Exhibit
      10.11




**SECURITIES
      PURCHASE AGREEMENT**








**THIS**  **SECURITIES
      PURCHASE AGREEMENT** (this
“ Agreement ”)
      is
      made as of the 15 th day of
      August, 2007, by and among **HEALTH
      DISCOVERY CORPORATION** ,
      a
      Georgia corporation (the “ Company ”),
      the
      investors listed on Schedule A hereto (the “ Cash
      Purchasers ”),
      and
      the investors listed on Schedule B hereto (the “ Lender
      Purchasers ”
and
      with the Cash Purchasers, the “ Purchasers ”).




**WHEREAS** ,
      the
      Company and the Purchasers are executing and delivering this Agreement in
      reliance upon the exemption from securities registration afforded by Rule 506
      under Regulation D as promulgated by the United States Securities and Exchange
      Commission (the “ Commission ”)
      under
      Section 4(2) of the Securities Act of 1933, as amended (the “ Securities
      Act ”);




**WHEREAS** ,
      subject
      to the terms and conditions set forth in this Agreement, the Company desires
      to
      issue and sell to the Purchasers, and the Purchasers desire to purchase from
      the
      Company, **** (i)
      shares (the “ Shares ”)
      of the
      common stock of the Company, no par value (the “ Common
      Stock ”),
      (ii)
      warrants to purchase shares of Common Stock at an exercise price of $0.14 per
      share (the “ Tranche
      1 Warrants ”),
      and
      (iii) warrants to purchase shares of Common Stock at an exercise price of $0.19
      per share (the “ Tranche
      2 Warrants ”
and
      together with the Tranche 1 Warrants, the “ Warrants ”);




**WHEREAS,** this
      Agreement and the sale of the securities to the Purchasers is a part of a
      private offering (the “ Offering ”)
      with
      an aggregate minimum gross proceeds of at least $1,500,000.00 (the “ Minimum
      Amount ”);
      and




**WHEREAS,** as
      a
      condition precedent to the obligations of the Cash Purchasers hereunder, holders
      of at least $1,500,000 in principal amount of outstanding indebtedness of the
      Company must convert such indebtedness into equity securities of the
      Company.




**NOW,
      THEREFORE** ,
      in
      consideration of the promises and mutual covenants and agreements herein, the
      Company and the Purchasers hereby agree as follows:




**ARTICLE
      I.**


**PURCHASE
      AND SALE**




1.1  Purchase
      and Sale .
      Subject
      to the terms and conditions set forth herein, the Company shall issue and sell
      to each Purchaser, and each Purchaser, severally and not jointly, agrees to
      purchase from the Company, at the Closing (as defined below) that number of
      Shares, Tranche 1 Warrants and Tranche 2 Warrants set forth opposite such
      Purchaser’s name on Schedule A or Schedule B, as appropriate, for the amount set
      forth on such Schedule (the “ Purchase
      Price ”).
      Not
      withstanding the foregoing sentence, at any time prior to the Closing Date,
      the
      Lead Investor may increase, in its sole discretion, the amount of its investment
      under this Agreement (provided that such investment is not more than $700,000)
      and the number of Shares, Tranche 1 Warrants and Tranche 2 Warrants set forth
      opposite the Lead Investor's name on Schedule A shall be proportionately
      increased. Any such increase shall not decrease or otherwise change the amounts
      set forth opposite the other Purchasers' names on Schedule A and Schedule
      B.




1.2  Closing.




a.  The
      Closing .
      The
      initial closing (the “ Initial
      Closing ”
or
      the
“ Closing ”)
      of the
      purchase and sale of the Shares and the Warrants shall take place on September
      7, 2007, or such other time as the Company and the Purchasers shall otherwise
      agree (the “ Closing
      Date ”).
      If
      there is more than one closing, the term “ Closing ”
shall
      apply to each such closing unless otherwise specified.




b.  Purchaser
      Deliveries at Closing .
      At the
      closing, each Purchaser must deliver to the Company the following:




(i)  a
      copy of
      this Agreement, each duly executed by such Purchaser,







(ii)  a
      completed Purchaser Questionnaire in the form of Exhibit A, attached hereto;
      and




(iii)  the
      Purchase Price (A) for the Cash Purchasers to be paid by personal check, wire
      transfer, bank check or money order and (B) for the Lender Purchasers to be
      paid
      by conversion of the indebtedness and all accrued interest under the promissory
      note(s) previously issued by the Company to such Purchaser.




c.  Company
      Deliveries at Closing .
      Upon
      Closing, the Company shall deliver to each Purchaser (at the Purchasers’ address
      listed on the signature page of this Agreement):




(i)  one
      copy
      of this Agreement, duly executed by the Company,




(ii)  an
      opinion of the Company’s counsel in form, scope and substance in the form of
      Exhibit B, attached hereto;




(iii)  copies
      of
      duly executed Lock-Up Agreements from all executive officers of the Company
      in
      form, scope and substance substantially in the form of Exhibit C, attached
      hereto;




(iv)  a
      certificate evidencing the Shares in the applicable amount set forth on Schedule
      A hereto,
      registered in the books and records of the Company in the name of the Purchaser
      or the Purchaser’s nominee, and




(v)  Warrants
      in the form attached hereto as Exhibit E, duly executed on behalf of the Company
      and representing the Purchaser’s right to acquire shares of Common Stock,
      registered in the books and records of the Company in the name of the
      Purchaser.




1.3  Sale
      of Additional Shares and Warrants .




(a)
      After
      the Initial Closing, the Company may sell, on the same terms and conditions
      as
      those contained in this Agreement (subject to equitable and proportional
      adjustment in the event of any stock dividend, stock split, reverse stock
      dividend or reverse stock split, or any capital reorganization or
      recapitalization or similar event affecting the Common Stock, which becomes
      effective after the date of this Agreement and on or before the Closing Date),
      additional shares of Common Stock (the “Additional
      Shares”)
      together with corresponding Warrants (the “Additional
      Warrants”),
      to
      one or more purchasers (the “Additional
      Purchasers”),
      in
      one or more subsequent closings provided that (a) such
      subsequent sales, together with the sales to the Cash Purchasers, do not result
      in gross proceeds to the Company of greater than $2,500,000 (the “Maximum
      Amount”),
      (b)
      such subsequent sales are consummated on or prior to October 31, 2007, and
      (c) each Additional Purchaser shall become a party to this Agreement, as
      defined below, by executing and delivering a counterpart signature page to
      this
      Agreement. Schedule A or Schedule B, as appropriate, to this Agreement shall
      be
      updated to reflect the number of Additional Shares purchased at each such
      Closing and the parties purchasing such Additional Shares and Additional
      Warrants. The term “Shares”
and
      “Warrants”
shall
      include the Additional Shares and Additional Warrants unless otherwise
      specified.




(b) Prior to the Initial Closing, additional Cash Purchasers or Lender
      Purchasers may, with the written consent of the Company, become a party to
      this
      Agreement by executing and delivering a counterpart signature page to this
      Agreement, in which event (i) such Additional Purchasers will purchase their
      Additional Shares and Additional Warrants at the Initial Closing, and (ii)
      Schedule A or Schedule B, as appropriate, to this Agreement shall be updated
      to
      reflect the number of Additional Shares purchased, and the parties purchasing
      such Additional Shares and Additional Warrants.  Notwithstanding the
      foregoing, any additional Cash Purchaser or Lender Purchaser may not become
      a
      party to this Agreement to the extent that his, her or its purchase of Common
      Stock and Warrants at the Initial Closing would result in an aggregate Purchase
      Price for total sales of Common Stock and Warrants to all Cash Purchasers in
      the
      Offering in an amount exceeding the Maximum Amount.




**ARTICLE
      II.**


**REPRESENTATIONS
      AND WARRANTIES**




2.1  Representations
      and Warranties of the Company .
      The
      Company represents and warrants to the Purchasers that, to its knowledge, the
      statements contained in this Section 2.1 are true, correct and complete, in
      all
      material respects, as of the date of this Agreement, and will be true correct
      and complete, in all material respects, as of the Closing Date.




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a.  Organization
      and Qualification .
      The
      Company is duly incorporated, validly existing and in good standing under the
      laws of the State of Georgia, with the requisite corporate power and authority
      to carry on its business as currently conducted. The Company is duly qualified
      as a foreign corporation to do business and is in good standing as a foreign
      corporation in each jurisdiction in which the nature of the business conducted
      or property owned by it makes such qualification necessary, except where the
      failure to be so qualified or in good standing, as the case may be, would not,
      individually or in the aggregate, (x) adversely affect the legality,
      validity or enforceability of this Agreement or any of the transactions
      contemplated hereby, (y) have or result in a material adverse effect on the
      condition (financial or otherwise), business, operations, results of operations,
      assets, capitalization, financial condition, licenses, permits, rights or
      privileges (whether contractual or otherwise) or prospects of the Company,
      taken
      as a whole, or (z) impair the Company’s ability to perform fully on a timely
      basis its obligations hereunder (an effect caused by or change resulting from
      any event or circumstance described in clause (x), (y) or (z), being a
“ Material
      Adverse Effect ”).
      The
      Company has made available to the Purchasers true and correct copies of the
      Company’s Articles of Incorporation, as in effect on the date of this Agreement
      (the “ Articles
      of Incorporation ”),
      and
      the Company’s Bylaws, as in effect on the date of this Agreement (the
“ Bylaws ”).




b.  Authorization;
      Enforcement .
      The
      Company has the requisite corporate power and authority to enter into and to
      consummate the transactions contemplated by this Agreement and otherwise to
      carry out its obligations hereunder. The execution and delivery of this
      Agreement by the Company and the consummation by it of the transactions
      contemplated hereby have been duly authorized by all necessary corporate action
      by the Company. This Agreement has been duly executed by the Company and when
      delivered in accordance with the terms hereof will constitute the valid and
      binding obligation of the Company enforceable against the Company in accordance
      with its terms, except as such enforceability may be limited by applicable
      bankruptcy, insolvency, reorganization, moratorium, liquidation or similar
      laws
      relating to, or affecting generally the enforcement of, creditors’ rights and
      remedies or by other equitable principles of general application and except
      that
      rights to indemnification and contribution may be limited by federal or state
      securities laws or public policy relating thereto.




c.  Capitalization .
      As of
      the date of this Agreement, the authorized capital stock of the Company consists
      of 300,000,000 shares of Common Stock, of which 117,468,384 shares are issued
      and outstanding, 30,000,000 shares of preferred stock, of which no shares are
      issued and outstanding, and options and warrants to acquire 73,296,250 shares
      of
      Common Stock have been granted, and 4,376,598 shares of Common Stock may be
      issued upon the conversion of convertible notes issued in connection with the
      acquisition of interests in the support vector machine patents and other assets
      formerly owned by BioWulf Technologies LLC (the “ Acquisition ”).
      All
      of such shares of capital stock have been, or upon issuance will be, duly
      authorized and validly issued, fully paid and nonassessable. The sellers in
      the
      Acquisition were granted the right to participate pro rata in all future
      fundraising efforts until the notes issued in the Acquisition have been fully
      paid, and the Company has fully complied with such rights in connection with
      the
      execution, delivery and performance of this Agreement. Except as described
      in
      this Section 2.1(c), no Person (as hereinafter defined) has any right of first
      refusal, preemptive right, right of participation, or any similar right to
      participate in the transactions contemplated by this Agreement. Other than
      with
      respect to the Placement Agent engaged by the Company to assist in the sale
      of
      the securities pursuant to this Agreement, the issuance and sale of the Shares
      and the Warrants will not obligate the Company to issue shares of Common Stock
      or other securities to any Person (other than the Purchasers) and will not
      result in a right of any holder of Company securities to adjust the exercise,
      exchange, conversion or reset price under such securities. Other than as set
      forth in this Section 2.1(c) and except as may be granted pursuant to this
      Agreement, there are no outstanding options, warrants, rights (including
      conversion or preemptive rights, rights of first refusal and phantom stock
      rights), or proxy, voting, transfer restriction or shareholder agreements with
      respect to the Company’s capital stock or agreements of any kind for the
      purchase or acquisition from the Company of any of its securities.




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d.  Authorization
      and Validity; Issuance of Shares .
      The
      Shares, the shares of Common Stock issuable upon exercise of the
      Warrants **** (the
      “ Warrant
      Shares ”),
      and
      the Subsequent Shares (collectively with the Shares and the Warrant Shares,
      the
“ Securities ”)
      are
      and will at all times hereafter continue to be duly authorized and, when issued
      and paid for in accordance with this Agreement or the applicable warrant
      agreement, will be validly issued, fully paid and non-assessable, free and
      clear
      of all liens.




e.  No
      Conflicts .
      The
      execution, delivery and performance of this Agreement by the Company and the
      consummation by the Company of the transactions contemplated hereby do not
      and
      will not (i) conflict with or violate any provision of the Articles of
      Incorporation, Bylaws or other organizational documents of the Company,
      (ii) **** subject
      to obtaining the consents referred to in Section 2.1(f), conflict with, or
      constitute a default (or an event which with notice or lapse of time or both
      would become a default) under, or give to others any rights of termination,
      amendment, acceleration or cancellation of, any agreement, indenture, patent,
      patent license or instrument to which the Company is a party or by which any
      property or asset of the Company is bound or affected, or (iii) result in a
      violation of any law, rule, regulation, order, judgment, injunction, decree
      or
      other restriction of any court or governmental authority to which the Company
      is
      subject or by which any material property or asset of the Company is
      bound.




f.  Consents
      and Approvals .
      The
      Company is not required to obtain any consent, waiver, authorization or order
      of, give any notice to, or make any filing or registration with, any court
      or
      other federal, state, local or other governmental authority, regulatory or
      self
      regulatory agency, or other Person in connection with the execution, delivery
      and performance by the Company of this Agreement, other than (i)  any
      required application(s) or any letter(s) acceptable to the Over-the-Counter
      Bulletin Board (“ OTCBB ”),
      and
      (ii) any filings, notices or registrations under applicable federal or state
      securities laws (the “ Required
      Approvals ”),
      except where failure to do so has not resulted or would not reasonably result,
      individually, or in the aggregate, in a Material Adverse Effect. “ Person ”
means
      an individual or corporation, partnership, trust, incorporated or unincorporated
      association, joint venture, limited liability company, joint stock company,
      government (or an agency or subdivision thereof) or other entity of any
      kind.




g.  Litigation;
      Proceedings .
      Except
      as specifically set forth on in the SEC Documents (hereinafter defined) there
      is
      no action, suit, notice of violation, proceeding or investigation pending or
      threatened against or affecting the Company or any of its subsidiaries or any
      of
      their respective properties before or by any court, governmental or
      administrative agency or regulatory authority (collectively, an “ Action ”)
      which
      (i) adversely affects or challenges the legality, validity or enforceability
      of
      any of this Agreement, or (ii) would reasonably be expected to, individually
      or
      in the aggregate, have a Material Adverse Effect. There has not been, and there
      is not pending or contemplated, any investigation by the Commission involving
      the Company or any current or former director that was a director of the Company
      at any time during the last three years or officer of the Company. The
      Commission has not issued any stop order or other order suspending the
      effectiveness of any registration statement filed by the Company or any
      subsidiary under the Exchange Act of 1934, as amended (the “ Exchange
      Act ”)
      or the
      Securities Act.




h.  No
      Default or Violation .
      The
      Company (i) is not in default under or in violation of any indenture, loan
      or
      other credit agreement or any other agreement or instrument to which it is
      a
      party or by which it or any of its properties is bound and which is required
      to
      be included as an exhibit to any SEC Document, other than with respect to the
      promissory notes currently held by Memorial Health Trust, Inc., Julian Stern,
      James Roberts, Joseph McKenzie, Jules Paderewski, and Curtis Anderson where
      the
      Company currently does not have the requisite cash balance required by the
      terms
      of the promissory notes (and with respect to which the Company is being released
      from each such default by such Persons pursuant to Section 2.2(n) hereof),
      (ii)
      is not in violation of any order of any court, arbitrator or governmental body
      applicable to it, (iii) is not in violation of any statute, rule or
      regulation of any governmental authority to which it is subject, (iv) is not
      in
      default under or in violation of its Articles of Incorporation, Bylaws or other
      organizational documents, respectively in the case of (i), (ii) and (iii),
      except where such violations have not resulted or would not reasonably result,
      individually or in the aggregate, in a Material Adverse Effect.




4




i.  SEC
      Documents; Financial Statements .
      Since
      January 1, 2005, the Company has filed all reports, schedules, forms, statements
      and other documents required to be filed by it, with the Commission, pursuant
      to
      Section 13, 14 or 15(d) of the Exchange Act (collectively referred to herein
      as
      the “ SEC
      Documents ”).
      As of
      their respective dates, the SEC Documents complied in all material respects
      with
      the requirements of the Securities Act and the Exchange Act and the rules and
      regulations of the Commission promulgated thereunder applicable to such SEC
      Document. Except to the extent that information contained in any SEC Document
      filed and publicly available prior to the date of this Agreement has been
      revised or superseded by a later filed SEC Document, which later filed SEC
      Document was filed prior to the date of this Agreement, none of the SEC
      Documents, when filed, contained any untrue statement of a material fact or
      omitted to state a material fact required to be stated therein or necessary
      in
      order to make the statements therein, in light of the circumstances under which
      they were made, not misleading. The financial statements of the Company included
      in the SEC Documents comply as to form in all material respects with applicable
      accounting requirements and the published rules and regulations of the
      Commission with respect thereto as in effect at the time of filing. Such
      financial statements 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, year-end audit adjustments.




j.  Material
      Changes .
      Since
      the date of the latest audited financial statements included within the SEC
      Documents, except as specifically disclosed in the SEC Documents, (i) there
      has
      been no event, occurrence or development that has had or that could result
      in a
      Material Adverse Effect, (ii) the Company has not incurred any liabilities
      other
      than (A) trade payables and accrued expenses incurred in the ordinary course
      of
      business consistent with past practice, (B) liabilities not required to be
      reflected in the Company’s financial statements pursuant to GAAP or required to
      be disclosed in filings made with the Commission, and (C) in connection with
      the
      termination of Robert Braswell's employment with the Company and in lieu of
      the
      cash payment by the Company under his employment agreement, the grant to Mr.
      Braswell of 300,000 options for Common Stock with an exercise price of $0.08
      per
      share and the issuance to Mr. Braswell of 575,000 shares of Common Stock
      (collectively, the "Braswell Securities"), (iii) the Company has not altered
      its
      method of accounting or the identity of its auditors, and (iv) the Company
      has
      not declared or made any dividend or distribution of cash or other property
      to
      its shareholders or purchased, redeemed or made any agreements to purchase
      or
      redeem any shares of its capital stock.




k.  Listing
      and Maintenance Requirements .
      The
      Company has not, in the two years preceding the date of this Agreement, received
      notice from the OTCBB or any other exchange or market on which the Common Stock
      is or has been listed or quoted to the effect that the Company is not in
      compliance with the listing or maintenance requirements of such exchange or
      market. The Company is, and has no reason to believe that it will not in the
      foreseeable future continue to be, in compliance with all such listing and
      maintenance requirements of the OTCBB. The issuance and sale of the Shares
      and
      Warrants hereunder does not contravene the rules and regulations of the OTCBB
      and approval of the shareholders of the Company is not required for the Company
      to issue and deliver to the Purchasers the number of Shares and Warrant Shares
      contemplated by this Agreement.




l.  Broker’s
      Fees .
      The
      Purchasers shall have no obligation with respect to any fees or with respect
      to
      any claims made by or on behalf of other Persons for fees of any broker, finder
      or other intermediary retained by the Company that may be due in connection
      with
      the transactions contemplated by this Agreement.




5




m.  Intellectual
      Property .




(i)  For
      purposes hereof, “ Patents ”
means
      rights arising from or in respect to patents and patent applications, including
      continuation, divisional, continuation-in-part, reissue or reexamination patent
      applications and patents issuing therefrom, patent disclosures and inventions,
      draft patent applications and foreign versions of the foregoing whether
      protected, created or arising under the laws of the United States or any other
      jurisdiction. For purposes hereof, “ Trademarks ”
means
      rights arising from or in respect to trademarks, service marks, trade names,
      logos, internet domain names and corporate names (whether registered or
      unregistered, including any applications for registration of the foregoing),
      trade dress rights and general intangibles of a like nature, industrial or
      product designs together with all of the goodwill associated therewith, and
      foreign versions of the foregoing, whether protected, created or arising under
      the laws of the United States or any other jurisdiction. For purposes hereof,
      “ Copyrights ”
means
      rights arising from or in respect to copyrights and copyrightable works and
      registrations, applications and renewals for registration thereof, mask works
      and registrations and applications for registration or renewals thereof,
      computer software, data, databases and documentation including copies and
      tangible embodiments (in whatever form or medium) thereof whether protected,
      created or arising under the laws of the United States or any other
      jurisdiction. For purposes hereof, “ Trade
      Secrets ”
means
      rights arising from or in respect to trade secrets and other confidential
      information (including, without limitation, ideas, formulas, compositions,
      inventions (whether patentable or unpatentable and whether or not reduced to
      practice), know-how, concepts, manufacturing and production processes and
      techniques, research and development information, drawings, specifications,
      designs, plans, proposals, technical data, financial and marketing plans and
      customer and supplier lists and information whether protected, created or
      arising under the laws of the United States or any other jurisdiction. For
      purposes hereof, the “Lucent License” means that certain patent license
      agreement by and between the Company and Lucent Technologies GRL Corporation
      (“Lucent”) effective September 26, 2004, pursuant to which the Company received
      a license to use a hyperplane patent (Pat. No. 5,649,068) from Lucent. The
      Patents, Trademarks, Copyrights, and Trade Secrets that the Company owns or
      otherwise has the right to use (including, but not limited to, Patent No.
      6,996,549 and those other patents listed in the Company’s Annual Report on Form
      10-KSB for the fiscal year ended December 31, 2006 and filed on March 30, 2007
      other than Patent No. 6,996,542, which is not owned by the Company ) and
      the
      Lucent License are referred to herein as the “ Intellectual
      Property ”
or
      “ Company
      Intellectual Property ”.




(ii)  The
      Company owns all right, title and interest in and to or possesses exclusive
      rights to use all of the Company Intellectual Property, subject to the terms
      of
      the applicable agreement, free and clear of all Liens or claims of others.
      For
      purposes of this Section 2.1(m), “ Lien ”
means
      (a) any encumbrance, mortgage, pledge, lien, charge or other security interest
      of any kind upon any property or assets of any character, or upon the income
      or
      profits therefrom; (b) any acquisition of or agreement to have an option to
      acquire any property or assets upon conditional sale or other title retention
      agreement, device or arrangement (including a capitalized lease); or (c) any
      sale, assignment, pledge or other transfer for security of any accounts, general
      intangibles or chattel paper, with or without recourse.




(iii)  The
      Company has not received any notice, written or otherwise, or claim challenging
      the complete and exclusive ownership or possession of its rights to use the
      Company Intellectual Property by the Company, or suggesting that any other
      Person has any claim of legal or beneficial ownership with respect thereto.
      Similarly, the Company has not received any notice, written or otherwise,
      challenging, terminating, amending, or affecting the interest of the Company
      in
      the Company Intellectual Property.




(iv)  The
      Company has taken all necessary and reasonable actions to procure and maintain
      the Company Intellectual Property that it owns or licenses ,
      including, if and when applicable and required, the secrecy or confidentiality
      thereof, which
      action may be taken by the Company and the
      Company, the Company Intellectual Property is currently in compliance with
      all
      applicable legal requirements (including timely payment of filing, examination,
      maintenance and legal fees) necessary to maintain the Company Intellectual
      Property.




6




(v)  The
      Company has not received any notice, written or otherwise, of a claim that
      any
      of the Company Intellectual Property is invalid, unenforceable, or
      misused.




(vi)  No
      Company Intellectual Property owned by the Company and no Company Intellectual
      Property owned by a third party, is involved in any interference, reissue,
      reexamination, opposition or cancellation proceeding or any other litigation
      or
      proceeding of any kind in the United States or in any other
      jurisdiction.




(vii)  The
      transactions contemplated by this Agreement shall have no adverse effect on
      the
      right, title and interest of the Company in and to Company Intellectual
      Property.




(viii)  The
      Company has not received any communications, written or otherwise, from any
      other Person alleging  that
      it
      has infringed or,
      by
      conducting its Business as currently conducted or proposed to be conducted,
      would infringe
      the intellectual property rights
      of any Person.




(ix)  It
      is not
      necessary to the Business, as currently conducted, to utilize any Intellectual
      Property of any of its employees of the Company made prior to their employment
      by the Company, except for inventions, trade secrets or proprietary information
      that have been assigned to the Company.




(x)  Since
      the
      date of this Agreement, there has not been any sale, assignment or transfer
      of
      any Intellectual Property or other material intangible assets of the Company,
      except for licenses entered into in the ordinary course of
      business.




(xi)  All
      former and current Employees and Consultants of the Company have signed
      agreements containing confidentiality provisions and invention assignment
      provisions.




(xii)  The
      Company Intellectual Property is sufficient to permit the operation of the
      Company’s business as currently conducted and as proposed to be conducted as
      described in the SEC Documents.




2.2  Representations,
      Warranties and Covenants of the Purchasers .




a.  Purchaser
      Status .
      Each
      Purchaser, severally and not jointly, represents and warrants to, and covenants
      with, the Company that: (i) the Purchaser is an “accredited investor” as
      defined in Regulation D under the Securities Act, and the Purchaser is also
      knowledgeable, sophisticated and experienced in making, and is qualified to
      evaluate the risks and merits and make decisions with respect to investments
      in
      securities presenting an investment decision like that involved in the purchase
      of the Securities, including investments in securities issued by the Company
      and
      investments in comparable companies, and has requested, received, reviewed
      and
      considered all information it deemed relevant in making an informed decision
      to
      purchase the Securities and is able to bear the risks of this investment;
      (ii) the Purchaser is acquiring the Securities in the ordinary course of
      its business and for its own account for investment only and not with a view
      to,
      or for resale in connection with, any distribution thereof within the meaning
      of
      the Securities Act; (iii) the Purchaser will not, directly or indirectly,
      offer, sell, pledge, transfer or otherwise dispose of (or solicit any offers
      to
      buy, purchase or otherwise acquire or take a pledge of) any of the Securities
      (including the Warrant Shares) except in compliance with the Securities Act,
      applicable state securities laws and the respective rules and regulations
      promulgated thereunder; (iv) the Purchaser has answered all questions on
      the Investor Questionnaire for use in preparation of the Registration Statement
      and the answers thereto are true, correct and complete in all material respects
      as of the date hereof and will be true, correct and complete in all material
      respects as of the Closing Date; (v) the Purchaser has delivered to the
      Company the Investor Questionnaire; (vi) the Purchaser will notify the Company
      immediately of any material change in any of such information until such time
      as
      the




7




Purchaser
      has sold all of its Shares and Warrant Shares or until the Company is no longer
      required to keep the Registration Statement effective; and (vii) the Purchaser
      has, in connection with its decision to purchase the Securities, relied only
      upon the SEC Documents and the representations and warranties of the Company
      contained herein. Each Purchaser understands that its acquisition of the Shares,
      the Warrants and the Warrant Shares has not been registered under the Securities
      Act or registered or qualified under any state securities law in reliance on
      specific exemptions therefrom, which exemptions may depend upon, among other
      things, the bona fide nature of the Purchasers’ investment intent as expressed
      herein.




b.  Foreign
      Offering .
      Each
      Purchaser acknowledges, represents and agrees that no action has been or will
      be
      taken in any jurisdiction outside the United States by the Company that would
      permit an offering of the Securities, or possession or distribution of offering
      materials in connection with the issuance of the Securities, in any jurisdiction
      outside the United States where legal action by the Company for that purpose
      is
      required. Each Purchaser outside the United States will comply with all
      applicable laws and regulations in each foreign jurisdiction in which it
      purchases, offers, sells or delivers the Securities or has in its possession
      or
      distributes any offering material, in all cases at its own expense.




c.  Resale
      Restrictions .
      Each
      Purchaser hereby covenants with the Company not to make any sale of the Shares,
      the Warrants or the Warrant Shares without complying with the provisions of
      this
      Agreement and without satisfying all requirement of an applicable exemption
      under the Securities Act for such sale. Each Purchaser acknowledges that there
      may occasionally be times when the Company determines that it must suspend
      the
      use of the Prospectus forming a part of the Registration Statement, as set
      forth
      in Section 3.2(c). Each Purchaser acknowledges that the Shares, the Warrants
      and
      the Warrant Shares will be imprinted with the following legend that prohibits
      their transfer except in accordance therewith:




THE
      SECURITIES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED WITH THE SECURITIES
      AND
      EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION IN RELIANCE UPON AN
      EXEMPTION FROM REGISTRATION UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE
      “SECURITIES ACT”), AND, ACCORDINGLY, MAY NOT BE OFFERED OR SOLD EXCEPT PURSUANT
      TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT OR AN AVAILABLE
      EXEMPTION FROM, OR IN A TRANSACTION NOT SUBJECT TO, THE REGISTRATION
      REQUIREMENTS OF THE SECURITIES ACT AND IN ACCORDANCE WITH APPLICABLE STATE
      SECURITIES LAWS AS EVIDENCED BY A LEGAL OPINION OF COUNSEL TO THE TRANSFEROR
      TO
      SUCH EFFECT, THE SUBSTANCE OF WHICH SHALL BE REASONABLY ACCEPTABLE TO THE
      COMPANY.




d.  Short
      Positions .
      Each
      Purchaser hereby covenants with the Company not to use any of the Shares or
      the
      Warrant Shares, acquired pursuant to this Agreement, to cover any short position
      in the Common Stock of the Company if doing so would be in violation of
      applicable securities laws.




e.  No
      Advice .
      Each
      Purchaser understands that nothing in the SEC Documents, this Agreement or
      any
      other materials presented to the Purchasers in connection with the purchase
      and
      sale of the Securities constitutes legal, tax or investment advice. Each
      Purchaser has consulted such legal, tax and investment advisors as it, in its
      sole discretion, has deemed necessary or appropriate in connection with its
      purchase of the Securities.




f.  Organization;
      Authority .
      Each
      Purchaser is either an individual residing in the state as set forth on the
      signature page of this Agreement, or a corporation, limited liability company
      or
      limited partnership duly formed, validly existing and in good standing under
      the
      laws of the jurisdiction of its incorporation or formation in either case with
      the requisite power and authority, corporate or otherwise, to enter into and
      to
      consummate the transactions contemplated by this Agreement and to carry out
      the
      obligations hereunder. The purchase by each Purchaser of the Shares and the
      Warrants hereunder has been duly authorized by all necessary action on the
      part
      of the Purchaser. This Agreement




8


has
      been
      duly executed and delivered by the Purchaser and constitutes the valid and
      legally binding obligation of each Purchaser, enforceable against each Purchaser
      in accordance with its terms, subject to bankruptcy, insolvency, fraudulent
      transfer, reorganization, moratorium and similar laws of general applicability
      relating to or affecting creditors’ rights generally and to general principles
      of equity and except that rights to indemnification and contribution may be
      limited by federal or state securities laws or public policy relating thereto.




g.  Risk .
      Each
      Purchaser has carefully reviewed and understands the risks of, and other
      considerations relating to, the purchase of the Shares and the Warrants, and
      an
      investment in the Company. Each Purchaser has adequate means of providing for
      its current needs and possible future contingencies, and each Purchaser has
      no
      need, and anticipates no need in the foreseeable future, to sell or otherwise
      transfer the Shares, the Warrants or the Warrant Shares. Each Purchaser is
      able
      to bear the economic risks of this investment and, consequently, without
      limiting the generality of the foregoing, each Purchaser is able to hold the
      Shares, the Warrants or the Warrant Shares for an indefinite period of time
      and
      has sufficient net worth to sustain a loss of its entire investment in the
      Company if such loss should occur. Each Purchaser understands that each of
      the
      Shares, the Warrants and the Warrant Shares is a highly speculative investment,
      which involves a high degree of risk of loss of the Purchaser’s entire
      investment therein.




h.  Reliance .
      Each
      Purchaser understands and acknowledges that (i) the Shares, the Warrants and
      the
      Warrant Shares are being offered and sold to the Purchasers without registration
      under the Securities Act in a private placement that is exempt from the
      registration provisions of the Securities Act under Section 4(2) of the
      Securities Act or Regulation D promulgated thereunder, and (ii) the availability
      of such exemption depends in part on, and the Company will rely upon the
      accuracy and truthfulness of, the representations set forth in this Section
      2.2,
      including, without limitation, the accredited investor status and the investment
      intent of the Purchasers, and each Purchaser hereby consents to such reliance.




i.  Information .
      Each
      Purchaser and its advisors, if any, have been furnished with all materials
      relating to the business, finances and operations of the Company and materials
      relating to the offer and sale of the Shares and the Warrants which have been
      requested by such Purchaser or its advisors. Each Purchaser and its advisors,
      if
      any, have been afforded the opportunity to ask questions of the Company and
      receive answers concerning the terms and conditions of the offering and obtain
      any additional information, which the Company possesses or can acquire without
      unreasonable effort or expense, that is necessary to verify the accuracy of
      any
      representations or information set forth in any such material. Representatives
      of the Company have adequately answered all inquiries that the Purchasers has
      made of them concerning the Company or any other matters relating to the
      operation of the Company and sale of the Shares and Warrants.




j.  Taxes .
      Each
      Purchaser is aware that the Company and its representatives assume no
      responsibility for the tax consequences to the Purchasers of any investment
      in
      the Company.




k.  No
      Representation or Promise .
      No one
      has ever represented or promised expressly or by implication, any of the
      following: (i) the approximate or exact length of time that Purchasers will
      be required to remain as owner of the Shares or Warrant Shares, (ii) the
      amount or type of profit, or loss (including tax write-offs and/or tax benefits)
      to be realized, if any, as a result of the Purchaser’s investment, or
      (iii) that the past performance or experience of the officers or directors
      of the Company or any affiliate, their associates, agents, or employees or
      of
      any other person gives any assurance that the Company will be a
      success.




9




l.  Offering
      Literature; No Advertisement .
      No
      Purchaser has not been furnished any offering literature other than, and has
      relied only on the information contained in, (i) the Company’s public SEC
      Documents, and (ii) this Agreement, including the exhibits and schedules
      thereto. No Purchaser is purchasing the Shares or the Warrants as a result
      of,
      or subsequent to, any advertisement, article, notice or other communication
      published in any newspaper, magazine or similar media or broadcast over
      television or radio or presented at any seminar or meeting in which
      representatives of the Company were in attendance.




m.  Governmental
      Review .
      Each
      Purchaser understands that no United States federal or state agency or any
      other
      government or governmental agency has passed upon or made any recommendation
      or
      endorsement of the Common Stock or the Warrants.




n.  Lender
      Purchaser .
      Each
      Lender Purchaser unconditionally and irrevocably agrees to accept the number
      of
      Shares specified under the caption “Shares
      Purchased” adjacent
      to the name of such Lender Purchaser on Schedule B in full payment and
      satisfaction of the note(s) issued to such Lender Purchaser, including
      principal, accrued interest, fees, and all other rights of such Lender Purchaser
      and all other obligations of the Company under the note(s). At the Closing,
      each
      Lender Purchaser shall deliver to the Company the original note(s) for
      cancellation by the Company; provided that the failure of a Lender Purchaser
      to
      do so shall not affect the cancellation of such note(s) pursuant to this Section
      2.2(n). Effective at the Closing, upon delivery of the Shares and Warrants
      to a
      Lender Purchaser pursuant to this Agreement, all liens and encumbrances securing
      the note(s) owned by such Lender Purchaser shall be terminated and discharged,
      the Company shall be authorized to file such termination statements and other
      filings as may be necessary, convenient, or appropriate to evidence the
      satisfaction and discharge of all obligations of the Company under the note(s)
      owned by such Lender Purchaser, and the Company shall thereupon be released
      and
      discharged from any and all liability to the Lender Purchasers that may have
      arisen by virtue of any defaults under the note(s). ******




**ARTICLE
      III.**


**REGISTRATION
      OF THE SHARES AND WARRANT SHARES;**


**COMPLIANCE
      WITH THE SECURITIES ACT**




3.1  Registration
      Procedures and Other Matters .
      The
      Company shall:




a.  subject
      to receipt of necessary information from the Purchasers after prompt request
      from the Company to the Purchasers to provide such information, (i) prepare
      and
      file with the SEC, within 45 days after the filing of the Company’s Form 10-KSB
      for the year ended December 31, 2007, a registration statement on Form SB-2
      (the
“ Registration
      Statement ”
and
      the
      date of filing of the Registration Statement, the “ Filing
      Date ”)
      to
      enable the public, unrestricted resale of the Shares and the Warrant Shares
      (and
      shall include in the Registration Statement or promptly file an amendment to
      the
      Registration Statement to register any Additional Shares or Warrant Shares
      issued pursuant to Section 1.3, shares of Common Stock issued pursuant to this
      Section 3.1(a), and shares of Common Stock (or other securities convertible
      into
      Common Stock) issued pursuant to Section 4.6 (collectively, the “ Subsequent
      Shares ”))
      by
      the Purchasers from time to time, and shall use its best efforts to ensure
      that
      the Registration Statement is declared effective by the earlier of July 29,
      2008
      or 120 days after the Filing Date if the Securities and Exchange Commission
      (the
“ SEC ”)
      does
      not undertake a review of the Registration Statement (a “ Review ”)
      or by
      the earlier of August 28, 2008 or 150 days after the Filing Date if the SEC
      does
      undertake a Review (the applicable date by which effectiveness is to be achieved
      being herein referred to as the “ Effectiveness
      Due Date ”),
      and
      (ii) if the Registration Statement is not declared effective by the
      Effectiveness Due Date, then the number of Shares sold to the Purchasers
      pursuant to this Agreement shall be increased by one percent (1%) for the 30-day
      period beginning on the day after the Registration Statement was to be declared
      effective and two percent (2%) for each 30-day period thereafter until the
      Registration Statement is declared effective; provided, however, that the
      maximum number of shares to be issued under this Section 3.1(a) shall be 10%
      of
      the number originally purchased pursuant to this Agreement. All Shares to effect
      Section 3.1(a)(ii) will be delivered to the Purchasers within ten days of each
      delinquency.




10




b.  use
      its
      reasonable efforts to prepare and file with the SEC such amendments and
      supplements to the Registration Statement and the prospectus used in connection
      therewith (the “ Prospectus ”)
      as may
      be necessary to keep the Registration Statement current, effective and free
      from
      any material misstatement or omission to state a material fact for a period
      not
      exceeding, with respect to each Purchaser’s Shares, Warrant Shares and
      Subsequent Shares, the earlier of (i) the date on which the Purchasers may
      sell all Shares, Warrant Shares and Subsequent Shares then held by the
      Purchasers under Rule 144(k) under the Securities Act, or (ii) such
      time as all Shares, Warrant Shares and Subsequent Shares have been sold by
      the
      Purchasers;




c.  furnish
      to the Purchasers with respect to the Shares, Warrant Shares and Subsequent
      Shares registered under the Registration Statement such number of copies of
      the
      Registration Statement, Prospectuses and preliminary Prospectuses, if
      applicable, in conformity with the requirements of the Securities Act and such
      other documents as the Purchasers may reasonably request in light of then
      existing securities laws, rules and regulations, in order to facilitate the
      public sale or other disposition of all or any of the Shares, Warrant Shares
      or
      Subsequent Shares by the Purchasers; provided, however, that the obligation
      of
      the Company to deliver copies of Prospectuses or preliminary Prospectuses,
      if
      applicable, to the Purchasers shall be subject to the receipt by the Company
      of
      reasonable assurances from the Purchasers that the Purchasers will comply with
      the applicable provisions of the Securities Act and of such other securities
      or
      blue sky laws as may be applicable in connection with any use of such
      Prospectuses or preliminary Prospectuses;




d.  file
      documents required of the Company for normal blue sky clearance in states
      specified in writing by the Purchasers and use its best efforts to maintain
      such
      blue sky qualifications during the period the Company is required to maintain
      the effectiveness of the Registration Statement pursuant to Section 3.1(b);
      provided, however, that the Company shall not be required to qualify to do
      business or consent to service of process in any jurisdiction in which it is
      not
      now so qualified or has not so consented;




e.  bear
      all
      expenses in connection with the procedures in paragraph (a) through (d) of
      this
      Section 3.1 and the registration of the Shares, Warrant Shares and
      Subsequent Shares pursuant to the Registration Statement; and




f.  advise
      the Purchasers promptly after it shall receive notice or obtain knowledge of
      the
      issuance of any stop order by the SEC delaying or suspending the effectiveness
      of the Registration Statement or of the initiation or threat of any proceeding
      for that purpose; and it will promptly use its reasonable best efforts to
      prevent the issuance of any stop order or to obtain its withdrawal at the
      earliest possible moment if such stop order should be issued.




The
      Company understands that each Purchaser disclaims being an underwriter, but
      that
      any Purchaser being deemed an underwriter by the SEC shall not relieve the
      Company of any obligations it has hereunder; provided , however that if
      the Company receives notification from the SEC that any Purchaser is deemed
      an
      underwriter, then the period by which the Company is obligated to submit an
      acceleration request to the SEC shall be extended to the earlier of (i) the
      90th day after such SEC notification, or (ii) 120 days after the initial
      filing of the Registration Statement with the SEC.




3.2  Transfer
      of Shares, Warrant Shares and Subsequent Shares After Registration;
      Suspension .




a.  Each
      Purchaser agrees that it will not effect any disposition of the Shares, the
      Warrants, the Warrant Shares or the Subsequent Shares that would constitute
      a
      sale within the meaning of the Securities Act except as contemplated in the
      Registration Statement referred to in Section 3.1 (with respect to the
      Shares, Warrant Shares and Subsequent Shares) and as described below or as
      otherwise permitted by law, and that it will promptly notify the Company of
      any
      material changes in the information set forth in the Registration Statement
      regarding itself or its plan of distribution.




11




b.  Except
      in
      the event that paragraph (c) below applies, the Company shall (i)  prepare
      and file from time to time with the SEC a post-effective amendment to the
      Registration Statement or a supplement to the related Prospectus or a supplement
      or amendment to any document incorporated therein by reference or file any
      other
      required document so that such Registration Statement will not contain an untrue
      statement of a material fact or omit to state a material fact required to be
      stated therein or necessary to make the statements therein not misleading,
      and
      so that, as thereafter delivered to purchasers of the Shares, Warrant Shares
      or
      Subsequent Shares being sold thereunder, such Prospectus will not contain an
      untrue statement of a material fact or omit to state a material fact required
      to
      be stated therein or necessary to make the statements therein, in light of
      the
      circumstances under which they were made, not misleading; and (ii) inform
      each Purchaser if the Company files a post-effective amendment to the
      Registration Statement which has not yet been declared effective, and will
      use
      its reasonable efforts to secure the effectiveness of such post-effective
      amendment as promptly as reasonably possible and will promptly notify the
      Purchasers pursuant to Section 7.2 hereof when the amendment has
      become effective.




c.  Subject
      to paragraph (d) below, in the
      event (i) of any request by the SEC or any other federal or state governmental
      authority during the period of effectiveness of the Registration Statement
      for
      amendments or supplements to the Registration Statement or related Prospectus
      or
      for additional information; (ii) of the issuance by the SEC or any other
      federal or state governmental authority of any stop order suspending the
      effectiveness of the Registration Statement or the initiation of any proceedings
      for that purpose; (iii) of the receipt by the Company of any notification
      with respect to the suspension of the qualification or exemption from
      qualification of any of the Shares, Warrant Shares or Subsequent Shares for
      sale
      in any jurisdiction or the initiation or threatening of any proceeding for
      such
      purpose; or (iv) of any event or circumstance which necessitates the making
      of
      any changes, or in the good faith judgment of the Board of Directors of the
      Company, it would be seriously detrimental to the Company or any plan or
      proposal of the Company with respect to its corporate development, financing
      or
      other activities to make such changes, in the Registration Statement or
      Prospectus, or any document incorporated or deemed to be incorporated therein
      by
      reference, so that, in the case of the Registration Statement, it will not
      contain any untrue statement of a material fact or any omission to state a
      material fact required to be stated therein or necessary to make the statements
      therein not misleading, and that in the case of the Prospectus, it will not
      contain any untrue statement of a material fact or any omission to state a
      material fact required to be stated therein or necessary to make the statements
      therein, in light of the circumstances under which they were made, not
      misleading; then the Company shall deliver a certificate in writing to each
      Purchaser (the “ Suspension
      Notice ”)
      to the
      effect of the foregoing and, upon receipt of such Suspension Notice, the
      Purchasers will refrain from selling any Shares, Warrant Shares or Subsequent
      Shares pursuant to the Registration Statement (a “ Suspension ”)
      until
      the Purchaser is advised in writing by the Company that the then current
      Prospectus may be used; provided, however, that there may be no more than one
      Suspension in any 12-month period. In the event of any Suspension, the Company
      will use its reasonable efforts to cause the use of the Prospectus so suspended
      to be resumed and the Registration Statement to be effective as soon as
      reasonably practicable, and in any event within 90 days after the delivery
      of a
      Suspension Notice to the Purchasers.




d.  Provided
      that a Suspension is not then in effect, the Purchasers may sell the Shares,
      the
      Warrant Shares and the Subsequent Shares under the Registration Statement once
      effective, provided that it arranges for any required delivery of a current
      Prospectus to the transferee of such shares.




12




e.  In
      the
      event of a sale of the Shares, the Warrant Shares or the Subsequent Shares
      by
      the Purchasers pursuant to the Registration Statement, the Purchasers must
      also
      deliver to the Company’s transfer agent, with a copy to the Company, a
      Certificate of Subsequent Sale substantially in the form attached hereto as
      Exhibit D, so that the Shares, the Warrant Shares and the Subsequent Shares
      may be properly transferred.




3.3  Termination
      of Conditions and Obligations .
      The
      conditions precedent imposed by Section 2.2 or this Article III upon the
      transferability of the Shares, the Warrant Shares and the Subsequent Shares
      shall cease and terminate as to any particular number of Shares, Warrant Shares
      and Subsequent Shares when such shares shall have been effectively registered
      under the Securities Act and sold or otherwise disposed of in accordance with
      the intended method of disposition set forth in the Registration Statement
      covering such shares or at such time as an opinion of counsel reasonably
      satisfactory to the Company shall have been rendered to the effect that such
      conditions are not necessary in order to comply with the Securities
      Act.




**ARTICLE
      IV.**


**OTHER
      AGREEMENTS**




4.1  Reservation
      of Warrant Shares .
      If at
      any time the number of authorized but unissued shares of Common Stock is
      insufficient to cover the number of Warrant Shares issuable upon exercise of
      the
      Warrants without regard to any limitation on exercises and a Purchaser indicates
      that it desires to exercise a Warrant, the Company will pursue best efforts
      to
      acquire the authority for issuance sufficient for the exercise of such Warrant.
      If any Investors have indicated an intention to exercise Warrants but the
      Company has not acquired the authority for sufficient shares to honor the
      election, such Investors’ Warrants shall not expire until the exercise of those
      Warrants has been honored.




4.2  Furnishing
      of Information .
      Until
      the earlier of the second anniversary of the Closing Date or the date upon
      which
      no Purchaser owns any Shares, Warrants or Warrant Shares, **** the
      Company covenants to timely file (or obtain extensions in respect thereof and
      file within the applicable grace period) all reports required to be filed by
      the
      Company after the date of this Agreement pursuant to the Exchange Act.




4.3  Integration .
      The
      Company shall not and shall use its best efforts to ensure that no affiliate
      of
      the Company shall sell, offer for sale or solicit offers to buy or otherwise
      negotiate in respect of any security (as defined in Section 2 of the Securities
      Act) that would be integrated with the offer or sale of the shares of Common
      Stock hereunder in a manner that would require the registration under the
      Securities Act of the sale of the shares Common Stock to the
      Purchasers.




4.4  Best
      Efforts .
      Both of
      the parties hereto shall use its best efforts to satisfy each of the conditions
      to be satisfied by it as provided in Article IV of this Agreement.




4.5  Confidential
      Information .




a.  Each
      Purchaser represents to the Company that, at all times during the Company’s
      offering of the Securities, the Purchaser has maintained in confidence and
      has
      not used except in connection with its purchase of the Securities pursuant
      hereto, all non-public information regarding the Company received by the
      Purchaser from the Company or its agents, and covenants that it will continue
      to
      maintain in confidence such information until such information (i) becomes
      generally publicly available other than through a violation of this provision
      by
      the Purchaser or its agents or (ii) is required to be disclosed in legal
      proceedings (such as by deposition, interrogatory, request for documents,
      subpoena, civil investigation demand, filing with any governmental authority
      or
      similar process), provided, however, that before making any use or disclosure
      in
      reliance on this subparagraph (ii) the Purchasers shall give the Company at
      least fifteen (15) days prior written notice (or such shorter period as required
      by law) specifying the circumstances giving rise thereto and will furnish only
      that portion of the non-public information which is legally required and will
      exercise its best efforts to obtain reliable assurance that confidential
      treatment will be accorded any non-public information so furnished.




13




b.  The
      Company shall on or as soon as practicable following the date of this Agreement
      issue a press release disclosing the material terms of the transactions
      contemplated hereby (including at least the amount of Securities sold and
      proceeds therefrom).




4.6 Issuances
      of Additional Shares of Common Stock .




a.  If,
      at
      any time prior to the Anti-Dilution End Date, the Company shall issue or
      sell any shares of Common Stock (or other New Securities) at an effective
      price per share of Common Stock of less than $0.08 (after giving effect to
      the conversion, exchange or exercise of all convertible, exchangeable and
      exercisable New Securities), as adjusted pursuant to the terms of this Agreement
      (a “ Discounted
      Price ”),
      then
      each Purchaser shall, within 30 days of each sale or issuance of Common Stock
      (or other New Securities) at a Discounted Price (each, a “ Discounted
      Price Transaction ”)
      be
      issued by the Company (the “ Anti-Dilution
      Issuance ”),
      for
      no additional consideration, a number of additional shares of Common Stock
      so
      that the sum of the number of shares of Common Stock issued to them in the
      Offering and in the Anti-Dilution Issuance shall, collectively, be equal to
      the
      number of shares of Common Stock which is:




(i)  $0.08, divided
      by




(ii)  the
      effective per share sale price for the Common Stock in the Discounted Price
      Transaction, with such quotient then being multiplied
      by




(iii)  the
      number of shares issued to such Purchaser in the Offering.




b.  The
      provisions of paragraph (a) of this Section 4.6 shall not apply to any issuance
      of shares of Common Stock for which an adjustment is provided under Section
      4 of
      the Warrant.




c.  No
      additional shares of Common Stock will be issued under paragraph (a) above
      due
      to, or as a result of, any Permitted Issuances. “ Permitted
      Issuances ”
shall
      mean (i) Common Stock issued pursuant to a stock split or subdivision, (ii)
      Common Stock issued or issuable upon conversion of the Warrants or any other
      securities exercisable or exchangeable for, or convertible into shares of Common
      Stock, outstanding as of the date hereof.




d.  All
      references to $0.08 or $0.01 in this Section 4.6 shall be subject to equitable
      and proportional adjustment in the event of any stock dividend, stock split,
      reverse stock dividend or reverse stock split, or any capital reorganization
      or
      recapitalization or similar event affecting the Common Stock, which becomes
      effective after the date of this Agreement.




e.  If,
        any
        time prior to the three year anniversary of the Closing Date, the Company
        re-prices any warrants or options (whether or not such warrants or options
        are
        outstanding as of the date hereof) or extends the exercise period of any
        such
        warrant or option, then each such warrant and option shall be deemed, for
        purposes of this Section 4.6 to be an issue or sale of a number of shares
        of
        Common Stock equal to the number of shares that may be acquired upon exercise
        of
        such warrant or option at an effective price per share of Common Stock equal
        to
        $0.01.
  f.  The
          "Anti-Dilution End Date" shall mean (i) for purposes of this Section 4.6
          other
          than Section 4.6(e), the date that is eighteen months after the Closing
          Date,
          and (ii) for purposes of Section 4.6(e), the date that is three years after
          the
          Closing Date.




4.7 Competing
      Registration Statement .
      Until
      the Registration Statement required to be filed pursuant to Section 3.1 is
      declared effective by the SEC, the Company shall not file any other registration
      statement attempting to register any other shares of Common Stock under the
      Securities Act for sale to the public for its own account or for the account
      of
      other shareholders (except with respect to registration statements on Form
      S-4
      or S-8 or another form not available for registering the shares of Common Stock
      issued in the Offering for sale to the public or registration statements used
      otherwise in connection with bona fide acquisitions, mergers, technology
      licenses or purchases, corporate partnering agreements, joint ventures or
      similar transactions, the terms of which are approved by the Board of Directors
      of the Company; provided, however, that if any Form S-8 attempts to register
      shares of Common Stock in excess of 1% of the number of the then outstanding
      shares of Common Stock, the Company must obtain the prior written approval
      of
      the Purchasers).




14




4.8 Right
      of Participation .
      Within
      thirty (30) days after the issuance of New Securities (a “ Financing ”),
      the
      Company shall give notice to Prime Mover Capital Partners, LP  (the
      “ Lead
      Purchaser ”),
      which
      notice shall describe the type, price, and terms of the New Securities (as
      defined below). The Lead Purchaser shall have twenty (20) days from the date
      of
      receipt of such notice to elect to purchase up to 10% of the number of New
      Securities that were sold in the Financing. The closing of such sale shall
      occur
      within sixty (60) days of the date of notice to the Lead Purchaser consisting
      of
      the same type, price, and terms of the New Securities that were issued in the
      Financing. The Lead Purchaser’s rights under this Section 4.8 shall expire on
      the fifth anniversary of the Closing Date. The Lead Purchaser shall be entitled
      to apportion the right granted to it by this Section 4.8 among itself and its
      partners, members, and affiliates in such proportions as it deems appropriate.
      For purposes of this Agreement, a Financing shall exclude the issuance of:
      (i) compensatory grants of shares of Common Stock or options or warrants to
      acquire shares of Common Stock issued or deemed issued to employees or directors
      of, or consultants to, the Company or any of its subsidiaries pursuant to a
      compensation plan, agreement, or arrangement approved by the Board of Directors
      of the Company; provided that such grants are not made in connection with a
      capital raising transaction or as compensation for services in connection with
      the promotion or maintaining of a market for the Company's
      securities; (ii) securities pursuant to the conversion or exercise of
      convertible or exercisable securities outstanding on the date hereof; (iii)
      securities issued in connection with any stock split or stock dividend of the
      Company; (iv) securities in connection with a bona fide business
      acquisition of or by the Company, whether by merger, consolidation, sale of
      assets, sale or exchange of stock, or otherwise; (v) stock, warrants, or
      other securities or rights to persons with which the Company has business
      relationships provided such issuances are for other than capital raising
      purposes and provided that at the time of any such issuance, the aggregate of
      such issuance and similar issuances in the preceding twelve month period do
      not
      exceed 2% of the then outstanding shares of Common Stock. For purposes of this
      Agreement, “ New
      Securities ”
shall
      mean equity securities of the Company, whether now authorized or not, or rights,
      options, or warrants to purchase said equity securities, or securities of any
      type whatsoever that are, or may become, convertible into or exchangeable into
      or exercisable for said equity securities.




4.9 Matters
      Related to the Board of Directors .
      Upon
      the Closing, the Company shall take all acts necessary to effect an increase
      in
      the size of the Board of Directors to facilitate the election of two individuals
      reasonably acceptable to the Company and the Lead Investor, and shall support
      the appointment of each to serve until the next meeting of the shareholders.
      Promptly after the Closing, the Board of Directors shall evaluate a reverse
      stock split of at least 15 to 1 and up to 100 to 1.




4.10 Limitation
      on Issuance of Options and Warrants .
      Except
      with the consent of the Lead Purchaser, until the third anniversary of the
      Closing Date, the Company will not issue (a) warrants to any director, employee
      or consultant other than Hong Zhang or the members of the Company's Scientific
      Advisory Board; (b) in any single calendar year options to directors, employees
      and consultants of the Company and warrants to Hong Zhang or the members of
      the
      Company's Scientific Advisory Board (issued in accordance with Section 4.10(a))
      in an aggregate amount greater than 2.5% of the primary shares outstanding;
      and
      (c) any warrants to acquire shares of Common Stock other than in a future
      financing. For purposes of this Section 4.10, the Braswell Securities shall
      be
      deemed to have been issued prior to the Closing Date.




411. Debt
      Payments .
      All
      amounts of debt owed by the Company to Timothy P. O'Hayer at the Closing Date
      (whether or not then payable) shall be paid in full within three months
      following the Closing Date. The Company will use its best efforts to, within
      three months following the Closing Date, either (i) pay in full all amounts
      of
      debt owed by the Company to each of the DIP Financers at the Closing Date
      (whether or not then payable), or (ii) have each of the DIP Financers convert
      such debt into an equity interest in the Company. The "DIP Financers" shall
      mean
      Dr. Glynn A. Bergaron, John E. Matthews, K. Russell Simpson, Julian Stern,
      Curtis Anderson, James Tobey Roberts, Dr. Jules Paderewski, Memorial Health
      Trust and Dr. Joseph McKenzie.




4.12 Right
      of First Refusal for Warrants .
      Subject
      to Section 7.5, if a Purchaser (the “ Transferring
      Purchaser ”)
      proposes to transfer any Warrant(s) (the " Transfer
      Warrants "),
      then
      the Transferring Purchaser shall promptly give written notice (the " Transfer
      Notice ")
      of
      such proposed transfer to the Lead Purchaser pursuant to Section 7.2 hereof.
      The
      Transfer Notice shall set forth the terms and conditions of the proposed
      transfer, including, without limitation, the number of Warrant Shares issuable
      upon exercise of each Transfer Warrant, the cash consideration to be paid per
      warrant (or, in the event that the consideration is other than cash, the value
      of the consideration as determined in good faith by the Transferring




15


Purchaser)
      (the " Purchase
      Price Per Warrant "),
      and
      the name and address of each prospective purchaser or transferee (each, a
      " Proposed
      Transferee ").
      The
      Transferring Purchaser shall enclose with the Transfer Notice a copy of any
      written offer, letter of intent or other written document signed by the Proposed
      Transferee(s) setting forth the proposed terms and conditions of the transfer.
      For a period of three (3) days
      following the date (the " Transfer
      Notice Date ")
      on
      which the Transfer Notice is given to the Lead Purchaser (the " Lead
      Purchaser Acceptance Period "),
      the
      Lead Purchaser shall have the right to purchase such Warrant(s) on the same
      terms and conditions as set forth in the Transfer Notice. If the Lead Purchaser
      desires to exercise its right to purchase all or any portion of such Transfer
      Warrants, it shall give written notice (the " Lead
      Investor Notice ")
      to the
      Transferring Purchaser, with a copy to the Company, no later than the expiration
      of the Lead Investor Acceptance Period. The Lead Investor Notice shall state
      that the Lead Investor desires to purchase all of the Transfer Warrants or,
      if
      the Lead Investor desires to purchase less than all of the Transfer Warrants,
      the number of Transfer Warrants the Lead Investor desires to purchase. If
      the
      Transferring Purchaser fails or refuses to deliver on a timely basis a
      certificate or certificates representing such Transfer Warrants properly
      endorsed for transfer, the Company shall effect the transfer of the Transfer
      Warrants to the Lead Purchaser in accordance with this Section 4.12 and
      thereafter the Transferring Purchaser shall look only to the Lead Purchaser
      for
      payment.




**ARTICLE
      V.**


**CONDITIONS**




5.1  Closing .




a.  Conditions
      Precedent to the Obligation of the Company to Sell the Shares and the
      Warrants .
      The
      obligation of the Company to sell the Shares and the Warrants is subject to
      the
      satisfaction or waiver by the Company, at or before the Closing Date, of each
      of
      the following conditions:




(i)  the
      representations and warranties of the Purchasers in this Agreement shall be
      true
      and correct in all material respects as of the date when made and as of the
      Closing Date;




(ii)  the
      Purchasers shall have performed, satisfied and complied in all material respects
      with all covenants, agreements and conditions required by this Agreement to
      be
      performed, satisfied or complied with by the Purchasers at or before the Closing
      Date; and




(iii)  no
      statute, rule, regulation, executive order, decree, ruling or injunction shall
      have been enacted, entered, promulgated or endorsed by any court or governmental
      authority of competent jurisdiction which prohibits the consummation of any
      of
      the transactions contemplated by this Agreement.




b.  Conditions
      Precedent to the Obligation of the Purchasers to Purchase the Shares and
      Warrants at the Closing .
      The
      obligation of the Purchasers hereunder to acquire and pay for the Shares and
      the
      Warrant at the Closing shall be several and not joint and is subject to the
      satisfaction or waiver by the Purchasers, at or before the Closing Date, of
      each
      of the following conditions:




(i)  the
      representations and warranties of the Company set forth in this Agreement shall
      be true and correct in all material respects as of the date when made and as
      of
      the Closing Date;




(ii)  the
      Company shall have performed, satisfied and complied in all material respects
      with all covenants, agreements and conditions required by this Agreement to
      be
      performed, satisfied or complied with by the Company at or before the Closing
      Date;




16




(iii)  no
      statute, rule, regulation, executive order, decree, ruling or injunction shall
      have been enacted, entered, promulgated or endorsed by any court or governmental
      authority of competent jurisdiction which prohibits the consummation of any
      of
      the transactions contemplated by this Agreement;




(iv) all
      Required Approvals shall have been obtained;




(v)  the
      Minimum Amount shall have been subscribed for;




(vi) execution
      and delivery by each of the managers and employees of the Company of the
      Management Lockup Agreement in the form attached hereto as Exhibit
      C;




(vii) the
      sales
      to the Purchasers hereunder shall not result in gross cash proceeds to the
      Company of greater than the Maximum Amount;


(viii) delivery
        of all items deliverable under Section 1.2(c);


(ix) no
      Material Adverse Effect shall have occurred or been threatened (and no
      condition, event or development shall have occurred or been threatened involving
      a prospective Material Adverse Effect) in respect of the Company or any of
      its
      subsidiaries between the date of this Agreement and the Closing Date;
      and





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





**ARTICLE
      VI.**


**INDEMNIFICATION**




6.1  Indemnification .




a.  By
      the
      Company .
      The
      Company will indemnify and hold each Purchaser harmless from any and all losses,
      liabilities, obligations, claims, contingencies, damages, costs and expenses,
      including all judgments, amounts paid in settlements, court costs and reasonable
      attorneys’ fees and costs of investigation that such Purchaser may suffer or
      incur as a result of or relating to any misrepresentation, breach or inaccuracy,
      or any allegation by a third party that, if true, would constitute a breach
      or
      inaccuracy, of any of the representations, warranties, covenants or agreements
      made by the Company in this Agreement; provided, however, that any and all
      payments, in the aggregate, made or due by the Company as a result of the
      obligations of this Section 6.1 shall be limited to, and in no case shall
      exceed, the Purchase Price paid by such Purchaser, as stated in Section 1.1
      herein.




b.  By
      the
      Purchasers .
      Each
      Purchaser will indemnify and hold the Company harmless from any and all losses,
      liabilities, obligations, claims, contingencies, damages, costs and expenses,
      including all judgments, amounts paid in settlements, court costs and reasonable
      attorneys’ fees and costs of investigation that the Company may suffer or incur
      as a result of or relating to any misrepresentation, breach or inaccuracy,
      or
      any allegation by a third party that, if true, would constitute a breach or
      inaccuracy, of any




17




of
      the
      representations, warranties, covenants or agreements made by such Purchaser in
      this Agreement; provided, however, that any and all payments, in the aggregate,
      made or due by such Purchaser as a result of the obligations of this Section
      6.1
      shall be limited to, and in no case shall exceed, the amount of the Purchase
      Price (but no credit shall be granted for such payment for any obligation of
      the
      Purchasers pursuant to this Section 6.1) paid by such Purchaser, as stated
      in
      Section 1.1 herein.




c.  Registration-Related
      Indemnification .




(i)  For
      purposes of this Section 6.1(c):




(a)  “ Equity
      Securities ”
shall
      mean (i) the Shares and the Warrant Shares, and (ii) any equity securities
      issued as a distribution with respect to or in exchange for or in replacement
      for any of the shares referred to in clause (i).




(b)  “ Registrable
      Securities ”
shall
      mean any Equity Securities until the earlier of the date on which (i) a
      registration statement covering such Equity Securities has been declared
      effective by the Commission and such Equity Securities have been disposed of
      pursuant to such effective registration statement, (ii) such Equity Securities
      are sold under circumstances in which all the applicable conditions of Rule
      144
      (or any similar provisions then in force) under the Securities Act are met,
      or
      such Equity Securities may be sold in a single transaction under Rule 144(k)
      (or
      any similar provision then in force) under the Securities Act, and are freely
      tradable after such sale by the transferee, (iii) the Company has delivered
      a
      new certificate or other evidence of ownership for such Equity Securities not
      bearing a legend restricting further transfer and such Equity Securities may
      be
      resold without registration under the Equity Securities Act or (iv) such
      Securities shall have been sold or otherwise disposed of by the Purchasers
      (other than as permitted under Section 7.5 or to the Lead Purchaser pursuant
      to
      Section 4.12).






(c)  A
      person
      shall be deemed to be a holder of such Registrable Securities (each a
“ Holder ”)
      whenever such Person is the registered holder of such Registrable Securities
      on
      the Company’s books and records.




(ii)  The
      Company agrees, to the maximum extent permitted by law, to indemnify and hold
      harmless (i) each Holder covered by any Registration Statement, (ii) each other
      Person who participates as an underwriter in the offering or sale of such
      securities, (iii) each person, if any, who controls (within the meaning of
      Section 15 of the Securities Act or Section 20 of the Exchange Act) any such
      Holder or underwriter (any of the persons referred to in this clause (iii)
      being
      hereinafter referred to as a “controlling person”) and (iv) the respective
      officers, directors, partners, employees, representatives and agents of any
      such
      Holder or underwriter or any controlling person (any person referred to in
      clause (i), (ii), (iii) or (iv) may hereinafter be referred to as an
“ Indemnified
      Person ”),
      from
      and against any and all losses, claims, damages, liabilities, judgments or
      expenses, joint or several (or actions or proceedings, whether commenced or
      threatened, in respect thereof), including, without limitation, interest,
      penalties, and attorneys’ fees and disbursements, asserted against, resulting
      to, imposed upon or incurred by such Indemnified Person (collectively,
“ Claims ”),
      to
      which such Indemnified Person may become subject, directly or indirectly, under
      either Section 15 of the Securities Act or Section 20 of the Exchange Act or
      otherwise, insofar as such Claims arise out of or are based upon, or are caused
      by any untrue statement or alleged untrue statement of a material fact contained
      in any Registration Statement or Prospectus (or any amendment or supplement
      thereto), or any 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 a 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




18




such
      registration or qualification, except insofar as such losses, claims, damages,
      liabilities, judgments or expenses of any such Indemnified Person; (x) are
      caused by any such untrue statement or omission or alleged untrue statement
      or
      omission that is based upon information relating to such Indemnified Person
      furnished in writing to the Company by or on behalf of any of such Indemnified
      Person expressly for use therein; or (y) with respect to the preliminary
      Prospectus, result from the fact that such Holder sold Equity Securities to
      a
      person to whom there was not sent or given, at or prior to the written
      confirmation of such sale, a copy of the Prospectus, as amended or supplemented,
      if the Company shall have previously furnished copies thereof to such Holder
      in
      accordance with this Agreement and said Prospectus, as amended or supplemented,
      would have corrected such untrue statement or omission. Such indemnity shall
      remain in full force and effect regardless of any investigation made by or
      on
      behalf of any Indemnified Person and shall survive the transfer of such
      securities by such Holder.




(iii)  In
      case
      any action shall be brought or asserted against any of the Indemnified Persons
      with respect to which indemnity may be sought against the Company, such
      Indemnified Person shall promptly notify the Company and the Company shall
      assume the defense thereof with counsel reasonably satisfactory to the
      Indemnified Persons. Such Indemnified Person shall have the right to employ
      separate counsel in any such action and to participate in the defense thereof,
      but the fees and expenses of such counsel shall be at the expense of the
      Indemnified Person unless (i) the employment of such counsel shall have been
      specifically authorized in writing by the Company, (ii) the Company shall have
      failed to assume the defense and employ counsel or (iii) the named parties
      to
      any such action (including any implied parties) include both the Indemnified
      Person and the Company and the Indemnified Person shall have been advised in
      writing by its counsel that there may be one or more legal defenses available
      to
      it which are materially different from or additional to those available to
      the
      Company, it being understood, however, that the Company shall not, in connection
      with such action or similar or related actions or proceedings arising out of
      the
      same general allegations or circumstances, be liable for the reasonable fees
      and
      expenses of more than one separate firm of attorneys (in addition to any local
      counsel) at any time for all the Indemnified Persons, which firm shall be (x)
      designated by such Indemnified Persons and (y) reasonably satisfactory to the
      Company. The Company shall not be liable for any settlement of any such action
      or proceeding effected without the Company’s prior written consent, which
      consent shall not be withheld unreasonably, and the Company agrees to indemnify
      and hold harmless any Indemnified Person from and against any loss, claim,
      damage, liability, judgment or expense by reason of any settlement of any action
      effected with the written consent of the Company. The Company shall not, without
      the prior written consent of each Indemnified Person, which shall not be
      unreasonably withheld, settle or compromise or consent to the entry of judgment
      on or otherwise seek to terminate any pending or threatened action, claim,
      litigation or proceeding in respect of which indemnification or contribution
      may
      be sought hereunder (whether or not any Indemnified Person is a party thereto),
      unless such settlement, compromise, consent or termination includes an
      unconditional release of each Indemnified Person from all liability arising
      out
      of such action, claim litigation or proceeding.




(iv)  Each
      Holder of Registrable Securities covered by any Registration Statement agrees,
      severally and not jointly, to indemnify and hold harmless the Company and its
      directors, officers and any person controlling (within the meaning of Section
      15
      of the Securities Act or Section 20 of the Exchange Act) the Company, and the
      respective officers, directors, partners, employees, representatives and agents
      of each person, to the same extent as the foregoing indemnity from the Company
      to each of the Indemnified Persons, but only (i) (x)
      with respect to actions based on information relating to such Holder furnished
      in writing by or on behalf of such Holder expressly for use in any Registration
      Statement or Prospectus, or (y) with respect to the preliminary Prospectus,
      any
      matters which result from the fact that such Holder sold Equity Securities
      to a
      person to whom there was not sent or given, at or prior to the written
      confirmation of such sale, a copy of the Prospectus, as amended or supplemented,
      if the Company shall have previously furnished copies thereof to such Holder
      in
      accordance with this Agreement and said Prospectus, as amended or supplemented,
      would have corrected such untrue statement or




19




omission,
      and (ii) to the extent of the net cash proceeds, if any, received by such Holder
      from the sale or other disposition of his or its Registrable Securities covered
      by such Registration Statement. In case any action or proceeding shall be
      brought against the Company or its directors or officers or any such controlling
      person in respect of which indemnity may be sought against a Holder of
      Registrable Securities covered by any Registration Statement, such Holder shall
      have the rights and duties given the Company in Section 6.1(c)(ii), and the
      Company or its directors or officers or such controlling person shall have
      the
      rights and duties given to each Holder by Section 6.1(c)(ii). Such indemnity
      shall remain in full force and effect regardless of any investigation made
      by or
      on behalf of any the Company or any other Indemnified Person and shall survive
      the transfer of securities by any applicable Holder.




(v)  If
      the
      indemnification provided for in this Section 6.1(c) is unavailable to an
      indemnified party under Section 6.1(c)(ii), (iii) or (iv) (other than by reason
      of exceptions provided in those Sections) in respect of any losses, claims,
      damages, liabilities, judgments or expenses referred to therein, then each
      applicable indemnifying party (in the case of the Holders severally and not
      jointly), in lieu of indemnifying such indemnified party, shall contribute
      to
      the amount paid or payable by such indemnified party as a result of such losses,
      claims damages, liabilities, judgments or expenses (i) in such proportion as
      is
      appropriate to reflect the relative benefits received by the Company on the
      one
      hand and the Holder on the other hand from sale of Registrable Securities or
      (ii) if such allocation provided by clause (i) above is not permitted by
      applicable law, in such proportion as is appropriate to reflect not only the
      relative benefits referred to in clause (i) above but also the relative fault
      of
      the Company and such Holder in connection with the statements or omissions
      which
      resulted in such losses, claims, damages, liabilities, judgments or expenses,
      as
      well as any other relevant equitable considerations. The relative fault of
      the
      Company on the one hand and of such Holder on the other shall be determined
      by
      reference to, among other things, whether the untrue or alleged untrue statement
      of a material fact or the omission or alleged omission to state a material
      fact
      relates to information supplied by the Company or by such Holder and the parties
      relative intent, knowledge, access to information and opportunity to correct
      or
      prevent such statement or omission. The amount paid to a party as a result
      of
      the losses, claims, damages, liabilities judgments and expenses referred to
      above shall be deemed to include, subject to the limitations set forth in
      Section 6.1(c)(iii) and Section 6.1(c)(iv), any legal or other fees or expenses
      reasonably incurred by such party in connection with investigating or defending
      any action or claim.




(vi)  The
      Company and each Holder of Registrable Securities covered by any Registration
      Statement agree that it would not be just and equitable if contribution pursuant
      to this Section 6.1(c)(vi) were determined by pro rata allocation (even if
      the
      Holders were treated as one entity for such purpose) or by any other method
      of
      allocation which does not take into account the equitable considerations
      referred to in the immediately preceding paragraph. Notwithstanding the
      provisions of this Section 6.1(c)(vi), no Holder (and none of its related
      Indemnified Persons) shall be required to contribute, in the aggregate, any
      amount in excess of the amount by which the dollar amount of proceeds received
      by such Holder upon the sale of the Registrable Securities exceeds the amount
      of
      any damages which such Holder has otherwise been required to pay by reason
      of
      such untrue statement or omission or alleged omission. No person guilty of
      fraudulent misrepresentations (within the meaning of Section 11(f) of the
      Securities Act) shall be entitled to contribution from any person who was not
      guilty of such fraudulent misrepresentation.




(vii)  The
      indemnity and contribution provisions contained in this Section 6.1(c) are
      in
      addition to any liability which the indemnifying person may otherwise have
      to
      the Indemnified persons referred to above.




**ARTICLE
      VII.**


**MISCELLANEOUS**







7.1  Entire
      Agreement .
      This
      Agreement, together with the Schedules and Exhibits hereto, contain the entire
      understanding of the parties with respect to the subject matter hereof and
      supersedes all prior agreements and understandings, oral or written, with
      respect to such matters.




20




7.2  Notices .
      Whenever it is provided herein that any notice, demand, request, consent,
      approval, declaration or other communication shall or may be given to any of
      the
      parties by another, or whenever any of the parties desires to give another
      any
      such communication with respect to this Agreement, each such notice, demand,
      request, consent, approval, declaration or other communication shall be in
      writing, and shall be delivered in person with receipt acknowledged or by
      registered or certified mail, return receipt requested, postage prepaid, or
      by
      telecopy and confirmed by telecopy answerback addressed as follows:




If
                to the Company:
            With
                a Copy to:Health
                Discovery Corporation
              2
                East Bryan Street, Suite #601
              Savannah,
                GA 31401
              Attn:
                Daniel R. Furth
              Facsimile:
                (912) 443-1989
            Powell
                Goldstein LLP
              1201
                W. Peachtree Street, N.E.
              14thFloor
              Atlanta,
                Georgia 30309
              Attn:
                Todd Wade, Esq.
              Facsimile:
                (404) 572-6999If
                to the Purchasers:To
                the addresses listed on the
              signature page of this Agreement





or
      at
      such other address as may be substituted by notice given as herein provided.
      The
      giving of any notice required hereunder may be waived in writing by the party
      entitled to receive such notice. Every notice, demand, request, consent,
      approval, declaration or other communication hereunder shall be deemed to have
      been duly given and effective on the earliest of (a) the date of transmission,
      if such notice or communication is delivered via facsimile prior to 5:30 p.m.
      (New York City time) on a business day, (b) the next business day after the
      date
      of transmission, if such notice or communication is delivered via facsimile
      on a
      day that is not a business day or later than 5:30 p.m. (New York City time)
      on
      any business day, (c) the business day following the date of mailing, if sent
      by
      a U.S. nationally recognized overnight courier service, or (d) upon actual
      receipt by the party to whom such notice is required to be given. As used
      herein, a “ business
      day ”
means
      any day except Saturday, Sunday or a day which is a federal legal holiday or
      a
      day on which banking institutions in the State of New York are authorized or
      required by law or other governmental action to close.




7.3  Amendments;
      Waivers .
      No
      provision of this Agreement may be waived or amended except in a written
      instrument signed, in the case of an amendment, by both the Company and each
      of
      the Purchasers or, in the case of a waiver, by the party against whom
      enforcement of any such waiver is sought. No waiver of any default with respect
      to any provision, condition or requirement of this Agreement shall be deemed
      to
      be a continuing waiver in the future or a waiver of any other provision,
      condition or requirement hereof, nor shall any delay or omission of either
      party
      to exercise any right hereunder in any manner impair the exercise of any such
      right accruing to it thereafter.




7.4  Headings .
      The
      headings herein are for convenience only, do not constitute a part of this
      Agreement, and shall not be deemed to limit or affect any of the provisions
      hereof.




7.5  Successors
      and Assigns; Assignability; No Third-Party Beneficiaries .
      Neither
      this Agreement nor any right, remedy, obligation or liability arising hereunder,
      or by reason hereof, shall be assignable by the Purchasers without the prior
      written consent of the Company; provided, however, that each Purchaser may
      assign any of its rights under this Agreement to any of its affiliates. In
      the
      event that this Agreement is assigned, all covenants contained herein shall
      bind
      and inure to the benefit of the parties hereto and their respective successors
      and assigns. This Agreement is intended for the benefit of the parties hereto
      and their respective permitted successors and assigns and is not for the benefit
      of, nor may any provision hereof be enforced by, any other Person. ****




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7.6  Governing
      Law; Waiver of Jury Trial .
      All
      questions concerning the construction, validity, enforcement and interpretation
      of this Agreement shall be governed by and construed and enforced in accordance
      with the internal laws of the State of Georgia, without regard to the principles
      of conflicts of law thereof. Each party agrees that all proceedings concerning
      the interpretations, enforcement and defense of the transactions contemplated
      by
      this Agreement (whether brought against a party hereto or its respective
      affiliates, directors, officers, shareholders, employees or agents) (each a
      “ Proceeding ”)
      shall
      be commenced exclusively in the state and federal courts sitting in the Atlanta,
      Georgia. Each party hereto hereby irrevocably submits to the exclusive
      jurisdiction of the state and federal courts sitting in the Atlanta, Georgia
      for
      the adjudication of any dispute hereunder or in connection herewith or with
      any
      transaction contemplated hereby or discussed herein, and hereby irrevocably
      waives, and agrees not to assert in any Proceeding, any claim that it is not
      personally subject to the jurisdiction of any such court, that such Proceeding
      is improper. Each party hereto hereby irrevocably waives personal service of
      process and consents to process being served in any such Proceeding by mailing
      a
      copy thereof via registered or certified mail or overnight delivery (with
      evidence of delivery) to such party at the address in effect for notices to
      it
      under this Agreement and agrees that such service shall constitute good and
      sufficient service of process and notice thereof. Nothing contained herein
      shall
      be deemed to limit in any way any right to serve process in any manner permitted
      by law. Each party hereto hereby irrevocably waives, to the fullest extent
      permitted by applicable law, any and all right to trial by jury in any legal
      proceeding arising out of or relating to this Agreement or the transactions
      contemplated hereby. If either party shall commence a Proceeding to enforce
      any
      provisions of this Agreement, then the prevailing party in such Proceeding
      shall
      be reimbursed by the other party for its attorney’s fees and other costs and
      expenses incurred with the investigation, preparation and prosecution of such
      Proceeding.




7.7  Survival .
      The
      representations, warranties, agreements and covenants contained herein shall
      survive following the Closing.




7.8  Counterparts;
      Execution .
      This
      Agreement may be executed in any number of counterparts, each of which shall
      be
      deemed to be an original and all of which together shall be deemed to be one
      and
      the same instrument. In the event that any signature is delivered by facsimile
      transmission, such signature shall create a valid and binding obligation of
      the
      party executing (or on whose behalf such signature is executed) with the same
      force and effect as if such facsimile signature page were an original
      thereof.




7.9  Publicity .
      The
      Purchasers shall not issue any press release or make any public disclosure
      regarding the transactions contemplated hereby unless such press release or
      public disclosure is approved by the Company in advance. Notwithstanding the
      foregoing, each of the parties hereto may, in documents required to be filed
      by
      it with the SEC or other regulatory bodies, make such statements with respect
      to
      the transactions contemplated hereby as each may be advised by counsel is
      legally necessary or advisable, and may make such disclosure as it is advised
      by
      its counsel is required by law.




7.10 Severability .
      In case
      any one or more of the provisions of this Agreement shall be invalid or
      unenforceable in any respect, the validity and enforceability of the remaining
      terms and provisions of this Agreement shall not in any way be affected or
      impaired thereby and the parties will attempt to agree upon a valid and
      enforceable provision which shall be a reasonable substitute thereof, and upon
      so agreeing, shall incorporate such substitute provision in this
      Agreement.




7.11 Further
      Assurances .
      Each
      party shall do and perform, or cause to be done and performed, all such further
      acts and things, and shall execute and deliver all such other agreements,
      certificates, instruments and documents, as the other party may reasonably
      request in order to carry out the intent and accomplish the purposes of this
      Agreement and the consummation of the transactions contemplated
      hereby.




22




7.12 Remedies .
      In
      addition to being entitled to exercise all rights provided herein or granted
      by
      law, including recovery of damages, the Purchasers and the Company will be
      entitled to specific performance under this Agreement. The parties agree that
      monetary damages will not be adequate compensation for any loss incurred by
      reason of any breach of obligations described in the foregoing sentence and
      hereby agree to waive in any action for specific performance of any such
      obligation the defense that a remedy at law would be adequate.




7.13 Fees
      and Expenses .
      If the
      Closing occurs or if the Closing does not occur at the election of the Company,
      the Company will pay the reasonable legal fees of the Lead Purchaser in an
      aggregate amount not to exceed $25,000.00. Except as provided herein, each
      Party
      shall pay the fees and expenses of its own advisers, accountants and other
      experts.




23





**IN
      WITNESS WHEREOF** ,
      the
      parties hereto have caused this Securities Purchase Agreement to be duly
      executed by their respective authorized persons as of the day and year
      below.











**HEALTH
      DISCOVERY
      CORPORATION**








By:


Name:


Title:




Date:
      __________________________, 2007







**IN
      MAKING AN INVESTMENT DECISION, THE PURCHASER MUST RELY ON ITS OWN EXAMINATION
      OF
      THE COMPANY AND THE TERMS OF THE SALE OF THE SHARES AND WARRANT, INCLUDING
      THE
      MERITS AND RISKS INVOLVED. THESE SECURITIES HAVE NOT BEEN RECOMMENDED BY ANY
      FEDERAL OR STATE SECURITIES COMMISSION OR REGULATORY AUTHORITY. FURTHERMORE,
      THE
      FOREGOING AUTHORITIES HAVE NOT CONFIRMED THE ACCURACY OR DETERMINED THE ADEQUACY
      OF THIS DOCUMENT. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL
      OFFENSE.**








**PURCHASER**








Print
      Name:




Signature:





Date:
      __________________________, 2007





Address:










Resident
      of the State
      of






24





**SCHEDULE
      A**





**Schedule
      of Cash Purchasers**





**Name**
            **Purchase
                Price**
            **Number
                of Shares**
              **Purchased**
            **Number
                of Tranche 1**
              **Warrants
                Purchased**
            **Number
                of Tranche 2**
              **Warrants
                Purchased**


















25


**SCHEDULE
      B**





**Schedule
      of Lender Purchasers**





**Name**
            **Purchase
                Price**
              **(Principal
                +**
              **Accrued
                Interest)**
            **Number
                of Shares**
              **Purchased**
            **Number
                of Tranche 1**
              **Warrants
                Purchased**
            **Number
                of Tranche 2**
              **Warrants
                Purchased**














26