DERMA SCIENCES, INC.
PLACEMENT AGREEMENT - TAGLICH
<DOCUMENT>
<TYPE>EX-10
<SEQUENCE>6
<FILENAME>ex10-05.htm
<DESCRIPTION>PLACEMENT AGREEMENT - TAGLICH
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<TITLE>Exhibit 10.05, Placement Agreement - Taglich Brothers</TITLE>
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<P ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2><B>EXHIBIT 10.05</B> </FONT></P>

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<P ALIGN=CENTER><FONT FACE="Times New Roman, Times, Serif" SIZE=2><U>PLACEMENT AGREEMENT</U> </FONT></P>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;This
PLACEMENT AGREEMENT (as amended or supplemented from time to time, this
&#147;Agreement&#148;) dated as of the 17<SUP>th</SUP> day of April, 2006, by and between
<B>DERMA SCIENCES, INC.</B>, a Pennsylvania corporation (the &#147;Company&#148;), and
<B>TAGLICH BROTHERS, INC.</B> (the &#147;Placement Agent&#148;). </FONT></P>

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<P ALIGN=CENTER><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<U>W
I T N E S S E T H</U>: </FONT></P>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;WHEREAS,
in reliance upon the representations, warranties, terms and conditions hereinafter set
forth, the Placement Agent will use its best efforts to privately place all or a portion
of a minimum principal amount of $5,400,000 (the &#147;Minimum Amount&#148;) and a maximum
principal amount of $6,600,000 (the &#147;Maximum Amount&#148;) of the Company&#146;s
series H units (the &#147;Units&#148;), with each Unit consisting of four shares (the
&#147;Shares&#148;) of the Company&#146;s common stock, $.01 par value per share (the
&#147;Common Stock&#148;), and one warrant (as amended, or supplemented from time to time,
each, an &#147;Investor Warrant&#148;) with a five (5) year term for the purchase of one
share of Common Stock with an initial exercise price equal to $1.00 per Share, subject to
adjustment as provided in the Investor Warrants; </FONT></P>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;WHEREAS,
the Units will be sold at a purchase price (the &#147;Purchase Price&#148;) equal to $2.40
per Unit, with a minimum purchase of 5,000 Units, subject to the right of the Company to
accept investments of lesser amounts; </FONT></P>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;WHEREAS,
the Units are being issued pursuant to the Company&#146;s Confidential Private Placement
Memorandum and the Exhibits thereto, dated April 5, 2006 (as amended or supplemented from
time to time, collectively, the &#147;Offering Materials&#148;); and </FONT></P>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;WHEREAS,
the Units are being issued to investors referred by the Placement Agent (the &#147;Taglich
Investors&#148;) and other investors (the &#147;Other Investors&#148;; and, together with
the Taglich Investors, the &#147;Investors&#148;) pursuant to an exemption from the
registration requirements of the Securities Act of 1933, as amended (the &#147;1933
Act&#148;). </FONT></P>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;NOW,
THEREFORE, in consideration of the premises and the respective promises hereinafter set
forth, the Company and the Placement Agent hereby agree as follows: </FONT></P>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;1.&nbsp;&nbsp;&nbsp;&nbsp;<U>Sale
and Purchase of Units</U>.</FONT></P>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(a)&nbsp;&nbsp;&nbsp;&nbsp;Subject
to the terms and conditions of this Agreement, the Company shall sell the Units
to the Investors. The Placement Agent is hereby appointed as the exclusive
placement agent of the Company for the purpose of the offering and sale of the
Units to the Taglich Investors.</FONT></P>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(b)&nbsp;&nbsp;&nbsp;&nbsp;The
Initial Closing (as defined below) shall take place at such place as shall be
acceptable to the Company and the Placement Agent on such date or dates as the
Placement Agent shall advise the Company on two (2) business days notice or
such shorter notice as shall be reasonably acceptable to the Company. In no
event shall the Initial Closing </FONT></P>



<P ALIGN=CENTER><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp; </FONT></P>
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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>occur unless the Minimum Amount of Units is
sold and the Company&#146;s acquisition of Western Medical is successfully
completed, as determined by the Placement Agent, in its sole discretion.
Notwithstanding the foregoing, if the Placement Agent raises at least
$2,000,000 from the Taglich Investors and no Closing occurs, the Company shall
pay the Placement Agent a break-up fee equal to $100,000. Subsequent sales and
purchases of the Units, up to the Maximum Amount, shall take place at one or
more Closings held on such dates and in such locations as the Company and the
Placement Agent shall mutually determine. All Closings pursuant to this
Agreement shall occur not later than April 30, 2006, unless such date is
extended for up to thirty (30) days by mutual agreement of the Company and the
Placement Agent. The term &#147;Closing&#148; means the purchase and sale of
the Units as described in Section 1(b) of this Agreement. The initial Closing
hereunder shall be referred to as &#147;Initial Closing&#148;; the final
Closing hereunder shall be referred to as &#147;Final Closing&#148;; and the
date of the Final Closing shall be referred to as the &#147;Final Closing Date&#148;.</FONT></P>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(c)&nbsp;&nbsp;&nbsp;&nbsp;All
capitalized terms used in this Agreement which are not otherwise defined shall
have the meanings ascribed to them in the Offering Materials.</FONT></P>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;2.&nbsp;&nbsp;&nbsp;&nbsp;<U>Payment</U>.
At each Closing, the Company or its agent shall deliver to the Placement Agent
an irrevocable direction letter addressed to the Company&#146;s stock transfer
agent authorizing completion of the Common Stock certificates and the Investor
Warrants representing the Units being purchased by the Taglich Investors at
such Closing, against receipt at such Closing by the Company of payment for
such Units by certified or bank check drawn on a bank located in the United
States or by Federal wire transfer, in the amount of the aggregate purchase
price for such Units (less any fees payable to, and reimbursement of expenses
incurred by, the Placement Agent in accordance with this Agreement). With
respect to each Closing, the Company or its agent shall deliver to the
Placement Agent within 15 days after such Closing, on behalf of the Taglich<B></B>Investors,
the original executed and sealed<B></B>Common Stock certificates and Investor
Warrants representing the Units being purchased by the Taglich Investors in
such Closing. All Units being purchased by the Taglich<B></B>Investors shall be issued in
the respective names of the Taglich<B></B>Investors in accordance with instructions
provided by the Placement Agent.</FONT></P>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;3.&nbsp;&nbsp;&nbsp;&nbsp;<U>Representations
and Warranties of the Company</U>. The Company hereby represents and warrants
to and covenants and agrees with the Placement Agent, as of the date hereof and
as of the date of each Closing, as follows:</FONT></P>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(a)&nbsp;&nbsp;&nbsp;&nbsp;The
Company is a corporation duly organized, validly existing and in good standing
under the laws of the State of Pennsylvania and is qualified and in good
standing as a foreign corporation in each jurisdiction in which the nature of
the business conducted by the Company or the property owned or leased by the
Company requires such qualification. Except as set forth in the Offering
Materials, the Company has no subsidiaries and does not own any equity interest
and has not made any loans, advances or guarantees of indebtedness to any
person, corporation, partnership or other entity. Each of Derma Sciences Canada
Inc. and Sunshine Products, Inc., each a wholly-owned subsidiary of the Company
(collectively, the &#147;Subsidiaries&#148;), is a corporation duly organized,
validly existing and in good standing under the laws of the state of its
incorporation and each Subsidiary is qualified and in good standing as a
foreign corporation in each jurisdiction in which the nature of the business
conducted by such </FONT></P>



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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Subsidiary or the property owned or leased by such Subsidiary
requires such qualification. Except as disclosed in the Offering Materials, no
Subsidiary has any subsidiaries, no Subsidiary owns any equity interest in any
other entity and no Subsidiary has made any loans, advances or guarantees of
indebtedness to any person, corporation, partnership or other entity. The
Company owns all of the issued and outstanding shares of common stock of each
of the Subsidiaries free and clear of any lien, charge, claim, mortgage,
pledge, encumbrance, other security interest, pre-emptive right or contractual
right of first refusal.</FONT></P>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(b)&nbsp;&nbsp;&nbsp;&nbsp;The
capital structure of the Company is as described in the Offering Materials.
Except as set forth in the Offering Materials or pursuant to its stock option
plan in the ordinary course of business, the Company is not a party to any
agreement to issue, nor has it issued, any warrants, options or rights or
preferred stock, notes or other evidence of indebtedness or other securities,
instruments or agreements upon the exercise or conversion of which or pursuant
to the terms of which additional shares of Common Stock may become issuable. No
holder of any of the Company&#146;s securities (including, without limitation,
the Common Stock, the Preferred Stock (as defined below), or any options or
warrants) has preemptive rights or contractual rights of first refusal.</FONT></P>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(c)&nbsp;&nbsp;&nbsp;&nbsp;The
Company has the full right, power and authority to execute, deliver and perform
under this Agreement, the Investor Warrants and the Placement Agent Warrants
(as defined below). This Agreement has been duly executed by the Company and,
at each Closing, the Units and the Placement Agent Warrants being issued will
have been duly executed by the Company, and this Agreement, the Investor
Warrants, the Placement Agent Warrants and the transactions contemplated by
this Agreement have been duly authorized by all necessary corporate action and
each constitute, the legal, valid and binding obligations of the Company,
enforceable in accordance with their respective terms.</FONT></P>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(d)&nbsp;&nbsp;&nbsp;&nbsp;All
of the issued and outstanding shares of Common Stock and preferred stock of the
Company (the &#147;Preferred Stock&#148;) have been duly and validly authorized
and issued, are fully paid and nonassessable (with no personal liability
attaching to the holders thereof or to the Company) and are free from
preemptive rights or rights of first refusal held by any person. All of the
issued and outstanding shares of Common Stock and Preferred Stock have been
issued pursuant to either a current effective registration statement under the
1933 Act or an exemption from the registration requirements thereof, and were
issued in accordance with all applicable Federal and state securities laws. All
of the issued and outstanding shares of common stock of each Subsidiary have
been duly and validly authorized and issued, are fully paid and nonassessable,
with no personal liability attaching to the Company.</FONT></P>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(e)&nbsp;&nbsp;&nbsp;&nbsp;The
Units and the Placement Agent Warrants to be issued at each Closing, the shares
of Common Stock issuable upon the exercise of the Investor Warrants (the &#147;IW
Shares&#148;) and the shares of Common Stock issuable upon the exercise of the
Placement Agent Warrants (the &#147;PAW Shares&#148;), have been duly and
validly authorized for issuance and, when issued pursuant to this Agreement
will be duly and validly authorized and issued, fully paid and nonassessable
and free from all taxes, liens, charges, preemptive rights or rights of first
refusal held by any person. The Company covenants and agrees that it will not
take any action which would result in any adjustment in the number of shares of
Common Stock purchasable </FONT></P>



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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>in connection with the Investor Warrants and/or the
Placement Agent Warrants, regardless of whether the total number of shares of
Common Stock issuable pursuant to the terms of the Investor Warrants and the
Placement Agent Warrants, upon full exercise of such warrants and full exercise
of any or all other options, warrants and other rights to purchase or convert
to shares of Common Stock then outstanding, would exceed the total number of
shares of Common Stock then authorized by the Company&#146;s Articles of
Incorporation, as then amended.</FONT></P>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(f)&nbsp;&nbsp;&nbsp;&nbsp;The
following financial statements of the Company (hereinafter collectively, the
&#147;Financial Statements&#148;) are included in the Offering Materials: (i)
consolidated balance sheets as of December 31, 2005, and consolidated
statements of operations, shareholders&#146; equity and cash flows for the
fiscal year ended December 31, 2005, and the related notes thereto, which have
been audited by J.H. Cohn LLP, independent certified public accountants, and
(ii) consolidated balance sheets as of December 31, 2004, and consolidated
statements of operations, shareholders&#146; equity and cash flows for the
fiscal year ended December 31, 2004, and the related notes thereto, which have
been audited by J.H. Cohn LLP, independent certified public accountants. The
Financial Statements, which are included in the Company&#146;s Form 10KSB
Annual Report for the year ended December 31, 2005 (the &#147;Form 10KSB&#148;),
were prepared in accordance with generally accepted accounting principles
consistently applied and present and reflect fairly the financial position of
the Company at the respective balance sheet dates and the results of its
operations and cash flows for the periods then ended. During the period of J.H.
Cohn LLP&#146;s engagement as the Company&#146;s independent certified public
accountants, there has been no disagreements between the accounting firm and
the Company on any matters of accounting principles or practices, financial
statement disclosure or auditing scope or procedure and no events required to
be reported on a current report on Form 8-K relating to the relationship
between the Company and the accounting firm. The Company has made and kept
books and records and accounts which are in reasonable detail and which fairly
and accurately reflect the activities of the Company, subject only to year-end
adjustments.</FONT></P>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(g)&nbsp;&nbsp;&nbsp;&nbsp;The
Company and each of the Subsidiaries has good and marketable title to all of
its material property and assets and, except as set forth in the Offering
Materials or the Financial Statements, none of such property or assets of the
Company or any of the Subsidiaries are subject to any lien, mortgage, pledge,
encumbrance or other security interest.</FONT></P>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(h)&nbsp;&nbsp;&nbsp;&nbsp;Since
December 31, 2005, there has not been any material adverse change in the
financial condition or in the operations, business or prospects of the Company
from that shown in the Financial Statements or any damage or destruction, not
covered by insurance, which affects the business, property or assets of the
Company.</FONT></P>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(i)&nbsp;&nbsp;&nbsp;&nbsp;Except
as set forth in the Exhibits to the Offering Materials, the Company has not
filed any current reports on Form 8-K or any other reports with the Securities
and Exchange Commission (the &#147;SEC&#148;) subsequent to December 31, 2005.</FONT></P>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(j)&nbsp;&nbsp;&nbsp;&nbsp;Neither
the execution or delivery of this Agreement, the Units or the Placement Agent
Warrants by the Company nor the performance by the Company of the transactions
contemplated by this Agreement, the Investor Warrants or the Placement Agent
Warrants: (i) requires the consent, waiver, approval, license or authorization
of or filing with or </FONT></P>



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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>notice to any person, entity, stock exchange or public
authority (except any filings required by Federal or state securities laws,
which filings have been or will be made by the Company on a timely basis); (ii)
violates or constitutes a default under or breach of any law, rule or
regulation (including, without limitation, rules and regulations promulgated by
any stock exchange on which the Common Stock is currently listed) applicable to
the Company; or (iii) conflicts with or results in a breach or termination of
any provision of, or constitutes a default under, or will result in the
creation of any lien, charge or encumbrance upon any of the property or assets
of the Company with or without the giving of notice, the passage of time or
both, pursuant to (A) the Company&#146;s articles of incorporation (as amended)
or by-laws, (B) any mortgage, deed of trust, indenture, note, loan agreement,
security agreement, contract, lease, license, alliance agreement, joint venture
agreement, or other agreement or instrument, or (C) any order, judgment,
decree, statute, regulation or any other restriction of any kind or character
to which the Company is a party or by which any of the assets of the Company
may be bound.</FONT></P>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(k)&nbsp;&nbsp;&nbsp;&nbsp;Neither
the Company nor any of the Subsidiaries has any indebtedness to any officer,
director, five percent (5%) stockholder or other Affiliate (as defined in the
Rules and Regulations of the SEC under the 1933 Act) of the Company.</FONT></P>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(l)&nbsp;&nbsp;&nbsp;&nbsp;The
Company and each of the Subsidiaries is in compliance with all laws, rules and
regulations of all Federal, state, local and foreign government agencies having
jurisdiction over the Company and each of the Subsidiaries or affecting the
business, assets or properties of the Company or any of the Subsidiaries,
except where the failure to comply has not and will not have a material adverse
effect on the business, financial condition or results of operations of the
Company or its Subsidiaries, taken as a whole (a &#147;Material Adverse
Effect&#148;). The Company and each of the Subsidiaries possesses all licenses,
permits, consents, approvals and agreements (collectively, &#147;Licenses&#148;)
which are required to be issued by any and all applicable Federal, state, local
or foreign authorities necessary for the operation of its business and/or in
connection with its assets or properties, except where the failure to possess
such Licenses has not and will not have a Material Adverse Effect.</FONT></P>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(m)&nbsp;&nbsp;&nbsp;&nbsp;Neither
the Company nor any of the Subsidiaries is in default under any note, loan
agreement, security agreement, mortgage, contract, franchise agreement,
distribution agreement, lease, alliance agreement, joint venture agreement,
other agreement, license, permit, consent, approval or instrument to which it
is a party, and no event has occurred which, with or without the lapse of time
or giving of notice, or both, would constitute such default thereof by the
Company or any of the Subsidiaries or would cause acceleration of any
obligation of the Company or any of the Subsidiaries or would adversely affect
the business, operations, or financial condition of the Company or any of the
Subsidiaries, except where such default or event, whether with or without the
lapse of time or giving of notice, or both, has not and will not have a
Material Adverse Effect. To the best of the knowledge of the Company, no party
to any note, loan agreement, security agreement, mortgage, contract, franchise
agreement, distribution agreement, lease, alliance agreement, joint venture
agreement, other agreement, license, permit, consent, approval or instrument
with or given to the Company or any of the Subsidiaries is in default
thereunder and no event has occurred with respect to such party, which, with or
without the lapse of time or giving of notice, or both, would constitute a
default by such party or would cause acceleration of any obligations of such
party.</FONT></P>



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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(n)&nbsp;&nbsp;&nbsp;&nbsp;To
the best of the Company&#146;s knowledge, except as set forth in the Offering
Materials, no officer, director or five percent (5%) stockholder of the Company
and no Affiliate of any such person either (i) materially participates in any
corporation, partnership, business, trust, sole proprietorship or any other
entity which is engaged in a business similar to that conducted by the Company
or any of the Subsidiaries (other than a passive immaterial interest in a
public company engaged in any such business) or (ii) engages in business with
the Company.</FONT></P>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(o)&nbsp;&nbsp;&nbsp;&nbsp;There
are no material (<U>i.e.</U>, involving an asserted liability in excess of
twenty-five thousand dollars ($25,000)) claims, actions, suits, proceedings,
labor disputes, inquiries or investigations (whether or not purportedly on
behalf of the Company or any of the Subsidiaries), pending or, to the best of
the Company&#146;s knowledge, threatened, against the Company or any of the
Subsidiaries, formal or informal, at law or in equity or by or before any
Federal, state, county, municipal or other governmental department, the SEC,
the National Association of Securities Dealers, Inc. (the &#147;NASD&#148;),
board, bureau, agency or instrumentality, domestic or foreign, whether legal or
administrative or in arbitration or mediation, nor is there any basis for any
such action or proceeding. Neither the Company, any of the Subsidiaries nor any
of their respective assets are subject to, nor is the Company or any of the
Subsidiaries in default with respect to, any order, writ, injunction, judgment
or decree that could adversely affect the financial condition, business, assets
or prospects of the Company or any of the Subsidiaries. Within the past three
(3) years, there has been no correspondence between the Company or any of the
Subsidiaries and any Federal, state, county, municipal or other governmental
department, the SEC, the NASD, board, bureau, agency or instrumentality,
domestic or foreign, other than filings required in the ordinary course of the
Company&#146;s and the Subsidiaries&#146; respective business and receipts
therefor.</FONT></P>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(p)&nbsp;&nbsp;&nbsp;&nbsp;The
accounts receivable of the Company and the Subsidiaries represent receivables
generated from the sale of goods and services in the ordinary course of
business. The Company knows of no material disputes concerning accounts
receivable of the Company and the Subsidiaries not disclosed in the Offering
Materials.</FONT></P>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(q)&nbsp;&nbsp;&nbsp;&nbsp;The
accounts payable of the Company and the Subsidiaries represent bona fide
payables to third parties incurred in the ordinary course of business and
represent bona fide debts for services and/or goods provided to the Company and
the Subsidiaries.</FONT></P>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(r)&nbsp;&nbsp;&nbsp;&nbsp;Except
as set forth in the Offering Materials, neither the Company nor any of the
Subsidiaries has (i) any written employment contracts or oral employment
contracts not terminable at will by the Company or any Subsidiary, as
applicable, with any five percent (5%) shareholder, officer or director of the
Company; (ii) any consulting agreement or other compensation agreement with any
five percent (5%) shareholder, officer or director of the Company of any
Subsidiary, as applicable; or (iii) any agreement or contract with any five
percent (5%) shareholder, officer or director of the Company or any Subsidiary,
as applicable, that will result in the payment by the Company or any
Subsidiary, as applicable, or the creation of any commitment or obligation
(absolute or contingent), of the Company or any Subsidiary, as applicable, to
pay any severance, termination, &#147;golden parachute,&#148; or similar
payment to any present or former personnel of the Company or any Subsidiary, as
applicable, following </FONT></P>



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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>termination of employment. No director, executive officer
or other key employee of the Company or any Subsidiary, as applicable, has
advised the Company that he or she intends to resign as director and/or
executive officer of the Company or any Subsidiary, as applicable, or to
terminate his or her employment with the Company or any Subsidiary, as
applicable.</FONT></P>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(s)&nbsp;&nbsp;&nbsp;&nbsp;Except
as set forth in the Offering Materials, neither the Company nor any of the
Subsidiaries is a party to a labor agreement with respect to any of its
employees with any labor organization, union, group or association and there
are no employee unions (nor any similar labor or employee organizations). There
is no labor strike or labor stoppage or slowdown pending, or, to the knowledge
of the Company, threatened against the Company or any of the Subsidiaries, nor
has the Company or any of the Subsidiaries experienced in the last five (5)
years any work stoppage or other labor difficulty. The Company and the
Subsidiaries are in compliance with all applicable laws, rules and regulations
regarding employment practices, employee documentation, terms or conditions of
employment and wage and hours and neither the Company nor any of the
Subsidiaries is engaged in any unfair labor practices, except where the failure
to comply has not and will not have a Material Adverse Effect. There are no
unfair labor practice charges or complaints against the Company or any of the
Subsidiaries pending before the National Labor Relations Board or any other
governmental agency.</FONT></P>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(t)&nbsp;&nbsp;&nbsp;&nbsp;Except
as disclosed in the Offering Materials, there are no employee pension,
retirement or other benefit plans, maintained, contributed to or required to be
contributed to by the Company or any of the Subsidiaries covering any employee
or former employee of the Company or any of the Subsidiaries. Neither the
Company nor any of the Subsidiaries has any material liability or obligation of
any kind or nature, whether accrued or contingent, matured or unmatured, known
or unknown, under any provision of the Employee Retirement Income Security Act
of 1974, as amended (&#147;ERISA&#148;), or any provision of the Internal
Revenue Code of 1986, as amended, specifically relating to persons subject to
ERISA.</FONT></P>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(u)&nbsp;&nbsp;&nbsp;&nbsp;The
Company and each of the Subsidiaries has timely filed or will timely file with
the appropriate taxing authorities all returns in respect of taxes required to
be filed through the date hereof and has timely paid or will timely pay all
taxes that it is required to pay or has established an adequate reserve
therefore. There are no pending or, to the knowledge of the Company, threatened
audits, investigations or claims for or relating to any liability of the
Company or any of the Subsidiaries in respect of taxes.</FONT></P>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(v)&nbsp;&nbsp;&nbsp;&nbsp;Neither
the Company nor any of the Subsidiaries has any liabilities of any kind or
nature whether accrued or contingent, matured or unmatured, known or unknown,
except as set forth in the Offering Materials and those liabilities incurred by
the Company and each of the Subsidiaries in the ordinary course of business
since December 31, 2005.</FONT></P>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(w)&nbsp;&nbsp;&nbsp;&nbsp;Except
as set forth in the Offering Materials, no customer of the Company or any of
the Subsidiaries during fiscal year 2005, accounted for more than ten percent
(10%) of the revenues of the Company (on a consolidated basis) and to the best
of the Company&#146;s knowledge, no customer, other than the customers
identified in the Offering Materials, will account for more than twenty percent
(20%) of the Company&#146;s revenues (on a consolidated basis) during fiscal
year 2006 or fiscal year 2007.</FONT></P>



<P ALIGN=CENTER><FONT FACE="Times New Roman, Times, Serif" SIZE=2>7 </FONT></P>
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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(x)&nbsp;&nbsp;&nbsp;&nbsp;There
are no finder&#146;s fees or brokerage commissions payable with respect to the
purchase of Units by the Taglich Investors due to the actions of the Company,
except as provided in Section 12 of this Agreement.</FONT></P>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(y)&nbsp;&nbsp;&nbsp;&nbsp;Except
as set forth in the Offering Materials, the Company is not currently and has
not during the past six (6) months been engaged in negotiations with respect
to: (i) any merger or consolidation of the Company where the Company would not
be the surviving entity; or (ii) the sale of the Company, any of the
Subsidiaries or any of their respective assets other than sales in the ordinary
course of business.</FONT></P>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(z)&nbsp;&nbsp;&nbsp;&nbsp;The
Company and each of the Subsidiaries has the right to conduct its business in
the manner in which its business has been heretofore conducted. To the
knowledge of the Company, the conduct of such businesses by the Company and
each of the Subsidiaries does not violate or infringe upon the patent,
copyright, trade secret or other proprietary rights of any third party, and
neither the Company nor any of the Subsidiaries has received any notice of any
claim of any such violation or infringement.</FONT></P>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(aa)&nbsp;&nbsp;&nbsp;&nbsp;The
Company and each of the Subsidiaries is currently in compliance in all respects
with all applicable Environmental Laws (as defined below), including, without
limitation, obtaining and maintaining in effect all permits, licenses, consents
and other authorizations required by applicable Environmental Laws, and the
Company and each of the Subsidiaries is currently in compliance with all such
permits, licenses, consents and other authorizations, except where the failure
to comply does not and will not have a Material Adverse Effect. Neither the
Company nor any of the Subsidiaries has received notice from any property
owner, landlord, tenant or Governmental Authority (as defined below) that
Hazardous Wastes (as defined below) are being improperly used, stored or
disposed of at any property currently or formerly owned or leased by the
Company or any of the Subsidiaries or that any soil or ground water
contamination has emanated from any such property. For purposes hereof, the
term &#147;Environmental Laws&#148; means, collectively, the Comprehensive
Environmental Response, Compensation and Liability Act of 1980, as amended, the
Superfund Amendments and Reauthorization Act of 1986, as amended, the Resource
Conservation and Recovery Act, as amended, the Toxic Substances Act, as
amended, the Clean Air Act, as amended, the Clean Water Act, as amended, any
other &#147;Superfund&#148; or &#147;Superlien&#148; law or any other Federal,
state or local statute, law, ordinance, code, rule, regulation, order or decree
regulating, relating to, or imposing liability or standards of conduct
concerning any hazardous, toxic or dangerous waste, substance, or material, as
now or at any time hereafter in effect. For purposes hereof, the term
&#147;Governmental Authority&#148; shall mean the Federal Government of the
United States of America, any state or any political subdivision of the Federal
Government or any state, including but not limited to courts, departments,
commissions, boards, bureaus, agencies, ministries or other instrumentalities.
For purposes hereof, the term &#147;Hazardous Wastes&#148; shall mean any
regulated quantity of hazardous substances as listed by the Environmental
Protection Agency (the &#147;EPA&#148;) and the list of toxic pollutants
designated by the United States Congress and/or the EPA or defined by any other
Federal, state or local statute, law, ordinance, code, rule, regulation, order,
or decree regulating, relating to or imposing liability for standard of conduct
concerning any hazardous, toxic substance or material.</FONT></P>



<P ALIGN=CENTER><FONT FACE="Times New Roman, Times, Serif" SIZE=2>8 </FONT></P>
<HR SIZE=5 NOSHADE>
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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(bb)&nbsp;&nbsp;&nbsp;&nbsp;The
information contained in the Offering Materials, taken together, describe in
all material respects the business and financial condition of the Company and
the Subsidiaries, and such material, taken together, does not contain any
misstatement of a material fact or omit to state a material fact necessary to
make the information not misleading. The Taglich Investors and the Placement
Agent shall be entitled to rely on such material notwithstanding any
investigation they or any of them may have made.</FONT></P>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(cc)&nbsp;&nbsp;&nbsp;&nbsp;The
Financial Statements included in the Offering Materials present fairly the
financial position of the Company and the Subsidiaries as of the dates
indicated and the results of its operations for the periods specified. The
historical financial information included in the Offering Materials has been
derived from the accounting records of the Company and the Subsidiaries and
presents fairly the information shown thereby. The assumptions underlying pro
forma financial information included in the Offering Materials are reasonable
and are set forth in the Offering Materials.</FONT></P>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(dd)&nbsp;&nbsp;&nbsp;&nbsp;The
Placement Agent Warrants have been authorized for issuance to the Placement
Agent or its designees. The PAW Shares, when issued and delivered against
payment therefor in accordance with the terms thereof, will be duly and validly
issued, fully paid, nonassessable and free of preemptive rights or rights of
first refusal held by any person, and all corporate action required to be taken
for the authorization and issuance of the Placement Agent Warrants and the PAW
Shares has been validly and sufficiently taken. The execution by the Company of
the Placement Agent Warrants has been duly authorized by all required action of
the Company and, when so executed and delivered, will constitute the valid and
binding obligations of the Company, enforceable against the Company in
accordance with their respective terms, subject, as to enforcement, to
bankruptcy, insolvency, reorganization and other laws of general applicability
relating to or affecting creditors&#146; rights and to general equity
principles.</FONT></P>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(ee)&nbsp;&nbsp;&nbsp;&nbsp;For
so long as the Company is subject to the reporting requirements of Section 13
or 15 of the Securities Exchange Act of 1934, as amended (the &#147;Exchange Act&#148;),
the Company covenants that it will file the reports required to be filed by it
under the 1933 Act and Section 13(a) or 15(d) of the Exchange Act and the rules
and regulations adopted by the SEC thereunder. If the Company is not subject to
the reporting requirements of Section 13 or 15 of the Exchange Act, the Company
also covenants that it will provide the information required pursuant to Rule
144A(d)(4) under the Securities Act upon the request of any Registered Holder
(as defined below) which continue to be &#147;restricted securities&#148; within
the meaning of Rule 144(a)(3) under the 1933 Act and it will take such further
action as any holder of such Registrable Securities (as defined below) may
reasonably request, all to the extent required from time to time to enable such
Registered Holder to sell its Registrable Securities without registration under
the 1933 Act within the limitation of the exemptions provided by (a) Rule 144
under the 1933 Act, as such Rule may be amended from time to time, so long as
such provision does not require the public filing of information relating to
the Company which the Company is not otherwise required to file, (b) Rule 144A
under the 1933 Act, as such Rule may be amended from time to time, or (c) any
similar rule or regulation hereafter adopted by the SEC that does not require
the public filing of information relating to the Company. Upon the request of
any Registered Holder, the Company will deliver to such Registered Holder a
written statement as to whether it has complied with such requirements.</FONT></P>



<P ALIGN=CENTER><FONT FACE="Times New Roman, Times, Serif" SIZE=2>9 </FONT></P>
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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;4.&nbsp;&nbsp;&nbsp;&nbsp;<U>Representations, Warranties and Covenants of
the Placement Agent.</U> </FONT></P>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(a)&nbsp;&nbsp;&nbsp;&nbsp;The
Placement Agent hereby represents and warrants that it is duly authorized to
execute this Agreement and perform its duties hereunder, and the execution and
delivery by the Placement Agent of this Agreement and the consummation of the
transactions contemplated by this Agreement have been authorized by all
necessary corporate action and will not result in any violation of, or be in
conflict with, or constitute a default under, the Placement Agent&#146;s
articles of incorporation or by-laws, any agreement or instrument to which the
Placement Agent is a party or by which the Placement Agent&#146;s property is
bound, or any judgment, decree, order or any statute, rule or regulation
applicable to the Placement Agent.</FONT></P>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(b)&nbsp;&nbsp;&nbsp;&nbsp;In
offering the Units for sale, the Placement Agent will not offer the Units for
sale, or solicit any offers to buy any Units, or otherwise negotiate with any
person in respect of the Units, on the basis of any communications or documents
relating to the Units or any investment therein or to the Company or investment
therein, other than the Offering Materials and any other document satisfactory
in form and substance to the Company. The Placement Agent will promptly deliver
a copy of each amendment or supplement to the Offering Materials (i) to all
prospective investors then being or thereafter solicited by the Placement
Agent, and (ii) to each Taglich Investor who has subscribed for Units prior to
the receipt by such person of such amendment or supplement.</FONT></P>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(c)&nbsp;&nbsp;&nbsp;&nbsp;In
offering the Units for sale, the Placement Agent shall conduct such sales in
the manner described in the Offering Materials.</FONT></P>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;5.&nbsp;&nbsp;&nbsp;&nbsp;<U>Survival
of Representations and Warranties and Indemnification</U>. The representations
and warranties of the Company and the Placement Agent set forth in Sections 3
and 4 of this Agreement shall survive the execution and delivery of the Units.
The indemnification obligations of the Company as set forth in the
indemnification rider identified as <U>Exhibit B</U> (as amended or
supplemented from time to time, the &#147;Indemnification Rider&#148;) to that
certain engagement letter between the Company and the Placement Agent, dated
March 21, 2006 (as amended or supplemented from time to time), is hereby
incorporated by reference in its entirety as if more fully set forth herein,
and the provisions of the Indemnification Rider shall apply and be applicable
to, among other things, all representations and warranties of the Company.</FONT></P>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;6.&nbsp;&nbsp;&nbsp;&nbsp;<U>Use
of Proceeds</U>. The net proceeds to the Company from the sale of the Minimum
Amount of the Units and the Maximum Amount of the Units are estimated to be
approximately $4,918,000 and $5,470,000, respectively, after deducting the fees
and expenses associated with the offering of the Units. The net proceeds from
the sale of the Units will be used by the Company as disclosed in the Offering
Materials.</FONT></P>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;7.&nbsp;&nbsp;&nbsp;&nbsp;<U>Unregistered
Securities</U>. None of the Shares, the IW Shares or the PAW Shares have been
registered under the 1933 Act, in reliance upon the applicability of Section
4(2), 4(6) and/or Rule 506 of Regulation D of the 1933 Act to the transactions
contemplated hereby. The certificates representing the Shares, the IW Shares
and the PAW Shares will bear an investment legend stating that they are &#147;restricted
securities&#148; (as defined in Rule 144 under the </FONT></P>



<P ALIGN=CENTER><FONT FACE="Times New Roman, Times, Serif" SIZE=2>10 </FONT></P>
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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>1933 Act) and may only be
publicly offered and sold pursuant to an effective registration statement filed
with the SEC or pursuant to an exemption from the registration requirements.</FONT></P>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;8.&nbsp;&nbsp;&nbsp;&nbsp;<U>Registration
Rights and &#147;Piggy-Back&#148; Registration Rights</U>.</FONT></P>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(a)&nbsp;&nbsp;&nbsp;&nbsp;As
soon as possible after the Final Closing Date, the Company shall , at its sole
cost and expense, use its best efforts to file not later than 60 days after the
date hereof (the &#147;Anticipated Filing Date&#148;), and use its best efforts
to cause to be declared effective not later than 180 days after the date hereof
(the &#147;Anticipated Effective Date&#148;), a registration statement (as
amended or supplemented from time to time, the &#147;Registration Statement&#148;)
on any appropriate form under the 1933 Act covering all of the Shares, the IW
Shares and the PAW Shares (collectively, the &#147;Registrable Securities&#148;)
such as to permit the public resale of the Registrable Securities by all
holders of the Shares, the Investor Warrants and the Placement Agent Warrants
(collectively, the &#147;Registered Holders&#148;), time being of the essence.
In the event the Company fails to either file the Registration Statement by the
Anticipated Filing Date or cause the Registration Statement to be declared
effective by the Anticipated Effective Date or maintain the effectiveness of
the Registration Statement for the entire Effectiveness Period (as defined
below), then (i) the Company shall pay to each Investor, as liquidated damages
and not as a penalty, on the Anticipated Filing Date, Anticipated Effective
Date or the date within the Effectiveness Period that the Registration
Statement ceases to be effective, as applicable, and each monthly anniversary
thereof until the Registration Statement is filed or declared effective, an
amount equal to 2.0% of the aggregate purchase price paid by such Investor for
the Units, such amount to be payable, at the election of the Company, either in
cash or in Common Stock of the Company valued at the average closing bid price
thereof on the OTC Bulletin Board for the ten trading days immediately
preceding the date as to which the subject liquidated damages are calculated
and (ii) the exercise price of the Placement Agent Warrants will be reduced
(and, concomitantly, the aggregate number of PAW Shares issuable upon the
exercise of the Placement Agent Warrants shall increase) by 2.0%; provided,
however, that if as of the Anticipated Effective Date the Registration
Statement has not yet been declared effective, the Anticipated Effective Date
shall be extended for: (1) such periods as the SEC has under consideration
responses of the Company to its comments relative to the Registration
Statement, and (2) such periods, not to exceed 20 days each, following the SEC&#146;s
responses to the filing by the Company of pre-effective amendments to the
Registration Statement; and provided, further, that the maximum liquidated
damages payable by the Company to each Investor, and the maximum reduction in
the exercise price of the Placement Agent Warrants (and, concomitantly, the
maximum increase in the aggregate number of PAW Shares issuable upon the
exercise of the Placement Agent Warrants) pursuant to these provisions is 10.0%
of such Investor&#146;s Purchase Price or the aggregate exercise price of the
Placement Agent Warrants (and, concomitantly, the aggregate number of PAW
Shares), as the case may be.</FONT></P>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(b)&nbsp;&nbsp;&nbsp;&nbsp;The
Company agrees to use its best efforts to keep the Registration Statement
continuously effective and usable for resale of Registrable Securities until
the date which is three (3) years (the &#147;Effectiveness Period&#148;) after
the date upon which the SEC declares the Registration Statement effective or
such shorter period which shall terminate when all the Registrable Securities
covered by such Registration Statement have been sold pursuant to such
Registration Statement or when all Registrable Securities otherwise have been
sold pursuant to </FONT></P>



<P ALIGN=CENTER><FONT FACE="Times New Roman, Times, Serif" SIZE=2>11 </FONT></P>
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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Rule 144 under the 1933 Act or are freely tradeable in
essentially the same manner as contemplated below. The Effectiveness Period
shall be extended, day for day, by the length of any &#147;black out&#148; periods
declared by the Company pursuant to Section 8(c) hereof.</FONT></P>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(c)&nbsp;&nbsp;&nbsp;&nbsp;In
connection with the Company&#146;s obligation to file the Registration
Statement as provided in Section 8(a) hereof, the Company will as expeditiously
as possible:</FONT></P>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(1)&nbsp;&nbsp;&nbsp;&nbsp;before
filing the Registration Statement or the prospectus included in the
Registration Statement (as amended or supplemented from time to time, the
&#147;Prospectus&#148;) or any amendments or supplements thereto, furnish to
the Registered Holders a copy of all such documents proposed to be filed, which
documents will be subject to the review of the Registered Holders, and the
Company will not file the Registration Statement or any amendment thereto or
any Prospectus or any supplement thereto to which the Registered Holders of a
majority of the Registrable Securities covered by the Registration Statement
shall reasonably object (provided that the Company may assume, for the purposes
of the foregoing that any Registered Holder has no objection if the Company has
not received notice from such Registered Holder within five (5) business days
after delivery of such documents to such Registered Holder);</FONT></P>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(2)&nbsp;&nbsp;&nbsp;&nbsp;prepare
and file with the SEC such amendments and post-effective amendments to the
Registration Statement, and such supplements to the Prospectus, as may be
required by the rules, regulations or instructions applicable to the
registration form utilized by the Company or by the 1933 Act or rules and
regulations thereunder or otherwise necessary to keep the Registration
Statement effective for the applicable period and cause the Prospectus as so
supplemented to be filed pursuant to Rule 424 under the 1933 Act, and comply
with the provisions of the 1933 Act with respect to the disposition of all
securities covered by the Registration Statement during the applicable period
in accordance with the intended methods of disposition by the sellers thereof
set forth in the Registration Statement or supplement to the Prospectus;</FONT></P>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(3)&nbsp;&nbsp;&nbsp;&nbsp;notify
each Registered Holder promptly, and confirm such advice in writing:</FONT></P>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(A)&nbsp;&nbsp;&nbsp;&nbsp;when
the Prospectus or any supplement or post-effective amendment thereto has been
filed, and, with respect to the Registration Statement or any post-effective
amendment, when the same has become effective,</FONT></P>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(B)&nbsp;&nbsp;&nbsp;&nbsp;of
the issuance by the SEC of any stop order suspending the effectiveness of the
Registration Statement or the initiation of any proceedings for that purpose,
and</FONT></P>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(C)&nbsp;&nbsp;&nbsp;&nbsp;of
the receipt by the Company of any notification with respect to the suspension
of the qualification of the Registrable Securities for sale in any jurisdiction
or the initiation or threatening of any proceeding for such purpose;</FONT></P>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(4)&nbsp;&nbsp;&nbsp;&nbsp;make
every reasonable effort to obtain the withdrawal of any order suspending the
effectiveness of the Registration Statement at the earliest possible moment;</FONT></P>



<P ALIGN=CENTER><FONT FACE="Times New Roman, Times, Serif" SIZE=2>12 </FONT></P>
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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(5)&nbsp;&nbsp;&nbsp;&nbsp;furnish,
without charge, to each Investor and, upon request, each Registered Holder, at
least one conformed copy of the Registration Statement and any post-effective
amendment thereto, including financial statements and schedules, all documents
incorporated therein by reference and all exhibits (including those
incorporated by reference);</FONT></P>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(6)&nbsp;&nbsp;&nbsp;&nbsp;deliver
to each Investor and each Registered Holder, without charge, as many copies of
the Prospectus (including each preliminary prospectus) and any amendment or
supplement thereto as such Persons may reasonably request, and the Company
consents to the use of the Prospectus or any amendment or supplement thereto by
each Investor and each Registered Holder in connection with the offering and
sale of the Registrable Securities covered by the Prospectus or any amendment
or supplement thereto;</FONT></P>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(7)&nbsp;&nbsp;&nbsp;&nbsp;use
its reasonable efforts to cause the Registrable Securities covered by the
Registration Statement to be registered with or approved by such governmental
agencies or authorities as may be necessary to enable the Registered Holders
thereof to consummate the disposition of such Registrable Securities in such
jurisdictions as the Registered Holders may reasonably specify in response to
inquiries to be made by the Company, provided that the Company will not be
required to qualify generally to do business in any jurisdiction where it is
not then so qualified or to take any action which would subject it to general
service of process in any such jurisdiction where it is not then so subject;</FONT></P>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(8)&nbsp;&nbsp;&nbsp;&nbsp;if
any event shall occur as a result of which it is necessary, in the opinion of
counsel for the Company, to amend or supplement the Prospectus in order to make
the Prospectus not misleading in the light of the circumstances existing at the
time it is delivered by a Registered Holder, prepare a supplement or
post-effective amendment to the Registration Statement or the related
Prospectus or any document incorporated therein by reference or file any other
required document so that, as thereafter delivered to the Registered Holders,
the Prospectus will not contain an untrue statement of a material fact or omit
to state any material fact necessary to make the statements therein not
misleading;</FONT></P>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(9)&nbsp;&nbsp;&nbsp;&nbsp;obtain
a CUSIP number for all Registrable Securities (unless already obtained), not
later than the date that the Registration Statement is declared effective by
the SEC;</FONT></P>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(10)&nbsp;&nbsp;&nbsp;&nbsp;make
available for inspection during normal business hours by a representative of
the Placement Agent and any attorney or accountant retained by the Placement
Agent representative, all financial and other records, pertinent corporate
documents and properties of the Company, and cause the Company&#146;s officers,
directors and employees to supply all information reasonably requested by the
Placement Agent or any such attorney or accountant in connection with the
Registration Statement; provided that all such records, information or
documents shall be kept confidential by such persons unless disclosure of such
records, information or documents is required by court or administrative order
or is generally available to the public other than as a result of disclosure in
violation of this Section 8(c);</FONT></P>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(11)&nbsp;&nbsp;&nbsp;&nbsp;if
at any time an event of the kind described in Section 8(c)(8) hereof shall
occur, notify each Investor and the Registered Holders that the use of the
Prospectus </FONT></P>



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<HR SIZE=5 NOSHADE>
<BR>



<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>must be discontinued, provided that the Company will not declare any
such &#147;black-out&#148; period in excess of twenty (20) business days during
any twelve (12) month period, unless otherwise required;</FONT></P>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(12)&nbsp;&nbsp;&nbsp;&nbsp;on
or prior to the date the Registration Statement is declared effective by the
SEC, cause all of the Shares, the IW Shares and the PAW Shares to be listed for
trading on the exchange(s) on which the Common Stock is listed (or on any other
national securities exchange(s)) and the OTC Bulletin Board; and</FONT></P>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(13)&nbsp;&nbsp;&nbsp;&nbsp;upon
request, deliver promptly to counsel of each Registered Holder participating in
the offering copies of all correspondence between the SEC and the Company, its
counsel or auditors and all memoranda relating to discussions with the SEC or
its staff with respect to the registration statement and permit each such
Registered Holder to do such investigation at such Registered Holder&#146;s
sole cost and expense, upon reasonable advance notice, with respect to
information contained in or omitted from the registration statement as it deems
reasonably necessary. Each Registered Holder agrees that it will use its best
efforts not to interfere unreasonably with the Company&#146;s business when
conducting any such investigation and each Registered Holder shall keep any
such information received pursuant to this Section 8(c)(13) confidential.</FONT></P>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(d)&nbsp;&nbsp;&nbsp;&nbsp;Each
Registered Holder as to which any registration is being effected agrees, as a
condition to the registration obligations with respect to such Registered
Holder provided herein, to furnish to the Company such information regarding
the distribution of such Registrable Securities as the Company may from time to
time reasonably request in writing.</FONT></P>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(e)&nbsp;&nbsp;&nbsp;&nbsp;Each
Registered Holder agrees that, upon receipt of any notice from the Company
described in Section 8(c)(11), such Registered Holder will forthwith
discontinue disposition of Registrable Securities until such Registered Holder&#146;s
receipt of the copies of the supplemented or amended Prospectus contemplated by
Section 8(c)(6) hereof, or until it is advised in writing by the Company (which
notice the Company shall give as promptly as possible), that the use of the
Prospectus may be resumed, and has received copies of any additional or
supplemental filings which are incorporated by reference in the Prospectus,
and, if so directed by the Company, such Registered Holder will deliver to the
Company (at the Company&#146;s expense) all copies, other than permanent file
copies then in such Registered Holder&#146;s possession, of the Prospectus
covering such Registrable Securities current at the time of receipt of such
notice.</FONT></P>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(f)&nbsp;&nbsp;&nbsp;&nbsp;All
of the following expenses (the &#147;Registration Expenses&#148;) incident to
the Company&#146;s performance of or compliance with this Agreement will be
borne by the Company, regardless of whether the Registration Statement becomes
effective:</FONT></P>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(1)&nbsp;&nbsp;&nbsp;&nbsp;all
registration, filing and listing fees;</FONT></P>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(2)&nbsp;&nbsp;&nbsp;&nbsp;fees
and expenses of counsel acceptable to the Placement Agent for compliance with
securities or blue sky laws;</FONT></P>



<P ALIGN=CENTER><FONT FACE="Times New Roman, Times, Serif" SIZE=2>14 </FONT></P>
<HR SIZE=5 NOSHADE>
<BR>




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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(3)&nbsp;&nbsp;&nbsp;&nbsp;the
Company&#146;s printing, messenger, telephone and delivery expenses;</FONT></P>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(4)&nbsp;&nbsp;&nbsp;&nbsp;fees
and disbursements of counsel for the Company;</FONT></P>

<!-- MARKER FORMAT-SHEET="Para Indent" FSL="Default" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(5)&nbsp;&nbsp;&nbsp;&nbsp;fees
and disbursements of all independent certified public accountants of the
Company (including the expenses of any special audit necessary to satisfy the
requirements of the 1933 Act); and</FONT></P>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(6)&nbsp;&nbsp;&nbsp;&nbsp;fees
and expenses associated with any filings required to be made in connection with
the Registration Statement.</FONT></P>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The
Company will, in any event, pay its internal expenses (including, without limitation, all
salaries and expenses of its officers and employees performing legal or accounting
duties), the expense of any annual audit, the fees and expenses incurred in connection
with the listing of the securities to be registered on the exchange(s) on which the
Common stock is listed and the OTC Bulletin Board.</FONT></P>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(g)&nbsp;&nbsp;&nbsp;&nbsp;
Indemnification by the Company. The Company agrees to indemnify and hold harmless each Registered Holder, its officers, directors,
employees and agents and each person who controls such Registered Holder within the meaning of either Section 15 of the 1933 Act
or Section 20 of the Exchange Act (each such person being sometimes hereinafter referred to as an &#147;Indemnified Holder&#148;)
from and against all losses, claims, damages, liabilities and expenses (including reasonable costs of investigation and legal
expenses) arising out of or based upon any untrue statement or alleged untrue statement of a material fact contained in any
Registration Statement or Prospectus or in any amendment or supplement thereto or in any preliminary prospectus, or arising out of
or based upon 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; provided, however, that the Company will not be liable in any such case to the extent that
any such losses, claims, damages, liabilities or expenses arise out of or are based upon any untrue statement or alleged untrue
statement or omission or alleged omission thereof based upon information furnished in writing to the Company by such Registered
Holder or its agent expressly for use therein; provided further, that the Company shall not be liable in any such case to the
extent that any such loss, claim, damage, liability or expense arises out of or is based upon an untrue statement or alleged
untrue statement or omission or alleged omission in the Prospectus, if such untrue statement or alleged untrue statement, omission
or alleged omission was completely corrected in an amendment or supplement to the Prospectus and if, having previously been
furnished by or on behalf of the Company with copies of the Prospectus as so amended or supplemented, such Registered Holder
thereafter fails to deliver such Prospectus as so amended or supplemented, prior to or concurrently with the sale of a Registrable
Security to the person asserting such loss, claim, damage, liability or expense who purchased such Registrable Security which is
the subject thereof from such Registered Holder. This indemnity will be in addition to any liability which the Company may
otherwise have.</FONT></P>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(h)&nbsp;&nbsp;&nbsp;&nbsp;If
any action or proceeding (including any governmental investigation or inquiry)
shall be brought or asserted against any Indemnified Holder in respect of which</FONT></P>



<P ALIGN=CENTER><FONT FACE="Times New Roman, Times, Serif" SIZE=2>15 </FONT></P>
<HR SIZE=5 NOSHADE>
<BR>



<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>
indemnity may be sought from the Company, such Indemnified Holder shall promptly notify the Company in writing (but the omission
to so notify the Company shall not relieve it of any liability that it may have against any Indemnified Holder otherwise than
under this subsection), and the Company shall assume the defense thereof, including the employment of counsel reasonably
satisfactory to such Indemnified Holder and the payment of all expenses. The Placement Agent shall have the right to employ its
own counsel in any such action and to participate in the defense thereof, but the fees and expenses of such counsel shall be the
expense of the Placement Agent unless (a) the Company has agreed to pay such fees and expenses or (b) the Company shall have
failed to assume the defense of such action or proceeding and have failed to employ counsel reasonably satisfactory to the
Placement Agent in any such action or proceeding or (c) the named parties to any such action or proceeding (including any
impleaded parties) include the Placement Agent and the Company, and the Placement Agent shall have been advised by counsel that
there may be one or more legal defenses available to the Placement Agent which are different from or additional to those available
to the Company (in which case, if the Placement Agent notifies the Company in writing that it elects to employ its own counsel at
the expense of the Company, the Company shall not have the right to assume the defense of such action or proceeding on behalf of
the Placement Agent, it being understood, however, that the Company shall not, in connection with any one such action or
proceeding or separate but substantially similar or related actions or proceedings in the same jurisdiction arising out of the
same general allegations or circumstances, be liable for the reasonable fees and expenses of more than one separate firm of
attorneys (together with appropriate local counsel) at any time for the Placement Agent which firm shall be designated in writing
by the Placement Agent). Any such fees and expenses payable by the Company shall be paid to the Placement Agent entitled thereto
as incurred by the Placement Agent. The Company shall not be liable for any settlement of any such action or proceeding effected
without its written consent, but if settled with its written consent, or if there be a final judgment for the plaintiff in any
such action or proceeding, the Company agrees to indemnify and hold harmless the Indemnified Holders from and against any loss or
liability by reason of such settlement or judgment.</FONT></P>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(i)&nbsp;&nbsp;&nbsp;&nbsp;
Indemnification by Registered Holder. Each Registered Holder agrees to indemnify and hold harmless the Company, its respective
directors and officers and each Person, if any, who controls the Company within the meaning of either Section 15 of the 1933 Act
or Section 20 of the Exchange Act to the same extent as the foregoing indemnity from the Company to such Registered Holder, but
only with respect to information relating to such Registered Holder furnished in writing by such Registered Holder expressly for
use in any Registration Statement or Prospectus, or any amendment or supplement thereto, or any preliminary prospectus. In case
any action or proceeding shall be brought against the Company or its respective directors or officers or any such controlling
person, in respect of which indemnity may be sought against a Registered Holder, such Registered Holder shall have the rights and
duties given the Company, and the Company or its respective directors or officers or such controlling person shall have the rights
and duties given to each holder by the preceding paragraph. In no event shall the liability of any Registered Holder hereunder be
greater in amount than the dollar amount of the proceeds received by such Registered Holder upon the sale of the Registrable
Securities giving rise to such indemnification obligation.</FONT></P>



<P ALIGN=CENTER><FONT FACE="Times New Roman, Times, Serif" SIZE=2>16 </FONT></P>
<HR SIZE=5 NOSHADE>
<BR>




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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(j)&nbsp;&nbsp;&nbsp;&nbsp;
Contribution. If the indemnification provided for in this Section 8 is unavailable to an indemnified party under Section 8(h)
or Section 8(i) hereof (other than by reason of exceptions provided in those Sections 8(h) and 8(i) hereof) in respect of any
losses, claims, damages, liabilities or expenses referred to therein, then each applicable indemnifying party, in lieu of
indemnifying such indemnified party, shall contribute to the amount paid or payable by such indemnified party as a result of such
losses, claims, damages, liabilities or expenses, (i) in such proportion as is appropriate to reflect the relative benefits
received by the Company from the sale of the Units to each Investor on the one hand and each Registered Holder from the offering
of the Registrable Securities by such Registered Holder, on the other hand, or (ii) if the allocation provided by clause (i) above
is not permitted by applicable law, in such proportion as is appropriate to reflect not only the relative benefits referred to in
clause (i) above but also the relative fault of the Company on the one hand and each Registered Holder on the other in connection
with the statements or omissions that resulted in such losses, claims, damages, or liabilities, as well as the other relevant
equitable considerations. The relative benefits received by the Company on the one hand and each Registered Holder on the other
shall be deemed to be in the same proportion as the aggregate amount paid by each Investor to the Company for the Registrable
Securities purchased by such Registered Holder that were sold pursuant to the Registration Statement bears to the difference (the
&#147;Difference&#148;) between the amount such Registered Holder paid for the Registrable Securities that were sold pursuant to
the Registration Statement and the amount received by such Registered Holder from such sale. The relative fault shall be
determined by reference to, among other things, whether the untrue or alleged untrue statement of a material fact or the omission
or alleged omission to state a material fact relates to information supplied by the Company or the particular Registered Holder
and the parties&#146; relative intent, knowledge, access to information and opportunity to correct or prevent such untrue
statement or omission. The Company and the Registered Holders agree that it would not be just and equitable if contributions
pursuant to this Section 8(j) were to be determined by pro rata allocation or by any other method of allocation that does not take
account of the equitable consideration referred to in the first sentence of this Section 8(j). The amount paid by an indemnified
party as a result of the losses, claims, damages or liabilities referred to in the first sentence of this Section 8(j) shall be
deemed to include any legal or other expenses reasonably incurred by such indemnified party in connection with investigation or
defending against any action or claim that is the subject of this Section 8(j). Notwithstanding the provisions of this Section
8(j), each Registered Holder shall not be required to contribute any amount in excess of the amount by which the Difference
exceeds the amount of any damages that such Registered Holder has otherwise been required to pay by reason of such untrue or
alleged untrue statement or omission or alleged omission. No person guilty of fraudulent misrepresentation (within the meaning of
Section 11(f) of the 1933 Act), shall be entitled to contribution from any person who was not guilty of such fraudulent
misrepresentation.</FONT></P>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(k)&nbsp;&nbsp;&nbsp;&nbsp;The
provisions of Sections 8(g) through 8(j) of this Agreement shall be in addition
to any other rights to indemnification or contribution which any indemnified
party may have pursuant to law or contract and shall remain operative and in
full force and effect regardless of any investigation made or omitted by or on
behalf of any indemnified party and shall survive the transfer of the
Registrable Securities by any such party.</FONT></P>



<P ALIGN=CENTER><FONT FACE="Times New Roman, Times, Serif" SIZE=2>17 </FONT></P>
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<BR>




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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(l)&nbsp;&nbsp;&nbsp;&nbsp;The
Registered Holders shall have certain &#147;piggy-back&#148; registration
rights with respect to the Registrable Securities as hereinafter provided:</FONT></P>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(1)&nbsp;&nbsp;&nbsp;&nbsp;If,
at any time or from time to time on or after the three-year anniversary of the
Final Closing Date, the Company determines to register Common Stock for its own
account for a public offering or for the account of any of its stockholders to
publicly sell their shares of Common Stock, other than a registration on Form
S-1 or S-8 relating solely to employee stock option or purchase plans, the
Company will promptly notify each Registered Holder of such registration.</FONT></P>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(2)&nbsp;&nbsp;&nbsp;&nbsp;If
within five (5) days after such notice from the Company a Registered Holder
gives notice to the Company of such Registered Holder&#146;s desires to have
such Registered Holder&#146;s Registrable Securities included in a registration
statement, then the Company shall include such Registered Holder&#146;s
Registrable Securities in such registration statement, at the Company&#146;s
sole cost and expense, subject to the remaining terms of this Section 8(l). If
a Registered Holder fails to give such notice within such period, such
Registered Holder shall not have the right to have such Registered Holder&#146;s
Registrable Securities registered pursuant to such registration statement.</FONT></P>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(3)&nbsp;&nbsp;&nbsp;&nbsp;The
Company at its expense will keep such registration effective for a period of
180 days or until all of the selling securities holders named in such
registration statement relating thereto have completed the distribution
described in such registration statement, whichever first occurs, and will
furnish such number of prospectuses and other documents incident thereto as
such selling securities holders from time to time may reasonably request.</FONT></P>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(4)&nbsp;&nbsp;&nbsp;&nbsp;The
Registered Holder shall furnish in writing to the Company such information as
the Company shall reasonably require in connection with any registration
statement.</FONT></P>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(m)&nbsp;&nbsp;&nbsp;&nbsp;The
Company acknowledges that there is no adequate remedy at law for failure by it
to comply with the provisions of this Section 8 and that such failure would not
be adequately compensable in damages, and therefore agrees that its obligations
and agreements contained in this Section 8 may be specifically enforced. In
addition, the Company shall also reimburse the Registered Holders for any and
all reasonable legal fees, expenses and disbursements incurred by them in
enforcing their rights pursuant to this Section 8, regardless of whether any
litigation was commenced; provided, however, that the Company shall not be
liable for the fees and expenses of more than one law firm, which firm shall be
designated by the Placement Agent.</FONT></P>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;9.&nbsp;&nbsp;&nbsp;&nbsp;<U>Conditions</U>.
The following obligations of the Company shall be satisfied or fulfilled on or
prior to the date of each Closing, unless otherwise specified hereinbelow or
agreed to in writing by the Placement Agent:</FONT></P>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(a)&nbsp;&nbsp;&nbsp;&nbsp;The
Company shall have delivered to the Placement Agent, at the Initial Closing,
(i) by-laws of the Company and each Subsidiary certified by the secretary of
the </FONT></P>



<P ALIGN=CENTER><FONT FACE="Times New Roman, Times, Serif" SIZE=2>18 </FONT></P>
<HR SIZE=5 NOSHADE>
<BR>



<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Company and the respective secretaries of each Subsidiary; and (ii)
certified resolutions of the Board of Directors of the Company approving this
Agreement, the sale of the Units and the Placement Agent Warrants, and the
registration of the Registrable Securities. The Company shall deliver to the
Placement Agent, as soon after the Initial Closing as feasible, (i) a
currently-dated good standing certificate or telegram from the Secretary of
State where the Company and each Subsidiary is incorporated and each other
jurisdiction in which the Company and any of the Subsidiaries is qualified to
do business as a foreign corporation and (ii) the articles of incorporation (as
amended) of the Company and each Subsidiary, as currently in effect, certified
by the Secretary of State of the state where the Company and each Subsidiary is
incorporated.</FONT></P>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(b)&nbsp;&nbsp;&nbsp;&nbsp;There
shall have occurred no event which has a Material Adverse Effect on the Company
or the Subsidiaries or any of their respective businesses, assets, prospects or
the Company&#146;s securities since the date of this Agreement.</FONT></P>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(c)&nbsp;&nbsp;&nbsp;&nbsp;No
litigation or administrative proceeding shall have been threatened or commenced
against the Company or any of its Subsidiaries which (i) seeks to enjoin or
otherwise prohibit or restrict the consummation of the transactions
contemplated by this Agreement or (ii) if adversely determined, would have a
Material Adverse Effect on the Company or the Company&#146;s securities.</FONT></P>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(d)&nbsp;&nbsp;&nbsp;&nbsp;The
Company shall have delivered to the Placement Agent a certificate of its
principal executive and financial officers as to the matters set forth in
Sections 9(a), (b) and (c) of this Agreement and to the further effect that (i)
neither the Company nor any Subsidiary is in default, in any respect, under any
note, loan agreement, security agreement, mortgage, deed of trust, indenture,
contract, alliance agreement, lease, license, joint venture agreement, other
agreement or other instrument to which it is a party, except as disclosed in
the Financial Statements or the Memorandum and except where such default has
not and will not have a Material Adverse Effect; (ii) the Company&#146;s
representations and warranties contained in this Agreement are true and correct
in all respects on such date with the same force and effect as if made on such
date, (iii) there has been no amendment or changes to the Company&#146;s or the
Subsidiaries&#146;articles of incorporation or by-laws or authorizing
resolutions from those to be delivered pursuant to Section 9(a) of this
Agreement; and (iv) no event has occurred which, with or without the lapse of
time or giving of notice, or both, would constitute a breach of default thereof
by the Company or any Subsidiary, or would cause acceleration of any obligation
of the Company or any Subsidiary, or could adversely affect the business,
operations, financial condition or prospects of the Company or any Subsidiary.</FONT></P>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(e)&nbsp;&nbsp;&nbsp;&nbsp;The
Placement Agent shall have received the opinion of Hedger &amp; Hedger, counsel
for the Company, dated as of the Closing Date in form and substance reasonably
satisfactory to the Placement Agent and its counsel.</FONT></P>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(f)&nbsp;&nbsp;&nbsp;&nbsp;The
Company shall timely prepare and file or deliver to counsel for filing with the
SEC and any states in which such filing is required, a Form D relating to the
sale of the Units and such other documents and certificates as are required.</FONT></P>



<P ALIGN=CENTER><FONT FACE="Times New Roman, Times, Serif" SIZE=2>19 </FONT></P>
<HR SIZE=5 NOSHADE>
<BR>




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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(g)&nbsp;&nbsp;&nbsp;&nbsp;Subscriptions
for at least the Minimum Amount of Units shall have been accepted by the
Company.</FONT></P>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(h)&nbsp;&nbsp;&nbsp;&nbsp;In
addition to the right of the Placement Agent to terminate this Agreement and
not consummate the transactions contemplated by this Agreement as a result of
the failure of the Company to comply with any of its obligations set forth in
this Agreement, this Agreement may be terminated by the Placement Agent by
written notice to the Company at any time prior to the Initial Closing if, in
the Placement Agent&#146;s sole judgment, (i) the Company and/or any of the
Subsidiaries shall have sustained a loss that is material to the Company or the
Subsidiaries, taken as a whole, whether or not insured, by reason of fire,
earthquake, flood, accident or other calamity, or from any labor dispute or
court or government action, order or decree; (ii) trading in securities on any
exchange or system shall have been suspended or limited either generally or
specifically with respect to the Common Stock; (iii) material governmental
restrictions have been imposed on trading in securities generally or
specifically with respect to the Common Stock (not in force and effect on the
date of this Agreement); (iv) a banking moratorium shall have been declared by
Federal or New York State authorities; (v) an outbreak of major international
hostilities or other national or international calamity shall have occurred;
(vi) the Congress of the United States or any state legislative body shall have
passed or taken any action or measure, or such bodies or any governmental body
or any authoritative accounting institute, or board, or any governmental
executive shall have adopted any orders, rules or regulations, which the
Placement Agent reasonably believes is likely to have a Material Adverse Effect
on the business, financial condition or financial statements of the Company or
the market for the Common Stock; (vii) the Common Stock shall have been
delisted from the exchange(s) on which it currently listed, or the Company
shall have received notice from such exchange(s) advising the Company of its
intention to have the Common Stock delisted from such exchange(s), whether
conditional or otherwise, or the Company shall fail to meet the requirements
for continued listing on such exchange(s); or (viii) there shall have been, in
the Placement Agent&#146;s judgment, a material decline in the Dow Jones
Industrial Index or the market price of the Common Stock at any time subsequent
to the date of this Agreement.</FONT></P>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;10.&nbsp;&nbsp;&nbsp;&nbsp;<U>Covenants
of the Company</U>. The Company agrees at all times as long as the Investor
Warrants or the Placement Agent Warrants may be exercised, to keep reserved
from the authorized and unissued Common Stock, such number of shares of Common
Stock as may be, from time to time, issuable upon exercise of the Investor
Warrants and the Placement Agent Warrants.</FONT></P>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;11.&nbsp;&nbsp;&nbsp;&nbsp;<U>Indemnification</U>.</FONT></P>

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 <P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(a)&nbsp;&nbsp;&nbsp;
<U>Indemnification by Company</U>. The Company agrees to indemnify and hold
harmless the Placement Agent, its officers, directors and agents from and
against any and all loss, liability, claim, damage and expense whatsoever
arising out of (1) a breach or alleged breach by the Company of any warranty set
forth in Section 3 of this Agreement, (2) failure or alleged failure by the
Company to comply with the provisions of Section 3 of this Agreement, (3) claims
for finder&#146;s fees or brokerage commissions payable with respect to the
Taglich Investors, except as provided in Section 12 of this Agreement, or (4)
any untrue statement or alleged untrue statement of a material fact contained in
the Offering Materials or the omission or alleged </FONT></P>



<P ALIGN=CENTER><FONT FACE="Times New Roman, Times, Serif" SIZE=2>20 </FONT></P>
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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>omission therefrom of a
material fact necessary in order to make the statements therein, in the light of
the circumstances under which they were made, not misleading; <U>provided</U>,
<U>however</U>, that the Company will not be liable in any such case to the
extent that any such loss, claim, damage, liability or expense arises out of or
is based upon any such untrue statement or alleged untrue statement or omission
or alleged omission contained in the material furnished to the Company by the
Placement Agent on the Placement Agent&#146;s behalf, specifically for inclusion
therein, which relates to the Placement Agent&#146;s activities pursuant to this
Agreement. </FONT></P>

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 <P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(b)&nbsp;&nbsp;&nbsp;
<U>Indemnification by Placement Agent</U>. The Placement Agent agrees to
indemnify and hold harmless the Company (its officers, directors and agents) and
each person, if any, who controls any of the foregoing within the meaning of the
1933 Act to the same extent as the indemnity from the Company described above
against any and all loss, liability, claim, damage and expense whatsoever (or
actions in respect thereto) arising out of or based upon any misrepresentation
or alleged misrepresentation, failure or alleged failure by the Placement Agent
to comply with the covenants and agreements set forth in Section 4 of this
Agreement. </FONT></P>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;12.&nbsp;&nbsp;&nbsp;&nbsp;<U>Fees</U>.</FONT></P>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(a)&nbsp;&nbsp;&nbsp;&nbsp;As
disclosed in the Offering Materials, a fee (the &#147;Success Fee&#148;) equal
to eight percent (8%) of the gross proceeds through the sale of the Units shall
be payable to the Placement Agent.</FONT></P>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(b)&nbsp;&nbsp;&nbsp;&nbsp;In
addition to the sums payable to the Placement Agent as provided elsewhere
herein, the Placement Agent shall be entitled to receive at the Closing, as
additional compensation for its services, warrants (as amended, or supplemented
from time to time, the &#147;Placement Agent Warrants&#148;) with a five (5)
year term for the purchase of an amount of Common Stock equal to ten percent
(10%) of the Shares sold to Taglich Investors in this offering. The initial
exercise price of the Placement Agent Warrants shall be equal to $.72 per share
of Common Stock, subject to adjustment as provided in the Placement Agent
Warrants.</FONT></P>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(c)&nbsp;&nbsp;&nbsp;&nbsp;Upon
closing, the Company will reimburse the Placement Agent for up to $35,000 of
its actual and reasonable out-of-pocket expenses incurred in connection with
the offering of the Units, including fees and expenses of its counsel.</FONT></P>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(d)&nbsp;&nbsp;&nbsp;&nbsp;The
Company shall pay any fees required in connection with the qualification of the
sale of the Units under the state securities or blue sky laws of any state
which the Placement Agent reasonably deems necessary.</FONT></P>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(e)&nbsp;&nbsp;&nbsp;&nbsp;All
payments in connection with the sale of the Units shall be made pursuant to the
terms and conditions of the escrow agreement among the Company, the Placement
Agent and CSC Trust Company of Delaware.</FONT></P>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;13.&nbsp;&nbsp;&nbsp;&nbsp;<U>Notices</U>.
All notices provided for in this Agreement shall be in writing signed by the
party giving such notice, and delivered personally or sent by overnight courier
or messenger against receipt thereof or sent by registered or certified mail,
return receipt requested, or by facsimile transmission, if confirmed by mail as
provided in this Section 13. Notices shall be deemed to have been received on
the date of personal delivery or facsimile or, if sent by certified or
registered mail, return receipt requested, shall </FONT></P>



<P ALIGN=CENTER><FONT FACE="Times New Roman, Times, Serif" SIZE=2>21 </FONT></P>
<HR SIZE=5 NOSHADE>
<BR>



<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>be deemed to be delivered on
the third business day after the date of mailing. Notices shall be sent to the
following addresses:</FONT></P>


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 <TD WIDTH=10%></TD>
 <TD WIDTH=90%></TD>
</TR>
<TR VALIGN=TOP>
 <TD>&nbsp;</TD>
 <TD><FONT FACE="Times New Roman, Times, Serif" SIZE=2>To the Company: <BR>&nbsp; </FONT></TD>
</TR>
<TR VALIGN=TOP>
 <TD>&nbsp;</TD>
 <TD><FONT FACE="Times New Roman, Times, Serif" SIZE=2>DERMA SCIENCES, INC. <BR>214 Carnegie Center, Suite 100 <BR> Princeton,
 NJ 08540 <BR>Facsimile: (609) 514-8554 <BR>Attention: Edward J. Quilty, President and CEO <BR>&nbsp;</FONT></TD>
</TR>
<TR VALIGN=TOP>
 <TD>&nbsp;</TD>
 <TD><FONT FACE="Times New Roman, Times, Serif" SIZE=2>With a copy to: <BR>&nbsp; </FONT></TD>
</TR>
<TR VALIGN=TOP>
 <TD>&nbsp;</TD>
 <TD><FONT FACE="Times New Roman, Times, Serif" SIZE=2>HEDGER &amp; HEDGER <BR>2 Fox Chase Drive <BR>P.O. Box 915 <BR>
 Hershey, PA 17033 <BR>Facsimile: (717) 534-9813 <BR>Attention: Ray Hedger, Esq. <BR>&nbsp; </FONT></TD>
</TR>
<TR VALIGN=TOP>
 <TD>&nbsp;</TD>
 <TD><FONT FACE="Times New Roman, Times, Serif" SIZE=2>To Placement Agent: <BR>&nbsp; </FONT></TD>
</TR>
<TR VALIGN=TOP>
 <TD>&nbsp;</TD>
 <TD><FONT FACE="Times New Roman, Times, Serif" SIZE=2>TAGLICH BROTHERS, INC. <BR>405 Lexington Avenue, 51st Floor <BR>New
 York, NY 10174 <BR>Facsimile: (212) 661-6824 <BR>Attention: Richard Oh <BR>&nbsp; </FONT></TD>
</TR>
<TR VALIGN=TOP>
 <TD>&nbsp;</TD>
 <TD><FONT FACE="Times New Roman, Times, Serif" SIZE=2>With a copy to: <BR>&nbsp; </FONT></TD>
</TR>
<TR VALIGN=TOP>
 <TD>&nbsp;</TD>
 <TD><FONT FACE="Times New Roman, Times, Serif" SIZE=2>BINGHAM MCCUTCHEN LLP <BR>399 Park Avenue <BR>New York, NY 10022
 <BR>Facsimile: (212) 702-3629 <BR>Attention: Robert G. Leonard, Esq. </FONT></TD>
</TR>
</TABLE>


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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>or to such other address as any party
shall designate in the manner provided in this Section 13. </FONT></P>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;14.&nbsp;&nbsp;&nbsp;&nbsp;<U>Miscellaneous</U>.</FONT></P>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(a)&nbsp;&nbsp;&nbsp;&nbsp;This
Agreement constitutes the entire agreement between the parties relating to the
subject matter hereof and supercedes any and all prior or contemporaneous oral
and prior written agreements and understandings. This Agreement may not be
modified or amended nor may any right be waived except by a writing which
expressly refers to this Agreement, states that it is a modification, amendment
or waiver and is signed by all parties with respect to a modification or
amendment or the party granting the waiver with respect to a waiver. </FONT></P>



<P ALIGN=CENTER><FONT FACE="Times New Roman, Times, Serif" SIZE=2>22 </FONT></P>
<HR SIZE=5 NOSHADE>
<BR>



<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>No course
of conduct or dealing and no trade custom or usage shall modify any provisions
of this Agreement.</FONT></P>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(b)&nbsp;&nbsp;&nbsp;&nbsp;This
Agreement shall be governed by and construed in accordance with the laws of the
State of New York applicable to contracts made and to be performed entirely
within such state. Each party hereby consents to the exclusive jurisdiction of
the Federal and state courts situated in New York County, New York in
connection with any action arising out of or based upon this Agreement and the
transactions contemplated by this Agreement.</FONT></P>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(c)&nbsp;&nbsp;&nbsp;&nbsp;This
Agreement shall be binding upon and inure to the benefit of the parties hereto,
and their respective personal representatives, successors and permitted
assigns.</FONT></P>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(d)&nbsp;&nbsp;&nbsp;&nbsp;In
the event that any provision of this Agreement becomes or is declared by a
court of competent jurisdiction to be illegal, unenforceable or void, this
Agreement shall continue in full force and effect without said provision.</FONT></P>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(e)&nbsp;&nbsp;&nbsp;&nbsp;Each
party shall, without payment of any additional consideration by any other
party, at any time on or after the date of any Closings take such further
action and execute such other and further documents and instruments as the
other party may request in order to provide the other party with the benefits
of this Agreement.</FONT></P>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(f)&nbsp;&nbsp;&nbsp;&nbsp;The
captions and headings contained herein are solely for convenience and reference
and do not constitute a part of this Agreement.</FONT></P>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(g)&nbsp;&nbsp;&nbsp;&nbsp;All
references to any gender shall be deemed to include the masculine, feminine or
neuter gender, the singular shall include the plural and the plural shall
include the singular.</FONT></P>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(h)&nbsp;&nbsp;&nbsp;&nbsp;This
Agreement may be executed in any number of counterparts, each of which shall be
deemed an original but all of which together shall constitute one and the same
document.</FONT></P>



<P ALIGN=CENTER><FONT FACE="Times New Roman, Times, Serif" SIZE=2>23 </FONT></P>
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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B>IN
WITNESS WHEREOF,</B> the parties have executed this Agreement as of the date first set
forth above. </FONT></P>


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 <TD WIDTH=3%></TD>
 <TD WIDTH=37%></TD>
 <TD WIDTH=10%></TD>
</TR>
<TR VALIGN=TOP>
 <TD COLSPAN=2><FONT FACE="Times New Roman, Times, Serif" SIZE=2>DERMA SCIENCES, INC.<BR>&nbsp;<BR>&nbsp; </FONT></TD>
 <TD>&nbsp;</TD>
 <TD COLSPAN=2><FONT FACE="Times New Roman, Times, Serif" SIZE=2>TAGLICH BROTHERS, INC.<BR>&nbsp;<BR>&nbsp; </FONT></TD>
 <TD>&nbsp;</TD>
</TR>
<TR VALIGN=TOP>
 <TD><FONT FACE="Times New Roman, Times, Serif" SIZE=2>By: </FONT></TD>
 <TD style="border-bottom: 1pt solid #000000;"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp; </FONT></TD>
 <TD>&nbsp;</TD>
 <TD><FONT FACE="Times New Roman, Times, Serif" SIZE=2>By: </FONT></TD>
 <TD style="border-bottom: 1pt solid #000000;"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp; </FONT></TD>
 <TD>&nbsp;</TD>
</TR>
<TR VALIGN=TOP>
 <TD>&nbsp;</TD>
 <TD><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Name: Edward J. Quilty <BR>Title: President and Chief Executive Officer </FONT></TD>
 <TD>&nbsp;</TD>
 <TD>&nbsp;</TD>
 <TD><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Name:<BR>Title: </FONT></TD>
 <TD>&nbsp;</TD>
</TR>
</TABLE>
<BR>



<P ALIGN=CENTER><FONT FACE="Times New Roman, Times, Serif" SIZE=2>24 </FONT></P>
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<A NAME=A003></A>
<P ALIGN=CENTER><FONT FACE="Times New Roman, Times, Serif" SIZE=2><B><U>EXHIBIT A</U></B> </FONT></P>


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 <TD WIDTH=5%></TD>
 <TD WIDTH=50%></TD>
</TR>
<TR VALIGN=TOP>
 <TD style="border-bottom: 1pt solid #000000;"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Names, Addresses and Social
 Security <BR> or Employer Identification Number <BR>of Investors </FONT></TD>
 <TD>&nbsp;</TD>
 <TD><FONT FACE="Times New Roman, Times, Serif" SIZE=2><U>Number of Units</U> </FONT></TD>
</TR>
</TABLE>
<BR>

<P ALIGN=CENTER><FONT FACE="Times New Roman, Times, Serif" SIZE=2>25 </FONT></P>

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