UNDERWRITING AGREEMENT

VeriChip Corporation, a Delaware corporation (the “Company”), proposes to issue and sell to the several underwriters named in Schedule A hereto (the “Underwriters”), pursuant to this underwriting agreement (the “Agreement”), an aggregate of Three Million One Hundred Thousand (3,100,000) shares of common stock of the Company, par value $0.01 per share (the “Common Stock”). In addition, the stockholder of the Company named in Schedule B hereto (the “Selling Stockholder”) has granted to the Underwriters the option referred to in Section 3(d) hereof to purchase an aggregate of not more than an additional Four Hundred Sixty Five Thousand (465,000) shares of Common Stock, if requested by the Underwriters in accordance with Section 3(d) hereof. It is understood that the Underwriters propose to offer the “Shares” (as hereinafter defined) to be purchased hereunder to the public upon the terms and conditions set forth in the “Registration Statement” (as defined below) after the “Effective Date” (as defined below) of the Registration Statement. As used in this Agreement, (a) the term “Firm Shares” shall mean the Firm Shares, to be issued and sold to the Underwriters at the “First Closing Date” (as defined in Section 3(b) below); (b) the term “Option Shares” shall mean any of the additional up to Four Hundred Sixty Five Thousand (465,000) shares of Common Stock purchased pursuant to the option referred to in Section 3(d) hereof; and (c) the term “Shares” shall mean the Firm Shares and the Option Shares collectively.

As the representative of the Underwriters, Merriman Curhan Ford & Co. has informed the Company and the Selling Stockholder that Merriman Curhan Ford & Co. is authorized to enter into this Agreement on behalf of the several Underwriters, and that the several Underwriters are willing, on the basis of the representations, warranties and agreements of the Company and the Selling Stockholder herein contained, and upon the terms but subject to the conditions herein set forth, acting severally and not jointly, to purchase the number of Firm Shares set forth opposite their respective names in Schedule A hereto, plus their pro rata portion of the Option Shares if Merriman Curhan Ford & Co. elects to exercise the over-allotment option in whole or in part for the account of the several Underwriters.

As the representative of the Underwriters, Merriman Curhan Ford & Co. has also informed the Company and the Selling Stockholder that (i) the Underwriters have or will orally provide the pricing information set forth in Schedule 1(b)(i) to prospective purchasers prior to confirming sales of the Shares, and (ii) each Underwriter has represented and agreed that, without the prior written consent of the Company and Merriman Curhan Ford & Co., it has not made and will not make any offer relating to the Shares that would constitute a free writing prospectus, and any such free writing prospectus, the use of which has been consented to by the Company and Merriman Curhan Ford & Co., is listed in Schedule 1(b) hereto.

The Company and the Selling Stockholder hereby confirm their respective agreements with respect to the purchase of the Shares by the Underwriters as follows:

1.       Representations and Warranties of the Company . The Company hereby represents and warrants to, and agrees with, the Underwriters that, as of the Effective Date, the First Closing Date and each Option Closing Date (as defined below):

(a)      A registration statement on Form S-1 (File No. 333-130754) relating to the offering of the Shares has been prepared by the Company in conformity with the requirements of the Securities Act of 1933, as amended (the “Act”), and the rules and regulations of the United States Securities and Exchange Commission (the “Commission”) promulgated pursuant to the Act (the “Rules and Regulations”), and said registration statement has been filed with the Commission under the Act. Amendments to said registration statement have been similarly prepared and filed with the Commission covering the registration of the Shares under the Act including the related preliminary prospectus or preliminary prospectuses (each being hereinafter referred to as a “Preliminary Prospectus” as further defined below), each of which has been furnished to the Underwriters. Each Preliminary Prospectus was endorsed with the legend required by Item 501(b) of Regulation S-K. As used in this Agreement and unless the context indicates otherwise, the term “Registration Statement” refers to and means said registration statement, all exhibits, financial statements and schedules included therein and the Prospectus included therein, as finally amended and revised on or prior to the Effective Date (as defined below) and, in the event of any post-effective amendment thereto or if any Rule 462(b) Registration Statement becomes effective prior to the Closing Date (as hereinafter defined), shall also mean such registration statement as so amended or such Rule 462(b) Registration Statement, as the case may be, and shall also include any Rule 430A Information (as defined below) to be included in the Prospectus included therein at the Effective Date, as provided by Rule 430A. The term “Effective Date” shall mean each date and time that the Registration Statement, any post-effective amendment or amendments thereto and any Rule 462(b) Registration Statement became or becomes effective. The term “Preliminary Prospectus” refers to and means a preliminary prospectus filed with the Commission and included in said Registration Statement before the Effective Date and any preliminary prospectus included in the Registration Statement at the Effective Date that omits Rule 430A Information; the term “Pricing Prospectus” shall mean the Preliminary Prospectus included in the Registration Statement immediately prior to the Applicable Time; the term “Applicable Time” shall mean 9:15 New York time on the date of this Agreement; the term “Issuer Free Writing Prospectus” shall mean any “issuer free writing prospectus” as defined in Rule 433 under the Act; the term “Rule 430A Information” shall mean information with respect to the Shares and the offering thereof permitted to be omitted from the Registration Statement when it becomes effective pursuant to Rule 430A; and, the term “Prospectus” refers to and means the prospectus relating to the Shares that is first filed pursuant to Rule 424(b) or, if no filing pursuant to Rule 424(b) is required, shall mean the form of final prospectus relating to the Shares included in the Registration Statement at the Effective Date. If the Registration Statement is amended or such Prospectus is supplemented after the Effective Date and prior to the Option Closing Date, then the terms “Registration Statement” and “Prospectus” shall include such documents as so amended or supplemented. Each Preliminary Prospectus and the Prospectus delivered to the Underwriters for use in connection with the offer and sale of the Shares was identical to the electronic version filed with the Commission via EDGAR, except to the extent permitted by Regulation S-T.

(b)      (i) The Pricing Prospectus as supplemented by any Issuer Free Writing Prospectus, other documents and pricing information listed in Schedule 1(b)(i) hereto, taken together (collectively, the “Pricing Disclosure Package”) as of the Applicable Time did not include any untrue statement of a material fact or omit to state any material fact necessary in order to make the statements therein, in light of the circumstances under which they were made, not misleading, (ii) each Issuer Free Writing Prospectus listed in Schedule 1(b)(i) hereto does not conflict with the information contained in the Registration Statement, the Pricing Prospectus or the Prospectus, and each such Issuer Free Writing Prospectus, as supplemented by and taken together with the Pricing Disclosure Package as of the Applicable Time, did not include any untrue statement of a material fact or omit to state any material fact necessary in order to make the statements therein, in light of the circumstances under which they were made, not misleading; provided, however, that the foregoing representations and warranties shall not apply to statements or omissions made in the Pricing Prospectus or in an Issuer Free Writing Prospectus in reliance upon and conformity with written information furnished to the Company through Merriman Curhan Ford & Co. by or on behalf of any Underwriter expressly for inclusion therein. Each of the Registration Statement, any Rule 462(b) Registration Statement and any post-effective amendment to the Registration Statement or the Rule 462(b) Registration Statement, as the case may be, at the time it became effective and at all subsequent times, complied and will comply in all material respects with the Act and the applicable Rules and Regulations and did not and will not contain any untrue statement of a material fact or omit to state a material fact required to be stated therein or necessary to make the statements therein not misleading. Each Preliminary Prospectus, as of its date, and the Prospectus, as amended or supplemented, as of its date and at all subsequent times through the First Closing Date and the Option Closing Date, did not and will not contain any untrue statement of a material fact or omit to state a material fact necessary in order to make the statements therein, in the light of the circumstances under which they were made, not misleading. The representations and warranties set forth in the two immediately preceding paragraphs do not apply to statements in or omissions from the Registration Statement, any Rule 462(b) Registration Statement, or any post-effective amendment to the Registration Statement or the Rule 462(b) Registration Statement, as the case may be, or the Prospectus, or any amendments or supplements thereto, made in reliance upon and in conformity with information furnished to the Company in writing through Merriman Curhan Ford & Co. by or on behalf of any of the Underwriters expressly for inclusion therein.

(c)      Neither the Commission nor any state regulatory authority has issued an order preventing or suspending the use of any Preliminary Prospectus nor has the Commission or any such authority instituted or, to the Knowledge of the Company (as defined below), threatened to institute any proceedings with respect to such an order. When representations or warranties in this Agreement are qualified to the “Knowledge of the Company,” they are given by the Company to the extent of and qualified in all respects by the facts actually known to any of the executive officers or directors of the Company, with an obligation of reasonable inquiry on the part of such executive officers and directors, prior to the date such representations or warranties are made.

(d)      The Company has delivered to the Underwriters one complete conformed copy of the Registration Statement and of each consent and certificate of experts filed as a part thereof, and conformed copies of the Registration Statement (without exhibits) and Preliminary Prospectus, any Issuer Free Writing Prospectus and the Prospectus, as amended or supplemented, in such quantities and at such places as the Underwriters have reasonably requested.

(e)      The Company has not distributed and will not distribute, prior to the later of the Option Closing Date and the completion of the Underwriters’ distribution of the Shares, any offering material in connection with the offering and sale of the Shares other than a Preliminary Prospectus, the Prospectus, the Registration Statement or, following receipt of written consent of Merriman Curhan Ford & Co., which shall not be unreasonably withheld or delayed, any Issuer Free Writing Prospectus.

(f)       This Agreement has been duly authorized, executed and delivered by, and assuming due authorization, execution and delivery by the other parties hereto, is a valid and binding agreement of, the Company, enforceable against the Company in accordance with its terms, except as rights to indemnification and contribution hereunder may be limited by applicable law and except as the enforcement hereof may be limited by bankruptcy, insolvency, reorganization, moratorium or other similar laws relating to or affecting the rights and remedies of creditors or by general equitable principles.

(g)      The Company has been duly incorporated and is now, and at the First Closing Date (as defined below) and each Option Closing Date (as defined below) will be, validly existing as a corporation and in good standing under the laws of the State of Delaware, and has the corporate power and authority (i) to own or lease, as the case may be, its properties, whether tangible or intangible, and conduct its business as presently conducted and as described in the Pricing Prospectus (the “Business”) and (ii) to execute, deliver and perform this Agreement and consummate the transactions contemplated hereby and thereby. The Company has no subsidiaries other than those subsidiaries set forth on Exhibit 21.1 of the Registration Statement (each, a “Subsidiary” and collectively, the “Subsidiaries”). Each of the Subsidiaries has been duly incorporated and is now, and at the Closing Dates (as defined below) will be, validly existing as a corporation in good standing under the laws of its respective jurisdiction as set forth on such Exhibit. Each of the Subsidiaries has the corporate power and authority to own or lease, as the case may be, its properties, whether tangible or intangible, and to conduct its business as presently conducted and described in the Pricing Prospectus. Each of the Company and its Subsidiaries is duly qualified as a foreign corporation to transact business and is in good standing in each jurisdiction in which the nature of the business transacted by it or the character or location of its properties, in each case taken as a whole, makes such qualification necessary, except where the failure to so qualify or be in good standing would not reasonably be expected to have a material adverse effect upon the condition (financial or otherwise), results of operations, income, shareholders’ equity, net worth, business, assets, or properties of the Company and the Subsidiaries, taken as a whole (a “Material Adverse Effect”). The Company owns, directly or indirectly, all of the issued and outstanding shares of capital stock or other equity and ownership and/or voting interests of each of the Subsidiaries, free and clear of any security interests, liens, encumbrances, claims and charges other than as disclosed in the Registration Statement and the Pricing Prospectus, and all of such shares or other interests have been duly authorized and validly issued and are fully paid and non-assessable. There are no options or warrants for the purchase of, or other rights to purchase or acquire, or outstanding securities convertible into or exchangeable for, any capital stock or other securities or interests of the Subsidiaries. Other than the Subsidiaries, the Company has no equity interests in any entity. Each of the Company and its Subsidiaries holds such permits, licenses, certifications, registrations, approvals, consents, orders, franchises and other authorizations (collectively, “Permits”) from state, federal, foreign or other regulatory authorities necessary for the conduct of its Business and is in compliance with all laws and regulations and all orders and decrees applicable to it or to such Business, except where the failure to hold such Permits or comply with such laws, regulations, orders or decrees would not reasonably be expected to result in a Material Adverse Effect, and there are no proceedings pending or, to the Knowledge of the Company, threatened, seeking to cancel, terminate or limit such Permits.

(h)      The consolidated financial statements of the Company and the financial statements of its Subsidiaries, including the schedules and related notes, filed with the Commission as part of the Registration Statement and included in the Pricing Prospectus are correct in all material respects and fairly present the financial position of the Company and its Subsidiaries, or that of the applicable Subsidiary, as the case may be, as of and at the respective dates thereof and the results of operations and cash flows of the Company or that of the applicable Subsidiary, as the case may be, for the respective periods indicated therein and comply as to form in all material respects with the applicable accounting requirements included in Regulations S-K and S-X, as well as any other applicable Rules and Regulations. Such financial statements have been prepared in accordance with generally accepted accounting principles applied in the United States (“GAAP”) applied on a consistent basis throughout the periods involved, except as otherwise stated in the Registration Statement and the Pricing Prospectus; provided, however, that financial statements that are unaudited are subject to year-end adjustments and do not contain footnotes required under GAAP. The selected consolidated financial data set forth in the Registration Statement and the Pricing Prospectus fairly present the information shown therein at the respective dates thereof and for the respective periods covered thereby and have been presented on a basis consistent with that of the audited and unaudited financial statements included in the Registration Statement and the Pricing Prospectus. Except as included in the Registration Statement and the Pricing Prospectus, no other financial statement or supporting schedules are required to be included in the Registration Statement.

(i)      The accounting firm of Eisner LLP, which has audited certain of the financial statements filed and to be filed with the Commission as part of the Registration Statement and Pricing Prospectus, are registered independent public accountants with the Public Company Accounting Oversight Board as required by the Act and the Rules and Regulations, and the Securities Exchange Act of 1934, as amended (the “1934 Act”) and the rules and regulations thereunder. Except as described in the Pricing Prospectus and as pre-approved in accordance with the requirements set forth in Section 10A of the 1934 Act, Eisner LLP has not been engaged by the Company to perform any “prohibited activities” (as defined in Section 10A of the 1934 Act).

(j)      Subsequent to the respective dates as of which information is given in the Registration Statement and the Pricing Prospectus and the Company’s latest financial statements filed with the Commission as a part thereof, and except as described in the Registration Statement and the Pricing Prospectus, (i) neither the Company nor any Subsidiary has incurred any material liability or obligation, direct or contingent, or entered into any material transactions whether or not incurred in the ordinary course of business; (ii) neither the Company nor any Subsidiary has sustained any material loss or interference with its business from fire, storm, explosion, flood or other casualty (whether or not such loss is insured against), or from any labor dispute or court or governmental action, order or decree; (iii) there have not been, and through and including the First Closing Date, there will not be, any changes in the capital stock or any material increases in the long-term debt or other securities of the Company; (iv) the Company has not paid or declared any dividend or other distribution on its Common Stock or its other securities or redeemed or repurchased any of its Common Stock or other securities, and (v) no change, event, development or circumstance has occurred which would reasonably be expected to result in a Material Adverse Effect.

(k)      No Permits of or filing with any government or governmental instrumentality, agency, body or court, except as have been obtained or made under the Act, the “blue sky” or securities laws of any state or the rules of the National Association of Securities Dealers, Inc. (“NASD”) (including approval of underwriting compensation) or in connection with the listing of the Common Stock on the NASDAQ Global Market, are required (i) for the valid authorization, issuance, sale and delivery of the Firm Shares and the Option Shares to the Underwriters pursuant to this Agreement, and (ii) the consummation by the Company of the transactions contemplated by this Agreement.

(l)       Except as disclosed in the Registration Statement and Pricing Prospectus, there is neither pending nor, to the Knowledge of the Company, threatened in writing, against the Company or any Subsidiary any claim, action, suit, or proceeding at law or in equity, arbitration, investigation or inquiry to which the Company or any of its respective officers, key employees, directors or 5% or greater securityholders is a party and involving the Company’s or any Subsidiary’s properties or businesses, before or by any court, arbitration tribunal or governmental instrumentality, agency, or body.

(m)      There is no contract or other document which is required by the Act or by the Rules and Regulations to be described in the Registration Statement or the Pricing Prospectus or to be filed as an exhibit to the Registration Statement which has not been so described or filed as required and each contract or document which has been described in the Registration Statement and Pricing Prospectus has been described accurately, in all material respects, and presents fairly, in all material respects, the information required to be described and each such contract or document which is filed as an exhibit to the Registration Statement is and shall be in full force and effect at the Closing Date or shall have been terminated in accordance with its terms or as set forth in the Registration Statement and Pricing Prospectus, and no party to any such contract has given notice to the Company or any Subsidiary of the cancellation of or, to the Knowledge of the Company, has threatened to cancel, any such contract, and except as described in the Registration Statement and Pricing Prospectus, neither the Company nor any Subsidiary is in material default thereunder. Except as described in the Registration Statement and the Pricing Prospectus, there is no voting or other stockholder agreement between the Company and any of its stockholders or, to the Knowledge of the Company, between or by and among any stockholders of the Company. There are and, as of the Closing Date, there will be, no loans to the Company from any officers, directors, securityholders or consultants, or any affiliates thereof, except as described in the Registration Statement and Pricing Prospectus.

(n)      The Company and the Subsidiaries do not own any real property. Each of the Company and the Subsidiaries has good title to all of its personal property (tangible and intangible) and assets reflected as owned in the financial statements referred to in Section 1(h) above, including any licenses, trademarks and copyrights, described in the Registration Statement and Pricing Prospectus as owned by it, free and clear of all security interests, liens, charges, mortgages, encumbrances and restrictions other than as disclosed in the Registration Statement and the Pricing Prospectus and other than such security interests, liens, charges, mortgages, encumbrances and restrictions that do not materially affect the value of such property or materially interfere with the use made or proposed to be made of such property by the Company or its Subsidiaries. The material leases, subleases and licenses under which the Company or a Subsidiary is entitled to lease, hold or use any real or personal property, are valid and enforceable by the Company and the Subsidiaries, all rentals, royalties or other payments accruing thereunder which became due prior to the date of this Agreement have been duly paid and none of the Company, any Subsidiary, or, to the Knowledge of the Company, any other party, is in default in respect of any of the terms or provisions of any such material leases, subleases and licenses and no claim of any sort has been asserted by anyone against the Company or any Subsidiary under any such leases, subleases or licenses affecting or questioning the rights of the Company or any Subsidiary to the continued use or enjoyment of the rights and property covered thereby. Neither the Company nor any Subsidiary has received notice of any violation of any applicable law, ordinance, regulation, order or requirement relating to its owned or leased properties, except for any such violation that would not reasonably be expected to result in a Material Adverse Effect. Each of the Company and each Subsidiary owns or leases all such properties as are necessary to its operations as now conducted and as proposed to be conducted as set forth in the Registration Statement and Prospectus.

(o)      Each of the Company and its Subsidiaries has filed with the appropriate federal, state and local governmental agencies, and all appropriate foreign countries and political subdivisions thereof, all tax returns, including franchise tax returns, which are required to be filed by it or has duly obtained extensions of time for the filing thereof and has paid all material taxes required to be paid by it as shown on such returns and all other material assessments against it, to the extent that the same have become due and are not being contested in good faith; and the provisions for income taxes payable, if any, shown on the financial statements filed with or as part of the Registration Statement and the Pricing Prospectus are sufficient for all accrued and unpaid foreign and domestic taxes, whether or not disputed, and for all periods to and including the dates of such consolidated financial statements. None of the Company nor any Subsidiary has executed or filed with any taxing authority, foreign or domestic, any agreement extending the period for assessment or collection of any income taxes and, to the Knowledge of the Company, is not a party to any pending action or proceeding by any foreign or domestic governmental agency for assessment or collection of material taxes; and no claims for material assessment or collection of material taxes have been asserted in writing against the Company. To the Company’s Knowledge, there is no material tax deficiency that has been or might be asserted or threatened against the Company or its Subsidiaries.

(p)      Each of the Company and its Subsidiaries are insured by recognized, financially sound and reputable institutions with policies in such amounts, with such deductibles and covering such risks as reasonably adequate and customary, in the Company’s judgment, for their businesses including, but not limited to, policies covering real and personal property owned or leased by the Company and its Subsidiaries against theft, damage, destruction, acts of vandalism, general liability and directors and officers liability. The Company has no reason to believe that it or any Subsidiary will not be able (i) to renew its existing insurance coverage as and when such policies expire or (ii) to obtain comparable coverage from similar institutions as may be necessary or appropriate to conduct its business as now conducted without incurring a material additional cost to the Company. Neither of the Company nor any Subsidiary has been denied any insurance coverage which it has sought or for which it has applied. To the Knowledge of the Company, there are no facts or circumstances which would require it or a Subsidiary to notify its insurers of any material claim of which notice has not been made or will not be made in a timely manner. To the Knowledge of the Company, there are no facts or circumstances under any of its or any Subsidiary’s existing insurance policies which would relieve any insurer of its obligation to satisfy in full any existing valid claim of the Company or a Subsidiary under any such policies.

(q)      Except as disclosed in the Registration Statement and the Pricing Prospectus, each of the Company and its Subsidiaries owns or otherwise possesses adequate, and to the Knowledge of the Company, enforceable, and unrestricted rights to use all patents, patent applications, patent rights, licenses, inventions, collaborative research agreements, trade secrets, know-how, trademarks, trademark registrations, service marks, service mark registrations, trade names, copyrights, works of authorship, formulae, customer lists, designs, technical data and other proprietary rights and intellectual property (including other unpatented and/or unpatentable proprietary or confidential information, systems or procedures) which are necessary to or used in the conduct of its businesses as now conducted or as proposed to be conducted as described in the Registration Statement and Pricing Prospectus (collectively, the “Intellectual Property”). Except as set forth in Schedule 1(q) or as described in the Registration Statement and Pricing Prospectus, (i) the Company or one of its Subsidiaries is the beneficial and record owner of all right, title and interest in, to and under the Intellectual Property, free and clear of all liens, security interests, charges, encumbrances or other adverse claims and has the right to use the Intellectual Property without payment to a third party; (ii) there is no pending or, to the Knowledge of the Company, threatened action, suit, proceeding or claim by others challenging the Company’s or any Subsidiary’s rights in or to, or the validity or scope of, any Intellectual Property, nor, to the Knowledge of the Company, do there exist any facts which would form a reasonable basis for any such claim; (iii) to the Knowledge of the Company, neither the Company nor any Subsidiary has infringed, is infringing upon, or is otherwise in conflict with the intellectual property rights of others; (iv) none of the Company nor any Subsidiary has received any notice that it has or may have infringed, is infringing upon, or is in conflict with the intellectual property rights of others; (v) there is no pending or, to the Knowledge of the Company, threatened action, suit, proceeding or claim by others alleging that the Company or any Subsidiary infringes, is in conflict with, or otherwise violates any patent, trademark, copyright, trade secret or other proprietary rights of others, nor, to the Knowledge of the Company, do there exist any facts which would form a reasonable basis for any such claim; (vi) to the Knowledge of the Company, no others have infringed upon the Intellectual Property of the Company or any Subsidiary; (vii) neither the Company nor any Subsidiary is obligated or under any liability whatsoever to make any payment by way of royalties, fees or otherwise to any owner or licensee of, or other claimant to, intellectual property rights not owned or controlled by the Company or such Subsidiary or in connection with the conduct of the Business; (viii) the expiration of any patents, patent rights, trade secrets, trademarks, service marks, trade names or copyrights would not result in a Material Adverse Effect that is not otherwise disclosed in the Pricing Prospectus; (ix) none of the patents owned or licensed by either the Company or any Subsidiary is unenforceable or invalid, and the Company and its Subsidiaries are unaware of any facts which would form a reasonable basis for any claim that the patent applications owned or licensed by the Company would be unenforceable or invalid if issued as patents; (x) the Company has taken reasonable security measures to protect the secrecy, confidentiality and value of all material proprietary technical information developed by and belonging to the Company which has not been patented; (xi) neither the Company nor its Subsidiaries is obligated to pay a royalty, grant a license or provide other consideration to any third person in connection with the Intellectual Property; and (xii) neither the Company nor its Subsidiaries has granted or assigned to any other person or entity any right to manufacture, have manufactured, assemble or sell the current products and services of the Company or those products and services described in the Registration Statement and the Pricing Prospectus.

(r)      Except as described in the Registration Statement and Pricing Prospectus, neither the Company nor any officer, director or any other affiliate of the Company (as such term is defined in Rule 405 promulgated under the Rules and Regulations) has incurred any liability for or entered into any agreement providing for a finder’s fee or similar fee in connection with the transactions contemplated by this Agreement.

(s)      Neither the Company nor any of its officers, directors, to the Knowledge of the Company, other affiliates (as such term is defined in Rule 405 promulgated under the Rules and Regulations) has taken, and each officer or director has agreed that he will not take, and the Company has used reasonable efforts to cause each of its affiliates not to have taken or take, directly or indirectly, any action designed to constitute or which has constituted or which might cause or result in the stabilization or manipulation of the price of any security of the Company or other violation under Regulation M promulgated under the 1934 Act or otherwise, to facilitate the sale or resale of the Shares.

(t)      Except as disclosed in the Registration Statement and Pricing Prospectus under the caption “Certain Relationships and Related Party Transactions,” no person related to the Company as described in Item 404(a) of Regulation S-K promulgated under the Act has or has had during the past three (3) fiscal years of the Company, either directly or indirectly, (i) a material interest in any person or entity which (A) furnishes or sells products which are furnished or sold or are proposed to be furnished or sold by the Company or any Subsidiary, or (B) purchases from or sells or furnishes to the Company or any Subsidiary any goods or services, or (ii) a beneficial interest in any contract or agreement to which the Company or any Subsidiary is a party or by which it may be bound or affected. There are no existing agreements, arrangements, or transactions, between or among the Company or any Subsidiary and any officer, director of the Company or any Subsidiary which are required to be described in the Registration Statement and the Pricing Prospectus under the caption “Certain Relationships and Related Party Transactions” and which are not so described.

(u)     The minute books of the Company have been provided to the Underwriters through Wilson Sonsini Goodrich & Rosati, Professional Corporation, counsel for the Underwriters (“Underwriters’ Counsel”) and contain accurate summaries of all meetings and actions of the directors, all committees of the Board of Directors and stockholders of the Company since February 5, 2002, and reflect all transactions referred to in such minutes accurately in all material respects. The minute books of each Subsidiary have been provided to the Underwriters through Underwriters’ Counsel and contain accurate summaries of all meetings and actions of the directors, all committees of the board of directors and stockholders of such Subsidiary since February 5 , 2002, and reflect all transactions referred to in such minutes accurately in all material respects.

(v)      The Company had at the date or dates indicated in the Registration Statement and Pricing Prospectus a duly authorized, issued and outstanding capitalization as set forth in the Registration Statement and the Pricing Prospectus. Based on the assumptions stated in the Registration Statement and the Pricing Prospectus, the Company will have on the Closing Date the as-adjusted stock capitalization set forth therein. Except as set forth in the Registration Statement or the Pricing Prospectus, on the Effective Date and on the Closing Date, there will be no options to purchase, warrants or other rights to subscribe for, or any securities or obligations convertible into, or any contracts or commitments or preemptive rights or rights of first refusal to issue or sell shares of the Company’s or any Subsidiary’s capital stock or any such warrants, convertible securities or obligations. Except as set forth in the Registration Statement or the Pricing Prospectus, no holder of any of the Company’s securities has any rights, “demand,” “piggyback” or otherwise, to have such securities registered under the Act, and all holders with any such rights have agreed not to exercise such rights with respect to the Registration Statement. The Company has the right under the terms of its agreements with the holders of its securities to exclude from the Registration Statement (by amendment or otherwise) any securities held by such holders.

(w)      The Shares and the other securities of the Company conform in all material respects to all descriptions and statements in relation thereto in the Registration Statement and Pricing Prospectus; the outstanding shares of Common Stock of the Company have been duly authorized and validly issued and are fully paid and non-assessable; the outstanding options and warrants to purchase Common Stock have been duly authorized and validly issued and constitute the valid and binding obligations of the Company, and none of such outstanding shares of Common Stock or outstanding warrants or options to purchase Common Stock were issued in violation of the pre-emptive rights, rights of first refusal or similar rights to subscribe for or purchase securities of the Company of any stockholder of the Company. The offers and sales of the outstanding Common Stock and outstanding options and warrants to purchase Common Stock since February 5, 2002 were at all relevant times either registered under the Act and the applicable state securities or “blue sky” laws or exempt from such registration requirements. None of the offers and sales of the outstanding Common Stock or outstanding options or warrants to purchase Common Stock are required to be integrated (within the meaning of the Act) with the offered sale of the Shares.

(x)      The issuance and sale of the Shares to be purchased by the Underwriters from the Company have been duly authorized and, upon delivery against payment therefor as contemplated by this Agreement, will be validly issued, fully paid and non-assessable and will conform to the description of the Shares contained in the Pricing Prospectus.

(y)      Except as set forth in Schedule 1(y), each officer and director of the Company and each owner of record of capital stock or options or warrants to acquire capital stock of the Company has agreed to sign an agreement substantially in the form attached hereto either as Exhibit A-1 or Exhibit A-2 (the “Lock-up Agreements”). The Company has provided to Underwriters’ Counsel true, accurate and complete copies of all of the Lock-up Agreements presently in effect or effected hereby.

(z)      Neither the Company, nor any Subsidiary or any agent of the Company or any Subsidiary, acting on behalf of the Company, has at any time (i) made any contributions to any candidate for political office in violation of law, or failed to disclose fully any such contributions in violation of law, (ii) made any payment to any state, Federal or foreign governmental officer or official, or any other person charged with similar public or quasi-public duties, other than payments required or allowed by applicable law or (iii) made any payment of funds of the Company or any Subsidiary or received or retained any funds in violation of any law, rule or regulation and under circumstances requiring the disclosure of such payment, receipt or retention of funds in the Registration Statement and Pricing Prospectus. The Company’s and the Subsidiaries’ internal accounting controls and procedures are sufficient to cause the Company and the Subsidiaries to comply in all material respects with the Foreign Corrupt Practices Act of 1977, as amended.

(aa)      The Company is not an “investment company” or a company “controlled” by an “investment company,” within the meaning of the Investment Company Act of 1940, as amended. After giving effect to the offering and sale of the Shares and the application of the proceeds thereof as described in the Registration Statement and Pricing Prospectus, the Company will not be an “investment company” within the meaning of the Investment Company Act of 1940, as amended, and the rules and regulations of the Commission thereunder.

(bb)      The confidentiality agreements between the Company or the Subsidiaries and their officers, employees and consultants are binding and enforceable obligations upon the other parties thereto in accordance with their terms, except to the extent enforceability may be limited by any applicable bankruptcy, insolvency, reorganization, fraudulent conveyance, moratorium or similar laws affecting creditors’ rights generally and to the extent that the remedy of specific performance and injunction or other forms of equitable relief may be subject to equitable defenses and the discretion of the court before which any proceeding therefor may be brought.

(cc)      Except as set forth in the Registration Statement and Pricing Prospectus, none of the Company or any Subsidiary has employee benefit plans (including, without limitation, profit sharing and welfare benefit plans) or deferred compensation arrangements that are subject to the provisions of the United States Employee Retirement Income Security Act of 1974 (“ERISA”), it being understood that neither the Registration Statement nor the Pricing Prospectus disclose that such employee benefit plans are subject to ERISA. The Company has fulfilled its obligations, if any, under the minimum funding standards of Section 302 of ERISA and the regulations and published interpretations thereunder with respect to each “plan” (as defined in Section 3(3) of ERISA and such regulations and published interpretations) in which employees of the Company or any Subsidiary are eligible to participate and each such plan subject to ERISA is in compliance in all material respects with the presently applicable provisions of ERISA and such regulations and published interpretations. None of the Company or any Subsidiary has incurred any unpaid liability to the Pension Benefit Guaranty Corporation (other than for the payment of premiums in the ordinary course) or to any such plan under Title IV of ERISA.

(dd)      The Company has filed a registration statement on Form 8-A with respect to its Common Stock under Section 12(b) of the 1934 Act and such registration statement has been declared effective by the Commission. The Company has filed listing applications with respect to its Common Stock with The NASDAQ Stock Market (“NASDAQ”), such listing applications have been accepted by, and the Shares have been approved for listing on, the NASDAQ Global Market, subject to official notices of issuance. The Company has taken no action designed to, or likely to have the effect of, terminating the registration of the Common Stock under the 1934 Act, nor has the Company received any notification that the Commission or NASDAQ is contemplating terminating such registration or listing.

(ee)      None of the Company nor any Subsidiary is involved in any labor disputes with any of its employees and, to the Knowledge of the Company, no employee has threatened the commencement of any labor disputes with the Company or any Subsidiary, which, in either case, would reasonably be expected to result in a Material Adverse Effect, nor has the Company or any Subsidiary received any notice of any bankruptcy, labor disturbance or other event affecting any of its principal suppliers or customers, which would reasonably be expected to result in a Material Adverse Effect. Each of the Company and each Subsidiary is in compliance in all material respects with all federal, state, local, and foreign laws and regulations respecting employment and employment practices, terms and conditions of employment and wages and hours that are applicable to them. Neither the Company nor any Subsidiary has received notice of any pending investigations involving the Company or any Subsidiary, by the U.S. Department of Labor or any other governmental agency responsible for the enforcement of such federal, state, local, or foreign laws and regulations. There is no unfair labor practice charge or complaint against the Company or any Subsidiary pending before the National Labor Relations Board or, to the Knowledge of the Company, any strike, picketing, boycott, labor dispute, slowdown or stoppage pending or threatened against or involving the Company or any Subsidiary and none has ever occurred. No collective bargaining representation question exists respecting the employees of the Company or any Subsidiary, and no collective bargaining agreement or modification thereof is currently being negotiated by the Company or any Subsidiary. Neither the Company nor any Subsidiary has received notice that any grievance or arbitration proceeding is pending under any expired or existing collective bargaining agreements of the Company or any Subsidiary.

(ff)     The Company has provided to Underwriters’ Counsel, complete and accurate copies of all agreements, certificates, correspondence and other items, documents and information requested by such counsel, including in such counsel’s due diligence requests of (A) September 30, 2005, as supplemented thereafter, and (B) January 10, 2007.

(gg)       The Company's board of directors has validly appointed an audit committee whose composition satisfies the requirements of the 1934 Act and the rules and regulations of the Commission adopted thereunder, and Rules 4200 and 4350 of the rules of NASDAQ. The Company's audit committee has adopted a charter that satisfies the 1934 Act and the rules and regulations of the Commission adopted thereunder, and Rules 4200 and 4350 of NASDAQ.

(hh)      The Company and each of its Subsidiaries maintain a system of internal accounting controls sufficient to provide reasonable assurance that (i) transactions are executed in accordance with management's general or specific authorizations; (ii) transactions are recorded as necessary to permit preparation of financial statements in conformity with GAAP and to maintain asset accountability; (iii) access to assets is permitted only in accordance with management's general or specific authorization; and (iv) the recorded accountability for assets is compared with the existing assets at reasonable intervals and appropriate action is taken with respect to any differences.   The Company has taken all necessary actions to ensure that, upon and at all times after effectiveness of the Registration Statement, it will establish and maintain disclosure controls and procedures (as such term is defined in Rule 13a-15 and 15d-15 under the 1934 Act) that: (A) are designed to ensure that material information relating to the Company, including its consolidated subsidiaries, is made known to the Company’s principal executive officer and its principal financial officer by others within those entities, particularly during the periods in which the periodic reports required under the 1934 Act will be prepared; and (B) are effective to perform the functions for which they are established.   The Company is not aware of (x) any significant deficiency or material weakness in the design or operation of internal controls over financial reporting; or (y) any fraud, whether or not material, that involves management or other employees who have a significant role in the Company's internal controls over financial reporting.   Since the date of the Company’s most recent audited fiscal year, there has been no change in the Company's internal controls that has materially adversely affected, or is reasonably likely to materially adversely affect, the Company's internal controls, including any corrective actions with regard to significant deficiencies and material weaknesses.

(ii)      The Company is in material compliance with all provisions of the Sarbanes-Oxley Act of 2002 and the rules and regulations promulgated by the Commission thereunder (the "Sarbanes-Oxley Act") that are applicable, or will be applicable as of the date of payment for and delivery of the Firm Shares pursuant hereto, to the Company.

(jj)      Except as set forth in the Registration Statement and Pricing Prospectus (exclusive of any supplement thereto), the Company and each of the Subsidiaries (A) are in compliance with any and all applicable foreign, federal, state and local laws and regulations relating to the protection of human health and safety, the environment or hazardous or toxic substances or wastes, pollutants or contaminants applicable to its Business (“Environmental Laws”), except where any non-compliance would not reasonably be expected to result in a Material Adverse Effect, (B) have received and is in compliance with all Permits required under applicable Environmental Laws to conduct its Business, except where failure to receive or any non-compliance would not reasonably be expected to result in a Material Adverse Effect, and (C) have not received notice of any actual or potential liability for the investigation or remediation of any disposal or release of hazardous or toxic substances or wastes, pollutants or contaminants. The Company has not received written notice and, to the Knowledge of the Company, has not been named as a “potentially responsible party” under the Comprehensive Environmental Response, Compensation, and Liability Act of 1980, as amended.

(kk)       In the ordinary course of its Business, the Company and each of the Subsidiaries conduct a periodic review of the effect of Environmental Laws on the Business, operations and properties of the Company and its Subsidiaries, in the course of which it identifies and evaluates associated costs and liabilities (including, without limitation, any capital or operating expenditures required for clean-up, closure of properties or compliance with Environmental Laws or any Permit, any related constraints on operating activities and any potential liabilities to third parties). On the basis of such review and the amount of its established reserves, the Company has reasonably concluded that such associated costs and liabilities would not, individually or in the aggregate, result in a material expenditure by the Company or any Subsidiary.

(ll)      Except as set forth in the Registration Statement and the Pricing Prospectus, the Company, each of its Subsidiaries and, to the Knowledge of the Company, the distributors responsible for placing the Company’s products in the market in the European Union, are in material compliance with European Directive 2002/96/EC on waste electrical and electronic equipment and European Directive 2002/95/EC on the restriction of the use of certain hazardous substances in electrical and electronic equipment.

(mm)     To the Knowledge of the Company, after reasonable investigation under the circumstances, there are no affiliations or associations between any member of the NASD and any Company officer, director or holder of five percent (5%) or more of the Company’s securities, except as set forth in the Registration Statement and the Pricing Prospectus.

(nn)      There are no material off-balance sheet arrangements (as defined in Item 303 of Regulation S-K) that have or are reasonably likely to have a current or future effect on the Company’s financial condition, changes in financial condition, results of operations, liquidity, capital expenditures or capital resources or components or revenue or expenses.

(oo)      Any certificate signed by an officer of the Company in his capacity as such and delivered to the Underwriters or Underwriters’ Counsel pursuant to this Agreement shall be deemed a representation and warranty by the Company to the Underwriters as to the matters set forth in such certificate.

(pp)      The issue and sale of the Shares and the compliance by the Company with this Agreement and the consummation of the transactions herein contemplated will not conflict with or result in a breach or violation of any of the terms or provisions of, or constitute a default under (i) any indenture, mortgage, deed of trust, loan agreement or other agreement or instrument to which the Company or any of its Subsidiaries is a party or by which the Company or any of its Subsidiaries is bound or to which any of the property or assets of the Company or any of its Subsidiaries is subject; (ii) the provisions of the Second Amended and Restated Certificate of Incorporation or Amended and Restated By-laws of the Company; or (iii) any statute or any order, rule or regulation of any court or governmental agency or body having jurisdiction over the Company or any of its Subsidiaries or any of their properties, except, in the case of clauses (i) and (iii) above, for such conflicts, breaches or violations as would not, individually or in the aggregate, be reasonably expected to result in a Material Adverse Effect.

(qq)      Neither the Company nor any of its Subsidiaries is (i) in violation of its charter or by-laws or (ii) in default in the performance or observance of any material obligation, agreement, covenant or condition contained in any indenture, mortgage, deed of trust, loan agreement, lease or other agreement or instrument to which it is a party or by which it or any of its properties may be bound.

(rr)      The Company and the Subsidiaries have materially complied with, are not in material violation of, and have not received any written notices of violation with respect to, any statutes, rules, or regulations applicable to the ownership, testing, development, manufacture, packaging, processing, use, distribution, marketing, labeling, promotion, sale, offer for sale, reimbursement, storage, import, export or disposal of any product manufactured or distributed by the Company or the Subsidiaries ("Applicable Laws"), or any license, certificate, approval, clearance, authorization, permit, supplement or amendment required by any Applicable Laws ("Authorizations"). The Company and the Subsidiaries possess all material Authorizations and such material Authorizations are in full force and effect. The Company and the Subsidiaries are, and their products are, in compliance in all material respects with all Authorizations and Applicable Laws, including, but not limited to, all laws, statutes, rules, regulations, or orders administered, issued or enforced by the Federal Food and Drug Administration (the "FDA") or any other federal or foreign governmental authority having authority over the Company or any of its products ("Governmental Authority"). Except as described in the Registration Statement and the Prospectus, the Company or the Subsidiaries have not received from the FDA or any other Governmental Authority any notice of adverse findings, regulatory letters, notices of violations, Warning Letters, criminal proceeding notices under Section 305 of the U.S. Federal Food, Drug, and Cosmetic Act, or other similar communication from the FDA alleging or asserting material noncompliance with Applicable Laws or any Authorizations, and there have been no seizures conducted or, to the Knowledge of the Company, threatened by the FDA, and no recalls, market withdrawals, field notifications, notifications of misbranding or adulteration, safety alerts or similar actions relating to the safety or efficacy of the Company's or the Subsidiaries’ products conducted, requested or threatened by the FDA or other Governmental Authority relating to the products sold by the Company or the Subsidiaries. Except as described in the Prospectus and the Registration Statement, the Company and the Subsidiaries have not, either voluntarily or involuntarily, initiated, conducted, or issued or caused to be initiated, conducted or issued, any recall, market withdrawal, safety alert, "dear doctor" letter, or other similar notice or action relating to the alleged lack of safety or efficacy of any of the Company's or Subsidiaries’ products or any alleged product defect or violation, and to the Knowledge of the Company, no Governmental Authority has initiated, conducted or intends to initiate any such notice or action. The Company and the Subsidiaries have not received notice of any claim, action, suit, proceeding, hearing, enforcement, investigation, arbitration or other similar action from any Governmental Authority alleging that any product operation or activity is in material violation of any Applicable Laws or Authorizations and, to the Knowledge of the Company, no such Governmental Authority is considering any such claim, litigation, arbitration, action, suit, investigation or proceeding. Each regulatory submission for the Company's or the Subsidiaries’ products has been filed, cleared, approved and maintained in compliance in all material respects with all Applicable Laws and Authorizations, including without limitation applicable federal statutes, rules, regulations or orders administered or promulgated by the FDA, and all laboratory and clinical studies, and tests that support clearance or approval of its products have been conducted in all material respects in compliance with accepted professional scientific standards and all Applicable Laws and Authorizations in all material respects. No filing or submission to the FDA or any other Governmental Authority, intended to be the basis for any Authorization, contains any material omission or material false information, and neither the Company nor the Subsidiaries have received any notices or correspondence from any Governmental Authority (including, but not limited to, the FDA) requiring suspension of any studies, tests, or clinical trials conducted by or on behalf of the Company. To the Knowledge of the Company, except as would not be reasonably expected to result in a Material Adverse Effect, there are no facts which are reasonably likely to cause (A) the withdrawal, or recall of any products sold or intended to be sold by the Company or the Subsidiaries, (B) a change in the marketing classification or labeling of any such products, (C) a termination or suspension of marketing clearance of any such products, or (D) a suspension or revocation of any of the Company's or Subsidiaries Authorizations. The Company or the Subsidiaries have not received notice (whether complete or pending) of any proceeding seeking recall, suspension or seizure of any products sold or intended to be sold by the Company or the Subsidiaries. Excepted from the representations in this paragraph is the November 2002 Warning Letter sent by FDA to the Applied Digital Solutions, Inc. alleging that the human-implantable microchip transponder was a misbranded and adulterated medical device because it lacked FDA clearance or approval, it being acknowledged that this matter was resolved upon the Company’s receipt of 510(k) clearance of the transponder on October 12, 2004.

2.       Representations and Warranties of the Selling Stockholder . The Selling Stockholder hereby represents and warrants to, and agrees with, the Underwriters that, as of the Effective Date, the First Closing Date and each Option Closing Date (as defined below):

(a)      To the Knowledge of the Selling Stockholder (as defined below), the Selling Stockholder has no reason to believe that the representations and warranties of the Company contained in Section 1 are not true and correct. When representations or warranties in this Agreement are qualified to the “Knowledge of the Selling Stockholder,” they are given by the Selling Stockholder to the extent of and qualified in all respects by the facts actually known to any of the executive officers or directors of the Selling Stockholder, with an obligation of reasonable inquiry on the part of such executive officers and directors, prior to the date such representations or warranties are made. To the Knowledge of the Selling Stockholder, there is no material fact, condition or information not disclosed in the Registration Statement or the Pricing Prospectus that has had, or would reasonably be expected to have, a Material Adverse Effect.

(b)      Representatives of the Selling Stockholder have participated in conferences and telephone conversations with representatives of the Company, special intellectual property and regulatory counsel to the Company, representatives of the independent public accountants for the Company, representatives of the Underwriters and representatives of the Underwriters’ counsel, during which conferences and conversations the contents of the Registration Statement and the Pricing Prospectus and related matters were discussed. The Selling Stockholder has reviewed the Registration Statement and the Pricing Prospectus and to the Knowledge of the Selling Stockholder, there are no facts that would cause the Selling Stockholder to believe that  ( i) the Pricing Disclosure Package, as of the Applicable Time, included any untrue statement of a material fact or omitted to state any material fact necessary to make the statements therein, in light of the circumstances under which they were made, not misleading; (ii) any Issuer Free Writing Prospectus listed on Schedule 1(a) hereto conflicts with the information contained in the Registration Statement, the Pricing Prospectus or the Prospectus and each such Issuer Free Writing Prospectus, as supplemented by and taken together with the Pricing Disclosure Package as of the Applicable Time, included any untrue statement of a material fact or omitted to state any material fact necessary in order to make the statements therein, in light of the circumstances under which they were made, not misleading, (iii) each of the Registration Statement, any Rule 462(b) Registration Statement and any post-effective amendment thereto, at the time it became effective and at all subsequent times, contained or contains any untrue statement of a material fact or omitted or omits to state a material fact required to be stated therein or necessary to make the statements therein not misleading, and (iv) each Preliminary Prospectus, as of its date, and the Prospectus, as amended or supplemented, as of its date and at all subsequent times through the First Closing Date and the Option Closing Date, contained or contains any untrue statement of a material fact or omitted or omits to state a material fact necessary to make the statements therein, in light of the circumstances under which they were made, not misleading. The representations and warranties set forth in this Section 2(b) do not apply to statements in, or omissions from, the Registration Statement, any 462(b) Registration Statement, or any post-effective amendment thereto, or the Prospectus, each Preliminary Prospectus or amendment or supplement thereto, or any Issuer Free Writing Prospectus, in reliance upon and in conformity with written information furnished to the Company through Merriman Curhan Ford & Co. by or on behalf of any Underwriter expressly for inclusion therein. The Selling Stockholder is not prompted to sell the Shares to be sold by the Selling Stockholder by any information concerning the Company which is not set forth in the Registration Statement or the Prospectus.

(c)      This Agreement has been duly authorized, executed and delivered by or on behalf of the Selling Stockholder and is a valid and binding agreement of the Selling Stockholder, enforceable in accordance with its terms, except as rights to indemnification hereunder may be limited by applicable law and except as the enforcement hereof may be limited by bankruptcy, insolvency, reorganization, moratorium or other similar laws relating to or affecting the rights and remedies of creditors or by general equitable principles.

(d)      The Custody Agreement signed by the Selling Stockholder and the Company, as custodian (the “Custodian”), relating to the deposit of the Shares to be sold by the Selling Stockholder (the “Custody Agreement”) has been duly authorized, executed and delivered by the Selling Stockholder and is a valid and binding agreement of the Selling Stockholder, enforceable in accordance with its terms, except as rights to indemnification thereunder may be limited by applicable law and except as the enforcement thereof may be limited by bankruptcy, insolvency, reorganization, moratorium or other similar laws relating to or affecting the rights and remedies of creditors or by general equitable principles. The Selling Stockholder agrees that the Shares to be sold by the Selling Stockholder on deposit with the Custodian is subject to the interests of the Underwriters, that the arrangements made for such custody are to that extent irrevocable, and that the obligations of the Selling Stockholder hereunder shall not be terminated, except as provided in this Agreement or in the Custody Agreement, by any act of the Selling Stockholder, by operation of law or by the occurrence of any other event. If any such other event should occur before the delivery of the Shares to be sold by the Selling Stockholder hereunder, the documents evidencing the Shares to be sold by the Selling Stockholder then on deposit with the Custodian shall be delivered by the Custodian in accordance with the terms and conditions of this Agreement as if such other event had not occurred, regardless of whether or not the Custodian shall have received notice thereof.

(e)      The Selling Stockholder is the lawful owner of the Shares to be sold by the Selling Stockholder hereunder and upon sale and delivery of, and payment for, such Shares, as provided herein, the Selling Stockholder will convey good and marketable title to such Shares, free and clear of all liens, encumbrances, equities and claims whatsoever.

(f)      The Selling Stockholder has, and on each Closing Date will have, good and valid title to all of the Shares which may be sold by the Selling Stockholder pursuant to this Agreement on such date and the legal right and power, and all authorizations and approvals required by law and under its charter or by-laws, to enter into this Agreement and its Custody Agreement, to sell, transfer and deliver all of the Shares which may be sold by the Selling Stockholder pursuant to this Agreement and to comply with its other obligations hereunder and thereunder.

(g)      No consent, approval, authorization or order of any court or governmental agency or body is required for the consummation by the Selling Stockholder of the transactions contemplated herein, except such as may have been obtained under the Act and such as may be required under the blue sky laws of any jurisdiction and from the NASD in connection with the purchase and distribution of the Shares by the Underwriters and such other approvals as have been obtained.

(h)      Neither the sale of the Shares being sold by the Selling Stockholder nor the consummation of any other of the transactions herein contemplated by the Selling Stockholder or the fulfillment of the terms hereof by the Selling Stockholder will conflict with, result in a breach or violation of, or constitute a default under any law or the terms of any indenture or other agreement or instrument to which the Selling Stockholder is party or bound, any judgment, order or decree applicable to the Selling Stockholder or any court or regulatory body, administrative agency, governmental body or arbitrator having jurisdiction over the Selling Stockholder.

(i)       The Selling Stockholder does not have any registration or other similar rights to have any equity or debt securities registered for sale by the Company under the Registration Statement or included in the offering contemplated by this Agreement.

(j)       The Selling Stockholder does not have, or has waived prior to the date hereof, any preemptive right, co-sale right or right of first refusal or other similar right to purchase any of the Shares that are to be sold by the Company to the Underwriters pursuant to this Agreement; and the Selling Stockholder does not own any warrants, options or similar rights to acquire, and does not have any right or arrangement to acquire, any capital stock, right, warrants, options or other securities from the Company, other than those described in the Registration Statement and the Prospectus.

(k)      All information furnished by or on behalf of the Selling Stockholder in writing expressly for use in the Registration Statement and Prospectus is, and on each Closing Date will be, true, correct, and complete in all material respects, and does not, and on each Closing Date will not, contain any untrue statement of a material fact or omit to state any material fact necessary to make such information not misleading. The Selling Stockholder confirms as accurate the number of Shares set forth opposite the Selling Stockholder’s name in the Prospectus under the caption “Principal and Selling Stockholders” (both prior to and after giving effect to the sale of the Shares).

(l)       The Selling Stockholder has not taken and will not take, directly or indirectly, any action designed to or that might cause or result in stabilization or manipulation of the price of the Common Stock to facilitate the sale or resale of the Shares.

(m)     There are no transfer taxes or other similar fees or charges under Federal law or the laws of any state, or any political subdivision thereof, required to be paid in connection with the execution and delivery of this Agreement or the sale by the Selling Stockholder of the Shares.

(n)      The Selling Stockholder has not distributed and will not distribute, prior to the later of the Option Closing Date and the completion of the Underwriters’ distribution of the Shares, any offering material in connection with the offering and sale of the Shares by the Selling Stockholder other than a Preliminary Prospectus, the Prospectus or the Registration Statement.

(o)      Any certificate signed by an officer of the Selling Stockholder in his capacity as such and delivered to the Underwriters or Underwriters’ Counsel pursuant to this Agreement shall be deemed a representation and warranty by the Selling Stockholder to the Underwriters as to the matters set forth in such certificate

3.       Purchase, Delivery and Sale of the Shares .

(a)      Upon the basis of the representations and warranties of Merriman Curhan Ford & Co. herein contained, and subject to the terms and conditions herein set forth, the Company agrees to issue and sell to the several Underwriters the respective number of Firm Shares set forth opposite the name of such Underwriter in Schedule A hereto. On the basis of the representations, warranties and agreements of the Company and the Selling Stockholder herein contained, and upon the terms but subject to the conditions herein set forth, the Underwriters agree, severally and not jointly, to purchase from the Company the respective number of Firm Shares set forth opposite their names on Schedule A , subject to adjustment in accordance with Section 9 hereof. The purchase price per Share to be paid by the several Underwriters to the Company shall be U.S.$6.045 per share.

Payment for the Firm Shares to be sold by the Company shall be made at the First Closing Date (and, in the case of the Option Shares, if applicable, at the Option Closing Date) by wire transfer of immediately available funds to the order of the Company.

(b)      Delivery by the Company of the Firm Shares to be purchased by the Underwriters and payment therefor by the Underwriters shall be made by the Company and the Underwriters at 9:00 a.m. New York time, at the offices of Holland & Knight LLP, 195 Broadway, 24 ^th Floor, New York, NY 10007 (the “H&K New York Office”), or at such other place as may be agreed upon among the Underwriters and the Company, on the third (3rd) full business day following the date of this Agreement, or, if this Agreement is executed and delivered after 1:30 P.M., New York time, on the fourth (4th) full business day following the date of this Agreement, or at such other time and date not later than seven (7) full business days following the first day that Shares are traded as the Underwriters and the Company may determine (or at such time and date to which payment and delivery shall have been postponed pursuant to this Section 3), such time and date of payment and delivery being herein called the “First Closing Date”; provided, however, that if the Company has not made available to the Underwriters copies of the Prospectus within the time provided in this Agreement, the Underwriters may, in their sole discretion, postpone the Closing Date until no later than two (2) full business days following delivery of copies of the Prospectus to the Underwriters.

(c)      The Company shall deliver, or cause to be delivered, a credit representing the Firm Shares to an account or accounts at The Depository Trust Company (“DTC”) for the accounts of the Underwriters at the First Closing Date, against the irrevocable release of a wire transfer of immediately available funds for the amount of the purchase price therefor. The Company shall also deliver, or cause to be delivered, a credit representing the Option Shares to an account or accounts at DTC for the accounts of the Underwriters, at the First Closing Date or the Option Closing Date, as the case may be, against the irrevocable release of a wire transfer of immediately available funds for the amount of the purchase price therefor. Time shall be of the essence, and delivery at the time and place specified in this Agreement is a further condition to the obligations of the Underwriters. Not later than 12:00 noon on the second business day following the date the Shares are released by the Underwriters for sale to the public, the Company shall deliver or cause to be delivered copies of the Prospectus in such quantities and at such places as the Underwriters shall request.

(d)      Subject to the terms and conditions of this Agreement, and on the basis of the representations, warranties and agreements contained herein, for the purposes of covering any over-allotments in connection with the distribution and sale of the Firm Shares as described in the Registration Statement and Pricing Prospectus, the Underwriters are hereby granted an option to purchase all or any part of the Option Shares from the Selling Stockholder. The purchase price to be paid per share for the Option Shares will be the same price as the price per Firm Share set forth in Section 3(a) hereof. The option granted hereby may be exercised by notice from the Underwriters to the Company, the Custodian and the Selling Stockholder in accordance with Section 3(e) hereof solely by the Underwriters as to all or any part of the Option Shares at any time within thirty (30) days after the Effective Date. The Underwriters will not be under any obligation to purchase any Option Shares prior to the exercise by the Underwriters of such option in accordance with Section 3(e) hereof.

(e)      The option granted pursuant to Section 3(d) hereof may be exercised by Merriman Curhan Ford & Co. by giving notice t