EXHIBIT 10.1


 


Confidential


 





 


iVOW, Inc.


 


SUBSCRIPTION AGREEMENT


 


Dated as of May          ,
2005


 


Name of Subscriber:


Address of Subscriber:


 


Facsimile Number:


Telephone Number:


E-Mail Address:


Tax ID Number of Subscriber:


 


TO:         iVOW, Inc., a Delaware Corporation (the “Company”).


 


SUBSCRIPTION TO PURCHASE, units (a “Unit” or the “Units”) consisting of shares of
Common Stock, $0.01 par value per share, and warrants (the “Common Stock
Warrants”) exercisable for the purchase of shares of Common Stock of the Company,
on the terms and conditions set forth on Exhibit A hereto.  Each
Unit consists of one share of Common Stock and a Common Stock Warrant to
purchase one share of Common Stock of the Company. The Common Stock and the
Common Stock Warrants, and the shares of Common Stock issuable upon the
exercise of the Common Stock Warrants, are collectively referred to herein as
the “Securities”.  The initial
closing (the “Initial Closing”) of the offering will occur after
subscriptions for at least $2.0 million (the “Minimum Offering Amount”) have
been received and the funds representing the Minimum Offering Amount have been
placed into an escrow account.  The
Initial Closing shall consist of that number of Units that represent no more
than 19.9% of the outstanding voting power of the Company as defined in Rule 4350(i) of
the Nasdaq Stock Market.  The final
closing (the “Final Closing”) will take


 





















 


place for the remaining offering amount held in the escrow account within
5 days of Stockholder Approval for the offering.


 


Price Per Unit:    $0.30 per Unit


 


Subscription Amount:  $                   
(the “Subscription Amount”) delivered herewith (as provided by paragraph
“A” below).


 


The undersigned Subscriber hereby
irrevocably subscribes for, and agrees to purchase, the Securities, at the
Subscription Amount (this “Subscription”), in accordance with and
subject to the terms, provisions and conditions set forth herein and the
exhibits hereto.  When this Subscription
Agreement is completed, signed and returned, with payment, by the undersigned
Subscriber, and accepted by the Company, the Subscriber will become entitled to
all of its benefits and subject to all of the obligations, restrictions and
limitations set forth herein and in the exhibits hereto.


 


The Subscriber understands that
this Subscription is an irrevocable offer to purchase the Securities and may be
accepted or rejected in whole or in part for any reason whatsoever by the
Company, at any time on or prior to June 15, 2005, unless otherwise
extended by the Placement Agent (as defined herein) and the Company (but in no
event later than June 30, 2005).


 


This Subscription is subject to the
Company’s receipt, at the Initial Closing, of executed Subscription Agreements
that have been accepted by the Company to purchase Units with aggregate gross
proceeds to the Company in an amount equal to at least $2,000,000.


 


This Subscription is subject to the
Company’s execution of a definitive voting agreement with the holders of more
than 50% of the Company’s outstanding shares of Common Stock and Preferred
Stock, providing that such holders shall vote in favor of approval of the
issuance of the shares of Common Stock and the shares of Common Stock issuable
upon the exercise of the Common Stock Warrants.


 


A.            Payment.  In connection with this Subscription
Agreement and subject to acceptance by the Company, the Subscriber hereby
delivers the Subscription Amount.  The
Subscription Amount will be held in a separate escrow fund pending the Company’s
acceptance or rejection of this Subscription. 
If the Company rejects this Subscription, the Subscription Amount shall
be returned in full without interest; and the Subscriber shall have no further
rights or obligations under or in respect of this Subscription.  See Exhibit B
for payment instruction.


 


B.            Representations and Warranties.    In connection with this Subscription, the Subscriber
hereby represents and warrants to, agrees with the Company, acknowledges and
confirms as follows:


 


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(1)           The Securities being subscribed for by the
Subscriber will be purchased for the account of the Subscriber for investment
only and not with a view to, nor with any intention of, a distribution or
resale thereof, in whole or in part, or the grant of any participation
therein.  The Subscriber has no agreement
or other arrangement with any other person to sell, transfer, or pledge any
part of the Securities or any agreement or arrangement that would guarantee the
Subscriber any profit or against any loss with respect to such Securities, and
the Subscriber has no plans to enter into any such agreement or
arrangement.  The Subscriber acknowledges
and confirms that it understands that the Securities, and those securities
issuable upon exercise or conversion of the Securities, as the case may be,
have not been registered under the Securities Act of 1933, as amended (the “Securities
Act”), and the rules and regulations promulgated thereunder, or the
securities laws of any state or other jurisdiction, and cannot be disposed of
unless subsequently registered under the Securities Act and any applicable laws
of states or other jurisdictions or an exemption from such registration is
available.


 


(2)           The Securities are
being offered and sold by the Company under an exemption from registration
provided by the Securities Act and the rules and regulations promulgated
thereunder in reliance, in good faith, upon the representations and warranties
of the Subscriber contained herein.


 


(3)           The Subscriber:


 


(A) has been furnished a copy of the Company’s confidential offering package dated May 25, 2005 (the “PPM”);
 
(B) has carefully read, has carefully considered and fully understands the provisions of:
 
(i) the PPM (including, without limitation, the terms of this offering and the Securities offered by the Company as described in the “OFFERING” section of the PPM and the materials under the “RISK FACTORS” section of the PPM);
 
(ii) all documents and information included as exhibits, or incorporated in the PPM by reference, including but not limited to the filings and information made by the Company under the Exchange Act (as defined in the PPM); and
 
(iii) this Subscription Agreement (and the exhibits and annexes hereto).
 
(C) has been given sufficient access and opportunity to:
 
(i) examine all material books and records, and material contracts and documents of the Company and such other information and documents as the Subscriber has requested; and


 


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(ii) ask questions of the Company and its management, and, if the Subscriber asked questions of the Company or its management, has received satisfactory answers.
 
(D) represents and warrants that in making the decision to invest in the Securities, the Subscriber has relied on independent investigations made by the Subscriber and the Subscriber’s own professional advisors.  The Subscriber acknowledges that no representation has been made by the Company or otherwise by or on behalf of the Company concerning the Securities (including any current value of the Securities or as to any prospective return on investment in the Securities), the Company, its business or prospects, or other matters, except as set forth in the PPM.


 


(4)           The Subscriber is able (i) to bear the economic
risk of the Subscriber’s investment in the Securities; (ii) to hold the
Securities for an indefinite period of time and understands that the Securities
cannot be resold unless subsequently registered under the Securities Act or
unless an exemption from such registration is available, as established by an
opinion of counsel satisfactory to the Company; and (iii) currently, and
based on existing conditions, hereafter will be able to afford a complete loss
of such investment.


 


(5)           The Subscriber understands the business in which the
Company is engaged and has such knowledge and experience in financial and
business matters that the Subscriber is capable of evaluating the merits and
risks of the Subscriber’s investment in the Securities and of making an
informed investment decision with respect thereto.


 


(6)           The Subscriber hereby acknowledges and confirms
that, except as set forth in the PPM, neither the Company nor any of its
officers, directors, affiliates, agents or representatives has made any
representations or warranties (oral or written) concerning (i) the
Securities; (ii) the Subscriber’s investment in the Securities; or (iii) the
Company, its business, prospects, or anticipated financial or other results, or
other matters.


 


(7)           The Subscriber understands that all certificates or other documents evidencing the Securities will bear substantially the following legend:
 
THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE “ACT”), OR ANY STATE SECURITIES OR “BLUE SKY” LAWS, AND MAY NOT BE OFFERED, SOLD, ASSIGNED, TRANSFERRED, PLEDGED, OR OTHERWISE DISPOSED OF UNLESS REGISTERED PURSUANT TO THE PROVISIONS OF SUCH ACT AND BLUE SKY LAWS OR AN EXEMPTION THEREFROM IS AVAILABLE AS ESTABLISHED BY A WRITTEN OPINION OF COUNSEL ACCEPTABLE TO THE CORPORATION.


 


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(8)           The Subscriber understands that no federal or state agency has passed on or made any recommendation or endorsement of the Securities.
 


(9)           The Subscriber hereby represents and warrants that:


 


(Please check the boxes opposite each of the items in clauses (a) and
(b) below which is true of the Subscriber. 
If clause (a) is checked, the Subscriber need not complete the
items under clause (c).  If clause (a) is
not checked, please complete each blank in clause (c) below.  Please also initial each item checked or
completed.)


 


o            (a)           The Subscriber is an “accredited
investor” (as such term is defined in Rule 501(a) of Regulation D
promulgated by the Securities and Exchange Commission under the Securities Act)
for at least one of the reasons specified below:


 


o            The
Subscriber’s net worth (together with the net worth of the Subscriber’s spouse)
exceeds $1,000,000.


 


o            The
Subscriber’s individual income in each of the two immediately previous calendar
years has been $200,000 or more and his current year’s income is reasonably
expected to be at least equal to that amount; or, the Subscriber’s joint income
with his spouse in each of the two immediately previous calendar years has been
$300,000 or more and the current year’s joint income is reasonably expected to
equal at least that amount.


 


o            The
Subscriber is a director or executive officer of the Company.


 


o            The
Subscriber, if other than an individual, either (A) is a corporation,
partnership, business trust or 501(c)(3) organization which has total
assets in excess of $5,000,000 and has not been formed for the specific purpose
of purchasing the Securities, or (B) is an entity (other than a trust)
with only accredited investors as its partners, members or stockholders, or (C) is
a trust other than a business trust which has assets in excess of $5,000,000,
has not been organized for the purposes of acquiring the investment in the
Securities and has its investment hereunder directed by a person described in
the first sentence of the following clause (b). 
The Subscriber, if other than an individual, represents that this
Subscription has been duly authorized by all necessary corporate, partnership
or other governance action on its part.


 


o            (b)           The
Subscriber has (or, if other than an individual, is directed by a person who
has) such knowledge and experience in financial and business matters that he or
she is capable of evaluating the risks of an investment in the Securities.  The Subscriber has adequate means of
providing for current financial needs and contingencies, has no need for
liquidity in the investment


 


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in the Securities, and is able to
bear the substantial economic risks of the investment in the Securities for an
indefinite period.


 


(c)           The Subscriber (if an individual) hereby represents
and warrants that:


 


(If the box opposite Paragraph
(9)(a) above has not been checked,
please complete the blanks below in this clause (c).)


 


The Subscriber’s higher education
consists of the following (include college or university, any graduate programs
and any other specialized education programs relevant to the Subscriber’s
business experience):


 


The Subscriber’s principal business
and professional activities during the last five years are as follows:


 


(10)         The Subscriber hereby represents and warrants as to
the following personal information:


 


(Each Subscriber should furnish all of the information called for below
in this Paragraph (10).)


 


The Subscriber’s residence address
(or, if other than an individual, principal office address) is as follows:


 


The Subscriber (if an individual)
maintains a house or apartment in the following state(s) in addition to his or
her residence:


 


The Subscriber (if an individual) pays state income taxes in the following
state:


 


The Subscriber (if an individual)
holds a driver’s license in the following state:


 


The Subscriber (if an individual)
is registered to vote in the following state:


 


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(11)         This Subscription Agreement and any other documents
executed and delivered by the Subscriber in connection herewith have been duly
executed and delivered by the Subscriber, and are the legal, valid and binding
obligations of the Subscriber enforceable in accordance with their respective
terms.


 


(12)         The execution and delivery of this Subscription
Agreement and any other documents executed and delivered by the Subscriber in
connection herewith do not, and the performance and consummation of the terms
and transactions set forth or contemplated herein will not, contravene or
result in a default under any provision of existing law or regulations to which
the Subscriber is subject, or any indenture, mortgage or other agreement or
instrument to which the Subscriber is a party or by which he, she or it is
bound and does not require on the part of the Subscriber any approval,
authorization, license or filing from or with any foreign, federal or state or
municipal board or agency.


 


(13)         The Subscriber acknowledges that Silicon Valley Bank
is acting only as an escrow agent in connection with the offering of the
Securities described here, and has not endorsed, recommended or guaranteed the
purchase, value or repayment of such Securities.


 


C.            Effectiveness of Subscription.


 


(1)           This Subscription shall be binding upon the
successors and permitted assigns of the Subscriber and, when accepted by the
Company, shall be binding upon the successors and assigns of the Company.


 


(2)           All of the agreements,
representations and warranties made by the Subscriber in this Subscription
Agreement shall survive the execution and delivery hereof.  The Subscriber shall immediately notify the
Company upon discovering that any of the representations or warranties made
herein were false when made or has, as a result of changes in circumstances,
become false.  Every provision of this
Subscription Agreement is intended to be severable, and if any term or
provision hereof is held to be illegal or invalid for any reason whatsoever,
such illegality or invalidity shall not affect the validity of the remainder
hereof.


 


(3)           The agreements of the Subscriber and the Company set
forth herein shall become effective and binding upon the undersigned, without
right of revocation, upon the Company’s acceptance of this Subscription.


 


D.            Hedging.                Subscriber will not engage in any hedging or other
transaction which is designed to or could reasonably be expected to lead to or
result in a disposition of the Securities by the Subscriber or any other person
or entity.  Such prohibited hedging or
other transactions include without limitation effecting any short sale or
having in effect any short position (whether or not such sale or position is
against the box and regardless of when such position was entered into) or any
purchase, sale or grant of any right (including without limitation any put or
call option) with respect to the Securities.


 


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E.             Stockholder Approval.


 


(1)           Unless previously prepared and filed, as soon as
practicable following the acceptance of this Subscription, the Company agrees
that it shall prepare and file with the SEC a preliminary proxy statement (as
amended and supplemented, the “Proxy Statement”) in connection with the
meeting of its stockholders (the “Stockholders Meeting”).  At the Stockholders Meeting, the Company will
seek to obtain stockholder approval (“Stockholder Approval”) of the
issuance of the shares of Common Stock and shares of Common Stock upon the
exercise of the Common Stock Warrants. The Company shall use its reasonable
best efforts to respond to any written comments of the SEC or its staff, and,
to the extent permitted by law, to cause the Proxy Statement to be mailed to
the Company’s stockholders as promptly as practicable after responding to all
such comments to the satisfaction of the SEC staff. Subscriber shall cooperate
with the Company in the preparation of the Proxy Statement or any amendment or
supplement thereto and shall furnish the Company with all information required
to be included therein with respect to Subscriber, the Subscription and this
offering.


 


(2)           Without limiting the generality of the foregoing,
the Subscriber shall correct promptly any information provided by it to be used
specifically in the Proxy Statement, if required, that shall have become false
or misleading in any material respect and shall take all reasonable steps
necessary to file with the SEC and have declared effective or cleared by the
SEC any amendment or supplement to the Proxy Statement so as to correct the
same and to cause the Proxy Statement as so corrected to be disseminated to the
stockholders of the Company, in each case to the extent required by applicable
law.


 


F.             Brokers or Finders.           The Subscriber has not engaged any brokers, finders
or agents, and the Company has not, and will not, except with respect to Dawson
James Securities (the “Placement Agent”), incur, directly or indirectly,
as a result of any action taken by the Subscriber, any liability for brokerage
or finders’ fees or agents’ commissions or any similar charges in conjunction
with this Subscription Agreement.  In the
event that the preceding sentence is in any way inaccurate, the Subscriber
agrees to indemnify and hold harmless the Company from any liability for any
commission or compensation in the nature of a finder’s fee (and the costs and
expenses of defending against such liability) for which the Company, or any of
its officers, directors, employees or representatives, is responsible, except
such as related to the Placement Agent for which the Company is solely
responsible in accordance with the terms and provisions of that certain Selling
Agreement dated May 3, 2005 by and between the Company and the Placement
Agent.


 


G.            Legal Advice.  The Subscriber understands that nothing in
the Company’s filings under the Exchange Act, this Subscription Agreement or
any other materials presented to the Subscriber in connection with the purchase
and sale of the Securities constitutes legal, tax or investment advice.  The Subscriber has consulted such legal, tax
and investment advisors as she, he or it, in her, his or its sole


 


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discretion,
has deemed necessary or appropriate in connection with this Subscription
Agreement, and his, her or its subscription for the purchase of the Securities.


 


H.            Miscellaneous.     Unless otherwise indicated, the address on the front
page of this document is the legal residence of the Subscriber and all
offers and communications in connection with the offering of the Securities
subscribed to herein have been conducted at such address.


 


I.              Communications.                Any notice, demand, request or other communication
which may be required or contemplated herein shall be sufficiently given if (i) given
either by facsimile transmission, by reputable overnight delivery service,
delivery charges prepaid, or by registered or certified mail, postage prepaid
and return receipt requested, to the address indicated herein or to such other
address as any party hereto may specify as provided herein, or (ii) delivered
personally at such address.


 


J.             Confidentiality.    The Subscriber agrees to maintain in strict
confidence all non-public information regarding the Company obtained from the
Company or its representatives or agents during the course of this
Subscription.  The Subscriber also agrees
not to trade in the securities of the Company (other than pursuant to this
Subscription Agreement) at any time that the Subscriber is in possession of any
non-public information regarding the Company obtained from the Company or its
agents during the course of this Subscription.


 


K.            Applicable Law.    This Subscription Agreement and all legal relations,
claims or obligations arising out of this transaction shall be governed by and
construed in accordance with the internal substantive laws of the Commonwealth
of Delaware.


 


[signature page follows]


 


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IN WITNESS WHEREOF, the undersigned has executed this Subscription
Agreement this         day of the month of                ,
2005.


 


	
   

  	
  By:

  	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  Name:

  	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  Title:

  	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  Taxpayer Identification No.  

  
	
   

  	
   

  
	
   

  	
  Purchase Price:   $

  
	
   

  	
   

  
	
   

  	
  Number of Shares to be acquired:

  
	
   

  	
   

  
	
   

  	
  Underlying Shares subject to warrants:

  
	
   

  	
   

  
	
   

  	
  Address for Notice:

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  Facsimile No.:

  
	
   

  	
   

  
	
   

  	
  Telephone No.:

  
	
   

  	
   

  
	
   

  	
  Attn:

  
						



 


Please indicate below the number and type of Company securities
beneficially held (as determined under Rule 13d-3 under the
Securities Exchange Act of 1934) as of the date hereof, but excluding the
Company securities identified above that you are purchasing.  This information will be included in the
Registration Statement and, by signing above, you acknowledge that the Company
may rely on this information for inclusion in the Registration Statement.


 


	
   

  	
   

  
	
  (Identify the number of securities and type (e.g., common stock,
  warrants, etc.)

  



 


	
   

  	
   

  
	
  (Identify the extent to which you may not exercise sole voting and/or
  dispositive power of such securities and the reason(s) why)

  



 


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ACCEPTANCE


 


The foregoing Subscription is
hereby accepted upon the terms and conditions set forth herein.


 


 


	
   

  	
  iVOW, INC.

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By: 

  	
   

  	
   

  
	
   

  	
  Name:

  	
   

  	
   

  
	
   

  	
  Title:

  	
   

  	
   

  
	
   

  	
   

  
	
  Date:

  	
   

  	
  , 2005

  	
   

  	
   

  
										



 


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EXHIBIT A


 


This Exhibit A is qualified
in its entirety by Annex A hereto. 
Capitalized terms used in this Exhibit A and not otherwise defined
shall have the meanings set forth in the Subscription Agreement.


 


	
  Securities
  Offered:

  	
   

  	
  Each Unit consists of one share of Common Stock of the Company and a
  Warrant to purchase one share of Common Stock of the Company.

  
	
   

  	
   

  	
   

  
	
  Offering Amount:

  	
   

  	
  Minimum of $2.0 million/maximum of $2.5 million.

  
	
   

  	
   

  	
   

  
	
  Closings:

  	
   

  	
  The Initial Closing of the offering will occur after Subscription
  Agreements for the Minimum Offering Amount have been received and the funds
  have been placed into an Escrow Account. The Initial Closing shall consist of
  that number of Units that represent no more than 19.9% of the outstanding
  voting power of the Company as defined in Rule 4350(i) of the
  Nasdaq Stock Market. The Final Closing will take place for the remaining
  Offering Amount held in the Escrow Account within 5 days of Stockholder
  Approval for the Offering.

  
	
   

  	
   

  	
   

  
	
  Per Unit Price:

  	
   

  	
  $0.30 per Unit

  
	
   

  	
   

  	
   

  
	
  Warrants:

  	
   

  	
  The Warrants have an exercise price of $0.30 per share and shall be
  exercisable for Common Stock of the Company and have a five-year term,
  subject to the forced exercise provision below. The Warrants will contain
  provisions providing for same-day exercise and sale.

  
	
   

  	
   

  	
   

  
	
  Forced Exercise:

  	
   

  	
  The Company can require holders of Warrants to exercise their Warrants
  within 30 days of receiving notice from the Company (or forfeit such
  Warrants) when the price of the Company’s common stock closes at six
  (6) times the Per Unit Price per share or greater for 20 consecutive
  trading days subsequent to the effectiveness of the registration statement
  pertaining to the resale of the Common Stock underlying the Warrants;
  provided that the registration statement described below shall be effective at
  all times during such 30-day notice period.

  
	
   

  	
   

  	
   

  
	
  Registration Rights:

  	
   

  	
  The Company has agreed with the Placement Agent to file a registration
  statement within 45 days of Final Closing covering the resale of the Common
  Stock and the Common Stock underlying the Warrants offered herein. The
  Company has also agreed to use its best efforts to cause such registration
  statement to become effective as promptly as practicable and to remain
  effective until the first anniversary of the Closing (except as otherwise set
  forth above). Without limiting the foregoing, the Company will promptly
  respond

  



 


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  to
  all SEC comments, inquiries and requests, and shall request acceleration of
  effectiveness at the earliest possible date. In the event a registration
  statement is not filed with the SEC within 45 days or is not declared
  effective within 150 days from the date of the Final Closing, then in such
  event a fee of 1% per month (or portion thereof) shall be assessed against the
  Company as a default payment and in favor of the holders of the Common Stock
  and Warrants for each such 30 day period until such time as the registration
  statement is declared effective.

  
	
   

  	
   

  	
   

  
	
  Transfer Restrictions:

  	
   

  	
  The Shares will initially be unregistered and may not be transferred
  absent registration under the Securities Act of 1933 (the “Securities Act”)
  or the availability of an exemption therefrom.

  
	
   

  	
   

  	
   

  
	
  Use of Proceeds:

  	
   

  	
  The Company intends that the net proceeds of the Offering and, if any,
  the additional proceeds to be received upon exercise of Warrants, will be
  used for development and expansion of the Company’s Obesity Surgery
  Management Services business, including working capital, funding of
  anticipated operating losses, infrastructure development, expenses associated
  with marketing efforts and payment of corporate overhead. In addition, we
  intend to use a portion of the proceeds from this offering (along with
  certain other of our assets) to redeem some of our outstanding shares of
  Series A Preferred Stock (the “Series A Shares”) and to obtain the
  rights to (i) redeem a portion of Series A Shares concurrent with
  this Unit financing and (ii) cause the conversion of the Series A
  Shares to common stock concurrent with this Unit financing.  Specifically,
  we currently intend to us use approximately $126,406 to redeem 75,844 shares
  of our 826,447 outstanding Series A Shares. We also intend to convert
  224,156 outstanding Series A Shares into 1,245,313 Units under this Unit
  financing at the time of the Final Closing. In exchange, we anticipate
  gaining the following rights: (i) the holders of Series A Shares
  will consent (which consent we are required to obtain) to the completion of
  the Offering described in this Memorandum and (ii) at the time of the
  Final Closing, the remaining 526,447 outstanding Series A Shares will
  convert into common stock on a 1 for 1 basis. As a result these actions, we
  will not have any outstanding Series A Shares immediately after the
  Final Closing. We may also use a portion of the net proceeds, currently
  intended for general corporate purposes, to invest in acquisitions, joint
  ventures or other collaborative arrangements, or to invest in or acquire
  products or services.

  
	
   

  	
   

  	
   

  
	
  Stockholder Approval:

  	
   

  	
  The Company shall prepare and file a proxy statement (the “Proxy
  Statement”) with the SEC in connection with a meeting of its stockholders to
  be held no later than July 20, 2005 (the “Stockholders Meeting”). At the
  Stockholders Meeting, the Company will seek stockholder approval of (i) the
  issuance of the shares of Common Stock and the Common Stock issuable upon the

  



 


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  exercise of the Warrants, including the Placement Agent Warrants, and
  (ii) an increase in the authorized number of shares of Common Stock from
  35,000,000 to 70,000,000. IT SHALL BE A CONDITION TO THE INITIAL CLOSING THAT
  THE COMPANY SHALL HAVE ENTERED INTO A VOTING AGREEMENT WITH THE HOLDERS OF
  MORE THAN 50% OF THE COMPANY’S OUTSTANDING SHARES OF COMMON STOCK AND
  PREFERRED STOCK PROVIDING THAT SUCH HOLDERS SHALL VOTE IN FAVOR OF SUCH
  PROPOSALS At the Stockholders Meeting the Company also intends to seek
  approval for (i) an amendment to the Restated Certificate to effect, at
  the discretion of the Board of Directors of the Company, a reverse stock
  split of the issued and outstanding shares of Common Stock in a ratio for
  such stock split that is not less than 2:1 nor greater than 10:1 and
  (ii) an increase in the number of shares authorized for issuance
  pursuant to its Stock Option Plan.

  
	
   

  	
   

  	
   

  
	
  Risk Factors:

  	
   

  	
  The Securities offered hereby involve a high degree of risk. See Risk
  Factors in the PPM.

  
	
   

  	
   

  	
   

  
	
  Placement Agent:

  	
   

  	
  Dawson James

  
	
   

  	
   

  	
   

  
	
  Confidential Information:

  	
   

  	
  The recipient of this Memorandum and the materials attached hereto agrees
  with the Company to maintain in confidence this disclosed information,
  together with any other non-public information regarding the Company obtained
  from the Company or their agents during the course of the proposed Offering.
  The recipient also agrees not to trade in the securities of the Company
  (other than pursuant to this Offering) at any time that the recipient is in
  possession of any non-public information regarding the Company obtained from
  the Company or its agents during the course of this Offering. The Company has
  caused these materials to be delivered to you in reliance upon such agreement
  and upon Rule 100(b)(2)(ii) of Regulation FD as promulgated by the
  Securities and Exchange Commission.

  



 


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EXHIBIT B


 


Payment Instructions


 


Remittance Via Check:


 


Payable To:


 


Mailed To:


 


Remittance Via Wire Transfer:


 


Account Name:


 


Bank:


Account #:


ABA #:


 


Address:


 


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Annex A


 


Registration Rights


 


1.             Registration of Shares.  The Company
will (i) use best efforts to prepare and file, within 45 days after the
Final Closing, a Registration Statement (the “Registration Statement”)
with the SEC to register resales under the Securities Act of the Common Stock
and the Common Stock issuable upon the exercise of the Common Stock Warrants by
the Subscriber, (ii) use its reasonable best efforts to cause the
Registration Statement to become effective as soon as practicable after such
filing, (iii) use its reasonable best efforts to cause such Registration
Statement to remain effective until the first anniversary of the Final Closing
(except as otherwise set forth above); provided  that the Company
may suspend sales at any time under the Registration Statement immediately upon
notice to the Subscriber, for a period or periods of time not to exceed 90 days
in the aggregate during any 12-month period, if there then exists
material, non-public information relating to the Company, which in the
reasonable opinion of the Company, would not be appropriate for disclosure
during that time, and (iv) prepare and file with the SEC such amendments
and supplements to the Registration Statement and the prospectus used in
connection therewith as may be necessary to keep such Registration Statement
effective for the period specified in this sentence above.  Without limiting the foregoing, the Company
will promptly respond to all SEC comments, inquiries and requests, and shall
request acceleration of effectiveness at the earliest possible date.  In the event a registration statement is not
filed with the SEC within 45 days or is not declared effective within 150 days
from the date of the Final Closing, then in such event a fee of 1% per month
(or portion thereof) shall be assessed against the Company as a Default Payment
and in favor of the holders of the Common Stock and Warrants for each such 30
day period until such time as the registration statement is declared
effective.  The Subscriber shall provide
all information and materials, including, without limitation, all information
requested in a questionnaire to be provided to the Subscriber by the Company,
and take all such action as may be required in order to permit the Company to
comply with all applicable requirements of the Securities Act and the Exchange
Act and to obtain any desired acceleration of the effective date of the
Registration Statement, such provision of information and materials to be a
condition precedent to the obligations of the Company hereunder to register the
Common Stock issued or issuable upon the exercise of the Common Stock
Warrants.  The offerings made pursuant to
the Registration Statement shall not be underwritten.


 


2.             Registration Procedures.  With
respect to the registration of Common Stock under this Annex A, the Company
will: (i) furnish to the Subscriber such number of copies of the
Registration Statement, each amendment and supplement thereto, the prospectus
included in such Registration Statement (including each preliminary prospectus)
and such other documents as the Subscriber may reasonably request in order to
facilitate the disposition of the Common Stock and the Common Stock acquired by
the Subscriber upon the exercise of Common Stock Warrants and owned by the
Subscriber; (ii) use its best efforts to register or qualify the Common


 


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Stock
included in such registration under such other securities or blue sky laws of
such jurisdictions as the Subscriber reasonably requests and do any and all
other acts and things which may be reasonably necessary or advisable to enable
the Subscriber to consummate the disposition in such jurisdictions of the
shares of Common Stock to be sold by the Subscriber (provided  that
the Company will not be required to qualify generally to do business in any
jurisdiction where it would not otherwise be required to qualify but for this
subparagraph, subject itself to taxation in any such jurisdiction, or consent
to general service of process in any such jurisdiction); (iii) notify the
Subscriber at any time when a prospectus relating thereto is required to be
delivered under the Securities Act, upon discovery that, or upon the discovery
of the happening of any event as a result of which, the prospectus included in
such registration statement contains an untrue statement of a material fact or
omits any fact necessary to make the statements therein not misleading in the
light of the circumstances under which they were made, and the Company will
promptly prepare and file with the SEC and, at the request of any the
Subscriber, furnish to the Subscriber a reasonable number of copies of, a
supplement or amendment to such prospectus so that, as thereafter delivered to
the Subscriber, such prospectus will not contain an untrue statement of a
material fact or omit to state any fact necessary to make the statements
therein not misleading in light of the circumstances under which they were
made; and (iv) promptly reissue, or promptly authorize and instruct its
transfer agent to reissue, unlegended certificates at the request of the
Subscriber upon such Subscriber’s delivery of original certificates
representing the shares of Common Stock tendered for sale pursuant to the
effective Registration Statement, and to promptly respond to broker’s inquiries
made of the Company in connection with such sales, in each case with a view to
reasonably assisting the Subscriber to complete such sale during such period of
effectiveness.


 


3.             Registration Expenses. All of the out-of-pocket expenses incurred by the
Company in complying with its obligations under this Annex A in
connection with the registration of the Common Stock and the Common Stock
issuable upon the exercise of the Common Stock Warrants, including, without
limitation, all SEC, Nasdaq SmallCap Market and blue sky registration and
filing fees, printing expenses, transfer agents’ and registrars’ fees, and the
fees and disbursements of the Company’s outside counsel and independent
accountants shall be paid by the Company. 
The Company shall not be responsible to pay any legal fees for any
Subscriber or any selling expenses of any Subscriber (including, without
limitation, any broker’s fees or commissions, including underwriter
commissions).


 


4.             Indemnification.


 


(a)           The Company agrees to indemnify and hold harmless, to
the extent permitted by law, the Subscriber, its officers, directors, employees
and agents and each Person who controls such Subscriber (within the meaning of
the Securities Act), if applicable, against any losses, claims, damages or
liabilities, joint or several, to which such the Subscriber or any such
director, officer, employee, agent or controlling Person may become subject
under the Securities Act or otherwise, insofar as such losses, claims, damages
or liabilities (or actions or proceedings, whether


 


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commenced
or threatened, in respect thereof) arise out of or are based upon (i) any
untrue or alleged untrue statement of a material fact contained (A) in the
Registration Statement or prospectus or preliminary prospectus or any amendment
thereof or supplement thereto used in connection with this Annex A or (B) in
any application or other document or communication (in this Annex A
collectively called an “application”) executed by or on behalf of the Company
or based upon written information furnished by or on behalf of the Company
filed in any jurisdiction in order to qualify any securities covered by such
Registration Statement under the “blue sky” or securities laws thereof, (ii) any
omission or alleged omission of a material fact required to be stated therein
or necessary to make the statements therein not misleading or (iii) any
violation by the Company of the Securities Act or any state securities law, or
any rule or regulation promulgated under the Securities Act or any state
securities law, or any other law applicable to the Company relating to any such
registration or qualification, and the Company will reimburse the Subscriber
and each such director, officer and controlling Person for any legal or any
other expenses incurred by them in connection with investigating or defending
any such loss, claim liability, action or proceeding; provided  that
the Company shall not be liable in any such case to the extent that any such
loss, claim, damage, liability (or action or proceeding with respect thereof)
or expense arises out of or is based upon an untrue statement, any such
prospectus or preliminary prospectus or any amendment or supplement thereto, or
in any application, in reliance upon and in conformity with written information
prepared and furnished to the Company by the Subscriber or any other subscriber
expressly for use therein or by the Subscriber’s failure to deliver a copy of
the prospectus or any amendments or supplements thereto after the Company has
furnished the Subscriber with a sufficient number of copies of the same.


 


(b)           In connection with the Registration Statement, the
Subscriber will furnish to the Company in writing such information and
documents concerning the Subscriber as the Company reasonably requests for use
in connection with the Registration Statement or prospectus and, to the extent
permitted by law, will indemnify and hold harmless the Company and its
directors and officers and each other Person who controls or is controlled by
the Company and the directors and officers of each such Person controlling or
controlled by the Company and the directors and officers of each such
controlling or controlled Person (within the meaning of the Securities Act)
against any losses, claims, damages, liabilities, joint or several, to which
the Company or any such director or officer or controlling or controlled Person
may become subject under the Securities Act or otherwise, insofar as such
losses, claims, damages or liabilities (or actions or proceedings, whether
commenced or threatened, in respect thereof) arise out of or are based upon (i) any
untrue or alleged untrue statement of a material fact contained in the
Registration Statement, prospectus or preliminary prospectus or any amendment
thereof or supplement thereto or in, any application or (ii) any omission
or alleged omission of a material fact required to be stated therein or
necessary to make the statements therein not misleading, but only to the extent
that such untrue statement or omission or alleged omission is made in such
Registration Statement, any such prospectus or preliminary prospectus or any
amendment or supplement thereto, or in any application, in reliance upon and in
conformity with written information concerning


 


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the
Subscriber prepared and furnished to the Company by or on behalf of the
Subscriber in writing expressly for use therein, and the Subscriber will
reimburse the Company and each such director, officer and controlling or
controlled Person for any legal or any other expenses incurred by them in
connection with investigating or defending any such loss, claim, liability,
action or proceeding.


 


(c)           Any person entitled to indemnification hereunder
will (i) give prompt written notice to the Company of any claim with
respect to which it seeks indemnification and (ii) unless in such
indemnified party’s reasonable judgment a conflict of interest between such
indemnified parties and the Company may exist with respect to such claim,
permit the Company to assume the defense of such claim with counsel reasonably
satisfactory to the indemnified party; provided, however, that
the failure of any indemnified party to give notice as provided herein shall
not relieve the indemnifying party of its obligations hereunder unless the
failure to give such notice is materially prejudicial to an indemnifying party’s
ability to defend such action.  If such
defense is assumed, the indemnified party will not be subject to any liability
for any settlement made by the Company without its consent (but such consent
will not be unreasonably withheld). 
Anything to the contrary appearing in this Annex A
notwithstanding, the Company will not be obligated to pay the fees and expenses
of more than one counsel for all parties indemnified hereunder with respect to
such claim, unless in the reasonable judgment of any indemnified party a
conflict of interest may exist between such indemnified party and any other of
such indemnified parties with respect to such claim.  If the Company assumes the defense, the
indemnified party may engage its own counsel at its own sole cost and
expense.  All fees and expenses of
counsel to any indemnified party required to be paid by the Company shall be
paid by the Company as incurred by such indemnified party.


 


(d)           The indemnification provided for herein will remain
in full force and effect regardless of any investigation made by or on behalf
of the indemnified party or any officer, director, employee, agent or
controlling or controlled Person of such indemnified party and will survive the
transfer of securities issued hereunder by the Subscriber.  If the indemnification provided for herein is
unavailable to an indemnified party or insufficient in respect of any losses,
claims, damages or liabilities referred to therein, then the Company, in lieu
of indemnifying such indemnified party thereunder, shall contribute to the
amount paid or payable by such indemnified party as a result of such losses,
claims, damages or liabilities in such proportion as is appropriate to reflect
the relative fault of the Company, on the one hand, and the indemnified party
or parties, on the other hand, in connection with the statements or omissions
that resulted in such losses, claims, damages or liabilities, as well as any
other relevant equitable considerations.


 


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