Document:

Exhibit 4.2

 [FORM OF SERIES B WARRANT]

NOVADEL PHARMA INC.

WARRANT TO PURCHASE COMMON STOCK

Series B
Warrant No.: _______________

Date of Issuance: March 31, 2010 (“Issuance
Date”)

          Novadel
Pharma Inc., a Delaware corporation (the “Company”),
hereby certifies that, for good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, [IROQUOIS MASTER FUND LTD.][OTHER
BUYERS], the registered holder hereof or its permitted assigns (the “Holder”), is entitled, subject to the
terms set forth below, to purchase from the Company, at the Exercise Price (as
defined below) then in effect, upon exercise of this Warrant to Purchase Common
Stock (including any Warrants to Purchase Common Stock issued in exchange,
transfer or replacement hereof, the “Warrant”),
at any time or times on or after the Issuance Date, but not after 11:59 p.m.,
New York time, on the Expiration Date (as defined below), [______________]1
(subject to adjustment as provided herein) fully paid and nonassessable shares
of Common Stock (as defined below) (the “Warrant
Shares”). Except as otherwise defined herein, capitalized terms in
this Warrant shall have the meanings set forth in Section 16. This Warrant is
one of the Warrants to Purchase Common Stock (the “SPA Warrants”) issued pursuant to Section 1 of that certain
Securities Purchase Agreement, dated as of March 31, 2010 (the “Subscription Date”), by and among the
Company and the investors (the “Buyers”)
referred to therein (the “Securities Purchase
Agreement”). 

1. EXERCISE
OF WARRANT. 

          (a)
Mechanics of Exercise. Subject to the terms and conditions hereof
(including, without limitation, the limitations set forth in Section 1(f)),
this Warrant may be exercised by the Holder on any day on or after the Issuance
Date, in whole or in part, by delivery (whether via facsimile or otherwise) of
a written notice, in the form attached hereto as Exhibit A (the “Exercise
Notice”), of the Holder’s election to exercise this Warrant. Within
one (1) Trading Day following an exercise of this Warrant as aforesaid, the
Holder shall deliver payment to the Company of an amount equal to the Exercise
Price in effect on the date of such exercise multiplied by the number of
Warrant Shares as to which this Warrant was so exercised (the “Aggregate Exercise Price”) in cash or via
wire transfer of immediately available funds if the Holder did not notify the
Company in such Exercise Notice that such exercise was made pursuant to a
Cashless Exercise (as defined in Section 1(d)). The Holder shall not be
required to deliver the original of this Warrant in order to effect an exercise
hereunder. Execution and delivery of an Exercise Notice with respect to less
than all of the Warrant Shares shall have the same effect as cancellation of the
original of this Warrant and issuance of a new Warrant evidencing the right to
purchase the remaining number of Warrant Shares. Execution and delivery of an
Exercise Notice for all of the then-remaining Warrant Shares shall have the
same 

1 Insert number equal to 33% of the number of
Common Shares issued on the Issuance Date 

effect as
cancellation of the original of this Warrant after delivery of the Warrant
Shares in accordance with the terms hereof. On or before the first (1st)
Trading Day following the date on which the Company has received an Exercise
Notice, the Company shall transmit by facsimile an acknowledgment of
confirmation of receipt of such Exercise Notice to the Holder and the Company’s
transfer agent (the “Transfer Agent”).
On or before the third (3rd) Trading Day following the date on which
the Company has received such Exercise Notice, the Company shall (X) provided
that the Transfer Agent is participating in The Depository Trust Company (“DTC”) Fast Automated Securities Transfer
Program, upon the request of the Holder, credit such aggregate number of shares
of Common Stock to which the Holder is entitled pursuant to such exercise to
the Holder’s or its designee’s balance account with DTC through its Deposit/
Withdrawal at Custodian system, or (Y) if the Transfer Agent is not
participating in the DTC Fast Automated Securities Transfer Program, issue and
deliver to the Holder or, at the Holder’s instruction pursuant to the Exercise
Notice, the Holder’s agent or designee, in each case, sent by reputable
overnight courier to the address as specified in the applicable Exercise
Notice, a certificate, registered in the Company’s share register in the name
of the Holder or its designee (as indicated in the applicable Exercise Notice),
for the number of shares of Common Stock to which the Holder is entitled
pursuant to such exercise. Upon delivery of an Exercise Notice, the Holder
shall be deemed for all corporate purposes to have become the holder of record
of the Warrant Shares with respect to which this Warrant has been exercised,
irrespective of the date such Warrant Shares are credited to the Holder’s DTC
account or the date of delivery of the certificates evidencing such Warrant
Shares (as the case may be). If this Warrant is submitted in connection with
any exercise pursuant to this Section 1(a) and the number of Warrant Shares
represented by this Warrant submitted for exercise is greater than the number
of Warrant Shares being acquired upon such exercise, then, at the request of
the Holder, the Company shall as soon as practicable and in no event later than
three (3) Business Days after any exercise and at its own expense, issue and
deliver to the Holder (or its designee) a new Warrant (in accordance with
Section 7(d)) representing the right to purchase the number of Warrant Shares
purchasable immediately prior to such exercise under this Warrant, less the
number of Warrant Shares with respect to which this Warrant is exercised. No
fractional shares of Common Stock are to be issued upon the exercise of this
Warrant, but rather the number of shares of Common Stock to be issued shall be
rounded up to the nearest whole number. The Company shall pay any and all taxes
which may be payable with respect to the issuance and delivery of Warrant
Shares upon exercise of this Warrant. Notwithstanding the foregoing, if the
Holder did not notify the Company in such Exercise Notice that such exercise
was made pursuant to a Cashless Exercise (as defined in Section 1(d)), the
Company’s failure to deliver Warrant Shares to the Holder on or prior to the
Trading Day in which the Company receives the Aggregate Exercise Price shall
not be deemed to be a breach of this Warrant. 

          (b)
Exercise Price. For purposes of this Warrant, “Exercise Price” means $0.25, subject to adjustment as
provided herein. 

          (c)
Company’s Failure to Timely Deliver Securities. If the Company shall
fail, for any reason or for no reason, to issue to the Holder within the later
of (i) three (3) Trading Days after receipt of the applicable Exercise Notice
and (ii) two (2) Trading Days after the Company’s receipt of the Aggregate
Exercise Price (or valid notice of a Cashless Exercise) (such later date, the “Share Delivery Deadline”), a certificate
for the number of shares of Common Stock to which the Holder is entitled and
register such shares of Common Stock on the Company’s share 

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register or to
credit the Holder’s balance account with DTC for such number of shares of
Common Stock to which the Holder is entitled upon the Holder’s exercise of this
Warrant (as the case may be), and if on or after such Share Delivery Deadline
the Holder purchases (in an open market transaction or otherwise) shares of
Common Stock to deliver in satisfaction of a sale by the Holder of shares of
Common Stock issuable upon such exercise that the Holder anticipated receiving
from the Company, then, in addition to all other remedies available to the
Holder, the Company shall, within three (3) Business Days after the Holder’s
request and in the Holder’s discretion, either (i) pay cash to the Holder in an
amount equal to the Holder’s total purchase price (including brokerage
commissions, if any) for the shares of Common Stock so purchased (the “Buy-In Price”), at which point the
Company’s obligation to deliver such certificate or credit the Holder’s balance
account with DTC for the number of shares of Common Stock to which the Holder
is entitled upon the Holder’s exercise hereunder (as the case may be) (and to
issue such shares of Common Stock) shall terminate, or (ii) promptly honor its
obligation to deliver to the Holder a certificate or certificates representing
such shares of Common Stock or credit the Holder’s balance account with DTC for
the number of shares of Common Stock to which the Holder is entitled upon the
Holder’s exercise hereunder (as the case may be) and pay cash to the Holder in
an amount equal to the excess (if any) of the Buy-In Price over the product of
(A) such number of shares of Common Stock times (B) the Closing Sale Price of
the Common Stock on the Trading Day immediately preceding the date of the
applicable Exercise Notice. 

          (d)
Cashless Exercise. Notwithstanding anything contained herein to the
contrary (other than Section 1(f) below), if at the time of exercise hereof the
Registration Statement (as defined in the Securities Purchase Agreement) is not
effective (or the prospectus contained therein is not available for use) for the issuance by the
Company to the Holder of all of the Warrant Shares and all of the Warrant
Shares are not then registered for resale by the Holder into the market at
market prices from time to time on an effective registration statement for use
on a continuous basis (or the prospectus contained therein is not available for
use), then the Holder may, in its sole discretion, exercise this Warrant in
whole or in part and, in lieu of making the cash payment otherwise contemplated
to be made to the Company upon such exercise in payment of the Aggregate Exercise
Price, elect instead to receive upon such exercise the “Net Number” of shares
of Common Stock determined according to the following formula (a “Cashless Exercise”): 

	
  

 	
  

 	
  

 	
  

 
	
  

 	
 Net Number =
 

 	
  (A x B) - (A
x C) 

 	
  

 
	
  

 	
  

 	
 

 	
  

 
	
  

 	
  

 	
 B

 	
  

 
	
  

 	
  

 	
  

 	
  

 
	
  

 	
 For purposes
 of the foregoing formula:

 

	
  

 	
  

 
	
  

 	
 A = the total
 number of shares with respect to which this Warrant is then being exercised. 

 
	
  

 	
  

 
	
  

 	
 B = as
 applicable: (i) the Closing Sale Price of the Common Stock on the Trading Day
 immediately preceding the date of the applicable Exercise Notice if such
 Exercise Notice is (1) both executed and delivered pursuant to Section 1(a)
 hereof on a day that is not a Trading Day or (2) both executed and delivered
 pursuant to Section 1(a) hereof on a Trading Day prior to the opening of
 “regular trading 

 

3

	
  

 	
  

 
	
  

 	
 hours” (as
 defined in Rule 600(b)(64) of Regulation NMS promulgated under the federal
 securities laws) on such Trading Day, (ii) the Bid Price of the Common Stock
 as of the time of the Holder’s execution of the applicable Exercise Notice if
 such Exercise Notice is executed during “regular trading hours” on a Trading
 Day and is delivered within two (2) hours thereafter pursuant to Section 1(a)
 hereof and (iii) the Closing Sale Price of the Common Stock on the date of
 the applicable Exercise Notice if the date of such Exercise Notice is a
 Trading Day and such Exercise Notice is both executed and delivered pursuant
 to Section 1(a) hereof after the close of “regular trading hours” on such
 Trading Day. 

 
	
  

 	
  

 
	
  

 	
 C = the
 Exercise Price then in effect for the applicable Warrant Shares at the time
 of such exercise. 

 
	
  

 	
  

 

          (e)
Disputes. In the case of a dispute as to the determination of the
Exercise Price or the arithmetic calculation of the number of Warrant Shares to
be issued pursuant to the terms hereof, the Company shall promptly issue to the
Holder the number of Warrant Shares that are not disputed and resolve such
dispute in accordance with Section 13. 

          (f)
[Limitations on Exercises. Notwithstanding anything to the contrary
contained in this Warrant, this Warrant shall not be exercisable by the Holder
hereof to the extent (but only to the extent) that the Holder together with any
of its affiliates would beneficially own in excess of 4.99% (the “Maximum Percentage”) of the Common Stock after
giving effect to such exercise. To the extent the above limitation applies, the
determination of whether this Warrant shall be exercisable (vis-à-vis other
convertible, exercisable or exchangeable securities owned by the Holder or any
of its affiliates) and of which such securities shall be exercisable (as among
all such securities owned by the Holder) shall, subject to such Maximum
Percentage limitation, be determined on the basis of the first submission to
the Company for conversion, exercise or exchange (as the case may be). No prior
inability to exercise this Warrant pursuant to this paragraph shall have any
effect on the applicability of the provisions of this paragraph with respect to
any subsequent determination of exercisability. For the purposes of this
paragraph, beneficial ownership and all determinations and calculations
(including, without limitation, with respect to calculations of percentage
ownership) shall be determined in accordance with Section 13(d) of the 1934 Act
(as defined in the Securities Purchase Agreement) and the rules and regulations
promulgated thereunder. The provisions of this paragraph shall be implemented
in a manner otherwise than in strict conformity with the terms of this
paragraph to correct this paragraph (or any portion hereof) which may be
defective or inconsistent with the intended Maximum Percentage beneficial
ownership limitation herein contained or to make changes or supplements
necessary or desirable to properly give effect to such Maximum Percentage
limitation. The limitations contained in this paragraph shall apply to a
successor Holder of this Warrant. The holders of Common Stock shall be third
party beneficiaries of this paragraph and the Company may not waive this
paragraph without the consent of holders of a majority of its Common Stock. For
any reason at any time, upon the written or oral request of the Holder, the
Company shall within one (1) Business Day confirm orally and in writing to the
Holder the number of shares of Common Stock then outstanding, including by
virtue of any prior conversion or exercise of convertible or exercisable
securities into Common Stock, including, without limitation, pursuant to this
Warrant or securities issued pursuant to the Securities Purchase Agreement. [By
written notice to the Company, any Holder may increase or decrease 

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the Maximum
Percentage to any other percentage not in excess of 9.99% specified in such
notice; provided that (i) any such increase will not be effective until the
61st day after such notice is delivered to the Company, and (ii) any such
increase or decrease will apply only to the Holder sending such notice and not
to any other holder of SPA Warrants.]2] 

          (g)
Insufficient Authorized Shares. The Company shall at all times keep
reserved for issuance under this Warrant 120% of such number of shares of
Common Stock as shall be necessary to satisfy the Company’s obligation to issue
shares of Common Stock hereunder (without regard to any limitation otherwise
contained herein with respect to the number of shares of Common Stock that may
be acquirable upon exercise of this Warrant). If, notwithstanding the
foregoing, and not in limitation thereof, at any time while any of the SPA
Warrants remain outstanding the Company does not have a sufficient number of
authorized and unreserved shares of Common Stock to satisfy its obligation to
reserve for issuance upon exercise of the SPA Warrants at least a number of
shares of Common Stock (the “Required Reserve
Amount”) equal to the number of shares of Common Stock as shall from
time to time be necessary to effect the exercise of all of the SPA Warrants
then outstanding (an “Authorized Share
Failure”), then the Company shall promptly take all action necessary
to increase the Company’s authorized shares of Common Stock to an amount
sufficient to allow the Company to reserve the Required Reserve Amount for all
the SPA Warrants then outstanding. Without limiting the generality of the
foregoing sentence, as soon as practicable after the date of the occurrence of
an Authorized Share Failure, but in no event later than ninety (90) days after
the occurrence of such Authorized Share Failure, the Company shall hold a
meeting of its stockholders for the approval of an increase in the number of
authorized shares of Common Stock. In connection with such meeting, the Company
shall provide each stockholder with a proxy statement and shall use its
reasonable best efforts to solicit its stockholders’ approval of such increase
in authorized shares of Common Stock and to cause its board of directors to
recommend to the stockholders that they approve such proposal. 

2. ADJUSTMENT OF EXERCISE PRICE AND NUMBER OF
WARRANT SHARES. The
Exercise Price and number of Warrant Shares issuable upon exercise of this
Warrant are subject to adjustment from time to time as set forth in this
Section 2. 

          (a)
Stock Dividends and Splits. Without limiting any provision of Section 4,
if the Company, at any time on or after the date of the Securities Purchase
Agreement, (i) pays a stock dividend on one or more classes of its then
outstanding shares of Common Stock or otherwise makes a distribution on any
class of capital stock that is payable in shares of Common Stock, (ii)
subdivides (by any stock split, stock dividend, recapitalization or otherwise)
one or more classes of its then outstanding shares of Common Stock into a
larger number of shares or (iii) combines (by combination, reverse stock split
or otherwise) one or more classes of its then outstanding shares of Common
Stock into a smaller number of shares, then in each such case the Exercise
Price shall be multiplied by a fraction of which the numerator shall be the
number of shares of Common Stock outstanding immediately before such event and
of which the denominator shall be the number of shares of Common Stock
outstanding immediately after such event. Any adjustment made pursuant to
clause (i) of this paragraph shall become effective immediately after the
record date for the determination of stockholders entitled to receive such
dividend or distribution, and any adjustment pursuant to clause (ii) or (iii)
of this paragraph shall become effective immediately after the effective date
of such subdivision or combination. If any event 

_____________________________________

2 Holder may elect to not have this provision included or the entire blocker included prior to the issuance

5

requiring an
adjustment under this paragraph occurs during the period that an Exercise Price
is calculated hereunder, then the calculation of such Exercise Price shall be
adjusted appropriately to reflect such event. 

          (b)
Adjustment Upon Issuance of Shares of Common Stock. If and whenever on
or after the date of the Securities Purchase Agreement, the Company issues or
sells, or in accordance with this Section 2 is deemed to have issued or sold,
any shares of Common Stock (including the issuance or sale of shares of Common
Stock owned or held by or for the account of the Company, but excluding any
Excluded Securities issued or sold or deemed to have been issued or sold) for a
consideration per share (the “New Issuance
Price”) less than a price equal to the Exercise Price in effect
immediately prior to such issue or sale or deemed issuance or sale (such
Exercise Price then in effect is referred to as the “Applicable Price”) (the foregoing a “Dilutive Issuance”), then immediately
after such Dilutive Issuance, the Exercise Price then in effect shall be
reduced to an amount equal to the New Issuance Price. For purposes of
determining the adjusted Exercise Price under this Section 2(b), the following
shall be applicable: 

	
  

 	
  

 
	
  

 	
           (i)
 Issuance of Options. If the Company in any manner grants or sells any
 Options and the lowest price per share for which one share of Common Stock is
 issuable upon the exercise of any such Option or upon conversion, exercise or
 exchange of any Convertible Securities issuable upon exercise of any such
 Option is less than the Applicable Price, then such share of Common Stock
 shall be deemed to be outstanding and to have been issued and sold by the
 Company at the time of the granting or sale of such Option for such price per
 share. For purposes of this Section 2(b)(i), the “lowest price per share for
 which one share of Common Stock is issuable upon the exercise of any such
 Options or upon conversion, exercise or exchange of any Convertible
 Securities issuable upon exercise of any such Option” shall be equal to the
 lower of (x) the exercise price set forth in such Option for which one share
 of Common Stock is issuable upon the exercise of any such Options or upon
 conversion, exercise or exchange of any Convertible Securities issuable upon
 exercise of any such Option and (y) the sum of the lowest amounts of
 consideration (if any) received or receivable by the Company with respect to
 any one share of Common Stock upon the granting or sale of such Option, upon
 exercise of such Option and upon conversion, exercise or exchange of any
 Convertible Security issuable upon exercise of such Option. Except as
 contemplated below, no further adjustment of the Exercise Price shall be made
 upon the actual issuance of such shares of Common Stock or of such
 Convertible Securities upon the exercise of any such Option or upon the
 actual issuance of such shares of Common Stock upon conversion, exercise or
 exchange of such Convertible Securities. For clarification purposes and
 without limiting the foregoing, in calculating the “lowest price per share
 for which one share of Common Stock is issuable upon the exercise of any such
 Options or upon conversion, exercise or exchange of any Convertible
 Securities issuable upon exercise of any such Option” paid or payable to the
 Company pursuant to this Section 2(b), any amounts paid or payable to the
 holder of such Option (or any other Person) upon such conversion, exercise or
 exchange of such Option shall reduce the value of the consideration paid or
 payable to the Company in such conversion, exercise or exchange and/or, as
 the case may be, the value of any other consideration or benefit conferred. 

 

6

	
  

 	
  

 
	
  

 	
           (ii)
 Issuance of Convertible Securities. If the Company in any manner
 issues or sells any Convertible Securities and the lowest price per share for
 which one share of Common Stock is issuable upon the conversion, exercise or
 exchange thereof is less than the Applicable Price, then such share of Common
 Stock shall be deemed to be outstanding and to have been issued and sold by
 the Company at the time of the issuance or sale of such Convertible
 Securities for such price per share. For the purposes of this Section
 2(b)(ii), the “lowest price per share for which one share of Common Stock is
 issuable upon the conversion, exercise or exchange thereof” shall be equal to
 the lower of (x) the conversion price set forth in such Convertible Security
 for which one share of Common Stock is issuable upon the conversion, exercise
 or exchange thereof and (y) the sum of the lowest amounts of consideration
 (if any) received or receivable by the Company with respect to one share of
 Common Stock upon the issuance or sale of such Convertible Security and upon
 conversion, exercise or exchange of such Convertible Security. Except as
 contemplated below, no further adjustment of the Exercise Price shall be made
 upon the actual issuance of such shares of Common Stock upon conversion,
 exercise or exchange of such Convertible Securities, and if any such issue or
 sale of such Convertible Securities is made upon exercise of any Options for
 which adjustment of this Warrant has been or is to be made pursuant to other
 provisions of this Section 2(b), except as contemplated below, no further
 adjustment of the Exercise Price shall be made by reason of such issue or
 sale. For clarification purposes and without limiting the foregoing, in
 calculating the “lowest price per share for which one share of Common Stock
 is issuable upon the conversion, exercise or exchange thereof” paid or
 payable to the Company pursuant to this Section 2(b), any amounts paid or
 payable to the holder of such Convertible Security (or any other Person) upon
 conversion or exercise (as applicable) of such Convertible Security shall
 reduce the value of the consideration paid or payable to the Company in such
 conversion, exercise or exchange and/or, as the case may be, the value of any
 other consideration or benefit conferred. 

 
	
  

 	
  

 
	
  

 	
           (iii)
 Change in Option Price or Rate of Conversion. If the purchase or
 exercise price provided for in any Options, the additional consideration, if
 any, payable upon the issue, conversion, exercise or exchange of any
 Convertible Securities, or the rate at which any Convertible Securities are
 convertible into or exercisable or exchangeable for shares of Common Stock
 increases or decreases at any time, the Exercise Price in effect at the time
 of such increase or decrease shall be adjusted to the Exercise Price which
 would have been in effect at such time had such Options or Convertible
 Securities provided for such increased or decreased purchase price,
 additional consideration or increased or decreased conversion rate, as the
 case may be, at the time initially granted, issued or sold. For purposes of
 this Section 2(b)(iii), if the terms of any Option or Convertible Security
 that was outstanding as of the date of issuance of this Warrant are increased
 or decreased in the manner described in the immediately preceding sentence,
 then such Option or Convertible Security and the shares of Common Stock
 deemed issuable upon exercise, conversion or exchange thereof shall be deemed
 to have been issued as of the date of such increase or decrease. No
 adjustment pursuant to this Section 2(b) shall be made if such adjustment
 would result in an increase of the Exercise Price then in effect. 

 
	
  

 	
  

 
	
  

 	
           (iv)
 Calculation of Consideration Received. If any Option
 or Convertible Security or Adjustment Right is issued in connection with the
 issuance or sale or deemed 

 

7

	
  

 	
  

 
	
  

 	
 issuance or
 sale of any other securities of the Company, together comprising one
 integrated transaction, (x) such Option or Convertible Security (as
 applicable) or Adjustment Right (as applicable) will be deemed to have been
 issued for consideration equal to the Black Scholes Consideration Value
 thereof and (y) the other securities issued or sold or deemed to have been
 issued or sold in such integrated transaction shall be deemed to have been
 issued for consideration equal to the difference of (I) the aggregate
 consideration received or receivable by the Company minus (II) the Black
 Scholes Consideration Value of each such Option or Convertible Security (as
 applicable) or Adjustment Right (as applicable). If any shares of Common
 Stock, Options or Convertible Securities are issued or sold or deemed to have
 been issued or sold for cash, the consideration received therefor will be
 deemed to be the gross amount of consideration received by the Company
 therefor. If any shares of Common Stock, Options or Convertible Securities
 are issued or sold for a consideration other than cash, the amount of such
 consideration received by the Company will be the fair value of such
 consideration, except where such consideration consists of publicly traded
 securities, in which case the amount of consideration received by the Company
 for such securities will be the arithmetic average of the VWAPs of such
 security for each of the five (5) Trading Days immediately preceding the date
 of receipt. If any shares of Common Stock, Options or Convertible Securities
 are issued to the owners of the non-surviving entity in connection with any
 merger in which the Company is the surviving entity, the amount of
 consideration therefor will be deemed to be the fair value of such portion of
 the net assets and business of the non-surviving entity as is attributable to
 such shares of Common Stock, Options or Convertible Securities, as the case
 may be. The fair value of any consideration other than cash or publicly
 traded securities will be determined jointly by the Company and the Holder.
 If such parties are unable to reach agreement within ten (10) days after the
 occurrence of an event requiring valuation (the “Valuation Event”), the fair value of such consideration
 will be determined within five (5) Trading Days after the tenth (10th)
 day following such Valuation Event by an independent, reputable appraiser
 jointly selected by the Company and the Holder. The determination of such
 appraiser shall be final and binding upon all parties absent manifest error
 and the fees and expenses of such appraiser shall be borne by the Company. 

 
	
  

 	
  

 
	
  

 	
           (v)
 Record Date. If the Company takes a record of the holders of shares of
 Common Stock for the purpose of entitling them (A) to receive a dividend or
 other distribution payable in shares of Common Stock, Options or in
 Convertible Securities or (B) to subscribe for or purchase shares of Common
 Stock, Options or Convertible Securities, then such record date will be
 deemed to be the date of the issue or sale of the shares of Common Stock
 deemed to have been issued or sold upon the declaration of such dividend or the
 making of such other distribution or the date of the granting of such right
 of subscription or purchase (as the case may be). 

 

          (c)
Number of Warrant Shares. Simultaneously with any adjustment to the
Exercise Price pursuant to paragraphs (a), (b) or (d) of this Section 2, the
number of Warrant Shares that may be purchased upon exercise of this Warrant
shall be increased or decreased proportionately, so that after such adjustment
the aggregate Exercise Price payable hereunder for the adjusted number of
Warrant Shares shall be the same as the aggregate Exercise Price in effect 

8

immediately
prior to such adjustment (without regard to any limitations on exercise
contained herein). 

          (d)
Holder’s Right of Alternative Exercise Price Following Issuance of Certain
Options or Convertible Securities. Subject to Section 4(n) of the
Securities Purchase Agreement, in addition to and not in limitation of the
other provisions of this Section 2, if the Company in any manner issues or
sells any Options or Convertible Securities (any such securities, “Variable Price Securities”) after the
Subscription Date that are convertible into or exchangeable or exercisable for
shares of Common Stock at a price which varies or may vary with the market
price of the Common Shares (as defined in the Securities Purchase Agreement),
including by way of one or more reset(s) to a fixed price, but exclusive of
such formulations reflecting customary anti-dilution provisions (such as share
splits, share combinations, share dividends and similar transactions) (each of
the formulations for such variable price being herein referred to as, the “Variable Price”), the Company shall
provide written notice thereof via facsimile and overnight courier to the
Holder on the date of issuance of such Convertible Securities or Options.
Subject to Section 4(n) of the Securities Purchase Agreement, from and after
the date the Company issues any such Convertible Securities or Options with a
Variable Price, the Holder shall have the right, but not the obligation, in its
sole discretion to substitute the Variable Price for the Exercise Price upon
Exercise of this Warrant by designating in the Exercise Notice delivered upon
any Exercise of this Warrant that solely for purposes of such Exercise the Holder
is relying on the Variable Price rather than the Exercise Price then in effect.
The Holder’s election to rely on a Variable Price for a particular Exercise of
this Warrant shall not obligate the Holder to rely on a Variable Price for any
future Exercises of this Warrant. 

          (e)
Other Events. In the event that the Company (or any Subsidiary thereof)
shall take any action to which the provisions hereof are not strictly
applicable, or, if applicable, would not operate to protect the Holder from dilution
or if any event occurs of the type contemplated by the provisions of this
Section 2 but not expressly provided for by such provisions (including, without
limitation, the granting of stock appreciation rights, phantom stock rights or
other rights with equity features), then the Company’s board of directors shall
in good faith determine and implement an appropriate adjustment in the Exercise
Price and the number of Warrant Shares (if applicable) so as to protect the
rights of the Holder, provided that no such adjustment pursuant to this Section
2(e) will increase the Exercise Price or decrease the number of Warrant Shares
as otherwise determined pursuant to this Section 2, provided further that if
the Holder does not accept such adjustments as appropriately protecting its
interests hereunder against such dilution, then the Company’s board of
directors and the Holder shall agree, in good faith, upon an independent
investment bank of nationally recognized standing to make such appropriate
adjustments, whose determination shall be final and binding and whose fees and
expenses shall be borne by the Company. 

          (f)
Calculations. All calculations under this Section 2 shall be made by
rounding to the nearest cent or the nearest 1/100th of a share, as applicable.
The number of shares of Common Stock outstanding at any given time shall not
include shares owned or held by or for the account of the Company, and the
disposition of any such shares shall be considered an issue or sale of Common
Stock. 

9

3. RIGHTS
UPON DISTRIBUTION OF ASSETS. Except with respect to such dividend or other
distributions in which an adjustment has been made to the Exercise Price, if
the Company shall declare or make any dividend or other distribution of its
assets (or rights to acquire its assets) to holders of shares of Common Stock,
by way of return of capital or otherwise (including, without limitation, any
distribution of cash, stock or other securities, property or options by way of
a dividend, spin off, reclassification, corporate rearrangement, scheme of
arrangement or other similar transaction) (a “Distribution”),
at any time after the issuance of this Warrant, then, in each such case, the
Holder shall be entitled to participate in such Distribution to the same extent
that the Holder would have participated therein if the Holder had held the
number of shares of Common Stock acquirable upon complete exercise of this
Warrant (without regard to any limitations on exercise hereof, including
without limitation, the Maximum Percentage) immediately before the date on
which a record is taken for such Distribution, or, if no such record is taken,
the date as of which the record holders of shares of Common Stock are to be
determined for the participation in such Distribution (provided, however, to
the extent that the Holder’s right to participate in any such Distributions
would result in the Holder exceeding the Maximum Percentage, then the Holder
shall not be entitled to participate in such Distribution to such extent (or
the beneficial ownership of any such shares of Common Stock as a result of such
Distribution to such extent) and such Distribution to such extent shall be held
in abeyance for the benefit of the Holder until such time, if ever, as its
right thereto would not result in the Holder exceeding the Maximum Percentage).

4. PURCHASE
RIGHTS; FUNDAMENTAL TRANSACTIONS. 

          (a)
Purchase Rights. In addition to any adjustments pursuant to Section 2
above, if at any time the Company grants, issues or sells any Options, Convertible
Securities or rights to purchase stock, warrants, securities or other property
pro rata to the record holders of any class of shares of Common Stock (the “Purchase Rights”), then the Holder will be
entitled to acquire, upon the terms applicable to such Purchase Rights, the
aggregate Purchase Rights which the Holder could have acquired if the Holder
had held the number of shares of Common Stock acquirable upon complete exercise
of this Warrant (without regard to any limitations on exercise hereof, including
without limitation, the Maximum Percentage) immediately before the date on
which a record is taken for the grant, issuance or sale of such Purchase
Rights, or, if no such record is taken, the date as of which the record holders
of shares of Common Stock are to be determined for the grant, issue or sale of
such Purchase Rights (provided, however, to the extent that the Holder’s right
to participate in any such Purchase Right would result in the Holder exceeding
the Maximum Percentage, then the Holder shall not be entitled to participate in
such Purchase Right to such extent (or beneficial ownership of such shares of
Common Stock as a result of such Purchase Right to such extent) and such
Purchase Right to such extent shall be held in abeyance for the Holder until
such time, if ever, as its right thereto would not result in the Holder
exceeding the Maximum Percentage). 

          (b)
Fundamental Transactions. The Company shall not enter into or be party
to a Fundamental Transaction unless the Successor Entity assumes in writing all
of the obligations of the Company under this Warrant and the other Transaction
Documents (as defined in the Securities Purchase Agreement) in accordance with
the provisions of this Section 4(b) pursuant to written agreements in form and
substance reasonably satisfactory to the Holder and approved by the Holder
prior to such Fundamental Transaction, including agreements to deliver to the 

10

Holder in
exchange for this Warrant a security of the Successor Entity evidenced by a written
instrument substantially similar in form and substance to this Warrant,
including, without limitation, which is exercisable for a corresponding number
of shares of capital stock equivalent to the shares of Common Stock acquirable
and receivable upon exercise of this Warrant (without regard to any limitations
on the exercise of this Warrant) prior to such Fundamental Transaction, and
with an exercise price which applies the exercise price hereunder to such
shares of capital stock (but taking into account the relative value of the
shares of Common Stock pursuant to such Fundamental Transaction and the value
of such shares of capital stock, such adjustments to the number of shares of
capital stock and such exercise price being for the purpose of protecting the
economic value of this Warrant immediately prior to the consummation of such
Fundamental Transaction). Upon the consummation of each Fundamental
Transaction, the Successor Entity shall succeed to, and be substituted for (so
that from and after the date of the applicable Fundamental Transaction, the
provisions of this Warrant and the other Transaction Documents referring to the
“Company” shall refer instead to the Successor Entity), and may exercise every
right and power of the Company and shall assume all of the obligations of the
Company under this Warrant and the other Transaction Documents with the same
effect as if such Successor Entity had been named as the Company herein. Upon
consummation of each Fundamental Transaction, the Successor Entity shall
deliver to the Holder confirmation that there shall be issued upon exercise of
this Warrant at any time after the consummation of the applicable Fundamental
Transaction, in lieu of the shares of Common Stock (or other securities, cash,
assets or other property (except such items still issuable under Sections 3 and
4(a) above, which shall continue to be receivable thereafter)) issuable upon
the exercise of this Warrant prior to the applicable Fundamental Transaction,
such shares of publicly traded common stock (or its equivalent) of the
Successor Entity (including its Parent Entity) which the Holder would have been
entitled to receive upon the happening of the applicable Fundamental
Transaction had this Warrant been exercised immediately prior to the applicable
Fundamental Transaction (without regard to any limitations on the exercise of
this Warrant), as adjusted in accordance with the provisions of this Warrant.
Notwithstanding the foregoing, and without limiting Section 9 hereof, the
Holder may elect, at its sole option, by delivery of written notice to the
Company to waive this Section 4(b) to permit the Fundamental Transaction
without the assumption of this Warrant. In addition to and not in substitution
for any other rights hereunder, prior to the consummation of each Fundamental
Transaction pursuant to which holders of shares of Common Stock are entitled to
receive securities or other assets with respect to or in exchange for shares of
Common Stock (a “Corporate Event”),
the Company shall make appropriate provision to insure that the Holder will
thereafter have the right to receive upon an exercise of this Warrant at any
time after the consummation of the applicable Fundamental Transaction but prior
to the Expiration Date, in lieu of the shares of the Common Stock (or other
securities, cash, assets or other property (except such items still issuable
under Sections 3 and 4(a) above, which shall continue to be receivable
thereafter)) issuable upon the exercise of the Warrant prior to such
Fundamental Transaction, such shares of stock, securities, cash, assets or any
other property whatsoever (including warrants or other purchase or subscription
rights) which the Holder would have been entitled to receive upon the happening
of the applicable Fundamental Transaction had this Warrant been exercised
immediately prior to the applicable Fundamental Transaction (without regard to
any limitations on the exercise of this Warrant). Provision made pursuant to
the preceding sentence shall be in a form and substance reasonably satisfactory
to the Holder. 

11

          (c)
Black Scholes Value. Notwithstanding the foregoing and the provisions of
Section 4(b) above, in the event of either (x) a Fundamental Transaction in
which the Successor Entity (including its Parent Entity) is not a publicly
traded corporation whose common stock is quoted on or listed for trading on an
Eligible Market or (y) a Change of Control (each, a “Redemption Right Event”), if the Holder has not exercised
this Warrant in full prior to the consummation of such Redemption Right Event,
at the request of the Holder delivered before the ninetieth (90th)
day after the consummation of such Redemption Right Event, the Company or the
Successor Entity (as the case may be) shall purchase this Warrant from the Holder
on the date of such request by paying to the Holder cash in an amount equal to
the Black Scholes Value of the unexercised portion of this Warrant that
remained on the date of the consummation of such Redemption Right Event. 

          (d)
Application. The provisions of this Section 4 shall apply similarly and
equally to successive Fundamental Transactions and Corporate Events and shall
be applied as if this Warrant (and any such subsequent warrants) were fully
exercisable and without regard to any limitations on the exercise of this
Warrant (provided that the Holder shall continue to be entitled to the benefit
of the Maximum Percentage, applied however with respect to shares of capital
stock registered under the 1934 Act and thereafter receivable upon exercise of
this Warrant (or any such other warrant)). 

5. NONCIRCUMVENTION.
The Company hereby covenants and agrees that the Company will not, by amendment
of its Articles of Incorporation (as defined in the Securities Purchase
Agreement), Bylaws (as defined in the Securities Purchase Agreement) or through
any reorganization, transfer of assets, consolidation, merger, scheme of
arrangement, dissolution, issue or sale of securities, or any other voluntary
action, avoid or seek to avoid the observance or performance of any of the
terms of this Warrant, and will at all times in good faith carry out all the
provisions of this Warrant and take all action as may be required to protect
the rights of the Holder. Without limiting the generality of the foregoing, the
Company (i) shall not increase the par value of any shares of Common Stock
receivable upon the exercise of this Warrant above the Exercise Price then in
effect, (ii) shall take all such actions as may be reasonably necessary or
appropriate in order that the Company may validly and legally issue fully paid
and nonassessable shares of Common Stock upon the exercise of this Warrant, and
(iii) shall, so long as any of the SPA Warrants are outstanding, take all
action necessary to reserve and keep available out of its authorized and
unissued shares of Common Stock, solely for the purpose of effecting the
exercise of the SPA Warrants, the maximum number of shares of Common Stock as
shall from time to time be necessary to effect the exercise of the SPA Warrants
then outstanding (without regard to any limitations on exercise). 

6. WARRANT
HOLDER NOT DEEMED A STOCKHOLDER. Except as otherwise specifically provided
herein, the Holder, solely in its capacity as a holder of this Warrant, shall
not be entitled to vote or receive dividends or be deemed the holder of share
capital of the Company for any purpose, nor shall anything contained in this
Warrant be construed to confer upon the Holder, solely in its capacity as the
Holder of this Warrant, any of the rights of a stockholder of the Company or
any right to vote, give or withhold consent to any corporate action (whether
any reorganization, issue of stock, reclassification of stock, consolidation,
merger, conveyance or otherwise), receive notice of meetings, receive dividends
or subscription rights, or otherwise, prior to the issuance to the Holder of
the Warrant Shares which it is then 

12

entitled to
receive upon the due exercise of this Warrant. In addition, nothing contained
in this Warrant shall be construed as imposing any liabilities on the Holder to
purchase any securities (upon exercise of this Warrant or otherwise) or as a
stockholder of the Company, whether such liabilities are asserted by the
Company or by creditors of the Company. Notwithstanding this Section 6, the
Company shall provide the Holder with copies of the same notices and other
information given to the stockholders of the Company generally,
contemporaneously with the giving thereof to the stockholders. 

7. REISSUANCE
OF WARRANTS. 

          (a)
Transfer of Warrant. If this Warrant is to be transferred, the Holder
shall surrender this Warrant to the Company, whereupon the Company will
forthwith issue and deliver upon the order of the Holder a new Warrant (in
accordance with Section 7(d)), registered as the Holder may request,
representing the right to purchase the number of Warrant Shares being
transferred by the Holder and, if less than the total number of Warrant Shares
then underlying this Warrant is being transferred, a new Warrant (in accordance
with Section 7(d)) to the Holder representing the right to purchase the number
of Warrant Shares not being transferred. 

          (b)
Lost, Stolen or Mutilated Warrant. Upon receipt by the Company of
evidence reasonably satisfactory to the Company of the loss, theft, destruction
or mutilation of this Warrant (as to which a written certification and the
indemnification contemplated below shall suffice as such evidence), and, in the
case of loss, theft or destruction, of any indemnification undertaking by the
Holder to the Company in customary and reasonable form and, in the case of
mutilation, upon surrender and cancellation of this Warrant, the Company shall
execute and deliver to the Holder a new Warrant (in accordance with Section
7(d)) representing the right to purchase the Warrant Shares then underlying
this Warrant. 

          (c)
Exchangeable for Multiple Warrants. This Warrant is exchangeable, upon
the surrender hereof by the Holder at the principal office of the Company, for
a new Warrant or Warrants (in accordance with Section 7(d)) representing in the
aggregate the right to purchase the number of Warrant Shares then underlying
this Warrant, and each such new Warrant will represent the right to purchase
such portion of such Warrant Shares as is designated by the Holder at the time
of such surrender; provided, however, no warrants for fractional shares of
Common Stock shall be given. 

          (d)
Issuance of New Warrants. Whenever the Company is required to issue a
new Warrant pursuant to the terms of this Warrant, such new Warrant (i) shall
be of like tenor with this Warrant, (ii) shall represent, as indicated on the
face of such new Warrant, the right to purchase the Warrant Shares then
underlying this Warrant (or in the case of a new Warrant being issued pursuant
to Section 7(a) or Section 7(c), the Warrant Shares designated by the Holder
which, when added to the number of shares of Common Stock underlying the other
new Warrants issued in connection with such issuance, does not exceed the
number of Warrant Shares then underlying this Warrant), (iii) shall have an
issuance date, as indicated on the face of such new Warrant which is the same
as the Issuance Date, and (iv) shall have the same rights and conditions as
this Warrant. 

13

8. NOTICES.
Whenever notice is required to be given under this Warrant, unless otherwise
provided herein, such notice shall be given in accordance with Section 9(f) of
the Securities Purchase Agreement. The Company shall provide the Holder with
prompt written notice of all actions taken pursuant to this Warrant, including
in reasonable detail a description of such action and the reason therefor.
Without limiting the generality of the foregoing, the Company will give written
notice to the Holder (i) immediately upon each adjustment of the Exercise Price
and the number of Warrant Shares, setting forth in reasonable detail, and
certifying, the calculation of such adjustment(s) and (ii) at least fifteen
(15) days prior to the date on which the Company closes its books or takes a
record (A) with respect to any dividend or distribution upon the shares of
Common Stock, (B) with respect to any grants, issuances or sales of any
Options, Convertible Securities or rights to purchase stock, warrants,
securities or other property to holders of shares of Common Stock or (C) for
determining rights to vote with respect to any Fundamental Transaction,
dissolution or liquidation, provided in each case that such information shall
be made known to the public prior to or in conjunction with such notice being
provided to the Holder and (iii) at least ten (10) Trading Days prior to the
consummation of any Fundamental Transaction. To the extent that any notice
provided hereunder constitutes, or contains, material, non-public information
regarding the Company or any of its subsidiaries, the Company shall
simultaneously file such notice with the SEC (as defined in the Securities
Purchase Agreement) pursuant to a Current Report on Form 8-K. It is expressly
understood and agreed that the time of execution specified by the Holder in
each Exercise Notice shall be definitive and may not be disputed or challenged
by the Company. 

9. AMENDMENT
AND WAIVER. Except as otherwise provided herein, the provisions of this
Warrant (other than Section 1(f)) may be amended and the Company may take any
action herein prohibited, or omit to perform any act herein required to be
performed by it, only if the Company has obtained the written consent of the
Holder. No consideration shall be offered or paid to the Holder to amend or
consent to a waiver or modification of any provision of this Warrant unless the
same consideration is also offered to all of the holders of the other SPA
Warrants. No waiver shall be effective unless it is in writing and signed by an
authorized representative of the waiving party. 

10. SEVERABILITY.
If any provision of this Warrant 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 Warrant so long as this
Warrant 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). 

11. GOVERNING
LAW. This Warrant shall be governed by and construed and enforced in
accordance with, and all questions concerning the construction, validity,
interpretation and 

14

performance of
this Warrant 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. 

12. CONSTRUCTION;
HEADINGS. This Warrant shall be deemed to be jointly drafted by the Company
and the Holder and shall not be construed against any Person as the drafter
hereof. The headings of this Warrant are for convenience of reference and shall
not form part of, or affect the interpretation of, this Warrant. Terms used in
this Warrant but defined in the other Transaction Documents shall have the
meanings ascribed to such terms on the Closing Date (as defined in the
Securities Purchase Agreement) in such other Transaction Documents unless
otherwise consented to in writing by the Holder. 

13. DISPUTE
RESOLUTION. In the case of a dispute as to the determination of the
Exercise Price, the Closing Sale Price, the Bid Price or fair market value or
the arithmetic calculation of the Warrant Shares (as the case may be), the
Company or the Holder (as the case may be) shall submit the disputed
determinations or arithmetic calculations (as the case may be) via facsimile
(i) within two (2) Business Days after receipt of the applicable notice giving
rise to such dispute to the Company or the Holder (as the case may be) or (ii)
if no notice gave rise to such dispute, at any time after the Holder learned of
the circumstances giving rise to such dispute (including, without limitation,
as to whether any issuance or sale or deemed issuance or sale was an issuance
or sale or deemed issuance or sale of Excluded Securities). If the Holder and
the Company are unable to agree upon such determination or calculation (as the
case may be) of the Exercise Price, the Closing Sale Price, the Bid Price or fair
market value or the number of Warrant Shares (as the case may be) within three
(3) Business Days of such disputed determination or arithmetic calculation
being submitted to the Company or the Holder (as the case may be), then the
Company shall, within two (2) Business Days submit via facsimile (a) the
disputed determination of the Exercise Price, the Closing Sale Price, the Bid
Price or fair market value (as the case may be) to an independent, reputable
investment bank selected by the Company and approved by the Holder or (b) the
disputed arithmetic calculation of the Warrant Shares to the Company’s
independent, outside accountant. The Company shall cause at its expense the
investment bank or the accountant (as the case may be) to perform the
determinations or calculations (as the case may be) and notify the Company and
the Holder of the results no later than ten (10) Business Days from the time it
receives such disputed determinations or calculations (as the case may be).
Such investment bank’s or accountant’s determination or calculation (as the
case may be) shall be binding upon all parties absent demonstrable error. 

14. REMEDIES,
CHARACTERIZATION, OTHER OBLIGATIONS, BREACHES AND INJUNCTIVE RELIEF. The
remedies provided in this Warrant shall be cumulative and in addition to all
other remedies available under this Warrant and the other Transaction
Documents, at law or in equity (including a decree of specific performance
and/or other injunctive relief), and nothing herein shall limit the right of
the Holder to pursue actual damages for any failure by the Company to comply
with the terms of this Warrant. The Company covenants to the Holder that there
shall be no characterization concerning this instrument other than as expressly
provided herein. Amounts set forth or provided for herein with respect to
payments, exercises and the like (and the computation thereof) shall be the
amounts to be received by the Holder and shall not, except as expressly
provided herein, be subject to any other obligation of the Company (or the 

15

performance
thereof). The Company acknowledges that a breach by it of its obligations
hereunder will cause irreparable harm to the Holder and that the remedy at law
for any such breach may be inadequate. The Company therefore agrees that, in
the event of any such breach or threatened breach, the holder of this Warrant
shall be entitled, in addition to all other available remedies, to an
injunction restraining any breach, without the necessity of showing economic
loss and without any bond or other security being required. The Company shall
provide all information and documentation to the Holder that is requested by
the Holder to enable the Holder to confirm the Company’s compliance with the
terms and conditions of this Warrant (including, without limitation, compliance
with Section 2 hereof). The issuance of shares and certificates for shares as
contemplated hereby upon the exercise of this Warrant shall be made without
charge to the Holder or such shares for any issuance tax or other costs in
respect thereof, provided that the Company shall not be required to pay any tax
which may be payable in respect of any transfer involved in the issuance and
delivery of any certificate in a name other than the Holder or its agent on its
behalf. 

15. TRANSFER.
This Warrant may be offered for sale, sold, transferred or assigned without the
consent of the Company. 

16. CERTAIN
DEFINITIONS. For purposes of this Warrant, the following terms shall have
the following meanings: 

          (a)
“Adjustment Right” means any right
granted with respect to any securities issued in connection with, or with
respect to, any issuance or sale (or deemed issuance or sale in accordance with
Section 2) of Common Stock (other than rights of the type described in Section
3 an 4 hereof) that could result in a decrease in the net consideration
received by the Company in connection with, or with respect to, such securities
(including, without limitation, any cash settlement rights, cash adjustment or
other similar rights). 

          (b)
“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, options to purchase Common Stock, restricted stock or restricted
stock units may be issued to any employee, officer or director for services
provided to the Company in their capacity as such. 

          (c)
“Bid Price” means, for any
security as of the particular time of determination, the bid price for such
security on the Principal Market as reported by Bloomberg as of such time of
determination, or, if the Principal Market is not the principal securities
exchange or trading market for such security, the bid price of such security on
the principal securities exchange or trading market where such security is
listed or traded as reported by Bloomberg as of such time of determination, or
if the foregoing does not apply, the bid price of such security in the
over-the-counter market on the electronic bulletin board for such security as
reported by Bloomberg as of such time of determination, or, if no bid price is
reported for such security by Bloomberg as of such time of determination, the
average of the bid prices of any market makers for such security as reported in
the “pink sheets” by Pink Sheets LLC (formerly the National Quotation Bureau,
Inc.) as of such time of determination. If the Bid Price cannot be calculated
for a security as of the particular time of determination on any of the
foregoing bases, the Bid Price of such security as of such time of
determination shall be the fair market value as mutually determined by the 

16

Company and
the Holder. If the Company and the Holder are unable to agree upon the fair
market value of such security, then such dispute shall be resolved in
accordance with the procedures in Section 13. All such determinations shall be
appropriately adjusted for any stock dividend, stock split, stock combination
or other similar transaction during such period. 

          (d)
“Black Scholes Consideration Value”
means the value of the applicable Option or Convertible Security (as the case
may be) based on the Black Scholes Option Pricing Model obtained from the “OV”
function on Bloomberg determined as of the close of business on the Trading Day
immediately following the public announcement of the execution of definitive
documents with respect to the issuance of such Option or Convertible Security
(as the case may be) and reflecting (i) a risk-free interest rate corresponding
to the U.S. Treasury rate for a period equal to the remaining term of such
Option or Convertible Security (as the case may be) as of the date of issuance
of such Option or Convertible Security (as the case may be), (ii) an expected
volatility equal to the greater of 100% and the 100 day volatility obtained
from the HVT function on Bloomberg (using 360 as the input for the
annualization factor and the Rogers-Satchell volatility estimator model) and
(iii) the underlying price per share used in such calculation shall be the
highest Closing Bid Price for any Trading Day during the ten (10) Trading Day
period ending on and including the Trading Day immediately preceding the public
announcement of the execution of definitive documents with respect to the
issuance of such Option or Convertible Security (as the case may be). 

          (e)
“Black Scholes Value” means the
value of this Warrant based on the Black Scholes Option Pricing Model obtained
from the “OV” function on Bloomberg determined as of the day of consummation of
the applicable Fundamental Transaction for pricing purposes and reflecting (i)
a risk-free interest rate corresponding to the U.S. Treasury rate for a period
equal to the remaining term of this Warrant as of the date of the Holder’s
request pursuant to Section 4(c), (ii) an expected volatility equal to the
greater of 100% and the 100 day volatility obtained from the HVT function on
Bloomberg as of the Trading Day immediately following the public announcement
of the applicable Fundamental Transaction (using 360 as the input for the
annualization factor and the Rogers-Satchell volatility estimator model) and,
if applicable, (iii) the underlying price per share used in such calculation
shall be the sum of the price per share being offered in cash, if any, plus the
value of any non-cash consideration, if any, being offered in the applicable
Fundamental Transaction. 

          (f)
“Bloomberg” means Bloomberg, L.P. 

          (g)
“Business Day” means any day other
than Saturday, Sunday or other day on which commercial banks in The City of New
York are authorized or required by law to remain closed. 

          (h)
“Change of Control” means any
Fundamental Transaction other than (A) any merger of the Company or any of its
direct or indirect wholly-owned Subsidiaries with or into any of the foregoing
Persons, (B) any reorganization, recapitalization or reclassification of the
Common Stock, in which holders of the Company’s voting power immediately prior
to such reorganization, recapitalization or reclassification continue after
such reorganization, recapitalization or reclassification to hold publicly
traded securities and, directly or indirectly, the voting power of the
surviving entity or entities necessary to elect a majority of the members 

17

of the board
of directors (or their equivalent if other than a corporation) of such entity
or entities, (C) pursuant to a migratory merger effected solely for the purpose
of changing the jurisdiction of incorporation of the Company or (D) a merger in
connection with a bona fide acquisition by the Company of any Person in which
(x) the gross consideration paid, directly or indirectly, by the Company (as
calculated in accordance with Section 2(b)(iv) above, but treating any
assumption of indebtedness, directly or indirectly, by the Company as an
increase in the consideration paid on a dollar-for-dollar basis) in such
acquisition is not greater than 20% of the Company’s market capitalization as
calculated on each of (1) the date of the public announcement of such merger
and (2) the date of the consummation of such merger and (y) such merger does
not contemplate any change to the identity of the board of directors of the
Company or any of the members of the senior management of the Company,
including, without limitation, the chief executive officer and the chief
financial officer of the Company. 

          (i)
“Closing Bid Price” and “Closing Sale Price” means, for any
security as of any date, the last closing bid price and last closing trade
price, respectively, for such security on the Principal Market, as reported by
Bloomberg, or, if the Principal Market begins to operate on an extended hours
basis and does not designate the closing bid price or the closing trade price
(as the case may be) then the last bid price or last trade price, respectively,
of such security prior to 4:00:00 p.m., New York time, as reported by
Bloomberg, or, if the Principal Market is not the principal securities exchange
or trading market for such security, the last closing bid price or last trade
price, respectively, of such security on the principal securities exchange or
trading market where such security is listed or traded as reported by
Bloomberg, or if the foregoing do not apply, the last closing bid price or last
trade price, respectively, of such security in the over-the-counter market on
the electronic bulletin board for such security as reported by Bloomberg, or,
if no closing bid price or last trade price, respectively, is reported for such
security by Bloomberg, the average of the bid prices, or the ask prices,
respectively, of any market makers for such security as reported in the “pink
sheets” by Pink Sheets LLC (formerly the National Quotation Bureau, Inc.). If
the Closing Bid Price or the Closing Sale Price cannot be calculated for a security
on a particular date on any of the foregoing bases, the Closing Bid Price or
the Closing Sale Price (as the case may be) of such security on such date shall
be the fair market value as mutually determined by the Company and the Holder.
If the Company and the Holder are unable to agree upon the fair market value of
such security, then such dispute shall be resolved in accordance with the
procedures in Section 13. All such determinations shall be appropriately
adjusted for any stock dividend, stock split, stock combination or other
similar transaction during such period. 

          (j)
“Common Stock” means (i) the
Company’s shares of common stock, $0.001 par value per share, and (ii) any
capital stock into which such common stock shall have been changed or any share
capital resulting from a reclassification of such common stock. 

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

18

          (l)
“Convertible Securities” means any
stock or other security (other than Options) 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 shares of Common Stock. 

          (m)
“Eligible Market” means The New
York Stock Exchange, the NYSE Amex LLC, the Nasdaq Global Select Market, the
Nasdaq Capital Market, the Nasdaq Global Market or the Principal Market. 

          (n)
“Excluded Securities” means any
Common Stock issued or issuable: (i) to directors, officers or employees of the
Company in their capacity as such pursuant to an Approved Share Plan, (ii) upon
the conversion or exercise of Common Stock Equivalents (other than standard
Options to purchase Common Stock issued pursuant to an Approved Share Plan that
are covered by clause (i) above) issued prior to the date hereof, provided that
the conversion price of any such Common Stock Equivalents is not lowered, none of
such Common Stock Equivalents are amended to increase the number of shares
issuable thereunder and none of the terms or conditions of any such Common
Stock Equivalents are otherwise materially changed in any manner that adversely
affects the Holder or any of the Buyers; and (iii) the Warrant Shares issuable
upon exercise of any Warrant, provided that the exercise price of such Warrant
is not lowered and such Warrant is not amended to increase the number of shares
issuable thereunder. 

          (o)
“Expiration Date” means the date
that is the six (6) month anniversary of the Issuance Date or, if such date
falls on a day other than a Business Day or on which trading does not take
place on the Principal Market (a “Holiday”),
the next date that is not a Holiday. 

          (p)
“Fundamental Transaction” means
that (i) the Company or any of its Subsidiaries shall, directly or indirectly,
in one or more related transactions, (1) consolidate or merge with or into
(whether or not the Company or any of its Subsidiaries is the surviving
corporation) any other Person, or (2) sell, lease, license, assign, transfer,
convey or otherwise dispose of all or substantially all of its respective
properties or assets to any other Person, or (3) allow any other Person to make
a purchase, tender or exchange offer that is accepted by the holders of more
than 50% of the outstanding shares of Voting Stock of the Company (not
including any shares of Voting Stock of the Company held by the Person or
Persons making or party to, or associated or affiliated with the Persons making
or party to, such purchase, tender or exchange offer), or (4) consummate a
stock or share purchase agreement or other business combination (including,
without limitation, a reorganization, recapitalization, spin-off or scheme of
arrangement) with any other Person whereby such other Person acquires more than
50% of the outstanding shares of Voting Stock of the Company (not including any
shares of Voting Stock of the Company held by the other Person or other Persons
making or party to, or associated or affiliated with the other Persons making
or party to, such stock or share purchase agreement or other business
combination), or (5) reorganize, recapitalize or reclassify the Common Stock,
or (ii) any “person” or “group” (as these terms are used for purposes of
Sections 13(d) and 14(d) of the 1934 Act and the rules and regulations
promulgated thereunder) is or shall become the “beneficial owner” (as defined
in Rule 13d-3 under the 1934 Act), directly or indirectly, of 50% of the
aggregate ordinary voting power represented by issued and outstanding Voting
Stock of the Company. 

19

          (q)
“Options” means any rights,
warrants or options to subscribe for or purchase shares of Common Stock or
Convertible Securities. 

          (r)
“Parent Entity” of a Person means
an entity that, directly or indirectly, controls the applicable Person and
whose common stock or equivalent equity security is quoted or listed on an
Eligible Market, or, if there is more than one such Person or Parent Entity,
the Person or Parent Entity with the largest public market capitalization as of
the date of consummation of the Fundamental Transaction. 

          (s)
“Person” means an individual, a
limited liability company, a partnership, a joint venture, a corporation, a
trust, an unincorporated organization, any other entity or a government or any
department or agency thereof. 

          (t)
“Principal Market” means the OTC
Bulletin Board. 

          (u)
“Successor Entity” means the
Person (or, if so elected by the Holder, the Parent Entity) formed by,
resulting from or surviving any Fundamental Transaction or the Person (or, if
so elected by the Holder, the Parent Entity) with which such Fundamental
Transaction shall have been entered into. 

          (v)
“Trading Day” means any day on
which the Common Stock is traded on the Principal Market, or, if the Principal
Market is not the principal trading market for the Common Stock, then on the
principal securities exchange or securities market on which the Common Stock is
then traded, provided that “Trading Day” shall not include any day on which the
Common Stock is scheduled to trade on such exchange or market for less than 4.5
hours or any day that the Common Stock is suspended from trading during the final
hour of trading on such exchange or market (or if such exchange or market does
not designate in advance the closing time of trading on such exchange or
market, then during the hour ending at 4:00:00 p.m., New York time) unless such
day is otherwise designated as a Trading Day in writing by the Holder. 

          (w)
“Voting Stock” of a Person means
capital stock of such Person of the class or classes pursuant to which the
holders thereof have the general voting power to elect, or the general power to
appoint, at least a majority of the board of directors, managers or trustees of
such Person (irrespective of whether or not at the time capital stock of any
other class or classes shall have or might have voting power by reason of the
happening of any contingency). 

          (x)
“VWAP” means, for any security as
of any date, the dollar volume-weighted average price for such security on the
Principal Market (or, if the Principal Market is not the principal trading
market for such security, then on the principal securities exchange or
securities market on which such security is then traded) during the period
beginning at 9:30:01 a.m., New York time, and ending at 4:00:00 p.m., New York
time, as reported by Bloomberg through its “Volume at Price” function or, if
the foregoing does not apply, the dollar volume-weighted average price of such
security in the over-the-counter market on the electronic bulletin board for
such security during the period beginning at 9:30:01 a.m., New York time, and
ending at 4:00:00 p.m., New York time, as reported by Bloomberg, or, if no
dollar volume-weighted average price is reported for such security by Bloomberg
for such hours, the average of the highest closing bid price and the lowest
closing ask price of any of the market makers for such security as reported 

20

in the “pink
sheets” by Pink Sheets LLC (formerly the National Quotation Bureau, Inc.). If
VWAP cannot be calculated for such security on such date on any of the
foregoing bases, the VWAP of such security on such date shall be the fair
market value as mutually determined by the Company and the Holder. If the
Company and the Holder are unable to agree upon the fair market value of such
security, then such dispute shall be resolved in accordance with the procedures
in Section 13. All such determinations shall be appropriately adjusted for any
stock dividend, stock split, stock combination or other similar transaction
during such period. 

[signature
page follows]

21

          IN
WITNESS WHEREOF, the Company has caused this Warrant
to Purchase Common Stock to be duly executed as of the Issuance Date set out
above.

	
  

 	
  

 	
  

 
	
  

 	
 NOVADEL PHARMA INC. 

 
	
  

 	
  

 	
  

 
	
  

 	
 By:

 	
  

 
	
  

 	
  

 	

 

 
	
  

 	
  

 	
 Name:

 
	
  

 	
  

 	
 Title:

 

EXHIBIT A

EXERCISE NOTICE

TO BE EXECUTED BY THE REGISTERED HOLDER TO
EXERCISE THIS

WARRANT TO PURCHASE COMMON STOCK

NOVADEL PHARMA INC.

          The
undersigned holder hereby exercises the right to purchase _________________ of
the shares of Common Stock (“Warrant Shares”)
of Novadel Pharma Inc., a Delaware corporation (the “Company”), evidenced by Series B Warrant No. _______ (the “Warrant”). Capitalized terms used herein
and not otherwise defined shall have the respective meanings set forth in the
Warrant.

          1.
Form of Exercise Price. The Holder intends that payment of the Exercise
Price shall be made as:

	
  

 	
  

 	
  

 
	
 ________________

 	
  

 	
 a “Cash
 Exercise” with respect to
 ___________________ Warrant Shares; and/or

 
	
  

 	
  

 	
  

 
	
 ________________

 	
  

 	
 a “Cashless
 Exercise” with respect to _________________ Warrant Shares.

 

          In
the event that the Holder has elected a Cashless Exercise with respect to some
or all of the Warrant Shares to be issued pursuant hereto, the Holder hereby
represents and warrants that (i) this Exercise Notice was executed by the
Holder at __________ [a.m.][p.m.] on the date set forth below and (ii) if
applicable, the Bid Price as of such time of execution of this Exercise Notice
was $________.

          2.
Payment of Exercise Price. In the event that the Holder has elected a
Cash Exercise with respect to some or all of the Warrant Shares to be issued
pursuant hereto, the Holder shall pay the Aggregate Exercise Price in the sum
of $___________________ to the Company in accordance with the terms of the
Warrant.

          3.
Delivery of Warrant Shares. The Company shall deliver to Holder, or its
designee or agent as specified below, __________ Warrant Shares in accordance
with the terms of the Warrant. Delivery shall be made to Holder, or for its
benefit, to the following address:

Date:
_______________ __, ______

	
  

 	
  

 
	

 

 	
  

 
	
 Name of Registered Holder

 	
  

 

	
  

 	
  

 	
  

 
	
 By:

 	

 

 	
  

 
	
  

 	
 Name:

 	
  

 
	
  

 	
 Title:

 	
  

 

ACKNOWLEDGMENT

          The
Company hereby acknowledges this Exercise Notice and hereby directs
______________ to issue the above indicated number of shares of Common Stock in
accordance with the Transfer Agent Instructions dated March __, 2010, from the
Company and acknowledged and agreed to by _______________.

	
  

 	
  

 	
  

 
	
  

 	
 NOVADEL PHARMA INC.

 
	
  

 	
  

 
	
  

 	
 By:

 	
  

 
	
  

 	
  

 	

 

 
	
  

 	
  

 	
 Name:

 
	
  

 	
  

 	
 Title:Exhibit 10.1 

SECURITIES PURCHASE AGREEMENT

          This
SECURITIES PURCHASE AGREEMENT (the “Agreement”), dated as of March 31, 2010, is
by and among Novadel Pharma Inc., a Delaware corporation with offices located
at 1200 Route 22 East, Suite 2000, Bridgewater, NJ 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 and each Buyer desire to enter into this transaction to purchase
the Common Shares (as defined below) set forth herein pursuant to a currently
effective shelf registration statement on Form S-3, which has at least
16,683,336 unallocated shares of common stock, $0.001 par value per share, of
the Company (the “Common Stock”)
registered thereunder (Registration Number 333-159485) as of March 31, 2010
(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”). 

          B.
Each Buyer wishes to purchase, and the Company wishes to sell, upon the terms
and conditions stated in this Agreement, (i) the aggregate number of shares of
Common Stock set forth opposite such Buyer’s name in column (3) on the Schedule
of Buyers at a price per share of $0.165 (which aggregate amount for all Buyers
shall be 9,100,001 shares of Common Stock and shall collectively be referred to
herein as the “Common Shares”), (ii)
a five year warrant to initially acquire up to that number of additional shares
of Common Stock set forth opposite such Buyer’s name in column (4) on the
Schedule of Buyers with an initial exercise price of $0.25 per share, in the
form attached hereto as Exhibit A
(the “Series A Warrants”) (as
exercised, collectively, the “Series A
Warrant Shares”) and (iii) a six month warrant to initially acquire
up to that number of additional shares of Common Stock set forth opposite such
Buyer’s name in column (5) on the Schedule of Buyers with an initial exercise
price of $0.25 per share, in the form attached hereto as Exhibit B (the “Series B Warrants”) (as exercised,
collectively, the “Series B Warrant Shares”).
The Series A Warrants and the Series B Warrants are collectively referred to
herein as the “Warrants.” The
Series A Warrant Shares and the Series B Warrant Shares are collectively
referred to herein as the “Warrant Shares.”

          C.
The Common 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 COMMON SHARES AND
WARRANTS. 

          (a)
Common Shares 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), such aggregate number
of Common Shares, as is set forth opposite such Buyer’s name in column (3) on
the Schedule of Buyers, along with (i) a Series A Warrant to initially acquire
up to that aggregate number of Series A Warrant Shares as is set forth opposite
such Buyer’s name in column (4) on the Schedule of Buyers and (ii) a Series B
Warrant to initially acquire up to that aggregate number of Series B Warrant
Shares as is set forth opposite such Buyer’s name in column (5) on the Schedule
of Buyers. 

          (b)
Closing. The closing (the “Closing”)
of the purchase of the Common Shares and the Warrants by the Buyers shall occur
at the offices of Greenberg Traurig, LLP, MetLife Building, 200 Park Avenue,
New York, NY 10166. The date and time of the Closing (the “Closing Date”) shall be 10:00 a.m., New
York time, on the third (3rd) Trading Day (as defined in the
Warrants) after the date hereof (or such earlier 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 Common Shares 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 (6) on the Schedule of Buyers. 

          (d)
Form of Payment; Deliveries. On the Closing Date, (i) each Buyer shall
pay its respective Purchase Price to the Company for the Common Shares 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, (less, in the case of Iroquois (as defined below), the amounts
withheld pursuant to Section 4(g)) and (ii) the Company shall (A) cause
American Stock Transfer & Trust Company, LLC (together with any subsequent
transfer agent, the “Transfer Agent”)
through the Depository Trust Company (“DTC”)
Fast Automated Securities Transfer Program, to credit such aggregate number of
Common Shares that such Buyer is purchasing as is set forth opposite such
Buyer’s name in column (3) of the Schedule of Buyers to such Buyer’s or its
designee’s balance account with DTC through its Deposit/Withdrawal at Custodian
system, (B) deliver to such Buyer a Series A Warrant pursuant to which such
Buyer shall have the right to initially acquire up to such number of Series A
Warrant Shares as is set forth opposite such Buyer’s name in column (4) of the
Schedule of Buyers duly executed on behalf of the Company and registered in the
name of such Buyer or its designee, (C) deliver to such Buyer a Series B
Warrant pursuant to which such Buyer shall have the right to initially acquire
up to such number of Series B Warrant Shares as is set forth opposite such
Buyer’s name in column (5) of the Schedule of Buyers duly executed on behalf of
the Company and registered in the name of such Buyer or its designee and (D)
deliver to such Buyer the other documents, instruments and certificates set
forth in Section 7. 

2. BUYER’S REPRESENTATIONS AND WARRANTIES. 

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

2

          (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 or (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. 

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 its Subsidiaries
is an entity duly organized and validly existing and in good standing under the
laws of the jurisdiction in which it is formed, and has the requisite power and
authorization to own its properties and to carry on its business as now being
conducted and as presently proposed to be conducted. Each of the Company and
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. As used in this Agreement, “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 equity or similar interest of such
Person or (II) controls or operates all or at least 50% of the business,
operations or 

3

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. 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 Common Shares, the issuance
of the Warrants and the reservation for issuance and issuance of the Warrant
Shares issuable upon exercise of the Warrants) have been duly authorized by the
Company’s board of directors. Other than the filing with the SEC of the
prospectus supplement required by the Registration Statement pursuant to Rule
424(b) under the 1933 Act (the “Prospectus
Supplement”) supplementing the base prospectus forming part of the
Registration Statement (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 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
limited by federal or state securities law. “Transaction
Documents” means, collectively, this Agreement, the Warrants, 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
Common Shares and the Warrants are duly authorized and, upon issuance and sale
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 120% of the maximum number of shares of Common Stock
issuable upon exercise of the Warrants (without taking into account any
limitations on the exercise of the Warrants set forth therein). 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 nonassessable 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 has been registered under the 1933
Act, the Securities are being issued pursuant to the Registration Statement and
all of the Securities 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 thereunder and the Company has not
received any notice that the SEC 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 

4

Distribution”
section under the Registration Statement permits the issuance and sale of the Securities
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 and the Prospectus Supplement, complied in all
material respects with the requirements of the 1933 Act and the Securities Act
of 1934, as amended (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 (including, without limitation the Prospectus Supplement), 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 Registration Statement is available under
the 1933 Act to be used by the Company for the offering and sale of the
Securities 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. The filing of the Company’s Annual Report on Form 10-K for the year ended
December 31, 2009 qualifies under the 1933 Act as a Section 10(a)(3) update to
the Registration Statement. The Registration Statement meets the requirements
set forth in Rule 415(a)(1)(x) 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, the Prospectus
or the Prospectus Supplement. 

          (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 Common Shares, the Warrants and the Warrant Shares and the
reservation for issuance of the 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), (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 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 

5

“Principal Market”)
and including all applicable federal laws, rules and regulations) 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 Supplement 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
other than as disclosed in subsection (b) above. 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, to its knowledge, 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, to its
knowledge, 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) 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 an 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
Chardan Capital Markets (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 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 of the Company under 

6

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 Warrant Shares will increase in certain circumstances. The Company
further acknowledges that its obligation to issue the Warrant Shares upon
exercise of the Warrants in accordance with this Agreement 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,
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 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, 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 

7

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. Except as set forth in the SEC Documents,
since the date of the Company’s most recent audited financial statements
contained in a 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. Except as set forth in the
SEC Documents, 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,
individually or in the aggregate, 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 as of the date hereof, and after giving effect to the transactions
contemplated hereby to occur at the Closing will not be, Insolvent (as defined
below). For purposes of this Section 3(l), “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 exist or occur with respect to the Company, any of its
Subsidiaries or any of their respective 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 

8

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. 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 or employee or, to the Company’s
knowledge, any agent 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. 

          (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 

9

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, 89,343,457 are issued and outstanding and 28,099,000 shares are reserved
for issuance pursuant to securities (other than the Warrants) exercisable or
exchangeable for, or convertible into, shares of Common Stock and (ii)
1,000,000 shares of preferred stock, of which none 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 nonassessable. 30,955,000 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 set forth 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 Common Stock Equivalents (as defined in the
Warrants), 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). Except as disclosed in the SEC Documents, : (i) 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) 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
(including, without limitation, any equity line of credit) 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) 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 (except pursuant to this
Agreement); (vi) there are no outstanding securities or instruments of the
Company or any of its 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)
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 

10

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 that have not otherwise been disclosed in the SEC
Documents. 

          (s)
Indebtedness and Other Contracts. Except as disclosed in the SEC
Documents, neither the Company nor any of its Subsidiaries (i) 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, claim, lien, pledge, charge, tax,
encumbrance, 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” 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 

11

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,
governmental agency or other 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 is outside of the ordinary course of
business or individually or in the aggregate which could reasonably be expected
to result in a Material Adverse Effect. 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. To the Company’s knowledge, 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 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. Neither the Company nor any of its Subsidiaries owns any real
property. Except as set forth in the SEC Documents, the Company and its
Subsidiaries have good and 

12

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. Except as set forth in the SEC Documents,
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. Except as set forth in the SEC Documents, 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. The term “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. 

          (z)
Tax Status. Each of the Company and 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 

13

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

14

          (dd)
Acknowledgement Regarding Buyers’ Trading Activity. It is understood and
acknowledged by the Company that, subject to applicable law, (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
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 (b)
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 currently can use the Registration
Statement for the issuance and sale of the Securities to the Buyers. 

          (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 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. 

15

          (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)
FDA; Studies. Since the respective dates as of which information is set
forth in the SEC Documents, (i) all of the descriptions of the Company’s legal
and governmental proceedings and procedures before the United States Food and
Drug Administration (the “FDA”) or
any other national, departmental, state or local governmental body exercising
comparable authority are true and correct in all material respects, (ii) except
as disclosed in the SEC Documents, the studies, tests and preclinical and
clinical trials conducted by or on behalf of the Company and its Subsidiaries
that are described in the SEC Documents were and, if still pending, are (a)
with respect to the foregoing conducted by employees of the Company or any of
its Subsidiaries (“Company Studies”),
being conducted in accordance with experimental protocols, procedures and
controls pursuant to, where applicable, accepted professional scientific
standards, in each case in all necessary respects and in all material respects;
and (b) with respect to the foregoing conducted on behalf of the Company or
independently by others using the Company’s or any of its Subsidiaries’
technologies, products or product candidates (“Independent
Studies”), to the Company’s knowledge, after due inquiry, being
conducted in accordance with experimental protocols, procedures and controls
pursuant to, where applicable, accepted professional scientific standards, in
each case in all necessary respects and in all material respects; (iii) the
descriptions of the results of the Company Studies, and, to the Company’s
knowledge, after due inquiry, the Independent Studies, contained in the SEC
Documents are true and correct in all material respects; and (iv) except as
disclosed in the SEC Documents, neither the Company nor its Subsidiaries have
received any notices or correspondence from the FDA, or any national, state or
local governmental body exercising comparable authority requiring the
termination, suspension or material modification of any of the Company Studies
or Independent Studies. 

          (ll)
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. 

16

          (mm)
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, but not limited to, the laws, regulations and Executive Orders and
sanctions programs administered by the U.S. Office of Foreign Assets Control,
including, but not limited, to (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. 

          (nn)
Management. Except as set forth in the SEC Documents hereto, during the
past five year period, no current or former officer or director or, to the
knowledge of the Company, stockholder of the Company or any of its Subsidiaries
has been the subject of: 

	
  

 	
  

 	
  

 
	
  

 	
           (i)
 a petition under bankruptcy laws or any other insolvency or moratorium law or
 the appointment by a court of a receiver, fiscal agent or similar officer for
 such Person, or any partnership in which such person was a general partner at
 or within two years before the filing of such petition or such appointment,
 or any corporation or business association of which such person was an
 executive officer at or within two years before the time of the filing of
 such petition or such appointment; 

 
	
  

 	
  

 
	
  

 	
           (ii)
 a conviction in a criminal proceeding or a named subject of a pending
 criminal proceeding (excluding traffic violations that do not relate to
 driving while intoxicated or driving under the influence); 

 
	
  

 	
  

 
	
  

 	
           (iii)
 any order, judgment or decree, not subsequently reversed, suspended or vacated,
 of any court of competent jurisdiction, permanently or temporarily enjoining
 any such person from, or otherwise limiting, the following activities: 

 
	
  

 	
  

 	
  

 
	
  

 	
  

 	
                     (1)
 Acting as a futures commission merchant, introducing broker, commodity
 trading advisor, commodity pool operator, floor broker, leverage transaction
 merchant, any other person regulated by the United States Commodity Futures
 Trading Commission or an associated person of any of the foregoing, or as an
 investment adviser, underwriter, broker or dealer in securities, or as an
 affiliated person, director or employee of any investment company, bank,
 savings and loan association or insurance company, or engaging in or
 continuing any conduct or practice in connection with such activity; 

 
	
  

 	
  

 	
  

 
	
  

 	
  

 	
                     (2)
 Engaging in any type of business practice; or 

 
	
  

 	
  

 	
  

 
	
  

 	
  

 	
                     (3)
 Engaging in any activity in connection with the purchase or sale of any
 security or commodity or in connection with any violation of securities laws
 or commodities laws; 

 
	
  

 	
  

 	
  

 
	
  

 	
           (iv)
 any order, judgment or decree, not subsequently reversed, suspended or
 vacated, of any authority barring, suspending or otherwise limiting for more
 than 60 days the right of any such person to engage in any activity described
 in the preceding sub paragraph, or to be associated with persons engaged in
 any such activity;

 

17

	
  

 	
  

 
	
  

 	
           (v)
 a finding by a court of competent jurisdiction in a civil action or by the
 SEC or other authority to have violated any securities law, regulation or
 decree and the judgment in such civil action or finding by the SEC or any
 other authority has not been subsequently reversed, suspended or vacated; or 

 
	
  

 	
  

 
	
  

 	
           (vi)
 a finding by a court of competent jurisdiction in a civil action or by the
 Commodity Futures Trading Commission to have violated any federal commodities
 law, and the judgment in such civil action or finding has not been
 subsequently reversed, suspended or vacated. 

 

          (oo)
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.

          (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)
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. 

          (rr)
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. 

          (ss)
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 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 

18

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 1(d). 

          (tt)
10-K Filing. Without limiting any other representation or warranty
contained in this Agreement, no material adverse event, liability, development
or circumstance has occurred or exists, or is reasonably expected to exist or
occur, with respect to the Company, any of its Subsidiaries or any of their
respective businesses, properties, liabilities, prospects, operations
(including results thereof) or condition (financial or otherwise) that will be
disclosed, or is required to be disclosed, in the Form 10-K (including, without
limitation, in the financial statements contained therein or in notes thereto
or in any schedules, exhibits or other matters to be incorporated therein (by
reference or otherwise)) to be filed by the Company for the fiscal year ending
December 31, 2009, which Form 10-K will be filed on the date hereof. At the
time of filing of such Form 10-K, such Form 10-K (including, without
limitation, the financial statements contained therein and the notes thereto and
all schedules, exhibits and other matters to be incorporated therein (by
reference or otherwise)) (i) will comply in all material respects with the
requirements of the 1934 Act and the rules and regulations of the SEC
promulgated thereunder applicable to such Form 10-K and (ii) will not contain
any untrue statement of a material fact or omit to state a material fact
required to be stated therein or necessary in order to make the statements
therein, in the light of the circumstances under which they were made, not
misleading. 

	
  

 	
  

 
	
 4. COVENANTS. 

 

          (a)
Maintenance of Registration Statement For so long as any of the Warrants
remain outstanding, the Company shall use its best efforts to maintain the
effectiveness of the Registration Statement for the issuance thereunder of the
Warrant Shares, provided that, if at any time while the Warrants are
outstanding the Company shall be ineligible to utilize Form S-3 (or any
successor form) for the purpose of issuance of the Warrant Shares, the Company
shall promptly amend the Registration Statement on such other form as may be
necessary to maintain the effectiveness of the Registration Statement for this
purpose. 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
or any prospectus contained therein is not available for use, the Company shall
immediately notify the holders of the 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
the Securities or such prospectus is again available for use. 

          (b)
Prospectus Supplement 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
Supplement with respect to the Securities 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 

19

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
(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. 

          (c)
Reporting Status. During the period from the date hereof until the date
on which no Warrants are outstanding (such period, 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. 

          (d)
Use of Proceeds. The Company shall use the proceeds from the sale of the
Securities for working capital, the expansion of its business through internal
growth or acquisitions, the payment of the fees and expenses described in
Section 4(g) below and general corporate purposes and not for the (i) repayment
of any outstanding Indebtedness of the Company or any of its Subsidiaries
except as described in this subsection or (ii) redemption or repurchase of any
securities of the Company or any of its Subsidiaries or (iii) the settlement of
any outstanding litigation. 

          (e)
Financial Information. The Company agrees to send the following to each
Buyer during the Reporting Period (i) unless the following are filed with the
SEC through EDGAR and are available to the public through the EDGAR system,
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. 

          (f)
Listing. The Company shall promptly (but in no event later than the
Closing Date) secure the listing or designation for quotation (as the case may
be) of all of the Common 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) 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 LLC, the Nasdaq Capital Market, the Nasdaq Global Market or the Nasdaq
Global Select 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 use
commercially reasonable efforts to cause the Warrants to be listed on the
Principal Market within ninety (90) calendar 

20

days after the
Closing Date. The Company shall pay all fees and expenses in connection with
satisfying its obligations under this Section 4(f). 

          (g)
Fees. The Company shall reimburse Iroquois Master Fund Ltd. (“Iroquois”)
or its designee(s) for all reasonable costs and expenses incurred by it or its
affiliates in connection with the transactions contemplated by the Transaction
Documents (including, without limitation, all reasonably legal fees and disbursements
in connection therewith, documentation and implementation of the transactions
contemplated by the Transaction Documents and due diligence and regulatory filings
in connection therewith) in a non-accountable amount equal to $25,000, which
amount shall be withheld, in whole or in part, by Iroquois from its Purchase
Price at the Closing or paid by the Company upon termination of this Agreement
on demand by Iroquois so long as such termination did not occur as a result of
a material breach by Iroquois of any of its obligations hereunder (as the case
may be), less $10,000 which was previously advanced by the Company. The Company
shall be responsible for the payment of any placement agent’s fees, financial
advisory fees, transfer agent fees, DTC 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. 

          (h)
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 (except to the extent otherwise required under applicable
law), 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. 

          (i)
Disclosure of Transactions and Other Material Information. The Company
shall, on or before 9:30 a.m. (but in no event prior to 9:15 a.m.), New York
time, on the date of this Agreement, (i) 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 (ii) 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 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, 

21

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(n) by the
Company, any of its Subsidiaries, or any of its or their respective officers,
directors, employees and agents (as 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 (provided that in the case of clause
(i) each Buyer shall be consulted by the Company in connection with any such
press release or other public disclosure prior to its release). Without the
prior written consent of the applicable Buyer, other then with respect to the
attachment of this Agreeemnt to the 8-K Filing, the Company shall not (and
shall cause each of its Subsidiaries and affiliates to not) disclose the name
of such Buyer in any filing, announcement, release or otherwise. 

          (j)
Additional Issuance of Securities. 

	
  

 	
  

 
	
  

 	
           (i)
 The Company agrees that for the period commencing on the date hereof and
 ending on the date immediately following the one hundred and twentieth (120th)
 calendar day after 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 Common Stock
 Equivalents, 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”). 

 
	
  

 	
  

 
	
  

 	
           (ii)
 Notwithstanding the foregoing, this Section 4(j) shall not apply in respect
 of the issuance of (A) any Excluded Securities (as defined in the Warrants)
 or (B) shares of Common Stock issued or issuable in connection with strategic
 alliances, acquisitions, mergers, and strategic partnerships, provided, that
 (x) the primary purpose of such issuance is not to raise capital as
 determined in good faith by the holders of a majority of the Registrable
 Securities, (y) the purchaser or acquirer of the securities in such issuance
 solely consists of either (I) the actual participants in such strategic
 alliance or strategic partnership, (II) the actual owners of such assets or
 securities acquired in such acquisition 

 

22

	
  

 	
  

 
	
  

 	
 or merger or
 (III) the stockholders, partners or members of the foregoing Persons and (z)
 the number or amount of securities issued to such Person by the Company shall
 not be disproportionate to such Person’s actual participation in such
 strategic alliance or strategic partnership or ownership of such assets or
 securities to be acquired by the Company, as applicable (collectively the “Standstill Excluded Securities”). 

 

          (k)
Reservation of Shares. So long as any Warrants remain outstanding, the
Company shall use its reasonable best efforts to at all times have authorized,
and reserved for the purpose of issuance, no less than 120% of the maximum
number of shares of Common Stock issuable upon exercise of all the Warrants as
of the date hereof (without regard to any limitations on the exercise of the
Warrants set forth therein), less the number of Warrant Shares represented by
any such Warrants that have been exercised.

          (l)
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. 

          (m)
Variable Rate Transaction. From the date hereof until the twelve (12)
month anniversary of the Closing Date, 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
Common Stock Equivalents 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 Common Stock Equivalents, 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 Common Stock Equivalents 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) 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. 

          (n)
Participation Right. From the date hereof until the eighteen (18) month
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(n). The
Company acknowledges and agrees that the right set forth in this Section 4(n)
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 

 

23

	
  

 	
  

 
	
  

 	
 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 100% 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(n) shall be (a) based on such Buyer’s pro rata portion of the
 aggregate number of Common Shares 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 third (3rd) Business
 Day after such Buyer’s receipt of the Offer Notice (the period from the date
 of such Buyer’s receipt of the Offer Notice until the end of such third
 Business day thereafter being, subject to the last sentence of this paragraph
 (ii), 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. 

 

24

	
  

 	
  

 
	
  

 	
           (iii)
 The Company shall have five (5) Business 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 of the Refused
 Securities (any such sale to be in the manner and on the terms specified in
 Section 4(n)(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(n)(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(n) 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 securities
 have again been offered to the Buyers in accordance with Section 4(n)(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(n) 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
 (other than as required by applicable law) or be required to consent to any
 amendment to 

 

25

	
  

 	
  

 
	
  

 	
 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(n) 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 and such Buyer will again have the right
 of participation set forth in this Section 4(n). Other than as set forth in
 the preceding sentence 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(n)(ii). 

 
	
  

 	
  

 
	
  

 	
           (ix)
 The restrictions contained in this Section 4(n) shall not apply in connection
 with the issuance of (A) any Standstill Excluded Securities and (B) any
 shares of Common Stock pursuant to a bona fide firm commitment underwritten
 public offering with a nationally recognized underwriter which generates
 gross proceeds to the Company of at least $20,000,000 (other than an
 “at-the-market offering” as defined in Rule 415(a)(4) under the 1933 Act and
 “equity lines”). The Company shall not circumvent the provisions of this
 Section 4(n) by providing terms or conditions to one Buyer that are not
 provided to all. 

 

          (o)
Dilutive Issuances. From the date hereof until the eighteen (18) month
anniversary of the Closing Date, the Company shall not, in any manner, enter
into or effect any Dilutive Issuance (as defined in the Warrants) if the effect
of such Dilutive Issuance is to cause the Company to be required to issue upon
exercise of any Warrant any shares of Common Stock in excess of that number of
shares of Common Stock which the Company may issue upon exercise of the
Warrants without breaching the Company’s obligations under the rules or
regulations of the Principal Market. 

          (p)
Passive Foreign Investment Company. The Company shall conduct its
business in 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 Warrants
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 without the prior express written consent of the Buyers. 

26

          (r)
Corporate Existence. So long as any Buyer owns any Warrants, the Company
shall not be party to any 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. 

          (s)
Closing Documents. On or prior to fourteen (14) calendar days after the
Closing Date, the Company agrees to deliver, or cause to be delivered, to each
Buyer and Greenberg Traurig, LLP executed copies of the Transaction Documents,
Securities and other document required to be delivered to any party pursuant to
Section 7 hereof. 

	
  

 	
  

 
	
 5. REGISTER; TRANSFER AGENT INSTRUCTIONS; LEGEND.

 

          (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 Common Shares and the Warrants
in which the Company shall record the name and address of the Person in whose
name the Common Shares and the
Warrants have been issued (including the name and address of each transferee),
the number of Common Shares 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 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 DTC, registered in the name of each Buyer or its
respective nominee(s), for the Common Shares and the Warrant Shares in such
amounts as specified from time to time by each Buyer to the Company upon
delivery of the Common Shares 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. Any fees (with respect to
the Transfer Agent, counsel to the Company or otherwise) associated with the
issuance of such opinion shall be borne by the Company. 

          (c)
Legends. Certificates and any other instruments evidencing the
Securities (assuming the Cashless Exercise (as defined in the Warrants) of any
Warrants) shall not bear any restrictive or other legend. 

	
  

 	
  

 
	
 6. CONDITIONS TO THE COMPANY’S OBLIGATION TO SELL.

 

27

                    The
obligation of the Company hereunder to issue and sell the Common Shares and the
related 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: 

          (a)
Such Buyer shall have executed this Agreement and delivered the same to the
Company. 

          (b)
Such Buyer shall have delivered to the Company the Purchase Price (less, in the
case of Iroquois, the amounts withheld pursuant to Section 4(g)) for the Common
Shares and the related 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. 

          (c)
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 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 specific
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.

 

                    The
obligation of each Buyer hereunder to purchase the Common Shares and the
related 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: 

          (a)
The Company shall have (i) executed and delivered to such Buyer each of the
Transaction Documents, (ii) electronically delivered the Common Shares being
purchased by such Buyer at the Closing pursuant to this Agreement and (iii)
executed and delivered the related Series A Warrants and Series B Warrants (in
such amounts as such Buyer shall request) being purchased by such Buyer at the
Closing pursuant to this Agreement. 

          (b)
Such Buyer shall have received the opinion of Morgan Lewis & Bockius, the
Company’s counsel, dated as of the Closing Date, in a form reasonably
acceptable to the Buyers. 

          (c)
The Company shall have delivered to such Buyer a copy of the Irrevocable
Transfer Agent Instructions, in the form of Exhibit C attached hereto, which instructions shall have
been delivered to and acknowledged in writing by the Transfer Agent. 

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

28

          (e)
The Common Stock (i) shall be 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
listing maintenance requirements of the Principal Market. 

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

          (g)
The Company shall have delivered to such Buyer a certified copy of the
Certificate of Incorporation, as amended to date as certified by the Secretary
of State of Delaware within 10 days of the Closing Date. 

          (h)
The Company shall have delivered to such Buyer a certificate, executed by the
Secretary of the Company and dated as of the Closing Date, as to (i) the
resolutions consistent with this transaction as adopted by the Company’s Board
of Directors in a form reasonably acceptable to such Buyer, (ii) the
Certificate of Incorporation and (iii) the Bylaws of the Company, each as in
effect at the Closing, in the form attached hereto as Exhibit D. 

          (i)
The representations and warranties of the
Company shall be true and correct as of the date when made and as of the
Closing Date as though 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 specific date) and the Company shall have performed, satisfied and
complied in all respects with the covenants, agreements and conditions required
by the Transaction Documents 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 attached hereto as Exhibit E. 

          (j)
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. 

          (k)
The Company shall have obtained all governmental, regulatory or third party
consents and approvals, if any, necessary for the sale of the Common Shares,
the Warrants and the Warrant Shares. 

29

          (l)
The Registration Statement shall be effective and available for the issuance
and sale of the Common Shares hereunder and the Company shall have delivered to
such Buyer the Prospectus and the Prospectus Supplement as required thereunder.

          (m)
There shall have been no Material Adverse Effect with respect to the Company
since the date hereof. 

          (n)
The Company shall have delivered to such Buyer evidence, reasonably
satisfactory to such Buyer, with respect to the termination of that certain Common
    Stock Purchase Agreement, dated as of June 26, 2009, by and between the Company
    and Seaside 88, L.P. 

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

8. TERMINATION.

          In
the event that the Closing shall not have occurred with respect to a Buyer within
five (5) days of 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 Common Shares 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(g) 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 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 in connection herewith or with
any transaction contemplated hereby or discussed herein, 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, 

30

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. 

          (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 

31

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 or waived other than by an instrument in writing signed by the Company
and holders of Warrants exercisable into 2/3rds of the Warrant Shares issuable
upon exercise of the Warrants then outstanding (without regard for any
limitations on exercise set forth therein and excluding any Warrants held by
the Company or any of its Subsidiaries). 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 Common Shares 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
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 investigation conducted by a Buyer or its advisors, if any, or its
representatives shall affect such Buyer’s right to rely on, or modify, qualify
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, the Prospectus or the Prospectus
Supplement shall affect such Buyer’s right to rely on, or modify, qualify 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 modify, qualify 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. 

 

32

	
  

 	
  

 	
  

 
	
  

 	
  

 	
 1200 Route
 22 East, Suite 2000 

 
	
  

 	
  

 	
 Bridgewater,
 New Jersey 08807 

 
	
  

 	
  

 	
 Facsimile:
 (908) 203-4744 

 
	
  

 	
  

 	
 Attention:
 Steven B. Ratoff, President and Chief Executive 

 
	
  

 	
  

 	
 Officer 

 
	
  

 	
  

 	
  

 
	
  

 	
 With a copy
 (for informational purposes only) to: 

 
	
  

 	
  

 
	
  

 	
  

 	
 Morgan Lewis
 & Bockius, LLP 

 
	
  

 	
  

 	
 502 Carnegie
 Center

 
	
  

 	
  

 	
 Princeton, New
 Jersey 08540 

 
	
  

 	
  

 	
 Facsimile:
 (609) 919-6701 

 
	
  

 	
  

 	
 Attention:
 Emilio Ragosa, Esq. 

 
	
  

 	
  

 	
  

 
	
  

 	
 If to the
 Transfer Agent: 

 
	
  

 	
  

 
	
  

 	
  

 	
 American
 Stock Transfer & Trust Company, LLC 

 
	
  

 	
  

 	
 59 Maiden
 Lane 

 
	
  

 	
  

 	
 New York,
 New York 10038 

 
	
  

 	
  

 	
 Facsimile:
 (718) 921-8310 

 
	
  

 	
  

 	
 Attention:
 Carlos Pinto 

 

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 

 
	
  

 	
  

 	
 MetLife Building 

 
	
  

 	
  

 	
 200 Park Avenue 

 
	
  

 	
  

 	
 New York, NY 10166 

 
	
  

 	
  

 	
 Telephone: (212) 801-9200 

 
	
  

 	
  

 	
 Facsimile: (212) 805-9222 

 
	
  

 	
  

 	
 Attention: Michael A. Adelstein, Esq. 

 
	
  

 	
  

 	
  

 
	
  

 	
  

 	
 Greenberg Traurig, LLP 

 
	
  

 	
  

 	
 77 W. Wacker Drive, Suite 3100 

 
	
  

 	
  

 	
 Chicago, IL 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 

33

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 holders of Warrants exercisable into
2/3rds of the Warrant Shares issuable upon exercise of the Warrants then
outstanding (without regard for any limitations on exercise set forth therein
and excluding any Warrants held by the Company or any of its Subsidiaries),
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). 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. 

          (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 

 

34

	
  

 	
  

 
	
  

 	
 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(i), 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 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 

 

35

	
  

 	
  

 
	
  

 	
 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)
 No Strict 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. 

 
	
  

 	
  

 
	
           (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 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
 

 

36

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. So
long as any Warrants are 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 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)
Closing. Notwithstanding anything contained in this Agreement to the
contrary, (i) the obligations of each Buyer to purchase the securities set
forth in this Agreement to be purchased from the Company by each such Buyer,
and the obligations of the Company to sell such securities to each such Buyer,
shall be unconditional and all conditions to Closing shall be 

37

disregarded,
(ii) the Closing shall occur simultaneously with the execution of this
Agreement and (iii) any condition to Closing contemplated by this Agreement
(but prior to being disregarded by clause (i) above) that required delivery by
the Company or the undersigned of any agreement, instrument, certificate or the
like or purchase price (as applicable) shall no longer be a condition and shall
instead be an unconditional obligation of the Company or each such Buyer (as
applicable) to deliver such agreement, instrument, certificate or the like or
purchase price (as applicable) to such other party on the Closing Date. 

[signature
pages follow]

38

          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, each 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

 

          IN
WITNESS WHEREOF, each 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:

 
	
  

 	
  

 	
  

 
	
  

 	
 HUDSON BAY FUND, LP

 
	
  

 	
  

 	
  

 
	
  

 	
 By: 

 	
  

 
	
  

 	
  

 	

 

 
	
  

 	
  

 	
 Name:

 
	
  

 	
  

 	
 Title:

 

          IN
WITNESS WHEREOF, each 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:

 
	
  

 	
  

 	
  

 
	
  

 	
 HUDSON BAY OVERSEAS FUND, LTD.

 
	
  

 	
  

 	
  

 
	
  

 	
 By: 

 	
  

 
	
  

 	
  

 	

 

 
	
  

 	
  

 	
 Name:

 
	
  

 	
  

 	
 Title:

 

          IN
WITNESS WHEREOF, each 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:

 
	
  

 	
  

 	
  

 
	
  

 	
 By: 

 	
  

 
	
  

 	
  

 	

 

 
	
  

 	
  

 	
 Name:

 
	
  

 	
  

 	
 Title:

 

SCHEDULE OF BUYERS

	
  
 	
  
 	
  
 	
  
 	
  
 	
  
 	
  
 	
  
 	
  
 	
  
 	
  
 	
  
 	
  
 
	
  (1)
 	
  
 	
  (2)
 	
  
 	
  (3)
 	
  
 	
  (4)
 	
  
 	
  (5)
 	
  
 	
  (6)
 	
  
 	
  (7)
 
	
  
 	
  
 	
  
 	
  
 	
  
 	
  
 	
  
 	
  
 	
  
 	
  
 	
  
 	
  
 	
  
 
	
 Buyer
 	
  
 	
 Address and Facsimile Number
 	
  
 	
 Aggregate

 Number of

 Common

 Shares
 	
  
 	
 Aggregate

 Number of

 Series A

 Warrants

 Shares
 	
  
 	
 Aggregate

 Number of

 Series B

 Warrant

 Shares
 	
  
 	
 Purchase

 Price
 	
  
 	
 Legal Representative’s

 Address and Facsimile Number
 
	

 
 	
  
 	

 
 	
  
 	

 
 	
  
 	

 
 	
  
 	

 
 	
  
 	

 
 	
  
 	

 
 
	
  
 	
  
 	
  
 	
  
 	
  
 	
  
 	
  
 	
  
 	
  
 	
  
 	
  
 	
  
 	
  
 
	
 Iroquois Master Fund Ltd.
 	
  
 	
 Iroquois Master Fund Ltd.

 641 Lexington Avenue

 26th Floor

 New York, New York 10022

 Facsimile: (212) 207-3452
 	
  
 	
 2,125,758
 	
  
 	
 1,062,879
 	
  
 	
 708,586
 	
  
 	
 $350,075.07
 	
  
 	
 Greenberg Traurig, LLP

 MetLife Building

 200 Park Avenue

 New York, NY 10166

 Telephone: (212) 801-9200

 Facsimile: (212) 805-9222

 Attention: Michael A. Adelstein
 
	
  
 	
  
 	
  
 	
  
 	
  
 	
  
 	
  
 	
  
 	
  
 	
  
 	
  
 	
  
 	
  
 
	
  
 	
  
 	
  
 	
  
 	
  
 	
  
 	
  
 	
  
 	
  
 	
  
 	
  
 	
  
 	
 Greenberg Traurig, LLP

 77 W. Wacker Drive, Suite 3100

 Chicago, Illinois 60601

 Attention: Peter H. Lieberman

                  Todd A. Mazur

 Facsimile: (312) 456-8435
 
	
  
 	
  
 	
  
 	
  
 	
  
 	
  
 	
  
 	
  
 	
  
 	
  
 	
  
 	
  
 	
  
 
	
 Hudson Bay Fund, LP
 	
  
 	
 120 Broadway, 40th Floor

 New York, New York 10271

 Attention: Yoav Roth

 Facsimile: (646) 214-7946

 Telephone: (212) 571-1244

 E-mail:

 investments@hudsonbaycapital.com
 	
  
 	
 871,561
 	
  
 	
 435,781
 	
  
 	
 290,520
 	
  
 	
 $143,807.56
 	
  
 	
 Elected Not To Provide
 
	
  
 	
  
 	
  
 	
  
 	
  
 	
  
 	
  
 	
  
 	
  
 	
  
 	
  
 	
  
 	
  
 
	
 Hudson Bay Overseas Fund,
 Ltd.
 	
  
 	
 c/o Walkers SPV Limited

 Walker House

 P.O. Box 908GT

 Mary Street

 George Town, Grand Cayman

 Cayman Islands
 	
  
 	
 1,254,197
 	
  
 	
 627,098
 	
  
 	
 418,066
 	
  
 	
 $206,942.51
 	
  
 	
 Elected Not To Provide
 
	
  
 	
  
 	
  
 	
  
 	
  
 	
  
 	
  
 	
  
 	
  
 	
  
 	
  
 	
  
 	
  
 
	
  
 	
  
 	
 with a copy to:
 	
  
 	
  
 	
  
 	
  
 	
  
 	
  
 	
  
 	
  
 	
  
 	
  
 
	
  
 	
  
 	
  
 	
  
 	
  
 	
  
 	
  
 	
  
 	
  
 	
  
 	
  
 	
  
 	
  
 
	
  
 	
  
 	
 120 Broadway, 40th Floor

 New York, New York 10271

 Attention: Yoav Roth

 Facsimile: (646) 214-7946

 Telephone: (212) 571-1244

 E-mail:

 investments@hudsonbaycapital.com
 	
  
 	
  
 	
  
 	
  
 	
  
 	
  
 	
  
 	
  
 	
  
 	
  
 
	
  
 	
  
 	
  
 	
  
 	
  
 	
  
 	
  
 	
  
 	
  
 	
  
 	
  
 	
  
 	
  
 
	ProQuest Investments II,
         L.P.
	 
	ProQuest Investments

     90 Nassau Street, 5th Floor

     Princeton, New Jersey 08542

     Fax No.: 609-919-3570

     Attention: Pasquale DeAngelis

   
	
  
 	
 4,848,485
 	
  
 	
 2,424,243
 	
  
 	
 1,616,162
 	
  
 	
 $800,000.03
 	
  
 	
 Elected Not To Provide
 
	
  
 	
  
 	
  
 	
  
 	
  
 	
  
 	
  
 	
  
 	
  
 	
  
 	
  
 	
  
 	
  
 
	
 Totals:
 	
  
 	
  
 	
  
 	
 9,100,001
 	
  
 	
 4,550,001
 	
  
 	
 3,033,334
 	
  
 	
 $1,500,150.17

Source: [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00171-of-00352.parquet"}, [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00171-of-00352.parquet"}]]