Document:

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                                                                     Exhibit 5.1

                                 828,571 SHARES

                           HALOZYME THERAPEUTICS, INC.

                             SHARES OF COMMON STOCK

                               ($0.001 PAR VALUE)

                            PLACEMENT AGENT AGREEMENT

                                                               December 13, 2005

SG COWEN & CO., LLC
RODMAN & RENSHAW, LLC
ROTH CAPITAL PARTNERS, LLC
c/o SG Cowen & Co., LLC
1221 Avenue of the Americas
New York, New York 10020

Dear Sirs:

      Halozyme Therapeutics, Inc., a Nevada corporation (the "COMPANY"),
proposes to sell to the Purchasers, pursuant to the terms of this Placement
Agent Agreement (this "AGREEMENT") and the Subscription Agreements in the form
of Exhibit A attached hereto (the "SUBSCRIPTION AGREEMENTS") entered into with
the Purchasers identified therein (each a "PURCHASER" and, collectively, the
"PURCHASERS"), an aggregate of 828,571 shares of Common Stock, $0.001 par value
(the "COMMON STOCK"), of the Company. The aggregate of 828,571 shares so
proposed to be sold is hereinafter referred to as the "STOCK." The Company
hereby confirms its agreement with the placement agents named on Schedule I
attached hereto (the "PLACEMENT AGENTS"), as set forth below. SG Cowen & Co.,
LLC is acting as the representative of the Placement Agents and in such capacity
is hereinafter referred to as the "REPRESENTATIVE." Certain terms used herein
are defined in Section 14 hereof.

1. AGREEMENT TO ACT AS PLACEMENT AGENTS; PLACEMENT OF SECURITIES. On the basis
of the representations, warranties and agreements of the Company and its
Subsidiary (as defined below) herein contained, and subject to all the terms and
conditions of this Agreement:

      (a) The Company hereby authorizes the Placement Agents to act as its
      exclusive agents to solicit offers for the purchase of all or part of the
      Stock from the Company in connection with the proposed offering of the
      Stock (the "OFFERING"). Until the Closing Date (as defined in Section 3
      hereof), the Company shall not, without the prior consent of the
      Representative, solicit or accept offers to purchase the Stock otherwise
      than through the Placement Agents.

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      (b) The Placement Agents agree, as agents of the Company, to use their
      commercially reasonable efforts to solicit offers to purchase the Stock
      from the Company on the terms and subject to the conditions set forth in
      the Base Prospectus (as defined below) and the Prospectus Supplement (as
      defined below). The Placement Agents shall make commercially reasonable
      efforts to assist the Company in obtaining performance by each Purchaser
      whose offer to purchase Stock has been solicited by the Placement Agents
      and accepted by the Company, but the Placement Agents shall not, except as
      otherwise provided in this Agreement, be obligated to disclose the
      identity of any potential purchaser or have any liability to the Company
      in the event any such purchase is not consummated for any reason. Under no
      circumstances will the Placement Agents be obligated to purchase any Stock
      for its own account and, in soliciting purchases of Stock, the Placement
      Agents shall act solely as the Company's agent and not as principals.
      Notwithstanding the foregoing and except as otherwise provided in Section
      1(c), it is understood and agreed that the Placement Agents (or their
      affiliates) may, solely at their discretion and without any obligation to
      do so, purchase Stock as principals.

      (c) Subject to the provisions of this Section 1, offers for the purchase
      of Stock may be solicited by the Placement Agents as agents for the
      Company at such times and in such amounts as the Placement Agents deem
      advisable. Each Placement Agent shall communicate to the Company, orally
      or in writing, each reasonable offer to purchase Stock received by it as
      agent of the Company. The Company shall have the sole right to accept
      offers to purchase the Stock and may reject any such offer, in whole or in
      part. Each Placement Agent shall have the right, in its discretion
      reasonably exercised, without notice to the Company, to reject any offer
      to purchase Stock received by it, in whole or in part, and any such
      rejection shall not be deemed a breach of its agreement contained herein.

      (d) The purchases of the Stock by the Purchasers shall be evidenced by the
      execution of the Subscription Agreements by each of the parties thereto.

      (e) As compensation for services rendered, on the Closing Date the Company
      shall pay to the Placement Agents by wire transfer of immediately
      available funds to an account or accounts designated by the
      Representative, an amount equal to seven percent (7%) of the gross
      proceeds received by the Company from the sale of the Stock on such
      Closing Date.

      (f) No Stock which the Company has agreed to sell pursuant to this
      Agreement shall be deemed to have been purchased and paid for, or sold by
      the Company, until such Stock shall have been delivered to the Purchaser
      thereof against payment by such Purchaser. If the Company shall default in
      its obligations to deliver Stock to a Purchaser whose offer it has
      accepted, the Company shall indemnify and hold the Placement Agents
      harmless against any loss, claim or damage arising from or as a result of
      such default by the Company.

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2. REPRESENTATIONS AND WARRANTIES OF THE COMPANY AND ITS SUBSIDIARY. The Company
and its Subsidiary represent and warrant to, and agrees with, the several
Placement Agents and the Purchasers that:

      (a) The Company meets the requirements for use of Form S-3 under the
      Securities Act of 1933, as amended (the "SECURITIES ACT"), and has filed
      with the Securities and Exchange Commission (the "COMMISSION") a
      registration statement on such form (Registration File No. 333-125731),
      which became effective as of June 17, 2005, for the registration under the
      Securities Act of the Stock. Such registration statement meets the
      requirements set forth in Rule 415(a)(1)(x) under the Securities Act and
      complies with said Rule. The Company will file with the Commission
      pursuant to Rule 424(b) under the Securities Act, and the rules and
      regulations (the "RULES AND REGULATIONS") of the Commission promulgated
      thereunder, a supplement to the form of prospectus included in such
      registration statement relating to the placement of the Stock and the plan
      of distribution thereof and has advised the Representative of all further
      information (financial and other) with respect to the Company required to
      be set forth therein. Such registration statement, including the exhibits
      thereto, as amended at the date of this Agreement, is hereinafter called
      the "REGISTRATION STATEMENT"; such prospectus in the form in which it
      appears in the Registration Statement is hereinafter called the "BASE
      PROSPECTUS"; and the supplemented form of prospectus, in the form in which
      it will be filed with the Commission pursuant to Rule 424(b) (including
      the Base Prospectus as so supplemented) is hereinafter called the
      "PROSPECTUS SUPPLEMENT." Any reference herein to the Registration
      Statement, the Base Prospectus or the Prospectus Supplement shall be
      deemed to refer to and include the documents incorporated by reference
      therein, including all exhibits thereto (the "INCORPORATED DOCUMENTS")
      pursuant to Item 12 of Form S-3 which were filed under the Securities
      Exchange Act of 1934, as amended (the "EXCHANGE ACT"), on or before the
      date of this Agreement, or the issue date of the Base Prospectus or the
      Prospectus Supplement, as the case may be; and any reference herein to the
      terms "amend," "amendment" or "supplement" with respect to the
      Registration Statement, the Base Prospectus or the Prospectus Supplement
      shall be deemed to refer to and include the filing of any document under
      the Exchange Act after the date of this Agreement, or the issue date of
      the Base Prospectus or the Prospectus Supplement, as the case may be,
      deemed to be incorporated therein by reference. All references in this
      Agreement to financial statements and schedules and other information
      which is "contained," "included," "described," "set forth" or "stated" in
      the Registration Statement, the Base Prospectus or the Prospectus
      Supplement (and all other references of like import) shall be deemed to
      mean and include all such financial statements and schedules and other
      information which is or is deemed to be incorporated by reference in the
      Registration Statement, the Base Prospectus or the Prospectus Supplement,
      as the case may be. No stop order suspending the effectiveness of the
      Registration Statement or the use of the Base Prospectus or the Prospectus
      Supplement has been issued, and no proceeding for any such purpose is
      pending or has been initiated or, to the Company's knowledge, is
      threatened by the Commission. For purposes of this Agreement, "FREE
      WRITING PROSPECTUS" has the meaning set forth in Rule 405 under the
      Securities Act and the "TIME OF SALE PROSPECTUS" means the

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      preliminary prospectus, if any, together with the free writing
      prospectuses, if any, used in connection with the Offering, including any
      documents, incorporated by reference therein.

      (b) The Registration Statement (and any further documents to be filed with
      the Commission) contains all exhibits and schedules as required by the
      Securities Act. Each of the Registration Statement and any post-effective
      amendment thereto, at the time it became effective, complied in all
      material respects with the Securities Act and the Exchange Act and the
      applicable Rules and Regulations and did not and, as amended or
      supplemented, if applicable, will not, contain any untrue statement of a
      material fact or omit to state a material fact required to be stated
      therein or necessary to make the statements therein not misleading. The
      Base Prospectus, the Time of Sale Prospectus, if any, and the Prospectus
      Supplement, each as of its respective date, comply in all material
      respects with the Securities Act and the Exchange Act and the applicable
      Rules and Regulations. Each of the Base Prospectus, the Time of Sale
      Prospectus, if any, and the Prospectus Supplement, as amended or
      supplemented, did not and will not contain as of the date thereof any
      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. The Incorporated
      Documents, when they were filed with the Commission, conformed in all
      material respects to the requirements of the Exchange Act and the
      applicable Rules and Regulations, and none of such documents, when they
      were filed with the Commission, contained any untrue statement of a
      material fact or omitted to state a material fact necessary to make the
      statements therein not misleading; and any further documents so filed and
      incorporated by reference in the Base Prospectus, the Time of Sale
      Prospectus, if any, or Prospectus Supplement, when such documents are
      filed with the Commission, will conform in all material respects to the
      requirements of the Exchange Act and the applicable Rules and Regulations,
      as applicable, and will not contain any untrue statement of a material
      fact or omit to state a material fact necessary to make the statements
      therein not misleading. Notwithstanding the foregoing, the Company makes
      no representations or warranties as to information, if any, contained in
      or omitted from the Time of Sale Prospectus, if any, or the Prospectus
      Supplement or any amendment thereof or supplement thereto in reliance upon
      and in conformity with information furnished in writing to the Company by
      or on behalf of any Placement Agent specifically for use in the
      Registration Statement, the Time of Sale Prospectus, if any, or the
      Prospectus Supplement, which information the parties hereto agree is
      limited to the Placement Agents' Information as defined in Section 16. No
      post-effective amendment to the Registration Statement reflecting any
      facts or events arising after the date thereof which represent,
      individually or in the aggregate, a fundamental change in the information
      set forth therein is required to be filed with the Commission. There are
      no documents required to be filed with the Commission in connection with
      the transaction contemplated hereby that (x) have not been filed as
      required pursuant to the Securities Act or (y) will not be filed within
      the requisite time period. There are no contracts or other documents
      required to be described in the Base Prospectus, the Time of Sale
      Prospectus, if any, or Prospectus Supplement, or to be filed as exhibits
      or

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      schedules to the Registration Statement, which have not been described or
      filed as required.

      (c) The Company is eligible to use free writing prospectuses in connection
      with the Offering pursuant to Rules 164 and 433 under the Securities Act.
      Any free writing prospectus that the Company is required to file pursuant
      to Rule 433(d) under the Securities Act has been, or will be, filed with
      the Commission in accordance with the requirements of the Securities Act
      and the applicable rules and regulations of the Commission thereunder.
      Each free writing prospectus that the Company has filed, or is required to
      file, pursuant to Rule 433(d) under the Securities Act or that was
      prepared by or behalf of or used by the Company complies or will comply in
      all material respects with the requirements of the Securities Act and the
      applicable rules and regulations of the Commission thereunder. The Company
      will not, without the Representative's consent, prepare, use or refer to,
      any free writing prospectus.

      (d) The Company has delivered, or will as promptly as practicable deliver,
      to the Representative complete conformed copies of the Registration
      Statement and of each consent and certificate of experts filed as a part
      thereof, and conformed copies of the Registration Statement (without
      exhibits) and the Base Prospectus, the Time of Sale Prospectus, if any,
      and the Prospectus Supplement, as amended or supplemented, in such
      quantities and at such places as the Representative reasonably requests.
      Neither the Company nor any of its directors and officers has distributed
      and none of them will distribute, prior to the completion of the
      distribution of Stock, any offering material in connection with the
      offering and sale of the Stock other than the Base Prospectus, the Time of
      Sale Prospectus, if any, the Prospectus Supplement, the Registration
      Statement, copies of the documents incorporated by reference therein and
      any other materials permitted by the Securities Act.

      (e) Each of the Company and Halozyme, Inc., a wholly-owned subsidiary of
      the Company (the "SUBSIDIARY"), have been duly organized and are validly
      existing as corporations or other legal entities in good standing (or the
      equivalent thereof, if any) under the laws of their respective
      jurisdictions of incorporation, are duly qualified to do business and are
      in good standing (or the equivalent thereof, if any) as foreign
      corporations in each jurisdiction in which their respective ownership or
      lease of property or the conduct of their respective businesses requires
      such qualification, and have all power and authority necessary to own or
      hold their respective properties and to conduct the businesses in which
      they are engaged, except where the failure to be so qualified and in good
      standing or have such power or authority would not have, singularly or in
      the aggregate, a material adverse effect on the condition (financial or
      otherwise), results of operations, business, properties or prospects of
      the Company and its Subsidiary taken as a whole (a "MATERIAL ADVERSE
      EFFECT").

      (f) The Stock to be issued and sold by the Company hereunder and under the
      Subscription Agreements has been duly and validly authorized and, when
      issued and delivered against payment therefor as provided herein, will be
      duly and validly issued, fully paid and nonassessable and free of any
      preemptive or

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      similar rights. The Stock conforms to the description thereof contained in
      the Base Prospectus, the Prospectus Supplement and the Time of Sale
      Prospectus, if any.

      (g) The Company has an authorized capitalization as set forth in the Base
      Prospectus, the Prospectus Supplement and the Time of Sale Prospectus, if
      any, all of the issued and outstanding shares of capital stock of the
      Company have been duly and validly authorized and issued, are fully paid
      and non-assessable, have been issued in compliance with federal and state
      securities laws, and conform to the description thereof contained in the
      Base Prospectus, the Prospectus Supplement and the Time of Sale
      Prospectus, if any. None of the outstanding shares of Common Stock was
      issued in violation of any preemptive rights, rights of first refusal or
      other similar rights to subscribe for or purchase securities of the
      Company. There are no authorized or outstanding options, warrants,
      preemptive rights, rights of first refusal or other rights to purchase, or
      equity or debt securities convertible into or exchangeable or exercisable
      for, any capital stock of the Company that have been granted by the
      Company other than: (i) those accurately described in the Base Prospectus
      or ii) those issued pursuant to existing stock option plans. The
      description of the Company's stock option, stock bonus and other stock
      plans or arrangements, and the options or other rights granted thereunder,
      as described in the Base Prospectus, completely, accurately and fairly
      present the information required to be shown with respect to such plans,
      arrangements, options and rights.

      (h) All the outstanding shares of capital stock of the Subsidiary have
      been duly authorized and validly issued, are fully paid and non-assessable
      and, except to the extent set forth in the Base Prospectus, are owned
      directly by the Company, free and clear of any claim, lien, encumbrance,
      security interest, defect or restriction upon voting or transfer or any
      other claim of any kind ("LIENS").

      (i) The Company has the full right, power and authority to enter into this
      Agreement and each of the Subscription Agreements and to perform and to
      discharge its obligations hereunder and thereunder; and each of this
      Agreement and each of the Subscription Agreements has been duly
      authorized, executed and delivered by the Company, and constitutes a valid
      and binding obligation of the Company enforceable in accordance with its
      terms, except as limited by applicable bankruptcy, insolvency,
      reorganization, moratorium or similar laws affecting creditors' and
      contracting parties' rights generally and except as enforceability may be
      subject to general principles of equity (regardless of whether such
      enforceability is considered in a proceeding in equity or at law) and
      except as the indemnification agreements of the Company herein may be
      legally unenforceable.

      (j) The execution, delivery and performance of this Agreement and the
      Subscription Agreements by the Company and the consummation of the
      transactions contemplated hereby and thereby will not conflict with or
      result in a breach or violation of any of the terms or provisions of, or
      constitute a default under, any indenture, mortgage, deed of trust, loan
      agreement or other

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      agreement or instrument to which the Company or its Subsidiary is a party
      or by which the Company or its Subsidiary is bound or to which any of the
      property or assets of the Company or its Subsidiary is subject, except any
      such conflicts, breaches or violations which would not reasonably be
      expected to have a Material Adverse Effect, nor will such actions result
      in any violation of the provisions of the charter or bylaws of the Company
      or its Subsidiary or any statute, law, rule or regulation or any judgment,
      order or decree of any court or governmental agency or body having
      jurisdiction over the Company or its Subsidiary or any of their properties
      or assets.

      (k) There is no franchise, contract, lease, instrument or other document
      of a character required by the Securities Act or the Rules and Regulations
      to be described in the Base Prospectus or the Prospectus Supplement, or to
      be filed as an exhibit to the Registration Statement, which is not
      described or filed as required; and all statements summarizing any such
      franchises, contracts, leases, instruments or other documents or legal
      matters contained in the Registration Statement are accurate and complete
      in all material respects, except as redacted pursuant to confidential
      treatment requests. Other than as described in the Base Prospectus, no
      such franchise, contract, lease, instrument or other document has been
      suspended or terminated for convenience or default by the Company or its
      Subsidiary or any of the other parties thereto, neither the Company or its
      Subsidiary has sent or received any communication regarding intent not to
      renew any such franchise, contract, lease, instrument or other document,
      and neither the Company nor its Subsidiary has received notice or any
      other knowledge of any such pending or threatened suspension, termination
      or non-renewal, except for such pending or threatened suspensions,
      terminations or non-renewals that would not reasonably be expected to,
      singularly or in the aggregate, have a Material Adverse Effect.

      (l) All existing minute books of the Company and its Subsidiary, including
      all existing records of all meetings and actions of the board of directors
      (including, Audit, Compensation, Nominating and Governance and other board
      committees) and stockholders of the Company through the date of the latest
      meeting and action (collectively, the "CORPORATE RECORDS") have been made
      available to the Placement Agents and counsel for the Placement Agents.
      All such Corporate Records are complete and accurately reflect, in all
      material respects, all transactions referred to in such Corporate Records.
      There are no material transactions, agreements or other actions of the
      Company or its Subsidiary that are not properly approved and/or recorded
      in the Corporate Records.

      (m) No consent, approval, authorization, filing with or order of or
      registration with, any court or governmental agency or body is required in
      connection with the transactions contemplated herein or in the
      Subscription Agreements, except such as have been obtained or made (or
      will be timely obtained or made) under the Securities Act or the Exchange
      Act and such as may be required under the securities, or blue sky, laws of
      any jurisdiction in connection with the offer and sale of the Stock by the
      Company in the manner contemplated herein and in the Base Prospectus and
      the Prospectus Supplement.

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      (n) Except as described in the Base Prospectus, (i) no person has the
      right, contractual or otherwise, to cause the Company to issue or sell to
      it any shares of Common Stock or shares of any other capital stock or
      other equity interests of the Company, (ii) no person has any preemptive
      rights, resale rights, rights of first refusal or other rights to purchase
      from the Company any shares of Common Stock or shares of any other capital
      stock or other securities of the Company, and (iii) except as provided
      herein, no person has the right to act as an underwriter, placement agent
      or financial advisor to the Company in connection with and as a result of
      the offer and sale of the Stock, in the case of each of the foregoing
      clauses (i), (ii) and (iii), whether as a result of the filing or
      effectiveness of the Registration Statement or the sale of the Stock as
      contemplated thereby or otherwise; no person has the right, contractual or
      otherwise, to cause the Company to register under the Securities Act any
      shares of Common Stock or shares of any other capital stock or other
      securities of the Company, or to include any such shares or interests in
      the Registration Statement or the offering contemplated thereby, whether
      as a result of the filing or effectiveness of the Registration Statement
      or the sale of the Stock as contemplated thereby or otherwise, except for
      persons and entities who have had their shares already registered under
      the Securities Act, who have expressly waived such right or who have been
      given timely and proper notice and have failed to exercise such right
      within the time or times required under the terms and conditions of such
      right, and the Company is not required to file any registration statement
      for the registration of any securities of any person or register any such
      securities pursuant to any other registration statement filed by the
      Company under the Securities Act for a period of at least 180 days after
      the date hereof.

      (o) The financial statements, together with the related notes and
      schedules, of the Company included in the Base Prospectus, the Prospectus
      Supplement or the Registration Statement, the Time of Sale Prospectus, if
      any, or incorporated by reference therein, as the case may be, present
      fairly the financial condition, results of operations and cash flows of
      the Company and its consolidated subsidiary as of the dates and for the
      periods indicated, comply in all material respects with the Securities Act
      and the Rules and Regulations thereunder, and have been prepared in
      conformity with generally accepted accounting principles applied on a
      consistent basis throughout the periods involved; provided, however, that
      statements that are unaudited are subject to year-end adjustments and do
      not contain notes required under generally accepted accounting principles.
      No other financial statements or supporting schedules or exhibits are
      required by the Securities Act or the Rules and Regulations thereunder to
      be included in the Base Prospectus, the Prospectus Supplement or the
      Registration Statement, the Time of Sale Prospectus, if any, or
      incorporated by reference therein, as the case may be.

      (p) Except as set forth in the Base Prospectus, there is no legal or
      governmental proceeding pending to which the Company or its Subsidiary is
      a party or of which any property or assets of the Company or its
      Subsidiary is the subject which is required to be described in the Base
      Prospectus, and is not described therein, or which, singularly or in the
      aggregate, if determined adversely to the Company or its Subsidiary, might
      have a Material Adverse

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      Effect or would prevent or adversely affect the ability of the Company or
      its Subsidiary to perform its obligations under this Agreement; and to the
      best of the Company's knowledge, no such proceedings are threatened or
      contemplated by governmental authorities or threatened by others.

      (q) The Company and its Subsidiary have good and marketable title to all
      property (real and personal) described in the Registration Statement, the
      Base Prospectus and the Prospectus Supplement and the Time of Sale
      Prospectus, if any as being owned by the Company or its Subsidiary, free
      and clear of any Liens, except for those Liens that do not materially
      interfere with the use made or proposed to be made of such property by the
      Company or its Subsidiary or that would not have a Material Adverse
      Effect; all the property described in the Registration Statement, the Base
      Prospectus the Time of Sale Prospectus, if any, and the Prospectus
      Supplement as being held under lease by the Company or its Subsidiary is
      held thereby under valid, subsisting and enforceable leases except where
      the failure to be valid, subsisting or enforceable would not have a
      Material Adverse Effect.

      (r) Neither the Company nor its Subsidiary is (i) in violation of any
      provision of its charter or bylaws, (ii) in default in any respect, and no
      event has occurred which, with notice or lapse of time or both, would
      constitute such a default, in the due performance or observance of any
      term, covenant, or condition of any indenture, contract, lease, mortgage,
      deed of trust, note agreement, loan agreement or other agreement,
      obligation, condition, covenant or instrument to which it is a party or by
      which it is bound or to which any of its property or assets is subject, or
      (iii) in violation in any respect of any statute, law, rule, regulation,
      ordinance, judgment, order or decree of any court, regulatory body,
      administrative agency, governmental body, arbitrator or other authority
      having jurisdiction over the Company or its Subsidiary, or any of their
      properties, as applicable (including, without limitation, those
      administered by the Food and Drug Administration of the U.S. Department of
      Health and Human Services (the "FDA") or by any foreign, federal, state or
      local governmental or regulatory authority performing functions similar to
      those performed by the FDA), except, with respect to clauses (ii) and
      (iii), any violations or defaults which, singularly or in the aggregate,
      would not have a Material Adverse Effect.

      (s) The contracts described in the Company's regular reports on Forms
      10-Q, 10-K, and 8-K as filed by the Company with the Commission or
      incorporated by reference therein that are material to the Company are in
      full force and effect on the date hereof, and neither the Company nor, to
      the Company's knowledge, any other party to such contracts is in breach of
      or default under any of such contracts which would have a Material Adverse
      Effect.

      (t) No labor problem or dispute with the employees of the Company or its
      Subsidiary exists or, to the Company's knowledge, is threatened or
      imminent, which might be expected to have a Material Adverse Effect.
      Neither the Company nor its Subsidiary is aware that any key employee of
      the Company or its Subsidiary or significant group of employees of the
      Company or its

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      Subsidiary plans to terminate employment with the Company or its
      Subsidiary.

      (u) Each of the Company and its Subsidiary has fulfilled its obligations,
      if any, under the minimum funding standards of Section 302 of the United
      States Employee Retirement Income Security Act of 1974 ("ERISA") and the
      regulations and published interpretations thereunder with respect to each
      "PLAN" (as defined in Section 3(3) of ERISA and such regulations and
      published interpretations) in which employees of the Company and its
      Subsidiary are eligible to participate and each such plan is in compliance
      in all material respects with the presently applicable provisions of ERISA
      and such regulations and published interpretations. No "PROHIBITED
      TRANSACTION" (as defined in Section 406 of ERISA, or Section 4975 of the
      Internal Revenue Code of 1986, as amended from time to time (the "CODE"))
      has occurred with respect to any employee benefit plan which could have a
      Material Adverse Effect. Each of the Company and its Subsidiary has not
      incurred any unpaid liability to the Pension Benefit Guaranty Corporation
      (other than for the payment of premiums in the ordinary course) or to any
      such plan under Title IV of ERISA. Each "PENSION PLAN" (as defined in
      ERISA) for which the Company or its Subsidiary would have any liability
      that is intended to be qualified under Section 401(a) of the Code is so
      qualified in all material respects and nothing has occurred, whether by
      action or by failure to act, which could cause the loss of such
      qualification.

      (v) The Company and its Subsidiary maintain insurance in such amounts and
      covering such risks as is adequate for the conduct of its business and the
      value of its properties and as is customary for companies engaged in
      similar businesses in similar industries; all such insurance is fully in
      force on the date hereof and will be fully in force on the Closing Date.

      (w) Each of the Company and its Subsidiary has made all filings,
      applications and submissions required by, and possesses all approvals,
      licenses, certificates, certifications, clearances, consents, exemptions,
      marks, notifications, orders, permits and other authorizations issued by,
      the appropriate federal, state or foreign regulatory authorities
      (including, without limitation, the FDA, and any other foreign, federal,
      state or local government or regulatory authorities performing functions
      similar to those performed by the FDA) necessary to conduct its business
      as presently conducted (collectively, "PERMITS"), except for such Permits
      which the failure to obtain would not have a Material Adverse Effect, and
      is in compliance with the terms and conditions of all such Permits; all of
      such Permits held by each of the Company and its Subsidiary are valid and
      in full force and effect; there is no pending or threatened action, suit,
      claim or proceeding which may cause any such Permit to be limited,
      revoked, cancelled, suspended, modified or not renewed and each of the
      Company and its Subsidiary has not received any notice of proceedings
      relating to the limitation, revocation, cancellation, suspension,
      modification or non-renewal of any such Permit which, singularly or in the
      aggregate, if the subject of an unfavorable decision, ruling or finding,
      would have a Material Adverse Effect, whether or not arising from

                                       10
<PAGE>

      transactions in the ordinary course of business, except as set forth in or
      contemplated by the Base Prospectus.

      (x) Cacciamatta Accountancy Corp., who have certified certain financial
      statements of the Company and delivered their report with respect to the
      audited consolidated financial statements and schedules included in the
      Base Prospectus, the Prospectus Supplement or the Registration Statement,
      or incorporated by reference therein, as the case may be, are independent
      registered public accountants with respect to the Company within the
      meaning of the Securities Act and the Rules and Regulations.

      (y) Each of the Company and its Subsidiary has filed all foreign, federal,
      state and local tax returns that are required to be filed or has requested
      extensions thereof (except in any case in which the failure so to file
      would not have a Material Adverse Effect, except as set forth in the Base
      Prospectus) and has paid all taxes required to be paid by it and any other
      assessment, fine or penalty levied against it, to the extent that any of
      the foregoing is due and payable, except for any such assessment, fine or
      penalty that is currently being contested in good faith or as would not
      have a Material Adverse Effect, except as set forth in the Base
      Prospectus.

      (z) The principal executive officer and principal financial officer of the
      Company have made all certifications required by the Sarbanes-Oxley Act of
      2002 and the rules and regulations promulgated in connection therewith
      (the "SARBANES-OXLEY ACT"), and the statements contained in any such
      certification are complete and correct. The Company maintains "disclosure
      controls and procedures" (as defined in Rule 13a-14(c) under the Exchange
      Act), and such controls and procedures are designed (i) to ensure that
      information required to be disclosed by the Company in the reports that 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 and (ii) to ensure that information required to be disclosed by
      the Company in the reports that it files or submits under the Exchange Act
      is accumulated and communicated to the Company's management, including its
      principal executive officer and principal financial officer, as
      appropriate to allow timely decisions regarding required disclosure. The
      Company does not have any material weaknesses in internal controls, and to
      the Company's knowledge there has been no fraud, whether or not material,
      that involves management or other employees of the Company or its
      Subsidiary who have a significant role in the Company's internal controls.
      The Company is otherwise in compliance in all respects with all applicable
      effective provisions of the Sarbanes-Oxley Act and the rules and
      regulations promulgated by the Commission (and intends to comply with all
      applicable provisions that are not yet effective upon effectiveness).

      (aa) Each of the Company and its Subsidiary maintains 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 generally
      accepted accounting

                                       11
<PAGE>

      principles and to maintain accountability of assets; (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. Except as described in
      the Base Prospectus, since the end of the Company's most recent fiscal
      year, there has been no change in the Company's or its Subsidiary's
      internal control over financial reporting that has materially affected, or
      is reasonably likely to materially affect, the Company's internal control
      over financial reporting.

      (bb) Each of the Company and its Subsidiary (i) is in compliance in all
      material respects with any and all applicable foreign, federal, state and
      local laws and regulations relating to the protection of human health and
      safety, the environment or hazardous or toxic substances or wastes,
      pollutants or contaminants ("ENVIRONMENTAL LAWS"), (ii) has received and
      is in compliance with all permits, licenses or other approvals required of
      it under applicable Environmental Laws to conduct its business and (iii)
      has not received notice of any actual or potential liability for the
      investigation or remediation of any disposal or release of hazardous or
      toxic substances or wastes, pollutants or contaminants, except where such
      non-compliance with Environmental Laws, failure to receive required
      permits, licenses or other approvals, or liability would not, individually
      or in the aggregate, have a Material Adverse Effect, whether or not
      arising from transactions in the ordinary course of business, except as
      set forth in or contemplated by the Base Prospectus (exclusive of any
      supplement thereto). Neither the Company nor its Subsidiary has been named
      as a "POTENTIALLY RESPONSIBLE PARTY" under the Comprehensive Environmental
      Response, Compensation, and Liability Act of 1980, as amended.

      (cc) There has been no storage, disposal, generation, manufacture,
      refinement, transportation, handling or treatment of medical wastes, toxic
      wastes, hazardous wastes or hazardous substances by the Company or its
      Subsidiary (or, to the Company's knowledge, any of the Company's or its
      Subsidiary's predecessors in interest) at, upon or from any of the
      property now or previously owned or leased by the Company or its
      Subsidiary in violation of any applicable Environmental Law which would
      require remedial action under any applicable Environmental Law, except for
      any violation or remedial action which would not cause, singularly or in
      the aggregate with all such violations and remedial actions, a Material
      Adverse Effect; there has been no material spill, discharge, leak,
      emission, injection, escape, dumping or release of any kind onto such
      property or of any medical wastes, toxic wastes, hazardous wastes or
      hazardous substances due to or caused by the Company or its Subsidiary or
      with respect to which the Company or its Subsidiary had knowledge, except
      for any such spill, discharge, leak, emission, injection, escapes,
      dumpings or releases which would not cause or would not be reasonably
      likely to cause, singularly or in the aggregate with all such spills,
      discharges, leaks, emissions, injections, escapes, dumpings or releases, a
      Material Adverse Effect; and the terms "hazardous substances," "toxic
      wastes," "hazardous wastes" and "medical wastes" shall have the meanings
      specified in any applicable Environmental Laws.

                                       12
<PAGE>

      (dd) In the ordinary course of its business, the Company and its
      Subsidiary periodically reviews the effect of Environmental Laws on the
      business, operations and properties of each of the Company and its
      Subsidiary in the course of which it identifies and evaluates associated
      costs and liabilities (including, without limitation, any capital or
      operating expenditures required for clean-up, closure of properties or
      compliance with Environmental Laws, or any permit, license or approval,
      any related constraints on operating activities and any potential
      liabilities to third parties). On the basis of such review, the Company
      and its Subsidiary has reasonably concluded that such associated costs and
      liabilities would not, singularly or in the aggregate, have a Material
      Adverse Effect, whether or not arising from transactions in the ordinary
      course of business, except as set forth in or contemplated by the Base
      Prospectus.

      (ee) Each of the Company and its Subsidiary owns, possesses, licenses or
      has other rights to use all foreign and domestic patents, patent
      applications, trade and service marks, trade and service mark
      registrations, trade names, copyrights, licenses, inventions, trade
      secrets, technology, Internet domain names, know-how and other
      intellectual property (collectively, the "INTELLECTUAL PROPERTY")
      necessary for the conduct of the Company's business as now conducted or as
      proposed in the Base Prospectus, the Prospectus Supplement and the Time of
      Sale Prospectus, if any, to be conducted. Except as set forth in the Base
      Prospectus, (a) there are no rights of third parties to any such
      Intellectual Property; (b) to the best of the Company's knowledge, there
      is no infringement by third parties of any such Intellectual Property; (c)
      there is no pending or, to the best of the Company's knowledge, threatened
      action, suit, proceeding or claim by others challenging each of the
      Company's and the Subsidiary's rights in or to any such Intellectual
      Property, and neither the Company nor its Subsidiary is unaware of any
      facts which would form a reasonable basis for any such claim; (d) there is
      no pending or, to the best of the Company's knowledge, threatened action,
      suit, proceeding or claim by others challenging the validity or scope of
      any such Intellectual Property; (e) there is no pending or, to the best of
      the Company's knowledge, threatened action, suit, proceeding or claim by
      others that the Company or its Subsidiary infringe or otherwise violate
      any patent, trademark, copyright, trade secret or other proprietary rights
      of others, and neither the Company nor its Subsidiary is unaware of any
      other fact which would form a reasonable basis for any such claim; (f) to
      the Company's knowledge, there is no third-party U.S. patent or published
      U.S. patent application which contains claims for which an Interference
      Proceeding could be commenced against any patent or patent application
      that is part of the Intellectual Property; (g) there is no pending or, to
      the best of the Company's knowledge, threatened action, suit, proceeding
      or claim by others claiming the ownership of and interest in the
      Intellectual Property; and (h) to the best of the Company's knowledge, the
      Company and its Subsidiary have taken all steps necessary to perfect its
      ownership of and interest in the Intellectual Property.

      (ff) The clinical, pre-clinical and other studies and tests conducted by
      or on behalf of or sponsored by the Company or its Subsidiary that are
      described or referred to in the Base Prospectus or Prospectus Supplement
      were and, if still pending, are being conducted in accordance with all
      statutes, laws, rules and

                                       13
<PAGE>

      regulations, as applicable (including, without limitation, those
      administered by the FDA or by any foreign, federal, state or local
      governmental or regulatory authority performing functions similar to those
      performed by the FDA). The descriptions of the results of such studies and
      tests that are described or referred to in the Base Prospectus or
      Prospectus Supplement are accurate and complete in all material respects
      and fairly present the published data derived from such studies and tests,
      and each of the Company and its Subsidiary has no knowledge of other
      studies or tests the results of which are materially inconsistent with or
      otherwise call into question the results described or referred to in the
      Base Prospectus, the Time of Sale Prospectus, if any, or the Prospectus
      Supplement. Neither the Company nor its Subsidiary has received any
      notices or other correspondence from the FDA or any other foreign,
      federal, state or local governmental or regulatory authority performing
      functions similar to those performed by the FDA with respect to any
      ongoing clinical or pre-clinical studies or tests requiring the
      termination, suspension or modification of such studies or tests. For the
      avoidance of doubt, the Company makes no representation or warranty that
      the results of any studies, tests or preclinical or clinical trials
      conducted by or on behalf of the Company will be sufficient to obtain
      governmental approval from the FDA or any foreign, state or local
      governmental body exercising comparable authority.

      (gg) Each of the Company and its Subsidiary has established and
      administers a compliance program (including a written compliance policy)
      applicable to the Company and its Subsidiary, to assist the Company, its
      Subsidiary and their directors, officers and employees of the Company and
      its Subsidiary in complying with applicable regulatory guidelines
      (including, without limitation, those administered by the FDA and any
      other foreign, federal, state or local governmental or regulatory
      authority performing functions similar to those performed by the FDA).

      (hh) Neither the Company nor its Subsidiary has failed to file with the
      applicable regulatory authorities (including, without limitation, the FDA
      or any foreign, federal, state or local governmental or regulatory
      authority performing functions similar to those performed by the FDA) any
      filing, declaration, listing, registration, report or submission; all such
      filings, declarations, listings, registrations, reports or submissions
      were in compliance with applicable laws when filed and no deficiencies
      have been asserted by any applicable regulatory authority (including,
      without limitation, the FDA or any foreign, federal, state or local
      governmental or regulatory authority performing functions similar to those
      performed by the FDA) with respect to any such filings, declarations,
      listings, registrations, reports or submissions.

      (ii) No relationship, direct or indirect, exists between or among the
      Company or its Subsidiary on the one hand and the directors, officers,
      stockholders, customers or suppliers of the Company or its Subsidiary on
      the other hand which is required to be described in the Base Prospectus or
      the Prospectus Supplement, and which is not so described.

      (jj) To the Company's knowledge, neither the Company nor any other person
      associated with or acting on behalf of the Company including, without

                                       14
<PAGE>

      limitation, any director, officer, agent or employee of the Company or its
      Subsidiary, has, directly or indirectly, while acting on behalf of the
      Company or its Subsidiary (i) used any corporate funds for unlawful
      contributions, gifts, entertainment or other unlawful expenses, or
      received or retained any funds, relating to political activity; (ii) made
      any unlawful payment from corporate funds to, or received or retained any
      unlawful funds from, foreign or domestic government officials or employees
      or to or from foreign or domestic political parties or campaigns; (iii)
      violated any provision of the Foreign Corrupt Practices Act of 1977, as
      amended; or (iv) made any other unlawful payment or received or retained
      any other unlawful funds.

      (kk) Neither the Company nor its Subsidiary is and, after giving effect to
      the offering and sale of the Stock and the application of the proceeds
      thereof as described in the Base Prospectus and the Prospectus Supplement,
      will become an "INVESTMENT COMPANY" as defined in the Investment Company
      Act of 1940, as amended.

      (ll) No forward-looking statement (within the meaning of Section 27A of
      the Securities Act and Section 21E of the Exchange Act) contained in the
      Base Prospectus, the Prospectus Supplement and the Time of Sale
      Prospectus, if any, has been made or reaffirmed without a reasonable basis
      or has been disclosed other than in good faith.

      (mm) Other than as contemplated by this Agreement, neither the Company nor
      its Subsidiary is a party to any contract, agreement or understanding with
      any person that would give rise to a valid claim against the Company or
      its Subsidiary or the Placement Agents for a brokerage commission,
      finder's fee or like payment in connection with the offering and sale of
      the Stock.

      (nn) Neither the Company nor its Subsidiary has sustained, since the date
      of the latest audited financial statements included in the Base Prospectus
      or the Registration Statement, or incorporated by reference therein, as
      the case may be, any material loss or interference with its business from
      fire, explosion, flood, terrorist act or other calamity, whether or not
      covered by insurance, or from any labor dispute or court or governmental
      action, order or decree, otherwise than as set forth in or contemplated by
      the Base Prospectus.

      (oo) Except as set forth in or as otherwise contemplated by the
      Registration Statement or, the Base Prospectus, subsequent to the
      respective dates as of which information is given in the Registration
      Statement or, the Base Prospectus, there has not been (i) any material
      adverse change, or any development that would reasonably be expected to
      result in a material adverse change, in the business, properties,
      management, financial condition or results of operations of the Company
      taken as a whole, (ii) any transaction which is material to the Company
      taken as a whole, (iii) any obligation, direct or contingent (including
      any off-balance sheet obligations), incurred by the Company outside the
      ordinary course of business, which is material to the Company taken as a
      whole, (iv) any change in the capital stock (other than the issuance of
      shares of Common Stock upon exercise of stock options and warrants
      disclosed as outstanding in the Registration Statement and the Base
      Prospectus, if any, and the grant of options under existing stock option
      plans

                                       15
<PAGE>

      described in the Registration Statement and the Base Prospectus) or
      outstanding indebtedness of the Company or (v) any dividend or
      distribution of any kind declared, paid or made on the capital stock of
      the Company.

      (pp) Any statistical and market-related data included in the Registration
      Statement, the Base Prospectus, the Prospectus Supplement or the Time of
      Sale Prospectus, if any, are based on or derived from sources that the
      Company believes to be reliable and accurate, and the Company has obtained
      the written consent to the use of such data from such sources to the
      extent required.

      (qq) The Stock is registered under the Exchange Act and is duly listed and
      admitted and authorized for trading, subject to official notice of
      issuance, on the American Stock Exchange ("AMEX") and the Company has
      taken no action designed to terminate, or likely to have the effect of
      terminating the registration of the Common Stock under the Exchange Act or
      delisting or suspending from trading the Common Stock from AMEX, nor has
      the Company received any information suggesting that the Commission or the
      National Association of Securities Dealers, Inc. ("NASD") is contemplating
      terminating or suspending such registration or listing.

      (rr) Neither the Company, its Subsidiary nor, to the Company's knowledge,
      any of the Company's or its Subsidiary's officers, directors or affiliates
      has taken or will take, directly or indirectly, any action designed or
      intended to stabilize or manipulate the price of any security of the
      Company, or which caused or resulted in, or which might in the future
      reasonably be expected to cause or result in, stabilization or
      manipulation of the price of any security of the Company.

      (ss) Neither the Company, its Subsidiary, nor any of the Company's or its
      Subsidiary's officers, directors or affiliates has offered, or caused any
      Placement Agent to offer, Stock to any person with the intent to influence
      unlawfully (i) a customer or supplier of the Company to alter the
      customer's or supplier's level or type of business with the Company or
      (ii) a trade journalist or publication to write or publish favorable
      information about the Company or any of their respective products or
      services.

      (tt) There are no affiliations with the NASD among the Company's officers,
      directors or, to the best of the knowledge of the Company, any five
      percent or greater stockholder of the Company, except as set forth in the
      Base Prospectus or otherwise disclosed in writing to the Placement Agents.

      (uu) The Company has provided the Placement Agents true, correct, and
      complete copies of all documentation pertaining to any extension of credit
      in the form of a personal loan made, directly or indirectly, by the
      Company to any director or executive officer of the Company, or to any
      family member or affiliate of any director or executive officer of the
      Company that is currently outstanding; and since December 31, 2003, the
      Company has not, directly or indirectly: (i) extended credit, arranged to
      extend credit, or renewed any extension of credit, in the form of a
      personal loan, to or for any director or executive officer of the Company,
      or to or for any family member or affiliate

                                       16
<PAGE>

      of any director or executive officer of the Company; or (ii) made any
      material modification, including any renewal thereof, to any term of any
      personal loan to any director or executive officer of the Company, or any
      family member or affiliate of any director or executive officer, which
      loan was outstanding on December 31, 2003, except as disclosed in the Base
      Prospectus or the Registration Statement.

      (vv) The Company has taken all necessary actions to ensure that, upon and
      at all times after the AMEX shall have approved the Stock for inclusion,
      it will be in compliance with all applicable corporate governance
      requirements set forth in the AMEX Rules that are then in effect and is
      actively taking steps to ensure that it will be in compliance with other
      applicable corporate governance requirements set forth in the AMEX Rules
      not currently in effect upon and all times after the effectiveness of such
      requirements.

      (ww) No approval of the stockholders of the Company under the rules and
      regulations of any trading market, and no approval of the stockholders of
      the Company thereunder is required for the Company to issue and deliver to
      the Purchasers the Stock.

      Any certificate signed by any officer of the Company and delivered to the
Placement Agents or counsel for the Placement Agents in connection with the
offering of the Stock shall be deemed a representation and warranty by the
Company, as to the matters covered thereby, to the Placement Agents and the
Purchasers.

3. THE CLOSING. The time and date of closing and delivery of the documents
required to be delivered to the Placement Agents pursuant to Section 6 hereof
shall be at 10:00 A.M., local time, on December 16, 2005 (the "CLOSING DATE") at
the office of DLA Piper Rudnick Gray Cary LLP located at 4365 Executive Drive,
Suite 1100, San Diego, CA 92101.

4. FURTHER AGREEMENTS OF THE COMPANY. The Company agrees with the Placement
Agents and the Purchasers:

      (a) (i) to make no further amendment or supplement prior to the Closing
      Date to the Registration Statement or any amendment or supplement to the
      Prospectus Supplement, without the prior written consent of the
      Representative, which consent shall not be unreasonably withheld, except
      for the supplement to the form of prospectus included in the Registration
      Statement (Registration File No. 333-125731), which became effective as of
      June 17, 2005, relating to the placement of 9,171,429 shares of Common
      Stock, as fled with the Commission on December 13, 2005 pursuant to Rule
      424(b)(5); (ii) for so long as the delivery of a prospectus is required in
      connection with the offering or sale of the Stock, to advise the
      Representative promptly after it receives notice thereof, of the time when
      any amendment to the Registration Statement has been filed or becomes
      effective or any supplement to the Prospectus Supplement or any amended
      Prospectus Supplement has been filed and to furnish the Representative
      with copies thereof; (iii) to file promptly all reports and any definitive
      proxy or information statements required to be filed by the Company with
      the Commission and AMEX pursuant to Section 13(a), 15 or 15(d) of the

                                       17
<PAGE>

      Exchange Act subsequent to the date of the Prospectus Supplement and for
      so long as the delivery of a prospectus is required in connection with the
      offering or sale of the Stock; (iv) to advise the Representative, promptly
      after it receives notices thereof, (x) of any request by the Commission to
      amend the Registration Statement or to amend or supplement the Prospectus
      Supplement or for additional information and (y) of the issuance by the
      Commission, of any stop order suspending the effectiveness of the
      Registration Statement or any post-effective amendment thereto or any
      order directed at any Incorporated Document or any amendment or supplement
      thereto or any order preventing or suspending the use of the Base
      Prospectus or the Prospectus Supplement or any amendment or supplement
      thereto, of the suspension of the qualification of the Stock for offering
      or sale in any jurisdiction, of the institution or threatening of any
      proceeding for any such purpose, or of any request by the Commission for
      the amending or supplementing of the Registration Statement or Prospectus
      Supplement or for additional information; and, (v) in the event of the
      issuance of any stop order or of any order preventing or suspending the
      use of the Base Prospectus or Prospectus Supplement or suspending any such
      qualification, promptly to use its reasonable best efforts to obtain the
      withdrawal of such order.

      (b) To comply with the Securities Act and the Exchange Act, and the Rules
      and Regulations thereunder, so as to permit the completion of the
      distribution of the Stock as contemplated in this Agreement and the
      Prospectus Supplement. If during the period in which a prospectus is
      required by law to be delivered by a Placement Agents or a dealer in
      connection with the distribution of Stock contemplated by the Prospectus
      Supplement, any event shall occur as a result of which, in the judgment of
      the Company or in the reasonable opinion of the Placement Agents or
      counsel for the Placement Agents, it becomes necessary to amend or
      supplement the Prospectus Supplement in order to make the statements
      therein, in the light of the circumstances existing at the time the
      Prospectus Supplement is delivered to a purchaser, not misleading, or, if
      it is necessary at any time to amend or supplement the Prospectus
      Supplement to comply with any law, the Company promptly will prepare and
      file with the Commission, and furnish at its own expense to the
      Representative and to dealers, an appropriate amendment to the
      Registration Statement or supplement to the Prospectus Supplement so that
      the Prospectus Supplement as so amended or supplemented will not, in the
      light of the circumstances when it is so delivered, be misleading, or so
      that the Prospectus Supplement will comply with such law. Before amending
      the Registration Statement or supplementing the Base Prospectus in
      connection with the Offering, the Company will furnish the Representative
      with a copy of such proposed amendment or supplement and will not file
      such amendment or supplement to which the Representative reasonably and
      timely objects.

      (c) To furnish promptly to the Representative and to counsel for the
      Representative a copy of the Registration Statement as originally filed
      with the Commission, and each amendment thereto filed with the Commission,
      including all consents and exhibits filed therewith.

                                       18
<PAGE>

      (d) To deliver promptly to the Representative such number of the following
      documents as the Representative shall reasonably request: (i) conformed
      copies of the Registration Statement as originally filed with the
      Commission and each amendment thereto (in each case excluding exhibits),
      (ii) the Base Prospectus, (iii) the Prospectus Supplement (not later than
      10:00 A.M., New York time, on the Business Day following the execution and
      delivery of this Agreement) and any amendment or supplement thereto (not
      later than 10:00 A.M., New York City time, on the Business Day following
      the date of such amendment or supplement); (iv) the Time of Sale
      Prospectus, if any, and (v) any document incorporated by reference in the
      Base Prospectus, the Time of Sale Prospectus, if any, or the Prospectus
      Supplement. The Company will pay the expenses of printing or other
      production of all documents relating to the Offering.

      (e) To make generally available to its stockholders and the Representative
      as soon as practicable, but in any event not later than eighteen months
      after the effective date of the Registration Statement (as defined in Rule
      158(c) under the Securities Act), an earnings statement of the Company
      (which need not be audited) complying with Section 11(a) of the Securities
      Act and the Rules and Regulations (including, at the option of the
      Company, Rule 158).

      (f) To promptly take from time to time such actions as the Representative
      may reasonably request to qualify the Stock for offering and sale under
      the securities, or blue sky, laws of such jurisdictions (including without
      limitation any post-filing requirements) as the Representative may
      designate and to continue such qualifications in effect for so long as
      required for the distribution of the Stock, and the Company will pay the
      fee of the NASD in connection with its review of the Offering, if
      applicable. The Company shall not be obligated to qualify as a foreign
      corporation in any jurisdiction in which it is not so qualified or to file
      a general consent to service of process in any jurisdiction.

      (g) Not to directly or indirectly offer, sell, assign, transfer, pledge,
      contract to sell, or otherwise dispose of any shares of Common Stock or
      securities convertible into or exercisable or exchangeable for Common
      Stock for a period of 90 days from the date of the Prospectus Supplement
      without the prior written consent of the Representative, other than the
      Company's sale of the Stock, the Company's sale of 9,171,429 shares of
      Common Stock pursuant to the supplement to the form of prospectus included
      in the Registration Statement, filed with the Commission on December 13,
      2005 pursuant to Rule 424(b)(5), and shares of Common Stock pursuant to
      the supplement to the form of prospectus included and shares or options to
      purchase shares pursuant to currently existing stock plans, currently
      outstanding options, warrants or rights. The Company will cause each of
      its executive officers and directors to furnish to the Placement Agents,
      prior to the Closing Date, a letter, substantially in the form of Exhibit
      B attached hereto, pursuant to which each such person shall agree not to
      directly or indirectly offer, sell, assign, transfer, pledge, contract to
      sell, or otherwise dispose of any shares of Common Stock or securities
      convertible into or exercisable or exchangeable for Common Stock for a
      period of 90 days from the date of the Prospectus Supplement,

                                       19
<PAGE>

      without the prior written consent of the Representative. If (i) the
      Company issues an earnings release or material news or a material event
      relating to the Company occurs during the last 17 days of the lock-up
      period, or (ii) prior to the expiration of the lock-up period, the Company
      announces that it will release earnings results during the 16-day period
      beginning on the last day of the lock-up period, the restrictions imposed
      by this Section 4(g) shall continue to apply until the expiration of the
      18-day period beginning on the issuance of the earnings release or the
      occurrence of the material news or material event.

      (h) Prior to the Closing Date, to furnish to the Placement Agents, as soon
      as they have been prepared, copies of any unaudited interim consolidated
      financial statements of the Company for any periods subsequent to the
      periods covered by the financial statements appearing or incorporated by
      reference in the Base Prospectus, the Prospectus Supplement, the Time of
      Sale Prospectus, if any, or the Registration Statement.

      (i) Prior to the Closing Date, not to issue any press release or other
      communication directly or indirectly or hold any press conference with
      respect to the Company, its condition, financial or otherwise, or
      earnings, business affairs or business prospects (except for routine oral
      marketing communications in the ordinary course of business and consistent
      with the past practices of the Company and of which the Representative is
      notified), without the prior written consent of the Representative, unless
      in the judgment of the Company and its counsel, and after notification to
      the Representative, such press release or communication is required by
      law. In such event, the Company shall consult with the Representative as
      to the contents of such press release.

      (j) To apply the net proceeds from the sale of the Stock as set forth in
      the Prospectus Supplement under the heading "USE OF PROCEEDS."

      (k) To comply in all material respects with all applicable securities and
      other applicable laws, rules and regulations, including, without
      limitation, the Sarbanes-Oxley Act, and use its best efforts to cause the
      Company's directors and officers, in their capacities as such, to comply
      with such laws, rules and regulations, including, without limitation, the
      provisions of the Sarbanes-Oxley Act.

      (l) To engage and maintain, at its expense, a registrar and transfer agent
      for the Stock.

      (m) To not take any action prior to the Closing Date which would require
      the Prospectus Supplement to be amended or supplemented pursuant to
      Section 4(b).

      (n) To supply the Representative with copies of all correspondence to and
      from, and all documents issued to and by, the Commission in connection
      with the registration of the Stock under the Securities Act.

      (o) The Company will use its best efforts to ensure that the Stock is
      quoted on the AMEX at the Closing Date.

                                       20
<PAGE>

      (p) To furnish to the Placement Agents a copy of each proposed free
      writing prospectus to be prepared by or on behalf of, used by, or referred
      to by the Company and not use or refer to any free writing prospectus to
      which the Representative reasonably objects.

      (q) Not to take any action that would result in any Placement Agent or the
      Company being required to file with the Commission pursuant to Rule 433(d)
      under the Securities Act a free writing prospectus prepared by or on
      behalf of any Placement Agent that such Placement Agent otherwise would
      not have been required to file thereunder.

      (r) If the Time of Sale Prospectus, if any, is being used and any event
      shall occur or condition exist as a result of which it is necessary to
      amend or supplement the Time of Sale Prospectus in writing in order to
      make the statements therein, not misleading, or if, in the opinion of
      counsel to the Placement Agents, it is necessary to amend or supplement
      the Time of Sale Prospectus to comply with applicable law, forthwith to
      prepare, file with the Commission and furnish, at its own expense, to the
      Placement Agents upon request, either amendments or supplements to the
      Time of Sale Prospectus so that the statements in the Time of Sale
      Prospectus as so amended or supplemented will not, in light of the
      circumstances when the Time of Sale Prospectus is delivered to a
      prospective purchaser, be misleading or so that the Time of Sale
      Prospectus, as amended or supplemented, will comply with law.

5. PAYMENT OF EXPENSES. The Company agrees with the Placement Agents to pay (a)
the costs incident to the authorization, issuance, sale, preparation and
delivery of the Stock to the Purchasers and any taxes payable in that
connection; (b) the costs incident to the Registration of the Stock under the
Securities Act; (c) the costs incident to the preparation, printing and
distribution of the Registration Statement, Base Prospectus and Prospectus
Supplement and any amendments and exhibits thereto or any document incorporated
by reference therein, and the costs of printing, reproducing and distributing,
this Agreement by mail, telex or other means of communication; (d) any
applicable listing or other similar fees; (e) the fees and expenses of
qualifying the Stock under the securities laws of the several jurisdictions as
provided in Section 4(f) and of preparing, printing and distributing Blue Sky
Memoranda (including related fees and expenses of counsel to the Placement
Agents); (f) all fees and expenses of the registrar and transfer agent of the
Stock; (g) fifty percent (50%) of the fees and expenses of the Placement Agents'
legal counsel; and (h) all other costs and expenses incident to the performance
of the obligations of the Company under this Agreement (including, without
limitation, the fees and expenses of the Company's counsel and the Company's
independent accountants and the travel and other expenses incurred by Company
personnel in connection with any "roadshow" including, without limitation, any
expenses advanced by the Placement Agents on the Company's behalf (which will be
promptly reimbursed)).

6. CONDITIONS TO THE OBLIGATIONS OF THE PLACEMENT AGENTS AND THE PURCHASERS, AND
THE SALE OF THE STOCK. The respective obligations of each

                                       21
<PAGE>

Placement Agent and the Purchasers, and the closing of the sale of the Stock
hereunder are subject to the accuracy, when made and on the Closing Date, of the
representations and warranties on the part of the Company and its Subsidiary
contained herein, to the accuracy of the statements of the Company and its
Subsidiary made in any certificates pursuant to the provisions hereof, to the
performance by the Company and of its Subsidiary of their obligations hereunder,
and to each of the following additional terms and conditions:

      (a) No stop order suspending the effectiveness of the Registration
      Statement shall have been issued and no proceedings for that purpose shall
      have been initiated or threatened by the Commission, and any request for
      additional information on the part of the Commission (to be included in
      the Registration Statement, the Base Prospectus, the Time of Sale
      Prospectus, if any, or the Prospectus Supplement or otherwise) shall have
      been complied with to the reasonable satisfaction of the Representative.
      Any filings required to be made by the Company in accordance with Section
      4(a) shall have been timely filed with the Commission.

      (b) None of the Placement Agents shall have discovered and disclosed to
      the Company on or prior to the Closing Date that the Registration
      Statement, the Base Prospectus, the Time of Sale Prospectus, if any, or
      the Prospectus Supplement or any amendment or supplement thereto contains
      an untrue statement of a fact which, in the opinion of counsel for the
      Placement Agents, is material or omits to state any fact which, in the
      opinion of such counsel, is material and is required to be stated therein
      or is necessary to make the statements therein not misleading.

      (c) All corporate proceedings and other legal matters incident to the
      authorization, form, execution, delivery and validity of each of this
      Agreement, the Stock, the Registration Statement, the Base Prospectus, the
      Time of Sale Prospectus, if any, and the Prospectus Supplement and all
      other legal matters relating to this Agreement and the transactions
      contemplated hereby shall be reasonably satisfactory in all material
      respects to counsel for the Placement Agents, and the Company shall have
      furnished to such counsel all documents and information that they may
      reasonably request to enable them to pass upon such matters.

      (d) The Placement Agents shall have received from each of (i) DLA Piper
      Rudnick Gray Cary US LLP, corporate counsel for the Company (ii) Hale Lane
      Peek Dennison and Howard, special counsel for the Company (iii) DLA Piper
      Rudnick Gray Cary US LLP, intellectual property counsel for the Company,
      such counsel's written opinion, addressed to the Placement Agents and the
      Purchasers and dated as of the Closing Date, in form and substance
      reasonably satisfactory to the Placement Agents as set forth in Exhibits
      C-1, C-2 and C-3 attached hereto, respectively.

            DLA Piper Rudnick Gray Cary US LLP shall also have furnished to the
      Placement Agents a written statement, addressed to the Placement Agents
      and the Purchasers and dated the Closing Date, in form and substance
      satisfactory to the Representative, to the effect that (x) such counsel
      has acted as counsel to the Company in connection with the preparation of
      the Registration Statement, (y) based on such counsel's examination of the
      Registration Statement and such counsel's investigations made in
      connection with the preparation of the

                                       22
<PAGE>

      Registration Statement and conferences with certain officers and employees
      of and with auditors for and counsel to the Company, such counsel has no
      reason to believe that (I) the Registration Statement, as of its effective
      date, contained any untrue statement of a material fact or omitted to
      state any material fact required to be stated therein or necessary in
      order to make the statements therein not misleading, or that the Base
      Prospectus, the Time of Sale Prospectus, if any, or the Prospectus
      Supplement contains any untrue statement of a material fact or omits to
      state any material fact required to be stated therein or necessary in
      order to make the statements therein, in light of the circumstances under
      which they were made, not misleading or (II) any document incorporated by
      reference in the Base Prospectus, the Time of Sale Prospectus, if any, or
      the Prospectus Supplement or any further amendment or supplement to any
      such incorporated document made by the Company prior to the Closing Date,
      when they became effective or were filed with the Commission, as the case
      may be, contained, in the case of a registration statement which became
      effective under the Securities Act, any untrue statement of a material
      fact or omitted to state any material fact required to be stated therein
      or necessary in order to make the statements therein not misleading, or,
      in the case of other documents which were filed under the Exchange Act
      with the Commission, any untrue statement of a material fact or omitted to
      state any material fact necessary in order to make the statements therein,
      in light of the circumstances under which they were made, not misleading;
      it being understood that such counsel need express no opinion as to the
      financial statements or other financial data contained in the Registration
      Statement, the Base Prospectus, the Time of Sale Prospectus, if any, or
      the Prospectus Supplement.

      (e) The Placement Agents shall have received from Brown Raysman Millstein
      Felder & Steiner LLP, such opinion or opinions, dated the Closing Date and
      addressed to the Placement Agents, with respect to the issuance and sale
      of the Stock, the Registration Statement, the Base Prospectus, the Time of
      Sale Prospectus, if any, the Prospectus Supplement (together with any
      supplement thereto) and other related matters as the Representative may
      reasonably require, and the Company shall have furnished to such counsel
      such documents as they request for the purpose of enabling them to pass
      upon such matters.

      (f) The Company shall have furnished to the Placement Agents and the
      Purchasers a certificate, dated as of the Closing Date, executed by its
      Chief Executive Officer and its Chief Financial Officer on behalf of the
      Company stating that (i) such officers have carefully examined the
      Registration Statement, the Base Prospectus, the Time of Sale Prospectus,
      if any, and the Prospectus Supplement and, in their opinion, the
      Registration Statement (including the Base Prospectus) as of its effective
      date, the Time of Sale Prospectus, if any, as of each such effective date
      and the Prospectus Supplement, as of each such effective date, did not
      include any untrue statement of a material fact and did not omit to state
      a material fact required to be stated therein or necessary to make the
      statements therein not misleading,

                                       23
<PAGE>

      (ii) since the effective date of the Registration Statement no event has
      occurred which should have been set forth in a supplement or amendment to
      the Registration Statement, the Base Prospectus, the Time of Sale
      Prospectus, if any, or the Prospectus Supplement and that is not already
      included in such document by reason of materials incorporated by reference
      therein, (iii) to the best of their knowledge after reasonable
      investigation, as of the Closing Date, the representations and warranties
      of the Company and its Subsidiary in this Agreement are true and correct
      and the Company and its Subsidiary have complied with all agreements and
      covenants contained in this Agreement and satisfied all conditions on its
      part to be performed or satisfied hereunder at or prior to the Closing
      Date, (iv) subsequent to the date of the most recent financial statements
      included or incorporated by reference in the Base Prospectus, there has
      been no change in the financial position or results of operation of the
      Company and its Subsidiary that could have a Material Adverse Effect, or
      any material change, or any material development including a prospective
      change, in or affecting the condition (financial or otherwise), results of
      operations, business or prospects of the Company taken as a whole, except
      as set forth in, or contemplated by, the Base Prospectus, and (v) the
      Registration Statement became effective on June 17, 2005, and to their
      knowledge, as of the Closing Date (I) no stop order suspending the
      effectiveness of the Registration Statement has been issued and no
      proceedings for that purpose have been commenced or are pending before or
      are contemplated by the Commission and (II) no action has been taken by
      any governmental agency, body or official, and no injunction, restraining
      order or order of any nature by any federal or state court has been
      issued, which would prevent the issuance of the Stock.

      (g) On the Closing Date, the Placement Agents shall have received from
      Cacciamatta Accountancy Corp. a letter, addressed to the Placement Agents
      and dated the Closing Date confirming, as of the Closing Date (or, with
      respect to matters involving changes or developments since the respective
      dates as of which specified financial information is given in the Base
      Prospectus, the Time of Sale Prospectus, if any, and the Prospectus
      Supplement as of a date not more than three Business Days prior to the
      Closing Date), the conclusions and findings of such firm with respect to
      the financial information and other matters covered by the comfort letter
      delivered to the Placement Agents on December 12, 2005.

      (h) (i) Neither the Company nor its Subsidiary shall have sustained since
      the date of the latest audited financial statements included or
      incorporated by reference in the Base Prospectus or the Prospectus
      Supplement any loss or interference with its business from fire,
      explosion, flood, terrorist act or other calamity, whether or not covered
      by insurance, or from any labor dispute or court or governmental action,
      order or decree, otherwise than as set forth in or contemplated by the
      Base Prospectus, and (ii) except for the exercise of stock options in the
      ordinary course of the Company's business, since such date there shall not
      have been any change in the capital stock or long-term debt of the Company
      or its Subsidiary or any change, or any development involving a
      prospective change, in or affecting the business, general affairs,
      management, financial position, stockholders' equity, results of
      operations or prospects of

                                       24
<PAGE>

      the Company or its Subsidiary, otherwise than as set forth in or
      contemplated by the Base Prospectus, the effect of which, in any such case
      described in clause (i) or (ii), is, in the judgment of the
      Representative, so material and adverse as to make it impracticable or
      inadvisable to proceed with the sale or delivery of the Stock on the terms
      and in the manner contemplated by the Base Prospectus, the Time of Sale
      Prospectus, if any, and the Prospectus Supplement.

      (i) The Stock is registered under the Exchange Act and, as of the Closing
      Date, the Stock shall be listed and admitted and authorized for trading on
      the AMEX and satisfactory evidence of such actions shall have been
      provided to the Representative. The Company shall have taken no action
      designed to, or likely to have the effect of terminating the registration
      of the Stock under the Exchange Act or delisting or suspending from
      trading the Stock from AMEX, nor has the Company received any information
      suggesting that the Commission or the AMEX is contemplating terminating
      such registration or listing.

      (j) At the Execution Time, the Company shall have furnished to the
      Representative a letter substantially in the form of Exhibit B hereto from
      each executive officer and director of the Company. ---------

      (k) Subsequent to the execution and delivery of this Agreement, there
      shall not have occurred any of the following: (i) trading in securities
      generally on the New York Stock Exchange, the Nasdaq National Market or
      the American Stock Exchange or in the over-the-counter market, or trading
      in any securities of the Company on any exchange or in the
      over-the-counter market, shall have been suspended or minimum or maximum
      prices or maximum ranges for prices shall have been established on any
      such exchange or such market by the Commission, by such exchange or by any
      other regulatory body or governmental authority having jurisdiction, (ii)
      a banking moratorium shall have been declared by Federal or state
      authorities or a material disruption has occurred in commercial banking or
      securities settlement or clearance services in the United States, (iii)
      the United States shall have become engaged in hostilities, or the subject
      of an act of terrorism, there shall have been an escalation in hostilities
      involving the United States or there shall have been a declaration of a
      national emergency or war by the United States or (iv) there shall have
      occurred any other calamity or crisis or any change in general economic,
      political or financial conditions in the United States or elsewhere, if
      the effect of any such event in clause (iii) or (iv) makes it, in the sole
      judgment of the Representative, impracticable or inadvisable to proceed
      with the sale or delivery of the Stock on the terms and in the manner
      contemplated by the Base Prospectus and the Prospectus Supplement.

      (l) No action shall have been taken and no statute, rule, regulation or
      order shall have been enacted, adopted or issued by any governmental
      agency or body which would, as of the Closing Date, prevent the issuance
      or sale of the Stock or materially and adversely affect or potentially
      materially and adversely affect the business or operations of the Company;
      and no injunction, restraining order or order of any other nature by any
      federal or state court of

                                       25
<PAGE>

      competent jurisdiction shall have been issued as of the Closing Date which
      would prevent the issuance or sale of the Stock or materially and
      adversely affect or potentially materially and adversely affect the
      business or operations of the Company.

      (m) The Company shall have prepared and filed with the Commission a
      Current Report on Form 8-K with respect to the Offering, including as an
      exhibit thereto this Agreement and any other documents relating thereto
      which are required to be filed therewith.

      (n) The Company shall have entered into Subscription Agreements with each
      of the Purchasers and such agreements shall be in full force and effect.

      (o) Prior to the Closing Date, the Company shall have furnished to the
      Placement Agents such further information, certificates and documents as
      the Representative may reasonably request.

      All opinions, letters, evidence and certificates mentioned above or
elsewhere in this Agreement shall be deemed to be in compliance with the
provisions hereof only if they are in form and substance reasonably satisfactory
to counsel for the Placement Agents.

      7. INDEMNIFICATION AND CONTRIBUTION.

      (a) The Company shall indemnify and hold harmless the Placement Agents,
      their respective officers, employees, representatives and agents and each
      person, if any, who controls such Placement Agents within the meaning of
      the Securities Act (collectively the "PLACEMENT AGENT INDEMNIFIED PARTIES"
      and each a "PLACEMENT AGENT INDEMNIFIED PARTY") against any loss, claim,
      damage or liability, joint or several, or any action in respect thereof,
      to which that Placement Agent Indemnified Party may become subject, under
      the Securities Act or otherwise, insofar as such loss, claim, damage,
      liability or action arises out of or is based upon (i) any untrue
      statement or alleged untrue statement of a material fact contained in the
      Base Prospectus, the Registration Statement, the Time of Sale Prospectus,
      if any, or the Prospectus Supplement or in any amendment or supplement
      thereto, (ii) the omission or alleged omission to state in the Base
      Prospectus, the Registration Statement, the Time of Sale Prospectus, if
      any, or the Prospectus Supplement or in any amendment or supplement
      thereto a material fact required to be stated therein or necessary to make
      the statements therein not misleading, (iii) any breach of the
      representations and warranties of the Company contained herein or (iv) any
      act or failure to act, or any alleged act or failure to act, by any
      Placement Agent in connection with, or relating in any manner to, the
      Stock or the offering contemplated hereby, and which is included as part
      of or referred to in any loss, claim, damage, liability or action arising
      out of or based upon matters covered by clause (i), (ii) or (iii) above;
      (provided that the Company shall not be liable in the case of any matter
      covered by this clause (iv) to the extent that it is determined in a final
      judgment by a court of competent jurisdiction that such loss, claim,
      damage, liability or action resulted directly from any such act or failure
      to act undertaken or omitted to be taken by such Placement Agent through
      its gross negligence or willful misconduct) and shall reimburse each

                                       26
<PAGE>

      Placement Agent Indemnified Party promptly upon demand for any legal or
      other expenses reasonably incurred by that Placement Agent Indemnified
      Party in connection with investigating or preparing to defend or defending
      against or appearing as a third party witness in connection with any such
      loss, claim, damage, liability or action as such expenses are incurred;
      provided, however, that the Company shall not be liable in any such case
      to the extent that any such loss, claim, damage, liability or action
      arises out of or is based upon an untrue statement or alleged untrue
      statement in or omission or alleged omission from the Base Prospectus, the
      Registration Statement, the Time of Sale Prospectus, if any, or the
      Prospectus Supplement or any such amendment or supplement in reliance upon
      and in conformity with written information furnished to the Company by or
      on behalf of any Placement Agent through the Representative specifically
      for use therein, which information the parties hereto agree is limited to
      the Placement Agents' Information (as defined in Section 16). This
      indemnity agreement is not exclusive and will be in addition to any
      liability, which the Company might otherwise have and shall not limit any
      rights or remedies which may otherwise be available at law or in equity to
      each Placement Agent Indemnified Party.

      (b) Each Placement Agent, severally and not jointly, shall indemnify and
      hold harmless the Company its officers, employees, representatives and
      agents, each of its directors and each person, if any, who controls the
      Company within the meaning of the Securities Act (collectively the
      "COMPANY INDEMNIFIED PARTIES" and each a "COMPANY INDEMNIFIED PARTY")
      against any loss, claim, damage or liability, joint or several, or any
      action in respect thereof, to which the Company Indemnified Parties may
      become subject, under the Securities Act or otherwise, insofar as such
      loss, claim, damage, liability or action arises out of or is based upon
      (i) any untrue statement or alleged untrue statement of a material fact
      contained in the Base Prospectus, the Registration Statement, the Time of
      Sale Prospectus, if any, or the Prospectus Supplement or in any amendment
      or supplement thereto or (ii) the omission or alleged omission to state
      therein a material fact required to be stated therein or necessary to make
      the statements therein not misleading, but in each case only to the extent
      that the untrue statement or alleged untrue statement or omission or
      alleged omission was made in reliance upon and in conformity with written
      information furnished to the Company by or on behalf of that Placement
      Agent through the Representative specifically for use therein, and shall
      reimburse the Company Indemnified Parties for any legal or other expenses
      reasonably incurred by such parties in connection with investigating or
      preparing to defend or defending against or appearing as third party
      witness in connection with any such loss, claim, damage, liability or
      action as such expenses are incurred; provided that the parties hereto
      hereby agree that such written information provided by the Placement
      Agents consist solely of the Placement Agents Information. This indemnity
      agreement is not exclusive and will be in addition to any liability, which
      each of the Placement Agents and the Purchasers might otherwise have and
      shall not limit any rights or remedies which may otherwise be available at
      law or in equity to the Company Indemnified Parties. Notwithstanding the
      provisions of this Section 7(b), in no event shall any indemnity by any
      Placement Agent under this

                                       27
<PAGE>

      Section 7(b) exceed the total compensation received by such Placement
      Agent in accordance with Section 1(e).

      (c) Promptly after receipt by an indemnified party under this Section 7 of
      notice of any claim or the commencement of any action, the indemnified
      party shall, if a claim in respect thereof is to be made against the
      indemnifying party under this Section 7, notify the indemnifying party in
      writing of the claim or the commencement of that action; provided,
      however, that the failure to notify the indemnifying party shall not
      relieve it from any liability which it may have under this Section 7
      except to the extent it has been materially prejudiced by such failure;
      and, provided, further, that the failure to notify the indemnifying party
      shall not relieve it from any liability which it may have to an
      indemnified party otherwise than under this Section 7. If any such claim
      or action shall be brought against an indemnified party, and it shall
      notify the indemnifying party thereof, the indemnifying party shall be
      entitled to participate therein and, to the extent that it wishes, jointly
      with any other similarly notified indemnifying party, to assume the
      defense thereof with counsel reasonably satisfactory to the indemnified
      party. After notice from the indemnifying party to the indemnified party
      of its election to assume the defense of such claim or action, the
      indemnifying party shall not be liable to the indemnified party under this
      Section 7 for any legal or other expenses subsequently incurred by the
      indemnified party in connection with the defense thereof other than
      reasonable costs of investigation; provided, however, that any indemnified
      party shall have the right to employ separate counsel in any such action
      and to participate in the defense thereof but the fees and expenses of
      such counsel shall be at the expense of such indemnified party unless (i)
      the employment thereof has been specifically authorized by the
      indemnifying party in writing, (ii) such indemnified party shall have been
      advised by such counsel that there may be one or more legal defenses
      available to it which are different from or additional to those available
      to the indemnifying party and in the reasonable judgment of such counsel
      it is advisable for such indemnified party to employ separate counsel or
      (iii) the indemnifying party has failed to assume the defense of such
      action in accordance with the terms hereof and employ counsel reasonably
      satisfactory to the indemnified party, in which case, if such indemnified
      party notifies the indemnifying party in writing that it elects to employ
      separate counsel at the expense of the indemnifying party, the
      indemnifying party shall not have the right to assume the defense of such
      action on behalf of such indemnified party, it being understood, however,
      that the indemnifying party shall not, in connection with any one such
      action or separate but substantially similar or related actions in the
      same jurisdiction arising out of the same general allegations or
      circumstances, be liable for the reasonable fees and expenses of more than
      one separate firm of attorneys at any time for all such indemnified
      parties, which firm shall be designated in writing by the Representative,
      if the indemnified parties under this Section 7 consist of any Placement
      Agent Indemnified Party, or by the Company if the indemnified parties
      under this Section 7 consist of any Company Indemnified Parties. Each
      indemnified party, as a condition of the indemnity agreements contained in
      Sections 7(a) and 7(b) shall use all reasonable efforts to cooperate with
      the indemnifying party in the defense of any such action or claim. Subject
      to the provisions of Section 7(d) below, no indemnifying party shall

                                       28
<PAGE>

      be liable for any settlement, compromise or consent to the entry of
      judgment in connection with any such action effected without its written
      consent (which consent shall not be unreasonably withheld), but if settled
      with its written consent or if there be a final judgment for the plaintiff
      in any such action (other than a judgment entered with the consent of such
      indemnified party), the indemnifying party agrees to indemnify and hold
      harmless any indemnified party from and against any loss or liability by
      reason of such settlement or judgment.

      (d) If at any time an indemnified party shall have requested that an
      indemnifying party reimburse the indemnified party for fees and expenses
      of counsel, such indemnifying party agrees that it shall be liable for any
      settlement of the nature contemplated by this Section 7 effected without
      its written consent if (i) such settlement is entered into more than 45
      days after receipt by such indemnifying party of the request for
      reimbursement, (ii) such indemnifying party shall have received notice of
      the terms of such settlement at least 30 days prior to such settlement
      being entered into and (iii) such indemnifying party shall not have
      reimbursed such indemnified party in accordance with such request prior to
      the date of such settlement.

      (e) If the indemnification provided for in this Section 7 is unavailable
      or insufficient to hold harmless an indemnified party under Section 7(a)
      or 7(b), then each indemnifying party shall, in lieu of indemnifying such
      indemnified party, contribute to the amount paid or payable by such
      indemnified party as a result of such loss, claim, damage or liability, or
      action in respect thereof, (i) in such proportion as shall be appropriate
      to reflect the relative benefits received by the Company on the one hand
      and the Placement Agents on the other from the offering of the Stock or
      (ii) if the allocation provided by clause (i) above is not permitted by
      applicable law, in such proportion as is appropriate to reflect not only
      the relative benefits referred to in clause (i) above but also the
      relative fault of the Company on the one hand and the Placement Agents on
      the other with respect to the statements or omissions which resulted in
      such loss, claim, damage or liability, or action in respect thereof, as
      well as any other relevant equitable considerations. The relative benefits
      received by the Company on the one hand and the Placement Agents on the
      other with respect to such offering shall be deemed to be in the same
      proportion as the total net proceeds from the offering of the Stock
      purchased under this Agreement (before deducting expenses) received by the
      Company bears to the total compensation received by the Placement Agents
      with respect to the Stock purchased under this Agreement. The relative
      fault shall be determined by reference to, among other things, whether the
      untrue or alleged untrue statement of a material fact or the omission or
      alleged omission to state a material fact relates to information supplied
      by the Company on the one hand or the Placement Agents on the other, the
      intent of the parties and their relative knowledge, access to information
      and opportunity to correct or prevent such untrue statement or omission;
      provided that the parties hereto agree that the written information
      furnished to the Company by the Placement Agents for use in the Prospectus
      Supplement consists solely of the Placement Agents' Information. The
      Company and the Placement Agents agree that it would not be just and
      equitable if contributions pursuant to this Section 7(e)

                                       29
<PAGE>

      were to be determined by pro rata allocation or by any other method of
      allocation which does not take into account the equitable considerations
      referred to herein. The amount paid or payable by an indemnified party as
      a result of the loss, claim, damage or liability, or action in respect
      thereof, referred to above in this Section 7(e) shall be deemed to
      include, for purposes of this Section 7(e), any legal or other expenses
      reasonably incurred by such indemnified party in connection with
      investigating or defending any such action or claim. Notwithstanding the
      provisions of this Section 7(e), the Placement Agents shall not be
      required to contribute any amount in excess of the total compensation
      received by such Placement Agent in accordance with Section 1(e) less the
      amount of any damages which such Placement Agent has otherwise paid or
      become liable to pay by reason of any untrue or alleged untrue statement
      or omission or alleged omission. No person guilty of fraudulent
      misrepresentation (within the meaning of Section 11(f) of the Securities
      Act) shall be entitled to contribution from any person who was not guilty
      of such fraudulent misrepresentation.

      (f) The Placement Agents' obligations to contribute as provided in this
      Section 7(f) are several in proportion to the total compensation received
      by each of the Placement Agents in accordance with Section 1(e) and not
      joint.

8. TERMINATION. The obligations of the Placement Agents and the Purchasers
hereunder and under the Subscription Agreements may be terminated by the
Representative, in its absolute discretion by notice given to the Company prior
to delivery (including electronic delivery) of and payment for the Stock if,
prior to that time, any of the events described in Sections 6(i) or 6(l) have
occurred or if the Purchasers shall decline to purchase the Stock for any reason
permitted under this Agreement or the Subscription Agreements.

9. REIMBURSEMENT OF PLACEMENT AGENTS' EXPENSES. If the sale of the Stock
provided for herein is not consummated because any condition to the obligations
of the Placement Agents and the Purchasers set forth in Section 6 hereof is not
satisfied, because of any termination pursuant to Section 8 hereof or because of
any refusal, inability or failure on the part of the Company to perform any
agreement herein or comply with any provision hereof other than by reason of a
default by the Placement Agents, the Company will reimburse the Placement Agents
upon demand for all out-of-pocket expenses (including fees and disbursements of
counsel and any expenses advanced by the Placement Agents on the Company's
behalf) that shall have been incurred by the Placement Agents in connection with
this Agreement and the proposed purchase and sale of the Stock and, upon demand,
the Company shall pay the full amount thereof to Representative.

10. SUCCESSORS; PERSONS ENTITLED TO BENEFIT OF AGREEMENT. This Agreement shall
inure to the benefit of and be binding upon the Placement Agents, the
Purchasers, the Company, and their respective successors. Nothing expressed or
mentioned in this Agreement is intended or shall be construed to give any person
other than the persons mentioned in the preceding sentence any legal or
equitable right, remedy or claim under or in respect of this Agreement, or any
provisions herein contained, this Agreement and all conditions and provisions
hereof being intended to be and being for the sole and exclusive benefit of such
persons and for the benefit of

                                       30
<PAGE>

no other person; except that the representations, warranties, covenants,
agreements and indemnities of the Company contained in this Agreement shall also
be for the benefit of the Placement Agent Indemnified Parties, and the
indemnities of the Placement Agents shall also be for the benefit of the Company
Indemnified Parties.

11. ABSENCE OF FIDUCIARY RELATIONSHIP. The Company acknowledges and agrees that:

      (a) each Placement Agent's responsibility to the Company is solely
      contractual in nature, the Placement Agents have been retained solely to
      act as placement agents in connection with the sale of the Stock and no
      fiduciary, advisory or agency relationship between the Company and the
      Placement Agents has been created in respect of any of the transactions
      contemplated by this Agreement, irrespective of whether any of the
      Placements Agents has advised or is advising the Company on other matters;

      (b) the price of the Stock set forth in this Agreement was established by
      the Company following discussions and arms-length negotiations with the
      Representative, the Purchasers, and the Company is capable of evaluating
      and understanding, and understands and accepts, the terms, risks and
      conditions of the transactions contemplated by this Agreement;

      (c) the Company has been advised that the Placement Agents and their
      affiliates are engaged in a broad range of transactions which may involve
      interests that differ from those of the Company and that the Placement
      Agents have no obligation to disclose such interests and transactions to
      the Company by virtue of any fiduciary, advisory or agency relationship;
      and

      (d) the Company waives, to the fullest extent permitted by law, any claims
      it may have against the Placement Agents for breach of fiduciary duty or
      alleged breach of fiduciary duty and agrees that the Placement Agents
      shall have no liability (whether direct or indirect) to the Company in
      respect of such a fiduciary duty claim or to any person asserting a
      fiduciary duty claim on behalf of or in right of the Company, including
      stockholders, employees or creditors of the Company.

12. SURVIVAL OF INDEMNITIES, REPRESENTATIONS, WARRANTIES, ETC. The respective
indemnities, covenants, agreements, representations, warranties and other
statements of the Company, its Subsidiary and the Placement Agents, as set forth
in this Agreement or made by them respectively, pursuant to this Agreement,
shall remain in full force and effect, regardless of any investigation made by
or on behalf of the Placement Agents, the Company, the Purchasers or any person
controlling any of them and shall survive delivery of and payment for the Stock.

13. NOTICES. All statements, requests, notices and agreements hereunder shall be
in writing, and:

      (a) if to the Placement Agents, shall be delivered or sent by mail, telex
      or facsimile transmission to SG Cowen & Co., LLC, 1221 Avenue of the
      Americas, New York, New York 10020, Attention: Veronica Iuliano (E-mail)
      (Fax: 212-278-7995), with a copy to: Brown Raysman Millstein Felder &

                                       31
<PAGE>

      Steiner LLP, 900 Third Avenue, New York, New York 10022, Attention: Stuart
      Bressman, Esq. (Fax: 212-895-2900).

      (b) if to the Company shall be delivered or sent by mail, telex or
      facsimile transmission to Halozyme Therapeutics, Inc., 11588 Sorrento
      Valley Road, Suite 17, San Diego, CA 92121, Attention: David A. Ramsay
      (Fax: (858) 259-2539, with a copy to: DLA Piper Rudnick Gray Cary US LLP,
      4365 Executive Drive, Suite 1100, San Diego, CA 92121, Attention: Douglas
      J. Rein (Fax: (858) 677-1477).

      14. DEFINITIONS OF CERTAIN TERMS. The terms which follow, when used in
this Agreement, shall have the meanings indicated.

      "BUSINESS DAY" shall mean any day other than a Saturday, a Sunday, a legal
holiday, a day on which banking institutions or trust companies are authorized
or obligated by law to close in New York City or any day on which the Nasdaq
National Market is not open for trading.

      "EFFECTIVE DATE" shall mean each date and time that the Registration
Statement (and any post-effective amendment or amendments thereto) became or
becomes effective.

      "EXECUTION TIME" shall mean the date and time that this Agreement is
executed and delivered by the parties hereto.

      "INTERFERENCE PROCEEDING" shall have the meaning set forth in 35 U.S.C.
Section 135.

      "TO THE COMPANY'S KNOWLEDGE" and words of similar import shall mean that
which the Company or its Subsidiary knows or should have known using the
exercise of reasonable due diligence.

15. GOVERNING LAW. This Agreement shall be governed by and construed in
accordance with the laws of the State of New York.

16. PLACEMENT AGENTS' INFORMATION. The parties hereto acknowledge and agree
that, for all purposes of this Agreement, the Placement Agents' Information
consists solely of the statements concerning the Placement Agents contained in
the third paragraph under the heading "Plan of Distribution" in the Prospectus
Supplement.

17. PARTIAL UNENFORCEABILITY. The invalidity or unenforceability of any Section,
paragraph or provision of this Agreement shall not affect the validity or
enforceability of any other Section, paragraph or provision hereof. If any
Section, paragraph or provision of this Agreement is for any reason determined
to be invalid or unenforceable, there shall be deemed to be made such minor
changes (and only such minor changes) as are necessary to make it valid and
enforceable.

18. GENERAL. This Agreement constitutes the entire agreement of the parties to
this Agreement and supersedes all prior written or oral and all contemporaneous
oral agreements, understandings and negotiations with respect to the subject
matter hereof. In this Agreement, the masculine, feminine and neuter genders and
the singular and

                                       32
<PAGE>

the plural include one another. The section headings in this Agreement are for
the convenience of the parties only and will not affect the construction or
interpretation of this Agreement. This Agreement may be amended or modified, and
the observance of any term of this Agreement may be waived, only by a writing
signed by the Company and the Placement Agents.

19. COUNTERPARTS. This Agreement may be signed in any number of counterparts,
each of which shall be an original, with the same effect as if the signatures
thereto and hereto were upon the same instrument.

20. CONSENT TO ACT AS REPRESENTATIVE. Rodman & Renshaw, LLC ("RR") and Roth
Capital Partners, LLC ("ROTH") each consent and agree that SG Cowen & Co., LLC
("SG COWEN") will act as Representative of the Placement Agents under this
Agreement and with respect to the sale of the Stock. Accordingly, each of RR and
Roth authorizes SG Cowen to manage the Offering and the sale of the Stock and to
take such action in connection therewith as SG Cowen in its sole discretion
deems appropriate or desirable, consistent with the provisions of each Agreement
Among Underwriters previously entered into between SG Cowen and RR, and SG Cowen
and Roth, respectively, taking into account that the Offering of the Stock will
be in the form of a best efforts placement and not a firm commitment
underwriting.

                                       33
<PAGE>

         If the foregoing is in accordance with your understanding of the
agreement between the Company and the Placement Agents, kindly indicate your
acceptance in the space provided for that purpose below.

                                             Very truly yours,

                                             HALOZYME THERAPEUTICS, INC.

                                             By: /s/David Ramsay
                                                ------------------------
                                                  Name: David Ramsay
                                                  Title: Secretary and CFO

Accepted as of the date first above written:

SG COWEN & CO., LLC

By:    /s/ Richard E. Gormley
   ---------------------------------
     Name: Richard E. Gormley
     Title: Managing Director

RODMAN & RENSHAW, LLC

By:    /s/ Thomas G. Pinou
   ---------------------------------
     Name: Thomas G. Pinou
     Title: Chief Financial Officer

ROTH CAPITAL PARTNERS, LLC

By:  /s/ Theodore D. Roth
   ---------------------------------
     Name: Theodore D. Roth
     Title: Managing Director

                                       34
<PAGE>

                                   SCHEDULE 1

                                PLACEMENT AGENTS

SG Cowen & Co., LLC
Rodman & Renshaw, LLC
Roth Capital Partners, LLC

                                       35
<PAGE>

                                    EXHIBIT A

                         FORM OF SUBSCRIPTION AGREEMENT

                                       36
<PAGE>

                                    EXHIBIT B

                            FORM OF LOCK-UP AGREEMENT

                                       37
<PAGE>

                                   EXHIBIT C-1

               LEGAL OPINION OF DLA PIPER RUDNICK GRAY CARY US LLP

<PAGE>

                                   EXHIBIT C-2

               LEGAL OPINION OF HALE LANE PEEK DENNISON AND HOWARD

                                       39
<PAGE>

                                   EXHIBIT C-3

               LEGAL OPINION OF DLA PIPER RUDNICK GRAY CARY US LLP<PAGE>
                                                                               .
                                                                               .
                                                                               .
                                                                    EXHIBIT 10.1

<TABLE>
<S>                                     <C>                                         <C>                 <C>
AWARD/CONTRACT                          1. THIS CONTRACT IS A RATED ORDER           RATING DOA 6        PAGE 1 OF 29
                                        UNDER DPAS (15 CFR 700)
-----------------------------------------------------------------------------------------------------------------------------------
2. CONTRACT (PROC. INST. IDENT). NO.    3. EFFECTIVE DATE                    4. REQUISITION/PURCHASE REQUEST/PROJECT NO.
DAAA09-03-C-0029                        29 APR 2003                                                    SEE SCHEDULE
-----------------------------------------------------------------------------------------------------------------------------------
5. ISSUED BY                            CODE WS2P1J   6. ADMINISTERED BY (IF OTHER THAN ITEM 5)         CODE S0101A
HO JHC                                                  DCHA BIRMINGHAM
AHSOS-CCM-F                                             BURGER PHILLIPS CENTER
CARL MCDONALD (300) 782-3916                            1910 THIRD AVE NORTH AM 201
HOCX ISLAND IL 61299-6000                               BIRMINGHAM AL 35203-2376

BLDG 150

e-mail address: MCDONALDCROSC.ARMY.MIL                                SCD c PAS NONE                  ADP PT HQ0338
-----------------------------------------------------------------------------------------------------------------------------------
7. NAME AND ADDRESS OF CONTRACTOR (NO. STREET, CITY, COUNTY, STATE, AND ZIP CODE)   8. DELIVERY
VALENTEC SYSTEMS                                                                [X]FOB Origin  [ ] Other(See Below)
2816 YORK AVE                                                                   ----------------------------------------------------
MINDEN LA 71055-0000                                                            9. DISCOUNT FOR PROMPT PAYMENT
                                                                                ----------------------------------------------------
                                                                                10. SUBMIT INVOICES                       ITEM
TYPE BUSINESSS: other Small Business Performing in U.S.                         (4 Copies Unless Otherwise Specified       12
-----------------------------------------------------------------------------
Code 1 PD 90                               Facility Code                       To The Address Shown In:
------------------------------------------------------------------------------------------------------------------------------------
11. SHIP TO/MARK FOR                        CODE ______     12. PAYMENT WILL BE MADE BY                        CODE  HQ0338
SEE SCHEDULE                                                DFAS-COLUMBUS CENTER
                                                            DFAS-COSOUTH ENTITLEMENT OPERATIONS
                                                            P.O. BOX 192264
                                                            COLUMBUS, 011 43218-2264
------------------------------------------------------------------------------------------------------------------------------------
13. AUTHORITY FOR USING OTHER THAN FULL AND OPEN COMPETITION:   14. ACCOUNTING AND APPROPRIATION DATA
[ ] 10 U.S.C 2304(c) (    )      [ ] 41 U.S.C. 253(c) (    )      ACRN: AA 21  X45280650 65            26EB S1117J W52P1J
------------------------------------------------------------------------------------------------------------------------------------
15A. ITEM NO.        15B. SCHEDULE OF SUPPLIES/SERVICES           15C. QUANTITY     15D. UNIT     15E. UNIT PRICE      15F. AMOUNT
------------------------------------------------------------------------------------------------------------------------------------
SEE SCHEDULE          CONTRACT TYPE:                                  KIND OF CONTRACT
                          Firm-Fixed-Price                              Supply Contracts and Priced Orders
------------------------------------------------------------------------------------------------------------------------------------
                                                                           15G. Total Amount Of Contract              5503,689.20
------------------------------------------------------------------------------------------------------------------------------------
                                                        16. TABLE OF CONTENTS
------------------------------------------------------------------------------------------------------------------------------------
</TABLE>

<TABLE>
<CAPTION>
(X) SECTION         DESCRIPTION                     PAGE(S) (X) SECTION         DESCRIPTION                                PAGE(S)
--- -------         -----------                     ------- --- -------         -----------                                -------
<S> <C>      <C>                                    <C>     <C> <C>                                                        <C>
             PART I-THE SCHEDULE                                 PART II CONTRNET CLAUSES
x     A      Solicitation/Contract Form                1     x     I        Contract Clauses                                 23
x     B      Supplies or Services and Prices/Costs     5        PART III LIST OF DOCUMENTS, EXHIBITS, AND OTHER ATTACHMENTS
x     C      Description/Specs/Work Statement          7     x     J        List of Attachments                              29
x     D      Packaging and Marking                    10        PART IV REPRESENTATIONS AND INSTRUCTIONS
x     E      Inspection and Acceptance                11           K        Representations, Certifications, and
x     F      Deliveries or Performance                17                    Other Statements of Offerors
x     G      Contract Administration Data             19           L        Instrs, Conds, and Notices to Offerors
x     H      Special Contract Requirements            20           M        Evaluation Factors for Award
</TABLE>

<TABLE>
                                    CONTRACTING OFFICER WILL COMPLETE ITEM 17 OR 18 AS APPLICABLE
------------------------------------------------------------------------------------------------------------------------------------
<S>                                                                <C>
17. [ ]CONTRACTOR'S NEGOTIATED AGREEMENT (CONTRACTOR IS            18. [X] AWARD (CONTRACTOR IS NOT REQUIRED TO SIGN THIS
REQUIRED TO SIGN THIS DOCUMENT AND RETURN_____ COPIES TO           DOCUMENT.) YOUR OFFER ON SOLICITATION NUMBER DAAA0902R0151
ISSUING OFFICE.) CONTRACTOR AGREES TO FURNISH AND DELIVER          INCLUDING THE ADDITION OR CHANGES MADE BY YOU WHICH
ALL ITEMS OR PERFORM ALL THE SERVICES SET FORTH OR OTHERWISE       ADDITIONS OR CHANGES ARE SET FORTH IN FULL ABOVE,IS HEREBY
IDENTIFIED ABOVE AND ON ANY CONTINUATION SHEETS FOR THE            ACCEPTED AS TO THE ITEM LISTED ABOVE AND ON ANY CONTINUATION
CONSIDERATION STATED HEREIN. THE RIGHTS AND OBLIGATIONS OF         SHEETS. THIS AWARD CONSUMMATES THE CONTRACT WHICH CONSISTS
THE PARTIES TO THIS CONTRACT SHALL BE SUBJECT TO AND               OF THE FOLLOWING DOCUMENTS: (A) THE GOVERNMENT'S SOLICITATION
GOVERNED BY THE FOLLOWING DOCUMENTS: (A) THIS                      AND YOUR OFFER, AND (B) THIS AWARD/CONTRACT. NO FURTHER
AWARD/CONTRACT,(B) THE SOLICITATION, IF ANY, AND (C) SUCH          CONTRACTUAL DOCUMENT IS NECESSARY.
PROVISIONS, REPRESENTATIONS, CERTIFICATIONS, AND
SPECIFICATIONS, AS ARE ATTACHED OR INCORPORATED BY REFERENCE
HEREIN.(ATTACHMENTS ARE LISTED HEREIN).
------------------------------------------------------------------------------------------------------------------------------------
19A. NAME AND TITLE OF SIGNER (TYPE OR PRINT)                      20A. NAME OF CONTRACTING OFFICER
                                                                        MARK E. HALDEHAN
S.J. SHOWS VP/GM                                                        HALDEMANH OSC. ARMY. MIL (309) 782-3414
------------------------------------------------------------------------------------------------------------------------------------
19B. NAME OF CONTRACTOR                      19C. DATE SIGNED      20B. UNITED STATES OF AMERICA         20C. DATE SIGNED
VALENTEC SYSTEMS, INC.

By /s/ S.J. Shows                                   050103          By  /s/ MARK E. HALDEHAN             29 APR 2003
  --------------------------------------                               ----------------------
  (Signature of person authorized to sign)                              (Signature of Contracting Officer)
------------------------------------------------------------------------------------------------------------------------------------
NSN 7540-01-152-8069                                      25-108                       Standard Form 26 (Rev,4-85)
PREVIOUS EDITIONS UNUSABLE                          GPO: 1985 0-478-632                Prescribed By GSA-FAR (4.8 CFR) 53.214(a)
</TABLE>

<PAGE>

                     REFERENCE NO. OF DOCUMENT BEING CONTINUED      PAGE 2 OF 29
CONTINUATION SHEET
                      PIIN/SIIN DAAA09-03-C-0029       MOD/AMD        REPRINT

NAME OF OFFEROR OR CONTRACTOR: VALENTEC SYSTEMS

SECTION A SUPPLEMENTAL INFORMATION

For Local clauses See: http://www.osc.army.mil/[ILLEGIBLE]clauses/index.htm

<TABLE>
<CAPTION>
                REGULATORY CITE                  TITLE                              DATE
                ---------------                  -----                              ----
<S>             <C>                     <C>                                     <C>
A-1             52.215-4501             ARSENALS AS SUBCONTRACTORS              JUN/2000
                OSC

A-2             AMC                     AMC-LEVEL PROTEST PROGRAM               OCT/1996
***
                                            (End of clause)

(AH7010)

A-3             52.222.1100             10 U.S.C 4543 PILOT PROGRAM             FEB/2003
                OSC
</TABLE>

Congressional language in Section 141 of the 1998 Defence Authorization Act(10
U.S.C 4543 Pilot Program allows "not more than three Army industrial facilities"
to sell manufactured articles and services in support of DoD Weapon systems
without regard to availability from domestic sources. The three Army industrial
facilities in this program are McAlester Army Ammunition Plant. McAlester OR
Rock Island Arsenal, Rock Island, IL. and Watervliet Arsenal, Watervliet, NY.

These facilities cannot submit offers as the prime contractor on this
solicitation, but in accordance with the above described pilot program can act
as a subcontractor to potential prime [ILLEGIBLE] when the statutory
requirements (10 U.S.C. 4543) are [ILLEGIBLE].

If you are interested in obtaining information about their capabilities, please
contact the following:

McAlester Army Ammunition Plant
Mr. Paul McDaniel,Attn: [ILLEGIBLE]
McAlester, Oklahoma 74501-9002
[ILLEGIBLE]
[ILLEGIBLE]

[ILLEGIBLE] Island Arsenal
Mr. Earl Fox, Attn: [ILLEGIBLE]
Rock Island,:[ILLEGIBLE] [ILLEGIBLE]
[ILLEGIBLE]
siori-co-bditla.army.mil

Watervliet Arsenal
Mr. Michael Flaherty, Attn: SOSWV-ODP
Watervliet,  New York 12169-4050
(518) 266-3918
flaherty-wva.army.mil

                                (End of Clause)

(AS7010)

          A-4  [ILLEGIBLE]      CONTRACTOR PERFORMANCE
                                CERTIFICATION PROGRAM      APR/1997
***

                                (End of clause)

(AS7000)

<PAGE>

                      REFERENCE NO. OF DOCUMENT BEING CONTINUED     PAGE 3 OF 29
CONTINUATION SHEET
                      PIIN/SIIN DAAA09-03-C-0029       MOD/AMD        REPRINT

NAME OF OFFEROR OR CONTRACTOR: VALENTEC SYSTEMS

A-5             52.252-4500      FULL TEXT CLAUSES              SEP/1997
                OSC

1. The entire body of full text regulatory and command unique clauses and
provisions will no longer be included in solicitations or contracts. These
clauses and provisions have the same force and effect as if the entire full text
was included in the solicitation/ contract. Where text has been removed three
astericks are put in its place (***).

2. You can view or obtain a copy of the clauses and provisions on the internet
At: www.osc.army.mil/ac/aais/osc/clauses/index.htm. Click on command unique
first to locate the clause. If it is not located under command unique click on
regulatory to find.

3. All full text clauses have a 6 or 7 as the third digit of the clause number
(i.e. AS7000).

                                (End of clause)

(AS7001)

This request for Proposal is a 1001 Small Business Set-Aside for the M74
Simulator.

MSN: 1370-00-029-6007

Offerore shall submit proposal on a with First Article Basis.

The Government provides a best value, competitive, firm fixed price contract.

The evaluation factors include: The Manufacturing Plan, Past Performance, Price.
Small Business Utilization. Award will be made to the offeror whose
Manufacturing Plan. Past Performance, Price and Small Business Utilization
provides the best value to the Government. The Manufacturing Plan is
significantly more important than Past Performance and Price. Past Performance
and Price are of equal value. Small Business Utilization has the least value.
The Manufacturing Plan. Past Performance and Small Business Utilization. When
combined are significantly more important than Price. The subfactor in each
category are in descending order of importance.

In order to evaluate the proposal, the Government will employ the best value
approach to evaluate proposals submitted in response to this solicitation. The
Government cautions offerors to pay close attention to Section L: "Instructions
to Offerors" and to Section M, "Evaluation Factors and Significant Subfactors
for Award" in their entirety.

The government is not bound to award to the lowest priced evaluated offer in
this best value approach. The offeror's Manufacturing Plan may justify payment
of a premium See Section L S HI. For purposes of evaluation,each offeror is to
provide the information specified in the applicable provision. Award will be
made to the offeror whose proposal is determined to be the best value to the
Government based on the cited criteria. Offerors are responsible for including
sufficient details to permit a complete and accurate evaluation of their
proposal. The Government will not make assumptions as to the offeror's Intent,
capabilities, facilities,or experience. Clear identification is the sole
responsibility of the offeror. The Government cautions the offerors to ensure
that their proposal is complete, including all fill-in the blanks in the
solicitation.

Offerors should take note of the provision FAR 52.215-1,"Instructions to
Offerors-Competitive Acquisition." The Government intends to award a contract
resulting from this solicitation without discussions with the offerors (except
for clarification as described in FAR 15.306(A)).Therefore, offeror's initial
proposals should contain the best terms from all Lactoru/sub factors. However,
the Government reserves the right to conduct discussions if determined necessary
by the Procuring Contracting Officer.

The Government directs the offeror's attention to the Critical Characteristics
clause (See Section 2).

The Government defines NSP, as seen in Section B, as Not Separately Priced.

In accordance with solicitation clause, "Required Central Contractor Reg.
stration,"262.204-7004, failure to register in the Central Contractor
Registration database will make an offeror ineligible for award.

The Government provided [ILLEGIBLE] summary for administrative assistance only
and is not intended to alter the terms and conditions of the solicitation.

                         *** End of Narrative A001*****

THE PURPOSE OF THIS DOCUMENT IS AS FOLLOWS:

MAKE A BASIC CONTRACT AWARD TO VALENTEC SYSTEMS, INC., FOR THE PRODUCTION OF 17,
[ILLEGIBLE] SIMULATOR, AIRBURST PROJECTILE AT A COST OF

<PAGE>

                      REFERENCE NO. OF DOCUMENT BEING CONTINUED    PAGE 4 OF 29
CONTINUATION SHEET
                      PIIN/SIIN DAAA09-03-C-0029       MOD/AMD        REPRINT

NAME OF OFFEROR OR CONTRACTOR: VALENTEC SYSTEMS

$29.59 PER UNIT FOR A TOTAL CONTRACT COST OF $503,689,20.

DELETED CLIN 003AA AND RENUMBERED 0002A9 0001AC.

DELIVERIES ARE ON A F.O.B ORIGIN WITH A FIRST ARTICLE BASIS.

EARLY DELIVERIES ARE ACCEPTABLE AND AUTHORIZED AT NO COST TO THE GOVERNMENT.

TERMS AND CONDITIONS FROM EFP DAAA09-02-R-0151 ARE INCORPORATED INTO THIS AWARD.

                         *** END OF NARRATIVE A 003 ***

<PAGE>

                      REFERENCE NO. OF DOCUMENT BEING CONTINUED     PAGE 5 OF 29
 CONTINUATION SHEET                                                   REPRINT
                       PIIN/SIIN DAAA09-03-C-0020        MOD/AMD

NAME OF OFFEROR OR CONTRACTOR: VALENTEC SYSTEMS

<TABLE>
<CAPTION>

ITEM NO                   SUPPLIES/SERVICES                                      QUANTITY   UNIT       UNIT PRICE      AMOUNT
-------     ---------------------------------------------------------------      --------   ----       ----------    -----------
<S>         <C>                                                                  <C>        <C>        <C>           <C>
            SECTION B - SUPPLIES OF SERVICES AND PRICES/COSTS

0001        SECURITY CLASS  Unclassified

0001AA      FIRST ARTICLE  TEST REPORT                                              1         EA       $ **NSP **    $ ** NSP **
                                                                                                       ----------    -----------

            Packaging and Marking

            Inspection and Acceptance
            INSPECTION: Origin      ACCEPTANCE: Origin

            Deliveries or Performance
            DOC                    SUPPL
            REL CD      MILSTRIP   ADDR      SIG CD     MARK FOR      TP CD
             001                                                        3

            DEL PEL CD            QUANTITY                    DEL DATE
               001                   1                      29-AUG 2001

            FOB POINT: Origin

            SHIP TO: PARCEL POST ADDRESS
            (W52P1J) XR   WOKB USA MAC ROCK ISL  ARSENAL
                        CONVENTIONAL AHRO WORKING CAP FUNC
                        BLDG 150 BODMAN AVE
                        ROCK ISLAND                 IL 61299.5000

                                  SEE SECTION E

                         (End of narrative F001)

0001AB      PRODUCTION QUANTITY                                                    7000       EA       $  29.49000   $ 206,789.20
                                                                                                       -----------   ------------
            CLIN CONTRACT TYPE:
                 Firm-Fixed-price
            NOUN: H74 SIHULATOR
            FROM: F12A0H2EM2  PRON AMD: 03   ACRN: AA
            AMS CD: 080011

            Packaging and Marking

            Inspection and Acceptance
            INSPECTION: Origin      ACCEPTANCE: Origin

            Deliveries or Performance
</TABLE>
<PAGE>

                       REFERENCE NO. OF DOCUMENT BEING CONTINUED    PAGE 6 OF 29
CONTINUATION SHEET                                                     REPRINT
                            PIIN/SIIN DAAA09-01-C-0029   MOD/AMD

NAME OF OFFEROR OR CONTRACTOR:  VALENTEC SYSTEMS

<TABLE>
<CAPTION>
 ITEM NO                               SUPPLIES/SERVICES                          QUANTITY   UNIT  UNIT PRICE      AMOUNT
----------     -----------------------------------------------------------------  --------   ----  ----------  -------------
<S>            <C>                                                                <C>        <C>   <C>         <C>
               DOC                     SUPPL

               REL CD    MILSTRIP        ADDN       SIG CD      MARK FOR   TP CD
                 001   FW 202670062051A  W67G33     J                      I

               DEL HEL CD             QUANTITY                DEL DATE
                   001                 7,060                30-OCT-2003

               FOR POINT: ORIGIN

               SHIP TO: PARCEL POST ADDRESS
               (W67G23  XR WOMM USA OSC DEPOT TOOELE
                        TOOELE ARMY DEPOT
                        TOOELE                               UT 84074-5003

0001AC         PRODUCTION QUANTITY                                                  10000     EA   $ 29,49000  $  294,900.00
                                                                                                   ----------  -------------
               CLIN CONTRACT   TYPE
                   Firm Fixed Price
               NOUN: H24 SIMULATOR
               PROG: F12A0R17M2           PRON AMD: 07          ACRN: AA
               ANS CD: 060011

               PACKAGING AND MARKING

               INSPECTION AND ACCEPTANCE
               INSPECTION: ORIGIN      ACCEPTANCE: ORIGIN

               DELIVERING OR PERFORMANCE
               DOC                     SUPPL

               REL CD    MILSTRIP        ADDR       SIG CD      MARK FOR   TP CD
                 001   N490667042002HA   [ILLEGIBLE]   J                     3

               DEL REL CD                    QUANTITY                DEL DATE
                  001                         10,000               30-OCT-2003

               FOR POINT: ORIGIN

               SHIP TO: PARCEL POST ADDRESS
               (WS3XHD)  SU W302 HAC CRANE ARMY AMMO ACT
                         WHOLESALE SUPPLY ACCOUNT
                         SLDG 13 300 HWY 361
                         CRANE                                    IN 47522-5099
</TABLE>

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