Document:

Exhibit 4.3 Registration Rights dated Octber 5, 2006

    
      
        

      

      
        

      

      Exhibit
        4.3 Registration Rights dated October 5, 2006

      
        
          

              EXHIBIT
              B 

            

            REGISTRATION
              RIGHTS AGREEMENT

            

            This
              Registration Rights Agreement (this “Agreement”)
              is
              made and entered into as of October 5, 2006, among Chembio Diagnostics,
              Inc., a
              Nevada corporation (the “Company”),
              and
              the purchasers signatory hereto (each such purchaser is a “Purchaser”
and
              collectively, the “Purchasers”).

            

            This
              Agreement is made pursuant to the Securities Purchase Agreement, dated
              as of the
              date hereof among the Company and the Purchasers (the “Purchase
              Agreement”).

            

            The
              Company and the Purchasers hereby agree as follows:

            

            1.
              Definitions

            

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

            

            “Advice”
shall
              have the meaning set forth in Section 6(d).

            

            “Effectiveness
              Date”
means,
              with respect to the initial Registration Statement required to be filed
              hereunder, the 120th
              calendar
              day following the date hereof (150th
              calendar
              day following the date hereof in the event of a full review by the
              Commission of
              the initial Registration Statement) and, with respect to any additional
              Registration Statements which may be required pursuant to Section 3(c),
              the
              60th
              calendar
              day following the date on which the Company first knows, or reasonably
              should
              have known, that such additional Registration Statement is required
              hereunder;
provided,
              however,
              that in
              the event the Company is notified by the Commission that one of the
              above
              Registration Statements will not be reviewed or is no longer subject
              to further
              review and comments, the Effectiveness Date as to such Registration
              Statement
              shall be the fifth Trading Day following the date on which the Company
              is so
              notified if such date precedes the dates required above.

            

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

            

            “Event”
shall
              have the meaning set forth in Section 2(b).

            

            “Event
              Date”
shall
              have the meaning set forth in Section 2(b).

            

            “Filing
              Date”
means,
              with respect to the initial Registration Statement required hereunder,
              the
              45th
              calendar
              day following the date hereof and, with respect to any additional Registration
              Statements which may be required pursuant to Section 3(c), the 15th
              day
              following the date on which the Company first knows, or reasonably
              should have
              known that such additional Registration Statement is required hereunder.
              

            

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

            

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

            

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

            

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

            

            “Plan
              of Distribution”
shall
              have the meaning set forth in Section 2(a).

            

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

            

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

            

            “Registrable
              Securities”
means,
              as of the date in question, (i) all of the shares of Common Stock issuable
              upon
              conversion in full of the shares of Preferred Stock, (ii) all shares
              of Common
              Stock issuable as dividends on the Preferred Stock assuming all dividend
              payments are made in shares of Common Stock and the Preferred Stock
              is held for
              at least 3 years, (iii) all Warrant Shares, (iv) any securities issued
              or
              issuable upon any stock split, dividend or other distribution, recapitalization
              or similar event with respect to the foregoing and (v) any additional
              shares
              issuable in connection with any anti-dilution provisions associated
              with the
              Preferred Stock and Warrants (in each case, without giving effect to
              any
              limitations on conversion set forth in the Certificate of Designation
              or
              limitations on exercise set forth in the Warrant).

            

            “Registration
              Statement”
means
              the registration statements required to be filed hereunder and any
              additional
              registration statements contemplated by Section 3(c), including (in
              each case)
              the Prospectus, amendments and supplements to such registration statement
              or
              Prospectus, including pre- and post-effective amendments, all exhibits
              thereto,
              and all material incorporated by reference or deemed to be incorporated
              by
              reference in such registration statement. 

            

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

            

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

            

            “Selling
              Shareholder Questionnaire”
shall
              have the meaning set forth in Section 3(a).

            

            2.
              Shelf
              Registration

            

            (a)
              On or
              prior to each Filing Date, the Company shall prepare and file with
              the
              Commission a “Shelf” Registration Statement covering the resale of 130% of the
              Registrable Securities on such Filing Date for an offering to be made
              on a
              continuous basis pursuant to Rule 415. The Registration Statement shall
              be on
              Form S-3 (except if the Company is not then eligible to register for
              resale the
              Registrable Securities on Form S-3, in which case such registration
              shall be on
              another appropriate form in accordance herewith, such as Form SB-2)
              and shall
              contain (unless otherwise directed by the Holders) substantially the
              “Plan
              of Distribution”
              attached hereto as Annex
              A.
              Subject
              to the terms of this Agreement, the Company shall use its best efforts
              to cause
              the Registration Statement to be declared effective under the Securities
              Act as
              promptly as possible after the filing thereof, but in any event prior
              to the
              applicable Effectiveness Date, and shall use its best efforts to keep
              such
              Registration Statement continuously effective under the Securities
              Act until all
              Registrable Securities covered by such Registration Statement have
              been sold or
              may be sold without volume restrictions pursuant to Rule 144(k) as
              determined by
              the counsel to the Company pursuant to a written opinion letter to
              such effect,
              addressed and acceptable to the Company’s transfer agent and the affected
              Holders (the “Effectiveness
              Period”).
              The
              Company shall telephonically request effectiveness of a Registration
              Statement
              as of 5:00 pm Eastern Time on a Trading Day. The Company shall immediately
              notify the Holders via facsimile of the effectiveness of a Registration
              Statement on the same Trading Day that the Company telephonically confirms
              effectiveness with the Commission, which shall be the date requested
              for
              effectiveness of a Registration Statement. The Company shall, by 9:30
              am Eastern
              Time on the Trading Day after the Effective Date (as defined in the
              Purchase
              Agreement), file a final Prospectus with the Commission as required
              by Rule 424.
              Failure to so notify the Holder within 1 Trading Day of such notification
              of
              effectiveness or failure to file a final Prospectus as aforesaid shall
              be deemed
              an Event under Section 2(b).

            

            (b)
              If:
              (i) a Registration Statement is not filed on or prior to its Filing
              Date (if the
              Company files a Registration Statement without affording the Holders
              the
              opportunity to review and comment on the same as required by Section
              3(a), the
              Company shall not be deemed to have satisfied this clause (i)), or
              (ii) the
              Company fails to file with the Commission a request for acceleration
              in
              accordance with Rule 461 promulgated under the Securities Act, within
              five
              Trading Days of the date that the Company is notified (orally or in
              writing,
              whichever is earlier) by the Commission that a Registration Statement
              will not
              be “reviewed,” or not subject to further review, or (iii) prior to its
              Effectiveness Date, the Company fails to file a pre-effective amendment
              and
              otherwise respond in writing to comments made by the Commission in
              respect of
              such Registration Statement within 20 calendar days after the receipt
              of
              comments by or notice from the Commission that such amendment is required
              in
              order for a Registration Statement to be declared effective, or (iv)
              a
              Registration Statement filed or required to be filed hereunder is not
              declared
              effective by the Commission by its Effectiveness Date, or (v) after
              the
              Effectiveness Date, a Registration Statement ceases for any reason
              to remain
              continuously effective as to all Registrable Securities for which it
              is required
              to be effective, or the Holders are not permitted to utilize the Prospectus
              therein to resell such Registrable Securities for 10 consecutive calendar
              days
              but no more than an aggregate of 15 calendar days during any 12-month
              period
              (which need not be consecutive Trading Days) (any such failure or breach
              being
              referred to as an “Event”,
              and
              for purposes of clause (i) or (iv) the date on which such Event occurs,
              or for
              purposes of clause (ii) the date on which such five Trading Day period
              is
              exceeded, or for purposes of clause (iii) the date which such 20 calendar
              day
              period is exceeded, or for purposes of clause (v) the date on which
              such 10 or
              15 calendar day period, as applicable, is exceeded being referred to
              as
“Event
              Date”),
              then
              in addition to any other rights the Holders may have hereunder or under
              applicable law, on each such Event Date and on each monthly anniversary
              of each
              such Event Date (if the applicable Event shall not have been cured
              by such date)
              until the applicable Event is cured, the Company shall pay to each
              Holder an
              amount in cash, as partial liquidated damages and not as a penalty,
              equal to
              1.5% (1% as to an Event caused solely under clause (i) above) of the
              aggregate
              purchase price paid by such Holder pursuant to the Purchase Agreement
              for any
              Registrable Securities (including the Preferred Stock overlying such
              Registrable
              Securities) then held by such Holder. The parties agree that (1) the
              Company
              will not be liable for liquidated damages under this Agreement with
              respect to
              any Warrants or Warrant Shares and (2) the maximum aggregate liquidated
              damages
              payable to a Holder under this Agreement shall be 9% of the aggregate
              Subscription Amount paid by such Holder pursuant to the Purchase Agreement.
              If
              the Company fails to pay any partial liquidated damages pursuant to
              this Section
              in full within seven days after the date payable, the Company will
              pay interest
              thereon at a rate of 18% per annum (or such lesser maximum amount that is
              permitted to be paid by applicable law) to the Holder, accruing daily
              from the
              date such partial liquidated damages are due until such amounts, plus
              all such
              interest thereon, are paid in full. The partial liquidated damages
              pursuant to
              the terms hereof shall apply on a daily pro-rata basis for any portion
              of a
              month prior to the cure of an Event.

            

            3.
              Registration
              Procedures

            

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

            

            (a) Not
              less
              than three Trading Days prior to the filing of each Registration Statement
              or
              any related Prospectus or any amendment or supplement thereto (including
              any
              document that would be incorporated or deemed to be incorporated therein
              by
              reference), the Company shall, (i) furnish to each Holder copies of
              all such
              documents proposed to be filed, which documents (other than those incorporated
              or deemed to be incorporated by reference) will be subject to the review
              of such
              Holders, and (ii) cause its officers and directors, counsel and independent
              certified public accountants to respond to such inquiries as shall
              be necessary,
              in the reasonable opinion of respective counsel to conduct a reasonable
              investigation within the meaning of the Securities Act. The Company
              shall not
              file the Registration Statement or any such Prospectus or any amendments
              or
              supplements thereto to which the Holders of a majority of the Registrable
              Securities shall reasonably object in good faith, provided that, the
              Company is
              notified of such objection in writing no later than 3 Trading Days
              after the
              Holders have been so furnished copies of such documents. Each Holder
              agrees to
              furnish to the Company a completed Questionnaire in the form attached
              to this
              Agreement as Annex B (a “Selling
              Shareholder Questionnaire”)
              not
              less than two Trading Days prior to the Filing Date or by the end of
              the fourth
              Trading Day following the date on which such Holder receives draft
              materials in
              accordance with this Section.

             

            (b) (i)
              Prepare and file with the Commission such amendments, including post-effective
              amendments, to a Registration Statement and the Prospectus used in
              connection
              therewith as may be necessary to keep a Registration Statement continuously
              effective as to the applicable Registrable Securities for the Effectiveness
              Period and prepare and file with the Commission such additional Registration
              Statements in order to register for resale under the Securities Act
              all of the
              Registrable Securities; (ii) cause the related Prospectus to be amended
              or
              supplemented by any required Prospectus supplement (subject to the
              terms of this
              Agreement), and as so supplemented or amended to be filed pursuant
              to Rule 424;
              (iii) respond as promptly as reasonably possible to any comments received
              from
              the Commission with respect to a Registration Statement or any amendment
              thereto
              and as promptly as reasonably possible provide the Holders true and
              complete
              copies of all correspondence from and to the Commission relating to
              a
              Registration Statement; and (iv) comply in all material respects with
              the
              provisions of the Securities Act and the Exchange Act with respect
              to the
              disposition of all Registrable Securities covered by a Registration
              Statement
              during the applicable period in accordance (subject to the terms of
              this
              Agreement) with the intended methods of disposition by the Holders
              thereof set
              forth in such Registration Statement as so amended or in such Prospectus
              as so
              supplemented.

             

            (c) If
              during
              the Effectiveness Period, the number of Registrable Securities at any
              time
              exceeds 85% of the number of shares of Common Stock then registered
              in a
              Registration Statement, then the Company shall file as soon as reasonably
              practicable but in any case prior to the applicable Filing Date, an
              additional
              Registration Statement covering the resale by the Holders of not less
              than 130%
              of the number of such Registrable Securities.

            

            (d) Notify
              the Holders of Registrable Securities to be sold (which notice shall,
              pursuant
              to clauses (ii) through (vi) hereof, be accompanied by an instruction
              to suspend
              the use of the Prospectus until the requisite changes have been made)
              as
              promptly as reasonably possible (and, in the case of (i)(A) below,
              not less than
              five Trading Days prior to such filing) and (if requested by any such
              Person)
              confirm such notice in writing no later than one Trading Day following
              the day
              (i)(A) when a Prospectus or any Prospectus supplement or post-effective
              amendment to a Registration Statement is proposed to be filed; (B)
              when the
              Commission notifies the Company whether there will be a “review” of such
              Registration Statement and whenever the Commission comments in writing
              on such
              Registration Statement (the Company shall provide true and complete
              copies
              thereof and all written responses thereto to each of the Holders);
              and (C) with
              respect to a Registration Statement or any post-effective amendment,
              when the
              same has become effective; (ii) of any request by the Commission or
              any other
              Federal or state governmental authority for amendments or supplements
              to a
              Registration Statement or Prospectus or for additional information;
              (iii) of the
              issuance by the Commission or any other federal or state governmental
              authority
              of any stop order suspending the effectiveness of a Registration Statement
              covering any or all of the Registrable Securities or the initiation
              of any
              Proceedings for that purpose; (iv) of the receipt by the Company of
              any
              notification with respect to the suspension of the qualification or
              exemption
              from qualification of any of the Registrable Securities for sale in
              any
              jurisdiction, or the initiation or threatening of any Proceeding for
              such
              purpose; (v) of the occurrence of any event or passage of time that
              makes the
              financial statements included in a Registration Statement ineligible
              for
              inclusion therein or any statement made in a Registration Statement
              or
              Prospectus or any document incorporated or deemed to be incorporated
              therein by
              reference untrue in any material respect or that requires any revisions
              to a
              Registration Statement, Prospectus or other documents so that, in the
              case of a
              Registration Statement or the Prospectus, as the case may be, it will
              not
              contain any untrue statement of a material fact or omit to state any
              material
              fact required to be stated therein or necessary to make the statements
              therein,
              in light of the circumstances under which they were made, not misleading;
              and
              (vi) the occurrence or existence of any pending corporate development
              with
              respect to the Company that the Company believes may be material and
              that, in
              the determination of the Company, makes it not in the best interest
              of the
              Company to allow continued availability of the Registration Statement
              or
              Prospectus; provided that any and all of such information shall remain
              confidential to each Holder until such information otherwise becomes
              public,
              unless disclosure by a Holder is required by law; provided,
              further,
              notwithstanding each Holder’s agreement to keep such information confidential,
              the Holders make no acknowledgement that any such information is material,
              non-public information. 

             

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

            

            (f) Furnish
              to each Holder, without charge, at least one conformed copy of each
              such
              Registration Statement and each amendment thereto, including financial
              statements and schedules, all documents incorporated or deemed to be
              incorporated therein by reference to the extent requested by such Person,
              and
              all exhibits to the extent requested by such Person (including those
              previously
              furnished or incorporated by reference) promptly after the filing of
              such
              documents with the Commission.

            

            (g) Promptly
              deliver to each Holder, without charge, as many copies of the Prospectus
              or
              Prospectuses (including each form of prospectus) and each amendment
              or
              supplement thereto as such Persons may reasonably request in connection
              with
              resales by the Holder of Registrable Securities. Subject to the terms
              of this
              Agreement, the Company hereby consents to the use of such Prospectus
              and each
              amendment or supplement thereto by each of the selling Holders in connection
              with the offering and sale of the Registrable Securities covered by
              such
              Prospectus and any amendment or supplement thereto, except after the
              giving of
              any notice pursuant to Section 3(d).

            

            (h) Prior
              to
              any resale of Registrable Securities by a Holder, use its commercially
              reasonable efforts to register or qualify or cooperate with the selling
              Holders
              in connection with the registration or qualification (or exemption
              from the
              Registration or qualification) of such Registrable Securities for the
              resale by
              the Holder under the securities or Blue Sky laws of such jurisdictions
              within
              the United States as any Holder reasonably requests in writing, to
              keep each
              registration or qualification (or exemption therefrom) effective during
              the
              Effectiveness Period and to do any and all other acts or things reasonably
              necessary to enable the disposition in such jurisdictions of the Registrable
              Securities covered by each Registration Statement; provided, that the
              Company
              shall not be required to qualify generally to do business in any jurisdiction
              where it is not then so qualified, subject the Company to any material
              tax in
              any such jurisdiction where it is not then so subject or file a general
              consent
              to service of process in any such jurisdiction.

            

            (i) If
              NASDR
              Rule 2710 requires any broker-dealer to make a filing prior to executing
              a sale
              by a Holder, make an Issuer Filing with the NASDR, Inc. Corporate Financing
              Department pursuant to NASDR Rule 2710(b)(10)(A)(i) and respond within
              five
              Trading Days to any comments received from NASDR in connection therewith,
              and
              pay the filing fee required in connection therewith.

            

            (j) If
              requested by the Holders, cooperate with the Holders to facilitate
              the timely
              preparation and delivery of certificates representing Registrable Securities
              to
              be delivered to a transferee pursuant to a Registration Statement,
              which
              certificates shall be free, to the extent permitted by the Purchase
              Agreement,
              of all restrictive legends, and to enable such Registrable Securities
              to be in
              such denominations and registered in such names as any such Holders
              may
              reasonably request.

            

            (k) Upon
              the
              occurrence of any event contemplated by this Section 3, as promptly
              as
              reasonably possible under the circumstances taking into account the
              Company’s
              good faith assessment of any adverse consequences to the Company and
              its
              stockholders of the premature disclosure of such event, prepare a supplement
              or
              amendment, including a post-effective amendment, to a Registration
              Statement or
              a supplement to the related Prospectus or any document incorporated
              or deemed to
              be incorporated therein by reference, and file any other required document
              so
              that, as thereafter delivered, neither a Registration Statement nor
              such
              Prospectus will contain an untrue statement of a material fact or omit
              to state
              a material fact required to be stated therein or necessary to make
              the
              statements therein, in light of the circumstances under which they
              were made,
              not misleading. If
              the
              Company notifies the Holders in accordance with clauses (ii) through
              (vi) of
              Section 3(d) above to suspend the use of any Prospectus until the requisite
              changes to such Prospectus have been made, then the Holders shall suspend
              use of
              such Prospectus. The Company will use its best efforts to ensure that
              the use of
              the Prospectus may be resumed as promptly as is practicable. The Company
              shall
              be entitled to exercise its right under this Section 3(j) to suspend
              the
              availability of a Registration Statement and Prospectus, subject to
              the payment
              of partial liquidated damages pursuant to Section 2(b), for a period
              not to
              exceed 60 days (which need not be consecutive days) in any 12 month
              period.

             

            (l) Comply
              with all applicable rules and regulations of the Commission.

            

            (m) The
              Company may require each selling Holder to furnish to the Company a
              certified
              statement as to the number of shares of Common Stock beneficially owned
              by such
              Holder and, if required by the Commission, the person thereof that
              has voting
              and dispositive control over the Shares. During any periods that the
              Company is
              unable to meet its obligations hereunder with respect to the registration
              of the
              Registrable Securities solely because any Holder fails to furnish such
              information within three Trading Days of the Company’s request, any liquidated
              damages that are accruing at such time shall be tolled and any Event
              that may
              otherwise occur solely because of such delay shall be suspended, until
              such
              information is delivered to the Company.

            

            4.
              Registration
              Expenses.
              All
              fees and expenses incident to the performance of or compliance with
              this
              Agreement by the Company shall be borne by the Company whether or not
              any
              Registrable Securities are sold pursuant to the Registration Statement.
              The fees
              and expenses referred to in the foregoing sentence shall include, without
              limitation, (i) all registration and filing fees (including, without
              limitation,
              fees and expenses (A) with respect to filings required to be made with
              the
              Trading Market on which the Common Stock is then listed for trading,
              (B) in
              compliance with applicable state securities or Blue Sky laws reasonably
              agreed
              to by the Company in writing (including, without limitation, fees and
              disbursements of counsel for the Company in connection with Blue Sky
              qualifications or exemptions of the Registrable Securities and determination
              of
              the eligibility of the Registrable Securities for investment under
              the laws of
              such jurisdictions as reasonably requested by the Holders) and (C)
              if not
              previously paid by the Company in connection with an Issuer Filing,
              with respect
              to any filing that may be required to be made by any broker through
              which a
              Holder intends to make sales of Registrable Securities with NASD Regulation,
              Inc. pursuant to the NASD Rule 2710, so long as the broker is receiving
              no more
              than a customary brokerage commission in connection with such sale,
              (ii)
              printing expenses (including, without limitation, expenses of printing
              certificates for Registrable Securities), (iii) messenger, telephone
              and
              delivery expenses, (iv) fees and disbursements of counsel for the Company,
              (v)
              Securities Act liability insurance, if the Company so desires such
              insurance,
              and (vi) fees and expenses of all other Persons retained by the Company
              in
              connection with the consummation of the transactions contemplated by
              this
              Agreement. In addition, the Company shall be responsible for all of
              its internal
              expenses incurred in connection with the consummation of the transactions
              contemplated by this Agreement (including, without limitation, all
              salaries and
              expenses of its officers and employees performing legal or accounting
              duties),
              the expense of any annual audit and the fees and expenses incurred
              in connection
              with the listing of the Registrable Securities on any securities exchange
              as
              required hereunder. In no event shall the Company be responsible for
              any broker
              or similar commissions or, except to the extent provided for in the
              Transaction
              Documents, any legal fees or other costs of the Holders.

            

            5.
              Indemnification

            

            (a)
              Indemnification
              by the Company.
              The
              Company shall, notwithstanding any termination of this Agreement, indemnify
              and
              hold harmless each Holder, the officers, directors, members, partners,
              agents,
              brokers (including brokers who offer and sell Registrable Securities
              as
              principal as a result of a pledge or any failure to perform under a
              margin call
              of Common Stock), investment advisors and employees (and any other
              Persons with
              a functionally equivalent role of a Person holding such titles, notwithstanding
              a lack of such title or any other title) of each of them, each Person
              who
              controls any such Holder (within the meaning of Section 15 of the Securities
              Act
              or Section 20 of the Exchange Act) and the officers, directors, members,
              shareholders, partners, agents and employees (and any other Persons
              with a
              functionally equivalent role of a Person holding such titles, notwithstanding
              a
              lack of such title or any other title) of each such controlling Person,
              to the
              fullest extent permitted by applicable law, from and against any and
              all losses,
              claims, damages, liabilities, costs (including, without limitation,
              reasonable
              attorneys’ fees) and expenses (collectively, “Losses”),
              as
              incurred, arising out of or relating to (1) any untrue or alleged untrue
              statement of a material fact contained in a Registration Statement,
              any
              Prospectus or any form of prospectus or in any amendment or supplement
              thereto
              or in any preliminary prospectus, or arising out of or relating to
              any omission
              or alleged omission of a material fact required to be stated therein
              or
              necessary to make the statements therein (in the case of any Prospectus
              or form
              of prospectus or supplement thereto, in light of the circumstances
              under which
              they were made) not misleading, or (2) any violation or alleged violation
              by the
              Company of the Securities Act, Exchange Act or any state securities
              law, or any
              rule or regulation thereunder, in connection with the performance of
              its
              obligations under this Agreement, except to the extent, but only to
              the extent,
              that (i) such untrue statements or omissions are based solely upon
              information
              regarding such Holder furnished in writing to the Company by such Holder
              expressly for use therein, or to the extent that such information relates
              to
              such Holder or such Holder’s proposed method of distribution of Registrable
              Securities and was reviewed and expressly approved in writing by such
              Holder
              expressly for use in a Registration Statement, such Prospectus or such
              form of
              Prospectus or in any amendment or supplement thereto (it being understood
              that
              the Holder has approved Annex A hereto for this purpose) or (ii) in
              the case of
              an occurrence of an event of the type specified in Section 3(d)(iii)-(vi),
              the
              use by such Holder of an outdated or defective Prospectus after the
              Company has
              notified such Holder in writing that the Prospectus is outdated or
              defective and
              prior to the receipt by such Holder of the Advice contemplated in Section
              6(d).
              The Company shall notify the Holders promptly of the institution, threat
              or
              assertion of any Proceeding arising from or in connection with the
              transactions
              contemplated by this Agreement of which the Company is aware.

            

            (b)
              Indemnification
              by Holders.
              Each
              Holder shall, severally and not jointly, indemnify and hold harmless
              the
              Company, its directors, officers, agents and employees, each Person
              who controls
              the Company (within the meaning of Section 15 of the Securities Act
              and Section
              20 of the Exchange Act), and the directors, officers, agents or employees
              of
              such controlling Persons, to the fullest extent permitted by applicable
              law,
              from and against all Losses, as incurred, to the extent arising out
              of or based
              solely upon: (x) such Holder’s failure to comply with the prospectus delivery
              requirements of the Securities Act or (y) any untrue or alleged untrue
              statement
              of a material fact contained in any Registration Statement, any Prospectus,
              or
              any form of prospectus, or in any amendment or supplement thereto or
              in any
              preliminary prospectus, or arising out of or relating to any omission
              or alleged
              omission of a material fact required to be stated therein or necessary
              to make
              the statements therein not misleading (i) to the extent, but only to
              the extent,
              that such untrue statement or omission is contained in any information
              so
              furnished in writing by such Holder to the Company specifically for
              inclusion in
              such Registration Statement or such Prospectus or (ii) to the extent
              that (1)
              such untrue statements or omissions are based solely upon information
              regarding
              such Holder furnished in writing to the Company by such Holder expressly
              for use
              therein, or to the extent that such information relates to such Holder
              or such
              Holder’s proposed method of distribution of Registrable Securities and was
              reviewed and expressly approved in writing by such Holder expressly
              for use in
              the Registration Statement (it being understood that the Holder has
              approved
              Annex A hereto for this purpose), such Prospectus or such form of Prospectus
              or
              in any amendment or supplement thereto or (2) in the case of an occurrence
              of an
              event of the type specified in Section 3(d)(ii)-(vi), the use by such
              Holder of
              an outdated or defective Prospectus after the Company has notified
              such Holder
              in writing that the Prospectus is outdated or defective and prior to
              the receipt
              by such Holder of the Advice contemplated in Section 6(d). In no event
              shall the
              liability of any selling Holder hereunder be greater in amount than
              the dollar
              amount of the net proceeds received by such Holder upon the sale of
              the
              Registrable Securities giving rise to such indemnification
              obligation.

            

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

            

            An
              Indemnified Party shall have the right to employ separate counsel in
              any such
              Proceeding and to participate in the defense thereof, but the fees
              and expenses
              of such counsel shall be at the expense of such Indemnified Party or
              Parties
              unless: (1) the Indemnifying Party has agreed in writing to pay such
              fees and
              expenses; (2) the Indemnifying Party shall have failed promptly to
              assume the
              defense of such Proceeding and to employ counsel reasonably satisfactory
              to such
              Indemnified Party in any such Proceeding; or (3) the named parties
              to any such
              Proceeding (including any impleaded parties) include both such Indemnified
              Party
              and the Indemnifying Party, and such Indemnified Party shall reasonably
              believe
              that a material conflict of interest is likely to exist if the same
              counsel were
              to represent such Indemnified Party and the Indemnifying Party (in
              which case,
              if such Indemnified Party notifies the Indemnifying Party in writing
              that it
              elects to employ separate counsel at the expense of the Indemnifying
              Party, the
              Indemnifying Party shall not have the right to assume the defense thereof
              and
              the reasonable fees and expenses of one separate counsel shall be at
              the expense
              of the Indemnifying Party). The Indemnifying Party shall not be liable
              for any
              settlement of any such Proceeding effected without its written consent,
              which
              consent shall not be unreasonably withheld. No Indemnifying Party shall,
              without
              the prior written consent of the Indemnified Party, effect any settlement
              of any
              pending Proceeding in respect of which any Indemnified Party is a party,
              unless
              such settlement includes an unconditional release of such Indemnified
              Party from
              all liability on claims that are the subject matter of such
              Proceeding.

            

            Subject
              to the terms of this Agreement, all reasonable fees and expenses of
              the
              Indemnified Party (including reasonable fees and expenses to the extent
              incurred
              in connection with investigating or preparing to defend such Proceeding
              in a
              manner not inconsistent with this Section) shall be paid to the Indemnified
              Party, as incurred, within ten Trading Days of written notice thereof
              to the
              Indemnifying Party; provided, that the Indemnified Party shall promptly
              reimburse the Indemnifying Party for that portion of such fees and
              expenses
              applicable to such actions for which such Indemnified Party is not
              entitled to
              indemnification hereunder, determined based upon the relative faults
              of the
              parties.

            

            (d)
              Contribution.
              If the
              indemnification under Section 5(a) or 5(b) is unavailable to an Indemnified
              Party or insufficient to hold an Indemnified Party harmless for any
              Losses, then
              each Indemnifying Party shall contribute to the amount paid or payable
              by such
              Indemnified Party, in such proportion as is appropriate to reflect
              the relative
              fault of the Indemnifying Party and Indemnified Party in connection
              with the
              actions, statements or omissions that resulted in such Losses as well
              as any
              other relevant equitable considerations. The relative fault of such
              Indemnifying
              Party and Indemnified Party shall be determined by reference to, among
              other
              things, whether any action in question, including any untrue or alleged
              untrue
              statement of a material fact or omission or alleged omission of a material
              fact,
              has been taken or made by, or relates to information supplied by, such
              Indemnifying Party or Indemnified Party, and the parties’ relative intent,
              knowledge, access to information and opportunity to correct or prevent
              such
              action, statement or omission. The amount paid or payable by a party
              as a result
              of any Losses shall be deemed to include, subject to the limitations
              set forth
              in this Agreement, any reasonable attorneys’ or other reasonable fees or
              expenses incurred by such party in connection with any Proceeding to
              the extent
              such party would have been indemnified for such fees or expenses if
              the
              indemnification provided for in this Section was available to such
              party in
              accordance with its terms.

            

            The
              parties hereto agree that it would not be just and equitable if contribution
              pursuant to this Section 5(d) were determined by pro rata allocation
              or by any
              other method of allocation that does not take into account the equitable
              considerations referred to in the immediately preceding paragraph.
              Notwithstanding the provisions of this Section 5(d), no Holder shall
              be required
              to contribute, in the aggregate, any amount in excess of the amount
              by which the
              net proceeds actually received by such Holder from the sale of the
              Registrable
              Securities subject to the Proceeding exceeds the amount of any damages
              that such
              Holder has otherwise been required to pay by reason of such untrue
              or alleged
              untrue statement or omission or alleged omission, except in the case
              of fraud by
              such Holder.

            

            The
              indemnity and contribution agreements contained in this Section are
              in addition
              to any liability that the Indemnifying Parties may have to the Indemnified
              Parties.

            

            6.
              Miscellaneous

            

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

            

            (b) No
              Piggyback on Registrations.
              Except
              as set forth on Schedule
              6(b)
              attached
              hereto and except for other shares issuable upon conversion of Preferred
              Stock
              and exercise of Warrants held by the holders of the Preferred Stock
              issued on
              September 29, 2006, neither the Company nor any of its security holders
              (other
              than the Holders in such capacity pursuant hereto) may include securities
              of the
              Company in the Registration Statement other than the Registrable Securities.
              The
              Company shall not file any other registration statements until the
              initial
              Registration Statement required hereunder is declared effective by
              the
              Commission, provided that this Section 6(b) shall not prohibit the
              Company from
              filing amendments to registration statements already filed.

            

            (c) Compliance.
              Each
              Holder covenants and agrees that it will comply with the prospectus
              delivery
              requirements of the Securities Act as applicable to it in connection
              with sales
              of Registrable Securities pursuant to the Registration Statement.

            

            (d) Discontinued
              Disposition.
              Each
              Holder agrees by its acquisition of such Registrable Securities that,
              upon
              receipt of a notice from the Company of the occurrence of any event
              of the kind
              described in Section 3(d), such Holder will forthwith discontinue disposition
              of
              such Registrable Securities under a Registration Statement until such
              Holder’s
              receipt of the copies of the supplemented Prospectus and/or amended
              Registration
              Statement, or until it is advised in writing (the “Advice”)
              by the
              Company that the use of the applicable Prospectus may be resumed, and,
              in either
              case, has received copies of any additional or supplemental filings
              that are
              incorporated or deemed to be incorporated by reference in such Prospectus
              or
              Registration Statement. The Company will use its best efforts to ensure
              that the
              use of the Prospectus may be resumed as promptly as it practicable.
              The Company
              agrees and acknowledges that any periods during which the Holder is
              required to
              discontinue the disposition of the Registrable Securities hereunder
              shall be
              subject to the provisions of Section 2(b).

            

            (e) Piggy-Back
              Registrations.
              If at
              any time during the Effectiveness Period there is not an effective
              Registration
              Statement covering all of the Registrable Securities and the Company
              shall
              determine to prepare and file with the Commission a registration statement
              relating to an offering for its own account or the account of others
              under the
              Securities Act of any of its equity securities, other than on Form
              S-4 or Form
              S-8 (each as promulgated under the Securities Act) or their then equivalents
              relating to equity securities to be issued solely in connection with
              any
              acquisition of any entity or business or equity securities issuable
              in
              connection with the stock option or other employee benefit plans, then
              the
              Company shall send to each Holder a written notice of such determination
              and, if
              within fifteen days after the date of such notice, any such Holder
              shall so
              request in writing, the Company shall include in such registration
              statement all
              or any part of such Registrable Securities such Holder requests to
              be
              registered; provided, that, the Company shall not be required to register
              any
              Registrable Securities pursuant to this Section 6(e) that are eligible
              for
              resale pursuant to Rule 144(k) promulgated under the Securities Act
              or that are
              the subject of a then effective Registration Statement.

            

            (f) Amendments
              and Waivers.
              The
              provisions of this Agreement, including the provisions of this sentence,
              may not
              be amended, modified or supplemented, and waivers or consents to departures
              from
              the provisions hereof may not be given, unless the same shall be in
              writing and
              signed by the Company and Holders holding at least 51% of the then
              Registrable
              Securities. Notwithstanding the foregoing, a waiver or consent to depart
              from
              the provisions hereof with respect to a matter that relates exclusively
              to the
              rights of Holders and that does not directly or indirectly affect the
              rights of
              other Holders may be given by Holders of all of the Registrable Securities
              to
              which such waiver or consent relates; provided,
              however,
              that
              the provisions of this sentence may not be amended, modified, or supplemented
              except in accordance with the provisions of the immediately preceding
              sentence.

            

            (g) Notices.
              Any and
              all notices or other communications or deliveries required or permitted
              to be
              provided hereunder shall be delivered as set forth in the Purchase
              Agreement.

            

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

            

            (i) No
              Inconsistent Agreements.
              Neither
              the Company nor any of its subsidiaries has entered, as of the date
              hereof, nor
              shall the Company or any of its subsidiaries, on or after the date
              of this
              Agreement, enter into any agreement with respect to its securities,
              that would
              have the effect of impairing the rights granted to the Holders in this
              Agreement
              or otherwise conflicts with the provisions hereof. Except as set forth
              on
Schedule
              6(i),
              neither
              the Company nor any of its subsidiaries has previously entered into
              any
              agreement granting any registration rights with respect to any of its
              securities
              to any Person that have not been satisfied in full.

            

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

            

            (k) Governing
              Law.
              All
              questions concerning the construction, validity, enforcement and interpretation
              of this Agreement shall be determined with the provisions of the Purchase
              Agreement.

            

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

            

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

            

            (n) Headings.
              The
              headings in this Agreement are for convenience of reference only and
              shall not
              limit or otherwise affect the meaning hereof.

            

            (o) Independent
              Nature of Holders’ Obligations and Rights.
              The
              obligations of each Holder hereunder are several and not joint with
              the
              obligations of any other Holder hereunder, and no Holder shall be responsible
              in
              any way for the performance of the obligations of any other Holder
              hereunder.
              Nothing contained herein or in any other agreement or document delivered
              at any
              closing, and no action taken by any Holder pursuant hereto or thereto,
              shall be
              deemed to constitute the Holders as a partnership, an association,
              a joint
              venture or any other kind of entity, or create a presumption that the
              Holders
              are in any way acting in concert with respect to such obligations or
              the
              transactions contemplated by this Agreement. Each Holder shall be entitled
              to
              protect and enforce its rights, including without limitation the rights
              arising
              out of this Agreement, and it shall not be necessary for any other
              Holder to be
              joined as an additional party in any proceeding for such purpose.

            

            ********************

            
              
                
                

              

              
                
                

                
                  

                

              

              
                
                

              

            

            

            IN
              WITNESS WHEREOF, the parties have executed this Registration Rights
              Agreement as
              of the date first written above.

            

              

            
              	
                      CHEMBIO
                        DIAGNOSTICS, INC.

                       

                    
	
                      By:__________________________________________

                      Name:

                      Title:

                    

            

             

            

            

            

            

            

            

            

            

            [SIGNATURE
              PAGE OF HOLDERS FOLLOWS]

            

            
              
                
                

              

              
                
                

                
                  

                

              

              
                
                

              

            

            [HOLDER’S
              SIGNATURE PAGE TO CEMI RRA]

            

            Name
              of
              Holder: __________________________

            Signature
              of Authorized Signatory of Holder:
              __________________________

            Name
              of
              Authorized Signatory: _________________________

            Title
              of
              Authorized Signatory: __________________________

             

            

            

            [SIGNATURE
              PAGES CONTINUE]

            

             

            

            
              
                
                

              

              
                
                

                
                  

                

              

              
                
                

              

            

             ANNEX
              A

            

            Plan
              of Distribution

             

            Each
              Selling Stockholder (the “Selling
              Stockholders”)
              of the
              common stock and any of their pledgees, assignees and successors-in-interest
              may, from time to time, sell any or all of their shares of common stock
              on the
              [principal Trading Market] or any other stock exchange, market or trading
              facility on which the shares are traded or in private transactions.
              These sales
              may be at fixed or negotiated prices. A Selling Stockholder may use
              any one or
              more of the following methods when selling shares:

             

            
              	 	
                      ·

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

                    

            

             

            
              	 	
                      ·

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

                    

            

             

            
              	 	
                      ·

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

                    

            

             

            
              	 	
                      ·

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

                    

            

             

            
              	 	
                      ·

                    	
                      privately
                        negotiated transactions;

                    

            

             

            
              	 	
                      ·

                    	
                      settlement
                        of short sales entered into after the effective date of the
                        registration
                        statement of which this prospectus is a
                        part;

                    

            

             

            
              	 	
                      ·

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

                    

            

             

            
              	 	
                      ·

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

                    

            

             

            
              	 	
                      ·

                    	
                      a
                        combination of any such methods of sale;
                        or

                    

            

             

            
              	 	
                      ·

                    	
                      any
                        other method permitted pursuant to applicable
                        law.

                    

            

             

            The
              Selling Stockholders may also sell shares under Rule 144 under the
              Securities
              Act of 1933, as amended (the “Securities
              Act”),
              if
              available, rather than under this prospectus.

             

            Broker-dealers
              engaged by the Selling Stockholders may arrange for other brokers-dealers
              to
              participate in sales. Broker-dealers may receive commissions or discounts
              from
              the Selling Stockholders (or, if any broker-dealer acts as agent for
              the
              purchaser of shares, from the purchaser) in amounts to be negotiated,
              but,
              except as set forth in a supplement to this Prospectus, in the case
              of an agency
              transaction not in excess of a customary brokerage commission in compliance
              with
              NASDR Rule 2440; and in the case of a principal transaction a markup
              or markdown
              in compliance with NASDR IM-2440. 

             

            In
              connection with the sale of the common stock or interests therein,
              the Selling
              Stockholders may enter into hedging transactions with broker-dealers
              or other
              financial institutions, which may in turn engage in short sales of
              the Common
              Stock in the course of hedging the positions they assume. The Selling
              Stockholders may also sell shares of the common stock short and deliver
              these
              securities to close out their short positions, or loan or pledge the
              common
              stock to broker-dealers that in turn may sell these securities. The
              Selling
              Stockholders may also enter into option or other transactions with
              broker-dealers or other financial institutions or the creation of one
              or more
              derivative securities which require the delivery to such broker-dealer
              or other
              financial institution of shares offered by this prospectus, which shares
              such
              broker-dealer or other financial institution may resell pursuant to
              this
              prospectus (as supplemented or amended to reflect such
              transaction).

             

            The
              Selling Stockholders and any broker-dealers or agents that are involved
              in
              selling the shares may be deemed to be “underwriters” within the meaning of the
              Securities Act in connection with such sales. In such event, any commissions
              received by such broker-dealers or agents and any profit on the resale
              of the
              shares purchased by them may be deemed to be underwriting commissions
              or
              discounts under the Securities Act. Each Selling Stockholder has informed
              the
              Company that it does not have any written or oral agreement or understanding,
              directly or indirectly, with any person to distribute the Common Stock.
              In no
              event shall any broker-dealer receive fees, commissions and markups
              which, in
              the aggregate, would exceed eight percent (8%).

             

            The
              Company is required to pay certain fees and expenses incurred by the
              Company
              incident to the registration of the shares. The Company has agreed
              to indemnify
              the Selling Stockholders against certain losses, claims, damages and
              liabilities, including liabilities under the Securities Act. 

             

            Because
              Selling Stockholders may be deemed to be “underwriters” within the meaning of
              the Securities Act, they will be subject to the prospectus delivery
              requirements
              of the Securities Act including Rule 172 thereunder. In addition, any
              securities
              covered by this prospectus which qualify for sale pursuant to Rule
              144 under the
              Securities Act may be sold under Rule 144 rather than under this prospectus.
              There is no underwriter or coordinating broker acting in connection
              with the
              proposed sale of the resale shares by the Selling Stockholders.

             

            We
              agreed
              to keep this prospectus effective until the earlier of (i) the date
              on which the
              shares may be resold by the Selling Stockholders without registration
              and
              without regard to any volume limitations by reason of Rule 144(k) under
              the
              Securities Act or any other rule of similar effect or (ii) all of the
              shares
              have been sold pursuant to this prospectus or Rule 144 under the Securities
              Act
              or any other rule of similar effect. The resale shares will be sold
              only through
              registered or licensed brokers or dealers if required under applicable
              state
              securities laws. In addition, in certain states, the resale shares
              may not be
              sold unless they have been registered or qualified for sale in the
              applicable
              state or an exemption from the registration or qualification requirement
              is
              available and is complied with.

             

            Under
              applicable rules and regulations under the Exchange Act, any person
              engaged in
              the distribution of the resale shares may not simultaneously engage
              in market
              making activities with respect to the common stock for the applicable
              restricted
              period, as defined in Regulation M, prior to the commencement of the
              distribution. In addition, the Selling Stockholders will be subject
              to
              applicable provisions of the Exchange Act and the rules and regulations
              thereunder, including Regulation M, which may limit the timing of purchases
              and
              sales of shares of the common stock by the Selling Stockholders or
              any other
              person. We will make copies of this prospectus available to the Selling
              Stockholders and have informed them of the need to deliver a copy of
              this
              prospectus to each purchaser at or prior to the time of the sale (including
              by
              compliance with Rule 172 under the Securities Act).

             

            

             

            

            

            
              
                
                

              

              
                
                

                
                  

                

              

              
                
                

              

            

            Annex
              B

             

            CHEMBIO
              DIAGNOSTICS, INC.

             

            Selling
              Securityholder Notice and Questionnaire

             

            The
              undersigned beneficial owner of common stock, par value $0.01 per share
              (the
“Common
              Stock”),
              of
              Chembio Diagnostics, Inc., a Nevada corporation (the “Company”),
              (the
“Registrable
              Securities”)
              understands that the Company has filed or intends to file with the
              Securities
              and Exchange Commission (the “Commission”)
              a
              registration statement on Form [S-3 (the “Registration
              Statement”)
              for
              the registration and resale under Rule 415 of the Securities Act of
              1933, as
              amended (the “Securities
              Act”),
              of
              the Registrable Securities, in accordance with the terms of the Registration
              Rights Agreement, dated as of October __, 2006 (the “Registration
              Rights Agreement”),
              among
              the Company and the Purchasers named therein. A copy of the Registration
              Rights
              Agreement is available from the Company upon request at the address
              set forth
              below. All capitalized terms not otherwise defined herein shall have
              the
              meanings ascribed thereto in the Registration Rights Agreement.

             

            Certain
              legal consequences arise from being named as a selling securityholder
              in the
              Registration Statement and the related prospectus. Accordingly, holders
              and
              beneficial owners of Registrable Securities are advised to consult
              their own
              securities law counsel regarding the consequences of being named or
              not being
              named as a selling securityholder in the Registration Statement and
              the related
              prospectus.

             

            NOTICE

             

            The
              undersigned beneficial owner (the “Selling
              Securityholder”)
              of
              Registrable Securities hereby elects to include the Registrable Securities
              owned
              by it and listed below in Item 3 (unless otherwise specified under
              such Item 3)
              in the Registration Statement.

             

            
              
                
                

              

              
                
                

                
                  

                

              

              
                
                

              

            

            The
              undersigned hereby provides the following information to the Company
              and
              represents and warrants that such information is accurate:

             

            QUESTIONNAIRE

             

            1. Name.

             

            
              	 	
                      (a)

                    	
                      Full
                        Legal Name of Selling
                        Securityholder

                    

            

             

            
              	 
	 

            

            

            
              	 	
                      (b)

                    	
                      Full
                        Legal Name of Registered Holder (if not the same as (a) above)
                        through
                        which Registrable Securities Listed in Item 3 below are
                        held:

                    

            

             

            
              	 
	 

            

            

            
              	 	
                      (c)

                    	
                      Full
                        Legal Name of Natural Control Person (which means a natural
                        person who
                        directly or indirectly alone or with others has power to
                        vote or dispose
                        of the securities covered by the
                        questionnaire):

                    

            

             

            
              	 
	 

            

            

             

            2.
              Address for Notices to Selling Securityholder:

             

            
              	 
	 
	 
	
                      Telephone: 

                    
	
                      Fax: 

                    
	
                      Contact
                        Person: 

                    

            

            

            3.
              Beneficial Ownership of Registrable Securities:

             

            
              	 	
                      (a)

                    	
                      Type
                        and Number of Registrable Securities beneficially owned (not
                        including the
                        Registrable Securities that are issuable pursuant to the
                        Purchase
                        Agreement):

                    

            

             

            
              	 
	 
	 
	 

            

            

             

            
              
                
                

              

              
                
                

                
                  

                

              

              
                
                

              

            

            4.
              Broker-Dealer Status:

             

            
              	 	
                      (a)

                    	
                      Are
                        you a broker-dealer?

                    

            

             

            Yes
               No
              

             

            
              	 	
                      (b)

                    	
                      If
                        “yes” to Section 4(a), did you receive your Registrable Securities
                        as
                        compensation for investment banking services to the
                        Company.

                    

            

             

            Yes
               No
              

             

            
              	 	
                      Note:

                    	
                      If
                        no, the Commission’s staff has indicated that you should be identified as
                        an underwriter in the Registration
                        Statement.

                    

            

             

            
              	 	
                      (c)

                    	
                      Are
                        you an affiliate of a
                        broker-dealer?

                    

            

             

            Yes
               No
              

             

            
              	 	
                      (d)

                    	
                      If
                        you are an affiliate of a broker-dealer, do you certify that
                        you bought
                        the Registrable Securities in the ordinary course of business,
                        and at the
                        time of the purchase of the Registrable Securities to be
                        resold, you had
                        no agreements or understandings, directly or indirectly,
                        with any person
                        to distribute the Registrable
                        Securities?

                    

            

             

            Yes
               No
              

             

            
              	 	
                      Note:

                    	
                      If
                        no, the Commission’s staff has indicated that you should be identified as
                        an underwriter in the Registration
                        Statement.

                    

            

             

            5.
              Beneficial Ownership of Other Securities of the Company Owned by the
              Selling
              Securityholder.

             

            Except
              as set forth below in this Item 5, the undersigned is not the beneficial
              or
              registered owner of any securities of the Company other than the Registrable
              Securities listed above in Item 3.

             

            
              	 	
                      (a)

                    	
                      Type
                        and Amount of Other Securities beneficially owned by the
                        Selling
                        Securityholder:

                    

            

             

            
              	 
	 
	 

            

            

            

             

            
              
                
                

              

              
                
                

                
                  

                

              

              
                
                

              

            

            6.
              Relationships with the Company:

             

            Except
              as set forth below, neither the undersigned nor any of its affiliates,
              officers,
              directors or principal equity holders (owners of 5% of more of the
              equity
              securities of the undersigned) has held any position or office or has
              had any
              other material relationship with the Company (or its predecessors or
              affiliates)
              during the past three years.

             

            State
              any
              exceptions here:

             

            
              	 
	 
	 

            

            

             

            The
              undersigned agrees to promptly notify the Company of any inaccuracies
              or changes
              in the information provided herein that may occur subsequent to the
              date hereof
              at any time while the Registration Statement remains effective.

             

            By
              signing below, the undersigned consents to the disclosure of the information
              contained herein in its answers to Items 1 through 6 and the inclusion
              of such
              information in the Registration Statement and the related prospectus
              and
              any
              amendments or supplements thereto.
              The
              undersigned understands that such information will be relied upon by
              the Company
              in connection with the preparation or amendment of the Registration
              Statement
              and the related prospectus.

             

            IN
              WITNESS WHEREOF the undersigned, by authority duly given, has caused
              this Notice
              and Questionnaire to be executed and delivered either in person or
              by its duly
              authorized agent.

             

            Dated:
                Beneficial
              Owner:  

            

            By:  

            Name:

            Title: 

            

            PLEASE
              FAX A COPY OF THE COMPLETED AND EXECUTED NOTICE AND QUESTIONNAIRE,
              AND RETURN
              THE ORIGINAL BY OVERNIGHT MAIL, TO:Exhibit 10.1 Securities Purchase Agreement

    
      
        

      

      
        

      

      Exhibit 10.1 Securities Purchase Agreement

      
        
          

            

            SECURITIES
              PURCHASE AGREEMENT

             

            This
              Securities Purchase Agreement (this “Agreement”)
              is
              dated as of September 29, 2006, by and among Chembio Diagnostics, Inc.,
              a Nevada
              corporation (the “Company”),
              and
              the purchasers identified on the signature pages hereto (each, including
              its
              successors and assigns, a “Purchaser”
and
              collectively the “Purchasers”).

             

            WHEREAS,
              subject to the terms and conditions set forth in this Agreement and
              pursuant to
              Section 4(2) of the Securities Act of 1933, as amended (the “Securities
              Act”)
              and
              Rule 506 promulgated thereunder, the Company desires to issue and sell
              to each
              Purchaser, and each Purchaser, severally and not jointly, desires to
              purchase
              from the Company, securities of the Company as more fully described
              in this
              Agreement.

             

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

             

             

            ARTICLE
              I

            DEFINITIONS

             

            1.1 Definitions.
              In
              addition to the terms defined elsewhere in this Agreement: (a) capitalized
              terms
              that are not otherwise defined herein have the meanings given to such
              terms in
              the Certificate of Designation (as defined herein), and (b) the following
              terms
              have the meanings indicated in this Section 1.1:

             

            “Action”
shall
              have the meaning ascribed to such term in Section 3.1(j).

             

            “Actual
              Minimum”
means,
              as of any date, the maximum aggregate number of shares of Common Stock
              then
              issued or potentially issuable in the future pursuant to the Transaction
              Documents, including any Underlying Shares issuable upon exercise or
              conversion
              in full of all Warrants and shares of Preferred Stock, ignoring any
              conversion
              or exercise limits set forth therein, and assuming that any previously
              unconverted shares of Preferred Stock are held until the third anniversary
              of
              the Closing Date and all dividends are paid in shares of Common Stock
              until such
              third anniversary.

             

            “Affiliate”
means
              any Person that, directly or indirectly through one or more intermediaries,
              controls or is controlled by or is under common control with a Person,
              as such
              terms are used in and construed under Rule 144 under the Securities
              Act. With
              respect to a Purchaser, any investment fund or managed account that
              is managed
              on a discretionary basis by the same investment manager as such Purchaser
              will
              be deemed to be an Affiliate of such Purchaser.

             

            “Certificate
              of Designations”
means
              the Certificate of Designations to be filed prior to the Closing by
              the Company
              with the Secretary of State of Nevada, in the form of Exhibit
              A
              attached
              hereto.

             

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

             

            “Closing
              Date”
means
              the Trading Day when all of the Transaction Documents have been executed
              and
              delivered by the applicable parties thereto, and all conditions precedent
              to (i)
              the Purchasers’ obligations to pay the Subscription Amount and (ii) the
              Company’s obligations to deliver the Securities have been satisfied or
              waived.

             

            “Commission”
means
              the Securities and Exchange Commission.

             

            “Common
              Stock”
means
              the common stock of the Company, par value $0.01 per share, and any
              other class
              of securities into which such securities may hereafter be reclassified
              or
              changed into.

             

            “Common
              Stock Equivalents”
means
              any securities of the Company or the Subsidiaries which would entitle
              the holder
              thereof to acquire, directly or indirectly, at any time Common Stock,
              including
              without limitation, any debt, preferred stock, rights, options, warrants
              or
              other instrument that is at any time convertible into or exercisable
              or
              exchangeable for, or otherwise entitles the holder thereof to receive,
              Common
              Stock.

             

            “Company
              Counsel”
means
              Patton Boggs LLP.

             

            “Conversion
              Price”
shall
              have the meaning ascribed to such term in the Certificate of
              Designation.

             

            “Disclosure
              Schedules”
shall
              have the meaning ascribed to such term in Section 3.1.

             

            “Effective
              Date”
means
              the date that the initial Registration Statement filed by the Company
              pursuant
              to the Registration Rights Agreement is first declared effective by
              the
              Commission.

             

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

             

            “Exempt
              Issuance”
means
              the issuance of (a) shares of Common Stock or options to employees,
              officers,
              consultants, or directors of the Company pursuant to any stock or option
              plan or
              other resolution duly adopted by a majority of the non-employee members
              of the
              Board of Directors of the Company or a majority of the members of a
              committee of
              non-employee directors established for such purpose, (b) securities
              upon the
              exercise of or conversion of any Securities issued hereunder, convertible
              securities, options or warrants issued and outstanding on the date
              of this
              Agreement, provided that such securities have not been amended since
              the date of
              this Agreement to increase the number of such securities or to decrease
              the
              exercise or conversion price of any such securities (except pursuant
              to any
              anti-dilution adjustment contained therein), (c) securities issued
              pursuant to
              acquisitions or strategic transactions, provided any such issuance
              shall only be
              to a Person which is, itself or through its subsidiaries, an operating
              company
              in a business reasonably deemed by the Company’s Board of Directors to be
              strategically advantageous to the business of the Company and in which
              the
              Company receives benefits in addition to the investment of funds, but
              shall not
              include a transaction in which the Company is issuing securities primarily
              for
              the purpose of raising capital or to an entity whose primary business
              is
              investing in securities, (d) shares issued as dividend payments on
              the Series A,
              Series B Preferred Stock and Preferred Stock and (e) for purposes of
              Sections
              4.13 and 4.14 only, up to an amount of Preferred Stock and warrants
              equal to the
              difference between $10,000,000 and the aggregate Subscription Amounts
              hereunder,
              on substantially the same terms and conditions hereunder, which investors
              shall
              execute definitive agreements for the purchase of such securities and
              such
              transactions shall have closed on or before October 5, 2006.

             

            “FWS”
means
              Feldman Weinstein & Smith LLP with offices located at 420 Lexington Avenue,
              Suite 2620, New York, New York 10170-0002.

             

            “GAAP”
shall
              have the meaning ascribed to such term in Section 3.1(h).

             

            “Intellectual
              Property Rights”
shall
              have the meaning ascribed to such term in Section 3.1(o).

             

            “Legend
              Removal Date”
shall
              have the meaning ascribed to such term in Section 4.1(c). 

             

            “Liens”
means
              a
              lien, charge, security interest, encumbrance, right of first refusal,
              preemptive
              right or other restriction.

             

            “Material
              Adverse Effect”
shall
              have the meaning assigned to such term in Section 3.1(b).

             

            “Material
              Permits”
shall
              have the meaning ascribed to such term in Section 3.1(m).

             

            “Maximum
              Rate”
shall
              have the meaning ascribed to such term in Section 5.17.

             

            “Participation
              Maximum”
shall
              have the meaning ascribed to such term in Section 4.13. 

             

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

             

            “Preferred
              Stock”
means
              the up to 205 shares of the Company’s 7% Series C Convertible Preferred Stock
              issued hereunder having the rights, preferences and privileges set
              forth in the
              Certificate of Designations, in the form of Exhibit A attached
              hereto.

             

            “Pre-Notice”
shall
              have the meaning ascribed to such term in Section 4.13. 

             

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

             

            “Purchaser
              Party”
shall
              have the meaning ascribed to such term in Section 4.11.

             

            “Registration
              Rights Agreement”
means
              the Registration Rights Agreement, dated the date hereof, among the
              Company and
              the Purchasers, in the form of Exhibit
              B
              attached
              hereto.

             

            “Registration
              Statement”
means
              a
              registration statement meeting the requirements set forth in the Registration
              Rights Agreement and covering the resale of the Underlying Shares by
              each
              Purchaser as provided for in the Registration Rights Agreement.

             

            “Required
              Approvals”
shall
              have the meaning ascribed to such term in Section 3.1(e).

             

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

             

            “SEC
              Reports”
shall
              have the meaning ascribed to such term in Section 3.1(h).

             

            “Securities”
means
              the Preferred Stock, the Warrants and the Underlying Shares.

             

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

             

            “Short
              Sales”
means
              all “short sales” as defined in Rule 200 of Regulation SHO under the Exchange
              Act (but shall not be deemed to include the location and/or reservation
              of
              borrowable shares of Common Stock).

            

            “Stated
              Value”
means
              $50,000 per share of Preferred Stock.

             

            “Subscription
              Amount”
shall
              mean, as to each Purchaser, the aggregate amount to be paid for the
              Preferred
              Stock purchased hereunder as specified below such Purchaser’s name on the
              signature page of this Agreement and next to the heading “Subscription Amount”,
              in United States Dollars and in immediately available funds. Notwithstanding
              the
              foregoing, a Purchaser may pay its Subscription Amount by surrendering
              the
              Company’s Secured Debentures, dated June 29, 2006 (aggregate of all such
              debentures, $1,300,000). The principal amount surrendered by a Purchaser
              shall
              be as set forth on such Purchaser’s signature page to this Agreement and such
              Purchaser’s Subscription Amount as it relates to surrendered debentures shall
              be
              calculated by multiplying 1.14286 times the sum of the principal amount
              plus all
              accrued interest on the Secured Debentures surrendered.

            

            “Subsequent
              Financing”
shall
              have the meaning ascribed to such term in Section 4.13.

             

            “Subsequent
              Financing Notice”
shall
              have the meaning ascribed to such term in Section 4.13. 

             

            “Subsidiary”
means
              any subsidiary of the Company as set forth on Schedule
              3.1(a).

             

            “Trading
              Day”
means
              a
              day on which the Common Stock is traded on a Trading Market.

             

            “Trading
              Market”
means
              the following markets or exchanges on which the Common Stock is listed
              or quoted
              for trading on the date in question: the Nasdaq SmallCap Market, the
              American
              Stock Exchange, the New York Stock Exchange, the Nasdaq National Market
              or the
              OTC Bulletin Board.

             

            “Transaction
              Documents”
means
              this Agreement, the Certificate of Designation, the Warrants, the Registration
              Rights Agreement and any other documents or agreements executed in
              connection
              with the transactions contemplated hereunder.

             

            “Underlying
              Shares”
means
              the shares of Common Stock issued and issuable upon conversion of the
              Preferred
              Stock, upon exercise of the Warrants and issued and issuable in lieu
              of the cash
              payment of dividends on the Preferred Stock in accordance with the
              terms of the
              Certificate of Designation.

             

            “VWAP”
means,
              for any date, the price determined by the first of the following clauses
              that
              applies: (a) if the Common Stock is then listed or quoted on a Trading
              Market,
              the daily volume weighted average price of the Common Stock for such
              date (or
              the nearest preceding date) on the Trading Market on which the Common
              Stock is
              then listed or quoted as reported by Bloomberg Financial L.P. (based
              on a
              Trading Day from 9:30 a.m. Eastern Time to 4:02 p.m. Eastern Time);
              (b) if the
              Common Stock is not then listed or quoted on a Trading Market and if
              prices for
              the Common Stock are then reported in the “Pink Sheets” published by the 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; or (c) in all other cases, the fair market value of a share
              of Common
              Stock as determined by an independent appraiser selected in good faith
              by the
              Purchasers and reasonably acceptable to the Company.

             

            “Warrants”
means
              collectively the Series C-1 Common Stock purchase warrants, in the
              form of
Exhibit C
              delivered to the Purchasers at the Closing in accordance with Section
              2.2(a)
              hereof, which Warrants shall be exercisable immediately and have a
              term of
              exercise equal to five years.

             

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

             

            

             

             

            ARTICLE
              II

            PURCHASE
              AND SALE

             

            2.1 Closing.
              On the
              Closing Date, upon the terms and subject to the conditions set forth
              herein,
              substantially concurrent with the execution and delivery of this Agreement
              by
              the parties hereto, the Company agrees to sell, and each Purchaser
              agrees to
              purchase in the aggregate, severally and not jointly, up to $10,000,000
              of
              shares of Preferred Stock with an aggregate Stated Value equal to such
              Purchaser’s Subscription Amount and Warrants as determined by pursuant to
              Section 2.2(a). The aggregate number of shares of Preferred Stock sold
              hereunder
              shall be up to 205. Each Purchaser shall deliver to the Company via
              wire
              transfer or a certified check of immediately available funds (or principal
              amount of Secured Debentures surrendered as described in the definition
              of
              Subscription Amount) equal to their Subscription Amount and the Company
              shall
              deliver to each Purchaser their respective shares of Preferred Stock
              and
              Warrants as determined pursuant to Section 2.2(a) and the other items
              set forth
              in Section 2.2 issuable at the Closing. Upon satisfaction of the conditions
              set
              forth in Sections 2.2 and 2.3, the Closing shall occur at the offices
              of FWS, or
              such other location as the parties shall mutually agree.

             

            
              	 	
                      2.2

                    	
                      Deliveries.

                    

            

             

            a) On
              the
              Closing Date, the Company shall deliver or cause to be delivered to
              each
              Purchaser the following:

             

            
              	 	
                      (i)

                    	
                      this
                        Agreement duly executed by the
                        Company;

                    

            

             

            (ii) a
              legal
              opinion of Company Counsel, in the form of Exhibit
              D
              attached
              hereto;

             

            (iii) a
              certificate evidencing a number of shares of Preferred Stock equal
              to such
              Purchaser’s Subscription Amount divided by the Stated Value, registered in the
              name of such Purchaser;

             

            (iv) a
              Warrant
              registered in the name of such Purchaser to purchase up to a number
              of shares of
              Common Stock equal to 25% of such Purchaser’s Subscription Amount divided by
              $0.85, with an exercise price equal to $1.00,
              subject
              to adjustment therein; and

             

            (v) the
              Registration Rights Agreement duly executed by the Company.

             

            b) On
              the
              Closing Date, each Purchaser shall deliver or cause to be delivered
              to the
              Company the following:

             

            
              	 	
                      (i)

                    	
                      this
                        Agreement duly executed by such
                        Purchaser;

                    

            

             

            (ii) such
              Purchaser’s Subscription Amount as to the applicable Closing by wire transfer
              to
              the Company (or surrender of Secured Debentures, as applicable);
              and

             

            (iii) the
              Registration Rights Agreement duly executed by such Purchaser.

             

            
              	 	
                      2.3

                    	
                      Closing
                        Conditions.

                    

            

             

            (a) The
              obligations of the Company hereunder in connection with the Closing
              are subject
              to the following conditions being met; provided that the Company, in
              its sole
              discretion, may waive any and all such conditions:

             

            (i) the
              accuracy in all material respects when made and on the Closing Date
              of the
              representations and warranties of the Purchasers contained herein;

             

            (ii) all
              obligations, covenants and agreements of the Purchasers required to
              be performed
              at or prior to the Closing Date shall have been performed; and

             

            (iii) the
              delivery by the Purchasers of the items set forth in Section 2.2(b)
              of this
              Agreement.

             

            (b) The
              respective obligations of the Purchasers hereunder in connection with
              the
              Closing are subject to the following conditions being met; provided
              that each
              Purchaser, in its sole discretion, may waive any and all such
              conditions:

             

            (i) the
              accuracy in all material respects when made and on the Closing Date
              of the
              representations and warranties of the Company contained herein;

             

            (ii) all
              obligations, covenants and agreements of the Company required to be
              performed at
              or prior to the Closing Date shall have been performed;

             

            (iii) the
              delivery by the Company of the items set forth in Section 2.2(a) of
              this
              Agreement;

             

            (iv) there
              shall have been no Material Adverse Effect with respect to the Company
              since the
              date hereof; 

             

            (v) all
              holders of secured Indebtedness of the Company shall have agreed to
              exchange
              such Indebtedness for Preferred Stock as payment in full of any obligations
              thereunder or agree to be paid off for cash at the Closing as set forth
              on
              Schedule 4.9 (and in both cases the Company shall have received duly
              authorized
              pay-off letters from all such holders); and

             

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

             

             

            ARTICLE
              III

            REPRESENTATIONS
              AND WARRANTIES

             

            3.1Representations
              and Warranties of the Company.
              Except
              as set forth under the corresponding section of the disclosure schedules
              delivered to the Purchasers concurrently herewith (the “Disclosure
              Schedules”)
              which
              Disclosure Schedules shall be deemed a part hereof, the Company hereby
              makes the
              representations and warranties set forth below to each Purchaser.

             

            (a) Subsidiaries.
              All of
              the direct and indirect subsidiaries of the Company are set forth on
              Schedule
              3.1(a).
              Except
              as set forth on Schedule
              3.1(g)
              attached
              hereto, the Company owns, directly or indirectly, all of the capital
              stock or
              other equity interests of each Subsidiary free and clear of any Liens,
              and all
              the issued and outstanding shares of capital stock of each Subsidiary
              are
              validly issued and are fully paid, non-assessable and free of preemptive
              and
              similar rights to subscribe for or purchase securities. If the Company
              has no
              subsidiaries, then references in the Transaction Documents to the Subsidiaries
              will be disregarded.

             

            (b) Organization
              and Qualification.
              The
              Company and each of the Subsidiaries is an entity duly incorporated
              or otherwise
              organized, validly existing and in good standing under the laws of
              the
              jurisdiction of its incorporation or organization (as applicable),
              with the
              requisite power and authority to own and use its properties and assets
              and to
              carry on its business as currently conducted. Neither the Company nor
              any
              Subsidiary is in violation or default of any of the provisions of its
              respective
              certificate or articles of incorporation, bylaws or other organizational
              or
              charter documents. Each of the Company and the Subsidiaries is duly
              qualified to
              conduct business and is in good standing as a foreign corporation or
              other
              entity in each jurisdiction in which the nature of the business conducted
              or
              property owned by it makes such qualification necessary, except where
              the
              failure to be so qualified or in good standing, as the case may be,
              could not
              have or reasonably be expected to result in (i) a material adverse
              effect on the
              legality, validity or enforceability of any Transaction Document, (ii)
              a
              material adverse effect on the results of operations, assets, business,
              prospects or financial condition of the Company and the Subsidiaries,
              taken as a
              whole, or (iii) a material adverse effect on the Company’s ability to perform in
              any material respect on a timely basis its obligations under any Transaction
              Document (any of (i), (ii) or (iii), a “Material
              Adverse Effect”)
              and no
              Proceeding has been instituted in any such jurisdiction revoking, limiting
              or
              curtailing or seeking to revoke, limit or curtail such power and authority
              or
              qualification.

             

            (c) Authorization;
              Enforcement.
              The
              Company has the requisite corporate power and authority to enter into
              and to
              consummate the transactions contemplated by each of the Transaction
              Documents
              and otherwise to carry out its obligations hereunder and thereunder.
              The
              execution and delivery of each of the Transaction Documents by the
              Company and
              the consummation by it of the transactions contemplated hereby and
              thereby have
              been duly authorized by all necessary action on the part of the Company
              and no
              further action is required by the Company, its board of director or
              its
              stockholders in connection therewith other than in connection with
              the Required
              Approvals. Each Transaction Document has been (or upon delivery will
              have been)
              duly executed by the Company and, when delivered in accordance with
              the terms
              hereof and thereof, will constitute the valid and binding obligation
              of the
              Company enforceable against the Company in accordance with its terms
              except (i)
              as limited by applicable bankruptcy, insolvency, reorganization, moratorium
              and
              other laws of general application affecting enforcement of creditors’ rights
              generally, (ii) as limited by laws relating to the availability of
              specific
              performance, injunctive relief or other equitable remedies and (iii)
              insofar as
              indemnification and contribution provisions may be limited by applicable
              law.

             

            (d) No
              Conflicts.
              The
              execution, delivery and performance of the Transaction Documents by
              the Company
              and the consummation by the Company of the other transactions contemplated
              hereby and thereby do not and will not: (i) conflict with or violate
              any
              provision of the Company’s or any Subsidiary’s certificate or articles of
              incorporation, bylaws or other organizational or charter documents,
              or (ii)
              conflict with, or constitute a default (or an event that with notice
              or lapse of
              time or both would become a default) under, result in the creation
              of any Lien
              upon any of the properties or assets of the Company or any Subsidiary,
              or give
              to others any rights of termination, amendment, acceleration or cancellation
              (with or without notice, lapse of time or both) of, any agreement,
              credit
              facility, debt or other instrument (evidencing a Company or Subsidiary
              debt or
              otherwise) or other understanding to which the Company or any Subsidiary
              is a
              party or by which any property or asset of the Company or any Subsidiary
              is
              bound or affected, or (iii) subject to the Required Approvals, conflict
              with or
              result in a violation of any law, rule, regulation, order, judgment,
              injunction,
              decree or other restriction of any court or governmental authority
              to which the
              Company or a Subsidiary is subject (including federal and state securities
              laws
              and regulations), or by which any property or asset of the Company
              or a
              Subsidiary is bound or affected; except in the case of each of clauses
              (ii) and
              (iii), such as could not have or reasonably be expected to result in
              a Material
              Adverse Effect.

             

            (e) Filings,
              Consents and Approvals.
              Except
              as set forth on Schedule
              3.1(e),
              the
              Company is not required to obtain any consent, waiver, authorization
              or order
              of, give any notice to, or make any filing or registration with, any
              court or
              other federal, state, local or other governmental authority or other
              Person in
              connection with the execution, delivery and performance by the Company
              of the
              Transaction Documents, other than (i) filings required pursuant to
              Section 4.6,
              (ii) the filing with the Commission of the Registration Statement,
              (iii) the
              notice and/or application(s) to each applicable Trading Market for
              the issuance
              and sale of the Preferred Stock and Warrants and the listing of the
              Underlying
              Shares for trading thereon in the time and manner required thereby,
              and (iv) the
              filing of Form D with the Commission and such filings as are required
              to be made
              under applicable state securities laws (collectively, the “Required
              Approvals”).

             

            (f) Issuance
              of the Securities.
              The
              Securities are duly authorized and, when issued and paid for in accordance
              with
              the applicable Transaction Documents, will be duly and validly issued,
              fully
              paid and nonassessable, free and clear of all Liens imposed by the
              Company other
              than restrictions on transfer provided for in the Transaction Documents.
              The
              Underlying Shares, when issued in accordance with the terms of the
              Transaction
              Documents, will be validly issued, fully paid and nonassessable, free
              and clear
              of all Liens imposed by the Company. The Company has reserved from
              its duly
              authorized capital stock a number of shares of Common Stock for issuance
              of the
              Underlying Shares at least equal to the Actual Minimum on the date
              hereof.

             

            (g) Capitalization.
              The
              capitalization of the Company is as set forth on Schedule
              3.1(g).
              The
              Company has not issued any capital stock since its most
              recently filed periodic report under the Exchange Act,
              other
              than pursuant to the exercise of employee stock options under the Company’s
              stock option plans, the issuance of shares of Common Stock to employees
              pursuant
              to the Company’s employee stock purchase plan and pursuant to the conversion or
              exercise of outstanding Common Stock Equivalents. Except as set forth
              in the SEC
              Reports, no Person has any right of first refusal, preemptive right,
              right of
              participation, or any similar right to participate in the transactions
              contemplated by the Transaction Documents. Except as set forth in Schedule
              3.1(g)
              and
              except as a result of the purchase and sale of the Securities, there
              are no
              outstanding options, warrants, script rights to subscribe to, calls
              or
              commitments of any character whatsoever relating to, or securities,
              rights or
              obligations convertible into or exercisable or or exchangeable for,
              or giving
              any Person any right to subscribe for or acquire, any shares of Common
              Stock, or
              contracts, commitments, understandings or arrangements by which the
              Company or
              any Subsidiary is or may become bound to issue additional shares of
              Common Stock
              or Common Stock Equivalents. The issuance and sale of the Securities
              will not
              obligate the Company to issue shares of Common Stock or other securities
              to any
              Person (other than the Purchasers) and will not result in a right of
              any holder
              of Company securities to adjust the exercise, conversion, exchange
              or reset
              price under such securities. All of the outstanding shares of capital
              stock of
              the Company are validly issued, fully paid and nonassessable, have
              been issued
              in compliance with all federal and state securities laws, and none
              of such
              outstanding shares was issued in violation of any preemptive rights
              or similar
              rights to subscribe for or purchase securities. No further approval
              or
              authorization of any stockholder, the Board of Directors of the Company
              or
              others is required for the issuance and sale of the Securities. There
              are no
              stockholders agreements, voting agreements or other similar agreements
              with
              respect to the Company’s capital stock to which the Company is a party or, to
              the knowledge of the Company, between or among any of the Company’s
              stockholders.

             

            (h) SEC
              Reports; Financial Statements.
              The
              Company has filed all reports, schedules, forms, statements and other
              documents
              required to be filed by it under the Securities Act and the Exchange
              Act,
              including pursuant to Section 13(a) or 15(d) thereof, for the two years
              preceding the date hereof (or such shorter period as the Company was
              required by
              law to file such material) (the foregoing materials, including the
              Company’s
              Registration Statement on Form SB-2 filed in 2004 and the exhibits
              thereto and
              documents incorporated by reference therein, being collectively referred
              to
              herein as the “SEC
              Reports”)
              on a
              timely basis or has received a valid extension of such time of filing
              and has
              filed any such SEC Reports prior to the expiration of any such extension.
              As of
              their respective dates, the SEC Reports complied in all material respects
              with
              the requirements of the Securities Act and the Exchange Act and the
              rules and
              regulations of the Commission promulgated thereunder, and none of the
              SEC
              Reports, when filed, contained any untrue statement of a material fact
              or
              omitted to state a material fact required to be stated therein or necessary
              in
              order to make the statements therein, in light of the circumstances
              under which
              they were made, not misleading. The financial statements of the Company
              included
              in the SEC Reports comply in all material respects with applicable
              accounting
              requirements and the rules and regulations of the Commission with respect
              thereto as in effect at the time of filing. Such financial statements
              have been
              prepared in accordance with United States generally accepted accounting
              principles applied on a consistent basis during the periods involved
              (“GAAP”),
              except as may be otherwise specified in such financial statements or
              the notes
              thereto and except that unaudited financial statements may not contain
              all
              footnotes required by GAAP, and fairly present in all material respects
              the
              financial position of the Company and its consolidated subsidiaries
              as of and
              for the dates thereof and the results of operations and cash flows for the
              periods then ended, subject, in the case of unaudited statements, to
              normal,
              immaterial, year-end audit adjustments. 

             

            (i) Material
              Changes.
              Since
              the date of the latest audited financial statements included within
              the SEC
              Reports, except as specifically disclosed in the SEC Reports or as
              set forth on
              Schedule 3.1(i), (i) there has been no event, occurrence or development
              that has
              had or that could reasonably be expected to result in a Material Adverse
              Effect,
              (ii) the Company has not incurred any liabilities (contingent or otherwise)
              other than (A) trade payables and accrued expenses incurred in the
              ordinary
              course of business consistent with past practice and (B) liabilities
              not
              required to be reflected in the Company’s financial statements pursuant to GAAP
              or required to be disclosed in filings made with the Commission, (iii)
              the
              Company has not altered its method of accounting, (iv) the Company
              has not
              declared or made any dividend or distribution of cash or other property
              to its
              stockholders or purchased, redeemed or made any agreements to purchase
              or redeem
              any shares of its capital stock and (v) except as set forth in the
              SEC Reports,
              the Company has not issued any equity securities to any officer, director
              or
              Affiliate, except pursuant to existing Company stock option plans.
              The Company
              does not have pending before the Commission any request for confidential
              treatment of information. Except for the issuance of the Securities
              contemplated
              by this Agreement or as set forth on Schedule
              3.1(i),
              no
              event, liability or development has occurred or exists with respect
              to the
              Company or its Subsidiaries or their respective business, properties,
              operations
              or financial condition, that would be required to be disclosed by the
              Company
              under applicable securities laws at the time this representation is
              made that
              has not been publicly disclosed at least 1 Trading Day prior to the
              date that
              this representation is made.

             

            (j) Litigation.
              Except
              as set forth in the SEC Reports, there is no action, suit, inquiry,
              notice of
              violation, proceeding or investigation pending or, to the knowledge
              of the
              Company, threatened against or affecting the Company, any Subsidiary
              or any of
              their respective properties before or by any court, arbitrator, governmental
              or
              administrative agency or regulatory authority (federal, state, county,
              local or
              foreign) (collectively, an “Action”)
              which
              (i) adversely affects or challenges the legality, validity or enforceability
              of
              any of the Transaction Documents or the Securities or (ii) could, if
              there were
              an unfavorable decision, have or reasonably be expected to result in
              a Material
              Adverse Effect. Neither the Company nor any Subsidiary, nor any director
              or
              officer thereof, is or has been the subject of any Action involving
              a claim of
              violation of or liability under federal or state securities laws or
              a claim of
              breach of fiduciary duty. There has not been, and to the knowledge
              of the
              Company, there is not pending or contemplated, any investigation by
              the
              Commission involving the Company or any current or former director
              or officer of
              the Company. The Commission has not issued any stop order or other
              order
              suspending the effectiveness of any registration statement filed by
              the Company
              or any Subsidiary under the Exchange Act or the Securities Act.

             

            (k) Labor
              Relations.
              No
              material labor dispute exists or, to the knowledge of the Company,
              is imminent
              with respect to any of the employees of the Company which could reasonably
              be
              expected to result in a Material Adverse Effect.

             

            (l) Compliance.
              Neither
              the Company nor any Subsidiary (i) is in default under or in violation
              of (and
              no event has occurred that has not been waived that, with notice or
              lapse of
              time or both, would result in a default by the Company or any Subsidiary
              under),
              nor has the Company or any Subsidiary received notice of a claim that
              it is in
              default under or that it is in violation of, any indenture, loan or
              credit
              agreement or any other agreement or instrument to which it is a party
              or by
              which it or any of its properties is bound (whether or not such default
              or
              violation has been waived), (ii) is in violation of any order of any
              court,
              arbitrator or governmental body, or (iii) is or has been in violation
              of any
              statute, rule or regulation of any governmental authority, including
              without
              limitation all foreign, federal, state and local laws applicable to
              its business
              except in each case as could not have a Material Adverse Effect. 

             

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

             

            (n) Title
              to Assets.
              Except
              as set forth on Schedule 3.1(n), the Company and the Subsidiaries have
              good and
              marketable title in fee simple to all real property owned by them that
              is
              material to the business of the Company and the Subsidiaries and good
              and
              marketable title in all personal property owned by them that is material
              to the
              business of the Company and the Subsidiaries, in each case free and
              clear of all
              Liens, except for Liens as do not materially affect the value of such
              property
              and do not materially interfere with the use made and proposed to be
              made of
              such property by the Company and the Subsidiaries and Liens for the
              payment of
              federal, state or other taxes, the payment of which is neither delinquent
              nor
              subject to penalties. Any real property and facilities held under lease
              by the
              Company and the Subsidiaries are held by them under valid, subsisting
              and
              enforceable leases of which the Company and the Subsidiaries are in
              compliance.

             

            (o) Patents
              and Trademarks.
              Except
              as set forth in the SEC Reports, the Company and the Subsidiaries have,
              or have
              rights to use, all patents, patent applications, trademarks, trademark
              applications, service marks, trade names, copyrights, licenses and
              other similar
              rights that are necessary for use in connection with their respective
              businesses
              as described in the SEC Reports and which the failure to so have could
              have a
              Material Adverse Effect (collectively, the “Intellectual
              Property Rights”).
              Except as set forth in the SEC Reports, neither the Company nor any
              Subsidiary
              has received a written notice that the Intellectual Property Rights
              used by the
              Company or any Subsidiary violates or infringes upon the rights of
              any Person.
              To the knowledge of the Company, all such Intellectual Property Rights
              are
              enforceable and there is no existing infringement by another Person
              of any of
              the Intellectual Property Rights of others.

             

            (p) Insurance.
              The
              Company and the Subsidiaries are insured by insurers of recognized
              financial
              responsibility against such losses and risks and in such amounts as
              are prudent
              and customary in the businesses in which the Company and the Subsidiaries
              are
              engaged, including, but not limited to, directors and officers insurance
              coverage in an amount as set forth on Schedule
              3.1(p).
              To the
              best of Company’s knowledge, such insurance contracts and policies are accurate
              and complete. Neither the Company nor any Subsidiary has any reason
              to believe
              that it will not be able to renew its existing insurance coverage as
              and when
              such coverage expires or to obtain similar coverage from similar insurers
              as may
              be necessary to continue its business without a significant increase
              in
              cost.

             

            (q) Transactions
              With Affiliates and Employees.
              Except
              as set forth in the SEC Reports, none of the officers or directors
              of the
              Company and, to the knowledge of the Company, none of the employees
              of the
              Company is presently a party to any transaction with the Company or
              any
              Subsidiary (other than 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 knowledge of the Company, any
              entity in
              which any officer, director, or any such employee has a substantial
              interest or
              is an officer, director, trustee or partner, in each case in excess
              of $60,000
              other than (i) for payment of salary or consulting fees for services
              rendered,
              (ii) reimbursement for expenses incurred on behalf of the Company and
              (iii) for
              other employee benefits, including stock option agreements under any
              stock
              option plan of the Company.

             

            (r) Sarbanes-Oxley;
              Internal Accounting Controls.
              The
              Company is in material compliance with all provisions of the Sarbanes-Oxley
              Act
              of 2002 which are applicable to it as of the Closing Date.

             

            (s) Certain
              Fees.
              Except
              as set forth on Schedule
              3.1(s),
              no
              brokerage or finder’s fees or commissions are or will be payable by the Company
              to any broker, financial advisor or consultant, finder, placement agent,
              investment banker, bank or other Person with respect to the transactions
              contemplated by this Agreement. The Purchasers shall have no obligation
              with
              respect to any fees or with respect to any claims made by or on behalf
              of other
              Persons for fees of a type contemplated in this Section that may be
              due in
              connection with the transactions contemplated by this Agreement.

             

            (t) Private
              Placement.
              Assuming the accuracy of the Purchasers representations and warranties
              set forth
              in Section 3.2, no registration under the Securities Act is required
              for the
              offer and sale of the Securities by the Company to the Purchasers as
              contemplated hereby. The issuance and sale of the Securities hereunder
              does not
              contravene the rules and regulations of the Trading Market.

             

            (u) Investment
              Company.
              The
              Company is not, and is not an Affiliate of, and immediately after receipt
              of
              payment for the shares of Preferred Stock, will not be or be an Affiliate
              of, an
“investment company” within the meaning of the Investment Company Act of 1940,
              as amended. The Company shall conduct its business in a manner so that
              it will
              not become subject to the Investment Company Act.

             

            (v) Registration
              Rights.
              Except
              as set forth in the SEC Reports and on Schedule
              3.1(v),
              other
              than each of the Purchasers, no Person has any right to cause the Company
              to
              effect the registration under the Securities Act of any securities
              of the
              Company.

             

            (w)Listing
              and Maintenance Requirements.
              The
              Company’s Common Stock is registered pursuant to Section 12(g) of the Exchange
              Act, and the Company has taken no action designed to, or which to its
              knowledge
              is likely to have the effect of, terminating the registration of the
              Common
              Stock under the Exchange Act nor has the Company received any notification
              that
              the Commission is contemplating terminating such registration. The
              Company has
              not, in the 12 months preceding the date hereof, received notice from
              any
              Trading Market on which the Common Stock is or has been listed or quoted
              to the
              effect that the Company is not in compliance with the listing or maintenance
              requirements of such Trading Market. The Company is, and has no reason
              to
              believe that it will not in the foreseeable future continue to be,
              in compliance
              with all such listing and maintenance requirements.

             

            (x)Application
              of Takeover Protections.
              The
              Company and its Board of Directors have taken all necessary action,
              if any, in
              order to render inapplicable any control share acquisition, business
              combination, poison pill (including any distribution under a rights
              agreement)
              or other similar anti-takeover provision under the Company’s Certificate of
              Incorporation (or similar charter documents) or the laws of its state
              of
              incorporation that is or could become applicable to the Purchasers
              as a result
              of the Purchasers and the Company fulfilling their obligations or exercising
              their rights under the Transaction Documents, including without limitation
              the
              Company’s issuance of the Securities and the Purchasers’ ownership of the
              Securities.

             

            (y)Disclosure.
              The
              Company confirms that neither it nor any other Person acting on its
              behalf has
              provided any of the Purchasers or their agents or counsel with any
              information
              that constitutes or might constitute material, nonpublic information,
              other than
              the information that will be disclosed in the Current Report on Form
              8-K to be
              filed on or before October 5, 2006 pursuant to Section 4.6. The Company
              understands and confirms that the Purchasers will rely on the foregoing
              representations and covenants in effecting transactions in securities
              of the
              Company. All disclosure provided to the Purchasers regarding the Company,
              its
              business and the transactions contemplated hereby, including the Disclosure
              Schedules to this Agreement, furnished by or on behalf of the Company
              with
              respect to the representations and warranties made herein are true
              and correct
              with respect to such representations and warranties and do not contain
              any
              untrue statement of a material fact or omit to state any material fact
              necessary
              in order to make the statements made therein, in light of the circumstances
              under which they were made, not misleading. The Company acknowledges
              and agrees
              that no Purchaser makes or has made any representations or warranties
              with
              respect to the transactions contemplated hereby other than those specifically
              set forth in Section 3.2 hereof.

             

            (z)No
              Integrated Offering.
              Assuming
              the accuracy of the Purchasers’ representations and warranties set forth in
              Section 3.2 and except as set forth on Schedule
              3.1(z),
              neither
              the Company, nor any of its Affiliates, nor any Person acting on its
              or their
              behalf has, directly or indirectly, made any offers or sales of any
              security or
              solicited any offers to buy any security, under circumstances that
              would cause
              this offering of the Securities to be integrated with prior offerings
              by the
              Company for purposes of the Securities Act or any applicable shareholder
              approval provisions, including, without limitation, under the rules
              and
              regulations of any Trading Market on which any of the securities of
              the Company
              are listed or designated. 

             

            (aa)Solvency.
              The
              Company does not intend to incur debts beyond its ability to pay such
              debts as
              they mature (taking into account the timing and amounts of cash to
              be payable on
              or in respect of its debt). The Company has no knowledge of any facts
              or
              circumstances which lead it to believe that it will file for reorganization
              or
              liquidation under the bankruptcy or reorganization laws of any jurisdiction
              within one year from the Closing Date. The SEC Reports set forth as
              of the dates
              thereof all outstanding secured and unsecured Indebtedness of the Company
              or any
              Subsidiary, or for which the Company or any Subsidiary has commitments.
              For the
              purposes of this Agreement, “Indebtedness”
shall
              mean (a) any liabilities for borrowed money or amounts owed in excess
              of $50,000
              (other than trade accounts payable incurred in the ordinary course
              of business),
              (b) all guaranties, endorsements and other contingent obligations in
              respect of
              Indebtedness of others, whether or not the same are or should be reflected
              in
              the Company’s balance sheet (or the notes thereto), except guaranties by
              endorsement of negotiable instruments for deposit or collection or
              similar
              transactions in the ordinary course of business; and (c) the present
              value of
              any lease payments
              in excess of $50,000 due under leases required to be capitalized in
              accordance
              with GAAP. Except
              as
              set forth on Schedule
              3.1(aa),
              neither
              the Company nor any Subsidiary is in default with respect to any
              Indebtedness.

             

            (bb)Intentionally
              Omitted.

             

            (cc)Tax
              Status.
              Except
              for matters that would not, individually or in the aggregate, have
              or reasonably
              be expected to result in a Material Adverse Effect, the Company and
              each
              Subsidiary has filed all necessary federal, state and foreign income
              and
              franchise tax returns and has paid or accrued all taxes shown as due
              thereon,
              and the Company has no knowledge of a tax deficiency which has been
              asserted or
              threatened against the Company or any Subsidiary.

             

            (dd)No
              General Solicitation.
              Neither
              the Company nor any person acting on behalf of the Company has offered
              or sold
              any of the Securities by any form of general solicitation or general
              advertising. The Company has offered the Securities for sale only to
              the
              Purchasers and certain other “accredited investors” within the meaning of Rule
              501 under the Securities Act.

             

            (ee)Foreign
              Corrupt Practices.
              Neither
              the Company, nor to the knowledge of the Company, any agent or other
              person
              acting on behalf of the Company, has (i) directly or indirectly, used
              any funds
              for unlawful contributions, gifts, entertainment or other unlawful
              expenses
              related to foreign or domestic political activity, (ii) made any unlawful
              payment to foreign or domestic government officials or employees or
              to any
              foreign or domestic political parties or campaigns from corporate funds,
              (iii)
              failed to disclose fully any contribution made by the Company (or made
              by any
              person acting on its behalf of which the Company is aware) which is in violation
              of law, or (iv) violated in any material respect any provision of the
              Foreign
              Corrupt Practices Act of 1977, as amended

             

            (ff)Accountants.
              The
              Company’s accountants are set forth on Schedule
              3.1(ff)
              of the
              Disclosure Schedule. To the Company’s knowledge, such accountants, who the
              Company expects will express their opinion with respect to the financial
              statements to be included in the Company’s Annual Report on Form 10-KSB for the
              year ending December 31, 2004 are a registered public accounting firm
              as
              required by the Securities Act.

             

            (gg)Seniority.
              Except
              as set forth on Schedule
              3.1(gg),
              as of
              the Closing Date, no indebtedness or other equity of the Company is
              senior to
              the Preferred Stock in right of payment, whether with respect to interest
              or
              upon liquidation or dissolution, or otherwise, other than indebtedness
              secured
              by purchase money security interests (which is senior only as to underlying
              assets covered thereby) and capital lease obligations (which is senior
              only as
              to the property covered thereby).

             

            (hh)No
              Disagreements with Accountants and Lawyers.
              There
              are no disagreements of any kind presently existing, or reasonably
              anticipated
              by the Company to arise, between the accountants and lawyers formerly
              or
              presently employed by the Company and, except as set forth on Schedule
              3.1(hh),
              the
              Company is current with respect to any fees owed to its accountants
              and
              lawyers.

             

            (ii)Acknowledgment
              Regarding Purchasers’ Purchase of Securities.
              The
              Company acknowledges and agrees that each of the Purchasers is acting
              solely in
              the capacity of an arm’s length purchaser with respect to the Transaction
              Documents and the transactions contemplated hereby. The Company further
              acknowledges that no Purchaser is acting as a financial advisor or
              fiduciary of
              the Company (or in any similar capacity) with respect to this Agreement
              and the
              transactions contemplated hereby and any advice given by any Purchaser
              or any of
              their respective representatives or agents in connection with this
              Agreement and
              the transactions contemplated hereby is merely incidental to the Purchasers’
purchase of the Securities. The Company further represents to each
              Purchaser
              that the Company’s decision to enter into this Agreement has been based solely
              on the independent evaluation of the transactions contemplated hereby
              by the
              Company and its representatives.

             

            (jj)Acknowledgement
              Regarding Purchasers’ Trading Activity.
              Anything in this Agreement or elsewhere herein to the contrary notwithstanding
              (except for Section 4.16 hereof), it is understood and agreed by the
              Company (i)
              that none of the Purchasers have been asked to agree, nor has any Purchaser
              agreed, to desist from purchasing or selling, long and/or short, securities
              of
              the Company, or “derivative” securities based on securities issued by the
              Company or to hold the Securities for any specified term; (ii) that
              past or
              future open market or other transactions by any Purchaser, including
              Short
              Sales, and specifically including, without limitation, Short Sales
              or
“derivative” transactions, before or after the closing of this or future private
              placement transactions, may negatively impact the market price of the
              Company’s
              publicly-traded securities; (iii) that any Purchaser, and counter parties
              in
“derivative” transactions to which any such Purchaser is a party, directly or
              indirectly, presently may have a “short” position in the Common Stock, and (iv)
              that each Purchaser shall not be deemed to have any affiliation with
              or control
              over any arm’s length counter-party in any “derivative”
transaction.

             

            (kk)Regulation
              M Compliance. 
              The Company has not, and to its knowledge no one acting on its behalf
              has, (i)
              taken, directly or indirectly, any action designed to cause or to result
              in the
              stabilization or manipulation of the price of any security of the Company
              to
              facilitate the sale or resale of any of the Securities, (ii) sold,
              bid for,
              purchased, or paid any compensation for soliciting purchases of, any
              of the
              securities of the Company, or (iii) paid or agreed to pay to any Person
              any
              compensation for soliciting another to purchase any other securities
              of the
              Company, other than, in the case of clauses (ii) and (iii), compensation
              paid to
              the Company’s placement agent in connection with the placement of the
              Securities.

             

            3.2 Representations
              and Warranties of the Purchasers

             

            .
              Each
              Purchaser hereby, for itself and for no other Purchaser, represents
              and warrants
              as of the date hereof and as of the Closing Date to the Company as
              follows:

             

            (a) Organization;
              Authority.
              Such
              Purchaser is an entity duly organized, validly existing and in good
              standing
              under the laws of the jurisdiction of its organization with full right,
              corporate or partnership power and authority to enter into and to consummate
              the
              transactions contemplated by the Transaction Documents and otherwise
              to carry
              out its obligations hereunder and thereunder. The execution, delivery
              and
              performance by such Purchaser of the transactions contemplated by this
              Agreement
              have been duly authorized by all necessary corporate or similar action
              on the
              part of such Purchaser. Each Transaction Document to which it is a
              party has
              been duly executed by such Purchaser, and when delivered by such Purchaser
              in
              accordance with the terms hereof, will constitute the valid and legally
              binding
              obligation of such Purchaser, enforceable against it in accordance
              with its
              terms, except (i) as limited by general equitable principles and applicable
              bankruptcy, insolvency, reorganization, moratorium and other laws of
              general
              application affecting enforcement of creditors’ rights generally, (ii) as
              limited by laws relating to the availability of specific performance,
              injunctive
              relief or other equitable remedies and (iii) insofar as indemnification
              and
              contribution provisions may be limited by applicable law.

             

            (b) Own
              Account.
              Such
              Purchaser understands that the Securities are “restricted securities” and have
              not been registered under the Securities Act or any applicable state
              securities
              law and is acquiring the Securities as principal for its own account
              and not
              with a view to or for distributing or reselling such Securities or
              any part
              thereof in violation of the Securities Act or any applicable state
              securities
              law, has no present intention of distributing any of such Securities
              in
              violation of the Securities Act or any applicable state securities
              law and has
              no direct or indirect arrangement or understandings with any other
              persons to
              distribute or regarding the distribution of such Securities (this representation
              and warranty not limiting such Purchaser’s right to sell the Securities pursuant
              to the Registration Statement or otherwise in compliance with applicable
              federal
              and state securities laws) in violation of the Securities Act or any
              applicable
              state securities law. Such Purchaser is acquiring the Securities hereunder
              in
              the ordinary course of its business.

             

            (c) Purchaser
              Status.
              At the
              time such Purchaser was offered the Securities, it was, and at the
              date hereof
              it is, and on each date on which it exercises any Warrants, it will
              be either:
              (i) an “accredited investor” as defined in Rule 501(a)(1), (a)(2), (a)(3),
              (a)(7) or (a)(8) under the Securities Act or (ii) a “qualified institutional
              buyer” as defined in Rule 144A(a) under the Securities Act. Such Purchaser
              is
              not required to be registered as a broker-dealer under Section 15 of
              the
              Exchange Act.

             

            (d) Experience
              of Such Purchaser.
              Such
              Purchaser, either alone or together with its representatives, has such
              knowledge, sophistication and experience in business and financial
              matters so as
              to be capable of evaluating the merits and risks of the prospective
              investment
              in the Securities, and has so evaluated the merits and risks of such
              investment.
              Such Purchaser is able to bear the economic risk of an investment in
              the
              Securities and, at the present time, is able to afford a complete loss
              of such
              investment.

             

            (e) General
              Solicitation.
              Such
              Purchaser is not purchasing the Securities as a result of any advertisement,
              article, notice or other communication regarding the Securities published
              in any
              newspaper, magazine or similar media or broadcast over television or
              radio or
              presented at any seminar or any other general solicitation or general
              advertisement.

             

            (f) Short
              Sales and Confidentiality Prior To The Date Hereof.
              Other
              than the transaction contemplated hereunder, such Purchaser has not
              directly or
              indirectly, nor has any Person acting on behalf of or pursuant to any
              understanding with such Purchaser, executed any disposition, including
              Short
              Sales, in the securities of the Company during the period commencing
              from
              the time
              that such Purchaser first received a term sheet (written or oral) from
              the
              Company or any other Person setting forth the material terms of the
              transactions
              contemplated hereunder until the date hereof (“Discussion
              Time”).
              Notwithstanding the foregoing, in the case of a Purchaser that is a
              multi-managed investment vehicle whereby separate portfolio managers
              manage
              separate portions of such Purchaser's assets and the portfolio managers
              have no
              direct knowledge of the investment decisions made by the portfolio
              managers
              managing other portions of such Purchaser's assets, the representation
              set forth
              above shall only apply with respect to the portion of assets managed
              by the
              portfolio manager that made the investment decision to purchase the
              Securities
              covered by this Agreement. Other than to other Persons party to this
              Agreement,
              such Purchaser has maintained the confidentiality of all disclosures
              made to it
              in connection with this transaction (including the existence and terms
              of this
              transaction).

             

            (g) Company
              Information.
              Each
              Purchaser has had an opportunity to discuss the Company’s business, management
              and financial affairs with management of the Company. The undersigned
              has also
              had the opportunity to ask questions of, and receive answers from,
              management of
              the Company regarding the terms and conditions of this investment.
              Each
              Purchaser has consulted its own legal and tax counsel regarding the
              terms and
              conditions of this investment.

             

            The
              Company acknowledges and agrees that each Purchaser does not make or
              has not
              made any representations or warranties with respect to the transactions
              contemplated hereby other than those specifically set forth in this
              Section
              3.2.

             

             

            ARTICLE
              IV

            OTHER
              AGREEMENTS OF THE PARTIES

             

            4.1 Transfer
              Restrictions.

             

            (a) The
              Securities may only be disposed of in compliance with state and federal
              securities laws. In connection with any transfer of Securities other
              than
              pursuant to an effective registration statement or Rule 144, to the
              Company or
              to an Affiliate of a Purchaser or in connection with a pledge as contemplated
              in
              Section 4.1(b), the Company may require the transferor thereof to provide
              to the
              Company an opinion of counsel selected by the transferor and reasonably
              acceptable to the Company, the form and substance of which opinion
              shall be
              reasonably satisfactory to the Company, to the effect that such transfer
              does
              not require registration of such transferred Securities under the Securities
              Act. As a condition of transfer, any such transferee shall agree in
              writing to
              be bound by the terms of this Agreement and shall have the rights of
              a Purchaser
              under this Agreement and the Registration Rights Agreement.

             

            (b) The
              Purchasers agree to the imprinting, so long as is required by this
              Section
              4.1(b), of a legend on any of the Securities in the following form:
              

             

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

             

            The
              Company acknowledges and agrees that a Purchaser may from time to time
              pledge
              pursuant to a bona fide margin agreement with a registered broker-dealer
              or
              grant a security interest in some or all of the Securities to a financial
              institution that is an “accredited investor” as defined in Rule 501(a) under the
              Securities Act and who agrees to be bound by the provisions of this
              Agreement
              and the Registration Rights Agreement and, if required under the terms
              of such
              arrangement, such Purchaser may transfer pledged or secured Securities
              to the
              pledgees or secured parties. Such a pledge or transfer would not be
              subject to
              approval of the Company and no legal opinion of legal counsel of the
              pledgee,
              secured party or pledgor shall be required in connection therewith.
              Further, no
              notice shall be required of such pledge. At the appropriate Purchaser’s expense,
              the Company will execute and deliver such reasonable documentation
              as a pledgee
              or secured party of Securities may reasonably request in connection
              with a
              pledge or transfer of the Securities, including, if the Securities
              are subject
              to registration pursuant to the Registration Rights Agreement, the
              preparation
              and filing of any required prospectus supplement under Rule 424(b)(3)
              under the
              Securities Act or other applicable provision of the Securities Act
              to
              appropriately amend the list of Selling Stockholders thereunder.

             

            (c) Certificates
              evidencing the Underlying Shares shall not contain any legend (including
              the
              legend set forth in Section 4.1(b) hereof): (i) while a registration
              statement
              (including the Registration Statement) covering the resale of such
              security is
              effective under the Securities Act, or (ii) following any sale of such
              Underlying Shares pursuant to Rule 144, or (iii) if such Underlying
              Shares are
              eligible for sale under Rule 144(k), or (iv) if such legend is not
              required
              under applicable requirements of the Securities Act (including judicial
              interpretations and pronouncements issued by the staff of the Commission).
              The
              Company shall cause its counsel to issue a legal opinion to the Company’s
              transfer agent promptly after the Effective Date if required by the
              Company’s
              transfer agent to effect the removal of the legend hereunder. If all
              or any
              shares of Preferred Stock or any portion of a Warrant is converted
              or exercised
              (as applicable) at a time when there is an effective registration statement
              to
              cover the resale of the Underlying Shares, or if such Underlying Shares
              may be
              sold under Rule 144(k) or if such legend is not otherwise required
              under
              applicable requirements of the Securities Act (including judicial
              interpretations thereof) then such Underlying Shares shall be issued
              free of all
              legends. The Company agrees that following the Effective Date or at
              such time as
              such legend is no longer required under this Section 4.1(c), it will,
              no later
              than three Trading Days following the delivery by a Purchaser to the
              Company or
              the Company’s transfer agent of a certificate representing Underlying Shares, as
              applicable, issued with a restrictive legend (such third Trading Day,
              the
“Legend
              Removal Date”),
              deliver or cause to be delivered to such Purchaser a certificate representing
              such shares that is free from all restrictive and other legends. The
              Company may
              not make any notation on its records or give instructions to any transfer
              agent
              of the Company that enlarge the restrictions on transfer set forth
              in this
              Section. Certificates for Underlying Shares subject to legend removal
              hereunder
              shall be transmitted by the transfer agent of the Company to the Purchasers
              by
              crediting the account of the Purchaser’s prime broker with the Depository Trust
              Company System, if the Company’s transfer agent is a participant in such system.
              The Company agrees to cause its transfer agent to be a participant
              in such
              system (or engage a new transfer agent which is a participant in the
              system)
              within 60 calendar days of the Closing Date.

            

            (d) In
              addition to such Purchaser’s other available remedies, the Company shall pay to
              a Purchaser, in cash, as partial liquidated damages and not as a penalty,
              for
              each $1,000 of Underlying Shares (based on the VWAP of the Common Stock
              on the
              date such Securities are submitted to the Company’s transfer agent) delivered
              for removal of the restrictive legend and subject to Section 4.1(c),
              $10 per
              Trading Day (increasing to $20 per Trading Day 5 Trading Days after
              such damages
              have begun to accrue) for each Trading Day after the Legend Removal
              Date until
              such certificate is delivered without a legend. Nothing herein shall
              limit such
              Purchaser’s right to pursue actual damages for the Company’s failure to deliver
              certificates representing any Securities as required by the Transaction
              Documents, and such Purchaser shall have the right to pursue all remedies
              available to it at law or in equity including, without limitation,
              a decree of
              specific performance and/or injunctive relief.

            

            (e) 
              Each
              Purchaser, severally and not jointly with the other Purchasers, agrees
              that the
              removal of the restrictive legend from certificates representing Securities
              as
              set forth in this Section 4.1 is predicated upon the Company’s reliance that the
              Purchaser will sell any Securities pursuant to either the registration
              requirements of the Securities Act, including any applicable prospectus
              delivery
              requirements, or an exemption therefrom, and that if Securities are
              sold
              pursuant to a Registration Statement, they will be sold in compliance
              with the
              plan of distribution set forth therein.

            

            4.2Acknowledgment
              of Dilution.
              The
              Company acknowledges that the issuance of the Securities may result
              in dilution
              of the outstanding shares of Common Stock, which dilution may be substantial
              under certain market conditions. The Company further acknowledges that
              its
              obligations under the Transaction Documents, including without limitation
              its
              obligation to issue the Underlying Shares pursuant to the Transaction
              Documents,
              are unconditional and absolute and not subject to any right of set
              off,
              counterclaim, delay or reduction, regardless of the effect of any such
              dilution
              or any claim the Company may have against any Purchaser and regardless
              of the
              dilutive effect that such issuance may have on the ownership of the
              other
              stockholders of the Company.

             

            4.3Furnishing
              of Information.
              As long
              as any Purchaser owns Securities, the Company covenants to timely file
              (or
              obtain extensions in respect thereof and file within the applicable
              grace
              period) all reports required to be filed by the Company after the date
              hereof
              pursuant to the Exchange Act. As long as any Purchaser owns Securities
              that are
              not eligible to be sold under Rule 144(k), if the Company is not required
              to
              file reports pursuant to the Exchange Act, it will prepare and furnish
              to the
              Purchasers and make publicly available in accordance with Rule 144(c)
              such
              information as is required for the Purchasers to sell the Securities
              under Rule
              144. The Company further covenants that it will take such further action
              as any
              holder of Securities may reasonably request, all to the extent required
              from
              time to time to enable such Person to sell such Securities without
              registration
              under the Securities Act within the limitation of the exemptions provided
              by
              Rule 144.

             

            4.4Integration.
              The
              Company shall not sell, offer for sale or solicit offers to buy or
              otherwise
              negotiate in respect of any security (as defined in Section 2 of the
              Securities
              Act) that would be integrated with the offer or sale of the Securities
              in a
              manner that would require the registration under the Securities Act
              of the sale
              of the Securities to the Purchasers or that would be integrated with
              the offer
              or sale of the Securities for purposes of the rules and regulations
              of any
              Trading Market.

             

            4.5Conversion
              and Exercise Procedures.
              The
              form of Notice of Exercise included in the Warrants and the Notice
              of Conversion
              included in the Certificate of Designation set forth the totality of
              the
              procedures required of the Purchasers in order to exercise the Warrants
              or
              convert the Preferred Stock. No additional legal opinion or other information
              or
              instructions shall be required of the Purchasers to exercise their
              Warrants or
              convert their Preferred Stock. The Company shall honor exercises of
              the Warrants
              and conversions of the Preferred Stock and shall deliver Underlying
              Shares in
              accordance with the terms, conditions and time periods set forth in
              the
              Transaction Documents.

             

            4.6Securities
              Laws Disclosure;
              Publicity.
              The
              Company shall, by 8:30 a.m. New York City time on October 5, 2006,
              issue a
              Current Report on Form 8-K, disclosing the material terms of the transactions
              contemplated hereby and including the Transaction Documents as exhibits
              thereto
              and also disclosing any other material non-public information of which
              the
              Company has informed the Purchasers. The Company and each Purchaser
              shall
              consult with each other in issuing any other press releases with respect
              to the
              transactions contemplated hereby, and neither the Company nor any Purchaser
              shall issue any such press release or otherwise make any such public
              statement
              without the prior consent of the Company, with respect to any press
              release of
              any Purchaser, or without the prior consent of each Purchaser, with
              respect to
              any press release of the Company, which consent shall not unreasonably
              be
              withheld or delayed, except if such disclosure is required by law,
              in which case
              the disclosing party shall promptly provide the other party with prior
              notice of
              such public statement or communication. Notwithstanding the foregoing,
              the
              Company shall not publicly disclose the name of any Purchaser, or include
              the
              name of any Purchaser in any filing with the Commission or any regulatory
              agency
              or Trading Market, without the prior written consent of such Purchaser,
              except
              (i) as required by federal securities law in connection with (A) any
              registration statement contemplated by the Registration Rights Agreement
              and (B)
              the filing of final Transaction Documents (including signature pages
              thereto)
              with the Commission and (ii) to the extent such disclosure is required
              by law or
              Trading Market regulations, in which case the Company shall provide
              the
              Purchasers with prior notice of such disclosure permitted under this
              subclause
              (ii).

             

            4.7 Shareholder
              Rights Plan.
              No
              claim will be made or enforced by the Company or, to the knowledge
              of the
              Company, any other Person that any Purchaser is an “Acquiring Person” under any
              shareholder rights plan or similar plan or arrangement in effect or
              hereafter
              adopted by the Company, or that any Purchaser could be deemed to trigger
              the
              provisions of any such plan or arrangement, by virtue of receiving
              Securities
              under the Transaction Documents or under any other agreement between
              the Company
              and the Purchasers. The Company shall conduct its business in a manner
              so that
              it will not become subject to the Investment Company Act.

             

            4.8
               Non-Public
              Information.
              The
              Company covenants and agrees that from and after the date hereof, neither
              it nor
              any other Person acting on its behalf will provide any Purchaser or
              its agents
              or counsel with any information that the Company believes constitutes
              material
              non-public information, unless prior thereto such Purchaser shall have
              executed
              a written agreement regarding the confidentiality and use of such information.
              The Company understands and confirms that each Purchaser shall be relying
              on the
              foregoing representations in effecting transactions in securities of
              the
              Company.

             

            4.9 Use
              of
              Proceeds.
              Except
              as set forth on Schedule
              4.9
              attached
              hereto, the Company shall use the net proceeds from the sale of the
              Securities
              hereunder for general corporate purposes including growth and capital
              initiatives such as FDA clinical trials, marketing, travel, investor
              relations,
              public relations and capital expenditures for additional manufacturing
              equipment
              and, except as set forth on Schedule
              4.9
              attached
              hereto, not for the satisfaction of any portion of the Company’s debt (other
              than payment of trade payables in the ordinary course of the Company’s business
              and prior practices), to redeem Common Stock or Common Stock Equivalents
              or to
              settle any outstanding litigation.

             

            4.10 Reimbursement.
              If any
              Purchaser becomes involved in any capacity in any Proceeding by or
              against any
              Person who is a stockholder of the Company (except as a result of sales,
              pledges, margin sales and similar transactions by such Purchaser to
              or with any
              current stockholder), solely as a result of such Purchaser’s acquisition of the
              Securities under this Agreement, the Company will reimburse such Purchaser
              for
              its reasonable legal and other expenses (including the cost of any
              investigation
              preparation and travel in connection therewith) incurred in connection
              therewith, as such expenses are incurred. The reimbursement obligations
              of the
              Company under this paragraph shall be in addition to any liability
              which the
              Company may otherwise have, shall extend upon the same terms and conditions
              to
              any Affiliates of the Purchasers who are actually named in such action,
              proceeding or investigation, and partners, directors, agents, employees
              and
              controlling persons (if any), as the case may be, of the Purchasers
              and any such
              Affiliate, and shall be binding upon and inure to the benefit of any
              successors,
              assigns, heirs and personal representatives of the Company, the Purchasers
              and
              any such Affiliate and any such Person. The Company also agrees that
              neither the
              Purchasers nor any such Affiliates, partners, directors, agents, employees
              or
              controlling persons shall have any liability to the Company or any
              Person
              asserting claims on behalf of or in right of the Company solely as
              a result of
              acquiring the Securities under this Agreement.

             

            4.11 Indemnification
              of Purchasers.
              Subject
              to the provisions of this Section 4.11, the Company will indemnify
              and hold each
              Purchaser and its directors, officers, shareholders, members, partners,
              employees and agents (and any other Persons with a functionally equivalent
              role
              of a Person holding such titles notwithstanding a lack of such title
              or any
              other title), each Person who controls such Purchaser (within the meaning
              of
              Section 15 of the Securities Act and Section 20 of the Exchange Act),
              and the
              directors, officers, shareholders, agents, members, partners or employees
              (and
              any other Persons with a functionally equivalent role of a Person holding
              such
              titles notwithstanding a lack of such title or any other title) of
              such
              controlling person (each, a “Purchaser
              Party”)
              harmless from any and all losses, liabilities, obligations, claims,
              contingencies, damages, costs and expenses, including all judgments,
              amounts
              paid in settlements, court costs and reasonable attorneys’ fees and costs of
              investigation that any such Purchaser Party may suffer or incur as
              a result of
              or relating to (a) any breach of any of the representations, warranties,
              covenants or agreements made by the Company in this Agreement or in
              the other
              Transaction Documents or (b) any action instituted against a Purchaser,
              or any
              of them or their respective Affiliates, by any stockholder of the Company
              who is
              not an Affiliate of such Purchaser, with respect to any of the transactions
              contemplated by the Transaction Documents (unless such action is based
              upon a
              breach of such Purchaser’s representations, warranties or covenants under the
              Transaction Documents or any agreements or understandings such Purchaser
              may
              have with any such stockholder or any violations by the Purchaser of
              state or
              federal securities laws or any conduct by such Purchaser which constitutes
              fraud, gross negligence, willful misconduct or malfeasance). If any
              action shall
              be brought against any Purchaser Party in respect of which indemnity
              may be
              sought pursuant to this Agreement, such Purchaser Party shall promptly
              notify
              the Company in writing, and the Company shall have the right to assume
              the
              defense thereof with counsel of its own choosing. Any Purchaser Party
              shall have
              the right to employ separate counsel in any such action and participate
              in the
              defense thereof, but the fees and expenses of such counsel shall be
              at the
              expense of such Purchaser Party except to the extent that (i) the employment
              thereof has been specifically authorized by the Company in writing,
              (ii) the
              Company has failed after a reasonable period of time to assume such
              defense and
              to employ counsel or (iii) in such action there is, in the reasonable
              opinion of
              such separate counsel, a material conflict on any material issue between
              the
              position of the Company and the position of such Purchaser Party. The
              Company
              will not be liable to any Purchaser Party under this Agreement (i)
              for any
              settlement by a Purchaser Party effected without the Company’s prior written
              consent, which shall not be unreasonably withheld or delayed; or (ii)
              to the
              extent, but only to the extent that a loss, claim, damage or liability
              is
              attributable to any Purchaser Party’s breach of any of the representations,
              warranties, covenants or agreements made by the Purchasers in this
              Agreement or
              in the other Transaction Documents.

             

            4.12 Reservation
              and Listing of Securities.

             

            (a) The
              Company shall maintain a reserve from its duly authorized shares of
              Common Stock
              for issuance pursuant to the Transaction Documents in such amount as
              may be
              required to fulfill its obligations in full under the Transaction Documents.
              

             

            (b) If,
              on
              any date, the number of authorized but unissued (and otherwise unreserved)
              shares of Common Stock is less than 130% of (i) the Actual Minimum on such
              date, minus (ii) the number of shares of Common Stock previously issued
              pursuant
              to the Transaction Documents, then the Board of Directors of the Company
              shall
              use commercially reasonable efforts to amend the Company’s certificate or
              articles of incorporation to increase the number of authorized but
              unissued
              shares of Common Stock to at least the Actual Minimum at such time
              (minus the
              number of shares of Common Stock previously issued pursuant to the
              Transaction
              Documents), as soon as possible and in any event not later than the
              75th
              day
              after such date; provided that the Company will not be required at
              any time to
              authorize a number of shares of Common Stock greater than the maximum
              remaining
              number of shares of Common Stock that could possibly be issued after
              such time
              pursuant to the Transaction Documents.

             

            (c) The
              Company shall, if applicable: (i) in the time and manner required by
              the Trading
              Market, prepare and file with such Trading Market an additional shares
              listing
              application covering a number of shares of Common Stock at least equal
              to the
              Actual Minimum on the date of such application, (ii) take all steps
              necessary to
              cause such shares of Common Stock to be approved for listing on the
              Trading
              Market as soon as possible thereafter, (iii) provide to the Purchasers
              evidence
              of such listing, and (iv) maintain the listing of such Common Stock
              on any date
              at least equal to the Actual Minimum on such date on such Trading Market
              or
              another Trading Market. 

             

            4.13 Participation
              in Future Financing.
              

             

            (a) From
              the
              date hereof until the one year anniversary of the Closing Date, upon
              any
              financing by the Company or any of its Subsidiaries of Common Stock
              or Common
              Stock Equivalents (a “Subsequent
              Financing”),
              each
              Purchaser shall have the right, subject to Section 4.13(e), to participate
              in up
              to 100% of the Subsequent Financing (the “Participation
              Maximum”);
              provided,
              however,
              the
              Participation Maximum shall be reduced on a pro rata basis to allow
              the holders
              of the Company’s Secured Debentures, dated June 29, 2006, to participate in the
              Subsequent Financing, to the extent such holders may have such
              rights.

             

            (b) At
              least
              7 Trading Days prior to the closing of the Subsequent Financing, the
              Company
              shall deliver to each Purchaser a written notice of its intention to
              effect a
              Subsequent Financing (“Pre-Notice”),
              which
              Pre-Notice shall ask such Purchaser if it wants to review the details
              of such
              financing (such additional notice, a “Subsequent
              Financing Notice”).
              Upon
              the request of a Purchaser, and only upon a request by such Purchaser,
              for a
              Subsequent Financing Notice, the Company shall promptly, but no later
              than 1
              Trading Day after such request, deliver a Subsequent Financing Notice
              to such
              Purchaser. The Subsequent Financing Notice shall describe in reasonable
              detail
              the proposed terms of such Subsequent Financing, the amount of proceeds
              intended
              to be raised thereunder, the Person with whom such Subsequent Financing
              is
              proposed to be effected, and attached to which shall be a term sheet
              or similar
              document relating thereto. 

            

            (c) Any
              Purchaser desiring to participate in such Subsequent Financing must
              provide
              written notice to the Company by not later than 5:30 p.m. (New York
              City time)
              on the 7th
              Trading
              Day after such Purchaser has received the Pre-Notice that the Purchaser
              is
              willing to participate in the Subsequent Financing, the amount of the
              Purchaser’s participation, and that the Purchaser has such funds ready, willing,
              and available for investment on the terms set forth in the Subsequent
              Financing
              Notice. If the Company receives no notice from a Purchaser as of such
              7th
              Trading
              Day, such Purchaser shall be deemed to have notified the Company that
              it does
              not elect to participate. 

            

            (d) If
              by
              5:30 p.m. (New York City time) on the 7th
              Trading
              Day after all of the requesting Purchasers have received the Pre-Notice,
              notifications by the Purchasers of their willingness to participate
              in the
              Subsequent Financing (or to cause their designees to participate) is,
              in the
              aggregate, less than the total amount of the Subsequent Financing,
              then the
              Company may effect the remaining portion of such Subsequent Financing
              on the
              terms and to the Persons set forth in the Subsequent Financing Notice.
              

            

            (e) If
              by
              5:30 p.m. (New York City time) on the 7th
              Trading
              Day after all of the Purchasers have received the Pre-Notice, the Company
              receives responses to a Subsequent Financing Notice from Purchasers
              seeking to
              purchase more than the aggregate amount of the Participation Maximum,
              each such
              Purchaser shall have the right to purchase the greater of (a) their
              Pro Rata
              Portion (as defined below) of the Participation Maximum and (b) the
              difference
              between the Participation Maximum and the aggregate amount of participation
              by
              all other Purchasers. “Pro
              Rata Portion”
is
              the
              ratio of (x) the Subscription Amount of Securities purchased on the
              Closing Date
              by a Purchaser participating under this Section 4.13 and (y) the sum
              of the
              aggregate Subscription Amounts of Securities purchased on the Closing
              Date by
              all Purchasers participating under this Section 4.13.

            

            (f) The
              Company must provide the Purchasers with a second Subsequent Financing
              Notice,
              and the Purchasers will again have the right of participation set forth
              above in
              this Section 4.13, if the Subsequent Financing subject to the initial
              Subsequent
              Financing Notice is not consummated for any reason on the terms set
              forth in
              such Subsequent Financing Notice within 60 Trading Days after the date
              of the
              initial Subsequent Financing Notice.

            

            (g) Notwithstanding
              the foregoing, this Section 4.13 shall not apply in respect of an Exempt
              Issuance or (ii) an underwritten public offering of Common Stock. 

            

            4.14 Subsequent
              Equity Sales.
              

            

            (a) From
              the
              date hereof until 90 days after the Effective Date, neither the Company
              nor any
              Subsidiary shall issue shares of Common Stock or Common Stock Equivalents;
              provided, however, the 90 day period set forth in this Section 4.14
              shall be
              extended for the number of Trading Days during such period in which
              (i) trading
              in the Common Stock is suspended by any Trading Market, or (ii) following
              the
              Effective Date, the Registration Statement is not effective or the
              prospectus
              included in the Registration Statement may not be used by the Purchasers
              for the
              resale of the Underlying Shares. 

            

            (b) From
              the
              date hereof until such time as no Purchaser holds any of the Securities,
              the
              Company shall be prohibited from effecting or entering into an agreement
              to
              effect any Subsequent Financing involving a “Variable
              Rate Transaction”
or
              an
“MFN
              Transaction”
(each
              as defined below). The term “Variable
              Rate Transaction”
shall
              mean a transaction in which the Company issues or sells (i) any debt
              or equity
              securities that are convertible into, exchangeable or exercisable for,
              or
              include the right to receive additional shares of Common Stock either
              (A) at a
              conversion, exercise or exchange rate or other price that is based
              upon and/or
              varies with the trading prices of or quotations for the shares of Common
              Stock
              at any time after the initial issuance of such debt or equity securities,
              or (B)
              with a conversion, exercise or exchange price that is subject to being
              reset at
              some future date after the initial issuance of such debt or equity
              security or
              upon the occurrence of specified or contingent events directly or indirectly
              related to the business of the Company or the market for the Common
              Stock or
              (ii) enters into any agreement, including, but not limited to, an equity
              line of
              credit, whereby the Company may sell securities at a future determined
              price.
              The term “MFN
              Transaction”
shall
              mean a transaction in which the Company issues or sells any securities
              in a
              capital raising transaction or series of related transactions which
              grants to an
              investor the right to receive additional shares based upon future transactions
              of the Company on terms more favorable than those granted to such investor
              in
              such offering. 

            

            (c) Notwithstanding
              the foregoing, this Section 4.14 shall not apply in respect of an Exempt
              Issuance, except that no Variable Rate Transaction or MFN Transaction
              shall be
              an Exempt Issuance.

            

            4.15 Equal
              Treatment of Purchasers.
              No
              consideration shall be offered or paid to any Person to amend or consent
              to a
              waiver or modification of any provision of any of the Transaction Documents
              unless the same consideration is also offered to all of the parties
              to the
              Transaction Documents. For clarification purposes, this provision constitutes
              a
              separate right granted to each Purchaser by the Company and negotiated
              separately by each Purchaser, and is intended to treat for the Company
              the
              Purchasers as a class and shall not in any way be construed as the
              Purchasers
              acting in concert or as a group with respect to the purchase, disposition
              or
              voting of Securities or otherwise.

             

            4.16 Short
              Sales and Confidentiality After The Date Hereof.
              Each
              Purchaser severally and not jointly with the other Purchasers covenants
              that
              neither it nor any Affiliate acting on its behalf or pursuant to any
              understanding with it will execute any Short Sales during the period
              commencing
              at the Discussion Time and ending at the time that the transactions
              contemplated
              by this Agreement are first publicly announced as described in Section
              4.6. Each
              Purchaser, severally and not jointly with the other Purchasers, covenants
              that
              until such time as the transactions contemplated by this Agreement
              are publicly
              disclosed by the Company as described in Section 4.6, such Purchaser
              will
              maintain the confidentiality of all disclosures made to it in connection
              with
              this transaction (including the existence and terms of this transaction).
              Each
              Purchaser understands and acknowledges, severally and not jointly with
              any other
              Purchaser, that the Commission currently takes the position that coverage
              of
              short sales of shares of the Common Stock “against the box” prior to the
              Effective Date of the Registration Statement with the Securities is
              a violation
              of Section 5 of the Securities Act, as set forth in Item 65, Section
              A, of the
              Manual of Publicly Available Telephone Interpretations, dated July
              1997,
              compiled by the Office of Chief Counsel, Division of Corporation Finance.
              Notwithstanding
              the foregoing, no Purchaser makes any representation, warranty or covenant
              hereby that it will not engage in Short Sales in the securities of
              the Company
              after the time that the transactions contemplated by this Agreement
              are first
              publicly announced as described in Section 4.6. Notwithstanding
              the foregoing, in the case of a Purchaser that is a multi-managed investment
              vehicle whereby separate portfolio managers manage separate portions
              of such
              Purchaser's assets and the portfolio managers have no direct knowledge
              of the
              investment decisions made by the portfolio managers managing other
              portions of
              such Purchaser's assets, the covenant set forth above shall only apply
              with
              respect to the portion of assets managed by the portfolio manager that
              made the
              investment decision to purchase the Securities covered by this
              Agreement.

             

            4.17 Most
              Favored Nation Provision.
              From
              the date hereof until the earlier of (a) such time when the Preferred
              Stock is
              no longer outstanding or (b) the 18 month anniversary of the Closing
              Date, any
              time the Company effects a Subsequent Financing, each Purchaser may
              elect, in
              its sole discretion, to exchange all or some of any of its Preferred
              Stock then
              held by it for any securities (including all components if in a unit
              with other
              securities) issued in a Subsequent Financing (such exchange to be made
              at the
              same time as, and pursuant to, the closing of such Subsequent Financing)
              based
              on the outstanding Stated Value of the Preferred Stock plus accrued
              but unpaid
              dividends and other fees owed and the effective price at which such
              securities
              were sold in such Subsequent Placement. The Company covenants and agrees
              to
              provide each Purchaser with at least five (5) days written notice of
              the terms
              of such Subsequent Financing.

             

            4.18 Form
              D; Blue Sky Filings.
              The
              Company agrees to timely file a Form D with respect to the Securities
              as
              required under Regulation D and to provide a copy thereof, promptly
              upon request
              of any Purchaser. The Company shall take such action as the Company
              shall
              reasonably determine is necessary in order to obtain an exemption for,
              or to
              qualify the Securities for, sale to the Purchasers at the Closing under
              applicable securities or “Blue Sky” laws of the states of the United States, and
              shall provide evidence of such actions promptly upon request of any
              Purchaser.

             

            4.18 Capital
              Change.
              Until
              the one year anniversary of the Effective Date, the Company shall not
              undertake
              a reverse or forward stock split or reclassification of the Common
              Stock without
              the prior written consent of the Purchasers holding a majority in interest
              of
              the shares of Preferred Stock.

             

             

            ARTICLE
              V

            MISCELLANEOUS

             

            5.1Termination.
              This
              Agreement may be terminated by any Purchaser, by written notice to
              the other
              parties, if the Closing has not been consummated on or before October
              5, 2006;
              provided that no such termination will affect the right of any party
              to sue for
              any breach by the other party (or parties).

             

            5.2Fees
              and Expenses.
              At the
              Closing, the Company has agreed to reimburse Crestview Capital Master
              LLC up to
              $15,000 for its actual, reasonable, out-of-pocket legal fees and expenses.
              At
              the Closing, the Company has agreed to reimburse [_________] up to
              $15,000 for
              its actual, reasonable, out-of-pocket legal fees and expenses. Accordingly,
              in
              lieu of the foregoing payments, the aggregate amount that such Purchasers
              are to
              pay for the Securities at the Closing shall be reduced by $15,000 for
              each such
              Purchaser in lieu thereof. The Company shall deliver, prior to the
              Closing, a
              completed and executed copy of the Closing Statement, attached hereto
              as
Annex
              A.
              Except
              as expressly set forth in the Transaction Documents to the contrary,
              each party
              shall pay the fees and expenses of its advisers, counsel, accountants
              and other
              experts, if any, and all other expenses incurred by such party incident
              to the
              negotiation, preparation, execution, delivery and performance of this
              Agreement.
              The Company shall pay all transfer agent fees, stamp taxes and other
              taxes and
              duties levied in connection with the delivery of any Securities.

             

            5.3Entire
              Agreement.
              The
              Transaction Documents, together with the exhibits and schedules thereto,
              contain
              the entire understanding of the parties with respect to the subject
              matter
              hereof and supersede all prior agreements and understandings, oral
              or written,
              with respect to such matters, which the parties acknowledge have been
              merged
              into such documents, exhibits and schedules.

             

            5.4 Notices.
              Any and
              all notices or other communications or deliveries required or permitted
              to be
              provided hereunder shall be in writing and shall be deemed given and
              effective
              on the earliest of (a) the date of transmission, if such notice or
              communication
              is delivered via facsimile at the facsimile number set forth on the
              signature
              pages attached hereto prior to 5:30 p.m. (New York City time) on a
              Trading Day,
              (b) the next Trading Day after the date of transmission, if such notice
              or
              communication is delivered via facsimile at the facsimile number set
              forth on
              the signature pages attached hereto on a day that is not a Trading
              Day or later
              than 5:30 p.m. (New York City time) on any Trading Day, (c) the second
              Trading
              Day following the date of mailing, if sent by U.S. nationally recognized
              overnight courier service, or (d) upon actual receipt by the party
              to whom such
              notice is required to be given. The address for such notices and communications
              shall be as set forth on the signature pages attached hereto.

             

            5.5 Amendments;
              Waivers.
              No
              provision of this Agreement may be waived, modified, supplemented or
              amended
              except in a written instrument signed, in the case of an amendment,
              by the
              Company and Purchasers then holding at least 81% of the Securities
              then
              outstanding or, in the case of a waiver, by the party against whom
              enforcement
              of any such waiver is sought. No waiver of any default with respect
              to any
              provision, condition or requirement of this Agreement shall be deemed
              to be a
              continuing waiver in the future or a waiver of any subsequent default
              or a
              waiver of any other provision, condition or requirement hereof, nor
              shall any
              delay or omission of any party to exercise any right hereunder in any
              manner
              impair the exercise of any such right.

             

            5.6 Headings
              The
              headings herein are for convenience only, do not constitute a part
              of this
              Agreement and shall not be deemed to limit or affect any of the provisions
              hereof. The language used in this Agreement will be deemed to be the
              language
              chosen by the parties to express their mutual intent, and no rules
              of strict
              construction will be applied against any party.

             

            5.7 Successors
              and Assigns

             

            .
              This
              Agreement shall be binding upon and inure to the benefit of the parties
              and
              their successors and permitted assigns. The Company may not assign
              this
              Agreement or any rights or obligations hereunder without the prior
              written
              consent of each Purchaser. Any Purchaser may assign any or all of its
              rights
              under this Agreement to any Person to whom such Purchaser assigns or
              transfers
              any Securities, provided such transferee agrees in writing to be bound,
              with
              respect to the transferred Securities, by the provisions hereof that
              apply to
              the “Purchasers”.

             

            5.8 No
              Third-Party Beneficiaries.
              This
              Agreement is intended for the benefit of the parties hereto and their
              respective
              successors and permitted assigns and is not for the benefit of, nor
              may any
              provision hereof be enforced by, any other Person, except as otherwise
              set forth
              in Section 4.11.

             

            5.9 Governing
              Law.
              All
              questions concerning the construction, validity, enforcement and interpretation
              of the Transaction Documents shall be governed by and construed and
              enforced in
              accordance with the internal laws of the State of New York, without
              regard to
              the principles of conflicts of law thereof. Each party agrees that
              all legal
              proceedings concerning the interpretations, enforcement and defense
              of the
              transactions contemplated by this Agreement and any other Transaction
              Documents
              (whether brought against a party hereto or its respective affiliates,
              directors,
              officers, shareholders, employees or agents) shall be commenced exclusively
              in
              the state and federal courts sitting in the City of New York. Each
              party hereby
              irrevocably submits to the exclusive jurisdiction of the state and
              federal
              courts sitting in the City of New York, borough of Manhattan for the
              adjudication of any dispute hereunder or in connection herewith or
              with any
              transaction contemplated hereby or discussed herein (including with
              respect to
              the enforcement of any of the Transaction Documents), and hereby irrevocably
              waives, and agrees not to assert in any suit, action or proceeding,
              any claim
              that it is not personally subject to the jurisdiction of any such court,
              that
              such suit, action or proceeding is improper or inconvenient venue for
              such
              proceeding. Each party hereby irrevocably waives personal service of
              process and
              consents to process being served in any such suit, action or proceeding
              by
              mailing a copy thereof via registered or certified mail or overnight
              delivery
              (with evidence of delivery) to such party at the address in effect
              for notices
              to it under this Agreement and agrees that such service shall constitute
              good
              and sufficient service of process and notice thereof. Nothing contained
              herein
              shall be deemed to limit in any way any right to serve process in any
              manner
              permitted by law. The parties hereby waive all rights to a trial by
              jury. If
              either party shall commence an action or proceeding to enforce any
              provisions of
              the Transaction Documents, then the prevailing party in such action
              or
              proceeding shall be reimbursed by the other party for its attorneys’ fees and
              other costs and expenses incurred with the investigation, preparation
              and
              prosecution of such action or proceeding.

             

            5.10 Survival.
              The
              representations and warranties contained herein shall survive the Closing
              and
              the delivery, exercise and/or conversion of the Securities, as applicable
              for
              the applicable statue of limitations.

             

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

             

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

             

            5.13 Rescission
              and Withdrawal Right.
              Notwithstanding anything to the contrary contained in (and without
              limiting any
              similar provisions of) any of the other Transaction Documents, whenever
              any
              Purchaser exercises a right, election, demand or option under a Transaction
              Document and the Company does not timely perform its related obligations
              within
              the periods therein provided, then such Purchaser may rescind or withdraw,
              in
              its sole discretion from time to time upon written notice to the Company,
              any
              relevant notice, demand or election in whole or in part without prejudice
              to its
              future actions and rights; provided,
              however,
              in the
              case of a rescission of a conversion of the Preferred Stock or exercise
              of a
              Warrant, the Purchaser shall be required to return any shares of Common
              Stock
              subject to any such rescinded conversion or exercise notice.

             

            5.14 Replacement
              of Securities.
              If any
              certificate or instrument evidencing any Securities is mutilated, lost,
              stolen
              or destroyed, the Company shall issue or cause to be issued in exchange
              and
              substitution for and upon cancellation thereof, or in lieu of and substitution
              therefor, a new certificate or instrument, but only upon receipt of
              evidence
              reasonably satisfactory to the Company of such loss, theft or destruction
              and
              customary and reasonable indemnity, if requested. The applicants for a new
              certificate or instrument under such circumstances shall also pay any
              reasonable
              third-party costs associated with the issuance of such replacement
              Securities.

             

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

             

            5.16 Payment
              Set Aside.
              To the
              extent that the Company makes a payment or payments to any Purchaser
              pursuant to
              any Transaction Document or a Purchaser enforces or exercises its rights
              thereunder, and such payment or payments or the proceeds of such enforcement
              or
              exercise or any part thereof are subsequently invalidated, declared
              to be
              fraudulent or preferential, set aside, recovered from, disgorged by
              or are
              required to be refunded, repaid or otherwise restored to the Company,
              a trustee,
              receiver or any other person under any law (including, without limitation,
              any
              bankruptcy law, state or federal law, common law or equitable cause
              of action),
              then to the extent of any such restoration the obligation or part thereof
              originally intended to be satisfied shall be revived and continued
              in full force
              and effect as if such payment had not been made or such enforcement
              or setoff
              had not occurred.

             

            5.17Usury.
              To the
              extent it may lawfully do so, the Company hereby agrees not to insist
              upon or
              plead or in any manner whatsoever claim, and will resist any and all
              efforts to
              be compelled to take the benefit or advantage of, usury laws wherever
              enacted,
              now or at any time hereafter in force, in connection with any claim,
              action or
              proceeding that may be brought by any Purchaser in order to enforce
              any right or
              remedy under any Transaction Document. Notwithstanding any provision
              to the
              contrary contained in any Transaction Document, it is expressly agreed
              and
              provided that the total liability of the Company under the Transaction
              Documents
              for payments in the nature of interest shall not exceed the maximum
              lawful rate
              authorized under applicable law (the “Maximum
              Rate”),
              and,
              without limiting the foregoing, in no event shall any rate of interest
              or
              default interest, or both of them, when aggregated with any other sums
              in the
              nature of interest that the Company may be obligated to pay under the
              Transaction Documents exceed such Maximum Rate. It is agreed that if
              the maximum
              contract rate of interest allowed by law and applicable to the Transaction
              Documents is increased or decreased by statute or any official governmental
              action subsequent to the date hereof, the new maximum contract rate
              of interest
              allowed by law will be the Maximum Rate applicable to the Transaction
              Documents
              from the effective date forward, unless such application is precluded
              by
              applicable law. If under any circumstances whatsoever, interest in
              excess of the
              Maximum Rate is paid by the Company to any Purchaser with respect to
              indebtedness evidenced by the Transaction Documents, such excess shall
              be
              applied by such Purchaser to the unpaid principal balance of any such
              indebtedness or be refunded to the Company, the manner of handling
              such excess
              to be at such Purchaser’s election.

             

            5.18 Independent
              Nature of Purchasers’ Obligations and Rights.
              The
              obligations of each Purchaser under any Transaction Document are several
              and not
              joint with the obligations of any other Purchaser, and no Purchaser
              shall be
              responsible in any way for the performance of the obligations of any
              other
              Purchaser under any Transaction Document. Nothing contained herein
              or in any
              Transaction Document, and no action taken by any Purchaser pursuant
              thereto,
              shall be deemed to constitute the Purchasers as a partnership, an association,
              a
              joint venture or any other kind of entity, or create a presumption
              that the
              Purchasers are in any way acting in concert or as a group with respect
              to such
              obligations or the transactions contemplated by the Transaction Documents.
              Each
              Purchaser shall be entitled to independently protect and enforce its
              rights,
              including without limitation, the rights arising out of this Agreement
              or out of
              the other Transaction Documents, and it shall not be necessary for
              any other
              Purchaser to be joined as an additional party in any proceeding for
              such
              purpose. Each Purchaser has been represented by its own separate legal
              counsel
              in their review and negotiation of the Transaction Documents. For reasons
              of
              administrative convenience only, Purchasers and their respective counsel
              have
              chosen to communicate with the Company through FWS. FWS does not represent
              any
              of the Purchasers but only Crestview Capital
              Master, LLC. The Company has elected to provide all Purchasers with
              the same
              terms and Transaction Documents for the convenience of the Company
              and not
              because it was required or requested to do so by the Purchasers.

             

            5.19 Liquidated
              Damages.
              The
              Company’s obligations to pay any partial liquidated damages or other amounts
              owing under the Transaction Documents is a continuing obligation of
              the Company
              and shall not terminate until all unpaid partial liquidated damages
              and other
              amounts have been paid notwithstanding the fact that the instrument
              or security
              pursuant to which such partial liquidated damages or other amounts
              are due and
              payable shall have been canceled.

             

            5.20 Construction.
              The
              parties agree that each of them and/or their respective counsel has
              reviewed and
              had an opportunity to revise the Transaction Documents and, therefore,
              the
              normal rule of construction to the effect that any ambiguities are
              to be
              resolved against the drafting party shall not be employed in the interpretation
              of the Transaction Documents or any amendments hereto.

             

            

             

            [SIGNATURE
              PAGE FOLLOWS]

            
              
                
                

              

              
                
                

                
                  

                

              

              
                
                

              

            

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

             

            

            
              	
                      CHEMBIO
                        DIAGNOSTICS, INC.

                    	
                      Address
                        for Notice:

                    
	
                      By:__________________________________________

                      Name:

                      Title:

                    	 
	
                      With
                        a copy to (which shall not constitute notice):

                       

                       

                    	 

            

            

            

            

            

            [REMAINDER
              OF PAGE INTENTIONALLY LEFT BLANK

            SIGNATURE
              PAGE FOR PURCHASER FOLLOWS]

             

            
              
                
                

              

              
                
                

                
                  

                

              

              
                
                

              

            

            [PURCHASER
              SIGNATURE PAGES TO CEMI SECURITIES PURCHASE AGREEMENT]

            

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

             

            Name
              of
              Purchaser: __________________________

            Signature
              of Authorized Signatory of Purchaser:
              __________________________

            Name
              of
              Authorized Signatory: _________________________

            Title
              of
              Authorized Signatory: __________________________

            Email
              Address of Purchaser:________________________________

            Address
              for Notice of Purchaser:

            

            

            

            

            Address
              for Delivery of Securities for Purchaser (if not same as above):

            

            

            

            

            

            Subscription
              Amount:

            Cash:

            Surrendered
              Secured Debentures:

            Shares
              of
              Preferred Stock:

            Warrant
              Shares:

            EIN
              Number: [PROVIDE
              THIS UNDER SEPARATE COVER]

            

            [SIGNATURE
              PAGES CONTINUE]

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