EXHIBIT 10.32


FOR
NEGOTIATION AND 

DISCUSSION PURPOSES ONLY

NOT AN OFFER OR SALE OF SECURITIES


SECURITIES PURCHASE AGREEMENT


          This
SECURITIES PURCHASE AGREEMENT (the
“Agreement”),
dated as of February [___], 2011, is by and among NovaDel Pharma Inc., a
Delaware corporation with headquarters located at 1200 Route 22 East, Suite 2000, Bridgewater, New Jersey 08807 (the
“Company”),
and each of the investors listed on the Schedule of Buyers attached hereto
(individually, a “Buyer” and
collectively, the “Buyers”).


RECITALS


          A. The
Company has authorized a series of preferred stock entitled the “Series A
Convertible Preferred Stock” (the “Preferred
Stock”), which Preferred Stock shall be convertible into shares of
the Company’s common stock, $0.001 par value per share (the “Common Stock”), in accordance with the
terms of the Preferred Stock. The rights, preferences and other terms and
provisions of the Preferred Stock are set forth in the Certificate of
Designation, Preferences and Rights of Series A Convertible Preferred Stock in
the form attached hereto as Exhibit A
(the “Certificate of Designation”).
As used herein, the term “Conversion Shares”
shall include all shares of Common Stock issuable upon conversion of the
Preferred Stock in accordance with the Certificate of Designation.


          B. The
Company and each Buyer desire to enter into this transaction to purchase the
shares of the Preferred Stock and Warrants (as defined below) set forth herein
pursuant to a currently effective registration statement on Form S-1, as
amended (Registration Number 333-170066) (as amended, the “Registration Statement”), which Registration Statement has
been declared effective in accordance with the Securities Act of 1933, as
amended (the “1933 Act”), by the United States Securities and Exchange
Commission (the “SEC”).


          C. Each
Buyer wishes to purchase, and the Company wishes to sell, upon the terms and
conditions stated in this Agreement, (i) the number of shares of Preferred
Stock set forth opposite such Buyer’s name in column (3) on the Schedule of
Buyers, (ii) a warrant to initially acquire up to the aggregate number of
shares of Common Stock set forth opposite such Buyer’s name in column (4) on
the Schedule of Buyers, in the form attached hereto as Exhibit B (the “Series A Warrants”) (as exercised,
collectively, the “Series A Warrant Shares”),
(iii) a warrant to initially acquire up to the aggregate number of shares of
Common Stock set forth opposite such Buyer’s name in column (5) on the Schedule
of Buyers, in the form attached hereto as Exhibit
C (the “Series B Warrants”)
(as exercised, collectively, the “Series B
Warrant Shares”) and (iv) a warrant to initially acquire up to the
aggregate number of shares of Common Stock set forth opposite such Buyer’s name
in column (6) on the Schedule of Buyers, in the form attached hereto as Exhibit D (the “Series C Warrants”) (as exercised, collectively, the “Series C Warrant Shares”). The Series A Warrants, the Series B
Warrants and the Series C Warrants are
collectively referred to herein as the “Warrants.” The Series A Warrant Shares, the
Series B Warrant Shares and the Series
C Warrant Shares are collectively referred to herein as the “Warrant
Shares.”





          D. The
Preferred Stock, the Conversion Shares, the Warrants and the Warrant Shares are
collectively referred to herein as the “Securities.”


AGREEMENT


          NOW,
THEREFORE, in consideration of the premises and the mutual
covenants contained herein and for other good and valuable consideration, the receipt
and sufficiency of which are hereby acknowledged, the Company and each Buyer
hereby agree as follows:


	
  

 	
  

 
	
 1.

 	
 PURCHASE AND SALE OF PREFERRED STOCK AND WARRANTS.

 


          (a) Preferred
Stock and Warrants. Subject to the satisfaction (or waiver) of the
conditions set forth in Sections 6 and 7 below, the Company shall issue and
sell to each Buyer, and each Buyer severally, but not jointly, shall purchase
from the Company on the Closing Date (as defined below), the number of shares
of Preferred Stock as is set forth opposite such Buyer’s name in column (3) on
the Schedule of Buyers, along with (i) Series A Warrants to initially acquire
up to the aggregate number of Series A Warrant Shares as is set forth opposite
such Buyer’s name in column (4) on the Schedule of Buyers, (ii) Series B
Warrants to initially acquire up to the aggregate number of Series B Warrant
Shares as is set forth opposite such Buyer’s name in column (5) on the Schedule
of Buyers and (iii) Series C Warrants to initially acquire up to the aggregate
number of Series C Warrant Shares as is set forth opposite such Buyer’s name in
column (6) on the Schedule of Buyers.


          (b) Closing.
The closing (the “Closing”) of the
purchase of the Preferred Stock and Warrants by the Buyers shall occur at the
offices of Greenberg Traurig, LLP, 77 W. Wacker Drive, Suite 3100, Chicago,
Illinois 60601. The date and time of the Closing (the “Closing Date”) shall be the time agreed to
by the parties on the first (1st) Business Day on which the
conditions to the Closing set forth in Sections 6 and 7 below are satisfied or
waived (or such later time or date as is mutually agreed to by the Company and
each Buyer). As used herein “Business Day”
means any day other than a Saturday, Sunday or other day on which commercial
banks in New York, New York are authorized or required by law to remain closed.



          (c) Purchase
Price. The aggregate purchase price for the Preferred Stock and the
Warrants to be purchased by each Buyer (the “Purchase
Price”) shall be the amount set forth opposite such Buyer’s name in
column (7) on the Schedule of Buyers.


          (d) Payment
of Purchase Price; Delivery of Preferred Stock and Warrants. On the Closing
Date, (i) each Buyer shall pay its respective Purchase Price (less, in the case
of Iroquois (as defined below), the amounts withheld pursuant to Section 4(h))
to the Company for the Preferred Stock and the Warrants to be issued and sold
to such Buyer at the Closing, by wire transfer of immediately available funds
in accordance with the Company’s written wire instructions and (ii) the
Company shall deliver to each Buyer (A) a certificate representing the number
of shares of Preferred Stock as is set forth opposite such Buyer’s name in
column (3) on the Schedule of Buyers, (B) Series A Warrants to initially
acquire up to the aggregate number of Series A Warrant Shares as is set forth
opposite such Buyer’s name in column (4) on the Schedule of Buyers, (iii)
Series B Warrants to initially acquire up to the aggregate number of Series B
Warrant Shares as is set forth opposite such Buyer’s name in column (5) on the 


2





Schedule of Buyers and (iv) Series C Warrants to initially acquire up
to the aggregate number of Series C Warrant Shares as is set forth opposite
such Buyer’s name in column (6) on the Schedule of Buyers, in each case, duly
executed on behalf of the Company and registered in the name of such Buyer or
its designee.


	
  

 	
  

 
	
 2.

 	
 BUYER’S REPRESENTATIONS AND WARRANTIES.

 


          Each Buyer,
severally and not jointly, represents and warrants to the Company with respect
to only itself that: 


          (a) Organization;
Authority. Such Buyer is an entity duly organized, validly existing and in
good standing under the laws of the jurisdiction of its organization with the
requisite power and authority to enter into and to consummate the transactions
contemplated by the Transaction Documents (as defined below) to which it is a
party and otherwise to carry out its obligations hereunder and thereunder.


          (b) Validity;
Enforcement. This Agreement has been duly and validly authorized, executed
and delivered on behalf of such Buyer and constitutes the legal, valid and
binding obligations of such Buyer enforceable against such Buyer in accordance
with its terms, except as such enforceability may be limited by general
principles of equity or applicable bankruptcy, insolvency, reorganization,
moratorium, liquidation and other similar laws relating to, or affecting
generally, the enforcement of applicable creditors’ rights and remedies.


          (c) No
Conflicts. The execution, delivery and performance by such Buyer of this
Agreement and the consummation by such Buyer of the transactions contemplated
hereby will not (i) result in a violation of the organizational documents of
such Buyer, (ii) conflict with, or constitute a default (or an event which with
notice or lapse of time or both would become a default) under, or give to
others any rights of termination, amendment, acceleration or cancellation of,
any agreement, indenture or instrument to which such Buyer is a party or (iii)
result in a violation of any law, rule, regulation, order, judgment or decree
(including federal and state securities laws) applicable to such Buyer, 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 ability of such
Buyer to perform its obligations hereunder.


          (d) Certain
Trading Activities. Such Buyer has not directly or indirectly, nor has any
Person acting on behalf of or pursuant to any understanding with such Buyer,
engaged in any transactions in the securities of the Company (including,
without limitation, any Short Sales (as defined below) involving the Company’s
securities) during the period commencing as of the time that such Buyer was
first contacted by the Placement Agent (as defined below) regarding the
specific investment in the Company contemplated by this Agreement and ending
immediately prior to the execution of this Agreement by such Buyer. “Short Sales” means all “short sales” as
defined in Rule 200 promulgated under Regulation SHO under the Securities
Exchange Act of 1934, as amended (the “1934 Act”) (but shall not be deemed to include
the location and/or reservation of borrowable shares of Common Stock).


3









	
  

 	
  

 
	
 3.

 	
 REPRESENTATIONS AND WARRANTIES OF THE COMPANY.

 


          The Company
represents and warrants to each of the Buyers that:


          (a) Organization
and Qualification. Each of the Company and each of its Subsidiaries (as
defined below) are entities duly organized and validly existing and in good
standing under the laws of the jurisdiction in which they are formed, and have
the requisite power and authorization to own their properties and to carry on
their business as now being conducted and as presently proposed to be
conducted. Each of the Company and each of its Subsidiaries is duly qualified
as a foreign entity to do business and is in good standing in every jurisdiction
in which its ownership of property or the nature of the business conducted by
it makes such qualification necessary, except to the extent that the failure to
be so qualified or be in good standing would not have a Material Adverse
Effect. “Material
Adverse Effect” means any material adverse effect on (i) the
business, properties, assets, liabilities, operations (including results
thereof), condition (financial or otherwise) or prospects of the Company or any
Subsidiary, either individually or taken as a whole, (ii) the transactions
contemplated hereby or in any of the other Transaction Documents or (iii) the
authority or ability of the Company to perform any of its obligations under any
of the Transaction Documents. The Company has no Subsidiaries. “Subsidiaries”
means any Person (A) that is a “Significant Subsidiary” (as such term is
defined in Rule 1-02 of Regulation S-X of the 1933 Act) of the Company or (B)
in which the Company, directly or indirectly, (I) owns at least 50% of the
outstanding capital stock or holds at least 50% of any equity or similar
interest of such Person or (II) controls or operates all or at least 50% of the
business, operations or administration of such Person, and each of the
foregoing, is individually referred to herein as a “Subsidiary.” 


          (b) Authorization;
Enforcement; Validity. The Company has the requisite power and authority to
enter into and perform its obligations under this Agreement and the other Transaction Documents and to issue the
Securities in accordance with the terms hereof and thereof, subject, with
respect to the issuance of the Series A Warrant Shares and the Series C Warrant
Shares upon the exercise of the Series A Warrants and the Series C Warrants, as
applicable, to Stockholder Approval (as defined below). The execution and
delivery of this Agreement and the other Transaction Documents by the Company
and the consummation by the Company of the transactions contemplated hereby and
thereby (including, without limitation, the issuance of the Preferred Stock and
the reservation for issuance and issuance of the Conversion Shares, and the
issuance of the Warrants and the reservation for issuance and issuance of the
Warrant Shares (other than the Series A Warrant Shares and Series C Warrant
Shares) issuable upon exercise of the Warrants) have been duly authorized by
the Company’s board of directors and (other than the filing with the SEC of the
final prospectus forming part of the Registration Statement pursuant to Rule
424(b) under the 1933 Act (the “Prospectus”) and any other filings as may be required by any state
securities agencies) no further filing, consent or authorization is required by
the Company, its board of directors or its stockholders (other than the
Stockholder Approval) or other governing body. This Agreement has been, and the
other Transaction Documents will be prior to the Closing, duly executed and
delivered by the Company, and each constitutes the legal, valid and binding
obligations of the Company, enforceable against the Company in accordance with
its respective terms, except as such enforceability may be limited by general
principles of equity or applicable bankruptcy, insolvency, reorganization,
moratorium, liquidation or similar laws relating to, or affecting generally,
the enforcement of applicable creditors’ rights and remedies and except as
rights to indemnification and to contribution may be 


4





limited by federal or state securities law. “Transaction Documents” means,
collectively, this Agreement, the Warrants, the Certificate of Designation, the
Irrevocable Transfer Agent Instructions (as defined below) and each of the
other agreements and instruments entered into or delivered by any of the
parties hereto in connection with the transactions contemplated hereby and
thereby, as may be amended from time to time. 


          (c) Issuance
of Securities; Registration Statement. The issuance of the Preferred Stock
and the Warrants are duly authorized and, upon issuance in accordance with the
terms of the Transaction Documents, will be validly issued, fully paid and
non-assessable and free from all preemptive or similar rights, taxes, liens,
charges and other encumbrances with respect to the issue thereof. As of the
Closing, the Company shall have reserved from its duly authorized capital stock
not less than 100% of the sum of (i) the maximum number of Conversion Shares
issuable upon conversion of the Preferred Stock (assuming for purposes hereof
that the Preferred Stock is convertible at the initial Conversion Price (as
defined in the Certificate of Designation) and without taking into account any
adjustments or limitations on the conversion of the Preferred Stock set forth
in the Certificate of Designation) and (ii) the maximum number of Series B
Warrant Shares issuable upon exercise of the Series B Warrants (assuming for
purposes hereof that the Series B Warrants are convertible at the initial
Exercise Price (as defined in the Series B Warrants)) (without taking into
account any adjustments and limitations on the exercise of the Series B Warrants
set forth therein). In addition, immediately following receipt of Stockholder
Approval, the Company shall have also reserved from its duly authorized capital
stock not less than 100% of the sum of (i) the maximum number of Series A
Warrant Shares issuable upon exercise of the Series A Warrants (assuming for
purposes hereof that the Series A Warrants are convertible at the initial
Exercise Price (as defined in the Series A Warrants)) (without taking into
account any adjustments or limitations on the exercise of the Series A Warrants
set forth therein) and (ii) the maximum number of Series C Warrant Shares
issuable upon exercise of the Series C Warrants (assuming for purposes hereof
that the Series C Warrants are convertible at the initial Exercise Price (as
defined in the Series C Warrants)) (without taking into account any adjustments
or limitations on the exercise of the Series C Warrants set forth therein). The
issuance of the Conversion Shares is duly authorized, and upon conversion of
the Preferred Stock in accordance with the Certificate of Designation, the
Conversion Shares, when issued, will be validly issued, fully paid and
non-assessable and free from all preemptive or similar rights, taxes, liens,
charges and other encumbrances with respect to the issue thereof, with the
holders being entitled to all rights accorded to a holder of Common Stock.
Subject, with respect to the issuance of the Series A Warrant Shares and the
Series C Warrant Shares upon the exercise of the Series A Warrants and the Series
C Warrants, as applicable, to Stockholder Approval, the issuance of the Warrant
Shares is duly authorized, and upon exercise in accordance with the Warrants,
the Warrant Shares, when issued, will be validly issued, fully paid and
non-assessable and free from all preemptive or similar rights, taxes, liens,
charges and other encumbrances with respect to the issue thereof, with the
holders being entitled to all rights accorded to a holder of Common Stock. The
issuance by the Company of the Securities (other than the Series A Warrant
Shares and the Series C Warrant Shares) has been registered under the 1933 Act,
the Securities (other than the Series A Warrant Shares and the Series C Warrant
Shares) are being issued pursuant to the Registration Statement and all of the
Securities (other than the Series A Warrant Shares and the Series C Warrant
Shares) are freely transferable and freely tradable by each of the Buyers
without restriction. The Registration Statement is effective and available for
the issuance of the Securities (other than the Series A Warrant Shares and the
Series C Warrant Shares) thereunder and the Company has not received any notice
that the SEC 


5





has issued or intends to issue a stop-order with respect to the
Registration Statement or that the SEC otherwise has suspended or withdrawn the
effectiveness of the Registration Statement, either temporarily or permanently,
or intends or has threatened in writing to do so. The “Plan of Distribution”
section under the Registration Statement permits the issuance and sale of the
Securities (other than the Series A Warrant Shares and the Series C Warrant
Shares) hereunder and as contemplated by the other Transaction Documents. Upon
receipt of the Securities, each of the Buyers will have good and marketable
title to the Securities. The Registration Statement and any prospectus included
therein, including the Prospectus, complied in all material respects with the
requirements of the 1933 Act and the 1934 Act and the rules and regulations of
the SEC promulgated thereunder and all other applicable laws and regulations.
At the time the Registration Statement and any amendments thereto became
effective, at the date of this Agreement and at each deemed effective date
thereof pursuant to Rule 430B(f)(2) of the 1933 Act, the Registration Statement
and any amendments thereto complied and will comply in all material respects
with the requirements of the 1933 Act and did not and will not contain any
untrue statement of a material fact or omit to state any material fact required
to be stated therein or necessary to make the statements therein not
misleading. The Prospectus and any amendments or supplements thereto, at the
time the Prospectus or any amendment or supplement thereto was issued and at
the Closing Date, complied, and will comply, in all material respects with the
requirements of the 1933 Act and did not, and will not, contain any untrue
statement of a material fact or omit to state a material fact necessary in
order to make the statements therein, in light of the circumstances under which
they were made, not misleading. The Company meets all of the requirements for
the use of Form S-1 under the 1933 Act for the offering and sale of the
Securities (other than the Series A Warrant Shares and the Series C Warrant
Shares) contemplated by this Agreement and the other Transaction Documents, and
the SEC has not notified the Company of any objection to the use of the form of
the Registration Statement pursuant to Rule 401(g)(1) under the 1933 Act. At
the earliest time after the filing of the Registration Statement that the
Company or another offering participant made a bona fide offer (within the
meaning of Rule 164(h)(2) under the 1933 Act) relating to any of the
Securities, the Company was not and is not an “Ineligible Issuer” (as defined
in Rule 405 under the 1933 Act). The Company (i) has not distributed any
offering material in connection with the offer or sale of any of the Securities
and (ii) until no Buyer holds any of the Securities, shall not distribute any offering
material in connection with the offer or sale of any of the Securities to, or
by, any of the Buyers (if required), in each case, other than the Registration
Statement or the Prospectus. The Company has made all filings required to be
made by the Company, if any, with the Financial Industry Regulatory Authority
in connection with the offering and sale of the Securities.


          (d) No
Conflicts. The execution, delivery and performance of the Transaction
Documents by the Company and the consummation by the Company of the
transactions contemplated hereby and thereby (including, without limitation,
the issuance of the Preferred Stock, the Warrants, the Conversion Shares and
Warrant Shares and the reservation for issuance of the Conversion Shares and Warrant
Shares) will not (i) result in a violation of the Certificate of Incorporation
(as defined below) (including, without limitation, any certificates of
designation contained therein) or other organizational documents of the Company
or any of its Subsidiaries, any capital stock of the Company, or Bylaws (as
defined below), subject, with respect to the issuance and reservation for
issuance of the Series A Warrant Shares and the Series C Warrant Shares, to
Stockholder Approval, (ii) conflict with, or constitute a default (or an event
which with notice or lapse of time or both would become a default) under, or
give to others any rights of termination, amendment, acceleration or
cancellation of, any agreement, indenture or 


6





instrument to which the Company or any of its Subsidiaries is a party
or (iii) result in a violation of any law, rule, regulation, order, judgment or
decree (including, without limitation, federal and state securities laws and
regulations and the rules and regulations of the OTC Bulletin Board (the “Principal Market”)) applicable to the
Company or any of its Subsidiaries or by which any property or asset of the
Company or any of its Subsidiaries is bound or affected, except, in the case of
clause (ii) or (iii) above, to the extent such violations that could not
reasonably be expected to have a Material Adverse Effect.  


          (e) Consents.
The Company is not required to obtain any consent from, authorization or order
of, or make any filing or registration with (other than the filing with the SEC
of the Prospectus and any other filings as may be required by any state
securities agencies), any court, governmental agency or any regulatory or
self-regulatory agency or any other Person in order for it to execute, deliver
or perform any of its obligations under, or contemplated by, the Transaction
Documents, in each case, in accordance with the terms hereof or thereof. All
consents, authorizations, orders, filings and registrations which the Company
is required to obtain at or prior to the Closing have been obtained or effected
on or prior to the Closing Date, and neither the Company nor any of its
Subsidiaries are aware of any facts or circumstances which might prevent the
Company from obtaining or effecting any of the registration, application or
filings contemplated by the Transaction Documents. The Company is not in
violation of the requirements of the Principal Market and has no knowledge of
any facts or circumstances which could reasonably lead to delisting or
suspension of the Common Stock in the foreseeable future. 


          (f) Acknowledgment
Regarding Buyer’s Purchase of Securities. The Company acknowledges and
agrees that each Buyer is acting solely in the capacity of an arm’s length
purchaser with respect to the Transaction Documents and the transactions
contemplated hereby and thereby and that no Buyer is (i) an officer or director
of the Company or any of its Subsidiaries, (ii) an “affiliate” (as defined in
Rule 144 promulgated under the 1933 Act (or a successor rule thereto) (collectively,
“Rule 144”))
of the Company or any of its Subsidiaries or (iii) to its knowledge, a
“beneficial owner” of more than 10% of the shares of Common Stock (as defined
for purposes of Rule 13d-3 of the 1934 Act). The Company further acknowledges
that no Buyer is acting as a financial advisor or fiduciary of the Company or
any of its Subsidiaries (or in any similar capacity) with respect to the
Transaction Documents and the transactions contemplated hereby and thereby, and
any advice given by a Buyer or any of its representatives or agents in
connection with the Transaction Documents and the transactions contemplated
hereby and thereby is merely incidental to such Buyer’s purchase of the
Securities. The Company further represents to each Buyer that the Company’s
decision to enter into the Transaction Documents has been based solely on the
independent evaluation by the Company and its representatives.


          (g) Placement
Agent’s Fees. The Company shall be responsible for the payment of any
placement agent’s fees, financial advisory fees, or brokers’ commissions (other
than for Persons engaged by any Buyer or its investment advisor) relating to or
arising out of the transactions contemplated hereby. Other than Roth Capital
Partners (the “Placement Agent”),
neither the Company nor any of its Subsidiaries has engaged any placement agent
or other agent in connection with the offer or sale of the Securities.


          (h) No
Integrated Offering. None of the Company, its Subsidiaries or any of their
affiliates, nor any Person acting on their behalf has, directly or indirectly,
made any offers or 


7





sales of any security or solicited any offers to buy any security,
under circumstances that would cause this offering of the Securities to require
approval of stockholders (other than the Stockholder Approval) of the Company
under any applicable stockholder approval provisions, including, without
limitation, under the rules and regulations of any exchange or automated
quotation system on which any of the securities of the Company are listed or
designated for quotation. None of the Company, its Subsidiaries, their
affiliates nor any Person acting on their behalf will take any action or steps
that would cause the offering of any of the Securities to be integrated with other
offerings of securities of the Company.


          (i) Dilutive
Effect. The Company understands and acknowledges that the number of
Conversion Shares and Warrant Shares will increase in certain circumstances.
The Company further acknowledges that its obligation to issue the Conversion
Shares upon conversion of the Preferred Stock and the Warrant Shares upon
exercise of the Warrants in accordance with this Agreement, the Certificate of
Designation and the Warrants is absolute and unconditional, regardless of the
dilutive effect that such issuance may have on the ownership interests of other
stockholders of the Company.


          (j) Application
of Takeover Protections; Rights Agreement. The Company and its 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, without limitation, any distribution under
a rights agreement) or other similar anti-takeover provision under the
Certificate of Incorporation, Bylaws or other organizational documents or the
laws of the jurisdiction of its incorporation or otherwise which is or could
become applicable to any Buyer as a result of the transactions contemplated by
this Agreement, including, without limitation, the Company’s issuance of the
Securities and any Buyer’s ownership of the Securities. The Company and its
board of directors have taken all necessary action, if any, in order to render
inapplicable any stockholder rights plan or similar arrangement relating to
accumulations of beneficial ownership of shares of Common Stock or a change in
control of the Company or any of its Subsidiaries.


          (k) SEC
Documents; Financial Statements. During the two (2) years prior to the date
hereof, the Company has timely filed all reports, schedules, forms, proxy
statements, statements and other documents required to be filed by it with the
SEC pursuant to the reporting requirements of the 1934 Act (all of the
foregoing filed prior to the date hereof and all exhibits and appendices
included therein and financial statements, notes and schedules thereto and
documents incorporated by reference therein being hereinafter referred to as the “SEC Documents”). The
Company has delivered to the Buyers or their respective representatives true,
correct and complete copies of each of the SEC Documents not available on the
EDGAR system. As of their respective dates, the SEC Documents complied in all
material respects with the requirements of the 1934 Act and the rules and
regulations of the SEC promulgated thereunder applicable to the SEC Documents,
and none of the SEC Documents, at the time they were filed with the SEC,
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. As of their respective dates, the financial statements of
the Company included in the SEC Documents complied as to form in all material
respects with applicable accounting requirements and the published rules and
regulations of the SEC with respect thereto as in effect as of the time of
filing. Such financial statements have been prepared in accordance with
generally accepted accounting principles,  


8





consistently applied, during the periods involved (except (i) as may be
otherwise indicated in such financial statements or the notes thereto, or (ii)
in the case of unaudited interim statements, to the extent they may exclude
footnotes or may be condensed or summary statements) and fairly present in all
material respects the financial position of the Company as of the dates thereof
and the results of its operations and cash flows for the periods then ended
(subject, in the case of unaudited statements, to normal year-end audit
adjustments which will not be material, either individually or in the
aggregate). No other information provided by or on behalf of the Company to any
of the Buyers which is not included in the SEC Documents contains any untrue
statement of a material fact or omits to state any material fact necessary in
order to make the statements therein not misleading, in the light of the
circumstance under which they are or were made.


          (l) Absence
of Certain Changes. Since the date of the Company’s most recent audited
financial statements contained in a Form 10-K, except as disclosed in the SEC
Documents filed subsequent to such Form 10-K, there has been no material
adverse change and no material adverse development in the business, assets,
liabilities, properties, operations (including results thereof), condition
(financial or otherwise) or prospects of the Company or any of its
Subsidiaries. Since the date of the Company’s most recent audited financial
statements contained in a Form 10-K, neither the Company nor any of its
Subsidiaries has (i) declared or paid any dividends, (ii) sold any assets
outside of the ordinary course of business or (iii) made any material capital
expenditures, individually or in the aggregate. Neither the Company nor any of
its Subsidiaries has taken any steps to seek protection pursuant to any law or
statute relating to bankruptcy, insolvency, reorganization, receivership,
liquidation or winding up, nor does the Company or any Subsidiary have any
knowledge or reason to believe that any of their respective creditors intend to
initiate involuntary bankruptcy proceedings or any actual knowledge of any fact
which would reasonably lead a creditor to do so. The Company and its
Subsidiaries, individually and on a consolidated basis, are not, and after
giving effect to the transactions contemplated hereby to occur at the Closing
will not be, Insolvent (as defined below). “Insolvent” means, (I) with respect to the Company and its
Subsidiaries, on a consolidated basis, (i) the present fair saleable value of
the Company’s and its Subsidiaries’ assets is less than the amount required to
pay the Company’s and its Subsidiaries’ total Indebtedness (as defined below),
(ii) the Company and its Subsidiaries are unable to pay their debts and
liabilities, subordinated, contingent or otherwise, as such debts and
liabilities become absolute and matured or (iii) the Company and its
Subsidiaries intend to incur or believe that they will incur debts that would
be beyond their ability to pay as such debts mature; and (II) with respect to
the Company and each Subsidiary, individually, (i) the present fair saleable
value of the Company’s or such Subsidiary’s (as the case may be) assets is less
than the amount required to pay its respective total Indebtedness, (ii) the
Company or such Subsidiary (as the case may be) is unable to pay its respective
debts and liabilities, subordinated, contingent or otherwise, as such debts and
liabilities become absolute and matured or (iii) the Company or such Subsidiary
(as the case may be) intends to incur or believes that it will incur debts that
would be beyond its respective ability to pay as such debts mature. Neither the
Company nor any of its Subsidiaries has engaged in any business or in any
transaction, and is not about to engage in any business or in any transaction,
for which the Company’s or such Subsidiary’s remaining assets constitute
unreasonably small capital. 


          (m) No
Undisclosed Events, Liabilities, Developments or Circumstances. No event,
liability, development or circumstance has occurred or exists, or is reasonably
expected to occur or exist with respect to the Company, any of its Subsidiaries
or any of their respective 


9





businesses, properties, liabilities, prospects, operations (including
results thereof) or condition (financial or otherwise) that (i) would be
required to be disclosed by the Company under applicable securities laws on a
registration statement on Form S-1 filed with the SEC relating to an issuance
and sale by the Company of its Common Stock and which has not been publicly
announced, (ii) could have a material adverse effect on any Buyer’s investment
hereunder or (iii) could have a Material Adverse Effect. 


          (n) Conduct
of Business; Regulatory Permits. Neither the Company nor any of its
Subsidiaries is in violation of any term of or in default under its Certificate
of Incorporation, any certificate of designation, preferences or rights of any
other outstanding series of preferred stock of the Company or any of its
Subsidiaries or Bylaws or their organizational charter, certificate of
formation or certificate of incorporation or bylaws, respectively. Neither the
Company nor any of its Subsidiaries is in violation of any judgment, decree or
order or any statute, ordinance, rule or regulation applicable to the Company
or any of its Subsidiaries, and neither the Company nor any of its Subsidiaries
will conduct its business in violation of any of the foregoing, except in all
cases for possible violations which could not, individually or in the
aggregate, have a Material Adverse Effect. Without limiting the generality of
the foregoing, the Company is not in violation of any of the rules, regulations
or requirements of the Principal Market and has no knowledge of any facts or
circumstances that could reasonably lead to delisting or suspension of the
Common Stock by the Principal Market in the foreseeable future. Except as set
forth in the SEC Documents, since January 1, 2008, (i) the Common Stock has
been listed or designated for quotation on the Principal Market or an Eligible
Market, (ii) trading in the Common Stock has not been suspended by the SEC or
the Principal Market and (iii) the Company has received no communication,
written or oral, from the SEC or the Principal Market regarding the suspension
or delisting of the Common Stock from the Principal Market. The Company and
each of its Subsidiaries possess all certificates, authorizations and permits
issued by the appropriate regulatory authorities necessary to conduct their
respective businesses, except where the failure to possess such certificates,
authorizations or permits would not have, individually or in the aggregate, a
Material Adverse Effect, and neither the Company nor any such Subsidiary has
received any notice of proceedings relating to the revocation or modification
of any such certificate, authorization or permit.


          (o) Foreign
Corrupt Practices. Neither the Company nor any of its Subsidiaries nor any
director, officer, agent, employee or other Person acting on behalf of the
Company or any of its Subsidiaries has, in the course of its actions for, or on
behalf of, the Company or any of its Subsidiaries (i) used any corporate funds
for any unlawful contribution, gift, entertainment or other unlawful expenses
relating to political activity; (ii) made any direct or indirect unlawful
payment to any foreign or domestic government official or employee from
corporate funds; (iii) violated or is in violation of any provision of the U.S.
Foreign Corrupt Practices Act of 1977, as amended; or (iv) made any unlawful
bribe, rebate, payoff, influence payment, kickback or other unlawful payment to
any foreign or domestic government official or employee.


          (p) Sarbanes-Oxley
Act. The Company and each Subsidiary is in compliance with all applicable
requirements of the Sarbanes-Oxley Act of 2002 that are effective as of the
date hereof, and all applicable rules and regulations promulgated by the SEC
thereunder that are effective as of the date hereof.


10





          (q) Transactions
With Affiliates. Except as disclosed in the SEC Documents, none of the
officers, directors or employees of the Company or any of its Subsidiaries is
presently a party to any transaction with the Company or any of its
Subsidiaries (other than for ordinary course services as employees, officers or
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
such officer, director or employee or, to the knowledge of the Company or any
of its Subsidiaries, any corporation, partnership, trust or other Person in
which any such officer, director or employee has a substantial interest or is
an employee, officer, director, trustee or partner.


          (r) Equity
Capitalization. As of the date hereof, the authorized
capital stock of the Company consists of (i) 200,000,000 shares of Common
Stock, of which 98,681,029 are issued and outstanding and 40,608,021 shares are
reserved for issuance pursuant to securities (other than the Preferred Stock
and the Warrants) exercisable or exchangeable for, or convertible into, shares
of Common Stock and (ii) 1,000,000 shares of preferred stock, none of which are
issued and outstanding. 3,012 shares of Common Stock are held in treasury. All
of such outstanding shares are duly authorized and have been, or upon issuance
will be, validly issued and are fully paid and non-assessable. 36,200,909
shares of the Company’s issued and outstanding Common Stock on the date hereof
are owned by Persons who are “affiliates” (as defined in Rule 405 of the 1933
Act and calculated based on the assumption that only officers, directors and
holders of at least 10% of the Company’s issued and outstanding Common Stock
are “affiliates” without conceding that any such Persons are “affiliates” for
purposes of federal securities laws) of the Company or any of its Subsidiaries.
To the Company’s knowledge, except as disclosed in the SEC Documents, no
Person owns 10% or more of the Company’s issued and outstanding shares of
Common Stock (calculated based on the assumption that all Convertible
Securities (as defined below), whether or not presently exercisable or
convertible, have been fully exercised or converted (as the case may
be) taking account of any limitations on exercise or conversion (including
“blockers”) contained therein without conceding that such identified Person is
a 10% stockholder for purposes of federal securities laws). (i) Except as
disclosed in the SEC Documents, none of the Company’s or any Subsidiary’s
capital stock is subject to preemptive rights or any other similar rights or
any liens or encumbrances suffered or permitted by the Company or any
Subsidiary; (ii) except as disclosed in the SEC Documents, there are no
outstanding options, warrants, scrip, rights to subscribe to, calls or
commitments of any character whatsoever relating to, or securities or rights convertible
into, or exercisable or exchangeable for, any capital stock of the Company or
any of its Subsidiaries, or contracts, commitments, understandings or
arrangements by which the Company or any of its Subsidiaries is or may become
bound to issue additional capital stock of the Company or any of its
Subsidiaries or options, warrants, scrip, rights to subscribe to, calls or
commitments of any character whatsoever relating to, or securities or rights
convertible into, or exercisable or exchangeable for, any capital stock of the
Company or any of its Subsidiaries; (iii) there are no outstanding debt
securities, notes, credit agreements, credit facilities or other agreements,
documents or instruments evidencing Indebtedness of the Company or any of its Subsidiaries
or by which the Company or any of its Subsidiaries is or may become bound; (iv)
there are no financing statements securing obligations in any amounts filed in
connection with the Company or any of its Subsidiaries; (v) except as disclosed
in the SEC Documents and except pursuant to this Agreement, there are no
agreements or arrangements under which the Company or any of its Subsidiaries
is obligated to register the sale of any of their securities under the 1933
Act; (vi) except as disclosed in the SEC Documents, there are no outstanding
securities or instruments of the Company or any of its 


11





Subsidiaries which contain any redemption or similar provisions, and
there are no contracts, commitments, understandings or arrangements by which
the Company or any of its Subsidiaries is or may become bound to redeem a
security of the Company or any of its Subsidiaries; (vii) except as disclosed
in the SEC Documents, there are no securities or instruments containing
anti-dilution or similar provisions that will be triggered by the issuance of
the Securities; (viii) neither the Company nor any Subsidiary has any stock
appreciation rights or “phantom stock” plans or agreements or any similar plan
or agreement; and (ix) neither the Company nor any of its Subsidiaries have any
liabilities or obligations required to be disclosed in the SEC Documents which
are not so disclosed in the SEC Documents, other than those incurred in the
ordinary course of the Company’s or its Subsidiaries’ respective businesses and
which, individually or in the aggregate, do not or could not have a Material
Adverse Effect. The Company has furnished to the Buyers true, correct and
complete copies of the Company’s Certificate of Incorporation, as amended and
as in effect on the date hereof (the “Certificate
of Incorporation”), and the Company’s bylaws, as amended and as in
effect on the date hereof (the “Bylaws”), and the terms of all securities
convertible into, or exercisable or exchangeable for, shares of Common Stock
and the material rights of the holders thereof in respect thereto.


          (s) Indebtedness
and Other Contracts. Neither the Company nor any of its Subsidiaries (i)
except as disclosed in the SEC Documents, has any outstanding Indebtedness (as
defined below), (ii) is a party to any contract, agreement or instrument, the
violation of which, or default under which, by the other party(ies) to such
contract, agreement or instrument could reasonably be expected to result in a
Material Adverse Effect, (iii) is in violation of any term of, or in default
under, any contract, agreement or instrument relating to any Indebtedness,
except where such violations and defaults would not result, individually or in
the aggregate, in a Material Adverse Effect, or (iv) is a party to any contract,
agreement or instrument relating to any Indebtedness, the performance of which,
in the judgment of the Company’s officers, has or is expected to have a
Material Adverse Effect. For purposes of this Agreement: (x) “Indebtedness”
of any Person means, without duplication (A) all indebtedness for borrowed
money, (B) all obligations issued, undertaken or assumed as the deferred
purchase price of property or services (including, without limitation, “capital
leases” in accordance with generally accepted accounting principles) (other
than trade payables entered into in the ordinary course of business), (C) all
reimbursement or payment obligations with respect to letters of credit, surety
bonds and other similar instruments, (D) all obligations evidenced by notes,
bonds, debentures or similar instruments, including obligations so evidenced
incurred in connection with the acquisition of property, assets or businesses,
(E) all indebtedness created or arising under any conditional sale or other
title retention agreement, or incurred as financing, in either case with
respect to any property or assets acquired with the proceeds of such
indebtedness (even though the rights and remedies of the seller or bank under
such agreement in the event of default are limited to repossession or sale of
such property), (F) all monetary obligations under any leasing or similar
arrangement which, in connection with generally accepted accounting principles,
consistently applied for the periods covered thereby, is classified as a
capital lease, (G) all indebtedness referred to in clauses (A) through (F)
above secured by (or for which the holder of such Indebtedness has an existing
right, contingent or otherwise, to be secured by) any mortgage, lien, pledge,
charge, security interest or other encumbrance upon or in any property or
assets (including accounts and contract rights) owned by any Person, even
though the Person which owns such assets or property has not assumed or become
liable for the payment of such indebtedness, and (H) all Contingent Obligations
in respect of indebtedness or obligations of others of the kinds referred to in
clauses (A) through (G) above; (y) “Contingent Obligation” 


12





means, as to any Person, any direct or indirect liability, contingent
or otherwise, of that Person with respect to any indebtedness, lease, dividend
or other obligation of another Person if the primary purpose or intent of the
Person incurring such liability, or the primary effect thereof, is to provide
assurance to the obligee of such liability that such liability will be paid or
discharged, or that any agreements relating thereto will be complied with, or
that the holders of such liability will be protected (in whole or in part)
against loss with respect thereto; and (z) “Person” means an individual, a limited liability company, a
partnership, a joint venture, a corporation, a trust, an unincorporated
organization, any other entity and a government or any department or agency
thereof. 


          (t) Absence
of Litigation. There is no action, suit, proceeding, inquiry or
investigation before or by the Principal Market, any court, public board,
government agency, self-regulatory organization or body pending or, to the
knowledge of the Company, threatened against or affecting the Company or any of
its Subsidiaries, the Common Stock or any of the Company’s or its Subsidiaries’
officers or directors which would be reasonably likely to adversely affect the
transactions contemplated by this Agreement or would require disclosure in the
SEC Documents. There has not been, and to the knowledge of the Company, there
is not pending or contemplated, any investigation by the SEC involving the
Company, any of its Subsidiaries or any current or former director or officer
of the Company or any of its Subsidiaries. The SEC has not issued any stop
order or other order suspending the effectiveness of any registration statement
filed by the Company under the 1933 Act or the 1934 Act, including, without
limitation, the Registration Statement.


          (u) Insurance.
The Company and each of its Subsidiaries are insured by insurers of recognized
financial responsibility against such losses and risks and in such amounts as
management of the Company believes to be prudent and customary in the
businesses in which the Company and its Subsidiaries are engaged. Neither the
Company nor any such Subsidiary has been refused any insurance coverage sought
or applied for, and neither the Company nor any such Subsidiary has any reason
to believe that it will be unable 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 at a cost that would not
have a Material Adverse Effect.


          (v) Employee
Relations. Neither the Company nor any of its Subsidiaries is a party to
any collective bargaining agreement or employs any member of a union. The
Company believes that its and its Subsidiaries’ relations with their respective
employees are good. No executive officer (as defined in Rule 501(f) promulgated
under the 1933 Act) or other key employee of the Company or any of its
Subsidiaries has notified the Company or any such Subsidiary that such officer
intends to leave the Company or any such Subsidiary or otherwise terminate such
officer’s employment with the Company or any such Subsidiary. No executive
officer or other key employee of the Company or any of its Subsidiaries is, or
is now expected to be, in violation of any material term of any employment
contract, confidentiality, disclosure or proprietary information agreement,
non-competition agreement, or any other contract or agreement or any
restrictive covenant, and the continued employment of each such executive
officer or other key employee (as the case may be) 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
federal, state, local and foreign laws and regulations respecting labor,
employment and employment practices and benefits, terms and conditions of 


13





employment and wages and hours, except where failure to be in
compliance would not, either individually or in the aggregate, reasonably be
expected to result in a Material Adverse Effect.


          (w) Title.
The Company and its Subsidiaries have good and marketable title in fee simple
to all real property, and have good and marketable title to all personal
property, owned by them which is material to the business of the Company and
its Subsidiaries, in each case, free and clear of all liens, encumbrances and
defects except such as do not materially affect the value of such property and
do not interfere with the use made and proposed to be made of such property by
the Company and any of its Subsidiaries. Any real property and facilities held
under lease by the Company or any of its Subsidiaries are held by them under
valid, subsisting and enforceable leases with such exceptions as are not
material and do not interfere with the use made and proposed to be made of such
property and buildings by the Company or any of its Subsidiaries. 


          (x) Intellectual
Property Rights. The Company and its Subsidiaries own or possess adequate
rights or licenses to use all trademarks, trade names, service marks, service
mark registrations, service names, patents, patent rights, copyrights, original
works, inventions, licenses, approvals, governmental authorizations, trade
secrets and other intellectual property rights and all applications and
registrations therefor (“Intellectual Property Rights”) necessary to
conduct their respective businesses as now conducted and as presently proposed
to be conducted. None of the Company’s or its Subsidiaries’ Intellectual
Property Rights have expired, terminated or been abandoned, or are expected to
expire, terminate or be abandoned, within three years from the date of this
Agreement. The Company has no knowledge of any infringement by the Company or
any of its Subsidiaries of Intellectual Property Rights of others. There is no
claim, action or proceeding being made or brought, or to the knowledge of the
Company or any of its Subsidiaries, being threatened, against the Company or
any of its Subsidiaries regarding their Intellectual Property Rights. The
Company is not aware of any facts or circumstances which might give rise to any
of the foregoing infringements or claims, actions or proceedings. The Company
and each of its Subsidiaries have taken reasonable security measures to protect
the secrecy, confidentiality and value of all of their Intellectual Property
Rights.


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


14





          (z) Tax
Status. The Company and each of its Subsidiaries (i) has timely made or
filed all foreign, federal and state income and all other tax returns, reports
and declarations required by any jurisdiction to which it is subject, (ii) has
timely paid all taxes and other governmental assessments and charges that are
material in amount, shown or determined to be due on such returns, reports and
declarations, except those being contested in good faith and (iii) has set
aside on its books provision reasonably adequate for the payment of all taxes for
periods subsequent to the periods to which such returns, reports or
declarations apply and except in each case where the failure to file, pay or
set aside could not be reasonably expected to have a Material Adverse Effect.
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 and its
Subsidiaries know of no basis for any such claim. The Company is not operated
in such a manner as to qualify as a passive foreign investment company, as
defined in Section 1297 of the U.S. Internal Revenue Code of 1986, as amended.


          (aa) Internal
Accounting and Disclosure Controls. The Company and each of its
Subsidiaries maintains internal control over financial reporting (as such term
is defined in Rule 13a-15(f) under the 1934 Act) that is effective to provide
reasonable assurance regarding the reliability of financial reporting and the
preparation of financial statements for external purposes in accordance with
generally accepted accounting principles, including 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 generally accepted accounting principles and to
maintain asset and liability accountability, (iii) access to assets or
incurrence of liabilities is permitted only in accordance with management’s
general or specific authorization and (iv) the recorded accountability for
assets and liabilities is compared with the existing assets and liabilities at
reasonable intervals and appropriate action is taken with respect to any
difference. The Company maintains disclosure controls and procedures (as such
term is defined in Rule 13a-15(e) under the 1934 Act) that are effective in
ensuring that information required to be disclosed by the Company in the
reports that it files or submits under the 1934 Act is recorded, processed,
summarized and reported, within the time periods specified in the rules and
forms of the SEC, including, without limitation, controls and procedures
designed to ensure that information required to be disclosed by the Company in
the reports that it files or submits under the 1934 Act is accumulated and communicated
to the Company’s management, including its principal executive officer or
officers and its principal financial officer or officers, as appropriate, to
allow timely decisions regarding required disclosure. Neither the Company nor
any of its Subsidiaries has received any notice or correspondence from any
accountant or other Person relating to any potential material weakness or
significant deficiency in any part of the internal controls over financial
reporting of the Company or any of its Subsidiaries.


          (bb) Off
Balance Sheet Arrangements. There is no transaction, arrangement, or other
relationship between the Company or any of its Subsidiaries and an
unconsolidated or other off balance sheet entity that is required to be
disclosed by the Company in its 1934 Act filings and is not so disclosed or
that otherwise could be reasonably likely to have a Material Adverse Effect.


          (cc) Investment
Company Status. The Company is not, and upon consummation of the sale of
the Securities will not be, an “investment company,” an affiliate of an
“investment company,” a company controlled by an “investment company” or an
“affiliated person” of, or 


15





“promoter” or “principal underwriter” for, an “investment company” as
such terms are defined in the Investment Company Act of 1940, as amended. 


          (dd) Acknowledgement
Regarding Buyers’ Trading Activity. It is understood and acknowledged by
the Company that (i) following the public disclosure of the transactions
contemplated by the Transaction Documents, in accordance with the terms
thereof, none of the Buyers have been asked by the Company or any of its
Subsidiaries to agree, nor has any Buyer agreed with the Company or any of its
Subsidiaries, to desist from effecting any transactions in or with respect to
(including, without limitation, purchasing or selling, long and/or short) any
securities of the Company, or “derivative” securities based on securities
issued by the Company or to hold any of the Securities for any specified term;
(ii) any Buyer, and counterparties in “derivative” transactions to which any
such Buyer is a party, directly or indirectly, presently may have a “short”
position in the Common Stock which was established prior to such Buyer’s
knowledge of the transactions contemplated by the Transaction Documents; and
(iii) each Buyer shall not be deemed to have any affiliation with or control
over any arm’s length counterparty in any “derivative” transaction. The Company
further understands and acknowledges that following the public disclosure of
the transactions contemplated by the Transaction Documents pursuant to the
Press Release (as defined below) one or more Buyers may engage in hedging
and/or trading activities at various times during the period that the
Securities are outstanding, including, without limitation, during the periods
that the value and/or number of the Warrant Shares deliverable with respect to
the Securities are being determined and such hedging and/or trading activities,
if any, can reduce the value of the existing stockholders’ equity interest in
the Company both at and after the time the hedging and/or trading activities
are being conducted. The Company acknowledges that such aforementioned hedging
and/or trading activities do not constitute a breach of this Agreement or any
other Transaction Document or any of the documents executed in connection
herewith or therewith.


          (ee) Manipulation
of Price. Neither the Company nor any of its Subsidiaries has, and, to the
knowledge of the Company, no Person acting on their behalf has, directly or
indirectly, (i) taken any action designed to cause or to result in the
stabilization or manipulation of the price of any security of the Company or
any of its Subsidiaries 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 (other than the Placement Agent), or (iii)
paid or agreed to pay to any Person any compensation for soliciting another to
purchase any other securities of the Company or any of its Subsidiaries.


          (ff) U.S.
Real Property Holding Corporation. Neither the Company nor any of its
Subsidiaries is, or has ever been, and so long as any of the Securities are
held by any of the Buyers, shall become, a U.S. real property holding
corporation within the meaning of Section 897 of the Internal Revenue Code of
1986, as amended, and the Company and each Subsidiary shall so certify upon any
Buyer’s request.


          (gg) Registration
Eligibility. The Company is eligible to register the issuance and sale of
the Securities (other than the Series A Warrant Shares and the Series C Warrant
Shares) to the Buyers using Form S-1 promulgated under the 1933 Act.


          (hh) Transfer
Taxes. On the Closing Date, all stock transfer or other taxes (other than
income or similar taxes) which are required to be paid in connection with the
issuance and sale 


16





of the Securities to be sold to each Buyer hereunder will be, or will
have been, fully paid or provided for by the Company, and all laws imposing
such taxes will be or will have been complied with.


          (ii) Bank
Holding Company Act. Neither the Company nor any of its Subsidiaries 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 (25%) or more of the total equity of a bank or any equity 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.


          (jj) Shell
Company Status. The Company is not, and has never been, an issuer
identified in, or subject to, Rule 144(i).


          (kk) Public
Utility Holding Act. None of the Company nor any of its Subsidiaries is a
“holding company,” or an “affiliate” of a “holding company,” as such terms are
defined in the Public Utility Holding Act of 2005.


          (ll) Federal
Power Act. None of the Company nor any of its Subsidiaries is subject to
regulation as a “public utility” under the Federal Power Act, as amended.


          (mm) No
Additional Agreements. The Company does not have any agreement or understanding
with any Buyer with respect to the transactions contemplated by the Transaction
Documents other than as specified in the Transaction Documents.


          (nn) Illegal
or Unauthorized Payments; Political Contributions. Neither the Company nor
any of its Subsidiaries nor, to the best of the Company’s knowledge (after
reasonable inquiry of its officers and directors), any of the officers,
directors, employees, agents or other representatives of the Company or any of
its Subsidiaries or any other business entity or enterprise with which the
Company or any Subsidiary is or has been affiliated or associated, has,
directly or indirectly, made or authorized any payment, contribution or gift of
money, property, or services, whether or not in contravention of applicable
law, (a) as a kickback or bribe to any Person or (b) to any political
organization, or the holder of or any aspirant to any elective or appointive
public office except for personal political contributions not involving the
direct or indirect use of funds of the Company or any of its Subsidiaries.


          (oo) Money
Laundering. The Company and its Subsidiaries are in compliance with, and
have not previously violated, the USA Patriot Act of 2001 and all other
applicable U.S. and non-U.S. anti-money laundering laws and regulations,
including, without limitation, the laws, regulations and Executive Orders and
sanctions programs administered by the U.S. Office of Foreign Assets Control,
including, without limitation, (i) Executive Order 13224 of September 23, 2001 entitled, “Blocking
Property and Prohibiting Transactions With Persons Who Commit, Threaten to
Commit, or Support Terrorism” (66 Fed. Reg. 49079 (2001)); and (ii) any
regulations contained in 31 CFR, Subtitle B, Chapter V.


17





          (pp) Registration
Rights. No holder of securities of the Company has rights to the
registration of any securities of the Company because of the filing of the
Registration Statement or the issuance of the Securities hereunder that could
expose the Company to material liability or any Buyer to any liability or that
could impair the Company’s ability to consummate the issuance and sale of the
Securities in the manner, and at the times, contemplated hereby, which rights
have not been waived by the holder thereof as of the date hereof.


          (qq) FDA.
As to each product subject to the jurisdiction of the U.S. Food and Drug
Administration (the “FDA”) under
the Federal Food, Drug and Cosmetic Act, as amended, and the regulations
thereunder (the “FDCA”) that is
manufactured, packaged, labeled, tested, distributed, sold, and/or marketed by
the Company or any of its Subsidiaries (each such product, a “Product”), such
Product is being manufactured, packaged, labeled, tested, distributed, sold
and/or marketed by the Company or such Subsidiary (as the case may be) in
compliance with all applicable requirements under FDCA and similar laws, rules
and regulations relating to registration, investigational use, premarket
clearance, licensure, or application approval, good manufacturing practices,
good laboratory practices, good clinical practices, product listing, quotas,
labeling, advertising, record keeping and filing of reports, except where the
failure to be in compliance would not have a Material Adverse Effect. There is
no pending, completed or, to the Company’s knowledge, threatened, action
(including, without limitation, 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 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 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 subject to the jurisdiction
of the FDA 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. 


          (rr) Disclosure.
The Company confirms that neither it nor any other Person acting on its behalf
has provided any of the Buyers or their agents or counsel with any information
that constitutes or could reasonably be expected to constitute material,
non-public information concerning the Company or any of its Subsidiaries, other
than the existence of the transactions contemplated by this Agreement and the
other Transaction Documents. The Company understands and confirms that each of
the Buyers will rely on the foregoing representations in effecting transactions
in securities of the Company. All disclosure provided to the Buyers regarding
the Company and its Subsidiaries, their businesses and the transactions
contemplated 


18





hereby, including the schedules to this Agreement, furnished by or on
behalf of the Company or any of its Subsidiaries 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 the
light of the circumstances under which they were made, not misleading. Each
press release issued by the Company or any of its Subsidiaries during the
twelve (12) months preceding the date of this Agreement did not at the time of
release 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 the light of the circumstances under which they are
made, not misleading. No event or circumstance has occurred or, to the
Company’s knowledge, information exists with respect to the Company or any of
its Subsidiaries or its or their business, properties, liabilities, prospects,
operations (including results thereof) or conditions (financial or otherwise),
which, under applicable law, rule or regulation, requires public disclosure at
or before the date hereof or announcement by the Company but which has not been
so publicly disclosed. The Company acknowledges and agrees that no Buyer makes
or has made any representations or warranties with respect to the transactions
contemplated hereby other than those specifically set forth in Section 2.


	
  

 	
  

 
	
 4.

 	
 COVENANTS.

 


          (a) Best
Efforts. Each Buyer shall use its best efforts to timely satisfy each of
the conditions to be satisfied by it as provided in Section 6 of this
Agreement. The Company shall use its best efforts to timely satisfy each of the
conditions to be satisfied by it as provided in Section 7 of this Agreement.


          (b) Maintenance
of Registration Statement For so long as any of the shares of Preferred
Stock or Series B Warrants remain outstanding, the Company shall use its best
efforts to maintain the effectiveness of the Registration Statement for the
issuance thereunder of the Conversion Shares and Series B Warrant Shares. If at
any time following the date hereof the Registration Statement is not effective
or is not otherwise available for the issuance of the Securities (other than
the Series A Warrant Shares and Series C Warrant Shares) or any prospectus
contained therein is not available for use, the Company shall immediately notify
the holders of such Securities in writing that the Registration Statement is
not then effective or a prospectus contained therein is not available for use
and thereafter shall promptly notify such holders when the Registration
Statement is effective again and available for the issuance of such Securities
or such prospectus is again available for use.


          (c)
Prospectus and Blue Sky. Immediately prior to execution of
this Agreement, the Company shall have delivered, and as soon as practicable
after execution of this Agreement the Company shall file, the Prospectus with
respect to the Securities (other than the Series A Warrant Shares and the
Series C Warrant Shares) and as required under, and in conformity with, the
1933 Act, including Rule 424(b) thereunder. If required, the Company, on or
before the Closing Date, 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 Buyers at the Closing pursuant to this Agreement
under applicable securities or “Blue Sky” laws of the states of the United
States (or to obtain an exemption from such qualification), and shall provide
evidence of any such action so taken to the Buyers on or prior to the Closing Date.
Without limiting any other obligation of the Company under this Agreement, the Company shall timely make all filings
and reports relating to the offer and sale of the Securities required under all
applicable securities laws 


19





(including, without limitation,
all applicable federal securities laws and all applicable “Blue Sky” laws), and
the Company shall comply with all applicable federal, state and local laws,
statutes, rules, regulations and the like relating to the offering and sale of
the Securities to the Buyers.


          (d) Reporting
Status. Until the date on which no shares of Preferred Stock or Warrants
are outstanding (the “Reporting Period”), the Company shall
timely file all reports required to be filed with the SEC pursuant to the 1934 Act,
and the Company shall not terminate its status as an issuer required to file
reports under the 1934 Act even if the 1934 Act or the rules and regulations
thereunder would no longer require or otherwise permit such termination.


          (e) Use
of Proceeds. The Company shall use the net proceeds from the sale of the
Securities hereunder solely for general working capital purposes. Without
limiting the foregoing, none of such proceeds shall be used, directly or
indirectly, (i) for the satisfaction of any debt of the Company or any of its
Subsidiaries (other than payment of trade payables incurred after the date
hereof in the ordinary course of business of the Company and its Subsidiaries
and consistent with prior practices), (ii) for the redemption of any securities
of the Company (other than any of the Securities) or (iii) with respect to any
litigation involving the Company or any of its Subsidiaries (including, without
limitation, (x) any settlement thereof or (y) the payment of any costs or
expenses related thereto). 


          (f) Financial
Information. The Company agrees to send the following to each Buyer during
the Reporting Period unless the following are filed with the SEC through EDGAR
and are available to the public through the EDGAR system, (i) within one (1)
Business Day after the filing thereof with the SEC, a copy of its Annual
Reports on Form 10-K and Quarterly Reports on Form 10-Q, any interim reports or
any consolidated balance sheets, income statements, stockholders’ equity
statements and/or cash flow statements for any period other than annual, any
Current Reports on Form 8-K and any registration statements (other than on Form
S-8) or amendments filed pursuant to the 1933 Act, (ii) on the same day as the
release thereof, facsimile copies of all press releases issued by the Company
or any of its Subsidiaries and (iii) copies of any notices and other
information made available or given to the stockholders of the Company
generally, contemporaneously with the making available or giving thereof to the
stockholders.


          (g) Listing.
The Company shall promptly secure the listing or designation for quotation (as
the case may be) of all of the Conversion Shares and Warrant Shares upon each
national securities exchange and automated quotation system, if any, upon which
the Common Stock is then listed or designated for quotation (as the case may
be) (subject to official notice of issuance) (but in no event later than the
Closing Date) and shall maintain such listing or designation for quotation (as
the case may be) of all the shares of Common Stock from time to time issuable
under the terms of the Transaction Documents on such national securities
exchange or automated quotation system. The Company shall maintain the Common
Stock’s listing or designation for quotation (as the case may be) on the
Principal Market, The New York Stock Exchange, the NYSE Amex, the Nasdaq Global
Select Market, the Nasdaq Global Market or the Nasdaq Capital Market (each, an
“Eligible Market”). Neither the
Company nor any of its Subsidiaries shall take any action which could be
reasonably expected to result in the delisting or suspension of the Common
Stock on an Eligible Market. The Company shall pay all fees and expenses in
connection with satisfying its obligations under this Section 4(g).


20





          (h) Fees.
The Company shall reimburse Iroquois Master Fund Ltd. (“Iroquois”) 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,
structuring, 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 equal to $60,000, which
amount shall be withheld by Iroquois from its Purchase Price at the Closing or
paid by the Company on demand by Iroquois if Iroquois terminates its
obligations under this Agreement in accordance with Section 8 (as the case may
be), less $25,000 which was previously advanced by the Company to Iroquois. The
Company shall be responsible for the payment of any placement agent’s fees,
financial advisory fees, or broker’s commissions (other than for Persons
engaged by any Buyer) relating to or arising out of the transactions
contemplated hereby (including, without limitation, any fees payable to the
Placement Agent, who is the Company’s sole placement agent in connection with
the transactions contemplated by this Agreement). The Company shall pay, and
hold each Buyer harmless against, any liability, loss or expense (including,
without limitation, reasonable attorneys’ fees and out-of-pocket expenses)
arising in connection with any claim relating to any such payment. Except as
otherwise set forth in the Transaction Documents, each party to this Agreement
shall bear its own expenses in connection with the sale of the Securities to
the Buyers.


          (i) Pledge
of Securities. Notwithstanding anything to the contrary contained in this
Agreement, the Company acknowledges and agrees that the Securities may be
pledged by a Buyer in connection with a bona fide margin agreement or other
loan or financing arrangement that is secured by the Securities. The pledge of
Securities shall not be deemed to be a transfer, sale or assignment of the
Securities hereunder, and no Buyer effecting a pledge of Securities shall be
required to provide the Company with any notice thereof or otherwise make any
delivery to the Company pursuant to this Agreement or any other Transaction
Document. The Company hereby agrees to execute and deliver such documentation
as a pledgee of the Securities may reasonably request in connection with a
pledge of the Securities to such pledgee by a Buyer.


          (j) Disclosure
of Transactions and Other Material Information. The Company shall, on or
before 8:30 a.m., New York time, on the date that is one Business Day after the date of this Agreement, (x)
issue a press release (the “Press Release”)
reasonably acceptable to the Buyers disclosing all the material terms of the
transactions contemplated by the Transaction Documents and (y) file a Current
Report on Form 8-K describing all the material terms of the transactions
contemplated by the Transaction Documents in the form required by the 1934 Act
and attaching all the material Transaction Documents (including, without
limitation, this Agreement, the Certificate of Designation and the form of
Warrants) (including all attachments, the “8-K
Filing”). From and after the issuance of the Press Release, the
Company shall have disclosed all material, non-public information (if any)
delivered to any of the Buyers 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
shall not, and the Company shall cause each of its Subsidiaries and each of its
and their respective officers, directors, employees and agents, not to, provide
any Buyer with any material, non-public information regarding the Company or
any of its Subsidiaries from and after the issuance of the Press Release
without the express prior written consent of such Buyer. In the event of a
breach of any of the foregoing covenants or any of the covenants contained in
Section 4(o) by the Company, any of its Subsidiaries, or any of its or their
respective officers, directors, employees and agents (as 


21





determined in the reasonable good faith judgment of such Buyer), in
addition to any other remedy provided herein or in the Transaction Documents,
such Buyer shall have the right to make a public disclosure, in the form of a
press release, public advertisement or otherwise, of such material, non-public
information without the prior approval by the Company, any of its Subsidiaries,
or any of its or their respective officers, directors, employees or agents. No
Buyer shall have any liability to the Company, any of its Subsidiaries, or any
of its or their respective officers, directors, employees, stockholders or
agents, for any such disclosure. Subject to the foregoing, neither the Company,
its Subsidiaries nor any Buyer shall issue any press releases or any other
public statements with respect to the transactions contemplated hereby;
provided, however, the Company shall be entitled, without the prior approval of
any Buyer, to make any press release or other public disclosure with respect to
such transactions (i) in substantial conformity with the 8-K Filing and
contemporaneously therewith and (ii) as is required by applicable law and
regulations. Without the prior written consent of the applicable Buyer, the
Company shall not (and shall cause each of its Subsidiaries and affiliates to
not) disclose the name of such Buyer in any filing (other than the 8-K Filing
or any filing that incorporates language from the 8-K Filing), announcement,
release or otherwise. Notwithstanding anything contained in this Agreement to
the contrary and without implication that the contrary would otherwise be true,
the Company expressly acknowledges and agrees that no Buyer has had, and no
Buyer shall have (unless expressly agreed to by a particular Buyer after the
date hereof in a written definitive and binding agreement executed by the
Company and such particular Buyer (it being understood and agreed that no Buyer
may bind any other Buyer with respect thereto)), any duty of confidentiality
with respect to, or a duty not to trade on the basis of, any information
regarding the Company or any of its Subsidiaries that such Buyer receives from
the Company, any of its Subsidiaries, or any of its or their respective
officers, directors, employees, stockholders or agents.


          (k) Additional
Issuance of Securities. The Company agrees that for the period commencing
on the date hereof and ending on the date immediately following the ninety (90)
day anniversary of the Closing Date (provided that such period shall be
extended by the number of days during such period and any extension thereof
contemplated by this proviso on which the Registration Statement is not
effective or any prospectus contained therein is not available for use) (the “Restricted Period”), 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 1933 Act), any Convertible Securities, any
debt, any preferred stock or any purchase rights) (any such issuance, offer,
sale, grant, disposition or announcement (whether occurring during the Restricted
Period or at any time thereafter) is referred to as a “Subsequent Placement”).
Notwithstanding the foregoing, this Section 4(k) shall not apply in respect of
the issuance of (A) shares of Common Stock or standard options to purchase
Common Stock to directors, officers or employees of the Company in their
capacity as such pursuant to an Approved Share Plan (as defined below),
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 5,000,000 shares of
Common Stock (adjusted for stock splits, stock combinations and other similar
transactions) 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 


22





manner that adversely affects any of the Buyers; (B) shares of Common
Stock issued upon the conversion or exercise of Convertible Securities (other
than standard 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 price of any such Convertible Securities
(other than standard 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 Convertible Securities (other than standard 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 Convertible Securities (other than
standard 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 Buyers; (C) the Conversion Shares;
and (D) the Warrant Shares (each of the foregoing in clauses (A) through (D)
collectively the “Excluded Securities”).
“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 standard options to purchase Common Stock may be issued to any
employee, officer or director for services provided to the Company in their
capacity as such. “Convertible Securities” 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. 


          (l) Reservation
of Shares. So long as any of the shares of Preferred Stock or Warrants
remain outstanding, the Company shall take all action necessary to at all times
have authorized, and reserved for the purpose of issuance, no less than 100% of
(i) the maximum number of shares of Common Stock issuable upon conversion of
all the shares of Preferred Stock (assuming for purposes hereof, that the
Preferred Stock is convertible at the Conversion Price (as defined in the
Certificate of Designation) and without regard to any limitations on the
conversion of the Preferred Stock set forth in the Certificate of Designation) and
(ii) the maximum number of shares of Common Stock issuable upon exercise of all
the Warrants (assuming for purposes hereof, that the Warrants are exercisable
at the initial Exercise Price (as defined in such Warrants) and without regard
to any limitations on the exercise of the Warrants set forth therein), subject,
with respect to the Series A Warrant Shares and the Series C Warrant Shares, to
Stockholder Approval.


          (m) Conduct
of Business. The business of the Company and its Subsidiaries shall not be
conducted in violation of any law, ordinance or regulation of any governmental
entity, except where such violations would not result, either individually or
in the aggregate, in a Material Adverse Effect.


          (n) Variable
Rate Transaction. Until none of the shares of Preferred Stock or the Series
B Warrants are outstanding, the Company and each Subsidiary shall be prohibited
from effecting or entering into an agreement to effect any Subsequent Placement
involving a Variable Rate Transaction. “Variable
Rate Transaction” means a transaction in which the Company or any
Subsidiary (i) issues or sells any Convertible Securities either (A) at a
conversion, exercise 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 


23





Convertible Securities, or (B) with a conversion, exercise or exchange
price that is subject to being reset at some future date after the initial
issuance of such Convertible Securities 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, other than pursuant to a customary
“weighted average” anti-dilution provision, or (ii) enters into any agreement
(including, without limitation, an “equity line of credit” or an “at-the-market
offering”) whereby the Company or any Subsidiary may sell securities at a
future determined price (other than standard and customary “preemptive” or
“participation” rights). Each Buyer shall be entitled to obtain injunctive
relief against the Company and its Subsidiaries to preclude any such issuance,
which remedy shall be in addition to any right to collect damages.


          (o) Participation
Right. From the date hereof through the one (1) year anniversary of the
Closing Date, neither the Company nor any of its Subsidiaries shall, directly
or indirectly, effect any Subsequent Placement unless the Company shall have
first complied with this Section 4(o). The Company acknowledges and agrees that
the right set forth in this Section 4(o) is a right granted by the Company,
separately, to each Buyer.


	
  

 	
  

 
	
  

 	
           (i) At
 least five (5) Trading Days prior to any proposed or intended Subsequent
 Placement, the Company shall deliver to each Buyer a written notice of its
 proposal or intention to effect a Subsequent Placement (each such notice, 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 proposes or intends
 to effect a Subsequent Placement, (ii) a statement that the statement in
 clause (i) above does not constitute material, non-public information and
 (iii) a statement informing such Buyer that it is entitled to receive an
 Offer Notice (as defined below) with respect to such Subsequent Placement
 upon its written request. Upon the written request of a Buyer within
 three (3) Trading Days after the Company’s delivery to such Buyer of such
 Pre-Notice, and only upon a written request by such Buyer, the Company shall
 promptly, but no later than one (1) Trading Day after such request, deliver
 to such Buyer an irrevocable written notice (the “Offer Notice”) of any proposed or intended issuance or sale
 or exchange (the “Offer”) of the
 securities being offered (the “Offered
 Securities”) in a Subsequent Placement, which Offer Notice shall
 (w) identify and describe the Offered Securities, (x) describe the price and
 other terms upon which they are to be issued, sold or exchanged, and the
 number or amount of the Offered Securities to be issued, sold or exchanged,
 (y) identify the Persons (if known) to which or with which the Offered
 Securities are to be offered, issued, sold or exchanged and (z) offer to
 issue and sell to or exchange with such Buyer in accordance with the terms of
 the Offer all of the Offered Securities, provided that the number of Offered
 Securities which such Buyer shall have the right to subscribe for under this
 Section 4(o) shall be (a) based on such Buyer’s pro rata portion of the
 aggregate number of shares of Preferred Stock purchased hereunder by all
 Buyers (the “Basic Amount”), and
 (b) with respect to each Buyer that elects to purchase its Basic Amount, any
 additional portion of the Offered Securities attributable to the Basic
 Amounts of other Buyers as such Buyer shall indicate it will purchase or
 acquire should the other Buyers subscribe for less than their Basic Amounts
 (the “Undersubscription Amount”).

 
	
  

 	
  

 
	
  

 	
           (ii) To
 accept an Offer, in whole or in part, such Buyer must deliver a written
 notice to the Company prior to the end of the fifth (5th) Business
 Day after such Buyer’s 

 


24









	
  

 	
  

 
	
  

 	
 receipt of the Offer Notice (the “Offer
 Period”), setting forth the portion of such Buyer’s Basic Amount
 that such Buyer elects to purchase and, if such Buyer shall elect to purchase
 all of its Basic Amount, the Undersubscription Amount, if any, that such
 Buyer elects to purchase (in either case, the “Notice of Acceptance”). If the Basic Amounts subscribed for
 by all Buyers are less than the total of all of the Basic Amounts, then such
 Buyer who has set forth an Undersubscription Amount in its Notice of
 Acceptance shall be entitled to purchase, in addition to the Basic Amounts
 subscribed for, the Undersubscription Amount it has subscribed for; provided,
 however, if the Undersubscription Amounts subscribed for exceed the
 difference between the total of all the Basic Amounts and the Basic Amounts
 subscribed for (the “Available
 Undersubscription Amount”), such Buyer who has subscribed for any
 Undersubscription Amount shall be entitled to purchase only that portion of
 the Available Undersubscription Amount as the Basic Amount of such Buyer
 bears to the total Basic Amounts of all Buyers that have subscribed for
 Undersubscription Amounts, subject to rounding by the Company to the extent
 it deems reasonably necessary. Notwithstanding the foregoing, if the Company
 desires to modify or amend the terms and conditions of the Offer prior to the
 expiration of the Offer Period, the Company may deliver to each Buyer a new
 Offer Notice and the Offer Period shall expire on the fifth (5th)
 Business Day after such Buyer’s receipt of such new Offer Notice.

 
	
  

 	
  

 
	
  

 	
           (iii) The
 Company shall have five (5) days from the expiration of the Offer Period
 above (i) to offer, issue, sell or exchange all or any part of such Offered
 Securities as to which a Notice of Acceptance has not been given by a Buyer
 (the “Refused Securities”)
 pursuant to a definitive agreement(s) (the “Subsequent
 Placement Agreement”), but only to the offerees described in the
 Offer Notice (if so described therein) and only upon terms and conditions
 (including, without limitation, unit prices and interest rates) that are not
 more favorable to the acquiring Person or Persons or less favorable to the
 Company than those set forth in the Offer Notice and (ii) to publicly
 announce (a) the execution of such Subsequent Placement Agreement, and (b)
 either (x) the consummation of the transactions contemplated by such
 Subsequent Placement Agreement or (y) the termination of such Subsequent
 Placement Agreement, which shall be filed with the SEC on a Current Report on
 Form 8-K with such Subsequent Placement Agreement and any documents contemplated
 therein filed as exhibits thereto.

 
	
  

 	
  

 
	
  

 	
           (iv) In
 the event the Company shall propose to sell less than all the Refused
 Securities (any such sale to be in the manner and on the terms specified in
 Section 4(o)(iii) above), then such Buyer may, at its sole option and in its
 sole discretion, reduce the number or amount of the Offered Securities
 specified in its Notice of Acceptance to an amount that shall be not less
 than the number or amount of the Offered Securities that such Buyer elected to
 purchase pursuant to Section 4(o)(ii) above multiplied by a fraction, (i) the
 numerator of which shall be the number or amount of Offered Securities the
 Company actually proposes to issue, sell or exchange (including Offered
 Securities to be issued or sold to Buyers pursuant to this Section 4(o) prior
 to such reduction) and (ii) the denominator of which shall be the original
 amount of the Offered Securities. In the event that any Buyer so elects to
 reduce the number or amount of Offered Securities specified in its Notice of
 Acceptance, the Company may not issue, sell or exchange more than the reduced
 number or amount of the Offered Securities unless and until such

 


25









	
  

 	
  

 
	
  

 	
 securities have again been offered to the Buyers in accordance with
 Section 4(o)(i) above.

 
	
  

 	
  

 
	
  

 	
           (v) Upon
 the closing of the issuance, sale or exchange of all or less than all of the
 Refused Securities, such Buyer shall acquire from the Company, and the
 Company shall issue to such Buyer, the number or amount of Offered Securities
 specified in its Notice of Acceptance. The purchase by such Buyer of any
 Offered Securities is subject in all cases to the preparation, execution and
 delivery by the Company and such Buyer of a separate purchase agreement
 relating to such Offered Securities reasonably satisfactory in form and
 substance to such Buyer and its counsel.

 
	
  

 	
  

 
	
  

 	
           (vi) Any
 Offered Securities not acquired by a Buyer or other Persons in accordance
 with this Section 4(o) may not be issued, sold or exchanged until they are
 again offered to such Buyer under the procedures specified in this Agreement.

 
	
  

 	
  

 
	
  

 	
           (vii) The
 Company and each Buyer agree that if any Buyer elects to participate in the
 Offer, neither the Subsequent Placement Agreement with respect to such Offer
 nor any other transaction documents related thereto (collectively, the “Subsequent Placement Documents”) shall
 include any term or provision whereby such Buyer shall be required to agree
 to any restrictions on trading as to any securities of the Company or be
 required to consent to any amendment to or termination of, or grant any
 waiver, release or the like under or in connection with, any agreement
 previously entered into with the Company or any instrument received from the
 Company.

 
	
  

 	
  

 
	
  

 	
           (viii)
 Notwithstanding anything to the contrary in this Section 4(o) and unless
 otherwise agreed to by such Buyer, the Company shall either confirm in
 writing to such Buyer that the transaction with respect to the Subsequent
 Placement has been abandoned or shall publicly disclose its intention to
 issue the Offered Securities, in either case in such a manner such that such
 Buyer will not be in possession of any material, non-public information, by
 the fifth (5th) Business Day following delivery of the Offer
 Notice. If by such fifth (5th) Business Day, no public disclosure
 regarding a transaction with respect to the Offered Securities has been made,
 and no notice regarding the abandonment of such transaction has been received
 by such Buyer, such transaction shall be deemed to have been abandoned and
 such Buyer shall not be in possession of any material, non-public information
 with respect to the Company or any of its Subsidiaries. Should the Company
 decide to pursue such transaction with respect to the Offered Securities, the
 Company shall provide such Buyer with another Offer Notice in accordance
 with, and subject to, the terms of this Section 4(o) and such Buyer will
 again have the right of participation set forth in this Section 4(o). The
 Company shall not be permitted to deliver more than one Offer Notice to such
 Buyer in any sixty (60) day period, except as expressly contemplated by the
 last sentence of Section 4(o)(ii).

 
	
  

 	
  

 
	
  

 	
           (ix) The
 restrictions contained in this Section 4(o) shall not apply in connection with
 the issuance of any Excluded Securities. The Company shall not circumvent the
 provisions of this Section 4(o) by providing terms or conditions to one Buyer
 that are not provided to all.

 


          (p) Passive
Foreign Investment Company. The Company shall conduct its business in 


26





such a manner as will ensure that the Company will not be deemed to
constitute a passive foreign investment company within the meaning of Section
1297 of the U.S. Internal Revenue Code of 1986, as amended.


          (q) Restriction
on Redemption and Cash Dividends. So long as any shares of Preferred Stock
are outstanding, the Company shall not, directly or indirectly, redeem, or
declare or pay any cash dividend or distribution on, any securities of the
Company (other than any of the Securities) without the prior express written
consent of the Buyers.


          (r) Corporate
Existence. So long as any Buyer owns any shares of Preferred Stock or
Warrants, the Company shall not be party to any Fundamental Transaction (as
defined in the Certificate of Designation) unless the Company is in compliance
with the applicable provisions governing Fundamental Transactions set forth in
the Certificate of Designation and the Warrants.


          (s) Stockholder
Approval. The Company shall provide each stockholder entitled to vote at a special or annual meeting of stockholders of
the Company (the “Stockholder Meeting”), which meeting shall be held no later than the Company’s annual
meeting to be held in 2011 (which shall be held no later than July 31, 2011) (the “Stockholder Meeting
Deadline”)), a proxy statement, substantially in a form which has been previously reviewed by each of the Buyers and
each of their counsel, soliciting each such stockholder’s affirmative vote at the Stockholder Meeting for approval of a
resolution (the “Resolution”) to amend the Certificate of Incorporation to increase the Company’s
authorized capital stock to at least 501,000,000 but not more than 1,001,000,000 shares of capital stock, at least
500,000,000 but not more than 1,000,000,000 of such shares being Common Stock and 1,000,000 of such shares being preferred
stock (such affirmative approval being referred to herein as the “Stockholder Approval”), and the Company
shall use its reasonable best efforts to solicit its stockholders’ approval of the Resolution (which efforts shall
include, without limitation, the requirement to hire a reputable proxy solicitor) and to cause the board of directors of the
Company to recommend to the stockholders that they approve the Resolution. The Company shall be obligated to hold the
Stockholder Meeting by the Stockholder Meeting Deadline and seek to obtain the Stockholder Approval at the Stockholder
Meeting by the Stockholder Meeting Deadline. If, despite the Company’s best efforts the Stockholder Approval is not
obtained on or prior to the Stockholder Meeting Deadline, the Company shall cause an additional Stockholder Meeting to be
held every three (3) months thereafter until such Stockholder Approval is obtained. Until Stockholder Approval is obtained,
(i) the Company shall not, directly or indirectly, issue or sell, or, in accordance with Section 2 of the Warrants, be deemed
to have issued or sold, any shares of Common Stock (other than Excluded Securities and shares of Common Stock issuable under
Convertible Securities held by any Buyer) for consideration per share (determined in accordance with Section 2 of the
Warrants) less than the Exercise Price of the Series A Warrants at any time while any of the shares of Preferred Stock or
Warrants are outstanding without the prior written consent of each Buyer, which consent may be granted or withheld in each
Buyer’s sole discretion and (ii) in no event shall any Excluded Securities (other than the Conversion Shares and the
Warrant Shares) be issued, or be deemed to be issued as contemplated hereby, for less than the fair market value of the
Common Stock at the time such Excluded Securities are so issued or are so deemed to be issued.


27






	
  

 	
  

 
	
 5.

 	
 REGISTER; TRANSFER AGENT INSTRUCTIONS; NO LEGENDS.

 



          (a) Register.
The Company shall maintain at its principal executive offices (or such other
office or agency of the Company as it may designate by notice to each holder of
Securities), a register for the Preferred Stock and the Warrants in which the
Company shall record the name and address of the Person in whose name the
Preferred Stock and the Warrants
have been issued (including the name and address of each transferee), the
number of shares of Preferred Stock held by such Person, the number of
Conversion Shares issuable upon conversion of the Preferred Stock held by such
Person and the number of Warrant Shares issuable upon exercise of the Warrants
held by such Person. The Company shall keep the register open and available at
all times during business hours for inspection of any Buyer or its legal
representatives.


          (b) Transfer
Agent Instructions. The Company shall issue irrevocable instructions to its
transfer agent (the “Transfer Agent”)
in the form previously provided to the Company (the “Irrevocable Transfer Agent Instructions”)
to issue certificates or credit shares to the applicable balance accounts at
The Depository Trust Company (“DTC”),
registered in the name of each Buyer or its respective nominee(s), for the
Conversion Shares and the Warrant Shares in such amounts as specified from time
to time by each Buyer to the Company upon conversion of the Preferred Stock or
the exercise of the Warrants (as the case may be). The Company represents and
warrants that no instruction other than the Irrevocable Transfer Agent
Instructions referred to in this Section 5(b) will be given by the Company to
the Transfer Agent with respect to the Securities, and that the Securities
shall otherwise be freely transferable on the books and records of the Company.
If a Buyer effects a sale, assignment or transfer of the Securities, the
Company shall permit the transfer and shall promptly instruct the Transfer
Agent to issue one or more certificates or credit shares to the applicable
balance accounts at DTC in such name and in such denominations as specified by
such Buyer to effect such sale, transfer or assignment. The Company
acknowledges that a breach by it of its obligations hereunder will cause
irreparable harm to each Buyer. Accordingly, the Company acknowledges that the
remedy at law for a breach of its obligations under this Section 5(b) will be
inadequate and agrees, in the event of a breach or threatened breach by the
Company of the provisions of this Section 5(b), that each Buyer shall be
entitled, in addition to all other available remedies, to an order and/or injunction
restraining any breach and requiring immediate issuance and transfer, without
the necessity of showing economic loss and without any bond or other security
being required.


          (c) No
Legends. Certificates and any other instruments evidencing the Securities
shall not bear any restrictive or other legend. 


	
  

 	
  

 
	
 6.

 	
 CONDITIONS TO THE COMPANY’S OBLIGATION TO SELL. 

 


          (a) The
obligation of the Company hereunder to issue and sell the Preferred Stock and
Warrants to each Buyer at the Closing is subject to the satisfaction, at or
before the Closing Date, of each of the following conditions, provided that
these conditions are for the Company’s sole benefit and may be waived by the
Company at any time in its sole discretion by providing each Buyer with prior
written notice thereof:


                    (i)
Such Buyer and each other Buyer shall have delivered to the Company the
Purchase Price (less, in the case of Iroquois, the amounts withheld pursuant to
Section 4(h)) for the Preferred Stock and Warrants being purchased by such
Buyer at the Closing by wire transfer of immediately available funds pursuant
to the wire instructions provided by the Company.


28






                    (ii)
The representations and warranties of such Buyer shall be true and correct in
all material respects as of the date when made and as of the Closing Date as
though originally made at that time (except for representations and warranties
that speak as of a specific date, which shall be true and correct as of such
date), and such Buyer shall have performed, satisfied and complied in all
material respects with the covenants, agreements and conditions required by
this Agreement to be performed, satisfied or complied with by such Buyer at or
prior to the Closing Date.


	
  

 	
  

 
	
 7.

 	
 CONDITIONS TO EACH
 BUYER’S OBLIGATION TO PURCHASE.

 


          (a) The
obligation of each Buyer hereunder to purchase its shares of Preferred Stock and
Warrants at the Closing is subject to the satisfaction, at or before the
Closing Date, of each of the following conditions, provided that these
conditions are for each Buyer’s sole benefit and may be waived by such Buyer at
any time in its sole discretion by providing the Company with prior written
notice thereof:


                    (i)
The Company shall have duly executed and delivered to such Buyer: (A) a
certificate representing the number of shares of Preferred Stock as is set
forth across from such Buyer’s name in column (3) of the Schedule of Buyers,
(B) Series A Warrants for such aggregate number of Warrant Shares as is set
forth across from such Buyer’s name in column (4) of the Schedule of Buyers,
(C) Series B Warrants for such aggregate number of Warrant Shares as is set
forth across from such Buyer’s name in column (5) of the Schedule of Buyers and
(D) Series C Warrants for such aggregate number of Warrant Shares as is set
forth across from such Buyer’s name in column (6) of the Schedule of Buyers, in
each case, which are being purchased by such Buyer at the Closing pursuant to
this Agreement.


                    (ii)
Such Buyer shall have received the opinion of Morgan, Lewis & Bockius LLP, the
Company’s counsel, dated as of the Closing Date, in the form previously provided
to the Company.


                    (iii)
The Company shall have delivered to such Buyer a copy of the Irrevocable
Transfer Agent Instructions, in the form previously provided to the Company,
that have been delivered to and acknowledged in writing by the Transfer Agent.


                    (iv)
The Company shall have delivered to such Buyer a certificate evidencing the
incorporation and good standing of the Company and each of its Subsidiaries in
each such entity’s jurisdiction of incorporation issued by the Secretary of
State (or comparable office) of such jurisdiction of incorporation as of a date
within ten (10) days of the Closing Date.


                    (v)
The Company shall have delivered to such Buyer a certificate evidencing the
Company’s qualification as a foreign corporation and good standing issued by
the Secretary of State (or comparable office) of each jurisdiction in which the
Company conducts business and is required to so qualify, as of a date within
ten (10) days of the Closing Date.


                    (vi)
The Company shall have delivered to such Buyer a certified copy of the
Certificate of Incorporation, including, without limitation, the Certificate of
Designation, as certified by the Secretary of State of the State of Delaware within
ten (10) days of the Closing Date.


29





                    (vii)
The Company shall have delivered to such Buyer a certificate, in the form
previously provided to the Company, executed by the Secretary of the Company
and dated as of the Closing Date, as to (i) the resolutions consistent with
Section 3(b) as adopted by the Company’s board of directors in a form
reasonably acceptable to such Buyer, (ii) the Certificate of Incorporation,
including, without limitation, the Certificate of Designation, and (iii) the
Bylaws, each as in effect at the Closing.


                    (viii)
Each and every representation and warranty of the Company shall be true and
correct as of the date when made and as of the Closing Date as though
originally made at that time (except for representations and warranties that
speak as of a specific date, which shall be true and correct as of such date)
and the Company shall have performed, satisfied and complied in all respects
with the covenants, agreements and conditions required to be performed,
satisfied or complied with by the Company at or prior to the Closing Date. Such
Buyer shall have received a certificate, executed by the Chief Executive
Officer of the Company, dated as of the Closing Date, to the foregoing effect
and as to such other matters as may be reasonably requested by such Buyer in
the form previously provided to the Company.


                    (ix)
The Company shall have delivered to such Buyer a letter from the Transfer Agent
certifying the number of shares of Common Stock outstanding on the Closing Date
immediately prior to the Closing.


                    (x)
The Common Stock (I) shall be designated for quotation or listed on the
Principal Market and (II) shall not have been suspended, as of the Closing
Date, by the SEC or the Principal Market from trading on the Principal Market
nor shall suspension by the SEC or the Principal Market have been threatened as
of the Closing Date, either (A) in writing by the SEC or the Principal Market
or (B) by falling below the minimum maintenance requirements of the Principal
Market.


                    (xi)
The Company shall have obtained all governmental, regulatory or third party
consents and approvals, if any, necessary for the sale of the Securities,
including without limitation, those required by the Principal Market, subject,
with respect to the issuance of the Series A Warrant Shares and the Series C
Warrant Shares, to Stockholder Approval.


                    (xii)
No statute, rule, regulation, executive order, decree, ruling or injunction
shall have been enacted, entered, promulgated or endorsed by any court or
governmental authority of competent jurisdiction that prohibits the
consummation of any of the transactions contemplated by the Transaction
Documents.


                    (xiii)
Since the date of execution of this Agreement, no event or series of events
shall have occurred that reasonably would have or result in a Material Adverse
Effect.


                    (xiv)
The Company shall have delivered notice to the Principal Market to list or
designate for quotation (as the case may be) the Conversion Shares and the
Warrant Shares.


                    (xv)
The Company shall have delivered to such Buyer such other documents,
instruments or certificates relating to the transactions contemplated by this
Agreement as such Buyer or its counsel may reasonably request.


30






	
  

 	
  

 
	
 8.

 	
 TERMINATION. 

 



          In the
event that the Closing shall not have occurred with respect to a Buyer within
five (5) days after the date hereof, then such Buyer shall have the right to
terminate its obligations under this Agreement with respect to itself at any
time on or after the close of business on such date without liability of such
Buyer to any other party; provided,
however, (i) the right to terminate this Agreement under this Section 8
shall not be available to such Buyer if the failure of the transactions
contemplated by this Agreement to have been consummated by such date is the
result of such Buyer’s breach of this Agreement and (ii) the abandonment of the
sale and purchase of the Preferred Stock and the Warrants shall be applicable
only to such Buyer providing such written notice, provided further that no such
termination shall affect any obligation of the Company under this Agreement to
reimburse such Buyer for the expenses described in Section 4(h) above. Nothing contained in this Section 8 shall be deemed to release any party from
any liability for any breach by such party of the terms and provisions of this
Agreement or the other Transaction Documents or to impair the right of any
party to compel specific performance by any other party of its obligations
under this Agreement or the other Transaction Documents.


	
  

 	
  

 
	
 9.

 	
 MISCELLANEOUS.

 


          (a) Governing
Law; Jurisdiction; Jury Trial. All questions concerning the construction,
validity, enforcement and interpretation of this Agreement and the other
Transaction Documents shall be governed by the internal laws of the State of
New York, without giving effect to any choice of law or conflict of law
provision or rule (whether of the State of New York or any other jurisdictions)
that would cause the application of the laws of any jurisdictions other than
the State 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 under
any of the other Transaction Documents or in connection herewith or therewith
or with any transaction contemplated hereby or thereby or discussed herein or
therein, 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 brought
in an inconvenient forum or that the venue of such suit, action or proceeding
is improper. 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 to such party at the address for such notices to it
under this Agreement and agrees that such service shall constitute good and
sufficient service of process and notice thereof. Nothing contained herein
shall be deemed to limit in any way any right to serve process in any manner
permitted by law. EACH PARTY HEREBY
IRREVOCABLY WAIVES ANY RIGHT IT MAY HAVE TO, AND AGREES NOT TO REQUEST, A JURY
TRIAL FOR THE ADJUDICATION OF ANY DISPUTE HEREUNDER OR IN CONNECTION WITH OR
ARISING OUT OF THIS AGREEMENT OR ANY TRANSACTION CONTEMPLATED HEREBY.


          (b) Counterparts.
This Agreement may be executed in two or more identical counterparts, all of
which 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. In the event that any signature is delivered by facsimile transmission
or by an e-mail which contains a portable document format (.pdf) file of an
executed signature page, such signature page 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 signature page were an
original thereof.


31





          (c) Headings;
Gender. The headings of this Agreement are for convenience of reference and
shall not form part of, or affect the interpretation of, this Agreement. Unless
the context clearly indicates otherwise, each pronoun herein shall be deemed to
include the masculine, feminine, neuter, singular and plural forms thereof. The
terms “including,” “includes,” “include” and words of like import shall be
construed broadly as if followed by the words “without limitation.” The terms
“herein,” “hereunder,” “hereof” and words of like import refer to this entire Agreement
instead of just the provision in which they are found.


          (d) Severability.
If any provision of this Agreement is prohibited by law or otherwise determined
to be invalid or unenforceable by a court of competent jurisdiction, the
provision that would otherwise be prohibited, invalid or unenforceable shall be
deemed amended to apply to the broadest extent that it would be valid and
enforceable, and the invalidity or unenforceability of such provision shall not
affect the validity of the remaining provisions of this Agreement so long as
this Agreement as so modified continues to express, without material change,
the original intentions of the parties as to the subject matter hereof and the
prohibited nature, invalidity or unenforceability of the provision(s) in
question does not substantially impair the respective expectations or
reciprocal obligations of the parties or the practical realization of the
benefits that would otherwise be conferred upon the parties. The parties will
endeavor in good faith negotiations to replace the prohibited, invalid or
unenforceable provision(s) with a valid provision(s), the effect of which comes
as close as possible to that of the prohibited, invalid or unenforceable
provision(s).


          (e) Entire
Agreement; Amendments. This Agreement, the other Transaction Documents and
the schedules and exhibits attached hereto and thereto and the instruments
referenced herein and therein supersede all other prior oral or written
agreements between the Buyers, the Company, their affiliates and Persons acting
on their behalf solely with respect to the matters contained herein and
therein, and this Agreement, the other Transaction Documents, the schedules and
exhibits attached hereto and thereto and the instruments referenced herein and
therein contain the entire understanding of the parties solely with respect to
the matters covered herein and therein; 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 Buyer 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 Buyer 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 Buyer 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 Buyer and all such agreements
shall continue in full force and effect. Except as specifically set forth
herein or therein, neither the Company nor any Buyer makes any representation,
warranty, covenant or undertaking with respect to such matters. For
clarification purposes, the Recitals are part of this Agreement. No provision
of this Agreement may be amended other than by an instrument in writing signed
by the Company and each of the Buyers. No waiver shall be effective unless it
is in writing and signed by an authorized representative of the waiving party.
No consideration 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 also is offered to all of the parties to the
Transaction Documents, all holders of the Preferred Stock or all holders of the
Warrants (as the case may be). The Company has not, directly or indirectly,
made any agreements with any Buyers relating to the terms or conditions of the
transactions contemplated by the Transaction Documents except as set forth in
the Transaction Documents. Without 


32





limiting the foregoing, the Company confirms that, except as set forth
in this Agreement, no Buyer has made any commitment or promise or has any other
obligation to provide any financing to the Company, any Subsidiary or
otherwise. As a material inducement for each Buyer to enter into this
Agreement, the Company expressly acknowledges and agrees that (i) no due
diligence or other investigation or inquiry conducted by a Buyer, any of its
advisors or any of its representatives shall affect such Buyer’s right to rely
on, or shall modify or qualify in any manner or be an exception to any of, the
Company’s representations and warranties contained in this Agreement or any
other Transaction Document, (ii) nothing contained in the Registration
Statement or the Prospectus shall affect such Buyer’s right to rely on, or
shall modify or qualify in any manner or be an exception to any of, the
Company’s representations and warranties contained in this Agreement or any
other Transaction Document and (iii) unless a provision of this Agreement or
any other Transaction Document is expressly preceded by the phrase “except as
disclosed in the SEC Documents,” nothing contained in any of the SEC Documents
shall affect such Buyer’s right to rely on, or shall modify or qualify in any
manner or be an exception to any of, the Company’s representations and
warranties contained in this Agreement or any other Transaction Document.


          (f) Notices.
Any notices, consents, waivers or other communications required or permitted to
be given under the terms of this Agreement must be in writing and will be
deemed to have been delivered: (i) upon receipt, when delivered personally;
(ii) upon receipt, when sent by facsimile (provided confirmation of
transmission is mechanically or electronically generated and kept on file by
the sending party); or (iii) one (1) Business Day after deposit with an
overnight courier service with next day delivery specified, in each case,
properly addressed to the party to receive the same. The addresses and
facsimile numbers for such communications shall be:


	
  

 	
  

 	
  

 
	
  

 	
 If to the
 Company: 

 
	
  

 	
  

 	
  

 
	
  

 	
  

 	
 NovaDel
 Pharma Inc.

 
	
  

 	
  

 	
 1200 Route 22 East, Suite 2000

 
	
  

 	
  

 	
 Bridgewater, New Jersey 08807

 
	
  

 	
  

 	
 Telephone:

 Facsimile:

 Attention:

 
	
  

 	
  

 	
  

 
	
  

 	
 With a copy
 (for informational purposes only) to:

 
	
  

 	
  

 	
  

 
	
  

 	
  

 	
 Morgan,
 Lewis & Bockius LLP

 502 Carnegie Center

 Princeton, New Jersey 08540

 Telephone: 609.919.6633

 Facsimile: 609.919.6701

 Attention: Emilio Ragosa, Esq.

 
	
  

 	
  

 	
  

 
	
  

 	
 If to the
 Transfer Agent:

 
	
  

 	
  

 	
  

 
	
  

 	
  

 	
 [_______________]
 

 [_______________]

 [_______________]

 


33









	
  

 	
  

 	
  

 
	
  

 	
  

 	
 Telephone:

 Facsimile:

 Attention:

 


If to a Buyer, to its address and facsimile number set forth on the
Schedule of Buyers, with copies to such Buyer’s representatives as set forth on
the Schedule of Buyers,


	
  

 	
  

 	
  

 
	
  

 	
 with a copy
 (for informational purposes only) to:

 
	
  

 	
  

 	
  

 
	
  

 	
  

 	
 Greenberg
 Traurig, LLP 

 77 W. Wacker Drive, Suite 3100

 Chicago, Illinois 60601

 Telephone: (312) 456-8400

 Facsimile: (312) 456-8435

 Attention: Peter H. Lieberman, Esq.

 
	
  

 	
  

 	
                  Todd
 A. Mazur, Esq.

 


or to such other address and/or facsimile number and/or to the
attention of such other Person as the recipient party has specified by written
notice given to each other party five (5) days prior to the effectiveness of
such change, provided that Greenberg Traurig, LLP shall only be provided copies
of notices sent to Iroquois. Written confirmation of receipt (A) given by the
recipient of such notice, consent, waiver or other communication, (B)
mechanically or electronically generated by the sender’s facsimile machine
containing the time, date, recipient facsimile number and an image of the first
page of such transmission or (C) provided by an overnight courier service shall
be rebuttable evidence of personal service, receipt by facsimile or receipt
from an overnight courier service in accordance with clause (i), (ii) or (iii)
above, respectively.


          (g) Successors
and Assigns. This Agreement shall be binding upon and inure to the benefit
of the parties and their respective successors and assigns, including, as
contemplated below, any assignee of any of the Securities. The Company shall
not assign this Agreement or any rights or obligations hereunder without the
prior written consent of each of the Buyers, including, without limitation, by
way of a Fundamental Transaction (as defined in the Warrants) (unless the
Company is in compliance with the applicable provisions governing Fundamental
Transactions set forth in the Warrants) or a Fundamental Transaction (as
defined in the Certificate of Designation) (unless the Company is in compliance
with the applicable provisions governing Fundamental Transactions set forth in
the Certificate of Designation). A Buyer may assign some or all of its rights
hereunder in connection with any transfer of any of its Securities without the
consent of the Company, in which event such assignee shall be deemed to be a
Buyer hereunder with respect to such assigned rights.


          (h) No
Third Party Beneficiaries. This Agreement is intended for the benefit of
the parties hereto and their respective permitted successors and assigns, and
is not for the benefit of, nor may any provision hereof be enforced by, any
other Person, other than the Indemnitees referred to in Section 9(k).


          (i) Survival.
The representations, warranties, agreements and covenants shall survive the
Closing. Each Buyer shall be responsible only for its own representations,
warranties, agreements and covenants hereunder.


34





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


          (k)
Indemnification. 


                    (i)
In consideration of each Buyer’s execution and delivery of the Transaction
Documents and acquiring the Securities thereunder and in addition to all of the
Company’s other obligations under the Transaction Documents, the Company shall
defend, protect, indemnify and hold harmless each Buyer and each holder of any
Securities and all of their stockholders, partners, members, officers,
directors, employees and direct or indirect investors and any of the foregoing
Persons’ agents or other representatives (including, without limitation, those
retained in connection with the transactions contemplated by this Agreement)
(collectively, the “Indemnitees”)
from and against any and all actions, causes of action, suits, claims, losses,
costs, penalties, fees, liabilities and damages, and expenses in connection
therewith (irrespective of whether any such Indemnitee is a party to the action
for which indemnification hereunder is sought), and including reasonable
attorneys’ fees and disbursements (the “Indemnified
Liabilities”), incurred by any Indemnitee as a result of, or arising
out of, or relating to (a) any misrepresentation or breach of any
representation or warranty made by the Company in any of the Transaction
Documents, (b) any breach of any covenant, agreement or obligation of the
Company contained in any of the Transaction Documents or (c) any cause of
action, suit or claim brought or made against such Indemnitee by a third party
(including for these purposes a derivative action brought on behalf of the
Company) and arising out of or resulting from (i) the execution, delivery,
performance or enforcement of any of the Transaction Documents, (ii) any
transaction financed or to be financed in whole or in part, directly or
indirectly, with the proceeds of the issuance of the Securities, (iii) any
disclosure properly made by such Buyer pursuant to Section 4(j), or (iv) the
status of such Buyer or holder of the Securities as an investor in the Company
pursuant to the transactions contemplated by the Transaction Documents. To the
extent that the foregoing undertaking by the Company may be unenforceable for
any reason, the Company shall make the maximum contribution to the payment and
satisfaction of each of the Indemnified Liabilities which is permissible under
applicable law. 


                    (ii)
Promptly after receipt by an Indemnitee under this Section 9(k) of notice of
the commencement of any action or proceeding (including any governmental action
or proceeding) involving an Indemnified Liability, such Indemnitee shall, if a
claim in respect thereof is to be made against the Company under this Section
9(k), deliver to the Company a written notice of the commencement thereof, and
the Company shall have the right to participate in, and, to the extent the
Company so desires, to assume control of the defense thereof with counsel
mutually satisfactory to the Company and the Indemnitee; provided, however,
that an Indemnitee shall have the right to retain its own counsel with the fees
and expenses of such counsel to be paid by the Company if: (i) the Company has agreed
in writing to pay such fees and expenses; (ii) the Company shall have failed
promptly to assume the defense of such Indemnified Liability and to employ
counsel reasonably satisfactory to such Indemnitee in any such Indemnified
Liability; or (iii) the named parties to any such Indemnified Liability
(including any impleaded parties) include both such Indemnitee and the Company,
and such Indemnitee shall have been advised by counsel that a conflict of
interest is likely to exist if the 


35





same counsel were to represent such Indemnitee and the Company (in
which case, if such Indemnitee notifies the Company in writing that it elects
to employ separate counsel at the expense of the Company, then the Company
shall not have the right to assume the defense thereof and such counsel shall
be at the expense of the Company), provided further, that in the case of clause
(iii) above the Company shall not be responsible for the reasonable fees and
expenses of more than one (1) separate legal counsel for such Indemnitee. The
Indemnitee shall reasonably cooperate with the Company in connection with any
negotiation or defense of any such action or Indemnified Liability by the
Company and shall furnish to the Company all information reasonably available
to the Indemnitee which relates to such action or Indemnified Liability. The
Company shall keep the Indemnitee reasonably apprised at all times as to the
status of the defense or any settlement negotiations with respect thereto. The
Company shall not be liable for any settlement of any action, claim or
proceeding effected without its prior written consent, provided, however, that
the Company shall not unreasonably withhold, delay or condition its consent.
The Company shall not, without the prior written consent of the Indemnitee,
consent to entry of any judgment or enter into any settlement or other
compromise which does not include as an unconditional term thereof the giving
by the claimant or plaintiff to such Indemnitee of a release from all liability
in respect to such Indemnified Liability or litigation, and such settlement
shall not include any admission as to fault on the part of the Indemnitee.
Following indemnification as provided for hereunder, the Company shall be
subrogated to all rights of the Indemnitee with respect to all third parties,
firms or corporations relating to the matter for which indemnification has been
made. The failure to deliver written notice to the Company within a reasonable
time of the commencement of any such action shall not relieve the Company of
any liability to the Indemnitee under this Section 9(k), except to the extent
that the Company is materially and adversely prejudiced in its ability to
defend such action.


                    (iii)
The indemnification required by this Section 9(k) 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 Indemnified Liabilities are
incurred.


                    (iv)
The indemnity agreement contained herein shall be in addition to (A) any cause
of action or similar right of the Indemnitee against the Company or others, and
(B) any liabilities the Company may be subject to pursuant to the law.


          (l) Construction.
The language used in this Agreement will be deemed to be the language chosen by
the parties to express their mutual intent, and no rules of strict construction
will be applied against any party. No specific representation or warranty shall
limit the generality or applicability of a more general representation or
warranty. Each and every reference to share prices, shares of Common Stock and
any other numbers in this Agreement that relate to the Common Stock shall be
automatically adjusted for stock splits, stock dividends, stock combinations
and other similar transactions that occur with respect to the Common Stock
after the date of this Agreement. 


          (m) Remedies.
Each Buyer and each holder of any Securities shall have all rights and remedies
set forth in the Transaction Documents and all rights and remedies which such
holders have been granted at any time under any other agreement or contract and
all of the rights which 


36





such holders have under any law. Any Person having any rights under any
provision of this Agreement shall be entitled to enforce such rights
specifically (without posting a bond or other security), to recover damages by
reason of any breach of any provision of this Agreement and to exercise all
other rights granted by law. Furthermore, the Company recognizes that in the
event that it fails to perform, observe, or discharge any or all of its
obligations under the Transaction Documents, any remedy at law may prove to be
inadequate relief to the Buyers. The Company therefore agrees that the Buyers
shall be entitled to seek specific performance and/or temporary, preliminary
and permanent injunctive or other equitable relief from any court of competent
jurisdiction in any such case without the necessity of proving actual damages
and without posting a bond or other security.


          (n) Withdrawal
Right. Notwithstanding anything to the contrary contained in (and without
limiting any similar provisions of) the Transaction Documents, whenever any
Buyer 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 Buyer 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.


          (o) Payment
Set Aside; Currency. To the extent that the Company makes a payment or
payments to any Buyer hereunder or pursuant to any of the other Transaction
Documents or any of the Buyers enforce or exercise their rights hereunder or
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, foreign, 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. Until the Series B Warrants are no
longer outstanding, the Company shall not effect any stock combination, reverse
stock split or other similar transaction (or make any public announcement or
disclosure with respect to any of the foregoing) without the prior written
consent of each of the Buyers. Unless otherwise expressly indicated, all dollar
amounts referred to in this Agreement and the other Transaction Documents are
in United States Dollars (“U.S. Dollars”), and all amounts owing under this
Agreement and all other Transaction Documents shall be paid in U.S. Dollars.
All amounts denominated in other currencies (if any) shall be converted into
the U.S. Dollar equivalent amount in accordance with the Exchange Rate on the
date of calculation. “Exchange Rate” means,
in relation to any amount of currency to be converted into U.S. Dollars
pursuant to this Agreement, the U.S. Dollar exchange rate as published in the
Wall Street Journal on the relevant date of calculation.


          (p) Independent
Nature of Buyers’ Obligations and Rights. The obligations of each Buyer
under the Transaction Documents are several and not joint with the obligations
of any other Buyer, and no Buyer shall be responsible in any way for the
performance of the obligations of any other Buyer under any Transaction
Document. Nothing contained herein or in any other Transaction Document, and no
action taken by any Buyer pursuant hereto or thereto, shall be deemed to
constitute the Buyers as, and the Company acknowledges that the Buyers do not
so constitute, a partnership, an association, a joint venture or any other kind
of group or entity, or 


37





create a presumption that the Buyers are in any way acting in concert
or as a group or entity with respect to such obligations or the transactions contemplated
by the Transaction Documents or any matters, and the Company
acknowledges that the Buyers are not acting in concert or as a group,
and the Company shall not assert any such claim, with respect to such
obligations or the transactions contemplated by the Transaction Documents. The decision of each Buyer to purchase
Securities pursuant to the Transaction Documents has been made by such Buyer
independently of any other Buyer. Each Buyer acknowledges that no other Buyer
has acted as agent for such Buyer in connection with such Buyer making its
investment hereunder and that no other Buyer will be acting as agent of such
Buyer in connection with monitoring such Buyer’s investment in the Securities
or enforcing its rights under the Transaction Documents. The Company and each
Buyer confirms that each Buyer has independently participated with the Company
in the negotiation of the transaction contemplated hereby with the advice of
its own counsel and advisors. Each Buyer shall be entitled to independently protect
and enforce its rights, including, without limitation, the rights arising out
of this Agreement or out of any other Transaction Documents, and it shall not
be necessary for any other Buyer to be joined as an additional party in any
proceeding for such purpose. The use of a single agreement to effectuate the
purchase and sale of the Securities contemplated hereby was solely in the control of the Company, not the
action or decision of any Buyer, and was done solely for the convenience of the
Company and not because it was required or requested to do so by any Buyer. 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
Buyer, solely, and not between the Company and the Buyers collectively and not
between and among the Buyers.


          (q) Judgment
Currency.


                    (i)
If for the purpose of obtaining or enforcing judgment against the Company in
any court in any jurisdiction it becomes necessary to convert into any other
currency (such other currency being hereinafter in this Section 9(q) referred
to as the “Judgment Currency”) an
amount due in U.S. Dollars under this Agreement or any other Transaction
Document, the conversion shall be made at the Exchange Rate prevailing on the
Trading Day immediately preceding: (1) the date actual payment of the amount
due, in the case of any proceeding in the courts of Illinois or in the courts
of any other jurisdiction that will give effect to such conversion being made
on such date or (2) the date on which the foreign court determines, in the case
of any proceeding in the courts of any other jurisdiction (the date as of which
such conversion is made pursuant to this Section 9(q)(i) being hereinafter
referred to as the “Judgment Conversion Date”).


                    (ii)
If in the case of any proceeding in the court of any jurisdiction referred to
in Section 9(q)(i) above, there is a change in the Exchange Rate prevailing
between the Judgment Conversion Date and the date of actual payment of the
amount due, the applicable party shall pay such adjusted amount as may be
necessary to ensure that the amount paid in the Judgment Currency, when
converted at the Exchange Rate prevailing on the date of payment, will produce
the amount of U.S. Dollars which could have been purchased with the amount of
Judgment Currency stipulated in the judgment or judicial order at the Exchange
Rate prevailing on the Judgment Conversion Date. 


38





                    (iii)
Any amount due from the Company under this provision shall be due as a separate
debt and shall not be affected by judgment being obtained for any other amounts
due under or in respect of this Agreement or any other Transaction Document.


 [signature
pages follow] 


39





          IN
WITNESS WHEREOF, Buyer and the Company have caused
their respective signature page to this Agreement to be duly executed as of the
date first written above.


	
  

 	
  

 	
  

 
	
  

 	
 COMPANY:

 
	
  

 	
  

 	
  

 
	
  

 	
 NOVADEL PHARMA INC.

 
	
  

 	
  

 
	
  

 	
 By:

 	
  

 
	
  

 	
  

 	

 


 



	
  

 	
  

 	
  

 	
  

 
	
  

 	
  

 	
 Name: 

 	
  

 
	
  

 	
  

 	
  

 	

 


 



	
  

 	
  

 	
  

 	
  

 
	
  

 	
  

 	
 Title:

 	
  

 
	
  

 	
  

 	
  

 	

 


 
	
  

 	
  

 	
  

 	
  

 









          IN
WITNESS WHEREOF, Buyer and the Company have caused
their respective signature page to this Agreement to be duly executed as of the
date first written above.


	
  

 	
  

 
	
  

 	
 BUYER:

 
	
  

 	
  

 
	
  

 	
 IROQUOIS MASTER FUND LTD.

 
	
  

 	
  

 
	
  

 	

 


 
	
  

 	
 By: Joshua
 Silverman, Authorized Signatory

 









SCHEDULE OF BUYERS


	
  

 	
  

 	
  

 	
  

 	
  

 	
  

 	
  

 	
  

 	
  

 	
  

 	
  

 	
  

 	
  

 	
  

 	
  

 
	
  (1)

 	
  

 	
  (2)

 	
  

 	
  (3)

 	
  

 	
  (4)

 	
  

 	
  (5)

 	
  

 	
  (6)

 	
  

 	
  (7)

 	
  

 	
  (8)

 
	
  

 	
  

 	
  

 	
  

 	
  

 	
  

 	
  

 	
  

 	
  

 	
  

 	
  

 	
  

 	
  

 	
  

 	
  

 
	
 Buyer

 	
  

 	
 Address
 and Facsimile Number

 	
  

 	
 Number of
 Shares 

 of Preferred Stock

 	
  

 	
 Number of 

 Series A Warrant 

 Shares

 	
  

 	
 Number of 

 Series B Warrant 

 Shares

 	
  

 	
 Number of 

 Series C Warrant 

 Shares

 	
  

 	
 Purchase
 Price

 	
  

 	
 Legal
 Representative’s

 Address and Facsimile Number

 
	

 


 	
  

 	

 


 	
  

 	

 


 	
  

 	

 


 	

 


 	

 


 	

 


 	

 


 	

 


 	

 


 	
  

 	

 


 
	
  

 	
  

 	
  

 	
  

 	
  

 	
  

 	
  

 	
  

 	
  

 	
  

 	
  

 	
  

 	
  

 	
  

 	
  

 
	
 Iroquois Master Fund Ltd.

 	
  

 	
 641 Lexington Avenue, 26th Floor

 New York, New York 10022

 Facsimile: (212) 207-3452

 	
  

 	
 [_________]

 	
  

 	
 [_________]

 	
  

 	
 [_________]

 	
  

 	
 [_________]

 	
  

 	
 $[_________]

 	
  

 	
 Greenberg Traurig, LLP

 77 W. Wacker Drive, Suite 3100

 Chicago, Illinois 60601

 Attention: Peter H. Lieberman

                  Todd
 A. Mazur

 Facsimile: (312) 456-8435