ex10127.htm


    Exhibt 10.127

     

    PREFERRED
STOCK PURCHASE AGREEMENT

     

    This
Preferred Stock Purchase Agreement (“Agreement”) is
entered into and effective as of November 2, 2009 (“Effective Date”), by
and among Advanced Cell Technology, Inc., a
Delaware corporation (“Company”), and
Optimus Capital Partners, LLC, a Delaware limited liability company, dba Optimus
Life Sciences Capital Partners, LLC (including its designees, successors and
assigns, “Investor”).

     

    RECITALS

     

    A. The
parties desire that, upon the terms and subject to the conditions contained
herein, the Company shall issue to Investor, and Investor shall purchase from
the Company, from time to time as provided herein, up to $10,000,000.00 of
shares of Series B Preferred Stock; and

     

    B. The offer
and sale of the Securities provided for herein are being made without
registration under the Act, in reliance upon the provisions of Section 4(2) of
the Act, Regulation D promulgated under the Act, and such other exemptions from
the registration requirements of the Act as may be available with respect to any
or all of the purchases of Securities to be made hereunder.

     

    AGREEMENT

     

    In
consideration of the premises, the mutual provisions of this Agreement, and
other good and valuable consideration the receipt and adequacy of which are
hereby acknowledged, Company and Investor agree as follows:

     

    ARTICLE 1

     

    DEFINITIONS

     

    In
addition to the terms defined elsewhere in this Agreement:  (a)
capitalized terms that are not otherwise defined herein have the meanings given
to such terms in the Certificate of Designations, and (b) the following terms
have the meanings indicated in this ARTICLE
1:

     

    “Act” means the
Securities Act of 1933, as amended.

     

    “Affiliate” means any
Person that, directly or indirectly through one or more intermediaries,
controls, is controlled by, or is under common control with a Person, as such
terms are used in and construed under Rule 144 under the Act.  With
respect to Investor, without limitation, any Person owning, owned by, or under
common ownership with Investor, and any investment fund or managed account that
is managed on a discretionary basis by the same investment manager as Investor
will  be deemed to be an Affiliate.

     

    “Agreement” means this
Preferred Stock Purchase Agreement.

     

    “Bloomberg” means
Bloomberg Financial Markets.

     

    “Change in Control”
has the meaning set forth within the definition of Fundamental Transaction,
below.

     

    
      
        
        

      

      
        1

        
          

        

      

      
        
        

      

    

     

    “Certificate of
Designations” means the certificate to be filed with the Secretary of
State of the State of Delaware, in the form attached hereto as Exhibit
B.

     

    “Closing” means any
one of (i) the Commitment Closing and (ii) each Tranche Closing.

     

    “Closing Bid Price”
and “Closing Sale
Price” means, for any security as of any date, the last closing bid price
and last closing trade price, respectively, for such security on the Trading
Market, as reported by Bloomberg, or, if the Trading Market begins to operate on
an extended hours basis and does not designate the closing bid price or the
closing trade price, as the case may be, then the last bid price or last trade
price, respectively, of such security prior to 4:00 p.m., Eastern time, as
reported by Bloomberg, or, if the Trading Market is not the principal securities
exchange or trading market for such security, the last closing bid price or last
trade price, respectively, of such security on the principal securities exchange
or trading market where such security is listed or traded as reported by
Bloomberg, or if the foregoing do not apply, the last closing bid price or last
trade price, respectively, of such security in the over-the-counter market on
the electronic bulletin board for such security as reported by Bloomberg, or, if
no closing bid price or last trade price, respectively, is reported for such
security by Bloomberg, the average of the bid prices, or the ask prices,
respectively, of any market makers for such security as reported in the “pink
sheets” by Pink Sheets LLC (formerly the National Quotation Bureau,
Inc.).  If the Closing Bid Price or the Closing Sale Price cannot be
calculated for a security on a particular date on any of the foregoing bases,
the Closing Bid Price or the Closing Sale Price, as the case may be, of such
security on such date shall be the fair market value as mutually determined by
the Company and Investor.  If the Company and Investor are unable to
agree upon the fair market value of such security, then such dispute shall be
resolved pursuant to Section
6.7.  All such determinations to be appropriately adjusted for
any stock dividend, stock split, stock combination or other similar transaction
during the applicable calculation period.

     

    “Commitment Closing”
has the meaning set forth in Section 2.2(a).

     

    “Commitment Fee” means a
non-refundable fee of $500,000.00, payable by Company to Investor on earlier of
the first Tranche Closing Date or the six-month anniversary of the Effective
Date, at the Company’s election either (a) in cash or by wire transfer of
immediately available funds to an account designated by the Investor, or (b) by issuance and delivery of registered and
freely tradable shares of Common Stock, delivered on, and valued based upon 90%
of the VWAP for the Common Stock on the 5 Trading Days immediately preceding,
the payment date.  If not paid earlier, the Commitment Fee shall be
due and payable in full on the six-month anniversary of the Effective Date,
whether or not any Tranche Closings have then occurred.

     

    “Common Shares”
includes the Warrant Shares and any shares of Common Stock issued as the
Commitment Fee.

     

    “Common Stock” means
the common stock, par value $0.001 per share, of the Company, and any
replacement or substitute thereof, or any share capital into which such Common
Stock shall have been changed or any share capital resulting from a
reclassification of such Common Stock.

     

    
      
        
        

      

      
        2

        
          

        

      

      
        
        

      

    

     

    “Company Termination”
has the meaning set forth in Section 3.2.

     

    “Delisting Event”
means any time during the term of this Agreement, that the Common Stock is not
listed for and actively trading on a Trading Market, or is suspended or delisted
with respect to the trading of shares of the Common Stock on a Trading
Market.

     

    “Disclosure Schedules”
means the disclosure schedules of the Company delivered concurrently herewith,
attached hereto, and incorporated herein by reference.  The Disclosure
Schedules shall contain no material non-public information.

    


    “DTC” means The
Depository Trust Company, or any successor performing substantially the same
function for Company.

     

    “DWAC Shares” means
all Common Shares or other shares of Common Stock issued or
issuable to Investor or any Affiliate, successor or assign of Investor pursuant
to any of the Transaction Documents, including
without limitation any Warrant Shares, all of which shall be (a) issued
in electronic form, (b) freely tradable and without restriction on resale, and
(c) timely credited by Company to the
specified Deposit/Withdrawal at Custodian
(DWAC) account with DTC under its Fast Automated Securities Transfer (FAST)
Program or any similar program hereafter adopted by DTC performing substantially
the same function, in accordance with irrevocable instructions issued to and
countersigned by the Transfer Agent, in the form attached hereto as Exhibit C or in such
other form agreed upon by the parties.

     

    “Exchange Act” means
the Securities Exchange Act of 1934, as amended.

     

    “Fundamental Transaction” means and shall be deemed to have occurred at such
time upon any of the following events:

     

    (i) a consolidation, merger or other business combination or
event or transaction following which the holders of Common Stock immediately
preceding such consolidation, merger, combination or event either (a) no longer
hold a majority of the shares of Common Stock or (b) no longer have the ability
to elect a majority of the board of directors of the Company (a “Change in
Control”);

    
      (ii) the sale or transfer of all or substantially all of the Company’s assets,
other than in the ordinary course of business; or

      
        (iii) a purchase, tender or exchange offer made to the holders
of the outstanding shares of Common Stock.

         

        “GAAP” means United
States generally accepted accounting principles applied on a consistent basis
during the periods involved.

         

        “Indebtedness” means
(a) any liabilities for borrowed money or amounts owed in excess of $50,000
(other than trade accounts payable incurred in the ordinary course of business),
(b) all guaranties, endorsements and other contingent obligations in respect of
Indebtedness of others, whether or not the same are or should be reflected in
the Company’s
balance sheet (or the notes thereto), except guaranties by endorsement of
negotiable instruments for deposit or collection or similar transactions in the
ordinary course of business; and (c) the present value of any lease payments in
excess of $50,000 due under leases required to be capitalized in accordance with
GAAP.

         

        
          
            
            

          

          
            3

            
              

            

          

          
            
            

          

        

         

        “Liens” means a lien,
charge, security interest, encumbrance, right of first refusal, preemptive right
or other restriction.

         

        “Lock-Up Agreements”
means an agreement in the form attached as Exhibit D, executed
by each of the Company’s officers, directors and beneficial owners of 10% or
more of the Common Stock, precluding each such Person from participating in any
sale of the Common Stock from the Tranche Notice Date through the Tranche
Closing Date.

         

        “Material Adverse
Effect” includes any material adverse effect on (i) the legality,
validity or enforceability of any Transaction Document, (ii) the results of
operations, assets, business, prospects or financial condition of the Company
and the Subsidiaries, taken as a whole, or (iii) a the Company’s ability to
perform in any material respect on a timely basis its obligations under any
Transaction Document.

         

        “Material Agreement”
includes any loan agreement, financing agreement,
equity investment agreement or securities instrument to which Company is a
party, any agreement or instrument to which Company and Investor or any
Affiliate of Investor is a party, and any other material agreement
listed, or required to be listed, on any of Company’s reports filed or required
to be filed with the SEC, including without limitation Forms 10-K, 10-Q or
8-K.

         

        “Maximum
Placement” means
$10,000,000.00.

         

        “Maximum Tranche
Amount” means, subject to any other applicable limitations set forth in
this Agreement, the Maximum Placement less the amount of any previously noticed
and funded Tranches.

         

         “Officer’s Closing
Certificate” means a certificate in customary form reasonably acceptable
to the Investor, executed by an authorized officer of the Company.

         

        “Opinion” means an
opinion from Company’s independent legal counsel, in the form attached as Exhibit E or in such
other form agreed upon by the parties, to be delivered in connection with the
Commitment Closing and any Tranche Closing.

         

        “Person” means an
individual or corporation, partnership, trust, incorporated or unincorporated
association, joint venture, limited liability company, joint stock company,
government (or an agency or subdivision thereof) or other entity of any
kind.

         

        “Preferred Shares”
means shares of Series B Preferred Stock of the Company provided for in the
Certificate of Designations, to be issued to Investor pursuant to this
Agreement.

         

        “Prospectus” includes
each prospectus and prospectus supplement (within the meaning of the Act)
related to the sale or offering of any Common
Shares, including without limitation any prospectus or prospectus
supplement contained within the Registration Statement.

         

        
          
            
            

          

          
            4

            
              

            

          

          
            
            

          

        

         

        “Registration
Statement” means a valid, current and effective registration statement
registering for resale the Common Shares,
and except where the context otherwise requires, means the registration
statement, as amended, including (i) all documents filed as a part thereof or
incorporated by reference therein, and (ii) any information contained or
incorporated by reference in a prospectus filed with the SEC in connection with
such registration statement, to the extent such information is deemed under the
Act to be part of any registration statement.

         

        “Regulation D” means
Regulation D promulgated under the Act.

         

        “Required Approval”
means any approval of the Trading Market or the Company’s stockholders required
to be obtained by Company prior to issuing the Securities pursuant to any
applicable rules of the Trading Market.

         

        “Required Tranche
Documents” has the meaning set forth in Section
2.3(e).

         

        “Rule 144” means Rule
144 promulgated by the SEC pursuant to the Act, as such Rule may be amended from
time to time, or any similar rule or regulation hereafter adopted by the SEC
having substantially the same effect.

         

        “Rule 144 Eligible”
means eligible for immediate resale under Rule 144 without limitation on the
amount of securities sold under Rule 144(e) and without  requiring
discharge by payment in full of any promissory notes given to the Company prior
to the sale of the securities under Rule 144(d)(2)(iii).

         

        “SEC” means the United
States Securities and Exchange Commission.

         

        “SEC Reports” includes
all reports required to be filed by the Company under the Act and/or the Exchange Act,
including pursuant to Section 13(a) or 15(d) thereof, for the two years
preceding the Effective Date (or such shorter period as the Company was required
by law to file such material).

         

        “Securities” includes
the Warrants, the Common Shares and the Preferred Shares issuable pursuant to
this Agreement.

         

        “Subsidiary” means any
Person the Company owns or controls, or in which the Company, directly or
indirectly, owns a majority of the capital stock or similar interest that would
be disclosable pursuant to Regulation S-K, Item 601(b)(21).

         

        “Termination” has the
meaning set forth in Section 3.1.

         

        “Termination Date”
means the earlier of (i) the date that is the two-year anniversary of the
Effective Date, or (ii) the Tranche Closing Date on which the sum of the
aggregate Tranche Purchase Price for all Tranche Shares equals the Maximum
Placement.

         

        “Termination Notice”
has the meaning as set forth in Section 3.2.

         

        
          
            
            

          

          
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        “Trading Day” means
any day on which the Common Stock is traded on the Trading Market; provided that
it shall not include any day on which the Common Stock is (a) scheduled to trade
for less than 5 hours, or (b) suspended from trading.

         

        “Trading Market” means
the OTC Bulletin Board, the NASDAQ Capital Market, the NASDAQ Global Market,
the NASDAQ Global Select Market, the
NYSE Amex, or the New York Stock Exchange, whichever is at the time the
principal trading exchange or market for the Common Stock, but does not include
the Pink Sheets inter-dealer electronic quotation and trading
system.

         

        “Tranche” has the
meaning set forth in Section 2.3.

         

        “Tranche Amount” means
the amount of any individual purchase of Preferred Shares under this Agreement,
as specified by the Company, and shall not exceed the Maximum Tranche
Amount.

         

        “Tranche Closing” has
the meaning set forth in Section 2.3(f).

         

        “Tranche Closing Date”
has the meaning set forth in Section 2.3(f).

         

        “Tranche Notice” has
the meaning set forth in Section
2.3(b).

         

        “Tranche Notice Date”
has the meaning set forth in Section 2.3(a).

         

        “Tranche Purchase
Price” has the meaning set forth in Section 2.3(a), and shall be
specified in writing by the Company.

         

        “Tranche Share Price”
means $10,000.00 per Preferred Share.  The Company may not issue
fractional Preferred Shares.

         

        “Tranche Shares” means
the
Preferred Shares that are purchased by Investor pursuant to a
Tranche.  For the Maximum Placement, the Company shall issue 1000
Preferred Shares to Investor.

         

        “Transaction
Documents” means this Agreement, the other agreements and documents
referenced herein, and the exhibits and schedules hereto and
thereto.

         

        “Transfer Agent” means
Empire Stock Transfer or any successor transfer agent for the Common
Stock.

         

        “Use of Proceeds
Certificate” means a certificate, the form of which is attached as Exhibit F, signed by
an officer of the Company, setting forth how the Tranche Purchase Price will be
applied by the Company.

         

        “VWAP” means, for any
date, the volume-weighted average price, calculated by dividing the aggregate
value of Common Stock traded on the Trading Market (price multiplied by number
of shares traded) by the total volume (number of shares) of Common Stock traded
on the Trading Market for such date, or the nearest preceding Trading
Day.

         

        
          
            
            

          

          
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        “Warrant Shares” means
the shares of Common Stock issuable upon exercise of the Warrants.

         

        “Warrants” means the
warrants issuable under this Agreement, in the form attached hereto as Exhibit A, to
purchase shares of Common Stock with an aggregate exercise price equal to 135.0%
of the Maximum Placement (subject to adjustment as set forth therein).

         

        ARTICLE 2

         

        PURCHASE AND
SALE

         

        2.1 Agreement to
Purchase

         

        .  Subject
to the terms and conditions herein and the satisfaction of the conditions to
closing set forth in this ARTICLE 2:

         

        (a) Investor
hereby agrees to purchase such amounts of Preferred Shares as the Company may,
in its sole and absolute discretion, from time to time elect to issue and sell
to Investor according to one or more Tranches pursuant to Section 2.3 below;
and

         

        (b) The
Company agrees to pay the Commitment Fee and
to issue the Preferred Shares, the Common
Shares and the Warrants to Investor as provided herein.

         

        2.2 Investment
Commitment

         

        (a) Investment
Commitment. The closing of this Agreement (the “Commitment Closing”)
shall be deemed to occur when this Agreement has been duly executed by both
Investor and the Company, and the other Conditions to the Commitment Closing set
forth in Section
2.2(b)
have been met.

         

        (b) Conditions to Investment
Commitment. As a condition precedent to the Commitment Closing, all of
the following (the “Conditions to Commitment
Closing”) shall have been satisfied prior to or concurrently with the
Company’s execution and delivery of this Agreement:

         

        (i) the
following documents shall have been delivered to Investor:  (A) this
Agreement, executed by the Company; (B) a Secretary’s Certificate as to (x) the
resolutions of the Company’s board of directors authorizing this Agreement and
the Transaction Documents, and the transactions contemplated hereby and thereby,
(y) a copy of the Company’s current Certificate of Incorporation, and (z) a copy
of the Company’s current Bylaws; (C) the Certificate of Designations executed by
the Company and accepted by the Secretary of State of Delaware; (D) the Opinion;
and (E) a copy of (1) the Company’s press release (if any) announcing the
transactions contemplated by this Agreement, and (F) a copy of the Company’s
Current Report on Form 8-K, as filed with the SEC, describing the transaction
contemplated by, and attaching a complete copy of, the Transaction
Documents;

         

        (ii) other
than for losses incurred in the ordinary course of business, there has not been
any Material Adverse Effect on the Company since the date of the last SEC Report
filed by the Company, including but not limited to incurring material
liabilities;

         

        
          
            
            

          

          
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        (iii) the
representations and warranties of the Company in this Agreement shall be true
and correct in all material respects and the Company shall have delivered an
Officer’s Closing Certificate to such effect to Investor, signed by an officer
of the Company;

         

        (iv) the
Warrant to purchase shares of Common Stock, with an aggregate exercise price
equal to 135.0% of the Maximum Placement (subject to adjustment as set forth
therein), shall have been delivered to Investor; and

         

        (v) any Required Approval has been
obtained.

         

        (c) Investor’s Obligation to
Purchase. Subject to the prior satisfaction of all conditions set forth
in this Agreement, following the Investor’s receipt of a validly delivered
Tranche Notice, the Investor shall be required to purchase from the Company a
number of Tranche Shares equal to the permitted Tranche Share Amount, in the manner described
below.

         

        2.3 Tranches to
Investor

         

        (a) Procedure to Elect a
Tranche. Subject to the Maximum Tranche Amount, the
Maximum Placement and the other conditions and limitations set forth in
this Agreement (including without limitation the filing with and acceptance by
the Secretary of State of the State of Delaware of the Certificate of
Designations), at any time beginning on the effective date of the Registration
Statement, the Company may, in its sole and absolute discretion, elect to
exercise one or more individual purchases of Preferred Shares under this
Agreement (each a “Tranche”) according
to the following procedure.

         

        (b) Delivery of Tranche
Notice.  The Company shall deliver an irrevocable written
notice (the “Tranche
Notice”), in the form attached as Exhibit G, to
Investor stating that the Company shall exercise a Tranche and stating the
number of Preferred Shares which the Company will sell to Investor at the
Tranche Share Price, and the aggregate purchase price for such Tranche (the
“Tranche Purchase
Price”).  A Tranche Notice delivered by the Company to Investor
by 4:30 p.m. Eastern time on any Trading Day shall be deemed delivered on the
same day.  A Tranche Notice delivered by the Company to Investor after
4:30 p.m. Eastern time on any Trading Day, or at any time on a non-Trading Day,
shall be deemed delivered on the next Trading Day.  The date that the
Tranche Notice is deemed delivered is the “Tranche Notice
Date”.  Each Tranche Notice shall be delivered via facsimile or
electronic mail, with confirming copy by overnight carrier, in each case to the
address set forth in Section
6.2.  Except for the first Tranche Closing, the Company may not
give a Tranche Notice unless the Tranche Closing for the prior Tranche has
occurred or has been cancelled by the Company pursuant to Section
2.3(g).

         

        (c) Issuance of
Warrants.  On each Tranche Notice Date, the Company shall issue
a replacement Warrant, in the form attached hereto as Exhibit A, to acquire
that number of Warrant Shares equal in value to 135.0% of the Tranche Purchase
Price, at an exercise price equal to the Closing Bid Price for the Common Stock
on the Tranche Notice Date.  Each Warrant shall have a term of five
years from issuance.  Any Warrant issued in connection with a Tranche
Notice and exercised by Investor in accordance with Section 1.1 of the
Warrant shall be deemed exercised (i) on the applicable Tranche Notice Date, if
the Company receives the Exercise Delivery Documents from Investor by 6:30 p.m.
Eastern time on the Tranche Notice Date, or (ii) on the next Trading Day, if the
Company receives the Exercise Delivery Documents from Investor after 6:30 p.m.
Eastern Time on the applicable Tranche Notice Date or on any subsequent
date.

         

        
          
            
            

          

          
            8

            
              

            

          

          
            
            

          

        

         

        (d) Conditions Precedent to
Right to Deliver a Tranche Notice.  The right of the Company to
deliver a Tranche Notice is subject to the satisfaction (or written waiver by
Investor in its sole discretion), on the date of delivery of such Tranche
Notice, of each of the following conditions:

         

        (i) the
Common Stock (including without limitation any shares of Common Stock that may
be issued to the Investor in payment of the Commitment Fee) shall be listed for
and currently trading on the Trading Market, and to the Company’s knowledge
there is no notice of any suspension or delisting
with respect the trading of the shares of Common Stock on such Trading
Market;

        
          (ii) the
representations and warranties of the Company set forth in this Agreement are
true and correct in all material respects as if made on such date, and no
default shall have occurred under this Agreement, or any other agreement with
Investor, any Affiliate of Investor, or any other
Material Agreement, and the Company
shall deliver an Officer’s Closing Certificate to such effect to Investor,
signed by an officer of the Company;

          
            (iii) other
than losses incurred in the ordinary course of business, there has been no
Material Adverse Effect on the Company since the Commitment Closing;

             

            (iv) the
Company is not, and will not be as a result of the applicable Tranche, in
default of this Agreement or any other Material Agreement;

             

            (v) there is
not then in effect any law, rule or regulation prohibiting or restricting the
transactions contemplated in this Agreement or any other Transaction Document,
or requiring any consent or approval which shall not have been obtained, nor is
there any pending or threatened proceeding or investigation which may have the
effect of prohibiting or adversely affecting any of the transactions
contemplated by this Agreement; no statute, rule, regulation, executive order,
decree, ruling or injunction shall have been enacted, entered, promulgated or
adopted by any court or governmental authority of competent jurisdiction that
prohibits the transactions contemplated by this Agreement, and no actions, suits
or proceedings shall be in progress, pending or, to the Company’s knowledge
threatened, by any person (other than Investor or any Affiliate of Investor),
that seek to enjoin or prohibit the transactions contemplated by this
Agreement;

             

            (vi) all
Common Shares shall have been timely
delivered, including all Warrant Shares issuable pursuant to any Exercise Notice delivered to Company prior to the Tranche Notice
Date;

             

            (vii) all
previously-issued and issuable Common Shares are DWAC Shares, are DTC eligible,
and can be immediately converted into electronic form without restriction on
resale;

             

            
              
                
                

              

              
                9

                
                  

                

              

              
                
                

              

            

             

            (viii) Company
is in compliance with all requirements to maintain listing on the Trading
Market;

             

            (ix) Company
has a current, valid and effective Registration Statement permitting the lawful
resale of all previously-issued and issuable Common Shares (including without
limitation all Warrant Shares issuable upon exercise of the Warrant delivered in
connection with such Tranche and any Common Shares that may be issued to
Investor in payment of the Commitment Fee);

             

            (x) Company
has a sufficient number of duly authorized
shares of Common Stock reserved for issuance in such amount as may be required
to fulfill its obligations pursuant to the Transaction Documents and any
outstanding agreements with Investor and any Affiliate of Investor, including without
limitation all Warrant Shares issuable upon
exercise of the Warrant issued in connection with such
Tranche;

            
              (xi) Company
has provided notice of its delivery of the Tranche Notice to all signatories of
a Lock-Up Agreement as required under the Lock-Up Agreement; and

              
                (xii) the
aggregate number of Warrant Shares issuable upon exercise of the Warrant issued at that Tranche Notice Date, when
aggregated with all other shares of Common Stock deemed beneficially owned by
the Investor and its Affiliates (whether acquired in connection with the
transactions contemplated by the Transaction Documents or otherwise), would not
result in the Investor owning more than 9.99% of all Common Stock outstanding on
the Tranche Notice Date, as determined in accordance with Section 13(d) of the
Exchange Act and the rules and regulations promulgated thereunder;
and

                 

                (xiii) except
with respect to the first Tranche Notice, Investor shall have previously received the Commitment Fee.

                 

                (e) Documents to be Delivered at
Tranche Closing. The Closing of any Tranche and Investor’s obligations
hereunder shall additionally be conditioned upon the delivery to Investor of
each of the following (the “Required Tranche
Documents”) on or before the applicable Tranche Closing
Date:

                 

                (i) a number
of Preferred Shares equal to the Tranche Purchase Price divided by the Tranche
Share Price shall have been delivered to Investor or an account specified by
Investor for the Tranche Shares;

                 

                (ii) the
following executed documents:  Opinion, Officer’s Certificate and
Lock-Up Agreements;

                 

                (iii) a Use of
Proceeds Certificate, signed by an officer of the Company, and setting forth how
the Tranche Purchase Price will be applied by the Company;

                 

                (iv) all
Warrant Shares shall have been timely
delivered in accordance with any Exercise Notice delivered to Company prior to the Tranche Closing
Date;

                 

                (v) all
documents, instruments and other writings required to be delivered by the
Company to Investor on or before the Tranche Closing Date pursuant to any
provision of this Agreement or in order to implement and effect the transactions
contemplated herein; and

                 

                (vi) payment
of a $5,000.00 non-refundable administrative fee to Investor’s counsel, by
offset against the Tranche Amount, or wire transfer of immediately available
funds.

                 

                (f) Mechanics of Tranche
Closing.

                 

                (i) Each of
the Company and Investor shall deliver all documents, instruments and writings
required to be delivered by either of them pursuant to Section 2.3(e) of
this Agreement at or prior to each Tranche Closing. Subject to such delivery and
the satisfaction of the conditions set forth in Section 2.3(d) as of the
Tranche Closing Date, the closing of the purchase by Investor of Preferred
Shares shall occur by 5:00 p.m. Eastern time, on the date which is 10 Trading
Days following (and not counting) the Tranche Notice Date (each a “Tranche Closing
Date”) at the offices of Investor.

                 

                (ii) If any
portion of the Warrant is exercised by Investor on or after the Tranche Notice
Date and prior to or on the Tranche Closing Date (which exercise shall be
effected by Investor sending the Exercise Delivery Documents to the Company in
accordance with Section 1.1 of the
Warrant), the Company shall send Investor an electronic copy of its share
issuance instructions to the Transfer Agent and shall cause the requisite number
of Warrant Shares to be credited to Investor’s account with DTC as DWAC Shares
by 12:00 p.m. Eastern time on the Trading Day after the date the Company
receives the Exercise Delivery Documents from Investor.  If DWAC
shares are not timely credited pursuant to this Section 2.3(f)(ii), then the
Tranche Closing Date shall be extended by one Trading Day for each Trading Day
that such timely credit of DWAC Shares is not made.

                 

                (iii) On or
before each Tranche Closing Date, Investor shall deliver to the Company, in cash
or immediately available funds, the Tranche Purchase Price to be paid for such
Tranche Shares.

                 

                (iv) The
closing (each a “Tranche Closing”) for
each Tranche shall occur on the date that both (i) the Company has delivered to
Investor all Required Tranche Documents, and (ii) Investor has delivered to the
Company the Tranche Purchase Price.

                 

                
                  
                    
                    

                  

                  
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                (g) Limitation on Obligations to
Purchase and Sell.  Notwithstanding any other provision, in the
event the Closing Bid Price or Closing Sale Price of the Common Stock during any
one or more of the 9 Trading Days following the Tranche Notice Date falls below
75.0% of the Closing Bid Price on the Tranche Notice Date, except as otherwise
agreed in writing between the Company and Investor:  (i) the Company
may, at its option, and without penalty, terminate the Tranche Notice and
decline to sell any Tranche Shares on the Tranche Closing Date; and (ii) the
Investor may, at its option, decline to purchase any Tranche Shares on the
Tranche Closing Date, and return to the Company all unexercised Warrants (if
any).

                 

                2.4 Maximum
Placement

                 

                .  Investor
shall not be obligated to purchase any additional Tranche Shares once the
aggregate Tranche Purchase Price paid by Investor equals the Maximum
Placement.

                 

                2.5 Share
Sufficiency

                 

                .  On
or before the date on which the Warrants become exercisable, the Company shall
have a sufficient number of duly authorized shares of Common Stock for issuance
in such amount as may be required to fulfill its obligations pursuant to the
Transaction Documents and any outstanding agreements with Investor and any
Affiliate of Investor.

                 

                ARTICLE 3

                 

                TERMINATION

                 

                3.1 Termination

                 

                .  The
Investor may elect to terminate this Agreement and the Company’s right to
initiate subsequent Tranches to Investor under this Agreement (each, a “Termination”) upon
the occurrence of any of the following:

                 

                (a) if, at
any time, either the Company or any director or executive officer of the Company
has engaged in a transaction or conduct related to the Company that has resulted
in (i) a SEC enforcement action, including without limitation such director or
executive officer being sanctioned by the SEC, or (ii) a civil judgment or
criminal conviction for fraud or misrepresentation, or for any other offense
that, if prosecuted criminally, would constitute a felony under applicable
law;

                 

                (b) on any
date after a Delisting Event that lasts for an aggregate of 20 Trading Days
during any calendar year;

                 

                (c) if at any
time the Company has filed for and/or is subject to any bankruptcy, insolvency,
reorganization or liquidation proceedings or other proceedings for relief under
any bankruptcy law or any law for the relief of debtors instituted by or against
the Company or any Subsidiary of the Company;

                 

                (d) the
Company is in breach or default of any Material
Agreement, which breach or default could have a Material Adverse Effect;

                 

                (e) the
Company is in breach or default of this Agreement, any Transaction Document, or
any agreement with Investor or any Affiliate of Investor;

                 

                (f) upon the
occurrence of a Fundamental Transaction;

                 

                (g) so long
as any Preferred Shares are outstanding, the Company effects or publicly
announces its intention to create a security senior to the Series B Preferred
Stock, or substantially altering the capital
structure of the Company in a manner that materially adversely affects the
rights or preferences of the Series B Preferred Stock; and

                 

                 

                
                  
                    
                    

                  

                  
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                (h) on the
Termination Date.

                 

                3.2 Company
Termination

                 

                .  The
Company may at any time in its sole discretion terminate (a “Company Termination”)
this Agreement and its right to initiate future Tranches by providing 30 days
advanced written notice (“Termination Notice”)
to Investor.

                 

                3.3 Effect of
Termination

                 

                .  Except
as otherwise provided herein, the termination of this Agreement will have no
effect on any Common Shares, Preferred Shares, Warrants or DWAC Shares
previously issued, delivered or credited, or on any then-existing rights of any
holder thereof.  Notwithstanding any other provision of this
Agreement, the Commitment Fee is payable despite any termination of this
Agreement and all fees paid to Investor or its counsel are
non-refundable.

                 

                ARTICLE 4

                 

                REPRESENTATIONS AND
WARRANTIES

                 

                4.1 Representations and
Warranties of the Company

                 

                .  Except
as set forth under the corresponding section of the Disclosure Schedules, which
shall be deemed a part hereof and which shall not contain any material
non-public information, the Company hereby represents and warrants to, and as
applicable covenants with, Investor as of each Closing:

                 

                (a) Subsidiaries.  All
of the direct and indirect subsidiaries of the Company are set forth on Section 4.1(a) to the
Disclosure Schedule.  The
Company owns, directly or indirectly, all of the capital stock or other equity
interests of each Subsidiary, and all of such directly or indirectly owned
capital stock or other equity interests are owned free and clear of any
Liens.  All
the issued and outstanding shares of capital stock of each Subsidiary are duly
authorized, validly issued, fully paid, non-assessable and free of preemptive
and similar rights to subscribe for or purchase securities.

                 

                (b) Organization and
Qualification.  Each of the Company and each Subsidiary is an
entity duly incorporated or otherwise organized, validly existing and in good
standing under the laws of the jurisdiction of its incorporation or
organization, as applicable, with the requisite power and authority to own and
use its properties and assets and to carry on its business as currently
conducted.  Neither the Company nor any Subsidiary is in violation or
default of any of the provisions of its respective certificate or articles of
incorporation, bylaws or other organizational or charter
documents.  Each of the Company and each Subsidiary is duly qualified
to conduct 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, could not
have or reasonably be expected to result in a Material Adverse Effect and no
proceeding has been instituted in any such jurisdiction revoking, limiting or
curtailing or seeking to revoke, limit or curtail such power and authority or
qualification.

                 

                 

                
                  
                    
                    

                  

                  
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                  (c) Authorization;
Enforcement.  The Company has the requisite corporate power and
authority to enter into and to consummate the transactions contemplated by each
of the Transaction Documents and otherwise to carry out its obligations
hereunder or thereunder.  The execution and delivery of each of the
Transaction Documents by the Company and the consummation by it of the
transactions contemplated hereby or thereby have been duly authorized by all
necessary action on the part of the Company and no further consent or action is
required by the Company other than the filing of the Certificate of
Designations.  Each of the Transaction Documents has been, or upon
delivery will be, duly executed by the Company and, 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
(i) as limited by general equitable principles and applicable bankruptcy,
insolvency, reorganization, moratorium and other laws of general application
affecting enforcement of creditors’ rights generally, (ii) as limited by laws
relating to the availability of specific performance, injunctive relief or other
equitable remedies and (iii) insofar as indemnification and contribution
provisions may be limited by applicable law.  Neither the Company nor any Subsidiary is in violation
of any of the provisions of its respective certificate or articles of
incorporation, by-laws or other organizational or charter
documents.

                   

                

                (d) No
Conflicts.  The execution, delivery and performance of the
Transaction Documents by the Company, the issuance and sale of the Securities
and the consummation by the Company of the other transactions contemplated
thereby do not and will not (i) conflict with or violate any provision of the
Company’s or any Subsidiary’s certificate or articles of incorporation, bylaws
or other organizational or charter documents, or (ii) conflict with, or
constitute a default (or an event that with notice or lapse of time or both
would become a default) under, result in the creation of any Lien upon any of
the properties or assets of the Company or any Subsidiary, 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 or Subsidiary debt or otherwise) or other
understanding to which the Company or any Subsidiary is a party or by which any
property or asset of the Company or any Subsidiary is bound or affected, or
(iii) conflict with or result in a violation of any material law, rule,
regulation, order, judgment, injunction, decree or other restriction of any
court or governmental authority to which the Company or a Subsidiary is subject
(including federal and state securities laws and regulations), or by which any
property or asset of the Company or a Subsidiary is bound or affected, or (iv)
conflict with or violate the terms of any agreement by which the Company or any
Subsidiary is bound or to which any property or asset of the Company or any
Subsidiary is bound or affected; except in the case of each of clauses (ii) and
(iii), such as could not have or reasonably be expected to result in a Material
Adverse Effect.

                 

                (e) Filings, Consents and
Approvals.  Neither the Company nor any Subsidiary is required
to obtain any consent, waiver, authorization or order of, give any notice to, or
make any filing or registration with, any court or other federal, state, local
or other governmental authority or other Person in connection with the
execution, delivery and performance by the Company of the Transaction Documents,
other than the filing of the Certificate of Designations and required federal
and state securities filings and such filings and approvals as are required to
be made or obtained under the applicable Trading Market rules in connection with
the transactions contemplated hereby, each of which has been, or (if not yet
required to be filed) shall be, timely filed.

                 

                (f) Issuance of the
Securities.  The Securities are duly authorized and, when
issued and paid for in accordance with the applicable Transaction Documents,
will be duly and validly issued, fully paid and nonassessable, free and clear of
all Liens.  The Company has reserved from its duly authorized capital
stock a number of shares of Common Stock and Preferred Stock for issuance of the
Securities at least equal to the number of Securities which could be issued
pursuant to the terms of the Transaction Documents.

                 

                
                  
                    
                    

                  

                  
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                (g) Capitalization.  Except
as set forth on Section 4.1(g) to the
Disclosure Schedule, the capitalization of the Company is as described in the
Company’s most recently filed SEC Report and the Company has not issued any
capital stock since such filing.  No Person has any right of first
refusal, preemptive right, right of participation, or any similar right to
participate in the transactions contemplated by the Transaction Documents which
has not been waived or satisfied.  Except as set forth in the SEC
reports or on Section
4.1(g) to the Disclosure Schedule, or except as a result of the purchase
and sale of the Securities, there are no outstanding options, warrants, script
rights to subscribe to, calls or commitments of any character whatsoever
relating to, or securities, rights or obligations convertible into or
exchangeable for, or giving any Person any right to subscribe for or acquire,
any shares of Common Stock, or contracts, commitments, understandings or
arrangements by which the Company or any Subsidiary is or may become bound to
issue additional shares of Common Stock or securities convertible into or
exercisable for shares of Common Stock.  Assuming the Securities are
issued at a price of at least $.10 per share, 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 Investor) and will not result in a
right of any holder of Company securities to adjust the exercise, conversion,
exchange, or reset price under such securities. All of the outstanding shares of
capital stock of the Company are validly issued, fully paid and nonassessable,
have been issued in compliance with all federal and state securities laws, and
none of such outstanding shares was issued in violation of any preemptive rights
or similar rights to subscribe for or purchase securities.  No
further approval or authorization of any stockholder, the Board of Directors of
the Company or others is required for the issuance and sale of the
Securities.  There are no stockholders agreements, voting agreements
or other similar agreements with respect to the Company’s capital stock to which
the Company is a party or, to the knowledge of the Company, between or among any
of the Company’s stockholders.

                 

                (h) SEC Reports; Financial
Statements.  The Company has filed all required SEC Reports
for the two years preceding the Effective Date (or such shorter period as the
Company was required by law to file such SEC Reports).  As of their respective dates or as subsequently
amended, the SEC Reports complied in all material respects with the requirements
of the Act and the Exchange Act and the rules and regulations of the SEC
promulgated thereunder, as applicable, and none of the SEC Reports, when filed,
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 light of the circumstances under which they were made, not
misleading.  The financial statements of the Company included in the
SEC Reports, as amended, 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.  Such financial statements
have been prepared in accordance with GAAP, except as may be otherwise specified
in such financial statements or the notes thereto and except that unaudited
financial statements may not contain all footnotes required by GAAP, and fairly
present in all material respects the financial position of the Company and its
consolidated subsidiaries as of and for the dates thereof and the results of
operations and cash flows for the periods then ended, subject, in the case of
unaudited statements, to normal, immaterial,
year-end audit adjustments.

                 

                
                  
                    
                    

                  

                  
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                (i) Material
Changes.  Except as disclosed on Section 4.1(i) to the
Disclosure Schedule, since the date of the latest audited financial statements
included within the SEC Reports, except as specifically disclosed in the SEC
Reports, (i) there has been no event, occurrence or development that has had, or
that could reasonably be expected to result in, a Material Adverse Effect, (ii)
the Company has not incurred any liabilities (contingent or otherwise) 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, (iv) the Company has not declared or made any dividend or
distribution of cash or other property to its stockholders or purchased,
redeemed or made any agreements to purchase or redeem any shares of its capital
stock and (v) the Company has not issued any equity securities to any officer,
director or Affiliate, except pursuant to existing Company equity incentive
plans.  The Company does not have pending before the SEC any request
for confidential treatment of information.

                 

                (j) Litigation.  Except
as set forth in Section 4.1(j) of the Disclosure Schedule, there is no action, suit, inquiry, notice of
violation, proceeding or investigation pending or, to the knowledge of the
Company, threatened against or affecting the Company, any Subsidiary or any of
their respective properties before or by any court, arbitrator, governmental or
administrative agency or regulatory authority (federal, state, county, local or
foreign) (collectively, an “Action”), which (i)
adversely affects or challenges the legality, validity or enforceability of any
of the Transaction Documents or the Securities, or (ii) could, if there were an
unfavorable decision, have or reasonably be expected to result in a Material
Adverse Effect.  Neither the Company nor any Subsidiary, nor to the knowledge of the Company any director or
officer thereof, is or has been the subject of any Action involving a claim of
violation of or liability under federal or state securities laws or a claim of
breach of fiduciary duty.  There has not been, and to the knowledge of
the Company, there is not pending or contemplated, any investigation by the SEC
involving the Company or any current or former director or officer of the
Company.  The SEC has not issued any stop order or other order
suspending the effectiveness of any registration statement filed by the Company
or any Subsidiary under the Exchange Act or the Act.

                 

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

                 

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

                 

                
                  
                    
                    

                  

                  
                    15

                    
                      

                    

                  

                  
                    
                    

                  

                

                 

                (m) Regulatory
Permits.  The Company and each Subsidiary possess all
certificates, authorizations and permits issued by the appropriate federal,
state, local or foreign regulatory authorities necessary to conduct their
respective businesses as described in the SEC Reports, except where the failure
to possess such permits could not, individually or in the aggregate, have or
reasonably be expected to result in a Material Adverse Effect (“Material Permits”),
and neither the Company nor any Subsidiary has received any notice of
proceedings relating to the revocation or modification of any Material
Permit.

                 

                (n) Title to
Assets.  Except as disclosed on Section 4.1(n) to the
Disclosure Schedule, the Company and each
Subsidiary have good and marketable title in
fee simple to all real property owned by them that is material to the business
of the Company and each Subsidiary and good and marketable title in all
personal property owned by them that is material to the business of the Company
and each Subsidiary, in each case free and clear of all Liens, except for Liens
that do not materially affect the value of such property and do not materially
interfere with the use made and proposed to be made of such property by the
Company and each Subsidiary and Liens for the payment of federal, state or other
taxes, the payment of which is neither delinquent nor subject to
penalties.  Any real property and facilities held under lease by the
Company and each Subsidiary are held by them under valid, subsisting and
enforceable leases of which the Company and each Subsidiary are in
compliance.

                 

                (o) Patents and
Trademarks.  The Company
and each Subsidiary have, or have rights to use, all patents, patent
applications, trademarks, trademark applications, service marks, trade names,
copyrights, licenses and other similar rights that are necessary or material for
use in connection with their respective businesses as described in the SEC
Reports and which the failure to so have could have a Material Adverse Effect
(collectively, the “Intellectual Property Rights”).  Neither the
Company nor any Subsidiary has received a written notice that the Intellectual
Property Rights used by the Company or any Subsidiary violates or infringes upon the rights of any Person. To the
knowledge of the Company, all such Intellectual Property Rights are enforceable
and there is no existing infringement by another Person of any of the
Intellectual Property Rights of the Company or each Subsidiary.

                 

                (p) Insurance.  The
Company and each Subsidiary are insured by insurers of recognized financial
responsibility against such losses and risks and in such amounts as are prudent
and customary in the businesses in which the Company and each Subsidiary are
engaged, including but not limited to directors and officers insurance coverage
at least equal to the Maximum Placement.  To the best of Company’s
knowledge, such insurance contracts and policies are accurate and
complete.  Neither the Company nor any Subsidiary has any reason to
believe that it will not be able to renew its existing insurance coverage as and
when such coverage expires or to obtain similar coverage from similar insurers
as may be necessary to continue its business without a significant increase in
cost.

                 

                (q) Transactions With Affiliates
and Employees.  Except as set forth in the SEC Reports, none of
the officers or directors of the Company and, to the knowledge of the Company,
none of the employees of the Company is presently a party to any transaction
with the Company or any Subsidiary (other than for services as employees,
officers and 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
officer, director or such employee or, to the knowledge of the Company, any
entity in which any officer, director, or any such employee has a substantial
interest or is an officer, director, trustee or partner, in each case in excess
of $120,000 other than (i) for payment of salary or consulting fees for services
rendered, (ii) reimbursement for expenses incurred on behalf of the Company and
(iii) for other employee benefits, including stock option agreements under any
equity incentive plan of the Company.

                 

                
                  
                    
                    

                  

                  
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                (r) Sarbanes-Oxley; Internal
Accounting Controls.  The Company is in material compliance
with all provisions of the Sarbanes-Oxley Act of 2002, which are applicable to
it as of the date of the Commitment Closing.  The Company and each
Subsidiary maintain a system of internal accounting controls sufficient to
provide reasonable assurance that (i) transactions are executed in accordance
with management’s
general or specific authorizations, (ii) transactions are recorded as necessary
to permit preparation of financial statements in conformity with GAAP and to
maintain asset accountability, (iii) access to assets is permitted only in
accordance with management’s
general or specific authorization, and (iv) the recorded accountability for
assets is compared with the existing assets at reasonable intervals and
appropriate action is taken with respect to any differences.  The
Company has established disclosure controls and procedures (as defined in
Exchange Act Rules 13a-15(e) and 15d-15(e)) for the Company and designed such
disclosure controls and procedures to ensure that material information relating
to the Company, including its Subsidiaries, is made known to the certifying
officers by others within those entities, particularly during the period in
which the Company’s
most recently filed periodic report under the Exchange Act, as the case
may be, is being prepared.  The Company’s
certifying officers have evaluated the effectiveness of the Company’s
disclosure controls and procedures as of the date prior to the filing date of
the most recently filed periodic report under the Exchange Act (such date, the
“Evaluation
Date”).  The Company presented in its most recently filed
periodic report under the Exchange Act the conclusions of the certifying
officers about the effectiveness of the Company’s disclosure controls and
procedures based on their evaluations as of the Evaluation
Date.  Since the Evaluation Date, there have been no significant
changes in the Company’s internal accounting controls or its disclosure controls
and procedures or, to the Company’s knowledge, in other factors that could
materially affect the Company’s internal accounting controls or its disclosure
controls and procedures.

                 

                (s) Certain
Fees.  Except for the payment of the Commitment Fee, no
brokerage or finder’s fees or commissions are or will be payable by the Company
to any broker, financial advisor or consultant, finder, placement agent,
investment banker, bank or other Person with respect to the transactions
contemplated by this Agreement.  Investor shall have no obligation
with respect to any fees or with respect to any claims made by or on behalf of
other Persons for
fees of a type contemplated in this Section 4.1(s) that may be
due in connection with the transactions contemplated by this Agreement or the
other Transaction Documents.

                 

                (t) Private Placement.
Assuming the accuracy of Investor representations and warranties set forth in
Section 4.2, no
registration under the Act is required for the offer and sale of the Securities
by the Company to Investor as contemplated hereby. The issuance and sale of the
Securities hereunder does not contravene the rules and regulations of any
Trading Market.

                 

                (u) Investment Company.
The Company is not, and is not an Affiliate of, and immediately after receipt of
payment for the Securities, will not be or be an Affiliate of, an “investment
company” within the meaning of the Investment Company Act of 1940, as
amended.  The Company shall conduct its business in a manner so that
it will not become subject to the Investment Company Act.

                 

                
                  
                    
                    

                  

                  
                    17

                    
                      

                    

                  

                  
                    
                    

                  

                

                 

                (v) Registration
Rights.  Except as disclosed on Section 4.1(v) to the
Disclosure Schedule, no Person has any right to cause the Company to effect the
registration under the Act of any securities of the Company.

                 

                (w) Listing and Maintenance
Requirements.  The Common Stock is registered pursuant to
Section 12 of the Exchange Act, and the Company has taken no action designed to,
or which to its knowledge is likely to have the effect of, terminating the
registration of the Common Stock under the Exchange Act nor has the Company
received any notification that the SEC is contemplating terminating such
registration.  Except as disclosed on Section 4.1(w) to the Disclosure
Schedule, the Company has not, in the 12
months preceding the Effective Date, received notice from any Trading Market on
which the Common Stock is or has been listed or quoted to the effect that the
Company is not in compliance with the listing or maintenance requirements of
such Trading Market. The Company is, and has
no reason to believe that it will not in the foreseeable future continue to be,
in compliance with all such listing and maintenance
requirements.

                 

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

                 

                (y) Disclosure; Non-Public
Information.  Except with respect to the information that will
be, and to the extent that it actually is timely publicly disclosed by the
Company pursuant to Section 2.2(b)(i)E, and
notwithstanding any other provision in this Agreement or the other Transaction
Documents, neither the Company nor any other Person acting on its behalf has
provided Investor or its agents or counsel with any information that constitutes
or might constitute material, non-public information, including without
limitation this Agreement and the Exhibits, Appendices and Schedules hereto,
unless prior thereto Investor shall have executed a written agreement regarding
the confidentiality and use of such information.  The Company
understands and confirms that neither Investor nor any Affiliate of Investor
shall have any duty of trust or confidence that is owed directly, indirectly, or
derivatively to the Company or the shareholders of the Company or to any other
Person who is the source of material non-public information regarding the
Company.  No information contained in the Disclosure Schedules
constitutes material non-public information.  There is no adverse
material information regarding the Company that has not been publicly disclosed
prior to the Effective Date.  The Company understands and confirms
that Investor will rely on the foregoing representations and covenants in
effecting transactions in securities of the Company.  All disclosure
provided to Investor regarding the Company, its business and the transactions
contemplated hereby, including the Disclosure Schedules to this Agreement,
furnished by or on behalf of the Company with respect to the representations and
warranties made herein 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 light of the
circumstances under which they were made, not misleading.

                 

                
                  
                    
                    

                  

                  
                    18

                    
                      

                    

                  

                  
                    
                    

                  

                

                 

                (z) No Integrated
Offering. Neither the Company, nor any of its Affiliates, nor any Person
acting on its or their behalf has, directly or indirectly, made any offers or
sales of any security or solicited any offers to buy any security, under
circumstances that would cause this offering of the Securities to be integrated
with prior offerings by the Company for purposes of the Act or which could
violate any applicable stockholder approval provisions, including, without
limitation, under the rules and regulations of the Trading Market.

                 

                (aa) Financial
Condition.  Based on the financial condition of the Company as of
the date of the Commitment Closing: (i) the fair saleable market value of the
Company’s assets exceeds the amount that will be required to be paid on or in
respect of the Company’s existing debts and other liabilities (including known
contingent liabilities) as they mature; (ii) the Company’s assets do not
constitute unreasonably small capital to carry on its business for the current
fiscal year as now conducted and as proposed to be conducted including its
capital needs taking into account the particular capital requirements of the
business conducted by the Company, and projected capital requirements and
capital availability thereof; and (iii) the current cash flow of the Company,
together with the proceeds the Company would receive, were it to liquidate all
of its assets, after taking into account all anticipated uses of the cash, would
be sufficient to pay all amounts on or in respect of its debt when such amounts
are required to be paid.  The Company does not intend to incur debts
beyond its ability to pay such debts as they mature (taking into account the
timing and amounts of cash to be payable on or in respect of its debt). The
Company has no knowledge of any facts or circumstances, which lead it to believe
that it will file for reorganization or liquidation under the bankruptcy or
reorganization laws of any jurisdiction within one year from the date of the
Commitment Closing.  The SEC Reports set forth as of the dates thereof
all outstanding secured and unsecured Indebtedness of the Company or any
Subsidiary, or for which the Company or any Subsidiary has
commitments.  Neither the Company nor any Subsidiary is in default
with respect to any Indebtedness.

                 

                (bb) Tax
Status.  The Company and
each of its Subsidiaries has made or filed all federal, state and foreign income
and all other tax returns, reports and declarations required by any jurisdiction
to which it is subject (unless and only to the extent that the Company and each
of its Subsidiaries has set aside on its books provisions reasonably adequate
for the payment of all unpaid and unreported taxes) and 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 has set aside on its books provisions
reasonably adequate for the payment of all taxes for periods subsequent to the
periods to which such returns, reports or declarations apply.  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.  The Company has not executed a waiver with
respect to the statute of limitations relating to the assessment or collection
of any foreign, federal, statue or local tax.  None of the Company’s
tax returns is presently being audited by any taxing authority.

                 

                
                  
                    
                    

                  

                  
                    19

                    
                      

                    

                  

                  
                    
                    

                  

                

                 

                (cc) No General Solicitation or
Advertising.  Neither the Company nor, to the knowledge of the
Company, any of its directors or officers (i) has conducted or will conduct any
general solicitation (as that term is used in Rule 502(c) of Regulation D) or
general advertising with respect to the sale of the Securities, or (ii) made any
offers or sales of any security or solicited any offers to buy any security
under any circumstances that would require registration of the Securities under
the Act or made any “directed selling efforts” as defined in Rule 902 of
Regulation S.

                 

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

                 

                (ee) Acknowledgment Regarding
Investor’s Purchase of Securities.  The Company acknowledges
and agrees that Investor is acting solely in the capacity of arm’s length
purchaser with respect to this Agreement and the transactions contemplated
hereby.  The Company further acknowledges that Investor is not 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
statement made by Investor or any of its
representatives or agents in connection with this Agreement and the transactions
contemplated hereby is not advice or a recommendation and is merely incidental
to Investor’s purchase of the Securities.  The Company further
represents to Investor that the Company’s decision to enter into this Agreement
has been based solely on the independent evaluation of the Company and its
representatives.

                 

                (ff) Accountants.  The
Company’s accountants are set forth in the SEC
Reportsand such accountants are
an independent registered public accounting firm as required by the
Act.

                 

                (gg) No Disagreements with
Accountants and Lawyers.  There are no disagreements of any
kind presently existing, or reasonably anticipated by the Company to arise,
between the accountants and lawyers formerly or presently employed by the
Company, and the Company is current with
respect to any fees owed to its accountants and lawyers.

                 

                (hh) Registration Statements and
Prospectuses.

                 

                (i)  The
offer and sale of the Common Shares as contemplated hereby complies with the
requirements of Rule 415 under the Act.

                 

                (ii) The
Company has not, directly or indirectly, used or referred to any “free writing
prospectus” (as defined in Rule 405 under the Act) except in compliance with
Rules 164 and 433 under the Act.

                 

                
                  
                    
                    

                  

                  
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                (iii) The
Company is not an “ineligible issuer” (as defined in Rule 405 under the Act) as
of the eligibility determination date for purposes of Rules 164 and 433 under
the Act with respect to the offering of the Common Shares contemplated by any
Registration Statement filed or to be filed, without taking into account any
determination by the SEC pursuant to Rule 405 under the Act that it is not
necessary under the circumstances that the Company be considered an “ineligible
issuer.”

                 

                (ii) Section 5 Compliance.
No representation or warranty or other statement made by Company in the
Transaction Documents contains any untrue statement or omits to state a material
fact necessary to make any of them, in light of the circumstances in which it
was made, not misleading.  The Company is not aware of any facts or
circumstances that would cause the transactions contemplated by the Transaction
Documents, when consummated, to violate Section 5 of the Act or other federal or
state securities laws or regulations.

                 

                4.2 Representations and
Warranties of Investor. Investor hereby represents and warrants as of the
Effective Date as follows:

                 

                (a) Organization;
Authority.  Investor is an entity validly existing and in good
standing under the laws of the jurisdiction of its organization with full right,
company power and authority to enter into and to consummate the transactions
contemplated by the Transaction Documents and otherwise to carry out its
obligations thereunder.  The execution, delivery and performance by
Investor of the transactions contemplated by this Agreement have been duly
authorized by all necessary company or similar action on the part of
Investor.  Each Transaction Document to which it is a party has been
(or will be) duly executed by Investor, and when delivered by Investor in
accordance with the terms hereof, will constitute the valid and legally binding
obligation of Investor, enforceable against it in accordance with its terms,
except (i) as limited by general equitable principles and applicable bankruptcy,
insolvency, reorganization, moratorium and other laws of general application
affecting enforcement of creditors’ rights generally, (ii) as limited by laws
relating to the availability of specific performance, injunctive relief or other
equitable remedies and (iii) insofar as indemnification and contribution
provisions may be limited by applicable law.

                 

                (b) Investor
Status.  At the time Investor was offered the Securities, it
was, and at the Effective Date it is an “accredited investor” as defined in Rule
501(a) under the Act.

                 

                (c) Experience of
Investor.  Investor, 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.  Investor is able to bear the economic
risk of an investment in the Securities and, at the present time, is able to
afford a complete loss of such investment.

                 

                (d) General
Solicitation.  Investor is not purchasing the Securities as a
result of any advertisement, article, notice or other communication regarding
the Securities published in any newspaper, magazine or similar media or
broadcast over television or radio or presented at any seminar or any other
general solicitation or general advertisement.

                 

                
                  
                    
                    

                  

                  
                    21

                    
                      

                    

                  

                  
                    
                    

                  

                

                 

                The
Company acknowledges and agrees that Investor does not make or has not made any
representations or warranties with respect to the transactions contemplated
hereby other than those specifically set forth in this Section
4.2.

                 

                ARTICLE 5

                 

                OTHER AGREEMENTS OF THE
PARTIES

                 

                5.1 Transfer
Restrictions

                 

                (a) The
Securities may only be disposed of in compliance with state and federal
securities laws.  In connection with any transfer of Securities other
than (i) pursuant to an effective Registration Statement or Rule 144, (ii) to
the Company, (iii) to an Affiliate of Investor, or (iv) in connection with a
pledge as contemplated in Section 5.1(b), the Company
may require the transferor thereof to provide to the Company an opinion of Luce
Forward Hamilton & Scripps LLP (“Luce Forward”), or
other counsel selected by the transferor and reasonably acceptable to the
Company, to the effect that such transfer does not require registration of such
transferred Securities under the Act.

                 

                (b) Investor
agrees to the imprinting, so long as is required by this Section 5.1, of the following
legend, or substantially similar legend, on any certificate evidencing
Securities other than DWAC Shares:

                 

                NEITHER
THESE SECURITIES NOR THE SECURITIES INTO WHICH THESE SECURITIES ARE EXERCISABLE
HAVE BEEN REGISTERED WITH THE SECURITIES AND EXCHANGE COMMISSION OR THE
SECURITIES COMMISSION OF ANY STATE IN RELIANCE UPON AN EXEMPTION FROM
REGISTRATION UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE “SECURITIES ACT”),
AND, ACCORDINGLY, MAY NOT BE OFFERED OR SOLD EXCEPT PURSUANT TO AN EFFECTIVE
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OR PURSUANT TO AN AVAILABLE
EXEMPTION FROM, OR IN A TRANSACTION NOT SUBJECT TO, THE REGISTRATION
REQUIREMENTS OF THE SECURITIES ACT AND IN ACCORDANCE WITH APPLICABLE STATE
SECURITIES LAWS AS EVIDENCED BY A LEGAL OPINION OF COUNSEL TO THE TRANSFEROR TO
SUCH EFFECT, THE SUBSTANCE OF WHICH SHALL BE REASONABLY ACCEPTABLE TO THE
COMPANY. THESE SECURITIES AND THE SECURITIES ISSUABLE UPON EXERCISE OF THESE
SECURITIES MAY BE PLEDGED IN CONNECTION WITH A BONA FIDE MARGIN ACCOUNT OR OTHER
LOAN SECURED BY SUCH SECURITIES.

                 

                The
Company agrees to cause such legend to be removed immediately upon effectiveness
of a Registration Statement, or when any
Common Shares are eligible for sale
under Rule 144, in compliance with such Rule.  Company further
acknowledges and agrees that Investor may from time to time pledge pursuant to a
bona fide margin agreement with a registered broker-dealer or grant a security
interest in some or all of the Securities to a financial institution that is an
“accredited investor” as defined in Rule 501(a) under the Act and who agrees to
be bound by the provisions of this Agreement and, if required under the terms of
such arrangement, Investor may transfer pledged or secured Securities to the
pledgees or secured parties.  Such a pledge or transfer would not be
subject to approval of the Company and no legal opinion of legal counsel of the
pledgee, secured party or pledgor shall be required in connection
therewith.  Further, no notice shall be required of such
pledge.  At Investor’s reasonable expense, the Company will execute
and deliver such documentation as a pledgee or secured party of Securities may
reasonably request in connection with a pledge or transfer of the
Securities.

                 

                
                  
                    
                    

                  

                  
                    22

                    
                      

                    

                  

                  
                    
                    

                  

                

                 

                5.2 Furnishing of
Information

                 

                .  As
long as Investor owns Securities, the Company covenants to timely file (or
obtain extensions in respect thereof and file within the applicable grace
period) all reports required to be filed by the Company after the Effective Date
pursuant to the Exchange Act.  Upon the request of Investor, the
Company shall deliver to Investor a written certification of a duly authorized
officer as to whether it has complied with the preceding sentence. As long as
Investor owns Securities, if the Company is not required to file reports
pursuant to such laws, it will prepare and furnish to Investor and make publicly
available in accordance with Rule 144(c) such information as is required for
Investor to sell the Securities under Rule 144.  The Company further
covenants that it will take such further action as any holder of Securities may
reasonably request, all to the extent required from time to time to enable such
Person to sell such Securities without registration under the Act within the
limitation of the exemptions provided by Rule 144.

                 

                5.3 Integration

                 

                .  The
Company shall not sell, offer for sale or solicit offers to buy or otherwise
negotiate in respect of any security (as defined in Section 2 of the Act) that
would be integrated with the offer or sale of the Securities in a manner that
would require the registration under the Act of the sale of the Securities to
Investor or that would be integrated with the offer or sale of the Securities
for purposes of the rules and regulations of any Trading Market such that it
would require stockholder approval prior to the closing of such other
transaction unless stockholder approval is obtained before the closing of such
subsequent transaction.

                 

                5.4 Securities Laws Disclosure;
Publicity

                 

                .  The
Company shall timely (and in any event, prior to giving any Tranche Notice to
Investor) file a Current Report on Form 8-K, and in the Company’s discretion
file a press release, in each case reasonably acceptable to Investor, disclosing
the material terms of the transactions contemplated hereby.  The
Company and Investor shall consult with each other in issuing any press releases
with respect to the transactions contemplated hereby, and neither the Company
nor Investor shall issue any such press release or otherwise make any such
public statement without the prior consent of the Company, with respect to any
such press release of Investor, or
without the prior consent of Investor, with respect to any such press release of the Company, which
consent shall not unreasonably be withheld or delayed, except if such
disclosure is required by law or Trading Market regulations, in which case the
disclosing party shall promptly provide the other party with prior notice of
such public statement or communication.  Notwithstanding the
foregoing, the Company shall not publicly disclose the name of Investor, or
include the name of Investor in any filing with the SEC or any regulatory agency
or Trading Market, without the prior written consent of Investor, except (i) as
contained in the Current Report on Form 8-K and press release described above,
(ii) as required by federal securities law in connection with any registration
statement under which the Common Shares are registered, or (iii) to the extent
such disclosure is required by law or Trading Market regulations, in which case
the Company shall provide Investor with prior notice of such
disclosure.

                 

                
                  
                    
                    

                  

                  
                    23

                    
                      

                    

                  

                  
                    
                    

                  

                

                 

                5.5 Shareholders Rights
Plan

                 

                .  No
claim will be made or enforced by the Company or, to the knowledge of the
Company, any other Person that Investor is an “Acquiring Person” under any
shareholders rights plan or similar plan or arrangement in effect or hereafter
adopted by the Company, or that Investor could be deemed to trigger the
provisions of any such plan or arrangement, by virtue of receiving Securities
under the Transaction Documents or under any other agreement between the Company
and Investor. The Company shall conduct its business in a manner so that it will
not become subject to the Investment Company Act of 1940, as
amended.

                 

                5.6 Non-Public
Information

                 

                .  The
Company covenants and agrees that neither it nor any other Person acting on its
behalf will, provide Investor or its agents or counsel with any information that
the Company believes or reasonably should believe constitutes material
non-public information, unless prior thereto Investor shall have executed a
written agreement regarding the confidentiality and use of such
information.  On and after the Effective Date, neither Investor nor
any Affiliate Investor shall have any duty of trust or confidence that is owed
directly, indirectly, or derivatively, to the Company or the shareholders of the
Company, or to any other Person who is the source of material non-public
information regarding the Company.  The Company understands and
confirms that Investor shall be relying on the foregoing in effecting
transactions in securities of the Company.

                 

                5.7 Reimbursement

                 

                .  If Investor becomes involved in any
capacity in any proceeding by or against any Person who is a stockholder of the
Company (except as a result of sales, pledges, margin sales and similar
transactions by Investor to or with any current stockholder), solely as a result
of Investor’s acquisition of the Securities under this Agreement, the Company
will reimburse Investor for its reasonable legal and other expenses (including
the cost of any investigation preparation and travel in connection therewith)
incurred in connection therewith, as such expenses are incurred, or will assume
the defense of Investor in such matter.  The reimbursement obligations
of the Company under this Section 5.7 shall be in addition to any liability which the
Company may otherwise have, shall extend upon the same terms and conditions to
any Affiliates of Investor who are actually named in such action, proceeding or
investigation, and partners, directors, agents, employees and controlling
persons (if any), as the case may be, of Investor and any such Affiliate,
and shall be binding upon and inure to
the benefit of any successors, assigns,
heirs and personal representatives of the Company, Investor and any such
Affiliate and any such Person.  The Company also agrees that neither
Investor nor any such Affiliates, partners, directors, agents, employees or
controlling persons shall have any liability to the Company or any Person
asserting claims on behalf of or in right of the Company solely as a result of
acquiring the Securities under this Agreement.

                 

                5.8 Indemnification of
Investor

                 

                (a) Obligation to
Indemnify.  Subject to the provisions of this Section 5.8, the
Company will indemnify and hold Investor and any Warrant holder, their
Affiliates and attorneys, and each of their directors, officers, shareholders,
partners, employees, agents, and any person who controls Investor within the
meaning of Section 15 of the Act or Section 20 of the Exchange Act
(collectively, the “Investor Parties” and
each an “Investor
Party”), harmless from any and all losses, liabilities, obligations,
claims, contingencies, damages, costs and expenses, including all judgments,
amounts paid in settlements, court costs and reasonable attorneys’ fees and
costs of investigation (collectively, “Losses”) that any
Investor Party may suffer or incur as a result of or relating to (i) any breach
of any of the representations, warranties, covenants or agreements made by the
Company in this Agreement or in the other Transaction Documents,

                 

                
                  
                    
                    

                  

                  
                    24

                    
                      

                    

                  

                  
                    
                    

                  

                

                 

                (ii) any
action instituted against any Investor Party, or any of them or their respective
Affiliates, by any stockholder of the Company who is not an Affiliate of an
Investor Party, with respect to any of the transactions contemplated by the
Transaction Documents (unless such action is based upon a breach of Investor’s
representations, warranties or covenants under the Transaction Documents or any
agreements or understandings Investor may have with any such stockholder or any
violations by Investor of state or federal securities laws or any conduct by
Investor which constitutes fraud, gross negligence, willful misconduct or
malfeasance), (iii)  any untrue statement or alleged untrue statement of a material fact
contained in a Registration Statement (or in a Registration Statement as amended
by any post-effective amendment thereof by the Company) or arising out of or
based upon any omission or alleged omission
to state a material fact required to be stated therein or necessary to
make the statements therein not misleading, and/or (iv) any untrue statement
or alleged untrue statement of a material
fact included in any Prospectus ( or any amendments or supplements to any
Prospectus ), in any free writing
prospectus, in any “issuer information” (as defined in Rule 433 under the
Act) of the Company, or in any Prospectus together
with any combination of one or more of the  free writing prospectuses,
if any, or arising out of or based upon any omission or alleged omission
to state a material fact necessary in order to make the statements therein, in
the light of the circumstances under which they were made, not
misleading.

                 

                (b) Procedure for
Indemnification.  If any action shall be brought against an
Investor Party in respect of which indemnity may be sought pursuant to this
Agreement, such Investor Party shall promptly notify the Company in writing, and
the Company shall have the right to assume the defense thereof with counsel of
its own choosing.  The Investor Parties shall have the right to employ
separate counsel in any such action and participate in the defense thereof, but
the fees and expenses of such counsel shall be at the expense of the Investor
Parties except to the extent that (i) the employment thereof has been
specifically authorized by the Company in writing, (ii) the Company has failed
after a reasonable period of time to assume such defense and to employ counsel
or (iii) in such action there is, in the reasonable opinion of such separate
counsel, a material conflict with respect to the
dispute in question on any material issue between the position of the
Company and the position of the Investor Parties
such that it would be inappropriate for one counsel to represent the Company
and the Investor Parties.  The Company will not be liable to
the Investor Parties under this Agreement (i) for any settlement by an Investor
Party effected without the Company’s prior written consent, which shall not be
unreasonably withheld or delayed; or (ii) to the extent, but only to the extent
that a loss, claim, damage or liability is either
attributable to Investor’s breach of any of the representations,
warranties, covenants or agreements made by Investor in this Agreement or in the
other Transaction Documents.

                 

                5.9 Reservation of
Securities

                 

                .  The
Company shall maintain a reserve from its duly authorized shares of Common Stock
for issuance pursuant to the Transaction Documents in such amount as may be
required to fulfill its obligations in full under the Transaction
Documents.

                 

                5.10 Limited
Standstill

                 

                .  The
Company will deliver to Investor on or before each Tranche Closing Date, and
will honor and enforce, and will take reasonable actions to assist Investor in
enforcing, the provisions of, the Lock-Up Agreements with the Company’s officers, directors and
beneficial owners of 10% or more of the Common Stock.

                 

                
                  
                    
                    

                  

                  
                    25

                    
                      

                    

                  

                  
                    
                    

                  

                

                 

                5.11 Prospectus Availability and
Changes

                 

                .  The
Company will make available to Investor upon request, and thereafter from time
to time will furnish Investor, as many copies of any Prospectus (or of the
Prospectus as amended or supplemented if the Company shall have made any
amendments or supplements thereto after the effective date of the applicable
Registration Statement) as Investor may request for the purposes contemplated by
the Act; and in case Investor is required to deliver  a prospectus
after the nine-month period referred to in Section 10(a)(3) of the Act in
connection with the sale of the Common
Shares, or after the time a post-effective amendment to the applicable
Registration Statement is required pursuant to Item 512(a) of Regulation S-K
under the Act, the Company will prepare, at its expense, promptly upon request
such amendment or amendments to the Registration Statement and the Prospectus as
may be necessary to permit compliance with the requirements of Section 10(a)(3)
of the Act or Item 512(a) of Regulation S-K under the Act, as the case may
be.

                 

                The
Company will advise Investor promptly of the happening of any event within the
time during which a Prospectus is required to be delivered under the Act which
could require the making of any change in the Prospectus then being used so that
the Prospectus would not include an untrue statement of material fact or omit to
state a material fact necessary in order to make the statements therein, in the
light of the circumstances under which they are made, not misleading, and to
advise Investor promptly if, during such period, it shall become necessary to
amend or supplement any Prospectus to cause such Prospectus to comply with the
requirements of the Act, and in each case, during such time, to prepare and
furnish, at the Company’s expense, to Investor promptly such amendments or
supplements to such Prospectus as may be necessary to reflect any such change or
to effect such compliance.

                 

                5.12 Required
Approval

                 

                .  No
transactions contemplated under this Agreement or the Transaction Documents
shall be consummated for an amount that would require approval by any Trading
Market or Company stockholders under any approval provisions, rules or
regulations of any Trading Market applicable to the Company, unless and until
such approval is obtained.  Company shall use best efforts to obtain
any required approval as soon as possible.

                 

                5.13 Activity
Restrictions

                 

                . For so long as Investor or
any of its Affiliates holds any Preferred Shares, Warrants or Warrant Shares,
neither Investor nor any Affiliate will:  (i) vote any shares of
Common Stock owned or controlled by it, solicit any proxies, or seek to advise
or influence any Person with respect to any voting securities of the Company;
(ii) engage or participate in any actions, plans or proposals which relate to or
would result in (a) acquiring additional securities of the Company, alone or
together with any other Person, which would result in beneficially owning or
controlling more than 9.99% of the total outstanding Common Stock or other
voting securities of the Company, (b) an extraordinary corporate transaction,
such as a merger, reorganization or liquidation, involving Company or any of its
subsidiaries, (c) a sale or transfer of a material amount of assets of the
Company or any of its subsidiaries, (d) any change in the present board of
directors or management of the Company, including any plans or proposals to
change the number or term of directors or to fill any existing vacancies on the
board, (e) any material change in the present capitalization or dividend policy
of the Company, (f) any other material change in the Company’s business or
corporate structure, including but not limited to, if the Company is a
registered closed-end investment company, any plans or proposals to make any
changes in its investment policy for which a vote is required by Section 13 of
the Investment Company Act of 1940, (g) changes in the Company’s charter, bylaws
or instruments corresponding thereto or other actions which may impede the
acquisition of control of the Company by any Person, (h) causing a class of
securities of the Company to be delisted from a national securities exchange or
to cease to be authorized to be quoted in an inter-dealer quotation system of a
registered national securities association, (i) a class of equity securities of
the Company becoming eligible for termination of registration
pursuant  to Section 12(g)(4) of the Act, or (j) any action,
intention, plan or arrangement similar to any of those enumerated above; or
(iii) request the Company or its directors, officers, employees, agents or
representatives to amend or waive any provision of this Section
5.13.

                 

                
                  
                    
                    

                  

                  
                    26

                    
                      

                    

                  

                  
                    
                    

                  

                

                 

                5.14 Registration Statements and
Prospectuses.

                 

                (a) Company
will use its best efforts to file within 60 calendar days after the Effective
Date (or as soon as possible thereafter), cause to become effective as soon as
possible thereafter, and remain effective until all Common Shares have been sold
or are Rule 144 Eligible, a Registration Statement for the resale of all Common
Shares issued hereunder (including without limitation all Warrant Shares
underlying the Warrant and any Common Shares that may be issued to the Investor
in payment of the Commitment Fee).  Each Registration Statement shall
comply when it becomes effective, and, as amended or supplemented, at the time
of any Tranche Notice Date, Tranche Closing Date, or issuance of any Common
Shares, and at all times during which a prospectus is required by the Act to be
delivered in connection with any sale of Common Shares, will comply, in all
material respects, with the requirements of the Act.

                 

                (b)   Each
Registration Statement, as of its respective effective time, will not, as
applicable, contain any untrue statement of a material fact or omit to state a
material fact required to be stated therein or necessary to make the statements
therein not misleading.

                 

                (c)   Each
Prospectus will comply, as of its date and the date it  will be filed
with the SEC,  and, at the time of any Tranche Notice Date, Tranche
Closing Date, or issuance of any Common Shares, and at all times during which a
prospectus is required by the Act to be delivered in connection with any sale of
Common Shares, will comply, in all material respects, with the requirements of
the Act.

                 

                (d)  At
no time during the period that begins on the date a Prospectus is filed with the
SEC and ends at the time a Prospectus is no longer required by the Act to be
delivered in connection with any sale of Common Shares will any such Prospectus,
as then amended or supplemented, include an untrue statement of a material fact
or omit to state a material fact necessary in order to make the statements
therein, in the light of the circumstances under which they were made, not
misleading, and at no time during such period will such Prospectus, as then
amended or supplemented, include an untrue statement of a material fact or omit
to state a material fact necessary in order to make the statements therein, in
the light of the circumstances under which they were made, not
misleading.

                 

                
                  
                    
                    

                  

                  
                    27

                    
                      

                    

                  

                  
                    
                    

                  

                

                 

                (e)  Each
Registration Statement will meet, and the offering and sale of the Common Shares
as contemplated hereby will comply with, the requirements of Rule 415 under the
Act.

                 

                (f) The
Company will not, directly or indirectly, use or refer to any “free writing
prospectus” (as defined in Rule 405 under the Act) except in compliance with
Rules 164 and 433 under the Act.

                 

                (g) The
Company will not be an “ineligible issuer” (as defined in Rule 405 under the
Act) as of the eligibility determination date for purposes of Rules 164 and 433
under the Act with respect to the offering of the Common Shares contemplated by
any Registration Statement that is filed, without taking into account any
determination by the SEC pursuant to Rule 405 under the Act that it is not
necessary under the circumstances that the Company be considered an “ineligible
issuer.”

                 

                5.15 Investor Due
Diligence

                 

                Investor
shall have the right and opportunity to conduct due diligence  with
respect to any Registration Statement or Prospectus in which the name of
Investor or any Affiliate of Investor appears.

                 

                5.16 Registration

                 

                In the
event that all Warrant Shares that Company is required to make available to
Investor upon the exercise of Warrants, are not, by the one year anniversary of
the Effective Date, made available to Investor as DTC Shares without restriction
on resale pursuant to (i) an effective Registration Statement, or (ii) Rule 144,
without requiring discharge by payment in full of any notes given in exchange
for any Warrant Shares prior to the sale thereof or limiting the amount of
securities that may be sold, Company shall, at Investor’s election in Investor’s
sole discretion, exercise the Company’s Redemption Option provided for in
Section 6 of the Certificate of Designations to effectuate the repurchase of any
outstanding Preferred Shares.

                 

                ARTICLE 6

                 

                MISCELLANEOUS

                 

                6.1 Fees and
Expenses

                 

                Except
for the $20,000.00 non-refundable document preparation fee previously paid by
the Company to counsel for Investor (which shall cover only the initial drafts
of the Transaction Documents and one week of legal fees), the receipt of which
is hereby acknowledged, and the $5,000.00 non-refundable administrative fee
payable to counsel for Investor at each Tranche Closing, or as may be otherwise
provided in this Agreement, each party shall pay the fees and expenses of its
own 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 the Transaction Documents.  The
Company acknowledges and agrees that Luce Forward solely represents Investor,
and does not represent the Company or its interests in connection with the
Transaction Documents or the transactions contemplated thereby.  The
Company shall pay all stamp and other taxes and duties levied in connection with
the sale of the Securities, if any.

                 

                6.2 Notices

                 

                Unless a
different time of day or method of delivery is set forth in the Transaction
Documents, 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 electronic mail prior
to 5:30 p.m. Eastern time on a Trading Day and an electronic confirmation of
delivery is received by the sender, (b) the next Trading Day after the date of
transmission, if such notice or communication is delivered later than 5:30 p.m.
Eastern time or on a day that is not a Trading Day, (c) three Trading Days
following the date of mailing, if sent by U.S. nationally recognized overnight
courier service, or (d) upon actual receipt by the party to whom such notice is
required to be given.  The addresses for such notices and
communications are those set forth following the signature page hereof, or such
other address as may be designated in writing hereafter, in the same manner, by
such Person.

                 

                
                  
                    
                    

                  

                  
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                6.3 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 Investor 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 either party to exercise any right hereunder in
any manner impair the exercise of any such right.

                 

                6.4 Headings

                 

                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

                 

                6.5 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 Investor.  Investor may assign any or all of its
rights under this Agreement (a) to any Affiliate, or (b) to any Person to whom
Investor assigns or transfers any Securities.

                 

                6.6 No Third-Party
Beneficiaries

                 

                This
Agreement is intended for the benefit of the parties hereto 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 as otherwise set forth
in Section 5.8.

                 

                6.7 Governing
Law

                 

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

                 

                
                  
                    
                    

                  

                  
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                6.8 Survival

                 

                The
representations and warranties contained herein shall survive the Closing and
the delivery and exercise of the Securities.

                 

                6.9 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, 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 signature page
were an original thereof.

                 

                6.10 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.

                 

                6.11 Replacement  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
customary and reasonable indemnity, if requested.  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.

                 

                6.12 Remedies

                 

                In
addition to being entitled to exercise all rights provided herein or granted by
law, including recovery of damages, each of Investor and the Company will be
entitled to specific performance under the Transaction Documents.  The
parties agree that monetary damages may not be adequate compensation for any
loss incurred by reason of any breach of obligations described in the foregoing
sentence and hereby agrees to waive in any action for specific performance of
any such obligation the defense that a remedy at law would be
adequate.

                 

                
                  
                    
                    

                  

                  
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                6.13 Payment Set
Aside

                 

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

                 

                6.14 Liquidated
Damages

                 

                The
Company’s obligations to pay any partial liquidated damages or other amounts
owing under the Transaction Documents is a continuing obligation of the Company
and shall not terminate until all unpaid partial liquidated damages and other
amounts have been paid notwithstanding the fact that the instrument or security
pursuant to which such partial liquidated damages or other amounts are due and
payable shall have been canceled.

                 

                6.15 Time of the
Essence

                 

                Time is
of the essence with respect to all provisions of this Agreement that specify a
time for performance.

                 

                6.16 Construction

                 

                The parties agree that each of them and/or their
respective counsel has reviewed and had an opportunity to revise the Transaction
Documents and, therefore, the normal rule of construction to the effect that any
ambiguities are to be resolved against the drafting party shall not be employed
in the interpretation of the Transaction Documents or any amendments
hereto. 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.

                 

                6.17 Entire
Agreement

                 

                .  This
Agreement, together with the Exhibits, Appendices and Schedules hereto, contains the entire agreement and understanding of the
parties, and supersedes all prior and contemporaneous agreements, term sheets, letters, discussions, communications
and understandings, both oral and written,
which the parties acknowledge have been merged into this
Agreement.  No party, representative, attorney or agent has
relied upon any collateral contract, agreement, assurance, promise,
understanding or representation not expressly set forth
hereinabove.  The parties hereby expressly waive all rights and
remedies, at law and in equity, directly or indirectly arising out of or
relating to, or which may arise as a result of, any Person’s reliance on any
such assurance.

                 

                 

                
                  
                    
                    

                  

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

                 

                


                ADVANCED CELL TECHNOLOGY, INC.

                


                


                By:________________________________________                                                      

                Name:______________________________________

                Title:_______________________________________

                


                


                By:________________________________________        

                Name:______________________________________

                Title:_______________________________________

                


                


                OPTIMUS LIFE SCIENCES CAPITAL PARTNERS,
LLC

                


                


                By:________________________________________

                Name:_____________________________________

                Title:_______________________________________

                


                


                
                   

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