Document:

Exclusive
      Option Agreement

    

    Exclusive
      Option Agreement (the “Agreement”)
      is
      entered into as of the ___ day of February, 2008 (“Effective
      Date”)
      by and
      between NeuralStem, Inc., a Delaware corporation having its principal offices
      at
      9700 Great Seneca Highway, Rockville, MD 20850 (“NeuralStem”)
      and CJ
      CheilJedang Corporation, a South Korean corporation having its principal offices
      at CJ Bldg., 500, 5-ga, Namdaemun-ro, Jung-gu, Seoul, Korea, 100-749
      (“CJ”).

    

    The
      parties have previously entered in to that certain Memorandum of Understanding
      dated as of July 30, 2007 (the “MOU”),
      pursuant to which the parties agreed to negotiate in good faith the terms on
      which CJ may obtain an option to negotiate an exclusive license to certain
      inventions and technology owned or controlled by NeuralStem. The parties now
      desire to set forth the terms of such option. Therefore, in consideration of
      the
      mutual covenants set forth below, and other good and valuable consideration
      paid
      and received, the parties agree as follows: 

    

    1. Grant
      of Option. Subject
      to all of the terms and conditions of this Agreement, Neuralstem hereby grants
      to CJ an exclusive option to negotiate in good faith (“Option”)
      the
      terms pursuant to which CJ may obtain an exclusive license (the “License”)
      to
      develop, manufacture, market, distribute and sell one or more pharmaceutical
      products incorporating Neuralstem human spinal cord cells and/or certain
      technology then owned or controlled by Neuralstem for transplantation in to
      patients for all indications for which necessary approval from the U.S. Food
      and
      Drug Administration has been obtained by NeuralStem, in all cases as described
      in the patent and patent applications of Neuralstem set forth on Exhibit
      A
      to this
      Agreement (the “IP
      Rights”). The
      parties acknowledge and agree that the negotiations which may occur regarding
      the License shall address the following:

    

    (a) The
      License is not intended to include any in
      vitro
      uses of
      any products based on the IP Rights for any purposes, which in all circumstances
      will be reserved to Neuralstem. 

    

    (b) The
      term
      of the License will be the longer of (i) the life of the last-to-expire IP
      Rights, or (ii) 20 years from the commencement of the License. The License
      will
      be subject to customary termination rights for breaches and insolvency of a
      party. The License will also address a right of first negotiation granted to
      CJ
      with respect to therapeutic, in
      vivo
      uses,
      for the “Territory” (as defined below), of the products based upon Neuralstem
      human spinal cord cells and/or certain technology subsequently developed and
      offered for use in humans by Neuralstem during the term of the
      License.

    

    (d) The
      territory to be covered by the License will include Korea, Indonesia,
      Philippines, Malaysia, Singapore and Vietnam (the “Territory”).
      For
      so long as the Option remains in effect as set forth in this Agreement, either
      party may, upon written notice to the other party, initiate a good faith
      negotiation concerning the terms on which the Territory, if a License is
      executed by the parties, may be extended to include China and Japan. If such
      notice is so given, the parties shall negotiate in good faith with respect
      to
      the terms of such extension of the Territory for a period of not more than
      ninety (90) days from the date of the notice of exercise. If the parties are
      unable to agree on the terms of such extension as of the end of such period,
      Neuralstem agrees that it will not grant a license to any of the IP Rights
      to
      any third party in China or Japan for a period of 18 months after the expiration
      of such ninety (90) day period on terms and conditions materially equal to
      or
      more favorable to such third party, taken as a whole, than those last negotiated
      with CJ during such ninety (90) day period.

    

    (e) The
      License will specify that CJ will (i) have no manufacturing or research and
      development obligations with respect to any products based on the IP Rights,
      (ii) be responsible for any regulatory approvals necessary to market and sell
      any such products in the Territory, and (iii) have customary obligations to
      monitor and enforce the IP Rights in the Territory.

     

    
      
         

      

      
         

        
          

        

      

      
         

      

    

     

    (f) The
      parties specifically acknowledge and agree that the parties have not mutually
      agreed to (i) the rate of any royalties which may be due and owing with respect
      to the IP Rights and related products under a license agreement, or the manner
      of calculation or reporting of any royalties, (ii) the amounts of any upfront
      or
      annual license fees, minimum royalty payments, or other economic matters related
      to the sale of products or the maintenance of the license rights, (iii) the
      fields of use of the IP Rights, (iv) the relative rights and obligations of
      the
      parties with respect to patent prosecution, maintenance, enforcement and
      infringement actions, (v) warranties to be given by Neuralstem, (vi) support
      or
      assistance, if any, to be provided by Neuralstem, or (vii) substantial other
      economic, business and intellectual property matters of a type typically
      addressed in an exclusive license, including without limitation the rights,
      if
      any, which may be granted to CJ with respect to sublicenses, affiliates of
      CJ,
      or rights to transfer or assign the License. Consequently, the parties further
      acknowledge and confirm that no License or other rights in or to any IP Rights
      shall arise unless and until the parties execute a mutually agreed, definitive
      license agreement addressing all such matters to the mutual satisfaction of
      the
      parties. 

    

    2. Option
      Period.
      The
      Option for the License may be exercised at any time at the sole discretion
      of CJ
      by delivery of written notice of exercise to Neuralstem (the “Option
      Exercise Notice”)
      from
      the date on which Neuralstem delivers written notice to CJ that Neuralstem
      has
      successfully concluded the first human clinical trial of a product based on
      the
      IP Rights, together with an offer for exercise of the Option for such product
      (the “Option
      Exercise Offer”),
      through and including the second anniversary of such Option Exercise Offer
      (provided
      that if
      no Option Exercise Offer has been so given by Neuralstem on or before the second
      anniversary of the Effective Date, CJ may give the Option Exercise Notice from
      and after the second anniversary of the Effective Date through and including
      the
      fifth anniversary of the Effective Date; provided further
      that if
      no Option Exercise Offer has been so given by Neuralstem on or before the fifth
      anniversary of the Effective Date, the period within which CJ may exercise
      the
      Option shall be extended for an additional three-year period (the time period
      as
      so determined above, “Option
      Exercise Period”).
      Upon
      receipt of the Option Exercise Notice, the parties shall negotiate in good
      faith
      with respect to the terms of the License for a period of not more than ninety
      (90) days (the “Option
      Negotiation Period”).
      If
      the Option Exercise Notice has not been given in a timely manner during the
      Option Exercise Period, of if the parties are unable to execute and deliver
      a
      mutually satisfactory License during the Option Negotiation Period, the Option
      with respect to any and all of the IP Rights shall terminate and be of no
      further force or effect, regardless of whether any such IP Rights were
      previously the subject of the Option Exercise Offer or other good faith
      negotiations of the parties. 

    

    The
      Option Exercise Period and the Option Negotiation Period may only be extended
      by
      mutual written agreement of the parties. The Option, the Option Exercise Period
      and the Option Negotiation Period will terminate immediately if either party
      is
      the subject of a bankruptcy, insolvency, or similar legal process or event
      or is
      unable to pay its debts as they become due. In addition, the Option may be
      terminated by either party upon any material breach by the other party which
      is
      not cured within thirty (30) days of delivery of written notice of such breach
      from the non-breaching party. Upon termination of the Option, this Agreement
      shall terminate and neither party shall have any further obligations hereunder;
      provided
      that
      termination of the Option will not terminate the rights or obligations of the
      parties under the Securities Purchase Agreement or the Registration Rights
      Agreement (each as defined below), or under Section 9 below, and shall not
      terminate any obligations or liabilities of a party arising prior to the date
      of
      termination, provided
      further
      that
      CJ’s sale, transfer, assignment or other disposition of all or any part of the
      securities purchased under the Securities Purchase Agreement will not affect
      the
      existence, validity or the terms of the Option or this Agreement, which will
      remain effective in accordance with the terms and conditions
      hereof.

    

    As
      further consideration for the grant of the Option, CJ agrees that while this
      Agreement remains in effect CJ shall use good faith effort to monitor the
      Territory with respect to potential infringement of the IP Rights in the
      Territory by third parties, will notify Neuralstem of any such potential
      infringement of which it becomes aware, and will assist Neuralstem (at no out
      of
      pocket cost to CJ) concerning any efforts Neuralstem may choose to take, in
      its
      discretion, with respect to any such potential infringement.

     

    
      
         

      

      
        Page
          2 of
          8

        
          

        

      

      
         

      

    

     

    Upon
      execution of this Agreement, the parties will form a joint committee (the
“Committee”)
      for
      the purpose of informing and sharing with the other such information as the
      progress and status of development, clinical trials, regulatory process and
      patent registration concerning the IP Rights and any other technologies and
      products subsequently developed and offered for use in humans by Neuralstem,
      as
      well as the industry-wide development and trend related to stem cell products.
      The Committee shall consist of CEO and CSO of Neuralstem and officer/manager
      of
      CJ and convene or communicate periodically (one teleconference each calendar
      month at a minimum). In addition, Neuralstem shall furnish CJ with quarterly
      reports informing CJ of the progress and status of the development, regulatory
      and patent filing status of each product based on the IP Rights, together with
      reasonable and necessary documents and materials corroborating or otherwise
      supporting such report. All information exchanged in connection with any
      activities of the Committee shall be subject to the existing confidentiality
      obligations of the parties.

    

    3. Exclusivity
      and Related Matter.
      During
      the Option Exercise Period, and so long as this Agreement remains in effect,
      Neuralstem agrees that it will not grant to any third party a license in or
      to
      any of the IP Rights in the Territory. In addition, if CJ exercises the Option
      and the parties are thereafter unable following good-faith negotiations to
      execute a mutually acceptable and legally binding License during the Option
      Negotiation Period, Neuralstem agrees that it will not grant any license
      concerning such product to any third party in the Territory for a period of
      18
      months after the Option Negotiation Period expires on terms and conditions
      materially equal to or more favorable to such third party, taken as a whole,
      than those last negotiated with CJ during the Option Negotiation
      Period.

    

    4. Option
      Consideration.
      In
      consideration of the grant of the Option, the parties hereby agree to execute,
      deliver and perform, effective as of the Effective Date, the Securities Purchase
      Agreement in the form attached to this Agreement as Exhibit
      B
      (the
“Securities
      Purchase Agreement”)
      and
      the Registration Rights Agreement in the form attached hereto as Exhibit
      C
      (the
“Registration
      Rights Agreement”),
      pursuant to which CJ has agreed to purchase $2,500,000 of the common stock
      of
      Neuralstem at the price, and on the terms and conditions, set forth in the
      Securities Purchase Agreement and the Registration Rights
      Agreement.

    

    5. Representations.
      Each
      party represents to the other that it has the full right, power and authority
      to
      enter into and perform its obligations under this Agreement, and that it has
      not
      entered into any binding agreements inconsistent with such
      representation.

    

    6. Option
      Superseded by License. Upon
      execution of the License during the Option Negotiation Period, this Option
      shall
      terminate and all obligations of the parties hereunder shall cease.

    

    7. Governing
      Law.
      This
      Agreement and any claim, dispute or loss arising out of, or in connection
      therewith, shall be governed by the laws of the State of Delaware without
      reference to conflict of laws rules.

    

    8. Notices.
      Any
      notice required or permitted by this Agreement shall be in writing and deemed
      delivered if delivered by any overnight courier service to the receiving party’s
      authorized representative at the addresses shown below, or be electronic or
      hand
      delivery, with delivery confirmed. Notices to Neuralstem shall be delivered
      to
      the address first set forth above, Attention: President, and notices to CJ
      shall
      be delivered to the address first set forth above, Attention: Stem Cell Business
      Team. Either party may change the address for delivery of notice pursuant to
      a
      written notice delivered in accordance with this Section 7.

    

    9. Confidentiality.
      The
      parties agree that the confidentiality obligations of the parties set forth
      in
      Section 5 of the MOU will remain effective. Neither this Section 9 nor Section
      5
      of the MOU are intended to, nor do they, supersede any existing confidentiality
      and non-use obligations binding on the parties with respect to any Products
      or
      any other confidential or proprietary information of either party, or with
      respect to any such obligations as the parties may subsequently agree, which
      such obligations remain binding and enforceable in accordance with their
      respective terms. The terms, conditions and existence of this Agreement shall
      be
      deemed confidential information of the parties, and may only be disclosed by
      a
      party as required by applicable law or by a party to its accountants, attorneys
      or other professional advisors having a need to know such information.

     

    
      
         

      

      
        Page
          3 of
          8

        
          

        

      

      
         

      

    

     

    10. Entire
      Agreement; Miscellaneous.
      This
      Agreement (including exhibits) constitutes the entire agreement between the
      parties concerning the subject matter hereof and, except as specifically set
      forth in this Agreement, supersedes all prior written and oral agreements and
      understandings with respect thereto. This Agreement may not be amended or
      modified except by an instrument in writing signed by both parties. The parties
      specifically acknowledge and agree that Section 5 of the MOU shall continue
      to
      be of full force and effect in accordance with its terms. This Agreement, and
      the rights and obligations set forth in this Agreement, may not be assigned
      by
      CJ without the prior written consent of Neuralstem, which shall not be
      unreasonably withheld; provided
      if CJ
      may so assign this Agreement to any of its Affiliates (as defined in the
      Securities Purchase Agreement), NeuralStem will not unreasonably withhold or
      delay such consent so long as CJ notifies Neuralstem in writing of such
      assignment in advance, and provides Neuralstem with such reasonable information
      concerning the resources of such Affiliate as Neuralstem may reasonably request,
      including without limitation information concerning such Affiliate’s financial
      and technical resources. Neuralstem shall not be deemed to have unreasonably
      withheld or delayed such consent if such Affiliate does not, in the good faith
      judgment of Neuralstem, have the necessary and sufficient financial, technical
      and other resources required to execute and perform the terms of this Agreement
      and any License which the parties may enter into. A party’s failure to enforce
      any of its rights hereunder shall not be construed as a waiver of such rights,
      nor shall one or more instances of non-enforcement be construed as a continuing
      waiver or as a waiver in any other instance.

    

    11. Remedies.
      In the
      event of a breach by Neuralstem or CJ of any of their respective obligations
      under this Agreement, CJ or Neuralstem, 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, shall be entitled to seek injunctive relief,
      specific performance or other equitable remedies of its rights under this
      Agreement. Neuralstem and CJ 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 agree that, in the event
      of any action for injunctive relief, specific performance or other equitable
      remedies in respect of such breach, it shall not assert or shall waive the
      defense that a remedy at law would be adequate.

    

    12. Counterparts.
      This
      Agreement may be executed in one or more counterparts, each of which shall
      be
      deemed an original and all of which together shall be deemed the same agreement.
      A fax or other copy of this Agreement shall be treated as an original for all
      purposes. 

    

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

    

    
      	
              Neuralstem,
                Inc.

            	 	
              CJ
                CheilJedang Corporation

            
	 	 	 
	
              By:  

            	 	 	
              By:  

            	
              Jin
                Soo Kim

            
	 	 	 	 	 
	
              Its:  

            	 	 	
              Its:  

            	
              Chief
                Executive Officer

            

    

     

    
      
         

      

      
        Page
          4 of
          8

        
          

        

      

      
         

      

    

     

    Exhibit
      A 

    

    Exclusive
      Option Agreement

    

    IP
      Rights

    

    
      	
              Matter #

            	 	
              Title

            	 	
              Country

              ID

            	 	
              Appl. No.

            	 	
              Filed

            	 	
              Patent No.

            	 	
              Issued

            	 	
              Status

            	 	
              Expiration
                Date

            	 	
              Pub. No.

            
	
              037

            	 	
              TRANSPLANTATION
                OF HUMAN NEURAL CELLS FOR TREATMENT OF NEUROLOGICAL
                DISORDERS

            	 	
              US

            	 	
              60/629,220

            	 	
              17-Nov-04

            	 	
               

            	 	
               

            	 	
              Expired

            	 	
               

            	 	
               

            
	
              041

            	 	
              TRANSPLANTATION
                OF HUMAN NEURAL CELLS FOR TREATMENT OF NEUROLOGICAL
                DISORDERS

            	 	
              WO

            	 	
              PCT/US05/41631

            	 	
              11/17/2005

            	 	
               

            	 	
               

            	 	
              NAT
                PHASE

            	 	
               

            	 	
               

            
	
              042

            	 	
              TRANSPLANTATION
                OF HUMAN NEURAL CELLS FOR TREATMENT OF NEUROLOGICAL
                DISORDERS

            	 	
              US

            	 	
              11/281,640

            	 	
              17-Nov-05

            	 	
               

            	 	
               

            	 	
              PENDING

            	 	
               

            	 	
              2006/0141622

            
	
              055

            	 	
              TRANSPLANTATION
                OF HUMAN NEURAL CELLS FOR TREATMENT OF NEUROLOGICAL
                DISORDERS

            	 	
              CN

            	 	
              2.0058E+11

            	 	
              11/17/2005

            	 	
               

            	 	
               

            	 	
              PENDING

            	 	
              11/17/2025

            	 	
               

            
	
              057

            	 	
              TRANSPLANTATION
                OF HUMAN NEURAL CELLS FOR TREATMENT OF NEUROLOGICAL
                DISORDERS

            	 	
              EP

            	 	
              5851748.3

            	 	
              11/17/2005

            	 	
               

            	 	
               

            	 	
              PUBLISHED

            	 	
              11/17/2025

            	 	
               

            
	
              058

            	 	
              TRANSPLANTATION
                OF HUMAN NEURAL CELLS FOR TREATMENT OF NEUROLOGICAL
                DISORDERS

            	 	
              ID

            	 	
              W00200701532

            	 	
              11/17/2005

            	 	
               

            	 	
               

            	 	
              PENDING

            	 	
              11/17/2025

            	 	
               

            
	
              059

            	 	
              TRANSPLANTATION
                OF HUMAN NEURAL CELLS FOR TREATMENT OF NEUROLOGICAL
                DISORDERS

            	 	
              IL

            	 	
              183092

            	 	
              11/17/2005

            	 	
               

            	 	
               

            	 	
              PENDING

            	 	
              11/17/2025

            	 	
               

            
	
              060

            	 	
              TRANSPLANTATION
                OF HUMAN NEURAL CELLS FOR TREATMENT OF NEUROLOGICAL
                DISORDERS

            	 	
              JP

            	 	
              2007-543219

            	 	
              11/17/2005

            	 	
               

            	 	
               

            	 	
              PENDING

            	 	
              11/17/2025

            	 	
               

            
	
              061

            	 	
              TRANSPLANTATION
                OF HUMAN NEURAL CELLS FOR TREATMENT OF NEUROLOGICAL
                DISORDERS

            	 	
              KR

            	 	
              10-2007-7012097

            	 	
              11/17/2005

            	 	
               

            	 	
               

            	 	
              PENDING

            	 	
              11/17/2025

            	 	
               

            
	
              062

            	 	
              TRANSPLANTATION
                OF HUMAN NEURAL CELLS FOR TREATMENT OF NEUROLOGICAL
                DISORDERS

            	 	
              MY

            	 	
              PCT/US05/41631

            	 	
              11/17/2005

            	 	
               

            	 	
               

            	 	
              PENDING

            	 	
              11/17/2025

            	 	
               

            
	
              063

            	 	
              TRANSPLANTATION
                OF HUMAN NEURAL CELLS FOR TREATMENT OF NEUROLOGICAL
                DISORDERS

            	 	
              PH

            	 	
              1-2007-501016

            	 	
              11/17/2005

            	 	
               

            	 	
               

            	 	
              PENDING

            	 	
              11/17/2025

            	 	
               

            
	
              064

            	 	
              TRANSPLANTATION
                OF HUMAN NEURAL CELLS FOR TREATMENT OF NEUROLOGICAL
                DISORDERS

            	 	
              RU

            	 	
              2007122507

            	 	
              11/17/2005

            	 	
               

            	 	
               

            	 	
              PENDING

            	 	
              11/17/2025

            	 	
               

            

    

     

    
      
         

      

      
        Page
          5 of
          8

        
          

        

      

      
         

      

    

     

    
      	
              065

            	 	
              TRANSPLANTATION
                OF HUMAN NEURAL CELLS FOR TREATMENT OF NEUROLOGICAL
                DISORDERS

            	 	
              SG

            	 	
              200703490-3

            	 	
              11/17/2005

            	 	
               

            	 	
               

            	 	
              PENDING

            	 	
              11/17/2025

            	 	
               

            
	
              066

            	 	
              TRANSPLANTATION
                OF HUMAN NEURAL CELLS FOR TREATMENT OF NEURODEGENERATIVE
                CONDITIONS

            	 	
              VN

            	 	
              1-2007-01216

            	 	
              11/17/2005

            	 	
               

            	 	
               

            	 	
              PENDING

            	 	
              11/17/2025

            	 	
               

            
	
              067

            	 	
              TRANSPLANTATION
                OF HUMAN NEURAL CELLS FOR TREATMENT OF NEUROLOGICAL
                DISORDERS

            	 	
              NO

            	 	
              20073078

            	 	
              11/17/2005

            	 	
               

            	 	
               

            	 	
              PENDING

            	 	
              11/17/2025

            	 	
               

            
	
              068

            	 	
              TRANSPLANTATION
                OF HUMAN NEURAL CELLS FOR TREATMENT OF NEUROLOGICAL
                DISORDERS

            	 	
              IN

            	 	
              PCT/US05/41631

            	 	
              11/17/2005

            	 	
               

            	 	
               

            	 	
              PENDING

            	 	
              11/17/2025

            	 	
               

            
	
              075

            	 	
              US-CON:
                TRANSPLANTATION OF HUMAN NEURAL CELLS FOR TREATMENT OF NEURODEGENERATIVE
                CONDITIONS

            	 	
              US

            	 	
              11/932,923
                

            	 	
              10/31/2007

            	 	
               

            	 	
               

            	 	
              PENDING

            	 	
               

            	 	
               

            

    

     

    
      
         

      

      
        Page
          6 of
          8

        
          

        

      

      
         

      

    

     

    Exhibit
      B 

    

    Exclusive
      Option Agreement

    

    Securities
      Purchase Agreement

     

    
      
         

      

      
        Page
          7 of
          8

        
          

        

      

      
         

      

    

     

    Exhibit
      C 

    

    Exclusive
      Option Agreement

    

    Registration
      Rights Agreement

     

    
      
         

      

      
        Page
          8 of
          8SECURITIES
      PURCHASE AGREEMENT

     

    This
      Securities Purchase Agreement (this “Agreement”)
      is
      dated as of February
      __,
      2008,
      between
      Neuralstem, Inc., a Delaware corporation (the “Company”),
      and
      the purchaser identified on the signature pages hereto (including its successors
      and assigns, the “Purchaser”).

     

    WHEREAS,
      the Company has granted Purchaser an Option (as defined herein) to negotiate
      a
      license for certain technology and/or products currently owned by the Company.
      

     

    WHEREAS,
      as consideration for the Option, the Purchaser has agreed to purchase
$2.5
      million
      of the
      Company’s newly-issued
      shares of Common Stock.

     

    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
      the Purchaser, and the Purchaser, 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, for all purposes
      of
      this Agreement, the following terms have the meanings set forth in this Section
      1.1:

     

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

     

    “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 405 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.

     

     “Business
      Day”
means
      any day except Saturday, Sunday, any day which is a national
      legal
      holiday in the United States or the
      Republic of Korea or any
      day
      on which banking institutions in the State of New York
      or
      Seoul
      are
      authorized or required by law or other governmental action to
      close.

     

    “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 Purchaser’s obligations to pay the Subscription Amount and (ii) the
      Company’s obligations to deliver the Securities have been satisfied or waived;
      provided that in no event shall the Closing Date be later than February 27,
      2008.

     

    “Commission”
means
      the Securities and Exchange Commission.

     

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

     

     “Disclosure
      Schedules”
means
      the Disclosure Schedules of the Company delivered concurrently herewith.

     

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

    

    “FDA”
shall
      mean the United States Food and Drug Administration. 

     

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

     

    “Indebtedness”
means:
      (a) any liabilities for borrowed money or amounts owed in excess of
      $25,000
      (other than trade accounts payable incurred in the ordinary course of business);
      (b) all guaranties, Liens,
      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
      $25,000
      due under leases required to be capitalized in accordance with GAAP.

     

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

     

    “Knowledge”
      (including any derivation thereof such as “known”
or
      “knowing”)
      of a
      Person that is not a natural individual means that any director or officer
      of
      such Person: (a) has actual knowledge of a particular fact or other matter;
      or
      (b) could reasonably be expected to discover or otherwise become aware of such
      fact or other matter in the course of conducting such due investigation and
      inquiry concerning the existence or truth of such fact or other matter as a
      reasonably prudent person, in the ordinary and usual course of the performance
      of his or her professional responsibilities, would conduct under the same
      applicable circumstances. 

     

    
      
        
        

      

      
        2

        
          

        

      

      
        
        

      

    

     

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

     

    “LRS”
means
      the Law Offices of Raul Silvestre & Associates, APLC. 

     

    “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).

     

    “Option”
means
      that certain Exclusive Option Agreement of even date with this Agreement
      executed by the parties,
      in the
      form of Exhibit
      B
      attached
      hereto. 

     

    “Option
      Period”
means
      a
      period of time as set forth in the Option. 

     

    “Per
      Share Purchase Price”
      shall
      equal $[_________].

     

    “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.

     

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

     

    “Product”
shall
      mean technology owned by the Company for transplantation into patients for
      all
      indications for which necessary approval from the FDA. 

     

    “Purchaser
      Party”
shall
      have the meaning ascribed to such term in Section 4.5.

     

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

     

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

     

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

     

    
      
        
        

      

      
        3

        
          

        

      

      
        
        

      

    

     

    “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”
means
      the most recent reports filed by the Company with the Commission under the
      Securities Act and the Exchange Act, including the exhibits thereto and
      documents incorporated by reference therein, consisting specifically of: (i)
      Form 10-KSB filed on April 2, 2007; (ii) Form SB-2 filed on April 30, 2007;
      (iii) Form 10-QSB filed on May 15, 2007; (iv), Form 10-QSB filed on August
      14,
      2007; (v) Form 10-QSB filed on November 13, 2007; and (vi) Form 8-K/A filed
      on
      November 8, 2007, all as attached hereto as Exhibit
      C.

     

    “Securities”
means
      the Shares.

     

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

     

    “Shares”
means
      the shares of Common Stock issued or issuable to the Purchaser pursuant to
      this
      Agreement.

     

    “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). 

     

    “Subscription
      Amount”
means
      two
      million five hundred thousand U.S. dollars (US$2,500,000.00).

     

    “Trading
      Day”
means
      a
      day on which the New York Stock Exchange is open for trading.

     

    “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 American Stock Exchange, the Nasdaq
      Capital Market, the Nasdaq Global Market, the Nasdaq Global Select Market,
      the
      New York Stock Exchange or the OTC Bulletin Board.

     

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

     

    
      
        
        

      

      
        4

        
          

        

      

      
        
        

      

    

     

    “Transfer
      Agent”
means
      American Stock Transfer & Trust Company, with a mailing address of 59 Maiden
      Lane New York, NY 10038 and a facsimile number of (718) 921 8116, and any
      successor transfer agent of the Company.

     

    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 the Purchaser
      agrees to purchase, such
      number of Shares as shall be determined by the Subscription Amount divided
      by
      the Per Share Purchase Price.
      The
      Purchaser shall deliver to the Company, via wire transfer or a certified check,
      immediately available funds equal to its Subscription Amount and the Company
      shall deliver to the Purchaser the Shares as determined pursuant to Section
      2.2(a), and the Company and the Purchaser shall deliver the other items set
      forth in Section 2.2(b) deliverable at the Closing. Upon satisfaction of the
      covenants and conditions set forth in Sections 2.2 and 2.3, the Closing shall
      occur at the offices of LRS, or such other location as the parties shall
      mutually agree.

     

    2.2
      Deliveries.

     

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

     

    (i)
      this
      Agreement duly executed by the Company;

     

    (ii)
      the
      Option duly executed by the Company;
      

     

    (iii)
      a
      certificate evidencing a number of Shares equal to such Purchaser’s Subscription
      Amount divided by the Per Share Purchase Price, registered in the name of such
      Purchaser; and

     

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

     

    (b)
      On
      or
      prior to the Closing Date, Purchaser shall deliver or cause to be delivered
      to
      the Company (except as noted) the following:

     

    (i)
      this
      Agreement duly executed by such Purchaser;

     

    (ii)
      the
      Option duly executed by the Purchaser;
      

     

    (iii)
      the
      Purchaser’s Subscription Amount by a certified check or wire transfer to the
      Company. Both parties acknowledge that, such wire transfer might occur later
      than the Closing Date, which is due to any matter associated with accounting
      process and, in such a case, the Purchaser shall notify the Company and use
      good
      faith effort
      for
      completion of wire transfer but in no event shall such wire be delayed more
      than
      3 days after the Closing Date; and 

     

    
      
        
        

      

      
        5

        
          

        

      

      
        
        

      

    

     

    (iv)
      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:

     

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

     

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

     

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

     

    (b)
      The
      obligations of the Purchaser hereunder in connection with the Closing are
      subject to the following conditions being met:

     

    (i)
      the
      accuracy in all material respects on the Closing Date of the representations
      and
      warranties of the Company contained herein;
      provided that
      for the
      purpose of determining the ‘material’ accuracy of the representations and
      warranties of the Company under this Section 2.3(b)(i), should a concerned
      representation and warranty itself contain any ‘materiality’ or similar
      qualifications, such qualifications shall be disregarded, so that only the
      ‘materiality’ qualification set forth in this Section 2.3(b)(i) will
      apply;

     

    (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) this
      Agreement and the other Transaction Documents, and the transactions contemplated
      hereby and thereby, shall have been duly approved by the board of directors
      or
      other pertinent body or officer of the Purchaser;

     

    (v) the
      sale,
      issuance and purchase of the Securities, on the Closing Date, shall be legally
      permitted by all laws and regulations to which the Company is subject. No
      proceeding, litigation, arbitration, investigation, shall be pending or
      threatened and no judgment, decision, decree, order, injunction or award shall
      be outstanding, seeking to delay, restrain, make illegal or alter the
      transactions contemplated by any Transaction Document;

     

    
      
        
        

      

      
        6

        
          

        

      

      
        
        

      

    

     

    (vi) each
      of
      the Purchaser and the Company shall have obtained any and all approvals,
      consents, permits and waivers, including those by or from governmental
      authorities, necessary or appropriate for consummation of the transactions
      contemplated by this Agreement;

     

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

     

    (viii)
      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 Securities at the Closing.

     

    ARTICLE
      III.

    REPRESENTATIONS
      AND WARRANTIES

     

    3.1
      Representations
      and Warranties of the Company. Except as
      set
      forth in the Disclosure Schedules
      and the
      SEC Reports where specifically referenced,
      which
      Disclosure Schedules and SEC Reports, if specifically referenced, shall be
      deemed a part hereof and shall qualify any representation or warranty otherwise
      made herein to the extent of the disclosure contained in the corresponding
      section of the Disclosure Schedules
      or the
      SEC Reports, if specifically referenced, would contradict any representation
      or
      warranty contained herein, the Company makes, as of the date hereof and as
      of
      the Closing Date, the following representations and warranties to the Purchaser.
      For purposes of this Article 3, any statement, facts, representations, or
      admissions contained in the SEC Reports, if specifically referenced, will be
      deemed to be included in the Disclosure Schedule and all such information will
      be deemed to be fully disclosed and furnished to the Purchaser.
      

     

    (a) Subsidiaries.
      The
      Company has no subsidiaries.

     

    
      
        
        

      

      
        7

        
          

        

      

      
        
        

      

    

     

    (b) Organization
      and Qualification.
      The
      Company is
      an
      entity duly incorporated or otherwise organized, validly existing and in good
      standing under the laws of the State
      of
      Delaware,
      with
      the requisite power and authority to own and use its properties and assets
      and
      to carry on its business as currently conducted. The
      Company is
      not
      in
      violation or default of any of the provisions of its certificate
      or articles of incorporation, bylaws or other organizational or charter
      documents. The
      Company 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 condition (financial or otherwise) of the Company,
      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 directors 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 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.

     

    
      
        
        

      

      
        8

        
          

        

      

      
        
        

      

    

     

    (d) No
      Conflicts.
      The
      execution, delivery and performance of the Transaction Documents by the Company,
      the issuance and sale of the Securities 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 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 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 debt
      or
      otherwise) or other understanding to which the Company is
      a
      party or by which any property or asset of the Company 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
      is
      subject (including federal and state securities laws and regulations), or by
      which any property or asset of the Company 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.
      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
      4.2
      of this
      Agreement, (ii) the filing with the Commission of the Registration Statement,
      (iii) application(s) to each applicable Trading Market for the listing of the
      Securities 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 other
      than restrictions on transfer provided for in the Transaction
      Documents.
      The sale
      of the Securities hereunder is not and will not be subject to any preemptive
      rights or rights of first refusal that have not been properly waived or complied
      with.

     

    (g)
      Capitalization.
      The
      Company’s capitalization is as set forth on the Disclosure Schedule.

     

    
      
        
        

      

      
        9

        
          

        

      

      
        
        

      

    

     

    (h)
      SEC
      Filings; Financial Statements.
      The
      Company has filed all reports, schedules, forms, statements and other documents
      required to be filed by the Company 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 or regulation to file such material) (the foregoing materials, including
      the
      exhibits thereto and documents incorporated by reference therein, being
      collectively referred to herein as the “Reports”)
      on a
      timely basis or has received a valid extension of such time of filing and has
      filed any such Reports prior to the expiration of any such extension. As of
      their respective dates, the Reports complied in all material respects with
      the
      requirements of the Securities Act and the Exchange Act, as applicable, and
      none
      of the 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 the light of the circumstances under
      which they were made, not misleading. The financial statements of the Company
      included in the 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 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.
      Specifically, but not by way of limitation, the balance sheet of such financial
      statements discloses all of the Company’s material debts, liabilities and
      obligations of any nature, whether due or to become due, as of their respective
      dates (including, without limitation, absolute liabilities, accrued liabilities,
      and contingent liabilities) to the extent such debts, liabilities and
      obligations are required to be disclosed in accordance with GAAP.

     

    (i)
      Material
      Changes; Undisclosed Events, or Developments.
      Since
      the date of the latest audited financial statements included within the
      Reports,
      except
      as specifically disclosed in the SEC Report filed prior to the date
      hereof
      or in
      Schedule 3.1(i) hereof, (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 altered its method of accounting,
      (iii)
      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 (iv) the Company
      has
      not issued any Common
      Stock Equivalents
      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
      as disclosed in the SEC Reports or contained in Schedule 3.1(i) hereto, the
      Company has no indebtedness for borrowed money that the Company has directly
      or
      indirectly created, incurred, assumed, or guaranteed, or with respect to which
      the Company has otherwise become directly or indirectly liable. The Company
      has
      no material liability and, to its Knowledge, knows of no material contingent
      liability not disclosed to the Purchaser, except current liabilities
      incurred
      in the
      ordinary course of business
      which have not been, either individually or in the aggregate, materially adverse
      to the assets, financial condition or operations of the Company.

     

    
      
        
        

      

      
        10

        
          

        

      

      
        
        

      

    

     

    (j)
      Litigation.
      Except
      as disclosed in the Disclosure Schedule 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 or any of its
      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
      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
      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. None of the Company’s
employees
      is a member of a union that relates to such employee’s relationship with the
      Company and the Company is
      not
      a party
      to a collective bargaining agreement, and the Company believes
      that
its
      relationships with its
      employees are good. No executive officer is,
      or,
      to the
      Knowledge of the Company, is
      now
      expected to be, in violation of any material term of any employment contract,
      confidentiality, disclosure or proprietary information agreement or
      non-competition agreement, or any other contract or agreement or any restrictive
      covenant in favor of any third party, and the continued employment of each
      such
      executive officer does not subject the Company to
      any
      liability with respect to any of the foregoing matters. The Company is
      in
      compliance with all U.S. federal, state, local and foreign laws and regulations
      relating to employment and employment practices, terms and conditions of
      employment and wages and hours, except where the failure to be in compliance
      could not, individually or in the aggregate, reasonably be expected to have
      a
      Material Adverse Effect.

     

    (l)
      Compliance.
      The
      Company (i)
      is
not
      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 under),
      nor has the 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
not
      in
      violation of any order of any court, arbitrator or governmental body, or (iii)
      is not
      and
      has
      not
      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 and all such laws that affect the environment, except
      in each case as could not have or reasonably be expected to result in a Material
      Adverse Effect.

     

    
      
        
        

      

      
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    (m)
      Regulatory
      Permits.
      The
      Company possesses
      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 reasonably be expected to result in a Material
      Adverse Effect (“Material
      Permits”),
      and
the
      Company has
      not
      received
      any notice of proceedings relating to the revocation or modification of any
      Material Permit.

     

    (n)
      Title
      to Assets.
      The
      Company has
      good and
      marketable title in all personal property owned by them that is material to
      the
      business of the Company, 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 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 are
      held
      by them under valid, subsisting and enforceable leases with which the Company
      is
      in
      compliance.

     

    (o)
      Patents
      and Trademarks.
      To the
      Company’s Knowledge, the Company has,
      or
      has
      rights
      to use, all patents, patent applications, trademarks, trademark applications,
      service marks, trade names, trade secrets, inventions, copyrights, licenses
      and
      other intellectual property rights and similar rights necessary or material
      for
      use in connection with its
      businesses as described
      in the Reports (collectively, the “Intellectual
      Property Rights”),
      without any known infringement of the rights of others and which failure to
      so
      have could have a Material Adverse Effect.
      Except
      for the Option and except as disclosed in Disclosure Schedules, there are no
      outstanding options, licenses or agreements of any kind relating to the
      Intellectual Property Rights that are the subject of the Option, nor is the
      Company bound by or a party to any options, licenses or agreements of any kind
      with respect to the patents, patent applications, trademarks, trademark
      applications, service marks, trade names, trade secrets, inventions, copyrights,
      licenses and other intellectual property rights and similar rights of any other
      Person which relate to any Intellectual Property Rights that are the subject
      of
      the Option. The Company has not
      received a notice (written or otherwise) that any of the Intellectual Property
      Rights used by the Company 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
      or
      threatened infringement
      by another Person of any of the Intellectual Property Rights other than as
      contained in the Disclosure Schedule. Except as disclosed in the Disclosure
      Schedules, there are no proceedings, including interference, re-examination,
      reissue, opposition, nullity, or cancellation proceedings pending that relate
      to
      any of the Intellectual Property Rights that are the subject of the Option,
      and
      the Company is not aware of any information indicating that such proceedings
      are
      threatened or contemplated by any governmental authority or any other Person.
      The Company has
      taken
      reasonable security measures to protect the secrecy, confidentiality and value
      of all of their intellectual properties, except where failure to do so could
      not, individually or in the aggregate, reasonably be expected to have a Material
      Adverse Effect.

     

    
      
        
        

      

      
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    (p)
      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 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.

     

    (q)
      Contracts.
      To the
      Company’s Knowledge, all agreements, contracts and undertakings to which the
      Company is a party or by which any of its assets may be bound are in full force
      and effect and binding upon the parties thereto, and neither the Company nor
      any
      other party thereto is in material breach of or default thereunder, and no
      condition exists that with or without the giving of notice or lapse of time,
      or
      both, would constitute a material breach or default thereunder. The Company
      is
      not a party to or bound by any contract, agreement, arrangement or understanding
      that by its terms would, after consummation of the transactions contemplated
      hereunder, purport to obligate, restrict or otherwise bind the Company with
      regard to exclusivity, non-competition or other similar covenant or agreement,
      or restrict the ability of the Company to engage freely in its business as
      it
      sees fit.

     

    (r)
      Offering
      Valid.
      Assuming the accuracy of the representations and warranties of the Purchaser
      contained in Section 3.2 hereof, the offer, sale and issuance of the Securities
      will be exempt from the registration requirements of the Securities Act, and
      will have been registered or qualified (or are exempt from registration and
      qualification) under the registration, permit or qualification requirements
      of
      all applicable state securities laws. Neither the Company nor any agent on
      its
      behalf has solicited or will solicit any offers to sell or has offered to sell
      or will offer to sell all or any part of the Securities to any
      person
      or persons so as to bring the sale of such Securities by the Company within
      the
      registration provisions of the Securities Act or any state securities
      laws.

     

    (s)
      Full
      Disclosure.
      To the
      Knowledge of the Company, (i) neither this Agreement nor any other written
      document, certificate, instrument or statement furnished or made available
      to
      the Purchaser by or on behalf of the Company in connection with the transactions
      contemplated hereby contains any untrue statement of a material fact or omits
      to
      state a material fact necessary in order to make the statements contained herein
      and therein not misleading, and (ii) there are no facts which materially
      adversely affect the business, assets, liabilities, financial condition,
      prospects or operations of the Company that have not been set forth in this
      Agreement or in the other documents, certificates, instruments or statements
      furnished to the Purchaser by or on behalf of the Company.

     

    (t)
      Reliance
      by Purchaser.
      The
      Company understands that the representations, warranties, covenants and
      acknowledgements set forth in this Section 3.1 constitute a material inducement
      to the Purchaser to execute and deliver the Transaction Documents.

     

    
      
        
        

      

      
        13

        
          

        

      

      
        
        

      

    

     

    3.2
      Representations
      and Warranties of the Purchaser.
      The
      Purchaser hereby represents and warrants as of the date hereof and as of the
      Closing Date to the Company as follows:

     

    (a)
      Organization;
      Authority.
      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 and delivery of
      the
      Transaction Documents and performance by such Purchaser of the transactions
      contemplated by the Transaction Documents 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 Purchaser,
      and when delivered by Purchaser in accordance with the terms hereof, will
      constitute the valid and legally binding obligation of the 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.
      The
      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. 

     

    (c)
      Purchaser
      Status.
      Purchaser is 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.
      The
      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.
      The 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.

     

    
      
        
        

      

      
        14

        
          

        

      

      
        
        

      

    

     

    (e)
      Short
      Sales and Confidentiality Prior To The Date Hereof.
      Other
      than consummating the transactions contemplated hereunder, the Purchaser has
      not, nor has any Person acting on behalf of or pursuant to any understanding
      with such Purchaser, directly or indirectly executed any purchases or sales,
      including Short Sales, of the securities of the Company during the period
      commencing from the time that the Purchaser and Company first discussed the
      terms of the Option or any other Person representing the Company setting forth
      the material terms of the transactions contemplated hereunder until the date
      hereof (“Discussion
      Time”).
      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).

     

    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, 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
      Purchaser agrees to the imprinting, so long as is required by this Section
      4.1,
      of a legend on any of the Securities in the following form:

     

    THIS
      SECURITY HAS NOT BEEN REGISTERED WITH THE SECURITIES AND EXCHANGE COMMISSION
      OR
      THE SECURITIES COMMISSION OF ANY STATE IN RELIANCE UPON AN EXEMPTION FROM
      REGISTRATION UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE “SECURITIES
      ACT”), 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. THIS SECURITY MAY BE PLEDGED IN CONNECTION WITH A BONA FIDE MARGIN
      ACCOUNT WITH A REGISTERED BROKER-DEALER OR OTHER LOAN WITH A FINANCIAL
      INSTITUTION THAT IS AN “ACCREDITED INVESTOR” AS DEFINED IN RULE 501(a) UNDER THE
      SECURITIES ACT OR OTHER LOAN SECURED BY SUCH SECURITIES.

     

    
      
        
        

      

      
        15

        
          

        

      

      
        
        

      

    

     

    The
      restrictions set forth in this Section 4.1 shall terminate upon the effective
      date of the Registration Statement filed under the Securities Act or the
      registration of the Shares under the Exchange Act.

     

    4.2
      Securities
      Laws Disclosure; Publicity. The Company shall issue a Current Report on Form
      8-K, disclosing the material terms of the transactions contemplated hereby,
      and
      filing the Transaction Documents as exhibits thereto within the required period
      of time following the Closing. The Company and the Purchaser shall consult
      with
      each other in issuing any other press releases with respect to the transactions
      contemplated hereby, and neither the Company nor the 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 the Purchaser,
      or
      without the prior consent of the 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. 

     

    4.3
      Limitation
      on Ownership & Representation. 

     

    (a) While
      the
      Option
      remains
      effective and outstanding
      (or in
      the event the parties enter into a licensing agreement as contemplated in the
      Option, for
      the
      duration of any
      such
      licensing agreement),
      the
      Purchaser shall not: (i) seek to secure board representation; (ii) enter into
      any voting agreement or grant a proxy to any third party with respect to any
      Common Stock owned by the Purchaser; or (iii) acquire any of the Company’s
      Common Stock or Common Stock Equivalents
      to the
      extent that any such acquisition would trigger the filing under
      Section
      13(d) of the Exchange Act.
      For
      purposes of this Section 4.3, (A) beneficial ownership, the manner of
      calculation of the percentage, and the definition of
      Common
      Stock Equivalents
      shall
      all
      be
      determined in accordance with Section 13(d) of the Exchange Act and the rules
      and regulations promulgated thereunder,
      and
      (B)
      in
      determining the number of outstanding shares of Common Stock, the
      parties
      may rely on the number of outstanding shares of Common Stock as reflected in
      (x)
      the Company’s most recent Form 10-QSB or Form 10-KSB, as the case may be, (y) a
      more recent public announcement by the Company or (z) any other notice by the
      Company or the Company’s Transfer Agent setting forth the number of shares of
      Common Stock outstanding. Upon the written or oral request of the Purchaser,
      the
      Company shall within two Trading Days confirm orally and in writing to the
      Purchaser the number of shares of Common Stock and the Common Stock Equivalents
      then outstanding,
      and if
      requested by the Purchaser, the percentage that would result from the
      Purchaser’s additional acquisition, calculated pursuant to Section 13(d) of the
      Exchange Act,
      it
      being acknowledged by the Purchaser that if
      the
      Company provides calculation of the percentage, the
      Company is not representing to the
      Purchaser that such calculation is in compliance with Section 13(d) of the
      Exchange Act and the
      Purchaser is solely responsible for any schedules required to be filed in
      accordance therewith.

     

    
      
        
        

      

      
        16

        
          

        

      

      
        
        

      

    

     

    (b) In
      the
      event Purchaser breaches any of the covenants and agreements contained in
      Section 4.3(a), Purchaser acknowledges that monetary remedies would not be
      sufficient and acknowledges that any such violation or threatened violation
      will
      cause irreparable injury to the other party and that, in addition to any other
      remedies that may be available, in law, in equity or otherwise, the Company
      shall be entitled to the following
      remedies, cumulatively: (i) the obtaining
      of injunctive relief against the threatened breach or the continuation of any
      such breach, without the necessity of proving actual damages and
      (ii)
      a determination by the Company, in its sole discretion, that any votes cast
      by
      the Purchaser, Affiliates acting on its behalf, or assigns with regard to the
      Common Stock then owned, are improper, void and of no force or effect, which
      determination will be binding on the Purchaser.

    

    4.4
      Use
      of
      Proceeds. The Company shall use the net proceeds from the sale of the
      Securities hereunder for working capital purposes.

     

    4.5
      Indemnification
      of Purchaser. Subject to the provisions of this Section 4.5, the Company
      will indemnify and hold 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 Persons (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 any
      such
Purchaser
      Party
      in any
      capacity, 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 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 reasonably
      acceptable to the Purchaser Party. 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, in which case the
      Company shall be responsible for the reasonable fees and expenses of no more
      than one such separate counsel. The Company will not be liable to Purchaser
      Party under this Agreement (i) for any settlement by 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 such
      Purchaser Party in this Agreement or in the other Transaction
      Documents.

     

    
      
        
        

      

      
        17

        
          

        

      

      
        
        

      

    

     

    4.6
      Short
      Sales and Confidentiality After The Date Hereof. The Purchaser 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 expiration of the Option Period or
      in
      the event a licensing agreement is reached between the parties, at the
      termination of the licensing period. 

     

    4.7
      Delivery
      of Securities After Closing. The Company shall deliver, or cause to be
      delivered, the Securities purchased by the Purchaser within 15 Trading Days
      of
      the Closing Date.

     

    4.8
      Financial
      Reports. The Company shall furnish to the Purchaser the following financial
      statements prepared in accordance with GAAP, consistently applied: (i) within
      sixty (60) days after the end of each calendar quarter, the Company’s unaudited
      or if available, audited balance sheet and statements of income and cash flows
      for the quarter just ended; and (ii) as soon as possible after the end of each
      fiscal year of the Company and not later than one hundred twenty (120) days
      after the end of each fiscal year, the Company’s unaudited or if available,
      audited balance sheet as of the end of its fiscal year and the related
      statements of income and cash flows for the fiscal year.

     

    4.9
      Inspection
      Rights. The Purchaser shall have the right to visit and inspect any of the
      properties of the Company, and to discuss the affairs, finances, accounts and
      capitalization of the Company with its officers, and to review such information
      as is reasonably requested all at such reasonable times and as often as may
      be
      reasonably requested; provided, however, that the Company shall not be obligated
      under this Section 4.9 with respect to a competitor of the Company. In
      the
      event Purchaser avails itself of its inspection rights as contained herein,
      Purchaser acknowledges that it may come privy to material inside information
      and
      accordingly, agrees to purchase or sell any of the Company’s securities until
      such information is publicly disclosed. 

     

    
      
        
        

      

      
        18

        
          

        

      

      
        
        

      

    

     

    4.10
      Notice
      of Stockholder Meeting or Resolutions. The Company shall provide written
      notice to the Purchaser of any proposed meeting, resolution or consent of the
      stockholders, setting forth the agenda in reasonable detail together with other
      appropriate documents to inform the Purchaser adequately of matters to be
      discussed and resolved, which notice shall be given no later than two (2) weeks
      in advance of the date of such meeting, resolution or consent.

     

    ARTICLE
      V.

    MISCELLANEOUS

     

    5.1
      Fees
      and Expenses. 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 to the Purchaser.

     

    5.2
      Entire
      Agreement. The Transaction Documents, together with the exhibits and
      schedules thereto, contain the entire understanding of the parties with respect
      to the subject matter hereof and supersede all prior agreements and
      understandings, oral or written, with respect to such matters, which the parties
      acknowledge have been merged into such documents, exhibits and
      schedules.

     

    5.3
      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
      2nd
      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.

     

    5.4
      Amendments;
      Waivers. No provision of this Agreement may be waived or amended except in a
      written instrument signed by the Company and the Purchaser or, in the case
      of a
      waiver, by the party against whom enforcement of any such waived provision
      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.

     

    
      
        
        

      

      
        19

        
          

        

      

      
        
        

      

    

     

    5.5
      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.

     

    5.6
      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 (other than by merger). 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 of the Transaction Documents that apply to the
“Purchaser.”

     

    5.7
      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 4.8.

     

    5.8
      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 Delaware,
      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 state
      of
      Delaware. Each party hereby irrevocably submits to the exclusive jurisdiction
      of
      the state and federal courts sitting in the state of Delaware 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 is an inconvenient venue for
      such
      proceeding. Each party agrees
      that any
      service
      of process
      in any
      such suit, action or proceeding shall
      be
      made in strict accordance with the Convention on the Service Abroad of Judicial
      and Extrajudicial Documents in Civil or Commercial Matters, as the same is
      effective for the jurisdiction of the Company and the Purchaser,
      respectively.
      Nothing
      contained herein shall be deemed to limit in any way any right to serve process
      in any other manner permitted by law. 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 reasonable attorneys’ fees and other costs and expenses incurred
      with the investigation, preparation and prosecution of such action or
      proceeding.

     

    
      
        
        

      

      
        20

        
          

        

      

      
        
        

      

    

     

    5.9
      Survival.
      The representations and warranties contained herein shall survive the Closing
      and the delivery of the Shares.

     

    5.10
      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.

     

    5.11
      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.

     

    5.12
      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 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 the 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. 

     

    5.13
      Replacement
      of Securities. If any certificate or instrument evidencing the 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 (in the
      case of mutilation), 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. The applicant for a new certificate
      or instrument under such circumstances shall also pay any reasonable third-party
      costs (including customary indemnity) associated with the issuance of such
      replacement Securities.

     

    5.14
      Remedies.
      In addition to being entitled to exercise all rights provided herein or granted
      by law, including recovery of damages, the Purchaser 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 contained in the Transaction
      Documents and hereby agrees to waive and not to assert in any action for
      specific performance of any such obligation the defense that a remedy at law
      would be adequate.

     

    
      
        
        

      

      
        21

        
          

        

      

      
        
        

      

    

     

    5.15
      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.

     

    5.16
      Waiver
      of Jury Trial. In any action, suit or proceeding in any jurisdiction brought
      by any party against any other party, the parties each knowingly and
      intentionally, to the greatest extent permitted by applicable law, hereby
      absolutely, unconditionally, irrevocably and expressly waives forever trial
      by
      jury.

     

    (Signature
      Pages Follow)

     

    
      
        
        

      

      
        22

        
          

        

      

      
        
        

      

    

     

    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.

     

    

    
      	
              NEURALSTEM,
                INC.

               

            	
              Address
                for Notice:

              9700
                Great Seneca Highway

              Rockville,
                Maryland 20850

            
	
              By:__________________________________________

                   
                Name:

                   
                Title:

            	
              Attn:

              e-mail:

              Tel:

              Fax:

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

            	 

    

     

    [REMAINDER
      OF PAGE INTENTIONALLY LEFT BLANK

    SIGNATURE
      PAGE FOR PURCHASER FOLLOWS]

     

    
      
        
        

      

      
        23

        
          

        

      

      
        
        

      

    

    [PURCHASER
      SIGNATURE PAGES TO NRLS 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: CJ CheilJedang Corporation____

     

    Signature
      of Authorized Signatory of Purchaser:
      __________________________________

     

    Name
      of
      Authorized Signatory: _Jin Soo Kim
      _____________________________________

     

    Title
      of
      Authorized Signatory: _Chief Executive Officer
      _________________________

     

    Email
      Address of Purchaser:_

     

    kek2006@CJ.net
      (attn: Kyoung-Eun Kim, Stem Cell Business Team, Pharma BU)_______

     

    Fax
      Number of Purchaser:
      _+82-2-6363-0519_____________________________________________

     

    Address
      for Notice of Purchaser:

    Attn:
      Kyoung-Eun Kim, Stem Cell Business Team, 

    CJ
      CheilJedang Corporation

    KCCI
      Building 45, 4-ga, Namdaemun-ro, Jung-gu, Seoul, 100-743 Korea

    

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

    

    Subscription
      Amount:

    $:

    Shares:

    #:

    EIN
      Number:

    

    [SIGNATURE
      PAGES CONTINUE]

     

    
      
        
        

      

      
        24

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