Document:

ex10_1.htm

     

    Exhibit 10.1

     

    SECURITIES
PURCHASE AGREEMENT

    

    This Securities Purchase Agreement
(this “Agreement”) is dated as of May 15, 2009, between XOMA Ltd., a Bermuda
company (the “Company”), and each purchaser identified on the signature pages
hereto (each, including its successors and assigns, a “Purchaser” and
collectively the “Purchasers”).

    

    WHEREAS, subject to the terms and
conditions set forth in this Agreement and pursuant to an effective registration
statement under the Securities Act of 1933, as amended (the “Securities Act”),
the Company desires to issue and sell to each Purchaser, and each Purchaser,
severally and not jointly, desires to purchase from the Company, securities of
the Company as more fully described in this Agreement.

    

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

    

    ARTICLE
I.

    DEFINITIONS

    

    1.1           Definitions.  In
addition to the terms defined elsewhere in this Agreement, for all purposes of
this Agreement, the following terms have the meanings set forth in this Section
1.1:

    

    “Acquiring
Person” shall have the meaning ascribed to such term in Section
4.5.

    

    “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.

    

    “Bermuda
Counsel” means Conyers Dill & Pearman, with offices located at Clarendon
House, 2 Church Street, Hamilton HM11, Bermuda.

    

    “Board of
Directors” means the board of directors of the Company.

    

    “Business
Day” means any day except any Saturday, any Sunday, any day which is a federal
legal holiday in the United States or any day on which banking institutions in
the State of New York 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 on which all of the Transaction Documents have been
executed and delivered by the applicable parties thereto, and all conditions
precedent to (i) the Purchasers’ obligations to pay the Subscription Amount and
(ii) the Company’s obligations to deliver the Securities, in each case, have
been satisfied or waived.

    
      
         

      

      
         

        
          

        

      

      
         

      

    

    

    

    “Commission”
means the United States Securities and Exchange Commission.

    

    “Common
Stock” means the common shares of the Company, par value $0.0005 per share, and
any other class of securities into which such securities may hereafter be
reclassified or changed.

    

    “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.

    

    “Evaluation
Date” shall have the meaning ascribed to such term in Section
3.1(r).

    

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

    

    “Exempt
Issuance” means the issuance of (a) shares of Common Stock or options to
employees, officers or directors of the Company pursuant to any stock or option
plan duly adopted for such purpose, by a majority of the non-employee members of
the Board of Directors or a majority of the members of a committee of
non-employee directors established for such purpose, (b) securities upon the
exercise or exchange of or conversion of any Securities issued hereunder and/or
other securities exercisable or exchangeable for or convertible into shares of
Common Stock issued and outstanding on the date of this Agreement, provided that
such securities have not been amended since the date of this Agreement to
increase the number of such securities or to decrease the exercise price,
exchange price or conversion price of such securities, (c) securities issued
pursuant to acquisitions or strategic transactions approved by a majority of the
disinterested directors of the Company, which acquisitions or strategic
transactions can have a Variable Rate Transaction component,  provided
that any such issuance shall only be to a Person (or to the equityholders of a
Person) which is, itself or through its subsidiaries, an operating company or an
asset in a business synergistic with the business of the Company and shall
provide to the Company additional benefits in addition to the investment of
funds, but shall not include a transaction in which the Company is issuing
securities primarily for the purpose of raising capital or to an entity whose
primary business is investing in securities; (d) shares of Common Stock issued
pursuant to an “at the market (ATM)” or “dribble out” program entered into by
the Company no later than sixty (60) days
following the Subscription Date, provided that the Company has complied with its
obligations under Section 4.11 and Section
4.12 of this Agreement with
respect to such program, (e) on a one time basis, warrants to purchase Common
Stock to the lenders in connection with any refinancing or restructuring of
existing secured bank financed indebtedness of the Company, and (f) shares of
Common Stock issued pursuant to that certain Common Share Purchase Agreement,
dated October 21, 2008, by and between the Company and Azimuth Opportunity
Ltd.

    
      
         

      

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

    

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

    

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

    

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

    

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

    

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

    

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

    

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

    

    “NASDAQ
Approval” means the approval by the NASDAQ of the Company’s additional listing
applications with regard to the issuance of the Securities.

    

    “Per
Share Purchase Price” equals $0.85, subject to adjustment for reverse and
forward stock splits, stock dividends, stock combinations and other similar
transactions of the Common Stock that occur after the date of this
Agreement.

    

    “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.

    

    “Placement
Agents” mean Canaccord Adams Inc. and Wedbush Morgan Securities,
Inc.

    

    “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.

    

    “Prospectus”
means the final prospectus filed for the Registration Statement.

    

    “Prospectus
Supplement” means the supplement to the Prospectus complying with Rule 424(b) of
the Securities Act that is filed with the Commission and delivered by the
Company to each Purchaser prior to the Closing.

    

    “Purchaser
Party” shall have the meaning ascribed to such term in Section 4.8.

    

    “Registration
Statement” means the effective registration statement with Commission file No.
333-148342 which registers the sale of the Shares, the Warrants and the Warrant
Shares by the Purchasers.

    
      
         

      

      
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    “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.

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

    

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

    

    “Securities”
means the Shares, the Warrants and the Warrant 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 each 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, as to each Purchaser, the aggregate amount to be paid for Shares
and Warrants purchased hereunder as specified below such Purchaser’s name on the
signature page of this Agreement and next to the heading “Subscription Amount,”
in United States dollars and in immediately available funds.

    

    “Subsidiary”
means any subsidiary of the Company as set forth on Schedule 3.1(a), and shall,
where applicable, also include any direct or indirect subsidiary of the Company
formed or acquired after the date hereof.

    

    “Trading
Day” means a day on which the principal Trading Market is open for
trading.

    

    “Trading
Market” means any of the following markets or exchanges on which the Common
Stock is listed or quoted for trading on the date in question: the NYSE AMEX,
the Nasdaq Capital Market, the Nasdaq Global Market, the Nasdaq Global Select
Market, or the New York Stock Exchange (or any successors to any of the
foregoing).

    

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

    
      
         

      

      
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    “Transfer
Agent” means BNY Mellon Shareowner Services, the current transfer agent of the
Company, with a mailing address of 480 Washington Blvd., Jersey City, New Jersey
07310 and a facsimile number of 415-951-4181, and any successor transfer agent
of the Company.

    

    “U.S.
Counsel” means Cahill Gordon & Reindel LLP, with offices located at 80 Pine
Street, New York, New York, USA.

    

     “Variable
Rate Transaction” shall have the meaning ascribed to such term in Section
4.12(b).

    

    “Warrants”
means, the Common Stock purchase warrants delivered to the Purchasers at the
Closing in accordance with Section 2.2(a) hereof, which shall be exercisable
immediately and have a term of exercise equal to five (5) years, each in the
form of Exhibit A attached hereto.

    

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

    

    ARTICLE
II.

    PURCHASE
AND SALE

    

    2.1           Closing.  On the
Closing Date, upon the terms and subject to the conditions set forth herein,
substantially concurrent with the execution and delivery of this Agreement by
the parties hereto, the Company agrees to sell, and the Purchasers, severally
and not jointly,  agree to purchase, up to an aggregate of $10,000,000
of Shares and Warrants.  Each Purchaser shall deliver to the Company,
via wire transfer or a certified check of immediately available funds equal to
such Purchaser’s Subscription Amount as set forth on the signature page hereto
executed by such Purchaser and the Company shall deliver to each Purchaser its
respective Shares and a Warrant as determined pursuant to Section 2.2(a), and
the Company and each Purchaser shall deliver the other items set forth in
Section 2.2 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 Choate, Hall & Stewart LLP, Two International Place,
Boston, MA 02110 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 each Purchaser the following:

    

    (i)           this
Agreement duly executed by the Company;

    

    (ii)           a
legal opinion of U.S. Counsel delivered and addressed to the Purchasers and the
Placement Agents, substantially in the form of Exhibit B attached hereto and a
legal opinion of Bermuda Counsel delivered and addressed to the Purchasers and
the Placement Agents in a form acceptable to each of the Purchasers and each of
the Placement Agents;

    

    (iii)           a
copy of the irrevocable instructions to the Company’s transfer agent instructing
the transfer agent to deliver via the Depository Trust Company Deposit
With-

    
      
         

      

      
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    drawal
Agent Commission System (“DWAC”) Shares equal to such Purchaser’s Subscription
Amount divided by the Per Share Purchase Price, registered in the name of such
Purchaser;

    

    (iv)           a
Warrant registered in the name of such Purchaser to purchase up to a number of
shares of Common Stock equal to 50% of such Purchaser’s Shares, with an exercise
price equal to $1.02, subject to adjustment therein (such Warrant certificate
may be delivered within three Trading Days of the Closing Date);
and

    

    (vi)           the
Prospectus and Prospectus Supplement (which may be delivered in accordance with
Rule 172 under the Securities Act).

    

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

    

    (i)           this
Agreement duly executed by such Purchaser; and

    

    (ii)           such
Purchaser’s Subscription Amount by wire transfer to the account as specified in
writing by the Company.

    

    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 Purchasers contained herein (unless as of a specific date
therein);

    

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

    

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

    

    (iv)           the
NASDAQ Approval;

    

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

    

    (i)           the
accuracy in all material respects when made and on the Closing Date of the
representations and warranties of the Company contained herein (unless as of a
specific date therein);

    

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

    
      
         

      

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

    

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

    

    (v)           the
NASDAQ Approval; and

    

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

    

    ARTICLE
III.

    REPRESENTATIONS
AND WARRANTIES

    

    3.1           Representations and Warranties of the
Company.  Except as set forth in the SEC Reports or the
Disclosure Schedules, which Disclosure Schedules shall be deemed a part hereof
and shall qualify any representation or otherwise made herein to the extent of
the disclosure contained in the corresponding section of the Disclosure
Schedules, the Company hereby makes the following representations and warranties
to each Purchaser:

    

    (a)           Subsidiaries.  All
of the direct and indirect subsidiaries of the Company are set forth on Schedule
3.1(a).  Except as set forth on Schedule 3.1(a), the Company owns,
directly or indirectly, all of the capital stock or other equity interests of
each Subsidiary free and clear of any Liens, and all of the issued and
outstanding shares of capital stock of each Subsidiary are validly issued and
are fully paid, non-assessable and free of preemptive and similar rights to
subscribe for or purchase securities.

    

    (b)           Organization and
Qualification.  The Company and each of the Subsidiaries is an
entity duly incorporated or otherwise organized, validly existing and in good
standing under the laws of the jurisdiction of its incorporation or
organization, with the requisite power and authority to own and use its
properties and assets and to carry on its business as currently
conducted.  Neither the Company nor any Subsidiary is in violation nor
default of any of the provisions of its respective certificate or articles of
incorporation, bylaws or other organizational or charter
documents.  Each of the Company and the Subsidiaries is duly qualified
to conduct business and

    
      
         

      

      
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    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 or financial condition of the Company and the
Subsidiaries, taken as a whole, or (iii) a material adverse effect on the
Company’s ability to perform in any material respect on a timely basis its
obligations under any Transaction Document (any of (i), (ii) or (iii), a
“Material Adverse Effect”) and no Proceeding has been instituted in any such
jurisdiction revoking, limiting or curtailing or seeking to revoke, limit or
curtail such power and authority or qualification.

    

    (c)           Authorization;
Enforcement.  The Company has the requisite corporate power and
authority to enter into and to consummate the transactions contemplated by each
of the Transaction Documents and otherwise to carry out its obligations
hereunder and thereunder.  The execution and delivery of each of the
Transaction Documents by the Company and the consummation by it of the
transactions contemplated hereby and thereby have been duly authorized by all
necessary action on the part of the Company and no further action is required by
the Company, the Board of Directors or the Company’s stockholders in connection
therewith other than in connection with the Required Approvals.  Each
Transaction Document to which it is a party 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.

    

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

    
      
         

      

      
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    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) the filings required pursuant to Section 4.4 of this Agreement, (ii)
the filing with the Commission of the Prospectus Supplement, (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)
such filings as are required to be made under applicable Bermuda and state
securities laws (collectively, the “Required Approvals”).

    

    (f)           Issuance of the Securities;
Registration.  The Securities are duly authorized and, when
issued and paid for in accordance with the applicable Transaction Documents,
will be duly and validly issued, fully paid and nonassessable, free and clear of
all Liens imposed by the Company.  The Warrant Shares, when issued in
accordance with the terms of the Warrants, will be validly issued, fully paid
and nonassessable, free and clear of all Liens imposed by the
Company.  The Company has reserved from its duly authorized capital
stock the maximum number of shares of Common Stock issuable pursuant to this
Agreement and the Warrants. The Company has prepared and filed the Registration
Statement in conformity with the requirements of the Securities Act, which
became effective on May 29, 2008 (the “Effective Date”), including the
Prospectus, and such amendments and supplements thereto as may have been
required to the date of this Agreement.  The Registration Statement is
effective under the Securities Act and no stop order preventing or suspending
the effectiveness of the Registration Statement or suspending or preventing the
use of the Prospectus has been issued by the Commission and no proceedings for
that purpose have been instituted or, to the knowledge of the Company, are
threatened by the Commission.  The Company, if required by the rules
and regulations of the Commission, proposes to file the Prospectus Supplement,
with the Commission pursuant to Rule 424(b).  At the time the
Registration Statement and any amendments thereto became effective, at the date
of this Agreement and at the Closing Date, the Registration Statement and any
amendments thereto conformed and will conform in all material respects to the
requirements of the Securities Act and did not and will not contain any untrue
statement of a material fact or omit to state any material fact required to be
stated therein or necessary to make the statements therein not misleading; and
the Prospectus and any amendments or supplements thereto, at time the Prospectus
or any amendment or supplement thereto was issued and at the Closing Date,
conformed and will conform in all material respects to the requirements of the
Securities Act and did not and will not contain an untrue statement of a
material fact or omit to state a material fact necessary in order to make the
statements therein, in light of the circumstances under which they were made,
not misleading.

    

    (g)           Capitalization.  The
capitalization of the Company as of March 31, 2009 is as set forth in the
Company’s Quarterly Report on Form 10-Q for the quarterly period ended March 31,
2009.  Except as set forth on Schedule 3.1(g), the Company has not
issued any capital stock since its most recently filed periodic report under the
Exchange Act, other than pursuant to the exercise of employee stock options
under the Company’s stock option plans, the issuance of shares of Common Stock
to employees pursuant to the Company’s employee stock purchase plans
and

    
      
         

      

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

    

    (h)           SEC Reports; Financial
Statements.  The Company has filed all reports, schedules,
forms, statements and other documents required to be filed by 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, together with the Prospectus and the
Prospectus Supplement, being collectively referred to herein as the “SEC
Reports”) on a timely basis or has received a valid extension of such time of
filing and has filed any such SEC Reports prior to the expiration of any such
extension.  As of their respective dates, the SEC Reports complied in
all material respects with the requirements of the Securities Act and the
Exchange Act, as applicable, and none of the SEC Reports, when filed, contained
any untrue statement of a material fact or omitted to state a material fact
required to be stated therein or necessary in order to make the statements
therein, in the light of the circumstances under which they were made, not
misleading. The Company has never been an issuer subject to Rule 144(i) under
the Securities Act. The financial statements of the Company included in the SEC
Reports comply in all material respects with applicable accounting requirements
and the rules and regulations of the Commission with respect thereto as in
effect at the time of filing.  Such financial statements have been
prepared in accordance with United States generally accepted accounting
principles applied on a consistent basis during the periods involved (“GAAP”),
except as may be otherwise specified in such financial statements or the notes
thereto and except that unaudited financial statements may not contain all
footnotes required by GAAP, and fairly present in all material respects the
financial position of the Company and its consolidated Subsidiaries as of and
for the dates thereof and the

    
      
         

      

      
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    results
of operations and cash flows for the periods then ended, subject, in the case of
unaudited statements, to normal, immaterial, year-end audit
adjustments.

    

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

    

    (j)           Litigation.  Except
as disclosed in the SEC Reports, there is no action, suit, inquiry, notice of
violation, proceeding or investigation pending or, to the knowledge of the
Company, threatened against or affecting the Company, any Subsidiary or any of
their respective properties before or by any court, arbitrator, governmental or
administrative agency or regulatory authority (federal, state, county, local or
foreign) (collectively, an “Action”) which (i) adversely affects or challenges
the legality, validity or enforceability of any of the Transaction Documents or
the Securities or (ii) could, if there were an unfavorable decision, have or
reasonably be expected to result in a Material Adverse
Effect.  Neither the Company nor any Subsidiary, nor any director or
officer thereof, is or has been within the last five (5) years 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 targeting the Company or any current or
former director or officer of the Company.  The Commission has not
issued any stop order or other order suspending the effectiveness of any
registration statement filed by the Company or any Subsidiary under the Exchange
Act or the Securities Act.

    

    (k)           Labor
Relations.  No material labor dispute exists or, to the
knowledge of the Company, is imminent with respect to any of the employees of
the Company, which could reasonably be expected to result in a Material Adverse
Effect.  None of the Company’s or its Subsidiaries’ employees is a
member of a union that relates to such employee’s relationship with the Company
or such Subsidiary, and neither the Company nor any of its Subsidiaries is a
party to a collective bargaining agreement, and the Company and its Subsidiaries
believe that their relationships with their employees are good.  No
executive officer, to the knowledge of the Com-

    
      
         

      

      
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    pany, is,
or 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 or any of its Subsidiaries to any
liability with respect to any of the foregoing matters.  The Company
and its Subsidiaries are 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.  Neither
the Company nor any Subsidiary: (i) is in default under or in violation of (and
no event has occurred that has not been waived that, with notice or lapse of
time or both, would result in a default by the Company or any Subsidiary under),
nor has the Company or any Subsidiary received notice of a claim that it is in
default under or that it is in violation of, any indenture, loan or credit
agreement or any other agreement or instrument to which it is a party or by
which it or any of its properties is bound (whether or not such default or
violation has been waived), (ii) is in violation of any judgment, decree or
order of any court, arbitrator or governmental body or (iii) is or has been in
violation of any statute, rule, ordinance 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.

    

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

    

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

    

    (o)           Patents and
Trademarks.  The Company and the Subsidiaries have, or have
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 their respective businesses as described in
the SEC Reports and which the failure to so have could have a Material Adverse
Ef-

    
      
         

      

      
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    fect
(collectively, the “Intellectual Property Rights”).  Neither the
Company nor any Subsidiary has received a notice (written or otherwise) that any
of the Intellectual Property Rights used by the Company or any Subsidiary
violates or infringes upon the rights of any Person.  To the knowledge
of the Company, all such Intellectual Property Rights are enforceable and there
is no existing material infringement by another Person of any of the
Intellectual Property Rights.  The Company and its Subsidiaries have
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.

    

    (p)           Insurance.  Except
as set forth on Schedule 3.1(p), the Company and the Subsidiaries are insured by
insurers of recognized financial responsibility against such losses and risks
and in such amounts as are prudent and customary in the businesses in which the
Company and the Subsidiaries are engaged, including, but not limited to,
directors and officers insurance coverage at least equal to the aggregate
Subscription Amount.  Neither the Company nor any Subsidiary has any
reason to believe that it will not be able to renew its existing insurance
coverage as and when such coverage expires or to obtain similar coverage from
similar insurers as may be necessary to continue its business without a
significant increase in cost.

    

    (q)           Transactions With Affiliates
and Employees.  Except as set forth in the SEC Reports, none of
the officers or directors of the Company and, to the knowledge of the Company,
none of the employees of the Company is presently a party to any transaction
with the Company or any Subsidiary (other than for services as employees,
officers and directors), including any contract, agreement or other arrangement
providing for the furnishing of services to or by, providing for rental of real
or personal property to or from, or otherwise requiring payments to or from any
officer, director or such employee or, to the knowledge of the Company, any
entity in which any officer, director, or any such employee has a substantial
interest or is an officer, director, trustee or partner, in each case in excess
of $120,000 other than for (i) payment of salary or consulting fees for services
rendered, (ii) reimbursement for expenses incurred on behalf of the Company and
(iii) other employee benefits, including stock option agreements under any stock
option plan of the Company.

    

    (r)           Sarbanes-Oxley; Internal
Accounting Controls.  The Company is in material compliance
with all provisions of the Sarbanes-Oxley Act of 2002 which are applicable to it
as of the Closing Date.  The Company and the Subsidiaries maintain a
system of internal accounting controls sufficient to provide reasonable
assurance that: (i) transactions are executed in accordance with management’s
general or specific authorizations, (ii) transactions are recorded as necessary
to permit preparation of financial statements in conformity with GAAP and to
maintain asset accountability, (iii) access to assets is permitted only in
accordance with management’s general or specific authorization, and (iv) the
recorded accountability for assets is compared with the existing assets at
reasonable intervals and appropriate action is taken with respect to any
differences. The Company has established disclosure controls and procedures (as
defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) for the Company and
designed such disclosure controls and procedures to ensure that information
required to be disclosed by the Company in the reports it files or submits under
the Exchange Act is recorded, processed, summarized and reported, within the
time periods specified in the Commission’s rules and forms.  The
Company’s certifying officers have evaluated the effectiveness of the Company’s
disclosure controls and

    
      
         

      

      
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    procedures
as of the end of the period covered by the Company’s most recently filed
periodic report under the Exchange Act (such date, the “Evaluation
Date”).  The Company presented in its most recently filed periodic
report under the Exchange Act the conclusions of the certifying officers about
the effectiveness of the disclosure controls and procedures based on their
evaluations as of the Evaluation Date.  Since the Evaluation Date,
there have been no changes in the Company’s internal control over financial
reporting (as such term is defined in the Exchange Act) that has materially
affected, or is reasonably likely to materially affect, the Company’s internal
control over financial reporting.

    

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

    

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

    

    (u)           Registration
Rights.  No Person has any right to cause the Company to effect
the registration under the Securities Act of any securities of the
Company.

    

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

    

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

     

    
 

    
      
         

      

      
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    (x)           Disclosure.  Except
with respect to the material terms and conditions of the transactions
contemplated by the Transaction Documents, the Company confirms that neither it
nor any other Person acting on its behalf has provided any of the Purchasers or
their agents or counsel with any information that it believes constitutes or
might constitute material, non-public information which is not otherwise
disclosed in the Prospectus Supplement.   The Company understands
and confirms that the Purchasers will rely on the foregoing representation in
effecting transactions in securities of the Company.  All of the
disclosure furnished by or on behalf of the Company to the Purchasers regarding
the Company, its business and the transactions contemplated hereby, including
the Disclosure Schedules to this Agreement, is true and correct and does not
contain any untrue statement of a material fact or omit to state any material
fact necessary in order to make the statements made therein, in light of the
circumstances under which they were made, not misleading. The press releases
disseminated by the Company during the twelve months preceding the date of this
Agreement taken as a whole do not contain any untrue statement of a material
fact or omit to state a material fact required to be stated therein or necessary
in order to make the statements therein, in light of the circumstances under
which they were made and when made, not misleading.  The Company
acknowledges and agrees that no Purchaser makes or has made any representations
or warranties with respect to the transactions contemplated hereby other than
those specifically set forth in Section 3.2 hereof.

    

    (y)           No Integrated
Offering.  Assuming the accuracy of the Purchasers’
representations and warranties set forth in Section 3.2 and the NASDAQ Approval,
neither the Company, nor any of its Affiliates, nor any Person acting on its or
their behalf has, directly or indirectly, made any offers or sales of any
security or solicited any offers to buy any security, under circumstances that
would cause this offering of the Securities to be integrated with prior
offerings by the Company for purposes of any applicable shareholder approval
provisions of any Trading Market on which any of the securities of the Company
are listed or designated.

    

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

    

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

    

    (cc)           Accountants.  The
Company’s accounting firm is set forth on Schedule 3.1(cc) of the Disclosure
Schedules.  To the knowledge and belief of the Company, such
accounting firm (i) is a registered public accounting firm as required by the
Exchange Act and (ii) shall express

    
      
         

      

      
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    its
opinion with respect to the financial statements to be included in the Company’s
Annual Report for the year ended December 31, 2009.

    

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

    

    (ee)           Acknowledgement Regarding
Purchaser’s Trading Activity.  Anything in this Agreement or
elsewhere herein to the contrary notwithstanding (except for Sections 3.2(e) and
4.14 hereof), it is understood and acknowledged by the Company that: (i) none of
the Purchasers have been asked by the Company to agree, nor has any Purchaser
agreed, to desist from purchasing or selling, long and/or short, securities of
the Company, or “derivative” securities based on securities issued by the
Company or to hold the Securities for any specified term; (ii) past or future
open market or other transactions by any Purchaser, specifically including,
without limitation, Short Sales or “derivative” transactions, before or after
the closing of this or future private placement transactions, may negatively
impact the market price of the Company’s publicly-traded securities; (iii) any
Purchaser, and counter-parties in “derivative” transactions to which any such
Purchaser is a party, directly or indirectly, presently may have a “short”
position in the Common Stock, and (iv) each Purchaser shall not be deemed to
have any affiliation with or control over any arm’s length counter-party in any
“derivative” transaction.  The Company further understands and
acknowledges that (y) one or more Purchasers may engage in hedging activities at
various times during the period that the Securities are outstanding, including,
without limitation, during the periods that the value of the Warrant Shares
deliverable with respect to Securities are being determined, and (z) such
hedging activities (if any) could reduce the value of the existing stockholders'
equity interests in the Company at and after the time that the hedging
activities are being conducted.  The Company acknowledges that such
aforementioned hedging activities do not constitute a breach of any of the
Transaction Documents.

    

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

    
      
         

      

      
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    (gg)           FDA.  As to
each product subject to the jurisdiction of the U.S. Food and Drug
Administration (“FDA”) under the Federal Food, Drug and Cosmetic Act, as
amended, and the regulations thereunder (“FDCA”) that is manufactured, packaged,
labeled, tested, distributed, sold, and/or marketed by the Company or any of its
Subsidiaries (each such product, a “Pharmaceutical Product”), such
Pharmaceutical Product is being manufactured, packaged, labeled, tested,
distributed, sold and/or marketed by the Company in compliance with all
applicable requirements under FDCA and similar laws, rules and regulations
relating to registration, investigational use, premarket clearance, licensure,
or application approval, good manufacturing practices, good laboratory
practices, good clinical practices, product listing, quotas, labeling,
advertising, record keeping and filing of reports, except where the failure to
be in compliance would not have a Material Adverse Effect.  There is
no pending, completed or, to the Company's knowledge, threatened, action
(including any lawsuit, arbitration, or legal or administrative or regulatory
proceeding, charge, complaint, or investigation) against the Company or any of
its Subsidiaries, and none of the Company or any of its Subsidiaries has
received any notice, warning letter or other communication from the FDA or any
other governmental entity, which (i) contests the premarket clearance,
licensure, registration, or approval of, the uses of, the distribution of, the
manufacturing or packaging of, the testing of, the sale of, or the labeling and
promotion of any Pharmaceutical Product, (ii) withdraws its approval of,
requests the recall, suspension, or seizure of, or withdraws or orders the
withdrawal of advertising or sales promotional materials relating to, any
Pharmaceutical Product, (iii) imposes a clinical hold on any clinical
investigation by the Company or any of its Subsidiaries, (iv) enjoins production
at any facility of the Company or any of its Subsidiaries, (v) enters or
proposes to enter into a consent decree of permanent injunction with the Company
or any of its Subsidiaries, or (vi) otherwise alleges any violation of any laws,
rules or regulations by the Company or any of its Subsidiaries, and which,
either individually or in the aggregate, would have a Material Adverse
Effect.  The properties, business and operations of the Company have
been and are being conducted in all material respects in accordance with all
applicable laws, rules and regulations of the FDA.  The Company has
not been informed by the FDA that the FDA will prohibit the marketing, sale,
license or use in the United States of any product proposed to be developed,
produced or marketed by the Company nor has the FDA expressed any concern as to
approving or clearing for marketing any product being developed or proposed to
be developed by the Company.

    

    (hh)           Placement
Agent Compensation. To enable the Placement Agents to rely on Rule
2710(b)(7)(C)(i) of the NASD, the registration of the Shares registered with the
Commission could have been affected on Form S-3 under the Securities Act
pursuant to the standards for such Form S-3 in effect prior to October 21,
1992.

    

    3.2           Representations and Warranties of the
Purchasers.  Each Purchaser, for itself and for no other
Purchaser, hereby represents and warrants as of the date hereof and as of the
Closing Date to the Company as follows (unless as of a specific date
therein):

    

    (a)           Organization;
Authority.  Such Purchaser is either an individual or 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
this Agreement and otherwise to carry out its obligations hereunder and
thereunder. The execution and delivery of this Agreement and performance by
such

    
      
         

      

      
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    Purchaser
of the transactions contemplated by this Agreement have been duly authorized by
all necessary corporate, partnership, limited liability company or similar
action, as applicable, on the part of such Purchaser.  Each
Transaction Document to which it is a party has been duly executed by such
Purchaser, and when delivered by such Purchaser in accordance with the terms
hereof, will constitute the valid and legally binding obligation of such
Purchaser, enforceable against it in accordance with its terms, except: (i) as
limited by general equitable principles and applicable bankruptcy, insolvency,
reorganization, moratorium and other laws of general application affecting
enforcement of creditors’ rights generally, (ii) as limited by laws relating to
the availability of specific performance, injunctive relief or other equitable
remedies and (iii) insofar as indemnification and contribution provisions may be
limited by applicable law.

    

    (b)           Own
Account.  Such Purchaser 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 in violation of the Securities Act or any applicable state securities
law (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).  Such
Purchaser is acquiring the Securities hereunder in the ordinary course of its
business.

    

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

    

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

    

    (e)           Certain Transactions and
Confidentiality.  Other than consummating the transactions
contemplated hereunder, such 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 as of the time that such
Purchaser first received a term sheet (written or oral) as of the Company or any
other Person representing the Company setting forth the material terms of the
transactions contemplated hereunder and ending immediately prior to the
execution hereof.  Notwithstanding the foregoing, in the case of a
Purchaser that is a multi-managed investment vehicle whereby separate portfolio
managers manage separate portions of such Purchaser’s assets and the portfolio
managers have no direct knowledge of the investment decisions made by the
portfolio man-

    
      
         

      

      
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    agers
managing other portions of such Purchaser’s assets, the representation set forth
above shall only apply with respect to the portion of assets managed by the
portfolio manager that made the investment decision to purchase the Securities
covered by this Agreement.  Other than to other Persons party to this
Agreement, such Purchaser has maintained the confidentiality of all disclosures
made to it in connection with this transaction (including the existence and
terms of this transaction). Notwithstanding the foregoing, for avoidance of
doubt, nothing contained herein shall constitute a representation or warranty,
or preclude any actions, with respect to the identification of the availability
of, or securing of, available shares to borrow in order to effect Short Sales or
similar transactions in the future.

    

    The
Company acknowledges and agrees that the representations contained in Section
3.2 shall not modify, amend or affect such Purchaser’s right to rely on the
Company’s representations and warranties contained in this Agreement or any
representations and warranties contained in any other Transaction Document or
any other document or instrument executed and/or delivered in connection with
this Agreement or the consummation of the transaction contemplated
hereby.

    

    ARTICLE
IV.

    OTHER
AGREEMENTS OF THE PARTIES

    

    4.1           Warrant Shares.  If
all or any portion of a Warrant is exercised at a time when there is an
effective registration statement to cover the issuance or resale of the Warrant
Shares or if the Warrant is exercised via cashless exercise, the Warrant Shares
issued pursuant to any such exercise shall be issued free of all
legends.  If at any time following the date hereof the Registration
Statement (or any subsequent registration statement registering the sale or
resale of the Warrant Shares) is not effective or is not otherwise available for
the sale or resale of the Warrant Shares, the Company shall immediately notify
the holders of the Warrants in writing that such registration statement is not
then effective and thereafter shall promptly notify such holders when the
registration statement is effective again and available for the sale or resale
of the Warrant Shares (it being understood and agreed that the foregoing shall
not limit the ability of the Company to issue, or any Purchaser to sell, any of
the Warrant Shares in compliance with applicable federal and state securities
laws).  The Company shall use best efforts to keep a registration
statement (including the Registration Statement) registering the issuance or
resale of the Warrant Shares effective during the term of the Warrants. Upon a
cashless exercise of a Warrant, the holding period for purposes of Rule 144
shall tack back to the original date of issuance of such Warrant.

    

    4.2           Furnishing of
Information.  Until the earliest of the time that (i) no
Purchaser owns Securities or (ii) the Warrants have expired, the Company
covenants to timely file (or obtain extensions in respect thereof and file
within the applicable grace period) all reports required to be filed by the
Company after the date hereof pursuant to the Exchange Act even if the Company
is not then subject to the reporting requirements of the Exchange
Act.  As long as any Purchaser owns Securities, if the Company is not
required to file reports pursuant to the Exchange Act, it will prepare and
furnish to the Purchasers and make publicly available in accordance with Rule
144(c) such information as is required for the Purchasers to sell the
Securities, including without limitation, under Rule 144. The Company further
covenants that it will take such further action as any holder of Securities may
reasonably request, to the extent required from time to time to

    
      
         

      

      
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    enable
such Person to sell such Securities without registration under the Securities
Act, including without limitation, within the requirements of the exemption
provided by Rule 144.

    

    4.3           Integration.  The
Company shall not sell, offer for sale or solicit offers to buy or otherwise
negotiate in respect of any security (as defined in Section 2 of the Securities
Act) that would be integrated with the offer or sale of the Securities for
purposes of the rules and regulations of any Trading Market such that it would
require shareholder approval prior to the closing of such other transaction
unless shareholder approval is obtained before the closing of such subsequent
transaction.

    

    4.4           Securities Laws Disclosure;
Publicity.  The Company shall, by 9:30 a.m. (New York City
time) on the Trading Day immediately following the date hereof, issue a press
release disclosing the material terms of the transactions contemplated hereby,
and a Current Report on Form 8-K including the Transaction Documents as exhibits
thereto.  From and after the issuance of such press release, the
Company shall have publicly disclosed all material, non-public information
delivered to any of the Purchasers by the Company or any of its subsidiaries, or
any of their respective officers, directors, employees or agents in connection
with the transactions contemplated by the Transaction Documents.  The
Company and each Purchaser shall consult with each other in issuing any other
press releases with respect to the transactions contemplated hereby, and neither
the Company nor any Purchaser shall issue any such press release nor otherwise
make any such public statement without the prior consent of the Company, with
respect to any press release of any Purchaser, or without the prior consent of
each Purchaser, with respect to any press release of the Company, which consent
shall not unreasonably be withheld or delayed, except if such disclosure is
required by law, in which case the disclosing party shall promptly provide the
other party with prior notice of such public statement or
communication.  Notwithstanding the foregoing, the Company shall not
publicly disclose the name of any Purchaser, or include the name of any
Purchaser in any filing with the Commission or any regulatory agency or Trading
Market, without the prior written consent of such Purchaser, except (a) as
required by federal securities law in connection with the filing of final
Transaction Documents (including signature pages thereto) with the Commission
and (b) to the extent such disclosure is required by law or Trading Market
regulations, in which case the Company shall provide the Purchasers with prior
notice of such disclosure permitted under this clause (b).

    

    4.5           Shareholder Rights
Plan.  No claim will be made or enforced by the Company or,
with the consent of the Company, any other Person, that any Purchaser is an
“Acquiring Person” under any control share acquisition, business combination,
poison pill (including any distribution under a rights agreement) or similar
anti-takeover plan or arrangement in effect or hereafter adopted by the Company,
or that any Purchaser could be deemed to trigger the provisions of any such plan
or arrangement, by virtue of receiving Securities under the Transaction
Documents or under any other agreement between the Company and the
Purchasers.

    

    4.6           Non-Public
Information.  Except with respect to the material terms and
conditions of the transactions contemplated by the Transaction Documents, the
Company covenants and agrees that neither it, nor any other Person acting on its
behalf will provide any Purchaser or its agents or counsel with any information
that the Company believes constitutes material non-public information, unless
prior thereto such Purchaser shall have executed a written agreement with
the

    
      
         

      

      
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    Company
regarding the confidentiality and use of such information.  The
Company understands and confirms that each Purchaser shall be relying on the
foregoing covenant in effecting transactions in securities of the
Company.

    

    4.7           Use of
Proceeds.  Except as set forth on Schedule 4.7 attached hereto,
the Company shall use the net proceeds from the sale of the Securities hereunder
for working capital purposes and shall not use such proceeds for: (a) the
satisfaction of any portion of the Company’s debt (other than payment of trade
payables in the ordinary course of the Company’s business and prior practices),
(b) the redemption of any Common Stock or Common Stock Equivalents or (c) the
settlement of any outstanding litigation.

    

    4.8           Indemnification of
Purchasers.   Subject to the provisions of this Section
4.8, the Company will indemnify and hold each Purchaser and its directors,
officers, shareholders, members, partners, employees and agents (and any other
Persons with a functionally equivalent role of a Person holding such titles
notwithstanding a lack of such title or any other title), each Person who
controls such Purchaser (within the meaning of Section 15 of the Securities Act
and Section 20 of the Exchange Act), and the directors, officers, shareholders,
agents, members, partners or employees (and any other Persons with a
functionally equivalent role of a Person holding such titles notwithstanding a
lack of such title or any other title) of such controlling 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 a Purchaser
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 such Purchaser’s representations,
warranties or covenants under the Transaction Documents or any agreements or
understandings such Purchaser may have with any such stockholder or any
violations by such 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.  Any
Purchaser Party shall have the right to employ separate counsel in any such
action and participate in the defense thereof, but the fees and expenses of such
counsel shall be at the expense of such Purchaser Party except to the extent
that (i) the employment thereof has been specifically authorized by the Company
in writing, (ii) the Company has failed after a reasonable period of time to
assume such defense and to employ counsel or (iii) in such action there is, in
the reasonable opinion of 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 any Purchaser Party under this Agreement (y) for any settlement by a
Purchaser Party effected without the Company’s prior written consent, which
shall not be unreasonably withheld or delayed; or (z) to the extent, but only to
the extent that a loss, claim,

    
      
         

      

      
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    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.

    

    4.9           Reservation of Common
Stock.  As of the date hereof, the Company has reserved and the
Company shall continue to reserve and keep available at all times, free of
preemptive rights, a sufficient number of shares of Common Stock for the purpose
of enabling the Company to issue Shares pursuant to this Agreement and Warrant
Shares pursuant to any exercise of the Warrants.

    

    4.10           Listing of Common
Stock.  The Company hereby agrees to use best efforts to
maintain the listing or quotation of the Common Stock on the Trading Market on
which it is currently listed, and the Company shall promptly apply to list or
quote all of the Shares and Warrant Shares on such Trading Market and promptly
secure the listing of all of the Shares and Warrant Shares on such Trading
Market. The Company further agrees, if the Company applies to have the Common
Stock traded on any other Trading Market, it will then include in such
application all of the Shares and Warrant Shares, and will take such other
action as is necessary to cause all of the Shares and Warrant Shares to be
listed or quoted on such other Trading Market as promptly as
possible.  The Company will then take all action reasonably necessary
to continue the listing and trading of its Common Stock on a Trading Market and
will comply in all respects with the Company’s reporting, filing and other
obligations under the bylaws or rules of the Trading Market.

    

    4.11           Right of First
Refusal.

    

    (a)           Until
the six month anniversary of the Closing Date, (i) if the Company authorizes the
issuance or sale of any equity security, or any rights, options, warrants or
convertible or exchangeable securities entitling the holders thereof to
subscribe for or purchase or otherwise acquire any equity security of the
Company (“Share Equivalents”) other than pursuant to (A) an Exempt Issuance or
(B) a firm commitment fully underwritten public offering, the Company shall
first offer to sell to the Purchasers up to $10,000,000 of such equity
securities or Share Equivalents prior to offering such equity securities or
Share Equivalents to any other Person, or (ii) if the Company authorizes the
execution of a definitive agreement for an “at the market (ATM)” or “dribble
out” program, the Company shall first offer to enter into such a definitive
agreement with the Purchasers for such a program prior to entering into any such
program with any other Person.  In order to accept an offer under this
Section 4.11, each Purchaser must, within five (5) days after receipt of
written notice from the Company describing in reasonable detail the equity
securities, Share Equivalents or program being offered, the purchase price and
other material terms thereof, the payment terms and such holder’s percentage
allotment, deliver a written notice to the Company accepting such
offer.

    

    (b)           Any
securities not purchased by the Purchasers or any other person or entity in
accordance with this Section 4.11 may not be sold or otherwise disposed of until
they are again offered to the Purchasers under the procedures specified
herein.

    

    4.12           Subsequent
Equity Sales.

    
      
         

      

      
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    (a)           From
the date hereof until 30 days after the Closing Date, neither the Company nor
any Subsidiary shall issue, enter into any agreement to issue or announce the
issuance or proposed issuance of any shares of Common Stock or Common Stock
Equivalents; provided, however, that the 30 day period set forth in this Section
4.12 shall be extended for the number of Trading Days during such period in
which (i) trading in the Common Stock is suspended by any Trading Market, or
(ii) the Registration Statement is not effective or the prospectus included in
the Registration Statement may not be used by the Purchasers for the resale of
the Shares and Warrant Shares.

    

    (b)           From
the date hereof until such time as the later of six months after the Closing
Date or the date that no Purchaser holds any of the Securities, the Company
shall be prohibited from effecting or entering into an agreement to effect any
issuance by the Company or any of its Subsidiaries of Common Stock or Common
Stock Equivalents for cash consideration (or a combination of units hereof)
involving a Variable Rate Transaction.  “Variable Rate Transaction”
means a transaction in which the Company (i) issues or sells any debt or equity
securities that are convertible into, exchangeable or exercisable for, or
include the right to receive additional shares of Common Stock either (A) at a
conversion price, exercise price or exchange rate or other price that is based
upon and/or varies with the trading prices of or quotations for the shares of
Common Stock at any time after the initial issuance of such debt or equity
securities, or (B) with a conversion, exercise or exchange price that is subject
to being reset at some future date after the initial issuance of such debt or
equity security or upon the occurrence of specified or contingent events
directly or indirectly related to the business of the Company or the market for
the Common Stock or (ii) enters into any agreement, including, but not limited
to, an equity line of credit, whereby the Company may sell securities at a
future determined price.  Any Purchaser shall be entitled to obtain
injunctive relief against the Company to preclude any such issuance, which
remedy shall be in addition to any right to collect damages.

    

    (c)           Notwithstanding
the foregoing, this Section 4.12 shall not apply in respect of an Exempt
Issuance of the type described in clause (e) of the definition
thereof.

    

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

    

    4.14           Certain Transactions and
Confidentiality.  Each Purchaser, severally and not jointly
with the other Purchasers, covenants that neither it nor any Affiliate acting on
its behalf or pursuant to any understanding with it will execute any purchases
or sales, including Short Sales of any of the Company’s securities during the
period commencing with the execution of this Agreement and ending at such time
that the transactions contemplated by this Agreement are first publicly
announced pursuant to the initial press release as described in Section
4.4.  Each Purchaser, severally and not jointly with the other
Purchasers, covenants that until such time as

    
      
         

      

      
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    the
transactions contemplated by this Agreement are publicly disclosed by the
Company pursuant to the initial press release as described in Section 4.4, such
Purchaser will maintain the confidentiality of the existence and terms of this
transaction and the information included in the Disclosure
Schedules.  Notwithstanding the foregoing and notwithstanding anything
contained in this Agreement to the contrary, the Company expressly acknowledges
and agrees that (i) no Purchaser makes any representation, warranty or covenant
hereby that it will not engage in effecting transactions in any securities of
the Company after the time that the transactions contemplated by this Agreement
are first publicly announced pursuant to the initial press release as described
in Section 4.4, (ii) no Purchaser shall be restricted or prohibited from
effecting any transactions in any securities of the Company in accordance with
applicable securities laws from and after the time that the transactions
contemplated by this Agreement are first publicly announced pursuant to the
initial press release as described in Section 4.4 and (iii) no Purchaser shall
have any duty of confidentiality to the Company or its Subsidiaries after the
issuance of the initial press release as described in Section
4.4.  Notwithstanding the foregoing, in the case of a Purchaser that
is a multi-managed investment vehicle whereby separate portfolio managers manage
separate portions of such Purchaser’s assets and the portfolio managers have no
direct knowledge of the investment decisions made by the portfolio managers
managing other portions of such Purchaser’s assets, the covenant set forth above
shall only apply with respect to the portion of assets managed by the portfolio
manager that made the investment decision to purchase the Securities covered by
this Agreement.

    

    4.15           Delivery of Warrants After Closing;
Buy-In in Respect of the Share.  The Company shall deliver, or
cause to be delivered, the respective Warrant certificates purchased by each
Purchaser to such Purchaser within 3 Trading Days of the Closing Date. In
addition to any other rights available to the a Purchaser, if the Company fails
to cause the Transfer Agent to transmit to such Purchaser it Shares within 3
Trading Days of the date required under this Agreement, and if after such date
the Purchaser is required by its broker to purchase (in an open market
transaction or otherwise) or the Purchaser’s brokerage firm otherwise purchases,
shares of Common Stock to deliver in satisfaction of a sale by the Purchaser of
the Shares which the Purchaser was entitled to receive hereunder (a “Buy-In”),
then the Company shall (A) pay in cash to the Purchaser the amount, if any, by
which (x) the Purchaser’s total purchase price (including brokerage commissions,
if any) for the shares of Common Stock so purchased exceeds (y) the amount
obtained by multiplying (1) the number of Shares that the Company was required
to deliver to the Purchaser times (2) the price at which the sell order giving
rise to such purchase obligation was executed, and (B) deliver to the Purchaser
the number of shares of Common Stock that would have been issued had the Company
timely complied with its obligations hereunder.  Nothing herein shall
limit a Purchaser’s right to pursue any other remedies available to it
hereunder, at law or in equity including, without limitation, a decree of
specific performance and/or injunctive relief with respect to the Company’s
failure to timely deliver certificates representing shares of Common Stock as
required pursuant to the terms hereof.

    

    4.16           Capital
Changes.  Until the one year anniversary of the Closing Date,
the Company shall not undertake a reverse or forward stock split or
reclassification of the Common Stock without the prior written consent of the
Purchasers holding a majority in interest of the Shares.

    
      
         

      

      
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    4.17           Liquidated Damages for Failure to
Comply.  If the Company shall fail to materially observe or
perform any other covenant or agreement contained in the Transaction Documents
(each, an “Event” and the date on which such Event occurs, the “Event Date”),
then, in addition to any other rights the Purchasers may have hereunder or under
applicable law, on each such Event Date and on each monthly anniversary of each
such Event Date (if the applicable Event shall not have been cured by such date)
until the applicable Event is cured, the Company shall pay to each Purchaser, in
cash, as liquidated damages and not as a penalty, an amount equal to 1.5% of the
Subscription Amount of the Shares then held by such Purchaser, subject to a
maximum aggregate amount of 10% of the original Subscription Amount of such
Purchaser; provided, that if any other provision of any Transaction Document
separately provides for liquidated damages for any particular breach of a
covenant therein, then if the Company actually pays such liquidated damages
required under such other Transaction Document, then no further liquidated
damages shall be payable pursuant to this provision.  Nothing herein
shall limit a Purchaser’s right to pursue any remedies available to it
hereunder, at law or in equity including, without limitation, a decree of
specific performance and/or injunctive relief.  The exercise of any
such rights shall not prohibit a Purchaser from seeking to enforce damages
pursuant to any other Section hereof or under applicable law. If the Company
fails to pay any partial liquidated damages pursuant to this Section in full
within seven days after the date payable, the Company will pay interest thereon
at a rate of 18% per annum (or such lesser maximum amount that is permitted to
be paid by applicable law) to the Purchaser, accruing daily from the date such
partial liquidated damages are due until such amounts, plus all such interest
thereon, are paid in full. The partial liquidated damages pursuant to the terms
hereof shall apply on a daily pro rata basis for any portion of a month prior to
the cure of an Event.

    

    ARTICLE
V.

    MISCELLANEOUS

    

    5.1           Termination.  This
Agreement may be terminated by any Purchaser, as to such Purchaser’s obligations
hereunder only and without any effect whatsoever on the obligations between the
Company and the other Purchasers, by written notice to the other parties, if the
Closing has not been consummated on or before May 31, 2009; provided,
however, that no such termination will affect the right of any party to sue for
any breach by the other party (or parties).

    

    5.2           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 Purchasers.

    

    5.3           Entire
Agreement.  The Transaction Documents, together with the
exhibits and schedules thereto, the Prospectus and the Prospectus Supplement,
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.

    
      
         

      

      
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    5.4           Notices.  Any and
all notices or other communications or deliveries required or permitted to be
provided hereunder shall be in writing and shall be deemed given and effective
on the earliest of: (a) the date of transmission, if such notice or
communication is delivered via facsimile at the facsimile number set forth on
the signature pages attached hereto prior to 5:30 p.m. (New York City time) on a
Trading Day, (b) the next Trading Day after the date of transmission, if such
notice or communication is delivered via facsimile at the facsimile number set
forth on the signature pages attached hereto on a day that is not a Trading Day
or later than 5:30 p.m. (New York City time) on any Trading Day, (c) the second
(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.

    

    5.5           Amendments;
Waivers.  No provision of this Agreement may be waived,
modified, supplemented or amended except in a written instrument signed, in the
case of an amendment, by the Company and the Purchasers holding at least 66% in
interest of the Shares then outstanding 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.

    

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

    

    5.7           Successors and
Assigns.  This Agreement shall be binding upon and inure to the
benefit of the parties and their successors and permitted
assigns.  The Company may not assign this Agreement or any rights or
obligations hereunder without the prior written consent of each Purchaser (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 that 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 “Purchasers.”

    

    5.8           No Third-Party
Beneficiaries.  This Agreement is intended for the benefit of
the parties hereto and their respective successors and permitted assigns and is
not for the benefit of, nor may any provision hereof be enforced by, any other
Person, except as otherwise set forth in Section 4.8 and except that the
Placement Agents may rely on the representations and warranties made by each of
the parties hereto.

    

    5.9           Governing Law.  All
questions concerning the construction, validity, enforcement and interpretation
of the Transaction Documents shall be governed by and construed and enforced in
accordance with the internal laws of the State of New York, without regard to
the principles of conflicts of law thereof.  Each party agrees that
all legal proceedings concerning the interpretations, enforcement and defense of
the transactions contemplated by this Agreement and any other Transaction
Documents (whether brought against a party hereto or its respective affiliates,
directors, officers, shareholders, employees or agents) shall be commenced
exclusively in the state

    
      
         

      

      
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    and
federal courts sitting in the City of New York. Each party hereby irrevocably
submits to the exclusive jurisdiction of the state and federal courts sitting in
the City of New York, borough of Manhattan for the adjudication of any dispute
hereunder or in connection herewith or with any transaction contemplated hereby
or discussed herein (including with respect to the enforcement of any of the
Transaction Documents), and hereby irrevocably waives, and agrees not to assert
in any suit, action or proceeding, any claim that it is not personally subject
to the jurisdiction of any such court, that such suit, action or proceeding is
improper or is an inconvenient venue for such proceeding.  Each party
hereby irrevocably waives personal service of process and consents to process
being served in any such suit, action or proceeding by mailing a copy thereof
via registered or certified mail or overnight delivery (with evidence of
delivery) to such party at the address in effect for notices to it under this
Agreement and agrees that such service shall constitute good and sufficient
service of process and notice thereof.  Nothing contained herein shall
be deemed to limit in any way any right to serve process in any other manner
permitted by law.  If either party shall commence an action or
proceeding to enforce any provisions of the Transaction Documents, then, in
addition to the obligations of the Company under Section 4.8, 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.

    

    5.10           Survival.  The
representations and warranties contained herein shall survive the Closing and
the delivery of the Securities.

    

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

    

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

    

    5.13           Rescission and Withdrawal
Right.  Notwithstanding anything to the contrary contained in
(and without limiting any similar provisions of) any of the other Transaction
Documents, whenever any Purchaser exercises a right, election, demand or option
under a Transaction Document and the Company does not timely perform its related
obligations within the periods therein provided, then such Purchaser may rescind
or withdraw, in its sole discretion from time

    
      
         

      

      
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    to time
upon written notice to the Company, any relevant notice, demand or election in
whole or in part without prejudice to its future actions and rights; provided,
however, that in the case of a rescission of an exercise of a Warrant, the
applicable Purchaser shall be required to return any shares of Common Stock
subject to any such rescinded exercise notice concurrently with the return to
such Purchaser of the aggregate exercise price paid to the Company for such
shares and the restoration of such Purchaser’s right to acquire such shares
pursuant to such Purchaser’s Warrant (including, issuance of a replacement
warrant certificate evidencing such restored right).

    

    5.14           Replacement of
Securities.  If any certificate or instrument evidencing any
Securities is mutilated, lost, stolen or destroyed, the Company shall issue or
cause to be issued in exchange and substitution for and upon cancellation
thereof (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.

    

    5.15           Remedies.  In
addition to being entitled to exercise all rights provided herein or granted by
law, including recovery of damages, each of the Purchasers and the Company will
be entitled to specific performance under the Transaction
Documents.  The parties agree that monetary damages may not be
adequate compensation for any loss incurred by reason of any breach of
obligations contained in the Transaction Documents and hereby agree 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.

    

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

    

    5.17           Independent Nature of Purchasers’
Obligations and Rights.  The obligations of each Purchaser
under any Transaction Document are several and not joint with the obligations of
any other Purchaser, and no Purchaser shall be responsible in any way for the
performance or non-performance of the obligations of any other Purchaser under
any Transaction Document.  Nothing contained herein or in any other
Transaction Document, and no action taken by any Purchaser pursuant thereto,
shall be deemed to constitute the Purchasers as a partnership, an association, a
joint venture or any other kind of entity, or create a presumption that the
Purchasers are in any way acting in concert or as a group with respect to such
obligations or the transactions contemplated by the Transaction
Documents.  Each Purchaser shall be entitled to independently protect
and enforce its rights including, without limitation, the rights arising out of
this Agreement or out of the other Transaction Documents, and it shall not be
necessary for any other Purchaser

    
      
         

      

      
        28

        
          

        

      

      
         

      

    

    to be
joined as an additional party in any proceeding for such
purpose.  Each Purchaser has been represented by its own separate
legal counsel in their review and negotiation of the Transaction
Documents.  For reasons of administrative convenience only, each
Purchaser and its respective counsel have chosen to communicate with the Company
through Choate, Hall & Stewart LLP.  Choate, Hall & Stewart
LLP does not represent any of the Purchasers and only represents the Placement
Agents. The Company has elected to provide all Purchasers with the same terms
and Transaction Documents for the convenience of the Company and not because it
was required or requested to do so by any of the Purchasers.

    

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

    

    5.19           Saturdays, Sundays, Holidays,
etc.  If the last or appointed day for the taking of any action
or the expiration of any right required or granted herein shall not be a
Business Day, then such action may be taken or such right may be exercised on
the next succeeding Business Day.

    

    5.20           Construction.  The
parties agree that each of them and/or their respective counsel has reviewed and
had an opportunity to revise the Transaction Documents and, therefore, the
normal rule of construction to the effect that any ambiguities are to be
resolved against the drafting party shall not be employed in the interpretation
of the Transaction Documents or any amendments hereto. In addition, each and
every reference to share prices and shares of Common Stock in any Transaction
Document shall be subject to adjustment for reverse and forward stock splits,
stock dividends, stock combinations and other similar transactions of the Common
Stock that occur after the date of this Agreement.

    

    5.21           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)

    

    
      
         

      

      
        29

        
          

        

      

      
         

      

    

    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.

    

    

    

    
      	
              XOMA
      LTD.

            
	 
      
	
              By:_____________________________

            
	
                   
      Name:

            
	
                   
      Title:

            
	 
      
	
              Address
      for Notice: 2910 Seventh Street, Berkeley CA 94710

            
	
              Fax:
      (510) 649 7571

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

            
	 
      
	
              Geoff
      Liebmann

              Cahill
      Gordon & Reindel LLP

              80
      Pine Street

              New
      York, NY   10005

              Direct
      Fax 212-378-2295

            

    

    

    

    

    [REMAINDER
OF PAGE INTENTIONALLY LEFT BLANK

    SIGNATURE
PAGE FOR PURCHASER FOLLOWS]

    

    

    

    
      
         

      

      
         

        
          

        

      

      
         

      

    

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

    

    
      	
              Name
      of Purchaser:
      ________________________________________________________

            
	 
      
	
              Signature
      of Authorized Signatory of Purchaser:
      _________________________________

            
	 
      
	
              Name
      of Authorized Signatory:
      _______________________________________________

            
	 
      
	
              Title
      of Authorized Signatory:
      ________________________________________________

            
	 
      
	
              Email
      Address of Authorized
      Signatory:_________________________________________

            
	 
      
	
              Facsimile
      Number of Authorized Signatory:
      _______________________________________

            
	 
      
	
              Address
      for Notice of Purchaser:

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

            
	 
      
	
              Subscription
      Amount: $_________________

            
	 
      
	 
      
	
              Shares:
      _________________

            
	 
      
	 
      
	
              Warrant
      Shares: __________________

            
	 
      
	 
      
	
              EIN
      Number:  [PROVIDE THIS UNDER SEPARATE
  COVER]ex10_2.htm

     

    Exhibit 10.2

     

    NEITHER
THE ISSUANCE AND SALE OF THE SECURITIES REPRESENTED BY THIS CERTIFICATE NOR THE
SECURITIES INTO WHICH THESE SECURITIES ARE EXERCISABLE HAVE BEEN REGISTERED
UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR APPLICABLE STATE SECURITIES
LAWS.  THE SECURITIES MAY NOT BE OFFERED FOR SALE, SOLD, TRANSFERRED
OR ASSIGNED (I) IN THE ABSENCE OF (A) AN EFFECTIVE REGISTRATION STATEMENT FOR
THE SECURITIES UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR (B) AN OPINION
OF COUNSEL (WHICH COUNSEL SHALL BE SELECTED BY THE HOLDER), IN A GENERALLY
ACCEPTABLE FORM, THAT REGISTRATION IS NOT REQUIRED UNDER SAID ACT OR (II) UNLESS
SOLD PURSUANT TO RULE 144 OR RULE 144A UNDER SAID
ACT.  NOTWITHSTANDING THE FOREGOING, THE SECURITIES MAY BE PLEDGED IN
CONNECTION WITH A BONA FIDE MARGIN ACCOUNT OR OTHER LOAN OR FINANCING
ARRANGEMENT SECURED BY THE SECURITIES.

     

    XOMA
Ltd.

     

    Warrant
To Purchase Common Stock

     

    

    Warrant
No.: 

    Number of
Common Shares:

    Date of
Issuance:          ("Issuance Date")

    

     

    XOMA
Ltd., a Bermuda corporation, (the "Company"), hereby certifies
that, for good and valuable consideration, the receipt and sufficiency of which
are hereby acknowledged,       , the
registered holder hereof, or its permitted assigns (the "Holder"), is entitled, subject
to the terms set forth below, to purchase from the Company, at the Exercise
Price (as defined below) then in effect, upon surrender of this Warrant to
Purchase Common Stock (including any Warrants to Purchase Common Stock issued in
exchange, transfer or replacement hereof, the "Warrant"), at any time or
times on or after the date hereof, but not after 11:59 p.m., New York Time, on
the Expiration Date (as defined below), __________ fully paid nonassessable
shares of Common Stock (as defined below), as adjusted pursuant to the terms
hereof (the "Warrant
Shares").  Except as otherwise defined herein, capitalized
terms in this Warrant shall have the meanings set forth in Section
16.  This Warrant is one of the Warrants to purchase Common Stock (the
"SPA Warrants") issued
pursuant to Section 1 of that certain Securities Purchase Agreement, dated as
of        (the "Subscription Date"), by and
among the Company and the investors (individually, a "Buyer" and collectively, the
"Buyers") referred to
therein (the "Securities
Purchase Agreement").

     

    1. EXERCISE OF
WARRANT.

     

    (a) Mechanics of
Exercise.  Subject to the terms and conditions hereof
(including, without limitation, the limitations set forth in Section 1(f)), this
Warrant may be exercised by the Holder on any day on or after the date hereof in
whole or in part, by (i) delivery

     

    
      
         

      

      
         

        
          

        

      

      
         

      

    

    of a
written notice, in the form attached hereto as Exhibit A (the "Exercise Notice"), of the
Holder's election to exercise this Warrant and (ii) (A) payment to the
Company of an amount equal to the applicable Exercise Price multiplied by the
number of Warrant Shares as to which this Warrant is being exercised (the "Aggregate Exercise Price") in
cash or by wire transfer of immediately available funds or (B) by notifying the
Company that this Warrant is being exercised pursuant to a Cashless Exercise (as
defined in Section 1(d)).  The Holder shall not be required to deliver
the original Warrant in order to effect an exercise
hereunder.  Execution and delivery of the Exercise Notice with respect
to less than all of the Warrant Shares shall have the same effect as
cancellation of the original Warrant and issuance of a new Warrant evidencing
the right to purchase the remaining number of Warrant Shares.  On or
before the first (1st) Business Day following the date on which the Company has
received each of the Exercise Notice and the Aggregate Exercise Price (or notice
of a Cashless Exercise) (the "Exercise Delivery Documents"),
the Company shall transmit by facsimile an acknowledgment of confirmation of
receipt of the Exercise Delivery Documents to the Holder and the Company's
transfer agent (the "Transfer
Agent").  On or before the third (3rd) Trading Day following
the date on which the Company has received all of the Exercise Delivery
Documents (the "Share Delivery
Date"), the Company shall (X) provided that the Transfer Agent is
participating in The Depository Trust Company ("DTC") Fast Automated
Securities Transfer Program, upon the request of the Holder, credit such
aggregate number of shares of Common Stock to which the Holder is entitled
pursuant to such exercise to the Holder's or its designee's balance account with
DTC through its Deposit Withdrawal Agent Commission system, or (Y) if the
Transfer Agent or the Company is not participating in the DTC Fast Automated
Securities Transfer Program, issue and dispatch by overnight courier to the
address as specified in the Exercise Notice, a certificate, registered in the
Company's share register in the name of the Holder or its designee, for the
number of shares of Common Stock to which the Holder is entitled pursuant to
such exercise.  Upon delivery of the Exercise Delivery Documents, the
Holder shall be deemed for all corporate purposes to have become the holder of
record of the Warrant Shares with respect to which this Warrant has been
exercised, irrespective of the date such Warrant Shares are credited to the
Holder's DTC account or the date of delivery of the certificates evidencing such
Warrant Shares, as the case may be.  If this Warrant is submitted in
connection with any exercise pursuant to this Section 1(a) and the number of
Warrant Shares represented by this Warrant submitted for exercise is greater
than the number of Warrant Shares being acquired upon an exercise, then the
Company shall as soon as practicable and in no event later than three (3)
Business Days after any exercise and at its own expense, issue a new Warrant (in
accordance with Section 7(d)) representing the right to purchase the number of
Warrant Shares issuable immediately prior to such exercise under this Warrant,
less the number of Warrant Shares with respect to which this Warrant is
exercised.  No fractional shares of Common Stock are to be issued upon
the exercise of this Warrant, but rather the number of shares of Common Stock to
be issued shall be rounded up to the nearest whole number.  The
Company shall pay any and all taxes which may be payable with respect to the
issuance and delivery of Warrant Shares upon exercise of this
Warrant.

     

    (b) Exercise
Price.  For purposes of this Warrant, "Exercise Price" means $____,
subject to adjustment as provided herein.

     

    (c) Company's Failure to Timely
Deliver Securities.  In addition to any other rights available
to the Holder, if the Company fails to cause the Transfer Agent to
transmit

     

    
      
         

      

      
        2

        
          

        

      

      
         

      

    

    to the
Holder a certificate or the certificates representing the Warrant Shares
pursuant to an exercise on or before the Warrant Share Delivery Date, and if
after such date the Holder purchases (in an open market transaction or
otherwise) or the Holder’s brokerage firm otherwise purchases, shares of Common
Stock to deliver in satisfaction of a sale by the Holder of the Warrant Shares
which the Holder anticipated receiving upon such exercise (a “Buy-In”), then the
Company shall (A) pay in cash to the Holder the amount, if any, by which (x) the
Holder’s total purchase price (including brokerage commissions, if any) for the
shares of Common Stock so purchased exceeds (y) the amount obtained by
multiplying (1) the number of Warrant Shares that the Company was required to
deliver to the Holder in connection with the exercise at issue times (2) the
price at which the sell order giving rise to such purchase obligation was
executed, and (B) at the option of the Holder, either reinstate the portion of
the Warrant and equivalent number of Warrant Shares for which such exercise was
not honored (in which case such exercise shall be deemed rescinded) or deliver
to the Holder the number of shares of Common Stock that would have been issued
had the Company timely complied with its exercise and delivery obligations
hereunder.  The Holder shall provide the Company written notice
indicating the amounts payable to the Holder in respect of the Buy-In and, upon
request of the Company, evidence of the amount of such loss.  Nothing
herein shall limit a Holder’s right to pursue any other remedies available to it
hereunder, at law or in equity including, without limitation, a decree of
specific performance and/or injunctive relief with respect to the Company’s
failure to timely deliver certificates representing shares of Common Stock upon
exercise of the Warrant as required pursuant to the terms hereof.

     

    (d) Cashless Exercise.
 Notwithstanding
anything contained herein to the contrary, the Holder may, in its sole
discretion, exercise this Warrant in whole or in part and, in lieu of making the
cash payment otherwise contemplated to be made to the Company upon such exercise
in payment of the Aggregate Exercise Price, elect instead to receive upon such
exercise the "Net Number" of shares of Common Stock determined according to the
following formula (a "Cashless
Exercise"):

     

    
      
        
          	
                  Net
      Number =

                	
                  (A x B) - (A x C)

                  B

                

        

      

    

    

     

    For purposes of the foregoing
formula:

     

    A = the
total number of shares with respect to which this Warrant is then being
exercised.

     

    B = the
Weighted Average Price of the shares of Common Stock (as reported by Bloomberg)
for the five (5) consecutive Trading Days ending on the date immediately
preceding the date of the Exercise Notice.

     

    C = the
Exercise Price then in effect for the applicable Warrant Shares at the time of
such exercise.

     

    
      
         

      

      
        3

        
          

        

      

      
         

      

    

    

     

    (e) Disputes.  In
the case of a dispute as to the determination of the Exercise Price or the
arithmetic calculation of the Warrant Shares, the Company shall promptly issue
to the Holder the number of Warrant Shares that are not disputed and resolve
such dispute in accordance with Section 12.

     

    (f) Limitations on Exercises;
Beneficial Ownership.  The Company shall not effect the
exercise of this Warrant, and the Holder shall not have the right to exercise
this Warrant, to the extent that after giving effect to such exercise, such
Person (together with such Person's affiliates) would beneficially own in excess
of 9.80% (the "Maximum
Percentage") of the shares of Common Stock outstanding immediately after
giving effect to such exercise.  For purposes of the foregoing
sentence, the aggregate number of shares of Common Stock beneficially owned by
such Person and its affiliates shall include the number of shares of Common
Stock issuable upon exercise of this Warrant with respect to which the
determination of such sentence is being made, but shall exclude shares of Common
Stock which would be issuable upon (A) exercise of the remaining, unexercised
portion of this Warrant beneficially owned by such Person and its affiliates and
(B) exercise or conversion of the unexercised or unconverted portion of any
other securities of the Company beneficially owned by such Person and its
affiliates (including, without limitation, any convertible notes or convertible
preferred shares or warrants) subject to a limitation on conversion or exercise
analogous to the limitation contained herein.  Except as set forth in
the preceding sentence, for purposes of this paragraph, beneficial ownership
shall be calculated in accordance with Section 13(d) of the Securities Exchange
Act of 1934, as amended (the "Exchange Act").  For
purposes of this Warrant, in determining the number of outstanding shares of
Common Stock, the Holder may rely on the number of outstanding shares of Common
Stock as reflected in (1) the Company's most recent Form 10-K, Form 10-Q,
Current Report on Form 8-K or other public filing with the Securities and
Exchange Commission, as the case may be, (2) a more recent public announcement
by the Company or (3) any other notice by the Company or the Transfer Agent
setting forth the number of shares of Common Stock outstanding.  For
any reason at any time, upon the written or oral request of the Holder, the
Company shall within one (1) Business Day confirm orally and in writing to the
Holder the number of shares of Common Stock then outstanding.  In any
case, the number of outstanding shares of Common Stock shall be determined after
giving effect to the conversion or exercise of securities of the Company,
including the SPA Warrants, by the Holder and its affiliates since the date as
of which such number of outstanding shares of Common Stock was
reported.  By written notice to the Company, the Holder may from time
to time increase or decrease the Maximum Percentage to any other percentage not
in excess of 9.99% specified in such notice; provided that (i) any such increase
will not be effective until the sixty-first (61st) day
after such notice is delivered to the Company, and (ii) any such increase or
decrease will apply only to the Holder and not to any other holder of SPA
Warrants.  The provisions of this paragraph shall be construed and
implemented in a manner otherwise than in strict conformity with the terms of
this Section 1(f) to correct this paragraph (or any portion hereof) which may be
defective or inconsistent with the intended beneficial ownership limitation
herein contained or to make changes or supplements necessary or desirable to
properly give effect to such limitation.

     

    (g) Insufficient Authorized
Shares.  If at any time while any of the Warrants remain
outstanding the Company does not have a sufficient number of authorized
and

     

    
      
         

      

      
        4

        
          

        

      

      
         

      

    

    unreserved
shares of Common Stock to satisfy its obligation to reserve for issuance upon
exercise of the Warrants at least a number of shares of Common Stock equal to
100% (the "Required Reserve
Amount") of the number of shares of Common Stock as shall from time to
time be necessary to effect the exercise of all Warrants then outstanding (an
"Authorized Share
Failure"), then the Company shall immediately take all action necessary
to increase the Company's authorized shares of Common Stock to an amount
sufficient to allow the Company to reserve the Required Reserve Amount for all
Warrants then outstanding.  Without limiting the generality of the
foregoing sentence, as soon as practicable after the date of the occurrence of
an Authorized Share Failure, but in no event later than sixty (60) days after
the occurrence of such Authorized Share Failure, the Company shall hold a
meeting of its shareholders for the approval of an increase in the number of
authorized shares of Common Stock.  In connection with such meeting,
the Company shall provide each shareholder with a proxy statement and shall use
its best efforts to solicit its shareholders' approval of such increase in
authorized shares of Common Stock and to cause its board of directors to
recommend to the shareholders that they approve such proposal.

     

    2. ADJUSTMENT OF EXERCISE PRICE
AND NUMBER OF WARRANT SHARES.  The Exercise Price and the
number of Warrant Shares shall be adjusted from time to time as
follows:

     

    (a) Adjustment upon Issuance of
shares of Common Stock. If and whenever on or after the Subscription Date
the Company issues or sells, or in accordance with this Section 2 is deemed to
have issued or sold, any shares of Common Stock (including the issuance or sale
of shares of Common Stock owned or held by or for the account of the Company,
but excluding shares of Common Stock deemed to have been issued or sold by the
Company in connection with any Excluded Securities) for a consideration per
share (the “New Issuance Price”) less than a price (the “Applicable Price”)
equal to the Exercise Price in effect immediately prior to such issue or sale or
deemed issuance or sale (the foregoing a “Dilutive Issuance”), then immediately
after such Dilutive Issuance, the Exercise Price then in effect shall be reduced
to an amount equal to the New Issuance Price. Upon each such adjustment of the
Exercise Price hereunder, the number of Warrant Shares shall be adjusted to the
number of shares of Common Stock determined by multiplying the Exercise Price in
effect immediately prior to such adjustment by the number of Warrant Shares
acquirable upon exercise of this Warrant immediately prior to such adjustment
and dividing the product thereof by the Exercise Price resulting from such
adjustment. For purposes of determining the adjusted Exercise Price under this
Section 2(a), the following shall be applicable:

     

    (i)
Issuance of Options. If the Company in any manner grants any Options and the
lowest price per share for which one share of Common Stock is issuable upon the
exercise of any such Option or upon conversion, exercise or exchange of any
Convertible Securities issuable upon exercise of any such Option is less than
the Applicable Price, then such share of Common Stock shall be deemed to be
outstanding and to have been issued and sold by the Company at the time of the
granting or sale of such Option for such price per share. For purposes of this
Section 2(a)(i), the “lowest price per share for which one share of Common Stock
is issuable upon exercise of such Options or upon conversion, exercise or
exchange of such Convertible Securities issuable upon exercise of any such
Option” shall be equal to the sum of the lowest amounts of consideration
(if

     

    
      
         

      

      
        5

        
          

        

      

      
         

      

    

    any)
received or receivable by the Company with respect to any one share of Common
Stock upon the granting or sale of the Option, upon exercise of the Option and
upon conversion, exercise or exchange of any Convertible Security issuable upon
exercise of such Option. No further adjustment of the Exercise Price or number
of Warrant Shares shall be made upon the actual issuance of such shares of
Common Stock or of such Convertible Securities upon the exercise of such Options
or upon the actual issuance of such shares of Common Stock upon conversion,
exercise or exchange of such Convertible Securities.

     

    (ii)
Issuance of Convertible Securities. If the Company in any manner issues or sells
any Convertible Securities and the lowest price per share for which one share of
Common Stock is issuable upon the conversion, exercise or exchange thereof is
less than the Applicable Price, then such share of Common Stock shall be deemed
to be outstanding and to have been issued and sold by the Company at the time of
the issuance or sale of such Convertible Securities for such price per share.
For the purposes of this Section 2(a)(ii), the “lowest price per share for which
one share of Common Stock is issuable upon the conversion, exercise or exchange
thereof” shall be equal to the sum of the lowest amounts of consideration (if
any) received or receivable by the Company with respect to one share of Common
Stock upon the issuance or sale of the Convertible Security and upon conversion,
exercise or exchange of such Convertible Security. No further adjustment of the
Exercise Price or number of Warrant Shares shall be made upon the actual
issuance of such shares of Common Stock upon conversion, exercise or exchange of
such Convertible Securities, and if any such issue or sale of such Convertible
Securities is made upon exercise of any Options for which adjustment of this
Warrant has been or is to be made pursuant to other provisions of this Section
2(a), no further adjustment of the Exercise Price or number of Warrant Shares
shall be made by reason of such issue or sale.

     

    (iii)
Change in Option Price or Rate of Conversion. If the purchase price provided for
in any Options, the additional consideration, if any, payable upon the issue,
conversion, exercise or exchange of any Convertible Securities, or the rate at
which any Convertible Securities are convertible into or exercisable or
exchangeable for shares of Common Stock increases or decreases at any time, the
Exercise Price and the number of Warrant Shares in effect at the time of such
increase or decrease shall be adjusted to the Exercise Price and the number of
Warrant Shares which would have been in effect at such time had such Options or
Convertible Securities provided for such increased or decreased purchase price,
additional consideration or increased or decreased conversion rate, as the case
may be, at the time initially granted, issued or sold. For purposes of this
Section 2(a)(iii), if the terms of any Option or Convertible Security that was
outstanding as of the date of issuance of this Warrant are increased or
decreased in the manner described in the immediately preceding sentence, then
such Option or Convertible Security and the shares of Common Stock deemed
issuable upon exercise, conversion or exchange thereof shall be deemed to have
been issued as of the date of such increase or decrease. No adjustment pursuant
to this Section 2(a) shall be made if such adjustment would result in an
increase of the Exercise Price then in effect or a decrease in the number of
Warrant Shares.

     

    (iv)
Calculation of Consideration Received. In case any Option is issued in
connection with the issue or sale of other securities of the Company, together
comprising one integrated transaction in which no specific consideration is
allocated to such Options by the parties thereto, (x) the Options will be deemed
to have been issued for a value determined by use of the Black
Scholes

     

    
      
         

      

      
        6

        
          

        

      

      
         

      

    

    Option
Pricing Model (the “Option Value”) and (y) the other securities issued or sold
in such integrated transaction shall be deemed to have been issued for the
difference of (I) the aggregate consideration received by the Company, less (II)
the Option Value. If any shares of Common Stock, Options or Convertible
Securities are issued or sold or deemed to have been issued or sold for cash,
the consideration received therefor will be deemed to be the net amount received
by the Company therefor. If any shares of Common Stock, Options or Convertible
Securities are issued or sold for a consideration other than cash, the amount of
such consideration received by the Company will be the fair value of such
consideration, except where such consideration consists of securities, in which
case the amount of consideration received by the Company will be the Closing
Sale Price of such security on the date of receipt. If any shares of Common
Stock, Options or Convertible Securities are issued to the owners of the
non-surviving entity in connection with any merger in which the Company is the
surviving entity, the amount of consideration therefor will be deemed to be the
fair value of such portion of the net assets and business of the non-surviving
entity as is attributable to such shares of Common Stock, Options or Convertible
Securities, as the case may be. The fair value of any consideration other than
cash or securities will be determined jointly by the Company and the Required
Holders. If such parties are unable to reach agreement within ten (10) days
after the occurrence of an event requiring valuation (the “Valuation Event”),
the fair value of such consideration will be determined within five (5) Business
Days after the tenth (10th) day following the Valuation Event by an independent,
reputable appraiser jointly selected by the Company and the Required Holders.
The determination of such appraiser shall be final and binding upon all parties
absent manifest error and the fees and expenses of such appraiser shall be borne
by the Company.

     

    (v)
Record Date. If the Company takes a record of the holders of shares of Common
Stock for the purpose of entitling them (A) to receive a dividend or other
distribution payable in shares of Common Stock, Options or in Convertible
Securities or (B) to subscribe for or purchase shares of Common Stock, Options
or Convertible Securities, then such record date will be deemed to be the date
of the issue or sale of the shares of Common Stock deemed to have been issued or
sold upon the declaration of such dividend or the making of such other
distribution or the date of the granting of such right of subscription or
purchase, as the case may be.

     

    (b) Adjustment upon Subdivision
or Combination of shares of Common Stock.  If the Company at
any time on or after the Subscription Date subdivides (by any share split,
dividend, recapitalization or otherwise) one or more classes of its outstanding
shares of Common Stock into a greater number of shares, the Exercise Price in
effect immediately prior to such subdivision will be proportionately reduced and
the number of Warrant Shares will be proportionately increased.  If
the Company at any time on or after the Subscription Date  combines
(by combination, reverse share split or otherwise) one or more classes of its
outstanding shares of Common Stock into a smaller number of shares, the Exercise
Price in effect immediately prior to such combination will be proportionately
increased and the number of Warrant Shares will be proportionately
decreased.  Any adjustment under this Section 2(b) shall become
effective at the close of business on the date the subdivision or combination
becomes effective.

     

    (c) Other
Events.  If any event occurs of the type contemplated by the
provisions of this Section 2 but not expressly provided for by such provisions
(including, without

     

    
      
         

      

      
        7

        
          

        

      

      
         

      

    

    limitation,
the granting of share appreciation rights, phantom share rights or other rights
with equity features), then the Company's Board of Directors will make an
appropriate adjustment in the Exercise Price and the number of Warrant Shares so
as to protect the rights of the Holder; provided that no such adjustment
pursuant to this Section 2(c) will increase the Exercise Price or decrease the
number of Warrant Shares as otherwise determined pursuant to this Section
2.

     

    (d) Voluntary Adjustment By
Company. The Company may at any time during the term of this Warrant
reduce the then current Exercise Price to any amount and for any period of time
deemed appropriate by the Board of Directors of the Company.

     

    3. RIGHTS UPON DISTRIBUTION OF
ASSETS.  If the Company shall declare or make any dividend or
other distribution of its assets (or rights to acquire its assets) to holders of
shares of Common Stock, by way of return of capital or otherwise (including,
without limitation, any distribution of cash, share or other securities,
property or options by way of a dividend, spin off, reclassification, corporate
rearrangement, scheme of arrangement or other similar transaction) (a "Distribution"), at any time
after the issuance of this Warrant, then, in each such case:

     

    (a) any
Exercise Price in effect immediately prior to the close of business on the
record date fixed for the determination of holders of shares of Common Stock
entitled to receive the Distribution shall be reduced, effective as of the close
of business on such record date, to a price determined by multiplying such
Exercise Price by a fraction of which (i) the numerator shall be the Closing Bid
Price of the shares of Common Stock on the Trading Day immediately preceding
such record date minus the value of the Distribution (as determined in good
faith by the Company's Board of Directors) applicable to one share of Common
Stock, and (ii) the denominator shall be the Closing Bid Price of the shares of
Common Stock on the Trading Day immediately preceding such record date;
and

     

    (b) the
number of Warrant Shares shall be increased to a number of shares equal to the
number of shares of Common Stock obtainable immediately prior to the close of
business on the record date fixed for the determination of holders of shares of
Common Stock entitled to receive the Distribution multiplied by the reciprocal
of the fraction set forth in the immediately preceding paragraph (a); provided
that in the event that the Distribution of common shares ("Other Shares of Common Stock")
of a company whose common shares are traded on a national securities exchange or
a national automated quotation system, then the Holder may elect to receive a
warrant to purchase Other Shares of Common Stock in lieu of an increase in the
number of Warrant Shares, the terms of which shall be identical to those of this
Warrant, except that such warrant shall be exercisable into the number of shares
of Other Shares of Common Stock that would have been payable to the Holder
pursuant to the Distribution had the Holder exercised this Warrant immediately
prior to such record date and with an aggregate exercise price equal to the
product of the amount by which the exercise price of this Warrant was decreased
with respect to the Distribution pursuant to the terms of the immediately
preceding paragraph (a) and the number of Warrant Shares calculated in
accordance with the first part of this paragraph (b).

     

    
      
         

      

      
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    4. PURCHASE RIGHTS; FUNDAMENTAL
TRANSACTIONS.

     

    (a) Purchase
Rights.  In addition to any adjustments pursuant to Section 2
above, if at any time the Company grants, issues or sells any Options,
Convertible Securities or rights to purchase shares, warrants, securities or
other property pro rata to the record holders of any class of shares of Common
Stock (the "Purchase
Rights"), then the Holder will be entitled to acquire, upon the terms
applicable to such Purchase Rights, the aggregate Purchase Rights which the
Holder could have acquired if the Holder had held the number of shares of Common
Stock acquirable upon complete exercise of this Warrant (without regard to any
limitations on the exercise of this Warrant) immediately before the date on
which a record is taken for the grant, issuance or sale of such Purchase Rights,
or, if no such record is taken, the date as of which the record holders of
shares of Common Stock are to be determined for the grant, issue or sale of such
Purchase Rights.

     

    (b) Fundamental
Transactions.  The Company shall not enter into or be party to
a Fundamental Transaction unless (i) the Successor Entity assumes in writing all
of the obligations of the Company under this Warrant in accordance with the
provisions of this Section (4)(b) pursuant to written agreements in form and
substance satisfactory to the Required Holders and approved by the Required
Holders prior to such Fundamental Transaction, including agreements to deliver
to each holder of Warrants in exchange for such Warrants a security of the
Successor Entity evidenced by a written instrument substantially similar in form
and substance to this Warrant, including, without limitation, an adjusted
exercise price equal to the value for the shares of Common Stock reflected by
the terms of such Fundamental Transaction, and exercisable for a corresponding
number of shares of capital stock equivalent to the shares of Common Stock
acquirable and receivable upon exercise of this Warrant (without regard to any
limitations on the exercise of this Warrant) prior to such Fundamental
Transaction, and satisfactory to the Required Holders and (ii) the
Successor Entity (including its Parent Entity) is a publicly traded corporation
whose common stock is quoted on or listed for trading on an Eligible
Market.  Upon the occurrence of any Fundamental Transaction, the
Successor Entity shall succeed to, and be substituted for (so that from and
after the date of such Fundamental Transaction, the provisions of this Warrant
referring to the "Company" shall refer instead to the Successor Entity), and may
exercise every right and power of the Company and shall assume all of the
obligations of the Company under this Warrant with the same effect as if such
Successor Entity had been named as the Company herein.  Upon
consummation of the Fundamental Transaction, the Successor Entity shall deliver
to the Holder confirmation that there shall be issued upon exercise of this
Warrant at any time after the consummation of the Fundamental Transaction, in
lieu of the shares of the Common Stock (or other securities, cash, assets or
other property) issuable upon the exercise of this Warrant prior to such
Fundamental Transaction, such shares of the publicly traded Common Stock (or its
equivalent) of the Successor Entity (including its Parent Entity) which the
Holder would have been entitled to receive upon the happening of such
Fundamental Transaction had this Warrant been converted immediately prior to
such Fundamental Transaction, as adjusted in accordance with the provisions of
this Warrant.  In addition to and not in substitution for any other
rights hereunder, prior to the consummation of any Fundamental Transaction
pursuant to which holders of shares of Common Stock are entitled to receive
securities or other assets with respect to or in exchange for shares of Common
Stock (a "Corporate
Event"), the Company shall make appropriate provision to insure that the
Holder

     

    
      
         

      

      
        9

        
          

        

      

      
         

      

    

    will
thereafter have the right to receive upon an exercise of this Warrant at any
time after the consummation of the Fundamental Transaction but prior to the
Expiration Date, in lieu of the shares of the Common Stock (or other securities,
cash, assets or other property) issuable upon the exercise of this Warrant prior
to such Fundamental Transaction, such shares of stock, securities, cash, assets
or any other property whatsoever (including warrants or other purchase or
subscription rights) which the Holder would have been entitled to receive upon
the happening of such Fundamental Transaction had this Warrant been exercised
immediately prior to such Fundamental Transaction.  Provision made
pursuant to the preceding sentence shall be in a form and substance reasonably
satisfactory to the Required Holders.  The provisions of this Section
shall apply similarly and equally to successive Fundamental Transactions and
Corporate Events and shall be applied without regard to any limitations on the
exercise of this Warrant.

     

    (c) Notwithstanding
the foregoing, in the event of a Change of Control, at the request of the Holder
delivered before the ninetieth (90th) day after the consummation of such Change
of Control, the Company (or the Successor Entity) shall purchase this Warrant
from the Holder by paying to the Holder, within five (5) Business Days of such
request (or, if later, on the effective date of the Change of Control, cash in
an amount equal to the Black Scholes Value of the remaining unexercised portion
of this Warrant on the date of such Change of Control.

     

    5. WARRANT HOLDER NOT DEEMED A
STOCKHOLDER.  Except as otherwise specifically provided herein,
the Holder, solely in such Person's capacity as a holder of this Warrant, shall
not be entitled to vote or receive dividends or be deemed the holder of share
capital of the Company for any purpose, nor shall anything contained in this
Warrant be construed to confer upon the Holder, solely in such Person's capacity
as the Holder of this Warrant, any of the rights of a shareholder of the Company
or any right to vote, give or withhold consent to any corporate action (whether
any reorganization, issue of shares, reclassification of shares, consolidation,
merger, conveyance or otherwise), receive notice of meetings, receive dividends
or subscription rights, or otherwise, prior to the issuance to the Holder of the
Warrant Shares which such Person is then entitled to receive upon the due
exercise of this Warrant.  In addition, nothing contained in this
Warrant shall be construed as imposing any liabilities on the Holder to purchase
any securities (upon exercise of this Warrant or otherwise) or as a shareholder
of the Company, whether such liabilities are asserted by the Company or by
creditors of the Company.  Notwithstanding this Section 5, the Company
shall provide the Holder with copies of the same notices and other information
given to the shareholders of the Company generally, contemporaneously with the
giving thereof to the shareholders.

     

    6. NONCIRCUMVENTION.  The
Company hereby covenants and agrees that the Company will not, by amendment of
its Certificate of Incorporation, Bylaws or through any reorganization, transfer
of assets, consolidation, merger, scheme of arrangement, dissolution, issue or
sale of securities, or any other voluntary action, avoid or seek to avoid the
observance or performance of any of the terms of this Warrant, and will at all
times in good faith carry out all the provisions of this Warrant and take all
action as may be required to protect the rights of the
Holder.  Without limiting the generality of the foregoing, the Company
(i) shall not increase the par value of any shares of Common Stock
receivable upon the exercise of this Warrant above the Exercise Price then in
effect, (ii) shall take all such actions as may be necessary or appropriate
in

     

    
      
         

      

      
        10

        
          

        

      

      
         

      

    

    order
that the Company may validly and legally issue fully paid and nonassessable
shares of Common Stock upon the exercise of this Warrant, and (iii) shall, so
long as any of the SPA Warrants are outstanding, take all action necessary to
reserve and keep available out of its authorized and unissued shares of Common
Stock, solely for the purpose of effecting the exercise of the SPA Warrants,
100% of the number of shares of Common Stock as shall from time to time be
necessary to effect the exercise of the SPA Warrants then outstanding (without
regard to any limitations on exercise).

     

    7. REISSUANCE OF
WARRANTS.

     

    (a) Transfer of
Warrant.  If this Warrant is to be transferred, the Holder
shall surrender this Warrant to the Company, whereupon the Company will
forthwith issue and deliver upon the order of the Holder a new Warrant (in
accordance with Section 7(d)), registered as the Holder may request,
representing the right to purchase the number of Warrant Shares being
transferred by the Holder and, if less than the total number of Warrant Shares
then underlying this Warrant is being transferred, a new Warrant (in accordance
with Section 7(d)) to the Holder representing the right to purchase the number
of Warrant Shares not being transferred.

     

    (b) Lost, Stolen or Mutilated
Warrant.  Upon receipt by the Company of evidence reasonably
satisfactory to the Company of the loss, theft, destruction or mutilation of
this Warrant, and, in the case of loss, theft or destruction, of any
indemnification undertaking by the Holder to the Company in customary form and,
in the case of mutilation, upon surrender and cancellation of this Warrant, the
Company shall execute and deliver to the Holder a new Warrant (in accordance
with Section 7(d)) representing the right to purchase the Warrant Shares then
underlying this Warrant.

     

    (c) Exchangeable for Multiple
Warrants.  This Warrant is exchangeable, upon the surrender
hereof by the Holder at the principal office of the Company, for a new Warrant
or Warrants (in accordance with Section 7(d)) representing in the aggregate the
right to purchase the number of Warrant Shares then underlying this Warrant, and
each such new Warrant will represent the right to purchase such portion of such
Warrant Shares as is designated by the Holder at the time of such surrender;
provided, however, that no Warrants for fractional shares of Common Stock shall
be given.

     

    (d) Issuance of New
Warrants.  Whenever the Company is required to issue a new
Warrant pursuant to the terms of this Warrant, such new Warrant (i) shall be of
like tenor with this Warrant, (ii) shall represent, as indicated on the face of
such new Warrant, the right to purchase the Warrant Shares then underlying this
Warrant (or in the case of a new Warrant being issued pursuant to Section 7(a)
or Section 7(c), the Warrant Shares designated by the Holder which, when added
to the number of shares of Common Stock underlying the other new Warrants issued
in connection with such issuance, does not exceed the number of Warrant Shares
then underlying this Warrant), (iii) shall have an issuance date, as indicated
on the face of such new Warrant which is the same as the Issuance Date, and (iv)
shall have the same rights and conditions as this Warrant.

     

    
      
         

      

      
        11

        
          

        

      

      
         

      

    

    

     

    8. NOTICES.  Whenever
notice is required to be given under this Warrant, unless otherwise provided
herein, such notice shall be given in accordance with Section 9(f) of the
Securities Purchase Agreement.  The Company shall provide the Holder
with prompt written notice of all actions taken pursuant to this Warrant,
including in reasonable detail a description of such action and the reason
therefor.  Without limiting the generality of the foregoing, the
Company will give written notice to the Holder (i) immediately upon any
adjustment of the Exercise Price, setting forth in reasonable detail, and
certifying, the calculation of such adjustment and (ii) at least fifteen (15)
days prior to the date on which the Company closes its books or takes a record
(A) with respect to any dividend or distribution upon the shares of Common
Stock, (B) with respect to any grants, issuances or sales of any Options,
Convertible Securities or rights to purchase shares, warrants, securities or
other property to holders of shares of Common Stock or (C) for determining
rights to vote with respect to any Fundamental Transaction, dissolution or
liquidation, provided in each case that such information shall be made known to
the public prior to or in conjunction with such notice being provided to the
Holder.

     

    9. AMENDMENT AND
WAIVER.  Except as otherwise provided herein, the provisions of
this Warrant may be amended and the Company may take any action herein
prohibited, or omit to perform any act herein required to be performed by it,
only if the Company has obtained the written consent of the Required Holders;
provided that no such action may increase the exercise price of any SPA Warrant
or decrease the number of shares or class of shares obtainable upon exercise of
any SPA Warrant without the written consent of the Holder.  No such
amendment shall be effective to the extent that it applies to less than all of
the holders of the SPA Warrants then outstanding.

     

    10. GOVERNING
LAW.  This Warrant shall be governed by and construed and
enforced in accor­dance with, and all questions concerning the construction,
validity, interpretation and performance of this Warrant shall be governed by,
the internal laws of the State of New York, without giving effect to any choice
of law or conflict of law provision or rule (whether of the State of New York or
any other jurisdictions) that would cause the application of the laws of any
jurisdictions other than the State of New York.

     

    11. CONSTRUCTION;
HEADINGS.  This Warrant shall be deemed to be jointly drafted
by the Company and all the Buyers and shall not be construed against any person
as the drafter hereof.  The headings of this Warrant are for
convenience of reference and shall not form part of, or affect the
interpretation of, this Warrant.

     

    12. DISPUTE
RESOLUTION.  In the case of a dispute as to the determination
of the Exercise Price with respect to some or all of this Warrant or the
arithmetic calculation of the Warrant Shares, the Company shall submit the
disputed determinations or arithmetic calculations via facsimile within two (2)
Business Days of receipt of the Exercise Notice giving rise to such dispute, as
the case may be, to the Holder.  If the Holder and the Company are
unable to agree upon such determination or calculation of the Exercise Price or
the Warrant Shares within three (3) Business Days of such disputed determination
or arithmetic calculation being submitted to the Holder, then the Company shall,
within two (2) Business Days submit via facsimile (a) the disputed determination
of the Exercise Price to an independent, reputable investment bank selected by
the Company and approved by the Holder  or (b) the
disputed

     

    
      
         

      

      
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    arithmetic
calculation of the Warrant Shares to the Company's independent, outside
accountant.  The Company shall cause at its expense the investment
bank or the accountant, as the case may be, to perform the determinations or
calculations and notify the Company and the Holder of the results no later than
ten Business Days from the time it receives the disputed determinations or
calculations.  Such investment bank's or accountant's determination or
calculation, as the case may be, shall be binding upon all parties absent
demonstrable error.

     

    13. REMEDIES, OTHER OBLIGATIONS,
BREACHES AND INJUNCTIVE RELIEF.  The remedies provided in this
Warrant shall be cumulative and in addition to all other remedies available
under this Warrant, at law or in equity (including a decree of specific
performance and/or other injunctive relief), and nothing herein shall limit the
right of the Holder to pursue actual damages for any failure by the Company to
comply with the terms of this Warrant.  The Company acknowledges that
a breach by it of its obligations hereunder will cause irreparable harm to the
Holder and that the remedy at law for any such breach may be
inadequate.  The Company therefore agrees that, in the event of any
such breach or threatened breach, the holder of this Warrant shall be entitled,
in addition to all other available remedies, to an injunction restraining any
breach, without the necessity of showing economic loss and without any bond or
other security being required.

     

    14. TRANSFER.  This
Warrant may be offered for sale, sold, transferred or assigned without the
consent of the Company, except as may be required by Section 2(f) of the
Securities Purchase Agreement. The Holder shall give prompt notice to the
Company of any such sale, transfer or assignment.

     

    15. SEVERABILITY.  If
any provision of this Agreement is prohibited by law or otherwise determined to
be invalid or unenforceable by a court of competent jurisdiction, the provision
that would otherwise be prohibited, invalid or unenforceable shall be deemed
amended to apply to the broadest extent that it would be valid and enforceable,
and the invalidity or unenforceability of such provision shall not affect the
validity of the remaining provisions of this Agreement so long as this Agreement
as so modified continues to express, without material change, the original
intentions of the parties as to the subject matter hereof and the prohibited
nature, invalidity or unenforceability of the provision(s) in question does not
substantially impair the respective expectations or reciprocal obligations of
the parties or the practical realization of the benefits that would otherwise be
conferred upon the parties.  The parties will endeavor in good faith
negotiations to replace the prohibited, invalid or unenforceable provision(s)
with a valid provision(s), the effect of which comes as close as possible to
that of the prohibited, invalid or unenforceable provision(s).

     

    16. CERTAIN
DEFINITIONS.  For purposes of this Warrant, the following terms
shall have the following meanings:

     

    (a) "Approved Stock Plan” means any
employee benefit plan which has been approved by the Board of Directors of the
Company, pursuant to which the Company’s securities may be issued to any
employee, officer or director for services provided to the Company.

     

    
      
         

      

      
        13

        
          

        

      

      
         

      

    

    

     

    (b) "Black Scholes Value" means the
value of this Warrant based on the Black and Scholes Option Pricing Model
obtained from the "OV" function on Bloomberg determined as of the day of the
closing of the applicable Fundamental Transaction for pricing purposes and
reflecting (i) a risk-free interest rate corresponding to the U.S. Treasury rate
for a period equal to the remaining term of this Warrant as of such date of
request, (ii) an expected volatility equal to the greater of 100% and the 100
day volatility obtained from the HVT function on Bloomberg as of the day
immediately following the public announcement of the applicable Fundamental
Transaction and (iii) the underlying price per share used in such calculation
shall be the sum of the price per share being offered in cash, if any, plus the
value of any non cash consideration, if any, being offered in the Fundamental
Transaction.

     

    (c) "Bloomberg" means Bloomberg
Financial Markets.

     

    (d) "Business Day" means any day
other than Saturday, Sunday or other day on which commercial banks in The City
of New York are authorized or required by law to remain closed.

     

    (e) "Change of Control" means any
Fundamental Transaction other than (A) any reorganization, recapitalization or
reclassification of the Common Stock, in which holders of the Company's voting
power immediately prior to such reorganization, recapitalization or
reclassification continue after such reorganization, recapitalization or
reclassification to hold publicly traded securities and, directly or indirectly,
the voting power of the surviving entity or entities necessary to elect a
majority of the members of the board of directors (or their equivalent if other
than a corporation) of such entity or entities, or (B) pursuant to a migratory
merger effected solely for the purpose of changing the jurisdiction of
incorporation of the Company.

     

    (f) "Closing Bid Price" and "Closing Sale Price" means, for
any security as of any date, the last closing bid price and last closing trade
price, respectively, for such security on the Principal Market, as reported by
Bloomberg, or, if the Principal Market begins to operate on an extended hours
basis and does not designate the closing bid price or the closing trade price,
as the case may be, then the last bid price or last trade price, respectively,
of such security prior to 4:00:00 p.m., New York Time, as reported by Bloomberg,
or, if the Principal Market is not the principal securities exchange or trading
market for such security, the last closing bid price or last trade price,
respectively, of such security on the principal securities exchange or trading
market where such security is listed or traded as reported by Bloomberg, or if
the foregoing do not apply, the last closing bid price or last trade price,
respectively, of such security in the over-the-counter market on the electronic
bulletin board for such security as reported by Bloomberg, or, if no closing bid
price or last trade price, respectively, is reported for such security by
Bloomberg, the average of the bid prices, or the ask prices, respectively, of
any market makers for such security as reported in the "pink sheets" by Pink
Sheets LLC (formerly the National Quotation Bureau, Inc.).  If the
Closing Bid Price or the Closing Sale Price cannot be calculated for a security
on a particular date on any of the foregoing bases, the Closing Bid Price or the
Closing Sale Price, as the case may be, of such security on such date shall be
the fair market value as mutually determined by the Company and the
Holder.  If the Company and the Holder are unable to agree upon the
fair market value of such security, then such dispute shall be

     

    
      
         

      

      
        14

        
          

        

      

      
         

      

    

    resolved
pursuant to Section 12.  All such determinations to be appropriately
adjusted for any dividend, share split, share combination or other similar
transaction during the applicable calculation period.

     

    (g) "Common Stock" means
(i) the Company's Common Shares, par value $0.005 per share, and
(ii) any share capital into which such Common Stock shall have been changed
or any share capital resulting from a reclassification of such Common
Stock.

     

    (h) "Convertible Securities" means
any shares or securities (other than Options) directly or indirectly convertible
into or exercisable or exchangeable for shares of Common Stock.

     

    (i) "Eligible Market" means the
Principal Market, The New York Stock Exchange, Inc., The NASDAQ Global Market,
The NASDAQ Capital Market or The NASDAQ Global Select Market.

     

    (j) "Excluded Securities” means any
Common Stock issued or issuable: (I) (i) in connection with any Approved Stock
Plan; (ii) upon exercise of the SPA Warrants; (iii) in connection with any share
split, dividend, recapitalization or similar transaction by the Company for
which adjustment is made pursuant to Section 2(b); and (iv) upon exercise of any
Options or Convertible Securities which are outstanding on the day immediately
preceding the Subscription Date, provided that the terms of such Options or
Convertible Securities are not amended, modified or changed on or after the
Subscription Date; (II) pursuant to an “at the money (ATM)” or “dribble out”
program entered into by the Company no later than sixty (60) days following the
Subscription Date, provided that the Company has complied with its obligations
under Section 4.11 and Section 4.12 of the Securities Purchase Agreement
with respect to such program; (III) pursuant to warrants issued on a one-time
basis to the lenders in connections any refinancing or restructuring of existing
secured bank financed indebtedness of the Company; and (IV) pursuant to that
certain Common Share Agreement, dated October 21, 2008, by and between the
Company and Azimuth Opportunity Ltd., provided that such agreement has not been
amended since the Subscription Date.

     

    (k) "Expiration Date" means the
date that is five (5) years following the date that all of the Warrant Shares
shall be issuable without restriction or limitation of the Maximum Percentage
or, if such date falls on a day other than a Business Day or on which trading
does not take place on the Principal Market (a "Holiday"), the next day that
is not a Holiday.

     

    (l) "Fundamental Transaction" means
that the Company shall directly or indirectly, in one or more related
transactions, (i) consolidate or merge with or into (whether or not the Company
is the surviving corporation) another Person, or (ii) sell, assign, transfer,
convey or otherwise dispose of all or substantially all of the properties or
assets of the Company to another Person, or (iii) allow another Person to make a
purchase, tender or exchange offer that is accepted by the holders of more than
the 50% of the outstanding shares of Common Stock (not including any shares of
Common Stock held by the Person or Persons making or party to, or associated or
affiliated with the Persons making or party to, such purchase, tender
or

     

    
      
         

      

      
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    exchange
offer), or (iv) consummate a share purchase agreement or other business
combination (including, without limitation, a reorganization, recapitalization,
spin-off or scheme of arrangement) with another Person whereby such other Person
acquires more than the 50% of the outstanding shares of Common Stock (not
including any shares of Common Stock held by the other Person or other Persons
making or party to, or associated or affiliated with the other Persons making or
party to, such share purchase agreement or other business combination), or (v)
reorganize, recapitalize or reclassify its Common Stock, or (vi) any "person" or
"group" (as these terms are used for purposes of Sections 13(d) and 14(d) of the
Exchange Act), become the "beneficial owner" (as defined in Rule 13d-3 under the
Exchange Act), directly or indirectly, of 50% of the aggregate ordinary voting
power represented by issued and outstanding Common Stock.

     

    (m) "Options" means any rights,
warrants or options to subscribe for or purchase shares of Common Stock or
Convertible Securities.

     

    (n) "Parent Entity" of a Person
means an entity that, directly or indirectly, controls the applicable Person and
whose common stock or equivalent equity security is quoted or listed on an
Eligible Market, or, if there is more than one such Person or Parent Entity, the
Person or Parent Entity with the largest public market capitalization as of the
date of consummation of the Fundamental Transaction.

     

    (o) "Person" means an individual, a
limited liability company, a partnership, a joint venture, a corporation, a
trust, an unincorporated organization, any other entity and a government or any
department or agency thereof.

     

    (p) "Principal Market" means The
Nasdaq Global Market.

     

    (q) "Registration Rights Agreement"
means that certain Registration Rights Agreement dated as of the Subscription
Date by and among the Company and the Buyers.

     

    (r) "Required Holders" means the
holders of the SPA Warrants representing at least sixty percent (60%) of the
shares of Common Stock underlying the SPA Warrants then
outstanding.

     

    (s) "Successor Entity" means the
Person (or, if so elected by the Required Holders, the Parent Entity) formed by,
resulting from or surviving any Fundamental Transaction or the Person (or, if so
elected by the Required Holders, the Parent Entity) with which such Fundamental
Transaction shall have been entered into.

     

    (t) "Trading Day" means any day on
which the Common Stock is traded on the Principal Market, or, if the Principal
Market is not the principal trading market for the Common Stock, then on the
principal securities exchange or securities market on which the Common Stock is
then traded; provided that "Trading Day" shall not include any day on which the
Common Stock is scheduled to trade on such exchange or market for less than 4.5
hours or any day that the Common Stock is suspended from trading during the
final hour of trading on such exchange or market (or if such exchange or market
does not designate in advance the

     

    
      
         

      

      
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    closing
time of trading on such exchange or market, then during the hour ending at
4:00:00 p.m., New York Time).

     

    (u) "Weighted Average Price" means,
for any security as of any date, the dollar volume-weighted average price for
such security on the Principal Market during the period beginning at 9:30:01
a.m., New York Time (or such other time as the Principal Market publicly
announces as the official open of trading), and ending at 4:00:00 p.m., New York
Time (or such other time as the Principal Market publicly announces is the
official close of trading) as reported by Bloomberg through its "Volume at
Price" function, or, if the foregoing does not apply, the dollar volume-weighted
average price of such security in the over-the-counter market on the electronic
bulletin board for such security during the period beginning at 9:30:01 a.m.,
New York Time (or such other time as such market publicly announces is the
official open of trading), and ending at 4:00:00 p.m., New York Time (or such
other time as such market publicly announces is the official close of trading)
as reported by Bloomberg, or, if no dollar volume-weighted average price is
reported for such security by Bloomberg for such hours, the average of the
highest closing bid price and the lowest closing ask price of any of the market
makers for such security as reported in the "pink sheets" by Pink Sheets LLC
(formerly the National Quotation Bureau, Inc.).  If the Weighted
Average Price cannot be calculated for a security on a particular date on any of
the foregoing bases, the Weighted Average Price of such security on such date
shall be the fair market value as mutually determined by the Company and the
Holder.  If the Company and the Holder are unable to agree upon the
fair market value of such security, then such dispute shall be resolved pursuant
to Section 12.  All such determinations are to be appropriately
adjusted for any dividend, share split, share combination or other similar
transaction during the applicable calculation period.

     

    [Signature
Page Follows]

    
      
         

      

      
        17

        
          

        

      

      
         

      

    

    IN WITNESS WHEREOF, the
Company has caused this Warrant to Purchase Common Stock to be duly executed as
of the Issuance Date set out above.

    

    
      
        	 
      
	
                XOMA
      LTD.

              
	 
      
	 
      
	
                By:________________________________

              
	
                Name:

              
	
                Title:

              

      

    

    
      
         

      

      
         

        
          

        

      

      
         

      

    

     EXHIBIT
A

    EXERCISE
NOTICE

    TO
BE EXECUTED BY THE REGISTERED HOLDER TO EXERCISE THIS

    WARRANT
TO PURCHASE COMMON STOCK

    

    
       
XOMA
LTD.

    

    

    The undersigned holder hereby exercises
the right to purchase _________________ of the shares of Common Stock ("Warrant Shares") of XOMA Ltd.,
a Bermuda corporation (the "Company"), evidenced by the
attached Warrant to Purchase Common Stock (the "Warrant").  Capitalized
terms used herein and not otherwise defined shall have the respective meanings
set forth in the Warrant.

     

    1.           Form
of Exercise Price.  The Holder intends that payment of the Exercise
Price shall be made as:

     

    
      	
               
      

            	
              ____________

            	
              a
      "Cash
      Exercise" with respect to _________________ Warrant Shares;
      and/or

            

    

     

    
      	
               
      

            	
              ____________

            	
              a
      "Cashless
      Exercise" with respect to _______________ Warrant
      Shares.

            

    

     

    2.           Payment
of Exercise Price.  In the event that the holder has elected a Cash
Exercise with respect to some or all of the Warrant Shares to be issued pursuant
hereto, the holder shall pay the Aggregate Exercise Price in the sum of
$___________________ to the Company in accordance with the terms of the
Warrant.

     

    3.           Delivery
of Warrant Shares.  The Company shall deliver to the holder __________
Warrant Shares in accordance with the terms of the Warrant.

     

    

     

    Date:
_______________ __, ______

     

    _____________________________

       Name
of Registered Holder

     

    

     

    By: 
__________________________

           
Name:

           
Title:

    
      
         

      

      
         

        
          

        

      

      
         

      

    

    ACKNOWLEDGMENT

     

    

     

    The Company hereby acknowledges this
Exercise Notice and hereby directs [Insert Stock
Transfer Agent] to issue the above indicated number of shares of Common
Stock in accordance with the Transfer Agent Instructions dated [    ], 2009 from the Company and
acknowledged and agreed to by [Insert Stock
Transfer Agent].

     

    
      
        	
                XOMA
      LTD.

              
	 
      
	
                By:_________________________________

                Name:

                Title:

Source: [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00159-of-00352.parquet"}, [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00159-of-00352.parquet"}]]