Document:

Alfacell Corporation

EXHIBIT 10.2

INVESTOR RIGHTS AGREEMENT

This Investor Rights Agreement (this “Agreement”) is made and entered into as of October 19, 2009 by and among Alfacell Corporation, a Delaware corporation (the “Company”), and the several purchasers signatory hereto (each a “Purchaser” and collectively, the “Purchasers”).

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

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

1.

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

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

“Affiliate” means, with respect to any person, any other person which directly or indirectly controls, is controlled by, or is under common control with, such person.

“Agreement” has the meaning set forth in the Preamble.

“Business Day” means a day, other than a Saturday or Sunday, on which banks in New York City are open for the general transaction of business.

“Closing” has the meaning set forth in the Purchase Agreement.

“Closing Date” has the meaning set forth in the Purchase Agreement.

“Commission” means the Securities and Exchange Commission.

“Common Stock” means the common stock of the Company, par value $0.001 per share, and any securities into which such common stock may hereinafter be reclassified. 

“Company” has the meaning set forth in the Preamble.

“Conversion Shares” means the shares of Common Stock issued or issuable upon conversion of the Notes.

“Effective Date” means the date that the Registration Statement filed pursuant to Section 2(a) is first declared effective by the Commission.

“Effectiveness Deadline” means, with respect to the Initial Registration Statement or the New Registration Statement, the one hundred and eightieth (180th) calendar day following the Closing (or, in the event the Commission reviews and has written comments to the Initial Registration Statement or the New Registration Statement, the two hundred and tenth (210th) calendar day following the Closing); provided, however, that if the Company is notified by the Commission that the Initial Registration Statement or the New Registration Statement will not be reviewed or is no longer subject to further 

review and comments, the Effectiveness Deadline as to such Registration Statement shall be the fifth (5th) Trading Day following the date on which the Company is so notified if such date precedes the dates otherwise required above; provided, further, that if the Effectiveness Deadline falls on a Saturday, Sunday or other day that the Commission is closed for business, the Effectiveness Deadline shall be extended to the next Business Day on which the Commission is open for business.  With respect to any Remainder Registration Statement, the Effectiveness Deadline shall be the 90th calendar day following the date that the Company is eligible to file such Remainder Registration Statement pursuant to SEC Guidance (or, in the event the Commission reviews and has written comments to the Remainder Registration Statement, the 120th calendar day following the date that the Company is eligible to file such Remainder Registration Statement pursuant to SEC Guidance); provided, however, that if the Company is notified by the Commission that the Remainder Registration Statement will not be reviewed or is no longer subject to further review and comments, the Effectiveness Deadline as to such Remainder Registration Statement shall be the fifth (5th) Trading Day following the date on which the Company is so notified if such date precedes the dates otherwise required above; provided, further, that if the Effectiveness Deadline falls on a Saturday, Sunday or other day that the Commission is closed for business, the Effectiveness Deadline shall be extended to the next Business Day on which the Commission is open for business. 

“Effectiveness Period” has the meaning set forth in Section 2(b).

“Event” has the meaning set forth in Section 2(c).

“Event Date” has the meaning set forth in Section 2(c).

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

“Filing Deadline” means, with respect to the Initial Registration Statement required to be filed pursuant to Section 2(a), the one hundred twentieth (120th) calendar day following the Closing, provided, however, that if the Filing Deadline falls on a Saturday, Sunday or other day that the Commission is closed for business, the Filing Deadline shall be extended to the next business day on which the Commission is open for business.  With respect to any Remainder Registration Statement, the Filing Deadline shall be the 30th calendar day following the date that the Company is eligible to file such Remainder Registration Statement pursuant to SEC Guidance, provided, however, that if the Filing Deadline falls on a Saturday, Sunday or other day that the Commission is closed for business, the Filing Deadline shall be extended to the next business day on which the Commission is open for business.

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

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

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

“Initial Registration Statement” means the initial Registration Statement filed pursuant to Section 2(a) of this Agreement.

“Liquidated Damages” has the meaning set forth in Section 2(c).

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

“New Registration Statement” has the meaning set forth in Section 2(a).

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“Notes” means the Notes issued pursuant to the Purchase Agreement.

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

“Principal Market” means the Trading Market on which the Common Stock is primarily listed on and quoted for trading, which, as of the Closing Date, shall be the OTC Bulletin Board.

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

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

“Purchase Agreement” has the meaning set forth in the Recitals.

“Purchaser” or “Purchasers” has the meaning set forth in the Preamble.

“Registrable Securities” means all of (i) the Conversion Shares, (ii) the Warrant Shares and (iii) any securities issued or issuable upon any stock split, dividend or other distribution, recapitalization or similar event with respect to the Conversion Shares or Warrant Shares, provided, that the Holder has completed and delivered to the Company a Selling Stockholder Questionnaire; and provided, further, that with respect to a particular Holder, such Holder’s Conversion Shares and Warrant Shares shall cease to be Registrable Securities upon the earliest to occur of the following: (A) a sale of such shares pursuant to a Registration Statement or Rule 144 under the Securities Act (in which case, only such security sold by the Holder shall cease to be a Registrable Security); or (B) such shares becoming eligible for resale by the Holder under Rule 144 without the requirement for the Company to be in compliance with the current public information required thereunder and without volume or manner-of-sale restrictions, pursuant to a written opinion letter to such effect, addressed, delivered and acceptable to the Transfer Agent.

“Registration Statements” means any one or more registration statements of the Company filed under the Securities Act that covers the resale of any of the Registrable Securities pursuant to the provisions of this Agreement (including without limitation the Initial Registration Statement, the New Registration Statement and any Remainder Registration Statements), amendments and supplements to such Registration Statements, including post-effective amendments, all exhibits and all material incorporated by reference or deemed to be incorporated by reference in such Registration Statements.

“Remainder Registration Statement” has the meaning set forth in Section 2(a).

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

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

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

“SEC Guidance” means (i) any publicly-available written or oral guidance, comments, requirements or requests of the Commission staff and (ii) the Securities Act. 

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

“Selling Stockholder Questionnaire” means a questionnaire in the form attached as Annex A hereto, or such other form of questionnaire as may reasonably be adopted by the Company from time to time.

“Trading Day” means (i) a day on which the Common Stock is listed or quoted and traded on its Principal Market (other than the OTC Bulletin Board), or (ii) if the Common Stock is not listed on a Trading Market (other than the OTC Bulletin Board), a day on which the Common Stock is traded in the over-the-counter market, as reported by the OTC Bulletin Board, or (iii) if the Common Stock is not quoted on any Trading Market, a day on which the Common Stock is quoted in the over-the-counter market as reported in the “pink sheets” by Pink Sheets LLC (or any similar organization or agency succeeding to its functions of reporting prices); provided, that in the event that the Common Stock is not listed or quoted as set forth in (i), (ii) and (iii) hereof, then Trading Day shall mean a Business Day.

“Trading Market” means whichever of the New York Stock Exchange, the American Stock Exchange, the NASDAQ Global Select Market, the NASDAQ Global Market, the NASDAQ Capital Market or OTC Bulletin Board on which the Common Stock is listed or quoted for trading on the date in question. 

“Warrants” means the Warrants issued pursuant to the Purchase Agreement.

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

2.

Registration.

(a)

On or prior to the Filing Deadline, the Company shall prepare and file with the Commission a Registration Statement covering the resale of all of the Registrable Securities not already covered by an existing and effective Registration Statement for an offering to be made on a continuous basis pursuant to Rule 415 or, if Rule 415 is not available for offers and sales of the Registrable Securities, by such other means of distribution of Registrable Securities as the Holders may reasonably specify (the “Initial Registration Statement”).  The Initial Registration Statement shall be on Form S-3 (except if the Company is then ineligible to register for resale the Registrable Securities on Form S-3, in which case such registration shall be on such other form available to register for resale the Registrable Securities as a secondary offering) subject to the provisions of Section 2(e).  Notwithstanding the registration obligations set forth in this Section 2, in the event the Commission informs the Company that all of the Registrable Securities cannot, as a result of the application of Rule 415, be registered for resale 

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as a secondary offering on a single registration statement, the Company agrees to promptly (i) inform each of the Holders thereof and use its commercially reasonable efforts to file amendments to the Initial Registration Statement as required by the Commission and/or (ii) withdraw the Initial Registration Statement and file a new registration statement (a “New Registration Statement”), in either case covering the maximum number of Registrable Securities permitted to be registered by the Commission, on Form S-3 or such other form available to register for resale the Registrable Securities as a secondary offering; provided, however, that prior to filing such amendment or New Registration Statement, the Company shall be obligated to use its commercially reasonable efforts to advocate with the Commission for the registration of all of the Registrable Securities in accordance with the SEC Guidance, including without limitation, the Manual of Publicly Available Telephone Interpretations D.29. Notwithstanding any other provision of this Agreement and subject to the payment of liquidated damages in Section 2(c), if any SEC Guidance sets forth a limitation of the number of Registrable Securities permitted to be registered on a particular Registration Statement as a secondary offering (and notwithstanding that the Company used diligent efforts to advocate with the Commission for the registration of all or a greater number of Registrable Securities), unless otherwise directed in writing by a Holder as to its Registrable Securities, the number of Registrable Securities to be registered on such Registration Statement will first be reduced by Registrable Securities not acquired pursuant to the Purchase Agreement (whether pursuant to registration rights or otherwise), second by Registrable Securities represented by Holders of Warrant Shares (applied, in the case that some Warrant Shares may be registered, to the Holders on a pro rata basis based on the total number of unregistered Warrant Shares held by such Holders) and third by Registrable Securities represented by Holders of Conversion Shares (applied, in the case that some Conversion Shares may be registered, to the Holders on a pro rata basis based on the total number of unregistered Conversion Shares held by such Holders).  The foregoing sentence is subject to determination by the Commission that certain Holders must be reduced first based on the number of Conversion Shares held by such Holders.  In the event the Company amends the Initial Registration Statement or files a New Registration Statement, as the case may be, under clauses (i) or (ii) above, the Company will use its commercially reasonable efforts to file with the Commission, as promptly as allowed by Commission or SEC Guidance provided to the Company or to registrants of securities in general, one or more registration statements on Form S-3 or such other form available to register for resale those Registrable Securities that were not registered for resale on the Initial Registration Statement, as amended, or the New Registration Statement (the “Remainder Registration Statements”).

(b)

The Company shall use its commercially reasonable efforts to cause each Registration Statement to be declared effective by the Commission as soon as practicable and, with respect to the Initial Registration Statement, the New Registration Statement or the Remainder Registration Statement, as applicable, no later than the Effectiveness Deadline (including filing with the Commission a request for acceleration of effectiveness in accordance with Rule 461 promulgated under the Securities Act), and shall use its commercially reasonable efforts to keep each Registration Statement continuously effective under the Securities Act until the earlier of (i) such time as all of the Registrable Securities covered by such Registration Statement have been publicly sold by the Holders or (ii) the date that all Registrable Securities covered by such Registration Statement may be sold by non-affiliates without volume or manner-of-sale restrictions pursuant to Rule 144, and without the requirement for the Company to be in compliance with the current public information requirement under Rule 144 as determined by counsel to the Company pursuant to a written opinion letter to such effect, addressed and reasonably acceptable to the Company’s transfer agent (the “Effectiveness Period”).  The Company shall telephonically request effectiveness of a Registration Statement as of 5:00 P.M. New York City time on a Trading Day.  The Company shall promptly notify the Holders via facsimile or electronic mail of a “.pdf” format data file of the effectiveness of a Registration Statement on the same Trading Day that the Company telephonically confirms effectiveness with the Commission, which date of confirmation shall initially be the date requested for effectiveness of such Registration Statement. The Company shall, by 9:30 A.M. New York City time on the first Trading Day after the Effective Date, file a final Prospectus 

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with the Commission, as required by Rule 424(b).  Failure to so notify the Holders on or before the second Trading Day after such notification or effectiveness or failure to file a final Prospectus as aforesaid shall be deemed an Event under Section 2(c).  

(c)

If: (i) the Initial Registration Statement is not filed with the Commission on or prior to the Filing Deadline, (ii) the Initial Registration Statement or the New Registration Statement, as applicable, is not declared effective by the Commission (or otherwise does not become effective) for any reason on or prior to the Effectiveness Deadline or (iii) after its Effective Date, (A) such Registration Statement ceases for any reason (including without limitation by reason of a stop order, or the Company’s failure to update the Registration Statement), to remain continuously effective as to all Registrable Securities for which it is required to be effective or (B) the Holders are not permitted to utilize the Prospectus therein to resell such Registrable Securities for any reason for more than an aggregate of twenty (20) consecutive Trading Days or forty (40) Trading Days (which need not be consecutive days) during any twelve (12) month period, or (iv) the Company fails to satisfy the current public information requirement pursuant to Rule 144(c)(1) as a result of which the Holders who are not affiliates are unable to sell Registrable Securities without restriction under Rule 144 (or any successor thereto), (any such failure or breach in clauses (i) through (iv) above being referred to as an “Event,” and, for purposes of clauses (i), (ii) or (iv), the date on which such Event occurs, or for purposes of clause (iii), the date on which such twenty (20) or forty (40) calendar day period is exceeded, being referred to as an “Event Date”), then in addition to any other rights the Holders may have hereunder or under applicable law, on each such Event Date and on each monthly anniversary of each such Event Date (if the applicable Event shall not have been cured by such date) until the earlier of (1) the applicable Event is cured or (2) the Registrable Securities are eligible for resale pursuant to Rule 144 without manner of sale or volume restrictions, the Company shall pay to each Holder an amount in cash, as partial liquidated damages and not as a penalty (“Liquidated Damages”), equal to one percent (1%) of the aggregate purchase price paid by such Holder pursuant to the Purchase Agreement for any unregistered Registrable Securities then held by such Holder.  The parties agree that (1) the Company will not be liable for Liquidated Damages under this Agreement with respect to any Notes, Conversion Shares, Warrants or Warrant Shares (prior to their issuance), (2) notwithstanding anything to the contrary herein or in the Purchase Agreement, no Liquidated Damages shall be payable with respect to any period after the expiration of the Effectiveness Period (except in respect of an Event described in Section 2(c)(iv) herein), (it being understood that this sentence shall not relieve the Company of any Liquidated Damages accruing prior to the Effectiveness Deadline) and in no event shall, the aggregate amount of Liquidated Damages (excluding Liquidated Damages payable in respect of an Event described in Section 2(c)(iv) herein) payable to a Holder exceed, in the aggregate, six percent (6%) of the aggregate purchase price paid by such Holder pursuant to the Purchase Agreement (twelve percent (12%) if the only Event is clause (iv)) and (3) in no event shall the Company be liable in any thirty (30) day period for Liquidated Damages under this Agreement in excess of one percent (1%) of the aggregate purchase price paid by the Holders pursuant to the Purchase Agreement.  The Liquidated Damages pursuant to the terms hereof shall apply on a daily pro-rata basis for any portion of a month prior to the cure of an Event, except in the case of the first Event Date.  The Company shall not be liable for Liquidated Damages under this Agreement as to any Registrable Securities which are not permitted by the Commission to be included in a Registration Statement due solely to SEC Guidance from the time that it is determined that such Registrable Securities are not permitted to be registered until such time as the provisions of this Agreement as to the Remainder Registration Statements required to be filed hereunder are triggered, in which case the provisions of this Section 2(c) shall once again apply, if applicable.  In such case, the Liquidated Damages shall be calculated to only apply to the percentage of Registrable Securities which are permitted in accordance with SEC Guidance to be included in such Registration Statement. The Company shall not be liable for Liquidated Damages under this Agreement for the period that a Registration Statement is not effective as a result of the requirement that the Company file a post-effective amendment to such Registration Statement in order to update the financial statements as required by Section 10(a)(3) of the Securities Act, 

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provided that the Company uses commercially reasonable efforts to obtain the effectiveness of such Registration Statement.  The Effectiveness Deadline for a Registration Statement shall be extended without default or Liquidated Damages hereunder in the event that the Company’s failure to obtain the effectiveness of the Registration Statement on a timely basis results from the failure of a Purchaser to timely provide the Company with information requested by the Company and necessary to complete the Registration Statement in accordance with the requirements of the Securities Act (in which case the Effectiveness Deadline would be extended with respect to Registrable Securities held by such Purchaser).  Notwithstanding any provision of this Agreement to the contrary, the Company shall be permitted to suspend for one or more periods (provided that (i) the aggregate length of any one suspension period shall not exceed ten (10) consecutive Business Days, (ii) the length of all suspension periods in any 365 day period shall not exceed twenty (20) Business Days in the aggregate, and (iii) there is not more than one suspension period in any thirty calendar day period; provided further, however, that until the Company meets the eligibility requirements to use Form S-3, the first thirty (30) calendar days (or the first forty-five (45) calendar days if the Company is using its best efforts to cause the effectiveness of the applicable post-effective amendment) of a suspension due to a full review by the Commission of a post-effective amendment of a Registration Statement shall not count towards the ten (10) and twenty (20) Business Day limitations set forth in the preceding clauses (i) and (ii), respectively) the actions required under paragraph 2(a) of this Agreement to the extent that the Company’s Board of Directors concludes reasonably and in good faith that the disclosure of information in the Prospectus is not in the best interest of the Company.

(d)

Each Holder agrees to furnish to the Company a completed Selling Stockholder Questionnaire not more than five (5) Trading Days following the date of this Agreement. At least ten (10) Trading Days prior to the first anticipated filing date of a Registration Statement for any registration under this Agreement, the Company will notify each Holder of the information the Company requires from that Holder other than the information contained in the Selling Stockholder Questionnaire, if any, which shall be completed and delivered to the Company promptly upon request and, in any event, within three (3) Trading Days prior to the applicable anticipated filing date.  Each Holder further agrees that it shall not be entitled to be named as a selling securityholder in the Registration Statement or use the Prospectus for offers and resales of Registrable Securities at any time, unless such Holder has returned to the Company a completed and signed Selling Stockholder Questionnaire and a response to any requests for further information as described in the previous sentence. If a Holder of Registrable Securities returns a Selling Stockholder Questionnaire or a request for further information, in either case, after its respective deadline, the Company shall use its commercially reasonable efforts to take such actions as are required to name such Holder as a selling security holder in the Registration Statement or any pre-effective or post-effective amendment thereto and to include (to the extent not theretofore included) in the Registration Statement the Registrable Securities identified in such late Selling Stockholder Questionnaire or request for further information. Each Holder acknowledges and agrees that the information in the Selling Stockholder Questionnaire or request for further information as described in this Section 2(d) will be used by the Company in the preparation of the Registration Statement and hereby consents to the inclusion of such information in the Registration Statement.

(e)

In the event that Form S-3 is not  available for the registration of the resale of Registrable Securities hereunder, the Company shall (i) register the resale of the Registrable Securities on another appropriate form reasonably acceptable to the Holders and (ii) undertake to register the Registrable Securities on Form S-3 promptly after such form is available, provided that the Company shall maintain the effectiveness of the Registration Statement then in effect until such time as a Registration Statement on Form S-3 covering the Registrable Securities has been declared effective by the Commission.  The Purchasers acknowledge that at the time of the Closing and at the time of the Filing Deadline the Company will not be eligible to use a Form S-3 to register the resale of the Registrable Securities. 

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3.

Registration Procedures

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

(a)

Not less than five (5) Trading Days prior to the filing of each Registration Statement and not less than one (1) Trading Day prior to the filing of any related Prospectus or any amendment or supplement thereto (except for amendments or supplements required by the Company filing Annual Reports on Form 10-K, and Quarterly Reports on Form 10-Q and Current Reports on Form 8-K and any similar or successor reports), (i) furnish to the Holder copies of such Registration Statement, Prospectus or amendment or supplement thereto, as proposed to be filed, which documents will be subject to the review of such Holder (it being acknowledged and agreed that if a Holder does not object to or comment on the aforementioned documents within such five (5) Trading Day or one (1) Trading Day period, as the case may be, then the Holder shall be deemed to have consented to and approved the use of such documents) and (ii) use commercially reasonable efforts to cause its officers and directors, counsel and independent registered public accountants to respond to such inquiries as shall be necessary, in the reasonable opinion of respective counsel to each Holder, to conduct a reasonable investigation within the meaning of the Securities Act.  The Company shall not file any Registration Statement or amendment or supplement thereto in a form to which a Holder reasonably objects in good faith, provided that, the Company is notified of such objection in writing within the five (5) Trading Day or one (1) Trading Day period described above, as applicable.  

(b)

(i)  Prepare and file with the Commission such amendments (including post-effective amendments) and supplements, to each Registration Statement and the Prospectus used in connection therewith as may be necessary to keep such Registration Statement continuously effective as to the applicable Registrable Securities for its Effectiveness Period; (ii) cause the related Prospectus to be amended or supplemented by any required Prospectus supplement (subject to the terms of this Agreement), and, as so supplemented or amended, to be filed pursuant to Rule 424; (iii) respond as promptly as reasonably practicable to any comments received from the Commission with respect to each Registration Statement or any amendment thereto and, as promptly as reasonably possible, provide the Holders true and complete copies of all correspondence from and to the Commission relating to such Registration Statement that pertains to the Holders as “Selling Stockholders” but not any comments that would result in the disclosure to the Holders of material and non-public information concerning the Company; and (iv) comply with the provisions of the Securities Act and the Exchange Act with respect to the disposition of all Registrable Securities covered by a Registration Statement until such time as all of such Registrable Securities shall have been disposed of (subject to the terms of this Agreement) in accordance with the intended methods of disposition by the Holders thereof as set forth in such Registration Statement as so amended or in such Prospectus as so supplemented; provided, however, that each Purchaser shall be responsible for the delivery of the Prospectus to the Persons to whom such Purchaser sells any of the Conversion Shares or the Warrant Shares (including in accordance with Rule 172 under the Securities Act), and each Purchaser agrees to dispose of Registrable Securities in compliance with applicable federal and state securities laws. In the case of amendments and supplements to a Registration Statement which are required to be filed pursuant to this Agreement (including pursuant to this Section 3(b)) by reason of the Company filing a report on Form 10-K, Form 10-Q or Form 8-K or any analogous report under the Exchange Act, the Company shall have incorporated such report by reference into such Registration Statement, if applicable, or shall file such amendments or supplements with the Commission on the same day on which the Exchange Act report which created the requirement for the Company to amend or supplement such Registration Statement was filed.

(c)

Notify the Holders (which notice shall, pursuant to clauses (iii) through (vi) hereof, be accompanied by an instruction to suspend the use of the Prospectus until the requisite changes have been made) as promptly as reasonably practicable (and, in the case of (i)(A) below, not less than one 

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(1) Trading Day prior to such filing) and (if requested by any such Person) confirm such notice in writing no later than one (1) Trading Day following the day: (i)(A) when a Prospectus or any Prospectus supplement or post-effective amendment to a Registration Statement is proposed to be filed; (B) when the Commission notifies the Company whether there will be a “review” of such Registration Statement and whenever the Commission comments in writing on any Registration Statement (in which case the Company shall provide to each of the Holders true and complete copies of all comments that pertain to the Holders as a “Selling Stockholder” and all written responses thereto, but not information that the Company believes would constitute material and non-public information); and (C) with respect to each Registration Statement or any post-effective amendment, when the same has become effective; (ii) of any request by the Commission or any other Federal or state governmental authority for amendments or supplements to a Registration Statement or Prospectus or for additional information that pertains to the Holders as “Selling Stockholders”; (iii) of the issuance by the Commission or any other federal or state governmental authority of any stop order suspending the effectiveness of a Registration Statement covering any or all of the Registrable Securities or the initiation of any Proceedings for that purpose; (iv) of the receipt by the Company of any notification with respect to the suspension of the qualification or exemption from qualification of any of the Registrable Securities for sale in any jurisdiction, or the initiation or threatening of any Proceeding for such purpose; (v) of the occurrence of any event or passage of time that makes the financial statements included in a Registration Statement ineligible for inclusion therein or any statement made in such Registration Statement or Prospectus or any document incorporated or deemed to be incorporated therein by reference untrue in any material respect or that requires any revisions to such Registration Statement, Prospectus or other documents so that, in the case of such Registration Statement or the Prospectus, as the case may be, it will not contain any untrue statement of a material fact or omit to state any material fact required to be stated therein or necessary to make the statements therein (in the case of any Prospectus, form of prospectus or supplement thereto, in light of the circumstances under which they were made), not misleading and (vi) of the occurrence or existence of any pending corporate development with respect to the Company that the Company believes may be material and that, in the determination of the Company, makes it not in the best interest of the Company to allow continued availability of a Registration Statement or Prospectus, provided that, any and all such information shall remain confidential to each Holder until such information otherwise becomes public, unless disclosure by a Holder is required by law; and provided, further, that notwithstanding each Holder’s agreement to keep such information confidential, each such Holder makes no acknowledgement that any such information is material, non-public information.

(d)

Use commercially reasonable efforts to avoid the issuance of, or, if issued, obtain the withdrawal of (i) any order suspending the effectiveness of a Registration Statement, or (ii) any suspension of the qualification (or exemption from qualification) of any of the Registrable Securities for sale in any jurisdiction, as soon as practicable.

(e)

If requested by a Holder, furnish to such Holder, without charge, at least one conformed copy of each Registration Statement and each amendment thereto and all exhibits to the extent requested by such Person (including those previously furnished or incorporated by reference) promptly after the filing of such documents with the Commission; provided, that the Company shall have no obligation to provide any document pursuant to this clause that is available on the Commission’s EDGAR system.

(f)

Prior to any resale of Registrable Securities by a Holder, use its commercially reasonable efforts to register or qualify or cooperate with the selling Holders in connection with the registration or qualification (or exemption from the registration or qualification) of such Registrable Securities for the resale by the Holder under the securities or Blue Sky laws of such jurisdictions within the United States as any Holder reasonably requests in writing, to keep each registration or qualification (or exemption therefrom) effective during the Effectiveness Period and to do any and all other acts or 

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things reasonably necessary to enable the disposition in such jurisdictions of the Registrable Securities covered by each Registration Statement; provided, that the Company shall not be required to qualify generally to do business in any jurisdiction where it is not then so qualified, subject the Company to any material tax in any such jurisdiction where it is not then so subject or file a general consent to service of process in any such jurisdiction.

(g)

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

(h)

Following the occurrence of any event contemplated by Section 3(c), as promptly as reasonably practicable (taking into account the Company’s good faith assessment of any adverse consequences to the Company and its stockholders of the premature disclosure of such event), prepare a supplement or amendment, including a post-effective amendment, to the affected Registration Statements or a supplement to the related Prospectus or any document incorporated or deemed to be incorporated therein by reference, and file any other required document so that, as thereafter delivered, no Registration Statement nor any Prospectus will contain an untrue statement of a material fact or omit to state a material fact required to be stated therein or necessary to make the statements therein (in the case of any Prospectus, form of prospectus or supplement thereto, in light of the circumstances under which they were made), not misleading.  If the Company notifies the Holders in accordance with clauses (iii) through (vi) of Section 3(c) above to suspend the use of any Prospectus until the requisite changes to such Prospectus have been made, then the Holders shall suspend use of such Prospectus.  The Company will use its commercially reasonable efforts to ensure that the use of the Prospectus may be resumed as promptly as is practicable.  The Company shall be entitled to exercise its right under this Section 3(h) to suspend the availability of a Registration statement and Prospectus, subject to the payment of partial Liquidated Damages otherwise required pursuant to Section 2(c), for a period not to exceed forty (40) calendar days (which need not be consecutive days) in any twelve (12) month period.

(i)

The Company may require each selling Holder to furnish to the Company a certified statement as to (i) the number of shares of Common Stock beneficially owned by such Holder and any Affiliate thereof, (ii) any Financial Industry Regulatory Authority (“FINRA”) affiliations, (iii) any natural persons who have the power to vote or dispose of the common stock and (iv) any other information as may be requested by the Commission, FINRA or any state securities commission. During any periods that the Company is unable to meet its obligations hereunder with respect to the registration of Registrable Securities because any Holder fails to furnish such information within three (3) Trading Days of the Company’s request, any Liquidated Damages that are accruing at such time as to such Holder only shall be tolled and any Event that may otherwise occur solely because of such delay shall be suspended as to such Holder only, until such information is delivered to the Company.

4.

Registration Expenses.  All fees and expenses incident to the Company’s performance of or compliance with its obligations under this Agreement (excluding any underwriting discounts and selling commissions and all legal fees and expenses of legal counsel for any Holder) shall be borne by the Company whether or not any Registrable Securities are sold pursuant to a Registration Statement.  The fees and expenses referred to in the foregoing sentence shall include, without limitation, (i) all registration and filing fees (including, without limitation, fees and expenses (A) with respect to filings required to be made with any Trading Market on which the Common Stock is then listed for trading, (B) with respect to compliance with applicable state securities or Blue Sky laws (including, without limitation, fees and disbursements of counsel for the Company in connection with Blue Sky qualifications or exemptions of the Registrable Securities and determination of the eligibility of the Registrable Securities for investment 

10

under the laws of such jurisdictions as requested by the Holders) and (C) if not previously paid by the Company in connection with Section 3(j) above, with respect to any filing that may be required to be made by any broker through which a Holder intends to make sales of Registrable Securities with FINRA pursuant to the FINRA Rule 2710, so long as the broker is receiving no more than a customary brokerage commission in connection with such sale, (ii) printing expenses (including, without limitation, expenses of printing certificates for Registrable Securities and of printing prospectuses if the printing of prospectuses is reasonably requested by the Holders of a majority of the Registrable Securities included in the Registration Statement), (iii) messenger, telephone and delivery expenses, (iv) fees and disbursements of counsel for the Company, (v) Securities Act liability insurance, if the Company so desires such insurance, and (vi) fees and expenses of all other Persons retained by the Company in connection with the consummation of the transactions contemplated by this Agreement.  In addition, the Company shall be responsible for all of its internal expenses incurred in connection with the consummation of the transactions contemplated by this Agreement (including, without limitation, all salaries and expenses of its officers and employees performing legal or accounting duties), the expense of any annual audit and the fees and expenses incurred in connection with the listing of the Registrable Securities on any securities exchange as required hereunder.  In no event shall the Company be responsible for any underwriting, broker or similar fees or commissions of any Holder or, except to the extent provided for in the Transaction Documents, any legal fees or other costs of the Holders.

5.

Indemnification.

(a)

Indemnification by the Company.  The Company shall, notwithstanding any termination of this Agreement, indemnify, defend and hold harmless each Holder, the officers, directors, agents, partners, members, managers, stockholders, Affiliates and employees of each of them, each Person who controls any such Holder (within the meaning of Section 15 of the Securities Act or Section 20 of the Exchange Act) and the officers, directors, partners, members, managers, stockholders, agents and employees of each such controlling Person, to the fullest extent permitted by applicable law, from and against any and all losses, claims, damages, liabilities, costs (including, without limitation, reasonable costs of preparation and investigation and reasonable attorneys’ fees) and expenses (collectively, “Losses”), as incurred, that arise out of or are based upon (i) any untrue or alleged untrue statement of a material fact contained in any Registration Statement, any Prospectus or any form of prospectus or in any amendment or supplement thereto or in any preliminary prospectus, or arising out of or relating to any omission or alleged omission to state a material fact required to be stated therein or necessary to make the statements therein (in the case of any Prospectus or form of prospectus or supplement thereto, in light of the circumstances under which they were made) not misleading, or (ii) any violation or alleged violation by the Company of the Securities Act, Exchange Act or any state securities law or any rule or regulation thereunder, in connection with the performance of its obligations under this Agreement, except to the extent, but only to the extent, that (A) such untrue statements, alleged untrue statements, omissions or alleged omissions are based solely upon information regarding such Holder furnished in writing to the Company by such Holder expressly for use therein, or to the extent that such information relates to such Holder or such Holder’s proposed method of distribution of Registrable Securities and was reviewed and approved  in writing by such Holder expressly for use in the Registration Statement, such Prospectus or such form of Prospectus or in any amendment or supplement thereto or (B) in the case of an occurrence of an event of the type specified in Section 3(c)(iii)-(vi), related to the use by a Holder of an outdated or defective Prospectus after the Company has notified such Holder in writing that the Prospectus is outdated or defective and prior to the receipt by such Holder of the Advice contemplated and defined in Section 6(d) below, to the extent that following the receipt of the Advice the misstatement or omission giving rise to such Loss would have been corrected or (C) to the extent that any such Losses arise out of the Purchaser’s (or any other indemnified Person’s) failure to send or give a copy of the Prospectus or supplement (as then amended or supplemented), if required, pursuant to Rule 172 under the Securities Act (or any successor rule) to the Persons asserting an untrue statement or alleged untrue statement or alleged 

11

untrue statement or omission or alleged omission at or prior to the written confirmation of the sale of Registrable Securities to such Person if such statement or omission was corrected in such Prospectus or supplement.  The Company shall notify the Holders promptly of the institution, threat or assertion of any Proceeding arising from or in connection with the transactions contemplated by this Agreement of which the Company is aware.  Such indemnity shall remain in full force and effect regardless of any investigation made by or on behalf of an Indemnified Party (as defined in Section 5(c)) and shall survive the transfer of the Registrable Securities by the Holders.

(b)

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

(c)

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

An Indemnified Party shall have the right to employ separate counsel in any such Proceeding and to participate in the defense thereof, but the fees and expenses of such counsel shall be at the expense of such Indemnified Party or Parties unless:  (1) the Indemnifying Party has agreed in writing to pay such fees and expenses; (2) the Indemnifying Party shall have failed promptly to assume the defense of such Proceeding and to employ counsel reasonably satisfactory to such Indemnified Party in any such Proceeding; or (3) the named parties to any such Proceeding (including any impleaded parties) include both such Indemnified Party and the Indemnifying Party, and such Indemnified Party shall have been advised by counsel that a conflict of interest exists if the same counsel were to represent such Indemnified Party and the Indemnifying Party (in which case, if such Indemnified Party notifies the 

12

Indemnifying Party in writing that it elects to employ separate counsel at the expense of the Indemnifying Party, the Indemnifying Party shall not have the right to assume the defense thereof and such counsel shall be at the expense of the Indemnifying Party); provided, that the Indemnifying Party shall not be liable for the fees and expenses of more than one separate firm of attorneys at any time for all Indemnified Parties.  The Indemnifying Party shall not be liable for any settlement of any such Proceeding effected without its written consent, which consent shall not be unreasonably withheld, delayed or conditioned.  No Indemnifying Party shall, without the prior written consent of the Indemnified Party, effect any settlement of any pending Proceeding in respect of which any Indemnified Party is a party, unless such settlement includes an unconditional release of such Indemnified Party from all liability on claims that are the subject matter of such Proceeding.

Subject to the terms of this Agreement, all fees and expenses of the Indemnified Party (including reasonable fees and expenses to the extent incurred in connection with investigating or preparing to defend such Proceeding in a manner not inconsistent with this Section 5) shall be paid to the Indemnified Party, as incurred, within twenty (20) Trading Days of written notice thereof to the Indemnifying Party; provided, that the Indemnified Party shall promptly reimburse the Indemnifying Party for that portion of such fees and expenses applicable to such actions for which such Indemnified Party is finally judicially determined to not be entitled to indemnification hereunder). The failure to deliver written notice to the Indemnifying Party within a reasonable time of the commencement of any such action shall not relieve such Indemnifying Party of any liability to the Indemnified Party under this Section 5, except to the extent that the Indemnifying Party is materially and adversely prejudiced in its ability to defend such action.

(d)

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

The parties hereto agree that it would not be just and equitable if contribution pursuant to this Section 5(d) were determined by pro rata allocation or by any other method of allocation that does not take into account the equitable considerations referred to in the immediately preceding paragraph.  Notwithstanding the provisions of this Section 5(d), (A) no Holder shall be required to contribute, in the aggregate, any amount in excess of the amount by which the net proceeds actually received by such Holder from the sale of the Registrable Securities subject to the Proceeding exceeds the amount of any damages that such Holder has otherwise been required to pay by reason of such untrue or alleged untrue statement or omission or alleged omission and (B) no contribution will be made under circumstances where the maker of such contribution would not have been required to indemnify the Indemnified Party under the fault standards set forth in this Section 5.  No person guilty of fraudulent misrepresentation 

13

(within the meaning of Section 11(f) of the Securities Act) shall be entitled to contribution from any Person who was not guilty of such fraudulent misrepresentation.  

The indemnity and contribution agreements contained in this Section 5 are in addition to any liability that the Indemnifying Parties may have to the Indemnified Parties and are not in diminution or limitation of the indemnification provisions under the Purchase Agreement.

6.

Miscellaneous.

(a)

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

(b)

No Piggyback on Registrations; Prohibition on Filing Other Registration Statements.  Except and to the extent specified in the Disclosure Letter (as defined in the Purchase Agreement) to the Purchase Agreement, neither the Company nor any of its security holders (other than the Holders in such capacity pursuant hereto) may include securities of the Company in a Registration Statement other than the Registrable Securities and the Company shall not prior to the Effective Date enter into any agreement providing any such right to any of its security holders. The Company shall not file with the Commission a registration statement relating to an offering for its own account under the Securities Act of any of its equity securities other than a registration statement on Form S-8 or, in connection with an acquisition, on Form S-4 until the earlier of (i) the date that is thirty (30) days after the Initial Registration Statement or New Registration Statement, as the case may be, is declared effective or (ii) the date that all Registrable Securities are eligible for resale by non-affiliates without volume or manner of sale restrictions under Rule 144 and without the requirement for the Company to be in compliance with the current public information requirements under Rule 144. For the avoidance of doubt, the Company shall not be prohibited from preparing and filing with the Commission a registration statement relating to an offering of Common Stock by existing stockholders of the Company under the Securities Act pursuant to the terms of registration rights held by such stockholder or from filing amendments to registration statements filed prior to the date of this Agreement.

(c)

Compliance.  Each Holder covenants and agrees that it will comply with the prospectus delivery requirements of the Securities Act as applicable to it (unless an exemption therefrom is available) in connection with sales of Registrable Securities pursuant to the Registration Statement and shall sell the Registrable Securities only in accordance with a method of distribution described in the Registration Statement

(d)

Discontinued Disposition.  By its acquisition of Registrable Securities, each Holder agrees that, upon receipt of a notice from the Company of the occurrence of any event of the kind described in Section 3(c)(iii)-(vi), such Holder will forthwith discontinue disposition of such Registrable Securities under a Registration Statement until it is advised in writing (the “Advice”) by the Company that the use of the applicable Prospectus (as it may have been supplemented or amended) may be resumed.    The Company will use its commercially reasonable efforts to ensure that the use of the Prospectus may be resumed as promptly as is practicable.  The Company agrees and acknowledges that any periods during which the Holder is required to discontinue the disposition of the Registrable Securities hereunder shall be subject to the provisions of Section 2(c). 

14

(e)

No Inconsistent Agreements.  The Company has not entered, as of the date hereof, nor shall the Company, on or after the date hereof, enter into any agreement with respect to its securities, that would have the effect of impairing the rights granted to the Holders in this Agreement or otherwise conflicts with the provisions hereof except and to the extent specified in the Disclosure Letter to the Purchase Agreement.

(f)

Amendments and Waivers.  The provisions of this Agreement, including the provisions of this sentence, may not be amended, modified or supplemented, or waived unless the same shall be in writing and signed by the Company and Holders holding no less than a majority of the Registrable Securities then outstanding and issuable, provided that any party may give a waiver as to itself.  Notwithstanding the foregoing,  a waiver or consent to depart from the provisions hereof with respect to a matter that relates exclusively to the rights of Holders and that does not directly or indirectly affect the rights of other Holders may be given by Holders of all of the Registrable Securities to which such waiver or consent relates; provided, however, that the provisions of this sentence may not be amended, modified, or supplemented except in accordance with the provisions of the immediately preceding sentence. 

(g)

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

(h)

Successors and Assigns.  This Agreement shall inure to the benefit of and be binding upon the successors and permitted assigns of each of the parties and shall inure to the benefit of each Holder.  Nothing in this Agreement, express or implied, is intended to confer upon any party other than the parties hereto or their respective successors and assigns any rights, remedies, obligations, or liabilities under or by reason of this Agreement, except as expressly provided in this Agreement.  The Company may not assign its rights (except by merger or in connection with another entity acquiring all or substantially all of the Company’s assets) or obligations hereunder without the prior written consent of all the Holders of the Registrable Securities then outstanding and issuable.  Each Holder may assign its respective rights hereunder in the manner and to the Persons as permitted under the Purchase Agreement; provided in each case that (i) the Holder agrees in writing with the transferee or assignee to assign such rights and related obligations under this Agreement, and for the transferee or assignee to assume such obligations, and a copy of such agreement is furnished to the Company within a reasonable time after such assignment, (ii) the Company is, within a reasonable time after such transfer or assignment, furnished with written notice of the name and address of such transferee or assignee and the securities with respect to which such registration rights are being transferred or assigned, (iii) at or before the time the Company received the written notice contemplated by clause (ii) of this sentence, the transferee or assignee agrees in writing with the Company to be bound by all of the provisions contained herein and (iv) the transferee is an “accredited investor,” as that term is defined in Rule 501 of Regulation D.

(i)

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

(j)

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

15

(k)

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

(l)

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

(m)

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

(n)

Independent Nature of Purchasers’ Obligations and Rights.  The obligations of each Purchaser under this Agreement are several and not joint with the obligations of any other Purchaser hereunder, and no Purchaser shall be responsible in any way for the performance of the obligations of any other Purchaser hereunder.  The decision of each Purchaser to purchase the Securities pursuant to the Transaction Documents has been made independently of any other Purchaser. Nothing contained herein or in any other agreement or document delivered at any closing, 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 with respect to such obligations or the transactions contemplated by this Agreement.  Each Purchaser acknowledges that no other Purchaser has acted as agent for such Purchaser in connection with making its investment hereunder and that no Purchaser will be acting as agent of such Purchaser in connection with monitoring its investment in the Securities or enforcing its rights under the Transaction Documents. Each Purchaser shall be entitled to protect and enforce its rights, including, without limitation, the rights arising out of this Agreement, and it shall not be necessary for any other Purchaser to be joined as an additional party in any Proceeding for such purpose.  The Company acknowledges that each of the Purchasers has been provided with the same Investor Rights Agreement for the purpose of closing a transaction with multiple Purchasers and not because it was required or requested to do so by any Purchaser.

[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]

16

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

			
	 
	ALFACELL CORPORATION

	 
	 
	 

	 
	 
	 

	 
	By:

	/s/ Charles Muniz

	 
	 
	Name: Charles Muniz

	 
	 
	Title: President, Chief Executive Officer and Chief Financial Officer

[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]

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

			
	 
	NAME OF INVESTING ENTITY

	 
	 
	 

	 
	EUROPA INTERNATIONAL, INC.

	 
	 
	 

	 
	AUTHORIZED SIGNATORY

	 
	 
	 

	 
	By: 

	/s/ Fred Knoll

	 
	Name:  

	Fred Knoll

	 
	Title: 

	Knoll Capital Management, Investment Manager for Europa Int’l, Inc.

	 
	 
	 

	 
	ADDRESS FOR NOTICE:

	 
	 

	 
	c/o Knoll Capital Management

	 
	1114 Avenue of the Americas, 45th Fl

	 
	New York, NY 10036

	 
	Attn: Fred Knoll

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

			
	 
	NAME OF INVESTING ENTITY

	 
	 
	 

	 
	CHARLES MUNIZ

	 
	 
	 

	 
	AUTHORIZED SIGNATORY

	 
	 
	 

	 
	By: 

	/s/ Charles Muniz

	 
	Name:  

	Charles Muniz

	 
	Title: 

	 

	 
	 
	 

	 
	ADDRESS FOR NOTICE:

	 
	 

	 
	2358 S Ocean Blvd

	 
	Highland Beach, FL 33487

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

			
	 
	NAME OF INVESTING ENTITY

	 
	 
	 

	 
	UNILAB LP

	 
	 
	 

	 
	AUTHORIZED SIGNATORY

	 
	 
	 

	 
	By: 

	/s/ F. Patrick Ostronic

	 
	Name:  

	F. Patrick Ostronic

	 
	Title: 

	Director, Unilab GP Inc., General Partner for Unilab LP

	 
	 
	 

	 
	ADDRESS FOR NOTICE:

	 
	 

	 
	c/o USPI, 966 Hungerford Drive, Ste 3B, Rockville, MD 20854

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

			
	 
	NAME OF INVESTING ENTITY

	 
	 
	 

	 
	MARY M. MCCASH TRUST DECLARATION DECLARED OCTOBER 20, 2008

	 
	 
	 

	 
	AUTHORIZED SIGNATORY

	 
	 
	 

	 
	By: 

	/s/ Mary M. McCash

	 
	Name: 

	Mary M. McCash

	 
	Title: 

	Trustee

	 
	 
	 

	 
	ADDRESS FOR NOTICE

	 
	 
	 

	 
	5660 Rush Road

	 
	Conover, Wisconsin 54519

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

			
	 
	NAME OF INVESTING ENTITY

	 
	 
	 

	 
	THE MICHAEL J. MCCASH LIVING TRUST

	 
	 
	 

	 
	AUTHORIZED SIGNATORY

	 
	 
	 

	 
	By: 

	/s/ Michael J. McCash

	 
	Name: 

	Michael J. McCash

	 
	Title: 

	Trustee and Grantor

	 
	 
	 

	 
	ADDRESS FOR NOTICE

	 
	 
	 

	 
	N 3810 South Grand Oak Road

	 
	Iron Mountain, Michigan 4801

	 
	 
	 

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

			
	 
	NAME OF INVESTING ENTITY

	 
	 
	 

	 
	COLLEEN A. LOWE

	 
	 
	 

	 
	AUTHORIZED SIGNATORY

	 
	 
	 

	 
	By: 

	/s/ Colleen A. Lowe

	 
	Name: 

	Colleen A. Lowe

	 
	Title: 

	 

	 
	 
	 

	 
	ADDRESS FOR NOTICE

	 
	 
	 

	 
	13639 Bridle Trail Rd.

	 
	Draper, Utah 84020

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

			
	 
	NAME OF INVESTING ENTITY

	 
	 
	 

	 
	CORINNE M. POQUETTE

	 
	 
	 

	 
	AUTHORIZED SIGNATORY

	 
	 
	 

	 
	By: 

	/s/ Corinne M. Poquette

	 
	Name: 

	Corinne M. Poquette

	 
	Title:

	 

	 
	 
	 

	 
	ADDRESS FOR NOTICE

	 
	 
	 

	 
	W 4454 County Road 573

	 
	Kulcan, Michigan 49892

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

			
	 
	NAME OF INVESTING ENTITY

	 
	 
	 

	 
	DAVID J. MCCASH 

	 
	 
	 

	 
	AUTHORIZED SIGNATORY

	 
	 
	 

	 
	By: 

	/s/ David J. McCash

	 
	Name: 

	David J. McCash

	 
	Title:

	 

	 
	 
	 

	 
	ADDRESS FOR NOTICE

	 
	 
	 

	 
	716 Hillcrest Drive

	    

	Iron Mountain, Michigan 4980

ANNEX A

SELLING STOCKHOLDER NOTICE AND QUESTIONNAIRE

The undersigned holder of shares of the common stock, par value $0.001 per share of Alfacell Corporation (the “Company”) issued pursuant to a certain Securities Purchase Agreement by and among the Company and the Purchasers named therein, dated as of October 19, 2009 (the “Agreement”), understands that the Company intends to file with the Securities and Exchange Commission a registration statement on Form S-3 (the “Resale Registration Statement”) for the registration and the resale under Rule 415 of the Securities Act of 1933, as amended (the “Securities Act”), of the Registrable Securities in accordance with the terms of the Agreement. All capitalized terms not otherwise defined herein shall have the meanings ascribed thereto in the Agreement. 

In order to sell or otherwise dispose of any Registrable Securities pursuant to the Resale Registration Statement, a holder of Registrable Securities generally will be required to be named as a selling stockholder in the related prospectus or a supplement thereto (as so supplemented, the “Prospectus”), deliver the Prospectus to purchasers of Registrable Securities (including pursuant to Rule 172 under the Securities Act) and be bound by the provisions of the Agreement (including certain indemnification provisions, as described below).  Holders must complete and deliver this Notice and Questionnaire in order to be named as selling stockholders in the Prospectus.  Holders of Registrable Securities who do not complete, execute and return this Notice and Questionnaire within three (3) Trading Days following the date of the Agreement (1) will not be named as selling stockholders in the Resale Registration Statement or the Prospectus and (2) may not use the Prospectus for resales of Registrable Securities. 

Certain legal consequences arise from being named as a selling stockholder in the Resale Registration Statement and the Prospectus.  Holders of Registrable Securities are advised to consult their own securities law counsel regarding the consequences of being named or not named as a selling stockholder in the Resale Registration Statement and the Prospectus. 

NOTICE

The undersigned holder (the “Selling Stockholder”) of Registrable Securities hereby gives notice to the Company of its intention to sell or otherwise dispose of Registrable Securities owned by it and listed below in Item (3), unless otherwise specified in Item (3), pursuant to the Resale Registration Statement.  The undersigned, by signing and returning this Notice and Questionnaire, understands and agrees that it will be bound by the terms and conditions of this Notice and Questionnaire and the Agreement. 

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

QUESTIONNAIRE

1.

Name.

(a)

Full Legal Name of Selling Stockholder:

	
	 

	 

(b)

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

	
	 

	 

(c)

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

	
	 

	 

2.  Address for Notices to Selling Stockholder:

	
	__________________________________________________________________________________

	__________________________________________________________________________________

	__________________________________________________________________________________

	Telephone:

_______________________________________________________________________

	Fax:

______________________________________________________________________________

	Contact Person:

_____________________________________________________________________

	E-mail address of Contact Person:

______________________________________________________

3.  Beneficial Ownership of Registrable Securities Issuable Pursuant to the Purchase Agreement:

(a)

Type and Number of Registrable Securities beneficially owned and issued pursuant to the Agreement:

	
	 

	 

	 

	 

(b)

Number of shares of Common Stock to be registered pursuant to this Notice for resale:

	
	 

	 

	 

	 

4.  Broker-Dealer Status:

(a)

Are you a broker-dealer?

Yes    ̈   No    ̈

(b)

If “yes” to Section 4(a), did you receive your Registrable Securities as compensation for 

investment banking services to the Company?

Yes    ̈   No    ̈

Note:

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

(c)

Are you an affiliate of a broker-dealer?

Yes    ̈   No    ̈

Note:

If yes, provide a narrative explanation below:

	
	 

	 

	 

(c)

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

Yes    ̈   No    ̈

Note:

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

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

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

Type and amount of other securities beneficially owned:

	
	 

	 

	 

6.  Relationships with the Company:

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

State any exceptions here:

	
	 

	 

	 

***********

The undersigned agrees to promptly notify the Company of any inaccuracies or changes in the information provided herein that may occur subsequent to the date hereof and prior to the effective date of any applicable Resale Registration Statement. All notices hereunder and pursuant to the Agreement shall be made in writing, by hand delivery, confirmed or facsimile transmission, first-class mail or air courier guaranteeing overnight delivery at the address set forth below.  In the absence of any such notification, the Company shall be entitled to continue to rely on the accuracy of the information in this Notice and Questionnaire.

By signing below, the undersigned consents to the disclosure of the information contained herein in its answers to Items (1) through (7) above and the inclusion of such information in the Resale Registration Statement and the Prospectus.  The undersigned understands that such information will be relied upon by the Company in connection with the preparation or amendment of any such Registration Statement and the Prospectus.

By signing below, the undersigned acknowledges that it understands its obligation to comply, and agrees that it will comply, with the provisions of the Exchange Act and the rules and regulations thereunder, particularly Regulation M in connection with any offering of Registrable Securities pursuant to the Resale Registration Statement.  The undersigned also acknowledges that it understands that the answers to this Questionnaire are furnished for use in connection with Registration Statements filed pursuant to the Investor Rights Agreement and any amendments or supplements thereto filed with the Commission pursuant to the Securities Act.

The undersigned hereby acknowledges and is advised of the following Interpretation A.65 of the July 1997 SEC Manual of Publicly Available Telephone Interpretations regarding short selling:

“An Issuer filed a Form S-3 registration statement for a secondary offering of common stock which is not yet effective.  One of the selling stockholders wanted to do a short sale of common stock “against the box” and cover the short sale with registered shares after the effective date.  The issuer was advised that the short sale could not be made before the registration statement become effective, because the shares underlying the short sale are deemed to be sold at the time such sale is made.  There would, therefore, be a violation of Section 5 if the shares were effectively sold prior to the effective date.”

By returning this Questionnaire, the undersigned will be deemed to be aware of the foregoing interpretation.

I confirm that, to the best of my knowledge and belief, the foregoing statements (including without limitation the answers to this Questionnaire) are correct.

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

				
	Dated: 

	 
	Beneficial Owner: 

	 

	 
	 
	 
	 

	 
	 
	By:

	 

	 
	 
	Name:

	 

	 
	 
	Title:

	 

PLEASE FAX A COPY OF THE COMPLETED AND EXECUTED NOTICE AND QUESTIONNAIRE, AND RETURN THE ORIGINAL BY OVERNIGHT MAIL, TO:

Goodwin Procter LLP

The New York Times Building

620 Eighth Avenue

New York, New York 10018

Attention: Nithya B. Das

Fax: 212-355-3333

Email: nbdas@goodwinprocter.comAlfacell Corporation

EXHIBIT 10.3

SECURITY AGREEMENT

THIS SECURITY AGREEMENT (this “Agreement”) is made and entered into as of October 19, 2009 by Alfacell Corporation, a Delaware corporation (the “Borrower”), and in favor of James McCash (the “Agent”) and each of the lenders whose names appear on the signature pages hereof. Such lenders are each referred to herein as a “Secured Party” and, collectively, as the “Secured Parties”. This Agreement is being executed and delivered by the Borrower and the Secured Parties in connection with that certain Securities Purchase Agreement dated concurrently herewith (the “Purchase Agreement”) by and between the Borrower and each Secured Party. Capitalized terms used herein and not otherwise defined herein shall have the respective meanings set forth in the Purchase Agreement.

WITNESSETH:

WHEREAS, pursuant to the terms of the Purchase Agreement, the Secured Parties have agreed to purchase from the Borrower, and the Borrower has agreed to sell to the Secured Parties, units (the “Units”) consisting of Senior Secured Convertible Promissory Notes (the “Notes”), Series A Common Stock Purchase Warrants and Series B Common Stock Purchase Warrants;

WHEREAS, the Borrower shall derive substantial direct and/or indirect benefits from the transactions contemplated by the Purchase Agreement and the sale of the Units;

WHEREAS, it is a condition to the obligation of the Secured Parties to purchase the Units that the Borrower enter into this Agreement; and

WHEREAS, pursuant to Purchase Agreement, the Secured Parties and such other secured parties have designated the Agent as their collateral agent.

NOW, THEREFORE, in consideration of the foregoing, the covenants set forth herein, and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the Agent, Secured Parties and the Borrower hereby agree as follows.

ARTICLE I

COLLATERAL; OBLIGATION SECURED

Section 1.1  Grant and Description.  As security for the Borrower’s obligations under this Agreement, the Purchase Agreement and the Notes (collectively, the “Transaction Documents”), the Borrower hereby grants to each Secured Party a continuing first priority security interest in and Lien (as defined in the Notes) upon, and pledges to each Secured Party, all of the Borrower’s right, title and interest in, to and under all of the Borrower’s assets (other than Excluded Assets (as defined below), now owned or hereafter acquired, including, without limitation, all of the following property and interests in property of the Borrower (collectively and each individually, the “Collateral”):

(a)

all of the Borrower’s tangible personal property, including without limitation all present and future goods, inventory and equipment (including items of equipment which are or become fixtures), software and computer hardware and software, now owned or hereafter acquired;

(b)

all of the Borrower’s intangible personal property, including without limitation all present and future accounts, securities, contract rights, permits, general intangibles, chattel paper, investment property, intellectual property, documents, instruments, deposit accounts, letter-of-credit rights and supporting obligations, rights to the payment of money or other forms of consideration of any kind, tax refunds, insurance proceeds (including, without limitation, proceeds of any life insurance policy), now owned or hereafter acquired, and all intangible and tangible personal property relating to or arising out of any of the foregoing; and

(c)

any and all additions to any of the foregoing, and any and all replacements, products and proceeds (including insurance proceeds) of any of the foregoing.

For purposes hereof, “Excluded Assets” means any assets leased or licensed by the Borrower if the granting or enforcement of a security interest in those assets is prohibited by or otherwise would breach the terms of that lease or license.

Section 1.2  Financing Statements; Further Assurances.  The Borrower hereby authorizes the Agent to file, transmit or communicate, as applicable, Uniform Commercial Code (“UCC”) financing statements and amendments (collectively, “Financing Statements”) in order to perfect each Secured Party’s first priority security interest in the Collateral without the Borrower’s signature to the extent permitted by applicable law, provided that the Agent shall concurrently copy the Borrower on all such filings. In addition to the foregoing, at any time upon the written request of the Agent, the Borrower shall promptly (i) execute (or cause to be executed) and deliver to the Agent, any and all agreements, Financing Statements, certificates, instruments and other documents (the “Additional Documents”) upon which the Borrower’s signature may be required and that the Agent may reasonably request in form and substance satisfactory to the Agent, and/or (ii) perform any acts; in each case, to perfect and continue perfected or better perfect each Secured Party’s security interest in the Collateral (whether now owned or hereafter arising or acquired), and in order to fully consummate all of the transactions contemplated hereby and under the other Transaction Documents that the Agent reasonably believes to be necessary as a result of any amendment to the UCC in effect from time to time in any applicable jurisdiction, provided, that any Additional Documents that require the Borrower to assume any new obligations shall be subject to the review and approval of the Borrower, such approval not to be unreasonably withheld or delayed. The Borrower also hereby ratifies its authorization for the Agent to have filed in any jurisdiction the Financing Statements or amendments thereto filed prior to the date hereof (if any), copies of which have previously been provided to the Borrower. The Borrower shall not terminate, amend or file any correction statement with respect to any Financing Statement filed pursuant to this Agreement without obtaining the prior written consent of the Required Holders (as defined in the Notes). The Borrower agrees that it will join with the Agent in executing or authorizing and will file and refile, or permit the Agent to file and refile such financing statements, continuation statements and other documents (including, without limitation, this Security Agreement and licenses to use software and other property protected by copyright), in such offices (including, without limitation, the United States Patent and Trademark 

2

Office, appropriate state trademark offices, and the United States Copyright Office), as the Agent may reasonably deem necessary or appropriate in order to perfect and preserve the rights and interests granted to the Secured Parties hereunder. The Borrower appoints the Agent as the Borrower’s attorney-in-fact, with a power of attorney to execute and file in any appropriate filing office on behalf of the Borrower, to the extent not performed by the Borrower within two (2) Business Days of a request therefor by the Agent, such Additional Documents and other similar instruments as the Agent may from time to time deem necessary or desirable to protect or perfect the security interest in the Collateral, provided, that any Additional Documents that require the Borrower to assume any new obligations shall be subject to the review and approval of the Borrower, such approval not to be unreasonably withheld or delayed. Such power of attorney is coupled with an interest and shall be irrevocable.

Section 1.3  Obligations Secured.  The Collateral and the power of collection pertaining thereto shall secure any and all indebtedness, liabilities and obligations of the Borrower to the Secured Parties evidenced by and/or arising pursuant to any of the Transaction Documents now existing or hereafter arising, whether direct, indirect, related, unrelated, fixed, contingent, liquidated, unliquidated, joint, several or joint and several, including, without limitation, the obligations of the Borrower to repay principal outstanding under the Notes, to pay interest on the Notes (including, without limitation, interest accruing after any bankruptcy, insolvency, reorganization or other similar filing) and to pay all fees, indemnities, costs and expenses (including attorneys’ fees) provided for in any of the Transaction Documents (collectively the “Obligations”).

ARTICLE II

COVENANTS

Section 2.1  Duties of the Borrower Regarding Collateral.  At all times after the date hereof, the Borrower agrees that it shall:

(a)

Preserve the Collateral in good condition and order (ordinary wear and tear excepted) and not permit it to be abused or misused; provided, however, that Agent and Secured Parties shall be obligated to exercise reasonable care with respect to any Collateral that comes into any of their possession;

(b)

Not allow any of the Collateral to be affixed to real estate, except for any property deemed to be fixtures;

(c)

Maintain good and complete title to the Collateral subject to Permitted Liens;

(d)

Keep the Collateral free and clear at all times of all Liens other than Permitted Liens;

(e)

Take or cause to be taken such acts and actions as shall be necessary or appropriate to assure that the Secured Parties’ security interest in the Collateral shall not become subordinate or junior to the security interests, liens or claims of any other Person (other than Permitted Liens);

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(f)

Refrain from selling, assigning or otherwise disposing of any of the Collateral or moving or removing any of the Collateral, without obtaining the prior written consent of the Required Holders, or until all of the Obligations have been fully performed and paid in full other than (i) sales or dispositions of inventory in the ordinary course of business, (ii) sales or dispositions of obsolete or unused assets, (iii) licenses of the Borrower’s intellectual property approved by the Borrower’s board of directors and (iv) sales or dispositions of assets having an aggregate value (when combined with all other assets sold or disposed of) less than or equal to $1 million made in connection with sale-leaseback transactions; provided, however, that concurrently with any disposition permitted by this Section 2.1(f), (x) the security interest granted hereby shall automatically be released from the Collateral so disposed, and (y) the security interest shall continue in the Proceeds (as defined in the UCC) of such Collateral and such Proceeds shall be applied against the Obligations in such order as the Agent shall determine in its sole discretion; and provided further, that, Agent and Secured Parties shall execute and deliver, at the Borrower’s sole cost and expense, any releases or other documents reasonably requested by the Borrower, that are in form and substance reasonably acceptable to the executing party, confirming the release of the security interest in that portion of the Collateral that is the subject of a disposition permitted by this Section 2.1(f);

(g)

Promptly provide to Agent and each Secured Party such financial statements, reports, lists and schedules related to the Collateral and any other information relating to the Collateral as Agent or such Secured Party may reasonably request from time to time;

(h)

Upon reasonable notice, permit Agent or any Secured Party to inspect all books and records of the Borrower relating to the Collateral at such times and as often as Agent or any such Secured Party may reasonably request; and

(i)

Promptly notify Agent and each Secured Party if any Event of Default (as hereinafter defined) occurs.

As used herein, the following definitions shall apply:

“Permitted Liens” shall mean the following: (i) Liens for taxes, assessments or other governmental charges that are not delinquent or which are being contested in good faith by appropriate proceedings, which proceedings have the effect of preventing the forfeiture or sale of Property subject to such Liens, and for which adequate reserves (as determined in accordance with GAAP) have been established; (ii) Liens of mechanics, materialmen, warehousemen, carriers, landlords or other similar statutory Liens securing obligations that are not yet due and are incurred in the ordinary course of business or which are being contested in good faith by appropriate proceedings, which proceedings have the effect of preventing the forfeiture or sale of the Property subject to such Liens, for which adequate reserves (as determined in accordance with GAAP) have been established, (iii) any interest or title of a lessor under any capitalized lease obligation provided that such Liens do not extend to any property or assets which is not leased property subject to such capitalized lease obligation and (iv) any Lien, license or other right granted by the Company to a strategic partner, licensee or distributor.  

“Property” shall mean property and/or assets of all kinds, whether real, personal or mixed, tangible or intangible (including, without limitation, all rights relating thereto).

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Section 2.2  Other Encumbrances. At all times after the date hereof, the Borrower shall: (i) defend its title to, and the Secured Parties’ interest in, the Collateral against all claims, (ii) take any action necessary to remove any encumbrances on the Collateral other than Permitted Liens, and (iii) defend the right, title and interest of the Secured Parties in and to any of the Borrower’s rights in the Collateral.

Section 2.3  Change Name or Location. The Borrower shall not, except upon 30 days’ prior written notice to Agent and each Secured Party, change its company name or conduct its business under any name other than that set forth herein or change its jurisdiction of organization or incorporation, chief executive office or place of business from the current location.

ARTICLE III

EVENTS OF DEFAULT

Section 3.1  Events of Default Defined.  The occurrence of any of the following events shall constitute an event of default under this Agreement (each, an “Event of Default”):

(a)

The failure of the Borrower to perform or comply in a material respect with any act, duty or obligation required to be performed under this Agreement if such failure is not remedied within ten (10) Business Days after the Borrower receives written notice of such failure from any Secured Party, provided, that if during such ten Business Day period, the Borrower is diligently and in good faith taking steps to cure such breach, such period will be extended from ten Business Days to twenty (20) Business Days;

(b)

If any of the representations or warranties of the Borrower set forth in this Agreement shall prove to have been incorrect in any material respect when made; or

(c)

If any material portion of the Collateral shall be damaged, destroyed or otherwise lost and such damage, destruction or loss is not covered by insurance.

Section 3.2  Rights and Remedies Upon Default.  If an Event of Default shall have occurred hereunder and is continuing, any Secured Party may, at its option, without notice or demand, declare the Obligations to be immediately due and payable. As to any Collateral, the Agent shall, in its capacity as collateral agent for the Secured Parties, have the rights and remedies of any secured creditor under the UCC, such rights to be exercised in such order or manner as the Secured Parties may determine against the Borrower. If for any reason the Agent should be required by law or otherwise to give notice to the Borrower of the sale of any Collateral, the Borrower agrees that any written notice sent by overnight delivery service not less than ten (10) calendar days before the sale or mailed postage prepaid, return receipt requested, to the Borrower’s address listed below not less than fifteen (15) calendar days before the sale shall be deemed reasonable and adequate.

Section 3.3  Allocation of Proceeds Among Secured Parties.  Any funds received by the Agent or a Secured Party pursuant to this Agreement shall be allocated among and paid to the Secured Parties on a pro rata basis based on the amount of principal and accrued and unpaid interest then outstanding on their respective Notes. To the extent that a Secured Party receives greater than its pro rata share, such Secured Party shall promptly remit such overpayment to each other Secured Party as required to comply with the preceding sentence.

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Each Secured Party may determine the order in which to apply funds received by it regardless of the order in which any other Secured Party applies funds (e.g., a Secured Party may determine to apply funds first to expenses, second to interest and third to principal and another Secured Party may determine to apply funds first to interest, second to expenses and third to principal).

ARTICLE IV

ADDITIONAL REMEDIES

Upon the occurrence and during the continuance of an Event of Default, the Borrower shall:

(a)

Endorse any and all documents evidencing any Collateral to the Agent, or as otherwise instructed by the Agent, and notify any payor that said documents have been so endorsed and that all sums due and owing pursuant to them should be paid directly to the Agent, or as otherwise instructed by the Agent;

(b)

Turn over to the Agent, or as otherwise instructed by the Agent, copies of all documents evidencing any right to collection of any sums due the Borrower arising from or in connection with any of the Collateral;

(c)

Take any action reasonably required by the Agent with reference to the Federal Assignment of Claims Act; and

(d)

Keep all of its books, records, documents and instruments relating to the Collateral in such manner as the Agent may reasonably require.

ARTICLE V

REPRESENTATIONS AND WARRANTIES

The Borrower represents and warrants to the Agent and the Secured Parties as follows:

Section 5.1  Title to Collateral.  The Borrower is the owner of and has good and marketable title to, or has a valid and subsisting leasehold interest in, all of the its assets and properties comprising the Collateral.

Section 5.2  No Other Encumbrances.  The Borrower has not granted, nor will it grant, a security interest in the Collateral to any other individual or entity, and such Collateral is free and clear of any mortgage, pledge, lease, trust, bailment, lien, security interest, encumbrance, charge or other arrangement (other than the Permitted Liens).

Section 5.3  Authority; Enforceability.  The Borrower has the authority and capacity to perform its obligations hereunder, and this Agreement, when executed and delivered, will be the valid and binding obligation of the Borrower enforceable against the Borrower in accordance with its terms, except as the enforceability thereof may be limited by bankruptcy, insolvency or other similar laws of general application affecting the enforcement of creditors’ rights or general equitable principals, whether applied in law or equity.

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Section 5.4  Company Name; Place of Business; Location of Collateral.  The Borrower’s true and correct company name, all trade name(s) under which it conducts its business, its jurisdiction of organization or incorporation and each of its chief executive office, its place(s) of business and the locations of its Collateral or records relating to such Collateral are set forth beneath the Borrower’s name in Exhibit A hereto.

Section 5.5  Perfection; First Priority Security Interest.  Upon the filing of Financing Statements with the state of incorporation of the Borrower, the security interest in the Borrower’s Collateral granted hereunder shall constitute at all times a valid first priority security interest (other than (i) with respect to Permitted Liens and (ii) where the Secured Parties have failed to file necessary continuation statements), perfected with respect to all Collateral for which the filing of the Financing Statements is a valid method of perfection and vested in the Secured Parties, in and upon the Collateral, free and clear of any liens (other than the Permitted Liens).

ARTICLE VI

MISCELLANEOUS

Section 6.1  Survival; Severability.  The representations, warranties, covenants and indemnities made by the Borrower herein shall survive the execution and delivery of this Agreement notwithstanding any due diligence investigation made by or on behalf of the party seeking to rely thereon. In the event that any provision of this Agreement becomes or is declared by a court of competent jurisdiction to be illegal, unenforceable or void, this Agreement shall continue in full force and effect without said provision; provided that in such case the parties shall negotiate in good faith to replace such provision with a new provision which is not illegal, unenforceable or void, as long as such new provision does not materially change the economic benefits of this Agreement to the parties.

Section 6.2  Successors and Assigns.  The terms and conditions of this Agreement shall inure to the benefit of and be binding upon the successors and permitted assigns of the Agent and the Secured Parties. Each Secured Party may assign its rights hereunder in connection with any private sale or transfer of the Notes in accordance with the terms of the Purchase Agreement, in which case the term “Secured Party” shall be deemed to refer to such transferee as though such transferee was an original signatory hereto. The Agent may resign or be replaced in accordance with the terms of the Agency Agreement, in which case the term “Agent” shall be deemed to refer to the successor agent as though such agent was an original signatory hereto. The Borrower may not assign its rights or obligations under this Agreement.

Section 6.3  Governing Law; Jurisdiction.  This Agreement shall be governed by and construed under the laws of the State of New York applicable to contracts made and to be performed entirely within the State of New York. The Borrower hereby irrevocably submits to the non-exclusive jurisdiction of the state and federal courts sitting in the City of New York, for the adjudication of any dispute hereunder or in connection herewith or with any transaction contemplated hereby or discussed herein, and hereby irrevocably waives, and agrees not to assert in any suit, action or proceeding, any claim that it is not personally subject to the jurisdiction of any such court, that such suit, action or proceeding is brought in an inconvenient forum or that the venue of such suit, action or proceeding is improper. The Borrower hereby irrevocably waives personal service of process and consents to process being served in any such suit, action 

7

or proceeding by mailing a copy thereof to the Borrower at the address in effect for notices to it under this Agreement and agrees that such service shall constitute good and sufficient service of process and notice thereof. Nothing contained herein shall be deemed to limit in any way any right to serve process in any manner permitted by law.

Section 6.4  Headings.  The headings used in this Agreement are used for convenience only and are not to be considered in construing or interpreting this Agreement.

Section 6.5  Notices.  Any notice, demand or request required or permitted to be given by the Borrower, the Agent or a Secured Party pursuant to the terms of this Agreement shall be in writing and shall be deemed delivered (i) when delivered personally or by verifiable facsimile transmission, unless such delivery is made on a day that is not a Business Day, in which case such delivery will be deemed to be made on the next succeeding Business Day and (ii) on the next Business Day after timely delivery to an overnight courier, addressed as follows:

If to the Borrower:

Alfacell Corporation

300 Atrium Drive

Somerset, New Jersey  08873

Attention: Chief Executive Officer

with a copy to:

Goodwin Procter LLP

The New York Times Building

620 Eighth Avenue

New York, New York  10018

Attention:  Kevin Collins, Esq.

If to the Agent:

James O. McCash

N 3820 South Grand Oak Drive

Iron Mountain, Michigan 49801

and if to a Secured Party, to the address for such Secured Party as shall appear on the signature page to the Purchase Agreement executed by such Secured Party, or as shall be designated by such Secured Party in writing to the Borrower in accordance with this Section 6.5.

Section 6.6  Entire Agreement; Amendments.  This Agreement and the other Transaction Documents constitute the entire agreement between the parties with regard to the subject matter hereof and thereof, superseding all prior agreements or understandings, whether written or oral, between or among the parties. Except as expressly provided herein, neither this Agreement nor any term hereof may be amended except pursuant to a written instrument executed by the Borrower, the Agent and the Required Holders, and no provision hereof may be waived other than by a written instrument signed by the party against whom enforcement of any such waiver is sought.

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Section 6.7  No Waiver. Neither the Agent nor any Secured Party shall by any act (except as provided in Section 6.6 above), any failure to act or any delay in acting be deemed to have (i) waived any right or remedy under this Agreement, any other Transaction Document or any document, agreement or instrument made, delivered or given in connection with this Agreement or the other Transaction Documents, or (ii) acquiesced in any Event of Default or in any breach of any of the terms and conditions of this Agreement, any other Transaction Document or any document, agreement or instrument made, delivered or given in connection with this Agreement or the other Transaction Documents. No failure to exercise, nor any delay in exercising, any right, power or privilege of the Agent or any Secured Party under this Agreement, any other Transaction Document or any document, agreement or instrument made, delivered or given in connection with this Agreement or the other Transaction Documents shall operate as a waiver of any such right, power or privilege. No single or partial exercise of any right, power or privilege under this Agreement, any other Transaction Document or any document, agreement or instrument made, delivered or given in connection with this Agreement or the other Transaction Documents shall preclude any other or further exercise of any other right, power or privilege. A waiver by the Agent or a Secured Party of any right or remedy under this Agreement, any other Transaction Document or any other document or instrument made, delivered or given in connection with this Agreement or the other Transaction Documents on any one occasion shall not be construed as a bar to any right or remedy that the Agent or such Secured Party would otherwise have on any future occasion.

Section 6.8  Cumulative Remedies.  The rights and remedies provided in this Agreement are cumulative, may be exercised singly or concurrently, and are not exclusive of any other rights or remedies provided by law.

Section 6.9  Waivers of Jury Trial.  The Borrower hereby irrevocably and unconditionally waives trial by jury in any legal action or proceeding relating to this Agreement or any other Transaction Document to which it is a party and for any counterclaim therein.

Section 6.10  Waivers.  The Borrower acknowledges that the Obligations arose out of a commercial transaction and hereby knowingly and intelligently waives any right to require the Agent or any Secured Party to (i) proceed against any person or entity, (ii) proceed against any other collateral under any other agreement, (iii) pursue any other remedy available to the Agent or such Secured Party, or (iv) make presentment, demand, dishonor, notice of dishonor, acceleration and/or notice of non-payment.

The Borrower further waives any defense that it may have to the exercise by the Agent or any Secured Party of its rights under this Agreement, other than the defense that the Obligations have fully been paid and performed.

Section 6.11  Attorney-in-Fact.  The Borrower appoints the Agent as its true attorney-in-fact to perform any of the following powers, which are irrevocable until termination of this Agreement and may be exercised, from time to time, by the Agent’s officers and employees or any of them if an Event of Default occurs:

(a)

to perform any obligation of the Borrower hereunder in the Borrower’s name or otherwise;

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(b)

to collect by legal proceedings or otherwise all dividends, interest, principal or other sums now or hereafter payable upon or on account of the Collateral, to accept other property in exchange for the Collateral, and any money or property received in exchange for the Collateral may be applied to the Obligations or held by the Agent under this Agreement; 

(c)

to make any compromise or settlement the Agent deems desirable or proper in respect of the Collateral; and 

(d)

to insure, process and preserve the Collateral. The foregoing power of attorney shall take effect only upon an Event of Default.

Section 6.12  Fees and Expenses.  On demand by the Agent or any Secured Party, without limiting any of the terms of any other Transaction Document, the Borrower is obligated to pay all reasonable filing fees, and out-of-pocket costs incurred by the Agent or such Secured Party in connection with (i) filing or recording any documents (including all taxes in connection therewith) in public offices; and (ii) paying or discharging any taxes, counsel fees, maintenance fees, encumbrances, or other amounts in connection with protecting, maintaining, or preserving the Collateral or defending or prosecuting any actions or proceedings arising out of or related to the Collateral (including, without limitation, reasonable legal fees and disbursements); and (iii) the enforcement of this Agreement and any amendment, waiver or consent relating hereto (including, without limitation, reasonable legal fees and disbursements).

Section 6.13  Release.  No transfer or renewal, extension, assignment or termination of this Agreement or of any instrument or document executed and delivered by the Borrower to a Secured Party, nor additional advances made by any Secured Party to the Borrower, nor the taking of further security, nor the retaking or re-delivery of the Collateral to the Borrower by the Agent or any Secured Party nor any other act of the Agent or any Secured Party shall release the Borrower from any Obligation, except a release or discharge executed in writing by each Secured Party with respect to such Obligation or upon full payment and satisfaction of all Obligations and termination of the Notes. At such time the Obligations have been satisfied in full, the Agent and each Secured Party shall execute and deliver to the Borrower all assignments, authorizations and other instruments as may be reasonably necessary or proper to terminate such Secured Party’s security interest in the Collateral, subject to any disposition of the Collateral that may have been made by the Agent or such Secured Party pursuant to this Agreement. For the purpose of this Agreement, the Obligations shall be deemed to continue if the Borrower enters into any bankruptcy or similar proceeding at a time when any amount paid to the Agent or a Secured Party could be ordered to be repaid as a preference or pursuant to a similar theory, and shall continue until it is finally determined that no such repayment can be ordered.

Section 6.14  Marshalling and Other Matters.  The Borrower hereby waives, to the extent permitted by law, the benefit of all appraisement, valuation, stay, extension, reinstatement and redemption laws now or hereafter in force and all rights of marshalling in the event of any sale hereunder of the Collateral or any part thereof or any interest therein. Further, the Borrower hereby expressly waives any and all rights of redemption from sale under any order or decree of foreclosure of this Agreement on behalf of the Borrower, and on behalf of each and every person acquiring any interest in or title to the Collateral subsequent to the date of this Agreement and on behalf of all persons to the extent permitted by applicable law.

10

IN WITNESS WHEREOF, the Borrower, the Agent and each Secured Party have duly executed this Agreement as of the date first written above.

			
	 
	BORROWER:

	 
	 
	 

	 
	ALFACELL CORPORATION

	 
	 
	 

	 
	By:

	/s/ Charles Muniz

	 
	Name: 

	Charles Muniz

	 
	Title: 

	President, Chief Executive Officer and Chief Financial Officer

11

IN WITNESS WHEREOF, the Borrower, the Agent and each Secured Party have duly executed this Agreement as of the date first written above.

			
	 
	AGENT:

	 
	 
	 

	 
	James O. McCash

	 
	 
	 

	 
	By:

	/s/ James O. McCash

	 
	Name:

	James O. McCash

	 
	Title:

	 

12

IN WITNESS WHEREOF, the Borrower, the Agent and each Secured Party have duly executed this Agreement as of the date first written above.

			
	 
	SECURED PARTIES:

	 
	 
	 

	 
	EUROPA INTERNATIONAL, INC.

	 
	 
	 

	 
	By: 

	/s/ Fred Knoll

	 
	Name: 

	Fred Knoll

	 
	Title: 

	Knoll Capital Management, Investment Manager for Europa Int’l, Inc.

	 
	 
	 

	 
	CHARLES MUNIZ

	 
	 
	 

	 
	By: 

	/s/ Charles Muniz

	 
	Name: 

	Charles Muniz

	 
	 
	 

	 
	UNILAB LP

	 
	 
	 

	 
	Authorized Signatory

	 
	 
	 

	 
	By: 

	/s/ F. Patrick Ostronic

	 
	Name: 

	F. Patrick Ostronic

	 
	Title: 

	Director, Unilab GP Inc., General Partner for Unilab LP

	 
	 
	 

	 
	MARY M. MCCASH TRUST DECLARATION DECLARED OCTOBER 20, 2008

	 
	 
	 

	 
	By: 

	/s/ Mary M. McCash

	 
	Name: 

	Mary M. McCash

	 
	Title: 

	Trustee

	 
	 
	 

	 
	THE MICHAEL J. MCCASH LIVING TRUST 

	 
	 
	 

	 
	By:

	/s/ Michael J. McCash

	 
	Name: 

	Michael J. McCash

	 
	Title: 

	Trustee and Grantor

	 
	 
	 

	 
	COLLEEN A. LOWE 

	 
	 
	 

	 
	By:

	/s/ Colleen A. Lowe

	 
	Name: 

	Colleen A. Lowe

	 
	Title:

	 

13

			
	 
	 
	 

	 
	CORINNE M. POQUETTE 

	 
	 
	 

	 
	By:

	/s/ Corinne M. Poquette

	 
	Name: 

	Corinne M. Poquette

	 
	Title:

	 

	 
	 
	 

	 
	DAVID J. MCCASH 

	 
	 
	 

	 
	By:

	/s/ David J. McCash

	 
	Name: 

	David J. McCash

	 
	Title:

	 

14

Exhibit A

List of Collateral Locations, Executive Offices and

Jurisdiction of Organization or Incorporation of Borrowers

Alfacell Corporation

300 Atrium Drive

Somerset, New Jersey 08873

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