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Unassociated Document

     

    
      SUBSCRIPTION
        AGREEMENT

      

      THIS
        SUBSCRIPTION AGREEMENT (this “Agreement”) made as of the date set forth on the
        signature page hereof between Manhattan Pharmaceuticals, Inc., a Delaware
        corporation having a place of business at 810 Seventh Avenue, New York, New
        York
        10019 (the “Company”), and the undersigned (the “Subscriber”).

      

      W
        I T N E
        S S E T H:

      

      WHEREAS,
        the Company is offering (the “Offering”) Units (as defined below) to a limited
        number of persons who qualify as “accredited investors” as defined in Rule 501
        of Regulation D promulgated under the under the Securities Act of 1933, as
        amended (the “Act”). Each “Unit” shall consist of (a) a number of shares (the
“Shares”) of common stock of the Company, par value $.001 per share (“Common
        Stock”), determined by dividing one hundred thousand dollars ($100,000) (the
“Unit Price”) by the Per Share Price (as defined below) of the Common Stock, and
        (b) warrants (the “Warrants” and collectively with the Shares, the “Securities”)
        to purchase, at any time prior to the fifth anniversary of the date of issuance,
        a number of shares of Common Stock equal to 20% of the number of Shares included
        in such Unit, at an initial exercise price equal to 110% of the Market Price
        (the “Warrant Exercise Price”). The “Per Share Price” of the Common Stock shall
        equal eighty-five percent (85%) of the Market Price. For purposes hereof,
        “Market Price” shall mean the average closing sale price of the Common Stock as
        reported by the OTC Bulletin Board during the five (5) Business Days (as
        defined
        in Article 5) immediately preceding the Closing Date;

      

      WHEREAS,
        the sale of the Units is contingent upon the Company making sales of at least
        100 Units which would provide the Company with aggregate gross proceeds of
        $10,000,000 (the “Minimum Offering Amount”). The Company may sell up to a
        maximum number of 140 Units which would provide the Company with aggregate
        gross
        proceeds of $14,000,000 (the “Maximum Offering Amount”), with an option in favor
        of the Placement Agent (as defined below) to offer an additional 10 Units
        with
        aggregate gross proceeds of up to $1,000,000 to cover over-allotments (the
“Over
        Allotment”); 

      

      WHEREAS,
        Paramount BioCapital, Inc., is acting as exclusive placement agent (the
“Placement Agent”) for the Offering; and

      

      WHEREAS,
        on the terms and conditions hereinafter set forth, the Subscriber desires
        to
        purchase from the Company, and the Company desires to sell to the Subscriber,
        a
        number of Units.

      

      NOW,
        THEREFORE, in consideration of the promises and the mutual representations
        and
        covenants hereinafter set forth, the parties hereto do hereby agree as
        follows:

      

      1.           
        SUBSCRIPTION
        FOR UNITS.

       

      1.1  Offering.
        The
        Company is offering to a limited number of persons who qualify as “accredited
        investors” as defined by Rule 501(a) of Regulation D of the Act, Units on terms
        and conditions described in this Agreement. The Minimum Offering Amount will
        be
        offered on an “all or none, best efforts” basis. The Maximum Offering Amount and
        the Over -Allotment, if exercised, will be offered on a “best efforts” basis.
        The Subscriber understands, however, that this purchase of the Units is
        contingent upon the Company making aggregate sales of Units equal to or
        exceeding the Minimum Offering Amount. Each Unit shall consist of (a) a number
        of Shares, determined by dividing the Unit Price by the Per
        Share
        Price, and (b) Warrants to purchase, at any time prior to the fifth anniversary
        of the date of issuance, a number of shares of Common Stock equal to 20%
        of the
        number of Shares included in such Unit. In the event that the closing bid
        price
        for any 30 consecutive trading days is at least 200% of the Exercise Price,
        the
        Company shall be entitled to redeem not less than all of the Warrants at
        a per
        Warrant redemption price of $0.01, by providing 30 business days’ written notice
        to the holder. In
        the
        event that the Company decides to redeem the Warrants pursuant to this Section
        1.1, such
        holders may
        exercise this Warrant
        during
such
        30-day period. The Warrant shall be in substantially the
        form
        attached as an exhibit
        to the
        Memorandum (as defined below). 

       

      
        
          
          

        

        
          
          

          
            

          

        

        
          
          

        

      

       

      1.2  Closing.
        At each
        closing (each a “Closing,” and the date thereof, the “Closing Date”), provided
        the Company has received the Minimum Offering Amount, the Company shall issue
        and sell to the Subscriber and the Subscriber shall purchase from the Company
        the Shares and Warrants included in the Units

       

      1.3  Closing
        Mechanics.
        The
        Closing shall be held at a date and time designated by the Company and Paramount
        BioCapital, Inc. prior to 11:59 p.m. Eastern Standard Time on August 31,
        2005
        (subject to extension at the discretion of the Company and the Placement
        Agent
        without notice to the Subscriber of up to 60 days), which date shall be no
        later
        than five (5) Business Days after satisfaction or waiver of the closing
        conditions set forth in Article 4 hereof. The Closing shall occur at the
        offices
        of Paramount BioCapital, Inc., located at 787 Seventh Avenue, New York, New
        York
        10019. Upon
        satisfaction or waiver of all conditions to the Closing, the Placement Agent
        and
        the Company shall instruct an escrow agent (the “Escrow Agent”) to release the
        proceeds of the Closing to the Company, less fees and expenses due to the
        Placement Agent. Interest, if any, that has accrued with respect to the
        Aggregate Purchase Price while in escrow shall also be distributed to the
        Company at the Closing and the Subscriber will have no right to such interest,
        even if there is no Closing.

       

      1.4  Payment
        of Aggregate Purchase Price.
        Upon,
        or prior to, the execution of this Agreement by the Subscriber, the Subscriber
        shall deposit the amount of readily available funds equal to the Aggregate
        Purchase Price in a segregated escrow account with the Escrow Agent by check
        or
        wire transfer of immediately available funds pursuant to the instructions
        provided below. Subject to the terms and conditions of this Agreement
        (including, without limitation, the Company’s and the Placement Agent’s option,
        each at its sole discretion, to refuse to accept subscriptions, in whole
        or in
        part, from any Subscriber), the Subscriber hereby subscribes for and agrees
        to
        purchase from the Company such number of Units and the Company agrees to
        sell
        such number of Units to the Subscriber as is set forth upon the signature
        page
        hereof at the Aggregate Purchase Price as accepted by the Company and the
        Placement Agent.

       

      ABA
        Routing Number: ______________

      Account
        Name: ______________

      Account
        Number: ______________

      For
        Further Credit: ______________

      SEI
        Number: ______________

      Reference:
        [Investor Name]

      Attn:
        ______________

      

      The
        Subscriber must complete and return a duly executed, unaltered copy of this
        Agreement (including the completed Confidential Subscriber Questionnaire
        included in Article 7 hereof) to the Placement Agent at the Placement Agent’s
        address indicated in the Memorandum on or before the date indicated to the
        Subscriber by the Placement Agent to be eligible to participate in the Offering.
        The Company and the Placement Agent retain complete discretion to accept
        or
        reject any subscription unless and until the Company executes a counterpart
        to
        this Agreement that includes such Subscriber’s signature.

      

      
        
          
          

        

        
          
          

          
            

          

        

        
          
          

        

      

      1.5  Delivery
        of Certificates.
        The
        Company shall deliver, or cause to be delivered, the certificates representing
        the Securities purchased by the Subscriber hereunder as soon as practical
        after
        the Closing to the Subscriber’s residential or business address indicated on the
        signature page hereto.

       

      2.    REPRESENTATIONS
        AND WARRANTIES OF SUBSCRIBER.

      

      The
        Subscriber hereby represents and warrants to the Company as of the date hereof
        and the Closing Date as follows:

      

      2.1 The
        Subscriber understands, acknowledges and agrees that the purchase of the
        Units
        involves a high degree of risk including, but not limited to, the following:
        (i)
        an investment in the Company is highly speculative, and only investors who
        can
        afford the loss of their entire investment should consider investing in the
        Company and the Units; (ii) the Subscriber may not be able to liquidate its
        investment; (iii) transferability of the Securities is extremely limited;
        (iv)
        in the event of a disposition of the Securities, the Subscriber could sustain
        the loss of its entire investment; and (v) since the Company has been a
        publicly-traded company, the Company has not paid any dividends on its Common
        Stock since inception and does not anticipate the payment of dividends in
        the
        foreseeable future.

      

      2.2 The
        Subscriber is an “accredited investor” as such term is defined in Rule 501 of
        Regulation D promulgated under the Act, as indicated by the Subscriber’s
        responses to the questions contained in Article 7 hereof, which are true
        and
        correct as of the date hereof and shall be true and correct as of the Closing
        Date, and that the Subscriber is able to bear the economic risk of an investment
        in the Company. If the Subscriber is a natural person, the Subscriber has
        reached the age of majority in the state or other jurisdiction in which the
        Subscriber resides, has adequate means of providing for the Subscriber’s current
        financial needs and contingencies, is able to bear the substantial economic
        risks of an investment in the Securities for an indefinite period of time,
        has
        no need for liquidity in such investment and, at the present time, could
        afford
        a complete loss of such investment.

       

      2.3 The
        Subscriber understands, acknowledges and agrees that: (i) the Subscriber
        is
        knowledgeable, sophisticated and has experience in making, and is qualified
        to
        make, decisions with respect to investments representing an investment decision
        like that involved in the purchase of the Units and has prior investment
        experience, including investments in securities which are non-listed,
        unregistered and/or not traded on the New York Stock Exchange, AMEX, the
        National Market or SmallCap Market of the National Association of Securities
        Dealers, Inc. (“NASD”) Automated Quotation System or any other national stock
        exchange; (ii) the investment in the Securities is of a highly speculative
        nature and involves a significant degree of risk, that the market price of
        the
        Common Stock has been and continues to be volatile and that Subscriber has
        carefully evaluated the risks of an investment in the Securities; and (iii)
        the
        Subscriber is able to bear the economic risk of an investment in the Securities
        and the potential loss of such investment, which risk the Subscriber hereby
        assumes.

       

      
        
          
          

        

        
          
          

          
            

          

        

        
          
          

        

      

      2.4  The
        Subscriber has received and carefully reviewed this Agreement, the confidential
        offering memorandum prepared by the Company and dated June 21, 2005, as may
        be
        amended or supplemented, including all documents attached thereto or
        incorporated by reference therein, including the following documents filed
        by
        the Company with the Securities and Exchange Commission (the “SEC”, and such
        documents, the “SEC Filings”): SEC Form 10-KSB for the year ended December 31,
        2004, filed March 31, 2005; SEC Form 10-QSB for the three months ended March
        31,
        2005, filed May 16, 2005, and SEC Form 8-K filed April 7, 2005; and any future
        filings that the Company makes with the SEC under Sections 13(a), 13(c),
        14 or
        15(d) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”),
        until the earlier of the Closing Date and the Termination Date (the confidential
        offering memorandum, including the SEC Filings and all other exhibits and
        information incorporated by reference therein is referred to herein as the
        “Memorandum”). Any information that the Company subsequently files with the SEC
        that is incorporated by reference into any SEC Report will automatically
        update
        and supersede any previous information that is part of the Memorandum. The
        Subscriber further represents that the Subscriber has been furnished by the
        Company during the course of this transaction with all information regarding
        the
        Company which the Subscriber, its investment advisor, attorney and/or accountant
        has requested or desired to know or which is otherwise relevant to an investment
        decision, has been afforded the opportunity to ask questions of and receive
        answers from duly authorized officers or other representatives of the Company
        concerning the terms and conditions of the Offering, and has received any
        additional information which the Subscriber or its advisors or agents has
        requested.

      

      2.5 (a) The
        Subscriber has relied solely upon the information provided by the Company
        in
        making the decision to invest in the Securities. The Subscriber is familiar
        with
        and understands the terms of the Offering, including the rights to which
        the
        Subscriber is entitled under this Agreement. In evaluating the suitability
        of an
        investment in the Company, the Subscriber has not relied upon any representation
        or other information (whether oral or written) from the Company, or any agent,
        employee or Affiliate of the Company other than as set forth in the Memorandum,
        in this Agreement or resulting from the results of the Subscriber’s own
        independent investigation. The Subscriber understands and acknowledges that
        nothing in this Agreement, the Memorandum or any other materials provided
        to the
        Subscriber in connection with the subscription for the Units or sale of the
        Securities constitutes investment, tax or legal advice. To the extent deemed
        necessary or advisable by the Subscriber in its sole discretion, the Subscriber
        has retained, at its sole expense, and relied upon appropriate professional
        advice regarding the investment, tax and legal merits and consequences of
        this
        Agreement and its purchase of the Units hereunder. 

      

      (b) No
        Securities were offered or sold to the Subscriber by means of any form of
        general solicitation or general advertising, and in connection therewith
        the
        Subscriber did not: (A) receive or review any advertisement, article, notice
        or
        other communication published in a newspaper or magazine or similar media
        or
        broadcast over television or radio whether closed circuit, or generally
        available; or (B) attend any seminar meeting or industry investor conference
        whose attendees were invited by any general solicitation or general
        advertising.

      

      2.6 The
        Subscriber, either by reason of the Subscriber’s business or financial
        experience or the business or financial experience of the Subscriber’s
        professional advisors, has the capacity to protect the Subscriber’s own
        interests in connection with the transaction contemplated hereby. 

      

      
        
          
          

        

        
          
          

          
            

          

        

        
          
          

        

      

      2.7 The
        Subscriber understands, acknowledges and agrees that the Offering has not
        been
        reviewed, recommended or endorsed by the SEC or any state securities regulatory
        authority or other governmental body or agency, since the Offering is intended
        to be exempt from the registration requirements of Section 5 of the Act pursuant
        to Regulation D promulgated under the Act. The Subscriber shall not sell
        or
        otherwise transfer the Securities unless such transfer is registered under
        the
        Act or unless an exemption from such registration is available. The Subscriber
        understands that if required by the laws or regulations or any applicable
        jurisdictions, the Offering contemplated hereby will be submitted to the
        appropriate authorities of such state(s) for registration of exemption
        therefrom. 

      

      2.8 The
        Subscriber understands, acknowledges and agrees that the Securities have
        not
        been registered under the Act in reliance upon a claimed exemption under
        the
        provisions of the Act which depends, in part, upon the Subscriber’s investment
        intention and the truth and accuracy of, and Subscriber’s compliance with, the
        representations, warranties, acknowledgments and covenants of Subscriber
        set
        forth herein. In this connection, the Subscriber hereby represents that the
        representations, warranties, acknowledgments and covenants of Subscriber
        set
        forth herein are true and correct, Subscriber will comply with the covenants
        set
        forth herein, and the Subscriber is purchasing the Units for the Subscriber’s
        own account for investment purposes only and not with a view toward the resale
        or distribution to others and has no contract, undertaking, agreement or
        other
        arrangement, in existence or contemplated, to sell, pledge, assign or otherwise
        transfer the Securities to any other Person (as defined in Article 6). The
        Subscriber, if an entity, also represents that it was not formed for the
        purpose
        of purchasing the Units. The Subscriber has no current plans to effect a
“change
        of control” of the Company, as such term is understood in Rule 13d of the
        Exchange Act.

      

      2.9 The
        Subscriber understands that the Securities will not be registered or available
        for sale in the public markets except as specifically provided herein, and
        Rule
        144 promulgated under the Act (“Rule 144”) requires, among other conditions, a
        one-year holding period prior to the resale (in limited amounts) of securities
        acquired in a non-public offering (and a two-year holding period for unlimited
        sales by non-Affiliates of the Company) without having to satisfy the
        registration requirements under the Act. The Subscriber understands and hereby
        acknowledges that the Company is under no obligation to register any of the
        Securities under the Act or any state securities or “blue sky” laws or assist
        the Subscriber in obtaining an exemption from various registration requirements,
        other than as set forth in Article 5 herein. The Subscriber agrees to hold
        the
        Company and its directors, officers, employees, controlling Persons and agents
        and their respective heirs, representatives, successors and assigns harmless
        and
        to indemnify them against all liabilities, costs and expenses incurred by
        them
        as a result of (i) any misrepresentation made by the Subscriber contained
        in
        this Agreement (including the Confidential Investor Questionnaire set forth
        in
        Article 7 hereof and the Registration Questionnaire attached hereto as
Appendix
        A
        (the
“Registration Questionnaire”), (ii) any sale or distribution by the Subscriber
        in violation of the Act or any applicable state securities or “blue sky” laws or
        (iii) any untrue statement of a material fact made by the Subscriber and
        contained herein (including the Confidential Investor Questionnaire set forth
        in
        Article 7 hereof and the Registration Questionnaire) or omission of a material
        fact asked for by such questionnaires necessary to make such statements made
        by
        the Subscriber and contained herein (including the Confidential Investor
        Questionnaire set forth in Article 7 hereof and the Registration Questionnaire),
        in light of the circumstances in which they are made, not misleading, provided,
        however, that
        the
        aggregate amount of such indemnity shall
        not
        exceed the proceeds received by the Company at the Closing.

      

      
        
          
          

        

        
          
          

          
            

          

        

        
          
          

        

      

         2.10 The
        Subscriber consents to the placement of a legend on any certificate or other
        document evidencing the Securities substantially as set forth below, that
        such
        Securities have not been registered under the Act or any state securities
        or
“blue sky” laws and setting forth or referring to the restrictions on
        transferability and sale thereof contained in this Agreement. The Subscriber
        is
        aware that the Company will make a notation in its appropriate records with
        respect to the restrictions on the transferability of the Securities.

      

      THE
        SECURITIES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED UNDER THE SECURITIES
        ACT
        OF 1933, AS AMENDED (THE “SECURITIES ACT”), OR UNDER THE SECURITIES LAWS OF ANY
        STATE. THESE SECURITIES ARE SUBJECT TO RESTRICTIONS ON TRANSFERABILITY AND
        RESALE AND MAY NOT BE SOLD, TRANSFERRED OR ASSIGNED IN THE ABSENCE OF AN
        EFFECTIVE REGISTRATION STATEMENT FOR THE SECURITIES UNDER THE SECURITIES
        ACT AND
        APPLICABLE STATE SECURITIES LAWS, OR AN OPINION OF COUNSEL IN FORM, SUBSTANCE
        AND SCOPE REASONABLY SATISFACTORY TO THE COMPANY, TO THE EFFECT THAT
        REGISTRATION IS NOT REQUIRED UNDER THE SECURITIES ACT AND APPLICABLE STATE
        SECURITIES LAWS.

       

      2.11 The
        Subscriber agrees to supply the Company, within five (5) days after the
        Subscriber receives the request therefor from the Company, with such additional
        information concerning the Subscriber as the Company deems necessary or
        advisable in order to establish or verify the Subscriber’s representations
        contained herein.

      

      2.12 The
        address of the Subscriber furnished by Subscriber on the signature page hereof
        is the Subscriber’s principal residence if Subscriber is an individual or its
        principal business address if it is a corporation or other entity.

      

      2.13 The
        Subscriber has full power and authority (corporate or otherwise) to execute,
        deliver, and perform this Agreement and to purchase the Units and has taken
        all
        action necessary to authorize the execution, delivery and performance of
        this
        Agreement. This Agreement constitutes the legal, valid and binding obligation
        of
        the Subscriber, enforceable against the Subscriber in accordance with its
        terms,
        subject to laws of general application relating to bankruptcy, insolvency
        and
        the relief of debtors and rules of law governing specific performance,
        injunctive relief or other equitable remedies, and to limitations of public
        policy.

      

      2.14 If
        the
        Subscriber is a corporation, partnership, limited liability company, trust,
        employee benefit plan, individual retirement account, Keogh Plan, or other
        entity (a) it is authorized and qualified to become an investor in the Company
        and the Person signing this Agreement on behalf of such entity has been duly
        authorized by such entity to do so and (b) it is duly organized, validly
        existing and in good standing under the laws of the jurisdiction of its
        organization.

      

      2.15  The
        Subscriber acknowledges that if he or she is a Registered Representative
        of an
        NASD member firm, he or she must give such firm the notice required by the
        NASD
        Rules of Fair Practice, receipt of which must be acknowledged by such firm
        in
        Section 8.4 below in accordance with such rules.

      

      2.16 The
        Subscriber understands, acknowledges and agrees that this subscription may
        be
        rejected, in whole or in part, by the Company or the Placement Agent, in
        each of
        their sole and absolute discretion, at any time before any Closing Date
        notwithstanding prior receipt by the Subscriber of notice of acceptance of
        the
        Subscriber’s subscription. The Subscriber hereby authorizes and directs the
        Company to return, without interest, any funds for unaccepted subscriptions
        to
        the same account from which the funds were drawn, including any customer
        account
        maintained by the Subscriber with the Placement Agent.

       

      
        
          
          

        

        
          
          

          
            

          

        

        
          
          

        

      

      2.17 The
        Subscriber understands, acknowledges and agrees with the Company that except
        as
        otherwise set forth herein, the subscription hereunder is irrevocable by
        the
        Subscriber, that, except as required by law, the Subscriber is not entitled
        to
        cancel, terminate or revoke this Agreement or any agreements of the Subscriber
        hereunder and that this Agreement and such other agreements shall survive
        the
        death or disability of the Subscriber and shall be binding upon and inure
        to the
        benefit of the parties and their heirs, executors, administrators, successors,
        legal representatives and permitted assigns. If the Subscriber is more than
        one
        Person, the obligations of the Subscriber hereunder shall be joint and several
        and the agreements, representations, warranties and acknowledgments herein
        contained shall be deemed to be made by and be binding upon each such Person
        and
        its heirs, executors, administrators, successors, legal representatives and
        permitted assigns.

      

      2.18  The
        Subscriber understands, acknowledges and agrees with the Company that, the
        Offering is intended to be exempt from registration under the Act by virtue
        of
        Section 4(2) of the Act and the provisions of Regulation D, and/or the
        provisions of Regulation S which is in part dependent upon the truth,
        completeness and accuracy of the statements made by the Subscriber.

      

      2.19  The
        Subscriber understands, acknowledges and agrees that there can be no assurance
        that the Subscriber will be able to sell or dispose of the Securities. It
        is
        understood than in order not to jeopardize the Offering’s exempt status under
        Section 4(2) of the Act and Regulation D, in addition to any other restrictions
        on transfer set forth herein or in the Warrants, the Company may, at a minimum,
        require any transferee to fulfill the Subscriber suitability requirements
        thereunder and make the representations, warranties and covenants of Subscriber
        hereunder.

      

      2.20  The
        Subscriber represents and warrants that during the period commencing upon
        the
        date that the Subscriber was first contacted with respect to the Offering
        (the
“First Date”) the Subscriber has not, directly or indirectly, through related
        parties, Affiliates or otherwise, sold “short” or “short against the box” (as
        such terms are generally understood) and until the Registration Statement
        (as
        defined in Article 6) is declared effective, will not sell "short" or "short
        against the box" any equity security of the Company or take any action with
        respect to any equity security of the Company which would violate the Act
        or the
        rules and regulations promulgated thereunder and from the First Date through
        the
        Closing Date has not and will not take any action the intent or reasonably
        foreseeable effect of which is to reduce the trading price of the Common
        Stock.

      

      2.21 The
        Subscriber understands, acknowledges and agrees that the information contained
        in this Agreement, the Memorandum or otherwise made available to the Subscriber
        by the Company (collectively, the “Confidential Information”) is to be used
        solely for the purpose of evaluating a possible investment in the Securities
        and
        is confidential and non-public and agrees that all such Confidential Information
        shall be kept in confidence by the Subscriber and neither used by the Subscriber
        for the Subscriber’s personal benefit (other than in connection with evaluating
        a possible investment in the Securities) nor disclosed to any third party
        for
        any reason and in any manner, notwithstanding that a Subscriber’s subscription
        may not be accepted by the Company; provided,
        however,
        that
        this obligation shall not apply to any such Confidential Information that
        (i) is
        part of the public knowledge or literature and readily accessible at the
        date
        hereof (except as a result of a breach of this provision by any party) or
        (ii)
        becomes part of the public knowledge or literature and readily accessible
        by
        publication (except as a result of a breach of this provision by any
        party).

      

      
        
          
          

        

        
          
          

          
            

          

        

        
          
          

        

      

      2.22 If
        the
        Subscriber is purchasing the Units in a fiduciary capacity for another Person,
        including without limitation a corporation, partnership, trust or any other
        entity, the Subscriber has been duly authorized and empowered to execute
        this
        Agreement and all other subscription documents, and such other Person fulfills
        all the requirements for purchase of the Units as such requirements are set
        forth herein, concurs in the purchase of the Units and agrees to be bound
        by the
        obligations, representations, warranties and covenants contained herein.
        Upon
        request of the Company, the Subscriber will provide true, complete and correct
        copies of all relevant documents creating the Subscriber, authorizing its
        investment in the Company and/or evidencing the satisfaction of the
        foregoing.

      

      2.23 No
        authorization, approval, consent or license of any Person (as defined in
        Article
        6) is required to be obtained for the purchase of the Units by the Subscriber,
        other than as have been obtained and are in full force and effect. The execution
        and delivery of this Agreement does not, and the consummation of the
        transactions contemplated hereby will not, result in any violation of or
        constitute a default under any material agreement or other instrument to
        which
        the Subscriber is a party or by which the Subscriber or any of its properties
        are bound, or to the best of the Subscriber’s knowledge, any permit, franchise,
        judgment, order, decree, statute, rule or regulation to which the Subscriber
        or
        any of its businesses or properties is subject.

      

      2.24 The
        Subscriber understands, acknowledges and agrees that the representations,
        warranties and agreements of the Subscriber contained herein (including the
        Confidential Investor Questionnaire set forth in Article 7 hereof), in the
        Registration Questionnaire and in any other writing delivered in connection
        with
        the transactions contemplated hereby shall be true and correct on the date
        hereof and as of the Closing Date as if made on and as of such date (except
        for
        representations, warranties and agreements as of a specific date, which shall
        be
        true and correct as of such date) and shall survive the execution and delivery
        of this Agreement and the purchase of the Units. The Subscriber agrees that
        the
        Placement Agent shall be entitled to rely on the representations, warranties
        and
        agreements of the Subscriber contained herein as if such representations,
        warranties and agreements were made or provided directly to the Placement
        Agent.

      

      2.25 The
        Subscriber hereby covenants with the Company not to make any sale of the
        Securities under the Registration Statement without effectively causing the
        prospectus delivery requirements under the Act to be satisfied, and further
        agrees to comply with reasonable requests of the Company or its transfer
        agent
        to provide additional information and representations concerning such
        sale.

      

      2.26 (a)
        The
        Subscriber agrees, acknowledges and understands that the Placement Agent
        is
        acting as placement agent for the Units being offered hereby and will be
        compensated by the Company for acting in such capacity, including, but not
        limited to, by: (i) placement fees in cash equal to up to seven percent (7%)
        of
        the proceeds received by the Company at the Closing; (ii) reimbursement of
        its
        reasonable, documented expenses (including reasonable legal fees) incurred
        in
        connection with the Offering (which reimbursement shall not exceed $75,000);
        and
        (iii) warrants (the “Placement Warrants”) to purchase a number of shares of
        Common Stock (the “Placement Warrant Shares”) equal to 5% of the number of
        shares of Common Stock actually sold by the Company in connection with the
        Offering (not including shares of Common Stock issuable upon exercise or
        conversion of warrants or other securities for which no cash consideration
        was
        received upon issuance). The Placement Warrants shall have an exercise price
        per
        share equal to 110% of the Market Price and have a cashless exercise feature.
        The Placement Warrants shall have a purchase price equal to $0.02 per Placement
        Warrant (payable by the Placement Agent to the Company upon issuance of each
        such Placement Warrant) and shall be exercisable for five (5) years from
        the
        final Closing Date. The Subscriber shall not be entitled to reimbursement
        of any
        expenses incurred by the Subscriber in connection with the
        Offering.

      

      
        
          
          

        

        
          
          

          
            

          

        

        
          
          

        

      

      (b) The
        Subscriber agrees, acknowledges and understands that the Placement Agent
        may
        engage other Persons, selected by it in its discretion, who are members of
        the
        NASD or who are located outside the United States, to assist the Placement
        Agent
        in connection with this Offering. 

      

      3.    REPRESENTATIONS
        BY AND COVENANTS OF THE COMPANY.

      

      The
        Company hereby represents and warrants to the Subscriber as of the date hereof
        and the Closing Date that:

      

      3.1 Organization,
        Good Standing and Qualification.
        The
        Company is a corporation duly organized, validly existing and in good standing
        under the laws of the State of Delaware and has full corporate power and
        authority to conduct its business as currently conducted. The Company is
        duly
        qualified as a foreign corporation to do business and is in good standing
        in
        every jurisdiction in which such qualification is necessary, except to the
        extent that the failure to be so qualified or in good standing would not
        reasonably be expected to have, individually or in the aggregate, a material
        adverse effect on the business, operations, conditions (financial or otherwise),
        assets or results of operations of the Company and its Subsidiaries (as defined
        below) as a whole (a “Material Adverse Effect”).

       

      3.2 Capitalization.
        (a) The
        authorized capital stock of the Company consists of 150,000,000 shares of
        Common
        Stock and 8,500,000 shares of undesignated preferred stock. As of June 16,
        2005,
        there were 40,768,958 shares of Common Stock issued and outstanding, all
        of
        which are duly authorized, validly issued, fully paid and non-assessable.
        In
        addition, there are 10,042,634 shares of Common Stock reserved for issuance
        pursuant to outstanding options and warrants. There are 716,377 shares of
        Series
        A preferred stock (the “Series A Preferred Stock”) issued or outstanding, the
        terms of which are described in the Memorandum. Upon closing of the Minimum
        Offering Amount, the shares of Series A Preferred Stock will be automatically
        converted into shares of Common Stock as further described in the Memorandum.
        All of the securities issued by the Company have been issued in accordance
        with
        all applicable federal and state securities laws. Other than as set forth
        above,
        there are no other options, warrants, calls, rights, commitments or agreements
        of any character to which the Company is a party or by which the Company
        is
        bound or obligating the Company to issue, deliver, sell, repurchase or redeem,
        or cause to be issued, delivered, sold, repurchased or redeemed, any shares
        of
        the capital stock of the Company or obligating the Company to grant, extend
        or
        enter into any such option, warrant, call, right, commitment or agreement.
        Except as set forth in Schedule
        3.2
        hereto
        there are no preemptive rights or rights of first refusal or similar rights
        which are binding on the Company permitting any Person to subscribe for or
        purchase from the Company shares of its capital stock pursuant to any provision
        of law, the Company’s Certificate of Incorporation as in effect on the date
        hereof (the “Certificate of Incorporation”) or the Company’s By-laws, as in
        effect on the date hereof (the “By-laws”) or by agreement or otherwise. Except
        as set forth in Schedule
        3.2
        hereto
        there are no securities or instruments containing anti-dilution or similar
        provisions that will be triggered by the issuance of the Securities as described
        in this Agreement. The Company has made available to the Placement Agent
        true,
        correct and complete copies of the Company’s Certificate of Incorporation and
        By-laws. 

       

      
        
          
          

        

        
          
          

          
            

          

        

        
          
          

        

      

      (b) The
        Securities have been duly authorized and, when issued, delivered and paid
        for in
        the manner set forth in this Agreement, will be duly authorized, validly
        issued,
        fully paid and non-assessable. Except for the selling stockholders listed
        in the
        Company’s currently effective registration statements on Form SB-2 (SEC File No.
        333-111897 and Forms S-8 (SEC File Nos. 333-112888 and 333-112889), no
        stockholder of the Company has any right to request or require the Company
        to
        register the sale of any shares owned by such stockholder under the Act.
        No
        further approval or authority of the stockholders or the Board of Directors
        of
        the Company will be required for the issuance and sale of the Securities
        to be
        sold by the Company as contemplated herein.

      

      3.3 Authorization;
        Enforceability.
        The
        Company has all power and authority (corporate or otherwise) to enter into
        this
        Agreement and to consummate the transactions contemplated hereby. Assuming
        receipt of the consents, approvals, authorizations or other orders set forth
        in
        Section 4.1 hereof, all corporate action on the part of the Company, its
        directors and stockholders necessary for the authorization, execution, delivery
        and performance of this Agreement by the Company, the authorization, sale,
        issuance and delivery of the Securities contemplated herein and the performance
        of the Company’s obligations hereunder has been taken. This Agreement has been
        duly executed and delivered by the Company and constitutes a legal, valid
        and
        binding obligation of the Company, enforceable against the Company in accordance
        with its terms, subject to laws of general application relating to bankruptcy,
        insolvency and the relief of debtors and rules of law governing specific
        performance, injunctive relief or other equitable remedies, and to limitations
        of public policy. Except as set forth in Schedule
        3.3,
        the
        issuance and sale of the Securities contemplated hereby will not give rise
        to
        any preemptive rights or rights of first refusal on behalf of any Person
        pursuant to any agreement, contract or understanding to which the Company
        is a
        party.

      

      3.4 No
        Conflict; Governmental and Other Consents.
        (a) 
        The
        execution and delivery by the Company of this Agreement and the consummation
        of
        the transactions contemplated hereby will not result in the violation of
        any
        law, statute, rule, regulation, order, writ, injunction, judgment or decree
        of
        any court or governmental authority to or by which the Company or any Subsidiary
        thereof is bound, or of any provision of the Certificate of Incorporation
        or
        By-Laws of the Company, and will not conflict with, or result in a breach
        or
        violation of, any of the terms or provisions of, or constitute (with due
        notice
        or lapse of time or both) a default under, any lease, loan agreement, mortgage,
        security agreement, trust indenture or other agreement or instrument to which
        the Company or any Subsidiary thereof is a party or by which it is bound
        or to
        which any of its properties or assets is subject, nor result in the creation
        or
        imposition of any lien upon any of the properties or assets of the Company
        or
        any Subsidiary thereof where such violation, breach, default or imposition
        would
        reasonably be likely to result in a Material Adverse Effect.

      

      (b) Other
        than the consents, approvals, authorizations or other orders set forth in
        Section 4.1 hereof, no material consent, approval, authorization or other
        order
        of any governmental authority or other third-party is required to be obtained
        by
        the Company or any Subsidiary thereof in connection with the authorization,
        execution and delivery of this Agreement or with the authorization, issue
        and
        sale of the Securities, except such filings as may be required to be made
        with
        the SEC, the NASD, AMEX and with any state or foreign blue sky or securities
        regulatory authority.

      

      3.5  Litigation.
        There
        is no pending, or to the knowledge of the Company, threatened, legal or
        governmental proceedings to which the Company is a party.

      

      3.6  Accuracy
        of Public Reports.
        All
        reports required to be filed by the Company within two years prior to the
        date
        of this Agreement under the Exchange Act (the “Public Reports”) have been duly
        filed with the SEC, complied at the time of filing in all material respects
        with
        the requirements of their respective forms and the rules and regulations
        thereunder, except to the extent updated or superseded by any subsequently
        filed
        report, were complete and correct in all material respects as of the dates
        at
        which the information was furnished, and such reports did not contain (as
        of
        their respective dates) any untrue statements of a material fact nor omitted
        to
        state any material fact necessary in order to make the statements contained
        therein, in light of the circumstances under which they were made, not
        misleading, or if amended, as so amended. 

      

      
        
          
          

        

        
          
          

          
            

          

        

        
          
          

        

      

      3.7 Investment
        Company.
        The
        Company is not an “investment company” within the meaning of such term under the
        Investment Company Act of 1940, as amended, and the rules and regulations
        of the
        SEC thereunder.

      

      3.8
         Proprietary
        Rights.
        To the
        Company’s knowledge, the Company owns or possesses adequate and enforceable
        rights to use all patents, patent applications, trademarks, trade names,
        corporate names, copyrights, trade secrets, licenses, inventions, formulations,
        technology and know-how and other intangible property used in the conduct
        of its
        business as described in the Memorandum (the “Proprietary Rights”). Except as
        described in the Memorandum, to the Company’s knowledge, the Company has not
        received any notice of, and there are no facts known to the Company that
        reasonably indicate the existence of (i) any infringement or misappropriation
        by
        any third party of any of the Proprietary Rights or (ii) any claim by a third
        party contesting the validity of any of the Proprietary Rights. The Company
        has
        not received any notice of any infringement, misappropriation or violation
        by
        the Company or any of its employees of any Proprietary Rights of third
        parties

      

      3.9 Taxes.
        The
        Company has filed all Federal, state, local and foreign tax returns that
        are
        required to have been filed by it and all such returns are true and correct
        in
        all material respects. The Company has paid all taxes pursuant to such returns
        or pursuant to any assessments received by it or which they are obligated
        to
        withhold from amounts owing to any employee, creditor or third party. Except
        as
        set forth on Schedule
        3.9
        hereto,
        the tax returns of the Company have never been audited by any state, local
        or
        Federal authorities. 

      

      3.10 No
        Integration.
        To the
        Company’s knowledge, there exists no fact or set of facts which may cause the
        Offering to be integrated with any other offering of the Company’s securities or
        which would cause this Offering to lose its exemption under Regulation D.
        

      

      3.11 Use
        of
        Proceeds.
        The
        Company intends to use the net proceeds in the Offering as described in the
        Memorandum. Except as described in the Memorandum, the Company shall not
        use any
        proceeds it receives in the Offering for the satisfaction of the Company’s debt
        (other than such debt it has incurred in the ordinary course of business).
        

      

      3.12 Labor
        Relations.
        No
        material labor dispute exists or, to the knowledge of the Company, is imminent
        with respect to any of the employees of the Company or any Subsidiary which
        could reasonably be expected to result in a Material Adverse
        Effect.

      

      3.13. Compliance.
        Neither
        the Company nor any Subsidiary (i) is in default under or in violation of
        (and
        no event has occurred that has not been waived that, with notice or lapse
        of
        time or both, would result in a default by the Company or any Subsidiary
        under),
        nor has the Company or any Subsidiary received notice of a claim that it
        is in
        default under or that it is in violation of, any indenture, loan or credit
        agreement or any other agreement or instrument to which it is a party or
        by
        which it or any of its properties is bound (whether or not such default or
        violation has been waived), (ii) is in violation of any order of any court,
        arbitrator or governmental body, or (iii) is or has been in violation of
        any
        statute, rule or regulation of any governmental authority, including without
        limitation all foreign, federal, state and local laws applicable to its business
        except in each case as could not have a Material Adverse Effect.

      

      
        
          
          

        

        
          
          

          
            

          

        

        
          
          

        

      

      3.14 Regulatory
        Permits.
        The
        Company and the Subsidiaries possess all certificates, authorizations and
        permits issued by the appropriate federal, state, local or foreign regulatory
        authorities necessary to conduct its business as described in the Memorandum,
        except where the failure to possess such permits would not, individually
        or in
        the aggregate, have or reasonably be expected to result in a Material Adverse
        Effect (“Material
        Permits”),
        and
        the Company has not received any notice of proceedings relating to the
        revocation or modification of any Material Permit.

      

      3.15 Title
        to Assets.
        The
        Company and the Subsidiaries have good and marketable title in all real and
        personal property owned by them that is material to the business of the Company
        and the Subsidiaries, in each case free and clear of any liens, encumbrances
        or
        other restrictions. Any real property and facilities held under lease by
        the
        Company and the Subsidiaries are held by them under valid, subsisting and
        enforceable leases of which the Company and the Subsidiaries are in
        compliance.

      

      3.16 Insurance.
        The
        Company and the Subsidiaries are insured by insurers of recognized financial
        responsibility against such losses and risks and in such amounts as are prudent
        and customary in the businesses in which the Company and the Subsidiaries
        are
        engaged, including directors and officers insurance. 

       

      3.17 Transactions
        with Affiliates and Employees.
        Except
        as set forth in the Memorandum, none of the officers or directors of the
        Company
        and, to the knowledge of the Company, none of the employees of the Company
        is
        presently a party to any transaction with the Company or any Subsidiary (other
        than for services as employees, officers and directors), including any contract,
        agreement or other arrangement providing for the furnishing of services to
        or
        by, providing for rental of real or personal property to or from, or otherwise
        requiring payments to or from any officer, director or such employee or,
        to the
        knowledge of the Company, any entity in which any officer, director, or any
        such
        employee has a substantial interest or is an officer, director, trustee or
        partner, in each case in excess of $50,000 other than (i) for payment of
        salary
        or consulting fees for services rendered, (ii) reimbursement for expenses
        incurred on behalf of the Company and (iii) for other employee benefits,
        including stock option agreements under any stock option plan of the
        Company.

      

      3.18 Internal
        Accounting Controls.
        Each of
        the Company and the Subsidiaries is in material compliance with all provisions
        of the Sarbanes Oxley Act of 2002 which are presently applicable to it.

       

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

      

      3.20 No
        General Solicitation.
        Neither
        the Company nor any Person acting on behalf of the Company has offered or
        sold
        any of the Units by any form of general solicitation or general advertising.
        The
        Company has offered the Units for sale only to each Subscriber in the Offering
        and certain other “accredited investors” within the meaning of Rule 501 under
        the Act.

      

      
        
          
          

        

        
          
          

          
            

          

        

        
          
          

        

      

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

      

      3.22 Accountants.
        The
        Company’s accountants are set forth in the Public Reports. To the Company’s
        knowledge, such accountants, who the Company expects will express their opinion
        with respect to the financial statements to be included in the Company’s
        upcoming annual report, are a registered public accounting firm as required
        by
        the Act.

      

      3.23 Indebtedness.
        As of
        the date of the Memorandum, the Company has not materially increased its
        indebtedness, except debt incurred in the ordinary course of
        business.

      

      3.24 Additional
        Covenants of the Company.
        Until
        the earlier of the Closing Date and the Termination Date (as defined below),
        the
        Company will not issue or sell any securities to any party, other than (i)
        the
        issuances and sales contemplated by this Agreement; and (ii) pursuant to
        the
        terms of previously granted employee stock options and previously issued
        warrants, options and convertible securities.

       

      3.25 Environmental
        Laws. 
        The Company (i) is in compliance with any and all Environmental Laws (as
        hereinafter defined), (ii) has received all permits, licenses or other approvals
        required of it under applicable Environmental Laws to conduct its business
        and
        (iii) are in compliance with all terms and conditions of any such permit,
        license or approval where, in each of the foregoing clauses (i), (ii) and
        (iii),
        the failure to so comply would reasonably be expected to have, individually
        or
        in the aggregate, a Material Adverse Effect.  The term “Environmental Laws”
        means all federal, state, local or foreign laws relating to pollution or
        protection of human health or the environment (including, without limitation,
        ambient air, surface water, groundwater, land surface or subsurface strata),
        including, without limitation, laws relating to emissions, discharges, releases
        or threatened releases of chemicals, pollutants, contaminants, or toxic or
        hazardous substances or wastes (collectively, “Hazardous
        Materials”)
        into
        the environment, or otherwise relating to the manufacture, processing,
        distribution, use, treatment, storage, disposal, transport or handling of
        Hazardous Materials, as well as all authorizations, codes, decrees, demands
        or
        demand letters, injunctions, judgments, licenses, notices or notice letters,
        orders, permits, plans or regulations issued, entered, promulgated or approved
        thereunder.

      

      
        
          
          

        

        
          
          

          
            

          

        

        
          
          

        

      

      3.26 Employee
        Relations; Employee Benefit Plans.
        The
        Company is not a party to any collective bargaining agreement or employs
        any
        member of a union.  The Company believes that its relations with its
        employees are good.  No executive officer of the Company (as defined
        in
        Rule 501(f) of the Act) has notified the Company that such officer intends
        to
        leave the Company or otherwise terminate such officer's employment with the
        Company. The Company is in compliance with all federal, state, local and
        foreign
        laws and regulations respecting employment and employment practices, terms
        and
        conditions of employment and wages and hours, except where failure to be
        in
        compliance would not, either individually or in the aggregate, reasonably
        be
        expected to result in a Material Adverse Effect.  Except as disclosed
        in
        the Memorandum, the Company does not maintain any compensation plan, agreement,
        arrangement or commitment (including, but not limited to, “employee benefit
        plans”, as defined in Section 3(3) of the Employee Retirement Income Security
        Act of 1974, as amended (“ERISA”)) for any present or former employees, officers
        or directors of the Company or with respect to which the Company has liability
        or makes or has an obligation to make contributions, other than any such
        plans,
        agreements, arrangements or commitments made generally available to the
        Company’s employees.

      

      4. CONDITIONS
        TO OBLIGATIONS OF EACH PARTY.

      

      4.1  Conditions
        to Obligations of the Company.
        The
        Company’s obligation to complete the sale of the Units and the issuance and
        deliver the Securities to the Subscriber at the Closing is subject to the
        fulfillment on or prior to the Closing of the following conditions, which
        conditions may be waived at the option of the Company to the extent permitted
        by
        law:

      

      (a) Representations
        and Warranties Correct.
        The
        representations and warranties made by the Subscriber in Article 2 hereof
        shall
        be true and correct when made, and shall be true and correct on and as of
        the
        Closing Date (except for any representation or warranty that speaks as of
        a
        specific date, which shall be true and correct as of such date).

      

      (b) Covenants.
        All
        covenants, agreements and conditions contained in this Agreement to be performed
        by the Subscriber on or prior to such sale and issuance shall have been
        performed or complied with in all material respects.

      

      (c) No
        Legal Order Pending.
        There
        shall not then be in effect any legal or other order enjoining or restraining
        the transactions contemplated by this Agreement.

      

      (d) No
        Law
        Prohibiting or Restricting Such Sale.
        There
        shall not be in effect any law, rule or regulation prohibiting or restricting
        the issuance and sale of the Units or requiring any consent or approval of
        any
        Person which shall not have been obtained to sell the Units or issue the
        Securities, or in either case to otherwise consummate the transactions
        contemplated hereby (except as otherwise provided in this
        Agreement).

      

      (e) Payment
        of Consideration.
        The
        Company shall have received the full amount of the Aggregate Purchase Price
        for
        the Units being purchased hereunder at the Closing.

      

      (f) Questionnaires.
        The
        Subscriber shall have completed, executed and delivered to the Company the
        Confidential Investor Questionnaire and the Registration Questionnaire, which
        questionnaires shall be true and correct as of the Closing and shall be
        satisfactory to the Placement Agent and the Company, each in their sole
        discretion.

      

      
        
          
          

        

        
          
          

          
            

          

        

        
          
          

        

      

      (g)  Minimum
        Offering Amount.
        The
        Company shall have received duly executed subscriptions and corresponding
        readily available funds in the Escrow Account from Subscribers equal to or
        in
        excess of the Minimum Offering Amount.

      

      4.2 The
        Subscriber’s obligation to purchase the Units at the Closing is subject to the
        fulfillment on or prior to the Closing of the following conditions, which
        conditions may be waived at the option of each Subscriber to the extent
        permitted by law:

      

      (a) Representations
        and Warranties Correct.
        The
        representations and warranties made by the Company in Article 3 hereof shall
        be
        true and correct when made, and shall be true and correct on and as of the
        Closing Date (except for any representation or warranty that speaks as of
        a
        specific date, which shall be true and correct as of such date).

      

      (b) Covenants.
        All
        covenants, agreements and conditions contained in this Agreement to be performed
        by the Company on or prior to such purchase shall have been performed or
        complied with in all material respects.

      

      (c) No
        Legal Order Pending.
        There
        shall not then be in effect any legal or other order enjoining or restraining
        the transactions contemplated by this Agreement.

      

      (d) No
        Law
        Prohibiting or Restricting Such Sale.
        There
        shall not be in effect any law, rule or regulation prohibiting or restricting
        the issuance and sale of the Units or requiring any consent or approval of
        any
        Person which shall not have been obtained to issue or sell the Units, or
        in
        either case to otherwise consummate the transactions contemplated hereby
        (except
        as otherwise provided in this Agreement).

      

      (e) Minimum
        Offering Amount.
        The
        Company shall have received duly executed subscriptions and corresponding
        readily available funds in the Escrow Account from Subscribers equal to or
        in
        excess of the Minimum Offering Amount.

      

      5.         REGISTRATION
        RIGHTS.

      

      5.1 As
        used
        in this Agreement, the following terms shall have the following
        meanings:

      

      (a) “Affiliate”
        shall mean, with respect to any Person (as defined below), any other Person
        controlling, controlled by or under direct or indirect common control with
        such
        Person (for the purposes of this definition “control”, when used with respect to
        any specified Person, shall mean the power to direct the management and policies
        of such Person, directly or indirectly, whether through ownership of voting
        securities, by contract or otherwise; and the terms “controlling” and
“controlled” shall have meanings correlative to the foregoing).

      

      (b) “Business
        Day” shall mean a day Monday through Friday on which banks are generally open
        for business in New York, New York.

      

      (c) “Holders”
        shall mean the Subscribers and any Person holding Registrable Securities
        or any
        Person to whom the rights under Article 6 have been transferred in accordance
        with Section 5.9 hereof.

      

      
        
          
          

        

        
          
          

          
            

          

        

        
          
          

        

      

      (d) “Person”
        shall mean any person, individual, corporation, limited liability company,
        partnership, trust or other nongovernmental entity or any governmental agency,
        court, authority or other body (whether foreign, federal, state, local or
        otherwise).

      

      (e) The
        terms
“register,”“registered” and “registration” refer to the registration effected by
        preparing and filing a registration statement in compliance with the Act,
        and
        the declaration or ordering of the effectiveness of such registration statement
        under the Act.

      

      (f) “Registrable
        Securities” shall mean the Shares, the Warrant Shares (as defined below) and the
        Placement Warrant Shares and any shares of Common Stock issued as a dividend
        or
        distribution with respect to or in replacement of the Common Stock issued,
        directly or indirectly, in connection with this Offering; provided,
        however,
        that
        securities shall only be treated as Registrable Securities if and only for
        so
        long as they (i) have not been sold (A) pursuant to a registration statement;
        (B) to or through a broker, dealer or underwriter in a public distribution
        or a
        public securities transaction; and/or (C) in a transaction exempt from the
        registration and prospectus delivery requirements of the Act under Section
        4(1)
        thereof so that all transfer restrictions and restrictive legends with respect
        thereto, if any, are removed upon the consummation of such sale; (ii) are
        not
        held by a Holder or a permitted transferee; or (iii) are not eligible for
        sale
        pursuant to Rule 144(k) (or any successor thereto) under the Act. For purposes
        of this Agreement, “Warrant Shares” shall mean the shares of Common Stock
        issuable upon exercise of the Warrants included in the Units.

      

      (g)  “Registration
        Expenses” shall mean all expenses incurred by the Company in complying with
        Section 5.2 hereof, including, without limitation, all registration,
        qualification and filing fees, printing expenses, escrow fees, fees and expenses
        of counsel for the Company, blue sky fees and expenses and the expense of
        any
        special audits incident to or required by any such registration (but excluding
        the fees of legal counsel for any Holder).

      

      (h)  “Selling
        Expenses” shall mean all underwriting discounts and selling commissions
        applicable to the sale of Registrable Securities and, except to the extent
        set
        forth in the definition of Registration Expenses, all fees and expenses of
        legal
        counsel for any Holder.

      

      (i)  “Subsidiary”
        shall mean, with respect to any Person, any other Person of which more than
        fifty percent (50%) of the shares of stock or other interests entitled to
        vote
        in the election of directors or comparable Persons performing similar functions
        (excluding shares or other interests entitled to vote only upon the failure
        to
        pay dividends thereon or other contingencies) are at the time owned or
        controlled directly or indirectly through one or more Subsidiaries, by such
        Person.

      

      5.2 (a) 
        Subject
        to the terms, conditions and limitations set forth herein, the Company will
        use
        its best efforts to (i) file a registration statement with the SEC on the
        appropriate form (the “Registration Statement”) within 30 days following the
final
        Closing Date
        (the
        date such Registration Statement is actually filed, the “Filing Date”) to allow
        the resale of the Registrable Securities under the Act, and use its best
        efforts
        to have such Registration Statement declared effective by the SEC prior to
        the
        date which is 120 days after the Filing Date; and (ii) cause such Registration
        Statement to remain effective (the “Registration Period”) until the earlier of
        (A) the second anniversary of the Closing Date; (B) the date on which the
        Subscriber may sell the Shares and the shares of Common Stock issued upon
        exercise of the Warrants then held by the Subscriber pursuant to Rule 144(k)
        of
        the Act; (C) such time as all Securities held by the Subscriber and registered
        under the Registration Statement have been sold (x) pursuant to a registration
        statement; (y) to or through a broker, dealer or underwriter in a public
        distribution or a public securities transaction; and/or (z) in a transaction
        exempt from the registration and prospectus delivery requirements of the
        Act
        under Section 4(1) thereof so that all transfer restrictions and restrictive
        legends with respect thereto, if any, are removed upon the consummation of
        such
        sale. To the extent permissible, such Registration Statement also shall include,
        or subsequently be amended to include, to the extent allowable under the
        Act and
        the rules promulgated thereunder (including Rule 416 under the Act), such
        indeterminate number of additional shares of Common Stock resulting from
        stock
        splits, stock dividends or similar transactions with respect to the Registrable
        Securities.

      

      
        
          
          

        

        
          
          

          
            

          

        

        
          
          

        

      

      (b) If:
        (i)
        the Registration Statement is not filed on or prior to thirty (30) days
        following the Closing Date or the Company fails to file with the SEC a request
        for acceleration in accordance with Rule 461 promulgated under the Securities
        Act, within five (5) trading days after the date that the Company is notified,
        in writing, by the SEC that the Registration Statement will not be “reviewed,”
        or will not be subject to further review, (ii) after the Registration Statement
        is filed with and declared effective by the SEC, such Registration Statement
        ceases to be effective as to all the Shares to which it is required to relate
        for
        more
        than an aggregate of 90 days (whether consecutive or non-consecutive) during
        any
        twelve (12) month period during the Registration Period without
        being succeeded within ten (10) trading days by an amendment to such
        Registration Statement or by a subsequent Registration Statement filed with
        and
        declared effective by the Commission, (iii) the Common Stock is not listed
        or
        quoted, or is suspended from trading on, the Nasdaq National Market or the
        facilities of any national securities exchange on which the Common Stock
        is then
        traded for a period of three (3) trading days (which need not be consecutive
        trading days) (any such failure or breach being referred to as an “Default,” and
        the date on which such Default occurs being referred to as “Default Date”),
        then: (x) on each such Default Date the Company shall pay to each Subscriber
        an
        amount in cash, as liquidated damages and not as a penalty, equal to 1.5%
        of the
        Aggregate Purchase price paid by such Subscriber pursuant to this Agreement;
        and
        (y) on each monthly anniversary of each such Default Date thereof (if the
        applicable Default shall not have been cured by such date) until the applicable
        Default is cured, the Company shall pay to each Subscriber an amount in cash,
        as
        liquidated damages and not as a penalty, equal to 1.5% of the Aggregate Purchase
        price paid by such Subscriber pursuant to this Agreement. Such payments shall
        constitute the Purchaser’s exclusive remedy for such Defaults. If the Company
        fails to pay any liquidated damages pursuant to this Section in full within
        seven days after the date payable, the Company will pay interest thereon
        at a
        rate of 8% per annum to the Purchaser, accruing daily from the date such
        liquidated damages are due until such amounts, plus all such interest thereon,
        are paid in full. Notwithstanding anything to the contrary contained herein,
        in
        no event shall any amount owed by the Company to any Subscriber pursuant
        to this
        Section 5.2(b) exceed 10% of the Aggregate Purchase Price paid by such
        Subscriber.

      

      5.3 All
        Registration Expenses incurred in connection with any registration,
        qualification, exemption or compliance pursuant to Section 5.2 shall be borne
        by
        the Company. All Selling Expenses relating to the sale of securities registered
        by or on behalf of Holders shall be borne by such Holders.

      

      5.4 In
        the
        case of the registration, qualification, exemption or compliance effected
        by the
        Company pursuant to this Agreement, the Company shall, upon reasonable request,
        inform each Holder as to the status of such registration, qualification,
        exemption and compliance. At its expense the Company shall: 

      

      (a) use
        best
        efforts to keep such registration, and any qualification, exemption or
        compliance under state or federal securities laws which the Company determines
        to obtain, continuously effective until the termination of the Registration
        Period; 

      

      
        
          
          

        

        
          
          

          
            

          

        

        
          
          

        

      

      (b) advise
        the Holders promptly:

      

      (i) when
        the
        Registration Statement or any amendment thereto has been filed with the SEC
        and
        when the Registration Statement or any post-effective amendment thereto has
        become effective;

      

      (ii) of
        any
        request by the SEC for amendments or supplements to the Registration Statement
        or the prospectus included therein or for additional information;

      

      (iii) of
        the
        issuance by the SEC of any stop order suspending the effectiveness of the
        Registration Statement or the initiation of any proceedings for such
        purpose;

      

      (iv) of
        the
        receipt by the Company of any notification with respect to the suspension
        of the
        qualification of the Registrable Securities included therein for sale in
        any
        jurisdiction or the initiation or threatening of any proceeding for such
        purpose; and

      

      (v) of
        the
        happening of any event that requires the making of any changes in the
        Registration Statement or the prospectus so that, as of such date, the
        statements therein are not misleading and do not omit to state a material
        fact
        required to be stated therein or necessary to make the statements therein
        (in
        the case of the prospectus, in the light of the circumstances under which
        they
        were made) not misleading (which notice will be accompanied by an instruction
        to
        suspend the use of the prospectus until such changes have been
        made);

      

      (c) make
        best
        efforts to obtain the withdrawal of any order suspending the effectiveness
        of
        any Registration Statement at the earliest possible time;

      

      (d) furnish
        to each Holder, without charge, at least one copy of such Registration Statement
        and any post-effective amendment thereto, including financial statements
        and
        schedules, and, if the Holder so requests in writing, all exhibits (including
        those incorporated by reference) in the form filed with the SEC;

      

      (e) during
        the Registration Period, deliver to each Holder, without charge, as many
        copies
        of the prospectus included in such Registration Statement and any amendment
        or
        supplement thereto as such Holder may reasonably request; and the Company
        consents to the use, consistent with the provisions hereof, of the prospectus
        or
        any amendment or supplement thereto by each of the selling Holders of
        Registrable Securities in connection with the offering and sale of the
        Registrable Securities covered by the prospectus or any amendment or supplement
        thereto.

      

      (f) prior
        to
        any public offering of Registrable Securities pursuant to the Registration
        Statement, register or qualify or obtain an exemption for offer and sale
        under
        the securities or blue sky laws of such jurisdictions as any such Holders
        reasonably request in writing, provided that the Company shall not for any
        such
        purpose be required to qualify generally to transact business as a foreign
        corporation in any jurisdiction where it is not so qualified or to consent
        to
        general service of process in any such jurisdiction, and do any and all other
        acts or things reasonably necessary or advisable to enable the offer and
        sale in
        such jurisdictions of the Registrable Securities covered by such Registration
        Statement in the sole discretion of the Company;

      

      
        
          
          

        

        
          
          

          
            

          

        

        
          
          

        

      

      (g) to
        the
        extent permitted under applicable rules and regulations promulgated under
        the
        Act, cooperate with the Holders to facilitate the timely preparation and
        delivery of certificates representing Registrable Securities to be sold pursuant
        to any Registration Statement free of any restrictive legends to the extent
        not
        required at such time and in such denominations and registered in such names
        as
        Holders may request at least five (5) Business Days prior to sales of
        Registrable Securities pursuant to such Registration Statement;

      

      (h) upon
        the
        occurrence of any event contemplated by Section 5.4(b)(v) above, the Company
        shall promptly prepare a post-effective amendment to the Registration Statement
        or a supplement to the related prospectus, or file any other required document
        so that, as thereafter promptly delivered to purchasers of the Registrable
        Securities included therein, the prospectus will not include any untrue
        statement of a material fact or omit to state any material fact necessary
        to
        make the statements therein, in the light of the circumstances under which
        they
        were made, not misleading; and

      

      (i) use
        commercially reasonable efforts to comply with all applicable rules and
        regulations of the SEC, and use commercially reasonable efforts to make
        generally available to its security holders not later than 45 days (or 90
        days
        if the fiscal quarter is the fourth fiscal quarter) after the end of its
        fiscal
        quarter in which the first anniversary date of the effective date of the
        Registration Statement occurs, an earnings statement satisfying the provisions
        of Section 11(a) of the Act.

      

      Notwithstanding
        the foregoing, it shall be a condition precedent to the obligations of the
        Company to take any action pursuant to paragraphs (a) through (i) of this
        Section 5.4, that the Holder shall furnish to the Company such information
        regarding itself, the Securities to be sold by the Holder and the intended
        method of disposition of such Securities as shall be required to effect the
        registration of the Securities, all of which information shall be furnished
        to
        the Company in writing specifically for use in the Registration
        Statement.

      

      5.5 The
        Holders shall have no right to take any action to restrain, enjoin or otherwise
        delay any registration pursuant to Section 5.2 hereof as a result of any
        controversy that may arise with respect to the interpretation or implementation
        of this Agreement. 

       

      5.6 (a) To
        the
        extent permitted by law, the Company shall indemnify each Holder with respect
        to
        (i) any registration, qualification or compliance has been effected pursuant
        to
        this Agreement, against all claims, losses, damages and liabilities (or actions
        in respect thereof), including any of the foregoing incurred in settlement
        of
        any litigation, commenced or threatened (subject to Section 5.6(c) below),
        arising out of or based on any untrue statement of a material fact contained
        in
        the Registration Statement, or any amendment or supplement thereof, incident
        to
        any such registration, qualification or compliance, or based on any omission
        to
        state therein a material fact required to be stated therein or necessary
        to make
        the statements therein not misleading, in light of the circumstances in which
        they were made, or (ii) any violation by the Company of the Act, the Exchange
        Act, or any rule or regulation promulgated under the Act, or the Exchange
        Act,
        and will reimburse each Holder for reasonable legal and other expenses
        reasonably incurred in connection with investigating or defending any such
        claim, loss, damage, liability or action as incurred; provided,
        that
        the Company will not be liable in any such case to the extent that any such
        claim, loss, damage, liability or action arises out of, relates to or is
        based
        upon: (i) any untrue statement or omission is made in reliance upon and in
        conformity with written information furnished to the Company by or on behalf
        of
        such Holder and stated to be specifically for use in preparation of such
        Registration Statement, prospectus or offering circular; or (ii) the failure
        of
        the Holder to comply with the covenants and agreements contained in this
        Agreement respecting sales of Registrable Securities. Notwithstanding the
        foregoing, the Company will not be liable in any such case where the claim,
        loss, damage, liability or actions arises out of or is related to the failure
        of
        the Holder to comply with the covenants and agreements contained in this
        Agreement respecting sales of Registrable Securities, and except that the
        foregoing indemnity agreement is subject to the condition that, insofar as
        it
        relates primarily to any such untrue statement or omission made in the
        preliminary prospectus but eliminated or remedied in the amended prospectus
        on
        file with the SEC at the time the Registration Statement becomes effective
        or in
        the amended prospectus filed with the Commission pursuant to Rule 424(b)
        or in
        the prospectus subject to completion under Rule 434 promulgated under the
        Act,
        which together meet the requirements of Section 10(a) of the Act (the “Final
        Prospectus”), such indemnity agreement shall not inure to the benefit of any
        such Holder, any such underwriter or any such controlling Person, if a copy
        of
        the Final Prospectus furnished by the Company to the Holder for delivery
        was not
        furnished by the Holder to the Person or entity asserting the loss, liability,
        claim, damage or at or prior to the time such furnishing is required by the
        Act
        and the Final Prospectus would have cured the defect giving rise to such
        loss,
        liability, claim, damage or action.

      

      
        
          
          

        

        
          
          

          
            

          

        

        
          
          

        

      

      (b) Absent
        any gross negligence or willful misconduct of the Company, each Holder will
        severally, if Registrable Securities held by such Holder are included in
        the
        securities as to which such registration, qualification or compliance is
        being
        effected, indemnify the Company, each of its directors and officers, each
        underwriter of the Registrable Securities and each Person who controls the
        Company within the meaning of Section 15 of the Act, against all claims,
        losses,
        damages and liabilities (or actions in respect thereof), including any of
        the
        foregoing incurred in settlement of any litigation, commenced or threatened
        (subject to Section 5.6(c) below), arising out of or based on any untrue
        statement (or alleged untrue statement) of a material fact contained in any
        registration statement, prospectus or offering circular, or any amendment
        or
        supplement thereof, incident to any such registration, qualification or
        compliance, or based on any omission (or alleged omission) to state therein
        a
        material fact required to be stated therein or necessary to make the statements
        therein not misleading, in light of the circumstances in which they were
        made,
        and will reimburse the Company, such directors and officers, each underwriter
        of
        the Registrable Securities and each Person controlling the Company for
        reasonable legal and any other expenses reasonably incurred in connection
        with
        investigating or defending any such claim, loss, damage, liability or action
        as
        incurred, in each case to the extent, but only to the extent, that such untrue
        statement or omission or allegation thereof is made in reliance upon and
        in
        conformity with written information furnished to the Company by or on behalf
        of
        the Holder and stated to be specifically for use in preparation of such
        registration statement, prospectus or offering circular. Notwithstanding
        the
        foregoing, in no event shall a Holder be liable for any such claims, losses,
        damages or liabilities in excess of the net proceeds received by such Holder
        in
        the offering, except in the event of fraud or intentional misrepresentation
        by
        such Holder.

      

      (c) Each
        party entitled to indemnification under this Section 5.6 (the “Indemnified
        Party”) shall give notice to the party required to provide indemnification (the
        “Indemnifying Party”) promptly after such Indemnified Party has actual knowledge
        of any claim as to which indemnity may be sought, and shall permit the
        Indemnifying Party to assume the defense of any such claim or any litigation
        resulting therefrom, provided that counsel for the Indemnifying Party, who
        shall
        conduct the defense of such claim or litigation, shall be approved by the
        Indemnified Party (whose approval shall not unreasonably be withheld), and
        the
        Indemnified Party may participate in such defense at such Indemnified Party’s
        expense, and provided further that the failure of any Indemnified Party to
        give
        notice as provided herein shall not relieve the Indemnifying Party of its
        obligations under this Agreement, unless such failure is materially prejudicial
        to the Indemnifying Party in defending such claim or litigation. An Indemnifying
        Party shall not be liable for any settlement of an action or claim effected
        without its written consent (which consent will not be unreasonably
        withheld).

      

      (d) If
        the
        indemnification provided for in this Section 5.6 is held by a court of competent
        jurisdiction to be unavailable to an Indemnified Party with respect to any
        loss,
        liability, claim, damage or expense referred to therein, then the Indemnifying
        Party, in lieu of indemnifying such Indemnified Party thereunder, shall
        contribute to the amount paid or payable by such Indemnified Party as a result
        of such loss, liability, claim, damage or expense in such proportion as is
        appropriate to reflect the relative fault of the Indemnifying Party on the
        one
        hand and of the Indemnified Party on the other in connection with the statements
        or omissions which resulted in such loss, liability, claim, damage or expense
        as
        well as any other relevant equitable considerations. The relative fault of
        the
        Indemnifying Party and of the Indemnified Party shall be determined by reference
        to, among other things, whether the untrue or alleged untrue statement of
        a
        material fact or the omission to state a material fact relates to information
        supplied by the Indemnifying Party or by the Indemnified Party and the parties’
        relative intent, knowledge, access to information and opportunity to correct
        or
        prevent such statement or omission. The Company and the Holders agree that
        it
        would not be just and equitable if contribution pursuant to this Section
        5.6(d)
        was based solely upon the number of entities from whom contribution was
        requested or by any other method of allocation which does not take account
        of
        the equitable considerations referred to above in this Section 5.6(d). The
        amount paid or payable by an Indemnified Party as a result of the losses,
        claims, damages and liabilities (or actions in respect thereof) referred
        to
        above in this Section 5.6(d) shall be deemed to include any legal or other
        expenses reasonably incurred by such Indemnified Party in connection with
        investigating or defending any such action or claim, subject to the provisions
        of Section 5.6(d) hereof. The parties agree that it would not be just and
        equitable if contributions pursuant to this Section 5.6 were determined by
        pro
        rata allocation or by any other method of allocation which does not take
        account
        of the equitable considerations as set forth in this Section 5.6.
        Notwithstanding the provisions of this Section 5.6(d), in no event shall
        a
        Holder be required to contribute any amount or make any other payments under
        this Agreement which in the aggregate exceed the net proceeds received by
        such
        Holder from the sale of Registrable Securities covered by such Registration
        Statement. No Person guilty of fraudulent misrepresentation (within the meaning
        of the Act) shall be entitled to contribution from any Person who was not
        guilty
        of such fraudulent misrepresentation. 

       

      
        
          
          

        

        
          
          

          
            

          

        

        
          
          

        

      

       

      5.7 (a) Each
        Holder agrees that, upon receipt of any notice from the Company of (i) the
        need
        for an amendment or supplement to the Registration Statement or the prospectus
        forming a part thereof, (ii) that the Board of Directors has determined in
        good
        faith that offers and sales pursuant to the prospectus forming part of the
        Registration Statement should not be made by reason of the presence of material
        undisclosed circumstances or developments with respect to which the disclosure
        that would be required in the Registration Statement would be premature or
        would
        have a Material Adverse Effect or (iii) in connection with a primary
        underwritten offering of equity securities of the Company, each Holder will
        forthwith discontinue disposition of Registrable Securities pursuant to the
        Registration Statement contemplated by Section 5.2 until its receipt of copies
        of the supplemented or amended prospectus from the Company or confirmation
        of
        the filing of such report with the SEC by the Company, any such prospectus
        to be
        forwarded promptly to the Holder by the Company, and, if so directed by the
        Company, each Holder shall deliver to the Company all copies, other than
        permanent file copies then in such Holder’s possession, of the prospectus
        covering such Registrable Securities current at the time of receipt of such
        notice; provided,
        that
        the Company, may suspend the disposition of Registrable Securities pursuant
        to
        the Registration Statement pursuant to clause (ii) above not more than one
        time
        (not to exceed 30 days) during any three month period, nor more than two
        times
        (not to exceed 30 days each) in any twelve-month period. 

       

      (b) As
        a
        condition to the inclusion of its Registrable Securities, each Holder shall
        furnish to the Company such information regarding such Holder and the
        distribution proposed by such Holder as the Company may reasonably request
        in
        writing or as shall be required in connection with any registration,
        qualification or compliance referred to in this Article 6, including the
        information required by the Registration Questionnaire attached hereto as
        Appendix
        A.

      

      (c) Each
        Holder hereby covenants with the Company not to make any sale of the Registrable
        Securities without effectively causing the prospectus delivery requirements
        under the Act to be satisfied.

      

      
        
          
          

        

        
          
          

          
            

          

        

        
          
          

        

      

      (d) Each
        Holder acknowledges and agrees that the Registrable Securities sold pursuant
        to
        the Registration Statement described in this Section are not transferable
        on the
        books of the Company unless the stock certificate submitted to the transfer
        agent evidencing such Registrable Securities is accompanied by a certificate
        reasonably satisfactory to the Company to the effect that (i) the
        Registrable Securities have been sold in accordance with such Registration
        Statement and (ii) the requirement of delivering a current prospectus
        has
        been satisfied.

      

      (e) Each
        Holder agrees not to take any action with respect to any distribution deemed
        to
        be made pursuant to such registration statement which would constitute a
        violation of Regulation M under the Exchange Act or any other applicable
        rule,
        regulation or law. 

      

      (f) At
        the
        end of the period during which the Company is obligated to keep the Registration
        Statement current and effective as described above, the Holders of Registrable
        Securities included in the Registration Statement shall discontinue sales
        of
        shares pursuant to such Registration Statement upon receipt of notice from
        the
        Company of its intention to remove from registration the shares covered by
        such
        Registration Statement which remain unsold, and such Holders shall notify
        the
        Company of the number of shares registered which remain unsold immediately
        upon
        receipt of such notice from the Company.

      

      5.8 With
        a
        view to making available to the Holders the benefits of certain rules and
        regulations of the SEC that at any time permit the sale of the Registrable
        Securities to the public without registration, the Company shall use
        commercially reasonable efforts to:

      

      (a) make
        and
        keep public information available, as those terms are understood and defined
        in
        Rule 144 under the Act, at all times;

      

      (b) file
        with
        the SEC in a timely manner all reports and other documents required of the
        Company under the Exchange Act; and 

      

      (c) so
        long
        as a Holder owns any unregistered Registrable Securities, furnish to such
        Holder, upon any reasonable request, a written statement by the Company as
        to
        its compliance with Rule 144 under the Act, and of the Exchange Act,
        a copy
        of the most recent annual or quarterly report of the Company, and such other
        reports and documents of the Company as such Holder may reasonably request
        in
        availing itself of any rule or regulation of the SEC allowing a Holder to
        sell
        any such securities without registration.

      

      5.9 The
        right
        to cause the Company to register Registrable Securities granted to the Holders
        by the Company under Section 5.2 may be assigned in full by a Holder
        in
        connection with a transfer by such Holder of its Registrable Securities,
        but
        only if: (i) such transfer may otherwise be effected in accordance with
        applicable securities laws; (ii) such Holder gives prior written notice of
        the
        proposed transfer to the Company including the name and address of such
        transferee and a copy of the transfer documents and agreements; (iii) such
        transferee agrees in writing with the Company to be bound by and comply with
        the
        terms and provisions of this Agreement; (iv) the transferee is an “accredited
        investor” as that term is defined in Rule 501 of Regulation D; and (v) such
        transfer is otherwise in compliance with this Agreement. Except as specifically
        permitted by this Section 5.9, the rights of a Holder with respect to
        Registrable Securities as set out herein shall not be transferable to any
        other
        Person, the Company may impose stop transfer orders with respect to any such
        transfer or attempted transfer, and any such transfer or attempted transfer
        shall be null and void. 

      

      
        
          
          

        

        
          
          

          
            

          

        

        
          
          

        

      

      5.10 The
        Company shall use best efforts to cause all Registrable Securities covered
        by a
        Registration Statement to be listed on each securities exchange, interdealer
        quotation system or other market on which similar securities issued by the
        Company are then listed.

      

      5.11 With
        the
        written consent of the Company and the Holders holding at least a majority
        of
        the Registrable Securities that are then outstanding, any provision of this
        Article 6 may be waived (either generally or in a particular instance, either
        retroactively or prospectively and either for a specified period of time
        or
        indefinitely) or amended. Upon the effectuation of each such waiver or
        amendment, the Company shall promptly give written notice thereof to the
        Holders, if any, who have not previously received notice thereof or consented
        thereto in writing.

      

      6.      MISCELLANEOUS.

      

      6.1 The
        Company reserves the right to reject the subscription made hereby in whole
        or in
        part its sole discretion. Unless terminated earlier in the Placement Agent’s or
        the Company’s sole discretion, the Offering will expire on July 31, 2005, (as
        such date may be extended by agreement of the Placement and the Company in
        their
        sole discretion without notice to the Subscribers for an additional 60 days
        (the
“Termination Date”), if the conditions to closing set forth in Article 4 have
        not been satisfied or waived by such time.

      

      6.2 The
        Company’s agreement with each Subscriber is a separate agreement and each sale
        of the Units to each Subscriber is a separate sale.

      

      6.3 All
        notices, requests and other communications under this Agreement shall be
        in
        writing, and shall be sufficiently given if delivered to the addressees in
        person or by recognized overnight courier, mailed by certified or registered
        mail, return receipt requested, or by facsimile or e-mail transmission, as
        follows: 

      

      If
        to the
        Company: Manhattan
        Pharmaceuticals, Inc.

       
        810
        Seventh Avenue

       
        New
        York, New York 10019

       
        Facsimile:
        (212) 582 3950

               Attn:
        Chief Executive Officer

               Email:
        dabel@manhattanpharma.com

       

      With
        a
        copy to: Maslon
        Edelman Borman & Brand, LLP

                  
        3300 Wells Fargo Center

                  
        90 South 7th Street

                  
        Minneapolis, MN  55402

                  
        Facsimile: (612) 672-8343

                          
        Attn: Christopher J. Melsha, Esq.

                          
        Email: chris.melsha@maslon.com

      

      
        
          
          

        

        
          
          

          
            

          

        

        
          
          

        

      

      If
        to a
        Subscriber, at such address as such Subscriber shall have provided in writing
        to
        the Company or such other addresses as such Subscriber furnishes by notice
        given
        in accordance with this Section 7.1 or such other address as may be designated
        in writing hereafter, in the same manner, by such Person. 

      

      6.4 Except
        as
        provided in Section 5.11 above, this Agreement shall not be changed, modified
        or
        amended except by a writing signed by the parties to be charged, and this
        Agreement may not be discharged except by performance in accordance with
        its
        terms or by a writing signed by the party to be charged.

      

      6.5 Subject
        to the provisions of Section 5.9, this Agreement shall be binding upon and
        inure
        to the benefit of the parties hereto and to their respective heirs, legal
        representatives, successors and assigns. This Agreement sets forth the entire
        agreement and understanding between the parties as to the subject matter
        hereof
        and merges and supersedes all prior discussions, agreements and understandings
        of any and every nature among them.

      

      6.6 Upon
        the
        execution and delivery of this Agreement by the Subscriber, this Agreement
        shall
        become a binding obligation of the Subscriber with respect to the purchase
        of
        the Units as herein provided; subject, however, to the right hereby reserved
        to
        the Company to reject this subscription in accordance with Section 2.16,
        enter
        into the same agreements with other subscribers and to add and/or delete
        other
        Persons as subscribers. 

      

      6.7 Notwithstanding
        the place where this Agreement may be executed by any of the parties hereto,
        the
        parties expressly agree that all the terms and provisions hereof shall be
        construed in accordance with and governed by the laws of the State of New
        York
        without regard to principles of conflicts of law.

      

      6.8 The
        holding of any provision of this Agreement to be invalid or unenforceable
        by a
        court of competent jurisdiction shall not affect any other provision of this
        Agreement, which shall remain in full force and effect. If any provision
        of this
        Agreement shall be declared by a court of competent jurisdiction to be invalid,
        illegal or incapable of being enforced in whole or in part, such provision
        shall
        be interpreted so as to remain enforceable to the maximum extent permissible
        consistent with applicable law and the remaining conditions and provisions
        or
        portions thereof shall nevertheless remain in full force and effect and
        enforceable to the extent they are valid, legal and enforceable, and no
        provisions shall be deemed dependent upon any other covenant or provision
        unless
        so expressed herein.

      

      6.9 It
        is
        agreed that a waiver by either party of a breach of any provision of this
        Agreement shall not operate, or be construed, as a waiver of any subsequent
        breach by that same party.

      

      6.10 The
        parties agree to execute and deliver all such further documents, agreements
        and
        instruments and take such other and further action as may be necessary or
        appropriate to carry out the purposes and intent of this Agreement.

      

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

      

      6.12 (a) The
        Subscriber agrees not to issue any public statement with respect to the
        Subscriber’s investment or proposed investment in the Company or the terms of
        any agreement or covenant between them and the Company without the Company’s
        prior written consent, except such disclosures as may be required under
        applicable law or under any applicable order, rule or regulation.

      

      
        
          
          

        

        
          
          

          
            

          

        

        
          
          

        

      

      (b) The
        Company agrees not to disclose the names, addresses or any other information
        about the Subscriber, except as required by law or court order and to satisfy
        its obligations under Article 5.

      

      6.13 The
        Subscriber represents and warrants that it has not engaged, consented to
        nor
        authorized any broker, finder or intermediary to act on its behalf, directly
        or
        indirectly, as a broker, finder or intermediary in connection with the
        transactions contemplated by this Agreement (other than the Placement Agent).
        The Subscriber hereby agrees to indemnify and hold harmless the Company from
        and
        against all fees, commissions or other payments owing to any such Person
        (other
        than the Placement Agent) acting on behalf of the Subscriber
        hereunder.

       

      6.14 This
        Agreement (including all exhibits, schedules and amendments hereto) (i)
        constitutes the entire Agreement and understandings of the parties hereto
        and
        supersedes all prior agreements and understandings, both written and oral,
        between the parties hereto with respect to the subject matter hereof and
        (ii) is
        not intended to confer upon any other Person other than the parties hereto
        any
        rights or remedies hereunder (except for the holders of Registrable Securities
        as set forth in Article 6).

      

      

      

      [REMAINDER
        OF PAGE LEFT BLANK - ARTICLE 7 FOLLOWS]

      

      
        
          
          

        

        
          
          

          
            

          

        

        
          
          

        

      

      7. CONFIDENTIAL
        INVESTOR QUESTIONNAIRE.

      

      7.1 The
        Subscriber represents and warrants that he, she or it comes within one category
        marked below, and that for any category marked, he, she or it has truthfully
        set
        forth, where applicable, the factual basis or reason the Subscriber comes
        within
        that category. ALL INFORMATION IN RESPONSE TO THIS SECTION WILL BE KEPT STRICTLY
        CONFIDENTIAL except as otherwise required by law or as necessary for inclusion
        in the Registration Statement. The undersigned agrees to furnish any additional
        information which the Company deems necessary in order to verify the answers
        set
        forth below.

      
        

          
            
              	
                      Category
                        A_ 

                    	
                      The
                        undersigned is an individual (not a partnership, corporation,
                        etc.) whose
                        individual net worth, or joint net worth with his or her
                        spouse, presently
                        exceeds $1,000,000.

                    	 
	 	 	 
	 	
                      Explanation:
                        In calculating net worth you may include equity in personal
                        property and
                        real estate, including your principal residence, cash, short-term
                        investments, stock and securities. Equity in personal property
                        and real
                        estate should be based on the fair market value of such property
                        less debt
                        secured by such property.

                    	 
	 	 	 
	
                      Category
                        B_

                    	
                      The
                        undersigned is an individual (not a partnership, corporation,
                        etc.) who
                        had an income in excess of $200,000 in each of the two most
                        recent years,
                        or joint income with his or her spouse in excess of $300,000
                        in each of
                        those years (in each case including foreign income, tax exempt
                        income and
                        full amount of capital gains and losses but excluding any
                        income of other
                        family members and any unrealized capital appreciation) and
                        has a
                        reasonable expectation of reaching the same income level
                        in the current
                        year.

                    	 
	 	 	 
	
                      Category
                        C_

                    	
                      The
                        undersigned is a director or executive officer of the Company
                        which is
                        issuing and selling the Securities.

                    	 
	 	 	 
	
                      Category
                        D_

                    	
                      The
                        undersigned is a bank; a savings and loan association; insurance
                        company;
                        registered investment company; registered business development
                        company;
                        licensed small business investment company (“SBIC”); or employee benefit
                        plan within the meaning of Title 1 of ERISA and (a) the investment
                        decision is made by a plan fiduciary which is either a bank,
                        savings and
                        loan association, insurance company or registered investment
                        advisor, or
                        (b) the plan has total assets in excess of $5,000,000 or
                        (c) is a self
                        directed plan with investment decisions made solely by persons
                        that are
                        accredited investors. (describe entity)

                    	 
	 	 	 
	
                      Category
                        E_

                    	
                      The
                        undersigned is a private business development company as
                        defined in
                        section 202(a)(22) of the Investment Advisors Act of 1940.
                        (describe
                        entity) 

                    	 
	 	 	 
	 	 	 
	 	 	 
	
                      Category
                        F  

                    	
                      The
                        undersigned is either a corporation, partnership, Massachusetts
                        business
                        trust, or non-profit organization within the meaning of Section
                        501(c)(3)
                        of the Internal Revenue Code, in each case not formed for
                        the specific
                        purpose of acquiring the Securities and with total assets
                        in excess of
                        $5,000,000.(describe entity)

                    	 
	 	 	 
	 	 	 
	 	 	 

            

             

            
              
                
                

              

              
                
                

                
                  

                

              

              
                
                

              

            

            
              	
                      Category
                        G  

                    	
                      The
                        undersigned is a trust with total assets in excess of $5,000,000,
                        not
                        formed for the specific purpose of acquiring the Securities,
                        where the
                        purchase is directed by a “sophisticated investor“ as defined in
                        Regulation 506(b)(2)(ii) under the Act.

                    	 
	 	 	 
	
                      Category
                        H  

                    	
                      The
                        undersigned is an entity (other than a trust) in which all
                        of the equity
                        owners are “accredited investors” within one or more of the above
                        categories. If relying upon this Category alone, each equity
                        owner must
                        complete a separate copy of this Agreement. (describe
                        entity)

                    	 
	 	 	 
	 	 	 
	
                      Category
                        I  

                    	
                      The
                        undersigned is not within any of the categories above and
                        is therefore not
                        an accredited investor.

                    	 

            

          

        

The
        undersigned agrees that the undersigned will notify the Company at any time
        on
        or prior to the Closing Date in the event that the representations and
        warranties in this Agreement shall cease to be true, accurate and
        complete.

      

      7.2 SUITABILITY
        (please
        answer each question)

      

      (a)
        For
        an individual Subscriber, please describe your current employment, including
        the
        company by which you are employed and its principal business:

      ________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________

       

      (b)
        For
        an individual Subscriber, please describe any college or graduate degrees
        held
        by you:

      __________________________________________________________________________________________________________________________________________________________________________________________________________________________________________

      

      

      (c)
        For
        all Subscribers, please state whether you have you participated in other
        private
        placements
        before:

      

      YES_______   NO_______

      

      (d)
        If
        your answer to question (d) above was “YES”, please indicate frequency of such
        prior participation in private
        placements
        of:

          

       
        Public          
Private       Public
        or
        Private

       Companies   Companies    
         Biopharmaceutical
        Companies

      Frequently        -             
        -                            
        -

      Occasionally           
        -              -                    
        -

      Never          

       

      (e)
        For
        individual Subscribers, do you expect your current level of income to
        significantly decrease in the foreseeable future:

      

      YES_______   NO_______

      

      (f)
        For
        trust, corporate, partnership and other institutional Subscribers, do you
        expect
        your total assets to significantly decrease in the foreseeable future:

      

      YES_______   NO_______

      

      (g)
        For
        all Subscribers, do you have any other investments or contingent liabilities
        which you reasonably anticipate could cause you to need sudden cash requirements
        in excess of cash readily available to you: 

      

      YES_______   NO_______

      

      (h)
        For
        all Subscribers, are you familiar with the risk aspects and the non-liquidity
        of
        investments such as the securities for which you seek to subscribe?

      

      YES_______   NO_______

      

      (h)  For
        all
        Subscribers, do you understand that there is no guarantee of financial return
        on
        this investment, that an investment in the Securities is highly speculative
        and
        risky and that you run the risk of losing your entire investment?

      

      (i)  For
        all
        Subscribers, will you have sufficient readily available cash to fund your
        obligation to purchase Securities at the Closing pursuant to your subscription
        if and when the Closing occurs?

      

      YES_______   NO_______

      

      7.3 MANNER
        IN WHICH TITLE IS TO BE HELD.
        (circle
        one)

      

      (a) Individual
        Ownership

      (b) Community
        Property

      (c) Joint
        Tenant with Right of 

                           
        Survivorship (both parties must
        sign)

      (d) Partnership*

      (e) Tenants
        in Common

      (f) Company*

      (g) Trust*

      (h) Other

      

      
        
          
          

        

        
          
          

          
            

          

        

        
          
          

        

      

      *If
        Securities are being subscribed for by an entity, the attached Certificate
        of
        Signatory must also be completed.

      

      7.4 NASD
        AFFILIATION.

      

      Are
        you
        affiliated or associated with an NASD member firm (please check
        one):

      

      Yes
        _________  No
        __________

      

      If
        Yes,
        please describe:

      _________________________________________________________

      _________________________________________________________

      _________________________________________________________

      

      *If
        Subscriber is a Registered Representative with an NASD member firm, have
        the
        following acknowledgment signed by the appropriate party:

      

      The
        undersigned NASD member firm acknowledges receipt of the notice required
        by
        Article 3, Sections 28(a) and (b) of the Rules of Fair Practice.

      

      _________________________________

      Name
        of
        NASD Member Firm

      

      By:
        ______________________________

      Authorized
        Officer

      

      Date:
        ____________________________

      

      7.5 The
        undersigned is informed of the significance to the Company of the foregoing
        representations and answers contained in the Confidential Investor Questionnaire
        contained in this Section 7 and such answers have been provided under the
        assumption that the Company will rely on them.

      

      

      Signature: __________________________________

      

      __________________________________

      (If
        purchased jointly)

      

      Print:  __________________________________

      

      __________________________________

      (If
        purchased jointly)

      

      Date:  __________________________________

       

      [REMAINDER
        OF PAGE INTENTIONALLY LEFT BLANK SIGNATURE
        PAGE TO FOLLOW]

      

      
        
          
          

        

        
          
          

          
            

          

        

        
          
          

          
          

        

      

      [Signature
        Page]

      

      $_____________________
        / Unit Price = ______________________ 

      Aggregate
        Purchase Price    Units
        Purchased

       

      _______________________       
        ______________________

      Signature     Signature
        (if purchasing jointly)

      _______________________       
        ______________________

      Name
        Typed or
        Printed                         Name
        Typed or Printed

       

      
        _______________________       
          ______________________

      

      Entity
        Name        Entity
        Name

       

      
        _______________________       
          ______________________

      

      Address          Address

       

      _______________________       
        ______________________

      City,
        State and Zip Code   City,
        State and Zip Code

       

      _______________________       
        ______________________

      Telephone-Business    Telephone--Business

       

      _______________________       
        ______________________

      Telephone-Residence    Telephone--Residence

       

      _______________________       
        ______________________

      Facsimile-Business    Facsimile--Business

       

      _______________________       
        ______________________
Facsimile-Residence    Facsimile—Residence

       

      _______________________       
        ______________________

      Email
        Address      
Email
        Address

       

      _______________________       
        ______________________

      Tax
        ID #
        or Social Security #   
Tax
        ID #
        or Social Security # 

      

      Name
        in
        which securities should be issued:      

      

      Dated:     
        ,
        2005

      

      INVESTORS:
         PLEASE
        COMPLETE THE REGISTRATION QUESTIONNAIRE ATTACHED HERETO AS APPENDIX
        A.

      

      This
        Subscription Agreement is agreed to and accepted by the Company as of
        _____________, 2005.  

      

      MANHATTAN
        PHARMACEUTICALS, INC.

      

      

      By:____________________________________

             
        Name:  
        Doug
        Abel 

      Title:
         President
        and Chief Executive OfficerEXHIBIT 10.1

                                   Dtomi, Inc.
                          601 Union Street, Suite 4500
                            Seattle, Washington 98101

                                 August 25, 2005

David M. Otto
The Otto Law Group, PLLC
601 Union Street, Suite 4500
Seattle, Washington 98101

      Re:  Amendment to Engagement Agreement for Payment of Fees

Dear David:

      This letter agreement memorializes the agreement by and among Dtomi, Inc.,
a Nevada corporation (the "Company"), The Otto Law Group, PLLC ("OLG"), and
David M. Otto ("Otto"), to amend that certain engagement agreement dated October
21, 2001 by and between OLG the Company (the "OLG Engagement Agreement").

      Not later than the fifth day of September 2005, and not later than the
fifth day of each calendar month thereafter, if Otto holds less than 4.9% of the
issued and outstanding shares of common stock of the Company or less than 4.9%
of other equity securities of the Company, the Company shall issue to Otto that
number of shares of common stock and other equity securities of the Company, if
any, so that Otto shall hold that number of shares of common stock of the
Company equal to four-and-nine-tenths percent (4.9%) of the issued and
outstanding shares of common stock and four-and-nine-tenths percent (4.9%) of
any other issued and outstanding equity securities, if any, of the Company, at
the time of such issuance. Not later than 30 days after each such issuance,
Dtomi shall register such shares under Section 5 of the Securities Act of 1933,
as amended (the "Securities Act"), on Form S-8, and if necessary, also register
such shares for resale under a reoffer prospectus on Form S-8 or other
registration statement.

      OLG shall to credit the Company, against future fees owed by the Company
to OLG pursuant to the OLG Engagement Agreement, the proceeds of the sale of any
of shares of common stock issued pursuant to this letter agreement. Prior to any
annual audit or quarterly review of the Company by the Company's independent
registered public accounting firm or other auditors, but at periods not
exceeding three months beginning on the date of this letter, OLG shall disclose
to the Company the amount of proceeds resulting from the sale of any or all of
the Shares and statements from OLG and/or OLG's broker disclosing the proceeds
resulting from the sale of Shares.
<PAGE>

The Otto Law Group, PLLC
August 25, 2005
Page 2

      If you agree to the terms and conditions of this letter agreement, please
indicate your agreement by signing in the OLG signature block, and the Otto
signature block, below and returning an original, signed version of this letter
to me.

      I understand that OLG and Otto have agreed to the arrangement described in
this letter, and that you are the sole holder of securities of OLG and the
natural person that has performed, and will perform, substantially all of the
services provided by OLG on behalf of the Company pursuant to the OLG Engagement
Agreement.

                                    Sincerely,

                                    Robert Koch
                                    Director

AGREED AND ACCEPTED:

THE OTTO LAW GROUP, PLLC

By:  _______________________________            Dated:  August 25, 2005
        Name:  David M. Otto
        Title:  President

By:  _______________________________            Dated:  August 25, 2005
        David M. Otto, individually

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