Document:

Unassociated Document

     

    Exhibit
10.6

     

     

    SUBSCRIPTION
AGREEMENT

     

    SUBSCRIPTION
AGREEMENT (“Agreement”) made as of this _____ day of ___________, 2008, by and
among VeruTEK Technologies, Inc., a Nevada corporation (the “Company”), and the
undersigned subscriber of securities of the Company (the
“Subscriber”).

     

    WHEREAS,
the Company intends to obtain subscriptions for the purchase and sale, in a
private placement transaction (the “Offering”) pursuant to Regulation D
promulgated under the Securities Act of 1933, as amended (the “Act”), of Units
(the “Units”) each consisting of two (2) shares of common stock of the
Company, par value $.001 per share (the “Common Stock”), and a warrant to
purchase one (1) share of Common Stock (a “Warrant”) at an exercise price of
$1.30 per share (the “Warrants” and the Common Stock issuable upon the exercise
of the Warrants are referred to herein as  the “Warrant Shares”), on
the terms and conditions hereinafter set forth, and the Subscriber desires to
acquire that number of Units set forth on the signature page hereof. The Units,
the Common Stock, the Warrants and the Warrant Shares are sometimes individually
and collectively referred to herein as “Securities.”

    

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

     

    1. Subscription
Procedure

     

    
      	
              1.1  

            	
              Subject
      to the terms and conditions hereinafter set forth, the Subscriber hereby
      subscribes for and agrees to purchase from the Company such number of
      Units as is set forth upon the signature page hereof at a price of $2.20
      per Unit (the “Purchase Price”).  Subject to the terms and
      conditions hereinafter set forth, the Company agrees to sell such Units to
      the Subscriber for the Purchase
Price.

            

    

     

    
      	
              1.2  

            	
              The
      subscription period will begin as of April 18, 2008, and will terminate at
      5:00 PM Eastern Daylight Time on May 16, 2008, unless terminated earlier
      or extended by the Company (the “Termination Date”).  The
      minimum dollar amount of Units that may be purchased by the Subscriber is
      $25,000 unless the Company elects to waive the requirement.  The
      consummation of the subscription contemplated hereby, in whole or in part,
      is subject to the satisfaction of the closing conditions set forth in
      Section 5 of this Agreement.

            

    

     

    
      	
              1.3  

            	
              The
      Purchase Price will be held by Mintz, Levin, Cohn, Ferris, Glovsky and
      Popeo, P.C., counsel to the Company, as escrow agent (“Mintz Levin”), in a
      non-interest bearing escrow account until the closing of the purchase of
      the Units in the Offering pursuant to this Agreement (the “Subscription
      Closing”).  There may be multiple closings and amounts held in
      escrow at the time of any closing may be released at such closing;
      provided that the initial closing shall not occur until there are at least
      $5,000,000 of subscriptions in the aggregate being held by Mintz Levin
      (the “Initial Closing”).

            

    

     

    
      	
              1.4  

            	
              The
      certificates for the Common Stock together with the accompanying Warrants
      bearing the name of the Subscriber will be delivered by the Company no
      later than twenty (20) business days following the final closing date of
      the Offering.  The Subscriber hereby authorizes and directs the
      Company to deliver the securities to be issued to the Subscriber pursuant
      to this Agreement to the residential or business address indicated in the
      Investor Questionnaire (as defined
below).

            

    

     

    
      	
              1.5  

            	
              A
      copy of this Agreement, once executed by the Subscriber, should be faxed
      to (and the original sent by overnight courier
  to):

            

    

     

    
      
         

      

      
        1

        
          

        

      

      
         

      

    

    

    Mike
Vagnini

    Chief
Financial Officer

    VeruTEK
Technologies, Inc.

    65 West
Dudley Town Road, Suite 100

    Bloomfield,
CT  06002

    Fax:  (860)
242-9899

    

    
      	
              1.6  

            	
              The
      Purchase Price for the Units purchased hereunder shall be paid by
      certified check, payable to Mintz Levin, Cohn, Ferris, Glovsky and Popeo,
      P.C, or by wire transfer to the Mintz Levin client funds account pursuant
      to the following instructions:

            

    

     

    All
wire transfers should also be accompanied by a facsimile notification of the
wire to the attention of Mike Vagnini at (860) 242-9899.

     

    

    1.7           The
Company may, in its sole discretion, reject any subscription, in whole or in
part, or terminate or withdraw the Offering in its entirety at any time prior to
a closing in relation thereto.  The Company shall not be required to
allocate among investors on a pro rata basis in the event of an
over-subscription.

     

     

    2. Representations and
Covenants of Subscriber.

     

    
      	
              2.1  

            	
              The
      Subscriber recognizes that the purchase of Units involves a high degree of
      risk in that (i) the Company will need additional capital but has no
      assurance of additional necessary capital; (ii) 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; (iii) an investor may not be able to liquidate his or her
      investment; (iv) transferability of the securities comprising the
      Units is extremely limited; (v) an investor could sustain the loss of
      his or her entire investment; and (vi) the Company is and will be
      subject to numerous other risks and uncertainties, including without
      limitation, significant and material risks relating to the Company’s
      business, and the industries and markets in which the Company will
      compete, as well as risks associated with the Offering, and the other
      transactions contemplated herein, in the Offering Memorandum dated
      February 16, 2008 and any supplements thereto (including all exhibits,
      schedules and attachments thereto, the “Offering Memorandum”), all as more
      fully set forth herein and in the Offering
      Memorandum.  

            

    

     

    
      	
              2.2  

            	
              The
      Subscriber represents that he or she is an “accredited investor” as such
      term is defined in Rule 501 of Regulation D promulgated under the Act, as
      indicated by his or her responses to the Investor Questionnaire (the
      “Investor Questionnaire”), the form of which is attached hereto as Exhibit A,
      and that he or she is able to bear the economic risk of an investment in
      the Units.  The Subscriber must complete the Investor
      Questionnaire to enable the Company to assess the Subscriber’s eligibility
      for the Offering.

            

    

     

    
      	
              2.3  

            	
              The
      Subscriber acknowledges that he or she has prior investment experience,
      including without limitation, investment in non-listed and non-registered
      securities, and he or she has read all of the documents furnished or made
      available by the Company to him or her and evaluated the merits and risks
      of such an investment, and that he or she recognizes the highly
      speculative nature of this
investment.

            

    

     

    
      
         

      

      
        2

        
          

        

      

      
         

      

    

     

    
      	
              2.4  

            	
              The
      Subscriber acknowledges receipt and careful review of the Offering
      Memorandum, this Agreement, the Common Stock Purchase Warrant representing
      the Warrants and any other attachments hereto and thereto (collectively,
      the “Offering Documents”) and hereby represents that he or she has been
      furnished or given access by the Company during the course of this
      Offering with or to all information regarding the Company and its
      respective financial condition and results of operations which he or she
      had requested or desired to know; that all documents which were
      specifically requested by the Subscriber and could be reasonably provided
      have been made available for his or her inspection and review; that he or
      she has been afforded the opportunity to ask questions of and receive
      answers from duly authorized representatives of the Company concerning the
      terms and conditions of the Offering, and any additional information which
      he or she had requested.  The Subscriber further represents and
      acknowledges that the Subscriber has not seen or received any
      advertisement or general solicitation with respect to the sale of any of
      the securities of the Company, including, without limitation, the
      Units.

            

    

     

    
      	
              2.5  

            	
              The
      Subscriber acknowledges that this Offering of Units may involve tax
      consequences, and that the contents of the Offering Documents do not
      contain tax advice or information.  The Subscriber acknowledges
      that he or she must retain his or her own professional advisors to
      evaluate the tax and other consequences of an investment in the
      Units.

            

    

     

    
      	
              2.6  

            	
              The
      Subscriber acknowledges that this Offering of Units has not been reviewed
      or approved by the United States Securities and Exchange Commission
      (“SEC”) and that the Offering is intended to be a nonpublic offering
      pursuant to Section 4(2) of the Act.  The Subscriber represents
      that the Units are being purchased for his or her own account, for
      investment and not for distribution or resale to others.  The
      Subscriber agrees that he or she will not sell or otherwise transfer any
      of the securities comprising the Units unless they are registered under
      the Act and any applicable state “blue sky” securities laws or unless an
      exemption from such registration is available and, upon the Company’s
      request, the Company receives an opinion of counsel reasonably
      satisfactory, in all respects, to the Company confirming that an exemption
      from such registration is available for such sale or
    transfer.

            

    

     

    
      	
              2.7  

            	
              The
      Subscriber understands that the Units have not been registered under the
      Act by reason of a claimed exemption under the provisions of the Act which
      depends, in part, upon his or her investment intention.  The
      Subscriber realizes that, in the view of the SEC, a purchase now with the
      intention to distribute would represent a purchase with an intention
      inconsistent with his or her representation to the Company, and the SEC
      might regard such a distribution as a deferred sale to which such
      exemption is not available.

            

    

     

    
      	
              2.8  

            	
              The
      Subscriber understands that Rule 144 (the “Rule”) promulgated under the
      Act requires, among other conditions, a holding period prior to the resale
      of securities acquired in a non-public offering, such as the Offering,
      without having to satisfy the registration requirements under the
      Act.  The Subscriber consents that the Company may, in its sole
      discretion and if it desires, permit the transfer of the Common Stock
      included in the Units or issuable upon the exercise of the Warrants, in
      whole or in part, out of his or her name but only when his or her request
      for transfer is accompanied by an opinion of counsel reasonably
      satisfactory to the Company, in all respects, that neither the sale nor
      the proposed transfer results in a violation of the Act, any applicable
      state “blue sky” securities laws or any applicable securities laws of any
      other country, province or jurisdiction (collectively, “Securities
      Laws”).  The Subscriber agrees to hold the Company and its
      respective directors, officers and controlling persons and their
      respective heirs, representatives, successors and assigns harmless and to
      indemnify them against all liabilities, costs and expenses incurred by any
      of them as a result of any misrepresentation made by him or her contained
      herein or in the Investor
Questionnaire.

            

    

     

    
      	
              2.9  

            	
              The
      Subscriber consents to the placement of one or more legends on any
      certificate or other document evidencing his or her Units and the Common
      Stock or Warrants included in the Units or issuable upon the exercise of
      the Warrants stating that they have not been registered under the Act and
      are subject to the terms of this Agreement, and setting forth or referring
      to the restrictions on the transferability and sale
    thereof.

            

    

     

    
      
         

      

      
        3

        
          

        

      

      
         

      

    

     

    
      	
              2.10  

            	
              The
      Subscriber understands and acknowledges that the Company will review this
      Agreement and the Investor Questionnaire and the Company reserves the
      unrestricted right, in its sole discretion, to reject or limit any
      subscription and to close the Offering at any time or not close the
      Offering.

            

    

     

    
      	
              2.11  

            	
              The
      Subscriber hereby represents that the address of Subscriber furnished at
      the end of this Agreement and in the Investor Questionnaire is the
      undersigned's principal residence if he or she is an individual or its
      principal business address if it is a corporation or other
      entity.

            

    

     

    
      	
              2.12  

            	
              The
      Subscriber acknowledges that if the Subscriber is a Registered
      Representative of a the Financial Industry Regulatory Authority (“FINRA”)
      member firm, he or she must give such firm the notice required by the
      FINRA Conduct Rules, or any applicable successor rules of FINRA, receipt
      of which has been acknowledged by such firm on the signature page
      hereof.  The Subscriber shall also notify the Company if the
      Subscriber or any affiliate of Subscriber is a registered broker-dealer,
      in which case the Subscriber represents that the Subscriber is purchasing
      the Units in the ordinary course of business and, at the time of purchase
      of the Units, has no agreements or understandings, directly or indirectly,
      with any person to distribute the Units or any portion
      thereof.

            

    

     

    
      	
              2.13  

            	
              The
      Subscriber hereby represents that, except as set forth in the Offering
      Documents, no representations or warranties have been made to the
      Subscriber by the Company or its agents, employees or affiliates and in
      entering into this transaction, the Subscriber is not relying on any
      information, other than that contained in the Offering
      Documents.

            

    

     

    
      	
              2.14  

            	
              The
      Subscriber agrees that he or she will purchase securities in the Offering
      only if his or her intent at such time is to make such purchase for
      investment purposes and not with a view toward
  resale.

            

    

     

    
      	
              2.15  

            	
              If
      the undersigned Subscriber is a partnership, corporation, trust or other
      entity, such partnership, corporation, trust or other entity further
      represents and warrants that:  (i) it was not formed for
      the purpose of investing in the Company; (ii) it is authorized and
      otherwise duly qualified to purchase and hold the Units; and
      (iii) that this Agreement has been duly and validly authorized,
      executed and delivered and constitutes the legal, binding and enforceable
      obligation of the undersigned.

            

    

     

    
      	
              2.16  

            	
              If
      the Subscriber is not a United States person, such Subscriber hereby
      represents that it has satisfied itself as to the full observance of the
      laws of its jurisdiction in connection with any invitation to subscribe
      for the Units or any use of this Agreement, including (i) the legal
      requirements within its jurisdiction for the purchase of the Units, (ii)
      any foreign exchange restrictions applicable to such purchase, (iii) any
      governmental or other consents that may need to be obtained, and (iv) the
      income tax and other tax consequences, if any, that may be relevant to the
      purchase, holding, redemption, sale or transfer of the
      Units.  Such Subscriber's subscription and payment for, and his
      or her or her continued beneficial ownership of the Units and of the
      shares of Common Stock included therein or to be issued upon the exercise
      of the Warrants, will not violate any applicable securities or other laws
      of the Subscriber's jurisdiction.

            

    

     

    
      
         

      

      
        4

        
          

        

      

      
         

      

    

     

    
      	
              2.17  

            	
              The
      Subscriber acknowledges that (i) the Offering Memorandum may contain
      material, non-public information concerning the Company within the meaning
      of Regulation FD promulgated by the SEC, and (ii) the Subscriber is
      obtaining such material, non-public information solely for the purpose of
      considering whether to purchase the Units pursuant to a private placement
      that is exempt from registration under the Act.  In accordance
      with Regulation FD and other applicable provisions of the Securities Laws,
      the Subscriber agrees to use such information only for the purpose set
      forth above in the immediately preceding sentence and to keep such
      information confidential and not to disclose it to any other person or
      entity except the Subscriber’s legal counsel, other advisors and other
      representatives who have agreed (i) to keep such information
      confidential, (ii) to use such information only for the purpose set
      forth above, and (iii) to comply with applicable securities laws with
      respect to such information.  In addition, the Subscriber
      further acknowledges that the Subscriber and such legal counsel, other
      advisors and other representatives are prohibited from trading in the
      Company’s securities while in possession of material, non-public
      information and agrees to refrain from purchasing or selling securities of
      the Company until such material, non-public information has been publicly
      disseminated by the Company. 

            

    

     

    
      	
              2.18  

            	
              The
      Subscriber understands and acknowledges that (i) the Units are being
      offered and sold to Subscriber without registration under the Act in a
      private placement that is exempt from the registration provisions of the
      Act under Section 4(2) of the Act and (ii) the availability of such
      exemption depends in part on, and that the Company will rely upon the
      accuracy and truthfulness of, the foregoing representations, and such
      Subscriber hereby consents to such
reliance.

            

    

     

    
      	
              2.19  

            	
              Neither
      the Subscriber, nor any Person acting on behalf of or pursuant to any
      understanding with the Subscriber, has, directly or indirectly, engaged in
      any transaction in the securities of the Company (including, without
      limitation any Short Sales involving any of the Company’s securities)
      since the time that such Subscriber was first contacted by the Company, or
      any other Person regarding an investment in the Company.  Such
      Subscriber covenants that neither it nor any Person acting on its behalf
      or pursuant to any understanding with such Subscriber will engage,
      directly or indirectly, in any transaction in the securities of the
      Company (including Short Sales) prior to the time the transaction
      contemplated by this Agreement are publicly disclosed or while the
      Subscriber is in possession of any material non-pubic
      information.  “Short Sales” include, without limitation, all
      “short sales” as defined in Rule 200 promulgated under Regulation SHO
      under the Exchange Act (as defined below) and all types of direct and
      indirect stock pledges, forward sale contracts, options, puts, calls,
      short sales, swaps, derivatives and similar arrangements (including on a
      total return basis), and sales and other transactions through non-U.S.
      broker-dealers or foreign regulated
brokers.

            

    

     

    3. Representations by the
Company 

     

    Except as
set forth in the reports previously filed by the Company on or after
May 15, 2007 (the “SEC Reports”) pursuant to the Securities Exchange Act of
1934, as amended (the “Exchange Act”), or in the Offering Memorandum, the
Company represents and warrants to the Subscriber that:

     

    
      	
              3.1  

            	
              Organization and
      Authority.  The Company, and each of its respective
      subsidiaries, if any (i) is a corporation validly existing and in
      good standing under the laws of the jurisdiction of its incorporation, and
      (ii) has all requisite corporate power and authority to own, lease
      and operate its properties and to carry on its business as presently
      conducted, and the Company has all requisite corporate power and authority
      to execute, deliver and perform its obligations under this Agreement and
      the Offering Documents being executed and delivered by it in connection
      herewith, and to consummate the transactions contemplated hereby and
      thereby.

            

    

     

    
      	
              3.2  

            	
              Qualifications.  The
      Company, and each of its respective subsidiaries, if any, is duly
      qualified to do business as a foreign corporation and is in good standing
      in all jurisdictions where such qualification is necessary and where
      failure to so qualify could have a material adverse effect on the
      business, properties, operations, condition (financial or other), results
      of operations or prospects of the Company and its subsidiaries, taken as a
      whole or has the affect of preventing the Company from performing any of
      its duties or obligations under this Agreement (a “Material Adverse
      Effect”).

            

    

     

    
      	
              3.3  

            	
              Capitalization of the
      Company.  The Common Stock and the Warrants to be issued
      to the Subscriber have been duly authorized, and when issued and paid for
      in accordance with this Agreement, the Common Stock will be duly and
      validly issued, fully paid and non-assessable, and the Warrant Shares,
      when issued upon exercise of the Warrants in exchange for the payment in
      full of the exercise price for such Warrant Share therein specified, will
      be duly and validly issued, fully paid and
  non-assessable.

            

    

     

    
      
         

      

      
        5

        
          

        

      

      
         

      

    

     

    
      	
              3.4  

            	
              Corporate
      Authorization.  The Offering Documents have been duly and
      validly authorized by the Company. This Agreement, assuming due execution
      and delivery by the Subscriber, and the Warrants, when the Subscription
      Agreement and the Warrants are executed and delivered by the Company, will
      be, valid and binding obligations of the Company, enforceable in
      accordance with their respective terms, except as the enforceability
      hereof and thereof may be limited by bankruptcy, insolvency,
      reorganization, moratorium or other similar laws now or hereafter in
      effect relating to or affecting creditors’ rights generally and general
      principles of equity, regardless of whether enforcement is considered in a
      proceeding in equity or at law.

            

    

     

    
      	
              3.5  

            	
              Non-Contravention.  The
      execution and delivery of the Offering Documents by the Company, the
      issuance of the Units as contemplated by the Offering Documents, with or
      without the giving of notice or the lapse of time, or both, will not (i)
      result in any violation of any provision of the articles of incorporation
      or by-laws or similar instruments of the Company or its respective
      subsidiaries, if any, (ii) conflict with or result in a breach by the
      Company or its respective subsidiaries of any of the terms or provisions
      of, or constitute a default under, or result in the modification of, or
      result in the creation or imposition of any lien, security interest,
      charge or encumbrance upon any of the properties or assets of the Company
      or its respective subsidiaries (if any) pursuant to, any agreements,
      instruments or documents filed as exhibits to the SEC Reports or any
      indenture, mortgage, deed of trust or other agreement or instrument to
      which Company or any of its subsidiaries is a party or by which Company or
      any of its subsidiaries or any of its properties or assets are bound, in
      any such case which would have a Material Adverse Effect, except to the
      extent that such conflict, breach, default, modification, lien, security
      interest, charge or encumbrance has been consented to or approved by or on
      behalf of the other party or parties to such agreement, instrument,
      document, indenture, mortgage, deed of trust or other agreement or
      instrument prior to the consummation of the Offering, (iii) violate or
      contravene any applicable law, rule or regulation or any applicable
      decree, judgment or order of any court, United States federal or state
      regulatory body, administrative agency or other governmental body having
      jurisdiction over Company or any of its subsidiaries or any of its
      respective properties or assets that would have a Material Adverse Effect,
      (iv) have any material adverse effect on any permit, certification,
      registration, approval, consent, license or franchise necessary for the
      Company or its subsidiaries to own or lease and operate any of its
      properties and to conduct any of its business or the ability of the
      Company or its subsidiaries to make use thereof or (v) except for
      applicable requirements of federal securities laws and state securities or
      blue-sky laws, require filing with, or permit, authorization, consent or
      approval of, any third party, public body or authority, other than any
      filing, permit, authorization, consent or approval made or obtained prior
      to the consummation of the Offering, except those which the failure to so
      make or obtain would not have a Material Adverse
  Effect.

            

    

     

    
      	
              3.6  

            	
              Information
      Provided.  The Company hereby represents and warrants to
      the Subscriber that the information set forth in the Offering Memorandum,
      the SEC Reports and any other document provided by the Company (or the
      Company’s authorized representatives) to the Subscriber in connection with
      the transactions contemplated by this Agreement, did not (in each case as
      of the respective date thereof) contain any untrue statement of a material
      fact or omit to state any material fact necessary in order to make the
      statements therein, in the light of the circumstances under which they are
      made, not misleading. 

            

    

     

    
      	
              3.7  

            	
              Events
      Subsequent.  Since January 1, 2008, as to the
      Company, there has not been any of the following that have not been
      disclosed to the Subscriber or disclosed in the SEC
    Reports:

            

    

     

    (a)           Any
sale, lease, transfer, license or assignment of any assets, tangible or
intangible, of the Company, other than in the ordinary course of
business;

     

    (b)           Any
material damage, destruction or property loss, whether or not covered by
insurance, affecting adversely the properties or business of the
Company;

     

    
      
         

      

      
        6

        
          

        

      

      
         

      

    

     

    (c)           Any
declaration or setting aside or payment of any dividend or distribution with
respect to the shares of capital stock of the Company or any redemption,
purchase or other acquisition of any such shares;

     

    (d)           Any
subjection to any material lien on any of the assets, tangible or intangible, of
the Company, other than in the ordinary course of business;

     

    (e)           Any
incurrence of any material indebtedness by the Company;

     

    (f)           Any
waiver or release by the Company of any right of any material
value;

     

    (g)           Any
material increase in compensation or benefits paid to officers or directors of
the Company, other than in the ordinary course of business;

     

    (h)           Any
material change made or authorized in the articles of incorporation or bylaws of
the Company, except in the ordinary course of business;

     

    (i)           Any
loan to or other transaction with any officer, director or stockholder of the
Company giving rise to any material claim or right of the Company against any
such person or of such person against the Company; or

     

    (j)           Any
material adverse change in the condition (financial or otherwise) of the
respective properties, assets, liabilities or business of the Company;
or

     

                                   
(k)           any
agreement, written or otherwise, to take any of the foregoing
actions.

     

    
      	
              3.8  

            	
              Compliance with
      Law.  Neither the Company nor any of its respective
      subsidiaries is in violation of or has any liability under any statute,
      law, rule, regulation, ordinance, decision or order of any governmental
      agency or body or any court, domestic or foreign, except where such
      violation or liability would not individually or in the aggregate have a
      Material Adverse Effect and to the knowledge of the Company there is no
      pending investigation that would reasonably be expected to lead to such a
      claim.

            

    

     

    
      	
              3.9  

            	
              Consents.  The
      Company has all necessary consents, approvals, authorizations, orders,
      registrations, qualifications, licenses, filings and permits of, with and
      from all applicable judicial, regulatory and other legal or governmental
      agencies and bodies and all third parties, foreign and domestic
      (collectively, the “Consents”), to own, lease and operate their respective
      properties and conduct their respective businesses as are now being
      conducted and as disclosed in the Offering Memorandum, except where the
      failure to have any such Consent would not have a Material Adverse
      Effect.  Each such Consent is valid and in full force and
      effect, and the Company has not received written notice of any
      investigation or proceedings which results in or, if decided adversely to
      the Company, could reasonably be expected to result in, the revocation of,
      or imposition of a materially burdensome restriction on, any
      Consent.

            

    

     

    
      	
              3.10  

            	
              Questionable
      Payments.  Neither the Company, nor any of its respective
      employees, agents or representatives have, directly or indirectly, made
      any bribes, kickbacks, illegal payments or illegal political contributions
      using Company funds or made any payments from the Company's funds,
      respectively, to governmental officials for improper purposes or made any
      illegal payments from the Company's funds, respectively, to obtain or
      retain business.

            

    

     

    
      
         

      

      
        7

        
          

        

      

      
         

      

    

     

    
      	
              3.11  

            	
              Intellectual
      Property.  The Company does not have any knowledge of any
      claim that, or inquiry as to whether, any product or service of the
      Company infringes upon or involves, or has resulted in the infringement
      of, any trademarks, patents, copyrights or other proprietary rights of any
      other person, corporation or other entity; and no such proceedings have
      been instituted, are pending or, to the Company’s knowledge, are
      threatened against the Company.  The Company: (i) owns or
      possesses all rights to use and/or license, as the case may be, all
      material patents, including any associated patent applications,
      trademarks, including any service marks, trade names, or registrations or
      applications therefor, copyrights and other intellectual property
      (including trade secrets and other unpatented and/or unpatentable
      proprietary or confidential information, systems, formulae or procedures,
      “Intellectual Property”) necessary for the conduct of its business as
      being conducted and as described in the Offering Memorandum except where
      the failure to so own or possess would not have a Material Adverse Effect
      and (ii) does not believe that the conduct of its  business
      does or will conflict with, and has not received any notice of any claim
      of conflict with, any such right of others, which conflict would have a
      Material Adverse Effect.  All Intellectual Property developed by
      and belonging to Company (including, without limitation, that which is
      developed by contractors to Company which has not been patented) has been
      kept confidential using reasonable commercial efforts.  To
      Company’s knowledge, there is no infringement by third parties of any
      Intellectual Property owned by the Company.  There are no
      pending or, to Company’s knowledge, threatened actions, suits, proceedings
      or claims by others challenging Company’s rights in or to any Intellectual
      Property.

            

    

     

    
      	
              3.12  

            	
              Insurance.  Company
      maintains insurance in such amounts and covering such risks as are
      customary for similarly-sized companies engaged in similar businesses in
      similar industries, all of which insurance is in full force and
      effect.  There are no material claims by Company under any such
      policy or instrument as to which any insurance company is denying
      liability or defending under a reservation of rights
      clause.  Company reasonably believes that it will be able to
      renew its existing insurance as and when such coverage expires or will be
      able to obtain replacement insurance adequate for the conduct of its
      business.

            

    

     

    
      	
              3.13  

            	
              Legal
      Compliance.  To the knowledge of the Company, no claim
      has been filed against the Company alleging a violation of any applicable
      laws or regulations of foreign, federal, state and local governments and
      all agencies thereof.  The Company holds all of the material
      permits, licenses, certificates or other authorizations of foreign,
      federal, state or local governmental agencies required for its respective
      business as presently conducted.

            

    

     

    
      	
              3.14  

            	
              Listing and
      Maintenance Requirements.  The Company’s common stock is
      currently quoted on the OTC Bulletin Board.  The Company has
      not, since May 15, 2007, received any notice from the OTC Bulletin
      Board or FINRA or any trading market on which the Company’s common stock
      is or has been listed or quoted to the effect that the Company is not in
      compliance with the quoting, listing or maintenance requirements of the
      OTC Bulletin Board or such other trading market.  The Company is
      in compliance with all such quoting, listing and maintenance requirements
      in all material respects.

            

    

     

    
      	
              3.15  

            	
              No SEC or FINRA
      Inquiries.  Neither the Company nor, to the Company’s
      knowledge, any of its past or present officers or directors is the subject
      of any formal or informal inquiry or investigation by the SEC or
      FINRA.

            

    

     

    
      	
              3.16  

            	
              Disclosure.  The
      representations and warranties and statements of fact made by the Company
      in this Agreement are, as applicable, accurate, correct and complete and
      do not contain any untrue statement of a material fact or omit to state
      any material fact necessary in order to make the statements and
      information contained herein not false or misleading.  The
      Company is and, at all times up to and including consummation of the
      transactions contemplated by this Agreement, and after giving effect to
      application of the net proceeds of the Placement, will not be, subject to
      registration as an “investment company” under the Investment Company Act
      of 1940, as amended (the “1940 Act”), and is not and will not be an entity
      “controlled” by an “investment company” within the meaning of the 1940
      Act.  The Company will initially utilize the proceeds of the
      Offering in such a manner so as to cause Company not to be subject to the
      1940 Act, and will thereafter use its commercially reasonable efforts to
      avoid Company becoming subject to the 1940
Act.

            

    

     

    
      
        	
                3.17  

              	Anti-takeover Device.  Neither the Company nor
      any of its respective subsidiaries has any outstanding shareholder rights
      plan or “poison pill” or any similar arrangement.  There are no
      provisions of any anti-takeover or business combination statute applicable
      to the Company or its Articles of Incorporation or Bylaws which would
      preclude the issuance and sale of the Securities, the reservation for
      issuance of the Warrant Shares and the consummation by the Company of the
      other transactions contemplated by this Agreement or any of the other
      Offering Documents.

      

             

    

    
      
         

      

      
        8

        
          

        

      

      
         

      

    

    
       

      
        	
                3.18  

              	Securities Law
      Compliance.  Subject to the accuracy and completeness of the
      representations and warranties of the Subscriber contained in this
      Agreement, the Company has complied and will comply with all applicable
      federal and state securities laws in connection with the offer, issuance
      and sale of the Securities hereunder.  Neither the Company nor
      anyone acting on its behalf, directly or indirectly, will sell, offer to
      sell or solicit offers to buy any of the Securities or similar securities
      to, or solicit offers with respect thereto from, or enter into any
      negotiations relating thereto with, any person, or has taken or will take
      any action, in any such case so as to bring the issuance and sale of any
      of the Securities issuable in the Offering under the registration
      provisions of the Act and applicable state securities laws, and neither
      the Company nor, to the knowledge of the Company, any of its affiliates or
      any person acting on its or their behalf, has engaged in any form of
      general solicitation or general advertising (within the meaning of
      Regulation D under the Act) in connection with the offer or sale of any of
      the Securities

      

               

    

    4. Covnants

     

    The
Company covenants with the Subscriber as follows, which covenants are for the
benefit of the Subscriber and its, his or her permitted assignees.

     

    4.1           Securities
Compliance.  The Company shall notify the SEC in accordance
with its rules and regulations, of the transactions contemplated by any of
Offering Documents and shall take all other necessary action and proceedings as
may be required and permitted by applicable law, rule and regulation, for the
legal and valid issuance of the Securities to the Subscriber, or their
respective subsequent holders.

    

    4.2           Reporting
Requirements.  If the Company ceases to file its periodic
reports with the SEC, or if the SEC ceases making these periodic reports
available via the Internet without charge, then the Company shall, promptly
after filing with the SEC, furnish the following to the Subscriber so long as
the Subscriber shall be obligated hereunder to purchase the Securities or shall
beneficially own Securities:

    

    (a)           Quarterly
Reports filed with the SEC on Form 10-Q, if any;

    (b)           Annual
Reports filed with the SEC on Form 10-K, if any; and

    
      	
               
      

            	
              (c)

            	
              Copies
      of all notices, information and proxy statements in connection with any
      meetings, that are, in each case, provided to holders of shares of Common
      Stock, if any, contemporaneously with the delivery of such notices or
      information to such holders of Common
Stock.

            

    

    

    4.3           Other
Agreements.  The Company shall not enter into any agreement in
which the terms of such agreement would restrict or impair the right or ability
of the Company or any Subsidiary to perform in any material respect its
obligations under any Offering Documents.

    

    4.4           Use of
Proceeds.  The Company will use the net proceeds from the sale
of the Securities for the purposes set forth in the Offering Memorandum under
the section titled “Use of Proceeds.”

    

    4.5           Form
D.  The Company agrees to file a Form D with respect to the
Securities as required by Rule 506 under Regulation D.

    

    4.6           No Integrated
Offerings.  The Company shall not make any offers or sales of
any security (other than the Securities being offered or sold hereunder) under
circumstances that would require registration of the Securities being offered or
sold hereunder under the Act.

     

    
      
         

      

      
        9

        
          

        

      

      
         

      

    

     

    4.7           Pledge of
Securities.  The Company acknowledges and agrees that the
Securities may be pledged by the Subscriber in connection with a bona fide loan or
financing arrangement that is secured by the Common Stock.  The pledge
of Common Stock shall not be deemed to be a transfer, sale or assignment of the
Common Stock hereunder, and no Subscriber effecting a pledge of Common Stock
shall be required to provide the Company with any notice thereof or otherwise
make any delivery to the Company pursuant to this Agreement or the Warrants;
provided that the Subscriber and its pledgee shall be required to comply with
all of the provisions of this Agreement in order to effect a sale, transfer or
assignment of Common Stock to such pledgee.  At the Subscriber's
expense, the Company hereby agrees to execute and deliver such documentation as
a pledgee of the Common Stock may reasonably request in connection with a pledge
of the Common Stock to such pledgee by the Subscriber.

    

    4.8           Confidentiality.  The
Subscriber agrees that it will not disclose and it will cause its officers,
directors, employees, representatives, agents, and advisers not to disclose, any
Confidential Information (as hereinafter defined), at any time or in any manner,
provided that (i) any disclosure of such information may be made to which
the Company and Subscriber consent in writing; and (ii) such information may be
disclosed if so, and to the extent, required by law or regulatory authority;
provided, however, that prior to disclosure of information pursuant to
clause (ii) above, Subscriber shall notify the Company that Subscriber
intends to make such disclosure and, upon the Company’s request, Subscriber use
all requisite reasonable efforts to obtain assurances that confidential
treatment will be accorded to such information to the extent such assurances are
available.  “Confidential
Information” means information or knowledge obtained in any due diligence
or other investigation relating to the negotiation and execution of this
Agreement, information relating to the terms of the transactions contemplated
hereby and any information furnished by or on behalf of the Company or
identified as confidential in writing by the Company; provided, however, that
Confidential Information shall not include information or knowledge that
(a) becomes generally available to the public absent any breach of this
Section 4.10, (b) was available on a non-confidential basis to a party
prior to its disclosure pursuant to this Agreement, or (c) becomes
available on a non-confidential basis from a third party who is not bound to
keep such information confidential.

    

    5.           Closing
Conditions

     

    5.1           Conditions Precedent to the
Obligation of the Company to Close and to Sell the
Securities.  The obligation hereunder of the Company to close
and issue and sell the Securities to the Subscriber at the date of the
Subscription Closing (the “Subscription Closing Date”) is subject to the
satisfaction or waiver, at or before the Subscription Closing of the conditions
set forth below.  These conditions are for the Company's sole benefit
and may be waived by the Company at any time in its sole
discretion.

    

    (a)           Accuracy of the Subscriber’s
Representations and Warranties.  The representations and
warranties of the Subscriber shall be true and correct in all respects as of the
date when made and as of the Subscription Closing Date as though made at that
time, except for representations and warranties that are expressly made as of a
particular date, which shall be true and correct in all respects as of such
date.

    

    (b)           Performance by the
Subscriber.  The Subscriber shall have performed, satisfied and
complied in all material respects with all covenants, agreements and conditions
required by this Agreement to be performed, satisfied or complied with by the
Subscriber at or prior to the Subscription Closing Date.

     

    
      
         

      

      
        10

        
          

        

      

      
         

      

    

     

    (c)           No
Injunction.  No statute, rule, regulation, executive order,
decree, ruling or injunction shall have been enacted, entered, promulgated or
endorsed by any court or governmental authority of competent jurisdiction which
prohibits the consummation of any of the transactions contemplated by this
Agreement.

    

    (d)           No Proceedings or
Litigation.  No action, suit or proceeding before any
arbitrator or any governmental authority shall have been commenced, and no
investigation by any governmental authority shall have been threatened, against
the Company or any Subsidiary, or any of the officers, directors or affiliates
of the Company or any Subsidiary seeking to restrain, prevent or change the
transactions contemplated by this Agreement, or seeking damages in connection
with such transactions.

    

    (e)           Delivery of Purchase
Price.  The Subscriber shall have delivered to the Company the
purchase price for the Securities to be purchased by the
Subscriber.

    

    (f)           Delivery of this Agreement
and the Warrants.  This Agreement and the Warrants shall have
been duly executed and delivered by the Subscriber.

    

    (g)           Acceptance of
Subscription.  The subscription contemplated by this Agreement
shall have been accepted by the Company, in its sole discretion.

    

    5.2           Conditions Precedent to the
Obligation of the Subscriber to Close and to Purchase the
Securities.  The obligation hereunder of the Subscriber to
purchase the Securities and consummate the transactions contemplated by this
Agreement is subject to the satisfaction or waiver, at or before the
Subscription Closing Date, of each of the conditions set forth
below.  These conditions are for the Subscriber’s sole benefit and may
be waived by the Subscriber at any time in its sole discretion.

    

    (a)           Delivery of Company
Certificate.  The Company shall have delivered a certificate to
Mintz Levin, as escrow agent, certifying as to the following:

    

    (i)            Accuracy of the Company's
Representations and Warranties.  Each of the representations
and warranties of the Company in this Agreement is true and correct in all
respects as of the Subscription Closing Date, except for representations and
warranties that speak as of a particular date, which shall be true and correct
in all respects as of such date.

    

    (ii)            Performance by the
Company.  The Company has performed, satisfied and complied in
all material respects with all covenants, agreements and conditions required by
this Agreement to be performed, satisfied or complied with by the Company at or
prior to the Subscription Closing Date.

    

    (iii)            No Suspension,
Etc.  Trading in the Common Stock has not been suspended by the
SEC or the OTC Bulletin Board (except for any suspension of trading of limited
duration agreed to by the Company, which suspension shall be terminated prior to
the Subscription Closing Date), and, at any time prior to the Subscription
Closing Date, trading in securities generally as reported by Bloomberg Financial
Markets (“Bloomberg”) shall not
have been suspended or limited, or minimum prices shall not have been
established on securities whose trades are reported by Bloomberg, or on the New
York Stock Exchange, nor shall a banking moratorium have been declared either by
the United States or New York State authorities.

    

    (iv)            No
Injunction.  No statute, rule, regulation, executive order,
decree, ruling or injunction has been enacted, entered, promulgated or endorsed
by any court or governmental authority of competent jurisdiction which prohibits
the consummation of any of the transactions contemplated by this
Agreement.

     

    
      
         

      

      
        11

        
          

        

      

      
         

      

    

     

    (v)            No Proceedings or
Litigation.  No action, suit or proceeding before any
arbitrator or any governmental authority has been commenced, and no
investigation by any governmental authority has been threatened, against the
Company or any Subsidiary, or any of the officers, directors or affiliates of
the Company or any Subsidiary seeking to restrain, prevent or change the
transactions contemplated by this Agreement, or seeking damages in connection
with such transactions.

    

    (vi)            Material Adverse
Effect.  No Material Adverse Effect has occurred and is
continuing  between the date of this Agreement and the Subscription
Closing Date.

    

    (b)           Receipt of Minimum
Subscriptions.  For purposes of the Initial Closing, the escrow
agent shall have received at least an aggregate of $5,000,000 of subscription
funds, it being understood that such threshold amount and the satisfaction of
this Section 5.2(b) is not required for any subsequent closings

    

    6.           Miscellaneous.

     

    6.1           Any
notice or other communication given hereunder shall be deemed sufficient if in
writing and sent by registered or certified mail, return receipt requested,
addressed to the Company at VeruTEK Technologies, Inc., 65 West Dudley Town
Road, Suite 100, Bloomfield, CT  06002, Attention:  John
Collins, Chief Executive Officer, with a copy to (which shall not constitute
notice) Mintz, Levin, Cohn, Ferris, Glovsky and Popeo, P.C., One Financial
Center, Boston, MA 02111, Attention:  Sahir C. Surmeli, Esq., and to
the Subscriber at the address indicated on the signature page of this
Agreement.  Notices shall be deemed to have been given three (3)
business days after the date of mailing, except notices of change of address,
which shall be deemed to have been given when received.

    

    6.2           This
Agreement may be amended through a written instrument signed by the Subscriber
and the Company; provided, however, that the terms of Section 4 of this
Agreement may be amended without the consent or approval of the Subscriber so
long as such amendment applies in the same fashion to the subscription
agreements of all of the other subscribers for Units in the Offering and the
other terms of this Agreement may be amended without the consent or approval of
the Subscriber so long as such amendment applies in the same fashion to the
subscription agreements of all of the other subscribers for Units in the
Offering and at least holders of a majority of the Units sold in the Offering
have given their approval of such amendment, which approval shall be binding on
all holders of Units.

     

    6.3           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.  This Agreement may not be assigned by the
Subscriber without the prior written consent of the Company.

     

    6.4           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 Nevada
(without regard to the choice of law rules thereof).

     

    6.5           This
Agreement may be executed in counterparts.  Notwithstanding anything
in herein to the contrary, this Agreement shall not be binding upon the Company
unless and until it is accepted by the Company.  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 Units as
herein provided; subject, however, to the right hereby reserved to the Company
to enter into the same agreements with other subscribers and to add and/or to
delete other persons as subscribers.

     

    
      
         

      

      
        12

        
          

        

      

      
         

      

    

     

    6.6           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.

     

    6.7           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.

     

    6.8           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.

     

    6.9           The
Company and the Subscriber acknowledge and agree that irreparable damage would
occur in the event that any of the provisions of this Agreement or the other
Offering Documents are not performed in accordance with their specific terms or
are otherwise breached.  It is accordingly agreed that the parties
shall be entitled to an injunction or injunctions to prevent or cure breaches of
the provisions of this Agreement or the other Offering Documents and to enforce
specifically the terms and provisions hereof or thereof, this being in addition
to any other remedy to which any of them may be entitled by law or
equity.

     

    6.10           The
representations and warranties of the Company and the Subscriber shall survive
the execution and delivery hereof and the Subscription Closing until the second
anniversary of the Subscription Closing Date.

     

    6.11           As
the context requires, all terms used herein in the singular shall extend to and
include the plural, all terms used in the plural shall extend to and include the
singular, and all terms used in either gender or the neuter shall extend to the
other gender or be neutral.  All pronouns contained herein, and any
variations thereof, shall be deemed to refer to the masculine, feminine or
neutral, singular or plural, as the identity of the parties hereto may
require.  For purposes of this Agreement, the words “knowledge of the
Company,” “Company’s knowledge” and similar language shall mean the actual
knowledge of the executive officers of the Company.

     

    6.12           The
obligation of the Subscriber hereunder is several and not joint with the
obligations of any other subscribers for the purchase of Units in the Offering
(the “Other Subscribers”), and the Subscriber shall not be responsible in any
way for the performance of the obligations of any Other
Subscribers.  Nothing contained herein or in any other agreement or
document delivered at the Subscription Closing, and no action taken by the
Subscriber pursuant hereto, shall be deemed to constitute the Subscriber and the
Other Subscribers as a partnership, an association, a joint venture or any other
kind of entity, or create a presumption that the Subscriber and the Other
Subscribers are in any way acting in concert with respect to such obligations or
the transactions contemplated by this Agreement.  The Subscriber shall
be entitled to protect and enforce the Subscriber’s rights, including without
limitation the rights arising out of this Agreement, and it shall not be
necessary for any Other Subscriber to be joined as an additional party in any
proceeding for such purpose.  The language used in this Agreement will
be deemed to be the language chosen by the parties to express their mutual
intent, and no rules of strict construction will be applied against any
party.  The Subscriber is not acting as part of a “group” (as that
term is used in Section 13(d) of the 1934 Act) in negotiating and entering into
this Agreement or purchasing the Units or acquiring, disposing of or voting any
of the underlying Common Shares or the Warrant Shares.  The Company
hereby confirms that it understands and agrees that the Subscriber is not acting
as part of any such group.

     

    [SIGNATURE
PAGE FOLLOWS]

     

    
      
         

      

      
        13

        
          

        

      

      
         

      

    

     

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

     

    __________________________________                                                                                     ____________________________________

    Full
Legal Name of Subscriber (Please
print)                                                                                       Full
Legal Name of Co-Subscriber (if applicable)

     

    

    __________________________________                                                                                     ____________________________________

    Signature
of (or on behalf of)
Subscriber                                                                                             Signature
of or on behalf of Co-Subscriber (if applicable)

    Name:

    Title:

    

    

    

    

    __________________________________                                                                                     ____________________________________

    Address
of
Subscriber                                                                                                                            Address
of Co-Subscriber (if applicable)

     

    

    __________________________________                                                                                     ____________________________________

    Social
Security or
Taxpayer                                                                                                                   
Social Security or Taxpayer Identification

    Identification
Number of
Subscriber                                                                                                    
Number of Co-Subscriber (if applicable)

     

    __________________________________

    Number of
Units Subscribed For

     

    

     

    Subscription
Agreed to and Accepted

    VeruTEK
Technologies, Inc., a Nevada corporation

     

    
      
        	 	 	 
	 	 	 	 
	
                 

              	
                By:
      

              	/s/ 	 
	 	 	John
      Collins	 
	 	 	Chief
      Executive Officer	 
	 	 	 	 

      

    

    
 

    
    

    
 

    14isco_ex-1001.htm

    
      

       

      EXHIBIT
10.1

       

      SECURITIES
PURCHASE AGREEMENT

       

      This
Securities Purchase Agreement (this “Agreement”) is dated
as of May 14, 2008 between International Stem Cell Corporation, a Delaware
corporation (the “Company”), and the
Purchaser identified on the signature pages hereto (including its successors and
assigns, “Purchaser”).

       

      WHEREAS,
subject to the terms and conditions set forth in this Agreement and pursuant to
Section 4(2) of the Securities Act of 1933, as amended (the “Securities Act”), and
Rule 506 promulgated thereunder, the Company desires to issue and sell to
Purchaser, and Purchaser desires to purchase from the Company, securities of the
Company as more fully described in this Agreement.

       

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

       

       

      ARTICLE
I.

      DEFINITIONS

       

      1.1 Definitions.  In
addition to the terms defined elsewhere in this Agreement: (a) capitalized terms
that are not otherwise defined herein have the meanings given to such terms in
the Note (as defined herein), and (b) the following terms have the meanings set
forth in this Section 1.1:

       

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

       

      “Affiliate” means any
Person that, directly or indirectly through one or more intermediaries, controls
or is controlled by or is under common control with a Person, as such terms are
used in and construed under Rule 405 under the Securities Act.  With
respect to Purchaser, any investment fund or managed account that is managed on
a discretionary basis by the same investment manager as Purchaser will be deemed
to be an Affiliate of Purchaser.

       

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

       

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

       

      “Closing” means the
closing of the purchase and sale of the Securities pursuant to Section
2.1.

       

      
        
           

        

        
           

          
            

          

        

        
           

        

      

      “Closing Date” means
the Trading Day when all of the Transaction Documents have been executed and
delivered by the applicable parties thereto, and all conditions precedent to (i)
the Purchaser’s obligations to pay the Subscription Amount and (ii) the
Company’s obligations to deliver the Securities, have been satisfied or
waived.

       

      “Commission” means the
Securities and Exchange Commission.

       

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

       

      “Common Stock
Equivalents” means any securities of the Company or the Subsidiaries
which would entitle the holder thereof to acquire at any time Common Stock,
including, without limitation, any debt, preferred stock, rights, options,
warrants or other instrument that is at any time convertible into or exercisable
or exchangeable for, or otherwise entitles the holder thereof to receive, Common
Stock.

       

      “Company Counsel”
means DLA Piper US LLP, with offices located at 4365 Executive Drive, Suite
1100, San Diego, California  92121, fax: (858) 677-1401.

       

      “Contingent
Obligation” means, as to any Person, any direct or indirect liability,
contingent or otherwise, of that Person with respect to any indebtedness, lease,
dividend or other obligation of another Person if the primary purpose or intent
of such other Person incurring such liability, or the primary effect thereof, is
to provide assurance to the obligee of such liability that such liability will
be paid or discharged, or that any agreements relating thereto will be complied
with, or that the holders of such liability will be protected (in whole or in
part) against loss with respect thereto.

       

      “Conversion Price”
shall have the meaning ascribed to such term in the Note.

       

      “Disclosure Schedules”
shall have the meaning ascribed to such term in Section 3.1.

       

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

       

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

      

      “Exempt Issuance”
means the issuance of (a) shares of Common Stock or options to employees,
officers or directors of the Company pursuant to any stock or option plan duly
adopted for such purpose by a majority of the non-employee members of the Board
of Directors or a majority of the members of a committee of non-employee
directors established for such purpose, (b) securities upon the exercise or
exchange of or conversion of any Securities issued hereunder and/or other
securities exercisable or exchangeable for or convertible into shares of Common
Stock issued and outstanding on the date of this Agreement, provided that such
securities have not been amended since the date of this Agreement to directly or
indirectly effectively increase the number of such securities or to decrease the
exercise, exchange or conversion price of such securities, and (c) shares of
Common Stock issued as reasonable compensation for services rendered to the
Company or its Subsidiaries.

       

      
        
           

        

        
          2

          
            

          

        

        
           

        

      

      “Form 10” means Form
10 prescribed by the Commission under the Exchange Act.

       

      “Form 10 Information”
means the information that is required by Form 10 to register the Common Stock
under the Exchange Act.

       

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

       

      “Indebtedness” of any
Person means (a) all indebtedness for borrowed money, (b) all obligations
issued, undertaken or assumed as the deferred purchase price of property or
services, except for trade payables entered into in the ordinary course of
business, (c) all obligations in respect of letters of credit, surety bonds,
bankers acceptances or similar instruments (including without limitation all
reimbursement or payment obligations with respect thereto), (d) all obligations
evidenced by Note, bonds, debentures or similar instruments, including without
limitation obligations so evidenced incurred in connection with the acquisition
of property, assets or businesses, (e) all indebtedness created or arising under
any conditional sale or other title retention agreement, or incurred as
financing, in either case with respect to any property or assets acquired with
the proceeds of such indebtedness (even if the rights and remedies of the seller
or bank under such agreement in the event of default are limited to repossession
or sale of such property), (f) all monetary obligations under any leasing or
similar arrangement which is classified as a “capital lease” under GAAP, and (g)
all Contingent Obligations in respect of Indebtedness of others of the kinds
referred to in clauses (a) through (f) above.

       

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

       

      “IP Security
Agreement” means the Intellectual Property Security Agreement, dated the
date hereof, by the Company in favor of the Purchaser, in the form of Exhibit D attached
hereto, securing the obligations of the Company under the Note and other
Transaction Documents.

       

      “Legend Removal Date”
shall have the meaning ascribed to such term in Section 4.1(c).

       

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

       

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

       

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

       

      “Maximum Rate” shall
have the meaning ascribed to such term in Section 5.17.

       

      
        
           

        

        
          3

          
            

          

        

        
           

        

      

      “Note” means the OID
Senior Secured Convertible Note due nine (9) months from its date of issuance,
issued by the Company to the Purchaser hereunder, in the form of Exhibit A attached
hereto and having an original Principal Amount of $1 million.

       

      “Participation
Maximum” shall have the meaning ascribed to such term in Section
4.12.

       

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

       

      “Principal Amount”
shall mean $1 million.

       

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

       

      “Purchaser Party”
shall have the meaning ascribed to such term in Section 4.10.

       

      “Required Approvals”
shall have the meaning ascribed to such term in Section 3.1(e).

       

      “Required Minimum”
means, as of any date, the maximum aggregate number of shares of Common Stock
then issued or potentially issuable in the future pursuant to the Transaction
Documents, including any Underlying Shares issuable upon exercise or conversion
in full of all Warrants and Note, ignoring any conversion or exercise limits set
forth therein, and assuming that the Conversion Price is at all times on and
after the date of determination 75% of the then Conversion Price on the Trading
Day immediately prior to the date of determination.

       

      “Regulation 13D-G”
means Regulation 13D-G promulgated by the Commission pursuant to the Exchange
Act, as such Regulation and the Rules thereunder may be amended from time to
time, or any similar rule or regulation hereafter adopted by the Commission
having substantially the same effect as such Regulation.

       

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

       

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

       

      “Securities” means the
Note, the Warrants and the Underlying Shares.

       

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

       

      
        
           

        

        
          4

          
            

          

        

        
           

        

      

      “Security Agreement”
means the Security Agreement, dated the date hereof, by the Company in favor of
the Purchaser, in the form of Exhibit C attached
hereto, securing the obligations of the Company under the Note and other
Transaction Documents.

       

      “Security Documents”
means any and all means any and all security agreements, pledge agreements,
hypothecation agreements, collateral assignments, mortgages, deeds of trust,
control agreements and similar such agreements, executed and delivered by the
Company, any of its Subsidiaries and/or any third party in favor of the
Purchaser pursuant to the Transaction Documents which secures the Company’s
obligations under the Transaction Documents and/or any of the Securities, and
other documents executed, delivered and/or filed by the Company, any of its
Subsidiaries, any third party and/or the Purchaser as permitted or required
under any of the foregoing, including without limitation the Security Agreement
and the IP Security Agreement.

       

      “Shell Company” means
an entity that has (a) no or nominal operations, and (b) either (i) no
or nominal assets, (ii) assets consisting solely of cash and cash equivalents,
or (iii) assets consisting of any amount of cash and cash equivalents and
nominal other assets.

      

      “Short Sales” means
all “short sales” as defined in Rule 200 of Regulation SHO under the Exchange
Act (but shall not be deemed to include the location and/or reservation of
borrowable shares of Common Stock). 

       

      “Subscription Amount”
means $850,000 in United States dollars and in immediately available funds,
which is the aggregate amount to be paid for the Note and Warrants purchased
hereunder by the Purchaser.

       

      “Subsequent Financing”
shall have the meaning ascribed to such term in Section 4.12.

       

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

       

      “Subsidiary Guarantee”
means the Subsidiary Guarantee, in the form attached hereto as Exhibit E, executed
by each Subsidiary in favor of the Purchaser, guaranteeing the Company’s
obligations under the Note.

       

      “Trading Day” means a
day on which the OTC Bulletin Board is open for trading.

       

      “Trading Market” means
the following markets or exchanges on which the Common Stock is listed or quoted
for trading on the date in question: the American Stock Exchange, the Nasdaq
Capital Market, the Nasdaq Global Market, the Nasdaq Global Select Market, the
New York Stock Exchange or the OTC Bulletin Board.

       

      “Transaction
Documents” means this Agreement, the Note, the Warrants, the Subsidiary
Guarantee, the Security Documents and all exhibits and schedules thereto and
hereto and any other documents or agreements executed in connection with the
transactions contemplated hereunder.

       

      
        
           

        

        
          5

          
            

          

        

        
           

        

      

      “Transfer Agent” means
Securities Transfer Corporation, the current transfer agent of the Company with
a mailing address of 2591 Dallas Parkway, Suite 102, Frisco, TX 75304 and a
facsimile number of _______________, and any successor transfer agent of the
Company.

       

      “Underlying Shares”
means the shares of Common Stock issued and issuable upon conversion or
redemption of the Note and upon exercise of the Warrants.

       

      “VWAP” means, for any
date, the price determined by the first of the following clauses that applies:
(a) if the Common Stock is then listed or quoted on a Trading Market, the daily
volume weighted average price of the Common Stock for such date (or the nearest
preceding date) on the Trading Market on which the Common Stock is then listed
or quoted as reported by Bloomberg L.P. (based on a Trading Day from 9:30 a.m.
New York City time to 4:02 p.m. New York City time); (b) if the Common
Stock is not then listed or quoted on the OTC Bulletin Board and if prices for
the Common Stock are then reported in the “Pink Sheets” published by Pink
Sheets, LLC (or a similar organization or agency succeeding to its functions of
reporting prices), the most recent bid price per share of the Common Stock so
reported; or (c) in all other cases, the fair market value of a share of
Common Stock as determined by an independent appraiser selected in good faith by
the Purchaser of a majority-in-interest of the Securities then outstanding and
reasonably acceptable to the Company, the fees and expenses of which shall be
paid by the Company.

       

      “Warrants” means the
Common Stock purchase warrants delivered to the Purchaser at the Closing in
accordance with Section 2.2(a) hereof in the form of Exhibit B
attached hereto.

       

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

       

      “Weisman” means Peter
J. Weisman, P.C. with offices located at 153 East 53rd Street,
29th
Floor, New York, New York 10022.

       

       

      ARTICLE
II.

      PURCHASE
AND SALE

       

      2.1 Closing.  On
the Closing Date, upon the terms and subject to the conditions set forth herein,
substantially concurrent with the execution and delivery of this Agreement by
the parties hereto, the Company agrees to sell, and the Purchaser agrees to
purchase, $1,000,000 in principal amount of the Note.  The Purchaser
shall deliver to the Company, via wire transfer or a certified check,
immediately available funds equal to its Subscription Amount and the Company
shall deliver to the Purchaser its Note and a Warrant, as determined pursuant to
Section 2.2(a), and the Company and Purchaser shall deliver the other items set
forth in Section 2.2 deliverable at the Closing.  Upon satisfaction of
the conditions set forth in Sections 2.2 and 2.3, the Closing shall occur at the
offices of Weisman or such other location as the parties shall mutually
agree.

       

      
        
           

        

        
          6

          
            

          

        

        
           

        

      

      
        2.2           Deliveries.

        

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

        

        
          (i)  this
Agreement duly executed by the Company;

        

         

        
          (ii)  a legal
opinion of Company Counsel, in substantially the form of Exhibit F attached
hereto;

           

          (iii)  a Note
with a principal amount equal to the Principal Amount, registered in the name of
Purchaser, and a Conversion Price of $0.50, subject to adjustment
therein;

        

        

        
          (iv) Warrant,
registered in the name of Purchaser to purchase up to 2 million shares of Common
Stock, with an exercise price equal to $0.50, subject to adjustment therein, for
a term of five years;

        

         

        
          (v) the
Security Documents, including without limitation the Security Agreement and the
IP Security Agreement, duly executed by the Company and each Subsidiary;
and

        

         

        (vi) the Subsidiary Guarantee, duly
executed by each Subsidiary of the Company.

         

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

         

        (i) this
Agreement duly executed by Purchaser,

        

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

        

         

        
          (iii) the
Security Documents to which Purchaser is a party and required by law to be
signed by such Party in order to be binding.

        

         

        2.3 Closing
Conditions.

         

        (a)           The
obligations of the Company hereunder in connection with the Closing are subject
to the following conditions being met:

         

        (i)
the
accuracy in all material respects on the Closing Date of the representations and
warranties of the Purchaser contained herein;

         

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

         

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

         

        
          
             

          

          
            7

            
              

            

          

          
             

          

        

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

         

        
          (i)
the
accuracy in all material respects when made and on the Closing Date of the
representations and warranties of the Company contained herein;

           

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

           

        

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

         

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

         

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

        

      

       

      ARTICLE
III.

      REPRESENTATIONS
AND WARRANTIES

       

      3.1 Representations and
Warranties of the Company.  Except as disclosed in the SEC
Reports filed after January 1, 2008 but at least 5 Business Days before the date
hereof and except as set forth under the corresponding section of the disclosure
schedules delivered to the Purchaser concurrently herewith (“Disclosure
Schedules”) which Disclosure Schedules shall be deemed a part hereof, the
Company hereby makes the following representations and warranties to
Purchaser:

       

      (a) Subsidiaries.  All
of the direct and indirect subsidiaries of the Company are set forth on Schedule 3.1(a)
(whether or not disclosed in SEC Reports).  The Company owns, directly
or indirectly, all of the capital stock or other equity interests of each
Subsidiary free and clear of any Liens, and all of the issued and outstanding
shares of capital stock of each Subsidiary are validly issued and are fully
paid, non-assessable and free of preemptive and similar rights to subscribe for
or purchase securities.  If the Company has no subsidiaries, all other
references to the Subsidiaries or any of them in this Section 3.1 shall be
disregarded.

       

      
        
           

        

        
          8

          
            

          

        

        
           

        

      

      (b) Organization and
Qualification.  The Company and each of the Subsidiaries is an
entity duly incorporated or otherwise organized, validly existing and in good
standing under the laws of the jurisdiction of its incorporation or organization
(as applicable), with the requisite power and authority to own and use its
properties and assets and to carry on its business as currently
conducted.  Neither the Company nor any Subsidiary is in violation or
default of any of the provisions of its respective certificate or articles of
incorporation, bylaws or other organizational or charter
documents.  Each of the Company and the Subsidiaries is duly qualified
to conduct business and is in good standing as a foreign corporation or other
entity in each jurisdiction in which the nature of the business conducted or
property owned by it makes such qualification necessary, except where the
failure to be so qualified or in good standing, as the case may be, could not
have or reasonably be expected to result in (i) a material adverse effect on the
legality, validity or enforceability of any Transaction Document, (ii) a
material adverse effect on the results of operations, assets, business,
prospects or condition (financial or otherwise) of the Company and the
Subsidiaries, taken as a whole, or (iii) a material adverse effect on the
Company’s ability to perform in any material respect on a timely basis its
obligations under any Transaction Document (any of (i), (ii) or (iii), a “Material Adverse
Effect”) and no Proceeding has been instituted in any such jurisdiction
revoking, limiting or curtailing or seeking to revoke, limit or curtail such
power and authority or qualification.  The Company has furnished to
the Purchaser true and correct copies of the Company's Certificate of
Incorporation and the Company's By-Laws, as each is currently in
effect.

       

      (c) Authorization;
Enforcement.  The Company has the requisite corporate power and
authority to enter into and to consummate the transactions contemplated by each
of the Transaction Documents and otherwise to carry out its obligations
hereunder and thereunder.  The execution and delivery of each of the
Transaction Documents by the Company and the consummation by it of the
transactions contemplated hereby and thereby have been duly authorized by all
necessary action on the part of the Company and no further action is required by
the Company, the Board of Directors or the Company’s stockholders in connection
therewith other than in connection with the Required Approvals.  Each
Transaction Document has been (or upon delivery will have been) duly executed by
the Company and, when delivered in accordance with the terms hereof and thereof,
will constitute the valid and binding obligation of the Company enforceable
against the Company in accordance with its terms, except (i) as limited by
general equitable principles and applicable bankruptcy, insolvency,
reorganization, moratorium and other laws of general application affecting
enforcement of creditors’ rights generally, (ii) as limited by laws relating to
the availability of specific performance, injunctive relief or other equitable
remedies and (iii) insofar as indemnification and contribution provisions may be
limited by applicable law.

       

      
        
           

        

        
          9

          
            

          

        

        
           

        

      

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

       

      (e) Filings, Consents and
Approvals.  The Company is not required to obtain any consent,
waiver, authorization or order of, give any notice to, or make any filing or
registration with, any court or other federal, state, local or other
governmental authority or other Person in connection with the execution,
delivery and performance by the Company of the Transaction Documents, other than
(i) filings required pursuant to Section 4.6, (ii) the notice and/or
application(s) to each applicable Trading Market for the issuance and sale of
the Securities and the listing of the Underlying Shares for trading thereon in
the time and manner required thereby, (iii) the filing of Form D with the
Commission and such filings as are required to be made under applicable state
securities laws, and (iv)
filings required under the terms of the Security Documents (collectively, the
“Required
Approvals”).

       

      (f) Issuance of the
Securities.  The Securities are duly authorized and, when
issued and paid for in accordance with the applicable Transaction Documents,
will be duly and validly issued, fully paid and nonassessable, free and clear of
all Liens imposed by the Company other than restrictions on transfer provided
for in the Transaction Documents.  The Underlying Shares, when issued
in accordance with the terms of the Transaction Documents, will be validly
issued, fully paid and nonassessable, free and clear of all Liens imposed by the
Company other than restrictions on transfer provided for in the Transaction
Documents.  The Company has reserved from its duly authorized capital
stock a number of shares of Common Stock for issuance of the Underlying Shares
at least equal to the Required Minimum on the date hereof.

       

      
        
           

        

        
          10

          
            

          

        

        
           

        

      

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

       

      (h) SEC Reports; Financial
Statements.  The Company has filed all reports, schedules,
forms, statements and other documents required to be filed by the Company under
the Securities Act and the Exchange Act, including pursuant to Section 13(a) or
15(d) thereof, for the two years preceding the date hereof (or such shorter
period as the Company was required by law or regulation to file such material)
(the foregoing materials, including the exhibits thereto and documents
incorporated by reference therein, being collectively referred to herein as the
“SEC Reports”)
on a timely basis or has received a valid extension of such time of filing and
has filed any such SEC Reports prior to the expiration of any such
extension.  As of their respective dates, the SEC Reports complied in
all material respects with the requirements of the Securities Act and the
Exchange Act, as applicable, and none of the SEC Reports, when filed, contained
any untrue statement of a material fact or omitted to state a material fact
required to be stated therein or necessary in order to make the statements
therein, in the light of the circumstances under which they were made, not
misleading.  The financial statements of the Company included in the
SEC Reports comply in all material respects with applicable accounting
requirements and the rules and regulations of the Commission with respect
thereto as in effect at the time of filing.  Such financial statements
have been prepared in accordance with United States generally accepted
accounting principles applied on a consistent basis during the periods involved
(“GAAP”),
except as may be otherwise specified in such financial statements or the Note
thereto and except that unaudited financial statements may not contain all
footnotes required by GAAP, and fairly present in all material respects the
financial position of the Company and its consolidated Subsidiaries as of and
for the dates thereof and the results of operations and cash flows for the
periods then ended, subject, in the case of unaudited statements, to normal,
immaterial, year-end audit adjustments.

       

      
        
           

        

        
          11

          
            

          

        

        
           

        

      

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

       

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

       

      (k) Labor
Relations.  No material labor dispute exists or, to the
knowledge of the Company, is imminent with respect to any of the employees of
the Company which could reasonably be expected to result in a Material Adverse
Effect.  None of the Company’s or its Subsidiaries’ employees is a
member of a union that relates to such employee’s relationship with the Company
or such Subsidiary, and neither the Company nor any of its Subsidiaries is a
party to a collective bargaining agreement, and the Company and its Subsidiaries
believe that their relationships with their employees are good.  No
executive officer, to the knowledge of the Company, is, or is now expected to
be, in violation of any material term of any employment contract,
confidentiality, disclosure or proprietary information agreement or
non-competition agreement, or any other contract or agreement or any restrictive
covenant in favor of any third party, and the continued employment of each such
executive officer does not subject the Company or any of its Subsidiaries to any
liability with respect to any of the foregoing matters.  The Company
and its Subsidiaries are in compliance with all U.S. federal, state, local and
foreign laws and regulations relating to employment and employment practices,
terms and conditions of employment and wages and hours, except where the failure
to be in compliance could not, individually or in the aggregate, reasonably be
expected to have a Material Adverse Effect.

       

      
        
           

        

        
          12

          
            

          

        

        
           

        

      

      (l) Compliance.  Neither
the Company nor any Subsidiary (i) is in default under or in violation of (and
no event has occurred that has not been waived that, with notice or lapse of
time or both, would result in a default by the Company or any Subsidiary under),
nor has the Company or any Subsidiary received notice of a claim that it is in
default under or that it is in violation of, any indenture, loan or credit
agreement or any other agreement or instrument to which it is a party or by
which it or any of its properties is bound (whether or not such default or
violation has been waived), (ii) is in violation of any 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
and all such laws that affect the environment, except in each case as could not
have or reasonably be expected to result in a Material Adverse
Effect.

       

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

       

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

       

      
        
           

        

        
          13

          
            

          

        

        
           

        

      

      (o) Patents and
Trademarks.  The Company and the Subsidiaries have, or have
rights to use, all patents, patent applications, trademarks, trademark
applications, service marks, trade names, trade secrets, inventions, copyrights,
licenses and other intellectual property rights and similar rights necessary or
material for use in connection with their respective businesses as described in
the SEC Reports and which the failure to so have could have a Material Adverse
Effect (collectively, the “Intellectual Property
Rights”).  Neither the Company nor any Subsidiary has received
a notice (written or otherwise) that any of the Intellectual Property Rights
used by the Company or any Subsidiary violates or infringes upon the rights of
any Person. To the knowledge of the Company, all such Intellectual Property
Rights are enforceable and there is no existing infringement by another Person
of any of the Intellectual Property Rights.  The Company and its
Subsidiaries have taken reasonable security measures to protect the secrecy,
confidentiality and value of all of their intellectual properties, except where
failure to do so could not, individually or in the aggregate, reasonably be
expected to have a Material Adverse Effect. The Company has duly and
properly filed or caused to be filed with the United States Patent and Trademark
Office (the “PTO”) and applicable
foreign and international patent authorities all patent applications owned by
the Company (the “Company Patent
Applications”). To the knowledge of the Company, the Company has complied
with the PTO’s duty of candor and disclosure for the Company Patent Applications
and has made no material misrepresentation in the Company Patent
Applications.  The Company is not aware of any information material to
a determination of patentability regarding the Company Patent Applications not
called to the attention of the PTO or similar foreign authority.  The
Company is not aware of any information not called to the attention of the PTO
or similar foreign authority that would preclude the grant of a patent for the
Company Patent Applications.  The Company has no knowledge of any
information that would preclude the Company from having clear title to the
Company Patent Applications.

       

      (p) 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, but not limited to, directors and officers insurance
coverage at least equal to the aggregate Subscription Amount.  Neither
the Company nor any Subsidiary has any reason to believe that it will not be
able to renew its existing insurance coverage as and when such coverage expires
or to obtain similar coverage from similar insurers as may be necessary to
continue its business without a significant increase in cost.

       

      (q) Transactions with Affiliates
and Employees.  Except as set forth in the SEC Reports, none of
the officers or directors of the Company and, to the knowledge of the Company,
none of the employees of the Company is presently a party to any transaction
with the Company or any Subsidiary (other than for services as employees,
officers and directors), including any contract, agreement or other arrangement
providing for the furnishing of services to or by, providing for rental of real
or personal property to or from, or otherwise requiring payments to or from any
officer, director or such employee or, to the knowledge of the Company, any
entity in which any officer, director, or any such employee has a substantial
interest or is an officer, director, trustee or partner, in each case in excess
of $10,000 other than for (i) payment of salary or consulting fees for services
rendered, (ii) reimbursement for expenses incurred on behalf of the Company and
(iii) other employee benefits, including stock option agreements under any stock
option plan of the Company.

       

      
        
           

        

        
          14

          
            

          

        

        
           

        

      

      (r) Sarbanes-Oxley; Internal
Accounting Controls.  The Company is in material compliance
with all provisions of the Sarbanes-Oxley Act of 2002 which are applicable to it
as of the Closing Date.  The Company and the Subsidiaries maintain a
system of internal accounting controls sufficient to provide reasonable
assurance that (i) transactions are executed in accordance with management’s
general or specific authorizations, (ii) transactions are recorded as necessary
to permit preparation of financial statements in conformity with GAAP and to
maintain asset accountability, (iii) access to assets is permitted only in
accordance with management’s general or specific authorization, and (iv) the
recorded accountability for assets is compared with the existing assets at
reasonable intervals and appropriate action is taken with respect to any
differences. The Company has established disclosure controls and procedures (as
defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) for the Company and
designed such disclosure controls and procedures to ensure that information
required to be disclosed by the Company in the reports it files or submits under
the Exchange Act is recorded, processed, summarized and reported, within the
time periods specified in the Commission’s rules and forms.  The
Company’s certifying officers have evaluated the effectiveness of the Company’s
disclosure controls and procedures as of the end of the period covered by the
Company’s most recently filed periodic report under the Exchange Act (such date,
the “Evaluation
Date”).  The Company presented in its most recently filed
periodic report under the Exchange Act the conclusions of the certifying
officers about the effectiveness of the disclosure controls and procedures based
on their evaluations as of the Evaluation Date.  Since the Evaluation
Date, there have been no changes in the Company’s internal control over
financial reporting (as such term is defined in the Exchange Act) that has
materially affected, or is reasonably likely to materially affect, the Company’s
internal control over financial reporting.

       

      (s) Certain
Fees.  No brokerage or finder’s fees or commissions are or will
be payable by the Purchaser to any broker, financial advisor or consultant,
finder, placement agent, investment banker, bank or other Person with respect to
the transactions contemplated by the Transaction Documents as a result of any
action taken by the Company.

       

      (t) Private
Placement.  Assuming the accuracy of the Purchaser’s
representations and warranties set forth in Section 3.2, no registration under
the Securities Act is required for the offer and sale of the Securities by the
Company to the Purchaser as contemplated hereby. The issuance and sale of the
Securities hereunder does not contravene the rules and regulations of the OTC
Bulletin Board.

       

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

       

      
        
           

        

        
          15

          
            

          

        

        
           

        

      

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

       

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

       

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

       

      (y) Disclosure.  Except
with respect to the material terms and conditions of the transactions
contemplated by the Transaction Documents, the Company confirms that neither it
nor any other Person acting on its behalf has provided any of the Purchaser or
their agents or counsel with any information that it believes constitutes or
might constitute material, nonpublic information.  The Company
understands and confirms that the Purchaser will rely on the foregoing
representation in effecting transactions in securities of the
Company.  All disclosure furnished by or on behalf of the Company to
the Purchaser regarding the Company, its business and the transactions
contemplated hereby, including the Disclosure Schedules to this Agreement, is
true and correct and does not contain any untrue statement of a material fact
or, when taken together, omit to state any material fact necessary in order to
make the statements made therein, in light of the circumstances under which they
were made, not misleading.   The press releases disseminated by
the Company during the twelve months preceding the date of this Agreement taken
as a whole do not contain any untrue statement of a material fact or omit to
state a material fact required to be stated therein or necessary in order to
make the statements therein, in light of the circumstances under which they were
made and when made, not misleading.  The Company acknowledges and
agrees that Purchaser does not make nor has made any representations or
warranties with respect to the transactions contemplated hereby other than those
specifically set forth in Section 3.2 hereof.

       

      
        
           

        

        
          16

          
            

          

        

        
           

        

      

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

       

      (aa) Solvency.  Based
on the consolidated financial condition of the Company as of the Closing Date
after giving effect to the receipt by the Company of the proceeds from the sale
of the Securities hereunder, (i) the fair saleable value of the Company’s assets
exceeds the amount that will be required to be paid on or in respect of the
Company’s existing debts and other liabilities (including known contingent
liabilities) as they mature, (ii) the Company’s assets do not constitute
unreasonably small capital to carry on its business as now conducted and as
proposed to be conducted including its capital needs taking into account the
particular capital requirements of the business conducted by the Company, and
projected capital requirements and capital availability thereof, and (iii) the
current cash flow of the Company, together with the proceeds the Company would
receive, were it to liquidate all of its assets, after taking into account all
anticipated uses of the cash, would be sufficient to pay all amounts on or in
respect of its liabilities when such amounts are required to be
paid.  The Company does not intend to incur debts beyond its ability
to pay such debts as they mature (taking into account the timing and amounts of
cash to be payable on or in respect of its debt).  The Company has no
knowledge of any facts or circumstances which lead it to believe that it will
file for reorganization or liquidation under the bankruptcy or reorganization
laws of any jurisdiction within one year from the Closing Date.  Schedule 3.1(aa) sets
forth as of the date hereof all outstanding secured and unsecured Indebtedness
of the Company or any Subsidiary, or for which the Company or any Subsidiary has
commitments, in excess of $25,000 (whether or not disclosed in SEC
Reports).

       

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

       

      (cc) No General
Solicitation. Neither the Company nor any person acting on behalf of the
Company has offered or sold any of the Securities by any form of general
solicitation or general advertising.  The Company has offered the
Securities for sale only to the Purchaser and certain other “accredited
investors” within the meaning of Rule 501 under the Securities Act.

       

      
        
           

        

        
          17

          
            

          

        

        
           

        

      

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

       

      (ee) Accountants.  The
Company’s accounting firm is Vasquez & Company, LLP.  To the
knowledge and belief of the Company, such accounting firm (i) is a registered
public accounting firm as required by the Exchange Act and (ii) shall express
its opinion with respect to the financial statements to be included in the
Company’s Annual Report for the year ending December 31, 2009.

       

      (ff) Seniority.  As
of the Closing Date, no Indebtedness or other claim against the Company is
senior to the Note in right of payment, whether with respect to interest or upon
liquidation or dissolution, or otherwise, other than indebtedness secured by
purchase money security interests (which is senior only as to underlying assets
covered thereby) and capital lease obligations (which is senior only as to the
property covered thereby).

       

      (gg) No Disagreements with
Accountants and Lawyers.  There are no disagreements of any
kind presently existing, or reasonably anticipated by the Company to arise,
between the Company and the accountants and lawyers formerly or presently
employed by the Company, and the Company is not aware of any circumstances with
respect to its accountants or lawyers which could affect the Company’s ability
to perform any of its obligations under any of the Transaction
Documents.

       

      (hh) Acknowledgment Regarding
Purchaser’s Purchase of Securities.  The Company acknowledges
and agrees that the Purchaser is acting solely in the capacity of an arm’s
length purchaser with respect to the Transaction Documents and the transactions
contemplated thereby.  The Company further acknowledges that Purchaser
is not acting as a financial advisor or fiduciary of the Company (or in any
similar capacity) with respect to the Transaction Documents and the transactions
contemplated thereby and any advice given by Purchaser or any of their
respective representatives or agents in connection with the Transaction
Documents and the transactions contemplated thereby is merely incidental to the
Purchaser’s purchase of the Securities.  The Company further
represents to Purchaser that the Company’s decision to enter into this Agreement
and the other Transaction Documents has been based solely on the independent
evaluation of the transactions contemplated hereby by the Company and its
representatives.

       

      
        
           

        

        
          18

          
            

          

        

        
           

        

      

      (ii) Acknowledgment Regarding
Purchaser’s Trading Activity.  Notwithstanding anything in this Agreement or elsewhere herein to the
contrary (except for Sections 3.2(f) and
4.15 hereof), it is understood and acknowledged by the Company
that (i) Purchaser has not been asked to
agree by the Company, nor has Purchaser agreed, to desist from purchasing or
selling, long and/or short, securities of the Company, or “derivative”
securities based on securities issued by the Company or to hold the Securities
for any specified term, (ii) past or future open market or other transactions
by Purchaser, specifically including, without limitation, Short Sales or
“derivative” transactions, before or after the closing of this or future private
placement transactions, may negatively impact the market price of the
Company’s publicly-traded
securities, (iii) Purchaser, and counter-parties in “derivative” transactions to which
Purchaser is a party, directly or indirectly, may presently have
a “short” position in the Common Stock, and (iv) Purchaser shall not
be deemed to have any affiliation with or control over any arm’s length
counter-party in any “derivative” transaction.  The Company
further understands and acknowledges that (a) Purchaser may engage in hedging
activities at various times during the period that the Securities are
outstanding, including, without limitation, during the periods that the value of
the Underlying Shares deliverable with respect to Securities are being
determined and (b) such hedging activities (if any) could reduce the value of
the existing stockholders' equity interests in the Company at and after the time
that the hedging activities are being conducted.  The Company acknowledges
that such aforementioned hedging activities do not constitute a breach of any of
the Transaction Documents.

       

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

       

      (kk) No Longer
“Shell”.  The Company has not been a Shell Company since
December 28, 2006.  The Company filed Form 10 Information with the
Commission in accordance with the rules and regulations of the Commission under
the Exchange Act on or about December 29, 2006, and at all times since such date
the Company has been subject to the reporting requirements of Section 13 or
15(d) of the Exchange Act and timely filed (or obtained extensions in respect
thereof and filed within the applicable grace period) all reports and other
materials required to be filed thereunder.

       

      (ll) Clinical Studies. The
clinical, pre-clinical and other studies and tests conducted by or on behalf of
or sponsored by the Company or in which the Company or products or product
candidates have participated that are described in the Registration Statement,
the SEC Reports were and, if still pending, are being conducted in accordance in
all material respects with all applicable federal, state or foreign statutes,
laws, rules and regulations, as applicable (including, without limitation, those
administered by the Food and Drug Administration of the U.S. Department of
Health and Human Services (the “FDA”) or by any
foreign, federal, state or local governmental or regulatory authority performing
functions similar to those performed by the FDA and current Good Laboratory and
Good Clinical Practices) and in accordance with experimental protocols,
procedures and controls pursuant to, where applicable, accepted professional
scientific methods. The descriptions in the SEC Reports of the results of such
studies, tests and trials are accurate and complete in all material respects and
fairly present the published data derived from such studies, tests and trials.
The Company has not received any notices or other correspondence from the FDA or
any other foreign, federal, state or local governmental or regulatory authority
performing functions similar to those performed by the FDA with respect to any
ongoing clinical or pre-clinical studies or tests requiring the termination,
suspension or material modification of such studies, tests or preclinical or
clinical trials, which termination, suspension or material modification would
reasonably be expected to result in a Material Adverse Effect. No filing or
submission to the FDA or any other federal, state or foreign regulatory body,
that is intended to be the basis for any approval, contains any material
statement or material false information. The Company is in compliance with all
applicable federal, state, local and foreign laws, regulations, orders and
decrees governing their business as prescribed by the FDA, or any other federal,
state or foreign agencies or bodies, including those bodies and agencies engaged
in the regulation of pharmaceuticals or biohazardous substances or materials,
except where noncompliance would not, singly or in the aggregate, result in a
Material Adverse Effect.

       

      
        
           

        

        
          19

          
            

          

        

        
           

        

      

      3.2  Representations and
Warranties of the Purchaser.    Purchaser hereby
represents and warrants as of the date hereof and as of the Closing Date to the
Company as follows:

       

      (a) Organization;
Authority.  Purchaser is an entity duly organized, validly
existing and in good standing under the laws of the jurisdiction of its
organization with full right, corporate or partnership power and authority to
enter into and to consummate the transactions contemplated by the Transaction
Documents and otherwise to carry out its obligations hereunder and thereunder.
The execution and delivery of the Transaction Documents and performance by
Purchaser of the transactions contemplated by the Transaction Documents have
been duly authorized by all necessary corporate or similar action on the part of
Purchaser.  Each Transaction Document to which it is a party has been
duly executed by Purchaser, and when delivered by Purchaser in accordance with
the terms hereof, will constitute the valid and legally binding obligation of
Purchaser, enforceable against it in accordance with its terms, except (i) as
limited by general equitable principles and applicable bankruptcy, insolvency,
reorganization, moratorium and other laws of general application affecting
enforcement of creditors’ rights generally, (ii) as limited by laws relating to
the availability of specific performance, injunctive relief or other equitable
remedies and (iii) insofar as indemnification and contribution provisions may be
limited by applicable law.

       

      (b) Own
Account.  Purchaser understands that the Securities are
“restricted securities” and have not been registered under the Securities Act or
any applicable state securities law and is acquiring the Securities as principal
for its own account and not with a view to or for distributing or reselling such
Securities or any part thereof in violation of the Securities Act or any
applicable state securities law, has no present intention of distributing any of
such Securities in violation of the Securities Act or any applicable state
securities law and has no direct or indirect arrangement or understandings with
any other persons to distribute or regarding the distribution of such Securities
(this representation and warranty not limiting Purchaser’s right to sell the
Securities pursuant to any registration statement filed under the Securities Act
or otherwise in compliance with applicable federal and state securities laws) in
violation of the Securities Act or any applicable state securities
law.  Purchaser is acquiring the Securities hereunder in the ordinary
course of its business.

       

      
        
           

        

        
          20

          
            

          

        

        
           

        

      

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

       

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

       

      (e) General
Solicitation.  Purchaser is not purchasing the Securities as a
result of any advertisement, article, notice or other communication regarding
the Securities published in any newspaper, magazine or similar media or
broadcast over television or radio or presented at any seminar or any other
general solicitation or general advertisement.

       

      (f) Short Sales and Confidentiality Prior To The
Date Hereof.  Other than consummating the transactions
contemplated hereunder, Purchaser has not directly or indirectly, nor has any
Person acting on behalf of or pursuant to any understanding with Purchaser,
executed any purchases or sales, including Short Sales, of the securities
of the Company during the period commencing from the time that Purchaser first
received a term sheet (written or oral) from the Company or any other Person
representing the Company setting forth the material terms of the transactions
contemplated hereunder until the date hereof (“Discussion
Time”).  Notwithstanding the foregoing, in the case of
Purchaser that is a multi-managed investment vehicle whereby separate portfolio
managers manage separate portions of Purchaser's assets and the portfolio
managers have no direct knowledge of the investment decisions made by the
portfolio managers managing other portions of Purchaser's assets, the
representation set forth above shall only apply with respect to the portion of
assets managed by the portfolio manager that made the investment decision to
purchase the Securities covered by this Agreement.  Other than to
other Persons party to this Agreement, Purchaser has maintained the
confidentiality of all disclosures made to it in connection with this
transaction (including the existence and terms of this
transaction).

       

       

      ARTICLE
IV.

      OTHER
AGREEMENTS OF THE PARTIES

       

      4.1 Transfer
Restrictions.

       

      (a) The
Securities may only be disposed of in compliance with state and federal
securities laws.  In connection with any transfer of Securities other
than pursuant to an effective registration statement or Rule 144, to the Company
or to an Affiliate of Purchaser or in connection with a pledge as contemplated
in Section 4.1(b), the Company may require the transferor thereof to provide to
the Company an opinion of counsel selected by the transferor and reasonably
acceptable to the Company, the form and substance of which opinion shall be
reasonably satisfactory to the Company, to the effect that such transfer does
not require registration of such transferred Securities under the Securities
Act.  As a condition of transfer, any such transferee shall agree in
writing to be bound by the terms of this Agreement and shall have the rights of
Purchaser under this Agreement.

       

      
        
           

        

        
          21

          
            

          

        

        
           

        

      

      (b) The
Purchaser agrees to the imprinting, so long as is required by this Section 4.1,
of a legend on any of the Securities in the following form:

       

      [NEITHER]
THIS SECURITY [NOR THE SECURITIES INTO WHICH THIS SECURITY IS [EXERCISABLE]
[CONVERTIBLE]] HAS [NOT] BEEN REGISTERED WITH THE SECURITIES AND EXCHANGE
COMMISSION OR THE SECURITIES COMMISSION OF ANY STATE IN RELIANCE UPON AN
EXEMPTION FROM REGISTRATION UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE
“SECURITIES ACT”), AND, ACCORDINGLY, MAY NOT BE OFFERED OR SOLD EXCEPT PURSUANT
TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT OR PURSUANT TO
AN AVAILABLE EXEMPTION FROM, OR IN A TRANSACTION NOT SUBJECT TO, THE
REGISTRATION REQUIREMENTS OF THE SECURITIES ACT AND IN ACCORDANCE WITH
APPLICABLE STATE SECURITIES LAWS.  THIS SECURITY [AND THE SECURITIES
ISSUABLE UPON [EXERCISE] [CONVERSION] OF THIS SECURITY] MAY BE PLEDGED IN
CONNECTION WITH A BONA FIDE MARGIN ACCOUNT OR OTHER LOAN SECURED BY SUCH
SECURITIES.

       

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

       

      
        
           

        

        
          22

          
            

          

        

        
           

        

      

      (c) Certificates
evidencing the Underlying Shares shall not contain any legend (including the
legend set forth in Section 4.1(b) hereof): (i) while a registration statement
covering the resale of such security is effective under the Securities Act, or
(ii) if such Underlying Shares are eligible for resale under Rule 144, or (iii)
if such legend is not required under applicable requirements of the Securities
Act (including judicial interpretations and pronouncements issued by the staff
of the Commission).  If required by the Transfer Agent to effect the
removal of the legend hereunder, the Company shall cause its counsel to issue a
legal opinion to the Transfer Agent promptly after the date which is six months
following the Closing Date (if the Company has been subject to the reporting
requirements of Section 13 or 15(d) of the Exchange Act for the then preceding
90 days and has filed all reports required to be filed thereunder during the
then preceding 12 months (or such shorter period that the Company was required
to file such reports)).  If all or any portion of a Note or Warrant is
converted or exercised (as applicable) at a time when there is an effective
registration statement to cover the resale of the Underlying Shares, or if such
Underlying Shares may be sold under Rule 144 or if such legend is not otherwise
required under applicable requirements of the Securities Act (including judicial
interpretations and pronouncements issued by the staff of the Commission) then
such Underlying Shares shall be issued free of all legends.  The
Company agrees that at such time as such legend is no longer required under this
Section 4.1(c), it will, no later than three Trading Days following the delivery
by Purchaser to the Company or the Transfer Agent of a certificate representing
Underlying Shares, as applicable, issued with a restrictive legend (such third
Trading Day, the “Legend Removal
Date”), and any reasonably required certifications to document compliance
with Rule 144, deliver or cause to be delivered to Purchaser a certificate
representing such shares that is free from all restrictive and other
legends.  The Company may not make any notation on its records or give
instructions to the Transfer Agent that enlarge the restrictions on transfer set
forth in this Section.  Certificates for Underlying Shares subject to
legend removal hereunder shall be transmitted by the Transfer Agent to the
Purchaser by crediting the account of the Purchaser’s prime broker with the
Depository Trust Company System as directed by Purchaser.

      

      (d) In
addition to Purchaser’s other available remedies, the Company shall pay to
Purchaser, in cash, as partial liquidated damages and not as a penalty, for each
$1,000 of Underlying Shares (based on the VWAP of the Common Stock on the date
such Securities are submitted to the Transfer Agent) delivered for removal of
the restrictive legend and subject to Section 4.1(c), $10 per Trading Day
(increasing to $20 per Trading Day 5 Trading Days after such damages have begun
to accrue) for each Trading Day after the Legend Removal Date until such
certificate is delivered without a legend.  Nothing herein shall limit
Purchaser’s right to pursue actual damages for the Company’s failure to deliver
certificates representing any Securities as required by the Transaction
Documents, and Purchaser shall have the right to pursue all remedies available
to it at law or in equity including, without limitation, a decree of specific
performance and/or injunctive relief.

       

      (e) Purchaser,
severally and not jointly with the other Purchaser, agrees that Purchaser will
sell any Securities pursuant to either Rule 144 or the registration requirements
of the Securities Act, including any applicable prospectus delivery
requirements, or an exemption therefrom, and that if Securities are sold
pursuant to a registration statement filed under the Securities Act, they will
be sold in compliance with the plan of distribution set forth therein, and
acknowledges that the removal of the restrictive legend from certificates
representing Securities as set forth in this Section 4.1 is predicated upon the
Company’s reliance upon this understanding.

       

      
        
           

        

        
          23

          
            

          

        

        
           

        

      

      4.2 Acknowledgment of
Dilution.  The Company acknowledges that the issuance of the
Securities may result in dilution of the outstanding shares of Common Stock,
which dilution may be substantial under certain market
conditions.  The Company further acknowledges that its obligations
under the Transaction Documents, including without limitation its obligation to
issue the Underlying Shares pursuant to the Transaction Documents, are
unconditional and absolute and not subject to any right of set off,
counterclaim, delay or reduction, regardless of the effect of any such dilution
or any claim the Company may have against Purchaser and regardless of the
dilutive effect that such issuance may have on the ownership of the other
stockholders of the Company.

       

      4.3 Furnishing of
Information.  Until the earliest of the time that (i) Purchaser
no longer owns Securities or (ii) the Warrants have expired, the Company
covenants to timely file (or obtain extensions in respect thereof and file
within the applicable grace period) all reports required to be filed by the
Company after the date hereof pursuant to the Exchange Act even if the Company
is not then subject to the reporting requirements of the Exchange
Act.  As long as Purchaser owns Securities, if the Company is not
required to file reports pursuant to the Exchange Act, it will prepare and
furnish to the Purchaser and make publicly available in accordance with Rule
144(c) such information as is required for the Purchaser to sell the Securities
under Rule 144.  The Company further covenants that it will take such
further action as any holder of Securities may reasonably request, to the extent
required from time to time to enable such Person to sell such Securities without
registration under the Securities Act within the requirements of the exemption
provided by Rule 144.  So long as any Securities are outstanding, the
Company shall cause itself to be subject to the reporting requirements of
Section 13 or 15(d) of the Exchange Act and timely file all reports required to
be filed thereunder.

       

      4.4 Integration.  The
Company shall not sell, offer for sale or solicit offers to buy or otherwise
negotiate in respect of any security (as defined in Section 2 of the Securities
Act) that would be integrated with the offer or sale of the Securities to the
Purchaser in a manner that would require the registration under the Securities
Act of the sale of the Securities to the Purchaser or that would be integrated
with the offer or sale of the Securities for purposes of the rules and
regulations of any Trading Market.

       

      4.5 Conversion and Exercise
Procedures.  The form of Notice of Exercise included in the
Warrants and the form of Notice of Conversion included in the Note set forth the totality
of the procedures required of the Purchaser in order to exercise the Warrants or
convert the Note.  No additional legal opinion or other information or
instructions shall be required of the Purchaser to exercise their Warrants or
convert their Note.  The Company shall honor exercises of the Warrants
and conversions of the Note and shall deliver Underlying Shares in accordance
with the terms, conditions and time periods set forth in the Transaction
Documents.

       

      
        
           

        

        
          24

          
            

          

        

        
           

        

      

      4.6 Securities Laws Disclosure;
Publicity.  The Company shall, by 8:30 a.m. (New York City
time) on the Trading Day following the date hereof, issue a Current Report on
Form 8-K disclosing the material terms of the transactions contemplated hereby
and attaching the Transaction Documents as exhibits thereto.  The
Company and Purchaser shall consult with each other in issuing any other press
releases with respect to the transactions contemplated hereby, and neither the
Company nor Purchaser shall issue any such press release or otherwise make any
such public statement without the prior consent of the Company, with respect to
any press release of Purchaser, or without the prior consent of Purchaser, with
respect to any press release of the Company, which consent shall not
unreasonably be withheld or delayed, except if such disclosure is required by
law, in which case the disclosing party shall promptly provide the other party
with prior notice of such public statement or
communication.  Notwithstanding the foregoing, the Company shall not
publicly disclose the name of Purchaser, or include the name of Purchaser in any
filing with the Commission or any regulatory agency or Trading Market, without
the prior written consent of Purchaser, except (i) as required by federal
securities law in connection with (A) any registration statement filed under the
Securities Act covering the resale of the Securities, and (B) the filing of
final Transaction Documents (including signature pages thereto) with the
Commission and (ii) to the extent such disclosure is required by law or Trading
Market regulations, in which case the Company shall provide the Purchaser with
prior notice of such disclosure permitted under this clause (ii).

       

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

       

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

       

      4.9 Use of
Proceeds.  Except as set forth on Schedule 4.9 attached
hereto, the Company shall use the net proceeds from the sale of the Securities
hereunder for working capital purposes and shall not use such proceeds for (a)
the satisfaction of any portion of the Company’s debt (other than payment of
trade payables in the ordinary course of the Company’s business and prior
practices), (b) the redemption of any Common Stock or Common Stock Equivalents,
(c) the settlement of any outstanding litigation, or (d) making any investments
in securities or otherwise purchasing any equity or debt securities, including
without limitation purchasing any corporate, governmental, municipal or
auction-rate bonds or other debts instruments (whether at auction, in the open
market or otherwise), any commercial or chattel paper, or any certificates of
deposit, or investing in any money market or mutual funds.

       

      
        
           

        

        
          25

          
            

          

        

        
           

        

      

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

       

      
        
           

        

        
          26

          
            

          

        

        
           

        

      

      4.11 Reservation and Listing of
Securities.

       

      (a) The
Company shall maintain a reserve from its duly authorized shares of Common Stock
for issuance pursuant to the Transaction Documents in such amount as may be
required to fulfill its obligations in full under the Transaction
Documents.

       

      (b) If, on
any date, the number of authorized but unissued (and otherwise unreserved)
shares of Common Stock is less than the Required Minimum on such date, then the
Board of Directors shall use commercially reasonable efforts to amend the
Company’s certificate or articles of incorporation to increase the number of
authorized but unissued shares of Common Stock to at least the Required Minimum
at such time, as soon as possible and in any event not later than the 75th day
after such date.

       

      (c)  The
Company shall apply for, to the extent necessary, and cause all Underlying
Shares to be listed, quoted and traded on the OTC Bulletin Board promptly
following the Closing Date.  The Company shall (i) if applicable in
the time and manner required by the OTC Bulletin Board, prepare and file with
such market an additional shares listing application covering a number of shares
of Common Stock at least equal to the Required Minimum on the date of such
application, (ii) take all steps necessary to cause such shares of Common Stock
to be approved for listing on such market as soon as possible thereafter, (iii)
provide to the Purchaser evidence of such listing, and (iv) maintain the listing
or quoting of the Company’s Common Stock on the OTC Bulletin Board or another
Trading Market so long as the Purchaser holds any Securities, including without
limitation the Underlying Shares on any date at least equal to the Required
Minimum on such date.

       

      4.12 Future
Financing.  If after the date hereof the Company and/or its
Subsidiaries in one or more transactions issues Common Stock or Common Stock
Equivalents or other debt or equity securities in connection with a financing
(“Subsequent
Financings”), Purchaser shall have the right to compel the Company to
redeem:

       

      (a) up to 50%
of the original Principal Amount of the Note, in the event the Company receives
gross proceeds in the aggregate for all such Subsequent Financings in excess of
$2 million, and

       

      (b) up to
100% of the outstanding Principal Amount of the Note, in the event the Company
receives gross proceeds in the aggregate for all such Subsequent Financings in
excess of $3 million,

       

      in each
case in whole or in part, at a redemption price equal to the Principal Amount
being so redeemed, by delivering written notice to the Company before or after
such financing specifying the redemption date and Principal Amount to be
redeemed, provided that (i) such notice may not be delivered more than 30 days
following the final closing of such Subsequent Financing, (ii) the redemption
date specified shall not be before the first closing of such Subsequent
Financing, and (iii) Purchaser may exercise its rights hereunder both under
clause (a) above and again under clause (b) above.  On the redemption
date designated by the Purchaser (which shall be no less than five (5) Business
Days following the date of receipt by the Company of such notice from the
Purchaser), the Company shall redeem such portion of the Note elected to be
redeemed for cash in immediately available funds.

       

      
        
           

        

        
          27

          
            

          

        

        
           

        

      

      4.13 Short Sales and
Confidentiality After The Date Hereof.  Purchaser covenants
that neither it nor any Affiliate acting on its behalf or pursuant to any
understanding with it will execute any Short Sales during the period commencing
at the Discussion Time and ending at the time that the transactions contemplated
by this Agreement are first publicly announced as described in Section
4.6.  Purchaser covenants that until such time as the transactions
contemplated by this Agreement are publicly disclosed by the Company as
described in Section 4.6, Purchaser will maintain the confidentiality of the
existence and terms of this transaction and the information included in the
Disclosure Schedules.  Notwithstanding the foregoing, Purchaser does not
make any representation, warranty or covenant hereby that it will not engage in
Short Sales in the securities of the Company after the time that the
transactions contemplated by this Agreement are first publicly announced as
described in Section 4.6.  Notwithstanding the foregoing, if Purchaser is a
multi-managed investment vehicle whereby separate portfolio managers manage
separate portions of Purchaser’s assets and the portfolio managers have no
direct knowledge of the investment decisions made by the portfolio managers
managing other portions of Purchaser’s assets, the covenant set forth above
shall only apply with respect to the portion of assets managed by the portfolio
manager that made the investment decision to purchase the Securities covered by
this Agreement.

       

      4.14 Form D; Blue Sky
Filings.  The Company agrees to timely file a Form D with
respect to the Securities as required under Regulation D and to provide a copy
thereof, promptly upon request of Purchaser. The Company shall take such action
as the Company shall reasonably determine is necessary in order to obtain an
exemption for, or to qualify the Securities for, sale to the Purchaser at the
Closing under applicable securities or “Blue Sky” laws of the states of the
United States, and shall provide evidence of such actions promptly upon request
of Purchaser.

       

      4.15 Piggy-Back
Registration.  If the Company shall
determine to prepare and file with the Commission a registration statement,
prior to the time when the Underlying Shares could be sold pursuant to Rule 144,
relating to an offering for its own account or the account of others under the
Securities Act of any of its equity securities (other than on Form S-4 or Form
S-8 (each as promulgated under the Securities Act) or its then equivalents
relating to equity securities to be issued solely in connection with any
acquisition of any entity or business or equity securities issuable in
connection with stock option or other employee benefit plans), then the Company
shall send to Purchaser written notice of such determination and, if within
seven (7) Business Days after receipt of such notice, Purchaser shall so request
in writing (which request shall specify the Underlying Shares intended to be
disposed of by the Purchaser), the Company will cause the registration under the
Securities Act of all Underlying Shares which the Company has been so requested
to register by the Purchaser, to the extent required to permit the disposition
of such Underlying Shares so to be registered.  The Company shall
include in such registration statement all or any part of such Underlying Shares
Purchaser requests to be registered; provided, however, that the Company shall
not be required to register any Underlying Shares pursuant to this Section that
are eligible for sale pursuant to Rule 144 of the Securities Act.  In
the case of an underwritten public offering, if the managing underwriter(s) or
underwriter(s) should reasonably object to the inclusion of the Underlying
Shares in such registration statement, then if the Company after consultation
with the managing underwriter should reasonably determine that the inclusion of
such Underlying Shares would materially adversely affect the offering
contemplated in such registration statement, and based on such determination
recommends inclusion in such registration statement of fewer or none of the
Underlying Shares of the Purchaser, then (x) the number of Underlying Shares of
the Purchaser included in such registration statement shall be reduced pro-rata
among Purchaser (based upon the number of Underlying Shares requested to be
included in the registration), if the Company after consultation with the
underwriter(s) recommends the inclusion of fewer Underlying Shares, or (y) none
of the Underlying Shares of the Purchaser shall be included in such registration
statement, if the Company after consultation with the underwriter(s) recommends
the inclusion of none of such Underlying Shares; provided, however, that if
securities are being offered for the account of other persons or entities as
well as the Company, such reduction shall not represent a greater fraction of
the number of Underlying Shares intended to be offered by the Purchaser than the
fraction of similar reductions imposed on such other persons or entities (other
than the Company).  The Company shall keep such
Registration Statement continuously effective under the Securities Act until
such date as is the earlier of (x) the date when all Underlying Shares covered
by such Registration Statement have been sold or (y) the date on which all
Underlying Shares may be sold without any restriction pursuant to Rule 144 as
determined by the counsel to the Company pursuant to a written opinion letter,
addressed to the Company's transfer agent to such effect.  In
connection with any registration of Underlying Shares pursuant to this Section,
the Company and the Purchaser participating in such registration shall enter
into a registration rights agreement containing customary and reasonable
provisions regarding the registration of securities.

       

      
        
           

        

        
          28

          
            

          

        

        
           

        

      

      4.16 Security.  The
Company’s and any Subsidiaries’ obligations under the Note and other Transaction
Documents (other than the Warrants) shall be secured by all the Company’s and
its Subsidiaries’ Patents (as defined in the Security Agreement).  As
of the Closing, the Purchaser shall be granted a security interest in all the
Patents of the Company and its Subsidiaries, to be memorialized in the Security
Documents.  The Company shall execute such other agreements, documents
and financing statements reasonably requested by Purchaser, which will be filed
at the Company’s expense with the applicable jurisdictions and
authorities.  The Company shall also execute all such documents
reasonably necessary in the opinion of the Purchaser to memorialize and further
protect the security interests described herein.  The Purchaser may
appoint a collateral agent to represent them collectively in connection with the
security interests being granted to the Purchaser.

       

      4.17 Additional
Guarantors.   The Company shall cause each of its
Subsidiaries formed or acquired on or after the date hereof to execute and
deliver to the Purchaser a Subsidiary Guarantee and a Security Agreement in
conformity with those executed and delivered at Closing.

       

      4.18 Insurance.  So
long as any Securities remain outstanding, the Company and its Subsidiaries
shall maintain in full force and effect insurance reasonably believed by the
Company to be adequate coverage (a) on all assets and activities, covering
property loss or damage and loss of income by fire or other hazards or casualty,
and (b) against all liabilities, claims and risks for which it is customary for
companies similarly situated to the Company to insure, including without
limitation applicable product liability insurance, required workmen’s
compensation insurance, and other insurance covering injury or damage to persons
or property, but excluding directors and officers insurance
coverage.  The Company shall promptly furnish or cause to be furnished
evidence of such insurance to Purchaser so requesting same, in form and
substance reasonably satisfactory to Purchaser.

       

       

      ARTICLE
V.

      MISCELLANEOUS

       

      5.1 Termination. 
This Agreement may be terminated by Purchaser by written notice to the other
parties, if the Closing has not been consummated on or before May 10, 2008;
provided, however, that such
termination will not affect the right of any party to sue for any breach by the
other party (or parties).

       

      
        
           

        

        
          29

          
            

          

        

        
           

        

      

      5.2 Fees and
Expenses.  At the Closing, the Company has agreed to reimburse
Gemini Strategies, LLC and/or Gemini Master Fund Ltd. (collectively, “Gemini”) the
non-accountable sum of $25,000 for its legal fees and expenses, $5,000 of which
has been paid prior to the Closing.  Accordingly, in lieu of the
foregoing payments, the aggregate amount that Gemini is to pay for the
Securities at the Closing shall be reduced by $25,000 in lieu
thereof.  Except as expressly set forth in the Transaction Documents
to the contrary, each party shall pay the fees and expenses of its advisers,
counsel, accountants and other experts, if any, and all other expenses incurred
by such party incident to the negotiation, preparation, execution, delivery and
performance of this Agreement.  The Company shall pay all transfer
agent fees, stamp taxes and other taxes and duties levied in connection with the
delivery of any Securities to the Purchaser.  The amounts set forth in
this paragraph as payable by the Company shall be so payable regardless of
whether the Closing occurs.

       

      5.3 Entire
Agreement.  The Transaction Documents, together with the
exhibits and schedules thereto, contain the entire understanding of the parties
with respect to the subject matter hereof and supersede all prior agreements and
understandings, oral or written, with respect to such matters, which the parties
acknowledge have been merged into such documents, exhibits and
schedules.

       

      5.4 Notices.  Any
and all notices or other communications or deliveries required or permitted to
be provided hereunder shall be in writing and shall be deemed given and
effective on the earliest of (a) the date of transmission, if such notice or
communication is delivered via facsimile at the facsimile number set forth on
the signature pages attached hereto prior to 5:30 p.m. (New York City time) on a
Trading Day, (b) the next Trading Day after the date of transmission, if such
notice or communication is delivered via facsimile at the facsimile number set
forth on the signature pages attached hereto on a day that is not a Trading Day
or later than 5:30 p.m. (New York City time) on any Trading Day, (c) the third
Trading Day following the date of mailing, if sent by regular mail, or (d) the
Trading Day following the date on which such notice or communication is
deposited with a nationally recognized overnight courier service.  The
address for such notices and communications shall be as set forth on the
signature pages attached hereto.

       

      5.5 Amendments;
Waivers.  No provision of this Agreement may be waived,
modified, supplemented or amended except in a written instrument signed, in the
case of an amendment, by the Company and the Purchaser, or, in the case of a
waiver, by the party against whom enforcement of any such waived provision is
sought.  No waiver of any default with respect to any provision,
condition or requirement of this Agreement shall be deemed to be a continuing
waiver in the future or a waiver of any subsequent default or a waiver of any
other provision, condition or requirement hereof, nor shall any delay or
omission of any party to exercise any right hereunder in any manner impair the
exercise of any such right.

       

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

       

      5.7 Successors and
Assigns.  This Agreement shall be binding upon and inure to the
benefit of the parties and their successors and permitted
assigns.  The Company may not assign this Agreement or any rights or
obligations hereunder without the prior written consent of Purchaser (other than
by merger).  Purchaser may assign any or all of its rights under this
Agreement to any Person to whom Purchaser assigns or transfers any Securities,
provided that such transferee agrees in writing to be bound, with respect to the
transferred Securities, by the provisions of the Transaction Documents that
apply to the “Purchaser.”

       

      
        
           

        

        
          30

          
            

          

        

        
           

        

      

      5.8 No Third-Party
Beneficiaries.  This Agreement is intended for the benefit of
the parties hereto and their respective successors and permitted assigns and is
not for the benefit of, nor may any provision hereof be enforced by, any other
Person, except as otherwise set forth in Section 4.10.

       

      5.9 Governing
Law.  All questions concerning the construction, validity,
enforcement and interpretation of the Transaction Documents shall be governed by
and construed and enforced in accordance with the internal laws of the State of
California, without regard to the principles of conflicts of law
thereof.  Each party agrees that all legal proceedings concerning the
interpretations, enforcement and defense of the transactions contemplated by
this Agreement and any other Transaction Documents (whether brought against a
party hereto or its respective affiliates, directors, officers, shareholders,
employees or agents) shall be commenced exclusively in the state and federal
courts sitting in San Diego County, California.  Each party hereby
irrevocably submits to the exclusive jurisdiction of the state and federal
courts sitting in San Diego County, California for the adjudication of any
dispute hereunder or in connection herewith or with any transaction contemplated
hereby or discussed herein (including with respect to the enforcement of any of
the Transaction Documents), and hereby irrevocably waives, and agrees not to
assert in any suit, action or proceeding, any claim that it is not personally
subject to the jurisdiction of any such court, that such suit, action or
proceeding is improper or is an inconvenient venue for such
proceeding.  Each party hereby irrevocably waives personal service of
process and consents to process being served in any such suit, action or
proceeding by mailing a copy thereof via registered or certified mail or
overnight delivery (with evidence of delivery) to such party at the address in
effect for notices to it under this Agreement and agrees that such service shall
constitute good and sufficient service of process and notice
thereof.  Nothing contained herein shall be deemed to limit in any way
any right to serve process in any other manner permitted by
law.   If either party shall commence an action or proceeding to
enforce any provisions of the Transaction Documents, then the prevailing party
in such action or proceeding shall be reimbursed by the other party for its
reasonable attorneys’ fees and other costs and expenses incurred with the
investigation, preparation and prosecution of such action or
proceeding.

       

      5.10 Survival.  The
representations and warranties shall survive the Closing and the delivery of the
Securities for the applicable statue of limitations.

       

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

       

      
        
           

        

        
          31

          
            

          

        

        
           

        

      

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

       

      5.13 Rescission and Withdrawal
Right.  Notwithstanding anything to the contrary contained in
(and without limiting any similar provisions of) any of the other Transaction
Documents, whenever Purchaser exercises a right, election, demand or option
under a Transaction Document and the Company does not timely perform its related
obligations within the periods therein provided, then Purchaser may rescind or
withdraw, in its sole discretion from time to time upon written notice to the
Company, any relevant notice, demand or election in whole or in part without
prejudice to its future actions and rights; provided, however, in the case
of a rescission of a conversion of a Note or exercise of a Warrant, the
Purchaser shall be required to return any shares of Common Stock delivered in
connection with any such rescinded conversion or exercise notice.

       

      5.14 Replacement of
Securities.  If any certificate or instrument evidencing any
Securities is mutilated, lost, stolen or destroyed, the Company shall issue or
cause to be issued in exchange and substitution for and upon cancellation
thereof (in the case of mutilation), or in lieu of and substitution therefor, a
new certificate or instrument, but only upon receipt of evidence reasonably
satisfactory to the Company of such loss, theft or destruction.  The
applicant for a new certificate or instrument under such circumstances shall
also pay any reasonable third-party costs (including customary indemnity)
associated with the issuance of such replacement Securities.

       

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

       

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

       

      
        
           

        

        
          32

          
            

          

        

        
           

        

      

      5.17 Usury.  To
the extent it may lawfully do so, the Company hereby agrees not to insist upon
or plead or in any manner whatsoever claim, and will resist any and all efforts
to be compelled to take the benefit or advantage of, usury laws wherever
enacted, now or at any time hereafter in force, in connection with any claim,
action or proceeding that may be brought by Purchaser in order to enforce any
right or remedy under any Transaction Document.  Notwithstanding any
provision to the contrary contained in any Transaction Document, it is expressly
agreed and provided that the total liability of the Company under the
Transaction Documents for payments in the nature of interest shall not exceed
the maximum lawful rate authorized under applicable law (the “Maximum Rate”), and,
without limiting the foregoing, in no event shall any rate of interest or
default interest, or both of them, when aggregated with any other sums in the
nature of interest that the Company may be obligated to pay under the
Transaction Documents exceed such Maximum Rate.  It is agreed that if
the maximum contract rate of interest allowed by law and applicable to the
Transaction Documents is increased or decreased by statute or any official
governmental action subsequent to the date hereof, the new maximum contract rate
of interest allowed by law will be the Maximum Rate applicable to the
Transaction Documents from the effective date forward, unless such application
is precluded by applicable law.  If under any circumstances
whatsoever, interest in excess of the Maximum Rate is paid by the Company to
Purchaser with respect to indebtedness evidenced by the Transaction Documents,
such excess shall be applied by Purchaser to the unpaid principal balance of any
such indebtedness or be refunded to the Company, the manner of handling such
excess to be at Purchaser’s election.

       

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

       

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

       

      5.20 Construction. The
parties agree that each of them and/or their respective counsel has reviewed and
had an opportunity to revise the Transaction Documents and, therefore, the
normal rule of construction to the effect that any ambiguities are to be
resolved against the drafting party shall not be employed in the interpretation
of the Transaction Documents or any amendments hereto.

       

      
        
           

        

        
          33

          
            

          

        

        
           

        

      

      5.21 Waiver of Jury
Trial.  In any action, suit or proceeding in any jurisdiction
brought by any party against any other party, the parties each knowingly and
intentionally, to the greatest extent permitted by applicable law, hereby
absolutely, unconditionally, irrevocably and expressly waives forever trial by
jury.

       

      

       

      (Signature
Pages Follow)

       

      
        
           

        

        
          34

          
            

          

        

        
           

        

      

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

       

      
        	
                INTERNATIONAL
      STEM CELL CORPORATION

                 

              	
                Address for
      Notice:

                2595
      Jason Court

                Oceanside,
      CA 92056

              
	
                By:
      /s/ Kenneth C.
      Aldrich__________

                     Name:
      Kenneth C. Aldrich

                     Title:
      Chief Executive Officer

                 

              	
                Fax:
      760-940-6383

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

                 

                 

                 

                 

                 

                 

              	 
      

      

      

      [REMAINDER
OF PAGE INTENTIONALLY LEFT BLANK

      SIGNATURE
PAGES FOR PURCHASER FOLLOWS]

       

      
        
           

        

        
          35

          
            

          

        

        
           

        

      

      [PURCHASER
SIGNATURE PAGES TO ISCO SECURITIES PURCHASE AGREEMENT]

      

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

       

      Name of
Purchaser:                                           GEMINI
MASTER FUND, LTD.

      By: GEMINI STRATEGIES, LLC, as
investment manager

      Signature of Authorized Signatory of
Purchaser: By:
/s/ Steven Winters

       

      Name of
Authorized Signatory: Steven Winters

       

      Title of
Authorized Signatory: President

       

      Email
Address of Purchaser: steve@geministrategies.com

       

      Facsimile
Number of Purchaser: (858) 509-8808

       

      Address
for Notice of Purchaser:

       

      
        
          	
                  c/o
      Gemini Strategies, LLC

                	
                  with
      copy to

                
	
                  135
      Liverpool Drive, Suite C

                	
                  Peter
      J. Weisman, P.C.

                
	
                  Cardiff,
      CA  92007

                	
                  153
      East 53rd
      Street, 29th
      Floor

                
	
                  Attn:  Steven
      Winters

                	
                  New
      York, NY  10022

                
	
                  Fax:
      (858) 509-8808

                	
                  Fax:
      (212) 433-1361

                
	
                  Email:  steve@geministrategies.com

                	
                  Email:  pweisman@pweisman.com

                

        

      

       

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

      

      

      

      

      Subscription
Amount: $850,000

      

      Principal
Amount: $1,000,000

      

      Warrant
Shares: 2,000,000

      
 

       

       

      

      36

Source: [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00142-of-00352.parquet"}, [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00142-of-00352.parquet"}]]