Document:

Unassociated Document

    

     

    SERIES
      B CONVERTIBLE PREFERRED STOCK PURCHASE

     

     

    AGREEMENT

     

    Dated
      as of July 31, 2007

     

    

    between

     

    URIGEN
      PHARMACEUTICALS, INC.

     

    and

     

     

    PLATINUM-MONTAUR
      LIFE SCIENCES, LLC

     

    

    

    
      
         

      

      
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    TABLE
      OF CONTENTS

    

    PAGE

     

    

    
      
        	
                ARTICLE
                  I  Purchase and Sale of Preferred Stock

              	 
                
                1

              
	
                    Section
                  1.1

              	
                Purchase
                  and Sale of Stock

              	
                1

              
	
                    Section
                  1.2

              	
                The
                  Conversion Shares

              	
                1

              
	
                    Section
                  1.3

              	
                Purchase
                  Price and Closing

              	
                1

              
	
                    Section
                  1.4

              	
                Warrants

              	
                1

              
	 	 	 
	
                ARTICLE
                  II  Representations and
                  Warranties

              	
                1

              
	 	 
	
                    Section
                  2.1

              	
                Representations
                  and Warranties of the Company

              	
                1

              
	
                    Section
                  2.2

              	
                Representations
                  and Warranties of the Purchasers

              	
                1

              
	 	 	 
	
                ARTICLE
                  III  Covenants

              	
                1

              
	 	 
	
                    Section
                  3.1

              	
                Securities
                  Compliance.

              	
                1

              
	
                    Section
                  3.2

              	
                Registration
                  and Listing

              	
                1

              
	
                    Section
                  3.3

              	
                Inspection
                  Rights

              	
                1

              
	
                    Section
                  3.4

              	
                Compliance
                  with Laws

              	
                1

              
	
                    Section
                  3.5

              	
                Keeping
                  of Records and Books of Account

              	
                1

              
	
                    Section
                  3.6

              	
                Reporting
                  Requirements

              	
                1

              
	
                    Section
                  3.7

              	
                Amendments

              	
                1

              
	
                    Section
                  3.8

              	
                Other
                  Agreements

              	
                1

              
	
                    Section
                  3.9

              	
                Distributions

              	
                1

              
	
                    Section
                  3.10

              	
                Status
                  of Dividends

              	
                1

              
	
                    Section
                  3.11

              	
                Disclosure
                  of Transaction

              	
                1

              
	
                    Section
                  3.12

              	
                Conversions;
                  Opinions.

              	
                1

              
	
                    Section
                  3.13

              	
                Reservation
                  of Shares

              	
                1

              
	
                    Section
                  3.14

              	
                Transfer
                  Agent Instructions

              	
                1

              
	
                    Section
                  3.15

              	
                Disposition
                  of Assets

              	
                1

              
	
                    Section
                  3.16

              	
                Most
                  Favored Nations Exchange Right

              	
                1

              
	
                    Section
                  3.17

              	
                Subsequent
                  Financing

              	
                 

              
	 	 	 
	
                ARTICLE
                  IV Conditions

              	
                1

              
	 	 
	
                    Section
                  4.1

              	
                Conditions
                  Precedent to the Obligation of the Company to Sell the
                  Shares

              	
                1

              
	
                    Section
                  4.2

              	
                Conditions
                  Precedent to the Obligation of the Purchasers to Purchase the
                  Shares

              	
                1

              

      

       

       

       

      
        
           

        

        
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                ARTICLE
                  V  Intentionally
                  Omitted.

              	
                1

              
	 	 
	
                ARTICLE
                  VI  Stock
                  Certificate Legend

              	
                1

              
	 	 
	
                    Section
                  6.1

              	
                Legend

              	
                1

              
	 	 	 
	
                ARTICLE
                  VII  Intentionally
                  Omitted.

              	
                1

              
	 	 
	
                ARTICLE
                  VIII Indemnification

              	
                1

              
	 	 
	
                    Section
                  8.1

              	
                General
                  Indemnity

              	
                1

              
	
                    Section
                  8.2

              	
                Indemnification
                  Procedure

              	
                1

              
	 	 	 
	
                ARTICLE
                  IX  

              	
                Miscellaneous

              	
                1

              
	 	 	 
	
                    Section
                  9.1

              	
                Fees
                  and Expenses

              	
                1

              
	
                    Section
                  9.2

              	
                Specific
                  Enforcement, Consent to Jurisdiction.

              	
                1

              
	
                    Section
                  9.3

              	
                Entire
                  Agreement; Amendment

              	
                1

              
	
                    Section
                  9.4

              	
                Notices

              	
                1

              
	
                    Section
                  9.5

              	
                Waivers
                  by Party

              	
                1

              
	
                    Section
                  9.6

              	
                Waivers
                  by Majority Holders

              	
                1

              
	
                    Section
                  9.7

              	
                Headings

              	
                1

              
	
                    Section
                  9.8

              	
                Successors
                  and Assigns

              	
                1

              
	
                    Section
                  9.9

              	
                No
                  Third Party Beneficiaries

              	
                1

              
	
                    Section
                  9.10

              	
                Governing
                  Law

              	
                1

              
	
                    Section
                  9.11

              	
                Survival

              	
                1

              
	
                    Section
                  9.12

              	
                Counterparts

              	
                1

              
	
                    Section
                  9.13

              	
                Publicity

              	
                1

              
	
                    Section
                  9.14

              	
                Severability

              	
                1

              
	
                    Section
                  9.15

              	
                Further
                  Assurances

              	
                1

              

      

    

     

     

    
      
         

      

      
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    SERIES
      B CONVERTIBLE PREFERRED STOCK PURCHASE AGREEMENT

     

    This
      SERIES B CONVERTIBLE PREFERRED STOCK PURCHASE AGREEMENT (the “Agreement”) is
      dated as of July 31, 2007 by and among Urigen Pharmaceuticals, Inc., a Delaware
      corporation (the “Company”), and each of the Purchasers of shares of Series B
      Convertible Preferred Stock of the Company whose names are set forth on Exhibit
      A hereto (individually, a “Purchaser” and collectively, the
“Purchasers”).

    

    The
      parties hereto agree as follows:

     

    ARTICLE
      I

     

    

     

    Purchase
      and Sale of Preferred Stock

     

    Section
      1.1  Purchase
      and Sale of Stock.  Upon the following terms and conditions, the
      Company shall issue and sell to the Purchasers and each of the Purchasers shall,
      severally but not jointly, purchase from the Company, the number of shares
      of
      the Company’s Series B Convertible Preferred Stock, par value $.001 per share
      (the “Preferred Shares”), at a purchase price of $10,000 per share, set forth
      with respect to such Purchaser on Exhibit A hereto.  The designation,
      rights, preferences and other terms and provisions of the Preferred Shares
      are
      set forth in the Amended and Restated Certificate of Designation of the Relative
      Rights and Preferences of the Series B Convertible Preferred Stock attached
      hereto as Exhibit C-1 (the “Certificate of Designation”).  The Company
      and the Purchasers are executing and delivering this Agreement in accordance
      with and in reliance upon the exemption from securities registration afforded
      by
      Rule 506 of Regulation D (“Regulation D”) as promulgated by the United States
      Securities and Exchange Commission (the “Commission”) under the Securities Act
      of 1933, as amended (the “Securities Act”) and/or Section 4(2) of the Securities
      Act.

     

    Section
      1.2  The
      Conversion Shares.  The Company has authorized and has reserved
      and covenants to continue to reserve, free of preemptive rights and other
      similar contractual rights of stockholders, such number of shares of Preferred
      Shares and Common Stock as shall from time to time be sufficient to effect
      the
      conversion of all of the Preferred Shares and exercise of the Warrants then
      outstanding; provided that the number of shares of Common Stock so
      reserved shall at no time be less than 120% of the number of shares of Common
      Stock required to be issued upon the conversion of the Preferred Shares and
      exercise of the Warrants.  Any shares of Common Stock issuable upon
      conversion of the Preferred Shares and exercise of the Warrants (and such shares
      when issued) are herein referred to as the “Conversion Shares” and the “Warrant
      Shares,” respectively.  The Preferred Shares, the Conversion Shares
      and the Warrant Shares are sometimes collectively referred to as the
“Shares.”

     

    Section
      1.3  Purchase
      Price and Closing.  The Company agrees to issue and sell to the
      Purchasers and, in consideration of and in express reliance upon the
      representations, warranties, covenants, terms and conditions of this Agreement,
      the Purchasers, severally but not jointly, agree to purchase, that number of
      the
      Preferred Shares and Warrants set forth opposite their respective names on
      Exhibit A.  The aggregate purchase price of the Preferred Shares and
      Warrants being acquired by each Purchaser is set forth opposite such Purchaser’s
      name on Exhibit A (for each such purchaser, the “Purchase
      Price”).  The closing of the purchase and sale of the Preferred Shares
      and Warrants to be acquired by the Purchasers from the Company under this
      Agreement shall take place at the offices of Platinum Montaur Life Sciences,
      LLC
      (the “Lead Purchaser”), 152 West 57th Street,
      New York,
      NY 10019 or at such other place as the Purchasers and the Company may agree
      upon
      (the “Closing”), at 10:00 a.m., New York time on the date on which the last to
      be fulfilled or waived of the conditions set forth in Article IV hereof and
      applicable to the Closing shall be fulfilled or waived in accordance herewith
      (the “Closing Date”).  At the Closing, the Company shall deliver or
      cause to be delivered to each Purchaser a certificate registered in the name
      of
      the Purchaser representing the number of Preferred Shares that such Purchaser
      is
      purchasing pursuant to the terms hereof and the Warrants to purchase such number
      of shares of Common Stock as is set forth opposite the name of such Purchaser
      on
      Exhibit A.  At or before the Closing, each Purchaser shall deliver its
      Purchase Price by wire transfer to the Company.

     

    
      
         

      

      
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    Section
      1.4  Warrants.  The
      Company agrees to issue to each of the Purchasers a Series A Warrant, in
      substantially the form attached hereto as Exhibit B-1 (the “Warrants”), to
      purchase the number of shares of Common Stock equal to one hundred percent
      (100%) of the number of Conversion Shares issuable upon such Purchasers
      Preferred Shares purchased hereunder, as set forth opposite such Purchaser’s
      name on Exhibit A hereto. The Warrants shall expire five
      (5) years following the Closing Date.  The Warrants shall have an
      exercise price per share equal to the Warrant Price (as defined in the
      Warrants).

     

     

    ARTICLE
      II    

                                

    Representations
      and Warranties

     

    Section
      2.1  Representations
      and Warranties of the Company.  The Company hereby represents and
      warrants to the Purchasers, except as set forth in the Company’s disclosure
      schedule delivered with this Agreement (with each numbered schedule
      corresponding to the section number herein), as follows:

     

    (a)  Organization,
      Good Standing and Power.  The Company is a corporation duly
      incorporated, validly existing and in good standing under the laws of the State
      of Delaware and has the requisite corporate power to own, lease and operate
      its
      properties and assets and to conduct its business as it is now being
      conducted.  The Company does not have any direct or indirect
      Subsidiaries (as defined in Section 2.1(g)) except PolyMASC Pharmaceuticals
      plc
      and Urigen N.A., Inc., or own securities of any kind in any other
      entity.  The Company and each such Subsidiary is duly qualified as a
      foreign corporation to do business and is in good standing in every jurisdiction
      in which the nature of the business conducted or property owned by it makes
      such
      qualification necessary except for any jurisdiction(s) (alone or in the
      aggregate) in which the failure to be so qualified will not have a Material
      Adverse Effect.  For the purposes of this Agreement, “Material
      Adverse Effect” means (i) any adverse effect on the business, operations,
      properties, prospects or financial condition of the Company or its Subsidiaries
      and which is material to such entity or other entities controlling or controlled
      by such entity and/or (ii) any condition, circumstance, or situation that would
      prohibit or otherwise materially interfere with the ability of the Company
      to
      perform any of its obligations under this Agreement or any of the Transaction
      Documents (as defined below) in any material respect.

     

    
      
         

      

      
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    (b)  Authorization;
      Enforcement.  The Company has the requisite corporate power and
      authority to enter into and perform this Agreement, the Certificate of
      Designation, the Registration Rights Agreement attached hereto as Exhibit D
      (the
“Registration Rights Agreement”), the Irrevocable Transfer Agent Instructions
      (as defined in Section 3.14) and the Warrants (collectively, the “Transaction
      Documents”), and to issue and sell the Preferred Shares in accordance with
      the terms hereof and the Warrants, as applicable.  The execution,
      delivery and performance of the Transaction Documents by the Company and the
      consummation by it of the transactions contemplated thereby have been duly
      and
      validly authorized by all necessary corporate action and no further consent
      or
      authorization of the Company or its Board of Directors or stockholders is
      required.  This Agreement has been duly executed and delivered by the
      Company.  The other Transaction Documents will have been duly executed
      and delivered by the Company at the Closing.  Each of the Transaction
      Documents constitutes, or shall constitute when executed and delivered, a valid
      and binding obligation of the Company enforceable against the Company in
      accordance with its terms, except as such enforceability may be limited by
      applicable bankruptcy, reorganization, moratorium, liquidation, conservatorship,
      receivership or similar laws relating to, or affecting generally the enforcement
      of, creditor’s rights and remedies or by other equitable principles of general
      application.

     

     

    (c)  Capitalization.  The
      authorized capital stock of the Company and the shares thereof currently issued
      and outstanding as of July 31, 2007 is set forth on Schedule 2.1(c)(1)
      hereto.  All of the outstanding shares of the Company’s Common Stock
      and any other security of the Company have been duly and validly
      authorized.  Except as set forth in Schedule 2.1(c)(1), no shares of
      Common Stock or any other security of the Company are entitled to preemptive
      rights or to registration rights which have not already been complied with,
      and
      except as set forth in Schedule 2.1(c)(1), there are no outstanding options,
      warrants, scrip, rights to subscribe to, call or commitments of any character
      whatsoever relating to, or securities or rights convertible into, any shares
      of
      capital stock of the Company.  Furthermore, except as set forth in
      this Agreement and as set forth in Schedule 2.1(c)(1), there are no contracts,
      commitments, understandings, or arrangements by which the Company is or may
      become bound to issue additional shares of the capital stock of the Company
      or
      options, securities or rights convertible into shares of capital stock of the
      Company.  The Company is not a party to or bound by any agreement or
      understanding granting registration or anti-dilution rights to any person with
      respect to any of its equity or debt securities.  Except as set forth
      on Schedule 2.1(c)(2), the Company is not a party to, and it has no
      knowledge of, any agreement or understanding restricting the voting or transfer
      of any shares of the capital stock of the Company.  The offer and sale
      of all capital stock, convertible securities, rights, warrants, or options
      of
      the Company issued prior to the Closing complied with all applicable federal
      and
      state securities laws, and no holder of such securities has a right of
      rescission or claim for damages with respect thereto which could have a Material
      Adverse Effect.  The Company has furnished or made available to the
      Purchasers true and correct copies of the Company’s Amended and Restated
      Certificate of Incorporation as in effect on the date hereof (the
“Certificate”), and the Company’s Bylaws as in effect on the date hereof
      (the “Bylaws”).

     

     

    
      
         

      

      
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    (d)  Issuance
      of Securities.  The Preferred Shares and the Warrants to be issued
      at the Closing have been duly authorized by all necessary corporate action
      and,
      when paid for or issued in accordance with the terms hereof, the Preferred
      Shares and the Warrants shall be validly issued and outstanding, fully paid
      and
      nonassessable and free and clear of all taxes, liens, encumbrances and rights
      of
      refusal of any kind and the holders of the Preferred Shares shall be entitled
      to
      all rights accorded to them in the Certificate of Designation.  When
      the Warrant Shares are issued and paid for in accordance with the terms of
      this
      Agreement and as set forth in the Warrants, and when the Conversion Shares
      are
      issued upon conversion of the Preferred Shares, such shares will be duly
      authorized by all necessary corporate action and validly issued and outstanding,
      fully paid and nonassessable, free and clear of all taxes, liens, encumbrances
      and rights of refusal of any kind and the holders shall be entitled to all
      rights accorded to a holder of Common Stock.

     

     

    (e)  No
      Conflicts.  The execution, delivery and performance of the
      Transaction Documents by the Company and the consummation by the Company of
      the
      transactions contemplated hereby and thereby (including, without limitation,
      the
      issuance of the Preferred Shares, the Warrants, the Conversion Shares and the
      Warrant Shares) do not and will not (i) violate or conflict with any provision
      of the Company’s  Certificate or Bylaws or its Subsidiaries’
comparable charter documents, (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, mortgage, deed of trust, indenture, note, bond,
      license, lease agreement, instrument or obligation to which the Company or
      any
      of its Subsidiaries is a party or by which the Company or any of its
      Subsidiaries’ respective properties or assets are bound, (iii) create or impose
      a lien, mortgage, security interest, charge or encumbrance of any nature on
      any
      property or asset of the Company or its Subsidiaries under any agreement or
      any
      commitment to which the Company or any of its Subsidiaries is a party or by
      which the Company or any of its Subsidiaries is bound or by which any of their
      respective properties or assets are bound, or (iv) result in a violation of
      any
      federal, state, local or foreign statute, rule, regulation, order, judgment
      or
      decree (including federal and state securities laws and regulations) applicable
      to the Company or any of its Subsidiaries or by which any property or asset
      of
      the Company or any of its Subsidiaries are bound or affected, except, in all
      cases other than violations pursuant to clauses (i) or (iv) (with respect to
      federal and state securities laws) above, for such conflicts, defaults,
      terminations, amendments, acceleration, cancellations and violations as would
      not, individually or in the aggregate, have a Material Adverse
      Effect.  The business of the Company and its Subsidiaries is not being
      conducted in violation of any laws, ordinances or regulations of any
      governmental entity, except for possible violations which singularly or in
      the
      aggregate do not and will not have a Material Adverse Effect.  Neither
      the Company nor any of its Subsidiaries is required under federal, state,
      foreign or local law, rule or regulation to obtain any consent, authorization
      or
      order of, or make any filing or registration with, any court or governmental
      agency in order for it to execute, deliver or perform any of its obligations
      under the Transaction Documents or issue and sell the Preferred Shares, the
      Warrants, the Conversion Shares and the Warrant Shares in accordance with the
      terms hereof or thereof (other than any filings which may be required to be
      made
      by the Company with the Commission, prior to or subsequent to the Closing,
      or
      state securities administrators subsequent to the Closing, or any registration
      statement which may be filed pursuant hereto or the Registration Rights
      Agreement).

     

    
      
         

      

      
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    (f)  Commission
      Documents, Financial Statements.  The Common Stock of the Company
      is registered pursuant to Section 12(b) or 12(g) of the Securities Exchange
      Act
      of 1934, as amended (the “Exchange Act”), and except as set forth on
      Schedule 2.1(f), the Company has timely filed all reports, schedules, forms,
      statements and other documents required to be filed by it with the Commission
      pursuant to the reporting requirements of the Exchange Act, including material
      filed pursuant to Section 13(a) or 15(d) of the Exchange Act (all of the
      foregoing, including filings incorporated by reference therein, together with
      the Merger Filings (as defined below), being referred to herein as the
“Commission Documents”).  The Company has delivered or made
      available to the Purchasers true and complete copies of the latest Commission
      Documents filed with the Commission.  The Company has not provided to
      the Purchasers any material non-public information or other information which,
      according to applicable law, rule or regulation, should have been disclosed
      publicly by the Company but which has not been so disclosed, other than with
      respect to the transactions contemplated by this Agreement.  At the
      time of their respective filings and as of the date hereof, the Form S-4 (File
      No. 333-140443), as amended, and the Form 8-K, filed on July 19, 2007 (the
      “Merger Filings”) complied in all material respects with the requirements
      of the Exchange Act and the Securities Act and the rules and regulations of
      the
      Commission promulgated thereunder and other federal, state and local laws,
      rules
      and regulations applicable to such documents, and the Merger Filings did not
      contain any untrue statement of a material fact or omit to state a material
      fact
      required to be stated therein or necessary in order to make the statements
      therein, in light of the circumstances under which they were made, not
      misleading.  As of their respective dates, the financial statements of
      the Company included in the Commission Documents comply as to form in all
      material respects with applicable accounting requirements and the published
      rules and regulations of the Commission or other applicable rules and
      regulations with respect thereto.  Such financial statements have been
      prepared in accordance with generally accepted accounting principles
      (“GAAP”) applied on a consistent basis during the periods involved
      (except (i) as may be otherwise indicated in such financial statements or the
      notes thereto or (ii) in the case of unaudited interim statements, to the extent
      they may not include footnotes or may be condensed or summary statements),
      and
      fairly present in all material respects the financial position of the Company
      and its Subsidiaries as of 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).

     

     

    (g)  Subsidiaries.  For
      purposes of this Agreement, “Subsidiary” shall mean any corporation or other
      entity of which at least a majority of the securities or other ownership
      interests having ordinary voting power for the election of directors or other
      persons performing similar functions are held or beneficially owned directly
      or
      indirectly by the Company.  The Company’s only direct or indirect
      Subsidiaries are PolyMASC Pharmaceuticals plc, an entity organized under the
      laws of England and Wales, and Urigen N.A., Inc., a corporation organized under
      the laws of the State of Delaware.  Such Subsidiaries are each
      wholly-owned by the Company.  All of the outstanding membership
      interests and other securities of such Subsidiaries have been duly authorized
      and validly issued, and are fully paid and nonassessable.  There are
      no outstanding preemptive, conversion or other rights, options, warrants or
      agreements granted or issued by or binding upon any such Subsidiary for the
      purchase or acquisition of any membership interests or other securities of
      such
      Subsidiary or any other securities convertible into, exchangeable for or
      evidencing the rights to subscribe for any membership interests or other
      securities of such Subsidiary.  Neither the Company nor any such
      Subsidiary is subject to any obligation (contingent or otherwise) to repurchase
      or otherwise acquire or retire any membership interests or other securities
      of
      such Subsidiary or any convertible securities, rights, warrants or options
      of
      the type described in the preceding sentence.  Neither the Company nor
      any such Subsidiary is party to, nor has any knowledge of, any agreement
      restricting the voting or transfer of any membership interests of such
      Subsidiaries.

     

    
      
         

      

      
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    (h)  No
      Material Adverse Change.  Since March 31, 2007, and except as
      disclosed in the Commission Documents, the Company has not experienced or
      suffered any Material Adverse Effect.

     

     

    (i)  No
      Undisclosed Liabilities.  Except as set forth on Schedule 2.1
      hereto, neither the Company nor any of its Subsidiaries has any liabilities,
      obligations, claims or losses (whether liquidated or unliquidated, secured
      or
      unsecured, absolute, accrued, contingent or otherwise) other than those incurred
      in the ordinary course of the Company’s or its Subsidiaries’ respective
      businesses since March 31, 2007 and which, individually or in the aggregate,
      do
      not or would not have a Material Adverse Effect on the Company or its
      Subsidiaries.

     

     

    (j)  No
      Undisclosed Events or Circumstances.  Since March 31, 2007, no
      event or circumstance has occurred or exists with respect to the Company or
      any
      of its Subsidiaries or their respective businesses, properties, prospects,
      operations or financial condition, which, under applicable law, rule or
      regulation, requires public disclosure or announcement by the Company but which
      has not been so publicly announced or disclosed.

     

     

    (k)  Indebtedness.
      The Company’s financial statements and other information in the Commission
      Documents set forth as of the date hereof all outstanding secured and unsecured
      Indebtedness of the Company or its Subsidiaries, or for which the Company or
      its
      Subsidiaries have commitments, except as set forth on Schedule
      2.1(k).  The Company is not in default with respect to any such
      indebtedness.

     

     

    (l)  Title
      to Assets.  Each of the Company and its Subsidiaries has good and
      marketable title to all of its real and personal property, free and clear of
      any
      mortgages, pledges, charges, liens, security interests or other encumbrances
      of
      any nature whatsoever, except for those indicated in the Commission Documents
      or
      such that, individually or in the aggregate, do not have a Material Adverse
      Effect.  All leases of the Company and its Subsidiaries are valid and
      subsisting and in full force and effect.

     

     

    (m)  Actions
      Pending.  There is no action, suit, claim, investigation,
      arbitration, alternate dispute resolution proceeding or other proceeding pending
      or, to the knowledge of the Company, threatened against the Company or its
      Subsidiaries which questions the validity of this Agreement or any of the other
      Transaction Documents or any of the transactions contemplated hereby or thereby
      or any action taken or to be taken pursuant hereto or thereto.  Except
      as set forth on Schedule 2.1(m) hereto, there is no action, suit, claim,
      investigation, arbitration, alternate dispute resolution proceeding or other
      proceeding pending or, to the knowledge of the Company, threatened, against
      or
      involving the Company, any of its Subsidiaries or any of their respective
      properties or assets, which individually or in the aggregate, would have a
      Material Adverse Effect.  There are no outstanding orders, judgments,
      injunctions, awards or decrees of any court, arbitrator or governmental or
      regulatory body against the Company or any of its Subsidiaries or any officers
      or directors of the Company or its Subsidiaries in their capacities as such,
      which individually or in the aggregate, would have a Material Adverse
      Effect.

     

    
      
         

      

      
        -9-

        
          

        

      

      
         

      

    

     

    (n)  Compliance
      with Law.  The business of the Company and its Subsidiaries has
      been and is presently being conducted in accordance with all applicable federal,
      state and local governmental laws, rules, regulations and ordinances, or such
      that, individually or in the aggregate, the noncompliance therewith would have
      a
      Material Adverse Effect.  The Company and its Subsidiaries have all
      franchises, permits, licenses, consents and other governmental or regulatory
      authorizations and approvals necessary for the conduct of their business as
      now
      being conducted by them unless the failure to possess such franchises, permits,
      licenses, consents and other governmental or regulatory authorizations and
      approvals, individually or in the aggregate, could not reasonably be expected
      to
      have a Material Adverse Effect.

     

     

    (o)  Taxes.  Except
      as set forth on Schedule 2.1(o), the Company and its Subsidiaries have
      accurately prepared and filed all federal, state, foreign and other tax returns
      required by law to be filed by them, has paid or made provisions for the payment
      of all taxes shown to be due and all additional assessments, and adequate
      provisions have been and are reflected in the financial statements of the
      Company and its Subsidiaries for all current taxes and other charges to which
      the Company or its Subsidiaries are subject and which are not currently due
      and
      payable.  None of the federal income tax returns of the Company or its
      Subsidiaries have been audited by the Internal Revenue Service.  The
      Company has no knowledge of any additional assessments, adjustments or
      contingent tax liability (whether federal, state or foreign) of any nature
      whatsoever, whether pending or threatened against the Company or any of its
      Subsidiaries for any period, nor of any basis for any such assessment,
      adjustment or contingency.

     

     

    (p)  Certain
      Fees. Except as set forth on Schedule 2.1(p) hereto, no brokers,
      finders or financial advisory fees or commissions will be payable by the Company
      or any subsidiary or any Purchaser with respect to the transactions contemplated
      by this Agreement.

     

     

    (q)  Disclosure.  The
      Company confirms that neither it nor anyone working on its behalf has provided
      any of the Purchasers or their agents or counsel with any information that
      constitutes or might constitute material, nonpublic
      information.  Neither this Agreement or the Schedules hereto nor any
      other documents, certificates or instruments furnished to the Purchasers by
      or
      on behalf of the Company or its Subsidiaries in connection with the transactions
      contemplated by this Agreement contain any untrue statement of a material fact
      or omit to state a material fact necessary in order to make the statements
      made
      herein or therein, in the light of the circumstances under which they were
      made
      herein or therein, not misleading.

     

     

    (r)  Operation
      of Business.  The Company and its Subsidiaries own or possess all
      patents, trademarks, domain names (whether or not registered) and any patentable
      improvements or copyrightable derivative works thereof, websites and
      intellectual property rights relating thereto, service marks, trade names,
      copyrights, licenses and authorizations, and all rights with respect to the
      foregoing, which are necessary for the conduct of its business as now conducted
      without any conflict with the rights of others.

     

    
      
         

      

      
        -10-

        
          

        

      

      
         

      

    

     

    (s)  Environmental
      Compliance.  The Company and its Subsidiaries have obtained all
      material approvals, authorization, certificates, consents, licenses, orders
      and
      permits or other similar authorizations of all governmental authorities, or
      from
      any other person, that are required under any  Environmental
      Laws.  “Environmental Laws” shall mean all applicable laws
      relating to the protection of the environment including, without limitation,
      all
      requirements pertaining to reporting, licensing, permitting, controlling,
      investigating or remediating emissions, discharges, releases or threatened
      releases of hazardous substances, chemical substances, pollutants, contaminants
      or toxic substances, materials or wastes, whether solid, liquid or gaseous
      in
      nature, into the air, surface water, groundwater or land, or relating to the
      manufacture, processing, distribution, use, treatment, storage, disposal,
      transport or handling of hazardous substances, chemical substances, pollutants,
      contaminants or toxic substances, material or wastes, whether solid, liquid
      or
      gaseous in nature.  The Company has all necessary governmental
      approvals required under all Environmental Laws and used in its business or
      in
      the business of its Subsidiaries, except for such instances as would not
      individually or in the aggregate have a Material Adverse Effect.  The
      Company and its Subsidiaries are also in compliance with all other limitations,
      restrictions, conditions, standards, requirements, schedules and timetables
      required or imposed under all Environmental Laws.  Except for such
      instances as would not individually or in the aggregate have a Material Adverse
      Effect, there are no past or present events, conditions, circumstances,
      incidents, actions or omissions relating to or in any way affecting the Company
      or its Subsidiaries that violate or may violate any Environmental Law after
      the
      Closing or that may give rise to any environmental liability, or otherwise
      form
      the basis of any claim, action, demand, suit, proceeding, hearing, study or
      investigation (i) under any Environmental Law, or (ii) based on or related
      to
      the manufacture, processing, distribution, use, treatment, storage (including,
      without limitation, underground storage tanks), disposal, transport or handling,
      or the emission, discharge, release or threatened release of any hazardous
      substance.  “Environmental Liabilities” means all liabilities
      of a person (whether such liabilities are owed by such person to governmental
      authorities, third parties or otherwise) whether currently in existence or
      arising hereafter which arise under or relate to any Environmental
      Law.

     

     

    (t)  Books
      and Records; Internal Accounting Controls.  The records and
      documents of the Company and its Subsidiaries accurately reflect in all material
      respects the information relating to the business of the Company and its
      Subsidiaries, the location and collection of their assets, and the nature of
      all
      transactions giving rise to the obligations or accounts receivable of the
      Company or its Subsidiaries.  The Company and its Subsidiaries
      maintain a system of internal accounting controls sufficient, in the judgment
      of
      the Company’s board of directors, 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 actions are taken
      with respect to any differences.

     

    
      
         

      

      
        -11-

        
          

        

      

      
         

      

    

     

    (u)  Material
      Agreements.  Except for those filed as exhibits to the Commission
      Documents, neither the Company nor any of its Subsidiaries is a party to any
      written or oral contract, instrument, agreement, commitment, obligation, plan
      or
      arrangement, a copy of which would be required to be filed with the Commission
      (collectively, “Material Agreements”) if the Company or any of its
      Subsidiaries were registering securities under the Securities
      Act.  Except as set forth on Schedule 2.1(u) hereto, the Company and
      its Subsidiaries have in all material respects performed all the obligations
      required to be performed by them to date under the foregoing agreements, have
      received no notice of default and, to the best of the Company’s knowledge are
      not in default under any other Material Agreement now in effect, the result
      of
      which could cause a Material Adverse Effect.  Except as set forth in
      Section 2.1(u) hereto, no written or oral contract, instrument, agreement,
      commitment, obligation, plan or arrangement of the Company or of any of its
      Subsidiaries limits the payment of dividends on its Common Stock.

     

     

    (v)  Transactions
      with Affiliates.  Except as disclosed in the Commission Documents,
      there are no loans, leases, agreements, contracts, royalty agreements,
      management contracts or arrangements or other continuing transactions between
      (a) the Company, its Subsidiaries or any of their respective customers or
      suppliers on the one hand, and (b) on the other hand, any executive officer,
      5%
      or greater stockholder, director or employee of the Company, or its
      Subsidiaries, or, to the knowledge of the Company, any member of the immediate
      family of such persons or any corporation or other entity controlled by such
      persons or their immediate family members.

     

     

    (w)  Securities
      Act of 1933.  The Company has complied and will comply with all
      applicable federal and state securities laws in connection with the offer,
      issuance and sale of the Preferred Shares, the Warrants, the Conversion Shares
      and the Warrant Shares hereunder.  Neither the Company nor anyone
      acting on its behalf, directly or indirectly, has or will sell, offer to sell
      or
      solicit offers to buy any of the Securities, or similar securities to, or
      solicit offers with respect thereto from, or enter into any preliminary
      conversations or negotiations relating thereto with, any person, or has taken
      or
      will take any action so as to bring the issuance and sale of any of the
      Securities under the registration provisions of the Securities Act and
      applicable state securities laws.  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 under the Securities Act) in connection with the offer or sale
      of
      any of the Securities.

     

     

    (x)  Governmental
      Approvals.  Except for the filing of any notice prior or
      subsequent to the Closing that may be required under applicable state and/or
      federal securities laws (which if required, shall be filed on a timely basis),
      no authorization, consent, approval, license, exemption of, filing or
      registration with any court or governmental department, commission, board,
      bureau, agency or instrumentality, domestic or foreign, is or will be necessary
      for, or in connection with, the execution or delivery of the Preferred Shares
      and the Warrants, or for the performance by the Company of its obligations
      under
      the Transaction Documents.

     

    
      
         

      

      
        -12-

        
          

        

      

      
         

      

    

     

    (y)  Employees.  Neither
      the Company nor its Subsidiaries have any collective bargaining arrangements
      or
      agreements covering any of their employees.  Neither the Company nor
      its Subsidiaries have any employment contract, agreement regarding proprietary
      information, non-competition agreement, non-solicitation agreement,
      confidentiality agreement, or any other similar contract or restrictive
      covenant, relating to the right of any officer, employee or consultant to be
      employed or engaged by the Company or such Subsidiary.  Since March
      31, 2007, no officer, consultant or key employee of the Company or its
      Subsidiary whose termination, either individually or in the aggregate, could
      have a Material Adverse Effect, has terminated or, to the knowledge of the
      Company, has any present intention of terminating his or her employment or
      engagement with the Company or any Subsidiary.

     

     

    (z)  Absence
      of Certain Developments.  Except as set forth in the Commission
      Documents and on Schedule 2.1(z), since March 31, 2007, neither the Company
      nor any of its Subsidiaries has:

     

     

    (i)  issued
      any stock, bonds or other corporate securities or any rights, options or
      warrants with respect thereto;

     

    (ii)  borrowed
      any amount or incurred or become subject to any liabilities (absolute or
      contingent) except trade payables incurred in the ordinary course of
      business;

     

    (iii)  discharged
      or satisfied any lien or encumbrance or paid any obligation or liability
      (absolute or contingent), other than current liabilities paid in the ordinary
      course of business;

     

    (iv)  declared
      or made any payment or distribution of cash or other property to stockholders
      with respect to its stock, or purchased or redeemed, or made any agreements
      so
      to purchase or redeem, any shares of its capital stock;

     

    (v)  sold,
      assigned or transferred any other tangible assets, or canceled any debts or
      claims, except in the ordinary course of business;

     

    (vi)  sold,
      assigned or transferred any patent rights, trademarks, trade names, copyrights,
      trade secrets or other intangible assets or intellectual property rights, or
      disclosed any proprietary confidential information to any person except in
      the
      ordinary course of business or to the Purchasers or their
      representatives;

     

    (vii)  suffered
      any substantial losses or waived any rights of material value, whether or not
      in
      the ordinary course of business, or suffered the loss of any material amount
      of
      prospective business;

     

    (viii)  made
      any
      changes in employee compensation except in the ordinary course of business
      and
      consistent with past practices;

     

    (ix)  made
      capital expenditures or commitments in excess of $250,000 therefor;

     

    
      
         

      

      
        -13-

        
          

        

      

      
         

      

    

    (x)  entered
      into any other transaction other than in the ordinary course of business, or
      entered into any other material transaction, whether or not in the ordinary
      course of business;

     

    (xi)  made
      charitable contributions or pledges in excess of $25,000;

     

    (xii)  suffered
      any material damage, destruction or casualty loss, whether or not covered by
      insurance;

     

    (xiii)  experienced
      any material problems with labor or management in connection with the terms
      and
      conditions of their employment;

     

    (xiv)  effected
      any two or more events of the foregoing kind which in the aggregate would cause
      a Material Adverse Effect; or

     

    (xv)  entered
      into an agreement, written or otherwise, to take any of the foregoing
      actions.

     

    (aa)  Use
      of
      Proceeds.  The proceeds from the sale of the Preferred Shares will
      be used by the Company for working capital and general corporate
      purposes.

     

     

    (bb)  Public
      Utility Holding Company Act and Investment Company Act
      Status.  The Company is not a “holding company” or a “public
      utility company” as such terms are defined in the Public Utility Holding Company
      Act of 1935, as amended.  The Company is not, and as a result of and
      immediately upon the Closing will not be, an “investment company” or a company
“controlled” by an “investment company,” within the meaning of the Investment
      Company Act of 1940, as amended.

     

     

    (cc)  ERISA.  No
      liability to the Pension Benefit Guaranty Corporation has been incurred with
      respect to any Plan by the Company or any of its subsidiaries which is or would
      be materially adverse to the Company and its subsidiaries.  The
      execution and delivery of this Agreement and the issue and sale of the Preferred
      Shares will not involve any transaction which is subject to the prohibitions
      of
      Section 406 of ERISA or in connection with which a tax could be imposed pursuant
      to Section 4975 of the Internal Revenue Code of 1986, as amended, provided
      that,
      if any of the Purchasers, or any person or entity that owns a beneficial
      interest in any of the Purchasers, is an “employee pension benefit plan” (within
      the meaning of Section 3(2) of ERISA) with respect to which the Company is
      a
“party in interest” (within the meaning of Section 3(14) of ERISA), the
      requirements of Sections 407(d)(5) and 408(e) of ERISA, if applicable, are
      met.  As used in this Section 2.1(cc), the term “Plan” shall mean an
“employee pension benefit plan” (as defined in Section 3 of ERISA) which is or
      has been established or maintained, or to which contributions are or have been
      made, by the Company or any of its Subsidiaries or by any trade or business,
      whether or not incorporated, which, together with the Company or any of its
      Subsidiaries, is under common control, as described in Section 414(b) or (c)
      of
      the Code.

     

    
      
         

      

      
        -14-

        
          

        

      

      
         

      

    

     

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

     

     

    (ee)  No
      Integrated Offering.  Neither the Company, nor any of its
      affiliates, nor any person acting on its or their behalf, has directly or
      indirectly made any offers or sales of any security or solicited any offers
      to
      buy any security under circumstances that would cause the offering of the
      Preferred Shares and Warrants pursuant to this Agreement to be integrated with
      prior offerings by the Company for purposes of the Securities Act which would
      prevent the Company from selling the Preferred Shares and Warrants pursuant
      to
      Rule 506 under the Securities Act, or any applicable exchange-related
      stockholder approval provisions, nor will the Company or any of its affiliates
      or subsidiaries take any action or steps that would cause the offering of the
      Preferred Shares and Warrants to be integrated with other
      offerings.  The Company does not have any registration statement
      pending before the Commission or currently under the Commission’s review and
      since January 1, 2007, the Company has not offered or sold
      any of its equity securities or debt securities convertible into shares of
      Common Stock.

     

     

    (ff)  Independent
      Nature of Purchasers.  The Company acknowledges that the
      obligations of each Purchaser under the Transaction Documents are several and
      not joint with the obligations of any other Purchaser, and no Purchaser shall
      be
      responsible in any way for the performance of the obligations of any other
      Purchaser under the Transaction Documents.  The Company acknowledges
      that the decision of each Purchaser to purchase securities pursuant to this
      Agreement has been made by such Purchaser independently of any other purchase
      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
      or of
      its Subsidiaries which may have been made or given by any other Purchaser or
      by
      any agent or employee of any other Purchaser, and no Purchaser or any of its
      agents or employees shall have any liability to any Purchaser (or any other
      person) relating to or arising from any such information, materials, statements
      or opinions.  The Company acknowledges that nothing contained herein,
      or in any Transaction Document, and no action taken by any Purchaser pursuant
      hereto or thereto, shall be deemed to constitute the Purchasers as a
      partnership, an association, a joint venture or any other kind of entity, or
      create a presumption that the Purchasers are in any way acting in concert or
      as
      a group with respect to such obligations or the transactions contemplated by
      the
      Transaction Documents.  The Company acknowledges that each Purchaser
      shall be entitled to independently protect and enforce its rights, including
      without limitation, the rights arising out of this Agreement or out of the
      other
      Transaction Documents, and it shall not be necessary for any other Purchaser
      to
      be joined as an additional party in any proceeding for such
      purpose.  The Company acknowledges that for reasons of administrative
      convenience only, the Transaction Documents have been prepared by counsel for
      one of the Purchasers and such counsel does not represent all of the Purchasers
      but only such Purchaser and the other Purchasers have retained their own
      individual counsel with respect to the transactions contemplated hereby. 
The Company acknowledges that it has elected to provide all Purchasers with
      the
      same terms and Transaction Documents for the convenience of the Company and
      not
      because it was required or requested to do so by the Purchasers.  The
      Company acknowledges that such procedure with respect to the Transaction
      Documents in no way creates a presumption that the Purchasers are in any way
      acting in concert or as a group with respect to the Transaction Documents or
      the
      transactions contemplated hereby or thereby.

     

    
      
         

      

      
        -15-

        
          

        

      

      
         

      

    

     

    (gg)  Sarbanes
      Oxley; Transfer Agent.  The Company has complied with its
      obligations under the Sarbanes Oxley Act of 2002 and the rules and regulations
      promulgated thereunder.  The Company’s transfer agent is a participant
      in and the Common Stock is eligible for transfer pursuant to the Depository
      Trust Company Automated Securities Transfer Program.  The name,
      address, contact person and telephone number of the Company’s transfer agent is
      set forth on Schedule 2.1(gg) hereto.

     

     

    Section
      2.2  Representations
      and Warranties of the Purchasers.  Each of the Purchasers
      severally and not jointly hereby makes the following representations and
      warranties to the Company with respect solely to itself and not with respect
      to
      any other Purchaser:

     

    (a)  Organization
      and Standing of the Purchasers.  If the Purchaser is an entity,
      such Purchaser is a corporation, limited liability company or partnership duly
      incorporated or organized, validly existing and in good standing under the
      laws
      of the jurisdiction of its incorporation or organization.

     

     

    (b)  Authorization
      and Power.  The Purchaser has the requisite power and authority to
      enter into and perform this Agreement and to purchase the Preferred Shares
      being
      sold to it hereunder.  The execution, delivery and performance of this
      Agreement and the Registration Rights Agreement by such Purchaser and the
      consummation by it of the transactions contemplated hereby and thereby have
      been
      duly authorized by all necessary corporate or partnership action (if the
      Purchaser is an entity), and no further consent or authorization of such
      Purchaser or its Board of Directors, stockholders, or partners, as the case
      may
      be, is required.  Each of this Agreement and the Registration Rights
      Agreement has been duly authorized, executed and delivered by such
      Purchaser.

     

     

    (c)  No
      Conflicts.  The execution, delivery and performance of this
      Agreement and the Registration Rights Agreement and the consummation by such
      Purchaser of the transactions contemplated hereby and thereby or relating hereto
      do not and will not (i) result in a violation of such Purchaser’s charter
      documents or bylaws or (ii) conflict with, or constitute a default (or an event
      which with notice or lapse of time or both would become a default) under, or
      give to others any rights of termination, amendment, acceleration or
      cancellation of any agreement, indenture or instrument to which such Purchaser
      is a party, or result in a violation of any law, rule, or regulation, or any
      order, judgment or decree of any court or governmental agency applicable to
      such
      Purchaser or its properties (except for such conflicts, defaults and violations
      as would not, individually or in the aggregate, have a material adverse effect
      on such Purchaser).

     

    
      
         

      

      
        -16-

        
          

        

      

      
         

      

    

     

    (d)  Acquisition
      for Investment.  Such Purchaser is acquiring the Preferred Shares
      and the Warrants solely for its own account for the purpose of investment and
      not with a view to or for sale in connection with distribution.  Such
      Purchaser does not have a present intention to sell the Preferred Shares or
      the
      Warrants, nor a present arrangement (whether or not legally binding) or
      intention to effect any distribution of the Preferred Shares or the Warrants
      to
      or through any person or entity, provided that by making the
      representations herein and subject to Section 2.2(h) below, such Purchaser
      does
      not agree to hold the Preferred Shares or the Warrants for any minimum or other
      specific term and reserves the right to dispose of the Preferred Shares or
      the
      Warrants at any time in accordance with Federal and state securities laws
      applicable to such disposition.  Such Purchaser acknowledges that it
      is able to bear the financial risks associated with an investment in the
      Preferred Shares and the Warrants and that it has been given full access to
      such
      records of the Company and the subsidiaries and to the officers of the Company
      and the subsidiaries and received such information as it has deemed necessary
      or
      appropriate to conduct its due diligence investigation.

     

     

    (e)  Accredited
      Purchasers.  Such Purchaser is an “accredited investor” as defined
      in Regulation D promulgated under the Securities Act and has such knowledge
      and
      experience in financial and business matters that such Purchaser is capable
      of
      evaluating the merits and risks of the prospective investment in the Preferred
      Shares.

     

     

    (f)  Opportunities
      for Additional Information.  Each Purchaser acknowledges that such
      Purchaser has had the opportunity to ask questions of and receive answers from,
      or obtain additional information from, the executive officers of the Company
      concerning the financial and other affairs of the Company, and to the extent
      deemed necessary in light of such Purchaser’s personal knowledge of the
      Company’s affairs, such Purchaser has asked such questions and received answers
      to the full satisfaction of such Purchaser, and such Purchaser desires to invest
      in the Company.

     

     

    (g)  No
      General Solicitation.  Each Purchaser acknowledges that the
      Securities were not offered to such Purchaser by means of any form of general
      or
      public solicitation or general advertising, or publicly disseminated
      advertisements or sales literature, including (i) any advertisement, article,
      notice or other communication published in any newspaper, magazine, or similar
      media, or broadcast over television or radio, or (ii) any seminar or meeting
      to
      which such Purchaser was invited by any of the foregoing means of
      communications.

     

     

    (h)  Rule
      144.  Such Purchaser understands that the Shares must be held
      indefinitely unless such Shares are registered under the Securities Act or
      an
      exemption from registration is available.  Such Purchaser acknowledges
      that such Purchaser is familiar with Rule 144 of the rules and regulations
      of
      the Commission, as amended, promulgated pursuant to the Securities Act (“Rule
      144”), and that such person has been advised that Rule 144 permits resales only
      under certain circumstances.  Such Purchaser understands that to the
      extent that Rule 144 is not available, such Purchaser will be unable to sell
      any
      Shares without either registration under the Securities Act or the existence
      of
      another exemption from such registration requirement.

     

    
      
         

      

      
        -17-

        
          

        

      

      
         

      

    

     

    (i)  No
      Shorting.  No Purchaser has engaged in any short sales of the
      Common Stock or instructed any third parties to engage in any short sales of
      the
      Common Stock on its behalf prior to the Closing Date.  Each Purchaser
      covenants and agrees that it will not be in a net short position with respect
      to
      the shares of Common Stock.  For purposes of this Section 2.2(i), a
“net short position” means a sale of Common Stock by a Purchaser that is marked
      as a short sale and that is made at a time when there is no equivalent
      offsetting long position in Common Stock held by such Purchaser.

     

     

    (j)  General.  Such
      Purchaser understands that the Shares are being offered and sold in reliance
      on
      a transactional exemption from the registration requirement of Federal and
      state
      securities laws and the Company is relying upon the truth and accuracy of the
      representations, warranties, agreements, acknowledgments and understandings
      of
      such Purchaser set forth herein in order to determine the applicability of
      such
      exemptions and the suitability of such Purchaser to acquire the
      Shares.

     

     

    ARTICLE
      III

     

    Covenants

     

    The
      Company covenants with each of the Purchasers as follows, which covenants are
      for the benefit of the Purchasers and their permitted assignees (as defined
      herein).

     

    Section
      3.1  Securities
      Compliance.                                                      The
      Company shall notify the Commission in accordance with their rules and
      regulations, of the transactions contemplated by any of the Transaction
      Documents, including filing a report on Form 8-K and filing a Form D with
      respect to the Preferred Shares, Warrants, Conversion Shares and Warrant Shares,
      if required by the Commission’s rules, and shall take all other necessary action
      and proceedings as may be required and permitted by applicable law, rule and
      regulation, for the legal and valid issuance of the Preferred Shares, the
      Warrants, the Conversion Shares and the Warrant Shares to the Purchasers or
      subsequent holders.

     

    Section
      3.2  Registration
      and Listing.  The Company will cause its Common Stock to continue
      to be registered under Sections 12(b) or 12(g) of the Exchange Act, will comply
      in all respects with its reporting and filing obligations under the Exchange
      Act, will comply with all requirements related to any registration statement
      filed pursuant to this Agreement or the Registration Rights Agreement, and
      will
      not take any action or file any document (whether or not permitted by the
      Securities Act or the rules promulgated thereunder) to terminate or suspend
      such
      registration or to terminate or suspend its reporting and filing obligations
      under the Exchange Act or Securities Act, except as permitted
      herein.  The Company will take all action necessary to continue the
      listing or trading of its Common Stock on the over-the-counter electronic
      bulletin board and on such other exchange or market on which the Common Stock
      is
      trading.  If required, the Company will apply any listing application
      for the Shares and Warrant Shares.  The Company further covenants and
      agrees that it will take such further action as the Purchasers may reasonably
      request, all to the extent required from time to time to enable the Purchasers
      to sell the Securities without registration under the Securities Act within
      the
      limitation of the exemptions provided in Rule 144 promulgated under the
      Securities Act.  Upon the request of the Purchasers, the Company shall
      deliver to the Purchasers a written certification of a duly authorized officer
      as to whether it has complied with such requirement.

     

    
      
         

      

      
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    Section
      3.3  Inspection
      Rights.  The Company shall permit, during normal business hours
      and upon reasonable request and reasonable notice, each Purchaser or any
      employees, agents or representatives thereof, so long as such Purchaser shall
      be
      obligated hereunder to purchase the Preferred Shares or shall beneficially
      own
      any Preferred Shares, or shall own Conversion Shares which, in the aggregate,
      represent more than 1% of the total combined voting power of all voting
      securities then outstanding, for purposes reasonably related to such Purchaser’s
      interests as a stockholder to examine and make reasonable copies of and extracts
      from the records and books of account of, and visit and inspect the properties,
      assets, operations and business of the Company and any subsidiary, and to
      discuss the affairs, finances and accounts of the Company and any subsidiary
      with any of its officers, consultants, directors, and key
      employees.

     

    Section
      3.4  Compliance
      with Laws.  The Company shall comply, and cause each subsidiary to
      comply, with all applicable laws, rules, regulations and orders, noncompliance
      with which could have a Material Adverse Effect.

     

    Section
      3.5  Keeping
      of Records and Books of Account.  The Company shall keep and cause
      each of its Subsidiaries to keep adequate records and books of account, in
      which
      complete entries will be made in accordance with GAAP consistently applied,
      reflecting all financial transactions of the Company and its Subsidiaries,
      and
      in which, for each fiscal year, all proper reserves for depreciation, depletion,
      obsolescence, amortization, taxes, bad debts and other purposes in connection
      with its business shall be made.

     

    Section
      3.6  Reporting
      Requirements.  If the Company ceases to file its periodic reports
      with the Commission, or if the Commission ceases making these periodic reports
      available via the Internet without charge, then at a Purchaser’s request the
      Company shall furnish the following to such Purchaser so long as such Purchaser
      shall be obligated hereunder to purchase the Preferred Shares or shall
      beneficially own any Preferred Shares, or shall own Conversion Shares which,
      in
      the aggregate, represent more than 1% of the total combined voting power of
      all
      voting securities then outstanding:

     

    (a)  Quarterly
      Reports filed with the Commission on Form 10-Q or Form 10-QSB as soon as
      available, and in any event within forty-five (45) days after the end of each
      of
      the first three fiscal quarters of the Company;

     

     

    (b)  Annual
      Reports filed with the Commission on Form 10-K or Form 10-KSB as soon as
      available, and in any event within ninety (90) days after the end of each fiscal
      year of the Company; and

     

     

    (c)  Copies
      of
      all notices and information, including without limitation notices and proxy
      statements in connection with any meetings, that are provided to holders of
      shares of Common Stock, contemporaneously with the delivery of such notices
      or
      information to such holders of Common Stock.

     

    
      
         

      

      
        -19-

        
          

        

      

      
         

      

    

     

    Section
      3.7  Amendments.  The
      Company shall not amend or waive any provision of the Certificate, Bylaws or
      the
      Registration Rights Agreement in any way that would adversely affect the
      liquidation preferences, conversion rights, voting rights or redemption rights
      of the holders of the Preferred Shares, unless in compliance with the terms
      of
      such instruments or agreements.

     

    Section
      3.8  Other
      Agreements.  The Company shall not enter into any agreement in
      which the terms of such agreement would restrict or impair the right or ability
      to perform of the Company or any subsidiary under any Transaction Document
      or
      the Certificate of Designation.  The Company shall comply with the
      terms of the Transaction Documents.

     

    Section
      3.9  Distributions;
      Subsidiaries; Use of Proceeds.  So long as any Preferred Shares or
      Warrants remain outstanding, the Company agrees that it shall not (i) declare
      or
      pay any dividends or make any distributions to any holder(s) of Common Stock
      or
      (ii) purchase or otherwise acquire for value, directly or indirectly, any Common
      Stock or other equity security of the Company.  So long as any
      Preferred Shares or Warrants remain outstanding, the Company agrees that it
      shall not transfer, assign, pledge, issue or otherwise permit any equity or
      other ownership interests in the Subsidiaries to be beneficially owned or held
      by any person other than the Company.  The proceeds from the sale of
      the Preferred Shares will be used by the Company for working capital and general
      corporate purposes and not to redeem or repay any securities or indebtedness
      or
      to settle any outstanding litigation.

     

    Section
      3.10  Status
      of Dividends.  The Company covenants and agrees that (i) no
      Federal income tax return or claim for refund of Federal income tax or other
      submission to the Internal Revenue Service will adversely affect the Preferred
      Shares, any other series of its Preferred Stock, or the Common Stock, and any
      deduction shall not operate to jeopardize the availability to Purchasers of
      the
      dividends received deduction provided by Section 243(a)(1) of the Code or any
      successor provision, (ii) in no report to shareholders or to any governmental
      body having jurisdiction over the Company or otherwise will it treat the
      Preferred Shares other than as equity capital unless required to do so by a
      governmental body having jurisdiction over the accounts of the Company or by
      a
      change in generally accepted accounting principles required as a result of
      action by an authoritative accounting standards setting body, and (iii) other
      than pursuant to this Agreement or the Certificate of Designation, it will
      take
      no action which would result in the dividends paid by the Company on the
      Preferred Shares out of the Company’s current or accumulated earnings and
      profits being ineligible for the dividends received deduction provided by
      Section 243(a)(1) of the Code.  The preceding sentence shall not be
      deemed to prevent the Company from designating the Preferred Stock as
“Convertible Preferred Stock” in its annual and quarterly financial statements
      in accordance with its prior practice concerning other series of preferred
      stock
      of the Company.  Notwithstanding the foregoing, the Company shall not
      be required to restate or modify its tax returns for periods prior to the
      Closing Date.  In the event that the Purchasers have reasonable cause
      to believe that dividends paid by the Company on the Preferred Shares out of
      the
      Company’s current or accumulated earnings and profits will not be treated as
      eligible for the dividends received deduction provided by Section 243(a)(1)
      of  the Code, or any successor provision, the Company will, at the
      reasonable request of the Purchasers of 51% of the outstanding Preferred Shares,
      join with the Purchasers in the submission to the Service of a request for
      a
      ruling that dividends paid on the Shares will be so eligible for Federal income
      tax purposes, at the Purchasers expense.  In addition, the Company
      will reasonably cooperate with the Purchasers (at Purchasers’ expense) in any
      litigation, appeal or other proceeding challenging or contesting any ruling,
      technical advice, finding or determination that earnings and profits are not
      eligible for the dividends received deduction provided by Section 243(a)(1)
      of
      the Code, or any successor provision to the extent that the position to be
      taken
      in any such litigation, appeal, or other proceeding is not contrary to any
      provision of the Code or incurred in connection with any such submission,
      litigation, appeal or other proceeding.  Notwithstanding the
      foregoing, nothing herein contained shall be deemed to preclude the Company
      from
      claiming a deduction with respect to such dividends if (i) the Code shall
      hereafter be amended, or final Treasury regulations thereunder are issued or
      modified, to provide that dividends on the Preferred Shares or Conversion Shares
      should not be treated as dividends for Federal income tax purposes or that
      a
      deduction with respect to all or a portion of the dividends on the Shares is
      allowable for Federal income tax purposes, or (ii) in the absence of such an
      amendment, issuance or modification and after a submission of a request for
      ruling or technical advice, the service shall rule or advise that dividends
      on
      the shares should not be treated as dividends for Federal income tax
      purposes.  If the Service determines that the Preferred Shares or
      Conversion Shares constitute debt, the Company may file protective claims for
      refund.

     

    
      
         

      

      
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    Section
      3.11   Disclosure
      of Transaction.  The Company shall issue a press release
      describing the material terms of the transactions contemplated hereby (the
      “Press Release”) no later than the 2nd
      Trading Day
      following the Closing Date.  The Company shall also file with the
      Commission a Current Report on Form 8-K (the “Form 8-K”) describing the
      material terms of the transactions contemplated hereby (and attaching as
      exhibits thereto this Agreement, the Certificate of Designation, the
      Registration Rights Agreement, the form of Warrant and the Press Release) as
      soon as practicable following the Closing Date but in no event more than four
      (4) Trading Days following the Closing Date, which Press Release and Form 8-K
      shall be subject to prior review and reasonable comment by the
      Purchasers.  “Trading Day” means any day during which the
      principal exchange on which the Common Stock is traded shall be open for
      trading.

     

    Section
      3.12  Conversions;
      Opinions.  The Company will provide, at the Company's expense,
      such legal opinions in the future as are reasonably necessary for the issuance
      and resale of the Common Stock issuable upon conversion of the Preferred Shares
      and exercise of the Warrants pursuant to an effective registration statement,
      Rule 144 under the 1933 Act or an exemption from registration.  In the
      event that Common Stock is sold in a manner that complies with an exemption
      from
      registration, the Company will promptly instruct its counsel (at its expense)
      to
      issue to the transfer agent an opinion permitting removal of the legend
      (indefinitely, if pursuant to Rule 144(k) of the 1933 Act, or to permit sale
      of
      the shares if pursuant to the other provisions of Rule 144 of the 1933
      Act).

     

    Section
      3.13  Reservation
      of Shares.  So long as any of the Preferred Shares or Warrants
      remain outstanding, the Company shall take all action necessary to at all times
      have authorized, and reserved for the purpose of issuance, no less than 120%
      of
      the aggregate number of shares of Common Stock needed to provide for the
      issuance of the Conversion Shares and the Warrant Shares.

     

    
      
         

      

      
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    Section
      3.14  Transfer
      Agent Instructions.  The Company shall issue irrevocable
      instructions to its transfer agent, and any subsequent transfer agent, to issue
      certificates, registered in the name of each Purchaser or its respective
      nominee(s), for the Conversion Shares and the Warrant Shares in such amounts
      as
      specified from time to time by each Purchaser to the Company upon conversion
      of
      the Preferred Shares or exercise of the Warrants in the form of Exhibit E
      attached hereto (the “Irrevocable Transfer Agent
      Instructions”).  Prior to registration of the Conversion Shares and
      the Warrant Shares under the Securities Act, all such certificates shall bear
      the restrictive legend specified in Section 6.1 of this
      Agreement.  The Company warrants that no instruction other than the
      Irrevocable Transfer Agent Instructions referred to in this Section 3.14 will
      be
      given by the Company to its transfer agent and that the Shares shall otherwise
      be freely transferable on the books and records of the Company as and to the
      extent provided in this Agreement and the Registration Rights
      Agreement.  Nothing in this Section 3.14 shall affect in any way each
      Purchaser’s obligations and agreements set forth in Section 6.1 to comply with
      all applicable prospectus delivery requirements, if any, upon resale of the
      Shares.  If a Purchaser provides the Company with an opinion of
      counsel, in a generally acceptable form, to the effect that a public sale,
      assignment or transfer of the Shares may be made without registration under
      the
      Securities Act or the Purchaser provides the Company with reasonable assurances
      that the Shares can be sold pursuant to Rule 144 without any restriction as
      to
      the number of securities acquired as of a particular date that can then be
      immediately sold, the Company shall permit the transfer, and, in the case of
      the
      Conversion Shares and the Warrant Shares, promptly instruct its transfer agent
      to issue one or more certificates in such name and in such denominations as
      specified by such Purchaser and, without any restrictive legend.  The
      Company acknowledges that a breach by it of its obligations under this Section
      3.14 will cause irreparable harm to the Purchasers by vitiating the intent
      and
      purpose of the transaction contemplated hereby.  Accordingly, the
      Company acknowledges that the remedy at law for a breach of its obligations
      under this Section 3.14 will be inadequate and agrees, in the event of a
      breach or threatened breach by the Company of the provisions of this Section
      3.14, that the Purchasers shall be entitled, in addition to all other available
      remedies, to an order and/or injunction restraining any breach and requiring
      immediate issuance and transfer, without the necessity of showing economic
      loss
      and without any bond or other security being required.

     

    Section
      3.15  Disposition
      of Assets; Liens.  (a) So long as the Preferred Shares remain
      outstanding, neither the Company nor any of its Subsidiaries shall (i) sell,
      transfer or otherwise dispose of any of its properties, assets and rights
      including, without limitation, its software and intellectual property, to any
      person except for sales to customers in the ordinary course of business or
      with
      the prior written consent of the holders of a majority of the Preferred Shares
      then outstanding or (ii) enter into, create, incur or suffer to exit any liens
      of any kind on, or with respect to any of their property or assets now owned
      or
      hereafter acquired or any interest therein or income or profits therefrom,
      other
      than (a) liens for taxes, assessments and other governmental charges or levies
      not yet due or liens for taxes, assessments and other governmental charges
      or
      levies being contested in good faith and by appropriate proceedings for which
      adequate reserves (in the good faith judgment of the management of the Company)
      have been established in accordance with GAAP, (b) liens in connection with
      any
      bank loans permitted pursuant to the terms of the Certificate of Designation,
      (c) liens imposed by law which were incurred in the ordinary course of business,
      such as carriers’, warehousemen’s and mechanics’ liens, statutory landlords’
liens, and other similar liens arising in the ordinary course of business,
      and
      (x) which do not individually or in the aggregate materially detract from the
      value of such property or assets or materially impair the use thereof in the
      operation of the business of the Company and its Subsidiaries or (y) which
      are
      being contested in good faith by appropriate proceedings, which proceedings
      have
      the effect of preventing the forfeiture or sale of the property or asset subject
      to such lien and (d) liens existing on the date hereof.

     

    
      
         

      

      
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    Section
      3.16  Most
      Favored Nation Exchange Right.  The Company will comply with its
      obligations under Section 8 of the Certificate of Designation.

     

    Section
      3.17  Subsequent
      Financing.  For a period of three (3) years following the Closing
      Date so long as the Preferred Shares remain outstanding, the Company covenants
      and agrees to promptly notify (in no event later than three (3) business days
      after making or receiving an applicable offer) each Purchaser in writing (a
      “Rights Notice”) of the terms and conditions of any proposed offer or sale to,
      or exchange with (or other type of distribution to) any person (the “New
      Purchaser”), of Common Stock or any debt or equity securities convertible,
      exercisable or exchangeable into Common Stock (a “Subsequent
      Financing”).  The Rights Notice shall describe, in reasonable detail,
      the proposed Subsequent Financing, the names and investment amounts of all
      investors participating in the Subsequent Financing (if known), the proposed
      closing date of the Subsequent Financing, which shall be within ten (10)
      calendar days from the date of the Rights Notice, and all of the terms and
      conditions thereof and proposed definitive documentation to be entered into
      in
      connection therewith.  The Rights Notice shall provide each Purchaser
      an option (the “Rights Option”) during the five (5) Trading Days following
      delivery of the Rights Notice (the “Option Period”) to elect to purchase
      securities in the form of the securities being offered in such Subsequent
      Financing up to an additional amount of such securities that will permit such
      Purchaser to maintain its proportionate ownership interest in the
      Company.  Proportionate ownership shall be determined on a fully
      diluted basis, without giving effect to any limitations on exercise set forth
      in
      the Preferred Shares, the Warrants or any other securities of the Company
      (including the securities to be issued in the Subsequent
      Financing).  Such acquisition to be on the same, absolute terms and
      conditions as contemplated by such Subsequent Financing.  Delivery of
      any Rights Notice constitutes a representation and warranty by the Company
      that
      there are no other material terms and conditions, arrangements, agreements
      or
      otherwise except for those disclosed in the Rights Notice, to provide additional
      compensation to any party participating in any proposed Subsequent Financing,
      including, but not limited to, additional compensation based on changes in
      the
      Purchase Price or any type of reset or adjustment of a purchase or conversion
      price or to issue additional securities at any time after the closing date
      of a
      Subsequent Financing.  If the Company receives notice of exercise of
      the Rights Option from the Purchaser within the Option Period, it shall make
      provision in such Subsequent Financing for the issuance to the Purchaser of
      the
      securities required hereunder (it being understood that such securities hall
      be
      in addition to the securities to be issued to the New Purchaser, not in lieu
      of
      such securities).  If the Company does not receive notice of exercise
      of the Rights Option from the Purchaser within the Option Period, the Company
      shall have the right to close the Subsequent Financing on the scheduled closing
      date with the New Purchaser; provided that all of the material terms and
      conditions of the closing are the same as those provided to the Purchaser in
      the
      Rights Notice.  If the closing of the proposed Subsequent Financing
      does not occur on that date, any closing of the contemplated Subsequent
      Financing or any other Subsequent Financing shall be subject to all of the
      provisions of this Section 3.17, including, without limitation, the delivery
      of
      a new Rights Notice.  The provisions of this Section 3.17 shall not
      apply to Permitted Issuances (as defined in the Warrants)

     

    
      
         

      

      
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    Section
      3.18  Affiliate
      Transaction. Without the prior written consent of holders of at least 50% of
      the Preferred Shares, the Company and its Subsidiaries shall not engage in
      any
      transactions with any officer, director, employee or any Affiliate of the
      Company or any Subsidiary, including any contract, agreement or other
      arrangement providing for the furnishing of services to or by, providing for
      rental of real or personal property to or from, or otherwise requiring payments
      to or from any officer, director or such employee or, to the knowledge of the
      Company, any entity in which any officer, director, or any such employee has
      a
      substantial interest or is an officer, director, trustee or partner, in each
      case in excess of an aggregate of $100,000 each fiscal year, other than (i)
      for
      payment of salary, bonus or consulting fees for services rendered as approved
      by
      the compensation committee of the Board of Directors, the majority of the
      members of which are independent directors, (ii) reimbursement for expenses
      incurred on behalf of the Company, (iii) stock or option grants authorized
      by the Board of Directors or by a committee of the Board of Directors the
      majority of the members of which are independent directors and (iv) transactions
      in the ordinary course of the Company’s business to the extent the disinterested
      directors of the Board of Directors of the Company determine the terms of such
      transaction to be fair to the Company and reasonably equivalent to the terms
      that could have been obtained from an unaffiliated third-party in an arms-length
      transaction.

     

    Section
      3.19  Reporting.  So
      long as a Purchaser beneficially owns any of the Shares, the Company shall
      timely file all reports required to be filed with the Commission pursuant to
      the
      Exchange Act, and the Company shall not terminate its status as an issuer
      required to file reports under the Exchange Act even if the Exchange Act or
      the
      rules and regulations thereunder would permit such
      termination.   The Company currently meets, and will take all
      necessary action to continue to meet, the “registrant eligibility” and
      transaction requirements set forth in the general instructions to Form SB-2
      applicable to “resale” registrations on Form SB-2 during the Effectiveness
      Period (as defined in the Registration Rights Agreement) and the Company shall
      file all reports required to be filed by the Company with the Commission in
      a
      timely manner so as to maintain such eligibility for the use of Form
      SB-2.

     

    Section
      3.20  Pledge
      of Securities. The Company acknowledges that the Securities may be pledged
      by a Purchaser in connection with a bona fide margin agreement or other loan
      or
      financing arrangement that is secured by the Securities.  The pledge
      of Securities shall not be deemed to be a transfer, sale or assignment of the
      Securities hereunder, and no Purchaser effecting a pledge of the Securities
      shall be required to provide the Company with any notice thereof or otherwise
      make any delivery to the Company pursuant to this Agreement or any other
      Transaction Document; provided that a Purchaser and its pledgee shall be
      required to comply with the provisions of Article VI hereof in order to effect
      a
      sale, transfer or assignment of Securities to such pledgee. At the Purchasers'
      expense, the Company hereby agrees to execute and deliver such documentation
      as
      a pledgee of the Securities may reasonably request in connection with a pledge
      of the Securities to such pledgee by a Purchaser.

     

    Section
      3.21  Amendment
      to Bylaws.  The Company shall, within 45 days of the date hereof
      (the “Amendment Deadline”), cause its Bylaws to be duly amended, the form of
      which amendment shall be satisfactory to the Purchasers in their sole discretion
      (the “Bylaw Amendment”), to permit adjustments to the Conversion Price set forth
      in the Certificate of Designation or the Warrant Price set forth in the Warrants
      (or the number of shares issuable upon conversion or exercise of the Preferred
      Shares and/or the Warrants) for as long as any of the Preferred Shares or
      Warrants are outstanding, including, without limitation, adjustments that would,
      but for the Bylaw Amendment, be prohibited by Section 48 of the Company’s Bylaws
      in effect on the date hereof.  The Company and the Purchasers agree
      that the Purchasers will suffer damages if the Bylaw Amendment is not effective
      on or prior to the Amendment Deadline.  The Company and the Purchasers
      further agree that it would not be feasible to ascertain the extent of such
      damages with precision.  Accordingly, if the Bylaw Amendment is not
      effective on or prior to the Amendment Deadline, the Company shall pay an amount
      as liquidated damages to each Purchaser equal to one and one-half percent (1.5%)
      of the amount of the Purchaser’s initial investment in the Preferred Shares and
      Warrants for each calendar month or portion thereof thereafter from the
      Amendment Deadline until the Bylaw Amendment is effective.

    

    
      
         

      

      
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    Section
      3.22                                Offering
      Restriction.  Until the effectiveness of the Bylaw Amendment
      (“Restriction Period”), the Company shall not enter into an agreement to nor
      issue any equity, options, warrants, rights, convertible debt or other
      securities convertible into or exchangeable for Common Stock or other equity
      of
      the Company (whether exercisable or convertible during the Restriction Period
      or
      otherwise) at an effective price of less than $0.15 per share of Common Stock
      (giving effect to any splits or similar adjustments), nor modify any of the
      foregoing which may be outstanding during the Restriction Period if the effect
      of such modification would be to reduce to effective price of such Common Stock
      to less than $0.15 per share, without the prior written consent of the
      Purchasers, which consent may be withheld for any reason (treating the effective
      price as the sum of the price of such instrument and any additional
      consideration payable upon conversion or exercise).

    

     

    ARTICLE
      IV

     

    Conditions

     

    Section
      4.1  Conditions
      Precedent to the Obligation of the Company to Sell the
      Shares.  The obligation hereunder of the Company to issue and sell
      the Preferred Shares and the Warrants to the Purchasers is subject to the
      satisfaction or waiver, at or before the Closing, of each of the conditions
      set
      forth below.  These conditions are for the Company’s sole benefit and
      may be waived by the Company at any time in its sole discretion.

     

    (a)  Accuracy
      of Each Purchaser’s Representations and Warranties.  The
      representations and warranties of each Purchaser shall be true and correct
      in
      all material respects as of the date when made and as of the Closing Date as
      though made at that time, except for representations and warranties that are
      expressly made as of a particular date, which shall be true and correct in
      all
      material respects as of such date.

     

     

    (b)  Performance
      by the Purchasers.  Each Purchaser shall have performed, satisfied
      and complied in all material respects with all covenants, agreements and
      conditions required by this Agreement to be performed, satisfied or complied
      with by such Purchaser at or prior to the Closing.

     

     

    
      
         

      

      
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    (c)  No
      Injunction.  No statute, rule, regulation, executive order,
      decree, ruling or injunction shall have been enacted, entered, promulgated
      or
      endorsed by any court or governmental authority of competent jurisdiction which
      prohibits the consummation of any of the transactions contemplated by this
      Agreement.

     

     

    (d)  Delivery
      of Purchase Price.  The Purchase Price for the Preferred Shares
      and Warrants has been delivered to the Company at the Closing Date.

     

     

    (e)  Delivery
      of Transaction Documents.  The Transaction Documents have been
      duly executed and delivered by the Purchasers to the Company.

     

     

    Section
      4.2  Conditions
      Precedent to the Obligation of the Purchasers to Purchase the
      Shares.  The obligation hereunder of each Purchaser to acquire and
      pay for the Preferred Shares and the Warrants is subject to the satisfaction
      or
      waiver, at or before the Closing, of each of the conditions set forth
      below.  These conditions are for each Purchaser’s sole benefit and may
      be waived by such Purchaser at any time in its sole discretion.

     

    (a)  Accuracy
      of the Company’s Representations and Warranties.  Each of the
      representations and warranties of the Company in this Agreement or the other
      agreements contemplated hereby shall be true and correct in all material
      respects as of the date when made and as of the Closing Date as though made
      at
      that time (except for representations and warranties that speak as of a
      particular date), which shall be true and correct in all material respects
      as of
      such date.

     

     

    (b)  Performance
      by the Company.  The Company shall have performed, satisfied and
      complied in all respects with all covenants, agreements and conditions required
      by this Agreement to be performed, satisfied or complied with by the Company
      at
      or prior to the Closing.

     

     

    (c)  No
      Suspension, Etc.  From the date hereof to the Closing Date,
      trading in the Company’s Common Stock shall not have been suspended by the
      Commission or the OTC Bulletin Board, and, at any time prior to the Closing,
      trading in securities generally as reported by Bloomberg Financial Markets
      (“Bloomberg”) shall not have been suspended or limited, or minimum prices shall
      not have been established on securities whose trades are reported by Bloomberg,
      or on the New York Stock Exchange, nor shall a banking moratorium have been
      declared either by the United States or New York State authorities, nor shall
      there have occurred any material outbreak or escalation of hostilities or other
      national or international calamity or crisis of such magnitude in its effect
      on,
      or any material adverse change in any financial market which, in each case,
      in
      the judgment of such Purchaser, makes it impracticable or inadvisable to
      purchase the Preferred Shares.

     

    
      
         

      

      
        -26-

        
          

        

      

      
         

      

    

     

    (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 governmental authority of competent jurisdiction which
      prohibits the consummation of any of the transactions contemplated by this
      Agreement.

     

     

    (e)  No
      Proceedings or Litigation.  No action, suit or proceeding before
      any arbitrator or any governmental authority shall have been commenced, and
      no
      investigation by any governmental authority shall have been threatened, against
      the Company or any of its Subsidiaries, or any of the officers, directors or
      affiliates of the Company or any of its Subsidiaries seeking to restrain,
      prevent or change the transactions contemplated by this Agreement, or seeking
      damages in connection with such transactions.

     

     

    (f)  Certificate
      of Designation of Rights and Preferences.  Prior to the Closing,
      the Certificate of Designation in the form of Exhibit C-1 attached hereto shall
      have been filed with and accepted by the Secretary of State of
      Delaware.

     

     

    (g)  Opinion
      of Counsel, Etc. At the Closing, the Purchasers shall have received an
      opinion of counsel to the Company, dated the date of the Closing, in the form
      of
      Exhibit F hereto, and such other certificates and documents as the Purchasers
      or
      its counsel shall reasonably require incident to the Closing.

     

     

    (h)  Registration
      Rights Agreement.  At the Closing, the Company shall have executed
      and delivered the Registration Rights Agreement to each Purchaser.

     

     

    (i)  Certificates.  The
      Company shall have executed and delivered to the Purchasers the certificates
      (in
      such denominations as such Purchaser shall request) for the Preferred Shares
      and
      Warrants being acquired by such Purchaser at the Closing.

     

     

    (j)  Resolutions.  The
      Board of Directors of the Company shall have adopted resolutions consistent
      with
      Section 2.1(b) above in a form reasonably acceptable to such Purchaser (the
      “Resolutions”).

     

     

    (k)  Reservation
      of Shares.  As of the Closing Date, the Company shall have
      reserved out of its authorized and unissued Common Stock, solely for the purpose
      of effecting the conversion of the Preferred Shares and the exercise of the
      Warrants, a number of shares of Common Stock equal to at least 120% of the
      aggregate number of Conversion Shares issuable upon conversion of the Preferred
      Shares outstanding on the Closing Date and the number of Warrant Shares issuable
      upon exercise of the number of Warrants assuming such Warrants were granted
      on
      the Closing Date (after giving effect to the Preferred Shares and the Warrants
      to be issued on the Closing Date and assuming all such Preferred Shares and
      Warrants were fully convertible or exercisable on such date regardless of any
      limitation on the timing or amount of such conversions or
      exercises).

     

    
      
         

      

      
        -27-

        
          

        

      

      
         

      

    

     

    (l)  Transfer
      Agent Instructions.  The Irrevocable Transfer Agent Instructions,
      in the form of Exhibit E attached hereto, shall have been delivered to and
      acknowledged in writing by the Company’s transfer agent.

     

     

    (m)  Secretary’s
      Certificate.  The Company shall have delivered to such Purchaser a
      secretary’s certificate, dated as of the Closing Date, as to (i) the
      Resolutions, (ii) the Certificate, (iii) the Bylaws, (iv) the Certificate of
      Designation, each as in effect at the Closing, and (iv) the authority and
      incumbency of the officers of the Company executing the Transaction Documents
      and any other documents required to be executed or delivered in connection
      therewith.

     

     

    (n)  Officer’s
      Certificate.  The Company shall have delivered to the Purchasers a
      certificate of an executive officer of the Company, dated as of the Closing
      Date, confirming the accuracy of the Company’s representations, warranties and
      covenants as of the Closing Date and confirming the compliance by the Company
      with the conditions precedent set forth in this Section 4.2 as of the Closing
      Date.

     

     

    (o)  Material
      Adverse Effect.  No Material Adverse Effect shall have occurred at
      or before the Closing Date.

     

     

    (p)  [Reserved]

     

    

    (q)           Due
      Diligence
      Fee.                                           The
      Company shall have paid to the Lead Purchaser a due diligence fee equal to
      3% of
      the aggregate gross purchase price hereunder ($63,000), and the legal fees
      set
      forth in Section 9.1.

     

    ARTICLE
      V

     

    Intentionally
      Omitted.

     

    ARTICLE
      VI

     

    

     

    Stock
      Certificate Legend

     

    Section
      6.1  Legend.  Each
      certificate representing the Preferred Shares and the Warrants, and, if
      appropriate, securities issued upon conversion or exercise thereof, shall be
      stamped or otherwise imprinted with a legend substantially in the following
      form
      (in addition to any legend required by applicable state securities or “blue sky”
laws):

     

    THESE
      SECURITIES REPRESENTED BY THIS CERTIFICATE (THE “SECURITIES”) HAVE NOT BEEN
      REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE “SECURITIES ACT”)
      OR ANY STATE SECURITIES LAWS AND MAY NOT BE SOLD, TRANSFERRED OR OTHERWISE
      DISPOSED OF UNLESS REGISTERED UNDER THE SECURITIES ACT AND UNDER APPLICABLE
      STATE SECURITIES LAWS OR URIGEN PHARMACEUTICALS, INC. SHALL HAVE RECEIVED AN
      OPINION OF COUNSEL THAT REGISTRATION OF SUCH SECURITIES UNDER THE SECURITIES
      ACT
      AND UNDER THE PROVISIONS OF APPLICABLE STATE SECURITIES LAWS IS NOT
      REQUIRED.

     

    
      
         

      

      
        -28-

        
          

        

      

      
         

      

    

    The
      Company agrees to reissue certificates representing the Shares without the
      legend set forth above if at such time, prior to making any transfer of any
      Shares or Shares, such holder thereof shall give written notice to the Company
      describing the manner and terms of such transfer and removal as the Company
      may
      reasonably request, and (x) the Shares have been registered for sale under
      the
      Securities Act and the holder is selling such shares and is complying with
      its
      prospectus delivery requirement under the Securities Act, (y) the holder is
      selling such Shares in compliance with the provisions of Rule 144 or (z) the
      provisions of paragraph (k) of Rule 144 apply to such Shares.

     

    ARTICLE
      VII

     

    Intentionally
      Omitted.

     

    ARTICLE
      VIII

     

    Indemnification

     

    Section
      8.1  General
      Indemnity.  The Company agrees to indemnify and hold harmless the
      Purchasers and any finder (and their respective directors, officers, affiliates,
      agents, successors and assigns) from and against any and all losses,
      liabilities, deficiencies, costs, damages and expenses (including, without
      limitation, reasonable attorneys’ fees, charges and disbursements) incurred by
      the Purchasers as a result of any inaccuracy in or breach of the
      representations, warranties or covenants made by the Company
      herein.  Each Purchaser severally but not jointly agrees to indemnify
      and hold harmless the Company and its directors, officers, affiliates, agents,
      successors and assigns from and against any and all losses, liabilities,
      deficiencies, costs, damages and expenses (including, without limitation,
      reasonable attorneys’ fees, charges and disbursements) incurred by the Company
      as result of any inaccuracy in or breach of the representations, warranties
      or
      covenants made by such Purchaser herein.  The maximum aggregate
      liability of each Purchaser pursuant to its indemnification obligations under
      this Article 8 shall not exceed the portion of the Purchase Price paid by such
      Purchaser hereunder.

     

    Section
      8.2  Indemnification
      Procedure.  Any party entitled to indemnification under this
      Article VIII (an “indemnified party”) will give written notice to the
      indemnifying party of any matters giving rise to a claim for indemnification;
      provided, that the failure of any party entitled to indemnification hereunder
      to
      give notice as provided herein shall not relieve the indemnifying party of
      its
      obligations under this Article VIII except to the extent that the indemnifying
      party is actually prejudiced by such failure to give notice.  In case
      any action, proceeding or claim is brought against an indemnified party in
      respect of which indemnification is sought hereunder, the indemnifying party
      shall be entitled to participate in and, unless in the reasonable judgment
      of
      the indemnified party a conflict of interest between it and the indemnifying
      party may exist with respect of such action, proceeding or claim, to assume
      the
      defense thereof with counsel reasonably satisfactory to the indemnified
      party.  In the event that the indemnifying party advises an
      indemnified party that it will contest such a claim for indemnification
      hereunder, or fails, within thirty (30) days of receipt of any indemnification
      notice to notify, in writing, such person of its election to defend, settle
      or
      compromise, at its sole cost and expense, any action, proceeding or claim (or
      discontinues its defense at any time after it commences such defense), then
      the
      indemnified party may, at its option, defend, settle or otherwise compromise
      or
      pay such action or claim.  In any event, unless and until the
      indemnifying party elects in writing to assume and does so assume the defense
      of
      any such claim, proceeding or action, the indemnified party’s costs and expenses
      arising out of the defense, settlement or compromise of any such action, claim
      or proceeding shall be losses subject to indemnification
      hereunder.  The indemnified party shall cooperate fully with the
      indemnifying party in connection with any negotiation or defense of any such
      action or claim by the indemnifying party and shall furnish to the indemnifying
      party all information reasonably available to the indemnified party which
      relates to such action or claim.  The indemnifying party shall keep
      the indemnified party fully apprised at all times as to the status of the
      defense or any settlement negotiations with respect thereto.  If the
      indemnifying party elects to defend any such action or claim, then the
      indemnified party shall be entitled to participate in such defense with counsel
      of its choice at its sole cost and expense.  The indemnifying party
      shall not be liable for any settlement of any action, claim or proceeding
      effected without its prior written consent.  Notwithstanding anything
      in this Article VIII to the contrary, the indemnifying party shall not, without
      the indemnified party’s prior written consent, settle or compromise any claim or
      consent to entry of any judgment in respect thereof which imposes any future
      obligation on the indemnified party or which does not include, as an
      unconditional term thereof, the giving by the claimant or the plaintiff to
      the
      indemnified party of a release from all liability in respect of such
      claim.  The indemnification required by this Article VIII shall be
      made by periodic payments of the amount thereof during the course of
      investigation or defense, as and when bills are received or expense, loss,
      damage or liability is incurred, so long as the indemnified party irrevocably
      agrees to refund such moneys if it is ultimately determined by a court of
      competent jurisdiction that such party was not entitled to
      indemnification.  The indemnity agreements contained herein shall be
      in addition to (a) any cause of action or similar rights of the indemnified
      party against the indemnifying party or others, and (b) any liabilities the
      indemnifying party may be subject to pursuant to the law.

     

    
      
         

      

      
        -29-

        
          

        

      

      
         

      

    

    ARTICLE
      IX

     

    Miscellaneous

     

    Section
      9.1  Fees
      and Expenses.  Except as otherwise set forth in this Agreement or
      the Certificate of Designation, each party shall pay the fees and expenses
      of
      its advisors, 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 pay, at the Closing, (i) $20,000 as payment for attorneys’ fees
      and expenses (exclusive of disbursements and out-of-pocket expenses) incurred
      by
      the Lead Purchaser in connection with the preparation, negotiation, execution
      and delivery of this Agreement and the transactions contemplated hereunder
      and
      (ii) in connection with the filing and declaration of effectiveness by the
      Commission of the Registration Statement and any amendments, modifications
      or
      waivers of this Agreement or any of the other Transaction
      Documents.  In addition, the Company shall pay all reasonable fees and
      expenses incurred by the Purchasers in connection with the enforcement of this
      Agreement or any of the other Transaction Documents, including, without
      limitation, all reasonable attorneys’ fees and expenses.  The Company
      shall pay all stamp or other similar taxes and duties levied in connection
      with
      issuance of the Preferred Shares pursuant hereto.

     

    Section
      9.2  Specific
      Enforcement, Consent to Jurisdiction.

     

    (a)  The
      Company and the Purchasers acknowledge and agree that irreparable damage would
      occur in the event that any of the provisions of this Agreement, the Certificate
      of Designation, the Warrants or the Registration Rights Agreement were not
      performed in accordance with their specific terms or were otherwise
      breached.  It is accordingly agreed that the parties shall be entitled
      to an injunction or injunctions to prevent or cure breaches of the provisions
      of
      this Agreement or the other Transaction Documents and to enforce specifically
      the terms and provisions hereof or thereof, this being in addition to any other
      remedy to which any of them may be entitled by law or equity.

     

    
      
         

      

      
        -30-

        
          

        

      

      
         

      

    

     

    (b)  Each
      of
      the Company and the Purchasers (i) hereby irrevocably submits to the
      jurisdiction of the United States District Court sitting in the Southern
      District of New York and the courts of the State of New York located in New
      York
      County for the purposes of any suit, action or proceeding arising out of or
      relating to this Agreement or any of the other Transaction Documents or the
      transactions contemplated hereby or thereby and (ii) hereby waives, and agrees
      not to assert in any such suit, action or proceeding, any claim that it is
      not
      personally subject to the jurisdiction of such court, that the suit, action
      or
      proceeding is brought in an inconvenient forum or that the venue of the suit,
      action or proceeding is improper.  Each of the Company and the
      Purchasers consents to process being served in any such suit, action or
      proceeding by mailing a copy thereof 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 in
      this Section 9.2 shall affect or limit any right to serve process in any other
      manner permitted by law.  The parties hereto agree that the prevailing
      party in any suit, action or proceeding arising out of or relating to the
      Preferred Shares, the Warrants, this Agreement or the other agreements between
      the Purchasers and the Company contemplated hereby shall be entitled to
      reimbursement for reasonable legal fees from the non-prevailing
      party.

     

     

    Section
      9.3  Entire
      Agreement; Amendment.  This Agreement contains the entire
      understanding of the parties with respect to the matters covered hereby and,
      except as specifically set forth herein or in the Transaction Documents or
      the
      Certificate of Designation,  neither the Company nor any of the
      Purchasers makes any representations, warranty, covenant or undertaking with
      respect to such matters and they supersede all prior understandings and
      agreements with respect to said subject matter, all of which are merged
      herein.  No provision of this Agreement may be waived or amended other
      than by a written instrument signed by the Company and the holders of at least
      a
      majority of the Preferred Shares then outstanding and no provision hereof may
      be
      waived other than by a written instrument signed by the party against whom
      enforcement of any such amendment or waiver is sought.  No such
      amendment shall be effective to the extent that it applies to less than all
      of
      the holders of the Preferred Shares then outstanding.  No
      consideration shall be offered or paid to any person to amend or consent to
      a
      waiver or modification of any provision of any of the Transaction Documents
      or
      the Certificate of Designation unless the same consideration is also offered
      to
      all of the parties to the Transaction Documents or holders of Preferred Shares,
      as the case may be.

     

    
      
         

      

      
        -31-

        
          

        

      

      
         

      

    

    Section
      9.4  Notices.  Any
      notice, demand, request, waiver or other communication required or permitted
      to
      be given hereunder shall be in writing and shall be effective (a) upon hand
      delivery by telex (with correct answer back received), telecopy or facsimile
      at
      the address or number designated below (if delivered on a business day during
      normal business hours where such notice is to be received), or the first
      business day following such delivery (if delivered other than on a business
      day
      during normal business hours where such notice is to be received) or (b) on
      the
      second business day following the date of mailing by express courier service,
      fully prepaid, addressed to such address, or upon actual receipt of such
      mailing, whichever shall first occur.  The addresses for such
      communications shall be:

     

    
      	
              If
                to the Company:

            	
              Urigen
                Pharmaceuticals, Inc.

              875
                Mahler Road, Suite 235

              Burlingame,
                California 94010

              Attention:
                William J. Gardener, MD

              Tel.
                No.: (650) 259-0239

              Fax
                No.: (650) 259-0901 and (866) 816-1107

               

            
	 	 
	
              with
                copies to:

            	
              Sichenzia
                Ross Friedman Ference LLP

              61
                Broadway, 32nd Floor

              New
                York, NY 10006

              Attention:
                Thomas Rose, Esq.

              Tel.
                No.:  (212) 930-9700

              Fax
                No.:  (212) 930-9725

               

            
	 	 
	
              If
                to any Purchaser:

            	
              At
                the address of such Purchaser set forth on Exhibit A to this Agreement,
                with copies to Purchaser’s counsel as set forth on Exhibit A or as
                specified in writing by such Purchaser with copies to:

            
	 	 
	 	
              Shane
                W. McCormack

              Burak
                Anderson & Melloni, PLC

              30
                Main Street, PO Box 787

              Burlington,
                Vermont 05402

              Tel
                No.: (802) 862-0500

              Fax
                No.: (802) 862-8176

            

    

     

     

    
      
         

      

      
        -32-

        
          

        

      

      
         

      

    

     

    Any
      party
      hereto may from time to time change its address for notices by giving at least
      ten (10) days written notice of such changed address to the other party
      hereto.

     

    Section
      9.5  Waivers
      by Party.  No waiver by either party 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 other provisions,
      condition or requirement hereof, nor shall any delay or omission of any party
      to
      exercise any right hereunder in any manner impair the exercise of any such
      right
      accruing to it thereafter.

     

    Section
      9.6  Waivers
      by Majority Holders.  The affirmative vote at a meeting duly
      called for such purpose or the written consent without a meeting of the holders
      of not less a majority of the then outstanding Preferred Shares may waive any
      of
      the obligations of the Company or the then rights of the Purchasers set forth
      in
      this Agreement.

     

    Section
      9.7  Headings.  The
      article, section and subsection headings in this Agreement are for convenience
      only and shall not constitute a part of this Agreement for any other purpose
      and
      shall not be deemed to limit or affect any of the provisions
      hereof.

     

    Section
      9.8  Successors
      and Assigns.  This Agreement shall be binding upon and inure to
      the benefit of the parties and their successors and assigns.  After
      the Closing, the assignment by a party to this Agreement of any rights hereunder
      shall not affect the obligations of such party under this
      Agreement.

     

    Section
      9.9  No
      Third Party Beneficiaries.  This Agreement is intended for the
      benefit of the parties hereto and their respective permitted successors and
      assigns and is not for the benefit of, nor may any provision hereof be enforced
      by, any other person.

     

    Section
      9.10  Governing
      Law.  This Agreement shall be governed by and construed in
      accordance with the internal laws of the State of New York, without giving
      effect to the choice of law provisions.  This Agreement shall not
      interpreted or construed with any presumption against the party causing this
      Agreement to be drafted.

     

    Section
      9.11  Survival.  The
      representations and warranties of the Company and the Purchasers contained
      in
      Sections 2.1(o) and (s) should survive indefinitely and those contained in
      Article II, with the exception of Sections 2.1(o) and (s), shall survive the
      execution and delivery hereof and the Closing until the date three (3) years
      from the Closing Date, and the agreements and covenants set forth in Articles
      I,
      III, VIII and IX of this Agreement shall survive the execution and delivery
      hereof and the Closing hereunder. 

     

    Section
      9.12  Counterparts.  This
      Agreement may be executed in any number of counterparts, all of which taken
      together shall constitute one and the same instrument and shall become effective
      when counterparts have been signed by each party and delivered to the other
      parties hereto, it being understood that all parties need not sign the same
      counterpart.  Any signature may be delivered by facsimile
      transmission.

     

    Section
      9.13  Publicity.  The
      Company agrees that it will not disclose, and will not include in any public
      announcement, the name of the Purchasers without the consent of the Purchasers
      unless and until such disclosure is required by law or applicable regulation,
      and then only to the extent of such requirement.

     

    
      
         

      

      
        -33-

        
          

        

      

      
         

      

    

    Section
      9.14  Severability.  The
      provisions of this Agreement, the Certificate of Designation and the
      Registration Rights Agreement are severable and, in the event that any court
      of
      competent jurisdiction shall determine that any one or more of the provisions
      or
      part of the provisions contained in this Agreement, the Certificate of
      Designation or the Registration Rights Agreement shall, for any reason, be
      held
      to be invalid, illegal or unenforceable in any respect, such invalidity,
      illegality or unenforceability shall not affect any other provision or part
      of a
      provision of this Agreement, the Certificate of Designation or the Registration
      Rights Agreement shall be reformed and construed as if such invalid or illegal
      or unenforceable provision, or part of such provision, had never been contained
      herein, so that such provisions would be valid, legal and enforceable to the
      maximum extent possible.

     

    Section
      9.15  Further
      Assurances.  From and after the date of this Agreement, upon the
      request of any Purchaser or the Company, each of the Company and the Purchasers
      shall execute and deliver such instrument, documents and other writings as
      may
      be reasonably necessary or desirable to confirm and carry out and to effectuate
      fully the intent and purposes of this Agreement, the Preferred Shares, the
      Conversion Shares, the Warrants, the Warrant Shares, the Certificate of
      Designation and the Registration Rights Agreement.

    

    Section
      9.16                                Representation
      of Lead Purchaser.  It is acknowledged by each Purchaser that the
      Lead Purchaser has retained Burak Anderson & Melloni, PLC to act as its
      counsel in connection with the transactions contemplated by the Transaction
      Documents and that Burak Anderson & Melloni, PLC has not acted as counsel
      for any Purchaser, other than the Lead Purchaser, in connection with the
      transactions contemplated by the Transaction Documents and that none of such
      Purchasers has the status of a client for conflict of interest or any other
      purposes as a result thereof.

    

    [REMAINDER
      OF PAGE INTENTIONALLY LEFT BLANK]

     

     

     

     

    
      
         

      

      
        -34-

        
          

        

      

      
         

      

    

    

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

     

    
      	 	
              URIGEN
                PHARMACEUTICALS, INC.

               

            
	 	 
	 	 
	 	
              By:
                /s/ Martin E. Shmagin

            
	 	
              Name:
                Martin E.
                Shmagin

              Title:
                Chief Financial
                Officer

            

    

    

    

    
      	 	
              PLATINUM-MONTAUR
                LIFE SCIENCES, LLC

            
	 	 
	 	 
	 	 
	 	
              By:/s/
                Mark
                Nordlicht                                                                   

              Name:
                Mark
                Nordlicht

              Title:  Managing
                Member

               

            
	 	 
	 	 

    

     

     

     

    
      
         

      

      
        -35-

        
          

        

      

      
         

      

    

     

     

    EXHIBIT
      A to the

    SERIES
      B CONVERTIBLE PREFERRED STOCK PURCHASE AGREEMENT

        FOR
      URIGEN PHARMACEUTICALS, INC.

    

    
      	
               

            	
               

            	 	
               

            	 	
               

            

    

    
      	
               

            	
               

            	
               

            	 	
               

            	 

    

     

     

    
      	 
              
              Names
                and Addresses
                
                of
                  Purchasers

              

            	 
              
              Number
                of Preferred Shares
                
                 & Warrants
                  Purchased  

              

            	Dollar
              Amount
              
              
                of
                  Investment

              

            
	 	 	 
	
              Platinum-Montaur
                Life                            

              Sciences, LLC                                                                                                               

            	Preferred
              Shares:
              210           
              
              Warrant
                Shares:  14,000,000    

            	$2,100,000

    

     

     

    
      
         

      

      
        -36-

        
          

        

      

      
         

      

    

    
 

    

    EXHIBIT
      B-1 to the

    SERIES
      B CONVERTIBLE PREFERRED STOCK PURCHASE AGREEMENT FOR

    URIGEN
      PHARMACEUTICALS, INC.

    

    

    FORM
      OF SERIES A WARRANT

    

    
      
         

      

      
        -37-

        
          

        

      

      
         

      

    

    

    EXHIBIT
      C-1 to the

    SERIES
      B CONVERTIBLE PREFERRED STOCK PURCHASE AGREEMENT FOR

    URIGEN
      PHARMACEUTICALS, INC.

    

    

    FORM
      OF CERTIFICATE OF DESIGNATION FOR PREFERRED SHARES

     

     

    
      
         

      

      
        -38-

        
          

        

      

      
         

      

    

    EXHIBIT
      D to the

    SERIES
      B CONVERTIBLE PREFERRED STOCK PURCHASE AGREEMENT FOR

    URIGEN
      PHARMACEUTICALS, INC.

    

    

    FORM
      OF REGISTRATION RIGHTS AGREEMENT

     

     

    
      
         

      

      
        -39-

        
          

        

      

      
         

      

    

     

     

     

    EXHIBIT
      E to the

    SERIES
      B CONVERTIBLE PREFERRED STOCK PURCHASE AGREEMENT FOR

    URIGEN
      PHARMACEUTICALS, INC.

    

    FORM
      OF IRREVOCABLE TRANSFER AGENT INSTRUCTIONS

    

    URIGEN
      PHARMACEUTICALS, INC.

     

     

     

                                                                                                                                           
      as of July __, 2007

     

    

     

    Computershare

    250
      Royall Street

    Canton,
      MA 02021

    Attn:  Mr.
      Gregory Veliotis

    

     

    Ladies
      and Gentlemen:

     

    Reference
      is made to that certain Series B Convertible Preferred Stock Purchase Agreement,
      dated as of July 31, 2007, by and among Urigen Pharmaceuticals, Inc., a Delaware
      corporation (the “Company”), and the purchasers named therein
      (collectively, the “Purchasers”) pursuant to which the Company
      is issuing to the Purchasers shares of its Series B Convertible Preferred Stock,
      par value $.001 per share, (the “Preferred Shares”) and
      warrants (the “Warrants”) to purchase shares of the Company’s
      common stock, par value $.001 per share (the “Common Stock”) in
      connection with the sale and issuance of Preferred Shares and Warrants to the
      Purchasers.  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 shares of Common Stock upon conversion of the Preferred
      Shares (the “Conversion Shares”) and exercise of the Warrants
      (the “Warrant Shares”) to or upon the order of a Purchaser from
      time to time upon (i) surrender to you of a properly completed and duly executed
      Conversion Notice or Exercise Notice, as the case may be, in the form attached
      hereto as Exhibit I and Exhibit II, respectively, (ii) in the case of the
      conversion of Preferred Shares, a copy of the certificates (with the original
      certificates delivered to the Company) representing Preferred Shares being
      converted or, in the case of Warrants being exercised, a copy of the Warrants
      (with  the original Warrants delivered to the Company) being exercised
      (or, in each case, an indemnification undertaking with respect to such share
      certificates or the warrants in the case of their loss, theft or destruction),
      and (iii) delivery of a treasury order or other appropriate order duly executed
      by a duly authorized officer of the Company.  So long as you have
      previously received (x) written confirmation from counsel to the Company that
      a
      registration statement covering resales of the Conversion Shares or Warrant
      Shares, as applicable, has been declared effective by the Securities and
      Exchange Commission (the “SEC”) under the Securities Act of
      1933, as amended (the “1933 Act”), and no subsequent notice by
      the Company or its counsel of the suspension or termination of its effectiveness
      and (y) a copy of such registration statement, and if the Purchaser represents
      in writing that the Conversion Shares or the Warrant Shares, as the case may
      be,
      were sold pursuant to the Registration Statement, then certificates representing
      the Conversion Shares and the Warrant Shares, as the case may be, shall not
      bear
      any legend restricting transfer of the Conversion Shares and the Warrant Shares,
      as the case may be, thereby and should not be subject to any stop-transfer
      restriction.  Provided, however, that if you have not previously
      received (i) written confirmation from counsel to the Company that a
      registration statement covering resales of the Conversion Shares or Warrant
      Shares, as applicable, has been declared effective by the SEC under the 1933
      Act, and (ii) a copy of such registration statement, then the certificates
      for
      the Conversion Shares and the Warrant Shares shall bear the following
      legend:

     

    
      
         

      

      
        -40-

        
          

        

      

      
         

      

    

    “THE
      SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER THE
      SECURITIES ACT OF 1933, AS AMENDED (THE SECURITIES ACT”), OR ANY STATE
      SECURITIES LAWS AND MAY NOT BE SOLD, TRANSFERRED OR OTHERWISE DISPOSED OF UNLESS
      REGISTERED UNDER THE SECURITIES ACT OR APPLICABLE STATE SECURITIES LAWS, OR
      URIGEN PHARMACEUTICALS, INC. SHALL HAVE RECEIVED AN OPINION OF COUNSEL THAT
      REGISTRATION OF SUCH SECURITIES UNDER THE SECURITIES ACT AND UNDER THE
      PROVISIONS OF APPLICABLE STATE SECURITIES LAWS IS NOT REQUIRED.”

     

    and,
      provided further, that the Company may from time to time notify you to place
      stop-transfer restrictions on the certificates for the Conversion Shares and
      the
      Warrant Shares in the event a registration statement covering the Conversion
      Shares and the Warrant Shares is subject to amendment for events then current
      or
      the prospectus which is part of such registration statement may no longer be
      used for sales of Conversion Shares or Warrant Shares.

     

    A
      form of
      written confirmation from counsel to the Company that a registration statement
      covering resales of the Conversion Shares and the Warrant Shares has been
      declared effective by the SEC under the 1933 Act is attached hereto as Exhibit
      III.

     

    Please
      be
      advised that the Purchasers are relying upon this letter as an inducement to
      enter into the Securities Purchase Agreement and, accordingly, each Purchaser
      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.  Should you have any questions
      concerning this matter, please contact me at (650) 697-1900.

    
      	 	
              Very
                truly yours,

            	 
	 	 	 
	 	URIGEN
              PHARMACEUTICALS, INC.	 
	 	 	 
	 	 	 	 
	
              Date

            	
              By:
                

            	/s/ 	 
	 	 	Name:
              Martin E.
              Shmagin	 
	 	 	Title:  Chief
              Financial Officer	 
	 	 	 	 

    

     

                    

    ACKNOWLEDGED
      AND AGREED:

     

    COMPUTERSHARE

     

    
      	 By:_________________________________	 	 	 
	 Name: _______________________________ 	 	 	 
	 Title: _______________________________	 	 	 
	 Date: _______________________________	 	 	 
	 	 	 	 

    

               

                       

    
      
         

      

      
        -41-

        
          

        

      

      
         

      

    

                         

                        

    EXHIBIT
      I

     

    URIGEN
      PHARMACEUTICALS, INC.

    CONVERSION
      NOTICE

     

    Reference
      is made to the Certificate of Designation of the Relative Rights and Preferences
      of the Series B Preferred Stock of Urigen Pharmaceuticals, Inc. (the
“Certificate of Designation”).  In accordance with and pursuant to the
      Certificate of Designation, the undersigned hereby elects to convert the number
      of shares of Series B Preferred Stock, par value $.001 per share (the “Preferred
      Shares”), of Urigen Pharmaceuticals, Inc., a Delaware corporation (the
“Company”), indicated below into shares of Common Stock, par value $.001 per
      share (the “Common Stock”), of the Company, by tendering the stock
      certificate(s) representing the share(s) of Preferred Shares specified below
      as
      of the date specified below.

    

    Date
      of
      Conversion:                                                                

    

    Number
      of
      Preferred Shares to be
      converted:                                                                                                                                

    

    Stock
      certificate no(s). of Preferred Shares to be
      converted:                                                                                                                                

    

    The
      Common Stock have been sold pursuant to the registration statement:

    YES
      ____                                                                NO____

    

    Please
      confirm the following information:

    

    
      	 	Conversion
              Price:  	 	 
	 	Number
              of shares of Common Stock to be issued: 	 	 
	 	 	 	 

    

                                                                  

    

    Please
      issue the Common Stock into which the Preferred Shares are being converted
      and,
      if applicable, any check drawn on an account of the Company in the following
      name and to the following address:

     

    
      
        	 	
                Issue
                  to: 

              	 	 
	 	
                Facsimile
                  Number:  

              	 	 
	 	Authorization:  	 	 
	 	 	 	 
	 	 	 	 
	 	 	By:	 
	 	Dated:	Title:   	 

      

                                                               

    

    

                                                                  

                                                                    

                                                                 

    

    

    

    PRICES
      ATTACHED

    

    
      
         

      

      
        -42-

        
          

        

      

      
         

      

    

     

    EXHIBIT
      I-A

     

    ASSIGNMENT

     

    

    

    

    FOR
      VALUE
      RECEIVED, _________________ hereby sells, assigns and transfers unto
      ________________.  _________ of the Preferred Shares evidenced by the
      within stock certificate together with all rights therein, and does irrevocably
      constitute and appoint ___________________, attorney, to transfer that part
      of
      the said Preferred Shares on the books of the within named
      corporation.

    

    
      	 Dated:
              _________________                                                                	Signature             ___________________________
	 	Address               ____________________________
	 	
               
                _____________________________

            

    

    

     

    
      
         

      

      
        -43-

        
          

        

      

      
         

      

    

     

     

    EXHIBIT
      II

     

    FORM
      OF EXERCISE NOTICE

     

    EXERCISE
      FORM

     

    URIGEN
      PHARMACEUTICALS, INC.

     

    The
      undersigned _______________, pursuant to the provisions of the within Warrant,
      hereby elects to purchase _____ shares of Common Stock of Urigen
      Pharmaceuticals, Inc. covered by the within Warrant.

     

    
      
        	
                Dated:
                  _________________

              	
                Signature
                  ___________________________

              
	 	
                Address
                  ____________________________

              
	 	
                _____________________________

              

      

    

    

    

    ASSIGNMENT

    

    FOR
      VALUE
      RECEIVED, _________________ hereby sells, assigns and transfers unto
      __________________ the within Warrant and all rights evidenced thereby and
      does
      irrevocably constitute and appoint _____________, attorney, to transfer the
      said
      Warrant on the books of the within named corporation.

     

    
      
        	
                Dated:
                  _________________

              	
                Signature
                  ___________________________

              
	 	
                Address
                  ____________________________

              
	 	
                _____________________________

              

      

       

      
 

    

    PARTIAL
      ASSIGNMENT

    

    FOR
      VALUE
      RECEIVED, _________________ hereby sells, assigns and transfers unto
      __________________ the right to purchase _________ shares of Warrant Stock
      evidenced by the within Warrant together with all rights therein, and does
      irrevocably constitute and appoint ___________________, attorney, to transfer
      that part of the said Warrant on the books of the within named
      corporation.

     

    
      
        	
                Dated:
                  _________________

              	
                Signature
                  ___________________________

              
	 	
                Address
                  ____________________________

              
	 	
                _____________________________

              

      

       

    

    

    FOR
      USE
      BY THE ISSUER ONLY:

    

    This
      Warrant No. W-_____ canceled (or transferred or exchanged) this _____ day of
      _____________.  ______ shares of Common Stock issued therefor in
      the name of _______________, Warrant No. W-_____ issued for ____ shares of
      Common Stock in the name of _______________.

     

     

     

    
      
         

      

      
        -44-

        
          

        

      

      
         

      

    

     

     

    EXHIBIT
      III

     

    FORM
      OF NOTICE OF EFFECTIVENESS

    OF
      REGISTRATION STATEMENT

     

    [Name
      and
      address of Transfer Agent]

    Attn:  _____________

    

    Re:           Urigen
      Pharmaceuticals, Inc.

     

    Ladies
      and Gentlemen:

     

    We
      are
      counsel to Urigen Pharmaceuticals, Inc., a Delaware corporation (the
“Company”), and have represented the Company in connection with
      that certain Series B Convertible Preferred Stock Purchase Agreement (the
“Purchase Agreement”), dated as of July __, 2007, by and among
      the Company and the purchasers named therein (collectively, the
“Purchasers”) pursuant to which the Company issued to the
      Purchasers shares of its Series B Convertible Preferred Stock, par value $.001
      per share, (the “Preferred Shares”) and warrants (the
“Warrants”) to purchase shares of the Company’s common stock,
      par value $.001 per share (the “Common
      Stock”).  Pursuant to the Purchase Agreement, the Company
      agreed, among other things, to register the shares of Common Stock issuable
      upon
      conversion of the Preferred Shares and exercise of the Warrants (together the
      “Registrable Shares”), under the Securities Act of 1933, as amended (the
“1933 Act”).  In connection with the Company’s
      obligations under the Purchase Agreement, on ________________, 2007, the Company
      filed a Registration Statement on Form SB-2 (File No. 333-________) (the
“Registration Statement”) with the Securities and Exchange
      Commission (the “SEC”) relating to the resale of the
      Registrable Shares which names each of the present Purchasers as a selling
      stockholder thereunder.

     

    In
      connection with the foregoing, we 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 1933 Act at [ENTER TIME OF
      EFFECTIVENESS] on [ENTER DATE OF EFFECTIVENESS] and we
      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
      accordingly, the Registrable Shares are available for resale under the 1933
      Act
      pursuant to the Registration Statement.

     

    Very
      truly yours,

     

    [COMPANY
      COUNSEL]

     

    By:______________________________

     

     

     

    cc:           [LIST
      NAMES OF PURCHASERS]

     

     

     

    
      
         

      

      
        -45-

        
          

        

      

      
         

      

    

    
 

    EXHIBIT
      F to the

    SERIES
      B CONVERTIBLE PREFERRED STOCK PURCHASE AGREEMENT FOR

    URIGEN
      PHARMACEUTICALS, INC.

    

    

    FORM
      OF OPINION OF COUNSEL

    

    

    1.  The
      Company is a corporation duly incorporated, validly existing and in good
      standing under the laws of the state of Delaware and has the requisite corporate
      power to own, lease and operate its properties and assets, and to carry on
      its
      business as presently conducted.  The company is duly qualified as a
      foreign corporation to do business and is in good standing in every jurisdiction
      in which the nature of the business conducted or property owned by it makes
      such
      qualification necessary.

    

    2.  The
      Company has the requisite corporate power and authority to enter into and
      perform its obligations under the Transaction Documents and to issue the
      Preferred Stock, the Warrants and the Common Stock issuable upon conversion
      of
      the Preferred Stock and exercise of the Warrants.  The execution,
      delivery and performance of each of the Transaction Documents by the Company
      and
      the consummation by it of the transactions contemplated thereby have been duly
      and validly authorized by all necessary corporate action and no further consent
      or authorization of the Company or its Board of Directors or stockholders is
      required.  Each of the Transaction Documents have been duly executed
      and delivered, and the Preferred Stock and the Warrants have been duly executed,
      issued and delivered by the Company and each of the Transaction Documents
      constitutes a legal, valid and binding obligation of the Company enforceable
      against the Company in accordance with its respective terms.  The
      Common Stock issuable upon conversion of the Preferred Stock and exercise of
      the
      Warrants are not subject to any preemptive rights under the Certificate of
      Incorporation or the Bylaws.

    

    3.           The
      Merger of the Company and Urigen N.A., Inc. was duly authorized by all necessary
      stockholders and other corporate action and was consummated in accordance with
      the terms of the Merger Agreement described in the Registration Statement on
      Form S-4 (Commission File No. 33-140443) filed by the Company.

    

    4.           The
      Preferred Stock and the Warrants have been duly authorized and, when delivered
      against payment in full as provided in the Purchase Agreement, will be validly
      issued, fully paid and nonassessable.  The shares of Common Stock
      issuable upon conversion of the Preferred Stock and exercise of the Warrants,
      have been duly authorized and reserved for issuance, and, when delivered upon
      conversion or against payment in full as provided in the Certificate of
      Designation and the Warrants, as applicable, will be validly issued, fully
      paid
      and nonassessable.

    

    5.           The
      execution, delivery and performance of and compliance with the terms of the
      Transaction Documents and the issuance of the Preferred Stock, the Warrants
      and
      the Common Stock issuable upon conversion of the Preferred Stock and exercise
      of
      the Warrants do not (i) violate any provision of the Certificate of
      Incorporation or Bylaws, (ii) to our knowledge 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 material agreement, mortgage, deed of
      trust, indenture, note, bond, license, lease agreement, instrument or obligation
      to which the Company is a party, (iii) to our knowledge create or impose a
      lien,
      charge or encumbrance on any property of the Company under any agreement or
      any
      commitment to which the Company is a party or by which the Company is bound
      or
      by which any of its respective properties or assets are bound, or
      (iv) (a) result in a violation of any federal, state or local statute,
      rule or regulation, or to our knowledge, any order, judgment, injunction or
      decree (including Federal and state securities laws and regulations) applicable
      to the Company or by which any property or asset of the Company is bound or
      affected, except, in all cases other than violations pursuant to clause (i)
      above, for such conflicts, default, terminations, amendments, acceleration,
      cancellations and violations as would not, individually or in the aggregate,
      have a Material Adverse Effect.

    

    6.           No
      consent, approval or authorization of or designation, declaration or filing
      with
      any governmental authority on the part of the Company is required under Federal,
      state or local law, rule or regulation in connection with the valid execution,
      delivery and performance of the Transaction Documents, or the offer, sale or
      issuance of the Preferred Stock, the Warrants or the Common Stock issuable
      upon
      conversion of the Preferred Stock and exercise of the Warrants other than the
      Certificate of Designation, the Registration Statement, report on Form 8-K
      and
      Form D, both to be filed with the Securities and Exchange
      Commission.

    

    7.           To
      our knowledge, there is no action, suit, claim, investigation or proceeding
      pending or threatened against the Company which questions the validity of this
      Agreement or the transactions contemplated hereby or any action taken or to
      be
      taken pursuant hereto or thereto.  To our knowledge, there is no
      action, suit, claim, investigation or proceeding pending, or to our knowledge,
      threatened, against or involving the Company or any of its properties or assets
      and which, if adversely determined, is reasonably likely to result in a Material
      Adverse Effect.  To our knowledge, there are no outstanding orders,
      judgments, injunctions, awards or decrees of any court, arbitrator or
      governmental or regulatory body against the Company or any officers or directors
      of the Company in their capacities as such.

    

    8.           The
      offer, issuance and sale of the Preferred Stock and the Warrants and the offer,
      issuance and sale of the shares of Common Stock issuable upon conversion of
      the
      Preferred Stock and exercise of the Warrants pursuant to the Purchase Agreement,
      the Certificate of Designation and the Warrants, as applicable, are based on
      the
      Purchasers’ representations in the Agreement, exempt from the registration
      requirements of the Securities Act.

     

    9.           The
      Company is not, and as a result of and immediately upon Closing will not be,
      an
“investment company” or a company “controlled” by an “investment company,”
within the meaning of the Investment Company Act of 1940, as
      amended.

    

    

    Very
      truly yours,

     

     

     

    

    -45-Unassociated Document

    REGISTRATION
      RIGHTS AGREEMENT

    

    This
      Registration Rights Agreement (this “Agreement”) is made and entered into
      as of August 1, 2007, by and among Urigen Pharmaceuticals, Inc., a Delaware
      corporation (the “Company”), and the purchasers listed on Schedule
      I hereto (the “Holders”).

    

    This
      Agreement is being entered into pursuant to the Series B Preferred Stock
      Purchase Agreement, dated as of July 31, 2007, among the
      Company and the Holders (the “Purchase Agreement”).

    

    The
      Company and the Holders hereby agree as follows:

    

    1.           Definitions.

    

    Capitalized
      terms used and not otherwise defined herein shall have the meanings given such
      terms in the Purchase Agreement.  As used in this Agreement, the
      following terms shall have the following meanings:

    

    “Affiliate”
      means, with respect to any Person, any other Person that directly or indirectly
      controls or is controlled by or under common control with such
      Person.  For the purposes of this definition, “control,” when
      used with respect to any Person, means the possession, direct or indirect,
      of
      the power to direct or cause the direction of the management and policies of
      such Person, whether through the ownership of voting securities, by contract
      or
      otherwise; and the terms of “affiliated,” “controlling” and
“controlled” have meanings correlative to the foregoing.

    

    “Board”
      shall have meaning set forth in Section 3(n).

    

               “Business
      Day” means any day except Saturday, Sunday and any day which shall be a
      legal holiday or a day on which banking institutions in the state of New York
      generally are authorized or required by law or other government actions to
      close.

    

    “Closing
      Date” means the date of
      the closing of the purchase and sale of the Preferred Shares and the Warrants
      pursuant to the Purchase Agreement.

    

    “Commission”
      means the Securities and Exchange Commission.

    

    “Common
      Stock” means the Company's Common Stock, par value $.001 per
      share.

    

    “Effectiveness
      Date”  means with respect to the Registration Statement the
      earlier of the ninetieth (90th) day following
      the
      Closing Date (or in the event that the Registration Statement is reviewed by
      the
      Commission, the one hundred twentieth (120th) day following
      the
      Closing Date) or the date which is within three (3) Business Days of the date
      on
      which the Commission informs the Company that (i) the Commission will not review
      the Registration Statement or (ii) the Company may request
      the acceleration of the effectiveness of the Registration Statement and the
      Company makes such request.

    

    
      
         

      

      
         

        
          

        

      

      
         

      

    

    “Effectiveness
      Period” shall have the meaning set forth in Section 2.

    

    “Event”
      shall have the meaning set forth in Section 7(d).

    

    “Event
      Date” shall have the meaning set forth in Section 7(d).

    

    “Exchange
      Act” means the Securities Exchange Act of 1934, as amended.

    

    “Filing
      Date” means the thirtieth (30th) day
      following the
      Closing Date.

    

            “Holder”
      or “Holders” means the holder or holders, as the case may be, from time
      to time of Registrable Securities.

    

                        “Indemnified
      Party” shall have the meaning set forth in Section 5(c).

    

                        “Indemnifying
      Party” shall have the meaning set forth in Section 5(c).

    

    “Losses”
      shall have the meaning set forth in
      Section 5(a).

    

               “Person”
      means an individual or a corporation, partnership, trust, incorporated or
      unincorporated association, joint venture, limited liability company, joint
      stock company, government (or an agency or political subdivision thereof) or
      other entity of any kind.

    

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

    

    “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 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 in such
      Prospectus.

    

    “Registrable
      Securities” means
      (A) one hundred and twenty percent (120%) of the shares of Common Stock issuable
      upon conversion of the Preferred Shares and (B) the shares of Common Stock
      issuable upon exercise of the Warrants (in each case giving effect to any
      anti-dilution and other adjustments therein).

    

    “Registration
      Statement” means the registration statements and any additional registration
      statements contemplated by Section 2, 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 in such registration statement.

    

    
      
         

      

      
        -2-

        
          

        

      

      
         

      

    

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

    

    “Rule
      158” means Rule 158 promulgated by the Commission pursuant to the Securities
      Act, as such Rule may be amended from time to time, or any similar rule or
      regulation hereafter adopted by the Commission having substantially the same
      effect as such Rule.

    

    “Rule
      415” means Rule 415 promulgated by the Commission pursuant to the Securities
      Act, as such Rule may be amended from time to time, or any similar rule or
      regulation hereafter adopted by the Commission having substantially the same
      effect as such Rule.

    

                          “Rule
      424” means Rule 424 promulgated by the Commission pursuant to the Securities
      Act, as such Rule may be amended from time to time, or any similar rule or
      regulation hereafter adopted by the Commission having substantially the same
      effect as such Rule.

    

    “Securities
      Act” means the
      Securities Act of 1933, as amended.

    

    “Special
      Counsel” means Burak Anderson & Melloni, PLC.

    

    “Warrants”
      means the warrants to purchase shares of Common Stock issued to the Holders
      pursuant to the Purchase Agreement.

    

    2.           Resale
      Registration.

    

    On
      or
      prior to the Filing Date the Company shall prepare and file with the Commission
      a “resale” shelf Registration Statement providing for 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 on Form SB-2 (except
      if the Company is not then eligible to register for resale the Registrable
      Securities on Form SB-2, in which case such registration shall be on another
      appropriate form in accordance with the Securities Act and the rules promulgated
      thereunder).  The Company shall (i) not permit any securities other
      than the Registrable Securities and the securities to be listed on Schedule
      II hereto to be included in the Registration Statement and (ii) use its best
      efforts to cause the Registration Statement to be declared effective under
      the
      Securities Act as promptly as possible after the filing thereof, but in any
      event prior to the Effectiveness Date, and to keep such Registration Statement
      continuously effective under the Securities Act until such date as is the
      earlier of (x) the date when all Registrable Securities covered by such
      Registration Statement have been sold, (y) the date on which all of the
      Registrable Securities may be sold without any restriction pursuant to Rule
      144(k) as determined by the counsel to the Company pursuant to a written opinion
      letter, addressed to the Company's transfer agent to such effect or (z) two
      years following the Effectiveness Date (the “Effectiveness
      Period”).  If at any time and for any reason, an additional
      Registration Statement is required to be filed because at such time the actual
      number of shares of Common Stock into which the Warrants are exercisable plus
      the number of shares of Common Stock exceeds the number of shares of Registrable
      Securities remaining under the Registration Statement, the Company shall have
      thirty-five (35) days to file such additional Registration Statement, and the
      Company shall use its best efforts to cause such additional Registration
      Statement to be declared effective by the Commission as soon as possible, but
      in
      no event later than seventy-five (75) days after filing.

    

    
      
         

      

      
        -3-

        
          

        

      

      
         

      

    

    3.           Registration
      Procedures.

    

                          In
      connection with the Company's registration obligations hereunder, the Company
      shall:

    

                          (a)           Prepare
      and file with the Commission on or prior to the Filing Date, a Registration
      Statement on Form SB-2 (or if the Company is not then eligible to register
      for
      resale the Registrable Securities on Form SB-2 such registration shall be on
      another appropriate form in accordance with the Securities Act and the rules
      promulgated thereunder) in accordance with the method or methods of distribution
      thereof as specified by the Holders (except if otherwise directed by the
      Holders), and cause the Registration Statement to become effective and remain
      effective as provided herein; provided, however, that not less
      than two (2) Business Days prior to the filing of the Registration Statement
      or
      any related Prospectus or any amendment or supplement thereto (including any
      document that would be incorporated therein by reference), the Company shall
      (i)
      furnish to the Holders and the Special Counsel, copies of all such documents
      proposed to be filed, which documents (other than those incorporated by
      reference) will be subject to the review of such Holders and such Special
      Counsel, and (ii) cause its officers and directors, counsel and independent
      certified public accountants to respond to such inquiries as shall be necessary,
      in the reasonable opinion of Special Counsel, to conduct a reasonable
      investigation within the meaning of the Securities Act.  The Company
      shall not file the Registration Statement or any such Prospectus or any
      amendments or supplements thereto to which the Holders of a majority of the
      Registrable Securities or the Special Counsel shall reasonably object in writing
      within one (1) Business Day of their receipt thereof.

    

    (b)           (i)
      Prepare and file with the Commission such amendments, including post-effective
      amendments, to the Registration Statement 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 Commission
      such additional Registration Statements as necessary in order to register for
      resale under the Securities Act all of the Registrable Securities; (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
      (or any similar provisions then in force) promulgated under the Securities
      Act;
      (iii) respond as promptly as possible, but in no event later than ten (10)
      Business Days, to any comments received from the Commission with respect to
      the
      Registration Statement or any amendment thereto and as promptly as possible
      provide the Holders and Special Counsel true and complete copies of all
      correspondence from and to the Commission relating to the Registration
      Statement; and (iv) comply in all material respects with the provisions of
      the
      Securities Act and the Exchange Act 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
      Holders thereof set forth in the Registration Statement as so amended or in
      such
      Prospectus as so supplemented.

    

    (c)           Notify
      the Holders of Registrable Securities to be sold and the Special Counsel as
      promptly as possible (and, in the case of (i)(A) below, not less than three
      (3)
      days prior to such filing) and (if requested by any such Person) confirm such
      notice in writing no later than one (1) Business Day following the day (i)(A)
      when a Prospectus or any Prospectus supplement or post-effective amendment
      to
      the Registration Statement is filed; (B) when the Commission notifies the
      Company whether there will be a “review” of such Registration Statement and
      whenever the Commission comments in writing on such Registration Statement
      and
      (C) with respect to the Registration Statement or any post-effective amendment,
      when the same has become effective; (ii) of any request by the Commission or
      any
      other Federal or state governmental authority for amendments or supplements
      to
      the Registration Statement or Prospectus or for additional information; (iii)
      of
      the issuance by the Commission of any stop order suspending the effectiveness
      of
      the Registration Statement covering any or all of the Registrable Securities
      or
      the initiation of any Proceedings for that purpose; (iv) if at any time any
      of
      the representations and warranties of the Company contained in any agreement
      contemplated hereby ceases to be true and correct in all material respects;
      (v)
      of the receipt by the Company of any notification with respect to the suspension
      of the qualification or exemption from qualification of any of the Registrable
      Securities for sale in any jurisdiction, or the initiation or threatening of
      any
      Proceeding for such purpose; and (vi) of the occurrence of any event that makes
      any statement made in the Registration Statement or Prospectus or any document
      incorporated or deemed to be incorporated therein by reference untrue in any
      material respect or that requires any revisions to the Registration Statement,
      Prospectus or other documents so that, in the case of the Registration Statement
      or the Prospectus, as the case may be, it will not contain any untrue statement
      of a material fact or omit to state any material fact required to be stated
      therein or necessary to make the statements therein, in the light of the
      circumstances under which they were made, not misleading.

    

    
      
         

      

      
        -4-

        
          

        

      

      
         

      

    

                          (d)           Use
      its best efforts to avoid the issuance of, or, if issued, obtain the withdrawal
      of, (i) any order suspending the effectiveness of the Registration Statement
      or
      (ii) any suspension of the qualification (or exemption from qualification)
      of
      any of the Registrable Securities for sale in any
      jurisdiction, at the earliest practicable moment.

    

    (e)           If
      requested by the Special Counsel and the Holders of a majority in interest
      of
      the Registrable Securities, (i) promptly incorporate in a Prospectus supplement
      or post-effective amendment to the Registration Statement such information
      as
      the Company reasonably agrees should be included therein and (ii) make all
      required filings of such Prospectus supplement or such post-effective amendment
      as soon as practicable after the Company has received notification of the
      matters to be incorporated in such Prospectus supplement or post-effective
      amendment.

    

    (f)           Furnish
      to each Holder and the Special Counsel, without charge, at least one conformed
      copy of each Registration Statement and each amendment thereto, including
      financial statements and schedules, all documents incorporated or deemed to
      be
      incorporated therein by reference, 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 Commission.

    

    (g)           Promptly
      deliver to each Holder and the Special Counsel, 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; and
      the
      Company hereby consents to the use of such Prospectus and each amendment or
      supplement thereto by each of the selling Holders in connection with the
      offering and sale of the Registrable Securities covered by such Prospectus
      and
      any amendment or supplement thereto.

    

    
      
         

      

      
        -5-

        
          

        

      

      
         

      

    

    (h)           Prior
      to any public offering of Registrable Securities, use its best efforts to
      register or qualify or cooperate with the selling Holders and the Special
      Counsel 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 Holder requests in writing, to keep each such registration
      or qualification (or exemption therefrom) effective during the Effectiveness
      Period and to do any and all other acts or things 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 required to qualify generally to do business in any
      jurisdiction where it is not then so qualified or to take any action that would
      subject it to general service of process in any such jurisdiction where it
      is
      not then so subject or subject the Company to any material tax in any such
      jurisdiction where it is not then so subject.

    

                          (i)           Cooperate
      with the Holders to facilitate the timely preparation and delivery of
      certificates representing Registrable Securities to be sold pursuant to a
      Registration Statement, which certificates shall be free of all restrictive
      legends (provided that the issuance of such unlegended certificates is in
      compliance with applicable securities laws), and to enable such Registrable
      Securities to be in such denominations and registered in such names as any
      Holder may request in writing at least two (2) Business Days prior to any sale
      of Registrable Securities.

    

    (j)           Upon
      the occurrence of any event contemplated by Section 3(c)(vi), as promptly as
      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.

    

    (k)           Use
      its best efforts to cause all Registrable Securities relating to the
      Registration Statement to be listed, traded or quoted on the OTC Bulletin Board,
      the Nasdaq SmallCap Market or any other securities
      exchange, quotation system or market, if any, on which similar securities issued
      by the Company are then listed, traded or quoted as and when required pursuant
      to the Purchase Agreement.

    

    (l)           Comply
      in all material respects with all applicable rules and regulations of the
      Commission and make generally available to its security holders earning
      statements satisfying the provisions of Section 11(a) of the Securities Act
      and
      Rule 158 not later than 45 days after the end of any 3-month period (or 90
      days
      after the end of any 12-month period if such period is a fiscal year) commencing
      on the first day of the first fiscal quarter of the Company after the effective
      date of the Registration Statement, which statement shall conform to the
      requirements of Rule 158.

    

    
      
         

      

      
        -6-

        
          

        

      

      
         

      

    

    (m)           The
      Company may require each selling Holder to furnish to the Company information
      regarding such Holder and the distribution of such Registrable Securities as
      is
      required by law to be disclosed in the Registration Statement, and the Company
      may exclude from such registration the Registrable Securities of any such Holder
      who unreasonably fails to furnish such information within a reasonable time
      after receiving such request.

    

    If
      the
      Registration Statement refers to any Holder by name or otherwise as the holder
      of any securities of the Company, then such Holder shall have the right to
      require (if such reference to such Holder by name or otherwise is not required
      by the Securities Act or any similar federal statute then in force) the deletion
      of the reference to such Holder in any amendment or supplement to the
      Registration Statement filed or prepared subsequent to the time that such
      reference ceases to be required.

    

    Each
      Holder covenants and agrees that (i) it will not sell any Registrable Securities
      under the Registration Statement until it has received copies of the Prospectus
      as then amended or supplemented as contemplated in Section 3(g) and notice
      from
      the Company that such Registration Statement and any post-effective amendments
      thereto have become effective as contemplated by Section 3(c) and (ii) it and
      its officers, directors or Affiliates, if any, will comply with the prospectus
      delivery requirements of the Securities Act as applicable to them in connection
      with sales of Registrable Securities pursuant to the Registration
      Statement.

    

    Each
      Holder agrees by its acquisition of such Registrable Securities that, upon
      receipt of a notice from the Company of the occurrence of any event of the
      kind
      described in Section 3(c)(ii), 3(c)(iii), 3(c)(iv), 3(c)(v), 3(c)(vi) or 3(n),
      such Holder will forthwith discontinue disposition of such Registrable
      Securities under the Registration Statement until such Holder's receipt of
      the
      copies of the supplemented Prospectus and/or amended Registration Statement
      contemplated by Section 3(j), or until it is advised in writing by the Company
      that the use of the applicable Prospectus may be resumed, and, in either case,
      has received copies of any additional or supplemental filings that are
      incorporated or deemed to be incorporated by reference in such Prospectus or
      Registration Statement.

    

    (n)           If
      (i) there is material non-public information regarding the Company which the
      Company's Board of Directors (the “Board”) reasonably determines not to
      be in the Company's best interest to disclose and which the Company is not
      otherwise required to disclose, or (ii) there is a significant business
      opportunity (including, but not limited to, the acquisition or disposition
      of
      assets (other than in the ordinary course of business) or any merger,
      consolidation, tender offer or other similar transaction) available to the
      Company which the Board reasonably determines not to be in the Company's best
      interest to disclose, then the Company may (x) postpone or suspend filing of
      a
      registration statement for a period not to exceed thirty (30) consecutive days
      or (y) postpone or suspend effectiveness of a registration statement for a
      period not to exceed twenty (20) consecutive days; provided that the Company
      may
      not postpone or suspend effectiveness or filing of a registration statement
      under this Section 3(n) for more than forty-five (45) days in the aggregate
      during any three hundred sixty (360) day period; provided,
however, that no such postponement or suspension shall be permitted
      for
      consecutive twenty (20) day periods arising out of the same set of facts,
      circumstances or transactions.

    

    
      
         

      

      
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         4.                      Registration
      Expenses.

    

    All
      fees
      and expenses incident to the performance of or compliance with this Agreement
      by
      the Company, except as and to the extent specified in this Section 4, shall
      be
      borne by the Company whether or not the Registration Statement is filed or
      becomes effective and whether or not any Registrable Securities are sold
      pursuant to the Registration Statement.  The fees and expenses
      referred to in the foregoing sentence shall include, without limitation, (i)
      all
      registration and filing fees (including, without limitation, fees and expenses
      (A) with respect to filings required to be made with the OTC Bulletin Board,
      the
      Nasdaq SmallCap Market and each other securities exchange or market on which
      Registrable Securities are required hereunder to be listed, (B) with respect
      to
      filings required to be made with the National Association of Securities Dealers,
      Inc. and the NASD Regulation, Inc. and (C) in compliance with state securities
      or Blue Sky laws (including, without limitation, fees and disbursements of
      counsel for the Holders in connection with Blue Sky qualifications of the
      Registrable Securities and determination of the eligibility of the Registrable
      Securities for investment under the laws of such jurisdictions as the Holders
      of
      a majority of Registrable Securities may designate)), (ii) printing expenses
      (including, without limitation, expenses of printing certificates for
      Registrable Securities and of printing prospectuses if the printing of
      prospectuses is requested by the holders of a majority of the Registrable
      Securities included in the Registration Statement), (iii) messenger, telephone
      and delivery expenses, (iv) fees and disbursements of counsel for the Company,
      (v) Securities Act liability insurance, if the Company so desires such
      insurance, and (vi) fees and expenses of all other Persons retained by the
      Company in connection with the consummation of the transactions contemplated
      by
      this Agreement, including, without limitation, the Company's independent public
      accountants (including the expenses of any comfort letters or costs associated
      with the delivery by independent public accountants of a comfort letter or
      comfort letters).  In addition, the Company shall be responsible for
      all of its internal expenses incurred in connection with the consummation of
      the
      transactions contemplated by this Agreement (including, without limitation,
      all
      salaries and expenses of its officers and employees performing legal or
      accounting duties), the expense of any annual audit, the fees and expenses
      incurred in connection with the listing of the Registrable Securities on any
      securities exchange as required hereunder.

    

         5.                      Indemnification.

    

    (a)           Indemnification
      by the Company.  The Company shall, notwithstanding any
      termination of this Agreement, indemnify and hold harmless each Holder, the
      officers, directors, agents, brokers (including brokers who offer and sell
      Registrable Securities as principal as a result of a pledge or any failure
      to
      perform under a margin call of Common Stock), investment advisors and employees
      of each of them, each Person who controls any such Holder (within the meaning
      of
      Section 15 of the Securities Act or Section 20 of the Exchange Act) and the
      officers, directors, agents and employees of each such controlling Person,
      to
      the fullest extent permitted by applicable law, from and against any and all
      losses, claims, damages, liabilities, costs (including, without limitation,
      costs of preparation and attorneys' fees) and expenses (collectively,
“Losses”), as incurred, 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 prospectus or in any amendment or
      supplement thereto or in any 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, except to the extent,
      but only to the extent, that  such untrue statements or omissions are
      based solely upon information regarding such Holder or such other Indemnified
      Party furnished in writing to the Company by such Holder expressly for use
      therein.  The Company shall notify the Holders promptly of the
      institution, threat or assertion of any Proceeding of which the Company is
      aware
      in connection with the transactions contemplated by this Agreement.

    

    
      
         

      

      
        -8-

        
          

        

      

      
         

      

    

    (b)           Indemnification
      by Holders.  Each Holder shall, severally and not jointly,
      indemnify and hold harmless the Company, the 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 and 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), as incurred, arising solely out of or based solely upon any untrue
      statement of a material fact contained in the Registration Statement, any
      Prospectus, or any form of prospectus, or arising solely out of or based solely
      upon any 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, to the extent, but only to the extent, that
      such
      untrue statement or omission is contained in any information so furnished in
      writing by such Holder or other Indemnifying Party to the Company specifically
      for inclusion in the Registration Statement or such
      Prospectus.  Notwithstanding anything to the contrary contained
      herein, each Holder shall be liable under this Section 5(b) for only that amount
      as does not exceed the lesser of (i) the net proceeds to such Holder as a result
      of the sale of Registrable Securities pursuant to such Registration Statement
      and (ii) the aggregate purchase price paid by such Holder for the Preferred
      Shares and the Warrants pursuant to the Purchase Agreement.

    

    (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 promptly shall 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 it shall be
      finally determined by a court of competent jurisdiction (which determination
      is
      not subject to appeal or further review) that such failure shall have
      proximately and materially adversely prejudiced the Indemnifying
      Party.

    

    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: (1) the Indemnifying Party has agreed in writing to pay such fees and
      expenses; or (2) the Indemnifying Party shall have failed promptly to assume
      the
      defense of such Proceeding and to employ counsel reasonably satisfactory to
      such
      Indemnified Party in any such Proceeding; or (3) 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 (which shall be reasonably acceptable to the Indemnifying Party)
      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
      such counsel shall be at the expense of the Indemnifying Party).  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.

    

    
      
         

      

      
        -9-

        
          

        

      

      
         

      

    

         All
      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 ten (10) Business 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 5(a) or 5(b) is unavailable to an
      Indemnified Party because of a failure or refusal of a governmental authority
      to
      enforce such indemnification in accordance with its terms (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 benefits received by the Indemnifying Party
      on the one hand and the Indemnified Party on the other from the offering of
      the
      Preferred Shares and Warrants.  If, but only if, the allocation
      provided by the foregoing sentence is not permitted by applicable law, the
      allocation of contribution shall be made in such proportion as is appropriate
      to
      reflect not only the relative benefits referred to in the foregoing sentence
      but
      also the relative fault, as applicable, 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 5(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.  In no event shall any selling Holder be
      required to contribute an amount under this Section 5(d) in excess of the net
      proceeds received by such Holder upon sale of such Holder’s Registrable
      Securities pursuant to the Registration Statement giving rise to such
      contribution obligation.

    

    
      
         

      

      
        -10-

        
          

        

      

      
         

      

    

         The
      parties hereto agree that it would not be just and equitable if contribution
      pursuant to this Section 5(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.  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.

    

         The
      indemnity and contribution agreements contained in this Section are in addition
      to any liability that the Indemnifying Parties may have to the Indemnified
      Parties.  Notwithstanding anything to the contrary contained herein,
      the Holders shall be liable under this Section 5(d) for only that amount as
      does
      not exceed the net proceeds to such Holder as a result of the sale of
      Registrable Securities pursuant to such Registration Statement.

    

    6.           Rule
      144.

    

         As
      long as any Holder owns any Registrable Securities or other securities entitling
      the Holder to acquire Registrable Securities, 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 Section 13(a) or 15(d) of the Exchange Act and to promptly
      furnish the Holders with true and complete copies of all such
      filings.  As long as any Holder owns any Registrable Securities or
      other securities entitling the Holder to acquire Registrable Securities, if
      the
      Company is not required to file reports pursuant to Section 13(a) or 15(d)
      of
      the Exchange Act, it will prepare and furnish to the Holders and make publicly
      available in accordance with Rule 144(c) promulgated under the Securities Act
      annual and quarterly financial statements, together with a discussion and
      analysis of such financial statements in form and substance substantially
      similar to those that would otherwise be required to be included in reports
      required by Section 13(a) or 15(d) of the Exchange Act, as well as any other
      information required thereby, in the time period that such filings would have
      been required to have been made under the Exchange Act.  The Company
      further covenants that it will take such further action as any Holder may
      reasonably request all to the extent required from time to time to enable such
      Person to sell the Registrable Securities without registration under the
      Securities Act within the limitation of the exemptions provided by Rule 144
      promulgated under the Securities Act, including providing any legal opinions
      relating to such sale pursuant to Rule 144.   Upon the request of
      any Holder, the Company shall deliver to such Holder a written certification
      of
      a duly authorized officer as to whether it has complied with such
      requirements.

    

    

    7.           Miscellaneous.

    

    (a)           Remedies.  In
      the event of a breach by the Company or by a Holder, of any of their obligations
      under this Agreement, each Holder or the Company, as the case may be, in
      addition to being entitled to exercise all rights granted by law and under
      this
      Agreement, including recovery of damages, will be entitled to specific
      performance of its rights under
      this Agreement.  The Company and each Holder
      agree that monetary damages would not provide adequate
      compensation for any losses incurred by reason of a breach by it of any of
      the
      provisions of this Agreement and hereby further agrees that, in the event of
      any
      action for specific performance in respect of such breach, it shall waive the
      defense that a remedy at law would be adequate.

    

    
      
         

      

      
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    (b)           No
      Inconsistent Agreements.  Neither the Company nor any of its
      subsidiaries has, as of the date hereof entered into and currently in effect,
      nor shall the Company or any of its subsidiaries, on or after the date of this
      Agreement, enter into any agreement with respect to its securities that is
      inconsistent with the rights granted to the Holders in this Agreement or
      otherwise conflicts with the provisions hereof.  Except as disclosed
      in Schedule 2.1(c) of the Purchase Agreement, neither the Company nor any
      of its subsidiaries has previously entered into any agreement currently in
      effect granting any registration rights with respect to any of its securities
      to
      any Person.  Without limiting the generality of the foregoing, without
      the written consent of the Holders of a majority of the then outstanding
      Registrable Securities, the Company shall not grant to any Person the right
      to
      request the Company to register any securities of the Company, under the
      Securities Act unless the rights so granted are subject in all respects to
      the
      prior rights in full of the Holders set forth herein, and are not otherwise
      in
      conflict with the provisions of this Agreement.

    

    (c)           No
      Piggyback on Registrations.  Neither the Company nor any of its
      security holders (other than the Holders in such capacity pursuant hereto or
      as
      disclosed on Schedule 2.1(c) of the Purchase Agreement or Schedule
      II hereto) may include securities of the Company in the Registration
      Statement, and the Company shall not after the date hereof enter into any
      agreement providing such right to any of its securityholders, unless the right
      so granted is subject in all respects to the prior rights in full of the Holders
      set forth herein, and is not otherwise in conflict with the provisions of this
      Agreement.

    

    (d)           Failure
      to File Registration Statement and Other Events.  The Company and
      the Holders agree that the Holders will suffer damages if the Registration
      Statement is not filed on or prior to the Filing Date and the Company does
      not
      respond to comments from the Commission within 14 days of the receipt thereof
      or
      if certain other events occur.  The Company and the Holders further
      agree that it would not be feasible to ascertain the extent of such damages
      with
      precision.  Accordingly, if (A) the Registration Statement is not
      filed on or prior to the Filing Date, or (B) the Company fails to respond to
      comments from the Commission on any registration statement filed pursuant to
      this Agreement within 14 days after the receipt of such comments, or (C) the
      Company fails to file with the Commission a request for acceleration in
      accordance with Rule 461 promulgated under the Securities Act within three
      (3)
      Business Days of the date that the Company is notified (orally or in writing,
      whichever is earlier) by the Commission that a Registration Statement will
      not
      be “reviewed,” or not subject to further review, or (D) the Registration
      Statement is filed with and declared effective by the Commission but thereafter
      ceases to be effective as to all Registrable Securities at any time prior to
      the
      expiration of the Effectiveness Period, without being succeeded immediately
      by a
      subsequent Registration Statement filed with and declared effective by the
      Commission, or (E) the Company has breached Section 3(n), or (F) trading in
      the
      Common Stock shall be suspended or if the Common Stock is delisted from the
      OTC
      Bulletin Board (or other principal exchange on which the Common Stock is traded)
      for any reason for more than three (3) Business Days in the aggregate (any
      such
      failure or breach being referred to as an “Event,” and for purposes of
      clauses (A) and (B) the date on which such Event occurs, or for purposes of
      clause (C) the date on which such three (3) Business Day period is exceeded,
      or
      for purposes of clause (D) after more than fifteen (15) Business Days, or for
      purposes of clause (F) the date on which such three (3) Business Day period
      is
      exceeded, being referred to as “Event Date”), the Company shall pay an
      amount as liquidated damages to each Holder equal to one and one-half percent
      (1.5%) of the amount of the Holder’s initial investment in the Preferred Shares
      and Warrants for each calendar month or portion thereof thereafter from the
      Event Date until the applicable Event is cured; provided, however,
      that in no event shall the amount of liquidated damages payable to any Holder
      pursuant to this Section 7(d) exceed eighteen percent (18%) of the amount of
      the
      Holder’s initial investment in the Preferred Shares and
      Warrants.  Notwithstanding anything to the contrary in this paragraph
      (e), if (i) any of the Events shall have occurred, (ii) on or prior to the
      applicable Event Date, the Company shall have exercised its rights under Section
      3(n) hereof and (iii) the postponement or suspension permitted pursuant to
      such
      Section 3(n) shall remain effective as of such applicable Event Date, then
      the
      applicable Event Date shall be deemed instead to occur on the second Business
      Day following the termination of such postponement or suspension.

    

    
      
         

      

      
        -12-

        
          

        

      

      
         

      

    

    Notwithstanding
      anything to the
      contrary set forth herein, in the event the Commission does not permit the
      Company to register all of the Registrable Securities in the Registration
      Statement because of the Commission’s application of Rule 415, the Company shall
      register in the Registration Statement such number of Registrable Securities
      as
      is permitted by the Commission, provided, however, that the number of
      Registrable Securities and the Other Securities, to be included in such
      Registration Statement or any subsequent registration statement shall be
      determined in the following order: (i) first, the Registrable Securities; (ii)
      second, the Other Securities.   In the event the Commission does
      not permit the Company to register all of the Registrable Securities in the
      initial Registration Statement, the Company shall use its best efforts to file
      subsequent Registration Statements to register the Registrable Securities that
      were not registered in the initial Registration Statement as promptly as
      possible and in a manner permitted by the Commission.  For purposes of
      a subsequent filing under this paragraph, “Filing Date” means with respect to
      each subsequent Registration Statement filed pursuant hereto, the later of
      (i)
      ninety (90) days following the sale of substantially all of the Registrable
      Securities, determined, to the extent permitted by the Commission, on a per
      holder (and its affiliates) basis, included in the initial Registration
      Statement or any subsequent Registration Statement and (ii) seven (7) months
      following the effective date of the initial Registration Statement or any
      subsequent Registration Statement, as applicable, or such earlier date as
      permitted by the Commission.  For purposes of a subsequent filing
      under this paragraph, “Effectiveness Date” means with respect to each subsequent
      Registration Statement filed pursuant hereto, the earlier of (A) the ninetieth
      (90th) day following the filing date of such Registration Statement (or in
      the
      event such Registration Statement receives a “full review” by the Commission,
      the one hundred twentieth (120th) day following such filing date) or (B) the
      date which is within three (3) Business Days after the date on which the
      Commission informs the Company (i) that the Commission will not review such
      Registration Statement or (ii) that the Company may request the acceleration
      of
      the effectiveness of such Registration Statement and the Company makes such
      request; provided that, if the Effectiveness Date falls on a Saturday, Sunday
      or
      any other day which shall be a legal holiday or a day on which the Commission
      is
      authorized or required by law or other government actions to close, the
      Effectiveness Date shall be the following Business Day.  Such
      subsequent Registration Statement shall be subject to the terms of this
      Agreement as a Registration Statement under Article II
      hereof.  Further, the liquidated damages set forth in the preceding
      paragraph shall not be applicable to any Registrable Securities that are not
      included in a Registration Statement in response to a Rule 415 restriction
      raised in a “comment letter” from the Commission, but shall be applicable to
      such Registrable Securities to the extent such Registrable Securities are,
      or
      should have been, included in a subsequent Registration Statement pursuant
      to
      the terms of this paragraph.

    

    
      
         

      

      
        -13-

        
          

        

      

      
         

      

    

    (e)           Amendments
      and Waivers.  The provisions of this Agreement, including the
      provisions of this sentence, may not be amended, modified or supplemented,
      and
      waivers or consents to departures from the provisions hereof may not be given,
      unless the same shall be in writing and signed by the Company and the Holders
      of
      three-fourths (3/4) of the Registrable Securities outstanding.

    

    (f)           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 earlier of (i) the date of transmission, if such notice or
      communication is delivered via facsimile at the facsimile telephone number
      specified for notice prior to 5:00 p.m., New York City time, on a Business
      Day,
      (ii) the Business Day after the date of transmission, if such notice or
      communication is delivered via facsimile at the facsimile telephone number
      specified for notice later than 5:00 p.m., New York City time, on any date
      and
      earlier than 11:59 p.m., New York City time, on such date, (iii) the Business
      Day following the date of mailing, if sent by nationally recognized overnight
      courier service or (iv) actual receipt by the party to whom such notice is
      required to be given.  The addresses for such communications shall be
      with respect to each Holder at its address set forth under its name on
Schedule I attached hereto, or with respect to the Company, addressed
      to:

    

    Urigen
      Pharmaceuticals, Inc.

    875
      Mahler Road, Suite 235

    Burlingame,
      California 94010

    Attention:
      William J. Garner, MD

    Tel.
      No.:
      (650) 259-0239

    Fax
      No.:
      (650) 259-0901 and (866) 816-1107

    

    

    with
      copies (which copies

    shall
      not
      constitute notice

    to
      the
      Company)
      to:                             Sichenzia
      Ross Friedman Ference LLP

    61
      Broadway, 32nd Floor

    New
      York,
      NY 10006

    Attention:
      Thomas Rose, Esq.

    Tel.
      No.:
      (212) 930-9700

    Fax
      No.:
      (212) 930-9725

    

    or
      to
      such other address or addresses or facsimile number or numbers as any such
      party
      may most recently have designated in writing to the other parties hereto by
      such
      notice.  Copies of notices to the Holders shall be sent to Burak
      Anderson & Melloni, PLC, 30 Main Street, Burlington, Vermont 05402,
      Attention: Shane W. McCormack, Tel No.: (802) 862-0500, Fax No.: (802)
      862-8176.

    

    
      
         

      

      
        -14-

        
          

        

      

      
         

      

    

    (g)           Successors
      and Assigns.  This Agreement shall be binding upon and inure to
      the benefit of the parties and their successors and permitted assigns and shall
      inure to the benefit of each Holder and its successors and
      assigns.  The Company may not assign this Agreement or any of its
      rights or obligations hereunder without the prior written consent of each
      Holder.  Each Holder may assign its rights hereunder in the manner and
      to the Persons as permitted under the Purchase Agreement.

    

    (h)           Assignment
      of Registration Rights.  The rights of each Holder hereunder,
      including the right to have the Company register for resale Registrable
      Securities in accordance with the terms of this Agreement, shall be
      automatically assignable by each Holder to any Affiliate of such Holder or
      any
      other Holder or Affiliate of any
      other Holder of all or a portion of
      the Registrable Securities if:  (i) the Holder agrees in writing with
      the transferee or assignee to assign such rights, and a copy of such agreement
      is furnished to the Company within a reasonable time after such assignment,
      (ii)
      the Company is, within a reasonable time after such transfer or assignment,
      furnished with written notice of (a) the name and address of such transferee
      or
      assignee, and (b) the 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 assignees is
      restricted under the Securities Act and applicable state securities laws, (iv)
      at or before the time the Company receives the written notice contemplated
      by
      clause (ii) of this Section, the transferee or assignee agrees in writing with
      the Company to be bound by all of the provisions of this Agreement, and (v)
      such
      transfer shall have been made in accordance with the applicable requirements
      of
      the Purchase Agreement.  In addition, each Holder shall have the right
      to assign its rights hereunder to any other Person with the prior written
      consent of the Company, which consent shall not be unreasonably
      withheld.  The rights to assignment shall apply to the Holders (and to
      subsequent) successors and assigns.

    

    (i)           Counterparts.  This
      Agreement may be executed in any number of counterparts, each of which when
      so
      executed shall be deemed to be an original and, all of which taken together
      shall constitute one and the same Agreement.  In the event that any
      signature is delivered by facsimile transmission, such signature shall create
      a
      valid binding obligation of the party executing (or on whose behalf such
      signature is executed) the same with the same force and effect as if such
      facsimile signature were the original thereof.

    

    (j)           Governing
      Law; Jurisdiction.  This Agreement shall be governed by and
      construed in accordance with the internal laws of the State of New York, without
      giving effect to any of the conflicts of law principles which would result
      in
      the application of the substantive law of another jurisdiction.  This
      Agreement shall not be interpreted or construed with any presumption against
      the
      party causing this Agreement to be drafted.  The Company and the
      Holders agree that venue for any dispute arising under this Agreement will
      lie
      exclusively in the state or federal courts located in New York County, New
      York,
      and the parties irrevocably waive any right to raise forum non
      conveniens or any other argument that New York is not the proper
      venue.  The Company and the Holders irrevocably consent to personal
      jurisdiction in the state and federal courts of the state of New
      York.  The Company and the Holders consent to process being served in
      any such suit, action or proceeding by mailing a copy thereof 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 in this Section 7(j) shall affect or limit any right
      to serve process in any other manner permitted by law.  The Company
      and the Holders hereby agree that the prevailing party in any suit, action
      or
      proceeding arising out of or relating to the this Agreement or the Purchase
      Agreement, shall be entitled to reimbursement for reasonable legal fees from
      the
      non-prevailing party.  The parties hereby waive all rights to a trial
      by jury.

    

    
      
         

      

      
        -15-

        
          

        

      

      
         

      

    

                          
      (k)           Cumulative
      Remedies.  The remedies provided herein are cumulative and not
      exclusive of any remedies provided by law.

    

    (l)           Severability.
      If any term, provision, covenant or restriction of this Agreement is held to
      be
      invalid, illegal, void or unenforceable in any respect, the remainder of the
      terms, provisions, covenants and restrictions set forth herein shall remain
      in
      full force and effect and shall in no way be affected, impaired or invalidated,
      and the parties hereto shall use their reasonable efforts to find and employ
      an
      alternative means to achieve the same or substantially the same result as that
      contemplated by such term, provision, covenant or restriction.  It is
      hereby stipulated and declared to be the intention of the
      parties that they would have executed the remaining terms, provisions, covenants
      and restrictions without including any of such that may be hereafter declared
      invalid, illegal, void or unenforceable.

    

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

    

    (n)           Shares
      Held by the Company and its Affiliates. Whenever the consent or approval of
      Holders of a specified percentage of Registrable Securities is required
      hereunder, Registrable Securities held by the Company or its Affiliates (other
      than any Holder or transferees or successors or assigns thereof if such Holder
      is deemed to be an Affiliate solely by reason of its holdings of such
      Registrable Securities) shall not be counted in determining whether such consent
      or approval was given by the Holders of such required percentage.

    

    (o)           Independent
      Nature of Holders.  The Company acknowledges that the obligations
      of each Holder under the Transaction Documents are several and not joint with
      the obligations of any other Holder, and no Holder shall be responsible in
      any
      way for the performance of the obligations of any other Holder under the
      Transaction Documents.  The Company acknowledges that the decision of
      each Holder to purchase Securities pursuant to the Purchase Agreement has been
      made by such Holder independently of any other purchase 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 or of its Subsidiaries
      which may have made or given by any other Holder or by any agent or employee
      of
      any other Holder, and no Holder or any of its agents or employees shall have
      any
      liability to any Holder (or any other person) relating to or arising from any
      such information, materials, statements or opinions.  The Company
      acknowledges that nothing contained herein, or in any Transaction Document,
      and
      no action taken by any Holder pursuant hereto or thereto (including, but not
      limited to, the (i) inclusion of a Holder in the Registration Statement and
      (ii)
      review by, and consent to, such Registration Statement by a Holder) shall be
      deemed to constitute the Holders as a partnership, an association, a joint
      venture or any other kind of entity, or create a presumption that the Holders
      are in any way acting in concert or as a group with respect to such obligations
      or the transactions contemplated by the Transaction Documents.  The
      Company acknowledges that each Holder 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 Holder to be joined as an additional party in any
      proceeding for such purpose.  The Company acknowledges that for
      reasons of administrative convenience only, the Transaction Documents have
      been
      prepared by counsel for one of the Holders and such counsel does not represent
      all of the Holders but only such Holder and the other Holders have retained
      their own individual counsel with respect to the transactions contemplated
      hereby.  The Company acknowledges that it has elected to provide all
      Holders with the same terms and Transaction Documents for the convenience of
      the
      Company and not because it was required or requested to do so by the
      Holders.  The Company acknowledges that such procedure with respect to
      the Transaction Documents in no way creates a presumption that the Holders
      are
      in any way acting in concert or as a group with respect to the Transaction
      Documents or the transactions contemplated hereby or thereby.

    

    

    [REMAINDER
      OF PAGE INTENTIONALLY LEFT BLANK]

    

    

    
      
         

      

      
        -16-

        
          

        

      

      
         

      

    

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

    
      	 	URIGEN
              PHARMACEUTICALS, INC.	 
	 	 	 	 
	
               

            	
              By:
                

            	/s/ Martin
              E. Shamagin	 
	 	 	Name: Martin
              E. Shmagin	 
	 	 	Title : 
              Chief Financial Officer	 
	 	 	 	 

      	 	PLATINUM-MONTAUR
              LIFE SCIENCES, LLC	 
	 	 	 	 
	
               

            	
              By:
                

            	/s/ Mark
              Nordlicht	 
	 	 	Name: Mark
              Nordlicht	 
	 	 	Title: Managing
              Member	 
	 	 	 	 

    

    
      
         

      

      
        -17-

        
          

        

      

      
         

      

    

    

    

    

    

    Schedule
      I

    List
      of Holders

    

    PLATINUM-MONTAUR
      LIFE SCIENCES, LLC Schedule II

    Securities
      Permitted to be Included on the Registration Statement

    

    

    None.

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