Unassociated Document


    SECURITIES
PURCHASE AGREEMENT

     

    This
Securities Purchase Agreement (this “Agreement”) is dated
as of February 25, 2010, between Cleveland BioLabs, 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, for all purposes of
this Agreement, 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 4.5.

     

    “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.

     

    “Approved Share Plan”
means any employee benefit plan which has been approved by the board of
directors of the Company prior to or subsequent to the date hereof pursuant to
which shares of Common Stock and options to purchase Common Stock may be issued
to any employee, consultant, officer or director for services provided to the
Company in their capacity as such.

     

    “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.

     

    “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 $0.005 per share, and any other class
of securities into which such securities may hereafter be reclassified or
changed.

     

    “Common Stock
Equivalents” means any capital stock or other security of the Company or
any of its Subsidiaries that is at any time and under any circumstances directly
or indirectly convertible into, exercisable or exchangeable for, or which
otherwise entitles the holder thereof to acquire, any capital stock or other
security of the Company (including, without limitation, Common Stock) or any of
its Subsidiaries.

     

    “Company Counsel”
means Katten Muchin Rosenman LLP, with offices located at 525 West Monroe
Street, Suite 1900, Chicago, Illinois 60661.

     

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

     

     “Effective Date” means
the date that is the earlier to occur of (i) the date on which all of the Shares
and Warrant Shares have been sold pursuant to Rule 144 and (ii) the date on
which all of the Shares and Warrant Shares are eligible to be sold (assuming
cashless exercise of the Warrants and none of the Shares or Warrant Shares are
held by an Affiliate of the Company) pursuant to Rule 144 without volume or
manner-of-sale restrictions and without the need for current public information
required by Rule 144(c)(1) (or Rule 144(i)(2), if applicable).

     

    “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.



    
      
         


      

      
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    “Exempt Issuance”
means the issuance of (a) shares of Common Stock or options to purchase Common
Stock to directors, officers, employees or consultants (provided that issuances
of Common Stock and Common Stock Equivalents to consultants shall not exceed, in
the aggregate over any 12 month period, 5% of the issued and outstanding shares
of Common Stock as of the date hereof and provided further consultants shall not
include attorneys, law firms, accountants or accounting firms) of the Company in
their capacity as such pursuant to an Approved Share Plan, provided that (1) all
such issuances (taking into account the shares of Common Stock issuable upon
exercise of such options) after the date hereof pursuant to this clause (A) do
not, in the aggregate, exceed more than 10% of the Common Stock issued and
outstanding immediately prior to the date hereof in any 12 month period and (2)
the exercise price of any such options is not lowered, none of such options are
amended to increase the number of shares issuable thereunder and none of the
terms or conditions of any such options are otherwise materially changed in any
manner that adversely affects any of the Purchasers, (b) securities upon the
exercise of any Securities issued hereunder, (c) shares of Common Stock issued
upon the conversion or exercise of Common Stock Equivalents (other than options
to purchase Common Stock issued pursuant to an Approved Share Plan that are
covered by clause (a) above) issued prior to the date hereof, provided that the
conversion or exercise price of any such Common Stock Equivalents (other than
options to purchase Common Stock issued pursuant to an Approved Share Plan that
are covered by clause (a) above) is not lowered, none of such Common Stock
Equivalents (other than options to purchase Common Stock issued pursuant to an
Approved Share Plan that are covered by clause (a) above) are amended to
increase the number of shares issuable thereunder and none of the terms or
conditions of any such Common Stock Equivalents (other than options to purchase
Common Stock issued pursuant to an Approved Share Plan that are covered by
clause (a) above) are otherwise materially changed in any manner that adversely
affects any of the Purchasers or (d) 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
the equity holders of a Person) which is, itself or through its subsidiaries, an
operating company or an owner of 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.

     

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

     

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

     

    “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).

     

    “Knowledge of the
Company” means the actual knowledge that was, or would reasonably be
expected to be, obtained after due inquiry of all officers of the
Company.

     

    “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 that has the practical effect of creating any of the
foregoing.

     

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


    
      
         


      

      
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    “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 5.22.

     

    “Participation
Maximum” shall have the meaning ascribed to such term in Section
4.11(a).

     

    “Per Share Purchase
Price” equals $3.25, 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 and prior to the Closing Date.

     

    “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(jj).

     

    “Pre-Notice” shall
have the meaning ascribed to such term in Section 4.11(b).

     

    “Pro Rata Portion”
shall have the meaning ascribed to such term in Section 4.11(e).

     

    “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
4.2(b).

     

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

     

     “Purchaser Party”
shall have the meaning ascribed to such term in Section 4.8.

     

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

     

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


    
      
         


      

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

     

    “Securities” means the
Shares, the Warrants and the Warrant Shares.

     

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

     

    “Shares” means the
shares of Common Stock issued or issuable (including, without limitation,
pursuant to Section 4.19) to each Purchaser pursuant to this
Agreement.

     

    “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). 

     

    “Subscription Amount”
means, as to each Purchaser, the aggregate amount to be paid for Shares and
Warrants 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.

     

    “Subsequent Financing”
shall have the meaning ascribed to such term in Section 4.11(a).

     

    “Subsequent Financing
Notice” shall have the meaning ascribed to such term in Section
4.11(b).

     

    “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 Warrants, all exhibits and schedules
thereto and hereto and any other documents or agreements executed in connection
with the transactions contemplated hereunder.

     

    “Transfer Agent” means
Continental Stock Transfer & Trust Company, the current transfer agent of
the Company, with a mailing address of 17 Battery Place, New York, New York
10004, and a facsimile number of (212) 509-5150, and any successor transfer
agent of the Company.


    
      
         


      

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

     

    “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 Shares 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 commencing on the 6 month anniversary of the Closing Date and have a
term of exercise equal to five (5) years from the Closing Date, in the form of
Exhibit B
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 $5,000,000
of Shares and Warrants. Each Purchaser shall deliver to the Company via wire
transfer of immediately available funds equal to such Purchaser’s Subscription
Amount as set forth on the signature page hereto executed by such Purchaser, and
the Company shall deliver to each Purchaser its respective Shares and a Warrant,
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 A attached
hereto;

     

    (iii)         a
copy of the irrevocable instructions to the Transfer Agent instructing the
Transfer Agent to deliver, on an expedited basis, a certificate evidencing a
number of Shares equal to such Purchaser’s Subscription Amount divided by the
Per Share Purchase Price, registered in the name of such Purchaser;
and

     

    (iv)         a
Warrant registered in the name of such Purchaser to purchase up to a number of
shares of Common Stock equal to 66% of such Purchaser’s Shares
with an exercise price equal to $4.50, subject to adjustment
therein.

     

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

     

    (i)           this
Agreement duly executed by such Purchaser; and

     

    (ii)       
  such Purchaser’s Subscription Amount by wire transfer to the account
as specified in writing by the Company.

     

    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.


    
      
         


      

      
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    (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;

     

    (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, 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, has not
ended or terminated and 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 attached hereto (the “Disclosure
Schedules”), which Disclosure Schedules shall be deemed a part hereof and
shall qualify any representation 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).  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.


    
      
         


      

      
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    (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 or
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.

     

    (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 and public
policy.


    
      
         


      

      
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    (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, state and foreign
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.  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 4.4 of this Agreement, (ii)
the notice and/or application(s) to each applicable Trading Market for the
issuance and sale of the Securities and the listing of the Securities for
trading thereon in the time and manner required thereby and (iii) the filing of
Form D with the Commission and such filings as are required to be made under
applicable state securities laws (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 Warrant Shares, when issued in
accordance with the terms of the Warrants, 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 at least 120% of the number of shares of Common Stock issuable pursuant to
this Agreement and the Warrants as of 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, to the
Knowledge of the Company, 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 to employees and other
eligible recipients pursuant to the Company’s employee stock incentive plans 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.  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 set
forth on Schedule
3.1(g) or 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.  Except as set forth on Schedule 3.1(g), 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.  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.  The Company has never been an issuer subject to, or
identified in, Rule 144(i) under the Securities Act. The financial statements of
the Company included in the SEC Reports complied 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 presented in all material respects the financial
position of the Company as of and for the dates thereof and the results of
operations and cash flows for the periods then ended, subject, in the case of
unaudited statements, to normal, immaterial, year-end audit
adjustments.


    
      
         


      

      
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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 or Affiliate, except pursuant to existing Company stock
option plans.  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,
prospects, 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.  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.


    
      
         


      

      
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    (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 relating to taxes, environmental protection, occupational health and
safety, product quality and safety and employment and labor matters, except in
each case as could not have or reasonably be expected to result in a Material
Adverse Effect.

     

    (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,
except where such revocation or modification would not reasonably be expected to
have a Material Adverse Effect.

     

    (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.


    
      
         


      

      
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    (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 has
expired, terminated or been abandoned, or is expected to expire or terminate or
be abandoned, within two (2) years after the date of this
Agreement.  Neither the Company nor any Subsidiary has received, since
the date of the latest audited financial statements included within the SEC
Reports, a written notice of a claim or otherwise has any knowledge that the
Intellectual Property Rights violate or infringe upon the rights of any Person,
except as would not have a Material Adverse Effect.  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 the Company
believes 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 an increase in cost that
would have a Material Adverse Effect.

     

    (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, director compensation 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 compliance with any and
all applicable requirements of the Sarbanes-Oxley Act of 2002 that are effective
as of the date hereof, and any and all applicable rules and regulations
promulgated by the Commission thereunder that are effective as of the date
hereof and 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 provide reasonable assurance
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 or any other
applicable securities laws 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.


    
      
         


      

      
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    (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.  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 the Knowledge of the Company, 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.  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. 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.

     

    (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, interested stockholder, 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, together with the SEC
Reports filed by the Company during such period, 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.


    
      
         


      

      
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    (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 of the
Securities under the Securities Act, or (ii) any applicable stockholder 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: (i) the fair saleable 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 liabilities (including known contingent
liabilities but excluding non-cash liabilities related to outstanding warrants)
as they mature, (ii) the Company’s assets do not constitute unreasonably small
capital to carry on its business as now conducted and as proposed to be
conducted including its capital needs taking into account the particular capital
requirements of the business conducted by the Company, and projected capital
requirements and capital availability thereof, and (iii) the current cash flow
of the Company, together with the proceeds the Company would receive, were it to
liquidate all of its assets, after taking into account all anticipated uses of
the cash, would be sufficient to pay all amounts on or in respect of its
liabilities when such amounts are required to be paid.  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).  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.


    
      
         


      

      
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    (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 (i) has made or filed all United States
federal and state income and all foreign income and franchise tax returns,
reports and declarations required by any jurisdiction to which it is subject,
(ii) has paid all taxes and other governmental assessments and charges that are
material in amount, shown or determined to be due on such returns, reports and
declarations and (iii) has set aside on its books provision reasonably adequate
for the payment of all material taxes for periods subsequent to the periods to
which such returns, reports or declarations apply.  There are no
unpaid taxes in any material amount claimed to be due by the taxing authority of
any jurisdiction, and the officers of the Company or of any Subsidiary know of
no basis for any such claim.

     

    (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 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 on Form 10-K for the
year ending December 31, 2009.

     

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


    
      
         


      

      
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    (gg)           
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.

     

    (hh)           Acknowledgment Regarding
Purchasers’ Trading Activity.  Anything in this Agreement or elsewhere
herein to the contrary notwithstanding (except for Sections 3.2(f) and 4.14
hereof), it is understood and acknowledged by the Company that: (i) none of the
Purchasers has been asked by the Company to agree, nor has any Purchaser agreed,
to desist from effecting any transactions (including, without limitation,
purchasing or selling, long and/or short) in any 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 Warrant 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, subject to Section 4.14, such
aforementioned hedging activities do not constitute a breach of any of the
Transaction Documents.

     

    (ii)           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.


    
      
         


      

      
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    (jj)           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 Knowledge of the
Company, 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.

     

    (kk)           Form S-3
Eligibility.  The Company is eligible to register the resale of
the Securities for resale by the Purchaser on Form S-3 promulgated under the
Securities Act, it being understood that the Company is under no obligation to
so register the Securities.

     

    (ll)           Stock Option Plans.
Each stock option granted by the Company under the Company’s stock option plans
was granted (i) in accordance with the terms of the Company’s stock option plans
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 plans 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.


    
      
         


      

      
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    (mm)        
Office of Foreign
Assets Control.  Neither the Company nor, to the Company's
knowledge, any director, officer, agent, employee or affiliate of the Company 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.

     

    (oo)           Bank Holding Company
Act.  To the Knowledge of the Company, neither the Company nor
any of its Subsidiaries or Affiliates 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 or
Affiliates 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 or Affiliates 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.  To the Knowledge of the Company, the operations of
the Company 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
with respect to the Money Laundering Laws is pending or, to the Knowledge of the
Company, 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 execution of
this Agreement on the date hereof 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 and
public policy.


    
      
         


      

      
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    (b)           No Conflicts. The
execution, delivery and performance of the Transaction Documents to which it is
a party by such Purchaser and the consummation by such Purchaser of the
transactions contemplated thereby do not and will not: (i) conflict with or
violate, if such Purchaser is an entity, any provision of the Purchaser’s
certificate or articles of incorporation, bylaws or other organizational or
charter documents, (ii) violate, or constitute a default (or an event which with
notice or lapse of time or both would become a default) under, or give to others
any rights of termination, amendment, acceleration or cancellation (with or
without notice, lapse or time or both) of, any agreement, credit facility, debt
or other instrument to which such Purchaser is a party or (iii) result in a
violation of any law, rule, regulation, order, judgment, injunction, decree or
other restriction of any court or governmental authority to which such Purchaser
is subject (including federal and state securities laws and regulations) or by
which any property or asset of such Purchaser is bound or affected; except in
the case of clauses (ii) and (iii) above, for such conflicts, defaults, rights
or violations which would not individually or in the aggregate, reasonably be
expected to have a material adverse effect on the transactions contemplated
hereby or in the other Transaction Documents or the authority or ability of such
Purchaser to perform it obligations under the Transaction
Documents.

     

    (c)           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
a 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.

     

    (d)           Purchaser
Status.  At the time such Purchaser was offered the Securities,
it was, and as of the date hereof it is, and as of the Closing Date and on each
date on which it exercises any Warrants in cash, it will be an “accredited
investor” as defined in Rule 501 under the Securities Act.


    
      
         


      

      
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    (e)           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. Such Purchaser and its
advisors, if any, have been furnished with all materials relating to the
business, finances and operations of the Company and relating to the offer and
sale of the Securities that have been requested by such Purchaser.

    


    (f)           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.

    


    (g)           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.

    


    (h)           Disclosure. Such
Purchaser acknowledges and agrees that the Company is not making any
representation or warranty and has not made any representation or warranty other
than those set forth in the Transaction Documents.

    


    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 the Transaction
Documents.


    
      
         


      

      
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    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 shall have the rights and
obligations of a Purchaser under this Agreement.

    


    (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 FOR WHICH THIS SECURITY IS EXERCISABLE] HAS
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 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, 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.


    
      
         


      

      
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    (c)           Certificates
evidencing the Shares and Warrant Shares shall not contain any legend (including
the legend set forth in Section 4.1(b) hereof), (i) while a registration
statement covering the resale of such security is effective under the Securities
Act, (ii) following any sale of such Shares or Warrant Shares pursuant to Rule
144, (iii) if such Shares or Warrant 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 Shares and Warrant
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).  If required by the Transfer Agent, the Company shall
cause its counsel to issue a legal opinion to the Transfer Agent promptly to
effect the removal of the legend hereunder if no legend is required by the
foregoing. If all or any portion of a Warrant is exercised at a time when there
is an effective registration statement to cover the resale of the Warrant
Shares, or if such Shares or Warrant Shares may be sold under Rule 144 and the
Company is then in compliance with the current public information required under
Rule 144, or if the Shares or Warrant 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 Shares or Warrant Shares 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 Warrant Shares shall be issued free of
all legends. The Company agrees that 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 Shares or Warrant Shares, as the case may be, 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 Securities 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 $1,000 of Shares or Warrant 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), $10 per Trading
Day (increasing to $20 per Trading Day five (5) Trading Days after such damages
have begun to accrue) for each Trading Day after the 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.


    
      
         


      

      
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    4.2         Furnishing of Information;
Public Information.

    


    (a)           Until
the earliest of the time that (i) no Purchaser owns Securities or (ii) the
Warrants have expired, the Company covenants to either (A) 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 other than filings for which
the failure to file would not impact the eligibility of the Company to use Form
S-3 or (B)  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.

    


    (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 assuming
the Warrants are exercised by way of cashless exercise and none of the
Securities are (or were at any time) held by an Affiliate of the Company, 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 Shares and Warrant Shares pursuant to Rule 144.  The
payments to which a Purchaser shall be entitled pursuant to this Section 4.2(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.


    
      
         


      

      
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    4.3         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 stockholder approval prior to the closing of such other
transaction unless stockholder approval is obtained before the closing of such
subsequent transaction.

    


    4.4         Securities Laws Disclosure;
Publicity.  The Company shall, (i) by 9:30 a.m. (New York City
time) on the Trading Day immediately following the date hereof, issue a press
release disclosing the material terms of the transactions contemplated hereby,
and (ii) by 5:30 p.m. (New York City time) on the Trading Day immediately
following the date hereof, file a Current Report on Form 8-K disclosing the
material terms of the transactions documents contemplated hereby and including
the Transaction Documents as exhibits thereto.  From and after the
issuance of the 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 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).

    


    4.5         Stockholder 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.


    
      
         


      

      
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    4.6         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.

    


    4.7         Use of Proceeds.
Except as set forth on Schedule 4.7 attached
hereto, the Company shall use the net proceeds from the sale of the Securities
hereunder for working capital purposes and shall not use such proceeds for: (a)
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) the redemption of any Common Stock or Common Stock Equivalents,
(c) the settlement of any outstanding litigation or (d) in violation of the FCPA
or OFAC regulations.

    


    4.8         Indemnification of
Purchasers.   Subject to the provisions of this Section
4.8, the Company will indemnify and hold each Purchaser and its directors,
officers, stockholders, 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, stockholders,
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 or any violations by the Purchaser of state or federal
securities laws or any conduct by such Purchaser that constitutes fraud, gross
negligence willful misconduct or malfeasance.  The indemnification
required by this Section 4.8 shall be made by periodic payments of the amount
thereof during the course of the investigation or defense, as and when bills are
received or are incurred. The indemnity agreements contained herein shall be in
addition to any cause of action or similar right of any Purchaser Party against
the Company or others, and any liabilities the Company may be subject to
pursuant to law.


    
      
         


      

      
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    4.9         Reservation of Common
Stock. As of the date hereof, the Company has reserved and the Company
shall continue to reserve and keep available at all times, free of preemptive
rights, a sufficient number of shares of Common Stock for the purpose of
enabling the Company to issue Shares pursuant to this Agreement and Warrant
Shares pursuant to any exercise of the Warrants.

    


    4.10       Listing of Common
Stock. The Company hereby agrees to use best efforts to maintain the
listing or quotation of the Common Stock on the Trading Market on which it is
currently listed, and concurrently with the Closing, the Company shall apply to
list or quote all of the Shares and Warrant Shares on such Trading Market and
promptly secure the listing of all of the Shares and Warrant Shares on such
Trading Market. The Company further agrees, if the Company applies to have the
Common Stock traded on any other Trading Market, it will then include in such
application all of the Shares and Warrant Shares, and will take such other
action as is necessary to cause all of the Shares and Warrant Shares to be
listed or quoted on such other Trading Market as promptly as
possible.  The Company will then take all action reasonably necessary
to continue the listing or quotation and trading of its Common Stock on a
Trading Market and will comply in all respects with the Company’s reporting,
filing and other obligations under the bylaws or rules of the Trading
Market.

    


    4.11       Participation in Future
Financing.

    


    (a)           From
the date hereof through the earlier of (i) the first (1st)
Trading Day immediately following the date on which the Company consummates a
Subsequent Financing (as defined below) or a series of Subsequent Financings
pursuant to which the Company receives via wire transfer gross proceeds in
excess of $15,000,000 in the aggregate and (ii) February 25, 2011 (4:00 p.m. New
York time on such earlier day is referred to herein as the “Termination Time”),
upon any issuance, directly or indirectly, by the Company or any of its
Subsidiaries of any securities (including, without limitation, Common Stock or
Common Stock Equivalents), Indebtedness or any combination thereof (each a
“Subsequent
Financing”), each Purchaser shall have the right to participate, in
accordance with the terms of this Section 4.11, in up to an amount of the
Subsequent Financing equal to 100% of the Subsequent Financing (the “Participation
Maximum”) on the same terms, conditions and price provided for in the
Subsequent Financing.


    
      
         


      

      
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    (b)           At
least five (5) Trading Days prior to the closing of the Subsequent Financing,
the Company shall deliver to each Purchaser a written notice of its intention to
effect a Subsequent Financing (a “Pre-Notice”), which
Pre-Notice shall not contain any information (including, without limitation,
material, non-public information) other than: (i) a statement that the Company
is considering a Subsequent Financing, (ii) a statement that the statement in
clause (i) above does not constitute material, non-public information and (iii)
a statement informing such Purchaser that it is entitled to receive a Subsequent
Financing Notice (as defined below) with respect to such Subsequent Financing
upon its written request. Upon the written request of a Purchaser within three
(3) Trading Days after the delivery of such Pre-Notice, and only upon a written
request by such Purchaser, the Company shall promptly, but no later than one (1)
Trading Day after such request, deliver to such Purchaser an irrevocable written
notice (a “Subsequent
Financing Notice”) of such Subsequent Financing, which shall describe in
reasonable detail the proposed terms of such Subsequent Financing, the amount of
proceeds intended to be raised thereunder and the Person or Persons through or
with whom such Subsequent Financing is proposed to be effected and shall include
a term sheet or similar document relating thereto as an
attachment.  Upon a Purchaser’s receipt of a requested Subsequent
Financing Notice, such Purchaser shall keep the existence and terms of the
Subsequent Financing so described in such requested Subsequent Financing Notice
confidential (except that such Purchaser may disclose both the existence and
terms of such Subsequent Financing to its representatives (including without
limitation, legal counsel and brokers)) and shall not use such information
except in connection with its evaluations of such Subsequent Financing and/or
such Purchaser’s participation therein, in each case, until the earlier to occur
of (i) the public disclosure of such Subsequent Financing or (ii) the fifth
(5th)
Business Day after such Purchaser’s receipt of such requested Subsequent
Financing Notice (it being expressly understood and agreed that on such earlier
date such confidentiality obligation of such Purchaser shall be free to use all
such information for any purpose.

    


    (c)           Any
Purchaser desiring to participate in such Subsequent Financing must provide
written notice to the Company by not later than 5:30 p.m. (New York City time)
on the third (3rd)
Trading Day after such Purchaser has received such Subsequent Financing Notice
that the Purchaser is willing to participate in such Subsequent Financing, the
amount of the Purchaser’s participation, and representing and warranting that
the Purchaser has such funds ready, willing, and available for investment on the
terms set forth in such Subsequent Financing Notice. If the Company receives no
such notice from a Purchaser as of such fifth (5th)
Trading Day, such Purchaser shall be deemed to have notified the Company that it
does not elect to participate. 


    (d)           If
by 5:30 p.m. (New York City time) on the fifth (5th)
Trading Day after all of the Purchasers requesting a Subsequent Financing Notice
have received such Subsequent Financing Notices, notifications by the Purchasers
of their willingness to participate in the Subsequent Financing (or to cause
their designees to participate) is, in the aggregate, less than the total amount
of the Subsequent Financing, then the Company may effect the remaining portion
of such Subsequent Financing on the terms and with the Persons set forth in the
Subsequent Financing Notice.

    


    
      
        
        

      

      
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    (e)           If
by 5:30 p.m. (New York City time) on the fifth (5th)
Trading Day after all of the Purchasers requesting a Subsequent Financing Notice
have received such Subsequent Financing Notices, the Company receives responses
to Subsequent Financing Notices from Purchasers seeking to purchase more than
the aggregate amount of the Participation Maximum, each such Purchaser shall
have the right to purchase its Pro Rata Portion (as defined below) of the
Participation Maximum. “Pro Rata Portion”
means the ratio of (x) the Subscription Amount of Securities purchased on the
Closing Date by a Purchaser participating under this Section 4.11 and (y) the
sum of the aggregate Subscription Amounts of Securities purchased on the Closing
Date by all Purchasers participating under this Section 4.11.

    


    (f)           The
Company must provide the Purchasers with a second Subsequent Financing Notice,
and the Purchasers will again have the right of participation set forth above in
this Section 4.11, if the Subsequent Financing subject to the initial Subsequent
Financing Notice is not consummated for any reason on the terms set forth in
such Subsequent Financing Notice within thirty (30) Trading Days after the date
of the initial Subsequent Financing Notice. The Company shall not be permitted
to deliver more than two Subsequent Financing Notices to any Purchaser in any
sixty (60) day period.

    


    (g)           The
Company and each Purchaser agree that if any Purchaser elects to participate in
the Subsequent Financing, no document with respect to such Subsequent Financing
shall include any term or provision whereby such Purchaser shall be required to
agree to any restrictions on trading as to any Shares or Warrant Shares or the
exercise of any Warrants (other than restrictions following the delivery of a
Subsequent Financing Notice and prior to the public announcement or abandonment
thereof similar in form and substance to Sections 3.2(f) and 4.14) or be
required to consent to any amendment to or termination of, or grant any waiver
or release or the like under or in connection with, any Transaction
Document.

    


    (h)           Notwithstanding
the foregoing, this Section 4.11 shall not apply in respect of an Exempt
Issuance. The Company acknowledges and agrees that the right set forth in this
Section 4.11 is a right granted by the Company, separately, to each
Purchaser.

    


    4.12       Subsequent Equity
Sales.

    


    (a)           From
the date hereof through the forty-fifth (45th) day
after the Closing Date, neither the Company nor any of its Subsidiaries shall,
directly or indirectly, issue, offer, sell, grant any option or right to
purchase, or otherwise dispose of (or announce any issuance, offer, sale, grant
of any option or right to purchase or other disposition of) any equity security
or any equity-linked or related security (including, without limitation, any
“equity security” (as that term is defined under Rule 405 promulgated under the
Securities Act), any Common Stock Equivalents, any debt, any preferred stock or
any purchase rights); provided, however, that the
forty-five (45) day period set forth in this Section 4.12 shall be extended for
the number of Trading Days during such period in which trading in the Common
Stock is suspended by any Trading Market.


    
      
         


      

      
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    (b)           From
the date hereof until such time as no Purchaser holds any of the Warrants, 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) other than with respect to customary
anti-dilution provisions, 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.

    


    (c)           Notwithstanding
the foregoing, this Section 4.12 shall not apply in respect of an Exempt
Issuance, except that no Variable Rate Transaction shall be an Exempt
Issuance.

    


    4.13       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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    4.14       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 4.4.  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 4.4, 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 4.4 and (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 4.4.  Except as otherwise agreed under Section 4.11, 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 4.4.  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.

    


    4.15       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.

    


    4.16       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; provided, however, that
this Section 4.16 shall not apply solely in connection with any reverse stock
split conducted to maintain compliance with the listing standards of the Trading
Market.

    


    4.17       Delivery of Securities After
Closing.  The Company shall deliver, or cause to be delivered,
the respective Securities purchased by each Purchaser to such Purchaser within 3
Trading Days of the Closing Date.

    


    4.18       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 Shares and Warrant 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.


    
      
         


      

      
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    4.19       Per Share Purchase Price
Protection.

    


    (a)           As
to each Purchaser, from the date hereof through the Termination Time, if and
whenever the Company or any Subsidiary, directly or indirectly, issues or sells
(or in accordance with the provisions set forth in Section 3(b) of the Warrants
is deemed to have issued or sold) (whether through a Subsequent Financing or
otherwise) any shares of Common Stock or Common Stock Equivalents (including the
issuance or sale of shares of Common Stock or Common Stock Equivalents owned or
held by or for the account of the Company) for a consideration per share that is
less than the Per Share Purchase Price (adjusted for stock splits, combinations,
dividends and the like occurring after the Closing Date) (such lesser price is
referred to herein as the “Discounted Per Share
Purchase Price”) (the foregoing a “Dilutive Issuance”),
then immediately after such Dilutive Issuance, the Company shall issue to such
Purchaser, without the payment of additional consideration, in connection with
such Dilutive Issuance, a number of additional shares of Common Stock equal to
difference between (1) the aggregate number of shares of Common Stock that would
have been issued to such Purchaser at the Closing if the Subscription Amount was
divided by the Discounted Per Share Purchase Price minus (2) the aggregate
number of shares of Common Stock equal to the sum of the Initial Shares (as
defined below), plus, to the extent there has been a previous issuance of
Additional Shares (as defined below) to such Purchaser, the number of Additional
Shares previously issued to such Purchaser. For purposes of this Section 4.19,
(I) “Additional
Shares” means, with respect to the applicable Purchaser, shares of Common
Stock issued to such Purchaser pursuant to this Section 4.19 (adjusted for stock
splits, combinations, dividends and the like occurring after the Closing Date);
and (II) “Initial
Shares” means, with respect to the applicable Purchaser, the number of
shares of Common Stock issued to such Purchaser on the Closing Date (adjusted
for stock splits, combinations, dividends and the like occurring after the
Closing Date).


    (b)           In
implementation of the foregoing, to the extent that an issuance of Additional
Shares would result in a Purchaser or any of its affiliates beneficially owning
in excess of 4.9% (the “Maximum Percentage”)
of the Common Stock, then the Company shall initially issue only such number of
Additional Shares that would result in such Purchaser (together with such
Purchaser’s affiliates) beneficially owning the Maximum Percentage of the Common
Stock, and, except as otherwise provided below, no other Additional Shares shall
be issuable under this Section 4.19. After such initial issuance, and until all
Additional Shares which otherwise would have been issued under this Section 4.19
have been issued, from time to time the Company will issue such number of such
unissued Additional Shares so that such Purchaser (together such Purchaser’s
affiliates) will beneficially own only the Maximum Percentage of the Common
Stock. Such Purchaser shall make representations and warranties to the Company
regarding its (together with its affiliates’) beneficial ownership to effectuate
the foregoing. The Maximum Percentage limitation contained in this paragraph and
the limitation on exercise contained in Section 2(e) of the Warrants issued to
such Purchaser pursuant to this Agreement shall be coordinated so that the
aggregate beneficial ownership of such Purchaser (together with its affiliates)
does not exceed the Maximum Percentage limitation. In connection therewith,
issuances pursuant to this Section 4.19 shall take precedence over issuances of
any Warrant Shares issuable to such Purchaser. The provisions of this paragraph
shall be implemented in a manner otherwise than in strict conformity with the
terms this paragraph to correct this paragraph (or any portion hereof) which may
be defective or inconsistent with the intended Maximum Percentage beneficial
ownership limitation herein contained or to make changes or supplements
necessary or desirable to properly give effect to such Maximum Percentage
limitation. The limitations contained in this paragraph shall apply to assignees
of such Purchaser hereunder. The holders of Common Stock of the Company shall be
third party beneficiaries of this paragraph and the Company may not waive this
paragraph without the consent of holders of a majority of its Common Stock. For
the purposes of this paragraph, beneficial ownership and all determinations and
calculations (including, without limitation, with respect to calculations of
percentage ownership) shall be determined in accordance with Section 13(d) of
the Exchange Act and the rules and regulations promulgated
thereunder.

    


    
      
        
        

      

      
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    (c)           If
shares of Common Stock or Common Stock Equivalents are issued for a
consideration other than cash, the per share price shall be the fair value of
such consideration as determined in good faith by the Board of Directors of the
Company. For the purposes of this Section 4.19, the “price per share for which
one share of Common Stock is issuable upon the conversion, exercise or exchange
of any Common Stock Equivalents” shall be equal to the sum of the lowest amounts
of consideration (if any) received or receivable by the Company with respect to
one share of Common Stock upon the issuance or sale of such Common Stock
Equivalents and upon conversion, exercise or exchange of such Common Stock
Equivalents. The Company may not refuse to issue to a Purchaser Additional
Shares hereunder based on any claim that such Purchaser or any one associated or
affiliated with such Purchaser has been engaged in any violation of law,
agreement or for any other reason, unless, an injunction from a court, on
notice, restraining and or enjoining an issuance hereunder shall have been
sought and obtained.  Nothing herein shall limit a Purchaser’s right
to pursue actual damages for the Company’s failure to deliver Additional Shares
hereunder, 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. On the date of closing of any
transaction pursuant to which securities are issued for a Discounted Per Share
Purchase Price, the Company shall give each of the Purchasers written notice
thereof. Notwithstanding anything to the contrary herein in this Section 4.19,
this Section 4.19 shall not apply to an Exempt Issuance. The Company
acknowledges and agrees that the right set forth in this Section 4.19 is a right
granted by the Company, separately, to each Purchaser.

    


    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 March 4, 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).

    


    
      
        
        

      

      
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    5.2         Fees and
Expenses.  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. The Company shall
reimburse 2035718 Ontario Inc. (“2035718 Ontario”) or
its designee(s) for all costs and expenses incurred by it or its affiliates in
connection with the transactions contemplated by the Transaction Documents
(including, without limitation, all legal fees and disbursements in connection
therewith, documentation and implementation of the transactions contemplated by
the Transaction Documents and due diligence and regulatory filings in connection
therewith) in a non-accountable amount not to exceed $20,000, which amount shall
be withheld by 2035718 Ontario from its Subscription Amount at the Closing or
paid by the Company upon termination of this Agreement on demand by 2035718
Ontario so long as such termination did not occur as a result of a material
breach by 2035718 Ontario of any of its obligations hereunder (as the case may
be).

    


    5.3         Entire
Agreement.  The Transaction Documents, together with the
exhibits and schedules thereto, contain the entire understanding of the parties
solely with respect to the subject matter hereof and supersede all prior
agreements and understandings, oral or written, solely with respect to such
matters, which the parties acknowledge have been merged into such documents,
exhibits and schedules; provided, however, nothing contained in this Agreement
or any other Transaction Document shall (or shall be deemed to) (i) have any
effect on any agreements any Purchaser has entered into with the Company or any
of its Subsidiaries prior to the date hereof with respect to any prior
investment made by such Purchaser in the Company or (ii) waive, alter, modify or
amend in any respect any obligations of the Company or any of its Subsidiaries,
or any rights of or benefits to any Purchaser or any other Person, in any
agreement entered into prior to the date hereof between or among the Company
and/or any of its Subsidiaries and any Purchaser and all such agreements shall
continue in full force and effect.

    


    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 or e-mail at the facsimile number or
e-mail address 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
or e-mail at the facsimile number or e-mail address 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 Purchasers having original Subscription
Amounts totaling at least 75% of the aggregate original Subscription Amounts at
the Closing, 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.

    


    
      
        
        

      

      
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    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).  Prior to the Closing Date, no Purchaser may assign
any or all of its rights under this Agreement to any Person without the prior
written consent of the Company. After the Closing Date, 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 4.8.


    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 4.8, 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 an exercise of a Warrant, the applicable Purchaser shall
be required to return any shares of Common Stock subject to any such rescinded
exercise notice concurrently with the return to such Purchaser of the aggregate
exercise price paid to the Company for such Warrant Shares and the restoration
of such Purchaser’s right to acquire such Warrant 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 execute a customary affidavit and pay any reasonable third-party costs
(including customary indemnity) associated with the issuance of such replacement
Securities.

     

    
      
        
        

      

      
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    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.

    


    5.17       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 Rodman & Renshaw LLC. 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. It is expressly understood and agreed that
each provision contained in this Agreement and in each other Transaction
Document is between the Company and a Purchaser, solely, and not between the
Company and the Purchasers collectively and not between and among the
Purchasers.

    


    5.18       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.

    


    
      
        
        

      

      
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    5.19       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.

    


    5.20       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.

    


    5.21       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.


    5.22       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.

    


    
      
        
        

      

      
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    5.23       Exercise Procedures.
The form of Notice of Exercise included in the Warrants sets forth the totality
of the procedures required of each of the Purchasers in order to exercise their
respective Warrants.  No additional legal opinion, other information
or instructions shall be required of any of the Purchasers to exercise their
respective Warrants. The Company shall honor exercises of the Warrants and shall
deliver Warrant Shares in accordance with the terms, conditions and time periods
set forth in the Warrants.

    


    (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.

     

    
      
        
          
            
              
                
                  
                    	CLEVELAND
      BIOLABS, INC.	 	
                            Address for Notice:

                          
	 	 
      	 	
                            73
      High Street

                          
	 	 
      	 	
                            Buffalo,
      NY 14203

                          
	
                            By:

                          	
                             

                          	 	
                            Fax:

                          
	 	
                            Name:  Michael
      Fonstein

                          	 	 
      
	 	
                            Title:  CEO

                          	 	 
      
	 	 
      	 	 
      
	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 CBLI 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 of Purchaser:

    


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

    


    Subscription
Amount: $_________________

    


    Shares:
_________________

    


    Warrant
Shares: __________________

    


    EIN
Number:  [PROVIDE
THIS UNDER SEPARATE COVER]

    


    


    [SIGNATURE
PAGES CONTINUE]


    
      
         


      

      
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