  Each Purchaser acknowledges that no other
Purchaser has acted as agent for such Purchaser in connection with making its
investment hereunder and that no other Purchaser will be acting as agent of such
Purchaser in connection with monitoring its investment
hereunder.  Each Purchaser shall be entitled to independently protect
and enforce its rights, including without limitation the rights arising out of
this Agreement or out of the other Transaction Documents, and it shall not be
necessary for any other Purchaser to be joined as an additional party in any
Proceeding for such purpose.

     

    [SIGNATURE
PAGES FOLLOW]


    
      
         


      

      
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    IN
WITNESS WHEREOF, the parties hereto have executed this Securities Purchase
Agreement on the date first above written.

     

    
      
        
          
            
              
                
                  
                    
                      
                        
                          
                            
                              
                                
                                  
                                    
                                      
                                        
                                          	 
      	
                                                  THE
      COMPANY:

                                                
	 
      	 
      
	 
      	
                                                  ARNO
      THERAPEUTICS, INC.,

                                                
	 
      	
                                                  a
      Delaware corporation

                                                
	 
      	 
      
	 
      	
                                                  By:

                                                	 
      
	 
      	 
      	
                                                  Name:
      David M. Tanen

                                                
	 
      	 
      	
                                                  Title:  President

                                                


                                        

                                      

                                    

                                  

                                

                              

                            

                          

                        

                      

                    

                  

                

              

            

          

        

      

    

    


    
      
        
          
            
              
                
                  
                    
                      	 
      	
                              Address: 

                            	
                              4
      Campus Drive, 2nd Floor

                            
	 
      	 
      	
                              Parsippany,
      NJ 07054

                            
	 
      	 
      	
                              Attention:
      President

                            
	 
      	 
      	
                              Facsimile:
      (973)
267-0101

                            


                    

                  

                

              

            

          

        

      

    

    


    
      
        
          
            
              
                
                  
                    
                      
                        
                          
                            
                              
                                
                                  
                                    
                                      
                                        
                                          	 
      	
                                                  PURCHASERS:

                                                
	 
      	 
      
	 
      	
                                                  UTA
      CAPITAL LLC,

                                                
	 
      	
                                                  a
      Delaware limited liability company

                                                
	 
      	 
      
	 
      	
                                                  By: 

                                                	
                                                  YZT
      Management LLC, its Managing Member

                                                
	 
      	 
      	 
      	 
      
	 
      	 
      	
                                                  By: 

                                                	
                                                   
      

                                                
	 
      	 
      	 
      	
                                                  Name:

                                                
	 
      	 
      	 
      	
                                                  Title:

                                                


                                        

                                      

                                    

                                  

                                

                              

                            

                          

                        

                      

                    

                  

                

              

            

          

        

      

    

    


    
      
        
          
            
              	 
      	
                      Address: 

                    	 
      
	 
      	 
      	 
      
	 
      	 
      	
                      Attention:

                    
	 
      	 
      	
                      Facsimile:

                    


            

          

        

      

    


    
      
         


      

      
        47

        
          

        

      

      
         


      

    

    


    
      
        
          
            
              
                
                  
                    	 
      	
                            PURCHASERS
      CONTINUED:

                          
	 
      	 
      
	 
      	
                            PONTIFAX
      (CAYMAN) II L.P.

                          
	 
      	 
      	 
      
	 
      	
                            By:

                          	 
      
	 
      	 
      	
                            Name:

                          
	 
      	 
      	
                            Title:

                          


                  

                

              

            

          

        

      

    

    


    
      
        
          
            	 
      	
                    Address:

                  	
                     
      

                  
	 
      	 
      	 
      
	 
      	 
      	
                    Attention:

                  
	 
      	 
      	
                    Facsimile:

                  


          

        

      

    

    


    
      
        
          
            
              
                	 
      	
                        PONTIFAX
      (ISRAEL) II L.P.

                      
	 
      	 
      	 
      
	 
      	
                        By:

                      	 
      
	 
      	 
      	
                        Name:

                      
	 
      	 
      	
                        Title:

                      


              

            

          

        

      

    

    


    
      
        
          
            	 
      	
                    Address:

                  	
                     
      

                  
	 
      	 
      	
                     
      

                  
	 
      	 
      	
                    Attention:

                  
	 
      	 
      	
                    Facsimile:

                  


          

        

      

    

    


    
      
        
          
            
              
                	 
      	
                        PONTIFAX
      (ISRAEL) II - INDIVIDUAL INVESTORS L.P.

                      
	 
      	 
      	 
      
	 
      	
                        By:

                      	 
      
	 
      	 
      	
                        Name:

                      
	 
      	 
      	
                        Title:

                      


              

            

          

        

      

    

    


    
      
        
          
            	 
      	
                    Address:

                  	 
      
	 
      	 
      	 
      
	 
      	 
      	
                    Attention:

                  
	 
      	 
      	
                    Facsimile:

                  


          

        

      

    


    
      
         


      

      
        48

        
          

        

      

      
         


      

    

    


    
      
        
          
            
              
                	 
      	
                        PURCHASERS
      CONTINUED:

                      
	 
      	 
      
	 
      	
                        COMMERCIAL
      STREET CAPITAL LLC

                      
	 
      	 
      	 
      
	 
      	
                        By:

                      	 
      
	 
      	 
      	
                        Name:

                      
	 
      	 
      	
                        Title:

                      


              

            

          

        

      

    

    


    
      
        
          	 
      	
                  Address:

                	 
      
	 
      	 
      	 
      
	 
      	 
      	
                  Attention:

                
	 
      	 
      	
                  Facsimile:

                


        

      

    

    


    
      
        
          
            	 
      	
                    FCC
      LTD

                  
	 
      	 
      	 
      
	 
      	
                    By:

                  	 
      
	 
      	 
      	
                    Name:

                  
	 
      	 
      	
                    Title:

                  


          

        

      

    

    


    
      
        
          	 
      	
                  Address:

                	 
      
	 
      	 
      	 
      
	 
      	 
      	
                  Attention:

                
	 
      	 
      	
                  Facsimile:

                


        

      

    

     

    
      
         


      

      
        49

        
          

        

      

      
         


      

    

    


    
      
        
          
            
              
                
                  
                    
                      
                        
                          
                            
                              
                                
                                  
                                    
                                      
                                        
                                          
                                            
                                              
                                                	 
      	
                                                        PURCHASERS
      CONTINUED:

                                                      
	 
      	 
      
	 
      	
                                                        UZI
      ZUCKER

                                                      
	 	 
	 
      	 
      
	 
      	
                                                        Uzi
      Zucker

                                                      
	 
      	 
      
	 
      	
                                                        Address:

                                                      	 
      
	 
      	 
      	 
      	 
      
	 
      	 
      	 
      	 
      
	 
      	 
      	 
      	 
      
	 
      	 
      	 
      	 
      
	 
      	 
      	
                                                        Facsimile:

                                                      	 
      


                                              

                                            

                                          

                                        

                                      

                                    

                                  

                                

                              

                            

                          

                        

                      

                    

                  

                

              

            

          

        

      

    

     

    
      
         


      

      
        50

        
          

        

      

      
         


      

    

    


    
      
        
          
            
              
                	 
      	
                        PURCHASERS
      CONTINUED:

                      
	 
      	 
      	 
      
	 
      	
                        Entity
      Purchasers:

                      
	 
      	 
      	 
      
	 
      	
                        Purchaser
      Name:

                      	 
      


              

            

          

        

      

    

    


    
      
        
          
            
              
                
                  
                    
                      
                        	 
      	 
      	
                                By: 

                              	 
      
	 
      	 
      	 
      	
                                Name:

                              
	 
      	 
      	 
      	
                                Title:

                              


                      

                    

                  

                

              

            

          

        

      

    

    


    
      
        
          
            
              
                
                  
                    
                      
                        	 
      	 	
                                Address:

                              	 
      	 
	 
      	 	 
      	 
      	 
	 
      	 	 
      	 
      	 
	 
      	 	 
      	 
      	 
	 
      	 	 
      	 
      	 
	 
      	 	 
      	 
      	 
	 
      	 	 
      	
                                Attention:

                              	 
	 
      	 	 
      	 
      	 
	 
      	 	 
      	
                                Facsimile:

                              	 


                      

                    

                  

                

              

            

          

        

      

    

    


    
      
        
          
            
              	 
      	
                      Amount
      Invested: $ _____________________

                    
	 
      	 
      	 
      
	 
      	
                      Individual
      Purchasers:

                    
	 
      	 
      	 
      
	 
      	
                      Purchaser
      Name:

                    	 
      


            

          

        

      

    

    


    
      
        
          
            
              
                
                  
                    
                      
                        
                          
                            
                              
                                
                                  
                                    	 
      	 	 
      	 
      	 
	 
      	 	
                                            [Signature]

                                          	 
      	 
	 
      	 	 
      	 
      	 
	 
      	 	
                                            Address:

                                          	 
      	 
	 
      	 	 
      	 
      	 
	 
      	 	 
      	 
      	 
	 
      	 	 
      	 
      	 
	 
      	 	 
      	 
      	 
	 
      	 	 
      	 
      	 
	 
      	 	 
      	
                                            Attention:

                                          	 
	 
      	 	 
      	 
      	 
	 
      	 	 
      	
                                            Facsimile:

                                          	 
	 	 	 
	 
      	Amount
      Invested: $
_____________________


                                  

                                

                              

                            

                          

                        

                      

                    

                  

                

              

            

          

        

      

    


    
      
         


      

      
        51

        
          

        

      

      
         


      

    


    SCHEDULE
1

    


    
      
        
          	
                  Purchasers

                	 	
                  Purchase Price of

                  Preferred Shares

                	 	 	
                  Class A Warrants

                	 	 	
                  Class B Warrants

                	 
	 
      	 	 	 	 	 	 	 	 	 
	
                  Pontifax
      (Cayman) II L.P.

                	 	$	1,466,512	 	 	 	117,321	 	 	 	615,935	 
	 
      	 	 	 	 	 	 	 	 	 	 	 	 
	
                  Pontifax
      (Israel) II L.P.

                	 	$	1,104,668	 	 	 	88,373	 	 	 	463,961	 
	 
      	 	 	 	 	 	 	 	 	 	 	 	 
	
                  Pontifax
      (Israel) II - Individual Investors L.P.

                	 	$	428,820	 	 	 	34,306	 	 	 	180,104	 
	 
      	 	 	 	 	 	 	 	 	 	 	 	 
	
                  Commercial
      Street Capital, LLC

                	 	$	2,200,000	 	 	 	176,000	 	 	 	924,000	 
	 
      	 	 	 	 	 	 	 	 	 	 	 	 
	
                  UTA
      Capital LLC

                	 	$	2,000,000	 	 	 	160,000	 	 	 	840,000	 
	 
      	 	 	 	 	 	 	 	 	 	 	 	 
	
                  Kardan
      Israel Ltd.

                	 	$	1,000,000	 	 	 	80,000	 	 	 	420,000	 
	 
      	 	 	 	 	 	 	 	 	 	 	 	 
	
                  Genesis
      Opportunity Fund, LP

                	 	$	1,250,000	 	 	 	100,000	 	 	 	525,000	 
	 
      	 	 	 	 	 	 	 	 	 	 	 	 
	
                  Genesis
      Capital Advisors, LLC

                	 	$	150,000	 	 	 	12,000	 	 	 	63,000	 
	 
      	 	 	 	 	 	 	 	 	 	 	 	 
	
                  Wexford
      Spectrum Investors LLC

                	 	$	1,071,990	 	 	 	85,759	 	 	 	450,236	 
	 
      	 	 	 	 	 	 	 	 	 	 	 	 
	
                  Kappa
      Investors LLC

                	 	$	168,010	 	 	 	13,441	 	 	 	70,564	 
	 
      	 	 	 	 	 	 	 	 	 	 	 	 
	
                  Clal
      Insurance Company Ltd. - Profit Participating Policies

                	 	$	700,000	 	 	 	56,000	 	 	 	294,000	 
	 
      	 	 	 	 	 	 	 	 	 	 	 	 
	
                  Clal
      Pension & Provident Funds Ltd. - Sapir

                	 	$	266,000	 	 	 	21,280	 	 	 	111,720	 
	 
      	 	 	 	 	 	 	 	 	 	 	 	 
	
                  Clal
      Pension & Provident Funds Ltd. - Yahalom

                	 	$	134,000	 	 	 	10,720	 	 	 	56,280	 
	 
      	 	 	 	 	 	 	 	 	 	 	 	 
	
                  Esperante
      AB

                	 	$	500,000	 	 	 	40,000	 	 	 	210,000	 


        

      

    

     

    
      
         


      

      
        I-1

        
          

        

      

      
         


      

    

    


    
      
        
          	
                  Purchasers

                	 	
                  Purchase Price of

                  Preferred Shares

                	 	 	
                  Class A Warrants

                	 	 	
                  Class B Warrants

                	 
	 
      	 	 	 	 	 	 	 	 	 
	
                  Leumi
      Overseas Trust Corporation Limited as Trustee of the BTL
    Trust

                	 	$	250,000	 	 	 	20,000	 	 	 	105,000	 
	 
      	 	 	 	 	 	 	 	 	 	 	 	 
	
                  Arie
      and Rebecka Belldegrun as Trustees of the Belldegrun Family Trust dated
      February 18, 1994

                	 	$	125,000	 	 	 	10,000	 	 	 	52,500	 
	 
      	 	 	 	 	 	 	 	 	 	 	 	 
	
                  MDRB
      Partnership, L.P.

                	 	$	125,000	 	 	 	10,000	 	 	 	52,500	 
	 
      	 	 	 	 	 	 	 	 	 	 	 	 
	
                  Uzi
      Zucker

                	 	$	300,000	 	 	 	24,000	 	 	 	126,000	 
	 
      	 	 	 	 	 	 	 	 	 	 	 	 
	
                  FCC
      Ltd

                	 	$	300,000	 	 	 	24,000	 	 	 	126,000	 
	 
      	 	 	 	 	 	 	 	 	 	 	 	 
	
                  Joia
      and Joshua Kazam (JTWROS)

                	 	$	250,000	 	 	 	20,000	 	 	 	105,000	 
	 
      	 	 	 	 	 	 	 	 	 	 	 	 
	
                  Primafides
      (Suisse) SA as Trustees of the Sirius Trust

                	 	$	100,000	 	 	 	8,000	 	 	 	42,000	 
	 
      	 	 	 	 	 	 	 	 	 	 	 	 
	
                  Peter
      and Donna Kash (JTWROS)

                	 	$	100,000	 	 	 	8,000	 	 	 	42,000	 
	 
      	 	 	 	 	 	 	 	 	 	 	 	 
	
                  Robert
      I. Falk

                	 	$	100,000	 	 	 	8,000	 	 	 	42,000	 
	 
      	 	 	 	 	 	 	 	 	 	 	 	 
	
                  DAFNA
      Life Science Select Ltd.

                	 	$	58,000	 	 	 	4,640	 	 	 	24,360	 
	 
      	 	 	 	 	 	 	 	 	 	 	 	 
	
                  DAFNA
      Life Science Ltd.

                	 	$	24,000	 	 	 	1,920	 	 	 	10,080	 
	 
      	 	 	 	 	 	 	 	 	 	 	 	 
	
                  DAFNA
      Life Science Market Neutral Ltd.

                	 	$	18,000	 	 	 	1,440	 	 	 	7,560	 
	 
      	 	 	 	 	 	 	 	 	 	 	 	 
	
                  David
      M. Tanen

                	 	$	65,000	 	 	 	5,200	 	 	 	27,300	 
	 
      	 	 	 	 	 	 	 	 	 	 	 	 
	
                  Isaac
      Kier

                	 	$	50,000	 	 	 	4,000	 	 	 	21,000	 


        

      

    

     

    
      
         


      

      
        I-2

        
          

        

      

      
         


      

    

    


    
      
        
          	
                  Purchasers

                	 	
                  Purchase Price of

                  Preferred Shares

                	 	 	
                  Class A Warrants

                	 	 	
                  Class B Warrants

                	 
	 
      	 	 	 	 	 	 	 	 	 
	
                  Ira
      Kalfus

                	 	$	35,000	 	 	 	2,800	 	 	 	14,700	 
	 
      	 	 	 	 	 	 	 	 	 	 	 	 
	
                  Nazy
      Zomorodian

                	 	$	30,000	 	 	 	2,400	 	 	 	12,600	 
	 
      	 	 	 	 	 	 	 	 	 	 	 	 
	
                  Kenzo
      Kosuda

                	 	$	50,000	 	 	 	4,000	 	 	 	21,000	 
	 
      	 	 	 	 	 	 	 	 	 	 	 	 
	
                  Taichi
      Wakabayashi

                	 	$	50,000	 	 	 	4,000	 	 	 	21,000	 
	 
      	 	 	 	 	 	 	 	 	 	 	 	 
	
                  Susumu
      Maeda

                	 	$	50,000	 	 	 	4,000	 	 	 	21,000	 
	 
      	 	 	 	 	 	 	 	 	 	 	 	 
	
                  Allan
      and Jodi Pantuck (JTWROS)

                	 	$	12,000	 	 	 	960	 	 	 	5,040	 
	 
      	 	 	 	 	 	 	 	 	 	 	 	 
	
                  The
      Michael J. Shimoko Trust

                	 	$	100,000	 	 	 	8,000	 	 	 	42,000	 
	 
      	 	 	 	 	 	 	 	 	 	 	 	 
	
                  Georgette
      Pagano

                	 	$	25,000	 	 	 	2,000	 	 	 	10,500	 
	 
      	 	 	 	 	 	 	 	 	 	 	 	 
	
                  Ricardo
      de la Guardia

                	 	$	25,000	 	 	 	2,000	 	 	 	10,500	 
	 
      	 	 	 	 	 	 	 	 	 	 	 	 
	
                  Ogier
      Employee Benefit Trust Limited as Trustees of the MBES Employee Benefit
      Trust – JD Sub Trust

                	 	$	100,000	 	 	 	8,000	 	 	 	42,000	 
	 
      	 	 	 	 	 	 	 	 	 	 	 	 
	
                  Harel
      Insurance Company Ltd.

                	 	$	203,362	 	 	 	16,269	 	 	 	85,412	 
	 
      	 	 	 	 	 	 	 	 	 	 	 	 
	
                  Harel
      Pension Fund Management Company Ltd.

                	 	$	52,226	 	 	 	4,178	 	 	 	21,935	 
	 
      	 	 	 	 	 	 	 	 	 	 	 	 
	
                  Harel
      Provident Funds Ltd.

                	 	$	35,116	 	 	 	2,809	 	 	 	14,749	 
	 
      	 	 	 	 	 	 	 	 	 	 	 	 
	
                  Dikla
      Insurance Company Ltd.

                	 	$	9,296	 	 	 	744	 	 	 	3,904	 
	 
      	 	 	 	 	 	 	 	 	 	 	 	 
	
                  I-Bankers
      Securities, Inc.

                	 	$	80,000	 	 	 	6,400	 	 	 	33,600	 
	 
      	 	 	 	 	 	 	 	 	 	 	 	 
	
                  3071341
      Canada Inc.

                	 	$	25,000	 	 	 	2,000	 	 	 	10,500	 


        

      

    

     

    
      
         


      

      
        I-3

        
          

        

      

      
         


      

    

    


    
      
        
          	
                  Purchasers

                	 	
                  Purchase Price of

                  Preferred Shares

                	 	 	
                  Class A Warrants

                	 	 	
                  Class B Warrants

                	 
	 
      	 	 	 	 	 	 	 	 	 
	
                  87111
      Canada Limited

                	 	$	25,000	 	 	 	2,000	 	 	 	10,500	 
	 
      	 	 	 	 	 	 	 	 	 	 	 	 
	
                  Hank
      C.K. Wuh

                	 	$	25,000	 	 	 	2,000	 	 	 	10,500	 
	 
      	 	 	 	 	 	 	 	 	 	 	 	 
	
                  Sabrinco
      Inc.

                	 	$	12,500	 	 	 	1,000	 	 	 	5,250	 
	 
      	 	 	 	 	 	 	 	 	 	 	 	 
	
                  Alrac
      Investments Inc.

                	 	$	12,500	 	 	 	1,000	 	 	 	5,250	 
	 
      	 	 	 	 	 	 	 	 	 	 	 	 
	
                  Allen
      Rubin

                	 	$	6,000	 	 	 	480	 	 	 	2,520	 
	 
      	 	 	 	 	 	 	 	 	 	 	 	 
	
                  6984321
      Canada Inc.

                	 	$	6,000	 	 	 	480	 	 	 	2,520	 
	 
      	 	 	 	 	 	 	 	 	 	 	 	 
	
                  Totals

                	 	$	15,274,000	 	 	 	1,221,920	 	 	 	6,415,080	 


        

      

    

     

    
      
        
        

      

      
        I-4