Document:

Exhibit
      10.1

    

    Execution
      Version

    

    

    

    

    

    

    

    

    

    

    

    

    

    

    

    

    

    

    ALTEON
      INC.

    

    SERIES
      B PREFERRED STOCK AND WARRANT PURCHASE AGREEMENT

    

    April
      5, 2007

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

    
      
         

      

      
         

        
          

        

      

      
         

      

    

    

    SERIES
      B
      PREFERRED STOCK AND WARRANT PURCHASE AGREEMENT

    

    This
      Series B Preferred Stock and Warrant Purchase Agreement (this “Agreement”)
      is
      dated as of April 5, 2007, among Alteon Inc., a Delaware corporation (the
“Company”),
      and
      each purchaser identified on the signature pages hereto (each, including its
      successors and assigns, a “Purchaser”
and
      collectively the “Purchasers”).

     

    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 each
      Purchaser, and each Purchaser, severally and not jointly, 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 each Purchaser agree as
      follows:

     

    ARTICLE
      I.

    DEFINITIONS

     

    1.1  Definitions

     

    In
      addition to the terms defined elsewhere in this Agreement, for all purposes
      of
      this Agreement, the following terms have the meanings indicated in this Section
      1.1:

     

    “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 144 under the Securities Act,
provided,
      however,
      that
      for the avoidance of doubt it is acknowledged and agreed that Atticus Global
      Advisors, Ltd. and Green Way Managed Account Series, Ltd., in respect of its
      segregated account, Green Way Portfolio D, are affiliates. 

     

    “Amended
      and Restated Certificate of Incorporation”
means
      that certain Amended and Restated Certificate of Incorporation to be filed
      with
      the Secretary of State of the State of Delaware in substantially the form
      attached hereto as Exhibit
      A.

     

    “Business
      Day”
means
      any day except Saturday, Sunday, any day which shall be 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 all conditions precedent to (i) the Purchasers’
obligations to pay the Subscription Amount and (ii) the Company’s obligations to
      deliver the Securities have been satisfied or waived.

     

    
      
         

      

      
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    “Closing
      Price”
means
      on any particular date (a) the last reported closing price per share of
      Common Stock on such date on the Trading Market (as reported by Bloomberg L.P.
      at 4:15 PM (New York time)), or (b) if there is no such price on such date,
      then
      the closing price on the Trading Market on the date nearest preceding such
      date
      (as reported by Bloomberg L.P. at 4:15 PM (New York time)), or (c) if the OTC
      Bulletin Board is not a Trading Market, the volume weighted average price of
      the
      Common Stock for such date (or the nearest preceding date) on the OTC Bulletin
      Board or (d)  if the Common Stock is not then listed or quoted on the
      Trading Market or 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 price per share of the Common Stock so reported, or (e) if the
      shares of Common Stock are not then publicly traded the fair market value of
      a
      share of Common Stock as determined by an appraiser selected in good faith
      by
      the Purchasers representing at least a majority in interest of the Shares to
      be
      purchased hereunder.

     

    “Commission”
means
      the Securities and Exchange Commission.

     

    “Common
      Stock”
means
      the common stock of the Company, par value $0.01 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
      Mintz Levin Cohn Ferris Glovsky and Popeo P.C.

     

    “Conversion
      Shares”
means
      the shares of Common Stock of the Company issuable upon conversion of the Series
      B Preferred Stock.

     

    “Convertible
      Promissory Notes”
means
      those certain Senior Convertible Secured Promissory Notes of the Company in
      an
      aggregate principal amount of $3,000,000 each dated January 11, 2007, issued
      pursuant to the Note and Warrant Purchase Agreement.

     

    “Disclosure
      Schedules”
means
      the Disclosure Schedules of the Company delivered concurrently herewith.

     

    “Effective
      Date”
means
      the date that the initial Registration Statement filed by the Company pursuant
      to the Registration Rights Agreement is first declared effective by the
      Commission.

     

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

    

    
      
         

      

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

     

    “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.

     

    “Note
      and Warrant Purchase Agreement”
means
      the Note and Warrant Purchase Agreement dated January 11, 2007 by and among
      the
      Company and the lenders named therein.

     

    “Per
      Share Purchase Price”
means
      50% of the average Closing Price of the Common Stock for the fifteen (15)
      Trading Days beginning after the later of the Shareholder Meeting or
      implementation of the Reverse Stock Split. The per share price shall in no
      event
      (i) exceed the equivalent of $0.075 per share immediately prior to the Reverse
      Stock Split or (ii) be less than the equivalent of $0.05 per share immediately
      prior the Reverse Stock Split.

     

    “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.

     

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

     

    “Proxy
      Statement”
means
      that certain Proxy Statement to be prepared by the Company and submitted to
      the
      Commission for review and comment in order to properly call and notice the
      Shareholder Meeting.

     

    “Registration
      Rights Agreement”
means
      the Registration Rights Agreement, dated the date hereof, among the Company
      and
      the Purchasers, in the form of Exhibit
      B
      attached
      hereto.

     

    “Registration
      Statement”
means
      a
      registration statement meeting the requirements set forth in the Registration
      Rights Agreement and covering the resale by the Purchasers of the Shares and
      the
      Warrant Shares. 

     

    “Reverse
      Stock Split”
shall
      have the meaning ascribed to such term in Section 4.11.

     

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

     

    
      
         

      

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

     

    “Securities”
means
      the Shares, the Conversion Shares, the Warrants and the Warrant
      Shares.

     

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

     

    “Series
      B Preferred Stock”
means
      the Series B Preferred Stock of the Company, $.01 par value per
      share.

     

    “Shares”
means
      the shares of Series B Preferred Stock issued or issuable to each Purchaser
      pursuant to this Agreement.

     

    “Shareholder
      Meeting”
means
      that certain meeting of the Company’s stockholders currently anticipated to be
      held on or prior to April 30, 2007, unless the proxy statement relating to
      the
      Shareholder Meeting is reviewed by the Commission, in which case such date
      shall
      be extended to May 31, 2007. 

     

    “Short
      Sales”
shall
      include 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). 

     

    “Significant
      Holder”
shall
      mean any beneficial holder or holder of record of at least that number of shares
      of Series B Preferred Stock as is equal to $4,000,000 divided by the Per Share
      Purchase Price (as adjusted for stock splits, stock dividends, reverse stock
      splits or the like). All shares of Series B Preferred Stock held or acquired
      by
      affiliated entities or persons shall be aggregated together for the purpose
      of
      determining the status of a holder as a Significant Holder.

     

    “Subscription
      Amount”
means,
      as to each Purchaser, the aggregate amount to be paid for Shares and Warrants
      purchased hereunder in United States Dollars and in immediately available funds,
      in an aggregate amount for all Purchasers equal to $25,000,000, including the
      principal and accrued but unpaid interest on the Convertible Promissory
      Notes.

     

    “Trading
      Day”
means
      a
      day on which the Common Stock is traded on a Trading Market.

     

    “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 Nasdaq Capital Market, the American
      Stock Exchange, the New York Stock Exchange, or the Nasdaq Global
      Market.

     

    “Transaction
      Documents”
means
      this Agreement, the Warrants, the Registration Rights Agreement and any other
      documents or agreements executed in connection with the transactions
      contemplated hereunder.

     

    
      
         

      

      
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    “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 for trading as reported by Bloomberg Financial 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 OTC Bulletin Board is not a Trading Market, the volume
      weighted average price of the Common Stock for such date (or the nearest
      preceding date) on the OTC Bulletin Board; (c) if the Common Stock is not then
      quoted for trading 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
      (d) 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 applicable
      Purchaser and reasonably acceptable to the Company. 

     

    “Warrants”
means
      collectively the Series B Preferred Stock purchase warrants, in the form of
      Exhibit
      C
      delivered to the Purchasers at the Closing in accordance with Section 2.2(b)
      hereof, which Warrants shall be exercisable six months after the Closing Date
      and have a term of exercise equal to five years.

     

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

     

    ARTICLE
      II.
PURCHASE
      AND SALE

     

    2.1  Closing.
      On the Closing Date, upon the terms and subject to the conditions set forth
      herein, (i) as consideration for receipt of the Subscription Amounts the Company
      agrees to sell, and each Purchaser, severally and not jointly, agrees to
      purchase the allocation, as set forth opposite such Purchaser’s name on Schedule
      A attached hereto, of Shares and Warrants at the Per Share Purchase Price and
      (ii) the Convertible Promissory Notes plus all accrued but unpaid interest
      thereon will be automatically converted pursuant to their terms, and will be
      of
      no further force or effect. Each Purchaser shall deliver to the Company via
      wire
      transfer or a certified check immediately available funds equal to their
      Subscription Amount, as set forth opposite their names on Schedule A attached
      hereto, and the Company shall deliver to each Purchaser their respective Shares
      and Warrants, as set forth opposite their names on Schedule A attached hereto,
      and the other items set forth in Section 2.2 issuable at the Closing; provided
      that the Subscription Amount for any holder of Convertible Promissory Notes
      shall be credited for the amount of principal and accrued interest thereon.
      Upon
      satisfaction of the conditions set forth in Sections 2.2 and 2.3, the Closing
      shall occur at the offices of Company Counsel, or such other location as the
      parties shall mutually agree.

     

    

    
      
         

      

      
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    2.2  Deliveries.

     

    (a)  On
      the
      date hereof, the Company and each of the Purchasers shall deliver or cause
      to be
      delivered to the other, this Agreement, together with all exhibits and schedules
      attached thereto, duly executed by an authorized representative. 

     

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

     

    (i)  a
      legal
      opinion of Company Counsel dated the Closing Date, in the form of Exhibit
      D
      attached
      hereto; 

     

    (ii)  a
      copy of
      the irrevocable instructions to the Company’s transfer agent instructing the
      transfer agent to deliver, on an expedited basis, a certificate evidencing
      a
      number of Shares equal to such Purchaser’s Subscription Amount divided by the
      Per Share Purchase Price, including any Shares issuable upon conversion of
      the
      Convertible Promissory Notes, each registered in the name of such
      Purchaser;

     

    (iii)  a
      certificate of the Secretary of the Company dated the Closing Date, certifying
      the incumbency and authority of the officers or authorized signatories of the
      Company who execute this Agreement and the other Transaction Documents and
      the
      truth, correctness and completeness of the following exhibits which shall be
      attached thereto: (i) a copy of resolutions duly adopted by the Board of
      Directors of the Company, in full force and effect at the time this Agreement
      is
      entered into, authorizing the execution of this Agreement and the other
      Transaction Documents and the consummation of the transactions contemplated
      herein and therein, (ii) a copy of the Amended and Restated Certificate of
      Incorporation of the Company, as amended through the Closing Date, and as filed
      with and accepted and certified by an appropriate official of the Company’s
      jurisdiction of incorporation, and (iii) a copy of the By-Laws of the Company,
      as amended through the Closing Date;

     

    (iv)  a
      Warrant
      registered in the name of such Purchaser to purchase up to a number of shares
      of
      Series B Preferred Stock equal to twenty five (25%) percent of such Purchaser’s
      Subscription Amount, divided by the Per Share Purchase Price; and

     

    (v)  the
      Registration Rights Agreement duly executed by the Company.

     

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

     

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

     

    (ii)  the
      Registration Rights Agreement duly executed by such Purchaser; 

     

    (iii)  if
      applicable, such Purchaser’s originally executed Convertible Promissory Note;

     

    
      
         

      

      
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    (iv)  if
      applicable, evidence of the filing of a UCC-3 termination statement with respect
      to any UCC-1 financing statement filed in connection with the Note and Warrant
      Purchase Agreement; and 

     

    (v)  if
      applicable, evidence of the termination of the security interest filed against
      the Company’s intellectual property with the United States Patent and Trademark
      Office pursuant to that certain Intellectual Property Security Agreement entered
      into contemporaneously with the Note and Warrant Purchase
      Agreement.

     

    2.3  Closing
      Conditions. 

     

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

     

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

     

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

     

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

     

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

     

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

     

    (ii)  all
      obligations, covenants and agreements of the Company contained herein 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(b) of this
      Agreement; 

     

    (iv)  the
      approval by the stockholders of the Company as to all matters in connection
      with
      the Reverse Stock Split and the issuance of the Securities at the Shareholder
      Meeting and the other matters set forth in Section 4.11;

     

    (v)  the
      filing with the Secretary of State of the State of Delaware of the Amended
      and
      Restated Certificate of Incorporation;

     

    
      
         

      

      
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    (vi)  from
      the
      date hereof to the Closing Date, trading in the Common Stock shall not have
      been
      suspended by the Commission or the Company’s principal Trading Market (except
      for any suspension of trading of limited duration agreed to by the Company,
      which suspension shall be terminated prior to the Closing), and, at any time
      prior to the Closing Date, trading in securities generally as reported by
      Bloomberg Financial Markets 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; and

     

    (vii)  the
      Company and its Board of Directors shall have taken all necessary action, if
      any, in order to render inapplicable any control share acquisition, business
      combination, poison pill (including any distribution under that certain Amended
      and Restated Stockholders’ Rights Agreement, dated as of July 25, 2005, between
      the Company and American Stock Transfer & Trust Company, as amended, and any
      other rights agreement) or other similar anti-takeover provision under
      the
      Amended
      and Restated Certificate of Incorporation
      or the
      laws of the jurisdiction of its formation which is or could become applicable
      to
      (i) any Purchaser as a result of the transactions contemplated by this
      Agreement, including, without limitation, the Company’s issuance of the
      Securities and any Purchaser’s ownership of the Securities and (ii) the
      Purchasers and their affiliates for a period of not less than five (5) years
      after the Closing Date.

     

    ARTICLE
      III.

    REPRESENTATIONS
      AND WARRANTIES

     

    3.1  Representations
      and Warranties of the Company. As of the date hereof, and as of the Closing,
      the
      Company hereby acknowledges, represents, warrants and/or agrees as
      follows:

     

    (a)  Organization,
      Standing and Qualification of the Company.
      The
      Company is a corporation duly organized, validly existing and in good standing
      under the laws of the State of Delaware. The Company has all requisite corporate
      power and authority to own and operate its properties and to carry on its
      business as now being conducted and as proposed to be conducted. The Company
      is
      duly qualified to do business as a foreign corporation and is in good standing
      in each jurisdiction in which failure to so qualify would materially and
      adversely affect the business, properties, operations or condition, financial
      or
      otherwise, of the Company. The resolutions adopted by the directors of the
      Company on March 30, 2007 authorizing the transactions contemplated by this
      Agreement have not been amended or modified in any way, have not been rescinded
      and are in full force and effect on the date hereof.

     

    (b)  Corporate
      Authority; Enforceability.
      The
      Company has full right, power and authority to issue and sell the Securities
      as
      herein contemplated and the Company has full power and authority to enter into
      and perform its obligations under this Agreement, the Securities, the Amended
      and Restated Certificate of Incorporation and the Registration Rights Agreement.
      The execution and delivery of this Agreement, the Securities, the Amended and
      Restated Certificate of Incorporation and the Registration Rights Agreement
      by
      the Company and the consummation of the transactions contemplated herein and
      therein have been duly authorized and approved by all requisite corporate
      action, and each of this Agreement, the Securities, the Amended and Restated
      Certificate of Incorporation and the Registration Rights Agreement are a valid
      and legally binding obligation of the Company; provided, however, that the
      issuance of the Securities and the conversion of the Convertible Promissory
      Notes will require approval of the Company’s stockholders under the applicable
      rules of the American Stock Exchange, which approval will be sought at the
      Shareholder Meeting, but as of the date hereof, has not been obtained.

     

    
      
         

      

      
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    (c)  Conflicts.
      Subject
      to Section 3.1(b)(i) and (ii) above, neither the authorization, execution and
      delivery of this Agreement, the Securities and the Registration Rights Agreement
      nor the consummation of the transactions herein and therein contemplated, will
      (i) conflict with or result in a breach of any of the terms of the Company’s
      Certificate of Incorporation or By-Laws, (ii) violate any judgment, order,
      injunction, decree or award of any court or governmental body, having
      jurisdiction over the Company, against or binding on the Company or to which
      its
      property is subject, (iii) violate any material law or regulation of any
      jurisdiction which is applicable to the Company, (iv) violate, conflict with
      or
      result in the breach or termination of, or constitute a default under, the
      terms
      of any material agreement to which the Company is a party, except for such
      violations or defaults which do not materially and adversely affect the
      business, assets, operations or financial condition of the Company, or (v)
      violate or conflict with the rules and regulations of the American Stock
      Exchange applicable to the Company.

     

    (d)  Capitalization.
      The
      capitalization of the Company is as set forth on Schedule 3.1(d) attached
      hereto. 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 and
      the issuance of shares of Common Stock to employees pursuant to the Company’s
      employee stock purchase plan outstanding as of the date of the most recently
      filed periodic report under the Exchange Act. All of the outstanding shares
      of
      capital stock of the Company are validly issued, fully paid and nonassessable.
      No further approval or authorization of any stockholder or the Board of
      Directors of the Company is required for the issuance and sale, except as
      described in Section 3.1(b)(i) above. The issuance of the Securities pursuant
      to
      the provisions of this Agreement will not violate any preemptive rights or
      rights of first refusal granted by the Company that will not be validly waived
      or complied with, and will be free of any liens or encumbrances, other than
      any
      liens or encumbrances created by or imposed upon the Purchasers through no
      action of the Company. 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. 

     

    (e)  Litigation.
      There
      are no actions, suits or proceedings at law or in equity or by or before any
      governmental instrumentality or other agency or regulatory authority now
      pending, or, to the best knowledge of the Company, threatened against the
      Company which, if adversely determined, could materially and adversely affect
      the business, assets, operations or condition, financial or otherwise, of the
      Company. There is no action, suit or proceeding by the Company currently pending
      or that the Company currently intends to initiate.

     

    
      
         

      

      
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    (f)  Compliance
      with Laws.
      The
      Company is not in violation of any statute, law, rule or regulation, or in
      default with respect to any judgment, writ, injunction, decree, rule or
      regulation of any court or governmental agency or instrumentality, except for
      such violations or defaults which do not materially and adversely affect the
      business, assets, operations or condition, financial or otherwise, of the
      Company.

     

    (g)  Governmental
      Consents.
      Subject
      to the accuracy of the representations and warranties of the Purchasers set
      forth herein, no registration or filing with, or consent or approval of or
      other
      action by, any Federal, state or other government agency under laws and
      regulations thereof as now in effect is or will be necessary for the valid
      execution, delivery and performance by the Company of this Agreement and the
      Registration Rights Agreement, and the issuance, sale and delivery of the
      Securities, other than the filing of a Form D with the Commission and the
      filings required by state securities law.

     

    (h)  Title.
      The
      Company has good and marketable title in fee simple to all real property and
      good and marketable title to all personal property owned by it which is material
      to the business of the Company, in each case free and clear of all liens,
      encumbrances and defects except such as do not materially affect the value
      of
      such property and do not interfere with the use made and proposed to be made
      of
      such property by the Company. Any real property and facilities held under lease
      by the Company are held by it under valid, subsisting and enforceable leases
      with such exceptions as are not material and do not interfere with the use
      made
      and proposed to be made of such property and buildings by the
      Company.

     

    (i)  Regulatory
      Matters.
      The
      clinical, pre-clinical and other trials, studies and tests conducted by or
      on
      behalf of or sponsored by the Company relating to its pharmaceutical product
      candidates were and, if still pending, are being conducted in all material
      respects in accordance with medical and scientific protocols and research
      procedures that the Company reasonably believes are appropriate. The
      descriptions of the results of such trials, studies and tests as set forth
      in
      the SEC Documents (as defined in Section 4(k)), provided to the Purchasers
      are
      accurate in all material respects and fairly present the data derived from
      such
      trials, studies and tests. The Company has operated and currently is in
      compliance in all material respects with applicable statutes and implementing
      regulations administered or enforced by the United States Food and Drug
      Administration (“FDA”).
      Except as set forth in the SEC Documents, the Company has not received any
      warning letters or written correspondence from the FDA and/or any other
      governmental entity requiring the termination, suspension or modification of
      any
      clinical, pre-clinical and other trials, studies or tests that are material
      to
      the Company. The Company has submitted to the FDA an Investigational New Drug
      Application or amendment or supplement thereto for all clinical trials it has
      conducted or sponsored or is conducting or sponsoring with respect to its
      product candidates termed “Alagebrium” and “ALT-2074” (the “Specified
      Candidates”),
      and
      all such submissions were in material compliance with applicable laws and rules
      and regulations when submitted and no material deficiencies are presently being
      asserted by the FDA with respect to any such submissions. None of the clinical
      trials that the Company is currently conducting or sponsoring or intends to
      conduct or sponsor with respect to the Specified Candidates is subject to any
      temporary or permanent clinical hold by the FDA or any other government agency,
      and the Company has no reason to believe that such clinical trials will be
      subject to any such action.

     

    
      
         

      

      
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    (j)  Material
      License Agreements.
      Each of
      the Material License Agreements (as defined below) is in full force and effect,
      and neither the Company nor, to its knowledge, the licensor, is in breach of
      any
      Material License Agreement and the Company is aware of no circumstances or
      grounds that would reasonably be expected to give rise to a claim of material
      breach or right of rescission, termination, revision, or amendment of any
      Material License Agreement. True and correct copies of the Material Agreements
      have been provided to the Purchasers, and no amendment or other modification
      with respect to such Material Agreements has been entered into by the Company.
      As used herein, the term “Material
      License Agreement”
shall
      mean: Exclusive License Agreement dated as of September 28, 2004 by and between
      Oxis International, a Delaware corporation, and HaptoGuard, as amended on March
      22, 2005, as further amended on July 19, 2006, and as further amended on April
      2, 2007; and License and Research Agreement dated as of July 12, 2004 by and
      between BIO-RAP Technologies, Ltd., an Israeli corporation, on its own behalf
      and on behalf of the Rappaport Family Institute for Research in the Medical
      Sciences, and HaptoGuard, as amended on April 1, 2007. 

     

    (k)  SEC
      Documents; Financial Statements.
      During
      the two (2) years prior to the date hereof, the Company has filed all
      reports, schedules, forms, statements and other documents required to be filed
      by it with the Commission pursuant to the reporting requirements of the Exchange
      Act (all of the foregoing filed prior to the date hereof and all exhibits
      included therein and financial statements, notes and schedules thereto and
      documents incorporated by reference therein being hereinafter referred to as
      the
“SEC
      Documents”).
      The
      Company has delivered to the Purchasers or their respective representatives
      true, correct and complete copies of each of the SEC Documents not available
      on
      the Electronic Data Gathering, Analysis, and Retrieval system of the Commission
      (“EDGAR”)
      that
      have been requested by each Purchaser. As of their respective dates, the SEC
      Documents complied as to form in all material respects with the requirements
      of
      the Exchange Act and the rules and regulations of the Commission promulgated
      thereunder applicable to the SEC Documents, and none of the SEC Documents,
      at
      the time they were filed with the Commission, 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. As of their
      respective dates, the financial statements of the Company included in the SEC
      Documents complied as to form in all material respects with applicable
      accounting requirements and the published rules and regulations of the
      Commission with respect thereto as in effect as of the time of filing. Such
      financial statements have been prepared in accordance with generally accepted
      accounting principles (“GAAP”),
      consistently applied, during the periods involved (except (i) as may be
      otherwise indicated in such financial statements or the notes thereto, or
      (ii) in the case of unaudited interim statements, to the extent they may
      exclude footnotes or may be condensed or summary statements) and fairly present
      in all material respects the financial position of the Company as of the dates
      thereof and the results of its operations and cash flows for the periods then
      ended (subject, in the case of unaudited statements, to normal year-end audit
      adjustments). The Company has no liabilities or obligations required to be
      disclosed in the SEC Documents that are not so disclosed in the SEC Documents,
      other than those incurred in the ordinary course of the Company’s business. The
      information contained in the Company’s interim balance sheet as of November 30,
      2006 is true and correct in all material respects.

     

    
      
         

      

      
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    (l)  Sarbanes-Oxley;
      Internal Accounting Controls.
      Except
      as set forth in Part I - Item 4 of the Company’s Quarterly Report on Form 10-Q
      for the quarter ended September 30, 2006 (the “Specified
      Weakness”),
      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 is taking
      all reasonable measures to implement remedial controls to address the Specified
      Weakness. The Company maintains a system of internal accounting controls
      sufficient to provide reasonable assurance that (i) transactions are executed
      in
      accordance with management’s general or specific authorizations, (ii)
      transactions are recorded as necessary to permit preparation of financial
      statements in conformity with 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.

     

    (m)  Absence
      of Changes.
      Except
      as disclosed in Schedule 3.1(m), since September 30, 2006, and except as
      otherwise disclosed in the SEC Documents, the Company has not (i) declared
      or paid any dividends, (ii) sold any assets, individually or in the
      aggregate, in excess of One Hundred Thousand Dollars ($100,000) outside of
      the
      ordinary course of business, or (iii) had capital expenditures,
      individually or in the aggregate, in excess of One Hundred Thousand Dollars
      ($100,000). During the two (2) years prior to the date hereof, except as
      disclosed in the SEC Documents (i) the Common Stock has been designated for
      quotation on the American Stock Exchange, (ii) trading in the Common Stock
      has not been suspended by the Commission or the American Stock Exchange and
      (iii) the Company has received no communication, written or oral, from the
      Commission or the American Stock Exchange regarding the suspension or delisting
      of the Common Stock from the American Stock Exchange. The Company has not taken
      any steps to seek protection pursuant to any bankruptcy law nor does the Company
      have any knowledge or reason to believe that its creditors intend to initiate
      involuntary bankruptcy proceedings or any actual knowledge of any fact which
      would reasonably lead any creditor or creditors having claims individually
      or in
      the aggregate in excess of One Hundred Thousand Dollars ($100,000) to do so.
      Based on the financial condition of the Company as of the Closing, after giving
      effect to the receipt by the Company of the proceeds from the transactions
      contemplated hereby, the Company reasonably believes that (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, without limitation, known contingent liabilities and the principal
      and interest on the Convertible Notes) 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, including, without limitation, with respect to the
      principal and interest on the Convertible Notes. 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 SEC Documents set forth as of the dates thereof all outstanding
      secured and unsecured Indebtedness of the Company or any Subsidiary, or for
      which the Company or any Subsidiary has commitments. For the purposes of this
      Agreement, “Indebtedness”
shall
      mean (a) any liabilities for borrowed money or amounts owed (other than trade
      accounts payable incurred in the ordinary course of business), (b) all
      guaranties, endorsements and other contingent obligations in respect of
      Indebtedness of others, whether or not the same are or should be reflected
      in
      the Company’s balance sheet (or the notes thereto), except guaranties by
      endorsement of negotiable instruments for deposit or collection or similar
      transactions in the ordinary course of business; and (c) the present value
      of
      any lease payments due under leases required to be capitalized in accordance
      with GAAP. Neither the Company nor any Subsidiary is in default with respect
      to
      any Indebtedness.

     

    
      
         

      

      
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    (n)  Patents
      and Trademarks.
      The
      Company has 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 its business as described
      in
      the SEC Documents and which the failure to so have would have a material adverse
      effect on the results of operations, assets, business, or condition (financial
      or otherwise) of the Company (collectively, the “Intellectual
      Property Rights”).
      The
      Company has not received any notice (written or otherwise) that the Intellectual
      Property Rights used by the Company violate or infringe upon the rights of
      any
      other person or entity. To the knowledge of the Company, all such Intellectual
      Property Rights are enforceable and there is no existing infringement by another
      person or entity of any of the Intellectual Property Rights. The Company has
      taken reasonable security measures to protect the secrecy, confidentiality
      and
      value of all of its Intellectual Property Rights.

     

    
      
         

      

      
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    (o)  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 on the results of operations,
      assets, business, prospects or condition (financial or otherwise) of the
      Company. To the knowledge of the Company, no executive officer 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, and the continued employment of each such executive officer does
      not
      subject the Company to any liability with respect to any of the foregoing
      matters. The Company is 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 on the results of operations, assets,
      business, prospects or condition (financial or otherwise) of the
      Company.

     

    (p)  Offering.
      Assuming the accuracy of the representations and warranties of the Purchasers
      contained in Section 3.2 hereof, the offer, issue, and sale of the
      Securities are exempt from the registration and prospectus delivery requirements
      of the Securities Act and the registration or qualification requirements of
      all
      applicable state securities laws.
      Neither
      the Company nor any authorized agent acting on its behalf will knowingly take
      any action hereafter that would cause the loss of such exemptions.

     

    (q)  Acknowledgment.
      The
      Company acknowledges and agrees that each Purchaser is acting solely in the
      capacity of an arm’s length purchaser with respect to the Securities and the
      transactions contemplated hereby and thereby and that no Purchaser is
      (i) an officer or director of the Company, (ii) an Affiliate of the
      Company or (iii) to the knowledge of the Company, a “beneficial owner” of
      more than 10% of the shares of Common Stock (as defined for purposes of Rule
      13d-3 of the Exchange Act). The Company further acknowledges that no Purchaser
      is acting as a financial advisor or fiduciary of the Company (or in any similar
      capacity) with respect to this Agreement and the transactions contemplated
      hereby, and any advice given by any Purchaser or any of its representatives
      or
      agents in connection with this Agreement and the transactions contemplated
      hereby is merely incidental to such Purchaser’s purchase of the Securities. The
      Company further represents to each Purchaser that the Company’s decision to
      enter into this Agreement, the Amended and Restated Certificate of Incorporation
      and the Registration Rights Agreement and issue the Securities has been based
      solely on the independent evaluation by the Company and its
      representatives.

     

    (r)  No
      General Solicitation; Placement Agent’s Fees.
      Neither
      the Company, nor any of its Affiliates, nor 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 of the Securities Act) in connection with
      the offer or sale of the Securities. The Company shall be responsible for the
      payment of any placement agent’s fees, financial advisory fees, or brokers’
commissions (other than for persons engaged by any Purchaser or its investment
      advisor) relating to or arising out of the transactions contemplated hereby.
      The
      Company shall pay, and hold each Purchaser harmless against, any liability,
      loss
      or expense (including, without limitation, attorney’s fees and out-of-pocket
      expenses) arising in connection with any such claim. The Company acknowledges
      that it has engaged Rodman & Renshaw, LLC as placement agent (the
“Agent”)
      in
      connection with the sale of the Securities. Other than the Agent, the Company
      has not engaged any placement agent or other agent in connection with the sale
      of the Securities.

     

    
      
         

      

      
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    (s)  No
      Integrated Offering.
      Neither
      the Company nor any person acting on its 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 require registration of any of the
      Securities under the Securities Act or cause this offering of the Securities
      to
      be integrated with prior offerings by the Company for purposes of the Securities
      Act or any applicable shareholder approval provisions, including, without
      limitation, under the rules and regulations of the American Stock Exchange
      or
      any other exchange or automated quotation system on which any of the securities
      of the Company are listed or designated. 

     

    (t)  Application
      of Takeover Protections; Rights Agreement.
      The
      Company and its Board of Directors have taken all necessary action, if any,
      in
      order to render inapplicable any control share acquisition, business
      combination, poison pill (including any distribution under that certain
      Stockholders’ Rights Agreement, dated as of July 27, 1995, between the Company
      and Registrar and Transfer Company, as amended, and any other rights agreement)
      or other similar anti-takeover provision under the Certificate of Incorporation
      or the laws of the jurisdiction of its formation which is or could become
      applicable to (i) any Purchaser as a result of the transactions contemplated
      by
      this Agreement, including, without limitation, the Company’s issuance of the
      Securities and any Purchaser’s ownership of the Securities and (ii) the
      Purchasers and their Affiliates for a period of not less than five (5) years
      after the Closing Date.

     

    (u)  Form
      S-3 Eligibility.
      The
      Company meets the eligibility requirements set forth in the Commission’s Form
      S-3 promulgated under the Securities Act for the registration of the Conversion
      Shares for resale by the Purchasers.

     

    (v)  Registration
      Rights.
      Except
      as set forth on Schedule 3.1(v), and except for such rights as have previously
      be satisfied, other than each of the Purchasers, no person or entity has any
      right to cause the Company to effect the registration under the Securities
      Act
      of any securities of the Company.

     

    (w)  Manipulation
      of Price.
      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) other than the
      Agent, sold, bid for, purchased, or paid any compensation for soliciting
      purchases of, any of the Securities, or (iii) other than the Agent, paid or
      agreed to pay to any person any compensation for soliciting another to purchase
      any other securities of the Company.

     

    
      
         

      

      
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    (x)  Disclosure.
      All
      disclosure provided to the Purchasers with regard to the representations and
      warranties contained in this Section 3.1 regarding the Company, its business
      and
      the transactions contemplated hereby, furnished in writing by the Company is
      true and correct in all material respects and does not contain any untrue
      statement of a material fact or omit to state any material fact necessary in
      order to make the statements made therein, in the light of the circumstances
      under which they were made, not misleading.

     

    3.2  Representations
      and Warranties of each Purchaser.
      As of
      the date hereof and as of the Closing, each Purchaser hereby acknowledges,
      represents, warrants and/or agrees as follows:

     

    (a)  The
      sale
      of the Securities has not been registered under the Securities Act or any state
      securities laws. The Purchaser understands that the offering and sale of the
      Securities is intended to be exempt from registration under the Securities
      Act,
      by virtue of Section 4(2) and/or Section 4(6) of the Securities Act and the
      provisions of Regulation D promulgated thereunder;

     

    (b)  The
      Purchaser is acquiring the Securities solely for its own account for investment
      and not with a view to resale or distribution and has no present intention
      of
      transferring the Securities to any other person or entity;

     

    (c)  The
      Purchaser is an “accredited investor” as that term is defined in Rule 501 of
      Regulation D under the Securities Act;

     

    (d)  The
      Purchaser is a sophisticated investor and has such knowledge and experience
      in
      financial, tax, and business matters, including, without limitation, experience
      in investments by actual participation, so as to enable it to utilize the
      information made available to it in connection with the offering of the
      Securities, to evaluate the merits and risks of an investment in the Securities
      and to make an informed investment decision with respect thereto;

     

    (e)  The
      Purchaser is either a natural person or an entity which was not formed for
      the
      specific purpose of acquiring the Securities. With respect to any
      entity-Purchaser, the execution, delivery and performance of this Agreement
      by
      the Purchaser have been duly authorized and the Agreement is a valid and legally
      binding agreement of the Purchaser;

     

    (f)  The
      Purchaser has received all documents requested by the Purchaser regarding the
      Company and has reviewed them and believes it is well-informed about the
      Company;

     

    (g)  The
      Purchaser acknowledges that neither the Commission nor any U.S. state or foreign
      securities commission has approved the Securities or passed upon or endorsed
      the
      merits of the offering;

     

    
      
         

      

      
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    (h)  The
      Purchaser is aware that an investment in the Securities involves a number of
      very significant risks;

     

    (i)  The
      Purchaser must bear the economic risk of the investment indefinitely because
      none of the Securities may be sold, hypothecated or otherwise disposed of unless
      subsequently registered under the Securities Act and applicable state securities
      laws or an exemption from registration is available. Legends shall be placed
      on
      the Securities to the effect that they have not been registered under the
      Securities Act or applicable state securities laws and of the resulting
      limitations on transfer and that appropriate notations thereof will be made
      in
      the Company’s books and stock transfer records;

     

    (j)  The
      aggregate purchase price of the Securities does not exceed twenty percent (20%)
      of the Purchaser’s net worth;

     

    (k)  The
      Purchaser has taken no action which would give rise to any claim by any person
      for brokerage commission, finders’ fees or the like relating to this Agreement
      or the transactions contemplated hereby; and

     

    (l)  The
      information contained herein is accurate and may be relied upon by the Company
      in determining the availability of an exemption from registration under Federal
      and state securities laws in connection with the offering of the
      Securities.

     

     

    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 a 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 a Purchaser
      under this Agreement and the Registration Rights Agreement.

     

    (b)  The
      Purchasers agree 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:

     

    THESE
      SECURITIES HAVE 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 AS EVIDENCED BY A LEGAL OPINION OF COUNSEL TO THE TRANSFEROR TO
      SUCH EFFECT, THE SUBSTANCE OF WHICH SHALL BE REASONABLY ACCEPTABLE TO THE
      COMPANY. THESE SECURITIES MAY BE PLEDGED IN CONNECTION WITH A BONA FIDE MARGIN
      ACCOUNT WITH A REGISTERED BROKER-DEALER OR OTHER LOAN WITH A FINANCIAL
      INSTITUTION THAT IS AN “ACCREDITED INVESTOR” AS DEFINED IN RULE 501(a) UNDER THE
      SECURITIES ACT OR OTHER LOAN SECURED BY SUCH SECURITIES.

     

    
      
         

      

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

     

    (c)  Certificates
      evidencing the Conversion Shares and Warrant Shares shall not contain any legend
      (including the legend set forth in Section 4.1(b)), (i) while a registration
      statement (including the Registration Statement) covering the resale of such
      security is effective under the Securities Act, or (ii) following any sale
      of
      such Conversion Shares or Warrant Shares pursuant to Rule 144, or (iii) if
      such
      Conversion Shares or Warrant Shares are eligible for sale under Rule 144(k),
      or
      (iv) 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). The Company shall cause its counsel to issue
      a
      legal opinion to the Company’s transfer agent promptly after the Effective Date
      if required by the Company’s transfer agent to effect the removal of the legend
      hereunder. If all or any portion of a Warrant is exercised at a time when there
      is an effective registration statement to cover the resale of the Warrant
      Shares, such Warrant 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
      a
      Purchaser to the Company or the Company’s transfer agent of a certificate
      representing Conversion Shares or Warrant Shares, as the case may be, issued
      with a restrictive legend (such third Trading Day, the “Legend
      Removal Date”),
      deliver or cause to be delivered to such 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 any transfer agent
      of the Company that enlarge the restrictions on transfer set forth in this
      Section except in the case of a Purchaser or its permitted transferee becoming
      an Affiliate. Certificates for Securities subject to legend removal hereunder
      shall be transmitted by the transfer agent of the Company to the Purchasers
      by
      crediting the account of the Purchaser’s prime broker with the Depository Trust
      Company System.

    

    
      
         

      

      
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    (d)  In
      addition to such Purchaser’s other available remedies, the Company shall pay to
      a Purchaser, in cash, as partial liquidated damages and not as a penalty, for
      each $1,000 of Conversion Shares or Warrant Shares (based on the VWAP of the
      Common Stock on the date such Securities are submitted to the Company’s 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 three (3) Trading
      Days after such damages have begun to accrue) for each Trading Day after the
      second Trading Day following the Legend Removal Date until such certificate
      is
      delivered without a legend. Nothing herein shall limit such 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 such
      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)  Each
      Purchaser, severally and not jointly with the other Purchasers, agrees 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 that the
      Purchaser will sell any Securities pursuant to either 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, they will be sold in compliance with
      the
      plan of distribution set forth therein.

     

    4.2  Financial
      Information. The Company shall maintain a system of accounting established
      and
      administered in accordance with GAAP consistently applied, and shall set aside
      on its books, all such proper reserves as shall be required by GAAP. Any
      Purchaser may direct the Company by written notice from time to time to provide
      any or all of the following materials or information in which case the Company
      shall furnish such materials or information, at the Company’s expense, to such
      Purchaser:

     

    (a)  Unless
      otherwise filed and available on the EDGAR system, no later than ninety (90)
      days after the end of each fiscal year, audited consolidated financial
      statements of the Company, together with all notes thereto, prepared in
      reasonable detail in accordance with GAAP, together with an opinion, based
      on an
      audit by independent certified public accountants selected by the Company,
      stating that such financial statements have been so prepared. The consolidated
      financial statements of the Company shall contain a balance sheet as of the
      end
      of such fiscal year and a statement of operations, cash flows and stockholders’
equity for such fiscal year, each setting forth in comparative form the
      corresponding figures for the preceding fiscal year. 

     

    
      
         

      

      
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    (b)  Subject
      to the prior receipt by the Company of a written Regulation FD-compliant
      confidentiality agreement from the requesting Purchaser, no later than thirty
      (30) days prior to the first day of each fiscal year of the Company, a budget
      prepared by the Company for each of the four quarters of such fiscal year
      prepared in the same level of detail as prepared for and delivered to the
      Company’s Board of Directors for the Company.

     

    (c)  Unless
      otherwise filed and available on the EDGAR system, no later than forty-five
      (45)
      days after the end of each of the first three fiscal quarters of the Company’s
      fiscal year, the Company’s unaudited consolidated balance sheet as of the end of
      such fiscal quarter and an unaudited consolidated statement of operations and
      cash flows for such fiscal quarter and for the period from the beginning of
      the
      then current fiscal year to the end of such fiscal quarter, setting forth in
      each case, in comparative form, figures for the corresponding periods in the
      preceding fiscal year, all in reasonable detail and prepared in accordance
      with
      GAAP, subject to changes resulting from normal or recurring year-end
      adjustments.

     

    (d)  Subject
      to the prior receipt by the Company of a written Regulation FD-compliant
      confidentiality agreement from the requesting Purchaser, no later than thirty
      (30) days after the end of each calendar month, the Company’s unaudited
      consolidated interim balance sheet as of the end of such month and the related
      unaudited consolidated interim statements of operations and cash flows for
      such
      one-month period and the portion of the fiscal year through the end of such
      month, setting forth in each case, in comparative form, figures for the
      corresponding fiscal periods in the preceding fiscal year (subject to normal
      year-end audit adjustments and the absence of footnote disclosure).

     

    4.3  Inspections.
      The Company shall, and shall cause its Subsidiaries to, furnish to each
      Purchaser any information which such Purchaser may from time to time reasonably
      request concerning any covenant, provision or condition of this Agreement,
      the
      Registration Rights Agreement or the Securities or any matter in connection
      with
      the Company’s business and operations. During normal business hours, upon
      reasonable notice from Purchasers holding a majority of all then outstanding
      Shares, and without undue interruption of the Company’s business, the Company
      shall permit representatives of each Purchaser, including each Purchaser’s
      independent accountants, agents, attorneys, appraisers and any other
      representatives, to visit and inspect any of the Company’s property, including
      its books of account, other books and records, and any facilities or other
      business assets. The inspections in accordance with the preceding sentence
      shall
      be limited to no more than four (4) times each calendar year, and all
      out-of-pocket costs and expenses of such inspections shall be borne by the
      applicable Purchasers; provided, however, that during any period in which an
      Event of Default (as such term is defined in the Convertible Notes) has occurred
      and is continuing, the number of inspections shall not be limited, and the
      reasonable, documented out-of-pocket costs and expenses of the inspections
      during the period in which an Event of Default has occurred and is continuing
      shall be borne by the Company. The information and access set forth in this
      Section 5(b) shall in each case be subject to the Company’s prior receipt of a
      written Regulation FD-compliant confidentiality agreement from the requesting
      Purchaser.

     

    
      
         

      

      
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    4.4  Use
      of
      Proceeds. The Company shall use the net cash proceeds of the sale of the
      Securities for general corporate and working capital purposes.

     

    4.5  Maintenance
      of Corporate Existence and Business. The Company will take such commercially
      reasonable action as may from time to time be necessary to preserve its
      corporate existence, rights and franchises, maintain its properties in good
      repair and to comply with the laws of the United States and all states and
      locations in which the Company shall do business as shall be necessary to permit
      the Company to conduct its business, and to preserve all of its rights,
      franchises and privileges.

     

    4.6  Compliance
      with Laws. The Company shall comply with applicable laws, rules and regulations
      of all governmental authorities, the violation of which might have a material
      adverse effect upon its business or financial condition.

     

    4.7  Payment
      of Taxes. The Company shall (i) timely file all required tax returns; and (ii)
      timely pay all taxes, assessments, and other governmental charges or levies
      imposed upon it or upon its income, profits or property, except to the extent
      the same are being contested in good faith and for which adequate reserves
      under
      GAAP have been established.

     

    4.8  Insurance.
      The Company shall maintain insurance in such amounts and covering such risks
      as
      are usually and customarily carried with respect to the Company’s assets and any
      other assets and property of the Company of a character usually insured by
      similar entities engaged in the same or similar businesses as the Company.
      The
      Company shall at all times maintain insurance against its liability for injury
      to persons or property, which insurance shall be by financially sound and
      reputable insurers.

     

    4.9  Listing.
      The Company shall promptly secure the listing of all of the Registrable
      Securities (as defined in the Registration Rights Agreement) upon each national
      securities exchange and automated quotation system, if any, upon which the
      Company’s Common Stock is then listed (subject to official notice of issuance)
      and shall maintain such listing of all Registrable Securities. The Company
      shall
      use commercially reasonable efforts to maintain the authorization for listing
      of
      the Common Stock on the American Stock Exchange. The Company shall pay all
      fees
      and expenses in connection with satisfying its obligations under this
      Section 4.10.

     

    4.10  Pre-Emptive
      Rights. From the Closing Date until the later of (a) January 11, 2010 or (b)
      the
      date on which less than that number of shares of Series B Preferred Stock that
      is equal to 50% of the Shares issued at the Closing remain outstanding, the
      Company shall not directly or indirectly, offer, sell or grant any option to
      purchase (or announce any offer, sale, grant or any option to purchase or other
      disposition of) any Common Stock, Options or Convertible Securities (any such
      offer, sale, grant, disposition or announcement being referred to as a
“Subsequent
      Placement”)
      unless
      the Company shall have first complied with this Section 4.10.

     

    
      
         

      

      
        22

        
          

        

      

      
         

      

    

    (a)  The
      Company shall deliver, at least ten (10) business days prior to the closing
      of a
      Subsequent Placement, to each Purchaser then holding at least the number of
      shares of Series B Preferred Stock that is equal to 50% of the Shares initially
      issued to such Purchaser at the Closing (an “Eligible
      Purchaser”),
      a
      written notice (the “Offer
      Notice”)
      of any
      proposed or intended issuance or sale or exchange (the “Offer”)
      of the
      securities being offered (the “Offered
      Securities”)
      in a
      Subsequent Placement, which Offer Notice shall (A) identify and describe
      the Offered Securities, (B) describe the price and other terms upon which
      they are to be issued, sold or exchanged, and the number or amount of the
      Offered Securities to be issued, sold or exchanged, and (C) offer to issue
      and sell to or exchange with such Eligible Purchasers 50% of the Offered
      Securities, allocated among such Eligible Purchasers (a) based on such
      Eligible Purchaser’s pro rata portion of the aggregate principal amount of
      shares of Series B Preferred Stock then held by all Eligible Purchasers (the
      “Basic
      Amount”),
      and
      (b) with respect to each Eligible Purchaser that elects to purchase its
      Basic Amount, any additional portion of the Offered Securities attributable
      to
      the Basic Amounts of other Eligible Purchasers as such Eligible Purchaser shall
      indicate it will purchase or acquire should the other Eligible Purchasers
      subscribe for less than their Basic Amounts (the “Undersubscription
      Amount”).

     

    (b)  To
      accept
      an Offer, in whole or in part, such Eligible Purchaser must deliver a written
      notice to the Company prior to the end of the 10th
      business
      day after such Eligible Purchaser’s receipt of the Offer Notice (the
“Offer
      Period”),
      setting forth the portion of such Eligible Purchaser’s Basic Amount that such
      Eligible Purchaser elects to purchase and, if such Eligible Purchaser shall
      elect to purchase all of its Basic Amount, the Undersubscription Amount, if
      any,
      that such Eligible Purchaser elects to purchase (in either case, the
“Notice
      of Acceptance”).
      If
      the Basic Amounts subscribed for by all Purchasers are less than the total
      of
      all of the Basic Amounts, then each Eligible Purchaser who has set forth an
      Undersubscription Amount in its Notice of Acceptance shall be entitled to
      purchase, in addition to the Basic Amounts subscribed for, the Undersubscription
      Amount it has subscribed for; provided,
      however,
      that if
      the Undersubscription Amounts subscribed for exceed the difference between
      the
      total of all the Basic Amounts and the Basic Amounts subscribed for (the
“Available
      Undersubscription Amount”),
      each
      Eligible Purchaser who has subscribed for any Undersubscription Amount shall
      be
      entitled to purchase only that portion of the Available Undersubscription Amount
      as the Basic Amount of such Eligible Purchaser bears to the total Basic Amounts
      of all Eligible Purchasers that have subscribed for Undersubscription Amounts,
      subject to rounding by the Company to the extent its deems reasonably
      necessary.

     

    (c)  The
      Company shall have thirty (30) days from the expiration of the Offer Period
      above to offer, issue, sell or exchange all or any part of such Offered
      Securities as to which a Notice of Acceptance has not been given by the Eligible
      Purchasers (the “Refused
      Securities”),
      but
      only upon terms and conditions (including, without limitation, the total amount
      of the financing, unit prices and interest rates) that are not more favorable
      to
      the acquiring person or persons or less favorable to the Company than those
      set
      forth in the Offer Notice.

     

    
      
         

      

      
        23

        
          

        

      

      
         

      

    

    (d)  Upon
      the
      closing of the issuance, sale or exchange of all or less than all of the Refused
      Securities, the Eligible Purchasers shall acquire from the Company, and the
      Company shall issue to the Purchasers, the number or amount of Offered
      Securities specified in the Notices of Acceptance, as reduced pursuant to
      Section 4.10(c) above if the Purchasers have so elected, upon the terms and
      conditions specified in the Offer. 

     

    (e)  Any
      Offered Securities not acquired by the Eligible Purchasers or other persons
      in
      accordance with Section 4.10(c) above may not be issued, sold or exchanged
      until they are again offered to the Eligible Purchasers under the procedures
      specified in this Agreement.

     

    (f)  The
      restrictions contained in this Section 4.10 shall not apply to the issuance
      of any Common Stock issued or issuable: (i) under any Approved Stock Plan;
      or (ii) upon conversion of the Convertible Promissory Notes or the exercise
      of the Warrants. “Approved
      Stock Plan”
means
      any employee benefit plan which has been approved by the Board of Directors
      and
      stockholders of the Company prior to the date of this Agreement and as amended
      hereafter solely consistent with Section 4.14, pursuant to which the Company’s
      securities may be issued to any employee, officer or director for services
      provided to the Company.

     

    4.11  Meeting
      of Company Stockholders.

     

    (a)  As
      promptly as practicable after the execution of this Agreement, the Company
      shall
      prepare and file with the Commission the Proxy Statement in form and substance
      reasonably satisfactory to the Company and the Purchasers in order to duly
      call,
      give notice of and hold the Shareholder Meeting on or prior to May 15, 2007,
      unless the Proxy Statement relating to the Shareholder Meeting is reviewed
      by
      the Commission, in which case such date shall be extended to June 15, 2007.
      The
      Company shall respond to any comments of the Commission and use its commercially
      reasonable efforts to have the Proxy Statement declared effective under the
      Securities Act as promptly as practicable after such filing. The Company shall
      cause the Proxy Statement to be distributed to the stockholders as promptly
      as
      practicable after the Proxy Statement shall have become effective under the
      Securities Act. 

     

    (b)  The
      Company’s Board of Directors shall recommend that the all of the proposals set
      forth in the Proxy Statement be approved, which proposals shall include the
      following: 

     

    (i)  the
      approval of a reverse split of 1-for 50 of the Company’s outstanding shares of
      Common Stock, or such other amount within the range of 1-for-45 to 1-for-55
      as
      may be determined by the Board of Directors and reasonably acceptable to the
      Purchasers who surrender Convertible Promissory Notes (the “Reverse
      Stock Split”);

     

    (ii)  the
      approval of the issuance of the Securities;

     

    (iii)  the
      approval of the Amended and Restated Certificate of Incorporation; 

     

    
      
         

      

      
        24

        
          

        

      

      
         

      

    

    (iv)  the
      increase in the shares of Common Stock reserved for issuance as incentive awards
      to the Company’s management and other employees, directors and consultants
      pursuant to the Company’s equity incentive plan for purposes of additional
      grants to current employees and initial grants to new hires consistent with
      Section 4.14 below; and

     

    (v)  any
      other
      terms and conditions of this Agreement and the Transaction Documents which
      may
      be required in accordance with applicable law and the rules and regulations
      of
      the Trading Market. 

     

    (c)  The
      Company shall notify the Purchasers promptly of the receipt of any comments
      from
      the Commission (or its staff) and of any request by the Commission (or its
      staff) or any other Government Authority for amendments or supplements to the
      Proxy Statement or any Other Filing for additional information, and shall
      promptly supply the Purchasers with copies of all correspondence between the
      Company or any of its representatives, on the one hand, and the Commission,
      its
      staff or any other Government Authority, on the other hand, with respect to
      the
      Proxy Statement, or any Other Filings. 

     

    (d)  As
      promptly as practicable after the date of this Agreement, the Company shall
      prepare and file any other filings required under the Exchange Act, the
      Securities Act or any other federal or state securities Law relating to the
      transactions contemplated by this Agreement (the “Other
      Filings”).
      

     

    (e)  The
      Company shall cause all documents that it is responsible for filing with the
      Commission or other regulatory authorities under this Section 4.11 to comply
      in
      all material respects with all applicable requirements of the Securities Act,
      the Exchange Act and the rules and regulations promulgated thereunder.

     

    (f)  Notwithstanding
      anything to the contrary contained in this Agreement, the Company, may adjourn
      or postpone the Shareholder Meeting to the extent necessary to ensure that
      any
      supplement or amendment to the Proxy Statement required under applicable
      requirements of the Securities Act, the Exchange Act and the rules and
      regulations promulgated thereunder is provided to the Company’s stockholders;
      provided that the Shareholder Meeting shall not be delayed for more than fifteen
      (15) days with out the Purchasers representing at least a majority in interest
      of the Shares to be purchased hereunder.

     

    4.12  Abstention
      from Trading.
      From
      the date hereof until the Closing Date and the public announcement of the
      transactions contemplated hereby, (i) the Purchasers will not engage in any
      financial market transactions (whether long, short or other hedging
      transactions) with respect to the Company’s Common Stock and (ii) the Company
      will not, and the Company shall cause its directors and officers and each of
      its
      and their respective Affiliates to not, engage in any financial market
      transactions (whether long, short or other hedging transactions) with respect
      to
      the Company’s Common Stock.

     

    4.13  Board
      of
      Directors. At the Shareholder Meeting, the Company will fix the size of its
      Board of Directors at seven (7) persons, which will consist of the following:
      (a) upon and after the Closing, four (4) incumbent directors, (b) one (1)
      vacancy that may be filled at any time after the Closing with a new director
      designated by the Purchasers who surrender Convertible Promissory Notes (the
      “Bridge
      Lenders”),
      which
      new director shall be reasonably acceptable to the Company (the “Initial Purchaser
      Designee”),
      and
      (c) two (2) additional vacancies. For so long as the Bridge Lenders hold at
      least that number of shares of Series B Preferred Stock that is equal to 50%
      of
      the Shares issued to the Bridge Lenders at the Closing, such Purchasers will
      have the right, but not the obligation, to designate the Initial Purchaser
      Designee and two (2) additional directors to the Board of Directors
      (the “Subsequent Purchaser
      Designees”
and,
      together with the Initial Purchaser Designee, the “Purchaser
      Designees”),
      to
      fill the two (2) additional vacancies that will exist following the Closing.
      Upon the Bridge Lenders’ request at the Closing or from time to time thereafter,
      the Company shall cause the Purchaser Designees or any successor designee
      identified in writing by the Bridge Lenders to become members of the Board
      of
      Directors. The Company further covenants and agrees that it will take all
      reasonably necessary actions to ensure that the Purchaser Designees will be
      included on the Company’s slate of nominees for the Board of Directors submitted
      for a shareholder vote at any applicable annual meeting of stockholders after
      the Closing, including preparation of proxy materials and solicitation of the
      Company’s stockholders to give effect to this Section 4.13.

     

    
      
         

      

      
        25

        
          

        

      

      
         

      

    

    4.14  Option
      Pool Increase. On or before the Closing the Company shall cause an increase
      in
      the shares of Common Stock reserved for issuance as incentive awards to the
      Company’s management and other employees, directors and consultants pursuant to
      its equity incentive plan for purposes of additional grants to current employees
      and initial grants to new hires, in an aggregate amount equal to the sum of
      (i)
      10% of the Series B Preferred Stock (on an as-converted basis) issued at the
      Closing (excluding the Warrants) and (ii) 13,000,000 shares of Common Stock
      calculated prior to the Reverse Stock Split. 

     

    4.15  Protective
      Provisions. At any time when any shares of Series B Preferred Stock issued
      pursuant to this Agreement, including upon exercise of the Warrants, are
      outstanding, the Company shall not, without first obtaining the approval (by
      vote or written consent, as provided by law) of the holders of at least a
      majority of the shares of the Series B Preferred Stock then held by Significant
      Holders, if any (it shall be understood, however, that the following Protective
      Provisions are identical to those set forth in Subsection 3.2 of the rights
      and
      preferences of the Series B Preferred Stock set forth in Article Fourth of
      the
      Company’s Amended and Restated Certificate of Incorporation, and approval or
      waiver of any of the following provisions in accordance with the Company’s
      Amended and Restated Certificate of Incorporation, will be deemed approval
      or
      waiver of the same provision hereunder):

     

    	a)  	
            authorize
              or incur any Indebtedness in excess of
              $2,000,000;

          

     

    	b)  	
            issue
              or sell any convertible debt, preferred stock (convertible or otherwise)
              or any other equity or equity-linked security at a price that values
              the
              Company’s Common Stock at a price less than the Per Share Purchase Price
              (as adjusted for all subsequent stock splits, stock dividends,
              consolidations, recapitalizations and reorganizations) other than any
              equity or equity linked security that is issued pursuant to any
              transactions approved under Subsection 4.15(k)
              hereof;

          

     

     

    
      
         

      

      
        26

        
          

        

      

      
         

      

    

     

    	c)  	
            increase
              or decrease the authorized number of shares of capital stock of the
              Company;

          

     

    	d)  	
            create
              or issue any new class or series of shares having rights, preferences
              or
              privileges senior to the Common Stock;

          

     

    	e)  	
            issue
              any shares of Series A Preferred Stock other than pursuant to the terms
              of
              that certain Amended and Restated Stockholders’ Rights Agreement, dated as
              of July 25, 2005, between the Company and American Stock Transfer &
              Trust Company;

          

     

    	f)  	
            amend,
              alter, or repeal any provision of the Amended and Restated Certificate
              of
              Incorporation or Amended and Restated Bylaws of the Company (including
              any
              filing of a certificate of designation), that alters or changes the
              voting
              powers, preferences, or other special rights or privileges, or
              restrictions of the Series B Preferred
              Stock;

          

     

    	g)  	
            pay
              or declare any dividends or make other distributions upon its shares
              of
              capital stock;

          

     

    	h)  	
            purchase,
              redeem or otherwise acquire any of the Company’s equity securities
              (including warrants, options and other rights to acquire equity
              securities) other than the repurchase of equity securities pursuant
              to
              existing agreements disclosed to the Purchasers in writing prior to
              the
              date hereof specifically referencing this Subsection
              4.15(h);

          

     

    	i)  	
            issue
              any equity or equity-linked securities to any employee other than pursuant
              to the Company’s Approved Stock Plans, or increase the shares of Common
              Stock or other securities reserved for issuance as incentive awards
              to the
              Company’s management and other employees, directors and consultants
              pursuant to the Approved Stock Plans or any other any equity incentive
              plan or similar arrangement, other than the increase contemplated by
              Section 4.14 hereof;

          

     

    	j)  	
            liquidate,
              dissolve or wind-up;

          

     

    	k)  	
            merge
              or consolidate with another corporation in which the holders of the
              Company’s voting equity securities immediately prior to the transaction
              would own 50% or less of the voting securities of the surviving
              corporation or engage in any other Deemed Liquidation Event (as defined
              in
              the Amended and Restated Certificate of
              Incorporation);

          

     

    	l)  	
            sell,
              license or dispose of any material assets of the Company, including
              intellectual property or other rights to the Company’s development stage,
              pre-clinical and/or diagnostic assets, including, without limitation,
              pursuant to any license, development, commercialization, distribution,
              marketing, co-marketing, collaboration, partnering or other agreement,
              other than licenses of immaterial technology in the ordinary course
              of
              business on commercially reasonable terms and consistent with past
              practices; 

          

     

     

    
      
         

      

      
        27

        
          

        

      

      
         

      

    

     

    	m)  	
            change
              the authorized number of directors of the
              Company;

          

     

    	n)  	
            amend
              or waive any material provision of the Amended and Restated Certificate
              of
              Incorporation or the Company’s By-Laws;

          

     

    	o)  	
            materially
              change the nature of the Company’s business from that engaged in on the
              date hereof; 

          

     

    	p)  	
            intentionally
              take any action which is reasonably likely to result in (i) the Common
              Stock of the Company no longer being approved for quotation on the
              American Stock Exchange or the Nasdaq Stock Market or (ii) the Common
              Stock of the Company ceasing to be registered pursuant to Section 12
              of
              the Exchange Act; or

          

     

    	q)  	
            agree,
              consent or acquiesce to any amendment, supplement or other modification
              to, or termination of, any of its material agreements, including, without
              limitation any Material License Agreement or any other agreement filed
              with the Commission pursuant to Item 601 of Regulation
              S-K.

          

     

    

     

    ARTICLE
      V.

    TERMINATION

     

    5.1  Termination.
      If the conditions to the Purchasers’ obligations at Closing have not been
      satisfied or waived on before the date that is fifteen (15) days after the
      applicable deadline for the Shareholder Meeting (i.e.,
      May 15,
      2007, unless the proxy statement relating to the Shareholder Meeting is reviewed
      by the Commission, in which case such date shall be extended to June 15, 2007),
      then this Agreement may be terminated at any time thereafter upon written notice
      to the Company by Purchasers representing at least a majority in interest of
      the
      Shares to be purchased hereunder. The provisions of Article VI shall survive
      the
      termination of this Agreement.

     

    

     

    ARTICLE
      VI.
MISCELLANEOUS

     

    6.1  Fees
      and
      Expenses. 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; provided that the Company shall reimburse the
      holders of Convertible Promissory Notes for all reasonable costs and expenses
      incurred in connection with this Agreement, the Proxy Statement and the
      Shareholder Meeting (including all reasonable legal fees and disbursements
      in
      connection therewith, documentation and implementation of the transactions
      contemplated by this Agreement and due diligence in connection therewith)
      subject to a maximum of One Hundred Thousand Dollars ($100,000), including
      any
      amounts previously reimbursed under the Note and Warrant Purchase 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
      Purchasers.

     

    
      
         

      

      
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    6.2  Entire
      Agreement. The Transaction Documents, together with the exhibits and schedules
      thereto, and the Note and Warrant Purchase Agreement and other agreements
      entered into and securities issued in connection therewith, 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.

     

    6.3  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
      2nd
      Trading
      Day following the date of mailing, if sent by U.S. nationally recognized
      overnight courier service, or (d) upon actual receipt by the party to whom
      such
      notice is required to be given. The address for such notices and communications
      shall be as set forth on the signature pages attached hereto.

     

    6.4  Amendments;
      Waivers. No provision of this Agreement may be waived or amended except in
      a
      written instrument signed by the Company and Purchasers representing at least
      a
      majority in interest of the Shares to be purchased hereunder. 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.

     

    6.5  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.

     

    6.6  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 each Purchaser (other than by merger). Any Purchaser may
      assign any or all of its rights under this Agreement to any Person to whom
      such
      Purchaser assigns or transfers any Securities, provided such assignment is
      otherwise permitted by law, provided 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 “Purchasers.”

     

    6.7  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 4.9.

     

    
      
         

      

      
        29

        
          

        

      

      
         

      

    

    6.8  Survival.
      The representations and warranties contained herein shall survive the Closing
      and the delivery of the Shares, the Conversion Shares and Warrant
      Shares.

     

    6.9  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 New York,
      without regard to the principles of conflicts of law thereof. 

     

    6.10  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” format data file, such signature
      shall create a valid and binding obligation of the party executing (or on whose
      behalf such signature is executed) with the same force and effect as if such
      facsimile or “.pdf” signature page were an original thereof.

     

    6.11  Severability.
      If any term, provision, covenant or restriction of this Agreement is held by
      a
      court of competent jurisdiction to be invalid, illegal, void or unenforceable,
      the remainder of the terms, provisions, covenants and restrictions set forth
      herein shall remain in full force and effect and shall in no way be affected,
      impaired or invalidated, and the parties hereto shall use their good faith
      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.

     

    6.12  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 any 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 such 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.

     

    6.13  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.

     

    
      
         

      

      
        30

        
          

        

      

      
         

      

    

    6.14  Remedies.
      In addition to being entitled to exercise all rights provided herein or granted
      by law, including recovery of damages, each of the Purchasers and the Company
      will be entitled to specific performance under the Transaction Documents. The
      parties agree that monetary damages will 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, and hereby further agrees to waive any requirement that
      the
      other party post a bond as a condition for obtaining any such
      relief.

     

    6.15  Payment
      Set Aside. To the extent that the Company makes a payment or payments to any
      Purchaser pursuant to any Transaction Document or a 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.

     

    6.16  Independent
      Nature of Purchasers’ Obligations and Rights. The obligations of each Purchaser
      under any Transaction Document are several and not joint with the obligations
      of
      any other Purchaser, and no Purchaser shall be responsible in any way for the
      performance or non-performance of the obligations of any other Purchaser under
      any Transaction Document. Nothing contained herein or in any other Transaction
      Document, and no action taken by any Purchaser pursuant thereto, shall be deemed
      to constitute the Purchasers as a partnership, an association, a joint venture
      or any other kind of entity, or create a presumption that the Purchasers are
      in
      any way acting in concert or as a group with respect to such obligations or
      the
      transactions contemplated by the Transaction Documents. Each Purchaser shall
      be
      entitled to independently protect and enforce its rights, including without
      limitation, the rights arising out of this Agreement or out of the other
      Transaction Documents, and it shall not be necessary for any other Purchaser
      to
      be joined as an additional party in any proceeding for such
      purpose.

     

    6.17  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.

     

    6.18  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.

     

    (Signature
      Pages Follow)

     

    
      
         

      

      
        31

        
          

        

      

      
         

      

    

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

     

     

    
      	ALTEON INC.	 	 	
              Address
                for Notice:

            
	 	 	 	 
	 	 	 	
               

            
	By:/s/ Noah
              Berkowitz	 	 	
              221
                West Grand Avenue

              Montvale,
                NJ 07645

            
	
              

              Name:
                Noah Berkowitz

              Title:
                President

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

               

              Mintz
                Levin Cohn Ferris Glovsky and Popeo, P.C.

              One
                Financial Center

              Boston,
                MA 02110

              Attn:
                William T. Whelan, Esq.

            	 	 	 
	 	 	 	 

    

    
 

     

    

    

    

    [REMAINDER
      OF PAGE INTENTIONALLY LEFT BLANK

    SIGNATURE
      PAGE FOR PURCHASER FOLLOWS]

    

    
      
         

      

      
        32

        
          

        

      

      
         

      

    

    

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

     

     

    
      	BAKER/TISCH INVESTMENTS,
              L.P.	Address for Notice:
	By: Baker/Tisch
              Capital, L.P.,	 
	
               its
                general partner 

            	667 Madison Avenue
	By: Baker/Tisch
              Capital (GP), LLC,	17th
              Floor
	
               its
                general partner 

            	New York, NY 10021
	 	Fax:
	By: /s/
              Feix Baker	 
	
               Name:
                Felix Baker, Ph.D

            	 
	
               Title:
                Managing Member

            	 

    

       

    BAKER
      BIOTECH FUND I, L.P.

    By:
       Baker
      Biotech Capital, L.P., 

    its
      general partner

    By:
       Baker
      Biotech Capital (GP), LLC, 

    its
      general partner

    

    By: _/s/
      Felix Baker____________

    Name:
      Felix Baker, Ph.D.

    Title:
      Managing Member

    

    Baker
      Brothers Life Sciences, L.P.

    By:
       Baker
      Brothers Life Sciences Capital, L.P.

    its
      general partner

    By:
       Baker
      Brothers Life Sciences Capital (GP), LLC 

    is
      general partner

    

    By: _/s/
      Felix Baker_____________

    Name:
      Felix Baker, Ph.D.

    Title:
      Managing Member

    

    14159,
      L.P.

    By:
       14159
      Capital, L.P., 

    its
      general partner

    By:
       14159
      Capital (GP), LLC, 

    is
      general partner

    

    By:__/s/
      Felix Baker________________

    Name:
      Felix Baker, Ph.D.

    Title:
      Managing Member

    

     

    
      
         

      

      
         

        
          

        

      

      
         

      

    

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

     

    
      
        	
                Atticus
                  Global Advisors,
                  Ltd. 

              	Address for Notice:
	 	 
	
                 

              	
                c/o
                  Atticus Capital LP

              
	 	152
                West 57th
                Street
	
                By:
                  /s/ Mathhew Edmonds

              	New
                York, NY 10019 
	Name: Matthew Edmonds 	Attn:
                Legal Department
	Title:
                Director 	Fax:
                (212) 373-0871
	
                 

              	 
	
                 

              	 

      

       

    

     

    Green
      Way Managed Account Series, Ltd.,
      

    in
      respect to its segregated account, Green Way Portfolio D

    

    

    By:_/s/Dominique
      Ould-Ferhat ___

           
      Name: Dominique Ould-Ferhat

           
      Title: President and Director

    

    

    

     

    
      
         

      

      
         

        
          

        

      

      
         

      

    

    SCHEDULE
      A

    

    LIST
      OF
      PURCHASERS

    

     

    

    
      	 	 Subscription
              Amount	 	 
	 

              Name
                of Purchaser

            	 
              Cash
                at Closing 

            	
               Conversion of Convertible

              Promissory Notes (plus 

              interest)

            	
              Series
                B Preferred Stock

              Purchased 

            	 
              Warrants

              Purchased

            
	
               

              Atticus
                Global Advisors, Ltd.

            	
               

              $3,500,000

            	
               

              N/A

            	
               

              (4)

            	
               

              (5)

            
	 	 	 	 	 
	
              Green
                Way Managed Account Series, Ltd., in respect to its segregated account,
                Green Way Portfolio D

            	
               

              $500,000

            	
               

              N/A

            	
               

              (4)

            	
               

              (5)

            
	
               

              Total

            	
               

              $22,000,000
                (2)

            	
               

              3,000,000
                (3)

            	
               

              (4)

            	
               

              (5)

            

    

    

    

     

     

      
        

      

    

    

      1.
        Baker
        Brothers Investments includes investments by the following funds: Baker/Tisch
        Investments, L.P., Baker Biotech Fund I, L.P., Baker Brothers Life Sciences,
        L.P., 14159,L.P., Baker Bros. Investments II, L.P.

      1.
        To be
        amended at Closing. The aggregate cash paid at closing by Baker Brothers
        Investments shall be reduced by the aggregate accrued and unpaid interest
        on the
        Convertible Promissory Notes through the Closing. 

      2.
        To be
        amended at closing to reflect the accrued and unpaid interest on the Convertible
        Promissory Notes. 

      2.
        To be
        completed at Closing. The number of shares of Series B Preferred Stock allocated
        to each Purchaser shall be determined at the Closing based upon each Purchaser's
        respective Subscription Amount divided by the Per Share Purchase Price.

      3.
        To be
        completed at Closing. The number of Warrants shall represent 25% of total
        Subscription Amount divided by the Per Share Purchase
        Price.

    
      
         

      

      
         

        
          

        

      

      
         

      

    

    Exhibit
      A

    

    Form
      of
      Amended and Restated Certificate of Incorporation

    

    

    
      
         

      

      
         

        
          

        

      

      
         

      

    

    

    Exhibit
      B

    

    Form
      of
      Registration Rights Agreement

    

    
      
         

      

      
         

        
          

        

      

      
         

      

    

    

    Exhibit
      C

    

    Form
      of
      Warrant

    

    

    
      
         

      

      
         

        
          

        

      

      
         

      

    

    

    Exhibit
      D

    

    Form
      of
      Opinion of Company Counsel

    

    

    1.
       The
      Company and the Subsidiary are corporations duly incorporated, validly existing
      and in good standing under the Delaware Law and have all requisite corporate
      power and authority to conduct their business as described in the Company’s
      Annual Report on Form 10-K for its fiscal year ended December 31, 2006, as
      amended.

    

    2.
       The
      Company has the requisite corporate power and authority to enter into
      and

    perform
      its obligations under the Transaction Documents and to issue the Series B
      Preferred Stock and the Warrants in accordance with their terms. The execution
      and delivery of the Transaction Documents by the Company have been duly
      authorized by all necessary corporate action. Each of the Transaction Documents
      has been duly executed and delivered, and each of the Transaction Documents
      constitute valid and binding obligations of the Company, enforceable against
      it
      in accordance with their respective terms.

     

    3.
       The
      shares of Series B Preferred Stock to be issued to you at the Closing have
      been
      duly and validly authorized, and, when issued and delivered against payment
      therefor pursuant to the Purchase Agreement, will be duly and validly issued,
      fully paid and nonassessable. 

    

    4. The
      number of shares of Series B Preferred Stock initially issuable upon exercise
      of
      the Warrants has been duly and validly authorized and reserved for issuance
      and,
      upon issuance in accordance with the terms of the Warrants, will be duly and
      validly issued, fully paid and nonassessable. 

    

    5. The
      number of shares of Common Stock initially issuable upon conversion of the
      Series B Prefered Stock, including the Series B Preferred Stock issuable upon
      exercise of the Warrants, has been duly and validly authorized and reserved
      for
      issuance and, upon issuance in accordance with the terms of the Transaction
      Documents, will be duly and validly issued, fully paid and
      nonassessable.

    

    6.
       The
      execution and delivery of the Transaction Documents by the Company will not
      (i)
      result in a violation of the Company’s Certificate of Incorporation or By-Laws;
      or (ii) to our knowledge, violate, breach or constitute a default under, or
      (except as created pursuant to the terms of the Transaction Documents) result
      in
      the creation of any lien, charge or encumbrance on any property or assets of
      the
      Company, pursuant to the terms of any material agreement, indenture or
      instrument to which the Company is a party.

    

    7.
       Based
      upon your representations, warranties and covenants contained in the Transaction
      Documents, the shares of Series B Preferred Stock, Warrants and underlying
      shares of Common Stock may be issued to you without registration under the
      Securities Act of 1933, as amended.

    

    
      
         

      

      
         

        
          

        

      

      
         

      

    

    8.
       No
      registration with, consent or approval of, notice to, or other action by, any
      governmental entity is required on the part of the Company for the execution
      or
      delivery by the Company of the Transaction Documents, or if required, such
      registration has been made, such consent or approval has been obtained, such
      notice has been given or such other appropriate action has been
      taken.Exhibit
      10.2

    

    

    FORM
      OF AMENDED AND RESTATED

    

    CERTIFICATE
      OF INCORPORATION

    

    OF

    

    ALTEON
      INC.

    

     The
      undersigned, for the purpose of amending and restating the Restated Certificate
      of Alteon Inc. filed December 7, 1990, as amended, hereby certifies as
      follows:

     

    1. The
      name
      of the Corporation is ALTEON INC. (the “Corporation”).
      The
      Certificate of Incorporation of the Corporation was filed with the Secretary
      of
      State of Delaware on October 22, 1986 under the name Geritech Inc. A Restated
      Certificate of Incorporation was filed with the Secretary of State of the State
      of Delaware on December 7, 1990. A Certificate of Amendment, changing the
      Corporation’s name from Geritech Inc. to Alteon Inc. was filed with the
      Secretary of State of the State of Delaware on August 29, 1991. Thereafter
      the
      Restated Certificate of Incorporation, as amended, was further amended by the
      following documents filed with the Secretary of State of the State of Delaware
      (a) a Certificate of Retirement filed June 14, 1993; (b) a Certificate of
      Designation filed August 3, 1995; (c) a Certificate of Designation filed April
      23, 1997; (d) two Certificates of Designation filed December 11, 1997; (e)
      a
      Certificate of Retirement filed February 10, 1998; (f) a Certificate of
      Amendment filed May 8, 1998; (g) a Certificate of Designation filed May 8,
      1998;
      (h) a Certificate of Retirement filed September 16, 1999; (i) a Certificate
      of
      Amendment filed September 16, 1999; (j) a Certificate of Retirement filed
      November 21, 2000; (k) a Certificate of Amendment filed June 7, 2001; (l) a
      Certificate of Amendment filed June 2, 2004; (m) a Certificate of Amendment
      filed September 17, 2004; (n) a Certificate of Designation filed October 6,
      2004; (o) a Certificate of Designation filed July 27, 2005; (p) a Certificate
      of
      Amendment filed October 24, 2005; (q) a Certificate of Amendment filed July
      20,
      2006; and (r) a Certificate of Amendment filed July 20, 2006.

     

    2. The
      Restated Certificate of Incorporation of the Corporation filed on December
      7,
      1990, as amended, is hereby further amended, among other provisions, to amend
      Article FIRST to reflect a change of the name of the Corporation and to amend
      Article FOURTH by substituting in lieu of said Article FOURTH a new Article
      FOURTH as set forth in the Restated Certificate of Incorporation set forth
      below.

     

    3. This
      Amended and Restated Certificate of Incorporation has been duly adopted
      in
      accordance with the provisions of Sections 141, 228, 242 and 245 of the General
      Corporation Law of the State of Delaware.

     

    4. The
      text
      of the Restated Certificate of Incorporation of the Corporation, as amended
      and
      restated herein, shall read in its entirety as follows:

     

    

    
      
        
        

      

      
        1

        
          

        

      

      
        
        

      

    

    

    

    RESTATED

    CERTIFICATE
      OF INCORPORATION

    OF

    [__________]
      INC.

    (Originally
      incorporated on October 22, 1986 

    under
      the
      name Geritech, Inc. and formerly known as Alteon Inc.)

    

    

    

    FIRST:
      The name of the corporation is [________] Inc. (the “Corporation”).

    

    SECOND:
      The name and address of the Corporation’s registered agent in the State of
      Delaware is The Corporation Trust Company, Corporation Trust Center, 1209 Orange
      Street, City of Wilmington, County of New Castle.

    

    THIRD:
      The purpose of the Corporation is to engage in any lawful act or activity or
      carry on any business for which corporations may be organized under the Delaware
      General Corporation Law or any successor statute.

    

    FOURTH:

    

    A. Designation
      and Number of Shares.

    

    The
      total
      number of shares of all classes of stock which the Corporation shall have the
      authority to issue is [___________] shares, consisting of [____________] shares
      of common stock, par value $0.01 per share (the “Common
      Stock”)
      and
      [________] shares of Preferred Stock, par value $0.01 per share (the
“Preferred
      Stock”).

    

    The
      number of authorized shares of Common Stock or Preferred Stock may be increased
      or decreased (but not below the number of shares thereof then outstanding)
      by
      the affirmative vote of the holders of a majority of the voting power of all
      of
      the then-outstanding shares of capital stock of the Corporation entitled to
      vote
      thereon, without a vote of the holders of the Preferred Stock, or of any series
      thereof, unless a vote of any such holders is required pursuant to the terms
      of
      any Preferred Stock designation.

    

    Upon
      the
      effectiveness of this Restated Certificate of Incorporation, every [____] issued
      and outstanding shares of Common Stock of the Corporation shall be changed
      and
      reclassified into one (1) share of Common Stock, which shares shall be fully
      paid and nonassessable shares of Common Stock of the Corporation; provided,
      however, that in lieu of fractional interests in shares of Common Stock to
      which
      any stockholder would otherwise be entitled pursuant hereto (taking into account
      all shares of Common Stock owned by such stockholder), such stockholder shall
      be
      entitled to receive a cash payment equal to the fair value of one share of
      Common Stock multiplied by such fraction. The par value of the Common Stock
      shall remain $0.01 per share. All certificates representing shares of Common
      Stock outstanding immediately prior to the filing of this Amended and Restated
      Certificate of Incorporation shall immediately after the filing of this Amended
      and Restated Certificate of Incorporation represent instead the number of shares
      of Common Stock as provided above. Notwithstanding the foregoing, any holder
      of
      Common Stock may (but shall not be required to) surrender his, her or its stock
      certificate or certificates to the Corporation, and upon such surrender the
      Corporation will issue a certificate for the correct number of shares of Common
      Stock to which the holder is entitled under the provisions of this Restated
      Certificate of Amendment. Shares of Common Stock that were outstanding prior
      to
      the filing of this Amended and Restated Certificate of Incorporation, and that
      are not outstanding after and as a result of the filing of this Amended and
      Restated Certificate of Incorporation, shall resume the status of authorized
      but
      unissued shares of Common Stock.

    

    
      
        
        

      

      
        2

        
          

        

      

      
        
        

      

    

    B. Common
      Stock.

    

    The
      holders of the Common Stock are entitled to one vote for each share held;
provided,
      however,
      that,
      except as otherwise required by law, holders of Common Stock shall not be
      entitled to vote on any amendment to this Restated Certificate of Incorporation
      (including any certificate of designation relating to Preferred Stock) that
      relates solely to the terms of one or more outstanding series of Preferred
      Stock
      if the holders of such affected series are entitled, either separately or
      together as a class with the holders of one or more other such series, to vote
      thereon by law or pursuant to this Restated Certificate of Incorporation
      (including any certificate of designation relating to Preferred
      Stock).

    

    C. Preferred
      Stock

    

    Undesignated
      Preferred Stock.
      

    

    1. [_______]
      shares of Preferred Stock may be issued in one or more series at such time
      or
      times and for such consideration as the Board of Directors may determine.

    

    2. Authority
      is hereby expressly granted to the Board of Directors to fix from time to time,
      by resolution or resolutions providing for the establishment and/or issuance
      of
      any series of Preferred Stock, the designation and number of the shares of
      such
      series and the powers, preferences and rights of such series, and the
      qualifications, limitations or restrictions thereof, to the fullest extent
      such
      authority may be conferred upon the Board of Directors under the Delaware
      General Corporation Law.

    

    Series
      A Preferred Stock 

    

    1.  Designation
      and Number of Shares.
      The
      shares of such series shall be designated as “Series
      A Preferred Stock”
(the
      “Series
      A Preferred Stock”),
      par
      value $0.01 per share. The number of shares initially constituting the Series
      A
      Preferred Stock shall be 400,000; provided, however, that, if more than a total
      of 400,000 shares of Series A Preferred Stock shall be issuable upon the
      exercise of Rights (the “Rights”)
      issued
      pursuant to the Stockholders Rights Agreement dated as of July 27, 1995, between
      the Corporation and Registrar and Transfer Company, as Rights Agent, as amended
      by the Amended and Restated Stockholder Rights Agreement dated as of July 27,
      2005, as amended, between the Corporation and American Stock Transfer &
Trust Company, as Rights Agent (the “Rights
      Agreement”),
      the
      Board of Directors of the Corporation, pursuant to Section 151(g) of the General
      Corporation Law of the State of Delaware, shall direct by resolution or
      resolutions that a certificate be properly executed, acknowledged, filed and
      recorded, in accordance with the provisions of Section 103 thereof, providing
      for the total number of shares of Series A Preferred Stock authorized to be
      issued to be increased (to the extent that the Certificate of Incorporation
      then
      permits) to the largest number of whole shares (rounded up to the nearest whole
      number) issuable upon exercise of such Rights.

    

    
      
        
        

      

      
        3

        
          

        

      

      
        
        

      

    

    2.  Dividends
      or Distributions.
      

    

    2.1  Subject
      to the prior and superior rights of the holders of shares of any other series
      of
      Preferred Stock or other class of capital stock of the Corporation ranking
      prior
      and superior to the shares of Series A Preferred Stock with respect to
      dividends, the holders of shares of the Series A Preferred Stock shall be
      entitled to receive, when, as and if declared by the Board of Directors, out
      of
      the assets of the Corporation legally available therefor, (1) quarterly
      dividends payable in cash on the last day of each fiscal quarter in each year,
      or such other dates as the Board of Directors of the Corporation shall approve
      (each such date being referred to herein as a “Quarterly
      Dividend Payment Date”),
      commencing on the first Quarterly Dividend Payment Date after the first issuance
      of a share or a fraction of a share of Series A Preferred Stock, in the amount
      of $.01 per whole share (rounded to the nearest cent) less the amount of all
      cash dividends declared on the Series A Preferred Stock pursuant to the
      following clause (2) since the immediately preceding Quarterly Dividend Payment
      Date or, with respect to the first Quarterly Dividend Payment Date, since the
      first issuance of any share or fraction of a share of Series A Preferred Stock
      (the total of which shall not, in any event, be less than zero) and (2)
      dividends payable in cash on the payment date for each cash dividend declared
      on
      the Common Stock in an amount per whole share (rounded to the nearest cent)
      equal to the Formula Number (as hereinafter defined) then in effect times the
      cash dividends then to be paid on each share of Common Stock. In addition,
      if
      the Corporation shall pay any dividend or make any distribution on the Common
      Stock payable in assets, securities or other forms of noncash consideration
      (other than dividends or distributions solely in shares of Common Stock), then,
      in each such case, the Corporation shall simultaneously pay or make on each
      outstanding whole share of Series A Preferred Stock a dividend or distribution
      in like kind equal to the Formula Number then in effect times such dividend
      or
      distribution on each share of the Common Stock. As used herein, the
“Formula
      Number”
shall
      be 1,000; provided, however, that, if at any time after July 20, 1995, the
      Corporation shall (i) declare or pay any dividend on the Common Stock payable
      in
      shares of Common Stock or make any distribution on the Common Stock in share
      of
      Common Stock, (ii) subdivide (by a stock split or otherwise) the outstanding
      shares of Common Stock into a larger number of shares of Common Stock or (iii)
      combine (by a reverse stock split or otherwise) the outstanding shares of Common
      Stock, into a smaller number of shares of Common Stock, then in each such event
      the Formula Number shall be adjusted to a number determined by multiplying
      the
      Formula Number in effect immediately prior to such event by a fraction, the
      numerator of which is the number of shares of Common Stock that are outstanding
      immediately after such event and the denominator of which is the number of
      shares of Common Stock that are outstanding immediately prior to such event
      (and
      rounding the result to the nearest whole number); and provided further, that,
      if
      at any time after July 20, 1995, the Corporation shall issue any shares of
      its
      capital stock in a merger, reclassification, or change of the outstanding shares
      of Common Stock, then in each such event the Formula Number shall be
      appropriately adjusted to reflect such merger, reclassification or change so
      that each share of Preferred Stock continues to be the economic equivalent
      of a
      Formula Number of shares of Common Stock prior to such merger, reclassification
      or change.

    

    
      
        
        

      

      
        4

        
          

        

      

      
        
        

      

    

    2.2  The
      Corporation shall declare a dividend or distribution on any outstanding Series
      A
      Preferred Stock as provided in Section
      2.1
      immediately prior to or at the same time it declares a dividend or distribution
      on the Common Stock (other than a dividend or distribution solely in shares
      of
      Common Stock); provided, however, that, in the event no dividend or distribution
      (other than a dividend or distribution in shares of Common Stock) shall have
      been declared on the Common Stock during the period between any Quarterly
      Dividend Payment Date and the next subsequent Quarterly Dividend Payment Date,
      a
      dividend of $.01 per share on the Series A Preferred Stock shall nevertheless
      be
      payable on such subsequent Quarterly Dividend Payment Date. The Board of
      Directors may fix a record date for the determination of holders of shares
      of
      Series A Preferred Stock entitled to receive a dividend or distribution declared
      thereon, which record date shall be the same as the record date for a
      corresponding dividend or distribution on the Common Stock.

     

    2.3  Dividends
      shall begin to accrue and be cumulative on any outstanding shares of Series
      A
      Preferred Stock from and after the Quarterly Dividend Payment Date next
      preceding the date of original issue of such shares of Series A Preferred Stock;
      provided, however, that dividends on such shares which are originally issued
      after the record date for the determination of holders of shares of Series
      A
      Preferred Stock entitled to receive a quarterly dividend and on or prior to
      the
      next succeeding Quarterly Dividend Payment Date shall begin to accrue and be
      cumulative from and after such Quarterly Dividend Payment Date. Notwithstanding
      the foregoing, dividends on shares of Series A Preferred Stock which are
      originally issued prior to the record date for the determination of holders
      of
      shares of Series A Preferred Stock entitled to receive a quarterly dividend
      on
      the first Quarterly Dividend Payment Date shall be calculated as if cumulative
      from and after the last day of the fiscal quarter next preceding the date of
      original issuance of such shares. Accrued but unpaid dividends shall not bear
      interest. Dividends paid on the shares of Series A Preferred Stock in an amount
      less than the total amount of such dividends at the time accrued and payable
      on
      such shares shall be allocated pro rata on a share-by-share basis among all
      such
      shares at the time outstanding.

    

    2.4  So
      long
      as any shares of the Series A Preferred Stock are outstanding, no dividends
      or
      other distributions shall be declared, paid or distributed, or set aside for
      payment or distribution, on the Common Stock unless, in each case, the dividend
      required by this Section 2 to be declared on the Series A Preferred Stock shall
      have been declared.

     

    2.5  The
      holders of the shares of Series A Preferred Stock shall not be entitled to
      receive any dividends or other distribution except as provided
      herein.

     

    3.  Voting
      Rights.
      The
      holders of shares of Series A Preferred Stock shall have the following voting
      rights:

     

    
      
        
        

      

      
        5

        
          

        

      

      
        
        

      

    

    3.1  Each
      holder of Series A Preferred Stock shall be entitled to a number of votes equal
      to the Formula Number then in effect, for each share of Series A Preferred
      Stock
      held of record on each matter on which holders of the Common Stock or
      stockholders generally are entitled to vote, multiplied by the maximum number
      of
      votes per share which any holder of the Common Stock or stockholders generally
      then have with respect to such matter (assuming any holding period or other
      requirement to vote a greater number of shares is satisfied).

     

    3.2  Except
      as
      otherwise provided herein or by applicable law, the holders of shares of Series
      A Preferred Stock and the holders of shares of Common Stock shall vote together
      as one class for the election of directors of the Corporation and on all other
      matters submitted to a vote of stockholders of the Corporation.

     

    3.3  If,
      at
      the time of any annual meeting of stockholders for the election of directors,
      the equivalent of six quarterly dividends (whether or not consecutive) payable
      on any share or shares of Series A Preferred Stock are in default, the number
      of
      directors constituting the Board of Directors of the Corporation shall be
      increased by two. In addition to voting together with the holders of Common
      Stock for the election of other directors of the Corporation, the holders of
      record of the Series A Preferred Stock, voting separately as a class to the
      exclusion of the holders of Common Stock, shall be entitled at said meeting
      of
      stockholders (and at each subsequent annual meeting of stockholders), unless
      all
      dividends in arrears have been paid or declared and set apart for payment prior
      thereto, to vote for the election of two directors of the Corporation, the
      holders of any Series A Preferred Stock being entitled to cast a number of
      votes
      per share of Series A Preferred Stock equal to the Formula Number. Until the
      default in payments of all dividends which permitted the election of said
      directors shall cease to exist, any director who shall have been so elected
      pursuant to the next preceding sentence may be removed at any time, either
      with
      or without cause, only by the affirmative vote of the holders of the shares
      of
      Series A Preferred Stock at the time entitled to cast a majority of the votes
      entitled to be cast for the election of any such director at a special meeting
      of such holders called for that purpose, and any vacancy thereby created may
      be
      filled by the vote of such holders. If and when such default shall cease to
      exist, the holders of the Series A Preferred Stock shall be divested of the
      foregoing special voting rights, subject to revesting in the event of each
      and
      every subsequent like default in payments of dividends. Upon the termination
      of
      the foregoing special voting rights, the terms of office of all persons who
      may
      have been elected directors pursuant to said special voting rights shall
      forthwith terminate, and the number of directors constituting the Board of
      Director shall be reduced by two. The voting rights granted by this Section
      3.3
      shall be in addition to any other voting rights granted to the holders of the
      Series A Preferred Stock in this Section 3.

    

    3.4  Except
      as
      provided herein, in Section
      11
      or by
      applicable law, holders of Series A Preferred Stock shall have no special voting
      rights and their consent shall not be required (except to the extent they are
      entitled to vote with holders of Common Stock as set forth herein) for
      authorizing or taking any corporate action.

     

    4.  Certain
      Restrictions.

    

    4.1  Whenever
      quarterly dividends or other dividends or distributions payable on the Series
      A
      Preferred Stock as provided in Section
      2
      are in
      arrears, thereafter and until all accrued and unpaid dividends and
      distributions, whether or not declared, on shares of Series A Preferred Stock
      outstanding shall have been paid in full, the Corporation shall not

     

    
      
        
        

      

      
        6

        
          

        

      

      
        
        

      

    

    4.1.1  declare
      or pay dividends on, make any other distributions on, or redeem or purchase
      or
      otherwise acquire for consideration any shares of stock ranking junior (either
      as to dividends or upon liquidation, dissolution or winding up) to the Series
      A
      Preferred Stock;

     

    4.1.2  declare
      or pay dividends on, or make any other distributions on any shares of stock
      ranking on a parity (either as to dividends or upon liquidation, dissolution
      or
      winding up) with the Series A Preferred Stock, except dividends paid ratably
      on
      the Series A Preferred Stock and all such parity stock on which dividends are
      payable or in arrears in proportion to the total amounts to which the holders
      of
      all such shares are then entitled;

     

    4.1.3  redeem
      or
      purchase or otherwise acquire for consideration shares of any stock ranking
      on a
      parity (either as to dividends or upon liquidation, dissolution or winding
      up)
      with the Series A Preferred Stock; provided that the Corporation may at any
      time
      redeem, purchase or otherwise acquire shares of any such parity stock in
      exchange for shares of any stock of the Corporation ranking junior (either
      as to
      dividends or upon dissolution, liquidation or winding up) to the Series A
      Preferred Stock; or

     

    4.1.4  purchase
      or otherwise acquire for consideration any shares of Series A Preferred Stock,
      or any shares of stock ranking on a parity with the Series A Preferred Stock,
      except in accordance with a purchase offer made in writing or by publication
      (as
      determined by the Board of Directors) to all holders of such shares upon such
      terms as the Board of Directors, after consideration of the respective annual
      dividend rates and other relative rights and preferences of the respective
      series and classes, shall determine in good faith will result in fair and
      equitable treatment among the respective series or classes.

     

    4.2  The
      Corporation shall not permit any subsidiary of the Corporation to purchase
      or
      otherwise acquire for consideration any shares of stock of the Corporation
      unless the Corporation could, under Section
      4.1,
      purchase or otherwise acquire such shares at such time and in such
      manner.

     

    5.  Liquidation
      Rights.
      Upon
      the liquidation, dissolution or winding up of the Corporation, whether voluntary
      or involuntary, no distribution shall be made (1) to the holders of shares
      of
      stock ranking junior (either as to dividends or upon liquidation, dissolution
      or
      winding up) to the Series A Preferred Stock unless, prior thereto, the holders
      of shares of Series A Preferred Stock shall have received an amount equal to
      the
      accrued and unpaid dividends and distributions thereon, whether or not declared,
      to the date of such payment, plus an amount equal to the greater of (x) $.01
      per
      whole share or (y) an aggregate amount per share equal to the Formula Number
      then in effect times the aggregate amount to be distributed per share to holders
      of Common Stock or (2) to the holders of stock ranking on a parity (either
      as to
      dividends or upon liquidation, dissolution or winding up) with the Series A
      Preferred Stock, except distributions made ratably on the Series A Preferred
      Stock and all other such parity stock in proportion to the total amounts to
      which the holders of all such shares are entitled upon such liquidation,
      dissolution or winding up.

     

    
      
        
        

      

      
        7

        
          

        

      

      
        
        

      

    

    6.  Consolidation,
      Merger, etc.
      In case
      the Corporation shall enter into any consolidation, merger, combination or
      other
      transaction in which the shares of Common Stock are exchanged for or changed
      into other stock or securities, cash or any other property, then in any such
      case the then outstanding shares of Series A Preferred Stock shall at the same
      time be similarly exchanged or changed into an amount per share equal to the
      Formula Number then in effect times the aggregate amount of stock, securities,
      cash or any other property (payable in kind), as the case may be, into which
      or
      for which each share of Common Stock is exchanged or changed. In the event
      both
      this Section 6 and Section 2 appear to apply to a transaction, this Section
      6
      will control.

     

    7.  No
      Redemption; No Sinking Fund.

     

    7.1  The
      shares of Series A Preferred Stock shall not be subject to redemption by the
      Corporation or at the option of any holder of Series A Preferred Stock except
      as
      set forth in the Certificate of Incorporation of the Corporation; provided,
      however, that the Corporation may purchase or otherwise acquire outstanding
      shares of Series A Preferred Stock in the open market or by offer to any holder
      or holders of shares of Series A Preferred Stock.

     

    7.2  The
      shares of Series A Preferred Stock shall not be subject to or entitled to the
      operation of a retirement or sinking fund.

     

    8.  Ranking.
      The
      Series A Preferred Stock shall rank junior to all other series of Preferred
      Stock of the Corporation, unless the Board of Directors shall specifically
      determine otherwise in fixing the powers, preferences and relative,
      participating, optional and other special rights of the shares of such series
      and the qualifications, limitations and restrictions thereof.

     

    9.  Fractional
      Shares.
      The
      Series A Preferred Stock shall be issuable upon exercise of the Rights issued
      pursuant to the Rights Agreement in whole shares or in any fraction of a share
      that is one one-thousandth (1/1,000ths) of a share of any integral multiple
      of
      such fraction which shall entitle the holder, in proportion to such holder’s
      fractional shares, to receive dividends, exercise voting rights, participate
      in
      distributions and to have the benefit of all other rights of holders of Series
      A
      Preferred Stock. In lieu of fractional shares, the Corporation, prior to the
      first issuance of a share or a fraction of a share of Series A Preferred Stock,
      may elect (1) to make a cash payment as provided in the Rights Agreement for
      fractions of a share other than one one-thousandth (1/1,000th) of a share or
      any
      integral multiple thereof or (2) to issue depository receipts evidencing such
      authorized fraction of a share of Series A Preferred Stock pursuant to an
      appropriate agreement between the Corporation and a depository selected by
      the
      Corporation; provided that such agreement shall provide that the holders of
      such
      depository receipts shall have all the rights, privileges and preferences to
      which they are entitled as holders of the Series A Preferred Stock.

     

    10.  Reacquired
      Shares.
      Any
      shares of Series A Preferred Stock purchased or otherwise acquired by the
      Corporation in any manner whatsoever shall be retired and canceled promptly
      after the acquisition thereof. All such shares shall upon their cancellation
      become authorized but unissued shares of Preferred Stock, without designation
      as
      to series until such shares are once more designated as part of a particular
      series by the Board of Directors pursuant to the provisions of Article Fourth
      of
      the Certificate of Incorporation.

     

    
      
        
        

      

      
        8

        
          

        

      

      
        
        

      

    

    11.  Amendment.
      None of
      the powers, preferences and relative, participating, optional and other special
      rights of the Series A Preferred Stock as provided herein or in the Certificate
      of Incorporation shall be amended in any manner which would alter or change
      the
      powers, preferences, rights or privileges of the holders of Series A Preferred
      Stock so as to affect them adversely without the affirmative vote of the holders
      of at least 66-2/3% of the outstanding shares of Series A Preferred Stock,
      voting as a separate class; provided, however, that no such amendment approved
      by the holders of at least 66-2/3% of the outstanding shares of Series A
      Preferred Stock shall be deemed to apply to the powers, preferences, rights
      or
      privileges of any holder of shares of Series A Preferred Stock originally issued
      upon exercise of the Rights after

    the
      time
      of such approval without the approval of such holder.

    

     

    Series
      B Preferred Stock 

     

    

    [___________]
      shares of the authorized and unissued Preferred Stock of the Corporation are
      hereby designated “Series
      B Preferred Stock”
with
      the following rights, preferences, powers, privileges and restrictions,
      qualifications and limitations. Unless otherwise indicated, references to
“Sections” or “Subsections” in this Part C of this Article Fourth refer to
      sections and subsections of this subpart of Part C of this subpart of Article
      Fourth.

     

    
      	1.  	
              Dividends.

            

    

    

    1.1  The
      holders of shares of Series B Preferred Stock, in preference to the holders
      of
      any other stock of the Corporation ranking junior to the Series B Preferred
      Stock including, without limitation, Common Stock and Series A Preferred Stock
      (collectively, the “Junior
      Stock”),
      shall
      be entitled to receive cumulative dividends, out of funds legally available
      therefor, at the annual rate of eight percent (8%) of the Series B Original
      Issue Price (as defined below) for each share of Series B Preferred Stock.
      Dividends on shares of Series B Preferred Stock shall, at the option of the
      holders of a majority of the outstanding Series B Preferred Stock, be payable
      in
      cash or in shares of Preferred Stock, regardless of whether declared by the
      Board of Directors, and for a period of five (5) years from the Series B
      Original Issue Date (as defined below). For purposes of this Certificate of
      Incorporation, the term “Series
      B Original Issue Price”
shall
      mean $[______] per share of Series B Preferred Stock (subject to appropriate
      adjustment in the event of any stock dividend, stock split, combination or
      other
      similar recapitalization with respect to the Series B Preferred
      Stock).

    

    1.2  The
      Corporation shall not declare or pay any dividends on any shares of Junior
      Stock
      unless all dividends accrued pursuant to Section
      1.1
      above
      have been paid with respect to all outstanding shares of Series B Preferred
      Stock. Subject to Section
      3.2(g),
      if
      the
      Board of Directors of the Corporation thereafter shall declare a dividend
      payable upon the then outstanding shares of the Common Stock (other than a
      dividend payable entirely in shares of the Common Stock of the Corporation),
      then the Board of Directors shall declare at the same time a dividend upon
      the
      then outstanding shares of the Series B Preferred Stock payable at the same
      time
      as the dividend is paid on the Common Stock, in an amount equal to the amount
      of
      dividends per share of Series B Preferred Stock as would have been payable
      on
      the number of shares of Common Stock which each share of Series B Preferred
      Stock held by each holder thereof would have received if such Series B Preferred
      Stock had been converted to Common Stock pursuant to the provisions of
Section
      4 hereof
      as
      of the record date for the determination of holders of Common Stock entitled
      to
      receive such dividends. In the event the Board of Directors of the Corporation
      shall declare a dividend payable upon any class or series of Junior Stock of
      the
      Corporation other than Common Stock, the Board of Directors shall declare at
      the
      same time a dividend upon the then outstanding shares of Series B Preferred
      Stock, payable at the same time as such dividend on such other class or series
      of Junior Stock in an amount equal to (i) in the case of any series or class
      convertible into Common Stock, a dividend per share of Series B Preferred Stock
      as would equal the dividend payable on such other class or series determined
      as
      if all such shares of such class or series had been converted to Common Stock
      and all shares of Series B Preferred Stock have been converted to Common Stock
      on the record date for the determination of holders entitled to receive such
      dividend or (ii) if such class or series of capital stock is not convertible
      into Common Stock, at a rate per share of Series B Preferred Stock determined
      by
      dividing the amount of the dividend payable on each share of such class or
      series of capital stock by the original issuance price of such class or series
      of capital stock and multiplying such fraction by the Series B Original Issue
      Price.

    

    
      
        
        

      

      
        9

        
          

        

      

      
        
        

      

    

    1.3  Participation
      Rights.
      If,
      after dividends in the full preferential amounts specified in Section
      1.1
      for the
      Series B Preferred Stock have been paid or declared and set apart, the Board
      of
      Directors shall declare an additional dividend or dividends out of the funds
      legally available therefore, then such additional dividend or dividends shall
      be
      declared pro rata on the Common Stock and the Series B Preferred Stock on a
      pari passu
      basis
      according to the number of shares of Common Stock held by such holders, where
      each holder of shares of Series B Preferred Stock is to be treated for this
      purpose as holding the greatest whole number of shares of Common Stock then
      issuable upon conversion of all shares of Series B Preferred Stock held by
      such
      holder pursuant Section
      4
      hereof.

    

    
      	2.  	
              Liquidation,
                Dissolution or Winding Up; Certain Mergers, Consolidations and Asset
                Sales.

            

    

    

    2.1  Preferential
      Payments to Holders of Series B Preferred Stock.
      In the
      event of any voluntary or involuntary liquidation, dissolution or winding up
      of
      the Corporation or any Deemed Liquidation Event (as defined below), the holders
      of shares of Series B Preferred Stock then outstanding shall be entitled to
      be
      paid out of the assets of the Corporation available for distribution to its
      stockholders before any payment shall be made to the holders of Junior Stock
      by
      reason of their ownership thereof, an amount per share equal to the Series
      B Original Issue Price, plus all dividends accrued, but unpaid pursuant to
      Section 1.1 above, including dividends with respect to any partial year at
      the
      appropriate pro rata rate consistent with Section 1.1 above, and any other
      dividends declared but unpaid thereon. If upon any such liquidation, dissolution
      or winding up of the Corporation or any Deemed Liquidation Event, the assets
      of
      the Corporation available for distribution to its stockholders shall be
      insufficient to pay the holders of shares of Series B Preferred Stock the full
      amount to which they shall be entitled under this Subsection
      2.1,
      the
      holders of shares of Series B Preferred Stock shall share ratably in any
      distribution of the assets available for distribution in proportion to the
      respective amounts which would otherwise be payable in respect of the shares
      held by them upon such distribution if all amounts payable on or with respect
      to
      such shares were paid in full.

    

    
      
        
        

      

      
        10

        
          

        

      

      
        
        

      

    

    2.2  Distribution
      of Remaining Assets.
      In the
      event of any voluntary or involuntary liquidation, dissolution or winding up
      of
      the Corporation or any Deemed Liquidation Event, after the payment of all
      preferential amounts required to be paid to the holders of shares of Series
      B
      Preferred Stock, the remaining assets of the Corporation available for
      distribution to its stockholders shall be distributed among the holders of
      the
      shares of Common Stock, pro rata based on the number of shares held by each
      such
      holder, provided, however, that the holders of Series B Preferred Stock shall
      be
      entitled to receive upon such dissolution, liquidation or winding up of the
      Corporation the greater of (i) any amount such holder would receive pursuant
      to
Subsection
      2.1
      hereof
      and (ii) the amount such holder would have received if such holder had converted
      his, her or its shares of Series B Preferred Stock into Common Stock immediately
      prior to such dissolution, liquidation or winding up of the Corporation. The
      aggregate amount which a holder of a share of Series B Preferred Stock is
      entitled to receive under Subsections
      2.1
      or
2.2
      is
      hereinafter referred to as the “Series
      B Liquidation Amount.”

    

    2.3  Deemed
      Liquidation Events.

    

    2.3.1  Definition.
      Each of
      the following events shall be considered a “Deemed
      Liquidation Event”
unless
      the holders of at least a majority of the outstanding shares of Series B
      Preferred Stock elect otherwise by written notice sent to the Corporation at
      least five (5) days prior to the effective date of any such event:

    

    (a) a
      merger
      or consolidation in which 

     

    
      	 	
              (i)

            	
              
              

            

    

     

    
      	 	
              (ii)

            	
              a
                subsidiary of the Corporation is a constituent party,
                

            

    

     

    except
      any such merger or consolidation involving the Corporation or a subsidiary
      in
      which the shares of capital stock of the Corporation outstanding immediately
      prior to such merger or consolidation continue to represent, or are converted
      into or exchanged for shares of capital stock that represent, immediately
      following such merger or consolidation, at least a majority, by voting power,
      of
      the capital stock of (1) the surviving or resulting corporation or (2) if the
      surviving or resulting corporation is a wholly owned subsidiary of another
      corporation immediately following such merger or consolidation, the parent
      corporation of such surviving or resulting corporation; or 

    

    (b) the
      sale,
      lease, license, transfer or other disposition, in a single transaction or series
      of related transactions, by the Corporation or any subsidiary of the Corporation
      of all or substantially all the assets of the Corporation and its subsidiaries
      taken as a whole, or the sale or disposition (whether by merger or otherwise)
      of
      one or more subsidiaries of the Corporation if substantially all of the assets
      of the Corporation and its subsidiaries taken as a whole are held by such
      subsidiary or subsidiaries, except where such sale, lease, license, transfer
      or
      other disposition is to a wholly owned subsidiary of the
      Corporation.

     

    
      
         

      

      
        11

        
          

        

      

      
         

      

    

    

    2.3.2  Amount
      Deemed Paid or Distributed.
      If the
      amount deemed paid or distributed under this Subsection
      2.3
      is made
      in property other than in cash, the value of such distribution shall be the
      fair
      market value of such property, determined as follows:

    

    (i) if
      traded
      on a securities exchange, the value shall be deemed to be the average of the
      closing prices of the securities on such exchange or market over the ten (10)
      day period ending one (1) day prior to the distribution;

     

    (ii) if
      actively traded over-the-counter, the value shall be deemed to be the average
      of
      the closing bid prices over the ten (10) day period ending one (1) day prior
      to
      the distribution; or

     

    (iii) if
      there
      is no active public market, the value shall be the fair market value thereof,
      as
      determined in good faith by the Board of Directors of the Corporation after
      reasonable consultation with the holders of at least a majority of the then
      outstanding shares of Series B Preferred Stock (the “Requisite
      Holders”).
      In
      the event that the Requisite Holders disagree with the fair market value as
      determined by the Board of Directors, the Requisite Holders shall select an
      appraiser that is reasonably acceptable to the Corporation who is experienced
      in
      such matters to determine the fair market value for purposes of this
Subsection
      2.3.2(iii);
      and
      such appraiser’s determination shall be binding upon the Corporation and the
      holders of Series B Preferred Stock.

     

    

    
      	3.  	
              Voting.

            

    

    

    3.1  General.
      On any
      matter presented to the stockholders of the Corporation for their action or
      consideration at any meeting of stockholders of the Corporation, each holder
      of
      outstanding shares of Series B Preferred Stock shall be entitled to cast the
      number of votes equal to one-half of the number of whole shares of Common Stock
      into which the shares of Series B Preferred Stock held by such holder are
      convertible as of the record date for determining stockholders entitled to
      vote
      on such matter. Except as provided by law or by the other provisions of the
      Certificate of Incorporation, holders of Series B Preferred Stock shall vote
      together with the holders of Common Stock as a single class. From and after
      the
      conversion of any share of Series B Preferred Stock into Common Stock, such
      resulting share or shares of Common Stock shall have the full voting rights
      applicable to the Common Stock generally.

    

    3.2  Series
      B Preferred Stock Protective Provisions.
      At any
      time when any shares of Series B Preferred Stock issued pursuant to that certain
      Series B Preferred Stock and Warrant Purchase Agreement dated as of April 5,
      2007 among this Corporation and the purchasers named therein (the “Series
      B Purchase Agreement”),
      including upon exercise of warrants, are outstanding, the Corporation shall
      not,
      without first obtaining the approval (by vote or written consent, as provided
      by
      law) of the holders of at least a majority of the shares of the Series B
      Preferred Stock held by Significant Holders (defined below), if
      any:

    

    a)  authorize
      or incur any Indebtedness (as defined below) in excess of
      $2,000,000;

     

    
      
         

      

      
        12

        
          

        

      

      
         

      

    

    b)  issue
      or
      sell any convertible debt, preferred stock (convertible or otherwise) or any
      other equity or equity-linked security at a price that values the Corporation’s
      Common Stock at a price less than the Series B Original Issue Price (as adjusted
      for all subsequent stock splits, stock dividends, consolidations,
      recapitalizations and reorganizations), other than any equity or equity linked
      security that is issued pursuant to any transaction or transactions approved
      under Subsection
      3.2(k)
      hereof;

     

    c)  increase
      or decrease the authorized number of shares of capital stock of the
      Corporation;

     

    d)  create
      or
      issue any new class or series of shares having rights, preferences or privileges
      senior to the Common Stock, or create or issue any other new equity or
      equity-linked securities, including convertible debt;

     

    e)  issue
      any
      shares of Series A Preferred Stock other than pursuant to the terms of that
      certain Amended and Restated Stockholders’ Rights Agreement, dated as of July
      25, 2005, as amended, between the Company and American Stock Transfer &
Trust Company;

     

    f)  amend,
      alter, or repeal any provision of this Restated Certificate of Incorporation
      or
      the Amended and Restated Bylaws of the Corporation (including any filing of
      a
      certificate of designation), that alters or changes the voting powers,
      preferences, or other special rights or privileges, or restrictions of the
      Series B Preferred Stock

     

    g)  pay
      or
      declare any dividends or make other distributions upon its shares of capital
      stock;

     

    h)  purchase,
      redeem or otherwise acquire any of the Corporation’s equity securities
      (including warrants, options and other rights to acquire equity securities)
      other than the repurchase of equity securities pursuant to existing agreements
      disclosed to the Purchasers in writing prior to the date of this Amended and
      Restated Certificate of Incorporation specifically referencing this Subsection
      3.2(h);

     

    i)  issue
      any
      equity or equity-linked securities to any employee other than pursuant to the
      Corporation’s Approved Stock Plans (as defined below), or increase the shares of
      Common Stock or other securities reserved for issuance as incentive awards
      to
      the Corporation’s management and other employees, directors and consultants
      pursuant to the Approved Stock Plans or any other any equity incentive plan
      or
      similar arrangement;

     

    j)  liquidate,
      dissolve or wind-up;

     

    k)  merge
      or
      consolidate with another corporation in which the holders of the Corporation’s
      voting equity securities immediately prior to the transaction would own 50%
      or
      less of the voting securities of the surviving corporation or engage in any
      other Deemed Liquidation Event;

     

    
      
         

      

      
        13

        
          

        

      

      
         

      

    

    l)  sell,
      license or dispose of any material assets of the Corporation, including
      intellectual property or other rights to the Corporation’s development stage,
      pre-clinical and/or diagnostic assets, including, without limitation, pursuant
      to any license, development, commercialization, distribution, marketing,
      co-marketing, collaboration, partnering or other agreement, other than licenses
      of immaterial technology in the ordinary course of business on commercially
      reasonable terms and consistent with past practices; 

     

    m)  change
      the authorized number of directors of the Corporation;

     

    n)  amend
      or
      waive any material provision of this Amended and Restated Certificate of
      Incorporation or the Corporation’s By-Laws;

     

    o)  materially
      change the nature of the Corporation’s business from that engaged in on the
      Series B Original Issue Date (as defined below); 

     

    p)  intentionally
      take any action which is reasonably likely to result in (i) the Common Stock
      of
      the Corporation no longer being approved for quotation on the American Stock
      Exchange or the Nasdaq Stock Market or (ii) the Common Stock of the Corporation
      ceasing to be registered pursuant to Section 12 of the Securities Exchange
      Act
      of 1934, as amended; or

     

    q)  agree,
      consent or acquiesce to any amendment, supplement or other modification to,
      or
      termination of, any of its material agreements, including, without limitation
      any Material License Agreement (as defined below) or any other agreement filed
      with the Securities and Exchange Commission pursuant to Item 601 of Regulation
      S-K;

     

    For
      the
      purposes hereof:

     

    “Significant
      Holder” shall
      mean any beneficial holder or holder of record of at least that number of shares
      of Series B Preferred Stock as is equal to $4,000,000 divided by the Series
      B
      Original Issue Price (as defined below) (as adjusted for stock splits, stock
      dividends, reverse stock splits or the like). All shares of Series B Preferred
      Stock held or acquired by affiliated entities or persons shall be aggregated
      together for the purpose of determining the status of a holder as a Significant
      Holder.

     

    “Indebtedness”
shall
      mean (a) any liabilities for borrowed money or amounts owed (other than trade
      accounts payable incurred in the ordinary course of business), (b) all
      guaranties, endorsements and other contingent obligations in respect of
      Indebtedness of others, whether or not the same are or should be reflected
      in
      the Corporation’s balance sheet (or the notes thereto), except guaranties by
      endorsement of negotiable instruments for deposit or collection or similar
      transactions in the ordinary course of business; and (c) the present value
      of
      any lease payments due under leases required to be capitalized in accordance
      with GAAP;

     

    “Approved
      Stock Plan”
shall
      mean any employee benefit plan which has been approved by the Board of Directors
      and stockholders of the Corporation, pursuant to which the Corporation’s
      securities may be issued to any employee, officer or director for services
      provided to the Corporation; and

     

    
      
         

      

      
        14

        
          

        

      

      
         

      

    

    “Material
      License Agreement”
shall
      mean (i) Exclusive License Agreement dated as of September 28, 2004 by and
      between Oxis International, a Delaware corporation, and HaptoGuard, as amended
      on March 22, 2005, as further amended on July 19, 2006, and as further amended
      on April 2, 2007; and (ii) License and Research Agreement dated as of July
      12,
      2004 by and between BIO-RAP Technologies, Ltd., an Israeli corporation, on
      its
      own behalf and on behalf of the Rappaport Family Institute for Research in
      the
      Medical Sciences, and HaptoGaurd, as amended on April 1, 2007. 

     

    

    
      	4.  	
              Optional
                Conversion. 

            

    

    

    The
      holders of the Series B Preferred Stock shall have conversion rights as follows
      (the “Conversion
      Rights”):

    

    4.1  Right
      to Convert.
      

    

    4.1.1  Conversion
      Ratio.
      Each
      share of Series B Preferred Stock, plus, prior to the fifth anniversary of
      the
      Series B Original Issue Date, all accrued and unpaid dividends, shall be
      convertible, at the option of the holder thereof, at any time and from time
      to
      time, and without the payment of additional consideration by the holder thereof,
      into such number of fully paid and nonassessable shares of Common Stock as
      is
      determined by dividing the Series B Original Issue Price by the Series B
      Conversion Price (as defined below) in effect at the time of conversion. The
      “Series
      B Conversion Price”
shall
      initially be equal to $[_______]. Such initial Series B Conversion Price, and
      the rate at which shares of Series B Preferred Stock may be converted into
      shares of Common Stock, shall be subject to adjustment as provided
      below.

    

    4.1.2  Termination
      of Conversion Rights.
      In the
      event of a notice of redemption of any shares of Series B Preferred Stock
      pursuant to Section 6,
      the
      Conversion Rights of the shares designated for redemption shall terminate at
      the
      close of business on the last full day preceding the date fixed for redemption,
      unless the redemption price is not fully paid on such redemption date, in which
      case the Conversion Rights for such shares shall continue until such price
      is
      paid in full. In the event of a liquidation, dissolution or winding up of the
      Corporation or a Deemed Liquidation Event, the Conversion Rights shall terminate
      at the close of business on the last full day preceding the date fixed for
      the
      payment of any such amounts distributable on such event to the holders of Series
      B Preferred Stock.

    

    4.2  Fractional
      Shares.
      No
      fractional shares of Common Stock shall be issued upon conversion of the Series
      B Preferred Stock. In lieu of any fractional shares to which the holder would
      otherwise be entitled, the Corporation shall pay cash equal to such fraction
      multiplied by the fair market value of a share of Common Stock as determined
      in
      good faith by the Board of Directors of the Corporation. In the event that
      the
      Requisite Holders disagree with the fair market value as determined by the
      Board
      of Directors, the Requisite Holders shall select an appraiser that is reasonably
      acceptable to the Corporation who is experienced in such matters to determine
      the fair market value for purposes of this Section
      4.2;
      and
      such appraiser’s determination shall be binding upon the Corporation and the
      holders of Series B Preferred Stock. Whether or not fractional shares would
      be
      issuable upon such conversion shall be determined on the basis of the total
      number of shares of Series B Preferred Stock the holder is at the time
      converting into Common Stock and the aggregate number of shares of Common Stock
      issuable upon such conversion.

    

    
      
         

      

      
        15

        
          

        

      

      
         

      

    

    4.3  Mechanics
      of Conversion.

    

    4.3.1  Notice
      of Conversion.
      In
      order for a holder of Series B Preferred Stock to voluntarily convert shares
      of
      Series B Preferred Stock into shares of Common Stock, such holder shall
      surrender the certificate or certificates for such shares of Series B Preferred
      Stock (or, if such registered holder alleges that such certificate has been
      lost, stolen or destroyed, a lost certificate affidavit and agreement reasonably
      acceptable to the Corporation to indemnify the Corporation against any claim
      that may be made against the Corporation on account of the alleged loss, theft
      or destruction of such certificate), at the office of the transfer agent for
      the
      Series B Preferred Stock (or at the principal office of the Corporation if
      the
      Corporation serves as its own transfer agent), together with written notice
      that
      such holder elects to convert all or any number of the shares of the Series
      B
      Preferred Stock represented by such certificate or certificates and, if
      applicable, any event on which such conversion is contingent. Such notice shall
      state such holder’s name or the names of the nominees in which such holder
      wishes the certificate or certificates for shares of Common Stock to be issued.
      If required by the Corporation, certificates surrendered for conversion shall
      be
      endorsed or accompanied by a written instrument or instruments of transfer,
      in
      form satisfactory to the Corporation, duly executed by the registered holder
      or
      his, her or its attorney duly authorized in writing. The close of business
      on
      the date of receipt by the transfer agent (or by the Corporation if the
      Corporation serves as its own transfer agent) of such certificates (or lost
      certificate affidavit and agreement) and notice shall be the time of conversion
      (the “Conversion
      Time”),
      and
      the shares of Common Stock issuable upon conversion of the shares represented
      by
      such certificate shall be deemed to be outstanding of record as of such date.
      The Corporation shall, as soon as practicable after the Conversion Time, issue
      and deliver to such holder of Series B Preferred Stock, or to his, her or its
      nominees, a certificate or certificates for the number of full shares of Common
      Stock issuable upon such conversion in accordance with the provisions hereof,
      a
      certificate for the number (if any) of the shares of Series B Preferred Stock
      represented by the surrendered certificate that were not converted into Common
      Stock, and cash as provided in Subsection
      4.2
      in lieu
      of any fraction of a share of Common Stock otherwise issuable upon such
      conversion and payment of any declared but unpaid dividends on the shares of
      Series B Preferred Stock converted.

    

    4.3.2  Reservation
      of Shares.
      The
      Corporation shall at all times when the Series B Preferred Stock shall be
      outstanding, reserve and keep available out of its authorized but unissued
      capital stock, for the purpose of effecting the conversion of the Series B
      Preferred Stock, such number of its duly authorized shares of Common Stock
      as
      shall from time to time be sufficient to effect the conversion of all
      outstanding Series B Preferred Stock; and if at any time the number of
      authorized but unissued shares of Common Stock shall not be sufficient to effect
      the conversion of all then outstanding shares of the Series B Preferred Stock,
      the Corporation shall take such corporate action as may be necessary to increase
      its authorized but unissued shares of Common Stock to such number of shares
      as
      shall be sufficient for such purposes, including, without limitation, engaging
      in best efforts to obtain the requisite stockholder approval of any necessary
      amendment to the Certificate of Incorporation. Before taking any action which
      would cause an adjustment reducing the Series B Conversion Price below the
      then
      par value of the shares of Common Stock issuable upon conversion of the Series
      B
      Preferred Stock, the Corporation will take any corporate action which may,
      in
      the opinion of its counsel, be necessary in order that the Corporation may
      validly and legally issue fully paid and nonassessable shares of Common Stock
      at
      such adjusted Series B Conversion Price.

    

    
      
         

      

      
        16

        
          

        

      

      
         

      

    

    4.3.3  Effect
      of Conversion.
      All
      shares of Series B Preferred Stock which shall have been surrendered for
      conversion as herein provided shall no longer be deemed to be outstanding and
      all rights with respect to such shares shall immediately cease and terminate
      at
      the Conversion Time, except only the right of the holders thereof to receive
      shares of Common Stock in exchange therefor and to receive payment of any
      dividends declared but unpaid thereon. Any shares of Series B Preferred Stock
      so
      converted shall be retired and cancelled and may not be reissued as shares
      of
      such series, and the Corporation may thereafter take such appropriate action
      (without the need for stockholder action) as may be necessary to reduce the
      authorized number of shares of Series B Preferred Stock accordingly.

    

    4.3.4  No
      Further Adjustment.
      Upon
      any such conversion, no adjustment to the Series B Conversion Price shall be
      made for any declared but unpaid dividends on the Series B Preferred Stock
      surrendered for conversion or on the Common Stock delivered upon
      conversion.

    

    4.3.5  Taxes.
      The
      Corporation shall pay any and all issue and other similar taxes 

    that
      may
      be payable in respect of any issuance or delivery of shares of Common Stock
      upon
      conversion of shares of Series B Preferred Stock pursuant to this Section 4.
      The
      Corporation shall not, however, be required to pay any tax which may be payable
      in respect of any transfer involved in the issuance and delivery of shares
      of
      Common Stock in a name other than that in which the shares of Series B Preferred
      Stock so converted were registered, and no such issuance or delivery shall
      be
      made unless and until the person or entity requesting such issuance has paid
      to
      the Corporation the amount of any such tax or has established, to the
      satisfaction of the Corporation, that such tax has been paid.

    

    4.4  Adjustments
      to Series B Conversion Price for Diluting Issues.

    

    4.4.1  Special
      Definitions.
      For
      purposes of this Article Fourth, the following definitions shall
      apply:

    a)  “Option”
shall
      mean rights, options or warrants to subscribe for, purchase or otherwise acquire
      Common Stock or Convertible Securities.

     

    b)  “Series
      B Original Issue Date”
shall
      mean the date on which the first share of Series B Preferred Stock was
      issued.

     

    c)  “Convertible
      Securities”
shall
      mean any evidences of indebtedness, shares or other securities directly or
      indirectly convertible into or exchangeable for Common Stock, but excluding
      Options.

     

    
      
         

      

      
        17

        
          

        

      

      
         

      

    

    d)  “Additional
      Shares of Common Stock”
shall
      mean all shares of Common Stock issued (or, pursuant to Subsection 4.4.3
      below,
      deemed to be issued) by the Corporation after the Series B Original Issue Date,
      other than the following shares of Common Stock, and shares of Common Stock
      deemed issued pursuant to the following Options and Convertible Securities
      (collectively “Exempted
      Securities”):

     

    
      	i.  	
              shares
                of Common Stock, Options or Convertible Securities issued as a dividend
                or
                distribution on Series B Preferred
                Stock;

            

    

     

    
      	ii.  	
              shares
                of Common Stock, Options or Convertible Securities issued by reason
                of a
                dividend, stock split, split-up or other distribution on shares of
                Common
                Stock that is covered by Subsection
                4.5, 4.6,
                4.7
                or
                4.8
                below; 

            

    

     

    
      	iii.  	
              shares
                of Common Stock or Options issued to employees or directors of, or
                consultants or advisors to, the Corporation or any of its subsidiaries
                pursuant to an Approved Stock Plan;

            

    

     

    
      	iv.  	
              shares
                of Common Stock or Convertible Securities actually issued upon the
                exercise of Options or shares of Common Stock actually issued upon
                the
                conversion or exchange of Convertible Securities issued pursuant
                to
                Subsections
                4.4.1(i),
                (ii),
                (iii)
                and (v);
                or

            

    

     

    
      	v.  	
              shares
                of Common Stock, Options or Convertible Securities issued to banks,
                equipment lessors or other financial institutions, or to real property
                lessors, pursuant to a debt financing, equipment leasing or real
                property
                leasing transaction approved by the Board of Directors of the
                Corporation.

            

    

     

    4.4.2  No
      Adjustment of Series B Conversion Price.
      No
      adjustment in the Series B Conversion Price shall be made as the result of
      the
      issuance or deemed issuance of Additional Shares of Common Stock if the
      Corporation receives written notice from the holders of at least a majority
      of
      the then outstanding shares of Series B Preferred Stock agreeing that no such
      adjustment shall be made as the result of the issuance or deemed issuance of
      such Additional Shares of Common Stock.

    

    4.4.3  Deemed
      Issue of Additional Shares of Common Stock.
      

    

    a)  If
      the
      Corporation at any time or from time to time after the Series B Original Issue
      Date shall issue any Options or Convertible Securities (excluding Options or
      Convertible Securities which are themselves Exempted Securities) or shall fix
      a
      record date for the determination of holders of any class of securities entitled
      to receive any such Options or Convertible Securities, then the maximum number
      of shares of Common Stock (as set forth in the instrument relating thereto,
      assuming the satisfaction of any conditions to exercisability, convertibility
      or
      exchangeability but without regard to any provision contained therein for a
      subsequent adjustment of such number) issuable upon the exercise of such Options
      or, in the case of Convertible Securities and Options therefor, the conversion
      or exchange of such Convertible Securities, shall be deemed to be Additional
      Shares of Common Stock issued as of the time of the issuance of such Options
      or
      Convertible Securities or, in case such a record date shall have been fixed,
      as
      of the close of business on such record date.

     

    
      
         

      

      
        18

        
          

        

      

      
         

      

    

    b)  If
      the
      terms of any Option or Convertible Security, the issuance of which resulted
      in
      an adjustment to the Series B Conversion Price pursuant to the terms of
Subsection
      4.4.4
      below,
      are revised as a result of an amendment to such terms or any other adjustment
      pursuant to the provisions of such Option or Convertible Security (but excluding
      automatic adjustments to such terms pursuant to anti-dilution or similar
      provisions of such Option or Convertible Security) to provide for either (1)
      any
      increase or decrease in the number of shares of Common Stock issuable upon
      the
      exercise, conversion and/or exchange of any such Option or Convertible Security
      or (2) any increase or decrease in the consideration payable to the Corporation
      upon such exercise, conversion and/or exchange, then, effective upon such
      increase or decrease becoming effective, the Series B Conversion Price computed
      upon the original issue of such Option or Convertible Security (or upon the
      occurrence of a record date with respect thereto) shall be readjusted to such
      Series B Conversion Price as would have obtained had such revised terms been
      in
      effect upon the original date of issuance of such Option or Convertible
      Security. Notwithstanding the foregoing, no readjustment pursuant to this
      clause (b) shall have the effect of increasing the Series B Conversion
      Price to an amount which exceeds the lower of (i) the Series B Conversion
      Price in effect immediately prior to the original adjustment made as a result
      of
      the issuance of such Option or Convertible Security, or (ii) the Series B
      Conversion Price that would have resulted from any issuances of Additional
      Shares of Common Stock (other than deemed issuances of Additional Shares of
      Common Stock as a result of the issuance of such Option or Convertible Security)
      between the original adjustment date and such readjustment date.

     

    c)  If
      the
      terms of any Option or Convertible Security (excluding Options or Convertible
      Securities which are themselves Exempted Securities), the issuance of which
      did
      not result in an adjustment to the Series B Conversion Price pursuant to the
      terms of Subsection
      4.4.4
      below
      (either because the consideration per share (determined pursuant to Subsection 4.4.5
      hereof)
      of the Additional Shares of Common Stock subject thereto was equal to or greater
      than the Series B Conversion Price then in effect, or because such Option or
      Convertible Security was issued before the Series B Original Issue Date), are
      revised after the Series B Original Issue Date as a result of an amendment
      to
      such terms or any other adjustment pursuant to the provisions of such Option
      or
      Convertible Security (but excluding automatic adjustments to such terms pursuant
      to anti-dilution or similar provisions of such Option or Convertible Security)
      to provide for either (1) any increase or decrease in the number of shares
      of
      Common Stock issuable upon the exercise, conversion or exchange of any such
      Option or Convertible Security or (2) any increase or decrease in the
      consideration payable to the Corporation upon such exercise, conversion or
      exchange, then such Option or Convertible Security, as so amended or adjusted,
      and the Additional Shares of Common Stock subject thereto (determined in the
      manner provided in Subsection
      4.4.3(a)
      above)
      shall be deemed to have been issued effective upon such increase or decrease
      becoming effective.

     

    
      
         

      

      
        19

        
          

        

      

      
         

      

    

    d)  Upon
      the
      expiration or termination of any unexercised Option or unconverted or
      unexchanged Convertible Security (or portion thereof) which resulted (either
      upon its original issuance or upon a revision of its terms) in an adjustment
      to
      the Series B Conversion Price pursuant to the terms of Subsection
      4.4.4
      below,
      the Series B Conversion Price shall be readjusted to such Series B Conversion
      Price as would have obtained had such Option or Convertible Security (or portion
      thereof) never been issued. 

     

    e)  If
      the
      number of shares of Common Stock issuable upon the exercise, conversion and/or
      exchange of any Option or Convertible Security, or the consideration payable
      to
      the Corporation upon such exercise, conversion and/or exchange, is calculable
      at
      the time such Option or Convertible Security is issued or amended but is subject
      to adjustment based upon subsequent events, any adjustment to the Series B
      Conversion Price provided for in this Subsection
      4.4.3
      shall be
      effected at the time of such issuance or amendment based on such number of
      shares or amount of consideration without regard to any provisions for
      subsequent adjustments (and any subsequent adjustments shall be treated as
      provided in clauses (b) and (c) of this Subsection
      4.4.3).
      If the
      number of shares of Common Stock issuable upon the exercise, conversion and/or
      exchange of any Option or Convertible Security, or the consideration payable
      to
      the Corporation upon such exercise, conversion and/or exchange, cannot be
      calculated at all at the time such Option or Convertible Security is issued
      or
      amended, any adjustment to the Series B Conversion Price that would result
      under
      the terms of this Subsection
      4.4.3
      at the
      time of such issuance or amendment shall instead be effected at the time such
      number of shares and/or amount of consideration is first calculable (even if
      subject to subsequent adjustments), assuming for purposes of calculating such
      adjustment to the Series B Conversion Price that such issuance or amendment
      took
      place at the time such calculation can first be made. 

     

    4.4.4  Adjustment
      of Series B Conversion Price Upon Issuance of Additional Shares of Common
      Stock.
      In the
      event the Corporation shall at any time after the Series B Original Issue Date
      issue Additional Shares of Common Stock (including Additional Shares of Common
      Stock deemed to be issued pursuant to Subsection 4.4.3),
      without consideration or for a consideration per share less than the Series
      B
      Conversion Price in effect immediately prior to such issue, then the Series
      B
      Conversion Price shall be reduced, concurrently with such issue, to a price
      (calculated to the nearest one-hundredth of a cent) determined in accordance
      with the following formula:

    CP2
      =
      CP1
      * (A +
      B)  ̧
      (A +
      C).

    

    For
      purposes of the foregoing formula, the following definitions shall apply:

    

    a)  “CP2”
shall
      mean the Series B Conversion Price in effect immediately after such issue of
      Additional Shares of Common Stock

     

    b)  “CP1”
shall
      mean the Series B Conversion Price in effect immediately prior to such issue
      of
      Additional Shares of Common Stock; 

     

    c)  “A”
shall
      mean the number of shares of Common Stock outstanding immediately prior to
      such
      issue of Additional Shares of Common Stock (including for this purpose as
      outstanding all shares of Common Stock issuable upon conversion of the
      outstanding shares of Series B Preferred Stock but otherwise excluding all
      shares of Common Stock subject to repurchase by the Corporation at cost or
      issuable upon exercise or conversion of Options or Convertible
      Securities);

     

    
      
         

      

      
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    d)  “B”
shall
      mean the number of shares of Common Stock that would have been issued if such
      Additional Shares of Common Stock had been issued at a price per share equal
      to
      CP1
      (determined by dividing the aggregate consideration received by the Corporation
      in respect of such issue by CP1);
      and

     

    e)  “C”
shall
      mean the number of such Additional Shares of Common Stock issued in such
      transaction. 

     

    4.4.5  Determination
      of Consideration.
      For
      purposes of this Subsection 4.4,
      the
      consideration received by the Corporation for the issue of any Additional Shares
      of Common Stock shall be computed as follows:

    

    
      	a)  	
              Cash
                and Property:
                Such consideration shall:

            

    

     

    
      	i.  	
              insofar
                as it consists of cash, be computed at the aggregate amount of cash
                received by the Corporation, excluding amounts paid or payable for
                accrued
                interest;

            

    

     

    
      	ii.  	
              insofar
                as it consists of property other than cash, be computed at the fair
                market
                value thereof at the time of such issue, as determined in good faith
                by
                the Board of Directors of the Corporation. In the event that the
                Requisite
                Holders disagree with the fair market value as determined by the
                Board of
                Directors, the Requisite Holders shall select an appraiser that is
                reasonably acceptable to the Corporation who is experienced in such
                matters to determine the fair market value for purposes of this
                Section
                4.4.5;
                and such appraiser’s determination shall be binding upon the Corporation
                and the holders of Series B Preferred
                Stock;

            

    

     

    
      	iii.  	
              in
                the event Additional Shares of Common Stock are issued together with
                other
                shares or securities or other assets of the Corporation for consideration
                which covers both, be the proportion of such consideration so received,
                computed as provided in clauses (i)
                and (ii)
                above, as determined in good faith by the Board of Directors of the
                Corporation. In the event that the Requisite Holders disagree with
                the
                fair market value as determined by the Board of Directors, the Requisite
                Holders shall select an appraiser that is reasonably acceptable to
                the
                Corporation who is experienced in such matters to determine the fair
                market value for purposes of this Section
                4.4.5;
                and such appraiser’s determination shall be binding upon the Corporation
                and the holders of Series B Preferred
                Stock.

            

    

     

     

    
      
         

      

      
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    b)  Options
      and Convertible Securities.
      The
      consideration per share received by the Corporation for Additional Shares of
      Common Stock deemed to have been issued pursuant to Subsection 4.4.3,
      relating to Options and Convertible Securities, shall be determined by
      dividing:

     

    
      	i.  	
              the
                total amount, if any, received or receivable by the Corporation as
                consideration for the issue of such Options or Convertible Securities,
                plus the minimum aggregate amount of additional consideration (as
                set
                forth in the instruments relating thereto, without regard to any
                provision
                contained therein for a subsequent adjustment of such consideration)
                payable to the Corporation upon the exercise of such Options or the
                conversion or exchange of such Convertible Securities, or in the
                case of
                Options for Convertible Securities, the exercise of such Options
                for
                Convertible Securities and the conversion or exchange of such Convertible
                Securities, by

            

    

     

    
      	ii.  	
              the
                maximum number of shares of Common Stock (as set forth in the instruments
                relating thereto, without regard to any provision contained therein
                for a
                subsequent adjustment of such number) issuable upon the exercise
                of such
                Options or the conversion or exchange of such Convertible Securities,
                or
                in the case of Options for Convertible Securities, the exercise of
                such
                Options for Convertible Securities and the conversion or exchange
                of such
                Convertible Securities.

            

    

     

    4.4.6  Multiple
      Closing Dates.
      In the
      event the Corporation shall issue on more than one date Additional Shares of
      Common Stock that are a part of one transaction or a series of related
      transactions and that would result in an adjustment to the Series B Conversion
      Price pursuant to the terms of Subsection
      4.4.4
      above
      then, upon the final such issuance, the Series B Conversion Price shall be
      readjusted to give effect to all such issuances as if they occurred on the
      date
      of the first such issuance (and without giving effect to any additional
      adjustments as a result of any such subsequent issuances within such
      period).

    

    
      
         

      

      
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    4.5  Adjustment
      for Stock Splits and Combinations.
      If the
      Corporation shall at any time or from time to time after the Series B Original
      Issue Date effect a subdivision of the outstanding Common Stock, the Series
      B
      Conversion Price in effect immediately before that subdivision shall be
      proportionately decreased so that the number of shares of Common Stock issuable
      on conversion of each share of such series shall be increased in proportion
      to
      such increase in the aggregate number of shares of Common Stock outstanding.
      If
      the Corporation shall at any time or from time to time after the Series B
      Original Issue Date combine the outstanding shares of Common Stock, the Series
      B
      Conversion Price in effect immediately before the combination shall be
      proportionately increased so that the number of shares of Common Stock issuable
      on conversion of each share of such series shall be decreased in proportion
      to
      such decrease in the aggregate number of shares of Common Stock outstanding.
      Any
      adjustment under this subsection shall become effective at the close of business
      on the date the subdivision or combination becomes effective.

    

    4.6  Adjustment
      for Certain Dividends and Distributions.
      In the
      event the Corporation at any time or from time to time after the Series B
      Original Issue Date shall make or issue, or fix a record date for the
      determination of holders of Common Stock entitled to receive, a dividend or
      other distribution payable on the Common Stock in additional shares of Common
      Stock, then and in each such event the Series B Conversion Price in effect
      immediately before such event shall be decreased as of the time of such issuance
      or, in the event such a record date shall have been fixed, as of the close
      of
      business on such record date, by multiplying the Series B Conversion Price
      then
      in effect by a fraction:

    

    
      	i.  	
              the
                numerator of which shall be the total number of shares of Common
                Stock
                issued and outstanding immediately prior to the time of such issuance
                or
                the close of business on such record date,
                and

            

    

     

    
      	ii.  	
              the
                denominator of which shall be the total number of shares of Common
                Stock
                issued and outstanding immediately prior to the time of such issuance
                or
                the close of business on such record date plus the number of shares
                of
                Common Stock issuable in payment of such dividend or
                distribution.

            

    

     

    Notwithstanding
      the foregoing, (a) if such record date shall have been fixed and such dividend
      is not fully paid or if such distribution is not fully made on the date fixed
      therefor, the Series B Conversion Price shall be recomputed accordingly as
      of
      the close of business on such record date and thereafter the Series B Conversion
      Price shall be adjusted pursuant to this subsection as of the time of actual
      payment of such dividends or distributions; and (b) that no such adjustment
      shall be made if the holders of Series B Preferred Stock simultaneously receive
      a dividend or other distribution of shares of Common Stock in a number equal
      to
      the number of shares of Common Stock as they would have received if all
      outstanding shares of Series B Preferred Stock had been converted into Common
      Stock on the date of such event.

    

    4.7  Adjustments
      for Other Dividends and Distributions.
      In the
      event the Corporation at any time or from time to time after the Series B
      Original Issue Date shall make or issue, or fix a record date for the
      determination of holders of Common Stock entitled to receive, a dividend or
      other distribution payable in securities of the Corporation (other than a
      distribution of shares of Common Stock in respect of outstanding shares of
      Common Stock) or in other property and the provisions of Section
      1
      do not
      apply to such dividend or distribution, then and in each such event the holders
      of Series B Preferred Stock shall receive, simultaneously with the distribution
      to the holders of Common Stock, a dividend or other distribution of such
      securities or other property in an amount equal to the amount of such securities
      or other property as they would have received if all outstanding shares of
      Series B Preferred Stock had been converted into Common Stock on the date of
      such event.

    

    
      
         

      

      
        23

        
          

        

      

      
         

      

    

    4.8  Adjustment
      for Merger or Reorganization, etc.
      Subject
      to the provisions of Subsection
      2.3,
      if
      there shall occur any reorganization, recapitalization, reclassification,
      consolidation or merger involving the Corporation in which the Common Stock
      (but
      not the Series B Preferred Stock) is converted into or exchanged for securities,
      cash or other property (other than a transaction covered by Subsections
      4.4,
      4.6
      or
4.7),
      then,
      following any such reorganization, recapitalization, reclassification,
      consolidation or merger, each share of Series B Preferred Stock shall thereafter
      be convertible in lieu of the Common Stock into which it was convertible prior
      to such event into the kind and amount of securities, cash or other property
      which a holder of the number of shares of Common Stock of the Corporation
      issuable upon conversion of one share of Series B Preferred Stock immediately
      prior to such reorganization, recapitalization, reclassification, consolidation
      or merger would have been entitled to receive pursuant to such transaction;
      and,
      in such case, appropriate adjustment (as determined in good faith by the Board
      of Directors of the Corporation,
      and
      in
      the event that the Requisite Holders disagree with the determination of the
      Board of Directors, the Requisite Holders shall select an appraiser that is
      reasonably acceptable to the Corporation who is experienced in such matters
      to
      make the determination for purposes of this Section
      4.8;
      and such
      appraiser’s determination shall be binding upon the Corporation and the holders
      of Series B Preferred Stock) shall be made in the application of the provisions
      in this Section 4
      with
      respect to the rights and interests thereafter of the holders of the Series
      B
      Preferred Stock, to the end that the provisions set forth in this Section 4
      (including provisions with respect to changes in and other adjustments of the
      Series B Conversion Price) shall thereafter be applicable, as nearly as
      reasonably may be, in relation to any securities or other property thereafter
      deliverable upon the conversion of the Series B Preferred Stock.

    

    4.9  Certificate
      as to Adjustments.
      Upon
      the occurrence of each adjustment or readjustment of the Series B Conversion
      Price pursuant to this Section 4,
      the
      Corporation at its expense shall, as promptly as reasonably practicable but
      in
      any event not later than ten (10) days thereafter, compute such adjustment
      or
      readjustment in accordance with the terms hereof and furnish to each holder
      of
      Series B Preferred Stock a certificate setting forth such adjustment or
      readjustment (including the kind and amount of securities, cash or other
      property into which the Series B Preferred Stock is convertible) and showing
      in
      detail the facts upon which such adjustment or readjustment is based. The
      Corporation shall, as promptly as reasonably practicable after the written
      request at any time of any holder of Series B Preferred Stock (but in any event
      not later than ten (10) days thereafter), furnish or cause to be furnished
      to
      such holder a certificate setting forth (i) the Series B Conversion Price
      then in effect, and (ii) the number of shares of Common Stock and the
      amount, if any, of other securities, cash or property which then would be
      received upon the conversion of Series B Preferred Stock.

    

    
      
         

      

      
        24

        
          

        

      

      
         

      

    

    4.10  Notice
      of Record Date.
      In the
      event:

    

    a)  the
      Corporation shall take a record of the holders of its Common Stock (or other
      capital stock or securities at the time issuable upon conversion of the Series
      B
      Preferred Stock) for the purpose of entitling or enabling them to receive any
      dividend or other distribution, or to receive any right to subscribe for or
      purchase any shares of capital stock of any class or any other securities,
      or to
      receive any other security; or

     

    b)  of
      any
      capital reorganization of the Corporation, any reclassification of the Common
      Stock of the Corporation, or any Deemed Liquidation Event; or

     

    c)  of
      the
      voluntary or involuntary dissolution, liquidation or winding-up of the
      Corporation,

     

    then,
      and
      in each such case, the Corporation will send or cause to be sent to the holders
      of the Series B Preferred Stock a notice specifying, as the case may be, (i)
      the
      record date for such dividend, distribution or right, and the amount and
      character of such dividend, distribution or right, or (ii) the effective date
      on
      which such reorganization, reclassification, consolidation, merger, transfer,
      dissolution, liquidation or winding-up is proposed to take place, and the time,
      if any is to be fixed, as of which the holders of record of Common Stock (or
      such other capital stock or securities at the time issuable upon the conversion
      of the Series B Preferred Stock) shall be entitled to exchange their shares
      of
      Common Stock (or such other capital stock or securities) for securities or
      other
      property deliverable upon such reorganization, reclassification, consolidation,
      merger, transfer, dissolution, liquidation or winding-up, and the amount per
      share and character of such exchange applicable to the Series B Preferred Stock
      and the Common Stock. Such notice shall be sent at least twenty (20) days prior
      to the record date or effective date for the event specified in such notice.
      

    

    
      	5.  	
              Mandatory
                Conversion.

            

    

    

    5.1  Trigger
      Event.
      At such
      time when (A) (i) the thirty (30) day prior trailing average Closing Price
      of
      the Common Stock for the entire six-months preceding such time is equal to
      at
      least the Series B Original Issue Price, and (ii) one and one half (1.5) years
      have elapsed after the Corporation has had declared effective by the Securities
      and Exchange Commission and continuously maintained for such one and one half
      (1.5) year period the effectiveness of a shelf registration statement providing
      for the resale of all of the Common Stock underlying the Series B Preferred
      Stock and those certain warrants issued in connection with the Series B
      Preferred Stock under the Series B Purchase Agreement, an equivalent of
      $7,500,000 (measured as of the Series B Original Issue Date) of the Series
      B
      Preferred Stock shall (a) automatically be converted into shares of Common
      Stock, at the then effective Series B Conversion Price, as may be adjusted
      pursuant to Section 4 above, and (b) such shares may not be reissued by the
      Corporation, or (B) (i) the thirty (30) day prior trailing average Closing
      Price
      of the Common Stock for the entire six (6)-months preceding such time is equal
      to at least two (2)-times the Series B Original Issue Price, and (ii) one and
      one half (1.5) years have elapsed after the Corporation has had declared
      effective by the Securities and Exchange Commission and continuously maintained
      for such one and one half (1.5) year period the effectiveness of a shelf
      registration statement providing for the resale of all of the Common Stock
      underlying the Series B Preferred Stock and those certain warrants issued in
      connection with the Series B Preferred Stock, the remainder of the outstanding
      Series B Preferred Stock shall (a) automatically be converted into shares of
      Common Stock, at the then effective Series B Conversion Price, as may be
      adjusted pursuant to Section 4 above, and (b) such shares may not be
      reissued by the Corporation (the occurrence of the events specified in these
      Sections
      5.1(A) and (B)
      is
      referred to herein as the “Mandatory
      Conversion Time”).

    

    
      
         

      

      
        25

        
          

        

      

      
         

      

    

    For
      purposes of this Section
      5
      the
      following terms are defined as follows: 

    

    “Closing
      Price”
means
      on any particular date (a) the last reported closing price per share of
      Common Stock on such date on the Trading Market (as reported by Bloomberg L.P.
      at 4:15 PM (New York time)), or (b) if there is no such price on such date,
      then
      the closing price on the Trading Market on the date nearest preceding such
      date
      (as reported by Bloomberg L.P. at 4:15 PM (New York time)), or (c) if the OTC
      Bulletin Board is not a Trading Market, the volume weighted average price of
      the
      Common Stock for such date (or the nearest preceding date) on the OTC Bulletin
      Board or (d)  if the Common Stock is not then listed or quoted on the
      Trading Market or 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 price per share of the Common Stock so reported, or (e) if the
      shares of Common Stock are not then publicly traded the fair market value of
      a
      share of Common Stock as determined by an appraiser selected in good faith
      by
      the Purchasers of a majority in interest of the Series B Preferred Stock then
      outstanding.

     

    “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 Nasdaq Capital Market, the American
      Stock Exchange, the New York Stock Exchange, or the Nasdaq Global
      Market.

     

    

    5.2  Procedural
      Requirements.
      All
      holders of record of shares of Series B Preferred Stock subject to conversion
      shall be sent written notice of the Mandatory Conversion Time and the place
      designated for mandatory conversion of all such shares of Series B Preferred
      Stock pursuant to this Section 5.
      Such
      notice need not be sent in advance of the occurrence of the Mandatory Conversion
      Time. Upon receipt of such notice, each holder of shares of Series B Preferred
      Stock subject to conversion shall surrender his, her or its certificate or
      certificates for all such shares (or, if such holder alleges that such
      certificate has been lost, stolen or destroyed, a lost certificate affidavit
      and
      agreement reasonably acceptable to the Corporation to indemnify the Corporation
      against any claim that may be made against the Corporation on account of the
      alleged loss, theft or destruction of such certificate) to the Corporation
      at
      the place designated in such notice, and shall thereafter receive certificates
      for the number of shares of Common Stock to which such holder is entitled
      pursuant to this Section 5.
      At the
      Mandatory Conversion Time, all outstanding shares of Series B Preferred Stock
      subject to conversion shall be deemed to have been converted into shares of
      Common Stock, which shall be deemed to be outstanding of record, and all rights
      with respect to the Series B Preferred Stock so converted, including the rights,
      if any, to receive notices and vote (other than as a holder of Common Stock),
      will terminate, except only the rights of the holders thereof, upon surrender
      of
      their certificate or certificates (or lost certificate affidavit and agreement)
      therefor, to receive the items provided for in the last sentence of this
Subsection
      5.2.
      If so
      required by the Corporation, certificates surrendered for conversion shall
      be
      endorsed or accompanied by written instrument or instruments of transfer, in
      form satisfactory to the Corporation, duly executed by the registered holder
      or
      by his, her or its attorney duly authorized in writing. As soon as practicable
      after the Mandatory Conversion Time and the surrender of the certificate or
      certificates (or lost certificate affidavit and agreement) for Series B
      Preferred Stock subject to conversion, the Corporation shall issue and deliver
      to such holder, or to his, her or its nominees, a certificate or certificates
      for the number of full shares of Common Stock issuable on such conversion in
      accordance with the provisions hereof, together with cash as provided in
Subsection 4.2
      in lieu
      of any fraction of a share of Common Stock otherwise issuable upon such
      conversion and the payment of any declared but unpaid dividends on the shares
      of
      Series B Preferred Stock converted.

    

    
      
         

      

      
        26

        
          

        

      

      
         

      

    

    5.3  Effect
      of Mandatory Conversion.
      All
      shares of Series B Preferred Stock subject to conversion shall, from and after
      the Mandatory Conversion Time, no longer be deemed to be outstanding and,
      notwithstanding the failure of the holder or holders thereof to surrender the
      certificates for such shares on or prior to such time, all rights with respect
      to such shares shall immediately cease and terminate at the Mandatory Conversion
      Time, except only the right of the holders thereof to receive shares of Common
      Stock in exchange therefor and to receive payment of any dividends declared
      but
      unpaid thereon. Such converted Series B Preferred Stock shall be retired and
      cancelled and may not be reissued as shares of such series, and the Corporation
      may thereafter take such appropriate action (without the need for stockholder
      action) as may be necessary to reduce the authorized number of shares of Series
      B Preferred Stock accordingly.

    

    6.  Redeemed
      or Otherwise Acquired Shares.
      Any
      shares of Series B Preferred Stock which are redeemed or otherwise acquired
      by
      the Corporation or any of its subsidiaries shall be automatically and
      immediately cancelled and retired and shall not be reissued, sold or
      transferred. Neither the Corporation nor any of its subsidiaries may exercise
      any voting or other rights granted to the holders of Series B Preferred Stock
      following redemption.

    

    7.  Waiver.
      Any of
      the rights, powers, preferences and other terms of the Series B Preferred Stock
      set forth herein may be waived on behalf of all holders of Series B Preferred
      Stock by the affirmative written consent or vote of the holders of at least
      a
      majority of the shares of Series B Preferred Stock then
      outstanding.

    

    8.  Notices.
      Any
      notice required or permitted by the provisions of this Article Fourth to be
      given to a holder of shares of Series B Preferred Stock shall be mailed, postage
      prepaid, to the post office address last shown on the records of the
      Corporation, or given by electronic communication in compliance with the
      provisions of the General Corporation Law, and shall be deemed sent upon such
      mailing or electronic transmission.

    

    
      
         

      

      
        27

        
          

        

      

      
         

      

    

    FIFTH:
      The following provisions are inserted for the management of the business and
      the
      conduct of the affairs of the Corporation, and for further definition,
      limitation and regulation of the powers of the Corporation and of its directors
      and stockholders:

    

    A. The
      business and affairs of the Corporation shall be managed by or under the
      direction of the Board of Directors. In addition to the powers and authority
      expressly conferred upon them by statute or by this Restated Certificate of
      Incorporation or the Bylaws of the Corporation as in effect from time to time,
      the directors are hereby empowered to exercise all such powers and do all such
      acts and things as may be exercised or done by the Corporation.

    

    B. The
      directors of the Corporation need not be elected by written ballot unless the
      Bylaws so provide.

    

    C. Subject
      to the rights of the holders of any series of Preferred Stock then outstanding,
      any action required or permitted to be taken by the stockholders of the
      Corporation may be effected only at a duly called annual or special meeting
      of
      stockholders of the Corporation and not by written consent. 

    

    D. Special
      meetings of the stockholders may only be called by the Board of Directors acting
      pursuant to a resolution adopted by a majority of the Whole Board. For the
      purposes of this Restated Certificate of Incorporation, the term “Whole Board”
shall mean the total number of authorized directors whether or not there exist
      any vacancies in previously authorized directorships.

    

    SIXTH:

    

    A. Subject
      to the rights of the holders of shares of any series of Preferred Stock then
      outstanding to elect additional directors under specified circumstances, the
      number of directors shall be fixed from time to time exclusively by the Board
      of
      Directors pursuant to a resolution adopted by a majority of the Whole
      Board.

    

    B. The
      directors, other than those who may be elected by the holders of shares of
      any
      series of Preferred Stock under specified circumstances, shall be divided into
      three classes, with the term of office of the first class to expire at the
      first
      annual meeting of stockholders following the initial classification of
      directors, the term of office of the second class to expire at the second annual
      meeting of stockholders following the initial classification of directors,
      and
      the term of office of the third class to expire at the third annual meeting
      of
      stockholders following the initial classification of directors. At each annual
      meeting of stockholders, directors elected to succeed those directors whose
      terms expire, other than directors elected by the holders of any series of
      Preferred Stock under specified circumstances, shall be elected for a term
      of
      office to expire at the third succeeding annual meeting of stockholders after
      their election and until their successors are duly elected and
      qualified.

    

    C. Subject
      to the rights of the holders of any series of Preferred Stock then outstanding,
      newly created directorships resulting from any increase in the authorized number
      of directors or any vacancies in the Board of Directors resulting from death,
      resignation, retirement, disqualification, removal from office or other cause
      shall, unless otherwise required by law or by resolution of the Board of
      Directors, be filled only by a majority vote of the directors then in office
      even though less than a quorum, or by a sole remaining director, and not by
      stockholders, and
      directors so chosen shall serve for a term expiring at the annual meeting of
      stockholders at which the term of office of the class to which they have been
      chosen expires or until such director’s successor shall have been duly elected
      and qualified. No decrease in the authorized number of directors shall shorten
      the term of any incumbent director.

    

    
      
         

      

      
        28

        
          

        

      

      
         

      

    

    D. Advance
      notice of stockholder nominations for the election of directors and of business
      to be brought by stockholders before any meeting of the stockholders of the
      Corporation shall be given in the manner provided in the Bylaws of the
      Corporation.

    

    E. Subject
      to the rights of the holders of any series of Preferred Stock then outstanding,
      any director, or the entire Board of Directors, may be removed from office
      at
      any time only for cause and only by the affirmative vote of the holders of
      at
      least eighty percent (80%) of the voting power of all of the then-outstanding
      shares of capital stock of the Corporation entitled to vote at an election
      of
      the directors, voting together as a single class. 

    

    SEVENTH:
      The Board of Directors is expressly empowered to adopt, amend or repeal Bylaws
      of the Corporation. Any adoption, amendment or repeal of the Bylaws of the
      Corporation by the Board of Directors shall require the approval of a majority
      of the Whole Board. The stockholders shall also have power to adopt, amend
      or
      repeal the Bylaws of the Corporation; provided, that in addition to any vote
      of
      the holders of any class or series of stock of the Corporation required by
      law
      or by this Restated Certificate of Incorporation, the affirmative vote of the
      holders of at least eighty (80%) of the voting power of all of the then
      outstanding shares of the capital stock of the Corporation entitled to vote
      generally in the election of directors, voting together as a single class,
      shall
      be required for the stockholders to adopt, amend or repeal any provision of
      the
      Bylaws of the Corporation.

    

    EIGHTH:
      

    

    A.
      Each
      person who was or is made a party or is threatened to be made a party to or
      is
      otherwise involved (including, without limitation, as a witness) in any action,
      suit or proceeding, whether civil, criminal, administrative or investigative,
      by
      reason of the fact that he is or was a director or an officer of the Corporation
      or is or was serving at the request of the Corporation as a director, officer,
      or trustee of another corporation, or of a partnership, joint venture, trust
      or
      other enterprise, including service with respect to an employee benefit plan
      (hereinafter an “Indemnitee”),
      whether the basis of such proceeding is alleged action in an official capacity
      as a director, officer or trustee or in any other capacity while serving as
      a
      director, officer or trustee, shall be indemnified and held harmless by the
      Corporation to the fullest extent permitted by the Delaware General Corporation
      Law, as the same exists or may hereafter be amended (but, in the case of any
      such amendment, only to the extent that such amendment permits the Corporation
      to provide broader indemnification rights than such law permitted the
      Corporation to provide prior to such amendment), against all expense, liability
      and loss (including attorneys’ fees, judgments, fines, ERISA excise taxes or
      penalties and amounts paid in settlement) reasonably incurred or suffered by
      such Indemnitee in connection therewith; provided, however, that, except as
      provided in Paragraph C of this Article EIGHTH with respect to proceedings
      to
      enforce rights to indemnification or as otherwise required by law, the
      Corporation shall not be required to indemnify or advance expenses to any such
      Indemnitee in connection with a proceeding (or part thereof) initiated by such
      Indemnitee unless such proceeding (or part thereof) was authorized by the Board
      of Directors of the Corporation. 

     

    
      
         

      

      
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    B. In
      addition to the right to indemnification conferred in Paragraph A of this
      Article EIGHTH, an Indemnitee shall also have the right to be paid by the
      Corporation the expenses (including attorney’s fees) incurred in defending any
      such proceeding in advance of its final disposition; provided, however, that,
      if
      the Delaware General Corporation Law requires, an advancement of expenses
      incurred by an Indemnitee in his capacity as a director or officer (and not
      in
      any other capacity in which service was or is rendered by such Indemnitee,
      including, without limitation, service to an employee benefit plan) shall be
      made only upon delivery to the Corporation of an undertaking, by or on behalf
      of
      such Indemnitee, to repay all amounts so advanced if it shall ultimately be
      determined by final judicial decision from which there is no further right
      to
      appeal that such Indemnitee is not entitled to be indemnified for such expenses
      under this Paragraph B or otherwise.

    

    C. If
      a
      claim under Paragraph A or B of this Article EIGHTH is not paid in full by
      the
      Corporation within sixty (60) days after a written claim has been received
      by
      the Corporation, except in the case of a claim for an advancement of expenses,
      in which case the applicable period shall be twenty (20) days, the Indemnitee
      may at any time thereafter bring suit against the Corporation to recover the
      unpaid amount of the claim. If successful in whole or in part in any such suit,
      or in a suit brought by the Corporation to recover an advancement of expenses
      pursuant to the terms of an undertaking, the Indemnitee shall also be entitled
      to be paid the expenses of prosecuting or defending such suit. In (i) any suit
      brought by the Indemnitee to enforce a right to indemnification hereunder (but
      not in a suit brought by the Indemnitee to enforce a right to an advancement
      of
      expenses) it shall be a defense that, and (ii) in any suit brought by the
      Corporation to recover an advancement of expenses pursuant to the terms of
      an
      undertaking, the Corporation shall be entitled to recover such expenses upon
      a
      final adjudication that, the Indemnitee has not met any applicable standard
      for
      indemnification set forth in the Delaware General Corporation Law. Neither
      the
      failure of the Corporation (including its directors who are not parties to
      such
      action, a committee of such directors, independent legal counsel, or its
      stockholders) to have made a determination prior to the commencement of such
      suit that indemnification of the Indemnitee is proper in the circumstances
      because the Indemnitee has met the applicable standard of conduct set forth
      in
      the Delaware General Corporation Law, nor an actual determination by the
      Corporation (including its directors who are not parties to such action, a
      committee of such directors, independent legal counsel, or its stockholders)
      that the Indemnitee has not met such applicable standard of conduct, shall
      create a presumption that the Indemnitee has not met the applicable standard
      of
      conduct or, in the case of such a suit brought by the Indemnitee, be a defense
      to such suit. In any suit brought by the Indemnitee to enforce a right to
      indemnification or to an advancement of expenses hereunder, or brought by the
      Corporation to recover an advancement of expenses pursuant to the terms of
      an
      undertaking, the burden of proving that the Indemnitee is not entitled to be
      indemnified, or to such advancement of expenses, under this Article EIGHTH
      or
      otherwise shall be on the Corporation.

    

    
      
         

      

      
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    D. The
      rights to indemnification and to the advancement of expenses conferred in this
      Article EIGHTH shall not be exclusive of any other right which any person may
      have or hereafter acquire under any statute, the Corporation’s Certificate of
      Incorporation as amended from time to time, the Corporation’s Bylaws, any
      agreement, any vote of stockholders or disinterested directors or
      otherwise.

    

    E. The
      Corporation may maintain insurance, at its expense, to protect itself and any
      director, officer, employee or agent of the Corporation or another corporation,
      partnership, joint venture, trust or other enterprise against any expense,
      liability or loss, whether or not the Corporation would have the power to
      indemnify such person against such expense, liability or loss under the Delaware
      General Corporation Law.

    

    F. The
      Corporation may, to the extent authorized from time to time by the Board of
      Directors, grant rights to indemnification and to the advancement of expenses
      to
      any employee or agent of the Corporation to the fullest extent of the provisions
      of this Article EIGHTH with respect to the indemnification and advancement
      of
      expenses of directors and officers of the Corporation.

    

    G. The
      rights conferred upon Indemnitees in this Article EIGHTH shall be contract
      rights and such rights shall continue as to an Indemnitee who has ceased to
      be a
      director, officer, employee or agent and shall inure to the benefit of the
      Indemnitee’s heirs, executors and administrators. Any amendment, alteration or
      repeal of this Article EIGHTH that adversely affects any right of an Indemnitee
      or its successors shall be prospective only and shall not limit or eliminate
      any
      such right with respect to any proceeding involving any occurrence or alleged
      occurrence of any action or omission to act that took place prior to any such
      amendment, alteration or repeal.

    

    NINTH:
      No
      director shall be personally liable to the Corporation or its stockholders
      for
      any monetary damages for breaches of fiduciary duty as a director; provided
      that
      this provision shall not eliminate or limit the liability of a director, to
      the
      extent that such liability is imposed by applicable law, (i) for any breach
      of
      the director’s duty of loyalty to the Corporation or its stockholders; (ii) for
      acts or omissions not in good faith or which involve intentional misconduct
      or a
      knowing violation of law; (iii) under Section 174 or successor provisions of
      the
      Delaware General Corporation Law; or (iv) for any transaction from which the
      director derived an improper personal benefit. No amendment to or repeal of
      this
      provision shall apply to or have any effect on the liability or alleged
      liability of any director for or with respect to any acts or omissions of such
      director occurring prior to such amendment or repeal. If the Delaware General
      Corporation Law is amended to authorize corporate action further eliminating
      or
      limiting the personal liability of directors, then the liability of a director
      of the Corporation shall be eliminated or limited to the fullest extent
      permitted by the Delaware General Corporation Law, as so amended. All references
      in this Article NINTH to a director shall also be deemed to refer to any such
      director acting in his or her capacity as a Continuing Director (as defined
      in
      Article ELEVENTH).

    

    TENTH:
      The Corporation reserves the right to amend or repeal any provision contained
      in
      this Restated Certificate of Incorporation in the manner prescribed by the
      Delaware General Corporation Law and all rights conferred upon stockholders
      are
      granted subject to this reservation; provided that in addition to the vote
      of
      the holders of any class or series of stock of the Corporation required by
      law
      or by this Restated Certificate of Incorporation, the affirmative vote of the
      holders of shares of voting stock of the Corporation representing at least
      eighty (80%) of the voting power of all of the then outstanding shares of the
      capital stock of the Corporation entitled to vote generally in the election
      of
      directors, voting together as a single class, shall be required to amend, alter
      or repeal, or adopt any provision inconsistent with, Articles FIFTH, SIXTH,
      SEVENTH, EIGHTH, NINTH, this Article TENTH and Article ELEVENTH of this Restated
      Certificate of Incorporation.

    

    
      
         

      

      
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    ELEVENTH:
      The Board of Directors is expressly authorized to cause the Corporation to
      issue
      rights pursuant to Section 157 of the Delaware General Corporation Law and,
      in
      that connection, to enter into any agreements necessary or convenient for such
      issuance, and to enter into other agreements necessary and convenient to the
      conduct of the business of the Corporation. Any such agreement may include
      provisions limiting, in certain circumstances, the ability of the Board of
      Directors of the Corporation to redeem the securities issued pursuant thereto
      or
      to take other action thereunder or in connection therewith unless there is
      a
      specified number or percentage of Continuing Directors then in office. Pursuant
      to Section 141(a) of the Delaware General Corporation Law, the Continuing
      Directors shall have the power and authority to make all decisions and
      determinations, and exercise or perform such other acts, that any such agreement
      provides that such Continuing Directors shall make, exercise or perform. For
      purposes of this Article ELEVENTH and any such agreement, the term,
“Continuing
      Directors,”
shall
      mean (1) those directors who were members of the Board of Directors of the
      Corporation at the time the Corporation entered into such agreement and any
      director who subsequently becomes a member of the Board of Directors, if such
      director’s nomination for election to the Board of Directors is recommended or
      approved by the majority vote of the Continuing Directors then in office or
      (2)
      such members of the Board of Directors designated in, or in the manner provided
      in, such agreement as Continuing Directors.

    

    

    [remainder
      left intentionally blank]

    

    
      
         

      

      
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    IN
      WITNESS WHEREOF, this Restated Certificate of Incorporation, which restates
      and
      integrates and further amends the provisions of the Restated Certificate of
      Incorporation of this Corporation, and which has been duly adopted in accordance
      with Sections 242 and 245 of the Delaware General Corporation Law, has been
      executed by its duly authorized President and Chief Executive Officer this
      ____
      day of __________, 2007.

    

    ALTEON
      INC.

    

    

    

    By:
            

    Noah
      Berkowitz, 

    Its
      President and Chief Executive Officer

    

    

    

    
      
         

      

      
        33

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