SECURITIES
      PURCHASE AGREEMENT

     

        This
      Securities Purchase Agreement (this “Agreement”)
      is
      dated as of March ____, 2007, between Neuralstem, Inc., a Delaware corporation
      (the “Company”),
      and
      each purchaser identified on the signature pages hereto (each, including its
      successors and assigns, a “Purchaser”
and
      collectively the “Purchasers”).

     

        WHEREAS,
      subject to the terms and conditions set forth in this Agreement and pursuant
      to
      Section 4(2) of the Securities Act of 1933, as amended (the “Securities Act”),
      and Rule 506 promulgated thereunder, the Company desires to issue and sell
      to
      each Purchaser, and each Purchaser, severally and not jointly, desires to
      purchase from the Company, securities of the Company as more fully described
      in
      this Agreement.

     

        NOW,
      THEREFORE, IN CONSIDERATION of the mutual covenants contained in this Agreement,
      and for other good and valuable consideration the receipt and adequacy of which
      are hereby acknowledged, the Company and each Purchaser agree as
      follows:

     

    ARTICLE
      I.

    DEFINITIONS

     

    1.1     Definitions.
       In addition to the terms defined elsewhere in this Agreement, for all
      purposes of this Agreement, the following terms have the meanings set forth
      in
      this Section 1.1:

     

    “Action”
shall
      have the meaning ascribed to such term in Section 3.1(j).

     

    “Affiliate”
means
      any Person that, directly or indirectly through one or more intermediaries,
      controls or is controlled by or is under common control with a Person as such
      terms are used in and construed under Rule 405 under the Securities Act. With
      respect to a Purchaser, any investment fund or managed account that is managed
      on a discretionary basis by the same investment manager as such Purchaser will
      be deemed to be an Affiliate of such Purchaser.

     

    “Business
      Day”
means
      any day except Saturday, Sunday, any day which is a federal legal holiday in
      the
      United States or any day on which banking institutions in the State of New
      York
      are authorized or required by law or other governmental action to
      close.

     

    “Closing”
means
      the closing of the purchase and sale of the Securities pursuant to Section
      2.1.

     

    “Closing
      Date”
means
      the Trading Day when all of the Transaction Documents have been executed and
      delivered by the applicable parties thereto, and all conditions precedent to
      (i)
      the Purchasers’ obligations to pay the Subscription Amount and (ii) the
      Company’s obligations to deliver the Securities have been satisfied or
      waived.

     

    “Commission”
means
      the Securities and Exchange Commission.

     

    
      
        
        

      

      
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    “Common
      Stock”
means
      the common stock of the Company, par value $.001 per share, and any other class
      of securities into which such securities may hereafter be reclassified or
      changed into. 

     

    “Common
      Stock Equivalents”
means
      any securities of the Company or the Subsidiaries which would entitle the holder
      thereof to acquire at any time Common Stock, including, without limitation,
      any
      debt, preferred stock, rights, options, warrants or other instrument that is
      at
      any time convertible into or exercisable or exchangeable for, or otherwise
      entitles the holder thereof to receive, Common Stock.

     

    “Company
      Counsel”
means
      the Law Offices of Raul Silvestre & Associates, APLC, with offices located
      at 31200Via Colinas, Suite 200, Westlake Village, CA 91362. 

     

    “Disclosure
      Schedules”
means
      the Disclosure Schedules of the Company delivered concurrently herewith.


     

    “Effective
      Date”
means
      the date that the initial Registration Statement filed by the Company pursuant
      to the Registration Rights Agreement is first declared effective by the
      Commission.

     

    “Evaluation
      Date”
shall
      have the meaning ascribed to such term in Section 3.1(r). 

     

    “Exchange
      Act”
means
      the Securities Exchange Act of 1934, as amended, and the rules and regulations
      promulgated thereunder.

    


    “Exempt
      Issuance”
means
      the issuance of (a) shares of Common Stock or options to employees, officers
      or
      directors of the Company pursuant to any stock or option plan duly adopted
      for
      such purpose, by a majority of the non-employee members of the Board of
      Directors of the Company or a majority of the members of a committee of
      non-employee directors established, (b) securities upon the exercise or exchange
      of or conversion of any Securities issued hereunder and/or other securities
      exercisable or exchangeable for or convertible into shares of Common Stock
      issued and outstanding on the date of this Agreement, provided that such
      securities have not been amended since the date of this Agreement to increase
      the number of such securities or to decrease the exercise, exchange or
      conversion price of such securities and (c) securities issued pursuant to
      acquisitions or strategic transactions approved by a majority of the directors
      of the Company, provided that any such issuance shall only be to a Person which
      is, itself or through its subsidiaries, an operating company in a business
      synergistic with the business of the Company and in which the Company receives
      benefits in addition to the investment of funds, but shall not include a
      transaction in which the Company is issuing securities primarily for the purpose
      of raising capital or to an entity whose primary business is investing in
      securities, and (d) up to $1,000,000 of Securities on the same terms as the
      transactions contemplated hereby, provided that such additional Securities
      are
      placed through TR Winston & Company within 15 calendar days from the Closing
      Date. 

     

    
      
        
        

      

      
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    “FWS”
means
      Feldman Weinstein & Smith LLP with offices located at 420 Lexington Avenue,
      Suite 2620, New York, New York 10170-0002.

     

    “GAAP”
shall
      have the meaning ascribed to such term in Section 3.1(h).

     

    “Indebtedness”
shall
      have the meaning ascribed to such term in Section 3.1(aa).

     

    “Intellectual
      Property Rights”
shall
      have the meaning ascribed to such term in Section 3.1(o).

     

    “Legend
      Removal Date”
shall
      have the meaning ascribed to such term in Section 4.1(c). 

     

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

     

    “Material
      Adverse Effect”
shall
      have the meaning assigned to such term in Section 3.1(b).

     

    “Material
      Permits”
shall
      have the meaning ascribed to such term in Section 3.1(m).

     

    “Participation
      Maximum”
shall
      have the meaning ascribed to such term in Section 4.12. 

     

    “Per
      Share Purchase Price”
equals
      $2.50, subject to adjustment for reverse and forward stock splits, stock
      dividends, stock combinations and other similar transactions of the Common
      Stock
      that occur after the date of this Agreement.

     

    “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.

     

    “Pre-Notice”
shall
      have the meaning ascribed to such term in Section 4.12. 

     

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

     

    “Purchaser
      Party”
shall
      have the meaning ascribed to such term in Section 4.8.

     

    “Registration
      Rights Agreement”
means
      the Registration Rights Agreement, dated the date hereof, among the Company
      and
      the Purchasers, in the form of Exhibit
      A
      attached
      hereto.

     

    “Registration
      Statement”
means
      a
      registration statement meeting the requirements set forth in the Registration
      Rights Agreement and covering the resale by the Purchasers of the Shares and
      the
      Warrant Shares. 

     

    
      
        
        

      

      
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    “Required
      Approvals”
shall
      have the meaning ascribed to such term in Section 3.1(e).

     

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

     

    “SEC
      Reports”
shall
      have the meaning ascribed to such term in Section 3.1(h).

     

    “Securities”
means
      the Shares, the Warrants and the Warrant Shares.

     

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

     

    “Shares”
means
      the shares of Common Stock issued or issuable to each Purchaser pursuant to
      this
      Agreement.

     

    “Short
      Sales”
means
      all “short sales” as defined in Rule 200 of Regulation SHO under the Exchange
      Act (but
      shall not be deemed to include the location and/or reservation of borrowable
      shares of Common Stock). 

     

    “Subscription
      Amount”
means,
      as to each Purchaser, the aggregate amount to be paid for Shares and Warrants
      purchased hereunder as specified below such Purchaser’s name on the signature
      page of this Agreement and next to the heading “Subscription Amount,” in United
      States dollars and in immediately available funds.

     

    “Subsequent
      Financing”
shall
      have the meaning ascribed to such term in Section 4.12.

     

    “Subsequent
      Financing Notice”
shall
      have the meaning ascribed to such term in Section 4.12. 

     

    “Subsidiary”
means
      any subsidiary of the Company as set forth on Schedule
      3.1(a),
      and
      shall, where applicable, include any subsidiary of the Company formed or
      acquired after the date hereof.

     

    “Trading
      Day”
means
      a
      day on which the New York Stock Exchange is open for trading.

     

    “Trading
      Market”
means
      the following markets or exchanges on which the Common Stock is listed or quoted
      for trading on the date in question: the American Stock Exchange, the Nasdaq
      Capital Market, the Nasdaq Global Market, the Nasdaq Global Select Market,
      the
      New York Stock Exchange or the OTC Bulletin Board.

     

    “Transaction
      Documents”
means
      this Agreement, the Warrants, the Registration Rights Agreement and any other
      documents or agreements executed in connection with the transactions
      contemplated hereunder.

     

    
      
        
        

      

      
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    “Transfer
      Agent”
means
      _____________________, with a mailing address of ___________________ and a
      facsimile number of _______________, and any successor transfer agent of the
      Company.

     

    “TR
      Winston”
shall
      have the meaning ascribed to such term in Section 5.2. 

     

    “VWAP”
means,
      for any date, the price determined by the first of the following clauses that
      applies: (a) if the Common Stock is then listed or quoted on a Trading Market,
      the daily volume weighted average price of the Common Stock for such date (or
      the nearest preceding date) on the Trading Market on which the Common Stock
      is
      then listed or quoted for trading as reported by Bloomberg L.P. (based on a
      Trading Day from 9:30 a.m. (New York City time) to 4:02 p.m. (New York City
      time); (b)  if the OTC Bulletin Board is not a Trading Market, the volume
      weighted average price of the Common Stock for such date (or the nearest
      preceding date) on the OTC Bulletin Board; (c) if the Common Stock is not then
      quoted for trading on the OTC Bulletin Board and if prices for the Common Stock
      are then reported in the “Pink Sheets” published by Pink Sheets, LLC (or a
      similar organization or agency succeeding to its functions of reporting prices),
      the most recent bid price per share of the Common Stock so reported; or
      (d) in all other cases, the fair market value of a share of Common Stock as
      determined by an independent appraiser selected in good faith by the Purchasers
      of a majority in interest of the Shares then outstanding and reasonably
      acceptable to the Company, the fees and expenses of which shall be paid by
      the
      Company. 

     

    “Warrants”
means
      collectively the Common Stock purchase warrants delivered to the Purchasers
      at
      the Closing in accordance with Section 2.2(a) hereof, which Warrants shall
      be
      exercisable immediately and have a term of exercise equal to 5 years, in the
      form of Exhibit
      C
      attached
      hereto.

     

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

     

    ARTICLE
      II.

    PURCHASE
      AND SALE

     

    2.1   
Closing.
      On the Closing Date, upon the terms and subject to the conditions set forth
      herein, substantially concurrent with the execution and delivery of this
      Agreement by the parties hereto, the Company agrees to  sell, and the Purchasers,
      severally and
      not jointly, agree to purchase, in the aggregate, up to $5,000,000 of Shares
      and
      Warrants. Each Purchaser shall deliver to the Company, via wire transfer or
      a
      certified check, immediately available funds equal to its Subscription Amount
      and the Company shall deliver to each Purchaser its respective Shares and a
      Warrant as determined pursuant to Section 2.2(a), and the Company and each
      Purchaser shall deliver the other items set forth in Section 2.2 deliverable
      at
      the Closing. Upon satisfaction of the covenants and conditions set forth in
      Sections 2.2 and 2.3, the Closing shall occur at the offices of FWS, or such
      other location as the parties shall mutually agree.

     

    2.2     Deliveries.

     

    (a) On
      or
      prior to the Closing Date, the Company shall deliver or cause to be delivered
      to
      each Purchaser the following:

     

    (i) this
      Agreement duly executed by the Company;

     

    (ii) a
      legal
      opinion of Company Counsel, substantially in the form of Exhibit
      B
      attached
      hereto; 

     

    (iii) a
      certificate evidencing a number of Shares equal to such Purchaser’s Subscription
      Amount divided by the Per Share Purchase Price, registered in the name of such
      Purchaser;

     

    (iv) a
      Warrant
      registered in the name of such Purchaser to purchase up to a number of shares
      of
      Common Stock equal to 50% of the Shares issuable to such Purchaser hereunder,
      with an exercise price equal to $3.00, subject to adjustment therein;
      and

     

    (v) the
      Registration Rights Agreement duly executed by the Company.

     

    (b) On
      or
      prior to the Closing Date, each Purchaser shall deliver or cause to be delivered
      to the Company (except as noted) the following:

     

    (i) this
      Agreement duly executed by such Purchaser; and

     

    (ii) the
      Registration Rights Agreement duly executed by such Purchaser.

     

    2.3     Closing
      Conditions. 

     

    (a) The
      obligations of the Company hereunder in connection with the Closing are subject
      to the following conditions being met:

     

    (i) the
      accuracy in all material respects on the Closing Date of the representations
      and
      warranties of the Purchasers contained herein; 

     

    (ii) all
      obligations, covenants and agreements of each Purchaser required to be performed
      at or prior to the Closing Date shall have been performed;
      and

     

    (iii) the
      delivery by each Purchaser of the items set forth in Section 2.2(b) of this
      Agreement.

     

    (b) The
      respective obligations of the Purchasers hereunder in connection with the
      Closing are subject to the following conditions being met:

     

    (i) the
      accuracy in all material respects on the Closing Date of the representations
      and
      warranties of the Company contained herein;

     

    (ii) all
      obligations, covenants and agreements of the Company required to be performed
      at
      or prior to the Closing Date shall have been performed; 

     

    (iii) the
      delivery by the Company of the items set forth in Section 2.2(a) of this
      Agreement; 

     

    (iv) there
      shall have been no Material Adverse Effect with respect to the Company since
      the
      date hereof; and

     

    (v) from
      the
      date hereof to the Closing Date, trading in the Common Stock shall not have
      been
      suspended by the Commission or the Company’s principal Trading Market (except
      for any suspension of trading of limited duration agreed to by the Company,
      which suspension shall be terminated prior to the Closing), and, at any time
      prior to the Closing Date, trading in securities generally as reported by
      Bloomberg L.P. shall not have been suspended or limited, or minimum prices
      shall
      not have been established on securities whose trades are reported by such
      service, or on any Trading Market, nor shall a banking moratorium have been
      declared either by the United States or New York State authorities nor shall
      there have occurred any material outbreak or escalation of hostilities or other
      national or international calamity of such magnitude in its effect on, or any
      material adverse change in, any financial market which, in each case, in the
      reasonable judgment of each Purchaser, makes it impracticable or inadvisable
      to
      purchase the Securities at the Closing.

    
      
        
        

      

      
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    ARTICLE
      III.

    REPRESENTATIONS
      AND WARRANTIES

     

    3.1     Representations
      and Warranties of the Company. 

     

    Except
      as
      set forth under the corresponding section of the disclosure schedules delivered
      to the Purchasers concurrently herewith (the “Disclosure Schedules”) which
      Disclosure Schedules shall be deemed a part hereof, the Company hereby makes
      the
      representations and warranties set forth below to each PurchaserExcept
      as
      set forth in the Disclosure Schedules or in the SEC Reports which Disclosure
      Schedules and SEC Reports shall be deemed a part hereof and shall qualify any
      representation or otherwise made herein to the extent of the disclosure
      contained in the corresponding section of the Disclosure Schedules, the Company
      hereby makes the following representations and warranties to each
      Purchaser:

     

    (a) Subsidiaries.
      All of
      the direct and indirect subsidiaries of the Company are set forth on
Schedule
      3.1(a).
      The
      Company owns, directly or indirectly, all of the capital stock or other equity
      interests of each Subsidiary free and clear of any Liens, and all of the issued
      and outstanding shares of capital stock of each Subsidiary are validly issued
      and are fully paid, non-assessable and free of preemptive and similar rights
      to
      subscribe for or purchase securities. If the Company has no subsidiaries, then
      all other references to the Subsidiaries or any of them in the Transaction
      Documents shall be disregarded.

     

    (b) Organization
      and Qualification.
      The
      Company and each of the Subsidiaries 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 material violation or material 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 the Subsidiaries
      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 (i) a material adverse
      effect on the legality, validity or enforceability of any Transaction Document,
      (ii) a material adverse effect on the results of operations, assets, business,
      prospects or condition (financial or otherwise) of the Company and the
      Subsidiaries, taken as a whole, or (iii) a material adverse effect on the
      Company’s ability to perform in any material respect on a timely basis its
      obligations under any Transaction Document (any of (i), (ii) or (iii), 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 and thereunder. The
      execution and delivery of each of the Transaction Documents by the Company
      and
      the consummation by it of the transactions contemplated hereby and thereby
      have
      been duly authorized by all necessary action on the part of the Company and
      no
      further action is required by the Company, its board of directors or its
      stockholders in connection therewith other than in connection with the Required
      Approvals. Each Transaction Document has been (or upon delivery will have been)
      duly executed by the Company and, when delivered in accordance with the terms
      hereof and thereof, 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.

     

    (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 hereby and 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 material 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) subject to
      the
      Required Approvals, conflict with or result in a violation of any law, rule,
      regulation, order, judgment, injunction, decree or other restriction of any
      court or governmental authority to which the Company 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; 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.

     

    
      
        
        

      

      
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    (e) Filings,
      Consents and Approvals.
      The
      Company is not 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 (i) filings required pursuant to Section
      4.4
      of this Agreement, (ii) the filing with the Commission of the Registration
      Statement, (iii) application(s) to each applicable Trading Market for the
      listing of the Securities for trading thereon in the time and manner required
      thereby and (iv) the filing of Form D with the Commission and such filings
      as
      are required to be made under applicable state securities laws (collectively,
      the “Required
      Approvals”).

     

    (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 imposed by the Company
      other
      than restrictions on transfer provided for in the Transaction Documents. The
      Warrant Shares, when issued in accordance with the terms of the Transaction
      Documents, will be validly issued, fully paid and nonassessable, free and clear
      of all Liens imposed by the Company other than restrictions on transfer provided
      for in the Transaction Documents. The Company has reserved from its duly
      authorized capital stock the maximum number of shares of Common Stock issuable
      pursuant to this Agreement and the Warrants.

     

    (g) Capitalization.
      The
      capitalization of the Company is as set forth in the SEC Reports. Schedule
      3.1(g)
      sets
      forth the number of shares of Common Stock owned beneficially, and of record,
      by
      Affiliates of the Company as of the date hereof. The Company has not issued
      any
      capital stock since its most
      recently filed periodic report under the Exchange Act, other
      than pursuant to the exercise of employee stock options under the Company’s
      stock option plans, the issuance of shares of Common Stock to employees pursuant
      to the Company’s employee stock purchase plans and pursuant to the conversion or
      exercise of Common Stock Equivalents outstanding as of the date of the most
      recently filed periodic report under the Exchange Act. 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.
      Except as a result of the purchase and sale of the Securities or as set forth
      on
Schedule
      3.1(g)
      attached
      hereto, there are no outstanding options, warrants, scrip rights to subscribe
      to, calls or commitments of any character whatsoever relating to, or securities,
      rights or obligations convertible into or exercisable or exchangeable for,
      or
      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 Common Stock Equivalents. The issuance and sale of the
      Securities will not obligate the Company to issue shares of Common Stock or
      other securities to any Person (other than the Purchasers) and will not result
      in a right of any holder of Company securities to adjust the exercise,
      conversion, exchange or reset price under any of 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.

     

    
      
        
        

      

      
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    (h) SEC
      Reports; Financial Statements.
      The
      Company has filed all reports, schedules, forms, statements and other documents
      required to be filed by the Company under the Securities Act and the Exchange
      Act, including pursuant to Section 13(a) or 15(d) thereof, for the two years
      preceding the date hereof (or such shorter period as the Company was required
      by
      law or regulation to file such material) (the foregoing materials, including the
      exhibits thereto and documents incorporated by reference therein, being
      collectively referred to herein as the “SEC
      Reports”)
      on a
      timely basis or has received a valid extension of such time of filing and has
      filed any such SEC Reports prior to the expiration of any such extension. As
      of
      their respective dates, the SEC Reports complied in all material respects with
      the requirements of the Securities Act and the Exchange Act, 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 the light of the
      circumstances under which they were made, not misleading. The financial
      statements of the Company included in the SEC Reports comply in all material
      respects with applicable accounting requirements and the rules and regulations
      of the Commission with respect thereto as in effect at the time of filing.
      Such
      financial statements have been prepared in accordance with United States
      generally accepted accounting principles applied on a consistent basis during
      the periods involved (“GAAP”),
      except as may be otherwise specified in such financial statements 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.

     

    (i) Material
      Changes; Undisclosed Events, Liabilities or Developments.
      Since
      the date of the latest audited financial statements included within the SEC
      Reports, except as specifically disclosed in a subsequent SEC Report filed
      prior
      to the date hereof, (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 disclosed in filings made with the Commission, (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 stock
      option plans. The Company does not have pending before the Commission any
      request for confidential treatment of information. Except for the issuance
      of
      the Securities contemplated by this Agreement or as set forth on Schedule
      3.1(i),
      no
      event, liability or development has occurred or exists with respect to the
      Company or its Subsidiaries or their respective business, properties, operations
      or financial condition, that would be required to be disclosed by the Company
      under applicable securities laws at the time this representation is made or
      deemed made that has not been publicly disclosed at least 1 Trading Day prior
      to
      the date that this representation is made.

     

    
      
        
        

      

      
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    (j) Litigation.
      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 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
      Commission involving the Company or any current or former director or officer
      of
      the Company. The Commission 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 Securities 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. None of the Company’s or its
      Subsidiaries’ employees is a member of a union that relates to such employee’s
      relationship with the Company or such Subsidiary, and neither the Company nor
      any of its Subsidiaries is a party to a collective bargaining agreement, and
      the
      Company and its Subsidiaries believe that their relationships with their
      employees are good. No executive officer, to the knowledge of the Company,
      is,
      or is now expected to be, in violation of any material term of any employment
      contract, confidentiality, disclosure or proprietary information agreement
      or
      non-competition agreement, or any other contract or agreement or any restrictive
      covenant in favor of any third party, and the continued employment of each
      such
      executive officer does not subject the Company or any of its Subsidiaries to
      any
      liability with respect to any of the foregoing matters. The Company and its
      Subsidiaries are in compliance with all U.S. federal, state, local and foreign
      laws and regulations relating to employment and employment practices, terms
      and
      conditions of employment and wages and hours, except where the failure to be
      in
      compliance could not, individually or in the aggregate, reasonably be expected
      to have a Material Adverse Effect.

     

    
      
        
        

      

      
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    (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 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
      and all such laws that affect the environment, except in each case as could
      not
      have or reasonably be expected to result in a Material Adverse
      Effect.

     

    (m) Regulatory
      Permits.
      The
      Company and the Subsidiaries possess all certificates, authorizations and
      permits issued by the appropriate federal, state, local or foreign regulatory
      authorities necessary to conduct their respective businesses as described in
      the
      SEC Reports, except where the failure to possess such permits could not
      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.
      The
      Company and the Subsidiaries have good and marketable title in fee simple to
      all
      real property owned by them and good and marketable title in all personal
      property owned by them that is material to the business of the Company and
      the
      Subsidiaries, in each case free and clear of all Liens, except for Liens as
      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
      the Subsidiaries 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 the Subsidiaries
      are
      held by them under valid, subsisting and enforceable leases with which the
      Company and the Subsidiaries are in compliance.

     

    (o) Patents
      and Trademarks.
      The
      Company and the Subsidiaries have, or have rights to use, all patents, patent
      applications, trademarks, trademark applications, service marks, trade names,
      trade secrets, inventions, copyrights, licenses and other intellectual property
      rights and similar rights 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 notice (written or
      otherwise) that any of 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. The Company and its Subsidiaries have taken
      reasonable security measures to protect the secrecy, confidentiality and value
      of all of their intellectual properties, except where failure to do so could
      not, individually or in the aggregate, reasonably be expected to have a Material
      Adverse Effect.

     

    
      
        
        

      

      
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    (p) Insurance.
      The
      Company and the Subsidiaries are insured by insurers of recognized financial
      responsibility against such losses and risks and in such amounts as are prudent
      and customary in the businesses in which the Company and the Subsidiaries are
      engaged, including, but not limited to, directors and officers insurance
      coverage at least equal to the aggregate Subscription Amount. 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 $60,000
      other than for (i) payment of salary or consulting fees for services rendered,
      (ii) reimbursement for expenses incurred on behalf of the Company and (iii)
      other employee benefits, including stock option agreements under any stock
      option plan of the Company.

     

    (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 Closing Date.
      The
      Company’s certifying officers have evaluated the effectiveness of the Company’s
      disclosure controls and procedures as of the end of the period covered by the
      Company’s 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
      disclosure controls and procedures based on their evaluations as of the
      Evaluation Date. Since the Evaluation Date, there have been no changes in the
      Company’s internal control over financial reporting (as such term is defined in
      the Exchange Act) that has materially affected, or is reasonably likely to
      materially affect, the Company’s internal control over financial
      reporting.

     

    (s) Certain
      Fees.
      Except
      as set forth on Schedule
      3.1(s)
      attached
      hereto, 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 the Transaction Documents. The Purchasers 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 that
      may
      be due in connection with the transactions contemplated by the Transaction
      Documents.

     

    
      
        
        

      

      
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    (t) Private
      Placement.
      Assuming the accuracy of the Purchasers representations and warranties set
      forth
      in Section 3.2, no registration under the Securities Act is required for the
      offer and sale of the Securities by the Company to the Purchasers as
      contemplated hereby. The issuance and sale of the Securities hereunder does
      not
      contravene the rules and regulations of the 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 of 1940, as amended.

     

    (v) Registration
      Rights.
      Other
      than each of the Purchasers hereunder, no Person has any right to cause the
      Company to effect the registration under the Securities Act of any securities
      of
      the Company.

     

    (w) Listing
      and Maintenance Requirements.
      The
      Company’s Common Stock is registered pursuant to Section 12(b) or 12(g) 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 Commission is contemplating terminating such registration.
      The Company has not, in the 12 months preceding the date hereof, 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 the Purchasers as a result
      of the Purchasers and the Company fulfilling their obligations or exercising
      their rights under the Transaction Documents, including without limitation
      as a
      result of the Company’s issuance of the Securities and the Purchasers’ ownership
      of the Securities.

     

    (y) Disclosure.
      Except
      with respect to the material terms and conditions of the transactions
      contemplated by the Transaction Documents, the Company confirms that neither
      it
      nor any other Person acting on its behalf has provided any of the Purchasers
      or
      their agents or counsel with any information that it believes constitutes or
      might constitute material, non-public information. The Company understands
      and
      confirms that the Purchasers will rely on the foregoing representation in
      effecting transactions in securities of the Company. All disclosure furnished
      by
      or on behalf of the Company to the Purchasers regarding the Company, its
      business and the transactions contemplated hereby, including the Disclosure
      Schedules to this Agreement, is true and correct and does 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. The press releases disseminated by the
      Company during the twelve months preceding the date of this Agreement taken
      as a
      whole do not contain any untrue statement of a material fact or omit to state
      a
      material fact required to be stated therein or necessary in order to make the
      statements therein, in light of the circumstances under which they were made
      and
      when made, not misleading. The Company acknowledges and agrees that no Purchaser
      makes or has made any representations or warranties with respect to the
      transactions contemplated hereby other than those specifically set forth in
      Section 3.2 hereof.

     

    
      
        
        

      

      
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    (z) No
      Integrated Offering.
      Assuming
      the accuracy of the Purchasers’ representations and warranties set forth in
      Section 3.2, 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 (i) the Securities Act
      which
      would require the registration of any such securities under the Securities
      Act,
      or (ii) any applicable shareholder approval provisions of any Trading Market
      on
      which any of the securities of the Company are listed or designated. 

     

    (aa) Solvency.
      Based
      on the consolidated financial condition of the Company as of the Closing Date,
      after giving effect to the receipt by the Company of the proceeds from the
      sale
      of the Securities hereunder, (i) the fair saleable 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 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 liabilities 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 Closing Date. Schedule
      3.1(aa)
      sets
      forth as of the date thereof all outstanding secured and unsecured Indebtedness
      of the Company or any Subsidiary, or for which the Company or any Subsidiary
      has
      commitments. For the purposes of this Agreement, “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. Neither
      the Company nor any Subsidiary is in default with respect to any
      Indebtedness.

     

    
      
        
        

      

      
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    (bb) Tax
      Status.
      Except
      for matters that would not, individually or in the aggregate, have or reasonably
      be expected to result in a Material Adverse Effect, the Company and each
      Subsidiary has filed all necessary federal, state and foreign income and
      franchise tax returns and has paid or accrued all taxes shown as due thereon,
      and the Company has no knowledge of a tax deficiency which has been asserted
      or
      threatened against the Company or any Subsidiary.

     

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

     

    (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 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)  Accountants.
      The
      Company’s accounting firm is set forth on Schedule
      3.1(ee)
      of the
      Disclosure Schedule. To the knowledge and belief of the Company, such accounting
      firm (i) is a registered public accounting firm as required by the Exchange
      Act
      and (ii) shall express its opinion with respect to the financial statements
      to
      be included in the Company’s Annual Report on Form 10-KSB for the year ended
      December 31, 2006.

     

    (ee) 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 Company and the accountants and lawyers
      formerly or presently employed by the Company which could affect the Company’s
      ability to perform any of its obligations under any of the Transaction
      Documents, and the Company is current with respect to any fees owed to its
      accountants and lawyers.

     

    
      
        
        

      

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

     

    (gg) Acknowledgement
      Regarding Purchaser’s Trading Activity.
      Anything
      in this Agreement or elsewhere herein to the contrary notwithstanding (except
      for Sections 3.2(f) and 4.15 hereof), it is understood and acknowledged by
      the
      Company (i) that none of the Purchasers have been asked by the Company to agree,
      nor has any Purchaser agreed, to desist from purchasing or selling, long and/or
      short, securities of the Company, or “derivative” securities based on securities
      issued by the Company or to hold the Securities for any specified term; (ii)
      that past or future open market or other transactions by any Purchaser,
      including Short Sales, and specifically including, without limitation, Short
      Sales or “derivative” transactions, before or after the closing of this or
      future private placement transactions, may negatively impact the market price
      of
      the Company’s publicly-traded securities; (iii) that any Purchaser, and
      counter-parties in “derivative” transactions to which any such Purchaser is a
      party, directly or indirectly, presently may have a “short” position in the
      Common Stock, and (iv) that each Purchaser shall not be deemed to have any
      affiliation with or control over any arm’s length counter-party in any
“derivative” transaction. The
      Company further understands and acknowledges that (a) one or more Purchasers
      may
      engage in hedging activities at various times during the period that the
      Securities are outstanding, including, without limitation, during the periods
      that the value of the Warrant Shares deliverable with respect to Securities
      are
      being determined and (b) such hedging activities (if any) could reduce the
      value
      of the existing stockholders' equity interests in the Company at and after
      the
      time that the hedging activities are being conducted.  The Company
      acknowledges that such aforementioned hedging activities do not constitute
      a
      breach of any of the Transaction Documents.

     

    (hh) Regulation
      M Compliance. 
      The Company has not, and to its knowledge no one acting on its behalf has,
      (i)
      taken, directly or indirectly, any action designed to cause or to result in
      the
      stabilization or manipulation of the price of any security of the Company to
      facilitate the sale or resale of any of the Securities, (ii) sold, bid for,
      purchased, or, paid any compensation for soliciting purchases of, any of the
      Securities, or (iii) paid or agreed to pay to any Person any compensation for
      soliciting another to purchase any other securities of the Company, other than,
      in the case of clauses (ii) and (iii), compensation paid to the Company’s
      placement agent in connection with the placement of the Securities.

     

    
      
        
        

      

      
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    (ii) FDA.
      The
      Company has no products subject to the jurisdiction of the U.S. Food and Drug
      Administration under the Federal Food, Drug and Cosmetic Act, as amended, and
      the regulations thereunder.

     

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

     

    (a) Organization;
      Authority.
      Such
      Purchaser is an entity duly organized, validly existing and in good standing
      under the laws of the jurisdiction of its organization with full right,
      corporate or partnership power and authority to enter into and to consummate
      the
      transactions contemplated by the Transaction Documents and otherwise to carry
      out its obligations hereunder and thereunder. The execution and delivery of
      the
      Transaction Documents and performance by such Purchaser of the transactions
      contemplated by the Transaction Documents have been duly authorized by all
      necessary corporate or similar action on the part of such Purchaser. Each
      Transaction Document to which it is a party has been duly executed by such
      Purchaser, and when delivered by such Purchaser in accordance with the terms
      hereof, will constitute the valid and legally binding obligation of such
      Purchaser, 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) Own
      Account.
      Such
      Purchaser understands that the Securities are “restricted securities” and have
      not been registered under the Securities Act or any applicable state securities
      law and is acquiring the Securities as principal for its own account and not
      with a view to or for distributing or reselling such Securities or any part
      thereof in violation of the Securities Act or any applicable state securities
      law, has no present intention of distributing any of such Securities in
      violation of the Securities Act or any applicable state securities law and
      has
      no direct or indirect arrangement or understandings with any other persons
      to
      distribute or regarding the distribution of such Securities (this representation
      and warranty not limiting such Purchaser’s right to sell the Securities pursuant
      to the Registration Statement or otherwise in compliance with applicable federal
      and state securities laws) in violation of the Securities Act or any applicable
      state securities law. Such Purchaser is acquiring the Securities hereunder
      in
      the ordinary course of its business.

     

    (c) Purchaser
      Status.
      At the
      time such Purchaser was offered the Securities, it was, and at the date hereof
      it is, and on each date on which it exercises any Warrants, it will be either:
      (i) an “accredited investor” as defined in Rule 501(a)(1), (a)(2), (a)(3),
      (a)(7) or (a)(8) under the Securities Act or (ii) a “qualified institutional
      buyer” as defined in Rule 144A(a) under the Securities Act. Such Purchaser is
      not required to be registered as a broker-dealer under Section 15 of the
      Exchange Act. 

     

    
      
        
        

      

      
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    (d) Experience
      of Such Purchaser.
      Such
      Purchaser, either alone or together with its representatives, has such
      knowledge, sophistication and experience in business and financial matters
      so as
      to be capable of evaluating the merits and risks of the prospective investment
      in the Securities, and has so evaluated the merits and risks of such investment.
      Such Purchaser 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.

     

    (e) General
      Solicitation.
      Such
      Purchaser 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.

     

    (f) Short
      Sales and Confidentiality Prior To The Date Hereof.
      Other
      than consummating the transactions contemplated hereunder, such Purchaser has
      not, nor has any Person acting on behalf of or pursuant to any understanding
      with such Purchaser, directly or indirectly executed any purchases or sales,
      including Short Sales, of the securities of the Company during the period
      commencing from
      the time
      that such Purchaser first received a term sheet (written or oral) from the
      Company or any other Person representing the Company setting forth the material
      terms of the transactions contemplated hereunder until the date hereof
(“Discussion
      Time”).
      Notwithstanding the foregoing, in the case of a Purchaser that is a
      multi-managed investment vehicle whereby separate portfolio managers manage
      separate portions of such Purchaser's assets and the portfolio managers have
      no
      direct knowledge of the investment decisions made by the portfolio managers
      managing other portions of such Purchaser's assets, the representation set
      forth
      above shall only apply with respect to the portion of assets managed by the
      portfolio manager that made the investment decision to purchase the Securities
      covered by this Agreement. Other than to other Persons party to this Agreement,
      such Purchaser has maintained the confidentiality of all disclosures made to
      it
      in connection with this transaction (including the existence and terms of this
      transaction).

     

    ARTICLE
      IV.

    OTHER
      AGREEMENTS OF THE PARTIES

     

    4.1     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
      pursuant to an effective registration statement or Rule 144, to the Company
      or
      to an Affiliate of a Purchaser or in connection with a pledge as contemplated
      in
      Section 4.1(b), the Company may require the transferor thereof to provide to
      the
      Company an opinion of counsel selected by the transferor and reasonably
      acceptable to the Company, the form and substance of which opinion shall be
      reasonably satisfactory to the Company, to the effect that such transfer does
      not require registration of such transferred Securities under the Securities
      Act. As a condition of transfer, any such transferee shall agree in writing
      to
      be bound by the terms of this Agreement and shall have the rights of a Purchaser
      under this Agreement and the Registration Rights Agreement.

     

    (b) The
      Purchasers agree to the imprinting, so long as is required by this Section
      4.1,
      of a legend on any of the Securities in the following form:

     

    THIS
      SECURITY HAS NOT 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. THIS SECURITY MAY BE PLEDGED IN CONNECTION WITH A BONA FIDE MARGIN
      ACCOUNT WITH A REGISTERED BROKER-DEALER OR OTHER LOAN WITH A FINANCIAL
      INSTITUTION THAT IS AN “ACCREDITED INVESTOR” AS DEFINED IN RULE 501(a) UNDER THE
      SECURITIES ACT OR OTHER LOAN SECURED BY SUCH SECURITIES.

     

    The
      Company acknowledges and agrees that a Purchaser 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
      Securities Act and who agrees to be bound by the provisions of this Agreement
      and the Registration Rights Agreement and, if required under the terms of such
      arrangement, such Purchaser 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 the appropriate Purchaser’s expense,
      the Company will execute and deliver such reasonable documentation as a pledgee
      or secured party of Securities may reasonably request in connection with a
      pledge or transfer of the Securities, including, if the Securities are subject
      to registration pursuant to the Registration Rights Agreement, the preparation
      and filing of any required prospectus supplement under Rule 424(b)(3) under
      the
      Securities Act or other applicable provision of the Securities Act to
      appropriately amend the list of Selling Stockholders thereunder.

     

    (c) Certificates
      evidencing the Shares and Warrant Shares shall not contain any legend (including
      the legend set forth in Section 4.1(b)), (i) while a registration statement
      (including the Registration Statement) covering the resale of such security
      is
      effective under the Securities Act, or (ii) following any sale of such Shares
      or
      Warrant Shares pursuant to Rule 144, or (iii) if such Shares or Warrant Shares
      are eligible for sale under Rule 144(k), or (iv) if such legend is not required
      under applicable requirements of the Securities Act (including judicial
      interpretations and pronouncements issued by the staff of the Commission).
      The
      Company shall cause its counsel to issue a legal opinion to the Transfer Agent
      promptly after the Effective Date if required by the Transfer Agent to effect
      the removal of the legend hereunder. If all or any portion of a Warrant is
      exercised at a time when there is an effective registration statement to cover
      the resale of the Warrant Shares, such Warrant Shares shall be issued free
      of
      all legends. The Company agrees that following the Effective Date or at such
      time as such legend is no longer required under this Section 4.1(c), it will,
      no
      later than three Trading Days following the delivery by a Purchaser to the
      Company or the Transfer Agent of a certificate representing Shares or Warrant
      Shares, as the case may be, issued with a restrictive legend (such third Trading
      Day, the “Legend
      Removal Date”),
      deliver or cause to be delivered to such Purchaser a certificate representing
      such shares that is free from all restrictive and other legends. The Company
      may
      not make any notation on its records or give instructions to the Transfer Agent
      that enlarge the restrictions on transfer set forth in this Section.
      Certificates for Securities subject to legend removal hereunder shall be
      transmitted by the Transfer Agent to the Purchaser by crediting the account
      of
      the Purchaser’s prime broker with the Depository Trust Company System as
      directed by such Purchaser.

    


    
      
        
        

      

      
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    (d) In
      addition to such Purchaser’s other available remedies, the Company shall pay to
      a Purchaser, in cash, as partial liquidated damages and not as a penalty, for
      each $1,000 of Shares or Warrant Shares (based on the VWAP of the Common Stock
      on the date such Securities are submitted to the Transfer Agent) delivered
      for
      removal of the restrictive legend and subject to Section 4.1(c), $10 per Trading
      Day (increasing to $20 per Trading Day five (5) Trading Days after such damages
      have begun to accrue) for each Trading Day after the second Trading Day
      following the Legend Removal Date until such certificate is delivered without
      a
      legend. Nothing herein shall limit such Purchaser’s right to pursue actual
      damages for the Company’s failure to deliver certificates representing any
      Securities as required by the Transaction Documents, and such Purchaser shall
      have the right to pursue all remedies available to it at law or in equity
      including, without limitation, a decree of specific performance and/or
      injunctive relief.

     

    (e) Each
      Purchaser, severally and not jointly with the other Purchasers, agrees that
      such
      Purchaser will sell any Securities pursuant to either the registration
      requirements of the Securities Act, including any applicable prospectus delivery
      requirements, or an exemption therefrom, and that if Securities are sold
      pursuant to a Registration Statement, they will be sold in compliance with
      the
      plan of distribution set forth therein, and acknowledges that the removal of
      the
      restrictive legend from certificates representing Securities as set forth in
      this Section 4.1 is predicated upon the Company’s reliance upon this
      understanding.

     

    4.2     Furnishing
      of Information.
      Until
      the earliest of the time that (i) no Purchaser owns Securities or (ii) the
      Warrants have expired, 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 date hereof pursuant
      to
      the Exchange Act even if the Company is not then subject to the reporting
      requirements of the Exchange Act. As long as any Purchaser owns Securities,
      if
      the Company is not required to file reports pursuant to the Exchange Act, it
      will prepare and furnish to the Purchasers and make publicly available in
      accordance with Rule 144(c) such information as is required for the Purchasers
      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, to the extent required from time to time to enable such Person to
      sell
      such Securities without registration under the Securities Act within the
      requirements of the exemption provided by Rule 144.

     

    
      
        
        

      

      
        19

        
          

        

      

      
        
        

      

    

    4.3     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 Securities
      Act) that would be integrated with the offer or sale of the Securities in a
      manner that would require the registration under the Securities Act of the
      sale
      of the Securities to the Purchasers or that would be integrated with the offer
      or sale of the Securities to the Purchasers for purposes of the rules and
      regulations of any Trading Market such that it would require shareholder
      approval prior to the closing of such other transaction unless shareholder
      approval is obtained before the closing of such subsequent
      transaction.

     

    4.4     Securities
      Laws Disclosure; Publicity. The Company shall, by 8:30 a.m. (New York City
      time) on the Trading Day immediately following the date hereof, issue a Current
      Report on Form 8-K, disclosing the material terms of the transactions
      contemplated hereby, and filing the Transaction Documents as exhibits thereto.
      The Company and each Purchaser shall consult with each other in issuing any
      other press releases with respect to the transactions contemplated hereby,
      and
      neither the Company nor any Purchaser shall issue any such press release or
      otherwise make any such public statement without the prior consent of the
      Company, with respect to any press release of any Purchaser, or without the
      prior consent of each Purchaser, with respect to any press release of the
      Company, which consent shall not unreasonably be withheld or delayed, except
      if
      such disclosure is required by law, 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 any Purchaser, or include the name of any Purchaser in
      any
      filing with the Commission or any regulatory agency or Trading Market, without
      the prior written consent of such Purchaser, except (i) as required by federal
      securities law in connection with (A) any registration statement contemplated
      by
      the Registration Rights Agreement and (B) the filing of final Transaction
      Documents (including signature pages thereto) with the Commission and (ii)
      to
      the extent such disclosure is required by law or Trading Market regulations,
      in
      which case the Company shall provide the Purchasers with prior notice of such
      disclosure permitted under this clause (ii).

     

    4.5     Shareholder
      Rights Plan. No claim will be made or enforced by the Company or, with the
      consent of the Company, any other Person, that any Purchaser is an “Acquiring
      Person” under any control share acquisition, business combination, poison pill
      (including any distribution under a rights agreement) or similar anti-takeover
      plan or arrangement in effect or hereafter adopted by the Company, or that
      any
      Purchaser 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 the
      Purchasers.

     

    
      
        
        

      

      
        20

        
          

        

      

      
        
        

      

    

    4.6     Non-Public
      Information. Except with respect to the material terms and conditions of the
      transactions contemplated by the Transaction Documents, the Company covenants
      and agrees that neither it nor any other Person acting on its behalf will
      provide any Purchaser or its agents or counsel with any information that the
      Company believes constitutes material non-public information, unless prior
      thereto such Purchaser shall have executed a written agreement regarding the
      confidentiality and use of such information. The Company understands and
      confirms that each Purchaser shall be relying on the foregoing covenant in
      effecting transactions in securities of the Company.

     

    4.7     Use
      of
      Proceeds. Except as set forth on Schedule 4.7 attached hereto, the Company
      shall use the net proceeds from the sale of the Securities hereunder for working
      capital purposes and shall not use such proceeds for the satisfaction of any
      portion of the Company’s debt (other than payment of trade payables in the
      ordinary course of the Company’s business and prior practices), or to redeem any
      Common Stock or Common Stock Equivalents or to settle any outstanding
      litigation.

     

    4.8     Indemnification
      of Purchasers. Subject to the provisions of this Section 4.8, the Company
      will indemnify and hold each Purchaser and its directors, officers,
      shareholders, members, partners, employees and agents (and any other Persons
      with a functionally equivalent role of a Person holding such titles
      notwithstanding a lack of such title or any other title), each Person who
      controls such Purchaser (within the meaning of Section 15 of the Securities
      Act
      and Section 20 of the Exchange Act), and the directors, officers, shareholders,
      agents, members, partners or employees (and any other Persons with a
      functionally equivalent role of a Person holding such titles notwithstanding
      a
      lack of such title or any other title) of such controlling persons (each, a
      “Purchaser 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 that any such Purchaser Party may suffer or incur as
      a
      result of or relating to (a) any breach of any of the representations,
      warranties, covenants or agreements made by the Company in this Agreement or
      in
      the other Transaction Documents or (b) any action instituted against a Purchaser
      in any capacity, or any of them or their respective Affiliates, by any
      stockholder of the Company who is not an Affiliate of such Purchaser, with
      respect to any of the transactions contemplated by the Transaction Documents
      (unless such action is based upon a breach of such Purchaser’s representations,
      warranties or covenants under the Transaction Documents or any agreements or
      understandings such Purchaser may have with any such stockholder or any
      violations by the Purchaser of state or federal securities laws or any conduct
      by such Purchaser which constitutes fraud, gross negligence, willful misconduct
      or malfeasance). If any action shall be brought against any Purchaser Party
      in
      respect of which indemnity may be sought pursuant to this Agreement, such
      Purchaser 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 reasonably acceptable to the Purchaser Party. Any Purchaser Party
      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 such Purchaser Party 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 on any material issue between the
      position of the Company and the position of such Purchaser Party, in which
      case
      the Company shall be responsible for the reasonable fees and expenses of no
      more
      than one such separate counsel. The Company will not be liable to any Purchaser
      Party under this Agreement (i) for any settlement by a Purchaser 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 attributable to any Purchaser Party’s breach of
      any of the representations, warranties, covenants or agreements made by such
      Purchaser Party in this Agreement or in the other Transaction
      Documents.

     

    
      
        
        

      

      
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    4.9     Reservation
      of Common Stock.
      As of
      the date hereof, the Company has reserved and the Company shall continue to
      reserve and keep available at all times, free of preemptive rights, a sufficient
      number of shares of Common Stock for the purpose of enabling the Company to
      issue Shares pursuant to this Agreement and Warrant Shares pursuant to any
      exercise of the Warrants. 

     

    4.10     Listing
      of Common Stock.  The
      Company hereby agrees to use best efforts to maintain the listing of the Common
      Stock on a Trading Market, and as soon as reasonably practicable following
      the
      Closing (but not later than the earlier of the Effective Date and the first
      anniversary of the Closing Date) to list all of the Shares and Warrant Shares
      on
      such Trading Market. The Company further agrees, if the Company applies to
      have
      the Common Stock traded on any other Trading Market, it will include in such
      application all of the Shares and Warrant Shares, and will take such other
      action as is necessary to cause all of the Shares and Warrant Shares to be
      listed on such other Trading Market as promptly as possible. The Company will
      take all action reasonably necessary to continue the listing and trading of
      its
      Common Stock on a Trading Market and will comply in all respects with the
      Company’s reporting, filing and other obligations under the bylaws or rules of
      the Trading Market. 

     

    4.11     Equal
      Treatment of Purchasers. No consideration shall be offered or paid to any
      Person to amend or consent to a waiver or modification of any provision of
      any
      of the Transaction Documents unless the same consideration is also offered
      to
      all of the parties to the Transaction Documents. For clarification purposes,
      this provision constitutes a separate right granted to each Purchaser by the
      Company and negotiated separately by each Purchaser, and is intended for the
      Company to treat the Purchasers as a class and shall not in any way be construed
      as the Purchasers acting in concert or as a group with respect to the purchase,
      disposition or voting of Securities or otherwise.

     

    4.12     Participation
      in Future Financing.

     

    (a) From
      the
      date hereof until the date that is the 18 month anniversary of the Effective
      Date, upon any issuance by the Company or any of its Subsidiaries of Common
      Stock, Common Stock Equivalents or Indebtedness for cash consideration (a
“Subsequent
      Financing”),
      each
      Purchaser shall have the right to participate in the Subsequent Financing up
      to
      an amount equal to 100% of the Subsequent Financing (the “Participation
      Maximum”)
      on the
      same terms, conditions and price provided for in the Subsequent
      Financing.

     

    (b) At
      least
      5 Trading Days prior to the closing of the Subsequent Financing, the Company
      shall deliver to each Purchaser a written notice of its intention to effect
      a
      Subsequent Financing (“Pre-Notice”),
      which
      Pre-Notice shall ask such Purchaser if it wants to review the details of such
      financing (such additional notice, a “Subsequent
      Financing Notice”). 
      Upon the request of a Purchaser, and only upon a request by such Purchaser,
      for
      a Subsequent Financing Notice, the Company shall promptly, but no later than
      1
      Trading Day after such request, deliver a Subsequent Financing Notice to such
      Purchaser.  The Subsequent Financing Notice shall describe in reasonable
      detail the proposed terms of such Subsequent Financing, the amount of proceeds
      intended to be raised thereunder and the Person or Persons through or with
      whom
      such Subsequent Financing is proposed to be effected and shall include a term
      sheet or similar document relating thereto as an
      attachment.   

     

    (c) Any
      Purchaser desiring to participate in such Subsequent Financing must provide
      written notice to the Company by not later than 5:30 p.m. (New York City time)
      on the 5th
      Trading
      Day after all of the Purchasers have received the Pre-Notice that the Purchaser
      is willing to participate in the Subsequent Financing, the amount of the
      Purchaser’s participation, and that the Purchaser has such funds ready, willing,
      and available for investment on the terms set forth in the Subsequent Financing
      Notice. If the Company receives no notice from a Purchaser as of such
      5th
      Trading
      Day, such Purchaser shall be deemed to have notified the Company that it does
      not elect to participate.  

     

    (d) If
      by
      5:30 p.m. (New York City time) on the 5th
      Trading
      Day after all of the Purchasers have received the Pre-Notice, notifications
      by
      the Purchasers of their willingness to participate in the Subsequent Financing
      (or to cause their designees to participate) is, in the aggregate, less than
      the
      total amount of the Subsequent Financing, then the Company may effect the
      remaining portion of such Subsequent Financing on the terms and with the Persons
      set forth in the Subsequent Financing Notice.  

     

    (e) If
      by
      5:30 p.m. (New York City time) on the 5th
      Trading
      Day after all of the Purchasers have received the Pre-Notice, the Company
      receives responses to a Subsequent Financing Notice from Purchasers seeking
      to
      purchase more than the aggregate amount of the Participation Maximum, each
      such
      Purchaser shall have the right to purchase its Pro Rata Portion (as defined
      below) of the Participation Maximum.  “Pro
      Rata Portion”
means
      the ratio of (x) the Subscription Amount of Securities purchased on the Closing
      Date by a Purchaser participating under this Section 4.12 and (y) the sum of
      the
      aggregate Subscription Amounts of Securities purchased on the Closing Date
      by
      all Purchasers participating under this Section 4.12.

     

    (f) The
      Company must provide the Purchasers with a second Subsequent Financing Notice,
      and the Purchasers will again have the right of participation set forth above
      in
      this Section 4.12, if the Subsequent Financing subject to the initial Subsequent
      Financing Notice is not consummated for any reason on the terms set forth in
      such Subsequent Financing Notice within 60 Trading Days after the date of the
      initial Subsequent Financing Notice.

     

    (g) Notwithstanding
      the foregoing, this Section 4.12 shall not apply in respect of (i)
      an
      Exempt
      Issuance
      or (ii)
      an underwritten public offering of Common Stock.

     

    
      
        
        

      

      
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    4.13     Subsequent
      Equity Sales. 

     

    (a) From
      the
      date hereof until 90 days after the Effective Date, neither the Company nor
      any
      Subsidiary shall issue shares of Common Stock or Common Stock Equivalents;
      provided,
      however,
      the 90
      day period set forth in this Section 4.13 shall be extended for the number
      of
      Trading Days during such period in which (i) trading in the Common Stock is
      suspended by any Trading Market, or (ii) following the Effective Date, the
      Registration Statement is not effective or the prospectus included in the
      Registration Statement may not be used by the Purchasers for the resale of
      the
      Shares and Warrant Shares. 

     

    (b) From
      the
      date hereof until the 12 month anniversary of the Effective Date, the Company
      shall be prohibited from effecting or entering into an agreement to effect
      any
      Subsequent Financing involving a Variable Rate Transaction. “Variable
      Rate Transaction”
means
      a
      transaction in which the Company issues or sells (i) any debt or equity
      securities that are convertible into, exchangeable or exercisable for, or
      include the right to receive additional shares of Common Stock either (A) at
      a
      conversion, exercise or exchange rate or other price that is based upon and/or
      varies with the trading prices of or quotations for the shares of Common Stock
      at any time after the initial issuance of such debt or equity securities, or
      (B)
      with a conversion, exercise or exchange price that is subject to being reset
      at
      some future date after the initial issuance of such debt or equity security
      or
      upon the occurrence of specified or contingent events directly or indirectly
      related to the business of the Company or the market for the Common Stock or
      (ii) enters into any agreement, including, but not limited to, an equity line
      of
      credit, whereby the Company may sell securities at a future determined price.
      Any Purchaser shall be entitled to obtain injunctive relief against the Company
      to preclude any such issuance, which remedy shall be in addition to any right
      to
      collect damages. 

     

    (c) Notwithstanding
      the foregoing, this Section 4.13 shall not apply in respect of an Exempt
      Issuance, except that no Variable Rate Transaction shall be an Exempt
      Issuance.

     

    
             
        4.14     Short
        Sales and Confidentiality After The Date Hereof. Each Purchaser severally
        and not jointly with the other Purchasers, covenants that neither it nor
        any
        Affiliate acting on its behalf or pursuant to any understanding with it will
        execute any Short Sales during the period commencing at the Discussion Time
        and
        ending at the time that the transactions contemplated by this Agreement are
        first publicly announced as described in Section 4.4. 
        Each
        Purchaser, severally and not jointly with the other Purchasers, covenants
        that
        until such time as the transactions contemplated by this Agreement are publicly
        disclosed by the Company as described in Section 4.4, such Purchaser will
        maintain the confidentiality of the existence and terms of this transaction
        and
        the information included in the Disclosure Schedules.  Each Purchaser
        understands and acknowledges, and agrees, severally and not jointly with
        any
        other Purchaser, to act in a manner that will not violate the positions of
        the
        Commission as set forth in Item 65, Section A, of the Manual of Publicly
        Available Telephone Interpretations, dated July 1997, compiled by the Office
        of
        Chief Counsel, Division of Corporation Finance. Notwithstanding
        the foregoing, no Purchaser makes any representation, warranty or covenant
        hereby that it will not engage in Short Sales in the securities of the Company
        after the time that the transactions contemplated by this Agreement are first
        publicly announced as described in Section 4.4.  Notwithstanding
        the foregoing, in the case of a Purchaser that is a multi-managed investment
        vehicle whereby separate portfolio managers manage separate portions of such
        Purchaser’s assets and the portfolio managers have no direct knowledge of the
        investment decisions made by the portfolio managers managing other portions
        of
        such Purchaser’s assets, the covenant set forth above shall only apply with
        respect to the portion of assets managed by the portfolio manager that made
        the
        investment decision to purchase the Securities covered by this
        Agreement.

    

     

    
      
        
        

      

      
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    4.15      Delivery
      of Securities After Closing. The Company shall deliver, or cause to be
      delivered, the respective Securities purchased by each Purchaser to such
      Purchaser within 3 Trading Days of the Closing Date.

     

    4.16     Form
      D; Blue Sky Filings. The Company agrees to timely file a Form D with respect
      to the Securities as required under Regulation D and to provide a copy thereof,
      promptly upon request of any Purchaser. The Company shall take such action
      as
      the Company shall reasonably determine is necessary in order to obtain an
      exemption for, or to qualify the Securities for, sale to the Purchasers at
      the
      Closing under applicable securities or “Blue Sky” laws of the states of the
      United States, and shall provide evidence of such actions promptly upon request
      of any Purchaser.

     

    4.17     Capital
      Changes. Until the one year anniversary of the Effective Date, the Company
      shall not undertake a reverse stock split or reclassification of the Common
      Stock without the prior written consent of the Purchasers holding a majority
      in
      interest of the Shares.

     

    4.18     Per
      Share Purchase Price Protection. As to each Purchaser, from the date hereof
      until the 18 month anniversary of the Effective Date, if the Company or any
      Subsidiary thereof shall issue any Common Stock or Common Stock Equivalents
      entitling any person or entity to acquire shares of Common Stock at an effective
      price per share less than the Per Share Purchase Price (the “Discounted Purchase
      Price”, as further defined below), within 5 Trading Days of the date thereof the
      Company shall issue to such Purchaser that number of additional shares of Common
      Stock equal to the difference between (a) the quotient obtained by dividing
      (i)
      the product of (A) the Shares then held by such Purchaser immediately prior
      to
      such issuance multiplied by (B) the Per Share Purchase Price (or if Shares
      were
      previously issued pursuant to this Section 4.18, the lowest Discounted Purchase
      Price used hereunder prior to such issuance) divided by (ii) the Discounted
      Purchase Price, less (b) the Shares then held by such Purchaser immediately
      prior to such issuance. The term “Discounted Purchase Price” shall mean the
      amount actually paid by third parties for a share of Common Stock. The sale
      of
      Common Stock Equivalents shall be deemed to have occurred at the time of the
      issuance of the Common Stock Equivalents and the Discounted Purchase Price
      covered thereby shall also include the actual exercise or conversion price
      thereof at the time of the conversion or exercise (in addition to the
      consideration per share of Common Stock underlying the Common Stock Equivalents
      received by the Company upon such sale or issuance of the Common Stock
      Equivalents). If shares are issued for a consideration other than cash, the
      per
      share selling price shall be the fair value of such consideration as determined
      in good faith by the Board of Directors of the Company. The Company may not
      refuse to issue a Purchaser additional Shares hereunder based on any claim
      that
      such Purchaser or any one associated or affiliated with such Purchaser has
      been
      engaged in any violation of law, agreement or for any other reason, unless,
      an
      injunction from a court, on notice, restraining and or enjoining an issuance
      hereunder shall have been sought and obtained. Nothing herein shall limit a
      Purchaser’s right to pursue actual damages for the Company's failure to deliver
      Shares hereunder and such Purchaser shall have the right to pursue all remedies
      available to it at law or in equity including, without limitation, a decree
      of
      specific performance and/or injunctive relief. On the date of closing of any
      transaction pursuant to which securities are issued for a Discounted Purchase
      Price, the Company shall give the Purchasers written notice thereof.
      Notwithstanding anything to the contrary herein, this Section 4.18 shall not
      apply to an Exempt Issuance.

     

    
      
        
        

      

      
        24

        
          

        

      

      
        
        

      

    

    4.19     Most
      Favored Nation Provision.  From the date hereof until the date that is
      the 18 month anniversary of the Closing Date, upon any Subsequent Financing,
      each Purchaser may elect, in its sole discretion, to exchange all or some of
      the
      Shares (but not the Warrants) then held by such Purchaser for additional
      securities (including any additional securities issued as part of a unit with
      such security) of the same type issued in such Subsequent Financing (such
      exchange to be made at the same time as the closing of such Subsequent
      Financing), on the same terms and conditions as the Subsequent Financing, based
      on the Per Share Purchase Price multiplied by the number of Shares being
      exchanged. 
      By way of example, if the Company undertakes a Subsequent Financing of
      convertible debentures and warrants, each Purchaser shall have the right to
      participate in such Subsequent Financing and use the exchange of its Shares
      as
      consideration, on a $1 for $1 basis, in lieu of cash consideration. The Company
      shall provide prior written notice of any such Subsequent Financing in the
      manner set forth in Section 4.12. Notwithstanding the foregoing, this Section
      4.19 shall not apply in respect of an Exempt Issuance.

     

    ARTICLE
      V.

    MISCELLANEOUS

     

    5.1     Termination. 
      This Agreement may be terminated by any Purchaser, as to such Purchaser’s
      obligations hereunder only and without any effect whatsoever on the obligations
      between the Company and the other Purchasers, by written notice to the other
      parties, if the Closing has not been consummated on or before April 30, 2007;
      provided, however, that no such termination will affect the right of any party
      to sue for any breach by the other party (or parties).

     

    5.2     Fees
      and Expenses. At the Closing, the Company has agreed to reimburse TR Winston
& Company (“TR Winston”) the non-accountable sum of $20,000, for its legal
      fees and expenses, $10,000 of which has been paid prior to the Closing. The
      Company shall deliver, prior to the Closing, a completed and executed copy
      of
      the Closing Statement, attached hereto as Annex A. Except as expressly set
      forth
      in the Transaction Documents to the contrary, each party shall pay the fees
      and
      expenses of its advisers, counsel, accountants and other experts, if any, and
      all other expenses incurred by such party incident to the negotiation,
      preparation, execution, delivery and performance of this Agreement. The Company
      shall pay all Transfer Agent fees, stamp taxes and other taxes and duties levied
      in connection with the delivery of any Securities to the
      Purchasers.

     

    
      
        
        

      

      
        25

        
          

        

      

      
        
        

      

    

    5.3     Entire
      Agreement. The Transaction Documents, together with the exhibits and
      schedules thereto, contain the entire understanding of the parties with respect
      to the subject matter hereof and supersede all prior agreements and
      understandings, oral or written, with respect to such matters, which the parties
      acknowledge have been merged into such documents, exhibits and
      schedules.

     

    5.4     Notices.
      Any and all notices or other communications or deliveries required or permitted
      to be provided hereunder shall be in writing and shall be deemed given and
      effective on the earliest of (a) the date of transmission, if such notice or
      communication is delivered via facsimile at the facsimile number set forth
      on
      the signature pages attached hereto prior to 5:30 p.m. (New York City time)
      on a
      Trading Day, (b) the next Trading Day after the date of transmission, if such
      notice or communication is delivered via facsimile at the facsimile number
      set
      forth on the signature pages attached hereto on a day that is not a Trading
      Day
      or later than 5:30 p.m. (New York City time) on any Trading Day, (c) the
      2nd
      Trading
      Day 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 address for such notices and communications
      shall be as set forth on the signature pages attached hereto.

     

    5.5     Amendments;
      Waivers. No provision of this Agreement may be waived or amended except in a
      written instrument signed, in the case of an amendment, by the Company and
      the
      Purchasers of at least 85% of the Shares still held by the Purchasers or, in
      the
      case of a waiver, by the party against whom enforcement of any such waived
      provision is sought. No waiver of any default with respect to any provision,
      condition or requirement of this Agreement shall be deemed to be a continuing
      waiver in the future or a waiver of any subsequent default or a waiver of any
      other provision, condition or requirement hereof, nor shall any delay or
      omission of any party to exercise any right hereunder in any manner impair
      the
      exercise of any such right.

     

    5.6     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.

     

    5.7     Successors
      and Assigns. This Agreement shall be binding upon and inure to the benefit
      of the parties and their successors and permitted assigns. The Company may
      not
      assign this Agreement or any rights or obligations hereunder without the prior
      written consent of each Purchaser (other than by merger). Any Purchaser may
      assign any or all of its rights under this Agreement to any Person to whom
      such
      Purchaser assigns or transfers any Securities, provided such transferee agrees
      in writing to be bound, with respect to the transferred Securities, by the
      provisions of the Transaction Documents that apply to the
“Purchasers.”

     

    5.8     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 4.8.

     

    5.9     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 internal laws of the State of New York,
      without regard to the principles of conflicts of law thereof. 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 is an 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 other
      manner permitted by law. 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 incurred with the
      investigation, preparation and prosecution of such action or
      proceeding.

     

    
      
        
        

      

      
        26

        
          

        

      

      
        
        

      

    

    5.10     Survival.
      The representations and warranties contained herein shall survive the Closing
      and the delivery of the Shares and Warrant Shares.

     

    5.11     Execution.
      This Agreement may be executed in two or more counterparts, all of which when
      taken together shall be considered one and the same agreement and shall become
      effective when counterparts have been signed by each party and delivered to
      the
      other party, it being understood that both parties need not sign the same
      counterpart. In the event that any signature is delivered by facsimile
      transmission or by e-mail delivery of a “.pdf” format data file, such signature
      shall create a valid and binding obligation of the party executing (or on whose
      behalf such signature is executed) with the same force and effect as if such
      facsimile or “.pdf” signature page were an original thereof.

     

    5.12     Severability.
      If any term, provision, covenant or restriction of this Agreement is held by
      a
      court of competent jurisdiction to be invalid, illegal, void or unenforceable,
      the remainder of the terms, provisions, covenants and restrictions set forth
      herein shall remain in full force and effect and shall in no way be affected,
      impaired or invalidated, and the parties hereto shall use their commercially
      reasonable efforts to find and employ an alternative means to achieve the same
      or substantially the same result as that contemplated by such term, provision,
      covenant or restriction. It is hereby stipulated and declared to be the
      intention of the parties that they would have executed the remaining terms,
      provisions, covenants and restrictions without including any of such that may
      be
      hereafter declared invalid, illegal, void or unenforceable.

     

    5.13     Rescission
      and Withdrawal Right. Notwithstanding anything to the contrary contained in
      (and without limiting any similar provisions of) any of the other Transaction
      Documents, whenever any Purchaser exercises a right, election, demand or option
      under a Transaction Document and the Company does not timely perform its related
      obligations within the periods therein provided, then such Purchaser may rescind
      or withdraw, in its sole discretion from time to time upon written notice to
      the
      Company, any relevant notice, demand or election in whole or in part without
      prejudice to its future actions and rights; provided, however, in the case
      of a
      rescission of an exercise of a Warrant, the Purchaser shall be required to
      return any shares of Common Stock delivered in connection with any such
      rescinded exercise notice.

     

    
      
        
        

      

      
        27

        
          

        

      

      
        
        

      

    

    5.14     Replacement
      of Securities. If any certificate or instrument evidencing any Securities is
      mutilated, lost, stolen or destroyed, the Company shall issue or cause to be
      issued in exchange and substitution for and upon cancellation thereof (in the
      case of mutilation), 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. The applicant for a new certificate
      or instrument under such circumstances shall also pay any reasonable third-party
      costs (including customary indemnity) associated with the issuance of such
      replacement Securities.

     

    5.15     Remedies.
      In addition to being entitled to exercise all rights provided herein or granted
      by law, including recovery of damages, each of the Purchasers 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 contained in the
      Transaction Documents and hereby agrees to waive and not to assert in any action
      for specific performance of any such obligation the defense that a remedy at
      law
      would be adequate.

     

    5.16     Payment
      Set Aside. To the extent that the Company makes a payment or payments to any
      Purchaser pursuant to any Transaction Document or a Purchaser 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.

     

    5.17     Independent
      Nature of Purchasers’ Obligations and Rights. The obligations of each
      Purchaser under any Transaction Document are several and not joint with the
      obligations of any other Purchaser, and no Purchaser shall be responsible in
      any
      way for the performance or non-performance of the obligations of any other
      Purchaser under any Transaction Document. Nothing contained herein or in any
      other Transaction Document, and no action taken by any Purchaser pursuant
      thereto, shall be deemed to constitute the Purchasers as a partnership, an
      association, a joint venture or any other kind of entity, or create a
      presumption that the Purchasers are in any way acting in concert or as a group
      with respect to such obligations or the transactions contemplated by the
      Transaction Documents. Each Purchaser shall be entitled to independently protect
      and enforce its rights, including without limitation, the rights arising out
      of
      this Agreement or out of the other Transaction Documents, and it shall not
      be
      necessary for any other Purchaser to be joined as an additional party in any
      proceeding for such purpose. Each Purchaser has been represented by its own
      separate legal counsel in their review and negotiation of the Transaction
      Documents. For reasons of administrative convenience only, Purchasers and their
      respective counsel have chosen to communicate with the Company through FWS.
      FWS
      does not represent all of the Purchasers but only TR Winston. The Company has
      elected to provide all Purchasers with the same terms and Transaction Documents
      for the convenience of the Company and not because it was required or requested
      to do so by the Purchasers.

     

    
      
        
        

      

      
        28

        
          

        

      

      
        
        

      

    

    5.18     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.

     

    5.19     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.

     

    5.20     Waiver
      of Jury Trial. In any action, suit or proceeding in any jurisdiction brought
      by any party against any other party, the parties each knowingly and
      intentionally, to the greatest extent permitted by applicable law, hereby
      absolutely, unconditionally, irrevocably and expressly waives forever trial
      by
      jury.

     

    


     

    (Signature
      Pages Follow)

     


    
      
        
        

      

      
        29

        
          

        

      

      
        
        

      

    


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

     

    


    
      	
              NEURALSTEM,
                INC.

               

            	
              Address
                for Notice:

              9700
                Great Seneca Highway

              Rockville,
                Maryland 20850

            
	
              By:__________________________________________

              Name:

              Title:

            	
              Attn:

              e-mail:

              Tel:

              Fax:

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

            	 


    

    


    


    


    [REMAINDER
      OF PAGE INTENTIONALLY LEFT BLANK

    SIGNATURE
      PAGE FOR PURCHASER FOLLOWS]


    
      
        
        

      

      
        30

        
          

        

      

      
        
        

      

    


    [PURCHASER
      SIGNATURE PAGES TO NRLS SECURITIES PURCHASE AGREEMENT]

    


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

     

    


    
      	 

              Name
                of Purchaser:
                _______________________________________________________________________________________________________

               

              Signature
                of Authorized Signatory of Purchaser:
                _________________________________________________________________________________

               

              Name
                of Authorized Signatory:
                ______________________________________________________________________________________________

               

              Title
                of Authorized Signatory:
                _______________________________________________________________________________________________

               

              Email
                Address of Purchaser:
                _________________________________________________________________________________________________

               

              Fax
                Number of Purchaser:
                ___________________________________________________________________________________________________

               

              Address
                for Notice of Purchaser: 

            


    

    


    


    


    Address
      for Delivery of Securities for Purchaser (if not same as above):

    


    


    


    


    


    Subscription
      Amount:

    $:

    Shares:

    #:

    Warrant
      Shares:

    #:

    EIN
      Number:

    


    


    [SIGNATURE
      PAGES CONTINUE]

     


    
      
        
        

      

      
        31

        
          

        

      

      
        
        

      

    


    Annex
      A 

    


    CLOSING
      STATEMENT

    


    Pursuant
      to the attached Securities Purchase Agreement, dated as of the date hereto,
      the
      purchasers shall purchase up to $5,000,000 of Common Stock and Warrants from
      Neuralstem, Inc. (the “Company”).
      All
      funds will be wired into an account maintained by Company Counsel. All funds
      will be disbursed in accordance with this Closing Statement.

    


    Disbursement
      Date: 
      March
      ___, 2007

     

    


    
      	
              I.
                PURCHASE
                PRICE

            	 
	 	 
	
              Gross
                Proceeds to be Received 

            	
              $

            
	 	 
	
              II. DISBURSEMENTS

            	 
	
               

            	
              $

            
	
               

            	
              $

            
	 	
              $

            
	 	
              $

            
	 	
              $

            
	 	 
	
              Total
                Amount Disbursed:

            	
              $

            
	 	 
	 	 
	 	 
	
              WIRE
                INSTRUCTIONS:

            	 
	
              To:
                _____________________________________

               

            	 
	 	 
	 	 
	
              To:
                _____________________________________