Document:

Unassociated Document

    
      EMPLOYMENT
        TERMINATION AGREEMENT

      

      This
        Employment Termination Agreement (the “Agreement”) dated as of July 1, 2008 (the
“Effective Date”) is entered into between vFinance, Inc. (the “Employer”) and
        Leonard J. Sokolow (the “Employee”) (collectively, the “Parties”).

      

      RECITALS:

      

      A. The
        Employee is employed as Chairman and Chief Executive Officer of Employer
        pursuant to an Amended and Restated Employment Agreement dated November 16,
        2004, as amended on May 12 and December 29, 2006 (the “Employment Agreement”);

      

      B. Upon
        the
        merger with a wholly-owned subsidiary of National Holdings Corporation
        (“National”), the principal office of the Employer will be relocated to New York
        (the “Merger”); 

      

      C. Pursuant
        to the terms of the Employment Agreement, as a result of the Merger of National
        and the relocation of the principal office of the Employer, Employee would
        be
        entitled to a lump sum payment of One Million One Hundred and Fifty Thousand
        ($1,150,000) in cash as of the effective date (“Effective Date”) of such merger;

      

      D. The
        Parties have agreed that the Employment Agreement shall be terminated and
        replaced with a new employment agreement with National of even date herewith
        (the “New Employment Agreement”).

      

      NOW,
        THEREFORE, the Employer and Employee agree as follows:

      

      1. Termination
        of Employment.
        The
        Employee shall resign from his positions as Chairman and Chief Executive
        Officer
        of the Employer and the Employment Agreement shall terminate as of the Effective
        Date. From and after the Effective Date, neither party has or will have any
        right, liability or obligation arising under the Employment
        Agreement.

      

      2. Payments.
        

       

      (a) Salary
        and Bonus.
        On the
        Effective Date, the Employer shall pay to the Employee all salary and all
        accrued payments due and payable to the Employee on the Effective Date pursuant
        to the terms of the Employment Agreement. 

      

      (b) Triggering
        Event Payment.
        The
        Employer shall pay to the Employee the principal sum of $1,150,000 on the
        Effective Date. 

      

      3. Waiver
        of Acceleration of Derivative Securities.
        Notwithstanding the fact that in accordance with the terms of the Employment
        Agreement, as of the Effective Date, all Employer stock options held by Employee
        would otherwise become immediately and fully vested, Employee hereby waives
        such
        acceleration of Employer stock options and acknowledges that in connection
        with
        the Merger such stock options shall be exchanged for stock options of National
        at the applicable exchange ratio of the Merger (the “Exchanged Options”).
        However, in the event Employee is terminated by National with cause or Employee
        voluntarily resigns from National for any reason, all Exchanged Options shall
        become 100% vested and shall remain exercisable by the Employee or his
        beneficiaries for a period of nine (9) months from the date of such event;
        provided, however, such period of nine (9) months shall not exceed the earlier
        of the latest date upon which such options could have expired by their original
        terms under any circumstances or the tenth anniversary of the original date
        of
        grant of such options. Notwithstanding anything contained in the New Employment
        Agreement to the contrary, the terms of this Section 3 shall control with
        respect to the acceleration of the vesting terms of the Exchange Options
        in the
        event of Employee’s termination of employment from the National.

       

      
        
           

        

        
           

          
            

          

        

        
           

        

      

      

      4. Taxes.
        If any
        of the payments under this Agreement or any other agreement, including the
        acceleration of derivative securities pursuant to Section 3 of this Agreement
        (the “Payments”),
        will
        be subject to the tax (the “Excise
        Tax”)
        imposed by Section 4999 of the Internal Revenue Code of 1986, as amended
        (the
“Code”)
        on the
        Employee, (or any similar tax that may hereafter be imposed) the Company
        shall
        pay to the Employee an additional amount (the “Gross-Up
        Payment”)
        in a
        manner consistent with Section 6(i) of the New Employment
        Agreement.

      

      5. Indemnification.
        In
        accordance with and subject to Employer’s corporate bylaws, Employer recognizes
        its continuing duty to indemnify, defend and hold Employee harmless to the
        fullest extent of Delaware law for any liabilities that may arise as a result
        of
        any acts taken by Employee (including, without limitation, the failure to
        take
        action) in the course of performing his duties for Employer. In addition,
        in
        accordance with Employer’s corporate bylaws, Employer shall pay any expenses
        (including reasonable attorneys’ fees), judgments, penalties, fines,
        settlements, and other liabilities incurred by Employee in investigating,
        defending, settling or appealing any action, suit or proceeding in advance
        of
        the final disposition of such action, suit or proceeding. Employer shall
        promptly pay the amount of such expenses to Employee, but in no event later
        than
        ten (10) days following Employee’s delivery to Employer of a written request for
        an advance pursuant to this Section 5, together with a reasonable accounting
        of
        such expenses. 

      

      6. Release.
        Simultaneous with the execution and delivery of this Agreement, the Employee
        shall deliver a release in favor of the Company substantially in form and
        substance identical to the release attached as Exhibit B to the New Employment
        Agreement.

      

      7. Severability;
        Entire Agreement; Governing Law.
        In the
        event any provision hereof becomes or is declared by a court of competent
        jurisdiction to be illegal, unenforceable or void, this Agreement shall continue
        in full force and effect without said provision. If any court refuses to
        enforce
        any part of this Agreement as written, the court shall modify that part to
        the
        minimum extent necessary to make it enforceable under applicable law, and
        shall
        enforce it as so modified. This Agreement represents the entire agreement
        and
        understanding concerning Employee’s separation from Employer. This
        Agreement supersedes and replaces any and all prior agreements, understandings,
        discussions, negotiations, or proposals concerning Employee’s relationship with
        Employer.
        This
        Agreement may only be amended in writing signed by the Employee and an executive
        officer of the Employer. This Agreement shall be governed by the laws of
        the
        State of Florida, without regard to its conflict of laws rules. Each Party
        hereby irrevocably submits to the exclusive jurisdiction of any Federal or
        state
        court sitting in Palm Beach County, Florida for the adjudication of any dispute
        arising out of or relating to the Agreement and the transactions contemplated
        hereunder, and hereby irrevocably waives, and agrees not to assert in any
        proceeding relating to this Agreement, any claim that he or it, as the case
        may
        be, is not personally subject to the jurisdiction of any such court, or that
        any
        such proceeding has been commenced in an improper or inconvenient forum.
        

       

      
        
           

        

        
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      8. Attorneys'
        Fees.
        In the
        event any dispute or litigation arises hereunder between any of the parties
        hereto, the prevailing party shall be entitled to all reasonable costs and
        expenses incurred by it in connection therewith (including, without limitation,
        all reasonable attorneys' fees and costs incurred before and at any trial
        or
        other proceeding and at all tribunal levels), as well as all other relief
        granted in any suit or other proceeding. As used herein, a party shall be
        deemed
        "prevailing" when it recovers (i) as to a damages claim, an aggregate of
        more
        than fifty percent (50%) of the damages which it seeks among its various
        asserted claims exclusive of interest, attorney's fees, costs incurred and
        exemplary damages and (ii) as to an equity claim, substantial injunctive
        or
        other equitable relief upon its asserted claim. Either of the parties herein
        shall be entitled to request the trier of fact in any dispute, litigation
        or
        arbitration between them, to determine which of the parties is
        "prevailing."

      

      9. Counterparts.
        This
        Agreement may be executed in any number of counterparts, each of which shall
        be
        an original, but all of which together shall constitute one
        instrument.

      
        	 	 	 	
                vFinance,
                  Inc.

                 

                 

                 

              
	
                By: 

              	
                /s/
                  Leonard J. Sokolow

                Leonard J. Sokolow  

              	
                By: 

              	
                
                  /s/
                    Alan B. Levin

                

                Alan
                  B. Levin, Chief Financial Officer

              

      

       

      
        
           

        

        
          -
            3 -Unassociated Document

    SUBSCRIPTION
      AGREEMENT

     

    THIS
      SUBSCRIPTION AGREEMENT
      (this
“Agreement”),
      dated
      as of June __,
      2008,
      by and among MedaSorb Technologies Corporation, a Nevada corporation (the
“Company”),
      and
      the subscribers identified on the signature page hereto (each a “Subscriber”
and
      collectively “Subscribers”).

     

    WHEREAS,
      the
      Company and the Subscribers are executing and delivering this Agreement in
      reliance upon an exemption from securities registration afforded by the
      provisions of Section 4(2), Section 4(6) and/or Regulation D (“Regulation
      D”)
      as
      promulgated by the United States Securities and Exchange Commission (the
“Commission”)
      under
      the Securities Act of 1933, as amended (the “1933
      Act”);

     

    WHEREAS,
      the
      parties desire that, upon the terms and subject to the conditions contained
      herein, the Company shall issue and sell to the Subscribers, as provided herein,
      and the Subscribers, in the aggregate, shall purchase (i) not less than
      $3,500,000 and up to $6,500,000 of stated value of 10% Series B Preferred Stock
      of the Company (“Preferred
      Stock”)
      at a
      purchase price (the “Purchase
      Price”)
      equal
      to the stated value thereof which Preferred Stock shall be convertible into
      shares of the Company’s common stock, $.001 par value (the “Common
      Stock”)
      hereof
      subject to the rights and preferences described in the form of Certificate
      of
      Designation annexed hereto as Exhibit
      A
      (“Certificate
      of Designation”),
      and
      (ii) in accordance with Section 9(s) of this Agreement, the “Additional
      Securities”. The Preferred Stock, shares of Common Stock issuable upon
      conversion of the Preferred Stock (the “Shares”)
      and
      the Additional Securities, are collectively referred to herein as the
“Securities”;
      and

     

    WHEREAS,
      the
      aggregate proceeds of the sale of the Preferred Stock contemplated hereby shall
      be held in escrow pursuant to the terms of a Funds Escrow Agreement to be
      executed by the parties substantially in the form attached hereto as
      Exhibit B
      (the
“Escrow Agreement”).
      

     

    NOW,
      THEREFORE,
      in
      consideration of the mutual covenants and other agreements contained in this
      Agreement the Company and the Subscribers hereby agree as follows:

     

    1. Closing.
      Subject
      to the satisfaction or waiver of the terms and conditions of this Agreement,
      on
      any “Closing
      Date”
(as
      defined in Section 2 hereof), each Subscriber shall purchase and the Company
      shall sell to each Subscriber the Preferred Stock having the stated value set
      forth on the signature page hereto (the “Stated
      Value”).
      The
      aggregate Stated Value of the Preferred Stock to be purchased by the Subscribers
      at the initial closing hereunder (the “Initial
      Closing Date”),
      shall
      in the aggregate be not less than $3,500,000 nor more than $5,000,000 (the
      “First
      Closing Amount”).
      Additional closings may be held within 60 calendar days following the Initial
      Closing Date. Each Closing Date shall be the date that funds representing the
      net amount due the Company for the Purchase Price for Preferred Stock purchased
      by Subscribers in the Offering (as defined in Section 7(b)) is transmitted
      by
      wire transfer or otherwise to or for the benefit of the Company.

     

    2. Closing
      Date.
      The
      consummation of the transactions contemplated herein shall take place at the
      offices of Reed Smith LLP, 599 Lexington Avenue, New York, N.Y., upon the
      satisfaction of all conditions to Closing set forth in this Agreement. Each
      of
      the Initial Closing Date and any other date on which a closing occurs hereunder
      is referred to as a “Closing
      Date”.

     

    3. Subscriber’s
      Representations, Warranties and Covenants.
      Each
      Subscriber hereby represents and warrants to and agrees with the Company, and
      covenants, as applicable, only as to such Subscriber that:

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

     

    (a) Organization
      and Standing of the Subscribers.
      If the
      Subscriber is an entity, such Subscriber is a corporation, partnership or other
      entity duly incorporated or organized, validly existing and in good standing
      under the laws of the jurisdiction of its incorporation or
      organization.

     

    (b) Authorization
      and Power.
      Each
      Subscriber has the requisite power and authority to enter into and perform
      this
      Agreement and to purchase the Preferred Stock being sold to it hereunder. The
      execution, delivery and performance of this Agreement by such Subscriber and
      the
      consummation by it of the transactions contemplated hereby and thereby have
      been
      duly authorized by all necessary corporate or partnership action, and no further
      consent or authorization of such Subscriber or its Board of Directors,
      stockholders, partners, members, as the case may be, is required. This Agreement
      has been duly authorized, executed and delivered by such Subscriber and
      constitutes, or shall constitute when executed and delivered, a valid and
      binding obligation of the Subscriber enforceable against the Subscriber in
      accordance with the terms thereof.

     

    (c) No
      Conflicts.
      The
      execution, delivery and performance of this Agreement and the consummation
      by
      such Subscriber of the transactions contemplated hereby or relating hereto
      do
      not and will not (i) result in a violation of such Subscriber’s charter
      documents or bylaws or other organizational documents or (ii) conflict with,
      or
      constitute a default (or an event which with notice or lapse of time or both
      would become a default) under, or give to others any rights of termination,
      amendment, acceleration or cancellation of any agreement, indenture or
      instrument or obligation to which such Subscriber is a party or by which its
      properties or assets are bound, or result in a violation of any law, rule,
      or
      regulation, or any order, judgment or decree of any court or governmental agency
      applicable to such Subscriber or its properties (except for such conflicts,
      defaults and violations as would not, individually or in the aggregate, have
      a
      material adverse effect on such Subscriber). Such Subscriber is not required
      to
      obtain any consent, authorization or order of, or make any filing or
      registration with, any court or governmental agency in order for it to execute,
      deliver or perform any of its obligations under this Agreement or to purchase
      the Preferred Stock in accordance with the terms hereof, provided that for
      purposes of the representation made in this sentence, such Subscriber is
      assuming and relying upon the accuracy of the relevant representations and
      agreements of the Company herein.

     

    (d) Information
      on Company.
      The
      Subscriber has been furnished with or has had access at the EDGAR Website of
      the
      Commission to the Company’s Form 10-KSB for the year ended December 31, 2007 and
      all other periodic reports filed by the Company with the Commission prior to
      the
      date hereof (hereinafter collectively referred to as the “Reports”).
      In
      addition, the Subscriber has received in writing from the Company and its
      subsidiary such other information concerning their operations, financial
      condition and other matters as the Subscriber has requested in writing (such
      other information is collectively, the “Other
      Written Information”),
      and
      considered all factors the Subscriber deems material in deciding on the
      advisability of investing in the Securities. Each Subscriber acknowledges that
      it has received all the information it has requested from the Company that
      it
      considers necessary or appropriate for deciding whether to acquire the
Preferred
      Stock,
      and
      represents that it has had an opportunity to ask questions and receive answers
      from the Company regarding the terms and conditions of the offering of the
      Preferred Stock and to obtain any additional information necessary to verify
      the
      accuracy of the information given the Subscriber. Nothing in this Section 3(d)
      shall limit the Subscribers’ rights under the express provisions of this
      Agreement. 

     

    (e) Information
      on Subscriber.
      The
      Subscriber is, and will be at the time of the conversion of the Preferred Stock
      an “accredited investor”, as such term is defined in Regulation D promulgated by
      the Commission under the 1933 Act, is experienced in investments and business
      matters, has made investments of a speculative nature and has purchased
      securities of United States publicly-owned companies in private placements
      in
      the past and, with its representatives, has such knowledge and experience in
      financial, tax and other business matters as to enable the Subscriber to utilize
      the information made available by the Company to evaluate the merits and risks
      of and to make an informed investment decision with respect to the proposed
      purchase, which represents a speculative investment. The Subscriber has the
      authority and is duly and legally qualified to purchase and own the Securities.
      The Subscriber is able to bear the risk of such investment for an indefinite
      period and to afford a complete loss thereof. The information set forth on
      the
      signature page hereto regarding the Subscriber is accurate.

     

    
      
        
        

      

      
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    (f) Purchase
      of Preferred Stock.
      The
      Subscriber will purchase the Preferred Stock as principal for its own account
      for investment only and not with a view toward, or for resale in connection
      with, the public sale or any distribution thereof.

     

    (g) Compliance
      with Securities Act.
      The
      Subscriber understands and agrees that the Securities have not been registered
      under the 1933 Act or any applicable state securities laws, by reason of their
      issuance in a transaction that does not require registration under the 1933
      Act
      (based in part on the accuracy of the representations and warranties of
      Subscriber contained herein), and that such Securities must be held indefinitely
      unless a subsequent disposition is registered under the 1933 Act or any
      applicable state securities laws or is exempt from such registration.
      Notwithstanding anything to the contrary contained in this Agreement, such
      Subscriber may transfer (without restriction and without the need for an opinion
      of counsel) the Securities to its Affiliates (as defined below) provided that
      each such Affiliate is an “accredited investor” under Regulation D and such
      Affiliate agrees to be bound by the terms and conditions of this Agreement.
      For
      the purposes of this Agreement, an “Affiliate”
of
      any
      person or entity means any other person or entity directly or indirectly
      controlling, controlled by or under direct or indirect common control with
      such
      person or entity. Affiliate when employed in connection with the Company
      includes each Subsidiary as defined in Section 4(a) hereof. For purposes of
      this
      definition, “control” means the power to direct the management and policies of
      such person or firm, directly or indirectly, whether through the ownership
      of
      voting securities, by contract or otherwise.

     

    (h) Stock
      Legends.
      The
      Preferred Stock shall bear the following legend:

     

    “THIS
      PREFERRED STOCK AND THE COMMON SHARES ISSUABLE UPON CONVERSION OF THIS PREFERRED
      STOCK HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED.
      THIS PREFERRED STOCK AND THE COMMON SHARES ISSUABLE UPON CONVERSION OF THESE
      PREFERRED STOCK MAY NOT BE SOLD, OFFERED FOR SALE, PLEDGED OR HYPOTHECATED
      IN
      THE ABSENCE OF AN EFFECTIVE REGISTRATION STATEMENT AS TO THESE PREFERRED STOCK
      UNDER SAID ACT OR AN OPINION OF COUNSEL REASONABLY SATISFACTORY TO MEDASORB
      TECHNOLOGIES CORPORATION THAT SUCH REGISTRATION IS NOT REQUIRED.”

     

     

    The
      Shares shall bear the following legend:

     

    "THE
      SHARES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER THE
      SECURITIES ACT OF 1933, AS AMENDED. THESE SHARES MAY NOT BE SOLD, OFFERED FOR
      SALE, PLEDGED OR HYPOTHECATED IN THE ABSENCE OF AN EFFECTIVE REGISTRATION
      STATEMENT UNDER SUCH SECURITIES ACT OR ANY APPLICABLE STATE SECURITIES LAW
      OR AN
      OPINION OF COUNSEL REASONABLY SATISFACTORY TO MEDASORB
      TECHNOLOGIES CORPORATION
      THAT
      SUCH REGISTRATION IS NOT REQUIRED."

    

    
      
        
        

      

      
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    (i) Communication
      of Offer.
      The
      offer to sell the Securities was directly communicated to the Subscriber by
      the
      Company. At no time was the Subscriber presented with or solicited by any
      leaflet, newspaper or magazine article, radio or television advertisement,
      or
      any other form of general advertising or solicited or invited to attend a
      promotional meeting otherwise than in connection and concurrently with such
      communicated offer.

     

    (j) Authority;
      Enforceability.
      This
      Agreement and other agreements delivered together with this Agreement or in
      connection herewith have been duly authorized, executed and delivered by the
      Subscriber and are valid and binding agreements enforceable in accordance with
      their terms, subject to bankruptcy, insolvency, fraudulent transfer,
      reorganization, moratorium and similar laws of general applicability relating
      to
      or affecting creditors’ rights generally and to general principles of equity;
      and Subscriber has full corporate power and authority necessary to enter into
      this Agreement and such other agreements and to perform its obligations
      hereunder and under all other agreements entered into by the Subscriber relating
      hereto.

     

    (k) No
      Governmental Review.
      Each
      Subscriber understands that no United States federal or state agency or any
      other governmental or state agency has passed on or made recommendations or
      endorsement of the Securities or the suitability of the investment in the
      Securities nor have such authorities passed upon or endorsed the merits of
      the
      offering of the Securities.

     

    (l) Correctness
      of Representations.
      Each
      Subscriber represents as to such Subscriber that the foregoing representations
      and warranties are true and correct as of the date hereof and, unless a
      Subscriber otherwise notifies the Company prior to the Closing Date shall be
      true and correct as of the Closing Date.

     

    (m) Survival.
      The
      foregoing representations and warranties shall survive until three years after
      the Closing Date. 

     

    (n) Voting
      Agreement.
      Each
      Subscriber agrees to vote all Shares purchased by it hereunder or hereafter
      acquired by such Subscriber, and any other shares of capital stock of the
      Company held by such Subscriber (i) to effect any and all amendments to the
      Certificate of Incorporation of the Company in connection with effecting an
      increase in the authorized shares of Common Stock, or a reverse stock split
      of
      the Common Stock (or combination of the foregoing), so that the Company shall
      have sufficient shares of unissued Common Stock so as to permit the conversion
      of all of the Preferred Stock and all other shares of preferred stock, warrants
      and other convertible securities of the Company, in accordance with Section
      9(f)
      below, and (ii) in favor of the approval of any stock option plan or similar
      stock incentive plan, approved of by the Company’s Board of Directors, provided
      that the number of shares of Common Stock issuable under all such plans of
      the
      Company shall not exceed 15% of the Common Stock of the Company from time to
      time outstanding on a fully diluted basis.

     

    4. Company
      Representations and Warranties.
      The
      Company represents and warrants to and agrees with each Subscriber that except
      as set forth in the Reports or as otherwise qualified in the “Transaction
      Documents” (as defined in Section 4(c)):

     

    (a) Due
      Incorporation.
      The
      Company is a corporation duly organized, validly existing and in good standing
      under the laws of the jurisdiction of its incorporation and has the requisite
      corporate power to own its properties and to carry on its business is disclosed
      in the Reports. The Company is duly qualified as a foreign corporation to do
      business and is in good standing in each jurisdiction where the nature of the
      business conducted or property owned by it makes such qualification necessary,
      other than those jurisdictions in which the failure to so qualify would not
      have
      a Material Adverse Effect. For purpose of this Agreement, a “Material
      Adverse Effect”
shall
      mean a material adverse effect on the financial condition, results of
      operations, properties, business or prospects of the Company taken as a whole.
      For purposes of this Agreement, “Subsidiary”
means,
      with respect to any entity at any date, any corporation, limited or general
      partnership, limited liability company, trust, estate, association, joint
      venture or other business entity) of which more than 50% of (i) the outstanding
      capital stock having (in the absence of contingencies) ordinary voting power
      to
      elect a majority of the board of directors or other managing body of such
      entity, (ii) in the case of a partnership or limited liability company, the
      interest in the capital or profits of such partnership or limited liability
      company or (iii) in the case of a trust, estate, association, joint venture
      or
      other entity, the beneficial interest in such trust, estate, association or
      other entity business is, at the time of determination, owned or controlled
      directly or indirectly through one or more intermediaries, by such entity.
      

     

    
      
        
        

      

      
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    (b) Outstanding
      Stock.
      All
      issued and outstanding shares of capital stock of the Company have been duly
      authorized and validly issued and are fully paid and nonassessable.

     

    (c) Authority;
      Enforceability.
      This
      Agreement, the Preferred Stock, Certificate of Designation, the Escrow
      Agreement, and any other agreements delivered together with this Agreement
      or in
      connection herewith (collectively “Transaction Documents”)
      have
      been duly authorized, executed and delivered by the Company and are valid and
      binding agreements enforceable in accordance with their terms, subject to
      bankruptcy, insolvency, fraudulent transfer, reorganization, moratorium and
      similar laws of general applicability relating to or affecting creditors’ rights
      generally and to general principles of equity. The Company has full corporate
      power and authority necessary to enter into and deliver the Transaction
      Documents and to perform its obligations thereunder.

     

    (d) Additional
      Issuances.
      There
      are no outstanding agreements or preemptive or similar rights affecting the
      Company’s common stock or equity and no outstanding rights, warrants or options
      to acquire, or instruments convertible into or exchangeable for, or agreements
      or understandings with respect to the sale or issuance of any shares of common
      stock or equity of the Company or other equity interest in any of the
      Subsidiaries of the Company except as described on Schedule
      4(d).
      The
      Common stock of the Company on a fully diluted basis outstanding as of the
      last
      trading day preceding the Closing Date is set forth on Schedule
      4(d).

     

    (e) Consents.
      Except
      as set forth in Schedule
      4(e),
      no
      consent, approval, authorization or order of any court, governmental agency
      or
      body or arbitrator having jurisdiction over the Company, or any of its
      Affiliates, any Principal Market (as defined in Section 9(b) of this Agreement),
      nor the Company’s shareholders is required for the execution by the Company of
      the Transaction Documents and compliance and performance by the Company of
      its
      obligations under the Transaction Documents, including, without limitation,
      the
      issuance and sale of the Securities. The Offering and Transaction Documents
      have
      been unanimously approved by the Company’s board of directors.

     

    (f) No
      Violation or Conflict.
      Assuming the representations and warranties of the Subscribers in Section 3
      are
      true and correct, neither the issuance and sale of the Securities nor the
      performance of the Company’s obligations under this Agreement and all other
      Transaction Documents will:

     

    (i) violate,
      conflict with, result in a breach of, or constitute a default (or an event
      which
      with the giving of notice or the lapse of time or both would be reasonably
      likely to constitute a default in any material respect) of a material nature
      under (A) the articles or certificate of incorporation, charter or bylaws of
      the
      Company, (B) any decree, judgment, order, law, treaty, rule, regulation or
      determination applicable to the Company of any court, governmental agency or
      body, or arbitrator having jurisdiction over the Company or over the properties
      or assets of the Company or any of its Affiliates, (C) the terms of any bond,
      debenture, note or any other evidence of indebtedness, or any agreement, stock
      option or other similar plan, indenture, lease, mortgage, deed of trust or
      other
      instrument to which the Company or any of its Affiliates is a party, by which
      the Company or any of its Affiliates is bound, or to which any of the properties
      of the Company or any of its Affiliates is subject, or (D) the terms of any
      “lock-up” or similar provision of any underwriting or similar agreement to which
      the Company, or any of its Affiliates is a party except the violation, conflict,
      breach, or default of which would not have a Material Adverse Effect;
      or

     

    
      
        
        

      

      
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    (ii) result
      in
      the creation or imposition of any lien, charge or encumbrance upon the
      Securities or any of the assets of the Company or any of its Affiliates;
      or

     

    (iii) except
      as
      disclosed in Schedule
      4(f),
      result
      in the activation of any anti-dilution rights or a reset or repricing of any
      debt or security instrument of any other creditor or equity holder of the
      Company, nor result in the acceleration of the due date of any obligation of
      the
      Company; or

     

    (iv) except
      as
      disclosed in Schedule
      4(f),
      result
      in the activation of any piggy-back registration rights or pre-emptive right
      of
      any person or entity holding securities or debt of the Company or having the
      right to receive securities of the Company.

     

    (g) The
      Securities.
      The
      Securities upon issuance:

     

    (i) are,
      or
      will be, free and clear of any security interests, liens, claims or other
      encumbrances, subject to restrictions upon transfer under the 1933 Act and
      any
      applicable state securities laws;

     

    (ii) have
      been
      duly and validly authorized and on the date of issuance of the Shares upon
      conversion of the Preferred Stock will be duly and validly issued, fully paid
      and nonassessable or if registered pursuant to the 1933 Act, and resold pursuant
      to an effective Registration Statement (as defined in Section 11.1(iv) hereof),
      will be free trading and unrestricted;

     

    (iii) will
      not
      have been issued or sold in violation of any preemptive or other similar rights
      of the holders of any securities of the Company;

     

    (iv) will
      not
      subject the holders thereof to personal liability by reason of being such
      holders provided Subscriber’s representations herein are true and accurate and
      Subscribers take no actions or fail to take any actions required for their
      purchase of the Securities to be in compliance with all applicable laws and
      regulations; and

     

    (v) will
      not
      result in a violation of Section 5 under the 1933 Act.

     

    (h) Litigation.
      There
      is no pending or, to the best knowledge of the Company, threatened action,
      suit,
      proceeding or investigation before any court, governmental agency or body,
      or
      arbitrator having jurisdiction over the Company, or any of its Affiliates that
      would affect the execution by the Company or the performance by the Company
      of
      its obligations under the Transaction Documents. Except as disclosed in the
      Reports or as set forth in Schedule
      4(h),
      there
      is no pending or, to the best knowledge of the Company, basis for or threatened
      action, suit, proceeding or investigation before any court, governmental agency
      or body, or arbitrator having jurisdiction over the Company, or any of its
      Affiliates which litigation if adversely determined would have a Material
      Adverse Effect.

     

    
      
        
        

      

      
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    (i) Reporting
      Company.
      The
      Company is a publicly-held company subject to reporting obligations pursuant
      to
      Section 13(a) and 15(d) of the Securities Exchange Act of 1934 (the
“1934
      Act”)
      and
      has a class of common stock registered pursuant to Section 12(g) of the 1934
      Act. Pursuant to the provisions of the 1934 Act, the Company has timely filed
      all reports and other materials required to be filed thereunder with the
      Commission during the preceding twenty-four months.

     

    (j) No
      Market Manipulation.
      The
      Company and its Affiliates have not taken, and will not take, directly or
      indirectly, any action designed to, or that might reasonably be expected to,
      cause or result in stabilization or manipulation of the price of the Common
      Stock to facilitate the sale or resale of the Securities or affect the price
      at
      which the Securities may be issued or resold, provided, however, that this
      provision shall not prevent the Company from engaging in investor
      relations/public relations activities consistent with past
      practices.

     

    (k) Information
      Concerning Company and Subsidiary.
      The
      Reports contain all material information relating to the Company and its
      operations, and financial condition as of their respective dates, and all the
      information required to be disclosed therein. Since the last day of the fiscal
      year of the most recent annual audited financial statements included in the
      Reports (“Latest
      Financial Date”),
      and
      except as modified in the Other Written Information or in the Schedules hereto,
      there has been no Material Adverse Event relating to the Company’s business,
      financial condition or affairs not disclosed in the Reports. The Reports do
      not
      contain any untrue statement of a material fact or omit to state a material
      fact
      required to be stated therein or necessary to make the statements therein not
      misleading in light of the circumstances when made. The financial statements
      included in the Reports (i) 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, (ii) fairly present in all material respects the
      financial position of the Company and its consolidated subsidiaries as of and
      for the dates thereof and the results of operations and cash flows for the
      periods then ended, subject, in the case of unaudited statements, to normal,
      immaterial, year-end audit adjustments, and (iii) do not require any restatement
      to comply with United States GAAP as of the Closing Date. The financial
      statements contained within the Reports are reported on a consolidated basis
      in
      accordance with GAAP.

     

    (l) Stop
      Transfer.
      The
      Company will not issue any stop transfer order or other order impeding the
      sale,
      resale or delivery of any of the Securities, except as may be required by any
      applicable federal or state securities laws and unless contemporaneous notice
      of
      such instruction is given to the Subscriber.

     

    (m) Defaults.
      The
      Company is not in violation of its certificate or articles of incorporation
      or
      bylaws. The Company is (i) not in default under or in violation of any material
      agreement or instrument to which it is a party or by which it or any of its
      properties are bound or affected, which default or violation would have a
      Material Adverse Effect, (ii) not in default with respect to any order of any
      court, arbitrator or governmental body or subject to or party to any order
      of
      any court or governmental authority arising out of any action, suit or
      proceeding under any statute or other law respecting antitrust, monopoly,
      restraint of trade, unfair competition or similar matters, or (iii) to the
      Company’s knowledge not in violation of any statute, rule or regulation of any
      governmental authority which violation would have a Material Adverse
      Effect.

     

    (n) Not
      an
      Integrated Offering.
      Neither
      the Company, nor any of its Affiliates, nor any person acting on its or their
      behalf, has directly or indirectly made any offers or sales of any security
      or
      solicited any offers to buy any security under circumstances that would cause
      the offer of the Securities pursuant to this Agreement to be integrated with
      prior offerings by the Company for purposes of the 1933 Act or any applicable
      stockholder approval provisions, including, without limitation, under the rules
      and regulations of the OTC Bulletin Board (“Bulletin
      Board”)
      any
      Principal Market as defined in Section 9(b) which would impair the exemptions
      relied upon in this Offering or the Company’s ability to timely comply with its
      obligations hereunder. Nor will the Company or any of its Affiliates take any
      action or steps that would cause the offer or issuance of the Securities to
      be
      integrated with other offerings which would impair the exemptions relied upon
      in
      this Offering or the Company’s ability to timely comply with its obligations
      hereunder. The Company will not conduct any offering other than the transactions
      contemplated hereby that will be integrated with the offer or issuance of the
      Securities, which would impair the exemptions relied upon in this Offering
      or
      the Company’s ability to timely comply with its obligations
      hereunder.

     

    
      
        
        

      

      
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    (o) No
      General Solicitation.
      Neither
      the Company, nor any of its Affiliates, nor to its knowledge, any person acting
      on its or their behalf, has engaged in any form of general solicitation or
      general advertising (within the meaning of Regulation D under the 1933 Act)
      in
      connection with the offer or sale of the Securities.

     

    (p) Listing.
      The
      Company’s common stock is listed on the Bulletin Board under the symbol MSBT.OB.
      The Company has not received any oral or written notice that the Common Stock
      is
      not eligible nor will become ineligible for listing on the Bulletin Board nor
      that the Common Stock does not meet all requirements for the continuation of
      such listing. The Company satisfies all the requirements for the continued
      quotation of the Common Stock on the Bulletin Board.

     

    (q) No
      Undisclosed Liabilities.
      The
      Company has no liabilities or obligations which are material, individually
      or in
      the aggregate, which are not disclosed in the Reports and Other Written
      Information, other than those incurred in the ordinary course of the Company’s
      businesses since the Latest Financial Date and which in the aggregate, would
      not
      reasonably be expected to have a Material Adverse Effect, except as disclosed
      on
Schedule
      4(q).
      As of
      the Closing Date, the consolidated liabilities of the Company, including its
      Subsidiaries, will not exceed $1,550,000.

     

    (r) No
      Undisclosed Events or Circumstances.
      Since
      the Latest Financial Date, no event or circumstance has occurred or exists
      with
      respect to the Company or its businesses, properties, operations or financial
      condition, that, under applicable law, rule or regulation, requires public
      disclosure or announcement prior to the date hereof by the Company but which
      has
      not been so publicly announced or disclosed in the Reports.

     

    (s) Capitalization.
      The
      authorized and outstanding capital stock of the Company as of the date of this
      Agreement and the Closing Date (not including the Securities) are set forth
      on
Schedule
      4(d).
      Except
      as set forth on Schedule
      4(d),
      there
      are no options, warrants, or rights to subscribe to, securities, rights or
      obligations convertible into or exchangeable for or giving any right to
      subscribe for any shares of capital stock of the Company or any of its
      Subsidiaries. All of the outstanding shares of Common Stock of the Company
      have
      been duly and validly authorized and issued and are fully paid and
      nonassessable.

     

    (t) Dilution.
      The
      Company’s executive officers and directors understand the nature of the
      Securities being sold hereby and recognize that the issuance of the Securities
      will have a potential dilutive effect on the equity holdings of other holders
      of
      the Company’s equity or rights to receive equity of the Company. The board of
      directors of the Company has concluded, in its good faith business judgment
      that
      the issuance of the Securities is in the best interests of the Company. The
      Company specifically acknowledges that its obligation to issue the Shares upon
      conversion of the Preferred Stock is binding upon the Company and enforceable
      regardless of the dilution such issuance may have on the ownership interests
      of
      other shareholders of the Company or parties entitled to receive equity of
      the
      Company.

     

    
      
        
        

      

      
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    (u) No
      Disagreements with Accountants and Lawyers.
      There
      are no disagreements of any kind during the two fiscal years preceding the
      date
      of this Agreement, presently existing, or reasonably anticipated by the Company
      to arise, between the Company and the accountants and lawyers formerly or
      presently employed by the Company, including but not limited to disputes or
      conflicts over payment owed to such accountants and lawyers.

     

    (v) Transfer
      Agent.
      The
      name, address, telephone number, fax number, contact person and email address
      of
      the Company’s transfer agent is set forth on Schedule
      4(v)
      hereto.

     

    (w) Investment
      Company.
      Neither
      the Company nor any Affiliate is an “investment company” within the meaning of
      the Investment Company Act of 1940, as amended.

     

    (x) Subsidiary
      Representations.
      The
      Company makes each of the representations contained in Sections 4(a), (b),
      (d),
      (e), (f), (h), (k), (m), (q), (r), (s), (u) and (w) of this Agreement, as same
      relate to its sole Subsidiary, MedaSorb Technologies, Inc., a Delaware
      corporation (“MedaSorb Delaware”). Other than MedaSorb Delaware, the Company has
      no Subsidiaries. 

     

    (y) Company
      Predecessor.
      All
      representations made by or relating to the Company of a historical or
      prospective nature and all undertakings described in Sections 9(g) through
      9(l)
      shall relate, apply and refer to the Company, its predecessors, and MedaSorb
      Delaware.

     

    (z) Correctness
      of Representations.
      The
      Company represents that the foregoing representations and warranties are true
      and correct as of the date hereof in all material respects, and, unless the
      Company otherwise notifies the Subscribers prior to the Closing Date, shall
      be
      true and correct in all material respects as of the Closing Date.

     

    (aa)  ISO
      Pool.
      On the
      Initial Closing Date, the incentive stock option pool of the Company, including
      awarded and un-awarded stock options, is as set forth on Schedule
      4(d).

     

    (bb) Survival.
      The
      foregoing representations and warranties shall survive until three years after
      the Closing Date. 

     

    (cc) D&O
      Insurance.
      All
      nominees of NJTC Venture Fund SBIC, L.P. (“NJTC”) 
      appointed to the Board of Directors of the Company on the Initial Closing Date
      pursuant to the Certificate of Designation shall be subject to coverage under
      the Company’s directors and officers liability insurance policies on the same
      terms as the Company’s then existing directors.

     

    5. Regulation
      D Offering.
      The
      offer and issuance of the Securities to the Subscribers is being made pursuant
      to the exemption from the registration provisions of the 1933 Act afforded
      by
      Section 4(2) or Section 4(6) of the 1933 Act and/or Rule 506 of Regulation
      D
      promulgated thereunder. On the Closing Date, the Company will provide an opinion
      reasonably acceptable to Subscriber from the Company’s legal counsel opining on
      the availability of an exemption from registration under the 1933 Act as it
      relates to the offer and issuance of the Securities and other matters reasonably
      requested by Subscribers. The Company will provide, at the Company’s expense,
      such other legal opinions in the future as are reasonably necessary for the
      issuance and resale of the Common Stock issuable upon conversion of the
      Preferred Stock pursuant to an effective registration statement or Rule 144
      under the 1933 Act.

     

    
      
        
        

      

      
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    6. Preferred
      Stock.

     

    6.1 Conversion
      of Preferred Stock.

     

    (a) Upon
      the
      conversion of any Preferred Stock, the Company shall, at its own cost and
      expense, take all necessary action, including obtaining and delivering, an
      opinion of counsel to assure that the Company’s transfer agent shall issue stock
      certificates in the name of Subscriber (or its nominee) or such other persons
      as
      designated by Subscriber and in such denominations to be specified at conversion
      representing the number of shares of Common Stock issuable upon such conversion.
      The Company warrants that no instructions other than these instructions have
      been or will be given to the transfer agent of the Company’s Common Stock and
      that, unless waived by the Subscriber, the Shares will be freely transferable,
      and will not contain a legend other than the usual 1933 Act restriction from
      transfer legend. If and when the Subscriber sells the Shares and assuming (i)
      the Registration Statement (as defined below) is effective and the prospectus,
      as supplemented or amended, contained therein is current and (ii) the Subscriber
      confirms in writing to the transfer agent that the Subscriber has or will comply
      with the prospectus delivery requirements, upon delivery to the purchaser,
      the
      restrictive legend will be immediately removed and the Shares upon such sale
      will be free-trading, and freely transferable. In the event that the Shares
      are
      sold in a manner that complies with an exemption from registration, the Company
      will promptly instruct its counsel to issue to the transfer agent an opinion
      permitting removal of the legend (indefinitely, if pursuant to Rule 144(b)(1)
      of
      the 1933 Act, or for 90 days if pursuant to the other provisions of Rule 144
      of
      the 1933 Act).

     

    (b) Nothing
      contained herein or in any document referred to herein or delivered in
      connection herewith shall be deemed to establish or require the payment of
      a
      rate of interest or other charges in excess of the maximum permitted by
      applicable law. In the event that the rate of interest or dividends required
      to
      be paid or other charges hereunder exceed the maximum permitted by such law,
      any
      payments in excess of such maximum shall be credited against amounts owed by
      the
      Company to the Subscriber and thus refunded to the Company.

     

    6.2 Adjustments.
      The
      Conversion Price and amount of Shares issuable upon conversion of the Preferred
      Stock shall be equitably adjusted and as described in this Agreement and the
      Certificate of Designation.

     

    6.3 Redemption.
      The
      Preferred Stock shall not be redeemable or callable except as described in
      the
      Certificate of Designation.

     

    7. Broker/Legal
      Fees.

     

    (a) Broker’s
      Fee.
      The
      Company on the one hand, and each Subscriber (for itself only) on the other
      hand, agree to indemnify the other against and hold the other harmless from
      any
      and all liabilities to any persons claiming brokerage commissions or finder’s
      fees on account of services purported to have been rendered on behalf of the
      indemnifying party in connection with this Agreement or the transactions
      contemplated hereby and arising out of such party’s actions. The Company
      represents that to its knowledge there are no parties entitled to receive fees,
      commissions, or similar payments from the Company in connection with the
      transaction described in this Agreement.

     

    (b) Legal
      Fees.
      The
      Company shall pay on the Initial Closing Date out of funds held pursuant to
      the
      Escrow Agreement, in respect of legal fees for services rendered to the
      Subscribers in connection with this Agreement and the purchase and sale of
      the
      Preferred Stock (the “Offering”),
      a
      cash fee of up to $60,000 to Reed Smith LLP, a cash fee of up to $7,500 to
      Grushko & Mittman, P.C., and a cash fee of $27,500 to Woodcock and Washburn
      LLP. An additional cash payment in the amount of $50,000 will be paid to Cooley
      Godward Kronish LLP on the Initial Closing Date out of funds held pursuant
      to
      the Escrow Agreement as partial payment of legal fees due to it. Following
      the
      Initial Closing Date, the Company shall pay a cash legal fee to Epstein Becker
      & Green. P.C. of up to $5,000. 

     

    
      
        
        

      

      
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    8. Closing
      Conditions.
      The
      obligations of each Subscriber under this Agreement are subject to the Company's
      fulfillment on or before Closing of each of the following
      conditions:

     

    8.1 Conditions
      of Subscriber’s Obligations to Close.
      

     

    (a) Representations
      and Warranties.
      Each of
      the representations and warranties of the Company contained in this Agreement
      that are qualified as to materiality must be true and correct in all respects,
      and each of the representations and warranties of the Company contained in
      this
      Agreement which are not qualified as to materiality must be true and correct
      in
      all material respects, in each case, as of the Closing Date.

     

    (b) Performance.
      The
      Company shall have performed and complied in all material respects with all
      agreements, covenants and conditions required to be performed and complied
      with
      by it under the Transaction Documents at or before the Closing.

     

    (c) No
      Suspension.
      No
      order enjoining the consummation of the transactions contemplated hereby or
      the
      offering or sale of the Preferred Stock shall have been issued, and no
      proceedings for that purpose or a similar purpose shall have been initiated
      or
      pending, or, to the best of the Company's knowledge, shall be contemplated
      or
      threatened, nor shall any order have been issued halting the trading of the
      Company's Common Stock.

     

    (d) Capitalization.
      Immediately prior to the consummation of the Closing, the Company will have
      an
      authorized capitalization as set forth on Schedule
      4(d).

     

    (e) Officer’s
      Certificate.
      The
      Subscribers shall have received certificates of the Chief Executive Officer
      and
      Chief Financial Officer of the Company, dated as of the Closing Date, certifying
      in their capacity as officers of the Company, as to the fulfillment of the
      conditions set forth in subparagraphs (a), (b) and (c) above.

     

    (f) No
      Material Adverse Change.
      At
      Closing, the Chief Executive Officer and the Chief Financial Officer of the
      Company shall have provided a certificate to NJTC confirming that there have
      been no material adverse changes in the condition (financial or otherwise)
      or
      prospects of the Company from the date of the financial statements included
      in
      the Reports.

     

    (g) Opinion
      of Counsel.
      The
      Company shall have delivered to the Subscribers an opinion dated as of the
      Closing Date and addressed to the Subscribers from Cane Clark LLP, Nevada counsel
      for the Company with regards to matters of good standing, due incorporation,
      non
      contravention, that the securities issued are validly issued fully paid and
      non-assessable, litigation and such matters as are reasonably appropriate in
      transactions of this type, in substantially the form attached hereto as
Exhibit
      C.
      Further, the Company shall have delivered to the Subscribers
      an
      opinion as of the Closing Date, and, addressed to the Subscribers, from Rubin
      & Bailin LLP, New York counsel to the Company with regards to all other
      matters reasonably requested in substantially the form attached hereto as
Exhibit
      D.

     

    
      
        
        

      

      
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    (h) Stock
      Certificates.
      The
      Company shall have delivered to each Subscriber certificates representing that
      number of Shares equal to the number of shares of Preferred Stock purchased
      by
      such Subscriber.

     

    (i) Lock-up
      Agreements.
      Other
      than as set forth on Schedule
      8(i),
      the
      Company shall have delivered to NJTC “Lock-up” agreements from each of its
      current officers, directors and shareholders owning greater than 5% of the
      Company’s outstanding Common Stock (or securities which are convertible or
      exchangeable into Common Stock) which are satisfactory to NJTC and having a
      duration of twelve (12) months. 

     

    (j) SBA
      Agreements.
      The
      Company shall have delivered to NJTC SBA Forms 480, 652, and 1031, which shall
      be in full force and effect. 

     

    (k) Waivers.
      Except
      with respect to anti-dilution protections provided to Al Kraus in connection
      with entering into his employment agreement, the Company shall deliver permanent
      and binding waivers and consents from all relevant stockholders of the Company,
      including, without limitation, the June 30, 2006 purchasers of the Company’s 10%
      Series A Cumulative Convertible Preferred Stock (“Series A Preferred Stock”),
      (i) waiving such stockholder’s and warrant holder’s right permanently to any
      rights relating to anti-dilution protection whatsoever except as contained
      in
      the Certificate of Designation, (ii) waiving any rights of first refusal or
      preemptive rights with respect to the transactions contemplated hereby, and
      (iii) waiving their registration rights with respect to the shares of Common
      Stock issuable upon conversion of the Series A Preferred Stock and exercise
      of
      the warrants issued in connection therewith, in substantially the form set
      forth
      as Exhibit
      E.
      

     

    9. Covenants
      of the Company.
      The
      Company covenants and agrees with the Subscribers as follows:

     

    (a) Stop
      Orders.
      The
      Company will advise the Subscribers, within four hours after the Company
      receives notice of issuance by the Commission, any state securities commission
      or any other regulatory
      authority of any stop order or of any order preventing or suspending any
      offering of any securities of the Company, or of the suspension of the
      qualification of the Common Stock of the Company for offering or sale in any
      jurisdiction, or the initiation of any proceeding for any such
      purpose.

     

    (b) Listing.
      The
      Company shall promptly secure the listing of the Shares upon each national
      securities exchange, or electronic or automated quotation system upon which
      they
      are or become eligible for listing and shall maintain such listing so long
      as
      any Preferred Stock is outstanding. The Company will maintain the listing of
      its
      Common Stock on the American Stock Exchange, Nasdaq SmallCap Market, Nasdaq
      National Market System, Bulletin Board, or New York Stock Exchange (whichever
      of
      the foregoing is at the time the principal trading exchange or market for the
      Common Stock (the “Principal Market”)),
      and
      will comply in all respects with the Company’s reporting, filing and other
      obligations under the bylaws or rules of the Principal Market, as applicable.
      The Company will provide the Subscribers copies of all notices it receives
      notifying the Company of the threatened and actual delisting of the Common
      Stock
      from any Principal Market. As of the date of this Agreement, the Bulletin Board
      is the Principal Market.

     

    (c) Market
      Regulations.
      The
      Company shall notify the Commission, the Principal Market and applicable state
      authorities, in accordance with their requirements, of the transactions
      contemplated by this Agreement, and shall take all other necessary action and
      proceedings as may be required and permitted by applicable law, rule and
      regulation, for the legal and valid issuance of the Securities to the
      Subscribers and promptly provide copies thereof to Subscriber.

     

    
      
        
        

      

      
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    (d) Filing
      Requirements.
      From
      the date of this Agreement and until the sooner of (i) two (2) years after
      the
      Closing Date, or (ii) until all the Shares have been resold or transferred
      by
      all the Subscribers pursuant to the Registration Statement or pursuant to Rule
      144, without regard to volume limitations, the Company will (A) comply in all
      respects with its reporting and filing obligations under the 1934 Act, (B)
      cause
      its Common Stock to continue to be registered under Section 12(b) or 12(g)
      of
      the 1934 Act, and (C) comply with all requirements related to any registration
      statement filed pursuant to this Agreement. The Company will use its best
      efforts not to take any action or file any document (whether or not permitted
      by
      the 1933 Act or the 1934 Act or the rules thereunder) to terminate or suspend
      such registration under the 1934 Act or to terminate or suspend its reporting
      and filing obligations under said acts until two (2) years after the Closing
      Date. Until the earlier of the resale of the Common Stock by each Subscriber,
      the Company will use its best efforts to continue the listing or quotation
      of
      the Common Stock on a Principal Market and will comply in all respects with
      the
      Company’s reporting, filing and other obligations under the bylaws or rules of
      the Principal Market. The Company agrees to timely file a Form D with respect
      to
      the Securities if required under Regulation D, if required, and to provide
      a
      copy thereof to each Subscriber promptly after such filing

     

    (e) Use
      of
      Proceeds.
      The
      proceeds of the Offering will be employed by the Company for the purposes set
      forth on Schedule
      9(e)
      hereto.

     

    (f) Stock
      Split; Reservation.
      Following the Initial Closing Date, the Company undertakes to use its
      commercially reasonable efforts (but in no event later than 180 days following
      the Initial Closing Date) to increase its authorized shares of Common Stock,
      or
      effect a reverse stock split (or combination of the foregoing) to permit the
      conversion or exercise, as applicable, of all preferred stock, warrants and
      other convertible securities of the Company outstanding on the Initial Closing
      Date. In addition, immediately following such increase or reverse split, the
      Company shall reserve, pro
      rata,
      on
      behalf of the Subscribers from its authorized but unissued Common Stock, a
      number of common shares equal to 175% of the amount of Common Stock necessary
      to
      allow each Subscriber to be able to convert all Preferred Stock issuable
      pursuant to this Agreement and dividends thereon. Failure to have sufficient
      shares reserved pursuant to this Section 9(f) for five (5) consecutive business
      days or fifteen (15) days in the aggregate shall be a material default of the
      Company’s obligations under this Agreement and an Event of Default pursuant to
      the Certificate of Designation.

     

    (g) Taxes.
      From
      the date of this Agreement and until the sooner of (i) two (2) years after
      the
      Closing Date, or (ii) until all the Shares have been resold or transferred
      by
      all the Subscribers pursuant to the Registration Statement or pursuant to Rule
      144, without regard to volume limitations, the Company will promptly pay and
      discharge, or cause to be paid and discharged, when due and payable, all lawful
      taxes, assessments and governmental charges or levies imposed upon the income,
      profits, property or business of the Company; provided, however, that any such
      tax, assessment, charge or levy need not be paid if the validity thereof shall
      currently be contested in good faith by appropriate proceedings and if the
      Company shall have set aside on its books adequate reserves with respect
      thereto, and provided, further, that the Company will pay all such taxes,
      assessments, charges or levies forthwith upon the commencement of proceedings
      to
      foreclose any lien which may have attached as security therefore.

     

    (h) Insurance.
      From
      the date of this Agreement and until the sooner of (i) two (2) years after
      the
      Closing Date, or (ii) until all the Shares have been resold or transferred
      by
      all the Subscribers pursuant to the Registration Statement or pursuant to Rule
      144, without regard to volume limitations, the Company will keep its material
      assets which are of an insurable character insured by financially sound and
      reputable insurers against loss or damage by fire, explosion and other risks
      customarily insured against by companies in the Company’s line of business, in
      amounts sufficient to prevent the Company from becoming a co-insurer and not
      in
      any event less than one hundred percent (100%) of the insurable value of the
      property insured; and the Company will maintain, with financially sound and
      reputable insurers, insurance against other hazards and risks and liability
      to
      persons and property to the extent and in the manner customary for companies
      in
      similar businesses similarly situated and to the extent available on
      commercially reasonable terms.

     

    
      
        
        

      

      
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    (i) Books
      and Records.
      From
      the date of this Agreement and until the sooner of (i) two (2) years after
      the
      Closing Date, or (ii) until all the Shares have been resold or transferred
      by
      all the Subscribers pursuant to the Registration Statement or pursuant to Rule
      144, without regard to volume limitations, the Company will keep true records
      and books of account in which full, true and correct entries will be made of
      all
      dealings or transactions in relation to its business and affairs in accordance
      with generally accepted accounting principles applied on a consistent
      basis.

     

    (j) Governmental
      Authorities.
      From
      the date of this Agreement and until the sooner of (i) two (2) years after
      the
      Closing Date, or (ii) until all the Shares have been resold or transferred
      by
      all the Subscribers pursuant to the Registration Statement or pursuant to Rule
      144, without regard to volume limitations, the Company shall duly observe and
      conform in all material respects to all valid requirements of governmental
      authorities relating to the conduct of its business or to its properties or
      assets.

     

    (k) Intellectual
      Property.
      From
      the date of this Agreement and until the sooner of (i) two (2) years after
      the
      Closing Date, or (ii) until all the Shares have been resold or transferred
      by
      all the Subscribers pursuant to the Registration Statement or pursuant to Rule
      144, without regard to volume limitations, the Company shall maintain in full
      force and effect its corporate existence, rights and franchises and all licenses
      and other rights to use intellectual property owned or possessed by it and
      reasonably deemed to be necessary to the conduct of its business, unless it
      is
      sold for value.

     

    (l) Properties.
      From
      the date of this Agreement and until the sooner of (i) two (2) years after
      the
      Closing Date, or (ii) until all the Shares have been resold or transferred
      by
      all the Subscribers pursuant to the Registration Statement or pursuant to Rule
      144, without regard to volume limitations, the Company will keep its material
      properties in good repair, working order and condition, reasonable wear and
      tear
      excepted, and from time to time make all necessary and proper repairs, renewals,
      replacements, additions and improvements thereto; and the Company will at all
      times comply with each provision of all leases to which it is a party or under
      which it occupies property if the breach of such provision could reasonably
      be
      expected to have a Material Adverse Effect.

     

    (m) Confidentiality/Public
      Announcement.
      From
      the date of this Agreement and until the sooner of (i) two (2) years after
      the
      Closing Date, or (ii) until all the Shares have been resold or transferred
      by
      all the Subscribers pursuant to the Registration Statement or pursuant to Rule
      144, without regard to volume limitations, the Company agrees that except in
      connection with a Form 8-K or the Registration Statement or as otherwise
      required in any other Commission filing, it will not disclose publicly or
      privately the identity of the Subscribers unless expressly agreed to in writing
      by a Subscriber, except to the extent required by law and then only upon five
      days prior notice to Subscriber. In any event and subject to the foregoing,
      the
      Company shall file a Form 8-K or make a public announcement describing the
      Offering not later than the third business day after the Closing Date. In the
      Form 8-K or public announcement, the Company will specifically disclose the
      amount of common stock outstanding immediately after the Closing. 

     

    
      
        
        

      

      
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    (n) Further
      Registration Statements.
      Except
      for a registration statement filed exclusively on behalf of the Subscribers
      pursuant to Section 11 of this Agreement or on Form S-8, the Company will not
      file any registration statements nor amend any already filed registration
      statement with the Commission or with state regulatory authorities without
      the
      consent of the Subscribers nor allow any other registration statement to be
      declared effective by the Commission until the sooner of (i) the Registration
      Statement shall have been current and available for use in connection with
      the
      resale of the Registrable Securities (as defined in Section 11.1(i)) for a
      period of 180 days (“Exclusion
      Period”),
      (ii)
      the date on which all the Shares have been resold or transferred by the
      Subscribers pursuant to the Registration Statement or Rule 144, or (iii) the
      date on which all the Shares may be resold or transferred by the Subscribers
      pursuant to Rule 144(b) without regard to volume limitations. The Exclusion
      Period will be tolled during the pendency of an Event of Default as defined
      in
      the Certificate of Designation.

     

    (o) Blackout.
      The
      Company undertakes and covenants that until the end of the Exclusion Period,
      the
      Company will not enter into any acquisition, merger, exchange or sale or other
      transaction that could have the effect of delaying the effectiveness of any
      pending registration statement or causing an already effective registration
      statement to no longer be effective or current for a period ten (10) or more
      consecutive days nor more than twenty (20) days in the aggregate during any
      consecutive three hundred and sixty five (365) day period.

     

    (p) Non-Public
      Information.
      The
      Company covenants and agrees that neither it nor any other person acting on
      its
      behalf will provide any Subscriber or its agents or counsel with any information
      that the Company believes constitutes material non-public information, unless
      prior thereto such Subscriber shall have agreed in writing to receive such
      information. The Company understands and confirms that each Subscriber shall
      be
      relying on the foregoing representations in effecting transactions in securities
      of the Company.

     

    (q) Negative
      Covenants.
      So long
      as at least twenty-five percent (25%) of the shares of Preferred Stock issued
      on
      the Initial Closing Date are outstanding, without the consent of the
      Subscribers, including NJTC, if it is then the
      holder of at least 25% of the shares of Preferred Stock issued to it on the
      Initial Closing Date,
      the
      Company will not directly or indirectly:

     

    (i) create,
      incur, assume or suffer to exist any pledge, hypothecation, assignment, deposit
      arrangement, lien, charge, claim, security interest, security title, mortgage,
      security deed or deed of trust, easement or encumbrance, or preference, priority
      or other security agreement or preferential arrangement of any kind or nature
      whatsoever (including any lease or title retention agreement, any financing
      lease having substantially the same economic effect as any of the foregoing,
      and
      the filing of, or agreement to give, any financing statement perfecting a
      security interest under the Uniform Commercial Code or comparable law of any
      jurisdiction) (each, a “Lien”)
      upon
      any of its property, whether now owned or hereafter acquired except for (A)
      the
      Excepted Issuances (as defined in Section 12(a) hereof), (B) (a) Liens imposed
      by law for taxes that are not yet due or are being contested in good faith
      and
      for which adequate reserves have been established in accordance with generally
      accepted accounting principles; (b) carriers’, warehousemen’s, mechanics’,
      material men’s, repairmen’s and other like Liens imposed by law, arising in the
      ordinary course of business and securing obligations that are not overdue by
      more than 30 days or that are being contested in good faith and by appropriate
      proceedings; (c) pledges and deposits made in the ordinary course of business
      in
      compliance with workers’ compensation, unemployment insurance and other social
      security laws or regulations; (d) deposits to secure the performance of bids,
      trade contracts, leases, statutory obligations, surety and appeal bonds,
      performance bonds and other obligations of a like nature, in each case in the
      ordinary course of business; (e) Liens created with respect to the financing
      of
      the purchase of new property in the ordinary course of the Company’s business up
      to the amount of the purchase price of such property,(f) easements, zoning
      restrictions, rights-of-way and similar encumbrances on real property imposed
      by
      law or arising in the ordinary course of business that do not secure any
      monetary obligations and do not materially detract from the value of the
      affected property or (g) indebtedness relating the New Jersey Economic
      Development Authority or CIT Healthcare, LLC (each of (a) through (g), a
“Permitted
      Lien”)
      and
      (C) indebtedness for borrowed money which is not senior or pari passu to the
      rights of the Subscribers to receive assets of the Company upon bankruptcy
      or
      dissolution;

     

    
      
        
        

      

      
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    (ii) amend
      its
      certificate of incorporation, bylaws or its charter documents so as to adversely
      affect any rights of the Subscriber, except as otherwise provided in this
      Agreement;

     

    (iii) repay,
      repurchase or offer to repay, repurchase or otherwise acquire or make any
      dividend or distribution in respect of any of its Common Stock, preferred stock,
      or other equity securities other than to the extent permitted or required under
      the Transaction Documents;

     

    (iv) prepay
      any financing related debt obligations; or

     

    (v) engage
      in
      any transactions with any officer, director, employee or any Affiliate of the
      Company, including any contract, agreement or other arrangement providing for
      the furnishing of services to or by, providing for rental of real or personal
      property to or from, or otherwise requiring payments to or from any officer,
      director or such employee or, to the knowledge of the Company, any entity in
      which any officer, director, or any such employee has a substantial interest
      or
      is an officer, director, trustee or partner, in each case in excess of $25,000
      in any calendar year 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, or interest previously
      owned by officers, directors, or employees of the Company as described on
Schedule
      9(q).

     

    (r) Board
      Observer.
      So long
      as Cahn Medical Technologies, LLC (“CMT”)
      is the
      holder of at least twenty-five percent (25%) of the shares of Preferred Stock
      purchased by it on the Initial Closing Date, CMT shall have the right to have
      its designee receive notices of, and attend as an observer, all meetings of
      the
      board of directors of the Company. The Company shall indemnify such observer
      in
      the same manner as it indemnifies directors of the Company, and to the extent
      it
      can do so at no additional cost, the Company shall include such observer under
      the Company’s directors and officers liability insurance policies.

     

    (s) Post
      Closing Covenants.
      

     

    (i) Within
      30
      days following the Initial Closing Date, the Company will issue to the
      Subscribers that purchase Preferred Stock on the Initial Closing Date, a
      security (the “Additional
      Security”)
      that
      will provide such Subscribers with the right to purchase an additional
      $1,500,000 of Preferred Stock, in the aggregate, at its Stated Value within
      15
      months following the Initial Closing Date, pro rata in accordance with their
      investment on the Initial Closing Date, provided,
      however,
      that
      the Additional Security issued to NJTC shall provide it with the right to
      purchase up to the greater of (x) its pro rata share of its investment in the
      Preferred Stock or (y) $750,000 in Stated Value of Preferred Stock. The
      Additional Security shall be delivered in accordance with applicable laws and
      regulations and in form and substance otherwise reasonably satisfactory to
      the
      Company, NJTC and their respective counsel. No holder of an Additional Security
      shall be required to exercise its right thereunder to purchase additional shares
      of Preferred Stock.

     

    
      
        
        

      

      
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    (ii) The
      option agreements evidencing the options to be issued on the Initial Closing
      Date to purchase 5,885,250 shares of Common Stock, as set forth on Schedule
      4(d),
      shall
      provide for vesting over a three-year period (25% upon issuance, and an
      additional 25% upon each of the first, second and third anniversaries of
      issuance), without any acceleration of such vesting upon the termination of
      employment of the holder of such option. 

     

    (iii) Attached
      hereto as Exhibit
      F
      is the
      Company’s “100-Day Plan” (the “Plan”).
      Following the conclusion of the period covered by the Plan, the Board of
      Directors of the Company will evaluate the Company’s performance as compared to
      the Plan and make appropriate recommendations following such evaluation.

     

    (iv) On
      or
      prior to the Initial Closing Date, the Company and each of the employees listed
      on Schedule
      9(s)
      that are
      party to employment agreements with the Company shall enter into amendments
      to
      such agreements providing for (a) the termination of such agreements on December
      31, 2008, (b) the Company’s ability to terminate employment in the event the
      Board of Directors is not, in its reasonable discretion, satisfied with the
      employee’s performance, subject to a 30-day cure period and an additional 15-day
      notice period following such cure period, (c) no acceleration of non-vested
      stock options upon termination of employment, and (d) severance payments equal
      to two weeks of base salary for each year of service with the Company. In
      connection with such amendments, such employees shall enter into separate
      non-disclosure and non-compete agreements (“NDAs”)
      with
      provisions in the same form as the non-disclosure and non-compete provisions
      in
      the current employment agreements such employees are a party to. On or prior
      to
      Initial Closing Date, each employee of the Company listed on Schedule
      9(s)
      shall
      agree in writing to enter into the amendments and NDAs provided for herein.
      

     

    (v) Following
      the termination of the employment agreements under clause (iv) above, the
      Company may or may not enter into new employment agreements with Company
      employees consistent with the terms of the amended employment agreements
      provided for under clause (iv), provided that all Company employees (whether
      or
      not party to written employment agreements) shall be entitled to severance
      payments equal to two weeks of base salary for each year of service with the
      Company.

     

    (vi) Until
      such time as the Company has completed the current clinical study in process
      in
      Germany of up to 80 patients with acute respiratory distress syndrome or acute
      lung injury in the setting of sepsis, the Company shall not increase the salary
      of any of its employees or pay any cash bonuses to any such employee.

     

    (t) Post
      Closing Issuances.
      Other
      than with respect to Excepted Issuances, during the 6-month period following
      the
      Initial Closing Date, the Company shall not issue Common Stock, or securities
      convertible into Common Stock, at per share price (or with a conversion or
      exercise price per share of Common Stock, as applicable) less than the
      conversion price of the Preferred Stock.

     

    10. Covenants
      of the Company and Subscriber Regarding Indemnification.

     

    (a) The
      Company agrees to indemnify, hold harmless, reimburse and defend the
      Subscribers, the Subscribers’ officers, directors, agents, Affiliates, control
      persons, and principal shareholders, against any claim, cost, expense,
      liability, obligation, loss or damage (including reasonable legal fees) of
      any
      nature, incurred by or imposed upon the Subscriber or any such person which
      results, arises out of or is based upon (i) any material misrepresentation
      by
      Company or breach of any warranty by Company in this Agreement, the Transaction
      Documents or in any Exhibits or Schedules attached hereto, or other agreement
      delivered pursuant hereto; or (ii) after any applicable notice and/or cure
      periods, any breach or default in performance by the Company of any covenant
      or
      undertaking to be performed by the Company hereunder, or any other agreement
      entered into by the Company and Subscriber relating hereto.

     

    
      
        
        

      

      
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    (b) Each
      Subscriber agrees to indemnify, hold harmless, reimburse and defend the Company
      and each of the Company’s officers, directors, agents, Affiliates, control
      persons against any claim, cost, expense, liability, obligation, loss or damage
      (including reasonable legal fees) of any nature, incurred by or imposed upon
      the
      Company or any such person which results, arises out of or is based upon (i)
      any
      material misrepresentation by such Subscriber in this Agreement or in any
      Exhibits or Schedules attached hereto, or other agreement delivered pursuant
      hereto; or (ii) after any applicable notice and/or cure periods, any breach
      or
      default in performance by such Subscriber of any covenant or undertaking to
      be
      performed by such Subscriber hereunder, or any other agreement entered into
      by
      the Company and Subscribers, relating hereto.

     

    (c) In
      no
      event shall the liability of any Subscriber or permitted successor hereunder
      or
      under any Transaction Document or other agreement delivered in connection
      herewith be greater in amount than the dollar amount of the net proceeds
      actually received by such Subscriber upon the sale of “Registrable Securities”
(as defined herein).

     

    (d) The
      procedures set forth in Section 11.6 shall apply to the indemnification set
      forth in Sections 10(a) and 10(b) above. 

     

    11.1 Registration
      Rights.
      The
      Company hereby grants the following registration rights to holders of the
      Securities.

     

    (i) On
      no
      more than two occasions, for a period commencing two hundred and eleven (211)
      days after the Closing Date, and no later than two (2) years after the Initial
      Closing Date, upon a written request therefor from any record holder or holders
      of more than 50% of the Shares issued and issuable upon conversion of the
      outstanding Preferred Stock, the Company shall prepare and file with the
      Commission a registration statement under the 1933 Act registering up to 100%
      of
      the Shares issuable upon conversion of all of the Preferred Stock issued to
      the
      Subscribers on the Initial Closing Date (the “Registrable
      Securities”).
      For
      purposes of Sections 11.1(i), 11.1(ii) and 11.1(iv), Registrable Securities
      shall not include Securities which are (A) registered for resale in an effective
      registration statement, (B) included for registration in a pending registration
      statement, (C) which have been issued without further transfer restrictions
      after a sale or transfer pursuant to Rule 144 under the 1933 Act, or (D) which
      may be sold under Rule 144(b)(1) without restriction. Upon the receipt of such
      request, the Company shall promptly give written notice to all other record
      holders of the Registrable Securities that such registration statement is to
      be
      filed and shall include in such registration statement Registrable Securities
      for which it has received written requests within ten (10) days after the
      Company gives such written notice. Such other requesting record holders shall
      be
      deemed to have exercised their demand registration right under this Section
      11.1(i).

     

    (ii) If
      the
      Company at any time proposes to register any of its securities under the 1933
      Act for sale to the public, whether for its own account or for the account
      of
      other security holders or both, except with respect to registration statements
      on Forms S-4, S-8 or another form not available for registering the Registrable
      Securities for sale to the public, provided the Registrable Securities are
      not
      otherwise registered for resale by the Subscribers or Holder pursuant to an
      effective registration statement, each such time it will give at least fifteen
      (15) days’ prior written notice to the record holder of the Registrable
      Securities of its intention so to do. Upon the written request of the holder,
      received by the Company within ten (10) days after the giving of any such notice
      by the Company, to register any of the Registrable Securities not previously
      registered, the Company will cause such Registrable Securities as to which
      registration shall have been so requested to be included with the securities
      to
      be covered by the registration statement proposed to be filed by the Company,
      all to the extent required to permit the sale or other disposition of the
      Registrable Securities so registered by the holder of such Registrable
      Securities (the “Seller”
or
      “Sellers”).
      In
      the event that any registration pursuant to this Section 11.1(ii) shall be,
      in
      whole or in part, an underwritten public offering of common stock of the
      Company, the number of shares of Registrable Securities to be included in such
      an underwriting may be reduced by the managing underwriter if and to the extent
      that the Company and the underwriter shall reasonably be of the opinion that
      such inclusion would adversely affect the marketing of the securities to be
      sold
      by the Company therein; provided, however, that the Company shall notify the
      Seller in writing of any such reduction. Notwithstanding the foregoing
      provisions, or Section 11.4 hereof, the Company may withdraw or delay or suffer
      a delay of any registration statement referred to in this Section 11.1(ii)
      without thereby incurring any liability to the Seller.

     

    
      
        
        

      

      
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    (iii) If,
      at
      the time any written request for registration is received by the Company
      pursuant to Section 11.1(i), the Company has determined to proceed with the
      actual preparation and filing of a registration statement under the 1933 Act
      in
      connection with the proposed offer and sale for cash of any of its securities
      for the Company’s own account and the Company actually does file such other
      registration statement, such written request shall be deemed to have been given
      pursuant to Section 11.1(ii) rather than Section 11.1(i), and the rights of
      the
      holders of Registrable Securities covered by such written request shall be
      governed by Section 11.1(ii).

     

    (iv) The
      Company shall use its best efforts to file with the Commission a Form S-1
      registration statement (the “Registration
      Statement”)
      (or
      such other form that it is eligible to use) in order to register the Registrable
      Securities for resale and distribution under the 1933 Act within one hundred
      and
      eighty (180) days after the Initial Closing Date (the “Filing
      Date”),
      and
      cause the Registration Statement to be declared effective within two hundred
      and
      forty (240) days after the Initial Closing Date (the “Effective
      Date”).
      The
      Registrable Securities shall be reserved and set aside exclusively for the
      benefit of each Subscriber, pro
      rata,
      and not
      issued, employed or reserved for anyone other than each such Subscriber. The
      Registration Statement will immediately be amended or additional registration
      statements will be immediately filed by the Company as necessary to register
      additional shares of Common Stock to allow the public resale of all Common
      Stock
      included in and issuable by virtue of the Registrable Securities. Except with
      the written consent of the Subscriber, or as described on Schedule
      11.1
      hereto,
      no securities of the Company other than the Registrable Securities will be
      included in the Registration Statement. The Company shall have no obligation
      to
      file the Registration Statement by the Filing Date, or cause the Registration
      Statement to be declared effective on the Effective Date, if the Registrable
      Securities cease to constitute Registrable Securities pursuant to Section
      11.1(i) as of such respective dates.

     

    11.2 Registration
      Procedures.
      If and
      whenever the Company is required by the provisions of Section 11.1(i), 11.1(ii),
      or (iv) to effect the registration of any Registrable Securities under the
      1933
      Act, the Company will, as expeditiously as possible:

     

    (a) subject
      to the timelines provided in this Agreement, prepare and file with the
      Commission a registration statement required by Section 11, with respect to
      such
      securities and use its best efforts to cause such registration statement to
      become and remain effective for the period of the distribution contemplated
      thereby (determined as herein provided), promptly provide to the holders of
      the
      Registrable Securities copies of all filings and Commission letters of comment
      and notify Reed Smith LLP (Attn: Gerard S. DiFiore) and Epstein Becker &
Green, P.C. (Attn: Brian J. Platton) on or before 6:00 PM EST not later than
      the
      first business Day after the Company receives notice that (i) the Commission
      has
      no comments or no further comments on the Registration Statement, and (ii)
      the
      registration statement has been declared effective (failure to timely provide
      notice as required by this Section 11.2(a) shall be a material breach of the
      Company’s obligation and an Event of Default as defined in the Preferred Stock
      and a Non-Registration Event as defined in Section 11.4 of this
      Agreement);

     

    
      
        
        

      

      
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    (b) prepare
      and file with the Commission such amendments and supplements to such
      registration statement and the prospectus used in connection therewith as may
      be
      necessary to keep such registration statement effective until such registration
      statement has been effective for a period of two (2) years or the sale or
      transfer of all Registrable Securities pursuant to the Registration Statement
      or
      pursuant to Rule 144, without regard to volume limitations, and comply with
      the
      provisions of the 1933 Act with respect to the disposition of all of the
      Registrable Securities covered by such registration statement in accordance
      with
      the Sellers’ intended method of disposition set forth in such registration
      statement for such period;

     

    (c) furnish
      to the Sellers, at the Company’s expense, such number of copies of the
      registration statement and the prospectus included therein (including each
      preliminary prospectus) as such persons reasonably may request in order to
      facilitate the public sale or their disposition of the securities covered by
      such registration statement or make them electronically available;

     

    (d) use
      its
      commercially reasonable best efforts to register or qualify the Registrable
      Securities covered by such registration statement under the securities or “blue
      sky” laws of New York and such jurisdictions as the Sellers shall request in
      writing, provided, however, that the Company shall not for any such purpose
      be
      required to qualify generally to transact business as a foreign corporation
      in
      any jurisdiction where it is not so qualified or to consent to general service
      of process in any such jurisdiction;

     

    (e) if
      applicable, list the Registrable Securities covered by such registration
      statement with any securities exchange on which the Common Stock of the Company
      is then listed;

     

    (f) notify
      the Sellers within four hours of the Company’s becoming aware that a prospectus
      relating thereto is required to be delivered under the 1933 Act, of the
      happening of any event of which the Company has knowledge as a result of which
      the prospectus contained in such registration statement, as then in effect,
      includes an untrue statement of a material fact or omits to state a material
      fact required to be stated therein or necessary to make the statements therein
      not misleading in light of the circumstances then existing or which becomes
      subject to a Commission, state or other governmental order suspending the
      effectiveness of the registration statement covering any of the
      Shares;

     

    (g) provided
      same would not be in violation of the provision of Regulation FD under the
      1934
      Act, reasonably make available for inspection by the Sellers, and any attorney,
      accountant or other agent retained by the Seller or underwriter, upon prior
      written request, all publicly available, non-confidential financial and other
      records, pertinent corporate documents and properties of the Company, and cause
      the Company’s officers, directors and employees to supply all publicly
      available, non-confidential information reasonably requested by the Seller,
      attorney, accountant or agent in connection with such registration statement;
      and

     

    (h) provide
      to the Sellers copies of the Registration Statement and amendments thereto
      not
      later than one business day prior to the filing thereof with the Commission.
      

     

    11.3 Provision
      of Documents.
      In
      connection with each registration described in this Section 11, each Seller
      will
      furnish to the Company in writing such information and representation letters
      with respect to itself and the proposed distribution by it as reasonably shall
      be necessary in order to assure compliance with federal and applicable state
      securities laws.

     

    
      
        
        

      

      
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    11.4 Non-Registration
      Events.
      The
      Company and the Subscribers agree that the Sellers will suffer damages if the
      Registration Statement is not filed by the Filing Date and not declared
      effective by the Commission by the Effective Date, and any registration
      statement required under Section 11.1(i) or 11.1(ii) is not filed within sixty
      (60) calendar days after written request and declared effective by the
      Commission within 120 days after such request or, if later, within 240 calendar
      days after the Initial Closing Date with respect to any registration statement
      required under Section 11.1(ii), and maintained in the manner and within the
      time periods contemplated by Section 11 hereof, and it would not be feasible
      to
      ascertain the extent of such damages with precision. Accordingly, if (A) the
      Registration Statement is not filed on or before the Filing Date, (B) is not
      declared effective on or before the Effective Date, (C) due to the action or
      inaction of the Company the Registration Statement is not declared effective
      within three (3) business days after receipt by the Company or its attorneys
      of
      a written or oral communication from the Commission that the Registration
      Statement will not be reviewed or that the Commission has no further comments
      which time will be reasonably extended if the Company is required to amend
      the
      Registration Statement to include additional financial statements, (D) if the
      registration statement described in Sections 11.1(i) or 11.1(ii) is not filed
      within 60 days after such written request, or is not declared effective within
      120 calendar days after such written request or, if later, within 240 calendar
      days after the Initial Closing Date with respect to any Registration Statement
      required under Section 11.1(ii), or (E) any registration statement described
      in
      Sections 11.1(i), 11.1(ii) or 11.1(iv) is filed and declared effective but
      shall
      thereafter cease to be effective without being succeeded within twenty (20)
      business days by an effective replacement or amended registration statement
      or
      for a period of time which shall exceed 30 days in the aggregate per year
      (defined as a period of 365 days commencing on the Actual Effective Date (each
      such event referred to in clauses (A) through (E) of this Section 11.4 is
      referred to herein as a “Non-Registration Event”), then the Company shall
      deliver to the holder of Registrable Securities, as Liquidated Damages, an
      amount equal to two percent (2%) for each thirty (30) days or part thereof
      of
      the Purchase Price of the Preferred Stock remaining unconverted and conversion
      price of Shares issued upon conversion of the Obligation Amount (as defined
      in
      the Certificate of Designation) owned of record by such holder which are subject
      to such Non-Registration Event until such time as the Non-Registration Event
      is
      cured, provided,
      however
      that if
      (i) a delay in the filing or effectiveness of the Registration Statement under
      Section 11.1(iv), or any registration statement required under Section 11.1(i)
      or 11.1(ii), is caused solely due to circumstances outside the Company’s
      reasonable control, including, without limitation, as a result of comments
      from
      the Commission relating to Rule 415 under the 1933 Act, (ii) the Company has
      used commercially reasonable efforts to cure the event causing such delay,
      and
      (iii) with respect to a registration statement requested to be filed by holders
      of Registrable Securities pursuant to Sections 11.1(i) or 11.1(ii), such
      registration statement is declared effective no later than 270 calendar days
      after the written request of such holders, then such delay shall not
      be
      deemed a Non-Registration Event, and
      provided,
      further
      that if
      such delay in the filing or effectiveness of any registration statement required
      under Section 11.1(i), 11.1(ii) or 11.1(iv), is caused solely due to comments
      received by the Company from the Commission with respect to such registration
      statement, including, without limitation, comments relating to Rule 415 under
      the 1933 Act, then such delay shall not
      be
      deemed a Non-Registration Event. The Company must pay the Liquidated Damages
      in
      cash. The Liquidated Damages must be paid within ten (10) days after the end
      of
      each thirty (30) day period or shorter part thereof for which Liquidated Damages
      are payable. In the event a Registration Statement is filed by the Filing Date
      but is withdrawn prior to being declared effective by the Commission, then
      such
      Registration Statement will be deemed to have not been filed. All oral or
      written comments received from the Commission relating to the Registration
      Statement must be satisfactorily responded to within fifteen (15) business
      days
      after receipt of comments from the Commission. Failure to timely respond to
      Commission comments is a Non-Registration Event for which Liquidated Damages
      shall accrue and be payable by the Company to the holders of Registrable
      Securities at the same rate set forth above. Notwithstanding the foregoing,
      the
      Company shall not be liable to the Subscriber under this Section 11.4 for any
      events or delays occurring as a consequence of the acts or omissions of the
      Subscribers contrary to the material obligations undertaken by Subscribers
      in
      this Agreement. Liquidated Damages will not accrue nor be payable pursuant
      to
      this Section 11.4 nor will a Non-Registration Event be deemed to have occurred
      under this Section 11 for times during which Registrable Securities are
      transferable by the holder of Registrable Securities pursuant to Rule 144(b)(1)
      under the 1933 Act without restriction.

     

    
      
        
        

      

      
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    11.5 Expenses.
      All
      expenses incurred by the Company in complying with Section 11, including,
      without limitation, all registration and filing fees, printing expenses (if
      required), fees and disbursements of counsel and independent public accountants
      for the Company, fees and expenses (including reasonable counsel fees) incurred
      in connection with complying with state securities or “blue sky” laws, fees of
      the National Association of Securities Dealers, Inc., transfer taxes, and fees
      of transfer agents and registrars, are called “Registration
      Expenses.”
All
      underwriting discounts and selling commissions applicable to the sale of
      Registrable Securities are called “Selling
      Expenses.”
The
      Company will pay all Registration Expenses in connection with the registration
      statement under Section 11. Selling Expenses in connection with each
      registration statement under Section 11 shall be borne by the Seller and may
      be
      apportioned among the Sellers in proportion to the number of shares sold by
      the
      Seller relative to the number of shares sold under such registration statement
      or as all Sellers thereunder may agree.

     

    11.6 Indemnification
      and Contribution.

     

    (a) In
      the
      event of a registration of any Registrable Securities under the 1933 Act
      pursuant to Section 11, the Company will, to the extent permitted by law,
      indemnify and hold harmless the Seller, each officer of the Seller, each
      director of the Seller, each underwriter of such Registrable Securities
      thereunder and each other person, if any, who controls such Seller or
      underwriter within the meaning of the 1933 Act, against any losses, claims,
      damages or liabilities, joint or several, to which the Seller, or such
      underwriter or controlling person may become subject under the 1933 Act or
      otherwise, insofar as such losses, claims, damages or liabilities (or actions
      in
      respect thereof) arise out of or are based upon any untrue statement or alleged
      untrue statement of any material fact contained in any registration statement
      under which such Registrable Securities was registered under the 1933 Act
      pursuant to Section 11, any preliminary prospectus or final prospectus contained
      therein, or any amendment or supplement thereof, or arise out of or are based
      upon the 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 when made, and will subject to the provisions
      of
      Section 11.6(c) reimburse the Seller, each such underwriter and each such
      controlling person for any legal or other expenses reasonably incurred by them
      in connection with investigating or defending any such loss, claim, damage,
      liability or action; provided, however, that the Company shall not be liable
      to
      the Seller to the extent that any such damages arise out of or are based upon
      an
      untrue statement or omission made in any preliminary prospectus if (i) the
      Seller failed to send or deliver a copy of the final prospectus or supplement
      to
      the final prospectus delivered by the Company to the Seller with or prior to
      the
      delivery of written confirmation of the sale by the Seller to the person
      asserting the claim from which such damages arise, (ii) the final prospectus
      or
      supplement to the final prospectus would have corrected such untrue statement
      or
      alleged untrue statement or such omission or alleged omission, or (iii) to
      the
      extent that any such loss, claim, damage or liability arises out of or is based
      upon an untrue statement or alleged untrue statement or omission or alleged
      omission so made in conformity with information furnished by any such Seller,
      or
      any such controlling person in writing specifically for use in such registration
      statement or prospectus.

     

    
      
        
        

      

      
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    (b) In
      the
      event of a registration of any of the Registrable Securities under the 1933
      Act
      pursuant to Section 11, each Seller severally but not jointly will, to the
      extent permitted by law, indemnify and hold harmless the Company, and each
      person, if any, who controls the Company within the meaning of the 1933 Act,
      each officer of the Company who signs the registration statement, each director
      of the Company, each underwriter and each person who controls any underwriter
      within the meaning of the 1933 Act, against all losses, claims, damages or
      liabilities, joint or several, to which the Company or such officer, director,
      underwriter or controlling person may become subject under the 1933 Act or
      otherwise, insofar as such losses, claims, damages or liabilities (or actions
      in
      respect thereof) arise out of or are based upon any untrue statement or alleged
      untrue statement of any material fact contained in the registration statement
      under which such Registrable Securities were registered under the 1933 Act
      pursuant to Section 11, any preliminary prospectus or final prospectus contained
      therein, or any amendment or supplement thereof, or arise out of or are based
      upon the omission or alleged omission to state therein a material fact required
      to be stated therein or necessary to make the statements therein not misleading,
      and will reimburse the Company and each such officer, director, underwriter
      and
      controlling person for any legal or other expenses reasonably incurred by them
      in connection with investigating or defending any such loss, claim, damage,
      liability or action, provided, however, that the Seller will be liable hereunder
      in any such case if and only to the extent that any such loss, claim, damage
      or
      liability arises out of or is based upon an untrue statement or alleged untrue
      statement or omission or alleged omission made in reliance upon and in
      conformity with information pertaining to such Seller, as such, furnished in
      writing to the Company by such Seller specifically for use in such registration
      statement or prospectus, and provided, further, however, that the liability
      of
      the Seller hereunder shall be limited to the net proceeds actually received
      by
      the Seller from the sale of Registrable Securities covered by such registration
      statement.

     

    (c) Promptly
      after receipt by an indemnified party hereunder of notice of the commencement
      of
      any action, such indemnified party shall, if a claim in respect thereof is
      to be
      made against the indemnifying party hereunder, notify the indemnifying party
      in
      writing thereof, but the omission so to notify the indemnifying party shall
      not
      relieve it from any liability which it may have to such indemnified party other
      than under this Section 11.6(c) and shall only relieve it from any liability
      which it may have to such indemnified party under this Section 11.6(c), except
      and only if and to the extent the indemnifying party is prejudiced by such
      omission. In case any such action shall be brought against any indemnified
      party
      and it shall notify the indemnifying party of the commencement thereof, the
      indemnifying party shall be entitled to participate in and, to the extent it
      shall wish, to assume and undertake the defense thereof with counsel reasonably
      satisfactory to such indemnified party, and, after notice from the indemnifying
      party to such indemnified party of its election so to assume and undertake
      the
      defense thereof, the indemnifying party shall not be liable to such indemnified
      party under this Section 11.6(c) for any legal expenses subsequently incurred
      by
      such indemnified party in connection with the defense thereof other than
      reasonable costs of investigation and of liaison with counsel so selected,
      provided, however, that, if the defendants in any such action include both
      the
      indemnified party and the indemnifying party and the indemnified party shall
      have reasonably concluded that there may be reasonable defenses available to
      it
      which are different from or additional to those available to the indemnifying
      party or if the interests of the indemnified party reasonably may be deemed
      to
      conflict with the interests of the indemnifying party, the indemnified parties,
      as a group, shall have the right to select one separate counsel and to assume
      such legal defenses and otherwise to participate in the defense of such action,
      with the reasonable expenses and fees of such separate counsel and other
      expenses related to such participation to be reimbursed by the indemnifying
      party as incurred.

     

    
      
        
        

      

      
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    (d) In
      order
      to provide for just and equitable contribution in the event of joint liability
      under the 1933 Act in any case in which either (i) a Seller, or any controlling
      person of a Seller, makes a claim for indemnification pursuant to this Section
      11.6 but it is judicially determined (by the entry of a final judgment or decree
      by a court of competent jurisdiction and the expiration of time to appeal or
      the
      denial of the last right of appeal) that such indemnification may not be
      enforced in such case notwithstanding the fact that this Section 11.6 provides
      for indemnification in such case, or (ii) contribution under the 1933 Act may
      be
      required on the part of the Seller or controlling person of the Seller in
      circumstances for which indemnification is not provided under this Section
      11.6;
      then, and in each such case, the Company and the Seller will contribute to
      the
      aggregate losses, claims, damages or liabilities to which they may be subject
      (after contribution from others) in such proportion so that the Seller is
      responsible only for the portion represented by the percentage that the public
      offering price of its securities offered by the registration statement bears
      to
      the public offering price of all securities offered by such registration
      statement, provided, however, that, in any such case, (y) the Seller will not
      be
      required to contribute any amount in excess of the public offering price of
      all
      such securities sold by it pursuant to such registration statement; and (z)
      no
      person or entity guilty of fraudulent misrepresentation (within the meaning
      of
      Section 11(f) of the 1933 Act) will be entitled to contribution from any person
      or entity who was not guilty of such fraudulent misrepresentation.

     

    11.7 Delivery
      of Unlegended Shares.

     

    (a) Within
      three (3) business days (such third business day being the “Unlegended
      Shares Delivery Date”)
      after
      the business day on which the Company has received (i) a notice that Shares
      or
      any other Common Stock held by a Subscriber have been sold pursuant to the
      Registration Statement or Rule 144 under the 1933 Act, (ii) a representation
      that the prospectus delivery requirements, or the requirements of Rule 144,
      as
      applicable and if required, have been satisfied, and (iii) the original share
      certificates representing the shares of Common Stock that have been sold, and
      (iv) in the case of sales under Rule 144, customary representation letters
      of
      the Subscriber and/or Subscriber’s broker regarding compliance with the
      requirements of Rule 144, the Company at its expense, (y) shall deliver, and
      shall cause legal counsel selected by the Company to deliver to its transfer
      agent (with copies to Subscriber) an appropriate instruction and opinion of
      such
      counsel, directing the delivery of shares of Common Stock without any legends
      including the legend set forth in Section 4(h) above, reissuable pursuant to
      any
      effective and current Registration Statement described in Section 11 of this
      Agreement or pursuant to Rule 144 under the 1933 Act (the “Unlegended Shares”);
      and
      (z) cause the transmission of the certificates representing the Unlegended
      Shares together with a legended certificate representing the balance of the
      submitted Shares certificate, if any, to the Subscriber at the address specified
      in the notice of sale, via express courier, by electronic transfer or otherwise
      on or before the Unlegended Shares Delivery Date.

     

    (b) In
      lieu
      of delivering physical certificates representing the Unlegended Shares, if
      the
      Company’s transfer agent is participating in the Depository Trust Company
      (“DTC”)
      Fast
      Automated Securities Transfer program, upon request of a Subscriber, so long
      as
      the certificates therefor do not bear a legend and the Subscriber is not
      obligated to return such certificate for the placement of a legend thereon,
      the
      Company agrees to cause its transfer agent to electronically transmit the
      Unlegended Shares by crediting the account of Subscriber’s prime Broker with DTC
      through its Deposit Withdrawal Agent Commission system. Such delivery must
      be
      made on or before the Unlegended Shares Delivery Date.

     

    (c) The
      Company understands that a delay in the delivery of the Unlegended Shares
      pursuant to Section 11 hereof later than two business days after the Unlegended
      Shares Delivery Date could result in economic loss to a Subscriber. As
      compensation to a Subscriber for such loss, the Company agrees to pay late
      payment fees (as liquidated damages and not as a penalty) to the Subscriber
      for
      late delivery of Unlegended Shares in the amount of $100 per business day after
      the Delivery Date for each $10,000 of purchase price of the Unlegended Shares
      subject to the delivery default. If during any 360 day period, the Company
      fails
      to deliver Unlegended Shares as required by this Section 11.7 for an aggregate
      of thirty (30) days, then each Subscriber or assignee holding Securities subject
      to such default may, at its option, require the Company to redeem all or any
      portion of the Shares subject to such default at a price per share equal to
      120%
      of the purchase price of such Common Stock (“Unlegended
      Redemption Amount”).
      The
      amount of the aforedescribed liquidated damages that have accrued to been paid
      for the twenty day period prior to the receipt by the Subscriber of the
      Unlegended Redemption Amount shall be credited against the Unlegended Redemption
      Amount. The Company shall pay any payments incurred under this Section in
      immediately available funds upon demand.

     

    
      
        
        

      

      
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    (d) In
      addition to any other rights available to a Subscriber, if the Company fails
      to
      deliver to a Subscriber Unlegended Shares as required pursuant to this
      Agreement, within seven (7) business days after the Unlegended Shares Delivery
      Date and the Subscriber or a broker on the Subscriber’s behalf, purchases (in an
      open market transaction or otherwise) shares of common stock to deliver in
      satisfaction of a sale by such Subscriber of the shares of Common Stock which
      the Subscriber was entitled to receive from the Company (a “Buy-In”),
      then
      the Company shall pay in cash to the Subscriber (in addition to any remedies
      available to or elected by the Subscriber) the amount by which (A) the
      Subscriber’s total purchase price (including brokerage commissions, if any) for
      the shares of common stock so purchased exceeds (B) the aggregate purchase
      price
      of the shares of Common Stock delivered to the Company for reissuance as
      Unlegended Shares together with interest thereon at a rate of 15% per annum,
      accruing until such amount and any accrued interest thereon is paid in full
      (which amount shall be paid as liquidated damages and not as a penalty). For
      example, if a Subscriber purchases shares of Common Stock having a total
      purchase price of $11,000 to cover a Buy-In with respect to $10,000 of purchase
      price of shares of Common Stock delivered to the Company for reissuance as
      Unlegended Shares, the Company shall be required to pay the Subscriber $1,000,
      plus interest. The Subscriber shall provide the Company written notice
      indicating the amounts payable to the Subscriber in respect of the
      Buy-In.

     

    (e) In
      the
      event a Subscriber shall request delivery of Unlegended Shares as described
      in
      Section 11.7 and the Company is required to deliver such Unlegended Shares
      pursuant to Section 11.7, the Company may not refuse to deliver Unlegended
      Shares based on any claim that such Subscriber or any one associated or
      affiliated with such Subscriber has been engaged in any violation of law, or
      for
      any other reason, unless, an injunction or temporary restraining order from
      a
      court, on notice, restraining and or enjoining delivery of such Unlegended
      Shares shall have been sought and obtained by the Company or at the Company’s
      request or with the Company’s assistance, and the Company has posted a surety
      bond for the benefit of such Subscriber in the amount of 120% of the amount
      of
      the aggregate purchase price of the Common Stock which are subject to the
      injunction or temporary restraining order, which bond shall remain in effect
      until the completion of arbitration/litigation of the dispute and the proceeds
      of which shall be payable to such Subscriber to the extent Subscriber obtains
      judgment in Subscriber’s favor.

     

    12. (a)
      Right
      of First Refusal.
      Until
      three (3) years after the Actual Effective Date, the Subscribers shall be given
      not less than seven (7) business days prior written notice of any proposed
      sale
      by the Company of its common stock or other securities or debt obligations,
      except in connection with (i) full or partial consideration in connection with
      a
      strategic merger, acquisition, consolidation or purchase of substantially all
      of
      the securities or assets of corporation or other entity, (ii) the Company’s
      issuance of securities in connection with strategic license agreements and
      other
      partnering arrangements so long as such issuances are not for the purpose of
      raising capital which holders of such securities or debt are not at any time
      granted registration rights, (iii) the Company’s issuance of Common Stock or the
      issuances or grants of options to purchase Common Stock to employees, directors
      or consultants of the Company pursuant to stock option plans and employee stock
      purchase plans, (iv) the conversion or exercise, as applicable of convertible
      securities of the Company outstanding on the Initial Closing Date and listed
      on
Schedule
      4(d),
      (v) as
      a result of conversion or issuance of Preferred Stock which are granted or
      issued pursuant to this Agreement or as a result of conversion or issuance
      of
      Series A Preferred Stock, (vi) the payment of dividends on the Preferred Stock,
      or Series A Preferred Stock, and liquidated and other damages hereunder or
      in
      respect of the Series A Preferred Stock, (vii) as has been described in the
      Reports or Other Written Information filed with the Commission not later than
      three Business Days before the Initial Closing Date and available on the EDGAR
      system and (viii) the issuance of securities in connection with a commercial
      bank lending arrangement, (collectively the foregoing are “Excepted
      Issuances”).
      Subject to the rights of the holders of the Series A Preferred Stock, the
      Subscribers of the Preferred Stock herein shall have the right during the seven
      (7) business days following receipt of the notice to participate in such
      offering of common stock, debt or other securities in accordance with the terms
      and conditions set forth in the notice of sale in the same proportion to each
      other as their purchase of Preferred Stock in the Offering for up to the entire
      amount of such other offering prior to any rights of first refusal which may
      be
      exercised by any other class of the Corporation’s securities (other than the
      Series A Preferred Stock). In the event such terms and conditions are modified
      during the notice period, the Subscribers shall be given prompt notice of such
      modification and shall have the right during the seven (7) business days
      following the notice of modification to exercise such right. 

     

    
      
        
        

      

      
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    (b) Maximum
      Exercise of Rights.
      In the
      event the exercise of the rights described in Section 12(a) would result in
      the
      issuance of an amount of Common Stock of the Company that would exceed the
      maximum amount that may be issued to a Subscriber calculated in the manner
      described in Section 4(c) of the Certificate of Designation, then the issuance
      to Subscriber of such additional shares of Common Stock of the Company to such
      Subscriber will be deferred in whole or in part until such time as such
      Subscriber is able to beneficially own such Common Stock without exceeding
      the
      maximum amount set forth calculated in such manner. The determination of when
      such Common Stock may be issued shall be made by each Subscriber as to only
      such
      Subscriber.

     

    13. Miscellaneous.

     

    (a) Notices.
      All
      notices, demands, requests, consents, approvals, and other communications
      required or permitted hereunder shall be in writing and, unless otherwise
      specified herein, shall be (i) personally served, (ii) deposited in the mail,
      registered or certified, return receipt requested, postage prepaid, (iii)
      delivered by reputable air courier service with charges prepaid, or (iv)
      transmitted by hand delivery, telegram, or facsimile, addressed as set forth
      below or to such other address as such party shall have specified most recently
      by written notice. Any notice or other communication required or permitted
      to be
      given hereunder shall be deemed effective (a) upon hand delivery or delivery
      by
      facsimile, with accurate confirmation generated by the transmitting facsimile
      machine, at the address or number designated below (if delivered on a business
      day during normal business hours where such notice is to be received), or the
      first business day following such delivery (if delivered other than on a
      business day during normal business hours where such notice is to be received)
      or (b) on the second business day following the date of mailing by express
      courier service, fully prepaid, addressed to such address, or upon actual
      receipt of such mailing, whichever shall first occur. The addresses for such
      communications shall be: (i) if to the Company, to: Medasorb Technologies
      Corporation, 7 Deer Park Drive, Suite K, Monmouth Junction, NJ 08852, Attn:
      Al
      Kraus, CEO, telecopier: (732) 329-8650, with a copy by telecopier only to:
      Cooley Godward Kronish LLP, 1114 Avenue of the Americas, New York, New York,
      10036, Attn: Alison Newman, Telecopy 212-479-6275, and (ii)
      if
      to the Subscriber, to: the one or more addresses and telecopier numbers
      indicated on the signature pages hereto, with an additional copy by telecopier
      only: (a) to Reed Smith LLP, 599 Lexington Avenue, New York, New York 10022,
      Telecopy 212-521-5450; Telephone Number 212-549-0396, Attn: Gerard S. DiFiore,
      Esq., and (b) if such Subscriber is CMT or Adelson Partners, L.L.C., to Epstein
      Becker & Green, P.C., 250 Park Avenue, New York, NY 10177-1211, Telecopy
      (212) 878-8727, Attn: Brian J. Platton, Esq.

     

    
      
        
        

      

      
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    (b) Entire
      Agreement; Assignment.
      This
      Agreement and other documents delivered in connection herewith represent the
      entire agreement between the parties hereto with respect to the subject matter
      hereof and may be amended only by a writing executed by both parties. Neither
      the Company nor the Subscribers have relied on any representations not contained
      or referred to in this Agreement and the documents delivered herewith. No right
      or obligation of the Company shall be assigned without prior notice to and
      the
      written consent of the Subscribers.

     

    (c) Counterparts/Execution.
      This
      Agreement may be executed in any number of counterparts and by the different
      signatories hereto on separate counterparts, each of which, when so executed,
      shall be deemed an original, but all such counterparts shall constitute but
      one
      and the same instrument. This Agreement may be executed by facsimile signature
      and delivered by facsimile transmission.

     

    (d) Law
      Governing this Agreement.
      This
      Agreement shall be governed by and construed in accordance with the laws of
      the
      State of New York without regard to conflicts of laws principles that would
      result in the application of the substantive laws of another jurisdiction.
      Any
      action brought by either party against the other concerning the transactions
      contemplated by this Agreement shall be brought only in the civil or state
      courts of New York or in the federal courts located in New York County.
The
      parties and the individuals executing this Agreement and other agreements
      referred to herein or delivered in connection herewith on behalf of the Company
      agree to submit to the jurisdiction of such courts and waive trial by
      jury.
      The
      prevailing party shall be entitled to recover from the other party its
      reasonable attorney’s fees and costs. In the event that any provision of this
      Agreement or any other agreement delivered in connection herewith is invalid
      or
      unenforceable under any applicable statute or rule of law, then such provision
      shall be deemed inoperative to the extent that it may conflict therewith and
      shall be deemed modified to conform with such statute or rule of law. Any such
      provision which may prove invalid or unenforceable under any law shall not
      affect the validity or enforceability of any other provision of any
      agreement.

     

    (e) Specific
      Enforcement, Consent to Jurisdiction.
      The
      Company and Subscriber acknowledge and agree that irreparable damage may occur
      in the event that any of the provisions of this Agreement were not performed
      in
      accordance with their specific terms or were otherwise breached. It is
      accordingly agreed that the parties shall be entitled to seek one or more
      preliminary and final injunctions to prevent or cure breaches of the provisions
      of this Agreement and to enforce specifically the terms and provisions hereof,
      this being in addition to any other remedy to which any of them may be entitled
      by law or equity. Subject to Section 13(d) hereof, each of the Company,
      Subscriber and any signator hereto in his personal capacity hereby waives,
      and
      agrees not to assert in any such suit, action or proceeding, any claim that
      it
      is not personally subject to the jurisdiction in New York of such court, that
      the suit, action or proceeding is brought in an inconvenient forum or that
      the
      venue of the suit, action or proceeding is improper. Nothing in this Section
      shall affect or limit any right to serve process in any other manner permitted
      by law.

     

    (f) Damages.
      In the
      event the Subscriber is entitled to receive any liquidated damages pursuant
      to
      the Transactions, the Subscriber may elect to receive the greater of actual
      damages or such liquidated damages.

     

    
      
        
        

      

      
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          27
          -

        
          

        

      

      
        
        

      

    

     

    (g) Independent
      Nature of Subscribers.
      The
      Company acknowledges that the obligations of each Subscriber under the
      Transaction Documents are several and not joint with the obligations of any
      other Subscriber, and no Subscriber shall be responsible in any way for the
      performance of the obligations of any other Subscriber under the Transaction
      Documents. The Company acknowledges that each Subscriber has represented that
      the decision of each Subscriber to purchase Securities has been made by such
      Subscriber independently of any other Subscriber and independently of any
      information, materials, statements or opinions as to the business, affairs,
      operations, assets, properties, liabilities, results of operations, condition
      (financial or otherwise) or prospects of the Company which may have been made
      or
      given by any other Subscriber or by any agent or employee of any other
      Subscriber, and no Subscriber or any of its agents or employees shall have
      any
      liability to any Subscriber (or any other person) relating to or arising from
      any such information, materials, statements or opinions. The Company
      acknowledges that nothing contained in any Transaction Document, and no action
      taken by any Subscriber pursuant hereto or thereto (including, but not limited
      to, the (i) inclusion of a Subscriber in the Registration Statement and (ii)
      review by, and consent to, such Registration Statement by a Subscriber) shall
      be
      deemed to constitute the Subscribers as a partnership, an association, a joint
      venture or any other kind of entity, or create a presumption that the
      Subscribers are in any way acting in concert or as a group with respect to
      such
      obligations or the transactions contemplated by the Transaction Documents.
      The
      Company acknowledges that each Subscriber shall be entitled to independently
      protect and enforce its rights, including without limitation, the rights arising
      out of the Transaction Documents, and it shall not be necessary for any other
      Subscriber to be joined as an additional party in any proceeding for such
      purpose. The Company acknowledges that it has elected to provide all Subscribers
      with the same terms and Transaction Documents for the convenience of the Company
      and not because Company was required or requested to do so by the Subscribers.
      The Company acknowledges that such procedure with respect to the Transaction
      Documents in no way creates a presumption that the Subscribers are in any way
      acting in concert or as a group with respect to the Transaction Documents or
      the
      transactions contemplated thereby.

     

    (h) Consent.
      As used
      in the Agreement, “consent of the Subscribers” or similar language means the
      consent of holders of not less than (i) a majority of the Shares issuable upon
      conversion of outstanding Preferred Stock owned by Subscribers on the date
      consent is requested and (ii) the written consent of NJTC, if it is then a
      holder of at least 25% of the shares of Preferred Stock issued to it on the
      Initial Closing Date.

     

    (i) Equal
      Treatment.
      No
      consideration shall be offered or paid to any person to amend or consent to
      a
      waiver or modification of any provision of the Transaction Documents unless
      the
      same consideration is also offered to all the parties to the Transaction
      Documents.

     

    [THIS
      SPACE INTENTIONALLY LEFT BLANK]

     

    
      
        
        

      

      
        -
          28
          -

        
          

        

      

      
        
        

      

    

    SIGNATURE
      PAGE TO SUBSCRIPTION AGREEMENT ( )

     

    Please
      acknowledge your acceptance of the foregoing Subscription Agreement by signing
      and returning a copy to the undersigned whereupon it shall become a binding
      agreement between us.

     

    
      	
              MEDASORB
                TECHNOLOGIES CORPORATION

            
	
              a
                Nevada corporation

            
	 	 
	
              By:
                

            	   

	
              Name:
                Al Kraus

            
	
              Title:
                Chief Executive Officer

            
	 
	
              Dated:
                _______________________, 2008

            

    

     

    
      	
              SUBSCRIBER

            	 	
              PURCHASE
                PRICE AND STATED VALUE
                OF PREFERRED STOCK

            
	 	 	 
	 	 	
              $_________

            
	 	 	 
	                             
              	 	 
	
                                           
                

            	 	 
	 	 	 
	   
	 	 
	
              (Signature)
                

            	 	 

    

     

    
      
        
        

      

      
        -
          29
          -

        
          

        

      

      
        
        

      

    

    LIST
      OF EXHIBITS AND SCHEDULES

     

    
      	
              Exhibit A

            	
              Certificate
                of Designation

            
	
              Exhibit B

            	
              Escrow
                Agreement

            
	
              Exhibit C

            	
              Form
                of Nevada Legal Opinion

            
	
              Exhibit D

            	
              Form
                of New York Legal Opinion

            
	
              Exhibit E

            	
              Series
                A Waiver (Agreement and Consent)

            
	
              Exhibit F

            	
              100-Day
                Plan

            
	
              Schedule 4(d)

            	
              Additional
                Issuances / Capitalization

            
	
              Schedule 4(e)

            	
              Consents

            
	
              Schedule 4(f)

            	
              Outstanding
                Reset Rights

            
	
              Schedule 4(h)

            	
              Litigation

            
	
              Schedule 4(q)

            	
              Undisclosed
                Liabilities

            
	
              Schedule 4(v)

            	
              Transfer
                Agent

            
	
              Schedule 8(i)

            	
              Lock-up
                Exceptions

            
	
              Schedule 9(e)

            	
              Use
                of Proceeds

            
	
              Schedule 9(q)

            	
              Affiliate
                Transactions

            
	
              Schedule 9(s)

            	
              Employees

            
	
              Schedule 11.1

            	
              Other
                Registrable Securities

            

    

     

    
      
        
        

      

      
        -
          30
          -

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