Document:

APNS 10QSB 9-30-07 Exhibit 4.1

    
      

    

    EXHIBIT
      4.1

    

    EXHIBIT
      A

    

    THE
      SECURITIES REPRESENTED HEREBY MAY NOT BE TRANSFERRED UNLESS (I) SUCH SECURITIES
      HAVE BEEN REGISTERED FOR SALE PURSUANT TO THE SECURITIES ACT OF 1933, AS
      AMENDED, (II) SUCH SECURITIES MAY BE SOLD PURSUANT TO RULE 144(K), OR (III)
      THE
      COMPANY HAS RECEIVED AN OPINION OF COUNSEL REASONABLY SATISFACTORY TO IT THAT
      SUCH TRANSFER MAY LAWFULLY BE MADE WITHOUT REGISTRATION UNDER THE SECURITIES
      ACT
      OF 1933 OR QUALIFICATION UNDER APPLICABLE STATE SECURITIES LAWS.

    

    SUBJECT
      TO THE PROVISIONS OF SECTION 10 HEREOF, THIS WARRANT SHALL BE VOID AFTER 5:00
      P.M. EASTERN TIME ON SEPTEMBER 28, 2012 (the “EXPIRATION DATE”).

    

    No.
      ___________

    

    

    

      APPLIED
        NEUROSOLUTIONS, INC.

      

      WARRANT
        TO PURCHASE 6,214,286 SHARES OF

      COMMON
        STOCK, PAR VALUE $0.0025 PER SHARE

    For
      VALUE
      RECEIVED, SF
      Capital Partners Ltd. (“Warrantholder”),
      is
      entitled to purchase, subject to the provisions of this Warrant, from Applied
      NeuroSolutions, Inc., a Delaware corporation (“Company”), at any time not later
      than 5:00 P.M., Eastern time, on the Expiration Date (as defined above), at
      an
      exercise price per share equal to $0.19 (the exercise price in effect being
      herein called the “Warrant Price”), 6,214,286 shares (“Warrant Shares”) of the
      Company’s Common Stock, par value $0.0025 per share (“Common Stock”). The number
      of Warrant Shares purchasable upon exercise of this Warrant and the Warrant
      Price shall be subject to adjustment from time to time as described
      herein.

    

    Section
      1. Registration.
      The
      Company shall maintain books for the transfer and registration of the Warrant.
      Upon the initial issuance of this Warrant, the Company shall issue and register
      the Warrant in the name of the Warrantholder.

    

    Section
      2. Transfers.
      As
      provided herein, this Warrant may be transferred only pursuant to a registration
      statement filed under the Securities Act of 1933, as amended (the “Securities
      Act”), or an exemption from such registration. Subject to such restrictions, the
      Company shall transfer this Warrant from time to time upon the books to be
      maintained by the Company for that purpose, upon surrender thereof for transfer
      properly endorsed or accompanied by appropriate instructions for transfer and
      such other documents as may be reasonably required by the Company, including,
      if
      required by the Company, an opinion of its counsel to the effect that such
      transfer is exempt from the registration requirements of the Securities Act,
      to
      establish that such transfer is being made in accordance with the terms hereof,
      and a new Warrant shall be issued to the transferee and the surrendered Warrant
      shall be canceled by the Company.

    

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

    Section
      3. Exercise
      of Warrant.
      

    

    (a)
      Subject to the provisions hereof, the Warrantholder may exercise this Warrant
      in
      whole or in part at any time prior to its expiration upon surrender of the
      Warrant, together with delivery of the duly executed Warrant exercise form
      attached hereto as Appendix A (the “Exercise Agreement”) and payment by cash,
      certified check or wire transfer of funds for the aggregate Warrant Price for
      that number of Warrant Shares then being purchased, to the Company during normal
      business hours on any business day at the Company’s principal executive offices
      (or such other office or agency of the Company as it may designate by notice
      to
      the Warrantholder). The Warrant Shares so purchased shall be deemed to be issued
      to the Warrantholder or the Warrantholder’s designee, as the record owner of
      such shares, as of the close of business on the date on which this Warrant
      shall
      have been surrendered (or evidence of loss, theft or destruction thereof and
      security or indemnity satisfactory to the Company), the Warrant Price shall
      have
      been paid and the completed Exercise Agreement shall have been delivered.
      Certificates for the Warrant Shares so purchased, representing the aggregate
      number of shares specified in the Exercise Agreement, shall be delivered to
      the
      Warrantholder within a reasonable time, not exceeding four (4) business days,
      after this Warrant shall have been so exercised. The certificates so delivered
      shall be in such denominations as may be requested by the Warrantholder and
      shall be registered in the name of the Warrantholder or such other name as
      shall
      be designated by the Warrantholder. 

    

    If
      by the
      fourth business day following the date this Warrant is duly exercised in
      accordance the preceding paragraph in this Section 3(a), the Company fails
      to
      deliver the required number of Warrant Shares in the manner required pursuant
      to
      this Section 3, and if after such date and prior to the receipt of such Warrant
      Shares, shares of Common Stock are purchased by or for the account of the
      Warrantholder to deliver in satisfaction of a sale by the Warrantholder of
      the
      Warrant Shares which the Warrantholder anticipated receiving upon such exercise
      (a “Buy-In”), then the Company
      shall
      (1) pay in cash to the Warrantholder the amount by which (x) the Warrantholder’s
      total purchase price (including brokerage commissions, if any) for the shares
      of
      Common Stock so purchased exceeds (y) the amount obtained by multiplying (A)
      the
      number of Warrant Shares that the Company was required to deliver to the
      Warrantholder in connection with such exercise by (B) the closing price of
      the
      Common Stock on the date the Exercise Form was delivered and (2) deliver to
      the
      Warrantholder the number of shares of Common Stock that would have been issued
      had the Company timely complied with its exercise and delivery obligations
      hereunder. The Warrantholder shall provide the Company written notice indicating
      the amounts payable to the Warrantholder in respect of the Buy-In.

    

    If
      this
      Warrant shall have been exercised only in part, then, unless this Warrant has
      expired, the Company shall, at its expense, at the time of delivery of such
      certificates, deliver to the Warrantholder a new Warrant representing the number
      of shares with respect to which this Warrant shall not then have been exercised.
      As used herein, “business day” means a day, other than a Saturday or Sunday, on
      which banks in New York City are open for the general transaction of business.
      Each exercise hereof shall constitute the re-affirmation by the Warrantholder
      that the representations and warranties contained in Section 5 of that certain
      Stock Purchase Agreement, dated as of September 28, 2007, by and among the
      Company and the Investor named therein (the “Purchase Agreement”) are true and
      correct in all material respects with respect to the Warrantholder as of the
      time of such exercise.

    

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

    (b) Net
      Issue Election.
      The
      Warrantholder may elect to receive, without the payment by the Warrantholder
      of
      any additional consideration, shares equal to the value of this Warrant or
      any
      portion hereof by the surrender of this Warrant, or such portion to the Company,
      with the net issue election notice annexed hereto as Appendix B duly executed,
      at the office of the Company, during any time period that the Company does
      not
      have an effective registration statement covering the shares to be issued upon
      execution of this warrant, after the Effectiveness Deadline, as described in
      the
      Registration Rights Agreement (Exhibit B). Thereupon, the Company shall issue
      to
      the Warrantholder such number of fully paid and nonassessable shares of Common
      Stock as is computed using the following formula:

    

    X
      = Y
      ( A - B )

    A

    

    where X
      = the
      number of shares to be issued to the Warrantholder pursuant to this Section
      3(b).

    

    Y
      = the
      number of shares covered by this Warrant in respect of which the net issue
      election is made pursuant to this Section 3(b).

    

    A
      = the
      VWAP (as
      defined below).

    

    B
      = the
      Purchase Price in effect under this Warrant at the time the net issue election
      is made pursuant to this Section 3(b).

    

    For
      purposes of this Section 3(b), the “VWAP” of a security of the Company as of a
      particular date shall be determined as follows: (i) if traded on a securities
      exchange or through the Nasdaq National Market (“Trading Market”), the
      daily
      volume weighted average price of the Common Stock on the Trading Market on
      which
      the Common Stock is then listed or quoted for trading as reported by Bloomberg
      L.P. (based on a Trading Day from 9:30 a.m. (New York City time) to 4:00 p.m.
      (New York City time) over
      the
      thirty (30) day period ending on
      the
      business day
      immediately
      prior to
      the net issue election; (ii) if traded on the OTC Bulletin Board, the
      volume weighted average price of the Common Stock over
      the
      thirty (30) day period ending on the business day immediately prior to the
      net
      issue election; (iii) if
      the
      Common Stock is not then quoted for trading on the OTC Bulletin Board and if
      prices for the Common Stock are then reported in the “Pink Sheets” published by
      Pink Sheets, LLC (or a similar organization or agency succeeding to its
      functions of reporting prices), the most recent bid price per share of the
      Common Stock so reported; and (iv) if
      there
      is no active public market, the fair market value shall be determined in good
      faith by the Board. The Board shall promptly respond in writing to an inquiry
      by
      the Warrantholder as to the VWAP of the Company’s securities.

    

    Section
      4. Compliance
      with the Securities Act of 1933.
      Except
      as provided in the Purchase Agreement, the Company may cause the legend set
      forth on the first page of this Warrant to be set forth on each Warrant or
      similar legend on any security issued or issuable upon exercise of this Warrant,
      unless counsel for the Company is of the opinion as to any such security that
      such legend is unnecessary.

    

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

    Section
      5. Payment
      of Taxes.
      The
      Company will pay any documentary stamp taxes attributable to the initial
      issuance of Warrant Shares issuable upon the exercise of the Warrant; provided,
      however, that the Company shall not be required to pay any tax or taxes which
      may be payable in respect of any transfer involved in the issuance or delivery
      of any certificates for Warrant Shares in a name other than that of the
      Warrantholder in respect of which such shares are issued, and in such case,
      the
      Company shall not be required to issue or deliver any certificate for Warrant
      Shares or any Warrant until the person requesting the same has paid to the
      Company the amount of such tax or has established to the Company’s reasonable
      satisfaction that such tax has been paid. The Warrantholder shall be responsible
      for income taxes due under federal, state or other law, if any such tax is
      due.

    

    Section
      6. Mutilated
      or Missing Warrants.
      In case
      this Warrant shall be mutilated, lost, stolen, or destroyed, the Company shall
      issue in exchange and substitution of and upon cancellation of the mutilated
      Warrant, or in lieu of and substitution for the Warrant lost, stolen or
      destroyed, a new Warrant of like tenor and for the purchase of a like number
      of
      Warrant Shares, but only upon receipt of evidence reasonably satisfactory to
      the
      Company of such loss, theft or destruction of the Warrant, and with respect
      to a
      lost, stolen or destroyed Warrant, reasonable indemnity or bond with respect
      thereto, if requested by the Company.

    

    Section
      7. Reservation
      of Common Stock.
      The
      Company hereby represents and warrants that there have been reserved, and the
      Company shall at all applicable times keep reserved until issued (if necessary)
      as contemplated by this Section 7, out of the authorized and unissued shares
      of
      Common Stock, sufficient shares to provide for the exercise of the rights of
      purchase represented by this Warrant. The Company agrees that all Warrant Shares
      issued upon due exercise of the Warrant shall be, at the time of delivery of
      the
      certificates for such Warrant Shares, duly authorized, validly issued, fully
      paid and non-assessable shares of Common Stock of the Company.

    

    Section
      8. Adjustments.
      Subject
      and pursuant to the provisions of this Section 8, the Warrant Price and number
      of Warrant Shares subject to this Warrant shall be subject to adjustment from
      time to time as set forth hereinafter.

    

    (a) If
      the
      Company shall, at any time or from time to time while this Warrant is
      outstanding, pay a dividend or make a distribution on its Common Stock in shares
      of Common Stock, subdivide its outstanding shares of Common Stock into a greater
      number of shares or combine its outstanding shares of Common Stock into a
      smaller number of shares or issue by reclassification of its outstanding shares
      of Common Stock any shares of its capital stock (including any such
      reclassification in connection with a consolidation or merger in which the
      Company is the continuing corporation), then the number of Warrant Shares
      purchasable upon exercise of the Warrant and the Warrant Price in effect
      immediately prior to the date upon which such change shall become effective,
      shall be adjusted by the Company so that the Warrantholder thereafter exercising
      the Warrant shall be entitled to receive the number of shares of Common Stock
      or
      other capital stock which the Warrantholder would have received if the Warrant
      had been exercised immediately prior to such event upon payment of a Warrant
      Price that has been adjusted to reflect a fair allocation of the economics
      of
      such event to the Warrantholder. Such adjustments shall be made successively
      whenever any event listed above shall occur.

    

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

    (b) If
      any
      capital reorganization, reclassification of the capital stock of the Company,
      consolidation or merger of the Company with another corporation in which the
      Company is not the survivor, or sale, transfer or other disposition of all
      or
      substantially all of the Company’s assets to another corporation shall be
      effected, then, as a condition of such reorganization, reclassification,
      consolidation, merger, sale, transfer or other disposition, lawful and adequate
      provision shall be made whereby each Warrantholder shall thereafter have the
      right to purchase and receive upon the basis and upon the terms and conditions
      herein specified and in lieu of the Warrant Shares immediately theretofore
      issuable upon exercise of the Warrant, such shares of stock, securities or
      assets as would have been issuable or payable with respect to or in exchange
      for
      a number of Warrant Shares equal to the number of Warrant Shares immediately
      theretofore issuable upon exercise of the Warrant, had such reorganization,
      reclassification, consolidation, merger, sale, transfer or other disposition
      not
      taken place, and in any such case appropriate provision shall be made with
      respect to the rights and interests of each Warrantholder to the end that the
      provisions hereof (including, without limitation, provision for adjustment
      of
      the Warrant Price) shall thereafter be applicable, as nearly equivalent as
      may
      be practicable in relation to any shares of stock, securities or assets
      thereafter deliverable upon the exercise hereof. The Company shall not effect
      any such consolidation, merger, sale, transfer or other disposition unless
      prior
      to or simultaneously with the consummation thereof the successor corporation
      (if
      other than the Company) resulting from such consolidation or merger, or the
      corporation purchasing or otherwise acquiring such assets or other appropriate
      corporation or entity shall assume the obligation to deliver to the
      Warrantholder, at the last address of the Warrantholder appearing on the books
      of the Company, such shares of stock, securities or assets as, in accordance
      with the foregoing provisions, the Warrantholder may be entitled to purchase,
      and the other obligations under this Warrant. The provisions of this paragraph
      (b) shall similarly apply to successive reorganizations, reclassifications,
      consolidations, mergers, sales, transfers or other dispositions.

    

    (c) In
      case
      the Company shall fix a payment date for the making of a distribution to all
      holders of Common Stock (including any such distribution made in connection
      with
      a consolidation or merger in which the Company is the continuing corporation)
      of
      evidences of indebtedness or assets (other than cash dividends or cash
      distributions payable out of consolidated earnings or earned surplus or
      dividends or distributions referred to in Section 8(a)), or subscription rights
      or warrants, the Warrant Price to be in effect after such payment date shall
      be
      determined by multiplying the Warrant Price in effect immediately prior to
      such
      payment date by a fraction, the numerator of which shall be the total number
      of
      shares of Common Stock outstanding multiplied by the Market Price (as defined
      below) per share of Common Stock immediately prior to such payment date, less
      the fair market value (as determined by the Company’s Board of Directors in good
      faith) of said assets or evidences of indebtedness so distributed, or of such
      subscription rights or warrants, and the denominator of which shall be the
      total
      number of shares of Common Stock outstanding multiplied by such Market Price
      per
      share of Common Stock immediately prior to such payment date. “Market Price” as
      of a particular date (the “Valuation Date”) shall mean the following: (a) if the
      Common Stock is then listed on a national stock exchange, the closing sale
      price
      of one share of Common Stock on such exchange on the last trading day prior
      to
      the Valuation Date; (b) if the Common Stock is then quoted on The Nasdaq Stock
      Market, Inc. (“Nasdaq”), the closing sale price of one share of Common Stock on
      Nasdaq on the last trading day prior to the Valuation Date or, if no such
      closing sale price is available, the average of the high bid and the low asked
      price quoted on Nasdaq or through the OTC Bulletin Board on the last trading
      day
      prior to the Valuation Date; or (c) if the Common Stock is not then listed
      on a
      national stock exchange or quoted on Nasdaq or through the OTC Bulletin Board,
      the fair market value of one share of Common Stock as of the Valuation Date,
      shall be determined in good faith by the Board of Directors of the Company
      and
      the Warrantholder. If the Common Stock is not then listed on a national
      securities exchange or quoted on Nasdaq or through the OTC Bulletin Board,
      the
      Board of Directors of the Company shall respond promptly, in writing, to an
      inquiry by the Warrantholder prior to the exercise hereunder as to the fair
      market value of a share of Common Stock as determined by the Board of Directors
      of the Company. In the event that the Board of Directors of the Company and
      the
      Warrantholder are unable to agree upon the fair market value in respect of
      subpart (c) hereof, the Company and the Warrantholder shall jointly select
      an
      appraiser, who is experienced in such matters. The decision of such appraiser
      shall be final and conclusive, and the cost of such appraiser shall be borne
      equally by the Company and the Warrantholder. Such adjustment shall be made
      successively whenever such a payment date is fixed.

    

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

    (d) An
      adjustment to the Warrant Price shall become effective immediately after the
      payment date in the case of each dividend or distribution and immediately after
      the effective date of each other event which requires an
      adjustment.

    

    (e) In
      the
      event that, as a result of an adjustment made pursuant to this Section 8, the
      Warrantholder shall become entitled to receive any shares of capital stock
      of
      the Company other than shares of Common Stock, the number of such other shares
      so receivable upon exercise of this Warrant shall be subject thereafter to
      adjustment from time to time in a manner and on terms as nearly equivalent
      as
      practicable to the provisions with respect to the Warrant Shares contained
      in
      this Warrant.

    

    Section
      9. Fractional
      Interest.
      The
      Company shall not be required to issue fractions of Warrant Shares upon the
      exercise of this Warrant. If any fractional share of Common Stock would, except
      for the provisions of the first sentence of this Section 9, be deliverable
      upon
      such exercise, the Company, in lieu of delivering such fractional share, shall
      pay to the exercising Warrantholder an amount in cash equal to the Market Price
      of such fractional share of Common Stock on the date of exercise.

    

    Section
      10. Benefits.
      Nothing
      in this Warrant shall be construed to give any person, firm or corporation
      (other than the Company and the Warrantholder) any legal or equitable right,
      remedy or claim, it being agreed that this Warrant shall be for the sole and
      exclusive benefit of the Company and the Warrantholder.

    

    Section
      11. Notices
      to Warrantholder.
      Upon
      the happening of any event requiring an adjustment of the Warrant Price, the
      Company shall promptly give written notice thereof to the Warrantholder at
      the
      address appearing in the records of the Company, stating the adjusted Warrant
      Price and the adjusted number of Warrant Shares resulting from such event and
      setting forth in reasonable detail the method of calculation and the facts
      upon
      which such calculation is based. Failure to give such notice to the
      Warrantholder or any defect therein shall not affect the legality or validity
      of
      the subject adjustment.

    

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

    Section
      12. Identity
      of Transfer Agent.
      The
      Transfer Agent for the Common Stock is American Stock Transfer and Trust
      Company. Upon the appointment of any subsequent transfer agent for the Common
      Stock or other shares of the Company’s capital stock issuable upon the exercise
      of the rights of purchase represented by the Warrant, the Company will mail
      to
      the Warrantholder a statement setting forth the name and address of such
      transfer agent.

    

    Section
      13. Notices.
      Unless
      otherwise provided, any notice required or permitted under this Warrant shall
      be
      given in writing and shall be deemed effectively given as hereinafter described
      (i) if given by personal delivery, then such notice shall be deemed given upon
      such delivery, (ii) if given by facsimile, then such notice shall be deemed
      given upon receipt of confirmation of complete transmittal, (iii) if given
      by
      mail, then such notice shall be deemed given upon the earlier of (A) receipt
      of
      such notice by the recipient or (B) three days after such notice is deposited
      in
      first class mail, postage prepaid, and (iv) if given by an internationally
      recognized overnight air courier, then such notice shall be deemed given one
      business day after delivery to such carrier. All notices shall be addressed
      as
      follows: if to the Warrantholder, at its address as set forth in the Company’s
      books and records and, if to the Company, at the address as follows, or at
      such
      other address as the Warrantholder or the Company may designate by ten days’
advance written notice to the other:

    

    If
      to the
      Company:

    

    Applied
      NeuroSolutions, Inc.

    50
      Lakeview Parkway

    Vernon
      Hills, Illinois 60061

    Attention:
      Ellen R. Hoffing

    Facsimile:
      (847) 573-8030

    

    With
      a
      copy to:

    

    Eilenberg
      Krause & Paul LLP

    11
      East
      44th
      Street,
      19th Floor, New York, NY 10017

    Attention.:
      Adam D. Eilenberg, Esq.

    Facsimile:
      (212) 986-2399

    

    Section
      14. Registration
      Rights.
      The
      initial Warrantholder is entitled to the benefit of certain registration rights
      with respect to the shares of Common Stock issuable upon the exercise of this
      Warrant as provided in the Registration Rights Agreement, and any subsequent
      Warrantholder may be entitled to such rights.

    

    Section
      15. 
      Successors.
      All the
      covenants and provisions hereof by or for the benefit of the Warrantholder
      shall
      bind and inure to the benefit of its respective successors and assigns
      hereunder. 

    

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

    Section
      16. Governing
      Law; Consent to Jurisdiction; Waiver of Jury Trial.
      This
      Warrant shall be governed by, and construed in accordance with, the internal
      laws of the State of New York, without reference to the choice of law provisions
      thereof. The Company and, by accepting this Warrant, the Warrantholder, each
      irrevocably submits to the exclusive jurisdiction of the courts of the State
      of
      New York located in New York County and the United States District Court for
      the
      Southern District of New York for the purpose of any suit, action, proceeding
      or
      judgment relating to or arising out of this Warrant and the transactions
      contemplated hereby. Service of process in connection with any such suit, action
      or proceeding may be served on each party hereto anywhere in the world by the
      same methods as are specified for the giving of notices under this Warrant.
      The
      Company and, by accepting this Warrant, the Warrantholder, each irrevocably
      consents to the jurisdiction of any such court in any such suit, action or
      proceeding and to the laying of venue in such court. The Company and, by
      accepting this Warrant, the Warrantholder, each irrevocably waives any objection
      to the laying of venue of any such suit, action or proceeding brought in such
      courts and irrevocably waives any claim that any such suit, action or proceeding
      brought in any such court has been brought in an inconvenient forum.
EACH
      OF THE COMPANY AND, BY ITS ACCEPTANCE HEREOF, THE WARRANTHOLDER HEREBY WAIVES
      ANY RIGHT TO REQUEST A TRIAL BY JURY IN ANY LITIGATION WITH RESPECT TO THIS
      WARRANT AND REPRESENTS THAT COUNSEL HAS BEEN CONSULTED SPECIFICALLY AS TO THIS
      WAIVER.

     

    Section
      17. No
      Rights as Stockholder.
      Prior
      to the exercise of this Warrant, the Warrantholder shall not have or exercise
      any rights as a stockholder of the Company by virtue of its ownership of this
      Warrant.

    

    Section
      18. Amendment;
      Waiver.
      This
      Warrant is one of a series of Warrants of like tenor issued by the Company
      pursuant to the Purchase Agreement and initially covering an aggregate of up
      to
      6,214,286 shares of Common Stock (collectively, the “Company
      Warrants”).
      Any
      term of this Warrant may be amended or waived (including the adjustment
      provisions included in Section 8 of this Warrant) upon the written consent
      of
      the Company and the Investor.

    

    Section
      19. Section
      Headings.
      The
      section headings in this Warrant are for the convenience of the Company and
      the
      Warrantholder and in no way alter, modify, amend, limit or restrict the
      provisions hereof.

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

    IN
      WITNESS WHEREOF, the Company has caused this Warrant to be duly executed, as
      of
      the 28th day of September , 2007.

    

    APPLIED
      NEUROSOLUTIONS, INC.

    

    

    

    By:___________________________

    Name:
      Ellen R. Hoffing

    Title:
      President and CEO

    

    

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

    APPENDIX
      A

    APPLIED
      NEUROSOLUTIONS, INC.

    WARRANT
      EXERCISE FORM

    

    To
      Applied NeuroSolutions, Inc.:

    

    The
      undersigned hereby irrevocably elects to exercise the right of purchase
      represented by the within Warrant (“Warrant”) for, and to purchase thereunder by
      the payment of the Warrant Price and surrender of the Warrant, _______________
      shares of Common Stock (“Warrant Shares”) provided for therein, and requests
      that certificates for the Warrant Shares be issued as follows: 

    

    _______________________________

    Name

    ________________________________

    Address

    ________________________________

    ________________________________

    Federal
      Tax ID or Social Security No.

    

    and
      delivered by (certified mail to the above address, or (electronically (provide
      DWAC Instructions:___________________), or  (other
      (specify): __________________________________________). and, if the number
      of
      Warrant Shares shall not be all the Warrant Shares purchasable upon exercise
      of
      the Warrant, that a new Warrant for the balance of the Warrant Shares
      purchasable upon exercise of this Warrant be registered in the name of the
      undersigned Warrantholder or the undersigned’s Assignee as below indicated and
      delivered to the address stated below.

    

    

    Dated:
      ___________________, ____

    

    Note:
      The
      signature must correspond with Signature:                      
      ______________________________

    the
      name
      of the Warrantholder as written

    on
      the
      first page of the Warrant in every          
______________________________

    particular,
      without alteration or enlargement          
Name
      (please print)

    or
      any
      change whatever, unless the Warrant 

    has
      been
      assigned.             
______________________________

       
      ______________________________

              
      Address

                   
      ______________________________

                     
      Federal Identification or

                     
      Social Security No.

    

                    
      Assignee: 

                 
      _______________________________

                 
      _______________________________

                 
      _______________________________

    

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

    APPENDIX
      B

    APPLIED
      NEUROSOLUTIONS, INC.

    NET
      ISSUE
      ELECTION NOTICE

    

    

    To:                            Date
            

    

    The
      undersigned hereby elects under Section 3 to surrender the right to purchase
          
      shares
      of Common Stock pursuant to this Warrant. The certificate(s) for the shares
      issuable upon such net issue election shall be issued in the name of the
      undersigned or as otherwise indicated below. 

    

     

     

    

      

      Signature                                

      

       

      Name
        for
        Registration                        

      

       

      Mailing
        AddressAPNS 10QSB Exhibit 10.1

    
      

    

    EXHIBIT
      10.1

    

    PURCHASE
      AGREEMENT

    

    

    THIS
      PURCHASE AGREEMENT (“Agreement”) is made as of the 28th day of September 2007 by
      and among Applied NeuroSolutions, Inc., a Delaware corporation (the “Company”),
      and SF Capital Partners Ltd., a British Virgin Islands corporation (the
“Investor”).

    

    Recitals

    

    A. The
      Company and the Investor are executing and delivering this Agreement in reliance
      upon the exemption from securities registration afforded by the provisions
      of
      Regulation D (“Regulation D”), as promulgated by the U.S. Securities and
      Exchange Commission (the “SEC”) under the Securities Act of 1933, as amended;
      and

    

    B. The
      Investor wishes to purchase from the Company, and the Company wishes to sell
      and
      issue to the Investor, upon the terms and conditions stated in this Agreement,
      (i) an aggregate of 20,714,286 shares of the Company’s Common Stock, par value
      $0.0025 per share (the “Common Stock”), and (ii) warrants to purchase an
      aggregate of 6,214,286 shares of Common Stock (appropriately adjusted for any
      stock split, reverse stock split, stock dividend or other reclassification
      or
      combination of the Common Stock occurring after the date hereof) in the form
      attached hereto as Exhibit A (the “Warrants”); and

    

    C. Contemporaneous
      with the sale of the Common Stock and Warrants, the parties hereto will execute
      and deliver a Registration Rights Agreement, in the form attached hereto as
      Exhibit B (the “Registration Rights Agreement”), pursuant to which the Company
      will agree to provide certain registration rights under the Securities Act
      of
      1933, as amended, and the rules and regulations promulgated thereunder, and
      applicable state securities laws.

    

    In
      consideration of the mutual promises made herein and for other good and valuable
      consideration, the receipt and sufficiency of which is hereby acknowledged,
      the
      parties hereto agree as follows:

    

    1. Definitions.
      In
      addition to those terms defined above and elsewhere in this Agreement, for
      the
      purposes of this Agreement, the following terms shall have the meanings set
      forth below:

    

    “Affiliate”
means,
      with respect to any Person, any other Person which directly or indirectly
      through one or more intermediaries Controls, is controlled by, or is under
      common control with, such Person.

    

    “Business
      Day”
means
      a
      day, other than a Saturday or Sunday, on which banks in New York City are open
      for the general transaction of business.

    

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

    “Common
      Stock”
means
      the common stock, par value $0.0025 per share, of the Company, and any
      securities into which the Common Stock may be reclassified.

    

    “Company’s
      Knowledge”
means
      the actual knowledge of the executive officers (as defined in Rule 405 under
      the
      1933 Act) of the Company, after due inquiry.

    

    “Confidential
      Information”
means
      trade secrets, confidential information and know-how (including but not limited
      to ideas, formulae, compositions, processes, procedures and techniques, research
      and development information, computer program code, performance specifications,
      support documentation, drawings, specifications, designs, business and marketing
      plans, and customer and supplier lists and related information).

    

    “Control”
      (including the terms “controlling”, “controlled by” or “under common control
      with”) means the possession, direct or indirect, of the power to direct or cause
      the direction of the management and policies of a Person, whether through the
      ownership of voting securities, by contract or otherwise.

    

    “Intellectual
      Property”
means
      all of the following: (i) patents, patent applications, patent disclosures
      and
      inventions (whether or not patentable and whether or not reduced to practice);
      (ii) trademarks, service marks, trade dress, trade names, corporate names,
      logos, slogans and Internet domain names, together with all goodwill associated
      with each of the foregoing; (iii) copyrights and copyrightable works; (iv)
      registrations, applications and renewals for any of the foregoing; and (v)
      proprietary computer software (including but not limited to data, data bases
      and
      documentation).

    

    “Material
      Adverse Effect”
means
      a
      material adverse effect on (i) the assets, liabilities, results of operations,
      condition (financial or otherwise), business, or prospects of the Company,
      or
      (ii) the ability of the Company to perform its obligations under the Transaction
      Documents.

    

    “Person”
means
      an individual, corporation, partnership, limited liability company, trust,
      business trust, association, joint stock company, joint venture, sole
      proprietorship, unincorporated organization, governmental authority or any
      other
      form of entity not specifically listed herein.

    

    “Purchase
      Price”
means
      Two Million Nine Hundred Thousand Dollars ($2,900,000), in United States dollars
      and in immediately available funds.

    

    “SEC
      Filings”
has
      the
      meaning set forth in Section 4.6.

    

    “Securities”
means
      the Shares, the Warrants and the Warrant Shares.

    

    “Shares”
means
      the shares of Common Stock being purchased by the Investor
      hereunder.

    

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

    “Transaction
      Documents”
means
      this Agreement, the Warrants and the Registration Rights Agreement.

    

    “Warrant
      Shares”
means
      the shares of Common Stock issuable upon the exercise of the
      Warrants.

    

    “1933
      Act”
means
      the Securities Act of 1933, as amended, or any successor statute, and the rules
      and regulations promulgated thereunder.

    

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

    

    2. Purchase
      and Sale of the Shares and Warrants.
      Subject
      to the terms and conditions of this Agreement, on the Closing Date, the Investor
      shall purchase, and the Company shall sell and issue to the Investor, the Shares
      and Warrants in the respective amounts set forth below the Investor’s name on
      the signature page attached hereto in exchange for the Purchase
      Price.

    

    3. Closing.
      Upon
      execution and delivery of this Agreement and subject to the satisfaction of
      the
      conditions set forth in Sections 6.1 and 6.2 hereof, (a) the Company shall
      deliver to the Investor the Warrant and a copy of the Company’s irrevocable
      instructions for the issuance of the Shares to the Investor that the Company
      has
      delivered to its transfer agent along with a copy of the legal opinion delivered
      to such transfer agent in regard to such issuance and (b) the Investor shall
      cause a wire transfer in same day funds to be sent to the account of the Company
      as instructed in writing by the Company, in an amount representing the
      Investor’s Purchase Price as set forth on the signature page to this Agreement.
      On the date (the “Closing Date”) the Company receives the Purchase Price, the
      certificates evidencing the Shares and Warrants shall be released to the
      Investor (the “Closing”). The Closing of the purchase and sale of the Shares and
      Warrants shall take place at such location, and on such other date, as the
      Company and the Investor shall mutually agree.

    

    4. Representations
      and Warranties of the Company.
      The
      Company hereby represents and warrants to the Investor that, to the best of
      its
      knowledge, except as set forth in the schedules delivered herewith
      (collectively, the “Disclosure Schedules”):

    

    4.
      1 Organization,
      Good Standing and Qualification.
      The
      Company is a corporation duly organized, validly existing and in good standing
      under the laws of the jurisdiction of its incorporation and has all requisite
      corporate power and authority to carry on its business as now conducted and
      to
      own its properties. The Company is duly qualified to do business as a foreign
      corporation and is in good standing in each jurisdiction in which the conduct
      of
      its business or its ownership or leasing of property makes such qualification
      or
      leasing necessary unless the failure to so qualify has not and could not
      reasonably be expected to have a Material Adverse Effect. The Company has no
      subsidiaries.

    

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

    4.2 Authorization.
      The
      Company has full power and authority and has taken all requisite action on
      the
      part of the Company, its officers, directors and stockholders necessary for
      (i)
      the authorization, execution and delivery of the Transaction Documents, (ii)
      authorization of the performance of all obligations of the Company hereunder
      or
      thereunder, and (iii) the authorization, issuance (or reservation for issuance)
      and delivery of the Securities.
      The
      Transaction Documents constitute the legal, valid and binding obligations of
      the
      Company, enforceable against the Company in accordance with their terms, subject
      to bankruptcy, insolvency, fraudulent transfer, reorganization, moratorium
      and
      similar laws of general applicability, relating to or affecting creditors’
rights generally.

    

    4.3 Capitalization.
      Schedule
      4.3
      sets
      forth (a) the authorized capital stock of the Company on the date hereof; (b)
      the number of shares of capital stock issued and outstanding; (c) the number
      of
      shares of capital stock issuable and reserved for issuance pursuant to the
      Company’s 2003 Stock Option Plan; (d) the number of shares of capital stock
      issuable and reserved for issuance for stock options issued outside of the
      Company’s 2003 Stock Option Plan; and (e) the number of shares of capital stock
      issuable and reserved for issuance pursuant to securities (other than the Shares
      and the Warrants) exercisable for, or convertible into or exchangeable for
      shares of capital stock of the Company. All of the issued and outstanding shares
      of the Company’s capital stock have been duly authorized and validly issued and
      are fully paid, nonassessable and free of pre-emptive rights and were issued
      in
      full compliance with applicable state and federal securities law and any rights
      of third parties. No Person is entitled to pre-emptive or similar statutory
      or
      contractual rights with respect to any securities of the Company. Except as
      described in the Company’s SEC Filings (as defined in Section 4.6 below), there
      are no outstanding warrants, options, convertible securities or other rights,
      agreements or arrangements of any character under which the Company is or may
      be
      obligated to issue any equity securities of any kind and except as contemplated
      by this Agreement, the Company is not currently in negotiations for the issuance
      of any equity securities of any kind. Except for the Registration Rights
      Agreement, there are no voting agreements, buy-sell agreements, option or right
      of first purchase agreements or other agreements of any kind among the Company
      and any of the securityholders of the Company relating to the securities of
      the
      Company held by them. No Person has the right to require the Company to register
      any securities of the Company under the 1933 Act, whether on a demand basis
      or
      in connection with the registration of securities of the Company for its own
      account or for the account of any other Person.

    

    The
      issuance and sale of the Securities hereunder will not obligate the Company
      to
      issue shares of Common Stock or other securities to any other Person (other
      than
      the Investor) and will not result in the adjustment of the exercise, conversion,
      exchange or reset price of any outstanding security.

    

    The
      Company does not have outstanding stockholder purchase rights or “poison pill”
or any similar arrangement in effect giving any Person the right to purchase
      any
      equity interest in the Company upon the occurrence of certain
      events.

    

    4.4 Valid
      Issuance.
      The
      Shares have been duly and validly authorized and, when issued and paid for
      pursuant to this Agreement, will be validly issued, fully paid and
      nonassessable, and shall be free and clear of all encumbrances and restrictions,
      except for restrictions on transfer set forth in the Transaction Documents
      or
      imposed by applicable securities laws and except for those restrictions created
      by the Investor. The Warrants have been duly and validly authorized. Upon the
      due exercise of the Warrants, the Warrant Shares will be validly issued, fully
      paid and non-assessable free and clear of all encumbrances and restrictions,
      except for restrictions on transfer set forth in the Transaction Documents
      or
      imposed by applicable securities laws and except for those restrictions created
      by the Investor. The Company has reserved a sufficient number of shares of
      Common Stock for issuance upon the exercise of the Warrants, free and clear
      of
      all encumbrances and restrictions, except for restrictions on transfer set
      forth
      in the Transaction Documents or imposed by applicable securities laws and except
      for those created by the Investor.

    

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

    4.5 Consents.
      The
      execution, delivery and performance by the Company of the Transaction Documents
      and the offer, issuance and sale of the Securities require no consent of, action
      by or in respect of, or filing with, any Person, governmental body, agency,
      or
      official other than filings that have been made pursuant to applicable state
      securities laws and post-sale filings pursuant to applicable state and federal
      securities laws which the Company undertakes to file within the applicable
      time
      periods. Subject to the accuracy of the representations and warranties of the
      Investor set forth in Section 5 hereof, the Company has taken all action
      necessary to exempt (i) the issuance and sale of the Securities, (ii) the
      issuance of the Warrant Shares upon due exercise of the Warrants, and (iii)
      the
      other transactions contemplated by the Transaction Documents from the provisions
      of any shareholder rights plan or other “poison pill” arrangement, any
      anti-takeover, business combination or control share law or statute binding
      on
      the Company or to which the Company or any of its assets and properties may
      be
      subject and any provision of the Company’s Certificate of Incorporation or
      By-laws that is or could reasonably be expected to become applicable to the
      Investor as a result of the transactions contemplated hereby, including without
      limitation, the issuance of the Securities and the ownership, disposition or
      voting of the Securities by the Investor or the exercise of any right granted
      to
      the Investor pursuant to this Agreement or the other Transaction
      Documents.

    

    4.6 Delivery
      of SEC Filings; Business.
      The
      Company has made available to the Investor through the EDGAR system, true and
      complete copies of the Company’s most recent Annual Report on Form 10-KSB for
      the fiscal year ended December 31, 2006 (the “10-KSB”), and all other reports
      filed by the Company pursuant to the 1934 Act since the filing of the 10-KSB
      and
      prior to the date hereof (collectively with the Form 10-KSB, the “SEC Filings”).
      The SEC Filings are the only filings required of the Company pursuant to the
      1934 Act for such period. The Company is engaged in all material respects only
      in the business described in the SEC Filings and the SEC Filings contain a
      complete and accurate description in all material respects of the business
      of
      the Company.

    

    4.7 Use
      of
      Proceeds.
      The net
      proceeds of the sale of the Shares and the Warrants hereunder shall be used
      by
      the Company for working capital and general corporate purposes.

    

    4.8 No
      Material Adverse Change.
      Since
      June 30, 2007, except as identified and described in the SEC Filings, there
      has
      not been:

    

    (i) any
      change in the consolidated assets, liabilities, financial condition or operating
      results of the Company from that reflected in the financial statements included
      in the Company’s Quarterly Report on Form 10-QSB for the quarter ended June 30,
      2007, except for changes in the ordinary course of business which have not
      and
      could not reasonably be expected to have a Material Adverse Effect, individually
      or in the aggregate;

    

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

    (ii) any
      declaration or payment of any dividend, or any authorization or payment of
      any
      distribution, on any of the capital stock of the Company, or any redemption
      or
      repurchase of any securities of the Company;

    

    (iii) any
      material damage, destruction or loss, whether or not covered by insurance to
      any
      assets or properties of the Company;

    

    (iv) any
      waiver, not in the ordinary course of business, by the Company of a material
      right or of a material debt owed to it;

    

    (v) any
      satisfaction or discharge of any lien, claim or encumbrance or payment of any
      obligation by the Company, except in the ordinary course of business and which
      is not material to the assets, properties, financial condition, operating
      results or business of the Company (as such business is presently conducted
      and
      as it is proposed to be conducted);

    

    (vi) any
      change or amendment to the Company's Certificate of Incorporation or by-laws,
      or
      material change to any material contract or arrangement by which the Company
      is
      bound or to which any of its assets or properties is subject;

    

    (vii) any
      material labor difficulties or labor union organizing activities with respect
      to
      employees of the Company;

    

    (viii) any
      material transaction entered into by the Company other than in the ordinary
      course of business; 

    

    (ix) the
      loss
      of the services of any key employee, or material change in the composition
      or
      duties of the senior management of the Company;

    

    (x) the
      loss
      or threatened loss of any customer which has had or could reasonably be expected
      to have a Material Adverse Effect; or

    

    (xi) any
      other
      event or condition of any character that has had or could reasonably be expected
      to have a Material Adverse Effect.

    

    4.9 SEC
      Filings.
      At the
      time of filing thereof, the SEC Filings complied as to form in all material
      respects with the requirements of the 1934 Act and did not contain any untrue
      statement of a material fact or omit to state any material fact necessary in
      order to make the statements made therein, in the light of the circumstances
      under which they were made, not misleading.

    

    

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

    4.10 No
      Conflict, Breach, Violation or Default.
      The
      execution, delivery and performance of the Transaction Documents by the Company
      and the issuance and sale of the Securities will not conflict with or result
      in
      a breach or violation of any of the terms and provisions of, or constitute
      a
      default under (i) the Company’s Certificate of Incorporation or the Company’s
      Bylaws, both as in effect on the date hereof (true and complete copies of which
      have been made available to the Investor through the EDGAR system), or (ii)(a)
      any statute, rule, regulation or order of any governmental agency or body or
      any
      court, domestic or foreign, having jurisdiction over the Company or any of
      its
      assets or properties, or (b) any agreement or instrument to which the Company
      is
      a party or by which the Company is bound or to which any of its assets or
      properties is subject.

    

    4.11 Tax
      Matters.
      The
      Company has timely prepared and filed all tax returns required to have been
      filed by the Company with all appropriate governmental agencies and timely
      paid
      all taxes shown thereon or otherwise owed by it. The charges, accruals and
      reserves on the books of the Company in respect of taxes for all fiscal periods
      are adequate in all material respects, and there are no material unpaid
      assessments against the Company nor, to the Company’s Knowledge, any basis for
      the assessment of any additional taxes, penalties or interest for any fiscal
      period or audits by any federal, state or local taxing authority except for
      any
      assessment which is not material to the Company. All taxes and other assessments
      and levies that the Company is required to withhold or to collect for payment
      have been duly withheld and collected and paid to the proper governmental entity
      or third party when due. There are no tax liens or claims pending or, to the
      Company’s Knowledge, threatened against the Company or any of its assets or
      property. The Company has no outstanding tax sharing agreements or other such
      arrangements with any other Person.

    

    4.12 Title
      to Properties.
      Except
      as disclosed in the SEC Filings, the Company has good and marketable title
      to
      all real properties and all other properties and assets owned by it, in each
      case free from liens, encumbrances and defects that would materially affect
      the
      value thereof or materially interfere with the use made or currently planned
      to
      be made thereof by the Company; and except as disclosed in the SEC Filings,
      the
      Company holds any leased real or personal property under valid and enforceable
      leases with no exceptions that would materially interfere with the use made
      or
      currently planned to be made thereof by the Company.

    

    4.13 Certificates,
      Authorities and Permits.
      The
      Company possesses adequate certificates, authorities or permits issued by
      appropriate governmental agencies or bodies necessary to conduct the business
      now operated by it, and the Company has not received any notice of proceedings
      relating to the revocation or modification of any such certificate, authority
      or
      permit that, if determined adversely to the Company, could reasonably be
      expected to have a Material Adverse Effect, individually or in the
      aggregate.

    

    4.14 No
      Labor Disputes.
      No
      material labor dispute with the employees of the Company exists or, to the
      Company’s Knowledge, is imminent.

    

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

    4.15 Intellectual
      Property.

    

    (a) All
      Intellectual Property of the Company is currently in compliance with all legal
      requirements (including timely filings, proofs and payments of fees) and is
      valid and enforceable. No Intellectual Property of the Company which is
      necessary for the conduct of Company’s business as currently conducted or as
      currently proposed to be conducted has been or is now involved in any
      cancellation, dispute or litigation, and, to the Company’s Knowledge, no such
      action is threatened. No patent of the Company has been or is now involved
      in
      any interference, reissue, re-examination or opposition proceeding.

    

    (b) All
      of
      the licenses and sublicenses and consent, royalty or other agreements concerning
      Intellectual Property which are necessary for the conduct of the Company’s
      business as currently conducted or as currently proposed to be conducted to
      which the Company is a party or by which any of its assets are bound (other
      than
      generally commercially available, non-custom, off-the-shelf software application
      programs having a retail acquisition price of less than $10,000 per license)
      (collectively, “License Agreements”) are valid and binding obligations of the
      Company and, to the Company’s Knowledge, the other parties thereto, enforceable
      in accordance with their terms, except to the extent that enforcement thereof
      may be limited by bankruptcy, insolvency, reorganization, moratorium, fraudulent
      conveyance or other similar laws affecting the enforcement of creditors’ rights
      generally, and there exists no event or condition which will result in a
      material violation or breach of or constitute (with or without due notice or
      lapse of time or both) a default by the Company under any such License
      Agreement.

    

    (c) The
      Company owns or has the valid right to use all of the Intellectual Property
      that
      is necessary for the conduct of the Company’s business as currently conducted or
      as currently proposed to be conducted and for the ownership, maintenance and
      operation of the Company’s properties and assets, free and clear of all liens,
      encumbrances, adverse claims or obligations to license all such owned
      Intellectual Property and Confidential Information, other than licenses entered
      into in the ordinary course of the Company’s business. The Company has a valid
      and enforceable right to use all third party Intellectual Property and
      Confidential Information used or held for use in the Company’s
      business.

    

    (d) The
      conduct of the Company’s business as currently conducted does not infringe or
      otherwise impair or conflict with (collectively, “Infringe”) any Intellectual
      Property rights of any third party or any confidentiality obligation owed to
      a
      third party, and, to the Company’s Knowledge, the Intellectual Property and
      Confidential Information of the Company which are necessary for the conduct
      of
      Company’s business as currently conducted or as currently proposed to be
      conducted are not being Infringed by any third party. There is no litigation
      or
      order pending or outstanding or, to the Company’s Knowledge, threatened or
      imminent, that seeks to limit or challenge or that concerns the ownership,
      use,
      validity or enforceability of any Intellectual Property or Confidential
      Information of the Company and the Company’s use of any Intellectual Property or
      Confidential Information owned by a third party, and, to the Company’s
      Knowledge, there is no valid basis for the same.

    

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

    (e) The
      consummation of the transactions contemplated hereby and by the other
      Transaction Documents will not result in the alteration, loss, impairment of
      or
      restriction on the Company’s ownership or right to use any of the Intellectual
      Property or Confidential Information which is necessary for the conduct of
      Company’s business as currently conducted or as currently proposed to be
      conducted.

    

    (f) All
      software owned by the Company, and, to the Company’s Knowledge, all software
      licensed from third parties by the Company, (i) is free from any material
      defect, bug, virus, or programming, design or documentation error; (ii) operates
      and runs in a reasonable and efficient business manner; and (iii) conforms
      in
      all material respects to the specifications and purposes thereof.

    

    (g) The
      Company has taken reasonable steps to protect the Company’s rights in their
      Intellectual Property and Confidential Information. Each employee, consultant
      and contractor who has had access to Confidential Information which is necessary
      for the conduct of Company’s business as currently conducted or as currently
      proposed to be conducted has executed an agreement to maintain the
      confidentiality of such Confidential Information and has executed appropriate
      agreements that are substantially consistent with the Company’s standard forms
      thereof. Except under confidentiality obligations, there has been no material
      disclosure of any of the Company’s Confidential Information to any third
      party.

    

    4.16 Environmental
      Matters.
      The
      Company is not in violation of any statute, rule, regulation, decision or order
      of any governmental agency or body or any court, domestic or foreign, relating
      to the use, disposal or release of hazardous or toxic substances or relating
      to
      the protection or restoration of the environment or human exposure to hazardous
      or toxic substances (collectively, “Environmental Laws”), owns or operates any
      real property contaminated with any substance that is subject to any
      Environmental Laws, is liable for any off-site disposal or contamination
      pursuant to any Environmental Laws, and is subject to any claim relating to
      any
      Environmental Laws, which violation, contamination, liability or claim has
      had
      or could reasonably be expected to have a Material Adverse Effect, individually
      or in the aggregate; and there is no pending or, to the Company’s Knowledge,
      threatened investigation that might lead to such a claim.

    

    4.17 Litigation.
      There
      are no pending actions, suits or proceedings against or affecting the Company
      or
      any of its properties; and to the Company’s Knowledge, no such actions, suits or
      proceedings are threatened or contemplated.

    

    4.18 Financial
      Statements.
      The
      financial statements included in each SEC Filing present fairly, in all material
      respects, the consolidated financial position of the Company as of the dates
      shown and its consolidated results of operations and cash flows for the periods
      shown, and such financial statements have been prepared in conformity with
      United States generally accepted accounting principles applied on a consistent
      basis (except as may be disclosed therein or in the notes thereto, and, in
      the
      case of quarterly financial statements, as permitted by Form 10-QSB under the
      1934 Act). Except as set forth in the financial statements of the Company
      included in the SEC Filings filed prior to the date hereof, the Company has
      not
      incurred any liabilities, contingent or otherwise, except those incurred in
      the
      ordinary course of business, consistent (as to amount and nature) with past
      practices since the date of such financial statements, none of which,
      individually or in the aggregate, have had or could reasonably be expected
      to
      have a Material Adverse Effect.

    

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

    4.19 Insurance
      Coverage.
      The
      Company maintains in full force and effect insurance coverage that is customary
      for comparably situated companies for the business being conducted and
      properties owned or leased by the Company, and the Company reasonably believes
      such insurance coverage to be adequate against all liabilities, claims and
      risks
      against which it is customary for comparably situated companies to
      insure.

    

    4.20 Brokers
      and Finders.
      No
      Person will have, as a result of the transactions contemplated by the
      Transaction Documents, any valid right, interest or claim against or upon the
      Company or an Investor for any commission, fee or other compensation pursuant
      to
      any agreement, arrangement or understanding entered into by or on behalf of
      the
      Company.

    

    4.21 No
      Directed Selling Efforts or General Solicitation.
      Neither
      the Company nor any Person acting on its behalf has conducted any general
      solicitation or general advertising (as those terms are used in Regulation
      D) in
      connection with the offer or sale of any of the Securities.

    

    4.22 No
      Integrated Offering.
      Neither
      the Company nor any Person acting on its or their behalf has, directly or
      indirectly, made any offers or sales of any Company security or solicited any
      offers to buy any security, under circumstances that would adversely affect
      reliance by the Company on Section 4(2) for the exemption from registration
      for
      the transactions contemplated hereby or would require registration of the
      Securities under the 1933 Act.

    

    4.23 Private
      Placement.
      The
      offer and sale of the Securities to the Investor as contemplated hereby is
      exempt from the registration requirements of the 1933 Act.

    

    4.24 Questionable
      Payments.
      Neither
      the Company nor, to the Company’s Knowledge, any of its current or former
      stockholders, directors, officers, employees, agents or other Persons acting
      on
      behalf of the Company, has on behalf of the Company or in connection with the
      Company’s business: (a) used any corporate funds for unlawful contributions,
      gifts, entertainment or other unlawful expenses relating to political activity;
      (b) made any direct or indirect unlawful payments to any governmental officials
      or employees from corporate funds; (c) established or maintained any unlawful
      or
      unrecorded fund of corporate monies or other assets; (d) made any false or
      fictitious entries on the books and records of the Company; or (e) made any
      unlawful bribe, rebate, payoff, influence payment, kickback or other unlawful
      payment of any nature.

    

    4.25 Transactions
      with Affiliates.
      Except
      as disclosed in the SEC Filings, none of the officers or directors of the
      Company and, to the Company’s Knowledge, none of the employees of the Company is
      presently a party to any transaction with the Company (other than as holders
      of
      stock options and/or warrants, and for services as employees, officers and
      directors), including any contract, agreement or other arrangement providing
      for
      the furnishing of services to or by, providing for rental of real or personal
      property to or from, or otherwise requiring payments to or from any officer,
      director or such employee or, to the Company’s Knowledge, any entity in which
      any officer, director, or any such employee has a substantial interest or is
      an
      officer, director, trustee or partner.

    

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

    4.26 Internal
      Controls.
      The
      Company maintains a system of internal accounting controls. At December 31,
      2006, the Company’s management identified the following material weaknesses in
      its internal controls over financial reporting: (i) lack of segregation of
      duties in the period-end financial reporting process; (ii) the Company’s chief
      financial officer is the only employee with any significant knowledge of
      generally accepted accounting principles and (iii) the Company’s chief financial
      officer is the sole employee in charge of (A) the general ledger (including
      the
      preparation of routine and non-routine journal entries and journal entries
      involving accounting estimates), (B) the preparation of accounting
      reconciliations, (C) the selection of accounting principles, and (D) the
      preparation of interim and annual financial statements (including report
      combinations, consolidation entries and footnote disclosures) in accordance
      with
      generally accepted accounting principles. As of the date hereof, the Company
      still has these material weaknesses in its internal control over financial
      reporting. The Company has established disclosure controls and procedures (as
      defined in 1934 Act Rules 13a-14 and 15d-14) for the Company and designed such
      disclosure controls and procedures to ensure that material information relating
      to the Company is made known to the certifying officers by others within those
      entities, particularly during the period in which the Company’s most recently
      filed period report under the 1934 Act, as the case may be, is being prepared.
      The Company's certifying officers have evaluated the effectiveness of the
      Company's controls and procedures as of a date within 90 days prior to the
      filing date of the most recently filed periodic report under the 1934 Act (such
      date, the "Evaluation Date"). The Company presented in its most recently filed
      periodic report under the 1934 Act the conclusions of the certifying officers
      about the effectiveness of the disclosure controls and procedures based on
      their
      evaluations as of the Evaluation Date. Since the Evaluation Date, there have
      been no significant changes in the Company's internal controls (as such term
      is
      defined in Item 307(b) of Regulation S-K) or, to the Company's Knowledge, in
      other factors that could significantly affect the Company's internal controls.
      The Company maintains and will continue to maintain a standard system of
      accounting established and administered in accordance with GAAP and the
      applicable requirements of the 1934 Act.

    

    4.27 Disclosures.
      Neither
      the Company nor any Person acting on its behalf has provided the Investor or
      their agents or counsel with any information that constitutes or might
      constitute material, non-public information. The written materials delivered
      to
      the Investor in connection with the transactions contemplated by the Transaction
      Documents do not contain any untrue statement of a material fact or omit to
      state a material fact necessary in order to make the statements contained
      therein, in light of the circumstances under which they were made, not
      misleading.

    

    5. Representations
      and Warranties of the Investor.
      The
      Investor hereby represents and warrants to the Company that:

    

    5.1 Organization
      and Existence.
      The
      Investor is a validly existing corporation, limited partnership or limited
      liability company, as the case may be, and has all requisite corporate,
      partnership or limited liability company power and authority to invest in the
      Securities pursuant to this Agreement.

    

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

    5.2 Authorization.
      The
      execution, delivery and performance by the Investor of the Transaction Documents
      to which the Investor is a party have been duly authorized and will each
      constitute the valid and legally binding obligation of the Investor, enforceable
      against the Investor in accordance with their respective terms, subject to
      bankruptcy, insolvency, fraudulent transfer, reorganization, moratorium and
      similar laws of general applicability, relating to or affecting creditors’
rights generally.

    

    5.3 Purchase
      Entirely for Own Account.
      The
      Securities to be received by the Investor hereunder will be acquired for the
      Investor’s own account, not as nominee or agent, and not with a view to the
      resale or distribution of any part thereof in violation of the 1933 Act, and
      the
      Investor has no present intention of selling, granting any participation in,
      or
      otherwise distributing the same in violation of the 1933 Act. The Investor
      is
      not a registered broker dealer or an entity engaged in the business of being
      a
      broker dealer.

    

    5.4 Investment
      Experience.
      The
      Investor acknowledges that it can bear the economic risk and complete loss
      of
      its investment in the Securities and has such knowledge and experience in
      financial or business matters that it is capable of evaluating the merits and
      risks of the investment contemplated hereby.

    

    5.5 Disclosure
      of Information.
      The
      Investor has had an opportunity to receive all additional information related
      to
      the Company requested by it and to ask questions of and receive answers from
      the
      Company regarding the Company, its business and the terms and conditions of
      the
      offering of the Securities. The Investor acknowledges receipt of copies of
      the
      SEC Filings. Neither such inquiries nor any other due diligence investigation
      conducted by the Investor shall modify, amend or affect the Investor’s right to
      rely on the Company’s representations and warranties contained in this
      Agreement.

    

    5.6 Restricted
      Securities.
      The
      Investor understands that the Securities are characterized as “restricted
      securities” under the U.S. federal securities laws inasmuch as they are being
      acquired from the Company in a transaction not involving a public offering
      and
      that under such laws and applicable regulations such securities may be resold
      without registration under the 1933 Act only in certain limited
      circumstances.

    

    5.7 Legends.
      It is
      understood that, except as provided below, certificates evidencing the
      Securities may bear the following or any similar legend:

    

    (a) “The
      securities represented by this certificate have not been registered under the
      Securities Act of 1933, as amended, or any state securities law and may not
      be
      sold, pledged, or otherwise transferred without an effective registration
      thereof under applicable Federal and state securities law or an opinion of
      counsel, satisfactory to the Company and its counsel that such registration
      is
      not required.”

    

    (b) If
      required by the authorities of any state in connection with the issuance or
      sale
      of the Securities, the legend required by such state authority.

    

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

    Upon
      the
      earlier of (i) registration for resale pursuant to the Registration Rights
      Agreement and receipt by the Company of the Investor’s written confirmation that
      such Securities will not be disposed of except in compliance with the prospectus
      delivery requirements of the 1933 Act or (ii) Rule 144(k) becoming available
      to
      the Investor with respect to the Securities held by the Investor, the Company
      shall, upon an Investor’s written request, promptly cause certificates
      evidencing the Shares to be replaced with certificates which do not bear such
      restrictive legends, and Warrant Shares subsequently issued upon due exercise
      of
      the Warrants shall not bear such restrictive legends provided the provisions
      of
      either clause (i) or clause (ii) above, as applicable, are satisfied with
      respect to such Warrant Shares. 

    

    5.8 Accredited
      Investor.
      The
      Investor is an accredited investor as defined in Rule 501(a) of Regulation
      D, as
      amended, under the 1933 Act.

    

    5.9 No
      General Solicitation.
      The
      Investor did not learn of the investment in the Securities as a result of any
      public advertising or general solicitation.

    

    5.10 Brokers
      and Finders.
      No
      Person will have, as a result of the transactions contemplated by the
      Transaction Documents, any valid right, interest or claim against or upon the
      Company or an Investor for any commission, fee or other compensation pursuant
      to
      any agreement, arrangement or understanding entered into by or on behalf of
      the
      Investor.

    

    5.11 Prohibited
      Transactions.
      During
      the last thirty (30) days prior to the date hereof, the Investor has not,
      directly or indirectly, effected or agreed to effect any short sale, whether
      or
      not against the box, established any “put equivalent position” (as defined in
      Rule 16a-1(h) under the 1934 Act) with respect to the Common Stock, granted
      any
      other right (including, without limitation, any put or call option) with respect
      to the Common Stock or with respect to any security that includes, relates
      to or
      derived any significant part of its value from the Common Stock or otherwise
      sought to hedge its position in the Securities (each, a “Prohibited
      Transaction”). Prior to the earlier of (i) the termination of this Agreement, or
      (ii) the Closing Date, the Investor shall not engage, directly or indirectly,
      in
      a Prohibited Transaction. The Investor acknowledges that the representations
      and
      warranties contained in this Section 5.11 are being made for the benefit of
      the
      Investor as well as the Company.

    

    6.
      Conditions
      to Closing.

    

    6.1 Conditions
      to the Investor’s Obligations.
      The
      obligation of the Investor to purchase the Shares and the Warrants at the
      Closing is subject to the fulfillment to the Investor’s reasonable satisfaction,
      on or prior to the Closing Date, of the following conditions, any of which
      may
      be waived by the Investor:

    

    (a) The
      representations and warranties made by the Company in Section 4 hereof qualified
      as to materiality shall be true and correct at all times prior to and on the
      Closing Date, except to the extent any such representation or warranty expressly
      speaks as of an earlier date, in which case such representation or warranty
      shall be true and correct as of such earlier date, and, the representations
      and
      warranties made by the Company in Section 4 hereof not qualified as to
      materiality shall be true and correct in all material respects at all times
      prior to and on the Closing Date, except to the extent any such representation
      or warranty expressly speaks as of an earlier date, in which case such
      representation or warranty shall be true and correct in all material respects
      as
      of such earlier date. The Company shall have performed in all material respects
      all obligations and conditions herein required to be performed or observed
      by it
      on or prior to the Closing Date.

    

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

    (b) The
      Company shall have obtained in a timely fashion any and all consents, permits,
      approvals, registrations and waivers necessary or appropriate for consummation
      of the purchase and sale of the Securities all of which shall be in full force
      and effect.

    

    (c) The
      Company shall have executed and delivered the Registration Rights
      Agreement.

    

    (d) No
      judgment, writ, order, injunction, award or decree of or by any court, or judge,
      justice or magistrate, including any bankruptcy court or judge, or any order
      of
      or by any governmental authority, shall have been issued, and no action or
      proceeding shall have been instituted by any governmental authority, enjoining
      or preventing the consummation of the transactions contemplated hereby or in
      the
      other Transaction Documents.

    

    (e) The
      Company shall have delivered a Certificate, executed on behalf of the Company
      by
      its Chief Executive Officer or its Chief Financial Officer, dated as of the
      Closing Date, certifying to the fulfillment of the conditions specified in
      subsections (a), (b), (d), and (h) of this Section 6.1.

    

    (f) The
      Company shall have delivered a Certificate, executed on behalf of the Company
      by
      its Secretary, dated as of the Closing Date, certifying the resolutions adopted
      by the Board of Directors of the Company approving the transactions contemplated
      by this Agreement, which resolutions shall specify that the approval of the
      transactions contemplated hereby is being made in accordance with section
      203(a)(1) of the Delaware General Corporation Law, and the other Transaction
      Documents and the issuance of the Securities, certifying the current versions
      of
      the Certificate of Incorporation and Bylaws of the Company and certifying as
      to
      the signatures and authority of persons signing the Transaction Documents and
      related documents on behalf of the Company.

    

    (g) The
      Investor shall have received an opinion from Eilenberg
      Krause & Paul LLP,
      the
      Company's counsel, dated as of the Closing Date, in form and substance
      reasonably acceptable to the Investor.

    

    (h) No
      stop
      order or suspension of trading shall have been imposed by Nasdaq, the SEC or
      any
      other governmental regulatory body with respect to public trading in the Common
      Stock.

    

    6.2 Conditions
      to Obligations of the Company.
      The
      Company's obligation to sell and issue the Shares and the Warrants at the
      Closing is subject to the fulfillment to the satisfaction of the Company on
      or
      prior to the Closing Date of the following conditions, any of which may be
      waived by the Company:

    

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

    (a) The
      representations and warranties made by the Investor in Section 5 hereof, other
      than the representations and warranties contained in Sections 5.3, 5.4, 5.5,
      5.6, 5.7, 5.8 and 5.9 (the “Investment Representations”), shall be true and
      correct in all material respects when made, and shall be true and correct in
      all
      material respects on the Closing Date with the same force and effect as if
      they
      had been made on and as of said date. The Investor shall have performed in
      all
      material respects all obligations and conditions herein required to be performed
      or observed by them on or prior to the Closing Date.

     

    (b) The
      Investor shall have executed and delivered the Registration Rights
      Agreement.

    

    (c) The
      Investor shall have delivered the Purchase Price to the Company.

    

    6.3 Termination
      of Obligations to Effect Closing; Effects.

    

    (a) The
      obligations of the Company, on the one hand, and the Investor, on the other
      hand, to effect the Closing shall terminate as follows:

    

    (i) Upon
      the
      mutual written consent of the Company and the Investor;

    

    (ii) By
      the
      Company if any of the conditions set forth in Section 6.2 shall have become
      incapable of fulfillment, and shall not have been waived by the
      Company;

    

    (iii) By
      the
      Investor if any of the conditions set forth in Section 6.1 shall have become
      incapable of fulfillment, and shall not have been waived by the Investor;
      or

    

    (iv) By
      either
      the Company or the Investor if the Closing has not occurred on or prior to
      September 30, 2007;

    

    provided,
      however, that, except in the case of clause (i) above, the party seeking to
      terminate its obligation to effect the Closing shall not then be in breach
      of
      any of its representations, warranties, covenants or agreements contained in
      this Agreement or the other Transaction Documents if such breach has resulted
      in
      the circumstances giving rise to such party’s seeking to terminate its
      obligation to effect the Closing.

    

    (b) Nothing
      in this Section 6.3 shall be deemed to release any party from any liability
      for
      any breach by such party of the terms and provisions of this Agreement or the
      other Transaction Documents or to impair the right of any party to compel
      specific performance by any other party of its obligations under this Agreement
      or the other Transaction Documents.

    

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

    7. Covenants
      and Agreements of the Company.

    

    7.1 Reservation
      of Common Stock.
      The
      Company shall at all times reserve and keep available out of its authorized
      but
      unissued shares of Common Stock, solely for the purpose of providing for the
      exercise of the Warrants, such number of shares of Common Stock as shall from
      time to time equal the number of shares sufficient to permit the exercise of
      the
      Warrants issued pursuant to this Agreement in accordance with their respective
      terms.

    

     

    7.2 No
      Conflicting Agreements.
      The
      Company will not take any action, enter into any agreement or make any
      commitment that would conflict or interfere in any material respect with the
      company’s obligations to the Investor under the Transaction
      Documents.

    

    7.3 Insurance.
      The
      Company shall not materially reduce the insurance coverages described in Section
      4.19.

    

    7.4 Compliance
      with Laws.
      The
      Company will comply in all material respects with all applicable laws, rules,
      regulations, orders and decrees of all governmental authorities.

    

    7.5 Termination
      of Covenants.
      The
      provisions of Sections 7.2 through 7.4 shall terminate and be of no further
      force and effect upon the earlier of (i) the mutual consent of the Company
      and
      the Investor or (ii) the date on which the Company’s obligations under the
      Registration Rights Agreement to register or maintain the effectiveness of
      any
      registration covering the Registrable Securities (as such term is defined in
      the
      Registration Rights Agreement) shall terminate.

     

    8. Survival
      and Indemnification.

    

    8.1 Survival.
      The
      representations, warranties, covenants and agreements contained in this
      Agreement shall survive the Closing of the transactions contemplated by this
      Agreement.

    

    8.2 Indemnification.
      The
      Company agrees to indemnify and hold harmless, on an after-tax and after
      insurance recovery basis, the Investor and its Affiliates and its directors,
      officers, employees and agents from and against any and all losses, claims,
      damages, liabilities and expenses (including without limitation reasonable
      attorney fees and disbursements and other expenses incurred in connection with
      investigating, preparing or defending any action, claim or proceeding, pending
      or threatened and the costs of enforcement thereof) (collectively, “Losses”) to
      which such Person may become subject as a result of any breach of
      representation, warranty, covenant or agreement made by or to be performed
      on
      the part of the Company under the Transaction Documents, and will reimburse
      any
      such Person for all such amounts as they are incurred by such
      Person.

    

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

    8.3 Conduct
      of Indemnification Proceedings.
      Promptly
      after receipt by any Person (the “Indemnified
      Person”) of notice of any demand, claim or circumstances which would or might
      give rise to a claim or the commencement of any action, proceeding or
      investigation in respect of which indemnity may be sought pursuant to Section
      8.2, such Indemnified Person shall promptly notify the Company in writing and
      the Company shall assume the defense thereof, including the employment of
      counsel reasonably satisfactory to such Indemnified Person, and shall assume
      the
      payment of all fees and expenses; provided,
      however, that
      the
      failure of any Indemnified Person so to notify the Company shall not relieve
      the
      Company of its obligations hereunder except to the extent that the Company
      is
      materially prejudiced by such failure to notify. In any such proceeding, any
      Indemnified Person shall have the right to retain its own counsel, but the
      fees
      and expenses of such counsel shall be at the expense of such Indemnified Person
      unless: (i) the Company and the Indemnified Person shall have mutually agreed
      to
      the retention of such counsel; or (ii) in the reasonable judgment of counsel
      to
      such Indemnified Person representation of both parties by the same counsel
      would
      be inappropriate due to actual or potential differing interests between them.
      The Company shall not be liable for any settlement of any proceeding effected
      without its written consent, which consent shall not be unreasonably withheld,
      but if settled with such consent, or if there be a final judgment for the
      plaintiff, the Company shall indemnify and hold harmless such Indemnified Person
      from and against any loss or liability (to the extent stated above) by reason
      of
      such settlement or judgment. Without the prior written consent of the
      Indemnified Person, which consent shall not be unreasonably withheld, the
      Company shall not effect any settlement of any pending or threatened proceeding
      in respect of which any Indemnified Person is or could have been a party and
      indemnity could have been sought hereunder by such Indemnified Party, unless
      such settlement includes an unconditional release of such Indemnified Person
      from all liability arising out of such proceeding.

    

    9. Miscellaneous.

    

    9.1 Successors
      and Assigns.
      This
      Agreement may not be assigned by a party hereto without the prior written
      consent of the Company or the Investor, as applicable, provided, however, that
      the Investor may assign its rights and delegate its duties hereunder in whole
      or
      in part to an Affiliate or to a third party acquiring some or all of its
      Securities in a private transaction without the prior written consent of the
      Company, after notice duly given by the Investor to the Company, provided,
      that
      no such assignment or obligation shall affect the obligations of the Investor
      hereunder. The provisions of this Agreement shall inure to the benefit of and
      be
      binding upon the respective permitted successors and assigns of the parties.
      Nothing in this Agreement, express or implied, is intended to confer upon any
      party other than the parties hereto or their respective successors and assigns
      any rights, remedies, obligations, or liabilities under or by reason of this
      Agreement, except as expressly provided in this Agreement.

    

    9.2 Counterparts;
      Faxes.
      This
      Agreement may be executed in two or more counterparts, each of which shall
      be
      deemed an original, but all of which together shall constitute one and the
      same
      instrument. This Agreement may also be executed via facsimile, which shall
      be
      deemed an original.

    

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

    9.3 Titles
      and Subtitles.
      The
      titles and subtitles used in this Agreement are used for convenience only and
      are not to be considered in construing or interpreting this
      Agreement.

    

    9.4 Notices.
      Unless
      otherwise provided, any notice required or permitted under this Agreement shall
      be given in writing and shall be deemed effectively given as hereinafter
      described (i) if given by personal delivery, then such notice shall be deemed
      given upon such delivery, (ii) if given by facsimile transmission, then such
      notice shall be deemed given upon receipt of confirmation of complete
      transmittal, (iii) if given by mail, then such notice shall be deemed given
      upon
      the earlier of (A) receipt of such notice by the recipient or (B) three days
      after such notice is deposited in first class mail, postage prepaid, and (iv)
      if
      given by an internationally recognized overnight air courier, then such notice
      shall be deemed given one business day after delivery to such carrier. All
      notices shall be addressed to the party to be notified at the address as
      follows, or at such other address as such party may designate by ten days’
advance written notice to the other party:

    

    If
      to the
      Company:

    

    Applied
      NeuroSolutions, Inc.

    50
      Lakeview Parkway

    Vernon
      Hills, Illinois 60061

    Attention:
      Ellen R. Hoffing

    Fax:
      (847) 573-8030

    

    With
      a
      copy to:

    

    Eilenberg
      Krause & Paul LLP

    11
      East
      44th
      Street,
      19th Floor, New York, NY 10017

    Attention.:
      Adam D. Eilenberg, Esq.

    Fax:
      (212) 986-2399

    

    If
      to the
      Investor: 

    

    to
      the
      addresses set forth on the signature pages hereto.

    

    

    

    

    9.5 Expenses.
      The
      parties hereto shall pay their own costs and expenses in connection herewith,
      except that the Company shall pay the reasonable fees and expenses of one legal
      counsel for the Investor not to exceed $35,000. Such expenses shall be paid
      upon
      presentation of itemized invoices, which must be received by the Company no
      later than 30 days after the Closing. In the event that legal proceedings are
      commenced by any party to this Agreement against another party to this Agreement
      in connection with this Agreement or the other Transaction Documents, the party
      or parties which do not prevail in such proceedings shall severally, but not
      jointly, pay their pro rata share of the reasonable attorneys’ fees and other
      reasonable out-of-pocket costs and expenses incurred by the prevailing party
      in
      such proceedings.

    

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

    9.6 Amendments
      and Waivers.
      Any
      term of this Agreement may be amended and the observance of any term of this
      Agreement may be waived (either generally or in a particular instance and either
      retroactively or prospectively), only with the written consent of the Company
      and the Investor. Any amendment or waiver effected in accordance with this
      paragraph shall be binding upon each holder of any Securities purchased under
      this Agreement at the time outstanding, each future holder of all such
      Securities, and the Company.

    

    9.7 Publicity.
      No
      public release or announcement concerning the transactions contemplated hereby
      shall be issued by the Company or the Investor without the prior consent of
      the
      Company (in the case of a release or announcement by the Investor) or the
      Investor (in the case of a release or announcement by the Company) (which
      consents shall not be unreasonably withheld or delayed), except as such release
      or announcement may be required by law or the applicable rules or regulations
      of
      any securities exchange or securities market, in which case the Company or
      the
      Investor, as the case may be, shall allow the Investor or the Company, as
      applicable, to the extent reasonably practicable in the circumstances,
      reasonable time to comment on such release or announcement in advance of such
      issuance.

    

    9.8 Severability.
      Any
      provision of this Agreement that is prohibited or unenforceable in any
      jurisdiction shall, as to such jurisdiction, be ineffective to the extent of
      such prohibition or unenforceability without invalidating the remaining
      provisions hereof but shall be interpreted as if it were written so as to be
      enforceable to the maximum extent permitted by applicable law, and any such
      prohibition or unenforceability in any jurisdiction shall not invalidate or
      render unenforceable such provision in any other jurisdiction. To the extent
      permitted by applicable law, the parties hereby waive any provision of law
      which
      renders any provision hereof prohibited or unenforceable in any
      respect.

    

    9.9 Entire
      Agreement.
      This
      Agreement, including the Exhibits and the Disclosure Schedules, and the other
      Transaction Documents constitute the entire agreement among the parties hereof
      with respect to the subject matter hereof and thereof and supersede all prior
      agreements and understandings, both oral and written, between the parties with
      respect to the subject matter hereof and thereof.

    

    9.10 Further
      Assurances.
      The
      parties shall execute and deliver all such further instruments and documents
      and
      take all such other actions as may reasonably be required to carry out the
      transactions contemplated hereby and to evidence the fulfillment of the
      agreements herein contained.

    

    9.11 Governing
      Law; Consent to Jurisdiction; Waiver of Jury Trial.
      This
      Agreement shall be governed by, and construed in accordance with, the internal
      laws of the State of New York without regard to the choice of law principles
      thereof. Each of the parties hereto irrevocably submits to the exclusive
      jurisdiction of the courts of the State of New York located in New York County
      and the United States District Court for the Southern District of New York
      for
      the purpose of any suit, action, proceeding or judgment relating to or arising
      out of this Agreement and the transactions contemplated hereby. Service of
      process in connection with any such suit, action or proceeding may be served
      on
      each party hereto anywhere in the world by the same methods as are specified
      for
      the giving of notices under this Agreement. Each of the parties hereto
      irrevocably consents to the jurisdiction of any such court in any such suit,
      action or proceeding and to the laying of venue in such court. Each party hereto
      irrevocably waives any objection to the laying of venue of any such suit, action
      or proceeding brought in such courts and irrevocably waives any claim that
      any
      such suit, action or proceeding brought in any such court has been brought
      in an
      inconvenient forum. EACH
      OF THE PARTIES HERETO WAIVES ANY RIGHT TO REQUEST A TRIAL BY JURY IN ANY
      LITIGATION WITH RESPECT TO THIS AGREEMENT AND REPRESENTS THAT COUNSEL HAS BEEN
      CONSULTED SPECIFICALLY AS TO THIS WAIVER.

    

    [signature
      page follows]

    
      
         

        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

    

    IN
      WITNESS WHEREOF, the parties have executed this Agreement or caused their duly
      authorized officers to execute this Agreement as of the date first above
      written.

    

    APPLIED
      NEUROSOLUTIONS, INC.

    

    

    

    By:_________________________

    Name:
      Ellen R. Hoffing

    Title:
      President & CEO

    

    
      
         

        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

    INVESTOR

    

    SF
      CAPITAL PARTNERS LTD.

    

    

    

    By:_________________________

    Name:     

    Title:
      

    

    Purchase
      Price: $2,900,000

    Number
      of
      Shares: 20,714,286

    Number
      of
      Warrants: 6,214,286

    

    

    Address
      for Notice:

    c/o
      Stark
      Offshore Management LLC

    

    

    

    

    

    
      
         

        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

    Schedule
      4.3 Capitalization

    

    Authorized
      capital stock of the Company - 200,000,000 shares of common stock and 5,000,000
      shares of preferred stock

    

    Shares
      of
      common stock issued and outstanding - 108,884,956

    

    Shares
      of
      preferred stock issued and outstanding - 0

    

    Stock
      options outstanding under the Company’s 2003 Stock Option Plan -
      10,315,680

    

    Stock
      options outstanding outside the Company’s 2003 Stock Option Plan -
      10,000,000

    

    Warrants
      outstanding - 38,296,417

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