Exhibit 10.1

 

 

NOTE REPURCHASE, EXCHANGE AND TERMINATION AGREEMENT

 

by and among

 

iBASIS, INC.

 

 

and

 

 

THE NOTEHOLDER SIGNATORIES HERETO

 

Dated as of April 27, 2004

 

 

REPURCHASE OF $25,175,000 PRINCIPAL AMOUNT OF SENIOR SECURED NOTES

 

and

 

ISSUANCE OF WARRANTS TO PURCHASE
5,176,065 SHARES OF COMMON STOCK

 

 

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This NOTE REPURCHASE, EXCHANGE AND AMENDMENT AGREEMENT, dated as of April 27,
2004 (this “Agreement”), is by and among iBASIS, INC., a Delaware corporation
(the “Company”), and the holders of the Notes (as defined below), identified on
the signature pages hereto (the “Noteholders”).

 

WHEREAS, the Company desires to repurchase an aggregate principal amount of
$25,175,000 of the Company’s 11.5% Senior Secured Notes due 2005 (the “Notes”)
from the Noteholders, and the Noteholders desire to tender such Notes to the
Company in exchange for (i) payment in cash of the sum of (A) 100% of the
aggregate outstanding principal amount of the Notes being prepaid and (B)
accrued and unpaid interest on such prepaid principal amount to the prepayment
date, and (ii) warrants (the “Warrants”) to purchase a number of shares of
Common Stock, $0.001 par value, of the Company (the “Common Stock”) equal to (x)
the aggregate principal amount of the Notes being prepaid, multiplied by (y)
0.2056033.

 

NOW, THEREFORE, in consideration of the premises and the mutual agreements
herein set forth, the parties hereto agree as follows:

 

1.                                       DEFINITIONS; CERTAIN RULES OF
CONSTRUCTION.  CERTAIN CAPITALIZED TERMS ARE USED IN THIS AGREEMENT AND IN THE
OTHER DOCUMENTS WITH THE SPECIFIC MEANINGS DEFINED BELOW IN THIS SECTION 1. 
EXCEPT AS OTHERWISE EXPLICITLY SPECIFIED TO THE CONTRARY OR UNLESS THE CONTEXT
CLEARLY REQUIRES OTHERWISE, (A) THE CAPITALIZED TERM “SECTION” REFERS TO
SECTIONS OF THIS AGREEMENT, (B) THE CAPITALIZED TERM “EXHIBIT” REFERS TO
EXHIBITS TO THIS AGREEMENT, (C) REFERENCES TO A PARTICULAR SECTION INCLUDE ALL
SUBSECTIONS THEREOF, (D) THE WORD “INCLUDING” SHALL BE CONSTRUED AS “INCLUDING
WITHOUT LIMITATION,” (E) ACCOUNTING TERMS NOT OTHERWISE DEFINED HEREIN HAVE THE
MEANING PROVIDED UNDER GAAP, (F) REFERENCES TO A PARTICULAR STATUTE OR
REGULATION INCLUDE ALL RULES AND REGULATIONS THEREUNDER AND ANY SUCCESSOR
STATUTE, REGULATION OR RULES, IN EACH CASE AS FROM TIME TO TIME IN EFFECT, (G)
REFERENCES TO A PARTICULAR PERSON INCLUDE SUCH PERSON’S SUCCESSORS AND ASSIGNS
TO THE EXTENT NOT PROHIBITED BY THIS AGREEMENT AND THE OTHER DOCUMENTS AND (H)
REFERENCES TO “DOLLARS” OR “$” MEAN UNITED STATES FUNDS.  REFERENCES TO “THE
DATE HEREOF” MEAN THE DATE FIRST SET FORTH ABOVE.

 

“Agreement” is defined in the preamble hereto.

 

“Book-Entry Security” is defined in Section 2.2 hereof.

 

“Closing” is defined in Section 2.4 hereof.

 

“Closing Date” means the date on which the transactions contemplated by the New
Financing are consummated.

 

“Code” means the Internal Revenue Code of 1986.

 

“Common Stock” is defined in the preamble hereto.

 

“Company” is defined the preamble to this Agreement.

 

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“Control” means, with respect to any Person, the possession, directly or
indirectly, of the power to (a) vote 10% or more of the capital securities
ordinary voting power for the election of directors of such Person or (b) direct
or cause the direction of management and policies of such Person, whether
through the ownership of voting capital securities, by contact or otherwise,
either alone or in conjunction with others.  The words “Controlling” and
“Controlled” have correlative meanings.

 

“DEPOSITORY” MEANS THE DEPOSITORY APPOINTED PURSUANT TO SECTION 2.3 HEREOF, TO
WHICH THE NOTES AND WARRANTS IN TYPEWRITTEN FORM REPRESENTING BOOK-ENTRY
SECURITIES ARE DELIVERED ON THE CLOSING DATE PURSUANT TO SECTION 2.3 HEREOF.

 

“Documents” means each of the Warrant and the Warrant Agreement.

 

“Effective Date” is defined in Section 13.10 hereof.

 

“ERISA” means the Employee Retirement Income Security Act of 1974.

 

“Exchange Act” means the Securities Exchange Act of 1934.

 

“Exchange Act Reports” means the Company’s reports filed with the SEC since
December 31, 2002 pursuant to Section 13 of the Exchange Act.

 

“Existing Convertible Notes” means the Company’s 5¾ Convertible Subordinated
Notes due 2005.

 

“Existing Convertible Notes Indenture” means the Indenture dated as of March 15,
2000 between the Company and The Bank of New York, as trustee, governing the
Existing Convertible Notes (as amended, modified or supplemented from time to
time).

 

“GAAP” means generally accepted accounting principles in effect within the
United States of America, consistently applied.

 

“Global Warrant” is defined in Section 2.2 hereof.

 

“Governmental Authority” means any nation or government, any state or other
political subdivision thereof and any entity exercising executive, legislative,
judicial, regulatory or administrative functions of, or pertaining to,
government.

 

“Governing Documents” means, as to any Person, the certificate or articles of
incorporation and by-laws or other organizational or governing documents of such
Person.

 

“JMG Exchange Agreement” means that certain Securities Exchange Agreement, dated
as of February 21, 2003, by and among the Company, iBasis Global, Inc., iBasis
Securities Corporation, JMG Triton Offshore Limited CITCO, U.S. Bank National
Association as Collateral Agent, and such other exchanging holders named
therein, as amended and supplemented from time to time prior to the date hereof.

 

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“Lien” means any mortgage, pledge, security interest, encumbrance, lien or
charge of any kind (including any agreement to give any of the foregoing, any
conditional sale or other title retention agreement or any lease in the nature
thereof).

 

“Majority Noteholders” means Noteholders holding, at any time,  Notes in an
outstanding principal amount greater than fifty percent (50%) of the total
principal amount of all Notes outstanding at such time.

 

“Material Adverse Effect” means a material adverse effect on the present or
future business, assets, operations, prospects or condition (financial or
otherwise) of the Company and its Subsidiaries taken as a whole.

 

“New Exchange” means the transactions contemplated by the Company’s exchange of
its Existing Convertible Notes for its 6¾ Convertible Subordinated Notes due
2009, as described in the Company’s Registration Statement on Form S-4 to be
filed with the SEC on or about April 27, 2004.

 

“New Financing” means the sale and issuance by the Company of senior secured
notes or other securities, prior to, or contemporaneous with, the transactions
contemplated by this Agreement, generating net proceeds therefrom received by
the Company of no less than the aggregate principal amount of Notes to be
purchased at the Closing.

 

“Notes” is defined in the preamble hereto.

 

“Person” means any individual, partnership, joint venture, limited liability
company, corporation, association, trust or other enterprise or any government
or political subdivision or any agency, department or instrumentality thereof.

 

“Registration Statements” means the Company’s registration statements filed with
the SEC since December 31, 2002 pursuant to the Securities Act.

 

“Requirement of Law” means, as to any Person, the Governing Documents of such
Person, and any law, treaty, rule, regulation, direction, ordinance, criterion
or guideline or determination of a court or other Governmental Authority or
determination of an arbitrator, in each case applicable to or binding upon such
Person or any of its property or to which such Person or any of its property is
subject.

 

“SEC” means the U.S. Securities and Exchange Commission.

 

“SEC Reports” means the Exchange Act Reports and the Registration Statements.

 

“Securities Act” means the Securities Act of 1933.

 

“Subsidiary” means with respect to any Person at any time, (a) any other Person
the accounts of which would be consolidated with those of such first Person in
its consolidated financial statements as of such time, and (b) any other Person
(i) which is, at such time, Controlled by, or (ii) capital securities of which
having ordinary voting power to elect a majority

 

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of the board of directors (or other persons having similar functions), or other
ownership interest of which ordinarily constituting a majority voting interest,
are at such time, directly or indirectly, owned or Controlled by, in the case of
each of clauses (i) and (ii), such first Person or one or more of its
Subsidiaries or by such first Person and one or more of its Subsidiaries. 
Unless otherwise expressly provided, all references herein to “Subsidiary” mean
a Subsidiary of the Company.

 

“Symphony Exchange Agreement” means that certain Securities Exchange Agreement,
dated as of January 30, 2003, by and among the Company, iBasis Global, Inc.,
iBasis Securities Corporation, the Symphony Funds identified on the signature
pages thereto and U.S. Bank National Association as Collateral Agent, as amended
and supplemented from time to time prior to the date hereof.

 

“UCC” means the Uniform Commercial Code as in effect in The Commonwealth of
Massachusetts.

 

“U.S.” means the United States of America.

 

“Warrant Agreement” means the 2004 Warrant and Registration Rights Agreement to
be entered into by the Company and U.S. Bank National Association, as Warrant
Agent, substantially in the form of Exhibit A attached hereto (as amended,
modified or supplemented from time to time).

 

“Warrants” is defined in the preamble hereto.

 

“in writing” means any form of written communication or a communication by means
of telex, facsimile transmission, telegraph or cable.

 

2.                                       REPURCHASE OF THE NOTES; ISSUANCE OF
THE WARRANTS.

 

2.1.                              REPURCHASE OF THE NOTES; ISSUANCE OF THE
WARRANTS. SUBJECT TO THE TERMS AND CONDITIONS HEREOF, THE COMPANY AGREES THAT IT
WILL REPURCHASE FROM EACH OF THE NOTEHOLDERS SET FORTH ON SCHEDULE 1 ATTACHED
HERETO, AND EACH SUCH NOTEHOLDER SEVERALLY AGREES THAT IT WILL TENDER TO THE
COMPANY, ON THE CLOSING DATE, FOR CANCELLATION AND RETIREMENT NOTES IN THE
AGGREGATE PRINCIPAL AMOUNT SET FORTH OPPOSITE SUCH NOTEHOLDER’S NAME ON
SCHEDULE 1 ATTACHED HERETO, IN EXCHANGE FOR (I) PAYMENT IN CASH OF THE SUM OF
(A) 100% OF THE AGGREGATE OUTSTANDING PRINCIPAL AMOUNT OF SUCH NOTES BEING
PREPAID AND (B) ANY ACCRUED AND UNPAID INTEREST ON SUCH PREPAID PRINCIPAL AMOUNT
THROUGH AND UNTIL THE CLOSING DATE, AND (II) WARRANTS TO PURCHASE A NUMBER OF
SHARES OF COMMON STOCK EQUAL TO (X) THE AGGREGATE PRINCIPAL AMOUNT OF SUCH NOTES
BEING PREPAID, MULTIPLIED BY (Y) 0.2056033, SUCH WARRANTS TO HAVE AN INITIAL
EXERCISE PRICE OF $1.85 (SUBJECT TO ADJUSTMENT AS PROVIDED IN THE WARRANT
AGREEMENT); PROVIDED, HOWEVER, (I) IN THE EVENT THAT THE CONVERSION PRICE PER
SHARE OF ANY CONVERTIBLE NOTES ISSUED IN CONNECTION WITH THE NEW EXCHANGE OR A
NEW FINANCING IS LOWER THAN $1.85, THE INITIAL EXERCISE PRICE FOR SUCH WARRANTS
SHALL INSTEAD BE EQUAL TO SUCH LOWER CONVERSION PRICE, AND (II) IN THE EVENT
THAT ANY CONVERTIBLE NOTES ISSUED IN CONNECTION WITH THE NEW FINANCING OR NEW
EXCHANGE ARE CONVERTIBLE FOR ANY PROPERTY OTHER THAN SHARES OF COMMON STOCK OR
FOR ANY PROPERTY IN ADDITION TO SHARES OF

 

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COMMON STOCK, AT THE ELECTION OF THE MAJORITY NOTEHOLDERS, THE WARRANTS SHALL BE
EXERCISABLE FOR SUCH OTHER OR ADDITIONAL PROPERTY IN ADDITION TO ANY SHARES OF
COMMON STOCK INTO WHICH SUCH NOTES ARE CONVERTIBLE AND THE INITIAL EXERCISE
PRICE OF THE WARRANTS SHALL BE EQUAL TO THE CONVERSION PRICE OF SUCH NOTES.
WITHOUT LIMITING THE FOREGING, IN THE EVENT THAT AS PART OF A NEW FINANCING THE
COMPANY RAISES MORE THAN $10,000,000 FROM THE ISSUANCE OF SHARES OF COMMON STOCK
OR SHARES OF PREFERRED STOCK CONVERTIBLE INTO SHARES OF COMMON STOCK  OR ISSUES
IN A NEW FINANCING ANY SUCH SHARES OF CAPITAL STOCK AT A PURCHASE PRICE OF LESS
THAN $1.40 PER SHARE OF COMMON STOCK (ASSUMING THE CONVERSION OF ANY SHARES OF
PREFERRED STOCK INTO SHARES OF COMMON STOCK AND TAKING INTO ACCOUNT IN
DETERMINING THE PURCHASE PRICE OF SUCH SHARES OF COMMON STOCK, THE VALUE OF ANY
ADDITIONAL PROPERTY ISSUED OR DELIVERED TOGETHER THEREWITH AS PART OF A UNIT),
THE INITIAL EXERCISE PRICE OF SUCH WARRANTS SHALL BE EQUAL TO THE EXERCISE PRICE
THAT SUCH WARRANTS WOULD HAVE HAD IN THE EVENT THAT SUCH WARRANTS WERE ISSUED
IMMEDIATELY PRIOR TO THE ISSUANCE OF SUCH SHARES IN THE NEW FINANCING AT AN
INITIAL EXERCISE PRICE OF $1.85, AND SUCH EXERCISE PRICE WERE IMMEDIATELY
ADJUSTED PURSUANT TO THE TERMS OF SECTION 7.4 OF THE WARRANT AGREEMENT, ASSUMING
FOR PURPOSES OF THIS SINGLE ADJUSTMENT ONLY, THAT THE FAIR MARKET VALUE (AS
DEFINED IN THE WARRANT AGREEMENT) OF A SHARE OF COMMON STOCK IS $1.85.

 

2.2.                              ISSUANCE OF WARRANTS UPON FAILURE TO
REPURCHASE NOTES.  IN THE EVENT THAT THE NEW EXCHANGE IS CONSUMMATED AND THE
COMPANY DOES NOT REPURCHASE ALL OF A NOTEHOLDER’S NOTES AS CONTEMPLATED HEREBY,
FOR ANY REASON OR NO REASON, OTHER THAN AS A RESULT OF A BREACH OF THIS
AGREEMENT BY SUCH NOTEHOLDER, THE COMPANY SHALL ISSUE TO THE NON-BREACHING
NOTEHOLDERS, PROMPTLY FOLLOWING CONSUMMATION OF THE NEW EXCHANGE, WARRANTS TO
PURCHASE A NUMBER OF SHARES OF COMMON STOCK EQUAL TO (X) THE AGGREGATE PRINCIPAL
AMOUNT OF SUCH NOTES HELD BY SUCH NOTEHOLDER, MULTIPLIED BY (Y) 0.2056033, SUCH
WARRANTS TO HAVE AN INITIAL EXERCISE PRICE OF $1.85 (SUBJECT TO ADJUSTMENT AS
PROVIDED IN THE WARRANT AGREEMENT) AND THE COMPANY SHALL EXECUTE AND DELIVER THE
WARRANT AGREEMENT.

 

2.3.                              FORM OF WARRANTS.  EACH WARRANT WILL BE ISSUED
ONLY IN FULLY REGISTERED FORM AND WILL INITIALLY BE REPRESENTED BY A GLOBAL
WARRANT (EACH, A “GLOBAL WARRANT”) REGISTERED IN THE NAME OF THE DEPOSITORY OR
ITS NOMINEE, AND DELIVERED TO THE WARRANT AGENT (AS DEFINED IN THE WARRANT
AGREEMENT), AS CUSTODIAN FOR THE DEPOSITORY, AND RECORDED IN THE BOOK-ENTRY
SYSTEM MAINTAINED BY THE DEPOSITORY (A “BOOK-ENTRY SECURITY”).  NO BENEFICIAL
OWNER OF AN INTEREST IN THE WARRANTS WILL BE ENTITLED TO RECEIVE A CERTIFICATE
REPRESENTING SUCH WARRANT, EXCEPT AS PROVIDED IN THE WARRANT AGREEMENT.

 

2.4.                              DEPOSITORY.  THE DEPOSITORY FOR THE WARRANTS
SHALL INITIALLY BE THE DEPOSITORY TRUST COMPANY AND SUCH WARRANTS SHALL BE
REGISTERED IN THE NAME OF CEDE & CO., ITS NOMINEE, AND SHALL BEAR A LEGEND IN
SUBSTANTIALLY THE FOLLOWING FORM:

 

“Unless this Certificate is presented by an authorized representative of The
Depository Trust Company, a New York corporation (“DTC”), to the Issuer or its
agent for registration of transfer, exchange, or payment, and any certificate
issued is registered in the name of Cede & Co. or in such other name as
requested by an authorized representative of DTC (and any payment is made to
Cede & Co. or to such other entity as requested by an authorized representative
of DTC), ANY TRANSFER, PLEDGE OR OTHER USE HEREOF FOR VALUE OR OTHERWISE BY OR
TO ANY PERSON IS

 

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WRONGFUL inasmuch as the registered owner hereof, Cede & Co., has any interest
herein.”

 

The Depository shall at all times be a “clearing corporation” as defined in
Section 8-102(3) of the UCC or any successor provision thereto.

 

2.5.                              CLOSING.  UNLESS OTHERWISE AGREED AMONG THE
COMPANY AND THE NOTEHOLDERS, THE REPURCHASE OF THE NOTES AND THE ISSUANCE OF THE
WARRANTS (THE “CLOSING”) SHALL TAKE PLACE ON THE CLOSING DATE AT THE OFFICES OF
BINGHAM MCCUTCHEN LLP, 150 FEDERAL STREET, BOSTON, MASSACHUSETTS, AT 10:00 A.M.,
LOCAL TIME.  ON THE CLOSING DATE, THE NOTEHOLDERS SHALL DELIVER THE NOTES TO BE
TENDERED BY THEM TO THE COMPANY AGAINST DELIVERY BY THE COMPANY OF THE CASH
CONSIDERATION THEREFORE AND THE WARRANTS.

 

3.                                       CONDITIONS PRECEDENT TO THE TENDER OF
THE NOTES.  THE OBLIGATION OF THE NOTEHOLDERS TO TENDER THE NOTES ON THE CLOSING
DATE FOR THE CONSIDERATION DESCRIBED IN SECTION 2.1 HEREOF IS SUBJECT TO THE
SATISFACTION, PRIOR TO OR ON THE CLOSING DATE, OF THE FOLLOWING CONDITIONS:

 

3.1.                              EFFECTIVE DATE; ISSUANCE OF WARRANTS.  (A) THE
EFFECTIVE DATE SHALL HAVE OCCURRED, AND (B) THERE SHALL HAVE BEEN DELIVERED TO
THE DEPOSITORY A GLOBAL WARRANT TO PURCHASE THE NUMBER OF SHARES OF COMMON STOCK
AS PROVIDED HEREIN.

 

3.2.                              OPINION OF COUNSEL.  THE NOTEHOLDERS SHALL
HAVE RECEIVED FROM BINGHAM MCCUTCHEN LLP, COUNSEL TO THE COMPANY, A LEGAL
OPINION IN A FORM SATISFACTORY TO THE MAJORITY NOTEHOLDERS.

 

3.3.                              CORPORATE PROCEEDINGS.

 

(A)                                  EACH NOTEHOLDER SHALL HAVE RECEIVED A
CERTIFICATE FROM THE COMPANY, DATED THE CLOSING DATE, SIGNED BY THE CHAIRMAN, A
VICE CHAIRMAN, THE PRESIDENT, ANY VICE PRESIDENT OR REPRESENTATIVE DIRECTOR OF
THE COMPANY, IN THE FORM ATTACHED HERETO AS EXHIBIT 3.3, WITH APPROPRIATE
INSERTIONS AND DELETIONS, TOGETHER WITH (I) COPIES OF THE CERTIFICATE OF
INCORPORATION, BY-LAWS OR OTHER ORGANIZATIONAL DOCUMENTS OF THE COMPANY, (II)
THE RESOLUTIONS OF THE COMPANY REFERRED TO IN SUCH CERTIFICATE AND ALL OF THE
FOREGOING (INCLUDING THE CERTIFICATE OF INCORPORATION AND BY-LAWS) IN FORM AND
SUBSTANCE REASONABLY SATISFACTORY TO THE MAJORITY NOTEHOLDERS AND (III) A
CERTIFICATION THAT ALL OF THE APPLICABLE CONDITIONS PRECEDENT SET FORTH IN
SECTIONS 3.3, 3.5 AND 3.6 HEREOF SHALL HAVE BEEN SATISFIED AS OF SUCH DATE.

 

(B)                                 ON THE CLOSING DATE, ALL CORPORATE AND LEGAL
PROCEEDINGS AND ALL INSTRUMENTS AND AGREEMENTS IN CONNECTION WITH THE
TRANSACTIONS CONTEMPLATED BY THIS AGREEMENT AND EACH OTHER DOCUMENT SHALL BE
REASONABLY SATISFACTORY IN FORM AND SUBSTANCE TO THE NOTEHOLDERS, AND THE
NOTEHOLDERS SHALL HAVE RECEIVED ALL INFORMATION AND COPIES OF ALL CERTIFICATES,
DOCUMENTS AND PAPERS, INCLUDING GOOD STANDING CERTIFICATES AND ANY OTHER RECORDS
OF CORPORATE PROCEEDINGS AND GOVERNMENTAL APPROVALS, IF ANY, WHICH A NOTEHOLDER
MAY HAVE REASONABLY REQUESTED IN CONNECTION THEREWITH, SUCH DOCUMENTS AND
PAPERS, WHERE APPROPRIATE, TO BE CERTIFIED BY PROPER CORPORATE OR GOVERNMENTAL
AUTHORITIES.

 

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3.4.                              LITIGATION. THERE SHALL BE NO ACTION, SUIT,
PROCEEDING OR INVESTIGATION (WHETHER CONDUCTED BY ANY JUDICIAL OR REGULATORY
BODY OR OTHER PERSON) THAT IS PENDING OR, TO THE KNOWLEDGE OF THE COMPANY OR ANY
NOTEHOLDER, IS THREATENED AGAINST THE COMPANY OR ANY NOTEHOLDER OR (NOR TO THE
KNOWLEDGE OF THE COMPANY OR ANY NOTEHOLDER SHALL THERE BE ANY BASIS THEREFOR)
WHICH (I) QUESTIONS THE VALIDITY OF THIS AGREEMENT OR ANY ACTION TAKEN OR TO BE
TAKEN PURSUANT HERETO OR (II) COULD RESULT IN A MATERIAL ADVERSE EFFECT.

 

3.5.                              APPROVALS.  THE COMPANY SHALL HAVE RECEIVED
ALL AUTHORIZATIONS, CONSENTS, APPROVALS, LICENSES, FRANCHISES, PERMITS AND
CERTIFICATES BY OR OF ALL GOVERNMENTAL AND THIRD PARTIES, IN EACH CASE NECESSARY
FOR THE ISSUANCE OF THE WARRANTS AND FOR THE EXECUTION AND DELIVERY OF THE
DOCUMENTS TO WHICH IT IS A PARTY (INCLUDING WITHOUT LIMITATION ALL
AUTHORIZATIONS, CONSENTS AND APPROVALS REQUIRED OF ANY HOLDER OF NOTES OTHER
THAN A NOTEHOLDER), AND ALL OF THE FOREGOING SHALL BE IN FULL FORCE AND EFFECT
ON THE CLOSING DATE.

 

3.6.                              WARRANT AGREEMENT. THE WARRANT AGREEMENT, WITH
SUCH CHANGES AS SHALL BE REQUIRED BY THE LAST SENTENCE OF SECTION 2.1. HEREOF,
SHALL HAVE BEEN DULY EXECUTED AND DELIVERED BY ALL OF THE PARTIES THERETO.

 

3.7.                              DTC ELIGIBILITY.  THE WARRANTS SHALL HAVE
BECOME ELIGIBLE FOR DTC BOOK-ENTRY DELIVERY SERVICES.

 

3.8.                              CUSIP NUMBER.  THE COMPANY SHALL HAVE OBTAINED
CUSIP NUMBERS FOR THE WARRANTS.

 

3.9.                              CAPITALIZATION.  THE COMPANY SHALL DELIVER
EVIDENCE FURNISHED BY EQUISERVE TRUST COMPANY, N.A, THE TRANSFER AGENT AND
REGISTRAR FOR THE COMMON STOCK,  AS TO THE AUTHORIZED AND ISSUED AND OUTSTANDING
COMMON STOCK OF THE COMPANY AS OF THE CLOSING DATE.

 

3.10.                        REPRESENTATIONS AND WARRANTIES.  ON THE CLOSING
DATE AND AFTER GIVING EFFECT TO THE TRANSACTION CONTEMPLATED HEREBY, ALL
REPRESENTATIONS AND WARRANTIES MADE BY THE COMPANY CONTAINED HEREIN SHALL BE
TRUE AND CORRECT IN ALL MATERIAL RESPECTS WITH THE SAME EFFECT AS THOUGH SUCH
REPRESENTATIONS AND WARRANTIES HAD BEEN MADE ON AND AS OF SUCH DATE, EXCEPT TO
THE EXTENT THAT SUCH REPRESENTATIONS AND WARRANTIES EXPRESSLY RELATE TO AN
EARLIER DATE.

 

ALL OF THE CERTIFICATES, LEGAL OPINIONS AND OTHER DOCUMENTS AND PAPERS REFERRED
TO IN THIS SECTION 3, UNLESS OTHERWISE SPECIFIED, SHALL BE DELIVERED TO EACH OF
THE NOTEHOLDERS AND SHALL BE REASONABLY SATISFACTORY IN FORM AND SUBSTANCE TO
SUCH MAJORITY NOTEHOLDERS.

 

4.                                       CONDITIONS PRECEDENT TO THE REPURCHASE
OF THE NOTES AND ISSUANCE OF THE WARRANTS.  THE OBLIGATION OF THE COMPANY TO
REPURCHASE THE NOTES AND TO SELL AND ISSUE THE WARRANTS ON THE CLOSING DATE IS
SUBJECT TO THE SATISFACTION, PRIOR TO OR ON THE CLOSING DATE, OF THE FOLLOWING
CONDITIONS:

 

4.1.                              EFFECTIVE DATE. THE EFFECTIVE DATE SHALL HAVE
OCCURRED.

 

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4.2.                              NEW FINANCING.  THE NEW FINANCING SHALL HAVE
OCCURRED, AND THE COMPANY SHALL HAVE RECEIVED NET PROCEEDS THEREFROM SUFFICIENT
TO PAY THE CASH CONSIDERATION REQUIRED TO BE PAID BY THE COMPANY HEREUNDER
PURSUANT TO SECTION 2.1 HEREOF.

 

4.3.                              NEW EXCHANGE. THE CONSUMMATION OF THE
TRANSACTIONS CONTEMPLATED BY THE NEW EXCHANGE SHALL HAVE OCCURRED.

 

4.4.                              LITIGATION.  THERE SHALL BE NO ACTION, SUIT,
PROCEEDING OR INVESTIGATION (WHETHER CONDUCTED BY ANY JUDICIAL OR REGULATORY
BODY OR OTHER PERSON) THAT IS PENDING OR, TO THE KNOWLEDGE OF ANY NOTEHOLDER OR
THE COMPANY, IS THREATENED AGAINST ANY NOTEHOLDER OR THE COMPANY (NOR TO THE
KNOWLEDGE OF ANY NOTEHOLDER OR THE COMPANY SHALL THERE BE ANY BASIS THEREFOR)
WHICH QUESTIONS THE VALIDITY OF THIS AGREEMENT OR ANY ACTION TAKEN OR TO BE
TAKEN PURSUANT HERETO.

 

4.5.                              APPROVALS.  THE COMPANY SHALL HAVE RECEIVED
ALL AUTHORIZATIONS, CONSENTS, APPROVALS, LICENSES, FRANCHISES, PERMITS AND
CERTIFICATES BY OR OF ALL GOVERNMENTAL AND THIRD PARTIES, IN EACH CASE NECESSARY
FOR THE REPURCHASE OF THE NOTES AND ISSUANCE OF THE WARRANTS AND FOR THE
EXECUTION AND DELIVERY OF THE DOCUMENTS TO WHICH IT IS A PARTY (INCLUDING
WITHOUT LIMITATION ALL AUTHORIZATIONS, CONSENTS AND APPROVALS REQUIRED OF ANY
HOLDER OF NOTES OTHER THAN A NOTEHOLDER), AND ALL OF THE FOREGOING SHALL BE IN
FULL FORCE AND EFFECT ON THE CLOSING DATE.

 

4.6.                              REPRESENTATIONS AND WARRANTIES.  ON THE
CLOSING DATE AND AFTER GIVING EFFECT TO THE TRANSACTION CONTEMPLATED HEREBY, ALL
REPRESENTATIONS AND WARRANTIES MADE BY ANY NOTEHOLDER CONTAINED HEREIN SHALL BE
TRUE AND CORRECT IN ALL MATERIAL RESPECTS WITH THE SAME EFFECT AS THOUGH SUCH
REPRESENTATIONS AND WARRANTIES HAD BEEN MADE ON AND AS OF SUCH DATE, EXCEPT TO
THE EXTENT THAT SUCH REPRESENTATIONS AND WARRANTIES EXPRESSLY RELATE TO AN
EARLIER DATE.

 

ALL OF THE CERTIFICATES AND OTHER DOCUMENTS AND PAPERS REFERRED TO IN THIS
SECTION 4, UNLESS OTHERWISE SPECIFIED, SHALL BE DELIVERED TO THE COMPANY AND
SHALL BE REASONABLY SATISFACTORY IN FORM AND SUBSTANCE TO THE COMPANY.

 

5.                                       REPRESENTATIONS AND WARRANTIES OF THE
COMPANY.  IN ORDER TO INDUCE THE NOTEHOLDERS TO ENTER INTO THIS AGREEMENT AND TO
ACQUIRE THE WARRANTS, THE COMPANY MAKES THE FOLLOWING REPRESENTATIONS AND
WARRANTIES, ALL OF WHICH SHALL SURVIVE THE EXECUTION AND DELIVERY OF THIS
AGREEMENT AND THE ACQUISITION OF THE WARRANTS:

 

5.1.                              CORPORATE STATUS.  THE COMPANY AND EACH OF ITS
SUBSIDIARIES (A) IS A DULY ORGANIZED AND VALIDLY EXISTING CORPORATION IN GOOD
STANDING UNDER THE LAWS OF THE JURISDICTION OF ITS ORGANIZATION AND HAS THE
CORPORATE POWER AND AUTHORITY TO OWN ITS PROPERTY AND ASSETS AND TO TRANSACT THE
BUSINESS IN WHICH IT IS ENGAGED AND PRESENTLY PROPOSES TO ENGAGE AND (B) HAS
DULY QUALIFIED TO DO BUSINESS AND IS IN GOOD STANDING IN EACH JURISDICTION WHERE
IT IS REQUIRED TO BE SO QUALIFIED AND WHERE THE FAILURE TO BE SO QUALIFIED IS
REASONABLY LIKELY TO HAVE A MATERIAL ADVERSE EFFECT.

 

5.2.                              CORPORATE POWER AND AUTHORITY.  THE COMPANY
HAS THE CORPORATE POWER AND AUTHORITY TO EXECUTE, DELIVER AND PERFORM ITS
OBLIGATIONS UNDER EACH OF THE DOCUMENTS TO WHICH IT

 

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IS A PARTY AND HAS TAKEN ALL NECESSARY CORPORATE ACTION TO AUTHORIZE THE
EXECUTION, DELIVERY AND PERFORMANCE OF THE DOCUMENTS TO WHICH IT IS A PARTY. THE
COMPANY HAS DULY EXECUTED AND DELIVERED TO THE NOTEHOLDERS EACH DOCUMENT TO
WHICH IT IS A PARTY AND EACH SUCH DOCUMENT CONSTITUTES THE LEGAL, VALID AND
BINDING OBLIGATION OF SUCH PERSON ENFORCEABLE IN ACCORDANCE WITH ITS TERMS.

 

5.3.                              NO VIOLATION.  NEITHER THE EXECUTION, DELIVERY
AND PERFORMANCE BY THE COMPANY OF THE DOCUMENTS TO WHICH IT IS A PARTY NOR
COMPLIANCE WITH THE TERMS AND PROVISIONS THEREOF (A) WILL CONTRAVENE ANY
APPLICABLE PROVISION OF ANY LAW, STATUTE, RULE, REGULATION, ORDER, WRIT,
INJUNCTION OR DECREE OF ANY COURT OR GOVERNMENTAL INSTRUMENTALITY, EXCEPT AS
WOULD NOT HAVE A MATERIAL ADVERSE EFFECT, (B) WILL CONFLICT OR BE INCONSISTENT
WITH OR RESULT IN ANY BREACH OF, ANY OF THE MATERIAL TERMS, COVENANTS,
CONDITIONS OR PROVISIONS OF, OR CONSTITUTE A DEFAULT UNDER, OR RESULT IN THE
CREATION OR IMPOSITION OF (OR THE OBLIGATION TO CREATE OR IMPOSE) ANY LIEN UPON
ANY OF THE PROPERTY OR ASSETS OF THE COMPANY PURSUANT TO THE TERMS OF, ANY
INDENTURE, MORTGAGE, DEED OF TRUST, AGREEMENT OR OTHER INSTRUMENT TO WHICH SUCH
PERSON IS A PARTY OR BY WHICH IT OR ANY OF ITS PROPERTY OR ASSETS ARE BOUND OR
TO WHICH IT MAY BE SUBJECT OR (C) WILL VIOLATE ANY PROVISION OF THE CERTIFICATE
OF INCORPORATION, BY-LAWS OR OTHER ORGANIZATIONAL DOCUMENT OF THE COMPANY.

 

5.4.                              CAPITALIZATION. THE AUTHORIZED CAPITAL STOCK
OF THE COMPANY CONSISTS OF 85,000,000 SHARES OF COMMON STOCK, OF WHICH
45,881,329 ARE ISSUED AND OUTSTANDING, AND 15,000,000 SHARES OF UNDESIGNATED
PREFERRED STOCK, $0.001 PAR VALUE PER SHARE, NONE OF WHICH ARE ISSUED AND
OUTSTANDING.  AS OF THE DATE HEREOF, (I) 7,762,128 SHARES OF COMMON STOCK WERE
RESERVED FOR FUTURE ISSUANCE PURSUANT TO OUTSTANDING OPTIONS ISSUED BY THE
COMPANY, (II) 4,187,789 SHARES OF COMMON STOCK WERE RESERVED FOR FUTURE ISSUANCE
PURSUANT TO OUTSTANDING WARRANTS ISSUED BY THE COMPANY AND (III) 443,232 SHARES
OF COMMON STOCK WERE RESERVED FOR FUTURE ISSUANCE UPON CONVERSION OF THE
EXISTING CONVERTIBLE NOTES.  THE WARRANTS TO BE ISSUED AND SOLD HEREUNDER SHALL
CONSTITUTE 8.2% OF THE FULLY DILUTED EQUITY OF THE COMPANY (CALCULATED ASSUMING
EXERCISE OF ALL WARRANTS, RIGHTS OR OPTIONS OUTSTANDING AS OF APRIL 26, 2004
DATE HEREOF).  EXCEPT AS SET FORTH ABOVE AND FOR THE EXERCISE RIGHTS OF THE
WARRANTS AND THE CONVERSION RIGHTS OF THE EXISTING CONVERTIBLE NOTES, AFTER
GIVING EFFECT TO THE TRANSACTIONS CONTEMPLATED BY THIS AGREEMENT, AND EXCEPT AS
SET FORTH ON SCHEDULE 5.4, THERE WILL BE NO OTHER OUTSTANDING OPTIONS, WARRANTS,
RIGHTS (INCLUDING CONVERSION OR PREEMPTIVE RIGHTS) OR ANY AGREEMENT FOR THE
PURCHASE OR ACQUISITION FROM THE COMPANY OF ANY SHARES OF THE COMPANY’S CAPITAL
STOCK OR VOTING AGREEMENTS WITH RESPECT TO EQUITY OF THE COMPANY.  ALL SHARES OF
THE CAPITAL STOCK OF THE COMPANY SUBJECT TO ISSUANCE AS AFORESAID, INCLUDING THE
WARRANTS, UPON ISSUANCE ON THE TERMS AND CONDITIONS SPECIFIED IN THE INSTRUMENTS
PURSUANT TO WHICH THEY ARE ISSUABLE, SHALL BE DULY AUTHORIZED, VALIDLY ISSUED,
FULLY PAID AND NONASSESSABLE.  THERE ARE NO OBLIGATIONS, CONTINGENT OR
OTHERWISE, OF THE COMPANY TO REPURCHASE, REDEEM OR OTHERWISE ACQUIRE ANY SHARES
OF COMMON STOCK OR TO PROVIDE FUNDS TO OR MAKE ANY INVESTMENT (IN THE FORM OF A
LOAN, CAPITAL CONTRIBUTION, GUARANTY OR OTHERWISE) IN ANY OTHER ENTITY.  NONE OF
THE OUTSTANDING SHARES OF CAPITAL STOCK OF THE COMPANY WERE ISSUED IN VIOLATION
OF THE SECURITIES ACT OR ANY STATE SECURITIES LAWS.

 

5.5.                              LITIGATION.  EXCEPT AS DISCLOSED IN THE SEC
REPORTS, NO ACTION, SUIT, PROCEEDING OR INVESTIGATION (WHETHER CONDUCTED BY ANY
JUDICIAL OR REGULATORY BODY OR OTHER PERSON) IS PENDING OR, TO THE KNOWLEDGE OF
THE COMPANY, IS THREATENED AGAINST THE COMPANY (NOR

 

9

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TO THE KNOWLEDGE OF THE COMPANY IS ANY BASIS THEREFOR) WHICH (I) QUESTIONS THE
VALIDITY OF THIS AGREEMENT OR ANY ACTION TAKEN OR TO BE TAKEN PURSUANT HERETO OR
(II) COULD RESULT IN A MATERIAL ADVERSE EFFECT.

 

5.6.                              GOVERNMENTAL APPROVALS.  EXCEPT FOR ANY
REQUIRED FILINGS AND RECORDINGS WHICH HAVE BEEN MADE AND ARE IN FULL FORCE AND
EFFECT, NO ORDER, CONSENT, APPROVAL, LICENSE, AUTHORIZATION OR VALIDATION OF, OR
FILING, RECORDING OR REGISTRATION WITH, OR EXEMPTION BY, ANY FOREIGN OR DOMESTIC
GOVERNMENTAL OR PUBLIC BODY OR AUTHORITY, OR ANY SUBDIVISION THEREOF, IS
REQUIRED TO AUTHORIZE OR IS REQUIRED IN CONNECTION WITH (A) THE EXECUTION,
DELIVERY AND PERFORMANCE OF ANY DOCUMENT OR (B) THE LEGALITY, VALIDITY, BINDING
EFFECT OR ENFORCEABILITY OF ANY DOCUMENT.

 

5.7.                              CONFORMITY TO SECURITIES ACT AND EXCHANGE ACT;
NO MISSTATEMENT OR OMISSION.  EACH OF THE SEC REPORTS AS OF THE DATE IT WAS
FILED WITH THE SEC IN THE CASE OF FILINGS UNDER THE EXCHANGE ACT OR DECLARED
EFFECTIVE IN THE CASE OF THE REGISTRATION STATEMENTS, COMPLIED IN ALL MATERIAL
RESPECTS WITH THE APPLICABLE REQUIREMENTS OF THE SECURITIES ACT OR THE EXCHANGE
ACT AND THE RESPECTIVE RULES AND REGULATIONS OF THE SEC THEREUNDER AND DID NOT
CONTAIN AN UNTRUE STATEMENT OF A MATERIAL FACT OR OMIT TO STATE A MATERIAL FACT
NECESSARY IN ORDER TO MAKE THE STATEMENTS THEREIN NOT MISLEADING.

 

5.8.                              FINANCIAL CONDITION; FINANCIAL STATEMENTS. 
THE FINANCIAL STATEMENTS AND SUPPORTING SCHEDULES INCLUDED IN THE COMPANY’S
ANNUAL REPORT ON FORM 10-K FOR THE YEAR ENDED DECEMBER 31, 2003, AND IN ANY
REGISTRATION STATEMENTS OR OTHER SEC REPORTS, IN EACH CASE FILED WITH THE SEC,
ARE COMPLETE AND CORRECT IN ALL MATERIAL RESPECTS AND PRESENT FAIRLY THE
CONSOLIDATED FINANCIAL POSITION OF THE COMPANY AND ITS SUBSIDIARIES AS OF THE
DATES SPECIFIED AND THE CONSOLIDATED RESULTS OF THEIR OPERATIONS FOR THE PERIODS
SPECIFIED, IN EACH CASE, IN CONFORMITY WITH GENERALLY ACCEPTED ACCOUNTING
PRINCIPLES APPLIED ON A CONSISTENT BASIS DURING THE PERIODS INVOLVED, EXCEPT AS
INDICATED THEREIN OR IN THE NOTES THERETO.

 

6.                                       NOTEHOLDER REPRESENTATIONS.  EACH
NOTEHOLDER, SEVERALLY BUT NOT JOINTLY, REPRESENTS AND WARRANTS ONLY AS TO ITSELF
AS FOLLOWS:

 

6.1.                              AUTHORIZATION; NO CONTRAVENTION.  THE
EXECUTION, DELIVERY AND PERFORMANCE BY IT OF THIS AGREEMENT: (A) IS WITHIN ITS
POWER AND AUTHORITY AND HAS BEEN DULY AUTHORIZED BY ALL NECESSARY ACTION AND (B)
DOES NOT CONTRAVENE THE TERMS OF ITS ORGANIZATIONAL DOCUMENTS OR ANY AMENDMENT
THEREOF.

 

6.2.                              BINDING EFFECT.  THIS AGREEMENT HAS BEEN DULY
EXECUTED AND DELIVERED BY IT AND THIS AGREEMENT CONSTITUTES ITS LEGAL, VALID AND
BINDING OBLIGATION, ENFORCEABLE AGAINST IT IN ACCORDANCE WITH ITS TERMS.

 

6.3.                              NO LEGAL BAR.  THE EXECUTION, DELIVERY AND
PERFORMANCE OF THIS AGREEMENT BY IT WILL NOT VIOLATE ANY REQUIREMENT OF LAW
APPLICABLE TO IT.

 

6.4.                              PURCHASE FOR OWN ACCOUNT.  THE WARRANTS TO BE
ACQUIRED BY IT PURSUANT TO THIS AGREEMENT ARE BEING ACQUIRED FOR ITS OWN ACCOUNT
AND WITH NO INTENTION OF DISTRIBUTING OR

 

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RESELLING SUCH SECURITIES OR ANY PART THEREOF IN ANY TRANSACTION THAT WOULD
VIOLATE THE SECURITIES LAWS OF THE UNITED STATES OF AMERICA, OR ANY STATE
THEREOF, WITHOUT PREJUDICE, HOWEVER, TO ITS RIGHT AT ALL TIMES TO SELL OR
OTHERWISE DISPOSE OF ALL OR ANY PART OF ITS WARRANTS, UNDER AN EFFECTIVE
REGISTRATION STATEMENT UNDER THE SECURITIES ACT, OR UNDER AN EXEMPTION FROM SUCH
REGISTRATION AVAILABLE UNDER THE SECURITIES ACT, AND SUBJECT, NEVERTHELESS, TO
THE DISPOSITION OF ITS PROPERTY BEING AT ALL TIMES WITHIN ITS CONTROL.

 

6.5.                              ACCREDITED INVESTOR.  SUCH NOTEHOLDER IS AN
“ACCREDITED INVESTOR” AS THAT TERM IS DEFINED IN RULE 501 OF REGULATION D
PROMULGATED UNDER THE SECURITIES ACT, BY VIRTUE, INTER ALIA, OF ITS BEING A
CORPORATION, MASSACHUSETTS OR SIMILAR BUSINESS TRUST, OR PARTNERSHIP, NOT FORMED
FOR THE SPECIFIC PURPOSE OF ACQUIRING THE WARRANTS OR THE SHARES OF COMMON STOCK
ISSUABLE UPON EXERCISE OF THE WARRANTS, WITH TOTAL ASSETS IN EXCESS OF
$5,000,000.

 

6.6.                              RESTRICTED SECURITIES.  SUCH NOTEHOLDER
UNDERSTANDS THAT THE WARRANTS ACQUIRED BY IT MAY NOT BE SOLD, TRANSFERRED OR
OTHERWISE DISPOSED OF WITHOUT REGISTRATION UNDER THE SECURITIES ACT OR AN
EXEMPTION THEREFROM, AND THAT IN THE ABSENCE OF AN EFFECTIVE REGISTRATION
STATEMENT COVERING THE WARRANTS OR AN AVAILABLE EXEMPTION FROM REGISTRATION
UNDER THE SECURITIES ACT, THE WARRANTS MUST BE HELD INDEFINITELY.  IN THE
ABSENCE OF A REGISTRATION STATEMENT COVERING THE WARRANTS, SUCH NOTEHOLDER WILL
SELL, TRANSFER OR OTHERWISE DISPOSE OF THE WARRANTS ONLY IN A MANNER CONSISTENT
WITH ITS REPRESENTATIONS AND AGREEMENTS SET FORTH HEREIN.

 

6.7.                              FINANCIAL CONDITION.  SUCH NOTEHOLDER’S
FINANCIAL CONDITION IS SUCH THAT IT IS ABLE TO BEAR THE RISK OF HOLDING THE
WARRANTS ACQUIRED BY IT FOR AN INDEFINITE PERIOD OF TIME AND CAN BEAR THE LOSS
OF ITS ENTIRE INVESTMENT IN THE WARRANTS.

 

6.8.                              EXPERIENCE.  SUCH NOTEHOLDER HAS SUCH
KNOWLEDGE AND EXPERIENCE IN FINANCIAL AND BUSINESS MATTERS AND IN MAKING
HIGH-RISK INVESTMENTS OF THE TYPE SUCH AS THE WARRANTS THAT IT IS CAPABLE OF
EVALUATING THE MERITS AND RISKS OF THE ACQUISITION OF THE WARRANTS.

 

6.9.                              LEGEND.  SUCH NOTEHOLDER UNDERSTANDS THAT THE
CERTIFICATES EVIDENCING THE WARRANTS MAY BEAR A LEGEND SUBSTANTIALLY IN THE
FOLLOWING FORM:

 

“THIS SECURITY HAS NOT BEEN REGISTERED UNDER THE UNITED STATES SECURITIES ACT OF
1933, AS AMENDED (THE “SECURITIES ACT”), AND, ACCORDINGLY, MAY NOT BE OFFERED OR
SOLD EXCEPT AS SET FORTH BELOW.  BY ITS ACQUISITION HEREOF, THE HOLDER (1)
REPRESENTS THAT IT IS A “QUALIFIED INSTITUTIONAL BUYER” (AS DEFINED IN RULE 144A
UNDER THE SECURITIES ACT), (2) AGREES THAT IT WILL NOT WITHIN TWO YEARS AFTER
THE ORIGINAL ISSUANCE OF THIS SECURITY RESELL OR OTHERWISE TRANSFER THIS
SECURITY EXCEPT (A) TO THE ISSUER OR ANY SUBSIDIARY THEREOF, (B) TO A QUALIFIED
INSTITUTIONAL BUYER IN COMPLIANCE WITH RULE 144A UNDER THE SECURITIES ACT, OR
(C) PURSUANT TO A REGISTRATION STATEMENT WHICH HAS BEEN DECLARED EFFECTIVE UNDER
THE SECURITIES ACT (AND WHICH CONTINUES TO BE EFFECTIVE AT THE TIME OF SUCH
TRANSFER) AND (3) AGREES THAT IT WILL DELIVER TO EACH PERSON TO WHOM THIS
SECURITY IS TRANSFERRED A NOTICE SUBSTANTIALLY TO THE EFFECT OF THIS LEGEND.”

 

11

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6.10.                        ERISA.  NO PART OF THE FUNDS USED BY IT TO ACQUIRE
THE WARRANTS HEREUNDER CONSTITUTES ASSETS OF AN “EMPLOYEE BENEFIT PLAN” (AS
DEFINED IN SECTION 3(3) OF ERISA) OR “PLAN” (AS DEFINED IN SECTION 4975 OF THE
CODE).

 

6.11.                        BROKER’S, FINDER’S OR SIMILAR FEES.  NO BROKERAGE
COMMISSIONS, FINDER’S FEES OR SIMILAR FEES OR COMMISSIONS ARE PAYABLE IN
CONNECTION WITH THE TRANSACTIONS CONTEMPLATED HEREBY BASED ON ANY AGREEMENT,
ARRANGEMENT OR UNDERSTANDING WITH IT OR ANY ACTION TAKEN BY IT.  SUCH NOTEHOLDER
HEREBY INDEMNIFIES EACH OTHER PARTY AGAINST AND AGREES THAT IT WILL HOLD EACH
SUCH PARTY HARMLESS FROM ANY CLAIM, DEMAND OR LIABILITY FOR ANY SUCH BROKERAGE
COMMISSIONS, FINDER’S FEES OR SIMILAR FEES OR COMMISSIONS ALLEGED TO HAVE BEEN
INCURRED BY SUCH NOTEHOLDER WITH RESPECT TO THE TRANSACTIONS CONTEMPLATED
HEREBY.

 

6.12.                        GOVERNMENTAL AUTHORIZATION; THIRD PARTY CONSENT. 
NO APPROVAL, CONSENT, COMPLIANCE, EXEMPTION, AUTHORIZATION OR OTHER ACTION BY,
OR NOTICE TO OR FILING WITH, ANY GOVERNMENTAL AUTHORITY OR ANY OTHER PERSON IN
RESPECT OF ANY REQUIREMENT OF LAW, AND NO LAPSE OF A WAITING PERIOD UNDER A
REQUIREMENT OF LAW, IS REQUIRED IN CONNECTION WITH THE EXECUTION, DELIVERY OR
PERFORMANCE BY IT OF THIS AGREEMENT OR THE TRANSACTIONS CONTEMPLATED HEREBY.

 

7.                                       COVENANTS.

 

7.1.                              SEC DOCUMENTS.  THE COMPANY COVENANTS AND
AGREES THAT FOR SO LONG AS THIS AGREEMENT IS IN EFFECT, THE COMPANY WILL TIMELY
FILE ALL DOCUMENTS REQUIRED TO BE FILED WITH THE SEC PURSUANT TO SECTION 13 OR
15 OF THE EXCHANGE ACT, AND SHALL PROVIDE TO THE NOTEHOLDERS WITHIN ONE DAY OF
MAKING ANY FILING WITH THE SEC COPIES, COPIES OF ALL SUCH DOCUMENTS, INCLUDING
ALL FINANCIAL STATEMENTS OF THE COMPANY FILED WITH THE SEC, AND ALL SUPPLEMENTAL
INFORMATION PACKAGES GIVEN TO SECURITIES ANALYSTS OR INVESTORS.

 

7.2.                              LITIGATION COOPERATION.  SHOULD ANY SUIT OR
PROCEEDING BE INSTITUTED BY OR AGAINST THE NOTEHOLDERS OR THE WARRANT AGENT (AS
DEFINED IN THE WARRANT AGREEMENT) BY A THIRD PARTY IN ANY MANNER RELATING TO THE
COMPANY, THE COMPANY SHALL, WITHOUT EXPENSE TO THE NOTEHOLDERS OR THE WARRANT
AGENT, MAKE AVAILABLE THE COMPANY AND ITS OFFICERS, EMPLOYEES AND AGENTS AND THE
COMPANY’S BOOKS AND RECORDS, TO THE EXTENT THAT THE NOTEHOLDERS MAY DEEM THEM
REASONABLY NECESSARY IN ORDER TO PROSECUTE OR DEFEND ANY SUCH SUIT OR PROCEEDING
BY SUCH THIRD PARTY.

 

8.                                       TERM.  THIS AGREEMENT SHALL CONTINUE IN
EFFECT INDEFINITELY, PROVIDED THAT THE MAJORITY NOTEHOLDERS MAY TERMINATE THIS
AGREEMENT ON OR AFTER AUGUST 3, 2004, IF NO NEW FINANCING HAS BEEN CONSUMMATED
ON OR PRIOR TO SUCH DATE.

 

9.                                       AMENDMENT TO SYMPHONY EXCHANGE
AGREEMENT.

 

9.1.              AMENDMENT TO SECTION 4.3.2 OF SYMPHONY EXCHANGE AGREEMENT. 
SUBJECT TO SECTION 9.2 HEREOF, SECTION 4.3.2 OF THE SYMPHONY EXCHANGE AGREEMENT
IS HEREBY AMENDED BY ADDING THE FOLLOWING NEW PARAGRAPH TO THE END OF
SECTION 4.3.2 AS IT CURRENTLY EXISTS:

 

12

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“Notwithstanding the foregoing or anything to the contrary herein, including but
not limited to Section 4.2 hereof, in the event that a Change of Control is
announced by the Company on or before October 3, 2004, upon the announcement by
the Company of such Change of Control, the Borrower shall issue to the Holders
warrants, having an exercise price of $1.85 per share and such other terms that
are substantially similar to the terms of the warrants contemplated to be issued
pursuant to that certain Note Repurchase, Exchange and Termination Agreement
dated as of April 27, 2004, to purchase a number of shares of Common Stock equal
to (x) the principal amount of a Note, as the case may be, being prepaid,
multiplied by (y) 0.2056033 (the “Warrants”). The Warrants shall terminate, if
unexercised, on the consummation of the Change of Control . In the event that
any of the Warrants have been exercised on or prior to the third day prior to
the effectiveness of such Change of Control, Borrower shall make an offer to
prepay all of the Notes then outstanding for consideration equal to 100% of the
outstanding principal amount of any Note, as the case may be, being prepaid plus
accrued and unpaid interest on such prepaid principal amount to the prepayment
date. In the event that none of the Warrants have been exercised on or prior to
the third day prior to the effectiveness of such Change of Control, Borrower
shall make an offer to prepay all of the Notes then outstanding for
consideration equal to the Note Prepayment Price set forth in Section 4.2.
Provision shall be made such that any such exercise may be made contingent upon,
and contemporaneous with, such Change of Control. Borrower shall provide each
Holder with ten business days prior notice of the effectiveness of such Change
of Control.”

 

9.2                 Effectiveness of Amendment to Symphony Exchange Agreement. 
Notwithstanding anything to the contrary express or implied in this Section 9,
and subject to the provisions of Section 12 hereof, the foregoing amendment to
the Symphony Exchange Agreement shall be effective only upon the termination of
this Agreement by the Majority Noteholders pursuant to Section 8 hereof or, if
earlier, immediately prior to the consummation of a Change of Control (as
defined in the Symphony Exchange Agreement).

 

10.                                 AMENDMENT TO JMG AGREEMENT.

 

10.1.        AMENDMENT TO SECTION 4.3.3 OF JMG EXCHANGE AGREEMENT.  SUBJECT TO
SECTION 10.2 HEREOF, SECTION 4.3.3 OF THE JMG EXCHANGE AGREEMENT IS HEREBY
AMENDED BY ADDING THE FOLLOWING NEW PARAGRAPH TO THE END OF SECTION 4.3.3 AS IT
CURRENTLY EXISTS:

 

“Notwithstanding the foregoing or anything to the contrary herein, including but
not limited to Section 4.2 hereof, in the event that a Change of Control is
announced by the Company on or before October 3, 2004, upon the announcement by
the Company of such Change of Control, the Borrower shall issue to the Holders
warrants, having an exercise price of $1.85 per share and such other terms that
are substantially similar to the terms of the warrants contemplated to be issued
pursuant to that certain Note Repurchase, Exchange and Termination Agreement
dated as of April 27, 2004, to purchase a number of shares of Common Stock equal
to (x) the principal amount of a Note, as the case may

 

13

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be, being prepaid, multiplied by (y) 0.2056033 (the “Warrants”). The Warrants
shall terminate, if unexercised, on the the consummation of the Change of
Control. In the event that any of the Warrants have been exercised on or prior
to the third day prior to the effectiveness of such Change of Control, Borrower
shall make an offer to prepay all of the Notes then outstanding for
consideration equal to 100% of the outstanding principal amount of any Note, as
the case may be, being prepaid plus accrued and unpaid interest on such prepaid
principal amount to the prepayment date. In the event that none of the Warrants
have been exercised on or prior to the third day prior to the effectiveness of
such Change of Control, Borrower shall make an offer to prepay all of the Notes
then outstanding for consideration equal to the Note Prepayment Price set forth
in Section 4.2. Provision shall be made such that any such exercise may be made
contingent upon, and contemporaneous with, such Change of Control. Borrower
shall provide each Holder with ten business days prior notice of the
effectiveness of such Change of Control “

 

10.2           Effectiveness of Amendment to JMG Exchange Agreement. 
Notwithstanding anything to the contrary express or implied in this Section 10,
and subject to the provisions of Section 11 hereof, the foregoing amendment to
the JMG Exchange Agreement shall be effective only upon the termination of this
Agreement by the Noteholders pursuant to Section 8 hereof or, if earlier,
immediately prior to the consummation of a Change of Control (as defined in the
JMG Exchange Agreement).

 

11.                                 TERMINATION OF JMG EXCHANGE AGREEMENT. 
PURSUANT TO SECTION 14.4 OF THE JMG EXCHANGE AGREEMENT, EACH OF THE COMPANY AND
EACH OF THE NOTEHOLDERS THAT IS PARTY THERETO HEREBY AGREE THAT, EFFECTIVE
IMMEDIATELY PRIOR TO CONSUMMATION OF THE CLOSING, THE JMG EXCHANGE AGREEMENT
SHALL AUTOMATICALLY TERMINATE AND BE OF NO FURTHER FORCE AND THAT THE RESPECTIVE
RIGHTS AND OBLIGATIONS OF THE PARTIES THEREUNDER SHALL TERMINATE IN ALL
RESPECTS, WITH NO SURVIVING OBLIGATIONS OR LIABILITIES THEREUNDER ACCRUING TO
ANY PARTY THERETO

 

12.                                 TERMINATION OF SYMPHONY EXCHANGE AGREEMENT. 
PURSUANT TO SECTION 13.4 OF THE SYMPHONY EXCHANGE AGREEMENT, EACH OF THE COMPANY
AND EACH OF THE NOTEHOLDERS THAT IS PARTY THERETO HEREBY AGREE THAT, EFFECTIVE
IMMEDIATELY PRIOR TO CONSUMMATION OF THE CLOSING, THE SYMPHONY EXCHANGE
AGREEMENT SHALL AUTOMATICALLY TERMINATE AND BE OF NO FURTHER FORCE AND THAT THE
RESPECTIVE RIGHTS AND OBLIGATIONS OF THE PARTIES THEREUNDER SHALL TERMINATE IN
ALL RESPECTS, WITH NO SURVIVING OBLIGATIONS OR LIABILITIES THEREUNDER ACCRUING
TO ANY PARTY THERETO.

 

13.                                 GENERAL.

 

13.1.        NOTICES.  EXCEPT AS OTHERWISE EXPRESSLY PROVIDED HEREIN, ALL
NOTICES, REQUESTS, CONSENTS, AND OTHER COMMUNICATIONS UNDER THIS AGREEMENT SHALL
BE IN WRITING AND SHALL BE DEEMED DELIVERED (A) TWO BUSINESS DAYS AFTER BEING
SENT BY REGISTERED OR CERTIFIED MAIL, RETURN RECEIPT REQUESTED, POSTAGE PREPAID
OR (B) ONE BUSINESS DAY AFTER BEING SENT VIA A REPUTABLE NATIONWIDE OVERNIGHT
COURIER SERVICE GUARANTEEING NEXT BUSINESS DAY DELIVERY, IN EACH CASE TO THE
INTENDED RECIPIENT AS SET FORTH BELOW:

 

If to the Company, at 20 Second Avenue, Burlington, MA  01803, Attention:  Chief
Financial Officer, or at such other address or addresses as may have been
furnished in writing by

 

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the Company to the Noteholders, with a copy to Johan V. Brigham, Bingham
McCutchen LLP, 150 Federal Street, Boston, MA  02110; and

 

If to any Noteholder, at such address or addresses as may have been furnished to
the Company in writing by the applicable Noteholder.

 

Any party may give any notice, request, consent or other communication under
this Agreement using any other means (including personal delivery, messenger
service, facsimile, first class mail or electronic mail), but no such notice,
request, consent or other communication shall be deemed to have been duly given
unless and until it is actually received by the party for whom it is intended. 
Any party may change the address to which notices, requests, consents or other
communications hereunder are to be delivered by giving the other parties notice
in the manner set forth in this Section 13.1.

 

13.2.                        ASSIGNMENTS; PARTICIPATIONS.  THIS AGREEMENT SHALL
BE BINDING UPON AND INURE TO THE BENEFIT OF AND BE ENFORCEABLE BY THE RESPECTIVE
SUCCESSORS AND ASSIGNS OF THE PARTIES HERETO.

 

13.3.                        AMENDMENT OR WAIVER.  NEITHER THIS AGREEMENT NOR
ANY OTHER DOCUMENT NOR ANY TERMS HEREOF OR THEREOF MAY BE CHANGED, WAIVED,
DISCHARGED OR TERMINATED UNLESS SUCH CHANGE, WAIVER, DISCHARGE OR TERMINATION IS
IN WRITING SIGNED BY THE COMPANY AND THE MAJORITY NOTEHOLDERS.

 

13.4.                        NO WAIVER; REMEDIES CUMULATIVE.  NO FAILURE OR
DELAY ON THE PART OF ANY NOTEHOLDER IN EXERCISING ANY RIGHT, POWER OR PRIVILEGE
HEREUNDER OR UNDER ANY OTHER DOCUMENT AND NO COURSE OF DEALING BETWEEN THE
COMPANY AND ANY NOTEHOLDER SHALL OPERATE AS A WAIVER THEREOF; NOR SHALL ANY
SINGLE OR PARTIAL EXERCISE OF ANY RIGHT, POWER OR PRIVILEGE HEREUNDER OR UNDER
ANY OTHER DOCUMENT PRECLUDE ANY OTHER OR FURTHER EXERCISE THEREOF OR THE
EXERCISE OF ANY OTHER RIGHT, POWER OR PRIVILEGE HEREUNDER OR THEREUNDER.  THE
RIGHTS AND REMEDIES HEREIN EXPRESSLY PROVIDED ARE CUMULATIVE AND NOT EXCLUSIVE
OF ANY RIGHTS OR REMEDIES THAT A NOTEHOLDER WOULD OTHERWISE HAVE.  NO NOTICE TO
OR DEMAND ON THE COMPANY IN ANY CASE SHALL ENTITLE THE COMPANY TO ANY OTHER OR
FURTHER NOTICE OR DEMAND IN SIMILAR OR OTHER CIRCUMSTANCES OR CONSTITUTE A
WAIVER OF THE RIGHTS OF THE NOTEHOLDERS TO ANY OTHER OR FURTHER ACTION IN ANY
CIRCUMSTANCES WITHOUT NOTICE OR DEMAND.

 

13.5.                        NO STRICT CONSTRUCTION.  THE PARTIES HAVE
PARTICIPATED JOINTLY IN THE NEGOTIATION AND DRAFTING OF THIS AGREEMENT AND THE
OTHER DOCUMENTS WITH COUNSEL SOPHISTICATED IN FINANCING TRANSACTIONS.  IN THE
EVENT AN AMBIGUITY OR QUESTION OF INTENT OR INTERPRETATION ARISES, THIS
AGREEMENT AND THE OTHER DOCUMENTS SHALL BE CONSTRUED AS IF DRAFTED JOINTLY BY
THE PARTIES AND NO PRESUMPTION OR BURDEN OF PROOF SHALL ARISE FAVORING OR
DISFAVORING ANY PARTY BY VIRTUE OF THE AUTHORSHIP OF ANY PROVISIONS OF THIS
AGREEMENT AND THE OTHER DOCUMENTS.

 

13.6.                        INTERPRETATION; GOVERNING LAW; ETC.

 

13.6.1.               TIME IS (AND SHALL BE) OF THE ESSENCE IN THIS AGREEMENT
AND THE OTHER DOCUMENTS.  ALL COVENANTS, AGREEMENTS, REPRESENTATIONS AND
WARRANTIES MADE IN THIS

 

15

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AGREEMENT OR ANY OTHER DOCUMENT OR IN CERTIFICATES DELIVERED PURSUANT HERETO OR
THERETO SHALL BE DEEMED TO HAVE BEEN RELIED ON BY EACH NOTEHOLDER,
NOTWITHSTANDING ANY INVESTIGATION MADE BY ANY SUCH PARTY ON ITS BEHALF, AND
SHALL SURVIVE THE EXECUTION AND DELIVERY TO EACH SUCH PARTY HEREOF AND THEREOF. 
THE INVALIDITY OR UNENFORCEABILITY OF ANY PROVISION HEREOF SHALL NOT AFFECT THE
VALIDITY OR ENFORCEABILITY OF ANY OTHER PROVISION HEREOF, AND ANY INVALID OR
UNENFORCEABLE PROVISION SHALL BE MODIFIED SO AS TO BE ENFORCED TO THE MAXIMUM
EXTENT OF ITS VALIDITY OR ENFORCEABILITY. THIS AGREEMENT AND THE OTHER DOCUMENTS
CONSTITUTE THE ENTIRE UNDERSTANDING OF THE PARTIES WITH RESPECT TO THE SUBJECT
MATTER HEREOF AND THEREOF AND SUPERSEDE ALL PRIOR AND CONTEMPORANEOUS
UNDERSTANDINGS AND AGREEMENTS, WHETHER WRITTEN OR ORAL.

 

13.6.2.               THIS AGREEMENT, AND ANY ISSUE, CLAIM OR PROCEEDING ARISING
OUT OF, OR RELATING TO, THIS AGREEMENT OR ANY OTHER DOCUMENT OR THE CONDUCT OF
THE PARTIES HERETO, WHETHER NOW EXISTING OR HEREAFTER ARISING AND WHETHER IN
CONTRACT, TORT OR OTHERWISE, SHALL BE GOVERNED BY, AND SHALL BE CONSTRUED AND
ENFORCED IN ACCORDANCE WITH, THE LAWS OF THE COMMONWEALTH OF MASSACHUSETTS,
WITHOUT REGARD TO THE PRINCIPLES OF CONFLICTS OF LAWS.  ANY LEGAL ACTION OR
PROCEEDING WITH RESPECT TO THIS AGREEMENT OR ANY OTHER DOCUMENT MAY BE BROUGHT
IN ANY STATE OR FEDERAL COURT SITTING IN THE COMMONWEALTH OF MASSACHUSETTS, AND,
BY EXECUTION AND DELIVERY OF THIS AGREEMENT AND THE OTHER DOCUMENTS, AS
APPLICABLE, THE COMPANY IRREVOCABLY ACCEPTS FOR ITSELF AND IN RESPECT OF ITS
PROPERTY, GENERALLY AND UNCONDITIONALLY, THE NONEXCLUSIVE JURISDICTION OF THE
AFORESAID COURTS FOR SUCH ACTION OR PROCEEDING.  THE COMPANY FURTHER IRREVOCABLY
CONSENTS TO THE SERVICE OF PROCESS OUT OF ANY OF THE AFOREMENTIONED COURTS IN
ANY SUCH ACTION OR PROCEEDING BY THE MAILING OF COPIES THEREOF BY REGISTERED OR
CERTIFIED MAIL, POSTAGE PREPAID, TO THE COMPANY AT ITS ADDRESS FOR NOTICES
PURSUANT TO SECTION 13.1 HEREOF, SUCH SERVICE TO BECOME EFFECTIVE 15 DAYS AFTER
SUCH MAILING. NOTHING HEREIN SHALL AFFECT THE RIGHT OF ANY NOTEHOLDER TO SERVE
PROCESS IN ANY OTHER MANNER PERMITTED BY LAW OR TO COMMENCE LEGAL PROCEEDINGS OR
OTHERWISE PROCEED AGAINST THE COMPANY IN ANY OTHER JURISDICTION.

 

13.6.3.               THE COMPANY IRREVOCABLY WAIVES ANY OBJECTION WHICH IT MAY
NOW OR HEREAFTER HAVE TO THE VENUE OF ANY OF THE AFORESAID ACTIONS OR
PROCEEDINGS ARISING OUT OF, OR IN CONNECTION WITH, THIS AGREEMENT OR ANY OTHER
DOCUMENT BROUGHT IN THE COURTS REFERRED TO IN SECTION 13.6.2 ABOVE AND FURTHER
IRREVOCABLY WAIVES AND AGREES NOT TO PLEAD OR CLAIM IN ANY SUCH COURT THAT ANY
SUCH ACTION OR PROCEEDING BROUGHT IN ANY SUCH COURT HAS BEEN BROUGHT IN AN
INCONVENIENT FORUM.

 

13.6.4.               EACH OF THE PARTIES TO THIS AGREEMENT WAIVES TO THE EXTENT
NOT PROHIBITED BY APPLICABLE LAW THAT CANNOT BE WAIVED ANY RIGHT IT MAY HAVE TO
CLAIM OR RECOVER IN ANY LEGAL ACTION OR PROCEEDING ANY SPECIAL, EXEMPLARY,
PUNITIVE OR CONSEQUENTIAL DAMAGES.

 

13.7.                        WAIVER OF JURY TRIAL.  TO THE EXTENT NOT PROHIBITED
BY APPLICABLE LAW THAT CANNOT BE WAIVED, EACH OF THE PARTIES HERETO WAIVES, AND
COVENANTS THAT IT WILL NOT ASSERT (WHETHER AS PLAINTIFF, DEFENDANT OR
OTHERWISE), ANY RIGHT TO TRIAL BY JURY IN ANY FORUM IN RESPECT OF ANY ISSUE,
CLAIM OR PROCEEDING ARISING OUT OF THIS AGREEMENT OR ANY OTHER DOCUMENT OR THE
SUBJECT MATTER HEREOF OR THEREOF OR ANY OBLIGATION OR IN ANY WAY CONNECTED WITH
THE DEALINGS OF THE NOTEHOLDERS OR THE COMPANY IN CONNECTION WITH ANY

 

16

--------------------------------------------------------------------------------

 

OF THE ABOVE, IN EACH CASE WHETHER NOW EXISTING OR HEREAFTER ARISING AND WHETHER
IN CONTRACT, TORT OR OTHERWISE.  THE COMPANY ACKNOWLEDGES THAT IT HAS BEEN
INFORMED BY THE NOTEHOLDERS THAT THE FOREGOING SENTENCE CONSTITUTES A MATERIAL
INDUCEMENT UPON WHICH EACH OF THE NOTEHOLDERS HAS RELIED AND WILL RELY IN
ENTERING INTO THIS AGREEMENT AND ANY OTHER DOCUMENT.  ANY PARTY HERETO MAY FILE
AN ORIGINAL COUNTERPART OR A COPY OF THIS AGREEMENT WITH ANY COURT AS WRITTEN
EVIDENCE OF THE CONSENT OF EACH OF THE PARTIES HERETO TO THE WAIVER OF THEIR
RIGHTS TO TRIAL BY JURY.

 

13.8.                        ENTIRE
AGREEMENT.                                                THE AGREEMENT CONTAINS
THE ENTIRE UNDERSTANDING OF THE PARTIES HERETO WITH RESPECT TO THE SUBJECT
MATTER HEREOF.  ALL EXPRESS OR IMPLIED AGREEMENTS AND UNDERSTANDINGS, EITHER
ORAL OR WRITTEN, HERETOFORE MADE ARE EXPRESSLY MERGED IN AND MADE A PART OF THIS
AGREEMENT.

 

13.9.                        COUNTERPARTS.  THIS AGREEMENT MAY BE EXECUTED IN
ANY NUMBER OF COUNTERPARTS AND BY THE DIFFERENT PARTIES HERETO ON SEPARATE
COUNTERPARTS, EACH OF WHICH WHEN SO EXECUTED AND DELIVERED SHALL BE AN ORIGINAL,
BUT ALL OF WHICH SHALL TOGETHER CONSTITUTE ONE AND THE SAME INSTRUMENT.  A SET
OF COUNTERPARTS EXECUTED BY ALL THE PARTIES HERETO SHALL BE LODGED WITH THE
COMPANY AND EACH NOTEHOLDER.

 

13.10.                  EXECUTION.  THIS AGREEMENT SHALL BECOME EFFECTIVE ON THE
DATE (THE “EFFECTIVE DATE”) ON WHICH EACH OF THE COMPANY AND THE NOTEHOLDERS
SHALL HAVE SIGNED A COPY HEREOF (WHETHER THE SAME OR DIFFERENT COPIES) AND SHALL
HAVE DELIVERED THE SAME TO ONE ANOTHER.

 

13.11.                  HEADINGS DESCRIPTIVE.  THE HEADINGS OF THE SEVERAL
SECTIONS AND SUBSECTIONS OF THIS AGREEMENT ARE INSERTED FOR CONVENIENCE ONLY AND
SHALL NOT IN ANY WAY AFFECT THE MEANING OR CONSTRUCTION OF ANY PROVISION OF THIS
AGREEMENT.

 

[Signature pages follow]

 

17

--------------------------------------------------------------------------------

 

Each of the parties hereto has caused a counterpart of this Agreement to be duly
executed and delivered as of the date first above written.

 

THE COMPANY:

 

 

 

 

iBASIS, INC.

 

 

 

 

 

By:

     /s/ Ofer Gneezy

 

 

 

Name:  Ofer Gneezy

 

 

Title:  President and CEO

 

 

THE NOTEHOLDERS:

 

 

 

 

RHAPSODY FUND, LP

 

 

 

By Symphony Asset Management LLC, as General
Partner

 

 

 

 

 

By:

     /s/ Neil Rudolph

 

 

 

Name:  Neil Rudolph

 

 

Title:  Chief Operating Officer and GP

 

 

 

 

 

ARPEGGIO FUND

 

 

 

By Symphony Asset Management LLC, as
Investment Advisor

 

 

 

 

 

By:

     /s/ Neil Rudolph

 

 

 

Name:  Neil Rudolph

 

 

Title:  Chief Operating Officer

 

 

 

 

 

INTERNATIONAL MONETARY FUND -
CONVERTIBLE ARBITRAGE ACCOUNT

 

 

 

By Symphony Asset Management LLC, as
Investment Advisor

 

 

 

 

 

By:

     /s/ Neil Rudolph

 

 

 

Name:  Neil Rudolph

 

 

Title:  Chief Operating Officer

 

--------------------------------------------------------------------------------

 

 

CSV LIMITED

 

By Symphony Asset Management LLC, as
Investment Advisor

 

 

 

 

 

By:

     /s/ Neil Rudolph

 

 

 

Name:  Neil Rudolph

 

 

Title:  Chief Operating Officer

 

 

 

 

 

ANDANTE FUND, LP

 

 

 

By Symphony Asset Management LLC, as General
Partner

 

 

 

 

 

By:

     /s/ Neil Rudolph

 

 

 

Name:  Neil Rudolph

 

 

Title:  Chief Operating Officer and GP

 

 

 

 

 

VIVACE FUND, LP

 

 

 

By Symphony Asset Management LLC, as General
Partner

 

 

 

 

 

By:

     /s/ Neil Rudolph

 

 

 

Name:  Neil Rudolph

 

 

Title:  Chief Operating Officer and GP

 

--------------------------------------------------------------------------------

 

 

ADAGIO FUND

 

 

 

By Symphony Asset Management LLC, as
Investment Advisor

 

 

 

 

 

By:

     /s/ Neil Rudolph

 

 

 

Name:  Neil Rudolph

 

 

Title:  Chief Operating Officer

 

 

 

 

 

JMG TRITON OFFSHORE FUND LIMITED CITCO

 

 

 

 

 

By:

     /s/ Jonathan Glaser

 

 

 

Name:  Jonathan Glaser

 

 

Title:  managing Member of the Investment Advisor

 

 

 

 

 

WINDWARD CAPITAL LLC

 

 

 

 

 

By:

     /s/ Kim S. Morris

 

 

 

Name:  Kim Morris

 

 

Title:  Portfolio Manager

 

--------------------------------------------------------------------------------

 

Schedule 1

 

NOTEHOLDERS

 

Noteholder

 

Principal Amount of Note to
be Retired

 

Warrant Shares

 

Rhapsody Fund, LP

 

$

6,525,000

 

1,341,562

 

Arpeggio Fund

 

$

5,875,000

 

1,207,920

 

International Arbitrary Fund – Convertible Arbitrage Account

 

$

500,000

 

102,802

 

CSV Limited

 

$

450,000

 

92,522

 

Andante Fund, LP

 

$

850,000

 

174,763

 

Vivace Fund, LP

 

$

750,000

 

154,202

 

Adagio Fund

 

$

150,000

 

30,840

 

JMG Triton Offshore Fund Limited CITCO

 

$

3,975,000

 

817,273

 

Windward Capital LLC

 

$

6,100,000

 

1,254,181

 

   TOTAL:

 

$

25,175,000.00

 

5,176,065

 

 

--------------------------------------------------------------------------------

 

Schedule 5.4

 

CAPITALIZATION

 

 

 

Number of Common Shares

 

As of April 26, 2004

 

 

 

 

 

 

 

Issued and outstanding

 

45,881,329

 

Outstanding (unexercised) stock options

 

6,297,914

 

Available for future grant under stock option plan

 

1,464,214

 

Underlying outstanding warrants

 

4,187,789

 

Issuable upon conversion of 5 ¾% Convertible Subordinated Notes

 

443,232

 

Total shares on a fully diluted basis

 

58,274,478

 

 

--------------------------------------------------------------------------------

 

EXHIBIT A

 

FORM OF WARRANT AGREEMENT

 

 

iBASIS, INC.

 

and

 

U.S. BANK NATIONAL ASSOCIATION,

 

as

 

Warrant Agent

 

--------------------------------------------------------------------------------

 

2004 WARRANT AND REGISTRATION RIGHTS AGREEMENT

 

Dated as of           , 2004

 

--------------------------------------------------------------------------------

 

WARRANT AND REGISTRATION RIGHTS AGREEMENT

 

TABLE OF CONTENTS

 

Section 1.

Appointment of Warrant Agent

 

Section 2.

Warrant Certificates; Warrant Shares

 

Section 3.

Execution of Warrant Certificates and Warrant Share Certificates

 

Section 4.

Registration and Countersignature

 

Section 5.

Transfer and Exchange of Warrants

 

Section 6.

Registration of Transfers and Exchanges.

 

 

6.1.

Transfer and Exchange of Physical Warrants

 

 

6.2.

Restrictions on Transfer of Physical Warrants for a Beneficial Interest in a
Global Warrant

 

 

6.3.

Transfer and Exchange of Global Warrants

 

 

6.4.

Transfer of a Beneficial Interest in a Global Warrant for a Physical Warrant.

 

 

6.5.

Restrictions on Transfer and Exchange of Global Warrants

 

 

6.6.

Authentication of Definitive Warrants in Absence of Depository

 

 

6.7.

Legends

 

 

6.8.

Cancellation and/or Adjustment of a Global Warrant

 

Section 7.

Issuance of Warrants; Terms of Warrants: Exercise of Warrants.

 

 

7.1.

Method of Exercise; Payment, Issuance of New Warrant; Transfer and Exchange.

 

 

7.2.

Warrantholder Representations

 

 

7.3.

Stock Fully Paid; Reservation of Shares

 

 

7.4.

Adjustment of Exercise Price and Number of Shares.

 

 

7.5.

Adjustments for Consolidation, Merger, Sale of Assets, Reorganization, etc

 

 

7.6.

Notice of Adjustments

 

 

7.7.

No Rights or Liabilities as Stockholder

 

Section 8.

Registration Rights

 

 

8.1.

Demand Registration Rights.

 

 

8.2.

Piggyback Registration Rights.

 

 

8.3.

Certain Other Provisions.

 

 

8.4.

Indemnification and Contribution.

 

 

8.5.

Reports Under Exchange Act

 

Section 9.

Definitions

 

Section 10.

Payment of Taxes

 

Section 11.

Mutilated or Missing Warrant Certificates and Warrant Share Certificates

 

Section 12.

Fractional Interests.

 

Section 13.

Merger, Consolidation or Change of Name of Warrant Agent

 

Section 14.

Warrant Agent

 

Section 15.

Change of Warrant Agent

 

Section 16.

Notices to Company and Warrant Agent

 

Section 17.

Supplements and Amendments

 

Section 18.

Successors

 

Section 19.

Survival of Registration Rights Provisions, Warrant Agent Provisions

 

 

--------------------------------------------------------------------------------

 

Section 20.

Governing Law; Submission to Jurisdiction: Waiver of Jury Trial

 

Section 21.

Exercise of Rights and Remedies

 

Section 22.

Benefits of This Agreement

 

Section 23.

Counterparts

 

 

--------------------------------------------------------------------------------

 

2004 WARRANT AND REGISTRATION RIGHTS AGREEMENT (this “Agreement”), dated as
of             , 2004, between iBasis, Inc., a Delaware (the “Company”), and
U.S. Bank National Association, as Warrant Agent (the “Warrant Agent”).

 

WHEREAS, the Company proposes to issue Warrants, as hereinafter described (the
“Warrants”), which in the aggregate initially entitle the holders of the
Warrants to purchase, at an Initial Exercise Price of $1.85 per share, 5,176,065
shares of Common Stock, par value $0.001 per share, of the Company (the Common
Stock issuable on exercise of any Warrant being referred to herein as the
“Warrant Shares”), in connection with the execution of that certain Note
Repurchase, Exchange and Amendment Agreement (as amended, supplemented and
otherwise modified from time to time, the “Exchange Agreement”), dated as of
April 27, 2004, by and among the Company and the Required Holders named therein.

 

WHEREAS, upon exercise of any Warrants, the Warrantholder shall own Warrant
Shares, which shall continue to be subject to the terms of this Agreement.

 

WHEREAS, the Warrant Shares shall have certain registration rights as provided
herein.

 

WHEREAS, the Company desires the Warrant Agent to act on behalf of the Company,
and the Warrant Agent is willing so to act, in connection with the issuance,
transfer, exchange and exercise of Warrants, and the issue, transfer and
exchange of the Warrant Shares, and other matters as provided herein.

 

NOW, THEREFORE, in consideration of the premises and the mutual agreements
herein set forth, the parties hereto agree as follows:

 

SECTION 1.  APPOINTMENT OF WARRANT AGENT.  THE COMPANY HEREBY APPOINTS THE
WARRANT AGENT TO ACT AS AGENT FOR THE COMPANY IN ACCORDANCE WITH THE
INSTRUCTIONS SET FORTH HEREINAFTER IN THIS AGREEMENT, AND THE WARRANT AGENT
HEREBY ACCEPTS SUCH APPOINTMENT.

 

SECTION 2.  WARRANT CERTIFICATES; WARRANT SHARES.  THE CERTIFICATES EVIDENCING
THE WARRANTS (THE “WARRANT CERTIFICATES”) TO BE DELIVERED PURSUANT TO THIS
AGREEMENT SHALL BE IN FULLY REGISTERED FORM ONLY AND SHALL INITIALLY BE
REPRESENTED BY ONE OR MORE GLOBAL WARRANTS (EACH, A “GLOBAL WARRANT”),
SUBSTANTIALLY IN THE FORM OF EXHIBIT A ATTACHED HERETO, REGISTERED IN THE NAME
OF THE DEPOSITORY TRUST COMPANY (THE “DEPOSITORY”) OR ITS NOMINEE AND DELIVERED
TO THE WARRANT AGENT, AS CUSTODIAN FOR THE DEPOSITORY AND RECORDED IN THE
BOOK-ENTRY SYSTEM MAINTAINED BY THE DEPOSITORY.  UPON WRITTEN REQUEST, A
BENEFICIAL OWNER OF AN INTEREST IN A GLOBAL WARRANT WILL BE ENTITLED TO RECEIVE
A PHYSICAL CERTIFICATE REPRESENTING SUCH INTEREST (A “PHYSICAL WARRANT”), AS
PROVIDED IN SECTION 6 HEREOF.  EACH GLOBAL WARRANT SHALL REPRESENT SUCH OF THE
OUTSTANDING WARRANTS AS SHALL BE SPECIFIED THEREIN AND EACH SHALL PROVIDE THAT
IT SHALL REPRESENT THE AGGREGATE AMOUNT OF OUTSTANDING WARRANTS FROM TIME TO
TIME ENDORSED THEREON AND THAT THE AGGREGATE AMOUNT OF OUTSTANDING WARRANTS
REPRESENTED THEREBY MAY FROM TIME TO TIME BE REDUCED OR INCREASED, AS
APPROPRIATE.  ANY ENDORSEMENT OF A GLOBAL WARRANT TO REFLECT THE AMOUNT OF ANY
INCREASE OR DECREASE IN THE AMOUNT OF WARRANT SHARES REPRESENTED THEREBY SHALL
BE MADE BY THE WARRANT AGENT AND THE DEPOSITORY IN ACCORDANCE WITH INSTRUCTIONS
GIVEN BY THE HOLDER THEREOF.  THE CERTIFICATES EVIDENCING THE WARRANT SHARES TO
BE DELIVERED UPON EXERCISE OF A

 

--------------------------------------------------------------------------------

 

WARRANT (THE “WARRANT SHARE CERTIFICATES”) SHALL BE SUBSTANTIALLY IN THE FORM OF
THE SPECIMEN CERTIFICATE ATTACHED HERETO AS EXHIBIT B.

 

SECTION 3.  EXECUTION OF WARRANT CERTIFICATES AND WARRANT SHARE CERTIFICATES. 
WARRANT CERTIFICATES SHALL BE SIGNED ON BEHALF OF THE COMPANY BY ITS PRESIDENT
OR A VICE PRESIDENT AND BY ITS SECRETARY OR AN ASSISTANT SECRETARY. EACH SUCH
SIGNATURE UPON THE WARRANT CERTIFICATES MAY BE IN THE FORM OF A FACSIMILE
SIGNATURE OF THE PRESENT OR ANY FUTURE PRESIDENT, VICE PRESIDENT, SECRETARY OR
ASSISTANT SECRETARY AND MAY BE IMPRINTED OR OTHERWISE REPRODUCED ON THE WARRANT
CERTIFICATES AND FOR THAT PURPOSE THE COMPANY MAY ADOPT AND USE THE FACSIMILE
SIGNATURE OF ANY PERSON WHO SHALL HAVE BEEN PRESIDENT, VICE PRESIDENT, SECRETARY
OR ASSISTANT SECRETARY, NOTWITHSTANDING THE FACT THAT AT THE TIME THE WARRANT
CERTIFICATES SHALL BE COUNTERSIGNED AND DELIVERED OR DISPOSED OF HE OR SHE SHALL
HAVE CEASED TO HOLD SUCH OFFICE.

 

In case any officer of the Company who shall have signed any of the Warrant
Certificates shall cease to be such officer before the Warrant Certificates so
signed shall have been countersigned by the Warrant Agent, or disposed of by the
Company, such Warrant Certificates nevertheless may be countersigned and
delivered or disposed of as though such person had not ceased to be such officer
of the Company; and any Warrant Certificate may be signed on behalf of the
Company by any person who, at the actual date of the execution of such Warrant
Certificate, shall be a proper officer of the Company to sign such Warrant
Certificate, although at the date of the execution of this Warrant Agreement any
such person was not such officer.

 

Warrant Certificates shall be dated the date of countersignature by the Warrant
Agent.

 

The Warrant Share Certificates shall be executed in accordance with the by-laws
of the Company.

 

SECTION 4.  REGISTRATION AND COUNTERSIGNATURE.  THE WARRANTS SHALL BE NUMBERED
AND SHALL BE REGISTERED ON THE BOOKS OF THE COMPANY MAINTAINED AT THE PRINCIPAL
OFFICE OF THE WARRANT AGENT IN BOSTON, MASSACHUSETTS (THE “WARRANT REGISTER”) AS
THEY ARE ISSUED.

 

Warrant Certificates shall be manually countersigned by the Warrant Agent and
shall not be valid for any purpose unless so countersigned. The Warrant Agent
shall, upon written instructions of the President, a Vice President, the
Treasurer or the Chief Financial Officer of the Company, initially countersign,
issue and deliver such number of Warrants as are set forth in such written
instructions, and the Warrant Agent shall be fully protected in conclusively
relying on such written instructions.  Such written instructions shall not
instruct the Warrant Agent to countersign Warrants entitling the holders thereof
to purchase more than the number of Warrant Shares referred to above in the
first recital hereof.  The Warrant Agent shall also countersign and deliver
Warrants as otherwise provided in this Agreement. 

The Company and the Warrant Agent may deem and treat the registered holder(s) of
the Warrant Certificates and the Warrant Shares as the absolute owner(s) thereof
(notwithstanding any notation of ownership or other writing thereon made by
anyone), for all purposes, and neither the Company nor the Warrant Agent shall
be affected by any notice to the contrary.

 

SECTION 5.  TRANSFER AND EXCHANGE OF WARRANTS.  THE WARRANT AGENT SHALL FROM
TIME TO TIME, SUBJECT TO THE LIMITATIONS SET FORTH IN SECTION 6 HEREOF, REGISTER
THE TRANSFER OF ANY

 

2

--------------------------------------------------------------------------------

 

OUTSTANDING WARRANTS UPON THE RECORDS TO BE MAINTAINED BY IT FOR THAT PURPOSE,
UPON SURRENDER THEREOF DULY ENDORSED OR ACCOMPANIED (IF SO REQUIRED BY IT) BY A
WRITTEN INSTRUMENT OR INSTRUMENTS OF TRANSFER IN FORM SATISFACTORY TO THE
WARRANT AGENT, DULY EXECUTED BY THE REGISTERED WARRANTHOLDER OR WARRANTHOLDERS
THEREOF OR BY THE DULY APPOINTED LEGAL REPRESENTATIVE THEREOF OR BY A DULY
AUTHORIZED ATTORNEY.  SUBJECT TO THE TERMS OF THIS AGREEMENT, EACH WARRANT
CERTIFICATE MAY BE EXCHANGED FOR ANOTHER CERTIFICATE OR CERTIFICATES ENTITLING
THE WARRANTHOLDER THEREOF TO PURCHASE A LIKE AGGREGATE NUMBER OF WARRANT SHARES
AS THE CERTIFICATE OR CERTIFICATES SURRENDERED THEN ENTITLE SUCH WARRANTHOLDER
TO PURCHASE.  ANY WARRANTHOLDER DESIRING TO EXCHANGE A WARRANT CERTIFICATE OR
WARRANT CERTIFICATES SHALL MAKE SUCH REQUEST IN WRITING DELIVERED TO THE WARRANT
AGENT, AND SHALL SURRENDER, DULY ENDORSED OR ACCOMPANIED (IF SO REQUIRED BY THE
WARRANT AGENT) BY A WRITTEN INSTRUMENT OR INSTRUMENTS OF TRANSFER IN FORM
SATISFACTORY TO THE WARRANT AGENT, THE WARRANT CERTIFICATE OR WARRANT
CERTIFICATES TO BE SO EXCHANGED.

 

Upon registration of transfer, the Warrant Agent shall countersign and deliver
by certified mail a new Warrant Certificate or Warrant Certificates to the
Persons entitled thereto. The Warrant Certificates may be exchanged at the
option of the Warrantholder thereof, when surrendered at the office or agency of
the Company maintained for such purpose, which initially will be the corporate
trust office of the Warrant Agent in Boston, Massachusetts for another Warrant
Certificate, or other Warrant Certificates of different denominations, of like
tenor and representing in the aggregate the right to purchase a like number of
Warrant Shares.

 

No service charge shall be made for any exchange or registration of transfer of
Warrant Certificates, but the Company may require payment of a sum sufficient to
cover any stamp or other tax or other governmental charge that is imposed in
connection with any such exchange or registration of transfer.

 

SECTION 6.  REGISTRATION OF TRANSFERS AND EXCHANGES.

 

6.1.  TRANSFER AND EXCHANGE OF PHYSICAL WARRANTS.  WHEN PHYSICAL WARRANTS ARE
PRESENTED TO THE WARRANT AGENT WITH A REQUEST:

 

(I)                                  TO REGISTER THE TRANSFER OF THE PHYSICAL
WARRANTS; OR

 

(II)                               TO EXCHANGE SUCH PHYSICAL WARRANTS FOR AN
EQUAL NUMBER OF PHYSICAL WARRANTS OF OTHER AUTHORIZED DENOMINATIONS,

 

the Warrant Agent shall register the transfer or make the exchange as requested
if the requirements under this Agreement as set forth in this Section 6 for such
transactions are met; provided, however, that the Physical Warrants presented or
surrendered for registration of transfer or exchange:

 

(1)                                  shall be duly endorsed or accompanied by a
written instrument of transfer in form satisfactory to the Warrant Agent, duly
executed by the Warrantholder thereof or his attorney duly authorized in
writing; and

 

(2)                                  in the case of Physical Warrants the offer
and sale of which have not been registered under the Securities Act, such
Physical Warrants shall be accompanied,

 

3

--------------------------------------------------------------------------------

 

in the sole discretion of the Company, by the following additional information
and documents, as applicable:

 

(A)                              if such Physical Warrants are being delivered
to the Warrant Agent by a holder for registration in the name of such holder,
without transfer, a certification from such holder to that effect (in
substantially the form of Exhibit C attached hereto); or

 

(B)                                if such Physical Warrants are being
transferred to a “qualified institutional buyer” (as defined in Rule 144A under
the Securities Act (a “Qualified Institutional Buyer”)) in accordance with Rule
144A under the Securities Act., a certification to that effect (in substantially
the form of Exhibit C attached hereto).

 

6.2.  RESTRICTIONS ON TRANSFER OF PHYSICAL WARRANTS FOR A BENEFICIAL INTEREST IN
A GLOBAL WARRANT.  A PHYSICAL WARRANT MAY NOT BE EXCHANGED FOR A BENEFICIAL
INTEREST IN A GLOBAL WARRANT EXCEPT UPON SATISFACTION OF THE REQUIREMENTS SET
FORTH BELOW. UPON RECEIPT BY THE WARRANT AGENT OF A PHYSICAL WARRANT, DULY
ENDORSED OR ACCOMPANIED BY APPROPRIATE INSTRUMENTS OF TRANSFER, IN FORM
SATISFACTORY TO THE WARRANT AGENT, TOGETHER WITH:

 

(A)                              a certification, in substantially the form of
Exhibit C attached hereto, that such Physical Warrant is being transferred to a
Qualified Institutional Buyer; and

 

(B)                                written instructions directing the Warrant
Agent to make, or to direct the Depository to make, an endorsement on the Global
Warrant to reflect an increase in the aggregate amount of the Warrants
represented by the Global Warrant,

 

then the Warrant Agent shall cancel such Physical Warrant and cause, or direct
the Depository to cause, in accordance with the standing instructions and
procedures existing between the Depository and the Warrant Agent, the number of
Warrants represented by the Global Warrant to be increased accordingly.  If no
Global Warrant is then outstanding, the Company shall issue and the Warrant
Agent shall upon written instructions from the Company authenticate a new Global
Warrant in the appropriate amount.

 

6.3.  TRANSFER AND EXCHANGE OF GLOBAL WARRANTS.  THE TRANSFER AND EXCHANGE OF
GLOBAL WARRANTS OR BENEFICIAL INTERESTS THEREIN SHALL BE EFFECTED THROUGH THE
DEPOSITORY, IN ACCORDANCE WITH THIS AGREEMENT (INCLUDING THE RESTRICTIONS ON
TRANSFER SET FORTH HEREIN) AND THE PROCEDURES OF THE DEPOSITORY THEREFORE.

 

6.4.  TRANSFER OF A BENEFICIAL INTEREST IN A GLOBAL WARRANT FOR A PHYSICAL
WARRANT.

 

6.4.1.  ANY PERSON HAVING A BENEFICIAL INTEREST IN A GLOBAL WARRANT MAY UPON
REQUEST EXCHANGE SUCH BENEFICIAL INTEREST FOR A PHYSICAL WARRANT. UPON RECEIPT
BY THE WARRANT AGENT OF WRITTEN INSTRUCTIONS OR SUCH OTHER FORM OF INSTRUCTIONS
AS IS CUSTOMARY FOR THE DEPOSITORY FROM THE DEPOSITORY OR ITS NOMINEE

 

4

--------------------------------------------------------------------------------

 

ON BEHALF OF ANY PERSON HAVING A BENEFICIAL INTEREST IN A GLOBAL WARRANT AND
UPON RECEIPT BY THE WARRANT AGENT OF A WRITTEN ORDER OR SUCH OTHER FORM OF
INSTRUCTIONS AS IS CUSTOMARY FOR THE DEPOSITORY OR THE PERSON DESIGNATED BY THE
DEPOSITORY AS HAVING SUCH A BENEFICIAL INTEREST CONTAINING REGISTRATION
INSTRUCTIONS AND, IN THE CASE OF ANY SUCH TRANSFER OR EXCHANGE OF A BENEFICIAL
INTEREST IN A GLOBAL WARRANT THE OFFER AND SALE OF WHICH HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT, THE FOLLOWING ADDITIONAL INFORMATION AND
DOCUMENTS:

 

(A)                              if such beneficial interest is being
transferred to the Person designated by the Depository as being the beneficial
owner, a certification from such person to that effect (in substantially the
form of Exhibit C attached hereto); or

 

(B)                                if such beneficial interest is being
transferred to a Qualified Institutional Buyer in accordance with Rule 144A
under the Securities Act, a certification to that effect (in substantially the
form of Exhibit C attached hereto),

 

then the Warrant Agent will cause, in accordance with the standing instructions
and procedures existing between the Depository and the Warrant Agent, the
aggregate amount of the Global Warrant to be reduced and, following such
reduction, the Company will execute and, upon receipt of an authentication order
in the form of an officers’ certificate, the Warrant Agent will authenticate and
deliver to the transferee a Physical Warrant.

 

6.4.2.  PHYSICAL WARRANTS ISSUED IN EXCHANGE FOR A BENEFICIAL INTEREST IN A
GLOBAL WARRANT PURSUANT TO THIS SECTION 6.4 SHALL BE REGISTERED IN SUCH NAMES
AND IN SUCH AUTHORIZED DENOMINATIONS AS THE DEPOSITORY, PURSUANT TO INSTRUCTIONS
FROM ITS DIRECT OR INDIRECT PARTICIPANTS OR OTHERWISE, SHALL INSTRUCT THE
WARRANT AGENT IN WRITING. THE WARRANT AGENT SHALL DELIVER SUCH PHYSICAL WARRANTS
TO THE PERSONS IN WHOSE NAMES SUCH PHYSICAL WARRANTS ARE SO REGISTERED.

 

6.5.  RESTRICTIONS ON TRANSFER AND EXCHANGE OF GLOBAL WARRANTS.  NOTWITHSTANDING
ANY OTHER PROVISIONS OF THIS AGREEMENT, A GLOBAL WARRANT MAY NOT BE TRANSFERRED
AS A WHOLE EXCEPT BY THE DEPOSITORY TO A NOMINEE OF THE DEPOSITORY OR BY A
NOMINEE OF THE DEPOSITORY TO THE DEPOSITORY OR ANOTHER NOMINEE OF THE DEPOSITORY
OR BY THE DEPOSITORY OR ANY SUCH NOMINEE TO A SUCCESSOR DEPOSITORY OR A NOMINEE
OF SUCH SUCCESSOR DEPOSITORY.

 

6.6.  AUTHENTICATION OF DEFINITIVE WARRANTS IN ABSENCE OF DEPOSITORY.  IF AT ANY
TIME THE DEPOSITORY FOR THE WARRANTS NOTIFIES THE COMPANY THAT THE DEPOSITORY IS
UNWILLING OR UNABLE TO CONTINUE AS DEPOSITORY FOR THE GLOBAL WARRANTS AND A
SUCCESSOR DEPOSITORY FOR THE GLOBAL WARRANTS CANNOT BE APPOINTED BY THE COMPANY
WITHIN 90 DAYS AFTER DELIVERY OF SUCH NOTICE, THEN THE COMPANY WILL EXECUTE, AND
THE WARRANT AGENT, UPON WRITTEN INSTRUCTIONS FROM THE COMPANY REQUESTING THE
AUTHENTICATION AND DELIVERY OF PHYSICAL WARRANTS AS A RESULT OF THE INABILITY TO
RETAIN A SUCCESSOR DEPOSITORY, WILL

 

5

--------------------------------------------------------------------------------

 

AUTHENTICATE AND DELIVER PHYSICAL WARRANTS, IN AN AGGREGATE NUMBER EQUAL TO THE
AGGREGATE NUMBER OF WARRANTS REPRESENTED BY THE GLOBAL WARRANTS, IN EXCHANGE FOR
SUCH HOLDER’S BENEFICIAL INTEREST IN GLOBAL WARRANTS.

 

6.7.  LEGENDS.  FOR SO LONG AS TRANSFER OF A WARRANT IS NOT PERMITTED WITHOUT
REGISTRATION UNDER THE SECURITIES ACT, EACH WARRANT CERTIFICATE EVIDENCING SUCH
WARRANT (AND ALL WARRANTS ISSUED IN EXCHANGE THEREFOR OR SUBSTITUTION THEREOF)
SHALL BEAR A LEGEND SUBSTANTIALLY TO THE FOLLOWING EFFECT:

 

“THIS SECURITY HAS NOT BEEN REGISTERED UNDER THE UNITED STATES SECURITIES ACT OF
1933, AS AMENDED (THE “SECURITIES ACT”), AND, ACCORDINGLY, MAY NOT BE OFFERED OR
SOLD EXCEPT AS SET FORTH BELOW.  BY ITS ACQUISITION HEREOF, THE HOLDER (1)
REPRESENTS THAT IT IS A “QUALIFIED INSTITUTIONAL BUYER” (AS DEFINED IN RULE 144A
UNDER THE SECURITIES ACT), (2) AGREES THAT IT WILL NOT WITHIN TWO YEARS AFTER
THE ORIGINAL ISSUANCE OF THIS SECURITY RESELL OR OTHERWISE TRANSFER THIS
SECURITY EXCEPT (A) TO THE ISSUER OR ANY SUBSIDIARY THEREOF, (B) TO A QUALIFIED
INSTITUTIONAL BUYER IN COMPLIANCE WITH RULE 144A UNDER THE SECURITIES ACT, OR
(C) PURSUANT TO A REGISTRATION STATEMENT WHICH HAS BEEN DECLARED EFFECTIVE UNDER
THE SECURITIES ACT (AND WHICH CONTINUES TO BE EFFECTIVE AT THE TIME OF SUCH
TRANSFER) AND (3) AGREES THAT IT WILL DELIVER TO EACH PERSON TO WHOM THIS
SECURITY IS TRANSFERRED A NOTICE SUBSTANTIALLY TO THE EFFECT OF THIS LEGEND.”

 

6.8.  CANCELLATION AND/OR ADJUSTMENT OF A GLOBAL WARRANT.  AT SUCH TIME AS ALL
BENEFICIAL INTERESTS IN A GLOBAL WARRANT HAVE EITHER BEEN EXCHANGED FOR PHYSICAL
WARRANTS, REDEEMED, REPURCHASED OR CANCELLED, SUCH GLOBAL WARRANT SHALL BE
RETURNED TO OR RETAINED AND CANCELLED BY THE WARRANT AGENT.  AT ANY TIME PRIOR
TO SUCH CANCELLATION, IF ANY BENEFICIAL INTEREST IN A GLOBAL WARRANT IS
EXCHANGED FOR PHYSICAL WARRANTS, REDEEMED, REPURCHASED OR CANCELLED, THE NUMBER
OF WARRANTS REPRESENTED BY SUCH GLOBAL WARRANT SHALL BE REDUCED AND AN
ENDORSEMENT SHALL BE MADE ON SUCH GLOBAL WARRANT, BY THE WARRANT AGENT TO
REFLECT SUCH REDUCTION.

 

6.8.1.  OBLIGATIONS WITH RESPECT TO TRANSFERS AND EXCHANGES OF PHYSICAL
WARRANTS.

 

(i)                                     To permit registrations of transfers and
exchanges, the Company shall execute, at the Warrant Agent’s request, and the
Warrant Agent shall authenticate, Physical Warrants and Global Warrants.

 

6

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(ii)                                  All Physical Warrants and Global Warrants
issued upon any registration, transfer or exchange of Physical Warrants or
Global Warrants shall be the valid obligations of the Company, entitled to the
same benefits under this Agreement as the Physical Warrants or Global Warrants
surrendered upon the registration of transfer or exchange.

 

(iii)                               Prior to due presentment for registration of
transfer of any Warrant, the Warrant Agent and the Company may deem and treat
the person in whose name any Warrant is registered as the absolute owner of such
Warrant, and neither the Warrant Agent nor the Company shall be affected by
notice to the contrary.

 

SECTION 7.  ISSUANCE OF WARRANTS; TERMS OF WARRANTS: EXERCISE OF WARRANTS.

 

7.1.  METHOD OF EXERCISE; PAYMENT, ISSUANCE OF NEW WARRANT; TRANSFER AND
EXCHANGE.

 

7.1.1.  METHOD OF EXERCISE.

 

7.1.1.1.  CASH EXERCISE.  SUBJECT TO THE TERMS OF THIS AGREEMENT, EACH
WARRANTHOLDER SHALL HAVE THE RIGHT TO EXERCISE THE WARRANTS EVIDENCED BY THE
WARRANT CERTIFICATES IT HOLDS, IN WHOLE OR IN PART, DURING NORMAL BUSINESS HOURS
ON ANY BUSINESS DAY ON OR PRIOR TO THE EXPIRATION DATE, BY SURRENDER OF THE
WARRANT CERTIFICATES HELD BY IT TO THE COMPANY AT ITS PRINCIPAL OFFICE,
ACCOMPANIED BY A SUBSCRIPTION SUBSTANTIALLY IN THE FORM ATTACHED TO THE WARRANT
CERTIFICATES DULY EXECUTED BY SUCH HOLDER AND ACCOMPANIED BY (A) WIRE TRANSFER
OF IMMEDIATELY AVAILABLE FUNDS OR (B) CERTIFIED OR OFFICIAL BANK CHECK PAYABLE
TO THE ORDER OF THE COMPANY, IN EACH CASE IN THE AMOUNT OBTAINED BY MULTIPLYING
(I) THE NUMBER OF SHARES OF COMMON STOCK (WITHOUT GIVING EFFECT TO ANY
ADJUSTMENT THEREOF PURSUANT TO THE PROVISIONS OF HEREOF) FOR WHICH THE WARRANT
IS THEN BEING EXERCISED, AS DESIGNATED IN SUCH SUBSCRIPTION, BY (II) THE INITIAL
EXERCISE PRICE.  THEREUPON, SUCH HOLDER SHALL BE ENTITLED TO RECEIVE THE NUMBER
OF DULY AUTHORIZED, VALIDLY ISSUED, FULLY PAID AND NONASSESSABLE WARRANT SHARES
(OR OTHER SECURITIES) DETERMINED AS PROVIDED IN SECTIONS 7.4 AND 7.5 HEREOF.

 

7.1.1.2.  CONVERSION.  SUBJECT TO THE TERMS OF THIS AGREEMENT, EACH
WARRANTHOLDER SHALL HAVE THE RIGHT TO CONVERT THE WARRANTS EVIDENCED BY THE
WARRANT CERTIFICATES IT HOLDS, IN WHOLE OR IN PART, INTO WARRANT SHARES (OR
OTHER SECURITIES), DURING NORMAL BUSINESS HOURS ON ANY BUSINESS DAY ON OR PRIOR
TO THE EXPIRATION DATE, BY SURRENDER OF THE WARRANT CERTIFICATES HELD BY IT TO
THE COMPANY AT ITS PRINCIPAL OFFICE, ACCOMPANIED BY A CONVERSION NOTICE
SUBSTANTIALLY IN THE FORM ATTACHED TO THE WARRANT CERTIFICATES DULY EXECUTED BY
SUCH HOLDER. THEREUPON, SUCH HOLDER SHALL BE

 

7

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ENTITLED TO RECEIVE A NUMBER OF DULY AUTHORIZED, VALIDLY ISSUED, FULLY PAID AND
NONASSESSABLE WARRANT SHARES (OR OTHER SECURITIES) EQUAL TO:

 

(A)           THE EXCESS OF

 

(i) (x) the number of Warrant Shares (or Other Securities) determined as
provided in Sections 7.4 and 7.5 hereof which such holder would be entitled to
receive upon exercise of such Warrant for the number of Warrant Shares
designated in such conversion notice (without giving effect to any adjustment
thereof pursuant to the provisions hereof) for which the Warrant is then being
exercised, as designated in such conversion notice, multiplied by (y) the
Current Market Price of each such Warrant Share (or such Other Securities) so
receivable upon such exercise

 

over

 

(ii) (x) the number of Warrant Shares (without giving effect to any adjustment
thereof pursuant to the provisions hereof) which such holder would be entitled
to receive upon exercise of such Warrant for the number of Warrant Shares
designated in such conversion notice (without giving effect to any adjustment
thereof pursuant to the provisions hereof), multiplied by (y) the Initial
Exercise Price

 

divided by

 

(B)           SUCH CURRENT MARKET PRICE OF EACH SUCH WARRANT SHARE (OR OTHER
SECURITIES).

 

7.1.2.  WHEN EXERCISE EFFECTIVE.  EACH EXERCISE OF A WARRANT SHALL BE DEEMED TO
HAVE BEEN EFFECTED IMMEDIATELY PRIOR TO THE CLOSE OF BUSINESS ON THE BUSINESS
DAY ON WHICH SUCH WARRANT SHALL HAVE BEEN SURRENDERED TO THE COMPANY AT THE
OFFICE OF THE WARRANT AGENT AND PAYMENT MADE AS PROVIDED IN SECTION 7.1.1
HEREOF, AND AT SUCH TIME THE PERSON OR PERSONS IN WHOSE NAME OR NAMES ANY
CERTIFICATE OR CERTIFICATES FOR WARRANT SHARES (OR OTHER SECURITIES) SHALL BE
ISSUABLE UPON SUCH EXERCISE AS PROVIDED IN SECTION 7.1.3 HEREOF SHALL BE DEEMED
TO HAVE BECOME THE HOLDER OR HOLDERS OF RECORD THEREOF.

 

7.1.3.  DELIVERY OF STOCK CERTIFICATES, ETC.  AS SOON AS PRACTICABLE, BUT NO
LATER THAN FIVE BUSINESS DAYS AFTER EACH EXERCISE OF A WARRANT, IN WHOLE OR IN
PART, EXCEPT AS OTHERWISE PROVIDED IN SECTION 7.1.4 HEREOF, THE COMPANY AT ITS
EXPENSE (INCLUDING THE PAYMENT BY IT OF ANY APPLICABLE ISSUE TAXES) WILL CAUSE
TO BE ISSUED IN THE NAME OF AND DELIVERED TO THE HOLDER THEREOF OR, SUBJECT TO
THE PROVISIONS OF THE EXCHANGE AGREEMENT, AS SUCH HOLDER (UPON PAYMENT BY SUCH
HOLDER OF ANY APPLICABLE TRANSFER TAXES AND SUBJECT TO SECTION 6 ABOVE) MAY
DIRECT:

 

8

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(A)           A CERTIFICATE OR CERTIFICATES FOR THE NUMBER OF DULY AUTHORIZED,
VALIDLY ISSUED, FULLY PAID AND NONASSESSABLE WARRANT SHARES (OR OTHER
SECURITIES) TO WHICH SUCH HOLDER SHALL BE ENTITLED UPON SUCH EXERCISE PLUS, IN
LIEU OF ANY FRACTIONAL SHARE TO WHICH SUCH HOLDER WOULD OTHERWISE BE ENTITLED,
CASH IN AN AMOUNT EQUAL TO THE SAME FRACTION OF THE CURRENT MARKET PRICE PER
SHARE ON THE BUSINESS DAY IMMEDIATELY PRECEDING THE DATE OF SUCH EXERCISE; AND

 

(B)           IN CASE SUCH EXERCISE IS IN PART ONLY, A NEW WARRANT OR WARRANTS
OF LIKE TENOR, DATED THE DATE HEREOF AND CALLING IN THE AGGREGATE ON THE FACE OR
FACES THEREOF FOR THE NUMBER OF WARRANT SHARES EQUAL (WITHOUT GIVING EFFECT TO
ANY ADJUSTMENT THEREOF PURSUANT TO THE TERMS HEREOF) TO THE NUMBER OF SUCH
SHARES CALLED FOR ON THE FACE OF SUCH WARRANT MINUS THE NUMBER OF SUCH SHARES
DESIGNATED BY THE HOLDER UPON SUCH EXERCISE AS PROVIDED IN SECTION 7.1.1 HEREOF.

 

7.1.4.  COMPANY TO REAFFIRM OBLIGATIONS.  THE COMPANY WILL, AT THE TIME OF OR AT
ANY TIME AFTER EACH EXERCISE OF A WARRANT, UPON THE REQUEST OF THE HOLDER
HEREOF, ACKNOWLEDGE IN WRITING ITS CONTINUING OBLIGATION TO AFFORD TO SUCH
HOLDER ALL RIGHTS TO WHICH SUCH HOLDER SHALL CONTINUE TO BE ENTITLED AFTER SUCH
EXERCISE IN ACCORDANCE WITH THE TERMS OF THIS WARRANT AGREEMENT AND THE
WARRANTS; PROVIDED THAT IF ANY SUCH HOLDER SHALL FAIL TO MAKE ANY SUCH REQUEST,
THE FAILURE SHALL NOT AFFECT THE CONTINUING OBLIGATION OF THE COMPANY TO AFFORD
SUCH RIGHTS TO SUCH HOLDER.

 

7.2.  WARRANTHOLDER REPRESENTATIONS.  PRIOR TO THE EXERCISE OF ANY WARRANT, THE
WARRANTHOLDER MUST REPRESENT AND WARRANT TO THE COMPANY, IN WRITING, AS FOLLOWS:

 

(I)                                      IT IS ACQUIRING THE WARRANT SHARES FOR
ITS OWN ACCOUNT FOR INVESTMENT AND NOT WITH A VIEW TO, OR FOR SALE IN CONNECTION
WITH, ANY DISTRIBUTION THEREOF, NOR WITH ANY PRESENT INTENTION OF DISTRIBUTING
OR SELLING THE SAME; AND THE WARRANTHOLDER HAS NO PRESENT OR CONTEMPLATED
AGREEMENT, UNDERTAKING, ARRANGEMENT, OBLIGATION, INDEBTEDNESS OR COMMITMENT
PROVIDING FOR THE DISPOSITION THEREOF;

 

(II)                                   THE WARRANTHOLDER IS AN “ACCREDITED
INVESTOR” AS DEFINED IN RULE 501(A) UNDER THE SECURITIES ACT; AND

 

(III)                                THE WARRANTHOLDER HAS MADE SUCH INQUIRY
CONCERNING THE COMPANY AND ITS BUSINESS AND PERSONNEL AS IT HAS DEEMED
APPROPRIATE; AND THE WARRANTHOLDER HAS SUFFICIENT KNOWLEDGE AND EXPERIENCE IN
FINANCE AND BUSINESS THAT IS CAPABLE OF EVALUATING THE RISKS AND MERITS OF
INVESTMENT IN THE COMPANY.

 

7.3.  STOCK FULLY PAID; RESERVATION OF SHARES.  THE COMPANY REPRESENTS,
WARRANTS, COVENANTS AND AGREES THAT ALL WARRANT SHARES WHICH MAY BE ISSUED UPON
THE EXERCISE OF THE RIGHTS REPRESENTED BY THE WARRANTS WILL, UPON ISSUANCE AND
PAYMENT THEREFOR IN

 

9

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ACCORDANCE WITH THE TERMS OF THE WARRANT, BE DULY AUTHORIZED, VALIDLY ISSUED,
FULLY PAID AND NON-ASSESSABLE.  THE COMPANY FURTHER COVENANTS AND AGREES THAT
DURING THE PERIOD WITHIN WHICH THE RIGHTS REPRESENTED BY THE WARRANTS MAY BE
EXERCISED, THE COMPANY WILL AT ALL TIMES HAVE AUTHORIZED AND RESERVED SOLELY FOR
THE PURPOSE OF THE ISSUANCE UPON EXERCISE OF THE WARRANTS A SUFFICIENT NUMBER OF
SHARES OF COMMON STOCK TO PROVIDE FOR THE EXERCISE OF THE RIGHTS REPRESENTED BY
THE WARRANTS.

 

The Company will (a) not increase the par value of any shares of Common Stock
receivable upon the exercise of any Warrant above the amount payable therefor
upon such exercise immediately prior to such increase in par value, (b) take all
such action as may be necessary or appropriate in order that the Company may
validly and legally issue fully paid and non-assessable Warrant Shares upon the
exercise of each Warrant, and (c) use its reasonable efforts to obtain all such
authorizations, exemptions or consents from any public regulatory body having
jurisdiction thereof as may be necessary to enable the Company to perform its
obligations under this Agreement and each Warrant.  Without limiting the
generality of the foregoing, the Company will from time to time take all such
action as may be required to assure that the par value per share, if any, of the
Common Stock is at all times equal to or less than the lowest quotient obtained
by dividing the then current exercise price of each Warrant by the number of
Warrant Shares into which such Warrant can from time to time be exercised.

 

7.4.  ADJUSTMENT OF EXERCISE PRICE AND NUMBER OF SHARES.

 

7.4.1.  GENERAL; NUMBER OF SHARES; EXERCISE PRICE.  THE NUMBER OF WARRANT SHARES
WHICH THE HOLDER OF A WARRANT SHALL BE ENTITLED TO RECEIVE UPON EACH EXERCISE
THEREOF SHALL BE DETERMINED BY MULTIPLYING THE NUMBER OF SHARES OF COMMON STOCK
WHICH WOULD OTHERWISE (BUT FOR THE PROVISIONS OF THIS SECTION 7.4) BE ISSUABLE
UPON SUCH EXERCISE, AS DESIGNATED BY THE HOLDER HEREOF PURSUANT TO SECTION 7.1.1
HEREOF, BY A FRACTION OF WHICH (A) THE NUMERATOR IS THE INITIAL EXERCISE PRICE
OF SUCH WARRANT AND (B) THE DENOMINATOR IS THE EXERCISE PRICE OF SUCH WARRANT IN
EFFECT ON THE DATE OF SUCH EXERCISE.  THE “EXERCISE PRICE” SHALL INITIALLY BE
THE INITIAL EXERCISE PRICE, AND SHALL BE ADJUSTED AND READJUSTED FROM TIME TO
TIME AS PROVIDED IN THIS SECTION 7.4 AND, AS SO ADJUSTED OR READJUSTED, SHALL
REMAIN IN EFFECT UNTIL A FURTHER ADJUSTMENT OR READJUSTMENT THEREOF IS REQUIRED
BY THIS SECTION 7.4.

 

7.4.2.  ISSUANCE OF ADDITIONAL WARRANTS DUE TO ISSUANCE OF ADDITIONAL COMMON
SHARES.  IN CASE THE COMPANY AT ANY TIME OR FROM TIME TO TIME AFTER THE DATE OF
THE FINAL CLOSING OF THE NEW EXCHANGE (AS DEFINED IN THE EXCHANGE AGREEMENT)
SHALL ISSUE OR SELL ADDITIONAL COMMON SHARES (INCLUDING ADDITIONAL COMMON SHARES
DEEMED TO BE ISSUED PURSUANT TO SECTION 7.4.4 OR 7.4.5 HEREOF), OTHER THAN AN
EXCLUDED ISSUANCE, WITHOUT CONSIDERATION OR FOR A CONSIDERATION PER SHARE LESS
THAN THE LOWER OF THE INITIAL EXERCISE PRICE OR THE THEN FAIR MARKET VALUE, THEN
IN EACH SUCH CASE SUCH EXERCISE PRICE SHALL BE REDUCED (BUT NOT INCREASED),
CONCURRENTLY WITH SUCH ISSUE OR SALE, TO A PRICE (CALCULATED TO THE NEAREST
0.000001 OF A CENT) DETERMINED BY MULTIPLYING THE EXERCISE PRICE IN EFFECT
IMMEDIATELY PRIOR TO SUCH ISSUE OR SALE (THE “ANTIDILUTION PRICE”) BY A
FRACTION:

 

10

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(A)           THE NUMERATOR OF WHICH SHALL BE THE SUM OF (I) THE NUMBER OF
SHARES OF COMMON STOCK OUTSTANDING IMMEDIATELY PRIOR TO SUCH ISSUE OR SALE
MULTIPLIED BY THE ANTIDILUTION PRICE PLUS (II) THE CONSIDERATION, IF ANY, DEEMED
RECEIVED BY THE COMPANY UPON SUCH ISSUE OR SALE; AND

 

(B)           THE DENOMINATOR OF WHICH SHALL BE THE PRODUCT OF (I) THE TOTAL
NUMBER OF SHARES OF COMMON STOCK DEEMED TO BE OUTSTANDING IMMEDIATELY AFTER SUCH
ISSUE OR SALE MULTIPLIED BY (II) THE ANTIDILUTION PRICE.

 

In each case, the number of shares of Common Stock shall be calculated in
accordance with Section 7.4.8 hereof.

 

7.4.3.  DIVIDENDS AND DISTRIBUTIONS.  IN CASE THE COMPANY AT ANY TIME OR FROM
TIME TO TIME AFTER THE DATE HEREOF SHALL DECLARE, ORDER, PAY OR MAKE A DIVIDEND
OR OTHER DISTRIBUTION (INCLUDING WITHOUT LIMITATION ANY DISTRIBUTION OF
ADDITIONAL STOCK OR OTHER SECURITIES OR PROPERTY OR OPTIONS, BY WAY OF DIVIDEND
OR SPIN-OFF, DISTRIBUTION, RECLASSIFICATION, RECAPITALIZATION OR SIMILAR
CORPORATE REARRANGEMENT OR OTHERWISE) ON THE SHARES OF COMMON STOCK, OTHER THAN
A DIVIDEND PAYABLE IN (OR OTHERWISE DEEMED TO BE AN ISSUANCE OF) ADDITIONAL
COMMON SHARES OR PERIODIC CASH DIVIDENDS DECLARED AND PAID IN THE ORDINARY
COURSE OF BUSINESS, THEN, AND IN EACH SUCH CASE, THE HOLDER OF A WARRANT SHALL
RECEIVE, UPON THE EXERCISE OF SUCH WARRANT AT ANY TIME ON OR AFTER SUCH RECORD
DATE, THE NUMBER OF WARRANT SHARES TO BE RECEIVED UPON EXERCISE OF SUCH WARRANT
DETERMINED AS PROVIDED HEREIN AND, IN ADDITION AND WITHOUT FURTHER PAYMENT, AND
WITHOUT ANY ADDITIONAL ACTION REQUIRED ON THE PART OF SUCH HOLDER, SUCH DIVIDEND
OR OTHER DISTRIBUTION TO WHICH SUCH HOLDER WOULD HAVE BEEN ENTITLED BY WAY OF
SUCH DIVIDEND OR OTHER DISTRIBUTION AND SUBSEQUENT DIVIDENDS AND OTHER
DISTRIBUTIONS THROUGH THE DATE OF EXERCISE AS IF SUCH HOLDER (X) HAD EXERCISED
SUCH WARRANT IMMEDIATELY PRIOR TO SUCH RECORD DATE AND (Y) HAD RETAINED SUCH
DIVIDEND OR OTHER DISTRIBUTION IN RESPECT OF THE SHARES OF COMMON STOCK AND ALL
SUBSEQUENT DIVIDENDS AND OTHER DISTRIBUTIONS OF ANY NATURE WHATSOEVER IN RESPECT
OF ANY STOCK OR SECURITIES PAID AS DIVIDENDS AND OTHER DISTRIBUTIONS AND
ORIGINATING DIRECTLY OR INDIRECTLY FROM SUCH SHARES OF COMMON STOCK.

 

7.4.4.  TREATMENT OF OPTIONS AND CONVERTIBLE SECURITIES.  IN CASE THE COMPANY AT
ANY TIME OR FROM TIME TO TIME AFTER THE DATE HEREOF SHALL ISSUE, SELL, GRANT OR
ASSUME, OR SHALL FIX A RECORD DATE FOR THE DETERMINATION OF HOLDERS OF ANY CLASS
OF SECURITIES ENTITLED TO RECEIVE, ANY OPTIONS OR CONVERTIBLE SECURITIES, THEN,
AND IN EACH SUCH CASE, THE MAXIMUM NUMBER OF ADDITIONAL COMMON SHARES (AS SET
FORTH IN THE INSTRUMENT RELATING THERETO, WITHOUT REGARD TO ANY PROVISIONS
CONTAINED THEREIN FOR A SUBSEQUENT ADJUSTMENT OF SUCH NUMBER THE PURPOSE OF
WHICH IS TO PROTECT AGAINST DILUTION) AT ANY TIME ISSUABLE UPON THE EXERCISE OF
SUCH OPTIONS OR, IN THE CASE OF CONVERTIBLE SECURITIES AND OPTIONS THEREFOR, THE
CONVERSION OR EXCHANGE OF SUCH CONVERTIBLE SECURITIES, SHALL BE DEEMED TO BE
ADDITIONAL COMMON SHARES ISSUED AS OF THE TIME OF SUCH ISSUE, SALE, GRANT OR
ASSUMPTION OR, IN CASE SUCH A RECORD DATE SHALL HAVE BEEN FIXED, AS OF THE CLOSE
OF

 

11

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BUSINESS ON SUCH RECORD DATE.  NOTWITHSTANDING THE FOREGOING, THIS SECTION 7.4.4
SHALL NOT APPLY TO (I.E., THERE SHALL NOT BE A DEEMED ISSUANCE OF ADDITIONAL
COMMON SHARES WITH RESPECT TO) THE ISSUANCE, SALE, GRANT OR ASSUMPTION OF, OR
FIXING OF A RECORD DATE FOR DETERMINATION OF ENTITLEMENT TO RECEIVE, AN EXCLUDED
ISSUANCE.  IN ADDITION:

 

(A)           NO FURTHER ADJUSTMENT OF THE EXERCISE PRICE SHALL BE MADE UPON THE
EXERCISE OF ANY OPTIONS OR THE CONVERSION OR EXCHANGE OF CONVERTIBLE SECURITIES
AND THE CONSEQUENT ISSUE OR SALE OF CONVERTIBLE SECURITIES OR SHARES OF COMMON
STOCK;

 

(B)           IF OPTIONS OR CONVERTIBLE SECURITIES BY THEIR TERMS PROVIDE, WITH
THE PASSAGE OF TIME OR OTHERWISE, FOR ANY INCREASE IN THE CONSIDERATION PAYABLE
TO THE COMPANY, OR DECREASE IN THE NUMBER OF COMMON SHARES ISSUABLE, UPON THE
EXERCISE, CONVERSION OR EXCHANGE THEREOF (BY CHANGE OF RATE OR OTHERWISE), THE
EXERCISE PRICES COMPUTED UPON THE ORIGINAL ISSUE, SALE, GRANT OR ASSUMPTION
THEREOF (OR UPON THE OCCURRENCE OF THE RECORD DATE WITH RESPECT THERETO), AND
ANY SUBSEQUENT ADJUSTMENTS BASED THEREON, SHALL, UPON ANY SUCH INCREASE OR
DECREASE BECOMING EFFECTIVE, BE RECOMPUTED TO REFLECT SUCH INCREASE OR DECREASE
INSOFAR AS IT AFFECTS SUCH OPTIONS, OR THE RIGHTS OF CONVERSION OR EXCHANGE
UNDER SUCH CONVERTIBLE SECURITIES, WHICH ARE OUTSTANDING AT SUCH TIME;

 

(C)           IF THE CONSIDERATION PROVIDED FOR IN ANY OPTION OR THE ADDITIONAL
CONSIDERATION, IF ANY, PAYABLE UPON THE CONVERSION OR EXCHANGE OF ANY
CONVERTIBLE SECURITY SHALL BE REDUCED, OR THE RATIO AT WHICH ANY OPTION IS
EXERCISABLE OR ANY CONVERTIBLE SECURITY IS CONVERTIBLE INTO OR EXCHANGEABLE FOR
SHARES OF COMMON STOCK SHALL BE INCREASED, AT ANY TIME UNDER OR BY REASON OF
PROVISIONS WITH RESPECT THERETO DESIGNED TO PROTECT AGAINST DILUTION, THEN,
EFFECTIVE CONCURRENTLY WITH EACH SUCH CHANGE, THE EXERCISE PRICE THEN IN EFFECT
SHALL FIRST BE ADJUSTED TO ELIMINATE THE PREVIOUS EFFECTS (IF ANY) OF THE
ISSUANCE (OR DEEMED ISSUANCE) OF SUCH OPTION OR CONVERTIBLE SECURITY ON THE
EXERCISE PRICE AND THEN READJUSTED AS IF SUCH OPTION OR CONVERTIBLE SECURITY HAD
BEEN ISSUED ON THE DATE OF SUCH CHANGE WITH THE TERMS IN EFFECT AFTER SUCH
CHANGE; AND

 

(D)           UPON THE EXPIRATION (OR PURCHASE BY THE COMPANY AND CANCELLATION
OR RETIREMENT) OF ANY OPTIONS WHICH SHALL NOT HAVE BEEN EXERCISED, OR THE
EXPIRATION OF ANY RIGHTS OF CONVERSION OR EXCHANGE UNDER ANY CONVERTIBLE
SECURITIES WHICH (OR PURCHASE BY THE COMPANY AND CANCELLATION OR RETIREMENT OF
ANY CONVERTIBLE SECURITIES THE RIGHTS OF CONVERSION OR EXCHANGE UNDER WHICH)
SHALL NOT HAVE BEEN EXERCISED, THE EXERCISE PRICE COMPUTED UPON THE ORIGINAL
ISSUE, SALE, GRANT OR ASSUMPTION THEREOF (OR UPON THE OCCURRENCE OF THE RECORD
DATE WITH RESPECT THERETO), AND ANY SUBSEQUENT ADJUSTMENTS BASED THEREON, SHALL,
UPON (AND EFFECTIVE AS OF) SUCH EXPIRATION (OR SUCH CANCELLATION OR RETIREMENT,
AS THE CASE MAY BE), BE RECOMPUTED AS IF:

 

12

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(I)            IN THE CASE OF OPTIONS OR CONVERTIBLE SECURITIES, THE ONLY
ADDITIONAL COMMON SHARES ISSUED OR SOLD WERE THE ADDITIONAL COMMON SHARES, IF
ANY, ACTUALLY ISSUED OR SOLD UPON THE EXERCISE OF SUCH OPTIONS OR THE CONVERSION
OR EXCHANGE OF SUCH CONVERTIBLE SECURITIES AND THE CONSIDERATION RECEIVED
THEREFOR WAS THE CONSIDERATION ACTUALLY RECEIVED BY THE COMPANY FOR THE ISSUE,
SALE, GRANT OR ASSUMPTION OF ALL SUCH OPTIONS, WHETHER OR NOT EXERCISED, PLUS
THE ADDITIONAL CONSIDERATION ACTUALLY RECEIVED BY THE COMPANY UPON ANY EXERCISE
THEREOF, OR THE CONSIDERATION ACTUALLY RECEIVED BY THE COMPANY FOR THE ISSUE OR
SALE OF ALL SUCH CONVERTIBLE SECURITIES, WHETHER OR NOT ACTUALLY CONVERTED OR
EXCHANGED, PLUS THE ADDITIONAL CONSIDERATION ACTUALLY RECEIVED BY THE COMPANY
UPON ANY CONVERSION OR EXCHANGE THEREOF, AND

 

(II)           IN THE CASE OF OPTIONS FOR CONVERTIBLE SECURITIES, ONLY THE
CONVERTIBLE SECURITIES, IF ANY, ACTUALLY ISSUED OR SOLD UPON THE EXERCISE OF
SUCH OPTIONS WERE ISSUED AT THE TIME OF THE ISSUE, SALE, GRANT OR ASSUMPTION OF
SUCH OPTIONS, AND THE CONSIDERATION RECEIVED BY THE COMPANY FOR THE ADDITIONAL
COMMON SHARES DEEMED TO HAVE THEN BEEN ISSUED WAS THE CONSIDERATION ACTUALLY
RECEIVED BY THE COMPANY FOR THE ISSUE, SALE, GRANT OR ASSUMPTION OF ALL SUCH
OPTIONS, WHETHER OR NOT EXERCISED, PLUS THE CONSIDERATION DEEMED TO HAVE BEEN
RECEIVED BY THE COMPANY (PURSUANT TO SECTION 7.4.6 HEREOF) UPON THE ISSUE OR
SALE OF SUCH CONVERTIBLE SECURITIES WITH RESPECT TO WHICH SUCH OPTIONS WERE
ACTUALLY EXERCISED.

 

7.4.5.  TREATMENT OF STOCK DIVIDENDS, STOCK SPLITS, ETC.  IN CASE THE COMPANY AT
ANY TIME OR FROM TIME TO TIME AFTER THE DATE HEREOF SHALL DECLARE OR PAY ANY
DIVIDEND ON THE SHARES OF COMMON STOCK PAYABLE IN SHARES OF COMMON STOCK OR
OTHER SECURITIES, OR SHALL EFFECT A SUBDIVISION OF THE OUTSTANDING SHARES OF
COMMON STOCK INTO A GREATER NUMBER OF SHARES OF COMMON STOCK (BY
RECLASSIFICATION OR OTHERWISE THAN BY PAYMENT OF A DIVIDEND IN SHARES OF COMMON
STOCK), THEN, AND IN EACH SUCH CASE, ADDITIONAL COMMON SHARES SHALL BE DEEMED TO
HAVE BEEN ISSUED (A) IN THE CASE OF ANY SUCH DIVIDEND, IMMEDIATELY AFTER THE
CLOSE OF BUSINESS ON THE RECORD DATE FOR THE DETERMINATION OF HOLDERS OF ANY
CLASS OF SECURITIES ENTITLED TO RECEIVE SUCH DIVIDEND, OR (B) IN THE CASE OF ANY
SUCH SUBDIVISION, AT THE CLOSE OF BUSINESS ON THE DAY IMMEDIATELY PRIOR TO THE
DAY UPON WHICH SUCH CORPORATE ACTION BECOMES EFFECTIVE.

 

7.4.6.  COMPUTATION OF CONSIDERATION.  FOR THE PURPOSES OF THIS SECTION 7.4:

 

(A)           THE CONSIDERATION FOR THE ISSUE OR SALE OF ANY ADDITIONAL COMMON
SHARES SHALL, IRRESPECTIVE OF THE ACCOUNTING TREATMENT OF SUCH CONSIDERATION, BE
COMPUTED AT THE FAIR VALUE THEREOF AT THE TIME OF SUCH ISSUE OR SALE, AS
DETERMINED IN GOOD FAITH BY THE BOARD, WITHOUT DEDUCTION

 

13

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FOR ANY EXPENSES PAID OR INCURRED BY THE COMPANY OR ANY COMMISSIONS OR
COMPENSATIONS PAID OR CONCESSIONS OR DISCOUNTS ALLOWED TO UNDERWRITERS, DEALERS
OR OTHERS PERFORMING SIMILAR SERVICES IN CONNECTION WITH SUCH ISSUE OR SALE.  IN
THE EVENT ADDITIONAL COMMON SHARES ARE ISSUED OR SOLD TOGETHER WITH OTHER STOCK
OR SECURITIES OR OTHER ASSETS OF THE COMPANY FOR A CONSIDERATION WHICH COVERS
BOTH, THE CONSIDERATION FOR THE ISSUE OR SALE OF ADDITIONAL COMMON SHARES SHALL
BE THE PORTION OF SUCH CONSIDERATION SO RECEIVED, COMPUTED AS PROVIDED IN THIS
SECTION 7.4.6, ALLOCABLE TO SUCH ADDITIONAL COMMON SHARES, ALL AS DETERMINED IN
GOOD FAITH BY THE BOARD.  NOTWITHSTANDING THE FOREGOING, IF ADDITIONAL COMMON
SHARES ARE ISSUED (I) TO AN AFFILIATE OF THE COMPANY OR (II) IN CONNECTION WITH
ANY ACQUISITION BY THE COMPANY OF STOCK OR ASSETS OF A THIRD PARTY OR PARTIES,
THE FAIR VALUE OF SUCH ADDITIONAL COMMON SHARES AT THE TIME OF SUCH ISSUE OR
SALE SHALL BE THE VALUE AS DETERMINED IN GOOD FAITH BY THE BOARD, EXCEPT THAT IN
THE CASE OF ISSUANCES TO AFFILIATES OF THE COMPANY, OR IN CONNECTION WITH
ACQUISITIONS BY THE COMPANY OF STOCK OR ASSETS OF A THIRD PARTY, SUCH FAIR VALUE
SHALL BE THE VALUE SET FORTH IN AN OPINION OF INDEPENDENT ACCOUNTANTS OR
INVESTMENT BANKERS SELECTED BY THE COMPANY, IF SUCH ENGAGEMENT IS REASONABLY
REQUESTED BY THE MAJORITY WARRANTHOLDERS;

 

(B)           ADDITIONAL COMMON SHARES DEEMED TO HAVE BEEN ISSUED PURSUANT TO
SECTION 7.4.4 HEREOF SHALL BE DEEMED TO HAVE BEEN ISSUED FOR A CONSIDERATION PER
SHARE DETERMINED BY DIVIDING:

 

(I)            THE TOTAL AMOUNT OF CONSIDERATION, IF ANY, RECEIVED AND/OR
RECEIVABLE BY THE COMPANY AS DIRECT CONSIDERATION FOR THE ISSUE, SALE, GRANT OR
ASSUMPTION OF THE OPTIONS OR CONVERTIBLE SECURITIES IN QUESTION, PLUS THE
MINIMUM AGGREGATE AMOUNT OF ADDITIONAL CONSIDERATION (AS SET FORTH IN THE
INSTRUMENTS RELATING THERETO, WITHOUT REGARD TO ANY PROVISION CONTAINED THEREIN
FOR A SUBSEQUENT ADJUSTMENT OF SUCH CONSIDERATION THE PURPOSE OF WHICH IS TO
PROTECT AGAINST DILUTION) PAYABLE TO THE COMPANY UPON THE EXERCISE IN FULL OF
SUCH OPTIONS OR THE CONVERSION OR EXCHANGE OF SUCH CONVERTIBLE SECURITIES OR, IN
THE CASE OF OPTIONS FOR CONVERTIBLE SECURITIES, THE EXERCISE OF SUCH OPTIONS FOR
CONVERTIBLE SECURITIES AND THE CONVERSION OR EXCHANGE OF SUCH CONVERTIBLE
SECURITIES, IN EACH CASE COMPUTING SUCH CONSIDERATION AS PROVIDED IN THE
FOREGOING CLAUSE (A), BY

 

(II)           THE MAXIMUM NUMBER OF SHARES OF COMMON STOCK (AS SET FORTH IN THE
INSTRUMENTS RELATING THERETO, WITHOUT REGARD TO ANY PROVISION CONTAINED THEREIN
FOR A SUBSEQUENT ADJUSTMENT OF SUCH NUMBER THE PURPOSE OF WHICH IS TO PROTECT
AGAINST DILUTION) ISSUABLE UPON THE EXERCISE OF SUCH OPTIONS OR THE CONVERSION
OR EXCHANGE OF SUCH CONVERTIBLE SECURITIES; AND

 

14

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(C)           ADDITIONAL COMMON SHARES DEEMED TO HAVE BEEN ISSUED PURSUANT TO
SECTION 7.4.5 HEREOF SHALL BE DEEMED TO HAVE BEEN ISSUED FOR NO CONSIDERATION,
UNLESS THE COMPANY ACTUALLY RECEIVES CONSIDERATION FOR ANY SUCH ISSUANCE.

 

7.4.7.  ADJUSTMENTS FOR COMBINATIONS, ETC.  IN CASE THE OUTSTANDING SHARES OF
COMMON STOCK SHALL BE COMBINED OR CONSOLIDATED, BY RECLASSIFICATION OR
OTHERWISE, INTO A LESSER NUMBER OF SHARES OF COMMON STOCK, THE EXERCISE PRICE IN
EFFECT IMMEDIATELY PRIOR TO SUCH COMBINATION OR CONSOLIDATION SHALL,
CONCURRENTLY WITH THE EFFECTIVENESS OF SUCH COMBINATION OR CONSOLIDATION, BE
PROPORTIONATELY INCREASED.

 

7.4.8.  SHARES DEEMED OUTSTANDING.  UNLESS OTHERWISE SPECIFICALLY PROVIDED
HEREIN, FOR ALL PURPOSES OF THE COMPUTATIONS TO BE MADE PURSUANT TO THIS SECTION
7.4, THERE SHALL BE DEEMED TO BE OUTSTANDING ALL SHARES OF COMMON STOCK ISSUABLE
PURSUANT TO THE EXERCISE OF OPTIONS AND CONVERSION OF CONVERTIBLE SECURITIES
OUTSTANDING AT THE TIME AS OF WHICH SUCH COMPUTATION IS MADE.  NO ADJUSTMENT
SHALL BE MADE IN THE EXERCISE PRICE UPON THE ISSUANCE OF SHARES OF COMMON STOCK
PURSUANT TO OPTIONS AND CONVERTIBLE SECURITIES SO DEEMED TO BE OUTSTANDING, BUT
THIS SECTION 7.4.8 SHALL NOT PREVENT OTHER ADJUSTMENTS IN THE EXERCISE PRICE
ARISING BY VIRTUE OF SUCH OUTSTANDING OPTIONS OR CONVERTIBLE SECURITIES PURSUANT
TO THE PROVISIONS OF SECTIONS 7.4.2, 7.4.4 AND 7.4.5 HEREOF.

 

7.4.9.  WARRANT AGENT’S DISCLAIMER.  THE WARRANT AGENT SHALL HAVE NO DUTIES OR
RESPONSIBILITIES UNDER THIS SECTION 7.4, INCLUDING, BUT NOT LIMITED TO,
DETERMINING WHEN AN ADJUSTMENT UNDER THIS SECTION 7.4 SHOULD BE MADE, HOW SUCH
ADJUSTMENT SHOULD BE MADE OR WHAT THE ADJUSTMENT SHOULD BE. THE WARRANT AGENT
MAKES NO REPRESENTATION AS TO THE VALIDITY OR VALUE OF ANY SECURITIES OR ASSETS
ISSUED UPON EXERCISE OF WARRANTS. THE WARRANT AGENT SHALL NOT BE RESPONSIBLE FOR
THE COMPANY’S FAILURE TO COMPLY WITH THIS SECTION 7.4.

 

7.4.10.  FILING OF REGISTRATION STATEMENT. IN THE EVENT THAT THE FIRST
REGISTRATION STATEMENT TO BE FILED BY THE COMPANY PURSUANT TO SECTION 8.1.1
HEREOF HAS NOT BEEN FILED WITH THE COMMISSION ON OR PRIOR TO THE DATE (THE
“FILING DATE”) THAT IS THIRTY (30) DAYS FROM THE DATE ON WHICH THE COMPANY
RECEIVES THE NOTICE DESCRIBED IN SECTION 8.1.1 HEREOF, ON THE FILING DATE THE
EXERCISE PRICE SHALL BE REDUCED TO A PRICE EQUAL TO THE EXERCISE PRICE THEN IN
EFFECT MINUS $.25.  IF SUCH REGISTRATION STATEMENT HAS NOT BEEN FILED WITH THE
COMMISSION ON OR PRIOR TO ANY SUBSEQUENT THIRTY (30) DAY PERIOD FOLLOWING THE
FILING DATE, ON EACH SUCH DATE THE EXERCISE PRICE SHALL BE FURTHER REDUCED TO A
PRICE EQUAL TO THE EXERCISE PRICE THEN IN EFFECT MINUS $0.10, PROVIDED, HOWEVER,
THAT THE EXERCISE PRICE SHALL NOT BE REDUCED PURSUANT TO THIS SECTION 7.4.10 TO
AN AMOUNT LESS THAN $0.10.

 

7.4.11.  DECLARATION OF EFFECTIVENESS OF REGISTRATION STATEMENT. IN THE EVENT
THAT THE FIRST REGISTRATION STATEMENT FILED BY THE COMPANY PURSUANT TO SECTION
8.1.1 HEREOF HAS NOT BEEN DECLARED EFFECTIVE BY THE COMMISSION ON OR PRIOR TO
THE DATE (THE “120 DAY DEADLINE”) THAT IS ONE HUNDRED TWENTY (120) DAYS

 

15

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FROM THE DATE ON WHICH THE COMPANY RECEIVES THE NOTICE DESCRIBED IN SECTION
8.1.1 HEREOF, ON THE 120 DAY DEADLINE THE EXERCISE PRICE SHALL BE REDUCED TO A
PRICE EQUAL TO THE EXERCISE PRICE THEN IN EFFECT MINUS $0.25.  IF SUCH
REGISTRATION STATEMENT HAS NOT BEEN DECLARED EFFECTIVE BY THE COMMISSION ON OR
PRIOR TO ANY SUBSEQUENT THIRTY (30) DAY PERIOD FOLLOWING SUCH 120 DAY DEADLINE,
ON EACH SUCH DATE THE EXERCISE PRICE SHALL BE FURTHER REDUCED TO A PRICE EQUAL
TO THE EXERCISE PRICE THEN IN EFFECT MINUS $0.10, PROVIDED, HOWEVER, THAT THE
EXERCISE PRICE SHALL NOT BE REDUCED PURSUANT TO THIS SECTION 7.4.11 TO AN AMOUNT
LESS THAN $0.10.

 

7.5.  ADJUSTMENTS FOR CONSOLIDATION, MERGER, SALE OF ASSETS, REORGANIZATION,
ETC.  IN CASE THE COMPANY AFTER THE DATE HEREOF (A) SHALL CONSOLIDATE WITH OR
MERGE INTO ANY OTHER PERSON AND SHALL NOT BE THE CONTINUING OR SURVIVING
CORPORATION OF SUCH CONSOLIDATION OR MERGER, OR (B) SHALL PERMIT ANY OTHER
PERSON TO CONSOLIDATE WITH OR MERGE INTO THE COMPANY AND THE COMPANY SHALL BE
THE CONTINUING OR SURVIVING PERSON AND THE HOLDERS OF A MAJORITY OF THE
COMPANY’S CAPITAL STOCK BEFORE SUCH CONSOLIDATION OR MERGER SHALL CEASE TO HOLD
A MAJORITY OF THE COMPANY’S CAPITAL STOCK AFTER SUCH CONSOLIDATION OR MERGER, OR
(C) SHALL EFFECT A CAPITAL REORGANIZATION OR RECLASSIFICATION OF THE COMMON
STOCK OR OTHER SECURITIES, THEN IN THE CASE OF EACH SUCH TRANSACTION PROPER
PROVISION SHALL BE MADE SO THAT, UPON THE BASIS AND THE TERMS AND IN THE MANNER
PROVIDED IN THIS AGREEMENT, THE HOLDERS OF THE WARRANTS, UPON THE EXERCISE
THEREOF AT ANY TIME AFTER THE CONSUMMATION OF SUCH TRANSACTION, SHALL BE
ENTITLED TO RECEIVE (AT THE AGGREGATE EXERCISE PRICE IN EFFECT AT THE TIME OF
SUCH CONSUMMATION FOR ALL COMMON STOCK OR OTHER SECURITIES ISSUABLE UPON SUCH
EXERCISE IMMEDIATELY PRIOR TO SUCH CONSUMMATION), IN LIEU OF THE COMMON STOCK OR
OTHER SECURITIES ISSUABLE UPON SUCH EXERCISE PRIOR TO SUCH CONSUMMATION, THE
GREATEST AMOUNT OF SECURITIES, CASH OR OTHER PROPERTY TO WHICH SUCH HOLDER WOULD
ACTUALLY HAVE BEEN ENTITLED AS A SHAREHOLDER UPON SUCH CONSUMMATION IF SUCH
HOLDER HAD EXERCISED THE RIGHTS REPRESENTED BY THE WARRANT CERTIFICATE HELD BY
IT IMMEDIATELY PRIOR THERETO.

 

7.6.  NOTICE OF ADJUSTMENTS.  WHENEVER THE EXERCISE PRICE IS ADJUSTED, THE
COMPANY WILL PROMPTLY DELIVER TO THE WARRANT AGENT AND TO EACH REGISTERED
WARRANTHOLDER AT THE ADDRESS PROVIDED TO THE WARRANT AGENT A CERTIFICATE SETTING
FORTH, IN REASONABLE DETAIL, THE EVENT THAT TRIGGERED THE ADJUSTMENT OR
ISSUANCE, THE AMOUNT OF THE ADJUSTMENT OR ISSUANCE, THE METHOD BY WHICH SUCH
ADJUSTMENT OR ISSUANCE WAS CALCULATED (INCLUDING A DESCRIPTION OF THE BASIS ON
WHICH THE BOARD MADE ANY DETERMINATION HEREUNDER), AND THE EXERCISE PRICE AFTER
GIVING EFFECT TO SUCH ADJUSTMENT.  UNLESS AND UNTIL THE WARRANT AGENT RECEIVES
SUCH A CERTIFICATE, IT MAY ASSUME WITHOUT INQUIRY THAT THE EXERCISE PRICE OF ANY
OUTSTANDING WARRANTS HAS NOT BEEN ADJUSTED.

 

7.7.  NO RIGHTS OR LIABILITIES AS STOCKHOLDER.  NOTHING CONTAINED IN THIS
AGREEMENT OR IN ANY WARRANT SHALL BE CONSTRUED AS CONFERRING UPON ANY
WARRANTHOLDER WHO HAS NOT EXERCISED A WARRANT ANY RIGHTS AS A STOCKHOLDER OF THE
COMPANY PRIOR TO EXERCISE OF ANY WARRANT OR AS IMPOSING ANY OBLIGATION ON SUCH
WARRANTHOLDER TO PURCHASE ANY SECURITIES OR AS IMPOSING ANY LIABILITIES ON SUCH
HOLDER AS A STOCKHOLDER OF THE COMPANY, WHETHER SUCH OBLIGATION OR LIABILITIES
ARE ASSERTED BY THE COMPANY OR BY CREDITORS OF THE COMPANY.

 

16

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SECTION 8.  REGISTRATION RIGHTS.  THE COMPANY WILL PERFORM AND COMPLY, AND CAUSE
EACH OF ITS SUBSIDIARIES TO PERFORM AND COMPLY, WITH EACH OF THE FOLLOWING
PROVISIONS AS ARE APPLICABLE TO IT.  EACH HOLDER OF WARRANT SHARES WILL PERFORM
AND COMPLY WITH EACH OF THE FOLLOWING PROVISIONS AS ARE APPLICABLE TO SUCH
HOLDER.

 

8.1.  DEMAND REGISTRATION RIGHTS.

 

8.1.1.  GENERAL.  ONE OR MORE HOLDERS OF WARRANTS OR WARRANT SHARES WHO AT SUCH
TIME HOLD GREATER THAN 20% OF THE WARRANT SHARES THAT HAVE BEEN OR MAY BE ISSUED
UPON EXERCISE, CONVERSION OR EXCHANGE OF THE WARRANTS (“INITIATING HOLDERS”) MAY
REQUEST, BY WRITTEN NOTICE TO THE COMPANY, THAT THE COMPANY EFFECT THE
REGISTRATION UNDER THE SECURITIES ACT FOR A PUBLIC OFFERING OF ALL OR A
SPECIFIED PART OF THE REGISTRABLE SECURITIES HELD BY SUCH INITIATING HOLDERS,
WITHOUT EXERCISING, CONVERTING OR EXCHANGING THE WARRANTS HELD BY SUCH
INITIATING HOLDERS PRIOR TO MAKING SUCH REQUEST.  SUCH NOTICE SHALL SPECIFY THE
INTENDED METHOD OR METHODS OF DISTRIBUTION.  PROMPTLY AFTER RECEIPT OF SUCH
NOTICE FROM THE INITIATING HOLDERS, THE COMPANY SHALL GIVE NOTICE OF SUCH
REQUESTED REGISTRATION TO ALL OTHER HOLDERS OF REGISTRABLE SECURITIES AND
WARRANTHOLDERS  IN ACCORDANCE WITH SECTION 8.2 HEREOF.  THE COMPANY WILL THEN
USE ITS REASONABLE BEST EFFORTS TO EFFECT THE REGISTRATION UNDER THE SECURITIES
ACT OF THE REGISTRABLE SECURITIES WHICH THE COMPANY HAS BEEN REQUESTED TO
REGISTER BY SUCH INITIATING HOLDERS, TOGETHER WITH ALL OTHER REGISTRABLE
SECURITIES WHICH THE COMPANY HAS BEEN REQUESTED TO REGISTER PURSUANT TO SECTION
8.2 HEREOF OR OTHERWISE BY NOTICE DELIVERED TO THE COMPANY WITHIN 20 DAYS AFTER
THE COMPANY HAS GIVEN THE REQUIRED NOTICE OF SUCH REQUESTED REGISTRATION (WHICH
REQUEST SHALL SPECIFY THE INTENDED METHOD OF DISPOSITION OF SUCH REGISTRABLE
SECURITIES), ALL TO THE EXTENT REQUISITE TO PERMIT THE DISPOSITION (IN
ACCORDANCE WITH THE INTENDED METHODS THEREOF AS AFORESAID) OF THE REGISTRABLE
SECURITIES WHICH THE COMPANY HAS BEEN SO REQUESTED TO REGISTER; PROVIDED,
HOWEVER, THAT THE COMPANY SHALL NOT BE OBLIGATED TO TAKE ANY ACTION TO EFFECT
ANY SUCH REGISTRATION PURSUANT TO THIS SECTION 8.1.1 WITHIN 180 DAYS IMMEDIATELY
FOLLOWING THE EFFECTIVE DATE OF ANY REGISTRATION STATEMENT PERTAINING TO AN
UNDERWRITTEN PUBLIC OFFERING OF SECURITIES OF THE COMPANY FOR ITS OWN ACCOUNT
(OTHER THAN A RULE 145 TRANSACTION, OR A REGISTRATION RELATING SOLELY TO
EMPLOYEE BENEFIT PLANS).

 

8.1.2.  FORM; LIMITATIONS.  EXCEPT AS OTHERWISE PROVIDED ABOVE, EACH
REGISTRATION REQUESTED PURSUANT TO SECTION 8.1.1 HEREOF SHALL BE EFFECTED BY THE
FILING OF A REGISTRATION STATEMENT ON FORM S-1 (OR ANY OTHER FORM WHICH INCLUDES
SUBSTANTIALLY THE SAME INFORMATION AS WOULD BE REQUIRED TO BE INCLUDED IN A
REGISTRATION STATEMENT ON SUCH FORM AS CURRENTLY CONSTITUTED), UNLESS THE USE OF
A DIFFERENT FORM HAS BEEN AGREED TO IN WRITING BY HOLDERS OF AT LEAST A MAJORITY
OF THE REGISTRABLE SECURITIES TO BE INCLUDED IN THE PROPOSED REGISTRATION
STATEMENT IN QUESTION (THE “MAJORITY PARTICIPATING HOLDERS”) OR THE COMPANY IS
THEN ELIGIBLE TO USE FORM S-3 FOR A PUBLIC OFFERING BY THE MAJORITY
PARTICIPATING HOLDERS OF THEIR WARRANT SHARES; PROVIDED, HOWEVER, THAT THE
COMPANY SHALL NOT BE REQUIRED TO EFFECT ANY REGISTRATION REQUESTED PURSUANT TO
SECTION 8.1.1 HEREOF ON ANY FORM OTHER THAN FORM S-3 (OR ANY SUCCESSOR FORM) IF
THE COMPANY HAS PREVIOUSLY

 

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effected three or more registrations of Registrable Securities under Section
8.1.1 hereof on any form other than Form S-3 (or any successor form).  No
registration of Registrable Securities which shall not have become and remained
effective in accordance with this Section 8.1 shall be included in the
calculation of the number of registrations contemplated by this Section 8.1.2
(unless the Initiating Holders withdraw their request for such registration,
other than (i) if such withdrawal is a result of information concerning the
business or financial condition of the Company which is made known after the
date on which such registration was requested or (ii) if the Initiating Holders
pay all the expenses of such registration otherwise payable by the Company
pursuant to Section 8.1.3 hereof).  If at the time of any request to register
Registrable Securities pursuant to this Section 8.1, the Company is engaged or
has plans to engage in a registered public offering or is engaged in any other
activity which, in the good faith determination of the Board, would be adversely
affected by the requested registration, then the Company may at its option
direct that such request be delayed for a period not in excess of 30 days from
the date of such request, such right to delay a request to be exercised by the
Company not more than once in any 12-month period.  In the event that, in the
judgment of the Company, it is advisable to suspend use of a prospectus included
in a registration statement due to pending material developments or other events
that have not yet been publicly disclosed and as to which the Company believes
public disclosure would be detrimental to the Company, the Company shall notify
all selling stockholders to such effect, and, upon receipt of such notice, each
such selling stockholder shall immediately discontinue any sales of Registrable
Securities pursuant to such registration statement until such selling
stockholder has received copies of a supplemented or amended prospectus or until
such selling stockholder is advised in writing by the Company that the then
current prospectus may be used and has received copies of any additional or
supplemental filings that are incorporated or deemed incorporated by reference
in such prospectus.  Notwithstanding anything to the contrary herein, the
Company shall not exercise its rights under the foregoing sentence to suspend
sales of Registrable Securities for a period in excess of 30 days consecutively
or 60 days in any 365-day period.

 

8.1.3.  PAYMENT OF EXPENSES.  THE COMPANY SHALL PAY ALL REASONABLE EXPENSES OF
HOLDERS OF WARRANT SHARES INCURRED IN CONNECTION WITH THE FIRST THREE
REGISTRATIONS OF REGISTRABLE SECURITIES REQUESTED PURSUANT TO THIS SECTION 8.1
(INCLUDING THE REASONABLE FEES AND EXPENSES OF A SINGLE LEGAL COUNSEL
REPRESENTING ALL SELLING STOCKHOLDERS), OTHER THAN UNDERWRITING DISCOUNTS AND
COMMISSIONS, IF ANY, AND APPLICABLE TRANSFER TAXES, IF ANY.

 

8.1.4.  ADDITIONAL PROCEDURES.  IN THE CASE OF A REGISTRATION PURSUANT TO THIS
SECTION 8.1, WHENEVER THE INITIATING HOLDERS SHALL REQUEST THAT SUCH
REGISTRATION SHALL BE EFFECTED PURSUANT TO AN UNDERWRITTEN OFFERING, THE COMPANY
SHALL INCLUDE SUCH INFORMATION IN THE WRITTEN NOTICES TO HOLDERS OF REGISTRABLE
SECURITIES REFERRED TO IN SECTION 8.1.2 HEREOF.  IN SUCH EVENT, THE RIGHT OF ANY
HOLDER OF REGISTRABLE SECURITIES TO HAVE SECURITIES OWNED BY SUCH HOLDER
INCLUDED IN SUCH REGISTRATION PURSUANT TO THIS SECTION 8.1 SHALL BE CONDITIONED
UPON SUCH HOLDER’S

 

18

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PARTICIPATION IN SUCH UNDERWRITING AND THE INCLUSION OF SUCH HOLDER’S
REGISTRABLE SECURITIES IN THE UNDERWRITING (UNLESS OTHERWISE MUTUALLY AGREED
UPON BY THE MAJORITY PARTICIPATING HOLDERS AND SUCH HOLDER).  IF REQUESTED BY
THE UNDERWRITERS OF SUCH REGISTRATION, THE COMPANY, TOGETHER WITH THE HOLDERS OF
REGISTRABLE SECURITIES PROPOSING TO DISTRIBUTE THEIR SECURITIES THROUGH SUCH
UNDERWRITING, WILL ENTER INTO AN UNDERWRITING AGREEMENT WITH SUCH UNDERWRITERS
FOR SUCH OFFERING CONTAINING SUCH REPRESENTATIONS AND WARRANTIES BY THE COMPANY
AND SUCH HOLDERS AND SUCH OTHER TERMS AND PROVISIONS AS ARE CUSTOMARILY
CONTAINED IN UNDERWRITING AGREEMENTS WITH RESPECT TO SECONDARY DISTRIBUTIONS,
INCLUDING, WITHOUT LIMITATION, CUSTOMARY INDEMNITY AND CONTRIBUTION PROVISIONS
(SUBJECT, IN EACH CASE, TO THE LIMITATIONS ON SUCH LIABILITIES SET FORTH IN THIS
AGREEMENT).

 

8.2.  PIGGYBACK REGISTRATION RIGHTS.

 

8.2.1.  GENERAL.  EACH TIME THE COMPANY PROPOSES TO REGISTER ANY SHARES OF
COMMON STOCK UNDER THE SECURITIES ACT ON A FORM WHICH WOULD PERMIT REGISTRATION
OF REGISTRABLE SECURITIES FOR SALE TO THE PUBLIC, FOR ITS OWN ACCOUNT AND/OR FOR
THE ACCOUNT OF ANY HOLDERS OF REGISTRABLE SECURITIES OR AFFILIATE OF A HOLDER OF
REGISTRABLE SECURITIES (PURSUANT TO SECTION 8.1 HEREOF OR OTHERWISE), FOR SALE
IN A PUBLIC OFFERING, THE COMPANY WILL GIVE NOTICE TO ALL HOLDERS OF REGISTRABLE
SECURITIES OF ITS INTENTION TO DO SO.  ANY SUCH HOLDER MAY, BY WRITTEN RESPONSE
DELIVERED TO THE COMPANY WITHIN 20 DAYS AFTER THE EFFECTIVENESS OF SUCH NOTICE,
REQUEST THAT ALL OR A SPECIFIED PART OF THE REGISTRABLE SECURITIES HELD BY SUCH
HOLDER BE INCLUDED IN SUCH REGISTRATION.  THE COMPANY THEREUPON WILL USE ITS
REASONABLE EFFORTS TO CAUSE TO BE INCLUDED IN SUCH REGISTRATION UNDER THE
SECURITIES ACT ALL SHARES OF COMMON STOCK WHICH THE COMPANY HAS BEEN SO
REQUESTED TO REGISTER BY SUCH HOLDERS, TO THE EXTENT REQUIRED TO PERMIT THE
DISPOSITION (IN ACCORDANCE WITH THE METHODS TO BE USED BY THE COMPANY OR OTHER
HOLDERS OF SHARES OF COMMON STOCK IN SUCH PUBLIC OFFERING) OF THE REGISTRABLE
SECURITIES TO BE SO REGISTERED.  NO REGISTRATION OF REGISTRABLE SECURITIES
EFFECTED UNDER THIS SECTION 8.2 SHALL RELIEVE THE COMPANY OF ANY OF ITS
OBLIGATIONS TO EFFECT REGISTRATIONS OF REGISTRABLE SECURITIES PURSUANT TO
SECTION 8.1 HEREOF.  THE COMPANY MAY WITHDRAW OR SUSPEND ANY REGISTRATION
COVERED BY THIS SECTION 8.2 AT ANY TIME (SUBJECT, IN THE CASE OF ANY
REGISTRATION ALSO COVERED BY SECTION 8.1 HEREOF, TO ANY LIMITATIONS SET FORTH
THEREIN).

 

8.2.2.  EXCLUDED TRANSACTIONS.  THE COMPANY SHALL NOT BE OBLIGATED TO EFFECT ANY
REGISTRATION OF REGISTRABLE SECURITIES UNDER THIS SECTION 8.2 INCIDENTAL TO THE
REGISTRATION OF ANY OF ITS SECURITIES IN CONNECTION WITH:

 

(A)           ANY PUBLIC OFFERING RELATING TO EMPLOYEE BENEFIT PLANS OR DIVIDEND
REINVESTMENT PLANS; OR

 

(B)           ANY PUBLIC OFFERING RELATING TO THE ACQUISITION OR MERGER AFTER
THE DATE HEREOF BY THE COMPANY OR ANY OF ITS SUBSIDIARIES OF OR WITH ANY OTHER
BUSINESSES.

 

19

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8.2.3.  PAYMENT OF EXPENSES.  THE COMPANY SHALL PAY ALL REASONABLE FEES AND
EXPENSES OF A SINGLE LEGAL COUNSEL REPRESENTING ANY AND ALL HOLDERS OF
REGISTRABLE SECURITIES INCURRED IN CONNECTION WITH THE FIRST THREE REGISTRATIONS
OF REGISTRABLE SECURITIES REQUESTED PURSUANT TO THIS SECTION 8.2.

 

8.2.4.  ADDITIONAL PROCEDURES.  HOLDERS OF WARRANT SHARES PARTICIPATING IN ANY
PUBLIC OFFERING PURSUANT TO THIS SECTION 8.2 SHALL TAKE ALL SUCH ACTIONS AND
EXECUTE ALL SUCH DOCUMENTS AND INSTRUMENTS THAT ARE REASONABLY REQUESTED BY THE
COMPANY TO EFFECT THE SALE OF THEIR WARRANT SHARES IN SUCH PUBLIC OFFERING,
INCLUDING, WITHOUT LIMITATION, BEING PARTIES TO THE UNDERWRITING AGREEMENT
ENTERED INTO BY THE COMPANY AND ANY OTHER SELLING STOCKHOLDERS IN CONNECTION
THEREWITH AND BEING LIABLE IN RESPECT OF THE REPRESENTATIONS AND WARRANTIES BY,
AND THE OTHER AGREEMENTS (INCLUDING WITHOUT LIMITATION CUSTOMARY SELLING
STOCKHOLDER REPRESENTATIONS, WARRANTIES, INDEMNIFICATIONS AND “LOCK-UP”
AGREEMENTS) FOR THE BENEFIT OF THE UNDERWRITERS; PROVIDED, HOWEVER, THAT
(A) WITH RESPECT TO INDIVIDUAL REPRESENTATIONS, WARRANTIES, INDEMNITIES AND
AGREEMENTS OF SELLING HOLDERS OF WARRANT SHARES IN SUCH PUBLIC OFFERING, THE
AGGREGATE AMOUNT OF SUCH LIABILITY SHALL NOT EXCEED SUCH HOLDER’S NET PROCEEDS
FROM SUCH OFFERING AND (B) TO THE EXTENT SELLING HOLDERS OF WARRANT SHARES GIVE
FURTHER REPRESENTATIONS, WARRANTIES AND INDEMNITIES, THEN WITH RESPECT TO ALL
OTHER REPRESENTATIONS, WARRANTIES AND INDEMNITIES OF SELLERS OF SHARES IN SUCH
PUBLIC OFFERING, THE AGGREGATE AMOUNT OF SUCH LIABILITY SHALL NOT EXCEED THE
LESSER OF (I) SUCH HOLDER’S PRO RATA PORTION OF ANY SUCH LIABILITY, IN
ACCORDANCE WITH SUCH HOLDER’S PORTION OF THE TOTAL NUMBER OF WARRANT SHARES
INCLUDED IN THE OFFERING OR (II) SUCH HOLDER’S NET PROCEEDS FROM SUCH OFFERING.

 

8.3.  CERTAIN OTHER PROVISIONS.

 

8.3.1.  UNDERWRITER’S CUTBACK.  IN CONNECTION WITH ANY REGISTRATION OF WARRANT
SHARES, THE UNDERWRITER MAY DETERMINE THAT MARKETING FACTORS (INCLUDING, WITHOUT
LIMITATION, AN ADVERSE EFFECT ON THE PER SHARE OFFERING PRICE) REQUIRE A
LIMITATION OF THE NUMBER OF WARRANT SHARES TO BE UNDERWRITTEN.  NOTWITHSTANDING
ANY CONTRARY PROVISION OF SECTION 8.1 OR SECTION 8.2 HEREOF, AND SUBJECT TO THE
TERMS OF THIS SECTION 8.3.1, THE UNDERWRITER MAY LIMIT THE NUMBER OF SHARES
WHICH WOULD OTHERWISE BE INCLUDED IN SUCH REGISTRATION BY EXCLUDING ANY OR ALL
REGISTRABLE SECURITIES FROM SUCH REGISTRATION (IT BEING UNDERSTOOD THAT THE
NUMBER OF SHARES WHICH THE COMPANY SEEKS TO HAVE REGISTERED IN SUCH REGISTRATION
SHALL NOT BE SUBJECT TO EXCLUSION, IN WHOLE OR IN PART, UNDER THIS
SECTION 8.3.1).  UPON RECEIPT OF NOTICE FROM THE UNDERWRITER OF THE NEED TO
REDUCE THE NUMBER OF SHARES TO BE INCLUDED IN THE REGISTRATION, THE COMPANY
SHALL ADVISE ALL HOLDERS OF THE COMPANY’S SECURITIES THAT WOULD OTHERWISE BE
REGISTERED AND UNDERWRITTEN PURSUANT HERETO, AND THE NUMBER OF SHARES OF SUCH
SECURITIES, INCLUDING REGISTRABLE SECURITIES, THAT MAY BE INCLUDED IN THE
REGISTRATION SHALL BE ALLOCATED IN THE FOLLOWING MANNER, UNLESS THE UNDERWRITER
SHALL DETERMINE THAT MARKETING FACTORS REQUIRE A DIFFERENT ALLOCATION: 
(I) SHARES, OTHER THAN REGISTRABLE SECURITIES, REQUESTED TO BE INCLUDED IN SUCH
REGISTRATION BY STOCKHOLDERS SHALL BE EXCLUDED UNLESS (X) THE COMPANY HAS, PRIOR
TO THE DATE HEREOF, OR AFTER THE DATE HEREOF WITH

 

20

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THE CONSENT OF THE MAJORITY HOLDERS, GRANTED REGISTRATION RIGHTS WHICH ARE TO BE
TREATED ON AN EQUAL BASIS WITH REGISTRABLE SECURITIES FOR THE PURPOSE OF THE
EXERCISE OF THE UNDERWRITER CUTBACK (WITH IT BEING SPECIFICALLY AGREED AND
ACKNOWLEDGED THAT THE REGISTRATION RIGHTS GRANTED (1) TO SILICON VALLEY BANK
PURSUANT TO THE REGISTRATION RIGHTS AGREEMENT, DATED ON OR AROUND DECEMBER 30,
2002, BETWEEN THE COMPANY AND SILICON VALLEY BANK AND (2) TO CERTAIN HOLDERS
PURSUANT TO THE AMENDED AND RESTATED WARRANT AND REGISTRATION RIGHTS AGREEMENT,
DATED FEBRUARY 21, 2003, BY AND AMONG THE COMPANY AND THE WARRANT AGENT AS
WARRANT AGENT ARE TO BE TREATED ON AN EQUAL BASIS WITH REGISTRABLE SECURITIES
FOR THE PURPOSES OF THIS UNDERWRITING CUTBACK), WITH IT BEING SPECIFICALLY
ACKNOWLEDGED THAT THE REGISTRATION RIGHTS GRANTED TO THE HOLDERS OF ANY SUCH
SHARES OF COMMON STOCK ARE TO BE TREATED ON AN EQUAL BASIS WITH REGISTRABLE
SECURITIES FOR PURPOSES OF THIS UNDERWRITING CUTBACK; AND (II) IF FURTHER
LIMITATION ON THE NUMBER OF SHARES TO BE INCLUDED IN THE OFFERING IS REQUIRED,
THE NUMBER OF REGISTRABLE SECURITIES AND OTHER SHARES OF COMMON STOCK THAT MAY
BE INCLUDED IN SUCH REGISTRATION SHALL BE ALLOCATED AMONG HOLDERS THEREOF IN
PROPORTION, AS NEARLY AS PRACTICABLE, TO THE RESPECTIVE AMOUNTS OF COMMON STOCK
WHICH EACH STOCKHOLDER REQUESTED BE REGISTERED IN SUCH REGISTRATION.  NO
SECURITIES EXCLUDED FROM THE UNDERWRITING BY REASON OF THE UNDERWRITER’S
MARKETING LIMITATION SHALL BE INCLUDED IN SUCH REGISTRATION.  UPON DELIVERY OF A
WRITTEN REQUEST THAT REGISTRABLE SECURITIES BE INCLUDED IN AN UNDERWRITTEN
OFFERING PURSUANT TO SECTION 8.1.1 OR SECTION 8.2.1 HEREOF, THE HOLDER THEREOF
MAY NOT THEREAFTER ELECT TO WITHDRAW THEREFROM WITHOUT THE WRITTEN CONSENT THE
COMPANY AND THE MAJORITY PARTICIPATING HOLDERS.

 

8.3.2.  REGISTRATION PROCEDURES.  IF AND IN EACH CASE WHEN THE COMPANY IS
REQUIRED TO USE ITS REASONABLE BEST EFFORTS TO EFFECT A REGISTRATION OF ANY
REGISTRABLE SECURITIES AS PROVIDED IN SECTION 8.1 OR SECTION 8.2 HEREOF, THE
COMPANY SHALL TAKE APPROPRIATE AND CUSTOMARY ACTIONS IN FURTHERANCE THEREOF,
INCLUDING, WITHOUT LIMITATION:

 

(A)           PROMPTLY FILING WITH THE COMMISSION A REGISTRATION STATEMENT AND
USING BEST EFFORTS TO CAUSE SUCH REGISTRATION STATEMENT TO BECOME EFFECTIVE;

 

(B)           PREPARING AND FILING WITH THE COMMISSION SUCH AMENDMENTS AND
SUPPLEMENTS TO SUCH REGISTRATION STATEMENTS AS MAY BE REQUIRED TO COMPLY WITH
THE SECURITIES ACT AND TO KEEP SUCH REGISTRATION STATEMENT EFFECTIVE FOR A
PERIOD NOT TO EXCEED 270 DAYS FROM THE DATE OF EFFECTIVENESS OR SUCH EARLIER
TIME AS THE REGISTRABLE SECURITIES COVERED BY SUCH REGISTRATION STATEMENT SHALL
HAVE BEEN DISPOSED OF IN ACCORDANCE WITH THE INTENDED METHOD OF DISTRIBUTION
THEREFOR OR THE EXPIRATION OF THE TIME WHEN A PROSPECTUS RELATING TO SUCH
REGISTRATION IS REQUIRED TO BE DELIVERED UNDER THE SECURITIES ACT; PROVIDED,
HOWEVER, THAT IF THE REGISTRATION IS EFFECTED BY THE FILING OF A REGISTRATION
STATEMENT ON FORM S-3, THEN THE COMPANY SHALL KEEP SUCH REGISTRATION STATEMENT
EFFECTIVE FOR A PERIOD NOT TO EXCEED 3 YEARS FROM THE DATE OF EFFECTIVENESS OR
SUCH EARLIER TIME AS THE

 

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REGISTRABLE SECURITIES COVERED BY SUCH REGISTRATION STATEMENT HAVE BEEN DISPOSED
OF IN ACCORDANCE WITH THE INTENDED METHOD OF DISTRIBUTION THEREFORE, THE
EXPIRATION OF THE TIME WHEN A PROSPECTUS RELATING TO SUCH REGISTRATION IS
REQUIRED TO BE DELIVERED UNDER THE SECURITIES ACT, OR SUCH REGISTRATION
STATEMENT NO LONGER COVERS REGISTRABLE SECURITIES;

 

(C)           USING ITS BEST EFFORTS TO REGISTER OR QUALIFY SUCH REGISTRABLE
SECURITIES UNDER THE STATE SECURITIES OR “BLUE SKY” LAWS OF SUCH JURISDICTIONS
AS THE SELLERS SHALL REASONABLY REQUEST; PROVIDED, HOWEVER, THAT THE COMPANY
SHALL NOT BE OBLIGATED TO FILE ANY GENERAL CONSENT TO SERVICE OF PROCESS OR TO
QUALIFY AS A FOREIGN CORPORATION IN ANY JURISDICTION IN WHICH IT IS NOT SO
QUALIFIED OR TO SUBJECT ITSELF TO TAXATION IN RESPECT OF DOING BUSINESS IN ANY
JURISDICTION IN WHICH IT WOULD NOT OTHERWISE BE SO SUBJECT; AND

 

(D)           OTHERWISE COOPERATING REASONABLY WITH, AND TAKING SUCH CUSTOMARY
ACTIONS AS MAY REASONABLY BE REQUESTED BY THE HOLDERS OF REGISTRABLE SECURITIES
IN CONNECTION WITH, SUCH REGISTRATION.

 

8.3.3.  SELECTION OF UNDERWRITERS AND COUNSEL.  THE UNDERWRITERS AND LEGAL
COUNSEL TO BE RETAINED IN CONNECTION WITH ANY PUBLIC OFFERING SHALL BE SELECTED
BY THE BOARD OR, IN THE CASE OF AN OFFERING FOLLOWING A REQUEST THEREFOR UNDER
SECTION 8.1.1 HEREOF, THE INITIATING HOLDERS WITH THE CONSENT OF THE COMPANY
(WHICH CONSENT SHALL NOT BE UNREASONABLY WITHHELD).

 

8.3.4.  LOCK-UP.  WITHOUT THE PRIOR WRITTEN CONSENT OF THE UNDERWRITERS MANAGING
ANY PUBLIC OFFERING, FOR A PERIOD BEGINNING SEVEN DAYS IMMEDIATELY PRECEDING AND
ENDING ON THE 90TH DAY FOLLOWING THE EFFECTIVE DATE OF THE REGISTRATION
STATEMENT USED IN CONNECTION WITH SUCH OFFERING, NO HOLDER OF WARRANT SHARES
(WHETHER OR NOT A SELLING STOCKHOLDER PURSUANT TO SUCH REGISTRATION
STATEMENT) REPRESENTING AT LEAST 1% OF THE OUTSTANDING COMMON STOCK SHALL
(A) OFFER, PLEDGE, SELL, CONTRACT TO SELL, SELL ANY OPTION OR CONTRACT TO
PURCHASE, PURCHASE ANY OPTION OR CONTRACT TO SELL, GRANT ANY OPTION, RIGHT OR
WARRANT TO PURCHASE, LEND, OR OTHERWISE TRANSFER, DIRECTLY OR INDIRECTLY, ANY
SHARES OF COMMON STOCK OR ANY SECURITIES CONVERTIBLE INTO OR EXERCISABLE OR
EXCHANGEABLE FOR SUCH COMMON STOCK OR (B) ENTER INTO ANY SWAP OR OTHER
ARRANGEMENT THAT TRANSFERS TO ANOTHER, IN WHOLE OR IN PART, ANY OF THE ECONOMIC
CONSEQUENCES OF OWNERSHIP OF COMMON STOCK, WHETHER ANY SUCH TRANSACTION
DESCRIBED IN CLAUSE (A) OR (B) ABOVE IS TO BE SETTLED BY DELIVERY OF SUCH COMMON
STOCK OR SUCH OTHER SECURITIES, IN CASH OR OTHERWISE; PROVIDED, HOWEVER, THAT
THE FOREGOING RESTRICTIONS SHALL NOT APPLY TO (I) THE SALE OF COMMON STOCK
PURSUANT TO ANY SUCH REGISTRATION STATEMENT FILED IN ACCORDANCE WITH SECTION 8.1
OR SECTION 8.2 HEREOF; (II) TRANSACTIONS RELATING TO SHARES OF COMMON STOCK OR
OTHER SECURITIES ACQUIRED IN OPEN MARKET TRANSACTIONS; OR (III) THE EXERCISE,
CONVERSION OR EXCHANGE OF WARRANTS OR CONVERSIONS OF SHARES OF COMMON STOCK INTO
OTHER CLASSES OF COMMON STOCK WITHOUT CHANGE OF HOLDER.

 

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8.3.5.  FUTURE REGISTRATION RIGHTS.  IF, AFTER THE DATE HEREOF, THE COMPANY
ENTERS INTO AN AGREEMENT OR OTHER COMMITMENT WITH ANY OTHER PERSON THAT HAS THE
EFFECT OF ESTABLISHING REGISTRATION RIGHTS WITH RESPECT TO THE COMPANY’S CAPITAL
STOCK THE TERMS OF WHICH ARE MORE FAVORABLE, TAKEN AS A WHOLE, TO SUCH PERSON
THAN THE REGISTRATION RIGHTS ESTABLISHED IN FAVOR OF THE HOLDERS OF REGISTRABLE
SECURITIES AND WARRANTHOLDERS PURSUANT TO SECTION 8.1 OR SECTION 8.2 HEREOF,
THEN THE COMPANY WILL PROMPTLY SO NOTIFY THE SUCH HOLDERS IN WRITING, AND THE
COMPANY SHALL, WITHOUT THE NECESSITY OF ANY ACTION ON THE PART OF SUCH HOLDERS,
EXTEND THE BENEFITS OF SUCH MORE FAVORABLE TERMS TO SUCH HOLDERS AS IF SUCH
TERMS WERE CONTAINED IN THIS AGREEMENT, OR PERMIT SUCH HOLDERS TO ENTER INTO
SUCH OTHER AGREEMENT ESTABLISHING SUCH RIGHTS IN LIEU OF THIS AGREEMENT.

 

8.4.  INDEMNIFICATION AND CONTRIBUTION.

 

8.4.1.  INDEMNITIES OF THE COMPANY.  IN THE EVENT OF ANY REGISTRATION OF ANY
REGISTRABLE SECURITIES OR OTHER DEBT OR EQUITY SECURITIES OF THE COMPANY OR ANY
OF ITS SUBSIDIARIES UNDER THE SECURITIES ACT PURSUANT TO SECTION 8.1, SECTION
8.2 HEREOF OR OTHERWISE, AND IN CONNECTION WITH ANY REGISTRATION STATEMENT OR
ANY OTHER DISCLOSURE DOCUMENT PRODUCED BY OR ON BEHALF OF THE COMPANY OR ANY OF
ITS SUBSIDIARIES INCLUDING, WITHOUT LIMITATION, REPORTS REQUIRED AND OTHER
DOCUMENTS FILED UNDER THE EXCHANGE ACT, AND OTHER DOCUMENTS PURSUANT TO WHICH
ANY DEBT OR EQUITY SECURITIES OF THE COMPANY OR ANY OF ITS SUBSIDIARIES ARE SOLD
(WHETHER OR NOT FOR THE ACCOUNT OF THE COMPANY OR ITS SUBSIDIARIES), THE COMPANY
WILL, AND HEREBY DOES, AND WILL CAUSE EACH OF ITS SUBSIDIARIES, JOINTLY AND
SEVERALLY, TO INDEMNIFY AND HOLD HARMLESS EACH SELLER OF REGISTRABLE SECURITIES,
ANY PERSON WHO IS OR MIGHT BE DEEMED TO BE A CONTROLLING PERSON OF THE COMPANY
OR ANY OF ITS SUBSIDIARIES WITHIN THE MEANING OF SECTION 15 OF THE SECURITIES
ACT OR SECTION 20 OF THE EXCHANGE ACT, THEIR RESPECTIVE DIRECT AND INDIRECT
PARTNERS, ADVISORY BOARD MEMBERS, DIRECTORS, OFFICERS, TRUSTEES, MEMBERS AND
STOCKHOLDERS, AND EACH OTHER PERSON, IF ANY, WHO CONTROLS ANY SUCH SELLER OR ANY
SUCH CONTROLLING PERSON WITHIN THE MEANING OF SECTION 15 OF THE SECURITIES ACT
OR SECTION 20 OF THE EXCHANGE ACT (EACH SUCH PERSON BEING REFERRED TO HEREIN AS
A “COVERED PERSON”), AGAINST ANY LOSSES, CLAIMS, DAMAGES OR LIABILITIES (OR
ACTIONS OR PROCEEDINGS IN RESPECT THEREOF), JOINT OR SEVERAL, TO WHICH SUCH
COVERED PERSON MAY BE OR BECOME SUBJECT UNDER THE SECURITIES ACT, THE EXCHANGE
ACT, ANY OTHER SECURITIES OR OTHER LAW OF ANY JURISDICTION, THE COMMON LAW OR
OTHERWISE, INSOFAR AS SUCH LOSSES, CLAIMS, DAMAGES OR LIABILITIES (OR ACTIONS OR
PROCEEDINGS IN RESPECT THEREOF) ARISE OUT OF OR ARE BASED UPON (I) ANY UNTRUE
STATEMENT OR ALLEGED UNTRUE STATEMENT OF ANY MATERIAL FACT CONTAINED OR
INCORPORATED BY REFERENCE IN ANY REGISTRATION STATEMENT UNDER THE SECURITIES
ACT, ANY PRELIMINARY PROSPECTUS OR FINAL PROSPECTUS INCLUDED THEREIN, OR ANY
RELATED SUMMARY PROSPECTUS, OR ANY AMENDMENT OR SUPPLEMENT THERETO, OR ANY
DOCUMENT INCORPORATED BY REFERENCE THEREIN, OR ANY OTHER SUCH DISCLOSURE
DOCUMENT (INCLUDING WITHOUT LIMITATION REPORTS AND OTHER DOCUMENTS FILED UNDER
THE EXCHANGE ACT AND ANY DOCUMENT INCORPORATED BY REFERENCE THEREIN) OR OTHER
DOCUMENT OR REPORT, (II) 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 OR (III) ANY VIOLATION OR

 

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ALLEGED VIOLATION BY THE COMPANY OR ANY OF ITS SUBSIDIARIES OF ANY FEDERAL,
STATE, FOREIGN OR COMMON LAW RULE OR REGULATION APPLICABLE TO THE COMPANY OR ANY
OF ITS SUBSIDIARIES AND RELATING TO ACTION OR INACTION IN CONNECTION WITH ANY
SUCH REGISTRATION, DISCLOSURE DOCUMENT OR OTHER DOCUMENT OR REPORT, AND WILL
REIMBURSE SUCH COVERED PERSON FOR ANY LEGAL OR ANY OTHER REASONABLE EXPENSES
INCURRED BY IT IN CONNECTION WITH INVESTIGATING OR DEFENDING ANY SUCH LOSS,
CLAIM, DAMAGE, LIABILITY, ACTION OR PROCEEDING; PROVIDED, HOWEVER, THAT NEITHER
THE COMPANY NOR ANY OF ITS SUBSIDIARIES SHALL BE LIABLE TO ANY COVERED PERSON IN
ANY SUCH CASE TO THE EXTENT THAT ANY SUCH LOSS, CLAIM, DAMAGE, LIABILITY, ACTION
OR PROCEEDING ARISES OUT OF OR IS BASED UPON AN UNTRUE STATEMENT OR ALLEGED
UNTRUE STATEMENT OR OMISSION OR ALLEGED OMISSION MADE IN SUCH REGISTRATION
STATEMENT, PRELIMINARY PROSPECTUS, FINAL PROSPECTUS, SUMMARY PROSPECTUS,
AMENDMENT OR SUPPLEMENT, INCORPORATED DOCUMENT OR OTHER SUCH DISCLOSURE DOCUMENT
OR OTHER DOCUMENT OR REPORT, IN RELIANCE UPON AND IN CONFORMITY WITH WRITTEN
INFORMATION FURNISHED TO THE COMPANY OR TO ANY OF ITS SUBSIDIARIES THROUGH AN
INSTRUMENT DULY EXECUTED BY SUCH COVERED PERSON SPECIFICALLY STATING THAT IT IS
FOR USE IN THE PREPARATION THEREOF.  THE INDEMNITIES OF THE COMPANY AND OF ITS
SUBSIDIARIES CONTAINED IN THIS SECTION 8.4.1 SHALL REMAIN IN FULL FORCE AND
EFFECT REGARDLESS OF ANY INVESTIGATION MADE BY OR ON BEHALF OF SUCH COVERED
PERSON AND SHALL SURVIVE ANY TRANSFER OF SECURITIES.

 

8.4.2.  INDEMNITIES TO THE COMPANY.  THE COMPANY AND ANY OF ITS SUBSIDIARIES MAY
REQUIRE, AS A CONDITION TO INCLUDING ANY SECURITIES IN ANY REGISTRATION
STATEMENT FILED PURSUANT TO THIS AGREEMENT, THAT THE COMPANY AND ANY OF ITS
SUBSIDIARIES SHALL HAVE RECEIVED AN UNDERTAKING SATISFACTORY TO IT FROM THE
PROSPECTIVE SELLER OF SUCH SECURITIES, TO INDEMNIFY AND HOLD HARMLESS THE
COMPANY AND ANY OF ITS SUBSIDIARIES, EACH DIRECTOR OF THE COMPANY OR ANY OF ITS
SUBSIDIARIES, EACH OFFICER OF THE COMPANY OR ANY OF ITS SUBSIDIARIES WHO SHALL
SIGN SUCH REGISTRATION STATEMENT AND EACH OTHER PERSON (OTHER THAN SUCH SELLER),
IF ANY, WHO CONTROLS THE COMPANY AND ANY OF ITS SUBSIDIARIES WITHIN THE MEANING
OF SECTION 15 OF THE SECURITIES ACT OR SECTION 20 OF THE EXCHANGE ACT AND EACH
OTHER PROSPECTIVE SELLER OF SUCH SECURITIES WITH RESPECT TO ANY STATEMENT IN OR
OMISSION FROM SUCH REGISTRATION STATEMENT, ANY PRELIMINARY PROSPECTUS, FINAL
PROSPECTUS OR SUMMARY PROSPECTUS INCLUDED THEREIN, OR ANY AMENDMENT OR
SUPPLEMENT THERETO, OR ANY OTHER DISCLOSURE DOCUMENT (INCLUDING, WITHOUT
LIMITATION, REPORTS AND OTHER DOCUMENTS FILED UNDER THE EXCHANGE ACT OR ANY
DOCUMENT INCORPORATED THEREIN) OR OTHER DOCUMENT OR REPORT, IF SUCH STATEMENT OR
OMISSION WAS MADE IN RELIANCE UPON AND IN CONFORMITY WITH WRITTEN INFORMATION
FURNISHED TO THE COMPANY OR ANY OF ITS SUBSIDIARIES THROUGH AN INSTRUMENT
EXECUTED BY SUCH SELLER SPECIFICALLY STATING THAT IT IS FOR USE IN THE
PREPARATION THEREOF.  SUCH INDEMNITY SHALL REMAIN IN FULL FORCE AND EFFECT
REGARDLESS OF ANY INVESTIGATION MADE BY OR ON BEHALF OF THE COMPANY, ANY OF ITS
SUBSIDIARIES OR ANY SUCH DIRECTOR, OFFICER OR CONTROLLING PERSON AND SHALL
SURVIVE ANY TRANSFER OF SECURITIES.

 

8.4.3.  CONTRIBUTION.  IF THE INDEMNIFICATION PROVIDED FOR IN SECTION 8.4.1
OR SECTION 8.4.2 HEREOF IS UNAVAILABLE TO A PARTY THAT WOULD HAVE BEEN ENTITLED
TO INDEMNIFICATION PURSUANT TO THE FOREGOING PROVISIONS OF THIS SECTION 8.4 (AN

 

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 “INDEMNITEE”) IN RESPECT OF ANY LOSSES, CLAIMS, DAMAGES OR LIABILITIES (OR
ACTIONS OR PROCEEDINGS IN RESPECT THEREOF) REFERRED TO THEREIN, THEN EACH PARTY
THAT WOULD HAVE BEEN AN INDEMNIFYING PARTY THEREUNDER SHALL, IN LIEU OF
INDEMNIFYING SUCH INDEMNITEE, CONTRIBUTE TO THE AMOUNT PAID OR PAYABLE BY SUCH
INDEMNITEE AS A RESULT OF SUCH LOSSES, CLAIMS, DAMAGES OR LIABILITIES (OR
ACTIONS OR PROCEEDINGS IN RESPECT THEREOF) IN SUCH PROPORTION AS IS APPROPRIATE
TO REFLECT THE RELATIVE FAULT OF SUCH INDEMNIFYING PARTY ON THE ONE HAND AND
SUCH INDEMNITEE ON THE OTHER IN CONNECTION WITH THE STATEMENTS OR OMISSIONS
WHICH RESULTED IN SUCH LOSSES, CLAIMS, DAMAGES OR LIABILITIES (OR ACTIONS OR
PROCEEDINGS IN RESPECT THEREOF).  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 SUCH INDEMNIFYING PARTY OR SUCH INDEMNITEE
AND THE PARTIES’ RELATIVE INTENT, KNOWLEDGE, ACCESS TO INFORMATION AND
OPPORTUNITY TO CORRECT OR PREVENT SUCH STATEMENT OR OMISSION.  THE PARTIES AGREE
THAT IT WOULD NOT BE JUST OR EQUITABLE IF CONTRIBUTION PURSUANT TO THIS
SECTION 8.4.3 WERE DETERMINED BY PRO RATA ALLOCATION OR BY ANY OTHER METHOD OF
ALLOCATION WHICH DOES NOT TAKE ACCOUNT OF THE EQUITABLE CONSIDERATIONS REFERRED
TO IN THE PRECEDING SENTENCE.  THE AMOUNT PAID OR PAYABLE BY A CONTRIBUTING
PARTY AS A RESULT OF THE LOSSES, CLAIMS, DAMAGES OR LIABILITIES (OR ACTIONS OR
PROCEEDINGS IN RESPECT THEREOF) REFERRED TO ABOVE IN THIS SECTION 8.4.3 SHALL
INCLUDE ANY LEGAL OR OTHER EXPENSES REASONABLY INCURRED BY SUCH INDEMNITEE IN
CONNECTION WITH INVESTIGATING OR DEFENDING ANY SUCH ACTION OR CLAIM.  NO PERSON
GUILTY OF FRAUDULENT MISREPRESENTATION (WITHIN THE MEANING OF SECTION 11(F) OF
THE SECURITIES ACT) SHALL BE ENTITLED TO CONTRIBUTION FROM ANY PERSON WHO WAS
NOT GUILTY OF SUCH FRAUDULENT MISREPRESENTATION.

 

8.4.4.  LIMITATION ON LIABILITY OF HOLDERS OF REGISTRABLE SECURITIES.  THE
LIABILITY OF EACH HOLDER OF REGISTRABLE SECURITIES IN RESPECT OF ANY
INDEMNIFICATION OR CONTRIBUTION OBLIGATION OF SUCH HOLDER ARISING UNDER THIS
SECTION 8.4 SHALL NOT IN ANY EVENT EXCEED AN AMOUNT EQUAL TO THE NET PROCEEDS TO
SUCH HOLDER (AFTER DEDUCTION OF ALL UNDERWRITERS’ DISCOUNTS AND
COMMISSIONS) FROM THE DISPOSITION OF THE REGISTRABLE SECURITIES DISPOSED OF BY
SUCH HOLDER PURSUANT TO SUCH REGISTRATION.

 

8.5.  REPORTS UNDER EXCHANGE ACT.  IN ORDER TO PROVIDE TO THE HOLDERS OF WARRANT
SHARES THE BENEFITS OF RULE 144 AND ANY OTHER RULE OR REGULATION OF THE
COMMISSION THAT MAY AT ANY TIME PERMIT ANY SUCH HOLDER TO SELL SECURITIES OF THE
COMPANY TO THE PUBLIC WITHOUT REGISTRATION, AND IN ORDER TO MAKE IT POSSIBLE FOR
THE HOLDERS OF WARRANT SHARES TO REGISTER THE SALE OF THE REGISTRABLE SECURITIES
PURSUANT TO A REGISTRATION ON FORM S-3 IF THE COMPANY IS THEN OTHERWISE ELIGIBLE
TO USE SUCH FORM, THE COMPANY AGREES TO:

 

(A)           MAKE AND KEEP PUBLIC INFORMATION AVAILABLE, AS THOSE TERMS ARE
UNDERSTOOD AND DEFINED IN RULE 144;

 

(B)           TAKE SUCH ACTION, INCLUDING THE REGISTRATION OF ITS COMMON STOCK
UNDER SECTION 12 OF THE EXCHANGE ACT, AS IS NECESSARY TO ENABLE THE HOLDERS OF
WARRANT SHARES TO UTILIZE FORM S-3 FOR THE RESALE OF THEIR

 

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REGISTRABLE SECURITIES (IGNORING, FOR THIS PURPOSE, THE PROVISIONS OF ITEMS
I.A.5 AND I.B.3 OF THE GENERAL INSTRUCTIONS THERETO);

 

(C)           FILE WITH THE COMMISSION IN A TIMELY MANNER ALL REPORTS AND OTHER
DOCUMENTS REQUIRED OF THE COMPANY UNDER THE SECURITIES ACT AND THE EXCHANGE ACT;
AND

 

(D)           FURNISH TO ANY HOLDER OF WARRANT SHARES, SO LONG AS THE HOLDER
OWNS ANY REGISTRABLE SECURITIES, FORTHWITH UPON REQUEST (I) A WRITTEN STATEMENT
BY THE COMPANY THAT IT HAS COMPLIED WITH THE REPORTING REQUIREMENTS OF RULE 144,
THE SECURITIES ACT AND THE EXCHANGE ACT, OR THAT IT QUALIFIES AS A REGISTRANT
WHOSE SECURITIES MAY BE RESOLD IN A SECONDARY OFFERING PURSUANT TO FORM S-3;
(II) A COPY OF THE MOST RECENT ANNUAL OR QUARTERLY REPORT OF THE COMPANY FILED
WITH THE COMMISSION AND SUCH OTHER REPORTS AND DOCUMENTS SO FILED BY THE
COMPANY; AND (III) SUCH OTHER INFORMATION AS MAY BE REASONABLY REQUESTED IN
AVAILING ANY HOLDER OF SHARES ANY RULE OR REGULATION OF THE COMMISSION WHICH
PERMITS THE SELLING OF ANY SUCH SECURITIES WITHOUT REGISTRATION OR PURSUANT TO
SUCH FORM.

 

SECTION 9.  DEFINITIONS.  FOR THE PURPOSES OF THIS AGREEMENT, THE FOLLOWING
TERMS HAVE THE MEANINGS BELOW:

 

“Additional Common Shares” shall mean, subject to Section 7.4.8 hereof, all
shares of Common Stock (including treasury shares) issued or sold (or, pursuant
to Section 7.4.4 or 7.4.5 hereof, deemed to be issued) by the Company after the
date hereof, whether or not subsequently reacquired or retired by the Company,
other than (i) shares of Common Stock issued or issuable upon conversion,
exercise or exchange of the Warrants; and (ii) Excluded Issuances.

 

“Affiliate” shall mean, with respect to the Company or any of its Subsidiaries
(or any other specified Person), any other Person which, directly or indirectly
controls or is controlled by or is under direct or indirect common control with
the Company or such Subsidiary (or such specified Person), and, without limiting
the generality of the foregoing, shall include (a) any other Person which
beneficially owns or holds 10% of more of any class of voting securities of such
Person or 10% or more of the equity interest in such Person, (b) any other
Person of which such Person beneficially owns or holds 10% or more of any class
of voting securities or in which such Person beneficially owns or holds 10% or
more of the equity interest in such Person and (c) any director or executive
officer of such Person.  For the purposes of this definition, the term “control”
(including, with correlative meanings, the terms “controlled by” and “under
common control with”), as used with respect to any Person, means the possession,
directly or indirectly, of the power to direct or cause the direction of the
management and policies of such Person, whether through the ownership of voting
securities or by contract or otherwise.

 

“Agreement” shall have the meaning set forth in the first paragraph of this
Agreement.

 

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“Antidilution Price” shall have the meaning set forth in Section 7.4.2 hereof.

 

“Board” shall mean the Board of Directors of the Company.

 

“Business Day” shall mean any day, excluding Saturday, Sunday and any day which
shall be in New York, New York or Boston, Massachusetts a legal holiday or a day
on which banking institutions are authorized by law or other governmental
actions to close.

 

“Commission” shall mean the Securities and Exchange Commission.

 

“Common Stock” shall mean the Company’s common stock, par value $0.001 per
share.

 

“Company” shall have the meaning set forth in the first paragraph of this
Agreement.

 

“Covered Person” shall have the meaning set forth in Section 8.4.1 hereof.

 

“Convertible Securities” shall mean any evidences of indebtedness, shares of
stock (other than shares of Common Stock) or other securities, including
warrants, directly or indirectly convertible into or exchangeable for shares of
Common Stock.

 

“Current Market Price” shall mean on any date specified herein, the average
daily Market Price during the period of the most recent 10 days, ending two
trading days immediately preceding such date, on which the national securities
exchanges were open for trading, except that if no Common Stock is then listed
or admitted to trading on any national securities exchange or quoted in the
over-the-counter market, the Current Market Price shall be the Market Price on
such date.

 

“Depository” shall have the meaning set forth in Section 2 hereof.

 

“Exchange Act” shall mean the Securities Exchange Act of 1934, as in effect from
time to time.

 

“Exchange Agreement” shall have the meaning set forth in the second paragraph
hereof.

 

“Excluded Issuance” shall mean the issuance of shares of Common Stock (or
options exercisable therefor) to officers, directors, and employees of the
Company, which shares are either (a) currently subject to the Company’s stock
option plan or (b)                            shares that are not currently
subject to the Company’s stock option plan.

 

“Exercise Price” shall have the meaning set forth in Section 7.4.1 hereof.

 

“Expiration Date” shall mean 5:00 P.M. Boston time on              , 2007.

 

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“Fair Market Value” shall mean, as of any date, as to any share of Common Stock,
the Board’s good faith determination of the fair value of such shares as of the
applicable reference date.

 

“Filing Date” shall have the meaning set forth in Section 7.4.10 hereof.

 

“Global Warrant” Shall have the meaning set froth in Section 2 hereof.

 

“Indemnitee” shall have the meaning set forth in Section 8.4.3 hereof.

 

“Initial Exercise Price” shall have the meaning set forth in the second
paragraph of this Agreement.

 

“Initiating Holders” shall have the meaning set forth in Section 8.1.1 hereof.

 

“Majority Holders” shall mean, as of any date, the holders of a majority of the
Warrant Shares outstanding on such date.

 

“Majority Participating Holders” shall have the same meaning set forth in
Section 8.1.2 hereof.

 

“Majority Warrantholders” shall mean at any time holders of more than 50% of the
Warrants or, if the Warrants have been exercised, the Warrant Shares.

 

“Market Price” shall mean on any date specified herein, the amount per share of
Common Stock equal to (a) the last sale price of Common Stock, regular way, on
such date or, if no such sale takes place on such date, the average of the
closing bid and asked prices thereof on such date, in each case as officially
reported on the principal national securities exchange on which Common Stock is
then listed or admitted to trading, or (b) if Common Stock is not then listed or
admitted to trading on any national securities exchange but is designated as a
national market system security by the NASD, the last trading price of Common
Stock on such date, or (c) if there shall have been no trading on such date or
if Common Stock is not so designated, the average of the closing bid and asked
prices of Common Stock on such date as shown by the NASD automated quotation 
system, or if applicable, the OTCBB, or (d) if the Common Stock is not then
listed or admitted to trading on any national exchange or quoted in the
over-the-counter market, the Market Price thereof determined by good faith
mutual agreement of the Company and the Majority Warrantholders.  If, in the
case of subsection (d), the Company and the Majority Warrantholders are unable
to agree on the value of such Common Stock within 10 business days, the Market
Price shall be determined in accordance with the following appraisal process:

 

Within the following five business days, each of the Company and the Majority
Warrantholders shall select and retain a firm of recognized expertise in the
valuation of business to perform a valuation of the Market Price.  Such firms
shall then value the shares of the Common Stock, on a going concern basis,
without regard to any minority, marketability or other discount resulting from
consideration of a minority interest, the Company’s status as a closely held
corporation or the existence of any put or call rights.

 

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The Company shall provide to both valuation firms any information reasonably
requested by either such firm in connection with its valuation.  Each such firm
shall deliver its valuation report to the Company and the holder within 20 days
after receiving all requested information from the Company.  If the greater of
the valuations of a share of the Common Stock is no more than 110% of the lesser
of such valuations, the Market Price shall be deemed to be the average of the
two valuations.  If the greater of such valuations exceeds 110% of the lesser of
such valuations, the two valuation firms shall select a third mutually
acceptable valuation firm within five business days of such determination.  Such
third valuation firm shall be directed to provide, within 15 business days, its
valuation report, and the valuation determined by the first two valuation firms
that is closest to the valuation determined by the third valuation firm shall be
the Market Price as of the reference date.  The Company shall bear all costs and
expenses of this appraisal process.

 

“120 Day Deadline” shall have the meaning set forth in Section 7.4.11 hereof.

 

“Options” shall mean options, warrants or other rights to subscribe for,
purchase or otherwise acquire either Common Stock or Convertible Securities.

 

“Other Securities” shall mean any stock (other than Common Stock) and other
securities of the Company or any other Person which the holders of the Warrants
at any time shall be entitled to receive, or shall have received, upon the
exercise of the Warrants, in lieu of or in addition to Common Stock, or which at
any time shall be issuable or shall have been issued in exchange for or in
replacement of Common Stock or Other Securities pursuant to Section 6 hereof or
otherwise.

 

“Person” shall mean an individual, a corporation, a partnership, a limited
liability company, a trust, an unincorporated organization or a government
organization or an agency or political subdivision thereof.

 

“Physical Warrant” shall have the meaning set forth in Section 2 hereof.

 

“Public Offering” shall mean a public offering and sale of Common Stock for cash
pursuant to an effective registration statement under the Securities Act.

 

“Qualified Institutional Buyer” shall have the meaning set forth in Section 6.1
hereof.

 

“Registrable Securities” shall mean the Warrant Shares and all shares of Common
Stock directly or indirectly issued or issuable with respect to the Warrant
Shares by way of stock dividend or stock split or in connection with a
combination of shares, recapitalization, merger, consolidation or other
reorganization; provided, however, that shares of Common Stock which are
Registrable Shares shall cease to be Registrable Shares (i) upon any sale
pursuant to a registration statement or Rule 144 under the Securities Act or
(ii) at such time as they become eligible for sale pursuant to Rule 144(k) under
the Securities Act.

 

“Rule 144” shall mean Rule 144 under the Securities Act (or any successor Rule).

 

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“Rule 145 Transaction” shall mean a registration on Form S-4 pursuant to Rule
145 of the Securities Act (or any successor Form or provision, as applicable).

 

“Securities” shall mean any debt or equity securities of the Company, whether
now or hereafter authorized, and any instrument convertible into or exchangeable
for Securities or a Security.  “Security” shall mean one of the Securities.

 

“Securities Act” shall mean the Securities Act of 1933, as in effect from time
to time.

 

“Stock” shall include any and all shares, interests or other equivalents
(however designated) of, or participants in, the capital stock of a corporation
of any class.

 

“Subsidiary” shall mean, for any Person, (i) a corporation a majority of whose
voting stock is at the time, directly or indirectly, owned by such Person, by
one or more Subsidiaries of such Person or by such Person and one or more
Subsidiaries of such Person, (ii) a partnership in which such Person or a
Subsidiary of such Person is, at the date of determination, a general or limited
partner of such partnership, but only if such Person or its Subsidiary is
entitled to receive more than 50% of the assets of such partnership upon its
dissolution, (iii) a limited liability company, a majority of whose membership
interests is, at the time, directly or indirectly owned by such Person or with
respect to which such Person has a right, under any scenario, to receive 50% or
more of the distributions of the assets of such limited liability company upon
its dissolution, or (iv) any other Person (other than a corporation or
partnership) in which such Person, a Subsidiary of such Person or such Person
and one or more Subsidiaries of such Person, directly or indirectly, at the date
of determination thereof, has (a) at least a majority ownership interest or (b)
the power to elect or direct the election of a majority of the directors or
other governing body of such Person.

 

“Warrant Agent” shall have the meaning set forth in the first paragraph of this
Agreement.

 

“Warrant Certificates” shall have the meaning set forth in Section 2 hereof.

 

“Warrant Register” shall have the meaning set forth in Section 4 hereof.

 

“Warrant Share Certificates” shall have the meaning set forth in Section 2
hereof.

 

“Warrant Shares” shall mean the shares received or to be received upon exercise,
conversion or exchange of the Warrants.

 

“Warrants” shall mean any warrants to purchase shares of Common Stock issued
hereunder or pursuant to the Exchange Agreement.

 

“Warrantholders” shall mean the holders of the Warrants from time to time,
together with any permitted transferees of such holders who subsequently acquire
Warrants.

 

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SECTION 10.  PAYMENT OF TAXES.  THE COMPANY WILL PAY ALL DOCUMENTARY STAMP TAXES
ATTRIBUTABLE TO THE INITIAL ISSUANCE OF WARRANT SHARES UPON THE EXERCISE OF
WARRANTS; PROVIDED, HOWEVER, THAT THE COMPANY SHALL NOT BE REQUIRED TO PAY ANY
TAX OR GOVERNMENTAL CHARGE WHICH MAY BE PAYABLE IN RESPECT OF ANY TRANSFER
INVOLVED IN THE ISSUE OF ANY WARRANT CERTIFICATES OR ANY WARRANT SHARE
CERTIFICATES IN A NAME OTHER THAN THAT OF THE REGISTERED HOLDER OF A WARRANT
SHARE CERTIFICATE OR A WARRANT CERTIFICATE SURRENDERED UPON THE EXERCISE OF A
WARRANT, AND THE COMPANY SHALL NOT BE REQUIRED TO ISSUE OR DELIVER SUCH WARRANT
CERTIFICATES OR WARRANT SHARE CERTIFICATES UNLESS OR UNTIL THE PERSON OR PERSONS
REQUESTING THE ISSUANCE THEREOF SHALL HAVE PAID TO THE COMPANY THE AMOUNT OF
SUCH TAX OR CHARGE OR SHALL HAVE ESTABLISHED TO THE SATISFACTION OF THE COMPANY
THAT SUCH TAX OR CHARGE HAS BEEN PAID.  THE WARRANT AGENT SHALL HAVE NO DUTY OR
OBLIGATION TO TAKE ANY ACTION UNDER ANY SECTION OF THIS AGREEMENT WHICH REQUIRES
THE PAYMENT BY A WARRANTHOLDER OF APPLICABLE TAXES AND GOVERNMENTAL CHARGES
UNLESS AND UNTIL THE WARRANT AGENT IS SATISFIED THAT ALL SUCH TAXES AND/OR
CHARGES HAVE BEEN PAID.

 

SECTION 11.  MUTILATED OR MISSING WARRANT CERTIFICATES AND WARRANT SHARE
CERTIFICATES.  IN CASE ANY OF THE WARRANT CERTIFICATES SHALL BE MUTILATED, LOST,
STOLEN OR DESTROYED, THE COMPANY, AT ITS EXPENSE, SHALL ISSUE AND THE WARRANT
AGENT SHALL COUNTERSIGN, IN EXCHANGE AND SUBSTITUTION FOR AND UPON CANCELLATION
OF THE MUTILATED WARRANT CERTIFICATE, OR IN LIEU OF AND SUBSTITUTION FOR THE
WARRANT CERTIFICATE LOST, STOLEN OR DESTROYED, A NEW WARRANT CERTIFICATE OF LIKE
TENOR AND REPRESENTING AN EQUIVALENT NUMBER OF WARRANTS, BUT ONLY UPON RECEIPT
OF EVIDENCE REASONABLY SATISFACTORY TO THE COMPANY AND THE WARRANT AGENT OF SUCH
LOSS, THEFT OR DESTRUCTION OF SUCH WARRANT CERTIFICATE AND INDEMNITY, IF
REQUESTED, SATISFACTORY TO THE COMPANY AND THE WARRANT AGENT.

 

SECTION 12.  FRACTIONAL INTERESTS.

 

(a)           The Company shall not be required to issue fractional Warrant
Shares on the exercise of Warrants or otherwise. If more than one Warrant shall
be presented for exercise in full at the same time by the same holder, the
number of full Warrant Shares which shall be issuable upon the exercise thereof
shall be computed on the basis of the aggregate number of Warrant Shares
purchasable on exercise of the Warrants so presented. If any fraction of a
Warrant Share would, except for the provisions of this Section 12, be issuable
on the exercise of any Warrants (or specified portion thereof), the Company
shall pay an amount in cash equal to the Current Market Price of such fractional
Warrant Share as of the day immediately preceding the date the Warrant is
presented for exercise, multiplied by such fraction.

 

(b)           Warrants may be issued in fractional interests. Holders of
fractional interests in Warrants will be entitled to purchase a number of
Warrant Shares equal to the product obtained by multiplying the number of
Warrant Shares issuable with respect to a full Warrant multiplied by the
fractional interest owned by such holder in the Warrant.

 

(c)           Whenever a payment for fractional Warrant Shares is to be made by
the Warrant Agent, the Company shall (i) promptly prepare and deliver to the
Warrant Agent a certificate setting forth in reasonable detail the facts related
to such payment and the prices and/or formulas utilized in calculating such
payments, and (ii) provide sufficient monies to the Warrant Agent in the form of
fully collected funds to make such payments.  The Warrant Agent shall be fully
protected in relying upon such a certificate and shall have no duty with respect
to, and shall not

 

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be deemed to have knowledge of any payment for fractional Warrant Shares under
any Section of this Agreement relating to the payment of fractional Warrant
Shares unless and until the Warrant Agent shall have received such a certificate
and sufficient monies.

 

SECTION 13.  MERGER, CONSOLIDATION OR CHANGE OF NAME OF WARRANT AGENT.  ANY
PERSON INTO WHICH THE WARRANT AGENT MAY BE MERGED OR WITH WHICH IT MAY BE
CONSOLIDATED, OR ANY PERSON RESULTING FROM ANY MERGER OR CONSOLIDATION TO WHICH
THE WARRANT AGENT SHALL BE A PARTY, OR ANY PERSON SUCCEEDING TO SUBSTANTIALLY
ALL OF THE BUSINESS OF THE WARRANT AGENT (INCLUDING THE ADMINISTRATION OF THIS
AGREEMENT), SHALL BE THE SUCCESSOR TO THE WARRANT AGENT HEREUNDER WITHOUT THE
EXECUTION OR FILING OF ANY PAPER OR ANY FURTHER ACT ON THE PART OF ANY OF THE
PARTIES HERETO, PROVIDED THAT SUCH PERSON WOULD BE ELIGIBLE FOR APPOINTMENT AS A
SUCCESSOR WARRANT AGENT UNDER THE PROVISIONS OF SECTION 15 HEREOF.  IN CASE AT
THE TIME SUCH SUCCESSOR TO THE WARRANT AGENT SHALL SUCCEED TO THE AGENCY CREATED
BY THIS AGREEMENT, AND IN CASE AT THAT TIME ANY OF THE WARRANT CERTIFICATES
SHALL HAVE BEEN COUNTERSIGNED BUT NOT DELIVERED, ANY SUCH SUCCESSOR TO THE
WARRANT AGENT MAY ADOPT THE COUNTERSIGNATURE OF THE ORIGINAL WARRANT AGENT; AND
IN CASE AT THAT TIME ANY OF THE WARRANT CERTIFICATES SHALL NOT HAVE BEEN
COUNTERSIGNED, ANY SUCCESSOR TO THE WARRANT AGENT MAY COUNTERSIGN SUCH WARRANT
CERTIFICATES EITHER IN THE NAME OF THE PREDECESSOR WARRANT AGENT OR IN THE NAME
OF THE SUCCESSOR TO THE WARRANT AGENT; AND IN ALL SUCH CASES SUCH WARRANT
CERTIFICATES SHALL HAVE THE FULL FORCE AND EFFECT PROVIDED IN THE WARRANT
CERTIFICATES AND IN THIS AGREEMENT.

 

In case at any time the name of the Warrant Agent shall be changed and at such
time any of the Warrant Certificates shall have been countersigned but not
delivered, the Warrant Agent whose name has been changed may adopt the
countersignature under its prior name, and in case at that time any of the
Warrant Certificates shall not have been countersigned, the Warrant Agent may
countersign such Warrant Certificates either in its prior name or in its changed
name, and in all such cases such Warrant Certificates shall have the full force
and effect provided in the Warrant Certificates and in this Agreement.

 

SECTION 14.  WARRANT AGENT.  THE WARRANT AGENT UNDERTAKES THE DUTIES AND
OBLIGATIONS IMPOSED BY THIS AGREEMENT (AND NO IMPLIED DUTIES OR OBLIGATIONS
SHALL BE READ INTO THIS AGREEMENT AGAINST THE WARRANT AGENT) UPON THE FOLLOWING
TERMS AND CONDITIONS, BY ALL OF WHICH THE COMPANY AND THE WARRANTHOLDERS, BY
THEIR ACCEPTANCE THEREOF, SHALL BE BOUND:

 

(A)           THE STATEMENTS CONTAINED HEREIN AND IN THE WARRANT CERTIFICATES
SHALL BE TAKEN AS STATEMENTS OF THE COMPANY AND THE WARRANT AGENT ASSUMES NO
RESPONSIBILITY FOR THE CORRECTNESS OF ANY OF THE SAME EXCEPT SUCH AS DESCRIBE
THE WARRANT AGENT OR ACTION TAKEN OR TO BE TAKEN BY IT. THE WARRANT AGENT
ASSUMES NO RESPONSIBILITY WITH RESPECT TO THE DISTRIBUTION OF THE WARRANT
CERTIFICATES AND THE WARRANT SHARE CERTIFICATES EXCEPT AS HEREIN OTHERWISE
PROVIDED.

 

(B)           THE WARRANT AGENT SHALL NOT BE RESPONSIBLE FOR ANY FAILURE OF THE
COMPANY TO COMPLY WITH ANY OF THE COVENANTS CONTAINED IN THIS AGREEMENT OR IN
THE WARRANT CERTIFICATES TO BE COMPLIED WITH BY THE COMPANY.

 

(C)           THE WARRANT AGENT MAY CONSULT AT ANY TIME WITH COUNSEL OF ITS OWN
SELECTION (WHO MAY BE COUNSEL FOR THE COMPANY) AND THE WARRANT AGENT SHALL INCUR
NO LIABILITY OR

 

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RESPONSIBILITY TO THE COMPANY OR TO ANY WARRANTHOLDER IN RESPECT OF ANY ACTION
TAKEN, SUFFERED OR OMITTED TO BE TAKEN BY IT HEREUNDER IN ACCORDANCE WITH THE
OPINION OR THE ADVICE OF SUCH COUNSEL.

 

(D)           THE WARRANT AGENT SHALL INCUR NO LIABILITY OR RESPONSIBILITY TO
THE COMPANY OR TO ANY WARRANTHOLDER FOR ANY ACTION TAKEN IN RELIANCE ON ANY
WARRANT CERTIFICATE, CERTIFICATE OF SHARES, NOTICE, RESOLUTION, WAIVER, CONSENT,
ORDER, CERTIFICATE, OR OTHER PAPER, DOCUMENT OR INSTRUMENT (WHETHER IN ITS
ORIGINAL OR FACSIMILE FORM) BELIEVED BY IT TO BE GENUINE AND TO HAVE BEEN
SIGNED, SENT OR PRESENTED BY THE PROPER PARTY OR PARTIES.

 

(E)           THE COMPANY AGREES (I) TO PAY TO THE WARRANT AGENT REASONABLE
COMPENSATION FOR ALL SERVICES RENDERED BY THE WARRANT AGENT (INCLUDING FEES AND
EXPENSES OF ITS COUNSEL) AND TO REIMBURSE THE WARRANT AGENT FOR ALL EXPENSES,
TAXES AND GOVERNMENTAL CHARGES AND OTHER CHARGES AND DISBURSEMENTS OF ANY KIND
AND NATURE INCURRED BY THE WARRANT AGENT IN THE PREPARATION, DELIVERY,
EXECUTION, ADMINISTRATION AND AMENDMENT OF THIS AGREEMENT AND THE EXERCISE AND
PERFORMANCE OF ITS DUTIES HEREUNDER AND (II) TO INDEMNIFY THE WARRANT AGENT (AND
ANY PREDECESSOR WARRANT AGENT) AND SAVE IT HARMLESS AGAINST ANY AND ALL CLAIMS
(WHETHER ASSERTED BY THE COMPANY, A HOLDER OR ANY OTHER PERSON), DAMAGES,
LOSSES, FINES, PENALTIES, SETTLEMENTS, EXPENSES (INCLUDING TAXES OTHER THAN
TAXES BASED ON THE INCOME OF THE WARRANT AGENT), LIABILITIES, INCLUDING
JUDGMENTS, COSTS AND COUNSEL FEES AND EXPENSES, FOR ANY ACTION TAKEN, SUFFERED
OR OMITTED TO BE TAKEN BY THE WARRANT AGENT IN CONNECTION WITH THE EXECUTION OF
THIS AGREEMENT AND THE ACCEPTANCE AND ADMINISTRATION OF THIS AGREEMENT, EXCEPT
AS A RESULT OF ITS GROSS NEGLIGENCE OR WILLFUL MISCONDUCT (EACH AS FINALLY
DETERMINED BY A COURT OF COMPETENT JURISDICTION). THE COSTS AND EXPENSES
INCURRED IN ENFORCING THIS RIGHT OF INDEMNIFICATION SHALL BE PAID BY THE
COMPANY.  THE PROVISIONS OF THIS SECTION 14 SHALL SURVIVE THE EXPIRATION OF THE
WARRANTS, THE TERMINATION OF THIS AGREEMENT AND THE RESIGNATION OR REMOVAL OF
THE WARRANT AGENT.

 

(F)            THE WARRANT AGENT SHALL BE UNDER NO OBLIGATION TO INSTITUTE ANY
ACTION, SUIT OR LEGAL PROCEEDING OR TO TAKE ANY OTHER ACTION LIKELY TO INVOLVE
EXPENSE UNLESS THE COMPANY OR ONE OR MORE REGISTERED WARRANTHOLDERS SHALL
FURNISH THE WARRANT AGENT WITH REASONABLE SECURITY AND INDEMNITY SATISFACTORY TO
IT FOR ANY COSTS AND EXPENSES WHICH MAY BE INCURRED, BUT THIS PROVISION SHALL
NOT LIMIT THE POWER OF THE WARRANT AGENT TO TAKE SUCH ACTION AS IT MAY CONSIDER
PROPER, WHETHER WITH OR WITHOUT ANY SUCH SECURITY OR INDEMNITY. ALL RIGHTS OF
ACTION UNDER THIS AGREEMENT OR UNDER ANY OF THE WARRANTS MAY BE ENFORCED BY THE
WARRANT AGENT WITHOUT THE POSSESSION OF ANY OF THE WARRANT CERTIFICATES OR
WARRANT SHARE CERTIFICATES OR THE PRODUCTION THEREOF AT ANY TRIAL OR OTHER
PROCEEDING RELATIVE THERETO, AND ANY SUCH ACTION, SUIT OR PROCEEDING INSTITUTED
BY THE WARRANT AGENT SHALL BE BROUGHT IN ITS NAME AS WARRANT AGENT AND ANY
RECOVERY OF JUDGMENT SHALL BE FOR THE RATABLE BENEFIT OF THE REGISTERED HOLDERS
OF THE WARRANTS, AS THEIR RESPECTIVE RIGHTS OR INTERESTS MAY APPEAR.

 

(G)           THE WARRANT AGENT, AND ANY STOCKHOLDER, AFFILIATE, DIRECTOR,
OFFICER OR EMPLOYEE OF IT, MAY BUY, SELL OR DEAL IN ANY OF THE WARRANTS OR OTHER
SECURITIES OF THE COMPANY OR BECOME PECUNIARILY INTERESTED IN ANY TRANSACTION IN
WHICH THE COMPANY MAY BE INTERESTED, OR CONTRACT WITH OR LEND MONEY TO THE
COMPANY OR OTHERWISE ACT AS FULLY AND FREELY AS THOUGH IT WERE NOT WARRANT AGENT
UNDER THIS AGREEMENT. NOTHING HEREIN SHALL PRECLUDE THE WARRANT AGENT FROM
ACTING IN ANY OTHER CAPACITY FOR THE COMPANY OR FOR ANY OTHER LEGAL ENTITY.

 

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(H)           THE WARRANT AGENT SHALL ACT HEREUNDER SOLELY AS AGENT FOR THE
COMPANY, AND ITS DUTIES SHALL BE DETERMINED SOLELY BY THE PROVISIONS HEREOF. 
THE WARRANT AGENT SHALL NOT BE LIABLE FOR ANY ACTION TAKEN, SUFFERED OR OMITTED
TO BE TAKEN BY IT IN CONNECTION WITH THIS AGREEMENT EXCEPT FOR ITS OWN GROSS
NEGLIGENCE OR WILLFUL MISCONDUCT, EACH AS FINALLY DETERMINED BY A COURT OF
COMPETENT JURISDICTION.  ANYTHING TO THE CONTRARY NOTWITHSTANDING, IN NO EVENT
SHALL THE WARRANT AGENT BE LIABLE FOR SPECIAL, PUNITIVE, INDIRECT, CONSEQUENTIAL
OR INCIDENTAL LOSS OR DAMAGE OF ANY KIND WHATSOEVER (INCLUDING BUT NOT LIMITED
TO LOST PROFITS), EVEN IF THE WARRANT AGENT HAS BEEN ADVISED OF THE LIKELIHOOD
OF SUCH LOSS OR DAMAGE.

 

(I)            THE WARRANT AGENT SHALL NOT AT ANY TIME BE UNDER ANY DUTY OR
RESPONSIBILITY TO ANY WARRANTHOLDER TO MAKE OR CAUSE TO BE MADE ANY ADJUSTMENT
OF THE EXERCISE PRICE OR NUMBER OF THE WARRANT SHARES OR OTHER SECURITIES OR
PROPERTY DELIVERABLE AS PROVIDED IN THIS AGREEMENT, OR TO DETERMINE WHETHER ANY
FACTS EXIST WHICH MAY REQUIRE ANY OF SUCH ADJUSTMENTS, OR WITH RESPECT TO THE
NATURE OR EXTENT OF ANY SUCH ADJUSTMENTS, WHEN MADE, OR WITH RESPECT TO THE
METHOD EMPLOYED IN MAKING THE SAME. THE WARRANT AGENT SHALL NOT BE ACCOUNTABLE
WITH RESPECT TO THE VALIDITY OR VALUE OR THE KIND OR AMOUNT OF ANY WARRANT
SHARES OR OF ANY SECURITIES OR PROPERTY WHICH MAY AT ANY TIME BE ISSUED OR
DELIVERED UPON THE EXERCISE OF ANY WARRANT OR WITH RESPECT TO WHETHER ANY SUCH
WARRANT SHARES OR OTHER SECURITIES WILL WHEN ISSUED BE VALIDLY ISSUED AND FULLY
PAID AND NONASSESSABLE, AND MAKES NO REPRESENTATION WITH RESPECT THERETO.

 

(J)            NOTWITHSTANDING ANYTHING IN THIS AGREEMENT TO THE CONTRARY,
NEITHER THE COMPANY NOR THE WARRANT AGENT SHALL HAVE ANY LIABILITY TO ANY
WARRANTHOLDER OR OTHER PERSON AS A RESULT OF ITS INABILITY TO PERFORM ANY OF ITS
OBLIGATIONS UNDER THIS AGREEMENT BY REASON OF ANY PRELIMINARY OR PERMANENT
INJUNCTION OR OTHER ORDER, DECREE OR RULING ISSUED BY A COURT OF COMPETENT
JURISDICTION OR BY A GOVERNMENTAL, REGULATORY OR ADMINISTRATIVE AGENCY OR
COMMISSION, OR ANY STATUTE, RULE, REGULATION OR EXECUTIVE ORDER PROMULGATED OR
ENACTED BY ANY GOVERNMENTAL AUTHORITY PROHIBITING OR OTHERWISE RESTRAINING
PERFORMANCE OF SUCH OBLIGATION; PROVIDED THAT THE COMPANY MUST USE ITS
REASONABLE BEST EFFORTS TO HAVE ANY SUCH ORDER, DECREE OR RULING LIFTED OR
OTHERWISE OVERTURNED AS SOON AS POSSIBLE.

 

(K)           WITH RESPECT TO THE EXERCISE BY A WARRANTHOLDER OF ANY WARRANTS IN
ACCORDANCE WITH THE TERMS OF THIS AGREEMENT AND WITH RESPECT TO ANY OTHER
ACTIONS OR OMISSIONS THAT MAY ARISE AS A RESULT OF OR UNDER THIS AGREEMENT, TO
THE EXTENT THE WARRANT AGENT HAS ANY QUESTIONS OR UNCERTAINTIES AS TO WHAT
ACTIONS IT SHOULD TAKE WITH RESPECT THERETO, THE WARRANT AGENT MAY SEEK WRITTEN
DIRECTION FROM THE COMPANY AS TO WHAT COURSE OF ACTION THE WARRANT AGENT SHOULD
TAKE AND THE WARRANT AGENT SHALL BE FULLY PROTECTED AND INCUR NO LIABILITY IN
REFRAINING FROM TAKING ANY ACTION THEREUNDER UNLESS AND UNTIL THE WARRANT AGENT
HAS RECEIVED SUCH WRITTEN DIRECTION FROM THE COMPANY.  ANY APPLICATION BY THE
WARRANT AGENT FOR SUCH WRITTEN INSTRUCTIONS FROM THE COMPANY MAY, AT THE OPTION
OF THE WARRANT AGENT, SET FORTH IN WRITING ANY ACTION PROPOSED TO BE TAKEN OR
OMITTED BY THE WARRANT AGENT UNDER THIS AGREEMENT AND THE DATE ON AND/OR AFTER
WHICH SUCH ACTION SHALL BE TAKEN OR SUCH OMISSION SHALL BE EFFECTIVE. THE
WARRANT AGENT SHALL NOT BE LIABLE FOR ANY ACTION TAKEN BY, OR OMISSION OF, THE
WARRANT AGENT IN ACCORDANCE WITH A PROPOSAL INCLUDED IN SUCH APPLICATION ON OR
AFTER THE DATE SPECIFIED IN SUCH APPLICATION (WHICH DATE SHALL NOT BE LESS THAN
THREE BUSINESS DAYS AFTER THE DATE ANY OFFICER OF THE COMPANY ACTUALLY RECEIVES
SUCH APPLICATION, UNLESS ANY SUCH OFFICER SHALL HAVE CONSENTED IN WRITING TO ANY
EARLIER DATE) UNLESS PRIOR TO TAKING ANY SUCH ACTION (OR THE EFFECTIVE DATE IN
THE CASE OF AN OMISSION), THE

 

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WARRANT AGENT SHALL HAVE RECEIVED WRITTEN INSTRUCTIONS IN RESPONSE TO SUCH
APPLICATION SPECIFYING THE ACTION TO BE TAKEN OR OMITTED.

 

(L)            NO PROVISION OF THIS AGREEMENT SHALL REQUIRE THE WARRANT AGENT TO
EXPEND OR RISK ITS OWN FUNDS OR OTHERWISE INCUR ANY FINANCIAL LIABILITY IN THE
PERFORMANCE OF ANY OF ITS DUTIES HEREUNDER OR IN THE EXERCISE OF ITS RIGHTS IF
THERE SHALL BE REASONABLE GROUNDS FOR BELIEVING THAT REPAYMENT OF SUCH FUNDS OR
ADEQUATE INDEMNIFICATION AGAINST SUCH RISK OR LIABILITY IS NOT REASONABLY
ASSURED TO IT.

 

(M)          WHENEVER IN THE PERFORMANCE OF ITS DUTIES UNDER THIS AGREEMENT THE
WARRANT AGENT SHALL DEEM IT NECESSARY OR DESIRABLE THAT ANY FACT OR MATTER BE
PROVED OR ESTABLISHED BY THE COMPANY PRIOR TO TAKING, SUFFERING OR OMITTING TO
TAKE ANY ACTION HEREUNDER, SUCH FACT OR MATTER (UNLESS OTHER EVIDENCE IN RESPECT
THEREOF BE HEREIN SPECIFICALLY PRESCRIBED) MAY BE DEEMED TO BE CONCLUSIVELY
PROVED AND ESTABLISHED BY A CERTIFICATE SIGNED BY ANY ONE OF THE PRESIDENT, A
VICE PRESIDENT, THE TREASURER OR THE SECRETARY OF THE COMPANY AND DELIVERED TO
THE WARRANT AGENT; AND SUCH CERTIFICATE SHALL BE FULL AUTHORIZATION AND
PROTECTION TO THE WARRANT AGENT FOR ANY ACTION TAKEN OR SUFFERED BY IT UNDER THE
PROVISIONS OF THIS AGREEMENT IN RELIANCE UPON SUCH CERTIFICATE.

 

(N)           THE WARRANT AGENT IS HEREBY AUTHORIZED AND DIRECTED TO ACCEPT
INSTRUCTIONS WITH RESPECT TO THE PERFORMANCE OF ITS DUTIES HEREUNDER FROM ANY
ONE OF THE PRESIDENT, A VICE PRESIDENT, THE SECRETARY OR THE TREASURER OF THE
COMPANY, AND TO APPLY TO SUCH OFFICERS FOR ADVICE OR INSTRUCTIONS IN CONNECTION
WITH ITS DUTIES, AND SUCH INSTRUCTIONS SHALL BE FULL AUTHORIZATION AND
PROTECTION TO THE WARRANT AGENT, AND THE WARRANT AGENT SHALL NOT BE LIABLE FOR
ANY ACTION TAKEN, SUFFERED OR OMITTED TO BE TAKEN BY IT IN ACCORDANCE WITH
INSTRUCTIONS OF ANY SUCH OFFICER.

 

(O)           THE WARRANT AGENT MAY EXECUTE AND EXERCISE ANY OF THE RIGHTS OR
POWERS HEREBY VESTED IN IT OR PERFORM ANY DUTY HEREUNDER EITHER ITSELF OR BY OR
THROUGH ITS ATTORNEYS OR AGENTS, AND THE WARRANT AGENT SHALL NOT BE ANSWERABLE
OR ACCOUNTABLE FOR ANY ACT, DEFAULT, NEGLECT OR MISCONDUCT OF ANY SUCH ATTORNEYS
OR AGENTS OR FOR ANY LOSS TO THE COMPANY RESULTING FROM ANY SUCH ACT, DEFAULT,
NEGLECT OR MISCONDUCT, ABSENT GROSS NEGLIGENCE OR WILLFUL MISCONDUCT (EACH AS
FINALLY DETERMINED BY A COURT OF COMPETENT JURISDICTION) IN THE SELECTION AND
CONTINUED EMPLOYMENT THEREOF.

 

SECTION 15.  CHANGE OF WARRANT AGENT.  THE WARRANT AGENT OR ANY SUCCESSOR
WARRANT AGENT MAY RESIGN AND BE DISCHARGED FROM ITS DUTIES UNDER THIS AGREEMENT
UPON 60 DAYS’ NOTICE IN WRITING MAILED TO THE COMPANY.  UPON SUCH RESIGNATION OR
IF THE WARRANT AGENT SHALL BECOME INCAPABLE OF ACTING AS WARRANT AGENT, THE
COMPANY SHALL APPOINT A SUCCESSOR TO SUCH WARRANT AGENT. IF THE COMPANY SHALL
FAIL TO MAKE SUCH APPOINTMENT WITHIN A PERIOD OF 60 DAYS AFTER IT HAS BEEN
NOTIFIED IN WRITING OF SUCH RESIGNATION OR INCAPACITY BY THE WARRANT AGENT OR BY
THE REGISTERED HOLDER OF A WARRANT CERTIFICATE OR A WARRANT SHARE CERTIFICATE,
THEN THE REGISTERED HOLDER OF ANY WARRANT CERTIFICATE OR WARRANT SHARE
CERTIFICATE MAY APPLY TO ANY COURT OF COMPETENT JURISDICTION FOR THE APPOINTMENT
OF A SUCCESSOR TO THE WARRANT AGENT. PENDING APPOINTMENT OF A SUCCESSOR TO SUCH
WARRANT AGENT, EITHER BY THE COMPANY OR BY SUCH A COURT, THE DUTIES OF THE
WARRANT AGENT SHALL BE CARRIED OUT BY THE COMPANY. THE MAJORITY WARRANTHOLDERS
SHALL BE ENTITLED AT ANY TIME TO REMOVE THE WARRANT AGENT AND APPOINT A
SUCCESSOR TO SUCH WARRANT AGENT. SUCH SUCCESSOR TO THE WARRANT AGENT MUST BE
APPROVED BY THE COMPANY, WHICH SHALL NOT UNREASONABLY WITHHOLD SUCH APPROVAL.
AFTER APPOINTMENT THE SUCCESSOR TO THE WARRANT

 

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AGENT SHALL BE VESTED WITH THE SAME POWERS, RIGHTS, DUTIES AND RESPONSIBILITIES
AS IF IT HAD BEEN ORIGINALLY NAMED AS WARRANT AGENT WITHOUT FURTHER ACT OR DEED;
BUT THE FORMER WARRANT AGENT UPON PAYMENT OF ALL FEES AND EXPENSES DUE IT AND
ITS AGENTS AND COUNSEL SHALL DELIVER AND TRANSFER TO THE SUCCESSOR TO THE
WARRANT AGENT ANY PROPERTY AT THE TIME HELD BY IT HEREUNDER AND EXECUTE AND
DELIVER ANY FURTHER ASSURANCE, CONVEYANCE, ACT OR DEED NECESSARY FOR THE
PURPOSE. FAILURE TO GIVE ANY NOTICE PROVIDED FOR IN THIS SECTION 15, HOWEVER, OR
ANY DEFECT THEREIN, SHALL NOT AFFECT THE LEGALITY OR VALIDITY OF THE APPOINTMENT
OF A SUCCESSOR TO THE WARRANT AGENT.

 

SECTION 16.  NOTICES TO COMPANY AND WARRANT AGENT.  ANY NOTICE OR DEMAND
AUTHORIZED BY THIS AGREEMENT TO BE GIVEN OR MADE BY THE WARRANT AGENT OR BY THE
REGISTERED HOLDER OF ANY WARRANT CERTIFICATE TO OR ON THE COMPANY SHALL BE
SUFFICIENTLY GIVEN OR MADE WHEN AND IF DELIVERED BY FACSIMILE TRANSMISSION
(PROVIDED CONFIRMATION OF RECEIPT IS RECEIVED IMMEDIATELY THEREAFTER) OR WHEN
RECEIVED, IF DEPOSITED IN THE MAIL, FIRST CLASS OR REGISTERED, POSTAGE PREPAID,
ADDRESSED (UNTIL ANOTHER ADDRESS IS FILED IN WRITING BY THE COMPANY WITH THE
WARRANT AGENT), AS FOLLOWS:

 

iBasis, Inc.

20 Second Avenue

Burlington, MA  01803

Attention:  Chief Financial Officer

Facsimile No.: 781-505-7304

 

with a copy to:

 

Bingham, McCutchen LLP

150 Federal Street

Boston, MA 02110

Attn:      Johan V. Brigham

Facsimile No.: 617-951-8736

 

In case the Company shall fail to maintain such office or agency or shall fail
to give such notice of the location or of any change in the location thereof,
presentations may be made and notices and demands may be served at the office of
the Warrant Agent designated for such purpose.

 

Any notice pursuant to this Agreement to be given by the Company or by the
registered holder(s) of any Warrant Certificate to the Warrant Agent shall be
sufficiently given when and if delivered by facsimile transmission (provided
confirmation of receipt is received immediately thereafter) or deposited in the
mail, first-class or registered, postage prepaid, addressed (until another
address is filed in writing by the Warrant Agent with the Company) to the
Warrant Agent as follows:

 

U.S. Bank National Association

2 Avenue de Lafayette – 6th Floor

Boston, MA  02111

Attention:  Corporate Trust Services

Facsimile No.: 617-662-1458

 

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with copies to:

 

Nixon Peabody LLP

101 Federal Street

Boston, MA  02110

Attn: Robert J. Coughlin

Facsimile No.: 617-345-1300

 

and

 

Ropes & Gray LLP

One International Place

Boston, MA 02110

Attn:  Thomas B. Draper

Facsimile No.: 617-951-7050

 

SECTION 17.  SUPPLEMENTS AND AMENDMENTS.  THE COMPANY AND THE WARRANT AGENT MAY
FROM TIME TO TIME SUPPLEMENT OR AMEND THIS AGREEMENT OR THE WARRANT CERTIFICATES
WITHOUT THE APPROVAL OF ANY WARRANTHOLDERS IN ORDER TO CURE ANY AMBIGUITY OR TO
CORRECT OR SUPPLEMENT ANY PROVISION CONTAINED HEREIN OR THEREIN WHICH MAY BE
DEFECTIVE OR INCONSISTENT WITH ANY OTHER PROVISION HEREIN, OR TO MAKE ANY OTHER
REVISIONS IN REGARD TO MATTERS OR QUESTIONS ARISING HEREUNDER WHICH THE COMPANY
AND THE WARRANT AGENT MAY DEEM NECESSARY OR DESIRABLE AND WHICH SHALL NOT IN ANY
WAY ADVERSELY AFFECT THE INTERESTS OF THE WARRANTHOLDERS.  ANY SUPPLEMENT OR
AMENDMENT NOT COVERED BY THE PRECEDING SENTENCE SHALL REQUIRE THE CONSENT OF THE
MAJORITY WARRANTHOLDERS, THE COMPANY AND THE WARRANT AGENT.  PRIOR TO EXECUTING
ANY SUPPLEMENT OR AMENDMENT, THE WARRANT AGENT SHALL BE ENTITLED TO RELY ON AN
OFFICER’S CERTIFICATE OF THE COMPANY TO THE EFFECT THAT SUCH AMENDMENT OR
SUPPLEMENT COMPLIES WITH THE TERMS OF THIS SECTION 17.  NOTWITHSTANDING ANYTHING
IN THIS AGREEMENT TO THE CONTRARY, THE PRIOR WRITTEN CONSENT OF THE WARRANT
AGENT MUST BE OBTAINED IN CONNECTION WITH ANY SUPPLEMENT OR AMENDMENT THAT
ALTERS THE RIGHTS OR DUTIES OF THE WARRANT AGENT.

 

SECTION 18.  SUCCESSORS.  ALL THE COVENANTS AND PROVISIONS OF THIS AGREEMENT BY
OR FOR THE BENEFIT OF THE COMPANY OR THE WARRANT AGENT SHALL BIND AND INURE TO
THE BENEFIT OF THEIR RESPECTIVE SUCCESSORS AND ASSIGNS HEREUNDER.

 

SECTION 19.  SURVIVAL OF REGISTRATION RIGHTS PROVISIONS, WARRANT AGENT
PROVISIONS.  THE PROVISIONS OF SECTIONS 8 AND 14 HEREOF SHALL SURVIVE THE
EXERCISE OR EXPIRATION OF THE WARRANTS.

 

SECTION 20.  GOVERNING LAW; SUBMISSION TO JURISDICTION: WAIVER OF JURY TRIAL. 
THIS AGREEMENT AND EACH WARRANT CERTIFICATES ISSUED HEREUNDER SHALL BE DEEMED TO
BE A CONTRACT MADE UNDER THE LAWS OF THE COMMONWEALTH OF MASSACHUSETTS AND FOR
ALL PURPOSES SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE INTERNAL
LAWS OF SAID STATE, WITHOUT REGARD TO PRINCIPLES OF CONFLICTS OF LAWS.  EACH
PARTY HERETO HEREBY SUBMITS TO THE NONEXCLUSIVE JURISDICTION OF THE UNITED
STATES DISTRICT COURT FOR THE DISTRICT OF MASSACHUSETTS AND OF ANY MASSACHUSETTS
STATE COURT SITTING IN BOSTON FOR PURPOSES OF ALL LEGAL PROCEEDINGS ARISING OUT
OF OR RELATING TO THIS AGREEMENT OR THE TRANSACTIONS CONTEMPLATED HEREBY. EACH
PARTY HERETO IRREVOCABLY WAIVES, TO THE

 

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FULLEST EXTENT PERMITTED BY LAW, ANY OBJECTION WHICH IT MAY NOW OR HEREAFTER
HAVE TO THE LAYING OF THE VENUE OF ANY SUCH PROCEEDING BROUGHT IN SUCH A COURT
AND ANY CLAIM THAT ANY SUCH PROCEEDING BROUGHT IN SUCH A COURT HAS BEEN BROUGHT
IN AN INCONVENIENT FORUM.

 

TO THE EXTENT NOT PROHIBITED BY APPLICABLE LAW WHICH CANNOT BE WAIVED, EACH
PARTY HERETO HEREBY WAIVES AND COVENANTS THAT IT WILL NOT ASSERT (WHETHER AS
PLAINTIFF, DEFENDANT OR OTHERWISE) ANY RIGHT TO TRIAL BY JURY IN ANY FORUM IN
RESPECT OF ANY ISSUE OR ACTION, CLAIM, CAUSE OF ACTION OR SUIT (IN CONTRACT,
TORT OR OTHERWISE), INQUIRY, PROCEEDING OR INVESTIGATION ARISING OUT OF OR BASED
UPON THIS AGREEMENT OR THE SUBJECT MATTER HEREOF OR IN ANY WAY CONNECTED WITH OR
RELATED OR INCIDENTAL TO THE TRANSACTIONS CONTEMPLATED HEREBY, IN EACH CASE
WHETHER NOW EXISTING OR HEREAFTER ARISING.  EACH PARTY HERETO ACKNOWLEDGES THAT
IT HAS BEEN INFORMED BY THE OTHER PARTIES HERETO THAT THIS SECTION 20
CONSTITUTES A MATERIAL INDUCEMENT UPON WHICH THEY ARE RELYING AND WILL RELY IN
ENTERING INTO THIS AGREEMENT.   Any party hereto may file an original
counterpart or a copy of this Section 20 with any court as written evidence of
the consent of each party hereto to the waiver of its right to trial by jury.

 

SECTION 21.  EXERCISE OF RIGHTS AND REMEDIES.  NO DELAY OF OR OMISSION IN THE
EXERCISE OF ANY RIGHT, POWER OR REMEDY ACCRUING TO ANY PARTY AS A RESULT OF ANY
BREACH OR DEFAULT BY ANY OTHER PARTY UNDER THIS AGREEMENT SHALL IMPAIR ANY SUCH
RIGHT, POWER OR REMEDY, NOR SHALL IT BE CONSTRUED AS A WAIVER OF OR ACQUIESCENCE
IN ANY SUCH BREACH OR DEFAULT, OR OF ANY SIMILAR BREACH OR DEFAULT OCCURRING
LATER; NOR SHALL ANY SUCH DELAY, OMISSION OR WAIVER OF ANY SINGLE BREACH OR
DEFAULT BE DEEMED A WAIVER OF ANY OTHER BREACH OR DEFAULT OCCURRING BEFORE OR
AFTER THAT WAIVER.

 

SECTION 22.  BENEFITS OF THIS AGREEMENT.  NOTHING IN THIS AGREEMENT SHALL BE
CONSTRUED TO GIVE TO ANY PERSON OR CORPORATION OTHER THAN THE COMPANY, THE
WARRANT AGENT AND THE WARRANTHOLDERS (INCLUDING ANY HOLDER OF A BENEFICIAL
INTEREST IN ANY WARRANT) ANY LEGAL OR EQUITABLE RIGHT, REMEDY OR CLAIM UNDER
THIS AGREEMENT, AND THIS AGREEMENT SHALL BE FOR THE SOLE AND EXCLUSIVE BENEFIT
OF THE COMPANY, THE WARRANT AGENT AND THE WARRANTHOLDERS (INCLUDING ANY HOLDER
OF A BENEFICIAL INTEREST IN ANY WARRANT).

 

SECTION 23.  COUNTERPARTS.  THIS AGREEMENT MAY BE EXECUTED IN ANY NUMBER OF
COUNTERPARTS AND EACH OF SUCH COUNTERPARTS SHALL FOR ALL PURPOSES BE DEEMED TO
BE AN ORIGINAL, AND ALL SUCH COUNTERPARTS SHALL TOGETHER CONSTITUTE BUT ONE AND
THE SAME INSTRUMENT.

 

[Signature page follows]

 

38

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IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly
executed, as of the day and year first above written.

 

 

 

iBASIS, INC.

 

 

 

 

 

By:

 

 

 

 

Name:

 

 

 

Title:

 

 

 

 

 

 

 

 

 

 

U.S. BANK NATIONAL ASSOCIATION,
as Warrant Agent

 

 

 

 

 

 

 

 

 

By:

 

 

 

 

Name:

 

 

 

Title:

 

 

--------------------------------------------------------------------------------

 

Exhibit A

 

FORM OF WARRANT CERTIFICATE

 

THIS SECURITY IS A GLOBAL SECURITY WITHIN THE MEANING OF THE 2004 WARRANT AND
REGISTRATION RIGHTS AGREEMENT HEREINAFTER REFERRED TO AND IS REGISTERED IN THE
NAME OF A DEPOSITORY OR A NOMINEE OF A DEPOSITORY OR A SUCCESSOR DEPOSITORY. 
THIS SECURITY IS NOT EXCHANGABLE FOR SECURITIES REGISTERED IN THE NAME OF A
PERSON OTHER THAN THE DEPOSITORY OR ITS NOMINEE EXCEPT IN THE LIMITED
CIRCUMSTANCES DESCRIBED IN THE 2004 WARRANT AND REGISTRATION RIGHTS AGREEMENT,
AND NO TRANSFER OF THIS SECURITY (OTHER THAN A TRANSFER OF THIS SECURITY AS A
WHOLE BY THE DEPOSITORY TO A NOMINEE OF THE DEPOSITORY OR BY A NOMINEE OF THE
DEPOSITORY TO THE DEPOSITORY OR ANOTHER NOMINEE OF THE DEPOSITORY) MAY BE
REGISTERED EXCEPT IN THE LIMITED CIRCUMSTANCES DESCRIBED IN THE 2004 WARRANT AND
REGISTRATION RIGHTS AGREEMENT.  UNLESS THIS CERTIFICATE IS PRESENTED BY AN
AUTHORIZED REPRESENTATIVE OF THE DEPOSITORY TRUST COMPANY, A NEW YORK
CORPORATION (“DTC”), TO THE ISSUER OR ITS AGENT FOR REGISTRATION OF TRANSFER,
EXCHANGE, OR PAYMENT, AND ANY CERTIFICATE ISSUED IS REGISTERED IN THE NAME OF
CEDE & CO. OR IN SUCH OTHER NAME AS IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE
OF DTC (AND ANY PAYMENT IS MADE TO CEDE & CO. OR TO SUCH OTHER ENTITY AS IS
REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DTC), ANY TRANSFER, PLEDGE OR OTHER
USE HEREOF FOR VALUE OR OTHERWISE BY OR TO ANY PERSON IS WRONGFUL INASMUCH AS
THE REGISTERED OWNER HEREOF, CEDE & CO., HAS AN INTEREST HEREIN.

 

THIS SECURITY HAS NOT BEEN REGISTERED UNDER THE UNITED STATES SECURITIES ACT OF
1933, AS AMENDED (THE “SECURITIES ACT”), AND, ACCORDINGLY, MAY NOT BE OFFERED OR
SOLD EXCEPT AS SET FORTH BELOW.  BY ITS ACQUISITION HEREOF, THE HOLDER (1)
REPRESENTS THAT IT IS A “QUALIFIED INSTITUTIONAL BUYER” (AS DEFINED IN RULE 144A
UNDER THE SECURITIES ACT), (2) AGREES THAT IT WILL NOT WITHIN TWO YEARS AFTER
THE ORIGINAL ISSUANCE OF THIS SECURITY RESELL OR OTHERWISE TRANSFER THIS
SECURITY EXCEPT (A) TO THE ISSUER OR ANY SUBSIDIARY THEREOF, (B) TO A QUALIFED
INSTITUTIONAL BUYER IN COMPLIANCE WITH RULE 144A UNDER THE SECURITIES ACT, OR
(C) PURSUANT TO A REGISTRATION STATEMENT WHICH HAS BEEN DECLARED EFFECTIVE UNDER
THE SECURITIES ACT (AND WHICH CONTINUES TO BE EFFECTIVE AT THE TIME OF SUCH
TRANSFER) AND (3) AGREES THAT IT WILL DELIVER TO EACH PERSON TO WHOM THIS
SECURITY IS TRANSFERRED A NOTICE SUBSTANTIALLY TO THE EFFECT OF THIS LEGEND.

 

THE SHARES OF STOCK PURCHASABLE UPON EXERCISE OF THE WARRANTS REPRESENTED BY
THIS CERTIFICATE ARE ALSO SUBJECT TO THE 2004 WARRANT AND REGISTRATION RIGHTS
AGREEMENT AND THE SECURITIES

 

--------------------------------------------------------------------------------

 

EXCHANGE AGREEMENT TO WHICH THE ISSUER AND THE WARRANT AGENT ARE PARTY, A COPY
OF WHICH MAY BE INSPECTED AT THE PRINCIPAL OFFICE OF THE ISSUER OR OBTAINED FROM
THE ISSUER WITHOUT CHARGE.

 

2

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iBASIS, INC.

 

No.

 

5,176,065 Warrants

 

CUSIP NO: 450732 11 0

 

WARRANT CERTIFICATE

 

This Warrant Certificate certifies that CEDE & Co., or its registered assigns,
is the registered holder of warrants expiring              , 2007 (the
“Warrants”) to purchase shares of Common Stock, par value $0.001 per share (the
“Common Stock”), of iBasis, Inc., a Delaware Corporation (the “Company”).  Each
Warrant entitles the holder upon exercise to receive from the Company on or
after the date of issuance of such Warrant and on or before 5:00 P.M. Boston
Time on             , 2007 (the “Expiration Date”), one fully paid and
nonassessable share of Common Stock (a “Warrant Share”) at the initial exercise
price (the “Exercise Price”) of $1.85 payable in lawful money of the United
States of America upon surrender of this Warrant Certificate and payment of the
Exercise Price at the office or agency of the Warrant Agent, but only subject to
the conditions set forth herein and in the 2004 Warrant and Registration Rights
Agreement referred to on the reverse hereof.  The Exercise Price and number of
Warrant Shares issuable upon exercise of the Warrants are subject to adjustment
upon the occurrence of certain events set forth in the 2004 Warrant and
Registration Rights Agreement.

 

No Warrant may be exercised after the Expiration Date, and to the extent not
exercised by such time such warrants shall become void.

 

This Warrant Certificate shall not be valid unless countersigned by the Warrant
Agent, as such term is used in the 2004 Warrant and Registration Rights
Agreement.

 

This Warrant Certificate, and all actions, claims and conduct relating thereto,
shall be governed by and construed in accordance with the laws of The
Commonwealth of Massachusetts, without regard to the principles of conflicts of
laws.

 

3

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IN WITNESS WHEREOF, iBasis, Inc., has caused this Warrant Certificate to be duly
executed.

 

Dated:

, 2004

 

 

 

 

 

 

iBASIS, INC.

 

 

 

 

 

By:

 

 

 

 

Name:

 

 

 

Title:

 

 

 

WARRANT AGENT’S CERTIFICATE OF AUTHENTICATION

This is one of the Warrants described in the within-named 2004 Warrant and
Registration Rights Agreement.

 

U.S. BANK NATIONAL ASSOCIATION, as Warrant Agent

 

 

By:

 

 

 

Name:

 

Title:

 

 

 

 

By:

 

 

 

As Authenticating Agent

 

(if different from Warrant Agent)

 

4

--------------------------------------------------------------------------------

 

The Warrants evidenced by this Warrant Certificate are part of a duly authorized
issue of Warrants expiring             , 2007, entitling the holder on exercise
to receive shares of Common Stock and are issued or to be issued pursuant to a
2004 Warrant and Registration Rights Agreement dated as of              , 2004
(the “2004 Warrant and Registration Rights Agreement”), duly executed and
delivered by the Company to U.S. Bank National Association, as warrant agent
(the “Warrant Agent”), which 2004 Warrant and Registration Rights Agreement is
hereby incorporated by reference in and made a part of this instrument and is
hereby referred to for a description of the rights, limitation of rights,
obligations, duties and immunities thereunder of the Warrant Agent, the Company
and the holders (the words “holders” or “holder” meaning the registered holders
or registered holder) of the Warrants.  A copy of the 2004 Warrant and
Registration Rights Agreement may be obtained by the holder hereof upon written
request to the Company.  Capitalized terms used herein without being otherwise
defined shall have the meaning ascribed to them in the 2004 Warrant and
Registration Rights Agreement.

 

Each Warrant may be exercised at any time on or after the date of issuance of
such Warrant and on or before the Expiration Date.  The holder of Warrants
evidenced by this Warrant Certificate may exercise them as follows:

 

(I)            The Warrants evidenced by this Warrant Certificate may be
exercised by the holder hereof, in whole or in part, during normal business
hours on any Business Day on or prior to the Expiration Date, by surrender of
this Warrant Certificate to the Company at its principal office, accompanied by
a subscription substantially in the form attached to this Warrant Certificate
duly executed by such holder and accompanied by (a) wire transfer of immediately
available funds or (b) certified or official bank check payable to the order of
the Company, in each case in the amount obtained by multiplying (i) the number
of shares of Common Stock (without giving effect to any adjustment thereof
pursuant to the provisions of the 2004 Warrant and Registration Rights
Agreement) for which the Warrant evidenced by this Warrant Certificate is then
being exercised, as designated in such subscription, by (ii) the Initial
Exercise Price.  Thereupon, such holder shall be entitled to receive the number
of duly authorized, validly issued, fully paid and nonassessable shares of
Common Stock (or Other Securities) determined as provided in Sections 6 and 7 of
the 2004 Warrant and Registration Rights Agreement.

 

(II)          The Warrants evidenced by this Warrant Certificate may be
converted by the holder hereof, in whole or in part, into shares of Common Stock
(or Other Securities), during normal business hours on any Business Day on or
prior to the Expiration Date, by surrender of this Warrant Certificate to the
Company at its principal office, accompanied by a conversion notice
substantially in the form attached to this Warrant Certificate duly executed by
such holder. Thereupon, such holder shall be entitled to receive a number of
duly authorized, validly issued, fully paid and nonassessable shares of Common
Stock (or Other Securities) equal to:

 

(a)           the excess of

 

5

--------------------------------------------------------------------------------

 

(i) (x) the number of shares of Common Stock (or Other Securities) determined as
provided in Sections 6 and 7 of the 2004 Warrant and Registration Rights
Agreement which such holder would be entitled to receive upon exercise of the
Warrants represented by this Warrant Certificate for the number of shares of
Common Stock designated in such conversion notice (without giving effect to any
adjustment thereof pursuant to Sections 6 or 7 of the 2004 Warrant and
Registration Rights Agreement) multiplied by (y) the Current Market Price of
each such share of Common Stock (or such Other Securities) so receivable upon
such exercise

 

over

 

(ii) (x) the number of shares of Common Stock (without giving effect to any
adjustment thereof pursuant to Sections 6 or 7 of the 2004 Warrant and
Registration Rights Agreement or other provisions thereof) which such holder
would be entitled to receive upon exercise of the Warrants represented by this
Warrant Certificate for the number of shares of Common Stock designated in such
conversion notice (without giving effect to any adjustment thereof pursuant to
Sections 6 or 7 of the 2004 Warrant and Registration Rights Agreement)
multiplied by (y) the Initial Exercise Price

 

divided by

 

(b) such Current Market Price of each such share of Common Stock (or Other
Securities).

 

In the event that upon any exercise of Warrants evidenced hereby the number of
Warrants exercised shall be less than the total number of Warrants evidenced
hereby, there shall be issued to the holder hereof or its assignee a new Warrant
Certificate of like tenor, dated the date hereof and calling in the aggregate on
the face or faces thereof for the number of Warrants (without giving effect to
any adjustment thereof pursuant to the terms of the 2004 Warrant and
Registration Rights Agreement) to the number of Warrants called for on the face
of this Warrant Certificate minus the number of Warrants designated by the
holder upon such exercise.

 

Upon the exercise of the Warrants evidenced by this Warrant Certificate as
provided above, the Company may elect either (i) to comply with the requirements
of Section 7.1.3 of the 2004 Warrant and Registration Rights Agreement with
respect to the issuance of shares of Common Stock in connection with such
exercise or (ii) upon written notice to the holder not more than two Business
Days following the date of exercise, to pay to the holder an amount equal to the
Market Price for each share of Common Stock issuable upon such exercise (the
“Cash Close Out”) in lieu of issuing such Common Stock.  Any Cash Close Out made
in accordance with this paragraph shall be paid within two Business Days of the
exercise of the Warrants evidenced by this Warrant Certificate by (a) wire
transfer of immediately available funds or (b) certified or official bank check
payable to the order of the holder hereof.

 

The Company will not be required to issue fractional shares of Common Stock upon
exercise of the Warrants or distribute share certificates that evidence
fractional shares of Common Stock.  In lieu of fractional shares of Common
Stock, there may be paid to the registered Holder of this Warrant Certificate at
the time such Warrant Certificate is exercised an amount in cash equal to the
same fraction of the Current Market Value per share of Common

 

6

--------------------------------------------------------------------------------

 

Stock on the Business Day immediately proceeding the date this Warrant
Certificate is surrendered for exercise.

 

The holders of the Warrants are entitled to certain registration rights with
respect to the Common Stock purchasable upon exercise thereof.  Such
registration rights are set forth in Section 8 of the 2004 Warrant and
Registration Rights Agreement.

 

Warrant Certificates, when surrendered at the office of the Warrant Agent by the
registered holder thereof in person or by legal representative or attorney duly
authorized in writing, may be exchanged, in the manner and subject to the
limitations provided in the 2004 Warrant and Registration Rights Agreement, but
without payment of any service charge, for another Warrant Certificate or
Warrant Certificates of like tenor evidencing in the aggregate a like number of
Warrants.

 

Upon due presentation for registration of transfer of this Warrant Certificate
at the office of the Warrant Agent a new Warrant Certificate or Warrant
Certificates of like tenor and evidencing in the aggregate a like number of
Warrants shall be issued to the transferee(s) in exchange for this Warrant
Certificate, subject to the limitations provided in the 2004 Warrant and
Registration Rights Agreement, without charge except for any tax or other
governmental charge imposed in connection therewith.

 

The Company and the Warrant Agent may deem and treat the registered holder(s)
thereof as the absolute owner(s) of this Warrant Certificate (notwithstanding
any notation of ownership or other writing hereon made by anyone), for the
purpose of any exercise hereof, of any distribution to the holder(s) hereof, and
for all other purposes, and neither the Company nor the Warrant Agent shall be
affected by any notice to the contrary.  Neither the Warrants nor this Warrant
Certificate entitled any holder hereof to any rights of a stockholder of the
Company.

 

7

--------------------------------------------------------------------------------

 

FORM OF SUBSCRIPTION

 

[To be executed only upon exercise of Warrant]

 

To iBasis, Inc.:

 

The undersigned hereby irrevocably elects to exercise the right, represented by
this Warrant Certificate, to receive                        (1) shares of the
Common Stock and herewith makes payment of $            in accordance with the
terms hereof, and requests that the certificates for such shares be issued in
the name of, and delivered to                              , whose address is as
follows:

 

Dated:

 

 

 

(Signature must conform in all respects to name of holder as specified on the
face of Warrant)

 

 

 

 

 

 

 

 

(Street Address)

 

 

 

 

 

 

 

 

(City)

(State)

(Zip Code)

 

 

--------------------------------------------------------------------------------

(1) Insert here the number of shares called for on the face of this Warrant
Certificate (or, in the case of a partial exercise, the portion thereof as to
which the Warrant evidenced by this Warrant Certificate is being exercised), in
either case without making any adjustment for any stock or other securities or
property or cash which, pursuant to the adjustment provisions of the Warrant
evidenced by this Warrant Certificate, may be delivered upon exercise.  In the
case of a partial exercise, a new Warrant Certificate will be issued and
delivered, representing the unexercised portion of the Warrant evidenced by this
Warrant Certificate, to the holder surrendering the Warrant Certificate.

 

8

--------------------------------------------------------------------------------

 

FORM OF ASSIGNMENT

 

[To be executed only upon transfer of Warrant]

 

For value received, the undersigned registered holder of the Warrants evidenced
by this Warrant Certificate hereby sells, assigns and transfers unto
                              the right represented by such Warrant Certificate
to purchase               (2) shares of Common Stock of iBasis, Inc. to which
such Warrant Certificate relates, and appoints
                                   Attorney to make such transfer on the books
of iBasis, Inc. maintained for such purpose, with full power of substitution in
the premises.

 

Dated:

 

 

 

(Signature must conform in all respects to name of holder as specified on the
face of Warrant)

 

 

 

 

 

 

 

 

(Street Address)

 

 

 

 

 

 

 

 

(City)

(State)

(Zip Code)

 

 

Signed in the presence of:

 

 

 

 

Name:

 

--------------------------------------------------------------------------------

(2) Insert here the number of shares called for on the face of this Warrant
Certificate (or, in the case of a partial transfer, the portion thereof as to
which the Warrant evidenced by this Warrant Certificate is being transferred),
in either case without making any adjustment for any stock or other securities
or property or cash which, pursuant to the adjustment provisions of the Warrant
evidenced by this Warrant Certificate, may be delivered upon exercise.  In the
case of a partial transfer, a new Warrant Certificate will be issued and
delivered, representing the non-transferred portion of the Warrants evidenced by
this Warrant Certificate, to the holder transferring the Warrants.

 

9

--------------------------------------------------------------------------------

 

FORM OF CONVERSION NOTICE

 

To iBasis, Inc.:

 

The undersigned registered holder of the Warrants evidenced by this Warrant
Certificate hereby irrevocably converts such Warrants with respect to
                   (3) shares of the Common Stock which such holder would be
entitled to receive upon the exercise hereof, and requests that the certificates
for such shares be issued in the name of, and delivered to
                                     , whose address is as follows:

 

Dated:

 

 

 

(Signature must conform in all respects to name of holder as specified on the
face of Warrant)

 

 

 

 

 

 

 

 

(Street Address)

 

 

 

 

 

 

 

 

(City)

(State)

(Zip Code)

 

--------------------------------------------------------------------------------

(3) Insert here the number of shares called for on the face of this Warrant
Certificate (or, in the case of a partial conversion, the portion thereof as to
which the Warrants evidenced by this Warrant Certificate are being converted),
in either case without making any adjustment for additional shares of Common
Stock or any other stock or other securities or property or cash which, pursuant
to the adjustment provisions of the Warrant evidenced by this Warrant
Certificate, may be delivered upon exercise.  In the case of a partial
conversion, a new Warrant Certificate will be issued and delivered, representing
the unconverted portion of the Warrants, to the holder surrendering this Warrant
Certificate.

 

10

--------------------------------------------------------------------------------

 

SCHEDULE OF EXCHANGES

 

The following exchanges of a part of this Global Warrant for Physical Warrants
(or of Physical Warrants for an interest in the Global Warrant) have been made:

 

Date of
Exchange

 

Amount of
decrease in
Number of
Warrants this
Global Warrant

 

Amount of
increase in
Number of
Warrants of this
Global Warrant

 

Number of
Warrants of this
Global Warrant
following such
decrease (or
increase)

 

Signature of
authorized
officer of
Warrant Agent

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

11

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Exhibit B

 

FORM OF COMMON STOCK CERTIFICATE

 

To be provided

 

--------------------------------------------------------------------------------

 

Exhibit C

 

FORM OF QIB CERTIFICATION

 

To be provided

 

--------------------------------------------------------------------------------