Exhibit 10.7

 

EXHIBIT “C”

 

Registration Rights

 

1. Definitions.

 

(a) As used in this Exhibit C, the following terms shall have the meanings:

 

1. “Affiliate,” of any specified Person means any other Person who directly, or
indirectly through one or more intermediaries, is in control of, is controlled
by, or is under common control with, such specified Person. For purposes of this
definition, control of a Person means the power, directly or indirectly, to
direct or cause the direction of the management and policies of such Person
whether by contract, securities ownership or otherwise; and the terms
“controlling” and “controlled” have the respective meanings correlative to the
foregoing.

 

2. “Commission” means the Securities and Exchange Commission.

 

3. “Company” shall mean Paradigm Genetics, Inc.

 

4. “Exchange Act” means the Securities Exchange Act of 1934, as amended, and the
rules and regulations of the Commission thereunder, or any similar successor
statute.

 

5. “Holder” means Stonegate Securities, Inc. and any permitted transferee or
assignee of Registrable Securities who agrees to become bound by all of the
terms and provisions of this Exhibit C.

 

6. “Person” means any individual, partnership, corporation, limited liability
company, joint stock company, association, trust, unincorporated organization,
or a government agency or political subdivision thereof.

 

7. “Placement” means any offering of securities of the Company pursuant to which
Holder serves as a placement agent or underwriter, whether on a best efforts
basis or otherwise.

 

8. “Prospectus” means the prospectus (including any preliminary prospectus
and/or any final prospectus filed pursuant to Rule 424(b) under the Securities
Act and any prospectus that discloses information previously omitted from a
prospectus filed as part of an effective registration statement in reliance on
Rule 430A under the Securities Act) included in the Registration Statement, as
amended or supplemented by any prospectus supplement with respect to the terms
of the offering of any portion of the Registrable Securities covered by the
Registration Statement and by all other amendments and supplements to such
prospectus, including all material incorporated by reference in such prospectus
and all documents filed after the date of such prospectus by the Company under
the Exchange Act and incorporated by reference therein.

 

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9. “Public Offering” means an offer registered with the Commission and the
appropriate state securities commissions by the Company of its Common Stock and
made pursuant to the Securities Act.

 

10. “Registrable Securities” means the shares of common stock issued to
Stonegate Securities, Inc. or its designated affiliates pursuant to the terms of
the Placement Agency Agreement; provided, however, a share of common stock shall
cease to be a Registrable Security for purposes of this Exhibit C when it no
longer is a Restricted Security.

 

11. “Registration Statement” means a registration statement of the Company filed
on Form S-3 under the Securities Act providing for the registration of, and the
sale on a continuous or delayed basis by the holders of, all of the Registrable
Securities pursuant to Rule 415 under the Securities Act, including the
Prospectus contained therein and forming a part thereof, any amendments to such
registration statement and supplements to such Prospectus, and all exhibits and
other material incorporated by reference in such registration statement and
Prospectus. In the event that Form S-3 is unavailable for such a registration,
the Company shall use such other form as is available for such a registration.

 

12. “Restricted Security” means any share of common stock except any that (i)
have been registered pursuant to an effective registration statement under the
Securities Act and sold in a manner contemplated by the prospectus included in
such registration statement, (ii) have been transferred in compliance with the
resale provisions of Rule 144 under the Securities Act (or any successor
provision thereto) or is transferable pursuant to paragraph (k) of Rule 144
under the Securities Act (or any successor provision thereto), or (iii)
otherwise has been transferred and are not subject to transfer restrictions
under the Securities Act.

 

13. “Securities Act” means the Securities Act of 1933, as amended, and the rules
and regulations of the Commission thereunder, or any similar successor statute.

 

  (a) All capitalized terms used and not defined herein have the respective
meaning assigned to them in the Subscription Agreement.

 

2. Registration.

 

  (a) Initial Registration Statement. The Company hereby grants to Holder, with
respect to the Registrable Securities, registration rights identical to those
granted to the purchasers in the Placement and will include the Registrable
Securities in any registration statement filed for the purchasers in the
Placement.

 

  (b) Piggyback Registration Rights.

 

(i) Whenever the Company proposes to register any of its Common Shares or any
other common shares of the Company under the Securities Act (other than a (A) on
Form S-8 or S-4 or any successor or similar forms, (B) relating to Common Shares
or any other common shares of the Company issuable upon exercise of employee or
consultant share options or in

 

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connection with any employee benefit or similar plan of the Company or (C) in
connection with a direct or indirect acquisition by the Company of another
Person or any transaction with respect to which Rule 145 (or any successor
provision) under the Securities Act applies), whether or not for sale for its
own account, it will each such time, give prompt written notice at least 20 days
prior to the anticipated filing date of the registration statement relating to
such registration to the Holders, which notice shall set forth such Holders’
rights under this Section 2(b) and shall offer the Holders the opportunity to
include in such registration statement such number of Registrable Securities as
the Holders may request. Upon the written request of a Holder made within 10
days after the receipt of notice from the Company (which request shall specify
the number of Registrable Securities intended to be disposed of by such
Holders), the Company will use its best efforts to effect the registration under
the Securities Act of all Registrable Securities that the Company has been so
requested to register by the Holders, to the extent requisite to permit the
disposition of the Registrable Securities to be so registered; provided,
however, that (A) if such registration involves a Public Offering, the Holders
must sell their Registrable Securities to the underwriters on the same terms and
conditions as apply to the Company and (B) if, at any time after giving written
notice of its intention to register any Registrable Securities pursuant to this
Section 2(b) and prior to the effective date of the registration statement filed
in connection with such registration, the Company shall determine for any reason
not to register such Registrable Securities, the Company shall give written
notice to the Holders and, thereupon, shall be relieved of its obligation to
register any Registrable Securities in connection with such registration. The
Company’s obligations under this Section 2(b) shall terminate on the date that
the registration statement to be filed in accordance with Section 2(a) is
declared effective by the Commission.

 

(ii) If a registration pursuant to this Section 2(b) involves a Public Offering
and the managing underwriter thereof advises the Company that, in its view, the
number of Common Shares, if any, or other Common Shares that the Company and the
Holders intend to include in such registration exceeds the largest number of
Common Shares (including any other Common Shares or warrants of the Company)
that can be sold without having an adverse effect on such Public Offering (the
“Maximum Offering Size”), the Company will include in such registration only
that number of Common Shares which does not exceed the Maximum Offering Size, in
the following order of priorities: (1) first, all securities the Company
proposes to sell for its own account, (2) second, up to the full number of
securities proposed to be registered for the account of the holders of
securities entitled to inclusion of their securities in the Registration
Statement by reason of demand registration rights, and (3) third, the securities
requested to be registered by other holders of securities entitled to
participate in the registration, drawn from them pro-rata based on the number of
shares each has requested to be included in such registration and the Holders
pursuant to this Exhibit C.

 

If as a result of the proration provisions of this Section 2(b)(ii), the Holders
are not entitled to include all such Registrable Securities in such
registration, such Holders may elect to withdraw their request to include any
Registrable Securities in such registration. Notwithstanding the foregoing, the
Company shall have no obligations under this Section 2(b) hereof at any time
that such Registrable Securities are the subject of an effective registration
statement.

 

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3. Obligations of the Company. In connection with the registration of the
Registrable Securities, the Company shall use its reasonable best efforts to:

 

  (a) Subject to the provisions of Section 3(o) hereof, promptly (i) prepare and
file with the Commission such amendments (including post-effective amendments)
to the Registration Statement and supplements to the Prospectus as may be
necessary to keep the Registration Statement continuously effective and in
compliance with the provisions of the Securities Act applicable thereto so as to
permit the Prospectus forming part thereof to be current and useable by Holders
for resales of the Registrable Securities for a period of two years from the
date the Registration Statement is first declared effective by the Commission
(the “Effective Time”) or such shorter period that will terminate when all the
Registrable Securities covered by the Registration Statement have been sold
pursuant thereto in accordance with the plan of distribution provided in the
Prospectus, transferred pursuant to Rule 144 under the Securities Act or
otherwise transferred in a manner that results in the delivery of new securities
not subject to transfer restrictions under the Securities Act (the “Registration
Period”) and (ii) take all lawful action such that each of (A) the Registration
Statement and any amendment thereto does not, when it becomes effective, contain
an untrue statement of a material fact or omit to state a material fact required
to be stated therein or necessary to make the statements therein, not misleading
and (B) the Prospectus forming part of the Registration Statement, and any
amendment or supplement thereto, does not at any time during the Registration
Period include an untrue statement of a material fact or omit to state a
material fact required to be stated therein or necessary to make the statements
therein, in light of the circumstances under which they were made, not
misleading. Notwithstanding the foregoing, the Company’s obligations hereunder
shall terminate as to any Holder at such time as that Holder’s Registrable
Securities can be sold under Rule 144(k);

 

  (b) During the Registration Period, comply with the provisions of the
Securities Act with respect to the Registrable Securities of the Company covered
by the Registration Statement until such time as all of such Registrable
Securities have been disposed of in accordance with the intended methods of
disposition by the Holders as set forth in the Prospectus forming part of the
Registration Statement;

 

  (c) (i) Prior to the filing with the Commission of any Registration Statement
(including any amendments thereto) and the distribution or delivery of any
Prospectus (including any supplements thereto), provide draft copies thereof
(including a copy of the accountant’s consent letter to be included in the
filing) to Stonegate Securities, Inc. (“Stonegate”) and reflect in such
documents all such comments as Stonegate reasonably may propose; and (ii)
furnish to each Holder whose Registrable Securities are included in the
Registration Statement, (A) promptly after the same is prepared and publicly
distributed, filed with the Commission, or received by the Company, one copy of
the Registration Statement, each Prospectus, and each amendment or supplement
thereto, and (B) such number of copies of the Prospectus and all amendments and
supplements thereto and such other documents, as such Holder may reasonably
request in order to facilitate the disposition of the Registrable Securities
owned by such Holder;

 

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  (d) (i) Register or qualify the Registrable Securities covered by the
Registration Statement under such securities or “Blue Sky” laws of all
jurisdictions requiring Blue Sky registration or qualification, (ii) prepare and
file in such jurisdictions such amendments (including post-effective amendments)
and supplements to such registrations and qualifications as may be necessary to
maintain the effectiveness thereof at all times during the Registration Period,
(iii) take all such other lawful actions as may be necessary to maintain such
registrations and qualifications in effect at all times during the Registration
Period, and (iv) take all such other lawful actions reasonably necessary or
advisable to qualify the Registrable Securities for sale in such jurisdictions;
provided, however, that the Company shall not be required in connection
therewith or as a condition thereto to (A) qualify to do business in any
jurisdiction where it would not otherwise be required to qualify but for this
Section 3(d), (B) subject itself to general taxation in any such jurisdiction or
(C) file a general consent to service of process in any such jurisdiction;

 

  (e) As promptly as practicable after becoming aware of such event, notify each
Holder of the occurrence of any event, as a result of which the Prospectus
included in the Registration Statement, as then in effect, includes an untrue
statement of a material fact or omits to state a material fact required to be
stated therein or necessary to make the statements therein, in light of the
circumstances under which they were made, not misleading, and promptly prepare
an amendment to the Registration Statement and supplement to the Prospectus to
correct such untrue statement or omission, and deliver a number of copies of
such supplement and amendment to each Holder as such Holder may reasonably
request;

 

  (f) Notify each Holder who holds Registrable Securities being sold (or, in the
event of an underwritten offering, the managing underwriters) of the issuance by
the Commission of any stop order or other suspension of the effectiveness of the
Registration Statement on the date of receipt of any such stop order or other
suspension, and take all lawful action to effect the withdrawal, recession or
removal of such stop order or other suspension;

 

  (g) Cause all the Registrable Securities covered by the Registration Statement
to be listed not later than the date that the Registration Statement is declared
effective by the Commission on the principal national securities exchange, or
included in an inter-dealer quotation system of a registered national securities
association, on or in which securities of the same class or series issued by the
Company are then listed or included;

 

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  (h) Maintain a transfer agent and registrar, which may be a single entity, for
the Registrable Securities not later than the effective date of the Registration
Statement;

 

  (i) Cooperate with the Holders who hold Registrable Securities being offered
to facilitate the timely preparation and delivery of certificates for the
Registrable Securities to be offered pursuant to the registration statement and
enable such certificates for the Registrable Securities to be in such
denominations or amounts, as the case may be, as the Holders reasonably may
request and registered in such names as the Holder may request; and, within
three business days after a registration statement which includes Registrable
Securities is declared effective by the Commission, deliver and cause legal
counsel selected by the Company to deliver to the transfer agent for the
Registrable Securities (with copies to the Holders whose Registrable Securities
are included in such registration statement) an appropriate instruction and, to
the extent necessary, an opinion of such counsel;

 

  (j) Take all such other lawful actions reasonably necessary to expedite and
facilitate the disposition by the Holders of their Registrable Securities in
accordance with the intended methods therefor provided in the Prospectus which
are customary under the circumstances;

 

  (k) Make generally available to its security holders as soon as practicable,
but in any event not later than three (3) months after (i) the effective date
(as defined in Rule 158(c) under the Securities Act) of the Registration
Statement, and (ii) the effective date of each post-effective amendment to the
Registration Statement, as the case may be, an earnings statement of the Company
and its subsidiaries complying with Section 11(a) of the Securities Act and the
rules and regulations of the Commission thereunder (including, at the option of
the Company, Rule 158) and which delivery shall be deemed complied with by the
Company’s filing of its reports under the Exchange Act;

 

  (l) In the event of an underwritten offering, promptly include or incorporate
in a Prospectus supplement or post-effective amendment to the Registration
Statement such information as the managers reasonably agree should be included
therein and to which the Company does not reasonably object and make all
required filings of such Prospectus supplement or post-effective amendment as
soon as practicable after it is notified of the matters to be included or
incorporated in such Prospectus supplement or post-effective amendment;

 

  (m) In connection with any underwritten offering, make such representations
and warranties to the Holders participating in such underwritten offering and to
the managers, in form, substance and scope as are customarily made by the
Company to underwriters in secondary underwritten offerings;

 

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  (n) In connection with any underwritten offering, deliver such documents and
certificates as may be reasonably required by the managers, if any; and

 

  (o) Notwithstanding anything to the contrary in Section 3, at any time after
the Registration Statement has been declared effective, the Company may delay
the disclosure of material non-public information concerning the Company, the
disclosure of which at the time is not, in the good faith opinion of the Company
and its counsel, in the best interest of the Company (a “Grace Period”);
provided, that the Company shall promptly (i) notify the Holders in writing of
the existence of material non-public information giving rise to a Grace Period
and the date on which the Grace Period will begin, and (ii) notify the Holders
in writing in advance of, or on the same date on which, the Grace Period ends;
and, provided further, that during any consecutive 365 day period, there shall
be only two Grace Periods, such Grace Periods in total not to exceed 45 days.
For purposes of determining the length of a Grace Period above, the Grace Period
shall begin on and include the date the Holders receive the notice referred to
in clause (i) and shall end on and include the date specified as the Grace
Period ending date in the notice referred to in clause (ii).

 

Notwithstanding the foregoing, the Company shall have no obligations under
Section 3(l) through (n) unless it is effecting an underwritten offering
pursuant to Section 2(b).

 

4. Obligations of the Holders. In connection with the registration of the
Registrable Securities, the Holders shall have the following obligations, which
obligations shall be several and not joint:

 

  (a) Prior to the first anticipated filing date of the Registration Statement
under Section 2 hereof, the Company shall provide the Holders with a draft of
the Registration Statement, including such information about the Holder as has
been provided in the Questionnaire completed by the Holder, together with
whatever confirmations, certificates or consents as may be reasonably requested
by the Company. In connection with any other Registration Statement including
the Holders, it shall be a condition precedent to the obligations of the Company
to complete the registration pursuant to this Exhibit C with respect to the
Registrable Securities of a particular Holder that such Holder shall furnish to
the Company such information regarding itself, the Registrable Securities held
by it and the intended method of disposition of the Registrable Securities held
by it as shall be reasonably required to effect the registration of such
Registrable Securities and shall execute such documents in connection with such
registration as the Company may reasonably request. At least ten business days
prior to the first anticipated filing date of the Registration Statement, the
Company shall notify each Holder and its counsel, whether in-house or otherwise
(“Counsel”) of the information the Company requires from each such Holder (the
“Requested Information”) if such Holder elects to have any of its Registrable
Securities

 

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included in the Registration Statement. If at least four business days prior to
the anticipated filing date the Company has not received the Requested
Information from a Holder (a “Non-Responsive Holder”) or its Counsel, then the
Company shall send such Non-Responsive Holder and its Counsel a reminder of such
information request. If at least two business days prior to the anticipated
filing date the Company still has not received the Requested Information from
such Non-Responsive Holder or its Counsel, then the Company may file the
Registration Statement without including Registrable Securities of such
Non-Responsive Holder. However, promptly upon receipt of the Requested
Information, and at the expense of the Non-Responsive Holder, the Company shall
file such amendment(s) to the Registration Statement as may be necessary to
include therein the Registrable Securities of the Non-Responsive Holder.

 

  (b) Each Holder by its acceptance of the Registrable Securities agrees to
cooperate with the Company in connection with the preparation and filing of the
Registration Statement hereunder, unless such Holder has notified the Company in
writing of its election to exclude all of its Registrable Securities from the
Registration Statement; the Company shall, on its part, ensure that Item 507 of
Regulation S-K of the Securities Act (regarding information on the selling
security holders) be complied with in connection with its preparation and filing
of the Registration Statement hereunder;

 

  (c) As promptly as practicable after becoming aware of such event, notify the
Company of the occurrence of any event, as a result of which the Prospectus
included in the Registration Statement, as then in effect, includes an untrue
statement of a material fact or omits to state a material fact required to be
stated therein or necessary to make the statements therein, in light of the
circumstances under which they were made, not misleading; and

 

  (d) Each Holder agrees that, upon receipt of any notice from the Company of
the occurrence of any event of the kind described in Section 3(e) or 3(f), it
shall immediately discontinue its disposition of Registrable Securities pursuant
to the Registration Statement covering such Registrable Securities until such
Holder’s receipt of the copies of the supplemented or amended Prospectus
contemplated by Section 3(e) and, if so directed by the Company, such Holder
shall deliver to the Company (at the expense of the Company) or destroy (and
deliver to the Company a certificate of destruction) all copies in such Holder’s
possession, of the Prospectus covering such Registrable Securities current at
the time of receipt of such notice.

 

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5. Expenses of Registration. All expenses, other than underwriting discounts and
commissions, incurred in connection with registrations, filings or
qualifications pursuant to Section 3, but including, without limitation, all
registration, listing, and qualifications fees, printing and engraving fees,
accounting fees, and the fees and disbursements of counsel for the Company shall
be borne by the Company. Any expenses of registration of counsel for the Holders
shall be borne by the holders of the Registrable Securities.

 

6. Indemnification and Contribution.

 

  (a) The Company shall indemnify and hold harmless each Holder and each
underwriter, if any, which facilitates the disposition of Registrable
Securities, and each of their respective officers and directors and each person
who controls such Holder or underwriter within the meaning of Section 15 of the
Securities Act or Section 20 of the Exchange Act (a “Company Indemnified
Person”) from and against any losses, claims, damages or liabilities, joint or
several, to which such Company Indemnified Person may become subject under the
Securities Act or otherwise, insofar as such losses, claims, damages or
liabilities (or actions in respect thereof) arise out of or are based upon an
untrue statement or alleged untrue statement of a material fact contained in any
Registration Statement or an omission or alleged omission to state therein a
material fact required to be stated therein or necessary to make the statements
therein, not misleading, or arise out of or are based upon an untrue statement
or alleged untrue statement of a material fact contained in any Prospectus or an
omission or alleged omission to state therein a material fact required to be
stated therein or necessary to make the statements therein, in the light of the
circumstances under which they were made, not misleading; and the Company hereby
agrees to reimburse such Company Indemnified Person for all reasonable legal and
other expenses incurred by them in connection with investigating or defending
any such action or claim as and when such expenses are incurred; provided,
however, that the Company shall not be liable to any such Company Indemnified
Person in any such case to the extent that any such loss, claim, damage or
liability arises out of or is based upon (i) an untrue statement or alleged
untrue statement made in, or an omission or alleged omission from, such
Registration Statement or Prospectus in reliance upon and in conformity with
written information furnished to the Company by such Company Indemnified Person
expressly for use therein or (ii) in the case of the occurrence of an event of
the type specified in Section 3(e), the use by the Company Indemnified Person of
an outdated or defective Prospectus after the Company has provided to such
Company Indemnified Person written notice that such Prospectus is outdated or
defective.

 

  (b) Indemnification by the Holders. Each Holder agrees, as a consequence of
the inclusion of any of its Registrable Securities in a Registration Statement,
severally and not jointly, to (i) indemnify and hold harmless the Company, its
directors (including any person who, with his or her consent, is named in the
Registration Statement as a director nominee of the Company), its officers and
each person, if

 

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any, who controls the Company within the meaning of either Section 15 of the
Securities Act or Section 20 of the Exchange Act (“Holder Indemnified Person”),
against any losses, claims, damages or liabilities to which the Holder
Indemnified Person may become subject, under the Securities Act or otherwise,
insofar as such losses, claims, damages or liabilities (or actions in respect
thereof) arise out of or are based upon an untrue statement or alleged untrue
statement of a material fact contained in such Registration Statement or
Prospectus or arise out of or are based upon the omission or alleged omission to
state therein a material fact required to be stated therein or necessary to make
the statements therein (in light of the circumstances under which they were
made, in the case of the Prospectus), not misleading, in each case to the
extent, but only to the extent, that such untrue statement or alleged untrue
statement or omission or alleged omission was made by such Holder in reliance
upon and in conformity with written information furnished to the Company by such
holder expressly for use therein; provided, however, that no Holder shall be
liable under this Section 6(b) for any amount in excess of the gross proceeds
paid to such Holder in respect of shares sold by it, and (ii) reimburse the
Holder Indemnified Person for any legal or other expenses incurred in connection
with investigating or defending any such action or claim as such expenses are
incurred.

 

  (c) Notice of Claims, etc. Promptly after receipt by a party seeking
indemnification pursuant to this Section 6 (an “Indemnified Party”) of written
notice of any investigation, claim, proceeding or other action in respect of
which indemnification is being sought (each, a “Claim”), the Indemnified Party
promptly shall notify the party against whom indemnification pursuant to this
Section 6 is being sought (the “Indemnifying Party”) of the commencement
thereof; but the omission to so notify the Indemnifying Party shall not relieve
it from any liability that it otherwise may have to the Indemnified Party,
except to the extent that the Indemnifying Party is materially prejudiced and
forfeits substantive rights and defenses by reason of such failure. In
connection with any Claim as to which both the Indemnifying Party and the
Indemnified Party are parties, the Indemnifying Party shall be entitled to
assume the defense thereof. Notwithstanding the assumption of the defense of any
Claim by the Indemnifying Party, the Indemnified Party shall have the right to
employ separate legal counsel and to participate in the defense of such Claim,
and the Indemnifying Party shall bear the reasonable fees, out-of-pocket costs
and expenses of such separate legal counsel to the Indemnified Party if (and
only if): (x) the Indemnifying Party shall have agreed to pay such fees, costs
and expenses, (y) the Indemnified Party and the Indemnifying Party shall
reasonably have concluded that representation of the Indemnified Party by the
Indemnifying Party by the same legal counsel would not be appropriate due to
actual or, as reasonably determined by legal counsel to the Indemnified Party,
potentially differing interests between such parties in the conduct of the
defense of such Claim, or if there may be legal defenses available to the
Indemnified Party that are in addition to or disparate from those available to
the Indemnifying Party, or (z) the Indemnifying Party shall have failed to
employ

 

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legal counsel reasonably satisfactory to the Indemnified Party within a
reasonable period of time after notice of the commencement of such Claim. If the
Indemnified Party employs separate legal counsel in circumstances other than as
described in clauses (x), (y) or (z) above, the fees, costs and expenses of such
legal counsel shall be borne exclusively by the Indemnified Party. Except as
provided above, the Indemnifying Party shall not, in connection with any Claim
in the same jurisdiction, be liable for the fees and expenses of more than one
firm of counsel for the Indemnified Party (together with appropriate local
counsel). The Indemnified Party shall not, without the prior written consent of
the Indemnifying Party (which consent shall not unreasonably be withheld),
settle or compromise any Claim or consent to the entry of any judgment that does
not include an unconditional release of the Indemnifying Party from all
liabilities with respect to such Claim or judgment.

 

  (d) Contribution. If the indemnification provided for in this Section 6 is
unavailable to or insufficient to hold harmless an Indemnified Person under
subsection (a) or (b) above in respect of any losses, claims, damages or
liabilities (or actions in respect thereof) referred to therein, then each
Indemnifying Party shall contribute to the amount paid or payable by such
Indemnified Party as a result of such losses, claims, damages or liabilities (or
actions in respect thereof) in such proportion as is appropriate to reflect the
relative fault of the Indemnifying Party and the Indemnified Party in connection
with the statements or omissions which resulted in such losses, claims, damages
or liabilities (or actions in respect thereof), as well as any other relevant
equitable considerations. The relative fault of such Indemnifying Party and
Indemnified Party shall be determined by reference to, among other things,
whether the untrue or alleged untrue statement of a material fact or omission or
alleged omission to state a material fact relates to information supplied by
such Indemnifying Party or by such Indemnified Party, and the parties’ relative
intent, knowledge, access to information and opportunity to correct or prevent
such statement or omission. The parties hereto agree that it would not be just
and equitable if contribution pursuant to this Section 6(d) were determined by
pro rata allocation (even if the Holders or any underwriters were treated as one
entity for such purpose) or by any other method of allocation which does not
take account of the equitable considerations referred to in this Section 6(d).
The amount paid or payable by an Indemnified Party as a result of the losses,
claims, damages or liabilities (or actions in respect thereof) referred to above
shall be deemed to include any legal or other fees or expenses reasonably
incurred by such Indemnified Party in connection with investigating or defending
any such action or claim. No person guilty of fraudulent misrepresentation
(within the meaning of Section 11(f) of the Securities Act) shall be entitled to
contribution from any person who was not guilty of such fraudulent
misrepresentation. The obligations of the Holders and any underwriters in this
Section 6(d) to contribute shall be several in proportion to the percentage of
Registrable Securities registered or underwritten, as the case may be, by them
and not joint.

 

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  (e) Notwithstanding any other provision of this Section 6, in no event shall
any (i) Holder be required to undertake liability to any person under this
Section 6 for any amounts in excess of the dollar amount of the gross proceeds
to be received by such Holder from the sale of such Holder’s Registrable
Securities pursuant to any Registration Statement under which such Registrable
Securities are to be registered under the Securities Act.

 

  (f) The obligations of the Company under this Section 6 shall be in addition
to any liability which the Company may otherwise have to any Indemnified Person
and the obligations of any Indemnified Person under this Section 6 shall be in
addition to any liability which such Indemnified Person may otherwise have to
the Company. The remedies provided in this Section 6 are not exclusive and shall
not limit any rights or remedies which may otherwise be available to an
indemnified party at law or in equity.

 

7. Rule 144. With a view to making available to the Holders the benefits of Rule
144 under the Securities Act or any other similar rule or regulation of the
Commission that may at any time permit the Holders to sell securities of the
Company to the public without registration (“Rule 144”), the Company agrees to:

 

  (a) comply with the provisions of paragraph (c) (1) of Rule 144; and

 

  (b) file with the Commission in a timely manner all reports and other
documents required to be filed by the Company pursuant to Section 13 or 15(d)
under the Exchange Act; and, if at any time it is not required to file such
reports but in the past had been required to or did file such reports, it will,
upon the request of any Holder, make available other information as required by,
and so long as necessary to permit sales of, its Registrable Securities pursuant
to Rule 144.

 

8. Assignment. The rights to have the Company register Registrable Securities
pursuant to this Exhibit C may be assigned or transferred only with the prior
written consent of the Company, and any such assignment or transfer without such
consent shall be void and of no effect, which consent shall not be unreasonably
withheld. Notwithstanding the foregoing, such consent of the Company shall not
be required with respect to any assignment or transfer of Registrable Securities
to an affiliate of Subscriber, including for this purpose if Subscriber is an
investment company, any fund or account advised by Subscriber’s investment
adviser or any affiliate thereof. In the event of any such permitted assignment
or transfer by the Holders to any permitted transferee of all or any portion of
such Registrable Securities such transfer will be allowed only if: (a) the
Holder agrees in writing with the transferee or assignee to assign such rights,
and a copy of such agreement is furnished to the Company within a reasonable
time after such assignment, (b) the Company is, within a reasonable time after
such transfer or assignment, furnished with written notice of (i) the name and
address of such transferee or assignee and (ii) the securities with respect to
which such registration rights are being transferred or assigned, (c)
immediately following such transfer or assignment, the securities so transferred
or assigned to the transferee or assignee constitute Restricted Securities, and
(d) at or before the time the Company received the written notice contemplated
by clause (b) of this sentence the transferee or assignee agrees in writing with
the Company to be bound by all of the provisions contained herein.

 

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9. Amendment and Waiver. Any provision of this Exhibit C may be amended and the
observance thereof may be waived (either generally or in a particular instance
and either retroactively or prospectively), only with the written consent of the
Company and Holders who hold a majority interest of the Registrable Securities.
Any amendment or waiver effected in accordance with this Section 9 shall be
binding upon each Holder and the Company.

 

10. Miscellaneous.

 

  (a) A person or entity shall be deemed to be a holder of Registrable
Securities whenever such person or entity owns of record such Registrable
Securities. If the Company receives conflicting instructions, notices or
elections from two or more persons or entities with respect to the same
Registrable Securities, the Company shall act upon the basis of instructions,
notice or election received from the registered owner of such Registrable
Securities.

 

  (b) Except as may be otherwise provided herein, any notice or other
communication or delivery required or permitted hereunder shall be in writing
and shall be delivered personally or sent by certified mail, postage prepaid, or
by a nationally recognized overnight courier service as follows, and shall be
deemed given when actually received.

 

if to the Company, to:   

Paradigm Genetics, Inc.

108 Alexander Drive

Research Triangle Park,

North Carolina

Facsimile: (919) 425-2915

Attn: J. Barry Buzogany, Esq.

if to the Holders, to:   

Stonegate Securities, Inc.

5940 Sherry Lane, Suite 410

Dallas, Texas 75225

Facsimile: (214) 987-1981

Attn: Mr. Scott Griffith, President

 

The Company or any Holder may change the foregoing address by notice given
pursuant to this Section 10(b).

 

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  (c) Failure of any party to exercise any right or remedy under this Exhibit C
or otherwise, or delay by a party in exercising such right or remedy, shall not
operate as a waiver thereof.

 

  (d) This Exhibit C shall be governed by and interpreted in accordance with the
laws of the State of Delaware.

 

  (e) The remedies provided in this Exhibit C are cumulative and not exclusive
of any remedies provided by law. If any term, provision, covenant or restriction
of this Exhibit C is held by a court of competent jurisdiction to be invalid,
illegal, void or unenforceable, the remainder of the terms, provisions,
covenants and restrictions set forth herein shall remain in full force and
effect and shall in no way be affected, impaired or invalidated, and the parties
hereto shall use their best efforts to find and employ an alternative means to
achieve the same or substantially the same result as that contemplated by such
term, provision, covenant or restriction. It is hereby stipulated and declared
to be the intention of the parties that they would have executed the remaining
terms, provisions, covenants and restrictions without including any of such that
may be hereafter declared invalid, illegal, void or unenforceable.

 

  (f) The Company shall not enter into any agreement with respect to its
securities that is inconsistent with the rights granted to the holders of
Registrable Securities in this Exhibit C or otherwise conflicts with the
provisions hereof. The Company is not currently a party to any agreement
granting any registration rights with respect to any of its securities to any
person which conflicts with the Company’s obligations hereunder or gives any
other party the right to include any securities in any Registration Statement
filed pursuant hereto, except for such rights and conflicts as have been
irrevocably waived.

 

  (g) This Exhibit C, the Placement Agency Agreement, the Initial Warrants and
the Representative’s Warrant constitute the entire agreement among the parties
hereto with respect to the subject matter hereof. There are no restrictions,
promises, warranties or undertakings, other than those set forth or referred to
herein. This Exhibit C and the Subscription Agreements supersede all prior
agreements and undertakings among the parties hereto with respect to the subject
matter hereof.

 

  (h) Subject to the requirements of Section 8 hereof, this Exhibit C shall
inure to the benefit of and be binding upon the successors and assigns of each
of the parties hereto.

 

  (i) All pronouns and any variations thereof refer to the masculine, feminine
or neuter, singular or plural, as the context may require.

 

  (j) The headings in this Exhibit C are for convenience of reference only and
shall not limit or otherwise affect the meaning thereof.

 

Placement Agency Agreement paradigm genetics Final Execution