Exhibit 10.1

COMMON STOCK PURCHASE AGREEMENT

Dated May 10, 2006

by and between

NANOGEN, INC.

and

AZIMUTH OPPORTUNITY LTD.

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TABLE OF CONTENTS

 

          Page

Article I PURCHASE AND SALE OF COMMON STOCK

   1

Section 1.1

  

Purchase and Sale of Stock

   1

Section 1.2

  

Effective Date; Settlement Dates

   1

Section 1.3

  

The Shares

   2

Section 1.4

  

Current Report; Prospectus Supplement

   2

Article II FIXED REQUEST TERMS; OPTIONAL AMOUNT

   2

Section 2.1

  

Fixed Request Notice

   2

Section 2.2

  

Fixed Requests

   3

Section 2.3

  

Share Calculation

   3

Section 2.4

  

Limitation of Fixed Requests

   4

Section 2.5

  

Reduction of Commitment

   4

Section 2.6

  

Below Threshold Price

   4

Section 2.7

  

Settlement

   5

Section 2.8

  

Reduction of Pricing Period

   5

Section 2.9

  

Optional Amount

   6

Section 2.10

  

Calculation of Optional Amount Shares

   6

Section 2.11

  

Exercise of Optional Amount

   6

Section 2.12

  

Aggregate Limit

   7

Article III REPRESENTATIONS AND WARRANTIES OF THE INVESTOR

   7

Section 3.1

  

Organization and Standing of the Investor

   7

Section 3.2

  

Authorization and Power

   7

Section 3.3

  

No Conflicts

   8

Section 3.4

  

Information

   8

Section 3.5

  

Investor Information

   8

Section 3.6

  

Free Writing Prospectus

   8

Article IV REPRESENTATIONS AND WARRANTIES OF THE COMPANY

   9

Section 4.1

  

Organization, Good Standing and Power

   9

Section 4.2

  

Authorization, Enforcement

   9

Section 4.3

  

Capitalization

   9

Section 4.4

  

Issuance of Shares

   10

Section 4.5

  

No Conflicts

   10

Section 4.6

  

Commission Documents, Financial Statements

   10

Section 4.7

  

Subsidiaries

   12

Section 4.8

  

No Material Adverse Effect

   12

Section 4.9

  

Indebtedness

   12

Section 4.10

  

Title To Assets

   12

Section 4.11

  

Actions Pending

   12

Section 4.12

  

Compliance With Law

   13

 

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Section 4.13

  

Certain Fees

   13

Section 4.14

  

Operation of Business

   13

Section 4.15

  

Environmental Compliance

   15

Section 4.16

  

Material Agreements

   15

Section 4.17

  

Transactions With Affiliates

   16

Section 4.18

  

Securities Act

   16

Section 4.19

  

Employees

   17

Section 4.20

  

Use of Proceeds

   17

Section 4.21

  

Public Utility Holding Company Act and Investment Company Act Status

   17

Section 4.22

  

ERISA

   17

Section 4.23

  

Taxes

   18

Section 4.24

  

Insurance

   18

Section 4.25

  

Acknowledgement Regarding Investor’s Purchase of Shares

   18

Article V COVENANTS

   18

Section 5.1

  

Securities Compliance

   18

Section 5.2

  

Registration and Listing

   19

Section 5.3

  

Compliance with Laws.

   19

Section 5.4

  

Keeping of Records and Books of Account; Foreign Corrupt Practices Act

   19

Section 5.5

  

Limitations on Holdings and Issuances

   20

Section 5.6

  

Other Agreements and Other Financings.

   20

Section 5.7

  

Stop Orders

   21

Section 5.8

  

Amendments to the Registration Statement; Prospectus Supplements

   22

Section 5.9

  

Prospectus Delivery

   22

Section 5.10

  

Selling Restrictions.

   22

Section 5.11

  

Effective Registration Statement

   23

Section 5.12

  

Non-Public Information

   23

Section 5.13

  

Broker/Dealer

   23

Section 5.14

  

Update of Disclosure Schedule

   24

Article VI OPINION OF COUNSEL AND CERTIFICATE; CONDITIONS TO THE SALE AND
PURCHASE OF THE SHARES

   24

Section 6.1

  

Opinion of Counsel and Certificate

   24

Section 6.2

  

Conditions Precedent to the Obligation of the Company

   24

Section 6.3

  

Conditions Precedent to the Obligation of the Investor

   25

Article VII TERMINATION

   27

Section 7.1

  

Term, Termination by Mutual Consent

   27

Section 7.2

  

Other Termination

   28

Section 7.3

  

Effect of Termination

   28

Article VIII INDEMNIFICATION

   28

Section 8.1

  

General Indemnity.

   28

Section 8.2

  

Indemnification Procedures

   30

Article IX MISCELLANEOUS

   31

Section 9.1

  

Fees and Expenses.

   31

 

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Section 9.2

  

Specific Enforcement, Consent to Jurisdiction, Waiver of Jury Trial

   32

Section 9.3

  

Entire Agreement; Amendment

   32

Section 9.4

  

Notices

   32

Section 9.5

  

Waivers

   33

Section 9.6

  

Headings

   34

Section 9.7

  

Successors and Assigns

   34

Section 9.8

  

Governing Law

   34

Section 9.9

  

Survival

   34

Section 9.10

  

Counterparts

   34

Section 9.11

  

Publicity

   34

Section 9.12

  

Severability

   34

Section 9.13

  

Further Assurances

   34

 

Annex A. Definitions

 

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COMMON STOCK PURCHASE AGREEMENT

This COMMON STOCK PURCHASE AGREEMENT, made and entered into on this 10th day of
May 2006 (this “Agreement”), by and between Azimuth Opportunity Ltd., an
international business company incorporated under the laws of the British Virgin
Islands (the “Investor”), and Nanogen, Inc., a corporation organized and
existing under the laws of the State of Delaware (the “Company”).

RECITALS

WHEREAS, the parties desire that, upon the terms and subject to the conditions
contained herein, the Company may issue and sell to the Investor and the
Investor shall thereupon purchase from the Company up to $25,000,000 worth of
newly issued shares of the Company’s common stock, $.001 par value (“Common
Stock”), subject, in all cases, to the Trading Market Limit;

WHEREAS, the offer and sale of the shares of Common Stock hereunder have been
registered by the Company in the Registration Statement, which has been declared
effective by order of the Commission under the Securities Act;

NOW, THEREFORE, the parties hereto, intending to be legally bound, hereby agree
as follows:

ARTICLE I

PURCHASE AND SALE OF COMMON STOCK

Section 1.1 Purchase and Sale of Stock. Upon the terms and subject to the
conditions of this Agreement, during the Investment Period the Company in its
discretion may issue and sell to the Investor up to the lesser of
(i) $25,000,000 (the “Total Commitment”) worth of duly authorized, validly
issued, fully paid and non-assessable shares of Common Stock and (ii) such
number of shares of Common Stock not to exceed the Trading Market Limit (the
“Aggregate Limit”), by (a) the delivery to the Investor of not more than 24
separate Fixed Request Notices (unless the Investor and the Company mutually
agree that a different number of Fixed Request Notices may be delivered) as
provided in Article II hereof and (b) the exercise by the Investor of Optional
Amounts, which the Company may in its discretion grant to the Investor and which
may be exercised by the Investor, in whole or in part, as provided in Article II
hereof. The aggregate of all Fixed Request Amounts and Optional Amount Dollar
Amounts shall not exceed the Aggregate Limit.

Section 1.2 Effective Date; Settlement Dates. This Agreement shall become
effective and binding upon delivery (by facsimile transmission) of counterpart
signature pages of this Agreement executed by each of the parties hereto, and by
delivery of an opinion of counsel and a certificate of the Company as provided
in Section 6.1 hereof, to the offices of Greenberg Traurig, LLP, 200 Park
Avenue, New York, New York 10166, at l0:00 a.m., New York time, on the Effective
Date. In consideration of and in express reliance upon the representations,
warranties and covenants, and otherwise upon the terms and subject to the
conditions, of this Agreement, from and after the Effective Date and during the
Investment Period (i) the Company shall issue and sell to the Investor, and the
Investor agrees to purchase from the Company, the

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Shares in respect of each Fixed Request and (ii) the Investor may in its
discretion elect to purchase Shares in respect of each Optional Amount. The
issuance and sale of Shares to the Investor pursuant to any Fixed Request or
Optional Amount shall occur on the applicable Settlement Date in accordance with
Sections 2.7 and 2.9 (or on such Trading Day in accordance with Section 2.8, as
applicable), provided in each case that all of the conditions precedent thereto
set forth in Article VI theretofore shall have been fulfilled or (to the extent
permitted by applicable law) waived.

Section 1.3 The Shares. The Company has duly authorized and reserved for
issuance, and covenants to continue to reserve for issuance, free of all
preemptive and other similar rights, at all times during the Investment Period,
the requisite aggregate number of authorized but unissued shares of its Common
Stock to timely effect the issuance, sale and delivery in full to the Investor
of all Shares to be issued in respect of all Fixed Requests and Optional Amounts
under this Agreement.

Section 1.4 Current Report; Prospectus Supplement. Within four business days
after the Effective Date, the Company shall file with the Commission a report on
Form 8-K relating to the transactions contemplated by, and describing the
material terms and conditions of, this Agreement and, to the extent not included
in a Prospectus Supplement, disclosing all information relating to the
transactions contemplated hereby required to be disclosed in the Registration
Statement and the Base Prospectus (but which permissibly has been omitted
therefrom in accordance with the Securities Act), including, without limitation,
information required to be disclosed in the section captioned “Plan of
Distribution” in the Base Prospectus (the “Current Report”). The Current Report
may include a copy of this Agreement as an exhibit. To the extent applicable,
the Current Report shall be incorporated by reference in the Registration
Statement in accordance with the provisions of Rule 430B under the Securities
Act. Prior to filing the Current Report with the Commission, the Company shall
provide the Investor a reasonable opportunity to comment on a draft of such
Current Report and shall give due consideration to such comments.

Pursuant to Section 5.9 and subject to the provisions of Section 5.8, on the
first Trading Day immediately following the end of each Pricing Period, the
Company shall file with the Commission a Prospectus Supplement disclosing the
number of Shares to be issued and sold to the Investor thereunder, the total
purchase price therefor and the net proceeds to be received by the Company
therefrom and, to the extent required by the Securities Act, identifying the
Current Report.

ARTICLE II

FIXED REQUEST TERMS; OPTIONAL AMOUNT

Subject to the satisfaction of the conditions set forth in this Agreement, the
parties agree (unless otherwise mutually agreed upon by the parties in writing)
as follows:

Section 2.1 Fixed Request Notice. Upon three Trading Days’ prior notice to the
Investor, the Company shall, from time to time in its sole discretion, provide a
notice to the Investor of a Fixed Request before 9:30 a.m. (New York time) on
the first Trading Day of the Pricing Period (the “Fixed Request Notice”),
substantially in the form attached hereto as Exhibit

 

2

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A. The Fixed Request Notice shall specify the Fixed Amount Requested, establish
the Threshold Price for such Fixed Request, designate the first Trading Day of
the Pricing Period and specify the Optional Amount, if any, that the Company
elects to grant to the Investor during the Pricing Period and the applicable
Threshold Price for such Optional Amount (the “Optional Amount Threshold
Price”). Upon the terms and subject to the conditions of this Agreement, the
Investor is obligated to accept each Fixed Request Notice prepared and delivered
in accordance with the provisions of this Agreement.

Section 2.2 Fixed Requests. From time to time during the Investment Period, the
Company may in its sole discretion deliver to the Investor a Fixed Request
Notice for a specified Fixed Amount Requested, and the applicable discount price
(the “Discount Price”) shall be determined, in accordance with the price and
share amount parameters as set forth below or such other parameters mutually
agreed upon by the Investor and the Company, and upon the terms and subject to
the conditions of this Agreement, the Investor shall purchase from the Company
the Shares subject to such Fixed Request Notice; provided, however, that the
Company may not deliver any single Fixed Request Notice for a Fixed Amount
Requested in excess of 2.5% of the Market Capitalization:

 

Threshold Price

    

Fixed Amount Requested

    

Discount Price

Equal to or greater than $10.00

    

Not to exceed $9,000,000

    

96.125% of the VWAP

Equal to or greater than $9.00 and less than $10.00

    

Not to exceed $8,000,000

    

95.875% of the VWAP

Equal to or greater than $8.00 and less than $9.00

    

Not to exceed $7,000,000

    

95.625% of the VWAP

Equal to or greater than $7.00 and less than $8.00

    

Not to exceed $6,000,000

    

95.375% of the VWAP

Equal to or greater than $6.00 and less than $7.00

    

Not to exceed $5,000,000

    

95.125% of the VWAP

Equal to or greater than $5.00 and less than $6.00

    

Not to exceed $4,000,000

    

94.875% of the VWAP

Equal to or greater than $4.00 and less than $5.00

    

Not to exceed $3,250,000

    

94.625% of the VWAP

Equal to or greater than $3.00 and less than $4.00

    

Not to exceed $2,500,000

    

94.375% of the VWAP

Equal to or greater than $2.50 and less than $3.00

    

Not to exceed $1,750,000

    

94.125% of the VWAP

Equal to or greater than $2.00 and less than $2.50

    

Not to exceed $1,250,000

    

94.125% of the VWAP

Equal to or greater than $1.50 and less than $2.00

    

Not to exceed $500,000

    

94.125% of the VWAP

Anything to the contrary in this Agreement notwithstanding, at no time shall the
Investor be required to purchase more than $9,000,000 worth of Common Stock in
respect of any Pricing Period (not including Common Stock subject to any
Optional Amount). The date on which the Company delivers any Fixed Request
Notice in accordance with this Section 2.2 hereinafter shall be referred to as a
“Fixed Request Exercise Date”.

Section 2.3 Share Calculation. Subject to Section 2.6, the number of Shares to
be issued by the Company to the Investor pursuant to a Fixed Request shall equal
the aggregate sum of each quotient (calculated for each Trading Day during the
applicable Pricing Period for which

 

3

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the VWAP equals or exceeds the Threshold Price) determined pursuant to the
following equation (rounded to the nearest whole Share):

N = (A x B)/C, where:

N = the number of Shares to be issued by the Company to the Investor in respect
of a Trading Day during the applicable Pricing Period for which the VWAP equals
or exceeds the Threshold Price,

A = 0.10 (the “Multiplier”); provided, however, that if the number of Trading
Days constituting a Pricing Period is decreased as set forth in Section 2.8
hereof, then the Multiplier correspondingly shall be increased to equal the
decimal equivalent (in 10-millionths) of a fraction, the numerator of which is
one and the denominator of which equals the number of Trading Days in the
Pricing Period as so decreased,

B = the Fixed Amount Requested, and

C = the applicable Discount Price.

Section 2.4 Limitation of Fixed Requests. The Company shall not make more than
one Fixed Request in each Pricing Period. Not less than five Trading Days shall
elapse between the end of one Pricing Period and the commencement of any other
Pricing Period during the Investment Period unless otherwise mutually agreed
upon between the Investor and the Company. There shall be permitted a maximum of
24 Fixed Requests during the Investment Period. Each Fixed Request automatically
shall expire immediately following the last Trading Day of each Pricing Period.

Section 2.5 Reduction of Commitment. On the last Trading Day of each Pricing
Period, the Investor’s Total Commitment under this Agreement automatically (and
without the need for any amendment to this Agreement) shall be reduced, on a
dollar-for-dollar basis, by the total amount of the Fixed Request Amount and the
Optional Amount Dollar Amount, if any, for such Pricing Period.

Section 2.6 Below Threshold Price. If the VWAP on any Trading Day in a Pricing
Period is lower than the Threshold Price, then for each such Trading Day the
total amount of the Fixed Amount Requested for such Pricing Period shall be
reduced, on a dollar-for-dollar basis, by an amount equal to the product of
(x) the Multiplier and (y) the original Fixed Amount Requested, and no Shares
shall be purchased or sold with respect to such Trading Day, except as provided
below. If trading in the Common Stock on NASDAQ (or any national securities
exchange on which the Common Stock is then listed) is suspended for any reason
for more than three hours on any Trading Day, the Investor may at its option
deem the price of the Common Stock to be lower than the Threshold Price for such
Trading Day and, for each such Trading Day, the total amount of the Fixed Amount
Requested shall be reduced as provided in the immediately preceding sentence,
and no Shares shall be purchased or sold with respect to such Trading Day,
except as provided below. For each Trading Day during a Pricing Period on which
the VWAP is (or is deemed to be) lower than the Threshold Price, the Investor
may in its sole discretion elect to purchase such U.S. dollar amount of Shares
equal to the amount by which the Fixed Amount Requested has been reduced in
accordance with this Section 2.6, at the Threshold

 

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Price multiplied by the applicable percentage determined in accordance with the
price and share amount parameters set forth in Section 2.2. The Investor shall
inform the Company via facsimile transmission not later than 8:00 p.m. (New York
time) on the last Trading Day of such Pricing Period as to the number of Shares,
if any, the Investor elects to purchase as provided in this Section 2.6.

Section 2.7 Settlement. The payment for, against simultaneous delivery of,
Shares in respect of each Fixed Request shall be settled on the second Trading
Day next following the last Trading Day of each Pricing Period (the “Settlement
Date”). On each Settlement Date, the Company shall deliver the Shares purchased
by the Investor to the Investor or its designees via DTC’s Deposit Withdrawal
Agent Commission (DWAC) system, against simultaneous payment therefor to the
Company’s designated account by wire transfer of immediately available funds,
provided that if the Shares are received by the Investor later than 1:00 p.m.
(New York time), payment therefor shall be made with next day funds. A failure
by the Company to deliver such Shares shall result in the payment of liquidated
damages by the Company to the Investor pursuant to Section 9.1(ii) of this
Agreement.

Section 2.8 Reduction of Pricing Period. If during a Pricing Period the Company
elects to reduce the number of Trading Days in such Pricing Period (and thereby
amend its previously delivered Fixed Request Notice), the Company shall so
notify the Investor before 9:00 a.m. (New York time) on any Trading Day during a
Pricing Period (a “Reduction Notice”) and the last Trading Day of such Pricing
Period shall be the Trading Day immediately preceding the Trading Day on which
the Investor received such Reduction Notice; provided, however, that if the
Company delivers the Reduction Notice later than 9:00 a.m. (New York time) on a
Trading Day during a Pricing Period, then the last Trading Day of such Pricing
Period instead shall be the Trading Day on which the Investor received such
Reduction Notice.

Upon receipt of a Reduction Notice, the Investor (i) shall purchase the Shares
in respect of each Trading Day in such reduced Pricing Period for which the VWAP
equals or exceeds the Threshold Price in accordance with Section 2.3 hereof;
(ii) may elect to purchase the Shares in respect of any Trading Day in such
reduced Pricing Period for which the VWAP is (or is deemed to be) lower than the
Threshold Price in accordance with Section 2.6 hereof; and (iii) may elect to
exercise all or any portion of an Optional Amount on any Trading Day during such
reduced Pricing Period in accordance with Sections 2.10 and 2.11 hereof.

In addition, upon receipt of a Reduction Notice, the Investor may elect to
purchase such U.S. dollar amount of additional Shares equal to the quotient
determined pursuant to the following equation:

D = A x 1/B x (B – C), where:

D = the U.S. dollar amount of additional Shares to be purchased,

A = the Fixed Amount Requested,

B = 10 or, for purposes of this Section 2.8, such lesser number of Trading Days
as the parties may mutually agree to, and

 

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C = the number of Trading Days in the reduced Pricing Period,

at a per Share price equal to (x) the Fixed Amount Requested in the reduced
Pricing Period divided by (y) the number of Shares to be purchased during such
reduced Pricing Period pursuant to clause (i) of the immediately preceding
paragraph.

The Investor may also elect to exercise any portion of the applicable Optional
Amount which was unexercised during the reduced Pricing Period by issuing an
Optional Amount Notice to the Company not later than 10:00 a.m. (New York time)
on the first Trading Day next following the last Trading Day of the reduced
Pricing Period. The number of Shares to be issued upon exercise of such Optional
Amount shall be calculated pursuant to the equation set forth in Section 2.10
hereof, except that “C” shall equal the greater of (i) the VWAP for the Common
Stock on the last Trading Day of the reduced Pricing Period or (ii) the Optional
Amount Threshold Price.

The payment for, against simultaneous delivery of, Shares to be purchased and
sold in accordance with this Section 2.8 shall be settled on the second Trading
Day next following the Trading Day on which the Investor receives a Reduction
Notice.

Section 2.9 Optional Amount. With respect to any Pricing Period, the Company may
in its sole discretion grant to the Investor the right to exercise, from time to
time during the Pricing Period (but not more than once on any Trading Day), all
or any portion of an Optional Amount. The maximum Optional Amount Dollar Amount
and the Optional Amount Threshold Price shall be set forth in the Fixed Request
Notice. Each daily Optional Amount exercise shall be aggregated during the
Pricing Period and settled on the next Settlement Date. The Optional Amount
Threshold Price designated by the Company in its Fixed Request Notice shall
apply to each Optional Amount during the applicable Pricing Period.

Section 2.10 Calculation of Optional Amount Shares. The number of shares of
Common Stock to be issued in connection with the exercise of an Optional Amount
shall be the quotient determined pursuant to the following equation (rounded to
the nearest whole Share):

O = A/(B x C), where:

O = the number of shares of Common Stock to be issued in connection with such
Optional Amount exercise,

A = the Optional Amount Dollar Amount with respect to which the Investor has
delivered an Optional Amount Notice,

B = the applicable percentage determined in accordance with the price and shares
amount parameters set forth in Section 2.2, and

C = the greater of (i) the VWAP for the Common Stock on the day the Investor
delivers the Optional Amount Notice or (ii) the Optional Amount Threshold Price.

Section 2.11 Exercise of Optional Amount. If granted by the Company to the
Investor with respect to a Pricing Period, all or any portion of the Optional
Amount may be

 

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exercised by the Investor on any Trading Day during the Pricing Period, subject
to the limitations set forth in Section 2.9. As a condition to each exercise of
an Optional Amount pursuant to this Section 2.11, the Investor shall issue an
Optional Amount Notice to the Company no later than 8:00 p.m. (New York time) on
the day of such Optional Amount exercise. If the Investor does not exercise an
Optional Amount in full by 8:00 p.m. (New York time) on the last Trading Day of
the applicable Pricing Period, such unexercised portion of the Investor’s
Optional Amount with respect to that Pricing Period automatically shall lapse
and terminate.

Section 2.12 Aggregate Limit. Notwithstanding anything to the contrary contained
in this Agreement, in no event may the Company issue a Fixed Request Notice or
grant an Optional Amount to the extent that the sale of Shares pursuant thereto
and pursuant to all prior Fixed Request Notices or Optional Amounts issued
hereunder would cause the Company to sell or the Investor to purchase Shares
which in the aggregate are in excess of the Aggregate Limit. If the Company
issues a Fixed Request Notice or Optional Amount that otherwise would permit the
Investor to purchase shares of Common Stock which would cause the aggregate
purchases by Investor hereunder to exceed the Aggregate Limit, such Fixed
Request Notice or Optional Amount shall be void ab initio to the extent of the
amount by which the dollar value of shares or number of shares, as the case may
be, of Common Stock otherwise issuable pursuant to such Fixed Request Notice or
Optional Amount together with the dollar value of shares or number of shares, as
the case may be, of all other Common Stock purchased by the Investor pursuant
hereto would exceed the Aggregate Limit. The Company hereby represents, warrants
and covenants that, except for the transactions contemplated by the Italian
Asset Purchase Agreement, neither it nor any of its Subsidiaries (i) has
effected any transaction or series of transactions or (ii) is a party to any
pending transaction or series of transactions which, in either of such cases,
may be integrated with the transactions contemplated by this Agreement for
purposes of determining whether approval of the Company’s stockholders is
required under any bylaw, listed securities maintenance standards or other rules
of the Trading Market.

ARTICLE III

REPRESENTATIONS AND WARRANTIES OF THE INVESTOR

The Investor hereby makes the following representations and warranties to the
Company:

Section 3.1 Organization and Standing of the Investor. The Investor is an
international business company duly organized, validly existing and in good
standing under the laws of the British Virgin Islands.

Section 3.2 Authorization and Power. The Investor has the requisite corporate
power and authority to enter into and perform its obligations under this
Agreement and to purchase the Shares in accordance with the terms hereof. The
execution, delivery and performance of this Agreement by the Investor and the
consummation by it of the transactions contemplated hereby have been duly
authorized by all necessary corporate action, and no further consent or
authorization of the Investor, its Board of Directors or stockholders is
required. This Agreement has been duly executed and delivered by the Investor.
This Agreement constitutes a valid and binding obligation of the Investor
enforceable against it in accordance with its terms, except as such
enforceability may be limited by applicable bankruptcy, insolvency,
reorganization, moratorium, liquidation, conservatorship, receivership, or
similar laws relating to, or affecting generally the enforcement of, creditor’s
rights and remedies or by other equitable principles of general application.

 

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Section 3.3 No Conflicts. The execution, delivery and performance by the
Investor of this Agreement and the consummation by the Investor of the
transactions contemplated herein do not and shall not (i) result in a violation
of such Investor’s charter documents, bylaws or other applicable organizational
instruments, (ii) conflict with, constitute a default (or an event which, with
notice or lapse of time or both, would become a default) under, or give rise to
any rights of termination, amendment, acceleration or cancellation of, any
material agreement, mortgage, deed of trust, indenture, note, bond, license,
lease agreement, instrument or obligation to which the Investor is a party or is
bound, (iii) create or impose any lien, charge or encumbrance on any property of
the Investor under any agreement or any commitment to which the Investor is
party or under which the Investor is bound or under which any of its properties
or assets are bound, or (iv) result in a violation of any federal, state, local
or foreign statute, rule, or regulation, or any order, judgment or decree of any
court or governmental agency applicable to the Investor or by which any of its
properties or assets are bound or affected, except, in the case of clauses (ii),
(iii) and (iv), for such conflicts, defaults, terminations, amendments,
acceleration, cancellations and violations as would not, individually or in the
aggregate, prohibit or otherwise interfere with the ability of the Investor to
enter into and perform its obligations under this Agreement in any material
respect. The Investor is not required under federal, state, local or foreign
law, rule or regulation to obtain any consent, authorization or order of, or
make any filing or registration with, any court or governmental agency in order
for it to execute, deliver or perform any of its obligations under this
Agreement or to purchase the Shares in accordance with the terms hereof.

Section 3.4 Information. The Investor and its advisors have been furnished with
all materials relating to the business, financial condition, management and
operations of the Company and materials relating to the offer and sale of the
Shares which have been requested by the Investor. The Investor and its advisors
have been afforded the opportunity to ask questions of representatives of the
Company. The Investor has sought such accounting, legal and tax advice as it has
considered necessary to make an informed investment decision with respect to its
acquisition of the Shares. The Investor understands that it (and not the
Company) shall be responsible for its own tax liabilities that may arise as a
result of this investment or the transactions contemplated by this Agreement.

Section 3.5 Investor Information. All information contained in the written
materials furnished by the Investor to the Company specifically for use or
incorporated by reference in the Current Report or the Prospectus Supplement is
true and correct in all material respects.

Section 3.6 Free Writing Prospectus. The Investor represents and agrees with the
Company that it has not made and will not make any offer or sales of any Shares
it purchased pursuant to this Agreement that constitutes or would constitute a
Free Writing Prospectus.

 

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ARTICLE IV

REPRESENTATIONS AND WARRANTIES OF THE COMPANY

Except as set forth in the disclosure schedule delivered by the Company to the
Investor (which is hereby incorporated by reference in, and constitutes an
integral part of, this Agreement) (the “Disclosure Schedule”), the Company
hereby makes the following representations and warranties to the Investor:

Section 4.1 Organization, Good Standing and Power. The Company is a corporation
duly organized, validly existing and in good standing under the laws of the
State of Delaware and has the requisite corporate power and authority to own,
lease and operate its properties and assets and to conduct its business as it is
now being conducted. As of the Effective Date, the Company does not have any
Subsidiaries except as set forth in the 2005 Form 10-K or on Schedule 4.7
attached hereto. The Company and each such Subsidiary is duly qualified as a
foreign corporation to do business and is in good standing in every jurisdiction
in which the nature of the business conducted or property owned by it makes such
qualification necessary, except for any jurisdiction in which the failure to be
so qualified would not have a Material Adverse Effect.

Section 4.2 Authorization, Enforcement. The Company has the requisite corporate
power and authority to enter into and perform this Agreement and to issue and
sell the Shares in accordance with the terms hereof. Except for approvals of the
Company’s Board of Directors or a committee thereof as may be required in
connection with any issuance and sale of Shares to the Investor hereunder (which
approvals shall be obtained prior to the delivery of any Fixed Request Notice),
the execution, delivery and performance by the Company of this Agreement and the
consummation by it of the transactions contemplated hereby have been duly and
validly authorized by all necessary corporate action and no further consent or
authorization of the Company or its Board of Directors or stockholders is
required This Agreement has been duly executed and delivered by the Company and
constitutes a valid and binding obligation of the Company enforceable against
the Company in accordance with its terms, except as such enforceability may be
limited by applicable bankruptcy, insolvency, reorganization, moratorium,
liquidation, conservatorship, receivership or similar laws relating to, or
affecting generally the enforcement of, creditor’s rights and remedies or by
other equitable principles of general application.

Section 4.3 Capitalization. The authorized capital stock of the Company and the
shares thereof issued and outstanding as of the Effective Date are as set forth
in the 2005 Form 10-K or on Schedule 4.3 attached hereto. All of the outstanding
shares of Common Stock have been duly authorized and validly issued, and are
fully paid and nonassessable. Except as set forth in the Commission Documents or
on Schedule 4.3 attached hereto, as of the Effective Date, no shares of Common
Stock were entitled to preemptive rights or registration rights and there were
no outstanding options, warrants, scrip, rights to subscribe to, call or
commitments of any character whatsoever relating to, or securities or rights
convertible into or exchangeable for, any shares of capital stock of the
Company. Except as set forth in the Commission Documents or on Schedule 4.3
attached hereto, there were no contracts, commitments, understandings, or
arrangements by which the Company is or may become bound to issue additional
shares of the capital stock of the Company or options, securities or rights
convertible into or exchangeable for any shares of capital stock of the Company.
Except for customary transfer restrictions contained in agreements entered into
by the Company to sell restricted securities or as set forth in the Commission
Documents or on Schedule 4.3 attached hereto, as of the Effective Date, the
Company was not a party to, and it had no knowledge of, any agreement
restricting the voting or transfer of any shares of the capital stock of the
Company. Except as set forth in the

 

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Commission Documents or on Schedule 4.3 attached hereto, the offer and sale of
all capital stock, convertible or exchangeable securities, rights, warrants or
options of the Company issued prior to the Effective Date complied with all
applicable federal and state securities laws, and no stockholder has any right
of rescission or damages or any “put” or similar right with respect thereto
which would have a Material Adverse Effect. The Company has furnished or made
available to the Investor true and correct copies of the Company’s Certificate
of Incorporation as in effect on the Effective Date (the “Charter”), and the
Company’s Bylaws as in effect on the Effective Date (the “Bylaws”), and true and
correct copies (redacted as appropriate) of all executed resolutions of the
Company’s Board of Directors (and committees thereof) relating to the capital
stock of the Company (and transactions in respect thereof) since December 31,
2004.

Section 4.4 Issuance of Shares. The Shares to be issued under this Agreement
have been or will be duly authorized by all necessary corporate action and, when
paid for or issued in accordance with the terms hereof, the Shares shall be
validly issued and outstanding, fully paid and nonassessable, and the Investor
shall be entitled to all rights accorded to a holder and beneficial owner of
Common Stock.

Section 4.5 No Conflicts. The execution, delivery and performance by the Company
of this Agreement and the consummation by the Company of the transactions
contemplated herein do not and shall not (i) result in a violation of any
provision of the Company’s Charter or Bylaws, (ii) conflict with, constitute a
default (or an event which, with notice or lapse of time or both, would become a
default) under, or give rise to any rights of termination, amendment,
acceleration or cancellation of, any material agreement, mortgage, deed of
trust, indenture, note, bond, license, lease agreement, instrument or obligation
to which the Company or any of its Significant Subsidiaries is a party or is
bound, (iii) create or impose a lien, charge or encumbrance on any property of
the Company or any of its Significant Subsidiaries under any agreement or any
commitment to which the Company or any of its Significant Subsidiaries is a
party or under which the Company or any of its Significant Subsidiaries is bound
or under which any of their respective properties or assets are bound, or
(iv) result in a violation of any federal, state, local or foreign statute,
rule, regulation, order, judgment or decree applicable to the Company or any of
its Subsidiaries or by which any property or asset of the Company or any of its
Subsidiaries are bound or affected, except, in the case of clauses (ii),
(iii) and (iv), for such conflicts, defaults, terminations, amendments,
acceleration, cancellations and violations as would not, individually or in the
aggregate, have a Material Adverse Effect. The Company is not required under
federal, state, local or foreign law, rule or regulation to obtain any consent,
authorization or order of, or make any filing or registration with, any court or
governmental agency in order for it to execute, deliver or perform any of its
obligations under this Agreement, or to issue and sell the Shares to the
Investor in accordance with the terms hereof (other than any filings which may
be required to be made by the Company with the Commission or the Trading Market
subsequent to the Effective Date, including but not limited to a Prospectus
Supplement under Sections 1.4 and 5.9 hereof, and any registration statement,
prospectus or prospectus supplement which has been or may be filed pursuant
hereto and any blue sky filings which may be required to be made).

Section 4.6 Commission Documents, Financial Statements. (a) The Common Stock is
registered pursuant to Section 12(b) or 12(g) of the Exchange Act and, except as
disclosed in the Commission Documents or on Schedule 4.6 attached hereto, as of
the Effective

 

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Date the Company had timely filed (giving effect to permissible extensions in
accordance with Rule 12b-25 under the Exchange Act) all Commission Documents.
The Company has not provided to the Investor any information which, according to
applicable law, rule or regulation, should have been disclosed publicly by the
Company but which has not been so disclosed, other than with respect to the
transactions contemplated by this Agreement. As of its date, each Commission
Document filed with the Commission and incorporated by reference in the
Registration Statement and the Prospectus (including, without limitation, the
2005 Form 10-K) complied in all material respects with the requirements of the
Securities Act or the Exchange Act, as applicable, and other federal, state and
local laws, rules and regulations applicable to it, and, as of its date, such
Commission Document did not contain any untrue statement of a material fact or
omit to state a material fact required to be stated therein or necessary in
order to make the statements therein, in light of the circumstances under which
they were made, not misleading. Each Commission Document to be filed with the
Commission after the Effective Date and incorporated by reference in the
Registration Statement, the Prospectus and any Prospectus Supplement required to
be filed pursuant to Sections 1.4 and 5.9 hereof during the Investment Period
(including, without limitation, the Current Report), when such document becomes
effective or is filed with the Commission, as the case may be, shall comply in
all material respects with the requirements of the Securities Act or the
Exchange Act, as applicable, and other federal, state and local laws, rules and
regulations applicable to it, and shall not contain any untrue statement of a
material fact or omit to state a material fact required to be stated therein or
necessary in order to make the statements therein, in light of the circumstances
under which they were made, not misleading.

(b) The financial statements, together with the related notes and schedules, of
the Company included in the Commission Documents comply as to form in all
material respects with all applicable accounting requirements and the published
rules and regulations of the Commission and all other applicable rules and
regulations with respect thereto. Such financial statements, together with the
related notes and schedules, have been prepared in accordance with GAAP applied
on a consistent basis during the periods involved (except (i) as may be
otherwise indicated in such financial statements or the notes thereto or (ii) in
the case of unaudited interim statements, to the extent they may not include
footnotes or may be condensed or summary statements), and fairly present in all
material respects the financial condition of the Company and its consolidated
Subsidiaries as of the dates thereof and the results of operations and cash
flows for the periods then ended (subject, in the case of unaudited statements,
to normal year-end audit adjustments).

(c) The Company has timely filed with the Commission and made available to the
Investor all certifications and statements required by (x) Rule 13a-14 or Rule
15d-14 under the Exchange Act or (y) 18 U.S.C. Section 1350 (Section 906 of the
Sarbanes-Oxley Act of 2002 (“SOXA”)) with respect to all relevant Commission
Documents. The Company is in compliance in all material respects with the
provisions of SOXA applicable to it as of the date hereof. The Company maintains
disclosure controls and procedures required by Rule 13a-15 or Rule 15d-15 under
the Exchange Act; such controls and procedures are effective to ensure that all
material information concerning the Company and its Subsidiaries is made known
on a timely basis to the individuals responsible for the timely and accurate
preparation of the Company’s Commission filings and other public disclosure
documents. As used in this Section 4.6(c), the term “file” shall be broadly
construed to include any manner in which a document or information is furnished,
supplied or otherwise made available to the Commission.

 

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(d) Ernst & Young LLP and KPMG LLP, who have expressed their opinions on the
audited financial statements and related schedules included or incorporated by
reference in the Registration Statement and the Base Prospectus are, with
respect to the Company, independent registered public accounting firms as
required by the rules of the Public Company Accounting Oversight Board.

Section 4.7 Subsidiaries. The 2005 Form 10-K or on Schedule 4.7 attached hereto
sets forth each Subsidiary of the Company as of the Effective Date, showing its
jurisdiction of incorporation or organization and the percentage of the
Company’s ownership of the outstanding capital stock or other ownership
interests of such Subsidiary.

Section 4.8 No Material Adverse Effect. Since December 31, 2005, the Company has
not experienced or suffered any Material Adverse Effect, and there exists no
current state of facts, condition or event which would have a Material Adverse
Effect, except (i) as disclosed in any Commission Documents filed since
December 31, 2005 or (ii) continued losses from operations.

Section 4.9 Indebtedness. The 2005 Form 10-K sets forth, as of December 31,
2005, all outstanding secured and unsecured Indebtedness of the Company or any
Subsidiary, or for which the Company or any Subsidiary has commitments through
such date. For the purposes of this Agreement, “Indebtedness” shall mean (a) any
liabilities for borrowed money or amounts owed in excess of $10,000,000 (other
than trade accounts payable incurred in the ordinary course of business),
(b) all guaranties, endorsements, indemnities and other contingent obligations
in respect of Indebtedness of others in excess of $10,000,000, whether or not
the same are or should be reflected in the Company’s balance sheet (or the notes
thereto), except guaranties by endorsement of negotiable instruments for deposit
or collection or similar transactions in the ordinary course of business; and
(c) the present value of any lease payments in excess of $10,000,000 due under
leases required to be capitalized in accordance with GAAP. There is no existing
or continuing default or event of default in respect of any Indebtedness of the
Company or any of its Subsidiaries.

Section 4.10 Title To Assets. Each of the Company and its Subsidiaries has good
and marketable title to all of their respective real and personal property
reflected in the Commission Documents or on Schedule 4.10 attached hereto, free
of mortgages, pledges, charges, liens, security interests or other encumbrances,
except for those indicated in the Commission Documents or on Schedule 4.10
attached hereto or those that would not have a Material Adverse Effect. All real
property leases of the Company are valid and subsisting and in full force and
effect in all material respects.

Section 4.11 Actions Pending. There is no action, suit, claim, investigation or
proceeding pending, or to the knowledge of the Company threatened, against the
Company or any Subsidiary which questions the validity of this Agreement or the
transactions contemplated hereby or any action taken or to be taken pursuant
hereto or thereto. Except as set forth in the Commission Documents or on
Schedule 4.11 or Schedule 4.15 attached hereto, there is no

 

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action, suit, claim, investigation or proceeding pending, or to the knowledge of
the Company threatened, against or involving the Company, any Subsidiary or any
of their respective properties or assets, or involving any officers or directors
of the Company or any of its Subsidiaries, including, without limitation, any
securities class action lawsuit or stockholder derivative lawsuit, in each case
which, if determined adversely to the Company, its Subsidiary or any officer or
director of the Company or its Subsidiaries, would have a Material Adverse
Effect. Each of (i) the Settlement Agreement, dated July 20, 2001, by and among
Motorola, Inc., Genometrix, Inc., the Massachusetts Institute of Technology and
the Company, (ii) the Settlement Agreement, dated September 30, 2002, by and
among CombiMatrix Corp., Dr. Donald Montgomery, Acacia Research Corp. and the
Company, and (iii) that certain Tolling Agreement entered into in October 2003
between the Company and Oxford Gene Technology, is valid, binding and
enforceable against the Company and its Subsidiaries and each other party
thereto and is in full force and effect, and the Company has no further
obligation or liability of any kind or nature whatsoever (fixed, contingent or
otherwise) with respect to the litigations, actions, suits, cases or proceedings
that are the subject of the agreements described in clauses (i), (ii) and
(iii) above.

Section 4.12 Compliance With Law. The business of the Company and the
Subsidiaries has been and is presently being conducted in compliance with all
applicable federal, state, local and foreign governmental laws, rules,
regulations and ordinances, except as set forth in the Commission Documents or
on Schedule 4.12 attached hereto, and except for such non-compliance which,
individually or in the aggregate, would not have a Material Adverse Effect.

Section 4.13 Certain Fees. Except for the placement fee payable by the Company
to Reedland Capital Partners and Institutional Division of the Financial West
Group, Member NASD/SIPC, no brokers, finders or financial advisory fees or
commissions shall be payable by the Company or any Subsidiary with respect to
the transactions contemplated by this Agreement.

Section 4.14 Operation of Business. (a) The Company or one or more of its
Subsidiaries possesses such permits, licenses, approvals, consents and other
authorizations (including licenses, accreditation and other similar
documentation or approvals of any local health departments) (collectively,
“Governmental Licenses”) issued by the appropriate federal, state, local or
foreign regulatory agencies or bodies, including, without limitation, the United
States Food and Drug Administration (“FDA”), necessary to conduct the business
now operated by it, except where the failure to possess such Governmental
Licenses, individually or in the aggregate, would not have a Material Adverse
Effect. The Company and its Subsidiaries are in compliance with the terms and
conditions of all such Governmental Licenses and all applicable FDA rules and
regulations, guidelines and policies, and all applicable rules and regulations,
guidelines and policies of any governmental authority exercising authority
comparable to that of the FDA (including any non-governmental authority whose
approval or authorization is required under foreign law comparable to that
administered by the FDA), except where the failure to so comply, individually or
in the aggregate, would not have a Material Adverse Effect. All of the
Governmental Licenses are valid and in full force and effect, except where the
invalidity of such Governmental Licenses or the failure of such Governmental
Licenses to be in full force and effect, individually or in the aggregate, would
not have a Material Adverse Effect. As to each product that is subject to FDA
regulation or similar legal provisions in any foreign jurisdiction that is
developed, manufactured, tested, packaged, labeled, marketed, sold, distributed
and/or

 

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commercialized by the Company or any of its Subsidiaries, each such product is
being developed, manufactured, tested, packaged, labeled, marketed, sold,
distributed and/or commercialized in compliance with all applicable requirements
of the FDA (and any non-governmental authority whose approval or authorization
is required under foreign law comparable to that administered by the FDA),
including, but not limited to, those relating to investigational use,
investigational device exemption, premarket notification, premarket approval,
good clinical practices, good manufacturing practices, record keeping, filing of
reports, and patient privacy and medical record security, except where such
non-compliance, individually or in the aggregate, would not have a Material
Adverse Effect. As to each product subject to FDA regulation or similar legal
provision in any foreign jurisdiction, all manufacturing facilities of the
Company and its Subsidiaries are operated in compliance with the FDA’s Quality
System Regulation requirements at 21 C.F.R. Part 820, as applicable, except
where such non-compliance, individually or in the aggregate, would not have a
Material Adverse Effect. Except as set forth in the 2005 Form 10-K or on
Schedule 4.14 attached hereto, neither the Company nor any of its Subsidiaries
has received any notice of proceedings relating to the revocation or
modification of any such Governmental Licenses or relating to a potential
violation of, or failure to comply with, any FDA rules and regulations,
guidelines or policies which, if the subject of any unfavorable decision, ruling
or finding, individually or in the aggregate, would have a Material Adverse
Effect. Except as set forth in the 2005 Form 10-K or on Schedule 4.14 attached
hereto, the Company has not received any correspondence or notice from the FDA
and neither the Company nor any of its Subsidiaries knows of any basis therefor.
This Section 4.14 does not relate to environmental matters, such items being the
subject of Section 4.15.

(b) Except as described in the Commission Documents, the Company or one or more
of its Subsidiaries owns or possesses adequate patents, patent rights, licenses,
inventions, copyrights, know-how (including trade secrets and other unpatented
and/or unpatentable proprietary or confidential information, systems or
procedures), trademarks, service marks, trade names, trade dress, logos,
copyrights and other intellectual property, including, without limitation, all
of the intellectual property described in the Commission Documents or on
Schedule 4.14 attached hereto as being owned or licensed by the Company
(collectively, “Intellectual Property”), that are necessary or material to carry
on the business now operated by it. Except as set forth in the 2005 Form 10-K or
on Schedule 4.14 attached hereto, (i) there are no actions, suits or judicial
proceedings pending, or to the Company’s knowledge threatened, relating to
patents or proprietary information to which the Company or any of its
Subsidiaries is a party or of which any property of the Company or any of its
Subsidiaries is subject, and (ii) neither the Company nor any of its
Subsidiaries has received any notice or is otherwise aware of any infringement
of or conflict with asserted rights of others with respect to any Intellectual
Property or of any facts or circumstances which could render any Intellectual
Property invalid or inadequate to protect the interest of the Company and its
Subsidiaries therein, and which infringement or conflict (if the subject of any
unfavorable decision, ruling or finding) or invalidity or inadequacy,
individually or in the aggregate, would have a Material Adverse Effect.

(c) All pre-clinical and clinical trials conducted by the Company or any of its
Subsidiaries or in which the Company or any of its Subsidiaries has participated
that are described in the Commission Documents, or the results of which are
referred to in the Commission Documents, if any, are the only pre-clinical and
clinical trials currently being conducted by or on behalf of the Company and its
Subsidiaries. All such pre-clinical and clinical

 

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trials conducted, supervised or monitored by the Company or any of its
Subsidiaries have been conducted in compliance with all applicable federal,
state, local and foreign laws, and the regulations and requirements of any
applicable governmental entity, including, but not limited to, FDA good clinical
practice and good laboratory practice requirements. Neither the Company nor any
of its Subsidiaries has received any notices or correspondence from the FDA or
any other governmental agency requiring the termination, suspension or
modification of any pre-clinical or clinical trials conducted by, or on behalf
of, the Company or any of its Subsidiaries or in which the Company or any of its
Subsidiaries has participated that are described in the Commission Documents, if
any, or the results of which are referred to in the Commission Documents. All
pre-clinical and clinical trials previously conducted by or on behalf of the
Company or any of its Subsidiaries while conducted by or on behalf of the
Company or any of its Subsidiaries, were conducted in compliance with all
applicable federal, state, local and foreign laws, and the regulations and
requirements of any applicable governmental entity, including, but not limited
to, FDA good clinical practice and good laboratory practice requirements.

Section 4.15 Environmental Compliance. Except as disclosed in the Commission
Documents or on Schedule 4.15 attached hereto, the Company and each of its
Subsidiaries have obtained all material approvals, authorization, certificates,
consents, licenses, orders and permits or other similar authorizations of all
governmental authorities, or from any other person, that are required under any
Environmental Laws, except for any approvals, authorization, certificates,
consents, licenses, orders and permits or other similar authorizations the
failure of which to obtain does not or would not have a Material Adverse Effect.
“Environmental Laws” shall mean all applicable laws relating to the protection
of the environment including, without limitation, all requirements pertaining to
reporting, licensing, permitting, controlling, investigating or remediating
emissions, discharges, releases or threatened releases of hazardous substances,
chemical substances, pollutants, contaminants or toxic substances, materials or
wastes, whether solid, liquid or gaseous in nature, into the air, surface water,
groundwater or land, or relating to the manufacture, processing, distribution,
use, treatment, storage, disposal, transport or handling of hazardous
substances, chemical substances, pollutants, contaminants or toxic substances,
material or wastes, whether solid, liquid or gaseous in nature. Except for such
instances as would not, individually or in the aggregate, have a Material
Adverse Effect, to the best of the Company’s knowledge, there are no past or
present events, conditions, circumstances, incidents, actions or omissions
relating to or in any way affecting the Company or its Subsidiaries that violate
or could reasonably be expected to violate any Environmental Law after the
Effective Date or that could reasonably be expected to give rise to any
environmental liability, or otherwise form the basis of any claim, action,
demand, suit, proceeding, hearing, study or investigation (i) under any
Environmental Law, or (ii) based on or related to the manufacture, processing,
distribution, use, treatment, storage (including without limitation underground
storage tanks), disposal, transport or handling, or the emission, discharge,
release or threatened release of any hazardous substance.

Section 4.16 Material Agreements. Except as set forth in the Commission
Documents or on Schedule 4.16 attached hereto, neither the Company nor any
Subsidiary of the Company is a party to any written or oral contract,
instrument, agreement commitment, obligation, plan or arrangement, a copy of
which would be required to be filed with the Commission as an exhibit to an
annual report on Form 10-K (collectively, “Material Agreements”). The Company
and each of its Subsidiaries have performed in all material respects all the
obligations required to be

 

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performed by them under the Material Agreements, have received no notice of
default or an event of default by the Company or any of its Subsidiaries
thereunder and are not aware of any basis for the assertion thereof, and neither
the Company or any of its Subsidiaries nor, to the best knowledge of the
Company, any other contracting party thereto are in default under any Material
Agreement now in effect, the result of which would have a Material Adverse
Effect. Each of the Material Contracts is in full force and effect, and
constitutes a legal, valid and binding obligation enforceable in accordance with
its terms against the Company and/or any of its Subsidiaries and, to the best
knowledge of the Company, each other contracting party thereto, except as such
enforceability may be limited by applicable bankruptcy, insolvency,
reorganization, moratorium, liquidation, conservatorship, receivership or
similar laws relating to, or affecting generally the enforcement of, creditor’s
rights and remedies or by other equitable principles of general application.

Section 4.17 Transactions With Affiliates. Except as set forth in the Commission
Documents or on Schedule 4.17 attached hereto, there are no loans, leases,
agreements, contracts, royalty agreements, management contracts, service
arrangements or other continuing transactions exceeding $120,000 between (a) the
Company or any Subsidiary, on the one hand, and (b) any person or entity who
would be covered by Item 404(a) of Regulation S-K, on the other hand. Except as
disclosed in the Commission Documents, there are no outstanding amounts payable
to or receivable from, or advances by the Company or any of its Subsidiaries to,
and neither the Company nor any of its Subsidiaries is otherwise a creditor of
or debtor to, any beneficial owner of more than 5% of the outstanding shares of
Common Stock, or any director, employee or affiliate of the Company or any of
its Subsidiaries, other than (i) reimbursement for reasonable expenses incurred
on behalf of the Company or any of its Subsidiaries or (ii) as part of the
normal and customary terms of such persons’ employment or service as a director
with the Company or any of its Subsidiaries.

Section 4.18 Securities Act. The Company has complied with all applicable
federal and state securities laws in connection with the offer, issuance and
sale of the Shares hereunder.

(i) The Company has prepared and filed with the Commission in accordance with
the provisions of the Securities Act the Registration Statement, including the
Base Prospectus, relating to the Shares. The Registration Statement was declared
effective by order of the Commission on June 28, 2005. On May 9, 2006, the
Company prepared and filed with the Commission in accordance with the provisions
of the Securities Act a registration statement on Form S-3 pursuant to Rule
462(b) under the Securities Act relating to the Registration Statement. As of
the date hereof, no stop order suspending the effectiveness of the Registration
Statement has been issued by the Commission or is continuing in effect under the
Securities Act and no proceedings therefor are pending before or, to the
Company’s knowledge, threatened by the Commission. No order preventing or
suspending the use of the Prospectus has been issued by the Commission.

(ii) The Company meets the requirements for the use of Form S-3 under the
Securities Act. The Registration Statement in the form in which it became
effective and the Base Prospectus complied in all material respects with the
provisions of the Securities Act and did not at any such time contain an untrue
statement of a material fact or omit to state a material fact required to be
stated therein or necessary to make the statements therein (in the case of the

 

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Prospectus, in the light of the circumstances under which they were made) not
misleading; provided that this representation and warranty does not apply to
statements in or omissions from the Registration Statement or the Base
Prospectus made in reliance upon and in conformity with information relating to
the Investor furnished to the Company in writing by or on behalf of the Investor
expressly for use therein.

(iii) Each Prospectus Supplement required to be filed pursuant to Sections 1.4
and 5.9 hereof, when filed with the Commission under Rule 424(b) under the
Securities Act, shall comply in all material respects with the provisions of the
Securities Act and shall not at such time contain an untrue statement of a
material fact or omit to state a material fact required to be stated therein or
necessary to make the statements therein, in the light of the circumstances
under which they are made, not misleading, except that this representation and
warranty does not apply to statements in or omissions from any Prospectus
Supplement made in reliance upon and in conformity with information relating to
the Investor furnished to the Company in writing by or on behalf of the Investor
expressly for use therein.

(iv) The Company has not distributed and, prior to the completion of the
distribution of the Shares, shall not distribute any offering material in
connection with the offering and sale of the Shares other than the Registration
Statement, the Base Prospectus as supplemented by any Prospectus Supplement or
such other materials, if any, permitted by the Securities Act.

Section 4.19 Employees. As of the Effective Date, neither the Company nor any
Subsidiary of the Company has any collective bargaining arrangements or
agreements covering any of its employees, except as set forth in the Commission
Documents or on Schedule 4.19 attached hereto. As of the Effective Date, except
as disclosed in the Registration Statement, the Commission Documents or on
Schedule 4.19 attached hereto, no officer, consultant or key employee of the
Company or any Subsidiary whose termination, either individually or in the
aggregate, would reasonably be expected to have a Material Adverse Effect, has
terminated or, to the knowledge of the Company, has any present intention of
terminating his or her employment or engagement with the Company or any
Subsidiary.

Section 4.20 Use of Proceeds. The proceeds from the sale of the Shares shall be
used by the Company and its Subsidiaries as set forth in the Prospectus
Supplement filed pursuant to Sections 1.4 and 5.9.

Section 4.21 Public Utility Holding Company Act and Investment Company Act
Status. The Company is not a “holding company” or a “public utility company” as
such terms are defined in the Public Utility Holding Company Act of 1935, as
amended. The Company is not, and as a result of the consummation of the
transactions contemplated by this Agreement and the application of the proceeds
from the sale of the Shares as set forth in the Base Prospectus and any
Prospectus Supplement shall not be, an “investment company” or a company
“controlled” by an “investment company,” within the meaning of the Investment
Company Act of 1940, as amended.

Section 4.22 ERISA. Each material employee benefit plan, within the meaning of
Section 3(3) of the Employee Retirement Income Security Act of 1974, as amended
(“ERISA”),

 

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that is maintained, administered or contributed to by the Company or any of its
affiliates for employees or former employees of the Company and its Subsidiaries
has been maintained in material compliance with its terms and the requirements
of any applicable statutes, orders, rules and regulations, including but not
limited to ERISA and the Internal Revenue Code of 1986, as amended (the “Code”);
no prohibited transaction, within the meaning of Section 406 of ERISA or
Section 4975 of the Code, has occurred which would result in a material
liability to the Company with respect to any such plan excluding transactions
effected pursuant to a statutory or administrative exemption; and for each such
plan that is subject to the funding rules of Section 412 of the Code or
Section 302 of ERISA, no “accumulated funding deficiency” as defined in
Section 412 of the Code has been incurred, whether or not waived, and the fair
market value of the assets of each such plan (excluding for these purposes
accrued but unpaid contributions) exceeds the present value of all benefits
accrued under such plan determined using reasonable actuarial assumptions.

Section 4.23 Taxes. The Company (i) has filed all necessary federal, state and
foreign income and franchise tax returns or has duly requested extensions
thereof, (ii) has paid all federal, state, local and foreign taxes due and
payable for which it is liable, except to the extent that any such taxes are
being contested in good faith and by appropriate proceedings, and (iii) does not
have any tax deficiency or claims outstanding or assessed or, to the best of the
Company’s knowledge, proposed against it.

Section 4.24 Insurance. The Company carries, or is covered by, insurance in such
amounts and covering such risks as is adequate for the conduct of its and its
Subsidiaries’ businesses and the value of their respective properties and as is
customary for companies engaged in similar businesses in similar industries.

Section 4.25 Acknowledgement Regarding Investor’s Purchase of Shares. The
Company acknowledges and agrees that the Investor is acting solely in the
capacity of an arm’s length purchaser with respect to this Agreement and the
transactions contemplated hereunder. The Company further acknowledges that the
Investor is not acting as a financial advisor or fiduciary of the Company (or in
any similar capacity) with respect to this Agreement and the transactions
contemplated hereunder, and any advice given by the Investor or any of its
representatives or agents in connection with this Agreement and the transactions
contemplated hereunder is merely incidental to the Investor’s purchase of the
Shares.

ARTICLE V

COVENANTS

The Company covenants with the Investor, and the Investor covenants with the
Company, as follows, which covenants of one party are for the benefit of the
other party, during the Investment Period:

Section 5.1 Securities Compliance. The Company shall notify the Commission and
the Trading Market, as applicable, in accordance with their respective rules and
regulations, of the transactions contemplated by this Agreement, and shall take
all necessary action, undertake all proceedings and obtain all registrations,
permits, consents and approvals for the legal and valid issuance of the Shares
to the Investor in accordance with the terms of this Agreement.

 

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Section 5.2 Registration and Listing. The Company shall take all action
necessary to cause the Common Stock to continue to be registered as a class of
securities under Sections 12(b) or 12(g) of the Exchange Act, shall comply with
its reporting and filing obligations under the Exchange Act, and shall not take
any action or file any document (whether or not permitted by the Securities Act)
to terminate or suspend such registration or to terminate or suspend its
reporting and filing obligations under the Exchange Act or Securities Act,
except as permitted herein or required by law. The Company shall take all action
necessary to continue the listing and trading of its Common Stock and the
listing of the Shares purchased by Investor hereunder on the Trading Market, and
shall comply with the Company’s reporting, filing and other obligations under
the bylaws, listed securities maintenance standards and other rules of the
Trading Market.

Section 5.3 Compliance with Laws.

(i) The Company shall comply, and cause each Subsidiary to comply, (a) with all
laws, rules, regulations and orders applicable to the business and operations of
the Company and its Subsidiaries except as would not have a Material Adverse
Effect and (b) with all applicable provisions of the Securities Act and the
Exchange Act except for such non-compliance as would not have a Material Adverse
Effect. Without limiting the generality of the foregoing, neither the Company
nor any of its officers, directors or affiliates has taken or will take,
directly or indirectly, any action designed or intended to stabilize or
manipulate the price of any security of the Company, or which caused or resulted
in, or which would in the future reasonably be expected to cause or result in,
stabilization or manipulation of the price of any security of the Company.

(ii) The Investor shall comply with all laws, rules, regulations and orders
applicable to the performance by it of its obligations under this Agreement and
its investment in the Shares, except as would not, individually or in the
aggregate, prohibit or otherwise interfere with the ability of the Investor to
enter into and perform its obligations under this Agreement in any material
respect. Without limiting the foregoing, the Investor shall comply with all
applicable provisions of the Securities Act and the Exchange Act, except for
such non-compliance as would not, individually or in the aggregate, prohibit or
otherwise interfere with the ability of the Investor to enter into and perform
its obligations under this Agreement in any material respect. Without limiting
the generality of the foregoing, neither the Investor nor any of its officers,
directors or affiliates has taken or will take, directly or indirectly, any
action designed or intended to stabilize or manipulate the price of any security
of the Company, or which caused or resulted in, or which might in the future
reasonably be expected to cause or result in, stabilization or manipulation of
the price of any security of the Company.

Section 5.4 Keeping of Records and Books of Account; Foreign Corrupt Practices
Act.

(i) The Company shall keep and cause each Subsidiary to keep adequate records
and books of account, in which complete entries shall be made in accordance with
GAAP consistently applied, reflecting all financial transactions of the Company
and its Subsidiaries, and in which, for each fiscal year, all proper reserves
for depreciation, depletion, obsolescence, amortization, taxes, bad debts and
other purposes in connection with its business

 

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shall be made. The Company shall maintain a system of internal accounting
controls which are sufficient to provide reasonable assurance that
(a) transactions are executed with management’s authorization; (b) transactions
are recorded as necessary to permit preparation of the consolidated financial
statements of the Company and to maintain accountability for the Company’s
consolidated assets; (c) access to the Company’s assets is permitted only in
accordance with management’s authorization; and (d) the reporting of the
Company’s assets is compared with existing assets at regular intervals.

(ii) Neither the Company, nor any of its Subsidiaries, nor to the knowledge of
the Company, any of their respective directors, officers, agents, employees or
any other persons acting on their behalf shall, in connection with the operation
of their respective businesses, (a) use any corporate funds for unlawful
contributions, payments, gifts or entertainment or to make any unlawful
expenditures relating to political activity to government officials, candidates
or members of political parties or organizations, (b) pay, accept or receive any
unlawful contributions, payments, expenditures or gifts, or (c) violate or
operate in noncompliance with any export restrictions, anti-boycott regulations,
embargo regulations or other applicable domestic or foreign laws and
regulations, the violation or non-compliance of which would result in a Material
Adverse Effect.

(iii) Prior to each Settlement Date and from time to time, the Company shall
make available for inspection and review by the Investor customary documentation
allowing the Investor or its appointed counsel or advisors to conduct due
diligence.

Section 5.5 Limitations on Holdings and Issuances. At no time during the term of
this Agreement shall the Investor directly or indirectly own more than 9.9% of
the then issued and outstanding shares of Common Stock. The Company shall not be
obligated to issue and the Investor shall not be obligated to purchase any
shares of Common Stock which would result in the issuance under this Agreement
to the Investor at any time of Shares which, when aggregated with all other
shares of Common Stock then owned beneficially by the Investor, would result in
the beneficial ownership by the Investor of more than 9.9% of the then issued
and outstanding shares of the Common Stock.

Section 5.6 Other Agreements and Other Financings.

(i) The Company shall not enter into, announce or recommend to its stockholders
any agreement, plan, arrangement or transaction in or of which the terms thereof
would restrict, materially delay, conflict with or impair the right of the
Company or any Subsidiary to perform their obligations under this Agreement.

(ii) The Company shall notify the Investor, within 48 hours, if it enters into
any agreement, plan, arrangement or transaction with a third party, the
principal purpose of which is to obtain during a Pricing Period an Other
Financing not constituting an Acceptable Financing (an “Other Financing
Notice”); provided, however, that the Company shall provide the Investor with
five Trading Days’ prior written notice (an “Integration Notice”) if it intends
to enter into any agreement, plan, arrangement or transaction with a third
party, the principal purpose of which is to obtain an Other Financing which may
be integrated with the transactions contemplated by this Agreement for purposes
of determining whether approval of the

 

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Company’s stockholders is required under any bylaw, listed securities
maintenance standards or other rules of the Trading Market, and the Company
hereby represents, warrants and covenants that neither it nor any of its
Subsidiaries shall enter into any such agreement, plan, arrangement or
transaction unless it has timely given the Investor the Integration Notice in
accordance with this Section 5.6(ii). For purposes of this Section 5.6(ii), any
press release issued by, or Commission Document filed by, the Company shall
constitute sufficient notice, provided that it is issued or filed, as the case
may be, within the time requirements set forth in the first sentence of this
Section 5.6(ii) for an Other Financing Notice or an Integration Notice, as
applicable. During any Pricing Period in which the Company is required to
provide notice pursuant to the first sentence of this Section 5.6(ii), the
Investor shall (i) have the option to purchase the Shares subject to the Fixed
Request at (x) the price therefor in accordance with the terms of this Agreement
or (y) the third party’s price in connection with the Other Financing, net of
such third party’s discount and fees, or (ii) the Investor may elect to not
purchase any Shares subject to the Fixed Request for that Pricing Period. An
“Other Financing” shall mean (x) the issuance of Common Stock or securities
convertible into or exchangeable for Common Stock in exchange for cash at a net
discount (after all fees, discounts and commissions associated with the
transaction) to the then Current Market Price of the Common Stock; (y) the
implementation by the Company of any mechanism in respect of any securities
convertible into or exchangeable for Common Stock for the reset of the purchase
price of the Common Stock to below the then Current Market Price of the Common
Stock (including, without limitation, any antidilution or similar adjustment
provisions in respect of any Company securities); or (z) the issuance of
options, warrants or similar rights of subscription not constituting an
Acceptable Financing. “Acceptable Financing” shall mean the issuance by the
Company of shares of Common Stock or securities convertible into or exchangeable
for Common Stock (1) to an employee, director, officer or consultant of the
Company in a board-approved compensatory arrangement, whether or not pursuant to
a current or future employee, director, officer or consultant equity incentive
plans or stock purchase plans; (2) in connection with any shareholder rights
plan; (3) upon the conversion or exchange of options or convertible or
exchangeable securities outstanding as of the Effective Date; (4) in connection
with technology sharing, licensing, research and joint development agreements
with third parties; (5) in connection with the formation or maintenance of
strategic partnerships, alliances or joint ventures, commercial credit
arrangements, equipment financings or real property leases (or amendments
thereto); or (6) in connection with acquisition of products, licenses,
technology or business.

Section 5.7 Stop Orders. The Company shall advise the Investor immediately and
shall confirm such advice in writing: (i) of the Company’s receipt of notice of
any request by the Commission for amendment of or a supplement to the
Registration Statement, the Prospectus or for any additional information;
(ii) of the Company’s receipt of notice of the issuance by the Commission of any
stop order suspending the effectiveness of the Registration Statement or of the
suspension of qualification of the Shares for offering or sale in any
jurisdiction or the initiation of any proceeding for such purpose; and (iii) of
the Company becoming aware of the happening of any event, which makes any
statement of a material fact made in the Prospectus untrue or which requires the
making of any additions to or changes to the statements then made in the
Prospectus in order to state a material fact required by the Securities Act to
be stated therein or necessary in order to make the statements then made
therein, in light of the circumstances under which they were made, not
misleading, or of the necessity to amend the Registration Statement or
supplement the Prospectus to comply with the Securities Act or any

 

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other law. If at any time the Commission shall issue any stop order suspending
the effectiveness of the Registration Statement, the Company shall use
commercially reasonable efforts to obtain the withdrawal of such order at the
earliest possible time.

Section 5.8 Amendments to the Registration Statement; Prospectus Supplements.
Except as provided in this Agreement and other than periodic reports required to
be filed pursuant to the Exchange Act, the Company shall not file with the
Commission any amendment to the Registration Statement that relates to the
Investor, the Agreement or the transactions contemplated hereby or file with the
Commission any Prospectus Supplement that relates to the Investor, this
Agreement or the transactions contemplated hereby with respect to which (i) the
Investor shall not previously have been advised, (ii) the Company shall not have
given due consideration to any comments thereon received from the Investor or
its counsel, or (iii) the Investor shall reasonably object after being so
advised, unless it is necessary to amend the Registration Statement or make any
supplement to the Prospectus to comply with the Securities Act or any other
applicable law or regulation, in which case the Company shall immediately so
inform the Investor, the Investor shall be provided with a reasonable
opportunity to review any disclosure relating to the Investor and the Company
shall expeditiously furnish to the Investor an electronic copy thereof. In
addition, for so long as, in the reasonable opinion of counsel for the Investor,
the Prospectus is required to be delivered in connection with any purchase of
Shares by the Investor, the Company shall not file any Prospectus Supplement
with respect to the Shares without delivering or making available a copy of such
Prospectus Supplement, together with the Base Prospectus, to the Investor
promptly.

Section 5.9 Prospectus Delivery. The Company shall file with the Commission a
Prospectus Supplement on the first Trading Day immediately following the end of
each Pricing Period. The Company shall provide the Investor a reasonable
opportunity to comment on a draft of each such Prospectus Supplement (and shall
give due consideration to all such comments) and, subject to the provisions of
Section 5.8 hereof, shall deliver or make available to the Investor, without
charge, an electronic copy of each form of Prospectus Supplement, together with
the Base Prospectus, on each Settlement Date. The Company consents to the use of
the Prospectus (and of any Prospectus Supplement thereto) in accordance with the
provisions of the Securities Act and with the securities or “blue sky” laws of
the jurisdictions in which the Shares may be sold by the Investor, in connection
with the offering and sale of the Shares and for such period of time thereafter
as the Prospectus is required by the Securities Act to be delivered in
connection with sales of the Shares. If during such period of time any event
shall occur that in the judgment of the Company and its counsel is required to
be set forth in the Prospectus or should be set forth therein in order to make
the statements made therein, in the light of the circumstances under which they
were made, not misleading, or if it is necessary to supplement or amend the
Prospectus to comply with the Securities Act or any other applicable law or
regulation, the Company shall forthwith prepare and, subject to Section 5.8
above, file with the Commission an appropriate Prospectus Supplement to the
Prospectus and shall expeditiously furnish or make available to the Investor an
electronic copy thereof.

Section 5.10 Selling Restrictions.

(i) The Investor covenants that from and after the date hereof through and
including the 90th day next following the termination of this Agreement (the
“Restricted

 

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Period”), neither the Investor nor any of its affiliates (within the meaning of
the Exchange Act) nor any entity managed by the Investor shall, directly or
indirectly, sell any securities of the Company, except the Shares that it owns
or has the right to purchase as provided in a Fixed Request Notice. During the
Restricted Period, neither the Investor or any of its affiliates nor any entity
managed by the Investor shall sell any shares of Common Stock of the Company it
does not “own” or have the unconditional right to receive (within the meaning of
Rule 200 of Regulation SHO promulgated by the Commission under the Exchange
Act), including Shares in any account of the Investor or in any account directly
or indirectly managed by the Investor or any of its affiliates or any entity
managed by the Investor. Without limiting the generality of the foregoing, prior
to and during the Restricted Period, neither the Investor nor any of its
affiliates nor any entity managed by the Investor or any of its affiliates shall
enter into a short position with respect to shares of Common Stock of the
Company, including in any account of the Investor’s or in any account directly
or indirectly managed by the Investor or any of its Affiliates or any entity
managed by the Investor, except that the Investor may sell Shares that it is
obligated to purchase under a pending Fixed Request Notice but has not yet taken
possession of so long as the Investor (or the Broker-Dealer, as applicable)
covers any such sales with the Shares purchased pursuant to such Fixed Request
Notice; provided, however, that the Investor (or the Broker-Dealer, as
applicable) shall not be required to cover any such sales with the Shares
purchased pursuant to such Fixed Request Notice if the Company fails to deliver
such Shares to the Investor on the applicable Settlement Date upon the terms and
subject to the provisions of this Agreement. Prior to and during the Restricted
Period, the Investor shall not grant any option to purchase or acquire any right
to dispose or otherwise dispose for value of any shares of Common Stock or any
securities convertible into or exercisable or exchangeable for, or warrants to
purchase, any shares of Common Stock, or enter into any swap, hedge or other
agreement that transfers, in whole or in part, the economic risk of ownership of
the Common Stock, except for such sales expressly permitted by this
Section 5.10(i).

(ii) In addition to the foregoing, in connection with any sale of the Company’s
securities (including any sale permitted by paragraph (i) above), the Investor
shall comply in all respects with all applicable laws, rules, regulations and
orders, including, without limitation, the requirements of the Securities Act
and the Exchange Act.

Section 5.11 Effective Registration Statement. During the Investment Period, the
Company shall use its best efforts to maintain the continuous effectiveness of
the Registration Statement under the Securities Act.

Section 5.12 Non-Public Information. Neither the Company nor any of its
directors, officers or agents shall disclose any material non-public information
about the Company to the Investor, unless a simultaneous public announcement
thereof is made by the Company in the manner contemplated by Regulation FD.

Section 5.13 Broker/Dealer. The Investor shall use one or more broker-dealers to
effectuate all sales, if any, of the Shares that it may purchase from the
Company pursuant to this Agreement which (or whom) shall be unaffiliated with
the Investor and not then currently engaged or used by the Company
(collectively, the “Broker-Dealer”). The Investor will provide the Company with
all information regarding the Broker-Dealer reasonably requested by the Company.
The Investor shall be solely responsible for all fees and commissions of the
Broker-Dealer.

 

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Section 5.14 Update of Disclosure Schedule. During the Investment Period, the
Company shall from time to time update the Disclosure Schedule as may be
required to satisfy the condition set forth in Section 6.3(i). For purposes of
this Section 5.14, any disclosure made in a schedule to the Compliance
Certificate shall be deemed to be an update of the Disclosure Schedule.
Notwithstanding anything in this Agreement to the contrary, no update to the
Disclosure Schedule pursuant to this Section 5.14 shall cure any breach of a
representation or warranty of the Company contained in this Agreement and shall
not affect any of the Investor’s remedies with respect thereto.

ARTICLE VI

OPINION OF COUNSEL AND CERTIFICATE; CONDITIONS TO THE SALE AND

PURCHASE OF THE SHARES

Section 6.1 Opinion of Counsel and Certificate. Simultaneously with the
execution and delivery of this Agreement, the Investor has received and relied
upon (i) an opinion of outside counsel to the Company, dated the Effective Date,
in the form of Exhibit C hereto, and (ii) a certificate from the Company, dated
the Effective Date, in the form of Exhibit D hereto.

Section 6.2 Conditions Precedent to the Obligation of the Company. The
obligation hereunder of the Company to issue and sell the Shares to the Investor
under any Fixed Request Notice or Optional Amount is subject to the satisfaction
or (to the extent permitted by applicable law) waiver of each of the conditions
set forth below. These conditions are for the Company’s sole benefit and (to the
extent permitted by applicable law) may be waived by the Company at any time in
its sole discretion.

(i) Accuracy of the Investor’s Representations and Warranties. The
representations and warranties of the Investor contained in this Agreement
(i) that are not qualified by “materiality” shall have been true and correct in
all material respects when made and shall be true and correct in all material
respects as of the applicable Fixed Request Exercise Date and the applicable
Settlement Date with the same force and effect as if made on such dates, except
to the extent such representations and warranties are as of another date, in
which case, such representations and warranties shall be true and correct in all
material respects as of such other date and (ii) that are qualified by
“materiality” shall have been true and correct when made and shall be true and
correct as of the applicable Fixed Request Exercise Date and the applicable
Settlement Date with the same force and effect as if made on such dates, except
to the extent such representations and warranties are as of another date, in
which case, such representations and warranties shall be true and correct as of
such other date.

(ii) Registration Statement. The Registration Statement is effective and neither
the Company nor the Investor shall have received notice that the Commission has
issued or intends to issue a stop order with respect to the Registration
Statement. The Company shall have a maximum dollar amount certain of Shares
registered under the Registration Statement which are in an amount not less than
the maximum dollar amount worth of Shares issuable pursuant to all Fixed Request
Notices and Optional Amounts during the Investment Period. The

 

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Current Report shall have been filed with the Commission, as required pursuant
to Section 1.4, and a Prospectus Supplement shall have been filed with the
Commission, as required pursuant to Sections 1.4 and 5.9 hereof, to disclose the
sale of the Shares prior to each Settlement Date, as applicable.

(iii) Performance by the Investor. The Investor shall have performed, satisfied
and complied in all material respects with all covenants, agreements and
conditions required by this Agreement to be performed, satisfied or complied
with by the Investor at or prior to the applicable Fixed Request Exercise Date
and the applicable Settlement Date.

(iv) No Injunction. No statute, regulation, order, decree, writ, ruling or
injunction shall have been enacted, entered, promulgated, threatened or endorsed
by any court or governmental authority of competent jurisdiction which prohibits
the consummation of or which would materially modify or delay any of the
transactions contemplated by this Agreement.

(v) No Suspension, Etc. Trading in the Common Stock shall not have been
suspended by the Commission or the Trading Market (except for any suspension of
trading of limited duration agreed to by the Company, which suspension shall be
terminated prior to the applicable Fixed Request Exercise Date and applicable
Settlement Date), and, at any time prior to the applicable Fixed Request
Exercise Date and applicable Settlement Date, none of the events described in
clauses (i), (ii) and (iii) of Section 5.7 hereof shall have occurred, trading
in securities generally as reported on the Trading Market shall not have been
suspended or limited, nor shall a banking moratorium have been declared either
by the United States or New York State authorities, nor shall there have
occurred any material outbreak or escalation of hostilities or other national or
international calamity or crisis of such magnitude in its effect on, or any
material adverse change in, any financial market which, in each case, in the
reasonable judgment of the Company, makes it impracticable or inadvisable to
issue the Shares.

(vi) No Proceedings or Litigation. No action, suit or proceeding before any
arbitrator or any court or governmental authority shall have been commenced or
threatened, and no inquiry or investigation by any governmental authority shall
have been commenced or threatened, against the Company or any Subsidiary, or any
of the officers, directors or affiliates of the Company or any Subsidiary,
seeking to restrain, prevent or change the transactions contemplated by this
Agreement, or seeking damages in connection with such transactions.

(vii) Aggregate Limit. The issuance and sale of the Shares issuable pursuant to
such Fixed Request Notice or Optional Amount shall not violate Sections 2.2,
2.12 and 5.5 hereof.

Section 6.3 Conditions Precedent to the Obligation of the Investor. The
obligation hereunder of the Investor to accept a Fixed Request or Optional
Amount grant and to acquire and pay for the Shares is subject to the
satisfaction or (to the extent permitted by applicable law) waiver, at or before
each Fixed Request Exercise Date and each Settlement Date, of each of the
conditions set forth below. These conditions are for the Investor’s sole benefit
and (to the extent permitted by applicable law) may be waived by the Investor at
any time in its sole discretion.

 

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(i) Accuracy of the Company’s Representations and Warranties. The
representations and warranties of the Company contained in this Agreement
(i) that are not qualified by “materiality” or “Material Adverse Effect” shall
have been true and correct in all material respects when made and shall be true
and correct in all material respects as of the applicable Fixed Request Exercise
Date and the applicable Settlement Date with the same force and effect as if
made on such dates, except to the extent such representations and warranties are
as of another date, in which case, such representations and warranties shall be
true and correct in all material respects as of such other date and (ii) that
are qualified by “materiality” or “Material Adverse Effect” shall have been true
and correct when made and shall be true and correct as of the applicable Fixed
Request Exercise Date and the applicable Settlement Date with the same force and
effect as if made on such dates, except to the extent such representations and
warranties are as of another date, in which case, such representations and
warranties shall be true and correct as of such other date.

(ii) Registration Statement. The Registration Statement is effective and neither
the Company nor the Investor shall have received notice that the Commission has
issued or intends to issue a stop order with respect to the Registration
Statement. The Company shall have a maximum dollar amount certain of Shares
registered under the Registration Statement which are in an amount not less than
the maximum dollar amount worth of Shares issuable pursuant to all Fixed Request
Notices and Optional Amounts during the Investment Period. The Current Report
shall have been filed with the Commission, as required pursuant to Section 1.4,
and a Prospectus Supplement shall have been filed with the Commission, as
required pursuant to Sections 1.4 and 5.9 hereof, to disclose the sale of the
Shares prior to each Settlement Date, as applicable, and an electronic copy of
such Prospectus Supplement together with the Base Prospectus shall have been
delivered or made available to the Investor in accordance with Section 5.9
hereof.

(iii) No Suspension. Trading in the Common Stock shall not have been suspended
by the Commission or the Trading Market (except for any suspension of trading of
limited duration agreed to by the Company, which suspension shall be terminated
prior to the applicable Fixed Request Exercise Date and applicable Settlement
Date), and, at any time prior to the applicable Fixed Request Exercise Date and
applicable Settlement Date, none of the events described in clauses (i),
(ii) and (iii) of Section 5.7 hereof shall have occurred, trading in securities
generally as reported on the Trading Market shall not have been suspended or
limited, nor shall a banking moratorium have been declared either by the United
States or New York State authorities, nor shall there have occurred any material
outbreak or escalation of hostilities or other national or international
calamity or crisis of such magnitude in its effect on, or any material adverse
change in, any financial market which, in each case, in the reasonable judgment
of the Investor, makes it impracticable or inadvisable to purchase the Shares.

(iv) Performance of the Company. The Company shall have performed, satisfied and
complied in all material respects with all covenants, agreements and conditions
required by this Agreement to be performed, satisfied or complied with by the
Company at or prior to the applicable Fixed Request Exercise Date and the
applicable Settlement Date and shall have delivered to the Investor the
Compliance Certificate substantially in the form attached hereto as Exhibit E.

 

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(v) No Injunction. No statute, rule, regulation, order, decree, writ, ruling or
injunction shall have been enacted, entered, promulgated, threatened or endorsed
by any court or governmental authority of competent jurisdiction which prohibits
the consummation of or which would materially modify or delay any of the
transactions contemplated by this Agreement.

(vi) No Proceedings or Litigation. No action, suit or proceeding before any
arbitrator or any court or governmental authority shall have been commenced or
threatened, and no inquiry or investigation by any governmental authority shall
have been commenced or threatened, against the Company or any Subsidiary, or any
of the officers, directors or affiliates of the Company or any Subsidiary,
seeking to restrain, prevent or change the transactions contemplated by this
Agreement, or seeking damages in connection with such transactions.

(vii) Aggregate Limit. The issuance and sale of the Shares issuable pursuant to
such Fixed Request Notice or Optional Amount shall not violate Sections 2.2,
2.12 and 5.5 hereof.

(viii) Shares Authorized. The Shares issuable pursuant to such Fixed Request
Notice or Optional Amount shall have been duly authorized by all necessary
corporate action of the Company.

(ix) Notification of Listing of Shares. The Company shall have submitted to the
Trading Market a notification form of listing of additional shares related to
the Shares issuable pursuant to such Fixed Request or Optional Amount in
accordance with the bylaws, listed securities maintenance standards and other
rules of the Trading Market.

(x) Opinions of Counsel; Bring-Down. Subsequent to the filing of the Current
Report pursuant to Section 1.4 and prior to the first Fixed Request Exercise
Date, the Investor shall have received an opinion from outside counsel to the
Company in the form of Exhibit F hereto and an opinion from in-house counsel to
the Company in the form of Exhibit G hereto. On each Settlement Date, the
Investor shall have received an opinion “bring down” from outside counsel to the
Company in the form of Exhibit H hereto and an opinion “bring down” from
in-house counsel to the Company in the form of Exhibit I hereto.

ARTICLE VII

TERMINATION

Section 7.1 Term, Termination by Mutual Consent. Unless earlier terminated as
provided hereunder, this Agreement shall terminate automatically on the earliest
of (i) the first day of the month next following the 18-month anniversary of the
Effective Date (the “Investment Period”), (ii) the date that the entire dollar
amount of Shares registered under the Registration Statement have been issued
and sold and (iii) the date the Investor shall have purchased the Total
Commitment of shares of Common Stock (subject in all cases to the Trading Market
Limit). The Company may terminate this Agreement effective upon three days’
prior written notice to the Investor under Section 9.4; provided, however, that
such termination shall not occur during a Pricing Period or prior to a
Settlement Date. This Agreement may be terminated at any time by the mutual
written consent of the parties, effective as of the date of such mutual written
consent unless otherwise provided in such written consent; it being hereby
acknowledged and agreed that

 

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the Investor may not consent to such termination during a Pricing Period or
prior to a Settlement Date in the event the Investor has instructed the
Broker-Dealer to effect an open-market sale of Shares which are subject to a
pending Fixed Request Notice but which have not yet been physically delivered by
the Company (and/or credited by book-entry) to the Investor in accordance with
the terms and subject to the conditions of this Agreement.

Section 7.2 Other Termination. If the Company provides the Investor with an
Other Financing Notice (other than in respect of an underwritten public offering
or an Acceptable Financing) or an Integration Notice, the Investor shall have
the right to terminate this Agreement within the subsequent 30-day period (the
“Event Period”), effective upon one business day’s prior written notice
delivered to the Company in accordance with Section 9.4 at any time during the
Event Period. The Company shall notify the Investor and the Investor shall have
the right to terminate this Agreement at any time if: (i) an event constituting
a Material Adverse Effect has occurred or an event has occurred which would
result in the occurrence of a Material Adverse Effect; (ii) a Material Change in
Ownership has occurred; or (iii) a default or event of default has occurred and
is continuing under the terms of any agreement, contract, note or other
instrument to which the Company or any of its Subsidiaries is a party with
respect to any indebtedness representing more than 10% of the Company’s
consolidated assets, in any such case, upon one business day’s prior written
notice delivered to the Company in accordance with Section 9.4 hereof.

Section 7.3 Effect of Termination. In the event of termination by the Company or
the Investor, written notice thereof shall forthwith be given to the other party
as provided in Section 9.4 and the transactions contemplated by this Agreement
shall be terminated without further action by either party. If this Agreement is
terminated as provided in Section 7.1 or 7.2 herein, this Agreement shall become
void and of no further force and effect, except as provided in Section 9.9
hereof. Nothing in this Section 7.3 shall be deemed to release the Company or
the Investor from any liability for any breach under this Agreement, or to
impair the rights of the Company and the Investor to compel specific performance
by the other party of its obligations under this Agreement.

ARTICLE VIII

INDEMNIFICATION

Section 8.1 General Indemnity.

(i) Indemnification by the Company. The Company shall indemnify and hold
harmless the Investor, the Broker-Dealer, each affiliate, employee,
representative and advisor of and to the Investor and the Broker-Dealer, and
each person, if any, who controls the Investor or the Broker-Dealer within the
meaning of Section 15 of the Securities Act or Section 20(a) of the Exchange Act
from and against all losses, claims, damages, liabilities and expenses
(including reasonable costs of defense and investigation and all attorneys’
fees) to which the Investor, the Broker-Dealer and each such other person may
become subject, under the Securities Act or otherwise, insofar as such losses,
claims, damages, liabilities and expenses (or actions in respect thereof) arise
out of or are based upon (i) any violation of law (including United States
federal securities laws) in connection with the transactions contemplated by
this Agreement by the Company or any of its Subsidiaries, affiliates, officers,
directors or employees, (ii) any untrue

 

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statement or alleged untrue statement of a material fact contained, or
incorporated by reference, in the Registration Statement or any amendment
thereto or any omission or alleged omission to state therein, or in any document
incorporated by reference therein, a material fact required to be stated therein
or necessary to make the statements therein not misleading, or (iii) any untrue
statement or alleged untrue statement of a material fact contained, or
incorporated by reference, in the Prospectus or any omission or alleged omission
to state therein, or in any document incorporated by reference therein, a
material fact required to be stated therein or necessary to make the statements
therein, in light of the circumstances under which they were made, not
misleading; provided, however, that (A) the Company shall not be liable under
this Section 8.1(i) to the extent that a court of competent jurisdiction shall
have determined by a final judgment (from which no further appeals are
available) that such loss, claim, damage, liability or expense resulting
directly and solely from any such acts or failures to act, undertaken or omitted
to be taken by the Investor or such person through its bad faith or willful
misconduct, (B) the foregoing indemnity shall not apply to any loss, claim,
damage, liability or expense to the extent, but only to the extent, arising out
of or based upon any untrue statement or alleged untrue statement or omission or
alleged omission made in reliance upon and on conformity with written
information furnished to the Company by the Investor expressly for use in the
Current Report or any Prospectus Supplement and (C) with respect to the
Prospectus, the foregoing indemnity shall not inure to the benefit of the
Investor or any such person from whom the person asserting any loss, claim,
damage, liability or expense purchased Common Stock, if copies of all Prospectus
Supplements required to be filed pursuant to Section 1.4 and 5.9, together with
the Base Prospectus, were timely delivered or made available to the Investor
pursuant hereto and a copy of the Base Prospectus, together with a Prospectus
Supplement (as applicable), was not sent or given by or on behalf of the
Investor or any such person to such person, if required by law to have been
delivered, at or prior to the written confirmation of the sale of the Common
Stock to such person, and if delivery of the Base Prospectus, together with a
Prospectus Supplement (as applicable), would have cured the defect giving rise
to such loss, claim, damage, liability or expense.

The Company shall reimburse the Investor, the Broker-Dealer and each such
controlling person promptly upon demand (with accompanying presentation of
documentary evidence) for all legal and other costs and expenses reasonably
incurred by the Investor, the Broker-Dealer or such indemnified persons in
investigating, defending against, or preparing to defend against any such claim,
action, suit or proceeding with respect to which it is entitled to
indemnification.

(ii) Indemnification by the Investor. The Investor shall indemnify and hold
harmless the Company, each of its directors and officers, and each person, if
any, who controls the Company within the meaning of Section 15 of the Securities
Act or Section 20(a) of the Exchange Act from and against all losses, claims,
damages, liabilities and expenses (including reasonable costs of defense and
investigation and all attorneys fees) to which the Company and each such other
person may become subject, under the Securities Act or otherwise, insofar as
such losses, claims, damages, liabilities and expenses (or actions in respect
thereof) arise out of or are based upon (i) any violation of law (including
United States federal securities laws) in connection with the transactions
contemplated by this Agreement by the Investor or any of its affiliates,
officers, directors or employees, or (ii) any untrue statement or alleged untrue
statement of a material fact contained in the Current Report or any Prospectus
Supplement or any omission or alleged omission to state therein a material fact
required to be stated therein or

 

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necessary to make the statements therein, in light of the circumstances under
which they were made, not misleading, in each case, to the extent, but only to
the extent, the untrue statement, alleged untrue statement, omission or alleged
omission was made in reliance upon, and in conformity with, written information
furnished by the Investor to the Company expressly for inclusion in the Current
Report or such Prospectus Supplement.

The Investor shall reimburse the Company and each such director, officer or
controlling person promptly upon demand for all legal and other costs and
expenses reasonably incurred by the Company or such indemnified persons in
investigating, defending against, or preparing to defend against any such claim,
action, suit or proceeding with respect to which it is entitled to
indemnification.

Section 8.2 Indemnification Procedures. Promptly after a person receives notice
of a claim or the commencement of an action for which the person intends to seek
indemnification under Section 8.1, the person will notify the indemnifying party
in writing of the claim or commencement of the action, suit or proceeding;
provided, however, that failure to notify the indemnifying party will not
relieve the indemnifying party from liability under Section 8.1, except to the
extent it has been materially prejudiced by the failure to give notice. The
indemnifying party will be entitled to participate in the defense of any claim,
action, suit or proceeding as to which indemnification is being sought, and if
the indemnifying party acknowledges in writing the obligation to indemnify the
party against whom the claim or action is brought, the indemnifying party may
(but will not be required to) assume the defense against the claim, action, suit
or proceeding with counsel satisfactory to it. After an indemnifying party
notifies an indemnified party that the indemnifying party wishes to assume the
defense of a claim, action, suit or proceeding, the indemnifying party will not
be liable for any legal or other expenses incurred by the indemnified party in
connection with the defense against the claim, action, suit or proceeding except
that if, in the opinion of counsel to the indemnifying party, one or more of the
indemnified parties should be separately represented in connection with a claim,
action, suit or proceeding, the indemnifying party will pay the reasonable fees
and expenses of one separate counsel for the indemnified parties. Each
indemnified party, as a condition to receiving indemnification as provided in
Section 8.1, will cooperate in all reasonable respects with the indemnifying
party in the defense of any action or claim as to which indemnification is
sought. No indemnifying party will be liable for any settlement of any action
effected without its prior written consent. Notwithstanding the foregoing
sentence, if at any time an indemnified party shall have requested (by written
notice provided in accordance with Section 9.4) an indemnifying party to
reimburse the indemnified party for fees and expenses of counsel, such
indemnifying party agrees that it shall be liable for any settlement of the
nature contemplated hereby effected without its written consent if (i) such
settlement is entered into more than 45 days after receipt by such indemnifying
party of the aforesaid request, (ii) such indemnifying party shall have received
written notice of the terms of such settlement at least 30 days prior to such
settlement being entered into and (iii) such indemnifying party shall not have
reimbursed such indemnified party in accordance with such request prior to the
date of such settlement. No indemnifying party will, without the prior written
consent of the indemnified party, effect any settlement of a pending or
threatened action with respect to which an indemnified party is, or is informed
that it may be, made a party and for which it would be entitled to
indemnification, unless the settlement includes an unconditional release of the
indemnified party from all liability and claims which are the subject matter of
the pending or threatened action.

 

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If for any reason the indemnification provided for in this Agreement is not
available to, or is not sufficient to hold harmless, an indemnified party in
respect of any loss or liability referred to in Section 8.1 as to which such
indemnified party is entitled to indemnification thereunder, each indemnifying
party shall, in lieu of indemnifying the indemnified party, contribute to the
amount paid or payable by the indemnified party as a result of such loss or
liability, (i) in the proportion which is appropriate to reflect the relative
benefits received by the indemnifying party, on the one hand, and by the
indemnified party, on the other hand, from the sale of Shares which is the
subject of the claim, action, suit or proceeding which resulted in the loss or
liability or (ii) if the allocation provided by clause (i) is not permitted by
applicable law, in such proportion as is appropriate to reflect not only the
relative benefits referred to in clause (i) above, but also the relative fault
of the indemnifying party, on the one hand, and the indemnified party, on the
other hand, with respect to the statements or omissions which are the subject of
the claim, action, suit or proceeding that resulted in the loss or liability, as
well as any other relevant equitable considerations.

The remedies provided for in Section 8.1 and this Section 8.2 are not exclusive
and shall not limit any rights or remedies which may otherwise be available to
any Indemnified Person at law or in equity.

ARTICLE IX

MISCELLANEOUS

Section 9.1 Fees and Expenses.

(i) Each party shall bear its own fees and expenses related to the transactions
contemplated by this Agreement; provided, however, that the Company shall pay,
at the Effective Date, all reasonable attorneys’ fees and expenses (exclusive of
disbursements and out-of-pocket expenses) incurred by the Investor up to $35,000
in connection with the preparation, negotiation, execution and delivery of this
Agreement, and review of the Registration Statement, the Base Prospectus and the
Current Report. In addition, the Company shall pay (x) on the 30th day of the
third month in each calendar quarter during the Investment Period, due diligence
expenses incurred by the Investor during the Investment Period equal to $12,500,
and (y) all reasonable attorneys’ fees and expenses incurred by the Investor in
connection with any amendments, modifications or waivers of this Agreement and
the review of all related documents in connection therewith. The Company shall
pay all U.S. federal, state and local stamp and other similar transfer and other
taxes and duties levied in connection with issuance of the Shares pursuant
hereto.

(ii) If the Company issues a Fixed Request Notice and fails to deliver the
Shares to the Investor on the applicable Settlement Date and such failure
continues for 10 Trading Days, the Company shall pay the Investor, in cash (or,
at the option of the Investor, in shares of Common Stock which have not been
registered under the Securities Act), as liquidated damages for such failure and
not as a penalty, an amount equal to 2.75% of the payment required to be paid by
the Investor on such Settlement Date (i.e., the sum of the Fixed Amount
Requested and the Optional Amount Dollar Amount) for the initial 30 days
following such Settlement Date until the Shares have been delivered, and an
additional 1.375% for each additional 30-day period thereafter until the Shares
have been delivered, which amount shall be prorated for such periods less than
thirty 30 days.

 

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Section 9.2 Specific Enforcement, Consent to Jurisdiction, Waiver of Jury Trial.
(i) The Company and the Investor acknowledge and agree that irreparable damage
would occur in the event that any of the provisions of this Agreement were not
performed in accordance with their specific terms or were otherwise breached. It
is accordingly agreed that either party shall be entitled to an injunction or
injunctions to prevent or cure breaches of the provisions of this Agreement by
the other party and to enforce specifically the terms and provisions hereof this
being in addition to any other remedy to which either party may be entitled by
law or equity.

(i) Each of the Company and the Investor (a) hereby irrevocably submits to the
jurisdiction of the United States District Court and other courts of the United
States sitting in the State of New York for the purposes of any suit, action or
proceeding arising out of or relating to this Agreement, and (b) hereby waives,
and agrees not to assert in any such suit, action or proceeding, any claim that
it is not personally subject to the jurisdiction of such court, that the suit,
action or proceeding is brought in an inconvenient forum or that the venue of
the suit, action or proceeding is improper. Each of the Company and the Investor
consents to process being served in any such suit, action or proceeding by
mailing a copy thereof to such party at the address in effect for notices to it
under this Agreement and agrees that such service shall constitute good and
sufficient service of process and notice thereof. Nothing in this Section 9.2
shall affect or limit any right to serve process in any other manner permitted
by law.

(iii) Each of the Company and the Investor hereby waives to the fullest extent
permitted by applicable law, any right it may have to a trial by jury in respect
to any litigation directly or indirectly arising out of, under or in connection
with this Agreement or the transactions contemplated hereby or disputes relating
hereto. Each of the Company and the Investor (a) certifies that no
representative, agent or attorney of any other party has represented, expressly
or otherwise, that such other party would not, in the event of litigation, seek
to enforce the foregoing waiver and (b) acknowledges that it and the other
parties hereto have been induced to enter into this Agreement by, among other
things, the mutual waivers and certifications in this Section 9.2.

Section 9.3 Entire Agreement; Amendment. This Agreement, together with the
exhibits referred to herein and the Disclosure Schedule, represents the entire
agreement of the parties with respect to the subject matter hereof, and there
are no promises, undertakings, representations or warranties by either party
relative to subject matter hereof not expressly set forth herein. No provision
of this Agreement may be amended other than by a written instrument signed by
both parties hereto. The Disclosure Schedule and all exhibits to this Agreement
are hereby incorporated by reference in, and made a part of, this Agreement as
if set forth in full herein.

Section 9.4 Notices. Any notice, demand, request, waiver or other communication
required or permitted to be given hereunder shall be in writing and shall be
effective (a) upon hand delivery or facsimile (with facsimile machine
confirmation of delivery received) at the address or number designated below (if
delivered on a business day during normal business hours where such notice is to
be received), or the first business day following such delivery (if

 

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delivered other than on a business day during normal business hours where such
notice is to be received) or (b) on the second business day following the date
of mailing by express courier service, fully prepaid, addressed to such address,
or upon actual receipt of such mailing, whichever shall first occur. The address
for such communications shall be:

 

If to the Company:    Nanogen, Inc.    10398 Pacific Center Court    San Diego,
California 92121    Telephone Number: (858) 410-4600    Fax: (858) 410-4949   
Attention: Robert Saltmarsh With copies to:    Morgan, Lewis & Bockius LLP   
One Market, Spear Street Tower    San Francisco, California 94105    Telephone
Number: (415) 442-1000    Fax: (415) 442-1001    Attention: Scott D. Karchmer,
Esq. If to the Investor:    Azimuth Opportunity Ltd.    c/o Hedge Fund Services
(BVI) Ltd.    P.O. Box 761, James Frett Building    Wickham’s Cay 1, Road Town
   Tortola, British Virgin Islands    Telephone Number: (284) 494-6046 x232   
Fax: (284) 494-6898    Attention: Michael Kane With copies to:    Greenberg
Traurig, LLP    The MetLife Building    200 Park Avenue    New York, NY 10166   
Telephone Number: (212) 801-9200    Fax: (212) 801-6400    Attention: Clifford
E. Neimeth, Esq.                    Anthony J. Marsico, Esq.

Either party hereto may from time to time change its address for notices by
giving at least 10 days advance written notice of such changed address to the
other party hereto.

Section 9.5 Waivers. No waiver by either party of any default with respect to
any provision, condition or requirement of this Agreement shall be deemed to be
a continuing waiver in the future or a waiver of any other provisions, condition
or requirement hereof nor shall any delay or omission of any party to exercise
any right hereunder in any manner impair the exercise of any such right accruing
to it thereafter. No provision of this Agreement may be waived other than in a
written instrument signed by the party against whom enforcement of such waiver
is sought.

 

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Section 9.6 Headings. The article, section and subsection headings in this
Agreement are for convenience only and shall not constitute a part of this
Agreement for any other purpose and shall not be deemed to limit or affect any
of the provisions hereof.

Section 9.7 Successors and Assigns. The Investor may not assign this Agreement
to any person without the prior consent of the Company, in the Company’s sole
discretion. This Agreement shall be binding upon and inure to the benefit of the
parties and their successors and assigns. The assignment by a party to this
Agreement of any rights hereunder shall not affect the obligations of such party
under this Agreement.

Section 9.8 Governing Law. This Agreement shall be governed by and construed in
accordance with the internal procedural and substantive laws of the State of New
York, without giving effect to the choice of law provisions of such state.

Section 9.9 Survival. The representations and warranties of the Company and the
Investor contained in Articles III and IV and the covenants contained in Article
V shall survive the execution and delivery hereof until the termination of this
Agreement, and the agreements and covenants set forth in Article VIII of this
Agreement shall survive the execution and delivery hereof.

Section 9.10 Counterparts. This Agreement may be executed in counterparts, all
of which taken together shall constitute one and the same original and binding
instrument and shall become effective when all counterparts have been signed by
each party and delivered to the other parties hereto, it being understood that
all parties hereto need not sign the same counterpart. In the event any
signature is delivered by facsimile transmission, the party using such means of
delivery shall cause four additional executed signature pages to be physically
delivered to the other parties within five days of the execution and delivery
hereof.

Section 9.11 Publicity. On or after the Effective Date, the Company may issue a
press release or otherwise make a public statement or announcement with respect
to this Agreement or the transactions contemplated hereby or the existence of
this Agreement (including, without limitation, by filing a copy of this
Agreement with the Commission); provided, however, that prior to issuing any
such press release, or making any such public statement or announcement, the
Company shall consult with the Investor on the form and substance of such press
release or other disclosure.

Section 9.12 Severability. The provisions of this Agreement are severable and,
in the event that any court of competent jurisdiction shall determine that any
one or more of the provisions or part of the provisions contained in this
Agreement shall, for any reason, be held to be invalid, illegal or unenforceable
in any respect, such invalidity, illegality or unenforceability shall not affect
any other provision or part of a provision of this Agreement, and this Agreement
shall be reformed and construed as if such invalid or illegal or unenforceable
provision, or part of such provision, had never been contained herein, so that
such provisions would be valid, legal and enforceable to the maximum extent
possible.

Section 9.13 Further Assurances. From and after the date of this Agreement, upon
the request of the Investor or the Company, each of the Company and the Investor
shall execute and

 

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deliver such instrument, documents and other writings as may be reasonably
necessary or desirable to confirm and carry out and to effectuate fully the
intent and purposes of this Agreement.

[Signature Page Follows]

 

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IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly
executed by their respective authorized officer as of the date first above
written.

 

NANOGEN, INC.: By:  

/s/ ROBERT W. SALTMARSH

Name:   Robert W. Saltmarsh Title:   Chief Financial Officer AZIMUTH OPPORTUNITY
LTD.: By:  

/s/ DEIRDRE M. MCCOY

Name:   Deirdre M. McCoy Title:   Corporate Secretary

 

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ANNEX A TO THE

COMMON STOCK PURCHASE AGREEMENT

DEFINITIONS

(a) “Acceptable Financing” shall have the meaning assigned to such term in
Section 5.6(ii) hereof.

(b) “Aggregate Limit” shall have the meaning assigned to such term in
Section 1.1 hereof.

(c) “Base Prospectus” shall mean the Company’s prospectus, dated June 28, 2005,
included in the Registration Statement.

(d) “Broker-Dealer” shall have the meaning assigned to such term in Section 5.13
hereof.

(e) “Bylaws” shall have the meaning assigned to such term in Section 4.3 hereof.

(f) “Charter” shall have the meaning assigned to such term in Section 4.3
hereof.

(g) “Code” shall mean the Internal Revenue Code of 1986, as amended.

(h) “Commission” shall mean the Securities and Exchange Commission or any
successor entity.

(i) “Commission Documents” shall mean (1) all reports, schedules, registrations,
forms, statements, information and other documents filed by the Company with the
Commission pursuant to the reporting requirements of the Exchange Act, including
all material filed pursuant to Section 13(a) or 15(d) of the Exchange Act, which
have been filed by the Company since January 1, 2006 and which hereafter shall
be filed by the Company during the Investment Period, including, without
limitation, the Current Report and the Form 10-K filed by the Company for its
fiscal year ended December 31, 2005 (the “2005 Form 10-K”), (2) the Registration
Statement, as the same may be amended from time to time, the Prospectus and each
Prospectus Supplement, and (3) all information contained in such filings and all
documents and disclosures that have been and heretofore shall be incorporated by
reference therein.

(j) “Common Stock” shall have the meaning assigned to such term in the Recitals.

(k) “Current Market Price” means, with respect to any particular measurement
date, the closing price of a share of Common Stock as reported on the Trading
Market for the Trading Day immediately preceding such measurement date.

(l) “Current Report” shall have the meaning assigned to such term in Section 1.4
hereof.

(m) “Discount Price” shall have the meaning assigned to such term in Section 2.2
hereof.

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(n) “Effective Date” shall mean May 10, 2006.

(o) “Environmental Laws” shall have the meaning assigned to such term in
Section 4.15 hereof.

(p) “ERISA” shall mean the Employee Retirement Income Security Act of 1974, as
amended.

(q) “Event Period” shall have the meaning assigned to such term in Section 7.2
hereof.

(r) “Exchange Act” shall mean the Securities Exchange Act of 1934, as amended,
and the rules and regulations of the Commission thereunder.

(s) “FDA” shall have the meaning assigned to such term in Section 4.14(a)
hereof.

(t) “Fixed Amount Requested” shall mean the amount of a Fixed Request requested
by the Company in a Fixed Request Notice delivered pursuant to Section 2.1
hereof.

(u) “Fixed Request” means the transactions contemplated under Sections 2.1
through 2.8 of this Agreement.

(v) “Fixed Request Amount” means the actual amount of proceeds received by the
Company pursuant to a Fixed Request under this Agreement.

(w) “Fixed Request Exercise Date” shall have the meaning assigned to such term
in Section 2.2 hereof.

(x) “Fixed Request Notice” shall have the meaning assigned to such term in
Section 2.1 hereof.

(y) “Free Writing Prospectus” shall mean “Free Writing Prospectus” as defined in
Rule 405 of the Securities Act.

(z) “GAAP” shall mean generally accepted accounting principles in the United
States of America as applied by the Company.

(aa) “Governmental Licenses” shall have the meaning assigned to such term in
Section 4.14(a) hereof.

(bb) “Indebtedness” shall have the meaning assigned to such term in Section 4.9
hereof.

(cc) “Integration Notice” shall have the meaning assigned to such term in
Section 5.6(ii) hereof.

(dd) “Intellectual Property” shall have the meaning assigned to such term in
Section 4.14(b) hereof.

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(ee) “Investment Period” shall have the meaning assigned to such term in
Section 7.1 hereof.

(ff) “Italian Asset Purchase Agreement” shall mean the Asset Purchase Agreement,
dated April 19, 2006, between the Company, Nanogen Advanced Diagnostics, S.r.L.,
a company organized in accordance with the laws of Italy, and Amplimedical
S.p.A., a company organized in accordance with the laws of Italy, as amended
from time to time.

(gg) “Market Capitalization” shall be calculated on the Trading Day preceding
the applicable Pricing Period and shall be the product of (x) the number of
shares of Common Stock outstanding and (y) the closing bid price of the Common
Stock, both as determined by Bloomberg Financial LP using the DES and HP
functions.

(hh) “Material Adverse Effect” shall mean any condition, occurrence, state of
facts or event having, or insofar as reasonably can be foreseen would likely
have, any effect on the business, operations, properties or condition (financial
or otherwise) of the Company that is material and adverse to the Company and its
Subsidiaries, taken as a whole, and/or any condition, occurrence, state of facts
or event that would prohibit or otherwise materially interfere with or delay the
ability of the Company to perform any of its obligations under this Agreement.

(ii) “Material Change in Ownership” shall mean the occurrence of any one or more
of the following: (i) the acquisition by any person, including any syndicate or
group deemed to be a “person” under Section 13(d)(3) of the Exchange Act, of
beneficial ownership, directly or indirectly, through a purchase, merger or
other acquisition transaction or series of transactions, of shares of capital
stock or other securities of the Company entitling such person to exercise, upon
an event of default or default or otherwise, 50% or more of the total voting
power of all series and classes of capital stock and other securities of the
Company entitled to vote generally in the election of directors, other than any
such acquisition by the Company, any Subsidiary of the Company or any employee
benefit plan of the Company; (ii) any consolidation or merger of the Company
with or into any other person, any merger of another person into the Company, or
any conveyance, transfer, sale, lease or other disposition of all or
substantially all of the properties and assets of the Company to another person,
other than (a) any such transaction (x) that does not result in any
reclassification, conversion, exchange or cancellation of outstanding shares of
capital stock of the Company and (y) pursuant to which holders of capital stock
of the Company immediately prior to such transaction have the entitlement to
exercise, directly or indirectly, 50% or more of the total voting power of all
shares of capital stock of the Company entitled to vote generally in the
election of directors of the continuing or surviving person immediately after
such transaction or (b) any merger which is effected solely to change the
jurisdiction of incorporation of the Company and results in a reclassification,
conversion or exchange of outstanding shares of Common Stock solely into shares
of common stock of the surviving entity; (iii) during any consecutive two-year
period, individuals who at the beginning of that two-year period constituted the
Board of Directors (together with any new directors whose election to the Board
of Directors, or whose nomination for election by the stockholders of the
Company, was approved by a vote of a majority of the directors then still in
office who were either directors at the beginning of such period or whose
elections or nominations for election were previously so approved) cease for any
reason to constitute a majority of the Board of Directors then in office; or
(iv) the Company is liquidated or dissolved or a resolution is passed by the
Company’s

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stockholders approving a plan of liquidation or dissolution of the Company.
Beneficial ownership shall be determined in accordance with Rule 13d-3
promulgated by the SEC under the Exchange Act. The term “person” shall include
any syndicate or group which would be deemed to be a “person” under
Section 13(d)(3) of the Exchange Act.

(jj) “Material Agreements” shall have the meaning assigned to such term in
Section 4.16 hereof.

(kk) “Multiplier” shall have the meaning assigned to such term in Section 2.3
hereof.

(ll) “NASDAQ” means the NASDAQ National Market or any successor thereto.

(mm) “Optional Amount” means the transactions contemplated under Sections 2.9
through 2.11 of this Agreement.

(nn) “Optional Amount Dollar Amount” shall mean the actual amount of proceeds
received by the Company pursuant to the exercise of an Optional Amount under
this Agreement.

(oo) “Optional Amount Notice” shall mean a notice sent to the Company with
regard to the Investor’s election to exercise all or any portion of an Optional
Amount, as provided in Section 2.11 hereof and substantially in the form
attached hereto as Exhibit B.

(pp) “Other Financing” shall have the meaning assigned to such term in
Section 5.6(ii) hereof.

(qq) “Other Financing Notice” shall have the meaning assigned to such term in
Section 5.6(ii) hereof.

(rr) “Plan” shall have the meaning assigned to such term in Section 4.22 hereof.

(ss) “Pricing Period” shall mean a period of 10 consecutive Trading Days
commencing on the day of delivery of a Fixed Request Notice (or, if the Fixed
Request Notice is delivered after 9:30 a.m. (New York time), on the next Trading
Day), or such other period mutually agreed upon by the Investor and the Company.

(tt) “Promissory Note” means the convertible promissory note issued by the
Company pursuant to the Italian Asset Purchase Agreement, a form of which is
attached as Schedule 3.3(a) to the Italian Asset Purchase Agreement.

(uu) “Prospectus” shall mean the Base Prospectus, as supplemented by any
Prospectus Supplement.

(vv) “Prospectus Supplement” shall mean any prospectus supplement to the Base
Prospectus filed with the Commission pursuant to Rule 424(b) under the
Securities Act.

(ww) “Reduction Notice” shall have the meaning assigned to such term in
Section 2.8 hereof.

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(xx) “Registration Statement” shall mean collectively the registration statement
on Form S-3, Commission File Number 333-125975, filed by the Company with the
Commission under the Securities Act, and any new registration statement on Form
S-3 relating to such registration statement (No. 333-125975) filed by the
Company with the Commission pursuant to Rule 462(b) under the Securities Act,
for the registration of the Shares, as such Registration Statement may be
amended and supplemented from time to time.

(yy) “Restricted Period” shall have the meaning assigned to such term in
Section 5.10 hereof.

(zz) “Securities Act” shall mean the Securities Act of 1933, as amended, and the
rules and regulations of the Commission thereunder.

(aaa) “Settlement Date” shall have the meaning assigned to such term in
Section 2.7. hereof.

(bbb) “Shares” shall mean shares of Common Stock issuable to the Investor upon
exercise of a Fixed Request and shares of Common Stock issuable to the Investor
upon exercise of an Optional Amount.

(ccc) “Significant Subsidiary” means any Subsidiary of the Company that would
constitute a Significant Subsidiary of the Company within the meaning of Rule
1-02 of Regulation S-X of the Commission.

(ddd) “SOXA” shall have the meaning assigned to such term in Section 4.6(c)
hereof.

(eee) “Subsidiary” shall mean any corporation or other entity of which at least
a majority of the securities or other ownership interest having ordinary voting
power (absolutely or contingently) for the election of directors or other
persons performing similar functions are at the time owned directly or
indirectly by the Company and/or any of its other Subsidiaries.

(fff) “Total Commitment” shall have the meaning assigned to such term in
Section 1.1 hereof.

(ggg) “Threshold Price” is the lowest price at which the Company may sell Shares
during the applicable Pricing Period as set forth in a Fixed Request Notice (not
taking into account the applicable percentage discount during such Pricing
Period determined in accordance with Section 2.2); provided, however, that at no
time shall the Threshold Price be lower than $1.50 per share unless the Company
and the Investor mutually shall agree.

(hhh) “Trading Day” shall mean a trading day on the NASDAQ.

(iii) “Trading Market” means the following markets or exchanges on which the
Common Stock is listed or quoted for trading on the date in question: the
American Stock Exchange, the New York Stock Exchange or the NASDAQ National
Market.

(jjj) “Trading Market Limit” means that number of shares which, together with
the number of shares that are issued or are potentially issuable upon conversion
of the Promissory

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Note in accordance with its terms (as such number of shares potentially issuable
thereunder may be reduced upon prepayment by the Company of all or any portion
of the outstanding principal amount thereunder from time-to-time), is one less
than 20.0% of the issued and outstanding shares of the Company’s Common Stock as
of the date of the Italian Asset Purchase Agreement, subject to proportional
adjustment for stock splits, stock dividends, recapitalizations, reverse stock
splits, combinations and the like.

(kkk) “VWAP” shall mean the daily volume weighted average price (based on a
Trading Day from 9:30 p.m. to 4:00 p.m. (New York time)) of the Company on the
NASDAQ as reported by Bloomberg Financial L.P. using the AQR function.

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EXHIBIT A TO THE

COMMON STOCK PURCHASE AGREEMENT

FORM OF FIXED REQUEST NOTICE

Reference is made to the Common Stock Purchase Agreement dated as of May 10,
2006, (the “Purchase Agreement”) between Nanogen, Inc., a corporation organized
and existing under the laws of the State of Delaware (the “Company”), and
Azimuth Opportunity Ltd., an international business company incorporated under
the laws of the British Virgin Islands. Capitalized terms used and not otherwise
defined herein shall have the meanings given such terms in the Purchase
Agreement.

In accordance with and pursuant to Section 2.1 of the Purchase Agreement, the
Company hereby issues this Fixed Request Notice to exercise a Fixed Request for
the Fixed Request Amount indicated below.

 

Fixed Amount Requested:     

 

Optional Amount Dollar Amount:     

 

Pricing Period start date:     

 

Pricing Period end date:     

 

Settlement Date:     

 

Fixed Request Threshold Price:     

 

Optional Amount Threshold Price:     

 

Dollar Amount and Number of Shares of Common Stock Currently Unissued under the
Registration Statement;     

 

Dollar Amount and Number of Shares of Common Stock Currently Available under the
Aggregate Limit:     

 

Dated:                          By:  

 

     Name        Title:        Address: Facsimile No.  

AGREED AND ACCEPTED

 

By:  

 

Name   Title:  

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EXHIBIT B TO TILE

COMMON STOCK PURCHASE AGREEMENT

FORM OF OPTIONAL AMOUNT NOTICE

To:                                

 

Fax#:                            

Reference is made to the Common Stock Purchase Agreement dated as of May 10,
2006 (the “Purchase Agreement”) between Nanogen, Inc., a corporation organized
and existing under the laws of the State of Delaware (the “Company”), and
Azimuth Opportunity Ltd., an international business company incorporated under
the laws of the British Virgin Islands (the “Investor”). Capitalized terms used
and not otherwise defined herein shall have the meanings given such terms in the
Purchase Agreement.

In accordance with and pursuant to Section 2.1 of the Purchase Agreement, the
Investor hereby issues this Optional Amount Notice to exercise a Optional Amount
for the Optional Amount Dollar Amount indicated below.

 

Optional Amount Dollar Amount Exercised   

 

Number of Shares to be purchased   

 

VWAP on the date hereof:   

 

Discount Price:   

 

Settlement Date:   

 

Threshold Price:   

 

  

 

        Dated:                        By:  

 

   Name      Title:      Address: Facsimile No.  

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EXHIBIT C TO THE

COMMON STOCK PURCHASE AGREEMENT

OPINION OF OUTSIDE COUNSEL

[Company Counsel’s Letterhead]

1. The execution, delivery and performance of the Purchase Agreement have been
duly authorized by all necessary corporate action of the Company, and the
Purchase Agreement has been duly executed and delivered by the Company.

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EXHIBIT D TO THE

COMMON STOCK PURCHASE AGREEMENT

CERTIFICATE OF THE COMPANY

CLOSING CERTIFICATE

May     , 2006

The undersigned, of Nanogen, Inc., a corporation organized and existing under
the laws of the State of Delaware (the “Company”), delivers this certificate in
connection with the Common Stock Purchase Agreement, dated as of May 10, 2006
(the “Agreement”), by and between the Company and Azimuth Opportunity Ltd., an
international business company incorporated under the laws of the British Virgin
Islands (the “Investor”), and hereby certifies on the date hereof that
(capitalized terms used herein without definition have the meanings assigned to
them in the Agreement):

1. Attached hereto as Exhibit A is a true, complete and correct copy of the
Certificate of Incorporation of the Company as filed with the Secretary of State
of the State of Delaware. The Certificate of Incorporation of the Company has
not been further amended or restated, and no document with respect to any
amendment to the Certificate of Incorporation of the Company has been filed in
the office of the Secretary of State of the State of Delaware since the date
shown on the face of the state certification relating to the Company’s
Certificate of Incorporation, which is in full force and effect on the date
hereof, and no action has been taken by the Company in contemplation of any such
amendment or the dissolution, merger or consolidation of the Company.

2. Attached hereto as Exhibit B is a true and complete copy of the Bylaws of the
Company, as amended and restated through, and as in full force and effect on,
the date hereof, and no proposal for any amendment, repeal or other modification
to the Bylaws of the Company has been taken or is currently pending before the
Board of Directors or stockholders of the Company.

3. The Board of Directors of the Company has approved the transactions
contemplated by the Agreement; said approval has not been amended, rescinded or
modified and remains in full force and effect as of the date hereof.

4. Each person who, as an officer of the Company, or as attorney-in-fact of an
officer of the Company, signed (i) the Agreement and (ii) any other document
delivered prior hereto or on the date hereof in connection with the transactions
contemplated by the Agreement, was duly elected, qualified and acting as such
officer or duly appointed and acting as such attorney-in-fact, and the signature
of each such person appearing on any such document is his genuine signature.

IN WITNESS WHEREOF, I have signed my name as of the date first above written.

 

 

By:   Title:  

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EXHIBIT E TO THE

COMMON STOCK PURCHASE AGREEMENT

COMPLIANCE CERTIFICATE

In connection with the issuance of shares of common stock of Nanogen, Inc. (the
“Company”) pursuant to the Fixed Request Notice, dated                     ,
delivered by the Company to Azimuth Opportunity Ltd. (the “Investor”) pursuant
to Article II of the Common Stock Purchase Agreement, dated May 10, 2006, by and
between the Company and the Investor (the “Agreement”), the undersigned hereby
certifies as follows:

1. The undersigned is the duly elected                      of the Company.

2. Except as set forth in the attached Schedule, the representations and
warranties of the Company set forth in Article IV of the Agreement (i) that are
not qualified by “materiality” or “Material Adverse Effect” are true and correct
in all material respects as of [insert Fixed Request Exercise Date] and as of
the date hereof with the same force and effect as if made on such dates, except
to the extent such representations and warranties are as of another date, in
which case, such representations and warranties are true and correct in all
material respects as of such other date and (ii) that are qualified by
“materiality” or “Material Adverse Effect” are true and correct as of [insert
Fixed Request Exercise Date] and as of the date hereof with the same force and
effect as if made on such dates, except to the extent such representations and
warranties are as of another date, in which case, such representations and
warranties are true and correct as of such other date.

3. The Company has performed, satisfied and complied in all material respects
with all covenants, agreements and conditions required by the Agreement to be
performed, satisfied or complied with by the Company at or prior to [insert
Fixed Request Exercise Date] and the date hereof.

Capitalized terms used but not otherwise defined herein shall have the meanings
assigned to them in the Agreement.

The undersigned has executed this Certificate this [        ] day of
[                    ], 200[    ].

 

By:  

 

Name:  

 

Title:  

 

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EXHIBIT F TO THE

COMMON STOCK PURCHASE AGREEMENT

OPINION FROM OUTSIDE COUNSEL

[Company Counsel’s Letterhead]

 

  1. The Company is a corporation duly incorporated, validly existing and in
good standing under the laws of the State of Delaware, with the requisite
corporate power and authority to conduct its business as it is described in the
Registration Statement and the Prospectus, to execute and deliver the Purchase
Agreement, and to issue, sell and deliver the Shares as contemplated by the
Purchase Agreement. The Company is duly qualified to do business in the State of
California.

 

  2. Each of the Company’s United States subsidiaries listed in Schedule I
hereto is duly qualified to do business as a foreign corporation and is in good
standing in every jurisdiction in which the nature of the business conducted or
property owned by it makes such qualification necessary except for any
jurisdiction in which the failure to be so qualified would not have a Material
Adverse Effect.

 

  3. The issuance and sale of the Shares by the Company to you pursuant to the
Purchase Agreement, assuming such issuance and sale occurred on the date hereof,
do not (a) violate the provisions of any U.S. federal, New York or California
state law, rule or regulation applicable to the Company or the Delaware General
Corporation Law; (b) violate the provisions of the Company’s Certificate of
Incorporation or the Bylaws; (c) result in any breach or default under (nor
constitute any event that, with notice, lapse of time, or both, would result in
any breach or default under), or conflict with any provision of any agreement or
instrument filed as an exhibit to the Registration Statement; or (d) violate any
judgment, decree, order or award of any court, governmental body or arbitrator
specifically naming the Company or any of its Subsidiaries of which we have
knowledge, except in all such cases for such violations, defaults, breaches as
would not, individually or in the aggregate, have a Material Adverse Effect.

 

  4. No consent, approval, authorization, order, registration or qualification
of or with any U.S. federal, or New York or California state court or government
agency or under the Delaware General Corporation Law statute is required for the
issuance and sale of the Shares by the Company, or for the consummation of the
Company of the transactions contemplated by the Purchase Agreement, except for
such consents, approvals, authorization, orders, registrations or qualifications
as may be required under (x) state securities or “blue sky” laws or (y) the
rules and regulations of the National Association of Securities Dealers, Inc.,
as to which we express no opinion.

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

  5. The Registration Statement has become effective under the Securities Act
and, to our knowledge, no stop order suspending its effectiveness has been
issued by the Commission, nor, to our knowledge, is a proceeding for that
purpose pending before or contemplated by the Commission.

 

  6. Based upon the information disclosed to us, the Registration Statement, as
of the date it was declared effective, and the Prospectus as of the date it was
filed with the Commission (except as to the financial statements, schedules and
notes thereto, other financial and accounting data and statistical data derived
therefrom, information about internal controls over financial reporting, and
information about the Investor, disclosed therein, as to which we express no
opinion) complied as to form in all material respects with the requirements of
the Act and the Rules and Regulations thereunder.

 

  7. When the terms (including the sales price and number of Shares) of the
issuance of the Shares are determined by resolution of the Company’s Board of
Directors, or a duly authorized committee thereof, in accordance with the
Purchase Agreement, the Company’s Certificate of Incorporation, the Company’s
Bylaws and the laws of the State of Delaware, and upon receipt of payment for
the Shares in the manner contemplated by the Purchase Agreement in legal
consideration of not less than the aggregate par value for such Shares, and upon
execution, issuance and delivery of certificates representing the Shares (and
notation of such issuance in the stock transfer records of the Company) and
assuming the Company completes all other actions and proceedings required on its
part to be taken prior to the issuance and delivery of the Shares pursuant to
the Purchase Agreement, the Shares will be duly authorized, validly issued,
fully paid and nonassessable and free of preemptive rights arising under the
Company’s Certificate of Incorporation or Bylaws or the laws of the State of
Delaware.

 

  8. The Company is not an “investment company” within the meaning of the
Investment Company Act of 1940, as amended.

In addition to the foregoing opinions, we advise you supplementally that we have
participated in conferences with officers and other representatives of the
Company, at which conferences the contents of the Registration Statement and the
Prospectus were discussed and, although we are not passing upon and do not
assume responsibility for the accuracy, completeness or fairness of the
statements contained in the Registration Statement and the Prospectus, on the
basis of the foregoing and the information disclosed to us, but without
independent check and verification, and relying as to materiality on
representations and statements of officers and other representatives of the
Company, we confirm to you that no fact has come to the attention of those
lawyers in our firm that participated in the preparation of the Registration
Statement and the Prospectus that has led them to believe that (i) the
Registration Statement, at the time it became effective, contained any untrue
statement of a material fact or omitted to state a material fact required to be
stated therein or necessary to make the statements therein not misleading,
(ii) the Prospectus, at the date hereof, contained (or contains) any untrue
statement of a material fact or omitted to state a material fact required to be
stated therein or necessary to make the statements therein, in light of the
circumstances under which they were

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

made, not misleading (it being understood that we do not express any belief with
respect to the financial statements, schedules, and notes, other financial and
accounting data, statistical data derived therefrom, information about internal
controls over financial reporting, information about the Investor or the method
of distribution of the Shares included in the Registration Statement or the
Prospectus or with respect to the validity, enforceability or non-infringement
of any patent, copyright or trade mark or name).

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EXHIBIT G TO THE

COMMON STOCK PURCHASE AGREEMENT

OPINION FROM IN-HOUSE COUNSEL

[Company Letterhead]

 

1. The issuance and sale of the Shares by the Company pursuant to the Purchase
Agreement will not, as of the date hereof: (i) conflict with, or constitute a
default (or an event which with notice or lapse of time or both would become a
default) under, or give to others any rights of termination, amendment,
acceleration or cancellation of, any material agreement, mortgage, deed of
trust, indenture, note, bond, license, lease agreement, instrument or obligation
that was filed with the Commission as an exhibit and to which the Company or any
of its Significant Subsidiaries is a party, (ii) create or impose a lien, charge
or encumbrance on any property of the Company under any material agreement that
was filed with the Commission as an exhibit and to which the Company or any
Significant Subsidiary is a party or by which the Company or any Significant
Subsidiary is bound or by which any of its respective properties or assets are
bound, or (iii) to my knowledge, result in a violation of any federal or state
order, judgment or decree applicable to the Company or any of its subsidiaries
or by which any property or asset of the Company or any of its subsidiaries are
bound or affected, except, in all cases, for such conflicts, defaults,
terminations, amendments, acceleration, cancellations and violations as would
not, individually or in the aggregate, have a Material Adverse Effect.

 

2. There is no action, suit, claim, investigation or proceeding pending or, to
my knowledge, threatened against the Company or any subsidiary which questions
the validity of the Purchase Agreement or the transactions contemplated hereby
or any action taken or to be taken pursuant hereto or thereto. Except as set
forth in the Commission Documents, there is no action, suit, claim,
investigation or proceeding pending or, to my knowledge, threatened, against or
involving the Company, any subsidiary or any of their respective properties or
assets and which, if determined adversely to the Company or its subsidiary,
would have a Material Adverse Effect.

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EXHIBIT H TO THE

COMMON STOCK PURCHASE AGREEMENT

BRING-DOWN LETTER FROM OUTSIDE COUNSEL

[Company Counsel’s Letterhead]

 

1. The Registration Statement has become effective under the Securities Act and,
to our knowledge, no stop order suspending its effectiveness has been issued by
the Commission, nor, to our knowledge, is a proceeding for that purpose pending
before or contemplated by the Commission. Any required filing of the prospectus
supplement pursuant to Rule 424 under the Securities Act (the “Prospectus
Supplement”) has been made in the manner and within the time period required by
such Rule 424.

 

2. Based on our inquiry of the Company’s [                    ], no facts have
come to our attention that cause us to believe that any of the opinions
expressed in paragraphs 3, 4, 6 and 7 of our opinion letter to you dated [    ],
2006, or any of the statements made in the penultimate paragraph - i.e. 10b-5
negative assurances paragraph of such opinion letter, are not true and correct
as of the date hereof. For the purpose of “bring-down” opinions for paragraph 6
and the 10b-5 negative assurances paragraph in the [    ], 2006 opinion letter,
the definition of “Prospectus” shall mean the Base Prospectus and the Prospectus
Supplement

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EXHIBIT I TO THE

COMMON STOCK PURCHASE AGREEMENT

BRING-DOWN LETTER FROM IN-HOUSE COUNSEL

[Company Letterhead]

 

1. No facts have come to my attention that cause me to believe that any of the
opinions expressed in paragraphs 1 and 2 of my opinion letter to you dated
[                    ], 2006 are not true and correct as of the date hereof.