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      NEITHER
        THESE SECURITIES NOR THE SECURITIES FOR WHICH THESE SECURITIES ARE EXERCISABLE
        HAVE BEEN REGISTERED WITH THE SECURITIES AND EXCHANGE COMMISSION OR THE
        SECURITIES COMMISSION OF ANY STATE IN RELIANCE UPON AN EXEMPTION FROM
        REGISTRATION UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE
“SECURITIES
        ACT”),
        AND, ACCORDINGLY, MAY NOT BE OFFERED OR SOLD EXCEPT PURSUANT TO AN EFFECTIVE
        REGISTRATION STATEMENT UNDER THE SECURITIES ACT OR PURSUANT TO AN AVAILABLE
        EXEMPTION FROM, OR IN A TRANSACTION NOT SUBJECT TO, THE REGISTRATION
        REQUIREMENTS OF THE SECURITIES ACT AND IN ACCORDANCE WITH APPLICABLE STATE
        SECURITIES LAWS. THESE SECURITIES AND THE SECURITIES ISSUABLE UPON EXERCISE
        OF
        THESE SECURITIES MAY BE PLEDGED IN CONNECTION WITH A BONA FIDE MARGIN ACCOUNT
        OR
        OTHER LOAN SECURED BY SUCH SECURITIES.

       

      ACURA
        PHARMACEUTICALS, INC.

       

      WARRANT

      

        
          	
                  Warrant
                    No. 

                	
                  Dated:
                    August [__], 2007

                

        

      

       

      ACURA
        PHARMACEUTICALS, INC.,
        a New
        York corporation (the “Company”),
        hereby certifies that, for value received,                     
        or its
        registered assigns (the “Holder”),
        is
        entitled to purchase from the Company up to a total of                     
        shares
        of common stock, $0.01 par value per share (the “Common
        Stock”),
        of
        the Company (each such share, a “Warrant
        Share”
and
        all
        such shares, the “Warrant
        Shares”)
        at an
        exercise price equal to $0.34 per share (as adjusted from time to time as
        provided in Section 9
        , the
“Exercise
        Price”),
        at
        any time on or after date hereof and through and including August [__], 2014
        (the “Expiration
        Date”),
        and
        subject to the following terms and conditions. This Warrant (this “Warrant”)
        is one
        of a series of similar warrants issued pursuant to that certain Securities
        Purchase Agreement, dated as of the date hereof, by and among the Company
        and
        the Investors identified therein (the “Purchase
        Agreement”).
        All
        such warrants are referred to herein, collectively, as the “Warrants.”

       

      1.  Definitions.
        In
        addition to the terms defined elsewhere in this Warrant, capitalized terms
        that
        are not otherwise defined herein have the meanings given to such terms in
        the
        Purchase Agreement.

       

      2.  Registration
        of Warrant.
        The
        Company shall register this Warrant, upon records to be maintained by the
        Company for that purpose (the “Warrant
        Register”),
        in
        the name of the Holder of record hereof from time to time. The Company may
        deem
        and treat the registered Holder of this Warrant as the absolute owner hereof
        for
        the purpose of any exercise hereof or any distribution to the Holder, and
        for
        all other purposes, absent actual notice to the contrary.

       

      3.  Registration
        of Transfers.
        The
        Company shall register the transfer of any portion of this Warrant in the
        Warrant Register, upon surrender of this Warrant, with the Form of Assignment
        attached hereto duly completed and signed, to the Transfer Agent or to the
        Company at its address specified herein. Upon any such registration of transfer,
        a new warrant to purchase Common Stock, in substantially the form of this
        Warrant (any such new warrant, a “New
        Warrant”),
        evidencing the portion of this Warrant so transferred shall be issued to
        the
        transferee and a New Warrant evidencing the remaining portion of this Warrant
        not so transferred, if any, shall be issued to the transferring Holder. The
        acceptance of the New Warrant by the transferee thereof shall be deemed the
        acceptance by such transferee of all of the rights and obligations of a holder
        of a Warrant.

       

      
        
          
          

        

        
          
          

          
            

          

        

        
          
          

        

      

       

      4.  Exercise
        and Duration of Warrants.

       

      (a)  This
        Warrant shall be exercisable by the registered Holder at any time and from
        time
        to time on or after the date hereof to and including the Expiration
        Date.
        At
        6:30
        P.M., New York City time on the Expiration Date, the portion of this Warrant
        not
        exercised prior thereto shall be and become void and of no value; provided
        that,
        if the average of the Closing Prices for the five Trading Days immediately
        prior
        to (but not including) the Expiration Date exceeds the Exercise Price on
        the
        Expiration Date, then this Warrant shall be deemed to have been exercised
        in
        full (to the extent not previously exercised) on a “cashless exercise” basis at
        6:30 P.M. New York City time on the Expiration Date if a “cashless exercise” may
        occur at such time pursuant to Section 10 below.

       

      (b)  A
        Holder
        may exercise this Warrant by delivering to the Company (i) the original Warrant
        and an exercise notice, in the form attached hereto (the “Exercise
        Notice”),
        appropriately completed and duly signed, and (ii) payment of the Exercise
        Price
        for the number of Warrant Shares as to which this Warrant is being exercised
        (which may take the form of a “cashless exercise” if so indicated in the
        Exercise Notice and only if a “cashless exercise” may occur at such time
        pursuant to Section 10 below), and the date such items are delivered to the
        Company (as determined in accordance with the notice provisions hereof) is
        an
“Exercise
        Date.”
        Execution and delivery of the Exercise Notice in respect of less than all
        the
        Warrant Shares issuable upon exercise of this Warrant shall have the same
        effect
        as cancellation of the original Warrant and issuance of a New Warrant evidencing
        the right to purchase the remaining number of Warrant Shares.

       

      5.  Delivery
        of Warrant Shares.

       

      (a)  Upon
        exercise of this Warrant, the Company shall promptly (but in no event later
        than
        three Trading Days after the Exercise Date) issue or cause to be issued and
        cause to be delivered to or upon the written order of the Holder and in such
        name or names as the Holder may designate, a certificate for the Warrant
        Shares
        issuable upon such exercise, free of restrictive legends unless a registration
        statement covering the resale of the Warrant Shares and naming the Holder
        as a
        selling stockholder thereunder is not then effective or the Warrant Shares
        are
        not freely transferable without volume restrictions pursuant to Rule 144
        under the Securities Act or pursuant to Rule 144K under the Securities Act
        in the case of a “cashless exercise.” The Holder, or any Person so designated by
        the Holder to receive Warrant Shares, shall be deemed to have become the
        holder
        of record of such Warrant Shares as of the Exercise Date. The Company shall,
        upon request of the Holder, use commercially reasonable efforts to deliver
        Warrant Shares hereunder electronically through The Depository Trust Company
        or
        another established clearing corporation performing similar
        functions.

       

      
        
          
          

        

        
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      (b)  This
        Warrant is exercisable, either in its entirety or, from time to time, for
        a
        portion of the number of Warrant Shares. Upon surrender of this Warrant
        following one or more partial exercises, the Company shall issue or cause
        to be
        issued, at its expense, a New Warrant evidencing the right to purchase the
        remaining number of Warrant Shares.

       

      (c)  In
        addition to any other rights available to a Holder, if the Company fails
        to
        deliver to the Holder a certificate representing Warrant Shares by the third
        Trading Day after the date on which delivery of such certificate is required
        by
        this Warrant, and if after such third Trading Day 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 the Warrant Shares that the Holder
        anticipated receiving from the Company (a “Buy-In”),
        then
        the Company shall, within three Trading 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 reasonable 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 (and to issue
        such Common Stock) shall terminate, or (ii) promptly honor its obligation
        to deliver to the Holder a certificate or certificates representing such
        Common
        Stock 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 Price on the date of the event giving rise to
        the Company’s obligation to deliver such certificate. 

       

      (d)  The
        Company’s obligations to issue and deliver Warrant Shares in accordance with the
        terms hereof are absolute and unconditional, irrespective of any action or
        inaction by the Holder to enforce the same, any waiver or consent with respect
        to any provision hereof, the recovery of any judgment against any Person
        or any
        action to enforce the same, or any setoff, counterclaim, recoupment, limitation
        or termination, or any breach or alleged breach by the Holder or any other
        Person of any obligation to the Company or any violation or alleged violation
        of
        law by the Holder or any other Person, and irrespective of any other
        circumstance which might otherwise limit such obligation of the Company to
        the
        Holder in connection with the issuance of Warrant Shares. Nothing herein
        shall
        limit a Holder’s right to pursue any other remedies available to it hereunder,
        at law or in equity including, without limitation, a decree of specific
        performance and/or injunctive relief with respect to the Company’s failure to
        timely deliver certificates representing shares of Common Stock upon exercise
        of
        this Warrant as required pursuant to the terms hereof.

       

      6.  Charges,
        Taxes and Expenses.
        Issuance
        and delivery of certificates for shares of Common Stock upon exercise of
        this
        Warrant shall be made without charge to the Holder for any issue or transfer
        tax, withholding tax, transfer agent fee or other incidental tax or expense
        in
        respect of the issuance of such certificates, all of which taxes and expenses
        shall be paid by the Company; provided, however, that the Company shall not
        be
        required to pay any tax which may be payable in respect of any transfer involved
        in the issuance, delivery or registration of any certificates for Warrant
        Shares
        or Warrants in a name other than that of the Holder. The Holder shall be
        responsible for all other tax liability that may arise as a result of holding
        or
        transferring this Warrant or receiving Warrant Shares upon exercise
        hereof.

       

      7.  Replacement
        of Warrant.
        If
        this
        Warrant is mutilated, lost, stolen or destroyed, the Company shall issue
        or
        cause to be issued in exchange and substitution for and upon cancellation
        hereof, or in lieu of and substitution for this Warrant, a New Warrant, but
        only
        upon receipt of evidence reasonably satisfactory to the Company of such loss,
        theft or destruction and customary and reasonable bond or indemnity, if
        requested. Applicants for a New Warrant under such circumstances shall also
        comply with such other reasonable regulations and procedures and pay such
        other
        reasonable third party costs as the Company may prescribe.

       

      
        
          
          

        

        
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      8.  Reservation
        of Warrant Shares.
        The
        Company covenants that it will at all times reserve and keep available out
        of
        the aggregate of its authorized but unissued and otherwise unreserved Common
        Stock, solely for the purpose of enabling it to issue Warrant Shares upon
        exercise of this Warrant as herein provided, the number of Warrant Shares
        which
        are then issuable and deliverable upon the exercise of this entire Warrant,
        free
        from preemptive rights or any other contingent purchase rights of persons
        other
        than the Holder (after giving effect to the adjustments and restrictions
        of
        Section 9, if any). The Company covenants that all Warrant Shares so
        issuable and deliverable shall, upon issuance and the payment of the applicable
        Exercise Price in accordance with the terms hereof, be duly and validly
        authorized, issued and fully paid and nonassessable. The Company will use
        reasonable commercial efforts to take all such action to assure that such
        shares
        of Common Stock may be issued as provided herein without violation of any
        applicable law or regulation, or of any requirements of any securities exchange
        or automated quotation system upon which the Common Stock may be listed,
        in each
        case, applicable to the Company.

       

      9.  Certain
        Adjustments.
        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
        9.

       

      (a)  Stock
        Dividends and Splits.
        If the
        Company, at any time while this Warrant is outstanding, (i) pays a stock
        dividend on its Common Stock or otherwise makes a distribution on any class
        of
        capital stock that is payable in shares of Common Stock, (ii) subdivides
        outstanding shares of Common Stock into a larger number of shares, or
        (iii) combines 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.

       

      (b)  Pro
        Rata Distributions.
        If the
        Company, at any time while this Warrant is outstanding, distributes to holders
        of Common Stock (i) evidences of its indebtedness, (ii) any security
        (other than a distribution of Common Stock covered by the preceding paragraph),
        (iii) rights or warrants to subscribe for or purchase any security, or
        (iv) any other asset, including cash (in each case, “Distributed
        Property”),
        then
        in each such case the Holder shall be entitled upon exercise of this Warrant
        for
        the purchase of any or all of the Warrant Shares, to receive the amount of
        Distributed Property which would have been payable to the Holder had such
        Holder
        been the holder of such Warrant Shares on the record date for the determination
        of stockholders entitled to such Distributed Property. The Company will at
        all
        times set aside in escrow and keep available for distribution to such holder
        upon exercise of this Warrant a portion of the Distributed Property to satisfy
        the distribution to which such Holder is entitled pursuant to the preceding
        sentence. 

       

      
        
          
          

        

        
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      (c)  Fundamental
        Transactions.
        If, at
        any time while this Warrant is outstanding, (i) the Company effects any
        merger or consolidation of the Company with or into another Person,
        (ii) the Company effects any sale of all or substantially all of its assets
        in one or a series of related transactions, (iii) any tender offer or
        exchange offer (whether by the Company or another Person) is completed pursuant
        to which holders of Common Stock are permitted to tender or exchange their
        shares for other securities, cash or property, or (iv) the Company effects
        any
        reclassification of the Common Stock or any compulsory share exchange pursuant
        to which the Common Stock is effectively converted into or exchanged for
        other
        securities, cash or property (other than as a result of a subdivision or
        combination of shares of Common Stock covered by Section 9(a) above) (all
        such transactions being hereinafter referred to as a “Fundamental
        Transaction”),
        then
        the Holder shall have the right thereafter to receive, upon exercise of this
        Warrant, the same amount and kind of securities, cash or property as it would
        have been entitled to receive upon the occurrence of such Fundamental
        Transaction if it had been, immediately prior to such Fundamental Transaction,
        the holder of the number of the Warrant Shares then issuable upon exercise
        in
        full of this Warrant (the “Alternate
        Consideration”).
        The
        aggregate Exercise Price for this Warrant will not be affected by any such
        Fundamental Transaction, but the Company shall apportion such aggregate Exercise
        Price among the Alternate Consideration in a reasonable manner reflecting
        the
        relative value of any different components of the Alternate Consideration.
        If
        holders of Common Stock are given any choice as to the securities, cash or
        property to be received in a Fundamental Transaction, then the Holder shall
        be
        given the same choice as to the Alternate Consideration it receives upon
        any
        exercise of this Warrant following such Fundamental Transaction. At the Holder’s
        request, any successor to the Company or surviving entity in such Fundamental
        Transaction shall issue to the Holder a new warrant consistent with the
        foregoing provisions and evidencing the Holder’s right to purchase the Alternate
        Consideration for the aggregate Exercise Price upon exercise thereof. The
        provisions of this Section 9(c) shall similarly apply to successive
        reorganizations, reclassifications, consolidations, mergers, sales, transfers
        or
        other dispositions, each of which transactions shall also constitute a
        Fundamental Transaction. 

       

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

       

      (e)  Calculations.
        All
        calculations under this Section 9 shall be made 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.

       

      
        
          
          

        

        
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      (f)  Notice
        of Adjustments.
        Upon
        the occurrence of each adjustment pursuant to this Section 9, the Company
        at its expense will promptly compute such adjustment in accordance with the
        terms of this Warrant and prepare a certificate setting forth such adjustment,
        including a statement of the adjusted Exercise Price and adjusted number
        or type
        of Warrant Shares or other securities issuable upon exercise of this Warrant
        (as
        applicable), describing the transactions giving rise to such adjustments
        and
        showing in detail the facts upon which such adjustment is based. Upon written
        request, the Company will promptly deliver a copy of each such certificate
        to
        the Holder and to the Transfer Agent no later than ten (10) Trading Days
        after
        said adjustment.

       

      (g)  Notice
        of Corporate Events.
        If the
        Company (i) declares a dividend or any other distribution of cash,
        securities or other property in respect of its Common Stock, including without
        limitation any granting of rights or warrants to subscribe for or purchase
        any
        capital stock of the Company, (ii) publically announces or enters into any
        agreement contemplating, or solicits stockholder approval for, any Fundamental
        Transaction or (iii) authorizes the voluntary dissolution, liquidation or
        winding up of the affairs of the Company, then the Company shall deliver
        to the
        Holder a notice describing the material terms and conditions of such
        transaction, at least fifteen calendar days prior to the applicable record
        or
        effective date on which a Person would need to hold Common Stock in order
        to
        participate in or vote with respect to such transaction, and the Company
        will
        take all steps reasonably necessary in order to ensure that the Holder is
        given
        the practical opportunity to exercise this Warrant prior to such time so
        as to
        participate in or vote with respect to such transaction; provided, however,
        that
        the failure to deliver such notice or any defect therein shall not affect
        the
        validity of the corporate action required to be described in such
        notice.

       

      10.  Payment
        of Exercise Price.
        The
        Holder shall pay the Exercise Price in immediately available funds; provided,
        however, that if the Exercise Date is at least one hundred and eighty (180)
        days
        after the date hereof, then
        at any
        time (i) a registration statement covering the resale of the Warrant Shares
        is
        not effective on the Exercise Date or (ii) the resale of the Warrant Shares
        is
        not covered by the registration statement because the Securities and Exchange
        Commission would not permit the Company to include such Warrant Shares in
        such
        registration statement, then in each such case, the Holder may satisfy its
        obligation to pay the Exercise Price through a “cashless exercise,” in which
        event the Company shall issue to the Holder the number of Warrant Shares
        determined as follows:

       

      X
        = Y
        [(A-B)/A]

       

      where:

       

      X
        = the
        number of Warrant Shares to be issued to the Holder.

       

      Y
        = the
        number of Warrant Shares with respect to which this
        Warrant
        is being exercised.

       

      A
        = the
        average of the Closing Prices for the five Trading Days immediately prior
        to
        (but not including) the Exercise Date.

       

      B
        = the
        Exercise Price.

       

      
        
          
          

        

        
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      For
        purposes of Rule 144 promulgated under the Securities Act, it is intended,
        understood and acknowledged that the Warrant Shares issued in a cashless
        exercise transaction shall be deemed to have been acquired by the Holder,
        and
        the holding period for the Warrant Shares shall be deemed to have commenced,
        on
        the date this Warrant was originally issued pursuant to the Purchase
        Agreement.

       

      11.  Fractional
        Shares.
        The
        Company shall not be required to issue or cause to be issued fractional Warrant
        Shares on the exercise of this Warrant. If any fraction of a Warrant Share
        would, except for the provisions of this Section, be issuable upon exercise
        of
        this Warrant, the number of Warrant Shares to be issued will be rounded down
        to
        the nearest whole share.

       

      12.  Notices.
        Any
        and
        all notices or other communications or deliveries hereunder (including without
        limitation any Exercise Notice) shall be in writing and shall be deemed given
        and effective on the earliest of (i) the date of transmission, if such
        notice or communication is delivered via facsimile at the facsimile number
        specified in the Purchase Agreement prior to 6:30 p.m. (New York City time)
        on a
        Trading Day, (ii) the next Trading Day after the date of transmission, if
        such notice or communication is delivered via facsimile at the facsimile
        number
        specified in the Purchase Agreement on a day that is not a Trading Day or
        later
        than 6:30 p.m. (New York City time) on any Trading Day, (iii) the Trading
        Day following the date of delivery to the courier service, if sent by nationally
        recognized overnight courier service, or (iv) upon actual receipt by the
        party to whom such notice is required to be given. The address for such notices
        or communications shall be as set forth in the Purchase Agreement.

       

      13.  Warrant
        Agent.
        The
        Company shall serve as warrant agent under this Warrant. Upon 30 days’
notice to the Holder, the Company may appoint a new warrant agent. Any
        corporation into which the Company or any new warrant agent may be merged
        or any
        corporation resulting from any consolidation to which the Company or any
        new
        warrant agent shall be a party or any corporation to which the Company or
        any
        new warrant agent transfers substantially all of its corporate trust or
        stockholder services business shall be a successor warrant agent under this
        Warrant without any further act. Any such successor warrant agent shall promptly
        cause notice of its succession as warrant agent to be mailed (by first class
        mail, postage prepaid) to the Holder at the Holder’s last address as shown on
        the Warrant Register.

       

      14.  Miscellaneous.

       

      (a)  Subject
        to the restrictions on transfer set forth on the first page hereof, this
        Warrant
        may be assigned by the Holder. This Warrant may not be assigned by the Company
        except to a successor in the event of a Fundamental Transaction. This Warrant
        shall be binding on and inure to the benefit of the parties hereto and their
        respective successors and assigns. Subject to the preceding sentence, nothing
        in
        this Warrant shall be construed to give to any Person other than the Company
        and
        the Holder any legal or equitable right, remedy or cause of action under
        this
        Warrant. This Warrant may be amended only in writing signed by the Company
        and
        the Holder and their successors and assigns.

       

      (b)  The
        Company (i) will not increase the par value of any Warrant Shares above the
        amount payable therefor on such exercise and (ii) will not close its
        stockholder books or records in any manner which interferes with the timely
        exercise of this Warrant, other than in connection with a business combination
        transaction.

       

      
        
          
          

        

        
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      (c)  GOVERNING
        LAW; VENUE; WAIVER OF JURY TRIAL.
        ALL
        QUESTIONS CONCERNING THE CONSTRUCTION, VALIDITY, ENFORCEMENT AND INTERPRETATION
        OF THIS WARRANT SHALL BE GOVERNED BY AND CONSTRUED AND ENFORCED IN ACCORDANCE
        WITH THE LAWS OF 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 (INCLUDING WITH RESPECT TO THE ENFORCEMENT OF ANY OF THE
        TRANSACTION DOCUMENTS), AND HEREBY IRREVOCABLY WAIVES, AND AGREES NOT TO
        ASSERT
        IN ANY SUIT, ACTION OR PROCEEDING, ANY CLAIM THAT IT IS NOT PERSONALLY SUBJECT
        TO THE JURISDICTION OF ANY SUCH COURT AND THAT 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 VIA REGISTERED OR CERTIFIED MAIL OR OVERNIGHT DELIVERY
        (WITH EVIDENCE OF DELIVERY) TO SUCH PARTY AT THE ADDRESS IN EFFECT FOR NOTICES
        TO IT UNDER THIS AGREEMENT AND AGREES THAT SUCH SERVICE SHALL CONSTITUTE
        GOOD
        AND SUFFICIENT SERVICE OF PROCESS AND NOTICE THEREOF. NOTHING CONTAINED HEREIN
        SHALL BE DEEMED TO LIMIT IN ANY WAY ANY RIGHT TO SERVE PROCESS IN ANY MANNER
        PERMITTED BY LAW. EACH OF THE COMPANY AND THE HOLDER HEREBY WAIVES ALL RIGHTS
        TO
        A TRIAL BY JURY.

       

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

       

      (e)  In
        case
        any one or more of the provisions of this Warrant shall be invalid or
        unenforceable in any respect, the validity and enforceability of the remaining
        terms and provisions of this Warrant shall not in any way be affected or
        impaired thereby and the parties will attempt in good faith to agree upon
        a
        valid and enforceable provision which shall be a commercially reasonable
        substitute therefor, and upon so agreeing, shall incorporate such substitute
        provision in this Warrant.

       

      [REMAINDER
        OF PAGE INTENTIONALLY LEFT BLANK,

       

      SIGNATURE
        PAGE FOLLOWS]

       

      
        
          
          

        

        
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      IN
        WITNESS WHEREOF, the Company has caused this Warrant to be duly executed
        by its
        authorized officer as of the date first indicated above.

       

      
        	 	 	 
	 	ACURA
                PHARMACEUTICALS, INC.
	 
 	 
 	 
 
	 	By:  	 
	 	
                
Name:
                Andrew Reddick
	 	Title:
                President and CEO 

      

       

      
        
          
          

        

        
          9

          
            

          

        

        
          
          

        

      

      FORM
        OF
        EXERCISE NOTICE

       

      (To
        be
        executed by the Holder to exercise the right to purchase shares of Common
        Stock
        under the foregoing Warrant)

       

      To:
        ACURA
        PHARMACEUTICALS, INC.

       

      The
        undersigned is the Holder of Warrant No. ___ (the “Warrant”)
        issued
        by ACURA PHARMACEUTICALS, INC., a New York corporation (the “Company”).
        Capitalized terms used herein and not otherwise defined have the respective
        meanings set forth in the Warrant.

       

      	1.  	
              The
                Warrant is currently exercisable to purchase a total of ___________
                Warrant Shares.

            

       

      	2.  	
              The
                undersigned Holder hereby exercises its right to purchase ___________
                Warrant Shares pursuant to the Warrant.

            

       

      	3.  	
              The
                Holder intends that payment of the Exercise Price shall be made as
                (check
                one):

            

       

      ____
        “Cash
        Exercise” under Section 10

       

      ____
        “Cashless Exercise” under Section 10

       

      	4.  	
              If
                the holder has elected a Cash Exercise, the holder shall pay the
                sum of $
                ___________
                to the Company in accordance with the terms of the
                Warrant.

            

       

      	5.  	
              Pursuant
                to this exercise, the Company shall deliver to the holder ___________
                Warrant Shares in accordance with the terms of the
                Warrant.

            

       

      	6.  	
              Following
                this exercise, the Warrant shall be exercisable to purchase a total
                of
                ___________ Warrant Shares.

            

       

      Dated:
        ___________
        ___________, ___________

       

      

        
          	
                  Name
                    of Holder:

                   

                
	
                  (Print)

                	   

	
                   

                  By:

                	 
	
                   

                  Name:

                	 
	
                   

                  Title:

                	 
	 	
                   

                  (Signature
                    must conform in all respects to name of holder as specified on
                    the face of
                    the Warrant)

                

        

      

       

      
        
          
          

        

        
          
          

          
            

          

        

        
          
          

        

      

      FORM
        OF
        ASSIGNMENT

       

      [To
        be
        completed and signed only upon transfer of Warrant]

       

      FOR
        VALUE
        RECEIVED, the undersigned hereby sells, assigns and transfers unto                                          
        the
        right represented by the within Warrant to purchase                     
        shares
        of Common Stock of ACURA PHARMACEUTICALS, INC. to which the within Warrant
        relates and appoints                     
        attorney
        to transfer said right on the books of ACURA PHARMACEUTICALS, INC. with full
        power of substitution in the premises.

       

      Dated:
        ___________ ___________, ___________

      

        
          	 	 	
                  (Signature
                    must conform in all respects to name of holder as specified on
                    the face of
                    the Warrant)

                
	 	 	 
	 	 	
                   

                  Address
                    of Transferee

                
	 	 	 
	 	 	 
	
                  In
                    the presence of:Unassociated Document

    idn

    
      SECURITIES
        PURCHASE AGREEMENT

       

      THIS
        SECURITIES PURCHASE AGREEMENT
        (the
“Agreement”),
        dated
        as of August 20, 2007, by and among Acura Pharmaceuticals, Inc., a New York
        corporation with headquarters located at 616 N. North Court, Suite 120,
        Palatine, IL (the “Company”),
        and
        the investors listed on the Schedule of Investors attached hereto as
Exhibits
        A-1
        and
A-2
        (individually, an “Investor”
and
        collectively, the “Investors”).

       

      BACKGROUND

       

      A. The
        Company and each Investor are executing and delivering this Agreement in
        reliance upon the exemption from registration afforded by Section 4(2) of
        the Securities Act of 1933, as amended, including the rules and regulations
        promulgated thereunder (the “Securities
        Act”),
        and
        Rule 506 of Regulation D (“Regulation D”)
        as
        promulgated by the United States Securities and Exchange Commission (including
        the staff thereof, the “SEC”)
        under
        the Securities Act.

       

      B. Each
        Investor, severally and not jointly, wishes to purchase, and the Company
        wishes
        to sell, upon the terms and conditions stated in this Agreement, the aggregate
        number of units (the “Units”)
        set
        forth opposite such Investor’s name on Exhibits A-1
        and
A-2
        hereto,
        each such Unit consisting of (i) four shares (each a “Common
        Share,”
        collectively, the “Common
        Shares”)
        of the
        Common Stock, par value $0.01 per share, of the Company (the “Common
        Stock”)
        and
        (ii) one warrant (a “Warrant,”
        collectively, the “Warrants”)
        to
        purchase one (1) share of Common Stock, in substantially the form attached
        hereto as Exhibit
        F,
        for a
        purchase price of $1.08 per Unit (the “Purchase
        Price”).
        The
        shares of Common Stock issuable upon exercise of or otherwise pursuant to
        the
        Warrants are referred to herein as the “Warrant
        Shares.”

       

      C. The
        Units, the Common Shares, the Warrants and the Warrant Shares issued pursuant
        to
        this Agreement are collectively referred to herein as the “Securities.”

       

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

       

      ARTICLE
        1

       

      DEFINITIONS

       

      1.1  Definitions.
        In
        addition to the terms defined elsewhere in this Agreement, the following
        terms
        have the meanings indicated:

       

      “Affiliate”
means
        any Person that, directly or indirectly through one or more intermediaries,
        controls or is controlled by or is under common control with a Person, as
        such
        terms are used in and construed under Rule 144 under the Securities
        Act.

       

      “Agent”
has
        the
        meaning set forth in Section 3.1(l).

       

      “Agreement”
has
        the
        meaning set forth in the Preamble.

       

      
        
          
          

        

        
          A-1

          
            

          

        

        
          
          

        

      

       

      “Best
        Efforts”
means
        the reasonable efforts that a prudent person desirous of achieving a result
        would use in similar circumstances to ensure that such result is achieved
        as
        expeditiously as reasonably practical; provided,
        however,
        that an
        obligation to use Best Efforts under this Agreement does not require the
        Company
        to dispose of assets or make any change to its business, expend any material
        funds or incur any other material burden.

       

      “Bridge
        Loans”
means
        the loans in the principal amount of $10,544,000 made
        to
        the Company pursuant to the Loan Agreements dated June 22, 2005, September
        16,
        2005, November 9, 2005 and January 31, 2006 by and among the Company and
        one or
        more of the Bridge Lenders (and certain parties who have assigned such loans
        to
        the current Bridge Lenders effective immediately prior to the
        Closing).

       

      “Bridge
        Lenders”
means
        Michael Weisbrot, Susan Weisbrot, Dennis Adams, George Boudreau and GCE Holdings
        LLC (with GCE Holdings LLC as the transferee of Bridge Loans previously held
        by
        Galen Partners III, L.P., Galen Partners International III, L.P., Galen Employee
        Fund III, L.P., Essex Woodlands Health Ventures V, L.P., Care Capital
        Investments II, LP and Care Capital Offshore Investments II, LP).

       

      “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.

       

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

       

      “Closing
        Date”
means
        the date and time of the initial Closing and shall be on August 20, 2007
        such
        date and time as is mutually agreed to by the Company and the Investors listed
        on Exhibit A-1.

       

      “Closing
        Price”
means,
        for any date, the closing price per share of the Common Stock for such date
        (or
        the nearest preceding date) on the primary Eligible Market, exchange or
        quotation system or OTC Bulletin Board on which the Common Stock is then
        listed
        or quoted.

       

      “Company” has
        the
        meaning set forth in the Preamble.

       

      “Company
        Counsel”
means
        Seiden Wayne LLC.

       

      “Common
        Shares”
means
        the shares
        of
        Common Stock which are being issued and sold by the Company to the Investors
        pursuant to this Agreement.

       

      “Common
        Stock”
means
        the common stock of the Company, par value $0.01 per share.

       

      “Disclosure
        Materials”
has
        the
        meaning set forth in Section 3.1(g).

       

      “Effective
        Date”
means
        the date that the Registration Statement is first declared effective by the
        SEC.

       

      
        
          
          

        

        
          A-2

          
            

          

        

        
          
          

        

      

       

      “Effectiveness
        Period”
has
        the
        meaning set forth in Section 6.1(b).

       

      “8-K
        Filing”
has
        the
        meaning set forth in Section 4.5.

       

      “Eligible
        Market”
means
        any of the New York Stock Exchange, the American Stock Exchange, The Nasdaq
        Global Market, The Nasdaq Global Select Market or The Nasdaq Capital
        Market.

       

      “Environmental
        Laws”
has
        the
        meaning set forth in Section 3.1(dd).

       

      “Event”
has
        the
        meaning set forth in Section 6.1(d).

       

      “Event
        Payments”
has
        the
        meaning set forth in Section 6.1(d).

       

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

       

      “Filing
        Date”
means
        sixty (60) days after the Closing Date.

       

      “Five
        Million Dollar Note”
means
        the Secured Promissory Note in the principal amount of $5,000,000 issued
        by the
        Company on February 6, 2004, as amended on June 28, 2007, pursuant to the
        terms
        of that certain Loan Agreement dated as of March 29, 2000, as amended through
        June 28, 2007, between the Company and Galen Partners III, L.P., as
        agent.

       

      “GAAP”
has
        the
        meaning set forth in Section 3.1(g).

       

      “Hazardous
        Materials”
has
        the
        meaning set forth in Section 3.1(dd).

       

      “Indebtedness”
has
        the
        meaning set forth in Section 3.1(aa).

       

      “Indemnified
        Party”
has
        the
        meaning set forth in Section 6.4(c).

       

      “Indemnifying
        Party”
has
        the
        meaning set forth in Section 6.4(c).

       

      “Insolvent”
has
        the
        meaning set forth in Section 3.1(h).

       

      “Intellectual
        Property Rights”
has
        the
        meaning set forth in Section 3.1(t).

       

      “Investor”
has
        the
        meaning set forth in the Preamble.

       

      “Lien”
means
        any mortgage, lien, lien, charge, claim, security interest, encumbrance,
        right
        of first refusal or other restriction.

       

      “Losses”
means
        any and all losses, claims, damages, liabilities, settlement costs and expenses,
        including, without limitation and reasonable attorneys’ fees.

       

      “Material
        Adverse Effect”
means
        (i) a material adverse effect on the results of operations, assets,
        business, or financial condition of the Company and the Subsidiary, taken
        as a
        whole on a consolidated basis, or (ii) materially and adversely impair the
        Company’s ability to perform its obligations under any of the Transaction
        Documents, provided, that none of the following alone shall be deemed, in
        and of
        itself, to constitute a Material Adverse Effect: (i) a change in the market
        price or trading volume of the Common Stock or (ii) changes in general
        economic conditions or changes affecting the industry in which the Company
        operates generally (as opposed to Company-specific changes) so long as such
        changes do not have a materially disproportionate effect on the Company and
        its
        Subsidiary taken as a whole.

       

      
        
          
          

        

        
          A-3

          
            

          

        

        
          
          

        

      

       

      “Permits”
has
        the
        meaning set forth in Section 3.1(v).

       

      “Person”
means
        any individual or corporation, partnership, trust, incorporated or
        unincorporated association, joint venture, limited liability company, or
        joint
        stock company.

       

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

       

      “Prospectus”
means
        the prospectus included in the Registration Statement (including, without
        limitation, a prospectus that includes any information previously omitted
        from a
        prospectus filed as part of an effective registration statement in reliance
        upon
        Rule 430A or Rule 430B promulgated under the Securities Act), as
        amended or supplemented by any prospectus supplement, with respect to the
        terms
        of the offering of any portion of the Registrable Securities covered by the
        Registration Statement, and all other amendments and supplements to the
        Prospectus including post-effective amendments, and all material incorporated
        by
        reference or deemed to be incorporated by reference in such
        Prospectus.

       

      “Purchase
        Price”
has
        the
        meaning set forth in the Preamble.

       

      “Registrable
        Securities”
means
        the Common Shares and the Warrant Shares issued or issuable pursuant to
        the
        Transaction Documents, together with any securities issued or issuable upon
        any
        stock split, dividend or other distribution, recapitalization or similar
        event
        with respect to the foregoing.

       

      “Registration
        Statement”
means
        each
        registration statement required to be filed under Article VI, including (in
        each
        case) the Prospectus, amendments and supplements to such registration statement
        or Prospectus, including pre- and post-effective amendments, all exhibits
        thereto, and all material incorporated by reference or deemed to be incorporated
        by reference in such registration statement.

       

      “Regulation D”
has
        the
        meaning set forth in the Preamble.

       

      “Required
        Effectiveness Date”
means
        the date which is the earliest of (i) three (3) Trading Days after the
        SEC notifies the Company that (x) it does not intend to review the Registration
        Statement or (y) that the Registration Statement is no longer subject to
        further
        review and comment, as the case may be and (ii) one hundred and twenty
        (120) days after the Filing Date.

       

      “Rule 144,”
        “Rule 144(k),”
        “Rule
        172,”
        “Rule 415,”
and
        “Rule 424”
means
        Rule 144, Rule 144(k), Rule 172, Rule 415 and Rule 424,
        respectively, promulgated by the SEC pursuant to the Securities Act, as such
        Rules may be amended from time to time, or any similar rule or regulation
        hereafter adopted by the SEC having substantially the same effect as such
        Rule.

       

      
        
          
          

        

        
          A-4

          
            

          

        

        
          
          

        

      

       

      “SEC” has
        the
        meaning set forth in the Preamble.

       

      “SEC
        Approved Registrable Securities”
means
        Registrable Securities other than SEC Non-Registrable Securities. 

       

      “SEC
        Non-Registrable Securities”
means
        Registrable Securities excluded from the Registration Statement because the
        SEC
        has indicated through comment letters or otherwise that those securities
        are not
        eligible to be resold under Rule 415.

       

      “SEC
        Reports”
has
        the
        meaning set forth in Section 3.1(g).

       

      “Securities”
has
        the
        meaning set forth in the Preamble.

       

      “Securities
        Act”
has
        the
        meaning set forth in the Preamble.

       

      “Shares”
means
        shares of the Company’s Common Stock.

       

      “Short
        Sales”
has
        the
        meaning set forth in Section 3.2(h).

       

      “Subsidiary”
means
        any direct or indirect subsidiary of the Company.

       

      “Trading
        Day”
means
        (a) any day on which the Common Stock is listed or quoted and traded on its
        primary Trading Market, (b) if the Common Stock is not then listed or
        quoted and traded on any Eligible Market, then a day on which trading occurs
        on
        the OTC Bulletin Board (or any successor thereto), or (c) if trading ceases
        to occur on the OTC Bulletin Board (or any successor thereto), any Business
        Day.

       

      “Trading
        Market”
means
        the OTC Bulletin Board, any Eligible Market or any national securities exchange,
        market or trading or quotation facility on which the Common Stock is then
        listed
        or quoted.

       

      “Transaction
        Documents”
means
        this Agreement, the schedules and exhibits attached hereto, the Warrants
        and the
        Transfer Agent Instructions.

       

      “Transfer
        Agent”
means
        Continental Stock Transfer & Trust Company, or any successor transfer agent
        for the Company.

       

      “Transfer
        Agent Instructions”
means,
        with respect to the Company, the Irrevocable Transfer Agent Instructions,
        in the
        form of Exhibit E,
        executed by the Company and delivered to and acknowledged in writing by the
        Transfer Agent.

       

      “Vivo”
means
        Vivo Ventures Fund VI, L.P.

       

      “Warrants”
has
        the
        meaning set forth in the Preamble.

       

      “Warrant
        Shares”
has
        the
        meaning set forth in the Preamble.

       

      
        
          
          

        

        
          A-5

          
            

          

        

        
          
          

        

      

       

      ARTICLE
        2 

       

      PURCHASE
        AND SALE

       

      2.1  Closings.
        Subject
        to the terms and conditions set forth in this Agreement:

       

      (a)  at
        the
        Closing the Company shall issue and sell to each Investor listed on on
Exhibit A-1,
        and
        each such Investor shall, severally and not jointly, purchase from the Company,
        such number of Units for the price set forth opposite such Investor’s name on
Exhibit A-1
        hereto
        under the heading “Purchase Price”. The date and time of the Closing shall be
        11:00 a.m., New York City Time, on the Closing Date. The Closing shall take
        place at the offices of the Company’s Counsel or such other location as is
        mutually agreed by the Company and a majority-in-interest of the Investors
        listed on Exhibit A-1;
        and

       

      (b)  at
        a
        subsequent Closing to occur on or before August 31, 2007 (but only if there
        are
        Investors listed on Exhibit A-2
        when
        this Agreement is executed by the Company), the Company shall issue and sell
        to
        each Investor listed on Exhibit A-2,
        if any,
        and each such Investor shall, severally and not jointly, purchase from the
        Company, such number of Units for the price set forth opposite such Investor’s
        name on Exhibit A-2
        hereto
        under the heading “Purchase Price”. Each such subsequent Closing, if any, shall
        take place at the offices of the Company’s Counsel or such other location as is
        mutually agreed by the Company and a majority-in-interest of the
        Investors
        Exhibit A-2.

       

      2.2  Closing
        Deliveries.

       

      (a)  At
        each
        Closing, the Company shall deliver or cause to be delivered to each Investor
        participating in such Closing the following:

       

      (i)  one
        or
        more stock certificates (or copies thereof provided by the Transfer Agent
        or a
        copy of an irrevocable instruction letter from the Company to the Transfer
        Agent
        to issue such stock certificates), free and clear of all restrictive and
        other
        legends (except as expressly provided in Section 4.1(b)
        hereof), evidencing such number of Common Shares (A) in the case of the initital
        Closing, set forth opposite such Investor’s name on Exhibit A-1
        hereto
        under the heading “Common Shares,” and (B) in the case of the subsequent
        Closing, if any, set forth opposite such Investor’s name on Exhibit A-2
        hereto
        under the heading “Common Shares,” in each case registered in the name of such
        Investor;

       

      (ii)  a
        Warrant, issued in the name of such Investor, pursuant to which such Investor
        shall have the right (A) in the case of the initital Closing, to acquire
        such
        number of Warrant Shares set forth opposite such Investor’s name on Exhibit A-1
        hereto
        under the heading “Warrant Shares” and (B) in the case of the subsequent
        Closing, if any, to acquire such number of Warrant Shares set forth opposite
        such Investor’s name on Exhibit A-2
        hereto
        under the heading “Warrant Shares”;

       

      (iii)  a
        legal
        opinion of Company Counsel dated as of the Closing Date, in the form of
Exhibit C,
        executed by such counsel and delivered to the Investors; and

       

      
        
          
          

        

        
          A-6

          
            

          

        

        
          
          

        

      

       

      (iv)  duly
        executed Transfer Agent Instructions acknowledged by the Transfer
        Agent.

       

      (b)  At
        the
        initial Closing, each Investor listed on Exhibit A-1
        shall
        deliver or cause to be delivered to the Company the purchase price set forth
        opposite such Investor’s name on Exhibit A-1
        hereto
        under the heading “Purchase Price” in United States dollars and in immediately
        available funds, by wire transfer to an account designated in writing to
        such
        Investor by the Company for such purpose, except that Bridge Lenders who
        are
        Investors shall pay all or part (to the extent their purchase price exceeds
        the
        amount of their Bridge Loans being converted) of the purchase price set forth
        opposite their names, through the conversion of the outstanding principal
        amount
        of the Bridge Loans, set forth on Exhibit
        A-3,
        and by
        signing a counterpart signature page hereto, such Bridge Lenders who are
        Investors, acknowledge that such Bridge Lender has not transferred any Bridge
        Loans, the Bridge Loans listed on Exhibit
        A-3
        opposite
        its names have been paid in full and there are no other outstanding amounts
        owed
        such Bridge Lender on account of the Bridge Loans (subject to the payment
        of all
        accrued interest by the Company at the initial Closing). To the extent the
        conversion of the Bridge Loans hereunder is inconsistent in any way with
        the
        terms the Loan Agreements dated June 22, 2005, September 16, 2005, November
        9,
        2005 and January 31, 2006 by and among the Company and one or more of the
        Bridge
        Lenders, such agreements are hereby amended to permit such conversion on
        the
        terms described herein. In addition, the Company hereby agrees and acknowledges
        that it has consented to the transfer, effective immediately prior to the
        Closing, to GCE Holdings LLC of the Bridge Loans previously held by Galen
        Partners III, L.P., Galen Partners International III, L.P., Galen Employee
        Fund
        III, L.P., Essex Woodlands Health Ventures V, L.P., Care Capital Investments
        II,
        LP and Care Capital Offshore Investments II, LP.

       

      (c)  At
        the
        subsequent Closing, if any, each Investor listed on Exhibit A-2
        shall
        deliver or cause to be delivered to the Company the purchase price set forth
        opposite such Investor’s name on Exhibit A-2
        hereto
        under the heading “Purchase Price” in United States dollars and in immediately
        available funds, by wire transfer to an account designated in writing to
        such
        Investor by the Company for such purpose.

       

      ARTICLE
        3

       

      REPRESENTATIONS
        AND WARRANTIES

       

      3.1  Representations
        and Warranties of the Company.
        The
        Company hereby represents and warrants to the Investors on and as of the
        date
        hereof as follows (which representations and warranties shall be deemed to
        apply, where appropriate, to each Subsidiary of the Company):

       

      (a)  Subsidiaries.
        The
        Company has no Subsidiaries other than those listed in Schedule 3.1(a)
        hereto.
        Except as disclosed in Schedule
        3.1(a),
        the
        Company owns, directly or indirectly, all of the capital stock or comparable
        equity interests of each Subsidiary free and clear of any Lien and all the
        issued and outstanding shares of capital stock or comparable equity interest
        of
        each Subsidiary are validly issued and are fully paid, non-assessable and
        free
        of preemptive and similar rights.

       

      
        
          
          

        

        
          A-7

          
            

          

        

        
          
          

        

      

       

      (b)  Organization
        and Qualification.
        Each of
        the Company and the Subsidiary is an entity duly organized, validly existing
        and
        in good standing under the laws of the jurisdiction of its incorporation
        or
        organization (as applicable), with the requisite legal authority to own and
        use
        its properties and assets and to carry on its business as currently conducted.
        Neither the Company nor the Subsidiary is in violation of any of the provisions
        of its respective certificate or articles of incorporation, bylaws or other
        organizational or charter documents. Each of the Company and the Subsidiary
        is
        duly qualified to do business and is in good standing as a foreign corporation
        or other entity in each jurisdiction in which the nature of the business
        conducted or property owned by it makes such qualification necessary, except
        where the failure to be so qualified or in good standing, as the case may
        be,
        would not, individually or in the aggregate, reasonably be expected to result
        in
        a Material Adverse Effect.

       

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

       

      (d)  No
        Conflicts.
        The
        execution, delivery and performance of the Transaction Documents to which
        it is
        a party by the Company and the consummation by the Company of the transactions
        contemplated hereby and thereby do not, and will not, (i) conflict with or
        violate any provision of the Company’s or its Subsidiary’s certificate or
        articles of incorporation, bylaws or other organizational or charter documents,
        (ii) conflict with, or constitute a default (or an event that with notice
        or lapse of time or both would become a default) under, or. except as disclosed
        in Schedule 3.1(d) hereto, give rise to any Debt Repayment Triggering Event,
        or
        give to others any rights of termination, amendment, acceleration or
        cancellation (with or without notice, lapse of time or both) of, any agreement,
        credit facility, debt or other instrument (evidencing a Company or Subsidiary
        debt or otherwise) or other understanding to which the Company or its Subsidiary
        is a party or by which any property or asset of the Company or its Subsidiary
        is
        bound, or affected, except to the extent that such conflict, default,
        termination, amendment, acceleration or cancellation right would not reasonably
        be expected to have a Material Adverse Effect, or (iii) result in a
        violation of any law, rule, regulation, order, judgment, injunction, decree
        or
        other restriction of any court or governmental authority to which the Company
        or
        its Subsidiary is subject (including, assuming the accuracy of the
        representations and warranties of the Investors set forth in Section 3.2
        hereof,
        federal and state securities laws and regulations and the rules and regulations
        of any self-regulatory organization to which the Company or its securities
        are
        subject, including all applicable Trading Markets), or by which any property
        or
        asset of the Company or its Subsidiary is bound or affected, except to the
        extent that such violation would not reasonably be expected to have a Material
        Adverse Effect. As used herein, a “Debt
        Repayment Triggering Event”
means
        any event or condition which gives, or with the giving of notice or lapse
        of
        time would give, the holder of any note, debenture or other evidence of
        indebtedness (or any peron acting on such holder’s behalf) the right to require
        the repurchase, redemption or repayment of all or a portion of such indebtedness
        by the Company or its Subsididary.

       

      
        
          
          

        

        
          A-8

          
            

          

        

        
          
          

        

      

       

      (e)  The
        Securities.
        The
        Securities are duly authorized and, when issued and paid for in accordance
        with
        the Transaction Documents, will be duly and validly issued, fully paid and
        nonassessable, free and clear of all Liens and will not be subject to preemptive
        or similar rights of stockholders (other than those imposed by the Investors).
        The Company has reserved from its duly authorized capital stock the maximum
        number of shares of Common Stock issuable upon exercise of the Warrants.
        Assuming the accuracy of Section 3.2 of this Agreement, the offer, issuance
        and sale of the Shares, the Warrants and the Warrant Shares to the Investors
        pursuant to the Agreement, and in the case of the Warrant Shares, pursuant
        to
        the Warrants, are exempt from the registration requirements of the Securities
        Act.

       

      (f)  Capitalization.
        As of
        the date hereof, the aggregate number of shares and type of all authorized,
        issued and outstanding classes of capital stock, options and other securities
        of
        the Company (whether or not presently convertible into or exercisable or
        exchangeable for shares of capital stock of the Company) is set forth in
        Schedule 3.1(f)
        hereto.
        All outstanding shares of capital stock are duly authorized, validly issued,
        fully paid and nonassessable and have been issued in compliance in all material
        respects with all applicable securities laws. Except as disclosed in
Schedule 3.1(f)
        hereto:
        (i) none of the Company’s share capital is subject to preemptive rights or
        any other similar rights or any liens or encumbrances suffered or permitted
        by
        the Company; (ii) the Company does not have outstanding options, warrants,
        scrip, rights to subscribe to, calls or commitments of any character whatsoever
        relating to, or securities, rights or obligations convertible into or
        exercisable or exchangeable for, and has not entered into any agreement giving
        any Person any right to subscribe for or acquire any, shares of Common Stock
        or
        securities or rights convertible or exchangeable into shares of Common Stock;
        (iii) except for customary adjustments as a result of stock dividends, stock
        splits, combinations of shares, reorganizations, recapitalizations,
        reclassifications or other similar events, there are no anti-dilution, price
        adjustment or other similar provisions contained in any security issued by
        the
        Company (or in any agreement providing rights to security holders) and the
        issuance and sale of the Securities will not trigger any such rights or
        otherwise obligate the Company or its Subsidiary to issue shares of Common
        Stock
        or other securities to any Person (other than the Investors) and nor will
        it
        result in a right of any holder of the Company’s or its Subsidiary’s securities
        to adjust the exercise, conversion, exchange or reset price under any such
        securities; and (iv) the Company does not have any stock appreciation
        rights or “phantom stock” plans or arrangements or any similar plan or
        agreement, other than than its 2005 Restricted Stock Unit Award Plan, as
        amended. To the knowledge of the Company, except as specifically disclosed
        in
        the SEC Reports and in any Schedules filed by any reporting person pursuant
        to
        Rule 13d-1 or Rule 13d-2 of the Exchange Act or in Schedule
        3.1(f)
        hereto,
 no
        Person
        or group of related Persons beneficially owns (as determined pursuant to
        Rule 13d-3 under the Exchange Act), or has the right to acquire, by
        agreement with or by obligation binding upon the Company, beneficial ownership
        of in excess of five percent (5%) of the outstanding Common Stock. 

       

      
        
          
          

        

        
          A-9

          
            

          

        

        
          
          

        

      

       

      (g)  SEC
        Reports; Financial Statements.
        Except
        as set forth on Schedule
        3.1(g),
        the
        Company has filed all reports required to be filed by it under Exchange Act
        Sections 13(a)
        or
15(d),
        for
        the two years preceding the date hereof on a timely basis or has received
        a
        valid extension of such time of filing and has filed any such SEC Reports
        prior
        to the expiration of any such extension and has filed all reports required
        to be
        filed by it under Exchange Act Sections 13(a) or 15(d). Such reports
        required to be filed by the Company under the Exchange Act, including pursuant
        to Section 13(a) or 15(d) thereof, together with any materials filed or
        furnished by the Company under the Exchange Act, whether or not any such
        reports
        were required being collectively referred to herein as the “SEC
        Reports”
and,
        together with this Agreement and the Schedules to this Agreement, the
“Disclosure
        Materials”.
        As of
        their respective dates, the SEC Reports filed by the Company complied in
        all
        material respects with the requirements of the Exchange Act and the rules
        and
        regulations of the SEC promulgated thereunder, and none of the SEC Reports,
        when
        filed by the Company, contained any untrue statement of a material fact or
        omitted to state a material fact required to be stated therein or necessary
        in
        order to make the statements therein, in the light of the circumstances under
        which they were made, not misleading, except to the extent that information
        contained in an SEC Report has been revised or superseded by a later filed
        SEC
        Report. The financial statements of the Company included in the SEC Reports
        comply as to form in all material respects with applicable accounting
        requirements and the rules and regulations of the SEC with respect thereto
        as in
        effect at the time of filing, except to the extent that information contained
        in
        an SEC Report has been revised or superseded by a later filed SEC Report.
        Such
        financial statements have been prepared in accordance with United States
        generally accepted accounting principles applied on a consistent basis during
        the periods involved (“GAAP”),
        except as may be otherwise specified in such financial statements, the notes
        thereto and except that unaudited financial statements may not contain all
        footnotes required by GAAP or may be condensed or summary statements, and
        fairly
        present in all material respects the consolidated financial position of the
        Company and its consolidated Subsidiary as of and for the dates thereof and
        the
        results of operations and cash flows for the periods then ended, subject,
        in the
        case of unaudited statements, to normal, year-end audit adjustments. All
        material agreements to which the Company or its Subsidiary is a party or
        to
        which the property or assets of the Company or its Subsidiary are subject
        are
        included as part of or identified in the SEC Reports, to the extent such
        agreements are required to be included or identified pursuant to the rules
        and
        regulations of the SEC.

       

      (h)  Since
        the
        date of the latest audited financial statements included within the SEC Reports,
        except as disclosed in the SEC Reports or in Schedule 3.1(h)
        hereto,
        (i) there has been no event, occurrence or development that, individually
        or in
        the aggregate, has had or that would reasonably be expected to result in
        a
        Material Adverse Effect, (ii) the Company has not incurred any liabilities
        other than (A) trade payables, accrued expenses and other liabilities
        incurred in the ordinary course of business consistent with past practice
        or (B)
        other liabilities that would not, individually or in the aggregate, have
        a
        Material Adverse Effect, (iii) the Company has not altered its method of
        accounting or the changed its auditors, (iv) the Company has not declared
        or made any dividend or distribution of cash or other property to its
        stockholders, in their capacities as such, or purchased, redeemed or made
        any
        agreements to purchase or redeem any shares of its capital stock (except
        for
        repurchases by the Company of shares of capital stock held by employees,
        officers, directors, or consultants pursuant to an option of the Company
        to
        repurchase such shares upon the termination of employment or services),
        (v) the Company has not issued any equity securities to any officer,
        director or Affiliate, except pursuant to existing Company stock-based plans,
        (vi) sold any assets, individually or in the aggregate, in excess of
        $1,000,000 outside the ordinary course of business, (vii) had capital
        expenditures, individually or in the aggregate, in excess of $1,000,000;
        or
        (viii) the Company has not taken any steps to seek protection pursuant to
        any
        bankruptcy law nor does the Company believe that its 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, after giving
        effect to the transactions contemplated hereby to occur at all of the applicable
        Closings, will not be Insolvent (as defined below). For purposes of this
        Section 3.1(h), "Insolvent”
means
        (i) the present fair saleable value of the Company’s assets is less than
        the amount required to pay the Company’s total Indebtedness (as defined in
        Section 3.1(aa)), (ii) the Company is unable to pay its debts and
        liabilities, subordinated, contingent or otherwise, as such debts and
        liabilities become absolute and matured or (iii) the Company has unreasonably
        small capital with which to conduct the business in which it is engaged as
        such
        business is now conducted and is proposed to be conducted.

       

      
        
          
          

        

        
          A-10

          
            

          

        

        
          
          

        

      

       

      (i)  Absence
        of Litigation.
        There
        is no Proceeding, or, to the Company’s knowledge, inquiry or investigation,
        before or by any court, public board, government agency, self-regulatory
        organization or body pending or, to the knowledge of the Company, threatened
        against or affecting the Company or its Subsidiary that would, individually
        or
        in the aggregate, reasonably be expected to have a Material Adverse
        Effect.

       

      (j)  Compliance.
        Except
        as described in Schedule 3.1(j),
        neither
        the Company nor its Subsidiary, except in each case as would not, individually
        or in the aggregate, reasonably be expected to have or result in a Material
        Adverse Effect, (i) is in default under or in violation of (and no event
        has occurred that has not been waived that, with notice or lapse of time
        or
        both, would result in a default by the Company or its Subsidiary under),
        nor has
        the Company or its Subsidiary received written notice of a claim that it
        is in
        default under or that it is in violation of, any indenture, loan or credit
        agreement or any other agreement or instrument to which it is a party or
        by
        which it or any of its properties is bound (whether or not such default or
        violation has been waived), (ii) is in violation of any order of any court,
        arbitrator or governmental body, or (iii) is or has been in violation of
        any statute, rule or regulation of any governmental authority.

       

      (k)  Title
        to Assets.
        The
        Company and the Subsidiary have title to all real property owned by them
        that is
        material to the business of the Company and the Subsidiary and title in all
        personal property owned by them that is material to the business of the Company
        and the Subsidiary, in each case free and clear of all Liens, except for
        Liens
        securing the Bridge Loans and the Five Million Dollar Note and the related
        transaction documents and except for Liens that do not, individually or in
        the
        aggregate, have or result in a Material Adverse Effect. Any real property
        and
        facilities held under lease by the Company and the Subsidiary are held by
        them
        under valid, subsisting and enforceable leases of which the Company and its
        Subsidiary are in material compliance, except where non-compliance would
        not
        individually or in the aggregate have a Material Adverse Effect.

       

      (l)  No
        General Solicitation; Placement Agent’s Fees.
        Neither
        the Company, nor any of its Affiliates, nor any Person acting on its or their
        behalf, has engaged in any form of general solicitation or general advertising
        (within the meaning of Regulation D) in connection with the offer or sale
        of the Securities. The Company shall be responsible for the payment of any
        placement agent’s fees, financial advisory fees, or brokers’ commission (other
        than for persons engaged by any Investor or its investment advisor) relating
        to
        or arising out of the issuance of the Securities pursuant to this Agreement.
        The
        Company shall pay, and hold each Investor harmless against, any liability,
        loss
        or expense (including, without limitation, reasonable attorney’s fees and
        out-of-pocket expenses) arising in connection with any such claim for fees
        arising out of the issuance of the Securities pursuant to this Agreement.
        The
        Company acknowledges that it had previously engaged Thomas Weisel Partners
        LLC
        as its placement agent (the “Agent”)
        in a
        financing, and as such the Company may pay Thomas Weisel Partners LLC fees
        (in
        an amount not yet determined) in connection with the transactions contemplated
        by this Agreement.

       

      
        
          
          

        

        
          A-11

          
            

          

        

        
          
          

        

      

       

      (m)  Private
        Placement; FIRPTA.
        Neither
        the Company nor any of its Affiliates nor, any Person acting on the Company’s
        behalf has, directly or indirectly, at any time within the past six months,
        made
        any offer or sale of any security or solicitation of any offer to buy any
        security under circumstances that would (i) eliminate the availability of
        the exemption from registration under Regulation D in connection with the
        offer and sale by the Company of the Securities as contemplated hereby or
        (ii) cause the offering of the Securities pursuant to the Transaction
        Documents to be integrated with prior offerings by the Company for purposes
        of
        any applicable law, regulation or stockholder approval provisions, including,
        without limitation, under the rules and regulations of any Trading Market.
        The
        Company is not required to be registered as, a United States real property
        holding corporation within the meaning of the Foreign Investment in Real
        Property Tax Act of 1980.

       

      (n)  Intentionally
        Omitted.

       

      (o)  Listing
        and Maintenance Requirements.
        The
        Company has not, in the twelve (12) months preceding the date hereof,
        received notice (written or oral) from any Trading Market on which the Common
        Stock is or has been listed or quoted to the effect that the Company is not
        in
        compliance with the listing or maintenance requirements of such Trading Market.
        The Company is in compliance with all such listing and maintenance requirements,
        if any.

       

      (p)  Registration
        Rights.
        Except
        as described in the SEC Reports or Schedule 3.1(p),
        the
        Company has not granted or agreed to grant to any Person any rights (including
        “piggy-back” registration rights) to have any securities of the Company
        registered with the SEC or any other governmental authority that have not
        been
        satisfied or waived.

       

      (q)  Application
        of Takeover Protections.
        Except
        as described in Schedule
        3.1(q),
        there
        is no control share acquisition, business combination, poison pill (including
        any distribution under a rights agreement) or other similar anti-takeover
        provision under the Company’s charter documents or the laws of its state of
        incorporation that is or could become applicable to any of the Investors
        as a
        result of the Investors and the Company fulfilling their obligations or
        exercising their rights under the Transaction Documents, including, without
        limitation, as a result of the Company’s issuance of the Securities and the
        Investors’ ownership of the Securities.

       

      
        
          
          

        

        
          A-12

          
            

          

        

        
          
          

        

      

       

      (r)  Disclosure.
        All
        disclosure provided by the Company in writing to the Investors regarding
        the
        Company, its business and the transactions contemplated hereby, including
        the
        Schedules to this Agreement, are true and correct in all material respects
        and
        do 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. To
        the
        Company’s knowledge, except for the transactions contemplated by this Agreement,
        no event or circumstance has occurred or information exists with respect
        to the
        Company or its Subsidiary or its or its Subsidiary’s business, properties,
        operations or financial condition, which, under applicable law, rule or
        regulation, required public disclosure or announcement by the Company prior
        to
        the date hereof but which has not been so publicly announced or disclosed.
        The
        Company acknowledges and agrees that no Investors makes or has made any
        representations or warranties with respect to the transactions contemplated
        hereby other than those set forth in the Transaction Documents and other
        than
        those with respect to transactions contemplated by the Transaction
        Documents.

       

      (s)  Acknowledgment
        Regarding Investors’ Purchase of Securities.
        Based
        upon the assumption that the transactions contemplated by this Agreement
        are
        consummated in all material respects in conformity with the Transaction
        Documents, the Company acknowledges and agrees that each of the Investors
        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.
        The
        Company further acknowledges that no Investor is acting as a financial advisor
        or fiduciary of the Company (or in any similar capacity) with respect to
        this
        Agreement and the transactions contemplated hereby and any advice given by
        any
        Investor or any of their respective representatives or agents in connection
        with
        the Transaction Documents and the transactions contemplated hereby and thereby
        is merely incidental to the Investors’ purchase of the Securities. The Company
        further represents to each Investor that the Company’s decision to enter into
        this Agreement has been based solely on the independent evaluation of the
        transactions contemplated hereby by the Company and its representatives.
        The
        Company further acknowledges that no Investor has made any promises or
        commitments other than as set forth in this Agreement and the other Transaction
        Documents to which it is a party, including any promises or commitments for
        any
        additional investment by any such Investor in the Company.

       

      (t)  Patents
        and Trademarks.
        To the
        Company’s knowledge, the Company and its Subsidiary own all trademarks, trade
        names, service marks, service mark registrations, service names, patents,
        patent
        rights, copyrights, inventions, licenses, approvals, governmental
        authorizations, trade secrets and other intellectual property rights
        (“Intellectual
        Property Rights”)
        necessary to conduct their respective businesses as now conducted except
        as
        would not reasonably be expected to have a Material Adverse Effect. None
        of the
        Company’s Intellectual Property Rights are expected to expire or terminate,
        within the next three years from the date of this Agreement except as would
        not
        reasonably be expected to have a Material Adverse Effect. The Company does
        not
        have any knowledge of any infringement by the Company or its Subsidiary as
        such
        business is now conducted of valid Intellectual Property Rights of others,
        except as would not reasonably be expected to have a Material Adverse Effect.
        There is no claim, action or proceeding being made or brought, or to the
        knowledge of the Company, being threatened, against the Company or its
        Subsidiary regarding its Intellectual Property Rights, which could reasonably
        be
        expected to have a Material Adverse Effect.

       

      
        
          
          

        

        
          A-13

          
            

          

        

        
          
          

        

      

       

      (u)  Insurance.
        The
        Company and its Subsidiary are insured by insurers of recognized financial
        responsibility against such losses and risks and in such amounts as, in the
        judgement of the Company’s management, are prudent and customary in the
        businesses and location in which the Company and its Subsidiary are
        engaged.

       

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

       

      (w)  Transactions
        With Affiliates and Employees.
        Except
        as set forth or incorporated by reference in the SEC Reports, none of the
        officers, directors or employees of the Company is presently a party to any
        transaction (other than the transactions contemplated by the Transaction
        Documents) that would be required to be reported pursuant to Item 404 of
        Regulation S-K promulgated under the Securities Act.

       

      (x)  Internal
        Accounting Controls.
        The
        Company and the Subsidiary maintain a system of internal accounting controls
        sufficient to provide reasonable assurance that (i) transactions are executed
        in
        accordance with management’s general or specific authorizations,
        (ii) transactions are recorded as necessary to permit preparation of
        financial statements in conformity with generally accepted accounting principles
        and to maintain asset accountability, (iii) access to assets is permitted
        only in accordance with management’s general or specific authorization, and
        (iv) the recorded accountability for assets is compared with the existing
        assets at reasonable intervals and appropriate action is taken with respect
        to
        any differences.

       

      (y)  Sarbanes-Oxley
        Act.
        The
        Company is in compliance in all material respects with applicable requirements
        of the Sarbanes-Oxley Act of 2002 and applicable rules and regulations
        promulgated by the SEC thereunder, except where such noncompliance would
        not
        have, individually or in the aggregate, a Material Adverse Effect.

       

      (z)  Foreign
        Corrupt Practices.
        Neither
        the Company nor its Subsidiary nor, to the knowledge of the Company, any
        director, officer, agent, employee or other Person acting on behalf of the
        Company or its Subsidiary has, in the course of its actions for, or on behalf
        of, the Company (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.

       

      (aa)  Indebtedness.
        Except
        as disclosed in the SEC Reports or in Schedule 3.1(aa), neither the Company
        nor its Subsidiary (i) has any material outstanding Indebtedness (as
        defined below) or (ii) 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. “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 (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) and (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.

       

      
        
          
          

        

        
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      (bb)  Employee
        Relations.
        Neither
        the Company nor its Subsidiary is a party to any collective bargaining agreement
        or employs any member of a union. The Company believes that its relations
        with
        its employees are as disclosed in the SEC Reports. The Company is not aware
        that
        any executive officer has a present intention to terminate their employment
        with
        the Company, nor does the Company have a present intention to terminate the
        employment of any executive officer.

       

      (cc)  Labor
        Matters.
        The
        Company and its Subsidiary are in compliance in all material respects 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.

       

      (dd)  Environmental
        Laws.
        The
        Company and its Subsidiary (i) are in compliance with any and all
        Environmental Laws (as hereinafter defined), (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 failiure to so comply would
        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.

       

      (ee)  FDA
        Compliance.
        Except
        as provided in the Disclosure Materials, the Company is conducting its business
        in compliance with the rules and regulations of the United States Food and
        Drug
        Administration (the “FDA”)
        and
        all applicable federal, state and local laws, orders, rules, regulations,
        directives, decrees and judgments of each of the jurisdictions in which it
        is
        conducting business, including, without limitation, all applicable local,
        state
        and federal laws and regulations governing health, sanitation, safety, zoning
        and land use, except where the failure to be so in compliance would not have
        a
        Material Adverse Effect. There are no pending or threatened administrative,
        regulatory or judicial actions, suits, demands, demand letters, claims, liens,
        notices of noncompliance or violation, investigation or proceedings before
        the
        FDA or any other federal, state, local or foreign governmental bodies that
        involve or effect the Company, its existing products, product candidates
        or its
        Subsidiary which, individually or in the aggregate, if the subject of an
        unfavorable decision, ruling or finding, would be reasonably likely to result
        in
        a Material Adverse Effect.

       

      
        
          
          

        

        
          A-15

          
            

          

        

        
          
          

        

      

       

      (ff)  Subsidiary
        Rights.
        Except
        as set forth in Schedule 3.1(ff), the Company has the unrestricted right to
        vote, and (subject to limitations imposed by applicable law) to receive
        dividends and distributions on, all capital securities of its
        Subsidiary.

       

      (gg)  Tax
        Status.
        The
        Company and its Subsidiary (i) has 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, to the extent the final deadlines for
        which
        were on or before the date hereof, (ii) has paid all taxes and other
        governmental assessments and charges that are material in amount, shown or
        determined to be due on such returns, reports and declarations, 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,
        except where the failure to file, pay or make such set asides would not have
        a
        Material Adverse Effect.

       

      (hh)  Investment
        Company.
        The
        Company is not now, and after the sale of the Securities under the Transaction
        Documents and the application of net proceeds from the sale of the Securities
        described in Section 4.6
        herein
        will not be, an “investment company” within the meaning of the Investment
        Company Act of 1940, as amended.

       

      3.2  Representations,
        Warranties and Covenants of the Investors.
        Each
        Investor hereby, as to itself only and for no other Investor, represents,
        warrants and covenants to the Company as follows as of the date
        hereof:

       

      (a)  Organization;
        Authority.
        Such
        Investor is an entity duly organized, validly existing and in good standing
        under the laws of the jurisdiction of its organization with the requisite
        corporate, partnership or other power and authority to enter into and to
        consummate the transactions contemplated by the Transaction Documents and
        otherwise to carry out its obligations hereunder and thereunder. The purchase
        by
        such Investor of the Securities hereunder has been duly authorized by all
        necessary corporate, partnership or other action on the part of such Investor.
        This Agreement has been duly executed and delivered by such Investor and
        constitutes the valid and binding obligation of such Investor, enforceable
        against it in accordance with its terms, except as may be limited by
        (i) applicable bankruptcy, insolvency, reorganization or other laws of
        general application relating to or affecting the enforcement of creditors
        rights
        generally, and (ii) the effect of rules of law governing the availability
        of specific performance and other equitable remedies.

       

      
        
          
          

        

        
          A-16

          
            

          

        

        
          
          

        

      

       

      (b)  No
        Public Sale or Distribution.
        Such
        Investor is (i) acquiring the Common Shares and the Warrants and
        (ii) upon exercise of the Warrants will acquire the Warrant Shares issuable
        upon exercise thereof for its own account as principal and not with a view
        towards distributing or reselling such securities except pursuant to sales
        registered under the Securities Act or under an exemption from such registration
        and in compliance with applicable federal and state securities laws and such
        Investor does not have a present arrangement to effect any distribution of
        the
        Securities to or through any person or entity; provided,
        however,
        that by
        making the representations herein, such Investor does not agree to hold any
        of
        the Securities for any minimum or other specific term and reserves the right
        to
        dispose of the Securities at any time in accordance with or pursuant to a
        registration statement or an exemption under the Securities Act. Each Investor
        will complete or cause to be completed and delivered to the Company on or
        prior
        to August 27, 2007, the Registration Statement Questionnaire attached hereto
        as
Exhibit B-2
        for use
        in preparation of the Registration Statement, and the responses provided
        therein
        shall be true and correct in all material respects as of the Closing Date
        and,
        unless such Registration Statement Questionnaire has been otherwise amended
        and/or supplemented, will be true and correct as of the effective date of
        the
        Registration Statement.

       

      (c)  Investor
        Status.
        At the
        time such Investor was offered the Securities, it was, and at the date hereof
        it
        is, an “accredited investor” as defined in Rule 501(a) under the Securities
        Act or a “qualified institutional buyer” as defined in Rule 144A(a) under
        the Securities Act. Such Investor is not a registered broker dealer registered
        under Section 15(a) of the Exchange Act, or a member of the NASD, Inc. or
        an
        entity engaged in the business of being a broker dealer. Except as otherwise
        disclosed in writing to the Company on Exhibit B-2
        (attached hereto) on or prior to August 27, 2007, such Investor is not
        affiliated with any broker dealer registered under Section 15(a) of the Exchange
        Act, or a member of the NASD, Inc. or an entity engaged in the business of
        being
        a broker dealer. 

       

      (d)  Experience
        of Such Investor.
        Such
        Investor, either alone or together with its representatives, has such knowledge,
        sophistication and experience in business and financial matters so as to
        be
        capable of evaluating the merits and risks of the prospective investment
        in the
        Securities, and has so evaluated the merits and risks of such investment.
        Such
        Investor understands that it must bear the economic risk of this investment
        in
        the Securities indefinitely, and is able to bear such risk and is able to
        afford
        a complete loss of such investment.

       

      (e)  Access
        to Information.
        Such
        Investor acknowledges that it has reviewed the Disclosure Materials and has
        been
        afforded: (i) the opportunity to ask such questions as it has deemed
        necessary of, and to receive answers from, representatives of the Company
        concerning the terms and conditions of the offering of the Securities and
        the
        merits and risks of investing in the Securities; (ii) access to information
        about the Company and the Subsidiary and their respective financial condition,
        results of operations, business, properties, management and prospects sufficient
        to enable it to evaluate its investment; and (iii) the opportunity to
        obtain such additional information that the Company possesses or can acquire
        without unreasonable effort or expense that is necessary to make an informed
        investment decision with respect to the investment. Neither such inquiries
        nor
        any other investigation conducted by or on behalf of such Investor or its
        representatives or counsel shall modify, amend or affect such Investor’s right
        to rely on the truth, accuracy and completeness of the Disclosure Materials
        and
        the Company’s representations and warranties contained in the Transaction
        Documents. Such Investor acknowledges receipt of copies of the SEC
        Reports.

       

      
        
          
          

        

        
          A-17

          
            

          

        

        
          
          

        

      

       

      (f)  No
        Governmental Review.
        Such
        Investor understands that no United States federal or state agency or any
        other
        government or governmental agency has passed on or made any recommendation
        or
        endorsement of the Securities or the fairness or suitability of the investment
        in the Securities nor have such authorities passed upon or endorsed the merits
        of the offering of the Securities.

       

      (g)  No
        Conflicts.
        The
        execution, delivery and performance by such Investor of this Agreement and
        the
        consummation by such Investor of the transactions contemplated hereby will
        not
        (i) result in a violation of the organizational documents of such Investor,
        (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 Investor 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
        Investor, except in the case of clauses (ii) and (iii) above, for such
        that are not material and do not otherwise affect the ability of such Investor
        to consummate the transactions contemplated hereby.

       

      (h)  Prohibited
        Transactions.
        No
        Investor, directly or indirectly, and no Person acting on behalf of or pursuant
        to any understanding with any Investor, has engaged in any purchases or sales
        of
        any securities, including any derivatives, of the Company (including, without
        limitation, any Short Sales involving any of the Company’s securities) (a
“Transaction”)
        since
        the time that such Investor was first contacted by the Company, the Agent
        or any
        other Person regarding the sale of Securities as contemplated under the
        Transaction Documents. Such Investor covenants that neither it nor any Person
        acting on its behalf or pursuant to any understanding with such Investor
        will
        engage, directly or indirectly, in any Transactions prior to the time the
        transactions contemplated by this Agreement are publicly disclosed.
“Short
        Sales”
        include, without limitation, all “short sales” as defined in Rule 200
        promulgated under Regulation SHO under the Exchange Act and all types of
        direct and indirect stock pledges, forward sale contracts, options, puts,
        calls,
        short sales, swaps, derivatives and similar arrangements (including on a
        total
        return basis), and sales and other transactions through non-U.S. broker-dealers
        or foreign regulated brokers.

       

      (i)  Restricted
        Securities.
        The
        Investors understand that the Securities are characterized as “restricted
        securities” under the U.S. federal securities laws inasmuch as they are being
        acquired from the Company in a transaction not involving a public offering
        and
        that under such laws and applicable regulations such securities may be resold
        without registration under the Securities Act only in certain limited
        circumstances.

       

      (j)  Legends.
        It is
        understood that, except as provided in Section 4.1(b) of this Agreement,
        certificates evidencing such Securities may bear the legend set forth in
        Section 4.1(b).

       

      (k)  No
        Legal, Tax or Investment Advice.
        Such
        Investor understands that nothing in this Agreement or any other materials
        presented by or on behalf of the Company to the Investor in connection with
        the
        purchase of the Units constitutes legal, tax or investment advice. Such Investor
        has consulted such legal, tax and investment advisors as it, in its sole
        discretion, has deemed necessary or appropriate in connection with its purchase
        of the Units.

       

      
        
          
          

        

        
          A-18

          
            

          

        

        
          
          

        

      

       

      (l)  Reliance
        on Exemptions.
        Such
        Investor understands that the Units are being offered and sold to it in reliance
        upon specific exemptions from the registration requirements of the Securities
        Act, and state securities laws and that the Company is relying upon the truth
        and accuracy of, and the Investor’s compliance with, the representations,
        warranties, agreements, acknowledgments and understandings of the Investor
        set
        forth herein in order to determine the availability of such exemptions and
        the
        eligibility of the Investor to acquire the Units.

       

      (m)  Risk
        of Loss.
        Such
        Investor understands that its investment in the Units involves a significant
        degree of risk, including a risk of total loss of Investor’s investment, and the
        Investor has full cognizance of and understands all of the risk factors related
        to Investor’s purchase of the Units, including, but not limited to, those set
        forth under or incorporated by reference in the caption “Risk Factors” or “Risk
        Factors Relating to the Company” in the SEC Reports. The Investor understands
        that the market price of the Common Stock has been volatile and that no
        representation is being made as to the future value of the Common Stock.
        The
        Investor has the knowledge and experience in financial and business matters
        as
        to be capable of evaluating the merits and risks of an investment in the
        Units
        and has the ability to bear the economic risks of an investment in the
        Units.

       

      ARTICLE
        4

       

      OTHER
        AGREEMENTS OF THE PARTIES

       

      4.1  Transfer
        Restrictions.

       

      (a)  The
        Investors covenant that the Securities will only be disposed of pursuant
        to an
        effective registration statement under, and in compliance with the requirements
        of, the Securities Act or pursuant to an available exemption from the
        registration requirements of the Securities Act, and in compliance with any
        applicable state securities laws. In connection with any transfer of Securities
        other than (1) pursuant to an effective registration statement (2) to
        the Company or (3) pursuant
        to Rule 144(k), the Company may require the transferor to provide to the
        Company an opinion of counsel selected by the transferor, reasonably acceptable
        to the Company. the form and substance of which opinion shall be reasonably
        satisfactory to the Company, to the effect that such transfer does not require
        registration under the Securities Act. Notwithstanding the foregoing, the
        Company hereby consents to and agrees to register on the books of the Company
        and with its Transfer Agent, without any such legal opinion, any transfer
        of
        Securities by an Investor to an Affiliate of such Investor, provided that
        the
        transferee certifies to the Company that it is an “accredited investor” as
        defined in Rule 501(a) under the Securities Act and provided that such
        Affiliate does not request any removal of any existing legends on any
        certificate evidencing the Securities.

       

      (b)  The
        Investors agree to the imprinting, so long as is required by this Section
        4.1(b),
        of the
        following legend on any certificate evidencing any of the
        Securities:

       

      
        
          
          

        

        
          A-19

          
            

          

        

        
          
          

        

      

       

      THESE
        SECURITIES HAVE NOT BEEN REGISTERED WITH THE SECURITIES AND EXCHANGE COMMISSION
        OR THE SECURITIES COMMISSION OF ANY STATE IN RELIANCE UPON AN EXEMPTION FROM
        REGISTRATION UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE“
        SECURITIES
        ACT”),
        OR
        ANY APPLICABLE STATE SECURITIES LAWS AND, ACCORDINGLY, MAY NOT BE OFFERED
        OR
        SOLD EXCEPT PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES
        ACT OR PURSUANT TO AN AVAILABLE EXEMPTION FROM, OR IN A TRANSACTION NOT SUBJECT
        TO, THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT AND IN COMPLIANCE
        WITH
        APPLICABLE STATE SECURITIES LAWS OR BLUE SKY LAWS.

       

      Certificates
        evidencing Securities shall not be required to contain such legend or any
        other
        legend (i) while a registration statement (including the Registration
        Statement) covering the resale of the Securities is effective under the
        Securities Act, (ii) following any sale of such Securities pursuant to
        Rule 144, (iii) if the Securities are eligible for sale under
        Rule 144(k), or (iv) if the holder provides the Company with a legal
        opinion reasonably acceptable to the Company to the effect that the legend
        is
        not required under applicable requirements of the Securities Act. The Company
        shall use its Best Efforts to cause its counsel to issue the legal opinion
        included in the Transfer Agent Instructions to the Transfer Agent on the
        Effective Date. Following the Effective Date or at such earlier time as a
        legend
        is no longer required for certain Securities, the Company will no later than
        three Trading Days following the delivery by an Investor to the Company or
        the
        Transfer Agent of (i) a legended certificate representing such Securities,
        and (ii) an opinion of counsel to the extent required by Section 4.1(a),
        use its
        Best Efforts to deliver or cause to be delivered to such Investor a certificate
        representing such Securities that is free from the legend referred to above.
        The
        Company may not make any notation on its records or give instructions to
        the
        Transfer Agent that enlarge the restrictions on transfer set forth in this
        Section. If within three (3) Trading Days after the Company’s receipt of a
        legended certificate and the other documents as specified in clauses
        (i) and (ii) of the paragraph immediately above, the Company shall
        fail to issue and deliver to such Investor a certificate representing such
        Securities that is free from the legend referred to above, and if on or after
        such third Trading Day the Investor purchases (in an open market transaction)
        shares of Common Stock to deliver in satisfaction of a sale by the Investor
        of
        shares of Common Stock that the Investor anticipated receiving from the Company
        without any restrictive legend (the “Covering
        Shares”),
        then
        the Company shall, within three (3) Trading Days after the Investor’s
        request, pay cash to the Investor in an amount equal to the excess (if any)
        of
        the Investor’s total purchase price (including reasonable brokerage commissions,
        if any) for the Covering Shares, over the product of (A) the number of
        Covering Shares, times (B) the closing sale price on the date of delivery
        of such certificate.  

       

      (c)  The
        Company acknowledges and agrees that an Investor may from time to time pledge
        or
        grant a security interest in some or all of the Securities in connection
        with a
        bona fide margin agreement or other loan or financing arrangement secured
        by the
        Securities, and if required under the terms of such agreement, loan or
        arrangement, the Company will not object to and shall permit such Investor
        to
        transfer pledged or secured Securities to the pledges or secured parties,
        provided such Investor is an “Accredited Investor” under Rule 501(a) of the
        Securities Act. Such a pledge or transfer would not be subject to approval
        of
        the Company, no legal opinion of the pledgee, secured party or pledgor shall
        be
        required in connection therewith, and no notice shall be required of such
        pledge. At the appropriate Investor’s expense, the Company will execute and
        deliver such reasonable documentation as a pledgee or secured party of
        Securities may reasonably request in connection with a pledge or transfer
        of the
        Securities, including the preparation and filing of any required prospectus
        supplement under Rule 424(b)(3) of the Securities Act or other applicable
        provision of the Securities Act to appropriately amend the list of Selling
        Stockholders thereunder.

       

      
        
          
          

        

        
          A-20

          
            

          

        

        
          
          

        

      

       

      4.2  Furnishing
        of Information.
        During
        the time the Registration Statement is required to be effective, the Company
        covenants to timely file (or obtain extensions in respect thereof and file
        within the applicable grace period) all reports required to be filed by the
        Company after the date hereof pursuant to the Exchange Act. Upon the request
        of
        any Investor, the Company shall deliver to such Investor a written confirmation
        of a duly authorized officer as to whether it has complied with the preceding
        sentence. As long as any Investor owns Securities, if the Company is not
        required to file reports pursuant to such laws, it will prepare and furnish
        to
        the Investors and make publicly available in accordinace with paragragh (c)
        of Rule 144 such information as required for the Investors to sell the
        Secuirites under Rule 144. The Company further covenants that it will take
        such further action as any holder of Securities may reasonably request to
        satisfy the provisions of Rule 144 applicable to the issuer of securities
        relating to transactions for the sale of securities pursuant to
        Rule 144.

       

      4.3  Integration.
        The
        Company shall not, and shall use its Best Efforts to ensure that no Affiliate
        thereof shall, sell, offer for sale or solicit offers to buy or otherwise
        negotiate in respect of any security (as defined in Section 2 of the
        Securities Act) that would be integrated with the offer or sale of the
        Securities in a manner that would require the registration under the Securities
        Act of the sale of the Securities to the Investors or that would be integrated
        with the offer or sale of the Securities for purposes of the rules and
        regulations of any Trading Market.

       

      4.4  Reservation
        of Securities.
        The
        Company shall maintain a reserve from its duly authorized shares of Common
        Stock
        for issuance pursuant to the Transaction Documents in such amount as may
        be
        required to fulfill its obligations to issue Shares under the Transaction
        Documents. In the event that at any time the then authorized shares of Common
        Stock are insufficient for the Company to satisfy its obligations to issue
        such
        Shares under the Transaction Documents, the Company shall promptly take such
        actions as may be required to increase the number of authorized
        shares.

       

      4.5  Securities
        Laws Disclosure; Publicity. The
        Company shall, on or before 8:30 a.m., New York time, on the first Trading
        Day
        following execution of this Agreement, issue a press release disclosing all
        material terms of the transactions contemplated hereby. Within one Trading
        Day
        following the Closing Date, the Company shall file a Current Report on Form
        8-K
        with the SEC (the “8-K
        Filing”)
        describing the terms of the transactions contemplated by the Transaction
        Documents and including as exhibits to such Current Report on Form 8-K the
        Transaction Documents (including the names, and addresses of the Investors
        and
        the amount(s) of Securities respectively purchased) and the form of Warrants,
        in
        the form required by the Exchange Act. The Company shall, at least one (1)
        Trading Day prior to the filing or dissemination of the press release and
        Form
        8-K described above, provide a copy thereof to the Investors for their review.
        Thereafter, the Company shall timely file any filings and notices required
        by
        the SEC or applicable law with respect to the transactions contemplated hereby.
        Except as provided above, and except with respect to Bridge Lenders and as
        otherwise disclosed by the Company in any filings with the SEC which identify
        an
        Investor as the purchaser or holder of its securities, the Company shall
        not
        publicly disclose the name of any Investor, or include the name of any Investor
        in a press releases or any filing with the SEC or any regulatory agency or
        Trading Market, without the prior written consent of such Investor, except
        to
        the extent such disclosure is required by law or Trading Market regulations
        (including the filing of the final Transaction Documents (including signature
        pages thereto) with the SEC). The Company shall not, and shall cause the
        Subsidiary and its and each of the Subsidiary’s respective officers, directors,
        employees and agents not to, provide any Investor with any material non-public
        informaton regarding the Company or its Subsidiary from and after the filing
        of
        the 8-K Filing without the express written consent of such Investor, except
        to
        the extent the Investor has a designee on the Board of Directors of the Company
        or an observer then entitled to attend meetings of the Board of Directors.
        In
        the event of a breach of the foregoing covenant by the Company, its Subsidiary,
        or any of its or its Subsidiary’s respective officers, directors, employees and
        agents, in addition to any other remedy provided herein or in the Transaction
        Documents, an Investor shall have the right to require the Company to make
        a
        public disclosure, in the form of a press release, public advertisement or
        otherwise, of such material non-public information.

       

      
        
          
          

        

        
          A-21

          
            

          

        

        
          
          

        

      

       

      4.6  Use
        of
        Proceeds.
        The
        Company intends to use the net proceeds from the sale of the Securities for
        working capital and general corporate purposes. The Company also may use
        a
        portion of the net proceeds, currently intended for general corporate purposes,
        to acquire or invest in technologies, products, services or businesses that
        complement its business, although the Company has no present commitments
        with
        respect to these types of transactions. Pending these uses, the Company intends
        to invest the net proceeds from this offering in short-term, interest-bearing,
        investment-grade securities, or as otherwise pursuant to the Company’s customary
        investment policies.

       

      4.7  No
        Additional Issuances and Registrations.
        The
        Company agrees not to sell, offer or agree to sell, any shares of Common
        Stock
        or securities convertible into or exchangeable or exercisable for Common
        Stock,
        or file or cause to be declared effective a registration statement under
        the
        Securities Act relating to the offer and sale of any shares of Common Stock
        or
        securities convertible into or exercisable or exchangeable for Common Stock,
        for
        a period of 30 days after the Effective Date, except for (i) the
        registration of the Registrable Securities, (ii) issuances of Common Stock
        upon the exercise of options or warrants disclosed as outstanding in the
        SEC
        Reports, (iii) the issuance of equity incentives to employees,
        (iv) issuances of shares of Common Stock or any securities convertible into
        or exercisable for Common Stock in connection with a strategic licensing
        arrangement, corporate partnering transaction or similar collaboration;
        (v) agreements to issue shares of Common Stock or any securities
        convertible into or exercisable for Common Stock, and the issuance of shares
        of
        Common Stock, in connection with an acquisition, by merger or consolidation
        with, or by purchase of all or a substantial portion of the assets of, or
        by any
        other manner, of any business or corporation, partnership, association or
        other
        business organization or division thereof; (vi) any registration of
        securities on Form S-4 or S-8 or similar forms; and (vii) any
        post-effective amendments to registration statements effective as of the
        Effective Date.

       

      
        
          
          

        

        
          A-22

          
            

          

        

        
          
          

        

      

       

      4.8  Exercise
        Procedures.
        Except
        as qualified by the Warrants or the form of Exercise Notice included in the
        Warrants, the Warrants or the form of Exercise Notice included in the Warrants
        set forth the totality of the procedures required by the Investors in order
        exercise the Warrants. No additional legal opinion or other information or
        instructions shall be necessary to enable the Investors to exercise their
        Warrants. The Company shall honor exercises of the Warrants and shall deliver
        the Warrant Shares in accordance with the terms, conditions and time periods
        set
        for in the Transaction Documents.

       

      4.9  Return
        of Bridge Notes. The Bridge Lenders, who are Investors, agree to promptly
        after the applicable Closing, return all notes representing Bridge Loans
        that
        have been used to pay the purchase price hereunder to the Company marked
        cancelled or provide the Company with a customery affidavit of loss for same,
        acknowledging the cancellation of said notes and agree to take all actions
        necessary to release all liens and terminate all financing statements relating
        to such loans.

       

      4.10  Listing
        on Market. The Company will use commercially reasonable efforts to achieve
        and maintain a listing for its Common Stock on an Eligible Market and, upon
        request of any Investor who purchases at least $2,000,000 of Units hereunder
        (and has not disposed of more than half of the Common Shares and Warrant
        Shares
        included in such Units), will reasonably consult with such Investor and keep
        such Investor informed regarding such efforts and progress towards such listing.
        Notwithstanding anything to the contrary in this Section 4.10, during any
        period
        when the Board of Directors of the Company determines in good faith that
        such a
        listing is not commercially reasonable or a practical possibility (including
        by
        reason of sale of the Company (by way of merger or otherwise) or its assets),
        the Company may defer such listing efforts until such time as the Board no
        longer believes in good faith that such impractibility or lack of commercial
        reasonableness exists. Notwithstanding anything to the contrary in this
        Agreement the sole remedy available to Investors for breach of this provision
        is
        specific performance. The provisions of this Section 4.10 may waived by
        Investors holding the majority-in-interest of Registrable Securities. The
        provisions of this section 4.10 will expire five years from the date
        hereof.

       

      ARTICLE
        5

       

      CONDITIONS

       

      5.1  Conditions
        Precedent to the Obligations of the Investors.
        The
        obligation of each Investor to acquire Securities at the Closing is subject
        to
        the satisfaction or waiver by such Investor, at or before the Closing, of,
        each
        of the following conditions:

       

      (a) Representations
        and Warranties.
        The
        representations and warranties of the Company contained herein shall be true
        and
        correct in all material respects as of the date when made and as of the date
        of
        the initial Closing as though made on and as of such date;

       

      
        
          
          

        

        
          A-23

          
            

          

        

        
          
          

        

      

       

      (b) Performance.
        The
        Company and each other Investor shall have performed, satisfied and complied
        in
        all material respects with all covenants, agreements and conditions required
        by
        the Transaction Documents to be performed, satisfied or complied with by
        it at
        or prior to the initial Closing; the Company shall have obtained all
        governmental, regulatory or third party consents and approvals, if any,
        necessary for the sale of the Common Shares and the Warrants;

       

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

       

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

       

      (e) Adverse
        Changes.
        Since
        the date of excecution of this Agreement and prior to the initial Closing,
        no
        event or series of events shall have occurred that reasonably would be expected
        to have or result in a Material Adverse Effect;  

       

      (f) Amount
        Proceeds.
        This
        Agreement shall provide for at least $14,000,000.00 (excluding the conversion,
        if any, of Bridge Loans hereunder) of gross proceeds from the sale of the
        Securities, at both Closings combined;

       

      (g) Amendments
        to Five Million Dollar Note.
        The
        Five Million Dollar Note shall be amended and restated in the form attached
        hereto as Exhibit
        G;

       

      (h) Conversion
        of Bridge Notes.
        The
        principal amount of the outstanding Bridge Loans made by each of the Bridge
        Lenders shall be converted into Units in accordance with this Agreement (with
        all accrued and unpaid interest to be paid by the Company at the initial
        Closing);

       

      (i) Management
        Rights.
        The
        Company shall have delivered to Vivo a management rights letter in form and
        substance satisfactory to Vivo. Such letter shall, among other things, permit
        Vivo to designate an individual to serve as a non-voting observer with respect
        to the Company’s Board of Directors;

       

      (j) Consent
        regarding Registration Rights.
        Care
        Capital Investments II, LP, Care Capital Offshore Investments II, LP, Essex
        Woodlands Health Ventures, L.P. (except to the extent it is an Investor),
        Galen
        Partners International III, L.P., Galen Partners III, L.P., Galen Employee
        Fund
        III, L.P.and GCE Holdings LLC shall have provided the required consent under
        their existing registration rights to allow the Company to grant the
        registration rights provided in this Agreement. 

       

      (k) Officer’s
        Certificate.
        The
        Investor shall have received a certificate, executed by the Chief Executive
        Officer of the Company, dated as of the Closing Date, to the matters set
        forth
        in 5.1(a) and 5.1(b) in the form attached hereto as Exhibit
        G;

       

      
        
          
          

        

        
          A-24

          
            

          

        

        
          
          

        

      

       

      (l) Secretary’s
        Certificate.
        The
        Company shall have delivered to each Investor a certificate, executed by
        the
        Secretary of the Company and dated as of the Closing Date, as to (i) the
        resolutions consistent with Section 3.1(c) as adopted by the Company's Board
        of
        Directors, (ii) the Certificate of Incorporation and (iii) the Bylaws, each
        as
        in effect at the Closing, in the form attached hereto as Exhibit
        H;

       

      (m) Listing.
        The
        Common Stock shall not have been suspended, as of the Closing Date, by the
        SEC
        from trading on the OTC Bulletin Board nor shall suspension by the SEC have
        been
        threatened, as of the Closing Date; and

       

      (n) Good
        Standing.
        The
        Company shall have delivered to the Investors a certificate evidencing the
        incorporation and good standing of the Company in the Company's state of
        incorporation issued by the Secretary of State as of a date within 10 days
        of
        the Closing Date.

       

      5.2  Conditions
        Precedent to the Obligations of the Company

       

      .
        The
        obligation of the Company to sell the Securities at a particular Closing
        to an
        Investor is subject to the satisfaction or waiver by the Company, at or before
        the Closing, of each of the following conditions:

       

      (a) Receipt
        of Payment.
        Such
        Investor shall have delivered payment of the purchase price to the Company
        for
        the Securities being issued to such Investor hereunder; 

       

      (b) Representations
        and Warranties.
        The
        representations and warranties of the Investors contained herein shall be
        true
        and correct in all material respects as of the date when made and as of the
        date
        of the initial Closing as though made on and as of such date; and

       

      (c) Performance.
        Such
        Investor shall have performed, satisfied and complied in all material respects
        with all covenants, agreements and conditions required by the Transaction
        Documents to be performed, satisfied or complied with by such Investors at
        or
        prior to the applicable Closing.

       

      ARTICLE
        6

       

      REGISTRATION
        RIGHTS

       

      6.1  Registration
        Statement.

       

      (a)  As
        soon
        as practicable and in any event, on or prior to the Filing Date, the Company
        shall prepare and file with the SEC a Registration Statement covering the
        resale
        of all Registrable Securities for an offering to be made on a continuous
        basis
        pursuant to Rule 415. The Registration Statement shall be the appropriate
        Form (or, in the event the Company otherwise qualifies, on Form S-3) and
        shall
        contain (except if otherwise directed by the Investors or requested by the
        SEC)
        the “Plan of Distribution” in substantially the form attached hereto as
Exhibit D.

       

      (b)  The
        Company shall use its Best Efforts to cause the Registration Statement covering
        SEC Approved Registrable Securities to be declared effective by the SEC as
        promptly as practical after the filing thereof, but in any event prior to
        the
        Required Effectiveness Date, and shall use its Best Efforts to keep the
        Registration Statement continuously effective under the Securities Act until
        the
        earlier of (i) the date that all Common Shares and Warrant Shares covered
        by such Registration Statement have been sold, or (ii) the fifth
        anniversary of
        the
        Closing Date (the “Effectiveness
        Period”);
        provided that, upon notification by the SEC that a Registration Statement
        will
        not be reviewed or is no longer subject to further review and comments, the
        Company shall request acceleration of such Registration Statement within
        three
        (3) Trading Days after receipt of such notice and request that it becomes
        effective on 4:00 p.m. New York City time on the Effective Dave and file
        a
        prospectus supplement for any Registration Statement, whether or not required
        under Rule 424 (or otherwise), by 9:00 a.m. New York City time the day
        after the Effective Date. Notwithstanding the foregoing or anything to the
        contrary in this Agreement, the Company shall not be required to include
        in any
        Registration Statement any shares that are eligible to be sold by their holder
        without restriction under Rule 144(k), or any equivalent successor
        rule.

       

      
        
          
          

        

        
          A-25

          
            

          

        

        
          
          

        

      

       

      (c)  The
        Company shall notify the Investors in writing promptly (and in any event
        within
        two (2) Trading Days) after receiving notification from the SEC that the
        Registration Statement has been declared effective.

       

      (d)  Should
        an
        Event (as defined below) occur, then upon the occurrence of such Event, and
        on
        every monthly anniversary thereof until the applicable Event is cured, as
        relief
        for the damages suffered therefrom by the Investors (the parties hereto agreeing
        that the liquidated damages provided for in this Section 6.1(d) constitute
        a reasonable estimate of the damages that may be incurred by the Investors
        by
        reason of the Event and that such liquidated damages represent the exclusive
        monetary remedy for the Investors for damages suffered due to an Event),
        the
        Company shall pay to each Investor an amount in cash, as liquidated damages
        and
        not as a penalty, equal to one-twentieth of a percent (0.05%) of (i) the
        number of SEC Approved Registrable Securities held by such Investor as of
        the
        date of such Event, multiplied by (ii) the purchase price paid by such
        Investor for such SEC Approved Registered Securities then held, for each
        day
        that an Event has occurred, excluding the day on which such Event has been
        cured. The payments to which an Investor shall be entitled pursuant to this
        Section 6.1(d)
        are
        referred to herein as “Event
        Payments.”
In
        the
        event the Company fails to make Event Payments in a timely manner, such Event
        Payments shall bear interest at the rate of one percent (1.0%) per month
        (prorated for partial months) until paid in full.All
        pro
        rated calculations made pursuant to this paragraph shall be based upon the
        actual number of days in such pro rated month. Notwithstanding the foregoing
        provisions, in no event shall the Company be obligated to pay such liquidated
        damages (a) to more than one Investor in respect of the same Securities for
        the same period of time or (b) in an aggregate amount that exceeds 9.9% of
        the purchase price paid by such Investor for its Securities pursuant to this
        Agreement, as set forth opposite such Investor’s name on Exhibits A-1
        and
A-2
        hereto
        under the heading “Purchase Price” (including the amount of principal converted
        as set forth in Exhibit
        A-3).

       

      For
        such
        purposes, each of the following shall constitute an“Event”:

       

      (i)
        the
        Registration Statement is not filed on or prior to the Filing Date or is
        not
        declared effective on or prior to the Required Effectiveness Date except
        (A) as provided for in Section 6.1(e) or Section 6.1(f), (B) the SEC (whether
        by
        means of a comment letter provided by the SEC relating to
        the
        Registration Statement or
        otherwise) makes a determination that the registration of the Registrable
        Securities under the Registration Statement may not be appropriately
        characterized as secondary offerings that are eligible to be made on a shelf
        basis under Rule 415, (C) if the Company is involved in a “Rule 13e-3
        transaction” as defined in Rule 13e-3 under the Exchange Act or (D) in the event
        of a merger or consolidation of the Company or a sale, license or other
        disposition of more than fifty percent (50%) of the assets of the Company
        in one
        or a series of related transactions; or

       

      
        
          
          

        

        
          A-26

          
            

          

        

        
          
          

        

      

       

      (ii)
        on
and
        after
        the Effective Date, an Investor is not permitted to sell SEC Approved
        Registrable Securities under the Registration Statement (or a subsequent
        Registration Statement filed in replacement thereof) for any reason (other
        than
        the fault of such Investor) for ten (10) or more consecutive Trading Days
        or more than thirty (30) Trading Days, in the aggregate, in any 365 day period,
        except as provided in Section 6.1(e) or Section 6.1(f).

       

      (e)  Notwithstanding
        anything in this Agreement to the contrary, after the initial Registration
        Statement filed and declared effective pursuant to this Agreement, the Company
        may, by written notice to the Investors, suspend sales under a Registration
        Statement after the Effective Date thereof and/or require that the Investors
        immediately cease the sale of shares of Common Stock pursuant thereto if
        the
        Company is engaged in a material merger, acquisition, or sale or license
        transaction and the Board of Directors determines in good faith, by appropriate
        resolutions, that, as a result of such activity, (A)(x) it would be materially
        detrimental to the Company (other than as relating solely to the price of
        the
        Common Stock) to allow such sales under a Registration Statement at such
        time
        and (y) it is in the best interests of the Company to restrict such sales
        or
        defer proceeding with such registration at such time, or (B) it would be
        materially detrimental to the Company (other than as relating solely to the
        price of the Common Stock) to amend or supplement an effective Registration
        Statement or the related prospectus to disclose such activity or information,
        as
        applicable. Upon receipt of such notice, each Investor shall immediately
        discontinue any sales of Registrable Securities pursuant to such registration
        until such Investor is advised in writing by the Company that the current
        Prospectus or amended Prospectus, as applicable, may be used. In no event,
        however, shall this right be exercised to suspend sales beyond the period
        during
        which (in the good faith determination of the Company’s Board of Directors) the
        failure to require such suspension would be materially detrimental to the
        Company. The Company’s rights under this Section
        6(e)
        may be
        exercised for a period of no more than twenty (20) Trading Days at a time
        and not more than three times in any twelve (12) month period, without such
        suspension being considered as part of an Event Payment determination.
        Immediately after the end of any suspension period under this Section 6(e),
        the
        Company shall make its Best Efforts (including filing any required supplemental
        prospectus) to restore the effectiveness of the applicable Registration
        Statement and the ability of the Investors to publicly resell their Registrable
        Securities pursuant to such effective Registration Statement.

       

      (f)  Notwithstanding
        anything in this Agreement to the contrary, so long as the Registration
        Statement is on Form S-1 or on any other form that does not allow for forward
        incorporation by reference of reports and other materials filed by the Company
        pursuant to Section 13(a) or 15(d) of the Exchange Act, the Company may suspend
        sales under such Registration Statement (an “Updating Delay”) (i) for the
        period commencing at the time that the Company disseminates a press release
        announcing its preliminary financial results for any fiscal period and ending
        on
        the third Trading Day after the earlier of (A) the date that the related
        report on Form 10-K or 10-Q, as applicable, under the Exchange Act is filed
        with
        the SEC and (B) the date on which such report is required to be filed under
        the Exchange Act (giving effect to Rule 12b-25 promulgated thereunder);
        (ii) for the period commencing at the time that the Company disseminates a
        press release announcing a material development and ending on the third Trading
        Day after the earlier of (A) the date that the related report on Form 8-K
        is filed with the SEC and (B) the date on which such report is required to
        be filed under the Exchange Act (giving effect to Rule 12b-25 promulgated
        thereunder), and (iii) to the extent necessary to allow any post-effective
        amendment to the Registration Statement or supplement to the Prospectus to
        be
        prepared and, if necessary, filed with the SEC and, in the case of a
        post-effective amendment, declared effective. The Company will use commercially
        reasonable efforts to minimize periods during which the Registration Statement
        is not effective.

       

      
        
          
          

        

        
          A-27

          
            

          

        

        
          
          

        

      

       

      (g)  The
        Company shall not, from the date hereof until the Effective Date of the
        Registration Statement, prepare and file with the SEC a registration statement
        relating to an offering for cash for its own account under the Securities
        Act of
        any of its equity securities, other than any registration statement or
        post-effective amendment to a registration statement (or supplement thereto)
        relating to the Company’s employee benefit plans registered on
        Form S-8.

       

      (h)  In
        the
        event that the Company is required by the SEC to exclude a portion of the
        Registrable Securities from the Registration Statement, if requested by an
        Investor holding Regsitrable Securities so excluded, the Company will use
        its
        Best Efforts to file an additional registration statement covering such excluded
        Registrable Securities at the earliest permitted time allowed by the SEC
        (with,
        in the event the SEC permits some but not all of such excluded Registrable
        Securities to be included in such additional registration, successive additional
        registration(s) until all Registrable Securities have been included in
        additional registration statements), and to use its Best Efforts to cause
        such
        registration statement(s) to be declared effective as promptly as practical
        by
        the SEC; provided, however that (i) the Company shall not be requied to file
        a
        registration statement pursuant to this Section 6.1(h) until the earliest
        date
        permitted by the SEC following the effectiveness of the Registration Statement
        filed pursuant to Section 6.1(a), and (ii) the Effectiveness Period for each
        such Registration Statement shall be as provided in Section 6.1(b).

       

      (i)  Notwithstanding
        anything to the contrary in this Agreement, an Investor shall have the right
        to
        require the Company to exclude all or any portion of such Investor’s Registrable
        Securities from any Registration Statement, by written notice to the Company
        (in
        which event such Registrable Securities shall be treated as if they were
        SEC
        Non-Registable Securities; provided, that the Company shall not be required
        to
        file a new registration statement for such excluded shares pursuant to Section
        6.1(h) unless the Investor requests that such shares be excluded because
        such
        Investor has a reasonable belief that (x) inclusion of such Registrable
        Securities in the Registration Statement could subject such Investor to
        underwriter liability, or (y) the SEC will impose restrictions and terms
        on the
        disposition of such Registrable Securities that are materially inconsistent
        with
        the “Plan of Distribution” attached hereto as Exhibit D).

       

      (j)
         Nothwithstanding
        anything to the contrary in this Agreement, Investors holding a majority
        in
        interest of Registrable Securities may at any time, commencing two years
        after
        the Closing, waive the Company’s obligation to file and/or maintain the
        effectiveness of any Registration Statement.

       

      
        
          
          

        

        
          A-28

          
            

          

        

        
          
          

        

      

       

      6.2  Registration
        Procedures.
        In
        connection with the Company’s registration obligations hereunder, the Company
        shall:

       

      (a)  (i) Subject
        to Section 6.1(e),
        prepare
        and file with the SEC such amendments, including post-effective amendments,
        to
        each Registration Statement and the Prospectus used in connection therewith
        as
        may be necessary to keep the Registration Statement continuously effective,
        as
        to the applicable Registrable Securities for the Effectiveness Period and
        prepare and file with the SEC such additional Registration Statement as provided
        in Section 6.1(h); (ii) cause the related Prospectus to be amended or
        supplemented by any required Prospectus supplement, and as so supplemented
        or
        amended to be filed pursuant to Rule 424; (iii) respond as promptly as
        reasonably practical to any comments received from the SEC with respect to
        the
        Registration Statement or any amendment thereto; and (iv) comply in all
        material respects with the provisions of the Securities Act and the Exchange
        Act
        applicable to the Company with respect to the disposition of all Registrable
        Securities covered by the Registration Statement during the applicable period
        in
        accordance with the intended methods of disposition by the Investors thereof
        set
        forth in the Registration Statement as so amended or in such Prospectus as
        so
        supplemented.

       

      (b)  Notify
        the Investors as promptly as reasonably practical, and (if requested by the
        Investors) confirm such notice in writing no later than two (2) Trading
        Days thereafter, of any of the following events: (i) any Registration
        Statement or any post-effective amendment is declared effective; (ii) the
        SEC issues any stop order suspending the effectiveness of any Registration
        Statement or initiates any Proceedings for that purpose; (iii) the Company
        receives notice of any suspension of the qualification or exemption from
        qualification of any Registrable Securities for sale in any jurisdiction,
        or the
        initiation or threat of any Proceeding for such purpose; or (iv) the
        financial statements included in any Registration Statement become ineligible
        for inclusion therein or any Registration Statement or Prospectus or other
        document contains any untrue statement of a material fact or omits to state
        any
        material fact required to be stated therein or necessary to make the statements
        therein, in the light of the circumstances under which they were made, not
        misleading.

       

      (c)  Use
        its
        Best Efforts to avoid the issuance of or, if issued, obtain the withdrawal
        of
        (i) any order suspending the effectiveness of any Registration Statement,
        or (ii) any suspension of the qualification (or exemption from
        qualification) of any of the Registrable Securities for sale in any
        jurisdiction, as promptly as reasonably possible.

       

      (d)  If
        requested by an Investor, provide such Investor, without charge, at least
        one
        conformed copy of any Registration Statement and each amendment thereto,
        including financial statements and schedules, and all exhibits to the extent
        requested by such Person (including those previously furnished or incorporated
        by reference) promptly after the filing of such documents with the
        SEC.

       

      (e)  Promptly
        deliver to each Investor, without charge, as many copies of the Prospectus
        or
        Prospectuses (including each form of prospectus) and each amendment or
        supplement thereto as such Persons may reasonably request. The Company hereby
        consents to the use of such Prospectus and each amendment or supplement thereto
        by each of the selling Investors in connection with the offering and sale
        of the
        Registrable Securities covered by such Prospectus and any amendment or
        supplement thereto to the extent permitted by federal and state securities
        laws
        and regulations.

       

      
        
          
          

        

        
          A-29

          
            

          

        

        
          
          

        

      

       

      (f)  Prior
        to
        any public offering of Registrable Securities, use commercially reasonable
        efforts to register or qualify or cooperate with the selling Investors in
        connection with the registration or qualification (or exemption from such
        registration or qualification) of such Registrable Securities for offer and
        sale
        under the securities or Blue Sky laws of such jurisdictions within the United
        States as any Investor requests in writing, to keep each such registration
        or
        qualification (or exemption therefrom) effective for so long as required,
        but
        not to exceed the duration of the Effectiveness Period, and to do any and
        all
        other acts or things reasonably necessary or advisable to enable the disposition
        in such jurisdictions of the Registrable Securities covered by a Registration
        Statement; provided,
        however,
        that
        the Company shall not be obligated to file any general consent to service
        of
        process or to qualify as a foreign corporation or as a dealer in securities
        in
        any jurisdiction in which it is not so qualified or to subject itself to
        taxation in respect of doing business in any jurisdiction in which it is
        not
        otherwise so subject.

       

      (g)  Cooperate
        with the Investors to facilitate the timely preparation and delivery of
        certificates representing Registrable Securities to be delivered to a transferee
        pursuant to a Registration Statement, which certificates shall be free, to
        the
        extent permitted by this Agreement and under law, of all restrictive legends,
        and to enable such Registrable Securities to be in such denominations and
        registered in such names as any such Investors may reasonably
        request.

       

      (h)  Upon
        the
        occurrence of any event described in Section 6.2(b)(iv),
        as
        promptly as reasonably possible, prepare a supplement or amendment, including
        a
        post-effective amendment, to the Registration Statement or a supplement to
        the
        related Prospectus or any document incorporated or deemed to be incorporated
        therein by reference, and file any other required document so that, as
        thereafter delivered, neither the Registration Statement nor such Prospectus
        will contain an untrue statement of a material fact or omit to state a material
        fact required to be stated therein or necessary to make the statements therein,
        in the light of the circumstances under which they were made, not
        misleading.

       

      (i)  Comply
        with all rules and regulations of the SEC under the Securities Act and the
        Exchange Act applicable to the Company in connection with the registration
        of
        the Securities.

       

      (j)  It
        shall
        be a condition precedent to the obligations of the Company to complete the
        registration pursuant to this Agreement with respect to the Registrable
        Securities of any particular Investor or to make any Event Payments set forth
        in
        Section 6.1(d) to such Investor that such Investor furnish to the Company
        the information specified in Exhibits
        B-1,
        B-2
        and
B-3
        hereto
        and such other information regarding itself, the Registrable Securities and
        other shares of Common Stock held by it and the intended method of disposition
        of the Registrable Securities held by it (if different from the Plan of
        Distribution set forth on Exhibit D
        hereto)
        as shall be required under applicable federal and state securities laws to
        effect the registration of such Registrable Securities, and shall complete
        and
        execute such documents in connection with the registration as the Company
        may
        reasonably request.

       

      
        
          
          

        

        
          A-30

          
            

          

        

        
          
          

        

      

       

      6.3  Registration
        Expenses.
        The
        Company shall pay all fees and expenses incident to the performance of or
        compliance with Article VI of this Agreement by the Company, including
        without limitation (a) all registration and filing fees and expenses,
        including without limitation those related to filings with the SEC, any Trading
        Market and in connection with applicable state securities or Blue Sky laws,
        (b) printing expenses (including without limitation expenses of printing
        certificates for Registrable Securities), (c) messenger, telephone and
        delivery expenses incurred by the Company, (d) fees and disbursements of
        counsel for the Company, (e) fees and expenses of all other Persons
        retained by the Company in connection with the consummation of the transactions
        contemplated by this Agreement, (f) all listing fees to be paid by the
        Company to the Trading Market; and (g) fees and disbursements of a single
        counsel for the Investors in an amount not to exceed $25,000.

       

      6.4  Indemnification 

       

      (a)  Indemnification
        by the Company.
        The
        Company shall, notwithstanding any termination of this Agreement, indemnify
        and
        hold harmless each Investor, the officers, directors, partners, members,
        agents
        and employees of each of them, each Person who controls any such Investor
        (within the meaning of Section 15 of the Securities Act or Section 20
        of the Exchange Act) and the officers, directors, partners, members, agents
        and
        employees of each such controlling Person, to the fullest extent permitted
        by
        applicable law, from and against any and all Losses, as incurred, arising
        out of
        any material breach of this Agreement by the Company or arising out of or
        relating to any untrue or alleged untrue statement of a material fact contained
        in the Registration Statement, any Prospectus or any form of Company prospectus
        or in any amendment or supplement thereto or in any Company preliminary
        prospectus, or arising out of or relating to any omission or alleged omission
        of
        a material fact required to be stated therein or necessary to make the
        statements therein (in the case of any Prospectus or form of prospectus or
        supplement thereto, in the light of the circumstances under which they were
        made) not misleading, provided, however, that the Company shall not be liable
        in
        any such case to the extent that such Loss arises out of, or is based upon
        the
        use by an Investor of an outdated or defective Prospectus after the Company
        has
        notified the Investor in writing that the Prospectus is outdated or defective,
        or is based upon an untrue statement or omission or alleged untrue statement
        or
        omission made in such Registration Statement in reliance upon and in conformity
        with information furnished to the Company by or on behalf of such Investor
        in
        writing expressly for use therein, or to the extent that such information
        relates to such Investor or such Investor’s proposed method of distribution of
        Registrable Securities and was reviewed and approved in writing by such Investor
        for use in the Registration Statement (it being understood that the information
        provided by the Investor to the Company in Exhibits
        B-1,
        B-2
        and
B-3
        and the
        Plan of Distribution set forth on Exhibit D,
        as the
        same may be modified by such Investor in writing constitutes information
        reviewed and expressly approved by such Investor in writing expressly for
        use in
        the Registration Statement), such Prospectus or such form of Prospectus or
        in
        any amendment or supplement thereto; provided further, however, that the
        Company
        shall not be liable to any Investor of Registrable Securities (or any partner,
        member, officer, director or controlling person of such Investor) to the
        extent
        that any such Loss is caused by an untrue statement or omission or alleged
        untrue statement or omission made in any preliminary prospectus if (i)
        (A) such untrue statement or omission is corrected in an amendment or
        supplement to the prospectus and (B) having previously been furnished by or
        on behalf of the Company with copies of the prospectus as so amended or
        supplemented or, if Rule 172 is then in effect, notified by the Company
        that such amended or supplemented prospectus has been filed with the SEC,
        such
        Investor thereafter fails to deliver such prospectus as so amended or
        supplemented, with or prior to, or, if Rule 172 is then in effect, such
        Investor fails to confirm that the prospectus as so amended or supplemented
        was
        deemed to be delivered prior to, the delivery of written confirmation of
        the
        sale of a Registrable Security to the person asserting the claim from which
        such
        Loss resulted or (ii) such Investor sold Registrable Securities in
        violation of such Investor’s covenant contained in
        Section 6.5.

       

      
        
          
          

        

        
          A-31

          
            

          

        

        
          
          

        

      

       

      (b)  Indemnification
        by Investors.
        Each
        Investor shall, severally and not jointly, indemnify and hold harmless the
        Company, its directors, officers, agents and employees, each Person who controls
        the Company (within the meaning of Section 15 of the Securities Act and
        Section 20 of the Exchange Act), and the directors, officers, agents or
        employees of such controlling Persons, to the fullest extent permitted by
        applicable law, from and against all Losses (as determined by a court of
        competent jurisdiction in a final judgment not subject to appeal or review)
        arising out of any material breach of this Agreement by such Investor or
        arising
        out of any untrue statement or alleged untrue statement of a material fact
        contained in the Registration Statement, any Prospectus, or any form of
        prospectus, or in any amendment or supplement thereto, or arising out of
        or
        relating to any omission or alleged omission of a material fact required
        to be
        stated therein or necessary to make the statements therein (in the case of
        any
        Prospectus or form of prospectus or supplement thereto, in the light of the
        circumstances under which they were made) not misleading, in each case, on
        the
        effective date thereof, but only to the extent that (i) such untrue
        statements or omissions are based solely upon information regarding such
        Investor furnished to the Company by such Investor in writing expressly for
        use
        therein, or to the extent that such information relates to such Investor
        or such
        Investor’s proposed method of distribution of Registrable Securities and was
        reviewed and approved in writing by such Investor for use in the Registration
        Statement (it being understood that the information provided by the Investor
        to
        the Company in Exhibits
        B-1,
        B-2
        and
B-3
        and the
        Plan of Distribution set forth on Exhibit D,
        as the
        same may be modified in writing by such Investor constitutes information
        reviewed and expressly approved by such Investor in writing expressly for
        use in
        the Registration Statement), such Prospectus or such form of Prospectus or
        in
        any amendment or supplement thereto or (ii) in the event of the use by an
        Investor of a defective or outdated Prospectus after the Company has informed
        such Investor that the Prospectus is defective or outdated. In no event shall
        the liability of any Investor hereunder (when combined with liability of
        such
        Investor under Section
        6.4(d))
        be
        greater in amount than the dollar amount of the net proceeds received by
        such
        Investor upon the sale of the Registrable Securities giving rise to such
        indemnification obligation.

       

      (c)  Conduct
        of Indemnification Proceedings.
        If any
        Proceeding shall be brought or asserted against any Person entitled to indemnity
        hereunder (an “Indemnified
        Party”),
        such
        Indemnified Party shall promptly notify the Person from whom indemnity is
        sought
        (the “Indemnifying
        Party”)
        in
        writing, and the Indemnifying Party shall assume the defense thereof, including
        the employment of counsel reasonably satisfactory to the Indemnified Party
        and
        the payment of all fees and expenses incurred in connection with defense
        thereof; provided, that the failure of any Indemnified Party to give such
        notice
        shall not relieve the Indemnifying Party of its obligations or liabilities
        pursuant to this Agreement, except (and only) to the extent that such failure
        shall have adversely prejudiced the Indemnifying Party.

       

      
        
          
          

        

        
          A-32

          
            

          

        

        
          
          

        

      

       

      An
        Indemnified Party shall have the right to employ separate counsel in any
        such
        Proceeding and to participate in the defense thereof, but the fees and expenses
        of such counsel shall be at the expense of such Indemnified Party or Parties
        unless:
        (i) the Indemnifying Party has agreed in writing to pay such fees and
        expenses; (ii) the Indemnifying Party shall have failed promptly to assume
        the defense of such Proceeding; or (iii) the named parties to any such
        Proceeding (including any impleaded parties) include both such Indemnified
        Party
        and the Indemnifying Party, and such Indemnified Party shall have been advised
        by counsel that a conflict of interest is likely to exist if the same counsel
        were to represent such Indemnified Party and the Indemnifying Party (in which
        case, if such Indemnified Party notifies the Indemnifying Party in writing
        that
        it elects to employ separate counsel at the expense of the Indemnifying Party,
        the Indemnifying Party shall not have the right to assume the defense thereof
        and the reasonable fees and expenses of separate counsel shall be at the
        expense
        of the Indemnifying Party). It being understood, however, that the Indemnifying
        Party shall not, in connection with any one such Proceeding (including separate
        Proceedings that have been or will be consolidated before a single judge)
        be
        liable for the fees and expenses of more than one separate firm of attorneys
        at
        any time for all Indemnified Parties, which firm shall be appointed by a
        majority-in-interest of the Indemnified Parties. The Indemnifying Party shall
        not be liable for any settlement of any such Proceeding effected without
        its
        written consent, which consent shall not be unreasonably withheld or delayed.
        No
        Indemnifying Party shall, without the prior written consent of the Indemnified
        Party, effect any settlement of any pending Proceeding in respect of which
        any
        Indemnified Party is a party, unless such settlement includes an unconditional
        release of such Indemnified Party from all liability on claims that are the
        subject matter of such Proceeding (and imposes no obligations or liabilities
        on
        the Indemnified Party).

       

      All
        reasonable fees and expenses of the Indemnified Party (including reasonable
        fees
        and expenses to the extent incurred in connection with investigating or
        preparing to defend such Proceeding in a manner not inconsistent with this
        Section) shall be paid to the Indemnified Party, as incurred, within twenty
        (20) Trading Days of written notice thereof to the Indemnifying Party
        (regardless of whether it is ultimately determined that an Indemnified Party
        is
        not entitled to indemnification hereunder; provided, that the Indemnifying
        Party
        may require such Indemnified Party to undertake to reimburse all such fees
        and
        expenses to the extent it is finally judicially determined that such Indemnified
        Party is not entitled to indemnification hereunder).

       

      (d)  Contribution.
        If a
        claim for indemnification under Section 6.4(a)
        or
(b)
        is
        unavailable to an Indemnified Party (by reason of public policy or otherwise),
        then each Indemnifying Party, in lieu of indemnifying such Indemnified Party,
        shall contribute to the amount paid or payable by such Indemnified Party
        as a
        result of such Losses, in such proportion as is appropriate to reflect the
        relative fault of the Indemnifying Party and Indemnified Party in connection
        with the actions, statements or omissions that resulted in such Losses as
        well
        as any other relevant equitable considerations. The relative fault of such
        Indemnifying Party and Indemnified Party shall be determined by reference
        to,
        among other things, whether any action in question, including any untrue
        or
        alleged untrue statement of a material fact or omission or alleged omission
        of a
        material fact, has been taken or made by, or relates to information supplied
        by,
        such Indemnifying Party or Indemnified Party, and the parties’ relative intent,
        knowledge, access to information and opportunity to correct or prevent such
        action, statement or omission. The amount paid or payable by a party as a
        result
        of any Losses shall be deemed to include, subject to the limitations set
        forth
        in Section
        6.4(c),
        any
        reasonable attorneys’ or other reasonable fees or expenses incurred by such
        party in connection with any Proceeding to the extent such party would have
        been
        indemnified for such fees or expenses if the indemnification provided for
        in
        this Section was available to such party in accordance with its
        terms.

       

      
        
          
          

        

        
          A-33

          
            

          

        

        
          
          

        

      

       

      The
        parties hereto agree that it would not be just and equitable if contribution
        pursuant to this Section 6.4(d)
        were
        determined by pro rata allocation or by any other method of allocation that
        does
        not take into account the equitable considerations referred to in the
        immediately preceding paragraph. Notwithstanding the provisions of this
Section 6.4(d),
        no
        Investor shall be required to contribute, in the aggregate, any amount in
        excess
        of the amount by which the net proceeds actually received by such Investor
        from
        the sale of the Registrable Securities subject to the Proceeding exceeds
        the
        amount of any damages that such Investor has otherwise been required to pay
        by
        reason of such untrue or alleged untrue statement or omission or alleged
        omission (including pursuant to Section
        6.4(b)).
        No
        Person guilty of fraudulent misrepresentation (within the meaning of
Section 11(f)
        of the
        Securities Act) shall be entitled to contribution from any Person who was
        not
        guilty of such fraudulent misrepresentation. 

       

      6.5  Dispositions.
        Each
        Investor agrees that, in connection with any sales of Registrable Securities
        by
        it pursuant to the Registration Statement, it will comply with the prospectus
        delivery requirements of the Securities Act as applicable to it and shall
        sell
        its Registrable Securities in accordance with the Plan of Distribution set
        forth
        in the Prospectus. Each Investor further agrees that, upon receipt of a notice
        from the Company of the occurrence of any event of the kind described in
        Sections 6.2(b)(ii), (iii) or (iv), such Investor will discontinue
        disposition of such Registrable Securities under the Registration Statement
        until such Investor is advised in writing by the Company that the use of
        the
        Prospectus, or amended Prospectus, as applicable, may be used. The Company
        may
        provide appropriate stop orders to enforce the provisions of this
        paragraph.

       

      6.6  No
        Piggyback on Registrations.
        Except
        as
        required pursuant to agreements listed on Schedule 3.1(p), neither the
        Company nor any of its security holders (other than the Investors in such
        capacity pursuant hereto) may include securities of the Company in the
        Registration Statement other than the Registrable Securities. The Company
        and
        all Investors acknowledge that certain of the Investors have, and may exercise,
        the right to include securities of the Company in the Registration Agreement
        pursuant to agreements listed on Schedule 3.1(p).

       

      ARTICLE
        7

       

      MISCELLANEOUS

       

      7.1  Termination.
        This
        Agreement may be terminated by the Company or any Investor, by written notice
        to
        the other parties, if the initial Closing has not been consummated by the
        third
        Business Day following the date of this Agreement; provided that no such
        termination will affect the right of any party to sue for any breach by the
        other party (or parties).

       

      
        
          
          

        

        
          A-34

          
            

          

        

        
          
          

        

      

       

      7.2  Fees
        and ExpensesEach
        party
        shall pay the fees and expenses of its advisers, counsel, accountants and
        other
        experts, if any, and all other expenses incurred by such party incident to
        the
        negotiation, preparation, execution, delivery and performance of this Agreement,
        provided
        that the
        Company shall reimburse Vivo for its expenses relating to legal counsel and
        diligence in an amount not to exceed $75,000, upon presentation of reasonably
        detailed invoices for such exepnses and shall reimburse Care Capital Investments
        II, LP for its expenses relating to legal counsel and diligence in an amount
        not
        to exceed $30,000, upon presentation of reasonably detailed invoices for
        such
        exepnses. The Company shall pay all Transfer Agent fees, stamp taxes and
        other
        taxes and duties levied in connection with the sale and issuance of their
        applicable Securities. The Company shall pay the placement fee and reasonable
        expenses of the Placement Agent in connection with the sale and issuance
        of the
        Securities.

       

      7.3  Entire
        Agreement.
        The
        Transaction Documents, together with the Exhibits and Schedules thereto,
        contain
        the entire understanding of the parties with respect to the subject matter
        hereof and supersede all prior agreements and understandings, oral or written,
        with respect to such matters, which the parties acknowledge have been merged
        into such documents, exhibits and schedules, except that this agreement shall
        not supersede the confidentiality or non-disclosure agreements entered into
        by
        the Company and the Investor, or an affiliate thereof. At or after the Closing,
        and without further consideration, the Company will execute and deliver to
        the
        Investors and the Investors will execute and deliver to the Company such
        further
        documents as may be reasonably requested in order to give practical effect
        to
        the intention of the parties under the Transaction Documents.

       

      7.4  Notices.
        Any
        and
        all notices or other communications or deliveries required or permitted to
        be
        provided hereunder shall be in writing and shall be deemed given and effective
        on the earliest of (a) the date of transmission, if such notice or
        communication is delivered via facsimile or email at the facsimile number
        or
        email address specified in this Section prior to 6:30 p.m. (New York City
        time)
        on a Trading Day, (b) the next Trading Day after the date of transmission,
        if such notice or communication is delivered via facsimile or email at the
        facsimile number or email address specified in this Section on a day that
        is not
        a Trading Day or later than 6:30 p.m. (New York City time) on any Trading
        Day,
        (c) the Trading Day following the date of deposit with a nationally
        recognized overnight courier service, or (d) upon actual receipt by the
        party to whom such notice is required to be given. The addresses, facsimile
        numbers and email addresses for such notices and communications are those
        set
        forth on the signature pages hereof, or such other address or facsimile number
        as may be designated in writing hereafter, in the same manner, by any such
        Person.

       

      7.5  Amendments;
        Waivers.
        No
        provision of this Agreement may be waived or amended except in a written
        instrument signed, in the case of an amendment, by the Company and the holders
        of at least 67% of the Registrable Securities held on the date of such amendment
        or, in the case of a waiver, by the party against whom enforcement of any
        such
        waiver is sought. No waiver of any default with respect to any provision,
        condition or requirement of this Agreement shall be deemed to be a continuing
        waiver in the future or a waiver of any subsequent default or a waiver of
        any
        other provision, condition or requirement hereof, nor shall any delay or
        omission of either party to exercise any right hereunder in any manner impair
        the exercise of any such right. Notwithstanding the foregoing, a waiver or
        consent to depart from the provisions hereof with respect to a matter that
        relates exclusively to the rights of Investors under Article VI may be
        given by Investors holding at least a majority of the Registrable Securities
        to
        which such waiver or consent relates, and any such amendment shall be binding
        upon the Company and all holders of Registrable Securities.

       

      
        
          
          

        

        
          A-35

          
            

          

        

        
          
          

        

      

       

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

       

      7.7  Successors
        and Assigns.
        This
        Agreement shall be binding upon and inure to the benefit of the parties and
        their successors and permitted assigns. The Company may not assign this
        Agreement or any rights or obligations hereunder without the prior written
        consent of the Investors. Any Investor may assign its rights under this
        Agreement to any Person to whom such Investor assigns or transfers any
        Securities, provided (i) such transferor agrees in writing with the
        transferee or assignee to assign such rights, and a copy of such agreement
        is
        furnished to the Company after such assignment, (ii) the Company is
        furnished with written notice of (x) the name and address of such
        transferee or assignee and (y) the Registrable Securities with respect to
        which such registration rights are being transferred or assigned,
        (iii) following such transfer or assignment, the further disposition of
        such securities by the transferee or assignee is restricted under the Securities
        Act and applicable state securities laws, (iv) such transferee agrees in
        writing to be bound, with respect to the transferred Securities, by the
        provisions hereof that apply to the “Investors,” and (v) such transfer
        shall have been made in accordance with the applicable requirements of this
        Agreement and with all laws applicable thereto.

       

      7.8  No
        Third-Party Beneficiaries.
        This
        Agreement is intended for the benefit of the parties hereto and their respective
        successors and permitted assigns and is not for the benefit of, nor may any
        provision hereof be enforced by, any other Person, except that each Indemnified
        Party is an intended third party beneficiary of Section 6.4 and (in each
        case) may enforce the provisions of such Sections directly against the parties
        with obligations thereunder.

       

      7.9  Governing
        Law; Venue; Waiver of Jury TrialALL
        QUESTIONS CONCERNING THE CONSTRUCTION, VALIDITY, ENFORCEMENT AND INTERPRETATION
        OF THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE
        LAWS
        OF THE STATE OF NEW YORK.
        THE
        COMPANY AND INVESTORS HEREBY IRREVOCABLY SUBMIT 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 BROUGHT BY THE COMPANY OR ANY
        INVESTOR HEREUNDER, IN CONNECTION HEREWITH OR WITH ANY TRANSACTION CONTEMPLATED
        HEREBY OR DISCUSSED HEREIN (INCLUDING WITH RESPECT TO THE ENFORCEMENT OF
        ANY OF
        THE TRANSACTION DOCUMENTS), AND HEREBY IRREVOCABLY WAIVE, AND AGREE NOT TO
        ASSERT IN ANY SUIT, ACTION OR PROCEEDING BROUGHT BY THE COMPANY OR ANY INVESTOR,
        ANY CLAIM THAT IT IS NOT PERSONALLY SUBJECT TO THE JURISDICTION OF ANY SUCH
        COURT, OR THAT 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 VIA
        REGISTERED OR CERTIFIED MAIL OR OVERNIGHT DELIVERY (WITH EVIDENCE OF DELIVERY)
        TO SUCH PARTY AT THE ADDRESS IN EFFECT FOR NOTICES TO IT UNDER THIS AGREEMENT
        AND AGREES THAT SUCH SERVICE SHALL CONSTITUTE GOOD AND SUFFICIENT SERVICE
        OF
        PROCESS AND NOTICE THEREOF. NOTHING CONTAINED HEREIN SHALL BE DEEMED TO LIMIT
        IN
        ANY WAY ANY RIGHT TO SERVE PROCESS IN ANY MANNER PERMITTED BY LAW. THE COMPANY
        AND INVESTORS HEREBY WAIVE ALL RIGHTS TO A TRIAL BY JURY.

       

      
        
          
          

        

        
          A-36

          
            

          

        

        
          
          

        

      

       

      7.10  Survival.
        The
        representations, warranties and covenants contained herein shall survive
        the
        Closing.

       

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

       

      7.12  Severability.
        If
        any
        provision of this Agreement is held to be invalid or unenforceable in any
        respect, the validity and enforceability of the remaining terms and provisions
        of this Agreement shall not in any way be affected or impaired thereby and
        the
        parties will attempt to agree upon a valid and enforceable provision that
        is a
        reasonable substitute therefor, and upon so agreeing, shall incorporate such
        substitute provision in this Agreement.

       

      7.13  Replacement
        of Securities.
        If
        any
        certificate or instrument evidencing any Securities is mutilated, lost, stolen
        or destroyed, the Company shall issue or cause to be issued in exchange and
        substitution for and upon cancellation thereof, or in lieu of and substitution
        therefor, a new certificate or instrument, but only upon receipt of evidence
        reasonably satisfactory to the Company of such loss, theft or destruction
        and
        the execution by the holder thereof of a customary lost certificate affidavit
        of
        that fact and an agreement to indemnify and hold harmless the Company for
        any
        losses in connection therewith. The applicants for a new certificate or
        instrument under such circumstances shall also pay any reasonable third-party
        costs associated with the issuance of such replacement Securities.

       

      7.14  Remedies.
        In
        addition to being entitled to exercise all rights provided herein or granted
        by
        law, including recovery of damages, each of the Investors and the Company
        will
        be entitled to seek specific performance under the Transaction Documents.
        The
        parties agree that monetary damages may not be adequate compensation for
        any
        loss incurred by reason of any breach of obligations described in the foregoing
        sentence and hereby agrees to waive in any action for specific performance
        of
        any such obligation (other than in connection with any action for temporary
        restraining order) the defense that a remedy at law would be
        adequate.

       

      7.15  Adjustments
        in Share Numbers and Prices.
        In
        the
        event of any stock split, subdivision, dividend or distribution payable in
        shares of Common Stock (or other securities or rights convertible into, or
        entitling the holder thereof to receive directly or indirectly shares of
        Common
        Stock), combination or other similar recapitalization or event occurring
        after
        the date hereof and prior to the Closing, each reference in any Transaction
        Document to a number of shares or a price per share shall be amended to
        appropriately account for such event.

       

      
        
          
          

        

        
          A-37

          
            

          

        

        
          
          

        

      

       

      7.16  Independent
        Nature of Investors’ Obligations and Rights.
        The
        obligations of each Investor under any Transaction Document are several and
        not
        joint with the obligations of any other Investor, and no Investor shall be
        responsible in any way for the performance of the obligations of any other
        Investor under any Transaction Document. The decision of each Investor to
        purchase Securities pursuant to this Agreement has been made by such Investor
        independently of any other Investor and independently of any information,
        materials, statements or opinions as to the business, affairs, operations,
        assets, properties, liabilities, results of operations, condition (financial
        or
        otherwise) or prospects of the Company which may have been made or given
        by any
        other Investor or by any agent or employee of any other Investor, and no
        Investor or any of its agents or employees shall have any liability to any
        other
        Investor (or any other person) relating to or arising from any such information,
        materials, statements or opinions. Nothing contained herein or in any
        Transaction Document, and no action taken by any Investor pursuant thereto,
        shall be deemed to constitute the Investors as a partnership, an association,
        a
        joint venture or any other kind of entity, or create a presumption that the
        Investors are in any way acting in concert or as a group with respect to
        such
        obligations or the transactions contemplated by the Transaction Document.
        Each
        Investor acknowledges that no other Investor has acted as agent for such
        Investor in connection with making its investment hereunder and that no other
        Investor will be acting as agent of such Investor in connection with monitoring
        its investment hereunder. Each Investor shall be entitled to independently
        protect and enforce its rights, including without limitation the rights arising
        out of this Agreement or out of the other Transaction Documents, and it shall
        not be necessary for any other Investor to be joined as an additional party
        in
        any proceeding for such purpose.

       

      [SIGNATURE
        PAGES TO FOLLOW]

       

      
        
          
          

        

        
          A-38

          
            

          

        

        
          
          

        

      

       

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

       

      
        

          
            	
                    ACURA
                      PHARMACEUTICALS, INC.

                     

                  
	
                    By:

                  	
                     

                  
	
                    Name:

                  	
                    Andrew
                      D. Reddick

                  
	
                    Title:

                  	
                    President
                      and Chief Executive Officer

                  

          

           

          
            	
                    Address
                      for Notice:

                  
	 
	
                    Acura
                      Pharmaceuticals, Inc. 

                  
	
                    616
                      N. North Court, Suite 120

                  
	
                    Palatine,
                      Illinois 60067

                  

          

          
            	
                    Facsimile
                      No.: 

                  	
                    (847)-705-5399

                  
	
                    Telephone
                      No.: 

                  	
                    (847)
                      705-7709

                  
	
                    Email:
                      

                  	
                    areddick@acurapharm.com

                  
	 	 
	
                    With
                      a copy to:

                  	 
	 	 
	
                    John
                      P. Reilly, Esq.

                  
	
                    Seiden
                      Wayne LLC

                  
	
                    2
                      Penn Plaza East

                  
	
                    Newark,
                      NJ 07105

                  
	 
	
                    Facsimile:
                      973-491-5555

                  
	
                    Telephone:
                      973-491-3354

                  
	
                    Email:
                      jpr@seidenwayne.com

                  

          

        

         

      

      
        
          
          

        

        
          A-39

          
            

          

        

        
          
          

        

      

       

      Investor
        Signature Page

       

      By
        its
        execution and delivery of this signature page, the undersigned Investor hereby
        joins in and agrees to be bound by the terms and conditions of the Securities
        Purchase Agreement dated as of
        August
        20, 2007 (the “Securities
        Purchase Agreement”)
        between Acura Pharmaceuticals, Inc. and each of such Investors (as defined
        therein), as to the number of shares of Common Shares and the number of their
        Warrant Shares set forth on Exhibit
        A-1
        hereto
        and/or Exhibit
        A-2
        hereto,
        as applicable, and authorizes this signature page to be attached to the
        Securities Purchase Agreement or counterparts thereof.

       

      
        
          	 	 	 
	 	
                  Name
                    of
                    Investor:

                   

                   

                
	 
 	 
 	 
 
	Date: 	By:  	  
                  
	 	
                  
Name:
	 	Title:

        

      

       

      
        	 	Address:                                        
	 	                                         

	 	                                         
	 	Telephone No.:                                
                
	 	Facsimile No.:                                     
                
	 	 
	 	Number of Units:                           
	 	Aggregate Purchase Price: $            

      

      

      Agreed
        to
        and accepted this 

      20th
        day of
        August, 2007

      

      ACURA
        PHARMACEUTICALS, INC.

       

      

      By: ________________________________  

      Name: 
        Andrew
        D. Reddick

      Title: President
        and Chief Executive Officer 

       

      
        
          
          

        

        
          A-40

          
            

          

        

        
          
          

        

      

       

      Exhibits:

      A-1 Schedule
        of Investors - Initial Closing Units Purchased

      A-2 Schedule
        of Investors - Subsequent Closing units Purchased

      A-3 Schedule
        of Bridge Loans being Converted

      B Instruction
        Sheet for Investors

      C Opinion
        of Company Counsel

      D Plan
        of
        Distribution

      E Transfer
        Agent Instructions

      F Form
        of
        Warrant

      G:
         Company
        Officer’s Certificate

      H: Company
        Secretary’s Certificate

      

      

      Schedules:

      3.1(a) Subsidiaries

      3.1(d) Debt
        Repayment Triggering Event

      3.1(f) Capitalization

      3.1(g) SEC
        Reports

      3.1(h)
         Material
        Adverse Events

      3.1(j) Compliance

      3.1(p) Registration
        Rights

      3.1(q) Takeover
        Protections

      3.1(aa) Indebtedness

      3.1(ff) Subsidiary
        Rights

       

      
        
          
          

        

        
          A-41

          
            

          

        

        
          
          

        

      

      

        Exhibit A-1

         

        Schedule
          of Investors

         

        Initial
          Closing Units Purchased

         

        
          	
                  Investor

                	
                  Units

                	
                  Common
                    Shares

                	
                  Warrant
                    Shares

                	
                  Purchase
                    Price

                
	
                  Vivo
                    Ventures Fund VI, L.P.

                	
                  4,963,636

                	
                  19,854,444

                	
                  4,963,636

                	
                  $5,360,726.88
                    in cash 

                
	
                  Vivo
                    Ventures VI
                    Affiliates Fund, L.P

                	
                  36,364

                	
                  145,456

                	
                  36,364

                	
                  $39,273.12
                    in cash

                
	
                  GCE
                    Holdings LLC

                	
                  17,864,814

                	
                  71,459,256

                	
                  17,864,814

                	
                  $9.000.000
                    in cash and conversion of Bridge Loans on Exhibit
                    A-3

                
	
                  Michael
                    Weisbrot
                    and Susan Weisbrot

                	
                  138,888

                	
                  555,552

                	
                  138,888

                	
                  Conversion
                    of Bridge Loans on Exhibit
                    A-3

                
	
                  CGM
                    IRACustodian f/b/o Michael
                    M. Weisbrot

                	
                  185,185

                	
                  740,740

                	
                  185,185

                	
                  $200,000
                    in cash 

                
	
                  Dennis
                    Adams

                	
                  138,888

                	
                  555,552

                	
                  138,888

                	
                  $100,000
                    in cash and conversion of Bridge Loans on Exhibit
                    A-3

                
	
                  George
                    Boudreau

                	
                  138,888

                	
                  555,552

                	
                  138,888

                	
                  $100,000
                    in cash and conversion of Bridge Loans on Exhibit
                    A-3

                
	
                  Greg
                    Wood

                	
                  46,296

                	
                  185,184

                	
                  46,296

                	
                  $50,000
                    in cash

                
	
                  Peter
                    Stieglitz 

                	
                  46,296

                	
                  185,184

                	
                  46,296

                	
                  $50,000
                    in cash

                
	
                  Ian
                    Meierdiercks

                	
                  46,296

                	
                  185,184

                	
                  46,296

                	
                  $50,000
                    in cash

                
	
                  TOTAL

                	
                  23,605,551

                	
                  94,422,204

                	
                  23,605,551

                	 

        

         

        
          
            
            

          

          
            A-42

            
              

            

          

          
            
            

          

        

        Exhibit A-2

         

        Schedule
          of Investors

         

        Subsequent
          Closing Units Purchased

         

        

        
          	
                  Investor

                	
                  Units

                	
                  Common
                    Shares

                	
                  Warrant
                    Shares

                	
                  Purchase
                    Price

                
	
                  None

                	 	 	 	 
	
                  TOTAL

                	
                  0

                	
                  0

                	
                  0

                	
                  $0

                

        

        

        
          
             

             

            
            

          

          
            A-43

            
              

            

          

          
            
            

          

        

        

        Exhibit
          A-3

        

        Schedule
          of Bridge Loans Being Converted

         

        
          	
                  Bridge
                    Lender

                	 	
                  Principal
                    Amount of Bridge Loans Being Converted*

                	 
	
                  GCE
                    Holdings LLC

                	 	
                  $

                	
                  10,294,000

                	 
	
                  Dennis
                    Adams

                	 	 	
                  50,000

                	 
	
                  Michael
                    & Susan Weisbrot

                	 	 	
                  150,000

                	 
	
                  George
                    Boudreau

                	 	
                  $

                	
                  50,000

                	 

        

        

        *All
          principal is being converted under this Agreement, and all accrued but
          unpaid
          interest shall be paid in cash by the Company at the initial
          Closing

         

        
          
            
            

          

          
            A-44

            
              

            

          

          
            
            

          

        

         

        Exhibit B

         

        ACURA
          PHARMACEUTICALS, INC.

         

        INSTRUCTION
          SHEET FOR INVESTOR

         

         

        (to
          be
          read in conjunction with the entire Securities Purchase Agreement)

         

        A.    Complete
          the following items in the Securities Purchase Agreement:

         

        1.    
Complete
          and execute the Investor Signature Page. The Agreement must be executed
          by an
          individual authorized to bind the Investor.

         

        2.    
          Exhibit B-1 - Stock Certificate Questionnaire:

        Provide
          the information requested by the Stock Certificate Questionnaire; 

         

        3.    
          Exhibit B-2 - Registration Statement Questionnaire:

        Provide
          the information requested by the Registration Statement
          Questionnaire
          on
or
          prior
          to August 27, 2007.
          

         

        4.    
Exhibit B-3
          - Investor Certificate:

        Provide
          the information requested by the Certificate for Corporate, Partnership,
          Trust,
          Foundation and Joint Investors (B-3).

         

        5.    
Return,
          via facsimile, the signed Securities Purchase Agreement, including the
          properly
          completed Exhibits B-1 and B-3 (and also provide the completed Exhibit
          B-2 on
or
          prior
          to August 27, 2007),
          to:

        

        Acura
          Pharmaceuticals, Inc.

        616
          N.
          North Court, Suite 120, Palatine, Illinois 60067

        Attention:
          Andrew D. Reddick

        Facsimile:
          (847)-705-5399

        with
          a
          copy to:

        

        Seiden
          Wayne LLC

        Two
          Penn
          Plaza East Newark, NJ 07105

        Attention:
          John P. Reilly 

        Facsimile:
          (973) 491-3555

        E-mail:
          jpr@seidenwayne.com 

        

        
          	 	
                  6.

                	
                  After
                    completing instruction number 5 above, deliver the original signed
                    Securities Purchase Agreement including the properly completed
                    Exhibits
                    B-1 and B-3 (and also provide the completed Exhibit B-2 on or
                    prior to August 27, 2007) to:

                

        

        

         

        
          
            
            

          

          
            B-1

            
              

            

          

          
            
            

          

        

         

        
          Acura
            Pharmaceuticals, Inc.

          616
            N.
            North Court, Suite 120, Palatine, Illinois 60067

          Attention:
            Andrew D. Reddick

        

         

        with
          a
          copy to:

        

        Seiden
          Wayne LLC

        Two
          Penn
          Plaza East Newark, NJ 07105

        Attention:
          John P. Reilly 

         

        B.    Instructions
          regarding the transfer of funds for the purchase of Securities are:

        

        
          	BankName 	
                  LaSalle
                    National Bank 

                

          	 	135 South LaSalle
                  Street

          	 	Chicago, IL 60603
                  USA

          	 	 

          	Account
                  Name	Acura Pharmaceuticals,
                  Inc.

          	Account
                  Number 	5800103177

          	ABA#	071 000
                  505

          	 	 

          	Swift
                  #	LASLU44

          	IBN
                  #	DE805000 0000 00 5000
                  21
                  30

        

         

        (a)  LaSalle
          National Bank Contact

         

        Karen
          Peterson

        Commercial
          Banking

        135
          South LaSalle Street

        Chicago,
          Illinois 60603

        312
          904-8927

        312
          904-8802 (Fax)

        
          
            
            

          

          
            B-2

            
              

            

          

          
            
            

          

        

         

        Exhibit B-1

         

        ACURA
          PHARMACEUTICALS, INC.

         

        STOCK
          CERTIFICATE QUESTIONNAIRE

         

        

        
          	 	
                  Please
                    provide us with the following information:

                	 
	
                  1.

                	
                  The
                    exact name that the Securities are to be registered in (this
                    is the name
                    that will appear on the stock certificate(s)). You may use a
                    nominee name
                    if appropriate:

                	 
	 	 	 
	
                  2.

                	
                  The
                    relationship between the Investor of the Securities and the Registered
                    Holder listed in response to item 1 above:

                	
                
	 	 	 
	
                  3.

                	
                  The
                    mailing address, telephone and telecopy number of the Registered
                    Holder
                    listed in response to item 1 above:

                	 
	 	 	 
	 	 	 
	 	 	 
	 	 	 
	 	 	 
	
                  4.

                	
                  The
                    Tax Identification Number of the Registered Holder listed in
                    response to
                    item 1 above:

                	 

        

         

        
          
            
            

          

          
            B-1-1

            
              

            

          

          
            
            

          

        

         

        Exhibit B-2

         

        ACURA
          PHARMACEUTICALS, INC.

         

        REGISTRATION
          STATEMENT QUESTIONNAIRE

         

        

         

        In
          connection with the Registration Statement, please provide us with the
          following
          information regarding the Investor, on or prior to August 27,
          2007.

         

        1.    Please
          state your organization’s name exactly as it should appear in the Registration
          Statement:

         

        ______________________________________________________________________

         

        Except
          as
          set forth below, your organization does not hold any equity securities
          of the
          Company on behalf of another person or entity.

         

        State
          any
          exceptions here:

         

        ______________________________________________________________________

         

        2.    Address
          of
          your organization:

         

        ______________________________________________________

         

        ______________________________________________________

         

        Telephone:
          ___________________________

         

        Fax:
          ________________________________

         

        Contact
          Person: _______________________

         

        3.    Have
          you or
          your organization had any position, office or other material relationship
          within
          the past three years with the Company or its affiliates? (Include any
          relationships involving you or your affiliates, officers, directors, or
          principal equity holders (5% or more) that has held any position or office
          or
          has had any other material relationship with the Company (or its predecessors
          or
          affiliates) during the past three years.)

         

        Yes
          _____
          No _____ 

         

        If
          yes,
          please indicate the nature of any such relationship below:

         

        
          4.    Are
            you the
            beneficial owner of any other securities of the Company? (Include any
            equity
            securities that you beneficially own or have a right to acquire within
            60 days
            after the date hereof, and as to which you have sole voting power, shared
            voting
            power, sole investment power or shared investment power.)

        

         

        
          
            
            

          

          
            B-3-1

            
              

            

          

          
            
            

          

        

         

        Yes
          _____
          No _____ 

         

        If
          yes,
          please describe the nature and amount of such ownership as of a recent
          date.

         

        ______________________________________________________________________

         

        ______________________________________________________________________

         

        5.    If
          you are an
          entity, does any natural person have voting or investment power over the
          shares
          held by you?

         

        _______
           Yes   _______
           No

         

        If
          so,
          please state the person’s or persons’ names(s):

         

        ______________________________________________________________________

         

        ______________________________________________________________________

         

        ______________________________________________________________________

         

        6.
          Except
          as set forth below, you wish that all the shares of the Company’s common stock
          beneficially owned by you or that you have the right to acquire from the
          Company
          in connection with the Securities Purchase Agreement be offered for your
          account
          in the Registration Statement.

         

        State
          any
          exceptions here:

         

        ______________________________________________________________________

         

        ______________________________________________________________________

         

        7.
          Have
          you made or are you aware of any arrangements relating to the distribution
          of
          the shares of the Company pursuant to the Registration Statement?

         

        Yes
          _____
          No _____ 

         

        If
          yes,
          please describe the nature and amount of such arrangements.

         

        
          
            
            

          

          
            B-3-2

            
              

            

          

          
            
            

          

        

         

        NASD
          Questions

        
          1. Are
            you (i) a “member”1 of
            the
            National Association of Securities Dealers, Inc. (the “NASD”),
            (ii) an “affiliate”2 of
            a
            member of the NASD, (iii) a “person associated with a member” or an
“associated person of a member”3
            of
            the
            NASD or (iv) an immediate family member4 of
            any of
            the foregoing persons? If yes, please identify the member and describe
            such
            relationship (whether direct or indirect), and please respond to Question
            Number
            2 below; if no, please proceed directly to Question Number
            3.

           

          2. If
            you answered “yes” to Question Number 1, please furnish any information as to
            whether any such member intends to participate in any capacity in the
            private
            placement, including the details of such participation: 

        

        
          
Description:
            

        

         

        ______________________________________________________________________

         

        ______________________________________________________________________

         

        

          1    NASD
            defines a “member” as any broker or dealer admitted to membership in the NASD,
            or any officer or partner or branch manager of such a member, or any
            person
            occupying a similar status or performing a similar function for such
            a
            member.

          2     The
            term
“affiliate” means a person that directly, or indirectly through one or more
            intermediaries, controls, or is controlled by, or is in common control
            with, the
            person specified. Persons who have acted or are acting on behalf of or
            for the
            benefit of a person include, but are not necessarily limited to, directors,
            officers, employees, agents, consultants and sales representatives. The
            following should apply for purposes of the foregoing:

            (i)
             
            a person
            should be presumed to control a Member if the person beneficially owns
            10% or
            more the outstanding voting securities of a Member which is a corporation,
            or
            beneficially owns a partnership interest in 10% or more of the distributable
            profits or losses of a Member which is a partnership; 

            (ii)
             
            a Member
            should be presumed to control a person if the Member and Persons Associated
            With
            a Member beneficially own 10% or more of the outstanding voting securities
            of a
            person which is a corporation, or beneficially own a partnership interest
            in 10%
            or more of the distributable profits or losses of a person which is a
            partnership; 

            (iii)
             
            a person
            should be presumed to be under common control with a Member if:

            (1)
            the
            same person controls both the Member and another person by beneficially
            owning
            10% or more of the outstanding voting securities of a Member or person
            which is
            a corporation, or by beneficially owning a partnership interest in 10%
            or more
            of the distributable profits or losses of a Member or person which is
            a
            partnership; or 

            (2)
            a
            person having the power to direct or cause the direction of the management
            or
            policies of the Member or such person also has the power to direct or
            cause the
            direction of the management or policies of the other entity in
            question.

          3    The
            NASD
            defines a “person associated with a member” or an “associated person of a
            member” as being every sole proprietor, partner, equity owner, officer, director
            or branch manager of any member, or any natural person occupying a similar
            status or performing similar functions, or any natural person engaged
            in the
            investment banking or securities business who directly or indirectly
            controls or
            is controlled by such member (for example, any employee), whether or
            not any
            such person is registered or exempt from registration with the
            NASD.

          4    Immediate
            family includes parents, mother-in-law, father-in-law, husband or wife,
            brother
            or sister, brother-in-law or sister-in-law, son-in-law or daughter-in-law,
            and
            children, or any other person who is supported, directly or indirectly,
            to a
            material extent, by a person associated with a member of the NASD or
            any other
            broker/dealer.

        

         

        
          
            
            

          

          
            B-3-3

            
              

            

          

          
            
            

          

        

         

        3. Are
          you or have you been an “underwriter or related person”5 or
          a
          person associated with an underwriter or related person, including, without
          limitation, with respect to the proposed public offering? If yes, please
          identify the underwriter or related person and describe such relationship
          (whether direct or indirect). 

         

        Yes
          _____
          No _____ 

         

        Description:
          

         

        ______________________________________________________________________

         

        ______________________________________________________________________

         

        4. If
          known, please describe in detail any underwriting compensations, arrangements
          or
          dealings entered into during the previous twelve months, or proposed to
          be
          consummated in the next twelve months, between (i) any underwriter or
          related person, member of the NASD, affiliate of a member of the NASD,
          person
          associated with a member or associated person of a member of the NASD or
          any
          immediate family member thereof, on the one hand, and (ii) the Company, or
          any director, officer or stockholder thereof, on the other hand, which
          provides
          for the receipt of any item of value and/or the transfer of any warrants,
          options or other securities from the Company to any such person (other
          than the
          information relating to the arrangements with any investment firm or
          underwriting organization which may participate in the proposed public
          offering). 

         

        Description:
          

         

        ______________________________________________________________________

         

        ______________________________________________________________________

         

        5. Have
          you purchased the securities in the ordinary course of business? 

         

        Yes
          _____
          No _____ 

         

         

         

        ________________________

          1  The
            term
“underwriter or related person” includes underwriters, underwriters’ counsel,
            financial consultants and advisors, finders, members of the selling or
            distribution group, and any and all other persons associated with or
            related to
            any of such persons, including members of the immediate family of such
            persons.

        

         

        
          
            
            

          

          
            B-3-4

            
              

            

          

          
            
            

          

        

         

        ACKNOWLEDGEMENT

         

        The
          undersigned hereby agrees to notify the Company promptly of any changes
          in the
          foregoing information which should be made as a result of any developments,
          including the passage of time. The undersigned also agrees to provide the
          Company and the Company’s counsel any and all such further information regarding
          the undersigned promptly upon request in connection with the preparation,
          filing, amending, and supplementing of the Registration Statement (or any
          prospectus contained therein). The undersigned hereby consents to the use
          of all
          such information in the Registration Statement.

         

        The
          undersigned understands and acknowledges that the Company will rely on
          the
          information set forth herein for purposes of the preparation and filing
          of the
          Registration Statement.

         

        The
          undersigned understands that the undersigned may be subject to serious
          civil and
          criminal liabilities if the Registration Statement, when it becomes effective,
          either contains an untrue statement of a material fact or omits to state
          a
          material fact required to be stated in the Registration Statement or necessary
          to make the statements in the Registration Statement not misleading. The
          undersigned represents and warrants that all information it provides to
          the
          Company and its counsel is currently accurate and complete and will be
          accurate
          and complete at the time the Registration Statement becomes effective and
          at all
          times subsequent thereto and agrees to notify the Company immediately of
          any
          misstatement of a material fact in the Registration Statement or the omission
          of
          any material fact necessary to make the statements contained therein not
          misleading.

         

        Dated:
          __________

        ______________________________

        Name
          

        ______________________________

        Signature

        ______________________________

        Name
          and
          Title of Signatory

         

        
          
            
            

          

          
            B-3-5

            
              

            

          

          
            
            

          

        

      

       

      
        Exhibit B-3

         

        ACURA
          PHARMACEUTICALS, INC.

         

         

        CERTIFICATE

        

        The
          undersigned certifies that the representations and responses below are
          true and
          accurate:

        

        (a) If
          other
          than an individual, the investor has been duly formed and is validly existing
          and has full power and authority to invest in the Company. The person signing
          on
          behalf of the undersigned has the authority to execute and deliver the
          Securities Purchase Agreement on behalf of the Investor and to take other
          actions with respect thereto.

        

        (b) Indicate
          the form of entity of the undersigned: 

        

        
          	
                	____	
                  Individual

                

        

        
          	
                	____	
                  Limited
                    Partnership 

                

        

        
          	
                	____	
                  General
                    Partnership 

                

        

        
          	
                	____	
                  Limited
                    Liability Company

                

        

        
          	
                	____	
                  Corporation

                

        

        
          
            	
                  	____	
                    Revocable
                      Trust (identify each grantor and indicate under what circumstances
                      the
                      trust is revocable by the grantor): 

                     

                      

                    

                     

                    
                      
(Continue
                      on a separate piece of paper, if
                      necessary.)

                  

          

        

        
          
            	
                  	____	
                    Other
                      type of Trust (indicate type of trust and, for trusts other
                      than pension
                      trusts, name the grantors and beneficiaries):

                     

                    
                      

                    

                     

                    
                      

                    
(Continue on a separate piece of paper,
                    if
                    necessary.)

          

        

        
          	
                	
                  ____

                	
                  Other
                    form of organization (indicate form of organization 

                  (

                  
                    

                  

                  )

                  
                    

                  

                

        

         

        (c) If
          other
          than an individual, indicate the approximate date the undersigned entity
          was
          formed: _____.

        

        (d) In
          order
          for the Company to offer and sell the Securities in conformance with state
          and
          federal securities laws, the following information must be obtained regarding
          your investor status. Please initial
          each category
          applicable to you as an investor in the Company.

        

        
          	
                	____
                  1.	
                  the
                    undersigned had individual income (exclusive of any income attributable
                    to
                    spouse) of more than $200,000 in each of the most recent two
                    years or
                    joint income with the undersigned's spouse in excess of $300,000
                    in each
                    of such years and reasonably expects to have income of at least
                    the same
                    level for the current year. 

                

        

        

        
          
            
            

          

          
            B-3-6

            
              

            

          

          
            
            

          

        

        

        
          	
                	____
                  2.	
                  the
                    undersigned had individual income (exclusive of any income attributable
                    to
                    spouse) of more than $200,000 in each of the most recent two
                    years or
                    joint income with the undersigned's spouse in excess of $300,000
                    in each
                    of such years and reasonably expects to have income of at least
                    the same
                    level for the current year. 

                

        

        

        
          	
                	___
                  3.	
                  a
                    bank as defined in Section 3(a)(2) of the Securities Act, or
                    any savings
                    and loan association or other institution as defined in Section
                    3(a)(5)(A)
                    of the Securities Act whether acting in its individual or fiduciary
                    capacity;

                

        

        

        
          	
                	___
                  4.	
                  a
                    broker or dealer registered pursuant to Section 15 of the Exchange
                    Act;

                

        

        

        
          	
                	___
                  5	
                  an
                    insurance company as defined in Section 2(13) of the Securities
                    Act;

                

        

        

        
          	
                	___
                  6.	
                  an
                    investment company registered under the Investment Company Act
                    of 1940, as
                    amended, or a business development company as defined in Section 
                    2(a)(48) of such Act;

                

        

        

        
          	
                	___
                  7.	
                  a
                    Small Business Investment Company licensed by the U.S. Small
                    Business
                    Administration under Section 301(c) or (d) of the Small Business
                    Investment Act of 1958;

                

        

        

        
          	
                	___
                  8.	
                  a
                    plan established and maintained by a state, its political subdivisions,
                    or
                    any agency or instrumentality of a state or its political subdivisions,
                    for the benefit of its employees, if such plan has total assets
                    in excess
                    of $5,000,000;

                

        

        

        
          	
                	___
                  9.	
                  an
                    employee benefit plan within the meaning of the Employee Retirement
                    Income
                    Security Act of 1974, if the investment decision is made by a
                    plan
                    fiduciary, as defined in Section 3(21) of such Act, which is either a
                    bank, savings and loan association, insurance company, or registered
                    investment advisor, or if the employee benefit plan has total
                    assets in
                    excess of $5,000,000 or, if a self-directed plan, with investment
                    decisions made solely by persons that are accredited
                    investors;

                

        

        

        
          	
                	___
                  10.	
                  a
                    private business development company as defined in Section 202(a)(22)
                    of the Investment Advisers Act of 1940, as
                    amended;

                

        

        

        
          	
                	___
                  11.	
                  an
                    organization described in Section 501(c)(3) of the Internal Revenue
                    Code, corporation, Massachusetts or similar business trust, or
                    partnership, not formed for the specific purpose of acquiring
                    the
                    Securities, with total assets in excess of
                    $5,000,000;

                

        

        

        
          	
                	___
                  12.	
                  a
                    trust, with total assets in excess of $5,000,000, not formed
                    for the
                    specific purpose of acquiring the Securities, whose purchase
                    is directed
                    by a sophisticated person as described in Rule 
                    506(b)(2)(ii) under the Exchange
                    Act;

                

        

        

        
          
            
            

          

          
            B-3-7

            
              

            

          

          
            
            

          

        

         

        
          	
                	___
                  13.	
                  an
                    entity in which all of the equity owners qualify under any of
                    the above
                    subparagraphs. If the undersigned belongs to this investor category
                    only,
                    list the equity owners of the undersigned, and the investor category
                    which
                    each such equity owner satisfies: 

                

        

         

        
          
            

          

        

        
           

          
            

          

        

         

          
            

          

        

        (Continue
          on a separate piece of paper, if necessary.)

        
 

        (e) Please
          set forth in the space provided below the (i) states, if any, in the U.S.
          in which you maintained your principal office during the past two years
          and the
          dates during which you maintained such principal office in each state,
          (ii) state(s), if any, in which you are incorporated or otherwise organized
          and (iii) if an individual, the state(s), if any, in which you pay income
          taxes.

        

        
          
            
              

            

          

           

          
            
              

            

          

           

          
            
              

            

          

        

         

        Dated:
          August __,
          2007

         

                                                                                   

        Name
          of investor

         

                                                                                   

        Signature
          and title of authorized officer, partner or trustee

        

        

        
          
            
            

          

          
            B-3-8

            
              

            

          

          
            
            

          

        

         

        Exhibit C

         

        OPINION
          OF COMPANY CORPORATE COUNSEL

         

        1.
           The
          Company is duly
          incorporated,
          validly
          existing and in good standing under the
          New York Business Corporation Law and has the corporate power
          to own and lease the properties it purports to own and lease, to conduct
          the
          business in which it is engaged and
          to execute and deliver, and to perform its obligations under, this
          Agreement, including to
          issue and deliver the Common Shares and the Warrants hereunder.

         

        2. This
          Agreement has been duly authorized, executed and delivered by the
          Company.

         

        3. The
          Common Shares have been duly authorized and, upon issuance and delivery
          thereof
          and payment therefor pursuant to this Agreement, will be validly issued,
          fully
          paid and non-assessable and free of any pre-emptive or similar rights.
          The
          Warrants have been duly authorized and upon issuance and delivery thereof
          and
          payment therefor pursuant to this Agreement, will be validly issued, fully
          paid
          and nonassessable and free of any pre-emptive or similar rights. The Warrant
          Shares have been duly authorized, and if issued upon the exercise of the
          Warrants on the Closing Date in accordance with the terms of the Warrants,
          the
          Warrant Shares would be validly issued, outstanding, fully paid and
          nonassessable and free of any pre-emptive or similar rights.

         

        4. All
          corporate action on the part of the Company, its directors and stockholders
          necessary for the authorization, sale, issuance and delivery of the Common
          Shares and the Warrants has been taken.

         

        5. Neither
          the execution and delivery of, nor the performance of the Company’s obligations
          under, this Agreement, including the issuance and delivery of the Common
          Shares
          and the Warrants, by
          the Company will
          violate or conflict with, result in a breach of, or constitute a default
          under,
          (a) the
          Restated Certificate of Incorporation or the Restated By-Laws of
          the Company or (b) or any provision of any applicable federal or state
          law, rule
          or regulation that in our experience is generally applicable to transactions
          of
          the type contemplated by this Agreement. 

         

        6. Except
          as
          identified in the Agreement, and as disclosed in filings with the Securities
          and
          Exchange Commission, to our knowledge there are no actions, suits, proceedings
          or investigations pending against the Company or its properties before
          any court
          or governmental agency nor, to our knowledge, has the Company received
          any
          written threat thereof.

         

        
          
            
            

          

          
            C-1

            
              

            

          

          
            
            

          

        

         

        7. Except
          for compliance with the securities or blue sky laws of the
          various states, as
          to which we express no opinion, and registration of the Shares under the
          Securities Act, no approval, authorization or other action by any governmental
          authority or Eligible Market or filing with any such authority (other than
          any
          filing solely for information purposes or to obtain action that is not
          the
          subject of governmental discretion) that has not been obtained or accomplished
          is required by the Company for the valid execution and delivery of, or
          the
          performance of its obligations under, this Agreement, by the Company, including
          the issuance and delivery of the Common Shares and the Warrants by the
          Company
          thereunder.

         

        8. Based
          in part on the representations and warranties and covenants of the Investors
          set
          forth in Sections 3.2 and 4.1 of this Agreement, the offer and sale of
          the
          Common Shares and the Warrants pursuant to the terms of this Agreement
          are
          exempt from the registration requirements of the Securities Act.

        

         

        
          
            
            

          

          
            C-2

            
              

            

          

          
            
            

          

        

        Exhibit D

         

        PLAN
          OF
          DISTRIBUTION

         

        The
          selling stockholders may, from time to time, sell any or all of their shares
          of
          common stock on any stock exchange, market or trading facility on which
          the
          shares are traded or in private transactions.
          These
          sales may be at fixed or negotiated prices. The selling stockholders may
          use any
          one or more of the following methods when selling shares:

         

        
          	●	
                  ordinary
                    brokerage transactions and transactions in which the broker-dealer
                    solicits purchasers;

                

        

         

        
          	●	
                  block
                    trades in which the broker-dealer will attempt to sell the shares
                    as agent
                    but may position and resell a portion of the block as principal
                    to
                    facilitate the transaction;

                

        

         

        
          	●	
                  purchases
                    by a broker-dealer as principal and resale by the broker-dealer
                    for its
                    account;

                

        

         

        
          	●	
                  an
                    exchange distribution in accordance with the rules of the applicable
                    exchange;

                

        

         

        
          	●	
                  privately
                    negotiated transactions;

                

        

         

        
          	●	
                  short
                    sales;

                

        

         

        
          	●	
                  through
                    the writing or settlement of options or other hedging transactions,
                    whether through an options exchange or
                    otherwise;

                

        

         

        
          	●	
                  broker-dealers
                    may agree with the selling stockholders to sell a specified number
                    of such
                    shares at a stipulated price per
                    share;

                

        

         

        
          	●	
                  a
                    combination of any such methods of sale;
                    and

                

        

         

        
          	●	
                  any
                    other method permitted pursuant to applicable
                    law.

                

        

         

        The
          selling stockholders may also sell shares under Rule 144
          under the Securities Act, if available, rather than under this
          prospectus.

         

        Broker-dealers
          engaged by the selling stockholders may arrange for other brokers-dealers
          to
          participate in sales. Broker-dealers may receive commissions or discounts
          from
          the selling stockholders (or, if any broker-dealer acts as agent for the
          purchaser of shares, from the purchaser) in amounts to be negotiated. The
          selling stockholders do not expect these commissions and discounts to exceed
          what is customary in the types of transactions involved. Any profits on
          the
          resale of shares of common stock by a broker-dealer acting as principal
          might be
          deemed to be underwriting discounts or commissions under the Securities
          Act.
          Discounts, concessions, commissions and similar selling expenses, if any,
          attributable to the sale of shares will be borne by a selling stockholder.
          The
          selling stockholders may agree to indemnify any agent, dealer or broker-dealer
          that participates in transactions involving sales of the shares if liabilities
          are imposed on that person under the Securities Act.

         

        
          
            
            

          

          
            D-1

            
              

            

          

          
            
            

          

        

         

        The
          selling stockholders may from time to time pledge or grant a security interest
          in some or all of the shares of common stock owned by them and, if they
          default
          in the performance of their secured obligations, the pledgees or secured
          parties
          may offer and sell the shares of common stock from time to time under this
          prospectus after we have filed a supplement to this prospectus under
          Rule 424(b)(3) or other applicable provision of the Securities Act of 1933
          supplementing or amending the list of selling stockholders to include the
          pledgee, transferee or other successors in interest as selling stockholders
          under this prospectus.

         

        The
          selling stockholders also may transfer the shares of common stock in other
          circumstances, in which case the transferees, pledgees or other successors
          in
          interest will be the selling beneficial owners for purposes of this prospectus
          and may sell the shares of common stock from time to time under this prospectus
          after we have filed a supplement to this prospectus under Rule 424(b)(3)
          or
          other applicable provision of the Securities Act of 1933 supplementing
          or
          amending the list of selling stockholders to include the pledgee, transferee
          or
          other successors in interest as selling stockholders under this
          prospectus.

         

        The
          selling stockholders and any broker-dealers or agents that are involved
          in
          selling the shares of common stock may be deemed to be “underwriters” within the
          meaning of the Securities Act in connection with such sales. In such event,
          any
          commissions received by such broker-dealers or agents and any profit on
          the
          resale of the shares of common stock purchased by them may be deemed to
          be
          underwriting commissions or discounts under the Securities Act.

         

        We
          are
          required to pay all fees and expenses incident to the registration of the
          shares
          of common stock. We have agreed to indemnify the selling stockholders against
          certain losses, claims, damages and liabilities, including liabilities
          under the
          Securities Act.

         

        The
          selling stockholders have advised us that they have not entered into any
          agreements, understandings or arrangements with any underwriters or
          broker-dealers regarding the sale of their shares of common stock, nor
          is there
          an underwriter or coordinating broker acting in connection with a proposed
          sale
          of shares of common stock by any selling stockholder. If we are notified
          by any
          selling stockholder that any material arrangement has been entered into
          with a
          broker-dealer for the sale of shares of common stock, if required, we will
          file
          a supplement to this prospectus. If the selling stockholders use this prospectus
          for any sale of the shares of common stock, they will be subject to the
          prospectus delivery requirements of the Securities Act.

         

        The
          anti-manipulation rules of Regulation M under the Securities Exchange Act
          of 1934 may apply to sales of our common stock and activities of the selling
          stockholders.

         

        
          
            
            

          

          
            D-2

            
              

            

          

          
            
            

          

        

         

        Exhibit E

         

        COMPANY
          TRANSFER AGENT INSTRUCTIONS

        

         

        _____________________,
          2007

        

        VIA
          FACSIMILE (212-616-7608) AND REGULAR MAIL

        

        

        Continental
          Stock Transfer & Trust Company

        Compliance
          Department

        17
          Battery Place

        New
          York, New York 10004-1123

        Attn:
          Mr.
          Roger
          BernHammer, VP

         

        

        Ladies
          and Gentlemen: 

        

        Reference
          is made to that certain Securities Purchase Agreement, dated as of [__]
          [__],
          2007 (the “Agreement”),
          by and
          among Acura Pharmaceuticals, Inc., a New York corporation (the “Company”),
          and
          the investors named on Exhibits A-1 and A-2 attached thereto (collectively,
          the
“Holders”),
          pursuant to which the Company is issuing shares of its Common Stock, par
          value
          $0.01 per share (the “Common
          Stock”),
          and
          warrants to purchase shares of Common Stock (the “Warrants”)
          to the
          Holders. 

        

        This
          letter shall serve as our irrevocable authorization and direction to you
          (provided that you are the transfer agent of the Company at such time) to
          issue certificates representing (a) the shares of the Common Stock issued
          pursuant to the Agreement (the “Common
          Shares”)
          upon
          transfer or resale thereof in accordance with the terms thereof and (b)
          the
          shares of the Common Stock issued upon the exercise of the Warrants (the
          “Warrant
          Shares”)
          to or
          upon the order of a Holder from time to time upon delivery to you of a
          properly
          completed and duly executed Notice of Exercise, in the form attached to
          the
          Warrants, which has been acknowledged by the Company as indicated by the
          signature of a duly authorized officer of the Company thereon.

        

        You
          acknowledge and agree that so long as you have previously received
          (a) written confirmation from the Company’s legal counsel that either
          (i) a registration statement covering the resale of the Common Shares and
          the Warrant Shares has been declared effective by the Securities and Exchange
          Commission (the “SEC”)
          under
          the Securities Act of 1933, as amended (the “Securities
          Act”),
          or
          (ii) sales of the Common Shares or the Warrant Shares may be made in
          conformity with Rule 144 under the Securities Act (“Rule 144”),
          (b) if applicable, a copy of such registration statement and
          (c) notice from legal counsel to the Company or any Holder that a transfer
          of Common Shares or the Warrant Shares has been effected either pursuant
          to such
          registration statement (and a prospectus delivered to the transferee, unless
          such a prospectus is deemed to have been delivered pursuant to Rule 172
          under the Securities Act) or pursuant to Rule 144, then, unless otherwise
          required by law, within three (3) business days of your receipt of the
          notice
          referred to in clause (c) above, you shall issue the certificates representing
          the Common Shares or the Warrant Shares, as the case may be, so sold to
          the
          transferees registered in the names of such transferees, and such certificates
          shall not bear any legend restricting transfer of the Common Shares or
          the
          Warrant Shares, as the case may be, thereby and should not be subject to
          any
          stop-transfer restriction; provided, however, that if such Common Shares
          and
          Warrant Shares are not registered for resale under the Securities Act or
          able to
          be sold under Rule 144 and you have received an opinion from the Company’s legal
          counsel that the issuance of the Common Shares and Warrant Shares and the
          transfer of such Shares and Warrant Shares is an exempt transaction under
          the
          Securities Act, then the certificates for such Common Shares and/or Warrant
          Shares shall bear the legend attached hereto as Schedule A. 

         

        
          
            
            

          

          
            E-1

            
              

            

          

          
            
            

          

        

         

        A
          form of
          written confirmation (to be used in connection with any sale) from the
          Company’s
          legal counsel that a registration statement covering resales of the Common
          Shares and the Warrant Shares has been declared effective by the SEC under
          the
          Securities Act is attached hereto as Annex
          I.
          

        

        Please
          be
          advised that the Holders are relying upon this letter as an inducement
          to enter
          into the Agreement and, accordingly, each Holder is a third-party beneficiary
          to
          these instructions. 

        

        Please
          execute this letter in the space indicated to acknowledge your agreement
          to act
          in accordance with these instructions. 

         

        Very
          truly yours,

         

        ACURA
          PHARMACEUTICALS, INC.

         

        By:                                                                                   
           

        Name:
          Andrew D. Reddick

        Title:
          President and Chief Executive Officer

         

        THE
          FOREGOING INSTRUCTIONS ARE

        ACKNOWLEDGED
          AND AGREED TO 

        this
          [__]
          day of [__], 2007

         

        CONTINENTAL
          STOCK TRANSFER & TRUST COMPANY

         

        By:             
          

        Name:                                                                  
          

        Title:  
          

         

        Enclosures
          

         

        
          
            
            

          

          
            E-2

            
              

            

          

          
            
            

          

        

         

        SCHEDULE
          A

         

        THESE
          SECURITIES HAVE NOT BEEN REGISTERED WITH THE SECURITIES AND EXCHANGE COMMISSION
          OR THE SECURITIES COMMISSION OF ANY STATE IN RELIANCE UPON AN EXEMPTION
          FROM
          REGISTRATION UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE “SECURITIES
          ACT”),
          OR
          ANY APPLICABLE STATE SECURITIES LAWS AND, ACCORDINGLY, MAY NOT BE OFFERED
          OR
          SOLD EXCEPT PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES
          ACT OR PURSUANT TO AN AVAILABLE EXEMPTION FROM, OR IN A TRANSACTION NOT
          SUBJECT
          TO, THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT AND IN COMPLIANCE
          WITH
          APPLICABLE STATE SECURITIES LAWS OR BLUE SKY LAWS.

         

        
          
            
            

          

          
            E-3

            
              

            

          

          
            
            

          

        

         

        Annex
          I

         

        

        FORM
          OF NOTICE OF EFFECTIVENESS OF REGISTRATION STATEMENT

        

        [_____],
          2007

        

        Continental
          Stock Transfer & Trust Company

        Compliance
          Department

        17
          Battery Place

        New
          York, New York 10004-1123

        Attn:
          Mr.
          Roger
          BernHammer, VP

        

        Ladies
          and Gentlemen: 

        

        Reference
          is made to that certain Securities Purchase Agreement,
          dated as of August 20, 2007 (the “Agreement”),
          by and
          among Acura Pharmaceuticals, Inc., a New York corporation (the “Company”),
          and
          the investors named on Exhibits A-1 and A-2 attached thereto (collectively,
          the
“Holders”),
          pursuant to which the Company is issuing shares of its Common Stock, par
          value
$0.01
          per
          share (the “Common
          Stock”),
          and
          warrants to purchase shares of the Common Stock (the “Warrants”)
          to the
          Holders. 

        

        Pursuant
          to the Agreement, the Company has agreed, among other things, to register
          the
          resale of the Registrable Securities (as defined in the Agreement), including
          the shares of Common Stock issuable upon exercise of the Warrants under
          the
          Securities Act of 1933, as amended (the “Securities
          Act”).
          In
          connection with such agreement, on [_____], 2007, the Company filed a
          Registration Statement on Form S-1 (File No. 333-[_____]) (the “Registration
          Statement”)
          with
          the Securities and Exchange Commission (the “SEC”)
          relating to the Registrable Securities, which names each of the Holders
          (or
          transferees thereof) as a selling stockholder thereunder. 

        

        In
          connection with the foregoing, I advise you that a member of the SEC’s staff has
          advised us by telephone that the SEC has entered an order declaring the
          Registration Statement effective under the Securities Act at [_____] on
          [_____],
          2007, and I have no knowledge, after telephonic inquiry of a member of
          the SEC’s
          staff, that any stop order suspending its effectiveness has been issued
          or that
          any proceedings for that purpose are pending before, or threatened by,
          the SEC
          and the Registrable Securities are available for resale under the Securities
          Act
          pursuant to the Registration Statement.

        

        Very
          truly yours,

        [Legal
          Counsel]

         

        By:_____________________

        cc:
          [List
          Names of Holders]

        

         

        

        
          
            
            

          

          
            E-4

            
              

            

          

          
            
            

          

        

        

         

        Exhibit F

         

        FORM
          OF WARRANT

         

        

        
          
            
            

          

          
            F-1

            
              

            

          

          
            
            

          

        

         

        Exhibit G

         

        FORM
          OF NOTE

         

        

        
          
            
            

          

          
            G-1

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