Exhibit 10.1





Exhibit 10.1




SECURITIES PURCHASE AGREEMENT




This Securities Purchase Agreement (this “Agreement”) is dated as of
 _____, 2010, between Fibrocell Science, Inc., a Delaware corporation (the “Company”), and each purchaser
identified on the signature pages hereto (each, including its successors and assigns, a
“Purchaser” and collectively, the “Purchasers”).



WHEREAS, subject to the terms and conditions set forth in this Agreement and pursuant to
Section 4(2) of the Securities Act of 1933, as amended (the “Securities Act”), and Rule 506
promulgated thereunder, the Company desires to issue and sell to each Purchaser, and each
Purchaser, severally and not jointly, desires to purchase from the Company, securities of the
Company as more fully described in this Agreement.



NOW, THEREFORE, IN CONSIDERATION of the mutual covenants contained in this Agreement, and for
other good and valuable consideration the receipt and adequacy of which are hereby acknowledged,
the Company and each Purchaser agree as follows:



ARTICLE I.

DEFINITIONS




1.1 Definitions. In addition to the terms defined elsewhere in this Agreement: (a)
capitalized terms that are not otherwise defined herein have the meanings given to such terms in
the Certificate of Designation (as defined herein), and (b) the following terms have the meanings
set forth in this Section 1.1:




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




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




“Affiliate” means any Person that, directly or indirectly through one or more
intermediaries, controls or is controlled by or is under common control with a Person, as
such terms are used in and construed under Rule 405 under the Securities Act.




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




“Business Day” means any day except any Saturday, any Sunday, any day which is
a federal legal holiday in the United States or any day on which banking institutions in the
State of New York are authorized or required by law or other governmental action to close.




“Certificate of Designation” means the Certificate of Designation filed on July
16, 2010 by the Company with the Secretary of State of Delaware, as evidenced by a copy of
the certified filing attached hereto as Exhibit A.




“Closing” means the closing of the purchase and sale of the Securities pursuant
to Section 2.1.




“Closing Date” means the Trading Day on which all of the Transaction Documents
have been executed and delivered by the applicable parties thereto, and all conditions
precedent to (i) the Purchasers’ obligations to pay the Subscription Amount and (ii) the
Company’s obligations to deliver the Securities, in each case, have been satisfied or
waived, but in no event later than the third Trading Day following the date hereof.




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




“Common Stock” means the common stock of the Company, par value $0.01 per
share, and any other class of securities into which such securities may hereafter be
reclassified or changed.


 


 









 






“Common Stock Equivalents” means any securities of the Company or the
Subsidiaries which
would entitle the holder thereof to acquire at any time Common Stock, including,
without limitation, any debt, preferred stock, rights, options, warrants or other instrument
that is at any time convertible into or exercisable or exchangeable for, or otherwise
entitles the holder thereof to receive, Common Stock.




“Company Counsel” means Cozen O’Connor with offices located at 1900 Market
Street, Philadelphia, PA 19103.




“Conversion Price” shall have the meaning ascribed to such term in the
Certificate of Designation.




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




“Effective Date” means the earliest of the date that (a) the initial
Registration Statement has been declared effective by the Commission, (b) all of the
Registrable Securities have been sold pursuant to Rule 144 or may be sold pursuant to Rule
144 without the requirement for the Company to be in compliance with the current public
information required under Rule 144 and without volume or manner-of-sale restrictions or (c)
following the first anniversary of the Closing Date provided that a holder of Registrable
Securities is not an Affiliate of the Company, all of the Registrable Securities may be sold
pursuant to an exemption from registration under Section 4(1) of the Securities Act without
volume or manner-of-sale restrictions and Company counsel has delivered to such holders a
standing written unqualified opinion that resales may then be made by such holders of the
Registrable Securities pursuant to such exemption which opinion shall be in form and
substance reasonably acceptable to such holders.




“Escrow Agent” means Signature Bank, a New York State chartered bank and having
an office at 261 Madison Avenue, New York, New York 10016.




“Escrow Agreement” means the escrow agreement entered into prior to the date
hereof, by and among the Company, Viriathus and the Escrow Agent pursuant to which the
Purchasers, shall deposit Subscription Amounts with the Escrow Agent to be applied to the
transactions contemplated hereunder.




“Evaluation Date” shall have the meaning ascribed to such term in Section
3.1(r).




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




“Exempt Issuance” means the issuance of (a) shares of Common Stock or options
to employees, consultants, officers or directors of the Company pursuant to any stock or
option plan or agreement duly adopted for such purpose, by a majority of the non-employee
members of the Board of Directors or a majority of the members of a committee of
non-employee directors established for such purpose, (b) securities upon the exercise or
exchange of or conversion of any Securities issued hereunder and/or other securities
exercisable or exchangeable for or convertible into shares of Common Stock issued and
outstanding on the date of this Agreement, provided that such securities have not been
amended since the date of this Agreement to increase the number of such securities or to
decrease the exercise price, exchange price or conversion price of such securities, (c)
securities issued pursuant to acquisitions or strategic transactions approved by a majority
of the disinterested directors of the Company, provided that any such issuance shall only be
to a Person (or to the equityholders of a Person) which is, itself or through its
subsidiaries, an operating company or an asset in a business synergistic with the business
of the Company and shall provide to the Company additional benefits in addition to the
investment of funds, but shall not include a transaction in which the Company is issuing
securities primarily for the purpose of raising capital or to an entity whose primary
business is investing in securities, (d) securities issued to the Placement Agent and (e)
with the prior written consent of the Placement Agent, up to an amount of Preferred Stock
and Warrants equal to the difference between $                     and the aggregate Subscription
Amounts hereunder, on the same terms and conditions and prices as hereunder, with investors
executing definitive agreements for the purchase of such securities and such transactions
having closed on or before the earlier of (i) the Filing Date (as defined in the
Registration Rights Agreement) or (ii) the date that the Initial
Registration Statement (as defined in the Registration Rights Agreement) is actually
filed with the Commission.


 


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




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




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




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




“Intellectual Property Rights” shall have the meaning ascribed to such term in
Section 3.1(o).




“Legend Removal Date” shall have the meaning ascribed to such term in Section
4.1(c).




“Liens” means a lien, charge, security interest, encumbrance, right of first
refusal, preemptive right or other restriction.




“Material Adverse Effect” shall have the meaning assigned to such term in
Section 3.1(b).




“Material Permits” shall have the meaning ascribed to such term in Section
3.1(m).




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




“Person” means an individual or corporation, partnership, trust, incorporated
or unincorporated association, joint venture, limited liability company, joint stock
company, government (or an agency or subdivision thereof) or other entity of any kind.




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




“Placement Agent” means Viriathus and John Carris Investments LLC




“Preferred Stock” means the up to                      shares of the Company’s Series B 6%
Convertible Preferred Stock issued hereunder having the rights, preferences and privileges
set forth in the Certificate of Designation, in the form of Exhibit A hereto.




“Proceeding” means an action, claim, suit, investigation or proceeding
(including, without limitation, an informal investigation or partial proceeding, such as a
deposition), whether commenced or threatened.




“Public Information Failure” shall have the meaning ascribed to such term in
Section 4.3(b).




“Public Information Failure Payments” shall have the meaning ascribed to such
term in Section 4.3(b).




“Purchaser Party” shall have the meaning ascribed to such term in Section 4.10.




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




“Registration Statement” means a registration statement meeting the
requirements set forth in the Registration Rights Agreement and covering the resale of the
Underlying Shares by each Purchaser as provided for in the Registration Rights Agreement.




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


 


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“Required Minimum” means, as of any date, the maximum aggregate number of
 shares of Common Stock then issued or potentially issuable in the future pursuant to the
Transaction Documents, including any Underlying Shares issuable upon exercise in full of all
Warrants or conversion in full of all shares of Preferred Stock, ignoring any conversion or
exercise limits set forth therein, and assuming that any previously unconverted shares of
Preferred Stock are held until the third anniversary of the Closing Date and all dividends
are paid in shares of Common Stock until such third anniversary.




“Rule 144” means Rule 144 promulgated by the Commission pursuant to the
Securities Act, as such Rule may be amended or interpreted from time to time, or any similar
rule or regulation hereafter adopted by the Commission having substantially the same purpose
and effect as such Rule.




“Rule 424” means Rule 424 promulgated by the Commission pursuant to the
Securities Act, as such Rule may be amended or interpreted from time to time, or any similar
rule or regulation hereafter adopted by the Commission having substantially the same purpose
and effect as such Rule.




“SEC Reports” shall have the meaning ascribed to such term in Section 3.1(h).




“Securities” means the Preferred Stock, the Warrants, the Warrant Shares and
the Underlying Shares.




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




“Series A Preferred Stock” means the Series A 6% Convertible Preferred Stock of
the Company.




“Short Sales” means all “short sales” as defined in Rule 200 of Regulation SHO
under the Exchange Act (but shall not be deemed to include the location and/or reservation
of borrowable shares of Common Stock).




“Stated Value” means $1,000 per share of Preferred Stock.




“Subscription Amount” shall mean, as to each Purchaser, the aggregate amount to
be paid for the Preferred Stock purchased hereunder as specified below such Purchaser’s name
on the signature page of this Agreement and next to the heading “Subscription Amount,” in
United States dollars and in immediately available funds.




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




“Trading Day” means a day on which the principal Trading Market is open for
trading.




“Trading Market” means any of the following markets or exchanges on which the
Common Stock is listed or quoted for trading on the date in question: the NYSE AMEX, the
Nasdaq Capital Market, the Nasdaq Global Market, the Nasdaq Global Select Market, the New
York Stock Exchange or the OTC Bulletin Board (or any successors to any of the foregoing).




“Transaction Documents” means this Agreement, the Certificate of Designation,
the Warrants, the Registration Rights Agreement, the Escrow Agreement, all exhibits and
schedules thereto and hereto and any other documents or agreements executed in connection
with the transactions contemplated hereunder.




“Transfer Agent” means American Stock Transfer and Trust Company, the current
transfer agent of the Company, with a mailing address of 59 Maiden Lane, New York, NY 10038
and a facsimile number of (718) 921 8355, and any successor transfer agent of the Company.


 


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“12.5% Notes” means the Company’s 12.5% promissory notes issued to the holders
thereof, dated as of September 3, 2009.




“Underlying Shares” means the shares of Common Stock issued and issuable upon
conversion or redemption of the Preferred Stock, upon exercise of the Warrants and issued
and issuable in lieu of the cash payment of dividends on the Preferred Stock in accordance
with the terms of the Certificate of Designation.




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




“Viriathus” means Viriathus Capital LLC, an affiliate of John Carris
Investments, LLC, a FINRA registered broker-dealer.




“VWAP” means, for any date, the price determined by the first of the following
clauses that applies: (a) if the Common Stock is then listed or quoted on a Trading Market,
the daily volume weighted average price of the Common Stock for such date (or the nearest
preceding date) on the Trading Market on which the Common Stock is then listed or quoted as
reported by Bloomberg L.P. (based on a Trading Day from 9:30 a.m. (New York City time) to
4:02 p.m. (New York City time)), (b)  if the OTC Bulletin Board is not a Trading Market, the
volume weighted average price of the Common Stock for such date (or the nearest preceding
date) on the OTC Bulletin Board, (c) if the Common Stock is not then listed or quoted for
trading on the OTC Bulletin Board and if prices for the Common Stock are then reported in
the “Pink Sheets” published by Pink OTC Markets, Inc. (or a similar organization or agency
succeeding to its functions of reporting prices), the most recent bid price per share of the
Common Stock so reported, or (d) in all other cases, the fair market value of a share of
Common Stock as determined by an independent appraiser selected in good faith by the
Purchasers of a majority in interest of the Securities then outstanding and reasonably
acceptable to the Company, the fees and expenses of which shall be paid by the Company.




“Warrants” means, collectively, the Common Stock purchase warrants delivered to
the Purchasers at the Closing in accordance with Section 2.2(a) hereof, which Warrants shall
be exercisable immediately and shall terminate on the last day of the calendar month in
which occurs the five year anniversary of the initial exercise date, in the form of
Exhibit C attached hereto.




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




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



ARTICLE II.

PURCHASE AND SALE




2.1 Closing. On the Closing Date, upon the terms and subject to the conditions set
forth herein, substantially concurrent with the execution and delivery of this Agreement by the
parties hereto, the Company agrees to sell, and the Purchasers, severally and not jointly, agree to
purchase, up to an aggregate of $                     of shares of Preferred Stock with an aggregate Stated
Value for each Purchaser equal to such Purchaser’s Subscription Amount as set forth on the
signature page hereto executed by such Purchaser, and Warrants as determined by pursuant to Section
2.2(a). The aggregate number of shares of Preferred Stock sold hereunder shall be up to
                    . Each Purchaser shall deliver to the Escrow Agent via wire transfer or a certified
check of immediately available funds equal to its Subscription Amount and the Company shall deliver
to each Purchaser its respective shares of Preferred Stock and Warrants as determined pursuant to
Section 2.2(a), and the Company and each Purchaser shall deliver the other items set forth in
Section 2.2 deliverable at the Closing. Upon satisfaction of the covenants and conditions set
forth in Sections 2.2 and 2.3, the Closing shall occur at the offices of WS or such other location
as the parties shall mutually agree.


 


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2.2 Deliveries.




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




(i) this Agreement duly executed by the Company;




(ii) a legal opinion of Company Counsel, substantially in the form of
Exhibit D attached hereto;




(iii) a certificate evidencing a number of shares of Preferred Stock equal to
such Purchaser’s Subscription Amount divided by the Stated Value, registered in the
name of such Purchaser;




(iv) a Warrant registered in the name of such Purchaser to purchase up to a
number of shares of Common Stock equal to 100% of such Purchaser’s Subscription
Amount divided by the initial Conversion Price, with an exercise price equal to
$0.8054, subject to adjustment therein;




(v) the Registration Rights Agreement duly executed by the Company; and




(vi) the Escrow Agreement duly executed by the Company and Viriathus.




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




(i) this Agreement duly executed by such Purchaser;




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




(iii) the Registration Rights Agreement duly executed by such Purchaser.




2.3 Closing Conditions.




(a) The obligations of the Company hereunder in connection with the Closing are subject
to the following conditions being met:




(i) the accuracy in all material respects on the Closing Date of the
representations and warranties of the Purchasers contained herein (unless as of a
specific date therein);




(ii) all obligations, covenants and agreements of each Purchaser required to be
performed at or prior to the Closing Date shall have been performed; and




(iii) the delivery by each Purchaser of the items set forth in Section 2.2(b)
of this Agreement.




(b) The respective obligations of the Purchasers hereunder in connection with the
Closing are subject to the following conditions being met:




(i) the accuracy in all material respects when made and on the Closing Date of
the representations and warranties of the Company contained herein (unless as of a
specific date therein);




(ii) all obligations, covenants and agreements of the Company required to be
performed at or prior to the Closing Date shall have been performed;




(iii) the delivery by the Company of the items set forth in Section 2.2(a) of
this Agreement;


 


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(iv) there shall have been no Material Adverse Effect with respect to the
Company since the date hereof; and




(v) from the date hereof to the Closing Date, to the extent the Common Stock is
trading on a Trading Market, 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 Securities at the Closing.



ARTICLE III.

REPRESENTATIONS AND WARRANTIES




3.1 Representations and Warranties of the Company. Except as set forth in the
Disclosure Schedules, which Disclosure Schedules shall be deemed a part hereof and shall qualify
any representation or otherwise made herein to the extent of the disclosure contained in the
corresponding section of the Disclosure Schedules, the Company hereby makes the following
representations and warranties to each Purchaser:




(a) Subsidiaries. All of the direct and indirect subsidiaries of the Company
are set forth on Schedule 3.1(a). Except as set forth on Schedule 3.1(a),
the Company owns, directly or indirectly, all of the capital stock or other equity interests
of each Subsidiary free and clear of any Liens, and all of the issued and outstanding shares
of capital stock of each Subsidiary are validly issued and are fully paid, non-assessable
and free of preemptive and similar rights to subscribe for or purchase securities. If the
Company has no subsidiaries, all other references to the Subsidiaries or any of them in the
Transaction Documents shall be disregarded.




(b) Organization and Qualification. The Company and each of the Subsidiaries
is an entity duly incorporated or otherwise organized, validly existing and in good standing
under the laws of the jurisdiction of its incorporation or organization, with the requisite
power and authority to own and use its properties and assets and to carry on its business as
currently conducted. Neither the Company nor any Subsidiary is in violation nor default of
any of the provisions of its respective certificate or articles of incorporation, bylaws or
other organizational or charter documents. Each of the Company and the Subsidiaries is duly
qualified to conduct business and is in good standing as a foreign corporation or other
entity in each jurisdiction in which the nature of the business conducted or property owned
by it makes such qualification necessary, except where the failure to be so qualified or in
good standing, as the case may be, could not have or reasonably be expected to result in:
(i) a material adverse effect on the legality, validity or enforceability of any Transaction
Document, (ii) a material adverse effect on the results of operations, assets, business,
prospects or condition (financial or otherwise) of the Company and the Subsidiaries, taken
as a whole, or (iii) a material adverse effect on the Company’s ability to perform in any
material respect on a timely basis its obligations under any Transaction Document (any of
(i), (ii) or (iii), a “Material Adverse Effect”) and no Proceeding has been
instituted in any such jurisdiction revoking, limiting or curtailing or seeking to revoke,
limit or curtail such power and authority or qualification.


 


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(c) Authorization; Enforcement. The Company has the requisite corporate power
and authority to enter into and to consummate the transactions contemplated by each of the
Transaction Documents and otherwise to carry out its obligations hereunder and thereunder.
The execution and delivery of each of the Transaction Documents by the Company and the
consummation by it of the
transactions contemplated hereby and thereby have been duly authorized by all necessary
action on the part of the Company and no further action is required by the Company, the
Board of Directors or the Company’s stockholders in connection therewith other than in
connection with the Required Approvals. Each Transaction Document to which it is a party
has been (or upon delivery will have been) duly executed by the Company and, when delivered
in accordance with the terms hereof and thereof, will constitute the valid and binding
obligation of the Company enforceable against the Company in accordance with its terms,
except: (i) as limited by general equitable principles and applicable bankruptcy,
insolvency, reorganization, moratorium and other laws of general application affecting
enforcement of creditors’ rights generally, (ii) as limited by laws relating to the
availability of specific performance, injunctive relief or other equitable remedies and
(iii) insofar as indemnification and contribution provisions may be limited by applicable
law.




(d) No Conflicts. The execution, delivery and performance by the Company of
the Transaction Documents, the issuance and sale of the Securities and the consummation by
it of the transactions contemplated hereby and thereby to which it is a party do not and
will not: (i) conflict with or violate any provision of the Company’s or any Subsidiary’s
certificate or articles of incorporation, bylaws or other organizational or charter
documents, (ii) conflict with, or constitute a default (or an event that with notice or
lapse of time or both would become a default) under, result in the creation of any Lien upon
any of the properties or assets of the Company or any Subsidiary, or give to others any
rights of termination, amendment, acceleration or cancellation (with or without notice,
lapse of time or both) of, any agreement, credit facility, debt or other instrument
(evidencing a Company or Subsidiary debt or otherwise) or other understanding to which the
Company or any Subsidiary is a party or by which any property or asset of the Company or any
Subsidiary is bound or affected, or (iii) subject to the Required Approvals, conflict with
or result in a violation of any law, rule, regulation, order, judgment, injunction, decree
or other restriction of any court or governmental authority to which the Company or a
Subsidiary is subject (including federal and state securities laws and regulations), or by
which any property or asset of the Company or a Subsidiary is bound or affected; except in
the case of each of clauses (ii) and (iii), such as could not have or reasonably be expected
to result in a Material Adverse Effect.




(e) Filings, Consents and Approvals. Except as set forth on Schedule
3.1(e), the Company is not required to obtain any consent, waiver, authorization or
order of, give any notice to, or make any filing or registration with, any court or other
federal, state, local or other governmental authority or other Person in connection with the
execution, delivery and performance by the Company of the Transaction Documents, other than:
(i) the filings required pursuant to Section 4.6 of this Agreement, (ii) the filing with the
Commission pursuant to the Registration Rights Agreement, (iii) the notice and/or
application(s) to each applicable Trading Market for the issuance and sale of the Securities
and the listing of the Underlying Shares for trading thereon in the time and manner required
thereby, (iv) the filing of Form D with the Commission and such filings as are required to
be made under applicable state securities laws, and (v) notices to the holders of the 12.5%
Notes (collectively, the “Required Approvals”).




(f) Issuance of the Securities. The Securities are duly authorized and, when
issued and paid for in accordance with the applicable Transaction Documents, will be duly
and validly issued, fully paid and nonassessable, free and clear of all Liens imposed by the
Company other than restrictions on transfer provided for in the Transaction Documents. The
Underlying Shares, when issued in accordance with the terms of the Transaction Documents,
will be validly issued, fully paid and nonassessable, free and clear of all Liens imposed by
the Company other than restrictions on transfer provided for in the Transaction Documents.
The Company has reserved from its duly authorized capital stock a number of shares of Common
Stock for issuance of the Underlying Shares at least equal to the Required Minimum on the
date hereof.


 


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(g) Capitalization. The capitalization of the Company is as set forth on
Schedule 3.1(g), which Schedule 3.1(g) shall also include the number of
 shares of Common Stock owned beneficially, and of record, by Affiliates of the Company as of
the date hereof. The Company has not issued any capital stock since its most recently filed
periodic report under the Exchange Act, other than pursuant to the exercise of employee
stock options under the Company’s stock option plans, the issuance of shares of
Common Stock or options to purchase Common Stock to employees, directors or consultants
pursuant to the Company’s employee stock purchase plans or pursuant to other agreements
approved by the Company’s Board of Directors and pursuant to the conversion and/or exercise
of Common Stock Equivalents outstanding as of the date of the most recently filed periodic
report under the Exchange Act. Except as set forth on Schedule 3.1(g) and except
for the holders of the 12.5% Notes, no Person has any right of first refusal, preemptive
right, right of participation, or any similar right to participate in the transactions
contemplated by the Transaction Documents. Except as a result of the purchase and sale of
the Securities, there are no outstanding options, warrants, scrip rights to subscribe to,
calls or commitments of any character whatsoever relating to, or securities, rights or
obligations convertible into or exercisable or exchangeable for, or giving any Person any
right to subscribe for or acquire any shares of Common Stock, or contracts, commitments,
understandings or arrangements by which the Company or any Subsidiary is or may become bound
to issue additional shares of Common Stock or Common Stock Equivalents. The issuance and
sale of the Securities will not obligate the Company to issue shares of Common Stock or
other securities to any Person (other than the Purchasers) and will not result in a right of
any holder of Company securities to adjust the exercise, conversion, exchange or reset price
under any of such securities. All of the outstanding shares of capital stock of the Company
are validly issued, fully paid and nonassessable, have been issued in compliance with all
federal and state securities laws, and none of such outstanding shares was issued in
violation of any preemptive rights or similar rights to subscribe for or purchase
securities. No further approval or authorization of any stockholder, the Board of Directors
or others is required for the issuance and sale of the Securities. Except as set forth on
Schedule 3.1(g), there are no stockholders agreements, voting agreements or other
similar agreements with respect to the Company’s capital stock to which the Company is a
party or, to the knowledge of the Company, between or among any of the Company’s
stockholders.




(h) SEC Reports; Financial Statements. The Company has filed all reports,
schedules, forms, statements and other documents required to be filed by the Company under
the Securities Act and the Exchange Act, including pursuant to Section 13(a) or 15(d)
thereof, for the two years preceding the date hereof (or such shorter period as the Company
was required by law or regulation to file such material) (the foregoing materials, including
the exhibits thereto and documents incorporated by reference therein, being collectively
referred to herein as the “SEC Reports”) on a timely basis or has received a valid
extension of such time of filing and has filed any such SEC Reports prior to the expiration
of any such extension. As of their respective dates, the SEC Reports complied in all
material respects with the requirements of the Securities Act and the Exchange Act, as
applicable, and none of the SEC Reports, when filed, contained any untrue statement of a
material fact or omitted to state a material fact required to be stated therein or necessary
in order to make the statements therein, in the light of the circumstances under which they
were made, not misleading. Except as set forth on Schedule 3.1(h), the Company has
never been an issuer subject to Rule 144(i) under the Securities Act. The financial
statements of the Company included in the SEC Reports comply in all material respects with
applicable accounting requirements and the rules and regulations of the Commission with
respect thereto as in effect at the time of filing. Such financial statements have been
prepared in accordance with United States generally accepted accounting principles applied
on a consistent basis during the periods involved (“GAAP”), except as may be
otherwise specified in such financial statements or the notes thereto and except that
unaudited financial statements may not contain all footnotes required by GAAP, and fairly
present in all material respects the financial position of the Company and its consolidated
Subsidiaries as of and for the dates thereof and the results of operations and cash flows
for the periods then ended, subject, in the case of unaudited statements, to normal,
immaterial, year-end audit adjustments.


 


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(i) Material Changes; Undisclosed Events, Liabilities or Developments. Since
the date of the latest audited financial statements included within the SEC Reports, except
as specifically disclosed in a subsequent SEC Report filed prior to the date hereof: (i)
there has been no event, occurrence or development that has had or that could reasonably be
expected to result in a Material Adverse Effect, (ii) the Company has not incurred any
liabilities (contingent or otherwise) other than (A) trade payables and accrued expenses
incurred in the ordinary course of business consistent with past practice and (B)
liabilities not required to be reflected in the Company’s financial statements pursuant to
GAAP or disclosed in filings made with the Commission, (iii) the Company has not altered its
method of accounting, (iv) the Company
has not declared or made any dividend or distribution of cash or other property to its
stockholders or purchased, redeemed or made any agreements to purchase or redeem any shares
of its capital stock and (v) the Company has not issued any equity securities to any
officer, director, consultants or Affiliate, except pursuant to existing Company stock
option plans or pursuant to agreements approved by the Board of Directors. The Company does
not have pending before the Commission any request for confidential treatment of
information. Except for the issuance of the Securities contemplated by this Agreement or as
set forth on Schedule 3.1(i), no event, liability, fact, circumstance, occurrence or
development has occurred or exists or is reasonably expected to occur or exist with respect
to the Company or its Subsidiaries or their respective business, properties, operations,
assets or financial condition, that would be required to be disclosed by the Company under
applicable securities laws at the time this representation is made or deemed made that has
not been publicly disclosed at least 1 Trading Day prior to the date that this
representation is made.




(j) Litigation. Except as set forth on Schedule 3.1(j), there is no
action, suit, inquiry, notice of violation, proceeding or investigation pending or, to the
knowledge of the Company, threatened against or affecting the Company, any Subsidiary or any
of their respective properties before or by any court, arbitrator, governmental or
administrative agency or regulatory authority (federal, state, county, local or foreign)
(collectively, an “Action”) which (i) adversely affects or challenges the legality,
validity or enforceability of any of the Transaction Documents or the Securities or (ii)
could, if there were an unfavorable decision, have or reasonably be expected to result in a
Material Adverse Effect. Neither the Company nor any Subsidiary, nor any director or
officer thereof, is or has been the subject of any Action involving a claim of violation of
or liability under federal or state securities laws or a claim of breach of fiduciary duty.
There has not been, and to the knowledge of the Company, there is not pending or
contemplated, any investigation by the Commission involving the Company or any current or
former director or officer of the Company. The Commission has not issued any stop order or
other order suspending the effectiveness of any registration statement filed by the Company
or any Subsidiary under the Exchange Act or the Securities Act.




(k) Labor Relations. No material labor dispute exists or, to the knowledge of
the Company, is imminent with respect to any of the employees of the Company, which could
reasonably be expected to result in a Material Adverse Effect. None of the Company’s or its
Subsidiaries’ employees is a member of a union that relates to such employee’s relationship
with the Company or such Subsidiary, and neither the Company nor any of its Subsidiaries is
a party to a collective bargaining agreement, and the Company and its Subsidiaries believe
that their relationships with their employees are good. No executive officer, to the
knowledge of the Company, is, or is now expected to be, in violation of any material term of
any employment contract, confidentiality, disclosure or proprietary information agreement or
non-competition agreement, or any other contract or agreement or any restrictive covenant in
favor of any third party, and the continued employment of each such executive officer does
not subject the Company or any of its Subsidiaries to any liability with respect to any of
the foregoing matters. The Company and its Subsidiaries are in compliance with all U.S.
federal, state, local and foreign laws and regulations relating to employment and employment
practices, terms and conditions of employment and wages and hours, except where the failure
to be in compliance could not, individually or in the aggregate, reasonably be expected to
have a Material Adverse Effect.




(l) Compliance. Neither the Company nor any Subsidiary: (i) is in default
under or in violation of (and no event has occurred that has not been waived that, with
notice or lapse of time or both, would result in a default by the Company or any Subsidiary
under), nor has the Company or any Subsidiary received notice of a claim that it is in
default under or that it is in violation of, any indenture, loan or credit agreement or any
other agreement or instrument to which it is a party or by which it or any of its properties
is bound (whether or not such default or violation has been waived), (ii) is in violation of
any judgment, decree or order of any court, arbitrator or governmental body or (iii) is or
has been in violation of any statute, rule, ordinance or regulation of any governmental
authority, including without limitation all foreign, federal, state and local laws
applicable to its business and all such laws that affect the environment, except in each
case as could not have or reasonably be expected to result in a Material Adverse Effect.


 


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(m) Regulatory Permits. The Company and the Subsidiaries possess all
certificates, authorizations and permits issued by the appropriate federal, state, local or
foreign regulatory authorities necessary to conduct their respective businesses as described
in the SEC Reports, except where the failure to possess such permits could not reasonably be
expected to result in a Material Adverse Effect (“Material Permits”), and neither
the Company nor any Subsidiary has received any notice of proceedings relating to the
revocation or modification of any Material Permit.




(n) Title to Assets. The Company and the Subsidiaries have good and marketable
title in fee simple to all real property owned by them and good and marketable title in all
personal property owned by them that is material to the business of the Company and the
Subsidiaries, in each case free and clear of all Liens, except for Liens as do not
materially affect the value of such property and do not materially interfere with the use
made and proposed to be made of such property by the Company and the Subsidiaries and Liens
for the payment of federal, state or other taxes, the payment of which is neither delinquent
nor subject to penalties. Any real property and facilities held under lease by the Company
and the Subsidiaries are held by them under valid, subsisting and enforceable leases with
which the Company and the Subsidiaries are in compliance.




(o) Patents and Trademarks. The Company and the Subsidiaries have, or have
rights to use, all patents, patent applications, trademarks, trademark applications, service
marks, trade names, trade secrets, inventions, copyrights, licenses and other intellectual
property rights and similar rights as described in the SEC Reports as necessary or material
for use in connection with their respective businesses and which the failure to so have
could have a Material Adverse Effect (collectively, the “Intellectual Property
Rights”). Neither the Company nor any Subsidiary has received a notice (written or
otherwise) that any of the Intellectual Property Rights used by the Company or any
Subsidiary violates or infringes upon the rights of any Person. To the knowledge of the
Company, all such Intellectual Property Rights are enforceable and there is no existing
infringement by another Person of any of the Intellectual Property Rights. The Company and
its Subsidiaries have taken reasonable security measures to protect the secrecy,
confidentiality and value of all of their intellectual properties, except where failure to
do so could not, individually or in the aggregate, reasonably be expected to have a Material
Adverse Effect.




(p) Insurance. The Company and the Subsidiaries are insured by insurers of
recognized financial responsibility against such losses and risks and in such amounts as are
prudent and customary in the businesses in which the Company and the Subsidiaries are
engaged, including, but not limited to, directors and officers insurance coverage at least
equal to the aggregate Subscription Amount. Neither the Company nor any Subsidiary has any
reason to believe that it will not be able to renew its existing insurance coverage as and
when such coverage expires or to obtain similar coverage from similar insurers as may be
necessary to continue its business without a significant increase in cost.




(q) Transactions With Affiliates and Employees. Except as set forth in the SEC
Reports, none of the officers or directors of the Company and, to the knowledge of the
Company, none of the employees of the Company is presently a party to any transaction with
the Company or any Subsidiary (other than for services as employees, officers and
directors), including any contract, agreement or other arrangement providing for the
furnishing of services to or by, providing for rental of real or personal property to or
from, or otherwise requiring payments to or from any officer, director or such employee or,
to the knowledge of the Company, any entity in which any officer, director, or any such
employee has a substantial interest or is an officer, director, trustee or partner, in each
case in excess of $120,000 other than for: (i) payment of salary or consulting fees for
services rendered, (ii) reimbursement for expenses incurred on behalf of the Company and
(iii) other employee benefits, including stock option agreements under any stock option plan
of the Company.


 


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(r) Sarbanes-Oxley; Internal Accounting Controls. The Company is in material
compliance with all provisions of the Sarbanes-Oxley Act of 2002 which are applicable to it
as of the Closing Date. The Company and the Subsidiaries maintain a system of internal
accounting controls sufficient to provide reasonable assurance that: (i) transactions are
executed in accordance with management’s general or specific authorizations, (ii)
transactions are recorded as necessary to permit preparation of financial
statements in conformity with GAAP and to maintain asset accountability, (iii) access
to assets is permitted only in accordance with management’s general or specific
authorization, and (iv) the recorded accountability for assets is compared with the existing
assets at reasonable intervals and appropriate action is taken with respect to any
differences. The Company has established disclosure controls and procedures (as defined in
Exchange Act Rules 13a-15(e) and 15d-15(e)) for the Company and designed such disclosure
controls and procedures to ensure that information required to be disclosed by the Company
in the reports it files or submits under the Exchange Act is recorded, processed, summarized
and reported, within the time periods specified in the Commission’s rules and forms. The
Company’s certifying officers have evaluated the effectiveness of the Company’s disclosure
controls and procedures as of the end of the period covered by the Company’s most recently
filed periodic report under the Exchange Act (such date, the “Evaluation Date”).
The Company presented in its most recently filed periodic report under the Exchange Act the
conclusions of the certifying officers about the effectiveness of the disclosure controls
and procedures based on their evaluations as of the Evaluation Date. Since the Evaluation
Date, there have been no changes in the Company’s internal control over financial reporting
(as such term is defined in the Exchange Act) that has materially affected, or is reasonably
likely to materially affect, the Company’s internal control over financial reporting.




(s) Certain Fees. Except as set forth on Schedule 3.1(s), no brokerage
or finder’s fees or commissions are or will be payable by the Company to any broker,
financial advisor or consultant, finder, placement agent, investment banker, bank or other
Person with respect to the transactions contemplated by the Transaction Documents. The
Purchasers shall have no obligation with respect to any fees or with respect to any claims
made by or on behalf of other Persons for fees of a type contemplated in this Section that
may be due in connection with the transactions contemplated by the Transaction Documents.




(t) Private Placement. Assuming the accuracy of the Purchasers’ representations
and warranties set forth in Section 3.2, no registration under the Securities Act is
required for the offer and sale of the Securities by the Company to the Purchasers as
contemplated hereby. The issuance and sale of the Securities hereunder does not contravene
the rules and regulations of the Trading Market.




(u) Investment Company. The Company is not, and is not an Affiliate of, and
immediately after receipt of payment for the Securities, will not be or be an Affiliate of,
an “investment company” within the meaning of the Investment Company Act of 1940, as
amended. The Company shall conduct its business in a manner so that it will not become an
“investment company” subject to registration under the Investment Company Act of 1940, as
amended.




(v) Registration Rights. Other than each of the Purchasers and except as set
forth on Schedule 3.1(v), no Person has any right to cause the Company to effect the
registration under the Securities Act of any securities of the Company.




(w) Listing and Maintenance Requirements. The Common Stock is registered
pursuant to Section 12(b) or 12(g) of the Exchange Act, and the Company has taken no action
designed to, or which to its knowledge is likely to have the effect of, terminating the
registration of the Common Stock under the Exchange Act nor has the Company received any
notification that the Commission is contemplating terminating such registration. Except as
set forth on Schedule 3.1(w), the Company has not, in the 12 months preceding the
date hereof, received notice from any Trading Market on which the Common Stock is or has
been listed or quoted to the effect that the Company is not in compliance with the listing
or maintenance requirements of such Trading Market. Except as set forth on Schedule
3.1(w), 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.


 


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(x) Application of Takeover Protections. The Company and the Board of
Directors have taken all necessary action, if any, in order to render inapplicable any
control share acquisition, business combination, poison pill (including any distribution
under a rights agreement) or other similar anti-takeover provision under the Company’s
certificate of incorporation (or similar charter documents) or the laws of its state of
incorporation that is or could become applicable to the Purchasers as a result of the
Purchasers and
the Company fulfilling their obligations or exercising their rights under the
Transaction Documents, including without limitation as a result of the Company’s issuance of
the Securities and the Purchasers’ ownership of the Securities.




(y) Disclosure. Except with respect to the material terms and conditions of
the transactions contemplated by the Transaction Documents, the Company confirms that
neither it nor any other Person acting on its behalf has provided any of the Purchasers or
their agents or counsel with any information that it believes constitutes or might
constitute material, non-public information. The Company understands and confirms that the
Purchasers will rely on the foregoing representation in effecting transactions in securities
of the Company. All of the disclosure furnished by or on behalf of the Company to the
Purchasers regarding the Company, its business and the transactions contemplated hereby,
including the Disclosure Schedules to this Agreement, is true and correct and does not
contain any untrue statement of a material fact or omit to state any material fact necessary
in order to make the statements made therein, in light of the circumstances under which they
were made, not misleading. The press releases disseminated by the Company during the
twelve months preceding the date of this Agreement taken as a whole do not contain any
untrue statement of a material fact or omit 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 and when made, not misleading. The Company acknowledges and
agrees that no Purchaser makes or has made any representations or warranties with respect to
the transactions contemplated hereby other than those specifically set forth in Section 3.2
hereof.




(z) No Integrated Offering. Assuming the accuracy of the Purchasers’
representations and warranties set forth in Section 3.2, neither the Company, nor any of its
Affiliates, nor any Person acting on its or their behalf has, directly or indirectly, made
any offers or sales of any security or solicited any offers to buy any security, under
circumstances that would cause this offering of the Securities to be integrated with prior
offerings by the Company for purposes of (i) the Securities Act which would require the
registration of any such securities under the Securities Act, or (ii) any applicable
shareholder approval provisions of any Trading Market on which any of the securities of the
Company are listed or designated. 




(aa) Solvency. Based on the consolidated financial condition of the Company as
of the Closing Date, after giving effect to the receipt by the Company of the proceeds from
the sale of the Securities hereunder, the book value of the Company’s assets exceeds the
amount that will be required to be paid on or in respect of the Company’s existing debts and
other recorded liabilities (including known contingent liabilities) as they mature. The
Company does not intend to incur debts beyond its ability to pay such debts as they mature
(taking into account the timing and amounts of cash to be payable on or in respect of its
debt). Assuming the Company is able to raise additional capital as contemplated, the
Company has no knowledge of any facts or circumstances which lead it to believe that it will
file for reorganization or liquidation under the bankruptcy or reorganization laws of any
jurisdiction within one year from the Closing Date. Schedule 3.1(aa) sets forth as
of the date hereof all outstanding secured and unsecured Indebtedness of the Company or any
Subsidiary, or for which the Company or any Subsidiary has commitments. For the purposes of
this Agreement, “Indebtedness” means (x) any liabilities for borrowed money or
amounts owed in excess of $50,000 (other than trade accounts payable incurred in the
ordinary course of business), (y) all guaranties, endorsements and other contingent
obligations in respect of indebtedness of others, whether or not the same are or should be
reflected in the Company’s balance sheet (or the notes thereto), except guaranties by
endorsement of negotiable instruments for deposit or collection or similar transactions in
the ordinary course of business; and (z) the present value of any lease payments in excess
of $50,000 due under leases required to be capitalized in accordance with GAAP. Neither the
Company nor any Subsidiary is in default with respect to any Indebtedness.




(bb) Tax Status. Except for matters that would not, individually or in the
aggregate, have or reasonably be expected to result in a Material Adverse Effect, the
Company and each Subsidiary has filed all necessary federal, state and foreign income and
franchise tax returns and has paid or accrued all taxes shown as due thereon, and the
Company has no knowledge of a tax deficiency which has been asserted or threatened against
the Company or any Subsidiary.


 


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(cc) No General Solicitation. Neither the Company nor any person acting on
behalf of the Company has offered or sold any of the Securities by any form of general
solicitation or general advertising. The Company has offered the Securities for sale only
to the Purchasers and certain other “accredited investors” within the meaning of Rule 501
under the Securities Act.




(dd) Foreign Corrupt Practices. Neither the Company, nor to the knowledge of
the Company, any agent or other person acting on behalf of the Company, has: (i) directly or
indirectly, used any funds for unlawful contributions, gifts, entertainment or other
unlawful expenses related to foreign or domestic political activity, (ii) made any unlawful
payment to foreign or domestic government officials or employees or to any foreign or
domestic political parties or campaigns from corporate funds, (iii) failed to disclose fully
any contribution made by the Company (or made by any person acting on its behalf of which
the Company is aware) which is in violation of law or (iv) violated in any material respect
any provision of the Foreign Corrupt Practices Act of 1977, as amended.




(ee) Accountants. The Company’s accounting firm is set forth on Schedule
3.1(ee) of the Disclosure Schedules. To the knowledge and belief of the Company, such
accounting firm: (i) is a registered public accounting firm as required by the Exchange Act
and (ii) shall express its opinion with respect to the financial statements to be included
in the Company’s Annual Report for the year ending December 31, 2010.




(ff) Seniority. As of the Closing Date, no Indebtedness or other claim against
the Company is senior to the Preferred Stock in right of payment, whether with respect to
interest or upon liquidation or dissolution, or otherwise, other than the Series A Preferred
Stock, the 12.5% Notes, indebtedness secured by purchase money security interests (which is
senior only as to underlying assets covered thereby) and capital lease obligations (which is
senior only as to the property covered thereby).




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




(hh) Acknowledgment Regarding Purchasers’ Purchase of Securities. The Company
acknowledges and agrees that each of the Purchasers is acting solely in the capacity of an
arm’s length purchaser with respect to the Transaction Documents and the transactions
contemplated thereby. The Company further acknowledges that no Purchaser is acting as a
financial advisor or fiduciary of the Company (or in any similar capacity) with respect to
the Transaction Documents and the transactions contemplated thereby and any advice given by
any Purchaser or any of their respective representatives or agents in connection with the
Transaction Documents and the transactions contemplated thereby is merely incidental to the
Purchasers’ purchase of the Securities. The Company further represents to each Purchaser
that the Company’s decision to enter into this Agreement and the other Transaction Documents
has been based solely on the independent evaluation of the transactions contemplated hereby
by the Company and its representatives.




(ii) Acknowledgment Regarding Purchaser’s Trading Activity. Anything in this
Agreement or elsewhere herein to the contrary notwithstanding (except for Sections 3.2(f)
and 4.15 hereof), it is understood and acknowledged by the Company that: (i) none of the
Purchasers have been asked by the Company to agree, nor has any Purchaser agreed, to desist
from purchasing or selling, long and/or short, securities of the Company, or “derivative”
securities based on securities issued by the Company or to hold the Securities for any
specified term, (ii) past or future open market or other transactions by any Purchaser,
specifically including, without limitation, Short Sales or “derivative” transactions, before
or after the closing of this or future private placement transactions, may negatively impact
the market price of the Company’s publicly-traded securities, (iii) any Purchaser, and
counter-parties in “derivative” transactions to which any such Purchaser is a party,
directly or indirectly, may presently have a “short” position in the
Common Stock and (iv) each Purchaser shall not be deemed to have any affiliation with
or control over any arm’s length counter-party in any “derivative” transaction. The Company
further understands and acknowledges that (y) one or more Purchasers may engage in hedging
activities at various times during the period that the Securities are outstanding,
including, without limitation, during the periods that the value of the Underlying Shares
deliverable with respect to Securities are being determined, and (z) such hedging activities
(if any) could reduce the value of the existing stockholders’ equity interests in the
Company at and after the time that the hedging activities are being conducted.  The Company
acknowledges that such aforementioned hedging activities do not constitute a breach of any
of the Transaction Documents.


 


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(jj) Regulation M Compliance.  The Company has not, and to its knowledge no one
acting on its behalf has, (i) taken, directly or indirectly, any action designed to cause or
to result in the stabilization or manipulation of the price of any security of the Company
to facilitate the sale or resale of any of the Securities, (ii) sold, bid for, purchased, or
paid any compensation for soliciting purchases of, any of the Securities, or (iii) paid or
agreed to pay to any Person any compensation for soliciting another to purchase any other
securities of the Company, other than, in the case of clauses (ii) and (iii), compensation
paid to the Company’s placement agent in connection with the placement of the Securities.




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




(ll) Stock Option Plans. Each stock option granted by the Company under the
Company’s stock option plan was granted (i) in accordance with the terms of the Company’s
stock option plan and (ii) with an exercise price at least equal to the fair market value of
the Common Stock on the date such stock option would be considered granted under GAAP and
applicable law. No stock option granted under the Company’s stock option plan has been
backdated. The Company has not knowingly granted, and there is no and has been no Company
policy or practice to knowingly grant, stock options prior to, or otherwise knowingly
coordinate the grant of stock options with, the release or other public announcement of
material information regarding the Company or its Subsidiaries or their financial results or
prospects.


 


15









 






(mm) Office of Foreign Assets Control. Neither the Company or any Subsidiary
nor, to the Company’s knowledge, any director, officer, agent, employee or affiliate of the
Company or any Subsidiary is currently subject to any U.S. sanctions administered by the
Office of Foreign Assets Control of the U.S. Treasury Department (“OFAC”).




(nn) U.S. Real Property Holding Corporation. The Company is not and has never
been a U.S. real property holding corporation within the meaning of Section 897 of the
Internal Revenue Code of 1986, as amended, and the Company shall so certify upon Purchaser’s
request.




(oo) Bank Holding Company Act. Neither the Company nor any of its
Subsidiaries, officers or directors is subject to the Bank Holding Company Act of 1956, as
amended (the “BHCA”) and to regulation by the Board of Governors of the Federal
Reserve System (the “Federal Reserve”). Neither the Company nor any of its
Subsidiaries, officers or directors owns or controls, directly or indirectly, five percent
(5%) or more of the outstanding shares of any class of voting securities or twenty-five
percent or more of the total equity of a bank or any entity that is subject to the BHCA and
to regulation by the Federal Reserve. Neither the Company nor any of its Subsidiaries,
officers or directors exercises a controlling influence over the management or policies of a
bank or any entity that is subject to the BHCA and to regulation by the Federal Reserve.




(pp) Money Laundering. The operations of the Company and its Subsidiaries are
and have been conducted at all times in compliance with applicable financial record-keeping
and reporting requirements of the Currency and Foreign Transactions Reporting Act of 1970,
as amended, applicable money laundering statutes and applicable rules and regulations
thereunder (collectively, the “Money Laundering Laws”), and no action, suit or
proceeding by or before any court or governmental agency, authority or body or any
arbitrator involving the Company and any Subsidiary with respect to the Money Laundering
Laws is pending or, to the knowledge of the Company or any Subsidiary, threatened.



3.2 Representations and Warranties of the Purchasers. Each Purchaser, for itself and
for no other Purchaser, hereby represents and warrants as of the date hereof and as of the Closing
Date to the Company as follows (unless as of a specific date therein):




(a) Organization; Authority. Such Purchaser is either an individual or an
entity duly organized, validly existing and in good standing under the laws of the
jurisdiction of its organization with full right, corporate or partnership power and
authority to enter into and to consummate the transactions contemplated by the Transaction
Documents and otherwise to carry out its obligations hereunder and thereunder. The execution
and delivery of the Transaction Documents and performance by such Purchaser of the
transactions contemplated by the Transaction Documents have been duly authorized by all
necessary corporate, partnership, limited liability company or similar action, as
applicable, on the part of such Purchaser. Each Transaction Document to which it is a party
has been duly executed by such Purchaser, and when delivered by such Purchaser in accordance
with the terms hereof, will constitute the valid and legally binding obligation of such
Purchaser, enforceable against it in accordance with its terms, except: (i) as limited by
general equitable principles and applicable bankruptcy, insolvency, reorganization,
moratorium and other laws of general application affecting enforcement of creditors’ rights
generally, (ii) as limited by laws relating to the availability of specific performance,
injunctive relief or other equitable remedies and (iii) insofar as indemnification and
contribution provisions may be limited by applicable law.




(b) Own Account. Such Purchaser understands that the Securities are
“restricted securities” and have not been registered under the Securities Act or any
applicable state securities law and is acquiring the Securities as principal for its own
account and not with a view to or for distributing or reselling such Securities or any part
thereof in violation of the Securities Act or any applicable state securities law, has no
present intention of distributing any of such Securities in violation of the Securities Act
or any applicable state securities law and has no direct or indirect arrangement or
understandings with any other persons to distribute or regarding the distribution of such
Securities in violation of the Securities Act or any applicable state securities law (this
representation and warranty not limiting such Purchaser’s right to sell the Securities
pursuant to the Registration Statement or otherwise in compliance with applicable federal
and
state securities laws). Such Purchaser is acquiring the Securities hereunder in the
ordinary course of its business.


 


16









 






(c) Purchaser Status. At the time such Purchaser was offered the Securities,
it was, and as of the date hereof it is, and on each date on which it exercises any Warrants
or converts any shares of Preferred Stock, it will be either: (i) an “accredited investor”
as defined in Rule 501(a)(1), (a)(2), (a)(3), (a)(7) or (a)(8) under the Securities Act or
(ii) a “qualified institutional buyer” as defined in Rule 144A(a) under the Securities Act.
Such Purchaser is not required to be registered as a broker-dealer under Section 15 of the
Exchange Act.




(d) Experience of Such Purchaser. Such Purchaser, either alone or together
with its representatives, has such knowledge, sophistication and experience in business and
financial matters so as to be capable of evaluating the merits and risks of the prospective
investment in the Securities, and has so evaluated the merits and risks of such investment.
Such Purchaser is able to bear the economic risk of an investment in the Securities and, at
the present time, is able to afford a complete loss of such investment.




(e) General Solicitation. Such Purchaser is not purchasing the Securities as a
result of any advertisement, article, notice or other communication regarding the Securities
published in any newspaper, magazine or similar media or broadcast over television or radio
or presented at any seminar or any other general solicitation or general advertisement.




(f) Certain Transactions and Confidentiality. Other than consummating the
transactions contemplated hereunder, such Purchaser has not directly or indirectly, nor has
any Person acting on behalf of or pursuant to any understanding with such Purchaser,
executed any purchases or sales, including Short Sales, of the securities of the Company
during the period commencing as of the time that such Purchaser first received a term sheet
(written or oral) from the Company or any other Person representing the Company setting
forth the material terms of the transactions contemplated hereunder and ending immediately
prior to the execution hereof. Notwithstanding the foregoing, in the case of a Purchaser
that is a multi-managed investment vehicle whereby separate portfolio managers manage
separate portions of such Purchaser’s assets and the portfolio managers have no direct
knowledge of the investment decisions made by the portfolio managers managing other portions
of such Purchaser’s assets, the representation set forth above shall only apply with respect
to the portion of assets managed by the portfolio manager that made the investment decision
to purchase the Securities covered by this Agreement. Other than to other Persons party to
this Agreement, such Purchaser has maintained the confidentiality of all disclosures made to
it in connection with this transaction (including the existence and terms of this
transaction). Notwithstanding the foregoing, for avoidance of doubt, nothing contained
herein shall constitute a representation or warranty, or preclude any actions, with respect
to the identification of the availability of, or securing of, available shares to borrow in
order to effect Short Sales or similar transactions in the future.



The Company acknowledges and agrees that the representations contained in Section 3.2 shall not
modify, amend or affect such Purchaser’s right to rely on the Company’s representations and
warranties contained in this Agreement or any representations and warranties contained in any other
Transaction Document or any other document or instrument executed and/or delivered in connection
with this Agreement or the consummation of the transaction contemplated hereby.



ARTICLE IV.

OTHER AGREEMENTS OF THE PARTIES





4.1 Transfer Restrictions.




(a) The Securities may only be disposed of in compliance with state and federal
securities laws. In connection with any transfer of Securities other than pursuant to an
effective registration statement or Rule 144, to the Company or to an Affiliate of a
Purchaser or in connection with a pledge as contemplated in Section 4.1(b), the Company may
require the transferor thereof to provide to the Company
an opinion of counsel selected by the transferor and reasonably acceptable to the
Company, the form and substance of which opinion shall be reasonably satisfactory to the
Company, to the effect that such transfer does not require registration of such transferred
Securities under the Securities Act. As a condition of transfer, any such transferee shall
agree in writing to be bound by the terms of this Agreement and the Registration Rights
Agreement and shall have the rights and obligations of a Purchaser under this Agreement and
the Registration Rights Agreement.


 


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(b) The Purchasers agree to the imprinting, so long as is required by this Section 4.1,
of a legend on any of the Securities in the following form:




[NEITHER] THIS SECURITY [NOR THE SECURITIES INTO WHICH THIS SECURITY IS [EXERCISABLE]
[CONVERTIBLE]] HAS [NOT] BEEN REGISTERED WITH THE SECURITIES AND EXCHANGE COMMISSION OR THE
SECURITIES COMMISSION OF ANY STATE IN RELIANCE UPON AN EXEMPTION FROM REGISTRATION UNDER THE
SECURITIES ACT OF 1933, AS AMENDED (THE “SECURITIES ACT”), AND, ACCORDINGLY, MAY NOT BE
OFFERED OR SOLD EXCEPT PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES
ACT OR PURSUANT TO AN AVAILABLE EXEMPTION FROM, OR IN A TRANSACTION NOT SUBJECT TO, THE
REGISTRATION REQUIREMENTS OF THE SECURITIES ACT AND IN ACCORDANCE WITH APPLICABLE STATE
SECURITIES LAWS AS EVIDENCED BY A LEGAL OPINION OF COUNSEL TO THE TRANSFEROR TO SUCH EFFECT,
THE SUBSTANCE OF WHICH SHALL BE REASONABLY ACCEPTABLE TO THE COMPANY. THIS SECURITY [AND THE
SECURITIES ISSUABLE UPON [EXERCISE] [CONVERSION] OF THIS SECURITY] MAY BE PLEDGED IN
CONNECTION WITH A BONA FIDE MARGIN ACCOUNT WITH A REGISTERED BROKER-DEALER OR OTHER LOAN
WITH A FINANCIAL INSTITUTION THAT IS AN “ACCREDITED INVESTOR” AS DEFINED IN RULE 501(a)
UNDER THE SECURITIES ACT OR OTHER LOAN SECURED BY SUCH SECURITIES.




The Company acknowledges and agrees that a Purchaser may from time to time pledge
pursuant to a bona fide margin agreement with a registered broker-dealer or grant a security
interest in some or all of the Securities to a financial institution that is an “accredited
investor” as defined in Rule 501(a) under the Securities Act and who agrees to be bound by
the provisions of this Agreement and the Registration Rights Agreement and, if required
under the terms of such arrangement, such Purchaser may transfer pledged or secured
Securities to the pledgees or secured parties. Such a pledge or transfer would not be
subject to approval of the Company and no legal opinion of legal counsel of the pledgee,
secured party or pledgor shall be required in connection therewith. Further, no notice
shall be required of such pledge. At the appropriate Purchaser’s expense, the Company will
execute and deliver such reasonable documentation as a pledgee or secured party of
Securities may reasonably request in connection with a pledge or transfer of the Securities,
including, if the Securities are subject to registration pursuant to the Registration Rights
Agreement, the preparation and filing of any required prospectus supplement under Rule
424(b)(3) under the Securities Act or other applicable provision of the Securities Act to
appropriately amend the list of Selling Stockholders (as defined in the Registration Rights
Agreement) thereunder.




(c) Certificates evidencing the Underlying Shares shall not contain any legend
(including the legend set forth in Section 4.1(b) hereof): (i) while a registration
statement (including the Registration Statement) covering the resale of such security is
effective under the Securities Act, (ii) following any sale of such Underlying Shares
pursuant to Rule 144, (iii) if such Underlying Shares are eligible for sale under Rule 144,
without the requirement for the Company to be in compliance with the current public
information required under Rule 144 as to such Underlying Shares and without volume or
manner-of-sale restrictions or (iv) if such legend is not required under applicable
requirements of the Securities Act (including judicial interpretations and pronouncements
issued by the staff of the Commission). The Company shall cause its counsel to issue a legal
opinion to the Transfer Agent promptly after the Effective Date if required by the Transfer
Agent to effect the removal of the legend hereunder. If all or any shares of Preferred Stock
are converted or any portion of a Warrant is exercised at a time when there is an effective
registration statement to cover the resale of the Underlying Shares, or if such Underlying
Shares may be sold


 


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under Rule 144 and the Company is then in compliance with the current
public information required under Rule 144, or if the Underlying Shares may be sold under Rule 144 without the requirement for
the Company to be in compliance with the current public information required under Rule 144
as to such Underlying Shares and without volume or manner-of-sale restrictions or if such
legend is not otherwise required under applicable requirements of the Securities Act
(including judicial interpretations and pronouncements issued by the staff of the
Commission) then such Underlying Shares shall be issued free of all legends. The Company
agrees that following the Effective Date or at such time as such legend is no longer
required under this Section 4.1(c), it will, no later than three Trading Days following the
delivery by a Purchaser to the Company or the Transfer Agent of a certificate representing
Underlying Shares, as applicable, issued with a restrictive legend (such third Trading Day,
the “Legend Removal Date”), deliver or cause to be delivered to such Purchaser a
certificate representing such shares that is free from all restrictive and other legends.
The Company may not make any notation on its records or give instructions to the Transfer
Agent that enlarge the restrictions on transfer set forth in this Section 4. Certificates
for Underlying Shares subject to legend removal hereunder shall be transmitted by the
Transfer Agent to the Purchaser by crediting the account of the Purchaser’s prime broker
with the Depository Trust Company System as directed by such Purchaser.




(d) In addition to such Purchaser’s other available remedies, the Company shall pay to
a Purchaser, in cash, as partial liquidated damages and not as a penalty, for each $10,000
of Underlying Shares (based on the VWAP of the Common Stock on the date such Securities are
submitted to the Transfer Agent) delivered for removal of the restrictive legend and subject
to Section 4.1(c), $100 per Trading Day (increasing to $200 per Trading Day ten (10) Trading
Days after such damages have begun to accrue) for each Trading Day after the second
(2nd) Trading Day after such Legend Removal Date until such certificate is
delivered without a legend. Nothing herein shall limit such Purchaser’s right to pursue
actual damages for the Company’s failure to deliver certificates representing any Securities
as required by the Transaction Documents, and such Purchaser shall have the right to pursue
all remedies available to it at law or in equity including, without limitation, a decree of
specific performance and/or injunctive relief.




(e) Each Purchaser, severally and not jointly with the other Purchasers, agrees with
the Company that such Purchaser will sell any Securities pursuant to either the registration
requirements of the Securities Act, including any applicable prospectus delivery
requirements, or an exemption therefrom, and that if Securities are sold pursuant to a
Registration Statement, they will be sold in compliance with the plan of distribution set
forth therein, and acknowledges that the removal of the restrictive legend from certificates
representing Securities as set forth in this Section 4.1 is predicated upon the Company’s
reliance upon this understanding.



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




4.3 Furnishing of Information; Public Information.




(a) If the Common Stock is not registered under Section 12(b) or 12(g) of the Exchange
Act on the date hereof, the Company agrees to cause the Common Stock to be registered under
Section 12(g) of the Exchange Act on or before the 60th calendar day following
the date hereof. Until the time that no Purchaser owns Securities or, the Company covenants
to maintain the registration of the Common Stock under Section 12(b) or 12(g) of the
Exchange Act and to timely file (or obtain extensions in respect thereof and file within the
applicable grace period) all reports required to be filed by the Company after the date
hereof pursuant to the Exchange Act even if the Company is not then subject to the reporting
requirements of the Exchange Act. As long as any Purchaser owns Securities, if the
Company is not required to file reports pursuant to the Exchange Act, it will prepare and
furnish to the Purchasers and make publicly available in accordance with Rule 144(c) such
information as is required for the Purchasers to sell the
Securities, including without limitation, under Rule 144. The Company further covenants
that it will take such further action as any holder of Securities may reasonably request, to
the extent required from time to time to enable such Person to sell such Securities without
registration under the Securities Act, including without limitation, within the requirements
of the exemption provided by Rule 144.


 


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(b) At any time during the period commencing from the six (6) month anniversary of the
date hereof and ending at such time that all of the Securities may be sold without the
requirement for the Company to be in compliance with Rule 144(c)(1) and otherwise without
restriction or limitation pursuant to Rule 144, if the Company shall fail for any reason to
satisfy the current public information requirement under Rule 144(c) (a “Public
Information Failure”) then, in addition to such Purchaser’s other available remedies,
the Company shall pay to a Purchaser, in cash, as partial liquidated damages and not as a
penalty, by reason of any such delay in or reduction of its ability to sell the Securities,
an amount in cash equal to two percent (2.0%) of the aggregate Subscription Amount of such
Purchaser’s Securities on the day of a Public Information Failure and on every thirtieth
(30th) day (pro rated for periods totaling less than thirty days) thereafter
until the earlier of (a) the date such Public Information Failure is cured and (b) such time
that such public information is no longer required  for the Purchasers to transfer the
Underlying Shares pursuant to Rule 144.  The payments to which a Purchaser shall be entitled
pursuant to this Section 4.3(b) are referred to herein as “Public Information Failure
Payments.”  Public Information Failure Payments shall be paid on the earlier of (i) the
last day of the calendar month during which such Public Information Failure Payments are
incurred and (ii) the third (3rd) Business Day after the event or failure giving
rise to the Public Information Failure Payments is cured.  In the event the Company fails to
make Public Information Failure Payments in a timely manner, such Public Information Failure
Payments shall bear interest at the rate of 1.5% per month (prorated for partial months)
until paid in full. Nothing herein shall limit such Purchaser’s right to pursue actual
damages for the Public Information Failure, and such Purchaser shall have the right to
pursue all remedies available to it at law or in equity including, without limitation, a
decree of specific performance and/or injunctive relief.



4.4 Integration. The Company shall not sell, offer for sale or solicit offers to buy
or otherwise negotiate in respect of any security (as defined in Section 2 of the Securities Act)
that would be integrated with the offer or sale of the Securities in a manner that would require
the registration under the Securities Act of the sale of the Securities or that would be integrated
with the offer or sale of the Securities for purposes of the rules and regulations of any Trading
Market such that it would require shareholder approval prior to the closing of such other
transaction unless shareholder approval is obtained before the closing of such subsequent
transaction.



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



4.6 Securities Laws Disclosure; Publicity. The Company shall, by 8:30 a.m. (New York
City time) on the Trading Day immediately following the date hereof, issue a Current Report on Form
8-K and press release disclosing the material terms of the transactions contemplated hereby, and
including the Transaction Documents as exhibits thereto. From and after the issuance of such press
release, the Company shall have publicly disclosed all material, non-public information delivered
to any of the Purchasers by the Company or any of its subsidiaries, or any of their respective
officers, directors, employees or agents in connection with the transactions contemplated by the
Transaction Documents. The Company and each Purchaser shall consult with each other in issuing any
other press releases with respect to the transactions contemplated hereby, and neither the Company
nor any Purchaser shall issue any such press release nor otherwise make any such public statement
without the prior consent of the Company, with respect to any press release of any Purchaser, or
without the prior consent of each Purchaser, with respect to any press release of the Company,
which consent shall not unreasonably be withheld or delayed, except if such disclosure is required
by law, in which case the disclosing party shall promptly provide the other party with prior notice
of such public statement or communication. Notwithstanding the foregoing, the Company shall not
publicly disclose the name of any Purchaser, or include the name of any Purchaser in any
filing with the Commission or any regulatory agency or Trading Market, without the prior written
consent of such Purchaser, except: (a) as required by federal securities law in connection with (i)
any registration statement contemplated by the Registration Rights Agreement and (ii) the filing of
final Transaction Documents (including signature pages thereto) with the Commission and (b) to the
extent such disclosure is required by law or Trading Market regulations, in which case the Company
shall provide the Purchasers with prior notice of such disclosure permitted under this clause (b).


 


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4.7 Shareholder Rights Plan. No claim will be made or enforced by the Company or,
with the consent of the Company, any other Person, that any Purchaser is an “Acquiring Person”
under any control share acquisition, business combination, poison pill (including any distribution
under a rights agreement) or similar anti-takeover plan or arrangement in effect or hereafter
adopted by the Company, or that any Purchaser could be deemed to trigger the provisions of any such
plan or arrangement, by virtue of receiving Securities under the Transaction Documents or under any
other agreement between the Company and the Purchasers.



4.8 Non-Public Information. Except with respect to the material terms and conditions
of the transactions contemplated by the Transaction Documents, the Company covenants and agrees
that neither it, nor any other Person acting on its behalf, will provide any Purchaser or its
agents or counsel with any information that the Company believes constitutes material non-public
information, unless prior thereto such Purchaser shall have executed a written agreement with the
Company regarding the confidentiality and use of such information. The Company understands and
confirms that each Purchaser shall be relying on the foregoing covenant in effecting transactions
in securities of the Company.



4.9 Use of Proceeds. The Company shall use the net proceeds from the sale of the
Securities hereunder for working capital purposes and shall not use such proceeds: (a) for the
satisfaction of any portion of the Company’s debt (other than payment of trade payables in the
ordinary course of the Company’s business and prior practices), (b) for the redemption of any
Common Stock or Common Stock Equivalents, (c) for the settlement of any outstanding litigation or
(d) in violation of the “FCPA” (means the Foreign Corrupt Practices Act) or OFAC regulations.



4.10 Indemnification of Purchasers. Subject to the provisions of this Section 4.10,
the Company will indemnify and hold each Purchaser and its directors, officers, shareholders,
members, partners, employees and agents (and any other Persons with a functionally equivalent role
of a Person holding such titles notwithstanding a lack of such title or any other title), each
Person who controls such Purchaser (within the meaning of Section 15 of the Securities Act and
Section 20 of the Exchange Act), and the directors, officers, shareholders, agents, members,
partners or employees (and any other Persons with a functionally equivalent role of a Person
holding such titles notwithstanding a lack of such title or any other title) of such controlling
persons (each, a “Purchaser Party”) harmless from any and all losses, liabilities,
obligations, claims, contingencies, damages, costs and expenses, including all judgments, amounts
paid in settlements, court costs and reasonable attorneys’ fees and costs of investigation that any
such Purchaser Party may suffer or incur as a result of or relating to (a) any breach of any of the
representations, warranties, covenants or agreements made by the Company in this Agreement or in
the other Transaction Documents or (b) any action instituted against a Purchaser in any capacity,
or any of them or their respective Affiliates, by any stockholder of the Company who is not an
Affiliate of such Purchaser, with respect to any of the transactions contemplated by the
Transaction Documents (unless such action is based upon a breach of such Purchaser’s
representations, warranties or covenants under the Transaction Documents or any agreements or
understandings such Purchaser may have with any such stockholder or any violations by such
Purchaser of state or federal securities laws or any conduct by such Purchaser which constitutes
fraud, gross negligence, willful misconduct or malfeasance). If any action shall be brought
against any Purchaser Party in respect of which indemnity may be sought pursuant to this Agreement,
such Purchaser Party shall promptly notify the Company in writing, and the Company shall have the
right to assume the defense thereof with counsel of its own choosing reasonably acceptable to the
Purchaser Party. Any Purchaser Party shall have the right to employ separate counsel in any such
action and participate in the defense thereof, but the fees and expenses of such counsel shall be
at the expense of such Purchaser Party except to the extent that (i) the employment thereof has
been specifically authorized by the Company in writing, (ii) the Company has failed after a
reasonable period of time to assume such defense and to employ counsel or (iii) in such action
there is, in the reasonable opinion of counsel, a material conflict on any
material issue between the position of the Company and the position of such Purchaser Party,
in which case the Company shall be responsible for the reasonable fees and expenses of no more than
one such separate counsel. The Company will not be liable to any Purchaser Party under this
Agreement (y) for any settlement by a Purchaser Party effected without the Company’s prior written
consent, which shall not be unreasonably withheld or delayed; or (z) to the extent, but only to the
extent that a loss, claim, damage or liability is attributable to any Purchaser Party’s breach of
any of the representations, warranties, covenants or agreements made by such Purchaser Party in
this Agreement or in the other Transaction Documents.


 


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4.11 Reservation and Listing of Securities.




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




(b) If, on any date, the number of authorized but unissued (and otherwise unreserved)
 shares of Common Stock is less than 130% of (i) the Required Minimum on such date, minus
(ii) the number of shares of Common Stock previously issued pursuant to the Transaction
Documents, then the Board of Directors shall use commercially reasonable efforts to amend
the Company’s certificate or articles of incorporation to increase the number of authorized
but unissued shares of Common Stock to at least the Required Minimum at such time (minus the
number of shares of Common Stock previously issued pursuant to the Transaction Documents),
as soon as possible and in any event not later than the 75th day after such date;
provided that the Company will not be required at any time to authorize a number of shares
of Common Stock greater than the maximum remaining number of shares of Common Stock that
could possibly be issued after such time pursuant to the Transaction Documents.




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




4.12 RESERVED.



4.13 Variable Rate Transactions. From the date hereof until such time as no Purchaser
holds any of the Securities, the Company shall be prohibited from effecting or entering into an
agreement to effect any issuance by the Company or any of its Subsidiaries of Common Stock or
Common Stock Equivalents for cash consideration (or a combination of units thereof) involving a
Variable Rate Transaction. “Variable Rate Transaction” means a transaction in which the
Company (i) issues or sells any debt or equity securities that are convertible into, exchangeable
or exercisable for, or include the right to receive, additional shares of Common Stock either (A)
at a conversion price, exercise price or exchange rate or other price that is based upon, and/or
varies with, the trading prices of or quotations for the shares of Common Stock at any time after
the initial issuance of such debt or equity securities or (B) with a conversion, exercise or
exchange price that is subject to being reset at some future date after the initial issuance of
such debt or equity security or upon the occurrence of specified or contingent events directly or
indirectly related to the business of the Company or the market for the Common Stock or (ii) enters
into any agreement, including, but not limited to, an equity line of credit, whereby the Company
may sell securities at a future determined price. Any Purchaser shall be entitled to obtain
injunctive relief against the Company to preclude any such issuance, which remedy shall be in
addition to any right to collect damages. For the avoidance of doubt, the Purchasers agree that
neither the Preferred Stock nor the Warrants constitute a Variable Rate Transaction.



4.14 Equal Treatment of Purchasers. No consideration (including any modification of
any Transaction Document) shall be offered or paid to any Person to amend or consent to a waiver or
modification of any provision of any of the Transaction Documents unless the same consideration is
also offered to all of the parties to the Transaction Documents. For clarification purposes, this
provision constitutes a separate right granted to each
Purchaser by the Company and negotiated separately by each Purchaser, and is intended for the
Company to treat the Purchasers as a class and shall not in any way be construed as the Purchasers
acting in concert or as a group with respect to the purchase, disposition or voting of Securities
or otherwise.


 


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4.15 Certain Transactions and Confidentiality. Each Purchaser, severally and not
jointly with the other Purchasers, covenants that neither it, nor any Affiliate acting on its
behalf or pursuant to any understanding with it will execute any purchases or sales, including
Short Sales, of any of the Company’s securities during the period commencing with the execution of
this Agreement and ending at such time that the transactions contemplated by this Agreement are
first publicly announced pursuant to the initial press release as described in Section 4.6.  Each
Purchaser, severally and not jointly with the other Purchasers, covenants that until such time as
the transactions contemplated by this Agreement are publicly disclosed by the Company pursuant to
the initial press release as described in Section 4.6, such Purchaser will maintain the
confidentiality of the existence and terms of this transaction and the information included in the
Transaction Documents and the Disclosure Schedules. Notwithstanding the foregoing, and
notwithstanding anything contained in this Agreement to the contrary, the Company expressly
acknowledges and agrees that (i) no Purchaser makes any representation, warranty or covenant hereby
that it will not engage in effecting transactions in any securities of the Company after the time
that the transactions contemplated by this Agreement are first publicly announced pursuant to the
initial press release as described in Section 4.6, (ii) no Purchaser shall be restricted or
prohibited from effecting any transactions in any securities of the Company in accordance with
applicable securities laws from and after the time that the transactions contemplated by this
Agreement are first publicly announced pursuant to the initial press release as described in
Section 4.6 and (iii) no Purchaser shall have any duty of confidentiality to the Company or its
Subsidiaries after the issuance of the initial press release as described in Section 4.6. 
Notwithstanding the foregoing, in the case of a Purchaser that is a multi-managed investment
vehicle whereby separate portfolio managers manage separate portions of such Purchaser’s assets and
the portfolio managers have no direct knowledge of the investment decisions made by the portfolio
managers managing other portions of such Purchaser’s assets, the covenant set forth above shall
only apply with respect to the portion of assets managed by the portfolio manager that made the
investment decision to purchase the Securities covered by this Agreement.



4.16 Form D; Blue Sky Filings. The Company agrees to timely file a Form D with
respect to the Securities as required under Regulation D and to provide a copy thereof, promptly
upon request of any Purchaser. The Company shall take such action as the Company shall reasonably
determine is necessary in order to obtain an exemption for, or to qualify the Securities for, sale
to the Purchasers at the Closing under applicable securities or “Blue Sky” laws of the states of
the United States, and shall provide evidence of such actions promptly upon request of any
Purchaser.



4.17 Capital Changes. Until the one year anniversary of the Effective Date, the
Company shall not undertake a reverse or forward stock split or reclassification of the Common
Stock without the prior written consent of the Purchasers holding a majority in interest of the
shares of Preferred Stock.



ARTICLE V.

MISCELLANEOUS




5.1 Termination.  This Agreement may be terminated by any Purchaser, as to such
Purchaser’s obligations hereunder only and without any effect whatsoever on the obligations between
the Company and the other Purchasers, by written notice to the other parties, if the Closing has
not been consummated on or before                     , 2010; provided, however, that such
termination will not affect the right of any party to sue for any breach by the other party (or
parties).



5.2 Fees and Expenses. At the Closing, the Company has agreed to reimburse Viriathus
the non-accountable sum of $7,500. Except as expressly set forth in the Transaction Documents to
the contrary, each party shall pay the fees and expenses of its advisers, counsel, accountants and
other experts, if any, and all other expenses incurred by such party incident to the negotiation,
preparation, execution, delivery and performance of this Agreement. The Company shall pay all
Transfer Agent fees, stamp taxes and other taxes and duties levied in connection with the delivery
of any Securities to the Purchasers.


 


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5.3 Entire Agreement. The Transaction Documents, together with the exhibits and
schedules thereto, contain the entire understanding of the parties with respect to the subject
matter hereof and supersede all prior agreements and understandings, oral or written, with respect
to such matters, which the parties acknowledge have been merged into such documents, exhibits and
schedules.



5.4 Notices. Any and all notices or other communications or deliveries required or
permitted to be provided hereunder shall be in writing and shall be deemed given and effective on
the earliest of: (a) the date of transmission, if such notice or communication is delivered via
facsimile at the facsimile number set forth on the signature pages attached hereto prior to 5:30
p.m. (New York City time) on a Trading Day, (b) the next Trading Day after the date of
transmission, if such notice or communication is delivered via facsimile at the facsimile number
set forth on the signature pages attached hereto on a day that is not a Trading Day or later than
5:30 p.m. (New York City time) on any Trading Day, (c) the second (2nd) Trading Day
following the date of mailing, if sent by U.S. nationally recognized overnight courier service or
(d) upon actual receipt by the party to whom such notice is required to be given. The address for
such notices and communications shall be as set forth on the signature pages attached hereto.



5.5 Amendments; Waivers. No provision of this Agreement may be waived, modified,
supplemented or amended except in a written instrument signed, in the case of an amendment, by the
Company and the Purchasers holding at least 67% in interest of the Securities then outstanding or,
in the case of a waiver, by the party against whom enforcement of any such waived provision is
sought. No waiver of any default with respect to any provision, condition or requirement of this
Agreement shall be deemed to be a continuing waiver in the future or a waiver of any subsequent
default or a waiver of any other provision, condition or requirement hereof, nor shall any delay or
omission of any party to exercise any right hereunder in any manner impair the exercise of any such
right.



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



5.7 Successors and Assigns. This Agreement shall be binding upon and inure to the
benefit of the parties and their successors and permitted assigns. The Company may not assign this
Agreement or any rights or obligations hereunder without the prior written consent of each
Purchaser (other than by merger). Any Purchaser may assign any or all of its rights under this
Agreement to any Person to whom such Purchaser assigns or transfers any Securities, provided that
such transferee agrees in writing to be bound, with respect to the transferred Securities, by the
provisions of the Transaction Documents that apply to the “Purchasers.”



5.8 No Third-Party Beneficiaries. This Agreement is intended for the benefit of the
parties hereto and their respective successors and permitted assigns and is not for the benefit of,
nor may any provision hereof be enforced by, any other Person, except as otherwise set forth in
Section 4.10.



5.9 Governing Law. All questions concerning the construction, validity, enforcement
and interpretation of the Transaction Documents shall be governed by and construed and enforced in
accordance with the internal laws of the State of New York, without regard to the principles of
conflicts of law thereof. Each party agrees that all legal proceedings concerning the
interpretations, enforcement and defense of the transactions contemplated by this Agreement and any
other Transaction Documents (whether brought against a party hereto or its respective affiliates,
directors, officers, shareholders, employees or agents) shall be commenced exclusively in the state
and federal courts sitting in the City of New York. Each party hereby irrevocably submits to the
exclusive jurisdiction of the state and federal courts sitting in the City of New York, borough of
Manhattan for the adjudication of any dispute hereunder or in connection herewith or with any
transaction contemplated hereby or discussed herein (including with respect to the enforcement of
any of the Transaction Documents), and hereby irrevocably waives, and agrees not to assert in any
suit, action or proceeding, any claim that it is not personally subject to the jurisdiction of any
such court, that such suit, action or proceeding is improper or is an inconvenient venue for such
proceeding. Each party hereby irrevocably waives personal service of process and consents to
process being served in any such suit, action or proceeding by mailing a copy thereof via
registered or certified mail or overnight delivery (with evidence of delivery) to such party at the
address in effect for notices to it under this Agreement and agrees that such service shall
constitute good and sufficient service of process and notice thereof. Nothing contained herein
shall be deemed to limit in any way any right to serve process in any other manner
permitted by law. If either party shall commence an action or proceeding to enforce any
provisions of the Transaction Documents, then, in addition to the obligations of the Company under
Section 4.10, the prevailing party in such action or proceeding shall be reimbursed by the other
party for its reasonable attorneys’ fees and other costs and expenses incurred with the
investigation, preparation and prosecution of such action or proceeding.


 


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5.10 Survival. The representations and warranties contained herein shall survive the
Closing and the delivery of the Securities.



5.11 Execution. This Agreement may be executed in two or more counterparts, all of
which when taken together shall be considered one and the same agreement and shall become effective
when counterparts have been signed by each party and delivered to the other party, it being
understood that both parties need not sign the same counterpart. In the event that any signature
is delivered by facsimile transmission or by e-mail delivery of a “.pdf” format data file, such
signature shall create a valid and binding obligation of the party executing (or on whose behalf
such signature is executed) with the same force and effect as if such facsimile or “.pdf” signature
page were an original thereof.



5.12 Severability. If any term, provision, covenant or restriction of this Agreement
is held by a court of competent jurisdiction to be invalid, illegal, void or unenforceable, the
remainder of the terms, provisions, covenants and restrictions set forth herein shall remain in
full force and effect and shall in no way be affected, impaired or invalidated, and the parties
hereto shall use their commercially reasonable efforts to find and employ an alternative means to
achieve the same or substantially the same result as that contemplated by such term, provision,
covenant or restriction. It is hereby stipulated and declared to be the intention of the parties
that they would have executed the remaining terms, provisions, covenants and restrictions without
including any of such that may be hereafter declared invalid, illegal, void or unenforceable.



5.13 Rescission and Withdrawal Right. Notwithstanding anything to the contrary
contained in (and without limiting any similar provisions of) any of the other Transaction
Documents, whenever any Purchaser exercises a right, election, demand or option under a Transaction
Document and the Company does not timely perform its related obligations within the periods therein
provided, then such Purchaser may rescind or withdraw, in its sole discretion from time to time
upon written notice to the Company, any relevant notice, demand or election in whole or in part
without prejudice to its future actions and rights; provided, however, that in the
case of a rescission of a conversion of the Preferred Stock or exercise of a Warrant, the
applicable Purchaser shall be required to return any shares of Common Stock subject to any such
rescinded conversion or exercise notice concurrently with the return to such Purchaser of the
aggregate exercise price paid to the Company for such shares and the restoration of such
Purchaser’s right to acquire such shares pursuant to such Purchaser’s Warrant (including, issuance
of a replacement warrant certificate evidencing such restored right).



5.14 Replacement of Securities. If any certificate or instrument evidencing any
Securities is mutilated, lost, stolen or destroyed, the Company shall issue or cause to be issued
in exchange and substitution for and upon cancellation thereof (in the case of mutilation), or in
lieu of and substitution therefor, a new certificate or instrument, but only upon receipt of
evidence reasonably satisfactory to the Company of such loss, theft or destruction. The applicant
for a new certificate or instrument under such circumstances shall also pay any reasonable
third-party costs (including customary indemnity) associated with the issuance of such replacement
Securities.



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



5.16 Payment Set Aside. To the extent that the Company makes a payment or payments to
any Purchaser pursuant to any Transaction Document or a Purchaser enforces or exercises its rights
thereunder, and such payment or payments or the proceeds of such enforcement or exercise or any
part thereof are subsequently invalidated, declared to be fraudulent or preferential, set aside,
recovered from, disgorged by or are required to be
refunded, repaid or otherwise restored to the Company, a trustee, receiver or any other person
under any law (including, without limitation, any bankruptcy law, state or federal law, common law
or equitable cause of action), then to the extent of any such restoration the obligation or part
thereof originally intended to be satisfied shall be revived and continued in full force and effect
as if such payment had not been made or such enforcement or setoff had not occurred.


 


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



5.18 Independent Nature of Purchasers’ Obligations and Rights. The obligations of
each Purchaser under any Transaction Document are several and not joint with the obligations of any
other Purchaser, and no Purchaser shall be responsible in any way for the performance or
non-performance of the obligations of any other Purchaser under any Transaction Document. Nothing
contained herein or in any other Transaction Document, and no action taken by any Purchaser
pursuant thereto, shall be deemed to constitute the Purchasers as a partnership, an association, a
joint venture or any other kind of entity, or create a presumption that the Purchasers are in any
way acting in concert or as a group with respect to such obligations or the transactions
contemplated by the Transaction Documents. Each Purchaser shall be entitled to independently
protect and enforce its rights, including, without limitation, the rights arising out of this
Agreement or out of the other Transaction Documents, and it shall not be necessary for any other
Purchaser to be joined as an additional party in any proceeding for such purpose. Each Purchaser
has been represented by its own separate legal counsel in their review and negotiation of the
Transaction Documents. For reasons of administrative convenience only, each Purchaser and its
respective counsel have chosen to communicate with the Company through WS. WS does not represent
any of the Purchasers and only represents Viriathus, as one of the Placement Agents. The Company
has elected to provide all Purchasers with the same terms and Transaction Documents for the
convenience of the Company and not because it was required or requested to do so by any of the
Purchasers.



5.19 Liquidated Damages. The Company’s obligations to pay any partial liquidated
damages or other amounts owing under the Transaction Documents is a continuing obligation of the
Company and shall not terminate until all unpaid partial liquidated damages and other amounts have
been paid notwithstanding the fact that the instrument or security pursuant to which such partial
liquidated damages or other amounts are due and payable shall have been canceled.



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


 


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5.21 Construction. The parties agree that each of them and/or their respective counsel
has reviewed and had an opportunity to revise the Transaction Documents and, therefore, the normal
rule of construction to the effect that any ambiguities are to be resolved against the drafting
party shall not be employed in the interpretation of the Transaction Documents or any amendments
hereto. In addition, each and every reference to share prices and shares
of Common Stock in any Transaction Document shall be subject to adjustment for reverse and forward
stock splits, stock dividends, stock combinations and other similar transactions of the Common
Stock that occur after the date of this Agreement.



5.22 WAIVER OF JURY TRIAL. IN ANY ACTION, SUIT, OR PROCEEDING IN ANY JURISDICTION
BROUGHT BY ANY PARTY AGAINST ANY OTHER PARTY, THE PARTIES EACH KNOWINGLY AND INTENTIONALLY, TO THE
GREATEST EXTENT PERMITTED BY APPLICABLE LAW, HEREBY ABSOLUTELY, UNCONDITIONALLY, IRREVOCABLY AND
EXPRESSLY WAIVES FOREVER TRIAL BY JURY.



(Signature Pages Follow)



 


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IN WITNESS WHEREOF, the parties hereto have caused this Securities Purchase Agreement to be
duly executed by their respective authorized signatories as of the date first indicated above.



	 	 	 	 	 	 	 
	FIBROCELL SCIENCE, INC.	 	 	 	Address for Notice:
	 
	 	 	 	 	 	 
	By:

	 	 	 	 	 	Fax:
	 

	 	 

Name:
	 	 	 	 
	 

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






[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK

SIGNATURE PAGE FOR PURCHASER FOLLOWS]



 


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[PURCHASER SIGNATURE PAGES TO FIBROCELL SECURITIES PURCHASE AGREEMENT]




IN WITNESS WHEREOF, the undersigned have caused this Securities Purchase Agreement to be duly
executed by their respective authorized signatories as of the date first indicated above.



Name of Purchaser:                                                             



Signature of Authorized Signatory of Purchaser:                                         



Name of Authorized Signatory:                                                             



Title of Authorized Signatory:                                                             



Email Address of Authorized Signatory:                                                             



Facsimile Number of Authorized Signatory:                                                             



Address for Notice to Purchaser:



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



Subscription Amount: $                    




Shares of Preferred Stock:                                         




Warrant Shares:                                         




EIN Number: [PROVIDE THIS UNDER SEPARATE COVER]




[SIGNATURE PAGES CONTINUE]





 


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