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Unassociated Document

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    EXHIBIT
      4.8

    

     

    10%
      B NOTE

    
      	 	 
	
              ${______}.00

            	
              ________,
                2006

            

    

    

    Subject
      to the terms and conditions of this 10% B Note (“Note”), for good and valuable
      consideration received, Scientigo, Inc., a Delaware corporation (the
“Company”), promises to pay to the order of {_____________} (“Holder”) the
      principal amount of ${__________}.00 (the “Principal Amount”), plus simple
      interest, accrued on unpaid principal from the date of this Note until paid
      at
      the rate of 10.0% per annum (360-day year basis).

     

    The
      following is a statement of the rights of the Holder of this Note and the terms
      and conditions to which this Note is subject, and to which the Holder, hereof,
      by the acceptance of this Note, agrees:

     

    Payment
      Obligation.
      The
      principal and accrued but unpaid interest under this Note will be paid to the
      Holder on May 31, 2007 (the “Maturity Date”), unless previously paid or
      converted into securities of the Company in accordance with the “Optional
      Conversion” section hereof. All payments of principal and/or interest under this
      Note will be made at the address set forth below or by mail to the address
      of
      record of the Holder. All cash payments hereunder shall be made in lawful money
      of the United States of America, to the Holder, at such place and to such
      account as the Holder shall designate in a written notice to the Company.
Accrued
      but unpaid interest shall be due and payable quarterly, commencing on the
      earlier of the first February 28, May 31, August 31 or November 30 following
      the
      date hereof.

     

    Prepayment.
      The
      principal amount of this Note may be prepaid by the Company at any time without
      penalty upon thirty (30) days prior written notice to the Holder; provided
      that
      if such written notice is provided at anytime that the Principal Amount may
      not
      be converted into Conversion Shares as set forth in the “Optional Conversion”
section hereof, such prepayment shall be permissible only with the prior written
      consent of the holder hereof.

     

    Optional
      Conversion.
Beginning
      12 months from the Exchange Offer Expiration Date as defined in the Company’s
      prospectus dated February __, 2006, pursuant to which this Note was issued
      or
      such later date that the Company has filed a registration statement that has
      been declared effective by the SEC for the purpose of issuing registered shares
      of Common Stock upon conversion of the Principal Amount of this Note, and
      ending on the Maturity Date, the Principal Amount outstanding under this Note
      may be converted at the option of the Holder into shares of Common Stock of
      the
      Company at a conversion rate of one share per $.98 of the Principal Amount
      (the
“Conversion Shares”). Such optional conversion may be for the whole or any part
      of the Principal Amount of this Note. The Holder may exercise his conversion
      rights hereunder by delivering a conversion notice to the Company substantially
      in the form of Exhibit A hereto.

     

    The
      Company agrees to use its best efforts to (i) file such registration statement
      with the SEC and obtain such effectiveness not later than 12 months from the
      Exchange Offer Expiration Date as defined in the Company’s prospectus dated
      February __, 2006, pursuant to which this Note was issued and (ii) maintain
      the
      effectiveness of such registration for so long as this Note is
      outstanding.

    

      Reorganization,
        Reclassification, Consolidation, Merger or Sale, etc.  

       

      (i) If
        the
        Company at any time subdivides (by any stock split, stock dividend,
        recapitalization or otherwise) its class of outstanding shares of the Common
        Stock into a greater number of shares, the conversion rate in effect immediately
        prior to such subdivision will be proportionately reduced, and if the Company
        at
        any time combines (by reverse stock split or otherwise) one or more classes
        of
        its outstanding shares of its Common Stock, the conversion rate in effect
        immediately prior to such combination will be proportionately increased
        concurrently with the effectiveness of such event.

       

      
        
          
          

        

        
          
          

          
            

          

        

        
          
          

        

      

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      (ii) Any
        capital reorganization, reclassification, consolidation, merger or sale of
        all
        or substantially all of the Company’s assets to another person which is effected
        in such a way that holders of Common Stock are entitled to receive (either
        directly or upon subsequent liquidation) stock, securities or assets with
        respect to or in exchange for Common Stock is referred to herein as an “Organic
        Change.” Prior to the consummation of any Organic Change, the Company will make
        appropriate provisions to insure that the Holder will thereafter have the
        right
        upon subsequent conversion of the Principal Amount to acquire and receive
        such
        shares of stock, securities or assets as such Holder would have received
        in
        connection with such Organic Change if such Holder had converted the Principal
        Amount hereof immediately prior to such Organic Change. The Company will
        not
        effect any such consolidation, merger or sale, unless prior to the consummation
        thereof, the successor Company (if other than the Company) resulting from
        consolidation or merger or the Company purchasing such assets assumes by
        written
        instrument the obligation to deliver to the Holder such shares of stock,
        securities or assets as, in accordance with the foregoing provisions, such
        holder may be entitled to acquire.

       

      Stock
        to be Reserved.
        The
        Company will at all times reserve and keep available out of its authorized
        Common Stock or its treasury shares, solely for the purpose of issue upon
        the
        conversion of the Principal Amount of the Note as herein provided, such number
        of shares of Common Stock as shall then be issuable upon the conversion of
        then
        outstanding Principal Amount of this Note. The Company covenants that all
        shares
        of Common Stock which shall be so issued shall be duly and validly issued
        and
        fully paid and nonassessable and free from all liens and charges with respect
        to
        the issue thereof. 

       

    

    
    

    Assignment.
      The
      rights and obligations of the Company and the Holder will be binding upon and
      inure to the benefit of the successors, assigns, heirs, administrators and
      transferees of the parties.

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

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    Waiver
      and Amendment.
      Any
      provision of this Note may be amended, waived or modified upon the written
      consent of the Company and the Holder.

     

    Notices.
      Any
      notice, request or other communication required or permitted hereunder will
      be
      in writing and shall be deemed to have been duly given if personally delivered
      or if telegraphed or mailed by registered or certified mail, postage prepaid,
      at
      the respective addresses of the parties as set forth below. Any party hereto
      may
      by notice so given change its address for future notice hereunder. Notice will
      conclusively be deemed to have been given when personally delivered or when
      deposited in the mail or telegraphed in the manner set forth above and will
      be
      deemed to have been received when delivered. Prior to the maturity of this
      Note,
      if the Company (i) fixes a record date for purposes of determining the
      Holders of any class or series of securities who are entitled to receive any
      dividend or other distribution, or (ii) fixes a closing date for the
      issuance of any equity securities of the Company, the Company will mail to
      the
      Holder, at least fifteen (15) days prior to such date a notice specifying such
      record date or closing date and the matter pursuant to which such record date
      or
      closing date has been set. Prior to the payment of any Principal Amount, the
      Company shall provide the Holder with thirty (30) days prior written notice,
      stating that the Holder may convert the Principal Amount of the Note into
      Conversion Shares prior to payment.

     

    Rights
      as a Stockholder.
      This
      Note, as such, shall not entitle the Holder to any rights as a stockholder
      of
      the Company, except as otherwise specified herein.

     

    Governing
      Law.
      This
      Agreement shall be governed by and construed in accordance with the laws of
      the
      State of Delaware, excluding that body of law relating to conflict of
      laws.

     

    Severability.
      If one
      or more provisions of this Note are held to be unenforceable under applicable
      law, such provision shall be excluded from this Note and the balance of the
      Note
      shall be interpreted as if such provision were so excluded and shall be
      enforceable in accordance with its terms. 

     

    Time
      of the Essence.
      Time is
      of the essence of this Note.

     

    Costs
      of Enforcement; Presentment.
      The
      Company agrees to pay on demand all of the losses, costs, and expenses
      (including, without limitation, all reasonable attorneys’ fees and
      disbursements) which the Holder incurs in connection with enforcement of this
      Note, or the protection or preservation of the Holder’s rights under this Note,
      whether by judicial proceeding or otherwise. Such costs and expenses include,
      without limitation, those incurred in connection with any workout or
      refinancing, or any bankruptcy, insolvency, liquidation or similar proceedings.
      The Company hereby waives diligence, demand, presentment, protest or notice
      of
      any kind. The Company agrees to make all payments under this Note without setoff
      or deduction and regardless of any counterclaim or defense.

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

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    Headings;
      References.
      All
      headings used herein are used for convenience only and will not be used to
      construe or interpret this Note. Except where otherwise indicated, all
      references herein to Sections refer to Sections hereof.

     

    Previous
      Agreements Superceded.
      This
      Note shall supercede all previous agreements made on or prior to the date hereof
      between the Holder and the Company with respect to the subject matter
      hereof.

    

    IN
      WITNESS WHEREOF, the parties have caused this Note to be issued as of
      _____________, 2006.

    

    
      	 	
              THE
                COMPANY:

               

              Scientigo,
                Inc.

               

              By:__________________________________________

              Name:________________________________________

              Title:_________________________________________

               

              Address:

              Suite
                205

              6701
                Carmel Road

              Charlotte,
                NC 28226

            
	 	 
	 	
              HOLDER:

               

              
                By:__________________________________________

              

               

               

              Address:

              _________________________

              _________________________

              _________________________
                

            

    

    

    

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

    
      Page 5
        of 5

    

     

    

    EXHIBIT
      A

    

    Scientigo,
      Inc.

    6701
      Carmel Road

    Suite
      205

    Charlotte,
      NC 28266

    Atten:
      Chief Financial Officer

    

    CONVERSION
      NOTICE

    

    SCIENTIGO
      10% B NOTES

     

    The
      undersigned is the owner of $______________ Principal Amount of Scientigo 10%
      B
      Notes (the “Note”), which original Note is enclosed with this Conversion Notice.
      In accordance with the terms of such Note, the undersigned hereby elects to
      convert $_____________ Principal Amount of the Note into shares of the Common
      Stock of Scientigo, Inc. Any remaining Principal Amount of the Note and the
      shares of Common Stock should be delivered to:

     

    
      	 	
              __________________________________________

              __________________________________________

              __________________________________________

               

            
	 	 
	 	
              Name:__________________________________________

              Title:___________________________________________

              Date:___________________________________________Unassociated Document

    SUBSCRIPTION
      AGREEMENT

     

    This
      SUBSCRIPTION AGREEMENT (this “Agreement”) made as of the date set forth on the
      signature page hereof between INSITE VISION INCORPORATED, a Delaware corporation
      having a place of business at 965 Atlantic Avenue, Alameda, California 94501
      (the “Company”) and the undersigned (each, a “Subscriber” and collectively, the
“Subscribers”).

     

    W
      I T N E S S E T H:

     

    WHEREAS,
      the Company desires to sell up to $6,000,000 in aggregate principal amount
      of
      Senior Secured Promissory Notes of the Company, the form of which is attached
      hereto as Exhibit
      A
      (the
“Notes”), and warrants (“Warrants”) to purchase shares of common stock, par
      value $0.01 per share (the “Common Stock”), of the Company to persons who
      qualify as “accredited investors” as defined in Rule 501(a) of Regulation D
      (“Regulation D”) promulgated under the Securities Act of 1933, as amended (the
“Securities Act”), or pursuant to Section 4(2) of the Securities Act;
      and

     

    WHEREAS,
      each Subscriber desires to purchase that aggregate principal amount of Notes
      and
      corresponding Warrants as set forth on the signature page hereof on the terms
      and conditions hereinafter set forth;

     

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

     

    
      	
              I.

            	
              SUBSCRIPTION
                

            

    

     

    1.1 The
      Offering.
      The
      Company will offer to sell to persons who qualify as “accredited investors” as
      defined in Rule 501(a) of Regulation D or pursuant to Section 4(2) of the
      Securities Act (the “Offering”):

     

    (a) Notes,
      which will be sold in minimum principal denominations of $500,000 (or such
      other
      principal amount determined in the mutual discretion of Paramount BioCapital,
      Inc., as placement agent for the Offering (the “Placement Agent”) and the
      Company).

     

    (b) Each
      Subscriber will also receive a Warrant to purchase 20,000 shares of Common
      Stock
      for each $100,000 in aggregate principal amount of Notes purchased by such
      Subscriber. Each Warrant will have an exercise price equal to the volume
      weighted average price of the Company’s Common Stock, as reported on the
      American Stock Exchange (the “AMEX”) for the five trading days immediately prior
      to the date of the applicable closing (each, a “Closing Date”), will be
      exercisable for five years from the final Closing Date of the Offering (the
      “Final Closing Date”), and will otherwise be in the form attached hereto as
Exhibit
      B.
      The
      Notes, the Warrants and the shares of Common Stock issuable upon exercise of
      the
      Warrants (the “Warrant Shares”) are, individually and collectively, referred to
      herein as the “Securities”.

     

    
      
        
        

      

      
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    1.2 Closing.
      Upon
      receipt of binding subscription agreements for at least $3,000,000 in aggregate
      principal amount of Notes (the “Subscriptions”), and subject to the other terms
      and conditions of this Agreement, at a time to be agreed upon by the Company
      and
      the Placement Agent, the Company will (a) sell to the Subscribers and the
      Subscribers will purchase from the Company, the Notes and Warrants subscribed
      for by each such Subscriber under the terms of the Offering (the “Closing”), and
      the Subscribers will remit to the Escrow Agent (as defined in Section 1.4 below)
      prior to the Closing the applicable portion of the Aggregate Purchase Price
      (as
      defined below) for the Closing (each, a “Closing Amount”) for release to the
      Company at the Closing; (b) issue to the Placement Agent or its designees the
      warrants to purchase shares of Common Stock pursuant to Section 3(a) of that
      certain Placement Agent Agreement, dated December 16, 2005 (the “Placement Agent
      Agreement”) by and between the Company and the Placement Agent (the “Placement
      Warrants”); and (c) pay to the Placement Agent or its designees the cash
      placement fees described in Section 3(a) of the Placement Agent Agreement.
      The
      Placement Agent will notify each Subscriber, after consultation with the
      Company, as to such Subscriber’s Closing Amount (each a “Subscriber Amount”) by
      providing such Subscriber with a notice substantially similar to that attached
      hereto as Exhibit
      D.
      The
“Aggregate Purchase Price” shall mean the aggregate principal amount of Notes to
      be purchased by all Subscribers at a Closing. Upon compliance with all
      conditions to the Closing, the Placement Agent, with notice to the Company,
      shall authorize the Escrow Agent to release the proceeds of the Closing to
      the
      Company, less fees and expenses due to the Placement Agent. Interest, if any,
      that has accrued with respect to the Aggregate Purchase Price while in escrow
      shall also be distributed to the Company at the Closing and Subscribers will
      have no right to such interest.

     

    1.3 Offering
      Termination Date.
      Unless
      terminated earlier in the Placement Agent’s or the Company’s sole discretion,
      the Offering will expire on the earlier to occur of the Closing Date and 11:59
      p.m. New York City time on January 7, 2006 (subject to extension at the
      Company’s and the Placement Agent’s sole discretion without notice to the
      Subscribers for up to an additional 90 days) (the “Offering Termination
      Date”).

     

    1.4 Closing
      Mechanics.
      Prior
      to the Closing, the Aggregate Purchase Price will be deposited in a segregated
      escrow account with the Escrow Agent pursuant to the instructions provided
      below
      in this Section 1.4. Subject to the terms and conditions of this Agreement
      (including, without limitation, the Company’s and the Placement Agent’s option,
      each at its sole discretion, to refuse to accept Subscriptions from any
      Subscriber in whole or in part), the Subscriber hereby subscribes for and agrees
      to purchase from the Company the aggregate principal amount of Notes and
      corresponding Warrants and the Company agrees to sell such Notes and Warrants
      to
      the Subscriber as is set forth upon the signature pages hereof. Pursuant to
      Section 1.2, the Closing Amount, is payable by wire transfer, certified bank
      check, personal check, business check (only if subscribing as an entity), or
      money order made payable to “US Bank Trust National Association Corporation
      Trust, (the “Escrow Agent”) F/B/O InSite Vision Incorporated.” Subscribers
      paying by check should direct such check to: Basil Christakos, Paramount
      BioCapital, Inc., 787 Seventh Ave., 48th Floor, New York, New York 10019.
      Subscribers paying by wire transfer should direct such wire transfer
      to:

     

    
      
        
        

      

      
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    US
      Bank Trust National Association Corporation Trust

    ABA
      Routing Number: 091000022

    US
      Bank Trust N.A.

    Account
      Number: 180121167365

    For:
      Paramount BioCapital & InSite Vision

    SEI
      Number: 792303000

    Attn:
      Andrea Friessen

    Tel
      # 651-495-3725

    Fax
      # 651-495-8087

    

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

     

    1.5 Delivery
      of Documents.
      The
      documents evidencing the Notes and Warrants purchased at the Closing will be
      delivered by the Company as soon as practicable following the Final Closing
      Date.

     

    
      	
              II.

            	
              REPRESENTATIONS,
                WARRANTIES AND COVENANTS OF
                SUBSCRIBERS

            

    

     

    Each
      Subscriber hereby represents, warrants and covenants to the Company as
      follows:

     

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

     

    2.2 The
      Subscriber is an “accredited investor” as such term is defined in Rule 501(a) of
      Regulation D as indicated by the Subscriber’s responses to the questions
      contained in Article VIII hereof which responses are true and correct as of
      the
      date hereof and shall be true and correct as of the Closing, and that the
      Subscriber is able to bear the economic risk of an investment in the Company
      for
      an indefinite period of time. If the Subscriber is a natural person, the
      Subscriber has reached the age of majority in the state or other jurisdiction
      in
      which the Subscriber resides, has adequate means of providing for the
      Subscriber’s current financial needs and contingencies, is able to bear the
      substantial economic risks of an investment in the Securities for an indefinite
      period of time, has no need for liquidity in such investment and could afford
      a
      complete loss of such investment. After giving effect to the purchase of the
      Securities requested to be purchased by Subscriber hereunder, Subscriber
      represents and warrants that Subscriber neither individually nor together as
      a
      group (except as permitted by Rule 13d-5(b)(2) promulgated under the Exchange
      Act (as defined below)) shall own more than 19.9% of the Company’s outstanding
      Common Stock or voting power.

     

    
      
        
        

      

      
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    2.3 i) The
      Subscriber hereby acknowledges and represents that (i) the Subscriber is
      knowledgeable, sophisticated and has experience in making, and is qualified
      to
      make, decisions with respect to investments representing an investment decision
      like that involved in the purchase of the Securities hereunder and has prior
      investment experience, including investment in securities which are non-listed,
      unregistered and/or not traded on the NASDAQ National or SmallCap Market or
      listed on AMEX; (ii) the Subscriber recognizes the highly speculative nature
      of
      this investment, that an investment in the Securities involves a significant
      degree of risk, that the Company’s financial condition has been and continues to
      be weak and the Company’s auditors have included explanatory paragraphs in the
      Company’s audited financial statements for the fiscal years ended 2003 and 2004
      indicating substantial doubt as to the Company’s ability to continue as a going
      concern, and that the Company’s auditors will likely include a similar
      explanatory paragraph in the Company’s audited financial statements for the
      fiscal year ending 2005; (iii) Subscriber recognizes that that the market price
      of the Common Stock of the Company has been and continues to be volatile, and
      Subscriber has carefully evaluated the risks of an investment in the Securities;
      and (iii) the Subscriber is able to bear the economic risk of an investment
      in
      the Securities and the potential loss of such investment, which risk the
      Subscriber hereby assumes.

     

    (b) Subscriber
      hereby acknowledges that Subscriber has read the section of the Memorandum
      entitled “Risk Factors” and understands that (i) an investment in the Securities
      is a highly speculative investment, and in the event of a liquidation,
      bankruptcy or insolvency of the Company, it is highly unlikely that the Company
      will have sufficient assets to repay all the Notes in full; (ii) Subscribers
      of
      the Notes will rank pari passu with other secured creditors and as such, the
      collateral securing the Notes may not be sufficient to repay the amounts due
      Subscriber under the Notes; (iii) the collateral securing the Company's
      obligations under the Note consists primarily of the Company's intellectual
      property, the value of which is tied to the Company as a going concern and
      such
      collateral will generate substantially less value to secured creditors in a
      liquidation than the operating value of the Company and (iv) delays, costs
      and
      expenses incurred in connection with any enforcement of the Collateral will
      further erode the amount of funds available, if any, to repay the holders of
      Notes. 

     

    2.4 The
      Subscriber hereby acknowledges that he/she/it has received and carefully
      reviewed this Agreement, the Confidential Private Offering Memorandum prepared
      by the Company and dated as of December 27, 2005, as amended or supplemented,
      including all documents attached thereto or incorporated by reference therein,
      including the following documents filed by the Company with the Securities
      and
      Exchange Commission (the “SEC” or the “Commission”, and such documents, the “SEC
      Filings”): Annual Report on Form 10-K for the year ended December 31, 2004,
      filed March 31, 2005; Quarterly Report on Form 10-Q for the three months ended
      March 31, 2005, filed May 16, 2005; Quarterly Report on Form 10-Q for the three
      months ended June 30, 2005, filed August 15, 2005; Quarterly Report on Form
      10-Q
      for the three months ended September 30, 2005, filed November 14, 2005; Current
      Reports on Form 8-K filed March 31, 2005, May 9, 2005, May 16, 2005, June 1,
      2005, June 6, 2005, August 15, 2005, October 11, 2005, November 14, 2005 and
      November 30, 2005, as well as any future filings that the Company makes with
      the
      SEC under Sections 13(a), 13(c), 14, or 15(d) of the Securities Exchange Act
      of
      1934, as amended (the “Exchange Act”), until the Offering Termination Date (as
      defined herein) (the Confidential Private Offering Memorandum, including the
      SEC
      Filings and all other exhibits and information incorporated by reference therein
      is referred to herein as the “Memorandum”). Any information that the Company
      subsequently files with the SEC that is incorporated by reference will
      automatically update and supersede any previous information that is part of
      this
      Memorandum. The Subscriber further represents that the Subscriber has been
      furnished by the Company during the course of this transaction with all
      information regarding the Company which the Subscriber, its investment advisor,
      attorney and/or accountant has requested or desired to know or which is
      otherwise relevant to an investment decision, has been afforded the opportunity
      to ask questions of, and receive answers from, duly authorized officers or
      other
      representatives of the Company concerning the terms and conditions of the
      Offering, and has received any additional information which the Subscriber
      or
      its advisors or agents has requested.

     

    
      
        
        

      

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

     

    (b) The
      Subscriber represents that the Securities were not offered or sold to it by
      means of any form of general solicitation or general advertising, and in
      connection therewith the Subscriber did not: (A) receive or review any
      advertisement, article, notice or other communication published in a newspaper
      or magazine or similar media or broadcast over television or radio whether
      closed circuit, or generally available; or (B) attend any seminar meeting or
      industry or Subscriber conference whose attendees were invited by any general
      solicitation or general advertising.

     

    2.6 The
      Subscriber hereby acknowledges that neither the Offering nor the Memorandum
      has
      been reviewed, recommended or endorsed by the SEC or any state securities
      regulatory authority or other governmental body or agency, since the Offering
      is
      intended to be exempt from the registration requirements of Section 5 of the
      Securities Act pursuant to Regulation D. The Subscriber shall not sell or
      otherwise transfer the Securities unless such transfer is registered under
      the
      Securities Act or unless an exemption from such registration is available.
      The
      Subscriber understands that if required by the laws or regulations or any
      applicable jurisdictions, the Offering contemplated hereby will be submitted
      to
      the appropriate authorities of such state(s) for registration or exemption
      therefrom and the Offering contemplated hereby will be specifically subject
      to
      the receipt of such registration or exemption.

     

    
      
        
        

      

      
        5

        
          

        

      

      
        
        

      

       

    

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

     

    2.8 The
      Subscriber understands that the Securities will not be registered or available
      for sale in the public markets except as specifically provided herein, and
      Rule
      144 promulgated under the Securities Act (“Rule 144”) requires, among other
      conditions, a one year holding period prior to the resale (in limited amounts)
      of securities acquired in a non-public offering without having to satisfy the
      registration requirements under the Securities Act. The Subscriber understands
      and hereby acknowledges that the Company is under no obligation to register
      any
      of the Securities under the Securities Act or any state securities or “blue sky”
laws or assist the Subscriber in obtaining an exemption from various
      registration requirements, other than as set forth in Article VI herein. The
      Subscriber agrees to hold the Company and its directors, officers, employees,
      controlling persons and agents and their respective heirs, representatives,
      successors and assigns harmless and to indemnify them against all liabilities,
      costs and expenses incurred by them as a result of (i) any misrepresentation
      made by the Subscriber contained in this Agreement (including the Confidential
      Subscriber Questionnaire contained
      in Article VIII herein or otherwise furnished to the Company for purposes of
      disclosure in any registration statement),
      (ii) any
      sale or distribution by the Subscriber in violation of the Securities Act or
      any
      applicable state securities or “blue sky” laws or (iii) any untrue statement of
      a material fact made by the Subscriber and contained herein (including the
      Confidential Subscriber Questionnaire contained in Article VIII herein or
      otherwise furnished to the Company for purposes of disclosure in any
      registration statement), or omission of a material fact asked for by such
      questionnaire or otherwise in writing by the Company necessary to make such
      statements made by the Subscriber and contained herein (including the
      Confidential Subscriber Questionnaire contained in Article VIII herein), in
      light of the circumstances in which they are made, not misleading.

     

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

     

    
      
        
        

      

      
        6

        
          

        

      

      
        
        

      

       

    

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

     

    2.10 The
      Subscriber agrees to supply the Company, as soon as practical but in no event
      later than five days after the Subscriber receives the request therefore from
      the Company, with such additional information concerning the Subscriber as
      the
      Company reasonably deems necessary or advisable.

     

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

     

    2.12 The
      Subscriber represents that (i) the Subscriber has full right, power, authority
      and capacity (corporate, personal, statutory and otherwise) to execute, deliver,
      and perform this Agreement and to purchase the Securities and has taken all
      action necessary to authorize the execution, delivery and performance of this
      Agreement; and (ii) this Agreement constitutes the legal, valid and binding
      obligation of the Subscriber, enforceable against the Subscriber in accordance
      with its terms.

     

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

     

    2.14 The
      Subscriber acknowledges that if he or she is a Registered Representative of
      a
      National Association of Securities Dealers, Inc. (“NASD”) member firm, he or she
      must give such firm the notice required by the NASD Rules of Fair Practice,
      receipt of which must be acknowledged in accordance with such
      rules.

     

    2.15 The
      Subscriber understands, acknowledges and agrees with the Company that this
      Subscription may be rejected, in whole or in part, by the Company or the
      Placement Agent, in each of their sole and absolute discretion, at any time
      before the applicable Closing Date notwithstanding prior receipt by the
      Subscriber of notice of acceptance of the Subscriber’s Subscription. Only
      subscriptions accepted at the applicable Closing Date shall be binding on the
      Company.

     

    
      
        
        

      

      
        7

        
          

        

      

      
        
        

      

       

    

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

     

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

     

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

     

    2.19 The
      Subscriber agrees that during the period from the date that Subscriber was
      first
      contacted with respect to the Offering (the “First Date”) through the date upon
      which the Registration Statement (as defined in Section 6.2 below) is declared
      effective, the Subscriber will not directly or indirectly, through related
      parties, affiliates or otherwise sell "short" or "short against the box" (as
      those terms are generally understood) any equity security of the Company or
      take
      any action with respect to any equity security of the Company which would
      violate the Securities Act or the rules and regulations promulgated thereunder
      and from the First Date through the Closing Date has not and will not take
      any
      action the intent or reasonably foreseeable effect of which is to reduce the
      trading price of the Common Stock.

     

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

     

    
      
        
        

      

      
        8

        
          

        

      

      
        
        

      

       

    

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

     

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

     

    2.23 The
      representations, warranties and agreements of the Subscriber contained herein,
      in the Confidential Subscriber Questionnaire and in any other writing delivered
      in connection with the transactions contemplated hereby shall be true and
      correct in all respects on and as of the Closing Date as if made on and as
      of
      such date and shall survive the execution and delivery of this Agreement and
      the
      purchase of the Securities. Subscriber agrees to notify the Company as promptly
      as possible of any change in any of the foregoing information until such time
      as
      the Subscriber has sold all of its Securities.

     

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

     

    2.25 Subscriber
      acknowledges the following disclosure, which is set forth herein as required
      pursuant to Section 25102(a) of the California Corporate Securities Law of
      1968:

     

    “THE
      SALE
      OF THE SECURITIES THAT ARE THE SUBJECT OF THIS AGREEMENT HAS NOT BEEN QUALIFIED
      WITH THE COMMISSIONER OF CORPORATIONS OF THE STATE OF CALIFORNIA AND THE
      ISSUANCE OF THE SECURITIES OR THE PAYMENT OR RECEIPT OF ANY PART OF THE
      CONSIDERATION THEREFOR PRIOR TO THE QUALIFICATION IS UNLAWFUL, UNLESS THE SALE
      OF SECURITIES IS EXEMPT FROM THE QUALIFICATION BY SECTION 25100, 25102, OR
      25105
      OF THE CALIFORNIA CORPORATIONS CODE. THE RIGHTS OF ALL PARTIES TO THIS AGREEMENT
      ARE EXPRESSLY CONDITIONED UPON THE QUALIFICATION BEING OBTAINED, UNLESS THE
      SALE
      IS SO EXEMPT.”

     

    
      
        
        

      

      
        9

        
          

        

      

      
        
        

      

       

    

    2.26 The
      Subscriber is not an adverse party to the Company in any lawsuit involving
      the
      Company.

     

    
      	
              III.

            	
              REPRESENTATIONS,
                WARRANTIES AND COVENANTS BY AND OF THE
                COMPANY

            

    

     

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

     

    3.1 Organization,
      Good Standing and Qualification.
      The
      Company is a corporation duly incorporated, validly existing and in good
      standing under the laws of the State of Delaware and has full corporate power
      and authority to conduct its business as currently conducted. The Company is
      duly qualified as a foreign corporation to do business and is in good standing
      in every jurisdiction in which the property owned or leased by it or the nature
      of the business conducted by it makes such qualification necessary, except
      to
      the extent that the failure to be so qualified or in good standing would not
      reasonably be expected to have, individually or in the aggregate, (i) a material
      adverse effect on the legality, validity or enforceability of any Transaction
      Document, (ii) a material adverse effect on the Company’s ability to perform in
      any material respect on a timely basis its obligations under any Transaction
      Document; or (iii) a material adverse effect on the business, operations,
      condition (financial or otherwise), assets, properties or results of operations
      of the Company and its Subsidiaries (as defined below) as a whole (any of (i),
      (ii) or (iii), a “Material Adverse Effect”). For purposes hereof, “Subsidiary”
shall mean, with respect to any Person, any other Person of which more than
      fifty percent (50%) of the shares of stock or other interests entitled to vote
      in the election of directors or comparable Persons performing similar functions
      (excluding shares or other interests entitled to vote only upon the failure
      to
      pay dividends thereon or other contingencies) are at the time owned or
      controlled, directly or indirectly through one or more Subsidiaries, by such
      Person. For purposes hereof, “Transaction Documents” shall mean this Agreement,
      the Notes, the Security Agreement, the Intercreditor and Collateral Agent
      Agreement, the Warrants, the Placement Warrants and the Escrow
      Agreement.

     

    3.2 Capitalization.

     

    (a) The
      authorized, issued and outstanding capital stock of the Company is as set forth
      in the Memorandum, under the heading “Capitalization”. All of the securities
      issued by the Company have been issued in accordance with all applicable federal
      and state securities laws, and all issued and outstanding shares of Common
      Stock
      of the Company are validly issued, fully paid and non-assessable. Other than
      as
      disclosed or contemplated in the Memorandum under the heading “Capitalization”,
      there are no other options, warrants, calls, rights, commitments or agreements
      of any character to which the Company is a party or by which either the Company
      is bound or obligating the Company to issue, deliver, sell, repurchase or
      redeem, or cause to be issued, delivered, sold, repurchased or redeemed, any
      shares of the capital stock of the Company or obligating the Company to grant,
      extend or enter into any such option, warrant, call, right, commitment or
      agreement. 

     

    
      
        
        

      

      
        10

        
          

        

      

      
        
        

      

       

    

    Other
      than as disclosed in the Memorandum under the heading “Capitalization” there are
      no preemptive rights or rights of first refusal or similar rights which are
      binding on the Company permitting any person to subscribe for or purchase from
      the Company shares of its capital stock pursuant to any provision of law, the
      Company’s Certificate of Incorporation as in effect on the date hereof (the
“Certificate of Incorporation”) or the Company’s By-laws, as in effect on the
      date hereof (the “By-laws”) or by agreement or otherwise. Other than as
      disclosed in the Memorandum under the heading “Capitalization”, there are no
      securities or instruments (including, without limitation, any warrants or
      convertible debentures) containing anti-dilution or similar provisions that
      will
      be triggered by the issuance of the Securities as described in this Agreement.
      Except as provided in the Memorandum, this Agreement, in the Placement Agent
      Agreement and for the selling stockholders listed in the Company’s currently
      effective registration statements on Form S-3 filed on December 9, 2005 (SEC
      file number 333-130248); Form S-3 filed on June 23, 2005 (SEC file number
      333-126084); Form S-3 filed on June 29, 2004 (SEC filed number 333-116973);
      Form
      S-3 filed on June 29, 2004 (SEC filed number 333-116973); Form S-3 filed on
      February 2, 2002 (SEC file number 333-54912); Form S-3 filed June 1, 2000 (SEC
      file number 333-38266) and Form S-3 filed September 29, 1997 (SEC file number
      333-36673), no stockholder of the Company has any right to request or require
      the Company to register the sale of any shares owned by such stockholder under
      the Securities Act. The Company has made available to the Placement Agent true
      and correct copies of the Company’s Certificate of Incorporation and the
      Company’s By-laws.

     

    (b) The
      Securities are duly authorized and, when issued and paid for in accordance
      with
      the applicable Transaction Documents, will be duly and validly issued, fully
      paid and nonassessable, free and clear of all Liens (as defined below) imposed
      by the Company other than restrictions on transfer provided for in the
      Transaction Documents or by applicable law. The Warrant Shares when issued
      in
      accordance with the terms of the Transaction Documents, will be validly issued,
      fully paid and nonassessable, free and clear of all Liens imposed by the
      Company. The Company has reserved from its duly authorized capital stock a
      sufficient number of shares of Common Stock for issuance of the Warrant Shares.
      For purposes hereof, “Liens” shall mean and include security interests,
      mortgages, liens, pledges, charges, easements, reservations, restrictions,
      rights of way, servitudes, options, rights of first refusal, community property
      interests, equitable interests, restrictions of any kind and all other
      encumbrances, whether or not relating to the extension of credit or the
      borrowing of money.

     

    3.3 Authorization;
      Enforceability.
      The
      Company has all requisite corporate right, power and authority to enter into
      this Agreement and the other Transaction Documents and to consummate the
      transactions contemplated hereby and thereby. All corporate action on the part
      of the Company, its directors and stockholders necessary for the authorization,
      execution, delivery and performance of this Agreement and the other Transaction
      Documents by the Company, the authorization, sale, issuance and delivery of
      the
      Securities contemplated herein and the performance of the Company’s obligations
      hereunder has been taken (other than filings as may be required to be made
      with
      the Commission, the NASD and AMEX and with any state or foreign blue sky or
      securities regulatory authority, which filings will be made on or prior to
      the
      Closing or, for those filings which by their terms may be made post-Closing,
      such filings will be made post-Closing within the time period prescribed for
      such filings). This Agreement and the Transaction Documents have been duly
      executed and delivered by the Company and constitutes a legal, valid and binding
      obligation of the Company, enforceable against the Company in accordance with
      their respective terms, except as enforceability may be limited by applicable
      bankruptcy, insolvency, reorganization, moratorium or similar laws affecting
      creditors’ and contracting parties’ rights generally and except as
      enforceability may be subject to limitations of public policy or general
      principals of equity (regardless of whether such enforceability is considered
      at
      law or equity). 

     

    
      
        
        

      

      
        11

        
          

        

      

      
        
        

      

       

    

    3.4 No
      Conflict; Governmental and Other Consents.
      

     

    (a) Except
      as
      disclosed in the Memorandum, the execution, delivery and performance by the
      Company of the Transaction Documents and the consummation by the Company of
      the
      transactions contemplated thereby will not (i) conflict with or result in the
      violation of any law, statute, rule, regulation, order, writ, injunction,
      judgment or decree of any court or governmental authority to or by which the
      Company or any Subsidiary is bound, (ii) conflict with or violate any provision
      of the Certificate of Incorporation or By-laws of the Company or any Subsidiary,
      and (iii) will not conflict with, or result in a breach or violation of, any
      of
      the terms or provisions of, or constitute (with due notice or lapse of time
      or
      both) a default under, any lease, loan agreement, mortgage, security agreement,
      trust indenture or other agreement or instrument to which the Company or any
      Subsidiary is a party or by which it is bound or to which any of its properties
      or assets is subject, nor result in the creation or imposition of any Lien
      upon
      any of the properties or assets of the Company or any Subsidiary where, in
      the
      case of each of clauses (i) and (iii) such conflict, violation, breach, default
      or imposition is reasonably likely to result in a Material Adverse
      Effect.

     

    (b) Except
      as
      disclosed in the Memorandum, no consent, approval, authorization or other order
      of any governmental authority or other third-party is required to be made or
      obtained by the Company or any Subsidiary in connection with the authorization,
      execution, delivery and performance of this Agreement and the other Transaction
      Documents or with the authorization, issue and sale of the Securities, except
      such filings as may be required to be made with the Commission, the NASD and
      AMEX and with any state or foreign blue sky or securities regulatory authority,
      which filings will be made on or prior to the Closing or, for those filings
      which may be made post-Closing, such filings will be made post-Closing within
      the time period prescribed for such filings.

     

    3.5 Litigation.
      Other
      than as disclosed in the SEC filings or the Memorandum, there is no pending
      or,
      to the knowledge of the Company, threatened legal or governmental proceedings
      to
      which the Company is a party which is reasonably expected to result in a
      Material Adverse Effect or which would or might reasonably be expected to
      materially adversely affect the Company’s ability to perform its obligations
      under this Agreement.

     

    
      
        
        

      

      
        12

        
          

        

      

      
        
        

      

       

    

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

     

    3.7 Material
      Changes.
      Since
      the date of the latest audited financial statements included within the SEC
      Reports, except as disclosed in the SEC Reports, (i) there has been no event,
      occurrence or development that has had a Material Adverse Effect, (ii) the
      Company has not incurred any liabilities (contingent or otherwise) other than
      (A) trade payables and accrued expenses incurred in the ordinary course of
      business, (B) liabilities not required to be reflected in the Company’s
      financial statements pursuant to GAAP or required to be disclosed in filings
      made with the Commission and (C) expenses incurred in connection with the
      transactions contemplated hereunder, (iii) the Company has not altered its
      method of accounting, (iv) the Company has not declared or made any dividend
      or
      distribution of cash or other property to its stockholders or purchased,
      redeemed or made any agreements to purchase or redeem any shares of its capital
      stock (other than the repurchase at cost of shares of unvested or restricted
      stock as permitted under the Company’s stock option or stock purchase plan upon
      termination of employment or service) and (v) the Company has not issued any
      equity securities to any officer, director or Affiliate, except pursuant to
      existing Company stock purchase or stock option plans. 

     

    3.8 Investment
      Company.
      The
      Company is not, and is not an Affiliate of, and immediately after receipt of
      payment for the Securities, will not be or be an Affiliate of an “investment
      company” within the meaning of such term under the Investment Company Act of
      1940, as amended, and the rules and regulations of the Commission
      thereunder.

     

    3.9 Public
      Utility Holding Company.
      The
      Company is not, and after giving effect to the offering and sale of the
      Securities and the applications of the proceeds thereof as described in the
      Memorandum, will not be, a “holding company,” or a “subsidiary company” of a
“holding company,” or an “affiliate” of a “holding company” or of a “subsidiary
      company” of a “holding company,” within the meaning of the Public Utility
      Holding Company Act of 1935, as amended.

     

    
      
        
        

      

      
        13

        
          

        

      

      
        
        

      

       

    

    3.10 Use
      of
      Proceeds.
      The
      Company covenants and agrees to use the net proceeds of the Offering in the
      manner as described under the heading “Use of Proceeds” in the
      Memorandum.

     

    3.11 Intellectual
      Property.
      

     

    (a) Schedule
      3.11(a)
      of this
      Agreement sets forth a list of:

     

    (i)  all
      United States and foreign patents and patent applications, all United States,
      state and foreign trademarks, service marks and trade names for which
      registrations have been issued or applied for that are owned by or to the
      knowledge of the Company are subject to an obligation of assignment to the
      Company; and

     

    (ii) all
      United States and foreign patents and patent applications, all United States,
      state and foreign trademarks, service marks and trade names for which
      registrations have been issued or applied for that are licensed to the
      Company.

     

    (b) Except
      as
      set forth on Schedule 3.11(b) hereof, the Company and/or its Subsidiaries owns
      or possesses adequate and, to its knowledge, enforceable rights to use all
      material patents, patent applications, trademarks, service marks, trade names,
      logos, corporate names, copyrights, trade secrets, processes, mask works,
      licenses, inventions, formulations, technology and know-how and other intangible
      property currently used in the conduct of its business as described in the
      Memorandum (the “Proprietary Rights”). Except as set forth on Schedule 3.11(b)
      hereof, the Company and/or its Subsidiaries have taken commercially reasonable
      measures to protect all of the Company’s and such Subsidiary’s Proprietary
      Rights. Except as set forth on Schedule 3.11(b) hereof, neither the Company
      nor
      any of its Subsidiaries has received any notice of, and there are not any facts
      known to the Company or any Subsidiary which indicate the existence of (i)
      any
      infringement or misappropriation by any third party of any of the Proprietary
      Rights, which infringement or misappropriation would reasonably be expected
      to
      have a Material Adverse Effect, (ii) any claim by a third party contesting
      the
      validity of any of the Proprietary Rights, other than claims that would not
      reasonably be expected to have a Material Adverse Effect or (iii) any
      infringement, misappropriation or violation by the Company or any Subsidiary
      or,
      to the Company’s knowledge, any of their employees, of any Proprietary Rights of
      third parties that would be reasonably expected to have a Material Adverse
      Effect. Except as set forth on Schedule 3.11(b) hereof, to the Company's
      knowledge, no infringement, illicit copying, misappropriation or violation
      of
      any intellectual property rights of any third party has occurred by the Company
      or any of its Subsidiaries with respect to any products currently being sold
      by
      the Company or any Subsidiary or with respect to any products currently under
      development by the Company or any Subsidiary or with respect to the conduct
      of
      the business of the Company or any Subsidiary as currently conducted. Except
      as
      set forth on Schedule 3.11(b) hereof, to the Company's knowledge, no
      infringement, illicit copying, misappropriation or violation of any intellectual
      property rights of any third party will occur by the Company or any of its
      subsidiaries as a result of the sale by the Company or any Subsidiary of any
      products currently under development by the Company should such products receive
      the applicable regulatory approval for commercial sale. Except as set forth
      on
      Schedule 3.11(b) hereof, the Company is not aware that any of its employees,
      including the employees of its subsidiaries, are obligated under any contract
      (including licenses, covenants or commitments of any nature) or other agreement,
      or subject to any judgment, decree or order of any court or administrative
      agency, that the Company believes would materially interfere with the use of
      the
      employee’s best efforts to promote the interests of the Company and/or its
      subsidiaries or that would conflict with the business of the Company and/or
      its
      subsidiaries as currently conducted. To the Company's knowledge, neither the
      execution and delivery of this Agreement, nor the carrying on of the business
      of
      the Company and its subsidiaries by the employees of the Company and its
      subsidiaries, nor the conduct of the business of the Company and its
      subsidiaries, as currently conducted, will conflict with or result in a breach
      of the terms, conditions or provisions of, or constitute a default under, any
      contract, covenant or instrument under which any such employee is now
      obligated.

     

    
      
        
        

      

      
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    3.12 Private
      Offering.
      No form
      of general solicitation or general advertising was used by the Company in
      connection with the Offering. Subject in part to the accuracy and completeness
      of the Subscribers' representations in Article II and Article VIII of this
      Agreement, no registration of the Securities pursuant to the provisions of
      the
      Securities Act will be required by the offer, sale, or issuance of the
      Securities pursuant to this Agreement.

     

    3.13 Transactions
      With Officers and Directors.
      Except
      as set forth in the Memorandum, none of the officers or directors of the Company
      is presently a party to any transaction with the Company (other than for
      services as officers or directors), including any contract, agreement or other
      arrangement providing for the furnishing of services to or by, providing for
      rental of real or personal property to or from, or otherwise requiring payments
      to or from any officer or director, or to the knowledge of the Company, any
      entity in which any officer or director has a substantial interest or is an
      officer, director, trustee or partner, in each case in excess of $60,000 other
      than (i) for payment of salary or consulting fees for services rendered, (ii)
      reimbursement for expenses incurred on behalf of the Company and (iii) for
      other
      employee benefits, including stock option agreements under any stock option
      plan
      of the Company.

     

    3.14 Sarbanes-Oxley;
      Internal Accounting Controls.
      Except
      as set forth in the Memorandum, the Company is in compliance with all provisions
      of the Sarbanes-Oxley Act of 2002 which are applicable to it as of the Closing
      Date except where the failure to comply would no be reasonably likely to result
      in a Material Adverse Effect. 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 (or caused to de designed) such disclosure controls
      and
      procedures to ensure that material information relating to the Company was
      made
      known to the certifying officers by others within those entities, during the
      period in which the Company’s most recently filed periodic report under the
      Exchange Act was prepared. The Company’s certifying officers have evaluated the
      effectiveness of the Company’s disclosure controls and procedures as of the end
      covered by the period for the Company’s most recently filed periodic report
      under the Exchange Act (the “Evaluation Date”). The Company disclosed 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 significant changes in the Company’s
      internal controls (as such term is defined in Item 307(b) of Regulation S-K
      under the Exchange Act).

     

    
      
        
        

      

      
        15

        
          

        

      

      
        
        

      

       

    

    3.15 Certain
      Fees.
      Neither
      the Company nor any of its officers has retained any broker, financial advisor
      or consultant, finder, placement agent, investment banker, bank or other Person
      (collectively, “Intermediary”) with respect to the transactions contemplated by
      this Agreement other than the Placement Agent, and the Company shall indemnify
      and hold harmless the Subscribers from any liability for any compensation to
      any
      Intermediary (other than the Placement Agent) engaged by the Company and the
      fees and expenses of defending against said liability or alleged
      liability.

     

    3.16 Private
      Placement.
      Assuming the accuracy of the Purchasers’ representations and warranties set
      forth in Article II and Article VIII hereof, and compliance by the Placement
      Agent with its obligations, (i) no registration under the Securities Act is
      required for the offer and sale of the Securities to be delivered at Closing
      by
      the Company to the Purchasers as contemplated hereby and (ii) the issuance
      and
      sale of the Securities hereunder does not contravene the rules and regulations
      of the AMEX.

     

    3.17 Listing
      Requirements.
      The
      Company’s Common Stock is registered pursuant to Section 12(g) of the Exchange
      Act, and the Company has taken no action designed to, or which to its knowledge
      is likely to have the effect of, terminating the registration of the Common
      Stock under the Exchange Act nor has the Company received any notification
      that
      the Commission is contemplating terminating such registration. Except as set
      forth on Schedule 3.17 hereof, the Company has not, in the 12 months preceding
      the date hereof, received notice from the AMEX to the effect that the Company
      is
      not in compliance with the listing or maintenance requirements of the
      AMEX.

     

    3.18 Reasonably
      Equivalent Value.
      The
      Board of Directors has determined (after internal review and discussions with
      its advisors) that the terms of the Securities offered hereunder represent
      the
      reasonably equivalent value with respect to the sale of the Securities. The
      Transaction Documents and the transactions contemplated thereby were the result
      of arms' length negotiations among the parties.

     

    3.19 Representations
      Complete.
      None of
      the representations or warranties made by the Company in this Agreement (except
      as modified by the Memorandum) and none of the statements made by the Company
      in
      the Memorandum contains any untrue statement of a material fact, or omits to
      state any material fact necessary in order to make the statements contained
      herein or therein, in the light of the circumstances under which made, not
      misleading.

     

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

     

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

     

    
      
        
        

      

      
        16

        
          

        

      

      
        
        

      

       

    

    3.22 Additional
      Company Covenants.
      

     

    (a) The
      Company will use its best efforts to obtain from its officers and directors
      an
      agreement that, for a period of time commencing upon the Closing until the
      earlier to occur of (i) repayment of the amounts due under the Notes and (ii)
      30
      days from the date the Commission declares the Registration Statement effective,
      they will not transfer or sell any of the Company’s securities to any party,
      other than to a spouse, child, grandchild, parent, brother or sister, to a
      trust
      established for the benefit of the same, or to the estate of any of the same
      by
      gift, will or intestate succession, or pursuant to the terms of previously
      granted employee stock options and previously granted outstanding warrants,
      options, and convertible securities.

     

    (b) At
      the
      Closing the Company shall file with the United States Patent and Trademark
      Office a short-form security agreement evidencing the security interest of
      the
      Subscribers and the existing noteholders in the Company’s intellectual property
      as set forth in the Security Agreement

     

    
      	
              IV.

            	
              TERMS
                OF SUBSCRIPTION; CONDITIONS TO OBLIGATIONS OF THE
                COMPANY

            

    

     

    4.1 The
      Company and the Placement Agent reserve the right to reject the subscription
      made hereby in whole or in part in its sole discretion. Unless terminated
      earlier in the Placement Agent’s or the Company’s sole discretion, the Offering
      will expire on the Offering Termination Date.

     

    4.2 All
      funds
      paid hereunder shall be deposited by each such Subscriber in escrow with the
      Escrow Agent prior to the Closing, consistent with the terms of this
      Agreement.

     

    4.3 The
      Subscriber hereby authorizes and directs the Company, upon the Closing, to
      deliver the documents representing the Securities to be issued to the Subscriber
      pursuant to this Agreement at such Closing to the residential or business
      address indicated on the signature page hereto.

     

    4.4 The
      Subscriber hereby authorizes and directs the Company to return, without
      interest, any funds for unaccepted subscriptions to the same account from which
      the funds were drawn, including any customer account maintained with the
      Placement Agent.

     

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

     

    
      
        
        

      

      
        17

        
          

        

      

      
        
        

      

       

    

    (a) In
      addition to the other requirements set forth herein, the Company’s obligation to
      complete the sale and issuance of the Securities and deliver such Securities
      to
      the Subscriber at the Closing shall be subject to the following conditions,
      any
      one or more of which may be waived in writing by the Company: (a) receipt by
      the
      Company of the aggregate principal amount of the Notes being purchased hereunder
      at the Closing (less the cash placement fee due to the Placement Agent as
      provided in the Placement Agent Agreement); (b) the representations, warranties,
      and acknowledgements made by the Subscribers in this Agreement shall be true
      and
      correct when made and shall be true and correct on and as of the Closing, and
      all undertakings, agreements and covenants of the Subscribers required to be
      fulfilled prior to the Closing shall have been performed or complied with;
      (c)
      the Subscriber shall have completed, executed and delivered to the Company
      the
      Confidential Subscriber Questionnaire set forth in Article VIII of this
      Agreement, which Questionnaire shall be true and correct as of the Closing
      and
      shall be satisfactory to the Placement Agent and the Company, each in their
      sole
      discretion; (d) there shall not then be in effect any legal or other order
      enjoining or restraining the transactions contemplated by this Agreement; (e)
      the sale of the Securities shall not be prohibited by any applicable law,
      regulation or governmental order; (f) the Company shall have filed the required
      notice with AMEX with respect to the listing of the Warrant Shares and the
      Placement Warrants, (g) each of S. Kumar Chandrasekaran and the Collateral
      Agent
      shall have entered into the Security Agreement, the form of which is attached
      hereto as Exhibit
      C
      (the
“Security Agreement”) and (e) each of S. Kumar Chandrasekaran, the Collateral
      Agent and the Subscribers shall have entered into the Intercreditor and
      Collateral Agency Agreement, the form of which is attached hereto as
Exhibit
      E
      (the
“Intercreditor Agreement”).

     

    
      	
              V.

            	
              CONDITIONS
                TO OBLIGATIONS OF THE SUBSCRIBERS

            

    

     

    5.1 Each
      Subscriber’s obligations to purchase the Securities at the Closing is subject to
      the fulfillment on or prior to the Closing of the following conditions, which
      conditions may be waived at the option of each Subscriber to the extent
      permitted by law:

     

    (a) Representations
      and Warranties Correct; Survival.
      The
      representations and warranties made by the Company in Article III hereof shall
      be true and correct in all material respects when made (except for such
      representations and warranties that are qualified by their terms by a reference
      to materiality, which representations and warranties as so qualified shall
      be
      true and correct in all respects and for any representation or warranty that
      speaks as of a specific date, which shall be true and correct in all material
      respects as of such date), and shall be true and correct in all material
      respects on the Closing Date with the same force and effect as if they had
      been
      made on and as of said date (except for any representation or warranty that
      speaks as of a specific date, which shall be true and correct in all material
      respects as of such date). The representations and warranties made by the
      Company in Article III hereof shall survive until the first anniversary of
      the
      Closing Date.

     

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

     

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

     

    
      
        
        

      

      
        18

        
          

        

      

      
        
        

      

       

    

    (d) No
      Law
      Prohibiting or Restricting Such Sale.
      There
      shall not be in effect any law, rule or regulation prohibiting or restricting
      such sale or requiring any consent or approval of any person which shall not
      have been obtained to issue the Securities (except as otherwise provided in
      this
      Agreement). The Company shall have filed the required notice with AMEX with
      respect to the listing of the Warrant Shares.

     

    (e) Security
      Agreement.
      Each of
      the Company, S. Kumar Chandrasekaran and the Collateral Agent shall have
      executed and delivered the Security Agreement.

     

    (f) Intercreditor
      Agreement.
      Each of
      S. Kumar Chandrasekaran, the Collateral Agent and the Subscribers shall have
      executed and delivered the Intercreditor Agreement.

     

    (g) Legal
      Opinion.
      Counsel
      for the Company, O’Melveny & Myers LLP shall have furnished to a
      representative of the Placement Agent and the Subscribers, an opinion, dated
      as
      of the Closing Date, in the form provided in the Placement Agent
      Agreement.

     

    
      	
              VI.

            	
              REGISTRATION
                RIGHTS

            

    

     

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

     

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

     

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

     

    (c) “Holders”
      shall mean the Subscribers, the Placement Agent and any person holding
      Registrable Securities or any person to whom the rights under Article VI have
      been transferred in accordance with Section 6.9 hereof.

     

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

     

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

     

    
      
        
        

      

      
        19

        
          

        

      

      
        
        

      

       

    

    (f) “Registrable
      Securities” shall mean the Common Stock issuable upon exercise of the Warrants,
      and the Common Stock issuable upon exercise of the Placement Warrants;
provided,
      however,
      that
      securities shall only be treated as Registrable Securities if and only for
      so
      long as they (A) have not been disposed of pursuant to a registration statement
      declared effective by the Commission; (B) have not been sold in a transaction
      exempt from the registration and prospectus delivery requirements of the
      Securities Act so that all transfer restrictions and restrictive legends with
      respect thereto are removed upon the consummation of such sale; (C) are held
      by
      a Holder or a permitted transferee pursuant to Section 6.9; or (D) have not
      become eligible for sale pursuant to Rule 144(k) (or any successor thereto)
      under the Securities Act.

     

    (g) “Registration
      Expenses” shall mean all expenses incurred by the Company in complying with
      Section 6.2 hereof, including, without limitation, all registration,
      qualification and filing fees, printing expenses, escrow fees, fees and expenses
      of counsel for the Company, blue sky fees and expenses and the expense of any
      special audits incident to or required by any such registration, and the
      reasonable fees and expenses of one legal counsel for all Holders in connection
      with the Registration Statement, not to exceed $3,000.

     

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

     

    6.2 Subject
      to the terms herein, the Company will, as soon as practicable following the
      Closing Date but not later than 30 days following the Final Closing Date (the
      “Filing Date”), (a) subject to receipt of necessary information from, and
      reasonable cooperation by, the Holders, file a registration statement with
      the
      SEC (the “Registration Statement”) on the appropriate form to allow the resale
      of the Registrable Securities, and use its best efforts, subject to receipt
      of
      necessary information from, and reasonable cooperation by, the Holders, to
      have
      such Registration Statement declared effective by the SEC prior to the date
      which is 120 days after the Final Closing Date; and (b) subject to Section
      6.7
      hereof, cause such Registration Statement to remain effective (the “Registration
      Period”) until the earlier of (i) the second anniversary of the Final Closing
      Date, (ii) such date as all Registrable Securities have been sold (A) pursuant
      to the Registration Statement; (B) to or through a broker, dealer or underwriter
      in a public distribution or a public securities transaction; and/or (C) in
      a
      transaction exempt from the registration and prospectus delivery requirements
      of
      the Securities Act under Section 4(l) thereof so that all transfer restrictions
      and restrictive legends with respect thereto, if any, are removed upon the
      consummation of such sale and (iii) at such time that such Registrable
      Securities have become eligible for sale pursuant to Rule 144(k) (or any
      successor thereto) under the Securities Act. Thereafter, the Company shall
      be
      entitled to withdraw the Registration Statement and the Holders shall have
      no
      further right to offer or sell any of the Securities pursuant to the
      Registration Statement. To the extent permissible, such Registration Statement
      also shall cover, to the extent allowable under the Securities Act and the
      rules
      promulgated thereunder (including Rule 416 under the Securities Act), such
      indeterminate number of additional shares of Common Stock resulting from stock
      splits, stock dividends or similar transactions with respect to the Registrable
      Securities.

     

    
      
        
        

      

      
        20

        
          

        

      

      
        
        

      

       

    

    6.3 All
      Registration Expenses incurred in connection with any registration,
      qualification, exemption or compliance pursuant to Section 6.2 shall be borne
      by
      the Company. All Selling Expenses relating to the sale of securities registered
      by or on behalf of Holders shall be borne by such Holders.

     

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

     

    (a) subject
      to Section 6.7 hereof, use its best efforts to keep such registration, and
      any
      qualification, exemption or compliance under state or federal securities laws
      which the Company determines to obtain, continuously effective until the
      termination of the Registration Period; and

     

    (b) advise
      the Holders as soon as practicable:

     

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

     

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

     

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

     

    (iv) of
      the
      happening of any event that requires the making of any changes in the
      Registration Statement or the prospectus so that, as of such date, the
      statements therein are not misleading and do not omit to state a material fact
      required to be stated therein or necessary to make the statements therein (in
      the case of the prospectus, in the light of the circumstances under which they
      were made) not misleading;

     

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

     

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

     

    
      
        
        

      

      
        21

        
          

        

      

      
        
        

      

       

    

    (e) during
      the Registration Period, deliver to each Holder, without charge, as many copies
      of the prospectus included in such Registration Statement and any amendment
      or
      supplement thereto as such Holder may reasonably request in writing in order
      to
      facilitate the public sale or other disposition of all or any of the Securities
      by Holder; and the Company consents to the use, consistent with the provisions
      hereof and applicable laws, rules or regulations, of the prospectus or any
      amendment or supplement thereto by each of the selling Holders of Registrable
      Securities in connection with the offering and sale of the Registrable
      Securities covered by the prospectus or any amendment or supplement thereto.
      In
      addition, upon the reasonable request of the Holder and subject in all cases
      to
      confidentiality protections reasonably acceptable to the Company, the Company
      will meet with a Holder or a representative thereof at the Company’s
      headquarters to discuss all information relevant for disclosure in the
      Registration Statement covering the Registrable Securities, and will otherwise
      cooperate with any Holder conducting an investigation for the purpose of
      reducing or eliminating such Holder’s exposure to liability under the Securities
      Act, including the reasonable production of information at the Company’s
      headquarters;

     

    (f) prior
      to
      any public offering of Registrable Securities pursuant to any registration
      statement, register or qualify or obtain an exemption for offer and sale under
      the securities or blue sky laws of such jurisdictions as any such Holders
      reasonably request in writing and do any and all other reasonable acts or things
      reasonably necessary or advisable to enable the offer and sale in such
      jurisdictions of the Registrable Securities covered by such Registration
      Statement, provided, however, that the Company shall not for any such purpose
      be
      required to (i) qualify to transact business as a foreign corporation in any
      jurisdiction where it is not so qualified; (ii) consent to general service
      of
      process in any such jurisdiction; (iii) subject itself to taxation in any such
      jurisdiction; (iv) provide any undertakings that cause material expense or
      burden to the Company; or (v) make any change to its organizational documents
      which the Board of Directors of the Company determines to be contrary to the
      best interests of the Company and its stockholders;

     

    (g) cooperate
      with the Holders to facilitate the timely preparation and delivery of
      certificates representing Registrable Securities to be sold pursuant to any
      Registration Statement free of any restrictive legends to the extent not
      required at such time and in such denominations and registered in such names
      as
      Holders may request at least five (5) business days prior to sales of
      Registrable Securities pursuant to such Registration Statement, subject to
      the
      submission by Holder to the Company’s transfer agent of the original
      certificate(s) representing the Registrable Securities to be sold and a separate
      Subscriber’s Certificate of Subsequent Sale duly executed by Subscriber and all
      other documentation reasonably required by the Company and the Company’s
      transfer agent (all of which must be provided to the Company a reasonable period
      of time prior to the date such Holder intends to sell such Registrable
      Securities);

     

    (h) subject
      to Section 6.7 hereof, upon the occurrence of any event contemplated by Section
      6.4(b)(iv) above, the Company shall promptly prepare a post-effective amendment
      to the Registration Statement or a supplement to the related prospectus, or
      file
      any other required document so that, as thereafter promptly delivered to
      purchasers of the Registrable Securities included therein, the prospectus will
      not include any untrue statement of a material fact or omit to state any
      material fact necessary to make the statements therein, in the light of the
      circumstances under which they were made, not misleading; and

     

    
      
        
        

      

      
        22

        
          

        

      

      
        
        

      

       

    

    (i) use
      its
      reasonable best efforts to comply with all applicable rules and regulations
      of
      the Commission, and use its reasonable best efforts to make generally available
      to the Holders (which may be satisfied upon filing via EDGAR) not later than
      45
      days (or 90 days if the fiscal quarter is the fourth fiscal quarter) after
      the
      end of its fiscal quarter in which the first anniversary date of the effective
      date of the Registration Statement occurs, an earnings statement satisfying
      the
      provisions of Section 11(a) of the Securities Act.

     

    Notwithstanding
      the foregoing, it shall be a condition precedent to the obligations of the
      Company to take any action pursuant to paragraphs (a) through (i) of this
      Section 6.4, that the Subscriber shall furnish to the Company such information
      regarding itself, the Securities to be sold by the Subscriber, and the intended
      method of disposition of such Securities as shall be required to effect the
      registration of the Securities, all of which information shall be furnished
      to
      the Company in writing specifically for use in the Registration
      Statement.

     

    6.5 The
      Holders shall have no right to take any action to restrain, enjoin or otherwise
      delay any registration pursuant to Section 6.2 hereof as a result of any
      controversy that may arise with respect to the interpretation or implementation
      of this Agreement.

     

    6.6 iii) To
      the
      extent permitted by law, the Company shall indemnify each Holder and Affiliate
      of each Holder, with respect to which any registration, qualification or
      compliance has been effected pursuant to this Agreement, against all claims,
      losses, damages and liabilities (or action in respect thereof), including any
      of
      the foregoing incurred in settlement of any litigation, commenced or threatened
      (subject to Section 6.6(c) below), arising out of or based on any untrue
      statement (or alleged untrue statement) of a material fact contained in the
      Registration Statement, or any amendment or supplement thereof, incident to
      any
      such registration, qualification or compliance, or based on any omission (or
      alleged omission) to state therein a material fact required to be stated therein
      or necessary to make the statements therein not misleading, in light of the
      circumstances in which they were made, and will reimburse each Holder and each
      person controlling such Holder, for reasonable legal and other expenses
      reasonably incurred by such Holder or person controlling such Holder in
      connection with investigating or defending any such claim, loss, damage,
      liability or action as incurred; provided that the Company will not be liable
      in
      any such case to the extent that any such claim, loss, damage, liability or
      action arises out of, relates to or is based upon (i) an untrue statement or
      omission made in reliance upon and in conformity with written information
      furnished to the Company by or on behalf of such Holder or person controlling
      such Holder and stated to be specifically for use in preparation of such
      registration statement, prospectus or any supplement or amendment thereto,
      or
      (ii) the failure of the Holder to comply with the covenants and agreements
      contained in this Agreement respecting sales of Registrable
      Securities.

     

    (b) Each
      Holder will severally, if Registrable Securities held by such Holder are
      included in the securities as to which such registration, qualification or
      compliance is being effected, indemnify the Company, each of its directors,
      officers and Agents and each Affiliate of the foregoing, against all claims,
      losses, damages, liabilities and expenses (or actions in respect thereof),
      including any of the foregoing incurred in settlement of any litigation,
      commenced or threatened (subject to Section 6.6(c) below), arising out of or
      based on any untrue statement of a material fact contained in any registration
      statement, prospectus, or any amendment or supplement thereof, incident to
      any
      such registration, qualification or compliance, or based on any omission to
      state therein a material fact required to be stated therein or necessary to
      make
      the statements therein not misleading, in light of the circumstances in which
      they were made, in each case to the extent, but only to the extent, that such
      untrue statement or omission thereof is made in reliance upon and in conformity
      with written information furnished to the Company by or on behalf of the Holder
      and stated to be specifically for use in preparation of such registration
      statement, prospectus or any amendment or supplement thereto or is due to the
      failure of the Holder to comply with the covenants and agreements contained
      in
      the Agreement with respect to the sale of Registrable Securities, and the Holder
      will reimburse the Company, its directors and officers, and each person
      controlling the Company for reasonable legal and any other expenses reasonably
      incurred in connection with investigating, defending, settling, compromising
      or
      paying any such claim, loss, damage, liability, expense or action as incurred.
      Notwithstanding the foregoing, in no event shall a Holder be liable for any
      such
      claims, losses, damages or liabilities in excess of the net proceeds received
      by
      such Holder in the Offering, except in the event of fraud or intentional
      misrepresentation by such Holder.

     

    
      
        
        

      

      
        23

        
          

        

      

      
        
        

      

       

    

    (c) Each
      party entitled to indemnification under this Section 6.6 (the “Indemnified
      Party”) shall give notice to the party required to provide indemnification (the
“Indemnifying Party”) promptly after such Indemnified Party has actual knowledge
      of any claim as to which indemnity may be sought, provided that the failure
      of
      any Indemnified Party to give notice as provided herein shall not relieve the
      Indemnifying Party of its obligations under this Agreement, unless such failure
      is materially prejudicial to the Indemnifying Party in defending such claim
      or
      litigation. Subject to provisions hereinafter stated, in case any such action
      is
      brought against any Indemnified Party and such Indemnified Party seeks or
      intends to seek indemnity from an Indemnifying Party, the Indemnifying Party
      will be entitled to participate in, and, to the extent that it may wish, jointly
      with all other indemnifying parties similarly notified, to assume the defense
      thereof with counsel reasonably satisfactory to such Indemnified Party;
      provided, however, if the defendants in any such action include both the
      Indemnified Party and the Indemnifying Party, and the Indemnifying Party and
      the
      Indemnified Party, based upon the advice of such Indemnified Party’s counsel,
      shall have reasonably concluded that there may be a conflict of interest between
      the positions of the Indemnifying Party and the Indemnified Party in conducting
      the defense of any such action or that there may be legal defenses available
      to
      it and/or other indemnified parties which are different from or additional
      to
      those available to the Indemnifying Party, the Indemnified Party or parties
      shall have the right to select separate counsel to assume such legal defenses
      and to otherwise participate in the defense of such action on behalf of such
      Indemnified Party or parties. Upon receipt of notice from the Indemnifying
      Party
      to such Indemnified Party of its election so to assume the defense of such
      action and approval by the Indemnified Party of counsel, the Indemnifying Party
      will not be liable to such Indemnified Party under this Section 6.6 for any
      legal or other expenses subsequently incurred by such Indemnified Party in
      connection with the defense thereof unless (i) the Indemnified Party shall
      have
      employed such counsel in connection with the assumption of legal defenses in
      accordance with the proviso to the preceding sentence (it being understood,
      however, that the Indemnifying Party shall not be liable for the expenses of
      more than one separate counsel, approved by such Indemnifying Party representing
      the Indemnified Parties who are parties to such action, or (ii) the Indemnifying
      Party shall not have employed counsel reasonably satisfactory to the Indemnified
      Party to represent the Indemnified Party within a reasonable time after notice
      of commencement of action, in each of which cases the reasonable fees and
      expenses of counsel shall be at the expense of the Indemnifying Party. In no
      event shall any Indemnifying Party be liable in respect of any amounts paid
      in
      settlement of any action unless the Indemnifying Party shall have approved
      the
      terms of such settlement; provided that such approval shall not be unreasonably
      withheld.

     

    
      
        
        

      

      
        24

        
          

        

      

      
        
        

      

       

    

    (d) If
      the
      indemnification provided for in this Section 6.6 is held by a court of competent
      jurisdiction to be unavailable to an Indemnified Party with respect to any
      loss,
      liability, claim, damage or expense referred to therein (other than due to
      the
      exemptions to indemnity set forth in Section 6.6(a) above), then the
      Indemnifying Party, in lieu of indemnifying such Indemnified Party thereunder,
      shall contribute to the amount paid or payable by such Indemnified Party as
      a
      result of such loss, liability, claim, damage or expense in such proportion
      as
      is appropriate to reflect the relative fault of the Indemnifying Party on the
      one hand and of the Indemnified Party on the other in connection with the
      statements or omissions or inaccuracies in the representations and warranties
      in
      this Agreement which resulted in such loss, liability, claim, damage or expense
      as well as any other relevant equitable considerations. The relative fault
      of
      the Indemnifying Party and of the Indemnified Party shall be determined by
      reference to, among other things, whether the untrue or alleged untrue statement
      of a material fact or the omission to state a material fact or the inaccurate
      representation and/or warranty relates to information supplied by the
      Indemnifying Party or by the Indemnified Party and the parties’ relative intent,
      knowledge, access to information and opportunity to correct or prevent such
      statement or omission. Notwithstanding the foregoing, in no event shall a Holder
      be liable for any such claims, losses, damages or liabilities pursuant to this
      paragraph 6.6(b) in excess of the net proceeds received by such Holder in the
      Offering, except in the event of fraud or intentional misrepresentation by
      such
      Holder.

     

    6.7 iv) Notwithstanding
      any other provision of this Agreement, each Holder agrees that, upon receipt
      of
      any notice from the Company of the happening of any event requiring the
      preparation of a supplement or amendment to a prospectus relating to Registrable
      Securities or the filing of an appropriate report with the SEC pursuant to
      the
      Exchange Act, so that, as thereafter delivered to the Holders, such prospectus
      shall not contain an untrue statement of a material fact or omit to state any
      material fact required to be stated therein or necessary to make the statements
      therein not misleading, each Holder will forthwith discontinue disposition
      of
      Registrable Securities pursuant to the registration statement contemplated
      by
      Section 6.2 until its receipt of copies of the supplemented or amended
      prospectus from the Company or confirmation of the filing of such report with
      the SEC by the Company, any such prospectus to be forwarded promptly to the
      Subscriber by the Company, and, if so directed by the Company, each Holder
      shall
      deliver to the Company all copies, other than permanent file copies then in
      such
      Holder’s possession, of the prospectus covering such Registrable Securities
      current at the time of receipt of such notice.

     

    (b) Notwithstanding
      any other provision of this Agreement, each Holder shall suspend, upon request
      of the Company, any disposition of Registrable Securities pursuant to the
      Registration Statement and prospectus contemplated by Section 6.2 during any
      periods not to exceed 90 days in the aggregate within any one 12 month period
      when the Company reasonably determines in good faith that offers and sales
      pursuant thereto should not be made by reason of the presence of material
      undisclosed circumstances or developments with respect to which the disclosure
      that would be required in such a prospectus is premature, would have an adverse
      effect on the Company or is otherwise inadvisable.

     

    
      
        
        

      

      
        25

        
          

        

      

      
        
        

      

       

    

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

     

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

     

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

     

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

     

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

     

    6.8 With
      a
      view to making available to the Holders the benefits of certain rules and
      regulations of the Commission which at any time permit the sale of the
      Registrable Securities to the public without registration, the Company shall
      use
      its reasonable best efforts to:

     

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

     

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

     

    
      
        
        

      

      
        26

        
          

        

      

      
        
        

      

       

    

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

     

    6.9 The
      rights to cause the Company to register Registrable Securities granted to the
      Holders by the Company under Section 6.2 may be assigned in full by a Holder
      in
      connection with a transfer by such Holder of its Registrable Securities, but
      only if: (i) such transfer may otherwise be effected in accordance with
      applicable securities laws; (ii) such Holder gives prior written notice of
      the
      proposed transfer to the Company including the name and address of such
      transferee and a copy of the transfer documents and agreements; (iii) such
      transferee agrees in writing with the Company to be bound by and to comply
      with
      the terms and provisions of this Agreement; (iv) the transferee is an
“accredited investor” as that term is defined in Rule 501 of Regulation D; and
      (v) such transfer is otherwise in compliance with this Agreement. Except as
      specifically permitted by this Section 6.9, the rights of a Holder with respect
      to Registrable Securities as set forth herein shall not be transferable to
      any
      other person, the Company may impose stop transfer orders with respect to any
      such transfer or attempted transfer, and any such transfer or attempted transfer
      shall be null and void.

     

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

     

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

     

    
      	
              VII.

            	
              MISCELLANEOUS

            

    

     

    7.1 Any
      notice or other communication given hereunder shall be deemed sufficient if
      in
      writing and sent by facsimile, with confirmation, by registered or certified
      mail, return receipt requested, or delivered by hand against written receipt
      therefore or sent by nationally recognized overnight express courier postage
      prepaid, if to the Company: addressed to InSite Vision Incorporated, 965
      Atlantic Avenue, Alameda, California 94501, Attn: Chief Financial Officer,
      Fax:
      (510) 865-5700 and if to the Subscriber, at the Subscriber’s address or
      facsimile number indicated on the signature page of this Agreement. Notices
      shall be deemed to have been given or delivered in the case of facsimile, upon
      receipt of confirmation of transmission by the sender, registered or certified
      mail, three days after so mailed, in the case of hand delivery, when so
      delivered against written receipt therefore, and in the case of overnight
      express courier, the day after mailing, except notices of change of address,
      which shall be deemed to have been given or delivered when
      received.

     

    
      
        
        

      

      
        27

        
          

        

      

      
        
        

      

       

    

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

     

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

     

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

     

    7.5 NOTWITHSTANDING
      THE PLACE WHERE THIS AGREEMENT MAY BE EXECUTED BY ANY OF THE PARTIES HERETO,
      THE
      PARTIES EXPRESSLY AGREE THAT ALL THE TERMS AND PROVISIONS HEREOF SHALL BE
      CONSTRUED IN ACCORDANCE WITH AND GOVERNED BY THE LAWS OF THE STATE OF NEW YORK
      WITHOUT REGARD TO PRINCIPLES OF CONFLICTS OF LAW. IN THE EVENT THAT A JUDICIAL
      PROCEEDING IS NECESSARY, THE EXCLUSIVE FORUMS FOR RESOLVING DISPUTES ARISING
      OUT
      OF OR RELATING TO THIS AGREEMENT ARE EITHER THE SUPREME COURT OF THE STATE
      OF
      NEW YORK IN AND FOR THE COUNTY OF NEW YORK OR THE FEDERAL COURTS FOR SUCH STATE
      AND COUNTY, AND ALL RELATED APPELLATE COURTS, THE PARTIES HEREBY IRREVOCABLY
      CONSENT TO THE JURISDICTION OF SUCH COURTS AND AGREE TO SAID VENUE.

     

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

     

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

     

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

     

    
      
        
        

      

      
        28

        
          

        

      

      
        
        

      

       

    

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

     

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

     

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

     

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

     

    7.12 Nothing
      in this Agreement shall create or be deemed to create any rights in any person
      or entity not a party to this Agreement, except for the holders of Registrable
      Securities.

     

    7.13 The
      Company acknowledges and agrees that irreparable damage would occur in the
      event
      that any of the provisions of Article VI of this Agreement were not performed
      in
      accordance with its specific terms or were otherwise breached and that such
      damage would not be compensable in money damages and that it would be extremely
      difficult or impracticable to measure the resultant damages. Accordingly, except
      as otherwise specifically set forth herein, any Subscriber shall be entitled
      to
      an injunction or injunctions with respect to the provisions of this Agreement
      and to enforce specifically the terms and provisions hereof, in addition to
      any
      other remedy to which it may be entitled at law or in equity, and the Company
      expressly waives any defense that a remedy in damages would be adequate and
      expressly waives any requirement in an action for specific performance for
      the
      posting of a bond by the Subscriber bringing such action.

     

    

     

    [REMAINDER
      OF PAGE INTENTIONALLY LEFT BLANK]

     

    
      
        
        

      

      
        29

        
          

        

      

      
        
        

      

    

    

     

    
      	
              VIII.

            	
              CONFIDENTIAL
                SUBSCRIBER QUESTIONNAIRE

            

    

     

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

     

    

      
        	
                Category
                  A ___

                 

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

                 

              

      

       

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

       

      
        	
                Category
                  B ___

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

                 

              
	 	 
	
                Category
                  C ___

                 

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

                 

              
	 	 
	
                Category
                  D ___

                 

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

                 

              
	 	 
	 	 
	 	 

      

       

      
        
          
          

        

        
          30

          
            

          

        

        
          
          

        

      

       

      
        	
                Category
                  E ___

                 

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

                 

              
	 	 
	 	 
	 	 
	
                Category
                  F ___

                 

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

                 

              
	 	 
	 	 
	 	 
	
                Category
                  G ___

                 

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

                 

              
	 	 
	
                Category
                  H ___

                 

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

                 

              
	 	 
	 	 
	
                Category
                  I ____

                 

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

                 

              

      

       

    

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

     

    Part
      II
 SUITABILITY
      (please
      answer each question)

     

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

     

      
        
          

        

        
          

        

        
          

        

        

      

    

     

    
      
        
        

      

      
        31

        
          

        

      

      
        
        

      

       

    

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

     

    
      
        

        
          

          
            

          

           

        

      

    

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

     

    YES_______   NO_______

     

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

     

    
      
        	 	
                Public
                  Companies

                 

              	
                Private
                  Companies

                 

              	
                Public
                  or Private Pharmaceutical Companies

                 

              
	
                Frequently

              	
                _________

              	
                __________

              	
                _________

              
	
                Occasionally

              	
                _________

              	
                __________

              	
                _________

              
	
                Never

                 

              	
                _________

                 

              	
                _________

                 

              	
                __________

                 

              

      

    

     

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

     

    YES_______   NO_______

     

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

     

    YES_______   NO_______

     

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

     

    YES_______   NO_______

     

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

     

    YES_______   NO_______

     

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

     

    YES_______   NO_______

     

    
      
        
        

      

      
        32

        
          

        

      

      
        
        

      

       

    

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

     

    YES_______   NO_______

     

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

     

    (a) Individual
      Ownership

    (b) Community
      Property

    (c) Joint
      Tenant with Right of

    Survivorship
      (both parties

    must
      sign)

    (d) Partnership*

    (e) Tenants
      in Common

    (f) Company*

    (g) Trust*

    (h) Other

     

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

     

    Part
      IV  NASD
      AFFILIATION.

     

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

     

    Yes
      _________  No
      __________

     

    If
      Yes,
      please describe:

     

    _________________________________________________________

    _________________________________________________________

    _________________________________________________________

     

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

     

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

     

    _________________________________

     

    Name
      of
      NASD Member Firm

     

    By:
      ______________________________

     

    Authorized
      Officer

     

    Date:
      ____________________________

     

    

    
      
        
        

      

      
        33

        
          

        

      

      
        
        

      

    

     

    Part
      V
REGISTRATION
      QUESTIONNAIRE

     

    The
      following questions in this Part V are specifically intended to provide
      information to the Company for the Company's use in the preparation of the
      Registration Statement contemplated by the Subscription Agreement and for
      specific inclusion in such Registration Statement.

     

    PLEASE
      ANSWER EVERY QUESTION BELOW. If a question is inapplicable to you or your answer
      is in the negative, please so state by inserting “N/A.” If you are in doubt
      whether a particular question requires an affirmative response from you, please
      furnish full particulars so that those persons responsible for preparing the
      Registration Statement contemplated by the Subscription Agreement can determine
      whether any disclosure based on your answer is required. Information requested
      in this questionnaire is as of the date you complete the questionnaire, unless
      otherwise indicated. Your furnishing such information does not necessarily
      mean
      that such information will be disclosed, although it may be disclosed.
You
      are required to promptly provide the Company with any update to the information
      if such information changes after the date hereof.

     

    DEFINITIONS

     

    Your
      answers to this questionnaire should be made upon the basis of the following
      definitions of terms used in this questionnaire:

     

    The
      term
“beneficial
      owner”
of
      a
      security includes any person who, directly or indirectly, through any contract,
      arrangement, understanding, relationship or otherwise has or shares (1) voting
      power, which includes the power to vote, or direct the voting of, such security
      or (2) investment power, which includes the power to dispose or direct the
      disposition of such security. A person may be regarded as having voting power
      of
      a security which is owned (i) by his spouse or minor children or by any of
      his
      relatives or his spouse’s relatives who share the same home with him, (ii) a
      partnership of which he is a partner or (iii) a corporation of which he is
      a
      substantial stockholder. A person is also deemed to be the beneficial owner
      of
      shares which that person has the right to acquire within 60 days, including
      but
      not limited to any right to acquire through the exercise of an option, through
      conversion of a security, pursuant to the power to revoke a trust or pursuant
      to
      the automatic termination of a trust. Please also disclose any other rights
      which you have to acquire securities of the Company on or before July 31,
      2006.

     

    The
      term
“material,”
when
      used to qualify a requirement for the furnishing of information as to any
      subject, limits the information required to those matters about which the
      average prudent investor should reasonably be informed before buying or selling
      the securities of the Company. If you are in doubt as to the materiality of
      certain information, you should relate sufficient facts to enable the Company
      and its advisors to reach a conclusion as to its materiality.

     

    
      
        
        

      

      
        34

        
          

        

      

      
        
        

      

    

     

    QUESTIONS

     

    QUESTION
      1:

     

    State
      your present position or positions with the Company (if any), including
      membership on any audit, personnel, compensation or similar committee or
      committees; any positions held by you during the previous three years; and
      any
      positions to which you have been elected or appointed but the duties of which
      you have not yet assumed. For each position, list the term or expected term
      of
      office.

     

    ANSWER:

     

    QUESTION
      2:

     

    Other
      than Securities that you will acquire in connection with the
      Offering,
      provide
      below information regarding the equity securities of the Company of which you
      are the “beneficial owner.” Please
      refer to the definition of “beneficial owner,” above.
      Under
      the column “Nature of Ownership,” please indicate amounts of securities for
      which you have (a) sole voting power, (b) shared voting power, (c) sole
      investment power, or (d) shared investment power. If your response covers any
      securities included because you have the right to acquire them on or before
      July
      31, 2006, please separately indicate the amount of such securities. Also, if
      you
      hold more than 5% of the Company’s securities pursuant to a voting trust or
      similar agreement, please separately state the amount of such securities held
      or
      to be held pursuant to the trust or agreement, the duration of the agreement
      and
      the names and addresses of the voting trustees, outlining briefly their voting
      rights and other powers under the trust or agreement.

     

    ANSWER
      (attach additional pages if necessary):

     

    Number
      of  Nature
      of

    Securities  Ownership   Title
      of Securities

     

    

     

    

     

    QUESTION
      3:

     

    If
      you
      plan to offer your shares of Common Stock through the selling efforts of brokers
      or dealers, describe the terms (and attach copies) of any agreement,
      arrangement, or understanding entered into with broker(s) or dealer(s),
      including volume limitations on sales, parties to the agreement and the
      conditions under which the agreement may be terminated. If known, identify
      the
      broker(s) or dealer(s), which will participate in the offering and state the
      amount to be offered through each.

     

    ANSWER:

     

    
      
        
        

      

      
        35

        
          

        

      

      
        
        

      

       

    

    QUESTION
      4:

     

    Describe
      below any information known to you, and if none state “none,” pertaining to
      underwriting compensation and arrangements or any dealings between any
      underwriter or related person, member of the NASD or a person associated with
      a
      member of the NASD, and the Company or any controlling stockholder thereof
      since
      January 1, 2002.

     

    ANSWER:

     

    QUESTION
      5:

     

    State
      below whether you or any of your associates are a member of NASD, a controlling
      stockholder of a member, a person associated or affiliated with a member or
      an
      underwriter or related person with respect to the proposed offering. If you
      responded “yes,” describe such relationship:

     

    ANSWER:

     

    QUESTION
      6:

     

    Are
      you a
      broker-dealer?

     

    ANSWER:

     

    Yes
      ______ No______

     

    QUESTION
      7:

     

    If
      you
      are not a broker-dealer, are you affiliated with a broker-dealer?

     

    ANSWER:

     

    Yes
      ______ No______

     

    QUESTION
      8:

     

    If
      you
      are affiliated with a broker-dealer, did you purchase the securities in the
      ordinary course of business?

     

    ANSWER:

     

    Yes
      ______ No______

     

    
      
        
        

      

      
        36

        
          

        

      

      
        
        

      

    

     

    QUESTION
      9:

     

    If
      you
      are affiliated with a broker-dealer, did you have any agreements or
      understandings, directly or indirectly, with any person to distribute the
      securities at the time that you purchased the securities?

     

    ANSWER:

     

    Yes
      ______ No______

     

    Please
      note that the Commission takes the position that if you are a broker-dealer,
      you
      are to be identified in the Registration Statement as an underwriter. In the
      “Plan of Distribution,” the Registration Statement will provide substantially as
      follows:

     

    “The
      selling stockholders and any broker-dealers, agents or underwriters that
      participate with the selling stockholders in the distribution of the issued
      and
      outstanding shares of common stock or the shares of stock issuable upon exercise
      of warrants may be deemed to be "underwriters" within the meaning of the
      Securities Act, in which event any commissions received by these broker-dealers,
      agents or underwriters and any profits realized by the selling stockholders
      on
      the resales of the securities may be deemed to be underwriting commissions
      or
      discounts under the Securities Act. If the selling stockholders are deemed
      to be
      underwriters, the selling stockholders may be subject to certain statutory
      and
      regulatory liabilities, including liabilities imposed pursuant to Sections
      11,
      12 and 17 of the Securities Act and Rule 10b-5 under the Exchange
      Act.”

     

    QUESTION
      10:

     

    Are
      their
      specific individuals who have voting or investment control over the
      securities?

     

    ANSWER:

     

    Yes
      ______ No______

     

    If
      you
      answered “yes”, please list the names of such individuals:

     

    
      

    

     

    
      
        

      

       

    

    The
      answers to the foregoing questions are true and correct to the best of the
      undersigned’s knowledge, information and belief. The undersigned agrees to
      promptly notify the Company in writing in care of Chief Financial Officer,
      InSite Vision Incorporated, 965 Atlantic Avenue, Alameda, California 94501
      of
      (a) any transfer by you of your Securities, (b) sales of common stock of the
      Company (giving the number of shares sold and the name of the broker-dealer
      used) and (c) any other changes in the answers to this questionnaire that should
      be made as a result of any material development occurring subsequent to the
      date
      hereof.

     

    
      
        
        

      

      
        37

        
          

        

      

      
        
        

      

       

    

    Dated:
      December 30, 2005.

     

    ____________________________________

    Signature

     

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

     

    [REMAINDER
      OF PAGE INTENTIONALLY LEFT BLANK]

    [SIGNATURE
      PAGE TO FOLLOW]

     

    

    
      
        
        

      

      
        38

        
          

        

      

      
        
        

      

    

     

    [Signature
      Page]

     

    
      	
              $____________

              Closing
                Amount
                (Aggregate Principal Amount of Notes Purchased) 

            
	 	 
	
              _____________
                (Number of Warrants Granted) 

            
	 	 
	
              _____________________

              Signature
                of Subscriber

            	
              ________________________________

              Signature
                of Subscriber (if purchasing jointly)

            
	 	 
	
              _____________________

              Name
                Typed or Printed

            	
              ________________________________

              Name
                Typed or Printed

            
	 	 
	
              _____________________

              Entity
                Name

            	
              ________________________________

              Entity
                Name

            
	 	 
	
              _____________________

              Title

            	
              ________________________________

              Title

            
	 	 
	
              _____________________

              Address

            	
              ________________________________

              Address

            
	 	 
	
              _____________________

              City,
                State and Zip Code

            	
              ________________________________

              City,
                State and Zip Code

            
	 	 
	
              _____________________

              Telephone-Business

            	
              ________________________________

              Telephone--Business

            
	 	 
	
              _____________________

              Telephone-Residence

            	
              ________________________________

              Telephone--Residence

            
	 	 
	
              _____________________

              Facsimile-Business

            	
              ________________________________

              Facsimile--Business

            
	 	 
	
              _____________________

              Facsimile-Residence

            	
              ________________________________

              Facsimile—Residence

            
	 	 
	
              _____________________

              Tax
                ID # or Social Security #

            	
              ________________________________

              Tax
                ID # or Social Security #

            

    

     

    Name
      in
      which securities should be issued: _________________________

     

    Dated: December
      30, 2005

     

    This
      Subscription Agreement is agreed to and accepted by the Company as of December
      30, 2005.

     

    INSITE
      VISION INCORPORATED

     

    By:____________________________________

    Name:
       S.
      Kumar
      Chandrasekaran, Ph. D.

    Title: President
      and Chief Executive Officer

     

    
      
        
        

      

      
        39

        
          

        

      

      
        
        

      

       

    

    CERTIFICATE
      OF SIGNATORY

     

    (To
      be
      completed if Notes and Warrants are

    being
      subscribed for by an entity)

     

    I,____________________________,
      am the____________________________ of __________________________________________
      (the “Entity”).

     

    I
      certify
      that I am empowered and duly authorized by the Entity to execute and carry
      out
      the terms of the Subscription Agreement and to purchase and hold the Notes
      and
      Warrants offered hereunder, and certify further that the Subscription Agreement
      has been duly and validly executed on behalf of the Entity and constitutes
      a
      legal and binding obligation of the Entity.

     

    IN
      WITNESS WHEREOF, I have set my hand this ______ day of _________________,
      2005.

     

    _______________________________________

    Signature)

    

    
      
        
        

      

      
        40

        
          

        

      

      
        
        

      

    

    Exhibit
      A

    

    Form
      of
      Note

    

    
      
        
        

      

      
        41

        
          

        

      

      
        
        

      

    

    Exhibit
      B

    

    Form
      of
      Warrant

     

    
      
        
        

      

      
        42

        
          

        

      

      
        
        

      

       

    

    Exhibit
      C

    

    Form
      of
      Security/Intercreditor Agreement

     

    
      
        
        

      

      
        43

        
          

        

      

      
        
        

      

    

    Exhibit
      D

     

    Notice
      to Subscriber

    of

    Subscriber
      Amount

    

     

    Dear
      Subscriber:

     

    Pursuant
      to the Section 1.2 of that certain Subscriber Agreement by and between InSite
      Vision Incorporated and certain signatories therein, dated as of December 30,
      2005 (the “Subscription Agreement”), this letter shall serve as notice to
      provide you with information concerning your allocation for the Closing in
      connection with the Offering of Notes and Warrants by the Company and the amount
      you are hereby obligated to invest at the Closing per the Subscription Agreement
      (the “Closing Amount” as further defined in the Subscription
      Agreement).

     

     

    
      	A)
              Subscriber’s subscription amount:	 	______________
	 	 	 
	
              B)
                Aggregate Principal Amount of Notes

              Available to all Subscribers
                for
                Closing:

            	 	______________
	 	 	 
	
              C)
                Aggregate Principal Amount of Notes

              Allocated to you for
                Closing: 

            	 	______________
	 	 	 
	D)
              Warrants Allocated to you at Closing	 	______________
	
              (expressed
                in shares of Common Stock

              issuable
                upon exercise of such Warrants)

            	 	 
	 	 	 
	E)
              Closing Amount due at Closing:	 	______________

    

     

    
      
        
        

      

      
        44

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