Document:

SECURITIES
      PURCHASE AGREEMENT

     

    This
      SECURITIES PURCHASE AGREEMENT (this “Agreement”)
      is
      dated as of the 24th
      day of
      January, 2008 (the “Effective
      Date”)
      by and
      between MiddleBrook Pharmaceuticals, Inc., a Delaware corporation, with its
      principal office at 20425 Seneca Meadows Parkway, Germantown, Maryland 20876
      (the “Company”),
      and
      the several purchasers identified in the attached Exhibit A
      (individually, a “Purchaser”
and
      collectively, the “Purchasers”).

     

    WHEREAS,
      the Company desires to issue and sell to the Purchasers an aggregate of up
      to
      8,750,000 shares (the “Shares”)
      of the
      authorized but unissued shares of common stock, $0.01 par value per share,
      of
      the Company (the “Common
      Stock”);
      and
      (ii) warrants in the form attached as Exhibit B
      to
      purchase an aggregate of approximately 3,500,000 shares of Common Stock (each,
      a
“Warrant,”
and
      collectively, the “Warrants”);
      and

     

    WHEREAS,
      the Purchasers, severally, wish to purchase the Shares and the Warrants on
      the
      terms and subject to the conditions set forth in this Agreement.

     

    NOW,
      THEREFORE, in consideration of the mutual agreements, representations,
      warranties and covenants herein contained, the parties hereto agree as
      follows:

     

    1. Definitions.
      As used in this Agreement, the following terms shall have the following
      respective meanings:

     

    (a) “Affiliate”
      of a party means any corporation or other business entity controlled by,
      controlling or under common control with such party. For this purpose
“control”
      shall mean direct or indirect beneficial ownership of fifty percent (50%)
      or more of the voting or income interest in such corporation or other business
      entity.

     

    (b) “Agreement”
means
      this Securities Purchase Agreement.

     

    (c) “Business
      Day”
means
      any day except Saturday, Sunday and any day which shall be a federal legal
      holiday or a day on which banking institutions in the State of New York are
      authorized or required by law or other governmental action to
      close.

     

    (d) “Closing
      Dates”
means
      the dates of the First Closing and the Additional Closing.

     

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

     

    (f) “Registration
      Rights Agreement”
shall
      mean that certain Registration Rights Agreement, dated as of the date hereof,
      among the Company and the Purchasers.

     

    (g) “Operative
      Agreements”
shall
      mean the Registration Rights Agreement and the Warrants together with this
      Agreement.

     

    
      
         

      

      
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    (h) “Majority
      Purchasers”
shall
      mean Purchasers which, at any given time, hold greater than fifty
      percent (50%) of the voting power of the outstanding Shares, that have not
      been resold pursuant to an effective registration statement under the Securities
      Act or Rule 144 under the Securities Act.

     

    (i) “Rules
      and Regulations”
shall
      mean the rules and regulations of the SEC.

     

    (j) “SEC”
shall
      mean the Securities and Exchange Commission.

     

    (k) “SEC
      Documents”
shall
      have the meaning set forth in Section 3.26 below.

     

    (l) “Securities”
shall
      mean the Shares, the Warrants and the Underlying Shares.

     

    (m) “Securities
      Act”
shall
      mean the Securities Act of 1933, as amended, and all of the rules and
      regulations promulgated thereunder.

     

    (n) “Subsidiary”
      of any entity means another entity, an amount of the voting securities, other
      voting ownership or voting partnership interests of which is sufficient to
      elect
      at least a majority of its Board of Directors or other governing body (or,
      if
      there are no such voting interests, 50% or more of the equity interests of
      which) is owned directly or indirectly by such first entity.

     

    (o) “Trading
      Day”
      means(a) if the Common Stock is listed or quoted on the NASDAQ Global Market,
      then any day during which securities are generally eligible for trading on
      the
      NASDAQ Global Market, or (b) if the Common Stock is not then listed or quoted
      and traded on the NASDAQ Global Market, then any Business Day.

     

    (p) “Underlying
      Shares”
shall
      mean the shares of Common Stock issuable upon exercise of the
      Warrants.

     

    2. Purchase
      and Sale of Securities.

     

    2.1 
      Purchase
      and Sale.
      Subject
      to and upon the terms and conditions set forth in this Agreement, the Company
      agrees to issue and sell to each Purchaser, and each Purchaser, severally,
      hereby agrees to purchase from the Company, on the Closing Dates, (i) the number
      of shares of Common Stock set forth opposite the name of such Purchaser under
      the heading “Number
      of Shares to be Purchased”
on
      Exhibit A
      hereto,
      at a purchase price of $2.40 per share and (ii) a Warrant to purchase the
      number of Underlying Shares set forth opposite the name of such Purchaser under
      the heading “Number
      of Shares Underlying the Warrant”
on
      Exhibit
      A
      (which
      number of Underlying shares shall equal 0.40 share of Common Stock for every
      one
      Share purchased by the Purchaser), having an exercise price of $3.00 per
      Underlying Share. The total purchase price payable by each Purchaser for the
      Securities that such Purchaser is hereby agreeing to purchase is set forth
      opposite the name of such Purchaser under the heading “Aggregate
      Purchase Price”
on
      Exhibit A
      hereto.
      The aggregate purchase price payable by the Purchasers to the Company for all
      of
      the Securities shall be up $21,000,000.

     

    
      
         

      

      
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    2.2 
      Closings.
      The
      first closing of the transactions contemplated under this Agreement (the
“First
      Closing”)
      shall
      take place at the offices of Dewey & LeBoeuf LLP,
      1301 Avenue of the Americas, New York, New York 10019,
      counsel
      to the Company, on the second business day after the Company shall have given
      written notice (the “Closing
      Notice”)
      to the
      Purchasers that all of the conditions precedent set forth in Section 5.1 have
      been satisfied in full or at such other location, date and time as may be agreed
      upon between the Majority Purchasers and the Company. At the First Closing,
      the
      Company shall deliver to each Purchaser listed on Exhibit
      A
      hereto
      as participating in the First Closing a single stock certificate and a single
      Warrant representing the number of Securities purchased by such Purchaser,
      each
      to be registered in the name of such Purchaser, or in such nominee’s or
      nominees’ name(s) as designated by such Purchaser in writing in the form of the
      Investor Questionnaire attached hereto as Appendix I,
      against
      payment of the purchase price therefor by wire transfer of immediately available
      funds to such account or accounts as the Company shall designate in writing.
      Upon the completion of the First Closing, an additional closing, which shall
      take place within 5 Trading Days of the date hereof (the “Additional
      Closing”),
      will
      become unconditional. Notwithstanding
      anything herein to the contrary, an Additional Closing may not occur without
      the
      prior written consent of each Purchaser and the Placement
      Agent.
      At the
      Additional Closing which shall take place at the offices of Dewey & LeBoeuf
      LLP,
      1301 Avenue of the Americas, New York, New York 10019,
      counsel
      to the Company, the Company shall deliver to the Purchasers, listed on
Exhibit
      A
      hereto
      as participating in the Additional Closing, a single stock certificate and
      a
      single Warrant representing the number of Securities purchased by such
      Purchaser, to be registered in the name of such Purchaser, or in such nominee’s
      or nominees’ name(s) as designated by such Purchaser in writing in the form of
      the Investor Questionnaire attached hereto as Appendix I,
      against
      payment of the purchase price therefor by wire transfer of immediately available
      funds to such account or accounts as the Company shall designate in writing.
      

     

    3. Representations
      and Warranties of the Company.
      The
      Company hereby represents and warrants to each of the Purchasers as
      follows:

     

    3.1 
      Incorporation.
      The Company has been duly incorporated and is a validly existing corporation
      in
      good standing under the laws of Delaware with full power and authority
      (corporate and other) to own, lease and operate, as the case may be, its
      properties and conduct its business as now conducted; and the Company is duly
      qualified to transact business and is in good standing in each jurisdiction
      in
      which the nature of the business conducted by it, or its ownership or leasing
      of
      property, or its employment of employees or consultants therein, makes such
      qualification necessary, except where the failure to be so qualified or be
      in
      good standing would
      not reasonably be expected to have, individually or in the aggregate, a material
      adverse effect on the financial condition, business, properties, or results
      of
      operations of the Company (“Material
      Adverse Effect”).
      The Company has not received a written notification that any proceeding has
      been
      instituted in any such jurisdiction, revoking, limiting or curtailing, or
      seeking to revoke, limit or curtail, such power and authority or qualification,
      and to the Company’s knowledge, no proceeding has been instituted in any such
      jurisdiction, revoking, limiting or curtailing, or seeking to revoke, limit
      or
      curtail, such power and authority or qualification. The Company is in possession
      of and operating in material compliance with all authorizations, licenses,
      certificates, consents, orders and permits from state, federal and other
      regulatory authorities that are material to the conduct of its business, all
      of
      which are valid and in full force and effect. The Company is not in violation
      of
      its charter or bylaws. Except
      as disclosed in the SEC Documents
      the
      Company does not own or control, directly or indirectly, any corporation,
      association or other entity. Complete and correct copies of the certificate
      of
      incorporation (the “Certificate
      of Incorporation”)
      and bylaws (the “Bylaws”)
      of the Company as in effect on the Effective Date have been filed by the Company
      with the SEC. The
      business described in the SEC Documents is carried on primarily by the Company
      and the Company does not have any Subsidiary that constitutes a “Significant
      Subsidiary” as such term is defined in Item 1-02(w) of Regulation
      S-X.

     

    
      
         

      

      
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    3.2 
      Authority.
      The Company has all requisite corporate power and authority to enter into this
      Agreement and the other Operative Agreements and to perform the transactions
      contemplated hereby and thereby. The Operative Agreements have been duly
      authorized, executed and delivered by the Company and are valid and binding
      agreements on the part of the Company, enforceable in accordance with their
      terms, except as may be limited by applicable bankruptcy, insolvency,
      reorganization, moratorium or other similar laws relating to or affecting
      creditors’ rights generally or by general equitable principles. The performance
      of this Agreement and the other Operative Agreements and the consummation of
      the
      transactions herein and therein contemplated will not result in (A) any
      violation of the Certificate of Incorporation or Bylaws of the Company or (B)
      a
      breach or violation of any of the terms and provisions of, or constitute a
      default under any contract, agreement, license, understanding, indenture,
      mortgage, deed of trust, loan agreement, joint venture, lease (including without
      limitation any sale and leaseback arrangement) or bond, debenture, note or
      other
      evidence of indebtedness, to which the Company is a party or by or to which
      it
      or its properties (including without limitation all Company Intellectual
      Property (as defined in Section 3.9(b)) are or may be bound or subject
      (each, a “Contract”)
      or any law, order, ruling, rule, regulation, writ, assessment, injunction,
      judgment or decree of any government or governmental court, agency or body,
      domestic or foreign, having jurisdiction over the Company or over any of its
      respective properties (including without limitation all Company Intellectual
      Property) or Contracts (“Government
      Entity”)
      or by or to which they or such of its properties or Contracts are or may be
      bound or subject (each, a “Law”),
      except in the case of this clause (B), such defaults or violations which
would
      not reasonably be expected to have, individually or in the aggregate, a Material
      Adverse Effect. No consent, approval, authorization or order of or qualification
      with any Government Entity is required for the execution and delivery of this
      Agreement or the other Operative Agreements and the consummation by the Company
      of the transactions herein and therein contemplated, except such consents (i)
      that will be obtained prior to the Closing Dates and (ii) as may be required
      under the Securities Act, the Exchange Act (if applicable), the Rules and
      Regulations, or under state or other securities or blue sky laws or the National
      Association of Securities Dealers, Inc. (the “NASD”),
      all of which requirements will be satisfied in all material respects at or
      prior
      to the Closing Dates.

     

    
      
         

      

      
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    3.3 
      Litigation;
      Contracts.
      Except as disclosed in the SEC Documents, there are no actions, suits, claims,
      investigations or proceedings pending or, to the Company’s knowledge, threatened
      to which the Company or, to the Company’s knowledge, to which any of its
      respective directors or officers is a party, or of which any of its respective
      properties (including without limitation all Company Intellectual Property)
      or
      any Contract is the subject, at law or in equity, before or by any federal,
      state, local or foreign governmental or regulatory commission, board, body,
      authority or agency which, if adversely decided, would
      be reasonably likely to result in a decision, ruling, finding, judgment, decree,
      order or settlement having a Material Adverse Effect or to prevent consummation
      of the transactions contemplated hereby. There are no Contracts of a character
      required to be described or referred to in the SEC Documents, and/or filed
      as an
      exhibit to, by the Securities Act, the Exchange Act or the Rules and Regulations
      which have not been
      accurately described
      in all material respects in the SEC Documents,
      and/or filed as an exhibit to such SEC Documents. Except to the extent disclosed
      in the SEC Documents, the Contracts described in the SEC Documents are in full
      force and effect and are valid agreements, enforceable by the Company, except
      as
      the enforcement thereof may be limited by applicable bankruptcy, insolvency,
      reorganization, moratorium or other similar laws relating to or affecting
      creditors’ rights generally or by general equitable principles, and except where
      the enforceability and validity thereof would not reasonably be expected to
      have, individually or in the aggregate, a Material Adverse Effect. No event
      has
      occurred, and no circumstances or condition exists, that (with or without notice
      or lapse of time) (A) has resulted or is reasonably likely to result in a
      breach, default, violation or waiver of any Contract or any provision thereof;
      (B) gives or is reasonably likely to give any party to any Contract the right
      to
      declare a breach, default or violation of or exercise any remedy under such
      Contract; (C) gives or is reasonably likely to give any party to any Contract
      the right to cancel, terminate, modify or be excused from performance of any
      obligations under such Contract; or (D) has resulted or is reasonably likely
      to
      result in a violation of any Law or in imposition of any fines, penalties,
      damages, injunctions, prohibitions or other sanctions, except in the cases
      of
      clauses (A), (B) and (C) where such breaches, defaults, violations, waivers,
      remedies, cancellations, terminations, modifications excuses or impositions
      would not reasonably by expected to have, individually or in the aggregate,
      a
      Material Adverse Effect.

     

    3.4 
      Capitalization.
      All outstanding shares of capital stock of the Company have been duly authorized
      and validly issued and are fully paid and nonassessable, have been issued in
      compliance with all federal and state securities laws, and have not been issued
      in violation of any
      preemptive rights or other rights to subscribe for or purchase securities.
      The
      authorized capital stock of the Company consists of (i) 225,000,000 shares
      of Common Stock, of which approximately 46,748,748 shares are outstanding on
      the
      date hereof and (ii) 25,000,000 shares of preferred stock, of
      which no shares are outstanding on the date hereof. Except for options to
      purchase Common Stock, other equity awards issued to employees and consultants
      of the Company pursuant to employee benefits plans and the warrants disclosed
      in the SEC Documents,
      there are no existing options, warrants, calls, preemptive (or similar) rights,
      subscriptions or other rights, agreements, arrangements or commitments of any
      character obligating the Company to issue, transfer or sell, or cause to be
      issued, transferred or sold, any shares of the capital stock of the Company
      or
      other equity interests in the Company or any securities convertible into or
      exchangeable for such shares of capital stock or other equity interests, and
      there are no outstanding contractual obligations of the Company to repurchase,
      redeem or otherwise acquire any shares of its capital stock or other equity
      interests. There are no voting agreements or other similar arrangements with
      respect to the Common Stock to which the Company is a party. The description
      of
      the Company’s stock option plans, employee stock purchase plans or similar
      arrangements, and the options or other rights granted and exercised thereunder,
      set forth in the SEC Documents accurately and fairly presents, in all material
      respects, the information required to be shown with respect to such plans,
      arrangements, options and rights.
      Except
      as described in the SEC Documents or as have been waived, no person or entity
      has the right to require the Company to register any securities of the Company
      under the Securities Act, whether on a demand basis or in connection with the
      registration of securities of the Company for its own account or for the account
      of any other person or entity. The issuance and sale of the Securities hereunder
      will not obligate the Company to issue shares of Common Stock or other
      securities to any other person or entity (other than the Purchasers) and will
      not result in the adjustment of the exercise, conversion, exchange or reset
      price of any outstanding security.

     

    
      
         

      

      
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    3.5 
      Authorization.
      The Securities have been duly authorized for issuance and sale to the Purchasers
      pursuant to this Agreement and, when issued and delivered by the Company against
      payment therefor in accordance with the terms of this Agreement, will be duly
      and validly issued and fully paid and nonassessable, and will be sold free
      and
      clear of any pledge, lien, security interest, encumbrance, claim or equitable
      interest. The
      Underlying Shares have been duly and validly authorized and reserved for
      issuance and, upon exercise of the Warrants in accordance with their terms,
      including payment of the exercise price therefore, the Underlying Shares will
      be
      validly issued, fully paid and nonassessable and will be sold free and clear
      of
      any pledge, lien, security interest, encumbrance, claim or equitable interest.
      No
      preemptive right, co-sale right, registration right, right of first refusal
      or
      other similar right of stockholders exists with respect to any of the Securities
      or the issuance and sale thereof, other than those that have been expressly
      waived prior to the date hereof, those that will have been expressly waived
      prior to the Closing Dates, and those that will automatically expire upon or
      will not apply to the consummation of the transactions contemplated on the
      Closing Dates. No further approval or authorization of any stockholder, the
      Board of Directors of the Company or others is required for the issuance and
      sale or transfer of the Securities, except as may be required (i)
      under
      state or other securities or blue sky laws
      or
      (ii) pursuant to the Registration Rights Agreement.
      The Company does not have a stockholder rights plan or other “poison pill”
arrangement and no provision of the Company’s Certificate of Incorporation or
      Bylaws that is or could reasonably be expected to become applicable to the
      Purchasers as a result of the transactions contemplated hereby.

     

    3.6 
      Accountants.
      PricewaterhouseCoopers LLP, whose report on the financial statements of the
      Company is filed with the SEC in the Company’s Annual Report on Form 10-K for
      the year ended December 31, 2006, are independent registered public accountants
      as required by the Securities Act and the Rules and Regulations. Except as
      described in the SEC Documents and as preapproved in accordance with the
      requirements set forth in Section 10A of the Exchange Act, to the Company’s
      knowledge, PricewaterhouseCoopers LLP has not engaged in any “prohibited
      activities” (as defined in Section 10A of the Exchange Act) on behalf of the
      Company.

     

    3.7 
      Financial
      Statements.
      The financial statements of the Company contained
      in the SEC Documents,
      together with the related schedules and notes: (i) present fairly, in all
      material respects, the financial position of the Company as of the dates
      indicated and the results of operations and cash flows of the Company for the
      periods specified; (ii) have been prepared in compliance with requirements
      of
      the Securities Act and the Rules and Regulations and in conformity with
      generally accepted accounting principles in the United States applied on a
      consistent basis during the periods presented and present fairly, in all
      material respects, the information required to be stated therein (provided,
      however,
      that the statements that are unaudited are subject to normal year-end
      adjustments and do not contain certain footnotes required by generally accepted
      accounting principles); (iii) comply with the antifraud provisions of the
      federal securities laws; and (iv) describe accurately, in all material respects,
      the controlling principles used to form the basis for their presentation. There
      are no financial statements (historical or pro forma) and/or related schedules
      and notes that are required to be included in the SEC Documents that are not
      included as required by the Securities Act, the Exchange Act and/or the Rules
      and Regulations.
      

     

    3.8 
      No
      Changes.
      Subsequent to December 31, 2006, except as otherwise described in the SEC
      Documents, there has not been (i) any change, development or event that would
      reasonably be expected to result, individually or in the aggregate, in a
      Material Adverse Effect, (ii) any transaction that is material to the Company,
      (iii) any obligation, direct or contingent, that is material to the Company,
      incurred by the Company, (iv) any change in the capital stock or outstanding
      indebtedness of the Company that is material to the Company, (v) any dividend
      or
      distribution of any kind declared, paid or made on the capital stock of the
      Company or (vi) any loss or damage (whether or not insured) to the property
      of
      the Company that has been sustained or will have been sustained that could
      reasonably be expected to have, individually or in the aggregate, a Material
      Adverse Effect.

     

    3.9 
      Property.

     

    (a) Except
      as set forth in the SEC Documents: (i) the Company has good and marketable
      title
      to all properties and assets described in the SEC Documents as owned by it
      free
      and clear of any pledge, lien, security interest, encumbrance, claim or
      equitable interest, whether imposed by agreement, contract, understanding,
      law,
      equity or otherwise, except for Permitted Liens (as defined below) or where
      any
      failure to have good and marketable title to such properties and assets,
      individually or in the aggregate, would not reasonably be expected to have,
      individually or in the aggregate, a Material Adverse Effect; and (ii) the
      Company has valid and enforceable leases, including without limitation any
      leases that are the subject of any sale and leaseback arrangement, for all
      properties described in the SEC Documents as leased by it, except as the
      enforcement thereof may be limited by applicable bankruptcy, insolvency,
      reorganization, moratorium or other similar laws relating to or affecting
      creditors’ rights generally or by general equitable principles. Except as set
      forth in the SEC Documents, the Company owns or leases all such properties
      as
      are necessary to its operations as now conducted or as proposed to be conducted.
      A “Permitted
      Lien”
      shall mean (i) liens for taxes not yet due, (ii) mechanics liens and similar
      liens for labor, materials or supplies incurred in the ordinary course of
      business for amounts that are not delinquent and (iii) any liens that
      individually or in the aggregate are not material.

     

    
      
         

      

      
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    (b) Except
      as described in the SEC Documents, to
      the Company’s knowledge the Company owns or has valid, binding and enforceable
      licenses or other rights to use the patents and patent applications, inventions,
      copyrights,
      trademarks, service marks, trade names, service names, technology or know-how
      (including trade secrets and other unpatented and/or unpatentable proprietary
      rights and excluding generally commercially available “off the shelf” software
      programs licensed pursuant to shrink wrap or “click and accept” licenses)
      necessary to conduct its business in the manner described in the SEC Documents
      (collectively, the “Company
      Intellectual Property”),
      except for any Company Intellectual Property the absence of which, individually
      or in the aggregate, would not reasonably be expected to have a Material Adverse
      Effect.
      The Company Intellectual Property is free and clear of any pledge, lien,
      security interest, encumbrance, claim or equitable interest, whether imposed
      by
      agreement, contract, understanding, law, equity or otherwise, except for
      Permitted Liens or where any failure to have such adequate licenses or other
      rights of use to such Intellectual Property, individually or in the aggregate,
      would
      not reasonably be expected to have, individually or in the aggregate, a Material
      Adverse Effect
      or except as described in the SEC Documents.
      The Company is not obligated to pay a royalty, grant a license or provide other
      consideration to any third party in connection with the Company Intellectual
      Property other than as disclosed in the SEC Documents
      or except as could not reasonably be expected to have
      a Material Adverse Effect.
      Except as disclosed in the SEC Documents or as could
      not
      reasonably be expected to
      have a Material Adverse Effect, (i) the Company has not received any notice
      of
      infringement or conflict with asserted rights of others with respect to any
      Company Intellectual Property, (ii) the conduct of the business of the Company
      in the manner described in the SEC Documents does not and will not, to the
      knowledge of the Company, infringe, interfere or conflict with any valid issued
      patent claim or other intellectual property right of any third party
known
      to the Company and
      (iii) no third party, including any academic or governmental organization,
      possesses rights
      to the Company Intellectual Property which, if exercised, would
      enable such party to develop products competitive to those of the Company.
      Except as disclosed in the SEC Documents,
      the Company has not received any notice or has any knowledge of (i) any
      potential infringement or misappropriation by others of the Company Intellectual
      Property or (ii) any intellectual property of others that potentially
      conflicts or interferes with the Company Intellectual Property,
      that would reasonably be expected to have, individually or in the aggregate,
      a
      Material Adverse Effect. To the Company’s knowledge, no claim of any patent or
      patent application (assuming the claims of patent applications issue as
      currently pending) included in the Company Intellectual Property is
      unenforceable or invalid, except for such unenforceability or invalidity that
      would
      not reasonably be expected to result, individually or in the aggregate, in
      a
      Material Adverse Effect
      or except as described in the SEC Documents.
      Each former and current employee and independent contractor of the Company
      has
      signed and delivered one or more written contracts with the Company pursuant
      to
      which such employee or independent contractor assigns to the Company all of
      his,
      her or its rights in and to any inventions, discoveries, improvements, works
      of
      authorship, know-how or information made, conceived, reduced to practice,
      authored or discovered in the course of employment by or performance of services
      for the Company and any and all patent rights, copyrights, trademark and other
      intellectual property rights therein or thereto.

     

    
      
         

      

      
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    3.10 
      Tax
      Returns.
      The
      Company has timely filed all federal, state and foreign income and franchise
      tax
      returns required to be filed by the Company on or prior to the date hereof,
      and
      has paid all taxes shown thereon as due, and there is no tax deficiency that
      has
      been or, to the Company’s knowledge, might be asserted against the Company that
      could reasonably be expected to have a Material Adverse Effect. All tax
      liabilities are adequately provided for on the books of the
      Company.

     

    3.11 
      Internal
      Controls.
      The
      Company has established and maintains a system of internal accounting controls
      sufficient to provide reasonable assurances that: (i) transactions are executed
      in accordance with management’s general or specific authorization; (ii)
      transactions are recorded as necessary to permit preparation of financial
      statements in conformity with generally accepted accounting principles in the
      United States and to maintain accountability for 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
      existing assets at reasonable intervals and appropriate action is taken with
      respect to any differences.

     

    3.12 
      Audit
      Committee.
      The Company’s Board of Directors has validly appointed an Audit Committee whose
      composition satisfies the requirements of Rule 4350(d)(2) of the Rules of the
      NASD (the “NASD
      Rules”)
      and the Board of Directors and/or the Audit Committee has adopted a charter
      that
      satisfies the requirements of Rule 4350(d)(1) of the NASD Rules. The Audit
      Committee has reviewed the adequacy of its charter within the past 12
      months.

     

    3.13 
      Disclosure
      Controls.
      The
      Company has established and maintains disclosure controls and procedures (as
      such term is defined in Rules 13a-15 and 15d-15 under the Exchange Act). Since
      the date of the most recent evaluation of such disclosure controls and
      procedures, there have been no significant changes in internal controls or
      in
      other factors that could significantly affect internal controls, including
      any
      corrective actions with regard to significant deficiencies and material
      weaknesses. The Company is in compliance in all material respects with all
      provisions currently in effect and applicable to the Company of the
      Sarbanes-Oxley Act of 2002, and all rules and regulations promulgated thereunder
      or implementing the provisions thereof.

     

    
      
         

      

      
        -8-

        
          

        

      

      
         

      

    

    3.14 
      Insurance.
      The Company maintains insurance with insurers of recognized financial
      responsibility of the types and in the amounts it reasonably believes to be
      adequate for its business and consistent with insurance coverage maintained
      by
      similar companies in similar businesses, including, but not limited to,
      insurance covering the acts and omissions of directors and officers, real and
      personal property owned or leased by the Company against theft, damage,
      destruction, acts of vandalism and all other risks customarily insured against,
      all of which insurance is in full force and effect; and the Company has no
      reason to believe that it will not be able to renew its existing insurance
      coverage as and when such coverage expires or to obtain similar coverage from
      similar insurers as may be necessary to continue its business at a cost that
      would not reasonably be expected to have a Material Adverse Effect.

     

    3.15 
      Losses.
      The Company has not sustained since December 31, 2006 any losses or
      interferences with its business from fire, explosion, flood or other calamity,
      whether or not covered by insurance, or from any labor dispute or court or
      governmental action, order or decree, other than any losses or interferences
      which
      could not reasonably be expected to have, individually or in the aggregate,
      a
      Material Adverse Effect.

     

    3.16 
      Labor
      Disputes.
      No
      labor dispute with employees of the Company exists or, to the Company’s
      knowledge, is imminent which could reasonably be expected to have a Material
      Adverse Effect. No collective bargaining agreement exists with any of the
      Company’s employees and, to the Company’s knowledge, no such agreement is
      imminent.

     

    3.17 
      NASDAQ
      Global Market.
      The Common Stock is registered pursuant to Section 12(g) of the Exchange Act
      and
      is listed on the NASDAQ Global Market, and the Company has taken no action
      designed to, or likely to have the effect of, terminating the registration
      of
      the Common Stock under the Exchange Act or delisting the Common Stock from
      the
      NASDAQ Global Market. Except as disclosed in the Company’s Form 8-K filed on May
      10, 2005, the Company has not received any notification that the SEC or the
      NASDAQ Stock Market LLC is contemplating terminating such registration or
      listing. The Company has taken all actions necessary to list the Securities
      for
      quotation on the NASDAQ Global Market. The Company is in compliance with
      all corporate governance requirements of the NASDAQ Global Market except for
      such non-compliance as would not, individually or in the aggregate, have a
      Material Adverse Effect. The Company shall comply with all requirements of
      the
NASD
      with respect to the issuance of the Shares and the listing of the Shares on
      the
      NASDAQ Global Market and such other securities exchange or automated quotation
      system, as applicable. The sale and issuance of the Securities does not require
      stockholder approval, including, without limitation, pursuant to the NASD
      Rules.

     

    3.18 
      Investment
      Company. The
      Company is not and, after giving effect to the offering and sale of the
      Securities, will not be an “investment company,” as such term is defined in the
      Investment Company Act of 1940, as amended.

     

    
      
         

      

      
        -9-

        
          

        

      

      
         

      

    

    3.19 
      Offering
      Materials.
      Other
      than the SEC Documents and the Operative Agreements (collectively, the
“Offering
      Materials”),
      the
      Company has not distributed and, prior to the Closing Dates, will not
      distribute, any offering materials in connection with the offering and sale
      of
      the Securities. The Company has not in the past nor will it hereafter take
      any
      action to sell, offer for sale or solicit offers to buy any securities of the
      Company which would require the offer, issuance or sale of the Shares, as
      contemplated by this Agreement, to be registered under Section 5 of the
      Securities Act (other than pursuant to the Registration Rights
      Agreement).

     

    3.20 
      No
      Manipulation of Stock.
      Neither
      the Company nor, to its knowledge, any of its affiliates has taken, directly
      or
      indirectly, any action designed to or which has constituted or which would
      reasonably be expected to cause or result, under the Exchange Act or otherwise,
      in the stabilization or manipulation of the price of any security of the Company
      to facilitate the sale or resale of the Securities.

     

    3.21 
      ERISA.
      The
      Company is in compliance in all material respects with all currently applicable
      provisions of the Employee Retirement Income Security Act of 1974, as amended,
      including the regulations and published interpretations thereunder
      (“ERISA”),
      except where a failure to so comply could not reasonably be expected to have,
      individually or in the aggregate, a Material Adverse Effect; to the Company’s
      knowledge, no unwaivable “reportable event” (as defined in ERISA) has occurred
      with respect to any “pension plan” (as defined in ERISA) for which the Company
      would have any liability; the Company has not incurred and does not expect
      to
      incur any material liability under (i) Title IV of ERISA with respect to
      termination of, or withdrawal from, any “pension plan” or (ii) Sections 412 or
      4971 of the Internal Revenue Code of 1986, as amended, including the regulations
      and published interpretations thereunder (the “Code”);
      and
      each “pension plan” for which the Company 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 would cause the loss of such qualification. 

     

    3.22 
      Environmental.
      Except
      as set forth in the SEC Documents: (i) the Company is in material compliance
      with all rules, laws and regulations relating to the use, treatment, storage
      and
      disposal of toxic substances and protection of health or the environment
      (“Environmental
      Laws”)
      which
      are applicable to its business; (ii) the Company has not received any notice
      from any governmental authority or third party of an asserted claim under
      Environmental Laws, which claim is required to be disclosed in the SEC
      Documents; (iii), to the Company’s knowledge, the Company is not currently
      required to make future material capital expenditures to comply with
      Environmental Laws; and (iv) to the Company’s knowledge, no property that is
      owned, leased or occupied by the Company has been designated a Superfund site
      pursuant to the Comprehensive Response, Compensation and Liability Act of 1980,
      as amended (42 U.S.C. Section 9601, et seq.), or otherwise designated as a
      contaminated site under applicable state or local law.

     

    3.23 
      Outstanding
      Loans to Officers or Directors.
      There
      are no outstanding loans, advances (except normal advances for business expenses
      in the ordinary course of business) or guarantees of indebtedness by the Company
      to or for the benefit of any of the officers or directors of the Company or
      any
      of the members of the families of any of them.

     

    
      
         

      

      
        -10-

        
          

        

      

      
         

      

    

    3.24 
      Regulatory
      Compliance.

     

    (a) The
      Company possess all certificates, authorizations and permits issued by the
      appropriate federal, state or foreign regulatory authorities necessary to
      conduct its business as currently conducted, including without limitation all
      such certificates, authorizations and permits required by the United States
      Food
      and Drug Administration (the “FDA”)
      or any other federal, state or foreign agencies or bodies engaged in the
      regulation of pharmaceuticals or biohazardous materials, except where the
      failure to so possess such certificates, authorizations and permits,
      individually or in the aggregate, would not result in a Material Adverse
      Effect
      or except as disclosed in the SEC Documents.
      The Company has not received any notice of proceedings relating to the
      revocation or modification of any such certificate, authorization or permit
      which, individually or in the aggregate, if the subject of an unfavorable
      decision, ruling or finding, would have a Material Adverse Effect.

     

    (b) Except
      to the extent disclosed in the SEC
      Documents,
      the Company has not received any written notices or statements from the FDA,
      the
      European Medicines Agency (the “EMEA”)
      or any other governmental agency, and otherwise has no knowledge or reason
      to
      believe, that (i) any new drug application or marketing authorization
      application for any product or potential product of the Company is or has been
      rejected or determined to be non-approvable or conditionally approvable;
and
      (ii)
      any license, approval, permit or authorization to conduct any clinical trial
      of
      or market any product or potential product of the Company has been, will be
      or
      may be suspended
      or
      revoked, except
      in the cases of clauses (i)
      and (ii)
      where such rejections, determinations, delays, requests, suspensions,
      revocations, modifications or limitations could
      not reasonably be expected to have, individually or in the aggregate, a Material
      Adverse Effect.

     

    (c) To
      the Company’s knowledge, the preclinical and clinical testing, application for
      marketing approval of, manufacture, distribution, promotion and sale of the
      products and potential products of the Company is in compliance, in all material
      respects, with all laws, rules and regulations applicable to such activities,
      including without limitation applicable good laboratory practices, good clinical
      practices and good manufacturing practices, except for such non-compliance
      as
      would not, individually or in the aggregate, have a Material Adverse Effect.
      The
      descriptions of the results of such tests and trials contained in the SEC
      Documents are accurate in all material respects. Except to the extent disclosed
      in the SEC Documents, the Company has not received notice of adverse finding,
      warning letter or clinical hold notice from the FDA or any non-U.S. counterpart
      of any of the foregoing, or any untitled letter or other correspondence or
      notice from the FDA or any other governmental authority or agency or any
      institutional or ethical review board alleging or asserting noncompliance with
      any law, rule or regulation applicable in any jurisdiction, except notices,
      letters and correspondence and non-U.S. counterparts thereof alleging or
      asserting such noncompliance as would not, individually or in the aggregate,
      have a Material Adverse Effect. The Company has not, either voluntarily or
      involuntarily, initiated, conducted or issued, or caused to be initiated,
      conducted or issued, any recall, field correction, market withdrawal or
      replacement, safety alert, warning, “dear doctor” letter, investigator notice,
      or other notice or action relating to an alleged or potential lack of safety
      or
      efficacy of any product or potential product of the Company, or any violation
      of
      any material applicable law, rule, regulation or any clinical trial or marketing
      license, approval, permit or authorization for any product or potential product
      of the Company, except such notices or actions as would not, individually or
      in
      the aggregate, have a Material Adverse Effect. 

     

    
      
         

      

      
        -11-

        
          

        

      

      
         

      

    

    3.25 
      Lock-Up
      Agreements.
      The Company has caused each person listed on Schedule
      I
      hereto to furnish to the Placement
      Agent (as defined herein),
      on or prior to the date of this Agreement, a letter or letters, in form and
      substance reasonably
      satisfactory
      to the Placement
      Agent
      (the “Lock-up
      Agreements”),
      pursuant to which such person shall agree not to, directly or indirectly, for
      a
      period (the “Lock-up
      Period”)
      commencing on the date of this Agreement and ending on the Effectiveness Date
      of
      the Initial Registration Statement (as such terms are defined in the
      Registration Rights Agreement), offer, sell, pledge, contract to sell, grant
      any
      option to purchase, grant a security interest in, hypothecate or otherwise
      sell
      or dispose of (collectively, a “Transfer”)
      any shares of Common Stock (including without limitation, shares of Common
      Stock
      that may be deemed to be beneficially owned by such person in accordance with
      the Rules and Regulations and shares of Common Stock that may be issued upon
      the
      exercise of a stock option or warrant) or any securities convertible into,
      derivative of or exchangeable or exercisable for Common Stock (collectively,
      “Covered
      Securities”),
      owned directly by such person or as to which such person has the power of
      disposition, in any such case whether owned as of the date of such letter or
      acquired thereafter, except for such Transfers that are expressly permitted
      by
      the Lock-up Agreements. The foregoing restrictions have been expressly agreed
      to
      preclude the holder of the Covered Securities from engaging in any hedging
      or
      other transaction, as more fully described in the Lock-up Agreements.
      Furthermore, such person has also agreed and consented to the entry of stop
      transfer instructions with the Company’s transfer agent against the transfer of
      the Covered Securities held by such person except in compliance with this
      restriction. The Company hereby represents and warrants that it will not
      release, prior to the expiration of the Lock-up Period, any of its officers
      from
      any Lock-up Agreements currently existing or hereafter effected without the
      prior ritten consent of Rodman & Renshaw, LLC.

     

    3.26 
      SEC
      Documents.
      The
      Company has made available to each Purchaser, a true and complete copy of the
      Company’s Annual Report on Form 10-K for the year ended December 31, 2006,
      each current report on Form 8-K (except for the information deemed to be
      furnished and not filed therewith), and definitive proxy statement, filed by
      the
      Company with the SEC during the period commencing on January 1, 2007 and ending
      on the date hereof. The Company will, promptly upon the filing thereof, also
      make available to each Purchaser all Quarterly Reports on Form 10-Q and Current
      Reports on Form 8-K and definitive proxy statements filed by the Company with
      the SEC during the period commencing on the date hereof and ending on the
      Closing Dates (all such materials required to be furnished to each Purchaser
      pursuant to this sentence or pursuant to the next preceding sentence of this
      Section 3.26 being called, collectively, the “SEC
      Documents”).
      The
      Company has filed in a timely manner all documents that the Company was required
      to file under the Exchange Act during the 12 months preceding the date of this
      Agreement. As of their respective filing dates, the SEC Documents complied
      or,
      when filed will comply in all material respects with the requirements of the
      Exchange Act or the Securities Act, as applicable, and none of the SEC Documents
      contained or, when filed, will contain any untrue statement of a material fact
      or omitted or, when filed, will omit to state a material fact required to be
      stated therein or necessary in order to make the statements made therein, in
      light of the circumstances under which they were made, not misleading, as of
      their respective filing dates, except to the extent corrected by a subsequently
      filed SEC Document.

     

    
      
         

      

      
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    3.27 
      Brokers
      or Finders.
      Except
      for Rodman & Renshaw, LLC, the Company has not dealt with any broker or
      finder in connection with the transactions contemplated by this Agreement,
      and,
      except for certain fees and expenses payable by the Company to Rodman &
Renshaw, LLC, the Company has not incurred, and shall not incur, directly or
      indirectly, any liability for any brokerage or finders’ fees or agents
      commissions or any similar charges in connection with this Agreement or any
      transaction contemplated hereby.

     

    3.28 
      No
      Integrated Offering.
      Neither
      the Company, nor any of its affiliates, nor any person acting on its or their
      behalf, has directly or indirectly made any offers or sales of any security
      or
      solicited any offers to buy any security under circumstances within the prior
      six months that would require registration under the Securities Act of the
      issuance of the Securities to the Purchasers.

     

    3.29 
      No
      General Solicitation.
      Neither
      the Company nor, to the knowledge of the Company, any person acting for the
      Company, has conducted any “general solicitation” (as such term is defined in
      Regulation D) with respect to any of the Securities being offered hereby. The
      Company will not distribute any offering material in connection with the sale
      of
      the Securities prior to the Closing Dates, other than this Agreement, the
      Registration Rights Agreement and the SEC Documents.

     

    3.30 
      Private
      Placement.
      The offer and sale of the Securities to the Purchasers as contemplated hereby
      is
      exempt from the registration requirements of the Securities Act.

     

    3.31 
      S-3
      Eligibility.
      The Company is eligible to use Form S-3 to register the Registrable Securities
      (as such term is defined in the Registration Rights Agreement) for sale by
      the
      Purchasers as contemplated by the Registration Rights Agreement.

     

    3.32 
      Disclosures.
      Neither the Company nor any person or entity acting on its behalf has provided
      the Purchasers or their agents or counsel with any information that constitutes
      or might constitute material, non-public information, other than the terms
      of
      the transactions contemplated hereby, except as has been provided pursuant
      to
      confidentiality agreements with certain of the Purchasers or as has been
      acquired by certain Purchasers in the ordinary course of the performance of
      their duties as employees or directors of the Company. 

     

    4. Representations
      and Warranties of the Purchasers.
      Each
      Purchaser severally for itself, and not jointly with the other Purchasers,
      represents and warrants to the Company as follows:

     

    4.1 
      Authorization.
      All action on the part of such Purchaser and, if applicable, its officers,
      directors and shareholders necessary for the authorization, execution, delivery
      and performance of the Operative Agreements and the consummation of the
      transactions contemplated herein and therein has been taken. When executed
      and
      delivered, each of the Operative Agreements will constitute the legal, valid
      and
      binding obligation of such Purchaser, enforceable against such Purchaser in
      accordance with its terms, except as such may be limited by bankruptcy,
      insolvency, reorganization or other laws affecting creditors’ rights generally
      and by general equitable principles. Such Purchaser has all requisite corporate
      power to enter into each of the Operative Agreements and to carry out and
      perform its obligations under the terms of the Operative Agreements. Such
      Purchaser has the knowledge and experience in financial and business matters
      as
      to be capable of evaluating the merits and risks of an investment in the
      Securities and has the ability to bear the economic risks of an investment
      in
      the Securities for an indefinite period of time.  

     

    4.2 
      Purchase
      Entirely for Own Account.
      Such
      Purchaser is acquiring the Securities being purchased by it hereunder for its
      own account, and not for resale or with a view to distribution thereof in
      violation of the Securities Act. Such Purchaser has not entered into an
      agreement or understanding with any other party to resell or distribute such
      Securities without prejudice, however, to such Purchaser’s right, subject to the
      provisions of this Agreement, at all times to sell or otherwise dispose of
      all
      or any part of such Securities pursuant to an effective registration statement
      under the Securities Act or under an exemption from such registration and in
      compliance with applicable federal and state securities laws. Nothing contained
      herein shall be deemed a representation or warranty by such Purchaser to hold
      Securities for any period of time.

     

    4.3 
      Investor
      Status; Etc.
      Such
      Purchaser certifies and represents to the Company that it is now, and at the
      time such Purchaser acquires any of the Securities, such Purchaser will be,
      an
“Accredited Investor” as defined in Rule 501 of Regulation D promulgated under
      the Securities Act and was not organized for the purpose of acquiring the
      Securities. Such Purchaser’s financial condition is such that it is able to bear
      the risk of holding the Securities for an indefinite period of time and the
      risk
      of loss of its entire investment. Such Purchaser has received, reviewed and
      considered all information it deems necessary in making an informed decision
      to
      make an investment in the Securities and has been afforded the opportunity
      to
      ask questions of and receive answers from the management of the Company
      concerning this investment and has sufficient knowledge and experience in
      investing in companies similar to the Company in terms of the Company’s stage of
      development so as to be able to evaluate the risks and merits of its investment
      in the Company.

     

    
      
         

      

      
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    4.4 
      Shares
      Not Registered.
      Such
      Purchaser understands that the Securities have not been registered under the
      Securities Act, by reason of their issuance by the Company in a transaction
      exempt from the registration requirements of the Securities Act, and that the
      Securities must continue to be held by such Purchaser unless a subsequent
      disposition thereof is registered under the Securities Act or is exempt from
      such registration. The Purchaser understands that the exemptions from
      registration afforded by Rule 144 (the provisions of which are known to it)
      promulgated under the Securities Act depend on the satisfaction of various
      conditions, and that, if applicable, Rule 144 may afford the basis for sales
      only in limited amounts.

     

    4.5 
      No
      Conflict.
      The
      execution and delivery of the Operative Agreements by such Purchaser and the
      consummation of the transactions contemplated hereby and thereby will not
      conflict with or result in any violation of or default by such Purchaser (with
      or without notice or lapse of time, or both) under, or give rise to a right
      of
      termination, cancellation or acceleration of any obligation or to a loss of
      a
      material benefit under (i) any provision of the organizational documents of
      such Purchaser, (ii) any material agreement or instrument, permit,
      franchise, or license or (iii) any judgment, order, statute, law, ordinance,
      rule or regulations, applicable to such Purchaser or its respective properties
      or assets.

     

    4.6 
      Brokers.
      Such
      Purchaser has not retained, utilized or been represented by any broker or finder
      in connection with the transactions contemplated by this Agreement.

     

    4.7 
      Consents.
      All
      consents, approvals, orders and authorizations required on the part of such
      Purchaser in connection with the execution, delivery or performance of this
      Agreement and the consummation of the transactions contemplated herein have
      been
      obtained and are effective as of the First Closing.

     

    4.8 
      Acknowledgments
      Regarding Placement Agent.
      Each Purchaser acknowledges that Rodman & Renshaw, LLC is acting as
      placement agent (the “Placement
      Agent”)
      for the Securities being offered hereby and will be compensated by the Company
      for acting in such capacity. Each Purchaser further acknowledges that in making
      its decision to enter into this Agreement and purchase the Securities it has
      relied on its own examination of the Company and the terms of, and consequences,
      of holding the Securities.

     

    4.9 
      Information.
      Each
      Purchaser and its advisors, if any, have been furnished with all materials
      relating to the business, finances and operations of the Company, and materials
      relating to the offer and sale of the Securities, if any, that have been
      requested by the Purchaser or its advisors, if any. The Purchaser and its
      advisors, if any, have been afforded the opportunity to ask questions of the
      Company. The Purchaser acknowledges and understands that its investment in
      the
      Securities involves a significant degree of risk, including the risks reflected
      in the SEC Documents.

     

    4.10 
      No
      Public Offering.
      Such
      Purchaser has not received any information relating to the Securities or the
      Company, and is not purchasing the Securities as a result of, any form of
      general solicitation or general advertising, including but not limited to,
      any
      advertisement, article, notice or other communication published in any
      newspaper, magazine or similar media or broadcast over television or radio
      or
      pursuant to any seminar or meeting whose attendees were invited by any general
      solicitation or general advertising.

     

    
      
         

      

      
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    4.11 
      Short
      Positions;
      Certain Trading Limitations.
      Such
      Purchaser will not, at any time, use any of the Securities acquired pursuant
      to
      this Agreement to cover any short position in the Common Stock if doing so
      would
      be in violation of applicable securities laws. The
      Purchaser (i) represents that on and from the time the Purchaser first became
      aware of the offering of the Shares until the date and time hereof neither
      it
      nor anyone acting on its behalf has engaged in and (ii) covenants that for
      the
      period commencing on the date and
      time hereof and ending on the earlier to occur of (A) the Company’s issuance of
      a press release disclosing the transactions contemplated hereby and (B) the
      Company’s filing of a Current Report on Form 8-K disclosing the transactions
      contemplated hereby, neither it nor anyone acting on its behalf will, engage
      in
      any hedging or other transaction which is designed to or could reasonably be
      expected to lead to or result in, or be characterized as, a sale, an offer
      to
      sell, a solicitation of offers to buy, disposition of, loan, pledge or grant
      of
      any right with respect to (collectively, a “Disposition”)
      the Common Stock of the Company by the Purchaser or any person or entity. Such
      prohibited hedging or other transaction would include without limitation
      effecting any short sale (whether or not such sale or position is “against the
      box”) or any purchase, sale or grant of any right (including without limitation
      any put or call option) with respect to the Common Stock of the Company or
      with
      respect to any security (other than a broad-based market basket or index) that
      includes, relates to or derives any significant part of its value from the
      Common Stock of the Company.
      Notwithstanding
      the foregoing, nothing set forth above would prohibit the
      location and/or reservation of borrowable shares of Common Stock.

     

    4.12 
      Broker-dealer.
      The Purchaser is not a broker-dealer. If the Purchaser is an affiliate of a
      broker-dealer, the Purchaser is acquiring the Shares in the ordinary course
      of
      its business.

     

    4.13 
      Affiliates.
      To the knowledge of the Purchaser, the Purchaser is not
      an affiliate of the Company, except as otherwise disclosed such Purchaser’s
      Investor Questionnaire.

     

    5. Conditions
      Precedent.

     

    5.1 
      Conditions
      to the Obligation of the Purchasers to Consummate the Closings.
      The
      obligation of each Purchaser to consummate the First Closing and the Additional
      Closing and to purchase and pay for the Securities being purchased by it
      pursuant to this Agreement is subject to the satisfaction of the following
      conditions precedent:

     

    
      
         

      

      
        -15-

        
          

        

      

      
         

      

    

    (a) The
      representations and warranties of the Company contained herein shall be true
      and
      correct on and as of the Closing Dates with the same force and effect as though
      made on and as of the Closing Dates.

     

    (b) The
      Registration Rights Agreement shall have been executed and delivered by the
      Company.

     

    (c) The
      Company shall not have been adversely affected in any material way prior to
      the
      Closing Dates; and the Company shall have performed all obligations and
      conditions herein required to be performed or observed by the Company on or
      prior to the Closing Dates.

     

    (d) The
      Company shall have filed with NASDAQ a true and complete Notification Form:
      Listing of Additional Shares covering the Shares and the Underlying
      Shares.

     

    (e) No
      proceeding challenging this Agreement or the transactions contemplated hereby,
      or seeking to prohibit, alter, prevent or materially delay the First Closing
      or
      the Additional Closing, shall have been instituted before any court, arbitrator
      or governmental body, agency or official and shall be pending.

     

    (f) The
      purchase of and payment for the Securities by the Purchasers shall not be
      prohibited by any law or governmental order or regulation. All necessary
      consents, approvals, licenses, permits, orders and authorizations of, or
      registrations, declarations and filings with, any governmental or administrative
      agency or of any other person with respect to any of the transactions
      contemplated hereby shall have been duly obtained or made and shall be in full
      force and effect.

     

    (g) The
      Company shall have obtained and delivered to the Purchasers the Lock-up
      Agreements referred to in Section 3.25 hereof.

     

    (h) A
      minimum
      of 80% of the funds to be received by the Company shall have been received
      as
      payment for shares of Common Stock in accordance with this Agreement.

     

    (i) All
      instruments and corporate proceedings in connection with the transactions
      contemplated by this Agreement to be consummated at the First Closing and the
      Additional Closing shall be reasonably satisfactory in form and substance to
      such Purchaser, the Purchasers shall have received an opinion of legal counsel
      to the Company substantially in the form of Exhibit C
      attached
      hereto, and such Purchaser shall have received such certificates of the
      Company’s officers as such Purchaser may have reasonably requested in connection
      with such transactions.

     

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

     

    
      
         

      

      
        -16-

        
          

        

      

      
         

      

    

    5.2 
      Conditions
      to the Obligation of the Company to Consummate the Closings.
      The
      obligation of the Company to consummate the First Closing and the Additional
      Closing and to issue and sell to each of the Purchasers the Securities to be
      purchased by it at the First Closing and the Additional Closing is subject
      to
      the satisfaction of the following conditions precedent:

     

    (a) The
      representations and warranties contained herein of such Purchaser shall be
      true
      and correct on and as of the Closing Dates with the same force and effect as
      though made on and as of the Closing Dates.

     

    (b) The
      Registration Rights Agreement shall have been executed and delivered by each
      Purchaser.

     

    (c) The
      Purchasers shall have performed all obligations and conditions herein required
      to be performed or observed by the Purchasers on or prior to the Closing
      Dates.

     

    (d) No
      proceeding challenging this Agreement or the transactions contemplated hereby,
      or seeking to prohibit, alter, prevent or materially delay the First Closing
      or
      the Additional Closing, shall have been instituted before any court, arbitrator
      or governmental body, agency or official and shall be pending.

     

    (e) The
      sale
      of the Securities by the Company shall not be prohibited by any law or
      governmental order or regulation. All necessary consents, approvals, licenses,
      permits, orders and authorizations of, or registrations, declarations and
      filings with, any governmental or administrative agency or of any other person
      with respect to any of the transactions contemplated hereby shall have been
      duly
      obtained or made and shall be in full force and effect.

     

    (f) Each
      of
      the Purchasers shall have executed and delivered to the Company an Investor
      Questionnaire, in the form attached hereto as Appendix
      I,
      pursuant to which each such Purchaser shall provide information necessary to
      confirm each such Purchaser’s status as an “accredited investor” (as such term
      is defined in Rule 501 promulgated under the Securities Act) and to enable
      the
      Company to comply with the Registration Rights Agreement.

     

    (g) Each
      of
      the other Purchasers shall have purchased, in accordance with this Agreement,
      the number of shares of Common Stock set forth opposite its name under the
      heading “Number
      of Shares to be Purchased”
and
      the
      number of Warrants set forth opposite its name on Exhibit A.

     

    (h) All
      instruments and corporate proceedings in connection with the transactions
      contemplated by this Agreement to be consummated at the First Closing and the
      Additional Closing shall be satisfactory in form and substance to the Company,
      and the Company shall have received counterpart originals, or certified or
      other
      copies of all documents, including without limitation records of corporate
      or
      other proceedings, which it may have reasonably requested in connection
      therewith.

     

    
      
         

      

      
        -17-

        
          

        

      

      
         

      

    

    6. Transfer,
      Legends.

     

    6.1 
      Securities
      Law Transfer Restrictions.

     

    (a) Each
      Purchaser understands that the Securities have not been registered under the
      Securities Act or any state securities laws, and each Purchaser agrees that
      it
      will not dispose of the Securities unless (a) the resale of the Securities
      is registered under the Securities Act, or (b) such registration is not
      required under the Securities Act or any applicable state securities law due
      to
      the applicability of an exemption therefrom. In that connection, such Purchaser
      is aware of Rule 144 under the Securities Act and the restrictions imposed
      thereby.

     

    (b) Each
      Purchaser acknowledges that no action has been or will be taken in any
      jurisdiction outside the United States by the Company or the Placement Agent
      that would permit an offering of the Securities, or possession or distribution
      of offering materials in connection with the issue of Securities, in any
      jurisdiction outside of the United States where action for that purpose is
      required. Each Purchaser outside the United States will comply with all
      applicable laws and regulations in each foreign jurisdiction in which it
      purchases, offers, sells or delivers Securities or has in its possession or
      distributes any offering material, in all cases at its own expense. The
      Placement Agent is not authorized to make any representation or use any
      information in connection with the issue, placement, purchase and sale of the
      Securities.

     

    (c) Each
      Purchaser hereby covenants with the Company not to make any sale of the
      Securities without complying with the provisions of the Operative Agreements
      and
      such Purchaser acknowledges that the certificates evidencing the Shares and
      each
      Warrant will be imprinted with a legend that prohibits their transference except
      in accordance therewith. Each Purchaser acknowledges that there may occasionally
      be times when the Company, based on the advice of its counsel, determines that
      it must suspend a registration statement (a “Registration
      Statement”)
      registering the Shares and Underlying Shares, until such time as an amendment
      to
      a Registration Statement has been filed by the Company and declared effective
      by
      the SEC or until the Company has amended or supplemented such
      Prospectus.

     

    6.2 
      Legends.

     

    (a) Each
      certificate requesting any of the Shares shall be endorsed with the legends
      set
      forth below, and each Purchaser covenants that, except to the extent such
      restrictions are waived by the Company, it shall not transfer the shares
      represented by any such certificate without complying with the restrictions
      on
      transfer described in this Agreement and the legends endorsed on such
      certificate:

     

    “THE
      SHARES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER THE
      SECURITIES ACT OF 1933 AND MAY NOT BE OFFERED, SOLD, ASSIGNED, PLEDGED
      TRANSFERRED OR OTHERWISE DISPOSED OF IN THE ABSENCE OF AN EFFECTIVE REGISTRATION
      STATEMENT UNDER SAID ACT OR PURSUANT TO AN AVAILABLE EXEMPTION FROM REGISTRATION
      UNDER SAID ACT AND, IF REQUESTED BY THE COMPANY, UPON DELIVERY OF AN OPINION
      OF
      COUNSEL REASONABLY SATISFACTORY TO THE COMPANY THAT THE PROPOSED TRANSFER IS
      EXEMPT FROM SAID ACT. THIS SECURITY MAY BE PLEDGED IN CONNECTION WITH A BONA
      FIDE MARGIN ACCOUNT WITH A REGISTERED BROKER-DEALER OR OTHER LOAN WITH A
      FINANCIAL INSTITUTION THAT IS AN “ACCREDITED INVESTOR” AS DEFINED IN RULE 501(a)
      UNDER THE SECURITIES ACT OR OTHER LOAN SECURED BY SUCH SECURITIES.”

     

    
      
         

      

      
        -18-

        
          

        

      

      
         

      

    

    (b) Upon
      the
      earlier of (i) registration for resale pursuant to the Registration Rights
      Agreement or (ii) the date that the Purchasers may resell a Security pursuant
      to
      Rule 144 without volume or manner restrictions, the Company shall (A) deliver
      to
      the transfer agent for the Common Stock (the “Transfer
      Agent”)
      irrevocable instructions that the Transfer Agent shall reissue a certificate
      representing shares of Common Stock without legends upon receipt by such
      Transfer Agent of the legended certificates for such shares, together with,
      if
      the sale is being made pursuant to Rule 144, a customary representation by
      the
      Purchaser that Rule 144 applies to the shares of Common Stock represented
      thereby, and (B) cause its counsel to deliver to the Transfer Agent one or
      more
      blanket opinions to the effect that the removal of such legends in such
      circumstances may be effected under the Securities Act. From and after the
      earlier of such dates, upon a Purchaser’s written request, the Company shall
      promptly, and in any event within 3 business days of receipt of such
      certificates, cause certificates evidencing the Purchaser’s Securities to be
      replaced with certificates which do not bear such restrictive legends, and
      Underlying Shares subsequently issued upon due exercise of the Warrants shall
      not bear such restrictive legends provided, if applicable, the Rule 144
      certificate is provided. When the Company is required to cause an unlegended
      certificate to replace a previously issued legended certificate, if: (1) the
      unlegended certificate is not delivered to a Purchaser within three (3) Business
      Days of submission by that Purchaser of a legended certificate and supporting
      documentation to the Transfer Agent as provided above and (2) prior to the
      time
      such unlegended certificate is received by the Purchaser, the Purchaser, or
      any
      third party on behalf of such Purchaser or for the Purchaser’s account,
      purchases (in an open market transaction or otherwise) shares of Common Stock
      to
      deliver in satisfaction of a sale by the Purchaser of shares represented by
      such
      certificate (a “Buy-In”),
      then
      the Company shall pay in cash to the Purchaser (for costs incurred either
      directly by such Purchaser or on behalf of a third party) the amount by which
      the total purchase price paid for Common Stock as a result of the Buy-In
      (including brokerage commissions, if any) exceeds the proceeds received by
      such
      Purchaser as a result of the sale to which such Buy-In relates. The Purchaser
      shall provide the Company written notice indicating the amounts payable to
      the
      Purchaser in respect of the Buy-In. The Company shall pay all transfer agent
      fees, stamp taxes and other taxes and duties levied in connection with the
      delivery of any Securities to the Purchasers.

     

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

     

    (d) Notwithstanding
      the removal of legends as provided in Section 6.2(b) and subject in all
      respects to the requirements of a Purchasers’ custodian, until a Purchaser’s
      Shares are sold pursuant to a Registration Statement or Rule 144 (without volume
      or manner restrictions) becomes available to the Purchaser, the Purchaser shall
      continue to hold such shares in the form of a definitive stock certificate
      and
      shall not hold the shares in street name or in book-entry form with a securities
      depository.

     

    7. Termination;
      Liabilities Consequent Thereon.
      This
      Agreement may be terminated and the transactions contemplated hereunder
      abandoned at any time prior to the First Closing only as follows:

     

    (a) by
      any
      Purchaser (with respect to itself only), upon notice to the Company if the
      conditions set forth in Section 5.1 shall not have been satisfied on or prior
      to
      the fourth Trading Day following the date of this Agreement; or

     

    (b) by
      the
      Company, upon notice to the Purchasers if the conditions set forth in Section
      5.2 shall not have been satisfied on or prior to the fourth Trading Day
      following the date of this Agreement; or

     

    (c) at
      any
      time by mutual agreement of the Company and the Purchasers; or

     

    (d) by
      any
      Purchaser (with respect to itself only), if there has been any breach of any
      representation or warranty or any material breach of any covenant of the Company
      contained herein and the same has not been cured within 15 days after notice
      thereof (it being understood and agreed by each Purchaser that, in the case
      of
      any representation or warranty of the Company contained herein which is not
      hereinabove qualified by application thereto of a materiality standard, such
      representation or warranty will be deemed to have been breached for purposes
      of
      this Section 7(d) only if such representation or warranty was not true and
      correct in all material respects at the time such representation or warranty
      was
      made by the Company); or

     

    
      
         

      

      
        -19-

        
          

        

      

      
         

      

    

    (e) by
      the
      Company, if there has been any breach of any representation, warranty or any
      material breach of any covenant of any Purchaser contained herein and the same
      has not been cured within 15 days after notice thereof (it being understood
      and
      agreed by the Company that, in the case of any representation and warranty
      of
      the Purchaser contained herein which is not hereinabove qualified by application
      thereto of a materiality standard, such representation or warranty will be
      deemed to have been breached for purposes of this Section 7(e) only if such
      representation or warranty was not true and correct in all material respects
      at
      the time such representation or warranty was made by such
      Purchaser).

     

    In
      the event of termination by the Company or any Purchaser of its obligations
      to
      effect the First Closing or the Additional Closing pursuant to this Section
      7,
      written notice thereof shall forthwith be given to the other Purchasers and
      the
      other Purchasers shall have the right to terminate their obligations to effect
      the First Closing or the Additional Closing upon written notice to the Company
      and the other Purchasers.
      Any
      termination pursuant to this Section 7 shall be without liability on the part
      of
      any party, unless such termination is the result of a material breach of this
      Agreement by a party to this Agreement in which case such breaching party shall
      remain liable for such breach notwithstanding any termination of this
      Agreement.

     

    8. Agreements
      of the Company.
      

     

    8.1 Lock-Up.
      The Company agrees that
      it will not, until 90 days after the effective date of the Registration
      Statement (the “Registration
      Effective Date”),
      offer to sell, solicit offers to purchase or sell any of its capital stock
      or
      securities convertible into or exchangeable or exercisable for its capital
      stock, including without limitation any debt, preferred stock or other
      instrument or security that is, at any time during its life and under any
      circumstances, convertible into or exchangeable or exercisable for its capital
      stock, without the prior written consent of the Majority Purchasers; provided,
      however, that the foregoing shall not preclude the Company from issuing a pure
      debt instrument or from issuing stock options or Common
      Stock issuable upon exercise of outstanding options and warrants, or
      pursuant to employee benefit or stock purchase plans. The
      Company has not offered to sell, solicited offers to purchase or sold any
      securities during the six months preceding the date of this Agreement, and
      the
      Company will not offer to sell, solicit offers to purchase or sell, any
securities
      during the six months following the date of this Agreement, that would be
      required to be integrated with the offer and sale of the Securities so as to
      require registration of the offer and sale of the Securities under the
      Securities Act of 1933, as amended.

     

    8.2 Mergers.
      The
      Company agrees that it will not, prior to the date that is six (6) months from
      the Registration Effective Date, consummate a merger or other consolidation
      that
      could result in short swing liability under Section 16 of the Securities
      Exchange Act of 1934 (“Section 16”) for any Purchaser; provided, however, that
      the foregoing shall not preclude the Company from entering into a definitive
      agreement with respect to such merger or other business
      combination.

     

    
      
         

      

      
        -20-

        
          

        

      

      
         

      

    

    8.3 Non-Public
      Information.
      Except
      with respect to the material terms and conditions of the transactions
      contemplated by the Operative Agreements, the Company covenants and agrees
      that
      neither it nor any other person acting on its behalf will provide any Purchaser
      or its agents or counsel with any information that the Company believes
      constitutes material non-public information, unless prior thereto such Purchaser
      shall have executed a written agreement regarding the confidentiality and use
      of
      such information. The Company understands and confirms that each Purchaser
      shall
      be relying on the foregoing covenant in effecting transactions in securities
      of
      the Company.

     

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

     

      
      8.5   Listing
      of Common Stock.

     

    The
      Company hereby agrees to use best efforts to maintain the listing of the Common
      Stock on a Trading Market, and as soon as reasonably practicable following
      the
      Closing (but not later than the earlier of the Effective Date and the first
      anniversary of the Closing Date) to list all of the Shares and Warrant Shares
      on
      such Trading Market. The Company further agrees, if the Company applies to
      have
      the Common Stock traded on any other Trading Market, it will include in such
      application all of the Shares and Warrant Shares, and will take such other
      action as is necessary to cause all of the Shares and Warrant Shares to be
      listed on such other Trading Market as promptly as possible. The Company will
      take all action reasonably necessary to continue the listing and trading of
      its
      Common Stock on a Trading Market and will comply in all respects with the
      Company’s reporting, filing and other obligations under the bylaws or rules of
      the Trading Market.

     

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

     

    8.7 Indemnification
      of Purchasers.
      Subject
      to the provisions of this Section 8.7, the Company will indemnify and hold
      each
      Purchaser and its directors, officers, shareholders, members, partners,
      employees and agents (and any other persons with a functionally equivalent
      role
      of a person holding such titles notwithstanding a lack of such title or any
      other title), each person who controls such Purchaser (within the meaning of
      Section 15 of the Securities Act and Section 20 of the Exchange Act), and the
      directors, officers, shareholders, agents, members, partners or employees (and
      any other persons with a functionally equivalent role of a person holding such
      titles notwithstanding a lack of such title or any other title) of such
      controlling persons (each, a “Purchaser
      Party”)
      harmless from any and all losses, liabilities, obligations, claims,
      contingencies, damages, costs and expenses, including all judgments, amounts
      paid in settlements, court costs and reasonable attorneys’ fees and costs of
      investigation that any such Purchaser Party may suffer or incur as a result
      of
      or relating to any breach of any of the representations, warranties, covenants
      or agreements made by the Company in this Agreement or in the other Operative
      Documents. If any action shall be brought against any Purchaser Party in respect
      of which indemnity may be sought pursuant to this Agreement, such Purchaser
      Party shall promptly notify the Company in writing, and the Company shall have
      the right to assume the defense thereof with counsel of its own choosing
      reasonably acceptable to the Purchaser Party. Any Purchaser Party shall have
      the
      right to employ separate counsel in any such action and participate in the
      defense thereof, but the fees and expenses of such counsel shall be at the
      expense of such Purchaser Party except to the extent that (i) the employment
      thereof has been specifically authorized by the Company in writing, (ii) the
      Company has failed after a reasonable period of time to assume such defense
      and
      to employ counsel or (iii) in such action there is, in the reasonable opinion
      of
      such separate counsel, a material conflict on any material issue between the
      position of the Company and the position of such Purchaser Party, in which
      case
      the Company shall be responsible for the reasonable fees and expenses of no
      more
      than one such separate counsel. The Company will not be liable to any Purchaser
      Party under this Agreement (i) for any settlement by a Purchaser Party effected
      without the Company’s prior written consent, which shall not be unreasonably
      withheld or delayed; or (ii) to the extent, but only to the extent that a loss,
      claim, damage or liability is attributable to any Purchaser Party’s breach of
      any of the representations, warranties, covenants or agreements made by such
      Purchaser Party in this Agreement or in the other Operative
      Documents.

     

    
      
         

      

      
        -21-

        
          

        

      

      
         

      

    

    9. Miscellaneous
      Provisions.

     

    9.1 
      Public
      Statements or Releases.
      The Company shall by 8:30 a.m. Eastern time on the business day following the
      date hereof, issue
      a press release
      and file
      a Current Report on Form 8-K, copies of each of which shall be provided to
      the
      Purchasers for review, disclosing the transactions contemplated
      hereby and
      make
      such other filings and notices in the manner and time required by the SEC.
      The
      Company and each Purchaser shall consult with each other in issuing any press
      releases and/or filing any Current Reports on Form 8-K or other such SEC
      Documents with respect to the transactions contemplated hereby, and none of
      the
      parties to this Agreement shall
      make, issue, or release any announcement, whether to the public generally,
      or to
      any of its suppliers or customers, with respect to this Agreement or the
      transactions provided for herein, or make any statement or acknowledgment of
      the
      existence of, or reveal the status of, this Agreement or the transactions
      provided for herein, without the prior consent of the other
      parties, which shall not be unreasonably withheld or delayed,
      provided,
      that nothing in this Section 9.1 shall prevent any of
      the parties hereto from
      making such public announcements as it
      may consider
      necessary in
      order for
      it to
      satisfy its legal obligations, but to the extent not inconsistent with such
      obligations, it shall provide the other parties
      with an opportunity to review and comment on any proposed public announcement
      before it is made.

     

    9.2 
      Further
      Assurances.
      Each
      party agrees to cooperate fully with the other party and to execute such further
      instruments, documents and agreements and to give such further written
      assurances, as may be reasonably requested by the other party to better evidence
      and reflect the transactions described herein and contemplated hereby, and
      to
      carry into effect the intents and purposes of this Agreement.

     

    9.3 
      Rights
      Cumulative.
      Each
      and all of the various rights, powers and remedies of the parties shall be
      considered to be cumulative with and in addition to any other rights, powers
      and
      remedies which such parties may have at law or in equity in the event of the
      breach of any of the terms of this Agreement. The exercise or partial exercise
      of any right, power or remedy shall neither constitute the exclusive election
      thereof nor the waiver of any other right, power or remedy available to such
      party.

     

    9.4 
      Pronouns.
      All
      pronouns or any variation thereof shall be deemed to refer to the masculine,
      feminine or neuter, singular or plural, as the identity of the person, persons,
      entity or entities may require.

     

    9.5 
      Notices.
      Any
      notices, reports or other correspondence (hereinafter collectively referred
      to
      as “correspondence”) required or permitted to be given hereunder shall be in
      writing and shall be sent by postage prepaid first class mail, courier or
      telecopy or delivered by hand to the party to whom such correspondence is
      required or permitted to be given hereunder, and shall be deemed sufficient
      upon
      receipt when delivered personally or by courier, overnight delivery service
      or
      confirmed facsimile, or three (3) business days after being deposited in the
      regular mail as certified or registered mail (airmail if sent internationally)
      with postage prepaid, if such notice is addressed to the party to be notified
      at
      such party’s address or facsimile number as set forth below:

     

    (a) All
      correspondence to the Company shall be addressed as follows:

     

    
      	 	
              20425
                Seneca Meadows Parkway

              Germantown,
                Maryland 20876

              Attention:
                Edward
                M. Rudnic, Ph.D.

              President
                and Chief Executive Officer

              Facsimile: (301)
                944-6700

            	 
	 	 	 
	 	with a copy to	 
	 	 	 
	 	
              Dewey
                & LeBoeuf LLP

              1301
                Avenue of the Americas

              New
                York, New York

              Attention:
                 Frederick
                W. Kanner, Esq.

              Facsimile:   
                (212)
                259-6333

            	 

    

    

    

    
      
         

      

      
        -22-

        
          

        

      

      
         

      

    

    (b) All
      correspondence to any Purchaser shall be sent to such Purchaser at the address
      set forth in Exhibit A.

     

    (c) Any
      entity may change the address to which correspondence to it is to be addressed
      by written notification as provided for herein.

     

    9.6 
      Captions.
      The
      captions and paragraph headings of this Agreement are solely for the convenience
      of reference and shall not affect its interpretation.

     

    9.7 
      Severability.
      Should
      any part or provision of this Agreement be held unenforceable or in conflict
      with the applicable laws or regulations of any jurisdiction, the invalid or
      unenforceable part or provisions shall be replaced with a provision which
      accomplishes, to the extent possible, the original business purpose of such
      part
      or provision in a valid and enforceable manner, and the remainder of this
      Agreement shall remain binding upon the parties hereto.

     

    9.8 
      Governing
      Law; Consent to Jurisdiction; Waiver of Jury Trial; Injunctive
      Relief.

     

    (a) This
      Agreement shall be governed by and construed in accordance with the internal
      and
      substantive laws of the State of New York and without regard to any conflicts
      of
      laws concepts which would apply the substantive law of some other
      jurisdiction.

     

    (b) Each
      of the parties hereto irrevocably submits to the exclusive jurisdiction of
      the
      courts of the State of New York located in New York County and the United States
      District Court for the Southern District of New York for the purpose of any
      suit, action, proceeding or judgment relating to or arising out of this
      Agreement and the transactions contemplated hereby. Service of process in
      connection with any such suit, action or proceeding may be served on each party
      hereto anywhere in the world by the same methods as are specified for the giving
      of notices under this Agreement. Each of the parties hereto irrevocably consents
      to the jurisdiction of any such court in any such suit, action or proceeding
      and
      to the laying of venue in such court. Each party hereto irrevocably waives
      any
      objection to the laying of venue of any such suit, action or proceeding brought
      in such courts and irrevocably waives any claim that any such suit, action
      or
      proceeding brought in any such court has been brought in an inconvenient forum.
      EACH OF THE PARTIES HERETO WAIVES ANY RIGHT TO REQUEST A TRIAL BY JURY IN ANY
      LITIGATION WITH RESPECT TO THIS AGREEMENT AND REPRESENTS THAT COUNSEL HAS BEEN
      CONSULTED SPECIFICALLY AS TO THIS WAIVER.

     

    (c) Each
      of
      the parties hereto acknowledges and agrees that damages will not be an adequate
      remedy for any material breach or violation of this Agreement if such material
      breach or violation would cause immediate and irreparable harm (an “Irreparable
      Breach”).
      Accordingly, in the event of a threatened or ongoing Irreparable Breach, each
      party hereto shall be entitled to seek, equitable relief of a kind appropriate
      in light of the nature of the ongoing or threatened Irreparable Breach, which
      relief may include, without limitation, specific performance or injunctive
      relief; provided,
      however,
      that if
      the party bringing such action is unsuccessful in obtaining the relief sought,
      the moving party shall pay the non-moving party’s reasonable costs, including
      attorney’s fees, incurred in connection with defending such action. Such
      remedies shall not be the parties’ exclusive remedies, but shall be in addition
      to all other remedies provided in this Agreement.

     

    
      
         

      

      
        -23-

        
          

        

      

      
         

      

    

    9.9 
      Amendments.
      This
      Agreement may not be amended or modified except pursuant to an instrument in
      writing signed by the Company and the Majority Purchasers; notwithstanding
      the
      foregoing, Section 8.2 hereof cannot be amended or waived without the consent
      of
      any purchaser that could incur short swing liability under Section
      16.

     

    9.10 
      Waiver.
      No
      waiver of any term, provision or condition of this Agreement, whether by conduct
      or otherwise, in any one or more instances, shall be deemed to be, or be
      construed as, a further or continuing waiver of any such term, provision or
      condition or as a waiver of any other term, provision or condition of this
      Agreement.

     

    9.11 Expenses.
      Each
      party will bear its own costs and expenses in connection with this
      Agreement.

     

    9.12Assignment.
      The
      rights and obligations of the parties hereto shall inure to the benefit of
      and
      shall be binding upon the authorized successors and permitted assigns of each
      party. No party may assign its rights or obligations under this Agreement or
      designate another person (i) to perform all or part of its obligations
      under this Agreement or (ii) to have all or part of its rights and benefits
      under this Agreement, in each case without the prior written consent of the
      other party, provided,
      however,
      that a
      Purchaser may assign its rights and delegate its duties hereunder in whole
      or in
      part to an Affiliate or to a third party acquiring some or all of its Securities
      in a transaction complying with applicable securities laws without the prior
      written consent of the Company or the other Investors; provided,
      that
      no such
      assignment shall affect the obligations of such Purchaser hereunder. In the
      event of any assignment in accordance with the terms of this Agreement, the
      assignee shall specifically assume and be bound by the provisions of the
      Agreement by executing and agreeing to an assumption agreement reasonably
      acceptable to the other party.

     

    9.13 
      Survival.
      The respective representations and warranties given by the parties hereto shall
      survive the Closing Dates and the consummation of the transactions contemplated
      herein.

     

    9.14 
      Counterpart.
      This
      Agreement may be executed in two or more counterparts, each of which shall
      be
      deemed an original and all of which together shall constitute one
      instrument.

     

    
      
         

      

      
        -24-

        
          

        

      

      
         

      

    

    9.15 
      Entire
      Agreement.
      This
      Agreement and the Registration Rights Agreement constitute the entire agreement
      between the parties hereto respecting the subject matter hereof and supersede
      all prior agreements, negotiations, understandings, representations and
      statements respecting the subject matter hereof, whether written or oral. No
      modification, alteration, waiver or change in any of the terms of this Agreement
      shall be valid or binding upon the parties hereto unless made in writing and
      duly executed by the Company and the Majority Purchasers.

     

    9.16 
      Independent
      Nature of Purchasers’ Obligations and Rights.
      The
      obligations of each Purchaser under any Operative Agreement are several and
      not
      joint with the obligations of any other Purchaser, and no Purchaser shall be
      responsible in any way for the performance of the obligations of any other
      Purchaser under any Operative Agreement. Nothing contained herein or in any
      other Operative Agreement, and no action taken by any Purchaser pursuant hereto
      or thereto, shall be deemed to constitute the Purchasers as a partnership,
      an
      association, a joint venture or any other kind of entity, or create a
      presumption that the Purchasers are in any way acting in concert or as a group
      with respect to such obligations or the transactions contemplated by the
      Operative Agreements and the Company acknowledges that the Purchasers are not
      acting in concert or as a group with respect to such obligations or the
      transactions contemplated by the Operative Agreements. Each Purchaser confirms
      that it has independently participated in the negotiation of the transaction
      contemplated hereby with the advice of its own counsel and advisors. Each
      Purchaser shall be entitled to independently protect and enforce its rights,
      including, without limitation, the rights arising out of this Agreement or
      out
      of any other Operative Agreement, and it shall not be necessary for any other
      Purchaser to be joined as an additional party in any proceeding for such
      purpose.

     

    9.17 
      Equal
      Treatment of Purchasers.
      No consideration shall be offered or paid to any Purchaser to amend or consent
      to a waiver or modification of any provision of any of the Operative Agreements
      unless the same consideration is also offered to all of the parties to the
      Operative Agreements. For clarification purposes, this provision constitutes
      a
      separate right granted to each Purchaser by the Company and negotiated
      separately by each Purchaser, and is intended for the Company to treat the
      Purchasers as a class and shall not in any way be construed as the Purchasers
      acting in concert or as a group with respect to the purchase, disposition or
      voting of Securities or otherwise.

     

    9.18 
      Costs
      of Enforcement.
      In the
      event that legal proceedings are commenced by any party to this Agreement
      against another party to this Agreement in connection with this Agreement or
      the
      other Operative Agreements, the party or parties which do not prevail in such
      proceedings shall severally, but not jointly, pay their pro rata share of the
      reasonable attorneys’ fees and other reasonable out-of-pocket costs and expenses
      incurred by the prevailing party in such proceedings.

     

    [Signature
      Page to Follow]

     

    
      
         

      

      
        -25-

        
          

        

      

      
         

      

    

    IN
      WITNESS WHEREOF, the parties hereto have executed this Securities Purchase
      Agreement as of the day and year first above written.

     

    
      	 	 	 
	 	 	MIDDLEBROOK PHARMACEUTICALS,
              INC. 
	 
 	 
 	 
 
	 	 	By:
	 	
              
Name:
              Edward M. Rudnic, Ph.D.
	 	Title:
              President and Chief Executive Officer

    

     

     

    THE
      PURCHASER’S SIGNATURE TO THE INVESTOR QUESTIONNAIRE DATED OF EVEN DATE HEREWITH
      SHALL CONSTITUTE THE PURCHASER’S SIGNATURE TO THIS SECURITIES PURCHASE
      AGREEMENT.

     

    

     

    

     

    

      Signature
        Page to Securities Purchase Agreement

    

     

    
      
         

      

      
         

        
          

        

      

      
         

      

    

    Exhibit
      A

     

     

    SCHEDULE
      OF PURCHASERS

     

    
      	
              Purchaser
                Name and Address

            	
              Number
                of Shares to be Purchased

            	
              Number
                of Warrants to be Purchased

            	
              Aggregate
                Purchase Price

            	
              Closing
                Date

            
	 	 	 	 	 
	 	 	 	 	 
	 	 	 	 	 
	 	 	 	 	 
	 	 	 	 	 
	 	 	 	 	 
	 	 	 	 	 
	 	 	 	 	 
	 	 	 	 	 
	 	 	 	 	 
	 	 	 	 	 
	 	 	 	 	 
	 	 	 	 	 
	 	 	 	 	 
	 	 	 	 	 
	 	 	 	 	 
	 	 	 	 	 
	 	 	 	 	 
	 	 	 	 	 
	 	 	 	 	 
	 	 	 	 	 
	 	 	 	 	 
	 	 	 	 	 
	 	 	 	 	 
	 	 	 	 	 
	 	 	 	 	 

    

    

     

    
      
         

      

      
         

        
          

        

      

      
         

      

    

    Exhibit
      B

     

    

     

    FORM
      OF WARRANT

     

    

     

    

    
      
         

      

      
        
        

        
          

        

      

      
         

      

    

    Exhibit
      C

     

    

     

    LEGAL
      OPINION

     

    [Note:
      Opinion will be subject to customary assumptions and
      qualifications]

     

    1. The
      Company is a corporation validly existing and in good standing under the laws
      of
      the State of Delaware, with the corporate power and authority necessary to
      own
      and lease its properties and to conduct its business as described in the SEC
      Documents. The Company is qualified to do business as a foreign corporation
      in
      the State of Maryland. 

     

    2. The
      Company has the requisite corporate power and authority to execute, deliver
      and
      perform its obligations under the Operative Agreements and to issue and deliver
      the Securities. The Company has taken all necessary corporate action to
      authorize its execution, delivery and performance of each of the Operative
      Agreements and the issuance and delivery of the Securities.

    

    3. Each
      of
      the Operative Agreements has been duly executed and delivered by the Company
      and
      constitutes a legal, valid and binding obligation of the Company and is
      enforceable against the Company in accordance with its terms except as limited
      by (a) bankruptcy, insolvency, reorganization, moratorium, fraudulent transfer
      or similar laws of general application now or hereafter in effect affecting
      the
      rights and remedies of creditors; (b) general principles of equity (regardless
      of whether enforceability is considered in a proceeding at law or in equity);
      (c) the effect of judicial decisions which have held that certain provisions
      are
      unenforceable when their enforcement would violate the implied covenant of
      good
      faith and fair dealing, or would be commercially unreasonable, or where their
      breach is not material; or (d) the discretion of the court before which any
      proceeding therefor may be brought, and except as the right to indemnification
      or contribution set forth in the Operative Agreements may be limited by public
      policy or applicable securities laws.

    

    4. The
      execution, delivery and performance of the Operative Documents and the issuance
      and sale of the Shares and Warrants by the Company pursuant to the terms of
      the
      Purchase Agreement on the date hereof have been duly authorized all required
      corporate action on the part of the Company and its stockholders. When issued
      and delivered in accordance with the terms of the Purchase Agreement against
      payment of the purchase price therefor, the Shares will be validly issued,
      full
      paid and nonassessable. The Underlying Shares have been duly authorized and
      reserved for issuance by the Company and, when issued in accordance with the
      terms of the respective Warrants, will be validly issued, fully paid and
      nonassessable.

    

    5. The
      execution, deliver and performance of the Operative Agreements do not, and
      the
      issuance and sale of the Shares and Warrants on the date hereof as contemplated
      by the Purchase Agreement will not, (a) conflict with or violate the Company’s
      Sixth Restated Certificate of Incorporation, as amended, or its Amended and
      Restated Bylaws, (b) conflict with or violate any judgment, order or decree
      of
      any court or governmental authority which to our knowledge is applicable to
      the
      Company or any of its properties, (c) result in a material violation, or
      conflict with, any U.S. federal or New York State statute, rule or regulation,
      or any provision of the Delaware General Corporation Law, in any case known
      to
      us to be applicable to the Company or its properties or (d) result in a
      material default by the Company under any of the contracts or agreements filed
      as exhibits to the SEC Documents.

     

    
      
         

      

      
         

        
          

        

      

      
         

      

    

     

    6. No
      consent, approval or authorization of or designation, declaration or filing
      with, any U.S. federal or New York State governmental authority, or any
      governmental authority, pursuant to the Delaware General Corporation Law, on
      the
      part of the Company is required in connection with the valid execution, delivery
      and performance of the Operative Agreements, or the offer, sale or issuance
      of
      the Shares or the Warrants, other than (a) such as have been made or obtained;
      (b) compliance with the Blue Sky laws or federal securities laws applicable
      to
      the offering of the Shares, the Warrants and the Underlying Shares; and (c)
      the
      filing of a Registration Statement in accordance with the requirements of the
      Registration Rights Agreement.

    

    7. Assuming
      (i) the accuracy and completeness of the representations and warranties of
      each
      of the Investors set forth in the Purchase Agreement and (ii) that neither
      the
      Company nor any other person (including, without limitation, any placement
      agent
      for the transactions contemplated by the Purchase Agreement) has engaged in
      any
      activity that would be deemed a “general solicitation” under the provisions of
      Regulation D under the Securities Act, the offer, issuance and sale of the
      Securities being purchased by the Purchasers at the Closing and the Additional
      Closing on the terms and conditions contemplated by the Purchase Agreement
      constitute transactions exempt from the registration requirements of Section
      5
      of the Securities Act (it being understood that we need express no opinion
      as to
      any subsequent resales of the Securities by the Purchasers).

     

    
      
         

      

      
        -2-

        
          

        

      

      
         

      

    

     

    Schedule
      I

    

    SCHEDULE
      OF LOCK-UP AGREEMENTS

    

    Edward
      M.
      Rudnic, Ph.D., President and Chief Executive Officer

    

    Robert
      C.
      Low, CPA, Vice President, Finance and Chief Financial Officer

    

    Beth
      A.
      Burnside, Ph.D., Vice President, Pharmaceutical Research

    

    Donald
      J.
      Treacy, Jr., Ph.D., Vice President, Analysis and Pharmaceutical
      Quality

    

    Sandra
      E.
      Wassink, Vice President, Pharmaceutical Development Operations

    

    HealthCare
      Ventures group

    

    
      
         

      

      
         

        
          

        

      

      
         

      

    

    

    Appendix
      I

    

    

    FORM
      OF INVESTOR QUESTIONNAIREEXECUTION
      COPY

    

    EMPLOYMENT
      AGREEMENT

    

    EMPLOYMENT
      AGREEMENT
      (this
“Agreement”)
      effective as of the 1st
      day of
      January, 2008 between YTB
      INTERNATIONAL, INC., a
      Delaware corporation with principal executive offices located at 1901 East
      Edwardsville Road, Wood River, IL 62095 (the “Corporation”),
      and
      J. Scott Tomer, with an office at 1901 East Edwardsville Road, Wood River,
      IL
      62095 (the “Executive”).

     

    W
      I T N E S E T H:

    

    WHEREAS,
      the
      Corporation and the Executive are parties to that certain Employment Agreement,
      dated as of January 1, 2005 (the “Existing
      Employment Agreement”)
      pursuant to which the Executive is employed by the Corporation;

    

    WHEREAS,
      the
      Corporation and the Executive desire and intend via the entry into this
      Agreement to supersede, in its entirety, the Existing Employment Agreement
      and
      to provide for the employment of the Executive as the Chief Executive Officer
      of
      the Corporation, to engage in such activities and to render such services under
      the terms and conditions hereof; 

    

    WHEREAS,
      the
      Corporation has authorized and approved the execution of this Agreement and
      the
      Executive desires to be employed by the Corporation under the terms and
      conditions hereinafter provided; and

    

    WHEREAS,
      this
      Agreement constitutes the entire understanding and agreement between the Company
      and the Executive regarding its subject matter and supersedes all prior or
      contemporaneous negotiations and agreements, whether oral or written, between
      them with respect to such subject matter (including the Existing Employment
      Agreement). 

    

    NOW,
      THEREFORE,
      in
      consideration of the mutual covenants and undertakings herein contained, the
      parties agree as follows:

    

    1. Employment,
      Duties and Acceptance.

    

    1.1 Services.
      The
      Corporation hereby employs Executive, for the Term (as hereinafter defined
      in
      Section 2 hereof), to render services to the business and affairs of the
      Corporation in the office referenced in the recitals hereof and, in connection
      therewith, shall perform such duties as directed by the Board of Directors
      of
      the Corporation (the “Board
      of Directors”)
      from
      time to time, in its reasonable discretion, and shall perform such other duties
      as shall be consistent with the responsibilities of such office (collectively,
      the “Services”).
      Executive shall perform activities related to such office as he shall reasonably
      be directed or requested to so perform by the Board of Directors, to whom he
      shall report. Executive shall use his best efforts, skill and abilities to
      promote the interests of the Corporation and its subsidiaries. 

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

     

    EXECUTION
      COPY

    

    1.2 Acceptance.
      Executive hereby accepts such employment and agrees to render the Services.
      Executive shall not engage in any other business activity or serve in any
      industry, trade, professional, governmental or academic position during the
      term
      of this Agreement. The Executive may request permission from the Board of
      Directors to engage in business activity unrelated to the business activity
      of
      the Corporation and may only do so if the Board of Directors expressly approves
      the request in advance in writing.

    

    1.3 Representations
      of the Executive.
      The
      Executive represents and warrants to the Corporation that his execution and
      delivery of this Agreement, his performance of the Services hereunder and the
      observance of his other obligations contemplated hereby will not (i) violate
      any
      provisions of or require the consent or approval of any party to any agreement,
      letter of intent or other document to which he is a party or (ii) violate or
      conflict with any arbitration award, judgment or decree or other restriction
      of
      any kind to or by which he is subject or bound.

    

    2. Term
      of Employment. 

     

    The
      term
      of Executive’s employment under this Agreement (the “Term”)
      shall
      commence on January 1, 2008 (the “Commencement
      Date”)
      and
      shall terminate on December 31, 2012 unless sooner terminated pursuant to
      Sections 9 or 5 of this Agreement; provided,
      however,
      if
      either party shall fail to give written notice of non-renewal not less than
      90
      days prior to the scheduled expiration or any extension of the Term hereof,
      the
      Term shall automatically be extended for an additional one (1) year period,
      at
      the then current Base Salary (as hereinafter defined). Notwithstanding anything
      to the contrary contained herein, the provisions of this Agreement governing
      the
      protection of confidential information shall continue in effect as specified
      in
      Section 10 hereof.

    

    3. Base
      Salary and Expense Reimbursement.

    

    3.1 Base
      Salary.
      During
      the Term, as full compensation for the Services, the Corporation agrees to
      pay
      Executive a base salary (“Base
      Salary”)
      at the
      annual rate of $325,000 for the period from January 1, 2008 to December 31,
      2008, increasing annually thereafter on the anniversary date of the Commencement
      Date in the amount of $25,000 per year of the then current Base Salary. Base
      Salary is subject to withholding and other applicable taxes, payable during
      the
      term of this Agreement in accordance with the Corporation’s customary payment
      practices, but not less frequently than monthly.

    

    3.2 Business
      Expense Reimbursement.
      Upon
      submission to, and approval by an officer of the Corporation designated by
      the
      Board of Directors of the Corporation, of a statement of expenses, reports,
      vouchers or other supporting information, which approval shall be granted or
      withheld based on the Corporation’s policies in effect at such time, the
      Corporation shall promptly reimburse Executive for all reasonable business
      expenses actually incurred or paid by him during the Term or renewals thereof
      in
      the performance of the Services, including, but not limited to, expenses for
      entertainment, travel and similar items.

     

    
      
        
        

      

      
        -2-

        
          

        

      

      
        
        

      

    

     

    EXECUTION
      COPY

     

    3.3 YourTravelBiz.com
      Override. The
      Corporation acknowledges that Executive owns an override on the RTA sales and
      monthly fees generated by Representative position #2 of the Corporation’s
      YourTravelBiz.com subsidiary’s sales organization equal to 50% of the monthly
      commissions and overrides earned by said position #2, paid on a
      monthly
      basis.
      The
      compensation described in this Section 3.3 is fully vested to the Executive
      and
      its continuing receipt by Executive shall survive the termination of this
      Agreement.

     

    4. Bonuses.

     

    4.1 Bonus
      Amount.
      In order
      to provide performance-based incentive compensation to the Executive, the
      Corporation hereby agrees to pay the Executive, in addition to the Base Salary
      set forth in Section 3 hereof, a minimum cash bonus in respect of each fiscal
      year during the Executive’s employment hereunder (the “Bonus”)
      equal
      to the Applicable Percentage (as defined below) of the Net Pre-Tax Income (as
      defined below) of the Corporation. For purposes hereof, the Applicable
      Percentage shall equal (a) 2.0% if the Net Pre-Tax Income of the
      Corporation is at least $500,000, but less than $1,500,000 (b) 2.25% if the
      Net Pre-Tax Income of the Corporation is at least $1,500,000 but less than
      $
      3,000,000 and (c) 2.5% if the Net Pre-Tax Income of the Corporation is at
      least $ 3,000,000.

    

    4.2 Net
      Pre-Tax Income of the Corporation. For
      purposes hereof, the Net Pre-Tax Income of the Corporation shall be the amount
      determined by the Compensation
      Committee of the Board of Directors (the “Compensation
      Committee”),
      after
      consultation with the Corporation’s independent accountants and the Audit
      Committee of the Board of Directors, to be the Net Pre-Tax Income of the
      Corporation with respect to a given fiscal year, which amount shall be
      determined based on the financial statements of the Corporation (a) in a manner
      consistent with generally accepted accounting principles, (b) with regard solely
      to the Corporation and its subsidiaries, (c) so as to exclude the effect of
      any
      elimination of inter-company transfers applied with respect to any entity which
      is not a subsidiary of the Corporation, (d) having regard to such other matters,
      if any, as the Compensation Committee may determine to be equitable to consider
      and (e) without giving effect to any Bonus paid pursuant to this Section 4.2.
      The determination of the Compensation Committee of the Corporation shall be
      final, conclusive and binding for all purposes, absent manifest error.

    

    4.3 Determination
      and Payment.
      The
      determination of the amount of Net Pre-Tax Income and the extent to which any
      Bonus under this Section 4 may be payable (the “Final
      Determination”)
      shall
      be
      determined by the Compensation Committee in accordance with the terms hereof
      based on the audited financial statements of the Corporation and the criteria
      set forth herein with respect to each fiscal year. Such Final Determination
      with
      respect to any fiscal year shall be made promptly, and in any event within
      15
      days, after the Corporation has filed its Annual Report on Form 10-K for each
      year with the Securities and Exchange Commission.
      The
      Bonus
      shall be
      payable to the Executive in cash
      no
      later
      than the date of the Final Determination in each year of this
      Agreement.
      In any
      event, all matters pertaining to the Bonus and to the payment of any Bonus
      to
      the Executive hereunder, shall be administered and determined by the
      Compensation Committee in its reasonable discretion consistent with the terms
      hereof, the determination of which shall be final, conclusive and binding for
      all purposes, absent manifest error.

    

    
      
        
        

      

      
        -3-

        
          

        

      

      
        
        

      

    

     

    EXECUTION
      COPY

    

    4.4 Partial
      Years.
      Notwithstanding anything contained herein to the contrary, no Bonus under this
      Section 4 shall be deemed earned or payable with respect to any fiscal year
      during which this Agreement or the Executive’s employment is terminated by the
      Corporation for Cause (as such term is hereinafter defined). 

    

    4.5 No
      Additional Rights. Nothing
      in this Section 4 shall be construed as conferring upon the Executive any right
      (i) normally associated with the ownership of capital stock; (ii) to
      continue in the employ of the Corporation or any affiliate of the Corporation;
      or (iii) to interfere in any way with the right of the Corporation to
      terminate this Agreement in accordance with the provisions hereof. Nothing
      in
      this Agreement shall be construed to imply that any specific assets of the
      Corporation have been set aside to provide for payments under this Agreement.
      Any payments under this Agreement shall be made solely from general assets
      of
      the Corporation existing at the time such payments are due.

    

    5. Severance.

    

    5.1 Termination
      Without Cause. In
      the
      event that Executive’s employment hereunder shall be terminated by the
      Corporation without Cause (as defined in Section 9.3 hereof) at any time prior
      to the end of the Term, the Executive shall be entitled to receive from the
      Corporation, in addition to any Base Salary earned to the date of termination,
      severance pay in an amount equal to the Executive’s
      Base
      Salary, payable for the remainder of the Term as if this Agreement had not
      been
      terminated, in accordance with the provisions of the last sentence of Section
      3.1 hereof. In
      the
      event of such termination, the amounts due hereunder shall be payable without
      offset or defense or any obligation of the Executive to mitigate damages.

    

    6. Additional
      Benefits.

    

    6.1 In
      General.
      In
      addition to the compensation, bonuses, expenses and other benefits to be paid
      under Sections 3, 4 and 5 hereof, Executive will be entitled to all rights
      and
      benefits for which he shall be eligible under any insurance, health and medical
      (including health and medical plans offered exclusively to the management of
      the
      Corporation), incentive, bonus, profit-sharing, pension
      or other extra compensation or “fringe” benefit plan of the Corporation or any
      of its subsidiaries now existing or hereafter adopted for the benefit of the
      executives or employees generally of the Corporation. The provisions of this
      Agreement which incorporate employee benefit packages shall change as and when
      such employee benefit packages change. 

    

    5.2 Automobile.
      The
      Corporation shall pay the executive a monthly automobile payment in the amount
      of $1,000 which is to be utilized in the sole discretion of the Executive.
      In
      addition, the Corporation shall be responsible for all reasonable costs of
      operating, repairing, maintaining and insuring such automobile.

     

    
      
        
        

      

      
        -4-

        
          

        

      

      
        
        

      

    

     

    EXECUTION
      COPY

    

    5.3 Benefits
      Upon Death or Disability.
      In the
      event the Executive’s employment terminates due to the death of the Executive or
      the Executive becoming disabled (as defined in Section 9.2), the Executive’s
      estate shall receive a one time grant of the Corporation’s Class A Common Stock,
      $0.001 par value per share (“Common
      Stock”),
      within fifteen (15) days of the termination of the Executive’s employment, for
      such number of shares as calculated as follows:

     

    z
      =
      y/x;

    z
      =
      number of shares of Common Stock to be received by the Executive’s
      estate.

    y
      = then
      current Base Salary.

    
      	 	
              x
                =
                the closing trading price of the Common Stock on the date of termination
                of Executive’s employment due to death or disability of the Executive as
                reported on the Over-the-Counter Bulletin Board or similar public
                market,
                or, in the event there is no public market for the Common Stock,
                it shall
                be the fair market value of the Common Stock as determined by an
                independent valuation expert who has experience in valuing companies
                in
                the same industry as the
                Corporation.

            

    

    

    7. Vacation.

    

    7.1
       In
      General. The
      Executive shall be entitled each year during the Term of this Agreement to
      a
      vacation period of six (6) weeks, during which all salary, compensation,
      benefits and other rights to which the Executive is entitled to hereunder shall
      be provided in full. Such vacation may be taken in the Executive’s discretion,
      and such time or times as are not inconsistent with the reasonable business
      needs of the Corporation.

    

    8. Right
      to Insure.
      In the
      event that Executive is insurable, Executive agrees that the Corporation shall
      have the right during the Term to insure the life of Executive by a policy
      or
      policies of insurance in such amount or amounts as it may deem necessary or
      desirable, and the Corporation shall be the beneficiary of any such policy
      or
      policies and shall pay the premiums or other costs thereof. The Corporation
      shall have the right, from time to time, to modify any such policy or policies
      of insurance or to take out new insurance on the life of Executive. Executive
      agrees, upon request, at any time or times prior to the commencement of or
      during the Term to sign and deliver any and all documents and to submit to
      any
      physical or other reasonable examinations which may be required in connection
      with any such policy or policies of insurance or modifications
      thereof.

    

    9. Termination.

    

    9.1 Death.
      If
      Executive dies during the Term of this Agreement, Executive's employment
      hereunder shall terminate upon his death and all obligations of the Corporation
      hereunder shall terminate on such date, except that Executive's estate or his
      designated beneficiary shall be entitled to: (i) the issuance of the securities
      set forth in Section 6.3 and (ii) payment of any unpaid accrued Base Salary
      through the date of his death. In addition, any accrued and unpaid Bonus shall
      be paid in accordance with Section 4 hereof.

     

    
      
        
        

      

      
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    EXECUTION
      COPY

    

    9.2 Disability.
      Subject
      to the provisions of Section 6.1, if Executive shall be unable to perform a
      significant part of his duties and responsibilities in connection with the
      conduct of the business and affairs of the Corporation and such inability lasts
      for (i) a period of at least one hundred twenty (120) consecutive days, or
      (ii)
      periods aggregating at least one hundred eighty (180) days during any three
      hundred sixty five (365) consecutive days, by reason of Executive's physical
      or
      mental disability, whether by reason of injury, illness or similar cause,
      Executive shall be deemed disabled, and the Corporation any time thereafter
      may
      terminate Executive's employment hereunder by reason of the disability. Upon
      delivery to Executive of such notice, all obligations of the Corporation
      hereunder shall terminate, except that Executive shall be entitled to: (a)
      the
      issuance of the securities set forth in Section 6.3 and (b) the payment of
      any
      unpaid accrued Base Salary through the date of termination. In addition, any
      accrued and unpaid Bonus shall be paid in accordance with Section 4 hereof.
      The
      obligations of Executive under Section 10 hereof shall continue notwithstanding
      termination of Executive's employment pursuant to this Section 9.2.

    

    9.3 Termination
      for Cause.
      The
      Corporation may at any time during the Term, without any prior notice, terminate
      this Agreement and discharge Executive for Cause, whereupon the Corporation’s
      obligation to pay compensation or other amounts payable hereunder to or for
      the
      benefit of Executive shall terminate on the date of such discharge. As used
      herein the term “Cause” shall mean: (i) a willful and material breach by
      Executive of the terms of this Agreement, (ii) willful violation of specific
      and
      lawful written direction from the Board of Directors; provided such direction
      is
      not inconsistent with the Executive’s duties and responsibilities the Executive
      is holding at the time of the directive; (iii) fraud, embezzlement or other
      material dishonesty by the Executive with respect to the Corporation or any
      of
      its affiliates; (iv) conviction of the Executive of a felony by a federal or
      state court of competent jurisdiction; (v) Executive’s willful failure to
      perform (other than by reason of disability), or gross negligence in the
      performance of the Services; or (vi) Executive’s excessive absenteeism,
      alcoholism or drug abuse. The obligations of the Executive under Section 10
      shall continue notwithstanding termination of the Executive’s employment
      pursuant to this Section 9.3. 

     

    9.4 Termination
      Without Cause.
      The
      Corporation shall have the option to terminate this Agreement without Cause
      upon
      ninety (90) days written notice to the Executive. In the event the Corporation
      terminates this Agreement without Cause as defined above, the Corporation shall
      pay the Executive upon termination, the amount required pursuant to Section
      5.1.
      The obligations of the Executive under Section 10 hereof shall continue
      notwithstanding termination of the Executive’s employment pursuant to this
      Section 9.4.

    

    9.5 Post
      Agreement Employment.
      In the
      event Executive remains in the employ of the Corporation following termination
      of this Agreement, by the expiration of the Term or otherwise, then such
      employment shall be at will.

     

    
      
        
        

      

      
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    EXECUTION
      COPY

    

    10. Protection
      of Confidential Information; Intellectual Property.

    

    In
      view
      of the fact that Executive’s work for the Corporation will bring him into close
      contact with confidential information and plans for future developments,
      Executive agrees to the following:

    

    10.1 Secrecy.
      To keep
      secret and retain in the strictest confidence all confidential matters of the
      Corporation, including, without limitation, trade “know how” and trade secrets,
      customer lists, pricing policies, marketing plans, technical processes,
      formulae, inventions and research projects, and other business affairs of the
      Corporation, learned by him heretofore or hereafter, and not to disclose them
      to
      anyone inside or outside of the Corporation, except in the course of performing
      the Services hereunder or with the express written consent of the Chief
      Executive Officer or Board of Directors of the Corporation and except to the
      extent such information is already known to the general public.

    

    10.2 Return
      Memoranda, etc.
      To
      deliver promptly to the Corporation on termination of his employment, or at
      any
      other time as the Chief Executive Officer or the Board of Directors of the
      Corporation may so request, all memoranda, notes, records, reports, manuals,
      drawings, blueprints and other documents (and all copies thereof) relating
      to
      the Corporation’s business and all property associated therewith, which he may
      then possess or have under his control.

    

    10.3 Covenants.

    

    10.3.1 Non-competition.
      Executive agrees that at all times while he is employed by the Corporation
      and,
      regardless of the reason for termination of his employment or this Agreement,
      for a period of two (2) years thereafter, he will not, as a principal, agent,
      employee, employer, consultant, stockholder, investor, director or co-partner
      of
      any person, firm, corporation or business entity other than the Corporation,
      or
      in any individual or representative capacity whatsoever, directly or indirectly,
      without the express prior written consent of the Corporation:

    

    (i) engage
      or
      participate in any business whose products or services are competitive with
      that
      of the Corporation, which business is the sale of travel and sale support
      services to the travel industry, and which conducts or solicits business, or
      transacts with supplier or customers located within the United States or Puerto
      Rico;

    

    (ii) aid
      or
      counsel any other person, firm, corporation or business entity to do any of
      the
      above;

    

    (iii) become
      employed by a firm, corporation, partnership or joint venture which competes
      with the business of the Corporation within the United States or Puerto Rico;
      or

     

    
      
        
        

      

      
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    EXECUTION
      COPY

    

    (iv) approach,
      solicit business from, or otherwise do business or deal with any customer of
      the
      Corporation in connection with any product or service competitive to any
      provided by the Corporation. 

    

    10.3.2 Anti-Raiding.
      Executive agrees that during the term of his employment hereunder, and,
      thereafter for a period of two (2) years, he will not, as a principal, agent,
      employee, employer, consultant, director or partner of any person, firm,
      corporation or business entity other than the Corporation, or in any individual
      or representative capacity whatsoever, directly or indirectly, without the
      prior
      express written consent of the Corporation approach, counsel or attempt to
      induce any person who is then in the employ of the Corporation to leave the
      employ of the Corporation or employ or attempt to employ any such person or
      persons who at any time during the preceding six months was in the employ of
      the
      Corporation.

    

    10.3.3 Executive’s
      Acknowledgements.
      Executive acknowledges (i) that his position with the Corporation requires
      the
      performance of services which are special, unique, and extraordinary in
      character and places him in a position of confidence and trust with the
      customers and employees of the Corporation, through which, among other things,
      he shall obtain knowledge of the Corporation’s “technical information” and
“know-how” and become acquainted with its customers, in which matters the
      Corporation has substantial proprietary interests; (ii) that the restrictive
      covenants set forth above are necessary in order to protect and maintain such
      proprietary interests and the other legitimate business interests of the
      Corporation; and (iii) that the Corporation would not have entered into this
      Agreement unless such covenants were included herein. Executive also
      acknowledges that the business of the Corporation presently will extend
      throughout the United States and Puerto Rico, and that he will personally
      supervise and engage in such business on behalf of Corporation and, accordingly,
      it is reasonable that the restrictive covenants set forth above are not more
      limited as to geographic area then is set forth therein. Executive also
      represents to the Corporation that the enforcement of such covenants will not
      prevent Executive from earning a livelihood or impose an undue hardship on
      the
      Executive.

    

    10.3.4 Assignment
      of Rights to Intellectual Property.
      Executive shall promptly and fully disclose all Intellectual Property to the
      Corporation. Executive hereby assigns and agrees to assign to the Corporation
      (or as otherwise directed by the Corporation) Executive’s full right, title and
      interest in and to all Intellectual Property. Executive agrees to execute any
      and all applications for domestic and foreign patents, copyrights or other
      proprietary rights and to do such other acts (including without limitation
      the
      execution and delivery of instruments of further assurance or confirmation)
      requested by the Corporation to assign the Intellectual Property to the
      Corporation and to permit the Corporation to enforce any patents, copyrights
      or
      other proprietary rights to the Intellectual Property. Executive will not charge
      the Corporation for time spent, although the Corporation will reimburse
      Executive for any expenses Executive reasonably incurs, in complying with these
      obligations. All copyrightable works that Executive creates shall be considered
      “work made for hire”. “Intellectual Property” means inventions, discoveries,
      developments, methods, processes, compositions, works, concepts and ideas
      (whether or not patentable or copyrightable or constituting trade secrets)
      conceived, made, created, developed or reduced to practice by Executive (whether
      alone or with others, whether or not during normal business hours or on or
      off
      Corporation premises) during Executive’s employment that relate to either the
      Products or any prospective activity of the Corporation under active
      consideration. “Products” means all products planned, researched, developed,
      tested, manufactured, sold, licensed, leased or otherwise distributed or put
      into use by the Corporation or any of its affiliates, together with all services
      provided or planned by the Corporation, during Executive’s
      employment.

     

    
      
        
        

      

      
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    EXECUTION
      COPY

    

    10.4 Severability.
      If any
      of the provisions of this Section 10, or any part thereof, is hereinafter
      construed to be invalid or unenforceable, the same shall not affect the
      remainder of such provision or provisions, which shall be given full effect,
      without regard to the invalid portions. If any of the provisions of this Section
      10, or any part thereof, is held to be unenforceable because of the duration
      of
      such provision, the area covered thereby or the type of conduct restricted
      therein, the parties agree that the court making such determination shall have
      the power to modify the duration, geographic area and/or other terms of such
      provision and, as so modified, said provision(s) shall then be enforceable.
      In
      the event that the courts of any one or more jurisdictions shall hold such
      provisions wholly or partially unenforceable by reason of the scope thereof
      or
      otherwise, it is the intention of the parties hereto that such determination
      not
      bar or in any way affect the Corporation’s right to the relief provided for
      herein in the courts of any other jurisdictions as to breaches or threatened
      breaches of such provisions in such other jurisdictions, the above provisions
      as
      they relate to each jurisdiction being, for this purpose, severable into diverse
      and independent covenants.

    

    10.5 Injunctive
      Relief.
      Executive acknowledges and agrees that, because of the unique and extraordinary
      nature of his Services, any breach or threatened breach of the provisions of
      Sections 10.1, 10.2, or 10.3 hereof will cause irreparable injury and
      incalculable harm to the Corporation, and the Corporation shall, accordingly,
      be
      entitled to injunctive and other equitable relief for such breach or threatened
      breach and that resort by the Corporation to such injunctive or other equitable
      relief shall not be deemed to waive or to limit in any respect any right or
      remedy which the Corporation may have with respect to such breach or threatened
      breach. The Corporation and Executive agree that any such action for injunctive
      or equitable relief shall be heard in a state or federal court situated in
      New
      York, New York and each of the parties hereto, hereby agrees to accept service
      of process by registered mail and to otherwise consent to the jurisdiction
      of
      such courts.

    

    10.6 Expenses
      of Enforcement of Covenants.
      In the
      event that any action, suit or proceeding at law or in equity is brought to
      enforce the covenants contained in Sections 10.1, 10.2, or 10.3 hereof or to
      obtain money damages for the breach thereof, the party prevailing in any such
      action, suit or other proceeding shall be entitled upon demand, to reimbursement
      from the other party for all expenses (including, without limitation, reasonable
      attorneys’ fees and disbursements) incurred in connection
      therewith.

    

    10.7 Section
      16(a). Executive
      acknowledges that he is an insider under Section 16(a) of the Exchange Act
      of
      1934, as amended (“Exchange
      Act”)
      due to
      his status as an officer of the Corporation. Executive acknowledges he is aware
      of and agrees to comply with the Exchange Act requirements pertaining to
      insiders by reporting to the Securities and Exchange Commission (“SEC”)
      on
      Form 4 any transactions involving equity securities of the Corporation within
      two business days following the day on which the transaction is
      executed.

     

    
      
        
        

      

      
        -9-

        
          

        

      

      
        
        

      

    

     

    EXECUTION
      COPY

    

    10.8 Separate
      Agreement.
      The
      provisions of this Section 10 shall be construed as an agreement on the part
      of
      the Executive independent of any other part of this Agreement or any other
      agreement, and the existence of any claim or cause of action of the Executive
      against the Corporation, whether predicated on this Agreement or otherwise,
      shall not constitute a defense to the enforcement by the Corporation of the
      provisions of this Section 9.

    

    11. Indemnification.

    

    The
      Corporation shall provide the Executive (including his heirs, executors and
      administrators) with coverage under a standard directors and officer’s liability
      insurance policy at the Corporation’s expense to the same extent as provided for
      any other director, officer or trustee of the Corporation. In addition, the
      Corporation shall indemnify the Executive (and his heirs, executors and
      administrators) to the fullest extent permitted under the law of its state
      of
      incorporation against all expenses and liabilities reasonably incurred by him
      in
      connection with or arising out of any action, suit or proceeding in which the
      Executive may be involved by reason of his having been a director or officer
      of
      the Corporation or any subsidiary thereof. Such expenses and liabilities shall
      include, but not be limited to, judgments, court costs and attorneys’ fees and
      the cost of reasonable settlements, such settlements to be approved by the
      Board
      if such action is brought against the Executive in his capacity as a director
      or
      officer of the Corporation or any subsidiary thereof. The Corporation shall,
      upon the request of the Executive, advance to the Executive such amounts as
      necessary to cover expenses, including without limitation legal fees and
      expenses, incurred by the Executive in connection with any suit or proceeding
      in
      which the Executive may be involved by reason of his being or having been a
      director or officer of the Corporation or of any subsidiary thereof. Such
      indemnity and advance of expenses, however, shall not extend to matters as
      to
      which the Executive is finally adjudged to be liable for willful misconduct
      in
      the performance of his duties.

    

    12. Arbitration.
      

    

    Except
      with respect to any proceeding brought under Section 10 hereof, any controversy,
      claim, or dispute between the parties, directly or indirectly, concerning this
      Agreement or the breach hereof, or the subject matter hereof, including
      questions concerning the scope and applicability of this arbitration clause,
      shall be finally settled by arbitration in Madison County, Illinois, pursuant
      to
      the rules then applying of the American Arbitration Association. The arbitrators
      shall consist of one representative selected by the Corporation, one
      representative selected by the Executive and one representative selected by
      the
      first two arbitrators. The parties agree to expedite the arbitration proceeding
      in every way, so that the arbitration proceeding shall be commenced within
      thirty (30) days after request therefore is made, and shall continue thereafter,
      without interruption, and that the decision of the arbitrators shall be handed
      down within thirty (30) days after the hearings in the arbitration proceedings
      are closed. The arbitrators shall have the right and authority to assess the
      cost of the arbitration proceedings and to determine how their decision or
      determination as to each issue or matter in dispute may be implemented or
      enforced. The decision in writing of any two of the arbitrators shall be binding
      and conclusive on all of the parties to this Agreement. Should either the
      Corporation or the Executive fail to appoint an arbitrator as required by this
      Section 12 within thirty (30) days after receiving written notice from the
      other
      party to do so, the arbitrator appointed by the other party shall act for all
      of
      the parties and his decision in writing shall be binding and conclusive on
      all
      of the parties to this Agreement. Any decision or award of the arbitrators
      shall
      be final and conclusive on the parties to this Agreement; judgment upon such
      decision or award may be entered in any competent Federal or state court located
      in the United States of America; and the application may be made to such court
      for confirmation of such decision or award for any order of enforcement and
      for
      any other legal remedies that may be necessary to effectuate such decision
      or
      award.

     

    
      
        
        

      

      
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    EXECUTION
      COPY

    

    13. Notices.

    

    All
      notices, requests, consents and other communications required or permitted
      to be
      given hereunder, shall be in writing and shall be deemed to have been duly
      given
      if delivered personally or sent by prepaid telegram, telecopy or mailed first
      class, postage prepaid, by registered or certified mail (notices sent by
      telegram or mailed shall be deemed to have been given on the date sent), to
      the
      parties at their respective addresses hereinabove set forth or to such other
      address as either party shall designate by notice in writing to the other in
      accordance herewith.

    

    14. General.

    

    14.1 Governing
      Law.
      This
      Agreement shall be governed by and construed and enforced in accordance with
      the
      local laws of the State of Delaware.

    

    14.2 Captions.
      The
      section headings contained herein are for reference purposes only and shall
      not
      in any way affect the meaning or interpretation of this Agreement.

    

    14.3 Entire
      Agreement.
      This
      Agreement sets forth the entire agreement and understanding of the parties
      relating to the subject matter hereof, and supersedes all prior agreements,
      arrangements and understandings, written or oral, relating to the subject matter
      hereof. No representation, promise or inducement has been made by either party
      that is not embodied in this Agreement, and neither party shall be bound by
      or
      liable for any alleged representation, promise or inducement not so set
      forth.

    

    14.4 Severability.
      If any
      of the provisions of this Agreement shall be unlawful, void, or for any reason,
      unenforceable, such provision shall be deemed severable from, and shall in
      no
      way affect the validity or enforceability of, the remaining portions of this
      Agreement.

    

    14.5 Waiver.
      The
      waiver by any party hereto of a breach of any provision of this Agreement by
      any
      other party shall not operate or be construed as a waiver of any subsequent
      breach of the same provision or any other provision hereof.

     

    
      
        
        

      

      
        -11-

        
          

        

      

      
        
        

      

    

     

    EXECUTION
      COPY

    

    14.6 Counterparts.
      This
      Agreement may be executed in one or more counterparts, each of which shall
      be
      deemed an original, but all of which taken together shall constitute one and
      the
      same Agreement.

    

    14.7 Assignability.
      This
      Agreement, and Executive’s rights and obligations hereunder, may not be assigned
      by Executive. The Corporation may assign its rights, together with its
      obligations, hereunder in connection with any sale, transfer or other
      disposition of all or substantially all of its business or assets; in any event
      the rights and obligations of the Corporation hereunder shall be binding on
      its
      successors or assigns, whether by merger, consolidation or acquisition of all
      or
      substantially all of its business or assets. This Agreement shall inure to
      the
      benefit of, and be binding upon, the Executive and his executors,
      administrators, heirs and legal representatives.

    

    14.8 Amendment.
      This
      Agreement may be amended, modified, superseded, cancelled, renewed or extended
      and the terms or covenants hereof may be waived, only by a written instrument
      executed by both of the parties hereto, or in the case of a waiver, by the
      party
      waiving compliance. No superseding instrument, amendment, modification,
      cancellation, renewal or extension hereof shall require the consent or approval
      of any person other than the parties hereto. The failure of either party at
      any
      time or times to require performance of any provision hereof shall in no matter
      affect the right at a later time to enforce the same. No waiver by either party
      of the breach of any term or covenant contained in this Agreement, whether
      by
      conduct or otherwise, in any one or more instances, shall be deemed to be,
      or
      construed as, a further or continuing waiver of any such breach, or a waiver
      of
      the breach of any other term or covenant contained in this
      Agreement.

    

    
      
        
        

      

      
        -12-

        
          

        

      

      
        
        

      

    

    EXECUTION
      COPY

    

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

    

    

    
      	
              ATTEST:

            	 	
              YTB
                INTERNATIONAL, INC.

            
	 	 	 
	 	 	 
	
              By:

            	 	 	
              By:

            	 
	 	 	 	
              J.
                Lloyd Tomer, Chairman of the Board

            
	 	 	 	
                                      
                  of Directors

            
	 	 	 
	 	 	 
	
              ATTEST:

            	 	
              EXECUTIVE

            
	 	 	 
	 	 	 
	 	 	 	 
	 	 	
              J.
                Scott Tomer, Individually

            

    

    

    
      
        
        

      

      
        -13-

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