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

Exhibit 10.1
 
COMMON STOCK PURCHASE AGREEMENT

Dated as of August 16, 2011

by and between

EMCORE CORPORATION

and

COMMERCE COURT SMALL CAP VALUE FUND, LTD.

 
 

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

 

TABLE OF CONTENTS

     
Page
               
ARTICLE I
 
DEFINITIONS
1
       
ARTICLE II
 
PURCHASE AND SALE OF COMMON STOCK
1
Section 2.1.
 
Purchase and Sale of Stock
1
Section 2.2.
 
Closing Date; Settlement Dates
2
Section 2.3.
 
Initial Public Announcements and Required Filings
2
       
ARTICLE III
 
FIXED REQUEST TERMS
3
Section 3.1.
 
Fixed Request Notice
3
Section 3.2.
 
Fixed Requests
3
Section 3.3.
 
Share Calculation.
6
Section 3.4.
 
Limitation of Fixed Requests
7
Section 3.5.
 
Reduction of Commitment
7
Section 3.6.
 
Below Threshold Price.
7
Section 3.7.
 
Settlement
8
Section 3.8.
 
Reduction of Pricing Period; End of Pricing Period If Alternative Fixed Amount
Requested.
8
Section 3.9.
 
Failure to Deliver Shares
9
Section 3.10.
 
Certain Limitations
9
Section 3.11.
 
Trading Market Regulation
10
       
ARTICLE IV
 
REPRESENTATIONS, WARRANTIES AND COVENANTS OF THE INVESTOR
11
Section 4.1.
 
Organization and Standing of the Investor
11
Section 4.2.
 
Authorization and Power
11
Section 4.3.
 
No Conflicts
11
Section 4.4.
 
Investment Purpose
12
Section 4.5.
 
Accredited Investor Status
12
Section 4.6.
 
Reliance on Exemptions
12
Section 4.7.
 
Information
12
Section 4.8.
 
No Governmental Review
13
Section 4.9.
 
No General Solicitation
13
Section 4.10.
 
Not an Affiliate
13
Section 4.11.
 
Statutory Underwriter Status
13
Section 4.12.
 
Resales of Securities
13
       
ARTICLE V
 
REPRESENTATIONS, WARRANTIES AND COVENANTS OF THE COMPANY
14
Section 5.1.
 
Organization, Good Standing and Power
14
Section 5.2.
 
Authorization, Enforcement
14
Section 5.3.
 
Capitalization
14
Section 5.4.
 
Issuance of Securities
15
Section 5.5.
 
No Conflicts
15

 
i

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

 
 
Section 5.6.
 
Commission Documents, Financial Statements
16
Section 5.7.
 
Subsidiaries
18
Section 5.8.
 
No Material Adverse Effect
18
Section 5.9.
 
No Undisclosed Liabilities
18
Section 5.10.
 
No Undisclosed Events or Circumstances
18
Section 5.11.
 
Indebtedness; Solvency
18
Section 5.12.
 
Title To Assets
19
Section 5.13.
 
Actions Pending
19
Section 5.14.
 
Compliance With Law
20
Section 5.15.
 
Certain Fees
20
Section 5.16.
 
Disclosure
20
Section 5.17.
 
Operation of Business
21
Section 5.18.
 
Environmental Compliance
21
Section 5.19.
 
Material Agreements
22
Section 5.20.
 
Transactions With Affiliates
22
Section 5.21.
 
Employees
23
Section 5.22.
 
Use of Proceeds
23
Section 5.23.
 
Investment Company Act Status
23
Section 5.24.
 
ERISA
23
Section 5.25.
 
Taxes
23
Section 5.26.
 
Insurance
24
Section 5.27.
 
U.S. Real Property Holding Corporation
24
Section 5.28.
 
Exemption from Registration; Valid Issuances
24
Section 5.29.
 
No General Solicitation or Advertising
24
Section 5.30.
 
No Integrated Offering
24
Section 5.31.
 
Dilutive Effect
25
Section 5.32.
 
Manipulation of Price
25
Section 5.33.
 
Securities Act
25
Section 5.34.
 
Listing and Maintenance Requirements
25
Section 5.35.
 
Application of Takeover Protections
26
Section 5.36.
 
Acknowledgement Regarding Investor’s Acquisition of Securities
26
       
ARTICLE VI
 
ADDITIONAL COVENANTS
26
Section 6.1.
 
Securities Compliance
26
Section 6.2.
 
Reservation of Common Stock
26
Section 6.3.
 
Registration and Listing
27
Section 6.4.
 
Compliance with Laws.
27
Section 6.5.
 
Keeping of Records and Books of Account; Foreign Corrupt Practices Act.
27
Section 6.6.
 
Limitations on Holdings and Issuances
28
Section 6.7.
 
Other Agreements and Alternate Transactions.
28
Section 6.8.
 
Corporate Existence
31
Section 6.9.
 
Fundamental Transaction
31
Section 6.10.
 
Delivery of Registration Statement and Prospectus; Subsequent Changes
31
Section 6.11.
 
Amendments to the Registration Statement; Prospectus Supplements
32
Section 6.12.
 
Stop Orders
32
Section 6.13.
 
Selling Restrictions.
33

 
ii

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

 
 
Section 6.14.
 
Effective Registration Statement
33
Section 6.15.
 
Blue Sky
33
Section 6.16.
 
Non-Public Information
34
Section 6.17.
 
Broker/Dealer
34
Section 6.18.
 
Disclosure Schedule.
34
       
ARTICLE VII
 
CONDITIONS TO CLOSING AND CONDITIONS TO THE SALE AND PURCHASE OF THE SHARES
35
Section 7.1.
 
Conditions Precedent to Closing
35
Section 7.2.
 
Conditions Precedent to a Fixed Request
36
       
ARTICLE VIII
 
TERMINATION
39
Section 8.1.
 
Termination
39
Section 8.2.
 
Other Termination
39
Section 8.3.
 
Effect of Termination
40
       
ARTICLE IX
 
INDEMNIFICATION
41
Section 9.1.
 
Indemnification of Investor
41
Section 9.2.
 
Indemnification Procedures
42
       
ARTICLE X
 
MISCELLANEOUS
43
Section 10.1.
 
Fees and Expenses.
43
Section 10.2.
 
Specific Enforcement, Consent to Jurisdiction, Waiver of Jury Trial.
45
Section 10.3.
 
Entire Agreement; Amendment
46
Section 10.4.
 
Notices
46
Section 10.5.
 
No Waivers
47
Section 10.6.
 
Headings
47
Section 10.7.
 
Construction
47
Section 10.8.
 
Successors and Assigns
48
Section 10.9.
 
No Third Party Beneficiaries
48
Section 10.10.
 
Governing Law
48
Section 10.11.
 
Survival
48
Section 10.12.
 
Counterparts
48
Section 10.13.
 
Publicity
49
Section 10.14.
 
Severability
49
Section 10.15.
 
Further Assurances
49

Annex I.  Definitions

 
iii

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

 

COMMON STOCK PURCHASE AGREEMENT

This COMMON STOCK PURCHASE AGREEMENT is made and entered into as of August 16,
2011 (this “Agreement”), by and between Commerce Court Small Cap Value Fund,
Ltd., a business company incorporated under the laws of the British Virgin
Islands (the “Investor”), and EMCORE Corporation, a corporation organized and
existing under the laws of the State of New Jersey (the “Company”).

RECITALS

WHEREAS, the parties desire that, upon the terms and subject to the conditions
and limitations set forth herein, the Company may issue and sell to the
Investor, from time to time as provided herein, and the Investor shall purchase
from the Company, up to the lesser of (i) $50,000,000 of newly issued shares of
the Company’s common stock, no par value (“Common Stock”), and (ii) the Trading
Market Limit (except to the extent the Trading Market Limit shall be
inapplicable as expressly provided in Section 3.11); and

WHEREAS, such investments will be made in reliance upon the provisions of
Section 4(2) of the Securities Act (“Section 4(2)”) and Rule 506 of Regulation D
promulgated by the Commission under the Securities Act (“Regulation D”), and
upon such other exemption from the registration requirements of the Securities
Act as may be available with respect to any or all of the investments in Common
Stock to be made hereunder; and

WHEREAS, the parties hereto are concurrently entering into a Registration Rights
Agreement in the form of Exhibit A hereto (the “Registration Rights Agreement”),
pursuant to which the Company shall register the Registrable Securities (as
defined in the Registration Rights Agreement), upon the terms and subject to the
conditions set forth therein; and

WHEREAS, in consideration for the Investor’s execution and delivery of this
Agreement, the Company is concurrently causing its transfer agent to issue to
the Investor the Commitment Shares, upon the terms and subject to the conditions
set forth in this Agreement;

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

ARTICLE I
DEFINITIONS

Capitalized terms used in this Agreement shall have the meanings ascribed to
such terms in Annex I hereto, and hereby made a part hereof, or as otherwise set
forth in this Agreement.

ARTICLE II
PURCHASE AND SALE OF COMMON STOCK

Section 2.1.     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, and the Investor shall purchase
from the Company, up to the lesser of (i) $50,000,000 (the “Total Commitment”)
of duly authorized, validly issued, fully paid and nonassessable shares of
Common Stock and (ii) the Trading Market Limit (except to the extent the Trading
Market Limit shall be inapplicable as expressly provided in Section 3.11) (the
“Aggregate Limit”), by the delivery to the Investor of not more than 24 separate
Fixed Request Notices as provided in Article III hereof.

 
 

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

 

Section 2.2.     Closing Date; Settlement Dates. This Agreement shall become
effective and binding (the “Closing”) upon payment of the Document Preparation
Fee on or prior to the Closing Date pursuant to Sections 7.1 and 10.1, the
delivery of irrevocable instructions to issue the Commitment Shares to the
Investor or its designees as provided in Sections 7.1 and 10.1, the delivery of
counterpart signature pages of this Agreement and the Registration Rights
Agreement executed by each of the parties hereto and thereto, and the delivery
of all other documents, instruments and writings required to be delivered at the
Closing, in each case as provided in Section 7.1, to the offices of Greenberg
Traurig, LLP, 200 Park Avenue, New York, New York 10166, at 5:00 p.m., New York
City time, on the Closing Date. In consideration of and in express reliance upon
the representations, warranties and covenants contained in, and upon the terms
and subject to the conditions of, this Agreement, during the Investment Period
the Company shall issue and sell to the Investor, and the Investor shall
purchase from the Company, the Shares in respect of each Fixed Request. The
issuance and sale of Shares to the Investor pursuant to any Fixed Request shall
occur on the applicable Settlement Date in accordance with Section 3.7, provided
that all of the conditions precedent thereto set forth in Article VII
theretofore shall have been fulfilled on or prior to such Settlement Date.

Section 2.3.     Initial Public Announcements and Required Filings.  At or
before 8:30 a.m., New York City time, on the second Trading Day following the
Closing Date, the Company shall file a Current Report on Form 8-K describing all
the material terms of the transactions contemplated by the Transaction Documents
in the form required by the Exchange Act and attaching copies of each of this
Agreement and the Registration Rights Agreement as exhibits thereto (including
all exhibits thereto, the “Current Report”). The Company heretofore has provided
the Investor a reasonable opportunity to comment on a draft of such Current
Report and has given due consideration to such comments. From and after the
filing of the Current Report, the Company shall have disclosed all material,
nonpublic information delivered to the Investor (or the Investor’s
representatives or agents) by the Company or any of its Subsidiaries, or any of
their respective officers, directors, employees, agents or representatives (if
any) in connection with the transactions contemplated by the Transaction
Documents. The Investor covenants that until such time as the transactions
contemplated by this Agreement are publicly disclosed by the Company as
described in this Section 2.3, the Investor will maintain the confidentiality of
all disclosures made to it in connection with the transactions contemplated by
the Transaction Documents (including the existence and terms of the
transactions), except that the Investor may disclose the terms of such
transactions to its financial, accounting, legal and other advisors (provided
that the Investor directs such Persons to maintain the confidentiality of such
information). Not later than 15 calendar days following the Closing Date, the
Company shall file a Form D with respect to the Securities in accordance with
Regulation D and shall provide a copy thereof to the Investor promptly after
such filing. The Company shall prepare and file with the Commission the
Registration Statement (including the Prospectus) covering only the resale by
the Investor of the Registrable Securities in accordance with the Securities Act
and the Registration Rights Agreement. At or before 8:30 a.m. (New York City
time) on the Trading Day immediately following the Effective Date, the Company
shall file with the Commission in accordance with Rule 424(b) under the
Securities Act the final Prospectus to be used in connection with sales pursuant
to the Registration Statement. If the transactions contemplated by any Fixed
Request are material to the Company (individually or collectively with all other
prior Fixed Requests, the consummation of which have not previously been
reported in any Prospectus Supplement filed with the Commission under Rule
424(b) under the Securities Act or in any periodic report filed by the Company
with the Commission under the Exchange Act), or if otherwise required under the
Securities Act, in each case as reasonably determined by the Company or the
Investor, then, on the first Trading Day immediately following the last Trading
Day of the Pricing Period with respect to such Fixed Request, the Company shall
file with the Commission a Prospectus Supplement pursuant to Rule 424(b) under
the Securities Act with respect to the applicable Fixed Request(s), disclosing
the total Fixed Amount Requested or the Alternative Fixed Amount Requested (as
applicable) pursuant to such Fixed Request(s), the total number of Shares that
have been (or are to be) issued and sold to the Investor pursuant to such Fixed
Request(s), the total purchase price for the Shares subject to such Fixed
Request(s), the applicable Discount Price(s) for such Shares and the net
proceeds that have been (or are to be) received by the Company from the sale of
such Shares. To the extent not previously disclosed in the Prospectus or a
Prospectus Supplement, the Company shall disclose in its Quarterly Reports on
Form 10-Q and in its Annual Reports on Form 10-K the information described in
the immediately preceding sentence relating to any Fixed Request(s) consummated
during the relevant fiscal quarter.

 
2

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

 

ARTICLE III
FIXED REQUEST TERMS

Subject to the satisfaction of the conditions set forth in this Agreement, the
parties agree as follows:

Section 3.1.     Fixed Request Notice.  From time to time during the Investment
Period, the Company may, in its sole discretion, no later than 9:30 a.m. (New
York City time) on the first Trading Day of the Pricing Period, provide to the
Investor a Fixed Request Notice, substantially in the form attached hereto as
Exhibit B (the “Fixed Request Notice”), which Fixed Request Notice shall become
effective at 9:30 a.m. (New York City time) on the first Trading Day of the
Pricing Period specified in the Fixed Request Notice; provided, however, that if
the Company delivers the Fixed Request Notice to the Investor later than 9:30
a.m. (New York City time) on a Trading Day, then the first Trading Day of such
Pricing Period shall not be the Trading Day on which the Investor received such
Fixed Request Notice, but rather shall be the immediately following Trading Day
(unless a subsequent Trading Day is therein specified). The Fixed Request Notice
shall specify the Fixed Amount Requested (up to the Maximum Fixed Amount
Requested) or the number of Shares cap for the Alternative Fixed Amount
Requested (as applicable), establish the Threshold Price for such Fixed Request
and designate the first and last Trading Day of the Pricing Period. 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 3.2.     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 (up to the Maximum Fixed
Amount Requested) or for the Alternative 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 in the below
pricing grid, 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 at the Discount Price; provided, however, that (i) if
an ex-dividend date is established by the Trading Market in respect of the
Common Stock on or between the first Trading Day of the applicable Pricing
Period and the applicable Settlement Date, the Discount Price shall be reduced
by the per share dividend amount and (ii) if the Company does not elect the
Alternative Fixed Amount Requested, the Company may not deliver any single Fixed
Request Notice for a specified Fixed Amount Requested in excess of the specific
dollar amount in the applicable Fixed Amount Requested/Alternative Fixed Amount
Requested column below (the “Maximum Fixed Amount Requested”).

 
3

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

 

Threshold Price
 
Fixed Amount Requested
 
Discount Price
         
Equal to or greater than $10.00
 
Not to exceed, at the Company’s option, the greater of (i) $24,000,000 and (ii)
the Alternative Fixed Amount Requested
 
95.000% of the VWAP
         
Equal to or greater than $8.00 and less than $10.00
 
Not to exceed, at the Company’s option, the greater of (i) $19,200,000 and (ii)
the Alternative Fixed Amount Requested
 
95.000% of the VWAP
         
Equal to or greater than $7.00 and less than $8.00
 
Not to exceed, at the Company’s option, the greater of (i) $16,800,000 and (ii)
the Alternative Fixed Amount Requested
 
95.000% of the VWAP
         
Equal to or greater than $6.00 and less than $7.00
 
Not to exceed, at the Company’s option, the greater of (i) $14,400,000 and (ii)
the Alternative Fixed Amount Requested
 
95.000% of the VWAP
         
Equal to or greater than $5.00 and less than $6.00
 
Not to exceed, at the Company’s option, the greater of (i) $12,000,000 and (ii)
the Alternative Fixed Amount Requested
 
95.000% of the VWAP
         
Equal to or greater than $4.50 and less than $5.00
 
Not to exceed, at the Company’s option, the greater of (i) $10,800,000 and (ii)
the Alternative Fixed Amount Requested
 
95.000% of the VWAP
         
Equal to or greater than $4.00 and less than $4.50
 
Not to exceed, at the Company’s option, the greater of (i) $9,600,000 and (ii)
the Alternative Fixed Amount Requested
 
95.000% of the VWAP
         
Equal to or greater than $3.50 and less than $4.00
 
Not to exceed, at the Company’s option, the greater of (i) $8,400,000 and (ii)
the Alternative Fixed Amount Requested
 
95.000% of the VWAP
         
Equal to or greater than $3.00 and less than $3.50
 
Not to exceed, at the Company’s option, the greater of (i) $7,200,000 and (ii)
the Alternative Fixed Amount Requested
 
95.000% of the VWAP
         
Equal to or greater than $2.50 and less than $3.00
 
Not to exceed, at the Company’s option, the greater of (i) $6,000,000 and (ii)
the Alternative Fixed Amount Requested
 
95.000% of the VWAP
         
Equal to or greater than $2.00 and less than $2.50
 
Not to exceed, at the Company’s option, the greater of (i) $4,800,000 and (ii)
the Alternative Fixed Amount Requested
 
95.000% of the VWAP
         
Equal to or greater than $1.50 and less than $2.00
 
Not to exceed, at the Company’s option, the greater of (i) $3,600,000 and (ii)
the Alternative Fixed Amount Requested
 
95.000% of the VWAP
         
Equal to or greater than $1.00 and less than $1.50
 
Not to exceed, at the Company’s option, the greater of (i) $2,400,000 and (ii)
the Alternative Fixed Amount Requested
 
95.000% of the VWAP

 
 
4

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

 

Anything to the contrary in this Agreement notwithstanding, at no time shall the
Investor be required to purchase more than: (i) the Alternative Fixed Amount
Requested (assuming for this purpose the election of the Alternative Fixed
Amount Requested for each Trading Day during the applicable Pricing Period) or
(ii) the Maximum Fixed Amount Requested (assuming for this purpose the Company
does not elect the Alternative Fixed Amount Requested for any Trading Day during
the applicable Pricing Period), in each case in respect of any Pricing Period
(subject in all cases to the provisions of Section 3.10 and 6.6 of this
Agreement).

For purposes of this Agreement, “Alternative Fixed Amount Requested” shall mean
a dollar amount equal to the aggregate sum of each product (calculated for each
Trading Day during the applicable Pricing Period for which (i) the Company has
notified the Investor in writing that the Alternative Fixed Amount Requested
shall apply to such Trading Day and (ii) the VWAP equals or exceeds the
Threshold Price) determined pursuant to the following equation (rounded to the
nearest cent):

DAFAR =
A x B x C, where:

DAFAR =
the daily allocable portion of the total Alternative Fixed Amount Requested for
the applicable Trading Day during the applicable Pricing Period,

A =
0.25

B =
the trading volume of the Common Stock for the applicable Trading Day during the
applicable Pricing Period, as reported by Bloomberg L.P. using the AQR function
(excluding block trades of 25,000 shares or more), and

C =
the applicable Discount Price;

provided, however, that the Alternative Fixed Amount Requested shall not exceed
the dollar amount cap therefor to be specified by the Company in the applicable
Fixed Request Notice (and shall in all cases be subject to the provisions of
Section 3.10 and 6.6 of this Agreement). Notwithstanding anything herein to the
contrary, (i) if the Company has specified a dollar amount of Fixed Amount
Requested pursuant to the above pricing grid in a Fixed Request Notice, the
Company may, in its sole discretion, no later than 9:30 a.m. (New York City
time) on any Trading Day of the Pricing Period, provide to the Investor written
notice of its election of the Alternative Fixed Amount Requested with respect to
all or any portion of the remaining Trading Days of the applicable Pricing
Period, and (ii) if the Company has elected the Alternative Fixed Amount
Requested in a Fixed Request Notice, the Company may, in its sole discretion, no
later than 9:30 a.m. (New York City time) on any Trading Day of the Pricing
Period, provide to the Investor written notice of its election of a specific
dollar amount of Fixed Amount Requested pursuant to the above pricing grid with
respect to all or any portion of the remaining Trading Days of the applicable
Pricing Period, in the case of each of clauses (i) and (ii) above, which
election shall become effective at 9:30 a.m. (New York City time) on the Trading
Day on which the Investor received such notice; provided, however, that if the
Company delivers such notice to the Investor later than 9:30 a.m. (New York City
time) on a Trading Day, then the first Trading Day of such Pricing Period on
which such election shall become effective shall not be the Trading Day on which
the Investor received such notice, but rather shall be the next Trading Day
(unless a subsequent Trading Day is therein specified). The Company shall have
the right to effect such change on a daily basis during any Pricing Period.

 
5

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

 

The date on which the Company delivers any Fixed Request Notice in accordance
with this Section 3.2 hereinafter shall be referred to as a “Fixed Request
Exercise Date”. The parties hereto hereby acknowledge and agree that the
provisions of this Section 3.2 shall not be amended or waived under any
circumstances.

Section 3.3.      Share Calculation.
 
(a)      If, with respect to any Trading Day during the applicable Pricing
Period, the Company has not elected the Alternative Fixed Amount Requested in
accordance with the provisions of Section 3.2 hereof, then, with respect to such
Trading Days during the applicable Pricing Period for which the VWAP equals or
exceeds the Threshold Price, 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 (i) the Company has not elected the Alternative Fixed Amount Requested
and (ii) 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 (i) the Company has
not elected the Alternative Fixed Amount Requested and (ii) the VWAP equals or
exceeds the Threshold Price,

A =
0.10 (the “Multiplier”),

B =
the total Fixed Amount Requested, and

C =
the applicable Discount Price.

(b)      If, with respect to any Trading Day during the applicable Pricing
Period, the Company has elected the Alternative Fixed Amount Requested in
accordance with the provisions of Section 3.2 hereof, then, with respect to each
such Trading Day during the applicable Pricing Period for which the VWAP equals
or exceeds the Threshold Price, 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 product (calculated for each Trading Day during the applicable Pricing
Period for which (i) the Company has elected the Alternative Fixed Amount
Requested and (ii) the VWAP equals or exceeds the Threshold Price) determined
pursuant to the following equation (rounded to the nearest whole Share):

 
6

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

 

N =
A x B, 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 (i) the Company has
elected the Alternative Fixed Amount Requested and (ii) the VWAP equals or
exceeds the Threshold Price,

A =
0.25, and

B =
the trading volume of the Common Stock for the applicable Trading Day during the
applicable Pricing Period, as reported by Bloomberg L.P. using the AQR function
(excluding block trades of 25,000 shares or more).

Section 3.4.     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. 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 3.5.      Reduction of Commitment.  On each Settlement Date, 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 for the
portion of such Pricing Period paid to the Company on such Settlement Date.

Section 3.6.      Below Threshold Price.
 
(a)      With respect to each Trading Day (if any) during the applicable Pricing
Period with respect to which the Company has not elected the Alternative Fixed
Amount Requested in accordance with the provisions of Section 3.2 hereof, if the
VWAP on such Trading Day in a Pricing Period is lower than the Threshold Price,
then for each such Trading Day the Fixed Amount Requested shall be reduced, on a
dollar-for-dollar basis, by an amount equal to the product of (x) the Multiplier
and (y) the total Fixed Amount Requested, and no Shares shall be purchased or
sold with respect to such Trading Day. If trading in the Common Stock on the
Trading Market is suspended for any reason for more than three hours on any
Trading Day, then for each such Trading Day the Fixed Amount Requested shall be
reduced, on a dollar-for-dollar basis, as provided in the immediately preceding
sentence, and no Shares shall be purchased or sold with respect to such Trading
Day.

(b)      With respect to each Trading Day (if any) during the applicable Pricing
Period with respect to which the Company has elected the Alternative Fixed
Amount Requested in accordance with the provisions of Section 3.2 hereof, if the
VWAP on such Trading Day in a Pricing Period is lower than the Threshold Price,
then for each such Trading Day no Shares shall be purchased or sold with respect
to such Trading Day. If trading in the Common Stock on the Trading Market is
suspended for any reason for more than three hours on any Trading Day, then for
each such Trading Day no Shares shall be purchased or sold with respect to such
Trading Day.

 
7

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

 

Section 3.7.      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, or shall cause its transfer
agent to, electronically transfer the Shares purchased by the Investor by
crediting the Investor’s or its designees’ account (provided the Investor shall
have given the Company written notice of such designee prior to the Settlement
Date) at DTC through its Deposit/Withdrawal at Custodian (DWAC) system, which
Shares shall be freely tradable and transferable and without restriction on
resale pursuant to the Registration Statement, 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 City time, payment therefor shall be made with next day
funds.  As set forth in Section 3.9, a failure by the Company or its transfer
agent (if applicable) to deliver such Shares on the applicable Settlement Date
shall result in the payment of liquidated damages by the Company to the
Investor.

Section 3.8.      Reduction of Pricing Period; End of Pricing Period If
Alternative Fixed Amount Requested.

(a)       If during a Pricing Period the Company elects to reduce the number of
Trading Days in such Pricing Period, the Company shall so notify the Investor
before 9:00 a.m. (New York City 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 (i) the Company may not
elect to reduce the number of Trading Days in any such Pricing Period to less
than two Trading Days and (ii) if the Company delivers the Reduction Notice
later than 9:00 a.m. (New York City 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 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 3.3 hereof.

(b)       If, with respect to any Fixed Request Notice, an election by the
Company of the Alternative Fixed Amount Requested in accordance with the
provisions of Section 3.2 hereof is then in effect, the last Trading Day of the
applicable Pricing Period shall be the earliest of: (i) the Trading Day on which
the Alternative Fixed Amount Requested (calculated in accordance with Section
3.2 hereof) shall have reached the dollar amount cap therefor specified by the
Company in the applicable Fixed Request Notice, (ii) the last Trading Day of the
Pricing Period, if such Pricing Period is reduced by the Company pursuant to
clause (a) of this Section 3.8, and (iii) the 10th Trading Day of the Pricing
Period.

 
8

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

 

Section 3.9.      Failure to Deliver Shares.  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, in addition to all other remedies available to
the Investor, as partial damages for such failure and not as a penalty, an
amount equal to 2.0% of the payment required to be paid by the Investor on such
Settlement Date for the initial 30 days following such Settlement Date until the
Shares have been delivered, and an additional 2.0% for each additional 30-day
period thereafter until the Shares have been delivered, which amount shall be
prorated for such periods less than 30 days (the “Make Whole Amount”). If the
Make Whole Amount is not paid within two Trading Days following a demand
therefor from the Investor, the Make Whole Amount shall accrue annual interest
(on the basis of the 365 day year) compounded daily at a rate equal to the
greater of (i) the prime rate of interest then in effect as published by the
Wall Street Journal plus 3.0% and (ii) 10.0%, up to and including the date on
which the Make Whole Amount is actually paid.

Section 3.10.    Certain Limitations.  Notwithstanding anything to the contrary
contained in this Agreement, in no event may the Company issue a Fixed Request
Notice to the extent that (i) the Fixed Amount Requested in such Fixed Request
Notice exceeds the Maximum Fixed Amount Requested determined in accordance with
Section 3.2 (if the Company has not elected the Alternative Fixed Amount
Requested in accordance with the provisions of Section 3.2 hereof), (ii) the
sale of Shares pursuant to such Fixed Request Notice would cause the Company to
sell or the Investor to purchase (A) a dollar value of shares of Common Stock
which, when aggregated with all Fixed Request Amounts paid by the Investor
pursuant to all prior Fixed Request Notices issued under this Agreement, would
exceed the Aggregate Limit, (B) a number of shares of Common Stock which, when
aggregated with all Shares purchased by the Investor pursuant to all prior Fixed
Request Notices issued under this Agreement, would exceed the Aggregate Limit,
or (C) a number of shares of Common Stock which, when aggregated with (x) all
shares of Common Stock issued or sold pursuant to this Agreement or the Prior
Agreement within the six-month period immediately preceding the sale of such
Shares and (y) all other shares of Common Stock issued or sold pursuant to any
transaction or series of transactions during the Investment Period preceding the
sale of such Shares that would be aggregated with the transactions contemplated
by the applicable Fixed Request Notice 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
(including, without limitation, any issuances or sales of Common Stock pursuant
to any Alternate Transaction), would exceed that number of shares which is one
less than 20.0% of the issued and outstanding shares of Common Stock as of the
date immediately prior to the earliest of such issuance or sale (the “Single
Fixed Request Trading Market Limit”), or (iii) the sale of Shares pursuant to
such Fixed Request Notice would cause the Company to sell or the Investor to
purchase a number of shares of Common Stock which, when aggregated with all
other shares of Common Stock then beneficially owned (as calculated pursuant to
Section 13(d) of the Exchange Act and Rule 13d-3 promulgated thereunder) by the
Investor and its Affiliates, would result in the beneficial ownership by the
Investor or any of its Affiliates of more than 9.9% of the then issued and
outstanding shares of Common Stock (the “Ownership Limitation”). If the Company
issues a Fixed Request Notice in which the Fixed Amount Requested exceeds the
Maximum Fixed Amount Requested determined in accordance with Section 3.2 (if the
Company has not elected the Alternative Fixed Amount Requested in accordance
with the provisions of Section 3.2 hereof), such Fixed Request Notice shall be
void ab initio to the extent the Fixed Amount Requested exceeds the Maximum
Fixed Amount Requested. If the Company issues a Fixed Request Notice that
otherwise would require the Investor to purchase shares of Common Stock which
would cause the aggregate purchases of Common Stock by the Investor under this
Agreement to exceed the Aggregate Limit, such Fixed Request Notice shall be void
ab initio to the extent of (x) the amount by which the dollar value of shares of
Common Stock otherwise issuable pursuant to such Fixed Request Notice, together
with all Fixed Request Amounts paid by the Investor pursuant to all prior Fixed
Request Notices issued under this Agreement, would exceed the Aggregate Limit,
or (y) the amount by which the number of shares of Common Stock otherwise
issuable pursuant to such Fixed Request Notice, together with all Shares
purchased by the Investor pursuant to all prior Fixed Request Notices issued
under this Agreement, would exceed the Aggregate Limit, as the case may be. If
the Company issues a Fixed Request Notice that otherwise would require the
Investor to purchase shares of Common Stock which would cause the aggregate
purchases of Common Stock by the Investor pursuant to any transaction or series
of transactions that would be aggregated 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 to exceed
the Single Fixed Request Trading Market Limit, such Fixed Request Notice shall
be void ab initio to the extent of the amount by which the number of shares of
Common Stock otherwise issuable pursuant to such Fixed Request Notice, together
with all shares of Common Stock purchased by the Investor pursuant to all such
other aggregated transactions, would exceed the Single Fixed Request Trading
Market Limit. If the Company issues a Fixed Request Notice that otherwise would
require the Investor to purchase shares of Common Stock which would cause the
aggregate number of shares of Common Stock then beneficially owned (as
calculated pursuant to Section 13(d) of the Exchange Act and Rule 13d-3
promulgated thereunder) by the Investor and its Affiliates to exceed the
Ownership Limitation, such Fixed Request Notice shall be void ab initio to the
extent of the amount by which the number of shares of Common Stock otherwise
issuable pursuant to such Fixed Request Notice, together with all shares of
Common Stock then beneficially owned by the Investor and its Affiliates, would
exceed the Ownership Limitation. The Company hereby represents, warrants and
covenants that neither it nor any of its Subsidiaries (1) has effected any
transaction or series of transactions, (2) is a party to any pending transaction
or series of transactions or (3) shall enter into any contract, agreement,
agreement-in-principle, arrangement or understanding with respect to, or shall
effect, any Alternate Transaction which, in any of such cases, may be aggregated
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;
provided, however, that the Company shall be permitted to take any action
referred to in clause (3) above if (x) the Company has timely provided the
Investor with an Aggregation Notice as provided in Section 6.7(ii) hereof and
(y) unless the Investor has previously terminated this Agreement pursuant to
Section 8.2, the Company obtains the requisite stockholder approval prior to the
closing of such Alternate Transaction. The parties hereto hereby acknowledge and
agree that the provisions of this Section 3.10 shall not be amended or waived
under any circumstances.

 
9

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

 

Section 3.11.    Trading Market Regulation. Notwithstanding anything in this
Agreement to the contrary, the Trading Market Limit shall not be applicable for
any purposes of this Agreement or the transactions contemplated hereby, solely
to the extent (and only for so long as) the Average Discount Price shall equal
or exceed the Base Price (it being hereby acknowledged and agreed that the
Trading Market Limit shall be applicable for all purposes of this Agreement and
the transactions contemplated hereby at all other times during the term of this
Agreement); provided, however, that the Company shall not issue any shares of
Common Stock under this Agreement if such issuance would otherwise breach the
Company’s obligations under the rules and regulations of the Trading Market.
“Base Price” shall mean a price per Share equal to the sum of (i) the Signing
Market Price and (ii) $0.011, subject to adjustment for any stock splits, stock
combinations, stock dividends, recapitalizations and other similar transactions
that occur on or after the date of this Agreement. “Signing Market Price” shall
mean $1.84, representing the consolidated closing bid price of the Common Stock
as reported on the Trading Market on the Trading Day immediately preceding the
Closing Date. The Company hereby represents and warrants to the Investor that
the book value per share of Common Stock on the Trading Day immediately
preceding the Closing Date is less than the Signing Market Price. “Average
Discount Price” shall mean a price per Share (rounded to the nearest tenth of a
cent) equal to the quotient obtained by dividing (i) the total aggregate gross
purchase price paid by the Investor for all Shares purchased pursuant to all
Fixed Requests under this Agreement, by (ii) the total aggregate number of
Shares issued pursuant to all Fixed Requests under this Agreement. The
provisions of this Section 3.11 shall be implemented in a manner otherwise than
in strict conformity with the terms of this Section 3.11, only if necessary to
ensure compliance with the rules and regulations of the Trading Market.

 
10

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

 

ARTICLE IV
REPRESENTATIONS, WARRANTIES AND COVENANTS OF THE INVESTOR

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

Section 4.1.      Organization and Standing of the Investor.  The Investor is a
business company duly organized, validly existing and in good standing under the
laws of the British Virgin Islands.

Section 4.2.      Authorization and Power.  The Investor has the requisite
corporate power and authority to enter into and perform its obligations under
this Agreement and the Registration Rights Agreement and to purchase the Shares
in accordance with the terms hereof. The execution, delivery and performance by
the Investor of this Agreement and the Registration Rights Agreement and the
consummation by it of the transactions contemplated hereby and thereby have been
duly authorized by all necessary corporate action, and no further consent or
authorization of the Investor, its Board of Directors or its stockholders is
required. Each of this Agreement and the Registration Rights Agreement has been
duly executed and delivered by the Investor and 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 (including any limitation of equitable remedies).

Section 4.3.      No Conflicts.  The execution, delivery and performance by the
Investor of this Agreement and the Registration Rights Agreement and the
consummation by the Investor of the transactions contemplated hereby and thereby
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, in any material respect, the ability of
the Investor to enter into and perform its obligations under this Agreement and
the Registration Rights Agreement. The Investor is not required under any
applicable 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 and the Registration Rights
Agreement or to purchase the Shares in accordance with the terms hereof;
provided, however, that for purposes of the representation made in this
sentence, the Investor is assuming and relying upon the accuracy of the relevant
representations and warranties and the compliance with the relevant covenants
and agreements of the Company in the Transaction Documents to which it is a
party.

 
11

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

 

Section 4.4.      Investment Purpose. The Investor is acquiring the Securities
for its own account, for investment purposes and not with a view towards, or for
resale in connection with, the public sale or distribution thereof, except
pursuant to sales registered under or exempt from the registration requirements
of the Securities Act; provided, however, that by making the representations
herein, the Investor does not agree, or make any representation or warranty, to
hold any of the Securities for any minimum or other specific term and reserves
the right to dispose of the Securities at any time in accordance with or
pursuant to a registration statement or an exemption under the Securities Act.
The Investor does not presently have any agreement or understanding, directly or
indirectly, with any Person to distribute any of the Securities.

Section 4.5.      Accredited Investor Status. The Investor is an “accredited
investor” as that term is defined in Rule 501(a)(3) of Regulation D.

Section 4.6.      Reliance on Exemptions. The Investor understands that the
Securities are being offered and sold to it in reliance on specific exemptions
from the registration requirements of U.S. federal and state securities laws and
that the Company is relying in part upon the truth and accuracy of, and the
Investor’s compliance with, the representations, warranties, agreements,
acknowledgments and understandings of the Investor set forth herein in order to
determine the availability of such exemptions and the eligibility of the
Investor to acquire the Securities.

Section 4.7.      Information.  All materials relating to the business,
financial condition, management and operations of the Company and materials
relating to the offer and sale of the Securities which have been requested by
the Investor have been furnished or otherwise made available to the Investor or
its advisors, including, without limitation, the Commission Documents.  The
Investor understands that its investment in the Securities involves a high
degree of risk. The Investor is able to bear the economic risk of an investment
in the Securities and has such knowledge and experience in financial and
business matters that it is capable of evaluating the merits and risks of a
proposed investment in the Securities. The Investor and its advisors have been
afforded the opportunity to ask questions of and receive answers from
representatives of the Company concerning the financial condition and business
of the Company and other matters relating to an investment in the
Securities.  Neither such inquiries nor any other due diligence investigations
conducted by the Investor or its advisors, if any, or its representatives shall
modify, amend or affect the Investor’s right to rely on the Company’s
representations and warranties contained in this Agreement or in any other
Transaction Document to which the Company is a party or the Investor’s right to
rely on any other document or instrument executed and/or delivered in connection
with this Agreement or the consummation of the transaction contemplated hereby
(including, without limitation, the opinions of the Company’s counsel delivered
pursuant to Sections 7.1(iv) and 7.2(xv)). The Investor acknowledges and agrees
that neither the Company nor any of its Subsidiaries has made, and does not
make, any representations or warranties with respect to the transactions
contemplated by the Transaction Documents, other than those specifically set
forth in Article V of this Agreement. 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 Securities. 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.

 
12

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

 

Section 4.8.      No Governmental Review. The Investor understands that no
United States federal or state agency or any other government or governmental
agency has passed on or made any recommendation or endorsement of the Securities
or the fairness or suitability of the investment in the Securities nor have such
authorities passed upon or endorsed the merits of the offering of the
Securities.

Section 4.9.      No General Solicitation. The Investor is not purchasing the
Securities as a result of any form of general solicitation or general
advertising (within the meaning of Regulation D) in connection with the offer or
sale of the Securities.

Section 4.10.    Not an Affiliate. The Investor is not an officer, director or
an Affiliate of the Company.

Section 4.11.    Statutory Underwriter Status. The Investor acknowledges that it
will be disclosed as an “underwriter” and a “selling stockholder” in the
Registration Statement and in any Prospectus contained therein to the extent
required by applicable law and to the extent the Prospectus is related to the
resale of Registrable Securities.

Section 4.12.   Resales of Securities. The Investor represents, warrants and
covenants that unless the Securities are eligible for resale pursuant to Rule
144, it will resell such Securities only pursuant to the Registration Statement,
in a manner described under the caption “Plan of Distribution” in the
Registration Statement, and in a manner in compliance with all applicable U.S.
federal and state securities laws, rules and regulations, including, without
limitation, any applicable prospectus delivery requirements of the Securities
Act.

 
13

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

 

ARTICLE V
REPRESENTATIONS, WARRANTIES AND COVENANTS 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, warranties and covenants to the
Investor:

Section 5.1.      Organization, Good Standing and Power.  The Company and each
of its Subsidiaries is a corporation or limited liability company duly
organized, validly existing and in good standing under the laws of the
jurisdiction of its organization and has the requisite corporate or limited
liability company power and authority to own, lease and operate its properties
and assets and to conduct its business as it is now being conducted and as
presently proposed to be conducted. The Company and each 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 5.2.      Authorization, Enforcement.  The Company has the requisite
corporate power and authority to enter into and perform its obligations under
each of the Transaction Documents to which it is a party and to issue the
Securities in accordance with the terms hereof and thereof. 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 each of the
Transaction Documents to which it is a party and the consummation by it of the
transactions contemplated hereby and thereby have been duly and validly
authorized by all necessary corporate action, and no further consent or
authorization of the Company, its Board of Directors or its stockholders is
required. Each of the Transaction Documents to which the Company is a party 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 (including any limitation of
equitable remedies).

Section 5.3.      Capitalization.  The authorized capital stock of the Company
and the shares thereof issued and outstanding were as set forth in the
Commission Documents as of the dates reflected therein. 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,
this Agreement and the Registration Rights Agreement, there are no agreements or
arrangements under which the Company is obligated to register the sale of any
securities under the Securities Act. Except as set forth in the Commission
Documents, no shares of Common Stock are entitled to preemptive rights and there
are no outstanding options, warrants, scrip, rights to subscribe to, calls or
commitments of any character whatsoever relating to, or securities or rights
convertible into or exchangeable for, any shares of capital stock of the
Company, other than as may have been issued or became issuable subsequent to the
date as of which such information was reported in the last filed Commission
Document pursuant to the terms of an equity incentive plan maintained by the
Company.  Except as set forth in the Commission Documents, there are no
outstanding debt securities and 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, warrants, scrip, rights
to subscribe to, calls 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 other than those issued or granted in the ordinary
course of business pursuant to the Company’s equity incentive and/or
compensatory plans or arrangements. 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, the Company is not a
party to, and it has 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 Commission Documents, the offer and sale of all capital stock,
convertible or exchangeable securities, rights, warrants or options of the
Company issued prior to the Closing 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 that would have a
Material Adverse Effect. Except as set forth in the Commission Documents, there
are no securities or instruments containing anti-dilution or similar provisions
that will be triggered by this Agreement or any of the other Transaction
Documents or the consummation of the transactions described herein or therein.
The Company has furnished or made available to the Investor via EDGAR true and
correct copies of the Company’s Certificate of Incorporation as in effect on the
Closing Date (the “Charter”), and the Company’s Bylaws as in effect on the
Closing Date (the “Bylaws”).

 
14

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

 

Section 5.4.      Issuance of Securities. The Commitment Shares have been, and
the Shares to be issued under this Agreement have been or will be (prior to the
delivery of any Fixed Request Notice to the Investor hereunder), duly authorized
by all necessary corporate action on the part of the Company. The Commitment
Shares, when issued in accordance with the terms of this Agreement, and the
Shares, when paid for in accordance with the terms of this Agreement, shall be
validly issued and outstanding, fully paid and nonassessable and free from all
liens, charges, taxes, security interests, encumbrances, rights of first
refusal, preemptive or similar rights and other encumbrances with respect to the
issue thereof.

Section 5.5.      No Conflicts.  The execution, delivery and performance by the
Company of each of the Transaction Documents to which it is a party and the
consummation by the Company of the transactions contemplated hereby and thereby
do not and shall not (i) result in a violation of any provision of the Company’s
Charter or Bylaws, (ii) conflict with or result in a breach or violation of any
of the terms or provisions of, or constitute a default (or an event which, with
notice or lapse of time or both, would become a default) under, or give rise to
any 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 or assets 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 by which the
Company or any of its Significant Subsidiaries is bound or to which any of their
respective properties or assets is subject, 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 (including federal and state securities laws and regulations and the
rules and regulations of the Trading Market), except, in the case of clauses
(ii), (iii) and (iv), for such conflicts, defaults, terminations, amendments,
acceleration, cancellations, liens, charges, encumbrances and violations as
would not, individually or in the aggregate, have a Material Adverse
Effect.  Except as specifically contemplated by this Agreement or the
Registration Rights Agreement and as required under the Securities Act and any
applicable state securities laws, the Company is not required under any 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 (including, without limitation, the Trading Market) in order
for it to execute, deliver or perform any of its obligations under the
Transaction Documents to which it is a party, or to issue the Securities to the
Investor in accordance with the terms hereof and thereof (other than such
consents, authorizations, orders, filings or registrations as have been obtained
or made prior to the Closing Date); provided, however, that, for purposes of the
representation made in this sentence, the Company is assuming and relying upon
the accuracy of the representations and warranties of the Investor in this
Agreement and the compliance by it with its covenants and agreements contained
in this Agreement and the Registration Rights Agreement.

 
15

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

 

Section 5.6.      Commission Documents, Financial Statements.  (a)  Except for
the 2010 Form 10-K, the Company has timely filed (giving effect to permissible
extensions in accordance with Rule 12b-25 under the Exchange Act) all Commission
Documents. The Company has delivered or made available to the Investor via EDGAR
or otherwise true and complete copies of the Commission Documents filed with or
furnished to the Commission prior to the Closing Date (including, without
limitation, the 2010 Form 10-K). No Subsidiary of the Company is required to
file or furnish any report, schedule, registration, form, statement, information
or other document with the Commission. As of its filing date, each Commission
Document filed with or furnished to the Commission prior to the Closing Date
(including, without limitation, the 2010 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 filing date (or, if amended or superseded by a
filing prior to the Closing Date, on the date of such amended or superseded
filing), 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. The Registration Statement, on the
date it is filed with the Commission, on the date it is declared effective by
the Commission, on each Fixed Request Exercise Date and on each Settlement Date,
shall comply in all material respects with the requirements of the Securities
Act (including, without limitation, Rule 415 under the Securities Act) 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 not misleading, except that this representation and warranty shall not
apply to statements in or omissions from the Registration Statement 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. The Prospectus and each Prospectus Supplement required to be
filed pursuant to this Agreement or the Registration Rights Agreement after the
Closing Date, when taken together, on its date, on each Fixed Request Exercise
Date and on each Settlement Date, shall comply in all material respects with the
requirements of the Securities Act (including, without limitation, Rule 424(b)
under the Securities Act) 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, except that this representation and
warranty shall not apply to statements in or omissions from the Prospectus or
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. Each Commission Document
(other than the Registration Statement, the Prospectus or any Prospectus
Supplement) to be filed with or furnished to the Commission after the Closing
Date and incorporated by reference in the Registration Statement, the Prospectus
or any Prospectus Supplement required to be filed pursuant to this Agreement or
the Registration Rights Agreement (including, without limitation, the Current
Report), when such document is filed with or furnished to the Commission and, if
applicable, when such document becomes effective, 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. The Company has
delivered or made available to the Investor via EDGAR or otherwise true and
complete copies of all comment letters and substantive correspondence received
by the Company from the Commission relating to the Commission Documents filed
with or furnished to the Commission as of the Closing Date, together with all
written responses of the Company thereto in the form such responses were filed
via EDGAR. Other than as set forth in the Disclosure Schedule, there are no
outstanding or unresolved comments or undertakings in such comment letters
received by the Company from the Commission. The Commission has not issued any
stop order or other order suspending the effectiveness of any registration
statement filed by the Company under the Securities Act or the Exchange Act.

 
16

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

 

(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 are subject to normal
year-end audit adjustments), 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 filed with the Commission and made available to the
Investor via EDGAR or otherwise 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; and, except as set forth in
the Commission Documents, 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 5.6(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.

 
17

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

 

(d)           KPMG LLP and Deloitte & Touche LLP, who shall issue their consents
that their reports be included or incorporated by reference in the Registration
Statement and the Prospectus, are, with respect to the Company, independent
public accountants as required by the Securities Act and independent registered
public accounting firms within the meaning of SOXA as required by the rules of
the Public Company Accounting Oversight Board.

Section 5.7.      Subsidiaries.  Except as disclosed in the Disclosure Schedule,
the 2010 Form 10-K sets forth each Subsidiary of the Company as of the Closing
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, and the Company does not have any other
Subsidiaries as of the Closing Date.

Section 5.8.      No Material Adverse Effect. Except as disclosed in any
Commission Documents filed since September 30, 2010, or which may be deemed to
have resulted from the Company’s continued losses from operations, since
September 30, 2010, the Company has not experienced or suffered any Material
Adverse Effect, and there exists no current state of facts, condition or event
which would reasonably be expected to have a Material Adverse Effect.

Section 5.9.      No Undisclosed Liabilities. Neither the Company nor any of its
Subsidiaries has any liabilities, obligations, claims or losses (whether
liquidated or unliquidated, secured or unsecured, absolute, accrued, contingent
or otherwise) that would be required to be disclosed on a balance sheet of the
Company or any Subsidiary (including the notes thereto) in conformity with GAAP
and are not disclosed in the Commission Documents, other than those incurred in
the ordinary course of the Company’s or its Subsidiaries respective businesses
since September 30, 2010 and which, individually or in the aggregate, do not or
would not have a Material Adverse Effect.

Section 5.10.    No Undisclosed Events or Circumstances. No event or
circumstance has occurred or information exists with respect to the Company or
any of its Subsidiaries or its or their business, properties, liabilities,
operations (including results thereof) or conditions (financial or otherwise),
which, under applicable law, rule or regulation, requires public disclosure or
announcement by the Company at or before the Closing but which has not been so
publicly announced or disclosed, except for events or circumstances which,
individually or in the aggregate, do not or would not have a Material Adverse
Effect.

Section 5.11.    Indebtedness; Solvency.  The Company’s Quarterly Report on Form
10-Q for its fiscal quarter ended June 30, 2011 sets forth, as of June 30, 2011,
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. The Company has not taken any steps, and
does not currently expect to take any steps, to seek protection pursuant to
Title 11 of the United States Code or any similar federal or state bankruptcy
law or law for the relief of debtors, nor does the Company have any Knowledge
that its creditors intend to initiate involuntary bankruptcy, insolvency,
reorganization or liquidation proceedings or other proceedings for relief under
Title 11 of the United States Code or any other federal or state bankruptcy law
or any law for the relief of debtors. The Company is financially solvent and is
generally able to pay its debts as they become due.

 
18

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

 

Section 5.12.    Title To Assets.  Each of the Company and its Subsidiaries has
good and valid title to, or has valid rights to lease or otherwise use, all of
their respective real and personal property reflected in the Commission
Documents, free of mortgages, pledges, charges, liens, security interests or
other encumbrances, except for those indicated in the Commission Documents and
those that would not have a Material Adverse Effect. To the Company’s Knowledge,
all real property and facilities held under lease by the Company or any of its
Subsidiaries are held by them under valid, subsisting and enforceable leases
with such exceptions as are not material and do not interfere with the use made
and proposed to be made of such property and buildings by the Company or any of
its Subsidiaries.

Section 5.13.    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 the Transaction Documents or the transactions contemplated thereby or any
action taken or to be taken pursuant thereto.  Except as set forth in the
Commission Documents, there is no 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 related to the Company, 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. Except
as set forth in the Commission Documents, no judgment, order, writ, injunction
or decree or award has been issued by or, to the Knowledge of the Company,
requested of any court, arbitrator or governmental agency which would be
reasonably expected to result in a Material Adverse Effect. With respect to each
of those certain claims, disputes, investigations, arbitrations, actions or
proceedings referred to under the caption “Item 1. Legal Proceedings” in Part II
of the Company’s Quarterly Report on Form 10-Q for its fiscal quarter ended June
30, 2011, there has been no event or change required to be disclosed in a filing
under the Exchange Act that has not been so disclosed.

 
19

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

 

Section 5.14.    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 and
except for such non-compliance which, individually or in the aggregate, would
not have a Material Adverse Effect. Neither the Company nor any of its
Subsidiaries is in violation of any judgment, decree or order or any statute,
ordinance, rule or regulation applicable to the Company or any of its
Subsidiaries, and neither the Company nor any of its Subsidiaries will conduct
its business in violation of any of the foregoing, except in all cases for
possible violations which would not, individually or in the aggregate, have a
Material Adverse Effect. Without limiting the generality of the foregoing,
except as set forth in the Commission Documents, the Company has maintained all
requirements for the continued listing or quotation of its Common Stock on the
Trading Market, and, to the Company’s Knowledge, the Company is not in violation
of any of the rules, regulations or requirements of the Trading Market and has
no Knowledge of any facts or circumstances that would reasonably lead to
delisting or suspension of the Common Stock by the Trading Market in the
foreseeable future. This Section 5.14 does not relate to intellectual property
matters (such items being the subject of Section 5.17(b) or environmental
matters (such items being the subjection of Section 5.18).

Section 5.15.    Certain Fees.  Except for the placement fee payable by the
Company to Reedland Capital Partners, an Institutional Division of Financial
West Group, Member FINRA/SIPC (“Reedland”), which shall be set forth in a
separate engagement letter between the Company and Reedland (a true and complete
fully executed copy of which has heretofore been provided to the Investor) (the
“Placement Agent Engagement Letter”), no brokers, finders or financial advisory
fees or commissions shall be payable by the Company or any Subsidiary (or any of
their respective Affiliates) with respect to the transactions contemplated by
the Transaction Documents.

Section 5.16.    Disclosure.  The Company confirms that neither it nor any other
Person acting on its behalf has provided the Investor or any of its agents,
advisors or counsel with any information that constitutes or could reasonably be
expected to constitute material, nonpublic information concerning the Company or
any of its Subsidiaries, other than the existence of the transactions
contemplated by the Transaction Documents. The Company understands and confirms
that the Investor will rely on the foregoing representations in effecting
transactions in securities of the Company. All written disclosure provided to
Investor regarding the Company and its Subsidiaries, their businesses and the
transactions contemplated by the Transaction Documents (including, without
limitation, the representations and warranties of the Company contained in the
Transaction Documents to which it is a party (as modified by the Disclosure
Schedule)) furnished by or on behalf of the Company or any of its Subsidiaries,
taken together, is true and correct and does not contain any untrue statement of
a material fact or omit to state any material fact necessary in order to make
the statements made therein, in the light of the circumstances under which they
were made, not misleading. Each press release issued by the Company or any of
its Subsidiaries during the 12 months preceding the Closing Date did not at the
time of release (or, if amended or superseded by a later dated press release
issued by the Company or any of its Subsidiaries prior to the Closing Date or by
a later dated Commission Document filed with or furnished to the Commission by
the Company prior to the Closing Date, at the time of issuance of such later
dated press release or filing or furnishing of such Commission Document, as
applicable) 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 the light of the circumstances under which they are made,
not misleading.

 
20

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

 

Section 5.17.    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) issued by the
appropriate federal, state, local or foreign regulatory agencies or bodies as
are necessary to conduct the business now operated by it (collectively,
“Governmental Licenses”), 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, except where the failure to so
comply, individually or in the aggregate, would not have a Material Adverse
Effect or except as otherwise disclosed in the Commission Documents.  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 or except as otherwise disclosed in the
Commission Documents. This Section 5.17 does not relate to environmental
matters, such items being the subject of Section 5.18.

(b)       The Company or one or more of its Subsidiaries owns or possesses
adequate rights to use 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 as being owned or licensed by the
Company (collectively, “Intellectual Property”), necessary to carry on the
business now operated by it, except where the failure to own, license or have
such rights would not, individually or in the aggregate, have a Material Adverse
Effect.  Except as set forth in the Commission Documents, 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 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.

Section 5.18.    Environmental Compliance.  Except as disclosed in the
Commission Documents, 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 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 would reasonably be expected to violate any Environmental Law
after the Closing Date or that would 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.

 
21

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

 

Section 5.19.    Material Agreements.  Except as set forth in the Commission
Documents, 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”).  Except as set forth in the Commission Documents, the
Company and each of its Subsidiaries have performed in all material respects all
the obligations then required to be 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 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.  Except as set forth in the Commission
Documents, each of the Material Agreements 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
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 5.20.    Transactions With Affiliates.  Except as set forth in the
Commission Documents, 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.

 
22

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

 

Section 5.21.    Employees.  Neither the Company nor any Subsidiary of the
Company has any collective bargaining arrangements or material agreements
covering any of its employees, except as set forth in the Commission
Documents.  Except as disclosed in the Commission Documents, 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 5.22.    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
and any Prospectus Supplement filed pursuant to Section 2.3 of this Agreement
and pursuant to the Registration Rights Agreement.

Section 5.23.    Investment Company Act Status.  The Company is not, and as a
result of the consummation of the transactions contemplated by the Transaction
Documents and the application of the proceeds from the sale of the Shares as set
forth in the Prospectus and any Prospectus Supplement shall not be required to
be registered as, an “investment company” or a company “controlled” by an
“investment company,” within the meaning of the Investment Company Act of 1940,
as amended.

Section 5.24.    ERISA.  No liability to the Pension Benefit Guaranty
Corporation has been incurred with respect to any Plan by the Company or any of
its Subsidiaries which has had or would have a Material Adverse Effect.  No
“prohibited transaction” (as defined in Section 406 of ERISA or Section 4975 of
the Code) or “accumulated funding deficiency” (as defined in Section 302 of
ERISA) or any of the events set forth in Section 4043(b) of ERISA has occurred
with respect to any Plan which has had or would have a Material Adverse Effect,
and the execution and delivery of this Agreement and the issuance and sale of
the Shares hereunder shall not result in any of the foregoing events.  Each Plan
is in compliance in all material respects with applicable law, including ERISA
and the Code; the Company has not incurred and does not expect to incur
liability under Title IV of ERISA with respect to the termination of, or
withdrawal from, any Plan; and each Plan for which the Company would have any
liability that is intended to be qualified under Section 401(a) of the Code is
so qualified in all material respects and, to the Company’s Knowledge nothing
has occurred, whether by action or failure to act, which would cause the loss of
such qualifications.  As used in this Section 5.24, the term “Plan” shall mean
an “employee pension benefit plan” (as defined in Section 3 of ERISA) which is
or has been established or maintained, or to which contributions are or have
been made, by the Company or any Subsidiary or by any trade or business, whether
or not incorporated, which, together with the Company or any Subsidiary, is
under common control, as described in Section 414(b) or (c) of the Code.

Section 5.25.    Taxes.  The Company and each of its Subsidiaries (i) has filed
all necessary federal, state and foreign income and franchise tax returns or has
duly requested extensions thereof, except for those the failure of which to file
would not have a Material Adverse Effect, (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, except for such taxes the failure of which to pay would not have a
Material Adverse Effect, and (iii) does not have any tax deficiency or claims
outstanding or assessed or, to the Company’s Knowledge, proposed against it
which would have a Material Adverse Effect. To the Company’s Knowledge, there
are no unpaid taxes in any material amount claimed to be due by the taxing
authority of any jurisdiction and no basis for any such claim exists. The
Company is not operated in such a manner as to qualify as a passive foreign
investment company, as defined in Section 1297 of the U.S. Internal Revenue Code
of 1986, as amended.

 
23

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

 

Section 5.26.    Insurance. The Company and its Subsidiaries are insured by
insurers of recognized financial responsibility against such losses and risks
and in such amounts as management of the Company believes to be prudent and
customary in the businesses in which the Company and its Subsidiaries are
engaged. Neither the Company nor any such Subsidiary has been refused any
insurance coverage sought or applied for, and neither the Company nor any such
Subsidiary has any reason to believe that it will be unable to renew its
existing insurance coverage as and when such coverage expires or to obtain
similar coverage from similar insurers as may be necessary to continue its
business at a cost that would not have a Material Adverse Effect.

Section 5.27.    U.S. Real Property Holding Corporation.  Neither the Company
nor any of its Subsidiaries is, or has ever been, and so long as any of the
Securities are held by the Investor, shall become a U.S. real property holding
corporation within the meaning of Section 897 of the Code.

Section 5.28.    Exemption from Registration; Valid Issuances. Subject to, and
in reliance on, the representations, warranties and covenants made herein by the
Investor, the offer and sale of the Securities in accordance with the terms and
conditions of this Agreement is exempt from the registration requirements of the
Securities Act pursuant to Section 4(2) and Rule 506 of Regulation D; provided,
however, that at the request of and with the express agreement of the Investor,
the Shares will be delivered to the Investor via book entry through DTC and will
not bear legends noting restrictions as to resale of such securities under
federal or state securities laws, nor will any such securities be subject to
stop transfer instructions. Neither the offer or sale of the Securities pursuant
to, nor the Company’s performance of its obligations under, the Transaction
Documents to which it is a party shall (i) result in the creation or imposition
of any liens, charges, claims or other encumbrances upon the Securities, or
(ii) entitle the holders of any outstanding shares of capital stock of the
Company to preemptive or other rights to subscribe to or acquire the shares of
Common Stock or other securities of the Company.

Section 5.29.    No General Solicitation or Advertising. Neither the Company,
nor any of its Subsidiaries or Affiliates, nor any Person acting on its or their
behalf, has engaged in any form of general solicitation or general advertising
(within the meaning of Regulation D) in connection with the offer or sale of the
Securities.

Section 5.30.    No Integrated Offering. None of the Company, its Subsidiaries
or any of their Affiliates, nor any Person acting on their behalf has, directly
or indirectly, made any offers or sales of any security or solicited any offers
to buy any security, under circumstances that would require registration of the
issuance of any of the Securities under the Securities Act, whether through
integration with prior offerings or otherwise, or cause this offering of the
Securities to require approval of stockholders of the Company under any
applicable stockholder approval provisions, including, without limitation, under
the rules and regulations of the Trading Market.  None of the Company, its
Subsidiaries, their Affiliates nor any Person acting on their behalf will take
any action or steps referred to in the preceding sentence that would require
registration of the issuance of any of the Securities under the Securities Act
or cause the offering of any of the Securities to be integrated with other
offerings.

 
24

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

 

Section 5.31.    Dilutive Effect. The Company is aware and acknowledges that
issuance of the Securities could cause dilution to existing stockholders and
could significantly increase the outstanding number of shares of Common Stock.

Section 5.32.    Manipulation of Price. Neither the Company nor any of its
officers, directors or Affiliates has, and, to the Knowledge of the Company, no
Person acting on their behalf has, (i) taken, directly or indirectly, any action
designed or intended to cause or to result in the stabilization or manipulation
of 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, the
stabilization or manipulation of the price of any security of the Company, in
each case to facilitate the sale or resale of any of the Securities, or (ii)
sold, bid for, purchased, or paid any compensation for soliciting purchases of,
any of the Securities, other than, in the case of clause (ii), compensation paid
to Reedland on the Closing Date in connection with the placement of the
Securities pursuant to the Placement Agent Engagement Letter. Neither the
Company nor any of its officers, directors or Affiliates will during the term of
this Agreement, and, to the Knowledge of the Company, no Person acting on their
behalf will during the term of this Agreement, take any of the actions referred
to in the immediately preceding sentence, other than, in the case of clause
(ii), compensation paid to Reedland in connection with the settlement of each
Fixed Request pursuant to the Placement Agent Engagement Letter.

Section 5.33.    Securities Act. The Company has complied and shall comply with
all applicable federal and state securities laws in connection with the offer,
issuance and sale of the Securities hereunder, including, without limitation,
the applicable requirements of the Securities Act. The Registration Statement,
upon filing with the Commission and at the time it is declared effective by the
Commission, shall satisfy all of the requirements of the Securities Act to
register the resale of the Registrable Securities by the Investor in accordance
with the Registration Rights Agreement on a delayed or continuous basis under
Rule 415 under the Securities Act at then-prevailing market prices, and not
fixed prices. The Company is not, and has not previously been at any time, an
issuer identified in, or subject to, Rule 144(i).

Section 5.34.    Listing and Maintenance Requirements. The Company’s Common
Stock is registered pursuant to Section 12(b) or 12(g) of the Exchange Act, and
the Company has taken no action designed to, or which to its Knowledge is likely
to have the effect of, terminating the registration of the Common Stock under
the Exchange Act, nor has the Company received any notification that the
Commission is contemplating terminating such registration. Except as disclosed
in the Commission Documents, the Company has not, in the 12 months preceding the
Closing Date, received notice from any Trading Market on which the Common Stock
is or has been listed or quoted to the effect that the Company is not in
compliance with the listing or maintenance requirements of such Trading Market.
As of the Closing Date, the Company is in compliance with all such listing and
maintenance requirements.

 
25

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

 

Section 5.35.    Application of Takeover Protections. The Company and its Board
of Directors have taken all necessary action, if any, in order to render
inapplicable any control share acquisition, business combination, poison pill
(including any distribution under a rights agreement) or other similar
anti-takeover provision under the Company’s Charter or the laws of its state of
incorporation that is or would become applicable to the Investor as a result of
the Investor and the Company fulfilling their respective obligations or
exercising their respective rights under the Transaction Documents (as
applicable), including, without limitation, as a result of the Company’s
issuance of the Securities and the Investor’s ownership of the Securities.

Section 5.36.    Acknowledgement Regarding Investor’s Acquisition of Securities.
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 by the Transaction Documents. 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 by the Transaction Documents, and any advice given
by the Investor or any of its representatives or agents in connection therewith
is merely incidental to the Investor’s acquisition of the Securities. The
Company further represents to the Investor that the Company’s decision to enter
into the Transaction Documents to which it is a party has been based solely on
the independent evaluation of the Company and its representatives of the
transactions contemplated thereby, including without limitation the
representations, warranties, covenants and agreements of the Investor contained
in the Transaction Documents to which it is a party. The Company acknowledges
and agrees that the Investor has not made and does not make any representations
or warranties with respect to the transactions contemplated by the Transaction
Documents other than those specifically set forth in Article IV of this
Agreement.

ARTICLE VI
ADDITIONAL 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 6.1.      Securities Compliance. The Company shall notify the Commission
and the Trading Market, if and as applicable, in accordance with their
respective rules and regulations, of the transactions contemplated by the
Transaction Documents, 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 Securities to the Investor in accordance
with the terms of the Transaction Documents, as applicable.

Section 6.2.      Reservation of Common Stock. The Company has available and the
Company shall reserve and keep available at all times, free of preemptive and
other similar rights of stockholders, the requisite aggregate number of
authorized but unissued shares of Common Stock to enable the Company to timely
effect the issuance, sale and delivery in full to the Investor of all Shares to
be issued and delivered in respect of all Fixed Requests under this Agreement,
in any case prior to the issuance to the Investor of such Shares. The number of
shares of Common Stock so reserved from time to time, as theretofore increased
or reduced as hereinafter provided, may be reduced by the number of shares of
Common Stock actually delivered pursuant to this Agreement.

 
26

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

 

Section 6.3.      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 use
reasonable best efforts to 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 or the Exchange 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. The Company shall use its reasonable best efforts to continue
the listing and trading of its Common Stock and the listing of the Commitment
Shares and the Shares acquired or purchased by the Investor hereunder on the
Trading Market and to comply with the Company’s reporting, filing and other
obligations under the bylaws, listed securities maintenance standards and other
rules and regulations of the Trading Market. The Company shall not take any
action which could be reasonably expected to result in the delisting or
suspension (other than any suspension of trading of limited duration agreed to
by the Company, which suspension shall be terminated prior to any Fixed Request
Exercise Date or Settlement Date) of the Common Stock on the Trading Market.

Section 6.4.      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 and the rules and regulations of the Trading Market.

(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 Securities, 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 and any applicable securities laws of any non-U.S. jurisdiction.

Section 6.5.      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 shall be made.  The
Company shall maintain a system of internal accounting controls that (a) pertain
to the maintenance of records that in reasonable detail accurately and fairly
reflect the transactions and dispositions of the assets of the Company; (b)
provide reasonable assurance that transactions are recorded as necessary to
permit preparation of financial statements in accordance with generally accepted
accounting principles, and that receipts and expenditures of the Company are
being made only in accordance with authorizations of management and directors of
the Company; and (c) provide reasonable assurance regarding prevention or timely
detection of unauthorized acquisition, use or disposition of the Company’s
assets that would likely have a material effect on the Company’s financial
statements (it being acknowledged and agreed that the identification by the
Company and/or its independent registered public accounting firm of any
“significant deficiencies” or “material weaknesses” (each as defined by the
Public Company Accounting Oversight Board) in the Company’s internal controls
over its financial reporting shall not, in and of itself, constitute a breach of
this Section 6.5(i)).

 
27

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

 

(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 the Company’s and its Subsidiaries’ 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, except for such violations
or non-compliant operations that would not likely result in a Material Adverse
Effect.

(iii)      Subject to the requirements of Section 6.16 of this Agreement, from
time to time from and after the Closing Date, the Company shall make available
for inspection and review by the Investor during normal business hours and after
reasonable notice, customary documentation reasonably requested by the Investor
and/or its appointed counsel or advisors to conduct due diligence; provided,
however, that after the Closing Date, the Investor’s continued due diligence
shall not be a condition to the issuance of any Fixed Request Notice or the
settlement of any Fixed Request.

Section 6.6.      Limitations on Holdings and Issuances.  The Company shall not
be obligated to issue and the Investor shall not be obligated to purchase any
shares of Common Stock which would cause the aggregate number of shares of
Common Stock then beneficially owned (as calculated pursuant to Section 13(d) of
the Exchange Act and Rule 13d-3 promulgated thereunder) by the Investor and its
Affiliates to exceed the Ownership Limitation. Promptly following any request by
the Company, the Investor shall inform the Company of the number of shares of
Common Stock then beneficially owned by the Investor and its Affiliates. The
parties hereto hereby acknowledge and agree that the provisions of this Section
6.6 shall not be amended or waived under any circumstances.

Section 6.7.      Other Agreements and Alternate Transactions.

(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
ability or right of the Company to perform its obligations under the Transaction
Documents to which it is a party, including, without limitation, the obligation
of the Company to deliver the Commitment Shares to the Investor not later than
4:00 p.m. (New York time) on the second Trading Day immediately following the
Closing Date and to deliver the Shares to the Investor in respect of a Fixed
Request on the applicable Settlement Date. For the avoidance of doubt, nothing
in this Section 6.7(i) shall in any way limit the Company’s right to terminate
this Agreement in accordance with Section 8.1 (subject in all cases to Section
8.3).

 
28

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

 

(ii)       If the Company enters into any agreement, plan, arrangement or
transaction with a third party or seeks to utilize any existing agreement, plan
or arrangement with a third party, in each case the principal purpose of which
is to implement, effect or consummate, at any time during the period beginning
on the first Trading Day of any Pricing Period and ending on the second Trading
Day next following the applicable Settlement Date (the “Reference Period”), an
Alternate Transaction that does not constitute an Acceptable Transaction, the
Company shall provide prompt notice thereof (an “Alternate Transaction Notice”)
to the Investor; provided, however, that such Alternate Transaction Notice must
be received by the Investor not later than the earlier of (a) 48 hours after the
Company’s execution of any agreement, plan, arrangement or transaction relating
to such Alternate Transaction (or, with respect to any existing agreement, plan
or arrangement, 48 hours after the Company has determined to utilize any such
existing agreement, plan or arrangement to implement, effect or consummate such
Other Financing) and (b) the second Trading Day immediately preceding the
applicable Settlement Date with respect to the applicable Fixed Request Notice;
provided, further, that the Company shall notify the Investor within 24 hours
(an “Aggregation Notice”) if it enters into any agreement, plan, arrangement or
transaction with a third party, the principal purpose of which is to implement,
effect or consummate at any time during the Investment Period an Alternate
Transaction that the Company reasonably believes, upon advice of legal counsel,
may be aggregated with the transactions contemplated by the Transaction
Documents 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. If required under applicable
law, including, without limitation, Regulation FD promulgated by the Commission,
or under the applicable rules and regulations of the Trading Market, the Company
shall simultaneously publicly disclose the information included in any Alternate
Transaction Notice or any Aggregation Notice, as applicable, in accordance with
Regulation FD and the applicable rules and regulations of the Trading Market.
For purposes of this Section 6.7(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 (including the provisos thereto) of this Section
6.7(ii) for an Alternate Transaction Notice or an Aggregation Notice, as
applicable. With respect to any Reference Period for which the Company is
required to provide an Alternate Transaction Notice pursuant to the first
sentence of this Section 6.7(ii), the Investor shall purchase the Shares subject
to the applicable Fixed Request at the lower of (x) the price therefor in
accordance with the terms of this Agreement or (y) the third party’s per share
purchase price (or exercise or conversion price, as the case may be) in
connection with the Alternate Transaction, net of such third party’s discounts,
Warrant Value and fees.

 
29

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

 

(iii)      For all purposes of this Agreement, an “Alternate Transaction” shall
mean (w) the issuance of Common Stock for a purchase price less than, or the
issuance of securities convertible into or exchangeable for Common Stock at an
exercise or conversion price (as the case may be) less than, the then Current
Market Price of the Common Stock (including, without limitation, pursuant to any
“equity line” or other financing that is substantially similar to the financing
provided for under this Agreement, or pursuant to any other transaction in which
the purchase, conversion or exchange price for such Common Stock is determined
using a floating discount or other post-issuance adjustable discount to the then
Current Market Price (any such transaction, a “Similar Financing”)), in each
case, after all fees, discounts, Warrant Value and commissions associated with
the transaction (a “Below Market Offering”); (x) an “at-the-market” offering of
Common Stock or securities convertible into or exchangeable for Common Stock
pursuant to Rule 415(a)(4) under the Securities Act (an “ATM”); (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, but specifically excluding
customary antidilution adjustments for stock splits, stock dividends, stock
combinations, recapitalizations, reclassifications and similar events) (a “Price
Reset Provision”); or (z) the issuance of options, warrants or similar rights of
subscription or the issuance of convertible equity or debt securities, in each
case not constituting an Acceptable Transaction. For all purposes of this
Agreement, an “Acceptable Transaction” shall mean the issuance by the Company
of: (1) debt securities or any class or series of preferred stock of the
Company, in each case that are not convertible into or exchangeable for Common
Stock or securities convertible into or exchangeable for Common Stock; (2)
shares of Common Stock or securities convertible into or exchangeable for Common
Stock other than in connection with a Below Market Offering or an ATM, and the
issuance of shares of Common Stock upon the conversion, exercise or exchange
thereof; (3) shares of Common Stock or securities convertible into or
exchangeable for Common Stock in connection with an underwritten public offering
of equity securities of the Company or a registered direct public offering of
equity securities of the Company, in each case where the price per share of such
Common Stock (or the conversion or exercise price of such securities, as
applicable) is fixed concurrently with the execution of definitive documentation
relating to such offering, and the issuance of shares of Common Stock upon the
conversion, exercise or exchange thereof; (4) shares of Common Stock or
securities convertible into or exchangeable for Common Stock in connection with
awards under the Company’s benefit and equity plans and arrangements or
shareholder rights plan (as applicable), and the issuance of shares of Common
Stock upon the conversion, exercise or exchange thereof; (5) shares of Common
Stock issuable upon the conversion, exercise or exchange of equity awards or
convertible, exercisable or exchangeable securities outstanding as of the
Closing Date; (6) shares of Common Stock in connection with stock splits, stock
dividends, stock combinations, recapitalizations, reclassifications and similar
events; (7) shares of Common Stock or securities convertible into or exercisable
or exchangeable for Common Stock issued in connection with the acquisition,
license or sale of one or more other companies, equipment, technologies, other
assets or lines of business, and the issuance of shares of Common Stock upon the
conversion, exercise or exchange thereof; (8) shares of Common Stock or
securities convertible into or exercisable or exchangeable for Common Stock or
similar rights to subscribe for the purchase of shares of Common Stock in
connection with technology sharing, collaboration, partnering, licensing,
research and joint development agreements (or amendments thereto) with third
parties, and the issuance of shares of Common Stock upon the conversion,
exercise or exchange thereof; (9) shares of Common Stock or securities
convertible into or exchangeable for Common Stock to employees, consultants
and/or advisors as consideration for services rendered or to be rendered, and
the issuance of shares of Common Stock upon the conversion, exercise or exchange
thereof; and (10) shares of Common Stock or securities convertible into or
exchangeable for Common Stock issued in connection with capital or equipment
financings and/or real property lease arrangements, and the issuance of shares
of Common Stock upon the conversion, exercise or exchange thereof.

 
30

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

 

Section 6.8.      Corporate Existence.  The Company shall take all steps
necessary to preserve and continue the corporate existence of the Company;
provided, however, that, except as provided in Section 6.9, nothing in this
Agreement shall be deemed to prohibit the Company from engaging in any
Fundamental Transaction with another Person. For the avoidance of doubt, nothing
in this Section 6.8 shall in any way limit the Company’s right to terminate this
Agreement in accordance with Section 8.1 (subject in all cases to Section 8.3).

Section 6.9.      Fundamental Transaction. If a Fixed Request Notice has been
delivered to the Investor and the transactions contemplated therein have not yet
been fully settled in accordance with the terms and conditions of this
Agreement, the Company shall not effect any Fundamental Transaction until the
expiration of five Trading Days following the Settlement Date with respect to
such Fixed Request Notice.

Section 6.10.    Delivery of Registration Statement and Prospectus; Subsequent
Changes. In accordance with the Registration Rights Agreement, the Company shall
deliver or make available to the Investor and its counsel, without charge, an
electronic copy of the Registration Statement, the Prospectus and all amendments
and supplements to the Registration Statement or Prospectus that are filed with
the Commission during any period in which a Prospectus (or in lieu thereof, the
notice referred to in Rule 173(a) under the Securities Act) is required by the
Securities Act to be delivered in connection with resales of the Registrable
Securities, in each case as soon as reasonably practicable after the filing
thereof with the Commission. The Company shall provide the Investor a reasonable
opportunity to comment on a draft of each such document and shall give due
consideration to all such comments. 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 Registrable Securities may be sold by the
Investor, in connection with the resale of the Registrable Securities and for
such period of time thereafter as the Prospectus (or in lieu thereof, the notice
referred to in Rule 173(a) under the Securities Act) is required by the
Securities Act to be delivered in connection with resales of the Registrable
Securities. If during such period of time any event shall occur that in the
reasonable judgment of the Company and its counsel is required to be set forth
in the Registration Statement, the Prospectus or any Prospectus Supplement or
should be set forth therein in order to make the statements made therein (in the
case of the Prospectus or any Prospectus Supplement, in light of the
circumstances under which they were made) not misleading, or if it is necessary
to amend the Registration Statement or supplement or amend the Prospectus or any
Prospectus Supplement to comply with the Securities Act or any other applicable
law or regulation, the Company shall forthwith (i) notify the Investor to
suspend the resale of Registrable Securities during such period and (ii) prepare
and file with the Commission an appropriate amendment to the Registration
Statement or Prospectus Supplement to the Prospectus, and shall expeditiously
furnish or make available to the Investor an electronic copy thereof, so as to
correct such statement or omission or effect such compliance.

 
31

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

 

Section 6.11.    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 Transaction Documents or the transactions
contemplated thereby or file with the Commission any Prospectus Supplement that
relates to the Investor, the Transaction Documents or the transactions
contemplated thereby with respect to which (a) the Investor shall not previously
have been advised, (b) the Company shall not have given due consideration to any
comments thereon received from the Investor or its counsel, or (c) 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 promptly so inform the Investor, the Investor shall be
provided with a reasonable opportunity to review and comment upon 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 (or in lieu
thereof, the notice referred to in Rule 173(a) under the Securities Act) is
required to be delivered in connection with any sales of Registrable Securities
by the Investor, the Company shall not file any Prospectus Supplement without
delivering or making available a copy of such Prospectus Supplement to the
Investor promptly.

Section 6.12.    Stop Orders.  The Company shall notify the Investor as soon as
possible (but in no event later than 24 hours), and confirm in writing, upon its
becoming aware of the occurrence of any of the following events in respect of
the Registration Statement or related Prospectus or Prospectus Supplement
relating to an offering of Registrable Securities: (i) receipt of any request by
the Commission or any other federal or state governmental authority for any
additional information relating to the Registration Statement, the Prospectus or
any Prospectus Supplement, or for any amendment of or supplement to the
Registration Statement, the Prospectus, or any Prospectus Supplement; (ii) the
issuance by the Commission or any other federal or state governmental authority
of any stop order suspending the effectiveness of the Registration Statement or
prohibiting or suspending the use of the Prospectus or any Prospectus
Supplement, or of the suspension of qualification or exemption from
qualification of the Securities for offering or sale in any jurisdiction, or the
initiation or contemplated initiation of any proceeding for such purpose; and
(iii) any event or the existence of any condition or state of facts, which makes
any statement of a material fact made in the Registration Statement, the
Prospectus or any Prospectus Supplement untrue or which requires the making of
any additions to or changes to the statements then made in the Registration
Statement, the Prospectus or any Prospectus Supplement 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 the case of the Prospectus
or any Prospectus Supplement, in light of the circumstances under which they
were made) not misleading, or which requires an amendment to the Registration
Statement or a supplement to the Prospectus or any Prospectus Supplement to
comply with the Securities Act or any other law (other than the transactions
contemplated by any Fixed Request Notice and the settlement thereof). The
Company shall not be required to disclose to the Investor the substance or
specific reasons of any of the events set forth in clauses (i) through (iii) of
the immediately preceding sentence, but rather, shall only be required to
disclose that the event has occurred.  The Company shall not issue any Fixed
Request during the continuation of any of the foregoing events. If at any time
the Commission or any other federal or state governmental authority shall issue
any stop order suspending the effectiveness of the Registration Statement or
prohibiting or suspending the use of the Prospectus or any Prospectus
Supplement, the Company shall use commercially reasonable efforts to obtain the
withdrawal of such order at the earliest possible time.

 
32

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

 

Section 6.13.    Selling Restrictions.

(i)       Except as expressly set forth below, the Investor covenants that from
and after the Closing Date through and including the Trading Day next following
the expiration or termination of this Agreement (the “Restricted Period”),
neither the Investor nor any of its Affiliates nor any entity managed or
controlled by the Investor (collectively, the “Restricted Persons” and each of
the foregoing is referred to herein as a “Restricted Person”) shall, directly or
indirectly, (x) engage in, or induce any other Person to engage in, any Short
Sales involving the Company’s securities or (y) grant any option to purchase, or
acquire any right to dispose of or otherwise dispose for value of, any shares of
Common Stock or any securities convertible into or exercisable or exchangeable
for any shares of Common Stock, or enter into any swap, hedge or other similar
agreement that transfers, in whole or in part, the economic risk of ownership of
the Common Stock. Notwithstanding the foregoing, it is expressly understood and
agreed that nothing contained herein shall (without implication that the
contrary would otherwise be true) prohibit any Restricted Person during the
Restricted Period from: (1) selling “long” (as defined under Rule 200
promulgated under Regulation SHO) the Shares and the Commitment Shares; or (2)
selling a number of shares of Common Stock equal to the number of Shares that
such Restricted Person is or may be obligated to purchase under a pending Fixed
Request Notice but has not yet taken possession of so long as such Restricted
Person (or the Broker-Dealer, as applicable) delivers the Shares purchased
pursuant to such Fixed Request Notice to the purchaser thereof or the applicable
Broker-Dealer; provided, however, such Restricted Person (or the applicable
Broker-Dealer, as applicable) shall not be required to so deliver any such
Shares subject to such Fixed Request Notice if the Company fails for any reason
to deliver such Shares to the Investor on the applicable Settlement Date upon
the terms and subject to the provisions of this Agreement.

(ii)       In addition to the foregoing, in connection with any sale of
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 6.14.    Effective Registration Statement.  During the Investment
Period, the Company shall use its commercially reasonable efforts to maintain
the continuous effectiveness of the Registration Statement under the Securities
Act.

Section 6.15.    Blue Sky.  The Company shall take such action, if any, as is
necessary in order to obtain an exemption for or to qualify the Securities for
sale to the Investor pursuant to the Transaction Documents, at the request of
the Investor, and the subsequent resale of Registrable Securities by the
Investor, in each case, under applicable state securities or “Blue Sky” laws and
shall provide evidence of any such action so taken to the Investor from time to
time following the Closing Date; provided, however, that the Company shall not
be required in connection therewith or as a condition thereto to (x) qualify to
do business in any jurisdiction where it would not otherwise be required to
qualify but for this Section 6.15, (y) subject itself to general taxation in any
such jurisdiction, or (z) file a general consent to service of process in any
such jurisdiction.

 
33

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

 

Section 6.16.    Non-Public Information.  Neither the Company or any of its
Subsidiaries, nor any of their respective directors, officers, employees 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. In the event of a breach of
the foregoing covenant by the Company or any of its Subsidiaries, or any of
their respective directors, officers, employees and agents (as determined in the
reasonable good faith judgment of the Investor), (i) the Investor shall promptly
provide written notice of such breach to the Company and (ii) after such notice
has been provided to the Company and in addition to any other remedy provided
herein or in the other Transaction Documents, the Investor shall have the right
to make a public disclosure, in the form of a press release, public
advertisement or otherwise, of such material, non-public information without the
prior approval by the Company, any of its Subsidiaries, or any of their
respective directors, officers, employees or agents; provided that the Company
shall have failed to publicly disclose such material, non-public information
within twenty four hours following demand therefor by the Investor. The Investor
shall not have any liability to the Company, any of its Subsidiaries, or any of
their respective directors, officers, employees, stockholders or agents, for any
such disclosure.

Section 6.17.    Broker/Dealer.  The Investor shall use one or more
broker-dealers to effectuate all sales, if any, of Securities that it may
purchase or otherwise acquire from the Company pursuant to the Transaction
Documents, as applicable, which (or whom) shall be unaffiliated with the
Investor and Reedland and not then currently engaged or used by the Company
(collectively, the “Broker-Dealer”). The Investor shall, from time to time,
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, which shall not exceed customary brokerage
fees and commissions.

Section 6.18.    Disclosure Schedule.

(i)        The Company may, from time to time, update the Disclosure Schedule as
may be required to satisfy the condition set forth in Section 7.2(i).  For
purposes of this Section 6.18, any disclosure made in a schedule to the
Compliance Certificate substantially in the form attached hereto as Exhibit D
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 6.18 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 rights or remedies with respect thereto.

 
34

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

 

(ii)       Notwithstanding anything to the contrary contained in the Disclosure
Schedule or in this Agreement, the information and disclosure contained in any
Schedule of the Disclosure Schedule shall be deemed to be disclosed and
incorporated by reference in any other Schedule of the Disclosure Schedule as
though fully set forth in such Schedule for which applicability of such
information and disclosure is readily apparent on its face.  The fact that any
item of information is disclosed in the Disclosure Schedule shall not be
construed to mean that such information is required to be disclosed by this
Agreement.  Except as expressly set forth in this Agreement, such information
and the thresholds (whether based on quantity, qualitative characterization,
dollar amounts or otherwise) set forth herein shall not be used as a basis for
interpreting the terms “material” or “Material Adverse Effect” or other similar
terms in this Agreement.

ARTICLE VII
CONDITIONS TO CLOSING AND CONDITIONS TO THE SALE AND
PURCHASE OF THE SHARES

Section 7.1.      Conditions Precedent to Closing. The Closing is subject to the
satisfaction of each of the conditions set forth in this Section 7.1.

(i)        Accuracy of the Investor’s Representations and Warranties.  The
representations and warranties of the Investor contained in this Agreement (a)
that are not qualified by “materiality” shall be true and correct in all
material respects as of the Closing Date, 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 (b) that are qualified by “materiality” shall
be true and correct as of the Closing Date, 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)       Accuracy of the Company’s Representations and Warranties.  The
representations and warranties of the Company contained in this Agreement (a)
that are not qualified by “materiality” or “Material Adverse Effect” shall be
true and correct in all material respects as of the Closing Date, 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 (b) that are qualified by
“materiality” or “Material Adverse Effect” shall be true and correct as of the
Closing Date, 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.

(iii)      Payment of Document Preparation Fee; Issuance of Commitment Shares.
On or prior to the Closing Date, the Company shall have paid by wire transfer of
immediately available funds to an account designated by the Investor’s counsel,
the Document Preparation Fee in accordance with Section 10.1(i) hereof, all of
which fees shall be non-refundable regardless of whether any Fixed Requests are
issued by the Company or settled hereunder. On the Closing Date, the Company
shall deliver irrevocable instructions to its transfer agent to issue to the
Investor, not later than 4:00 p.m. (New York City time) on the second Trading
Day immediately following the Closing Date, a certificate representing the
Commitment Shares in the name of the Investor or its designee (in which case
such designee name shall have been provided to the Company prior to the Closing
Date), in consideration for the Investor’s execution and delivery of this
Agreement. Such certificate shall be delivered to the Investor by overnight
courier at its address set forth in Section 10.4 hereof. For the avoidance of
doubt, all of the Commitment Shares shall be fully earned as of the Closing Date
regardless of whether any Fixed Requests are issued by the Company or settled
hereunder.

 
35

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

 

(iv)      Closing Deliverables. At the Closing, counterpart signature pages of
this Agreement and the Registration Rights Agreement executed by each of the
parties hereto shall be delivered as provided in Section 2.2. Simultaneously
with the execution and delivery of this Agreement and the Registration Rights
Agreement, the Investor’s counsel shall have received (a) an opinion of outside
counsel to the Company, and an opinion of in-house counsel to the Company, in
each case, dated the Closing Date, in the form mutually agreed by the parties
hereto, (b) a certificate from the Company, dated the Closing Date, in the form
of Exhibit C hereto, (c) a copy of the irrevocable instructions to the Company’s
transfer agent regarding the issuance to the Investor of the certificate
representing the Commitment Shares, and (d) a copy of the Placement Agent
Engagement Letter executed by each of the parties thereto.

Section 7.2.      Conditions Precedent to a Fixed Request. The right of the
Company to deliver a Fixed Request Notice and the obligation of the Investor to
accept a Fixed Request Notice and to acquire and pay for the Shares in
accordance therewith is subject to the satisfaction, at each Fixed Request
Exercise Date and at each Settlement Date (except as otherwise expressly set
forth below), of each of the conditions set forth in this Section 7.2.

(i)        Accuracy of the Company’s Representations and Warranties.  The
representations and warranties of the Company contained in this Agreement (a)
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 (b) 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)       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 and the Registration Rights 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. The
Company shall have delivered to the Investor on the applicable Settlement Date
the Compliance Certificate substantially in the form attached hereto as Exhibit
D.

(iii)      Registration Statement Effective. The Registration Statement covering
the resale by the Investor of the Registrable Securities shall have been
declared effective under the Securities Act by the Commission and shall remain
effective, and the Investor shall be permitted to utilize the Prospectus therein
to resell (a) all of the Commitment Shares, (b) all of the Shares issued
pursuant to all prior Fixed Request Notices, and (c) all of the Shares issuable
pursuant to the applicable Fixed Request Notice.

 
36

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

 

(iv)     No Material Notices. None of the following events shall have occurred
and be continuing: (a) receipt of any request by the Commission or any other
federal or state governmental authority for any additional information relating
to the Registration Statement, the Prospectus or any Prospectus Supplement, or
for any amendment of or supplement to the Registration Statement, the
Prospectus, or any Prospectus Supplement; (b) the issuance by the Commission or
any other federal or state governmental authority of any stop order suspending
the effectiveness of the Registration Statement or prohibiting or suspending the
use of the Prospectus or any Prospectus Supplement, or of the suspension of
qualification or exemption from qualification of the Securities for offering or
sale in any jurisdiction, or the initiation or contemplated initiation of any
proceeding for such purpose; or (c) the occurrence of any event or the existence
of any condition or state of facts, which makes any statement of a material fact
made in the Registration Statement, the Prospectus or any Prospectus Supplement
untrue or which requires the making of any additions to or changes to the
statements then made in the Registration Statement, the Prospectus or any
Prospectus Supplement 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 the case of the Prospectus or any Prospectus Supplement,
in light of the circumstances under which they were made) not misleading, or
which requires an amendment to the Registration Statement or a supplement to the
Prospectus or any Prospectus Supplement to comply with the Securities Act or any
other law (other than the transactions contemplated by the applicable Fixed
Request Notice and the settlement thereof). The Company shall have no Knowledge
of any event that could reasonably be expected to have the effect of causing the
suspension of the effectiveness of the Registration Statement or the prohibition
or suspension of the use of the Prospectus or any Prospectus Supplement in
connection with the resale of the Registrable Securities by the Investor.

(v)      Other Commission Filings. The Current Report and the Form D shall have
been filed with the Commission as required pursuant to Section 2.3, and the
final Prospectus and all other Prospectus Supplements required to have been
filed with the Commission pursuant to Section 2.3 and pursuant to the
Registration Rights Agreement shall have been filed with the Commission in
accordance with Section 2.3 and the Registration Rights Agreement. All reports,
schedules, registrations, forms, statements, information and other documents
required to have been filed by the Company with the Commission pursuant to the
reporting requirements of the Exchange Act, including all material required to
have been filed pursuant to Section 13(a) or 15(d) of the Exchange Act, shall
have been filed with the Commission and, if any Registrable Securities are
covered by a Registration Statement on Form S-3, such filings shall have been
made within the applicable time period prescribed for such filing under the
Exchange Act.

(vi)     No Suspension of Trading in or Delisting of Common Stock.  Trading in
the Common Stock shall not have been suspended by the Commission, the Trading
Market or the FINRA (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 the applicable Settlement Date), the
Company shall not have received any final and non-appealable notice that the
listing or quotation of the Common Stock on the Trading Market shall be
terminated on a date certain, and, at any time prior to the applicable Fixed
Request Exercise Date and applicable Settlement Date, 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 U.S. 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, credit or securities market.

 
37

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

 

(vii)    Compliance with Laws.  The Company shall have complied with all
applicable federal, state and local governmental laws, rules, regulations and
ordinances in connection with the execution, delivery and performance of this
Agreement and the other Transaction Documents to which it is a party and the
consummation of the transactions contemplated hereby and thereby, including,
without limitation, the Company shall have obtained all permits and
qualifications required by any applicable state securities or “Blue Sky” laws
for the offer and sale of the Securities by the Company to the Investor and the
subsequent resale of the Registrable Securities by the Investor (or shall have
the availability of exemptions therefrom).

(viii)   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 the Transaction Documents.

(ix)      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 the Transaction Documents, or seeking material damages in connection with
such transactions.

(x)       Aggregate Limit.  The issuance and sale of the Shares issuable
pursuant to such Fixed Request Notice shall not violate Sections 3.2, 3.10, 3.11
and 6.6 hereof.

(xi)      Shares Authorized and Delivered. The Shares issuable pursuant to such
Fixed Request Notice shall have been duly authorized by all necessary corporate
action of the Company. The Company shall have delivered all Shares relating to
all prior Fixed Request Notices, as applicable.

(xii)     Listing of Securities.  All Commitment Shares issued by the Company to
the Investor shall have been approved for listing or quotation on the Trading
Market in accordance with this Agreement. The Company shall have submitted to
the Trading Market, at or prior to the applicable Fixed Request Exercise Date, a
notification form of listing of additional shares related to the Shares issuable
pursuant to such Fixed Request, in accordance with the bylaws, listed securities
maintenance standards and other rules of the Trading Market and, prior to the
applicable Settlement Date, such Shares shall have been approved for listing or
quotation on the Trading Market, subject only to notice of issuance.

 
38

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

 

(xiii)    No Material Adverse Effect. No condition, occurrence, state of facts
or event constituting a Material Adverse Effect shall have occurred and be
continuing.

(xiv)    No Restrictive Legends. If requested by the Investor from and after the
Effective Date, the Company shall have either (i) issued and delivered (or
caused to be issued and delivered) to the Investor a certificate representing
the Commitment Shares that is free from all restrictive and other legends or
(ii) caused the Company’s transfer agent to credit the Investor’s or its
designee’s account at DTC through its Deposit/Withdrawal at Custodian (DWAC)
system with a number of shares of Common Stock equal to the number of Commitment
Shares represented by the certificate delivered by the Investor to the Company
in accordance with Section 10.1(iv) of this Agreement.

(xv)     Opinion of Counsel; Bring-Down. Prior to the first Fixed Request
Exercise Date, the Investor shall have received an opinion from outside counsel
to the Company, in the form mutually agreed by the parties hereto. On each
Settlement Date, the Investor shall have received an opinion “bring down” from
outside counsel to the Company and an opinion “bring-down” from in-house counsel
to the Company, in each case, dated the applicable Settlement Date, in the form
mutually agreed by the parties hereto.

ARTICLE VIII
TERMINATION

Section 8.1.      Termination.  Unless earlier terminated as provided hereunder,
this Agreement shall terminate automatically on the earlier to occur of (i) the
first day of the month next following the 24-month anniversary of the Effective
Date (it being hereby acknowledged and agreed that such term may not be extended
by the parties hereto) and (ii) the date on which the Investor shall have
purchased the Aggregate Limit. Subject to Section 8.3, the Company may terminate
this Agreement effective upon one Trading Day’s prior written notice to the
Investor in accordance with Section 10.4; provided, however, that (A) the
Company shall have paid all fees and amounts and issued all Commitment Shares
owed to the Investor or its counsel, as applicable, pursuant to Section 10.1 of
this Agreement  prior to such termination, and (B) prior to issuing any press
release, or making any public statement or announcement, with respect to such
termination, the Company shall consult with the Investor and shall obtain the
Investor’s consent to the form and substance of such press release or other
disclosure, which consent shall not be unreasonably delayed or withheld. Subject
to Section 8.3, 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.

Section 8.2.      Other Termination.  Subject to Section 8.3, the Investor shall
have the right to terminate this Agreement effective upon one Trading Day’s
prior written notice to the Company in accordance with Section 10.4, if: (i) any
condition, occurrence, state of facts or event constituting a Material Adverse
Effect has occurred and is continuing; (ii) the Company shall have provided the
Investor an Aggregation Notice pursuant to Section 6.7(ii), or the Company shall
have entered into any agreement, plan, arrangement or transaction with a third
party or shall have determined to utilize any existing agreement, plan or
arrangement with a third party, in each case the principal purpose of which is
to implement, effect or consummate at any time during the Investment Period a
Similar Financing, an ATM or a Price Reset Provision; (iii) a Fundamental
Transaction shall have occurred; (iv) the Registration Statement is not filed by
the Filing Deadline (as defined in the Registration Rights Agreement) or
declared effective by the Effectiveness Deadline (as defined in the Registration
Rights Agreement), or the Company is otherwise in breach or default in any
material respect under any of the other provisions of the Registration Rights
Agreement, and, if such failure, breach or default is capable of being cured,
such failure, breach or default is not cured within 10 Trading Days after notice
of such failure, breach or default is delivered to the Company pursuant to
Section 10.4; (v) while the Registration Statement is required to be maintained
effective pursuant to the terms of the Registration Rights Agreement and the
Investor holds any Registrable Securities, the effectiveness of the Registration
Statement lapses for any reason (including, without limitation, the issuance of
a stop order) or the Registration Statement, the Prospectus or any Prospectus
Supplement is otherwise unavailable to the Investor for the resale of all of the
Registrable Securities in accordance with the terms of the Registration Rights
Agreement, and such lapse or unavailability continues for a period of 20
consecutive Trading Days or for more than an aggregate of 60 Trading Days in any
365-day period, other than due to acts of the Investor (unless all of such
Registrable Securities may be resold by the Investor without registration and
without any time, volume or manner of sale limitations pursuant to Rule 144);
(vi) trading in the Common Stock on the Trading Market shall have been suspended
or the Common Stock shall have failed to be listed or quoted on the Trading
Market, and such suspension or failure continues for a period of 20 consecutive
Trading Days or for more than an aggregate of 60 Trading Days in any 365-day
period; (vii) the Company has filed for and/or is subject to any bankruptcy,
insolvency, reorganization or liquidation proceedings or other proceedings for
relief under any bankruptcy law or any law for the relief of debtors instituted
by or against the Company or (viii) the Company is in material breach or default
of this Agreement, and, if such breach or default is capable of being cured,
such breach or default is not cured within 10 Trading Days after notice of such
breach or default is delivered to the Company pursuant to Section 10.4. Unless
notification thereof is required elsewhere in this Agreement (in which case such
notification shall be provided in accordance with such other provision), the
Company shall promptly (but in no event later than 24 hours) notify the Investor
(and, if required under applicable law, including, without limitation,
Regulation FD promulgated by the Commission, or under the applicable rules and
regulations of the Trading Market, the Company shall publicly disclose such
information in accordance with Regulation FD and the applicable rules and
regulations of the Trading Market) upon becoming aware of any of the events set
forth in the immediately preceding sentence.

 
39

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

 

Section 8.3.      Effect of Termination.  In the event of termination by the
Company or the Investor pursuant to Section 8.1 or 8.2, as applicable, written
notice thereof shall forthwith be given to the other party as provided in
Section 10.4 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 8.1 or 8.2 herein, this Agreement shall become
void and of no further force and effect, except that (i) the provisions of
Article V (Representations and Warranties of the Company), Article IX
(Indemnification), Article X (Miscellaneous) and this Article VIII (Termination)
shall remain in full force and effect indefinitely notwithstanding such
termination, (ii) so long as the Investor owns any Securities, the covenants and
agreements of the Company contained in Article VI (Additional Covenants) shall
remain in full force and effect notwithstanding such termination for a period of
six months following such termination, and (iii) the covenants and agreements of
the Investor contained in Section 6.13 (Selling Restrictions) shall remain in
full force and effect notwithstanding such termination in accordance with their
terms. Notwithstanding anything in this Agreement to the contrary, no
termination of this Agreement by any party shall (i) become effective prior to
the first Trading Day immediately following the Settlement Date related to any
pending Fixed Request Notice that has not been fully settled in accordance with
the terms and conditions of this Agreement (it being hereby acknowledged and
agreed that no termination of this Agreement shall limit, alter, modify, change
or otherwise affect any of the Company’s or the Investor’s rights or obligations
under the Transaction Documents with respect to any pending Fixed Request, and
that the parties shall fully perform their respective obligations with respect
to any such pending Fixed Request under the Transaction Documents, provided all
of the conditions to the settlement thereof set forth in Article VII are timely
satisfied), (ii) limit, alter, modify, change or otherwise affect the Company’s
or the Investor’s rights or obligations under the Registration Rights Agreement,
all of which shall survive any such termination (it being hereby acknowledged
and agreed that all of the Commitment Shares shall be fully earned as of the
Closing Date, regardless of whether any Fixed Requests are issued by the Company
or settled hereunder), (iii) affect any Commitment Shares previously issued or
delivered, or any rights of any holder thereof, or (iv) affect any cash fees
paid to the Investor or its counsel pursuant to Section 10.1 (including, without
limitation, the Document Preparation Fee), in each case all of which fees shall
be non-refundable regardless of whether any Fixed Requests are issued by the
Company or settled hereunder. Nothing in this Section 8.3 shall be deemed to
release the Company or the Investor from any liability for any breach or default
under this Agreement or any of the other Transaction Documents to which it is a
party, or to impair the rights of the Company and the Investor to compel
specific performance by the other party of its obligations under the Transaction
Documents to which it is a party.

 
40

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

 

ARTICLE IX
INDEMNIFICATION

Section 9.1.      Indemnification of Investor. In consideration of the
Investor’s execution and delivery of this Agreement and acquiring the Shares
hereunder and in addition to all of the Company’s other obligations under the
Transaction Documents to which it is a party, subject to the provisions of this
Section 9.1, the Company shall indemnify and hold harmless the Investor, each of
its directors, officers, shareholders, members, partners, employees,
representatives, agents and advisors (and any other Persons with a functionally
equivalent role of a Person holding such titles notwithstanding the lack of such
title or any other title), each Person, if any, who controls the Investor
(within the meaning of Section 15 of the Securities Act or Section 20(a) of the
Exchange Act), and the respective directors, officers, shareholders, members,
partners, employees, representatives, agents and advisors (and any other Persons
with a functionally equivalent role of a Person holding such titles
notwithstanding the lack of such title or any other title) of such controlling
Persons (each, an “Investor Party”), from and against all losses, liabilities,
obligations, claims, contingencies, damages, costs and expenses (including all
judgments, amounts paid in settlement, court costs, reasonable attorneys’ fees
and costs of defense and investigation) (collectively, “Damages”) that any
Investor Party may suffer or incur as a result of or relating to (a) any breach
of any of the representations, warranties, covenants or agreements made by the
Company in this Agreement or in the other Transaction Documents to which it is a
party or (b) any action, suit, claim or proceeding (including for these purposes
a derivative action brought on behalf of the Company) instituted against such
Investor Party arising out of or resulting from the execution, delivery,
performance or enforcement of the Transaction Documents, other than claims for
indemnification within the scope of Section 6 of the Registration Rights
Agreement; provided, however, that (x) the foregoing indemnity shall not apply
to any Damages to the extent, but only to the extent, that such Damages resulted
directly and primarily from a breach of any of the Investor’s representations,
warranties, covenants or agreements contained in this Agreement or the
Registration Rights Agreement, and (y) the Company shall not be liable under
subsection (b) of this Section 9.1 to the extent, but only 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 Damages resulted directly and
primarily from any acts or failures to act, undertaken or omitted to be taken by
such Investor Party through its fraud, bad faith, gross negligence, or willful
or reckless misconduct.

 
41

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

 

The Company shall reimburse any Investor Party promptly upon demand (with
accompanying presentation of documentary evidence) for all legal and other costs
and expenses reasonably incurred by such Investor Party in connection with (i)
any action, suit, claim or proceeding, whether at law or in equity, to enforce
compliance by the Company with any provision of the Transaction Documents or
(ii) any other any action, suit, claim or proceeding, whether at law or in
equity, with respect to which it is entitled to indemnification under this
Section 9.1; provided that the Investor shall promptly reimburse the Company for
all such legal and other costs and expenses to the extent a court of competent
jurisdiction determines that any Investor Party was not entitled to such
reimbursement.

An Investor Party’s right to indemnification or other remedies based upon the
representations, warranties, covenants and agreements of the Company set forth
in the Transaction Documents shall not in any way be affected by any
investigation or knowledge of such Investor Party. Such representations,
warranties, covenants and agreements shall not be affected or deemed waived by
reason of the fact that an Investor Party knew or should have known that any
representation or warranty might be inaccurate or that the Company failed to
comply with any agreement or covenant. Any investigation by such Investor Party
shall be for its own protection only and shall not affect or impair any right or
remedy hereunder.

To the extent that the foregoing undertakings by the Company set forth in this
Section 9.1 may be unenforceable for any reason, the Company shall make the
maximum contribution to the payment and satisfaction of each of the Damages
which is permissible under applicable law.

Section 9.2.      Indemnification Procedures.  Promptly after an Investor Party
receives notice of a claim or the commencement of an action for which the
Investor Party intends to seek indemnification under Section 9.1, the Investor
Party will notify the Company in writing of the claim or commencement of the
action, suit or proceeding; provided, however, that failure to notify the
Company will not relieve the Company from liability under Section 9.1, except to
the extent it has been materially prejudiced by the failure to give notice.  The
Company 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
Company acknowledges in writing the obligation to indemnify the Investor Party
against whom the claim or action is brought, the Company may (but will not be
required to) assume the defense against the claim, action, suit or proceeding
with counsel satisfactory to it.  After the Company notifies the Investor Party
that the Company wishes to assume the defense of a claim, action, suit or
proceeding, the Company will not be liable for any further legal or other
expenses incurred by the Investor Party in connection with the defense against
the claim, action, suit or proceeding except that if, in the opinion of counsel
to the Investor Party, it would be inappropriate under the applicable rules of
professional responsibility for the same counsel to represent both the Company
and such Investor Party.  In such event, the Company will pay the reasonable
fees and expenses of no more than one separate counsel for all such Investor
Parties promptly as such fees and expenses are incurred. Each Investor Party, as
a condition to receiving indemnification as provided in Section 9.1, will
cooperate in all reasonable respects with the Company in the defense of any
action or claim as to which indemnification is sought.  The Company will not be
liable for any settlement of any action effected without its prior written
consent, which consent shall not be unreasonably withheld, delayed or
conditioned. The Company will not, without the prior written consent of the
Investor Party, effect any settlement of a pending or threatened action with
respect to which an Investor 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 Investor Party from all
liability and claims which are the subject matter of the pending or threatened
action.

 
42

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

 

The remedies provided for in this Article IX are not exclusive and shall not
limit any rights or remedies which may otherwise be available to any Investor
Party at law or in equity.

ARTICLE X
MISCELLANEOUS

Section 10.1.    Fees and Expenses.

(i)        Structuring Fee; Counsel Fees; Diligence Expenses. Each party shall
bear its own fees and expenses related to the transactions contemplated by this
Agreement; provided, however, that the Company shall have paid on or prior to
the Closing Date by wire transfer of immediately available funds to an account
designated by the Investor’s counsel, a non-accountable and non-refundable
document preparation fee of up to $25,000, exclusive of disbursements and
out-of-pocket expenses (the “Document Preparation Fee”), in connection with the
preparation, negotiation, execution and delivery of the Transaction Documents
and legal due diligence of the Company. For the avoidance of doubt, the Document
Preparation Fee shall be non-refundable, regardless of whether any Fixed
Requests are issued by the Company or settled hereunder. 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 Securities pursuant
hereto.

(ii)       Commitment Shares. In consideration for the Investor’s execution and
delivery of this Agreement, concurrently with the execution and delivery of this
Agreement on the Closing Date, the Company shall deliver irrevocable
instructions to its transfer agent to issue to the Investor, not later than 4:00
p.m. (New York City time) on the second Trading Day immediately following the
Closing Date, a certificate representing the Commitment Shares in the name of
the Investor or its designee (in which case such designee name shall have been
provided to the Company prior to the Closing Date). Such certificate shall be
delivered to the Investor by overnight courier at its address set forth in
Section 10.4 hereof. For the avoidance of doubt, all of the Commitment Shares
shall be fully earned as of the Closing Date regardless of whether any Fixed
Requests are issued by the Company or settled hereunder. Upon issuance, the
Commitment Shares shall constitute “restricted securities” as such term is
defined in Rule 144(a)(3) under the Securities Act and, subject to the
provisions of subsection (iv) of this Section 10.1, the certificate representing
the Commitment Shares shall bear the restrictive legend set forth below in
subsection (iii) of this Section 10.1. The Commitment Shares shall constitute
Registrable Securities and shall be included in the Registration Statement in
accordance with the terms of the Registration Rights Agreement.

 
43

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

 

(iii)      Legends. The certificate representing the Commitment Shares, except
as set forth below, shall bear a restrictive legend in substantially the
following form (and a stop-transfer order may be placed against transfer of such
stock certificate):

THE OFFER AND SALE OF THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT
BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR APPLICABLE
STATE SECURITIES LAWS. THE SECURITIES MAY NOT BE OFFERED FOR SALE, SOLD,
TRANSFERRED OR ASSIGNED (I) IN THE ABSENCE OF (A) AN EFFECTIVE REGISTRATION
STATEMENT FOR THE SECURITIES UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR
(B) AN OPINION OF COUNSEL TO THE HOLDER (IF REQUESTED BY THE COMPANY), IN A FORM
REASONABLY ACCEPTABLE TO THE COMPANY, THAT REGISTRATION IS NOT REQUIRED UNDER
SAID ACT OR (II) UNLESS SOLD OR ELIGIBLE TO BE SOLD PURSUANT TO RULE 144 UNDER
SAID ACT. NOTWITHSTANDING THE FOREGOING, THE SECURITIES MAY BE PLEDGED IN
CONNECTION WITH A BONA FIDE MARGIN ACCOUNT OR OTHER LOAN OR FINANCING
ARRANGEMENT SECURED BY THE SECURITIES.

Notwithstanding the foregoing and for the avoidance of doubt, all Shares to be
issued in respect of any Fixed Request Notice delivered to the Investor pursuant
to this Agreement shall be issued to the Investor in accordance with Section 3.7
by crediting the Investor’s or its designees’ account at DTC through its
Deposit/Withdrawal at Custodian (DWAC) system, and all such Shares shall be
freely tradable and transferable and without restriction on resale (and no
stop-transfer order shall be placed against transfer thereof), and the Company
shall not take any action or give instructions to any transfer agent of the
Company otherwise.

(iv)     Removal of Legend. From and after the Effective Date, the Company
shall, no later than two Trading Days following the delivery by the Investor to
the Company or the Company’s transfer agent (with notice to the Company) of a
legended certificate representing the Commitment Shares (endorsed or with stock
powers attached, signatures guaranteed, and otherwise in form necessary to
affect the reissuance and/or transfer, if applicable), as directed by the
Investor, either: (A) issue and deliver (or cause to be issued and delivered) to
the Investor a certificate representing such Commitment Shares that is free from
all restrictive and other legends or (B) cause the Company’s transfer agent to
credit the Investor’s or its designee’s account at DTC through its
Deposit/Withdrawal at Custodian (DWAC) system with a number of shares of Common
Stock equal to the number of Commitment Shares represented by the certificate so
delivered by the Investor (the date by which such certificate is required to be
delivered to the Investor or such credit is so required to be made to the
account of the Investor or its designee at DTC pursuant to the foregoing is
referred to herein as the “Required Delivery Date”). If the Company fails on or
prior to the Required Delivery Date to either (i) issue and deliver (or cause to
be issued and delivered) to the Investor a certificate representing the
Commitment Shares that is free from all restrictive and other legends or (ii)
cause the Company’s transfer agent to credit the balance account of the Investor
or its designee at DTC through its Deposit/Withdrawal at Custodian (DWAC) system
with a number of shares of Common Stock equal to the number of Commitment Shares
represented by the certificate delivered by the Investor pursuant hereto, then,
in addition to all other remedies available to the Investor, the Company shall
pay in cash to the Investor on each day after the Required Delivery Date that
the issuance or credit of such shares is not timely effected an amount equal to
2.0% of the product of (A) the sum of the number of Commitment Shares not issued
to the Investor on a timely basis and to which the Investor is entitled and (B)
the VWAP for the five Trading Day period immediately preceding the Required
Delivery Date. In addition to the foregoing, if the Company fails to so properly
deliver such unlegended certificates or so properly credit the account of the
Investor or its designee at DTC by the Required Delivery Date, and if on or
after the Required Delivery Date the Investor purchases (in an open market
transaction or otherwise) shares of Common Stock to deliver in satisfaction of a
sale by the Investor of shares of Common Stock that the Investor anticipated
receiving from the Company without any restrictive legend, then the Company
shall, within three Trading Days after the Investor’s request, pay cash to the
Investor in an amount equal to the Investor’s total purchase price (including
brokerage commissions, if any) for the shares of Common Stock so purchased, at
which point the Company’s obligation to deliver a certificate or credit such
Investor’s or its designee’s account at DTC for such shares of Common Stock
shall terminate and such shares shall be cancelled.

 
44

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

 

Section 10.2.    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 (without the necessity of showing economic loss and without
any bond or other security being required), this being in addition to any other
remedy to which either party may be entitled by law or equity.

(ii)       Each of the Company and the Investor (a) hereby irrevocably submits
to the jurisdiction of the U.S. 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 10.2
shall affect or limit any right to serve process in any other manner permitted
by law.

 
45

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

 

(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 TO ENTER INTO THIS AGREEMENT BY, AMONG
OTHER THINGS, THE MUTUAL WAIVERS AND CERTIFICATIONS IN THIS SECTION 10.2.

Section 10.3.    Entire Agreement; Amendment.  The Transaction Documents set
forth the entire agreement and understanding of the parties with respect to the
subject matter hereof and supersedes all prior and contemporaneous agreements,
negotiations and understandings between the parties, both oral and written, with
respect to such matters. There are no promises, undertakings, representations or
warranties by either party relative to subject matter hereof not expressly set
forth in the Transaction Documents. 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 10.4.    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
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:

EMCORE Corporation
10420 Research Road, SE
Albuquerque, New Mexico 87123
Telephone Number: (505) 332-5000
Fax: (505) 332-5100
Attention: Alfredo Gomez, Esq.

 
46

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

 

With a copy (which shall not constitute notice) to:

Jenner & Block LLP
919 Third Avenue, 37th Floor
New York, NY 10022
Telephone Number: (212) 891-1600
Fax: (212) 909-0820
Attention:  Tobias L. Knapp, Esq.

If to the Investor:

Commerce Court Small Cap Value Fund, Ltd.
Fiduciary Services (BVI) Limited
Qwomar Complex, 4th Floor
P.O. Box 3170
Road Town, Tortola
British Virgin Islands
Telephone Number: (284) 494-8086
Fax:  (284) 494-9474
Attention: Peter W. Poole

With a copy (which shall not constitute notice) to:

Greenberg Traurig, LLP
The MetLife Building
200 Park Avenue
New York, NY 10166
Telephone Number: (212) 801-9200
Fax:  (212) 801-6400
Attention: 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 10.5.    No Waivers.  No failure or delay in the exercise of any power,
right or privilege hereunder shall operate as a waiver thereof, nor shall any
single or partial exercise of any such power, right or privilege preclude other
or further exercises thereof or of any other right, power or privilege.

Section 10.6.    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. Unless the context clearly indicates otherwise, each
pronoun herein shall be deemed to include the masculine, feminine, neuter,
singular and plural forms thereof. The terms “including,” “includes,” “include”
and words of like import shall be construed broadly as if followed by the words
“without limitation.”  The terms “herein,” “hereunder,” “hereof” and words of
like import refer to this entire Agreement instead of just the provision in
which they are found.

Section 10.7.    Construction. The parties agree that each of them and their
respective counsel has reviewed and had an opportunity to revise the Transaction
Documents and, therefore, the normal rule of construction to the effect that any
ambiguities are to be resolved against the drafting party shall not be employed
in the interpretation of the Transaction Documents. In addition, each and every
reference to share prices and shares of Common Stock in any Transaction Document
shall be subject to adjustment for any stock splits, stock combinations, stock
dividends, recapitalizations and other similar transactions that occur on or
after the date of this Agreement

 
47

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

 

Section 10.8.    Successors and Assigns.  This Agreement shall be binding upon
and inure to the benefit of the parties and their respective successors and
assigns. The Company may not assign this Agreement or any rights or obligations
hereunder to any Person without the prior written consent of the Investor, which
may be withheld or delayed in the Investor’s sole discretion, including by any
Fundamental Transaction. The Investor may not assign its rights or obligations
under this Agreement.

Section 10.9.    No Third Party Beneficiaries.  Except as expressly provided in
Article IX, this Agreement is intended only for the benefit of the parties
hereto and their respective permitted successors and assigns, and is not for the
benefit of, nor may any provision hereof be enforced by, any other Person.

Section 10.10.  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  that would cause the application of the laws of any other jurisdiction.

Section 10.11. Survival.  The representations, warranties, covenants and
agreements of the Company and the Investor contained in this Agreement shall
survive the execution and delivery hereof until the termination of this
Agreement; provided, however, that (i) the provisions of Article V
(Representations and Warranties of the Company), Article VIII (Termination),
Article IX (Indemnification) and this Article X (Miscellaneous) shall remain in
full force and effect indefinitely notwithstanding such termination, (ii) so
long as the Investor owns any Securities, the covenants and agreements of the
Company contained in Article VI (Additional Covenants), shall remain in full
force and effect notwithstanding such termination for a period of six months
following such termination, and (iii) the covenants and agreements of the
Investor contained in Section 6.13 (Selling Restrictions) shall remain in full
force and effect notwithstanding such termination in accordance with their
terms.

Section 10.12. 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, digital or electronic
transmission, such transmission shall constitute delivery of the manually
executed original and the party using such means of delivery shall thereafter
cause four additional executed signature pages to be physically delivered to the
other parties within five days of the execution and delivery hereof.  Failure to
provide or delay in the delivery of such additional executed signature pages
shall not adversely affect the efficacy of the original delivery.

 
48

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

 

Section 10.13. Publicity.  The Investor shall have the right to approve, prior
to issuance or filing, any press release, Commission filing or any other public
disclosure made by or on behalf of the Company relating to the Investor, its
purchases hereunder or any aspect of the Transaction Documents or the
transactions contemplated thereby; provided, however, that except as otherwise
provided in this Agreement, the Company shall be entitled, without the prior
approval of the Investor, to make any press release or other public disclosure
(including any filings with the Commission) with respect thereto as is required
by applicable law and regulations (including the regulations of the Trading
Market), so long as prior to making any such press release or other public
disclosure, if reasonably practicable, the Company and its counsel shall have
provided the Investor and its counsel with a reasonable opportunity to review
and comment upon, and shall have consulted with the Investor and its counsel on
the form and substance of, such press release or other disclosure. For the
avoidance of doubt, the Company shall not be required to submit for review any
such disclosure (i) contained in periodic reports filed with the Commission
under the Exchange Act if it shall have previously provided the same disclosure
for review in connection with a previous filing or (ii) any Prospectus
Supplement if it contains disclosure that does not reference the Investor, its
purchases hereunder or any aspect of the Transaction Documents or the
transactions contemplated thereby.

Section 10.14. 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 10.15. Further Assurances.  From and after the Closing Date, upon the
request of the Investor or the Company, each of the Company and the Investor
shall execute and 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]

 
49

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

 

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.

 
EMCORE CORPORATION:
             
By:
/s/ Hong Hou
 
Name:
Hong Hou
 
Title:
CEO
       
COMMERCE COURT SMALL CAP VALUE FUND, LTD.:
             
By:
/s/ Peter W. Poole
 
Name:
Peter W. Poole
 
Title:
Director

 
[Signature Page to Stock Purchase Agreement]

 
 

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

 

ANNEX I TO THE
COMMON STOCK PURCHASE AGREEMENT
DEFINITIONS

“Acceptable Transaction” shall have the meaning assigned to such term in Section
6.7(iii) hereof.

“Affiliate” means any Person that, directly or indirectly through one or more
intermediaries, controls, is controlled by, or is under common control with a
Person, as such terms are used in and construed under Rule 144.  With respect to
the Investor, without limitation, any Person owning, owned by, or under common
ownership with the Investor, and any investment fund or managed account that is
managed on a discretionary basis by the same investment manager as the Investor
will  be deemed to be an Affiliate.

“Aggregate Limit” shall have the meaning assigned to such term in Section 2.1
hereof.

“Aggregation Notice” shall have the meaning assigned to such term in Section
6.7(ii) hereof.

“Agreement” shall have the meaning assigned to such term in the preamble hereof.

“Alternate Transaction” shall have the meaning assigned to such term in Section
6.7(iii) hereof.

“Alternate Transaction Notice” shall have the meaning assigned to such term in
Section 6.7(ii) hereof.

“Alternative Fixed Amount Requested” shall have the meaning assigned to such
term in Section 3.2 hereof.

“ATM” shall have the meaning assigned to such term in Section 6.7(iii) hereof.

“Average Discount Price” shall have the meaning assigned to such term in Section
3.11 hereof.

“Base Price” shall have the meaning assigned to such term in Section 3.11
hereof.

“Below Market Offering” shall have the meaning assigned to such term in Section
6.7(iii) hereof.

“Broker-Dealer” shall have the meaning assigned to such term in Section 6.17
hereof.

“Bylaws” shall have the meaning assigned to such term in Section 5.3 hereof.

“Charter” shall have the meaning assigned to such term in Section 5.3 hereof.

“Closing” shall have the meaning assigned to such term in Section 2.2 hereof.

“Closing Date” means the date of this Agreement.

 
i

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

 

“Code” means the Internal Revenue Code of 1986, as amended.

“Commission” means the U.S. Securities and Exchange Commission or any successor
entity.

“Commission Documents” shall mean (1) all reports, schedules, registrations,
forms, statements, information and other documents filed with or furnished to
the Commission by the Company pursuant to the reporting requirements of the
Exchange Act, including all material filed or furnished pursuant to Section
13(a), 14(a) or 15(d) of the Exchange Act, which have been filed or furnished by
the Company since September 30, 2010, including, without limitation, the Annual
Report on Form 10-K filed by the Company for the year ended September 30, 2010,
as amended (the “2010 Form 10-K”), and which hereafter shall be filed with or
furnished to the Commission by the Company, including, without limitation, the
Current Report, (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.

“Commitment Shares” means 110,947 shares of duly authorized, validly issued,
fully paid and nonassessable shares of Common Stock which, concurrently with the
execution and delivery of this Agreement on the Closing Date, the Company has
caused its transfer agent to issue and deliver to the Investor not later than
4:00 p.m. (New York City time) on the second Trading Day immediately following
the Closing Date.

“Common Stock” shall have the meaning assigned to such term in the recitals
hereof.

“Company” shall have the meaning assigned to such term in the preamble hereof.

“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.

“Current Report” shall have the meaning assigned to such term in Section 2.3
hereof.

“Damages” shall have the meaning assigned to such term in Section 9.1 hereof.

“Disclosure Schedule” shall have the meaning assigned to such term in the
preamble to Article V hereof.

“Discount Price” shall have the meaning assigned to such term in Section 3.2
hereof.

“Document Preparation Fee” shall have the meaning assigned to such term in
Section 10.1 hereof.

“DTC” means The Depository Trust Company, or any successor thereto.

“EDGAR” means the Commission’s Electronic Data Gathering, Analysis and Retrieval
System.

 
ii

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

 

“Effective Date” means the first Trading Day immediately following the date on
which the initial Registration Statement filed pursuant to Section 2(a) of the
Registration Rights Agreement is declared effective by the Commission.

“Environmental Laws” shall have the meaning assigned to such term in Section
5.18 hereof.

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

“Exchange Act” means the Securities Exchange Act of 1934, as amended, and the
rules and regulations of the Commission thereunder.

“FINRA” means the Financial Industry Regulatory Authority.

“Fixed Amount Requested” shall mean the specific dollar amount of a Fixed
Request requested by the Company in a Fixed Request Notice delivered pursuant to
Sections 3.1 and 3.2 hereof (assuming the Alternative Fixed Amount Requested is
not then applicable to such Fixed Request).

“Fixed Request” means the transactions contemplated in Article III of this
Agreement with respect to any Fixed Request Notice delivered by the Company in
accordance with Article III of this Agreement.

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

“Fixed Request Exercise Date” shall have the meaning assigned to such term in
Section 3.2 hereof.

“Fixed Request Notice” shall have the meaning assigned to such term in Section
3.1 hereof.

“Fundamental Transaction” means that (i) the Company shall, directly or
indirectly, in one or more related transactions, (1) consolidate or merge with
or into (whether or not the Company is the surviving corporation) another
Person, with the result that the holders of the Company’s capital stock
immediately prior to such consolidation or merger together beneficially own less
than 50% of the outstanding voting power of the surviving or resulting
corporation, or (2) sell, lease, license, assign, transfer, convey or otherwise
dispose of all or substantially all of the properties or assets of the Company
to another Person, or (3) take action to facilitate a purchase, tender or
exchange offer by another Person that is accepted by the holders of more than
50% of the outstanding shares of Common Stock (not including any shares of
Common Stock held by the Person or Persons making or party to, or associated or
affiliated with the Persons making or party to, such purchase, tender or
exchange offer), or (4) consummate a stock or share purchase agreement or other
business combination (including, without limitation, a reorganization,
recapitalization, spin-off or scheme of arrangement) with another Person whereby
such other Person acquires more than 50% of the outstanding shares of Common
Stock (not including any shares of Common Stock held by the other Person or
other Persons making or party to, or associated or affiliated with the other
Persons making or party to, such stock or share purchase agreement or other
business combination), or (5) reorganize, recapitalize or reclassify its Common
Stock, or (ii) any “person” or “group” (as these terms are used for purposes of
Sections 13(d) and 14(d) of the Exchange Act) is or shall become the “beneficial
owner” (as defined in Rule 13d-3 under the Exchange Act), directly or
indirectly, of 50% of the aggregate ordinary voting power represented by issued
and outstanding Common Stock.

 
iii

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

 

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

“Governmental Licenses” shall have the meaning assigned to such term in Section
5.17 hereof.

“Indebtedness” shall have the meaning assigned to such term in Section 5.11
hereof.

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

“Investment Period” means the period commencing on the Effective Date and
expiring on the date this Agreement is terminated pursuant to Article VIII
hereof.

“Investor” shall have the meaning assigned to such term in the preamble hereof.

“Investor Party” shall have the meaning assigned to such term in Section 9.1
hereof.

“Knowledge” means the actual knowledge of the Company’s Chief Executive Officer
or Chief Financial Officer, after reasonable inquiry of all officers, directors
and employees of the Company who would reasonably be expected to have knowledge
or information with respect to the matter in question.

“Make Whole Amount” shall have the meaning assigned to such term in Section 3.9
hereof.

“Material Adverse Effect” means (i) any condition, occurrence, state of facts or
event having, or insofar as reasonably can be foreseen would likely have, any
material adverse effect on the legality, validity or enforceability of the
Transaction Documents or the transactions contemplated thereby, (ii) 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 financial condition of the Company that is material and adverse to
the Company and its Subsidiaries, taken as a whole, and/or (iii) any condition,
occurrence, state of facts or event that would, or insofar as reasonably can be
foreseen would likely, prohibit or otherwise materially interfere with or delay
the ability of the Company to perform any of its obligations under any of the
Transaction Documents to which it is a party; provided, however, that none of
the following, individually or in the aggregate, shall be taken into account in
determining whether a Material Adverse Effect has occurred or insofar as
reasonably can be foreseen would likely occur: (a) changes in conditions in the
U.S. or global capital, credit or financial markets generally, including changes
in the availability of capital or currency exchange rates, provided such changes
shall not have affected the Company in a materially disproportionate manner as
compared to other similarly situated companies; (b) changes generally affecting
the semiconductor or solar power industries, provided such changes shall not
have affected the Company in a materially disproportionate manner as compared to
other similarly situated companies; (c) any effect of the announcement of, or
the consummation of the transactions contemplated by, this Agreement and the
other Transaction Documents on the Company’s relationships, contractual or
otherwise, with customers, suppliers, vendors, bank lenders, strategic venture
partners or employees; and (d) the receipt of any notice that the Common Stock
may be ineligible to continue listing or quotation on the Trading Market, other
than a final and non-appealable notice that the listing or quotation of the
Common Stock on the Trading Market shall be terminated on a date certain.

 
iv

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

 

“Material Agreements” shall have the meaning assigned to such term in Section
5.19 hereof.

“Maximum Fixed Amount Requested” shall have the meaning assigned to such term in
Section 3.2 hereof.

“Multiplier” shall have the meaning assigned to such term in Section 3.3(a)
hereof.

“Ownership Limitation” shall have the meaning assigned to such term in Section
3.10 hereof.

“Person” means any person or entity, whether a natural person, trustee,
corporation, partnership, limited partnership, limited liability company, trust,
unincorporated organization, business association, firm, joint venture,
governmental agency or authority.

“Placement Agent Engagement Letter” shall have the meaning assigned to such term
in Section 5.15 hereof.

“Plan” shall have the meaning assigned to such term in Section 5.24 hereof.

“Price Reset Provision” shall have the meaning assigned to such term in Section
6.7(iii) hereof.

“Pricing Period” shall mean, with respect to each Fixed Request, a period of 10
consecutive Trading Days commencing on the Pricing Period start date set forth
in the Fixed Request Notice, or such shorter period of Trading Days as
determined in accordance with Section 3.8.

“Prior Agreement” means that certain common stock purchase agreement, dated
October 1, 2009, by and between the Company and the Investor.

“Prospectus” means the prospectus in the form included in the Registration
Statement, as supplemented from time to time by any Prospectus Supplement,
including the documents incorporated by reference therein.

 
v

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

 

“Prospectus Supplement” means any prospectus supplement to the Prospectus filed
with the Commission from time to time pursuant to Rule 424(b) under the
Securities Act, including the documents incorporated by reference therein.

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

“Reedland” shall have the meaning assigned to such term in Section 5.15 hereof.

“Reference Period” shall have the meaning assigned to such term in Section
6.7(ii) hereof.

“Registrable Securities” shall have the meaning assigned to such term in the
Registration Rights Agreement.

“Registration Rights Agreement” shall have the meaning assigned to such term in
the recitals hereof.

“Registration Statement” shall have the meaning assigned to such term in the
Registration Rights Agreement.

“Regulation D” shall have the meaning assigned to such term in the recitals
hereof.

“Required Delivery Date” shall have the meaning assigned to such term in Section
10.1(iv).

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

“Restricted Person” shall have the meaning assigned to such term in Section
6.13(i) hereof.

“Restricted Persons” shall have the meaning assigned to such term in Section
6.13(i) hereof.

“Rule 144” means Rule 144 promulgated by the Commission pursuant to the
Securities Act, as such Rule may be amended from time to time, or any similar
rule or regulation hereafter adopted by the Commission having substantially the
same effect.

“Section 4(2)” shall have the meaning assigned to such term in the recitals
hereof.

“Securities” means, collectively, the Shares and the Commitment Shares.

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

“Settlement Date” shall have the meaning assigned to such term in Section 3.7
hereof.

 
vi

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

 

“Shares” shall mean the shares of Common Stock that are and/or may be purchased
by the Investor under this Agreement pursuant to one or more Fixed Requests and
do not include the Commitment Shares.

“Short Sales” shall mean “short sales” as defined in Rule 200 promulgated under
Regulation SHO under the Exchange Act.

“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.

“Signing Market Price” shall have the meaning assigned to such term in Section
3.11 hereof.

“Similar Financing” shall have the meaning assigned to such term in Section
6.7(iii) hereof.

“Single Fixed Request Trading Market Limit” shall have the meaning assigned to
such term in Section 3.10 hereof.

“SOXA” shall mean the Sarbanes-Oxley Act of 2002 and the rules and regulations
of the Commission thereunder.

“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 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.

“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 3.2); provided, however, that at no
time shall the Threshold Price be lower than $1.00 per share.

“Total Commitment” shall have the meaning assigned to such term in Section 2.1
hereof.

“Trading Day” shall mean a full trading day (beginning at 9:30 a.m., New York
City time, and ending at 4:00 p.m., New York City time) on the Trading Market.

“Trading Market” means the NASDAQ Capital Market, the NASDAQ Global Select
Market, the NASDAQ Global Market, the NYSE Amex Equities, or the New York Stock
Exchange (or any successors to any of the foregoing), whichever is at the time
the principal trading exchange or market for the Common Stock.

“Trading Market Limit” means 18,517,820 shares of duly authorized, validly
issued, fully paid and nonassessable shares of Common Stock (as adjusted for any
stock splits, stock combinations, stock dividends, recapitalizations and other
similar transactions that occur on or after the date of this Agreement);
provided, however, that the Trading Market Limit shall not exceed under any
circumstances that number of shares of Common Stock that the Company may issue
pursuant to this Agreement and the transactions contemplated hereby without (a)
breaching the Company’s obligations under the rules and regulations of the
Trading Market or (b) obtaining stockholder approval under the applicable rules
and regulations of the Trading Market.

 
vii

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

 

“Transaction Documents” means, collectively, this Agreement (as qualified by the
Disclosure Schedule) and the exhibits hereto, the Registration Rights Agreement
and each of the other agreements, documents, certificates and instruments
entered into or furnished by the parties hereto in connection with the
transactions contemplated hereby and thereby.

“VWAP” means the volume weighted average price (the aggregate sales price of all
trades of Common Stock during a Trading Day divided by the total number of
shares of Common Stock traded during such Trading Day) of the Common Stock
during any Trading Day as reported by Bloomberg L.P. using the AQR function.

“Warrant Value” shall mean the fair value of all warrants, options and other
similar rights issued to a third party in connection with an Alternate
Transaction, determined by using a standard Black-Scholes option-pricing model
using a reasonable and appropriate expected volatility percentage based on
applicable volatility data from an investment banking firm of nationally
recognized reputation.
 
 
viii

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