Document:

fs1ex4vii_iaso.htm

    Exhibit 4.7

     

     

    THIS NOTE
AND THE SECURITIES ISSUABLE UPON CONVERSION HEREOF HAVE NOT BEEN REGISTERED
UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"),
APPLICABLE STATE SECURITIES LAWS, OR APPLICABLE LAWS OF ANY FOREIGN
JURISDICTION. THIS NOTE AND SUCH SECURITIES HAVE BEEN ACQUIRED FOR INVESTMENT
AND NOT WITH A VIEW TO DISTRIBUTION OR RESALE, AND MAY
NOT BE OFFERED, SOLD, PLEDGED, HYPOTHECATED OR OTHERWISE TRANSFERRED IN THE
ABSENCE OF AN EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT AND ANY
APPLICABLE STATE SECURITIES LAWS AND IN THE ABSENCE OF COMPLIANCE WITH
APPLICABLE LAWS OF ANY FOREIGN JURISDICTION, OR AN OPINION OF COUNSEL
SATISFACTORY TO THE COMPANY THAT SUCH REGISTRATION IS NOT REQUIRED OR SUCH
FOREIGN JURISDICTION LAWS HAVE BEEN SATISFIED.

    

     

    PACIFIC
BEACH BIOSCIENCES, INC. 

    CONVERTIBLE
PROMISSORY NOTE

    

    
    

     

    
      	$[    ]	 San Diego,
      CA
	 	 December 14,
      2007

    

                                                                                                      

     

    1.       Principal and
Interest

     

    PACIFIC
BEACH BIOSCIENCES, INC. (the "Company"), a Delaware
corporation, for value
received, hereby promises to pay to the order of ____________________, or
his, her or its assigns ("Holder"), in lawful
money of the United States of America at the address for notices to Holder set
forth in the applicable Purchase Agreement (as defined below) (or such other
address as Holder shall provide
to the Company in writing pursuant hereto), the principal amount
of  __________________________([$    ]),together
with interest as set forth below.

     

    The Company
promises to pay interest on the unpaid principal amount from the date hereof
until such principal amount is paid in full at the following rates: from the date hereof to December 13, 2008, eight
percent (8%); and from December 14, 2008 to the Due Date, ten percent (10%) (in
each case, or such lesser rate as shall be the maximum rate allowable
under applicable law); provided, however,
that upon an Event of Default (as defined herein), the interest rate on this
Note shall be increased to twelve percent (12%) per annum during the term of the
default.  Interest from the date hereof shall be computed on the basis
of a 360-day year of twelve 30-day months, shall compound annually and shall be
accrued and added to principal on an annual basis.  Unless converted,
all unpaid principal and accrued but unpaid interest on this Note shall be due
and payable on September 30, 2010 (the “Due
Date”).  For purposes of this Note, an “Event of Default”
shall occur if (i) the Company shall default in the payment on the Note, when
and as the same shall become due and payable and any such failure to make
payment continues for five (5) business days; or (ii) the Company shall default
in the due observance or performance of any material covenant, condition or
agreement on the part of the Company contained in this Note or the Purchase
Agreement (other than the failure to make payment when due) and any such default
shall continue for a period of thirty (30) days after the date on which the
Company receives written notice thereof from the Holder.

       

    

    
      
        
        

      

      
        1

        
          

        

      

      
        
        

      

    

    

    This Note
is being issued pursuant to that certain Note Purchase Agreement between the
Company and the Holder, dated as of the date hereof (the "Purchase Agreement"),
and is subject to its terms. Capitalized terms used herein but not defined shall
have the meanings given to such terms in the Purchase Agreement. This Note is
being issued together with a series of convertible promissory notes issued by
the Company in connection with an offering described in the Company's
Confidential Offering Memorandum (together with all amendments, supplements,
exhibits, and appendices thereto, the "Memorandum") dated
September 28, 2007 (such notes shall be collectively referred to as the "Bridge Notes"). The
Bridge Notes rank pari passu with all other existing indebtedness of the Company
and, pursuant to Section 2.17 of the Purchase Agreement, no new indebtedness
which is secured or senior in right of payment to the Bridge Notes may be issued
by the Company without the consent of the Holders of Bridge Notes representing
at least sixty-six and two-thirds percent (66 2/3%) of the outstanding principal
amount of all Bridge Notes. No consent of the holders of Bridge Notes will be
required for issuances by the Company of unsecured indebtedness that ranks pari
passu with, or junior to, the Bridge Notes.

     

    2.       Conversion.

     

     2.1      
(a)      All unpaid
principal and accrued but unpaid interest on this Note shall be automatically
converted into the Company’s equity securities (the “Securities”) issued
in the Company’s next equity financing (or series of related equity financings)
involving the sale of Securities in which the Company receives at least
$10,000,000 (minus the amount of aggregate gross cash proceeds to the Company
from the arm’s length sale of equity or debt securities of the Company, or the
incurrence of new loans, after December 14, 2009) in aggregate gross cash
proceeds (before brokers’ fees or other transaction related expenses, and
excluding any such proceeds resulting from any conversion of the Bridge Notes)
(a “Qualified
Financing”), at a conversion price equal to 70% of the lowest per unit
price paid for such Securities in cash by investors in such Qualified Financing,
and upon such other terms, conditions and agreements as may be applicable in
such Qualified Financing.

       

    

    (b)      In the
event that the Company consummates a merger, share exchange, or other
transaction (or series of related transactions), other than in connection with a
Qualified Financing, in which (i) the Company merges into or otherwise becomes a
wholly-owned subsidiary of a company that (A) is subject to the public company
reporting requirements of the Securities Exchange Act of 1934, as amended, or
the equivalent reporting requirements of the Ontario Securities Commission, or
that is listed on the London Stock Exchange main market, the Euronext markets,
or AIM (or their successor exchanges or markets), and (B) does not engage in any
active operations, and (ii) the aggregate consideration payable to the Company
or its stockholders in such transaction(s) (the “Reverse Merger
Consideration”) is greater than or equal to $10,000,000 (a “Reverse Merger”),
then immediately prior to such Reverse Merger, all unpaid principal and accrued
but unpaid interest on this Note shall be automatically converted into Common
Stock at a conversion price per share equal to 70% of the quotient obtained by
dividing (i) the Reverse Merger Consideration less the amount of unpaid
principal and accrued but unpaid interest on all Bridge Notes and the Existing
Notes (as defined below) immediately prior to the Reverse Merger by (ii) the
number of shares of Common Stock of the Company then outstanding, on a fully
diluted basis (the “Outstanding Shares”).
For this purpose, Outstanding Shares shall (i) exclude any shares of Common
Stock issuable upon conversion of the Bridge Notes or the Existing Notes or upon
exercise of the warrants issued to the Placement Agent in connection with the
sale of the Bridge Notes but (ii) include all shares of Common Stock issuable
upon the exercise of (A) options and other warrants outstanding (to the extent
that such options or warrants are exercised or assumed in connection with the
Reverse Merger) and (B) options that the Company is required by agreement to
issue to one or more employees, consultants, or licensors of the Company in
connection with such Reverse Merger to maintain a specified percentage interest
in the Company (but which have not yet been issued). For purposes hereof, “Existing Notes” shall
mean collectively, (1) that certain Future Advance Promissory Note dated
December 1, 2006, in favor of the Lindsay Rosenwald 2000 Family Trusts dated
December 15, 2000 and (2) those certain Future Advance Promissory Notes dated
December 1, 2006 and dated June 12, 2007, both in favor of Paramount
Biosciences, LLC.

       

    

     

    
      
        
        

      

      
        2

        
          

        

      

      
        
        

      

    

     

     

     

    The
shares of Common Stock issuable pursuant to clause 2.1(b) above shall be issued
effective prior to the consummation of the Reverse Merger and conditioned upon
the consummation of such Reverse Merger. As a holder of such shares of Common
Stock, the Holder will receive the consideration payable in connection with such
Reverse Merger on a share-for-share basis with all other stockholders of the
Company and in like kind, at the same time and upon the same conditions as all
other stockholders of the Company.

     

    If any
Reverse Merger Consideration is other than cash, its value will be deemed to be
its fair market value as determined, in good faith, by the Board of Directors of
the Company. The value of any securities shall be determined by the Board of
Directors of the Company as set forth for a Sale of the Company in Section
2.1(c) below.

    

    (c)      The
Notes plus any unpaid accrued interest thereon shall automatically
convert into shares of Common Stock of the Company effective immediately prior
to the
consummation of a Sale of the Company. For purposes hereof, "Sale of the Company"
shall mean a
transaction (or series of related transactions) with one or more non-affiliates
of the Company, pursuant
to which such party or parties acquire (i) capital stock of the Company or the
surviving entity
possessing the voting power to elect a majority of the board of directors of the
Company or the surviving
entity (whether by merger, consolidation, sale or transfer of the Company's
capital stock or otherwise)
(a "Stock
Acquisition"); or (ii) all or substantially all of the Company's assets
determined on a
consolidated basis (an "Asset Sale");
provided, however, that notwithstanding anything to the contrary
contained herein, to the extent any transaction (or series of related
transactions) qualifies as a
Qualified Financing or a Reverse Merger, such transaction(s) shall not be deemed
to constitute a Sale of
the Company. For purposes hereof, "Sale Proceeds" shall
mean (i) in the event of a Stock Acquisition,
the cash or securities paid by the acquirer to the Company or the selling
stockholders to acquire
such shares; and (ii) in the event of an Asset Sale, the cash or securities
legally available for distribution
to the Company's stockholders, after creation of adequate reserves for
liabilities of the Company.

     

    The price
per share at which the Notes will convert into Common Stock of the Company upon
a Sale of the Company will be equal to the lesser of (i) 70% of the quotient
obtained by dividing (x) the value of the Sale Proceeds received in such
transaction less the unpaid principal and accrued but unpaid interest on the
Notes and the Existing Notes immediately prior to the Sale of the Company by (y)
the number of Outstanding Shares, and (ii) the quotient obtained by dividing (x)
$50,000,000 less the unpaid principal and accrued but unpaid interest on the
Notes and the Existing Notes by (y) the number of Outstanding Shares. For
purposes of this Section 2.1(c), Outstanding Shares shall be determined as set
forth in Section 2.1(b) of this Note, except that it shall not include any
shares of Common Stock issuable upon the exercise of any options and warrants
outstanding immediately prior to such Sale of the Company if such options or
warrants have an exercise price in excess of the Note conversion price
determined under this Section 2.1(c).

       

    

    
      
        
        

      

      
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    (d)      In
the event the Company completes (in one or a series of related transactions)
a merger, consolidation, sale or transfer of more than fifty percent (50%) of
the Company's
capital stock, in each case, which does not constitute a Sale of the Company, a
Reverse Merger or a Qualified Financing (an "Other Transaction"),
then the term "Securities" as used herein shall thereafter refer to the equity
securities or securities convertible into or exchangeable for equity securities
of the surviving, resulting, combined or acquiring entity in such merger,
consolidation, sale or transfer.

     

    2.2         
Upon consummation of a Qualified Financing, Reverse Merger, Sale or Other
Transaction in accordance with the terms of Section 2.1, the outstanding unpaid
principal and accrued but unpaid interest of the Note shall be converted without
any further action by the Holder and whether or not the Note is surrendered to
the Company or its transfer agent, and the indebtedness evidenced by this Note
shall be satisfied in full and no interest shall continue to accrue on this Note
and all rights of the Holder hereunder shall terminate. The Company shall not be
obligated to issue certificates evidencing the shares of the securities issuable
upon such conversion unless the Note is either delivered to the Company or its
transfer agent, or the Holder notifies the Company or its transfer agent that
such Note has been lost, stolen or destroyed and executes an agreement
satisfactory to the Company to indemnify the Company from any loss incurred by
it in connection with such Note. The Company shall, as soon as practicable after
such delivery, or such agreement and indemnification, issue and deliver to such
Holder of such Note, a certificate or certificates for the securities to which
the Holder shall be entitled. Such conversion shall be deemed to have been made
concurrently with the closing of the Qualified Financing, the Reverse Merger,
the Sale of the Company or the Other Transaction, as applicable. The person or
persons entitled to receive securities issuable upon such conversion shall be
treated for all purposes as the record holder or holders of such securities on
such date. The Company shall not issue fractional shares but shall round down
the number of shares issued to the nearest whole number. Any conversion effected
in accordance with this Section 2 shall be binding upon the Holder
hereof.

    

    
      3.     
No Prepayment;
Repayment Premium.

       

      (a)    The
Notes may not be prepaid at any time, in whole or in part, prior to their
maturity.

       

      (b)    In
the event that this Note becomes due and payable (whether on the Due Date or
earlier pursuant to Section 7 hereof) prior to the consummation by the Company
of a Qualified Financing, Reverse Merger, Sale of the Company or Other
Transaction, then in connection with the repayment of this Note, in addition to
the payment of the unpaid principal amount and all accrued but unpaid interest
on this Note, the Company shall pay to Holder, as a repayment premium, an amount
in cash equal to 42.8571% of the aggregate principal amount plus all accrued and
unpaid interest on this Note.

       

      
      

    

    4.  Attorneys' Fees. If
the indebtedness represented by this Note or any part thereof is collected in
bankruptcy, receivership or other judicial proceedings or if this Note is placed
in the hands of attorneys for collection after default, the Company agrees to
pay, in addition to the principal and interest payable hereunder, reasonable
attorneys' fees and costs incurred by Holder.

     

    5.  Notices. Any notice,
other communication or payment required or permitted hereunder shall be in
writing and shall be deemed to have been given upon delivery to the address
provided pursuant to the Purchase Agreement. In the case of notice to either
party, copies should be sent to Covington & Burling LLP, The New York Times
Building, 620 Eighth Avenue, New York, New York 10018, Facsimile: (212)
841-1010, Attn: Ellen B. Corenswet, Esq.

     

    6.  Notice of Proposed
Transfers. Prior to any proposed transfer of this Note or the Securities,
unless there is in effect a registration statement under the Securities Act
covering the proposed transfer, the Holder shall give written notice to the
Company of such Holder's intention to effect such transfer. Each such notice
shall describe the manner and circumstances of the proposed transfer in
sufficient detail, and shall, if the Company so requests, be accompanied (except
in transactions in compliance with Rule 144) by an unqualified written opinion
of legal counsel, who shall be reasonably satisfactory to the Company, addressed
to the Company and reasonably satisfactory in form and substance to the
Company's counsel, to the effect that the proposed transfer of the Note or Securities
may be effected without registration under the Securities Act; provided, however, no
such opinion of counsel shall be necessary for a transfer without consideration
by a Holder to any affiliate of such Holder, or a transfer by a Holder which is
a partnership to a partner of such partnership or a retired partner of such
partnership who retires after the date hereof, or to the estate of any such
partner or retired partner or the transfer by gift, will or intestate succession
of any partner to his spouse or lineal descendants or ancestors, if the
transferee agrees in writing to be subject to the terms hereof to the same
extent as if such transferee were the original Holder hereunder. Each
certificate evidencing Securities or the Note transferred as above provided
shall bear an appropriate restrictive legend, except that the Note or
certificate shall not bear such restrictive legend if, in the opinion of counsel
for the Company, such legend is not required in order to establish compliance
with any provisions of the Securities Act.

     

    
      
        
        

      

      
        4

        
          

        

      

      
        
        

      

    

     

     

    7.  Acceleration. This
Note shall become immediately due and payable if (i) the Company commences any
proceeding in bankruptcy or for dissolution, liquidation, winding-up,
composition or other relief under state or federal bankruptcy laws; or (ii)
there is any material breach of any material covenant, warranty, representation
or other term or condition of this Note or the Purchase Agreement at any time
which is not cured within the time periods permitted therein, or if no cure
period is provided therein, within thirty (30) days after the date on which the
Company receives written notice thereof from the Holder.

     

    8.  No Dilution or
Impairment. The Company will not, by amendment of its Certificate of
Incorporation or Bylaws or through any reorganization, transfer of assets,
consolidation, merger, dissolution, issue or sale of securities or any other
voluntary action, avoid or seek to avoid the observance or performance of any of
the terms of this Note, but will at all times in good faith assist in the
carrying out of all such terms and in the taking of all such action as may be
necessary or appropriate in order to protect the rights of the Holder of this
Note against dilution or other impairment.

     

    9.  Waivers. The Company
hereby waives presentment, demand for performance, notice of non-performance,
protest, notice of protest and notice of dishonor. No delay on the part of the
Holder in exercising any right hereunder shall operate as a waiver of such right
or any other right. This Note is being delivered in and shall be construed in
accordance with the laws of the State of New York, without regard to the
conflicts of laws provisions thereof.

     

    10.  No Stockholder
Rights. Nothing contained in this Note shall be construed as conferring
upon the Holder or any other person the right to vote or to consent or to
receive notice as a stockholder of the Company.

     

    11.   
Amendment. Any term
of this Note may be amended with the written consent of the Company and the
holders of not less than sixty six and two-thirds percent (66 2/3%)
of the then outstanding principal amount of the Bridge Notes, even without the
consent of the Holder hereof. Any amendment effected in accordance with this
Section 11 shall be binding upon each holder of any Bridge Note, each future
holder of all such Bridge Notes, and the Company; provided, however,
that no special consideration or inducement may be given to any such Holder in
connection with such consent that is not given ratably to all such holders, and
that such amendment must apply to all such holders ratably in accordance with
the principal amount of their then outstanding Bridge Notes. The Company shall
promptly give notice to all holders of outstanding Bridge Notes of any amendment
effected in accordance with this Section 11.

     

    
      
        
        

      

      
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      ISSUED
as of the date from above written.

       

       

       

    

     

    
      
        	 	
                PACIFIC
      BEACH BIOSCIENCES, INC.

              	 
	 	 	 	 
	
                 

              	
                By:
      

              	/s/ Matthew
      A. Wikler, M.D.	 
	 	 	Name:
      Matthew A. Wikler, M.D.	 
	 	 	Title:   President
      and Chief Executive Officer	 
	 	 	 	 

      

    

    

      
        
           

        

        
          6fs1ex4viii_iaso.htm

    Exhibit
4.8

    

    NOTE
AND WARRANT PURCHASE
AGREEMENT

    

    This
NOTE AND WARRANT PURCHASE
AGREEMENT (this “Agreement”) is made
as of the last date set forth on the signature page hereof between PACIFIC BEACH BIOSCIENCES,
INC., a Delaware corporation (the “Company”), and
Paramount Credit Partners, LLC, a Delaware limited liability company (the “Subscriber”).

    

    W
I T N E S S E T H:

    

    WHEREAS, the Company desires
to offer and sell a senior promissory note in an aggregate principal amount of
$2,750,000 in substantially the form attached hereto as Exhibit A (the “Note”) in a private
offering (the “Offering”).  In
addition to the Note, the Subscriber will receive a warrant (the “Warrant”) to purchase
shares of Common Stock, $0.001 par value per share (the “Common Stock”), of
the Company in the form attached hereto as Exhibit B;
and

    

    WHEREAS, the Company desires
to enter into this Agreement to issue and sell the Note and Warrant and the
Subscriber desires to purchase the Note and Warrant on the terms and conditions
set forth herein;

    

    NOW, THEREFORE, in
consideration of the promises and the mutual representations and covenants
hereinafter set forth, the parties hereto do hereby agree as
follows:

    

    I.           SUBSCRIPTION FOR NOTES AND
REPRESENTATIONS BY SUBSCRIBER

    

    1.1           Subject
to the terms and conditions hereinafter set forth, the Subscriber agrees to
purchase from the Company and the Company agrees to sell and issue to the
Subscriber the Note and the Warrant for an aggregate purchase price of
$2,750,000.

    

    1.2           The
Subscriber recognizes that the purchase of the Note involves a high degree of
risk including, but not limited to, the following: (a) the Company has a limited
operating history and requires substantial funds in addition to the proceeds of
the Offering; (b) an investment in the Company is highly speculative, and only
investors who can afford the loss of their entire investment should consider
investing in the Company and the Note; (c) the Subscriber may not be able to
liquidate its investment; (d) transferability of the Note and the Common Stock
underlying the Warrant (sometimes hereinafter collectively referred to as the
“Securities”)
is extremely limited; (e) in the event of a disposition of the Securities, the
Subscriber could sustain the loss of its entire investment; and (f) the Company
has not paid any dividends on its capital stock since its inception and does not
anticipate paying any dividends in the foreseeable future.

    

    
      
         

      

      
        1

        
          

        

      

      
         

      

       

    

    1.3           The
Subscriber represents that the Subscriber is an “accredited investor” as such
term is defined in Rule 501 of Regula­tion D (“Regulation D”)
promulgated under the Securities Act of 1933, as amended (the “Securities Act”), and
that the Subscriber is able to bear the economic risk of an invest­ment in
the Securities.

    

    1.4           The
Subscriber hereby acknowledges receipt and careful review of this Agreement, the
Note and the Warrant, including all exhibits thereto (collectively referred to
as the “Offering
Materials”) and hereby represents that the Subscriber has been furnished
by the Company during the course of the Offering with all information regarding
the Company, the terms and conditions of the Offering and any additional
information that the Subscriber, its purchaser representative, attorney and/or
accountant has requested or desired to know, and has been afforded the
opportunity to ask questions of and receive answers from duly authorized
officers or other representatives of the Company concerning the Company and the
terms and conditions of the Offering.

    

    1.5           The
Subscriber hereby represents that the Subscriber, either by reason of the
Subscriber's business or financial experience or the business or financial
experience of the Subscriber's professional advisors (who are unaffiliated with
and not compensated by the Company or any affiliate or selling agent of the
Company directly or indirectly), has the capacity to protect the Subscriber's
own interests in connection with the transaction contemplated
hereby.

    

    1.6           The
Subscriber hereby acknowledges that the Offering has not been reviewed by the
United States Securities and Exchange Commission (the “SEC”) nor any state
regulatory authority since the Offering is intended to be exempt from the
registration requirements of Section 5 of the Securities Act pursuant to
Regulation D promulgated thereunder.  The Subscriber understands that
the Securities have not been registered under the Securities Act or under any
state securities or “blue sky” laws and agrees not to sell, pledge, assign or
otherwise transfer or dispose of the Securities unless they are registered under
the Securities Act and under any applicable state securities or “blue sky” laws
or unless an exemption from such registration is available.

    

    1.7           The
Subscriber understands that the Securities have not been registered under the
Securities Act or any state securities laws by reason of a claimed exemption
under the provisions of the Securities Act and such state securities laws that
depends, in part, upon the Subscriber's investment intention.  The
Subscriber hereby represents that the Subscrib­er is purchasing the
Securities for the Subscriber's own account for investment and not with a view
toward the resale or distribution to others.  The Subscriber, if an
entity, further represents that it was not formed for the purpose of purchasing
the Securities.

    

    1.8           The
Subscriber understands that there is no public market for the Securities and
that no market may develop for any of such Securities.  The
Subscrib­er under­stands that even if a public market develops for such
Securities, Rule 144 (“Rule 144”)
promul­gated under the Securities Act requires for non-affiliates, among
other conditions, certain holding periods prior to the resale (in limited
amounts) of secu­rities acquired in a non-public offering without having to
satisfy the regis­tration requirements under the Securities
Act.  The Subscriber understands and hereby acknowl­edges that the
Company is under no obli­ga­tion to register any of the Securities under
the Securities Act or any state secu­ri­ties or “blue sky” laws other
than as set forth in Article V.

    

    
      
         

      

      
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    1.9           The
Subscriber consents to the placement of a legend on any certificate or other
document evidencing the Warrant and Common Stock that such securities have not
been registered under the Securities Act or any state securities or “blue sky”
laws and setting forth or referring to the restrictions on transferability and
sale thereof contained in this Agreement.  The Subscriber is aware
that the Company will make a notation in its appropriate records with respect to
the restrictions on the transferability of such securities. The legend to be
placed on each certificate shall be in form substantially similar to the
following:

    

    "THE
SECURITIES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED UNDER THE UNITED STATES
SECURITIES ACT OF 1933, AS AMENDED (THE "ACT") OR ANY STATE SECURITIES OR "BLUE
SKY LAWS", AND MAY NOT BE OFFERED, SOLD, TRANSFERRED, ASSIGNED, PLEDGED OR
HYPOTHECATED ABSENT AN EFFECTIVE REGISTRATION THEREOF UNDER SUCH ACT OR LAWS, OR
UNLESS THE COMPANY HAS RECEIVED AN OPINION OF COUNSEL, REASONABLY SATISFACTORY
TO THE COMPANY AND ITS COUNSEL, THAT SUCH REGISTRATION IS NOT
REQUIRED."

    

    1.10         The
Subscriber represents that the Subscriber has full power and authority
(corporate, statutory and other­wise) to execute and deliver this Agreement
and to purchase the Securities.  This Agreement constitutes the legal,
valid and binding obligation of the Subscriber, enforce­able against the
Subscriber in accordance with its terms.

     

    1.11 The Subscriber (a) is authorized
and qualified to invest in the Company and the person signing this Agreement on
behalf of such entity has been duly authorized by such entity to do so and (b)
is duly organized, validly existing and in good standing under the laws of the
jurisdiction of its organization.

     

    1.12 Subject to the provision below,
the Subscriber hereby agrees that in the case of an initial offering of the
Common Stock to the public pursuant to an effective registration statement under
the Securities Act (the “IPO”), the Subscriber
will not, without the prior written consent of the Company, offer, pledge, sell,
contract to sell, grant any option for the sale of, or otherwise dispose of,
directly or indirectly, the Registrable Securities (as defined in Section 5.1)
purchased or acquired by the Subscriber for a period of up to 180 days from the
effective date of the registration statement relating to the IPO.

    
 

    
      
         

      

      
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    1.13         The
Subscriber represents and warrants that it has not engaged, consented to or
authorized any broker, finder or intermediary to act on its behalf, directly or
indirectly, as a broker, finder or intermediary in connection with the
transactions contemplated by this Agreement.  The Subscriber hereby
agrees to indemnify and hold harmless the Company from and against all fees,
commissions or other payments owing to any such person or firm acting on behalf
of the Subscriber hereunder.

    

    1.14         The
Subscriber agrees to hold the Company and its directors, officers, employees,
affiliates, controlling persons and agents  and their respective
heirs, representatives, successors and assigns harmless and to indemnify them
against all liabilities, costs and expenses incurred by them as a result of (a)
any sale or distribution of the Securities by the Subscriber in violation of the
Securities Act or any applicable state securities or “blue sky” laws; or (b) any
false representation or warranty or any breach or failure by the Subscriber to
comply with any covenant made by the Subscriber in this Agreement or any other
document furnished by the Subscriber to any of the foregoing in connection with
this transaction.

    

    1.15         The
Subscriber represents that no authorization, approval, consent or license of any
person is required to be obtained for the purchase of the Securities by the
Subscriber, other than as have been obtained and are in full force and
effect.  The execution and delivery of this Agreement does not, and
the consummation of the transactions contemplated hereby will not, result in any
violation of or constitute a default under any material agreement or other
instrument to which the Subscriber is a party or by which the Subscriber or any
of its properties are bound, or to the best of the Subscriber’s knowledge, any
permit, franchise, judgment, order, decree, statute, rule or regulation to which
the Subscriber or any of its businesses or properties is subject.

     

    1.16 The Subscriber understands,
acknowledges and agrees with the Company that the Offering is intended to be
exempt from the registration under the Securities Act by virtue of the
provisions of Regulation D thereunder, and/or the provisions of Regulation S,
which is in part dependent upon the truth, completeness and accuracy of the
statements made by the Subscriber.

    
 

    
      	
              II.  

            	
              REPRESENTATIONS BY AND
      COVENANTS OF THE COMPANY

            

    

    

    The Company hereby represents and
warrants to the Subscriber that:

     

    2.1 Organization, Good Standing
and Qualification. The Company is a corporation duly organized, validly
existing and in good standing under the laws of the State of Delaware and has
full corporate power and authority to conduct its business as currently
conducted. The Company is duly qualified as a foreign corporation to do business
and is in good standing in every jurisdiction in which the property owned or
leased by it or the nature of the business conducted by it makes such
qualification necessary, except to the extent that the failure to be so
qualified or in good standing would not reasonably be expected to have,
individually or in the aggregate, a material adverse effect on the business,
operations, conditions (financial or otherwise), properties, assets or results
of operations of that entity individually or of the Company and its Subsidiaries
(as defined below) as a whole (a “Material Adverse
Effect”). For purposes of this Section, “Subsidiary” means any
corporation, partnership, limited liability company, association, or other
business entity in which the Company owns or controls, directly or indirectly,
any interest, including, without limitation, any joint venture, partnership, or
similar arrangement.

    
 

    
      
         

      

      
        4

        
          

        

      

      
         

      

       

    

    2.2           Authorization;
Enforceability. The Company has all corporate right, power and authority
to enter into this Agreement and to consummate the transactions contemplated
hereby.  All corporate action on the part of the Company, its
directors and stockholders necessary for the (i) authorization execution,
delivery and performance of this Agreement by the Company; and (ii)
authorization, sale, issuance and delivery of the Securities contemplated hereby
and the performance of the Company's obligations hereunder has been
taken.  This Agreement has been duly executed and delivered by the
Company and constitutes a legal, valid and binding obligation of the Company,
enforceable against the Company in accordance with its terms, subject to laws of
general application relating to bankruptcy, insolvency and the relief of debtors
and rules of law governing specific performance, injunctive relief or other
equitable remedies, and to limitations of public policy.  The Note,
when issued and fully paid for in accordance with the terms of this Agreement,
will be validly issued.  The Common Stock issuable upon exercise of
the Warrant, when issued in accordance with the terms of the Warrant, will be
validly issued, full paid and non-assessable.  The issuance and sale
of the Securities contemplated hereby will not give rise to any preemptive
rights or rights of first refusal on behalf of any person which have not been
waived in connection with this Offering.

    

    2.3           No Conflict; Governmental
Consents.

     

    (a)      Except as would not
reasonably be expected to have a Material Adverse Effect, the execution and
delivery by the Company of this Agreement and the consumma­tion of the
transactions contemplated hereby will not result in the violation of any law,
statute, rule, regulation, order, writ, injunction, judgment or decree of any
court or governmental authority to or by which the Company is bound, or of any
provision of the Certificate of Incorporation or By-Laws of the Company, and
will not conflict with, or result in a breach or violation of, any of the terms
or provisions of, or constitute (with due notice or lapse of time or both) a
default under, any lease, loan agreement, mortgage, security agreement, trust
indenture or other agreement or instrument to which the Company is a party or by
which it is bound or to which any of its properties or assets is subject, nor
result in the creation or imposition of any lien upon any of the properties or
assets of the Company.

    
 

    (b)           No
consent, approval, authorization or other order of any governmental authority or
other third party is required to be obtained by the Company in connection with
the authorization, execution and delivery of this Agreement or with the
authorization, issue and sale of the Securities, except as has been obtained or
such filings as may be required to be made with the SEC and with any state or
foreign blue sky or securities regulatory authority relating to an exemption
from registration thereunder.

    

    
      
         

      

      
        5

        
          

        

      

      
         

      

       

    

    2.4           Licenses. Except as
would not reasonably be expected to have a Material Adverse Effect, the Company
has sufficient licenses, permits and other governmental authorizations currently
required for the conduct of its business or ownership of properties and is in
all material respects complying therewith.

    

    2.5           Litigation.  The
Company knows of no pending or threatened legal or governmental proceedings
against the Company which (i) adversely questions the validity of this Agreement
or any agreements related to the transactions contemplated hereby or the right
of the Company to enter into any of such agreements, or to consummate the
transactions contemplated hereby or thereby or (ii) could, if there were an
unfavorable decision, have a Material Adverse Effect. There is no action, suit,
proceeding or investigation by the Company currently pending in any court or
before any arbitrator or that the Company intends to initiate.

    

    2.6           Investment
Company  The Company is not an “investment company” within the
meaning of such term under the Investment Company Act of 1940, as amended, and
the rules and regulations of the SEC thereunder.

    

    2.7           Tax
Status.  To the best of its knowledge, the Company (i) has made
or filed all federal and state income and all other tax returns, reports and
declarations required by any jurisdiction to which it is subject, (ii) has paid
all taxes and other governmental assessments and charges that are material in
amount, shown or determined to be due on such returns, reports and declarations,
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.  There are no unpaid taxes in any material amount claimed to be
due by the taxing authority of any jurisdiction, and the officers of the Company
know of no basis for any such claim.

    

    2.8           Subordination.  Following
the Closing Date, as long as the Note remains outstanding, the Company will not,
without the Subscriber’s prior written consent, incur indebtedness for borrowed
money (“New
Debt”) in favor of any person or entity (each a “New Lender”) which
indebtedness is secured or otherwise senior in priority to the Note, unless the
New Lenders execute and deliver to the Subscriber a subordination agreement
providing for the subordination of the New Debt to the Note.

     

    III.           CLOSING;
DELIVERY

    

    3.1           The
purchase and sale of the Securities shall take place at the offices of Wyrick
Robbins Yates & Ponton LLP, 4101 Lake Boone Trail, Suite 300, Raleigh, North
Carolina, 27607, at 10:00 a.m., on the date hereof, or at such other time and
place as the Company and the Subscriber may mutually agree, orally or in writing
(which time and place are designated as the “Closing”).

     

    
      
         

      

      
        6

        
          

        

      

      
         

      

    

    

    3.2       At the
Closing, subject to the terms and conditions hereof, the Company will deliver to
the Subscriber duly executed copies of the Note and the Warrant dated the date
of the Closing (the “Closing Date”),
against payment of the purchase price therefor by wire transfer, a check or
checks made payable to the order of the Company, a combination of the above, or
by such other means as shall be mutually agreeable to the Subscriber and the
Company.

     

    IV.           CONDITIONS TO OBLIGATIONS OF
THE PARTIES

    

    4.1           The
Subscriber’s obligation to purchase the Securities at the Closing at which such
purchase is to be consummated is subject to the fulfillment on or prior to the
Closing of the following conditions, which conditions may be waived at the
option of the Subscriber to the extent permitted by law:

    

    (a)           Legal
Opinion.  The Subscriber shall have received an opinion of
counsel to the Company addressed to the Subscriber containing certain opinions
to be substantially in the form attached hereto as Exhibit
C.

    

    (b)           Officer’s
Certificate. The Subscriber shall have received an Officer’s Certificate,
signed by the authorized officer of the Company and dated as of the
Closing.  The certificate shall state, among other things, that the
representations and warranties contained herein and in the Offering Materials
are true and accurate in all material respects at the Closing Date with the same
effect as though expressly made at the Closing Date.

    

    V.           REGISTRATION
RIGHTS

    

    5.1           
Definitions.   As
used in this Agreement, the following terms shall have the following
meanings.

    

    (a)           The
term “Holder”
shall mean any holder of Registrable Securities.

    

    (b)           The
terms “register”, “registered” and
“registration”
refer to a registration effected by preparing and filing a registration
statement or similar document in compliance with the Securities Act, and the
declaration or order of effectiveness of such registration statement or
document.

    

    (c)           The
term “Registrable
Securities” shall mean (i) the shares of Common Stock issuable upon
exercise of the Warrant; and (ii) any shares of Common Stock issuable (or
issuable upon the conversion or exercise of any warrant, right or other security
that is issued) pursuant to a dividend or other distribution with respect to or
in replacement of any Securities; provided, however, that securities shall only
be treated as Registrable Securities if and only for so long as they (A) have
not been disposed of pursuant to a registration statement declared effective by
the SEC; (B) have not been sold in a transaction exempt from the registration
and prospectus delivery requirements of the Securities Act so that all transfer
restrictions and restrictive legends with respect thereto are removed upon the
consummation of such sale; (C) are held by a Holder or a permitted transferee of
a Holder pursuant to Section 5.9; and (D) may not be disposed of under Rule 144
under the Securities Act without restriction.

    

    (d)           The
term “Trading
Event” means the first date on which the Company’s Common Stock trades on
a national securi­ties exchange or other automated quotation service,
including the Over the Counter Bulletin Board.

     

    
      
         

      

      
        7

        
          

        

      

      
         

      

    

    

    5.2           Piggyback
Registration.

    

    (a)           The
Company agrees that if, at any time, and from time to time, after the earlier to
occur of (i) an IPO and (ii) a Trading Event, the Board of Directors of the
Company (the “Board”) shall
authorize the filing of a registration statement under the Securities Act (other
than the IPO or a registration statement on Form S-8, Form S-4 or any other form
that does not include substantially the same information as would be required in
a form for the general registration of securities) in connection with the
proposed offer of any of its securities by it or any of its stockholders, the
Company shall: (A) promptly notify each Holder that such registration statement
will be filed and that the Registrable Securities then held by such Holder will
be included in such registration statement at such Holder’s request; (B) cause
such registration statement to cover all of such Registrable Securities issued
to such Holder for which such Holder requests inclusion; (C) use best efforts to
cause such registration statement to become effective as soon as practicable;
and (D) take all other reasonable action necessary under any Federal or state
law or regulation of any governmental authority to permit all such Registrable
Securities that have been issued to such Holder to be sold or otherwise disposed
of, and will maintain such compliance with each such Federal and state law and
regulation of any governmental authority for the period necessary for such
Holder to promptly effect the proposed sale or other disposition.

    

    (b)           Notwithstanding
any other provision of this Section 5.2, the Company may at any time, abandon or
delay any registration commenced by the Company.  In the event of such
an abandonment by the Company, the Company shall not be required to continue
registration of shares requested by the Holder for inclusion, the Holder shall
retain the right to request inclusion of shares as set forth above and the
withdrawn registration shall not be deemed to be a registration request for the
purposes of Section 5.2(c) below.

    

    (c)           Each
Holder shall have the right to request inclusion of any of its Registrable
Securities in a registration statement as described in this Section 5.2, up to
three times.

    

    5.3           Furnish
Information.   It shall be a condition precedent to the
obligation of the Company to take any action pursu­ant to this Article V
with respect to the Registrable Securi­ties of any Holder that such Holder
shall furnish to the Company such informa­tion regarding the Holder, the
Registra­ble Securities held by the Holder, and the intended method of
disposition of such securi­ties as shall be reasonably required by the
Company to effect the registration of such Holder's Registrable
Securities.

     

    
      
         

      

      
        8

        
          

        

      

      
         

      

    

     

    5.4           Registration
Expenses.  The Company shall bear and pay all expenses incurred
in connection with any registration, filing or qualification of Registrable
Securities with respect to registrations pursuant to Section 5.2 for each
Holder, including (without limitation) all registration, filing, and
qualification fees, printers and accounting fees relating or apportionable
thereto (“Registration
Expenses”), but excluding underwriting discounts and com­missions
relating to Registrable Securities and excluding any professional fees or costs
of accounting, financial or legal advisors to any of the Holders.

    

    5.5           Underwriting
Requirements.  In connec­tion with any offering involving
an underwriting of shares of the Company's capital stock, the Company shall not
be required under Section 5.2 to include any of the Holders' Registrable
Securities in such underwriting unless they accept the terms of the underwriting
as agreed upon between the Company and the underwriters selected by it (or by
other persons entitled to select the underwrit­ers), and then only in such
quantity as the underwriters determine in their sole discretion will not
jeopardize the success of the offering by the Company.  If the total
amount of securities, including Registrable Secu­rities, requested by
stockholders to be included in such offering exceeds the amount of securities
sold other than by the Company that the underwriters determine in their sole
discretion is compatible with the success of the offering, then the Company
shall be required to include in the offering only that number of such
securi­ties, including Registra­ble Securities, which the
under­writers determine in their sole discretion will not jeopardize the
success of the offering (the securities so included to be appor­tioned pro
rata among the selling Holders according to the total amount of securities
entitled to be includ­ed there­in owned by each selling Holder or in
such other proportions as shall mutu­ally be agreed to by such sell­ing
Holders).  For purposes of the preceding paren­thetical concerning
apportionment, for any selling Holder who is a holder of Registrable Securities
and is a partner­ship or corporation, the partners, retired part­ners
and stockholders of such Holder, or the estates and family members of any such
partners and retired partners and any trusts for the benefit of any of the
foregoing persons shall be deemed to be a single “selling Holder”, and any
pro-rata reduction with respect to such “selling Holder” shall be based upon the
aggregate amount of shares carrying registra­tion rights owned by all
entities and individuals in­cluded in such “selling Holder”, as defined in
this sentence.

    

    5.6           Delay of
Registration.  No Holder shall have any right to obtain or seek
an injunction restrain­ing or otherwise delaying any such registration as
the result of any controversy that might arise with respect to the
inter­pretation or implemen­tation of this Article V.

    

    5.7           Indemnification.  In
the event that any Regis­trable Securi­ties are included in a
registration state­ment under this Article V:

    

    
      
         

      

      
        9

        
          

        

      

      
         

      

       

    

    (a)           To
the extent permitted by law, the Company will indemnify and hold harmless each
Holder, any underwriter (as defined in the Securities Act) for such Holder and
each person, if any, who controls such Holder or under­writer within the
meaning of the Securities Act or the Exchange Act, against any losses, claims,
damages, or liabili­ties (joint or sever­al) to which they may become
subject under the Securities Act, or the Exchange Act, insofar as such losses,
claims, damag­es, or liabilities (or actions in respect thereof) arise out
of or are based upon any of the following statements, omissions or violations
(collec­tively a “Violation”):  (i)
any untrue state­ment or alleged untrue statement of a material fact
contained in such registra­tion state­ment, including any preliminary
prospectus or final prospectus contained therein or any amendments or
sup­plements thereto, (ii) the omission or alleged omis­sion to state
therein a material fact re­quired to be stated therein, or necessary to make
the statements therein not misleading, or (iii) any viola­tion or alleged
violation by the Company of the Securities Act, the Exchange Act, or any rule or
regulation promulgated under the Securities Act, or the Exchange Act, and the
Company will pay to each such Holder, under­writer or controlling person, as
in­curred, any legal or other expenses reasonably in­curred by them in
connection with investi­gating or defending any such loss, claim, damage,
liability, or action; provided, however, that the
indemnity agreement contained in this Section 5.7(a) shall not apply to amounts
paid in settlement of any such loss, claim, damage, liability, or action if such
set­tlement is effected without the consent of the Compa­ny (which
consent shall not be unreasonably with­held), nor shall the Company be
liable in any such case for any such loss, claim, damage, liability, or action
to the extent that it arises out of or is based upon a Violation which occurs in
reliance upon and in conformi­ty with written information furnished
expressly for use in con­nection with such registration by any such Holder,
under­writer or controlling person or a violation of any provision of this
Agreement by a Holder.

    

    (b)           To
the extent permitted by law, each Holder will indemnify and hold harmless the
Company, each of its directors, each of its officers, each person, if any, who
con­trols the Company within the meaning of the Securities Act, any
underwriter, any other Holder selling securi­ties in such registration
statement and any controlling person of any such under­writer or other
Holder, against any losses, claims, damages, or liabilities (joint or
sever­al) to which any of the foregoing persons may become subject, under
the Securities Act, or the Exchange Act, insofar as such losses, claims,
damages, or liabilities (or actions in respect thereto) arise out of or are
based upon any Violation, in each case to the extent (and only to the extent)
that such Violation occurs in reliance upon and in conformity with written
information fur­nished by such Holder ex­pressly for use in connection
with such regis­tration or a violation of any provision of this Agreement by
a Holder; and each such Holder will pay, as incurred, any legal or other
expenses reasonably incurred by any person intend­ed to be indemnified
pursu­ant to this Section 5.7(b), in connection with investi­gating or
defending any such loss, claim, damage, liability, or action; provided, however, that the
indem­nity agreement con­tained in this Section 5.7(b) shall not apply
to amounts paid in settlement of any such loss, claim, damage, liability or
action if such settlement is ef­fected with­out the consent of the
Hold­er, which consent shall not be unreasonably withheld; provid­ed, further, that, in no
event shall any indemnity under this Section 5.7(b) exceed the greater of the
cash value of the (i) gross proceeds from the offering received by such Holder
or (ii) such Holder’s investment pursuant to this Agreement as set forth on the
signature page attached hereto.

     

    
      
         

      

      
        10

        
          

        

      

      
         

      

    

    

    (c)           Promptly
after receipt by an indem­ni­fied party under this Section 5.7 of notice
of the commencement of any action (including any governmental action), such
indem­nified party shall, if a claim in respect thereof is to be made
against any indemnify­ing party under this Section 5.7, deliver to the
indemnify­ing party a written notice of the commencement thereof and the
indemni­fying party shall have the right to par­ticipate in, and, to the
extent the indemnifying party so desires, jointly with any other indemnifying
party simi­larly notified, to assume the defense thereof with counsel
selected by the indemnifying party and approved by the indemnified party (whose
approval shall not be unreasonably withheld); provided, however, that an
indemnified party (together with all other indem­nified parties which may be
represented with­out conflict by one counsel) shall have the right to retain
one sepa­rate counsel, with the fees and expenses to be paid by the
indemnifying party, if representation of such indem­nified party by the
counsel retained by the indemnifying party would be inappropriate due to actual
or potential differing interests between such indemni­fied party and any
other party represented by such counsel in such proceeding.  The
failure to deliver written notice to the indemnifying party within a
rea­sonable time of the com­mencement of any such action, if prejudicial
to its ability to defend such action, shall relieve such indem­nifying party
of any liability to the indemnified party under this Section 5.7, but the
omission so to deliver written notice to the indemnify­ing party will not
re­lieve it of any liabil­ity that it may have to any indem­nified
party otherwise than under this Section 5.7.

    

    (d)           If
the indemnification provided for in this Section 5.7 is held by a court of
competent juris­diction to be unavailable to an indemnified party with
respect to any loss, liability, claim, damage, or ex­pense referred to
therein, then the indemnifying party, in lieu of indem­nifying such
indemnified party hereun­der, shall contrib­ute to the amount paid or
pay­able by such indemnified party as a result of such loss, liabil­ity,
claim, dam­age, or expense in such pro­por­tion as is
appro­priate to reflect the relative fault of the indem­nifying party on
the one hand and of the indem­nified party on the other in connection with
the state­ments or omissions that resulted in such loss, liabili­ty,
claim, damage, or expense as well as any other relevant equita­ble
consid­er­ations.  The relative fault of the indemni­fying
party and of the indemnified party shall be deter­mined by refer­ence
to, among other things, whether the untrue or alleged untrue statement of a
materi­al fact or the alleged omission to state a material fact relates to
infor­mation supplied by the indemnifying party or by the indemnified party
and the parties' rela­tive intent, knowl­edge, access to
infor­ma­tion, and opportunity to correct or prevent such state­ment
or omission.

    

    (e)           Notwithstanding
the foregoing, to the extent that the provisions on indemnification and
con­tri­bution contained in the underwriting agreement en­tered into
in connection with the underwritten public offering are in conflict with the
foregoing provisions, the provi­sions in the underwriting agreement shall
con­trol.

    

    (f)           The
obligations of the Company and Holders under this Section 5.7 shall survive the
com­ple­tion of any offer­ing of Registrable Securities in a
registration state­ment under this Article V, and
other­wise.

     

    
      
         

      

      
        11

        
          

        

      

      
         

      

    

    

    5.8           Reports Under Securities
Exchange Act of 1934.  With a view to making available to the
Holders the benefits of Rule 144 and any other rule or regula­tion of the
SEC that may at any time permit a Holder to sell securities of the Company to
the public without registration or pursuant to a registration on Form S-3, the
Company agrees to:

    

    (a)           make
and keep public information avail­able, as those terms are understood and
defined in Rule 144, at all times after 90 days after the effective date of the
IPO  or Trading Event by the Company;

    

    (b)           file
with the SEC in a timely manner all reports and other documents required of the
Company under the Securities Act and the Exchange Act; and

    

    (c)           furnish
to any Holder, so long as the Holder owns any Registrable Securities, forthwith
upon request (i) a copy of the most recent annual or quar­ter­ly report
of the Company and such other reports and documents so filed by the Company, and
(ii) such other information as may be reasonably requested in availing any
Holder of any rule or regulation of the SEC which permits the selling of any
such securities without regis­tration or pursuant to such form.

    

    5.9           Permitted
Transferees.  The rights to cause the Company to register
Registrable Securities granted to the Holders by the Company under this Article
V may be assigned in full by a Holder in connection with a transfer by such
Holder of its Registrable Securities if: (a) such Holder gives prior
written notice to the Company; (b) such transferee agrees to comply with the
terms and provisions of this Agreement; (c) such transfer is otherwise in
compliance with this Agreement and (d) such transfer is otherwise effected
in accordance with applicable securities laws.  Except as specifically
permitted by this Section 5.9, the rights of a Holder with respect to
Registrable Securities as set out herein shall not be transferable to any other
Person, and any attempted transfer shall cause all rights of such Holder therein
to be forfeited.

    

    5.10         Termination of Registration
Rights  The right of any Holder to request inclu­sion in
any regis­tration pursuant to Section 5.2 shall terminate if all shares of
Registrable Secu­rities held by such Holder may immediately be sold under
Rule 144 without restriction.

    

    VI.           MISCELLANEOUS

    

    6.1           Any
notice or other communication given hereunder shall be deemed sufficient if in
writing and sent by registered or certified mail, return receipt requested, or
delivered by hand against written receipt therefor, addressed as
follows:

     

    
      
         

      

      
        12

        
          

        

      

      
         

      

    

    

    if to the
Company, to it at:

    

    c/o
Paramount Biosciences, LLC

    787
Seventh Avenue

    48th
Floor

    New York,
NY  10019

    Facsimile:  (212)
554-4366

    Attn:  J.
Jay Lobell

     

    With a
copy to:

    

    Wyrick
Robbins Yates & Ponton LLP

    4101 Lake
Boone Trail

    Suite
300

    Raleigh,
NC 27607-7506

    Facsimile:  (919)781-4865

    Attn:  W.
David Mannheim, Esq.

    Email:  dmannheim@wyrick.com

     

    if to the
Subscriber, to it at:

    

    Paramount
Credit Partners, LLC

    787
Seventh Avenue, 48th
Floor

    New York,
NY 10019

    Facsimile:  (212)
554-4355

    Attn:
Lindsay A. Rosenwald, M.D.

     

    
      
         

      

      
        13

        
          

        

      

      
         

      

    

    

    Notices
shall be deemed to have been given or delivered on the date of mail­ing,
except notices of change of address, which shall be deemed to have been given or
delivered when received.

    

    6.2           Except
as otherwise expressly provided herein, any term of this Agreement may be
amended and the observance of any term of this Agreement may be waived (either
generally or in a particular instance, either retroactively or prospectively and
either for a specified period of time or indefinitely) with the written consent
of the Company and the Subscriber.

    

    6.3           Subject
to the provisions of Section 5.9, this Agreement shall be binding upon and inure
to the benefit of the parties hereto and to their respective heirs, legal
representatives, successors and assigns.  This Agreement sets forth
the entire agreement and under­standing between the parties as to the
subject matter hereof and merges and supersedes all prior dis­cussions,
agreements and understandings of any and every nature among them.

    

    6.4           NOTWITHSTANDING
THE PLACE WHERE THIS AGREE­MENT MAY BE EXECUTED BY ANY OF THE PARTIES
HERETO, THE PARTIES EX­PRESSLY AGREE THAT ALL THE TERMS AND PROVI­SIONS
HEREOF SHALL BE CONSTRUED IN ACCORDANCE WITH AND GOV­ERNED BY THE
SUBSTANTIVE AND PROCEDURAL LAWS OF THE STATE OF NEW YORK WITH­OUT REGARD TO
SUCH STATE’S PRINCIPLES OF CONFLICTS OF LAW.  IN THE EVENT THAT A
JUDICIAL PROCEEDING IS NECESSARY, THE SOLE FORUM FOR RESOLVING DISPUTES ARISING
OUT OF OR RELATING TO THIS AGREEMENT IS THE STATE AND FEDERAL COURTS LOCATED IN
THE BOROUGH OF MANHATTAN, STATE OF NEW YORK.  THE PARTIES HEREBY
IRREVOCABLY CONSENT TO THE JURISDICTION OF SUCH COURTS AND AGREE TO SAID
VENUE.

    

    
      
         

      

      
        14

        
          

        

      

      
         

      

       

    

    6.5           In
order to discourage frivolous claims the parties agree that unless a claimant in
any proceed­ing arising out of this Agreement succeeds in establishing his
claim and recovering a judgment against another party (regardless of whether
such claimant suc­ceeds against one of the other parties to the action),
then the other party shall be entitled to recover from such claimant all of its
reasonable legal costs and expenses relating to such proceeding and/or incurred
in prepara­tion therefor.

    

    6.6           The
holding of any provision of this Agreement to be invalid or unenforce­able
by a court of competent juris­diction shall not affect any other
provi­sion of this Agreement, which shall remain in full force and
effect.  If any provision of this Agreement shall be declared by a
court of competent jurisdiction to be inval­id, illegal or incapable of
being enforced in whole or in part, such provision shall be interpreted so as to
remain enforceable to the maximum extent permissible consistent with applicable
law and the remaining condi­tions and provisions or portions thereof shall
neverthe­less remain in full force and effect and enforceable to the extent
they are valid, legal and en­forceable, and no provisions shall be deemed
dependent upon any other covenant or provision unless so expressed
herein.

    

    6.7           It
is agreed that a waiver by either party of a breach of any provision of this
Agreement shall not operate, or be construed, as a waiver of any subsequent
breach by that same party.

    

    6.8          The
parties agree to execute and deliver all such further documents, agreements and
instruments and take such other and further action as may be neces­sary or
appropriate to carry out the purposes and intent of this Agreement.

    

    6.9          This
Agreement may be executed in two or more counter­parts each of which shall
be deemed an origi­nal, but all of which shall together constitute one and
the same instrument.

    

    6.10        Nothing
in this Agreement shall create or be deemed to create any rights in any person
or entity not a party to this Agreement, except for the holders of Registrable
Securities and (b) for the indemnified parties pursuant to Section 5.7
hereof.

    

    

    [REMAINDER
OF PAGE INTENTIONALLY BLANK]

     

    
      
         

      

      
        15

        
          

        

      

      
         

      

    

    

    IN WITNESS WHEREOF, the
undersigned have entered into this Note and Warrant Purchase Agreement as of the
15th day
of January, 2009.

    

    

     

    

    
      	 
      	PACIFIC BEACH BIOSCIENCES,
      INC.
	 
      	 
      
	 
      	
              By:

            	
              
                /s/
      J. Jay Lobell

              

            
	 
      	 
      	
              Name:

            	
              J.
      Jay Lobell

            
	 
      	 
      	
              Title:

            	 
      

    

    

     

    

    
      	 
      	PARAMOUNT CREDIT PARTNERS,
      LLC
	 
      	 
      
	 
      	
              By:

            	
              
                /s/
      Lindsay A. Rosenwald, M.D.

              

            
	 
      	 
      	
              Name:

            	
              Lindsay
      A. Rosenwald, M.D.

            
	 
      	 
      	
              Title:

            	
              Managing
      Member

            

    

     

    
 

    
      
         

      

      
        16

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