APNS 10QSB Exhibit 10.2


    
      

    


    EXHIBIT
      10.2

    


    EXHIBIT
      B

    


    REGISTRATION
      RIGHTS AGREEMENT

    


    This
      Registration Rights Agreement (the “Agreement”) is made and entered into as of
      this 28th day of September, 2007, by and among Applied NeuroSolutions, Inc.,
      a
      Delaware corporation (the “Company”), and SF Capital Partners Ltd., a British
      Virgin Islands corporation (the “Investor”).

     

    The
      parties hereby agree as follows:

     

    1. Certain
      Definitions.

     

    As
      used
      in this Agreement, the following terms shall have the following
      meanings:

     

    “Affiliate”
means,
      with respect to any person, any other person which directly or indirectly
      controls, is controlled by, or is under common control with, such
      person.

     

    “Business
      Day”
means
      a
      day, other than a Saturday or Sunday, on which banks in New York City are open
      for the general transaction of business.

     

    “Common
      Stock”
shall
      mean the Company’s common stock, par value $0.0025 per share, and any securities
      into which such shares may hereinafter be reclassified.

     

    “Effectiveness
      Period”
shall
      have the meaning set forth in Section 3(a).

     

    “Effectiveness
      Deadline”
means,
      with respect to the initial Registration Statement required to be filed
      hereunder, the 120th
      calendar
      day after the Closing (150th
      calendar
      day if the SEC reviews the registration statement) and, with respect to any
      additional Registration Statements which may be required pursuant to Section
      3(e), the 120th
      calendar
      day following the date on which an additional Registration Statement is required
      to be filed hereunder.

     

    “Filing
      Deadline”
means,
      with respect to the initial Registration Statement required hereunder, the
      45th
      calendar
      day following the Closing (as defined in the Purchase Agreement) and, with
      respect to any additional Registration Statements which may be required pursuant
      to Section 3(e), the earliest practical date on which the Company is permitted
      by SEC Guidance to file such additional Registration Statement related to the
      Registrable Securities.

     

    “Investor”
shall
      mean the Investor and any Affiliate or permitted transferee of any Investor
      who
      is a subsequent holder of any Warrants or Registrable Securities covered by
      this
      Registration Rights Agreement.

     

    “Prospectus”
shall
      mean the prospectus included in any Registration Statement, as amended or
      supplemented by any prospectus supplement, with respect to the terms of the
      offering of any portion of the Registrable Securities covered by such
      Registration Statement and by all other amendments and supplements to the
      prospectus, including post-effective amendments and all material incorporated
      by
      reference in such prospectus.

     

    “Purchase
      Agreement”
shall
      mean the purchase agreement entered into among the Company and the
      Investor.

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

    “Register,”
      “registered”
and
      “registration”
refer
      to a registration made by preparing and filing a Registration Statement or
      similar document in compliance with the 1933 Act (as defined below), and the
      declaration or ordering of effectiveness of such Registration Statement or
      document.

     

    “Registrable
      Securities”
shall
      mean the Shares and the shares of Common Stock issuable (i) upon the exercise
      of
      the Warrants, if any, and (ii) any other securities issued or issuable with
      respect to or in exchange for Registrable Securities; provided, that, a security
      shall cease to be a Registrable Security upon (A) sale pursuant to a
      Registration Statement or Rule 144 under the 1933 Act, or (B) such security
      becoming eligible for sale by the Investor pursuant to Rule 144(k).

     

    “Registration
      Statement”
shall
      mean any registration statement of the Company filed under the 1933 Act that
      covers the resale of any of the Registrable Securities pursuant to the
      provisions of this Agreement, amendments and supplements to such Registration
      Statement, including post-effective amendments, all exhibits and all material
      incorporated by reference in such Registration Statement.

     

    “SEC”
means
      the U.S. Securities and Exchange Commission.

     

    “SEC
      Guidance”
means
      (i) any publicly available written or oral guidance, comments, requirements
      or
      requests of the Commission staff and (ii) the Securities Act.

     

    “Shares”
means
      the shares of Common Stock issued pursuant to the Purchase
      Agreements.

     

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

     

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

     

    “Warrants”
means,
      the warrants to purchase shares of Common Stock issued to the Investor pursuant
      to the Purchase Agreement.

     

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

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

    2. Registration.

     

    (a)  Registration
      Statements.
      On or
      prior to each Filing Deadline, the Company shall prepare and file with the
      SEC
      one Registration Statement on Form SB-2, covering the resale of all or such
      portion of the Registrable Securities as permitted by SEC Guidance (provided
      that the Company shall use diligent efforts to advocate with the Commission
      for
      the registration of all of the Registrable Securities in accordance with the
      SEC
      Guidance, including without limitation, the Manual of Publicly Available
      Telephone Interpretations D.29) that are not then registered on an effective
      Registration Statement for an offering to be made on a continuous basis pursuant
      to Rule 415. Such Registration Statement shall include the plan of distribution
      attached hereto as Appendix
      A.
      Such
      Registration Statement also shall cover, to the extent allowable under the
      1933
      Act and the rules promulgated thereunder (including Rule 416), such
      indeterminate number of additional shares of Common Stock resulting from stock
      splits, stock dividends or similar transactions with respect to the Registrable
      Securities. The Company shall include in a Registration Statement only the
      Registrable Securities and those securities set forth in Schedule
      2(a)
      annexed
      hereto (the “Piggyback Shares”). Each Registration Statement (and each amendment
      or supplement thereto, and each request for acceleration of effectiveness
      thereof) shall be provided in accordance with Section 3(c) to the Investor
      and
      their counsel prior to its filing or other submission. If the initial
      Registration Statement covering the Registrable Securities is not filed with
      the
      SEC on or prior to the initial Filing Deadline, the Company will make payments
      to the Investor, as liquidated damages and not as a penalty, in an amount equal
      to 1.0% of the aggregate purchase price paid by the Investor pursuant to the
      Purchase Agreement for each 30-day period or pro rata for any portion thereof
      following the date by which such Registration Statement should have been filed
      for which no Registration Statement is filed with respect to the Registrable
      Securities (subject to the cap set forth in Section 2(c)(i) hereof). Such
      payments shall constitute the Investor’s exclusive remedy for such events;
      provided, however, that the Investor shall retain the right to pursue any
      equitable remedies available to it with respect to such events. Such payments
      shall be made to the Investor in cash. Notwithstanding
      any other provision of this Agreement, if any SEC Guidance sets forth a
      limitation on the number of Registrable Securities permitted to be registered
      on
      a particular Registration Statement (and notwithstanding that the Company used
      diligent efforts to advocate with the Commission for the registration of all
      or
      a greater number of Registrable Securities), unless otherwise directed in
      writing by the Investor as to its Registrable Securities, the number of
      Registrable Securities to be registered on such Registration Statement will
      first be reduced by Registrable Securities represented by Warrant Shares, and
      second by Registrable Securities represented by Shares.
      If
      any SEC
      Guidance sets forth a limitation on the number of both Registrable Securities
      and Piggyback Shares permitted to be registered on a particular Registration
      Statement (and notwithstanding that the Company used diligent efforts to
      advocate with the Commission for the registration of all or a greater number
      of
      Registrable Securities and Piggyback Shares), the number of Registrable
      Securities and Piggyback Shares to be registered on such Registration Statement
      will reduced first by the Piggyback Shares, second by Registrable Securities
      represented by Warrant Shares and third by Registrable Securities represented
      by
      Shares.
      Promptly
      following the date (the “Qualification
      Date”)
      upon
      which the Company becomes eligible to use a registration statement on Form
      S-3
      to register the Registrable Securities for resale, but in no event more than
      thirty (30) days after the Qualification Date (the “Qualification
      Deadline”),
      the
      Company shall file a registration statement on Form S-3 covering the Registrable
      Securities (or a post-effective amendment on Form S-3 to any registration
      statement on Form SB-2) (an “S-3
      Registration Statement”)
      and
      shall use best efforts to cause such S-3 Registration Statement to be declared
      effective as promptly as practicable thereafter. The Company shall file an
      S-3
      Registration Statement for any additional Registration Statement required to
      be
      filed by the Company pursuant to Section 3(e) hereof.

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

     

    (b)  Expenses.
      The
      Company will pay all expenses associated with each registration, including
      filing and printing fees, the Company’s counsel and accounting fees and
      expenses, costs associated with clearing the Registrable Securities for sale
      under applicable state securities laws, listing fees and the Investor’s
      reasonable expenses in connection with the registration, but excluding fees
      and
      expenses of counsel to the Investor, discounts, commissions, fees of
      underwriters, selling brokers, dealer managers or similar securities industry
      professionals with respect to the Registrable Securities being
      sold.

     

    (c)  Effectiveness.

     

    (i) The
      Company shall use best efforts to have a Registration Statement declared
      effective by the Effectiveness Deadline. The Company shall telephonically
      request effectiveness of a Registration Statement as of 5:00 p.m. New York
      City
      time on a business day. The Company shall immediately notify the Investor via
      facsimile or by e-mail delivery of the effectiveness of a Registration Statement
      on the same business day that the Company telephonically confirms effectiveness
      of a Registration Statement with the SEC, which shall be the date requested
      for
      effectiveness of such Registration Statement (“Effective Date”). The Company
      shall, by 9:30 a.m. New York City time on the business day after the Effective
      Date, file a final Prospectus with the Commission as required by Rule 424.
      If
      (A) a Registration Statement covering the Registrable Securities is not declared
      effective by the SEC by the applicable Effectiveness Deadline, (B) the Company
      fails to so notify the Investor within two (2) business days of the Effective
      Date, (C) the Company fails to file a final Prospectus within two (2) business
      days of the Effective Date
      or (D)
      after a Registration Statement has been declared effective by the SEC, sales
      cannot be made pursuant to such Registration Statement for any reason (including
      without limitation by reason of a stop order, or the Company’s failure to update
      the Registration Statement), but excluding (x) the inability of any Investor
      to
      sell the Registrable Securities covered thereby due to market conditions, (y)
      an
      Allowed Delay (as defined below in Section 2(c)(ii) hereof) and (z) the
45
      day
      period following the date on which the Company files its annual report on Form
      10-KSB and during which the Company’s post effective amendment to such
      Registration Statement
      has
      not yet
      been declared effective, then
      the
      Company will make payments to the Investor, as liquidated damages and not as
      a
      penalty, in an amount equal to 1.0%, of the aggregate purchase price paid by
      the
      Investor pursuant to the Purchase Agreement for each 30- day period or pro
      rata
      for any portion thereof following the date by which such Registration Statement
      should have been effective (the “Blackout Period”). Such payments shall
      constitute the Investor’s exclusive remedy for such events; provided,
      however, that the Investor shall retain the right to pursue any equitable
      remedies available to it with respect to such events. The amounts payable as
      liquidated damages pursuant to this paragraph shall be paid monthly within
      three
      (3) Business Days of the last day of each month following the commencement
      of
      the Blackout Period until the termination of the Blackout Period. Such payments
      shall be made to the Investor in cash. The maximum aggregate liquidated damages
      payable to the Investor under this Agreement shall be 10.0% of the aggregate
      purchase price paid by the Investor pursuant to the Purchase
      Agreement.

     

    (ii) For
      not
      more than twenty (20) consecutive days or for a total of not more than
      forty-five (45) days in any twelve (12) month period, the Company may delay
      the
      disclosure of material non-public information concerning the Company, by
      suspending the use of any Prospectus included in any registration contemplated
      by this Section containing such information, the disclosure of which at the
      time
      is not, in the good faith opinion of the Company, in the best interests of
      the
      Company (an “Allowed Delay”); provided, that the Company shall promptly (a)
      notify the Investor in writing of the existence of (but in no event, without
      the
      prior written consent of the Investor, shall the Company disclose to the
      Investor any of the facts or circumstances regarding) material non-public
      information giving rise to an Allowed Delay, (b) advise the Investor in writing
      to cease all sales under the Registration Statement until the end of the Allowed
      Delay and (c) use best efforts to terminate an Allowed Delay as promptly as
      practicable.

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

    (d)  Underwritten
      Offering.
      If any
      offering pursuant to a Registration Statement pursuant to Section 2(a) hereof
      involves an underwritten offering, the Company shall have the right to select
      an
      investment banker and manager to administer the offering, which investment
      banker or manager shall be reasonably satisfactory to the Investor.

     

       
      (e) Piggyback
      Registration.
      If (and
      on each occasion that) the Company proposes to register any of its securities
      under the 1933 Act, either for the Company’s own account or for the account of
      any of its security holders (each such registration not withdrawn or abandoned
      prior to the effective date thereof, a “Piggyback
      Registration”),
      the
      Company will give written notice to the Investor of such proposal not later
      than
      30 days prior to the anticipated filing date of such Piggyback Registration.
      Notwithstanding the foregoing, the Company will not be obligated to give notice
      to the Investor as to or to include any Registrable Securities in any
      registration on Form S-8 or similar limited-purpose form of registration
      statement effected solely to implement an employee benefit plan or any
      registration on Form S-4 or similar limited-purpose form of registration
      statement effected solely to implement an acquisition.

    


    (i)
      Subject to the provisions contained in subparagraphs (ii) and (iii) of this
      Section 2(e) and in the last sentence of this subparagraph (i): (A) the Company
      will be obligated to include in each Piggyback Registration all Registrable
      Securities with respect to which the Company receives, within 20 days after
      the
      date on which the Company gives written notice of such Piggyback Registration
      to
      the Investor pursuant to Section 2(e), the written requests of the Investor
      for
      inclusion in such Piggyback Registration, and (B) the Company will use
      commercially reasonable efforts to effect promptly the registration of all
      such
      Registrable Securities. The Investor will be permitted to withdraw all or any
      part of their Registrable Securities from any Piggyback Registration at any
      time
      prior to the effective date of such Piggyback Registration. The Company and
      its
      underwriters will be permitted, on any registration initiated by the Company,
      to
      terminate or withdraw such registration or to reduce the total number of shares
      proposed to be registered thereunder.

     

    (ii)
      If a
      Piggyback Registration is an underwritten registration, and the managing
      underwriters thereof give written advice to the Company that the total amount
      of
      securities, including Registrable Securities and other securities to be
      registered pursuant to the Piggyback Registration exceeds the amount of
      securities that the underwriters reasonably believe compatible with the success
      of the offering (the “Underwriters’
      Maximum Number”),
      then:

    


    (A)  If
      such
      registration was initiated by the Company, (x) the Company will be entitled
      to
      include in such registration that number of securities that the Company proposes
      to offer and sell for its own account in such registration and which does not
      exceed the Underwriters’ Maximum Number and (y) the Company will be obligated to
      include in such registration that number of securities of the Company that
      are
      requested by the Investor and by other persons and which does not exceed the
      difference between the Underwriters’ Maximum Number and the number of securities
      of the Company that the Company is entitled under clause (x) above to include
      in
      such registration, and such number of securities of the Company will be
      allocated pro
      rata among
      the
      Investor and other persons in proportion to the number of securities of the
      Company held by the Investor or each such other person.

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

    (B)  If
      such
      registration was initiated by a person other than the Company or the Investor,
      (w) the Company will be obligated to include in such registration that number
      of
      securities that are requested by the person(s) initiating such registration
      and
      which is not more than the Underwriters’ Maximum Number, and such number of
      securities will be allocated pro
      rata among
      such other person(s) in proportion to the number of securities of the Company
      held by each such other person; (x) the Company will be entitled to include
      in
      such registration that number of securities that the Company proposes to offer
      and sell for its own account in such registration and which does not exceed
      the
      difference between the Underwriters’ Maximum Number and the number of securities
      that the Company is required under clause (w) above to include in such
      registration; (y) and thereafter the Company will be obligated to include in
      such registration that number of securities that are requested by the Investor
      and which is not more than the Underwriters’ Maximum Number; and (z) if the
      Underwriters’ Maximum Number exceeds the sum of the number of securities that
      the Company is obligated to include in such registration for the account of
      other persons pursuant to clause (w) above and the number of securities that
      the
      Company proposes to offer and sell for its own account in such registration,
      then the Company may include in such registration that number of other
      securities that persons referred to in clause (w) above have requested be
      included in such registration and which is not greater than such
      excess.

     

    For
      purposes of this Section 2(e), the numbers of securities of the Company held
      by
      the Investor or any other person will be calculated on a fully diluted basis
      assuming the full exercise, conversion, or exchange of all outstanding
      securities that are exercisable, convertible or exchangeable for shares of
      the
      Company’s Common Stock. 

     

        (iii)
      In any
      Piggyback Registration, the Company will select, in its sole discretion, the
      investment bankers and managing underwriters in such registration.

     

        (iv)
      The
      Investor, if the Company or the managing underwriters so request of the Investor
      in connection with such registration, will not, without the prior written
      consent of the Company or such underwriters, effect any sale or other
      distribution of any equity securities of the Company, including any sale
      pursuant to Rule 144, during the seven days prior to and during the 180-day
      period commencing on the effective date of such underwritten registration,
      except pursuant to such underwritten registration.

    


    


    3. Company
      Obligations.
      The
      Company will use best efforts to effect the registration of the Registrable
      Securities in accordance with the terms hereof, and pursuant thereto the Company
      will, as expeditiously as possible:

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

    (a)  use
      best
      efforts to cause such Registration Statement to become effective and to remain
      continuously effective for a period that will terminate upon the earliest of
      (i)
      five years from the initial effectiveness date of the Registration Statement,
      (ii) the date on which all Registrable Securities covered by such Registration
      Statement as amended from time to time, have been sold, and (iii) the date
      on
      which all Registrable Securities covered by such Registration Statement may
      be
      sold pursuant to Rule 144(k) (the “Effectiveness Period”) and advise the
      Investor in writing when the Effectiveness Period has expired;

     

    (b)  prepare
      and file with the SEC such amendments and post-effective amendments to a
      Registration Statement and the Prospectus as may be necessary to keep such
      Registration Statement effective for the period specified in Section 3(a) and
      to
      comply with the provisions of the 1933 Act and the 1934 Act with respect to
      the
      distribution of all of the Registrable Securities covered thereby;

     

    (c)  provide
      copies to and permit counsel designated by the Investor to review each
      Registration Statement and all amendments and supplements thereto no fewer
      than
      two (2) days prior to their filing with the SEC;

     

    (d)  furnish
      to the Investor and their legal counsel (i) promptly after the same is prepared
      and publicly distributed, filed with the SEC, or received by the Company (but
      not later than two (2) Business Days after the filing date, receipt date or
      sending date, as the case may be) one (1) copy of any Registration Statement
      and
      any amendment thereto, each preliminary prospectus and Prospectus and each
      amendment or supplement thereto, and each letter written by or on behalf of
      the
      Company to the SEC or the staff of the SEC, and each item of correspondence
      from
      the SEC or the staff of the SEC, in each case relating to such Registration
      Statement (other than any portion of any thereof which contains information
      for
      which the Company has sought confidential treatment), and (ii) such number
      of
      copies of a Prospectus, including a preliminary prospectus, and all amendments
      and supplements thereto and such other documents as the Investor may reasonably
      request in order to facilitate the disposition of the Registrable Securities
      owned by the Investor that are covered by the related Registration
      Statement;

     

                   
 (e)
if
      during
      the Effectiveness Period, the number of Registrable Securities at any time
      exceeds 100% of the number of shares of Common Stock then registered in a
      Registration Statement, then the Company shall file as soon as reasonably
      practicable, but in any case prior to the applicable Filing Date, an additional
      Registration Statement covering the resale by the Holders of not less than
      the
      number of such Registrable Securities, subject to any limitations pursuant
      to
      SEC Guidance. 

    


     

    (f)  in
      the
      event the Company selects an underwriter for the offering, the Company shall
      enter into and perform its reasonable obligations under an underwriting
      agreement, in usual and customary form, including, without limitation, customary
      indemnification and contribution obligations, with the underwriter of such
      offering; 

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

    (g)  if
      required by the underwriter, or if any Investor is described in a Registration
      Statement as an underwriter, the Company shall furnish, on the effective date
      of
      such Registration Statement (except with respect to clause (i) below) and on
      the
      date that Registrable Securities are delivered to an underwriter, if any, for
      sale in connection with the Registration Statement (including any Investor
      deemed to be an underwriter), (i) (A) in the case of an underwritten offering,
      an opinion, dated as of the closing date of the sale of Registrable Securities
      to the underwriters, from independent legal counsel representing the Company
      for
      purposes of such Registration Statement, in form, scope and substance as is
      customarily given in an underwritten public offering, addressed to the
      underwriters and the Investor participating in such underwritten offering or
      (B)
      in the case of an “at the market” offering, an opinion, dated as of or promptly
      after the effective date of such Registration Statement to the Investor, from
      independent legal counsel representing the Company for purposes of such
      Registration Statement, in form, scope and substance as is customarily given
      in
      a public offering, addressed to the Investor, and (ii) a letter, dated as of
      the
      effective date of such Registration Statement and confirmed as of the applicable
      dates described above, from the Company’s independent certified public
      accountants in form and substance as is customarily given by independent
      certified public accountants to underwriters in an underwritten public offering,
      addressed to the underwriters (including any Investor deemed to be an
      underwriter);

     

    (h)  use
      best
      efforts to (i) prevent the issuance of any stop order or other suspension of
      effectiveness and, (ii) if such order is issued, obtain the withdrawal of any
      such order at the earliest possible moment;

     

    (i)  prior
      to
      any public offering of Registrable Securities, use best efforts to register
      or
      qualify or cooperate with the Investor and their counsel in connection with
      the
      registration or qualification of such Registrable Securities for offer and
      sale
      under the securities or blue sky laws of such jurisdictions requested by the
      Investor and do any and all other commercially reasonable acts or things
      necessary or advisable to enable the distribution in such jurisdictions of
      the
      Registrable Securities covered by a Registration Statement; provided,
      however, that the Company shall not be required in connection therewith or
      as a
      condition thereto to (i) qualify to do business in any jurisdiction where it
      would not otherwise be required to qualify but for this Section 3(i), (ii)
      subject itself to general taxation in any jurisdiction where it would not
      otherwise be so subject but for this Section 3(i), or (iii) file a general
      consent to service of process in any such jurisdiction;

     

    (j)  use
      best
      efforts to cause all Registrable Securities covered by a Registration Statement
      to be listed on each securities exchange, interdealer quotation system or other
      market on which similar securities issued by the Company are then
      listed;

     

    (k)  immediately
      notify the Investor, at any time when a Prospectus relating to Registrable
      Securities is required to be delivered under the 1933 Act, upon discovery that,
      or upon the happening of any event as a result of which, the Prospectus included
      in a Registration Statement, as then in effect, includes an untrue statement
      of
      a material fact or omits to state any material fact required to be stated
      therein or necessary to make the statements therein not misleading in light
      of
      the circumstances then existing, and at the request of any such holder, promptly
      prepare and file of a supplement to or an amendment of such Prospectus as may
      be
      necessary so that, as thereafter delivered to the purchasers of such Registrable
      Securities, such Prospectus shall not include an untrue statement of a material
      fact or omit to state a material fact required to be stated therein or necessary
      to make the statements therein not misleading in light of the circumstances
      then
      existing; and

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

    (l)  otherwise
      use best efforts to comply with all applicable rules and regulations of the
      SEC
      under the 1933 Act and the 1934 Act, take such other actions as may be
      reasonably necessary to facilitate the registration of the Registrable
      Securities hereunder;

     

      
      (m) with
      a
      view to making available to the Investor the benefits of Rule 144 (or its
      successor rule) and any other rule or regulation of the SEC that may at any
      time
      permit the Investor to sell shares of Common Stock to the public without
      registration, the Company covenants and agrees to: (i) make and keep public
      information available, as those terms are understood and defined in Rule 144,
      until the earlier of (A) six months after such date as all of the Registrable
      Securities may be resold pursuant to Rule 144(k) or any other rule of similar
      effect or (B) such date as all of the Registrable Securities shall have been
      resold; (ii) file with the SEC in a timely manner all reports and other
      documents required of the Company under the 1934 Act; and (iii) furnish to
      the
      Investor upon request, as long as the Investor owns any Registrable Securities,
      (A) a written statement by the Company that it has complied with the reporting
      requirements of the 1934 Act, (B) a copy of the Company’s most recent Annual
      Report on Form 10-KSB or Quarterly Report on Form 10-QSB, and (C) such other
      information as may be reasonably requested in order to avail the Investor of
      any
      rule or regulation of the SEC that permits the selling of any such Registrable
      Securities without registration.    

     

    4. Due
      Diligence Review; Information.
      The
      Company shall make available, during normal business hours, for inspection
      and
      review by the Investor, advisors to and representatives of the Investor (who
      may
      or may not be affiliated with the Investor and who are reasonably acceptable
      to
      the Company), any underwriter participating in any disposition of shares of
      Common Stock on behalf of the Investor pursuant to a Registration Statement
      or
      amendments or supplements thereto or any blue sky, NASD or other filing, all
      financial and other records, all SEC Filings (as defined in the Purchase
      Agreement) and other filings with the SEC, and all other corporate documents
      and
      properties of the Company as may be reasonably necessary for the purpose of
      such
      review, and cause the Company’s officers, directors and employees, within a
      reasonable time period, to supply all such information reasonably requested
      by
      the Investor or any such representative, advisor or underwriter in connection
      with such Registration Statement (including, without limitation, in response
      to
      all questions and other inquiries reasonably made or submitted by any of them),
      prior to and from time to time after the filing and effectiveness of the
      Registration Statement for the sole purpose of enabling the Investor and such
      representatives, advisors and underwriters and their respective accountants
      and
      attorneys to conduct initial and ongoing due diligence with respect to the
      Company and the accuracy of such Registration Statement.

     

    The
      Company shall not disclose material nonpublic information to the Investor,
      or to
      advisors to or representatives of the Investor, unless prior to disclosure
      of
      such information the Company identifies such information as being material
      nonpublic information and provides the Investor, such advisors and
      representatives with the opportunity to accept or refuse to accept such material
      nonpublic information for review and any Investor wishing to obtain such
      information enters into an appropriate confidentiality agreement with the
      Company with respect thereto.

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

    5. Obligations
      of the Investor.

     

    (a)  The
      Investor shall furnish in writing to the Company such information regarding
      itself, the Registrable Securities held by it and the intended method of
      disposition of the Registrable Securities held by it, as shall be reasonably
      required to effect the registration of such Registrable Securities and shall
      execute such documents in connection with such registration as the Company
      may
      reasonably request. At least ten (10) Business Days prior to the first
      anticipated filing date of any Registration Statement, the Company shall notify
      the Investor of the information the Company requires from the Investor if the
      Investor elects to have any of the Registrable Securities included in a
      Registration Statement. The Investor shall provide such information to the
      Company at least five (5) Business Days prior to the first anticipated filing
      date of such Registration Statement if the Investor elects to have any of the
      Registrable Securities included in such Registration Statement.

     

    (b)  The
      Investor, by its acceptance of the Registrable Securities agrees to cooperate
      with the Company as reasonably requested by the Company in connection with
      the
      preparation and filing of a Registration Statement hereunder, unless the
      Investor has notified the Company in writing of its election to exclude all
      of
      its Registrable Securities from such Registration Statement.

     

    (c)  In
      the
      event the Company, at the request of the Investor, determines to engage the
      services of an underwriter, the Investor agrees to enter into and perform its
      obligations under an underwriting agreement, in usual and customary form,
      including, without limitation, customary indemnification and contribution
      obligations, with the managing underwriter of such offering and take such other
      actions as are reasonably required in order to expedite or facilitate the
      dispositions of the Registrable Securities.

     

    (d)  The
      Investor agrees that, upon receipt of any notice from the Company of either
      (i)
      the commencement of an Allowed Delay pursuant to Section 2(c)(ii) or (ii) the
      happening of an event pursuant to Section 3(k) hereof, the Investor will
      immediately discontinue disposition of Registrable Securities pursuant to any
      Registration Statement covering such Registrable Securities, until the
      Investor’s receipt of the copies of the supplemented or amended prospectus filed
      with the SEC and until any related post-effective amendment is declared
      effective.

     

    (e)  The
      Investor may not participate in any third party underwritten registration
      hereunder unless it (i) agrees to sell the Registrable Securities on the basis
      provided in any underwriting arrangements in usual and customary form entered
      into by the Company, (ii) completes and executes all questionnaires, powers
      of
      attorney, indemnities, underwriting agreements and other documents reasonably
      required under the terms of such underwriting arrangements, and (iii) agrees
      to
      pay its pro rata share of all underwriting discounts and commissions.
      Notwithstanding the foregoing, the Investor shall not be required to make any
      representations to such underwriter, other than those with respect to itself
      and
      the Registrable Securities owned by it, including its right to sell the
      Registrable Securities, and any indemnification in favor of the underwriter
      by
      the Investor shall be several and not joint and limited in the case of the
      Investor, to the proceeds received by the Investor from the sale of its
      Registrable Securities. The scope of any such indemnification in favor of an
      underwriter shall be limited to the same extent as the indemnity provided in
      Section 6(b) hereof.

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

    6. Indemnification.

     

    (a)  Indemnification
      by the Company.
      The
      Company will indemnify and hold harmless the Investor and its officers,
      directors, employees and agents, successors and assigns, and each other person,
      if any, who controls the Investor within the meaning of the 1933 Act, against
      any losses, claims, damages or liabilities, joint or several, to which they
      may
      become subject under the 1933 Act or otherwise, insofar as such losses, claims,
      damages or liabilities (or actions in respect thereof) arise out of or are
      based
      upon: (i) any untrue statement or alleged untrue statement of any material
      fact
      contained in any Registration Statement, any preliminary prospectus or final
      prospectus contained therein, or any amendment or supplement thereof; (ii)
      any
      blue sky application or other document executed by the Company specifically
      for
      that purpose or based upon written information furnished by the Company filed
      in
      any state or other jurisdiction in order to qualify any or all of the
      Registrable Securities under the securities laws thereof (any such application,
      document or information herein called a “Blue
      Sky
      Application”);
      (iii)
      the omission or alleged omission to state therein a material fact required
      to be
      stated therein or necessary to make the statements therein not misleading;
      (iv)
      any violation by the Company or its agents of any rule or regulation promulgated
      under the 1933 Act applicable to the Company or its agents and relating to
      action or inaction required of the Company in connection with such registration;
      or (v) any failure to register or qualify the Registrable Securities included
      in
      any such Registration in any state where the Company or its agents has
      affirmatively undertaken or agreed in writing that the Company will undertake
      such registration or qualification on the Investor’s behalf (the undertaking of
      any underwriter chosen by the Company being attributed to the Company) and
      will
      reimburse the Investor, and each such officer, director and each such
      controlling person for any legal or other expenses reasonably incurred by them
      in connection with investigating or defending any such loss, claim, damage,
      liability or action; provided,
      however,
      that
      the Company will not be liable in any such case if and to the extent that any
      such loss, claim, damage or liability arises out of or is based upon an untrue
      statement or alleged untrue statement or omission or alleged omission so made
      in
      conformity with information furnished by the Investor or any such controlling
      person in writing specifically for use in such Registration Statement or
      Prospectus.

     

    (b)  Indemnification
      by the Investor.
      In
      connection with any registration pursuant to the terms of this Agreement, the
      Investor will furnish to the Company in writing such information as the Company
      reasonably requests concerning the holders of Registrable Securities or the
      proposed manner of distribution for use in connection with any Registration
      Statement or Prospectus and agrees to indemnify and hold harmless, to the
      fullest extent permitted by law, the Company, its directors, officers, employees
      and each person who controls the Company (within the meaning of the 1933 Act)
      against any losses, claims, damages, liabilities and expense (including
      reasonable attorney fees) resulting from any untrue statement of a material
      fact
      or any omission of a material fact required to be stated in any Registration
      Statement or Prospectus or preliminary prospectus or amendment or supplement
      thereto or necessary to make the statements therein not misleading, to the
      extent, but only to the extent that such untrue statement or omission is
      contained in any information furnished in writing by the Investor to the Company
      specifically for inclusion in such Registration Statement or Prospectus or
      amendment or supplement thereto. In no event shall the liability of the Investor
      be greater in amount than the dollar amount of the proceeds (net of all expense
      paid by the Investor in connection with any claim relating to this Section
      6 and
      the amount of any damages the Investor has otherwise been required to pay by
      reason of such untrue statement or omission) received by the Investor upon
      the
      sale of the Registrable Securities included in the Registration Statement giving
      rise to such indemnification obligation.

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

    (c)  Conduct
      of Indemnification Proceedings.
      Any
      person entitled to indemnification hereunder shall (i) give prompt notice to
      the
      indemnifying party of any claim with respect to which it seeks indemnification
      and (ii) permit such indemnifying party to assume the defense of such claim
      with
      counsel reasonably satisfactory to the indemnified party; provided
      that any
      person entitled to indemnification hereunder shall have the right to employ
      separate counsel and to participate in the defense of such claim, but the fees
      and expenses of such counsel shall be at the expense of such person unless
      (a)
      the indemnifying party has agreed to pay such fees or expenses, or (b) the
      indemnifying party shall have failed to assume the defense of such claim and
      employ counsel reasonably satisfactory to such person or (c) in the reasonable
      judgment of any such person, based upon written advice of its counsel, a
      conflict of interest exists between such person and the indemnifying party
      with
      respect to such claims (in which case, if the person notifies the indemnifying
      party in writing that such person elects to employ separate counsel at the
      expense of the indemnifying party, the indemnifying party shall not have the
      right to assume the defense of such claim on behalf of such person); and
provided,
      further,
      that
      the failure of any indemnified party to give notice as provided herein shall
      not
      relieve the indemnifying party of its obligations hereunder, except to the
      extent that such failure to give notice shall materially adversely affect the
      indemnifying party in the defense of any such claim or litigation. It is
      understood that the indemnifying party shall not, in connection with any
      proceeding in the same jurisdiction, be liable for fees or expenses of more
      than
      one separate firm of attorneys at any time for all such indemnified parties.
      No
      indemnifying party will, except with the consent of the indemnified party,
      consent to entry of any judgment or enter into any settlement that does not
      include as an unconditional term thereof the giving by the claimant or plaintiff
      to such indemnified party of a release from all liability in respect of such
      claim or litigation.

     

    (d)  Contribution.
      If for
      any reason the indemnification provided for in the preceding paragraphs (a)
      and
      (b) is unavailable to an indemnified party or insufficient to hold it harmless,
      other than as expressly specified therein, then the indemnifying party shall
      contribute to the amount paid or payable by the indemnified party as a result
      of
      such loss, claim, damage or liability in such proportion as is appropriate
      to
      reflect the relative fault of the indemnified party and the indemnifying party,
      as well as any other relevant equitable considerations. No person guilty of
      fraudulent misrepresentation within the meaning of Section 11(f) of the 1933
      Act
      shall be entitled to contribution from any person not guilty of such fraudulent
      misrepresentation. In no event shall the contribution obligation of a holder
      of
      Registrable Securities be greater in amount than the dollar amount of the
      proceeds (net of all expenses paid by such holder in connection with any claim
      relating to this Section 6 and the amount of any damages such holder has
      otherwise been required to pay by reason of such untrue or alleged untrue
      statement or omission or alleged omission) received by it upon the sale of
      the
      Registrable Securities giving rise to such contribution obligation.

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

    7. Miscellaneous.

     

    (a)  Amendments
      and Waivers.
      This
      Agreement may be amended only by a writing signed by the Company and the
      Investor. The Company may take any action herein prohibited, or omit to perform
      any act herein required to be performed by it, only if the Company shall have
      obtained the written consent to such amendment, action or omission to act,
      of
      the Investor.

     

    (b)  Notices.
      All
      notices and other communications provided for or permitted hereunder shall
      be
      made as set forth in Section 9.4 of the Purchase Agreement.

     

    (c)  Assignments
      and Transfers by Investor.
      The
      provisions of this Agreement shall be binding upon and inure to the benefit
      of
      the Investor and its successors and assigns. The Investor may transfer or
      assign, in whole or from time to time in part, to one or more persons its rights
      hereunder in connection with the transfer of Registrable Securities by the
      Investor to such person, provided that the Investor complies with all laws
      applicable thereto and provides written notice of assignment to the Company
      promptly after such assignment is effected.

     

    (d)  Assignments
      and Transfers by the Company.
      This
      Agreement may not be assigned by the Company (whether by operation of law or
      otherwise) without the prior written consent of the Investor, provided,
      however,
      that
      the Company may assign its rights and delegate its duties hereunder to any
      surviving or successor corporation in connection with a merger or consolidation
      of the Company with another corporation, or a sale, transfer or other
      disposition of all or substantially all of the Company’s assets to another
      corporation, without the prior written consent of the Investor, after notice
      duly given by the Company to the Investor.

     

    (e)  Benefits
      of the Agreement.
      The
      terms and conditions of this Agreement shall inure to the benefit of and be
      binding upon the respective permitted successors and assigns of the parties.
      Nothing in this Agreement, express or implied, is intended to confer upon any
      party other than the parties hereto or their respective successors and assigns
      any rights, remedies, obligations, or liabilities under or by reason of this
      Agreement, except as expressly provided in this Agreement.

     

    (f)  Counterparts;
      Faxes.
      This
      Agreement may be executed in two or more counterparts, each of which shall
      be
      deemed an original, but all of which together shall constitute one and the
      same
      instrument. This Agreement may also be executed via facsimile, which shall
      be
      deemed an original.

     

    (g)  Titles
      and Subtitles.
      The
      titles and subtitles used in this Agreement are used for convenience only and
      are not to be considered in construing or interpreting this
      Agreement.

     

    (h)  Severability.
      Any
      provision of this Agreement that is prohibited or unenforceable in any
      jurisdiction shall, as to such jurisdiction, be ineffective to the extent of
      such prohibition or unenforceability without invalidating the remaining
      provisions hereof but shall be interpreted as if it were written so as to be
      enforceable to the maximum extent permitted by applicable law, and any such
      prohibition or unenforceability in any jurisdiction shall not invalidate or
      render unenforceable such provision in any other jurisdiction. To the extent
      permitted by applicable law, the parties hereby waive any provision of law
      which
      renders any provisions hereof prohibited or unenforceable in any
      respect.

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

    (i)  Further
      Assurances.
      The
      parties shall execute and deliver all such further instruments and documents
      and
      take all such other actions as may reasonably be required to carry out the
      transactions contemplated hereby and to evidence the fulfillment of the
      agreements herein contained.

     

    (j)  Entire
      Agreement.
      This
      Agreement is intended by the parties as a final expression of their agreement
      and intended to be a complete and exclusive statement of the agreement and
      understanding of the parties hereto in respect of the subject matter contained
      herein. This Agreement supersedes all prior agreements and understandings
      between the parties with respect to such subject matter.

     

    (k)  Governing
      Law; Consent to Jurisdiction; Waiver of Jury Trial.
      This
      Agreement shall be governed by, and construed in accordance with, the internal
      laws of the State of New York without regard to the choice of law principles
      thereof. Each of the parties hereto irrevocably submits to the exclusive
      jurisdiction of the courts of the State of New York located in New York County
      and the United States District Court for the Southern District of New York
      for
      the purpose of any suit, action, proceeding or judgment relating to or arising
      out of this Agreement and the transactions contemplated hereby. Service of
      process in connection with any such suit, action or proceeding may be served
      on
      each party hereto anywhere in the world by the same methods as are specified
      for
      the giving of notices under this Agreement. Each of the parties hereto
      irrevocably consents to the jurisdiction of any such court in any such suit,
      action or proceeding and to the laying of venue in such court. Each party hereto
      irrevocably waives any objection to the laying of venue of any such suit, action
      or proceeding brought in such courts and irrevocably waives any claim that
      any
      such suit, action or proceeding brought in any such court has been brought
      in an
      inconvenient forum. EACH
      OF THE PARTIES HERETO WAIVES ANY RIGHT TO REQUEST A TRIAL BY JURY IN ANY
      LITIGATION WITH RESPECT TO THIS AGREEMENT AND REPRESENTS THAT COUNSEL HAS BEEN
      CONSULTED SPECIFICALLY AS TO THIS WAIVER.

     


    
      
        --

        
        

      

      
        
        

        
          

        

      

      
        
        

      

    


    IN
      WITNESS WHEREOF, the parties have executed this Agreement or caused their duly
      authorized officers to execute this Agreement as of the date first above
      written.

     

    APPLIED
      NEUROSOLUTIONS, INC.

    


    


    


    By:_________________________

    Name:
      Ellen R. Hoffing

    Title:
      President & CEO

    


    


    [INVESTOR’S
      SIGNATURE PAGES TO FOLLOW]

    



    
      
         

        
        

      

      
        
        

        
          

        

      

      
        
        

      

    


    


    


    SF
      CAPITAL PARTNERS LTD.

    


    


    


    By:_____________________________

    Name:

    Title:

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    


    Appendix
      A

    


    Plan
      of Distribution

    


    The
      selling stockholders, which as used herein includes donees, pledgees,
      transferees or other successors-in-interest selling shares of common stock
      or
      interests in shares of common stock received after the date of this prospectus
      from a selling stockholder as a gift, pledge, partnership distribution or other
      transfer, may, from time to time, sell, transfer or otherwise dispose of any
      or
      all of their shares of common stock or interests in shares of common stock
      on
      any stock exchange, market or trading facility on which the shares are traded
      or
      in private transactions. These dispositions may be at fixed prices, at
      prevailing market prices at the time of sale, at prices related to the
      prevailing market price, at varying prices determined at the time of sale,
      or at
      negotiated prices.

    


    The
      selling stockholders may use any one or more of the following methods when
      disposing of shares or interests therein:

    


    -
      ordinary brokerage transactions and transactions in which the broker-dealer
      solicits purchasers;

    


    -
      block
      trades in which the broker-dealer will attempt to sell the shares as agent,
      but
      may position and resell a portion of the block as principal to facilitate the
      transaction;

    


    -
      purchases by a broker-dealer as principal and resale by the broker-dealer for
      its account;

    


    -
      an
      exchange distribution in accordance with the rules of the applicable
      exchange;

    


    -
      privately negotiated transactions;

    


    -
      short
      sales;

    


    -
      through
      the writing or settlement of options or other hedging transactions, whether
      through an options exchange or otherwise;

    


    -
      broker-dealers may agree with the selling stockholders to sell a specified
      number of such shares at a stipulated price per share;

    


    -
      a
      combination of any such methods of sale; and

    


    -
      any
      other method permitted pursuant to applicable law.

    


    The
      selling stockholders may, from time to time, pledge or grant a security interest
      in some or all of the shares of common stock owned by them and, if they default
      in the performance of their secured obligations, the pledgees or secured parties
      may offer and sell the shares of common stock, from time to time, under this
      prospectus, or under an amendment to this prospectus under Rule 424(b)(3) or
      other applicable provision of the Securities Act amending the list of selling
      stockholders to include the pledgee, transferee or other successors in interest
      as selling stockholders under this prospectus. The selling stockholders also
      may
      transfer the shares of common stock in other circumstances, in which case the
      transferees, pledgees or other successors in interest will be the selling
      beneficial owners for purposes of this prospectus.

    


    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

    In
      connection with the sale of our common stock or interests therein, the selling
      stockholders may enter into hedging transactions with broker-dealers or other
      financial institutions, which may in turn engage in short sales of the common
      stock in the course of hedging the positions they assume. The selling
      stockholders may also sell shares of our common stock short and deliver these
      securities to close out their short positions, or loan or pledge the common
      stock to broker-dealers that in turn may sell these securities. The selling
      stockholders may also enter into option or other transactions with
      broker-dealers or other financial institutions or the creation of one or more
      derivative securities which require the delivery to such broker-dealer or other
      financial institution of shares offered by this prospectus, which shares such
      broker-dealer or other financial institution may resell pursuant to this
      prospectus (as supplemented or amended to reflect such
      transaction).

    


    The
      aggregate proceeds to the selling stockholders from the sale of the common
      stock
      offered by them will be the purchase price of the common stock less discounts
      or
      commissions, if any. Each of the selling stockholders reserves the right to
      accept and, together with their agents from time to time, to reject, in whole
      or
      in part, any proposed purchase of common stock to be made directly or through
      agents. We will not receive any of the proceeds from this offering. Upon any
      exercise of the warrants by payment of cash, however, we will receive the
      exercise price of the warrants.

    


    The
      selling stockholders also may resell all or a portion of the shares in open
      market transactions in reliance upon Rule 144 under the Securities Act of 1933,
      provided that they meet the criteria and conform to the requirements of that
      rule.

    


    The
      selling stockholders and any underwriters, broker-dealers or agents that
      participate in the sale of the common stock or interests therein may be
      "underwriters" within the meaning of Section 2(11) of the Securities Act. Any
      discounts, commissions, concessions or profit they earn on any resale of the
      shares may be underwriting discounts and commissions under the Securities Act.
      Selling stockholders who are "underwriters" within the meaning of Section 2(11)
      of the Securities Act will be subject to the prospectus delivery requirements
      of
      the Securities Act.

    


    To
      the
      extent required, the shares of our common stock to be sold, the names of the
      selling stockholders, the respective purchase prices and public offering prices,
      the names of any agents, dealer or underwriter, any applicable commissions
      or
      discounts with respect to a particular offer will be set forth in an
      accompanying prospectus supplement or, if appropriate, a post-effective
      amendment to the registration statement that includes this
      prospectus.

    


    In
      order
      to comply with the securities laws of some states, if applicable, the common
      stock may be sold in these jurisdictions only through registered or licensed
      brokers or dealers. In addition, in some states the common stock may not be
      sold
      unless it has been registered or qualified for sale or an exemption from
      registration or qualification requirements is available and is complied
      with.

    


    We
      have
      advised the selling stockholders that the anti-manipulation rules of Regulation
      M under the Exchange Act may apply to sales of shares in the market and to
      the
      activities of the selling stockholders and their affiliates. In addition, we
      will make copies of this prospectus (as it may be supplemented or amended from
      time to time) available to the selling stockholders for the purpose of
      satisfying the prospectus delivery requirements of the Securities Act. The
      selling stockholders may indemnify any broker-dealer that participates in
      transactions involving the sale of the shares against certain liabilities,
      including liabilities arising under the Securities Act.

    


    We
      have
      agreed to indemnify the selling stockholders against liabilities, including
      liabilities under the Securities Act and state securities laws, relating to
      the
      registration of the shares offered by this prospectus.

    


    We
      have
      agreed with the selling stockholders to keep the registration statement of
      which
      this prospectus constitutes a part effective until the earlier of (1) such
      time
      as all of the shares covered by this prospectus have been disposed of pursuant
      to and in accordance with the registration statement or (2) the date on which
      the shares may be sold pursuant to Rule 144(k) of the Securities
      Act.


    
      
         

        
        

      

      
        
        

        
          

        

      

      
        
        

      

    


    Schedule
      2(a) Additional Registered Securities

    


    


    Eli
      Lilly
      and Company - 1,116,071 shares of Common Stock

    


    Stephen
      Bochner - 271,845 shares of Common Stock

    


    Edward
      J.
      Rosenthal Profit Sharing Plan - 92,250 shares of Common Stock issuable upon
      the
      exercise of warrants

    


    Smith
      Family Trust - 92,250 shares of Common Stock issuable upon the exercise of
      warrants

    


    Peter
      J.
      Rozema, IRA - 92,250 shares of Common Stock issuable upon the exercise of
      warrants

    


    SKAT
      Capital - 92,250 shares of Common Stock issuable upon the exercise of
      warrants

    


    Sidney
      Singer - 92,250 shares of Common Stock issuable upon the exercise of
      warrants

    


    Gerald
      and Daphna Cramer Family Foundation - 276,750 shares of Common Stock issuable
      upon the exercise of warrants

    


    Irrevocable
      Trust FBO Daphna’s Grandchildren - 184,500 shares of Common Stock issuable upon
      the exercise of warrants