<SEC-DOCUMENT>0001193125-11-115399.txt : 20110428
<SEC-HEADER>0001193125-11-115399.hdr.sgml : 20110428
<ACCEPTANCE-DATETIME>20110428164923
ACCESSION NUMBER:		0001193125-11-115399
CONFORMED SUBMISSION TYPE:	8-K
PUBLIC DOCUMENT COUNT:		9
CONFORMED PERIOD OF REPORT:	20110424
ITEM INFORMATION:		Entry into a Material Definitive Agreement
ITEM INFORMATION:		Unregistered Sales of Equity Securities
ITEM INFORMATION:		Material Modifications to Rights of Security Holders
ITEM INFORMATION:		Departure of Directors or Certain Officers; Election of Directors; Appointment of Certain Officers: Compensatory Arrangements of Certain Officers
ITEM INFORMATION:		Other Events
ITEM INFORMATION:		Financial Statements and Exhibits
FILED AS OF DATE:		20110428
DATE AS OF CHANGE:		20110428

FILER:

	COMPANY DATA:	
		COMPANY CONFORMED NAME:			AP PHARMA INC /DE/
		CENTRAL INDEX KEY:			0000818033
		STANDARD INDUSTRIAL CLASSIFICATION:	PHARMACEUTICAL PREPARATIONS [2834]
		IRS NUMBER:				942875566
		STATE OF INCORPORATION:			DE
		FISCAL YEAR END:			1231

	FILING VALUES:
		FORM TYPE:		8-K
		SEC ACT:		1934 Act
		SEC FILE NUMBER:	001-33221
		FILM NUMBER:		11789196

	BUSINESS ADDRESS:	
		STREET 1:		123 SAGINAW DRIVE
		CITY:			REDWOOD CITY
		STATE:			CA
		ZIP:			94063
		BUSINESS PHONE:		6503662626

	MAIL ADDRESS:	
		STREET 1:		123 SAGINAW DRIVE
		STREET 2:		123 SAGINAW DRIVE
		CITY:			REDWOOD CITY
		STATE:			CA
		ZIP:			94063

	FORMER COMPANY:	
		FORMER CONFORMED NAME:	ADVANCED POLYMER SYSTEMS INC /DE/
		DATE OF NAME CHANGE:	19920703
</SEC-HEADER>
<DOCUMENT>
<TYPE>8-K
<SEQUENCE>1
<FILENAME>d8k.htm
<DESCRIPTION>FORM 8-K
<TEXT>
<HTML><HEAD>
<TITLE>Form 8-K</TITLE>
</HEAD>
 <BODY BGCOLOR="WHITE">

 <P STYLE="line-height:0px;margin-top:0px;margin-bottom:0px;border-bottom:0.5pt solid #000000">&nbsp;</P>
<P STYLE="line-height:3px;margin-top:0px;margin-bottom:2px;border-bottom:0.5pt solid #000000">&nbsp;</P> <P STYLE="margin-top:4px;margin-bottom:0px" ALIGN="center"><FONT STYLE="font-family:Times New Roman" SIZE="5"><B>UNITED STATES </B></FONT></P>
<P STYLE="margin-top:0px;margin-bottom:0px" ALIGN="center"><FONT STYLE="font-family:Times New Roman" SIZE="5"><B>SECURITIES AND EXCHANGE COMMISSION </B></FONT></P> <P STYLE="margin-top:0px;margin-bottom:0px" ALIGN="center"><FONT
STYLE="font-family:Times New Roman" SIZE="3"><B>Washington, D.C. 20549 </B></FONT></P> <P STYLE="font-size:6px;margin-top:0px;margin-bottom:0px">&nbsp;</P><center>
<P STYLE="line-height:6px;margin-top:0px;margin-bottom:2px;border-bottom:1pt solid #000000;width:21%">&nbsp;</P></center> <P STYLE="margin-top:6px;margin-bottom:0px" ALIGN="center"><FONT STYLE="font-family:Times New Roman" SIZE="5"><B>FORM 8-K
</B></FONT></P> <P STYLE="font-size:6px;margin-top:0px;margin-bottom:0px">&nbsp;</P><center> <P STYLE="line-height:6px;margin-top:0px;margin-bottom:2px;border-bottom:1pt solid #000000;width:21%">&nbsp;</P></center>
<P STYLE="margin-top:6px;margin-bottom:0px" ALIGN="center"><FONT STYLE="font-family:Times New Roman" SIZE="4"><B>CURRENT REPORT </B></FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px" ALIGN="center"><FONT
STYLE="font-family:Times New Roman" SIZE="3"><B>Pursuant to Section&nbsp;13 or 15(d) of the </B></FONT></P> <P STYLE="margin-top:0px;margin-bottom:0px" ALIGN="center"><FONT STYLE="font-family:Times New Roman" SIZE="3"><B>Securities Exchange Act of
1934 </B></FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px" ALIGN="center"><FONT STYLE="font-family:Times New Roman" SIZE="3"><B>Date of Report (Date of earliest event reported) April&nbsp;24, 2011 </B></FONT></P>
<P STYLE="font-size:6px;margin-top:0px;margin-bottom:0px">&nbsp;</P><center> <P STYLE="line-height:6px;margin-top:0px;margin-bottom:2px;border-bottom:1pt solid #000000;width:21%">&nbsp;</P></center>
<P STYLE="margin-top:6px;margin-bottom:0px" ALIGN="center"><FONT STYLE="font-family:Times New Roman" SIZE="6"><B>A.P. Pharma, Inc. </B></FONT></P> <P STYLE="margin-top:0px;margin-bottom:0px" ALIGN="center"><FONT
STYLE="font-family:Times New Roman" SIZE="2"><B>(Exact name of registrant as specified in its charter) </B></FONT></P> <P STYLE="font-size:6px;margin-top:0px;margin-bottom:0px">&nbsp;</P><center>
<P STYLE="line-height:6px;margin-top:0px;margin-bottom:2px;border-bottom:1pt solid #000000;width:21%">&nbsp;</P></center> <P STYLE="font-size:6px;margin-top:0px;margin-bottom:0px">&nbsp;</P>
<TABLE CELLSPACING="0" CELLPADDING="0" WIDTH="100%" BORDER="0" ALIGN="center">

<TR>
<TD WIDTH="34%"></TD>
<TD VALIGN="bottom" WIDTH="1%"></TD>
<TD WIDTH="32%"></TD>
<TD VALIGN="bottom" WIDTH="1%"></TD>
<TD WIDTH="32%"></TD></TR>
<TR>
<TD VALIGN="top" ALIGN="center"><FONT STYLE="font-family:Times New Roman" SIZE="2"><B>Delaware</B></FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="top" ALIGN="center"><FONT STYLE="font-family:Times New Roman" SIZE="2"><B>001-33221</B></FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="top" ALIGN="center"><FONT STYLE="font-family:Times New Roman" SIZE="2"><B>94-2875566</B></FONT></TD></TR>
<TR>
<TD VALIGN="top" ALIGN="center"> <P STYLE="margin-top:0px;margin-bottom:0px" ALIGN="center"><FONT STYLE="font-family:Times New Roman" SIZE="1"><B>(State or other jurisdiction</B></FONT></P> <P STYLE="margin-top:0px;margin-bottom:1px" ALIGN="center"><FONT
STYLE="font-family:Times New Roman" SIZE="1"><B>of incorporation)</B></FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="top" ALIGN="center"> <P STYLE="margin-top:0px;margin-bottom:0px" ALIGN="center"><FONT STYLE="font-family:Times New Roman" SIZE="1"><B>(Commission</B></FONT></P> <P STYLE="margin-top:0px;margin-bottom:1px" ALIGN="center"><FONT
STYLE="font-family:Times New Roman" SIZE="1"><B>File Number)</B></FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="top" ALIGN="center"> <P STYLE="margin-top:0px;margin-bottom:0px" ALIGN="center"><FONT STYLE="font-family:Times New Roman" SIZE="1"><B>(I.R.S. Employer</B></FONT></P> <P STYLE="margin-top:0px;margin-bottom:1px" ALIGN="center"><FONT
STYLE="font-family:Times New Roman" SIZE="1"><B>Identification No.)</B></FONT></P></TD></TR>
<TR>
<TD HEIGHT="16" COLSPAN="3"></TD>
<TD HEIGHT="16" COLSPAN="2"></TD></TR>
<TR>
<TD VALIGN="top" COLSPAN="3" ALIGN="center"> <P STYLE="margin-top:0px;margin-bottom:0px" ALIGN="center"><FONT STYLE="font-family:Times New Roman" SIZE="2"><B>123 Saginaw Drive</B></FONT></P>
<P STYLE="margin-top:0px;margin-bottom:1px" ALIGN="center"><FONT STYLE="font-family:Times New Roman" SIZE="2"><B>Redwood City CA</B></FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="center"><FONT STYLE="font-family:Times New Roman" SIZE="2"><B>94063</B></FONT></TD></TR>
<TR>
<TD VALIGN="top" COLSPAN="3" ALIGN="center"><FONT STYLE="font-family:Times New Roman" SIZE="1"><B>(Address of principal executive offices)</B></FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="top" ALIGN="center"><FONT STYLE="font-family:Times New Roman" SIZE="1"><B>(Zip Code)</B></FONT></TD></TR></TABLE>
<P STYLE="margin-top:12px;margin-bottom:0px" ALIGN="center"><FONT STYLE="font-family:Times New Roman" SIZE="2"><B>Registrant&#146;s telephone number, including area code (650)&nbsp;366-2626 </B></FONT></P>
<P STYLE="margin-top:12px;margin-bottom:0px" ALIGN="center"><FONT STYLE="font-family:Times New Roman" SIZE="2"><B>N/A </B></FONT></P>
<P STYLE="margin-top:0px;margin-bottom:0px" ALIGN="center"><FONT STYLE="font-family:Times New Roman" SIZE="1"><B>(Former name or former address, if changed since last report) </B></FONT></P>
<P STYLE="font-size:6px;margin-top:0px;margin-bottom:0px">&nbsp;</P><center> <P STYLE="line-height:6px;margin-top:0px;margin-bottom:2px;border-bottom:1pt solid #000000;width:21%">&nbsp;</P></center> <P STYLE="margin-top:6px;margin-bottom:0px"><FONT
STYLE="font-family:Times New Roman" SIZE="2">Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions (see General Instruction A.2.
below): </FONT></P> <P STYLE="font-size:6px;margin-top:0px;margin-bottom:0px">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="4%" VALIGN="top" ALIGN="left"><FONT STYLE="font-family:Times New Roman" SIZE="2"><FONT STYLE="FONT-FAMILY:WINGDINGS">&#168;</FONT></FONT></TD>
<TD ALIGN="left" VALIGN="top"><FONT STYLE="font-family:Times New Roman" SIZE="2">Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425) </FONT></TD></TR></TABLE>
<P STYLE="font-size:6px;margin-top:0px;margin-bottom:0px">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="4%" VALIGN="top" ALIGN="left"><FONT STYLE="font-family:Times New Roman" SIZE="2"><FONT STYLE="FONT-FAMILY:WINGDINGS">&#168;</FONT></FONT></TD>
<TD ALIGN="left" VALIGN="top"><FONT STYLE="font-family:Times New Roman" SIZE="2">Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12) </FONT></TD></TR></TABLE>
<P STYLE="font-size:6px;margin-top:0px;margin-bottom:0px">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="4%" VALIGN="top" ALIGN="left"><FONT STYLE="font-family:Times New Roman" SIZE="2"><FONT STYLE="FONT-FAMILY:WINGDINGS">&#168;</FONT></FONT></TD>
<TD ALIGN="left" VALIGN="top"><FONT STYLE="font-family:Times New Roman" SIZE="2">Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b)) </FONT></TD></TR></TABLE>
<P STYLE="font-size:6px;margin-top:0px;margin-bottom:0px">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="4%" VALIGN="top" ALIGN="left"><FONT STYLE="font-family:Times New Roman" SIZE="2"><FONT STYLE="FONT-FAMILY:WINGDINGS">&#168;</FONT></FONT></TD>
<TD ALIGN="left" VALIGN="top"><FONT STYLE="font-family:Times New Roman" SIZE="2">Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c)) </FONT></TD></TR></TABLE>
<P STYLE="font-size:8px;margin-top:0px;margin-bottom:0px">&nbsp;</P> <P STYLE="line-height:0px;margin-top:0px;margin-bottom:0px;border-bottom:0.5pt solid #000000">&nbsp;</P>
<P STYLE="line-height:3px;margin-top:0px;margin-bottom:0px;border-bottom:0.5pt solid #000000">&nbsp;</P> <P STYLE="line-height:0px;margin-top:0px;margin-bottom:2px;border-bottom:0.5pt solid #000000">&nbsp;</P>

<p Style='page-break-before:always'>
<HR  SIZE="3" style="COLOR:#999999" WIDTH="100%" ALIGN="CENTER">


<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="9%" VALIGN="top" ALIGN="left"><FONT STYLE="font-family:Times New Roman" SIZE="2"><B>Item&nbsp;1.01</B></FONT></TD>
<TD ALIGN="left" VALIGN="top"><FONT STYLE="font-family:Times New Roman" SIZE="2"><B>Entry Into A Material Definitive Agreement </B></FONT></TD></TR></TABLE>
<P STYLE="margin-top:6px;margin-bottom:0px"><FONT STYLE="font-family:Times New Roman" SIZE="2"><B>Securities Purchase Agreement </B></FONT></P> <P STYLE="margin-top:6px;margin-bottom:0px; text-indent:4%"><FONT
STYLE="font-family:Times New Roman" SIZE="2">On April&nbsp;24, 2011, A.P. Pharma, Inc. (the &#147;Company&#148;) entered into a Securities Purchase Agreement (the &#147;Purchase Agreement&#148;) with the purchasers named therein (the
&#147;Purchasers&#148;). Pursuant to the Purchase Agreement, the Company may issue up to $4.5 million aggregate principal amount of senior secured convertible notes due 2021 (the &#147;Notes&#148;) that are convertible into shares (the
&#147;Conversion Shares&#148;) of the Company&#146;s common stock, par value $0.01, subject to the satisfaction of closing conditions. The Company will receive $1.5 million at an initial closing that is expected to take place on April&nbsp;29, 2011,
or at such other time the Company and the Purchasers may agree (the &#147;Initial Closing Date&#148;). The Purchasers may also purchase up to an additional $3.0 million aggregate principal amount of Notes from time to time, with such right expiring
upon the second anniversary of the Initial Closing Date. </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px; text-indent:4%"><FONT STYLE="font-family:Times New Roman" SIZE="2">The Notes are secured by substantially all of the assets of the
Company. The Notes bear interest at 20%&nbsp;per annum, payable quarterly in cash or in additional principal amount of Notes at the election of the Purchasers. The Notes are convertible into Conversion Shares at a conversion rate of 25,000 shares
per $1,000 principal amount of Notes. The conversion rate will be adjusted for certain customary events. There is no right to convert the Notes to the extent that after giving effect to such conversion the holder (together with such holder&#146;s
affiliates) would beneficially own in excess of 9.99% (the &#147;Maximum Percentage&#148;) of the number of shares of common stock of the Company outstanding immediately after giving effect to such conversion. Each holder of the Notes can increase
or decrease the Maximum Percentage for such holder&#146;s Notes by written notice to the Company, provided that such increase or decrease will not be effective until 61 days after delivery of the notice. Under the Notes, certain events are
considered &#147;Events of Default,&#148; which will allow a Purchaser to require the Company to redeem all or any portion of its Notes, including: </FONT></P> <P STYLE="font-size:6px;margin-top:0px;margin-bottom:0px">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="5%"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD WIDTH="2%" VALIGN="top" ALIGN="left"><FONT STYLE="font-family:Times New Roman" SIZE="2">&#149;</FONT></TD>
<TD WIDTH="1%" VALIGN="top"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD ALIGN="left" VALIGN="top"> <P ALIGN="left"><FONT STYLE="font-family:Times New Roman" SIZE="2">the Company&#146;s failure to satisfy its conversion obligations on any of the Notes upon the exercise of a Purchaser&#146;s conversion right on such
Notes provided that such failure continues for a period of 10 business days; </FONT></P></TD></TR></TABLE> <P STYLE="font-size:6px;margin-top:0px;margin-bottom:0px">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="5%"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD WIDTH="2%" VALIGN="top" ALIGN="left"><FONT STYLE="font-family:Times New Roman" SIZE="2">&#149;</FONT></TD>
<TD WIDTH="1%" VALIGN="top"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD ALIGN="left" VALIGN="top"> <P ALIGN="left"><FONT STYLE="font-family:Times New Roman" SIZE="2">the Company&#146;s failure to pay the principal on any of the Notes, any interest due under the Notes or any other amounts due under other agreements
delivered in connection with this transaction, provided that in the case of failed interest payments, such failure continues for a period of five business days; </FONT></P></TD></TR></TABLE>
<P STYLE="font-size:6px;margin-top:0px;margin-bottom:0px">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="5%"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD WIDTH="2%" VALIGN="top" ALIGN="left"><FONT STYLE="font-family:Times New Roman" SIZE="2">&#149;</FONT></TD>
<TD WIDTH="1%" VALIGN="top"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD ALIGN="left" VALIGN="top"> <P ALIGN="left"><FONT STYLE="font-family:Times New Roman" SIZE="2">the Company&#146;s failure to comply with any other term, covenant or agreement contained in the Purchase Agreement provided that such failure is not
cured within 10 business days; </FONT></P></TD></TR></TABLE> <P STYLE="font-size:6px;margin-top:0px;margin-bottom:0px">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="5%"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD WIDTH="2%" VALIGN="top" ALIGN="left"><FONT STYLE="font-family:Times New Roman" SIZE="2">&#149;</FONT></TD>
<TD WIDTH="1%" VALIGN="top"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD ALIGN="left" VALIGN="top"> <P ALIGN="left"><FONT STYLE="font-family:Times New Roman" SIZE="2">any representation or warranty made by the Company in the Purchase Agreement shall prove to be materially false or misleading as of the date made or
deemed made; </FONT></P></TD></TR></TABLE> <P STYLE="font-size:6px;margin-top:0px;margin-bottom:0px">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="5%"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD WIDTH="2%" VALIGN="top" ALIGN="left"><FONT STYLE="font-family:Times New Roman" SIZE="2">&#149;</FONT></TD>
<TD WIDTH="1%" VALIGN="top"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD ALIGN="left" VALIGN="top"> <P ALIGN="left"><FONT STYLE="font-family:Times New Roman" SIZE="2">default by the Company in any payment when due under any indebtedness in an aggregate principal amount of $100,000; </FONT></P></TD></TR></TABLE>
<P STYLE="font-size:6px;margin-top:0px;margin-bottom:0px">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="5%"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD WIDTH="2%" VALIGN="top" ALIGN="left"><FONT STYLE="font-family:Times New Roman" SIZE="2">&#149;</FONT></TD>
<TD WIDTH="1%" VALIGN="top"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD ALIGN="left" VALIGN="top"> <P ALIGN="left"><FONT STYLE="font-family:Times New Roman" SIZE="2">default by the Company under any material contract, as such term is defined in the Purchase Agreement; </FONT></P></TD></TR></TABLE>
<P STYLE="font-size:6px;margin-top:0px;margin-bottom:0px">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="5%"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD WIDTH="2%" VALIGN="top" ALIGN="left"><FONT STYLE="font-family:Times New Roman" SIZE="2">&#149;</FONT></TD>
<TD WIDTH="1%" VALIGN="top"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD ALIGN="left" VALIGN="top"> <P ALIGN="left"><FONT STYLE="font-family:Times New Roman" SIZE="2">the Security Agreement (as defined below) ceases to create a valid and perfected lien of the collateral; </FONT></P></TD></TR></TABLE>
<P STYLE="font-size:6px;margin-top:0px;margin-bottom:0px">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="5%"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD WIDTH="2%" VALIGN="top" ALIGN="left"><FONT STYLE="font-family:Times New Roman" SIZE="2">&#149;</FONT></TD>
<TD WIDTH="1%" VALIGN="top"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD ALIGN="left" VALIGN="top"> <P ALIGN="left"><FONT STYLE="font-family:Times New Roman" SIZE="2">the failure of the respective Registration Statements (as defined below) to be declared effective by the Securities and Exchange Commission (the
&#147;SEC&#148;) on or prior to the date that is 60 days after the applicable Effectiveness Deadline (as defined in the Purchase Agreement), or, while the applicable Registration Statement is required to be maintained effective pursuant to the terms
of the Purchase Agreement, the effectiveness of the applicable Registration Statement lapses for any reason or is unavailable to any holder of the Notes for sale of all of such holder&#146;s Conversion Shares, and such lapse or unavailability
continues for a period of 20 consecutive days or for more than an aggregate of 45 days in any 365-day period, subject to certain grace periods; and </FONT></P></TD></TR></TABLE> <P STYLE="font-size:6px;margin-top:0px;margin-bottom:0px">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="5%"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD WIDTH="2%" VALIGN="top" ALIGN="left"><FONT STYLE="font-family:Times New Roman" SIZE="2">&#149;</FONT></TD>
<TD WIDTH="1%" VALIGN="top"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD ALIGN="left" VALIGN="top"> <P ALIGN="left"><FONT STYLE="font-family:Times New Roman" SIZE="2">certain events of bankruptcy or insolvency with respect to the Company. </FONT></P></TD></TR></TABLE>

<p Style='page-break-before:always'>
<HR  SIZE="3" style="COLOR:#999999" WIDTH="100%" ALIGN="CENTER">

 <P STYLE="margin-top:0px;margin-bottom:0px; text-indent:4%"><FONT STYLE="font-family:Times New Roman" SIZE="2">Pursuant to the Purchase Agreement, the Company agreed to file within 30 days of the Initial
Closing Date (i)&nbsp;a registration statement on Form S-1 with the SEC to register the offer and sale of up to $20.0 million of equity securities to be offered and sold by the Company on a primary basis (the &#147;Follow-on Registration
Statement&#148;) and (ii)&nbsp;a registration statement on Form S-3 with the SEC covering the resale of the full amount of the Conversion Shares (the &#147;Resale Registration Statement&#148; and together with the Follow-on Registration Statement,
the &#147;Registration Statements&#148;). The Company agreed to use its commercially reasonable efforts to cause the Follow-on Registration Statement to be declared effective by the SEC as promptly as practicable and the Resale Registration
Statement to be declared effective by the SEC within 90 days after the Initial Closing Date (or 120 days in the event the Resale Registration Statement is reviewed by the SEC). If the Company fails to meet certain filing or effectiveness deadlines
with respect to the Registration Statements or fails to keep any Registration Statement continuously effective (with limited exceptions), the Company may be obligated to pay to the holders of the Conversion Shares liquidated damages in the amount of
2%&nbsp;per month&nbsp;of such holder&#146;s pro rata interest in the total purchase price of the Notes. In the event the Company fails to pay such liquidated damages in a timely manner, the damages will bear interest at the rate of 2%&nbsp;per
month (prorated for partial months) until paid in full. </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px; text-indent:4%"><FONT STYLE="font-family:Times New Roman" SIZE="2">In connection with the Purchase Agreement, the Company and Tang
Capital Partners, LP, in its capacity as representative of the Purchasers (the &#147;Agent&#148;), entered into a Security Agreement dated April&nbsp;24, 2011 (the &#147;Security Agreement&#148;), pursuant to which the Company granted to the Agent a
security interest in substantially all of its assets. </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px; text-indent:4%"><FONT STYLE="font-family:Times New Roman" SIZE="2">The financing is exempt from registration pursuant to the exemption for
transactions by an issuer not involving any public offering under Section&nbsp;4(2) the Securities Act of 1933, as amended (the &#147;Securities Act&#148;), and Regulation D under the Securities Act. </FONT></P>
<P STYLE="margin-top:12px;margin-bottom:0px; text-indent:4%"><FONT STYLE="font-family:Times New Roman" SIZE="2">The securities sold and issued in connection with the Purchase Agreement have not been registered under the Securities Act or any state
securities laws and may not be offered or sold in the United States absent registration with the SEC or an applicable exemption from the registration requirements. </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px; text-indent:4%"><FONT
STYLE="font-family:Times New Roman" SIZE="2">The foregoing description of the transaction is only a summary and is qualified in its entirety by reference to the Purchase Agreement, the Form of Note and the Security Agreement, copies of which are
filed as Exhibits 10.1, 10.2 and 10.3 hereto, respectively. </FONT></P> <P STYLE="margin-top:18px;margin-bottom:0px"><FONT STYLE="font-family:Times New Roman" SIZE="2"><B>Lease Amendment </B></FONT></P>
<P STYLE="margin-top:6px;margin-bottom:0px; text-indent:4%"><FONT STYLE="font-family:Times New Roman" SIZE="2">On April&nbsp;25, 2011, the Company entered into the Second Amendment to Lease (the &#147;Lease Amendment&#148;) with Metropolitan Life
Insurance Company, effective as of April&nbsp;1, 2011, pursuant to which the Company extended the lease for its offices through September&nbsp;30, 2011. A copy of the Lease Amendment is filed as Exhibit 10.4 hereto. </FONT></P>
<P STYLE="font-size:18px;margin-top:0px;margin-bottom:0px">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="9%" VALIGN="top" ALIGN="left"><FONT STYLE="font-family:Times New Roman" SIZE="2"><B>Item&nbsp;3.02</B></FONT></TD>
<TD ALIGN="left" VALIGN="top"><FONT STYLE="font-family:Times New Roman" SIZE="2"><B>Unregistered Sales of Equity Securities </B></FONT></TD></TR></TABLE> <P STYLE="margin-top:6px;margin-bottom:0px; text-indent:4%"><FONT
STYLE="font-family:Times New Roman" SIZE="2">The information called for by this item is contained in Item&nbsp;1.01, which is incorporated herein by reference.</FONT></P> <P STYLE="font-size:18px;margin-top:0px;margin-bottom:0px">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="9%" VALIGN="top" ALIGN="left"><FONT STYLE="font-family:Times New Roman" SIZE="2"><B>Item&nbsp;3.03</B></FONT></TD>
<TD ALIGN="left" VALIGN="top"><FONT STYLE="font-family:Times New Roman" SIZE="2"><B>Material Modification to Rights of Security Holders </B></FONT></TD></TR></TABLE> <P STYLE="margin-top:6px;margin-bottom:0px; text-indent:4%"><FONT
STYLE="font-family:Times New Roman" SIZE="2">In order to enable the transaction described in Item&nbsp;1.01 above, on April&nbsp;24, 2011, the Board of Directors of the Company (the &#147;Board&#148;) approved the termination of the Company&#146;s
Preferred Shareholders Rights Agreement with Computershare Trust Company N.A. dated as of December&nbsp;18, 2006, as amended (the &#147;Rights Agreement&#148;), effective immediately prior to the Initial Closing Date. Under the Rights Agreement,
preferred stock purchase rights (the &#147;Rights&#148;) were distributed to stockholders of record as of January&nbsp;2, 2007 (and to each person who acquires the Company&#146;s common stock after that date unless determined otherwise by the board
of directors) at the rate of one Right for each share of common stock held. The Rights were exercisable only upon the acquisition, or the acquisition of the right to acquire, by a </FONT></P>

<p Style='page-break-before:always'>
<HR  SIZE="3" style="COLOR:#999999" WIDTH="100%" ALIGN="CENTER">

 <P STYLE="margin-top:0px;margin-bottom:0px"><FONT STYLE="font-family:Times New Roman" SIZE="2">
person or group of affiliated or associated persons, of 20% or more (34% for Tang Capital Partners, LP and 30% for Baker Brothers Investments) of the outstanding shares of the Company&#146;s
common stock. Once exercisable, each Right would have entitled the holder to purchase, at a price of $44.00, one one-thousandth of a share of the Company&#146;s Series A Participating Preferred Stock. As a result of the termination of the Rights
Agreement, all Rights will be terminated. The Rights Agreement had not been triggered to date. </FONT></P> <P STYLE="font-size:18px;margin-top:0px;margin-bottom:0px">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="10%" VALIGN="top" ALIGN="left"><FONT STYLE="font-family:Times New Roman" SIZE="2"><B>ITEM&nbsp;5.02</B></FONT></TD>
<TD ALIGN="left" VALIGN="top"><FONT STYLE="font-family:Times New Roman" SIZE="2"><B>Departure of Directors or Certain Officers; Election of Directors; Appointment of Certain Officers; Compensatory Arrangements of Certain Officers
</B></FONT></TD></TR></TABLE> <P STYLE="margin-top:6px;margin-bottom:0px; text-indent:4%"><FONT STYLE="font-family:Times New Roman" SIZE="2">On April&nbsp;24, 2011, the Board appointed John B. Whelan as President, Chief Executive Officer and
Director, effective immediately. Mr.&nbsp;Whelan has been with A.P. Pharma since February 2009, serving most recently as Acting Chief Executive Officer and Chief Financial Officer and previously as Vice President of Finance and Chief Financial
Officer. He was Chief Operating Officer and Chief Financial Officer at Raven biotechnologies, inc., a private company developing antibody-based cancer therapeutics, from April 2002 until the company&#146;s acquisition in July 2008. From January 2000
to March 2002, he was Vice President and Chief Financial Officer at Eos Biotechnology, Inc., a private therapeutic antibodies company. Mr.&nbsp;Whelan&#146;s qualifications to serve on the Board include his management experience with the Company,
which gives him valuable insight into the operations of the Company, and his former executive management positions with other biotechnology companies. </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px; text-indent:4%"><FONT
STYLE="font-family:Times New Roman" SIZE="2">In connection with Mr.&nbsp;Whelan&#146;s appointment, the Company entered into a management retention agreement with Mr.&nbsp;Whelan on April&nbsp;25, 2011 (the &#147;Whelan Management Agreement&#148;).
The Whelan Management Agreement provides that if Mr.&nbsp;Whelan&#146;s employment is terminated by the Company not in connection with a change of control, without cause, as such term is defined in the Whelan Management Agreement, or by
Mr.&nbsp;Whelan as a result of certain events set forth in the Whelan Management Agreement, during the 12 months after the date of termination (the &#147;Severance Period&#148;), he shall receive (i)&nbsp;an amount equal to the monthly base salary
he was receiving immediately prior to the termination, (ii)&nbsp;the average bonus paid during each of the three 12-month periods (or such shorter period of time during which he was eligible for a bonus) prior to termination, and (iii)&nbsp;the
immediate vesting of unvested stock options, restricted stock and other equity awards that otherwise would have vested during the Severance Period. The Company also agreed to reimburse for or continue to pay for health care benefits during the
Severance Period, or such date when he is no longer eligible for such benefits under applicable law. In the event Mr.&nbsp;Whelan&#146;s employment is terminated by the Company without good cause or he resigns for good reason within 12 months
following a change of control of the Company, then in lieu of the above benefits, during the 18-month period after the date of termination (the &#147;Change of Control Severance Period&#148;), he shall receive (i)&nbsp;an amount equal to the greater
of (A)&nbsp;the base salary he was receiving immediately prior to the termination or (B)&nbsp;the base salary he was receiving immediately prior to the change of control, (ii)&nbsp;150% of the average bonus paid during each of the three 12-month
periods (or such shorter period of time during which he was eligible for a bonus) prior to termination, and (iii)&nbsp;the immediate vesting of unvested stock options, restricted stock and other equity awards. The Company also agreed to reimburse
for or continue to pay for health care benefits during the Change of Control Severance Period, or such date when he is no longer eligible for such benefits under applicable law. A copy of the Whelan Management Agreement is filed as Exhibit 10.5
hereto. </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px; text-indent:4%"><FONT STYLE="font-family:Times New Roman" SIZE="2">In addition, on April&nbsp;24, 2011, the Board appointed Michael A. Adam, Ph.D., as Senior Vice President and Chief
Operating Officer, effective immediately. Dr.&nbsp;Adam has been working with the Company as a consultant since July 2010. From October 2008 to June 2010, he was Senior Vice President of Pharmaceutical Operations at Spectrum Pharmaceuticals, Inc., a
biotechnology company with fully integrated commercial and drug development operations with a primary focus in oncology. From March 2006 to February 2007, Dr.&nbsp;Adam served as Vice President, Drug Development Operations at Anadys Pharmaceuticals,
Inc., a biopharmaceutical company dedicated to improving patient care by developing novel medicines for the treatment of hepatitis C. Prior to that, Dr.&nbsp;Adam held various senior positions with Pfizer, Inc., Agouron Pharmaceuticals, Inc. and
Bristol-Myers Squibb Company. Dr.&nbsp;Adam received his Ph.D. in organic chemistry at the Massachusetts Institute of Technology. </FONT></P>

<p Style='page-break-before:always'>
<HR  SIZE="3" style="COLOR:#999999" WIDTH="100%" ALIGN="CENTER">

 <P STYLE="margin-top:0px;margin-bottom:0px; text-indent:4%"><FONT STYLE="font-family:Times New Roman" SIZE="2">In connection with Dr.&nbsp;Adam&#146;s appointment, the Company entered into a management
retention agreement with Dr.&nbsp;Adam on April&nbsp;25, 2011 (the &#147;Adam Management Agreement&#148;). The Adam Management Agreement provides that if Dr.&nbsp;Adam&#146;s employment is terminated by the Company not in connection with a change of
control, without cause, as such term is defined in the Adam Management Agreement, or by Dr.&nbsp;Adam as a result of certain events set forth in the Adam Management Agreement, during the six months after the date of termination (the &#147;Severance
Period&#148;), he shall receive (i)&nbsp;an amount equal to the monthly base salary he was receiving immediately prior to the termination, (ii)&nbsp;one-half the average bonus paid during each of the three 12-month periods (or such shorter period of
time during which he was eligible for a bonus) prior to termination, and (iii)&nbsp;the immediate vesting of unvested stock options, restricted stock and other equity awards that otherwise would have vested during the Severance Period. The Company
also agreed to reimburse for or continue to pay for health care benefits during the Severance Period, or such date when he is no longer eligible for such benefits under applicable law. In the event Dr.&nbsp;Adam&#146;s employment is terminated by
the Company without good cause or he resigns for good reason within 12 months following a change of control of the Company, then in lieu of the above benefits, during the twelve months after the date of termination (the &#147;Change of Control
Severance Period&#148;), he shall receive (i)&nbsp;an amount equal to the greater of (A)&nbsp;the monthly base salary he was receiving immediately prior to the termination or (B)&nbsp;the base salary he was receiving immediately prior to the change
of control, (ii)&nbsp;the average bonus paid during each of the three 12-month periods (or such shorter period of time during which he was eligible for a bonus) prior to termination, and (iii)&nbsp;the immediate vesting of unvested stock options,
restricted stock and other equity awards. The Company also agreed to reimburse for or continue to pay for health care benefits during the Change of Control Severance Period, or such date when he is no longer eligible for such benefits under
applicable law. A copy of the Adam Management Agreement is filed as Exhibit 10.6 hereto. </FONT></P> <P STYLE="font-size:18px;margin-top:0px;margin-bottom:0px">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="9%" VALIGN="top" ALIGN="left"><FONT STYLE="font-family:Times New Roman" SIZE="2"><B>Item&nbsp;8.01</B></FONT></TD>
<TD ALIGN="left" VALIGN="top"><FONT STYLE="font-family:Times New Roman" SIZE="2"><B>Other Events </B></FONT></TD></TR></TABLE> <P STYLE="margin-top:6px;margin-bottom:0px; text-indent:4%"><FONT STYLE="font-family:Times New Roman" SIZE="2">On
April&nbsp;25, 2011, the Company issued the press release attached hereto as Exhibit 99.1 regarding the transaction and management changes described in Item&nbsp;1.01 and Item&nbsp;5.02 this report, respectively. </FONT></P>
<P STYLE="font-size:18px;margin-top:0px;margin-bottom:0px">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="9%" VALIGN="top" ALIGN="left"><FONT STYLE="font-family:Times New Roman" SIZE="2"><B>Item&nbsp;9.01</B></FONT></TD>
<TD ALIGN="left" VALIGN="top"><FONT STYLE="font-family:Times New Roman" SIZE="2"><B>Financial Statements and Exhibits. </B></FONT></TD></TR></TABLE> <P STYLE="margin-top:6px;margin-bottom:0px"><FONT STYLE="font-family:Times New Roman" SIZE="2">(d)
Exhibits. The following material is filed as an exhibit to this Current Report on Form 8-K: </FONT></P> <P STYLE="font-size:6px;margin-top:0px;margin-bottom:0px">&nbsp;</P>
<TABLE CELLSPACING="0" CELLPADDING="0" WIDTH="100%" BORDER="0" ALIGN="center">

<TR>
<TD></TD>
<TD VALIGN="bottom" WIDTH="3%"></TD>
<TD WIDTH="94%"></TD></TR>
<TR>
<TD HEIGHT="8"></TD>
<TD HEIGHT="8" COLSPAN="2"></TD></TR>
<TR>
<TD VALIGN="top" NOWRAP><FONT STYLE="font-family:Times New Roman" SIZE="2">10.1</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="top"><FONT STYLE="font-family:Times New Roman" SIZE="2">Securities Purchase Agreement, dated as of April&nbsp;24, 2011, by and among the Company and the purchasers listed therein.</FONT></TD></TR>
<TR>
<TD HEIGHT="8"></TD>
<TD HEIGHT="8" COLSPAN="2"></TD></TR>
<TR>
<TD VALIGN="top" NOWRAP><FONT STYLE="font-family:Times New Roman" SIZE="2">10.2</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="top"><FONT STYLE="font-family:Times New Roman" SIZE="2">Form of Senior Secured Convertible Note due 2021.</FONT></TD></TR>
<TR>
<TD HEIGHT="8"></TD>
<TD HEIGHT="8" COLSPAN="2"></TD></TR>
<TR>
<TD VALIGN="top" NOWRAP><FONT STYLE="font-family:Times New Roman" SIZE="2">10.3</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="top"><FONT STYLE="font-family:Times New Roman" SIZE="2">Security Agreement, dated as of April 24, 2011, by and between the Company and Tang Capital Partners, LP, as Agent for the Purchasers.</FONT></TD></TR>
<TR>
<TD HEIGHT="8"></TD>
<TD HEIGHT="8" COLSPAN="2"></TD></TR>
<TR>
<TD VALIGN="top" NOWRAP><FONT STYLE="font-family:Times New Roman" SIZE="2">10.4</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="top"><FONT STYLE="font-family:Times New Roman" SIZE="2">Second Amendment to Lease, effective as of April 1, 2011, by and between the Company and Metropolitan Life Insurance Company.</FONT></TD></TR>
<TR>
<TD HEIGHT="8"></TD>
<TD HEIGHT="8" COLSPAN="2"></TD></TR>
<TR>
<TD VALIGN="top" NOWRAP><FONT STYLE="font-family:Times New Roman" SIZE="2">10.5</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="top"><FONT STYLE="font-family:Times New Roman" SIZE="2">Management Retention Agreement, dated as of April 25, 2011, by and between the Company and John B. Whelan.</FONT></TD></TR>
<TR>
<TD HEIGHT="8"></TD>
<TD HEIGHT="8" COLSPAN="2"></TD></TR>
<TR>
<TD VALIGN="top" NOWRAP><FONT STYLE="font-family:Times New Roman" SIZE="2">10.6</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="top"><FONT STYLE="font-family:Times New Roman" SIZE="2">Management Retention Agreement, dated as of April 25, 2011, by and between the Company and Michael A. Adam.</FONT></TD></TR>
<TR>
<TD HEIGHT="8"></TD>
<TD HEIGHT="8" COLSPAN="2"></TD></TR>
<TR>
<TD VALIGN="top" NOWRAP><FONT STYLE="font-family:Times New Roman" SIZE="2">99.1</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="top"><FONT STYLE="font-family:Times New Roman" SIZE="2">Press Release of A.P. Pharma, Inc. dated April 25, 2011.</FONT></TD></TR></TABLE>

<p Style='page-break-before:always'>
<HR  SIZE="3" style="COLOR:#999999" WIDTH="100%" ALIGN="CENTER">

 <P STYLE="margin-top:0px;margin-bottom:0px" ALIGN="center"><FONT STYLE="font-family:Times New Roman" SIZE="2"><B>SIGNATURE </B></FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px"><FONT
STYLE="font-family:Times New Roman" SIZE="2">Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized. </FONT></P>
<P STYLE="font-size:12px;margin-top:0px;margin-bottom:0px">&nbsp;</P>
<TABLE CELLSPACING="0" CELLPADDING="0" WIDTH="100%" BORDER="0">

<TR>
<TD WIDTH="50%"></TD>
<TD VALIGN="bottom" WIDTH="1%"></TD>
<TD WIDTH="49%"></TD></TR>
<TR>
<TD VALIGN="top"></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2">A.P. Pharma, Inc.</FONT></TD></TR>
<TR>
<TD HEIGHT="16"></TD>
<TD HEIGHT="16" COLSPAN="2"></TD></TR>
<TR>
<TD VALIGN="top"><FONT STYLE="font-family:Times New Roman" SIZE="2">Date: April&nbsp;28, 2011</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"> <P STYLE="margin-top:0px;margin-bottom:1px;border-bottom:1px solid #000000"><FONT STYLE="font-family:Times New Roman" SIZE="2">/s/ John B. Whelan</FONT></P></TD></TR>
<TR>
<TD VALIGN="top"></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2">John B. Whelan</FONT></TD></TR>
<TR>
<TD VALIGN="top"></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2">President, Chief Executive Officer and Chief Financial Officer</FONT></TD></TR></TABLE>

<p Style='page-break-before:always'>
<HR  SIZE="3" style="COLOR:#999999" WIDTH="100%" ALIGN="CENTER">

 <P STYLE="margin-top:0px;margin-bottom:0px" ALIGN="center"><FONT STYLE="font-family:Times New Roman" SIZE="2">EXHIBIT INDEX </FONT></P>
<P STYLE="font-size:6px;margin-top:0px;margin-bottom:0px">&nbsp;</P>
<TABLE CELLSPACING="0" CELLPADDING="0" WIDTH="100%" BORDER="0" ALIGN="center">

<TR>
<TD></TD>
<TD VALIGN="bottom" WIDTH="3%"></TD>
<TD WIDTH="94%"></TD></TR>
<TR>
<TD HEIGHT="8"></TD>
<TD HEIGHT="8" COLSPAN="2"></TD></TR>
<TR>
<TD VALIGN="top" NOWRAP><FONT STYLE="font-family:Times New Roman" SIZE="2">10.1</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="top"><FONT STYLE="font-family:Times New Roman" SIZE="2">Securities Purchase Agreement, dated as of April&nbsp;24, 2011, by and among the Company and the purchasers listed therein.</FONT></TD></TR>
<TR>
<TD HEIGHT="8"></TD>
<TD HEIGHT="8" COLSPAN="2"></TD></TR>
<TR>
<TD VALIGN="top" NOWRAP><FONT STYLE="font-family:Times New Roman" SIZE="2">10.2</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="top"><FONT STYLE="font-family:Times New Roman" SIZE="2">Form of Senior Secured Convertible Note due 2021.</FONT></TD></TR>
<TR>
<TD HEIGHT="8"></TD>
<TD HEIGHT="8" COLSPAN="2"></TD></TR>
<TR>
<TD VALIGN="top" NOWRAP><FONT STYLE="font-family:Times New Roman" SIZE="2">10.3</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="top"><FONT STYLE="font-family:Times New Roman" SIZE="2">Security Agreement, dated as of April 24, 2011, by and between the Company and Tang Capital Partners, LP, as Agent for the Purchasers.</FONT></TD></TR>
<TR>
<TD HEIGHT="8"></TD>
<TD HEIGHT="8" COLSPAN="2"></TD></TR>
<TR>
<TD VALIGN="top" NOWRAP><FONT STYLE="font-family:Times New Roman" SIZE="2">10.4</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="top"><FONT STYLE="font-family:Times New Roman" SIZE="2">Second Amendment to Lease, effective as of April 1, 2011, by and between the Company and Metropolitan Life Insurance Company.</FONT></TD></TR>
<TR>
<TD HEIGHT="8"></TD>
<TD HEIGHT="8" COLSPAN="2"></TD></TR>
<TR>
<TD VALIGN="top" NOWRAP><FONT STYLE="font-family:Times New Roman" SIZE="2">10.5</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="top"><FONT STYLE="font-family:Times New Roman" SIZE="2">Management Retention Agreement, dated as of April 25, 2011, by and between the Company and John B. Whelan.</FONT></TD></TR>
<TR>
<TD HEIGHT="8"></TD>
<TD HEIGHT="8" COLSPAN="2"></TD></TR>
<TR>
<TD VALIGN="top" NOWRAP><FONT STYLE="font-family:Times New Roman" SIZE="2">10.6</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="top"><FONT STYLE="font-family:Times New Roman" SIZE="2">Management Retention Agreement, dated as of April 25, 2011, by and between the Company and Michael A. Adam.</FONT></TD></TR>
<TR>
<TD HEIGHT="8"></TD>
<TD HEIGHT="8" COLSPAN="2"></TD></TR>
<TR>
<TD VALIGN="top" NOWRAP><FONT STYLE="font-family:Times New Roman" SIZE="2">99.1</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="top"><FONT STYLE="font-family:Times New Roman" SIZE="2">Press Release of A.P. Pharma, Inc. dated April 25, 2011.</FONT></TD></TR></TABLE>
</BODY></HTML>
</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-10.1
<SEQUENCE>2
<FILENAME>dex101.htm
<DESCRIPTION>SECURITIES PURCHASE AGREEMENT
<TEXT>
<HTML><HEAD>
<TITLE>Securities Purchase Agreement</TITLE>
</HEAD>
 <BODY BGCOLOR="WHITE">

 <P STYLE="margin-top:0px;margin-bottom:0px" ALIGN="right"><FONT STYLE="font-family:Times New Roman" SIZE="2">Exhibit 10.1 </FONT></P> <P STYLE="margin-top:24px;margin-bottom:0px" ALIGN="center"><FONT
STYLE="font-family:Times New Roman" SIZE="2">SECURITIES PURCHASE AGREEMENT </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px" ALIGN="center"><FONT STYLE="font-family:Times New Roman" SIZE="2">AMONG </FONT></P>
<P STYLE="margin-top:12px;margin-bottom:0px" ALIGN="center"><FONT STYLE="font-family:Times New Roman" SIZE="2">A.P. PHARMA, INC., </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px" ALIGN="center"><FONT
STYLE="font-family:Times New Roman" SIZE="2">TANG CAPITAL PARTNERS, LP, </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px" ALIGN="center"><FONT STYLE="font-family:Times New Roman" SIZE="2">BAKER BROS. INVESTMENTS II, L.P., </FONT></P>
<P STYLE="margin-top:12px;margin-bottom:0px" ALIGN="center"><FONT STYLE="font-family:Times New Roman" SIZE="2">BAKER BROTHERS LIFE SCIENCES, L.P., </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px" ALIGN="center"><FONT
STYLE="font-family:Times New Roman" SIZE="2">AND </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px" ALIGN="center"><FONT STYLE="font-family:Times New Roman" SIZE="2">14159, L.P. </FONT></P>
<P STYLE="margin-top:24px;margin-bottom:0px" ALIGN="center"><FONT STYLE="font-family:Times New Roman" SIZE="2">DATED AS OF APRIL 24, 2011 </FONT></P>

<p Style='page-break-before:always'>
<HR  SIZE="3" style="COLOR:#999999" WIDTH="100%" ALIGN="CENTER">

 <P STYLE="margin-top:0px;margin-bottom:0px" ALIGN="center"><FONT STYLE="font-family:Times New Roman" SIZE="2"><B>TABLE OF CONTENTS </B></FONT></P>
<P STYLE="font-size:12px;margin-top:0px;margin-bottom:0px">&nbsp;</P>
<TABLE CELLSPACING="0" CELLPADDING="0" WIDTH="100%" BORDER="0" ALIGN="center">

<TR>
<TD></TD>
<TD></TD>
<TD></TD>
<TD VALIGN="bottom" WIDTH="2%"></TD>
<TD></TD>
<TD VALIGN="bottom" WIDTH="3%"></TD>
<TD WIDTH="88%"></TD>
<TD VALIGN="bottom" WIDTH="2%"></TD>
<TD></TD>
<TD></TD>
<TD></TD></TR>
<TR>
<TD COLSPAN="2" VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD COLSPAN="3" VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom" COLSPAN="2" ALIGN="center"><FONT STYLE="font-family:Times New Roman" SIZE="1"><B>Page</B></FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD></TR>
<TR>
<TD HEIGHT="8" COLSPAN="3"></TD>
<TD HEIGHT="8" COLSPAN="4"></TD>
<TD HEIGHT="8" COLSPAN="4"></TD></TR>
<TR>
<TD VALIGN="top"><FONT STYLE="font-family:Times New Roman" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="top" ALIGN="right"><FONT STYLE="font-family:Times New Roman" SIZE="2">1.</FONT></TD>
<TD NOWRAP VALIGN="top"><FONT STYLE="font-family:Times New Roman" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="top" COLSPAN="3"><FONT STYLE="font-family:Times New Roman" SIZE="2">Authorization of Securities</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:Times New Roman" SIZE="2">1</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2">&nbsp;&nbsp;</FONT></TD></TR>
<TR>
<TD VALIGN="top"><FONT STYLE="font-family:Times New Roman" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="top" ALIGN="right"><FONT STYLE="font-family:Times New Roman" SIZE="2">2.</FONT></TD>
<TD NOWRAP VALIGN="top"><FONT STYLE="font-family:Times New Roman" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="top" COLSPAN="3"><FONT STYLE="font-family:Times New Roman" SIZE="2">Sale and Purchase of the Securities</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:Times New Roman" SIZE="2">2</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2">&nbsp;&nbsp;</FONT></TD></TR>
<TR>
<TD VALIGN="top"><FONT STYLE="font-family:Times New Roman" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="top" ALIGN="right"><FONT STYLE="font-family:Times New Roman" SIZE="2">3.</FONT></TD>
<TD NOWRAP VALIGN="top"><FONT STYLE="font-family:Times New Roman" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="top" COLSPAN="3"><FONT STYLE="font-family:Times New Roman" SIZE="2">Closing; Payment of Purchase Price; Use of Proceeds</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:Times New Roman" SIZE="2">2</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2">&nbsp;&nbsp;</FONT></TD></TR>
<TR>
<TD VALIGN="top"></TD>
<TD VALIGN="top"></TD>
<TD VALIGN="top"></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="top"><FONT STYLE="font-family:Times New Roman" SIZE="2">3.1.</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2">Closings</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:Times New Roman" SIZE="2">2</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2">&nbsp;&nbsp;</FONT></TD></TR>
<TR>
<TD VALIGN="top"></TD>
<TD VALIGN="top"></TD>
<TD VALIGN="top"></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="top"><FONT STYLE="font-family:Times New Roman" SIZE="2">3.2.</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2">Subsequent Closings</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:Times New Roman" SIZE="2">2</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2">&nbsp;&nbsp;</FONT></TD></TR>
<TR>
<TD VALIGN="top"><FONT STYLE="font-family:Times New Roman" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="top" ALIGN="right"><FONT STYLE="font-family:Times New Roman" SIZE="2">4.</FONT></TD>
<TD NOWRAP VALIGN="top"><FONT STYLE="font-family:Times New Roman" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="top" COLSPAN="3"><FONT STYLE="font-family:Times New Roman" SIZE="2">Representations and Warranties of the Purchasers; Register of Securities; Restrictions on Transfer</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:Times New Roman" SIZE="2">2</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2">&nbsp;&nbsp;</FONT></TD></TR>
<TR>
<TD VALIGN="top"></TD>
<TD VALIGN="top"></TD>
<TD VALIGN="top"></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="top"><FONT STYLE="font-family:Times New Roman" SIZE="2">4.1.</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2">Organization</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:Times New Roman" SIZE="2">2</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2">&nbsp;&nbsp;</FONT></TD></TR>
<TR>
<TD VALIGN="top"></TD>
<TD VALIGN="top"></TD>
<TD VALIGN="top"></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="top"><FONT STYLE="font-family:Times New Roman" SIZE="2">4.2.</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2">Validity</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:Times New Roman" SIZE="2">3</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2">&nbsp;&nbsp;</FONT></TD></TR>
<TR>
<TD VALIGN="top"></TD>
<TD VALIGN="top"></TD>
<TD VALIGN="top"></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="top"><FONT STYLE="font-family:Times New Roman" SIZE="2">4.3.</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2">Brokers</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:Times New Roman" SIZE="2">3</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2">&nbsp;&nbsp;</FONT></TD></TR>
<TR>
<TD VALIGN="top"></TD>
<TD VALIGN="top"></TD>
<TD VALIGN="top"></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="top"><FONT STYLE="font-family:Times New Roman" SIZE="2">4.4.</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2">Investment Representations and Warranties</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:Times New Roman" SIZE="2">3</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2">&nbsp;&nbsp;</FONT></TD></TR>
<TR>
<TD VALIGN="top"></TD>
<TD VALIGN="top"></TD>
<TD VALIGN="top"></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="top"><FONT STYLE="font-family:Times New Roman" SIZE="2">4.5.</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2">Investor Questionnaire</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:Times New Roman" SIZE="2">3</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2">&nbsp;&nbsp;</FONT></TD></TR>
<TR>
<TD VALIGN="top"></TD>
<TD VALIGN="top"></TD>
<TD VALIGN="top"></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="top"><FONT STYLE="font-family:Times New Roman" SIZE="2">4.6.</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2">Acquisition for Own Account</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:Times New Roman" SIZE="2">3</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2">&nbsp;&nbsp;</FONT></TD></TR>
<TR>
<TD VALIGN="top"></TD>
<TD VALIGN="top"></TD>
<TD VALIGN="top"></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="top"><FONT STYLE="font-family:Times New Roman" SIZE="2">4.7.</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2">Ability to Protect Its Own Interests and Bear Economic Risks</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:Times New Roman" SIZE="2">3</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2">&nbsp;&nbsp;</FONT></TD></TR>
<TR>
<TD VALIGN="top"></TD>
<TD VALIGN="top"></TD>
<TD VALIGN="top"></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="top"><FONT STYLE="font-family:Times New Roman" SIZE="2">4.8.</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2">Accredited Investor</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:Times New Roman" SIZE="2">4</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2">&nbsp;&nbsp;</FONT></TD></TR>
<TR>
<TD VALIGN="top"></TD>
<TD VALIGN="top"></TD>
<TD VALIGN="top"></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="top"><FONT STYLE="font-family:Times New Roman" SIZE="2">4.9.</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2">Access to Information</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:Times New Roman" SIZE="2">4</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2">&nbsp;&nbsp;</FONT></TD></TR>
<TR>
<TD VALIGN="top"></TD>
<TD VALIGN="top"></TD>
<TD VALIGN="top"></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="top"><FONT STYLE="font-family:Times New Roman" SIZE="2">4.10.</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2">Restricted Securities</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:Times New Roman" SIZE="2">4</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2">&nbsp;&nbsp;</FONT></TD></TR>
<TR>
<TD VALIGN="top"></TD>
<TD VALIGN="top"></TD>
<TD VALIGN="top"></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="top"><FONT STYLE="font-family:Times New Roman" SIZE="2">4.11.</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2">Tax Advisors</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:Times New Roman" SIZE="2">4</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2">&nbsp;&nbsp;</FONT></TD></TR>
<TR>
<TD VALIGN="top"></TD>
<TD VALIGN="top"></TD>
<TD VALIGN="top"></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="top"><FONT STYLE="font-family:Times New Roman" SIZE="2">4.12.</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2">Communication of Offer</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:Times New Roman" SIZE="2">4</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2">&nbsp;&nbsp;</FONT></TD></TR>
<TR>
<TD VALIGN="top"></TD>
<TD VALIGN="top"></TD>
<TD VALIGN="top"></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="top"><FONT STYLE="font-family:Times New Roman" SIZE="2">4.13.</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2">Short Sales, etc.</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:Times New Roman" SIZE="2">5</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2">&nbsp;&nbsp;</FONT></TD></TR>
<TR>
<TD VALIGN="top"><FONT STYLE="font-family:Times New Roman" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="top" ALIGN="right"><FONT STYLE="font-family:Times New Roman" SIZE="2">5.</FONT></TD>
<TD NOWRAP VALIGN="top"><FONT STYLE="font-family:Times New Roman" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="top" COLSPAN="3"><FONT STYLE="font-family:Times New Roman" SIZE="2">Representations and Warranties by the Company</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:Times New Roman" SIZE="2">5</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2">&nbsp;&nbsp;</FONT></TD></TR>
<TR>
<TD VALIGN="top"></TD>
<TD VALIGN="top"></TD>
<TD VALIGN="top"></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="top"><FONT STYLE="font-family:Times New Roman" SIZE="2">5.1.</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2">Capitalization</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:Times New Roman" SIZE="2">5</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2">&nbsp;&nbsp;</FONT></TD></TR>
<TR>
<TD VALIGN="top"></TD>
<TD VALIGN="top"></TD>
<TD VALIGN="top"></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="top"><FONT STYLE="font-family:Times New Roman" SIZE="2">5.2.</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2">Due Issuance and Authorization of Capital Stock</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:Times New Roman" SIZE="2">6</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2">&nbsp;&nbsp;</FONT></TD></TR>
<TR>
<TD VALIGN="top"></TD>
<TD VALIGN="top"></TD>
<TD VALIGN="top"></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="top"><FONT STYLE="font-family:Times New Roman" SIZE="2">5.3.</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2">Organization</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:Times New Roman" SIZE="2">7</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2">&nbsp;&nbsp;</FONT></TD></TR>
<TR>
<TD VALIGN="top"></TD>
<TD VALIGN="top"></TD>
<TD VALIGN="top"></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="top"><FONT STYLE="font-family:Times New Roman" SIZE="2">5.4.</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2">Subsidiaries</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:Times New Roman" SIZE="2">7</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2">&nbsp;&nbsp;</FONT></TD></TR>
<TR>
<TD VALIGN="top"></TD>
<TD VALIGN="top"></TD>
<TD VALIGN="top"></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="top"><FONT STYLE="font-family:Times New Roman" SIZE="2">5.5.</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2">Consents</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:Times New Roman" SIZE="2">7</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2">&nbsp;&nbsp;</FONT></TD></TR>
<TR>
<TD VALIGN="top"></TD>
<TD VALIGN="top"></TD>
<TD VALIGN="top"></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="top"><FONT STYLE="font-family:Times New Roman" SIZE="2">5.6.</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2">Authorization; Enforcement</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:Times New Roman" SIZE="2">7</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2">&nbsp;&nbsp;</FONT></TD></TR>
<TR>
<TD VALIGN="top"></TD>
<TD VALIGN="top"></TD>
<TD VALIGN="top"></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="top"><FONT STYLE="font-family:Times New Roman" SIZE="2">5.7.</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2">Valid Issuance of Securities</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:Times New Roman" SIZE="2">7</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2">&nbsp;&nbsp;</FONT></TD></TR>
<TR>
<TD VALIGN="top"></TD>
<TD VALIGN="top"></TD>
<TD VALIGN="top"></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="top"><FONT STYLE="font-family:Times New Roman" SIZE="2">5.8.</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2">No Conflicts</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:Times New Roman" SIZE="2">8</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2">&nbsp;&nbsp;</FONT></TD></TR>
<TR>
<TD VALIGN="top"></TD>
<TD VALIGN="top"></TD>
<TD VALIGN="top"></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="top"><FONT STYLE="font-family:Times New Roman" SIZE="2">5.9.</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2">Material Contracts</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:Times New Roman" SIZE="2">8</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2">&nbsp;&nbsp;</FONT></TD></TR>
<TR>
<TD VALIGN="top"></TD>
<TD VALIGN="top"></TD>
<TD VALIGN="top"></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="top"><FONT STYLE="font-family:Times New Roman" SIZE="2">5.10.</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2">Right of First Refusal; Stockholders Agreement; Voting and Registration Rights</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:Times New Roman" SIZE="2">9</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2">&nbsp;&nbsp;</FONT></TD></TR>
<TR>
<TD VALIGN="top"></TD>
<TD VALIGN="top"></TD>
<TD VALIGN="top"></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="top"><FONT STYLE="font-family:Times New Roman" SIZE="2">5.11.</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2">Previous Issuances</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:Times New Roman" SIZE="2">9</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2">&nbsp;&nbsp;</FONT></TD></TR>
<TR>
<TD VALIGN="top"></TD>
<TD VALIGN="top"></TD>
<TD VALIGN="top"></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="top"><FONT STYLE="font-family:Times New Roman" SIZE="2">5.12.</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2">No Integrated Offering</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:Times New Roman" SIZE="2">9</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2">&nbsp;&nbsp;</FONT></TD></TR>
<TR>
<TD VALIGN="top"></TD>
<TD VALIGN="top"></TD>
<TD VALIGN="top"></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="top"><FONT STYLE="font-family:Times New Roman" SIZE="2">5.13.</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2">Financial Statements</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:Times New Roman" SIZE="2">9</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2">&nbsp;&nbsp;</FONT></TD></TR>
<TR>
<TD VALIGN="top"></TD>
<TD VALIGN="top"></TD>
<TD VALIGN="top"></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="top"><FONT STYLE="font-family:Times New Roman" SIZE="2">5.14.</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2">No Undisclosed Material Liabilities</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:Times New Roman" SIZE="2">10</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2">&nbsp;&nbsp;</FONT></TD></TR>
<TR>
<TD VALIGN="top"></TD>
<TD VALIGN="top"></TD>
<TD VALIGN="top"></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="top"><FONT STYLE="font-family:Times New Roman" SIZE="2">5.15.</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2">Absence of Litigation</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:Times New Roman" SIZE="2">10</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2">&nbsp;&nbsp;</FONT></TD></TR>
<TR>
<TD VALIGN="top"></TD>
<TD VALIGN="top"></TD>
<TD VALIGN="top"></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="top"><FONT STYLE="font-family:Times New Roman" SIZE="2">5.16.</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2">Taxes</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:Times New Roman" SIZE="2">10</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2">&nbsp;&nbsp;</FONT></TD></TR>
<TR>
<TD VALIGN="top"></TD>
<TD VALIGN="top"></TD>
<TD VALIGN="top"></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="top"><FONT STYLE="font-family:Times New Roman" SIZE="2">5.17.</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2">Employee Matters</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:Times New Roman" SIZE="2">11</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2">&nbsp;&nbsp;</FONT></TD></TR>
<TR>
<TD VALIGN="top"></TD>
<TD VALIGN="top"></TD>
<TD VALIGN="top"></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="top"><FONT STYLE="font-family:Times New Roman" SIZE="2">5.18.</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2">Compliance with Laws</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:Times New Roman" SIZE="2">12</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2">&nbsp;&nbsp;</FONT></TD></TR>
<TR>
<TD VALIGN="top"></TD>
<TD VALIGN="top"></TD>
<TD VALIGN="top"></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="top"><FONT STYLE="font-family:Times New Roman" SIZE="2">5.19.</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2">Brokers</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:Times New Roman" SIZE="2">13</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2">&nbsp;&nbsp;</FONT></TD></TR>
<TR>
<TD VALIGN="top"></TD>
<TD VALIGN="top"></TD>
<TD VALIGN="top"></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="top"><FONT STYLE="font-family:Times New Roman" SIZE="2">5.20.</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2">Environmental Matters</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:Times New Roman" SIZE="2">13</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2">&nbsp;&nbsp;</FONT></TD></TR></TABLE>
 <p STYLE="margin-top:0px;margin-bottom:0px"><FONT SIZE="1">&nbsp;</FONT></P> <P STYLE="margin-top:0px;margin-bottom:0px" ALIGN="center"><FONT STYLE="font-family:Times New Roman" SIZE="2">i </FONT></P>


<p Style='page-break-before:always'>
<HR  SIZE="3" style="COLOR:#999999" WIDTH="100%" ALIGN="CENTER">


<TABLE CELLSPACING="0" CELLPADDING="0" WIDTH="100%" BORDER="0" ALIGN="center">

<TR>
<TD></TD>
<TD VALIGN="bottom" WIDTH="2%"></TD>
<TD></TD>
<TD></TD>
<TD></TD>
<TD VALIGN="bottom" WIDTH="3%"></TD>
<TD WIDTH="87%"></TD>
<TD VALIGN="bottom" WIDTH="2%"></TD>
<TD></TD>
<TD></TD>
<TD></TD></TR>

<TR>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD COLSPAN="5" VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom" COLSPAN="2" ALIGN="center"><FONT STYLE="font-family:Times New Roman" SIZE="1"><B>Page</B></FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD></TR>


<TR>
<TD HEIGHT="8"></TD>
<TD HEIGHT="8" COLSPAN="4"></TD>
<TD HEIGHT="8" COLSPAN="2"></TD>
<TD HEIGHT="8" COLSPAN="4"></TD></TR>
<TR>
<TD VALIGN="top"></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:Times New Roman" SIZE="2">5.21.</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2">Intellectual Property Matters</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:Times New Roman" SIZE="2">14</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2">&nbsp;&nbsp;</FONT></TD></TR>
<TR>
<TD VALIGN="top"></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="top"><FONT STYLE="font-family:Times New Roman" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="top"><FONT STYLE="font-family:Times New Roman" SIZE="2">5.22.</FONT></TD>
<TD NOWRAP VALIGN="top"><FONT STYLE="font-family:Times New Roman" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2">Related-Party Transactions</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:Times New Roman" SIZE="2">17</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2">&nbsp;&nbsp;</FONT></TD></TR>
<TR>
<TD VALIGN="top"></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="top"><FONT STYLE="font-family:Times New Roman" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="top"><FONT STYLE="font-family:Times New Roman" SIZE="2">5.23.</FONT></TD>
<TD NOWRAP VALIGN="top"><FONT STYLE="font-family:Times New Roman" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2">Title to Property and Assets</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:Times New Roman" SIZE="2">17</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2">&nbsp;&nbsp;</FONT></TD></TR>
<TR>
<TD VALIGN="top"></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="top"><FONT STYLE="font-family:Times New Roman" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="top"><FONT STYLE="font-family:Times New Roman" SIZE="2">5.24.</FONT></TD>
<TD NOWRAP VALIGN="top"><FONT STYLE="font-family:Times New Roman" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2">Disclosure</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:Times New Roman" SIZE="2">17</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2">&nbsp;&nbsp;</FONT></TD></TR>
<TR>
<TD VALIGN="top"></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="top"><FONT STYLE="font-family:Times New Roman" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="top"><FONT STYLE="font-family:Times New Roman" SIZE="2">5.25.</FONT></TD>
<TD NOWRAP VALIGN="top"><FONT STYLE="font-family:Times New Roman" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2">Absence of Changes</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:Times New Roman" SIZE="2">17</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2">&nbsp;&nbsp;</FONT></TD></TR>
<TR>
<TD VALIGN="top"></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="top"><FONT STYLE="font-family:Times New Roman" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="top"><FONT STYLE="font-family:Times New Roman" SIZE="2">5.26.</FONT></TD>
<TD NOWRAP VALIGN="top"><FONT STYLE="font-family:Times New Roman" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2">Illegal Payments</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:Times New Roman" SIZE="2">19</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2">&nbsp;&nbsp;</FONT></TD></TR>
<TR>
<TD VALIGN="top"></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="top"><FONT STYLE="font-family:Times New Roman" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="top"><FONT STYLE="font-family:Times New Roman" SIZE="2">5.27.</FONT></TD>
<TD NOWRAP VALIGN="top"><FONT STYLE="font-family:Times New Roman" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2">Suppliers and Customers</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:Times New Roman" SIZE="2">19</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2">&nbsp;&nbsp;</FONT></TD></TR>
<TR>
<TD VALIGN="top"></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="top"><FONT STYLE="font-family:Times New Roman" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="top"><FONT STYLE="font-family:Times New Roman" SIZE="2">5.28.</FONT></TD>
<TD NOWRAP VALIGN="top"><FONT STYLE="font-family:Times New Roman" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2">Regulatory Permits</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:Times New Roman" SIZE="2">19</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2">&nbsp;&nbsp;</FONT></TD></TR>
<TR>
<TD VALIGN="top"></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="top"><FONT STYLE="font-family:Times New Roman" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="top"><FONT STYLE="font-family:Times New Roman" SIZE="2">5.29.</FONT></TD>
<TD NOWRAP VALIGN="top"><FONT STYLE="font-family:Times New Roman" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2">Insurance</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:Times New Roman" SIZE="2">19</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2">&nbsp;&nbsp;</FONT></TD></TR>
<TR>
<TD VALIGN="top"></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="top"><FONT STYLE="font-family:Times New Roman" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="top"><FONT STYLE="font-family:Times New Roman" SIZE="2">5.30.</FONT></TD>
<TD NOWRAP VALIGN="top"><FONT STYLE="font-family:Times New Roman" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2">Indebtedness</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:Times New Roman" SIZE="2">19</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2">&nbsp;&nbsp;</FONT></TD></TR>
<TR>
<TD VALIGN="top"></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="top"><FONT STYLE="font-family:Times New Roman" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="top"><FONT STYLE="font-family:Times New Roman" SIZE="2">5.31.</FONT></TD>
<TD NOWRAP VALIGN="top"><FONT STYLE="font-family:Times New Roman" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2">Ranking of the Notes</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:Times New Roman" SIZE="2">20</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2">&nbsp;&nbsp;</FONT></TD></TR>
<TR>
<TD VALIGN="top"></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="top"><FONT STYLE="font-family:Times New Roman" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="top"><FONT STYLE="font-family:Times New Roman" SIZE="2">5.32.</FONT></TD>
<TD NOWRAP VALIGN="top"><FONT STYLE="font-family:Times New Roman" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2">Investment Company</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:Times New Roman" SIZE="2">20</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2">&nbsp;&nbsp;</FONT></TD></TR>
<TR>
<TD VALIGN="top"></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="top"><FONT STYLE="font-family:Times New Roman" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="top"><FONT STYLE="font-family:Times New Roman" SIZE="2">5.33.</FONT></TD>
<TD NOWRAP VALIGN="top"><FONT STYLE="font-family:Times New Roman" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2">Securities and Exchange Act Requirements</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:Times New Roman" SIZE="2">20</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2">&nbsp;&nbsp;</FONT></TD></TR>
<TR>
<TD VALIGN="top"></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="top"><FONT STYLE="font-family:Times New Roman" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="top"><FONT STYLE="font-family:Times New Roman" SIZE="2">5.34.</FONT></TD>
<TD NOWRAP VALIGN="top"><FONT STYLE="font-family:Times New Roman" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2">Accountants</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:Times New Roman" SIZE="2">20</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2">&nbsp;&nbsp;</FONT></TD></TR>
<TR>
<TD VALIGN="top"></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="top"><FONT STYLE="font-family:Times New Roman" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="top"><FONT STYLE="font-family:Times New Roman" SIZE="2">5.35.</FONT></TD>
<TD NOWRAP VALIGN="top"><FONT STYLE="font-family:Times New Roman" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2">Application of Takeover Protections; Exemption under Section 16</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:Times New Roman" SIZE="2">20</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2">&nbsp;&nbsp;</FONT></TD></TR>
<TR>
<TD VALIGN="top"></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="top"><FONT STYLE="font-family:Times New Roman" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="top"><FONT STYLE="font-family:Times New Roman" SIZE="2">5.36.</FONT></TD>
<TD NOWRAP VALIGN="top"><FONT STYLE="font-family:Times New Roman" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2">Stock Options</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:Times New Roman" SIZE="2">20</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2">&nbsp;&nbsp;</FONT></TD></TR>
<TR>
<TD VALIGN="top"><FONT STYLE="font-family:Times New Roman" SIZE="2">6.</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="top"><FONT STYLE="font-family:Times New Roman" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="top" COLSPAN="4"><FONT STYLE="font-family:Times New Roman" SIZE="2">Covenants</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:Times New Roman" SIZE="2">21</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2">&nbsp;&nbsp;</FONT></TD></TR>
<TR>
<TD VALIGN="top"></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="top"><FONT STYLE="font-family:Times New Roman" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="top"><FONT STYLE="font-family:Times New Roman" SIZE="2">6.1.</FONT></TD>
<TD NOWRAP VALIGN="top"><FONT STYLE="font-family:Times New Roman" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2">Best Efforts</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:Times New Roman" SIZE="2">21</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2">&nbsp;&nbsp;</FONT></TD></TR>
<TR>
<TD VALIGN="top"></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="top"><FONT STYLE="font-family:Times New Roman" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="top"><FONT STYLE="font-family:Times New Roman" SIZE="2">6.2.</FONT></TD>
<TD NOWRAP VALIGN="top"><FONT STYLE="font-family:Times New Roman" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2">Form D and Blue Sky</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:Times New Roman" SIZE="2">21</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2">&nbsp;&nbsp;</FONT></TD></TR>
<TR>
<TD VALIGN="top"></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="top"><FONT STYLE="font-family:Times New Roman" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="top"><FONT STYLE="font-family:Times New Roman" SIZE="2">6.3.</FONT></TD>
<TD NOWRAP VALIGN="top"><FONT STYLE="font-family:Times New Roman" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2">Reporting Status</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:Times New Roman" SIZE="2">21</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2">&nbsp;&nbsp;</FONT></TD></TR>
<TR>
<TD VALIGN="top"></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="top"><FONT STYLE="font-family:Times New Roman" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="top"><FONT STYLE="font-family:Times New Roman" SIZE="2">6.4.</FONT></TD>
<TD NOWRAP VALIGN="top"><FONT STYLE="font-family:Times New Roman" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2">Use of Proceeds</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:Times New Roman" SIZE="2">21</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2">&nbsp;&nbsp;</FONT></TD></TR>
<TR>
<TD VALIGN="top"></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="top"><FONT STYLE="font-family:Times New Roman" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="top"><FONT STYLE="font-family:Times New Roman" SIZE="2">6.5.</FONT></TD>
<TD NOWRAP VALIGN="top"><FONT STYLE="font-family:Times New Roman" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2">Financial Information</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:Times New Roman" SIZE="2">21</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2">&nbsp;&nbsp;</FONT></TD></TR>
<TR>
<TD VALIGN="top"></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="top"><FONT STYLE="font-family:Times New Roman" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="top"><FONT STYLE="font-family:Times New Roman" SIZE="2">6.6.</FONT></TD>
<TD NOWRAP VALIGN="top"><FONT STYLE="font-family:Times New Roman" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2">Listing</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:Times New Roman" SIZE="2">22</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2">&nbsp;&nbsp;</FONT></TD></TR>
<TR>
<TD VALIGN="top"></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="top"><FONT STYLE="font-family:Times New Roman" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="top"><FONT STYLE="font-family:Times New Roman" SIZE="2">6.7.</FONT></TD>
<TD NOWRAP VALIGN="top"><FONT STYLE="font-family:Times New Roman" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2">Fees</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:Times New Roman" SIZE="2">22</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2">&nbsp;&nbsp;</FONT></TD></TR>
<TR>
<TD VALIGN="top"></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="top"><FONT STYLE="font-family:Times New Roman" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="top"><FONT STYLE="font-family:Times New Roman" SIZE="2">6.8.</FONT></TD>
<TD NOWRAP VALIGN="top"><FONT STYLE="font-family:Times New Roman" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2">Pledge of Securities</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:Times New Roman" SIZE="2">22</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2">&nbsp;&nbsp;</FONT></TD></TR>
<TR>
<TD VALIGN="top"></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="top"><FONT STYLE="font-family:Times New Roman" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="top"><FONT STYLE="font-family:Times New Roman" SIZE="2">6.9.</FONT></TD>
<TD NOWRAP VALIGN="top"><FONT STYLE="font-family:Times New Roman" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2">Disclosure of Transactions and Other Material Information</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:Times New Roman" SIZE="2">22</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2">&nbsp;&nbsp;</FONT></TD></TR>
<TR>
<TD VALIGN="top"></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="top"><FONT STYLE="font-family:Times New Roman" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="top"><FONT STYLE="font-family:Times New Roman" SIZE="2">6.10.</FONT></TD>
<TD NOWRAP VALIGN="top"><FONT STYLE="font-family:Times New Roman" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2">Corporate Existence</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:Times New Roman" SIZE="2">23</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2">&nbsp;&nbsp;</FONT></TD></TR>
<TR>
<TD VALIGN="top"></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="top"><FONT STYLE="font-family:Times New Roman" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="top"><FONT STYLE="font-family:Times New Roman" SIZE="2">6.11.</FONT></TD>
<TD NOWRAP VALIGN="top"><FONT STYLE="font-family:Times New Roman" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2">Reservation of Shares</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:Times New Roman" SIZE="2">23</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2">&nbsp;&nbsp;</FONT></TD></TR>
<TR>
<TD VALIGN="top"></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="top"><FONT STYLE="font-family:Times New Roman" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="top"><FONT STYLE="font-family:Times New Roman" SIZE="2">6.12.</FONT></TD>
<TD NOWRAP VALIGN="top"><FONT STYLE="font-family:Times New Roman" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2">Conduct of Business</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:Times New Roman" SIZE="2">23</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2">&nbsp;&nbsp;</FONT></TD></TR>
<TR>
<TD VALIGN="top"></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="top"><FONT STYLE="font-family:Times New Roman" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="top"><FONT STYLE="font-family:Times New Roman" SIZE="2">6.13.</FONT></TD>
<TD NOWRAP VALIGN="top"><FONT STYLE="font-family:Times New Roman" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2">Ranking of the Notes</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:Times New Roman" SIZE="2">23</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2">&nbsp;&nbsp;</FONT></TD></TR>
<TR>
<TD VALIGN="top"></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="top"><FONT STYLE="font-family:Times New Roman" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="top"><FONT STYLE="font-family:Times New Roman" SIZE="2">6.14.</FONT></TD>
<TD NOWRAP VALIGN="top"><FONT STYLE="font-family:Times New Roman" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2">Follow-on Offering</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:Times New Roman" SIZE="2">23</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2">&nbsp;&nbsp;</FONT></TD></TR>
<TR>
<TD VALIGN="top"><FONT STYLE="font-family:Times New Roman" SIZE="2">7.</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="top"><FONT STYLE="font-family:Times New Roman" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="top" COLSPAN="4"><FONT STYLE="font-family:Times New Roman" SIZE="2">Conditions of Parties&#146; Obligations</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:Times New Roman" SIZE="2">23</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2">&nbsp;&nbsp;</FONT></TD></TR>
<TR>
<TD VALIGN="top"></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="top"><FONT STYLE="font-family:Times New Roman" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="top"><FONT STYLE="font-family:Times New Roman" SIZE="2">7.1.</FONT></TD>
<TD NOWRAP VALIGN="top"><FONT STYLE="font-family:Times New Roman" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2">Conditions of the Purchasers&#146; Obligations at the Initial Closing and the Subsequent Closings</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:Times New Roman" SIZE="2">23</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2">&nbsp;&nbsp;</FONT></TD></TR>
<TR>
<TD VALIGN="top"></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="top"><FONT STYLE="font-family:Times New Roman" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="top"><FONT STYLE="font-family:Times New Roman" SIZE="2">7.2.</FONT></TD>
<TD NOWRAP VALIGN="top"><FONT STYLE="font-family:Times New Roman" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2">Conditions of the Company&#146;s Obligations</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:Times New Roman" SIZE="2">25</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2">&nbsp;&nbsp;</FONT></TD></TR>
<TR>
<TD VALIGN="top"><FONT STYLE="font-family:Times New Roman" SIZE="2">8.</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="top"><FONT STYLE="font-family:Times New Roman" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="top" COLSPAN="4"><FONT STYLE="font-family:Times New Roman" SIZE="2">Transfer Restrictions; Restrictive Legend</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:Times New Roman" SIZE="2">25</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2">&nbsp;&nbsp;</FONT></TD></TR>
<TR>
<TD VALIGN="top"></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="top"><FONT STYLE="font-family:Times New Roman" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="top"><FONT STYLE="font-family:Times New Roman" SIZE="2">8.1.</FONT></TD>
<TD NOWRAP VALIGN="top"><FONT STYLE="font-family:Times New Roman" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2">Transfer Restrictions</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:Times New Roman" SIZE="2">25</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2">&nbsp;&nbsp;</FONT></TD></TR>
<TR>
<TD VALIGN="top"></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="top"><FONT STYLE="font-family:Times New Roman" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="top"><FONT STYLE="font-family:Times New Roman" SIZE="2">8.2.</FONT></TD>
<TD NOWRAP VALIGN="top"><FONT STYLE="font-family:Times New Roman" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2">Unlegended Certificates</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:Times New Roman" SIZE="2">26</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2">&nbsp;&nbsp;</FONT></TD></TR>
<TR>
<TD VALIGN="top"><FONT STYLE="font-family:Times New Roman" SIZE="2">9.</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="top"><FONT STYLE="font-family:Times New Roman" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="top" COLSPAN="4"><FONT STYLE="font-family:Times New Roman" SIZE="2">Registration, Transfer and Substitution of Certificates for Shares</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:Times New Roman" SIZE="2">26</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2">&nbsp;&nbsp;</FONT></TD></TR>
<TR>
<TD VALIGN="top"></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="top"><FONT STYLE="font-family:Times New Roman" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="top"><FONT STYLE="font-family:Times New Roman" SIZE="2">9.1.</FONT></TD>
<TD NOWRAP VALIGN="top"><FONT STYLE="font-family:Times New Roman" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2">Stock Register; Ownership of Securities</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:Times New Roman" SIZE="2">26</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2">&nbsp;&nbsp;</FONT></TD></TR>
<TR>
<TD VALIGN="top"></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="top"><FONT STYLE="font-family:Times New Roman" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="top"><FONT STYLE="font-family:Times New Roman" SIZE="2">9.2.</FONT></TD>
<TD NOWRAP VALIGN="top"><FONT STYLE="font-family:Times New Roman" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2">Transfer Agent Instruction</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:Times New Roman" SIZE="2">26</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2">&nbsp;&nbsp;</FONT></TD></TR>
<TR>
<TD VALIGN="top"></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="top"><FONT STYLE="font-family:Times New Roman" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="top"><FONT STYLE="font-family:Times New Roman" SIZE="2">9.3.</FONT></TD>
<TD NOWRAP VALIGN="top"><FONT STYLE="font-family:Times New Roman" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2">Replacement of Certificates</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:Times New Roman" SIZE="2">27</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2">&nbsp;&nbsp;</FONT></TD></TR>
<TR>
<TD VALIGN="top"><FONT STYLE="font-family:Times New Roman" SIZE="2">10.</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="top"><FONT STYLE="font-family:Times New Roman" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="top" COLSPAN="4"><FONT STYLE="font-family:Times New Roman" SIZE="2">Pre-emptive Right of the Purchasers</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:Times New Roman" SIZE="2">27</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2">&nbsp;&nbsp;</FONT></TD></TR>
<TR>
<TD VALIGN="top"></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="top"><FONT STYLE="font-family:Times New Roman" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="top"><FONT STYLE="font-family:Times New Roman" SIZE="2">10.1.</FONT></TD>
<TD NOWRAP VALIGN="top"><FONT STYLE="font-family:Times New Roman" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2">Issuance of Additional Securities</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:Times New Roman" SIZE="2">27</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2">&nbsp;&nbsp;</FONT></TD></TR>
<TR>
<TD VALIGN="top"></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="top"><FONT STYLE="font-family:Times New Roman" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="top"><FONT STYLE="font-family:Times New Roman" SIZE="2">10.2.</FONT></TD>
<TD NOWRAP VALIGN="top"><FONT STYLE="font-family:Times New Roman" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2">Additional Issuance Notices</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:Times New Roman" SIZE="2">27</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2">&nbsp;&nbsp;</FONT></TD></TR></TABLE>
 <p STYLE="margin-top:0px;margin-bottom:0px"><FONT SIZE="1">&nbsp;</FONT></P> <P STYLE="margin-top:0px;margin-bottom:0px" ALIGN="center"><FONT STYLE="font-family:Times New Roman" SIZE="2">ii </FONT></P>



<p Style='page-break-before:always'>
<HR  SIZE="3" style="COLOR:#999999" WIDTH="100%" ALIGN="CENTER">


<TABLE CELLSPACING="0" CELLPADDING="0" WIDTH="100%" BORDER="0" ALIGN="center">

<TR>
<TD></TD>
<TD VALIGN="bottom" WIDTH="2%"></TD>
<TD></TD>
<TD VALIGN="bottom" WIDTH="2%"></TD>
<TD WIDTH="87%"></TD>
<TD VALIGN="bottom" WIDTH="2%"></TD>
<TD></TD>
<TD></TD>
<TD></TD></TR>
<TR>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom" COLSPAN="2" ALIGN="center"><FONT STYLE="font-family:Times New Roman" SIZE="1"><B>Page</B></FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD></TR>
<TR>
<TD HEIGHT="8"></TD>
<TD HEIGHT="8" COLSPAN="2"></TD>
<TD HEIGHT="8" COLSPAN="2"></TD>
<TD HEIGHT="8" COLSPAN="4"></TD></TR>
<TR>
<TD VALIGN="top"></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="top"><FONT STYLE="font-family:Times New Roman" SIZE="2">10.3.</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2">Exercise of Pre-Emptive Rights</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:Times New Roman" SIZE="2">27</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2">&nbsp;&nbsp;</FONT></TD></TR>
<TR>
<TD VALIGN="top"></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="top"><FONT STYLE="font-family:Times New Roman" SIZE="2">10.4.</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2">Sales to Prospective Buyer</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:Times New Roman" SIZE="2">28</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2">&nbsp;&nbsp;</FONT></TD></TR>
<TR>
<TD VALIGN="top"></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="top"><FONT STYLE="font-family:Times New Roman" SIZE="2">10.5.</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2">Closing of the Issuance</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:Times New Roman" SIZE="2">28</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2">&nbsp;&nbsp;</FONT></TD></TR>
<TR>
<TD VALIGN="top"><FONT STYLE="font-family:Times New Roman" SIZE="2">11.</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="top" COLSPAN="3"><FONT STYLE="font-family:Times New Roman" SIZE="2">Registration Rights of Purchasers</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:Times New Roman" SIZE="2">28</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2">&nbsp;&nbsp;</FONT></TD></TR>
<TR>
<TD VALIGN="top"></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="top"><FONT STYLE="font-family:Times New Roman" SIZE="2">11.1.</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2">Mandatory Registration</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:Times New Roman" SIZE="2">28</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2">&nbsp;&nbsp;</FONT></TD></TR>
<TR>
<TD VALIGN="top"></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="top"><FONT STYLE="font-family:Times New Roman" SIZE="2">11.2.</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2">Legal Counsel</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:Times New Roman" SIZE="2">29</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2">&nbsp;&nbsp;</FONT></TD></TR>
<TR>
<TD VALIGN="top"></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="top"><FONT STYLE="font-family:Times New Roman" SIZE="2">11.3.</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2">Ineligibility for Form S-3</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:Times New Roman" SIZE="2">29</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2">&nbsp;&nbsp;</FONT></TD></TR>
<TR>
<TD VALIGN="top"></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="top"><FONT STYLE="font-family:Times New Roman" SIZE="2">11.4.</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2">Sufficient Number of Shares Registered</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:Times New Roman" SIZE="2">29</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2">&nbsp;&nbsp;</FONT></TD></TR>
<TR>
<TD VALIGN="top"></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="top"><FONT STYLE="font-family:Times New Roman" SIZE="2">11.5.</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2">Effect of Failure to File and Obtain and Maintain Effectiveness of Registration Statement</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:Times New Roman" SIZE="2">29</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2">&nbsp;&nbsp;</FONT></TD></TR>
<TR>
<TD VALIGN="top"></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="top"><FONT STYLE="font-family:Times New Roman" SIZE="2">11.6.</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2">Related Obligations</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:Times New Roman" SIZE="2">30</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2">&nbsp;&nbsp;</FONT></TD></TR>
<TR>
<TD VALIGN="top"></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="top"><FONT STYLE="font-family:Times New Roman" SIZE="2">11.7.</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2">Obligations of the Purchasers</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:Times New Roman" SIZE="2">35</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2">&nbsp;&nbsp;</FONT></TD></TR>
<TR>
<TD VALIGN="top"></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="top"><FONT STYLE="font-family:Times New Roman" SIZE="2">11.8.</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2">Expenses of Registration</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:Times New Roman" SIZE="2">36</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2">&nbsp;&nbsp;</FONT></TD></TR>
<TR>
<TD VALIGN="top"></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="top"><FONT STYLE="font-family:Times New Roman" SIZE="2">11.9.</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2">Reports under the Exchange Act</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:Times New Roman" SIZE="2">36</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2">&nbsp;&nbsp;</FONT></TD></TR>
<TR>
<TD VALIGN="top"></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="top"><FONT STYLE="font-family:Times New Roman" SIZE="2">11.10.</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2">Piggyback Rights</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:Times New Roman" SIZE="2">37</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2">&nbsp;&nbsp;</FONT></TD></TR>
<TR>
<TD VALIGN="top"></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="top"><FONT STYLE="font-family:Times New Roman" SIZE="2">11.11.</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2">Assignment of Registration Rights</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:Times New Roman" SIZE="2">37</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2">&nbsp;&nbsp;</FONT></TD></TR>
<TR>
<TD VALIGN="top"></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="top"><FONT STYLE="font-family:Times New Roman" SIZE="2">11.12.</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2">Indemnification</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:Times New Roman" SIZE="2">38</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2">&nbsp;&nbsp;</FONT></TD></TR>
<TR>
<TD VALIGN="top"><FONT STYLE="font-family:Times New Roman" SIZE="2">12.</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="top" COLSPAN="3"><FONT STYLE="font-family:Times New Roman" SIZE="2">Definitions</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:Times New Roman" SIZE="2">40</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2">&nbsp;&nbsp;</FONT></TD></TR>
<TR>
<TD VALIGN="top"><FONT STYLE="font-family:Times New Roman" SIZE="2">13.</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="top" COLSPAN="3"><FONT STYLE="font-family:Times New Roman" SIZE="2">Enforcement</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:Times New Roman" SIZE="2">46</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2">&nbsp;&nbsp;</FONT></TD></TR>
<TR>
<TD VALIGN="top"></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="top"><FONT STYLE="font-family:Times New Roman" SIZE="2">13.1.</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2">Cumulative Remedies</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:Times New Roman" SIZE="2">46</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2">&nbsp;&nbsp;</FONT></TD></TR>
<TR>
<TD VALIGN="top"></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="top"><FONT STYLE="font-family:Times New Roman" SIZE="2">13.2.</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2">No Implied Waiver</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:Times New Roman" SIZE="2">46</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2">&nbsp;&nbsp;</FONT></TD></TR>
<TR>
<TD VALIGN="top"><FONT STYLE="font-family:Times New Roman" SIZE="2">14.</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="top" COLSPAN="3"><FONT STYLE="font-family:Times New Roman" SIZE="2">Confidentiality</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:Times New Roman" SIZE="2">46</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2">&nbsp;&nbsp;</FONT></TD></TR>
<TR>
<TD VALIGN="top"><FONT STYLE="font-family:Times New Roman" SIZE="2">15.</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="top" COLSPAN="3"><FONT STYLE="font-family:Times New Roman" SIZE="2">Miscellaneous</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:Times New Roman" SIZE="2">47</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2">&nbsp;&nbsp;</FONT></TD></TR>
<TR>
<TD VALIGN="top"></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="top"><FONT STYLE="font-family:Times New Roman" SIZE="2">15.1.</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2">Waivers and Amendments</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:Times New Roman" SIZE="2">47</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2">&nbsp;&nbsp;</FONT></TD></TR>
<TR>
<TD VALIGN="top"></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="top"><FONT STYLE="font-family:Times New Roman" SIZE="2">15.2.</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2">Notices</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:Times New Roman" SIZE="2">47</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2">&nbsp;&nbsp;</FONT></TD></TR>
<TR>
<TD VALIGN="top"></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="top"><FONT STYLE="font-family:Times New Roman" SIZE="2">15.3.</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2">Indemnification</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:Times New Roman" SIZE="2">48</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2">&nbsp;&nbsp;</FONT></TD></TR>
<TR>
<TD VALIGN="top"></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="top"><FONT STYLE="font-family:Times New Roman" SIZE="2">15.4.</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2">No Waivers</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:Times New Roman" SIZE="2">48</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2">&nbsp;&nbsp;</FONT></TD></TR>
<TR>
<TD VALIGN="top"></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="top"><FONT STYLE="font-family:Times New Roman" SIZE="2">15.5.</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2">Successors and Assigns</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:Times New Roman" SIZE="2">48</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2">&nbsp;&nbsp;</FONT></TD></TR>
<TR>
<TD VALIGN="top"></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="top"><FONT STYLE="font-family:Times New Roman" SIZE="2">15.6.</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2">Headings</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:Times New Roman" SIZE="2">48</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2">&nbsp;&nbsp;</FONT></TD></TR>
<TR>
<TD VALIGN="top"></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="top"><FONT STYLE="font-family:Times New Roman" SIZE="2">15.7.</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2">Governing Law</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:Times New Roman" SIZE="2">48</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2">&nbsp;&nbsp;</FONT></TD></TR>
<TR>
<TD VALIGN="top"></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="top"><FONT STYLE="font-family:Times New Roman" SIZE="2">15.8.</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2">Jurisdiction</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:Times New Roman" SIZE="2">48</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2">&nbsp;&nbsp;</FONT></TD></TR>
<TR>
<TD VALIGN="top"></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="top"><FONT STYLE="font-family:Times New Roman" SIZE="2">15.9.</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2">Waiver of Jury Trial</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:Times New Roman" SIZE="2">49</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2">&nbsp;&nbsp;</FONT></TD></TR>
<TR>
<TD VALIGN="top"></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="top"><FONT STYLE="font-family:Times New Roman" SIZE="2">15.10.</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2">Counterparts; Effectiveness</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:Times New Roman" SIZE="2">49</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2">&nbsp;&nbsp;</FONT></TD></TR>
<TR>
<TD VALIGN="top"></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="top"><FONT STYLE="font-family:Times New Roman" SIZE="2">15.11.</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2">Entire Agreement</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:Times New Roman" SIZE="2">49</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2">&nbsp;&nbsp;</FONT></TD></TR>
<TR>
<TD VALIGN="top"></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="top"><FONT STYLE="font-family:Times New Roman" SIZE="2">15.12.</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2">Severability</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:Times New Roman" SIZE="2">49</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2">&nbsp;&nbsp;</FONT></TD></TR></TABLE> <P STYLE="margin-top:24px;margin-bottom:0px" ALIGN="center"><FONT STYLE="font-family:Times New Roman" SIZE="2"><B>LIST OF EXHIBITS
</B></FONT></P> <P STYLE="font-size:12px;margin-top:0px;margin-bottom:0px">&nbsp;</P>
<TABLE CELLSPACING="0" CELLPADDING="0" WIDTH="100%" BORDER="0" ALIGN="center">

<TR>
<TD WIDTH="14%"></TD>
<TD VALIGN="bottom" WIDTH="3%"></TD>
<TD WIDTH="83%"></TD></TR>
<TR>
<TD VALIGN="top"><FONT STYLE="font-family:Times New Roman" SIZE="2">EXHIBIT A</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2">Form of Senior Secured Convertible Notes due 2021</FONT></TD></TR>
<TR>
<TD VALIGN="top"><FONT STYLE="font-family:Times New Roman" SIZE="2">EXHIBIT B</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2">Form of Security Agreement</FONT></TD></TR></TABLE>
 <p STYLE="margin-top:0px;margin-bottom:0px"><FONT SIZE="1">&nbsp;</FONT></P> <P STYLE="margin-top:0px;margin-bottom:0px" ALIGN="center"><FONT STYLE="font-family:Times New Roman" SIZE="2">iii
</FONT></P>


<p Style='page-break-before:always'>
<HR  SIZE="3" style="COLOR:#999999" WIDTH="100%" ALIGN="CENTER">

 <P STYLE="margin-top:0px;margin-bottom:0px" ALIGN="center"><FONT STYLE="font-family:Times New Roman" SIZE="2"><B>SECURITIES PURCHASE AGREEMENT </B></FONT></P>
<P STYLE="margin-top:12px;margin-bottom:0px; text-indent:8%"><FONT STYLE="font-family:Times New Roman" SIZE="2">This SECURITIES PURCHASE AGREEMENT (this &#147;<B><I>Agreement</I></B>&#148;) is made and entered into as of April&nbsp;24, 2011 by and
among A.P. Pharma, Inc., a Delaware corporation (the &#147;<B><I>Company</I></B>&#148;), Tang Capital Partners, LP, a Delaware limited partnership, Baker Bros. Investments II, L.P., a Delaware limited partnership, Baker Brothers Life Sciences, L.P.,
a Delaware limited partnership and 14159, L.P., a Delaware limited partnership (each a &#147;<B><I>Purchaser</I></B>&#148; and together the &#147;<B><I>Purchasers</I></B>&#148;). Certain terms used and not otherwise defined in the text of this
Agreement are defined in Section&nbsp;12 hereof. </FONT></P> <P STYLE="margin-top:24px;margin-bottom:0px" ALIGN="center"><FONT STYLE="font-family:Times New Roman" SIZE="2">RECITALS </FONT></P>
<P STYLE="margin-top:12px;margin-bottom:0px; text-indent:8%"><FONT STYLE="font-family:Times New Roman" SIZE="2">WHEREAS, the Company and the Purchasers are executing and delivering this Agreement in reliance upon the exemption from securities
registration afforded by Section&nbsp;4(2) of the Securities Act of 1933, as amended (the &#147;<B><I>Securities Act</I></B>&#148;), and Rule 506 of Regulation D (&#147;<B><I>Regulation D</I></B>&#148;) as promulgated by the United States Securities
and Exchange Commission (the &#147;<B><I>Commission</I></B>) under the Securities Act; </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px; text-indent:8%"><FONT STYLE="font-family:Times New Roman" SIZE="2">WHEREAS the Company has authorized a
new series of Senior Secured Convertible Notes due 2021 (the &#147;<B><I>Notes</I></B>&#148;), in the form attached hereto as <U>Exhibit A</U>, which Notes shall be convertible into the Company&#146;s common stock, $0.01 par value per share (the
&#147;<B><I>Common Stock</I></B>&#148;), and, in accordance with the terms of the Notes, the interest on the Notes may be payable through the addition of the amount of such Interest to the then outstanding principal (&#147;<B><I>PIK
Interest</I></B>&#148;); </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px; text-indent:8%"><FONT STYLE="font-family:Times New Roman" SIZE="2">WHEREAS the Company desires to sell to the Purchasers, and the Purchasers desire to purchase from
the Company, Notes of the Company, all in accordance with the terms and provisions of this Agreement; and </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px; text-indent:8%"><FONT STYLE="font-family:Times New Roman" SIZE="2">WHEREAS, the
Purchasers have committed to investing a minimum aggregate amount of $1,500,000 (the &#147;<B><I>Commitment Amount</I></B>&#148;) in the transactions as described herein; </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px; text-indent:8%"><FONT
STYLE="font-family:Times New Roman" SIZE="2">NOW, THEREFORE, in consideration of the foregoing and the mutual representations, warranties and covenants herein contained, the parties hereto hereby agree as follows: </FONT></P>
<P STYLE="margin-top:12px;margin-bottom:0px; text-indent:4%"><FONT STYLE="font-family:Times New Roman" SIZE="2">1. <U>Authorization of Securities</U>. The Company has authorized the issuance and sale of Notes, in an aggregate principal amount of up
to $4,500,000, without regard to amounts potentially payable as PIK Interest. Each Note shall be in the form of <U>Exhibit A</U> attached hereto, shall be duly executed by the Company and shall be dated as of the date of the applicable Closing (as
defined in Section&nbsp;3.1). The Notes will be senior in right of payment to any future indebtedness, and secured by substantially all of the assets of the Company pursuant to the Security Agreement, in the form of <U>Exhibit B</U> hereto (the
&#147;<B><I>Security Agreement</I></B>&#148;), which shall be duly executed by the Company and the Purchasers as of the date hereof. The shares of Common Stock into which the Notes are convertible are sometimes referred to herein as the
&#147;<B><I>Conversion Shares</I></B>&#148;, and the Notes (including any PIK Interest that may be paid thereon) and the Conversion Shares are sometimes referred to herein collectively as the &#147;<B><I>Securities</I></B>.&#148; </FONT></P>

<p Style='page-break-before:always'>
<HR  SIZE="3" style="COLOR:#999999" WIDTH="100%" ALIGN="CENTER">

 <P STYLE="margin-top:0px;margin-bottom:0px; text-indent:4%"><FONT STYLE="font-family:Times New Roman" SIZE="2">2. <U>Sale and Purchase of the Securities</U>. Upon the terms and subject to the conditions
herein contained, the Company agrees to sell to each Purchaser, and each Purchaser agrees to purchase from the Company, at the Initial Closing (as defined in Section&nbsp;3.1) that amount of face value of Notes as set forth on Schedule I attached
hereto for a corresponding purchase price to be paid in cash, resulting in aggregate proceeds of $1,500,000 (the &#147;<B><I>Note Purchase Price</I></B>&#148;). </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px; text-indent:4%"><FONT
STYLE="font-family:Times New Roman" SIZE="2">3. <U>Closing; Payment of Purchase Price; Use of Proceeds</U>. </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px; text-indent:8%"><FONT STYLE="font-family:Times New Roman" SIZE="2">3.1.
<U>Closings</U>. </FONT></P> <P STYLE="margin-top:6px;margin-bottom:0px; margin-left:8%; text-indent:4%"><FONT STYLE="font-family:Times New Roman" SIZE="2">(a) The initial closing (the &#147;<B><I>Initial Closing</I></B>&#148;), with respect to the
transaction contemplated in Section&nbsp;2 hereof, shall take place at the offices of Ropes&nbsp;&amp; Gray LLP, Three Embarcadero Center, San Francisco, California on April&nbsp;29, 2011, or at such other time and place as the Company and
Purchasers may agree, including remotely via the exchange of documents and signatures (the &#147;<B><I>Initial Closing Date</I></B>&#148;). If the Initial Closing Date does not occur within seven business days from the date hereof, a majority in
interest of the Purchasers, in their sole discretion, may terminate this Agreement. </FONT></P> <P STYLE="margin-top:6px;margin-bottom:0px; margin-left:8%; text-indent:4%"><FONT STYLE="font-family:Times New Roman" SIZE="2">(b) The term
&#147;<B><I>Closing</I></B>&#148; shall refer to the Initial Closing and each Subsequent Closing (as defined in Section&nbsp;3.2), to the extent there is a Subsequent Closing. At the Initial Closing, the Company shall issue to each Purchaser a Note
representing the principal amount which such Purchaser is purchasing at the Closing, in the name of such Purchaser, against delivery to the Company by that Purchaser of a wire transfer in the amount of the Note Purchase Price therefor. </FONT></P>
<P STYLE="margin-top:12px;margin-bottom:0px; text-indent:8%"><FONT STYLE="font-family:Times New Roman" SIZE="2">3.2. <U>Subsequent Closings</U>. At any time and from time to time from and after the Initial Closing, each Purchaser may elect to
purchase up to its Pro Rata Interest in an additional $3,000,000 aggregate principal amount of Notes (&#147;<B><I>Additional Notes</I></B>&#148;) at a price equal to such additional principal amount; <U>provided</U>, the right to purchase Additional
Notes shall expire upon the second anniversary of the Initial Closing Date. A Purchaser electing to purchase Additional Notes shall provide at least two (2)&nbsp;days&#146; notice to the Company of such election, with each such closing (each a
&#147;<B><I>Subsequent Closing</I></B>&#148;) to occur at the offices of Ropes&nbsp;&amp; Gray LLP, Three Embarcadero Center, San Francisco, California, on the date and time elected by such Purchaser or at such other time and place as the Company
and Purchasers may agree, including remotely via the exchange of documents and signatures (each a &#147;<B><I>Subsequent Closing Date</I></B>&#148; and together with the Initial Closing Date, each a &#147;<B><I>Closing Date</I></B>&#148;). At each
Subsequent Closing, the Company shall provide a certification that the conditions set forth in Section&nbsp;7.1 continue to be satisfied with respect to the Additional Notes to be purchased in such Closing. </FONT></P>
<P STYLE="margin-top:12px;margin-bottom:0px; text-indent:4%"><FONT STYLE="font-family:Times New Roman" SIZE="2">4. <U>Representations and Warranties of the Purchasers; Register of Securities; Restrictions on Transfer</U>. Each Purchaser, severally
but not jointly, represents and warrants to the Company that the statements contained in this Section&nbsp;4 are true and complete as of the date of this Agreement and will be true and complete as of the date of each Closing: </FONT></P>
<P STYLE="margin-top:12px;margin-bottom:0px; text-indent:8%"><FONT STYLE="font-family:Times New Roman" SIZE="2">4.1. <U>Organization</U>. The Purchaser represents that the Purchaser is duly formed, validly existing and in good standing under the
laws of Delaware, has not been organized, reorganized or recapitalized specifically for the purpose of investing in the Company and has all </FONT></P>
 <p STYLE="margin-top:0px;margin-bottom:0px"><FONT SIZE="1">&nbsp;</FONT></P> <P STYLE="margin-top:0px;margin-bottom:0px" ALIGN="center"><FONT STYLE="font-family:Times New Roman" SIZE="2">2 </FONT></P>


<p Style='page-break-before:always'>
<HR  SIZE="3" style="COLOR:#999999" WIDTH="100%" ALIGN="CENTER">

 <P STYLE="margin-top:0px;margin-bottom:0px"><FONT STYLE="font-family:Times New Roman" SIZE="2">
partnership power and authority to enter into this Agreement and the other Transaction Documents and instruments referred to herein to which it is a party and to consummate the transactions
contemplated hereby and thereby. </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px; text-indent:8%"><FONT STYLE="font-family:Times New Roman" SIZE="2">4.2. <U>Validity</U>. The execution, delivery and performance of this Agreement, and the
other Transaction Documents and instruments referred to herein, in each case to which the Purchaser is a party, and the consummation by the Purchaser of the transactions contemplated hereby and thereby, have been duly authorized by all necessary
action on the part of the Purchaser. This Agreement has been duly executed and delivered by the Purchaser, and the other Transaction Documents and instruments referred to herein to which it is a party will be duly executed and delivered by the
Purchaser, and each such agreement and instrument constitutes or will constitute a valid and binding obligation of the Purchaser, enforceable against it in accordance with its terms, except as limited by applicable bankruptcy, insolvency,
reorganization, moratorium, fraudulent conveyance, and any other laws of general application affecting enforcement of creditors&#146; rights generally, and as limited by laws relating to the availability of specific performance, injunctive relief,
or other equitable remedies. </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px; text-indent:8%"><FONT STYLE="font-family:Times New Roman" SIZE="2">4.3. <U>Brokers</U>. There is no broker, investment banker, financial advisor, finder or other
Person which has been retained by or is authorized to act on behalf of the Purchaser who might be entitled to any fee or commission for which the Company will be liable in connection with the execution of this Agreement and the consummation of the
transactions contemplated hereby. </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px; text-indent:8%"><FONT STYLE="font-family:Times New Roman" SIZE="2">4.4. <U>Investment Representations and Warranties</U>. The Purchaser understands and agrees
that the offering and sale of the Securities has not been registered under the Securities Act or any applicable state securities laws and is being made in reliance upon federal and state exemptions for transactions not involving a public offering
which depend upon, among other things, the bona fide nature of the investment intent and the accuracy of the Purchaser&#146;s representations as expressed herein. </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px; text-indent:8%"><FONT
STYLE="font-family:Times New Roman" SIZE="2">4.5. <U>Investor Questionnaire</U>. In connection with the filing of a Registration Statement, the Company may require the Purchaser to furnish to the Company such information regarding the Purchaser and
the Registrable Securities, as the Company may reasonably request in writing and as shall reasonably be required in connection with the filing of the Registration Statement. At least five (5)&nbsp;Business Days prior to the first anticipated filing
date of such Registration Statement, the Company shall notify the Purchaser of the information the Company requests from the Purchaser. </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px; text-indent:8%"><FONT
STYLE="font-family:Times New Roman" SIZE="2">4.6. <U>Acquisition for Own Account</U>. The Purchaser is acquiring the Securities for its own account for investment and not with a view toward distribution in a manner which would violate the Securities
Act or any applicable state securities laws. </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px; text-indent:8%"><FONT STYLE="font-family:Times New Roman" SIZE="2">4.7. <U>Ability to Protect Its Own Interests and Bear Economic Risks</U>. The
Purchaser, by reason of the business and financial experience of its management, has the capacity to protect its own interests in connection with the transactions contemplated by this Agreement and the other Transaction Documents and is capable of
evaluating the merits and risks of the investment in the Securities. The Purchaser is able to bear the economic risk of an </FONT></P>
 <p STYLE="margin-top:0px;margin-bottom:0px"><FONT SIZE="1">&nbsp;</FONT></P> <P STYLE="margin-top:0px;margin-bottom:0px" ALIGN="center"><FONT STYLE="font-family:Times New Roman" SIZE="2">3 </FONT></P>


<p Style='page-break-before:always'>
<HR  SIZE="3" style="COLOR:#999999" WIDTH="100%" ALIGN="CENTER">

 <P STYLE="margin-top:0px;margin-bottom:0px"><FONT STYLE="font-family:Times New Roman" SIZE="2">
investment in the Securities and is able to sustain a loss of all of its investment in the Securities without economic hardship, if such a loss should occur. </FONT></P>
<P STYLE="margin-top:12px;margin-bottom:0px; text-indent:8%"><FONT STYLE="font-family:Times New Roman" SIZE="2">4.8. <U>Accredited Investor</U>. The Purchaser is an &#147;accredited investor&#148; as that term is defined in Regulation D promulgated
under the Securities Act. </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px; text-indent:8%"><FONT STYLE="font-family:Times New Roman" SIZE="2">4.9. <U>Access to Information</U>. The Purchaser has been given access to all Company documents,
records, and other information, and has had adequate opportunity to ask questions of, and receive answers from, the Company&#146;s officers, employees, agents, accountants, and representatives concerning the Company&#146;s business, operations,
financial condition, assets, liabilities, and all other matters relevant to its investment in the Securities. The foregoing, however, does not limit or modify the representations and warranties made by the Company pursuant to Section&nbsp;5 of this
Agreement or the right of the Purchaser to rely thereon. </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px; text-indent:8%"><FONT STYLE="font-family:Times New Roman" SIZE="2">4.10. <U>Restricted Securities</U>. </FONT></P>
<P STYLE="margin-top:6px;margin-bottom:0px; margin-left:8%; text-indent:4%"><FONT STYLE="font-family:Times New Roman" SIZE="2">(a) The Purchaser understands that the Securities will be characterized as &#147;restricted securities&#148; under the
federal securities laws inasmuch as they are being acquired from the Company in a private placement under Section&nbsp;4(2) of the Securities Act and that under such laws and applicable regulations such Securities may be resold without registration
under the Securities Act only in certain limited circumstances. </FONT></P> <P STYLE="margin-top:6px;margin-bottom:0px; margin-left:8%; text-indent:4%"><FONT STYLE="font-family:Times New Roman" SIZE="2">(b) The Purchaser acknowledges that the
Securities must be held indefinitely unless subsequently registered under the Securities Act and under applicable state securities laws or an exemption from such registration is available. The Purchaser understands that the Company is under no
obligation to register the Securities, except as provided in the Transaction Documents. </FONT></P> <P STYLE="margin-top:6px;margin-bottom:0px; margin-left:8%; text-indent:4%"><FONT STYLE="font-family:Times New Roman" SIZE="2">(c) The Purchaser is
aware of the provisions of Rule 144 under the Securities Act which permit limited resale of securities purchased in a private placement. </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px; text-indent:8%"><FONT
STYLE="font-family:Times New Roman" SIZE="2">4.11. <U>Tax Advisors</U>. The Purchaser has had the opportunity to review with the Purchaser&#146;s own tax advisors the federal, state and local tax consequences of this investment, where applicable,
and the transactions contemplated by this Agreement. The Purchaser is relying solely on the Purchaser&#146;s own determination as to tax consequences or the advice of such tax advisors and not on any statements or representations of the Company or
any of its agents and understands that the Purchaser (and not the Company) shall be responsible for the Purchaser&#146;s own tax liability that may arise as a result of this investment or the transactions contemplated by this Agreement. </FONT></P>
<P STYLE="margin-top:12px;margin-bottom:0px; text-indent:8%"><FONT STYLE="font-family:Times New Roman" SIZE="2">4.12. <U>Communication of Offer</U>. The offer to sell the Securities was directly communicated to the Purchaser by the Company. At no
time was the Purchaser presented with or solicited by any leaflet, advertisement, article, notice or other communication published in any newspaper, magazine, or similar media or broadcast over television or radio, or any other form of general
advertising, or solicited or invited to attend a promotional meeting or any seminar or meeting by any general solicitation or general advertising. </FONT></P>
 <p STYLE="margin-top:0px;margin-bottom:0px"><FONT SIZE="1">&nbsp;</FONT></P> <P STYLE="margin-top:0px;margin-bottom:0px" ALIGN="center"><FONT STYLE="font-family:Times New Roman" SIZE="2">4 </FONT></P>


<p Style='page-break-before:always'>
<HR  SIZE="3" style="COLOR:#999999" WIDTH="100%" ALIGN="CENTER">

 <P STYLE="margin-top:0px;margin-bottom:0px; text-indent:8%"><FONT STYLE="font-family:Times New Roman" SIZE="2">4.13. <U>Short Sales, etc</U>. Purchaser represents, warrants and covenants to the Company
that Purchaser has not, either directly or indirectly through an affiliate, agent or representative of the Company, engaged in any transaction in the securities of the Company during the thirty (30)&nbsp;days prior to the date hereof, except as set
forth in filings made with the Commission pursuant to Section&nbsp;16 of the Exchange Act. Purchaser represents and warrants to and covenants with the Company that Purchaser has not, during the thirty (30)&nbsp;days prior to the date hereof, engaged
and will not engage in any short sales of the Company&#146;s Common Stock prior to the effectiveness of the Registration Statement (either directly or indirectly through an affiliate, agent or representative). </FONT></P>
<P STYLE="margin-top:12px;margin-bottom:0px; text-indent:4%"><FONT STYLE="font-family:Times New Roman" SIZE="2">5. <U>Representations and Warranties by the Company</U>. Except as disclosed by the Company in a written Disclosure Schedule provided by
the Company to the Purchasers dated the date hereof (the <B><I>&#147;Disclosure Schedule</I></B>&#148;), the Company represents and warrants to the Purchasers that the statements contained in this Section&nbsp;5 are true and complete as of the date
of this Agreement and will be true and complete as of the date of the Initial Closing and the Subsequent Closings, as the case may be. The Disclosure Schedule shall be arranged in sections corresponding to the numbered and lettered sections and
subsections contained in this Section&nbsp;5, and the disclosures in any section or subsection of the Disclosure Schedule shall qualify other sections and subsections in this Section&nbsp;5 only to the extent it is clear from a reasonable reading of
the disclosure that such disclosure is applicable to such other sections and subsections. </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px; text-indent:8%"><FONT STYLE="font-family:Times New Roman" SIZE="2">5.1. <U>Capitalization</U>.
</FONT></P> <P STYLE="margin-top:6px;margin-bottom:0px; margin-left:8%; text-indent:4%"><FONT STYLE="font-family:Times New Roman" SIZE="2">(a) As of the date hereof, without giving effect to any of the Closings, the authorized capital stock of the
Company consists of 100,000,000 shares of Common Stock, par value $0.01 per share, and 2,500,000 shares of preferred stock, par value $0.01 per share (&#147;<B><I>Preferred Stock</I></B>&#148;). As of the date hereof, there are 40,064,194 shares of
Common Stock issued and outstanding and no shares of Preferred Stock issued and outstanding. The Company has reserved 109,158 shares of Common Stock for issuance to employees of the Company pursuant to its 1997 Employee Stock Purchase Plan (the
&#147;<B><I>ESPP</I></B>&#148;). The Company has reserved 3,944,597 shares of Common Stock for issuance to employees, officers, directors and consultants of the Company pursuant to its 2007 Equity Incentive Plan, as amended and in effect, duly
adopted by the Board of Directors of the Company (the &#147;<B><I>Board of Directors</I></B>&#148;) and approved by the stockholders of the Company (&#147;<B><I>2007 Equity Incentive Plan</I></B>&#148;). Of such reserved shares of Common Stock for
the 2007 Equity Incentive Plan, options to purchase 1,898,305 shares of Common Stock have been granted and are currently outstanding, 1,013,805 shares of Common Stock have been granted as restricted stock awards and are currently outstanding and
2,046,292 shares of Common Stock remain available for issuance to employees, officers, directors and consultants pursuant to the 2007 Equity Incentive Plan. The Company has reserved 325,533 shares of Common Stock for issuance to employees, officers,
directors and consultants of the Company pursuant to its 2002 Stock Incentive Plan, as amended and in effect, duly adopted by the Board of Directors and approved by the stockholders of the Company (&#147;<B><I>2002 Stock Incentive
Plan</I></B>&#148;). Of such reserved shares of Common Stock for the 2002 Stock Incentive Plan, options to purchase 246,742 shares of Common Stock have been granted, 163,496 shares of Common Stock have been granted as restricted stock awards and are
currently outstanding and 78,791 shares of Common Stock remain </FONT></P>
 <p STYLE="margin-top:0px;margin-bottom:0px"><FONT SIZE="1">&nbsp;</FONT></P> <P STYLE="margin-top:0px;margin-bottom:0px" ALIGN="center"><FONT STYLE="font-family:Times New Roman" SIZE="2">5 </FONT></P>


<p Style='page-break-before:always'>
<HR  SIZE="3" style="COLOR:#999999" WIDTH="100%" ALIGN="CENTER">

 <P STYLE="margin-top:0px;margin-bottom:0px; margin-left:8%"><FONT STYLE="font-family:Times New Roman" SIZE="2">
available for issuance to employees, officers, directors and consultants pursuant to the 2002 Stock Incentive Plan. The Company has reserved 1,028,958 shares of Common Stock for issuance to
employees, officers, directors and consultants of the Company pursuant to its Non-Qualified Stock Plan, as amended and in effect, duly adopted by the Board of Directors and approved by the stockholders of the Company (the &#147;<B><I>Non-Qualified
Stock Plan</I></B>&#148;). Of such reserved shares of Common Stock for the Non-Qualified Stock Plan, options to purchase 1,028,958 shares of Common Stock have been granted, 0 shares of Common Stock have been granted as restricted stock awards and
are currently outstanding and 0 shares of Common Stock remain available for issuance to prospective employees and non-executive employees and consultants pursuant to the Non-Qualified Stock Plan. The Company has reserved 200,000 shares of Preferred
Stock for issuance upon the exercise of the rights pursuant to the Preferred Shareholders Rights Agreement, as amended and in effect, duly adopted by the Board of Directors and approved by the Company stockholders (the &#147;<B><I>Preferred
Shareholders Rights Agreement</I></B>&#148;). The Company has no other shares of capital stock authorized, issued or outstanding. A capitalization table presenting the capitalization of the Company as of the date hereof, without giving effect to any
of the Closings, is set forth on <U>Schedule 5.1(a)</U> hereto. At each Subsequent Closing, if any, the Company shall provide an updated capitalization table representing the capitalization of the Company on such date thereof. </FONT></P>
<P STYLE="margin-top:6px;margin-bottom:0px; margin-left:8%; text-indent:4%"><FONT STYLE="font-family:Times New Roman" SIZE="2">(b) As of the date hereof, after giving effect to the Initial Closing and the Subsequent Closings, if any, except as may
be granted by this Agreement and the other Transaction Documents, (i)&nbsp;other than as set forth in <U>Schedule 5.1(b)</U>, there are no outstanding options, warrants, scrip, rights to subscribe to, calls or commitments of any character whatsoever
relating to, or securities or rights convertible into or exercisable or exchangeable for, any shares of capital stock of the Company, or arrangements by which the Company is or may become bound to issue additional shares of capital stock, nor are
any such issuances or arrangements contemplated other than pursuant to the ESPP, 2007 Equity Incentive Plan, 2002 Stock Incentive Plan, the Non-Qualified Stock Plan and the Preferred Shareholders Rights Agreement; (ii)&nbsp;other than as set forth
in <U>Schedule 5.1(b)</U>, there are no agreements or arrangements under which the Company is or may become obligated to register the sale of any of its securities under the Securities Act; (iii)&nbsp;the Company has no obligation (contingent or
otherwise) to purchase, redeem or otherwise acquire any of its equity securities or any interests therein or to pay any dividend or make any distribution in respect thereof, except as required by the Charter Documents; and (iv)&nbsp;except for
109,158 shares of Common Stock reserved for issuance under the ESPP, 3,944,597 shares of Common Stock reserved under the 2007 Equity Incentive Plan, 325,533 shares of Common Stock reserved under the 2002 Stock Incentive Plan, 1,028,958 shares of
Common Stock reserved under the Non-Qualified Stock Plan and 200,000 shares of Preferred Stock reserved under the Preferred Shareholder Rights Agreement as set forth in Schedule 5.1(b) hereto, the Company has not reserved any shares of capital stock
for issuance pursuant to any stock option plan or similar arrangement. </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px; text-indent:8%"><FONT STYLE="font-family:Times New Roman" SIZE="2">5.2. <U>Due Issuance and Authorization of Capital
Stock</U>. All of the outstanding shares of capital stock of the Company have been validly issued and are fully paid and non-assessable. The issuance of the Conversion Shares to the Purchasers pursuant to the terms hereof
</FONT></P>
 <p STYLE="margin-top:0px;margin-bottom:0px"><FONT SIZE="1">&nbsp;</FONT></P> <P STYLE="margin-top:0px;margin-bottom:0px" ALIGN="center"><FONT STYLE="font-family:Times New Roman" SIZE="2">6 </FONT></P>


<p Style='page-break-before:always'>
<HR  SIZE="3" style="COLOR:#999999" WIDTH="100%" ALIGN="CENTER">

 <P STYLE="margin-top:0px;margin-bottom:0px"><FONT STYLE="font-family:Times New Roman" SIZE="2">
upon conversion of the Notes will vest in the holders thereof legal and valid title to such Conversion Shares, free and clear of any lien, claim, judgment, charge, mortgage, security interest,
pledge, escrow, equity or other encumbrance other than restrictions pursuant to any applicable state or federal securities laws (collectively, <B><I>&#147;Encumbrances</I></B>&#148;). </FONT></P>
<P STYLE="margin-top:12px;margin-bottom:0px; text-indent:8%"><FONT STYLE="font-family:Times New Roman" SIZE="2">5.3. <U>Organization</U>. The Company (a)&nbsp;is duly incorporated or otherwise organized, validly existing and in good standing under
the laws of the jurisdiction of its formation, (b)&nbsp;is duly qualified to do business as a foreign entity and is in good standing in each jurisdiction where the nature of the property owned or leased by it or the nature of the business conducted
by it makes such qualification necessary, except where the failure to be so qualified would not have a Material Adverse Effect, and (c)&nbsp;has all requisite corporate power and authority to own or lease and operate its assets and carry on its
business as presently being conducted. </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px; text-indent:8%"><FONT STYLE="font-family:Times New Roman" SIZE="2">5.4. <U>Subsidiaries</U>. There are no direct or indirect Subsidiaries of the Company.
</FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px; text-indent:8%"><FONT STYLE="font-family:Times New Roman" SIZE="2">5.5. <U>Consents</U>. Except as set forth on <U>Schedule 5.5</U>, neither the execution, delivery or performance of this
Agreement or the other Transaction Documents by the Company, nor the consummation by it of the obligations and transactions contemplated hereby or thereby (including, without limitation, the issuance, the reservation for issuance and the delivery of
the Securities) requires any consent of, authorization by, exemption from, filing with or notice to any Governmental Entity or any other Person, other than filings required under applicable U.S. federal and state securities laws or filings with
applicable Governmental Entities to perfect the security interests created by the Security Agreement. </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px; text-indent:8%"><FONT STYLE="font-family:Times New Roman" SIZE="2">5.6. <U>Authorization;
Enforcement</U>. The Company has all requisite corporate power and has taken all necessary corporate action required for the due authorization, execution, delivery and performance by the Company of this Agreement and the other Transaction Documents
and the consummation of the transactions contemplated hereby and thereby (including, without limitation, the issuance of the Securities and the provision to the Purchaser of the rights contemplated by the Transaction Documents) and no action on the
part of the stockholders of the Company is required, except for the actions required pursuant to Section&nbsp;6.11. The execution, delivery and performance by the Company of each of the Transaction Documents and the consummation by the Company of
the transactions contemplated hereby and thereby, have been duly authorized by all necessary corporate action on the part of the Company, except for the stockholder approvals required in connection with the matters set forth in Section&nbsp;6.11.
This Agreement has been duly executed and delivered by the Company, and the other Transaction Documents and instruments referred to herein to which it is a party will be duly executed and delivered by the Company, and each such agreement constitutes
or will constitute a legal, valid and binding obligation of the Company enforceable against it in accordance with its terms, except to the extent that enforceability may be limited by bankruptcy, insolvency, reorganization, moratorium, fraudulent
conveyance, and any other laws of general application affecting enforcement of creditors&#146; rights generally, and as limited by laws relating to the availability of specific performance, injunctive relief, or other equitable remedies. </FONT></P>
<P STYLE="margin-top:12px;margin-bottom:0px; text-indent:8%"><FONT STYLE="font-family:Times New Roman" SIZE="2">5.7. <U>Valid Issuance of Securities</U>. The Notes, when issued, sold and delivered in accordance with the terms and for the
consideration set forth in this Agreement, at each Closing, will be duly authorized and a sufficient number of authorized but unissued shares of </FONT></P>
 <p STYLE="margin-top:0px;margin-bottom:0px"><FONT SIZE="1">&nbsp;</FONT></P> <P STYLE="margin-top:0px;margin-bottom:0px" ALIGN="center"><FONT STYLE="font-family:Times New Roman" SIZE="2">7 </FONT></P>


<p Style='page-break-before:always'>
<HR  SIZE="3" style="COLOR:#999999" WIDTH="100%" ALIGN="CENTER">

 <P STYLE="margin-top:0px;margin-bottom:0px"><FONT STYLE="font-family:Times New Roman" SIZE="2">
Common Stock (which may be unissued or issued but held by the Company as treasury shares) will have been, upon obtaining stockholder approval as contemplated by Section&nbsp;6.11, reserved for
issuance upon conversion of the Notes, and upon such conversion in accordance with the terms of this Agreement and the Notes, the Conversion Shares will be duly authorized, validly issued, fully paid and non-assessable, and free from all taxes and
Encumbrances, and will not be subject to preemptive rights or other similar rights of stockholders of the Company, except as set forth herein. </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px; text-indent:8%"><FONT
STYLE="font-family:Times New Roman" SIZE="2">5.8. <U>No Conflicts</U>. Except as set forth on <U>Schedule 5.8</U> or as specifically contemplated herein, the execution, delivery and performance of each of the Transaction Documents and the
consummation of the transactions contemplated hereby and thereby (including, without limitation, the issuance and reservation for issuance, as applicable, of the Securities) will not (a)&nbsp;result in a violation of the certificate of
incorporation, as amended, and the by-laws of the Company (the &#147;<B><I>Charter Documents</I></B>&#148;), (b)&nbsp;conflict with or result in the breach of the terms, conditions or provisions of or constitute a default (or an event which with
notice or lapse of time or both would become a default) under, or give rise to any right of termination, acceleration or cancellation under, any material agreement, lease, mortgage, license, indenture, instrument or other contract to which the
Company is a party, (c)&nbsp;result in a violation of any law, rule, regulation, order, judgment or decree (including, without limitation, U.S. federal and state securities laws and regulations) applicable to the Company or by which any property or
asset of the Company is bound or affected, (d)&nbsp;result in a material violation of any rule or regulation of FINRA or its Trading Markets, or (e)&nbsp;result in the creation of any Encumbrance upon any of the Company&#146;s assets. Except as set
forth on <U>Schedule 5.8</U>, the Company is not in violation of its Charter Documents, and the Company is not in default (and no event has occurred which, with notice or lapse of time or both, would cause the Company to be in default) under, nor
has there occurred any event giving others (with notice or lapse of time or both) any rights of termination, amendment, acceleration or cancellation of, any material agreement, indenture or instrument to which the Company is a party. The business of
the Company is not being conducted in violation of any law, ordinance or regulation of any Governmental Entity, except where the violation would not result in a Material Adverse Effect. </FONT></P>
<P STYLE="margin-top:12px;margin-bottom:0px; text-indent:8%"><FONT STYLE="font-family:Times New Roman" SIZE="2">5.9. <U>Material Contracts</U>. Each Material Contract is the legal, valid and binding obligation of the Company, enforceable against the
Company in accordance with its terms, except to the extent that enforceability may be limited by bankruptcy, insolvency, reorganization, moratorium, fraudulent conveyance, and any other laws of general application affecting enforcement of
creditors&#146; rights generally, and as limited by laws relating to the availability of specific performance, injunctive relief, or other equitable remedies. Except as set forth on Schedule 5.9, the Company is in compliance with all material terms
of the Material Contracts, and there has not occurred any breach, violation or default or any event that, with the lapse of time, the giving of notice or the election of any Person, or any combination thereof, would constitute a breach, violation or
default by the Company under any such Material Contract or, to the knowledge of the Company, by any other Person to any such contract except where such breach, violation or default would not have a Material Adverse Effect. To the knowledge of the
Company, it has not been notified that any party to any Material Contract intends to cancel, terminate, not renew or exercise an option under any Material Contract, whether in connection with the transactions contemplated hereby or otherwise.
</FONT></P>
 <p STYLE="margin-top:0px;margin-bottom:0px"><FONT SIZE="1">&nbsp;</FONT></P> <P STYLE="margin-top:0px;margin-bottom:0px" ALIGN="center"><FONT STYLE="font-family:Times New Roman" SIZE="2">8 </FONT></P>


<p Style='page-break-before:always'>
<HR  SIZE="3" style="COLOR:#999999" WIDTH="100%" ALIGN="CENTER">

 <P STYLE="margin-top:0px;margin-bottom:0px; text-indent:8%"><FONT STYLE="font-family:Times New Roman" SIZE="2">5.10. <U>Right of First Refusal; Stockholders Agreement; Voting and Registration Rights</U>.
Except as provided in this Agreement or the other Transaction Documents, or as otherwise set forth in <U>Schedule 5.10</U>, no party has any right of first refusal, right of first offer, right of co-sale, preemptive right or other similar right or
any registration right regarding the securities of the Company. Except pursuant to any agreement listed on <U>Schedule 5.10</U>, there are no provisions of the Charter Documents, and no Material Contracts, other than this Agreement or the other
Transaction Documents, which (a)&nbsp;may affect or restrict the voting rights of the Purchaser with respect to the Securities in its capacity as a stockholder of the Company, (b)&nbsp;restrict the ability of the Purchaser, or any successor thereto
or assignee or transferee thereof, to transfer the Securities, (c)&nbsp;would adversely affect the Company&#146;s or the Purchaser&#146;s right or ability to consummate the transactions contemplated by this Agreement or comply with the terms of the
other Transaction Documents and the transactions contemplated hereby or thereby, (d)&nbsp;require the vote of more than a majority of the Company&#146;s issued and outstanding Common Stock, voting together as a single class, to take or prevent any
corporate action, other than those matters requiring a different vote under Delaware law, or (e)&nbsp;entitle any party to nominate or elect any director of the Company or require any of the Company&#146;s stockholders to vote for any such nominee
or other person as a director of the Company in each case. </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px; text-indent:8%"><FONT STYLE="font-family:Times New Roman" SIZE="2">5.11. <U>Previous Issuances</U>. All shares of capital stock and
other securities previously issued by the Company have been issued in transactions registered under or exempt from the registration requirements under the Securities Act and all applicable state securities or &#147;blue sky&#148; laws, and in
compliance with all applicable corporate laws. The Company has not violated the Securities Act or any applicable state securities or &#147;blue sky&#148; laws in connection with the previous issuance of any shares of capital stock or other
securities. </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px; text-indent:8%"><FONT STYLE="font-family:Times New Roman" SIZE="2">5.12. <U>No Integrated Offering</U>. Neither the Company, nor any of its Affiliates or any other Person acting on
the Company&#146;s behalf, has directly or indirectly engaged in any form of general solicitation or general advertising with respect to the Securities, nor have any of such Persons made any offers or sales of any security of the Company or its
Affiliates or solicited any offers to buy any security of the Company or its Affiliates under circumstances that would require registration of the Securities under the Securities Act or any other securities laws or cause this offering of Securities
to be integrated with any prior offering of securities of the Company for purposes of the Securities Act or any applicable stockholder approval provisions of any Trading Market on which any securities of the Company are listed or designated.
</FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px; text-indent:8%"><FONT STYLE="font-family:Times New Roman" SIZE="2">5.13. <U>Financial Statements</U>. </FONT></P> <P STYLE="margin-top:6px;margin-bottom:0px; margin-left:8%; text-indent:4%"><FONT
STYLE="font-family:Times New Roman" SIZE="2">(a) Except as set forth in <U>Schedule 5.13</U>, the Company has filed all reports, schedules, forms, statements and other documents required to be filed by the Company under the Securities Act and the
Exchange Act, including pursuant to Section&nbsp;13(a) or 15(d) thereof, since January&nbsp;1, 2010 (the foregoing materials, including the exhibits thereto and documents incorporated by reference therein, being collectively referred to herein as
the &#147;<B><I>SEC Reports</I></B>&#148;) on a timely basis or has received a valid extension of such time of filing and has filed any such SEC Reports prior to the expiration of any such extension. As of their respective dates, the SEC Reports
complied as to form in all material respects with the requirements of the Securities Act and the Exchange Act, as applicable, and none of the SEC Reports, when filed, contained any </FONT></P>
 <p STYLE="margin-top:0px;margin-bottom:0px"><FONT SIZE="1">&nbsp;</FONT></P> <P STYLE="margin-top:0px;margin-bottom:0px" ALIGN="center"><FONT STYLE="font-family:Times New Roman" SIZE="2">9 </FONT></P>


<p Style='page-break-before:always'>
<HR  SIZE="3" style="COLOR:#999999" WIDTH="100%" ALIGN="CENTER">

 <P STYLE="margin-top:0px;margin-bottom:0px; margin-left:8%"><FONT STYLE="font-family:Times New Roman" SIZE="2">
untrue statement of a material fact or omitted to state a material fact required to be stated therein or necessary in order to make the statements therein, in the light of the circumstances under
which they were made, not misleading. All agreements to which the Company is a party or to which the property or assets of the Company are subject, which are required to be described in or filed as exhibits to an SEC Report, have been so described
or filed. </FONT></P> <P STYLE="margin-top:6px;margin-bottom:0px; margin-left:8%; text-indent:4%"><FONT STYLE="font-family:Times New Roman" SIZE="2">(b) The financial statements of the Company included in the SEC Reports comply in all material
respects with applicable accounting requirements and the rules and regulations of the Commission with respect thereto as in effect at the time of filing. Such financial statements have been prepared in accordance with GAAP, except as may be
otherwise specified in such financial statements or the notes thereto and except that unaudited financial statements may not contain all footnotes required by GAAP, and fairly present the financial position of the Company as of and for the dates
thereof and the results of operations and cash flows for the periods then ended, subject, in the case of unaudited statements, to normal, immaterial, year-end audit adjustments. </FONT></P>
<P STYLE="margin-top:12px;margin-bottom:0px; text-indent:8%"><FONT STYLE="font-family:Times New Roman" SIZE="2">5.14. <U>No Undisclosed Material Liabilities</U>. There are no liabilities of the Company of any kind whatsoever, whether
interest-bearing indebtedness, or liabilities accrued, contingent, absolute, determined, determinable or otherwise, other than liabilities: </FONT></P> <P STYLE="margin-top:6px;margin-bottom:0px; margin-left:8%; text-indent:4%"><FONT
STYLE="font-family:Times New Roman" SIZE="2">(a) reflected in the financial statements (including the footnotes thereto) included in the SEC Reports; </FONT></P> <P STYLE="margin-top:6px;margin-bottom:0px; margin-left:8%; text-indent:4%"><FONT
STYLE="font-family:Times New Roman" SIZE="2">(b) disclosed on <U>Schedule 5.14</U> hereto; or </FONT></P> <P STYLE="margin-top:6px;margin-bottom:0px; margin-left:8%; text-indent:4%"><FONT STYLE="font-family:Times New Roman" SIZE="2">(c) created
under, or incurred in connection with, this Agreement or the other Transaction Documents. </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px; text-indent:8%"><FONT STYLE="font-family:Times New Roman" SIZE="2">5.15. <U>Absence of Litigation</U>.
There is no claim, action, suit, arbitration, investigation or other proceeding pending against, or to the knowledge of the Company, threatened against or affecting, the Company or any of its properties or, to the knowledge of the Company, any of
its respective officers or directors before any Governmental Entity, except as disclosed on Schedule 5.15 hereto. </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px; text-indent:8%"><FONT STYLE="font-family:Times New Roman" SIZE="2">5.16.
<U>Taxes</U>. Except as set forth on <U>Schedule 5.16</U>, the Company has properly filed all federal, foreign, state, local, and other tax returns and reports which are required to be filed by it, which returns and reports were properly completed
and are true and correct in all material respects, and all taxes, interest, and penalties due and owing have been timely paid. There are no outstanding waivers or extensions of time with respect to the assessment or audit of any tax or tax return of
the Company, or claims now pending or matters under discussion between the Company and any taxing authority in respect of any tax of the Company. The Company has no material uncertain tax positions pursuant to FASB Interpretation 48 (FIN 48),
<I>Accounting for Uncertainty in Income Taxes.</I> </FONT></P>
 <p STYLE="margin-top:0px;margin-bottom:0px"><FONT SIZE="1">&nbsp;</FONT></P> <P STYLE="margin-top:0px;margin-bottom:0px" ALIGN="center"><FONT STYLE="font-family:Times New Roman" SIZE="2">10 </FONT></P>



<p Style='page-break-before:always'>
<HR  SIZE="3" style="COLOR:#999999" WIDTH="100%" ALIGN="CENTER">

 <P STYLE="margin-top:0px;margin-bottom:0px; text-indent:8%"><FONT STYLE="font-family:Times New Roman" SIZE="2">5.17. <U>Employee Matters</U>. </FONT></P>
<P STYLE="margin-top:6px;margin-bottom:0px; margin-left:8%; text-indent:4%"><FONT STYLE="font-family:Times New Roman" SIZE="2">(a) The Company has listed any &#147;employee benefit plan&#148; subject to the Employee Retirement Income Security Act of
1974, as amended (&#147;<B><I>ERISA</I></B>&#148;), that it maintains for employees on <U>Schedule 5.17(a)</U>. </FONT></P>
<P STYLE="margin-top:6px;margin-bottom:0px; margin-left:8%; text-indent:4%"><FONT STYLE="font-family:Times New Roman" SIZE="2">(b) Except as set forth on <U>Schedule 5.17(b)</U>, (i)&nbsp;no director or officer or other employee of the Company will
become entitled to any retirement, severance, change of control, or similar benefit or enhanced or accelerated benefit (including any acceleration of vesting) or lapse of repurchase rights or obligations with respect to any employee benefit plan
subject to ERISA or other benefit under any compensation plan or arrangement of the Company (each, an &#147;<B><I>Employee Benefit Plan</I></B>&#148;) as a result of the transactions contemplated in this Agreement; and (ii)&nbsp;no payment made or
to be made to any current or former employee or director of the Company, by reason of the transactions contemplated hereby (whether alone or in connection with any other event, including, but not limited to, the consummation of a change of control
or a termination of employment) will constitute an &#147;excess parachute payment&#148; within the meaning of Section&nbsp;280G of the Code. </FONT></P> <P STYLE="margin-top:6px;margin-bottom:0px; margin-left:8%; text-indent:4%"><FONT
STYLE="font-family:Times New Roman" SIZE="2">(c) No executive officer, to the knowledge of the Company, is, or is now reasonably expected to be, in violation of any term of any employment contract, confidentiality, disclosure or proprietary
information agreement or non-competition agreement, or any other contract or agreement or any restrictive covenant with the Company, and, to the knowledge of the Company, the continued employment of each such executive officer does not subject the
Company to any material liability with respect to any of the foregoing matters. </FONT></P> <P STYLE="margin-top:6px;margin-bottom:0px; margin-left:8%; text-indent:4%"><FONT STYLE="font-family:Times New Roman" SIZE="2">(d) The Company is in
compliance with all applicable federal, state, local and foreign statutes, laws (including, without limitation, common law), judicial decisions, regulations, ordinances, rules, judgments, orders and codes respecting employment, employment practices,
labor, terms and conditions of employment and wages and hours, except where the failure to comply would not have a Material Adverse Effect, and no work stoppage or labor strike against the Company is pending or, to its knowledge, threatened, nor is
the Company involved in or, to its knowledge, threatened with any labor dispute, grievance or litigation relating to labor matters involving any current or former employees of the Company or independent contractors. There are no suits, actions,
disputes, claims (other than routine claims for benefits), investigations or audits pending or, to the knowledge of the Company, threatened in connection with any Employee Benefit Plan, but excluding any of the foregoing which would not have a
Material Adverse Effect. Each Employee Benefit Plan subject to the Patient Protection and Affordable Care Act, as modified by the Health Care and Education Reconciliation Act, and related regulations, has been operated in compliance therewith and is
a &#147;grandfathered health plan&#148; as defined therein. </FONT></P> <P STYLE="margin-top:6px;margin-bottom:0px; margin-left:8%; text-indent:4%"><FONT STYLE="font-family:Times New Roman" SIZE="2">(e) Except as set forth on Schedule 5.17(e), no
Key Employee of the Company has advised the Company (orally or in writing) that he or she intends to </FONT></P>
 <p STYLE="margin-top:0px;margin-bottom:0px"><FONT SIZE="1">&nbsp;</FONT></P> <P STYLE="margin-top:0px;margin-bottom:0px" ALIGN="center"><FONT STYLE="font-family:Times New Roman" SIZE="2">11 </FONT></P>



<p Style='page-break-before:always'>
<HR  SIZE="3" style="COLOR:#999999" WIDTH="100%" ALIGN="CENTER">

 <P STYLE="margin-top:0px;margin-bottom:0px; margin-left:8%"><FONT STYLE="font-family:Times New Roman" SIZE="2">
terminate employment with the Company, nor does the Company have a present intention to terminate the employment of any officer or Key Employee. </FONT></P>
<P STYLE="margin-top:12px;margin-bottom:0px; text-indent:8%"><FONT STYLE="font-family:Times New Roman" SIZE="2">5.18. <U>Compliance with Laws</U>. </FONT></P> <P STYLE="margin-top:6px;margin-bottom:0px; margin-left:8%; text-indent:4%"><FONT
STYLE="font-family:Times New Roman" SIZE="2">(a) The Company has been and is in material compliance with the terms of, all franchises, permits, licenses and other rights and privileges necessary to conduct the Company&#146;s present and proposed
business and is in compliance with and has not violated, in any material respect, (i)&nbsp;any judgments, orders, decrees, injunctions or writs applicable to the Company, or (ii)&nbsp;any applicable provisions of any laws, statutes, ordinances,
rules or regulations applicable to the conduct of the Company&#146;s business, including the ownership, testing, development, manufacture, packaging, processing, use, distribution, marketing, labeling, promotion, sale, offer for sale, storage,
import, export or disposal of any drug or drug candidate under development, manufactured or distributed by the Company (collectively, &#147;<B><I>Applicable Laws</I></B>&#148;). </FONT></P>
<P STYLE="margin-top:6px;margin-bottom:0px; margin-left:8%; text-indent:4%"><FONT STYLE="font-family:Times New Roman" SIZE="2">(b) Except as set forth on Schedule 5.18, each of the Company and its subsidiaries: </FONT></P>
<P STYLE="font-size:6px;margin-top:0px;margin-bottom:0px">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="13%"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD WIDTH="4%" VALIGN="top" ALIGN="left"><FONT STYLE="font-family:Times New Roman" SIZE="2">(i)</FONT></TD>
<TD ALIGN="left" VALIGN="top"><FONT STYLE="font-family:Times New Roman" SIZE="2">has not received any FDA Form 483, notice of adverse finding, warning letter, untitled letter or other correspondence or notice from the U.S. Food and Drug
Administration (the &#147;<B><I>FDA</I></B>&#148;) or any other federal, state, local or foreign governmental or regulatory authority alleging or asserting material noncompliance with any Applicable Laws or any licenses, certificates, approvals,
clearances, authorizations, permits and supplements or amendments thereto required by any such Applicable Laws (&#147;<B><I>Authorizations</I></B>&#148;); </FONT></TD></TR></TABLE> <P STYLE="font-size:6px;margin-top:0px;margin-bottom:0px">&nbsp;</P>

<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="13%"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD WIDTH="4%" VALIGN="top" ALIGN="left"><FONT STYLE="font-family:Times New Roman" SIZE="2">(ii)</FONT></TD>
<TD ALIGN="left" VALIGN="top"><FONT STYLE="font-family:Times New Roman" SIZE="2">possesses all material Authorizations and such Authorizations are valid and in full force and effect and the Company is not in material violation of any term of any
such Authorizations; </FONT></TD></TR></TABLE> <P STYLE="font-size:6px;margin-top:0px;margin-bottom:0px">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="13%"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD WIDTH="4%" VALIGN="top" ALIGN="left"><FONT STYLE="font-family:Times New Roman" SIZE="2">(iii)</FONT></TD>
<TD ALIGN="left" VALIGN="top"><FONT STYLE="font-family:Times New Roman" SIZE="2">has not received notice of any claim, action, suit, proceeding, hearing, enforcement, investigation, arbitration or other action from the FDA or any other federal,
state, local or foreign governmental or regulatory authority or third party alleging that any product operation or activity is in material violation of any Applicable Laws or Authorizations and has no knowledge that the FDA or any other federal,
state, local or foreign governmental or regulatory authority or third party is considering any such claim, litigation, arbitration, action, suit, investigation or proceeding; </FONT></TD></TR></TABLE>
<P STYLE="font-size:6px;margin-top:0px;margin-bottom:0px">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="13%"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD WIDTH="4%" VALIGN="top" ALIGN="left"><FONT STYLE="font-family:Times New Roman" SIZE="2">(iv)</FONT></TD>
<TD ALIGN="left" VALIGN="top"> <P ALIGN="left"><FONT STYLE="font-family:Times New Roman" SIZE="2">has not received notice that the FDA or any other federal, state, local or foreign governmental or regulatory authority has taken, is taking or intends
to take action to limit, suspend, modify or revoke any material Authorizations and has no knowledge that the FDA or </FONT></P></TD></TR></TABLE>
 <p STYLE="margin-top:0px;margin-bottom:0px"><FONT SIZE="1">&nbsp;</FONT></P> <P STYLE="margin-top:0px;margin-bottom:0px" ALIGN="center"><FONT STYLE="font-family:Times New Roman" SIZE="2">12 </FONT></P>



<p Style='page-break-before:always'>
<HR  SIZE="3" style="COLOR:#999999" WIDTH="100%" ALIGN="CENTER">


<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="17%"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD ALIGN="left" VALIGN="top"> <P><FONT STYLE="font-family:Times New Roman" SIZE="2">
any other federal, state, local or foreign governmental or regulatory authority is considering such action; </FONT></P></TD></TR></TABLE>
<P STYLE="font-size:6px;margin-top:0px;margin-bottom:0px">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="13%"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD WIDTH="4%" VALIGN="top" ALIGN="left"><FONT STYLE="font-family:Times New Roman" SIZE="2">(v)</FONT></TD>
<TD ALIGN="left" VALIGN="top"><FONT STYLE="font-family:Times New Roman" SIZE="2">has filed, obtained, maintained or submitted all material reports, documents, forms, notices, applications, records, claims, submissions and supplements or amendments
as required by any Applicable Laws or Authorizations and that all such reports, documents, forms, notices, applications, records, claims, submissions and supplements or amendments were materially complete and correct on the date filed (or were
corrected or supplemented by a subsequent submission); and </FONT></TD></TR></TABLE> <P STYLE="font-size:6px;margin-top:0px;margin-bottom:0px">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="13%"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD WIDTH="4%" VALIGN="top" ALIGN="left"><FONT STYLE="font-family:Times New Roman" SIZE="2">(vi)</FONT></TD>
<TD ALIGN="left" VALIGN="top"><FONT STYLE="font-family:Times New Roman" SIZE="2">has not, either voluntarily or involuntarily, initiated, conducted, or issued or caused to be initiated, conducted or issued, any recall, market withdrawal or
replacement, safety alert, &#147;dear doctor&#148; letter, or other notice or action relating to the alleged lack of safety or efficacy of any product or any alleged product defect or violation and, to the Company&#146;s knowledge, no third party
has initiated, conducted or intends to initiate any such notice or action. </FONT></TD></TR></TABLE> <P STYLE="margin-top:6px;margin-bottom:0px; margin-left:8%; text-indent:4%"><FONT STYLE="font-family:Times New Roman" SIZE="2">(c) The studies,
tests and preclinical and clinical trials conducted by or on behalf of the Company or any of its subsidiaries were and, if still pending, are being conducted in accordance with experimental protocols, procedures and controls pursuant to accepted
professional scientific standards and all Applicable Laws and Authorizations, including, without limitation, the Federal Food, Drug and Cosmetic Act and the rules and regulations promulgated thereunder (collectively,
&#147;<B><I>FFDCA</I></B>&#148;); the descriptions of the results of such studies, tests and trials contained in the SEC Reports are accurate and complete and fairly present the data derived from such studies, tests and trials; the Company is not
aware of any studies, tests or trials, the results of which the Company believes reasonably call into question the study, test, or trial results described or referred to in the SEC Reports when viewed in the context in which such results are
described and the clinical state of development; and, since January&nbsp;1, 2008, the Company has not received any notices or correspondence from the FDA or any other federal, state, local or foreign governmental or regulatory authority requiring
the termination, suspension or material modification of any studies, tests or preclinical or clinical trials conducted by or on behalf of the Company. </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px; text-indent:8%"><FONT
STYLE="font-family:Times New Roman" SIZE="2">5.19. <U>Brokers</U>. There is no investment banker, broker, finder, financial advisor or other Person which has been retained by or is authorized to act on behalf of the Company who might be entitled to
any fee or commission in connection with the transactions contemplated by this Agreement. </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px; text-indent:8%"><FONT STYLE="font-family:Times New Roman" SIZE="2">5.20. <U>Environmental Matters</U>.
</FONT></P> <P STYLE="margin-top:6px;margin-bottom:0px; margin-left:8%; text-indent:4%"><FONT STYLE="font-family:Times New Roman" SIZE="2">(a)&nbsp;(i)&nbsp;(i)&nbsp;No written notice, notification, demand, request for information, citation,
summons, complaint or order has been received by, and no investigation, action, claim, suit, proceeding or review is pending or, to the knowledge of </FONT></P>
 <p STYLE="margin-top:0px;margin-bottom:0px"><FONT SIZE="1">&nbsp;</FONT></P> <P STYLE="margin-top:0px;margin-bottom:0px" ALIGN="center"><FONT STYLE="font-family:Times New Roman" SIZE="2">13 </FONT></P>



<p Style='page-break-before:always'>
<HR  SIZE="3" style="COLOR:#999999" WIDTH="100%" ALIGN="CENTER">

 <P STYLE="margin-top:0px;margin-bottom:0px; margin-left:8%"><FONT STYLE="font-family:Times New Roman" SIZE="2">
the Company, threatened by any Person against the Company and no penalty has been assessed against the Company with respect to any matters relating to or arising out of any Environmental Law;
(ii)&nbsp;the Company is in compliance with all Environmental Laws except where the failure to comply would not have a Material Adverse Effect; and (iii)&nbsp;to the knowledge of the Company there are no liabilities of or relating to the Company
relating to or arising out of any Environmental Law except such as would not have a Material Adverse Effect, and, to the knowledge of the Company, there is no existing condition, situation or set of circumstances which could reasonably be expected
to result in such a liability. </FONT></P> <P STYLE="margin-top:6px;margin-bottom:0px; margin-left:8%; text-indent:4%"><FONT STYLE="font-family:Times New Roman" SIZE="2">(b) For purposes of this Agreement, the term &#147;<B><I>Environmental
Laws</I></B>&#148; means federal, state, local and foreign statutes, laws, judicial decisions, regulations, ordinances, rules, judgments, orders, codes, injunctions, permits and governmental agreements relating to human health and the environment,
including, but not limited to, Hazardous Materials; and the term &#147;<B><I>Hazardous Material</I></B>&#148; means all substances or materials regulated as hazardous, toxic, explosive, dangerous, flammable or radioactive under any Environmental Law
including, but not limited to: (i)&nbsp;petroleum, asbestos, or polychlorinated biphenyls and (ii)&nbsp;in the United States, all substances defined as Hazardous Substances, Oils, Pollutants or Contaminants in the National Oil and Hazardous
Substances Pollution Contingency Plan. </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px; text-indent:8%"><FONT STYLE="font-family:Times New Roman" SIZE="2">5.21. <U>Intellectual Property Matters</U>. </FONT></P>
<P STYLE="margin-top:6px;margin-bottom:0px; margin-left:8%; text-indent:4%"><FONT STYLE="font-family:Times New Roman" SIZE="2">(a) &#147;<B><I>Intellectual Property</I></B>&#148; means any and all of the following arising under the laws of the
United States, any other jurisdiction or any treaty regime: (i)&nbsp;all inventions (whether patentable or unpatentable and whether or not reduced to practice), all improvements thereon, and all patents, patent applications and patent disclosures,
together with all reissuances, continuations, continuations-in-part, revisions, extensions and reexaminations thereof, (ii)&nbsp;all trademarks, service marks, trade dress, logos, trade names and corporate names, together with all translations,
adaptations, derivations and combinations thereof and including all goodwill associated therewith, and all applications, registrations and renewals in connection therewith, (iii)&nbsp;all copyrightable works, all copyrights and all applications,
registrations and renewals in connection therewith, (iv)&nbsp;all trade secrets and confidential business information (including, without limitation, ideas, research and development, know-how, formulas, compositions, manufacturing and production
processes and techniques, technical data, designs, drawings, specifications, customer and supplier lists, pricing and cost information and business and marketing plans and proposals), (v)&nbsp;all computer software (including, without limitation,
data and related documentation and except for any commercial &#147;shrink-wrapped&#148; software) and source codes (other than open source codes), (vi)&nbsp;all other proprietary rights, (vii)&nbsp;all copies and tangible embodiments of the
foregoing (in whatever form or medium) and (viii)&nbsp;all licenses or agreements in connection with the foregoing. &#147;<B><I>Company Intellectual Property</I></B>&#148; means all Intellectual Property which is used in connection with, and is
material to, the business of the Company and all Intellectual Property owned by the Company, provided that any Intellectual Property that is licensed by the Company shall be included within the meaning of Company
</FONT></P>
 <p STYLE="margin-top:0px;margin-bottom:0px"><FONT SIZE="1">&nbsp;</FONT></P> <P STYLE="margin-top:0px;margin-bottom:0px" ALIGN="center"><FONT STYLE="font-family:Times New Roman" SIZE="2">14 </FONT></P>



<p Style='page-break-before:always'>
<HR  SIZE="3" style="COLOR:#999999" WIDTH="100%" ALIGN="CENTER">

 <P STYLE="margin-top:0px;margin-bottom:0px; margin-left:8%"><FONT STYLE="font-family:Times New Roman" SIZE="2">
Intellectual Property only within the scope of use by the Company or in connection with the Company&#146;s business. </FONT></P>
<P STYLE="margin-top:6px;margin-bottom:0px; margin-left:8%; text-indent:4%"><FONT STYLE="font-family:Times New Roman" SIZE="2">(b) Except as set forth on <U>Schedule 5.21(b)</U>, with respect to each item of Company Intellectual Property that is
material to the Company&#146;s business: </FONT></P> <P STYLE="font-size:6px;margin-top:0px;margin-bottom:0px">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="13%"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD WIDTH="4%" VALIGN="top" ALIGN="left"><FONT STYLE="font-family:Times New Roman" SIZE="2">(i)</FONT></TD>
<TD ALIGN="left" VALIGN="top"><FONT STYLE="font-family:Times New Roman" SIZE="2">The Company possesses all rights, titles and interests in and to the item if owned by the Company, as applicable, free and clear of any Encumbrance, license or other
restriction, and possesses all rights necessary in the case of a licensed item to use such item in the manner in which it presently uses the item or reasonably contemplates using such item, and the Company has taken or caused to be taken reasonable
and prudent steps to protect its rights in and to, and the validity and enforceability of, the item owned by the Company; </FONT></TD></TR></TABLE> <P STYLE="font-size:6px;margin-top:0px;margin-bottom:0px">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="13%"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD WIDTH="4%" VALIGN="top" ALIGN="left"><FONT STYLE="font-family:Times New Roman" SIZE="2">(ii)</FONT></TD>
<TD ALIGN="left" VALIGN="top"><FONT STYLE="font-family:Times New Roman" SIZE="2">the item if owned by the Company is not, and if licensed, to the knowledge of the Company is not, subject to any outstanding injunction, judgment, order, decree, ruling
or charge naming the Company; </FONT></TD></TR></TABLE> <P STYLE="font-size:6px;margin-top:0px;margin-bottom:0px">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="13%"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD WIDTH="4%" VALIGN="top" ALIGN="left"><FONT STYLE="font-family:Times New Roman" SIZE="2">(iii)</FONT></TD>
<TD ALIGN="left" VALIGN="top"><FONT STYLE="font-family:Times New Roman" SIZE="2">no action, suit, proceeding, hearing, investigation, charge, complaint, claim or demand is pending or, to the knowledge of the Company, has been or is being threatened
which challenges the legality, validity, enforceability, use or ownership of the item; </FONT></TD></TR></TABLE> <P STYLE="font-size:6px;margin-top:0px;margin-bottom:0px">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="13%"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD WIDTH="4%" VALIGN="top" ALIGN="left"><FONT STYLE="font-family:Times New Roman" SIZE="2">(iv)</FONT></TD>
<TD ALIGN="left" VALIGN="top"><FONT STYLE="font-family:Times New Roman" SIZE="2">to the knowledge of the Company, the item if owned by the Company does not infringe upon any valid and enforceable Intellectual Property right or other right of any
third party; </FONT></TD></TR></TABLE> <P STYLE="font-size:6px;margin-top:0px;margin-bottom:0px">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="13%"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD WIDTH="4%" VALIGN="top" ALIGN="left"><FONT STYLE="font-family:Times New Roman" SIZE="2">(v)</FONT></TD>
<TD ALIGN="left" VALIGN="top"><FONT STYLE="font-family:Times New Roman" SIZE="2">to the knowledge of the Company, no third party has infringed upon or misappropriated the Company&#146;s intellectual property rights in the item;
</FONT></TD></TR></TABLE> <P STYLE="font-size:6px;margin-top:0px;margin-bottom:0px">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="13%"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD WIDTH="4%" VALIGN="top" ALIGN="left"><FONT STYLE="font-family:Times New Roman" SIZE="2">(vi)</FONT></TD>
<TD ALIGN="left" VALIGN="top"><FONT STYLE="font-family:Times New Roman" SIZE="2">the Company is not party to any option, license, sublicense or agreement of any kind covering the item that it is in breach or default thereunder, and to the knowledge
of the Company and no event has occurred which, with notice or lapse of time, would constitute such a breach or default or permit termination, modification or acceleration thereunder; and </FONT></TD></TR></TABLE>
<P STYLE="font-size:6px;margin-top:0px;margin-bottom:0px">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="13%"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD WIDTH="4%" VALIGN="top" ALIGN="left"><FONT STYLE="font-family:Times New Roman" SIZE="2">(vii)</FONT></TD>
<TD ALIGN="left" VALIGN="top"><FONT STYLE="font-family:Times New Roman" SIZE="2">each option, license, sublicense or agreement of any kind covering the item is legal, valid, binding, enforceable and in full force and effect.
</FONT></TD></TR></TABLE> <P STYLE="margin-top:6px;margin-bottom:0px; margin-left:8%; text-indent:4%"><FONT STYLE="font-family:Times New Roman" SIZE="2">The Company has provided to the Purchaser a list of all patents, copyrights, trademarks and
services marks of the Company included in the Company Intellectual Property that are registered with or issued by or pending before the U.S. or </FONT></P>
 <p STYLE="margin-top:0px;margin-bottom:0px"><FONT SIZE="1">&nbsp;</FONT></P> <P STYLE="margin-top:0px;margin-bottom:0px" ALIGN="center"><FONT STYLE="font-family:Times New Roman" SIZE="2">15 </FONT></P>



<p Style='page-break-before:always'>
<HR  SIZE="3" style="COLOR:#999999" WIDTH="100%" ALIGN="CENTER">

 <P STYLE="margin-top:0px;margin-bottom:0px; margin-left:8%"><FONT STYLE="font-family:Times New Roman" SIZE="2">
any foreign patent, trademark or copyright office as of the date of the Initial Closing (the &#147;<B><I>IP Summary</I></B>&#148;). All registered patents, copyrights, trademarks and service
marks included on the IP Summary (x)&nbsp;if owned by the Company and (y)&nbsp;if licensed, to the knowledge of the Company, are valid and subsisting and are not subject to any claims, Encumbrances, taxes or other fees except for periodic filing,
annuity and maintenance fees and Permitted Liens. Except as set forth on the IP Summary, the Company has not infringed upon or misappropriated any valid and enforceable Intellectual Property rights of third parties, and there is no pending or, to
the knowledge of the Company, threatened claim or litigation against the Company contesting the right to use any third party&#146;s Intellectual Property rights, asserting the misuse of any thereof, or asserting the infringement or other violation
thereof. </FONT></P> <P STYLE="margin-top:6px;margin-bottom:0px; margin-left:8%; text-indent:4%"><FONT STYLE="font-family:Times New Roman" SIZE="2">(c) None of the Key Employees of the Company are obligated under any contract (including, without
limitation, licenses, covenants, or commitments of any nature) or other agreement, or subject to any judgment, decree, or order of any court or administrative agency, that would interfere with the use of his or her reasonable diligence to promote
the interests of the Company or that would conflict with the Company&#146;s business as presently conducted. Neither the execution, delivery or performance of this Agreement, nor the carrying on of the Company&#146;s business by the employees of the
Company, nor the conduct of the Company&#146;s businesses as presently conducted, will violate or result in a breach of the terms, conditions or provisions of, or constitute a default under, any contract, covenant, or instrument under which any such
Key Employee is obligated, and which violation, breach or default would be materially adverse to the Company. </FONT></P>
<P STYLE="margin-top:6px;margin-bottom:0px; margin-left:8%; text-indent:4%"><FONT STYLE="font-family:Times New Roman" SIZE="2">(d) The Company has entered into confidentiality and proprietary information and assignment of inventions agreements,
substantially in the form previously provided to the Purchaser, with the executive officers of the Company. The Company is not aware of any violation by any such executive officers of such agreements. </FONT></P>
<P STYLE="margin-top:6px;margin-bottom:0px; margin-left:8%; text-indent:4%"><FONT STYLE="font-family:Times New Roman" SIZE="2">(e) No stockholder, member, director, officer or employee of the Company has any interest, right, title or interest in any
of the Company Intellectual Property. </FONT></P> <P STYLE="margin-top:6px;margin-bottom:0px; margin-left:8%; text-indent:4%"><FONT STYLE="font-family:Times New Roman" SIZE="2">(f) To the knowledge of the Company, it is not, nor will it be,
necessary to utilize any inventions, trade secrets or proprietary information of any of its employees made prior to their employment by the Company, except for valid and enforceable inventions, trade secrets or proprietary information that have been
assigned to the Company. </FONT></P> <P STYLE="margin-top:6px;margin-bottom:0px; margin-left:8%; text-indent:4%"><FONT STYLE="font-family:Times New Roman" SIZE="2">(g) The Company maintains policies and procedures regarding data security, privacy
and data use that are commercially reasonable and, in any event, comply with the Company&#146;s obligations to its customers and applicable laws, rules and regulations. To the knowledge of the Company, there have not been, and the transaction
contemplated under this Agreement will not result in, any security breaches of any </FONT></P>
 <p STYLE="margin-top:0px;margin-bottom:0px"><FONT SIZE="1">&nbsp;</FONT></P> <P STYLE="margin-top:0px;margin-bottom:0px" ALIGN="center"><FONT STYLE="font-family:Times New Roman" SIZE="2">16 </FONT></P>



<p Style='page-break-before:always'>
<HR  SIZE="3" style="COLOR:#999999" WIDTH="100%" ALIGN="CENTER">

 <P STYLE="margin-top:0px;margin-bottom:0px; margin-left:8%"><FONT STYLE="font-family:Times New Roman" SIZE="2">
security policy, data use restriction or privacy breach under any such policies or any applicable laws, rules or regulations. </FONT></P>
<P STYLE="margin-top:12px;margin-bottom:0px; text-indent:8%"><FONT STYLE="font-family:Times New Roman" SIZE="2">5.22. <U>Related-Party Transactions</U>. Except as disclosed in the SEC Reports or as contemplated hereby, no stockholder who is known by
the Company to beneficially own 5% or more (on a fully-diluted basis) of any class of equity securities, and no officer or director of the Company or member of his or her immediate family is currently indebted to the Company, nor is the Company
indebted (or committed to make loans or extend or guarantee credit) to any of such individuals. Except as set forth in the SEC Reports, as of the date hereof, no stockholder known by the Company to beneficially own 5% or more (on a fully-diluted
basis) of any class of equity securities, officer or director of the Company and no member of the immediate family of any stockholder known by the Company to beneficially owns 5% or more (on a fully-diluted basis) of any class of equity securities,
officer or director of the Company, is a party to any contract with the Company. </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px; text-indent:8%"><FONT STYLE="font-family:Times New Roman" SIZE="2">5.23. <U>Title to Property and Assets</U>.
The Company does not own any real property. Except as set forth on <U>Schedule 5.23</U> hereto, the Company owns or has legally enforceable rights to use or hold for use its personal property and assets free and clear of all Encumbrances except
Permitted Liens and such other Encumbrances, if any, that individually or in the aggregate, do not and would not detract from the value of any asset or property of the Company or interfere with the use or contemplated use of any personal property of
the Company. With respect to any real property, the Company is not in violation in any material respect of any of its leases. All machinery, equipment, furniture, fixtures and other personal property that is material to the Company&#146;s business
and all buildings, structures and other facilities, if any, including, without limitation, office or other space used by the Company in the conduct of its business and material to its business, are in good operating condition and fit for operation
in the ordinary course of business (subject to normal wear and tear) except for any defects which will not interfere with the conduct of normal operations of the Company. The Company has delivered to the Purchaser true and complete copies of any
leases related to the real property used by the Company in the conduct of its business. </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px; text-indent:8%"><FONT STYLE="font-family:Times New Roman" SIZE="2">5.24. <U>Disclosure</U>. The Company
understands and confirms that the Purchaser will rely on the foregoing representations in effecting transactions in securities of the Company. No representation or warranty by the Company contained in this Agreement contains any untrue statement of
a material fact or omits to state any material fact necessary in order to make the statements made therein, in light of the circumstances under which they were made, not misleading. The Company acknowledges and agrees that the Purchaser does not
make and has not made any representations or warranties with respect to the transactions contemplated hereby other than those specifically set forth in Section&nbsp;4 hereof. </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px; text-indent:8%"><FONT
STYLE="font-family:Times New Roman" SIZE="2">5.25. <U>Absence of Changes</U>. Since the date of the latest audited financial statements included in the SEC Reports, except as set forth in <U>Schedule 5.25</U> or as contemplated by, or in connection
with, this Agreement or the other Transaction Documents, there has not been: </FONT></P> <P STYLE="margin-top:6px;margin-bottom:0px; margin-left:8%; text-indent:4%"><FONT STYLE="font-family:Times New Roman" SIZE="2">(a) any declaration, setting
aside or payment of any dividend or other distribution with respect to any shares of capital stock of the Company or any repurchase, </FONT></P>
 <p STYLE="margin-top:0px;margin-bottom:0px"><FONT SIZE="1">&nbsp;</FONT></P> <P STYLE="margin-top:0px;margin-bottom:0px" ALIGN="center"><FONT STYLE="font-family:Times New Roman" SIZE="2">17 </FONT></P>



<p Style='page-break-before:always'>
<HR  SIZE="3" style="COLOR:#999999" WIDTH="100%" ALIGN="CENTER">

 <P STYLE="margin-top:0px;margin-bottom:0px; margin-left:8%"><FONT STYLE="font-family:Times New Roman" SIZE="2">
redemption or other acquisition by the Company of any outstanding shares of its capital stock of the Company; </FONT></P>
<P STYLE="margin-top:6px;margin-bottom:0px; margin-left:8%; text-indent:4%"><FONT STYLE="font-family:Times New Roman" SIZE="2">(b) any amendment of any term of any outstanding security of the Company; </FONT></P>
<P STYLE="margin-top:6px;margin-bottom:0px; margin-left:8%; text-indent:4%"><FONT STYLE="font-family:Times New Roman" SIZE="2">(c) any transaction or commitment made, or any contract, agreement or settlement entered into, by (or judgment, order or
decree affecting) the Company relating to its assets or business (including the acquisition or disposition of any material amount of assets) or any relinquishment by the Company of any contract or other right, other than transactions, commitments,
contracts, agreements or settlements (excluding settlements of litigation and tax proceedings) in the ordinary course of business; </FONT></P> <P STYLE="margin-top:6px;margin-bottom:0px; margin-left:8%; text-indent:4%"><FONT
STYLE="font-family:Times New Roman" SIZE="2">(d) any (A)&nbsp;grant of any severance or termination pay to (or amendment to any such existing arrangement with) any director, officer or employee of the Company, (B)&nbsp;entering into of any
employment, deferred compensation, supplemental retirement or other similar agreement (or any amendment to any such existing agreement) with any director, officer or employee of the Company, (C)&nbsp;increase in, or accelerated vesting and/or
payment of, benefits under any existing severance or termination pay policies or employment agreements or (D)&nbsp;increase in or enhancement of any rights or features related to compensation, bonus or other benefits payable to directors, officers
or senior employees of the Company other than in the ordinary course of business consistent with past practice; or </FONT></P> <P STYLE="margin-top:6px;margin-bottom:0px; margin-left:8%; text-indent:4%"><FONT
STYLE="font-family:Times New Roman" SIZE="2">(e) any material tax election made or changed, any audit settled or any amended tax returns filed; </FONT></P> <P STYLE="margin-top:6px;margin-bottom:0px; margin-left:8%; text-indent:4%"><FONT
STYLE="font-family:Times New Roman" SIZE="2">(f) any Material Adverse Effect or any event or events that individually or in the aggregate would have a Material Adverse Effect; </FONT></P>
<P STYLE="margin-top:6px;margin-bottom:0px; margin-left:8%; text-indent:4%"><FONT STYLE="font-family:Times New Roman" SIZE="2">(g) any damage, destruction or loss (whether or not covered by insurance) materially and adversely affecting the
Company&#146;s properties or assets; </FONT></P> <P STYLE="margin-top:6px;margin-bottom:0px; margin-left:8%; text-indent:4%"><FONT STYLE="font-family:Times New Roman" SIZE="2">(h) any sale, assignment or transfer, or any agreement to sell, assign or
transfer, any material asset, liability, property, obligation or right of the Company to any Person, including, without limitation, each Purchaser and its Affiliates, in each case, other than in the ordinary course of business; </FONT></P>
<P STYLE="margin-top:6px;margin-bottom:0px; margin-left:8%; text-indent:4%"><FONT STYLE="font-family:Times New Roman" SIZE="2">(i) any obligation or liability incurred, or any loans or advances made, by the Company to any of its Affiliates, other
than expenses allowable in the ordinary course of business of the Company; </FONT></P> <P STYLE="margin-top:6px;margin-bottom:0px; margin-left:8%; text-indent:4%"><FONT STYLE="font-family:Times New Roman" SIZE="2">(j) any purchase or acquisition of,
or agreement, plan or arrangement to purchase or acquire, any material property, rights or assets other than in the ordinary course of business of the Company; </FONT></P>
 <p STYLE="margin-top:0px;margin-bottom:0px"><FONT SIZE="1">&nbsp;</FONT></P> <P STYLE="margin-top:0px;margin-bottom:0px" ALIGN="center"><FONT STYLE="font-family:Times New Roman" SIZE="2">18 </FONT></P>



<p Style='page-break-before:always'>
<HR  SIZE="3" style="COLOR:#999999" WIDTH="100%" ALIGN="CENTER">

 <P STYLE="margin-top:0px;margin-bottom:0px; margin-left:8%; text-indent:4%"><FONT STYLE="font-family:Times New Roman" SIZE="2">(k) any assignment, lease or other transfer or disposition, or any other
agreement or arrangement therefor by the Company of any property or equipment having a value in excess of $50,000 except in the ordinary course of business; </FONT></P> <P STYLE="margin-top:6px;margin-bottom:0px; margin-left:8%; text-indent:4%"><FONT
STYLE="font-family:Times New Roman" SIZE="2">(l) any waiver of any rights or claims of the Company, except for such waivers which would not have a Material Adverse Effect; </FONT></P>
<P STYLE="margin-top:6px;margin-bottom:0px; margin-left:8%; text-indent:4%"><FONT STYLE="font-family:Times New Roman" SIZE="2">(m) any agreement or commitment by the Company to do any of the foregoing or any material transaction by the Company
outside the ordinary course of business of the Company; </FONT></P> <P STYLE="margin-top:6px;margin-bottom:0px; margin-left:8%; text-indent:4%"><FONT STYLE="font-family:Times New Roman" SIZE="2">(n) any lien upon, or adversely affecting, any
property or other assets of the Company, except for such liens which would not have a Material Adverse Effect; or </FONT></P> <P STYLE="margin-top:6px;margin-bottom:0px; margin-left:8%; text-indent:4%"><FONT
STYLE="font-family:Times New Roman" SIZE="2">(o) a determination by either the Company or the Commission that the Company is a &#147;shell company&#148; or a &#147;blank check company,&#148; each as defined by the applicable rules and regulations of
the Commission. </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px; text-indent:8%"><FONT STYLE="font-family:Times New Roman" SIZE="2">5.26. <U>Illegal Payments</U>. Neither the Company, nor, to the best knowledge of the Company, any director,
officer, agent or employee of the Company has paid, caused to be paid, or agreed to pay, directly or indirectly, in connection with the business of the Company: (a)&nbsp;to any government or agency thereof, any agent or any supplier or customer, any
bribe, kickback or other similar payment; (b)&nbsp;any contribution to any political party or candidate (other than from personal funds of directors, officers or employees not reimbursed by their respective employers or as otherwise permitted by
applicable law); or (c)&nbsp;intentionally established or maintained any unrecorded fund or asset or made any false entries on any books or records for any purpose. </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px; text-indent:8%"><FONT
STYLE="font-family:Times New Roman" SIZE="2">5.27. <U>Suppliers and Customers</U>. The Company does not have any knowledge of any termination, cancellation or threatened termination or cancellation or limitation of, or any material dissatisfaction
with, the business relationship between the Company and any material supplier, customer, vendor, customer or client. </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px; text-indent:8%"><FONT STYLE="font-family:Times New Roman" SIZE="2">5.28.
<U>Regulatory Permits</U>. The Company possesses all material certificates, authorizations and permits issued by the appropriate federal, state, local or foreign regulatory authorities necessary to conduct its business, as they are currently being
conducted (&#147;<B><I>Material Permits</I></B>&#148;), and the Company has not received any notice of proceedings relating to the revocation or modification of any Material Permit. </FONT></P>
<P STYLE="margin-top:12px;margin-bottom:0px; text-indent:8%"><FONT STYLE="font-family:Times New Roman" SIZE="2">5.29. <U>Insurance</U>. The Company maintains the insurance policies set forth on Schedule 5.29. The Company carries directors and
officers insurance coverage in the amount set forth on <U>Schedule 5.29</U>. The Company has no reason to believe that it will not be able to renew its existing insurance coverage as and when such coverage expires or to obtain similar coverage from
similar insurers as may be necessary to continue its business without a significant increase in cost. </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px; text-indent:8%"><FONT STYLE="font-family:Times New Roman" SIZE="2">5.30.
<U>Indebtedness</U>. Except as disclosed in Schedule 5.30 and other than Permitted Indebtedness, the Company (i)&nbsp;has no outstanding Indebtedness, (ii)&nbsp;is not a party to </FONT></P>
 <p STYLE="margin-top:0px;margin-bottom:0px"><FONT SIZE="1">&nbsp;</FONT></P> <P STYLE="margin-top:0px;margin-bottom:0px" ALIGN="center"><FONT STYLE="font-family:Times New Roman" SIZE="2">19 </FONT></P>



<p Style='page-break-before:always'>
<HR  SIZE="3" style="COLOR:#999999" WIDTH="100%" ALIGN="CENTER">

 <P STYLE="margin-top:0px;margin-bottom:0px"><FONT STYLE="font-family:Times New Roman" SIZE="2">
any contract, agreement or instrument, the violation of which, or default under which, by any other party to such contract, agreement or instrument could reasonably be expected to result in a
Material Adverse Effect, (iii)&nbsp;is not in violation of any term of or in default under any contract, agreement or instrument relating to any Indebtedness, except where such violations and defaults would not result, individually or in the
aggregate, in a Material Adverse Effect, or (iv)&nbsp;is not a party to any contract, agreement or instrument relating to any Indebtedness, the performance of which, in the judgment of the Company&#146;s officers, has or is expected to have a
Material Adverse Effect. Schedule 5.30 provides a detailed description of the material terms of any such outstanding Indebtedness. </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px; text-indent:8%"><FONT
STYLE="font-family:Times New Roman" SIZE="2">5.31. <U>Ranking of the Notes</U>. No Indebtedness of the Company is senior to or ranks <I>pari passu </I>with the Notes in right of payment, whether with respect of payment of redemptions, interest,
damages or upon liquidation or dissolution or otherwise. </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px; text-indent:8%"><FONT STYLE="font-family:Times New Roman" SIZE="2">5.32. <U>Investment Company</U>. The Company is not, and is not an
Affiliate of, and immediately after receipt of payment for the Securities, will not be or be an Affiliate of, an &#147;investment company&#148; within the meaning of the Investment Company Act of 1940, as amended. </FONT></P>
<P STYLE="margin-top:12px;margin-bottom:0px; text-indent:8%"><FONT STYLE="font-family:Times New Roman" SIZE="2">5.33. <U>Securities and Exchange Act Requirements</U>. The Company is required to file periodic and other reports with the Commission
pursuant to Section&nbsp;12(g) of the Exchange Act, and the Company has filed all such required reports with the Commission. </FONT></P>
<P STYLE="margin-top:12px;margin-bottom:0px; text-indent:8%"><FONT STYLE="font-family:Times New Roman" SIZE="2">5.34. <U>Accountants</U>. Odenberg, Ullakko, Muranishi&nbsp;&amp; Co. LLP (&#147;<B><I>OUM</I></B>&#148;), who expressed their opinion
with respect to the financial statements included in the SEC Reports, are independent accountants as required by the Securities Act and the rules and regulations promulgated thereunder. There are no disagreements of any kind presently existing, or
reasonably anticipated by the Company to arise, between the Company and OUM, and except as set forth on Schedule 5.34, upon completion of the Initial Closing, the Company will be current with respect to any fees owed to such accounting firm.
</FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px; text-indent:8%"><FONT STYLE="font-family:Times New Roman" SIZE="2">5.35. <U>Application of Takeover Protections; Exemption under Section&nbsp;16</U>. The Company and its Board of Directors
have taken all necessary action, if any, in order to (a)&nbsp;render inapplicable any control share acquisition, business combination, poison pill (including any distribution under a rights agreement) or other similar anti-takeover provision under
the Company&#146;s Charter Documents or the laws of its state of incorporation (including Section&nbsp;203 of the Delaware General Corporation Law) that is or could become applicable to each Purchaser as a result of such Purchaser and the Company
fulfilling their obligations or exercising their rights under the Transaction Documents, including without limitation as a result of the Company&#146;s issuance of the Securities and such Purchaser&#146;s ownership of the Securities, and
(b)&nbsp;exempt the acquisition of the Securities by the Purchaser, to the extent applicable, under Rule 16b-3 promulgated under the Act. </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px; text-indent:8%"><FONT
STYLE="font-family:Times New Roman" SIZE="2">5.36. <U>Stock Options</U>. With respect to stock options issued pursuant to the Company&#146;s Employee Benefit Plans (i)&nbsp;except as set forth on <U>Schedule 5.36</U> hereto, each grant of a stock
option was duly authorized no later than the date on which the grant of such stock option was by its terms to be effective by all necessary corporate action, including, as applicable, </FONT></P>
 <p STYLE="margin-top:0px;margin-bottom:0px"><FONT SIZE="1">&nbsp;</FONT></P> <P STYLE="margin-top:0px;margin-bottom:0px" ALIGN="center"><FONT STYLE="font-family:Times New Roman" SIZE="2">20 </FONT></P>



<p Style='page-break-before:always'>
<HR  SIZE="3" style="COLOR:#999999" WIDTH="100%" ALIGN="CENTER">

 <P STYLE="margin-top:0px;margin-bottom:0px"><FONT STYLE="font-family:Times New Roman" SIZE="2">
approval by the Board of Directors (or a duly constituted and authorized committee thereof) and any required stockholder approval by the necessary number of votes or written consents and
(ii)&nbsp;each such grant was made in accordance with the material terms of the Employee Benefit Plans, the Securities Act and all other applicable laws and regulatory rules or requirements. </FONT></P>
<P STYLE="margin-top:12px;margin-bottom:0px; text-indent:4%"><FONT STYLE="font-family:Times New Roman" SIZE="2">6. <U>Covenants</U>. </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px; text-indent:8%"><FONT
STYLE="font-family:Times New Roman" SIZE="2">6.1. <U>Best Efforts</U>. Each party shall use its best efforts timely to satisfy each of the conditions to be satisfied by it as provided in Section&nbsp;7 of this Agreement. </FONT></P>
<P STYLE="margin-top:12px;margin-bottom:0px; text-indent:8%"><FONT STYLE="font-family:Times New Roman" SIZE="2">6.2. <U>Form D and Blue Sky</U>. The Company agrees to file a Form D with respect to the Securities as required under Regulation D and to
provide a copy thereof to the Purchasers promptly after such filing.&nbsp;The Company shall, on or before each Closing Date, take such action as the Company shall reasonably determine is necessary in order to obtain an exemption for or to qualify
the Securities for sale to the Purchasers at the Closing pursuant to this Agreement under applicable securities or &#147;blue sky&#148; laws of the states of the United States (or to obtain an exemption from such qualification), and shall provide
evidence of any such action so taken to the Purchasers on or prior to the Closing Date.&nbsp;The Company shall make all filings and reports relating to the offer and sale of the Securities, and the resale of the Securities, as may be required under
applicable securities or &#147;blue sky&#148; laws of the states of the United States following the Closing Date. </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px; text-indent:8%"><FONT STYLE="font-family:Times New Roman" SIZE="2">6.3.
<U>Reporting Status</U>. Until the date on which the Purchasers shall have sold all the Conversion Shares and none of the Notes are outstanding (the &#147;<B><I>Reporting Period</I></B>&#148;), the Company shall (i)&nbsp;timely file all reports
required to be filed with the Commission pursuant to the Exchange Act or the rules and regulations thereunder and (ii)&nbsp;not take any action or file any document (whether or not permitted by the Securities Act or the rules promulgated thereunder)
to terminate or suspend the Company&#146;s reporting and filing obligations under the Exchange Act or Securities Act. </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px; text-indent:8%"><FONT STYLE="font-family:Times New Roman" SIZE="2">6.4.
<U>Use of Proceeds</U>. The Company will use the proceeds from the sale of the Securities for general corporate purposes, including sales, marketing, working capital, general and administrative expenses and not for (i)&nbsp;the repayment of any
outstanding Indebtedness of the Company or (ii)&nbsp;the redemption or repurchase of any of its equity securities. </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px; text-indent:8%"><FONT STYLE="font-family:Times New Roman" SIZE="2">6.5.
<U>Financial Information</U>. As long as any Notes are outstanding, the Company agrees to send the following to the Purchasers during the Reporting Period (i)&nbsp;unless the following are filed with the Commission through EDGAR and are available to
the public through the EDGAR system, within one (1)&nbsp;Business Day after the filing thereof with the Commission, a copy of its Annual Reports and Quarterly Reports on Form 10-K, 10-KSB, 10-Q or 10-QSB, any interim reports or any consolidated
balance sheets, income statements, stockholders&#146; equity statements and/or cash flow statements for any period other than annual, any Current Reports on Form 8-K and any registration statements (other than on Form S-8) or amendments filed
pursuant to the Securities Act, (ii)&nbsp;on the same day as the release thereof, facsimile or e-mailed copies of all press releases issued by the Company, and (iii)&nbsp;copies of any notices and other information made available or given to the
stockholders of the Company generally, contemporaneously with the making available or giving thereof to the stockholders.</FONT></P>
 <p STYLE="margin-top:0px;margin-bottom:0px"><FONT SIZE="1">&nbsp;</FONT></P> <P STYLE="margin-top:0px;margin-bottom:0px" ALIGN="center"><FONT STYLE="font-family:Times New Roman" SIZE="2">21 </FONT></P>



<p Style='page-break-before:always'>
<HR  SIZE="3" style="COLOR:#999999" WIDTH="100%" ALIGN="CENTER">

 <P STYLE="margin-top:0px;margin-bottom:0px"><FONT STYLE="font-family:Times New Roman" SIZE="2">
As used herein, &#147;<B><I>Business Day</I></B>&#148; means any day other than Saturday, Sunday or other day on which commercial banks in The City of New York are authorized or required by law
to remain closed. </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px; text-indent:8%"><FONT STYLE="font-family:Times New Roman" SIZE="2">6.6. <U>Listing</U>. The Company shall promptly secure the listing of all of the Registrable Securities
upon each national securities exchange and automated quotation system, if any, upon which the Common Stock is then listed (subject to official notice of issuance) and shall maintain, in accordance with the Notes, such listing of all Registrable
Securities from time to time issuable under the terms of the Transaction Documents.&nbsp;The Company shall pay all fees and expenses in connection with satisfying its obligations under this Section&nbsp;6.6. </FONT></P>
<P STYLE="margin-top:12px;margin-bottom:0px; text-indent:8%"><FONT STYLE="font-family:Times New Roman" SIZE="2">6.7. <U>Fees</U>. Upon consummation of each Closing pursuant to this Agreement or in the event that the Company elects to terminate this
Agreement, the Company shall pay, reimburse and hold the Purchasers harmless from liability for the payment of all reasonable fees and expenses incurred by them in connection with the preparation and negotiation of the Transaction Documents and the
consummation of the transactions contemplated hereby. The reasonable fees and expenses of the Purchasers may include, without limitation, the reasonable fees and expenses of counsel and out of pocket expenses, including diligence and travel
expenses, of the Purchasers arising in connection with the preparation, negotiation and execution of the Transaction Documents and the consummation of the transactions contemplated thereby. </FONT></P>
<P STYLE="margin-top:12px;margin-bottom:0px; text-indent:8%"><FONT STYLE="font-family:Times New Roman" SIZE="2">6.8. <U>Pledge of Securities</U>. The Company acknowledges and agrees that the Securities may be pledged by the Purchasers in connection
with a bona fide margin agreement or other loan or financing arrangement that is secured by the Securities.&nbsp;The pledge of Securities shall not be deemed to be a transfer, sale or assignment of the Securities hereunder, and in effecting a pledge
of Securities the Purchasers shall not be required to provide the Company with any notice thereof or otherwise make any delivery to the Company pursuant to this Agreement or any other Transaction Document. The Company hereby agrees to execute and
deliver such documentation as a pledgee of the Securities may reasonably request in connection with a pledge of the Securities to such pledgee by the Purchasers. </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px; text-indent:8%"><FONT
STYLE="font-family:Times New Roman" SIZE="2">6.9. <U>Disclosure of Transactions and Other Material Information</U>. On or before 8:30 a.m., New York City time, on the second Business Day following the date of this Agreement, the Company shall issue
a press release and file a Current Report on Form 8-K describing the terms of the transactions contemplated by the Transaction Documents in the form required by the Exchange Act and attaching the material Transaction Documents (including, without
limitation, this Agreement (and all schedules to this Agreement) and the form of the Notes) as exhibits to such filing (including all attachments, the &#147;8-K Filing&#148;).&nbsp;Subject to the foregoing, neither the Company nor the Purchasers
shall issue any press releases or any other public statements with respect to the transactions contemplated hereby; provided, however, that the Company shall be entitled, without the prior approval of the Purchasers, to make any press release or
other public disclosure with respect to such transactions (i)&nbsp;in substantial conformity with the 8-K Filing and contemporaneously therewith and (ii)&nbsp;as is required by applicable law and regulations (provided that in the case of clause
(i)&nbsp;the Purchasers shall be consulted by the Company in connection with any such press release or other public disclosure prior to its release).&nbsp;Without the prior written consent of a given Purchaser, neither the Company nor any of
</FONT></P>
 <p STYLE="margin-top:0px;margin-bottom:0px"><FONT SIZE="1">&nbsp;</FONT></P> <P STYLE="margin-top:0px;margin-bottom:0px" ALIGN="center"><FONT STYLE="font-family:Times New Roman" SIZE="2">22 </FONT></P>



<p Style='page-break-before:always'>
<HR  SIZE="3" style="COLOR:#999999" WIDTH="100%" ALIGN="CENTER">

 <P STYLE="margin-top:0px;margin-bottom:0px"><FONT STYLE="font-family:Times New Roman" SIZE="2">
its affiliates shall disclose the name of such Purchasers in any filing, announcement, release or otherwise. </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px; text-indent:8%"><FONT
STYLE="font-family:Times New Roman" SIZE="2">6.10. <U>Corporate Existence</U>. So long as any Purchaser beneficially owns any Securities, the Company shall not be party to any Change of Control transaction (as defined in the Notes) unless the
Company is in compliance with the applicable provisions governing Change of Control transactions set forth in the Notes. </FONT></P>
<P STYLE="margin-top:12px;margin-bottom:0px; text-indent:8%"><FONT STYLE="font-family:Times New Roman" SIZE="2">6.11. <U>Reservation of Shares</U>. The Company shall take all action necessary to, at all times from the Increase Deadline, have
authorized and reserved for the purpose of issuance upon conversion of the Notes, no less than the number of shares of Common Stock issuable (i)&nbsp;upon conversion of $4,500,000 aggregate principal amount of the Notes, and (ii)&nbsp;upon
conversion of accrued and unpaid PIK Interest potentially issuable under the Notes through the Maturity Date (as defined in the Notes). The &#147;<B><I>Increase Deadline</I></B>&#148; means the earlier of (a)&nbsp;six months from the Initial Closing
Date, and (b)&nbsp;one Business Day after the Company&#146;s 2011 annual meeting of stockholders. </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px; text-indent:8%"><FONT STYLE="font-family:Times New Roman" SIZE="2">6.12. <U>Conduct of
Business</U>. The business of the Company shall not be conducted in violation of any law, ordinance or regulation of any governmental entity, except where such violations would not result, either individually or in the aggregate, in a Material
Adverse Effect. </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px; text-indent:8%"><FONT STYLE="font-family:Times New Roman" SIZE="2">6.13. <U>Ranking of the Notes</U>. No Indebtedness of the Company may be incurred that is senior to or ranks
<I>pari passu </I>with the Notes in right of payment, whether with respect of payment of redemptions, interest, damages or upon liquidation or dissolution or otherwise. </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px; text-indent:8%"><FONT
STYLE="font-family:Times New Roman" SIZE="2">6.14. <U>Follow-on Offering</U>. Within thirty (30)&nbsp;days from the Initial Closing, the Company shall prepare and file a registration statement on Form S-1 registering the offer and sale of up to
$20,000,000 of equity securities (including common stock, common stock equivalents and preferred stock), to be offered and sold by the Company on a primary basis (the &#147;<B><I>Follow-on Offering</I></B>&#148;). The Company shall use commercially
reasonable efforts to have the foregoing registration statement declared effective by the staff of the Commission and to complete the Follow-on Offering as promptly as practicable. The failure to timely file a registration statement for the
Follow-on Offering within thirty (30)&nbsp;days from the Initial Closing Date shall be deemed a Filing Failure for purposes of Section&nbsp;11.5 of this Agreement. </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px; text-indent:4%"><FONT
STYLE="font-family:Times New Roman" SIZE="2">7. <U>Conditions of Parties&#146; Obligations</U>. </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px; text-indent:8%"><FONT STYLE="font-family:Times New Roman" SIZE="2">7.1. <U>Conditions of the
Purchasers&#146; Obligations at the Initial Closing and the Subsequent Closings</U>. The obligations of the Purchasers under Section&nbsp;2 hereof are subject to the fulfillment, prior to each Closing, of all of the following applicable conditions,
any of which may be waived in whole or in part by the Purchasers in their absolute discretion. </FONT></P> <P STYLE="margin-top:6px;margin-bottom:0px; margin-left:8%; text-indent:4%"><FONT STYLE="font-family:Times New Roman" SIZE="2">(a)
<U>Representations and Warranties</U>. The representations and warranties of the Company contained in this Agreement and in any certificate, if any, or other writing, if any, delivered by the Company pursuant hereto shall be true and correct
(i)&nbsp;on and as of the Initial Closing Date with the same effect as though such representations and warranties had been made on and as of the Initial Closing Date </FONT></P>
 <p STYLE="margin-top:0px;margin-bottom:0px"><FONT SIZE="1">&nbsp;</FONT></P> <P STYLE="margin-top:0px;margin-bottom:0px" ALIGN="center"><FONT STYLE="font-family:Times New Roman" SIZE="2">23 </FONT></P>



<p Style='page-break-before:always'>
<HR  SIZE="3" style="COLOR:#999999" WIDTH="100%" ALIGN="CENTER">

 <P STYLE="margin-top:0px;margin-bottom:0px; margin-left:8%"><FONT STYLE="font-family:Times New Roman" SIZE="2">
(except to the extent expressly made as of an earlier date in which case as of such earlier date) and (ii)&nbsp;on and as of each Subsequent Closing Date with the same effect as though such
representations and warranties had been made on and as of such Subsequent Closing Date (except to the extent expressly made as of an earlier date in which case as of such earlier date). </FONT></P>
<P STYLE="margin-top:6px;margin-bottom:0px; margin-left:8%; text-indent:4%"><FONT STYLE="font-family:Times New Roman" SIZE="2">(b) <U>Performance</U>. The Company shall have performed and complied in all material respects with all agreements,
obligations and conditions contained in this Agreement that are required to be performed or complied by it on or before the applicable Closing. </FONT></P> <P STYLE="margin-top:6px;margin-bottom:0px; margin-left:8%; text-indent:4%"><FONT
STYLE="font-family:Times New Roman" SIZE="2">(c) <U>Qualification Under State Securities Laws</U>. All registrations, qualifications, permits and approvals, if any, required under applicable state securities laws shall have been obtained for the
lawful execution, delivery and performance of this Agreement or the other Transaction Documents. </FONT></P> <P STYLE="margin-top:6px;margin-bottom:0px; margin-left:8%; text-indent:4%"><FONT STYLE="font-family:Times New Roman" SIZE="2">(d)
<U>Control Agreement</U>. The Company shall have executed and delivered each Control Agreement on or before the Initial Closing. </FONT></P> <P STYLE="margin-top:6px;margin-bottom:0px; margin-left:8%; text-indent:4%"><FONT
STYLE="font-family:Times New Roman" SIZE="2">(e) <U>Supporting Documents</U>. The Purchasers at each Closing shall have received the following: </FONT></P> <P STYLE="font-size:6px;margin-top:0px;margin-bottom:0px">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="13%"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD WIDTH="4%" VALIGN="top" ALIGN="left"><FONT STYLE="font-family:Times New Roman" SIZE="2">(i)</FONT></TD>
<TD ALIGN="left" VALIGN="top"><FONT STYLE="font-family:Times New Roman" SIZE="2">An opinion from Latham&nbsp;&amp; Watkins LLP, counsel to the Company, dated as of the date of the applicable Closing, in a form reasonably satisfactory to the
Purchasers; and </FONT></TD></TR></TABLE> <P STYLE="font-size:6px;margin-top:0px;margin-bottom:0px">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="13%"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD WIDTH="4%" VALIGN="top" ALIGN="left"><FONT STYLE="font-family:Times New Roman" SIZE="2">(ii)</FONT></TD>
<TD ALIGN="left" VALIGN="top"><FONT STYLE="font-family:Times New Roman" SIZE="2">Copies of resolutions of the Board of Directors, certified by the Secretary of the Company, authorizing and approving by the disinterested directors the execution,
delivery and performance of the Transaction Documents and all other documents and instruments to be delivered pursuant hereto and thereto. </FONT></TD></TR></TABLE> <P STYLE="margin-top:6px;margin-bottom:0px; margin-left:8%; text-indent:4%"><FONT
STYLE="font-family:Times New Roman" SIZE="2">(f) <U>Consents and Waivers</U>. The Company shall have obtained all consents or waivers necessary to execute and perform its obligations under this Agreement and the other Transaction Documents
(including consents and waivers listed on <U>Schedule 5.5</U>). All corporate and other action and governmental filings necessary to effectuate the terms of this Agreement, the other Transaction Documents, and other agreements and instruments
executed and delivered by the Company in connection herewith shall have been made or taken, and no Material Adverse Effect has occurred with respect to the operation of the Company&#146;s business. </FONT></P>
<P STYLE="margin-top:6px;margin-bottom:0px; margin-left:8%; text-indent:4%"><FONT STYLE="font-family:Times New Roman" SIZE="2">(g) <U>No Material Adverse Effect</U>. There shall have been no Material Adverse Effect with respect to the Company since
the date of the latest audited balance sheet of the Company included in the SEC Reports. </FONT></P> <P STYLE="margin-top:6px;margin-bottom:0px; margin-left:8%; text-indent:4%"><FONT STYLE="font-family:Times New Roman" SIZE="2">(h) <U>Fees and
Expenses of Purchasers</U>. The Company shall have paid (or the Purchasers shall have made arrangements to deduct from the Notes Purchase Price </FONT></P>
 <p STYLE="margin-top:0px;margin-bottom:0px"><FONT SIZE="1">&nbsp;</FONT></P> <P STYLE="margin-top:0px;margin-bottom:0px" ALIGN="center"><FONT STYLE="font-family:Times New Roman" SIZE="2">24 </FONT></P>



<p Style='page-break-before:always'>
<HR  SIZE="3" style="COLOR:#999999" WIDTH="100%" ALIGN="CENTER">

 <P STYLE="margin-top:0px;margin-bottom:0px; margin-left:8%"><FONT STYLE="font-family:Times New Roman" SIZE="2">
or the Total Notes Purchase Price, as applicable), in accordance with Section&nbsp;6.7, the fees, expenses and disbursements of the Purchasers. </FONT></P>
<P STYLE="margin-top:6px;margin-bottom:0px; margin-left:8%; text-indent:4%"><FONT STYLE="font-family:Times New Roman" SIZE="2">(i) <U>No Default</U>. No Event of Default (as defined in the Notes) shall be continuing as of each Closing, after giving
effect to the transactions contemplated to occur on each Closing. </FONT></P> <P STYLE="margin-top:6px;margin-bottom:0px; margin-left:8%; text-indent:4%"><FONT STYLE="font-family:Times New Roman" SIZE="2">(j) <U>Compliance Certificates</U>. The
Company shall have provided to the Purchasers, a Compliance Certificate, executed by the Chief Executive Officer (or acting Chief Executive Officer, if applicable) of the Company, dated as of the Closing, to the effect that the conditions specified
in subsections (a)&nbsp;&#147;Representations and Warranties&#148;, (b)&nbsp;&#147;Performance&#148;, (c)&nbsp;&#147;Qualification Under State Securities Laws&#148;, (f)&nbsp;&#147;Consents and Waivers&#148; and (i)&nbsp;&#147;No Default&#148; of
this Section&nbsp;7.1 have been satisfied. </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px; text-indent:8%"><FONT STYLE="font-family:Times New Roman" SIZE="2">7.2. <U>Conditions of the Company&#146;s Obligations</U>. The obligations of the
Company under Section&nbsp;2 hereof are subject to the fulfillment prior to or on each Closing of all of the following conditions, any of which may be waived in whole or in part by the Company. </FONT></P>
<P STYLE="margin-top:6px;margin-bottom:0px; margin-left:8%; text-indent:4%"><FONT STYLE="font-family:Times New Roman" SIZE="2">(a) <U>Covenants; Representations and Warranties</U>. (i)&nbsp;The Purchasers at the Closing shall have performed all of
its obligations hereunder required to be performed by it at or prior to the Closing and (ii)&nbsp;the representations and warranties of the Purchasers at the Closing contained in this Agreement shall be true and correct at and as of the Closing as
if made at and as of the Closing (except to the extent expressly made as of an earlier date, in which case as of such earlier date). </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px; text-indent:4%"><FONT
STYLE="font-family:Times New Roman" SIZE="2">8. <U>Transfer Restrictions; Restrictive Legend</U>. </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px; text-indent:8%"><FONT STYLE="font-family:Times New Roman" SIZE="2">8.1. <U>Transfer
Restrictions</U>. The Purchasers understand that the Company may, as a condition to the transfer of any of the Securities, require that the request for transfer be accompanied by an opinion of counsel reasonably satisfactory to the Company, to the
effect that the proposed transfer does not result in a violation of the Securities Act, unless such transfer is covered by an effective registration statement or by Rule 144 or Rule 144A under the Securities Act; <U>provided</U>, <U>however</U>,
that an opinion of counsel shall not be required for a transfer by a Purchaser that is (A)&nbsp;a partnership transferring to its partners or former partners in accordance with partnership interests, (B)&nbsp;a corporation transferring to a wholly
owned subsidiary or a parent corporation that owns all of the capital stock of such Purchaser, (C)&nbsp;a limited liability company transferring to its members or former members in accordance with their interest in the limited liability company,
(D)&nbsp;an individual transferring to such Purchaser&#146;s family member or trust for the benefit of an individual Purchaser, (E)&nbsp;transferring its Securities to any Affiliate of such Purchaser, in the case of an institutional investor, or
other Person under common management with such Purchaser, or (F)&nbsp;a transfer that is made pursuant to a bona fide gift to a third party; <U>provided</U>, <U>further</U>, that (i)&nbsp;the transferee in each case agrees to be subject to the
restrictions in this Section&nbsp;8 and provides the Company with a representation letter containing substantially the same representations and warranties set forth in Section&nbsp;4 hereof, (ii)&nbsp;the Company satisfies itself that the number of
transferees is sufficiently limited and (iii)&nbsp;in the case of transferees that are partners or limited liability company members, the transfer is for no consideration. It is understood that the certificates evidencing any Securities may bear
substantially the following </FONT></P>
 <p STYLE="margin-top:0px;margin-bottom:0px"><FONT SIZE="1">&nbsp;</FONT></P> <P STYLE="margin-top:0px;margin-bottom:0px" ALIGN="center"><FONT STYLE="font-family:Times New Roman" SIZE="2">25 </FONT></P>



<p Style='page-break-before:always'>
<HR  SIZE="3" style="COLOR:#999999" WIDTH="100%" ALIGN="CENTER">

 <P STYLE="margin-top:0px;margin-bottom:0px"><FONT STYLE="font-family:Times New Roman" SIZE="2">
legends (in addition to any other legends as legal counsel for the Company deems necessary or advisable under the applicable state and federal securities laws or any other agreement to which the
Company is a party): </FONT></P> <P STYLE="margin-top:6px;margin-bottom:0px; margin-left:8%; text-indent:4%"><FONT STYLE="font-family:Times New Roman" SIZE="2">&#147;THESE SECURITIES HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933 OR ANY
APPLICABLE STATE SECURITIES LAWS. THEY MAY NOT BE SOLD, OFFERED FOR SALE, PLEDGED OR HYPOTHECATED IN THE ABSENCE OF A REGISTRATION STATEMENT IN EFFECT WITH RESPECT TO THE SECURITIES UNDER SUCH ACT OR APPLICABLE STATE SECURITIES LAWS OR AN OPINION OF
COUNSEL SATISFACTORY TO THE COMPANY THAT SUCH REGISTRATION IS NOT REQUIRED OR UNLESS SOLD PURSUANT TO RULE 144 OR RULE 144A OF SUCH ACT.&#148; </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px; text-indent:8%"><FONT
STYLE="font-family:Times New Roman" SIZE="2">8.2. <U>Unlegended Certificates</U>. The Company shall be obligated to reissue promptly unlegended certificates at the request of any holder thereof if (a)&nbsp;the holder shall have obtained an opinion
of counsel reasonably acceptable to the Company to the effect that, or the Company is otherwise satisfied that, the securities proposed to be disposed of may lawfully be so disposed of without registration, qualification or legend, or (b)&nbsp;the
securities represented by the certificate containing the foregoing legend have been registered for resale as contemplated in Section&nbsp;11 of this Agreement, in which case the removal shall be predicated on the undertaking by such Purchaser that
the securities will only be sold pursuant to such registration statement(s) or an available exemption from registration. </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px; text-indent:4%"><FONT STYLE="font-family:Times New Roman" SIZE="2">9.
<U>Registration, Transfer and Substitution of Certificates for Shares</U>. </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px; text-indent:8%"><FONT STYLE="font-family:Times New Roman" SIZE="2">9.1. <U>Stock Register; Ownership of
Securities</U>. The Company will keep at its principal office a register in which the Company will provide for the registration of transfers of the Notes. The Company may treat the Person in whose name any of the Notes are registered on such
register as the owner thereof and the Company shall not be affected by any notice to the contrary. All references in this Agreement to a &#147;holder&#148; of any Securities shall mean the Person in whose name such Securities are at the time
registered on such register. </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px; text-indent:8%"><FONT STYLE="font-family:Times New Roman" SIZE="2">9.2. <U>Transfer Agent Instruction</U>. Subject to satisfaction of either condition set forth in
Section&nbsp;8.2, the Company shall issue irrevocable instructions to its transfer agent, and any subsequent transfer agent, to credit shares to the applicable balance accounts at The Depository Trust Company (&#147;<B><I>DTC</I></B>&#148;),
registered in the name of the Purchaser or its nominee(s), for the Conversion Shares or upon conversion of the Notes in such amounts as specified from time to time by the Purchaser to the Company upon conversion of the Notes.&nbsp;The Company
warrants that no instruction other than the Irrevocable Transfer Agent Instructions referred to in this Section&nbsp;9.2 will be given by the Company to its transfer agent and that the Securities shall otherwise be freely transferable on the books
and records of the Company as and to the extent provided in this Agreement and the other Transaction Documents.&nbsp;If a Purchaser effects a transfer of the Securities in accordance with Section&nbsp;8.1, the Company shall permit the transfer and
shall promptly instruct its transfer agent to issue one or more certificates or credit shares to the applicable balance accounts at DTC in such name and in such denominations as specified by such Purchaser to effect such transfer.&nbsp;In the event
that any sale, assignment or transfer involves </FONT></P>
 <p STYLE="margin-top:0px;margin-bottom:0px"><FONT SIZE="1">&nbsp;</FONT></P> <P STYLE="margin-top:0px;margin-bottom:0px" ALIGN="center"><FONT STYLE="font-family:Times New Roman" SIZE="2">26 </FONT></P>



<p Style='page-break-before:always'>
<HR  SIZE="3" style="COLOR:#999999" WIDTH="100%" ALIGN="CENTER">

 <P STYLE="margin-top:0px;margin-bottom:0px"><FONT STYLE="font-family:Times New Roman" SIZE="2">
Conversion Shares sold, assigned or transferred pursuant to an effective registration statement or pursuant to Rule 144, the transfer agent shall issue such Securities to the Purchaser, assignee
or transferee, as the case may be, without any restrictive legend.&nbsp;The Company acknowledges that a breach by it of its obligations hereunder will cause irreparable harm to the Purchasers.&nbsp;Accordingly, the Company acknowledges that the
remedy at law for a breach of its obligations under this Section&nbsp;9.2 will be inadequate and agrees, in the event of a breach or threatened breach by the Company of the provisions of this Section&nbsp;9.2, that the Purchaser shall be entitled,
in addition to all other available remedies, to an order and/or injunction restraining any breach and requiring immediate issuance and transfer, without necessity of showing economic loss and without bond or other security being required.
</FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px; text-indent:8%"><FONT STYLE="font-family:Times New Roman" SIZE="2">9.3. <U>Replacement of Certificates</U>. Upon receipt of evidence reasonably satisfactory to the Company of the loss, theft,
destruction or mutilation of any certificate representing Notes, and, in the case of any such loss, theft or destruction, upon delivery of an indemnity agreement reasonably satisfactory to the Company or, in the case of any such mutilation, upon
surrender of such certificate for cancellation at the office of the Company maintained pursuant to Section&nbsp;9.1 hereof, the Company at its expense will execute and deliver, in lieu thereof, a new certificate representing Notes of like tenor.
</FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px; text-indent:4%"><FONT STYLE="font-family:Times New Roman" SIZE="2">10. <U>Pre-emptive Right of the Purchasers</U>. </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px; text-indent:8%"><FONT
STYLE="font-family:Times New Roman" SIZE="2">10.1. <U>Issuance of Additional Securities</U>. The Company hereby grants to the Purchasers the right to purchase up to 50% (the &#147;<B><I>Preemptive Portion</I></B>&#148;) of any new securities
(excluding securities issued in an Exempt Issuance) offered and sold by the Company, (&#147;<B><I>New Securities</I></B>&#148;) at any time after the Initial Closing Date, until $15,000,000 in aggregate New Securities have been offered and sold to
any Persons (including the Purchasers). The Preemptive Portion shall be pro rated among the Purchasers with respect to each issuance of New Securities based on each Purchaser&#146;s Pro Rata Interest. </FONT></P>
<P STYLE="margin-top:12px;margin-bottom:0px; text-indent:8%"><FONT STYLE="font-family:Times New Roman" SIZE="2">10.2. <U>Additional Issuance Notices</U>. The Company shall give written notice (an &#147;<B><I>Issuance Notice</I></B>&#148;) of any
proposed issuance or sale of New Securities described in Section&nbsp;10.1 to the Purchasers within five (5)&nbsp;Business Days following any meeting of the Board of Directors at which such issuance or sale is approved. The Issuance Notice shall, if
applicable, be accompanied by a written offer from any prospective purchaser seeking to purchase New Securities and shall set forth the material terms and conditions of the proposed issuance including: </FONT></P>
<P STYLE="margin-top:6px;margin-bottom:0px; margin-left:8%; text-indent:4%"><FONT STYLE="font-family:Times New Roman" SIZE="2">(a) the number and description of the New Securities proposed to be issued and the percentage of the Company&#146;s
capitalization such issuance would represent; </FONT></P> <P STYLE="margin-top:6px;margin-bottom:0px; margin-left:8%; text-indent:4%"><FONT STYLE="font-family:Times New Roman" SIZE="2">(b) the proposed issuance date, which shall be at least ten
(10)&nbsp;Business Days from the date of the Issuance Notice; and </FONT></P> <P STYLE="margin-top:6px;margin-bottom:0px; margin-left:8%; text-indent:4%"><FONT STYLE="font-family:Times New Roman" SIZE="2">(c) the proposed purchase price per security
and other material terms of the offering. </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px; text-indent:8%"><FONT STYLE="font-family:Times New Roman" SIZE="2">10.3. <U>Exercise of Pre-Emptive Rights</U>. For a period of five (5)&nbsp;Business
Days following the receipt of the Issuance Notice (the &#147;<B><I>Exercise Period</I></B>&#148;), each Purchaser shall have </FONT></P>
 <p STYLE="margin-top:0px;margin-bottom:0px"><FONT SIZE="1">&nbsp;</FONT></P> <P STYLE="margin-top:0px;margin-bottom:0px" ALIGN="center"><FONT STYLE="font-family:Times New Roman" SIZE="2">27 </FONT></P>



<p Style='page-break-before:always'>
<HR  SIZE="3" style="COLOR:#999999" WIDTH="100%" ALIGN="CENTER">

 <P STYLE="margin-top:0px;margin-bottom:0px"><FONT STYLE="font-family:Times New Roman" SIZE="2">
the right to elect irrevocably to purchase its Preemptive Portion of the New Securities at the purchase price set forth in the Issuance Notice by delivering a written notice to the Company. The
closing of any purchase by such Purchaser shall be consummated concurrently with the consummation of the issuance or sale described in the Issuance Notice. Notwithstanding the foregoing, the closing of any purchase by a Purchaser may be extended
beyond the closing of the transaction in the Issuance Notice to the extent necessary to obtain any required third party approvals or consents (and the Company and such Purchaser shall use their respective reasonable efforts to obtain such
approvals); <I>provided, however</I>, any such extension shall not exceed 60 days. </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px; text-indent:8%"><FONT STYLE="font-family:Times New Roman" SIZE="2">10.4. <U>Sales to Prospective Buyer</U>.
If a Purchaser fails to purchase its allotment of the New Securities within the time period described in Section&nbsp;10.3, the Company shall be free to complete the proposed issuance or sale of New Securities described in the Issuance Notice with
respect to which such Purchaser(s) failed to exercise the option set forth in this Section&nbsp;10 on terms no less favorable to the Company than those set forth in the Issuance Notice (except that the amount of New Securities to be issued or sold
by the Company may be reduced); <I>provided</I>, that (x)&nbsp;such issuance or sale is closed within thirty (30)&nbsp;Business Days after the expiration of the Exercise Period (subject to the extension of such period for a reasonable time not to
exceed 60 days to the extent reasonably necessary to obtain any required third party approvals or consents) and (y)&nbsp;for the avoidance of doubt, the price at which the New Securities are sold is at least equal to or higher than the purchase
price described in the Issuance Notice. In the event the Company has not sold such New Securities within such time period, the Company shall not thereafter issue or sell any New Securities without first again offering such securities to the
Stockholders in accordance with the procedures set forth in this Section&nbsp;10. </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px; text-indent:8%"><FONT STYLE="font-family:Times New Roman" SIZE="2">10.5. <U>Closing of the Issuance</U>. Upon
the issuance of any New Securities to the Purchaser in accordance with this Section&nbsp;10, the Company shall deliver to the Purchaser(s) certificates (if any) evidencing the New Securities, which New Securities shall be issued free and clear of
any Encumbrances, and the Company shall so represent and warrant to the Purchaser(s), and further represent and warrant to the Purchaser(s) that such New Securities shall be, upon issuance thereof to the Purchaser(s) and after payment therefor, duly
authorized, validly issued, fully paid and non-assessable. The Purchaser(s) shall deliver to the Company the purchase price for the New Securities purchased by it by wire transfer of immediately available funds. Each party to the purchase and sale
of New Securities shall take all such other actions as may be reasonably necessary to consummate the purchase and sale including, without limitation, entering into such additional agreements as may be necessary or appropriate. </FONT></P>
<P STYLE="margin-top:12px;margin-bottom:0px; text-indent:4%"><FONT STYLE="font-family:Times New Roman" SIZE="2">11. <U>Registration Rights of Purchasers</U>. </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px; text-indent:8%"><FONT
STYLE="font-family:Times New Roman" SIZE="2">11.1. <U>Mandatory Registration</U>. The Company shall prepare, and, as soon as practicable but in no event later than thirty (30)&nbsp;days after the Initial Closing Date (the &#147;<B><I>Filing
Deadline</I></B>&#148;), file with the Commission a Registration Statement on Form S-3 covering the resale of the full amount of the Conversion Shares (including the Conversion Shares underlying the Notes, Additional Notes, as well as Notes that may
be issued in payment of PIK Interest) (collectively, the &#147;<B><I>Registrable Securities</I></B>&#148;). In the event that Form S-3 is unavailable for such a registration, the Company shall use such other form as is available for such a
registration on another appropriate form reasonably acceptable to the Purchasers, subject to the provisions of </FONT></P>
 <p STYLE="margin-top:0px;margin-bottom:0px"><FONT SIZE="1">&nbsp;</FONT></P> <P STYLE="margin-top:0px;margin-bottom:0px" ALIGN="center"><FONT STYLE="font-family:Times New Roman" SIZE="2">28 </FONT></P>



<p Style='page-break-before:always'>
<HR  SIZE="3" style="COLOR:#999999" WIDTH="100%" ALIGN="CENTER">

 <P STYLE="margin-top:0px;margin-bottom:0px"><FONT STYLE="font-family:Times New Roman" SIZE="2">
Section&nbsp;11.3.&nbsp;The Company shall use its commercially reasonable efforts to have the Registration Statement declared effective by the Commission as soon as practicable, but in no event
later than the <B><I>Effectiveness Deadline</I></B>, which shall be either (i)&nbsp;90 days after the Initial Closing Date or (ii)&nbsp;in the event that the Commission reviews the Registration Statement, 120 days after the Initial Closing Date (but
in any event, no later than two Business Days from the Commission indicating that it has no further comments on the Registration Statement).&nbsp;By 9:30 am on the Business Day following the Effective Date, the Company shall file with the Commission
in accordance with Rule 424 under the Securities Act the final prospectus to be used in connection with sales pursuant to such Registration Statement. </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px; text-indent:8%"><FONT
STYLE="font-family:Times New Roman" SIZE="2">11.2. <U>Legal Counsel</U>. The Purchasers shall have the right to select one legal counsel to review and oversee any registration pursuant to this Section&nbsp;11, which shall be Ropes&nbsp;&amp; Gray
LLP or such other counsel (&#147;<B><I>Legal Counsel</I></B>&#148;) as thereafter designated by the Purchasers. The Company and Legal Counsel shall reasonably cooperate with each other in performing the Company&#146;s obligations under this
Section&nbsp;11. </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px; text-indent:8%"><FONT STYLE="font-family:Times New Roman" SIZE="2">11.3. <U>Ineligibility for Form S-3</U>. In the event that Form S-3 is not available for the registration of
the resale of Registrable Securities hereunder, the Company shall (i)&nbsp;register the resale of the Registrable Securities on another appropriate form reasonably acceptable to the Purchasers and (ii)&nbsp;undertake to register the Registrable
Securities on Form S-3 as soon as such form is available, provided that the Company shall maintain the effectiveness of the Registration Statement then in effect until such time as a Registration Statement on Form S-3 covering the Registrable
Securities has been declared effective by the Commission. </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px; text-indent:8%"><FONT STYLE="font-family:Times New Roman" SIZE="2">11.4. <U>Sufficient Number of Shares Registered</U>. In the event
the number of shares available under a Registration Statement filed pursuant to Section&nbsp;11.1 is insufficient to cover all of the Registrable Securities required to be covered by such Registration Statement, by virtue of an adjustment of the
Conversion Price of the Notes or otherwise, the Company shall amend the applicable Registration Statement, or file a new Registration Statement (on the short form available therefor, if applicable), or both, so as to cover at least the Required
Registration Amount as of the trading day immediately preceding the date of the filing of such amendment or new Registration Statement, in each case, as soon as practicable, but in any event not later than fifteen (15)&nbsp;days after the necessity
therefor arises.&nbsp;The Company shall use its best efforts to cause such amendment and/or new Registration Statement to become effective as soon as practicable following the filing thereof.&nbsp;For purposes of the foregoing provision, the number
of shares available under a Registration Statement shall be deemed &#147;insufficient to cover all of the Registrable Securities&#148; if on any Trading Day after the Filing Date and during the Registration Period (each a &#147;<B><I>Test Trading
Day</I></B>&#148;), the number of shares of Common Stock available for resale under the Registration Statement is less than the Required Registration Amount, determined as of such Test Trading Day, (a)&nbsp;without regard to any limitations on the
conversion of the Notes, and (b)&nbsp;assuming that the Notes (including the Additional Notes and any Notes that may be issued in the payment of the PIK Interest), are then convertible into shares of Common Stock at the prevailing Conversion Rate
(as defined in the Notes) as of each Test Trading Day. </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px; text-indent:8%"><FONT STYLE="font-family:Times New Roman" SIZE="2">11.5. <U>Effect of Failure to File and Obtain and Maintain
Effectiveness of Registration Statement</U>. If (a)&nbsp;a Registration Statement covering all of the Registrable Securities required to be covered thereby and required to be filed by the Company pursuant to this
</FONT></P>
 <p STYLE="margin-top:0px;margin-bottom:0px"><FONT SIZE="1">&nbsp;</FONT></P> <P STYLE="margin-top:0px;margin-bottom:0px" ALIGN="center"><FONT STYLE="font-family:Times New Roman" SIZE="2">29 </FONT></P>



<p Style='page-break-before:always'>
<HR  SIZE="3" style="COLOR:#999999" WIDTH="100%" ALIGN="CENTER">

 <P STYLE="margin-top:0px;margin-bottom:0px"><FONT STYLE="font-family:Times New Roman" SIZE="2">
Agreement is (i)&nbsp;not filed with the Commission on or before the Filing Deadline (a &#147;<B><I>Filing Failure</I></B>&#148;) or (ii)&nbsp;not declared effective by the Commission on or
before the Effectiveness Deadline (an &#147;<B><I>Effectiveness Failure</I></B>&#148;) or (b)&nbsp;on any day after the Effective Date, sales of all of the Registrable Securities required to be included on such Registration Statement cannot be made
(other than during an Allowable Grace Period) pursuant to such Registration Statement (including, without limitation, because of a failure to keep such Registration Statement effective, to disclose such information as is necessary for sales to be
made pursuant to such Registration Statement or to register a sufficient number of shares of Common Stock) (a &#147;<B><I>Maintenance Failure</I></B>&#148;) then, as partial relief for the damages to any holder by reason of any such delay in or
reduction of its ability to sell the underlying shares of Common Stock (which remedy shall not be exclusive of any other remedies available at law or in equity), the Company shall pay to each holder of Registrable Securities relating to such
Registration Statement an amount in cash equal to two percent (2.0%)&nbsp;of such holder&#146;s Pro Rata Interest in the Total Notes Purchase Price on each of the following dates: (i)&nbsp;the day of a Filing Failure and on every thirtieth day (pro
rated for periods totaling less than thirty (30)&nbsp;days) thereafter until such Filing Failure is cured; (ii)&nbsp;the day of an Effectiveness Failure and on every thirtieth day (pro rated for periods totaling less than thirty (30)&nbsp;days)
thereafter until such Effectiveness Failure is cured; and (iii)&nbsp;the initial day of a Maintenance Failure and on every thirtieth day (pro rated for periods totaling less than thirty (30)&nbsp;days) thereafter until such Maintenance Failure is
cured.&nbsp;The payments to which a holder shall be entitled pursuant to this Section&nbsp;11.5 are referred to herein as &#147;<B><I>Registration Delay Payments</I></B>.&#148;&nbsp;The first such Registration Delay Payment shall be paid within
three (3)&nbsp;Business Days after the event or failure giving rise to such Registration Delay Payment occurred and all other Registration Delay Payments shall be paid on the earlier of (I)&nbsp;the last day of the calendar month during which such
Registration Delay Payments are incurred and (II) the third Business Day after the event or failure giving rise to the Registration Delay Payments is cured.&nbsp;In the event the Company fails to make Registration Delay Payments in a timely manner,
such Registration Delay Payments shall bear interest at the rate of two percent (2.0%)&nbsp;per month (prorated for partial months) until paid in full.</FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px; text-indent:8%"><FONT
STYLE="font-family:Times New Roman" SIZE="2">11.6. <U>Related Obligations</U>. At such time as the Company is obligated to file a Registration Statement with the Commission pursuant to Section&nbsp;11.1, 11.3 or 11.4, the Company will use its best
efforts to effect the registration of the Registrable Securities in accordance with the intended method of disposition thereof and, pursuant thereto, the Company shall have the following obligations: </FONT></P>
<P STYLE="margin-top:6px;margin-bottom:0px; margin-left:8%; text-indent:4%"><FONT STYLE="font-family:Times New Roman" SIZE="2">(a) The Company shall submit to the Commission, within two (2)&nbsp;Business Days after the Company learns that no review
of a particular Registration Statement will be made by the staff of the Commission or that the staff has no further comments on a particular Registration Statement, as the case may be, a request for acceleration of effectiveness of such Registration
Statement to a time and date not later than two (2)&nbsp;Business Days after the submission of such request.&nbsp;The Company shall keep each Registration Statement effective pursuant to Rule 415 at all times until the earlier of (i)&nbsp;the date
as of which the Purchasers may sell all of the Registrable Securities covered by such Registration Statement without restriction pursuant to Rule 144 (or any successor thereto) promulgated under the Securities Act or (ii)&nbsp;the date on which the
Purchasers shall have sold all of the Registrable Securities covered by such Registration Statement (the &#147;<B><I>Registration Period</I></B>&#148;).&nbsp;The Company shall ensure that each Registration
</FONT></P>
 <p STYLE="margin-top:0px;margin-bottom:0px"><FONT SIZE="1">&nbsp;</FONT></P> <P STYLE="margin-top:0px;margin-bottom:0px" ALIGN="center"><FONT STYLE="font-family:Times New Roman" SIZE="2">30 </FONT></P>



<p Style='page-break-before:always'>
<HR  SIZE="3" style="COLOR:#999999" WIDTH="100%" ALIGN="CENTER">

 <P STYLE="margin-top:0px;margin-bottom:0px; margin-left:8%"><FONT STYLE="font-family:Times New Roman" SIZE="2">
Statement (including any amendments or supplements thereto and prospectuses contained therein) shall 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 (in the case of prospectuses, in the light of the circumstances in which they were made) not misleading. </FONT></P>
<P STYLE="margin-top:6px;margin-bottom:0px; margin-left:8%; text-indent:4%"><FONT STYLE="font-family:Times New Roman" SIZE="2">(b) The Company shall prepare and file with the Commission such amendments (including post-effective amendments) and
supplements to a Registration Statement and the prospectus used in connection with such Registration Statement, which prospectus is to be filed pursuant to Rule 424 promulgated under the Securities Act, as may be necessary to keep such Registration
Statement effective at all times during the Registration Period, and, during such period, comply with the provisions of the Securities Act with respect to the disposition of all Registrable Securities of the Company covered by such Registration
Statement until such time as all of such Registrable Securities shall have been disposed of in accordance with the intended methods of disposition by the seller or sellers thereof as set forth in such Registration Statement.&nbsp;In the case of
amendments and supplements to a Registration Statement which are required to be filed pursuant to this Agreement (including pursuant to this Section&nbsp;11.6(b)) by reason of the Company filing a report on Form 10-Q, Form 10-K or any analogous
report under the Exchange Act, the Company shall have incorporated such report by reference into such Registration Statement, if applicable, or shall file such amendments or supplements with the Commission on the same day on which the Exchange Act
report is filed which created the requirement for the Company to amend or supplement such Registration Statement. </FONT></P> <P STYLE="margin-top:6px;margin-bottom:0px; margin-left:8%; text-indent:4%"><FONT
STYLE="font-family:Times New Roman" SIZE="2">(c) The Company shall (i)&nbsp;permit Legal Counsel to review and comment upon (A)&nbsp;a Registration Statement at least five (5)&nbsp;Business Days prior to its filing with the Commission and
(B)&nbsp;all amendments and supplements to all Registration Statements (except for Annual Reports on Form 10-K, and Quarterly Reports on Form 10-Q and any similar or successor reports) within a reasonable number of days prior to their filing with
the Commission, and (ii)&nbsp;not file any Registration Statement or amendment or supplement thereto in a form to which Legal Counsel reasonably objects.&nbsp;The Company shall not submit a request for acceleration of the effectiveness of a
Registration Statement or any amendment or supplement thereto without the prior approval of Legal Counsel, which consent shall not be unreasonably withheld.&nbsp;The Company shall furnish to Legal Counsel, without charge, (i)&nbsp;copies of any
correspondence from the Commission or the staff of the Commission to the Company or its representatives relating to any Registration Statement, (ii)&nbsp;promptly after the same is prepared and filed with the Commission, one copy of any Registration
Statement and any amendment(s) thereto, including financial statements and schedules, all documents incorporated therein by reference, if requested by the Purchasers, and all exhibits and (iii)&nbsp;upon the effectiveness of any Registration
Statement, one copy of the prospectus included in such Registration Statement and all amendments and supplements thereto.&nbsp;The Company shall reasonably cooperate with Legal Counsel in performing the Company&#146;s obligations pursuant to this
Section&nbsp;11. </FONT></P>
 <p STYLE="margin-top:0px;margin-bottom:0px"><FONT SIZE="1">&nbsp;</FONT></P> <P STYLE="margin-top:0px;margin-bottom:0px" ALIGN="center"><FONT STYLE="font-family:Times New Roman" SIZE="2">31 </FONT></P>



<p Style='page-break-before:always'>
<HR  SIZE="3" style="COLOR:#999999" WIDTH="100%" ALIGN="CENTER">

 <P STYLE="margin-top:0px;margin-bottom:0px; margin-left:8%; text-indent:4%"><FONT STYLE="font-family:Times New Roman" SIZE="2">(d) The Company shall furnish to the Purchasers without charge,
(i)&nbsp;promptly after the Registration Statement including such Purchaser&#146;s Registrable Securities is prepared and filed with the Commission, at least one copy of such Registration Statement and any amendment(s) thereto, including financial
statements and schedules, all documents incorporated therein by reference, if requested by the Purchaser, all exhibits and each preliminary prospectus, (ii)&nbsp;upon the effectiveness of any Registration Statement, ten (10)&nbsp;copies of the
prospectus included in such Registration Statement and all amendments and supplements thereto (or such other number of copies as the Purchaser may reasonably request) and (iii)&nbsp;such other documents, including copies of any preliminary or final
prospectus, as the Purchaser may reasonably request from time to time in order to facilitate the disposition of the Registrable Securities. </FONT></P> <P STYLE="margin-top:6px;margin-bottom:0px; margin-left:8%; text-indent:4%"><FONT
STYLE="font-family:Times New Roman" SIZE="2">(e) The Company shall use its best efforts to (i)&nbsp;register and qualify, unless an exemption from registration and qualification applies, the resale by the Purchaser of the Registrable Securities
covered by a Registration Statement under such other securities or &#147;blue sky&#148; laws of all applicable jurisdictions in the United States, (ii)&nbsp;prepare and file in those jurisdictions, such amendments (including post-effective
amendments) and supplements to such registrations and qualifications as may be necessary to maintain the effectiveness thereof during the Registration Period, (iii)&nbsp;take such other actions as may be necessary to maintain such registrations and
qualifications in effect at all times during the Registration Period, and (iv)&nbsp;take all other actions reasonably necessary or advisable to qualify the Registrable Securities for sale in such jurisdictions; provided, however, that the Company
shall not be required in connection therewith or as a condition thereto to (x)&nbsp;qualify to do business in any jurisdiction where it would not otherwise be required to qualify but for this Section&nbsp;11.6(e), (y)&nbsp;subject itself to general
taxation in any such jurisdiction, or (z)&nbsp;file a general consent to service of process in any such jurisdiction.&nbsp;The Company shall promptly notify Legal Counsel and the Purchasers of the receipt by the Company of any notification with
respect to the suspension of the registration or qualification of any of the Registrable Securities for sale under the securities or &#147;blue sky&#148; laws of any jurisdiction in the United States or its receipt of notice of the initiation or
threatening of any proceeding for such purpose. </FONT></P> <P STYLE="margin-top:6px;margin-bottom:0px; margin-left:8%; text-indent:4%"><FONT STYLE="font-family:Times New Roman" SIZE="2">(f) The Company shall notify Legal Counsel and the Purchasers
in writing of the happening of any event, as promptly as practicable after becoming aware of such event, as a result of which the prospectus included in a Registration Statement, as then in effect, includes an untrue statement of a material fact or
omission to state a material fact required to be stated therein or necessary to make the statements therein, in the light of the circumstances under which they were made, not misleading (provided that in no event shall such notice contain any
material, nonpublic information), and, promptly prepare a supplement or amendment to such Registration Statement to correct such untrue statement or omission, and deliver ten (10)&nbsp;copies of such supplement or amendment to Legal Counsel and the
Purchasers (or such other number of copies as Legal Counsel or the Purchasers may reasonably request).&nbsp;The Company shall also promptly notify Legal Counsel and the Purchasers in writing (i)&nbsp;when a prospectus or any prospectus supplement or
post-effective amendment has been filed, and when a Registration Statement or any post-effective amendment has become effective (notification of such effectiveness shall be delivered to Legal Counsel and the Purchasers by facsimile on the
</FONT></P>
 <p STYLE="margin-top:0px;margin-bottom:0px"><FONT SIZE="1">&nbsp;</FONT></P> <P STYLE="margin-top:0px;margin-bottom:0px" ALIGN="center"><FONT STYLE="font-family:Times New Roman" SIZE="2">32 </FONT></P>



<p Style='page-break-before:always'>
<HR  SIZE="3" style="COLOR:#999999" WIDTH="100%" ALIGN="CENTER">

 <P STYLE="margin-top:0px;margin-bottom:0px; margin-left:8%"><FONT STYLE="font-family:Times New Roman" SIZE="2">
same day of such effectiveness and by overnight mail), (ii)&nbsp;of any request by the Commission for amendments or supplements to a Registration Statement or related prospectus or related
information, and (iii)&nbsp;of the Company&#146;s reasonable determination that a post-effective amendment to a Registration Statement would be appropriate. </FONT></P> <P STYLE="margin-top:6px;margin-bottom:0px; margin-left:8%; text-indent:4%"><FONT
STYLE="font-family:Times New Roman" SIZE="2">(g) The Company shall use its best efforts to prevent the issuance of any stop order or other suspension of effectiveness of a Registration Statement, or the suspension of the qualification of any of the
Registrable Securities for sale in any jurisdiction and, if such an order or suspension is issued, to obtain the withdrawal of such order or suspension at the earliest possible moment and to notify Legal Counsel and the Purchaser who holds
Registrable Securities being sold of the issuance of such order and the resolution thereof or its receipt of notice of the initiation or threat of any proceeding for such purpose. </FONT></P>
<P STYLE="margin-top:6px;margin-bottom:0px; margin-left:8%; text-indent:4%"><FONT STYLE="font-family:Times New Roman" SIZE="2">(h) If a Purchaser is required under applicable securities law to be described in the Registration Statement as an
underwriter, at the reasonable request of the Purchaser, the Company shall furnish to the Purchaser, on the date of the effectiveness of the Registration Statement and thereafter from time to time on such dates as the Purchaser may reasonably
request (i)&nbsp;a letter, dated such date, from the Company&#146;s independent certified public accountants in form and substance as is customarily given by independent certified public accountants to underwriters in an underwritten public
offering, addressed to the Purchaser, and (ii)&nbsp;an opinion, dated as of such date, of counsel representing the Company for purposes of such Registration Statement, in form, scope and substance as is customarily given in an underwritten public
offering, addressed to the Purchaser. </FONT></P> <P STYLE="margin-top:6px;margin-bottom:0px; margin-left:8%; text-indent:4%"><FONT STYLE="font-family:Times New Roman" SIZE="2">(i) If a Purchaser is required under applicable securities law to be
described in the Registration Statement as an underwriter, upon the written request of the Purchaser in connection with the Purchaser&#146;s due diligence requirements, if any, the Company shall make available for inspection by (i)&nbsp;the
Purchaser, (ii)&nbsp;Legal Counsel and (iii)&nbsp;one firm of accountants or other agents retained by the Purchaser (collectively, the &#147;<B><I>Inspectors</I></B>&#148;), all pertinent financial and other records, and pertinent corporate
documents and properties of the Company (collectively, the &#147;<B><I>Records</I></B>&#148;), as shall be reasonably deemed necessary by each Inspector, and cause the Company&#146;s officers, directors and employees to supply all information which
any Inspector may reasonably request; provided, however, that each Inspector shall agree to hold in strict confidence and shall not make any disclosure (except to the Purchaser) or use of any Record or other information which the Company determines
in good faith to be confidential, and of which determination the Inspectors are so notified, unless (a)&nbsp;the disclosure of such Records is necessary to avoid or correct a misstatement or omission in any Registration Statement or is otherwise
required under the Securities Act, (b)&nbsp;the release of such Records is ordered pursuant to a final, non-appealable subpoena or order from a court or government body of competent jurisdiction, or (c)&nbsp;the information in such Records has been
made generally available to the public other than by disclosure in violation of this or any other Transaction Document.&nbsp;The Purchaser agrees that it shall, upon learning that disclosure of such Records is sought in or by a court or governmental
body of competent jurisdiction or through other means, give prompt notice to the Company and allow the </FONT></P>
 <p STYLE="margin-top:0px;margin-bottom:0px"><FONT SIZE="1">&nbsp;</FONT></P> <P STYLE="margin-top:0px;margin-bottom:0px" ALIGN="center"><FONT STYLE="font-family:Times New Roman" SIZE="2">33 </FONT></P>



<p Style='page-break-before:always'>
<HR  SIZE="3" style="COLOR:#999999" WIDTH="100%" ALIGN="CENTER">

 <P STYLE="margin-top:0px;margin-bottom:0px; margin-left:8%"><FONT STYLE="font-family:Times New Roman" SIZE="2">
Company, at its expense, to undertake appropriate action to prevent disclosure of, or to obtain a protective order for, the Records deemed confidential.&nbsp;Nothing herein (or in any other
confidentiality agreement between the Company and the Purchaser) shall be deemed to limit the Purchaser&#146;s ability to sell Registrable Securities in a manner which is otherwise consistent with applicable laws and regulations. </FONT></P>
<P STYLE="margin-top:6px;margin-bottom:0px; margin-left:8%; text-indent:4%"><FONT STYLE="font-family:Times New Roman" SIZE="2">(j) The Company shall hold in confidence and not make any disclosure of information concerning the Purchasers provided to
the Company unless (i)&nbsp;disclosure of such information is necessary to comply with federal or state securities laws, (ii)&nbsp;the disclosure of such information is necessary to avoid or correct a misstatement or omission in any Registration
Statement, (iii)&nbsp;the release of such information is ordered pursuant to a subpoena or other final, non-appealable order from a court or governmental body of competent jurisdiction or (iv)&nbsp;such information has been made generally available
to the public other than by disclosure in violation of this Agreement or any other agreement.&nbsp;The Company agrees that it shall, upon learning that disclosure of such information concerning the Purchasers is sought in or by a court or
governmental body of competent jurisdiction or through other means, give prompt written notice to the Purchasers and allow the Purchasers, at each Purchaser&#146;s expense, to undertake appropriate action to prevent disclosure of, or to obtain a
protective order for, such information. </FONT></P> <P STYLE="margin-top:6px;margin-bottom:0px; margin-left:8%; text-indent:4%"><FONT STYLE="font-family:Times New Roman" SIZE="2">(k) The Company shall use its best efforts to cause all of the
Registrable Securities covered by a Registration Statement to be listed on each securities exchange on which securities of the same class or series issued by the Company are then listed, if any, if the listing of such Registrable Securities is then
permitted under the rules of such exchange.&nbsp;The Company shall pay all fees and expenses in connection with satisfying its obligation under this Section&nbsp;11.6(k). </FONT></P>
<P STYLE="margin-top:6px;margin-bottom:0px; margin-left:8%; text-indent:4%"><FONT STYLE="font-family:Times New Roman" SIZE="2">(l) The Company shall cooperate with the Purchasers and, to the extent applicable, facilitate the timely preparation and
delivery of certificates (not bearing any restrictive legend) representing the Registrable Securities to be offered pursuant to a Registration Statement and enable such certificates to be in such denominations or amounts, as the case may be, as the
Purchasers may reasonably request and registered in such names as the Purchasers may request. </FONT></P> <P STYLE="margin-top:6px;margin-bottom:0px; margin-left:8%; text-indent:4%"><FONT STYLE="font-family:Times New Roman" SIZE="2">(m) If requested
by a Purchaser, the Company shall (i)&nbsp;as soon as practicable incorporate in a prospectus supplement or post-effective amendment such information as the Purchaser reasonably requests to be included therein relating to the sale and distribution
of Registrable Securities, including, without limitation, information with respect to the number of Registrable Securities being offered or sold, the purchase price being paid therefor and any other terms of the offering of the Registrable
Securities to be sold in such offering; (ii)&nbsp;as soon as practicable make all required filings of such prospectus supplement or post-effective amendment after being notified of the matters to be incorporated in such prospectus supplement or
post-effective amendment; and (iii)&nbsp;as soon as practicable, supplement or make amendments to any Registration Statement if reasonably requested by the Purchaser. </FONT></P>
 <p STYLE="margin-top:0px;margin-bottom:0px"><FONT SIZE="1">&nbsp;</FONT></P> <P STYLE="margin-top:0px;margin-bottom:0px" ALIGN="center"><FONT STYLE="font-family:Times New Roman" SIZE="2">34 </FONT></P>



<p Style='page-break-before:always'>
<HR  SIZE="3" style="COLOR:#999999" WIDTH="100%" ALIGN="CENTER">

 <P STYLE="margin-top:0px;margin-bottom:0px; margin-left:8%; text-indent:4%"><FONT STYLE="font-family:Times New Roman" SIZE="2">(n) The Company shall use its best efforts to cause the Registrable
Securities covered by a Registration Statement to be registered with or approved by such other governmental agencies or authorities as may be necessary to consummate the disposition of such Registrable Securities. </FONT></P>
<P STYLE="margin-top:6px;margin-bottom:0px; margin-left:8%; text-indent:4%"><FONT STYLE="font-family:Times New Roman" SIZE="2">(o) The Company shall otherwise use its best efforts to comply with all applicable rules and regulations of the Commission
in connection with any registration hereunder. </FONT></P> <P STYLE="margin-top:6px;margin-bottom:0px; margin-left:8%; text-indent:4%"><FONT STYLE="font-family:Times New Roman" SIZE="2">(p) Within two (2)&nbsp;Business Days after a Registration
Statement which covers Registrable Securities is ordered effective by the Commission, the Company shall deliver, and shall cause legal counsel for the Company to deliver, to the transfer agent for such Registrable Securities (with copies to the
Purchasers) confirmation that such Registration Statement has been declared effective by the Commission. </FONT></P> <P STYLE="margin-top:6px;margin-bottom:0px; margin-left:8%; text-indent:4%"><FONT STYLE="font-family:Times New Roman" SIZE="2">(q)
<B></B>Notwithstanding anything to the contrary herein, at any time after the Effective Date, the Company may delay the disclosure of material, non-public information concerning the Company the disclosure of which at the time is not, in the good
faith opinion of the Board of Directors and its counsel, in the best interest of the Company and, in the opinion of counsel to the Company, otherwise required (a &#147;<B><I>Grace Period</I></B>&#148;); provided, that the Company shall promptly
(i)&nbsp;notify the Purchasers in writing of the existence of material, non-public information giving rise to a Grace Period (provided that in each notice the Company will not disclose the content of such material, non-public information to the
Purchasers) and the date on which the Grace Period will begin, and (ii)&nbsp;notify the Purchasers in writing of the date on which the Grace Period ends; and, provided further, that the Grace Periods shall not exceed an aggregate of ten
(10)&nbsp;Trading Days during any three hundred sixty five (365)&nbsp;day period and the first day of any Grace Period must be at least thirty (30)&nbsp;days after the last day of any prior Grace Period (each, an &#147;<B><I>Allowable Grace
Period</I></B>&#148;).&nbsp;For purposes of determining the length of a Grace Period above, the Grace Period shall begin on and include the date the Purchasers receive the notice referred to in clause (i)&nbsp;and shall end on and include the later
of the date the Purchasers receive the notice referred to in clause (ii)&nbsp;and the date referred to in such notice.&nbsp;The provisions of Section&nbsp;11.6(g) hereof shall not be applicable during the period of any Allowable Grace
Period.&nbsp;Upon expiration of the Grace Period, the Company shall again be bound by the first sentence of Section&nbsp;11.6(f) with respect to the information giving rise thereto unless such material, non-public information is no longer
applicable.&nbsp;Notwithstanding anything to the contrary, the Company shall cause its transfer agent to deliver unlegended shares of Common Stock to a transferee of any Purchaser in accordance with the terms of this Agreement in connection with any
sale of Registrable Securities with respect to which a Purchaser has entered into a contract for sale, and delivered a copy of the prospectus included as part of the applicable Registration Statement (unless an exemption from such prospectus
delivery requirement exists), prior to the Purchaser&#146;s receipt of the notice of a Grace Period and for which the Purchaser has not yet settled. </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px; text-indent:8%"><FONT
STYLE="font-family:Times New Roman" SIZE="2">11.7. <U>Obligations of the Purchasers</U>. </FONT></P>
 <p STYLE="margin-top:0px;margin-bottom:0px"><FONT SIZE="1">&nbsp;</FONT></P> <P STYLE="margin-top:0px;margin-bottom:0px" ALIGN="center"><FONT STYLE="font-family:Times New Roman" SIZE="2">35 </FONT></P>



<p Style='page-break-before:always'>
<HR  SIZE="3" style="COLOR:#999999" WIDTH="100%" ALIGN="CENTER">

 <P STYLE="margin-top:0px;margin-bottom:0px; margin-left:8%; text-indent:4%"><FONT STYLE="font-family:Times New Roman" SIZE="2">(a) At least five (5)&nbsp;Business Days prior to the first anticipated
filing date of a Registration Statement, the Company shall notify each Purchaser in writing of the information the Company requires from such Purchaser in order to have that Purchaser&#146;s Registrable Securities included in such Registration
Statement.&nbsp;It shall be a condition precedent to the obligations of the Company to complete the registration pursuant to this Agreement with respect to the Registrable Securities of a particular Purchaser that the Purchaser shall furnish to the
Company such information regarding itself, the Registrable Securities held by it and the intended method of disposition of the Registrable Securities held by it as shall be reasonably required to effect the effectiveness of the registration of such
Registrable Securities and shall execute such documents in connection with such registration as the Company may reasonably request. </FONT></P> <P STYLE="margin-top:6px;margin-bottom:0px; margin-left:8%; text-indent:4%"><FONT
STYLE="font-family:Times New Roman" SIZE="2">(b) <B></B>Each Purchaser, by its acceptance of the Registrable Securities, agrees to cooperate with the Company as reasonably requested by the Company in connection with the preparation and filing of any
Registration Statement hereunder, unless the Purchaser has notified the Company in writing of the Purchaser&#146;s election to exclude all of the Purchaser&#146;s Registrable Securities from such Registration Statement. </FONT></P>
<P STYLE="margin-top:6px;margin-bottom:0px; margin-left:8%; text-indent:4%"><FONT STYLE="font-family:Times New Roman" SIZE="2">(c) Each Purchaser agrees that, upon receipt of any notice from the Company of the happening of any event of the kind
described in Section&nbsp;11.6(g) or the first sentence of 11.6(f), the Purchaser will immediately discontinue disposition of Registrable Securities pursuant to any Registration Statement(s) covering such Registrable Securities until the
Purchaser&#146;s receipt of the copies of the supplemented or amended prospectus contemplated by Section&nbsp;11.6(g) or the first sentence of 11.6(f) or receipt of notice that no supplement or amendment is required.&nbsp;Notwithstanding anything to
the contrary, the Company shall cause its transfer agent to deliver unlegended shares of Common Stock to a transferee of the Purchaser in accordance with the terms of this Agreement in connection with any sale of Registrable Securities with respect
to which the Purchaser has entered into a contract for sale prior to the Purchaser&#146;s receipt of a notice from the Company of the happening of any event of the kind described in Section&nbsp;11.6(g) or the first sentence of 11.6(f) and for which
the Purchaser has not yet settled. </FONT></P> <P STYLE="margin-top:6px;margin-bottom:0px; margin-left:8%; text-indent:4%"><FONT STYLE="font-family:Times New Roman" SIZE="2">(d) Each Purchaser covenants and agrees that it will comply with the
prospectus delivery requirements of the Securities Act as applicable to it or an exemption therefrom in connection with sales of Registrable Securities pursuant to the Registration Statement. </FONT></P>
<P STYLE="margin-top:12px;margin-bottom:0px; text-indent:8%"><FONT STYLE="font-family:Times New Roman" SIZE="2">11.8. <U>Expenses of Registration</U>. All reasonable expenses, other than underwriting discounts and commissions incurred in connection
with registrations, filings or qualifications pursuant to Section&nbsp;11.5 and Section&nbsp;11.6, including, without limitation, all registration, listing and qualifications fees, printers and accounting fees, and fees and disbursements of counsel
for the Company, shall be paid by the Company.</FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px; text-indent:8%"><FONT STYLE="font-family:Times New Roman" SIZE="2">11.9. <U>Reports under the Exchange Act</U>. With a view to making available to
the Purchasers the benefits of Rule 144 promulgated under the Securities Act or any other similar </FONT></P>
 <p STYLE="margin-top:0px;margin-bottom:0px"><FONT SIZE="1">&nbsp;</FONT></P> <P STYLE="margin-top:0px;margin-bottom:0px" ALIGN="center"><FONT STYLE="font-family:Times New Roman" SIZE="2">36 </FONT></P>



<p Style='page-break-before:always'>
<HR  SIZE="3" style="COLOR:#999999" WIDTH="100%" ALIGN="CENTER">

 <P STYLE="margin-top:0px;margin-bottom:0px"><FONT STYLE="font-family:Times New Roman" SIZE="2">
rule or regulation of the Commission that may at any time permit the Purchasers to sell securities of the Company to the public without registration (&#147;<B><I>Rule 144</I></B>&#148;), the
Company agrees to: </FONT></P> <P STYLE="margin-top:6px;margin-bottom:0px; margin-left:4%; text-indent:4%"><FONT STYLE="font-family:Times New Roman" SIZE="2">(a) make and keep public information available, as those terms are understood and defined
in Rule 144; </FONT></P> <P STYLE="margin-top:6px;margin-bottom:0px; margin-left:4%; text-indent:4%"><FONT STYLE="font-family:Times New Roman" SIZE="2">(b) file with the Commission in a timely manner all reports and other documents required of the
Company under the Exchange Act so long as the Company remains subject to such requirements and the filing of such reports and other documents is required for the applicable provisions of Rule 144; and </FONT></P>
<P STYLE="margin-top:6px;margin-bottom:0px; margin-left:4%; text-indent:4%"><FONT STYLE="font-family:Times New Roman" SIZE="2">(c) furnish to the Purchasers so long as any Purchaser owns Registrable Securities, promptly upon request, (i)&nbsp;a
written statement by the Company, if true, that it has complied with the reporting requirements of Rule 144, the Securities Act and the Exchange Act, (ii)&nbsp;a copy of the most recent annual or quarterly report of the Company and such other
reports and documents so filed by the Company and (iii)&nbsp;such other information as may be reasonably requested to permit the Purchasers to sell such securities pursuant to Rule 144 without registration. </FONT></P>
<P STYLE="margin-top:12px;margin-bottom:0px; text-indent:8%"><FONT STYLE="font-family:Times New Roman" SIZE="2">11.10. <U>Piggyback Rights</U>. Whenever the Company proposes to register any of its Common Stock or securities convertible into Common
Stock, whether or not for its own account, provided such offering shall be underwritten or placed by a placement agent, the Company will give prompt written notice to the Purchasers of its intention to effect such a registration (but in no event
less than fifteen (15)&nbsp;Business Days prior to the anticipated filing date) and will include in such registration all Registrable Securities with respect to which the Company has received written requests for inclusion therein within ten
(10)&nbsp;Business Days after the date of the Company&#146;s notice (a &#147;<B><I>Piggyback Registration</I></B>&#147;). Any Purchaser may withdraw its Registrable Securities from such Piggyback Registration by giving written notice to the Company
and the managing underwriter, if any, on or before the fifth Business Day prior to the planned effective date of such Piggyback Registration. The Company may terminate or withdraw any registration under this Section&nbsp;11.10 prior to the
effectiveness of such registration, whether or not the Purchaser has elected to include Registrable Securities in such registration. If a Piggyback Registration relates to an underwritten primary offering on behalf of the Company, and the managing
underwriters advise the Company that in their reasonable opinion the number of securities requested to be included in such registration exceeds the number which can be sold without adversely affecting the marketability of such offering (including an
adverse effect on the per share offering price), the Company will include in such registration or prospectus only such number of securities that in the reasonable opinion of such underwriters can be sold without adversely affecting the marketability
of the offering (including an adverse effect on the per share offering price), <I>provided</I>, without the consent of the Purchaser, such number so included shall equal at least 30% of such Purchaser&#146;s Registrable Securities. </FONT></P>
<P STYLE="margin-top:12px;margin-bottom:0px; text-indent:8%"><FONT STYLE="font-family:Times New Roman" SIZE="2">11.11. <U>Assignment of Registration Rights</U>. The rights under this Section&nbsp;11 shall be automatically assignable by a Purchaser
to any transferee of all or any portion of the Purchaser&#146;s Registrable Securities if: (i)&nbsp;the Purchaser agrees in writing with the transferee or assignee to assign such rights and a copy of such agreement is furnished to the Company within
a reasonable time after such assignment; (ii)&nbsp;the Company is, within a reasonable time after such </FONT></P>
 <p STYLE="margin-top:0px;margin-bottom:0px"><FONT SIZE="1">&nbsp;</FONT></P> <P STYLE="margin-top:0px;margin-bottom:0px" ALIGN="center"><FONT STYLE="font-family:Times New Roman" SIZE="2">37 </FONT></P>



<p Style='page-break-before:always'>
<HR  SIZE="3" style="COLOR:#999999" WIDTH="100%" ALIGN="CENTER">

 <P STYLE="margin-top:0px;margin-bottom:0px"><FONT STYLE="font-family:Times New Roman" SIZE="2">
transfer or assignment, furnished with written notice of (a)&nbsp;the name and address of such transferee or assignee and (b)&nbsp;the securities with respect to which such registration rights
are being transferred or assigned; (iii)&nbsp;immediately following such transfer or assignment the further disposition of such securities by the transferee or assignee is restricted under the Securities Act or applicable state securities laws;
(iv)&nbsp;at or before the time the Company receives the written notice contemplated by clause (ii)&nbsp;of this sentence the transferee or assignee agrees in writing with the Company to be bound by all of the provisions contained herein; and
(v)&nbsp;such transfer shall have been made in accordance with the applicable requirements of this Agreement. </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px; text-indent:8%"><FONT STYLE="font-family:Times New Roman" SIZE="2">11.12.
<U>Indemnification</U>. </FONT></P> <P STYLE="margin-top:6px;margin-bottom:0px; margin-left:8%; text-indent:4%"><FONT STYLE="font-family:Times New Roman" SIZE="2">(a) <U>Company Indemnification</U>. The Company will indemnify each Purchaser who
holds Registrable Securities (if Registrable Securities held by such Purchaser are included in the securities as to which such registration is being effected), each of its officers and directors, partners, members and each person controlling such
Purchaser within the meaning of Section&nbsp;15 of the Securities Act, against all expenses, claims, losses, damages or liabilities (or actions in respect thereof), including any of the foregoing incurred in settlement of any litigation, commenced
or threatened, arising out of or based on (A)&nbsp;any untrue statement (or alleged untrue statement) of a material fact contained in any Registration Statement, prospectus, offering circular or other document, or any amendment or supplement
thereto, incident to any such Registration Statement, or based on any omission (or alleged omission) to state therein a material fact required to be stated therein or necessary to make the statements therein, in light of the circumstances in which
they were made, not misleading, or (B)&nbsp;any violation by the Company of the Securities Act, the Exchange Act, state securities laws or any rule or regulation promulgated under such laws applicable to the Company in connection with any such
registration, and in each case, the Company will reimburse each such Purchaser, each of its officers and directors, partners, members and each person controlling such Purchaser, for any legal and any other expenses reasonably incurred, as such
expenses are incurred, in connection with investigating, preparing or defending any such claim, loss, damage, liability or action, <I>provided</I> that the Company will not be liable in any such case to the extent that any such claim, loss, damage,
liability or expense arises out of or is based on (X)&nbsp;any untrue statement or omission or alleged untrue statement or omission made in reliance upon and in conformity with written information furnished to the Company by an instrument duly
executed by such Purchaser or controlling person, and stated to be specifically for use therein, (Y)&nbsp;the use by a Purchaser of an outdated or defective prospectus after the Company has notified such Purchaser in writing that the prospectus is
outdated or defective or (Z)&nbsp;a Purchaser&#146;s (or any other indemnified person&#146;s) failure to send or give a copy of the prospectus or supplement (as then amended or supplemented), if required, pursuant to Rule 172 under the Securities
Act (or any successor rule) to the Persons asserting an untrue statement or alleged untrue statement or alleged untrue statement or omission or alleged omission at or prior to the written confirmation of the sale of Registrable Securities to such
person if such statement or omission was corrected in such prospectus or supplement; <I>provided, further,</I> that the indemnity agreement contained in this Section&nbsp;11.12(a) shall not apply to amounts paid in settlement of any such loss,
claim, damage, liability or action if such settlement is effected without the consent of the Company (which consent shall not be unreasonably withheld). </FONT></P>
 <p STYLE="margin-top:0px;margin-bottom:0px"><FONT SIZE="1">&nbsp;</FONT></P> <P STYLE="margin-top:0px;margin-bottom:0px" ALIGN="center"><FONT STYLE="font-family:Times New Roman" SIZE="2">38 </FONT></P>



<p Style='page-break-before:always'>
<HR  SIZE="3" style="COLOR:#999999" WIDTH="100%" ALIGN="CENTER">

 <P STYLE="margin-top:0px;margin-bottom:0px; margin-left:8%; text-indent:4%"><FONT STYLE="font-family:Times New Roman" SIZE="2">(b) <U>Purchaser Indemnification</U>. Each Purchaser holding Registrable
Securities will, if Registrable Securities held by such Purchaser are included in the securities as to which such registration is being effected, severally and not jointly, indemnify the Company, each of its directors and officers, other holders of
the Company&#146;s securities covered by such Registration Statement, each person who controls the Company within the meaning of Section&nbsp;15 of the Securities Act, and each such holder, each of its officers and directors and each person
controlling such holder within the meaning of Section&nbsp;15 of the Securities Act, against all claims, losses, damages and liabilities (or actions in respect thereof) arising out of or based on: (A)&nbsp;any untrue statement (or alleged untrue
statement) of a material fact contained in any such Registration Statement, prospectus, offering circular or other document, or any omission (or alleged omission) to state therein a material fact required to be stated therein or necessary to make
the statements therein not misleading, to the extent, and only to the extent, that such untrue statement (or alleged untrue statement) or omission (or alleged omission) is made in such Registration Statement, prospectus, offering circular or other
document in reliance upon and in conformity with written information furnished to the Company by an instrument duly executed by such Purchaser and stated to be specifically for use therein, or (B)&nbsp;any violation by such Purchaser of the
Securities Act, the Exchange Act, state securities laws or any rule or regulation promulgated under such laws applicable to such Purchaser, and in each case, such Purchaser will reimburse the Company, each other holder, and directors, officers,
persons, underwriters or control persons of the Company and the other holders for any legal or any other expenses reasonably incurred, as such expenses are incurred, in connection with investigating or defending any such claim, loss, damage,
liability or action; <I>provided, </I>that the indemnity agreement contained in this Subsection 11.12(b) shall not apply to amounts paid in settlement of any such loss, claim, damage, liability or action if such settlement is effected without the
consent of such indemnifying Purchaser (which consent shall not be unreasonably withheld or delayed). The liability of any Purchaser for indemnification under this Section&nbsp;11.12(b) in its capacity as a seller of Registrable Securities shall not
exceed the amount of net proceeds to such Purchaser of the securities sold in any such registration. </FONT></P> <P STYLE="margin-top:6px;margin-bottom:0px; margin-left:8%; text-indent:4%"><FONT STYLE="font-family:Times New Roman" SIZE="2">(c)
<U>Notice and Procedure</U>. Each party entitled to indemnification under this Section&nbsp;11.12 (the &#147;<B><I>Indemnified Party</I></B>&#148;) shall give written notice to the party required to provide indemnification (the
&#147;<B><I>Indemnifying Party</I></B>&#148;) promptly after such Indemnified Party has actual knowledge of any claim as to which indemnity may be sought, and shall permit the Indemnifying Party to assume the defense of any such claim or any
litigation resulting therefrom, provided that counsel for the Indemnifying Party, who shall conduct the defense of such claim or litigation, shall be approved by the Indemnified Party (whose approval shall not unreasonably be withheld), and the
Indemnified Party may participate in such defense at such party&#146;s expense, and provided further that the failure of any Indemnified Party to give notice as provided herein shall not relieve the Indemnifying Party of its obligations under this
Agreement unless the failure to give such notice is materially prejudicial to an Indemnifying Party&#146;s ability to defend such action and provided further, that the Indemnifying Party shall not assume the defense for matters as to which there is
a conflict of interest or there are separate and different defenses. No Indemnifying Party, in the defense of any such claim or litigation, </FONT></P>
 <p STYLE="margin-top:0px;margin-bottom:0px"><FONT SIZE="1">&nbsp;</FONT></P> <P STYLE="margin-top:0px;margin-bottom:0px" ALIGN="center"><FONT STYLE="font-family:Times New Roman" SIZE="2">39 </FONT></P>



<p Style='page-break-before:always'>
<HR  SIZE="3" style="COLOR:#999999" WIDTH="100%" ALIGN="CENTER">

 <P STYLE="margin-top:0px;margin-bottom:0px; margin-left:8%"><FONT STYLE="font-family:Times New Roman" SIZE="2">
shall, except with the consent of each Indemnified Party (whose consent shall not be unreasonably withheld), consent to entry of any judgment or enter into any settlement which does not include
as an unconditional term thereof the giving by the claimant or plaintiff to such Indemnified Party of a release from all liability in respect to such claim or litigation. </FONT></P>
<P STYLE="margin-top:6px;margin-bottom:0px; margin-left:8%; text-indent:4%"><FONT STYLE="font-family:Times New Roman" SIZE="2">(d) <U>Contribution</U>. If the indemnification provided for in this Section&nbsp;11.12 is held by a court of competent
jurisdiction to be unavailable to an Indemnified Party with respect to any losses, claims, damages or liabilities referred to herein, the Indemnifying Party, in lieu of indemnifying such Indemnified Party thereunder, shall to the extent permitted by
applicable law contribute to the amount paid or payable by such Indemnified Party as a result of such loss, claim, damage or liability in such proportion as is appropriate to reflect the relative fault of the Indemnifying Party on the one hand and
of the Indemnified Party on the other in connection with the untrue statement or omission that resulted in such loss, claim, damage or liability, as well as any other relevant equitable considerations. The relative fault of the Indemnifying Party
and of the Indemnified Party shall be determined by a court of law by reference to, among other things, whether the untrue or alleged untrue statement of a material fact or the omission to state a material fact relates to information supplied by the
Indemnifying Party or by the Indemnified Party and the parties&#146; relative intent, knowledge, access to information and opportunity to correct or prevent such statement or omission; provided, that in no event shall any contribution by a Purchaser
hereunder exceed the proceeds from the offering received by such Purchaser. The amount paid or payable by a party as a result of any loss, claim, damage or liability shall be deemed to include, subject to the limitations set forth in this Agreement,
any reasonable attorneys&#146; or other reasonable fees or expenses incurred by such party in connection with any proceeding to the extent such party would have been indemnified for such fees or expenses if the indemnification provided for in this
Section&nbsp;11.12 was available to such party in accordance with its terms. </FONT></P> <P STYLE="margin-top:6px;margin-bottom:0px; margin-left:8%; text-indent:4%"><FONT STYLE="font-family:Times New Roman" SIZE="2">(e) <U>Survival</U>. The
obligations of the Company and the Purchasers under this Section&nbsp;11.12 shall survive completion of any offering of Registrable Securities in a Registration Statement and the termination of this Agreement. The indemnity and contribution
agreements contained in this Section&nbsp;11.12 are in addition to any liability that the Indemnifying Parties may have to the Indemnified Parties and are not in diminution or limitation of other remedies or causes of action that the parties may
have under the Transaction Documents. </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px; text-indent:4%"><FONT STYLE="font-family:Times New Roman" SIZE="2">12. <U>Definitions</U>. Unless the context otherwise requires, the terms defined in
this Section&nbsp;12 shall have the meanings specified for all purposes of this Agreement. </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px; text-indent:4%"><FONT STYLE="font-family:Times New Roman" SIZE="2">Except as otherwise expressly
provided, all accounting terms used in this Agreement, whether or not defined in this Section&nbsp;12, shall be construed in accordance with GAAP. If the Company has one or more Subsidiaries, such accounting terms shall be determined on a
consolidated basis for the Company and each of its Subsidiaries, and the financial statements and other financial information to be furnished by the Company pursuant to this Agreement shall be
</FONT></P>
 <p STYLE="margin-top:0px;margin-bottom:0px"><FONT SIZE="1">&nbsp;</FONT></P> <P STYLE="margin-top:0px;margin-bottom:0px" ALIGN="center"><FONT STYLE="font-family:Times New Roman" SIZE="2">40 </FONT></P>



<p Style='page-break-before:always'>
<HR  SIZE="3" style="COLOR:#999999" WIDTH="100%" ALIGN="CENTER">

 <P STYLE="margin-top:0px;margin-bottom:0px"><FONT STYLE="font-family:Times New Roman" SIZE="2">
consolidated and presented with consolidating financial statements of the Company and each of its Subsidiaries. </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px; text-indent:8%"><FONT
STYLE="font-family:Times New Roman" SIZE="2">&#147;2002 Stock Incentive Plan&#148; has the meaning assigned to it in Section&nbsp;5.1(a) hereof. </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px; text-indent:8%"><FONT
STYLE="font-family:Times New Roman" SIZE="2">&#147;2007 Equity Incentive Plan&#148; has the meaning assigned to it in Section&nbsp;5.1(a) hereof. </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px; text-indent:8%"><FONT
STYLE="font-family:Times New Roman" SIZE="2">&#147;Additional Notes&#148; has the meaning assigned to it in Section&nbsp;3.2 hereof. </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px; text-indent:8%"><FONT
STYLE="font-family:Times New Roman" SIZE="2">&#147;Affiliate&#148; shall have the meaning ascribed to such term in Rule 12b-2 of the General Rules and Regulations under the Exchange Act. </FONT></P>
<P STYLE="margin-top:12px;margin-bottom:0px; text-indent:8%"><FONT STYLE="font-family:Times New Roman" SIZE="2">&#147;Agreement&#148; has the meaning assigned to it in the introductory paragraph hereof. </FONT></P>
<P STYLE="margin-top:12px;margin-bottom:0px; text-indent:8%"><FONT STYLE="font-family:Times New Roman" SIZE="2">&#147;Allowable Grace Period&#148; has the meaning assigned to it in Section&nbsp;11.6 hereof. </FONT></P>
<P STYLE="margin-top:12px;margin-bottom:0px; text-indent:8%"><FONT STYLE="font-family:Times New Roman" SIZE="2">&#147;Applicable Law&#148; has the meaning assigned to it in Section&nbsp;5.18 hereof. </FONT></P>
<P STYLE="margin-top:12px;margin-bottom:0px; text-indent:8%"><FONT STYLE="font-family:Times New Roman" SIZE="2">&#147;Authorizations&#148; has the meaning assigned to it in Section&nbsp;5.18 hereof. </FONT></P>
<P STYLE="margin-top:12px;margin-bottom:0px; text-indent:8%"><FONT STYLE="font-family:Times New Roman" SIZE="2">&#147;Board of Directors&#148; has the meaning assigned to it in Section&nbsp;5.1(a) hereof. </FONT></P>
<P STYLE="margin-top:12px;margin-bottom:0px; text-indent:8%"><FONT STYLE="font-family:Times New Roman" SIZE="2">&#147;Business Day&#148; has the meaning assigned to it in Section&nbsp;6.5 hereof. </FONT></P>
<P STYLE="margin-top:12px;margin-bottom:0px; text-indent:8%"><FONT STYLE="font-family:Times New Roman" SIZE="2">&#147;Charter Documents&#148; has the meaning assigned to it in Section&nbsp;5.8 hereof. </FONT></P>
<P STYLE="margin-top:12px;margin-bottom:0px; text-indent:8%"><FONT STYLE="font-family:Times New Roman" SIZE="2">&#147;Closing&#148; has the meaning assigned to it in Section&nbsp;3.1 hereof. </FONT></P>
<P STYLE="margin-top:12px;margin-bottom:0px; text-indent:8%"><FONT STYLE="font-family:Times New Roman" SIZE="2">&#147;Closing Date&#148; has the meaning assigned to it in Section&nbsp;3.2 hereof. </FONT></P>
<P STYLE="margin-top:12px;margin-bottom:0px; text-indent:8%"><FONT STYLE="font-family:Times New Roman" SIZE="2">&#147;Code&#148; means the Internal Revenue Code of 1986, as amended. </FONT></P>
<P STYLE="margin-top:12px;margin-bottom:0px; text-indent:8%"><FONT STYLE="font-family:Times New Roman" SIZE="2">&#147;Commission&#148; means the Securities and Exchange Commission. </FONT></P>
<P STYLE="margin-top:12px;margin-bottom:0px; text-indent:8%"><FONT STYLE="font-family:Times New Roman" SIZE="2">&#147;Commitment Amount&#148; has the meaning assigned to it in the recitals hereof. </FONT></P>
<P STYLE="margin-top:12px;margin-bottom:0px; text-indent:8%"><FONT STYLE="font-family:Times New Roman" SIZE="2">&#147;Common Stock&#148; has the meaning assigned to it in the recitals hereof. </FONT></P>
<P STYLE="margin-top:12px;margin-bottom:0px; text-indent:8%"><FONT STYLE="font-family:Times New Roman" SIZE="2">&#147;Company&#148; has the meaning assigned to it in the introductory paragraph. </FONT></P>
<P STYLE="margin-top:12px;margin-bottom:0px; text-indent:8%"><FONT STYLE="font-family:Times New Roman" SIZE="2">&#147;Company Intellectual Property&#148; has the meaning assigned to it in Section&nbsp;5.21(a) hereof. </FONT></P>
<P STYLE="margin-top:12px;margin-bottom:0px; text-indent:8%"><FONT STYLE="font-family:Times New Roman" SIZE="2">&#147;Contingent Obligation&#148; means, as to any Person, any direct or indirect liability, contingent or otherwise, of that Person with
respect to any indebtedness, lease, dividend or other obligation of another Person if the primary purpose or intent of the Person incurring such liability, or the primary effect thereof, is to provide assurance to the obligee of such liability that
</FONT></P>
 <p STYLE="margin-top:0px;margin-bottom:0px"><FONT SIZE="1">&nbsp;</FONT></P> <P STYLE="margin-top:0px;margin-bottom:0px" ALIGN="center"><FONT STYLE="font-family:Times New Roman" SIZE="2">41 </FONT></P>



<p Style='page-break-before:always'>
<HR  SIZE="3" style="COLOR:#999999" WIDTH="100%" ALIGN="CENTER">

 <P STYLE="margin-top:0px;margin-bottom:0px"><FONT STYLE="font-family:Times New Roman" SIZE="2">
such liability will be paid or discharged, or that any agreements relating thereto will be complied with, or that the holders of such liability will be protected (in whole or in part) against
loss with respect thereto. </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px; text-indent:8%"><FONT STYLE="font-family:Times New Roman" SIZE="2">&#147;Control Agreement&#148; has the meaning assigned to it in the Security Agreement.
</FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px; text-indent:8%"><FONT STYLE="font-family:Times New Roman" SIZE="2">&#147;Conversion Shares&#148; has the meaning assigned to it in the recitals hereof. </FONT></P>
<P STYLE="margin-top:12px;margin-bottom:0px; text-indent:8%"><FONT STYLE="font-family:Times New Roman" SIZE="2">&#147;Disclosure Schedule&#148; has the meaning assigned to it in Section&nbsp;5 hereof. </FONT></P>
<P STYLE="margin-top:12px;margin-bottom:0px; text-indent:8%"><FONT STYLE="font-family:Times New Roman" SIZE="2">&#147;Domain Names&#148; has the meaning assigned to it in Section&nbsp;5.21(c) hereof. </FONT></P>
<P STYLE="margin-top:12px;margin-bottom:0px; text-indent:8%"><FONT STYLE="font-family:Times New Roman" SIZE="2">&#147;DTC&#148; has the meaning assigned to it in Section&nbsp;9.2 hereof. </FONT></P>
<P STYLE="margin-top:12px;margin-bottom:0px; text-indent:8%"><FONT STYLE="font-family:Times New Roman" SIZE="2">&#147;Effective Date&#148; means the date the Registration Statement pursuant to Section&nbsp;11 has been declared effective by the
Commission. </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px; text-indent:8%"><FONT STYLE="font-family:Times New Roman" SIZE="2">&#147;Effectiveness Deadline&#148; has the meaning assigned to it in Section&nbsp;11.1 hereof. </FONT></P>
<P STYLE="margin-top:12px;margin-bottom:0px; text-indent:8%"><FONT STYLE="font-family:Times New Roman" SIZE="2">&#147;Effectiveness Failure&#148; has the meaning assigned to it in Section&nbsp;11.5 hereof. </FONT></P>
<P STYLE="margin-top:12px;margin-bottom:0px; text-indent:8%"><FONT STYLE="font-family:Times New Roman" SIZE="2">&#147;Employee Benefit Plan&#148; has the meaning assigned to it in Section&nbsp;5.17(b) hereof. </FONT></P>
<P STYLE="margin-top:12px;margin-bottom:0px; text-indent:8%"><FONT STYLE="font-family:Times New Roman" SIZE="2">&#147;Encumbrances&#148; has the meaning assigned to it in Section&nbsp;5.2 hereof. </FONT></P>
<P STYLE="margin-top:12px;margin-bottom:0px; text-indent:8%"><FONT STYLE="font-family:Times New Roman" SIZE="2">&#147;Environmental Laws&#148; has the meaning assigned to it in Section&nbsp;5.20(b) hereof. </FONT></P>
<P STYLE="margin-top:12px;margin-bottom:0px; text-indent:8%"><FONT STYLE="font-family:Times New Roman" SIZE="2">&#147;ERISA&#148; has the meaning assigned to it in Section&nbsp;5.17(a) hereof. </FONT></P>
<P STYLE="margin-top:12px;margin-bottom:0px; text-indent:8%"><FONT STYLE="font-family:Times New Roman" SIZE="2">&#147;Employee Benefit Plan&#148; has the meaning assigned to it in Section&nbsp;5.17(b) hereof. </FONT></P>
<P STYLE="margin-top:12px;margin-bottom:0px; text-indent:8%"><FONT STYLE="font-family:Times New Roman" SIZE="2">&#147;ESPP&#148; has the meaning assigned to it in Section&nbsp;5.1 hereof. </FONT></P>
<P STYLE="margin-top:12px;margin-bottom:0px; text-indent:8%"><FONT STYLE="font-family:Times New Roman" SIZE="2">&#147;Exchange Act&#148; means the Securities Exchange Act of 1934, as amended. </FONT></P>
<P STYLE="margin-top:12px;margin-bottom:0px; text-indent:8%"><FONT STYLE="font-family:Times New Roman" SIZE="2">&#147;Exempt Issuance&#148; means the issuance of (a)&nbsp;shares of Common Stock or options to Company employees, officers, directors or
consultants pursuant to any stock or option plan duly adopted by a majority of the non-employee members of the Board of Directors of the Company, (b)&nbsp;the Notes that may be issued pursuant to the Transaction Documents and any securities upon the
exchange or conversion of the Notes (including the Conversion Shares, the Additional Notes and Notes issued on payment of PIK Interest) and/or other securities exercisable or exchangeable for or convertible into shares of Common Stock issued and
outstanding on the date of this Agreement, or (c)&nbsp;securities issued pursuant to acquisitions or strategic transactions approved by a majority of the disinterested directors, but shall not include a transaction to an entity whose primary
business is investing in securities. </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px; text-indent:8%"><FONT STYLE="font-family:Times New Roman" SIZE="2">&#147;Exercise Period&#148; has the meaning assigned to it in Section&nbsp;10.3 hereof.
</FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px; text-indent:8%"><FONT STYLE="font-family:Times New Roman" SIZE="2">&#147;FDA&#148; has the meaning assigned to it in Section&nbsp;5.18 hereof. </FONT></P>
 <p STYLE="margin-top:0px;margin-bottom:0px"><FONT SIZE="1">&nbsp;</FONT></P> <P STYLE="margin-top:0px;margin-bottom:0px" ALIGN="center"><FONT STYLE="font-family:Times New Roman" SIZE="2">42 </FONT></P>



<p Style='page-break-before:always'>
<HR  SIZE="3" style="COLOR:#999999" WIDTH="100%" ALIGN="CENTER">

 <P STYLE="margin-top:0px;margin-bottom:0px; text-indent:8%"><FONT STYLE="font-family:Times New Roman" SIZE="2">&#147;FFDCA&#148; has the meaning assigned to it in Section&nbsp;5.18 hereof. </FONT></P>
<P STYLE="margin-top:12px;margin-bottom:0px; text-indent:8%"><FONT STYLE="font-family:Times New Roman" SIZE="2">&#147;Filing Deadline&#148; has the meaning assigned to it in Section&nbsp;11.1 hereof. </FONT></P>
<P STYLE="margin-top:12px;margin-bottom:0px; text-indent:8%"><FONT STYLE="font-family:Times New Roman" SIZE="2">&#147;Filing Failure&#148; has the meaning assigned to it in Section&nbsp;11.5 hereof. </FONT></P>
<P STYLE="margin-top:12px;margin-bottom:0px; text-indent:8%"><FONT STYLE="font-family:Times New Roman" SIZE="2">&#147;FINRA&#148; means the Financial Industry Regulatory Authority. </FONT></P>
<P STYLE="margin-top:12px;margin-bottom:0px; text-indent:8%"><FONT STYLE="font-family:Times New Roman" SIZE="2">&#147;Follow-on Offering&#148; has the meaning assigned to it in Section&nbsp;6.15 hereof. </FONT></P>
<P STYLE="margin-top:12px;margin-bottom:0px; text-indent:8%"><FONT STYLE="font-family:Times New Roman" SIZE="2">&#147;GAAP&#148; means U.S. generally accepted accounting principles consistently applied. </FONT></P>
<P STYLE="margin-top:12px;margin-bottom:0px; text-indent:8%"><FONT STYLE="font-family:Times New Roman" SIZE="2">&#147;Grace Period&#148; has the meaning assigned to it in Section&nbsp;11.6(q) hereof. </FONT></P>
<P STYLE="margin-top:12px;margin-bottom:0px; text-indent:8%"><FONT STYLE="font-family:Times New Roman" SIZE="2">&#147;Governmental Entity&#148; means any national, federal, state, municipal, local, territorial, foreign or other government or any
department, commission, board, bureau, agency, regulatory authority or instrumentality thereof, or any court, judicial, administrative or arbitral body or public or private tribunal. </FONT></P>
<P STYLE="margin-top:12px;margin-bottom:0px; text-indent:8%"><FONT STYLE="font-family:Times New Roman" SIZE="2">&#147;Hazardous Material&#148; has the meaning assigned to it in Section&nbsp;5.20(b) hereof. </FONT></P>
<P STYLE="margin-top:12px;margin-bottom:0px; text-indent:8%"><FONT STYLE="font-family:Times New Roman" SIZE="2">&#147;Increase Deadline&#148; has the meaning assigned to it in Section&nbsp;6.12 hereof. </FONT></P>
<P STYLE="margin-top:12px;margin-bottom:0px; text-indent:8%"><FONT STYLE="font-family:Times New Roman" SIZE="2">&#147;Indebtedness&#148; has the meaning assigned in the Notes. </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px; text-indent:8%"><FONT
STYLE="font-family:Times New Roman" SIZE="2">&#147;Initial Closing&#148; has the meaning assigned to it in Section&nbsp;3.1 hereof. </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px; text-indent:8%"><FONT
STYLE="font-family:Times New Roman" SIZE="2">&#147;Initial Closing Date&#148; has the meaning assigned to it in Section&nbsp;3.1 hereof. </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px; text-indent:8%"><FONT
STYLE="font-family:Times New Roman" SIZE="2">&#147;Inspectors&#148; has the meaning assigned to it in Section&nbsp;11.6(i). </FONT></P>
<P STYLE="margin-top:12px;margin-bottom:0px; text-indent:8%"><FONT STYLE="font-family:Times New Roman" SIZE="2">&#147;Intellectual Property&#148; has the meaning assigned to it in Section&nbsp;5.21(a) hereof. </FONT></P>
<P STYLE="margin-top:12px;margin-bottom:0px; text-indent:8%"><FONT STYLE="font-family:Times New Roman" SIZE="2">&#147;Interest Share Calculation&#148; shall have the meaning assigned to it in the definition of Required Registration Amount hereof.
</FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px; text-indent:8%"><FONT STYLE="font-family:Times New Roman" SIZE="2">&#147;IP Summary&#148; has the meaning assigned to it in Section&nbsp;5.21(b) hereof. </FONT></P>
<P STYLE="margin-top:12px;margin-bottom:0px; text-indent:8%"><FONT STYLE="font-family:Times New Roman" SIZE="2">&#147;Issuance Notice&#148; has the meaning assigned to it in Section&nbsp;10.2 hereof. </FONT></P>
<P STYLE="margin-top:12px;margin-bottom:0px; text-indent:8%"><FONT STYLE="font-family:Times New Roman" SIZE="2">&#147;Key Employee&#148; means each of the Company&#146;s executive officers. </FONT></P>
<P STYLE="margin-top:12px;margin-bottom:0px; text-indent:8%"><FONT STYLE="font-family:Times New Roman" SIZE="2">&#147;Knowledge&#148; by a Person of a particular fact or other matter means the following: (a)&nbsp;if the Person is an individual, that
such individual is actually aware or reasonably should be aware, after due inquiry, by virtue of such person&#146;s office, of such fact or other matter; and (b)&nbsp;if the Person is an Entity, any executive officer of such Person is actually aware
or reasonably should be aware, after due inquiry, of such fact or other matter. </FONT></P>
 <p STYLE="margin-top:0px;margin-bottom:0px"><FONT SIZE="1">&nbsp;</FONT></P> <P STYLE="margin-top:0px;margin-bottom:0px" ALIGN="center"><FONT STYLE="font-family:Times New Roman" SIZE="2">43 </FONT></P>



<p Style='page-break-before:always'>
<HR  SIZE="3" style="COLOR:#999999" WIDTH="100%" ALIGN="CENTER">

 <P STYLE="margin-top:0px;margin-bottom:0px; text-indent:8%"><FONT STYLE="font-family:Times New Roman" SIZE="2">&#147;Legal Counsel&#148; has the meaning assigned to it in Section&nbsp;11.2 </FONT></P>
<P STYLE="margin-top:12px;margin-bottom:0px; text-indent:8%"><FONT STYLE="font-family:Times New Roman" SIZE="2">&#147;Maintenance Failure&#148; has the meaning assigned to it in Section&nbsp;11.5 hereof. </FONT></P>
<P STYLE="margin-top:12px;margin-bottom:0px; text-indent:8%"><FONT STYLE="font-family:Times New Roman" SIZE="2">&#147;Material Adverse Effect&#148; means any (i)&nbsp;adverse effect on the issuance or validity of the Securities or the transactions
contemplated hereby or on the ability of the Company to perform its obligations under this Agreement or the other Transaction Documents, or (ii)&nbsp;material adverse effect on the condition (financial or otherwise), prospects, properties, assets,
liabilities, business or operations of the Company. </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px; text-indent:8%"><FONT STYLE="font-family:Times New Roman" SIZE="2">&#147;Material Contract&#148; means all written and oral contracts,
agreements, deeds, mortgages, leases, subleases, licenses, instruments, notes, commitments, commissions, undertakings, arrangements and understandings (i)&nbsp;which by their terms involve, or would reasonably be expected to involve, aggregate
payments by or to the Company during any twelve month period in excess of $50,000, (ii)&nbsp;the breach of which by the Company would reasonably be expected to have a Material Adverse Effect, (iii)&nbsp;which are required to be filed as exhibits by
the Company with the Commission pursuant to Items 601(b)(2), 601(b)(4) or 601(b)(10) of Regulation S-K promulgated by the Commission or (iv)&nbsp;the License Agreement with Sanofi-Aventis, dated March&nbsp;19, 1992. </FONT></P>
<P STYLE="margin-top:12px;margin-bottom:0px; text-indent:8%"><FONT STYLE="font-family:Times New Roman" SIZE="2">&#147;Material Permits&#148; has the meaning assigned to it in Section&nbsp;5.28 hereof. </FONT></P>
<P STYLE="margin-top:12px;margin-bottom:0px; text-indent:8%"><FONT STYLE="font-family:Times New Roman" SIZE="2">&#147;New Securities&#148; has the meaning assigned to it in Section&nbsp;10.1 hereof. </FONT></P>
<P STYLE="margin-top:12px;margin-bottom:0px; text-indent:8%"><FONT STYLE="font-family:Times New Roman" SIZE="2">&#147;Non-Qualified Stock Plan&#148; has the meaning assigned to it in Section&nbsp;5.1(a) hereof. </FONT></P>
<P STYLE="margin-top:12px;margin-bottom:0px; text-indent:8%"><FONT STYLE="font-family:Times New Roman" SIZE="2">&#147;Note Purchase Price&#148; has the meaning assigned to it in Section&nbsp;2 hereof. </FONT></P>
<P STYLE="margin-top:12px;margin-bottom:0px; text-indent:8%"><FONT STYLE="font-family:Times New Roman" SIZE="2">&#147;Notes&#148; has the meaning assigned to it in the recitals hereof. </FONT></P>
<P STYLE="margin-top:12px;margin-bottom:0px; text-indent:8%"><FONT STYLE="font-family:Times New Roman" SIZE="2">&#147;OUM&#148; has the meaning assigned to it in Section&nbsp;5.34 hereof. </FONT></P>
<P STYLE="margin-top:12px;margin-bottom:0px; text-indent:8%"><FONT STYLE="font-family:Times New Roman" SIZE="2">&#147;Person&#148; means and includes all natural persons, corporations, business trusts, associations, companies, partnerships, joint
ventures, limited liability companies and other entities and governments and agencies and political subdivisions. </FONT></P>
<P STYLE="margin-top:12px;margin-bottom:0px; text-indent:8%"><FONT STYLE="font-family:Times New Roman" SIZE="2">&#147;Permitted Indebtedness&#148; has the meaning assigned in the Notes. </FONT></P>
<P STYLE="margin-top:12px;margin-bottom:0px; text-indent:8%"><FONT STYLE="font-family:Times New Roman" SIZE="2">&#147;Permitted Liens&#148; has the meaning assigned in the Notes. </FONT></P>
<P STYLE="margin-top:12px;margin-bottom:0px; text-indent:8%"><FONT STYLE="font-family:Times New Roman" SIZE="2">&#147;Piggyback Registration&#148; has the meaning assigned to it in Section&nbsp;11.10 hereof. </FONT></P>
<P STYLE="margin-top:12px;margin-bottom:0px; text-indent:8%"><FONT STYLE="font-family:Times New Roman" SIZE="2">&#147;Preemptive Portion&#148; has the meaning assigned to it in Section&nbsp;10.1 hereof. </FONT></P>
<P STYLE="margin-top:12px;margin-bottom:0px; text-indent:8%"><FONT STYLE="font-family:Times New Roman" SIZE="2">&#147;Preferred Stock&#148; has the meaning assigned to it in Section&nbsp;5.1(a) hereof. </FONT></P>
<P STYLE="margin-top:12px;margin-bottom:0px; text-indent:8%"><FONT STYLE="font-family:Times New Roman" SIZE="2">&#147;Preferred Shareholders Rights Agreement&#148; has the meaning assigned to it in Section&nbsp;5.1(a) hereof. </FONT></P>
 <p STYLE="margin-top:0px;margin-bottom:0px"><FONT SIZE="1">&nbsp;</FONT></P> <P STYLE="margin-top:0px;margin-bottom:0px" ALIGN="center"><FONT STYLE="font-family:Times New Roman" SIZE="2">44 </FONT></P>



<p Style='page-break-before:always'>
<HR  SIZE="3" style="COLOR:#999999" WIDTH="100%" ALIGN="CENTER">

 <P STYLE="margin-top:0px;margin-bottom:0px; text-indent:8%"><FONT STYLE="font-family:Times New Roman" SIZE="2">&#147;Pro Rata Interest&#148; means the relative interests of the Purchasers, as set forth
on Schedule I attached hereto. </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px; text-indent:8%"><FONT STYLE="font-family:Times New Roman" SIZE="2">&#147;Purchaser&#148; has the meaning assigned to it in the introductory paragraph of this
Agreement and shall include any Affiliates of the Purchaser. </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px; text-indent:8%"><FONT STYLE="font-family:Times New Roman" SIZE="2">&#147;Records&#148; has the meaning assigned to it in
Section&nbsp;11.6(i). </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px; text-indent:8%"><FONT STYLE="font-family:Times New Roman" SIZE="2">&#147;Registrable Securities&#148; has the meaning assigned to it in Section&nbsp;11.1 hereof.
</FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px; text-indent:8%"><FONT STYLE="font-family:Times New Roman" SIZE="2">&#147;Registration Delay Payments&#148; has the meaning assigned to it in Section&nbsp;11.5 hereof. </FONT></P>
<P STYLE="margin-top:12px;margin-bottom:0px; text-indent:8%"><FONT STYLE="font-family:Times New Roman" SIZE="2">&#147;Registration Period&#148; has the meaning assigned to it in Section&nbsp;11.6(a). </FONT></P>
<P STYLE="margin-top:12px;margin-bottom:0px; text-indent:8%"><FONT STYLE="font-family:Times New Roman" SIZE="2">&#147;Registration Statement&#148; means a registration statement or registration statements of the Company filed under the Securities
Act pursuant to Section&nbsp;11 hereof. </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px; text-indent:8%"><FONT STYLE="font-family:Times New Roman" SIZE="2">&#147;Regulation D&#148; has the meaning assigned to it in the recitals hereof.
</FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px; text-indent:8%"><FONT STYLE="font-family:Times New Roman" SIZE="2">&#147;Reporting Period&#148; has the meaning assigned to it in Section&nbsp;6.3 hereof. </FONT></P>
<P STYLE="margin-top:12px;margin-bottom:0px; text-indent:8%"><FONT STYLE="font-family:Times New Roman" SIZE="2">&#147;Required Registration Amount&#148; for the Registration Statement pursuant to Section&nbsp;11 means, solely for the purposes of
calculating the number of shares of Common Stock covering the Registrable Securities on the Registration Statement, the sum of (i)&nbsp;the aggregate of the maximum number of Conversion Shares issued and issuable pursuant to the Notes (including,
for the avoidance of doubt, the Notes issued at the Initial Closing, plus the full amount of the Additional Notes potentially issuable hereunder), and (ii)&nbsp;the aggregate of the maximum number of Conversion Shares issued and issuable pursuant to
Notes that may be issued in satisfaction of PIK Interest, in each case at the then applicable Conversion Price as of the Trading Day (as defined in the Notes) immediately preceding the applicable date of determination, all subject to adjustment in
accordance with Section&nbsp;11.4 (without regard to any limitations on conversion of the Notes). </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px; text-indent:8%"><FONT STYLE="font-family:Times New Roman" SIZE="2">&#147;Rule 144&#148; has
the meaning assigned to it in Section&nbsp;11.9 hereof. </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px; text-indent:8%"><FONT STYLE="font-family:Times New Roman" SIZE="2">&#147;SEC Reports&#148; has the meaning assigned to it in
Section&nbsp;5.13(a) hereof. </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px; text-indent:8%"><FONT STYLE="font-family:Times New Roman" SIZE="2">&#147;Securities&#148; has the meaning assigned to it in Section&nbsp;1 hereof. </FONT></P>
<P STYLE="margin-top:12px;margin-bottom:0px; text-indent:8%"><FONT STYLE="font-family:Times New Roman" SIZE="2">&#147;Securities Act&#148; has the meaning assigned to it in the recitals hereof. </FONT></P>
<P STYLE="margin-top:12px;margin-bottom:0px; text-indent:8%"><FONT STYLE="font-family:Times New Roman" SIZE="2">&#147;Security Agreement&#148; has the meaning assigned to in Section&nbsp;1 hereof. </FONT></P>
<P STYLE="margin-top:12px;margin-bottom:0px; text-indent:8%"><FONT STYLE="font-family:Times New Roman" SIZE="2">&#147;Subsequent Closing&#148; has the meaning assigned to it in Section&nbsp;3.2 hereof. </FONT></P>
<P STYLE="margin-top:12px;margin-bottom:0px; text-indent:8%"><FONT STYLE="font-family:Times New Roman" SIZE="2">&#147;Subsequent Closing Date&#148; has the meaning assigned to it in Section&nbsp;3.2 hereof. </FONT></P>
 <p STYLE="margin-top:0px;margin-bottom:0px"><FONT SIZE="1">&nbsp;</FONT></P> <P STYLE="margin-top:0px;margin-bottom:0px" ALIGN="center"><FONT STYLE="font-family:Times New Roman" SIZE="2">45 </FONT></P>



<p Style='page-break-before:always'>
<HR  SIZE="3" style="COLOR:#999999" WIDTH="100%" ALIGN="CENTER">

 <P STYLE="margin-top:0px;margin-bottom:0px; text-indent:8%"><FONT STYLE="font-family:Times New Roman" SIZE="2">&#147;Subsidiary&#148; means any corporation, association trust, limited liability company,
partnership, joint venture or other business association or entity (i)&nbsp;at least 50% of the outstanding voting securities of which are at the time owned or controlled directly or indirectly by the Company or (ii)&nbsp;with respect to which the
Company possesses, directly or indirectly, the power to direct or cause the direction of the affairs or management of such Person. </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px; text-indent:8%"><FONT
STYLE="font-family:Times New Roman" SIZE="2">&#147;Test Trading Day&#148; has the meaning assigned to it in Section&nbsp;11.4 hereof. </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px; text-indent:8%"><FONT
STYLE="font-family:Times New Roman" SIZE="2">&#147;Total Notes Purchase Price&#148; shall mean $4,500,000. </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px; text-indent:8%"><FONT STYLE="font-family:Times New Roman" SIZE="2">&#147;Trading
Market&#148; means the following markets or exchanges on which the Common Stock is listed or quoted for trading on the date in question: the American Stock Exchange, the Nasdaq Capital Market, the Nasdaq Global Market, the Nasdaq Global Select
Market, the New York Stock Exchange or the OTC Markets Group Inc. </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px; text-indent:8%"><FONT STYLE="font-family:Times New Roman" SIZE="2">&#147;Transaction Documents&#148; means this Agreement, the
Note(s) and the Security Agreement. </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px; text-indent:4%"><FONT STYLE="font-family:Times New Roman" SIZE="2">13. <U>Enforcement</U>. </FONT></P>
<P STYLE="margin-top:12px;margin-bottom:0px; text-indent:8%"><FONT STYLE="font-family:Times New Roman" SIZE="2">13.1. <U>Cumulative Remedies</U>. None of the rights, powers or remedies conferred upon the Purchasers on the one hand or the Company on
the other hand shall be mutually exclusive, and each such right, power or remedy shall be cumulative and in addition to every other right, power or remedy, whether conferred by this Agreement, any of the other Transaction Documents or now or
hereafter available at law, in equity, by statute or otherwise. </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px; text-indent:8%"><FONT STYLE="font-family:Times New Roman" SIZE="2">13.2. <U>No Implied Waiver</U>. Except as expressly provided
in this Agreement, no course of dealing between the Company and the Purchasers or any other holder of shares of Common Stock and no delay in exercising any such right, power or remedy conferred hereby or by any of the other Transaction Documents or
now or hereafter existing at law in equity, by statute or otherwise, shall operate as a waiver of, or otherwise prejudice, any such right, power or remedy. </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px; text-indent:4%"><FONT
STYLE="font-family:Times New Roman" SIZE="2">14. <U>Confidentiality</U>. Except as otherwise agreed in writing by the Company, each Purchaser agrees that it will use reasonable care to keep confidential and not disclose, divulge, or use for any
purpose (other than to monitor its investment in the Company) any confidential information obtained from the Company pursuant to the terms of the Transaction Documents (including notice of the Company&#146;s intention to file a registration
statement), unless such confidential information (a)&nbsp;is known or becomes known to the public in general (other than as a result of a breach of this Section&nbsp;14 by the Purchaser), (b)&nbsp;is or has been independently developed or conceived
by the Purchaser without use of the Company&#146;s confidential information, (c)&nbsp;is or has been made known or disclosed to the Purchaser by a third party without knowledge by the Purchaser of any obligation of confidentiality such third party
owes to the Company with respect to the information or (d)&nbsp;was known to the Purchaser prior to disclosure to the Purchaser by the Company; <U>provided</U>, <U>however</U>, that the Purchaser may disclose confidential information (i)&nbsp;to its
attorneys, accountants, consultants, and other professionals to the extent necessary to obtain their services in connection with monitoring its investment in the Company provided that the Purchaser informs such person that such information is
confidential and directs such person to </FONT></P>
 <p STYLE="margin-top:0px;margin-bottom:0px"><FONT SIZE="1">&nbsp;</FONT></P> <P STYLE="margin-top:0px;margin-bottom:0px" ALIGN="center"><FONT STYLE="font-family:Times New Roman" SIZE="2">46 </FONT></P>



<p Style='page-break-before:always'>
<HR  SIZE="3" style="COLOR:#999999" WIDTH="100%" ALIGN="CENTER">

 <P STYLE="margin-top:0px;margin-bottom:0px"><FONT STYLE="font-family:Times New Roman" SIZE="2">
maintain the confidentiality of such information; (ii)&nbsp;to any prospective purchaser of any Securities from the Purchaser, if such prospective purchaser agrees to be bound by the provisions
of this Section&nbsp;14; (iii)&nbsp;to any Affiliate, partner, member, stockholder or advisor of the Purchaser in the ordinary course of business, provided that the Purchaser informs such person that such information is confidential and directs such
person to maintain the confidentiality of such information; or (iv)&nbsp;as may otherwise be required by law, provided that the Purchaser promptly notifies the Company of such disclosure and, if requested by the Company, reasonably cooperates with
the Company at the Company&#146;s sole expense to minimize the extent of any such required disclosure. Notwithstanding anything to the contrary herein, the confidentiality obligations of this Section&nbsp;14 shall survive the termination of this
Agreement. </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px; text-indent:4%"><FONT STYLE="font-family:Times New Roman" SIZE="2">15. <U>Miscellaneous</U>. </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px; text-indent:8%"><FONT
STYLE="font-family:Times New Roman" SIZE="2">15.1. <U>Waivers and Amendments</U>. Upon the approval of the Company and the written consent of the Required Holders, the obligations of the Company and the rights of the Purchasers under this Agreement
may be waived (either generally or in a particular instance, either retroactively or prospectively and either for a specified period of time or indefinitely). Neither this Agreement, nor any provision hereof, maybe changed, waived, discharged or
terminated orally or by course of dealing, but only by an instrument in writing executed by the Company and the Required Holders. </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px; text-indent:8%"><FONT
STYLE="font-family:Times New Roman" SIZE="2">15.2. <U>Notices</U>. All notices, requests, consents, and other communications under this Agreement shall be in writing and shall be deemed delivered (a)&nbsp;when delivered, if delivered personally,
(b)&nbsp;four business days after being sent by registered or certified mail, return receipt requested, postage prepaid; (c)&nbsp;one business day after being sent via a reputable nationwide overnight courier service guaranteeing next business day
delivery, or (d)&nbsp;when receipt is acknowledged, in the case of facsimile, in each case to the intended recipient as set forth below, with respect to the Company, and to the addresses set forth on Schedule I with respect to the Purchasers.
</FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px; text-indent:8%"><FONT STYLE="font-family:Times New Roman" SIZE="2">If to the Company: </FONT></P> <P STYLE="margin-top:6px;margin-bottom:0px; margin-left:13%; text-indent:4%"><FONT
STYLE="font-family:Times New Roman" SIZE="2">A.P. Pharma, Inc. </FONT></P> <P STYLE="margin-top:0px;margin-bottom:0px; margin-left:13%; text-indent:4%"><FONT STYLE="font-family:Times New Roman" SIZE="2">123 Saginaw Drive </FONT></P>
<P STYLE="margin-top:0px;margin-bottom:0px; margin-left:13%; text-indent:4%"><FONT STYLE="font-family:Times New Roman" SIZE="2">Redwood City, CA 94063 </FONT></P> <P STYLE="margin-top:0px;margin-bottom:0px; margin-left:13%; text-indent:4%"><FONT
STYLE="font-family:Times New Roman" SIZE="2">Attention: John Whelan </FONT></P> <P STYLE="margin-top:0px;margin-bottom:0px; margin-left:13%; text-indent:4%"><FONT STYLE="font-family:Times New Roman" SIZE="2">Facsimile No.: (650)&nbsp;365-6490
</FONT></P> <P STYLE="margin-top:6px;margin-bottom:0px; margin-left:8%; text-indent:4%"><FONT STYLE="font-family:Times New Roman" SIZE="2">with a copy to: </FONT></P> <P STYLE="margin-top:6px;margin-bottom:0px; margin-left:13%; text-indent:4%"><FONT
STYLE="font-family:Times New Roman" SIZE="2">Latham&nbsp;&amp; Watkins LLP </FONT></P> <P STYLE="margin-top:0px;margin-bottom:0px; margin-left:13%; text-indent:4%"><FONT STYLE="font-family:Times New Roman" SIZE="2">140 Scott Drive </FONT></P>
<P STYLE="margin-top:0px;margin-bottom:0px; margin-left:13%; text-indent:4%"><FONT STYLE="font-family:Times New Roman" SIZE="2">Menlo Park, California 94025 </FONT></P> <P STYLE="margin-top:0px;margin-bottom:0px; margin-left:13%; text-indent:4%"><FONT
STYLE="font-family:Times New Roman" SIZE="2">Attention: Alan C. Mendelson, Esq. </FONT></P> <P STYLE="margin-top:0px;margin-bottom:0px; margin-left:13%; text-indent:4%"><FONT STYLE="font-family:Times New Roman" SIZE="2">Facsimile No.:
(650)&nbsp;463-2600 </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px"><FONT STYLE="font-family:Times New Roman" SIZE="2">or at such other address as the Company or each Purchaser each may specify by written notice to the other parties hereto
in accordance with this Section&nbsp;15.2. </FONT></P>
 <p STYLE="margin-top:0px;margin-bottom:0px"><FONT SIZE="1">&nbsp;</FONT></P> <P STYLE="margin-top:0px;margin-bottom:0px" ALIGN="center"><FONT STYLE="font-family:Times New Roman" SIZE="2">47 </FONT></P>



<p Style='page-break-before:always'>
<HR  SIZE="3" style="COLOR:#999999" WIDTH="100%" ALIGN="CENTER">

 <P STYLE="margin-top:0px;margin-bottom:0px; text-indent:8%"><FONT STYLE="font-family:Times New Roman" SIZE="2">15.3. <U>Indemnification</U>. The Company shall indemnify, save and hold harmless each
Purchaser and its directors, officers, employees, partners, representatives and agents from and against (and shall promptly reimburse such indemnified persons for) any and all liability, loss, cost, damage, reasonable attorneys&#146; and
accountants&#146; fees and expenses, court costs and all other out-of-pocket expenses incurred in connection with or arising from claims, actions, suits, proceedings or similar claims by any Person or entity (other than such Purchaser) associated or
relating to the execution, delivery and performance of this Agreement, any of the other Transaction Documents or the transactions contemplated hereby or thereby or the exercise by the Purchaser of its rights thereunder. This indemnification
provision shall be in addition to the rights of each Purchaser to bring an action against the Company for breach of any term of this Agreement or the other Transaction Documents. </FONT></P>
<P STYLE="margin-top:12px;margin-bottom:0px; text-indent:8%"><FONT STYLE="font-family:Times New Roman" SIZE="2">15.4. <U>No Waivers</U>. No failure or delay by any party in exercising any right, power or privilege hereunder shall operate as a waiver
thereof nor shall any single or partial exercise thereof preclude any other or further exercise thereof or the exercise of any other right, power or privilege. The rights and remedies herein provided shall be cumulative and not exclusive of any
rights or remedies provided by law. </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px; text-indent:8%"><FONT STYLE="font-family:Times New Roman" SIZE="2">15.5. <U>Successors and Assigns</U>. All the terms and provisions of this Agreement shall
be binding upon and inure to the benefit of and be enforceable by the respective parties hereto, the successors and permitted assigns of each Purchaser and the successors of the Company, whether so expressed or not. None of the parties hereto may
assign its rights or obligations hereof without the prior written consent of the Company, except that a Purchaser may, without the prior consent of the Company, assign its rights to purchase the Securities hereunder to any of its Affiliates
(provided such Affiliate agrees to be bound by the terms of this Agreement and makes the same representations and warranties set forth in Section&nbsp;4 hereof). This Agreement shall not inure to the benefit of or be enforceable by any other Person.
</FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px; text-indent:8%"><FONT STYLE="font-family:Times New Roman" SIZE="2">15.6. <U>Headings</U>. The headings of the Sections and paragraphs of this Agreement have been inserted for convenience of
reference only and do not constitute a part of this Agreement. </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px; text-indent:8%"><FONT STYLE="font-family:Times New Roman" SIZE="2">15.7. <U>Governing Law</U>. This Agreement shall be governed
by and construed in accordance with the laws of the State of California without regard to its conflict of law principles. </FONT></P>
<P STYLE="margin-top:12px;margin-bottom:0px; text-indent:8%"><FONT STYLE="font-family:Times New Roman" SIZE="2">15.8. <U>Jurisdiction</U>. Any suit, action or proceeding seeking to enforce any provision of, or based on any matter arising out of or
in connection with, this Agreement or the transactions contemplated hereby shall be brought in any federal or state court located in the City and County of San Diego, California, and each of the parties hereby consents to the jurisdiction of such
courts (and of the appropriate appellate courts therefrom) in any such suit, action or proceeding and irrevocably waives, to the fullest extent permitted by law, any objection which it may now or hereafter have to the laying of the venue of any such
suit, action or proceeding in any such court or that any such suit, action or proceeding which is brought in any such court has been brought in an inconvenient forum. Process in any such suit, action or proceeding may be served on any party anywhere
in the world, whether within or without the jurisdiction of any </FONT></P>
 <p STYLE="margin-top:0px;margin-bottom:0px"><FONT SIZE="1">&nbsp;</FONT></P> <P STYLE="margin-top:0px;margin-bottom:0px" ALIGN="center"><FONT STYLE="font-family:Times New Roman" SIZE="2">48 </FONT></P>



<p Style='page-break-before:always'>
<HR  SIZE="3" style="COLOR:#999999" WIDTH="100%" ALIGN="CENTER">

 <P STYLE="margin-top:0px;margin-bottom:0px"><FONT STYLE="font-family:Times New Roman" SIZE="2">
such court. Without limiting the foregoing, each party agrees that service of process on such party as provided in Section&nbsp;15.2 shall be deemed effective service of process on such party.
</FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px; text-indent:8%"><FONT STYLE="font-family:Times New Roman" SIZE="2">15.9. <U>Waiver of Jury Trial</U>. TO THE EXTENT NOT PROHIBITED BY APPLICABLE LAW WHICH CANNOT BE WAIVED, THE PURCHASERS AND
THE COMPANY HEREBY WAIVE AND COVENANT THAT NEITHER THE COMPANY NOR THE PURCHASERS WILL ASSERT, ANY RIGHT TO TRIAL BY JURY ON ANY ISSUE IN ANY PROCEEDING, WHETHER AS PLAINTIFF, DEFENDANT OR OTHERWISE, IN RESPECT OF ANY ISSUE, CLAIM, DEMAND, ACTION OR
CAUSE OF ACTION ARISING OUT OF OR BASED UPON THIS AGREEMENT, ANY OTHER AGREEMENT OR THE SUBJECT MATTER HEREOF OR THEREOF OR IN ANY WAY CONNECTED WITH, RELATED OR INCIDENTAL TO THE DEALINGS OF THE PURCHASER AND THE COMPANY HEREUNDER OR THEREUNDER, IN
EACH CASE WHETHER NOW EXISTING OR HEREAFTER ARISING AND WHETHER IN TORT OR CONTRACT OR OTHERWISE. The Company acknowledges that it has been informed by the Purchasers that the provisions of this Section&nbsp;15.9 constitute a material inducement
upon which the Purchaser are relying and will rely in entering into this Agreement. The Purchaser or the Company may file an original counterpart or a copy of this Section&nbsp;15.9 with any court as written evidence of the consent of the Purchaser
and the Company to the waiver of the right to trial by jury. </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px; text-indent:8%"><FONT STYLE="font-family:Times New Roman" SIZE="2">15.10. <U>Counterparts; Effectiveness</U>. This Agreement may be
executed in any number of counterparts and by different parties hereto in separate counterparts, with the same effect as if all parties had signed the same document. All such counterparts (including counterparts delivered by facsimile or other
electronic format) shall be deemed an original, shall be construed together and shall constitute one and the same instrument. This Agreement shall become effective when each party hereto shall have received counterparts hereof signed by all of the
other parties hereto. </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px; text-indent:8%"><FONT STYLE="font-family:Times New Roman" SIZE="2">15.11. <U>Entire Agreement</U>. The Transaction Documents contain the entire agreement among the
parties hereto with respect to the subject matter hereof and thereof and such agreements supersede and replace all other prior agreements, written or oral, among the parties hereto with respect to the subject matter hereof and thereof. </FONT></P>
<P STYLE="margin-top:12px;margin-bottom:0px; text-indent:8%"><FONT STYLE="font-family:Times New Roman" SIZE="2">15.12. <U>Severability</U>. If any provision of this Agreement shall be found by any court of competent jurisdiction to be invalid or
unenforceable, the parties hereby waive such provision to the extent that it is found to be invalid or unenforceable. Such provision shall, to the maximum extent allowable by law, be modified by such court so that it becomes enforceable, and, as
modified, shall be enforced as any other provision hereof, all the other provisions hereof continuing in full force and effect. </FONT></P>
<P STYLE="margin-top:12px;margin-bottom:0px" ALIGN="center"><FONT STYLE="font-family:Times New Roman" SIZE="2"><I>[Signature Pages Follow.] </I></FONT></P>
 <p STYLE="margin-top:0px;margin-bottom:0px"><FONT SIZE="1">&nbsp;</FONT></P> <P STYLE="margin-top:0px;margin-bottom:0px" ALIGN="center"><FONT STYLE="font-family:Times New Roman" SIZE="2">49 </FONT></P>



<p Style='page-break-before:always'>
<HR  SIZE="3" style="COLOR:#999999" WIDTH="100%" ALIGN="CENTER">

 <P STYLE="margin-top:0px;margin-bottom:0px; text-indent:4%"><FONT STYLE="font-family:Times New Roman" SIZE="2">IN WITNESS WHEREOF, the parties hereto have caused this Securities Purchase Agreement to be
duly executed as of the day and year first written above. </FONT></P> <P STYLE="font-size:12px;margin-top:0px;margin-bottom:0px">&nbsp;</P><DIV ALIGN="right">
<TABLE CELLSPACING="0" CELLPADDING="0" WIDTH="40%" BORDER="0">

<TR>
<TD WIDTH="6%"></TD>
<TD VALIGN="bottom" WIDTH="2%"></TD>
<TD WIDTH="92%"></TD></TR>
<TR>
<TD VALIGN="top" COLSPAN="3"><FONT STYLE="font-family:Times New Roman" SIZE="2"><B>THE COMPANY</B></FONT></TD></TR>
<TR>
<TD HEIGHT="16" COLSPAN="3"></TD></TR>
<TR>
<TD VALIGN="top" COLSPAN="3"><FONT STYLE="font-family:Times New Roman" SIZE="2"><B>A.P. PHARMA, INC.</B></FONT></TD></TR>
<TR>
<TD HEIGHT="16"></TD>
<TD HEIGHT="16" COLSPAN="2"></TD></TR>
<TR>
<TD VALIGN="top"><FONT STYLE="font-family:Times New Roman" SIZE="2">By:</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"> <P STYLE="margin-top:0px;margin-bottom:1px;border-bottom:1px solid #000000"><FONT STYLE="font-family:Times New Roman" SIZE="2">/s/ John Whelan</FONT></P></TD></TR>
<TR>
<TD VALIGN="top"></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2">Name: John Whelan</FONT></TD></TR>
<TR>
<TD VALIGN="top"></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2">Title: &nbsp;&nbsp;Chief Executive Officer</FONT></TD></TR></TABLE></DIV> <P STYLE="margin-top:12px;margin-bottom:0px" ALIGN="center"><FONT
STYLE="font-family:Times New Roman" SIZE="2">[<I>Company Signature Page to Securities Purchase Agreement</I>] </FONT></P>

<p Style='page-break-before:always'>
<HR  SIZE="3" style="COLOR:#999999" WIDTH="100%" ALIGN="CENTER">

 <P STYLE="margin-top:0px;margin-bottom:0px; text-indent:4%"><FONT STYLE="font-family:Times New Roman" SIZE="2">IN WITNESS WHEREOF, the parties hereto have caused this Securities Purchase Agreement to be
duly executed as of the day and year first written above. </FONT></P> <P STYLE="font-size:12px;margin-top:0px;margin-bottom:0px">&nbsp;</P><DIV ALIGN="right">
<TABLE CELLSPACING="0" CELLPADDING="0" WIDTH="40%" BORDER="0">

<TR>
<TD WIDTH="6%"></TD>
<TD VALIGN="bottom" WIDTH="2%"></TD>
<TD WIDTH="92%"></TD></TR>
<TR>
<TD VALIGN="top" COLSPAN="3"><FONT STYLE="font-family:Times New Roman" SIZE="2"><B>THE PURCHASERS</B></FONT></TD></TR>
<TR>
<TD HEIGHT="16" COLSPAN="3"></TD></TR>
<TR>
<TD VALIGN="top" COLSPAN="3"><FONT STYLE="font-family:Times New Roman" SIZE="2"><B>TANG CAPITAL PARTNERS, LP</B></FONT></TD></TR>
<TR>
<TD HEIGHT="8"></TD>
<TD HEIGHT="8" COLSPAN="2"></TD></TR>
<TR>
<TD VALIGN="top"><FONT STYLE="font-family:Times New Roman" SIZE="2">By:</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2">Tang Capital Management, LLC,</FONT></TD></TR>
<TR>
<TD VALIGN="top"></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2">its general partner</FONT></TD></TR>
<TR>
<TD HEIGHT="16"></TD>
<TD HEIGHT="16" COLSPAN="2"></TD></TR>
<TR>
<TD VALIGN="top"><FONT STYLE="font-family:Times New Roman" SIZE="2">By:</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"> <P STYLE="margin-top:0px;margin-bottom:1px;border-bottom:1px solid #000000"><FONT STYLE="font-family:Times New Roman" SIZE="2">/s Kevin Tang</FONT></P></TD></TR>
<TR>
<TD VALIGN="top"></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2">Name: Kevin C. Tang</FONT></TD></TR>
<TR>
<TD VALIGN="top"></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2">Title: &nbsp;&nbsp;Managing Director</FONT></TD></TR></TABLE></DIV>
<P STYLE="margin-top:12px;margin-bottom:0px" ALIGN="center"><FONT STYLE="font-family:Times New Roman" SIZE="2">[<I>Purchaser Signature Page to Securities Purchase Agreement</I>] </FONT></P>

<p Style='page-break-before:always'>
<HR  SIZE="3" style="COLOR:#999999" WIDTH="100%" ALIGN="CENTER">

 <DIV ALIGN="right">
<TABLE CELLSPACING="0" CELLPADDING="0" WIDTH="40%" BORDER="0">

<TR>
<TD WIDTH="6%"></TD>
<TD VALIGN="bottom" WIDTH="2%"></TD>
<TD WIDTH="92%"></TD></TR>
<TR>
<TD VALIGN="top" COLSPAN="3"><FONT STYLE="font-family:Times New Roman" SIZE="2"><B>BAKER BROS. INVESTMENTS II, L.P.</B></FONT></TD></TR>
<TR>
<TD HEIGHT="16"></TD>
<TD HEIGHT="16" COLSPAN="2"></TD></TR>
<TR>
<TD VALIGN="top"><FONT STYLE="font-family:Times New Roman" SIZE="2">By:</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2">Baker Bros. Capital, L.P.,</FONT></TD></TR>
<TR>
<TD VALIGN="top"></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2">its general partner</FONT></TD></TR>
<TR>
<TD VALIGN="top"><FONT STYLE="font-family:Times New Roman" SIZE="2">By:</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2">Baker Bros. Capital (GP), LLC,</FONT></TD></TR>
<TR>
<TD VALIGN="top"></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2">its general partner</FONT></TD></TR>
<TR>
<TD HEIGHT="16"></TD>
<TD HEIGHT="16" COLSPAN="2"></TD></TR>
<TR>
<TD VALIGN="top"><FONT STYLE="font-family:Times New Roman" SIZE="2">By:</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"> <P STYLE="margin-top:0px;margin-bottom:1px;border-bottom:1px solid #000000"><FONT STYLE="font-family:Times New Roman" SIZE="2">/s/ Felix Baker</FONT></P></TD></TR>
<TR>
<TD VALIGN="top"></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2">Name: Felix Baker</FONT></TD></TR>
<TR>
<TD VALIGN="top"></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2">Title: Managing Member</FONT></TD></TR>
<TR>
<TD HEIGHT="16" COLSPAN="3"></TD></TR>
<TR>
<TD VALIGN="top" COLSPAN="3"><FONT STYLE="font-family:Times New Roman" SIZE="2"><B>BAKER BROTHERS LIFE SCIENCES, L.P.</B></FONT></TD></TR>
<TR>
<TD HEIGHT="16"></TD>
<TD HEIGHT="16" COLSPAN="2"></TD></TR>
<TR>
<TD VALIGN="top"><FONT STYLE="font-family:Times New Roman" SIZE="2">By:</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2">Baker Brothers Life Sciences Capital, L.P.,</FONT></TD></TR>
<TR>
<TD VALIGN="top"></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2">its general partner</FONT></TD></TR>
<TR>
<TD VALIGN="top"><FONT STYLE="font-family:Times New Roman" SIZE="2">By:</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2">Baker Brothers Life Sciences Capital (GP), LLC, its general partner</FONT></TD></TR>
<TR>
<TD HEIGHT="16"></TD>
<TD HEIGHT="16" COLSPAN="2"></TD></TR>
<TR>
<TD VALIGN="top"><FONT STYLE="font-family:Times New Roman" SIZE="2">By:</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"> <P STYLE="margin-top:0px;margin-bottom:1px;border-bottom:1px solid #000000"><FONT STYLE="font-family:Times New Roman" SIZE="2">/s/ Felix Baker</FONT></P></TD></TR>
<TR>
<TD VALIGN="top"></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2">Name: Felix Baker</FONT></TD></TR>
<TR>
<TD VALIGN="top"></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2">Title: Managing Member</FONT></TD></TR>
<TR>
<TD HEIGHT="16" COLSPAN="3"></TD></TR>
<TR>
<TD VALIGN="top" COLSPAN="3"><FONT STYLE="font-family:Times New Roman" SIZE="2"><B>14159, L.P.</B></FONT></TD></TR>
<TR>
<TD HEIGHT="16"></TD>
<TD HEIGHT="16" COLSPAN="2"></TD></TR>
<TR>
<TD VALIGN="top"><FONT STYLE="font-family:Times New Roman" SIZE="2">By:</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2">14159 Capital, L.P., its general partner</FONT></TD></TR>
<TR>
<TD VALIGN="top"><FONT STYLE="font-family:Times New Roman" SIZE="2">By:</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2">14159 Capital (GP), LLC, its general partner</FONT></TD></TR>
<TR>
<TD HEIGHT="16"></TD>
<TD HEIGHT="16" COLSPAN="2"></TD></TR>
<TR>
<TD VALIGN="top"><FONT STYLE="font-family:Times New Roman" SIZE="2">By:</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"> <P STYLE="margin-top:0px;margin-bottom:1px;border-bottom:1px solid #000000"><FONT STYLE="font-family:Times New Roman" SIZE="2">/s/ Felix Baker</FONT></P></TD></TR>
<TR>
<TD VALIGN="top"></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2">Name: Felix Baker</FONT></TD></TR>
<TR>
<TD VALIGN="top"></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2">Title: Managing Member</FONT></TD></TR></TABLE></DIV>
<P STYLE="margin-top:12px;margin-bottom:0px" ALIGN="center"><FONT STYLE="font-family:Times New Roman" SIZE="2"><I></I>[<I>Purchaser Signature Page to Securities Purchase Agreement</I>]<I> </I></FONT></P>

<p Style='page-break-before:always'>
<HR  SIZE="3" style="COLOR:#999999" WIDTH="100%" ALIGN="CENTER">

 <P STYLE="margin-top:0px;margin-bottom:0px" ALIGN="center"><FONT STYLE="font-family:Times New Roman" SIZE="2"><B><U>EXHIBIT A </U></B></FONT></P>
<P STYLE="margin-top:12px;margin-bottom:0px" ALIGN="center"><FONT STYLE="font-family:Times New Roman" SIZE="2"><B>FORM OF SENIOR SECURED CONVERTIBLE NOTE DUE 2021 </B></FONT></P>

<p Style='page-break-before:always'>
<HR  SIZE="3" style="COLOR:#999999" WIDTH="100%" ALIGN="CENTER">

 <P STYLE="margin-top:0px;margin-bottom:0px" ALIGN="center"><FONT STYLE="font-family:Times New Roman" SIZE="2"><B><U>EXHIBIT B </U></B></FONT></P>
<P STYLE="margin-top:12px;margin-bottom:0px" ALIGN="center"><FONT STYLE="font-family:Times New Roman" SIZE="2"><B>FORM OF SECURITY AGREEMENT </B></FONT></P>

<p Style='page-break-before:always'>
<HR  SIZE="3" style="COLOR:#999999" WIDTH="100%" ALIGN="CENTER">

 <P STYLE="margin-top:0px;margin-bottom:0px" ALIGN="center"><FONT STYLE="font-family:Times New Roman" SIZE="2"><B><U>SCHEDULE I </U></B></FONT></P>
<P STYLE="font-size:12px;margin-top:0px;margin-bottom:0px">&nbsp;</P>
<TABLE CELLSPACING="0" CELLPADDING="0" WIDTH="100%" BORDER="0" ALIGN="center">

<TR>
<TD WIDTH="27%"></TD>
<TD VALIGN="bottom" WIDTH="5%"></TD>
<TD WIDTH="48%"></TD>
<TD VALIGN="bottom" WIDTH="5%"></TD>
<TD></TD>
<TD></TD>
<TD></TD>
<TD VALIGN="bottom" WIDTH="5%"></TD>
<TD></TD>
<TD></TD>
<TD></TD></TR>
<TR>
<TD VALIGN="bottom" NOWRAP> <P STYLE="border-bottom:1px solid #000000;width:20pt"><FONT STYLE="font-family:Times New Roman" SIZE="1"><B>Name</B></FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="center" STYLE="border-bottom:1px solid #000000"> <P STYLE="margin-top:0px;margin-bottom:1px" ALIGN="center"><FONT STYLE="font-family:Times New Roman" SIZE="1"><B>Address</B></FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom" COLSPAN="2" ALIGN="center" STYLE="border-bottom:1px solid #000000"><FONT STYLE="font-family:Times New Roman" SIZE="1"><B>Initial&nbsp;Closing<BR>Investment&nbsp;Amount</B></FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom" COLSPAN="2" ALIGN="center" STYLE="border-bottom:1px solid #000000"><FONT STYLE="font-family:Times New Roman" SIZE="1"><B>Pro&nbsp;Rata&nbsp;Interest</B></FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD></TR>
<TR BGCOLOR="#cceeff">
<TD VALIGN="top"><FONT STYLE="font-family:Times New Roman" SIZE="2">Tang Capital Partners, LP</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="top"> <P STYLE="margin-top:0px;margin-bottom:0px"><FONT STYLE="font-family:Times New Roman" SIZE="2">Tang Capital Partners, LP</FONT></P> <P STYLE="margin-top:0px;margin-bottom:0px"><FONT STYLE="font-family:Times New Roman" SIZE="2">c/o
Tang Capital Management, LLC</FONT></P> <P STYLE="margin-top:0px;margin-bottom:0px"><FONT STYLE="font-family:Times New Roman" SIZE="2">4401 Eastgate Mall</FONT></P> <P STYLE="margin-top:0px;margin-bottom:1px"><FONT
STYLE="font-family:Times New Roman" SIZE="2">San Diego, California 92121</FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="top"><FONT STYLE="font-family:Times New Roman" SIZE="2">$</FONT></TD>
<TD VALIGN="top" ALIGN="right"><FONT STYLE="font-family:Times New Roman" SIZE="2">1,200,000</FONT></TD>
<TD NOWRAP VALIGN="top"><FONT STYLE="font-family:Times New Roman" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="top"><FONT STYLE="font-family:Times New Roman" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="top" ALIGN="right"><FONT STYLE="font-family:Times New Roman" SIZE="2">80</FONT></TD>
<TD NOWRAP VALIGN="top"><FONT STYLE="font-family:Times New Roman" SIZE="2">%&nbsp;</FONT></TD></TR>
<TR>
<TD VALIGN="top"><FONT STYLE="font-family:Times New Roman" SIZE="2">Baker Bros. Investments II, L.P</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="top"> <P STYLE="margin-top:0px;margin-bottom:0px"><FONT STYLE="font-family:Times New Roman" SIZE="2">Baker Bros. Investments II, L.P</FONT></P>
<P STYLE="margin-top:0px;margin-bottom:0px"><FONT STYLE="font-family:Times New Roman" SIZE="2">c/o Baker Brothers Investments</FONT></P> <P STYLE="margin-top:0px;margin-bottom:0px"><FONT STYLE="font-family:Times New Roman" SIZE="2">667 Madison
Avenue, 21st Floor</FONT></P> <P STYLE="margin-top:0px;margin-bottom:1px"><FONT STYLE="font-family:Times New Roman" SIZE="2">New York, NY 10065-8029</FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="top"><FONT STYLE="font-family:Times New Roman" SIZE="2">$</FONT></TD>
<TD VALIGN="top" ALIGN="right"><FONT STYLE="font-family:Times New Roman" SIZE="2">300</FONT></TD>
<TD NOWRAP VALIGN="top"><FONT STYLE="font-family:Times New Roman" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="top"><FONT STYLE="font-family:Times New Roman" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="top" ALIGN="right"><FONT STYLE="font-family:Times New Roman" SIZE="2">0.02</FONT></TD>
<TD NOWRAP VALIGN="top"><FONT STYLE="font-family:Times New Roman" SIZE="2">%&nbsp;</FONT></TD></TR>
<TR BGCOLOR="#cceeff">
<TD VALIGN="top"><FONT STYLE="font-family:Times New Roman" SIZE="2">Baker Brothers Life Sciences, L.P.</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="top"> <P STYLE="margin-top:0px;margin-bottom:0px"><FONT STYLE="font-family:Times New Roman" SIZE="2">Baker Brothers Life Sciences, L.P.</FONT></P> <P STYLE="margin-top:0px;margin-bottom:0px"><FONT
STYLE="font-family:Times New Roman" SIZE="2">c/o Baker Brothers Investments</FONT></P> <P STYLE="margin-top:0px;margin-bottom:0px"><FONT STYLE="font-family:Times New Roman" SIZE="2">667 Madison Avenue, 21st Floor</FONT></P>
<P STYLE="margin-top:0px;margin-bottom:1px"><FONT STYLE="font-family:Times New Roman" SIZE="2">New York, NY 10065-8029</FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="top"><FONT STYLE="font-family:Times New Roman" SIZE="2">$</FONT></TD>
<TD VALIGN="top" ALIGN="right"><FONT STYLE="font-family:Times New Roman" SIZE="2">294,300</FONT></TD>
<TD NOWRAP VALIGN="top"><FONT STYLE="font-family:Times New Roman" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="top"><FONT STYLE="font-family:Times New Roman" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="top" ALIGN="right"><FONT STYLE="font-family:Times New Roman" SIZE="2">19.62</FONT></TD>
<TD NOWRAP VALIGN="top"><FONT STYLE="font-family:Times New Roman" SIZE="2">%&nbsp;</FONT></TD></TR>
<TR>
<TD VALIGN="top"><FONT STYLE="font-family:Times New Roman" SIZE="2">14159, L.P.</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="top"> <P STYLE="margin-top:0px;margin-bottom:0px"><FONT STYLE="font-family:Times New Roman" SIZE="2">14159, L.P.</FONT></P> <P STYLE="margin-top:0px;margin-bottom:0px"><FONT STYLE="font-family:Times New Roman" SIZE="2">c/o Baker Brothers
Investments</FONT></P> <P STYLE="margin-top:0px;margin-bottom:0px"><FONT STYLE="font-family:Times New Roman" SIZE="2">667 Madison Avenue, 21st Floor</FONT></P> <P STYLE="margin-top:0px;margin-bottom:1px"><FONT
STYLE="font-family:Times New Roman" SIZE="2">New York, NY 10065-8029</FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="top"><FONT STYLE="font-family:Times New Roman" SIZE="2">$</FONT></TD>
<TD VALIGN="top" ALIGN="right"><FONT STYLE="font-family:Times New Roman" SIZE="2">5,400</FONT></TD>
<TD NOWRAP VALIGN="top"><FONT STYLE="font-family:Times New Roman" SIZE="2">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="top"><FONT STYLE="font-family:Times New Roman" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="top" ALIGN="right"><FONT STYLE="font-family:Times New Roman" SIZE="2">0.36</FONT></TD>
<TD NOWRAP VALIGN="top"><FONT STYLE="font-family:Times New Roman" SIZE="2">%&nbsp;</FONT></TD></TR></TABLE>
</BODY></HTML>
</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-10.2
<SEQUENCE>3
<FILENAME>dex102.htm
<DESCRIPTION>FORM OF SENIOR SECURED CONVERTIBLE NOTE DUE 2021
<TEXT>
<HTML><HEAD>
<TITLE>Form of Senior Secured Convertible Note due 2021</TITLE>
</HEAD>
 <BODY BGCOLOR="WHITE">

 <P STYLE="margin-top:0px;margin-bottom:0px" ALIGN="right"><FONT STYLE="font-family:Times New Roman" SIZE="2"><B>Exhibit 10.2 </B></FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px" ALIGN="center"><FONT
STYLE="font-family:Times New Roman" SIZE="2"><B>SENIOR SECURED CONVERTIBLE NOTE DUE 2021 </B></FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px"><FONT STYLE="font-family:Times New Roman" SIZE="2"><B>NEITHER THE SECURITIES REPRESENTED BY THIS
CERTIFICATE NOR THE SECURITIES INTO WHICH SUCH SECURITIES ARE CONVERTIBLE HAVE BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR APPLICABLE STATE SECURITIES LAWS. THE SECURITIES MAY NOT BE OFFERED FOR SALE, SOLD, TRANSFERRED OR
ASSIGNED (I)&nbsp;IN THE ABSENCE OF (A)&nbsp;AN EFFECTIVE REGISTRATION STATEMENT FOR THE SECURITIES UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR (B)&nbsp;AN OPINION OF COUNSEL, IN A GENERALLY ACCEPTABLE FORM, THAT REGISTRATION IS NOT REQUIRED
UNDER SAID ACT OR (II) UNLESS SOLD PURSUANT TO RULE 144 UNDER SAID ACT. </B></FONT></P> <P STYLE="margin-top:24px;margin-bottom:0px" ALIGN="center"><FONT STYLE="font-family:Times New Roman" SIZE="2"><B>A.P. PHARMA, INC. </B></FONT></P>
<P STYLE="margin-top:12px;margin-bottom:0px" ALIGN="center"><FONT STYLE="font-family:Times New Roman" SIZE="2"><B>SENIOR SECURED CONVERTIBLE NOTE DUE 2021 </B></FONT></P> <P STYLE="font-size:12px;margin-top:0px;margin-bottom:0px">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR VALIGN="TOP">
<TD WIDTH="97%"> <P STYLE="margin-bottom:1px"><FONT STYLE="font-family:Times New Roman" SIZE="2">Issuance Date: April [<FONT STYLE="FONT-FAMILY:WINGDINGS 2">&#151;</FONT>], 2011 </FONT></P></TD>
<TD> <P STYLE="margin-top:0px;margin-bottom:1px" ALIGN="right"><FONT STYLE="font-family:Times New Roman" SIZE="2">Principal:&nbsp;U.S.&nbsp;$<U>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</U>
</FONT></P></TD></TR></TABLE> <P STYLE="margin-top:12px;margin-bottom:0px; text-indent:4%"><FONT STYLE="font-family:Times New Roman" SIZE="2"><B>FOR VALUE RECEIVED,</B> A.P. Pharma, Inc. a Delaware corporation (the
<B></B>&#147;<B>Company</B>&#148;<B></B>), hereby promises to pay to <U>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</U>or its registered assigns
(<B></B>&#147;<B>Holder</B>&#148;<B></B>) the amount set out above opposite the caption <B></B>&#147;<B>Principal</B>&#148;<B></B> (as such amount may be increased or reduced from time to time pursuant to the terms hereof, whether through the
payment of PIK Interest (as defined below) or through redemption, conversion or otherwise, the <B></B>&#147;<B>Principal</B>&#148;<B></B>) when due, whether upon the Maturity Date (as defined below), acceleration, redemption or otherwise (in each
case, in accordance with the terms hereof) and to pay Interest (as defined below) on the outstanding Principal at the rates, in the manner and at the times set forth herein. This Senior Secured Convertible Note Due 2021 (including all Senior Secured
Convertible Notes Due 2021 issued in exchange, transfer or replacement hereof, this <B></B>&#147;<B>Note</B>&#148;<B></B>) is one of several Senior Secured Convertible Notes Due 2021 issued pursuant to the Securities Purchase Agreement (as defined
below) (collectively, the &#147;<B>Notes</B>&#148; and such other Senior Secured Convertible Notes Due 2021, the <B></B>&#147;<B>Other Notes</B>&#148;<B></B>). Certain capitalized terms used herein are defined in Section&nbsp;23. Capitalized terms
used herein but not defined shall have the meaning given to such terms in the Securities Purchase Agreement. </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px; text-indent:4%"><FONT STYLE="font-family:Times New Roman" SIZE="2">(1) <U>PAYMENTS
OF PRINCIPAL</U>. On the Maturity Date and upon the surrender of this Note, the Company shall pay to the Holder in cash, an amount equal to the outstanding Principal (if any) and accrued and unpaid Interest thereon. The <B></B>&#147;<B>Maturity
Date</B>&#148;<B></B> shall be April [<FONT STYLE="FONT-FAMILY:WINGDINGS 2">&#151;</FONT>], 2021, <I>provided</I> that the Holder may, upon providing ten (10)&nbsp;Business Days prior written notice, require prepayment of this Note at any time
beginning on or after April [<FONT STYLE="FONT-FAMILY:WINGDINGS 2">&#151;</FONT>], 2012. Other than as specifically permitted by this Note, the Company may not prepay any portion of the outstanding Principal or accrued and unpaid Interest, if any.
</FONT></P>

<p Style='page-break-before:always'>
<HR  SIZE="3" style="COLOR:#999999" WIDTH="100%" ALIGN="CENTER">

 <P STYLE="margin-top:0px;margin-bottom:0px; text-indent:4%"><FONT STYLE="font-family:Times New Roman" SIZE="2">(2) <U>INTEREST</U>. </FONT></P>
<P STYLE="margin-top:6px;margin-bottom:0px; margin-left:4%; text-indent:4%"><FONT STYLE="font-family:Times New Roman" SIZE="2">(a) Interest on this Note (&#147;<B>Interest</B>&#148;) shall commence accruing at the Interest Rate on the Issuance Date
and shall be computed on the basis of a 360-day year and twelve 30-day months and the actual number of days elapsed and shall be payable in arrears for each Calendar Quarter on the first day of the succeeding Calendar Quarter during the period
beginning on the Issuance Date and ending on, and including, the Maturity Date (each, an &#147;<B>Interest Date</B>&#148;) with the first Interest Date being July&nbsp;1, 2011.&nbsp;Interest shall be payable on each Interest Date, to the record
holder of this Note on the applicable Interest Date, through the addition of the amount of such Interest to the then outstanding Principal (&#147;<B>PIK Interest</B>&#148;); <I>provided however</I>, that for each Interest Date after October&nbsp;1,
2011, the Holder may, at its option upon notice to the Company, elect to receive Interest on any Interest Date in cash (&#147;<B>Cash Interest</B>&#148;) or in a combination of Cash Interest and PIK Interest.&nbsp;With respect to each Interest Date
after October&nbsp;1, 2011 for which the Holder elects to receive Cash Interest or a combination of Cash Interest and PIK Interest, the Holder shall deliver a written notice (each, an &#147;<B>Interest Election Notice</B>&#148;) to the Company at
least five (5)&nbsp;Business Days prior to the applicable Interest Date (&#147;<B>Interest Notice Due Date</B>&#148; and the date such notice is delivered to the Company, the &#147;<B>Interest Notice Date</B>&#148;), which notice elects to receive
Interest as Cash Interest or a combination of Cash Interest and PIK Interest and specifies the amount of Interest that shall be paid as Cash Interest and the amount of Interest, if any, that shall be paid in PIK Interest.&nbsp;For the avoidance of
doubt, if the Holder fails to deliver an Interest Election Notice on or prior to the Interest Notice Due Date, the Company shall pay the Holder PIK Interest on the applicable Interest Date. Interest that is paid in the form of PIK Interest shall be
considered paid or duly provided for, for all purposes under this Note, and shall not be considered overdue. </FONT></P>
<P STYLE="margin-top:6px;margin-bottom:0px; margin-left:4%; text-indent:4%"><FONT STYLE="font-family:Times New Roman" SIZE="2">(b) Accrued and unpaid Interest due on any portion of the Principal that is converted pursuant to Section&nbsp;3 shall
accrue through the Conversion Date and shall be paid on the next Interest Date, unless the entire outstanding Principal amount is being converted, in which case, the accrued and unpaid Interest shall be paid on the corresponding Share Delivery Date.
</FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px; text-indent:4%"><FONT STYLE="font-family:Times New Roman" SIZE="2">(3) <U>CONVERSION OF NOTES</U>. This Note shall be convertible into shares of the Company&#146;s common stock, par value
$0.01 per share (the<B> </B>&#147;<B>Common Stock</B>&#148;<B></B>), on the terms and conditions set forth in this Section&nbsp;3. </FONT></P> <P STYLE="margin-top:6px;margin-bottom:0px; margin-left:4%; text-indent:4%"><FONT
STYLE="font-family:Times New Roman" SIZE="2">(a) <U>Conversion Right</U>. Subject to the provisions of Section&nbsp;3(d), at any time or times on or after the Issuance Date, the Holder shall be entitled to convert any portion of the outstanding and
unpaid Conversion Amount (as defined below) into fully paid and non-assessable shares of Common Stock in accordance with Section&nbsp;3(c), at the Conversion Rate (as defined below).&nbsp;The Company shall not issue any fraction of a share of Common
Stock upon any conversion.&nbsp;If the issuance would result in the issuance of a fraction of a share of Common Stock, the Company shall round such fraction of a share of Common Stock up to the nearest whole share.&nbsp;The Company shall pay any and
all transfer, stamp and similar taxes that may be payable with respect to the issuance and delivery of Common Stock upon conversion of any Conversion Amount. </FONT></P>
 <p STYLE="margin-top:0px;margin-bottom:0px"><FONT SIZE="1">&nbsp;</FONT></P> <P STYLE="margin-top:0px;margin-bottom:0px" ALIGN="center"><FONT STYLE="font-family:Times New Roman" SIZE="2">2 </FONT></P>


<p Style='page-break-before:always'>
<HR  SIZE="3" style="COLOR:#999999" WIDTH="100%" ALIGN="CENTER">

 <P STYLE="margin-top:0px;margin-bottom:0px; margin-left:4%; text-indent:4%"><FONT STYLE="font-family:Times New Roman" SIZE="2">(b) <U>Conversion Rate</U>. The number of shares of Common Stock issuable
upon conversion of any Conversion Amount pursuant to Section&nbsp;3(a) shall be determined by multiplying (x)&nbsp;such Conversion Amount by (y)&nbsp;the Conversion Rate (as defined below). </FONT></P>
<P STYLE="font-size:6px;margin-top:0px;margin-bottom:0px">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="4%"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD WIDTH="4%" VALIGN="top" ALIGN="left"><FONT STYLE="font-family:Times New Roman" SIZE="2">(i)</FONT></TD>
<TD ALIGN="left" VALIGN="top"><FONT STYLE="font-family:Times New Roman" SIZE="2">&#147;<B>Conversion Amount</B>&#148; means the portion of the Principal to be converted, redeemed or otherwise with respect to which this determination is being made
(which shall include PIK Interest, if applicable under Section&nbsp;2(b)). </FONT></TD></TR></TABLE> <P STYLE="font-size:6px;margin-top:0px;margin-bottom:0px">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="4%"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD WIDTH="4%" VALIGN="top" ALIGN="left"><FONT STYLE="font-family:Times New Roman" SIZE="2">(ii)</FONT></TD>
<TD ALIGN="left" VALIGN="top"><FONT STYLE="font-family:Times New Roman" SIZE="2">&#147;<B>Conversion Rate</B>&#148; means as of any Conversion Date (as defined below) or other date of determination during the period beginning on the Issuance Date
and ending on and including the Maturity Date, 25,000 shares of Common Stock for every $1,000 of Conversion Amount. </FONT></TD></TR></TABLE> <P STYLE="margin-top:6px;margin-bottom:0px; margin-left:4%; text-indent:4%"><FONT
STYLE="font-family:Times New Roman" SIZE="2">(c) <U>Mechanics of Conversion</U>. </FONT></P> <P STYLE="font-size:6px;margin-top:0px;margin-bottom:0px">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="4%"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD WIDTH="4%" VALIGN="top" ALIGN="left"><FONT STYLE="font-family:Times New Roman" SIZE="2">(i)</FONT></TD>
<TD ALIGN="left" VALIGN="top"> <P ALIGN="left"><FONT STYLE="font-family:Times New Roman" SIZE="2"><U>Optional Conversion</U>. To convert any Conversion Amount into shares of Common Stock on any date (a <B></B>&#147;<B>Conversion
Date</B>&#148;<B></B>), the Holder shall (A)&nbsp;transmit by facsimile (or otherwise deliver), for receipt on or prior to 5:00 p.m., Pacific Time, on such date, a copy of an executed notice of conversion in the form attached hereto as <U>Exhibit
I</U> (the <B></B>&#147;<B>Conversion Notice</B>&#148;<B></B>) to the Company and (B)&nbsp;if required by Section&nbsp;3(c)(iii), surrender this Note to a common carrier for delivery to the Company as soon as practicable on or following such date
(or an indemnification undertaking with respect to this Note in the case of its loss, theft or destruction). On or before the first (1</FONT><FONT STYLE="font-family:Times New Roman" SIZE="1"><SUP
STYLE="vertical-align:baseline; position:relative; bottom:.8ex">st</SUP></FONT><FONT STYLE="font-family:Times New Roman" SIZE="2">)&nbsp;Business Day following the date of receipt of a Conversion Notice, the Company shall transmit by facsimile a
confirmation of receipt of such Conversion Notice to the Holder and the Transfer Agent. On or before the third
(3</FONT><FONT STYLE="font-family:Times New Roman" SIZE="1"><SUP STYLE="vertical-align:baseline; position:relative; bottom:.8ex">rd</SUP></FONT><FONT STYLE="font-family:Times New Roman" SIZE="2">)&nbsp;Business Day following the date of receipt of a
Conversion Notice (the <B></B>&#147;<B>Share Delivery Date</B>&#148;<B></B>), the Company shall issue and deliver to the address as specified in the Conversion Notice, a certificate, registered in the name of the Holder or its designee, for the
number of shares of Common Stock to which the Holder shall be entitled, or, if requested by the Holder in the applicable Conversion Notice, the Company shall deliver the shares of Common Stock to which the Holder shall be entitled by
Deposit/Withdrawal at Custodian (&#147;<B>DWAC</B>&#148;) or other available means of electronic delivery through the Depository Trust Company. If this Note is physically surrendered for conversion as required by Section&nbsp;3(c)(iii) and the
outstanding Principal of this Note is greater than the portion of the Conversion Amount constituting principal, then the Company shall as soon as practicable and in no event later than three (3)&nbsp;Business Days after receipt of this Note (the
<B></B>&#147;<B>Note Delivery Date</B>&#148;<B></B>) and at its own expense, issue and deliver to the holder a new Note (in accordance with Section&nbsp;13(d)) representing the outstanding Principal not converted. The Person or Persons entitled to
receive the shares of Common Stock issuable upon a conversion of this Note shall be treated for all purposes as the record holder or holders of such shares of Common Stock on the Conversion Date to the extent permitted by applicable law.
</FONT></P></TD></TR></TABLE>
 <p STYLE="margin-top:0px;margin-bottom:0px"><FONT SIZE="1">&nbsp;</FONT></P> <P STYLE="margin-top:0px;margin-bottom:0px" ALIGN="center"><FONT STYLE="font-family:Times New Roman" SIZE="2">3 </FONT></P>


<p Style='page-break-before:always'>
<HR  SIZE="3" style="COLOR:#999999" WIDTH="100%" ALIGN="CENTER">


<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="4%"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD WIDTH="4%" VALIGN="top" ALIGN="left"><FONT STYLE="font-family:Times New Roman" SIZE="2">(ii)</FONT></TD>
<TD ALIGN="left" VALIGN="top"><FONT STYLE="font-family:Times New Roman" SIZE="2"><U>Company&#146;s Failure to Timely Convert</U>. If the Company shall fail to deliver via DWAC or issue a certificate to the Holder for the number of shares of Common
Stock to which the Holder is entitled upon conversion of any Conversion Amount on or prior to the date which is three (3)&nbsp;Business Days after the Conversion Date (a <B></B>&#147;<B>Conversion Failure</B>&#148;<B></B>), then (A)&nbsp;the Company
shall pay damages in cash to the Holder for each date of such Conversion Failure in an amount equal to 1.5% of the product of (I)&nbsp;the sum of the number of shares of Common Stock not issued to the Holder on or prior to the Share Delivery Date
and to which the Holder is entitled, and (II) the Closing Sale Price of the Common Stock on the Share Delivery Date and (B)&nbsp;the Holder, upon written notice to the Company, may void its Conversion Notice with respect to, and retain or have
returned, as the case may be, any portion of this Note that has not been converted pursuant to such Conversion Notice; provided that the voiding of a Conversion Notice shall not affect the Company&#146;s obligations to make any payments which have
accrued prior to the date of such notice pursuant to this Section&nbsp;3(c)(ii) or otherwise. At the Holder&#146;s option in lieu of the foregoing, if within three (3)&nbsp;Business Days after the Company&#146;s receipt of the facsimile copy of a
Conversion Notice the Company shall fail to issue and deliver a certificate or shares via the DWAC system to the Holder for the number of shares of Common Stock to which the Holder is entitled upon such holder&#146;s conversion of any Conversion
Amount, and if on or after such Trading Day the Holder purchases (in an open market transaction or otherwise) Common Stock to deliver in satisfaction of a sale by the Holder of Common Stock issuable upon such conversion that the Holder anticipated
receiving from the Company (a &#147;<B>Common Stock Buy-In</B>&#148;), then the Company shall, within three (3)&nbsp;Business Days after the Holder&#146;s request (which shall include written evidence of a Common Stock Buy-In) and in the
Holder&#146;s discretion, either (i)&nbsp;pay cash to the Holder in an amount equal to the Holder&#146;s total purchase price (including brokerage commissions, if any) for the shares of Common Stock so purchased (the <B></B>&#147;<B>Common Stock
Buy-In Price</B>&#148;<B></B>), at which point the Company&#146;s obligation to deliver such certificate (and to issue such Common Stock) shall terminate, or (ii)&nbsp;promptly honor its obligation to deliver to the Holder a certificate or
certificates representing such Common Stock and pay cash to the Holder in an amount equal to the excess (if any) of the Common Stock Buy-In Price over the product of (A)&nbsp;such number of shares of Common Stock, times (B)&nbsp;the Closing Bid
Price on the Conversion Date. </FONT></TD></TR></TABLE> <P STYLE="font-size:6px;margin-top:0px;margin-bottom:0px">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="4%"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD WIDTH="4%" VALIGN="top" ALIGN="left"><FONT STYLE="font-family:Times New Roman" SIZE="2">(iii)</FONT></TD>
<TD ALIGN="left" VALIGN="top"> <P ALIGN="left"><FONT STYLE="font-family:Times New Roman" SIZE="2"><U>Book-Entry</U>. Notwithstanding anything to the contrary set forth herein, upon conversion of any portion of this Note in accordance with the terms
hereof, the Holder shall not be required to physically surrender this Note to the Company unless (A)&nbsp;the full Principal represented by this Note is being converted, together with all accrued and unpaid Interest thereon, or (B)&nbsp;the Holder
has provided the Company with prior written notice (which notice may be included in a Conversion Notice) requesting reissuance of this Note upon physical surrender of this Note. The Holder and the Company shall maintain records showing the portion
of Principal and Interest converted and the dates of such conversions or </FONT></P></TD></TR></TABLE>
 <p STYLE="margin-top:0px;margin-bottom:0px"><FONT SIZE="1">&nbsp;</FONT></P> <P STYLE="margin-top:0px;margin-bottom:0px" ALIGN="center"><FONT STYLE="font-family:Times New Roman" SIZE="2">4 </FONT></P>


<p Style='page-break-before:always'>
<HR  SIZE="3" style="COLOR:#999999" WIDTH="100%" ALIGN="CENTER">


<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="8%"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD ALIGN="left" VALIGN="top"> <P><FONT STYLE="font-family:Times New Roman" SIZE="2">
shall use such other method, reasonably satisfactory to the Holder and the Company, so as not to require physical surrender of this Note upon conversion. </FONT></P></TD></TR></TABLE>
<P STYLE="font-size:6px;margin-top:0px;margin-bottom:0px">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="4%"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD WIDTH="4%" VALIGN="top" ALIGN="left"><FONT STYLE="font-family:Times New Roman" SIZE="2">(iv)</FONT></TD>
<TD ALIGN="left" VALIGN="top"><FONT STYLE="font-family:Times New Roman" SIZE="2"><U>Pro Rata Conversion; Disputes</U>. In the event that the Company receives a Conversion Notice from more than one holder of Notes for the same Conversion Date and the
Company can convert some, but not all, of such portions of the Notes submitted for conversion, the Company shall convert from each holder of Notes electing to have a portion of its Notes converted on such date a pro rata amount of such holder&#146;s
portion of its Notes submitted for conversion based on the principal portion submitted for conversion on such date by such holder relative to the aggregate principal portions of all Notes submitted for conversion on such date. In the event of a
dispute as to the number of shares of Common Stock issuable to the Holder in connection with a conversion of this Note, the Company shall issue to the Holder the number of shares of Common Stock not in dispute and resolve such dispute in accordance
with Section&nbsp;18. </FONT></TD></TR></TABLE> <P STYLE="margin-top:6px;margin-bottom:0px; margin-left:4%; text-indent:4%"><FONT STYLE="font-family:Times New Roman" SIZE="2">(d) <U>Limitations on Conversions</U>. </FONT></P>
<P STYLE="font-size:6px;margin-top:0px;margin-bottom:0px">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="4%"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD WIDTH="4%" VALIGN="top" ALIGN="left"><FONT STYLE="font-family:Times New Roman" SIZE="2">(i)</FONT></TD>
<TD ALIGN="left" VALIGN="top"> <P ALIGN="left"><FONT STYLE="font-family:Times New Roman" SIZE="2"><U>Beneficial Ownership</U>. The Company shall not effect any conversion of this Note, and the Holder of this Note shall not have the right to convert
any portion of this Note pursuant to Section&nbsp;3(a), to the extent that after giving effect to such conversion, the Holder (together with the Holder&#146;s affiliates) would beneficially own in excess of 9.99% (subject to change as described
below, the &#147;<B>Maximum Percentage</B>&#148;) of the number of shares of Common Stock outstanding immediately after giving effect to such conversion.&nbsp;For purposes of the foregoing sentence, the number of shares of Common Stock beneficially
owned by the Holder and its affiliates shall include the number of shares of Common Stock issuable upon conversion of this Note with respect to which the determination of such sentence is being made, but shall exclude the number of shares of Common
Stock which would be issuable upon (A)&nbsp;conversion of the remaining, non-converted portion of this Note beneficially owned by the Holder or any of its affiliates and (B)&nbsp;exercise or conversion of the unexercised or non-converted portion of
any other securities of the Company (including, without limitation, any Other Notes or warrants) subject to a limitation on conversion or exercise analogous to the limitation contained herein beneficially owned by the Holder or any of its
affiliates.&nbsp;Except as set forth in the preceding sentence, for purposes of this Section&nbsp;3(d)(i), beneficial ownership shall be calculated in accordance with Section&nbsp;13(d) of the Securities Exchange Act of 1934, as amended (the
&#147;<B>1934 Act</B>&#148;).&nbsp;For purposes of this Section&nbsp;3(d)(i), in determining the number of outstanding shares of Common Stock, the Holder may rely on the number of outstanding shares of Common Stock as reflected in (x)&nbsp;the
Company&#146;s most recent Form 10-K, Form 10-Q, Form 8-K or other public filing with the Securities Exchange Commission, as the case may be, (y)&nbsp;a more recent public announcement by the Company or (z)&nbsp;any other notice by the Company or
the Transfer Agent setting forth the number of shares of Common Stock outstanding.&nbsp;For any reason at any time, upon the written or oral request of the Holder, the </FONT></P></TD></TR></TABLE>
 <p STYLE="margin-top:0px;margin-bottom:0px"><FONT SIZE="1">&nbsp;</FONT></P> <P STYLE="margin-top:0px;margin-bottom:0px" ALIGN="center"><FONT STYLE="font-family:Times New Roman" SIZE="2">5 </FONT></P>


<p Style='page-break-before:always'>
<HR  SIZE="3" style="COLOR:#999999" WIDTH="100%" ALIGN="CENTER">


<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="8%"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD ALIGN="left" VALIGN="top"> <P><FONT STYLE="font-family:Times New Roman" SIZE="2">
Company shall within one (1)&nbsp;Business Day confirm orally and in writing to the Holder the number of shares of Common Stock then outstanding.&nbsp;In any case, the number of outstanding
shares of Common Stock shall be determined after giving effect to the conversion or exercise of securities of the Company, including this Note, by the Holder or its affiliates since the date as of which such number of outstanding shares of Common
Stock was reported.&nbsp;By written notice to the Company, the Holder may increase or decrease the Maximum Percentage to any other percentage; provided that (i)&nbsp;any such increase or decrease will not be effective until the sixty-first
(61st)&nbsp;day after such notice is delivered to the Company, and (ii)&nbsp;any such increase or decrease will apply only to the Holder and not to any other holder of Notes. </FONT></P></TD></TR></TABLE>
<P STYLE="margin-top:12px;margin-bottom:0px; text-indent:4%"><FONT STYLE="font-family:Times New Roman" SIZE="2">(4) <U>EVENTS OF DEFAULT; RIGHTS UPON EVENT OF DEFAULT</U>. </FONT></P>
<P STYLE="margin-top:6px;margin-bottom:0px; margin-left:4%; text-indent:4%"><FONT STYLE="font-family:Times New Roman" SIZE="2">(a) <U>Events of Default</U>. Each of the following events (so long as it is continuing) shall constitute an
<B></B>&#147;<B>Event of Default</B>&#148;<B></B>: </FONT></P> <P STYLE="font-size:6px;margin-top:0px;margin-bottom:0px">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="4%"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD WIDTH="4%" VALIGN="top" ALIGN="left"><FONT STYLE="font-family:Times New Roman" SIZE="2">(i)</FONT></TD>
<TD ALIGN="left" VALIGN="top"><FONT STYLE="font-family:Times New Roman" SIZE="2">the Company&#146;s (A)&nbsp;failure to cure a Conversion Failure with respect to any of the Notes by delivery of the required number of shares of Common Stock within
ten (10)&nbsp;Business Days after the applicable Conversion Date or (B)&nbsp;notice, written or oral, to any holder of the Notes, including by way of public announcement or through any of its agents, at any time, of its intention not to comply with
a request for conversion of any Notes into shares of Common Stock that is tendered for conversion in compliance with the provisions of the Notes and applicable securities laws; </FONT></TD></TR></TABLE>
<P STYLE="font-size:6px;margin-top:0px;margin-bottom:0px">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="4%"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD WIDTH="4%" VALIGN="top" ALIGN="left"><FONT STYLE="font-family:Times New Roman" SIZE="2">(ii)</FONT></TD>
<TD ALIGN="left" VALIGN="top"><FONT STYLE="font-family:Times New Roman" SIZE="2">the Company&#146;s failure to pay to any Holder any amount of Principal, premium (if any), Interest, or other amounts when and as due under this Note (including,
without limitation, the Company&#146;s failure to pay any redemption payments hereunder), any other Transaction Document or any other agreement, document, certificate or other instrument delivered in connection with the transactions contemplated
hereby and thereby to which such Holder is a party, provided, that in the case of a failure to pay Interest when and as due, such failure shall constitute an Event of Default only if such failure continues for a period of at least five
(5)&nbsp;Business Days; </FONT></TD></TR></TABLE> <P STYLE="font-size:6px;margin-top:0px;margin-bottom:0px">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="4%"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD WIDTH="4%" VALIGN="top" ALIGN="left"><FONT STYLE="font-family:Times New Roman" SIZE="2">(iii)</FONT></TD>
<TD ALIGN="left" VALIGN="top"><FONT STYLE="font-family:Times New Roman" SIZE="2">any event of default under, redemption of or acceleration prior to maturity of any Indebtedness of the Company, other than the Notes, in an aggregate principal amount
in excess of $100,000; </FONT></TD></TR></TABLE> <P STYLE="font-size:6px;margin-top:0px;margin-bottom:0px">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="4%"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD WIDTH="4%" VALIGN="top" ALIGN="left"><FONT STYLE="font-family:Times New Roman" SIZE="2">(iv)</FONT></TD>
<TD ALIGN="left" VALIGN="top"><FONT STYLE="font-family:Times New Roman" SIZE="2">any default under a Material Contract; </FONT></TD></TR></TABLE> <P STYLE="font-size:6px;margin-top:0px;margin-bottom:0px">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="4%"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD WIDTH="4%" VALIGN="top" ALIGN="left"><FONT STYLE="font-family:Times New Roman" SIZE="2">(v)</FONT></TD>
<TD ALIGN="left" VALIGN="top"> <P ALIGN="left"><FONT STYLE="font-family:Times New Roman" SIZE="2">the Company, pursuant to or within the meaning of Title 11, U.S. Code, or any similar Federal, foreign or state law for the relief of debtors
(collectively, <B></B>&#147;<B>Bankruptcy Law</B>&#148;<B></B>), (A)&nbsp;commences a voluntary case, (B)&nbsp;consents to the entry of an order for relief against it in an involuntary case, (C)&nbsp;consents to the
</FONT></P></TD></TR></TABLE>
 <p STYLE="margin-top:0px;margin-bottom:0px"><FONT SIZE="1">&nbsp;</FONT></P> <P STYLE="margin-top:0px;margin-bottom:0px" ALIGN="center"><FONT STYLE="font-family:Times New Roman" SIZE="2">6 </FONT></P>


<p Style='page-break-before:always'>
<HR  SIZE="3" style="COLOR:#999999" WIDTH="100%" ALIGN="CENTER">


<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="8%"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD ALIGN="left" VALIGN="top"> <P><FONT STYLE="font-family:Times New Roman" SIZE="2">
appointment of a receiver, trustee, assignee, liquidator or similar official (a <B></B>&#147;<B>Custodian</B>&#148;<B></B>), (D)&nbsp;makes a general assignment for the benefit of its creditors,
or (E)&nbsp;admits in writing that it is generally unable to pay its debts as they become due; </FONT></P></TD></TR></TABLE> <P STYLE="font-size:6px;margin-top:0px;margin-bottom:0px">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="4%"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD WIDTH="4%" VALIGN="top" ALIGN="left"><FONT STYLE="font-family:Times New Roman" SIZE="2">(vi)</FONT></TD>
<TD ALIGN="left" VALIGN="top"><FONT STYLE="font-family:Times New Roman" SIZE="2">a court of competent jurisdiction enters an order or decree under any Bankruptcy Law that (A)&nbsp;is for relief against the Company in an involuntary case,
(B)&nbsp;appoints a Custodian of the Company or (C)&nbsp;orders the liquidation of the Company; </FONT></TD></TR></TABLE> <P STYLE="font-size:6px;margin-top:0px;margin-bottom:0px">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="4%"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD WIDTH="4%" VALIGN="top" ALIGN="left"><FONT STYLE="font-family:Times New Roman" SIZE="2">(vii)</FONT></TD>
<TD ALIGN="left" VALIGN="top"><FONT STYLE="font-family:Times New Roman" SIZE="2">a final judgment or judgments for the payment of money aggregating in excess of $100,000 are rendered against the Company and which judgments are not, within sixty
(60)&nbsp;days after the entry thereof, bonded, discharged or stayed pending appeal, or are not discharged within sixty (60)&nbsp;days after the expiration of such stay; provided, however, that any judgment which is covered by insurance or an
indemnity from a creditworthy party shall not be included in calculating the $100,000 amount set forth above so long as the Company provides the Holder with a written statement from such insurer or indemnity provider (which written statement shall
be reasonably satisfactory to the Holder) to the effect that such judgment is covered by insurance or an indemnity and the Company will receive the proceeds of such insurance or indemnity within thirty (30)&nbsp;days of the issuance of such judgment
or such later date as provided by the terms of such insurance policy; </FONT></TD></TR></TABLE> <P STYLE="font-size:6px;margin-top:0px;margin-bottom:0px">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="4%"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD WIDTH="4%" VALIGN="top" ALIGN="left"><FONT STYLE="font-family:Times New Roman" SIZE="2">(viii)</FONT></TD>
<TD ALIGN="left" VALIGN="top"><FONT STYLE="font-family:Times New Roman" SIZE="2">any representation or warranty made by the Company in any Transaction Document shall prove to be materially false or misleading as of the date made or deemed made;
</FONT></TD></TR></TABLE> <P STYLE="font-size:6px;margin-top:0px;margin-bottom:0px">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="4%"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD WIDTH="4%" VALIGN="top" ALIGN="left"><FONT STYLE="font-family:Times New Roman" SIZE="2">(ix)</FONT></TD>
<TD ALIGN="left" VALIGN="top"><FONT STYLE="font-family:Times New Roman" SIZE="2">the Company shall breach any covenant or other term or condition of any Transaction Document and, in the case of a breach of a covenant or term or condition which is
curable, such breach continues for a period of at least ten (10)&nbsp;consecutive Business Days; </FONT></TD></TR></TABLE> <P STYLE="font-size:6px;margin-top:0px;margin-bottom:0px">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="4%"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD WIDTH="4%" VALIGN="top" ALIGN="left"><FONT STYLE="font-family:Times New Roman" SIZE="2">(x)</FONT></TD>
<TD ALIGN="left" VALIGN="top"><FONT STYLE="font-family:Times New Roman" SIZE="2">any material provision of any Transaction Document ceases to be of full force and effect other than by its terms, or the Company contests in writing (or supports any
other person in contesting) the validity or enforceability of any provision of any Transaction Document; </FONT></TD></TR></TABLE> <P STYLE="font-size:6px;margin-top:0px;margin-bottom:0px">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="4%"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD WIDTH="4%" VALIGN="top" ALIGN="left"><FONT STYLE="font-family:Times New Roman" SIZE="2">(xi)</FONT></TD>
<TD ALIGN="left" VALIGN="top"><FONT STYLE="font-family:Times New Roman" SIZE="2">the Security Agreement shall for any reason (other than pursuant to the terms thereof) cease to create a valid and perfected lien, with the priority required by the
Security Agreement, on, and security interest in, any material portion of the Collateral purported to be covered thereby, subject to Permitted Liens; </FONT></TD></TR></TABLE> <P STYLE="font-size:6px;margin-top:0px;margin-bottom:0px">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="4%"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD WIDTH="4%" VALIGN="top" ALIGN="left"><FONT STYLE="font-family:Times New Roman" SIZE="2">(xii)</FONT></TD>
<TD ALIGN="left" VALIGN="top"> <P ALIGN="left"><FONT STYLE="font-family:Times New Roman" SIZE="2">the failure of the applicable Registration Statement required to be filed pursuant to the Securities Purchase Agreement to be declared effective by the
Commission on or prior to the date that is sixty (60)&nbsp;days after the applicable Effectiveness </FONT></P></TD></TR></TABLE>
 <p STYLE="margin-top:0px;margin-bottom:0px"><FONT SIZE="1">&nbsp;</FONT></P> <P STYLE="margin-top:0px;margin-bottom:0px" ALIGN="center"><FONT STYLE="font-family:Times New Roman" SIZE="2">7 </FONT></P>


<p Style='page-break-before:always'>
<HR  SIZE="3" style="COLOR:#999999" WIDTH="100%" ALIGN="CENTER">


<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="8%"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD ALIGN="left" VALIGN="top"> <P><FONT STYLE="font-family:Times New Roman" SIZE="2">
Deadline (as defined in the Securities Purchase Agreement), or, while the applicable Registration Statement is required to be maintained effective pursuant to the terms of the Securities Purchase
Agreement, the effectiveness of the applicable Registration Statement lapses for any reason (including, without limitation, the issuance of a stop order) or is unavailable to any holder of the Notes for sale of all of such holder&#146;s Registrable
Securities (as defined in the Securities Purchase Agreement) in accordance with the terms of the Securities Purchase Agreement, and such lapse or unavailability continues for a period of twenty (20)&nbsp;consecutive days or for more than an
aggregate of forty-five (45)&nbsp;days in any 365-day period (other than days during an Allowable Grace Period (as defined in the Securities Purchase Agreement)); or </FONT></P></TD></TR></TABLE>
<P STYLE="font-size:6px;margin-top:0px;margin-bottom:0px">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="4%"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD WIDTH="4%" VALIGN="top" ALIGN="left"><FONT STYLE="font-family:Times New Roman" SIZE="2">(xiii)</FONT></TD>
<TD ALIGN="left" VALIGN="top"><FONT STYLE="font-family:Times New Roman" SIZE="2">any breach or failure in any respect to comply with Section&nbsp;11 of this Note. </FONT></TD></TR></TABLE>
<P STYLE="margin-top:6px;margin-bottom:0px; margin-left:4%; text-indent:4%"><FONT STYLE="font-family:Times New Roman" SIZE="2">(b) <U>Redemption Right</U>. Upon the occurrence of an Event of Default with respect to this Note, the Company, within two
(2)&nbsp;Business Days of the date on which the Company becomes aware of or reasonably should have become aware of such Event of Default, shall deliver written notice thereof via facsimile and overnight courier (an &#147;<B>Event of Default
Notice</B>&#148;) to the Holder.&nbsp;At any time after the earlier of the Holder&#146;s receipt of an Event of Default Notice and the Holder becoming aware of an Event of Default, the Holder may require the Company to redeem all or any portion of
this Note by delivering written notice thereof (the &#147;<B>Event of Default Redemption Notice</B>&#148;) to the Company, which Event of Default Redemption Notice shall indicate the Conversion Amount of this Note the Holder is electing to require
the Company to redeem.&nbsp;Each portion of this Note subject to redemption by the Company pursuant to this Section&nbsp;4(b) shall be redeemed by the Company at a price equal to the greater of the following two formulas (such greater price being
referred to herein as the &#147;<B>Event of Default Redemption Price</B>&#148;): (i)&nbsp;A = B * C; or (ii)&nbsp;A = (B * D) * E. </FONT></P> <P STYLE="font-size:12px;margin-top:0px;margin-bottom:0px">&nbsp;</P>
<TABLE CELLSPACING="0" CELLPADDING="0" WIDTH="100%" BORDER="0" ALIGN="center">

<TR>
<TD></TD>
<TD VALIGN="bottom" WIDTH="1%"></TD>
<TD WIDTH="7%"></TD>
<TD VALIGN="bottom" WIDTH="1%"></TD>
<TD WIDTH="5%"></TD>
<TD VALIGN="bottom" WIDTH="1%"></TD>
<TD WIDTH="3%"></TD>
<TD VALIGN="bottom" WIDTH="1%"></TD>
<TD WIDTH="81%"></TD></TR>
<TR>
<TD VALIGN="top"></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="top"></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="top"><FONT STYLE="font-family:Times New Roman" SIZE="2">Where:</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"></TD></TR>
<TR>
<TD HEIGHT="8"></TD>
<TD HEIGHT="8" COLSPAN="2"></TD>
<TD HEIGHT="8" COLSPAN="2"></TD>
<TD HEIGHT="8" COLSPAN="2"></TD>
<TD HEIGHT="8" COLSPAN="2"></TD></TR>
<TR>
<TD VALIGN="top"></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="top"></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="top"><FONT STYLE="font-family:Times New Roman" SIZE="2">A</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="top"><FONT STYLE="font-family:Times New Roman" SIZE="2">=</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2">Amount due to the Holder on redemption pursuant to Section 4(b);</FONT></TD></TR>
<TR>
<TD HEIGHT="8"></TD>
<TD HEIGHT="8" COLSPAN="2"></TD>
<TD HEIGHT="8" COLSPAN="2"></TD>
<TD HEIGHT="8" COLSPAN="2"></TD>
<TD HEIGHT="8" COLSPAN="2"></TD></TR>
<TR>
<TD VALIGN="top"></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="top"></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="top"><FONT STYLE="font-family:Times New Roman" SIZE="2">B</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="top"><FONT STYLE="font-family:Times New Roman" SIZE="2">=</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2">Conversion Amount to be redeemed, together with any accrued and unpaid Interest, if any, on such Conversion Amount and Interest through the redemption date;</FONT></TD></TR>
<TR>
<TD HEIGHT="8"></TD>
<TD HEIGHT="8" COLSPAN="2"></TD>
<TD HEIGHT="8" COLSPAN="2"></TD>
<TD HEIGHT="8" COLSPAN="2"></TD>
<TD HEIGHT="8" COLSPAN="2"></TD></TR>
<TR>
<TD VALIGN="top"></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="top"></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="top"><FONT STYLE="font-family:Times New Roman" SIZE="2">C</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="top"><FONT STYLE="font-family:Times New Roman" SIZE="2">=</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2">The Redemption Multiplier;</FONT></TD></TR>
<TR>
<TD HEIGHT="8"></TD>
<TD HEIGHT="8" COLSPAN="2"></TD>
<TD HEIGHT="8" COLSPAN="2"></TD>
<TD HEIGHT="8" COLSPAN="2"></TD>
<TD HEIGHT="8" COLSPAN="2"></TD></TR>
<TR>
<TD VALIGN="top"></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="top"></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="top"><FONT STYLE="font-family:Times New Roman" SIZE="2">D</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="top"><FONT STYLE="font-family:Times New Roman" SIZE="2">=</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2">The Conversion Rate with respect to such Conversion Amount in effect at such time as the Holder delivers an Event of Default Redemption Notice; and</FONT></TD></TR>
<TR>
<TD HEIGHT="8"></TD>
<TD HEIGHT="8" COLSPAN="2"></TD>
<TD HEIGHT="8" COLSPAN="2"></TD>
<TD HEIGHT="8" COLSPAN="2"></TD>
<TD HEIGHT="8" COLSPAN="2"></TD></TR>
<TR>
<TD VALIGN="top"></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="top"></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="top"><FONT STYLE="font-family:Times New Roman" SIZE="2">E</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="top"><FONT STYLE="font-family:Times New Roman" SIZE="2">=</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2">The greatest of: (1) the Closing Sale Price of the Common Stock on the date immediately preceding such Event of Default, (2) the Closing Sale Price of the Common Stock on the
date immediately after such Event of Default, and (3) the Closing Sale Price of the</FONT></TD></TR></TABLE>
 <p STYLE="margin-top:0px;margin-bottom:0px"><FONT SIZE="1">&nbsp;</FONT></P> <P STYLE="margin-top:0px;margin-bottom:0px" ALIGN="center"><FONT STYLE="font-family:Times New Roman" SIZE="2">8 </FONT></P>


<p Style='page-break-before:always'>
<HR  SIZE="3" style="COLOR:#999999" WIDTH="100%" ALIGN="CENTER">


<TABLE CELLSPACING="0" CELLPADDING="0" WIDTH="100%" BORDER="0" ALIGN="center">

<TR>
<TD WIDTH="7%"></TD>
<TD VALIGN="bottom" WIDTH="1%"></TD>
<TD WIDTH="5%"></TD>
<TD VALIGN="bottom" WIDTH="1%"></TD>
<TD WIDTH="3%"></TD>
<TD VALIGN="bottom" WIDTH="1%"></TD>
<TD WIDTH="82%"></TD></TR>
<TR>
<TD VALIGN="top"></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="top"></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="top"></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="top"><FONT STYLE="font-family:Times New Roman" SIZE="2">Common Stock on the date the Holder delivers the Event of</FONT></TD></TR>
<TR>
<TD VALIGN="top"></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="top"></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="top"></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="top"><FONT STYLE="font-family:Times New Roman" SIZE="2">Default Redemption Notice.</FONT></TD></TR></TABLE> <P STYLE="margin-top:12px;margin-bottom:0px; text-indent:8%"><FONT STYLE="font-family:Times New Roman" SIZE="2">Redemptions
required by this Section&nbsp;4(b) shall be made in accordance with the provisions of Section&nbsp;9.&nbsp;To the extent redemptions required by this Section&nbsp;4(b) are deemed or determined by a court of competent jurisdiction to be prepayments
of the Note by the Company, such redemptions shall be deemed to be voluntary prepayments. The parties hereto agree that in the event of the Company&#146;s redemption of any portion of the Note under this Section&nbsp;4(b), the Holder&#146;s damages
would be uncertain and difficult to estimate because of the parties&#146; inability to predict future interest rates and the uncertainty of the availability of a suitable substitute investment opportunity for the Holder.&nbsp;Accordingly, any amount
due under this Section&nbsp;4(b) is intended by the parties to be, and shall be deemed, a reasonable estimate of the Holder&#146;s actual loss of its investment opportunity and not as a penalty. </FONT></P>
<P STYLE="margin-top:12px;margin-bottom:0px; text-indent:4%"><FONT STYLE="font-family:Times New Roman" SIZE="2">(5) <U>RIGHTS UPON CHANGE OF CONTROL</U>. </FONT></P> <P STYLE="margin-top:6px;margin-bottom:0px; margin-left:4%; text-indent:4%"><FONT
STYLE="font-family:Times New Roman" SIZE="2">(a) <U>Assumption</U>. The Company shall not enter into or be party to a Change of Control unless (i)&nbsp;the Successor Entity assumes in writing all of the obligations of the Company under this Note and
the other Transaction Documents in accordance with the provisions of this Section&nbsp;5(a) pursuant to written agreements in form and substance satisfactory to the Required Holders and approved by the Required Holders (such approval not to be
unreasonably withheld or delayed) prior to such Change of Control, including agreements to deliver to each holder of Notes in exchange for such Notes a security of the Successor Entity evidenced by a written instrument substantially similar in form
and substance to the Notes, including, without limitation, having a principal amount and interest rate equal to the principal amounts and the interest rates of the Notes held by such holder and having similar ranking to the Notes, and satisfactory
to the Required Holders (any such approval not to be unreasonably withheld or delayed) and (ii)&nbsp;the Successor Entity (including its Parent Entity) is a publicly traded corporation whose common stock is quoted on or listed for trading on an
Eligible Market. Upon the occurrence of any Change of Control, the Successor Entity shall succeed to, and be substituted for (so that from and after the date of such Change of Control, the provisions of this Note referring to the &#147;Company&#148;
shall refer instead to the Successor Entity), and may exercise every right and power of the Company and shall assume all of the obligations of the Company under this Note with the same effect as if such Successor Entity had been named as the Company
herein. Upon consummation of the Change of Control, the Successor Entity shall deliver to the Holder confirmation that there shall be issued upon conversion or redemption of this Note at any time after the consummation of the Change of Control, in
lieu of the shares of the Common Stock (or other securities, cash, assets or other property) purchasable upon the conversion or redemption of the Notes prior to such Change of Control, such shares of stock, securities, cash, assets or any other
property whatsoever (including warrants or other purchase or subscription rights) which the Holder would have been entitled to receive upon the consummation of such Change of Control had this Note been converted immediately prior to such Change of
Control, as adjusted in accordance with the provisions of this Note. The provisions of this Section shall apply similarly and equally to successive Change of Controls and shall be applied without regard to any limitations on the conversion or
redemption of this Note. </FONT></P>
 <p STYLE="margin-top:0px;margin-bottom:0px"><FONT SIZE="1">&nbsp;</FONT></P> <P STYLE="margin-top:0px;margin-bottom:0px" ALIGN="center"><FONT STYLE="font-family:Times New Roman" SIZE="2">9 </FONT></P>


<p Style='page-break-before:always'>
<HR  SIZE="3" style="COLOR:#999999" WIDTH="100%" ALIGN="CENTER">

 <P STYLE="margin-top:0px;margin-bottom:0px; margin-left:4%; text-indent:4%"><FONT STYLE="font-family:Times New Roman" SIZE="2">(b) <U>Holder Redemption Right</U>. No later than ten (10)&nbsp;days prior
to the consummation of a Change of Control, the Company shall deliver written notice thereof via facsimile and overnight courier to the Holder (a &#147;<B>Change of Control Notice</B>&#148;). At any time during the period beginning after the
Holder&#146;s receipt of a Change of Control Notice and ending on the date of the consummation of such Change of Control (or, in the event a Change of Control Notice is not delivered at least ten (10)&nbsp;days prior to a Change of Control, at any
time on or after the date which is ten (10)&nbsp;days prior to a Change of Control and ending ten (10)&nbsp;days after the consummation of such Change of Control), the Holder may require the Company to redeem all or any portion of this Note in cash
by delivering written notice thereof (&#147;<B>Change of Control Redemption Notice</B>&#148;) to the Company, which Change of Control Redemption Notice shall indicate the Conversion Amount the Holder is electing to redeem. The portion of this Note
subject to redemption pursuant to this Section&nbsp;5 shall be redeemed by the Company at a price equal to the product of (x)&nbsp;the Conversion Amount being redeemed, together with any accrued and unpaid Interest, if any, on such Conversion Amount
and Interest through the redemption date, and (y)&nbsp;the Redemption Multiplier (the &#147;<B>Change of Control Redemption Price</B>&#148;). Redemptions required by this Section&nbsp;5(b) shall be made in accordance with the provisions of
Section&nbsp;9 and shall have priority to payments to common stockholders in connection with a Change of Control. Notwithstanding anything to the contrary in this Section&nbsp;5(b), until the Change of Control Redemption Price (together with any
interest thereon) is paid in full, the Conversion Amount and any Interest submitted for redemption under this Section&nbsp;5(b) (together with any interest thereon) may be converted, in whole or in part, by the Holder into Common Stock pursuant to
Section&nbsp;3. </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px; text-indent:4%"><FONT STYLE="font-family:Times New Roman" SIZE="2">(6) <U>RIGHTS UPON ISSUANCE OF PURCHASE RIGHTS AND OTHER CORPORATE EVENTS</U>. </FONT></P>
<P STYLE="margin-top:6px;margin-bottom:0px; margin-left:4%; text-indent:4%"><FONT STYLE="font-family:Times New Roman" SIZE="2">(a) <U>Purchase Rights</U>. If at any time the Company grants, issues or sells any Options, Convertible Securities or
rights to purchase stock, warrants, securities or other property pro rata to the record holders of any class of Common Stock (the &#147;<B>Purchase Rights</B>&#148;), then the Holder will be entitled to acquire, upon the terms applicable to such
Purchase Rights, the aggregate Purchase Rights which the Holder could have acquired if the Holder had held the number of shares of Common Stock acquirable upon complete conversion of this Note (without taking into account any limitations or
restrictions on the convertibility of this Note) immediately before the date on which a record is taken for the grant, issuance or sale of such Purchase Rights, or, if no such record is taken, the date as of which the record holders of Common Stock
are to be determined for the grant, issue or sale of such Purchase Rights. </FONT></P> <P STYLE="margin-top:6px;margin-bottom:0px; margin-left:4%; text-indent:4%"><FONT STYLE="font-family:Times New Roman" SIZE="2">(b) <U>Other Corporate Events</U>.
Subject to Section&nbsp;6(a) hereof, in addition to and not in substitution for any other rights hereunder, prior to the consummation of any Change of Control pursuant to which holders of shares of Common Stock are entitled to receive securities or
other assets with respect to or in exchange for shares of Common Stock (a <B></B>&#147;<B>Corporate Event</B>&#148;<B></B>), the Company shall make appropriate provision to ensure that the Holder will thereafter have the right to receive upon a
conversion of this Note, (i)&nbsp;in addition to the shares of Common Stock receivable upon such conversion, such securities or other assets to which the Holder would have been entitled with respect to such shares of Common
</FONT></P>
 <p STYLE="margin-top:0px;margin-bottom:0px"><FONT SIZE="1">&nbsp;</FONT></P> <P STYLE="margin-top:0px;margin-bottom:0px" ALIGN="center"><FONT STYLE="font-family:Times New Roman" SIZE="2">10 </FONT></P>



<p Style='page-break-before:always'>
<HR  SIZE="3" style="COLOR:#999999" WIDTH="100%" ALIGN="CENTER">

 <P STYLE="margin-top:0px;margin-bottom:0px; margin-left:4%"><FONT STYLE="font-family:Times New Roman" SIZE="2">
Stock had such shares of Common Stock been held by the Holder upon the consummation of such Corporate Event (without taking into account any limitations or restrictions on the convertibility of
this Note), or (ii)&nbsp;in lieu of the shares of Common Stock otherwise receivable upon such conversion, such securities or other assets received by the holders of shares of Common Stock in connection with the consummation of such Corporate Event
in such amounts as the Holder would have been entitled to receive had this Note initially been issued with conversion rights for the form of such consideration (as opposed to shares of Common Stock) at a conversion rate for such consideration
commensurate with the Conversion Rate. Provision made pursuant to the preceding sentence shall be in a form and substance satisfactory to the Holder. The provisions of this Section shall apply similarly and equally to successive Corporate Events and
shall be applied without regard to any limitations on the conversion or redemption of this Note. </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px; text-indent:4%"><FONT STYLE="font-family:Times New Roman" SIZE="2">(7) <U>RIGHTS UPON ISSUANCE
OF OTHER SECURITIES</U>. </FONT></P> <P STYLE="margin-top:6px;margin-bottom:0px; margin-left:4%; text-indent:4%"><FONT STYLE="font-family:Times New Roman" SIZE="2">(a) <U>Pro Rata Distributions.</U> If the Company, at any time while this Note is
outstanding, distributes to all holders of Common Stock (i)&nbsp;evidences of its Indebtedness, (ii)&nbsp;any security (other than a distribution of Common Stock covered by the preceding paragraph), (iii)&nbsp;rights or warrants to subscribe for or
purchase any security, or (iv)&nbsp;any other asset (in each case &#147;<B>Distributed Property</B>&#148;), then, unless taken into account pursuant to Section&nbsp;7(b) below, upon any conversion of this Note that occurs after such record date, the
Holder shall be entitled to receive, in addition to the shares of Common Stock otherwise issuable upon such conversion, the Distributed Property that the Holder would have been entitled to receive in respect of such number of shares of Common Stock
immediately prior to such record date. </FONT></P> <P STYLE="margin-top:6px;margin-bottom:0px; margin-left:4%; text-indent:4%"><FONT STYLE="font-family:Times New Roman" SIZE="2">(b) <U>Adjustment of Conversion Rate upon Subdivision or Combination of
Common Stock</U>. If the Company at any time on or after the Subscription Date subdivides (by any stock split, stock dividend, recapitalization or otherwise) one or more classes of its outstanding shares of Common Stock into a greater number of
shares, the Conversion Rate in effect immediately prior to such subdivision will be proportionately increased. If the Company at any time on or after the Subscription Date combines (by combination, reverse stock split or otherwise) one or more
classes of its outstanding shares of Common Stock into a smaller number of shares, the Conversion Rate in effect immediately prior to such combination will be proportionately decreased. </FONT></P>
<P STYLE="margin-top:12px;margin-bottom:0px; text-indent:4%"><FONT STYLE="font-family:Times New Roman" SIZE="2">(8) <U>NONCIRCUMVENTION</U>. The Company hereby covenants and agrees that the Company will not, by amendment of its Certificate of
Incorporation, Bylaws or through any reorganization, transfer of assets, consolidation, merger, scheme of arrangement, dissolution, issue or sale of securities, or any other voluntary action, avoid or seek to avoid the observance or performance of
any of the terms of this Note, and will at all times in good faith carry out all of the provisions of this Note and take all action as may be required to protect the rights of the Holder of this Note. </FONT></P>
 <p STYLE="margin-top:0px;margin-bottom:0px"><FONT SIZE="1">&nbsp;</FONT></P> <P STYLE="margin-top:0px;margin-bottom:0px" ALIGN="center"><FONT STYLE="font-family:Times New Roman" SIZE="2">11 </FONT></P>



<p Style='page-break-before:always'>
<HR  SIZE="3" style="COLOR:#999999" WIDTH="100%" ALIGN="CENTER">

 <P STYLE="margin-top:0px;margin-bottom:0px; text-indent:4%"><FONT STYLE="font-family:Times New Roman" SIZE="2">(9) <U>HOLDER&#146;S REDEMPTIONS</U>. </FONT></P>
<P STYLE="margin-top:6px;margin-bottom:0px; margin-left:4%; text-indent:4%"><FONT STYLE="font-family:Times New Roman" SIZE="2">(a) If the Holder has submitted an Event of Default Redemption Notice in accordance with Section&nbsp;4(b), then the
Company shall deliver the Event of Default Redemption Price to the Holder within five (5)&nbsp;Business Days after the delivery of the Event of Default Redemption Notice. </FONT></P>
<P STYLE="margin-top:6px;margin-bottom:0px; margin-left:4%; text-indent:4%"><FONT STYLE="font-family:Times New Roman" SIZE="2">(b) If the Holder has submitted a Change of Control Redemption Notice in accordance with Section&nbsp;5(b), then the
Company shall deliver the Change of Control Redemption Price to the Holder concurrently with the consummation of such Change of Control if such notice is delivered to the Company at least five (5)&nbsp;Business Days prior to the consummation of such
Change of Control. If the Change of Control Redemption Notice is delivered to the Company less than five (5)&nbsp;Business Days prior to the consummation of such Change of Control, then the Change of Control Redemption Price shall be delivered no
more than five (5)&nbsp;Business Days after the delivery of the Change of Control Redemption Notice. </FONT></P> <P STYLE="margin-top:6px;margin-bottom:0px; margin-left:4%; text-indent:4%"><FONT STYLE="font-family:Times New Roman" SIZE="2">(c) In
the event of a redemption of less than all of the Principal of this Note under Sections 4(b) or 5(b), the Company shall promptly cause to be issued and delivered to the Holder (after such original Note has been delivered to the Company) a new Note
representing the outstanding Principal that has not been redeemed. In the event that the Company does not pay the required redemption amount to the Holder within the time periods required under Section&nbsp;9(a) or 9(b), as applicable, at any time
thereafter and until the Company pays such amount in full, the Holder shall have the option, in lieu of redemption, to require the Company to promptly return to the Holder all or any portion of this Note representing the Conversion Amount that was
submitted for redemption and for which the redemption amount has not been paid. Upon the Company&#146;s receipt of such notice, (x)&nbsp;the redemption notice shall be null and void with respect to such Conversion Amount and (y)&nbsp;the Company
shall immediately return this Note, or issue a new Note to the Holder representing such Conversion Amount. </FONT></P> <P STYLE="margin-top:6px;margin-bottom:0px; margin-left:4%; text-indent:4%"><FONT STYLE="font-family:Times New Roman" SIZE="2">(d)
<U>Redemption by Other Holders</U>. Upon the Company&#146;s receipt of notice from any of the holders of the Other Notes for redemption or repayment as a result of an event or occurrence substantially similar to the events or occurrences described
in Sections 5(b) (each, an &#147;<B>Other Redemption Notice</B>&#148;), the Company shall immediately forward to the Holder by facsimile a copy of such notice. If the Company timely receives a Change of Control Redemption Notice and one or more
Other Redemption Notices and the Company is unable to redeem all Principal, Interest and other amounts designated in such Change of Control Redemption Notice and such Other Redemption Notices, then the Company shall redeem a pro rata amount from
each holder of the Notes (including the Holder) based on the Principal amounts of the Notes submitted for redemption pursuant to such Change of Control Redemption Notice and pursuant to such Other Redemption Notices received by the Company.
</FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px; text-indent:4%"><FONT STYLE="font-family:Times New Roman" SIZE="2">(10) <U>RIGHTS</U>. Except as otherwise provided for herein, the Holder shall have no rights as a stockholder of the Company
as a result of being a holder of this Note, except as </FONT></P>
 <p STYLE="margin-top:0px;margin-bottom:0px"><FONT SIZE="1">&nbsp;</FONT></P> <P STYLE="margin-top:0px;margin-bottom:0px" ALIGN="center"><FONT STYLE="font-family:Times New Roman" SIZE="2">12 </FONT></P>



<p Style='page-break-before:always'>
<HR  SIZE="3" style="COLOR:#999999" WIDTH="100%" ALIGN="CENTER">

 <P STYLE="margin-top:0px;margin-bottom:0px"><FONT STYLE="font-family:Times New Roman" SIZE="2">
required by law, including, but not limited to, the General Corporation Law of the State of Delaware, and as expressly provided in this Note. </FONT></P>
<P STYLE="margin-top:12px;margin-bottom:0px; text-indent:4%"><FONT STYLE="font-family:Times New Roman" SIZE="2">(11) <U>COVENANTS</U>. </FONT></P> <P STYLE="margin-top:6px;margin-bottom:0px; margin-left:4%; text-indent:4%"><FONT
STYLE="font-family:Times New Roman" SIZE="2">(a) <U>Rank</U>. All payments due under this Note (a)&nbsp;shall rank <I>pari passu</I> with all Other Notes and (b)&nbsp;shall be senior to all other Indebtedness of the Company. </FONT></P>
<P STYLE="margin-top:6px;margin-bottom:0px; margin-left:4%; text-indent:4%"><FONT STYLE="font-family:Times New Roman" SIZE="2">(b) <U>Incurrence of Indebtedness</U>. So long as this Note is outstanding, the Company shall not, and the Company shall
not directly or indirectly, incur or guarantee, assume or suffer to exist any Indebtedness, other than Permitted Indebtedness. </FONT></P> <P STYLE="margin-top:6px;margin-bottom:0px; margin-left:4%; text-indent:4%"><FONT
STYLE="font-family:Times New Roman" SIZE="2">(c) <U>Existence of Liens</U>. So long as this Note is outstanding, the Company shall not, and the Company shall not permit any of its Subsidiaries to, directly or indirectly, allow or suffer to exist any
mortgage, lien, pledge, charge, security interest or other similar encumbrance upon or in any property or assets (including accounts and contract rights) owned by the Company or any of its Subsidiaries (collectively &#147;<B>Liens</B>&#148;) other
than Permitted Liens. </FONT></P> <P STYLE="margin-top:6px;margin-bottom:0px; margin-left:4%; text-indent:4%"><FONT STYLE="font-family:Times New Roman" SIZE="2">(d) <U>Restricted Payments</U>. The Company shall not, and the Company shall not permit
any of its Subsidiaries to, directly or indirectly, redeem, defease, repurchase, repay or make any payments in respect of, by the payment of cash or cash equivalents (in whole or in part, whether by way of open market purchases, tender offers,
private transactions or otherwise), all or any portion of any Indebtedness described in clause (2)&nbsp;of the definition of &#147;Permitted Indebtedness&#148;, whether by way of payment in respect of principal of (or premium, if any) or interest on
such Indebtedness if at the time such payment is due or is otherwise made or, after giving effect to such payment, an event constituting, or that with the passage of time and without being cured would constitute, an Event of Default has occurred and
is continuing. </FONT></P> <P STYLE="margin-top:6px;margin-bottom:0px; margin-left:4%; text-indent:4%"><FONT STYLE="font-family:Times New Roman" SIZE="2">(e) <U>Transactions with Affiliates</U>. The Company shall not directly or indirectly enter
into or permit to exist any transaction with any Affiliate except for (i)&nbsp;transactions (other than the payment of management, consulting, monitoring or advisory fees) between the Company, on the one hand, and any Affiliate of the Company, on
the other hand, so long as such transactions are (x)&nbsp;upon fair and reasonable terms and (y)&nbsp;are fully disclosed to Holder if they involve one or more payments by the Company in excess of $100,000 for any single transaction or series of
transactions, (ii)&nbsp;the payment of reasonable fees, compensation, or employee benefit arrangements to outside directors and executive officers and any indemnity provided for the benefit of directors, of Company in the ordinary course of
business, or (iii)&nbsp;in connection with the Secured Obligations. </FONT></P> <P STYLE="margin-top:6px;margin-bottom:0px; margin-left:4%; text-indent:4%"><FONT STYLE="font-family:Times New Roman" SIZE="2">(f) <U>Disposition of Assets</U>. The
Company shall not convey, sell, lease, license, assign, transfer or otherwise dispose of (or enter into an agreement to convey, sell, lease, license, assign, transfer, or otherwise dispose of) any of the Company&#146;s assets other than
(i)&nbsp;sales or other dispositions of equipment that is substantially worn, damaged or obsolete in the ordinary course of business, (ii)&nbsp;sales or leases of inventory to buyers or lessees in the
</FONT></P>
 <p STYLE="margin-top:0px;margin-bottom:0px"><FONT SIZE="1">&nbsp;</FONT></P> <P STYLE="margin-top:0px;margin-bottom:0px" ALIGN="center"><FONT STYLE="font-family:Times New Roman" SIZE="2">13 </FONT></P>



<p Style='page-break-before:always'>
<HR  SIZE="3" style="COLOR:#999999" WIDTH="100%" ALIGN="CENTER">

 <P STYLE="margin-top:0px;margin-bottom:0px; margin-left:4%"><FONT STYLE="font-family:Times New Roman" SIZE="2">
ordinary course of business, (iii)&nbsp;the use or transfer of cash in a manner that is not prohibited by the terms of the Transaction Documents, (iv)&nbsp;the licensing, on a non-exclusive
basis, of patents, trademarks, copyrights, and other intellectual property rights in the ordinary course of business, and (v)&nbsp;other sales and dispositions of assets with an aggregate value not exceeding $100,000 in any fiscal year;
<I>provided</I>, that the aggregate amount of sales of Equipment pursuant to clauses (i), (ii)&nbsp;and (v)&nbsp;above may not exceed $250,000 in the aggregate in any fiscal year. </FONT></P>
<P STYLE="margin-top:6px;margin-bottom:0px; margin-left:4%; text-indent:4%"><FONT STYLE="font-family:Times New Roman" SIZE="2">(g) <U>Investments</U>. Except for Permitted Investments, the Company shall not directly or indirectly, make or acquire
any investment or incur any Liabilities (including Contingent Obligations) for or in connection with any investment; <I>provided, however</I>, that the Company shall not, starting 30 days after the Effective Date, have Permitted Investments in
Deposit Accounts or Securities Accounts unless the Company and the applicable securities intermediary or bank have entered into control agreements governing such Permitted Investments in order to perfect (and further establish) the Liens in such
Permitted Investments.</FONT></P> <P STYLE="margin-top:6px;margin-bottom:0px; margin-left:4%; text-indent:4%"><FONT STYLE="font-family:Times New Roman" SIZE="2">(h) <U>Material Contracts</U>. The Company shall not directly or indirectly, amend,
modify, alter, increase, or change any of the terms or conditions of (i)&nbsp;any agreement, instrument, document, indenture, or other writing evidencing or concerning Indebtedness permitted under Section&nbsp;11(b), (ii)&nbsp;any Charter Documents,
or (iii)&nbsp;any Material Contract except to the extent that such amendment, modification, alteration, increase, or change to such Material Contract could not, individually or in the aggregate, reasonably be expected to result in a Material Adverse
Effect. </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px; text-indent:4%"><FONT STYLE="font-family:Times New Roman" SIZE="2">(12) <U>VOTE TO AMEND NOTES</U>. The affirmative vote at a meeting duly called for such purpose or the written
consent without a meeting of the Required Holders shall be required for any change or amendment to this Note or the Other Notes. </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px; text-indent:4%"><FONT
STYLE="font-family:Times New Roman" SIZE="2">(13) <U>REISSUANCE OF THIS NOTE</U>. </FONT></P> <P STYLE="margin-top:6px;margin-bottom:0px; margin-left:4%; text-indent:4%"><FONT STYLE="font-family:Times New Roman" SIZE="2">(a) <U>Transfer</U>. If this
Note is to be transferred in compliance with the Securities Purchase Agreement, the Holder shall surrender this Note to the Company, whereupon the Company will forthwith issue and deliver upon the order of the Holder a new Note, registered as the
Holder may request, representing the outstanding Principal being transferred by the Holder and, if less then the entire outstanding Principal is being transferred, a new Note to the Holder representing the outstanding Principal not being
transferred. The Holder and any assignee, by acceptance of this Note, acknowledge and agree that, by reason of the provisions of Section&nbsp;3(c)(iii), following conversion or redemption of any portion of this Note, the outstanding Principal
represented by this Note may be less than the Principal stated on the face of this Note. </FONT></P> <P STYLE="margin-top:6px;margin-bottom:0px; margin-left:4%; text-indent:4%"><FONT STYLE="font-family:Times New Roman" SIZE="2">(b) <U>Lost, Stolen
or Mutilated Note</U>. Upon receipt by the Company of evidence reasonably satisfactory to the Company of the loss, theft, destruction or mutilation of this Note, and, in the case of loss, theft or destruction, of an indemnification undertaking by
the Holder to the Company, in customary form and, in the case of mutilation, upon surrender and </FONT></P>
 <p STYLE="margin-top:0px;margin-bottom:0px"><FONT SIZE="1">&nbsp;</FONT></P> <P STYLE="margin-top:0px;margin-bottom:0px" ALIGN="center"><FONT STYLE="font-family:Times New Roman" SIZE="2">14 </FONT></P>



<p Style='page-break-before:always'>
<HR  SIZE="3" style="COLOR:#999999" WIDTH="100%" ALIGN="CENTER">

 <P STYLE="margin-top:0px;margin-bottom:0px; margin-left:4%"><FONT STYLE="font-family:Times New Roman" SIZE="2">
cancellation of this Note, the Company shall execute and deliver to the Holder a new Note representing the outstanding Principal. </FONT></P>
<P STYLE="margin-top:6px;margin-bottom:0px; margin-left:4%; text-indent:4%"><FONT STYLE="font-family:Times New Roman" SIZE="2">(c) <U>Note Exchangeable for Different Denominations</U>. This Note is exchangeable, upon the surrender hereof by the
Holder at the principal office of the Company, for a new Note or Notes representing in the aggregate the outstanding Principal of this Note, and each such new Note will represent such portion of such outstanding Principal as is designated by the
Holder at the time of such surrender. </FONT></P> <P STYLE="margin-top:6px;margin-bottom:0px; margin-left:4%; text-indent:4%"><FONT STYLE="font-family:Times New Roman" SIZE="2">(d) <U>Issuance of New Notes</U>. Whenever the Company is required to
issue a new Note pursuant to the terms of this Note, such new Note (i)&nbsp;shall be of like tenor with this Note, (ii)&nbsp;shall represent, as indicated on the face of such new Note, the Principal remaining outstanding, (iii)&nbsp;shall have an
issuance date, as indicated on the face of such new Note which is the same as the Issuance Date of this Note, (iv)&nbsp;shall have the same rights and conditions as this Note, and (v)&nbsp;shall represent accrued and unpaid Interest of this Note
from the Issuance Date. </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px; text-indent:4%"><FONT STYLE="font-family:Times New Roman" SIZE="2">(14) <U>REMEDIES, CHARACTERIZATIONS, OTHER OBLIGATIONS, BREACHES AND INJUNCTIVE RELIEF</U>.
</FONT></P> <P STYLE="margin-top:6px;margin-bottom:0px; margin-left:4%; text-indent:4%"><FONT STYLE="font-family:Times New Roman" SIZE="2">(a) The remedies provided in this Note shall be cumulative and in addition to all other remedies available
under this Note and any of the other Transaction Documents, at law or in equity (including a decree of specific performance and/or other injunctive relief), and nothing herein shall limit the Holder&#146;s right to pursue monetary damages for any
failure by the Company to comply with the terms of this Note. Amounts set forth or provided for herein with respect to payments, conversion and the like (and the computation thereof) shall be the amounts to be received by the Holder and shall not,
except as expressly provided herein, be subject to any other obligation of the Company (or the performance thereof). The Company acknowledges that a breach by it of its obligations hereunder will cause irreparable harm to the Holder and that the
remedy at law for any such breach may be inadequate. The Company therefore agrees that, in the event of any such breach or threatened breach, the Holder shall be entitled, in addition to all other available remedies, to an injunction restraining any
breach, without the necessity of showing economic loss and without any bond or other security being required. </FONT></P>
<P STYLE="margin-top:6px;margin-bottom:0px; margin-left:4%; text-indent:4%"><FONT STYLE="font-family:Times New Roman" SIZE="2">(b) Notwithstanding the foregoing, the right of the Holder to receive payment of Principal, premium, if any, and Interest
on the Note, on or after the respective due dates set forth herein (including in connection with a Change of Control), or convert any portion of the Note into shares of Common Stock on the terms and conditions set forth herein, or to bring suit for
the enforcement of any such right to payment or conversion, shall not be impaired or affected without the consent of the Holder. </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px; text-indent:4%"><FONT
STYLE="font-family:Times New Roman" SIZE="2">(15) <U>PAYMENT OF COLLECTION, ENFORCEMENT AND OTHER COSTS</U>. If (a)&nbsp;this Note is placed in the hands of an attorney for collection or enforcement or is collected or enforced through any legal
proceeding or the Holder otherwise takes action to collect amounts due under this Note or to enforce the provisions of this Note or (b)&nbsp;there occurs any bankruptcy, </FONT></P>
 <p STYLE="margin-top:0px;margin-bottom:0px"><FONT SIZE="1">&nbsp;</FONT></P> <P STYLE="margin-top:0px;margin-bottom:0px" ALIGN="center"><FONT STYLE="font-family:Times New Roman" SIZE="2">15 </FONT></P>



<p Style='page-break-before:always'>
<HR  SIZE="3" style="COLOR:#999999" WIDTH="100%" ALIGN="CENTER">

 <P STYLE="margin-top:0px;margin-bottom:0px"><FONT STYLE="font-family:Times New Roman" SIZE="2">
reorganization, receivership of the Company or other proceedings affecting Company creditors&#146; rights and involving a claim under this Note, then the Company shall pay the costs incurred by
the Holder for such collection, enforcement or action or in connection with such bankruptcy, reorganization, receivership or other proceeding, including, but not limited to, reasonable attorneys&#146; fees and disbursements. </FONT></P>
<P STYLE="margin-top:12px;margin-bottom:0px; text-indent:4%"><FONT STYLE="font-family:Times New Roman" SIZE="2">(16) <U>CONSTRUCTION; HEADINGS</U>. This Note shall be deemed to be jointly drafted by the Company and the Purchaser and shall not be
construed against any person as the drafter hereof. The headings of this Note are for convenience of reference and shall not form part of, or affect the interpretation of, this Note. </FONT></P>
<P STYLE="margin-top:12px;margin-bottom:0px; text-indent:4%"><FONT STYLE="font-family:Times New Roman" SIZE="2">(17) <U>FAILURE OR INDULGENCE NOT WAIVER</U>. No failure or delay on the part of the Holder in the exercise of any power, right or
privilege hereunder shall operate as a waiver thereof, nor shall any single or partial exercise of any such power, right or privilege preclude other or further exercise thereof or of any other right, power or privilege. </FONT></P>
<P STYLE="margin-top:12px;margin-bottom:0px; text-indent:4%"><FONT STYLE="font-family:Times New Roman" SIZE="2">(18) <U>DISPUTE RESOLUTION</U>. In the case of a dispute as to the determination of the Closing Bid Price, the Closing Sale Price, the
Redemption Price or the arithmetic calculation of the Conversion Rate or the Redemption Price, the Company shall submit the disputed determinations or arithmetic calculations via facsimile within one (1)&nbsp;Business Day of receipt, or deemed
receipt, of the Conversion Notice or the Change of Control Redemption Notice or other event giving rise to such dispute, as the case may be, to the Holder. If the Holder and the Company are unable to agree upon such determination or calculation of
the Redemption Price or the Conversion Rate, as applicable, within one (1)&nbsp;Business Day of such disputed determination or arithmetic calculation being submitted to the Holder, then the Company and the Holder shall, within one (1)&nbsp;Business
Day thereafter submit via facsimile (a)&nbsp;the disputed determination of the Closing Bid Price, the Closing Sale Price, to an independent, reputable investment bank selected by the Company and approved by the Holder or (b)&nbsp;the disputed
arithmetic calculation of the Conversion Rate or the Redemption Price to the Company&#146;s independent, outside accountant. The Company, at the Company&#146;s expense, shall cause the investment bank or the accountant, as the case may be, to
perform the determinations or calculations and notify the Company and the Holder of the results no later than five (5)&nbsp;Business Days from the time it receives the disputed determinations or calculations. Such investment bank&#146;s or
accountant&#146;s determination or calculation, as the case may be, shall be binding upon all parties absent manifest error. </FONT></P>
<P STYLE="margin-top:12px;margin-bottom:0px; text-indent:4%"><FONT STYLE="font-family:Times New Roman" SIZE="2">(19) <U>NOTICES; PAYMENTS</U>. </FONT></P> <P STYLE="margin-top:6px;margin-bottom:0px; margin-left:4%; text-indent:4%"><FONT
STYLE="font-family:Times New Roman" SIZE="2">(a) <U>Notices</U>. Whenever notice is required to be given under this Note, unless otherwise provided herein, such notice shall be given in accordance with Section&nbsp;15.2 of the Securities Purchase
Agreement. The Company shall provide the Holder with prompt written notice of all actions taken pursuant to this Note, including in reasonable detail a description of such action and the reason therefore. Without limiting the generality of the
foregoing, the Company will give written notice to the Holder (i)&nbsp;within one (1)&nbsp;Business Day upon any adjustment of the Conversion Rate, setting forth in reasonable detail, and certifying, the calculation of such adjustment and
(ii)&nbsp;at least fifteen (15)&nbsp;days prior to the date on which the Company closes its books or takes a record (A)&nbsp;with respect to any dividend or distribution </FONT></P>
 <p STYLE="margin-top:0px;margin-bottom:0px"><FONT SIZE="1">&nbsp;</FONT></P> <P STYLE="margin-top:0px;margin-bottom:0px" ALIGN="center"><FONT STYLE="font-family:Times New Roman" SIZE="2">16 </FONT></P>



<p Style='page-break-before:always'>
<HR  SIZE="3" style="COLOR:#999999" WIDTH="100%" ALIGN="CENTER">

 <P STYLE="margin-top:0px;margin-bottom:0px; margin-left:4%"><FONT STYLE="font-family:Times New Roman" SIZE="2">
upon the Common Stock, (B)&nbsp;with respect to any pro rata subscription offer to holders of Common Stock or (C)&nbsp;for determining rights to vote with respect to any Change of Control,
dissolution or liquidation, provided in each case that such information shall be made known to the public prior to or in conjunction with such notice being provided to the Holder. </FONT></P>
<P STYLE="margin-top:6px;margin-bottom:0px; margin-left:4%; text-indent:4%"><FONT STYLE="font-family:Times New Roman" SIZE="2">(b) <U>Payments</U>. Whenever any payment of cash is to be made by the Company to any Person pursuant to this Note, such
payment shall be made in lawful money of the United States of America by a check drawn on the account of the Company and sent via overnight courier service to such Person at such address as previously provided to the Company in writing (which
address, in the case of each of the Purchasers shall initially be as set forth in Section&nbsp;15.2 of the Securities Purchase Agreement); provided that the Holder may elect to receive a payment of cash via wire transfer of immediately available
funds by providing the Company with prior written notice setting out such request and the Holder&#146;s wire transfer instructions. Whenever any amount expressed to be due by the terms of this Note is due on any day which is not a Business Day, the
same shall instead be due on the next succeeding day which is a Business Day. </FONT></P> <P STYLE="margin-top:6px;margin-bottom:0px; margin-left:4%; text-indent:4%"><FONT STYLE="font-family:Times New Roman" SIZE="2">(c) <U>Withholding Taxes</U>.
All payments made by the Company hereunder shall be made without withholding for or on account of any present or future taxes (other than overall net income taxes imposed on the recipient). If any such withholding is so required, the Company shall
make the withholding, pay the amount withheld to the appropriate authority before penalties attach thereto or interest accrues thereon and pay to the recipient such additional amount as may be necessary to ensure that the net amount actually
received by the recipient free and clear of such taxes (including taxes on such additional amount) is equal to the amount that the recipient would have received had such withholding not been made. If the recipient is required to pay any such taxes,
penalties or interest, the Company shall reimburse the recipient for that payment on demand. If the Company pays any such taxes, penalties or interest, it shall deliver official tax receipts or other evidence of payment to the recipient on whose
account such withholding was made on or before the thirtieth day after payment. The Holder agrees to provide, promptly following the Company&#146;s request therefore, such forms or certifications as it is legally able to provide to establish an
exemption from, or a reduction in, any withholding taxes that might otherwise apply. </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px; text-indent:4%"><FONT STYLE="font-family:Times New Roman" SIZE="2">(20) <U>CANCELLATION</U>. After all
Principal, accrued Interest and other amounts at any time owed on this Note have been paid in full, this Note shall automatically be deemed canceled, shall be surrendered to the Company for cancellation and shall not be reissued. </FONT></P>
<P STYLE="margin-top:12px;margin-bottom:0px; text-indent:4%"><FONT STYLE="font-family:Times New Roman" SIZE="2">(21) <U>WAIVER OF NOTICE</U>. To the extent permitted by law, the Company hereby waives demand, notice, protest and all other demands and
notices in connection with the delivery, acceptance, performance, default or enforcement of this Note and the Securities Purchase Agreement. </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px; text-indent:4%"><FONT
STYLE="font-family:Times New Roman" SIZE="2">(22) <U>GOVERNING LAW</U>. This Note shall be construed and enforced in accordance with, and all questions concerning the construction, validity, interpretation and performance of this Note shall be
governed by, the internal laws of the State of California, without giving effect to any choice of law or conflict of law provision or rule (whether of the State of California or any </FONT></P>
 <p STYLE="margin-top:0px;margin-bottom:0px"><FONT SIZE="1">&nbsp;</FONT></P> <P STYLE="margin-top:0px;margin-bottom:0px" ALIGN="center"><FONT STYLE="font-family:Times New Roman" SIZE="2">17 </FONT></P>



<p Style='page-break-before:always'>
<HR  SIZE="3" style="COLOR:#999999" WIDTH="100%" ALIGN="CENTER">

 <P STYLE="margin-top:0px;margin-bottom:0px"><FONT STYLE="font-family:Times New Roman" SIZE="2">
other jurisdictions) that would cause the application of the laws of any jurisdictions other than the State of California. </FONT></P>
<P STYLE="margin-top:12px;margin-bottom:0px; text-indent:4%"><FONT STYLE="font-family:Times New Roman" SIZE="2">(23) <U>CERTAIN DEFINITIONS</U>. For purposes of this Note, the following terms shall have the following meanings: </FONT></P>
<P STYLE="margin-top:6px;margin-bottom:0px; margin-left:4%; text-indent:4%"><FONT STYLE="font-family:Times New Roman" SIZE="2">(a) &#147;<B>Bankruptcy Code</B>&#148; means Chapter 11 of Title 11 of the United States Code, as amended from time to
time and any successor statute and all rules and regulations promulgated thereunder. </FONT></P> <P STYLE="margin-top:6px;margin-bottom:0px; margin-left:4%; text-indent:4%"><FONT STYLE="font-family:Times New Roman" SIZE="2">(b) &#147;<B>Bankruptcy
Law</B>&#148; has the meaning assigned to it in Section&nbsp;4(a)(iv) hereof. </FONT></P> <P STYLE="margin-top:6px;margin-bottom:0px; margin-left:4%; text-indent:4%"><FONT STYLE="font-family:Times New Roman" SIZE="2">(c) &#147;<B>Beneficial
Ownership</B>&#148; has the meaning set forth in Rule 13d-3 under the Exchange Act. </FONT></P> <P STYLE="margin-top:6px;margin-bottom:0px; margin-left:4%; text-indent:4%"><FONT STYLE="font-family:Times New Roman" SIZE="2">(d)
&#147;<B>Bloomberg</B>&#148; means Bloomberg Financial Markets. </FONT></P> <P STYLE="margin-top:6px;margin-bottom:0px; margin-left:4%; text-indent:4%"><FONT STYLE="font-family:Times New Roman" SIZE="2">(e) <B>&#147;Board of Directors</B>&#148;
means the board of directors of the Company or any authorized committee of the board of directors. </FONT></P> <P STYLE="margin-top:6px;margin-bottom:0px; margin-left:4%; text-indent:4%"><FONT STYLE="font-family:Times New Roman" SIZE="2">(f)
&#147;<B>Business Day</B>&#148; means any day other than Saturday, Sunday or other day on which commercial banks in the City of New York are authorized or required by law to remain closed. </FONT></P>
<P STYLE="margin-top:6px;margin-bottom:0px; margin-left:4%; text-indent:4%"><FONT STYLE="font-family:Times New Roman" SIZE="2">(g) &#147;<B>Calendar Quarter</B>&#148; means each of the period beginning on and including January&nbsp;1 and ending on
and including March&nbsp;31; the period beginning on and including April&nbsp;1 and ending on and including June&nbsp;30; the period beginning on and including July&nbsp;1 and ending on and including September&nbsp;30; and the period beginning on
and including October&nbsp;1 and ending on and including December&nbsp;31. </FONT></P> <P STYLE="margin-top:6px;margin-bottom:0px; margin-left:4%; text-indent:4%"><FONT STYLE="font-family:Times New Roman" SIZE="2">(h) &#147;<B>Cash
Interest</B>&#148; has the meaning assigned to it in Section&nbsp;2 hereof. </FONT></P> <P STYLE="margin-top:6px;margin-bottom:0px; margin-left:4%; text-indent:4%"><FONT STYLE="font-family:Times New Roman" SIZE="2">(i) &#147;<B>Company</B>&#148; has
the meaning assigned to it in the introduction hereof. </FONT></P> <P STYLE="margin-top:6px;margin-bottom:0px; margin-left:4%; text-indent:4%"><FONT STYLE="font-family:Times New Roman" SIZE="2">(j) &#147;<B>Contractual Obligation</B>&#148; means,
with respect to any Person, any contract, agreement, deed, mortgage, lease, sublease, license, sublicense or other legally enforceable commitment, promise, undertaking, obligation, arrangement, instrument or understanding, whether written or oral,
to which or by which such Person is a party or otherwise subject or bound or to which or by which any property, business, operation or right of such Person is subject or bound. </FONT></P>
<P STYLE="margin-top:6px;margin-bottom:0px; margin-left:4%; text-indent:4%"><FONT STYLE="font-family:Times New Roman" SIZE="2">(k) &#147;<B>Change of Control</B>&#148; means: (1)&nbsp;the Company shall, directly or indirectly, in one or more related
transactions consolidate or merge with or into (whether or not the Company is the surviving corporation) a Person or Persons, or (2)&nbsp;that the Company shall, directly or indirectly, in one or more related transactions sell, assign, transfer,
license, convey or otherwise dispose of all or substantially all of the assets of the Company to a </FONT></P>
 <p STYLE="margin-top:0px;margin-bottom:0px"><FONT SIZE="1">&nbsp;</FONT></P> <P STYLE="margin-top:0px;margin-bottom:0px" ALIGN="center"><FONT STYLE="font-family:Times New Roman" SIZE="2">18 </FONT></P>



<p Style='page-break-before:always'>
<HR  SIZE="3" style="COLOR:#999999" WIDTH="100%" ALIGN="CENTER">

 <P STYLE="margin-top:0px;margin-bottom:0px; margin-left:4%"><FONT STYLE="font-family:Times New Roman" SIZE="2">
Person or Persons (for the avoidance of doubt, the sale, assignment, transfer, license, conveyance or other disposition of the Company&#146;s rights to the compound designated &#147;APF530&#148;
shall be deemed a sale of &#147;substantially all&#148; of the Company&#146;s assets), or (3)&nbsp;a Person or Persons acting in concert to make a purchase, tender or exchange offer that is accepted by the holders of more than the 50% of the
outstanding shares of Common Stock (not including any shares of Common Stock held by the Person or Persons making or party to, or associated or affiliated with the Persons making or party to, such purchase, tender or exchange offer), or (4)&nbsp;the
Company shall, directly or indirectly, in one or more related transactions consummate a securities purchase agreement or business combination (including, without limitation, a reorganization, recapitalization, spin-off) with a Person or Persons, in
one or more related transactions, whereby such Person(s) acquire Beneficial Ownership (without regard to any conversion limitations or delays on the securities convertible into Common Stock, if any) of more than 50% of the number of shares of Common
Stock issued and outstanding as of one Business Day prior to the Initial Closing, or (5)&nbsp;reorganize, recapitalize or reclassify its Common Stock. </FONT></P> <P STYLE="margin-top:6px;margin-bottom:0px; margin-left:4%; text-indent:4%"><FONT
STYLE="font-family:Times New Roman" SIZE="2">(l) &#147;<B>Change of Control Notice</B>&#148; has the meaning assigned to it in Section&nbsp;5(b) hereof. </FONT></P> <P STYLE="margin-top:6px;margin-bottom:0px; margin-left:4%; text-indent:4%"><FONT
STYLE="font-family:Times New Roman" SIZE="2">(m) &#147;<B>Change of Control Redemption Notice</B>&#148; has the meaning assigned to it in Section&nbsp;5(b) hereof. </FONT></P>
<P STYLE="margin-top:6px;margin-bottom:0px; margin-left:4%; text-indent:4%"><FONT STYLE="font-family:Times New Roman" SIZE="2">(n) &#147;<B>Change of Control Redemption Price</B>&#148; has the meaning assigned to it in Section&nbsp;5(b) hereof.
</FONT></P> <P STYLE="margin-top:6px;margin-bottom:0px; margin-left:4%; text-indent:4%"><FONT STYLE="font-family:Times New Roman" SIZE="2">(o) &#147;<B>Charter Documents</B>&#148; means the certificate of incorporation and by-laws of the Company.
</FONT></P> <P STYLE="margin-top:6px;margin-bottom:0px; margin-left:4%; text-indent:4%"><FONT STYLE="font-family:Times New Roman" SIZE="2">(p) &#147;<B>Closing Bid Price</B>&#148; and &#147;<B>Closing Sale Price</B>&#148; means, for any security as
of any date, the last closing bid price and last closing trade price, respectively, for such security, as reported by Bloomberg (whether or not such security is trading on an Eligible Market at such time), or, if the market on which the security is
trading begins to operate on an extended hours basis and does not designate the closing bid price or the closing trade price, as the case may be, then the last bid price or last trade price, respectively, of such security prior to 4:00:00 p.m., New
York Time, as reported by Bloomberg, or, if the market on which the security is trading is not the principal securities exchange or trading market for such security, the last closing bid price or last trade price, respectively, of such security on
the principal securities exchange or trading market where such security is listed or traded as reported by Bloomberg, or if the foregoing do not apply, the last closing bid price or last trade price, respectively, of such security in the
over-the-counter market on the electronic bulletin board for such security as reported by Bloomberg, or, if no closing bid price or last trade price, respectively, is reported for such security by Bloomberg, the average of the bid prices, or the ask
prices, respectively, of any market makers for such security as reported in the &#147;pink sheets&#148; by Pink Sheets LLC (formerly the National Quotation Bureau, Inc.). If the Closing Bid Price or the Closing Sale Price cannot be calculated for a
security on a particular date on any of the foregoing bases, the Closing Bid Price or the Closing Sale Price, as the </FONT></P>
 <p STYLE="margin-top:0px;margin-bottom:0px"><FONT SIZE="1">&nbsp;</FONT></P> <P STYLE="margin-top:0px;margin-bottom:0px" ALIGN="center"><FONT STYLE="font-family:Times New Roman" SIZE="2">19 </FONT></P>



<p Style='page-break-before:always'>
<HR  SIZE="3" style="COLOR:#999999" WIDTH="100%" ALIGN="CENTER">

 <P STYLE="margin-top:0px;margin-bottom:0px; margin-left:4%"><FONT STYLE="font-family:Times New Roman" SIZE="2">
case may be, of such security on such date shall be the fair market value as mutually determined by the Company and the Holder. If the Company and the Holder are unable to agree upon the fair
market value of such security, then such dispute shall be resolved pursuant to Section&nbsp;18. All such determinations to be appropriately adjusted for any stock dividend, stock split, stock combination or other similar transaction during the
applicable calculation period. </FONT></P> <P STYLE="margin-top:6px;margin-bottom:0px; margin-left:4%; text-indent:4%"><FONT STYLE="font-family:Times New Roman" SIZE="2">(q) &#147;<B>Collateral</B>&#148; has the meaning given to such term in the
Security Agreement. </FONT></P> <P STYLE="margin-top:6px;margin-bottom:0px; margin-left:4%; text-indent:4%"><FONT STYLE="font-family:Times New Roman" SIZE="2">(r) <B></B>&#147;<B>Commission</B>&#148;<B></B> means the United States Securities and
Exchange Commission. </FONT></P> <P STYLE="margin-top:6px;margin-bottom:0px; margin-left:4%; text-indent:4%"><FONT STYLE="font-family:Times New Roman" SIZE="2">(s) &#147;<B>Common Stock</B>&#148; has the meaning assigned to it in Section&nbsp;3
hereof. </FONT></P> <P STYLE="margin-top:6px;margin-bottom:0px; margin-left:4%; text-indent:4%"><FONT STYLE="font-family:Times New Roman" SIZE="2">(t) &#147;<B>Common Stock Buy-In</B>&#148; has the meaning assigned to it in Section&nbsp;3(c)(ii)
hereof. </FONT></P> <P STYLE="margin-top:6px;margin-bottom:0px; margin-left:4%; text-indent:4%"><FONT STYLE="font-family:Times New Roman" SIZE="2">(u) &#147;<B>Common Stock Buy-In Price</B>&#148; has the meaning assigned to it in
Section&nbsp;3(c)(ii) hereof. </FONT></P> <P STYLE="margin-top:6px;margin-bottom:0px; margin-left:4%; text-indent:4%"><FONT STYLE="font-family:Times New Roman" SIZE="2">(v) &#147;<B>Company Trading Day</B>&#148; means any day on which the Common
Stock is traded on the principal securities exchange or securities market on which the Common Stock is then traded; provided that &#147;Company Trading Day&#148; shall not include any day on which the Common Stock is scheduled to trade on such
exchange or market for less than 4.5 hours or any day that the Common Stock is suspended from trading during the final hour of trading on such exchange or market (or if such exchange or market does not designate in advance the closing time of
trading on such exchange or market, then during the hour ending at 4:00 p.m., New York Time). </FONT></P> <P STYLE="margin-top:6px;margin-bottom:0px; margin-left:4%; text-indent:4%"><FONT STYLE="font-family:Times New Roman" SIZE="2">(w)
&#147;<B>Contingent Obligation</B>&#148; means, as to any Person, any direct or indirect liability, contingent or otherwise, of that Person with respect to any indebtedness, lease, dividend or other obligation of another Person if the primary
purpose or intent of the Person incurring such liability, or the primary effect thereof, is to provide assurance to the obligee of such liability that such liability will be paid or discharged, or that any agreements relating thereto will be
complied with, or that the holders of such liability will be protected (in whole or in part) against loss with respect thereto. </FONT></P> <P STYLE="margin-top:6px;margin-bottom:0px; margin-left:4%; text-indent:4%"><FONT
STYLE="font-family:Times New Roman" SIZE="2">(x) &#147;<B>Conversion Amount</B>&#148; has the meaning assigned to it in Section&nbsp;3(b) hereof. </FONT></P> <P STYLE="margin-top:6px;margin-bottom:0px; margin-left:4%; text-indent:4%"><FONT
STYLE="font-family:Times New Roman" SIZE="2">(y) &#147;<B>Conversion Date</B>&#148; has the meaning assigned to it in Section&nbsp;3(c)(i) hereof. </FONT></P> <P STYLE="margin-top:6px;margin-bottom:0px; margin-left:4%; text-indent:4%"><FONT
STYLE="font-family:Times New Roman" SIZE="2">(z) &#147;<B>Conversion Failure</B>&#148; has the meaning assigned to it in Section&nbsp;3(c)(ii) hereof. </FONT></P>
 <p STYLE="margin-top:0px;margin-bottom:0px"><FONT SIZE="1">&nbsp;</FONT></P> <P STYLE="margin-top:0px;margin-bottom:0px" ALIGN="center"><FONT STYLE="font-family:Times New Roman" SIZE="2">20 </FONT></P>



<p Style='page-break-before:always'>
<HR  SIZE="3" style="COLOR:#999999" WIDTH="100%" ALIGN="CENTER">

 <P STYLE="margin-top:0px;margin-bottom:0px; margin-left:4%; text-indent:4%"><FONT STYLE="font-family:Times New Roman" SIZE="2">(aa) &#147;<B>Conversion Notice</B>&#148; has the meaning assigned to it in
Section&nbsp;3(c)(i) hereof. </FONT></P> <P STYLE="margin-top:6px;margin-bottom:0px; margin-left:4%; text-indent:4%"><FONT STYLE="font-family:Times New Roman" SIZE="2">(bb) &#147;<B>Conversion Rate</B>&#148; has the meaning assigned to it in
Section&nbsp;3(b) hereof. </FONT></P> <P STYLE="margin-top:6px;margin-bottom:0px; margin-left:4%; text-indent:4%"><FONT STYLE="font-family:Times New Roman" SIZE="2">(cc) &#147;<B>Convertible Securities</B>&#148; means with respect to any issuer, any
stock or securities (other than Options) directly or indirectly convertible into or exercisable or exchangeable for such issuer&#146;s common stock. </FONT></P> <P STYLE="margin-top:6px;margin-bottom:0px; margin-left:4%; text-indent:4%"><FONT
STYLE="font-family:Times New Roman" SIZE="2">(dd) &#147;<B>Corporate Event</B>&#148; has the meaning assigned to it in Section&nbsp;6(b) hereof. </FONT></P> <P STYLE="margin-top:6px;margin-bottom:0px; margin-left:4%; text-indent:4%"><FONT
STYLE="font-family:Times New Roman" SIZE="2">(ee) &#147;<B>Custodian</B>&#148; has the meaning assigned to it in Section&nbsp;4(a)(iv) hereof. </FONT></P> <P STYLE="margin-top:6px;margin-bottom:0px; margin-left:4%; text-indent:4%"><FONT
STYLE="font-family:Times New Roman" SIZE="2">(ff) &#147;<B>Deposit Accounts or Securities Accounts</B>&#148; has the meaning assigned to it in the Security Agreement. </FONT></P>
<P STYLE="margin-top:6px;margin-bottom:0px; margin-left:4%; text-indent:4%"><FONT STYLE="font-family:Times New Roman" SIZE="2">(gg) &#147;<B>Distributed Property</B>&#148; has the meaning assigned to it in Section&nbsp;7(a) hereof. </FONT></P>
<P STYLE="margin-top:6px;margin-bottom:0px; margin-left:4%; text-indent:4%"><FONT STYLE="font-family:Times New Roman" SIZE="2">(hh) &#147;<B>DWAC</B>&#148; has the meaning assigned to it in Section&nbsp;3(c)(i) hereof. </FONT></P>
<P STYLE="margin-top:6px;margin-bottom:0px; margin-left:4%; text-indent:4%"><FONT STYLE="font-family:Times New Roman" SIZE="2">(ii) &#147;<B>Eligible Market</B>&#148; means a national security exchange that has registered with the Commission under
Section&nbsp;6 of the Securities Exchange Act of 1934. </FONT></P> <P STYLE="margin-top:6px;margin-bottom:0px; margin-left:4%; text-indent:4%"><FONT STYLE="font-family:Times New Roman" SIZE="2">(jj) &#147;<B>Event of Default</B>&#148; has the
meaning assigned to it in Section&nbsp;4(a) hereof. </FONT></P> <P STYLE="margin-top:6px;margin-bottom:0px; margin-left:4%; text-indent:4%"><FONT STYLE="font-family:Times New Roman" SIZE="2">(kk) &#147;<B>Event of Default Notice</B>&#148; has the
meaning assigned to it in Section&nbsp;4(b) hereof. </FONT></P> <P STYLE="margin-top:6px;margin-bottom:0px; margin-left:4%; text-indent:4%"><FONT STYLE="font-family:Times New Roman" SIZE="2">(ll) &#147;<B>Event of Default Redemption Notice</B>&#148;
has the meaning assigned to it in Section&nbsp;4(b) hereof. </FONT></P> <P STYLE="margin-top:6px;margin-bottom:0px; margin-left:4%; text-indent:4%"><FONT STYLE="font-family:Times New Roman" SIZE="2">(mm) &#147;<B>Event of Default Redemption
Price</B>&#148; has the meaning assigned to it in Section&nbsp;4(b) hereof. </FONT></P> <P STYLE="margin-top:6px;margin-bottom:0px; margin-left:4%; text-indent:4%"><FONT STYLE="font-family:Times New Roman" SIZE="2">(nn) &#147;<B>GAAP</B>&#148; means
U.S. generally accepted accounting principles consistently applied. </FONT></P> <P STYLE="margin-top:6px;margin-bottom:0px; margin-left:4%; text-indent:4%"><FONT STYLE="font-family:Times New Roman" SIZE="2">(oo) &#147;<B>Holder</B>&#148; has the
meaning assigned to it in the introduction hereof. </FONT></P> <P STYLE="margin-top:6px;margin-bottom:0px; margin-left:4%; text-indent:4%"><FONT STYLE="font-family:Times New Roman" SIZE="2">(pp) &#147;<B>Indebtedness</B>&#148; means (1)&nbsp;all
indebtedness for borrowed money, (2)&nbsp;all obligations issued, undertaken or assumed as the deferred purchase price of property or services (including, without limitation, &#147;capital leases&#148; in accordance with GAAP) (other
</FONT></P>
 <p STYLE="margin-top:0px;margin-bottom:0px"><FONT SIZE="1">&nbsp;</FONT></P> <P STYLE="margin-top:0px;margin-bottom:0px" ALIGN="center"><FONT STYLE="font-family:Times New Roman" SIZE="2">21 </FONT></P>



<p Style='page-break-before:always'>
<HR  SIZE="3" style="COLOR:#999999" WIDTH="100%" ALIGN="CENTER">

 <P STYLE="margin-top:0px;margin-bottom:0px; margin-left:4%"><FONT STYLE="font-family:Times New Roman" SIZE="2">
than trade payables entered into in the ordinary course of business), (3)&nbsp;all reimbursement or payment obligations with respect to letters of credit, surety bonds and other similar
instruments, (4)&nbsp;all obligations evidenced by notes, bonds, debentures or similar instruments, including obligations so evidenced incurred in connection with the acquisition of property, assets or businesses, (5)&nbsp;all indebtedness created
or arising under any conditional sale or other title retention agreement, or incurred as financing, in either case with respect to any property or assets acquired with the proceeds of such indebtedness (even though the rights and remedies of the
seller or bank under such agreement in the event of default are limited to repossession or sale of such property), (6)&nbsp;all monetary obligations under any leasing or similar arrangement which, in connection with GAAP, consistently applied for
the periods covered thereby, is classified as a capital lease, (7)&nbsp;all indebtedness referred to in clauses (1)&nbsp;through (6)&nbsp;above secured by (or for which the holder of such Indebtedness has an existing right, contingent or otherwise,
to be secured by) any mortgage, lien, pledge, charge, security interest or other encumbrance upon or in any property or assets (including accounts and contract rights) owned by any Person, even though the Person which owns such assets or property
has not assumed or become liable for the payment of such indebtedness, and (8)&nbsp;all Contingent Obligations in respect of indebtedness or obligations of others of the kinds referred to in clauses (1)&nbsp;through (7)&nbsp;above. </FONT></P>
<P STYLE="margin-top:6px;margin-bottom:0px; margin-left:4%; text-indent:4%"><FONT STYLE="font-family:Times New Roman" SIZE="2">(qq) &#147;<B>Initial Closing Date</B>&#148; has the meaning ascribed to it in the Securities Purchase Agreement, which
date is the date the Company initially issued Notes pursuant to the terms of the Securities Purchase Agreement. </FONT></P>
<P STYLE="margin-top:6px;margin-bottom:0px; margin-left:4%; text-indent:4%"><FONT STYLE="font-family:Times New Roman" SIZE="2">(rr) &#147;<B>Interest</B>&#148; has the meaning assigned to it in Section&nbsp;2(a) hereof. </FONT></P>
<P STYLE="margin-top:6px;margin-bottom:0px; margin-left:4%; text-indent:4%"><FONT STYLE="font-family:Times New Roman" SIZE="2">(ss) &#147;<B>Interest Date</B>&#148; has the meaning assigned to it in Section&nbsp;2(a) hereof. </FONT></P>
<P STYLE="margin-top:6px;margin-bottom:0px; margin-left:4%; text-indent:4%"><FONT STYLE="font-family:Times New Roman" SIZE="2">(tt) &#147;<B>Interest Election Notice</B>&#148; has the meaning assigned to it in Section&nbsp;2 (a)&nbsp;hereof.
</FONT></P> <P STYLE="margin-top:6px;margin-bottom:0px; margin-left:4%; text-indent:4%"><FONT STYLE="font-family:Times New Roman" SIZE="2">(uu) &#147;<B>Interest Notice Date</B>&#148; has the meaning assigned to it in Section&nbsp;2(a) hereof.
</FONT></P> <P STYLE="margin-top:6px;margin-bottom:0px; margin-left:4%; text-indent:4%"><FONT STYLE="font-family:Times New Roman" SIZE="2">(vv) &#147;<B>Interest Notice Due Date</B>&#148; has the meaning assigned to it in Section&nbsp;2(a) hereof.
</FONT></P> <P STYLE="margin-top:6px;margin-bottom:0px; margin-left:4%; text-indent:4%"><FONT STYLE="font-family:Times New Roman" SIZE="2">(ww) &#147;<B>Interest Rate</B>&#148; means twenty percent (20.0%)&nbsp;per annum. </FONT></P>
<P STYLE="margin-top:6px;margin-bottom:0px; margin-left:4%; text-indent:4%"><FONT STYLE="font-family:Times New Roman" SIZE="2">(xx) <B></B>&#147;<B>Issuance Date</B>&#148;<B></B> means April [<FONT STYLE="FONT-FAMILY:WINGDINGS 2">&#151;</FONT>],
2011. </FONT></P> <P STYLE="margin-top:6px;margin-bottom:0px; margin-left:4%; text-indent:4%"><FONT STYLE="font-family:Times New Roman" SIZE="2">(yy) &#147;<B>Liability</B>&#148; means, with respect to any Person, any liability or obligation of such
Person whether known or unknown, whether asserted or unasserted, whether determined, determinable or otherwise, whether absolute or contingent, whether accrued or unaccrued, whether liquidated or unliquidated, whether directly incurred or
consequential, whether due or to become due and whether or not required under GAAP to be accrued on the financial statements of such Person. </FONT></P>
 <p STYLE="margin-top:0px;margin-bottom:0px"><FONT SIZE="1">&nbsp;</FONT></P> <P STYLE="margin-top:0px;margin-bottom:0px" ALIGN="center"><FONT STYLE="font-family:Times New Roman" SIZE="2">22 </FONT></P>



<p Style='page-break-before:always'>
<HR  SIZE="3" style="COLOR:#999999" WIDTH="100%" ALIGN="CENTER">

 <P STYLE="margin-top:0px;margin-bottom:0px; margin-left:4%; text-indent:4%"><FONT STYLE="font-family:Times New Roman" SIZE="2">(zz) &#147;<B>Lien</B>&#148; has the meaning assigned to it in
Section&nbsp;11(c) hereof. </FONT></P> <P STYLE="margin-top:6px;margin-bottom:0px; margin-left:4%; text-indent:4%"><FONT STYLE="font-family:Times New Roman" SIZE="2">(aaa) &#147;<B>Material Adverse Effect</B>&#148; has the meaning ascribed to such
term in the Securities Purchase Agreement. </FONT></P> <P STYLE="margin-top:6px;margin-bottom:0px; margin-left:4%; text-indent:4%"><FONT STYLE="font-family:Times New Roman" SIZE="2">(bbb) &#147;<B>Material Contract</B>&#148; has the meaning ascribed
to such term in the Securities Purchase Agreement. </FONT></P> <P STYLE="margin-top:6px;margin-bottom:0px; margin-left:4%; text-indent:4%"><FONT STYLE="font-family:Times New Roman" SIZE="2">(ccc) &#147;<B>Maturity Date</B>&#148; has the meaning
assigned to it in Section&nbsp;1 hereof. </FONT></P> <P STYLE="margin-top:6px;margin-bottom:0px; margin-left:4%; text-indent:4%"><FONT STYLE="font-family:Times New Roman" SIZE="2">(ddd) &#147;<B>Maximum Percentage</B>&#148; has the meaning assigned
to it in Section&nbsp;3(d)(i) hereof. </FONT></P> <P STYLE="margin-top:6px;margin-bottom:0px; margin-left:4%; text-indent:4%"><FONT STYLE="font-family:Times New Roman" SIZE="2">(eee) &#147;<B>Note</B>&#148; has the meaning assigned to it in the
introduction hereof. </FONT></P> <P STYLE="margin-top:6px;margin-bottom:0px; margin-left:4%; text-indent:4%"><FONT STYLE="font-family:Times New Roman" SIZE="2">(fff) &#147;<B>Note Delivery Date</B>&#148; has the meaning assigned to it in
Section&nbsp;3(c)(i) hereof. </FONT></P> <P STYLE="margin-top:6px;margin-bottom:0px; margin-left:4%; text-indent:4%"><FONT STYLE="font-family:Times New Roman" SIZE="2">(ggg) <B></B>&#147;<B>Other Notes</B>&#148;<B></B> has the meaning assigned to it
in the introduction hereof. </FONT></P> <P STYLE="margin-top:6px;margin-bottom:0px; margin-left:4%; text-indent:4%"><FONT STYLE="font-family:Times New Roman" SIZE="2">(hhh) <B></B>&#147;<B>Other Redemption Notice</B>&#148;<B></B> has the meaning
assigned to it in Section&nbsp;9(b) hereof. </FONT></P> <P STYLE="margin-top:6px;margin-bottom:0px; margin-left:4%; text-indent:4%"><FONT STYLE="font-family:Times New Roman" SIZE="2">(iii) <B></B>&#147;<B>Options</B>&#148;<B></B> means with respect
to any issuer, any rights, warrants or options to subscribe for or purchase such issuer&#146;s common stock or such issuer&#146;s Convertible Securities. </FONT></P> <P STYLE="margin-top:6px;margin-bottom:0px; margin-left:4%; text-indent:4%"><FONT
STYLE="font-family:Times New Roman" SIZE="2">(jjj) &#147;<B>Parent Entity</B>&#148; of a Person means an entity that, directly or indirectly, controls the applicable Person and whose common stock or equivalent equity security is quoted or listed on
an Eligible Market, or, if there is more than one such Person or Parent Entity, the Person or Parent Entity with the largest public market capitalization as of the date of consummation of the Change of Control. </FONT></P>
<P STYLE="margin-top:6px;margin-bottom:0px; margin-left:4%; text-indent:4%"><FONT STYLE="font-family:Times New Roman" SIZE="2">(kkk) &#147;<B>Permitted Indebtedness</B>&#148; means (1)&nbsp;the Indebtedness evidenced by this Note and the Other Notes
(including the Additional Notes), (2)&nbsp;Indebtedness incurred by the Company that is made expressly subordinate in right of payment to the Indebtedness evidenced by this Note, (3)&nbsp;Indebtedness existing on the Effective Date and disclosed on
Schedule 5.30 of the Securities Purchase Agreement, (4)&nbsp;Purchase Money Indebtedness, (5)&nbsp;Indebtedness to trade creditors incurred in the ordinary course of business, (6)&nbsp;extensions, refinancings and renewals of any items of Permitted
Indebtedness in clauses (3)&nbsp;and (4)&nbsp;hereof, provided that the principal amount is not increased or the terms modified to impose more burdensome terms upon Company and such Indebtedness shall not be secured by any additional collateral.
</FONT></P>
 <p STYLE="margin-top:0px;margin-bottom:0px"><FONT SIZE="1">&nbsp;</FONT></P> <P STYLE="margin-top:0px;margin-bottom:0px" ALIGN="center"><FONT STYLE="font-family:Times New Roman" SIZE="2">23 </FONT></P>



<p Style='page-break-before:always'>
<HR  SIZE="3" style="COLOR:#999999" WIDTH="100%" ALIGN="CENTER">

 <P STYLE="margin-top:0px;margin-bottom:0px; margin-left:4%; text-indent:4%"><FONT STYLE="font-family:Times New Roman" SIZE="2">(lll) &#147;<B>Permitted Investments</B>&#148; means (1)&nbsp;investments in
cash, (2)&nbsp;investments in negotiable instruments for collection, (3)&nbsp;advances made in connection with purchases of goods or services in the ordinary course of business, (4)&nbsp;investments received in settlement of amounts due to the
Company effected in the ordinary course of business or owing to the Company as a result of a proceeding of insolvency involving an account in debt to the Company or upon the foreclosure or enforcement of any Lien in favor of the Company,
(5)&nbsp;marketable direct obligations issued or unconditionally guaranteed by the United States of America or any agency or any State thereof maturing within one (1)&nbsp;year from the date of acquisition thereof, (7)&nbsp;commercial paper maturing
no more than one (1)&nbsp;year from the date of creation thereof and currently having rating of at least A-2 or P-2 from either Standard&nbsp;&amp; Poor&#146;s Corporation or Moody&#146;s Investors Service, (8)&nbsp;certificates of deposit maturing
no more than one year from the date of investment therein and (9)&nbsp;money market accounts. </FONT></P> <P STYLE="margin-top:6px;margin-bottom:0px; margin-left:4%; text-indent:4%"><FONT STYLE="font-family:Times New Roman" SIZE="2">(mmm)
&#147;<B>Permitted Liens</B>&#148; means (1)&nbsp;any Lien for taxes not yet due or delinquent or being contested in good faith by appropriate proceedings for which adequate reserves have been established in accordance with GAAP, (2)&nbsp;any
statutory Lien arising in the ordinary course of business by operation of law with respect to a liability that is not yet due or delinquent, (3)&nbsp;any Lien created by operation of law, such as materialmen&#146;s liens, mechanics&#146; liens and
other similar liens, arising in the ordinary course of business with respect to a liability that is not yet due or delinquent or that are being contested in good faith by appropriate proceedings, (4)&nbsp;Liens securing the Company&#146;s
obligations under the Notes, (5)&nbsp;Liens (A)&nbsp;upon or in any equipment acquired or held by the Company or any of its Subsidiaries to secure the purchase price of such equipment or indebtedness incurred solely for the purpose of financing the
acquisition or lease of such equipment, or (B)&nbsp;existing on such equipment at the time of its acquisition, provided that the Lien is confined solely to the property so acquired and improvements thereon, and the proceeds of such equipment,
(6)&nbsp;Liens incurred in connection with the extension, renewal or refinancing of the indebtedness secured by Liens of the type described in clauses (1)&nbsp;through (5)&nbsp;above, provided that any extension, renewal or replacement Lien shall be
limited to the property encumbered by the existing Lien and the principal amount of the Indebtedness being extended, renewed or refinanced does not increase, (7)&nbsp;leases, subleases, licenses and sublicenses granted to others in the ordinary
course of the Company&#146;s business, not interfering in any material respect with the business of the Company and its Subsidiaries taken as a whole, (8)&nbsp;Liens in favor of customs and revenue authorities arising as a matter of law to secure
payments of custom duties in connection with the importation of goods, (9)&nbsp;Liens arising from judgments, decrees or attachments in circumstances not constituting an Event of Default under Section&nbsp;4(a)(vi) and (10)&nbsp;Liens of King George
Holdings Luxembourg IIA S.&agrave;.r.l. or any affiliate thereof existing as of the Effective Date. </FONT></P> <P STYLE="margin-top:6px;margin-bottom:0px; margin-left:4%; text-indent:4%"><FONT STYLE="font-family:Times New Roman" SIZE="2">(nnn)
&#147;<B>Person</B>&#148; means and includes all natural persons, corporations, business trusts, associations, companies, partnerships, joint ventures, limited liability companies and other entities and governments and agencies and political
subdivisions. </FONT></P> <P STYLE="margin-top:6px;margin-bottom:0px; margin-left:4%; text-indent:4%"><FONT STYLE="font-family:Times New Roman" SIZE="2">(ooo) &#147;<B>PIK Interest</B>&#148; has the meaning assigned to it in Section&nbsp;2(a)
hereof. </FONT></P>
 <p STYLE="margin-top:0px;margin-bottom:0px"><FONT SIZE="1">&nbsp;</FONT></P> <P STYLE="margin-top:0px;margin-bottom:0px" ALIGN="center"><FONT STYLE="font-family:Times New Roman" SIZE="2">24 </FONT></P>



<p Style='page-break-before:always'>
<HR  SIZE="3" style="COLOR:#999999" WIDTH="100%" ALIGN="CENTER">

 <P STYLE="margin-top:0px;margin-bottom:0px; margin-left:4%; text-indent:4%"><FONT STYLE="font-family:Times New Roman" SIZE="2">(ppp) &#147;<B>Principal</B>&#148; has the meaning assigned to it in the
introduction hereof. </FONT></P> <P STYLE="margin-top:6px;margin-bottom:0px; margin-left:4%; text-indent:4%"><FONT STYLE="font-family:Times New Roman" SIZE="2">(qqq) &#147;<B>Purchase Money Indebtedness</B>&#148; means Indebtedness (other than the
Secured Obligations, but including capital lease obligations as defined under GAAP), incurred at the time of, or within 20 days after, the acquisition of any fixed assets for the purpose of financing all or any part of the acquisition cost thereof;
provided, such Indebtedness shall not exceed $50,000 in the aggregate. </FONT></P> <P STYLE="margin-top:6px;margin-bottom:0px; margin-left:4%; text-indent:4%"><FONT STYLE="font-family:Times New Roman" SIZE="2">(rrr) &#147;<B>Purchase
Rights</B>&#148; has the meaning assigned to it in Section&nbsp;6(a) hereof. </FONT></P> <P STYLE="margin-top:6px;margin-bottom:0px; margin-left:4%; text-indent:4%"><FONT STYLE="font-family:Times New Roman" SIZE="2">(sss) &#147;<B>Redemption
Multiplier</B>&#148; shall equal two (2). </FONT></P> <P STYLE="margin-top:6px;margin-bottom:0px; margin-left:4%; text-indent:4%"><FONT STYLE="font-family:Times New Roman" SIZE="2">(ttt) &#147;<B>Redemption Price</B>&#148; means either an Event of
Default Redemption Price or Change of Control Redemption Price. </FONT></P> <P STYLE="margin-top:6px;margin-bottom:0px; margin-left:4%; text-indent:4%"><FONT STYLE="font-family:Times New Roman" SIZE="2">(uuu) &#147;<B>Register</B>&#148; has the
meaning assigned to it in Section&nbsp;25 hereof. </FONT></P> <P STYLE="margin-top:6px;margin-bottom:0px; margin-left:4%; text-indent:4%"><FONT STYLE="font-family:Times New Roman" SIZE="2">(vvv) &#147;<B>Required Holders</B>&#148; means the holders
of Notes representing at least a majority of the aggregate principal amount of the Notes then outstanding. </FONT></P>
<P STYLE="margin-top:6px;margin-bottom:0px; margin-left:4%; text-indent:4%"><FONT STYLE="font-family:Times New Roman" SIZE="2">(www) &#147;<B>Secured Obligations</B>&#148; has the meaning assigned to it in the Security Agreement. </FONT></P>
<P STYLE="margin-top:6px;margin-bottom:0px; margin-left:4%; text-indent:4%"><FONT STYLE="font-family:Times New Roman" SIZE="2">(xxx) &#147;<B>Security Agreement</B>&#148; means that certain security agreement dated as of the Securities Purchase
Agreement initially by and among A.P. Pharma, Inc., Tang Capital Partners, LP, Baker Bros. Investments II, L.P., Baker Brothers Life Sciences, L.P. and 14159, L.P., pursuant to which the Notes were secured. </FONT></P>
<P STYLE="margin-top:6px;margin-bottom:0px; margin-left:4%; text-indent:4%"><FONT STYLE="font-family:Times New Roman" SIZE="2">(yyy) &#147;<B>Securities Purchase Agreement</B>&#148; means that certain securities purchase agreement dated as of the
Subscription Date by and among A.P. Pharma, Inc., Tang Capital Partners, LP, Baker Bros. Investments II, L.P., Baker Brothers Life Sciences, L.P. and 14159, L.P., pursuant to which the Company issued the Notes. </FONT></P>
<P STYLE="margin-top:6px;margin-bottom:0px; margin-left:4%; text-indent:4%"><FONT STYLE="font-family:Times New Roman" SIZE="2">(zzz) &#147;<B>Share Delivery Date</B>&#148; has the meaning assigned to it in Section&nbsp;3(c)(i) hereof. </FONT></P>
<P STYLE="margin-top:6px;margin-bottom:0px; margin-left:4%; text-indent:4%"><FONT STYLE="font-family:Times New Roman" SIZE="2">(aaaa) <B></B>&#147;<B>Subscription Date</B>&#148;<B></B> means April&nbsp;24, 2011. </FONT></P>
<P STYLE="margin-top:6px;margin-bottom:0px; margin-left:4%; text-indent:4%"><FONT STYLE="font-family:Times New Roman" SIZE="2">(bbbb) &#147;<B>Successor Entity</B>&#148; means the Person, which may be the Company, formed by, resulting from or
surviving any Change of Control or the Person with which such Change of Control shall have been made, provided that if such Person is not a publicly traded entity whose common stock or equivalent equity security is quoted or listed for trading on an
Eligible Market, Successor Entity shall mean such Person&#146;s Parent Entity. </FONT></P>
 <p STYLE="margin-top:0px;margin-bottom:0px"><FONT SIZE="1">&nbsp;</FONT></P> <P STYLE="margin-top:0px;margin-bottom:0px" ALIGN="center"><FONT STYLE="font-family:Times New Roman" SIZE="2">25 </FONT></P>



<p Style='page-break-before:always'>
<HR  SIZE="3" style="COLOR:#999999" WIDTH="100%" ALIGN="CENTER">

 <P STYLE="margin-top:0px;margin-bottom:0px; margin-left:4%; text-indent:4%"><FONT STYLE="font-family:Times New Roman" SIZE="2">(cccc) &#147;<B>Trading Day</B>&#148; means any day on which the Common
Stock is traded on the Principal Market, or, if the Principal Market is not the principal trading market for the Common Stock, then on the principal securities exchange or securities market on which the Common Stock is then traded; provided that
&#147;Trading Day&#148; shall not include any day on which the Common Stock is scheduled to trade on such exchange or market for less than 4.5 hours or any day that the Common Stock is suspended from trading during the final hour of trading on such
exchange or market (or if such exchange or market does not designate in advance the closing time of trading on such exchange or market, then during the hour ending at 4:00:00 p.m., New York Time). </FONT></P>
<P STYLE="margin-top:6px;margin-bottom:0px; margin-left:4%; text-indent:4%"><FONT STYLE="font-family:Times New Roman" SIZE="2">(dddd) <B></B>&#147;<B>Transaction Documents</B>&#148;<B></B> has the meaning ascribed to such term in the Securities
Purchase Agreement. </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px; text-indent:4%"><FONT STYLE="font-family:Times New Roman" SIZE="2">(24) <U>SECURITY</U>. The Notes shall be secured by and to the extent provided in the Security Agreement.
</FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px; text-indent:4%"><FONT STYLE="font-family:Times New Roman" SIZE="2">(25) <U>REGISTERED OBLIGATION</U>. The Company shall establish and maintain a record of ownership (the
&#147;<B>Register</B>&#148;) in which it will register by book entry the interest of the initial Holder and of each subsequent assignee in this Note, and in the right to receive any payments of principal and interest or any other payments hereunder,
and any assignment of any such interest. Notwithstanding anything herein to the contrary, this Note is intended to be treated as a registered obligation for federal income tax purposes and the right, title, and interest of the Holder and its
assignees in and to payments under this Note shall be transferable only upon notation of such transfer in the Register. This Section shall be construed so that the Note is at all times maintained in &#147;registered form&#148; within the meaning of
Sections 163(f), 871(h)(2) and 881(c)(2) of the Internal Revenue Code and any related regulations (or any successor provisions of the Code or such regulations). </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px" ALIGN="center"><FONT
STYLE="font-family:Times New Roman" SIZE="2"><B>[Signature Page Follows] </B></FONT></P>
 <p STYLE="margin-top:0px;margin-bottom:0px"><FONT SIZE="1">&nbsp;</FONT></P> <P STYLE="margin-top:0px;margin-bottom:0px" ALIGN="center"><FONT STYLE="font-family:Times New Roman" SIZE="2">26 </FONT></P>



<p Style='page-break-before:always'>
<HR  SIZE="3" style="COLOR:#999999" WIDTH="100%" ALIGN="CENTER">

 <P STYLE="margin-top:0px;margin-bottom:0px; text-indent:4%"><FONT STYLE="font-family:Times New Roman" SIZE="2"><B>IN WITNESS WHEREOF,</B> the Company has caused this Note to be duly executed as of the
Issuance Date set out above. </FONT></P> <P STYLE="font-size:12px;margin-top:0px;margin-bottom:0px">&nbsp;</P><DIV ALIGN="right">
<TABLE CELLSPACING="0" CELLPADDING="0" WIDTH="40%" BORDER="0">

<TR>
<TD WIDTH="6%"></TD>
<TD VALIGN="bottom" WIDTH="1%"></TD>
<TD WIDTH="9%"></TD>
<TD VALIGN="bottom" WIDTH="1%"></TD>
<TD WIDTH="83%"></TD></TR>
<TR>
<TD VALIGN="top" COLSPAN="5"><FONT STYLE="font-family:Times New Roman" SIZE="2"><B>A.P. PHARMA, INC.</B></FONT></TD></TR>
<TR>
<TD HEIGHT="16"></TD>
<TD HEIGHT="16" COLSPAN="4"></TD></TR>
<TR>
<TD VALIGN="top"><FONT STYLE="font-family:Times New Roman" SIZE="2">By:</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="top" COLSPAN="3"> <P STYLE="margin-top:0px;margin-bottom:1px;border-bottom:1px solid #000000"><FONT STYLE="font-family:Times New Roman" SIZE="2">&nbsp;</FONT></P></TD></TR>
<TR>
<TD VALIGN="top"></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="top"><FONT STYLE="font-family:Times New Roman" SIZE="2">Name:</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2">John Whelan</FONT></TD></TR>
<TR>
<TD VALIGN="top"></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="top"><FONT STYLE="font-family:Times New Roman" SIZE="2">Title:</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2">Chief Executive Officer</FONT></TD></TR></TABLE></DIV>
<P STYLE="margin-top:12px;margin-bottom:0px" ALIGN="center"><FONT STYLE="font-family:Times New Roman" SIZE="2">N<SMALL>OTE</SMALL> </FONT></P>

<p Style='page-break-before:always'>
<HR  SIZE="3" style="COLOR:#999999" WIDTH="100%" ALIGN="CENTER">

 <P STYLE="margin-top:0px;margin-bottom:0px" ALIGN="right"><FONT STYLE="font-family:Times New Roman" SIZE="2"><B>EXHIBIT I </B></FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px" ALIGN="center"><FONT
STYLE="font-family:Times New Roman" SIZE="2"><B>A.P. PHARMA, INC. </B></FONT></P> <P STYLE="margin-top:0px;margin-bottom:0px" ALIGN="center"><FONT STYLE="font-family:Times New Roman" SIZE="2"><B>CONVERSION NOTICE </B></FONT></P>
<P STYLE="margin-top:12px;margin-bottom:0px" ALIGN="center"><FONT STYLE="font-family:Times New Roman" SIZE="2"><B>TO BE EXECUTED BY THE REGISTERED HOLDER TO CONVERT THIS NOTE INTO COMMON STOCK </B></FONT></P>
<P STYLE="margin-top:12px;margin-bottom:0px; text-indent:4%"><FONT STYLE="font-family:Times New Roman" SIZE="2">Reference is made to the Senior Secured Convertible Note due 2021 (the <B></B>&#147;<B>Note</B>&#148;<B></B>) issued to the undersigned
by A.P. Pharma, Inc. (the <B></B>&#147;<B>Company</B>&#148;<B></B>). In accordance with and pursuant to the Note, the undersigned hereby elects to convert the Conversion Amount (as defined in the Note) of the Note indicated below into shares of
Common Stock, par value $0.01 per share (the <B></B>&#147;<B>Common Stock</B>&#148;<B></B>), of the Company as of the date specified below. The undersigned hereby makes the representations and warranties set forth in Section&nbsp;4 of the Securities
Purchase Agreement. </FONT></P> <P STYLE="font-size:12px;margin-top:0px;margin-bottom:0px">&nbsp;</P>
<TABLE CELLSPACING="0" CELLPADDING="0" WIDTH="100%" BORDER="0" ALIGN="center">

<TR>
<TD WIDTH="9%"></TD>
<TD VALIGN="bottom" WIDTH="1%"></TD>
<TD WIDTH="90%"></TD></TR>
<TR>
<TD VALIGN="bottom"> <P STYLE="margin-left:2.00em"><FONT STYLE="font-family:Times New Roman" SIZE="2">Date&nbsp;of&nbsp;Conversion:</FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"> <P STYLE="margin-top:0px;margin-bottom:1px;border-bottom:1px solid #000000"><FONT STYLE="font-family:Times New Roman" SIZE="2">&nbsp;</FONT></P></TD></TR></TABLE>
<TABLE CELLSPACING="0" CELLPADDING="0" WIDTH="100%" BORDER="0" ALIGN="center">

<TR>
<TD WIDTH="28%"></TD>
<TD VALIGN="bottom" WIDTH="1%"></TD>
<TD WIDTH="71%"></TD></TR>
<TR>
<TD HEIGHT="8"></TD>
<TD HEIGHT="8" COLSPAN="2"></TD></TR>

<TR>
<TD VALIGN="bottom"> <P STYLE="margin-left:2.00em"><FONT STYLE="font-family:Times New Roman" SIZE="2">Aggregate&nbsp;Conversion&nbsp;Amount&nbsp;to&nbsp;be&nbsp;converted:</FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"> <P STYLE="margin-top:0px;margin-bottom:1px;border-bottom:1px solid #000000"><FONT STYLE="font-family:Times New Roman" SIZE="2">&nbsp;</FONT></P></TD></TR></TABLE> <P STYLE="margin-top:12px;margin-bottom:0px"><FONT
STYLE="font-family:Times New Roman" SIZE="2">Please confirm the following information: </FONT></P> <P STYLE="font-size:12px;margin-top:0px;margin-bottom:0px">&nbsp;</P>
<TABLE CELLSPACING="0" CELLPADDING="0" WIDTH="100%" BORDER="0" ALIGN="center">

<TR>
<TD WIDTH="7%"></TD>
<TD VALIGN="bottom" WIDTH="1%"></TD>
<TD WIDTH="92%"></TD></TR>
<TR>
<TD VALIGN="top"> <P STYLE="margin-left:2.00em"><FONT STYLE="font-family:Times New Roman" SIZE="2">Conversion&nbsp;Rate:</FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="top"> <P STYLE="margin-top:0px;margin-bottom:1px;border-bottom:1px solid #000000"><FONT STYLE="font-family:Times New Roman" SIZE="2">&nbsp;</FONT></P></TD></TR></TABLE>
<TABLE CELLSPACING="0" CELLPADDING="0" WIDTH="100%" BORDER="0" ALIGN="center">

<TR>
<TD WIDTH="27%"></TD>
<TD VALIGN="bottom" WIDTH="1%"></TD>
<TD WIDTH="72%"></TD></TR>
<TR>
<TD HEIGHT="8"></TD>
<TD HEIGHT="8" COLSPAN="2"></TD></TR>

<TR>
<TD VALIGN="top"> <P STYLE="margin-left:2.00em"><FONT STYLE="font-family:Times New Roman" SIZE="2">Number&nbsp;of&nbsp;shares&nbsp;of&nbsp;Common&nbsp;Stock&nbsp;to&nbsp;be&nbsp;issued:</FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="top"> <P STYLE="margin-top:0px;margin-bottom:1px;border-bottom:1px solid #000000"><FONT STYLE="font-family:Times New Roman" SIZE="2">&nbsp;</FONT></P></TD></TR></TABLE>
<TABLE CELLSPACING="0" CELLPADDING="0" WIDTH="100%" BORDER="0" ALIGN="center">

<TR>
<TD WIDTH="18%"></TD>
<TD VALIGN="bottom" WIDTH="1%"></TD>
<TD WIDTH="81%"></TD></TR>
<TR>
<TD HEIGHT="8"></TD>
<TD HEIGHT="8" COLSPAN="2"></TD></TR>

<TR>
<TD VALIGN="top"> <P STYLE="margin-left:2.00em"><FONT STYLE="font-family:Times New Roman" SIZE="2">Common&nbsp;Stock&nbsp;Beneficially&nbsp;Owned:</FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="top"> <P STYLE="margin-top:0px;margin-bottom:1px;border-bottom:1px solid #000000"><FONT STYLE="font-family:Times New Roman" SIZE="2">&nbsp;</FONT></P></TD></TR></TABLE> <P STYLE="margin-top:12px;margin-bottom:0px"><FONT
STYLE="font-family:Times New Roman" SIZE="2">Please issue the Common Stock into which the Note is being converted in the following name and to the following address: </FONT></P> <P STYLE="font-size:12px;margin-top:0px;margin-bottom:0px">&nbsp;</P>
<TABLE CELLSPACING="0" CELLPADDING="0" WIDTH="100%" BORDER="0" ALIGN="center">

<TR>
<TD WIDTH="8%"></TD>
<TD VALIGN="bottom" WIDTH="1%"></TD>
<TD WIDTH="91%"></TD></TR>
<TR>
<TD VALIGN="top"> <P STYLE="margin-left:2.00em"><FONT STYLE="font-family:Times New Roman" SIZE="2">Issue&nbsp;to:</FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"> <P STYLE="margin-top:0px;margin-bottom:1px;border-bottom:1px solid #000000"><FONT STYLE="font-family:Times New Roman" SIZE="2">&nbsp;</FONT></P></TD></TR>
<TR>
<TD VALIGN="top"></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"> <P STYLE="margin-top:0px;margin-bottom:1px;border-bottom:1px solid #000000"><FONT STYLE="font-family:Times New Roman" SIZE="2">&nbsp;</FONT></P></TD></TR>
<TR>
<TD VALIGN="top"></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"> <P STYLE="margin-top:0px;margin-bottom:1px;border-bottom:1px solid #000000"><FONT STYLE="font-family:Times New Roman" SIZE="2">&nbsp;</FONT></P></TD></TR></TABLE>
<TABLE CELLSPACING="0" CELLPADDING="0" WIDTH="100%" BORDER="0" ALIGN="center">

<TR>
<TD WIDTH="7%"></TD>
<TD VALIGN="bottom" WIDTH="1%"></TD>
<TD WIDTH="92%"></TD></TR>
<TR>
<TD HEIGHT="8"></TD>
<TD HEIGHT="8" COLSPAN="2"></TD></TR>
<TR>
<TD VALIGN="top"> <P STYLE="margin-left:2.00em"><FONT STYLE="font-family:Times New Roman" SIZE="2">Facsimile&nbsp;Number:</FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"> <P STYLE="margin-top:0px;margin-bottom:1px;border-bottom:1px solid #000000" ALIGN="right"><FONT STYLE="font-family:Times New Roman" SIZE="2">&nbsp;</FONT></P></TD></TR></TABLE>
<TABLE CELLSPACING="0" CELLPADDING="0" WIDTH="100%" BORDER="0" ALIGN="center">

<TR>
<TD WIDTH="10%"></TD>
<TD VALIGN="bottom" WIDTH="1%"></TD>
<TD WIDTH="88%"></TD>
<TD VALIGN="bottom" WIDTH="1%"></TD>
<TD WIDTH="3%"></TD></TR>
<TR>
<TD HEIGHT="8"></TD>
<TD HEIGHT="8" COLSPAN="2"></TD>
<TD HEIGHT="8" COLSPAN="2"></TD></TR>

<TR>
<TD VALIGN="top"> <P STYLE="margin-left:2.00em"><FONT STYLE="font-family:Times New Roman" SIZE="2">Authorization:</FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="top"> <P STYLE="margin-top:0px;margin-bottom:1px;border-bottom:1px solid #000000"><FONT STYLE="font-family:Times New Roman" SIZE="2">&nbsp;</FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"></TD></TR></TABLE>
<TABLE CELLSPACING="0" CELLPADDING="0" WIDTH="100%" BORDER="0" ALIGN="center">

<TR>
<TD WIDTH="7%"></TD>
<TD VALIGN="bottom" WIDTH="1%"></TD>
<TD WIDTH="92%"></TD></TR>
<TR>
<TD HEIGHT="8"></TD>
<TD HEIGHT="8" COLSPAN="2"></TD></TR>

<TR>
<TD VALIGN="top"> <P STYLE="margin-left:4.00em"><FONT STYLE="font-family:Times New Roman" SIZE="2">By:</FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"> <P STYLE="margin-top:0px;margin-bottom:1px;border-bottom:1px solid #000000"><FONT STYLE="font-family:Times New Roman" SIZE="2">&nbsp;</FONT></P></TD></TR>
<TR>
<TD VALIGN="top"></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="center"><FONT STYLE="font-family:Times New Roman" SIZE="2">Title:&nbsp;&nbsp;<U>&nbsp;&nbsp;</U></FONT></TD></TR></TABLE>
<TABLE CELLSPACING="0" CELLPADDING="0" WIDTH="100%" BORDER="0" ALIGN="center">

<TR>
<TD WIDTH="1%"></TD>
<TD VALIGN="bottom" WIDTH="1%"></TD>
<TD WIDTH="98%"></TD></TR>
<TR>
<TD HEIGHT="8"></TD>
<TD HEIGHT="8" COLSPAN="2"></TD></TR>

<TR>
<TD VALIGN="top"><FONT STYLE="font-family:Times New Roman" SIZE="2">Dated:</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"> <P STYLE="margin-top:0px;margin-bottom:1px;border-bottom:1px solid #000000"><FONT STYLE="font-family:Times New Roman" SIZE="2">&nbsp;</FONT></P></TD></TR></TABLE>
<TABLE CELLSPACING="0" CELLPADDING="0" WIDTH="100%" BORDER="0" ALIGN="center">

<TR>
<TD WIDTH="9%"></TD>
<TD VALIGN="bottom" WIDTH="1%"></TD>
<TD WIDTH="90%"></TD></TR>
<TR>
<TD HEIGHT="8"></TD>
<TD HEIGHT="8" COLSPAN="2"></TD></TR>

<TR>
<TD VALIGN="top"> <P STYLE="margin-left:2.00em"><FONT STYLE="font-family:Times New Roman" SIZE="2">Account&nbsp;Number:</FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"> <P STYLE="margin-top:0px;margin-bottom:1px;border-bottom:1px solid #000000"><FONT STYLE="font-family:Times New Roman" SIZE="2">&nbsp;</FONT></P></TD></TR></TABLE>
<TABLE CELLSPACING="0" CELLPADDING="0" WIDTH="100%" BORDER="0" ALIGN="center">

<TR>
<TD WIDTH="9%"></TD>
<TD VALIGN="bottom" WIDTH="1%"></TD>
<TD WIDTH="90%"></TD></TR>

<TR>
<TD VALIGN="top" COLSPAN="3"> <P STYLE="margin-left:2.00em"><FONT STYLE="font-family:Times New Roman" SIZE="2">&nbsp;&nbsp;(if&nbsp;electronic&nbsp;book&nbsp;entry&nbsp;transfer)</FONT></P></TD></TR></TABLE>

<p Style='page-break-before:always'>
<HR  SIZE="3" style="COLOR:#999999" WIDTH="100%" ALIGN="CENTER">


<TABLE CELLSPACING="0" CELLPADDING="0" WIDTH="100%" BORDER="0" ALIGN="center">

<TR>
<TD></TD>
<TD VALIGN="bottom" WIDTH="1%"></TD>
<TD WIDTH="15%"></TD>
<TD VALIGN="bottom" WIDTH="1%"></TD>
<TD WIDTH="83%"></TD></TR>
<TR>
<TD VALIGN="top"></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="top"> <P STYLE="margin-left:2.00em"><FONT STYLE="font-family:Times New Roman" SIZE="2">Transaction&nbsp;Code&nbsp;Number:</FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"> <P STYLE="margin-top:0px;margin-bottom:1px;border-bottom:1px solid #000000" ALIGN="right"><FONT STYLE="font-family:Times New Roman" SIZE="2">&nbsp;</FONT></P></TD></TR>
<TR>
<TD VALIGN="top"></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="top" COLSPAN="3"> <P STYLE="margin-left:2.00em"><FONT STYLE="font-family:Times New Roman" SIZE="2">&nbsp;&nbsp;(if&nbsp;electronic&nbsp;book&nbsp;entry&nbsp;transfer)</FONT></P></TD></TR></TABLE>
<P STYLE="margin-top:24px;margin-bottom:0px" ALIGN="center"><FONT STYLE="font-family:Times New Roman" SIZE="2"><B>ACKNOWLEDGMENT </B></FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px; text-indent:4%"><FONT
STYLE="font-family:Times New Roman" SIZE="2">The Company hereby acknowledges this Conversion Notice and hereby directs <U>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</U>,
the Company&#146;s transfer agent (the &#147;<B>Transfer Agent</B>&#148;), to issue the above indicated number of shares of Common Stock in accordance with the Transfer Agent Instructions dated
<U>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</U> <U>&nbsp;&nbsp;&nbsp;&nbsp;</U>, 20<U>&nbsp;&nbsp;&nbsp;&nbsp;</U> from the Company and acknowledged and agreed to by Transfer Agent. </FONT></P>
<P STYLE="font-size:12px;margin-top:0px;margin-bottom:0px">&nbsp;</P><DIV ALIGN="right">
<TABLE CELLSPACING="0" CELLPADDING="0" WIDTH="40%" BORDER="0">

<TR>
<TD WIDTH="6%"></TD>
<TD VALIGN="bottom" WIDTH="3%"></TD>
<TD WIDTH="91%"></TD></TR>
<TR>
<TD VALIGN="top" COLSPAN="3"><FONT STYLE="font-family:Times New Roman" SIZE="2"><B>A.P. PHARMA, INC.</B></FONT></TD></TR>
<TR>
<TD HEIGHT="16"></TD>
<TD HEIGHT="16" COLSPAN="2"></TD></TR>
<TR>
<TD VALIGN="top"><FONT STYLE="font-family:Times New Roman" SIZE="2">By:</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="top"> <P STYLE="margin-top:0px;margin-bottom:1px;border-bottom:1px solid #000000"><FONT STYLE="font-family:Times New Roman" SIZE="2">&nbsp;</FONT></P></TD></TR>
<TR>
<TD VALIGN="top"></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="top"><FONT STYLE="font-family:Times New Roman" SIZE="2">Name:</FONT></TD></TR>
<TR>
<TD VALIGN="top"></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="top"><FONT STYLE="font-family:Times New Roman" SIZE="2">Title:</FONT></TD></TR></TABLE></DIV>
</BODY></HTML>
</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-10.3
<SEQUENCE>4
<FILENAME>dex103.htm
<DESCRIPTION>SECURITY AGREEMENT
<TEXT>
<HTML><HEAD>
<TITLE>Security Agreement</TITLE>
</HEAD>
 <BODY BGCOLOR="WHITE">

 <P STYLE="margin-top:0px;margin-bottom:0px" ALIGN="right"><FONT STYLE="font-family:Times New Roman" SIZE="2"><B>Exhibit 10.3 </B></FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px" ALIGN="center"><FONT
STYLE="font-family:Times New Roman" SIZE="2"><B>SECURITY AGREEMENT </B></FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px; text-indent:8%"><FONT STYLE="font-family:Times New Roman" SIZE="2">This <B>SECURITY AGREEMENT</B> (this
&#147;<U>Agreement</U>&#148;), dated as of April&nbsp;24, 2011 among <B>A.P. PHARMA, INC.</B> and those additional entities that hereafter become parties hereto by executing the form of Supplement attached hereto as <U>Annex 1</U>
(&#147;<U>Grantor</U>&#148;), and <B>TANG CAPITAL PARTNERS, LP, </B>in its capacity as representative of the Purchasers (together with its successors, &#147;<U>Agent</U>&#148;). </FONT></P>
<P STYLE="margin-top:24px;margin-bottom:0px" ALIGN="center"><FONT STYLE="font-family:Times New Roman" SIZE="2"><B><U>RECITALS </U></B></FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px; text-indent:8%"><FONT
STYLE="font-family:Times New Roman" SIZE="2"><B>WHEREAS</B>, Pursuant to that certain Securities Purchase Agreement, dated as of April&nbsp;24, 2011 (the &#147;<U>Securities Purchase Agreement</U>&#148;), by and among A.P. Pharma, Inc.
(&#147;<U>Debtor</U>&#148;), Tang Capital Partners, LP and Baker Bros. Investments II, L.P., Baker Brothers Life Sciences, L.P., and 14159, L.P., each as a Purchaser (collectively, the &#147;<U>Purchasers</U>&#148; and individually, a
&#147;<U>Purchaser</U>&#148;), Debtor has agreed to issue to the Purchasers, and the Purchasers have agreed to purchase from Debtor, the Notes, and </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px; text-indent:8%"><FONT
STYLE="font-family:Times New Roman" SIZE="2"><B>WHEREAS</B>, This Security Agreement is integral to the transactions contemplated by the Securities Purchase Agreement and the Notes, and the execution and delivery hereof are conditions precedent to
the willingness of Purchasers to purchase and extend credit under the Notes, </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px; text-indent:8%"><FONT STYLE="font-family:Times New Roman" SIZE="2"><B>WHEREAS</B>, Agent has agreed to act as agent
for the benefit of the Purchaser Group in connection with this Agreement; and </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px; text-indent:8%"><FONT STYLE="font-family:Times New Roman" SIZE="2"><B>NOW, THEREFORE</B>, for and in consideration
of the recitals made above and other good and valuable consideration, the receipt, sufficiency and adequacy of which are hereby acknowledged, the parties hereto agree as follows: </FONT></P>
<P STYLE="margin-top:12px;margin-bottom:0px; text-indent:8%"><FONT STYLE="font-family:Times New Roman" SIZE="2">1. <U>Defined Terms</U>. All capitalized terms used herein (including in the preamble and recitals hereof) without definition shall have
the meanings ascribed thereto in the Securities Purchase Agreement and the Notes, as the context requires. Any terms used in this Agreement that are defined in the Code shall be construed and defined as set forth in the Code unless otherwise defined
herein or in the Securities Purchase Agreement or the Notes; <U>provided</U>, <U>however</U>, that if the Code is used to define any term used herein and if such term is defined differently in different Articles of the Code, the definition of such
term contained in Article 9 of the Code shall govern. In addition to those terms defined elsewhere in this Agreement, as used in this Agreement, the following terms shall have the following meanings: </FONT></P>
<P STYLE="margin-top:12px;margin-bottom:0px; text-indent:8%"><FONT STYLE="font-family:Times New Roman" SIZE="2">(a) &#147;<U>Account</U>&#148; means an account (as that term is defined in the Code). </FONT></P>
<P STYLE="margin-top:12px;margin-bottom:0px; text-indent:8%"><FONT STYLE="font-family:Times New Roman" SIZE="2">(b) &#147;<U>Account Debtor</U>&#148; means an account debtor (as that term is defined in the Code). </FONT></P>
<P STYLE="margin-top:12px;margin-bottom:0px; text-indent:8%"><FONT STYLE="font-family:Times New Roman" SIZE="2">(c) &#147;<U>Agent</U>&#148; has the meaning specified in the preamble hereto. </FONT></P>
 <p STYLE="margin-top:0px;margin-bottom:0px"><FONT SIZE="1">&nbsp;</FONT></P> <P STYLE="margin-top:0px;margin-bottom:0px" ALIGN="center"><FONT STYLE="font-family:Times New Roman" SIZE="2">1 </FONT></P>


<p Style='page-break-before:always'>
<HR  SIZE="3" style="COLOR:#999999" WIDTH="100%" ALIGN="CENTER">

 <P STYLE="margin-top:0px;margin-bottom:0px; text-indent:8%"><FONT STYLE="font-family:Times New Roman" SIZE="2">(d) &#147;<U>Agent&#146;s Liens</U>&#148; means the Liens granted by Grantor to the
Purchasers and Agent pursuant to this Agreement. </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px; text-indent:8%"><FONT STYLE="font-family:Times New Roman" SIZE="2">(e) &#147;<U>Bankruptcy Law</U>&#148; has the meaning specified in the
Securities Purchase Agreement. </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px; text-indent:8%"><FONT STYLE="font-family:Times New Roman" SIZE="2">(f) &#147;<U>Books</U>&#148; means books and records (including Grantor&#146;s Records
indicating, summarizing, or evidencing Grantor&#146;s assets (including the Collateral) or liabilities, Grantor&#146;s Records relating to Grantor&#146;s business operations or financial condition, and Grantor&#146;s goods or General Intangibles
related to such information). </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px; text-indent:8%"><FONT STYLE="font-family:Times New Roman" SIZE="2">(g) &#147;<U>Chattel Paper</U>&#148; means chattel paper (as that term is defined in the Code)
and includes tangible chattel paper and electronic chattel paper. </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px; text-indent:8%"><FONT STYLE="font-family:Times New Roman" SIZE="2">(h) &#147;<U>Code</U>&#148; means the Delaware Uniform
Commercial Code, as in effect from time to time; <U>provided</U>, <U>however</U>, that in the event that, by reason of mandatory provisions of law, any or all of the attachment, perfection, priority, or remedies with respect to Agent&#146;s Lien on
any Collateral is governed by the Uniform Commercial Code as enacted and in effect in a jurisdiction other than the State of Delaware, the term &#147;Code&#148; shall mean the Uniform Commercial Code as enacted and in effect in such other
jurisdiction solely for purposes of the provisions thereof relating to such attachment, perfection, priority, or remedies. </FONT></P>
<P STYLE="margin-top:12px;margin-bottom:0px; text-indent:8%"><FONT STYLE="font-family:Times New Roman" SIZE="2">(i) &#147;<U>Collateral</U>&#148; has the meaning specified in <U>Section&nbsp;2</U>. </FONT></P>
<P STYLE="margin-top:12px;margin-bottom:0px; text-indent:8%"><FONT STYLE="font-family:Times New Roman" SIZE="2">(j) &#147;<U>Commercial Tort Claims</U>&#148; means commercial tort claims (as that term is defined in the Code), and includes those
commercial tort claims listed on <U>Schedule 1</U> attached hereto (&#147;<U>Commercial Tort Claims</U>&#148;). </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px; text-indent:8%"><FONT STYLE="font-family:Times New Roman" SIZE="2">(k)
&#147;<U>Control Agreement</U>&#148; means a deposit account control agreement or securities account control agreement that provides Agent with &#147;control&#148; in accordance with Sections 8-106, 9-104, 9-105, 9-106, and 9-107 of the Code and
otherwise in such form reasonably acceptable to Agent. </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px; text-indent:8%"><FONT STYLE="font-family:Times New Roman" SIZE="2">(l) &#147;<U>Copyrights</U>&#148; means copyrights and copyright
registrations, and also includes (i)&nbsp;any copyright registrations and recordings thereof and all applications in connection therewith, (ii)&nbsp;all reissues, continuations, extensions or renewals thereof, (iii)&nbsp;all income, royalties,
damages and payments now and hereafter due or payable under and with respect thereto, including payments under all licenses entered into in connection therewith and damages and payments for past or future infringements or dilutions thereof,
(iv)&nbsp;the right to sue for past, present and future infringements and dilutions thereof, (v)&nbsp;the goodwill of Grantor&#146;s business symbolized by the foregoing or connected therewith, and (vi)&nbsp;all of Grantor&#146;s rights
corresponding thereto throughout the world. </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px; text-indent:8%"><FONT STYLE="font-family:Times New Roman" SIZE="2">(m) &#147;<U>Deposit Account</U>&#148; means a deposit account (as that term is
defined in the Code) other than the Excluded Deposit Account. </FONT></P>
 <p STYLE="margin-top:0px;margin-bottom:0px"><FONT SIZE="1">&nbsp;</FONT></P> <P STYLE="margin-top:0px;margin-bottom:0px" ALIGN="center"><FONT STYLE="font-family:Times New Roman" SIZE="2">-2-
</FONT></P>


<p Style='page-break-before:always'>
<HR  SIZE="3" style="COLOR:#999999" WIDTH="100%" ALIGN="CENTER">

 <P STYLE="margin-top:0px;margin-bottom:0px; text-indent:8%"><FONT STYLE="font-family:Times New Roman" SIZE="2">(n) &#147;<U>Environmental Laws</U>&#148; has the meaning specified in the Securities
Purchase Agreement. </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px; text-indent:8%"><FONT STYLE="font-family:Times New Roman" SIZE="2">(o) &#147;<U>Equipment</U>&#148; means equipment (as that term is defined in the Code). </FONT></P>
<P STYLE="margin-top:12px;margin-bottom:0px; text-indent:8%"><FONT STYLE="font-family:Times New Roman" SIZE="2">(p) &#147;<U>Event of Default</U>&#148; has the meaning specified in the Notes. </FONT></P>
<P STYLE="margin-top:12px;margin-bottom:0px; text-indent:8%"><FONT STYLE="font-family:Times New Roman" SIZE="2">(q) &#147;<U>Excluded Deposit Account</U>&#148; means the Wells Fargo checking account number 028-5064622, provided that to the extent
the amount deposited in such account exceeds $314,715, then such account shall become a &#147;Deposit Account&#148; for all purposes hereunder. </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px; text-indent:8%"><FONT
STYLE="font-family:Times New Roman" SIZE="2">(r) &#147;<U>Expenses</U>&#148; means all (a)&nbsp;out-of pocket costs or expenses (including taxes, and insurance premiums) required to be paid by Debtor under any of the Note Documents that are paid,
advanced, or incurred by the Purchaser Group in accordance with the terms of this Agreement and the other Note Documents, (b)&nbsp;out-of-pocket fees or charges paid or incurred by Agent in connection with the Purchaser Group&#146;s transactions
with Debtor, including, fees or charges for photocopying, notarization, couriers and messengers, telecommunication, public record searches (including tax lien, litigation, and UCC searches and including searches with the patent and trademark office,
the copyright office, or the department of motor vehicles), filing, recording, publication, appraisal (including periodic collateral appraisals or business valuations to the extent of the fees and charges (and up to the amount of any limitation)
contained in the Agreement), (c)&nbsp;out-of pocket costs and expenses incurred by Agent in the disbursement of funds to Debtor or other members of the Purchaser Group (by wire transfer or otherwise), (d)&nbsp;out-of pocket charges paid or incurred
by Agent resulting from the dishonor of checks, (e)&nbsp;reasonable costs and expenses paid or incurred by the Purchaser Group to correct any default or enforce any provision of the Note Documents, or in gaining possession of, maintaining, handling,
preserving, storing, shipping, selling, preparing for sale, or advertising to sell the Collateral, or any portion thereof, irrespective of whether a sale is consummated, (f)&nbsp;out-of pocket audit fees and expenses (including travel, meals, and
lodging) of Agent related to any inspections or audits to the extent of the fees and charges (and up to the amount of any limitation) contained in the Note Documents, (g)&nbsp;reasonable costs and expenses of third party claims or any other suit
paid or incurred by the Purchaser Group in enforcing or defending the Note Documents or in connection with the transactions contemplated by the Note Documents or the Purchaser Group&#146;s relationship Debtor, (h)&nbsp;Agent&#146;s and each
Purchaser&#146;s reasonable costs and expenses (including attorneys fees) incurred in advising, structuring, drafting, reviewing, administering (including travel, meals, and lodging) or amending the Note Documents, and (i)&nbsp;Agent&#146;s and each
Purchaser&#146;s reasonable costs and expenses (including attorneys, accountants, consultants, and other advisors fees and expenses) incurred in terminating, enforcing (including attorneys, accountants, consultants, and other advisors fees and
expenses incurred in connection with a &#147;workout,&#148; a &#147;restructuring,&#148; or an Insolvency Proceeding concerning Debtor or in exercising rights or remedies under the Note Documents), or defending the Note Documents, irrespective of
whether suit is brought, or in taking any Remedial Action concerning the Collateral; provided that, notwithstanding anything herein to the contrary, the fees and </FONT></P>
 <p STYLE="margin-top:0px;margin-bottom:0px"><FONT SIZE="1">&nbsp;</FONT></P> <P STYLE="margin-top:0px;margin-bottom:0px" ALIGN="center"><FONT STYLE="font-family:Times New Roman" SIZE="2">-3-
</FONT></P>


<p Style='page-break-before:always'>
<HR  SIZE="3" style="COLOR:#999999" WIDTH="100%" ALIGN="CENTER">

 <P STYLE="margin-top:0px;margin-bottom:0px"><FONT STYLE="font-family:Times New Roman" SIZE="2">
expenses specified in this definition do not include fees and expenses solely related to the Agent&#146;s or any Purchasers&#146; role as an equity investor of Debtor. </FONT></P>
<P STYLE="margin-top:12px;margin-bottom:0px; text-indent:8%"><FONT STYLE="font-family:Times New Roman" SIZE="2">(s) &#147;<U>General Intangibles</U>&#148; means general intangibles (as that term is defined in the Code) and, in any event, includes
payment intangibles, contract rights, rights to payment, rights arising under common law, statutes, or regulations, choses or things in action, goodwill (including the goodwill associated with any Trademark, Patent, or Copyright), Patents,
Trademarks, Copyrights, URLs and domain names, industrial designs, other industrial or Intellectual Property or rights therein or applications therefor, whether under license or otherwise, programs, programming materials, blueprints, drawings,
purchase orders, customer lists, monies due or recoverable from pension funds, route lists, rights to payment and other rights under any royalty or licensing agreements, including Intellectual Property Licenses, infringement claims, computer
programs, information contained on computer disks or tapes, software, literature, reports, catalogs, pension plan refunds, pension plan refund claims, insurance premium rebates, tax refunds, and tax refund claims, interests in a partnership or
limited liability company which do not constitute a security under Article 8 of the Code, and any other personal property other than Commercial Tort Claims, money, Accounts, Chattel Paper, Deposit Accounts, goods, Investment Related Property,
Negotiable Collateral, and oil, gas, or other minerals before extraction. </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px; text-indent:8%"><FONT STYLE="font-family:Times New Roman" SIZE="2">(t) &#147;<U>Goods</U>&#148; means goods (as that
term is defined in the Code). </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px; text-indent:8%"><FONT STYLE="font-family:Times New Roman" SIZE="2">(u) &#147;<U>Grantor</U>&#148; has the meaning specified in the recitals to this Agreement.
</FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px; text-indent:8%"><FONT STYLE="font-family:Times New Roman" SIZE="2">(v) &#147;<U>Hazardous Materials</U>&#148; has the meaning specified in the Securities Purchase Agreement. </FONT></P>
<P STYLE="margin-top:12px;margin-bottom:0px; text-indent:8%"><FONT STYLE="font-family:Times New Roman" SIZE="2">(w) &#147;<U>Insolvency Proceeding</U>&#148; means any proceeding commenced by or against any Person under any provision of the
Bankruptcy Law or under any other state or federal bankruptcy or insolvency law, assignments for the benefit of creditors, formal or informal moratoria, compositions, extensions generally with creditors, or proceedings seeking reorganization,
arrangement, or other similar relief. </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px; text-indent:8%"><FONT STYLE="font-family:Times New Roman" SIZE="2">(x) &#147;<U>Intellectual Property</U>&#148; means the Patents, Copyrights, Trademarks,
the goodwill associated with such Trademarks, trade secrets and customer lists, and Intellectual Property Licenses, in each case other than the King George Property, but solely during such time that the King George Property is subject to the lien
described in the definition thereof. </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px; text-indent:8%"><FONT STYLE="font-family:Times New Roman" SIZE="2">(y) &#147;<U>Intellectual Property Licenses</U>&#148; means rights under or interests in
any patent, trademark, copyright or other intellectual property, including software license agreements with any other party, whether Grantor is a licensee or licensor under any such license agreement, including the license agreements listed on
<U>Schedule 2 </U>attached hereto and made a part hereof, in each case other than the King George Property, but solely during such time that the King George Property is subject to the lien described in the definition thereof. </FONT></P>
<P STYLE="margin-top:12px;margin-bottom:0px; text-indent:8%"><FONT STYLE="font-family:Times New Roman" SIZE="2">(z) &#147;<U>Inventory</U>&#148; means inventory (as that term is defined in the Code). </FONT></P>
 <p STYLE="margin-top:0px;margin-bottom:0px"><FONT SIZE="1">&nbsp;</FONT></P> <P STYLE="margin-top:0px;margin-bottom:0px" ALIGN="center"><FONT STYLE="font-family:Times New Roman" SIZE="2">-4-
</FONT></P>


<p Style='page-break-before:always'>
<HR  SIZE="3" style="COLOR:#999999" WIDTH="100%" ALIGN="CENTER">

 <P STYLE="margin-top:0px;margin-bottom:0px; text-indent:8%"><FONT STYLE="font-family:Times New Roman" SIZE="2">(aa) &#147;<U>Investment Related Property</U>&#148; means (i)&nbsp;investment property (as
that term is defined in the Code), and (ii)&nbsp;all of the following (regardless of whether classified as investment property under the Code): all Pledged Interests, Pledged Operating Agreements, and Pledged Partnership Agreements. </FONT></P>
<P STYLE="margin-top:12px;margin-bottom:0px; text-indent:8%"><FONT STYLE="font-family:Times New Roman" SIZE="2">(bb) &#147;<U>King George Property</U>&#148; means the collateral in which King George Holdings Luxembourg IIA S.&agrave; r.l.
(&#147;King George&#148;) has received a security interest pursuant to that certain Security Agreement dated as of January&nbsp;17, 2006 by and between Debtor and King George. </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px; text-indent:8%"><FONT
STYLE="font-family:Times New Roman" SIZE="2">(cc) &#147;<U>Mortgages</U>&#148; means, individually and collectively, one or more mortgages, deeds of trust, or deeds to secure debt, executed and delivered by Grantor in favor of Agent, in form and
substance satisfactory to Agent, that encumber the Real Property. </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px; text-indent:8%"><FONT STYLE="font-family:Times New Roman" SIZE="2">(dd) &#147;<U>Note Document</U>&#148; means the Securities
Purchase Agreement, Notes, this Agreement, the Patent Security Agreement and any other agreement entered into, now or in the future, by Debtor and in connection with the Securities Purchase Agreement or Notes. </FONT></P>
<P STYLE="margin-top:12px;margin-bottom:0px; text-indent:8%"><FONT STYLE="font-family:Times New Roman" SIZE="2">(ee) &#147;<U>Notes</U>&#148; shall have the meaning set forth in the Securities Purchase Agreement. </FONT></P>
<P STYLE="margin-top:12px;margin-bottom:0px; text-indent:8%"><FONT STYLE="font-family:Times New Roman" SIZE="2">(ff) &#147;<U>Negotiable Collateral</U>&#148; means letters of credit, letter-of-credit rights, instruments, promissory notes, drafts,
and documents. </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px; text-indent:8%"><FONT STYLE="font-family:Times New Roman" SIZE="2">(gg) &#147;<U>Patents</U>&#148; means patents and patent applications, and also includes (i)&nbsp;the patents
and patent applications listed on <U>Schedule 3</U> attached hereto and made a part hereof, (ii)&nbsp;all renewals thereof, (iii)&nbsp;all income, royalties, damages and payments now and hereafter due or payable under and with respect thereto,
including payments under all licenses entered into in connection therewith and damages and payments for past or future infringements or dilutions thereof, (iv)&nbsp;the right to sue for past, present and future infringements and dilutions thereof,
and (v)&nbsp;all of Grantor&#146;s rights corresponding thereto throughout the world, in each case other than the King George Property, but solely during such time that the King George Property is subject to the lien described in the definition
thereof. </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px; text-indent:8%"><FONT STYLE="font-family:Times New Roman" SIZE="2">(hh) &#147;<U>Patent Security Agreement</U>&#148; means each Patent Security Agreement among Grantor and Agent, in
substantially the form of <U>Exhibit A</U> attached hereto, pursuant to which Grantor has granted to the Purchaser Group a security interest in all its Patents. </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px; text-indent:8%"><FONT
STYLE="font-family:Times New Roman" SIZE="2">(ii) &#147;<U>Permitted Liens</U>&#148; shall have the meaning set forth in the Notes. </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px; text-indent:8%"><FONT
STYLE="font-family:Times New Roman" SIZE="2">(jj) &#147;<U>Person</U>&#148; has the meaning specified in the Securities Purchase Agreement. </FONT></P>
 <p STYLE="margin-top:0px;margin-bottom:0px"><FONT SIZE="1">&nbsp;</FONT></P> <P STYLE="margin-top:0px;margin-bottom:0px" ALIGN="center"><FONT STYLE="font-family:Times New Roman" SIZE="2">-5-
</FONT></P>


<p Style='page-break-before:always'>
<HR  SIZE="3" style="COLOR:#999999" WIDTH="100%" ALIGN="CENTER">

 <P STYLE="margin-top:0px;margin-bottom:0px; text-indent:8%"><FONT STYLE="font-family:Times New Roman" SIZE="2">(kk) &#147;<U>Pledged Companies</U>&#148; means, each Person listed on <U>Schedule 4</U>
hereto as a &#147;Pledged Company&#148;, together with each other Person, all or a portion of whose Stock, is acquired or otherwise owned by Grantor after the date hereof. </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px; text-indent:8%"><FONT
STYLE="font-family:Times New Roman" SIZE="2">(ll) &#147;<U>Pledged Interests</U>&#148; means all of Grantor&#146;s right, title and interest in and to all of the Stock now or hereafter owned by Grantor, regardless of class or designation, including
all substitutions therefor and replacements thereof, all proceeds thereof and all rights relating thereto, also including any certificates representing the Stock, the right to receive any certificates representing any of the Stock, all warrants,
options, share appreciation rights and other rights, contractual or otherwise, in respect thereof, and the right to receive dividends, distributions of income, profits, surplus, or other compensation by way of income or liquidating distributions, in
cash or in kind, and cash, instruments, and other property from time to time received, receivable, or otherwise distributed in respect of or in addition to, in substitution of, on account of, or in exchange for any or all of the foregoing.
</FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px; text-indent:8%"><FONT STYLE="font-family:Times New Roman" SIZE="2">(mm) &#147;<U>Pledged Interests Addendum</U>&#148; means a Pledged Interests Addendum substantially in the form of <U>Exhibit
B</U> to this Agreement. </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px; text-indent:8%"><FONT STYLE="font-family:Times New Roman" SIZE="2">(nn) &#147;<U>Pledged Operating Agreements</U>&#148; means all of Grantor&#146;s rights, powers, and
remedies under the limited liability company operating agreements of each of the Pledged Companies that are limited liability companies. </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px; text-indent:8%"><FONT
STYLE="font-family:Times New Roman" SIZE="2">(oo) &#147;<U>Pledged Partnership Agreements</U>&#148; means all of Grantor&#146;s rights, powers, and remedies under the partnership agreements of each of the Pledged Companies that are partnerships.
</FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px; text-indent:8%"><FONT STYLE="font-family:Times New Roman" SIZE="2">(pp) &#147;<U>Proceeds</U>&#148; has the meaning specified in <U>Section&nbsp;2</U>. </FONT></P>
<P STYLE="margin-top:12px;margin-bottom:0px; text-indent:8%"><FONT STYLE="font-family:Times New Roman" SIZE="2">(qq) &#147;<U>Purchaser</U>&#148; has the meaning specified in the preamble hereto. </FONT></P>
<P STYLE="margin-top:12px;margin-bottom:0px; text-indent:8%"><FONT STYLE="font-family:Times New Roman" SIZE="2">(rr) &#147;<U>Purchaser Group</U>&#148; means, individually and collectively, each of the Purchasers and Agent. </FONT></P>
<P STYLE="margin-top:12px;margin-bottom:0px; text-indent:8%"><FONT STYLE="font-family:Times New Roman" SIZE="2">(ss) &#147;<U>Real Property</U>&#148; means any estates or interests in real property now owned or hereafter acquired by Grantor and the
improvements thereto. </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px; text-indent:8%"><FONT STYLE="font-family:Times New Roman" SIZE="2">(tt) &#147;<U>Records</U>&#148; means information that is inscribed on a tangible medium or which is
stored in an electronic or other medium and is retrievable in perceivable form. </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px; text-indent:8%"><FONT STYLE="font-family:Times New Roman" SIZE="2">(uu) &#147;<U>Remedial Action</U>&#148; means
all actions taken to (a)&nbsp;clean up, remove, remediate, contain, treat, monitor, assess, evaluate, or in any way address Hazardous Materials in the indoor or outdoor environment, (b)&nbsp;prevent or minimize a release or threatened release of
Hazardous Materials so they do not migrate or endanger or threaten to endanger public health or welfare or the indoor or outdoor environment, (c)&nbsp;restore or reclaim natural resources or the environment, (d)&nbsp;perform any pre-remedial
studies, </FONT></P>
 <p STYLE="margin-top:0px;margin-bottom:0px"><FONT SIZE="1">&nbsp;</FONT></P> <P STYLE="margin-top:0px;margin-bottom:0px" ALIGN="center"><FONT STYLE="font-family:Times New Roman" SIZE="2">-6-
</FONT></P>


<p Style='page-break-before:always'>
<HR  SIZE="3" style="COLOR:#999999" WIDTH="100%" ALIGN="CENTER">

 <P STYLE="margin-top:0px;margin-bottom:0px"><FONT STYLE="font-family:Times New Roman" SIZE="2">
investigations, or post-remedial operation and maintenance activities, or (e)&nbsp;conduct any other actions with respect to Hazardous Materials authorized by Environmental Laws. </FONT></P>
<P STYLE="margin-top:12px;margin-bottom:0px; text-indent:8%"><FONT STYLE="font-family:Times New Roman" SIZE="2">(vv) &#147;<U>Security Interest</U>&#148; has the meaning specified in <U>Section&nbsp;2</U>. </FONT></P>
<P STYLE="margin-top:12px;margin-bottom:0px; text-indent:8%"><FONT STYLE="font-family:Times New Roman" SIZE="2">(ww) &#147;<U>Secured Obligations</U>&#148; means each and all of the following: all of the present and future indebtedness, liabilities,
and obligations of Grantor arising from this Agreement, the Notes, or the other Note Documents, including attorneys fees and expenses and any interest, fees, or expenses that accrue after the filing of an Insolvency Proceeding, regardless of whether
allowed or allowable in whole or in part as a claim in any Insolvency Proceeding. The Secured Obligation shall include, without limitation, future, as well as existing indebtedness, liabilities, and obligations owed by Debtor to the holders of the
Notes arising under the Notes and this Security Agreement, provided that, for the avoidance doubt, &#147;Secured Obligations&#148; shall not include any obligations solely related to any Stock (including Stock upon conversion of the Notes pursuant
to the terms thereof) held by the Purchasers in their capacity solely as shareholders. </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px; text-indent:8%"><FONT STYLE="font-family:Times New Roman" SIZE="2">(xx) &#147;<U>Securities
Account</U>&#148; means a securities account (as that term is defined in the Code). </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px; text-indent:8%"><FONT STYLE="font-family:Times New Roman" SIZE="2">(yy) &#147;<U>Securities Purchase
Agreement</U>&#148; has the meaning specified in the recitals to this Agreement. </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px; text-indent:8%"><FONT STYLE="font-family:Times New Roman" SIZE="2">(zz) &#147;<U>Stock</U>&#148; means all
shares, options, warrants, interests, participations, or other equivalents (regardless of how designated) of or in a Person, whether voting or nonvoting, including common stock, preferred stock, or any other &#147;equity security&#148; (as such term
is defined in Rule 3a11-1 of the General Rules and Regulations promulgated by the SEC under the Exchange Act). </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px; text-indent:8%"><FONT STYLE="font-family:Times New Roman" SIZE="2">(aaa)
&#147;<U>Supporting Obligations</U>&#148; means supporting obligations (as such term is defined in the Code). </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px; text-indent:8%"><FONT STYLE="font-family:Times New Roman" SIZE="2">(bbb)
&#147;<U>Trademarks</U>&#148; means trademarks, trade names, trademark applications, service marks, service mark applications, and also includes (i)&nbsp;all renewals thereof, (ii)&nbsp;all income, royalties, damages and payments now and hereafter
due or payable under and with respect thereto, including payments under all licenses entered into in connection therewith and damages and payments for past or future infringements or dilutions thereof, (iii)&nbsp;the right to sue for past, present
and future infringements and dilutions thereof, (iv)&nbsp;the goodwill of Grantor&#146;s business symbolized by the foregoing or connected therewith, and (v)&nbsp;all of Grantor&#146;s rights corresponding thereto throughout the world. </FONT></P>
<P STYLE="margin-top:12px;margin-bottom:0px; text-indent:8%"><FONT STYLE="font-family:Times New Roman" SIZE="2">(ccc) &#147;<U>URL</U>&#148; means &#147;uniform resource locator,&#148; an internet web address. </FONT></P>
<P STYLE="margin-top:12px;margin-bottom:0px; text-indent:8%"><FONT STYLE="font-family:Times New Roman" SIZE="2">2. <U>Grant of Security</U>. Grantor hereby unconditionally grants, assigns, and pledges to Agent, for the benefit of the Purchasers, a
continuing security interest (herein referred to as the &#147;<U>Security Interest</U>&#148;) in all personal property of Grantor whether now owned </FONT></P>
 <p STYLE="margin-top:0px;margin-bottom:0px"><FONT SIZE="1">&nbsp;</FONT></P> <P STYLE="margin-top:0px;margin-bottom:0px" ALIGN="center"><FONT STYLE="font-family:Times New Roman" SIZE="2">-7-
</FONT></P>


<p Style='page-break-before:always'>
<HR  SIZE="3" style="COLOR:#999999" WIDTH="100%" ALIGN="CENTER">

 <P STYLE="margin-top:0px;margin-bottom:0px"><FONT STYLE="font-family:Times New Roman" SIZE="2">
or hereafter acquired or arising and wherever located, including Grantor&#146;s right, title, and interest in and to the following, whether now owned or hereafter acquired or arising and wherever
located (the &#147;<U>Collateral</U>&#148;): </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px; text-indent:8%"><FONT STYLE="font-family:Times New Roman" SIZE="2">(a) all of Grantor&#146;s Accounts; </FONT></P>
<P STYLE="margin-top:12px;margin-bottom:0px; text-indent:8%"><FONT STYLE="font-family:Times New Roman" SIZE="2">(b) all of Grantor&#146;s Books; </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px; text-indent:8%"><FONT
STYLE="font-family:Times New Roman" SIZE="2">(c) all of Grantor&#146;s Chattel Paper; </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px; text-indent:8%"><FONT STYLE="font-family:Times New Roman" SIZE="2">(d) all of Grantor&#146;s Deposit
Accounts; </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px; text-indent:8%"><FONT STYLE="font-family:Times New Roman" SIZE="2">(e) all of Grantor&#146;s Equipment and fixtures; </FONT></P>
<P STYLE="margin-top:12px;margin-bottom:0px; text-indent:8%"><FONT STYLE="font-family:Times New Roman" SIZE="2">(f) all of Grantor&#146;s General Intangibles; </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px; text-indent:8%"><FONT
STYLE="font-family:Times New Roman" SIZE="2">(g) all of Grantor&#146;s Goods; </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px; text-indent:8%"><FONT STYLE="font-family:Times New Roman" SIZE="2">(h) all of Grantor&#146;s Inventory;
</FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px; text-indent:8%"><FONT STYLE="font-family:Times New Roman" SIZE="2">(i) all of Grantor&#146;s Investment Related Property; </FONT></P>
<P STYLE="margin-top:12px;margin-bottom:0px; text-indent:8%"><FONT STYLE="font-family:Times New Roman" SIZE="2">(j) all of Grantor&#146;s Negotiable Collateral; </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px; text-indent:8%"><FONT
STYLE="font-family:Times New Roman" SIZE="2">(k) all of Grantor&#146;s rights in respect of Supporting Obligations; </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px; text-indent:8%"><FONT STYLE="font-family:Times New Roman" SIZE="2">(l) all
of Grantor&#146;s Commercial Tort Claims; </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px; text-indent:8%"><FONT STYLE="font-family:Times New Roman" SIZE="2">(m) all of Grantor&#146;s money or other assets of Grantor that now or hereafter
come into the possession, custody, or control of Agent or any Purchaser; </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px; text-indent:8%"><FONT STYLE="font-family:Times New Roman" SIZE="2">(n) all of the proceeds and products, whether
tangible or intangible, of any of the foregoing, including proceeds of insurance or Commercial Tort Claims covering or relating to any or all of the foregoing, and any and all Accounts, Books, Chattel Paper, Deposit Accounts, Equipment, General
Intangibles, Inventory, Investment Related Property, Negotiable Collateral, Supporting Obligations, money, or other tangible or intangible property resulting from the sale, lease, license, exchange, collection, or other disposition of any of the
foregoing, the proceeds of any award in condemnation with respect to any of the foregoing, any rebates or refunds, whether for taxes or otherwise, and all proceeds of any such proceeds, or any portion thereof or interest therein, and the proceeds
thereof, and all proceeds of any loss of, damage to, or destruction of the above, whether insured or not insured, and, to the extent not otherwise included, any indemnity, warranty, or guaranty payable by reason of loss or damage to, or otherwise
with respect to any of the foregoing (the &#147;<U>Proceeds</U>&#148;). Without limiting the generality of the foregoing, the term &#147;Proceeds&#148; includes whatever is receivable or received when Investment Related Property or proceeds are
sold, exchanged, collected, or otherwise disposed of, whether such disposition is voluntary or </FONT></P>
 <p STYLE="margin-top:0px;margin-bottom:0px"><FONT SIZE="1">&nbsp;</FONT></P> <P STYLE="margin-top:0px;margin-bottom:0px" ALIGN="center"><FONT STYLE="font-family:Times New Roman" SIZE="2">-8-
</FONT></P>


<p Style='page-break-before:always'>
<HR  SIZE="3" style="COLOR:#999999" WIDTH="100%" ALIGN="CENTER">

 <P STYLE="margin-top:0px;margin-bottom:0px"><FONT STYLE="font-family:Times New Roman" SIZE="2">
involuntary, and includes proceeds of any indemnity or guaranty payable to Grantor or Agent from time to time with respect to any of the Investment Related Property. </FONT></P>
<P STYLE="margin-top:12px;margin-bottom:0px; text-indent:8%"><FONT STYLE="font-family:Times New Roman" SIZE="2">Notwithstanding anything contained in this Agreement to the contrary, the term &#147;Collateral&#148; shall not include (i)&nbsp;any
rights or interest in any contract, lease, permit, license, charter or license agreement covering personal property of Grantor if under the terms of such contract, lease, permit, license, charter or license agreement, or applicable law with respect
thereto, the grant of a security interest or lien therein is prohibited as a matter of law or under the terms of such contract, lease, permit, license, charter or license agreement and such prohibition has not been waived or the consent of the other
party to such contract, lease, permit, license, charter or license agreement has not been obtained (provided, that, the foregoing exclusions shall in no way be construed (A)&nbsp;to apply to the extent that any described prohibition is unenforceable
under Section&nbsp;9-406, 9-407, 9-408, or 9-409 of the Code or other applicable law, (B)&nbsp;to limit, impair, or otherwise affect the Purchaser Group&#146;s continuing security interests in and liens upon any rights or interests of Grantor in or
to (x)&nbsp;monies due or to become due under any described contract, lease, permit, license, charter or license agreement (including any Accounts), or (y)&nbsp;any proceeds from the sale, license, lease, or other dispositions of any such contract,
lease, permit, license, charter, license agreement, or Stock, or (C)&nbsp;apply to the extent that any consent or waiver has been obtained that would permit the security interest of lien notwithstanding the prohibition), (ii)&nbsp;more than sixty
five percent (65%)&nbsp;of the Stock of a foreign Subsidiary of Grantor, if and to the extent a grant of a security interest in such Stock would result in repatriation of earnings to Grantor pursuant to Section&nbsp;956 of the Internal Revenue Code;
and (iii)&nbsp;the King George Property but solely during such time that the King George Property is subject to the lien described in the definition thereof. </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px; text-indent:8%"><FONT
STYLE="font-family:Times New Roman" SIZE="2">3. <U>Security for Obligations</U>. This Agreement and the Security Interest created hereby secures the payment and performance of the Secured Obligations, whether now existing or arising hereafter.
Without limiting the generality of the foregoing, this Agreement secures the payment of all amounts which constitute part of the Secured Obligations and would be owed by Grantor to Agent or the Purchasers, but for the fact that they are
unenforceable or not allowable due to the existence of an Insolvency Proceeding involving Grantor. </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px; text-indent:8%"><FONT STYLE="font-family:Times New Roman" SIZE="2">4. <U>Grantor Remain
Liable</U>. Anything herein to the contrary notwithstanding, (a)&nbsp;Grantor shall remain liable under the contracts and agreements included in the Collateral, including the Pledged Operating Agreements and the Pledged Partnership Agreements, to
perform all of the duties and obligations thereunder to the same extent as if this Agreement had not been executed, (b)&nbsp;the exercise by Agent or any member of the Purchaser Group of any of the rights hereunder shall not release Grantor from any
of its duties or obligations under such contracts and agreements included in the Collateral, and (c)&nbsp;none of the members of the Purchaser Group shall have any obligation or liability under such contracts and agreements included in the
Collateral by reason of this Agreement, nor shall any member of the Purchaser Group be obligated to perform any of the obligations or duties of Grantor thereunder or to take any action to collect or enforce any claim for payment
</FONT></P>
 <p STYLE="margin-top:0px;margin-bottom:0px"><FONT SIZE="1">&nbsp;</FONT></P> <P STYLE="margin-top:0px;margin-bottom:0px" ALIGN="center"><FONT STYLE="font-family:Times New Roman" SIZE="2">-9-
</FONT></P>


<p Style='page-break-before:always'>
<HR  SIZE="3" style="COLOR:#999999" WIDTH="100%" ALIGN="CENTER">

 <P STYLE="margin-top:0px;margin-bottom:0px"><FONT STYLE="font-family:Times New Roman" SIZE="2">
assigned hereunder. Until an Event of Default shall occur and be continuing, except as otherwise provided in this Agreement, the Securities Purchase Agreement, or other Note Documents, Grantor
shall have the right to possession and enjoyment of the Collateral for the purpose of conducting the ordinary course of its businesses, subject to and upon the terms hereof and of the Notes, the Securities Purchase Agreement and the other Note
Documents. Without limiting the generality of the foregoing, it is the intention of the parties hereto that record and beneficial ownership of the Pledged Interests, including all voting, consensual, and dividend rights, shall remain in Grantor
until the occurrence of an Event of Default and until Agent shall notify Grantor of Agent&#146;s exercise of voting, consensual, or dividend rights with respect to the Pledged Interests pursuant to <U>Section&nbsp;16</U> hereof. </FONT></P>
<P STYLE="margin-top:12px;margin-bottom:0px; text-indent:8%"><FONT STYLE="font-family:Times New Roman" SIZE="2">5. <U>Representations and Warranties</U>. Grantor hereby represents and warrants as follows: </FONT></P>
<P STYLE="margin-top:12px;margin-bottom:0px; text-indent:8%"><FONT STYLE="font-family:Times New Roman" SIZE="2">(a) The exact legal name of Grantor is set forth on the signature pages of this Agreement. </FONT></P>
<P STYLE="margin-top:12px;margin-bottom:0px; text-indent:8%"><FONT STYLE="font-family:Times New Roman" SIZE="2">(b) Grantor does not own any Real Property as of the date hereof and Grantor has no copyrights that have been registered with the United
States Copyright Office. </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px; text-indent:8%"><FONT STYLE="font-family:Times New Roman" SIZE="2">(c) As of the date hereof, Grantor has no interest in, or title to, any Intellectual Property
Licenses or Patents, except as set forth on <U>Schedules 2</U> and <U>3,</U> respectively, attached hereto. This Agreement is effective to create a valid and continuing Lien on such Intellectual Property Licenses and Patents and, upon filing of the
Patent Security Agreement with the United State Patent and Trademark Office, and the filing of appropriate financing statements in the jurisdictions listed on <U>Schedule 5</U> hereto, all action necessary to perfect the Security Interest in and to
on Grantor&#146;s Patents has been taken and such perfected Security Interest is enforceable as such as against any and all creditors of and purchasers from Grantor. </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px; text-indent:8%"><FONT
STYLE="font-family:Times New Roman" SIZE="2">(d) This Agreement creates a valid security interest in the Collateral of Grantor, to the extent a security interest therein can be created under the Code, securing the payment of the Secured Obligations.
Except to the extent a security interest in the Collateral cannot be perfected by the filing of a financing statement under the Code, all filings and other actions necessary (other than entry into Control Agreements on the Initial Closing Date) to
perfect such security interest have been duly taken or will have been taken upon the filing of financing statements listing Grantor, as a debtor, and Agent, as secured party, in the jurisdictions listed next to Grantor&#146;s name on <U>Schedule
5</U> attached hereto. Upon the making of such filings, Agent shall have a first priority (subject to Permitted Liens) perfected security interest in the Collateral of Grantor to the extent such security interest can be perfected by the filing of a
financing statement. As of the Initial Closing Date and each Subsequent Closing Date, all action by Grantor reasonably necessary to perfect such security interest on each item of Collateral has been duly taken. </FONT></P>
 <p STYLE="margin-top:0px;margin-bottom:0px"><FONT SIZE="1">&nbsp;</FONT></P> <P STYLE="margin-top:0px;margin-bottom:0px" ALIGN="center"><FONT STYLE="font-family:Times New Roman" SIZE="2">-10-
</FONT></P>


<p Style='page-break-before:always'>
<HR  SIZE="3" style="COLOR:#999999" WIDTH="100%" ALIGN="CENTER">

 <P STYLE="margin-top:0px;margin-bottom:0px; text-indent:8%"><FONT STYLE="font-family:Times New Roman" SIZE="2">(e) (i) Except for the Security Interest created hereby, Grantor is and will at all times be
the sole holder of record and the legal and beneficial owner, free and clear of all Liens other than Permitted Liens, of the Pledged Interests indicated on <U>Schedule 4</U> as being owned by Grantor and, when acquired by Grantor, any Pledged
Interests acquired after the date hereof; (ii)&nbsp;all of the Pledged Interests are duly authorized, validly issued, fully paid and nonassessable and the Pledged Interests constitute or will constitute the percentage of the issued and outstanding
Stock of the Pledged Companies of Grantor identified on <U>Schedule 4</U> hereto as supplemented or modified by any Pledged Interests Addendum or any Supplement to this Agreement; (iii)&nbsp;Grantor has the right and requisite authority to pledge
the Investment Related Property pledged by Grantor to Agent as provided herein; (iv)&nbsp;all actions necessary to perfect, establish the first priority (subject to Permitted Liens) of, Agent&#146;s Liens in the Investment Related Collateral, and
the proceeds thereof, have been duly taken, (A)&nbsp;upon the execution and delivery of this Agreement; (B)&nbsp;upon the taking of possession by Agent of any certificates constituting the Pledged Interests, to the extent such Pledged Interests are
represented by certificates, together with undated powers endorsed in blank by Grantor; (C)&nbsp;upon the filing of financing statements in the applicable jurisdiction set forth on <U>Schedule 5</U> attached hereto for Grantor with respect to the
Pledged Interests of Grantor that are not represented by certificates, and (D)&nbsp;with respect to any Securities Accounts, upon the delivery of Control Agreements with respect thereto; and (v)&nbsp;Grantor has delivered to and deposited with Agent
(or, with respect to any Pledged Interests created or obtained after the date hereof, will deliver and deposit in accordance with <U>Sections 6(a)</U> and <U>8</U> hereof) all certificates representing the Pledged Interests owned by Grantor to the
extent such Pledged Interests are represented by certificates, and undated powers endorsed in blank with respect to such certificates. None of the Pledged Interests owned or held by Grantor has been issued or transferred in violation of any
securities registration, securities disclosure, or similar laws of any jurisdiction to which such issuance or transfer may be subject. </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px; text-indent:8%"><FONT
STYLE="font-family:Times New Roman" SIZE="2">(f) The Security Interest created hereby upon completion of the filings and other actions specified <U>Schedule 6</U> attached hereto (which, in the case of all filings and other documents referred to on
<U>Schedule 6</U>, have been delivered to Agent in completed an duly executed form) will constitute valid perfected security interests in all the Collateral in favor of Agent, enforceable as such as against any and all creditors of and purchasers
from Grantor in accordance with the terms hereof and (b)&nbsp;are prior to all other Liens on the Collateral in existence on the date hereof except for Permitted Liens. The fillings and other actions specified on <U>Schedule 6</U> constitute all of
the filings and other actions necessary to perfect all Security Interests granted hereunder. </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px; text-indent:8%"><FONT STYLE="font-family:Times New Roman" SIZE="2">(g) No consent, approval,
authorization, or other order or other action by, and no notice to or filing with, any Governmental Authority or any other Person is required (i)&nbsp;for the grant of a Security Interest by Grantor in and to the Collateral pursuant to this
Agreement or for the execution, delivery, or performance of this Agreement by Grantor, or (ii)&nbsp;for the exercise by Agent of the voting or other rights provided for in this Agreement with respect to the Investment Related Property or the
remedies in respect of the Collateral pursuant to this Agreement, except as may be required in connection with such disposition of Investment Related Property by laws affecting the offering and sale of securities generally. </FONT></P>
 <p STYLE="margin-top:0px;margin-bottom:0px"><FONT SIZE="1">&nbsp;</FONT></P> <P STYLE="margin-top:0px;margin-bottom:0px" ALIGN="center"><FONT STYLE="font-family:Times New Roman" SIZE="2">-11-
</FONT></P>


<p Style='page-break-before:always'>
<HR  SIZE="3" style="COLOR:#999999" WIDTH="100%" ALIGN="CENTER">

 <P STYLE="margin-top:0px;margin-bottom:0px; text-indent:8%"><FONT STYLE="font-family:Times New Roman" SIZE="2">(h) Grantor does not own any motor vehicles. </FONT></P>
<P STYLE="margin-top:12px;margin-bottom:0px; text-indent:8%"><FONT STYLE="font-family:Times New Roman" SIZE="2">(i) All Deposit Accounts and all other depositary and other accounts maintained by Grantor as of the date hereof are described on
<U>Schedule 7</U> attached hereto. </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px; text-indent:8%"><FONT STYLE="font-family:Times New Roman" SIZE="2">6. <U>Covenants</U>. Grantor, jointly and severally, covenants and agrees with Agent that
from and after the date of this Agreement and until the date of termination of this Agreement in accordance with <U>Section&nbsp;23</U> hereof: </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px; text-indent:8%"><FONT
STYLE="font-family:Times New Roman" SIZE="2">(a) <U>Possession of Collateral</U>. In the event that any Collateral, including proceeds, is evidenced by or consists of Negotiable Collateral, Investment Related Property, or Chattel Paper, in each case
with a value in excess of $5,000 individually and $25,000 in the aggregate, and if and to the extent that perfection or priority of Agent&#146;s Security Interest is dependent on or enhanced by possession, Grantor, immediately upon the request of
Agent, shall execute such other documents and instruments as shall be requested by Agent or, if applicable, endorse and deliver physical possession of such Negotiable Collateral, Investment Related Property, or Chattel Paper to Agent, together with
such undated powers endorsed in blank as shall be requested by Agent; </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px; text-indent:8%"><FONT STYLE="font-family:Times New Roman" SIZE="2">(b) <U>Chattel Paper</U>. </FONT></P>
<P STYLE="margin-top:12px;margin-bottom:0px; margin-left:4%; text-indent:4%"><FONT STYLE="font-family:Times New Roman" SIZE="2">(i) <U>Control Agreements</U>. Grantor shall take all steps reasonably necessary to grant Agent control of all electronic
Chattel Paper in accordance with the Code and all &#147;transferable records&#148; as that term is defined in Section&nbsp;16 of the Uniform Electronic Transaction Act and Section&nbsp;201 of the federal Electronic Signatures in Global and National
Commerce Act as in effect in any relevant jurisdiction; </FONT></P> <P STYLE="margin-top:6px;margin-bottom:0px; margin-left:4%; text-indent:4%"><FONT STYLE="font-family:Times New Roman" SIZE="2">(ii) If Grantor retains possession of any Chattel
Paper or instruments (which retention of possession shall be subject to the extent permitted hereby), promptly upon the request of Agent, such Chattel Paper and instruments shall be marked with the following legend: &#147;This writing and the
obligations evidenced or secured hereby are subject to the Security Interest of Tang Capital Partners, LP, as Agent for the Purchasers&#148;; </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px; text-indent:8%"><FONT
STYLE="font-family:Times New Roman" SIZE="2">(c) <U>Control Agreements; Deposit Accounts</U>. </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px; margin-left:4%; text-indent:4%"><FONT STYLE="font-family:Times New Roman" SIZE="2">(i) On or
before the Initial Closing Date, Grantor shall obtain an authenticated Control Agreement, from each bank maintaining a Deposit Account for Grantor; </FONT></P> <P STYLE="margin-top:6px;margin-bottom:0px; margin-left:4%; text-indent:4%"><FONT
STYLE="font-family:Times New Roman" SIZE="2">(ii) On or before the Initial Closing Date, Grantor shall obtain authenticated Control Agreements, from each issuer of uncertificated securities, securities intermediary, or commodities intermediary
issuing or holding any financial assets or commodities to or for Grantor </FONT></P>
 <p STYLE="margin-top:0px;margin-bottom:0px"><FONT SIZE="1">&nbsp;</FONT></P> <P STYLE="margin-top:0px;margin-bottom:0px" ALIGN="center"><FONT STYLE="font-family:Times New Roman" SIZE="2">-12-
</FONT></P>


<p Style='page-break-before:always'>
<HR  SIZE="3" style="COLOR:#999999" WIDTH="100%" ALIGN="CENTER">

 <P STYLE="margin-top:0px;margin-bottom:0px; margin-left:4%; text-indent:4%"><FONT STYLE="font-family:Times New Roman" SIZE="2">(iii) Grantor shall close the Excluded Account immediately upon confirmation
that all checks outstanding as of April&nbsp;25, 2011 have cleared; </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px; text-indent:8%"><FONT STYLE="font-family:Times New Roman" SIZE="2">(d) <U>Letter-of-Credit Rights</U>. Grantor that is or
becomes the beneficiary of a letter of credit with a face value in excess of $25,000 in the aggregate (excluding a letter of credit that is a Supporting Obligation) shall promptly (and in any event within 5 Business Days after becoming a
beneficiary), notify Agent thereof and, upon the request by Agent, enter into a tri-party agreement with Agent and the issuer or confirmation bank with respect to letter-of-credit rights assigning such letter-of-credit rights to Agent and directing,
during the continuance of an Event of Default all payments thereunder to Agent&#146;s Account, all in form and substance satisfactory to Agent; </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px; text-indent:8%"><FONT
STYLE="font-family:Times New Roman" SIZE="2">(e) <U>Commercial Tort Claims</U>. Grantor shall promptly (and in any event within 5 Business Days of receipt thereof), notify Agent in writing upon incurring or otherwise obtaining a Commercial Tort
Claim which is reasonably expected to have value in excess of $25,000 after the date hereof and, upon request of Agent, promptly amend <U>Schedule 1</U> to this Agreement to describe such after-acquired Commercial Tort Claim in a manner that
reasonably identifies such Commercial Tort Claim, and hereby authorizes the filing of additional financing statements or amendments to existing financing statements describing such Commercial Tort Claims, and agrees to do such other acts or things
deemed necessary or desirable by Agent to give Agent a first priority (subject to Permitted Liens), perfected security interest in any such Commercial Tort Claim; </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px; text-indent:8%"><FONT
STYLE="font-family:Times New Roman" SIZE="2">(f) <U>Government Contracts</U>. If any Account or Chattel Paper arises out of a contract or contracts with the United States of America or any department, agency, or instrumentality thereof with a value
in excess of $25,000 in the aggregate, Grantor shall promptly (and in any event within 5 Business Days of the creation thereof) notify Agent thereof in writing and execute any instruments or take any steps reasonably required by Agent in order that
all moneys due or to become due under such contract or contracts shall be assigned to Agent, for the benefit of the Purchaser Group and shall provide written notice thereof under the Assignment of Claims Act or other applicable law; </FONT></P>
<P STYLE="margin-top:12px;margin-bottom:0px; text-indent:8%"><FONT STYLE="font-family:Times New Roman" SIZE="2">(g) <U>Intellectual Property</U>. </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px; margin-left:4%; text-indent:4%"><FONT
STYLE="font-family:Times New Roman" SIZE="2">(i) Upon the request of Agent, in order to facilitate filings with the United States Patent and Trademark Office, Grantor shall execute and deliver to Agent one or more Patent Security Agreements to
further evidence Agent&#146;s Lien on Grantor&#146;s Patents and the General Intangibles of Grantor relating thereto or represented thereby; </FONT></P> <P STYLE="margin-top:6px;margin-bottom:0px; margin-left:4%; text-indent:4%"><FONT
STYLE="font-family:Times New Roman" SIZE="2">(ii) Grantor shall have the duty, to the extent necessary or economically desirable in the operation of Grantor&#146;s business, (A)&nbsp;to promptly sue for infringement, misappropriation, or dilution
and to recover any and all damages for such infringement, misappropriation, or dilution, (B)&nbsp;to prosecute diligently any trademark application or service mark application that is part of the Trademarks
</FONT></P>
 <p STYLE="margin-top:0px;margin-bottom:0px"><FONT SIZE="1">&nbsp;</FONT></P> <P STYLE="margin-top:0px;margin-bottom:0px" ALIGN="center"><FONT STYLE="font-family:Times New Roman" SIZE="2">-13-
</FONT></P>


<p Style='page-break-before:always'>
<HR  SIZE="3" style="COLOR:#999999" WIDTH="100%" ALIGN="CENTER">

 <P STYLE="margin-top:0px;margin-bottom:0px; margin-left:4%"><FONT STYLE="font-family:Times New Roman" SIZE="2">
pending as of the date hereof or hereafter until the termination of this Agreement, (C)&nbsp;to prosecute diligently any patent application that is part of the Patents pending as of the date
hereof or hereafter until the termination of this Agreement, and (D)&nbsp;to take all reasonable and necessary action to preserve and maintain all of Grantor&#146;s Trademarks, Patents, Copyrights, Intellectual Property Licenses, and its rights
therein, including the filing of applications for renewal, affidavits of use, affidavits of noncontestability and opposition and interference and cancellation proceedings. Grantor further agrees not to abandon any Trademark, Patent, Copyright, or
Intellectual Property License that is necessary in the operation of Grantor&#146;s business; </FONT></P> <P STYLE="margin-top:6px;margin-bottom:0px; margin-left:4%; text-indent:4%"><FONT STYLE="font-family:Times New Roman" SIZE="2">(iii) Grantor
acknowledges and agrees that Agent shall have no duties with respect to the Trademarks, Patents, Copyrights, or Intellectual Property Licenses. Without limiting the generality of this <U>Section&nbsp;6(g)</U>, Grantor acknowledges and agrees that no
member of the Purchaser Group shall be under any obligation to take any steps necessary to preserve rights in the Trademarks, Patents, Copyrights, or Intellectual Property Licenses against any other Person, but Agent may do so at its option from and
after the occurrence and during the continuance of an Event of Default, and all expenses incurred in connection therewith (including reasonable fees and expenses of attorneys and other professionals) shall be for the sole account of Grantor and
shall be chargeable (when due and payable); and </FONT></P> <P STYLE="margin-top:6px;margin-bottom:0px; margin-left:4%; text-indent:4%"><FONT STYLE="font-family:Times New Roman" SIZE="2">(iv) In no event shall Grantor, either itself or through any
employee, licensee, or designee, file an application for the registration of any Patent, Trademark, or Copyright with the United States Patent and Trademark Office, the United States Copyright Office or any similar office or agency without giving
Agent prior written notice thereof. Promptly upon any such Patent filing, Grantor shall comply with <U>Section&nbsp;6(g)(i)</U> hereof and promptly after any other such filing, Grantor shall execute such additional documents as may be necessary to
perfect Agent&#146;s Lien in such Trademarks and Copyrights, as applicable; </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px; text-indent:8%"><FONT STYLE="font-family:Times New Roman" SIZE="2">(h) <U>Investment Related Property</U>.
</FONT></P> <P STYLE="margin-top:6px;margin-bottom:0px; margin-left:4%; text-indent:4%"><FONT STYLE="font-family:Times New Roman" SIZE="2">(i) If Grantor shall receive or become entitled to receive any Pledged Interests after the date hereof, it
shall promptly (and in any event within 5 Business Days of receipt thereof) deliver to Agent a duly executed Pledged Interests Addendum identifying such Pledged Interests; </FONT></P>
<P STYLE="margin-top:6px;margin-bottom:0px; margin-left:4%; text-indent:4%"><FONT STYLE="font-family:Times New Roman" SIZE="2">(ii) Upon and during the continuance of an Event of Default, all sums of money and property paid or distributed in respect
of the Investment Related Property which are received by Grantor shall be held by Grantor in trust for the benefit of Agent segregated from Grantor&#146;s other property, and Grantor shall deliver it forthwith to Agent&#146;s in the exact form
received; </FONT></P> <P STYLE="margin-top:6px;margin-bottom:0px; margin-left:4%; text-indent:4%"><FONT STYLE="font-family:Times New Roman" SIZE="2">(iii) Grantor shall promptly deliver to Agent a copy of each material notice or other communication
received by it in respect of any Pledged Interests; </FONT></P>
 <p STYLE="margin-top:0px;margin-bottom:0px"><FONT SIZE="1">&nbsp;</FONT></P> <P STYLE="margin-top:0px;margin-bottom:0px" ALIGN="center"><FONT STYLE="font-family:Times New Roman" SIZE="2">-14-
</FONT></P>


<p Style='page-break-before:always'>
<HR  SIZE="3" style="COLOR:#999999" WIDTH="100%" ALIGN="CENTER">

 <P STYLE="margin-top:0px;margin-bottom:0px; margin-left:4%; text-indent:4%"><FONT STYLE="font-family:Times New Roman" SIZE="2">(iv) No Grantor shall make or consent to any amendment or other modification
or waiver with respect to any Pledged Interests, Pledged Operating Agreement, or Pledged Partnership Agreement, or enter into any agreement or permit to exist any restriction with respect to any Pledged Interests other than pursuant to the Note
Documents; </FONT></P> <P STYLE="margin-top:6px;margin-bottom:0px; margin-left:4%; text-indent:4%"><FONT STYLE="font-family:Times New Roman" SIZE="2">(v) Grantor agrees that it will cooperate with Agent in obtaining all necessary approvals and
making all necessary filings under federal, state, local, or foreign law in connection with the Security Interest on the Investment Related Property or any sale or transfer thereof; </FONT></P>
<P STYLE="margin-top:6px;margin-bottom:0px; margin-left:4%; text-indent:4%"><FONT STYLE="font-family:Times New Roman" SIZE="2">(vi) As to all limited liability company or partnership interests, issued under any Pledged Operating Agreement or Pledged
Partnership Agreement, Grantor hereby represents, warrants and covenants that the Pledged Interests issued pursuant to such agreement (A)&nbsp;are not and shall not be dealt in or traded on securities exchanges or in securities markets, (B)&nbsp;do
not and will not constitute investment company securities, and (C)&nbsp;are not and will not be held by Grantor in a securities account. In addition, none of the Pledged Operating Agreements, the Pledged Partnership Agreements, or any other
agreements governing any of the Pledged Interests issued under any Pledged Operating Agreement or Pledged Partnership Agreement, provide or shall provide that such Pledged Interests are securities governed by Article 8 of the Uniform Commercial Code
as in effect in any relevant jurisdiction; </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px; text-indent:8%"><FONT STYLE="font-family:Times New Roman" SIZE="2">(i) <U>[Reserved]</U>. </FONT></P>
<P STYLE="margin-top:12px;margin-bottom:0px; text-indent:8%"><FONT STYLE="font-family:Times New Roman" SIZE="2">(j) <U>Transfers and Other Liens</U>. Grantor shall not (i)&nbsp;sell, assign (by operation of law or otherwise) or otherwise dispose of,
or grant any option with respect to, any of the Collateral, except in the ordinary course of business and consistent with past practice, or (ii)&nbsp;create or permit to exist any Lien upon or with respect to any of the Collateral of Grantor, except
for Permitted Liens. The inclusion of Proceeds in the Collateral shall not be deemed to constitute Agent&#146;s consent to any sale or other disposition of any of the Collateral except as expressly permitted in this Agreement or the other Note
Documents; and </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px; text-indent:8%"><FONT STYLE="font-family:Times New Roman" SIZE="2">(k) <U>Other Actions as to Any and All Collateral</U>. Grantor shall promptly (and in any event within 5
Business Days of acquiring or obtaining such Collateral) notify Agent in writing upon (i)&nbsp;acquiring or otherwise obtaining any Collateral after the date hereof consisting of Trademarks, Patents, Copyrights, Intellectual Property Licenses,
Investment Related Property, Chattel Paper (electronic, tangible or otherwise), documents (as defined in Article 9 of the Code), promissory notes (as defined in the Code, or instruments (as defined in the Code) or (ii)&nbsp;any amount payable under
or in connection with any of the Collateral being or becoming evidenced after the date hereof by any Chattel Paper, documents, promissory notes, or instruments, in each case with a value in excess of $10,000 individually and $25,000 in the aggregate
and, in each such case upon the request of Agent, promptly execute such other documents, or if applicable, deliver such Chattel Paper, other </FONT></P>
 <p STYLE="margin-top:0px;margin-bottom:0px"><FONT SIZE="1">&nbsp;</FONT></P> <P STYLE="margin-top:0px;margin-bottom:0px" ALIGN="center"><FONT STYLE="font-family:Times New Roman" SIZE="2">-15-
</FONT></P>


<p Style='page-break-before:always'>
<HR  SIZE="3" style="COLOR:#999999" WIDTH="100%" ALIGN="CENTER">

 <P STYLE="margin-top:0px;margin-bottom:0px"><FONT STYLE="font-family:Times New Roman" SIZE="2">
documents or certificates evidencing any Investment Related Property and do such other acts or things deemed necessary or desirable by Agent to protect Agent&#146;s Security Interest therein; and
</FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px; text-indent:8%"><FONT STYLE="font-family:Times New Roman" SIZE="2">(l) <U>Changes in Locations, Names, etc</U>. Grantor shall not, except upon prior written consent of Agent and delivery to
Agent of additional financing statements and other documents reasonably requested by Agent as to the validity, perfection and priority of the Security Interests provided herein, change its name, identity, corporate structure or jurisdiction of
organization. </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px; text-indent:8%"><FONT STYLE="font-family:Times New Roman" SIZE="2">(m) <U>Notices</U>. Grantor will advise Agent promptly, in reasonable detail, of: (i)&nbsp;any Lien (other than
Permitted Liens) on any of the Collateral which would adversely affect the ability of Agent to exercise any of its remedies hereunder and (ii)&nbsp;the occurrence of any other event which could reasonably be expected to have a material adverse
effect on the aggregate value of the Collateral. </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px; text-indent:8%"><FONT STYLE="font-family:Times New Roman" SIZE="2">7. <U>Relation to Other Security Documents</U>. The provisions of this
Agreement shall be read and construed with the provisions of the Patent Security Agreements, which are supplemental to the provisions of this Agreement. Nothing contained in the Patent Security Agreements shall limit any of the rights or remedies of
Agent hereunder. </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px; text-indent:8%"><FONT STYLE="font-family:Times New Roman" SIZE="2">8. <U>Further Assurances</U>. </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px; text-indent:8%"><FONT
STYLE="font-family:Times New Roman" SIZE="2">(a) Grantor agrees that from time to time, at its own expense, Grantor will promptly execute and deliver all further instruments and documents, and take all further action, that may be necessary or that
Agent may reasonably request, in order to perfect and protect the Security Interest granted or purported to be granted hereby or to enable Agent to exercise and enforce its rights and remedies hereunder with respect to any of the Collateral.
</FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px; text-indent:8%"><FONT STYLE="font-family:Times New Roman" SIZE="2">(b) Grantor authorizes the filing by Agent of financing or continuation statements, or amendments thereto, and Grantor will
execute and deliver to Agent such other instruments or notices, as may be necessary or as Agent may reasonably request, in order to perfect and preserve the Security Interest granted or purported to be granted hereby. </FONT></P>
<P STYLE="margin-top:12px;margin-bottom:0px; text-indent:8%"><FONT STYLE="font-family:Times New Roman" SIZE="2">(c) Grantor authorizes Agent at any time and from time to time to file, transmit, or communicate, as applicable, financing statements and
amendments (i)&nbsp;describing the Collateral as &#147;all personal property of debtor&#148; or &#147;all assets of debtor&#148; or words of similar effect, (ii)&nbsp;describing the Collateral as being of equal or lesser scope or with greater
detail, or (iii)&nbsp;that contain any information required by part 5 of Article 9 of the Code for the sufficiency or filing office acceptance. Grantor also hereby ratifies any and all financing statements or amendments previously filed by Agent in
any jurisdiction. </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px; text-indent:8%"><FONT STYLE="font-family:Times New Roman" SIZE="2">(d) Grantor acknowledges that it is not authorized to file any financing statement or amendment or
termination statement with respect to any financing statement </FONT></P>
 <p STYLE="margin-top:0px;margin-bottom:0px"><FONT SIZE="1">&nbsp;</FONT></P> <P STYLE="margin-top:0px;margin-bottom:0px" ALIGN="center"><FONT STYLE="font-family:Times New Roman" SIZE="2">-16-
</FONT></P>


<p Style='page-break-before:always'>
<HR  SIZE="3" style="COLOR:#999999" WIDTH="100%" ALIGN="CENTER">

 <P STYLE="margin-top:0px;margin-bottom:0px"><FONT STYLE="font-family:Times New Roman" SIZE="2">
filed in connection with this Agreement without the prior written consent of Agent, subject to Grantor&#146;s rights under Section&nbsp;9-509(d)(2) of the Code. </FONT></P>
<P STYLE="margin-top:12px;margin-bottom:0px; text-indent:8%"><FONT STYLE="font-family:Times New Roman" SIZE="2">9. <U>Agent&#146;s Right to Perform Contracts, Exercise Rights, etc</U>. Upon the occurrence and during the continuance of an Event of
Default, Agent (or its designee) (a)&nbsp;may proceed to perform any and all of the obligations of Grantor contained in any contract, lease, or other agreement and exercise any and all rights of Grantor therein contained as fully as Grantor itself
could, (b)&nbsp;shall have the right to use Grantor&#146;s rights under Intellectual Property Licenses in connection with the enforcement of the Agent&#146;s rights hereunder, including the right to prepare for sale and sell any and all Inventory
and Equipment now or hereafter owned by Grantor and now or hereafter covered by such licenses, and (c)&nbsp;shall have the right to request that any Stock that is pledged hereunder be registered in the name of Agent or any of its nominees.
</FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px; text-indent:8%"><FONT STYLE="font-family:Times New Roman" SIZE="2">10. <U>Agent Appointed Attorney-in-Fact</U>. Grantor hereby irrevocably appoints Agent its attorney-in-fact, with full
authority in the place and stead of Grantor and in the name of Grantor or otherwise, at such time as an Event of Default has occurred and is continuing under the Notes, to take any action and to execute any instrument which Agent may reasonably deem
necessary or advisable to accomplish the purposes of this Agreement, including: </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px; text-indent:8%"><FONT STYLE="font-family:Times New Roman" SIZE="2">(a) to ask, demand, collect, sue for,
recover, compromise, receive and give acquittance and receipts for moneys due and to become due under or in connection with the Accounts or any other Collateral of Grantor; </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px; text-indent:8%"><FONT
STYLE="font-family:Times New Roman" SIZE="2">(b) to receive and open all mail addressed to Grantor and to notify postal authorities to change the address for the delivery of mail to Grantor to that of Agent; </FONT></P>
<P STYLE="margin-top:12px;margin-bottom:0px; text-indent:8%"><FONT STYLE="font-family:Times New Roman" SIZE="2">(c) to receive, indorse, and collect any drafts or other instruments, documents, Negotiable Collateral or Chattel Paper; </FONT></P>
<P STYLE="margin-top:12px;margin-bottom:0px; text-indent:8%"><FONT STYLE="font-family:Times New Roman" SIZE="2">(d) to file any claims or take any action or institute any proceedings which Agent may deem necessary or desirable for the collection of
any of the Collateral of Grantor or otherwise to enforce the rights of Agent with respect to any of the Collateral; </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px; text-indent:8%"><FONT STYLE="font-family:Times New Roman" SIZE="2">(e) to
repair, alter, or supply goods, if any, necessary to fulfill in whole or in part the purchase order of any Person obligated to Grantor in respect of any Account of Grantor; </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px; text-indent:8%"><FONT
STYLE="font-family:Times New Roman" SIZE="2">(f) to use any labels, Patents, Trademarks, trade names, URLs, domain names, industrial designs, Copyrights, advertising matter or other industrial or intellectual property rights, in advertising for sale
and selling Inventory and other Collateral and to collect any amounts due under Accounts, contracts or Negotiable Collateral of Grantor; and </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px; text-indent:8%"><FONT
STYLE="font-family:Times New Roman" SIZE="2">(g) Agent on behalf of the Purchaser Group shall have the right, but shall not be obligated, to bring suit in its own name to enforce the Trademarks, Patents,
</FONT></P>
 <p STYLE="margin-top:0px;margin-bottom:0px"><FONT SIZE="1">&nbsp;</FONT></P> <P STYLE="margin-top:0px;margin-bottom:0px" ALIGN="center"><FONT STYLE="font-family:Times New Roman" SIZE="2">-17-
</FONT></P>


<p Style='page-break-before:always'>
<HR  SIZE="3" style="COLOR:#999999" WIDTH="100%" ALIGN="CENTER">

 <P STYLE="margin-top:0px;margin-bottom:0px"><FONT STYLE="font-family:Times New Roman" SIZE="2">
Copyrights and Intellectual Property Licenses and, if Agent shall commence any such suit, the appropriate Grantor shall, at the request of Agent, do any and all lawful acts and execute any and
all proper documents reasonably required by Agent in aid of such enforcement. </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px; text-indent:8%"><FONT STYLE="font-family:Times New Roman" SIZE="2">To the extent permitted by law, Grantor hereby
ratifies all that such attorney-in-fact shall lawfully do or cause to be done by virtue hereof. This power of attorney is coupled with an interest and shall be irrevocable until this Agreement is terminated. </FONT></P>
<P STYLE="margin-top:12px;margin-bottom:0px; text-indent:8%"><FONT STYLE="font-family:Times New Roman" SIZE="2">11. <U>Appointment and Authorization of Agent</U>. Each Purchaser hereby designates and appoints Agent as its representative under this
Agreement and the other Note Documents and each Purchaser hereby irrevocably authorizes Agent to execute and deliver each of the other Note Documents on its behalf and to take such other action on its behalf under the provisions of this Agreement
and each other Note Document and to exercise such powers and perform such duties as are expressly delegated to Agent by the terms of this Agreement or any other Note Document, together with such powers as are reasonably incidental thereto. Agent
agrees to act as such on the express conditions contained in this Section&nbsp;11. The provisions of this Section&nbsp;11 are solely for the benefit of Agent and the Purchasers, and Debtor shall have no rights as a third party beneficiary of any of
the provisions contained herein. Any provision to the contrary contained elsewhere in this Agreement or in any other Note Document notwithstanding, Agent shall not have any duties or responsibilities, except those expressly set forth herein, nor
shall Agent have or be deemed to have any fiduciary relationship with any Purchaser, and no implied covenants, functions, responsibilities, duties, obligations or liabilities shall be read into this Agreement or any other Note Document or otherwise
exist against Agent; it being expressly understood and agreed that the use of the word &#147;Agent&#148; is for convenience only, that Agent is merely the representative of the Purchasers, and only has the contractual duties set forth herein. Except
as expressly otherwise provided in this Agreement, Agent shall have and may use its sole discretion with respect to exercising or refraining from exercising any discretionary rights or taking or refraining from taking any actions that Agent
expressly is entitled to take or assert under or pursuant to this Agreement and the other Note Documents. Without limiting the generality of the foregoing, or of any other provision of the Note Documents that provides rights or powers to Agent,
Purchasers agree that Agent shall have the right to exercise the following powers as long as this Agreement remains in effect: (a)&nbsp;maintain, in accordance with its customary business practices, ledgers and records reflecting the status of the
Secured Obligations, the Collateral and related matters, (b)&nbsp;execute or file any and all financing or similar statements or notices, amendments, renewals, supplements, documents, instruments, proofs of claim, notices and other written
agreements with respect to the Note Documents, (c)&nbsp;perform, exercise, and enforce any and all other rights and remedies of the Purchaser Group with respect to Debtor, the Secured Obligations, the Collateral, or otherwise related to any of same
as provided in the Note Documents, and (d)&nbsp;incur and pay such Expenses as Agent may deem necessary or appropriate for the performance and fulfillment of its functions and powers pursuant to the Note Documents. Agent shall have no obligation
whatsoever to any of the Purchasers to assure that the Collateral exists or is owned by Debtor or is cared for, protected, or insured or has been encumbered, or that the Agent&#146;s Liens have been properly or sufficiently or lawfully created,
perfected, protected, or enforced or are </FONT></P>
 <p STYLE="margin-top:0px;margin-bottom:0px"><FONT SIZE="1">&nbsp;</FONT></P> <P STYLE="margin-top:0px;margin-bottom:0px" ALIGN="center"><FONT STYLE="font-family:Times New Roman" SIZE="2">-18-
</FONT></P>


<p Style='page-break-before:always'>
<HR  SIZE="3" style="COLOR:#999999" WIDTH="100%" ALIGN="CENTER">

 <P STYLE="margin-top:0px;margin-bottom:0px"><FONT STYLE="font-family:Times New Roman" SIZE="2">
entitled to any particular priority, or to exercise at all or in any particular manner or under any duty of care, disclosure or fidelity, or to continue exercising, any of the rights, authorities
and powers granted or available to Agent pursuant to any of the Note Documents, it being understood and agreed that in respect of the Collateral, or any act, omission, or event related thereto, subject to the terms and conditions contained herein,
Agent may act in any manner it may deem appropriate, in its sole discretion given Agent&#146;s own interest in the Collateral in its capacity as one of the Purchasers and that Agent shall have no other duty or liability whatsoever to any Purchaser
as to any of the foregoing, except as otherwise provided herein. </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px; text-indent:8%"><FONT STYLE="font-family:Times New Roman" SIZE="2">12. <U>Agent May Perform</U>. If Grantor fails to perform
any agreement contained herein and an Event of Default exists and is continuing, Agent may itself perform, or cause performance of, such agreement, and the reasonable expenses of Agent incurred in connection therewith shall be payable, jointly and
severally, by Grantor. </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px; text-indent:8%"><FONT STYLE="font-family:Times New Roman" SIZE="2">13. <U>Agent&#146;s Duties</U>. The powers conferred on Agent hereunder are solely to protect the
Purchasers&#146; interest in the Collateral, for the benefit of the Purchaser Group, and shall not impose any duty upon Agent to exercise any such powers. Except for the safe custody of any Collateral in its actual possession and the accounting for
moneys actually received by it hereunder, Agent shall have no duty as to any Collateral or as to the taking of any necessary steps to preserve rights against prior parties or any other rights pertaining to any Collateral. Agent shall be deemed to
have exercised reasonable care in the custody and preservation of any Collateral in its actual possession if such Collateral is accorded treatment substantially equal to that which Agent accords its own property. </FONT></P>
<P STYLE="margin-top:12px;margin-bottom:0px; text-indent:8%"><FONT STYLE="font-family:Times New Roman" SIZE="2">14. <U>Collection of Accounts, General Intangibles and Negotiable Collateral</U>. At any time upon the occurrence and during the
continuation of an Event of Default, Agent or Agent&#146;s designee may (a)&nbsp;notify Account Debtors of Grantor that the Accounts, General Intangibles, Chattel Paper or Negotiable Collateral have been assigned to Agent, for the benefit of the
Purchaser Group, or that Agent has a security interest therein, and (b)&nbsp;collect the Accounts, General Intangibles and Negotiable Collateral directly, and any collection costs and expenses shall constitute part of Grantor&#146;s Secured
Obligations under the Note Documents. </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px; text-indent:8%"><FONT STYLE="font-family:Times New Roman" SIZE="2">15. <U>Disposition of Pledged Interests by Agent</U>. None of the Pledged Interests
existing as of the date of this Agreement are, and none of the Pledged Interests hereafter acquired on the date of acquisition thereof will be, registered or qualified under the various federal or state securities laws of the United States and
disposition thereof after an Event of Default may be restricted to one or more private (instead of public) sales in view of the lack of such registration. Grantor understands that in connection with such disposition, Agent may approach only a
restricted number of potential purchasers and further understands that a sale under such circumstances may yield a lower price for the Pledged Interests than if the Pledged Interests were registered and qualified pursuant to federal and state
securities laws and sold on the open market. Grantor, therefore, agrees that: (a)&nbsp;if Agent shall, pursuant to the terms of this Agreement, sell or cause the Pledged Interests or any portion thereof to be sold at a private sale, Agent shall have
the right to rely upon the advice and </FONT></P>
 <p STYLE="margin-top:0px;margin-bottom:0px"><FONT SIZE="1">&nbsp;</FONT></P> <P STYLE="margin-top:0px;margin-bottom:0px" ALIGN="center"><FONT STYLE="font-family:Times New Roman" SIZE="2">-19-
</FONT></P>


<p Style='page-break-before:always'>
<HR  SIZE="3" style="COLOR:#999999" WIDTH="100%" ALIGN="CENTER">

 <P STYLE="margin-top:0px;margin-bottom:0px"><FONT STYLE="font-family:Times New Roman" SIZE="2">
opinion of any nationally recognized brokerage or investment firm (but shall not be obligated to seek such advice and the failure to do so shall not be considered in determining the commercial
reasonableness of such action) as to the best manner in which to offer the Pledged Interest or any portion thereof for sale and as to the best price reasonably obtainable at the private sale thereof; and (b)&nbsp;such reliance shall be conclusive
evidence that Agent has handled the disposition in a commercially reasonable manner. </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px; text-indent:8%"><FONT STYLE="font-family:Times New Roman" SIZE="2">16. <U>Voting Rights</U>. </FONT></P>
<P STYLE="margin-top:12px;margin-bottom:0px; text-indent:8%"><FONT STYLE="font-family:Times New Roman" SIZE="2">(a) Upon the occurrence and during the continuation of an Event of Default, (i)&nbsp;Agent may, at its option, and with two
(2)&nbsp;Business Days prior notice to Grantor, and in addition to all rights and remedies available to Agent under any other agreement, at law, in equity, or otherwise, exercise all voting rights, and all other ownership or consensual rights in
respect of the Pledged Interests owned by Grantor, but under no circumstances is Agent obligated by the terms of this Agreement to exercise such rights, and (ii)&nbsp;if Agent duly exercises its right to vote any of such Pledged Interests, Grantor
hereby appoints Agent, Grantor&#146;s true and lawful attorney-in-fact and <I>irrevocable proxy</I> to vote such Pledged Interests in any manner Agent deems advisable for or against all matters submitted or which may be submitted to a vote of
shareholders, partners or members, as the case may be. The power-of-attorney granted hereby is coupled with an interest and shall be irrevocable. </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px; text-indent:8%"><FONT
STYLE="font-family:Times New Roman" SIZE="2">(b) For so long as Grantor shall have the right to vote the Pledged Interests owned by it, Grantor covenants and agrees that it will not, without the prior written consent of Agent, vote or take any
consensual action with respect to such Pledged Interests which would materially adversely affect the rights of Agent and the other members of the Purchaser Group solely in connection with their rights as holders of the Notes (and not in connection
with their rights solely as holders of Stock). </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px; text-indent:8%"><FONT STYLE="font-family:Times New Roman" SIZE="2">17. <U>Remedies</U>. Upon the occurrence and during the continuance of an
Event of Default and upon the vote of the majority of holders of the Notes outstanding at such time: </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px; text-indent:8%"><FONT STYLE="font-family:Times New Roman" SIZE="2">(a) Agent may exercise
in respect of the Collateral, in addition to other rights and remedies provided for herein, in the other Note Documents, or otherwise available to it, all the rights and remedies of a secured party on default under the Code or any other applicable
law. Without limiting the generality of the foregoing, Grantor expressly agrees that, in any such event, Agent without demand of performance or other demand, advertisement or notice of any kind (except a notice specified below of time and place of
public or private sale) to or upon Grantor or any other Person (all and each of which demands, advertisements and notices are hereby expressly waived to the maximum extent permitted by the Code or any other applicable law), may take immediate
possession of all or any portion of the Collateral and (i)&nbsp;require Grantor to, and Grantor hereby agrees that it will at its own expense and upon the reasonable request of Agent forthwith, assemble all or part of the Collateral as directed by
Agent and make it available to Agent at one or more locations where Grantor regularly maintains Inventory, and (ii)&nbsp;without notice except as specified </FONT></P>
 <p STYLE="margin-top:0px;margin-bottom:0px"><FONT SIZE="1">&nbsp;</FONT></P> <P STYLE="margin-top:0px;margin-bottom:0px" ALIGN="center"><FONT STYLE="font-family:Times New Roman" SIZE="2">-20-
</FONT></P>


<p Style='page-break-before:always'>
<HR  SIZE="3" style="COLOR:#999999" WIDTH="100%" ALIGN="CENTER">

 <P STYLE="margin-top:0px;margin-bottom:0px"><FONT STYLE="font-family:Times New Roman" SIZE="2">
below, sell the Collateral or any part thereof in one or more parcels at public or private sale, at any of Agent&#146;s offices or elsewhere, for cash, on credit, and upon such other commercially
reasonable terms as Agent may request. Grantor agrees that, to the extent notice of sale shall be required by law, at least 10 days notice to Grantor of the time and place of any public sale or the time after which any private sale is to be made
shall constitute reasonable notification and specifically such notice shall constitute a reasonable &#147;authenticated notification of disposition&#148; within the meaning of Section&nbsp;9-611 of the Code. Agent shall not be obligated to make any
sale of Collateral regardless of notice of sale having been given. Agent may adjourn any public or private sale from time to time by announcement at the time and place fixed therefor, and such sale may, without further notice, be made at the time
and place to which it was so adjourned. </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px; text-indent:8%"><FONT STYLE="font-family:Times New Roman" SIZE="2">(b) Agent is hereby granted a license or other right to use, other than any King
George Property (solely during such time that the King George Property is subject to the lien described in the definition thereof), without liability for royalties or any other charge, Grantor&#146;s labels, Patents, Copyrights, rights of use of any
name, trade secrets, trade names, Trademarks, service marks and advertising matter, URLs, domain names, industrial designs, other industrial or intellectual property or any property of a similar nature, whether owned by Grantor or with respect to
which Grantor have rights under license, sublicense, or other agreements, as it pertains to the Collateral, in preparing for sale, advertising for sale and selling any Collateral, and Grantor&#146;s rights under all licenses and all franchise
agreements shall inure to the benefit of Agent. </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px; text-indent:8%"><FONT STYLE="font-family:Times New Roman" SIZE="2">(c) Any cash held by Agent as Collateral and all cash proceeds received by
Agent in respect of any sale of, collection from, or other realization upon all or any part of the Collateral shall be applied against the Notes and the Secured Obligations, <I>pari passu</I>. In the event the proceeds of Collateral are insufficient
to satisfy all of the Secured Obligations in full, Grantor shall remain liable for any such deficiency. </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px; text-indent:8%"><FONT STYLE="font-family:Times New Roman" SIZE="2">(d) Grantor hereby
acknowledges that the Secured Obligations arose out of a commercial transaction, and agrees that if an Event of Default shall occur and be continuing Agent shall have the right to an immediate writ of possession without notice of a hearing. Agent
shall have the right upon notice to Grantor to the appointment of a receiver for the properties and assets of Grantor, and Grantor hereby consents to such rights and such appointment and hereby waives any objection Grantor may have thereto or the
right to have a bond or other security posted by Agent. </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px; text-indent:8%"><FONT STYLE="font-family:Times New Roman" SIZE="2">18. <U>Remedies Cumulative</U>. Each right, power, and remedy of
Agent as provided for in this Agreement or in the other Note Documents or now or hereafter existing at law or in equity or by statute or otherwise shall be cumulative and concurrent and shall be in addition to every other right, power, or remedy
provided for in this Agreement or in the other Note Documents or now or hereafter existing at law or in equity or by statute or otherwise, and the exercise or beginning of the exercise by Agent, of any one or more of such rights, powers, or remedies
shall not preclude the simultaneous or later exercise by Agent of any or all such other rights, powers, or remedies. </FONT></P>
 <p STYLE="margin-top:0px;margin-bottom:0px"><FONT SIZE="1">&nbsp;</FONT></P> <P STYLE="margin-top:0px;margin-bottom:0px" ALIGN="center"><FONT STYLE="font-family:Times New Roman" SIZE="2">-21-
</FONT></P>


<p Style='page-break-before:always'>
<HR  SIZE="3" style="COLOR:#999999" WIDTH="100%" ALIGN="CENTER">

 <P STYLE="margin-top:0px;margin-bottom:0px; text-indent:8%"><FONT STYLE="font-family:Times New Roman" SIZE="2">19. <U>Marshaling</U>. Agent shall not be required to marshal any present or future
collateral security (including but not limited to the Collateral) for, or other assurances of payment of, the Secured Obligations or any of them or to resort to such collateral security or other assurances of payment in any particular order, and all
of its rights and remedies hereunder and in respect of such collateral security and other assurances of payment shall be cumulative and in addition to all other rights and remedies, however existing or arising. To the extent that it lawfully may,
Grantor hereby agrees that it will not invoke any law relating to the marshaling of collateral which might cause delay in or impede the enforcement of Agent&#146;s rights and remedies under this Agreement or under any other instrument creating or
evidencing any of the Secured Obligations or under which any of the Secured Obligations is outstanding or by which any of the Secured Obligations is secured or payment thereof is otherwise assured, and, to the extent that it lawfully may, Grantor
hereby irrevocably waives the benefits of all such laws. </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px; text-indent:8%"><FONT STYLE="font-family:Times New Roman" SIZE="2">20. <U>Indemnity and Expenses</U>. </FONT></P>
<P STYLE="margin-top:12px;margin-bottom:0px; text-indent:8%"><FONT STYLE="font-family:Times New Roman" SIZE="2">(a) Grantor agrees to indemnify Agent and the other members of the Purchaser Group from and against all claims, lawsuits and liabilities
(including reasonable attorneys fees) growing out of or resulting from this Agreement (including enforcement of this Agreement) or any other Note Document to which Grantor is a party, except claims, losses or liabilities resulting from the gross
negligence or willful misconduct of the party seeking indemnification as determined by a final non-appealable order of a court of competent jurisdiction. This provision shall survive the termination of this Agreement and the repayment of the Secured
Obligations. </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px; text-indent:8%"><FONT STYLE="font-family:Times New Roman" SIZE="2">(b) Grantor, jointly and severally, shall, upon demand, pay to Agent all the Expenses which Agent may incur in
connection with (i)&nbsp;the administration of this Agreement, (ii)&nbsp;the custody, preservation, use or operation of, or, upon an Event of Default, the sale of, collection from, or other realization upon, any of the Collateral in accordance with
this Agreement and the other Note Documents, (iii)&nbsp;the exercise or enforcement of any of the rights of Agent hereunder or (iv)&nbsp;the failure by Grantor to perform or observe any of the provisions hereof. </FONT></P>
<P STYLE="margin-top:12px;margin-bottom:0px; text-indent:8%"><FONT STYLE="font-family:Times New Roman" SIZE="2">21. <U>Merger, Amendments; Etc.</U> THIS AGREEMENT, TOGETHER WITH THE OTHER NOTE DOCUMENTS, REPRESENTS THE FINAL AGREEMENT BETWEEN THE
PARTIES AND MAY NOT BE CONTRADICTED BY EVIDENCE OF PRIOR, CONTEMPORANEOUS OR SUBSEQUENT ORAL AGREEMENTS OF THE PARTIES. THERE ARE NO UNWRITTEN AGREEMENTS BETWEEN THE PARTIES WITH RESPECT TO THE MATTERS PERTAINING TO THIS AGREEMENT. No waiver of any
provision of this Agreement, and no consent to any departure by Grantor herefrom, shall in any event be effective unless the same shall be in writing and signed by Agent, and then such waiver or consent shall be effective only in the specific
instance and for the specific purpose for which given. No amendment of any provision of this Agreement shall be effective unless the same shall be in writing and signed by Agent and Grantor to which such amendment applies. </FONT></P>
 <p STYLE="margin-top:0px;margin-bottom:0px"><FONT SIZE="1">&nbsp;</FONT></P> <P STYLE="margin-top:0px;margin-bottom:0px" ALIGN="center"><FONT STYLE="font-family:Times New Roman" SIZE="2">-22-
</FONT></P>


<p Style='page-break-before:always'>
<HR  SIZE="3" style="COLOR:#999999" WIDTH="100%" ALIGN="CENTER">

 <P STYLE="margin-top:0px;margin-bottom:0px; text-indent:8%"><FONT STYLE="font-family:Times New Roman" SIZE="2">22. <U>Addresses for Notices</U>. All notices and other communications provided for
hereunder shall be given in the form and manner and delivered to Agent and to Grantor, at their respective addresses specified in the Securities Purchase Agreement, or, as to any party, at such other address as shall be designated by such party in a
written notice to the other party. </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px; text-indent:8%"><FONT STYLE="font-family:Times New Roman" SIZE="2">23. <U>Continuing Security Interest: Assignments under this Agreement</U>. This Agreement
shall create a continuing security interest in the Collateral and shall (a)&nbsp;remain in full force and effect until the Secured Obligations (other than inchoate indemnity obligations) have been paid in full in cash or redeemed or converted into
Stock in accordance with the provisions of the Notes, (b)&nbsp;be binding upon Grantor and its successors and assigns, and (c)&nbsp;inure to the benefit of, and be enforceable by, Agent, and its successors, transferees and assigns. Without limiting
the generality of the foregoing clause&nbsp;(c), each of Agent and the Purchasers may assign or otherwise transfer all or any portion of its rights and obligations under this Agreement to any other Person who receives transfer of any or all of the
Notes as permitted under the Notes, and such other Person shall thereupon become vested with all the benefits in respect thereof granted to Agent herein or otherwise upon such person becoming a &#147;Purchaser&#148; pursuant to the terms of the
Securities Purchase Agreement. Upon payment in full in cash or redemption or conversion of all the Secured Obligations (other than inchoate indemnity obligations) in accordance with the provisions of the Notes, the Security Interest granted hereby
shall automatically terminate and all rights to the Collateral shall revert to Grantor or any other Person entitled thereto. At such time, Agent authorizes Debtor or any designee of Debtor to file appropriate termination statements or take any other
steps that Debtor deems necessary to terminate such Security Interests. Except as provided herein, in the Securities Purchase Agreement or the Notes, no transfer or renewal, extension, assignment, or termination of this Agreement, any other Note
Document, or any other instrument or document executed and delivered by Grantor to Agent nor any additional loans made by the Purchasers to Grantor, nor the taking of further security, nor the retaking or re-delivery of the Collateral to Grantor by
Agent, nor any other act of the Purchaser Group, or any of them shall release Grantor from any obligation, except a release or discharge executed in writing by Agent. Agent shall not by any act, delay, omission or otherwise, be deemed to have waived
any of its rights or remedies hereunder, unless such waiver is in writing and signed by Agent and then only to the extent therein set forth. A waiver by Agent of any right or remedy on any occasion shall not be construed as a bar to the exercise of
any such right or remedy which Agent would otherwise have had on any other occasion. </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px; text-indent:8%"><FONT STYLE="font-family:Times New Roman" SIZE="2">24. <U>Governing Law</U>. </FONT></P>
<P STYLE="margin-top:12px;margin-bottom:0px; text-indent:8%"><FONT STYLE="font-family:Times New Roman" SIZE="2">(a) <B>This Agreement shall be construed and enforced in accordance with, and all questions concerning the construction, validity,
interpretation and performance of this Agreement shall be governed by, the internal laws of the State of California, without giving effect to any choice of law or conflict of law provision or rule (whether of the State of California or any other
jurisdictions) that would cause the application of the laws of any jurisdictions other than the State of California.</B> </FONT></P>
 <p STYLE="margin-top:0px;margin-bottom:0px"><FONT SIZE="1">&nbsp;</FONT></P> <P STYLE="margin-top:0px;margin-bottom:0px" ALIGN="center"><FONT STYLE="font-family:Times New Roman" SIZE="2">-23-
</FONT></P>


<p Style='page-break-before:always'>
<HR  SIZE="3" style="COLOR:#999999" WIDTH="100%" ALIGN="CENTER">

 <P STYLE="margin-top:0px;margin-bottom:0px; text-indent:8%"><FONT STYLE="font-family:Times New Roman" SIZE="2">(b) THE PARTIES AGREE THAT ALL ACTIONS OR PROCEEDINGS ARISING IN CONNECTION WITH THIS
AGREEMENT AND THE OTHER NOTE DOCUMENTS SHALL BE TRIED AND LITIGATED ONLY IN THE STATE AND, TO THE EXTENT PERMITTED BY APPLICABLE LAW, FEDERAL COURTS LOCATED IN THE CITY AND COUNTY OF SAN DIEGO, CALIFORNIA; <U>PROVIDED</U>, <U>HOWEVER</U>, THAT ANY
SUIT SEEKING ENFORCEMENT AGAINST ANY COLLATERAL OR OTHER PROPERTY MAY BE BROUGHT, AT AGENT&#146;S OPTION, IN THE COURTS OF ANY JURISDICTION WHERE AGENT ELECTS TO BRING SUCH ACTION OR WHERE SUCH COLLATERAL OR OTHER PROPERTY MAY BE FOUND. AGENT AND
GRANTOR WAIVE, TO THE EXTENT PERMITTED UNDER APPLICABLE LAW, ANY RIGHT EACH MAY HAVE TO ASSERT THE DOCTRINE OF <U>FORUM</U> <U>NON</U> <U>CONVENIENS</U> OR TO OBJECT TO VENUE TO THE EXTENT ANY PROCEEDING IS BROUGHT IN SAN DIEGO, CALIFORNIA IN
ACCORDANCE WITH THIS <U>SECTION 24(b)</U>. </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px; text-indent:8%"><FONT STYLE="font-family:Times New Roman" SIZE="2">(c) TO THE MAXIMUM EXTENT PERMITTED BY APPLICABLE LAW, AGENT AND GRANTOR HEREBY
WAIVE THEIR RESPECTIVE RIGHTS TO A JURY TRIAL OF ANY CLAIM OR CAUSE OF ACTION BASED UPON OR ARISING OUT OF THIS AGREEMENT OR ANY OF THE TRANSACTIONS CONTEMPLATED THEREIN, INCLUDING CONTRACT CLAIMS, TORT CLAIMS, BREACH OF DUTY CLAIMS, AND ALL OTHER
COMMON LAW OR STATUTORY CLAIMS. AGENT AND GRANTOR REPRESENT THAT EACH HAS REVIEWED THIS WAIVER AND EACH KNOWINGLY AND VOLUNTARILY WAIVES ITS JURY TRIAL RIGHTS FOLLOWING CONSULTATION WITH LEGAL COUNSEL. IN THE EVENT OF LITIGATION, A COPY OF THIS
AGREEMENT MAY BE FILED AS A WRITTEN CONSENT TO A TRIAL BY THE COURT. </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px; text-indent:8%"><FONT STYLE="font-family:Times New Roman" SIZE="2">25. <U>Agent</U>. Each reference herein to any right
granted to, benefit conferred upon or power exercisable by the &#147;Agent&#148; shall be a reference to Agent, for the benefit of the Purchaser Group. </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px; text-indent:8%"><FONT
STYLE="font-family:Times New Roman" SIZE="2">26. <U>Miscellaneous</U>. </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px; text-indent:8%"><FONT STYLE="font-family:Times New Roman" SIZE="2">(a) This Agreement may be executed in any number of
counterparts and by different parties on separate counterparts, each of which, when executed and delivered, shall be deemed to be an original, and all of which, when taken together, shall constitute but one and the same Agreement. Delivery of an
executed counterpart of this Agreement by telefacsimile or other electronic method of transmission shall be equally as effective as delivery of an original executed counterpart of this Agreement. Any party delivering an executed counterpart of this
Agreement by telefacsimile or other electronic method of transmission also shall deliver an original executed counterpart of this Agreement but the failure to deliver an original executed counterpart shall not affect the validity, enforceability,
and binding effect of this Agreement. The foregoing shall apply to each other Note Document <I>mutatis mutandis</I>. </FONT></P>
 <p STYLE="margin-top:0px;margin-bottom:0px"><FONT SIZE="1">&nbsp;</FONT></P> <P STYLE="margin-top:0px;margin-bottom:0px" ALIGN="center"><FONT STYLE="font-family:Times New Roman" SIZE="2">-24-
</FONT></P>


<p Style='page-break-before:always'>
<HR  SIZE="3" style="COLOR:#999999" WIDTH="100%" ALIGN="CENTER">

 <P STYLE="margin-top:0px;margin-bottom:0px; text-indent:8%"><FONT STYLE="font-family:Times New Roman" SIZE="2">(b) Any provision of this Agreement which is prohibited or unenforceable shall be
ineffective to the extent of such prohibition or unenforceability without invalidating the remaining provisions hereof in that jurisdiction or affecting the validity or enforceability of such provision in any other jurisdiction. </FONT></P>
<P STYLE="margin-top:12px;margin-bottom:0px; text-indent:8%"><FONT STYLE="font-family:Times New Roman" SIZE="2">(c) Headings used in this Agreement are for convenience only and shall not be used in connection with the interpretation of any provision
hereof. </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px; text-indent:8%"><FONT STYLE="font-family:Times New Roman" SIZE="2">(d) The pronouns used herein shall include, when appropriate, either gender and both singular and plural, and the
grammatical construction of sentences shall conform thereto. </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px; text-indent:8%"><FONT STYLE="font-family:Times New Roman" SIZE="2">(e) Unless the context of this Agreement or any other Note
Document clearly requires otherwise, references to the plural include the singular, references to the singular include the plural, the terms &#147;includes&#148; and &#147;including&#148; are not limiting, and the term &#147;or&#148; has, except
where otherwise indicated, the inclusive meaning represented by the phrase &#147;and/or.&#148; The words &#147;hereof,&#148; &#147;herein,&#148; &#147;hereby,&#148; &#147;hereunder,&#148; and similar terms in this Agreement or any other Note
Document refer to this Agreement or such other Note Document, as the case may be, as a whole and not to any particular provision of this Agreement or such other Note Document, as the case may be. Section, subsection, clause, schedule, and exhibit
references herein are to this Agreement unless otherwise specified. Any reference in this Agreement or in any other Note Document to any agreement, instrument, or document shall include all alterations, amendments, changes, extensions,
modifications, renewals, replacements, substitutions, joinders, and supplements, thereto and thereof, as applicable (subject to any restrictions on such alterations, amendments, changes, extensions, modifications, renewals, replacements,
substitutions, joinders, and supplements set forth herein). Any reference herein or in any other Note Document to the satisfaction or repayment in full of the Secured Obligations shall mean the repayment in full in cash (or cash collateralization in
accordance with the terms hereof) of all Secured Obligations other than unasserted contingent indemnification Secured Obligations. Any reference herein to any Person shall be construed to include such Person&#146;s successors and assigns. Any
requirement of a writing contained herein or in any other Note Document shall be satisfied by the transmission of a Record and any Record so transmitted shall constitute a representation and warranty as to the accuracy and completeness of the
information contained therein. </FONT></P>
 <p STYLE="margin-top:0px;margin-bottom:0px"><FONT SIZE="1">&nbsp;</FONT></P> <P STYLE="margin-top:0px;margin-bottom:0px" ALIGN="center"><FONT STYLE="font-family:Times New Roman" SIZE="2">-25-
</FONT></P>


<p Style='page-break-before:always'>
<HR  SIZE="3" style="COLOR:#999999" WIDTH="100%" ALIGN="CENTER">

 <P STYLE="margin-top:0px;margin-bottom:0px; text-indent:8%"><FONT STYLE="font-family:Times New Roman" SIZE="2">IN WITNESS WHEREOF, the undersigned parties hereto have executed this Agreement by and
through their duly authorized officers, as of the day and year first above written. </FONT></P> <P STYLE="font-size:12px;margin-top:0px;margin-bottom:0px">&nbsp;</P>
<TABLE CELLSPACING="0" CELLPADDING="0" WIDTH="100%" BORDER="0">

<TR>
<TD WIDTH="47%"></TD>
<TD VALIGN="bottom" WIDTH="1%"></TD>
<TD WIDTH="4%"></TD>
<TD VALIGN="bottom" WIDTH="1%"></TD>
<TD WIDTH="47%"></TD></TR>
<TR>
<TD VALIGN="top"><FONT STYLE="font-family:Times New Roman" SIZE="2"><B>GRANTOR:</B></FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom" COLSPAN="3"><FONT STYLE="font-family:Times New Roman" SIZE="2"><B>A.P. PHARMA, INC.</B></FONT></TD></TR>
<TR>
<TD HEIGHT="16"></TD>
<TD HEIGHT="16" COLSPAN="2"></TD>
<TD HEIGHT="16" COLSPAN="2"></TD></TR>
<TR>
<TD VALIGN="top"></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2">By:</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"> <P STYLE="margin-top:0px;margin-bottom:1px;border-bottom:1px solid #000000"><FONT STYLE="font-family:Times New Roman" SIZE="2">/s/ John Whelan</FONT></P></TD></TR>
<TR>
<TD VALIGN="top"></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2">Name:</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"> <P STYLE="margin-top:0px;margin-bottom:1px;border-bottom:1px solid #000000"><FONT STYLE="font-family:Times New Roman" SIZE="2">John Whelan</FONT></P></TD></TR>
<TR>
<TD VALIGN="top"></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2">Title:</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"> <P STYLE="margin-top:0px;margin-bottom:1px;border-bottom:1px solid #000000"><FONT STYLE="font-family:Times New Roman" SIZE="2">Chief Executive Officer</FONT></P></TD></TR></TABLE>
 <p STYLE="margin-top:0px;margin-bottom:0px"><FONT SIZE="1">&nbsp;</FONT></P> <P STYLE="margin-top:0px;margin-bottom:0px" ALIGN="center"><FONT STYLE="font-family:Times New Roman" SIZE="2">Signature Page
to Security Agreement </FONT></P>


<p Style='page-break-before:always'>
<HR  SIZE="3" style="COLOR:#999999" WIDTH="100%" ALIGN="CENTER">


<TABLE CELLSPACING="0" CELLPADDING="0" WIDTH="100%" BORDER="0">

<TR>
<TD WIDTH="47%"></TD>
<TD VALIGN="bottom" WIDTH="1%"></TD>
<TD WIDTH="4%"></TD>
<TD VALIGN="bottom" WIDTH="1%"></TD>
<TD WIDTH="47%"></TD></TR>
<TR>
<TD VALIGN="top"><FONT STYLE="font-family:Times New Roman" SIZE="2"><B>AGENT:</B></FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom" COLSPAN="3"><FONT STYLE="font-family:Times New Roman" SIZE="2"><B>TANG CAPITAL PARTNERS, LP</B></FONT></TD></TR>
<TR>
<TD HEIGHT="16"></TD>
<TD HEIGHT="16" COLSPAN="2"></TD>
<TD HEIGHT="16" COLSPAN="2"></TD></TR>
<TR>
<TD VALIGN="top"></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="top"><FONT STYLE="font-family:Times New Roman" SIZE="2">By:</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"> <P STYLE="margin-top:0px;margin-bottom:0px"><FONT STYLE="font-family:Times New Roman" SIZE="2">Tang Capital Management, LLC,</FONT></P>
<P STYLE="margin-top:0px;margin-bottom:1px"><FONT STYLE="font-family:Times New Roman" SIZE="2">its general partner</FONT></P></TD></TR>
<TR>
<TD HEIGHT="16"></TD>
<TD HEIGHT="16" COLSPAN="2"></TD>
<TD HEIGHT="16" COLSPAN="2"></TD></TR>
<TR>
<TD VALIGN="top"></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2">By:</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"> <P STYLE="margin-top:0px;margin-bottom:1px;border-bottom:1px solid #000000"><FONT STYLE="font-family:Times New Roman" SIZE="2">/s/ Kevin Tang</FONT></P></TD></TR>
<TR>
<TD VALIGN="top"></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2">Name:</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"> <P STYLE="margin-top:0px;margin-bottom:1px;border-bottom:1px solid #000000"><FONT STYLE="font-family:Times New Roman" SIZE="2">Kevin C. Tang</FONT></P></TD></TR>
<TR>
<TD VALIGN="top"></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2">Title:</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"> <P STYLE="margin-top:0px;margin-bottom:1px;border-bottom:1px solid #000000"><FONT STYLE="font-family:Times New Roman" SIZE="2">Managing Director</FONT></P></TD></TR>
<TR>
<TD HEIGHT="16"></TD>
<TD HEIGHT="16" COLSPAN="4"></TD></TR>
<TR>
<TD VALIGN="top"><FONT STYLE="font-family:Times New Roman" SIZE="2"><B>PURCHASER:</B></FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom" COLSPAN="3"><FONT STYLE="font-family:Times New Roman" SIZE="2"><B>TANG CAPITAL PARTNERS, LP</B></FONT></TD></TR>
<TR>
<TD HEIGHT="16"></TD>
<TD HEIGHT="16" COLSPAN="2"></TD>
<TD HEIGHT="16" COLSPAN="2"></TD></TR>
<TR>
<TD VALIGN="top"></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="top"><FONT STYLE="font-family:Times New Roman" SIZE="2">By:</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"> <P STYLE="margin-top:0px;margin-bottom:0px"><FONT STYLE="font-family:Times New Roman" SIZE="2">Tang Capital Management, LLC,</FONT></P>
<P STYLE="margin-top:0px;margin-bottom:1px"><FONT STYLE="font-family:Times New Roman" SIZE="2">its general partner</FONT></P></TD></TR>
<TR>
<TD HEIGHT="16"></TD>
<TD HEIGHT="16" COLSPAN="2"></TD>
<TD HEIGHT="16" COLSPAN="2"></TD></TR>
<TR>
<TD VALIGN="top"></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2">By:</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"> <P STYLE="margin-top:0px;margin-bottom:1px;border-bottom:1px solid #000000"><FONT STYLE="font-family:Times New Roman" SIZE="2">/s/ Kevin Tang</FONT></P></TD></TR>
<TR>
<TD VALIGN="top"></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2">Name:</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"> <P STYLE="margin-top:0px;margin-bottom:1px;border-bottom:1px solid #000000"><FONT STYLE="font-family:Times New Roman" SIZE="2">Kevin C. Tang</FONT></P></TD></TR>
<TR>
<TD VALIGN="top"></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2">Title:</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"> <P STYLE="margin-top:0px;margin-bottom:1px;border-bottom:1px solid #000000"><FONT STYLE="font-family:Times New Roman" SIZE="2">Managing Director</FONT></P></TD></TR></TABLE>
 <p STYLE="margin-top:0px;margin-bottom:0px"><FONT SIZE="1">&nbsp;</FONT></P> <P STYLE="margin-top:0px;margin-bottom:0px" ALIGN="center"><FONT STYLE="font-family:Times New Roman" SIZE="2">Signature Page
to Security Agreement </FONT></P>


<p Style='page-break-before:always'>
<HR  SIZE="3" style="COLOR:#999999" WIDTH="100%" ALIGN="CENTER">


<TABLE CELLSPACING="0" CELLPADDING="0" WIDTH="100%" BORDER="0">

<TR>
<TD WIDTH="47%"></TD>
<TD VALIGN="bottom" WIDTH="1%"></TD>
<TD WIDTH="4%"></TD>
<TD VALIGN="bottom" WIDTH="1%"></TD>
<TD WIDTH="47%"></TD></TR>
<TR>
<TD VALIGN="top"><FONT STYLE="font-family:Times New Roman" SIZE="2"><B>PURCHASER:</B></FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom" COLSPAN="3"><FONT STYLE="font-family:Times New Roman" SIZE="2"><B>BAKER BROS. INVESTMENTS II, L.P.</B></FONT></TD></TR>
<TR>
<TD HEIGHT="16"></TD>
<TD HEIGHT="16" COLSPAN="2"></TD>
<TD HEIGHT="16" COLSPAN="2"></TD></TR>
<TR>
<TD VALIGN="top"></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="top"><FONT STYLE="font-family:Times New Roman" SIZE="2">By:</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"> <P STYLE="margin-top:0px;margin-bottom:0px"><FONT STYLE="font-family:Times New Roman" SIZE="2">Baker Bros. Capital, L.P.,</FONT></P>
<P STYLE="margin-top:0px;margin-bottom:1px"><FONT STYLE="font-family:Times New Roman" SIZE="2">its general partner</FONT></P></TD></TR>
<TR>
<TD VALIGN="top"></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="top"><FONT STYLE="font-family:Times New Roman" SIZE="2">By:</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"> <P STYLE="margin-top:0px;margin-bottom:0px"><FONT STYLE="font-family:Times New Roman" SIZE="2">Baker Bros. Capital (GP), LLC,</FONT></P> <P STYLE="margin-top:0px;margin-bottom:1px"><FONT
STYLE="font-family:Times New Roman" SIZE="2">its general partner</FONT></P></TD></TR>
<TR>
<TD HEIGHT="16"></TD>
<TD HEIGHT="16" COLSPAN="2"></TD>
<TD HEIGHT="16" COLSPAN="2"></TD></TR>
<TR>
<TD VALIGN="top"></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2">By:</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"> <P STYLE="margin-top:0px;margin-bottom:1px;border-bottom:1px solid #000000"><FONT STYLE="font-family:Times New Roman" SIZE="2">/s/ Felix Baker</FONT></P></TD></TR>
<TR>
<TD VALIGN="top"></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2">Name:</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"> <P STYLE="margin-top:0px;margin-bottom:1px;border-bottom:1px solid #000000"><FONT STYLE="font-family:Times New Roman" SIZE="2">Felix Baker</FONT></P></TD></TR>
<TR>
<TD VALIGN="top"></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2">Title:</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"> <P STYLE="margin-top:0px;margin-bottom:1px;border-bottom:1px solid #000000"><FONT STYLE="font-family:Times New Roman" SIZE="2">Managing Member</FONT></P></TD></TR>
<TR>
<TD HEIGHT="16"></TD>
<TD HEIGHT="16" COLSPAN="4"></TD></TR>
<TR>
<TD VALIGN="top"><FONT STYLE="font-family:Times New Roman" SIZE="2"><B>PURCHASER:</B></FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom" COLSPAN="3"><FONT STYLE="font-family:Times New Roman" SIZE="2"><B>BAKER BROTHERS LIFE SCIENCES, L.P.</B></FONT></TD></TR>
<TR>
<TD HEIGHT="16"></TD>
<TD HEIGHT="16" COLSPAN="2"></TD>
<TD HEIGHT="16" COLSPAN="2"></TD></TR>
<TR>
<TD VALIGN="top"></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="top"><FONT STYLE="font-family:Times New Roman" SIZE="2">By:</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"> <P STYLE="margin-top:0px;margin-bottom:0px"><FONT STYLE="font-family:Times New Roman" SIZE="2">Baker Brothers Life Sciences Capital, L.P.,</FONT></P> <P STYLE="margin-top:0px;margin-bottom:1px"><FONT
STYLE="font-family:Times New Roman" SIZE="2">its general partner</FONT></P></TD></TR>
<TR>
<TD VALIGN="top"></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="top"><FONT STYLE="font-family:Times New Roman" SIZE="2">By:</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"> <P STYLE="margin-top:0px;margin-bottom:0px"><FONT STYLE="font-family:Times New Roman" SIZE="2">Baker Brothers Life Sciences Capital (GP), LLC,</FONT></P> <P STYLE="margin-top:0px;margin-bottom:1px"><FONT
STYLE="font-family:Times New Roman" SIZE="2">its general partner</FONT></P></TD></TR>
<TR>
<TD HEIGHT="16"></TD>
<TD HEIGHT="16" COLSPAN="2"></TD>
<TD HEIGHT="16" COLSPAN="2"></TD></TR>
<TR>
<TD VALIGN="top"></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2">By:</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"> <P STYLE="margin-top:0px;margin-bottom:1px;border-bottom:1px solid #000000"><FONT STYLE="font-family:Times New Roman" SIZE="2">/s/ Felix Baker</FONT></P></TD></TR>
<TR>
<TD VALIGN="top"></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2">Name:</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"> <P STYLE="margin-top:0px;margin-bottom:1px;border-bottom:1px solid #000000"><FONT STYLE="font-family:Times New Roman" SIZE="2">Felix Baker</FONT></P></TD></TR>
<TR>
<TD VALIGN="top"></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2">Title:</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"> <P STYLE="margin-top:0px;margin-bottom:1px;border-bottom:1px solid #000000"><FONT STYLE="font-family:Times New Roman" SIZE="2">Managing Member</FONT></P></TD></TR>
<TR>
<TD HEIGHT="16"></TD>
<TD HEIGHT="16" COLSPAN="4"></TD></TR>
<TR>
<TD VALIGN="top"><FONT STYLE="font-family:Times New Roman" SIZE="2"><B>PURCHASER:</B></FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom" COLSPAN="3"><FONT STYLE="font-family:Times New Roman" SIZE="2"><B>14159, L.P.</B></FONT></TD></TR>
<TR>
<TD HEIGHT="16"></TD>
<TD HEIGHT="16" COLSPAN="2"></TD>
<TD HEIGHT="16" COLSPAN="2"></TD></TR>
<TR>
<TD VALIGN="top"></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2">By:</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2">14159 Capital, L.P., its general partner</FONT></TD></TR>
<TR>
<TD VALIGN="top"></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="top"><FONT STYLE="font-family:Times New Roman" SIZE="2">By:</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"> <P STYLE="margin-top:0px;margin-bottom:0px"><FONT STYLE="font-family:Times New Roman" SIZE="2">14159 Capital (GP), LLC,</FONT></P>
<P STYLE="margin-top:0px;margin-bottom:1px"><FONT STYLE="font-family:Times New Roman" SIZE="2">its general partner</FONT></P></TD></TR>
<TR>
<TD HEIGHT="16"></TD>
<TD HEIGHT="16" COLSPAN="2"></TD>
<TD HEIGHT="16" COLSPAN="2"></TD></TR>
<TR>
<TD VALIGN="top"></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2">By:</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"> <P STYLE="margin-top:0px;margin-bottom:1px;border-bottom:1px solid #000000"><FONT STYLE="font-family:Times New Roman" SIZE="2">/s/ Felix Baker</FONT></P></TD></TR>
<TR>
<TD VALIGN="top"></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2">Name:</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"> <P STYLE="margin-top:0px;margin-bottom:1px;border-bottom:1px solid #000000"><FONT STYLE="font-family:Times New Roman" SIZE="2">Felix Baker</FONT></P></TD></TR>
<TR>
<TD VALIGN="top"></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2">Title:</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"> <P STYLE="margin-top:0px;margin-bottom:1px;border-bottom:1px solid #000000"><FONT STYLE="font-family:Times New Roman" SIZE="2">Managing Member</FONT></P></TD></TR></TABLE>
 <p STYLE="margin-top:0px;margin-bottom:0px"><FONT SIZE="1">&nbsp;</FONT></P> <P STYLE="margin-top:0px;margin-bottom:0px" ALIGN="center"><FONT STYLE="font-family:Times New Roman" SIZE="2">Signature Page
to Security Agreement </FONT></P>


<p Style='page-break-before:always'>
<HR  SIZE="3" style="COLOR:#999999" WIDTH="100%" ALIGN="CENTER">

 <P STYLE="margin-top:0px;margin-bottom:0px" ALIGN="center"><FONT STYLE="font-family:Times New Roman" SIZE="2"><B>EXHIBIT A </B></FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px" ALIGN="center"><FONT
STYLE="font-family:Times New Roman" SIZE="2"><B>PATENT SECURITY AGREEMENT </B></FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px; text-indent:8%;padding-bottom:0px;"><FONT STYLE="font-family:Times New Roman" SIZE="2">This PATENT SECURITY
AGREEMENT (this &#147;<U>Patent Security Agreement</U>&#148;) is made this 24</FONT><FONT STYLE="font-family:Times New Roman" SIZE="1"><SUP STYLE="vertical-align:baseline; position:relative; bottom:.8ex">th</SUP></FONT><FONT
STYLE="font-family:Times New Roman" SIZE="2"> day of April, 2011, among A.P. PHARMA, INC. (&#147;<U>Grantor</U>&#148;), and TANG CAPITAL PARTNERS, LP, in its capacity as representative for the Purchasers (&#147;<U>Agent</U>&#148;). </FONT></P>
<P STYLE="margin-top:24px;margin-bottom:0px" ALIGN="center"><FONT STYLE="font-family:Times New Roman" SIZE="2"><B><U>RECITALS </U></B></FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px; text-indent:8%"><FONT
STYLE="font-family:Times New Roman" SIZE="2">WHEREAS, Pursuant to that certain Securities Purchase Agreement, dated as of April&nbsp;24, 2011 (the &#147;<U>Securities Purchase Agreement</U>&#148;), by and among A.P. Pharma, Inc.
(&#147;<U>Debtor</U>&#148;), Agent and Baker Bros. Investments II, L.P., Baker Brothers Life Sciences, L.P. and 14159, L.P., as Purchasers (collectively, the &#147;<U>Purchasers</U>&#148;), Debtor has agreed to issue to the Purchasers, and the
Purchasers have agreed to purchase from Debtor, certain Secured Convertible Notes (the &#147;<U>Notes</U>&#148;), and </FONT></P>
<P STYLE="margin-top:12px;margin-bottom:0px; text-indent:8%"><FONT STYLE="font-family:Times New Roman" SIZE="2">WHEREAS, the Purchasers are willing to make the financial accommodations to Debtor as provided for in the Securities Purchase Agreement
and Notes, but only upon the condition, among others, that Grantor shall have executed and delivered to Agent, as representative of the Purchasers for the benefit of the Purchasers, that certain Security Agreement dated as of April&nbsp;24, 2011
(including all annexes, exhibits or schedules thereto, as from time to time amended, restated, supplemented or otherwise modified, the &#147;<U>Security Agreement</U>&#148;); </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px; text-indent:8%"><FONT
STYLE="font-family:Times New Roman" SIZE="2">WHEREAS, pursuant to the Security Agreement, Grantor is required to execute and deliver to Agent this Patent Security Agreement; </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px; text-indent:8%"><FONT
STYLE="font-family:Times New Roman" SIZE="2">NOW, THEREFORE, in consideration of the premises and mutual covenants herein contained and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, Grantor
hereby agrees as follows: </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px; text-indent:8%"><FONT STYLE="font-family:Times New Roman" SIZE="2">1. <U>DEFINED TERMS</U>. All capitalized terms used but not otherwise defined herein have the
meanings given to them in the Security Agreement. </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px; text-indent:8%"><FONT STYLE="font-family:Times New Roman" SIZE="2">2. <U>GRANT OF SECURITY INTEREST IN PATENT COLLATERAL</U>. Grantor hereby
grants to Agent a continuing first priority security interest in all of Grantor&#146;s right, title and interest in, to and under the following, whether presently existing or hereafter created or acquired (collectively, the &#147;<U>Patent
Collateral</U>&#148;): </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px; text-indent:8%"><FONT STYLE="font-family:Times New Roman" SIZE="2">(a) all of its Patents and Patent Intellectual Property Licenses to which it is a party including
those referred to on <U>Schedule I</U> hereto; </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px; text-indent:8%"><FONT STYLE="font-family:Times New Roman" SIZE="2">(b) all reissues, continuations or extensions of the foregoing; and
</FONT></P>

<p Style='page-break-before:always'>
<HR  SIZE="3" style="COLOR:#999999" WIDTH="100%" ALIGN="CENTER">

 <P STYLE="margin-top:0px;margin-bottom:0px; text-indent:8%"><FONT STYLE="font-family:Times New Roman" SIZE="2">(c) all products and proceeds of the foregoing, including any claim by Grantor against third
parties for past, present or future infringement or dilution of any Patent or any Patent licensed under any Intellectual Property License. </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px; text-indent:8%"><FONT
STYLE="font-family:Times New Roman" SIZE="2">3. <U>SECURITY FOR OBLIGATIONS</U>. This Patent Security Agreement and the Security Interest created hereby secures the payment and performance of all the Secured Obligations, whether now existing or
arising hereafter. Without limiting the generality of the foregoing, this Patent Security Agreement secures the payment of all amounts which constitute part of the Secured Obligations and would be owed by Grantor, or any of them, to Agent, whether
or not they are unenforceable or not allowable due to the existence of an Insolvency Proceeding involving Grantor. </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px; text-indent:8%"><FONT STYLE="font-family:Times New Roman" SIZE="2">4.
<U>SECURITY AGREEMENT</U>. The security interests granted pursuant to this Patent Security Agreement are granted in conjunction with the security interests granted to Agent pursuant to the Security Agreement. Grantor hereby acknowledges and affirms
that the rights and remedies of Agent with respect to the security interest in the Patent Collateral made and granted hereby are more fully set forth in the Security Agreement, the terms and provisions of which are incorporated by reference herein
as if fully set forth herein. </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px; text-indent:8%"><FONT STYLE="font-family:Times New Roman" SIZE="2">5. <U>AUTHORIZATION TO SUPPLEMENT</U>. If Grantor shall obtain rights to any new patentable
inventions or become entitled to the benefit of any patent application or patent for any reissue, division, or continuation, of any patent, the provisions of this Patent Security Agreement shall automatically apply thereto. Grantor shall give prompt
notice in writing to Agent with respect to any such new patent rights. Without limiting Grantor&#146;s obligations under this <U>Section&nbsp;5</U>, Grantor hereby authorizes Agent unilaterally to modify this Agreement by amending <U>Schedule I</U>
to include any such new patent rights of Grantor. Notwithstanding the foregoing, no failure to so modify this Patent Security Agreement or amend <U>Schedule I</U> shall in any way affect, invalidate or detract from Agent&#146;s continuing security
interest in all Collateral, whether or not listed on <U>Schedule I</U>. </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px; text-indent:8%"><FONT STYLE="font-family:Times New Roman" SIZE="2">6. <U>COUNTERPARTS</U>. This Patent Security
Agreement may be executed in any number of counterparts, each of which shall be deemed to be an original, but all such separate counterparts shall together constitute but one and the same instrument. In proving this Patent Security Agreement or any
other Note Document in any judicial proceedings, it shall not be necessary to produce or account for more than one such counterpart signed by the party against whom such enforcement is sought. Any signatures delivered by a party by facsimile
transmission or by e-mail transmission shall be deemed an original signature hereto. </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px; text-indent:8%"><FONT STYLE="font-family:Times New Roman" SIZE="2">7. <U>CONSTRUCTION</U>. Unless the
context of this Patent Security Agreement or any other Note Document clearly requires otherwise, references to the plural include the singular, references to the singular include the plural, the terms &#147;includes&#148; and &#147;including&#148;
are not limiting, and the term &#147;or&#148; has, except where otherwise indicated, the inclusive meaning represented by the phrase &#147;and/or.&#148; The words &#147;hereof,&#148; &#147;herein,&#148; &#147;hereby,&#148; &#147;hereunder,&#148; and
similar terms in this Patent Security Agreement or any other </FONT></P>
 <p STYLE="margin-top:0px;margin-bottom:0px"><FONT SIZE="1">&nbsp;</FONT></P> <P STYLE="margin-top:0px;margin-bottom:0px" ALIGN="center"><FONT STYLE="font-family:Times New Roman" SIZE="2">Patent
Security Agreement </FONT></P>


<p Style='page-break-before:always'>
<HR  SIZE="3" style="COLOR:#999999" WIDTH="100%" ALIGN="CENTER">

 <P STYLE="margin-top:0px;margin-bottom:0px"><FONT STYLE="font-family:Times New Roman" SIZE="2">
Note Document refer to this Patent Security Agreement or such other Note Document, as the case may be, as a whole and not to any particular provision of this Patent Security Agreement or such
other Note Document, as the case may be. Section, subsection, clause, schedule, and exhibit references herein are to this Patent Security Agreement unless otherwise specified. Any reference in this Patent Security Agreement or in any other Note
Document to any agreement, instrument, or document shall include all alterations, amendments, changes, extensions, modifications, renewals, replacements, substitutions, joinders, and supplements, thereto and thereof, as applicable (subject to any
restrictions on such alterations, amendments, changes, extensions, modifications, renewals, replacements, substitutions, joinders, and supplements set forth herein). Any reference herein or in any other Note Document to the satisfaction or repayment
in full of the Secured Obligations shall mean the repayment in full in cash (or cash collateralization in accordance with the terms hereof) of all Obligations other than unasserted contingent indemnification Secured Obligations. Any reference herein
to any Person shall be construed to include such Person&#146;s successors and assigns. Any requirement of a writing contained herein or in any other Note Document shall be satisfied by the transmission of a Record and any Record so transmitted shall
constitute a representation and warranty as to the accuracy and completeness of the information contained therein. </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px" ALIGN="center"><FONT STYLE="font-family:Times New Roman" SIZE="2">[signature
page follows] </FONT></P>
 <p STYLE="margin-top:0px;margin-bottom:0px"><FONT SIZE="1">&nbsp;</FONT></P> <P STYLE="margin-top:0px;margin-bottom:0px" ALIGN="center"><FONT STYLE="font-family:Times New Roman" SIZE="2">Patent
Security Agreement </FONT></P>


<p Style='page-break-before:always'>
<HR  SIZE="3" style="COLOR:#999999" WIDTH="100%" ALIGN="CENTER">

 <P STYLE="margin-top:0px;margin-bottom:0px; text-indent:8%"><FONT STYLE="font-family:Times New Roman" SIZE="2">IN WITNESS WHEREOF, Grantor has caused this Patent Security Agreement to be executed and
delivered by its duly authorized officer as of the date first set forth above. </FONT></P> <P STYLE="font-size:12px;margin-top:0px;margin-bottom:0px">&nbsp;</P><DIV ALIGN="right">
<TABLE CELLSPACING="0" CELLPADDING="0" WIDTH="40%" BORDER="0">

<TR>
<TD WIDTH="12%"></TD>
<TD VALIGN="bottom" WIDTH="1%"></TD>
<TD WIDTH="87%"></TD></TR>
<TR>
<TD VALIGN="top" COLSPAN="3"><FONT STYLE="font-family:Times New Roman" SIZE="2">A.P. PHARMA, INC.</FONT></TD></TR>
<TR>
<TD HEIGHT="16"></TD>
<TD HEIGHT="16" COLSPAN="2"></TD></TR>
<TR>
<TD VALIGN="top"><FONT STYLE="font-family:Times New Roman" SIZE="2">By:</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"> <P STYLE="margin-top:0px;margin-bottom:1px;border-bottom:1px solid #000000"><FONT STYLE="font-family:Times New Roman" SIZE="2">&nbsp;</FONT></P></TD></TR>
<TR>
<TD VALIGN="top"><FONT STYLE="font-family:Times New Roman" SIZE="2">Name:</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"> <P STYLE="margin-top:0px;margin-bottom:1px;border-bottom:1px solid #000000"><FONT STYLE="font-family:Times New Roman" SIZE="2">&nbsp;</FONT></P></TD></TR>
<TR>
<TD VALIGN="top"><FONT STYLE="font-family:Times New Roman" SIZE="2">Title:</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"> <P STYLE="margin-top:0px;margin-bottom:1px;border-bottom:1px solid #000000"><FONT STYLE="font-family:Times New Roman" SIZE="2">&nbsp;</FONT></P></TD></TR></TABLE></DIV>
 <p STYLE="margin-top:0px;margin-bottom:0px"><FONT SIZE="1">&nbsp;</FONT></P> <P STYLE="margin-top:0px;margin-bottom:0px" ALIGN="center"><FONT STYLE="font-family:Times New Roman" SIZE="2">Patent
Security Agreement </FONT></P>


<p Style='page-break-before:always'>
<HR  SIZE="3" style="COLOR:#999999" WIDTH="100%" ALIGN="CENTER">


<TABLE CELLSPACING="0" CELLPADDING="0" WIDTH="40%" BORDER="0">

<TR>
<TD WIDTH="13%"></TD>
<TD VALIGN="bottom" WIDTH="1%"></TD>
<TD WIDTH="86%"></TD></TR>
<TR>
<TD VALIGN="top" COLSPAN="3"><FONT STYLE="font-family:Times New Roman" SIZE="2"><B>ACCEPTED AND ACKNOWLEDGED BY:</B></FONT></TD></TR>
<TR>
<TD HEIGHT="16" COLSPAN="3"></TD></TR>
<TR>
<TD VALIGN="top" COLSPAN="3"><FONT STYLE="font-family:Times New Roman" SIZE="2">TANG CAPITAL PARTNERS, LP, as Agent</FONT></TD></TR>
<TR>
<TD HEIGHT="16"></TD>
<TD HEIGHT="16" COLSPAN="2"></TD></TR>
<TR>
<TD VALIGN="top"><FONT STYLE="font-family:Times New Roman" SIZE="2">By:</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"> <P STYLE="margin-top:0px;margin-bottom:0px"><FONT STYLE="font-family:Times New Roman" SIZE="2">Tang Capital Management, LLC,</FONT></P>
<P STYLE="margin-top:0px;margin-bottom:1px"><FONT STYLE="font-family:Times New Roman" SIZE="2">its general partner</FONT></P></TD></TR>
<TR>
<TD HEIGHT="16"></TD>
<TD HEIGHT="16" COLSPAN="2"></TD></TR>
<TR>
<TD VALIGN="top"><FONT STYLE="font-family:Times New Roman" SIZE="2">By:</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"> <P STYLE="margin-top:0px;margin-bottom:1px;border-bottom:1px solid #000000"><FONT STYLE="font-family:Times New Roman" SIZE="2">&nbsp;</FONT></P></TD></TR>
<TR>
<TD VALIGN="top"><FONT STYLE="font-family:Times New Roman" SIZE="2">Name:</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"> <P STYLE="margin-top:0px;margin-bottom:1px;border-bottom:1px solid #000000"><FONT STYLE="font-family:Times New Roman" SIZE="2">Kevin C. Tang</FONT></P></TD></TR>
<TR>
<TD VALIGN="top"><FONT STYLE="font-family:Times New Roman" SIZE="2">Title:</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"> <P STYLE="margin-top:0px;margin-bottom:1px;border-bottom:1px solid #000000"><FONT STYLE="font-family:Times New Roman" SIZE="2">Managing Director</FONT></P></TD></TR></TABLE>
 <p STYLE="margin-top:0px;margin-bottom:0px"><FONT SIZE="1">&nbsp;</FONT></P> <P STYLE="margin-top:0px;margin-bottom:0px" ALIGN="center"><FONT STYLE="font-family:Times New Roman" SIZE="2">Patent
Security Agreement </FONT></P>


<p Style='page-break-before:always'>
<HR  SIZE="3" style="COLOR:#999999" WIDTH="100%" ALIGN="CENTER">

 <P STYLE="margin-top:0px;margin-bottom:0px" ALIGN="center"><FONT STYLE="font-family:Times New Roman" SIZE="2"><B>EXHIBIT B </B></FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px" ALIGN="center"><FONT
STYLE="font-family:Times New Roman" SIZE="2"><B>ANNEX 1 TO PLEDGE AND SECURITY AGREEMENT </B></FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px" ALIGN="center"><FONT STYLE="font-family:Times New Roman" SIZE="2"><B><U>Pledged Interests Addendum
</U></B></FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px; text-indent:8%"><FONT STYLE="font-family:Times New Roman" SIZE="2">This Pledged Interests Addendum, dated as of
<U>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</U> <U>&nbsp;&nbsp;&nbsp;&nbsp;</U>, 2011, is delivered pursuant to <U>Section&nbsp;6</U> of the Security Agreement referred to below. The undersigned hereby agrees that
this Pledged Interests Addendum may be attached to that certain Security Agreement, dated as of April&nbsp;24, 2011 (as amended, restated, supplemented or otherwise modified from time to time, the &#147;<U>Security Agreement</U>&#148;), made by the
undersigned to Tang Capital Partners, LP, in its capacity as Agent. Initially capitalized terms used but not defined herein shall have the meaning ascribed to such terms in the Security Agreement. The undersigned hereby agrees that the additional
interests listed on this Pledged Interests Addendum as set forth below shall be and become part of the Pledged Interests pledged by the undersigned to Agent in the Security Agreement and any pledged company set forth on this Pledged Interests
Addendum as set forth below shall be and become a &#147;Pledged Company&#148; under the Security Agreement, each with the same force and effect as if originally named therein. </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px; text-indent:8%"><FONT
STYLE="font-family:Times New Roman" SIZE="2">The undersigned hereby certifies that the representations and warranties set forth in <U>Section&nbsp;4</U> of the Security Agreement of the undersigned are true and correct as to the Pledged Interests
listed herein on and as of the date hereof. </FONT></P> <P STYLE="font-size:12px;margin-top:0px;margin-bottom:0px">&nbsp;</P><DIV ALIGN="right">
<TABLE CELLSPACING="0" CELLPADDING="0" WIDTH="40%" BORDER="0">

<TR>
<TD WIDTH="12%"></TD>
<TD VALIGN="bottom" WIDTH="1%"></TD>
<TD WIDTH="87%"></TD></TR>
<TR>
<TD VALIGN="top" COLSPAN="3"><FONT STYLE="font-family:Times New Roman" SIZE="2">A.P. PHARMA, INC.</FONT></TD></TR>
<TR>
<TD HEIGHT="16"></TD>
<TD HEIGHT="16" COLSPAN="2"></TD></TR>
<TR>
<TD VALIGN="top"><FONT STYLE="font-family:Times New Roman" SIZE="2">By:</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"> <P STYLE="margin-top:0px;margin-bottom:1px;border-bottom:1px solid #000000"><FONT STYLE="font-family:Times New Roman" SIZE="2">&nbsp;</FONT></P></TD></TR>
<TR>
<TD VALIGN="top"><FONT STYLE="font-family:Times New Roman" SIZE="2">Name:</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"> <P STYLE="margin-top:0px;margin-bottom:1px;border-bottom:1px solid #000000"><FONT STYLE="font-family:Times New Roman" SIZE="2">&nbsp;</FONT></P></TD></TR>
<TR>
<TD VALIGN="top"><FONT STYLE="font-family:Times New Roman" SIZE="2">Title:</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"> <P STYLE="margin-top:0px;margin-bottom:1px;border-bottom:1px solid #000000"><FONT STYLE="font-family:Times New Roman" SIZE="2">&nbsp;</FONT></P></TD></TR></TABLE></DIV>
 <p STYLE="margin-top:0px;margin-bottom:0px"><FONT SIZE="1">&nbsp;</FONT></P> <P STYLE="margin-top:0px;margin-bottom:0px"><FONT STYLE="font-family:Times New Roman" SIZE="2">Pledged Interests Addendum
</FONT></P>


<p Style='page-break-before:always'>
<HR  SIZE="3" style="COLOR:#999999" WIDTH="100%" ALIGN="CENTER">


<TABLE CELLSPACING="0" CELLPADDING="0" WIDTH="100%" BORDER="0" ALIGN="center">

<TR>
<TD WIDTH="60%"></TD>
<TD VALIGN="bottom" WIDTH="8%"></TD>
<TD></TD>
<TD></TD>
<TD></TD>
<TD VALIGN="bottom" WIDTH="8%"></TD>
<TD></TD>
<TD></TD>
<TD></TD>
<TD VALIGN="bottom" WIDTH="8%"></TD>
<TD></TD>
<TD></TD>
<TD></TD>
<TD VALIGN="bottom" WIDTH="8%"></TD>
<TD></TD>
<TD></TD>
<TD></TD>
<TD VALIGN="bottom" WIDTH="8%"></TD>
<TD></TD>
<TD></TD>
<TD></TD></TR>
<TR>
<TD VALIGN="bottom" NOWRAP> <P STYLE="border-bottom:1px solid #000000;width:57pt"><FONT STYLE="font-family:Times New Roman" SIZE="1"><B>Name of Pledgor</B></FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom" COLSPAN="2" ALIGN="center" STYLE="border-bottom:1px solid #000000"><FONT STYLE="font-family:Times New Roman" SIZE="1"><B>Name&nbsp;of&nbsp;Pledged<BR>Company</B></FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom" COLSPAN="2" ALIGN="center" STYLE="border-bottom:1px solid #000000"><FONT STYLE="font-family:Times New Roman" SIZE="1"><B>Number&nbsp;of<BR>Shares/Units</B></FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom" COLSPAN="2" ALIGN="center" STYLE="border-bottom:1px solid #000000"><FONT STYLE="font-family:Times New Roman" SIZE="1"><B>Class of<BR>Interests</B></FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom" COLSPAN="2" ALIGN="center" STYLE="border-bottom:1px solid #000000"><FONT STYLE="font-family:Times New Roman" SIZE="1"><B>Percentage&nbsp;of<BR>Class Owned</B></FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom" COLSPAN="2" ALIGN="center" STYLE="border-bottom:1px solid #000000"><FONT STYLE="font-family:Times New Roman" SIZE="1"><B>Certificate<BR>Nos.</B></FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD></TR>
<TR BGCOLOR="#cceeff">
<TD VALIGN="top"></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD></TR>
<TR>
<TD VALIGN="top"></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD></TR></TABLE>
</BODY></HTML>
</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-10.4
<SEQUENCE>5
<FILENAME>dex104.htm
<DESCRIPTION>SECOND AMENDMENT TO LEASE
<TEXT>
<HTML><HEAD>
<TITLE>Second Amendment to Lease</TITLE>
</HEAD>
 <BODY BGCOLOR="WHITE">

 <P STYLE="margin-top:0px;margin-bottom:0px" ALIGN="right"><FONT STYLE="font-family:Times New Roman" SIZE="2"><B>Exhibit 10.4 </B></FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px" ALIGN="center"><FONT
STYLE="font-family:Times New Roman" SIZE="2">SECOND AMENDMENT TO LEASE </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px; text-indent:4%"><FONT STYLE="font-family:Times New Roman" SIZE="2">This Second Amendment to Lease (&#147;Amendment&#148;)
is entered into as of April&nbsp;1, 2011 (the &#147;Effective Date&#148;) by and between METROPOLITAN LIFE INSURANCE COMPANY, a New York corporation (&#147;Landlord&#148;), and AP PHARMA, INC., a Delaware corporation (&#147;Tenant&#148;), with
reference to the following facts (&#147;Recitals&#148;): </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px; text-indent:4%"><FONT STYLE="font-family:Times New Roman" SIZE="2">A. Landlord and Tenant are the current parties to that certain Lease
dated as of November&nbsp;7, 1997 executed by Landlord and Tenant&#146;s predecessor-in-interest, Advanced Polymer Systems, as amended by that certain Amendment to Lease Agreement dated as of March&nbsp;29, 2004 executed by Landlord and Tenant
(collectively, the &#147;Existing Lease&#148;) for certain Premises described therein commonly known as 123 Saginaw Drive, Redwood City, California 94063, all as more particularly described in the Existing Lease. The Expiration Date under the
Existing Lease is currently March&nbsp;31, 2011. </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px; text-indent:4%"><FONT STYLE="font-family:Times New Roman" SIZE="2">B. Tenant and Landlord desire to provide for the extension of the Term and
other amendments of the Existing Lease, but only in strict accordance with and as more particularly set forth in this Amendment. </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px; text-indent:4%"><FONT
STYLE="font-family:Times New Roman" SIZE="2">NOW, THEREFORE, in consideration of the foregoing, and of the mutual covenants set forth herein and of other good and valuable consideration, the receipt and adequacy of which are hereby acknowledged, the
parties hereto agree as follows: </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px; text-indent:4%"><FONT STYLE="font-family:Times New Roman" SIZE="2"><U>Section&nbsp;1</U>. <U>Scope of Amendment; Defined Terms</U>.&nbsp;Except as expressly
provided in this Amendment, the Existing Lease shall remain in full force and effect. Should any inconsistency arise between this Amendment and the Existing Lease as to the specific matters which are the subject of this Amendment, the terms and
conditions of this Amendment shall control. The term &#147;Lease&#148; as used herein and, from and after the Effective Date, in the Existing Lease shall refer to the Existing Lease as modified by this Amendment. Unless otherwise indicated,
capitalized terms used in this Amendment shall be defined as set forth in the Lease. Landlord and Tenant agree that this Amendment shall be effective as of the Effective Date with the same force and effect as if executed on that date. </FONT></P>
<P STYLE="margin-top:12px;margin-bottom:0px; text-indent:4%"><FONT STYLE="font-family:Times New Roman" SIZE="2"><U>Section&nbsp;2</U>. <U>Conditions Precedent</U>.&nbsp;Concurrently with Tenant&#146;s execution and delivery of this Amendment to
Landlord, Tenant shall satisfy all of the following (the &#147;Conditions Precedent&#148;): (i)&nbsp;Tenant shall pay to Landlord One Hundred Ten Thousand Two Hundred Nine Dollars and Seventy-Four Cents&nbsp;($110,209.74) to be applied toward Basic
Annual Rent and Additional Rent with respect to April 2011 and May 2011; and (ii)&nbsp;Tenant shall deposit with Landlord Fifty-Five Thousand One Hundred Four Dollars and Eighty-Seven Cents&nbsp;($55,104.87) to be held as the Security Deposit. If
all Conditions Precedent are not fully satisfied or waived in writing by Landlord in its sole discretion, Sections 3, 4 and 5 of this Amendment shall be null and void <I>ab initio</I>, and of no force or effect in any respect whatsoever at any time.
</FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px; text-indent:4%"><FONT STYLE="font-family:Times New Roman" SIZE="2"><U>Section&nbsp;3</U>. <U>Amended Amount of Security Deposit</U>.&nbsp;Notwithstanding any provision of the Existing Lease to
the contrary, from and after the Effective Date the Security Deposit shall be cash in the amount of Fifty-Five Thousand One Hundred Four Dollars and Eighty-Seven Cents&nbsp;($55,104.87). </FONT></P>
<P STYLE="margin-top:12px;margin-bottom:0px; text-indent:4%"><FONT STYLE="font-family:Times New Roman" SIZE="2"><U>Section&nbsp;4</U>. <U>Extension of Term</U>.&nbsp;Notwithstanding any provision of the Existing Lease to the contrary, the Expiration
Date is hereby extended to be September&nbsp;30, 2011 (the period from April&nbsp;1, 2011 through September&nbsp;30, 2011 is referred to herein as the &#147;Second Extended Term&#148;). This extension is with respect to the entire Premises and this
extension is further upon and subject to the same conditions, terms, covenants and agreements contained in the Existing Lease except as otherwise provided in this Amendment. Landlord and Tenant acknowledge and agree that this Amendment provides all
rights and obligations of the parties with respect to extension of the current Term, whether or not in accordance with any other provisions, if any, of the Existing Lease or otherwise regarding renewal or extension, and any such provisions, options
or rights for renewal or extension are hereby deleted as of the Effective Date. </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px; text-indent:4%"><FONT STYLE="font-family:Times New Roman" SIZE="2"><U>Section&nbsp;5</U>. <U>Basic Annual
Rent</U>.&nbsp;Notwithstanding any provision of the Existing Lease to the contrary, Basic Annual Rent and Monthly Installments thereof shall continue to be due and payable by Tenant with respect to the Second Extended Term in the same manner
required under the Lease therefor in the following amounts: </FONT></P>
 <p STYLE="margin-top:0px;margin-bottom:0px"><FONT SIZE="1">&nbsp;</FONT></P> <P STYLE="margin-top:0px;margin-bottom:0px" ALIGN="center"><FONT STYLE="font-family:Times New Roman" SIZE="2">1. </FONT></P>



<p Style='page-break-before:always'>
<HR  SIZE="3" style="COLOR:#999999" WIDTH="100%" ALIGN="CENTER">


<TABLE CELLSPACING="0" CELLPADDING="0" WIDTH="84%" BORDER="0" ALIGN="center">

<TR>
<TD WIDTH="34%"></TD>
<TD VALIGN="bottom" WIDTH="4%"></TD>
<TD WIDTH="62%"></TD></TR>
<TR>
<TD VALIGN="bottom" NOWRAP> <P STYLE="border-bottom:1px solid #000000;width:51pt"><FONT STYLE="font-family:Times New Roman" SIZE="1">Period From/To</FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"> <P STYLE="border-bottom:1px solid #000000;width:68pt"><FONT STYLE="font-family:Times New Roman" SIZE="1">Monthly Installments</FONT></P></TD></TR>
<TR>
<TD HEIGHT="8"></TD>
<TD HEIGHT="8" COLSPAN="2"></TD></TR>
<TR>
<TD VALIGN="top" NOWRAP><FONT STYLE="font-family:Times New Roman" SIZE="2">April&nbsp;1,&nbsp;2011&nbsp;&#150; September&nbsp;30,&nbsp;2011</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2">$41,967.87 (total for six months = $251,807.22)</FONT></TD></TR></TABLE> <P STYLE="margin-top:12px;margin-bottom:0px; text-indent:4%"><FONT
STYLE="font-family:Times New Roman" SIZE="2"><U>Section&nbsp;6</U>. <U>Condition of Premises</U>.&nbsp;Notwithstanding any provision of the Existing Lease to the contrary, Tenant acknowledges and agrees that: (1)&nbsp;Tenant has been in occupancy of
the Premises since 1997; (2)&nbsp;Tenant has investigated the condition of the Premises to the extent Tenant desires to do so; (3)&nbsp;Tenant is leasing the Premises in its &#147;As Is&#148; condition; (4)&nbsp;no representation regarding the
condition of the Premises has been made by or on behalf of Landlord; and (5)&nbsp;in connection with this Amendment, Landlord has no obligation to remodel or to make any repairs, alterations or improvements in connection with this Amendment, or to
provide Tenant any allowance therefor. </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px; text-indent:4%"><FONT STYLE="font-family:Times New Roman" SIZE="2"><U>Section&nbsp;7</U>. <U>Change of Address for Copies of Notices to
Landlord</U>.&nbsp;The current addresses for notices to be sent to Landlord pursuant to Paragraph 23 of the Existing Lease are modified as follows: </FONT></P> <P STYLE="margin-top:6px;margin-bottom:0px; text-indent:13%"><FONT
STYLE="font-family:Times New Roman" SIZE="2">Metropolitan Life Insurance Company </FONT></P> <P STYLE="margin-top:0px;margin-bottom:0px; text-indent:13%"><FONT STYLE="font-family:Times New Roman" SIZE="2">c/o Seaport Centre Property Manager
</FONT></P> <P STYLE="margin-top:0px;margin-bottom:0px; text-indent:13%"><FONT STYLE="font-family:Times New Roman" SIZE="2">701 Chesapeake Drive </FONT></P> <P STYLE="margin-top:0px;margin-bottom:0px; text-indent:13%"><FONT
STYLE="font-family:Times New Roman" SIZE="2">Redwood City, California 94063 </FONT></P> <P STYLE="margin-top:0px;margin-bottom:0px; text-indent:13%"><FONT STYLE="font-family:Times New Roman" SIZE="2">Attention: Property Manager </FONT></P>
<P STYLE="margin-top:6px;margin-bottom:0px; text-indent:13%"><FONT STYLE="font-family:Times New Roman" SIZE="2">with copies to the following: </FONT></P> <P STYLE="margin-top:6px;margin-bottom:0px; text-indent:17%"><FONT
STYLE="font-family:Times New Roman" SIZE="2">Metropolitan Life Insurance Company </FONT></P> <P STYLE="margin-top:0px;margin-bottom:0px; text-indent:17%"><FONT STYLE="font-family:Times New Roman" SIZE="2">425 Market Street, Suite 1050 </FONT></P>
<P STYLE="margin-top:0px;margin-bottom:0px; text-indent:17%"><FONT STYLE="font-family:Times New Roman" SIZE="2">San Francisco, California 94105 </FONT></P> <P STYLE="margin-top:0px;margin-bottom:0px; text-indent:17%"><FONT
STYLE="font-family:Times New Roman" SIZE="2">Attention: EIM Manager, Real Estate Investments </FONT></P> <P STYLE="margin-top:6px;margin-bottom:0px; text-indent:21%"><FONT STYLE="font-family:Times New Roman" SIZE="2">and </FONT></P>
<P STYLE="margin-top:6px;margin-bottom:0px; text-indent:17%"><FONT STYLE="font-family:Times New Roman" SIZE="2">Metropolitan Life Insurance Company </FONT></P> <P STYLE="margin-top:0px;margin-bottom:0px; text-indent:17%"><FONT
STYLE="font-family:Times New Roman" SIZE="2">425 Market Street, Suite 1050 </FONT></P> <P STYLE="margin-top:0px;margin-bottom:0px; text-indent:17%"><FONT STYLE="font-family:Times New Roman" SIZE="2">San Francisco, California 94105 </FONT></P>
<P STYLE="margin-top:0px;margin-bottom:0px; text-indent:17%"><FONT STYLE="font-family:Times New Roman" SIZE="2">Attention: Associate General Counsel </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px; text-indent:4%"><FONT
STYLE="font-family:Times New Roman" SIZE="2"><U>Section&nbsp;8</U>. <U>Time of Essence</U>.&nbsp;Without limiting the generality of any other provision of the Existing Lease, time is of the essence to each and every term and condition of this
Amendment. </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px; text-indent:4%"><FONT STYLE="font-family:Times New Roman" SIZE="2"><U>Section&nbsp;9</U>. <U>Brokers</U>.&nbsp;Tenant represents that no broker, agent or person has represented,
dealt with or had discussions with it in connection with this Amendment transaction other than Kristoph Lodge of Cornish&nbsp;&amp; Carey Commercial (&#147;Landlord&#146;s Broker&#148;) and that no broker, agent or person except Landlord&#146;s
Broker has brought about this Amendment transaction. Tenant hereby indemnifies and agrees to protect, defend and hold Landlord harmless from and against all claims, losses, damages, liability, costs and expenses (including, without limitation,
attorneys&#146; fees and expenses) by any broker, agent or other person (except Landlord&#146;s Broker) claiming a commission or other form of compensation by virtue of alleged representation of, or dealings or discussions with, Tenant with respect
to the transaction contemplated by this Amendment. Tenant shall not be responsible for payment of any commission to Landlord&#146;s Broker. The provisions of this Section shall survive the expiration or earlier termination of the Amendment or the
Lease. </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px; text-indent:4%"><FONT STYLE="font-family:Times New Roman" SIZE="2"><U>Section&nbsp;10</U>. <U>Attorneys&#146; Fees</U>.&nbsp;Each party to this Amendment shall bear its own
attorneys&#146; fees and costs incurred in connection with the discussions preceding, negotiations for and documentation of this Amendment. In the event any party brings any suit or other proceeding with respect to the subject matter or enforcement
of this Amendment or the Lease, the prevailing party (as determined by the court, agency or other authority before which such suit or proceeding is commenced) shall, in addition to such other relief as may be awarded, be entitled to recover
attorneys&#146; fees, expenses and costs of investigation as actually incurred, including court costs, </FONT></P>
 <p STYLE="margin-top:0px;margin-bottom:0px"><FONT SIZE="1">&nbsp;</FONT></P> <P STYLE="margin-top:0px;margin-bottom:0px" ALIGN="center"><FONT STYLE="font-family:Times New Roman" SIZE="2">2. </FONT></P>



<p Style='page-break-before:always'>
<HR  SIZE="3" style="COLOR:#999999" WIDTH="100%" ALIGN="CENTER">

 <P STYLE="margin-top:0px;margin-bottom:0px"><FONT STYLE="font-family:Times New Roman" SIZE="2">
expert witness fees, costs and expenses of investigation, and all attorneys&#146; fees, costs and expenses in any such suit or proceeding (including in any action or participation in or in
connection with any case or proceeding under the Bankruptcy Code, 11 United States Code Sections 101 <U>et seq</U>., or any successor statutes, in establishing or enforcing the right to indemnification, in appellate proceedings, or in connection
with the enforcement or collection of any judgment obtained in any such suit or proceeding). </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px; text-indent:4%"><FONT STYLE="font-family:Times New Roman" SIZE="2"><U>Section&nbsp;11</U>.
<U>Effect of Headings</U>.&nbsp;The titles or headings of the various parts or sections hereof are intended solely for convenience and are not intended and shall not be deemed to or in any way be used to modify, explain or place any construction
upon any of the provisions of this Amendment. </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px; text-indent:4%"><FONT STYLE="font-family:Times New Roman" SIZE="2"><U>Section&nbsp;12</U>. <U>Entire Agreement; Amendment</U>.&nbsp;This Amendment
taken together with the Existing Lease, together with all exhibits, schedules, riders and addenda to each, constitutes the full and complete agreement and understanding between the parties hereto and shall supersede all prior communications,
representations, understandings or agreements, if any, whether oral or written, concerning the subject matter contained in this Amendment and the Existing Lease, as so amended, and no provision of the Lease as so amended may be modified, amended,
waived or discharged, in whole or in part, except by a written instrument executed by all of the parties hereto. </FONT></P>
<P STYLE="margin-top:12px;margin-bottom:0px; text-indent:4%"><FONT STYLE="font-family:Times New Roman" SIZE="2"><U>Section&nbsp;13</U>. <U>OFAC</U>.&nbsp;Landlord advises Tenant hereby that the purpose of this Section is to provide to the Landlord
information and assurances to enable Landlord to comply with the law relating to OFAC. </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px; text-indent:4%"><FONT STYLE="font-family:Times New Roman" SIZE="2">Tenant hereby represents, warrants and
covenants to Landlord, either that (i)&nbsp;Tenant is regulated by the SEC, FINRA or the Federal Reserve (a &#147;Regulated Entity&#148;) or (ii)&nbsp;neither Tenant nor any person or entity that directly or indirectly (a)&nbsp;controls Tenant or
(b)&nbsp;has an ownership interest in Tenant of twenty-five percent (25%)&nbsp;or more, appears on the list of Specially Designated Nationals and Blocked Persons (&#147;OFAC List&#148;) published by the Office of Foreign Assets Control
(&#147;OFAC&#148;) of the U.S. Department of the Treasury. </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px; text-indent:4%"><FONT STYLE="font-family:Times New Roman" SIZE="2">If, in connection with the Lease, there is one or more Guarantors
of Tenant&#146;s obligations under the Lease, then Tenant further represents, warrants and covenants either that (i)&nbsp;any such Guarantor is a Regulated Entity or (ii)&nbsp;neither Guarantor nor any person or entity that directly or indirectly
(a)&nbsp;controls such Guarantor or (b)&nbsp;has an ownership interest in such Guarantor of twenty-five percent (25%)&nbsp;or more, appears on the OFAC List. </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px; text-indent:4%"><FONT
STYLE="font-family:Times New Roman" SIZE="2">Tenant covenants during the term of the Lease to provide to Landlord information reasonably requested by Landlord, including, without limitation, organizational structural charts and organizational
documents, which Landlord may deem to be necessary (&#147;Tenant OFAC Information&#148;) in order for Landlord to confirm Tenant&#146;s continuing compliance with the provisions of this Section. Tenant represents and warrants that the Tenant OFAC
Information it has provided or to be provided to Landlord or Landlord&#146;s Broker in connection with the execution of this Amendment is true and complete. </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px; text-indent:4%"><FONT
STYLE="font-family:Times New Roman" SIZE="2"><U>Section&nbsp;14</U>. <U>Ratification</U>.&nbsp;Tenant represents to Landlord as of the Effective Date that: (a)&nbsp;the Existing Lease is in full force and effect and has not been modified except as
provided by this Amendment; (b)&nbsp;there are no defaults or unfulfilled obligations on the part of Landlord under the Lease; and (c)&nbsp;Tenant is currently in possession of the entire Premises and neither the Premises, nor any part thereof, is
occupied by any subtenant or other party other than Tenant. </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px; text-indent:4%"><FONT STYLE="font-family:Times New Roman" SIZE="2"><U>Section&nbsp;15</U>. <U>Authority</U>.&nbsp;Each person
executing this Amendment represents and warrants that he or she is duly authorized and empowered to execute it, and does so as the act of and on behalf of the party indicated below. </FONT></P>
<P STYLE="margin-top:12px;margin-bottom:0px; text-indent:4%"><FONT STYLE="font-family:Times New Roman" SIZE="2"><U>Section&nbsp;16</U>. <U>Counterparts</U>.&nbsp;This Amendment may be executed in duplicates or counterparts, or both, and such
duplicates or counterparts together shall constitute but one original of the Amendment. The parties contemplate that they may be executing counterparts of this Amendment transmitted by facsimile and agree and intend that a signature by facsimile
machine shall bind the party so signing with the same effect as though the signature were an original signature. Each duplicate and counterpart shall be equally admissible in evidence, and each original shall fully bind each party who has executed
it. </FONT></P>
 <p STYLE="margin-top:0px;margin-bottom:0px"><FONT SIZE="1">&nbsp;</FONT></P> <P STYLE="margin-top:0px;margin-bottom:0px" ALIGN="center"><FONT STYLE="font-family:Times New Roman" SIZE="2">3. </FONT></P>



<p Style='page-break-before:always'>
<HR  SIZE="3" style="COLOR:#999999" WIDTH="100%" ALIGN="CENTER">

 <P STYLE="margin-top:0px;margin-bottom:0px; text-indent:4%"><FONT STYLE="font-family:Times New Roman" SIZE="2">IN WITNESS WHEREOF, the parties hereto have executed this Amendment as of the Effective
Date. </FONT></P> <P STYLE="font-size:12px;margin-top:0px;margin-bottom:0px">&nbsp;</P>
<TABLE CELLSPACING="0" CELLPADDING="0" WIDTH="100%" BORDER="0">

<TR>
<TD WIDTH="46%"></TD>
<TD VALIGN="bottom" WIDTH="1%"></TD>
<TD WIDTH="7%"></TD>
<TD VALIGN="bottom" WIDTH="1%"></TD>
<TD WIDTH="45%"></TD></TR>
<TR>
<TD VALIGN="top"> <P STYLE="text-indent:6.00em"><FONT STYLE="font-family:Times New Roman" SIZE="2">TENANT:</FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom" COLSPAN="3"><FONT STYLE="font-family:Times New Roman" SIZE="2"><B>AP PHARMA, INC.,</B></FONT></TD></TR>
<TR>
<TD VALIGN="top"></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom" COLSPAN="3"><FONT STYLE="font-family:Times New Roman" SIZE="2">a Delaware corporation</FONT></TD></TR>
<TR>
<TD HEIGHT="16"></TD>
<TD HEIGHT="16" COLSPAN="2"></TD>
<TD HEIGHT="16" COLSPAN="2"></TD></TR>
<TR>
<TD VALIGN="top"></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2">By:</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"> <P STYLE="margin-top:0px;margin-bottom:1px;border-bottom:1px solid #000000"><FONT STYLE="font-family:Times New Roman" SIZE="2">/s/ John Whelan</FONT></P></TD></TR>
<TR>
<TD VALIGN="top"></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2">Print&nbsp;Name:</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"> <P STYLE="margin-top:0px;margin-bottom:1px;border-bottom:1px solid #000000"><FONT STYLE="font-family:Times New Roman" SIZE="2">John Whelan</FONT></P></TD></TR>
<TR>
<TD VALIGN="top"></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2">Title:</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"> <P STYLE="margin-top:0px;margin-bottom:1px;border-bottom:1px solid #000000"><FONT STYLE="font-family:Times New Roman" SIZE="2">President, Chief Executive Officer</FONT></P></TD></TR>
<TR>
<TD HEIGHT="16"></TD>
<TD HEIGHT="16" COLSPAN="4"></TD></TR>
<TR>
<TD VALIGN="top"> <P STYLE="text-indent:6.00em"><FONT STYLE="font-family:Times New Roman" SIZE="2">LANDLORD:</FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom" COLSPAN="3"><FONT STYLE="font-family:Times New Roman" SIZE="2"><B>METROPOLITAN LIFE INSURANCE COMPANY,</B></FONT></TD></TR>
<TR>
<TD VALIGN="top"></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom" COLSPAN="3"><FONT STYLE="font-family:Times New Roman" SIZE="2">a New York corporation</FONT></TD></TR>
<TR>
<TD HEIGHT="16"></TD>
<TD HEIGHT="16" COLSPAN="2"></TD>
<TD HEIGHT="16" COLSPAN="2"></TD></TR>
<TR>
<TD VALIGN="top"></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2">By:</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"> <P STYLE="margin-top:0px;margin-bottom:1px;border-bottom:1px solid #000000"><FONT STYLE="font-family:Times New Roman" SIZE="2">/s/ Greg Hill</FONT></P></TD></TR>
<TR>
<TD VALIGN="top"></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2">Print&nbsp;Name:</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"> <P STYLE="margin-top:0px;margin-bottom:1px;border-bottom:1px solid #000000"><FONT STYLE="font-family:Times New Roman" SIZE="2">Greg Hill</FONT></P></TD></TR>
<TR>
<TD VALIGN="top"></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2">Title:</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"> <P STYLE="margin-top:0px;margin-bottom:1px;border-bottom:1px solid #000000"><FONT STYLE="font-family:Times New Roman" SIZE="2">Director</FONT></P></TD></TR></TABLE>
 <p STYLE="margin-top:0px;margin-bottom:0px"><FONT SIZE="1">&nbsp;</FONT></P> <P STYLE="margin-top:0px;margin-bottom:0px" ALIGN="center"><FONT STYLE="font-family:Times New Roman" SIZE="2">4. </FONT></P>


</BODY></HTML>
</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-10.5
<SEQUENCE>6
<FILENAME>dex105.htm
<DESCRIPTION>MANAGEMENT RETENTION AGREEMENT, DATED AS OF APRIL 25, 2011 - JOHN B. WHELAN
<TEXT>
<HTML><HEAD>
<TITLE>Management Retention Agreement, dated as of April 25, 2011 - John B. Whelan</TITLE>
</HEAD>
 <BODY BGCOLOR="WHITE">

 <P STYLE="margin-top:0px;margin-bottom:0px" ALIGN="right"><FONT STYLE="font-family:Times New Roman" SIZE="2"><B>Exhibit 10.5 </B></FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px" ALIGN="center"><FONT
STYLE="font-family:Times New Roman" SIZE="2"><B><U>A.P. PHARMA, INC. </U></B></FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px" ALIGN="center"><FONT STYLE="font-family:Times New Roman" SIZE="2"><B><U>MANAGEMENT RETENTION AGREEMENT</U></B>
</FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px; text-indent:4%"><FONT STYLE="font-family:Times New Roman" SIZE="2">This Management Retention Agreement (the &#147;<U>Agreement</U>&#148;) is dated as of April&nbsp;25, 2011, by and between
John B. Whelan (&#147;<U>Employee</U>&#148;) and A.P. Pharma, Inc., a Delaware corporation (the &#147;<U>Company</U>&#148;). This Agreement is intended to provide Employee with certain benefits described herein upon the occurrence of specific
events. </FONT></P> <P STYLE="margin-top:24px;margin-bottom:0px" ALIGN="center"><FONT STYLE="font-family:Times New Roman" SIZE="2">RECITALS </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px; text-indent:4%"><FONT
STYLE="font-family:Times New Roman" SIZE="2">A. The Company&#146;s Board of Directors believes it is in the best interests of the Company and its shareholders to retain Employee and provide incentives to Employee to continue in the service of the
Company. </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px; text-indent:4%"><FONT STYLE="font-family:Times New Roman" SIZE="2">B. The Board of Directors further believes that it is imperative to provide Employee with certain benefits upon
Employee&#146;s Involuntary Termination or a Change of Control, which benefits are intended to provide Employee with financial security and provide sufficient income and encouragement to Employee to remain employed with the Company, notwithstanding
the possibility of a Change of Control. </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px; text-indent:4%"><FONT STYLE="font-family:Times New Roman" SIZE="2">D. To accomplish the foregoing objectives, the Board of Directors has directed the
Company, upon execution of this Agreement by Employee, to agree to the terms provided in this Agreement. </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px; text-indent:4%"><FONT STYLE="font-family:Times New Roman" SIZE="2">It is therefore
agreed as follows: </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px; text-indent:4%"><FONT STYLE="font-family:Times New Roman" SIZE="2">1. <B><U>At-Will Employment</U></B>. The Company and Employee acknowledge that Employee&#146;s employment
is and shall continue to be at-will, as defined under applicable law, and that Employee&#146;s employment with the Company may be terminated by either party at any time for any or no reason. If Employee&#146;s employment terminates for any reason,
Employee shall not be entitled to any payments, benefits, damages, award or compensation other than as provided in this Agreement or otherwise agreed to by the Company. The terms of this Agreement shall terminate upon the earlier of: (i)&nbsp;the
date on which Employee ceases to be employed as a corporate officer of the Company, other than as a result of an Involuntary Termination; or (ii)&nbsp;the date that all obligations of the parties hereunder have been satisfied. A termination of the
terms of this Agreement pursuant to the preceding sentence shall be effective for all purposes, except that such termination shall not affect the payment or provision of compensation or benefits on account of a termination of employment occurring
prior to the termination of the terms of this Agreement. The rights and duties created by this Section&nbsp;1 are contingent upon Employee&#146;s release of claims against the Company (at the time of termination in a form reasonably satisfactory to
the Company) and may not be modified in any way except by a written agreement executed by an officer of the Company upon direction from the Board of Directors. </FONT></P>

<p Style='page-break-before:always'>
<HR  SIZE="3" style="COLOR:#999999" WIDTH="100%" ALIGN="CENTER">

 <P STYLE="margin-top:0px;margin-bottom:0px; text-indent:4%"><FONT STYLE="font-family:Times New Roman" SIZE="2">2. <B><U>Benefits Upon Termination of Employment.</U></B> </FONT></P>
<P STYLE="margin-top:12px;margin-bottom:0px; text-indent:8%"><FONT STYLE="font-family:Times New Roman" SIZE="2">(a) <B><U>Severance Upon Involuntary Termination.</U></B> In the event that Employee suffers an Involuntary Termination at any time under
circumstances other than as covered in paragraph 2(b) below, then in addition to all salary and bonuses accrued as of the date of Employee&#146;s termination of employment, Employee will be entitled to receive severance benefits as follows:
(i)&nbsp;during the period commencing on the date of Employee&#146;s termination and ending on the date twelve (12)&nbsp;months after the effective date of the termination (the &#147;<U>Severance Period</U>&#148;) the Company shall pay to Employee
an amount equal to the monthly base salary which Employee was receiving immediately prior to the Involuntary Termination in accordance with the Company&#146;s standard payroll practices; (ii)&nbsp;the average bonus paid by the Company to Employee
for services during each of the three 12- month periods (or such shorter period of time during which Employee was eligible for a bonus) prior to the Involuntary Termination date, which payments shall be paid during the Severance Period in accordance
with the Company&#146;s standard payroll practices; and (iii)&nbsp;reimbursement for or continuation of payment by the Company of its portion of the health insurance benefits provided to Employee immediately prior to the Involuntary Termination
pursuant to the terms of the Consolidated Omnibus Budget Reconciliation Act of 1985, as amended (&#147;<U>COBRA</U>&#148;) or other applicable law through the earlier of the end of the Severance Period or the date upon which Employee is no longer
eligible for such COBRA or other benefits under applicable law. In addition, Employee&#146;s stock options, restricted stock and other equity awards shall immediately vest, become exercisable and/or the restrictions thereon lapse with respect to
that number of shares of Company common stock that otherwise would have vested during the Severance Period had Employee&#146;s employment continued. Employee&#146;s stock options, restricted stock and other equity awards shall otherwise be subject
to the terms of the plan and option or award agreement pursuant to which such options and other equity awards were granted. </FONT></P>
<P STYLE="margin-top:12px;margin-bottom:0px; text-indent:8%"><FONT STYLE="font-family:Times New Roman" SIZE="2">(b) <B><U>Severance Upon a Change in Control.</U></B> In the event that Employee suffers an Involuntary Termination within the twelve
(12)&nbsp;month period following the effective date of a Change of Control, then in addition to all salary and bonuses accrued as of the date of Employee&#146;s termination of employment, Employee will be entitled to receive severance benefits as
follows: (i)&nbsp;during the period commencing on the date of Employee&#146;s termination and ending on the date eighteen (18)&nbsp;months after the effective date of the termination (the &#147;<U>Change of Control Severance Period</U>&#148;) the
Company shall pay to Employee an amount equal to the greater of (A)&nbsp;the monthly base salary which Employee was receiving immediately prior to the Involuntary Termination or (B)&nbsp;the monthly base salary which Employee was receiving
immediately prior to the Change of Control, in each case, in accordance with the Company&#146;s standard payroll practices; (ii)&nbsp;one hundred and fifty percent (150%)&nbsp;of the average bonus paid by the Company to Employee for services during
each of the three 12- month periods (or such shorter period of time during which Employee was eligible for a bonus) prior to the Involuntary Termination date, which payments shall be paid during the Change of Control Severance Period in accordance
with the Company&#146;s standard payroll practices; and (iii)&nbsp;reimbursement for or continuation of payment by the Company of its portion of the health insurance benefits provided to Employee immediately prior to the Involuntary Termination
pursuant to the terms of COBRA or other applicable law through the earlier of the end of the Change of Control Severance Period </FONT></P>
 <p STYLE="margin-top:0px;margin-bottom:0px"><FONT SIZE="1">&nbsp;</FONT></P> <P STYLE="margin-top:0px;margin-bottom:0px" ALIGN="center"><FONT STYLE="font-family:Times New Roman" SIZE="2">- 2 -
</FONT></P>


<p Style='page-break-before:always'>
<HR  SIZE="3" style="COLOR:#999999" WIDTH="100%" ALIGN="CENTER">

 <P STYLE="margin-top:0px;margin-bottom:0px"><FONT STYLE="font-family:Times New Roman" SIZE="2">
or the date upon which Employee is no longer eligible for such COBRA or other benefits under applicable law. In addition, Employee&#146;s stock options, restricted stock and other equity awards
shall immediately vest, become exercisable and/or the restrictions thereon lapse with respect to one hundred percent (100%)&nbsp;of the shares of Company common stock subject thereto. Employee&#146;s stock options, restricted stock and other equity
awards shall otherwise be subject to the terms of the plan and option or award agreement pursuant to which such options and other equity awards were granted. </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px; text-indent:8%"><FONT
STYLE="font-family:Times New Roman" SIZE="2">(c) <B><U>Termination for Cause</U></B>. Notwithstanding any other provision of this Agreement, if Employee&#146;s employment is terminated for Cause at any time, then Employee shall not be entitled to
receive payment of any severance benefits or any continuation or acceleration of stock option vesting or relinquishment of forfeiture and transfer restrictions on restricted stock awards. Employee will receive payment(s) for all salary and bonuses
accrued as of the date of Employee&#146;s termination of employment. </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px; text-indent:8%"><FONT STYLE="font-family:Times New Roman" SIZE="2">(d) <B><U>Voluntary Resignation</U></B>. If Employee
voluntarily resigns from the Company under circumstances which do not constitute an Involuntary Termination, then Employee shall not be entitled to receive payment of any severance benefits, or option acceleration, or relinquishment of forfeiture
and transfer restrictions. Employee will receive payment(s) for all salary and bonuses accrued as of the date of Employee&#146;s termination of employment. </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px; text-indent:4%"><FONT
STYLE="font-family:Times New Roman" SIZE="2">3. <B>Definition of Terms</B>. The following terms referred to in this Agreement shall have the following meanings: </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px; text-indent:8%"><FONT
STYLE="font-family:Times New Roman" SIZE="2">(a) <B>&#147;Cause&#148; </B>means any of the following: (i)&nbsp;Employee&#146;s theft, dishonesty, willful misconduct, breach of fiduciary duty for personal profit, or falsification of any Company or
Affiliate documents or records; (ii)&nbsp;Employee&#146;s material failure to abide by a Company&#146;s or Affiliate&#146;s code of conduct or other policies (including without limitation, policies relating to confidentiality and reasonable
workplace conduct); (iii)&nbsp;Employee&#146;s unauthorized use, misappropriation, destruction or diversion of any tangible or intangible asset or corporate opportunity of the Company or an Affiliate (including, without limitation, Employee&#146;s
improper use or disclosure of confidential or proprietary information); (iv)&nbsp;any intentional act by Employee which has a material detrimental effect on the Company or an Affiliate&#146;s reputation or business; (v)&nbsp;Employee&#146;s repeated
failure or inability to perform any reasonable assigned duties after written notice from the Company or an Affiliate (including, without limitation, habitual absence from work for reasons other than illness), and a reasonable opportunity to cure,
such failure or inability; (vi)&nbsp;any material breach by Employee of any employment or service agreement between Employee and the Company or an Affiliate, which breach is not cured pursuant to the terms of such agreement; or
(vii)&nbsp;Employee&#146;s conviction (including any plea of guilty or <I>nolo contendere</I>) of any criminal act involving fraud, dishonesty, misappropriation or moral turpitude, or which impairs Employee&#146;s ability to perform his or her
duties with the Company or an Affiliate. </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px; text-indent:8%"><FONT STYLE="font-family:Times New Roman" SIZE="2">(b) <B>&#147;Change in Control&#148;</B> means the occurrence of any of the
following: </FONT></P>
 <p STYLE="margin-top:0px;margin-bottom:0px"><FONT SIZE="1">&nbsp;</FONT></P> <P STYLE="margin-top:0px;margin-bottom:0px" ALIGN="center"><FONT STYLE="font-family:Times New Roman" SIZE="2">- 3 -
</FONT></P>


<p Style='page-break-before:always'>
<HR  SIZE="3" style="COLOR:#999999" WIDTH="100%" ALIGN="CENTER">

 <P STYLE="margin-top:0px;margin-bottom:0px; margin-left:8%; text-indent:4%"><FONT STYLE="font-family:Times New Roman" SIZE="2">(i) an Ownership Change Event or a series of related Ownership Change Events
(collectively, a &#147;<B>Transaction</B>&#148;) in which the stockholders of the Company immediately before the Transaction do not retain immediately after the Transaction, in substantially the same proportions as their ownership of shares of the
Company&#146;s voting stock immediately before the Transaction, direct or indirect beneficial ownership of more than fifty percent (50%)&nbsp;of the total combined voting power of the outstanding voting securities of the Company or such surviving
entity immediately outstanding after the Transaction, or, in the case of an Ownership Change Event the entity to which the assets of the Company were transferred (the &#147;<B>Transferee</B>&#148;), as the case may be; or </FONT></P>
<P STYLE="margin-top:12px;margin-bottom:0px; margin-left:8%; text-indent:4%"><FONT STYLE="font-family:Times New Roman" SIZE="2">(ii) the liquidation or dissolution of the Company. </FONT></P>
<P STYLE="margin-top:12px;margin-bottom:0px; margin-left:8%"><FONT STYLE="font-family:Times New Roman" SIZE="2">For purposes of the preceding sentence, indirect beneficial ownership shall include, without limitation, an interest resulting from
ownership of the voting securities of one or more corporations or other business entities which own the Company or the Transferee, as the case may be, either directly or through one or more subsidiary corporations or other business entities. The
Board shall have the right to determine whether multiple sales or exchanges of the voting securities in the Company or multiple Ownership Change Events are related, and its determination shall be final, binding and conclusive. The Board may also,
but need not, specify that other transactions or events constitute a Change in Control. </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px; text-indent:8%"><FONT STYLE="font-family:Times New Roman" SIZE="2">(c) <B>&#147;<U>Involuntary
Termination</U>&#148;</B> shall include any termination by the Company other than for Cause and Employee&#146;s voluntary termination within sixty days following the occurrence of any of the following events without Employee&#146;s written consent:
(i)&nbsp;a material reduction or change in job duties, responsibilities and requirements inconsistent with Employee&#146;s position with the Company and Employee&#146;s prior duties, responsibilities and requirements or a material negative change in
Employee&#146;s reporting relationship; (ii)&nbsp;a material reduction of Employee&#146;s base compensation (other than in connection with a general decrease in base salaries for most officers of the Company or successor corporation); or
(iii)&nbsp;Employee&#146;s refusal to relocate to a facility or location more than forty miles from the Company&#146;s current location, provided that Employee will not resign due to such change, reduction or relocation without first providing the
Company with written notice of the event or events constituting the grounds for his voluntary resignation within thirty days of the initial existence of such grounds and a reasonable cure period of not less than thirty days following the date of
such notice. </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px; text-indent:8%"><FONT STYLE="font-family:Times New Roman" SIZE="2">(d) <B>&#147;Ownership Change Event&#148;</B> means the occurrence of any of the following with respect to the
Company: (i)&nbsp;the direct or indirect sale or exchange in a single or series of related transactions by the stockholders of the Company of more than fifty percent (50%)&nbsp;of the voting stock of the Company; (ii)&nbsp;a merger or consolidation
in which the Company is a party; or (iii)&nbsp;the sale, exchange, or transfer of all or substantially all of the assets of the Company. </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px; text-indent:4%"><FONT
STYLE="font-family:Times New Roman" SIZE="2">4. <B>Limitation and Conditions on Payments.</B> </FONT></P>
 <p STYLE="margin-top:0px;margin-bottom:0px"><FONT SIZE="1">&nbsp;</FONT></P> <P STYLE="margin-top:0px;margin-bottom:0px" ALIGN="center"><FONT STYLE="font-family:Times New Roman" SIZE="2">- 4 -
</FONT></P>


<p Style='page-break-before:always'>
<HR  SIZE="3" style="COLOR:#999999" WIDTH="100%" ALIGN="CENTER">

 <P STYLE="margin-top:0px;margin-bottom:0px; text-indent:8%"><FONT STYLE="font-family:Times New Roman" SIZE="2">(a) <B><U>Parachute Payments</U></B>. In the event that the severance and other benefits
provided for in this Agreement to the Employee: (i)&nbsp;constitute &#147;parachute payments&#148; within the meaning of Section&nbsp;280G of the Internal Revenue Code of 1986, as amended (the &#147;<U>Code</U>&#148;); and (ii)&nbsp;but for this
Section, would be subject to the excise tax imposed by Section&nbsp;4999 of the Code, then the Employee&#146;s severance benefits under Sections 2(a) and 2(b) shall be payable either: </FONT></P>
<P STYLE="margin-top:6px;margin-bottom:0px; margin-left:8%; text-indent:4%"><FONT STYLE="font-family:Times New Roman" SIZE="2">(i) in full; or </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px; margin-left:8%; text-indent:4%"><FONT
STYLE="font-family:Times New Roman" SIZE="2">(ii) as to such lesser amount which would result in no portion of such severance benefits being subject to excise tax under Section&nbsp;4999 of the Code, whichever of the foregoing amounts, taking into
account the applicable federal, state and local income taxes and the excise tax imposed by Section&nbsp;4999, results in the receipt by the Employee on an after-tax basis, of the greatest amount of severance benefits under Section&nbsp;2(a) and
2(b), notwithstanding that all or some portion of such severance benefits may be taxable under Section&nbsp;4999 of the Code. Any determination required under this Section&nbsp;4 shall be made in writing by independent public accountants selected by
the Company (the &#147;<U>Accountants</U>&#148;), whose determination shall be conclusive and binding upon the Employee and the Company for all purposes. For purposes of making the calculations required by this Section&nbsp;4, the Accountants may
make reasonable assumptions and approximations concerning applicable taxes and may rely on reasonable, good faith interpretations concerning the application of Section&nbsp;280G and 4999 of the Code. The Company and the Employee shall furnish to the
Accountants such information and documents as the Accountants may reasonably request in order to make a determination under this Section. The Company shall bear all costs the Accountants may reasonably incur in connection with any calculations
contemplated by this Section&nbsp;4. Any reduction in severance benefits required by this Section&nbsp;4 shall occur in a manner necessary to provide the service provider with the greatest economic benefit. If more than one manner of reduction of
severance benefits necessary to arrive at the reduced amount yields the greatest economic benefit to the service provider, the payments and benefits shall be reduced pro rata. </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px; text-indent:8%"><FONT
STYLE="font-family:Times New Roman" SIZE="2">(b) <B><U>Release Prior to Receipt of Benefits</U></B>. Prior to the receipt of any benefits under this Agreement, Employee shall execute and allow to become effective, a release of claims agreement in a
form acceptable to the Company (the &#147;<U>Release</U>&#148;) not later than fifty-two (52)&nbsp;days following Employee&#146;s employment termination in the form provided by the Company. Such Release shall specifically relate to all of
Employee&#146;s rights and claims in existence at the time of such execution and shall confirm Employee&#146;s obligations under the Company&#146;s standard form of proprietary information agreement. In no event will severance benefits be provided
to Employee until the Release becomes effective. In the event severance payments are delayed because of the effective date of the Release, the Company will pay Employee the severance payments, that Employee would otherwise have received under
Section&nbsp;2(a) on or prior to the effective date of the Release, on the first regular payroll pay day following the effective date of the release, with the balance of the payments being paid as originally scheduled. </FONT></P>
 <p STYLE="margin-top:0px;margin-bottom:0px"><FONT SIZE="1">&nbsp;</FONT></P> <P STYLE="margin-top:0px;margin-bottom:0px" ALIGN="center"><FONT STYLE="font-family:Times New Roman" SIZE="2">- 5 -
</FONT></P>


<p Style='page-break-before:always'>
<HR  SIZE="3" style="COLOR:#999999" WIDTH="100%" ALIGN="CENTER">

 <P STYLE="margin-top:0px;margin-bottom:0px; text-indent:4%"><FONT STYLE="font-family:Times New Roman" SIZE="2">5. <B><U>Section&nbsp;409A</U></B>. All severance payments to be made upon a termination of
employment under this Agreement may be made only upon a &#147;separation of service&#148; within the meaning of Section&nbsp;409A of the Code and the Department of Treasury regulations and other guidance promulgated thereunder. Notwithstanding any
provision to the contrary in this Agreement, if Employee is deemed by the Company at the time of Employee&#146;s separation from service to be a &#147;specified employee&#148; for purposes of Code Section&nbsp;401A(a)(2)(B)(i), to the extent delayed
commencement of any portion of the benefits to which Employee is entitled under this Agreement is required in order to avoid a prohibited distribution under Code Section&nbsp;409A(a)(2)(B)(i), such portion of Employee&#146;s benefits shall not be
provided to Employee prior to the earlier of (i)&nbsp;the expiration of the six-month period measured from the date of Employee&#146;s &#147;separation of service&#148; with the Company or (ii)&nbsp;the date of Employee&#146;s death. Upon the first
business day following the expiration of the applicable Code Section&nbsp;409A(a)(2)(B)(i) period, all payments deferred pursuant to this Section&nbsp;5 shall be paid in a lump sum to Employee, and any remaining payments due under the Agreement
shall be paid as otherwise provided herein. For purposes of Code Section&nbsp;409A (including, without limitation, for purposes of Treasury Regulation Section&nbsp;1.409A-2(b)(2)(iii)), Employee&#146;s right to receive installment payments under
this Agreement shall be treated as a right to receive a series of separate payments and, accordingly, each installment payment hereunder shall at all times be considered a separate and distinct payment. It is intended that none of the severance
payments and benefits to be provided hereunder will be subject to Section&nbsp;409A of the Code and any ambiguities herein will be interpreted to be so exempt. Employee and the Company agree to work together in good faith to consider amendments to
this Agreement and to take such reasonable actions which are necessary, appropriate or desirable to avoid imposition of any additional tax or income recognition prior to actual payment to Employee under Section&nbsp;409A of the Code. Notwithstanding
anything to the contrary contained herein, to the extent that any amendment to this Agreement with respect to the payment of any severance payments or benefits would constitute under Code Section&nbsp;409A a delay in a payment or a change in the
form of payment, then such amendment must be done in a manner that complies with Code Section&nbsp;409A(a)(4)(C). </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px; text-indent:4%"><FONT STYLE="font-family:Times New Roman" SIZE="2">6.
<B><U>Conflicts</U></B>. Employee represents that Employee&#146;s performance of all the terms of this Agreement will not breach any other agreement to which Employee is a party. Employee has not, and will not during the term of this Agreement,
enter into any oral or written agreement in conflict with any of the provisions of this Agreement. Employee further represents that Employee is entering into or has entered into an employment relationship with the Company of Employee&#146;s own free
will and that Employee has not been solicited as an employee in any way by the Company. </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px; text-indent:4%"><FONT STYLE="font-family:Times New Roman" SIZE="2">7. <B><U>Successors</U></B>. Any
successor to the Company (whether direct or indirect and whether by purchase, lease, merger, consolidation, liquidation or otherwise) to all or substantially all of the Company&#146;s business and/or assets shall assume the obligations under this
Agreement and agree expressly to perform the obligations under this Agreement in the same manner and to the same extent as the Company would be required to perform such obligations in the absence of a succession. The terms of this Agreement and all
of Employee&#146;s rights hereunder and thereunder shall inure to the benefit of, and be enforceable by, Employee&#146;s personal or legal representatives, executors, administrators, successors, heirs, distributees, devisees and legatees.
</FONT></P>
 <p STYLE="margin-top:0px;margin-bottom:0px"><FONT SIZE="1">&nbsp;</FONT></P> <P STYLE="margin-top:0px;margin-bottom:0px" ALIGN="center"><FONT STYLE="font-family:Times New Roman" SIZE="2">- 6 -
</FONT></P>


<p Style='page-break-before:always'>
<HR  SIZE="3" style="COLOR:#999999" WIDTH="100%" ALIGN="CENTER">

 <P STYLE="margin-top:0px;margin-bottom:0px; text-indent:4%"><FONT STYLE="font-family:Times New Roman" SIZE="2">8. <B><U>Notice</U></B>. Notices and all other communications contemplated by this Agreement
shall be in writing and shall be deemed to have been duly given when personally delivered or when mailed by U.S. registered or certified mail, return receipt requested and postage prepaid. Mailed notices to Employee shall be addressed to Employee at
the home address which Employee most recently communicated to the Company in writing. In the case of the Company, mailed notices shall be addressed to its corporate headquarters, and all notices shall be directed to the attention of its Secretary.
</FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px; text-indent:4%"><FONT STYLE="font-family:Times New Roman" SIZE="2">9. <B><U>Miscellaneous Provisions</U></B>. </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px; text-indent:8%"><FONT
STYLE="font-family:Times New Roman" SIZE="2">(a) <B><U>No Duty to Mitigate</U></B>. Employee shall not be required to mitigate the amount of any payment contemplated by this Agreement (whether by seeking new employment or in any other manner), nor
shall any such payment be reduced by any earnings that Employee may receive from any other source. </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px; text-indent:8%"><FONT STYLE="font-family:Times New Roman" SIZE="2">(b) <B><U>Waiver</U></B>.
No provision of this Agreement shall be modified, waived or discharged unless the modification, waiver or discharge is agreed to in writing and signed by Employee and by an authorized officer of the Company (other than Employee). No waiver by either
party of any breach of, or of compliance with, any condition or provision of this Agreement by the other party shall be considered a waiver of any other condition or provision or of the same condition or provision at another time. </FONT></P>
<P STYLE="margin-top:12px;margin-bottom:0px; text-indent:8%"><FONT STYLE="font-family:Times New Roman" SIZE="2">(c) <B><U>Whole Agreement</U></B>. No agreements, representations or understandings (whether oral or written and whether express or
implied) which are not expressly set forth in this Agreement have been made or entered into by either party with respect to the subject matter hereof. This Agreement supersedes any agreement of the same title and concerning similar subject matter
dated prior to the Effective Date, and by execution of this Agreement both parties agree that any such predecessor agreement shall be deemed null and void. </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px; text-indent:8%"><FONT
STYLE="font-family:Times New Roman" SIZE="2">(d) <B><U>Choice of Law</U></B>. The validity, interpretation, construction and performance of this Agreement shall be governed by the laws of the State of California without reference to conflict of laws
provisions. </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px; text-indent:8%"><FONT STYLE="font-family:Times New Roman" SIZE="2">(e) <B><U>Severability</U></B>. If any term or provision of this Agreement or the application thereof to any
circumstance shall, in any jurisdiction and to any extent, be invalid or unenforceable, such term or provision shall be ineffective as to such jurisdiction to the extent of such invalidity or unenforceability without invalidating or rendering
unenforceable the remaining terms and provisions of this Agreement or the application of such terms and provisions to circumstances other than those as to which it is held invalid or unenforceable, and a suitable and equitable term or provision
shall be substituted therefore to carry out, insofar as may be valid and enforceable, the intent and purpose of the invalid or unenforceable term or provision. </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px; text-indent:8%"><FONT
STYLE="font-family:Times New Roman" SIZE="2">(f) <B><U>Arbitration</U></B>. Any dispute or controversy arising under or in connection with this Agreement may be settled at the option of either party by binding arbitration in the County of San Mateo,
California, in accordance with the rules of the American Arbitration </FONT></P>
 <p STYLE="margin-top:0px;margin-bottom:0px"><FONT SIZE="1">&nbsp;</FONT></P> <P STYLE="margin-top:0px;margin-bottom:0px" ALIGN="center"><FONT STYLE="font-family:Times New Roman" SIZE="2">- 7 -
</FONT></P>


<p Style='page-break-before:always'>
<HR  SIZE="3" style="COLOR:#999999" WIDTH="100%" ALIGN="CENTER">

 <P STYLE="margin-top:0px;margin-bottom:0px"><FONT STYLE="font-family:Times New Roman" SIZE="2">
Association then in effect. Judgment may be entered on the arbitrator&#146;s award in any court having jurisdiction. Punitive damages shall not be awarded. </FONT></P>
<P STYLE="margin-top:12px;margin-bottom:0px; text-indent:8%"><FONT STYLE="font-family:Times New Roman" SIZE="2">(g) <B><U>Legal Fees and Expenses</U></B>. The parties shall each bear their own expenses, legal fees and other fees incurred in
connection with this Agreement. </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px; text-indent:8%"><FONT STYLE="font-family:Times New Roman" SIZE="2">(h) <B><U>No Assignment of Benefits</U></B>. The rights of any person to payments or benefits
under this Agreement shall not be made subject to option or assignment, either by voluntary or involuntary assignment or by operation of law, including (without limitation) bankruptcy, garnishment, attachment or other creditor&#146;s process, and
any action in violation of this Section&nbsp;9(h) shall be void. </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px; text-indent:8%"><FONT STYLE="font-family:Times New Roman" SIZE="2">(i) <B><U>Employment Taxes</U></B>. All payments made
pursuant to this Agreement will be subject to withholding of applicable income and employment taxes. </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px; text-indent:8%"><FONT STYLE="font-family:Times New Roman" SIZE="2">(j) <B><U>Assignment by
Company</U></B>. The Company may assign its rights under this Agreement to an affiliate, and an affiliate may assign its rights under this Agreement to another affiliate of the Company or to the Company. In the case of any such assignment, the term
&#147;Company&#148; when used in a section of this Agreement shall mean the corporation that actually employs the Employee. </FONT></P>
<P STYLE="margin-top:12px;margin-bottom:0px; text-indent:8%"><FONT STYLE="font-family:Times New Roman" SIZE="2">(k) <B><U>Counterparts</U></B>. This Agreement may be executed in counterparts, each of which shall be deemed an original, but all of
which together will constitute one and the same instrument. </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px; text-indent:8%;padding-bottom:0px;"><FONT STYLE="font-family:Times New Roman" SIZE="2">(l) <B><U>Renewal</U></B>. This Agreement
shall remain in effect until December&nbsp;31, 2011 and shall be automatically renewed for additional one year periods unless not later than three months prior to December&nbsp;31</FONT><FONT STYLE="font-family:Times New Roman" SIZE="1"><SUP
STYLE="vertical-align:baseline; position:relative; bottom:.8ex">st</SUP></FONT><FONT STYLE="font-family:Times New Roman" SIZE="2"> of any year either party gives written notice to the other party of the intention to terminate the Agreement effective
December&nbsp;31</FONT><FONT STYLE="font-family:Times New Roman" SIZE="1"><SUP STYLE="vertical-align:baseline; position:relative; bottom:.8ex">st</SUP></FONT><FONT STYLE="font-family:Times New Roman" SIZE="2"> of that year, provided, that in no
event shall this Agreement terminate during the twelve (12)&nbsp;month period commencing upon a Change of Control. </FONT></P>
<P STYLE="margin-top:12px;margin-bottom:0px" ALIGN="center"><FONT STYLE="font-family:Times New Roman" SIZE="2"><I>[Signature page follows] </I></FONT></P>
 <p STYLE="margin-top:0px;margin-bottom:0px"><FONT SIZE="1">&nbsp;</FONT></P> <P STYLE="margin-top:0px;margin-bottom:0px" ALIGN="center"><FONT STYLE="font-family:Times New Roman" SIZE="2">- 8 -
</FONT></P>


<p Style='page-break-before:always'>
<HR  SIZE="3" style="COLOR:#999999" WIDTH="100%" ALIGN="CENTER">

 <P STYLE="margin-top:0px;margin-bottom:0px; text-indent:4%"><FONT STYLE="font-family:Times New Roman" SIZE="2">The parties have executed this Agreement on the date first written above. </FONT></P>
<P STYLE="font-size:12px;margin-top:0px;margin-bottom:0px">&nbsp;</P><DIV ALIGN="right">
<TABLE CELLSPACING="0" CELLPADDING="0" WIDTH="40%" BORDER="0">

<TR>
<TD WIDTH="7%"></TD>
<TD VALIGN="bottom" WIDTH="2%"></TD>
<TD WIDTH="91%"></TD></TR>
<TR>
<TD VALIGN="top" COLSPAN="3"><FONT STYLE="font-family:Times New Roman" SIZE="2"><B>A.P. PHARMA, INC.</B></FONT></TD></TR>
<TR>
<TD HEIGHT="16"></TD>
<TD HEIGHT="16" COLSPAN="2"></TD></TR>
<TR>
<TD VALIGN="top"><FONT STYLE="font-family:Times New Roman" SIZE="2">By:</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="top"> <P STYLE="margin-top:0px;margin-bottom:1px;border-bottom:1px solid #000000"><FONT STYLE="font-family:Times New Roman" SIZE="2">/s/ Paul Goddard</FONT></P></TD></TR>
<TR>
<TD VALIGN="top"><FONT STYLE="font-family:Times New Roman" SIZE="2">Name:</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2">Paul Goddard, Ph.D.</FONT></TD></TR>
<TR>
<TD VALIGN="top"><FONT STYLE="font-family:Times New Roman" SIZE="2">Title:</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2">Chairman</FONT></TD></TR></TABLE></DIV><DIV ALIGN="right">
<TABLE CELLSPACING="0" CELLPADDING="0" WIDTH="40%" BORDER="0">

<TR>
<TD WIDTH="10%"></TD>
<TD VALIGN="bottom" WIDTH="1%"></TD>
<TD WIDTH="89%"></TD></TR>
<TR>
<TD HEIGHT="16" COLSPAN="3"></TD></TR>

<TR>
<TD VALIGN="top" COLSPAN="3"><FONT STYLE="font-family:Times New Roman" SIZE="2"><B>EMPLOYEE</B></FONT></TD></TR>
<TR>
<TD HEIGHT="16"></TD>
<TD HEIGHT="16" COLSPAN="2"></TD></TR>
<TR>
<TD VALIGN="top"><FONT STYLE="font-family:Times New Roman" SIZE="2">Signature:</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"> <P STYLE="margin-top:0px;margin-bottom:1px;border-bottom:1px solid #000000"><FONT STYLE="font-family:Times New Roman" SIZE="2">/s/ John Whelan</FONT></P></TD></TR>
<TR>
<TD VALIGN="top"></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2">John B. Whelan</FONT></TD></TR>
<TR>
<TD HEIGHT="8"></TD>
<TD HEIGHT="8" COLSPAN="2"></TD></TR>
<TR>
<TD VALIGN="top"><FONT STYLE="font-family:Times New Roman" SIZE="2">Address:</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"></TD></TR>
<TR>
<TD VALIGN="top"></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"></TD></TR></TABLE></DIV>
 <p STYLE="margin-top:0px;margin-bottom:0px"><FONT SIZE="1">&nbsp;</FONT></P> <P STYLE="margin-top:0px;margin-bottom:0px" ALIGN="center"><FONT STYLE="font-family:Times New Roman" SIZE="2">- 9 -
</FONT></P>

</BODY></HTML>
</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-10.6
<SEQUENCE>7
<FILENAME>dex106.htm
<DESCRIPTION>MANAGEMENT RETENTION AGREEMENT, DATED AS OF APRIL 25, 2011 - MICHAEL A. ADAM
<TEXT>
<HTML><HEAD>
<TITLE>Management Retention Agreement, dated as of April 25, 2011 - Michael A. Adam</TITLE>
</HEAD>
 <BODY BGCOLOR="WHITE">

 <P STYLE="margin-top:0px;margin-bottom:0px" ALIGN="right"><FONT STYLE="font-family:Times New Roman" SIZE="2"><B>Exhibit 10.6 </B></FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px" ALIGN="center"><FONT
STYLE="font-family:Times New Roman" SIZE="2"><B><U>A.P. PHARMA, INC. </U></B></FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px" ALIGN="center"><FONT STYLE="font-family:Times New Roman" SIZE="2"><B><U>MANAGEMENT RETENTION AGREEMENT</U></B>
</FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px; text-indent:4%"><FONT STYLE="font-family:Times New Roman" SIZE="2">This Management Retention Agreement (the &#147;<U>Agreement</U>&#148;) is dated as of April&nbsp;25, 2011, by and between
Michael A. Adam, Ph.D. (&#147;<U>Employee</U>&#148;) and A.P. Pharma, Inc., a Delaware corporation (the &#147;<U>Company</U>&#148;). This Agreement is intended to provide Employee with certain benefits described herein upon the occurrence of
specific events. </FONT></P> <P STYLE="margin-top:24px;margin-bottom:0px" ALIGN="center"><FONT STYLE="font-family:Times New Roman" SIZE="2">RECITALS </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px; text-indent:4%"><FONT
STYLE="font-family:Times New Roman" SIZE="2">A. The Company&#146;s Board of Directors believes it is in the best interests of the Company and its shareholders to retain Employee and provide incentives to Employee to continue in the service of the
Company. </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px; text-indent:4%"><FONT STYLE="font-family:Times New Roman" SIZE="2">B. The Board of Directors further believes that it is imperative to provide Employee with certain benefits upon
Employee&#146;s Involuntary Termination or a Change of Control, which benefits are intended to provide Employee with financial security and provide sufficient income and encouragement to Employee to remain employed with the Company, notwithstanding
the possibility of a Change of Control. </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px; text-indent:4%"><FONT STYLE="font-family:Times New Roman" SIZE="2">D. To accomplish the foregoing objectives, the Board of Directors has directed the
Company, upon execution of this Agreement by Employee, to agree to the terms provided in this Agreement. </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px; text-indent:4%"><FONT STYLE="font-family:Times New Roman" SIZE="2">It is therefore
agreed as follows: </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px; text-indent:4%"><FONT STYLE="font-family:Times New Roman" SIZE="2">1. <B><U>At-Will Employment</U></B>. The Company and Employee acknowledge that Employee&#146;s employment
is and shall continue to be at-will, as defined under applicable law, and that Employee&#146;s employment with the Company may be terminated by either party at any time for any or no reason. If Employee&#146;s employment terminates for any reason,
Employee shall not be entitled to any payments, benefits, damages, award or compensation other than as provided in this Agreement or otherwise agreed to by the Company. The terms of this Agreement shall terminate upon the earlier of: (i)&nbsp;the
date on which Employee ceases to be employed as a corporate officer of the Company, other than as a result of an Involuntary Termination; or (ii)&nbsp;the date that all obligations of the parties hereunder have been satisfied. A termination of the
terms of this Agreement pursuant to the preceding sentence shall be effective for all purposes, except that such termination shall not affect the payment or provision of compensation or benefits on account of a termination of employment occurring
prior to the termination of the terms of this Agreement. The rights and duties created by this Section&nbsp;1 are contingent upon Employee&#146;s release of claims against the Company (at the time of termination in a form reasonably satisfactory to
the Company) and may not be modified in any way except by a written agreement executed by an officer of the Company upon direction from the Board of Directors. </FONT></P>

<p Style='page-break-before:always'>
<HR  SIZE="3" style="COLOR:#999999" WIDTH="100%" ALIGN="CENTER">

 <P STYLE="margin-top:0px;margin-bottom:0px; text-indent:4%"><FONT STYLE="font-family:Times New Roman" SIZE="2">2. <B><U>Benefits Upon Termination of Employment.</U></B> </FONT></P>
<P STYLE="margin-top:12px;margin-bottom:0px; text-indent:8%"><FONT STYLE="font-family:Times New Roman" SIZE="2">(a) <B><U>Severance Upon Involuntary Termination.</U></B> In the event that Employee suffers an Involuntary Termination at any time under
circumstances other than as covered in paragraph 2(b) below, then in addition to all salary and bonuses accrued as of the date of Employee&#146;s termination of employment, Employee will be entitled to receive severance benefits as follows:
(i)&nbsp;during the period commencing on the date of Employee&#146;s termination and ending on the date six (6)&nbsp;months after the effective date of the termination (the &#147;<U>Severance Period</U>&#148;) the Company shall pay to Employee an
amount equal to the monthly base salary which Employee was receiving immediately prior to the Involuntary Termination in accordance with the Company&#146;s standard payroll practices; (ii)&nbsp;one-half the average bonus paid by the Company to
Employee for services during each of the three 12- month periods (or such shorter period of time during which Employee was eligible for a bonus) prior to the Involuntary Termination date, which payments shall be paid during the Severance Period in
accordance with the Company&#146;s standard payroll practices; and (iii)&nbsp;reimbursement for or continuation of payment by the Company of its portion of the health insurance benefits provided to Employee immediately prior to the Involuntary
Termination pursuant to the terms of the Consolidated Omnibus Budget Reconciliation Act of 1985, as amended (&#147;<U>COBRA</U>&#148;) or other applicable law through the earlier of the end of the Severance Period or the date upon which Employee is
no longer eligible for such COBRA or other benefits under applicable law. In addition, Employee&#146;s stock options, restricted stock and other equity awards shall immediately vest, become exercisable and/or the restrictions thereon lapse with
respect to that number of shares of Company common stock that otherwise would have vested during the Severance Period had Employee&#146;s employment continued. Employee&#146;s stock options, restricted stock and other equity awards shall otherwise
be subject to the terms of the plan and option or award agreement pursuant to which such options and other equity awards were granted. </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px; text-indent:8%"><FONT
STYLE="font-family:Times New Roman" SIZE="2">(b) <B><U>Severance Upon a Change in Control.</U></B> In the event that Employee suffers an Involuntary Termination within the twelve (12)&nbsp;month period following the effective date of a Change of
Control, then in addition to all salary and bonuses accrued as of the date of Employee&#146;s termination of employment, Employee will be entitled to receive severance benefits as follows: (i)&nbsp;during the period commencing on the date of
Employee&#146;s termination and ending on the date twelve (12)&nbsp;months after the effective date of the termination (the &#147;<U>Change of Control Severance Period</U>&#148;) the Company shall pay to Employee an amount equal to the greater of
(A)&nbsp;the monthly base salary which Employee was receiving immediately prior to the Involuntary Termination or (B)&nbsp;the monthly base salary which Employee was receiving immediately prior to the Change of Control, in each case, in accordance
with the Company&#146;s standard payroll practices; (ii)&nbsp;the average bonus paid by the Company to Employee for services during each of the three 12- month periods (or such shorter period of time during which Employee was eligible for a bonus)
prior to the Involuntary Termination date, which payments shall be paid during the Change of Control Severance Period in accordance with the Company&#146;s standard payroll practices; and (iii)&nbsp;reimbursement for or continuation of payment by
the Company of its portion of the health insurance benefits provided to Employee immediately prior to the Involuntary Termination pursuant to the terms of COBRA or other applicable law through the earlier of the end of the Change of Control
Severance Period or the date upon which Employee is no longer </FONT></P>
 <p STYLE="margin-top:0px;margin-bottom:0px"><FONT SIZE="1">&nbsp;</FONT></P> <P STYLE="margin-top:0px;margin-bottom:0px" ALIGN="center"><FONT STYLE="font-family:Times New Roman" SIZE="2">- 2 -
</FONT></P>


<p Style='page-break-before:always'>
<HR  SIZE="3" style="COLOR:#999999" WIDTH="100%" ALIGN="CENTER">

 <P STYLE="margin-top:0px;margin-bottom:0px"><FONT STYLE="font-family:Times New Roman" SIZE="2">
eligible for such COBRA or other benefits under applicable law. In addition, Employee&#146;s stock options, restricted stock and other equity awards shall immediately vest, become exercisable
and/or the restrictions thereon lapse with respect to one hundred percent (100%)&nbsp;of the shares of Company common stock subject thereto. Employee&#146;s stock options, restricted stock and other equity awards shall otherwise be subject to the
terms of the plan and option or award agreement pursuant to which such options and other equity awards were granted. </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px; text-indent:8%"><FONT STYLE="font-family:Times New Roman" SIZE="2">(c)
<B><U>Termination for Cause</U></B>. Notwithstanding any other provision of this Agreement, if Employee&#146;s employment is terminated for Cause at any time, then Employee shall not be entitled to receive payment of any severance benefits or any
continuation or acceleration of stock option vesting or relinquishment of forfeiture and transfer restrictions on restricted stock awards. Employee will receive payment(s) for all salary and bonuses accrued as of the date of Employee&#146;s
termination of employment. </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px; text-indent:8%"><FONT STYLE="font-family:Times New Roman" SIZE="2">(d) <B><U>Voluntary Resignation</U></B>. If Employee voluntarily resigns from the Company under
circumstances which do not constitute an Involuntary Termination, then Employee shall not be entitled to receive payment of any severance benefits, or option acceleration, or relinquishment of forfeiture and transfer restrictions. Employee will
receive payment(s) for all salary and bonuses accrued as of the date of Employee&#146;s termination of employment. </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px; text-indent:4%"><FONT STYLE="font-family:Times New Roman" SIZE="2">3.
<B>Definition of Terms</B>. The following terms referred to in this Agreement shall have the following meanings: </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px; text-indent:8%"><FONT STYLE="font-family:Times New Roman" SIZE="2">(a)
<B>&#147;Cause&#148; </B>means any of the following: (i)&nbsp;Employee&#146;s theft, dishonesty, willful misconduct, breach of fiduciary duty for personal profit, or falsification of any Company or Affiliate documents or records;
(ii)&nbsp;Employee&#146;s material failure to abide by a Company&#146;s or Affiliate&#146;s code of conduct or other policies (including without limitation, policies relating to confidentiality and reasonable workplace conduct);
(iii)&nbsp;Employee&#146;s unauthorized use, misappropriation, destruction or diversion of any tangible or intangible asset or corporate opportunity of the Company or an Affiliate (including, without limitation, Employee&#146;s improper use or
disclosure of confidential or proprietary information); (iv)&nbsp;any intentional act by Employee which has a material detrimental effect on the Company or an Affiliate&#146;s reputation or business; (v)&nbsp;Employee&#146;s repeated failure or
inability to perform any reasonable assigned duties after written notice from the Company or an Affiliate (including, without limitation, habitual absence from work for reasons other than illness), and a reasonable opportunity to cure, such failure
or inability; (vi)&nbsp;any material breach by Employee of any employment or service agreement between Employee and the Company or an Affiliate, which breach is not cured pursuant to the terms of such agreement; or (vii)&nbsp;Employee&#146;s
conviction (including any plea of guilty or <I>nolo contendere</I>) of any criminal act involving fraud, dishonesty, misappropriation or moral turpitude, or which impairs Employee&#146;s ability to perform his or her duties with the Company or an
Affiliate. </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px; text-indent:8%"><FONT STYLE="font-family:Times New Roman" SIZE="2">(b) <B>&#147;Change in Control&#148;</B> means the occurrence of any of the following: </FONT></P>
<P STYLE="margin-top:6px;margin-bottom:0px; margin-left:8%; text-indent:4%"><FONT STYLE="font-family:Times New Roman" SIZE="2">(i) an Ownership Change Event or a series of related Ownership Change Events (collectively, a
&#147;<B>Transaction</B>&#148;) in which the stockholders of the Company </FONT></P>
 <p STYLE="margin-top:0px;margin-bottom:0px"><FONT SIZE="1">&nbsp;</FONT></P> <P STYLE="margin-top:0px;margin-bottom:0px" ALIGN="center"><FONT STYLE="font-family:Times New Roman" SIZE="2">- 3 -
</FONT></P>


<p Style='page-break-before:always'>
<HR  SIZE="3" style="COLOR:#999999" WIDTH="100%" ALIGN="CENTER">

 <P STYLE="margin-top:0px;margin-bottom:0px; margin-left:8%"><FONT STYLE="font-family:Times New Roman" SIZE="2">
immediately before the Transaction do not retain immediately after the Transaction, in substantially the same proportions as their ownership of shares of the Company&#146;s voting stock
immediately before the Transaction, direct or indirect beneficial ownership of more than fifty percent (50%)&nbsp;of the total combined voting power of the outstanding voting securities of the Company or such surviving entity immediately outstanding
after the Transaction, or, in the case of an Ownership Change Event the entity to which the assets of the Company were transferred (the &#147;<B>Transferee</B>&#148;), as the case may be; or </FONT></P>
<P STYLE="margin-top:6px;margin-bottom:0px; margin-left:8%; text-indent:4%"><FONT STYLE="font-family:Times New Roman" SIZE="2">(ii) the liquidation or dissolution of the Company. </FONT></P>
<P STYLE="margin-top:6px;margin-bottom:0px; margin-left:8%"><FONT STYLE="font-family:Times New Roman" SIZE="2">For purposes of the preceding sentence, indirect beneficial ownership shall include, without limitation, an interest resulting from
ownership of the voting securities of one or more corporations or other business entities which own the Company or the Transferee, as the case may be, either directly or through one or more subsidiary corporations or other business entities. The
Board shall have the right to determine whether multiple sales or exchanges of the voting securities in the Company or multiple Ownership Change Events are related, and its determination shall be final, binding and conclusive. The Board may also,
but need not, specify that other transactions or events constitute a Change in Control. </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px; text-indent:8%"><FONT STYLE="font-family:Times New Roman" SIZE="2">(c) <B>&#147;<U>Involuntary
Termination</U>&#148;</B> shall include any termination by the Company other than for Cause and Employee&#146;s voluntary termination within sixty days following the occurrence of any of the following events without Employee&#146;s written consent:
(i)&nbsp;a material reduction or change in job duties, responsibilities and requirements inconsistent with Employee&#146;s position with the Company and Employee&#146;s prior duties, responsibilities and requirements or a material negative change in
Employee&#146;s reporting relationship; (ii)&nbsp;a material reduction of Employee&#146;s base compensation (other than in connection with a general decrease in base salaries for most officers of the Company or successor corporation); or
(iii)&nbsp;Employee&#146;s refusal to relocate to a facility or location more than forty miles from the Company&#146;s current location, provided that Employee will not resign due to such change, reduction or relocation without first providing the
Company with written notice of the event or events constituting the grounds for his voluntary resignation within thirty days of the initial existence of such grounds and a reasonable cure period of not less than thirty days following the date of
such notice. </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px; text-indent:8%"><FONT STYLE="font-family:Times New Roman" SIZE="2">(d) &#147;<B>Ownership Change Event</B>&#148; means the occurrence of any of the following with respect to the
Company: (i)&nbsp;the direct or indirect sale or exchange in a single or series of related transactions by the stockholders of the Company of more than fifty percent (50%)&nbsp;of the voting stock of the Company; (ii)&nbsp;a merger or consolidation
in which the Company is a party; or (iii)&nbsp;the sale, exchange, or transfer of all or substantially all of the assets of the Company. </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px; text-indent:4%"><FONT
STYLE="font-family:Times New Roman" SIZE="2">4. <B>Limitation and Conditions on Payments.</B> </FONT></P>
 <p STYLE="margin-top:0px;margin-bottom:0px"><FONT SIZE="1">&nbsp;</FONT></P> <P STYLE="margin-top:0px;margin-bottom:0px" ALIGN="center"><FONT STYLE="font-family:Times New Roman" SIZE="2">- 4 -
</FONT></P>


<p Style='page-break-before:always'>
<HR  SIZE="3" style="COLOR:#999999" WIDTH="100%" ALIGN="CENTER">

 <P STYLE="margin-top:0px;margin-bottom:0px; text-indent:8%"><FONT STYLE="font-family:Times New Roman" SIZE="2">(a) <B><U>Parachute Payments</U></B>. In the event that the severance and other benefits
provided for in this Agreement to the Employee: (i)&nbsp;constitute &#147;parachute payments&#148; within the meaning of Section&nbsp;280G of the Internal Revenue Code of 1986, as amended (the &#147;<U>Code</U>&#148;); and (ii)&nbsp;but for this
Section, would be subject to the excise tax imposed by Section&nbsp;4999 of the Code, then the Employee&#146;s severance benefits under Sections 2(a) and 2(b) shall be payable either: </FONT></P>
<P STYLE="margin-top:6px;margin-bottom:0px; margin-left:8%; text-indent:4%"><FONT STYLE="font-family:Times New Roman" SIZE="2">(i) in full; or </FONT></P> <P STYLE="margin-top:6px;margin-bottom:0px; margin-left:8%; text-indent:4%"><FONT
STYLE="font-family:Times New Roman" SIZE="2">(ii) as to such lesser amount which would result in no portion of such severance benefits being subject to excise tax under Section&nbsp;4999 of the Code, whichever of the foregoing amounts, taking into
account the applicable federal, state and local income taxes and the excise tax imposed by Section&nbsp;4999, results in the receipt by the Employee on an after-tax basis, of the greatest amount of severance benefits under Section&nbsp;2(a) and
2(b), notwithstanding that all or some portion of such severance benefits may be taxable under Section&nbsp;4999 of the Code. Any determination required under this Section&nbsp;4 shall be made in writing by independent public accountants selected by
the Company (the &#147;<U>Accountants</U>&#148;), whose determination shall be conclusive and binding upon the Employee and the Company for all purposes. For purposes of making the calculations required by this Section&nbsp;4, the Accountants may
make reasonable assumptions and approximations concerning applicable taxes and may rely on reasonable, good faith interpretations concerning the application of Section&nbsp;280G and 4999 of the Code. The Company and the Employee shall furnish to the
Accountants such information and documents as the Accountants may reasonably request in order to make a determination under this Section. The Company shall bear all costs the Accountants may reasonably incur in connection with any calculations
contemplated by this Section&nbsp;4. Any reduction in severance benefits required by this Section&nbsp;4 shall occur in a manner necessary to provide the service provider with the greatest economic benefit. If more than one manner of reduction of
severance benefits necessary to arrive at the reduced amount yields the greatest economic benefit to the service provider, the payments and benefits shall be reduced pro rata. </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px; text-indent:8%"><FONT
STYLE="font-family:Times New Roman" SIZE="2">(b) <B><U>Release Prior to Receipt of Benefits</U></B>. Prior to the receipt of any benefits under this Agreement, Employee shall execute and allow to become effective, a release of claims agreement in a
form acceptable to the Company (the &#147;<U>Release</U>&#148;) not later than fifty-two (52)&nbsp;days following Employee&#146;s employment termination in the form provided by the Company. Such Release shall specifically relate to all of
Employee&#146;s rights and claims in existence at the time of such execution and shall confirm Employee&#146;s obligations under the Company&#146;s standard form of proprietary information agreement. In no event will severance benefits be provided
to Employee until the Release becomes effective. In the event severance payments are delayed because of the effective date of the Release, the Company will pay Employee the severance payments, that Employee would otherwise have received under
Section&nbsp;2(a) on or prior to the effective date of the Release, on the first regular payroll pay day following the effective date of the release, with the balance of the payments being paid as originally scheduled. </FONT></P>
 <p STYLE="margin-top:0px;margin-bottom:0px"><FONT SIZE="1">&nbsp;</FONT></P> <P STYLE="margin-top:0px;margin-bottom:0px" ALIGN="center"><FONT STYLE="font-family:Times New Roman" SIZE="2">- 5 -
</FONT></P>


<p Style='page-break-before:always'>
<HR  SIZE="3" style="COLOR:#999999" WIDTH="100%" ALIGN="CENTER">

 <P STYLE="margin-top:0px;margin-bottom:0px; text-indent:4%"><FONT STYLE="font-family:Times New Roman" SIZE="2">5. <B><U>Section&nbsp;409A</U></B>. All severance payments to be made upon a termination of
employment under this Agreement may be made only upon a &#147;separation of service&#148; within the meaning of Section&nbsp;409A of the Code and the Department of Treasury regulations and other guidance promulgated thereunder. Notwithstanding any
provision to the contrary in this Agreement, if Employee is deemed by the Company at the time of Employee&#146;s separation from service to be a &#147;specified employee&#148; for purposes of Code Section&nbsp;401A(a)(2)(B)(i), to the extent delayed
commencement of any portion of the benefits to which Employee is entitled under this Agreement is required in order to avoid a prohibited distribution under Code Section&nbsp;409A(a)(2)(B)(i), such portion of Employee&#146;s benefits shall not be
provided to Employee prior to the earlier of (i)&nbsp;the expiration of the six-month period measured from the date of Employee&#146;s &#147;separation of service&#148; with the Company or (ii)&nbsp;the date of Employee&#146;s death. Upon the first
business day following the expiration of the applicable Code Section&nbsp;409A(a)(2)(B)(i) period, all payments deferred pursuant to this Section&nbsp;5 shall be paid in a lump sum to Employee, and any remaining payments due under the Agreement
shall be paid as otherwise provided herein. For purposes of Code Section&nbsp;409A (including, without limitation, for purposes of Treasury Regulation Section&nbsp;1.409A-2(b)(2)(iii)), Employee&#146;s right to receive installment payments under
this Agreement shall be treated as a right to receive a series of separate payments and, accordingly, each installment payment hereunder shall at all times be considered a separate and distinct payment. It is intended that none of the severance
payments and benefits to be provided hereunder will be subject to Section&nbsp;409A of the Code and any ambiguities herein will be interpreted to be so exempt. Employee and the Company agree to work together in good faith to consider amendments to
this Agreement and to take such reasonable actions which are necessary, appropriate or desirable to avoid imposition of any additional tax or income recognition prior to actual payment to Employee under Section&nbsp;409A of the Code. Notwithstanding
anything to the contrary contained herein, to the extent that any amendment to this Agreement with respect to the payment of any severance payments or benefits would constitute under Code Section&nbsp;409A a delay in a payment or a change in the
form of payment, then such amendment must be done in a manner that complies with Code Section&nbsp;409A(a)(4)(C). </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px; text-indent:4%"><FONT STYLE="font-family:Times New Roman" SIZE="2">6.
<B><U>Conflicts</U></B>. Employee represents that Employee&#146;s performance of all the terms of this Agreement will not breach any other agreement to which Employee is a party. Employee has not, and will not during the term of this Agreement,
enter into any oral or written agreement in conflict with any of the provisions of this Agreement. Employee further represents that Employee is entering into or has entered into an employment relationship with the Company of Employee&#146;s own free
will and that Employee has not been solicited as an employee in any way by the Company. </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px; text-indent:4%"><FONT STYLE="font-family:Times New Roman" SIZE="2">7. <B><U>Successors</U></B>. Any
successor to the Company (whether direct or indirect and whether by purchase, lease, merger, consolidation, liquidation or otherwise) to all or substantially all of the Company&#146;s business and/or assets shall assume the obligations under this
Agreement and agree expressly to perform the obligations under this Agreement in the same manner and to the same extent as the Company would be required to perform such obligations in the absence of a succession. The terms of this Agreement and all
of Employee&#146;s rights hereunder and thereunder shall inure to the benefit of, and be enforceable by, Employee&#146;s personal or legal representatives, executors, administrators, successors, heirs, distributees, devisees and legatees.
</FONT></P>
 <p STYLE="margin-top:0px;margin-bottom:0px"><FONT SIZE="1">&nbsp;</FONT></P> <P STYLE="margin-top:0px;margin-bottom:0px" ALIGN="center"><FONT STYLE="font-family:Times New Roman" SIZE="2">- 6 -
</FONT></P>


<p Style='page-break-before:always'>
<HR  SIZE="3" style="COLOR:#999999" WIDTH="100%" ALIGN="CENTER">

 <P STYLE="margin-top:0px;margin-bottom:0px; text-indent:4%"><FONT STYLE="font-family:Times New Roman" SIZE="2">8. <B><U>Notice</U></B>. Notices and all other communications contemplated by this Agreement
shall be in writing and shall be deemed to have been duly given when personally delivered or when mailed by U.S. registered or certified mail, return receipt requested and postage prepaid. Mailed notices to Employee shall be addressed to Employee at
the home address which Employee most recently communicated to the Company in writing. In the case of the Company, mailed notices shall be addressed to its corporate headquarters, and all notices shall be directed to the attention of its Secretary.
</FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px; text-indent:4%"><FONT STYLE="font-family:Times New Roman" SIZE="2">9. <B><U>Miscellaneous Provisions</U></B>. </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px; text-indent:8%"><FONT
STYLE="font-family:Times New Roman" SIZE="2">(a) <B><U>No Duty to Mitigate</U></B>. Employee shall not be required to mitigate the amount of any payment contemplated by this Agreement (whether by seeking new employment or in any other manner), nor
shall any such payment be reduced by any earnings that Employee may receive from any other source. </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px; text-indent:8%"><FONT STYLE="font-family:Times New Roman" SIZE="2">(b) <B><U>Waiver</U></B>.
No provision of this Agreement shall be modified, waived or discharged unless the modification, waiver or discharge is agreed to in writing and signed by Employee and by an authorized officer of the Company (other than Employee). No waiver by either
party of any breach of, or of compliance with, any condition or provision of this Agreement by the other party shall be considered a waiver of any other condition or provision or of the same condition or provision at another time. </FONT></P>
<P STYLE="margin-top:12px;margin-bottom:0px; text-indent:8%"><FONT STYLE="font-family:Times New Roman" SIZE="2">(c) <B><U>Whole Agreement</U></B>. No agreements, representations or understandings (whether oral or written and whether express or
implied) which are not expressly set forth in this Agreement have been made or entered into by either party with respect to the subject matter hereof. This Agreement supersedes any agreement of the same title and concerning similar subject matter
dated prior to the Effective Date, and by execution of this Agreement both parties agree that any such predecessor agreement shall be deemed null and void. </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px; text-indent:8%"><FONT
STYLE="font-family:Times New Roman" SIZE="2">(d) <B><U>Choice of Law</U></B>. The validity, interpretation, construction and performance of this Agreement shall be governed by the laws of the State of California without reference to conflict of laws
provisions. </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px; text-indent:8%"><FONT STYLE="font-family:Times New Roman" SIZE="2">(e) <B><U>Severability</U></B>. If any term or provision of this Agreement or the application thereof to any
circumstance shall, in any jurisdiction and to any extent, be invalid or unenforceable, such term or provision shall be ineffective as to such jurisdiction to the extent of such invalidity or unenforceability without invalidating or rendering
unenforceable the remaining terms and provisions of this Agreement or the application of such terms and provisions to circumstances other than those as to which it is held invalid or unenforceable, and a suitable and equitable term or provision
shall be substituted therefore to carry out, insofar as may be valid and enforceable, the intent and purpose of the invalid or unenforceable term or provision. </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px; text-indent:8%"><FONT
STYLE="font-family:Times New Roman" SIZE="2">(f) <B><U>Arbitration</U></B>. Any dispute or controversy arising under or in connection with this Agreement may be settled at the option of either party by binding arbitration in the County of San Mateo,
California, in accordance with the rules of the American Arbitration </FONT></P>
 <p STYLE="margin-top:0px;margin-bottom:0px"><FONT SIZE="1">&nbsp;</FONT></P> <P STYLE="margin-top:0px;margin-bottom:0px" ALIGN="center"><FONT STYLE="font-family:Times New Roman" SIZE="2">- 7 -
</FONT></P>


<p Style='page-break-before:always'>
<HR  SIZE="3" style="COLOR:#999999" WIDTH="100%" ALIGN="CENTER">

 <P STYLE="margin-top:0px;margin-bottom:0px"><FONT STYLE="font-family:Times New Roman" SIZE="2">
Association then in effect. Judgment may be entered on the arbitrator&#146;s award in any court having jurisdiction. Punitive damages shall not be awarded. </FONT></P>
<P STYLE="margin-top:12px;margin-bottom:0px; text-indent:8%"><FONT STYLE="font-family:Times New Roman" SIZE="2">(g) <B><U>Legal Fees and Expenses</U></B>. The parties shall each bear their own expenses, legal fees and other fees incurred in
connection with this Agreement. </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px; text-indent:8%"><FONT STYLE="font-family:Times New Roman" SIZE="2">(h) <B><U>No Assignment of Benefits</U></B>. The rights of any person to payments or benefits
under this Agreement shall not be made subject to option or assignment, either by voluntary or involuntary assignment or by operation of law, including (without limitation) bankruptcy, garnishment, attachment or other creditor&#146;s process, and
any action in violation of this Section&nbsp;9(h) shall be void. </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px; text-indent:8%"><FONT STYLE="font-family:Times New Roman" SIZE="2">(i) <B><U>Employment Taxes</U></B>. All payments made
pursuant to this Agreement will be subject to withholding of applicable income and employment taxes. </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px; text-indent:8%"><FONT STYLE="font-family:Times New Roman" SIZE="2">(j) <B><U>Assignment by
Company</U></B>. The Company may assign its rights under this Agreement to an affiliate, and an affiliate may assign its rights under this Agreement to another affiliate of the Company or to the Company. In the case of any such assignment, the term
&#147;Company&#148; when used in a section of this Agreement shall mean the corporation that actually employs the Employee. </FONT></P>
<P STYLE="margin-top:12px;margin-bottom:0px; text-indent:8%"><FONT STYLE="font-family:Times New Roman" SIZE="2">(k) <B><U>Counterparts</U></B>. This Agreement may be executed in counterparts, each of which shall be deemed an original, but all of
which together will constitute one and the same instrument. </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px; text-indent:8%;padding-bottom:0px;"><FONT STYLE="font-family:Times New Roman" SIZE="2">(l) <B><U>Renewal</U></B>. This Agreement
shall remain in effect until December&nbsp;31, 2011 and shall be automatically renewed for additional one year periods unless not later than three months prior to December&nbsp;31</FONT><FONT STYLE="font-family:Times New Roman" SIZE="1"><SUP
STYLE="vertical-align:baseline; position:relative; bottom:.8ex">st</SUP></FONT><FONT STYLE="font-family:Times New Roman" SIZE="2"> of any year either party gives written notice to the other party of the intention to terminate the Agreement effective
December&nbsp;31</FONT><FONT STYLE="font-family:Times New Roman" SIZE="1"><SUP STYLE="vertical-align:baseline; position:relative; bottom:.8ex">st</SUP></FONT><FONT STYLE="font-family:Times New Roman" SIZE="2"> of that year, provided, that in no
event shall this Agreement terminate during the twelve (12)&nbsp;month period commencing upon a Change of Control. </FONT></P>
<P STYLE="margin-top:12px;margin-bottom:0px" ALIGN="center"><FONT STYLE="font-family:Times New Roman" SIZE="2"><I>[Signature page follows] </I></FONT></P>
 <p STYLE="margin-top:0px;margin-bottom:0px"><FONT SIZE="1">&nbsp;</FONT></P> <P STYLE="margin-top:0px;margin-bottom:0px" ALIGN="center"><FONT STYLE="font-family:Times New Roman" SIZE="2">- 8 -
</FONT></P>


<p Style='page-break-before:always'>
<HR  SIZE="3" style="COLOR:#999999" WIDTH="100%" ALIGN="CENTER">

 <P STYLE="margin-top:0px;margin-bottom:0px; text-indent:4%"><FONT STYLE="font-family:Times New Roman" SIZE="2">The parties have executed this Agreement on the date first written above. </FONT></P>
<P STYLE="font-size:12px;margin-top:0px;margin-bottom:0px">&nbsp;</P><DIV ALIGN="right">
<TABLE CELLSPACING="0" CELLPADDING="0" WIDTH="40%" BORDER="0">

<TR>
<TD WIDTH="9%"></TD>
<TD VALIGN="bottom" WIDTH="1%"></TD>
<TD WIDTH="90%"></TD></TR>
<TR>
<TD VALIGN="top" COLSPAN="3"><FONT STYLE="font-family:Times New Roman" SIZE="2"><B>A.P. PHARMA, INC.</B></FONT></TD></TR>
<TR>
<TD HEIGHT="16"></TD>
<TD HEIGHT="16" COLSPAN="2"></TD></TR>
<TR>
<TD VALIGN="top"><FONT STYLE="font-family:Times New Roman" SIZE="2">By:</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"> <P STYLE="margin-top:0px;margin-bottom:1px;border-bottom:1px solid #000000"><FONT STYLE="font-family:Times New Roman" SIZE="2">/s/ John Whelan</FONT></P></TD></TR>
<TR>
<TD VALIGN="top"><FONT STYLE="font-family:Times New Roman" SIZE="2">Name:</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2">John B. Whelan</FONT></TD></TR>
<TR>
<TD VALIGN="top"><FONT STYLE="font-family:Times New Roman" SIZE="2">Title:</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2">President &amp; CEO</FONT></TD></TR></TABLE></DIV><DIV ALIGN="right">
<TABLE CELLSPACING="0" CELLPADDING="0" WIDTH="40%" BORDER="0">

<TR>
<TD WIDTH="13%"></TD>
<TD VALIGN="bottom" WIDTH="1%"></TD>
<TD WIDTH="86%"></TD></TR>
<TR>
<TD HEIGHT="16" COLSPAN="3"></TD></TR>

<TR>
<TD VALIGN="top" COLSPAN="3"><FONT STYLE="font-family:Times New Roman" SIZE="2"><B>EMPLOYEE</B></FONT></TD></TR>
<TR>
<TD HEIGHT="16"></TD>
<TD HEIGHT="16" COLSPAN="2"></TD></TR>
<TR>
<TD VALIGN="top"><FONT STYLE="font-family:Times New Roman" SIZE="2">Signature:</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"> <P STYLE="margin-top:0px;margin-bottom:1px;border-bottom:1px solid #000000"><FONT STYLE="font-family:Times New Roman" SIZE="2">/s/ Michael A. Adam</FONT></P></TD></TR>
<TR>
<TD VALIGN="top"></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2">Michael A. Adam, Ph.D.</FONT></TD></TR>
<TR>
<TD HEIGHT="8"></TD>
<TD HEIGHT="8" COLSPAN="2"></TD></TR>
<TR>
<TD VALIGN="top"><FONT STYLE="font-family:Times New Roman" SIZE="2">Address:</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"></TD></TR>
<TR>
<TD VALIGN="top"></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"></TD></TR></TABLE></DIV>
 <p STYLE="margin-top:0px;margin-bottom:0px"><FONT SIZE="1">&nbsp;</FONT></P> <P STYLE="margin-top:0px;margin-bottom:0px" ALIGN="center"><FONT STYLE="font-family:Times New Roman" SIZE="2">- 9 -
</FONT></P>

</BODY></HTML>
</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-99.1
<SEQUENCE>8
<FILENAME>dex991.htm
<DESCRIPTION>PRESS RELEASE
<TEXT>
<HTML><HEAD>
<TITLE>Press Release</TITLE>
</HEAD>
 <BODY BGCOLOR="WHITE">

 <P STYLE="margin-top:0px;margin-bottom:0px" ALIGN="right"><FONT STYLE="font-family:Times New Roman" SIZE="2"><B>Exhibit 99.1 </B></FONT></P>
 <P STYLE="margin-top:12px;margin-bottom:0px">

<IMG SRC="g176826ex99_1.jpg" ALT="LOGO"> </P>
 <P STYLE="margin-top:12px;margin-bottom:0px"><FONT STYLE="font-family:Times New Roman" SIZE="2"><B>For Immediate Release </B></FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px" ALIGN="center"><FONT
STYLE="font-family:Times New Roman" SIZE="2">A.P. Pharma Announces Financing of Up to $4.5 Million and Names CEO and COO </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px"><FONT STYLE="font-family:Times New Roman" SIZE="2">REDWOOD CITY, Calif.
&#150; April&nbsp;25, 2011 &#150; A.P. Pharma, Inc. (OTCQB: APPA), a specialty pharmaceutical company, today announced that it has entered into definitive agreements with investors, including Tang Capital Partners, LP, for a private placement of up
to $4.5 million in convertible notes. The transaction is expected to close on or about April&nbsp;29, 2011, subject to the satisfaction of certain closing conditions. Upon the closing, an initial amount of $1.5 million will be funded to the Company.
Proceeds from the financing will be used to achieve important milestones toward resubmitting the APF530 New Drug Application (NDA) to the U.S. Food and Drug Administration (FDA). </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px"><FONT
STYLE="font-family:Times New Roman" SIZE="2">The Company also announced that it has appointed John B. Whelan as president, chief executive officer and a director and Michael A. Adam, Ph.D. as senior vice president and chief operating officer.
</FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px"><FONT STYLE="font-family:Times New Roman" SIZE="2">&#147;Since taking the position of acting chief executive officer, John has helped the organization move forward in an efficient manner to
address the concerns expressed by the FDA in its Complete Response Letter regarding the NDA for our lead product, APF530,&#148; said Paul Goddard, Ph.D., chairman of A.P. Pharma&#146;s board of directors. &#147;Under John&#146;s leadership, the
Company has held productive meetings with the FDA and gained agreement on the proposed resolution to some of the issues identified in the Complete Response Letter. As a result of this progress, we were able to secure bridge financing and attract
Dr.&nbsp;Michael Adam, who brings over 25 years of experience in drug development, regulatory affairs and pharmaceutical operations, as our chief operating officer.&#148; </FONT></P> <P STYLE="margin-top:18px;margin-bottom:0px"><FONT
STYLE="font-family:Times New Roman" SIZE="2"><B>Summary of Terms of the Financing </B></FONT></P> <P STYLE="margin-top:6px;margin-bottom:0px"><FONT STYLE="font-family:Times New Roman" SIZE="2">The $4.5 million of convertible notes issuable pursuant
to this transaction have a 10-year term and will be convertible into shares of A.P. Pharma common stock at a conversion rate of 25,000 shares of common stock for every $1,000 of principal that is converted. The convertible notes bear an annual
interest rate of 20%, payable quarterly in cash or via addition to the principal amount of the convertible notes at the election of the investors. The initial proceeds from this transaction are $1.5 million. The remaining $3.0 million can be funded
to the Company at the investors&#146; discretion within two years of the closing date. Additional terms of this transaction will be disclosed on a Form 8-K Report to be filed by the Company with the Securities and Exchange Commission. </FONT></P>
<P STYLE="margin-top:12px;margin-bottom:0px"><FONT STYLE="font-family:Times New Roman" SIZE="2">This press release is not an offer to sell or the solicitation of an offer to buy any securities of the Company, nor shall there be any sales of the
securities in any jurisdiction in which such offer, solicitation, or sale would be unlawful prior to the </FONT></P>
 <p STYLE="margin-top:0px;margin-bottom:0px"><FONT SIZE="1">&nbsp;</FONT></P> <P STYLE="margin-top:0px;margin-bottom:0px" ALIGN="center"><FONT STYLE="font-family:Times New Roman" SIZE="2"><I>- more -
</I></FONT></P>


<p Style='page-break-before:always'>
<HR  SIZE="3" style="COLOR:#999999" WIDTH="100%" ALIGN="CENTER">



<TABLE CELLSPACING="0" CELLPADDING="0" WIDTH="100%" BORDER="0" ALIGN="center">

<TR>
<TD WIDTH="91%"></TD>
<TD VALIGN="bottom" WIDTH="2%"></TD>
<TD WIDTH="7%"></TD></TR>
<TR>
<TD VALIGN="top"><FONT STYLE="font-family:Times New Roman" SIZE="2"><I>A.P. Pharma Announces Up to $4.5 Million Financing and Names CEO and COO</I></FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="top" ALIGN="right"><FONT STYLE="font-family:Times New Roman" SIZE="2"> Page
 2
</FONT></TD></TR></TABLE> <p STYLE="margin-top:0px;margin-bottom:0px"><FONT SIZE="1">&nbsp;</FONT></P>
 <P STYLE="margin-top:0px;margin-bottom:0px"><FONT STYLE="font-family:Times New Roman" SIZE="2">
registration or qualification under the securities laws of any such jurisdiction. The securities were offered only to accredited investors. The securities referenced herein have not been
registered under the Securities Act of 1933, as amended, or any state securities laws, and may not be offered or sold in the United States absent registration or an applicable exemption from registration requirements. </FONT></P>
<P STYLE="margin-top:12px;margin-bottom:0px"><FONT STYLE="font-family:Times New Roman" SIZE="2">The Company anticipates having to seek additional debt or equity financing or evaluate strategic alternatives. Multiple factors, including the
Company&#146;s progress towards its NDA resubmission and market conditions, may prevent the Company from obtaining adequate financing to support its operations, or obtaining financing that will be on terms favorable to A.P. Pharma or its
stockholders. </FONT></P> <P STYLE="margin-top:18px;margin-bottom:0px"><FONT STYLE="font-family:Times New Roman" SIZE="2"><B>Management Changes </B></FONT></P> <P STYLE="margin-top:6px;margin-bottom:0px"><FONT
STYLE="font-family:Times New Roman" SIZE="2">The Company has appointed John B. Whelan as president, chief executive officer and a director. Mr.&nbsp;Whelan has been with A.P. Pharma since February 2009, serving most recently as acting chief
executive officer and chief financial officer and previously as vice president of finance and chief financial officer. Prior to joining A.P. Pharma, Mr.&nbsp;Whelan was chief operating officer and chief financial officer at Raven biotechnologies,
Inc., where he oversaw the finance function and had broad operational responsibilities. </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px"><FONT STYLE="font-family:Times New Roman" SIZE="2">In addition, Michael A. Adam, Ph.D., has joined A.P.
Pharma as senior vice president and chief operating officer. Dr.&nbsp;Adam has been working with the Company as a consultant since July 2010 and brings over 25 years of drug development and pharmaceutical operations experience to the organization.
He was most recently senior vice president of pharmaceutical operations at Spectrum Pharmaceuticals, Inc., where he oversaw CMC development, quality assurance and manufacturing. Prior to Spectrum, Dr.&nbsp;Adam served as vice president, drug
development operations at Anadys Pharmaceuticals, Inc., where he was responsible for regulatory affairs, quality assurance, pharmaceutical development, manufacturing and project management. He also has held senior positions with Pfizer, Inc.,
Agouron Pharmaceuticals, Inc. and Bristol-Myers Squibb Company. Dr.&nbsp;Adam earned his Ph.D. in Organic Chemistry at the Massachusetts Institute of Technology. </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px"><FONT
STYLE="font-family:Times New Roman" SIZE="2">&#147;Michael has an impressive track record in drug development, regulatory affairs and pharmaceutical operations,&#148; Dr.&nbsp;Goddard continued. &#147;Over the past nine months, Michael has played a
vital role as a consultant to A.P. Pharma in helping the Company address some of the FDA&#146;s questions surrounding the NDA for APF530. We look forward to his continued contributions as we progress toward our NDA resubmission.&#148; </FONT></P>
<P STYLE="margin-top:18px;margin-bottom:0px"><FONT STYLE="font-family:Times New Roman" SIZE="2"><B>About APF530 </B></FONT></P> <P STYLE="margin-top:6px;margin-bottom:0px;padding-bottom:0px;"><FONT STYLE="font-family:Times New Roman" SIZE="2">A.P.
Pharma&#146;s lead product, APF530, prevents both acute-onset and delayed-onset chemotherapy-induced nausea and vomiting. APF530 contains the 5-HT</FONT><FONT STYLE="font-family:Times New Roman" SIZE="1"><SUB
STYLE="vertical-align:baseline; position:relative; top:.4ex">3</SUB></FONT><FONT STYLE="font-family:Times New Roman" SIZE="2"> antagonist, granisetron, formulated in the Company&#146;s proprietary Biochronomer&#153; drug delivery system, which
allows therapeutic drug levels to be maintained for five days with a single subcutaneous injection. Granisetron was selected because it is widely prescribed by physicians based on a well-established record of safety and efficacy. </FONT></P>
 <p STYLE="margin-top:0px;margin-bottom:0px"><FONT SIZE="1">&nbsp;</FONT></P> <P STYLE="margin-top:0px;margin-bottom:0px" ALIGN="center"><FONT STYLE="font-family:Times New Roman" SIZE="2"><I>- more -
</I></FONT></P>


<p Style='page-break-before:always'>
<HR  SIZE="3" style="COLOR:#999999" WIDTH="100%" ALIGN="CENTER">



<TABLE CELLSPACING="0" CELLPADDING="0" WIDTH="100%" BORDER="0" ALIGN="center">

<TR>
<TD WIDTH="91%"></TD>
<TD VALIGN="bottom" WIDTH="2%"></TD>
<TD WIDTH="7%"></TD></TR>
<TR>
<TD VALIGN="top"><FONT STYLE="font-family:Times New Roman" SIZE="2"><I>A.P. Pharma Announces Up to $4.5 Million Financing and Names CEO and COO</I></FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="top" ALIGN="right"><FONT STYLE="font-family:Times New Roman" SIZE="2"> Page
 3
</FONT></TD></TR></TABLE> <p STYLE="margin-top:0px;margin-bottom:0px"><FONT SIZE="1">&nbsp;</FONT></P>
 <P STYLE="margin-top:0px;margin-bottom:0px"><FONT STYLE="font-family:Times New Roman" SIZE="2"><B>About A.P. Pharma </B></FONT></P> <P STYLE="margin-top:6px;margin-bottom:0px"><FONT
STYLE="font-family:Times New Roman" SIZE="2">A.P. Pharma is a specialty pharmaceutical company developing products using its proprietary Biochronomer&#153; polymer-based drug delivery technology. The Company&#146;s primary focus is on its lead
product, APF530, for the prevention of CINV. A.P. Pharma received a Complete Response Letter on the APF530 NDA and is targeting the resubmission of the NDA for the first half of 2012. The Company has additional clinical and preclinical stage
programs in the area of pain management, all of which utilize its bioerodible injectable and implantable delivery systems. Further work on these programs has been deferred while the Company focuses on the approval of APF530. For further information,
please visit the Company&#146;s web site at <U>www.appharma.com</U>. </FONT></P> <P STYLE="margin-top:18px;margin-bottom:0px"><FONT STYLE="font-family:Times New Roman" SIZE="2"><B>Forward-looking Statements </B></FONT></P>
<P STYLE="margin-top:6px;margin-bottom:0px"><FONT STYLE="font-family:Times New Roman" SIZE="2">This news release contains &#147;forward-looking statements&#148; as defined by the Private Securities Litigation Reform Act of 1995. These
forward-looking statements involve risks and uncertainties, including uncertainties associated with capital resources and liquidity, timely development and regulatory approval of product candidates, satisfactory completion of clinical studies,
progress in research and development programs, launch and acceptance of new products and other risks and uncertainties identified in the Company&#146;s filings with the Securities and Exchange Commission. We caution investors that forward-looking
statements reflect our analysis only on their stated date. We do not intend to update them except as required by law. </FONT></P> <P STYLE="margin-top:18px;margin-bottom:0px"><FONT STYLE="font-family:Times New Roman" SIZE="2"><B>Contacts
</B></FONT></P> <P STYLE="margin-top:6px;margin-bottom:0px"><FONT STYLE="font-family:Times New Roman" SIZE="2"><B>Corporate Contact: </B></FONT></P> <P STYLE="margin-top:0px;margin-bottom:0px"><FONT STYLE="font-family:Times New Roman" SIZE="2">A.P.
Pharma, Inc. </FONT></P> <P STYLE="margin-top:0px;margin-bottom:0px"><FONT STYLE="font-family:Times New Roman" SIZE="2">John B. Whelan, President, Chief Executive Officer and Chief Financial Officer </FONT></P>
<P STYLE="margin-top:0px;margin-bottom:0px"><FONT STYLE="font-family:Times New Roman" SIZE="2">650-366-2626 </FONT></P> <P STYLE="margin-top:6px;margin-bottom:0px"><FONT STYLE="font-family:Times New Roman" SIZE="2">and </FONT></P>
<P STYLE="margin-top:6px;margin-bottom:0px"><FONT STYLE="font-family:Times New Roman" SIZE="2"><B>Media Relations: </B></FONT></P> <P STYLE="margin-top:0px;margin-bottom:0px"><FONT STYLE="font-family:Times New Roman" SIZE="2">Corporate
Communications Alliance, LLC </FONT></P> <P STYLE="margin-top:0px;margin-bottom:0px"><FONT STYLE="font-family:Times New Roman" SIZE="2">Edie DeVine </FONT></P> <P STYLE="margin-top:0px;margin-bottom:0px"><FONT
STYLE="font-family:Times New Roman" SIZE="2">209-814-9564 </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px" ALIGN="center"><FONT STYLE="font-family:Times New Roman" SIZE="2"><I>### </I></FONT></P>
</BODY></HTML>
</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>GRAPHIC
<SEQUENCE>9
<FILENAME>g176826ex99_1.jpg
<DESCRIPTION>GRAPHIC
<TEXT>
begin 644 g176826ex99_1.jpg
M_]C_X``02D9)1@`!`@``9`!D``#_[``11'5C:WD``0`$````9```_^X`#D%D
M;V)E`&3``````?_;`(0``0$!`0$!`0$!`0$!`0$!`0$!`0$!`0$!`0$!`0$!
M`0$!`0$!`0$!`0$!`0("`@("`@("`@("`P,#`P,#`P,#`P$!`0$!`0$"`0$"
M`@(!`@(#`P,#`P,#`P,#`P,#`P,#`P,#`P,#`P,#`P,#`P,#`P,#`P,#`P,#
M`P,#`P,#`P,#_\``$0@`.`"G`P$1``(1`0,1`?_$`*H```(!!0$!`0``````
M```````)"`$"!@<*`P0%`0`"`04!`0``````````````!P@!`@,%!@0)$```
M!@$#`P($!`8!!0$````!`@,$!08'`!$((1(),1-!42(483(5"G&!D:%2(Q:Q
M0B0T)1<1``$"!0,"!`0""0,#!0````$"`P`1!`4&(1(',4%181,(<8$B,I$4
MH;'!T4)2(S,5\8(6\.$78G*RPB3_V@`,`P$``A$#$0`_`._C1!!H@CSV``,(
M[^O7I_?8-7$Q8E&PSC&[/;*K2X.0L]QL,/5:[%(F<R4]89)G#1,>W('<*SN1
M?K(-$""'IW&Z^GKK+3TU;75":2@:6]4*E)"`2K7X3C%5W*BMU*JLKG6V:1`U
M4M0`_3";\]>=_A/B5T]AJ$ZMN?YU@JJW.&/F!&-4^X3`=TS72PBS8N?JV#O:
M).B?'?IL+]P[VU\CY*V*BI#5OI2)@U!.[MT2F?Z2/E$;\P]TO'&,U*J6WA^X
MUZ200QM"9=SN/;_;"_Y7]R9/"]7_`$3B7%!%=_\`X@2^7'1I+L_R=?8T<S4I
MOP(8P!\]-!CV=UBQ_P#MO0;7WV-S'Z5](52O>JCU"FAL3BT>*WY'_P"$;3Q+
M^XZQO+2[*-SAQ]L]%B'+@$W-IHMJ0O;6-3,8A4U'4`]BH"7<IEW$3_;F54``
M^DAAUH\G]H60V>W&NL-S:KP!]A24DCR(*OTB-_C/O)QZZ7!-'?K<Y1;C+>%!
M0'QFD?LCH1Q/F#&N<Z)`9*Q3;8B[T>SMQ<Q,]#."+MEA3$`7;+I")73!\S6W
M(LW7(19$X=IR@.HIWBPUV.W%RUWVG4Q<$*!*5#R!!'C,:S&D2WQZ_P!KRFW-
MWJPU"'Z!8.H/@2"#X$'24;/)^8>G_:'\-MQ'^VM>D!2RZ.DI?A_K&U22"6CV
MU_'_`$CUUDBZ#1!!H@@T00:((-$$&B"#1!!H@@T00:((-$$4'TU:I00G<>D$
MB=!UBSN'KUV^``.WP]=NNXZ`0"$J(W'H(H%B1)!D(4QY`_+-A?A,@\H\,DAE
M?/SAF=1ACN(?$)%U<5DQ%K)9$FD!6&":B(@8C,A3O7!0Z%3*/>#GXNX4RCDB
MH%Q,Z3&$&2W5)^HRZ[/'R/3XZB$1RWSWB_&M*JB!35Y(H?0PE0D">A6>WF.O
M:.-KE%S5Y'\Q+*M/YOR'(S,61RLI!T.(44B<>5MN<X^TWB:PV.5HLJBGL07;
MH'#I40[A4'<-?0C`^+,+P2C#=CI4JJBHJ4^Y_4=*B`#M6H;DHTF$#Z09D#4Q
M\W^0^7LWY`KO7O-8H4GIA(8;_IMI2%*("D).U2]=5$;B)`]`!%?N'XCZ`!=Q
M^!0$.TH?(H#Z!IFN/@R54)2X!H-VLH5:-P)#8.O60B\%?0"FW#;?8#;AL'KZ
M?#0EXJ_M(;2/+_2!MA"25*,E>:1_U.+.X0WVV#N+MZ!U*.X=.G]]8=B`K<@;
M?(:#\!%2ZX1)9W$]SJ?Q,=`/[?7D79J?R8L7&]U(N'%!R_4YNRQ\0JJ91I#W
MZE-4I(91BBJ)BMAF:XDNBY!/M*H9!(1`1#?41_=EAU+5XVSF#`0FY,/)0I0&
MI0J0D>Q,R#,]!.43-]GF:W"CRE[$75*5;'V5*2F<Y*$S,>'A\YQV8=^Q@'O+
MVCT$!Z#N`[#MZ_'IJ`1VZ)G]?E_UI'T:_K*7N3+TO/0C]\7&,?;Z1`/GO\/Q
MVZ[ZKL)4#N^GPEU^?:*K*S]+,I^)[?OB'O+CG1@3A/&4B3SE+6%BGD25DX:J
MM:O6WEHD7SR(:(.WHG9,CD400(1TD4#F^DQS@7H(ZZO$<%RG-G*O_`,>JU1M
M^HYJ!)/Q/?3IUCB<TY#QC`12C(GBVY5N;$`)F9Z:D>&L2RB9-.6C(V60!5)M
M*,&<B@FZ2%N[20>MTG*2;E`1-[+@A%0`Y!$1*8!#X:Y133B5$+,E`R(D-#WU
MCL67P\VEY&TLJ2"#/4@B8,NTY](^\5/J`H&*([`(AOU`/GMM\=4.GUJGM^'6
M,\TG0$S/32*B8W382[#MMZ==]NNJDI`W$R$6$K^U.TJ^/[(H)SAZ;"`_$1``
M_EMN.L:5K4J6V2?$F+TR3_<5/RE%HJ&V#M$IA]1WZ`(?,-@'TU=N`F3/R$M1
M&-Q3DPEK:5]Q/27QE%Y3CUW$.@^O3Y^GKK`RMT)_K`DS.L@-/"4^T9@4*^T@
MGPB@G$#"'>'0/3IO_#6<*4KHA03+KI^J<4*T2(3JL"9$6^X</S;`(^FX;>OI
MO\M]5"=B-RU3'PBQ*G%)*]H`[3,5*8^VXF`=O4-@`/ZZQI>2XL!`4$_#]\7[
MB4:`;_C.+P.(@(>A@`?X"(?+\-9I:]9Z_HC$E2U(.DEC]<54,!"&.("(%#?8
M/4?P#5I1Z@V>,9@%$R2)JA)GE'\C\I@M]7>*_&U]#O\`E;EE6-A&TC(2$:SB
ML2QUH738Q,O+NY19O%MK)+JK;L$W*A4FZ9?N5@$H)D.]N(>**;*%5&89)N;Q
M2@9+BM%%3^SJVW*?AJ>^HB-G-?+J\<6QA&*N)<S.M>#82"`&=Q$E+)T_=U^"
M:H/P]UZYY#4QKEKR'X>;<M;B+R:D<7QR*]ZGW,^X9*RSMI.SKF>CI&4F!23.
MJN8B)53%*(ID,4`WD+4>X^IL=M3=+%C5:SA=,A*%+*`ELH`"4JT21-0EJ93)
MB.2?;=2WRX_DKWD]N<SVI)6&O44M07J5)&IGM,]!/RA/'(;!EQXU9HR%@V_+
M1KFU8ZF_T=^\ASG4BI)NNT;247*1YE=EP;2,8]26`J@`HF)A(;J74FL+R6WY
MKB]+E-M_ITU4WOV'JD]"#+32417S7$[C@^356,7,;JRG<VE0U"O,>1C*N(O'
M*9Y8\A\<X"A)I.MN+X]DDGED6CCRR4!$Q$,_FI*3/'IN&AG7M-V`D`ONI[F.
M'U!K6Y]FS&`8Q49-4-)>2S(!"C+>5:``]B3T)C9\>815Y_EE+BU"Z&GZE1&_
M4A`'52@-2!W$-KB/"OB%IFJ8P3D/G_BFNY&>N6S.@T*(AF+V_P!A$8])?[F>
MA7ME;)P:RK@%"(,"J+.3I)@?N#N`!CA5^Y'*ZFV?YVUXV^NT(2%..2(0$]R%
M@$?,@#O$EJ7VR8LF\.8W<,FHSD""4AH$[M_::3TUZB<X4YRZXN7GAYG>VX,O
MCYC+OX!*,DH>PQ15DHRRUJ90.XAYQJU<"9=H+A,ADU45!$R*Z1R[B&PZD=Q_
MG-MY#QUG([4VXTPZLI*%D%2""0=Q3IU'[8C/R)@MSXXR1W&+NM#E2TD*#B`H
M(6"!(IW`&1G/7YPP3P,T65M?D`KU@:-CGC,:XVR#99MV&X$;?K486H1!#"'T
MB+IY,GV*([B"8C\-*#W5WA%#QF;0^!ZM74I],CK)*A,'S.U4OD(>7M)M2W^3
MV[DS-3+%,YO\`5(,OPF!\>D..F_-#DJ5Y&9TX\8.X>67.=@QI.6BLU!W2K(N
MY4GWU7F$HEU,V=L:$*WK5>352<@*@+JG44*0I?S"(1YI/;W:*7%;=E62WRGM
MK-<PE:D.I5N(E,I0?MW:C7SZ&),U_N)O;V47'&,<LS]?4T+I0%-E)0#,@%8G
MND92TC:'`ORPVSD=R$LG%/D)@L<#YJBF<X]B8YL_EW+5=[6R(NYFMS,;.,D'
MT5+I1JHNVZA3J(.4"")!#<N_.<B<*T.)XO3YKC5Q-=8WG`E4YE0GT4%`;=NH
M$OG&YXQYWN>8934X/DMM_P`??FFRI,M$F78@DF9[?.<+F\W>26EFY^<2L5KQ
M%CN4+C&+K-KG:13HLTU9+"^MEX;2CF!A(TH'^ZEI:OU5)-,A@[2D4$QA[0'3
M?]N5F=MO%-_OM34(I7:Q+C:'5$A"=DDDJEK+<KMK(&$U[E<@%QY=LN,MTRZM
MRBV.J:3*:]\U2':8">_B(E`/F2Y+8[Y.XLQ!R)X7CA*B9=L$!&5AM*3[UQD-
MC7++.)5V+LJA4A5@G_V,@X(5VT(DW.F!1`.NP#R3/M\Q2_8577[$[ZJMN5"D
ME_LT7$H+BPB:=P3,$)U,YCM':M^XS)K1F5#8<EL`H+36J2EE)_O;%*"$%6LI
MR()D.@,A#4N<'+.?XE8_K,Y3\'9#SQ>+]:F]'IM7I,:\7C4K&\3[V`VF7:-G
MZL,S>J_0W[4#BLH!@`2``F!'<>88WF%U525MPIK?;6&2XXMT@&0.NV?4R'PG
M*'WR=F]RP2S)K+-;JBY7"H>2AMII)5M)EJJ0)VS[#6%3J>6GFI@O.F'<>\TN
M(-2Q=4\T3T9&P+JLV1[(V2.CY&89P*D@FJ$S-Q,BY@Y"30%VU53;*BF(B3;I
MISHX6X\R?%KA?L&O;E966UM2G`L'TE;`2H2"$G4`[2#('X&$+_Y^Y,Q?*;?9
MN0;"U2T-Q4`@HT>^O1,IK*9`GZP0#*8$C*)R>4GR#3G`/'N,K!4*;6KO:LEW
M"2@$(NTOI%C'L(6%ACOI69/^D&!ZJ+9PLU3[?R@4X]=]M+KB'BJGY2NU91U;
MZZ>DHV/44I,YGJ0!U'8]8:?.'+=3Q1:J&MHZ=#]77.J0`?X2D(,SJ)SWR$N\
M:AXQ^3/+F?V_(O,<I@E;&7%W"N$Y.\TZ[V:*LC)_D^T135P[4"-D'J;:'1A#
MIL%E"H-2N5B)+H]ZPF$0UMLQXBLF,NVJRTMR-;EU?4!#C;1!2TB8'U)U5NU'
MQD=`(T&$\PY!DZ+K>*VV"DQ&W4Y6EQ8*7'5=@%3V]I^0B&>,?,'Y">0^(KE<
M,&\+:Q9']+<2LS:<@(N)C_\`.*S6(R'1DU8I!*6EHYU9+@D1-95=)!R'M("0
M`2,;3(NO`O&^*WYBBRS(5M-U*6T(83_>]4R"B?H(""H_3,::`F<+&V>X;E+*
MK'573#[`A:*1;BG'%":0RDD@CZ@"H)$U2/8D",FP%Y?>:_*+%+N/P'PR9Y)S
MK6W#X;C<FTJO#X5AH0&:+V'>%&5DVCI2TRB:AO\`Y8O@`I2@<IC`?8,66\"\
M?X->FW,BR%3%BJ$)+39234**M9F2"D)EK/;\3&RQ3W&<B9W8EM8ECZ7KVUN#
MS\QZ"`D&8E,*W`B74@ST!B7/B6\B>6N<;3-4!F6F5:OVW$TA`*$EZ<@_8QD@
MSGUIAJ>,>QCY[)`WE8M[#J`)TUCD5(8!$`$-Q7'-W%UHX]515&.5KE10UK84
M"L:@'Y#MX#K#`X&Y=OO)B+A;\BI6F[C0.E*MFB5$&4M3V/?2/DSART\E]QS?
MDK#W#KB'$QD!BE^2-F,I9V>)1<7;5%VY7C%U3$S2T9&/XZ5;?4W]M=VL)1#W
MBH&^C67'\.XIHK!1W;.+ZH5%8DE+%,)N(D2)+&Q4C,=Y"/-DV><Q5645=@X_
ML0+%&0%5#^U+2IB?TE2DS[Z)F?C&,<)O)!R$Y-<>>:TM:\=TJ%SUQ9J=K6@"
M0AW05BSVQO4;N^@XR5AW3]4&OV%FJ?V[@R;T47"*@"4R?4=;/D7B#%\*S+'Z
M.BK*AW&;W6,)4LC^JAA;K:5KEM`W;%DI&SJ.AZ1YN-.:LIS3",CK*VF8;RBR
MT50I($O374-M.+0/N^W>A,_J[G7O#%><G*JN<.>-N0\W30)2$G#,RPM(KJBI
M2#9[].]S6L0I=]O]0N0,X<"(AV-6ZI@Z@&E;Q]AM7GF74>-4X4$/.`NK`,FV
MAJI2C_"#HD'^90AP\DYI18!AM9DM6XA"VVB&@3(N.'1*4#^)0U5(=DDQQ4\0
M>*F6_)GGO*-OR!D0M;@X7W,H<@,Q3B0R*D4G+.'CINUAV"JR2!WZR$:O]HF=
M0C=@T:"(@)"$*;Z*Y[FV/\*XM2XS:*-FHN]0E+-,P)2<,@DJ4.XGU\29=X^9
MG'^"WCFW*ZO([I6KI[33J6]4U1)"FTS)`"NQE^`$])&'(^,VM>-"R\P6M=XS
M8\S?E?(F+:W/WQSR9RO:!3B/O&PH5<9.$JR:K91Q^O*S)P:*N&:(@F`G#N$-
MPC5S-5<R4F%%G-:JBMUKN92E%$PA.XI,EI*B9J3M`GUE,2\HDYPK;N&ZG.2Q
MA5-7W"[VY*EKKJE9V@B:9I``3K_#/L9]S"(>;%BM'(?F=RBR%5:[9;8U=Y8L
M;-H:MU^9L`M8&N.0J,*H\+$,GOV1%VL#W%[^TIA$=M^NI4<9T]MPOC"U4=YJ
MJ>G><I4[-ZPGU%DDD)G_`!:C3S$1'Y1-QS'E"[5EF9>K$(JE%Q3:2L)2`!.8
M&B!M.OD88U^WRQV22Y497RW,)E)%X;PQ(E,X73$"LIJW2B+4_><P`5%4D+#/
M0$!^H`[OQTJ/=K<W58I;,?844FMJFUZ?Q)0#IYS*A+S`AN^T>REK+KCDE0W_
M`$Z"C=U5H$J)$IGL9`_IB'W%2,N?,#RCU"V5]-X^>VCDI(9HL$DW]TZL)3J_
M;'%D=RZ[TI#J-6C:):HLDQ,8I1.J1,!Z]NNUS&IM>`<#/4[BVVR;>TR$.)"5
M+<*`-LCK,R)EY'PCAL%I;GG_`#RFJI`M3JZYQU;B%$H#8623_P"W4:^8C>_F
M?DK+G[GAE)]BNF6^\U[#5-J6-K7/U"J3=BBHR;@6TE8)U&3DX=D[:,C1:LT=
M-0RQR]@(GWV`HZY[V[5-HP[CFD&05C%)4W5Y3K2'7`@J1,R4D*E,$2,QUGYQ
MTON4;KLXY'K7;%3.U-':FPT\XVDJ2A8D"%D="""-?"'`>'+CBIQ!X69-Y3Y(
M8*1-TRI4)7)?M/TA0>0.*:;`R4M4FZQ%`)]LO/#[TD<@]?;71`W4-M(#W"YC
M_P"0N1*3#K2\EZS4M2VTEQ!W(6XM22J1'4H42G3N#UB0WMXPA/'G&-9FEQ0I
MJ[U%*ZYM6)*2A`5L)!UDH)"@?"4:^_;S589>C\L.1<\H@64R5DYI#KR2RZ8*
MIH1;)[;YQ58YQ[FZ)I*W=PF-L`^WO\-;+W4W9:*VQX2S]#5'0(V@3F7%@)(`
M\0$C\8\?M.H4+I+[F]84ERIK5@E4O[:5%>XD]IDZ]-#X1K;B:Z9\LO.GF[D/
MCE1*1Q?B&+GVB]GCS>Y&2CEI4F.*H11)TD7[=P6P2B3YPAUW40:B<NY=>[/5
MJPSVXVW&*X[+[6O!?I+T6!,+Z?RCI&HX["L[]R%TRJWMJ-BHT*`=2)H41H`2
M-)GK^F/MXKF'DOYYN1653'))5C!<9<&D2J8?<125KS".Q7""D40$"F%XN_<)
MC\!*(AUUZLX=.&>VNU65M1;?N+C2W#T.UU*W'`?$`[0?B(PX&NGSGW/W6]*;
M]2GMS3J4*ZC<VM*&]>Q(*B/$)/A'S<J2AR:\]/'+%")`D8#!<=2Y*91$3J-D
M%JRQE<L3@.2%W*'>NHP1$!V^H`_GBP'\GAWMCO5X54%%?7J*&U3^Y1<2U(>)
M*-RI>$X]6<%>7^YFSV5M"54U$D*=3+[0ELN$D>`7(?$B).\B>=W*7/?,><X%
M<!UJ73;)1FTBKE3.5WCR3)8!6+!H-@3KL8JV?M4F\$YD46HG%LX<N7@B0GME
M*8^N*P_C?$\3P1KDCDLOU+;^[\O2-G9ZH*E%(6=3]4I@:#:)QV>7<L9AE7(C
MG%O&(8:6V`*BK6-Y94D#<4S(2-@TZ$[IPJBU8BRG<?+GQDX[9>Y-SG+69I%L
MIEHM]I?I-4(6J&C3N;_9*A"Q+)](H1Z+%*`;`Z`_MG[U`*<I1#;3UM]_L5#P
M/><FLEF9L5&ZVMM#4SO?+O\`22LDZG57X`D0A;CC5_N?/=GQ>]WEV^5M,\VM
MQR4DMA!#BQ($CZ0#/I+72)C>5I-MR3\I'!SBP9-.5@(5:J2-LBU2>^U6:V^W
M?KM@2>(`!BF;GI]/_P!@&V`R:H@/32^X*]3&N%<GSP$HK'&%M-J.GU)0H`)G
MU5N/3X0P>>RK+.;\9P(_71MN-+6D:[0XY)14.TDI$_*&.>9F^Q^(/'3EB$@$
MFD*-Y&I8EA&$>DBQ:-&<Y*M3/F3)NW(FBW02K<4Y`J9"@4"!L``&E-P%;*[(
M>7+=5(475TRU/.%R9T'4DG4ZD:F&_P"XJ\T.)\0UM.EOT15A+"$MB0F=9:#P
M28B=C<5.)G@+D)I<OZ19[GA2QSJ(G*9LNI9,[S+EC$%W#L4^X)&6!`0VV'M)
M\M=M?`GDKW*BG*26T7$I!$]H333),^DB4]/`F.(MB1QU[7%5*BEM3U"%IEHI
M2J@@R5YR5^'PCQ\9:"7%KPUY+S>](5C)6*!S7E=LOWE(N<K=@YI]-(*QNT`[
MU(5N)/D"O3X:R<S5;F:>X.CL"2'&:=RGIY#5L!)2')><NO@`8LX:IV<(]O59
MDU20VX^P\\5"750*43^:OQE&C_$7?(3AIXT>3/,^Z1CF65FL@OUV$8FL1!W9
MW579Q58KL.W<J$-[*<G=)UT1140-V%[S[#VZW_.5D=Y!Y<M''-I<2E%,PTVH
MM?5LG)2B1T)2D`R\_..;X(O#''W#EYY-NS94]553KB`=/4EHD`^"ESF1X1^"
M2S\QN7/%VY<XN1_.A3BM@=2-O#_&V(L,N&%:>SZ]=&6:1U>5FU'L=(.'TQ+Q
M_P!JV045?OW)?K[$NX"A[54_'>$9O2\>8G83>\E14-I=K*@*4A!44[R`D2`2
M"3.4@1*9D8\M5<.1,ZPJIY$RZ_M6;&S3.*IZ5A24J<4`=J5$F94HR!ZF2@9=
MXQ[Q8T:9@_%5Y-<T.32"4ID'%^<8F,>F=+@_7/0L$6QPN[*[%0%A>A/V1P/O
M`;O[R[]VX:]_,]RJJSG#$[$0@U5+54!VRT#BZML!)3V'TC3O.-7P;;?R?!&9
M9*M1'YJCN`"O$(I'53!ZDZQZ_N.<T/G]\P)QW9.!+$PM=E\NV%LD<2D<3<R]
M6K%8%R4I@`QF4?&2)B`;?_V`'ITU=[0\:I5-5^7W-)FB3"=.WW';\Q^@QC]Y
M.75`N%!A[3A11H'KN2\2"!IX:B%Q^-?R*0G!0V9ZO><2+9;QSFV,BFT_$QLL
MPB9MD[B6<K&'2$91NNQDX27BY91%=`QDS$,'<41W,`MGE_A>NY/71WBR5J::
MXT*CLW])$@]M000)'Y$0F.$^;:+C:FK[5?:/\]8JU)2H)(2HSF#U!F""9@Q*
MO"?F1P)QK=W^&P%P&IV*:'9H<S6+"JW,A\B*39RNR&F;G:Y.,>*RL6U!P4&D
M:D)BMC%,8J@@(%*OKW[=LKR6WT=5?\D>KGF'`G:M!*4A)D0@;_+0ZF6D,NR^
MY?%<:<K1CF--4-OJ6BD*0L>HI1$@5?0/C*8'G$7>!7DG2X14[D1&I8D=9`O6
M<GA'7_-#W)O`)UL[:*G&S$ZS(\+)+R)D9B;4='[54A..P!M^;7=\B<)7+D"K
MM)37BCM%K:0@H(GN4%34KJ!,B2>G:%UQOSO;\%I;QZ]M_-5UU6LI7/5*5)D$
M'0S`/U=90QSQ2VI[Q4\9_-CF<HQCI&RO[.\3KI9I)19A//J>P:1,<T=HE.BH
MJR?W"WKD6[#?6`&#X;:47/%$,NY@L/&Y>(:;92V%#J%+)FO_`&A`_&'GP%7.
MX5Q!D')#J$*>==]1*%?:I*)_T_\`=N\.PB-SWS.4S'E.LRO%#A%A_CIG'(D<
M=I=LJQ)XI^D@Z=C[SQ]7X>.K<0\=@5V?WVZ3YP5NDL`'.DJ)=]=C;O;K77VX
M-_\`+<@J;A8*9V;;"TJ2%[-`"2L@@=Y)U$<`][E[1::%YO"L:IK5D50R4KJ`
M02G<)JVR0-3+3ZM#$]/`I(9(O^)<Y56X8G=3&*LB7BUV?(6?;19WI'V3K=8(
M^/BG=1B(,8<JLZV;-$EU9.0%[[!#N11*`G$2E5?N<I+39,@MZZ.N2+E3,I2U
M2M)$FDC^*8.@.FU.WJF8.D-OVJ5%[O-@N%-=;>HVFM<+CM0YU<49Z:@[NIUG
M_P!V/>6[(;+"_CKSFE%'2AQL5=@\25=NT*5NDV_Y=*,*_P#:LT4P(1)!I`_<
M"!2]"II=.@:4W"=G.3<H6VGJB5N?F?66>NJ9K'Z9$PW^?+VQCG#]T-(GTT%I
M-.V!I-*BE!`\I3'PA/7#_P`/V2,I\4<0Y+QYS`R?@-#.E1_6\L4.*1EW5<L,
M6\DY%M!KLFL19ZQVN'5832*JFZ!8JG?^<"")-2!Y$YXLUNY`KJ&Y6&CNBK:X
M$4[J]NX*2!NU4A6NX=I2D/C$?>/?;S=KG@]!=[+?JNU,7&G"ZIH`D+!)D``M
M(\?N!ZP_7A;P@P[P;Q:YQSB1)\_E)EPE*7*^SZ;9:RW*=0;&:M'LE]L1%HS8
M1B(^VT9H`5%NGN`;F.<YHP9SR+D'(MZ1>KXI+5(D[6Z<"24))^T:]3T)EK+H
M.D2OX]XYQ[CRTJLEC+AJU";E0L?6M1$I_ME/YF-.<$O&["\*;_G?):F5I7*U
MKSI(HO9-Y*U5C6OT1$)R;L3UFV^SEI4[XKZ4F.\QE#$$H(E``'?IM^0>3JSD
M*TVZS/,)IZ*VM[$!*IA0VA/20EH/..<XSXCIN-KY=+RBM545-S65&:9%,U%7
M\Q\?+I!A_P`;D%C#G-E;G/*9:F[M;,BH6=O&TU]6(Z*C*B2Q_I+,2M9A"2>/
M9((Z#B2M"`=)/N`PGZ#TU=>^6+G>^.Z7CNGIFF;91N)5N!U6I$Q,B0^XDDZG
M6+<>X>M]BY'J^2'ZYVHN-2EP;2G1(7V!W'H-!I$8LN^%",N_)J]<C<8<K\M8
M(>Y+EI2<M\=1(U-.;(\L'M#8VL%;$9Z,<,XJ:71!46Z[=R5)7<P=P;`'76;W
M!U5#BC&'WJT4UR13)2&E.R*$I3T!24J!([$=?*<<5=?;?0UN;/9K;;Q54:ZC
M<7`V"%343.2MPTD9:_.>D;0XJ^'C#W%#DXER3I64\B6EZT@K#%M:M=4(N6,$
MI:(Q%A,V1[:`]J5D)9VO[ZYA.0`W<&+Z%`=>#+^>;[FN**Q.OM]/24RE-G<U
M-*9(6%`!&NAD!]T;G!.`L?P?-4YK;[A55=:E#B2ET3)]1!0253[`GM&WD_'#
M3W//E3GM/90MLW;VS,S&"Q^M$PK>J0B)*B%09&2?$!25=+,6AUEB&,8H>ZL.
MX=-<X>3+HGCQ7'5.RENV.+"U+"C-1F"9B7>6NL=2UQ#;#R3_`.3*A]3UR2))
M;(T2.TC/MVTC,N>_!*N<],<U'&-MR9<<=0-7MQK@J>G,X5RXFGI8=[#M&SP9
MELZ020:)OU#@)"=PF-ZAT$-5Q_R)6<;WA5WMS*7'7&BV"HD``ZGI,QM.4N-:
M+D^T-VFXO*;IFG@X`!.9'3J1'T<G>"M3Y*\5JSQ.<WZUX]HU:)06996IM89:
M7>QN/6";&*C%BR[5XS(V74;I+*=I.[O3#8=AU;BF?W/$\Q>S1*$O7%3CBP#.
M0+I)/SUE%N9<9T66X,Q@BW"S;FFVDS`F2&D@#28\(][=P7HUGX2,N#;&[6VL
M8_94FL44UKATX<UL=15=?LI-954CEHK$`ZF7;,1<""'9LH(`7;11<A7.BSI6
M?^FA5X+ZWPA72:I_.0G+]T7UW&=FN''`XV2XM-K#`:*T]?I,YD3'4^<8_#^.
M?"\?P?-P/>R=IE\:J1#]HYM*J[%C<U)U]95[8C:BN&+1.-)*L)I5,Y"@A[)D
MT@(<I@$V_K<Y4RE7(8Y+8]--U*TG9V``"2)=9$#QGWG'@H^),99XV/%[A<5;
M$H5]9E/<HE4QU&A/2(%57]OGQQ85F0K%YSGG_($<5N]"G1[B>C8"NT2:?#NK
M:(2KQK56&7GP`1_VKIF3$3F$4Q$0$&;</<[EM?<$7&@M]OIJM'WKV3<7+Q4-
MIE^KQA64/M2Q&AHET%;<:^HIG-$H)DA$_P#T[C^L0Q/$/`[&F&>'EQX75NT6
MYW0KM5,JU.7M<B>'_P":>UEN-F(R=DDEVD8VB324>A,#]L8[8Y0]H@'*<`'2
MOO?*-]ON?4O(M2EO_,TU2RZ$@'9OIW$NH!$YRW#43AO6'BRQ8]QQ4\;4RUFV
M5=-4,J60-VVH:4TI4I]0E6FO:.:#]P_29>'YCX]NSE)4(2[X0AFD2[,D8K8T
MA3['.MYE@FM^51T@E,M%3%]0(L4?GJ9/M'O%-48A768[?S+3_J:RF0?#O_%$
M*?>3;JFFS*ENVU7Y5^F#<Y:3$N_^TPA'<?F/]?Y:E=L1X#7RB&4ATEI%NP;;
M;=!]0^`]-NO\M7@E*`A.B!T'8?`1<22=Q^Z/0@B'IMTV#80W#;KL&WI\="B$
MM%:DH4">B@"/C(]X%+^CT]>LYCKK*?ZHWT'*//:.`S<8DLD2Q,$JR`2*N.D6
MD.G%N)$\V2P"=P^(P&:6,K-E!8R8KF`Q@`.H:X!W`\15DJ<_J:<_\C;3M]=<
MRA"3W$S))$M"!/K#!8Y"RQW%?^!-O'_CZW`L,I^Y2P)`:"9![B<C(3$-=\<?
MABR1R0?066^147.XOP*4&\@PKC@AHV^Y5;"4JJ*;-DY(1U4JJYW#W'BQ2NG*
M?1N4H#[NDKS3[C[38V#C^'J347E"2A3B?[36X2,N@W]QM[C4B'_PG[9;UE+J
M+]G*5TMB*@M+:M''"#,3&OTGH9R^!CLNHM#J&-JE`42AUJ'J=.JL:VB:[7X1
MFBRC(J/:)@DBV;-TB@`;`7N.H81.JH(G.(F$1'Y\UM757&K-=<7'*BN5U<<4
M5K)E*94HE1T\X^D=OH:2U4PH[>TW3T:>C;:0A"?@E(`'X1@.<^/F'N2-/2H&
M;J%#Y%IC:89SZ%>G#OB1Q9E@FY29R`ECW;111=LF[4`H&,)0[Q';?7NLU_O.
M,UO^2L#SE/7R(WMD)4`1(R/43[RC5Y!CF/Y11_XZ_,)>H09[5)F@GX=(V-2Z
ME7J'5X"E5*&9U^JU2&CX"N0C`#`RB8:,;$9L(]J53<Y6[5LB4A=Q$1`.H[ZU
M]755%PJUW"M45UCJBI:CJ2I1FI1/B2=3WC9V^CH[;1MV^WH**-E(2@=`$CH`
M.P$90!2AT`I0#\``/^FL!^K[M8]I))F>L5V#Y!H(!U,6@`=(.T/78-_GL&J2
M'A%02!(=(!*4?4H#MZ;@'31M$I2$HK,CH8-@^0:KVEVBD4[2_P")>OKT#KJL
MSXQ1*0G5(`/E%>T/D']`U20EM_A@(!ZP=H?(/Z!H\XNF8H!"!Z%*'7?H4`ZC
M\?3UU0@%6\_=*4^\O#X1:E*4`A``!ZRTB[8/EHVI!W`#=%8IL&^^P;_/;KHV
MIG.0G%9GIV@[2_XA_0-``'0=Y_/QBTI2>H&D08Y\\%L=\[<-'QY;7AZ[;:\]
M/8,:WYLT3>/:A8A0,V7]QOW)'?P,TV$$7[7O+[A`*<H@HF0=,3C'D2X<:9,F
M_4J2]1J3L=9F0%(/\LNB@9$3F-)'0PL.6.,+9RGBQL%6KT:Q"PMIX`32L3T5
M,&:53,Y2/<=(XU<X>)'G?@^==QKG"-@R;!).3)L;KB-`UTA9%MWF*DZ/%M.R
MQQ1U2EW,DNV_UB.W>;UU]!L4]P7'&1T05558H+C+5#QD!\])_(F/FOF'MUY,
MQBM<:I:%VNHDD[5M)*ICM]H,:+8\"^:\D\28LN*>>U7"YQ(B"N-;$S2,/J`G
M<OFK9JB40^)SE#72UO+O&]&WO_S5"LRZ)5/_`.QCEF.&N3JI:4,V6M23_.@C
M]@B>>"O!)S:RDNS=Y#C*G@2M+*IF<N[O,H3=F*V,!1-]I4ZTJY.9R/=L!7+M
ML7<!#X:5^3^ZC`;'3J1:4KN%>1I($-CKUGM),QK(G0B0AN8A[3>1;ZXC_.)1
M;Z#=]6XCU9::@3.GRZQT1<.?#GQ.XJN8VUR$2YS5E5D!%D+UD1LS<,(5XF`;
M+5*G%*K"PJB>_P!*Z@.G@#U]T!U$W-^><[S5M=*'C165:I^BS-(/66Y1)7*1
MU`(!B9F`^W+C_!`W5+9_/7A(_N/2,CIJ$@!.A&A(/6&UE0*4H$`1[2[=/I#<
M"@!2AL!0#8H!T`-@TDSJLJ\>W[8>Z4[6PV#](T':0';32/3MZ;;CJLXN5]0E
M%`(`?$="B2)#2+4IVC;.8^45`H!\]4F92B[7N=(NT00:((-$$&B"#1!!H@@T
000:((-$$&B"#1!!H@C__V3\_
`
end
</TEXT>
</DOCUMENT>
</SEC-DOCUMENT>
