fs1ex4xvii_iaso.htm


    Exhibit
4.17

    


    NOTE
AND WARRANT PURCHASE AGREEMENT

     

    This
NOTE AND WARRANT PURCHASE
AGREEMENT (this “Agreement”) is made
as of the last date set forth on the signature page hereof between PACIFIC BEACH BIOSCIENCES,
INC., a Delaware corporation having its principal place of business at PO
Box 222, La Jolla, California 92038 (the “Company”), and the
undersigned (the “Subscriber”).

    


    W
I T N E S S E T H:

    


    WHEREAS, the Company has
retained Maxim Group LLC (the “Placement Agent”) to
act as its exclusive placement agent, on a “best efforts, all or none” basis, in
a private offering (the “Offering”) of
convertible promissory notes in substantially the form attached hereto as Exhibit A (the “Notes”) included in
the Minimum Offering (as defined below) and on a “best efforts” basis in the
Offering of such Notes which will provide the Company with aggregate proceeds in
excess of the Minimum Offering, and in connection therewith has authorized the
Placement Agent to engage one or more other firms to assist in finding qualified
subscribers for the Notes and the term “Placement Agent,” as used herein, shall
be deemed to include such other firms, if any;

    


    WHEREAS, the terms of the
Offering are summarized in that certain Confidential Offering Memorandum dated
November 30, 2009 (together with all amendments, supplements, exhibits and
appendices thereto, the “Memorandum”);

    


    WHEREAS, the Company desires
to offer and sell a minimum of $2,000,000 aggregate principal amount of Notes
(the “Minimum
Offering”) and a maximum of $5,000,000 aggregate principal amount of
Notes (the “Maximum
Offering”), with an option in favor of the Placement Agent and the
Company to offer up to an additional $500,000 aggregate principal amount of
Notes (the “Over-Allotment,” and
together with the Maximum Offering, the “Maximum Amount”)
(such amount of Notes actually issued, the “Principal Loan
Amount”).  In addition to the Notes, the Subscriber will
receive a five-year warrant (the “Warrant”), in
substantially the form attached hereto as Exhibit B, to
purchase a number of shares of common stock, $0.001 par value per share (the
“Common
Stock”), of the Company equal to 70% of the principal amount of the Notes
purchased by it divided by the price (the “IPO Price”) at which
shares of Common Stock are sold in an underwritten initial public offering by
the Company of units consisting of shares of Common Stock and warrants to
purchase Common Stock resulting in aggregate gross cash proceeds (before
commissions or other expenses) to the Company of at least $10,000,000 (a “Qualified IPO”), at a
per share exercise price equal to the exercise price of the warrants issued in a
Qualified IPO.  Notwithstanding the foregoing, if a Qualified IPO does
not occur on or before the second anniversary of the Initial Closing (as defined
below), then each Warrant will be exercisable for that number of shares of
Common Stock equal to seventy percent (70%) of the principal amount of the Note
purchased by the original holder divided by $1.00, at a per share exercise price
of $1.00.

     

    
      
        
        

      

      
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    WHEREAS, the Company desires
to enter into this Agreement to issue and sell the Notes and Warrants and the
Subscriber desires to purchase the principal amount of Notes and Warrants set
forth on the signature page hereto on the terms and conditions set forth herein;
and

    


    NOW, THEREFORE, in
consideration of the promises and the mutual representations and covenants
hereinafter set forth, the parties hereto do hereby agree as
follows:

    


    I.           SUBSCRIPTION FOR NOTES AND
WARRANTS AND REPRESENTATIONS BY SUBSCRIBER

    


    1.1           Subject
to the terms and conditions hereinafter set forth, the Subscriber hereby
irrevocably subscribes for and agrees to purchase from the Company that portion
of the aggregate principal amount of the Principal Loan Amount authorized to be
issued by the Company set forth on the signature page hereto (the “Subscriber Loan
Amount”) along with the applicable Warrants.  The purchase
price is payable by wire transfer of immediately available funds
to:

     

    
      	
              Bank:

              ABA Number:

              Account #: 

              Account Name:

              Reference: 

               

              Attention: 

            	
              JPMorgan
      Chase, N.A.

              021
      000 021

              323-838685

              American
      Stock Transfer & Trust Company, LLC as
      Agent for Pacific Beach Biosciences, Inc. 

                [Investor
      Name]

                 

                Marianne
      Rotundo

                (718)
      921-8235 (phone)

              

            


    

     

    Upon
acceptance by the Placement Agent and the Company of subscriptions for an amount
of Notes equal to at least the Minimum Offering, the Placement Agent and the
Company shall have the right at any time thereafter, prior to the Offering
Termination Date (as defined in Section 3.2), to effect an initial closing with
respect to the Offering (the “Initial
Closing”).  Thereafter, the Placement Agent and the Company
shall continue to accept additional subscriptions for, and continue to have
closings (together with the Initial Closing, each a “Closing” and the date
thereof the “Closing
Date”) with respect to subscriptions for Notes and Warrants from new or
existing investors from time to time and at any time up to the Offering
Termination Date.

    


    The
Subscriber understands that the Company’s and the Placement Agent’s respective
officers, directors, employees and/or affiliates may purchase Notes in this
Offering, which purchases may be used to satisfy the Minimum
Offering.

     

    
      
        
        

      

      
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    1.2           The
Subscriber recognizes that the purchase of the Notes and Warrants involves a
high degree of risk including, but not limited to, the following: (a) the
Company remains a development stage business with limited operating history and
requires substantial funds in addition to the proceeds of the Offering; (b) an
investment in the Company is highly speculative, and only investors who can
afford the loss of their entire investment should consider investing in the
Company and the Notes and Warrants; (c) the Subscriber may not be able to
liquidate its investment; (d) transferability of the Notes, the Warrants and the
Common Stock issuable upon conversion of the Notes and underlying the Warrant
(sometimes hereinafter collectively referred to as the “Securities”) is
extremely limited; (e) in the event of a disposition of the Securities, the
Subscriber could sustain the loss of its entire investment; and (f) the Company
has not paid any dividends on its capital stock since its inception and does not
anticipate paying any dividends in the foreseeable future.  Without
limiting the generality of the representations set forth in Section 1.5 below,
the Subscriber represents that the Subscriber has carefully reviewed the section
of the Memorandum captioned “Risk Factors.”

    


    1.3           The
Subscriber represents that the Subscriber is an “accredited investor” as such
term is defined in Rule 501 of Regulation D (“Regulation D”)
promulgated under the Securities Act of 1933, as amended (the “Securities Act”), as
indicated by the Subscriber’s responses to the questions contained in Article
VII hereof, and that the Subscriber is able to bear the economic risk of an
investment in the Securities.  If the Subscriber is a natural person,
the Subscriber has reached the age of majority in the state or other
jurisdiction in which the Subscriber resides, has adequate means of providing
for the Subscriber’s current financial needs and contingencies, is able to bear
the substantial economic risks of an investment in the Securities for an
indefinite period of time, has no need for liquidity in such investment and, at
the present time, could afford a complete loss of such investment.

    


    1.4           The
Subscriber hereby acknowledges and represents that (a) the Subscriber has
sufficient knowledge and experience in business and financial matters, prior
investment experience, including investment in securities that are non-listed,
unregistered and/or not traded on a national securities exchange, or the
Subscriber has employed the services of a “purchaser representative” (as defined
in Rule 501 of Regulation D), attorney and/or accountant to read all of the
documents furnished or made available by the Company both to the Subscriber and
to all other prospective investors in the Securities in order to evaluate the
merits and risks of such an investment on the Subscriber’s behalf; (b) the
Subscriber recognizes the highly speculative nature of this investment; and (c)
the Subscriber is able to bear the economic risk that the Subscriber hereby
assumes.

    


    1.5           The
Subscriber hereby acknowledges receipt and careful review of this Agreement, the
Note, the Warrant and the Memorandum (which includes the Risk Factors),
including all exhibits thereto (collectively referred to as the “Offering Materials”)
and hereby represents that the Subscriber has been furnished by the Company
during the course of the Offering with all information regarding the Company,
the terms and conditions of the Offering and any additional information that the
Subscriber, its purchaser representative, attorney and/or accountant has
requested or desired to know, and has been afforded the opportunity to ask
questions of and receive answers from duly authorized officers or other
representatives of the Company concerning the Company and the terms and
conditions of the Offering.

     

    
      
        
        

      

      
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    1.6           (a)           In
making the decision to invest in the Securities, the Subscriber has relied
solely upon the information provided by the Company in the Offering
Materials.  To the extent necessary, the Subscriber has retained, at
its own expense, and relied upon appropriate professional advice regarding the
investment, tax and legal merits and consequences of this Agreement and the
purchase of the Securities hereunder.  The Subscriber disclaims
reliance on any statements made or information provided by any person or entity
in the course of Subscriber’s consideration of an investment in the Securities
other than the Offering Materials.  The Subscriber acknowledges and
agrees that (i) the Company has prepared the Offering Materials and that no
other person, including without limitation, the Placement Agent, has supplied
any information for inclusion in the Offering Materials other than information
furnished in writing to the Company by the Placement Agent specifically for
inclusion in those parts of the Offering Materials relating specifically to the
Placement Agent, (ii) the Placement Agent has no responsibility for the accuracy
or completeness of the Offering Materials and (iii) the Subscriber has not
relied upon the independent investigation or verification, if any, that may have
been undertaken by the Placement Agent.

    


          
(b)           The
Subscriber represents that (i) the Subscriber was contacted regarding the sale
of the Securities by the Company or the Placement Agent (or an authorized agent
or representative of the Company or the Placement Agent) with whom the
Subscriber had a prior substantial pre-existing relationship and (ii) no
Securities were offered or sold to it by means of any form of general
solicitation or general advertising, and in connection therewith, the Subscriber
did not (A) receive or review any advertisement, article, notice or other
communication published in a newspaper or magazine or similar media or broadcast
over television or radio, whether closed circuit, or generally available; or (B)
attend any seminar meeting or industry investor conference whose attendees were
invited by any general solicitation or general advertising.

    


    1.7           The
Subscriber hereby represents that the Subscriber, either by reason of the
Subscriber’s business or financial experience or the business or financial
experience of the Subscriber’s professional advisors (who are unaffiliated with
and not compensated by the Company or any affiliate or selling agent of the
Company, including the Placement Agent, directly or indirectly), has the
capacity to protect the Subscriber’s own interests in connection with the
transaction contemplated hereby.

    


    1.8           The
Subscriber hereby acknowledges that the Offering has not been reviewed by the
United States Securities and Exchange Commission (the “SEC”) nor any state
regulatory authority since the Offering is intended to be exempt from the
registration requirements of Section 5 of the Securities Act pursuant to
Regulation D promulgated thereunder.  The Subscriber understands that
the Securities have not been registered under the Securities Act or under any
state securities or “blue sky” laws and agrees not to sell, pledge, assign or
otherwise transfer or dispose of the Securities unless they are registered under
the Securities Act and under any applicable state securities or “blue sky” laws
or unless an exemption from such registration is available.

    


    1.9           The
Subscriber understands that the Securities have not been registered under the
Securities Act or any state securities laws by reason of a claimed exemption
under the provisions of the Securities Act and such state securities laws that
depends, in part, upon the Subscriber’s investment intention. The Subscriber
hereby represents that the Subscrib­er is purchasing the Securities for the
Subscriber’s own account for investment and not with a view toward the resale or
distribution to others.  The Subscriber, if an entity, further
represents that it was not formed for the purpose of purchasing the
Securities.

     

    
      
        
        

      

      
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    1.10           The
Subscriber understands that there is no public market for the Securities and
that no market may develop for any of such Securities.  The Subscriber
understands that even if a public market develops for such Securities, Rule 144
(“Rule 144”)
promulgated under the Securities Act requires for non-affiliates, in the case of
a company that has filed periodic reports with the SEC under the Exchange Act
for a period of 90 days prior to the proposed sale, among other conditions, a
six-month holding period prior to the resale of securities acquired in a
non-public offering without having to satisfy the registration requirements
under the Securities Act.  If the Company has not made such filings,
such Securities will be subject to a one-year holding period, among other
restrictions, before they can be resold under Rule 144.  The
Subscriber understands and hereby acknowledges that the Company is under no
obligation to register any of the Securities under the Securities Act or any
state securities or “blue sky” laws other than as set forth in Article
V.

    


    1.11           The
Subscriber consents to the placement of a legend on any certificate or other
document evidencing the Securities that such Securities have not been registered
under the Securities Act or any state securities or “blue sky” laws and setting
forth or referring to the restrictions on transferability and sale thereof
contained in this Agreement.  The Subscriber is aware that the Company
will make a notation in its appropriate records with respect to the restrictions
on the transferability of such Securities. The legend to be placed on each
certificate shall be in form substantially similar to the
following:

    


    “THE
SECURITIES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED UNDER THE UNITED STATES
SECURITIES ACT OF 1933, AS AMENDED (THE “ACT”) OR ANY STATE SECURITIES OR “BLUE
SKY LAWS”, AND MAY NOT BE OFFERED, SOLD, TRANSFERRED, ASSIGNED, PLEDGED OR
HYPOTHECATED ABSENT AN EFFECTIVE REGISTRATION THEREOF UNDER SUCH ACT, OR UNLESS
THE COMPANY HAS RECEIVED AN OPINION OF COUNSEL, REASONABLY SATISFACTORY TO THE
COMPANY AND ITS COUNSEL, THAT SUCH REGISTRATION IS NOT REQUIRED.”

    


    1.12           The
Subscriber hereby represents that the address of the Subscriber furnished by the
Subscriber on the signature page hereof is the Subscriber’s principal residence
if the Subscriber is an individual or its principal business address if it is a
corporation or other entity.

    


    1.13           The
Subscriber represents that the Subscriber has full power and authority
(corporate, statutory and otherwise) to execute and deliver this Agreement and
to purchase the Securities.  This Agreement constitutes the legal,
valid and binding obligation of the Subscriber, enforceable against the
Subscriber in accordance with its terms, subject to laws of general application
relating to bankruptcy, insolvency and the relief of debtors and rules of law
governing specific performance, injunctive relief or other equitable remedies,
and to limitations of public policy.

     

    
      
        
        

      

      
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    1.14           If
the Subscriber is a corporation, partnership, limited liability company, trust,
employee benefit plan, individual retirement account, Keogh Plan, or other
tax-exempt entity, (a) it is authorized and qualified to invest in the Company
and the person signing this Agreement on behalf of such entity has been duly
authorized by such entity to do so and (b) it is duly organized, validly
existing and in good standing under the laws of the jurisdiction of its
organization.

    


    1.15           The
Subscriber acknowledges that if he or she is a Registered Representative of a
Financial Industry Regulatory Authority (“FINRA”) member firm,
he or she must give such firm the notice required by FINRA Rule 3050, receipt of
which must be acknowledged by such firm in Section 7.3 below.

    


    1.16           Subject
to the provision below, the Subscriber hereby agrees that in the case of an
initial offering of the Common Stock to the public (an “IPO”) pursuant to an
effective registration statement under the Securities Act, the Subscriber will
not, without the prior written consent of the Company, offer, pledge, sell,
contract to sell, grant any option for the sale of, or otherwise dispose of,
directly or indirectly, the Registrable Securities (as defined in Section 5.1)
purchased or acquired by the Subscriber for a period of up to 180 days from the
effective date of the registration statement relating to the IPO and that the
Subscriber will enter into an agreement with the Company or managing underwriter
of the IPO to that effect.

    


    1.17         
(a)           The
Subscriber agrees not to issue any public statement with respect to the
Subscriber’s investment or proposed investment in the Company or the terms of
any agreement or covenant between them and the Company without the Company’s
prior written consent, except such disclosures as may be required under
applicable law or under any applicable order, rule or regulation.

    


     (b)           The
Company agrees not to disclose the names, addresses or any other information
about the Subscriber, except as required by law; provided, that the Company may
use the name (but not the address) of the Subscriber in any registration
statement filed pursuant to Article V in which the Subscriber’s shares are
included and in any subsequent offering memorandum if the Subscriber
beneficially owns five percent (5%) or more of the Company’s voting capital
stock, on a fully-diluted or other basis, or otherwise as required by
law.

    


    1.18           The
Subscriber represents and warrants that it has not engaged, consented to or
authorized any broker, finder or intermediary to act on its behalf, directly or
indirectly, as a broker, finder or intermediary in connection with the
transactions contemplated by this Agreement.  The Subscriber hereby
agrees to indemnify and hold harmless the Company from and against all fees,
commissions or other payments owing to any such person or firm acting on behalf
of such Subscriber hereunder.

    


    1.19           The
Subscriber agrees to hold the Company and its directors, officers, employees,
affiliates, controlling persons and agents (including the Placement Agent and
its officers, directors, employees, counsel, controlling persons and agents) and
their respective heirs, representatives, successors and assigns harmless and to
indemnify them against all liabilities, costs and expenses incurred by them as a
result of (a) any sale or distribution of the Securities by the Subscriber in
violation of the Securities Act or any applicable state or foreign securities or
“blue sky” laws; or (b) any false representation or warranty or any breach or
failure by the Subscriber to comply with any covenant made by the Subscriber in
this Agreement (including the Confidential Investor Questionnaire contained in
Article VII herein) or any other document furnished by the Subscriber to any of
the foregoing in connection with this transaction; provided, however, that in no
event shall any indemnity under this subsection 1.19 exceed the aggregate
principal amount of Notes and Warrants subscribed for by the Subscriber pursuant
to this Agreement, except in the case of willful fraud by the
Subscriber.

     

    
      
        
        

      

      
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    1.20           The
Subscriber understands, acknowledges and agrees with the Company that this
subscription may be rejected, in whole or in part, by the Company, in the sole
and absolute discretion of the Company, at any time before the Closing Date
notwithstanding prior receipt by the Subscriber of notice of acceptance of the
Subscriber’s subscription.

    


    1.21           The
Subscriber acknowledges that the information contained in the Offering Materials
or otherwise made available to the Subscriber is confidential and non-public and
agrees that all such information shall be kept in confidence by the Subscriber
and neither used by the Subscriber for the Subscriber’s personal benefit (other
than in connection with this subscription) nor disclosed to any third party for
any reason, notwithstanding that a Subscriber’s subscription may not be accepted
by the Company; provided, however, that (a) the Subscriber may disclose such
information to its affiliates and advisors who may have a need for such
information in connection with providing advice to the Subscriber with respect
to its investment in the Company so long as such affiliates and advisors have an
obligation of confidentiality, and (b) this obligation shall not apply to any
such information that (i) is part of the public knowledge or literature and
readily accessible at the date hereof, (ii) becomes part of the public knowledge
or literature and readily accessible by publication (except as a result of a
breach of this provision) or (iii) is received from third parties without an
obligation of confidentiality (except third parties who disclose such
information in violation of any confidentiality agreements or obligations,
including, without limitation, any subscription or other similar agreement
entered into with the Company).

    


    1.22           The
Subscriber represents that no authorization, approval, consent or license of any
person is required to be obtained for the purchase of the Securities by the
Subscriber, other than as have been obtained and are in full force and
effect.

    


    1.23           The
Subscriber represents that the representations, warranties and agreements of the
Subscriber contained herein and in any other writing delivered in connection
with the transactions contemplated hereby shall be true and correct in all
respects on the date hereof and as of the Closing Date on which the Subscriber
purchases Notes and Warrants as if made on and as of such date and shall survive
the execution and delivery of this Agreement and the purchase of the Notes and
Warrants.  The Subscriber agrees that the Company and the Placement
Agent shall be entitled to rely on the representations, warranties and
agreements of the Subscriber contained herein.

     

    
      
        
        

      

      
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    1.24           The
Subscriber understands, acknowledges and agrees with the Company that, except as
otherwise set forth herein, the subscription hereunder is irrevocable by the
Subscriber, that, except as required by law, the Subscriber is not entitled to
cancel, terminate or revoke this Agreement or any agreements of the Subscriber
hereunder and that this Agreement and such other agreements shall survive the
death or disability of the Subscriber and shall be binding upon and inure to the
benefit of the parties and their heirs, executors, administrators, successors,
legal representatives and permitted assigns.  If the Subscriber is
more than one person, the obligations of the Subscriber hereunder shall be joint
and several and the agreements, representations, warranties and acknowledgments
herein contained shall be deemed to be made by and be binding upon each such
person and his/her heirs, executors, administrators, successors, legal
representatives and permitted assigns.

    


    1.25           The
Subscriber understands, acknowledges and agrees with the Company that the
Offering is intended to be exempt from the registration under the Securities Act
by virtue of the provisions of Regulation D thereunder, which is in part
dependent upon the truth, completeness and accuracy of the statements made by
the Subscriber.

    


    
      II.       
REPRESENTATIONS BY AND
COVENANTS OF THE COMPANY

       

          The Company
hereby represents and warrants to the Subscriber that:

    

    


    2.1           Organization, Good Standing
and Qualification.  The Company is a corporation duly
organized, validly existing and in good standing under the laws of the State of
Delaware and has full corporate power and authority to conduct its business as
currently conducted. The Company is duly qualified as a foreign corporation to
do business and is in good standing in every jurisdiction in which the property
owned or leased by it or the nature of the business conducted by it makes such
qualification necessary, except to the extent that the failure to be so
qualified or in good standing would not reasonably be expected to have,
individually or in the aggregate, a material adverse effect on the business,
operations, conditions (financial or otherwise), properties, assets or results
of operations of the Company (a “Material Adverse
Effect”).  The Company does not have any
subsidiaries.

    


    2.2           Capitalization and Voting
Rights.  The authorized, issued and outstanding capital stock
of the Company is as set forth in the Memorandum and all issued and
outstanding shares of the Company are validly issued, fully paid and
nonassessable.  Except as set forth in the Memorandum, there are no
outstanding options, warrants, agreements, convertible securities, preemptive
rights or other rights to subscribe for or to purchase any shares of capital
stock of the Company.  Except as set forth in the Offering
Materials and as
otherwise required by law, there are no restrictions upon the voting or transfer
of any of the shares of capital stock of the Company pursuant to the Company’s
Certificate of Incorporation, as amended (the “Certificate of
Incorporation”), By-Laws or other governing documents or any agreement or
other instruments to which the Company is a party or by which the Company is
bound.

     

    
      
        
        

      

      
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    2.3           Authorization;
Enforceability. The Company has all corporate right, power and authority
to enter into this Agreement and to consummate the transactions contemplated
hereby.  All corporate action on the part of the Company, its
directors and stockholders necessary for the (i) authorization, execution,
delivery and performance of this Agreement by the Company; and (ii)
authorization, sale, issuance and delivery of the Securities contemplated hereby
and the performance of the Company’s obligations hereunder has been
taken.  This Agreement has been duly executed and delivered by the
Company and constitutes a legal, valid and binding obligation of the Company,
enforceable against the Company in accordance with its terms, subject to laws of
general application relating to bankruptcy, insolvency and the relief of debtors
and rules of law governing specific performance, injunctive relief or other
equitable remedies, and to limitations of public policy.  The Notes
and Warrants, when issued and fully paid for in accordance with the terms of
this Agreement, will be validly issued. Upon the issuance and delivery of the
equity securities issuable upon conversion of the Notes in accordance with the
terms thereof, such equity securities will be validly issued, fully paid and
nonassessable.  The Common Stock issuable upon exercise of the
Warrants, when issued in accordance with the terms of such Warrants, will be
validly issued, full paid and non-assessable.  The issuance and sale
of the Securities contemplated hereby will not give rise to any preemptive
rights or rights of first refusal on behalf of any person which have not been
waived in connection with this Offering.

    


    2.4           No Conflict; Governmental
Consents.

    


    (a)           Except
as would not reasonably be expected to have a Material Adverse Effect or have
been waived, the execution and delivery by the Company of this Agreement and the
consummation of the transactions contemplated hereby will not result in the
violation of any law, statute, rule, regulation, order, writ, injunction,
judgment or decree of any court or governmental authority to or by which the
Company is bound, or of any provision of the Certificate of Incorporation or
By-Laws of the Company, and will not conflict with, or result in a breach or
violation of, any of the terms or provisions of, or constitute (with due notice
or lapse of time or both) a default under, any lease, loan agreement, mortgage,
security agreement, trust indenture or other agreement or instrument to which
the Company is a party or by which it is bound or to which any of its properties
or assets is subject, nor result in the creation or imposition of any lien upon
any of the properties or assets of the Company.

    


    (b)           No
consent, approval, authorization or other order of any governmental authority or
other third party is required to be obtained by the Company in connection with
the authorization, execution and delivery of this Agreement or with the
authorization, issue and sale of the Securities, except as have been obtained or
such filings as may be required to be made with the SEC and with any state or
foreign blue sky or securities regulatory authority relating to an exemption
from registration thereunder.

    


    2.5           No Defaults. The
Company is not, nor has it received notice that it would be with the passage of
time, giving of notice, or both, (i) in violation of any provision of its
Certificate of Incorporation and By-Laws, or (ii) in default or violation of any
term, condition or provision of any material agreement, note, mortgage,
indenture, contract, lease or instrument, permit, concession, franchise or
license to which the Company is a party.

     

    
      
        
        

      

      
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    2.6           Issuance of
Shares.  A sufficient number of shares of authorized but
unissued shares of Common Stock have been reserved for issuance upon conversion
of the Notes and exercise of the Warrants.

    


    2.7           No Integrated
Offering.  Neither the Company, nor any of its affiliates or
any other person acting on the Company’s behalf, has directly or indirectly
engaged in any form of general solicitation or general advertising with respect
to the Securities nor have any of such persons made any offers or sales of any
security or solicited any offers to buy any security under circumstances that
would require registration of the Securities under the Securities Act or cause
this offering of the Securities to be integrated with any prior offering of
securities of the Company for purposes of the Securities Act.

    


    2.8           Licenses. Except as
would not reasonably be expected to have a Material Adverse Effect, the Company
has sufficient licenses, permits and other governmental authorizations currently
required for the conduct of its business or ownership of properties and is in
all material respects complying therewith.

    


    2.8           Litigation.  The
Company knows of no pending or threatened legal or governmental proceedings
against the Company which (i) adversely questions the validity of this Agreement
or any agreements related to the transactions contemplated hereby or the right
of the Company to enter into any of such agreements, or to consummate the
transactions contemplated hereby or thereby or (ii) could, if there were an
unfavorable decision, have a Material Adverse Effect. There is no action, suit,
proceeding or investigation by the Company currently pending in any court or
before any arbitrator or that the Company intends to initiate.

    


    2.9           Investment
Company  The Company is not an “investment company” within the
meaning of such term under the Investment Company Act of 1940, as amended, and
the rules and regulations of the SEC thereunder.

    


    2.10         Placement
Agent.  The Company has engaged, consented to and authorized
the Placement Agent to act as agent of the Company in connection with the
transactions contemplated by this Agreement.  The Company will pay the
Placement Agent a commission, and the Company agrees to indemnify and hold
harmless the Subscribers from and against all fees, commissions or other
payments owing by the Company to the Placement Agent or any other person or firm
acting on behalf of the Company hereunder.

    


    2.11         Financial Statements.
The financial statements of the Company included in Appendix D to the Memorandum
(the “Financial
Statements”) fairly present in all material respects the financial
condition and position of the Company at the dates and for the periods
indicated; and have been prepared in conformity with generally accepted
accounting principles in the United States (“GAAP”) consistently
applied throughout the periods covered thereby, 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 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.  Since the date of
the most recent balance sheet included as part of the Financial Statements,
there has not been to the Company’s knowledge: (i) any change in the assets,
liabilities, financial condition or operations of the
Company from that reflected in the Financial Statements, other than changes in
the ordinary course of business, none of which individually or in the aggregate
would reasonably be expected to have a Material Adverse Effect; or (ii) any
other event or condition of any character that, either individually or
cumulatively, would reasonably be expected to have a Material Adverse Effect,
except for the expenses incurred in connection with the transactions
contemplated by this Agreement.

     

    
      
        
        

      

      
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    2.12           No Undisclosed
Liabilities. Except as set forth in the Financial Statements, and except
for liabilities and obligations incurred in the ordinary course of business
since September 30, 2009, as of the date hereof, Company does not have any
material liabilities or obligations (absolute, accrued, contingent or otherwise)
which are not fully reflected, reserved against or disclosed in the Financial
Statements.

    


    2.13           Title to Properties and
Assets; Liens, Etc. The Company has good and marketable title to its
properties and assets, including the properties and assets reflected in the most
recent balance sheet included in the Financial Statements, and good title to its
leasehold estates, in each case subject to no mortgage, pledge, lien, lease,
encumbrance or charge, other than (a) those resulting from taxes which have not
yet become delinquent; (b) liens and encumbrances which do not materially
detract from the value of the property subject thereto or materially impair the
operations of the Company; (c) those that have otherwise arisen in the ordinary
course of business; and (d) those that would not reasonably be expected to have
a Material Adverse Effect.  The Company is in compliance with all
material terms of each lease to which it is a party or is otherwise
bound.

    


    2.14           Patents and
Trademarks.  Except as would not reasonably be expected to have
a Material Adverse Effect or as disclosed in the Memorandum, to the Company’s
knowledge, (i) the Company owns or possesses adequate licenses or other rights
to use all patents, patent applications, trademarks, trademark applications,
service marks, service mark applications, trade names, copyrights, manufacturing
processes, formulae, trade secrets, licenses, customer lists and know how
(collectively, “Intellectual
Property”) , (ii) the Company has not received any communications
alleging that the Company has violated or, by conducting its business as
conducted, would violate any of the patents, trademarks, service marks, trade
names, copyrights or trade secrets or other proprietary rights or processes of
any other person or entity, nor is the Company aware of any basis therefore and
(iii) no claim is pending or, to the Company’s knowledge after due inquiry,
threatened to the effect that any Intellectual Property owned or licensed by the
Company, or which the Company otherwise has the right to use, is invalid or
unenforceable by the Company.

    


    2.15           Obligations to Related
Parties. Except as disclosed in the Memorandum or as would not reasonably
be expected to have a Material Adverse Effect, there are no obligations of the
Company to officers, directors, stockholders, or employees of the Company other
than (a) for payment of salary or other compensation for services rendered, (b)
reimbursement for reasonable expenses incurred on behalf of the Company, (c)
standard indemnification provisions in the certificate of incorporation and
by-laws, and (d) for other standard employee benefits made generally available
to all employees (including stock option agreements outstanding under any stock
option plan approved by the Board of Directors of the
Company).  Except as may be disclosed in the Financial Statements, the
Company is not a guarantor or indemnitor of any indebtedness of any other
person, firm or corporation.

     

    
      
        
        

      

      
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    2.16           Employee Relations; Employee
Benefit Plans. The Company is not a party to any collective bargaining
agreement or a union contract.  The Company believes that its
relations with its employees are good.  No executive officer (as
defined in Rule 501(f) of the Securities Act) of the Company has notified the
Company that such officer intends to leave the Company or otherwise terminate
such officer’s employment with the Company.  The Company is in
compliance with all federal, state, local and foreign laws and regulations
respecting employment and employment practices, terms and conditions of
employment and wages and hours, except where failure to be in compliance would
not, either individually or in the aggregate, reasonably be expected to result
in a Material Adverse Effect.  Except as disclosed in the Memorandum,
the Company does not maintain any compensation or benefit plan, agreement,
arrangement or commitment (including, but not limited to, “employee benefit
plans”, as defined in Section 3(3) of the Employee Retirement Income Security
Act of 1974, as amended (“ERISA”)) for any
present or former employees, officers or directors of the Company or with
respect to which the Company has liability or makes or has an obligation to make
contributions, other than any such plans, agreements, arrangements or
commitments made generally available to the Company’s employees.

    


    2.17           Environmental
Laws.  To the best of its knowledge, the Company (i) is in
compliance with any and all Environmental Laws (as hereinafter defined), (ii)
has received all permits, licenses or other approvals required of it under
applicable Environmental Laws to conduct its business and (iii) is in compliance
with all terms and conditions of any such permit, license or approval where, in
each of the foregoing clauses (i), (ii) and (iii), the failure to so comply
would reasonably be expected to have, individually or in the aggregate, a
Material Adverse Effect.  The term “Environmental Laws” means all
federal, state, local or foreign laws relating to pollution or protection of
human health or the environment (including, without limitation, ambient air,
surface water, groundwater, land surface or subsurface strata), including,
without limitation, laws relating to emissions, discharges, releases or
threatened releases of chemicals, pollutants, contaminants, or toxic or
hazardous substances or wastes (collectively, “Hazardous Materials”)
into the environment, or otherwise relating to the manufacture, processing,
distribution, use, treatment, storage, disposal, transport or handling of
Hazardous Materials, as well as all authorizations, codes, decrees, demands or
demand letters, injunctions, judgments, licenses, notices or notice letters,
orders, permits, plans or regulations issued, entered, promulgated or approved
thereunder.

    


    2.18           Tax
Status.  To the best of the Company’s knowledge, the Company
(i) has made or filed all federal and state income and all other tax returns,
reports and declarations required by any jurisdiction to which it is subject,
(ii) has paid all taxes and other governmental assessments and charges that are
material in amount, shown or determined to be due on such returns, reports and
declarations, except those being contested in good faith and (iii) has set aside
on its books provision reasonably adequate for the payment of all taxes for
periods subsequent to the periods to which such returns, reports or declarations
apply.  There are no unpaid taxes in any material amount claimed to be
due by the taxing authority of any jurisdiction, and the officers of the Company
know of no basis for any such claim.

     

    
      
        
        

      

      
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    2.19           Absence of Certain
Changes.  Since the date of the Memorandum, there has been no
change in the business, operations, conditions (financial or otherwise),
prospects, assets or results of operations of the Company or any of its
Subsidiaries that could reasonably be expected to have a Material Adverse
Effect.

     

    2.20           Ranking of Notes; Issuance
of New Debt.  On the Closing Date, the Notes will rank pari
passu with all of the Company’s existing indebtedness.  Following the
Closing Date, as long as any Note remains outstanding, the Company will not,
without the prior written consent of the holders of Notes evidencing at least
sixty-six and two-thirds percent (66 2⁄3%) of the Principal Loan Amount then
outstanding, incur indebtedness for borrowed money (“New Debt”) in favor of any person or
entity (each a “New Lender”)
which indebtedness is secured or otherwise senior in priority to any Note issued
to any subscriber pursuant to this Agreement or any substantially similar
agreement.  No consent of the holders of Notes will be required for
issuances by the Company of unsecured indebtedness that ranks pari passu with,
or junior to, the Notes.

     

    2.21           Disclosure.  The
information set forth in the Offering Materials as of the date hereof contains
no untrue statement of a material fact nor omits to state a material fact
necessary in order to make the statements contained therein, in light of the
circumstances under which they were made, not misleading.

    


    III.        TERMS OF
SUBSCRIPTION

    


    3.1           The
minimum purchase that may be made by any prospective investor shall be $50,000
aggregate principal amount of Notes.  Subscriptions for investment
below the minimum investment may be accepted at the discretion of the Placement
Agent and the Company.  The Company and the Placement Agent reserve
the right to reject any subscription made hereby, in whole or in part, in their
sole discretion.  The Company’s agreement with each Subscriber is a
separate agreement and the sale of the Securities to each Subscriber is a
separate sale.

    


    3.2           Pending
the sale of the Securities, all funds paid hereunder shall be deposited by the
Company in escrow with American Stock Transfer & Trust Company, LLC, having
an office at 59 Maiden Lane-Plaza Level, New York, New York
10038.  This Offering will terminate on the earlier of (i) the
Company’s acceptance of subscriptions for the Maximum Amount, or (ii) December
31, 2009, unless terminated at an earlier time or extended by the mutual
agreement of the Placement Agent and the Company without notice to prospective
investors for up to an additional sixty (60) days (the “Offering Termination
Date”).  The Company reserves the right to withdraw or cancel
the Offering and to accept or reject any subscription in whole or in part, in
its sole discretion.  The Subscriber hereby authorizes and directs the
Company and the Placement Agent to direct the Escrow Agent to return any funds
for unaccepted subscriptions to the same account from which the funds were
drawn, without interest, including any customer account maintained with the
Placement Agent.

    


    3.3           At
any time after the Company has received subscriptions and related funds for the
Minimum Offering, but prior to the Offering Termination Date, the Company may
conduct a Closing and may conduct subsequent Closings on an interim basis until
the Maximum Amount has been obtained or until the Offering Termination
Date.  Each Closing shall occur at the offices of the Placement Agent
at 405 Lexington Avenue, New York, NY 10174.

     

    
      
        
        

      

      
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    3.4           The
Note and Warrant purchased by the Subscriber pursuant to this Agreement will be
prepared for delivery to the Subscriber promptly following the Closing at which
such purchase takes place. The Subscriber hereby authorizes and directs the
Company to deliver the Note and Warrant purchased by the Subscriber pursuant to
this Agreement directly to the Subscriber’s account maintained by the Placement
Agent, if any, or, if no such account exists, to the residential or business
address indicated on the signature page hereto.

    


    IV.        CONDITIONS TO OBLIGATIONS OF
THE PARTIES

    


    4.1           In
addition to the Company’s right to reject, in whole or in part, any subscription
at any time before the Closing Date, the Company’s obligation to issue the
Securities at each Closing to the applicable Subscriber is subject to the
fulfillment on or prior to such Closing of the following conditions, which
conditions may be waived at the option of the Company to the extent permitted by
law:

    


    (a)           Representations and
Warranties Correct.  The representations and warranties made by
the Subscriber in Article I hereof shall be true and correct in all material
respects.

    


    (b)           Covenants.  All
covenants, agreements and conditions contained in this Agreement to be performed
by the Subscriber on or prior to the date of such Closing shall have been
performed or complied with in all material respects.

    


    (c)           No Legal Order
Pending.  There shall not then be in effect any legal or other
order enjoining or restraining the transactions contemplated by this
Agreement.

    


    (d)           No Law Prohibiting or
Restricting Such Sale.  There shall not be in effect any law,
rule or regulation prohibiting or restricting such sale or requiring any consent
or approval of any person, which shall not have been obtained, to issue the
Securities (except as otherwise provided in this Agreement).

     

    
      
        
        

      

      
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    4.2           The
Subscriber’s obligation to purchase the Notes and Warrants at the Closing at
which such purchase is to be consummated is subject to the fulfillment on or
prior to such Closing of the following conditions, which conditions may be
waived at the option of the Subscriber to the extent permitted by
law:

    


    (a)           Representations and
Warranties Correct.  The representations and warranties made by
the Company in Article II hereof shall be true and correct in all material
respects.

    


    (b)           Covenants.  All
covenants, agreements and conditions contained in this Agreement to be performed
by the Company on or prior to the date of such Closing shall have been performed
or complied with in all material respects.

    


    (c)           No Legal Order
Pending.  There shall not then be in effect any legal or other
order enjoining or restraining the transactions contemplated by this
Agreement.

    


    (d)           No Law Prohibiting or
Restricting Such Sale.  There shall not be in effect any law,
rule or regulation prohibiting or restricting such sale or requiring any consent
or approval of any person, which shall not have been obtained, to issue the
Securities (except as otherwise provided in this Agreement).

    


    (e)           Legal
Opinion.  The Placement Agent shall have received an opinion of
counsel to the Company addressed to the Subscribers (which the Placement Agent
may be permitted to rely on as if it were addressed to them) containing certain
opinions to be substantially in the form attached hereto as Exhibit C, which
opinion will be subject to standard qualifications and assumptions.

    


    (f)           Officer’s
Certificate. The Placement Agent shall have received an Officer’s
Certificate addressed to the Subscribers, signed by the authorized officer of
the Company and dated as of the Closing.  The certificate shall state,
among other things, that the representations and warranties contained herein and
in the Offering Materials are true and accurate in all material respects at such
Closing Date with the same effect as though expressly made at such Closing Date
and the Placement Agent shall be entitled to rely on such representations of the
Company in the Offering Materials as if they were made directly to the Placement
Agent.

    


    V.           REGISTRATION
RIGHTS

    


    5.1           Definitions.  As
used in this Agreement, the following terms shall have the following
meanings.

    


    (a)           The
term “Holder”
shall mean any holder of Registrable Securities.

    


    (b)           The
terms “register”, “registered” and
“registration”
refer to a registration effected by preparing and filing a registration
statement or similar document in compliance with the Securities Act, and the
declaration or order of effectiveness of such registration statement or
document.

    


    (c)           The
term “Registrable
Securities” shall mean (i) the shares of equity securities issuable upon
conversion of the Notes sold in the Offering (or any successor security); (ii)
the shares of equity securities issuable upon exercise of the Warrants; and
(iii) any shares of equity securities issuable (or issuable upon the conversion
or exercise of any warrant, right or other security that is issued) pursuant to
a dividend or other distribution with respect to or in replacement of any
Securities; provided, however, that securities shall only be treated as
Registrable Securities if and only for so long as they (A) have not been
disposed of pursuant to a registration statement declared effective by the SEC;
(B) have not been sold in a transaction exempt from the registration and
prospectus delivery requirements of the Securities Act so that all transfer
restrictions and restrictive legends with respect thereto are removed upon the
consummation of such sale; (C) are held by a Holder or a permitted transferee of
a Holder pursuant to Section 5.12; and (D) may not be disposed of under Rule 144
under the Securities Act without restriction.

     

    
      
        
        

      

      
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    (d)           The
term “Trading
Event” means the first date on which the Company’s Common Stock trades on
a national securities exchange or on the Over-the-Counter Bulletin
Board.

    


    5.2           Registration of Conversion
Shares.  The Company agrees that if the Board of Directors of
the Company (the “Board”) shall
authorize the filing with the SEC of a registration statement under the
Securities Act for an IPO, the Company shall use its reasonable best efforts to
(A) promptly notify each Holder that such registration statement will be filed
and that the shares of Common Stock into which the Notes then held by such
Holder will be automatically converted in connection with such IPO (the “Conversion Shares”)
will be included in such registration statement; (B) cause such registration
statement to cover all of such Conversion Shares to be issued to such Holder;
and (C) use reasonable best efforts to cause such registration statement to
become effective as soon as practicable.

    


    5.3           Piggyback
Registration.

    


    (a)           The
Company agrees that if, at any time, and from time to time, after the earlier to
occur of (i) the date an IPO is declared effective by the SEC and (ii) a Trading
Event, the Board shall authorize the filing of a registration statement under
the Securities Act (other than the filing of a registration statement pursuant
to the IPO or a registration statement on Form S-8, Form S-4 or any other form
that does not include substantially the same information as would be required in
a form for the general registration of securities) in connection with the
proposed offer of any of its securities by it or any of its stockholders, the
Company shall: (A) promptly notify each Holder that such registration statement
will be filed and that the Registrable Securities then held by such Holder will
be included in such registration statement at such Holder’s request; (B) cause
such registration statement to cover all of such Registrable Securities issued
to such Holder for which such Holder requests inclusion; (C) use reasonable best
efforts to cause such registration statement to become effective as soon as
practicable; and (D) take all other reasonable action necessary under any
Federal or state law or regulation of any governmental authority to permit all
such Registrable Securities that have been issued to such Holder to be sold or
otherwise disposed of, and will maintain such compliance with each such Federal
and state law and regulation of any governmental authority for the period
necessary for such Holder to promptly effect the proposed sale or other
disposition.

    


    (b)           Notwithstanding
any other provision of this Section 5.3, the Company may at any time, abandon or
delay any registration commenced by the Company.  In the event of such
an abandonment by the Company, the Company shall not be required to continue
registration of shares requested by the Holder for inclusion and the Holder
shall retain the right to request inclusion of shares as set forth in Section
5.3(a) above.

     

    
      
        
        

      

      
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    5.4           Demand
Registration.

    


    (a)           Registration on
Request.

    


    (i)           The
Company agrees that, at any time, and from time to time, but at least 180 days
after the earlier to occur of (i) the date an IPO is declared effective by the
SEC and (ii) a Trading Event, Holders of a majority of the Registrable
Securities may make a written request that the Company effect the registration
under the Securities Act of outstanding Registrable Securities; provided that such
requested registration would cover at least 51% of the Registrable Securities
owned by all the Holders at such time; and provided, further, that the
Holders shall be entitled to no more than one such demand
registration.

    


    (ii)           The
Company further agrees that if, at any time, and from time to time, after the
Company has qualified for the use of Form S-3 or any successor
form,  one or more of the Holders desire to effect the registration
under the Securities Act on Form S-3 or any successor form (“Short-Form
Registration”) of outstanding Registrable Securities, such Holder(s) may
make a written request that the Company effect a Short-Form Registration; provided that the
aggregate price to the public of the shares as to which such registration is
requested (based on the then current market price and before deducting
underwriting discounts and commissions) would equal or exceed $5,000,000. It is
understood and agreed that the Holders may make good faith requests for
Short-Form Registrations on an unlimited number of occasions; provided further,
that the Company shall not be required to effect more than one Short Form
Registration in any 12-month period.

    


    (iii)           Each
request made by one or more of the Holders pursuant to subsections (i) or (ii)
above (the “Initiating
Holders”) will specify the number of shares of Registrable Securities
proposed to be sold and will also specify the intended method of disposition
thereof. Following receipt of any such request, the Company shall promptly
notify all Holders other than the Initiating Holders of receipt of such request
and the Company shall use best efforts to file, within 60 days of such request,
the registration under the Securities Act of the Registrable Securities which
the Company has been so requested to register in the request by the Initiating
Holders (and in all notices received by the Company from such other Holders
within 30 days after the giving of such notice by the Company), to the extent
necessary to permit the disposition (in accordance with the intended methods
thereof as aforesaid) of the Registrable Securities to be registered. If such
method of disposition shall be an underwritten public offering, the Holders of a
majority of the shares of Registrable Securities to be sold in such offering may
designate the managing underwriter of such offering, subject to the approval of
the Company, which approval shall not be unreasonably withheld or
delayed.  The Holders will be permitted to withdraw Registrable
Securities from a registration at any time prior to the effective date of such
registration; provided the
remaining number of shares of Registrable Securities subject to a requested
registration is not less than the minimum amount required pursuant to this
Section 5.4.

     

    
      
        
        

      

      
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    (b)           Limitations on Demand
Registration. Notwithstanding Section 5.4(a), the Company shall not be
obligated to file a registration statement relating to a registration request
pursuant to this Section 5.4 at any time during the 180-day period immediately
following the effective date of any registration statement filed by the Company
(other than on Form S-8 or S-4 or any other form that does not include
substantially the same information as would be required in a form for the
general registration of securities). If the Board determines, in its good faith
judgment, that the Company (i) should not file any registration statement
otherwise required to be filed pursuant to Section 5.4 or (ii) should withdraw
any such previously filed registration statement because, in either case, the
Board determines, in its good faith judgment, that the Company is in the
possession of material nonpublic information required to be disclosed in such
registration statement or an amendment or supplement thereto, the disclosure of
which in such registration statement would be materially disadvantageous to the
Company (a “Disadvantageous
Condition”), the Company shall be entitled to postpone for the shortest
reasonable period of time (but not exceeding 90 days from the date of the
determination), the filing of such registration statement or, if such
registration statement has already been filed, may suspend or withdraw such
registration statement and shall promptly give the Holders written notice of
such determination, containing a general statement of the reasons for such
postponement and an approximation of the anticipated delay.  Upon the
receipt of any such notice, such Holders shall forthwith discontinue use of the
prospectus contained in such registration statement and, if so directed by the
Company, shall deliver to the Company all copies of the prospectus then covering
such Registrable Securities current at the time of receipt of such notice (or,
if no registration statement has yet been filed, all drafts of the prospectus
covering such Registrable Securities).  If any Disadvantageous
Condition shall cease to exist, the Company shall promptly notify the Holders to
such effect.  If any registration statement shall have been withdrawn,
the Company shall, at such time as it is possible or, if earlier, at the end of
the 90-day period following such withdrawal, file a new registration statement
covering the Registrable Securities that were covered by such withdrawn
registration statement. The Company’s right to delay a request for registration
or to withdraw a registration statement pursuant to this Section 5.4 may not be
exercised more than once in any one-year period.

    


    5.5           Registration
Procedures. Whenever required under this Article V to include Registrable
Securities in a Company registration statement, the Company shall, as
expeditiously as reasonably possible:

    


    (a)           Use
reasonable best efforts to (i) cause such registration statement to become
effective, and (ii) cause such registration statement to remain effective until
the earliest to occur of (A) such date as the Holders have completed the
distribution described in the registration statement and (B) such time that all
of such Registrable Securities are no longer, by reason of Rule 144(b)(1) under
the Securities Act, required to be registered for the sale thereof by such
Holders.  The Company will also use its reasonable best efforts to,
during the period that such registration statement is required to be maintained
hereunder, file such post-effective amendments and supplements thereto as may be
required by the Securities Act and the rules and regulations thereunder or
otherwise to ensure that the registration statement does not contain any untrue
statement of material fact or omit to state a fact required to be stated therein
or necessary to make the statements contained therein, in light of the
circumstances under which they are made, not misleading; provided, however, that
if applicable rules under the Securities Act governing the obligation to file a
post-effective amendment permits, in lieu of filing a post-effective amendment
that (i) includes any prospectus required by Section 10(a)(3) of the Securities
Act or (ii) reflects facts or events representing a material or fundamental
change in the information set forth in the registration statement, the Company
may incorporate by reference information required to be included in (i) and (ii)
above to the extent such information is contained in periodic reports filed
pursuant to Section 13 or 15(d) of the Exchange Act in the registration
statement. In the event that the Company becomes qualified for the use of Form
S-3 or any successor form at a time when any registration statement on any other
Form which includes Registrable Securities is required to be maintained
hereunder, the Company shall, upon the request of any Selling Holder, subject to
Section 5.6, (i) as expeditiously as reasonably possible, use reasonable best
efforts to cause a Short-Form Registration covering such Registrable Securities
to become effective and (ii) comply with each of the other requirements of this
Section 5.5 which may be applicable thereto. Upon the effectiveness of such
Short-Form Registration, the Company shall be relieved of its obligations
hereunder to keep in effect the registration statement which initially covered
the Registrable Securities included in such Short-Form
Registration.

     

    
      
        
        

      

      
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    (b)           Prepare
and file with the SEC such amendments and supplements to such registration
statement, and the prospectus used in connection with such registration
statement, as may be necessary to comply with the provisions of the Securities
Act with respect to the disposition of all securities covered by such
registration statement.

    


    (c)           Furnish
to the selling Holders such numbers of copies of a prospectus, including a
preliminary prospectus as amended or supplemented from time to time, in
conformity with the requirements of the Securities Act, and such other documents
as they may reasonably request in order to facilitate the disposition of
Registrable Securities owned by them.

    


    (d)           Use
reasonable best efforts to register and qualify the securities covered by such
registration statement under such other federal or state securities laws of such
jurisdictions as shall be reasonably requested by the selling Holders; provided,
however, that the Company shall not be required in connection therewith or as a
condition thereto to qualify to do business or to file a general consent to
service of process in any such states or jurisdictions, unless the Company is
already subject to service in such jurisdiction and except as may be
re­quired by the Securities Act.

    


    (e)           In
the event of any underwritten public offering, enter into and perform its
obligations under an underwriting agreement, in usual and customary form, with
the managing underwriter of such offering.  Each selling Holder
participating in such underwriting shall also enter into and perform its
obligations under such an agreement.

    


    (f)           Notify
each Holder of Registrable Securities covered by such registration statement, at
any time when a prospectus relating thereto is required to be delivered under
the Securities Act, (i) when the registration statement or any post-effective
amendment and supplement thereto has become effective; (ii) of the issuance by
the SEC of any stop order or the initiation of proceedings for that purpose (in
which event the Company shall make every effort to obtain the withdrawal of any
order suspending effectiveness of the registration statement at the earliest
possible time or prevent the entry thereof); (iii) of the receipt by the Company
of any notification with respect to the suspension of the qualification of the
Registrable Securities for sale in any jurisdiction or the initiation of any
proceeding for such purpose; and (iv) of the happening of any event as a result
of which the prospectus included in such registration statement, as then in
effect, includes an untrue statement of a material fact or omits to state a
material fact required to be stated therein or necessary to make the statements
therein not misleading in the light of the circumstances then existing (and each
Holder agrees to suspend any trading under the Registration Statement until such
condition is abated).

    


    (g)           Cause
all such Registrable Securities registered hereunder to be listed on each
securities exchange or quotation service on which similar securities issued by
the Company are then listed or quoted or, if no such similar securities are
listed or quoted on a securities exchange or quotation service, apply for
qualification and use reasonable best efforts to qualify such Registrable
Securities for inclusion on a national securities exchange or the
Over-the-Counter Bulletin Board.

     

    
      
        
        

      

      
        19

        
          

        

      

      
        
        

      

    

    


    (h)           Provide
a transfer agent and registrar for all Registrable Securities registered
pursuant here­under and CUSIP number for all such Registrable Securities, in
each case not later than the effective date of such registration.

    


    (i)           Cooperate
with the selling Holders and the managing underwriters, if any, to facilitate
the timely preparation and delivery of certificates representing the Registrable
Securities to be sold, which certificates will not bear any restrictive legends;
and enable such Registrable Securities to be in such denominations and
registered in such names as the managing underwriters, if any, shall request at
least two business days prior to any sale of the Registrable Securities to the
underwriters.

     

    5.6           Furnish
Information.  It shall be a condition precedent to the
obligation of the Company to take any action pursuant to this Article V with
respect to the Registrable Securities of any Holder that such Holder shall
furnish to the Company such information regarding the Holder, the Registrable
Securities held by the Holder, and the intended method of disposition of such
securities as shall be reasonably required by the Company to effect the
registration of such Holder’s Registrable Securities.

     

    5.7           Registration
Expenses.  The Company shall bear and pay all expenses incurred
in connection with any registration, filing or qualification of Registrable
Securities with respect to registrations pursuant to Sections 5.3 or 5.4 for
each Holder, including (without limitation) all registration, filing, and
qualification fees, printers and accounting fees relating or apportionable
thereto (“Registration
Expenses”), but excluding underwriting discounts and com­missions
relating to Registrable Securities and excluding any professional fees or costs
of accounting, financial or legal advisors to any of the Holders.

    


                  
5.8           Underwriting
Requirements.  In connection with any offering involving an
underwriting of shares of the Company’s capital stock, the Company shall not be
required under Section 5.3 to include any of the Holders’ Registrable Securities
in such underwriting unless they accept the terms of the underwriting as agreed
upon between the Company and the underwriters selected by it (or by other
persons entitled to select the underwriters), and then only in such quantity as
the underwriters determine in their sole discretion will not jeopardize the
success of the offering by the Company.  If the total amount of
securities, including Registrable Secu­rities, requested by stockholders to
be included in such offering exceeds the amount of securities sold other than by
the Company that the underwriters determine in their sole discretion is
compatible with the success of the offering, then the Company shall be required
to include in the offering only that number of such securities, including
Registrable Securities, which the underwriters determine in their sole
discretion will not jeopardize the success of the offering (the securities so
included to be apportioned pro rata among the selling Holders according to the
total amount of securities entitled to be included therein owned by each selling
Holder or in such other proportions as shall mutually be agreed to by such
selling Holders).  For purposes of the preceding parenthetical
concerning apportionment, for any selling Holder who is a holder of Registrable
Securities and is a partnership or corporation, the partners, retired partners
and stockholders of such Holder, or the estates and family members of any such
partners and retired partners and any trusts for the benefit of any of the
foregoing persons shall be deemed to be a single “selling Holder”, and any
pro-rata reduction with respect to such “selling Holder” shall be based upon the
aggregate amount of shares carrying registration rights owned by all entities
and individuals included in such “selling Holder”, as defined in this
sentence.

     

    
      
        
        

      

      
        20

        
          

        

      

      
        
        

      

    

    


    5.9           Delay of
Registration.  No Holder shall have any right to obtain or seek
an injunction restraining or otherwise delaying any such registration as the
result of any controversy that might arise with respect to the interpretation or
implementation of this Article V.

    


    5.10         Indemnification.  In
the event that any Registrable Securities are included in a registration
statement under this Article V:

    


    (a)           To
the extent permitted by law, the Company will indemnify and hold harmless each
Holder, any underwriter (as defined in the Securities Act) for such Holder and
each person, if any, who controls such Holder or underwriter within the meaning
of the Securities Act or the Exchange Act, against any losses, claims, damages,
or liabilities (joint or several) to which they may become subject under the
Securities Act, or the Exchange Act, insofar as such losses, claims, damages, or
liabilities (or actions in respect thereof) arise out of or are based upon any
of the following statements, omissions or violations (collectively a “Violation”):  (i)
any untrue statement or alleged untrue statement of a material fact contained in
such registration statement, including any preliminary prospectus or final
prospectus contained therein or any amendments or supplements thereto, (ii) 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, or
(iii) any violation or alleged violation by the Company of the Securities Act,
the Exchange Act, or any rule or regulation promulgated under the Securities
Act, or the Exchange Act, and the Company will pay to each such Holder,
underwriter or controlling person, as incurred, 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 indemnity agreement contained in this Section 5.10(a) shall not apply
to amounts paid in settlement of any such loss, claim, damage, liability, or
action if such settlement is effected without the consent of the Company (which
consent shall not be unreasonably withheld), nor shall the Company be liable in
any such case for any such loss, claim, damage, liability, or action to the
extent that it arises out of or is based upon a Violation which occurs in
reliance upon and in conformity with written information furnished expressly for
use in connection with such registration by any such Holder, underwriter or
controlling person or a violation of any provision of this Agreement by a
Holder.

    


    (b)           To
the extent permitted by law, each selling Holder will indemnify and hold
harmless the Company, each of its directors, each of its officers, each person,
if any, who controls the Company within the meaning of the Securities Act, any
underwriter, any other Holder selling securities in such registration statement
and any controlling person of any such underwriter or other Holder, against any
losses, claims, damages, or liabilities (joint or several) to which any of the
foregoing persons may become subject, under the Securities Act, or the Exchange
Act, insofar as such losses, claims, damages, or liabilities (or actions in
respect thereto) arise out of or are based upon any Violation, in each case to
the extent (and only to the extent) that such Violation occurs in reliance upon
and in conformity with written information furnished by such Holder expressly
for use in connection with such registration or a violation of any provision of
this Agreement by a Holder; and each such Holder will pay, as incurred, any
legal or other expenses reasonably incurred by any person intended to be
indemnified pursu­ant to this Section 5.10(b), in connection with
investigating or defending any such loss, claim, damage, liability, or action;
provided, however, that the
indemnity agreement contained in this Section 5.10(b) shall not apply to amounts
paid in settlement of any such loss, claim, damage, liability or action if such
settlement is effected without the consent of the Holder, which consent shall
not be unreasonably withheld; provided, further, that, in no
event shall any indemnity under this Section 5.10(b) exceed the gross proceeds
from the offering received by such Holder.

     

    
      
        
        

      

      
        21

        
          

        

      

      
        
        

      

    

    


    (c)           Promptly
after receipt by an indemnified party under this Section 5.10 of notice of the
commencement of any action (including any governmental action), such indemnified
party shall, if a claim in respect thereof is to be made against any
indemnifying party under this Section 5.10, deliver to the indemnifying party a
written notice of the commencement thereof and the indemnifying party shall have
the right to participate in, and, to the extent the indemnifying party so
desires, jointly with any other indemnifying party similarly notified, to assume
the defense thereof with counsel selected by the indemnifying party and approved
by the indemnified party (whose approval shall not be unreasonably withheld);
provided, however, that an indemnified party (together with all other
indemnified parties which may be represented without conflict by one counsel)
shall have the right to retain one separate counsel, with the fees and expenses
to be paid by the indemnifying party, if representation of such indemnified
party by the counsel retained by the indemnifying party would be inappropriate
due to actual or potential differing interests between such indemnified party
and any other party represented by such counsel in such
proceeding.  The failure to deliver written notice to the indemnifying
party within a reasonable time of the commencement of any such action, if
prejudicial to its ability to defend such action, shall relieve such
indemnifying party of any liability to the indemnified party under this Section
5.10, but the omission so to deliver written notice to the indemnifying party
will not relieve it of any liability that it may have to any indem­nified
party otherwise than under this Section 5.10.

    


    (d)           If
the indemnification provided for in this Section 5.10 is held by a court of
competent jurisdiction to be unavailable to an indemnified party with respect to
any loss, liability, claim, damage, or expense referred to therein, then the
indemnifying party, in lieu of indemnifying such indemnified party hereunder,
shall contribute to the amount paid or payable by such indemnified party as a
result of such loss, liability, claim, damage, or expense in such proportion as
is appropriate to reflect the relative fault of the indemnifying party on the
one hand and of the indemnified party on the other in connection with the
statements or omissions that resulted in such loss, liability, claim, damage, or
expense as well as any other relevant equitable considerations.  The
relative fault of the indemnifying party and of the indemnified party shall be
determined by reference to, among other things, whether the untrue or alleged
untrue statement of a material fact or the alleged omission to state a material
fact relates to information supplied by the indemnifying party or by the
indemnified party and the parties’ relative intent, knowledge, access to
information, and opportunity to correct or prevent such statement or
omission.

     

    
      
        
        

      

      
        22

        
          

        

      

      
        
        

      

    

    


    (e)           Notwithstanding
the foregoing, to the extent that the provisions on indemnification and
contribution contained in the underwriting agreement entered into in connection
with the underwritten public offering are in conflict with the foregoing
provisions, the provisions in the underwriting agreement shall
control.

    


    (f)           The
obligations of the Company and Holders under this Section 5.10 shall survive the
completion of any offering of Registrable Securities in a registration
state­ment under this Article V, and otherwise.

    


    5.11           Reports Under Securities
Exchange Act of 1934.  With a view to making available to the
Holders the benefits of Rule 144 and any other rule or regulation of the SEC
that may at any time permit a Holder to sell securities of the Company to the
public without registration or pursuant to a registration on Form S-3, the
Company agrees to:

    


    (a)           make
and keep public information available, as those terms are understood and defined
in Rule 144, at all times after 90 days after the effective date of the
IPO  or Trading Event by the Company;

    


    (b)           file
with the SEC in a timely manner all reports and other documents required of the
Company under the Securities Act and the Exchange Act; and

    


    (c)           furnish
to any Holder, so long as the Holder owns any Registrable Securities, forthwith
upon request (i) a copy of the most recent annual or quarterly report of the
Company and such other reports and documents so filed by the Company, and (ii)
such other information as may be reasonably requested in availing any Holder of
any rule or regulation of the SEC which permits the selling of any such
securities without registration or pursuant to such form.

    


    5.12           Permitted
Transferees.  The rights to cause the Company to register
Registrable Securities granted to the Holders by the Company under this Article
V may be assigned in full by a Holder in connection with a transfer by such
Holder of its Registrable Securities if: (a) such transferee agrees to
comply with the terms and provisions of this Agreement; (b) such transfer
is otherwise in compliance with this Agreement; (c) such transfer is
otherwise effected in accordance with applicable securities laws; and (d) such
Holder transfers at least 51% of its shares of Registrable Securities to the
transferee.  Except as specifically permitted by this Section 5.12,
the rights of a Holder with respect to Registrable Securities as set out herein
shall not be transferable to any other Person.

     

    
      
        
        

      

      
        23

        
          

        

      

      
        
        

      

    

    


    5.13           Termination of Registration
Rights.  The right of any Holder to request or demand inclusion
in any registration pursuant to Section 5.3 and Section 5.4 shall terminate if
all shares of Registrable Securities held by such Holder may immediately be sold
under Rule 144 without restriction.

    


    VI.           MISCELLANEOUS

    


    6.1           Any
notice or other communication given hereunder shall be deemed sufficient if in
writing and sent by registered or certified mail, return receipt requested, or
delivered by hand against written receipt therefor, addressed as
follows:

    


    if to the
Company, to it at:

    


    Pacific
Beach Biosciences, Inc.

    PO Box
222

    La Jolla,
CA 92038

    Facsimile:
(858) 459-8170

    Attention:
James Rock

    


    With a
copy to:

    


    Olshan
Grundman Frome Rosenzweig & Wolosky LLP

    Park
Avenue Tower

    65 East
55th Street

    New York,
NY 10022

    Facsimile:
(212) 451-2222

    Attn:
Yehuda Markovits

    


    if to the
Placement Agent, to it at:

    


    Maxim
Group LLC

    405
Lexington Avenue

    New York,
NY 10174

    Facsimile:  (212)
895-3783

    Attn:
Andrew Scott

    


    With a
copy to:

    


    Sichenzia
Ross Friedman Ference LLP

    61
Broadway, 32nd Floor

    New York,
NY 10006

    Facsimile:
(212) 930-9725

    Attn:
Marc Ross

    


    if to the
Subscriber, to the Subscriber’s address indicated on the signature page of this
Agreement.

     

    
      
        
        

      

      
        24

        
          

        

      

      
        
        

      

    

    


    Notices
shall be deemed to have been given or delivered on the date of mailing, except
notices of change of address, which shall be deemed to have been given or
delivered when received.

    


    6.2           Except
as otherwise expressly provided herein, any term of this Agreement may be
amended and the observance of any term of this Agreement may be waived (either
generally or in a particular instance, either retroactively or prospectively and
either for a specified period of time or indefinitely) with the written consent
of the Company and (a) subscribers holding Notes evidencing at least sixty six
and two-thirds percent (66 2⁄3%) of the then outstanding Principal Loan Amount of
the Notes issued pursuant to this Agreement and substantially similar
agreements, so long as the Notes are outstanding; and (b) holders of sixty six
and two-thirds percent (66 2⁄3%) of the Registrable Securities issued upon
conversion of the Notes, if the Notes are no longer outstanding.  Any
amendment or waiver effected in accordance with this Section 6.2 shall be
binding upon the Subscriber and the Company (even if the Subscriber does not
consent to such amendment or waiver), and upon the effectuation of each such
amendment or waiver, the Company shall promptly give written notice thereof to
the Subscriber if the Subscriber has not previously consented thereto in
writing.

    


    6.3           Subject
to the provisions of Section 5.12, this Agreement shall be binding upon and
inure to the benefit of the parties hereto and to their respective heirs, legal
representatives, successors and assigns.  This Agreement sets forth
the entire agreement and understanding between the parties as to the subject
matter hereof and merges and supersedes all prior discussions, agreements and
understandings of any and every nature among them.

    


    6.4           Upon
the execution and delivery of this Agreement by the Subscriber, this Agreement
shall become a binding obligation of the Subscriber with respect to the purchase
of Notes and Warrants as herein provided, subject, however, to the right hereby
reserved by the Company to enter into the same agreements with other subscribers
and to add and/or delete other persons as subscribers.

    


    6.5           NOTWITHSTANDING
THE PLACE WHERE THIS AGREE­MENT MAY BE EXECUTED BY ANY OF THE PARTIES
HERETO, THE PARTIES EX­PRESSLY AGREE THAT ALL THE TERMS AND PROVI­SIONS
HEREOF SHALL BE CONSTRUED IN ACCORDANCE WITH AND GOV­ERNED BY THE
SUBSTANTIVE AND PROCEDURAL LAWS OF THE STATE OF NEW YORK WITH­OUT REGARD TO
SUCH STATE’S PRINCIPLES OF CONFLICTS OF LAW.  IN THE EVENT THAT A
JUDICIAL PROCEEDING IS NECESSARY, THE SOLE FORUM FOR RESOLVING DISPUTES ARISING
OUT OF OR RELATING TO THIS AGREEMENT IS THE STATE AND FEDERAL COURTS SITTING IN
THE BOROUGH OF MANHATTAN, COUNTY OF NEW YORK.  THE PARTIES HEREBY
IRREVOCABLY CONSENT TO THE JURISDICTION OF SUCH COURTS AND AGREE TO SAID
VENUE.

     

    
      
        
        

      

      
        25

        
          

        

      

      
        
        

      

    

    


    6.6           The
holding of any provision of this Agreement to be invalid or unenforceable by a
court of competent jurisdiction shall not affect any other provision of this
Agreement, which shall remain in full force and effect.  If any
provision of this Agreement shall be declared by a court of competent
jurisdiction to be invalid, illegal or incapable of being enforced in whole or
in part, such provision shall be interpreted so as to remain enforceable to the
maximum extent permissible consistent with applicable law and the remaining
conditions and provisions or portions thereof shall nevertheless remain in full
force and effect and enforceable to the extent they are valid, legal and
enforceable, and no provisions shall be deemed dependent upon any other covenant
or provision unless so expressed herein.

    


    6.7           It
is agreed that a waiver by either party of a breach of any provision of this
Agreement shall not operate, or be construed, as a waiver of any subsequent
breach by that same party.

    


    6.8           The
parties agree to execute and deliver all such further documents, agreements and
instruments and take such other and further action as may be necessary or
appropriate to carry out the purposes and intent of this Agreement.

    


    6.9           This
Agreement may be executed in two or more counterparts each of which shall be
deemed an original, but all of which shall together constitute one and the same
instrument.

    


    6.10         Nothing
in this Agreement shall create or be deemed to create any rights in any person
or entity not a party to this Agreement, except (a) for the holders of
Registrable Securities; (b) for the Placement Agent pursuant to Sections 1.6(a),
1.19, and 1.23 hereof, (c) for the indemnified parties (including without
limitation the Placement Agent and its sub agents, if any) pursuant to Section
5.10 hereof; and (d) that the Placement Agent may rely upon the representations
and acknowledgements of the Subscriber in Articles I and VII hereof and the
representations and warranties of the Company in Article II hereof.

    


    Remainder of Page Intentionally Left
Blank.

     

    
      
        
        

      

      
        26

        
          

        

      

      
        
        

      

    

     

    VII.       CONFIDENTIAL INVESTOR
QUESTIONNAIRE

    


    7.1           ALL
INVESTORS - The undersigned represents and warrants as indicated below by the
undersigned’s mark:

     

    A.           Individual
investors:  (Please mark one or more of the following
statements)

     

    
      	
              1.
      ____

            	
              I
      certify that I am an accredited investor because I have had individual
      income (exclusive of any income earned by my spouse) of more than $200,000
      in each of the most recent two years and I reasonably expect to have an
      individual income in excess of $200,000 for the current
    year.

            


    

     

    
      	
              2.
      ____

            	
              I
      certify that I am an accredited investor because I have had joint income
      with my spouse in excess of $300,000 in each of the most recent two years
      and reasonably expect to have joint income with my spouse in excess of
      $300,000 for the current year.

            


    

     

    
      	
              3.
      ____

            	
              I
      certify that I am an accredited investor because I have an individual net
      worth, or my spouse and I have a joint net worth, in excess of
      $1,000,000.

            


    

     

    
      	
              4.
      ____

            	
              I
      am a director or executive officer of Pacific Beach BioSciences,
      Inc.

            


    

     

     

    
      	
              B.

            	
              Partnerships,
      corporations, trusts or other entities:  (Please mark one
      of the following seven statements).  The undersigned hereby
      certifies that it is an accredited investor because it
  is:

            


    

     

    
      	
              1.
      ____

            	
              an
      employee benefit plan whose total assets exceed
  $5,000,000;

            


    

     

    
      	
              2.
      ____

            	
              an
      employee benefit plan whose investments decisions are made by a plan
      fiduciary which is either a bank, savings and loan association or an
      insurance company (as defined in Section 3(a) of the Securities Act) or an
      investment adviser registered as such under the Investment Advisers Act of
      1940;

            


    

     

    
      	
              3.
      ____

            	
              a
      self-directed employee benefit plan, including an Individual Retirement
      Account, with investment decisions made solely by persons that are
      accredited investors;

            


    

     

    
      	
              4.
      ____

            	
              an
      organization described in Section 501(c)(3) of the Internal Revenue Code
      of 1986, as amended, not formed for the specific purpose of acquiring the
      Shares, with total assets in excess of
  $5,000,000;

            


    

     

    
      	
              5.
      ____

            	
              a
      corporation, partnership, limited liability company, limited liability
      partnership, other entity or similar business trust, not formed for the
      specific purpose of acquiring the Notes, with total assets excess of
      $5,000,000;

            


    

     

    
      	
              6.
      ____

            	
              a
      trust, not formed for the specific purpose of acquiring the Notes, with
      total assets exceed $5,000,000, whose purchase is directed by a person who
      has such knowledge and experience in financial and business matters that
      he is capable of evaluating the merits and risks of an investment in the
      Notes; or

            


    

     

    
      
        
        

      

      
        27

        
          

        

      

      
        
        

      

    

     

    
      	
              7.

            	
              an
      entity (including a revocable grantor trust but other than a conventional
      trust) in which each of the equity owners qualifies as an accredited
      investor.

            


    

     

    7.2           EUROPEAN
ECONOMIC AREA (“EEA”) INVESTORS - The undersigned further represents and
warrants as indicated below by the undersigned’s mark:

     

    A.           Please
mark one of the following statements:

     

    either

     

    1. 
____The undersigned hereby certifies that it is a Qualified Investor for the
purposes of Directive 2003/71/EC because it is a person falling within Article
2.1(e)(i), (ii) or (iii) of such directive or a person authorized by a
jurisdiction in the EEA to be considered as a qualified investor for the
purposes of such directive;

     

    or

     

    2. 
____The undersigned hereby certifies that it is not a Qualified Investor for the
purposes of Directive 2003/71/EC.

     

    B.           Please
mark one of the following statements.

     

    1.  ____         The
undersigned hereby certifies that it is acting on its own account and not for
the account of or otherwise on behalf of any person or persons; or

     

    2.  ____         The
undersigned is in the United Kingdom and is a Qualified Investor for the
purposes of Directive 2003/71/EC and is acting as an agent in the circumstances
contemplated in section 86(2) of the United Kingdom Financial Services and
Markets Act 2000.

     

    C.           Please
mark the following statement:

     

    1.  ____        
The undersigned hereby certifies that it has not received any recommendation
from the Placement Agent nor any person acting on their behalf in relation to
the purchase of the Securities.

     

    D.           Please
mark one of the following statements:

     

    1.  ____         The
undersigned hereby certifies that it is not in the United Kingdom.

     

    2.  ____         The
undersigned hereby certifies that it is a person falling within Article 19(5) of
the Financial Services and Markets Act 2000 (Financial Promotion) Order 2005
(“FPO”).

     

    3.  ____         The
undersigned hereby certifies that it is a person falling within Article 49(2)(a)
to the (d) of the FPO.

     

    
      
        
        

      

      
        28

        
          

        

      

      
        
        

      

    

     

    7.3           ALL
INVESTORS - The undersigned further represents and warrants as indicated below
by the undersigned’s mark:

     

    FINRA
AFFILIATION.

    


    Are you
affiliated or associated with an FINRA member firm:

    


    Yes
_________                                           No
__________

    


    If Yes,
please describe:

    _________________________________________________________

    _________________________________________________________

    _________________________________________________________

    


    *If
subscriber is a Registered Representative with an FINRA member firm, have the
following acknowledgment signed by the appropriate party:

    


    The
undersigned FINRA member firm acknowledges receipt of the notice required by
NASD Rule 3050.

    


    _________________________________

    Name of
FINRA Member Firm

    


    By:
______________________________

    Authorized Officer

    


    Date:
____________________________

     

    7.4           ALL
INVESTORS  - Indicate manner in which title is to be held (circle
one)

     

    
      	 	
              (a)

              (b)

              (c)

              (d)

              (e)

              (f)

              (g)

              (h)

              (i)

            	
              Individual
      Ownership

              Community
      Property

              Joint
      Tenant with Right of Survivorship
      (both parties must
      sign)

              Partnership

              Tenants
      in Common

              Corporation

              Limited
      Liability Company

              Trust

              Other

            


    

     

    
      
        
        

      

      
        29

        
          

        

      

      
        
        

      

    

     

    7.5           ALL
INVESTORS - Please answer each question.

    


    SUITABILITY

    


    (a)  For
an individual Subscriber, please describe your current employment, including the
company by which you are employed and its principal business:

     

      
        

      

    

    ____________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________

    


    (b)  For
an individual Subscriber, please describe any college or graduate degrees held
by you:

     

      
        

      

    

    _______________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________

    


    


    (c)  For
all Subscribers, please list types of prior investments:

     

      
        

      

    

    _______________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________

    


    (d)           For
all Subscribers, please state whether you have participated in other private
placements before:

    


    YES_______                                           NO_______

    


    (e) If
your answer to question 7.5(d) above was “YES”, please indicate frequency of
such prior participation in private placements of:

     

    
       

      
        	 	 	
                Public

                Companies

              	 	
                 Private
      

                Companies

              	 	
                 Public
      or Private 

                Biopharmaceutical
      Companies

              
	 	 	 	 	 	 	 
	
                Frequently

              	 	 	 	 	 	 
	Occasionally	 	 	 	 	 	 
	Never


      

    

     

    (f) For
individual Subscribers, do you expect your current level of income to
significantly decrease in the foreseeable future:

    


    YES_______                                           NO_______

     

     

    
      
        
        

      

      
        30

        
          

        

      

      
        
        

      

    

    


    (g)  For
trust, corporate, partnership and other institutional Subscribers, do you expect
your total assets to significantly decrease in the foreseeable
future:

    


    YES_______                                           NO_______

     

    (h)  For
all Subscribers, do you have any other investments or contingent liabilities
which you reasonably anticipate could cause you to need sudden cash requirements
in excess of cash readily available to you:

    


    YES_______                                           NO_______

    


    (i)  For
all Subscribers, are you familiar with the risk aspects and the non-liquidity of
investments such as the securities for which you seek to subscribe?

    


    YES_______                                           NO_______

    


    (j)  For
all Subscribers, do you understand that there is no guarantee of financial
return on this investment and that you run the risk of losing your entire
investment?

    


    YES_______                                           NO_______

     

    7.6           The
undersigned is informed of the significance to the Company of the foregoing
representations and answers contained in the Confidential Investor Questionnaire
contained in this Article VII and such answers have been provided under the
assumption that the Company will rely on them.

     

    
      
        	
                Signature:            

              	
                 

              
	 
      	 
      
	 
      	 
      
	 
      	
                 

              
	 
      	
                (If
      purchased jointly)

              
	 
      	 
      
	 
      	 
      
	
                Print
      Name:           

              	
                 

              
	 
      	 
      
	 
      	 
      
	 
      	
                 

              
	 
      	
                (If
      purchased jointly)

              
	 
      	 
      
	
                Date:                      

              	
                 

              


      

    

     

     

    
      
        
        

      

      
        31

        
          

        

      

      
        
        

      

    

     

    [SUBSCRIBER
SIGNATURE PAGE]

    


    AGGREGATE
PRINCIPAL AMOUNT OF NOTES = $ ______________________
(TOTAL INVESTMENT) 

     

    
      	
               

              _________________________________

              Signature

               

              __________________________________

              Name
      Typed or Printed 

               

              ___________________________________

              Entity Name

               

              _______________________________________

              Address

               

              _____________________________________

              City, State and Zip Code 

               

              ________________________________________

              Telephone-Business

               

              ___________________________________________

              Telephone-Residence

               

              ______________________________________________

              Facsimile-Business

                  

              ____________________________________________

              Facsimile--Residence  

               

              ____________________________________________

              Tax ID # or Social Security #

               

               

              Name in which securities should be
      issued: _____________________________________________

               

              Dated: __________________ , 20__

            	
               

              ____________________________________

              Signature
      (if purchasing jointly)

               

              ______________________________________

              Name Typed or Printed

               

              ______________________________________

              Entity Name

               

              _______________________________________

              Address

               

              _________________________________________

              City, State and Zip Code

               

              ___________________________________________

              Telephone-Business

               

              __________________________________________

              Telephone-Residence

               

              ____________________________________________

              Facsimile--Business

               

              ______________________________________

              Facsimile--Residence

               

              ______________________________________

              Tax ID # or Social Security #

               

            


    

                                                                         

    
      
        
        

      

      
        32

        
          

        

      

      
        
        

      

    

     

    [COMPANY
SIGNATURE PAGE]

    


    


    This Note and Warrant Purchase
Agreement is agreed to and accepted as of ___________________________,
20__.

     

    
      	 	
              PACIFIC
      BEACH BIOSCIENCES, INC.

              


              By:____________________________________

              Name:

              Title:

            


    

     

     

    
      
        
        

      

      
        33

        
          

        

      

      
        
        

      

    

     

    CERTIFICATE
OF SIGNATORY

    


    (To be
completed if Securities are

    being
subscribed for by an entity)

    


    


    I,____________________________,
am the____________________________ of __________________________________________
(the “Entity”).

    


    I certify
that I am empowered and duly authorized by the Entity to execute and carry out
the terms of the Note and Warrant Purchase Agreement and to purchase and hold
the Securities, and certify further that the Note and Warrant Purchase Agreement
has been duly and validly executed on behalf of the Entity and constitutes a
legal and binding obligation of the Entity.

    


    IN
WITNESS WHEREOF, I have set my hand this ________ day of
_________________,______

    


    


     

    
      	 
	 (Signature)


    

     

     

    
      
        
        

      

      
        34