Exhibit 10.1


 


SECURITIES PURCHASE AGREEMENT


 


This Securities Purchase
Agreement (this “Agreement”) is dated as of March 31, 2008 between
Advanced Cell Technology, 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: (a) capitalized terms that are not otherwise defined
herein have the meanings given to such terms in the Debentures (as defined
herein), and (b) the following terms have the meanings set forth in this Section 1.1:


 


“2005
Debentures” shall have the meaning ascribed to such term in Section 4.18(a).


 


 “2005 Purchase Agreement” shall have
the meaning ascribed to such term in Section 4.18(a).


 


“2005
Warrants” shall have the meaning ascribed to such term in Section 4.18(a).


 


 “2006 Debentures” shall have the
meaning ascribed to such term in Section 4.18(a).


 


 “2006 Purchase Agreement” shall have
the meaning ascribed to such term in Section 4.18(a).


 


“2006 Warrants”
shall have the meaning ascribed to such term in Section 4.18(a).


 


“2007
Debentures” shall have the meaning ascribed to such term in Section 4.18(a).


 


“2007
Purchase Agreement” shall have the meaning ascribed to such term in Section 4.18(a).


 

















 


“2007 Security
Agreement” shall have the meaning ascribed to such term in Section 4.18(a).


 


“2007
Warrants” shall have the meaning ascribed to such term in Section 4.18(a).


 


“Acquiring
Person” shall have the meaning ascribed to such term in Section 4.7.


 


“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.


 


“Board of
Directors” means the board of directors of the Company.


 


“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.


 


“Closing
Statement” means the Closing Statement in the form Annex A attached
hereto.


 


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


 


“Common
Stock” means the common stock of the Company, par value $0.001 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 Pierce Atwood LLP, with offices located at One Monument
Square, Portland, ME 04101.


 


2

















 


“Conversion
Price” shall have the meaning ascribed to such term in the Debentures.


 


“Debentures”
means the Original Issue Discount Senior Secured Convertible Debentures due,
subject to the terms therein, one year from their date of issuance, issued by
the Company to the Purchasers hereunder, in the form of Exhibit A
attached hereto.


 


“Disclosure
Schedules” shall have the meaning ascribed to such term in Section 3.1.


 


“Discussion
Time” shall have the meaning ascribed to such term in Section 3.2(f).


 


“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) options to employees, officers, directors or consultants (provided,
however, that issuances to consultants shall not exceed 500,000 shares in any
12 month period, subject to adjustment for reverse and forward stock splits,
stock interests, stock combinations and other similar transactions that occur
after the date of this Agreement; provided, further, that the issuance price of
such shares shall be equal to or greater than the VWAP on the Trading Day
immediately prior to the date of such issuance) of the Company pursuant to any
stock or option plan currently in effect or hereafter duly adopted by a
majority of the non-employee members of the Board of Directors or a majority of
the members of a committee of non-employee directors established for such
purpose, provided that the exercise price of such options shall not be less
than the VWAP on the Trading Day immediately prior to the grant of such
option), (b) securities upon the exercise or conversion of any securities
issued pursuant to this Agreement, convertible securities, options or warrants
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 any such securities except in accordance with their terms
as in effect as of the date hereof or (c) securities issued pursuant to
acquisitions or strategic transactions, provided any such issuance shall only
be made in connection with a transaction involving 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.


 


“Exercise
Price” shall have the meaning ascribed to such term in the Warrants.


 


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


 


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


 


3

















 


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


 


“Force
Majeure” shall mean any unusual event arising from causes reasonably beyond
the control of the Company that could not be reasonably anticipated that causes
a delay in or prevents the performance of any obligation under this Agreement
or the Transaction Documents, including but not limited to: acts of God; fire;
war; terrorism; insurrection; civil disturbance; explosion; adverse weather
conditions that could not be reasonably anticipated; unusual delay in
transportation; strikes or other labor disputes; restraint by court order or
order of public authority but not including delays solely caused by any action
of, or failure to act by, the Commission or the Transfer Agent.


 


“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).


 


“Maximum
Rate” shall have the meaning ascribed to such term in Section 5.17.


 


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


 


“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.


 


 “Pharmaceutical Product” shall have the
meaning ascribed to such term in Section 3.1(kk).


 


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


 


 “Principal Amount” means, as to each
Purchaser, the amounts set forth below such Purchaser’s signature block on the
signature pages hereto next to the heading 


 


4

















 


“Principal Amount,” in United
States Dollars, which shall equal such Purchaser’s Subscription Amount
multiplied by 1.255.


 


“Prior
Debentures” shall have the meaning ascribed to such term in Section 4.18(a).


 


 “Prior Purchase Agreements” shall have
the meaning ascribed to such term in Section 4.18(a).


 


“Prior
Purchaser” shall have the meaning ascribed to such term in Section 4.18(a).


 


“Prior
Transaction Documents” shall have the meaning ascribed to such term in Section 4.18(a).


 


 “Prior Warrants” shall have the meaning
ascribed to such term in Section 4.18(a).


 


 “Pro Rata Portion” shall have the
meaning ascribed to such term in Section 4.12(e).


 


“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 4.10.


 


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


 


“Required
Minimum” means, as of any date, the maximum aggregate number of shares of
Common Stock then issued or potentially issuable in the future pursuant to the
Transaction Documents, including any Underlying Shares issuable upon exercise
in full of all Warrants or conversion in full of all Debentures, ignoring any
conversion or exercise limits set forth therein, and assuming that the
Conversion Price is at all times on and after the date of determination 75% of
the then Conversion Price on the Trading Day immediately prior to the date of
determination.


 


“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 Debentures, the Warrants, the Warrant Shares and the Underlying
Shares.


 


5

















 


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


 


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


 


“Security
Documents” shall mean the Security Agreement, the Subsidiary Guarantees and
any other documents and filing required thereunder in order to grant the
Purchasers a first priority security interest in the assets of the Company and
the Subsidiaries as provided in the Security Agreement, including all UCC-1
filing receipts.


 


“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 Debentures 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(a).


 


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


 


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


 


 “Subsidiary Guarantee” means the
Subsidiary Guarantee, dated the date hereof, by each Subsidiary in favor of the
Purchasers, in the form of Exhibit E attached hereto.


 


“Trading
Day” means a day on which the principal Trading Market 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 Debentures, the Warrants, the Security
Agreement, the Subsidiary Guarantee, all exhibits and schedules thereto and
hereto and any other documents or agreements executed in connection with the
transactions contemplated hereunder.


 


6

















 


“Transfer
Agent” means Interwest Transfer Company, Inc., the current transfer
agent of the Company with a mailing address of 1981 East 4800 South, Suite 100,
Salt Lake City, UT 84117 and a facsimile number of 801-277-3147, and any
successor transfer agent of the Company.


 


“Underlying
Shares” means the shares of Common Stock issued and issuable upon
conversion or redemption of the Debentures and upon exercise of the Warrants.


 


“Variable
Rate Transaction” shall have the meaning ascribed to such term in Section 4.13(b).


 


“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 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 listed or 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 Securities
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 five 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, up to an aggregate of $6,275,000 in Principal Amount of the
Debentures.  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 Debenture and a Warrant, as determined pursuant to Section 2.2(a),
and 


 


7

















 


the Company
and each Purchaser shall deliver the other items set forth in Section 2.2
deliverable at the Closing.  Upon satisfaction
of the 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
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, in substantially the form of Exhibit B
attached hereto;


 


(iii)          a
Debenture with a principal amount equal to such Purchaser’s Principal Amount,
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 100% of such Purchaser’s Principal Amount
divided by the Conversion Price, with an exercise price equal to $0.165, subject to adjustment therein; and


 


(v)           the
Security Agreement, duly executed by the Company and each Subsidiary, along
with all of the Security Documents, including the Subsidiary Guarantee, duly
executed by the parties thereto.


 


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


 


(i)            this
Agreement duly executed by such Purchaser;


 


(ii)           such
Purchaser’s Subscription Amount by wire transfer to the account as specified in
writing by the Company; and


 


(iii)          the
Security 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


 


8

















 


(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 when made and 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;


 


(v)           the Company shall have received a sufficient number
of Purchasers such that the amendments set forth in Section 4.18 to the
Prior Transaction Documents are deemed effective;


 


(vi)          the
holders of the $600,000 principal amount of unsecured bridge notes issued by
the Company to on February 19, 2008 to JMJ Financial shall have agreed to
a permanent conversion floor on such notes of at least $0.15, 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, or such holders shall have exchanged the
notes, in full, into debentures in the form of the Debentures;


 


(vii)          the $130,000 in unsecured convertible notes
issued to PDPI LLC and The Shapiro Family Trust on March 21, 2008 shall
have exchanged such notes into Debentures on a $1 for $1 basis; and


 


(viii)        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 


 


9

















 


inadvisable to purchase the Securities at the Closing.


 


ARTICLE III.


REPRESENTATIONS AND WARRANTIES


 


3.1           Representations and Warranties of the Company.  Except as set forth in the Disclosure
Schedules, which Disclosure Schedules 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, 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, with the requisite power and authority to own
and use its properties and assets and to carry on its business as currently
conducted.  Neither the Company nor any
Subsidiary is in violation nor 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, 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.


 


(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 


 


10

















 


thereby have been duly authorized by all necessary action on the part
of the Company and no further action is required by the Company, the Board of
Directors or the Company’s stockholders in connection therewith other than in
connection with the Required Approvals. 
Each Transaction Document to which it is a party 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 by
the Company of the Transaction Documents and the consummation by it to which it
is a party 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 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, (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.


 


(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) the filings required pursuant to Section 4.6, (ii) the
notice and/or application(s) to each applicable Trading Market for the
issuance and sale of the Securities and the listing of the Underlying Shares
for trading thereon in the time and manner required thereby and (iii) 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 


 


11

















 


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 Underlying
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 a number of shares
of Common Stock for issuance of the Underlying Shares at least equal to the
Required Minimum on the date hereof.


 


(g)           Capitalization.  The list of the shareholders of the Company
holding in excess of five percent (5%) of the issued and outstanding stock of
the Company as of December 31, 2007, and stating in the aggregate the
number of shares held by shareholders holding less than five percent (5%) of
the outstanding stock of the Company and listing the number of shares of Common
Stock owned beneficially, and of record, by Affiliates of the Company as of the
date hereof is set forth on Schedule 3.1(g). 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 and/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, 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 or others is required for the issuance and
sale of the Securities.  There are no
stockholders agreements, voting agreements or other similar agreements with
respect to the Company’s capital stock to which the Company is a party or, to
the knowledge of the Company, between or among any of the Company’s
stockholders.


 


(h)           SEC
Reports; Financial Statements.  The
Company has filed all 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 


 


12

















 


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 Company has never been an issuer subject
to Rule 144(i) under the Securities Act. 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.  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.


 


13

















 


(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.


 


(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 material
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, 


 


14

















 


including without limitation all foreign, federal, state and local laws
applicable to its business except in each case as could not have a Material
Adverse Effect.


 


(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 that is material to the business of the Company and the
Subsidiaries 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, except in each
case as could not have a Material Adverse Effect.  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, except in each case as could no have a Material Adverse
Effect.


 


(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, licenses and other similar rights as
described in the SEC Reports as necessary or material for use in connection
with their respective businesses 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 in connection with their
respective businesses as described in the SEC Reports 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.


 


(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.  To the best
knowledge of the 


 


15

















 


Company, such
insurance contracts and policies are accurate and complete.  Neither the Company nor any Subsidiary has
any reason to believe that it will not be able to renew its existing insurance
coverage as and when such coverage expires or to obtain similar coverage from
similar insurers as may be necessary to continue its business without a
significant increase in cost.


 


(q)           Transactions
with Affiliates and Employees. 
Except as set forth in the SEC Reports, none of the officers or
directors of the Company and, to the knowledge of the Company, none of the
employees of the Company is presently a party to any transaction with the Company
or any Subsidiary (other than for services as employees, officers and
directors), including any contract, agreement or other arrangement providing
for the furnishing of services to or by, providing for rental of real or
personal property to or from, or otherwise requiring payments to or from any
officer, director or such employee or, to the knowledge of the Company, any
entity in which any officer, director, or any such employee has a substantial
interest or is an officer, director, trustee or partner, in each case in excess
of $120,000 other than 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
and the Subsidiaries maintain a system of internal accounting controls
sufficient to provide reasonable assurance that: (i) transactions are
executed in accordance with management’s general or specific authorizations, (ii) transactions
are recorded as necessary to permit preparation of financial statements in
conformity with GAAP and to maintain asset accountability, (iii) access to
assets is permitted only in accordance with management’s general or specific
authorization, and (iv) the recorded accountability for assets is compared
with the existing assets at reasonable intervals and appropriate action is
taken with respect to any differences. The Company has established disclosure
controls and procedures (as defined in Exchange Act Rules 13a-15(e) and
15d-15(e)) for the Company and designed such disclosure controls and procedures
to ensure that information required to be disclosed by the Company in the
reports it files or submits under the Exchange Act is recorded, processed,
summarized and reported, within the time periods specified in the Commission’s rules and
forms.  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.


 


16
















 


(s)           Certain Fees.  Except as set forth on Schedule 3.1(s),
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.


 


(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.  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 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 not taken any affirmative measures or action, to
institute 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,
other than those provisions of Delaware law generally applicable to
corporations organized under the laws of that State.


 


17

















 


(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, nonpublic
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 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.


 


(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 and assuming
for purposes of this representation that the Securities are all converted into
equity, (i) the Company’s 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 for the current fiscal year
as now conducted and as proposed to be conducted including its capital needs
taking into account the particular capital requirements of the business conducted
by the Company, and projected capital requirements and capital availability
thereof, and (iii) the current cash flow of the Company, together with the
proceeds the Company would receive, were it to liquidate all of its assets,
after taking into account all anticipated uses of the cash, would be sufficient
to pay all amounts on or in respect of its 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 hereof all outstanding secured and unsecured 


 


18

















 


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 (x) 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), (y) 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 (z) 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.


 


(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 Schedules.  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 for the year ended December 31, 2007.


 


(ff)           Seniority.  As of the Closing Date, no Indebtedness or
other claim against the Company is senior to the Debentures in right of
payment, whether with respect to interest or upon liquidation or dissolution,
or otherwise, other than general unsecured indebtedness incurred in connection
with equipment and real estate financing customary 


 


19

















 


for research
and development companies, accounts payables and indebtedness secured by
purchase money security interests (which is senior only as to underlying assets
covered thereby) and capital lease obligations (which is senior only as to the
property covered thereby), which indebtedness is set forth on Schedule
3.1(ff).


 


(gg)         No Disagreements with Accountants
and Lawyers.  There are no
disagreements of any kind presently existing, or reasonably anticipated by the
Company to arise, between the Company and the accountants and lawyers formerly
or presently employed by the Company and the Company has fully accrued all
amounts owed to its accountants and lawyers which could affect the Company’s
ability to perform any of its obligations under any of the Transaction
Documents.


 


(hh)         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.


 


(ii)           Acknowledgment Regarding
Purchasers’ Trading Activity. 
Notwithstanding anything in this Agreement or elsewhere herein to the
contrary, it is understood and acknowledged by the Company that: (i) none
of the Purchasers has been asked to agree by the Company, 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) past or
future open market or other transactions by any Purchaser, 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) any Purchaser, and counter-parties in “derivative” transactions to
which any such Purchaser is a party, directly or indirectly, may presently have
a “short” position in the Common Stock and (iv) 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 (y) 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 Underlying Shares deliverable with
respect to Securities are being determined, and (z) 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 


 


20

















 


aforementioned
hedging activities do not constitute a breach of any of the Transaction
Documents.


 


(jj)           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 of the Company, 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.


 


(kk)         FDA.  As to each product subject to the jurisdiction of the U.S. Food
and Drug Administration (“FDA”)
under the Federal Food, Drug and Cosmetic Act, as amended, and the regulations
thereunder (“FDCA”) that
is manufactured, packaged, labeled, tested, distributed, sold, and/or marketed
by the Company or any of its Subsidiaries (each such product, a “Pharmaceutical Product”), such
Pharmaceutical Product is being manufactured, packaged, labeled, tested,
distributed, sold and/or marketed by the Company in compliance with all
applicable requirements under FDCA and similar laws, rules and regulations
relating to registration, investigational use, premarket clearance, licensure,
or application approval, good manufacturing practices, good laboratory
practices, good clinical practices, product listing, quotas, labeling,
advertising, record keeping and filing of reports, except where the failure to
be in compliance would not have a Material Adverse Effect.  There is no pending, completed or, to the
Company’s knowledge, threatened, action (including any lawsuit, arbitration, or
legal or administrative or regulatory proceeding, charge, complaint, or
investigation) against the Company or any of its Subsidiaries, and none of the
Company or any of its Subsidiaries has received any notice, warning letter or
other communication from the FDA or any other governmental entity, which (i) contests
the premarket clearance, licensure, registration, or approval of, the uses of,
the distribution of, the manufacturing or packaging of, the testing of, the
sale of, or the labeling and promotion of any Pharmaceutical Product, (ii) withdraws
its approval of, requests the recall, suspension, or seizure of, or withdraws
or orders the withdrawal of advertising or sales promotional materials relating
to, any Pharmaceutical Product, (iii) imposes a clinical hold on any
clinical investigation by the Company or any of its Subsidiaries, (iv) enjoins
production at any facility of the Company or any of its Subsidiaries, (v) enters
or proposes to enter into a consent decree of permanent injunction with the
Company or any of its Subsidiaries, or (vi) otherwise alleges any
violation of any laws, rules or regulations by the Company or any of its
Subsidiaries, and which, either individually or in the aggregate, would have a
Material Adverse Effect.  The properties, business and operations of the
Company have been and are being conducted in all material respects in
accordance with all applicable laws, rules and regulations of the
FDA.  The Company has not been informed by the FDA that the FDA will
prohibit the marketing, sale, license or use in the United States of any
product proposed to be developed, produced or marketed by the Company nor has
the FDA expressed any concern as to approving or clearing for marketing 


 


21

















 


any product being developed or proposed to be
developed by the Company.


 


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 a
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. Such Purchaser does not have
any agreement or understanding, directly or indirectly, with any Person to
distribute any of the Securities.


 


(c)           Purchaser Status.  At the time such Purchaser was offered the
Securities, it was, and as of the date hereof it is, and on each date on which
it exercises any Warrants or converts any Debentures 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.


 


22

















 


(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.


 


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.


 


(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 substantially in the following form:


 


[NEITHER] THIS SECURITY [NOR
THE SECURITIES INTO WHICH THIS SECURITY IS [EXERCISABLE] [CONVERTIBLE]] 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 


 


23

















 


COMPANY.  THIS SECURITY [AND THE SECURITIES ISSUABLE
UPON [EXERCISE] [CONVERSION] OF THIS SECURITY] MAY BE PLEDGED IN
CONNECTION WITH A BONA FIDE MARGIN ACCOUNT 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, 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, 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 Underlying Shares
shall not contain any legend (including the legend set forth in Section 4.1(b) hereof):
(i) while a registration statement covering the resale of such security is
effective under the Securities Act, (ii) following any sale of such
Underlying Shares pursuant to Rule 144, (iii) if such Underlying
Shares are eligible for sale under Rule 144, without the requirement for
the Company to be in compliance with the current public information required
under Rule 144 as to such Underlying Shares and without volume or
manner-of-sale restrictions 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
if required by the Transfer Agent to effect the removal of the legend
hereunder.  If all or any portion of a
Debenture is converted or Warrant is exercised at a time when there is an effective
registration statement to cover the resale of the Underlying Shares, or if such
Underlying Shares may be sold under Rule 144, without the requirement for
the Company to be in compliance with the current public information required
under Rule 144 as to such Underlying Shares and without volume or
manner-of-sale restrictions or if such legend is not otherwise required under
applicable requirements of the Securities Act (including judicial
interpretations and pronouncements issued by the staff of the Commission) then
such Underlying Shares shall be issued free of all legends.  The Company agrees that 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 Underlying Shares, as
applicable, 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 


 


24

















 


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 4.  Certificates for Underlying Shares 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.


 


(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 Underlying 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 5 Trading Days after such damages have begun to accrue) for
each Trading Day after 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.


 


(f)            No
liquidated damages, financial penalty or other remedies provided for under this
Agreement, or any of the other Transaction Documents, in the event of delay in
delivery of share certificates or delay in the de-legending of share
certificates beyond any applicable deadline provided for herein, or therein, by
the Company, shall apply as to a Purchaser in the event such delay is the
result of (i) solely the fault of such Purchaser or (ii) any Force
Majeure, provided that the Company shall continue to use best efforts to cause
such delivery or de-legending as soon as possible.


 


4.2           Acknowledgment of
Dilution.  The Company acknowledges
that the issuance of the Securities may result in dilution of the outstanding
shares of Common Stock, which dilution may be substantial under certain market
conditions.  The Company further
acknowledges that its obligations under the Transaction Documents, including,
without limitation, its obligation to issue the Underlying Shares pursuant to
the Transaction Documents, are unconditional and absolute and not subject to
any right of set off, counterclaim, delay or reduction, regardless of the effect
of any such dilution or any claim the Company may have against any Purchaser
and regardless of the dilutive effect that such issuance may have on the
ownership of the other stockholders of the Company.


 


25

















 


4.3           Furnishing
of Information.  If the Common Stock
is not registered under Section 12(b) or 12(g) of the Exchange Act on the date
hereof, the Company agrees to cause the Common Stock to be registered under
Section 12(g) of the Exchange Act on or before the 60th calendar day following
the date hereof. Until the time that no Purchaser owns Securities, the Company
covenants to maintain the registration of the Common Stock under Section 12(b)
or 12(g) of the Exchange Act and 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.    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.


 


4.4           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 to the Purchasers 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 for purposes of the rules and regulations of any Trading
Market.


 


4.5           Conversion and
Exercise Procedures.  Each of the
form of Notice of Exercise included in the Warrants and the form of Notice of
Conversion included in the Debentures  set
forth the totality of the procedures required of the Purchasers in order to
exercise the Warrants or convert the Debentures.  No additional legal opinion, other
information or instructions shall be required of the Purchasers to exercise
their Warrants or convert their Debentures. 
The Company shall honor exercises of the Warrants and conversions of the
Debentures and shall deliver Underlying Shares in accordance with the terms,
conditions and time periods set forth in the Transaction Documents.


 


4.6           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,
reasonably acceptable to the placement agents, disclosing the material terms of
the transactions contemplated hereby and including 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 nor 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 


 


26

















 


Market, without the prior written consent of
such Purchaser, except: (a) as required by federal securities law in
connection with the filing of final Transaction Documents (including signature pages thereto)
with the Commission and (b) 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
(b).


 


4.7           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.


 


4.8           Non-Public
Information.  The Company covenants
and agrees that, except as specifically required to comply with the terms of
the Transaction Documents, 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.


 


4.9           Use of Proceeds.  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: (a) 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), (b) the redemption of any Common
Stock or Common Stock Equivalents or (c) the settlement of any outstanding
litigation.


 


4.10         Indemnification
of Purchasers.   Subject to the
provisions of this Section 4.10, 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 person (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 


 


27

















 


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 (y) for any
settlement by a Purchaser Party effected without the Company’s prior written
consent, which shall not be unreasonably withheld or delayed; or (z) 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.


 


4.11         Reservation and
Listing of Securities.


 


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


 


(b)           If, on any date, the number of
authorized but unissued (and otherwise unreserved) shares of Common Stock is
less than the Required Minimum on such date, then the Board of Directors shall
use commercially reasonable efforts to amend the Company’s certificate or
articles of incorporation to increase the number of authorized but unissued
shares of Common Stock to at least the Required Minimum at such time, as soon
as possible and in any event not later than the 75th day after such date.


 


(c)           The Company shall, if applicable: (i) in
the time and manner required by the principal Trading Market, prepare and file
with such Trading Market an additional shares listing application covering a
number of shares of Common Stock at least equal to the Required Minimum on the
date of such application, (ii) take all steps necessary to cause such
shares of Common Stock to be approved for listing on such Trading Market as
soon as possible thereafter, (iii) provide to the Purchasers evidence of
such listing and (iv) maintain the listing of such Common Stock on any
date at least equal to the Required Minimum on such date on such Trading Market
or another Trading Market.


 


28

















 


4.12         Participation in
Future Financing.


 


(a)           From the date hereof until a
Purchaser of Debentures (or their permitted assigns) holds less than 50% of the
Principal Amount of Debenture initially purchased pursuant to this Agreement,
upon any financing by the Company or any of its Subsidiaries of Common Stock or
Common Stock Equivalents, Indebtedness (or a combination of units hereof) (a “Subsequent
Financing”), each Purchaser shall have the right to participate in up to an
amount of the Subsequent Financing 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 


 


29

















 


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 30 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.


 


4.13         Subsequent Equity
Sales.


 


(a)           From the date hereof until 270 days
after the Closing Date, neither the Company nor any Subsidiary shall issue
shares of Common Stock or Common Stock Equivalents; provided, however,
the 270 day period set forth in this Section 4.13 shall be extended for
the number of Trading Days during such period in which trading in the Common
Stock is suspended by any Trading Market.


 


(b)           From the date hereof until such time
as no Purchaser holds any of the Securities, 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 price, exercise price 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.


 


(c)           From the date hereof until such time
as no Purchaser holds any of the Securities, in the event the Company issues or
sells any shares of Common Stock or Common Stock Equivalents, if a Purchaser
reasonably believes that any of the terms and conditions thereunder are more
favorable to such investors as the terms and conditions granted hereunder, upon
notice to the Company by such Purchaser the Company shall amend the terms of
this transaction as to such Purchaser only so as to give such Purchaser the
benefit of such more favorable terms or conditions.


 


(d)           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.


 


30

















 


4.14         Equal Treatment of
Purchasers.  No consideration
(including any modification of any Transaction Document) 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. Further, the
Company shall not make any payment of principal on the Debentures in amounts
which are disproportionate to the respective Principal Amounts outstanding on
the Debentures at any applicable time. 
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.


 


4.15         [Intentionally
Deleted]


 


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.  So long as any Debentures remain outstanding,
the Company shall not undertake a reverse or forward stock split or
reclassification of the Common Stock without the prior written consent of the
Purchasers then holding at least 67% of the Principal Amount outstanding of the
Debentures.


 


4.18         Certain Amendments.


 


(a)          The
Company entered into the following agreements: (i) the Securities Purchase
Agreement, dated September 15, 2005 by and among the Company and the
purchasers signatory thereto (the “2005 Purchase Agreement”) for the
issuance of amortizing convertible debentures (the “2005 Debentures”) and
common stock purchase warrants (the “2005 Warrants”), (ii) the
Securities Purchase Agreement, dated August 30, 2006 by and among the
Company and the purchasers signatory thereto (the “2006 Purchase Agreement”)
for the issuance of amortizing convertible debentures (the “2006 Debentures”)
and common stock purchase warrants (the “2006 Warrants”), and (iii) the
Securities Purchase Agreement, dated August 31, 2007 by and among the
Company and the purchasers signatory thereto (the “2007 Purchase Agreement”,
collectively with the 2005 Purchase Agreement and the 2006 Purchase Agreement,
the “Prior Purchase Agreements”) for the issuance of amortizing
convertible debentures (the “2007 Debentures”, together with the 2005
Debentures and the 2006 Debentures, the “Prior Debentures”) and common
stock purchase warrants (the “2007 Warrants”, together with the 2005
Warrants and the 2006 Warrants, the “Prior Warrants”) and the Security
Agreement, dated August 31, 2007, by and among the Company and the secured
parties signatory thereto (the “2007 Security Agreement”). The Prior
Purchase Agreements, 


 


31

















 


Prior Debentures, Prior Warrants and 2007 Security Agreement are
hereinafter collectively referred to as the “Prior Transaction Documents.”
In connection with the transactions contemplated by the Transaction Documents,
and, if and only if, (y) a purchaser from a Prior Purchase Agreement (“Prior
Purchaser”) is also a Purchaser and (z) such Purchaser still holds the
Prior Debentures or the Prior Warrants, the Company hereby agrees to amend the
terms of the applicable Prior Transaction Documents as follows:


 


(i)            The
“Conversion Price” of the Prior Debentures held by Purchasers purchasing their
pro-rata share (based on initial purchases of the 2007 Debentures) of Debenture
hereunder (but not the Prior Debenture held by non-participating Prior
Purchasers) is hereby reduced to equal $0.15, subject to further adjustment
therein;


 


(ii)           The
“Exercise Price” of the Prior Warrants held by Purchasers purchasing their
pro-rata share (based on initial purchases of the 2007 Debentures) of
Debentures hereunder (but not the Prior Warrants held by non-participating
Prior Purchasers) is hereby reduced to equal $0.165, subject to further
adjustment therein;


 


(iii)          The
definition of “Exempt Issuance” in each of the Prior Purchase Agreements shall
include (in addition to existing Exempt Issuances) (i) the transactions
contemplated under this Agreement, (ii) the issuance of additional
Debentures to Prior Purchasers in lieu of cash payments of any outstanding fees
or expenses incurred prior to the date hereof pursuant to the terms of the
Prior Transaction Documents on a $1 for $1 basis, (iii) the $600,000
principal amount of unsecured bridge notes issued by the Company to on February 19,
2008 to JMJ Financial and the $130,000 in unsecured convertible notes issued to
PDPI LLC and The Shapiro Family Trust on March 21, 2008 and (iv) the
issuance of Debentures to service providers of the Company in lieu of cash payments
for amounts incurred prior to the date hereof and set forth in the Disclosure
Schedules, including the payment of placement agent fees hereunder and accrued
but unpaid legal and consulting fees and expenses;


 


(iv)          The
definition of “Variable Rate Transaction” in each of the Prior Purchase
Agreements is amended to exclude the transactions contemplated under this
Agreement, the $600,000 principal amount of unsecured bridge notes issued by
the Company to on February 19, 2008 to JMJ Financial and the $130,000 in
unsecured convertible notes issued to PDPI LLC and The Shapiro Family Trust on March 21,
2008;


 


(v)           Section 9(b)(ii) of
the 2007 Security Agreement is hereby amended to be: “(ii) agree that the
2006 Transaction Documents or any provision thereof, may be modified or amended
or the provisions hereof waived with the prior written consent of the Company
and the holders holding at least 67% of the principal amount of the Company’s
debentures held by the Secured Parties.”;


 


32
















 


(vi)          Section 9(c)(ii) of
the 2007 Security Agreement is amended to be: “(ii) agree that the 2005
Transaction Documents or any provision thereof, may be modified or amended or
the provisions hereof waived with the prior written consent of the Company and
the holders holding at least 67% of the principal amount of the Company’s
debentures held by the Secured Parties.”;


 


(vii)         The
second sentence of Section 19(c) of the 2007 Security Agreement is
amended to be: “No provision of the Transaction Documents may be waived,
modified, supplemented or amended except in a written instrument signed by the
Debtors and the holders holding at least 67% of the principal amount of the
Company’s debentures held by the Secured Parties.”;


 


(viii)        Section 9
of the 2007 Security Agreement is hereby amended such that the “Obligations”
under the Security Agreement shall rank in the order or priority pari  passu  and pro-rata with the “Obligations”
under the 2007 Security Agreement; and


 


(ix)           Such
Purchaser consents to the consummation of the transaction contemplated pursuant
to this Agreement and waives all items set forth on Schedule 4.18(a).


 


Subject to the amendments provided in this Section 4.18, all of
the terms and conditions of the Prior Transaction Documents shall continue in full
force and effect after the execution of this Agreement and shall not be in any
way changed, modified or superseded by the terms set forth herein, including
but not limited to, any other obligations the Company may have to the
purchasers under the Prior Purchase Agreements. 
Except as expressly set forth herein, this Section 4.18 shall not
be deemed to be a waiver, amendment or modification of any provisions of the
Prior Purchase Agreements or the respective transaction documents or of any
right, power or remedy of the purchasers, or constitute a waiver of any
provision of the Prior Purchase Agreements or the respective transaction
documents (except to the extent set forth in this Section 4.18), or any
other document, instrument and/or agreement executed or delivered in connection
therewith, in each case whether arising before or after the date hereof or as a
result of performance hereunder or thereunder.


 


(b)           The
Purchasers and the Company agree that the Prior Transaction Documents are
hereby amended to provide that if a Prior Purchaser is not a Purchaser pursuant
to this Agreement, such Prior Purchaser shall be deemed to have consented to
the consummation of the transaction contemplated pursuant to this Agreement,
the $600,000 principal amount of unsecured bridge notes issued by the Company
to on February 19, 2008 to JMJ Financial and the $130,000 in unsecured
convertible notes issued to PDPI LLC and The Shapiro Family Trust on March 21,
2008, waived any Events of Default or default that has occurred or would
otherwise occur under the Prior Transaction Documents, or any registration
rights agreements (without waiving the right of the Prior Purchasers to receive
accrued but unpaid liquidated damages in kind incurred 


 


33

















 


prior to the date hereof), documents or agreements related to the
financing contemplated by the Prior Transaction Documents, and waived any
rights to prohibit, participate in, collect liquidated damages with respect to
or otherwise take any action solely as a result of the Company entering into
and consummating this Agreement, the $600,000 principal amount of unsecured
bridge notes issued by the Company to on February 19, 2008 to JMJ
Financial or the $130,000 in unsecured convertible notes issued to PDPI LLC and
The Shapiro Family Trust on March 21, 2008.


 


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 March       ,
2008; provided, however, that such termination will not 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 T.R. Winston & Company, LLC (“T.R. Winston”) the
non-accountable sum of $20,000 for its legal fees and expenses, $10,000 of
which has been paid prior to closing. 
Accordingly, in lieu of the foregoing payments, the aggregate amount
that T.R. Winston is to pay for the Securities at the Closing shall be reduced
by $10,000 in lieu thereof. The Company shall deliver to each Purchaser, 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.


 


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
second Trading Day following the date of mailing, if sent by U.S. nationally
recognized overnight courier service or (d) upon actual 


 


34

















 


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, modified, supplemented or amended except in a written
instrument signed, in the case of an amendment, by the Company and the
Purchasers holding at least 67% in interest of the Securities then outstanding
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 that 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 4.10.


 


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 


 


35

















 


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.


 


5.10         Survival.  The representations and warranties shall
survive the Closing and the delivery of the Securities for the applicable
statute of limitations.


 


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, that in the case of a
rescission of a conversion of a Debenture or exercise of a Warrant, the
Purchaser shall be required to return any shares of Common Stock subject to any
such rescinded conversion or exercise notice.


 


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 


 


36

















 


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         Usury.  To the extent it may lawfully do so, the
Company hereby agrees not to insist upon or plead or in any manner whatsoever
claim, and will resist any and all efforts to be compelled to take the benefit
or advantage of, usury laws wherever enacted, now or at any time hereafter in
force, in connection with any claim, action or proceeding that may be brought
by any Purchaser in order to enforce any right or remedy under any Transaction
Document.  Notwithstanding any provision
to the contrary contained in any Transaction Document, it is expressly agreed
and provided that the total liability of the Company under the Transaction
Documents for payments in the nature of interest shall not exceed the maximum
lawful rate authorized under applicable law (the “Maximum Rate”), and,
without limiting the foregoing, in no event shall any rate of interest or
default interest, or both of them, when aggregated with any other sums in the
nature of interest that the Company may be obligated to pay under the
Transaction Documents exceed such Maximum Rate. 
It is agreed that if the maximum contract rate of interest allowed by
law and applicable to the Transaction Documents is increased or decreased by
statute or any official governmental action subsequent to the date hereof, the
new maximum contract rate of interest allowed by law will be the Maximum Rate
applicable to the Transaction Documents from the effective date forward, unless
such application is precluded by applicable law.  If under any circumstances whatsoever,
interest in excess of the Maximum Rate is paid by the Company to any Purchaser
with respect to indebtedness evidenced by the Transaction Documents, such excess
shall be applied by such Purchaser to the unpaid principal balance of any such
indebtedness or be refunded to the Company, the manner of handling such excess
to be at such Purchaser’s election.


 


37

















 


5.18         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 T.R. 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.


 


5.19         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.


 


5.20         Saturdays,
Sundays, Holidays, etc.  If the last
or appointed day for the taking of any action or the expiration of any right
required or granted herein shall not be a Business Day, then such action may be
taken or such right may be exercised on the next succeeding Business Day.


 


5.21         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.


 


5.22         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.


 


38

















 


(Signature Pages Follow)


 


39

















 


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.


 


	
  ADVANCED CELL TECHNOLOGY, INC.

  	
  Address for Notice:

  
	
   

  	
   

  
	
   

  	
   

  
	
  By:

  	
  /s/ William M. Caldwell, IV

  	
   

  	
  Fax: 310-481-0833

  
	
         Name: William M. Caldwell, IV

  	
   

  
	
         Title: Chairman & CEO

  	
   

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

  	
   

  
				



 


 


[REMAINDER OF PAGE
INTENTIONALLY LEFT BLANK


SIGNATURE PAGE FOR PURCHASER
FOLLOWS]


 


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[PURCHASER SIGNATURE PAGES TO ACTC 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 Authorized Signatory:

  	
   

  	
   

  
	
   

  	
   

  
	
  Facsimile Number of Authorized Signatory:

  	
   

  	
   

  
	
   

  	
   

  
	
   

  	
   

  
	
  Address for Notice of Purchaser:

  	
   

  
	
   

  	
   

  
	
   

  	
   

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

  	
   

  
	
   

  	
   

  
	
   

  	
   

  
	
  Subscription Amount:

  	
   

  
	
   

  	
   

  
	
  Principal Amount (1.255x
  Subscription Amount):

  	
   

  
	
   

  	
   

  
	
  Warrant Shares:

  	
   

  
	
   

  	
   

  
	
  Adjusted Conversion Price for 2005
  Debenture (if applicable):

  	
   

  
	
  Adjusted Conversion Price for 2006
  Debenture: (if applicable):

  	
   

  
	
  Adjusted Conversion Price for 2007
  Debenture: (if applicable):

  	
   

  
	
  Adjusted Exercise Price for 2005 Warrant: (if applicable):

  	
   

  
	
  Adjusted Exercise Price for 2006 Warrant: (if applicable):

  	
   

  
	
  Adjusted Exercise Price for 2007 Warrant: (if applicable):

  	
   

  
								



 


 


EIN Number:  [PROVIDE
THIS UNDER SEPARATE COVER]


 


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