Exhibit 10.102

 

Execution Copy

 

PURCHASE AGREEMENT

 

THIS PURCHASE AGREEMENT (“Agreement”) is made as of this 19th day of April, 2004
by and among INCARA PHARMACEUTICALS CORPORATION, a Delaware corporation (the
“Company”), and the Investors set forth on Schedule I affixed hereto, as such
Schedule may be amended from time to time in accordance with the terms of this
Agreement (each an “Investor” and collectively the “Investors”).

 

Recitals:

 

A. The Company desires to raise up to $10,260,000 through the issuance and sale
of up to 41,040,000 shares of the Company’s common stock, par value $0.001 per
share (the “Common Stock”), to the Investors at a per share purchase price of
$0.25, together with warrants to acquire up to 16,416,000 shares of Common
Stock, at an exercise price of $0.40 per share, in the form of Exhibit A annexed
hereto and made a part hereof (the “Investor Warrants”), for each share of
Common Stock purchased by the Investors pursuant to this Agreement (the “Private
Placement”); and

 

B. The Investors wish to purchase from the Company, and the Company wishes to
sell and issue to the Investors, upon the terms and conditions stated in this
Agreement, such number of shares of the Company’s Common Stock as is set forth
next to each such Investor’s name on Schedule I affixed hereto; and

 

C. The Company has agreed that, upon consummation of the purchase of the Common
Stock, the Company will issue to each Investor, or its designee, Investor
Warrants to purchase such number of shares of the Company’s Common Stock as is
set forth next to each such Investor’s name on Schedule I affixed hereto; and

 

D. The Company also has agreed, subject to the terms and conditions therein, to
draw down the balance of that certain Secured Convertible Debenture, dated as of
January 9, 2004, made by the Company payable to the order of Goodnow Capital,
LLC, in the original principal amount of $5,000,000 (the “Goodnow Debenture”),
and the conversion of the Goodnow Debenture is a condition to the closing of the
Private Placement; and

 

E. The Company has engaged SCO Securities LLC as its placement agent (the
“Placement Agent”) for the Private Placement on a “best efforts” basis; and

 

F. Contemporaneous with the sale of the Common Stock, the parties hereto will
enter into a Registration Rights Agreement, in the form attached hereto as
Exhibit B (the “Registration Rights Agreement”), pursuant to which, among other
things, the Company will agree to provide certain registration rights under the
Securities Act of 1933, as amended and the rules and regulations promulgated
thereunder, and applicable state securities laws (the “1933 Act”); and

 

G. The Company and the Investors are executing and delivering this Agreement in
reliance upon the exemption from securities registration afforded by the
provisions of Regulation D (“Regulation D”), as promulgated by the U.S.
Securities and Exchange Commission (the “SEC”) under the 1933 Act, as amended.

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NOW, THEREFORE, in consideration of the mutual promises made herein and for
other good and valuable consideration, the receipt and sufficiency of which is
hereby acknowledged, the parties hereto agree as follows:

 

1. Definitions. In addition to those terms defined above and elsewhere in this
Agreement, for the purposes of this Agreement, the following terms shall have
the meanings set forth in this Section 1:

 

“Affiliate” means, with respect to any Person, any other Person which directly
or indirectly Controls, is Controlled by, or is under common Control with, such
Person.

 

“Business Day” means a day, other than a Saturday or Sunday, on which banks in
New York City are open for the general transaction of business.

 

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

 

“Common Stock” has the meaning set forth in the Recitals, and also includes any
securities into which the Common Stock may be reclassified.

 

“Company’s Knowledge” means the actual knowledge of the officers of the Company,
after due inquiry and investigation.

 

“Control” means the possession, direct or indirect, of the power to direct or
cause the direction of the management and policies of a Person, whether through
the ownership of voting securities, by contract or otherwise.

 

“Goodnow Debenture” has the meaning set forth in the Recitals.

 

“Intellectual Property” means all of the following: (i) patents, patent
applications, patent disclosures and inventions (whether or not patentable and
whether or not reduced to practice); (ii) trademarks, service marks, trade
dress, trade names, corporate names, logos, slogans and Internet domain names,
together with all goodwill associated with each of the foregoing; (iii)
copyrights and copyrightable works; (iv) registrations, applications and
renewals for any of the foregoing; (v) trade secrets, confidential information
and know-how (including but not limited to ideas, formulae, compositions,
manufacturing and production processes and techniques, research and development
information, drawings, specifications, designs, business and marketing plans,
and customer and supplier lists and related information); and (vi) computer
software (including but not limited to data, data bases and documentation).

 

“Material Adverse Effect” means a material adverse effect on (i) the assets,
liabilities, results of operations, condition (financial or otherwise),
business, or prospects of the Company and its Subsidiaries taken as a whole, or
(ii) the ability of the Company to issue and sell the securities contemplated
hereby and to perform its obligations under the Transaction Documents.

 

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“Material Contract” means any contract of the Company or any Subsidiary that was
filed as an exhibit to the SEC Filings pursuant to Item 601(b)(4) or Item
601(b)(10) of Regulation S-K.

 

“Net Escrow Amount” means the Escrow Amount (as defined in Section 3.1) less the
Cash Placement Agent Fee (as defined in Section 5.20) and the Placement Agent
Fees (as defined in Section 10.5).

 

“Person” means an individual, corporation, partnership, limited liability
company, trust, business trust, association, joint stock company, joint venture,
sole proprietorship, unincorporated organization, governmental authority or any
other form of entity not specifically listed herein.

 

“Placement Agent Agreement” means that certain letter agreement, dated as of
October 1, 2003, by and between the Company and SCO Financial Group LLC, an
Affiliate of the Placement Agent.

 

“SEC Filings” has the meaning set forth in Section 5.7.

 

“Securities” means the Shares, the Warrants and the Warrant Shares.

 

“Shares” means the shares of Common Stock being purchased by the Investors
hereunder.

 

“Subsidiary” has the meaning set forth in Section 5.1.

 

“Transaction Documents” means this Agreement, the Warrants, and the Registration
Rights Agreement.

 

“Warrants” means the Investor Warrants and the Placement Agent Warrants (as
defined in Section 5.20).

 

“Warrant Shares” means the shares of Common Stock issuable upon exercise of the
Warrants.

 

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

 

2. Purchase and Sale of the Shares. Subject to the terms and conditions of this
Agreement, at the Closing (as defined in Section 4), the Investors listed on
Schedule I attached hereto, which Schedule I may be amended from time to time to
add additional Investors who agree to purchase Common Stock in the Private
Placement by executing a counterpart to this Agreement following the date hereof
(collectively, the “Investors”), shall severally, and not jointly, purchase, and
the Company shall sell and issue to the Investors, the Shares in the respective
amounts set forth opposite their names on Schedule I affixed hereto, in exchange
for

 

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the cash consideration set forth opposite their respective names on Schedule I
affixed hereto. Also at the Closing, the Company shall issue the Investor
Warrants to the Investors, or their respective designees, in such amounts as set
forth opposite their respective names on Schedule I affixed hereto.

 

3. Escrow of Purchase Price.

 

3.1. Simultaneously with the execution and delivery of this Agreement by an
Investor, such Investor shall (i) promptly cause a wire transfer of immediately
available funds (U.S. dollars) in an amount representing such Investor’s
“Aggregate Purchase Price”, as set forth on such Investor’s signature page and
opposite such Investor’s name on Schedule I affixed hereto, to be paid to the
non-interest bearing escrow account of Lowenstein Sandler PC, the Placement
Agent’s counsel (“Placement Agent Counsel”), set forth on Schedule II affixed
hereto (the aggregate amounts being held in escrow are referred to herein as the
“Escrow Amount”) and (ii) deliver to the Placement Agent a duly executed
counterpart to the Registration Rights Agreement. Placement Agent Counsel shall
hold the Escrow Amount in escrow until Placement Agent Counsel receives written
instructions from the Company and the Placement Agent authorizing the release of
the Escrow Amount in accordance with Section 4. If Placement Agent Counsel has
not released the Escrow Amount pursuant to this Section 3.1, then, on the sooner
of (x) June 30, 2004, or (y) receipt of written instructions from the Company or
the Placement Agent to terminate the escrow and return the Escrow Amount to the
Investors, Placement Agent Counsel shall return to each Investor the portion of
the Escrow Amount such Investor delivered to the Placement Agent Counsel, but
only to the extent of the funds actually received by the Placement Agent Counsel
pursuant to this Agreement.

 

3.2. The Company and the Investors acknowledge and agree for the benefit of
Placement Agent Counsel (which shall be deemed to be a third party beneficiary
of this Section 3) as follows:

 

(a) Placement Agent Counsel (i) is not responsible for the performance by the
Company, the Investors or Placement Agent of this Agreement or any of the other
Transaction Documents or for determining or compelling compliance therewith,
(ii) is only responsible for (A) holding the Escrow Amount in escrow pending
receipt of written instructions from Placement Agent and/or the Company (as
provided herein) directing the release of the Escrow Amount and (B) disbursing
the Escrow Amount in accordance with the written instructions from the Company
and/or the Placement Agent (as provided herein) (each of the responsibilities of
Placement Agent Counsel in clauses (A) and (B) being ministerial in nature, and
no implied duties or obligations of any kind shall be read into this Agreement
against or on the part of Placement Agent Counsel) (collectively, the “Placement
Agent Counsel Duties”), (iii) shall not be obligated to take any legal or other
action hereunder which might in its judgment involve or cause it to incur any
expense or liability unless it shall have been furnished with indemnification
acceptable to it, in its sole discretion, (iv) may rely on and shall be
protected in acting or refraining from acting upon any written notice,
instruction (including, without limitation, wire transfer instructions, whether
incorporated herein or provided in a separate written instruction), instrument,
statement, certificate, request or other document furnished to it hereunder and
believed by it to be genuine and to have been signed or presented by the proper
Person, and shall have no responsibility for making inquiry as to, or for
determining, the genuineness, accuracy or

 

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validity thereof, or of the authority of the Person signing or presenting the
same, (v) may consult counsel satisfactory to it, and the written opinion or
advice of such counsel in any instance shall be full and complete authorization
and protection in respect of any action taken, suffered or omitted by it
hereunder in good faith and in accordance with the opinion or advice of such
counsel, and (vi) shall be authorized to distribute, at the Closing, to
Placement Agent Counsel the Placement Agent Counsel Fees. Documents and written
materials referred to in this Section 3.2(a) include, without limitation, e-mail
and other electronic transmissions capable of being printed, whether or not they
are in fact printed; and any such e-mail or other electronic transmission may be
deemed and treated by Placement Agent Counsel as having been signed or presented
by a Person if it bears, as sender, the Person’s e-mail address.

 

(b) Placement Agent Counsel shall not be liable to anyone for any action taken
or omitted to be taken by it hereunder, except in the case of Placement Agent
Counsel’s gross negligence or willful misconduct in breach of the Placement
Agent Counsel Duties. IN NO EVENT SHALL PLACEMENT AGENT BE LIABLE FOR INDIRECT,
PUNITIVE, SPECIAL OR CONSEQUENTIAL DAMAGE OR LOSS (INCLUDING BUT NOT LIMITED TO
LOST PROFITS) WHATSOEVER, EVEN IF PLACEMENT AGENT COUNSEL HAS BEEN INFORMED OF
THE LIKELIHOOD OF SUCH LOSS OR DAMAGE AND REGARDLESS OF THE FORM OF ACTION.

 

(c) The Company and the Investors hereby indemnify and hold harmless Placement
Agent Counsel from and against, any and all loss, liability, cost, damage and
expense, including, without limitation, reasonable counsel fees and expenses,
which Placement Agent Counsel may suffer or incur by reason of any action, claim
or proceeding brought against Placement Agent Counsel arising out of or relating
to the performance of the Placement Agent Counsel Duties, unless such action,
claim or proceeding is the result of the willful misconduct or gross negligence
of Placement Agent Counsel.

 

(d) Placement Agent Counsel has acted as legal counsel to the Placement Agent in
connection with this Agreement and the other Transaction Documents, is merely
acting as a stakeholder under this Agreement and is, therefore, hereby
authorized to continue acting as legal counsel to Placement Agent including,
without limitation, with regard to any dispute arising out of this Agreement,
the other Transaction Documents, the Escrow Amount or any other matter. Each of
the Company and the Investors hereby expressly consents to permit Placement
Agent Counsel to represent the Placement Agent in connection with all matters
relating to this Agreement, including, without limitation, with regard to any
dispute arising out of this Agreement, the other Transaction Documents, the
Escrow Amount or any other matter, and hereby waives any conflict of interest or
appearance of conflict or impropriety with respect to such representation. Each
of the Company and the Investors has consulted with its own counsel specifically
about this Section 3 to the extent they deemed necessary, and has entered into
this Agreement after being satisfied with such advice.

 

4. Closing. Upon satisfaction of the conditions to Closing set forth in Section
7 hereof, the Company and the Placement Agent shall jointly instruct Placement
Agent Counsel to release (i) the Net Escrow Amount to the Company (the date of
receipt of the Net Escrow Amount by the Company is hereinafter referred to as
the “Closing Date”), (ii) the Cash Placement Agent Fee to the Placement Agent
and (iii) the Placement Agent Counsel Fees to

 

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Placement Agent Counsel. Within three (3) Business Days after the Closing Date,
the Company shall issue to each Investor a certificate or certificates,
registered in such name or names as each such Investor may designate,
representing the number of shares of Common Stock as is set forth opposite such
Investor’s name on Schedule I affixed hereto, and Company shall also issue to
each such Investor, or such Investor’s respective designees, the number of
Investor Warrants as is set forth opposite such Investor’s name on Schedule I
affixed hereto (the “Closing”). On the Closing Date, the Company shall also
issue to the Placement Agent the Placement Agent Warrants (as defined in Section
5.20). The purchase and sale of the Shares and the issuance of the Warrants in
the Closing shall take place at the offices of Placement Agent Counsel, 1330
Avenue of the Americas, 21st Floor, New York, New York 10019, or at such other
location and on such other date as the Company and the Placement Agent shall
mutually agree.

 

5. Representations and Warranties of the Company. The Company hereby represents
and warrants to the Investors and the Placement Agent on and as of the Closing
Date, that, except as set forth in the schedules delivered herewith
(collectively, the “Disclosure Schedules”):

 

5.1. Organization, Good Standing and Qualification. Each of the Company and its
subsidiaries is a corporation duly incorporated, validly existing and in good
standing under the laws of the jurisdiction of its incorporation and has all
requisite corporate power and authority to carry on its business as now
conducted and own its properties. Each of the Company and its subsidiaries is
duly qualified to do business as a foreign corporation and is in good standing
in each jurisdiction in which the conduct of its business or its ownership or
leasing of property makes such qualification or licensing necessary unless the
failure to so qualify would not have a Material Adverse Effect. The Company’s
subsidiaries are reflected on Schedule 5.1 hereto (“Subsidiaries”).

 

5.2. Authorization. The Company has full power and authority and has taken all
requisite action on the part of the Company, its officers and directors
necessary for the (i) authorization, execution and delivery of the Transaction
Documents to which it is a party, (ii) authorization of the performance of all
obligations of the Company hereunder or thereunder, and (iii) authorization,
issuance (or reservation for issuance) and delivery of the Securities. The
Transaction Documents to which it is a party constitute the legal, valid and
binding obligations of the Company, enforceable against the Company in
accordance with their respective terms, subject to bankruptcy, insolvency,
fraudulent transfer, reorganization, moratorium and similar laws of general
applicability, relating to or affecting creditors’ rights generally.

 

5.3. Capitalization. Set forth on Schedule 5.3 hereto is (a) the authorized
capital stock of the Company on the date hereof; (b) the number of shares of
capital stock issued and outstanding; (c) the number of shares of capital stock
issuable pursuant to the Company’s stock plans; and (d) the number of shares of
capital stock issuable and reserved for issuance pursuant to securities (other
than the Securities) exercisable for, or convertible into or exchangeable for,
any shares of capital stock of the Company. All of the issued and outstanding
shares of the Company’s capital stock have been duly authorized and validly
issued and are fully paid, nonassessable and were issued in full compliance with
applicable law. Except as set forth on Schedule 5.3, no Person is entitled to
pre-emptive or similar statutory or contractual rights with respect to any
securities of the Company. Except as set forth on Schedule 5.3, there are no

 

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outstanding warrants, options, convertible securities or other rights,
agreements or arrangements of any character under which the Company or any of
the Subsidiaries is or may be obligated to issue any equity securities of any
kind and except as contemplated by this Agreement, neither the Company nor any
of its Subsidiaries is currently in negotiations for the issuance of any equity
securities of any kind. Except as set forth on Schedule 5.3, there are no voting
agreements, buy-sell agreements, option or right of first purchase agreements or
other agreements of any kind among any of the securityholders of the Company
relating to the securities of the Company held by them. Except as set forth on
Schedule 5.3, the Company has not granted any Person the right to require the
Company to register any securities of the Company under the 1933 Act, whether on
a demand basis or in connection with the registration of securities of the
Company for its own account or for the account of any other Person.

 

5.4. Valid Issuance. The Shares have been duly authorized and, when issued and
paid for pursuant to this Agreement, will be validly issued, fully paid and
non-assessable, free and clear of all encumbrances and restrictions, except for
restrictions on transfer set forth in the Transaction Documents or imposed by
applicable securities laws. The Warrants have been duly authorized. Upon the due
exercise of the Warrants, the Warrant Shares will be validly issued, fully paid
and non-assessable, free and clear of all encumbrances and restrictions, except
for restrictions on transfer set forth in the Transaction Documents or imposed
by applicable securities laws. The Company has reserved a sufficient number of
shares of Common Stock for issuance upon exercise of the Warrants, free and
clear of all encumbrances and restrictions, except for restrictions on transfer
set forth in the Transaction Documents or imposed by applicable securities laws.

 

5.5. Consents. The execution, delivery and performance by the Company of the
Transaction Documents to which it is a party and the offer, issuance and sale of
the Securities require no consent of, action by or in respect of, or filing
with, any Person, governmental body, agency, or official or securities
association or exchange, other than those consents set forth on Schedule 5.5 and
filings that have been made pursuant to applicable state securities laws and
post-sale filings pursuant to applicable state and federal securities laws which
the Company undertakes to file within the applicable time periods. The Company
has taken all action necessary to exempt (i) the issuance and sale of the
Securities, (ii) the issuance of the Warrant Shares upon due exercise of the
Warrants, and (iii) the other transactions contemplated by the Transaction
Documents from the provisions of any anti-takeover, business combination or
control share law or statute binding on the Company or to which the Company or
any of its assets and properties may be subject or any provision of the
Company’s Certificate of Incorporation, Bylaws or any shareholder rights
agreement that is or could become applicable to the Investors as a result of the
transactions contemplated hereby, including without limitation, the issuance of
the Securities and the ownership, disposition or voting of the Securities by the
Investors or the exercise of any right granted to the Investors pursuant to this
Agreement or the other Transaction Documents.

 

5.6. No Conflict, Breach, Violation or Default. Except as set forth in the
Disclosure Schedules, the execution, delivery and performance by the Company of
the Transaction Documents to which it is a party and the issuance and sale of
the Securities will not conflict with or result in a breach or violation of any
of the terms and provisions of, or constitute

 

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a default under (i) the Company’s Certificate of Incorporation or Bylaws, both
as in effect on the date hereof (copies of which have been provided to the
Investors before the date hereof), or (ii)(a) any statute, rule, regulation or
order of any governmental agency or body or any court, domestic or foreign,
having jurisdiction over the Company or any of its properties, or (b) except as
set forth on Schedule 5.6, any agreement or instrument to which the Company is a
party or by which the Company is bound or to which any of the properties of the
Company is subject.

 

5.7. Delivery of SEC Filings; Business. The Company has made available to the
Investors copies of the Company’s most recent Annual Report on Form 10-K for the
fiscal year ended September 30, 2003 (the “2003 10-K”) and all other schedules
and reports filed by the Company pursuant to the 1934 Act since the filing of
the 2003 10-K and prior to the date hereof (collectively, the “SEC Filings”).
The Company hereby represents and warrants that the SEC Filings are the only
filings required of the Company pursuant to the 1934 Act for such period. The
Company is engaged only in the business described in the SEC Filings and the SEC
Filings contain a complete and accurate description of the business of the
Company.

 

5.8. No Material Adverse Change. Since September 30, 2003, except as identified
and described in the SEC Filings or as set forth on Schedule 5.8 hereto, there
has not been:

 

(a) any change in the consolidated assets, liabilities, financial condition or
operating results of the Company from that reflected in the financial statements
included in the Company’s most recent Quarterly Report on Form 10-Q, except
changes in the ordinary course of business which have not had, in the aggregate,
a Material Adverse Effect;

 

(b) any declaration or payment of any dividend, or any authorization or payment
of any distribution, on any of the capital stock of the Company, or any
redemption or repurchase of any securities of the Company;

 

(c) any material damage, destruction or loss, whether or not covered by
insurance to any assets or properties of the Company or its Subsidiaries;

 

(d) any waiver by the Company or any Subsidiary of a valuable right or of a
material debt owed to it;

 

(e) any satisfaction or discharge of any lien, claim or encumbrance or payment
of any obligation by the Company or a Subsidiary, except in the ordinary course
of business and which is not material to the assets, properties, financial
condition, operating results or business of the Company and its Subsidiaries
taken as a whole;

 

(f) any change or amendment to the Company’s Certificate of Incorporation or
Bylaws, or material change to any material contract or arrangement by which the
Company or any Subsidiary is bound, or to which any of their respective assets
or properties is subject;

 

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(g) any material labor difficulties or labor union organizing activities with
respect to employees of the Company or any Subsidiary;

 

(h) any transaction entered into by the Company or a Subsidiary other than in
the ordinary course of business;

 

(i) the loss of the services of any key employee, or material change in the
composition or duties of the senior management of the Company or any Subsidiary;

 

(j) the loss or threatened loss of any customer which could be material to the
Company’s business; or

 

(k) any other event or condition of any character that might have a Material
Adverse Effect.

 

5.9. SEC Filings; Material Contracts.

 

(a) At the time of filing thereof, the SEC Filings complied as to form in all
material respects with the requirements of the 1934 Act and did 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. The Company is not (with or without
the lapse of time or the giving of notice, or both) in breach or default of any
Material Contract and, to the Company’s Knowledge, no other party to any
Material Contract is (with or without the lapse of time or the giving of notice,
or both) in breach or default of any Material Contract. Neither the Company nor
any Subsidiary has received any notice of the intention of any party to
terminate any Material Contract.

 

(b) During the preceding two (2) years, except as set forth in Schedule 5.9,
each registration statement and any amendment thereto filed by the Company
pursuant to the 1933 Act, as of the date such statement or amendment became
effective, complied as to form in all material respects with the 1933 Act and
did not contain any untrue statement of a material fact or omit to state any
material fact required to be stated therein or necessary in order to make the
statements made therein, in light of the circumstances under which they were
made, not misleading; and each prospectus filed pursuant to Rule 424(b) under
the 1933 Act, as of its issue date and as of the closing of any sale of
securities pursuant thereto did not contain any untrue statement of a material
fact or omit to state any material fact required to be stated therein or
necessary in order to make the statements made therein, in the light of the
circumstances under which they were made, not misleading.

 

5.10. Tax Matters. Each of the Company and each Subsidiary has timely prepared
and filed all tax returns required to have been filed by the Company or such
Subsidiary with all appropriate governmental agencies and timely paid all taxes
owed by it. The charges, accruals and reserves on the books of the Company in
respect of taxes for all fiscal periods are adequate in all material respects,
and there are no material unpaid assessments against the Company or any
Subsidiary nor, to the Company’s Knowledge, any basis for the assessment of any
additional taxes, penalties or interest for any fiscal period or audits by any
federal, state or

 

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local taxing authority except for any assessment which is not material to the
Company and its Subsidiaries, taken as a whole. All taxes and other assessments
and levies that the Company or any Subsidiary is required to withhold or to
collect for payment have been duly withheld and collected and paid to the proper
governmental entity or third party when due. There are no tax liens or claims
pending or, to the Company’s Knowledge, threatened against the Company or any
Subsidiary or any of their respective assets or property. There are no
outstanding tax sharing agreements or other such arrangements between the
Company and any Subsidiary or any other corporation or entity.

 

5.11. Title to Properties. Except as disclosed in the SEC Filings or Schedule
5.11, the Company and each Subsidiary has good and marketable title to all real
properties and all other properties and assets owned by them, in each case free
from liens, encumbrances and defects that would materially affect the value
thereof or materially interfere with the use made or currently planned to be
made thereof by them; and except as disclosed in the SEC Filings, the Company
and each Subsidiary holds any leased real or personal property under valid and
enforceable leases with no exceptions that would materially interfere with the
use made or currently planned to be made thereof by them.

 

5.12. Certificates, Authorities and Permits. The Company and each Subsidiary
possesses adequate certificates, authorities or permits issued by appropriate
governmental agencies or bodies necessary to conduct the business now operated
by them and has not received any notice of proceedings relating to the
revocation or modification of any such certificate, authority or permit that, if
determined adversely to the Company or any Subsidiary, would individually or in
the aggregate have a Material Adverse Effect.

 

5.13. No Labor Disputes. No material labor dispute with the employees of the
Company or any Subsidiary exists or, to the Company’s Knowledge, is imminent.

 

5.14. Benefit Plans.

 

(a) Schedule 5.14 contains a list and brief description of all “employee pension
benefit plans” (as defined in Section 3(2) of the Employee Retirement Income
Security Act of 1974, as amended (“ERISA”)), maintained or contributed to by the
Company for the benefit of any of the Company or the Subsidiaries’ officers or
employees (“Pension Plans”) and all “employee welfare benefit plans” (as defined
in Section 3(1) of ERISA), bonus, stock option, stock purchase, deferred
compensation plans or arrangements and other employee fringe benefit plans
maintained, or contributed to, by the Company or the Subsidiaries for the
benefit of any of the officers or employees of the Company or the Subsidiaries
(all the foregoing, including Pension Plans, being herein called “Benefit
Plans”).

 

(b) Each Benefit Plan has been administered in all material respects in
accordance with its terms. The Company and all the Benefit Plans are in
compliance in all material respects with the applicable provisions of ERISA, the
Code, all other applicable laws and all applicable collective bargaining
agreements. All material reports, returns and similar documents with respect to
the Benefit Plans required to be filed with any governmental entity or
distributed to any Benefit Plan participant have been duly and timely filed or
distributed. There

 

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are no actions or proceedings pending, or, to the Company’s Knowledge,
threatened against or involving any Benefit Plan and, to the Company’s
Knowledge, there are no investigations by any governmental entity or other
claims (except routine claims for benefits payable in the normal operation of
the Benefit Plans) pending or threatened against or involving any Benefit Plan
or asserting any rights to benefits under any Benefit Plan. To the Company’s
Knowledge, there are no unasserted claims of the type that would be required to
be disclosed in Schedule 5.14 if pending or threatened that are considered
probable of assertion and that if asserted would have at least a reasonable
possibility of an adverse determination.

 

5.15. Intellectual Property.

 

(a) All Intellectual Property owned or used by the Company and/or the
Subsidiaries is currently in compliance with all legal requirements (including
timely filings, proofs and payments of fees). All Intellectual Property owned or
used by the Company and/or the Subsidiaries is valid and enforceable. No
Intellectual Property of the Company or the Subsidiaries which is necessary for
the conduct of the Company’s and each of the Subsidiaries’ respective businesses
as currently conducted or as currently proposed to be conducted has been or is
now involved in any cancellation, invalidity challenge, dispute or litigation,
and, to the Company’s Knowledge, no such action is threatened. No patent owned
or used by the Company and/or the Subsidiaries has been or is now involved in
any interference, reissue, re-examination or opposition proceeding.

 

(b) All of the licenses, sublicenses, royalty or other agreements concerning
Intellectual Property which are necessary for the conduct of the Company’s and
each of the Subsidiaries’ respective businesses as currently conducted or as
currently proposed to be conducted to which the Company or any Subsidiary is a
party or by which any of their assets are bound (other than generally
commercially available, non-custom, off-the-shelf software application programs)
(collectively, “License Agreements”) are valid and binding obligations of the
Company or the Subsidiaries that are parties thereto and, to the Company’s
Knowledge, to the other parties thereto. The License Agreements are enforceable
in accordance with their terms, except to the extent that enforcement thereof
may be limited by bankruptcy, insolvency, reorganization, moratorium, fraudulent
conveyance or other similar laws affecting the enforcement of creditors’ rights
generally, and there exists no event or condition which will result in a
material violation or breach of, or constitute (with or without due notice or
lapse of time or both) a default by the Company or any of the Subsidiaries under
any such License Agreement.

 

(c) The Company and the Subsidiaries own and/or have the valid right to use
pursuant to valid and enforceable License Agreements the Intellectual Property
which is necessary for the conduct of the Company’s and each of the
Subsidiaries’ respective businesses as currently conducted or as currently
proposed to be conducted in all jurisdictions in which they conduct their
businesses. Except as set forth in the SEC Filings or on Schedule 5.15, all
Intellectual Property of the Company and the Subsidiaries that is owned by any
of the foregoing are owned free and clear of all liens, encumbrances, adverse
claims or obligations to license all such owned Intellectual Property, other
than licenses entered into in the ordinary course of the Company’s and the
Subsidiaries’ businesses.

 

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(d) The Company and each of the Subsidiaries have taken all reasonable steps to
maintain, police and protect the Intellectual Property which it owns and/or
which is necessary for the conduct of the Company’s and each of the
Subsidiaries’ respective businesses as currently conducted or as currently
proposed to be conducted, including the execution of appropriate confidentiality
agreements and intellectual property and work product assignments and releases.
The conduct of the Company’s and the Subsidiaries’ businesses as currently
conducted does not infringe or otherwise impair or conflict with (collectively,
“Infringe”) any Intellectual Property rights of any third party, and, to the
Company’s Knowledge, the Intellectual Property rights of the Company and the
Subsidiaries which are necessary for the conduct of the Company’s and each of
the Subsidiaries’ respective businesses as currently conducted or as currently
proposed to be conducted are not being Infringed by any third party. There is no
litigation or order pending or outstanding or, to the Company’s Knowledge,
threatened or imminent, that seeks to limit or challenge or that concerns the
ownership, use, validity or enforceability of any Intellectual Property of the
Company and the Subsidiaries and the Company’s and the Subsidiaries’ use of any
Intellectual Property owned by a third party, and, to the Company’s Knowledge,
there is no valid basis for the same.

 

(e) The consummation of the transactions contemplated hereby will not result in
the alteration, loss, impairment of or restriction on the Company’s or any of
the Subsidiaries’ ownership or right to use any of the Intellectual Property
which is necessary for the conduct of the Company’s and each of the
Subsidiaries’ respective businesses as currently conducted or as currently
proposed to be conducted.

 

(f) To the Company’s Knowledge, all software owned by the Company or any of the
Subsidiaries, and, to the Company’s Knowledge, all software licensed from third
parties by the Company or any of the Subsidiaries, (i) is free from any material
defect, bug, virus, or programming, design or documentation error; and (ii)
conforms in all material respects to the specifications and purposes thereof.

 

(g) The Company and the Subsidiaries have taken reasonable steps to protect the
Company’s and the Subsidiaries’ rights in their confidential information and
trade secrets. Each employee, consultant and contractor who has had access to
proprietary Intellectual Property which is necessary for the conduct of the
Company’s and each of the Subsidiaries’ respective businesses as currently
conducted or as currently proposed to be conducted has executed an agreement to
maintain the confidentiality of such Intellectual Property and has executed
appropriate agreements that are substantially consistent with the Company’s
standard forms thereof. Except under confidentiality obligations, to the
Company’s Knowledge, there has been no material disclosure of any of the
Company’s or the Subsidiaries’ confidential information or trade secrets to any
third party.

 

5.16. Environmental Matters. Neither the Company nor any Subsidiary (i) is in
violation of any statute, rule, regulation, decision or order of any
governmental agency or body or any court, domestic or foreign, relating to the
use, disposal or release of hazardous or toxic substances or relating to the
protection or restoration of the environment or human exposure to hazardous or
toxic substances (collectively, “Environmental Laws”), (ii) owns or operates any

 

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real property contaminated with any substance that is subject to any
Environmental Laws, (iii) is liable for any off-site disposal or contamination
pursuant to any Environmental Laws, or (iv) is subject to any claim relating to
any Environmental Laws, which violation, contamination, liability or claim would
individually or in the aggregate have a Material Adverse Effect; and the Company
is not aware of any pending investigation that might lead to such a claim.

 

5.17. Litigation. Except as disclosed in the SEC Filings or on Schedule 5.17
hereto, there are no pending actions, suits or proceedings against or affecting
the Company, the Subsidiaries or any of its or their properties; and to the
Company’s Knowledge, no such actions, suits or proceedings are threatened or
contemplated.

 

5.18. Financial Statements. The financial statements included in each SEC Filing
fairly present the consolidated financial position of the Company as of the
dates shown and its consolidated results of operations and cash flows for the
periods shown, and such financial statements have been prepared in conformity
with United States generally accepted accounting principles applied on a
consistent basis. Except as set forth in the financial statements of the Company
included in the SEC Filings filed prior to the date hereof, the Company has no
liabilities, contingent or otherwise, except those which individually or in the
aggregate would not have a Material Adverse Effect.

 

5.19. Insurance Coverage. The Company maintains in full force and effect
insurance coverage that is customary for comparably situated companies for the
business being conducted and properties owned or leased by the Company, and the
Company reasonably believes such insurance coverage to be adequate against all
liabilities, claims and risks against which it is customary for comparably
situated companies to insure.

 

5.20. Brokers and Finders. Except as set forth on Schedule 5.20 and for the cash
commission to be paid (the “Cash Placement Agent Fee”) and warrants to be issued
(the “Placement Agent Warrants”) to the Placement Agent pursuant to the terms of
the Placement Agent Agreement, no Person will have, as a result of the
transactions contemplated by this Agreement, any valid right, interest or claim
against or upon the Company, any Subsidiary or any Investor for any commission,
fee or other compensation pursuant to any agreement, arrangement or
understanding entered into by or on behalf of the Company.

 

5.21. No Directed Selling Efforts or General Solicitation; Exemption from
Registration. Neither the Company nor any Person acting on its behalf has
conducted any general solicitation or general advertising (as those terms are
used in Regulation D) in connection with the offer or sale of any of the
Securities. Subject to the accuracy and completeness of the representations and
warranties of the respective Investors contained in Section 6 hereof, the offer,
sale and issuance by the Company to the Investors of the Securities are exempt
from the registration requirements of the 1933 Act.

 

5.22. No Integrated Offering. Neither the Company nor any of its Affiliates, nor
any Person acting on its or 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 adversely affect reliance by the Company on
Section 4(2) for the exemption from registration for the transactions
contemplated hereby or would require registration of the Securities under the
1933 Act.

 

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5.23. Questionable Payments. Neither the Company nor any of the Subsidiaries
nor, to the Company’s Knowledge, any of their respective current or former
stockholders, directors, officers, employees, agents or other Persons acting on
behalf of the Company or any Subsidiary, has on behalf of the Company or any
Subsidiary or in connection with their respective businesses: (a) used any
corporate funds for unlawful contributions, gifts, entertainment or other
unlawful expenses relating to political activity; (b) made any direct or
indirect unlawful payments to any governmental officials or employees from
corporate funds; (c) established or maintained any unlawful or unrecorded fund
of corporate monies or other assets; (d) knowingly made any false or fictitious
entries on the books and records of the Company; or (e) made any unlawful bribe,
rebate, payoff, influence payment, kickback or other unlawful payment of any
nature.

 

5.24. Disclosures. Neither the Transaction Documents (including the Disclosure
Schedules, any schedules or exhibits attached hereto or thereto) nor the SEC
Filings contain any untrue statement of a material fact or omit to state a
material fact necessary in order to make the statements contained therein not
misleading in light of the circumstances under which they were made. There is no
fact known to the Company that the Company has not disclosed to the Investors
which has had or which could be expected to have a Material Adverse Effect.

 

5.25. Use of Proceeds. The proceeds of the sale of the Shares hereunder shall be
used by the Company for research and development and general corporate purposes
consistent with its business as conducted or proposed to be conducted as of the
Closing Date.

 

5.26. Transactions With Affiliates. Except as disclosed in SEC Filings made on
or prior to the date hereof, none of the officers or directors of the Company
and, to the Company’s Knowledge, none of the employees of the Company is
presently a party to any transaction with the Company or a Subsidiary or to a
presently contemplated transaction (other than for services as employees,
officers and directors) that would be required to be disclosed pursuant to Item
404 of Regulation S-K promulgated under the 1933 Act, without regard to the
dollar thresholds contained in such Item.

 

6. Representations and Warranties of the Investors. Each of the Investors hereby
severally, and not jointly, represents and warrants to the Company and the
Placement Agent that:

 

6.1. Authorization. The execution, delivery and performance by the Investor of
the Transaction Documents to which such Investor is a party have been duly
authorized and will each constitute the valid and legally binding obligation of
the Investor, enforceable against the Investor in accordance with their
respective terms, subject to bankruptcy, insolvency, fraudulent transfer,
reorganization, moratorium and similar laws of general applicability, relating
to or affecting creditors’ rights generally.

 

6.2. Purchase Entirely for Own Account. The Securities to be received by the
Investor hereunder will be acquired for the Investor’s own account, not as
nominee or agent, and

 

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not with a view to the resale or distribution of any part thereof in violation
of the 1933 Act, and the Investor has no present intention of selling, granting
any participation in, or otherwise distributing the same in violation of the
1933 Act. The Investor is not a registered broker dealer or an entity engaged in
the business of being a broker dealer.

 

6.3. Investment Experience. The Investor can bear the economic risk and complete
loss of its investment in the Securities and has such knowledge and experience
in financial or business matters that it is capable of evaluating the merits and
risks of the investment contemplated hereby. The Investor is experienced in
making private investments in public equities, similar to the purchase of the
Securities hereunder.

 

6.4. Disclosure of Information. The Investor has had an opportunity to receive
all additional information related to the Company requested by it and to ask
questions of and receive answers from the Company regarding the Company, its
business and the terms and conditions of the offering of the Securities. The
Investor acknowledges receipt of copies of and its satisfactory review of the
SEC Filings. Neither such inquiries nor any other due diligence investigation
conducted by the Investor shall modify, amend or affect the Investor’s right to
rely on the Company’s representations and warranties contained in this
Agreement.

 

6.5. Restricted Securities. The Investor understands that the Securities are
characterized as “restricted securities” under the U.S. federal securities laws
inasmuch as they are being acquired from the Company in a transaction not
involving a public offering and that under such laws and applicable regulations
such securities may be resold without registration under the 1933 Act only in
certain limited circumstances.

 

6.6. Legends.

 

(a) It is understood that, except as provided below, certificates evidencing
such Securities may bear the following or any similar legend:

 

“The securities represented hereby may not be transferred unless (i) such
securities have been registered for sale pursuant to the Securities Act of 1933,
as amended, or (ii) the Company has received an opinion of counsel satisfactory
to it that such transfer may lawfully be made without registration under the
Securities Act of 1933 or qualification under applicable state securities laws.”

 

(b) If required by the authorities of any state in connection with the issuance
of sale of the Securities, the legend required by such state authority.

 

(c) From and after the registration of the Shares and the Warrant Shares for
resale pursuant to the Registration Rights Agreement, the Company shall, upon an
Investor’s written request, promptly cause certificates evidencing the
Securities to be replaced with certificates which do not bear such restrictive
legends, and Warrant Shares subsequently issued upon due exercise of the
Investor Warrants shall not bear such restrictive legends.

 

6.7. Accredited Investor. The Investor is an “accredited investor” as defined in
Rule 501(a) of Regulation D, as amended, under the 1933 Act.

 

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6.8. No General Solicitation. The Investor did not learn of the investment in
the Securities as a result of any “general advertising” or “general
solicitation” as those terms are contemplated in Regulation D, as amended, under
the 1933 Act.

 

6.9. Brokers and Finders. No Person will have, as a result of the transactions
contemplated by this Agreement, any valid right, interest or claim against or
upon the Company, any Subsidiary or an Investor for any commission, fee or other
compensation pursuant to any agreement, arrangement or understanding entered
into by or on behalf of the Investors.

 

7. Conditions to Closing.

 

7.1. Conditions to the Investors’ Obligations. The obligation of the Investors
to purchase the Securities at the Closing is subject to the fulfillment to the
Placement Agent’s satisfaction, on or prior to the Closing Date, of the
following conditions:

 

(a) The representations and warranties made by the Company in Section 5 hereof
shall be true and correct in all material respects on the Closing Date, except
to the extent any of such representations and warranties are qualified as to
materiality, then those representations and warranties which are so qualified
shall be true and correct in all respects on the Closing Date. The Company shall
have performed in all material respects all obligations and conditions herein
required to be performed or observed by it on the Closing Date.

 

(b) The Company shall have obtained in a timely fashion any and all consents,
permits, approvals, registrations and waivers necessary or appropriate for
consummation of the purchase and sale of the Securities, and all of which shall
be and remain so long as necessary in full force and effect.

 

(c) The Company shall have executed and delivered the Registration Rights
Agreement to the Placement Agent.

 

(d) No judgment, writ, order, injunction, award or decree of or by any court, or
judge, justice or magistrate, including any bankruptcy court or judge, or any
order of or by any governmental authority, shall have been issued, and no action
or proceeding shall have been instituted by any governmental authority, or
self-regulatory organization enjoining or preventing the consummation of the
transactions contemplated hereby or in the other Transaction Documents.

 

(e) The Company shall have delivered a Certificate, executed on behalf of the
Company by its Chief Executive Officer or its Chief Financial Officer, dated as
of the Closing Date, certifying to the fulfillment of the conditions specified
in subsections (a), (b), (d) and (h) of this Section 7.1.

 

(f) The Company shall have delivered a Certificate, executed on behalf of the
Company by its Secretary, dated as of the Closing Date, certifying the
resolutions adopted by the Board of Directors of the Company approving the
transactions contemplated by this Agreement and the other Transaction Documents
and the issuance of the Securities, certifying the current versions of the
Certificate of Incorporation and by-laws of the Company and certifying as to the
signatures and authority of persons signing the Transaction Documents and
related documents on behalf of the Company.

 

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(g) The Investors and the Placement Agent shall have received an opinion from
Wyrick Robbins Yates & Ponton LLP, the Company’s counsel, dated as of the
Closing Date, substantially in the form attached hereto as Exhibit C.

 

(h) No stop order or suspension of trading shall have been imposed by any Person
with respect to public trading in the Common Stock.

 

(i) The Company shall have drawn down the balance of the principal under the
Goodnow Debenture in accordance with its terms and conditions, and the Goodnow
Debenture (all principal and accrued and unpaid interest thereon) shall have
been fully converted into Common Stock.

 

7.2. Conditions to Obligations of the Company. The Company’s obligation to sell
and issue the Securities at the Closing is subject to the fulfillment to the
satisfaction of the Company on or prior to the Closing Date of the following
conditions, any of which may be waived by the Company:

 

(a) The representations and warranties made by the Investors in Section 6 hereof
shall be true and correct in all material respects when made, and shall be true
and correct in all material respects on the Closing Date with the same force and
effect as if they had been made on and as of said date.

 

(b) The Investors shall have executed and delivered the Registration Rights
Agreement to the Placement Agent at or prior to Closing; provided, that, this
condition shall be satisfied with respect to each Investor who has executed and
delivered the Registration Rights Agreement.

 

(c) Each of the Investors shall have delivered to Placement Agent Counsel prior
to Closing the “Aggregate Purchase Price” set forth opposite such Investor’s
name on Schedule I affixed hereto.

 

(d) No judgment, writ, order, injunction, award or decree of or by any court, or
judge, justice or magistrate, including any bankruptcy court or judge, or any
order of or by any governmental authority, shall have been issued, and no action
or proceeding shall have been instituted by any governmental authority, or
self-regulatory organization enjoining or preventing the consummation of the
transactions contemplated hereby or in the other Transaction Documents.

 

8. Covenants and Agreements of the Company.

 

8.1. Reservation of Common Stock. The Company shall at all times reserve and
keep available out of its authorized but unissued shares of Common Stock, solely
for the purpose of providing for the exercise of the Warrants, such number of
shares of Common Stock as shall from time to time equal the number of shares
sufficient to permit the exercise of the Warrants (including the Placement Agent
Warrants) issued pursuant to this Agreement in accordance with their respective
terms.

 

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8.2. No Conflicting Agreements. The Company will not take any action, enter into
any agreement or make any commitment that would conflict with or interfere in
any material respect with the obligations to the Investors under the Transaction
Documents.

 

8.3. Insurance. The Company shall not materially reduce the product liability
and directors and officers insurance coverages described in Section 5.19;
provided, however, the Company may reduce the amount of directors and officers
liability insurance if (a) the renewal premium is greater than 300% of the then
current premium, and (b) the Board of Directors of the Company approves the
reduction.

 

8.4. Compliance with Laws. The Company will comply in all material respects with
all applicable laws, rules, regulations, orders and decrees of all governmental
authorities, except to the extent non-compliance would not have a Material
Adverse Effect.

 

8.5. Termination of Certain Covenants. The provisions of Sections 8.2 through
8.4 shall terminate and be of no further force and effect upon the date on which
the Company’s obligations under the Registration Rights Agreement to register
and maintain the effectiveness of any registration covering the Registrable
Securities (as such term is defined in the Registration Rights Agreement) shall
terminate.

 

8.6 Listing of Underlying Shares and Related Matters. If the Company applies to
have its Common Stock or other securities traded on the Nasdaq National Market
System or SmallCap Market, or any other principal stock exchange or market, it
shall include in such application the Shares and the Warrant Shares and will
take such other action as is necessary to cause such Common Stock to be so
listed. If listed, the Company will use commercially reasonable efforts to
continue the listing and trading of its Common Stock on the Nasdaq National
Market System or SmallCap Market or national securities exchange, as the case
may be, and, in accordance, therewith, will use commercially reasonable efforts
to comply in all respects with the Company’s reporting, filing and other
obligations under the bylaws or rules of such market or exchange, as applicable.

 

8.7 Goodnow Debenture. On or before the Closing Date, the Company shall, subject
to the terms and conditions thereof, draw down the balance of the Goodnow
Debenture, and comply with the conversion provisions thereof, including without
limitation the issuance of certificates evidencing the certificate of Common
Stock issuable upon conversion thereof.

 

9. Survival and Indemnification.

 

9.1. Survival. All representations, warranties, covenants and agreements
contained in this Agreement shall be deemed to be representations, warranties,
covenants and agreements as of the date hereof and shall survive the Closing
Date for a period of three (3) years; provided, however, that the provisions
contained in Section 8 hereof shall survive in accordance therewith.

 

9.2. Indemnification. The Company agrees to indemnify and hold harmless, each
Investor and the Placement Agent and their respective Affiliates and the owners,
directors,

 

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officers, employees and agents of each Investor, the Placement Agent and their
respective Affiliates, from and against any and all losses, claims, damages,
liabilities and expenses (including without limitation reasonable attorney fees
and disbursements and other reasonable expenses incurred in connection with
investigating, preparing or defending any action, claim or proceeding, pending
or threatened and the costs of enforcement hereof) (collectively, “Losses”) to
which such Person may become subject as a result of any breach of
representation, warranty, covenant or agreement made by, or to be performed on
the part of, the Company under the Transaction Documents, and will reimburse any
such Person for all such amounts as they are incurred by such Person.

 

9.3. Conduct of Indemnification Proceedings. Promptly after receipt by any
Person (the “Indemnified Person”) of notice of any demand, claim or
circumstances which would or might give rise to a claim or the commencement of
any action, proceeding or investigation in respect of which indemnity may be
sought pursuant to Section 9.2, such Indemnified Person shall promptly notify
the Company in writing and the Company shall assume the defense thereof,
including the employment of counsel reasonably satisfactory to such Indemnified
Person, and shall assume the payment of all fees and expenses; provided,
however, that the failure of any Indemnified Person so to notify the Company
shall not relieve the Company of its obligations hereunder except to the extent
that the Company is actually and materially prejudiced by such failure to
notify. In any such proceeding, any Indemnified Person shall have the right to
retain its own counsel, but the fees and expenses of such counsel shall be at
the expense of such Indemnified Person unless: (i) the Company and the
Indemnified Person shall have mutually agreed to the retention of such counsel;
or (ii) in the reasonable judgment of counsel to such Indemnified Person
representation of both parties by the same counsel would be inappropriate due to
actual or potential differing interests between them. The Company shall not be
liable for any settlement of any proceeding effected without its written
consent, which consent shall not be unreasonably withheld, delayed or
conditioned, but if settled with such consent, or if there be a final judgment
for the plaintiff, the Company shall indemnify and hold harmless such
Indemnified Person from and against any Losses by reason of such settlement or
judgment. Without the prior written consent of the Indemnified Person, which
consent shall not be unreasonably withheld, delayed or conditioned, the Company
shall not effect any settlement of any pending or threatened proceeding in
respect of which any Indemnified Person is or could have been a party and
indemnity could have been sought hereunder by such Indemnified Party, unless
such settlement includes an unconditional release of such Indemnified Person
from all liability arising out of such proceeding.

 

10. Miscellaneous.

 

10.1. Successors and Assigns. This Agreement may not be assigned by a party
hereto without the prior written consent of the Company or the Investors, as
applicable; provided, however, that an Investor may assign its rights and
delegate its duties hereunder in whole or in part to an Affiliate or to a third
party acquiring some or all of its Securities in a private transaction without
the prior written consent of the Company or the other Investors, after notice
duly given by such Investor to the Company, provided, that no such assignment or
obligation shall affect the obligations of such Investor hereunder. The
provisions of this Agreement shall inure to the benefit of and be binding upon
the respective permitted successors and assigns of the parties. Except for
Placement Agent and Placement Agent Counsel, which are

 

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express intended third party beneficiaries of this Agreement, and except for
provisions of this Agreement expressly to the contrary, nothing in this
Agreement, express or implied, is intended to confer upon any party other than
the parties hereto or their respective successors and assigns any rights,
remedies, obligations, or liabilities under or by reason of this Agreement.
References in Section 5 to the Company and any Subsidiaries shall include the
Company, such Subsidiary, and all of their respective predecessors-in-interest,
including without limitation, Incara Pharmaceuticals Corporation.

 

10.2. Counterparts; Faxes. This Agreement may be executed in counterparts, each
of which shall be deemed an original, but all of which together shall constitute
one and the same instrument. This Agreement may also be executed via facsimile,
which shall be deemed an original.

 

10.3. Titles and Subtitles. The titles and subtitles used in this Agreement are
used for convenience only and are not to be considered in construing or
interpreting this Agreement.

 

10.4. Notices. Unless otherwise provided, any notice required or permitted under
this Agreement shall be given in writing and shall be deemed effectively given
only upon delivery to each party to be notified by (i) personal delivery, (ii)
telex or telecopier, upon receipt of confirmation of complete transmittal, or
(iii) a nationally recognized overnight air courier, addressed to the party to
be notified at the address as follows, or at such other address as such party
may designate by ten (10) days’ advance written notice to the other party:

 

If to the Company:

 

P.O. Box 14287

79 T.W. Alexander Drive

4401 Research Commons, Suite 200

Research Triangle Park, North Carolina 27709

Attn: Clayton I. Duncan

Telephone: 919.558.8688

Facsimile: 919.544.1245

 

With a copy to:

 

Wyrick Robbins Yates & Ponton LLP

4101 Lake Boone Trail, Suite 300

Raleigh, North Carolina 27607

Attn: Larry E. Robbins, Esq.

Telephone: 919.781.4000

Facsimile: 919.781.4865

 

If to any of the Investors:

 

to the addresses set forth on Schedule I hereto.

 

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With a copy to:

 

SCO Securities LLC

1285 Avenue of the Americas

35th Floor

New York, New York 10019

Attn: Jeffrey B. Davis

Fax: 212-554-4058

 

10.5. Expenses. The Company shall pay the reasonable fees and expenses of
Placement Agent Counsel in connection with the Private Placement (the “Placement
Agent Counsel Fees”), which Placement Agent Counsel Fees shall include, without
limitation, the fees and expenses associated with the negotiation, preparation
and execution and delivery of this Agreement and the other Transaction Documents
and any amendments, modifications or waivers thereto. The Placement Agent
Counsel Fees shall be paid to Placement Agent Counsel at the Closing by release
to Placement Agent Counsel of the portion of the Escrow Amount equal to the
Placement Agent Counsel Fees. Except as set forth above, the Company and the
Investors shall each bear their own expenses in connection with the negotiation,
preparation, execution and delivery of this Agreement. In the event that legal
proceedings are commenced by any party to this Agreement against another party
to this Agreement in connection with this Agreement or the other Transaction
Documents, the party or parties which do not prevail in such proceedings shall
severally, but not jointly, pay their pro rata share of the reasonable
attorneys’ fees and other reasonable out-of-pocket costs and expenses incurred
by the prevailing party in such proceedings.

 

10.6. Amendments and Waivers. Any term of this Agreement may be amended and the
observance of any term of this Agreement may be waived (either generally or in a
particular instance and either retroactively or prospectively), only with the
prior written consent of the Company and the Placement Agent; provided, however,
that any provision hereof which impairs the rights or increases the obligations
of a specific Investor shall not be amended or waived without the prior written
consent of the Company, the Placement Agent and that particular Investor;
provided, further, that any provision affecting the rights or obligations of
Placement Agent or Placement Agent Counsel, as the case may be, shall not be
waived or amended without the prior written consent of the Placement Agent or
Placement Agent Counsel, as applicable. Any amendment or waiver effected in
accordance with this Section 10.6 shall be binding upon each holder of any
Securities purchased under this Agreement at the time outstanding, each future
holder of all such Securities, and the Company.

 

10.7. Publicity. No public release or announcement concerning the transactions
contemplated hereby shall be issued by the Company or the Investors without the
prior consent of the Company (in the case of a release or announcement by the
Investors) or the Placement Agent, as representative of the Investors (in the
case of a release or announcement by the Company) (which consents shall not be
unreasonably withheld), except as such release or announcement may be required
by law or the applicable rules or regulations of any securities exchange or
securities market on which the Securities are then listed and trading, in which
case the Company or the Placement Agent, as the case may be, shall allow the
Investors or the Company, as applicable, to the extent reasonably practicable in
the circumstances, reasonable time to comment on such release or announcement in
advance of such issuance.

 

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10.8. Severability. Any provision of this Agreement that is prohibited or
unenforceable in any jurisdiction shall, as to such jurisdiction, be ineffective
to the extent of such prohibition or unenforceability without invalidating the
remaining provisions hereof but shall be interpreted as if it were written so as
to be enforceable to the maximum extent permitted by applicable law, and any
such prohibition or unenforceability in any jurisdiction shall not invalidate or
render unenforceable such provision in any other jurisdiction. To the extent
permitted by applicable law, the parties hereby waive any provision of law which
renders any provision hereof prohibited or unenforceable in any respect.

 

10.9. Entire Agreement. This Agreement, including the Schedules, Exhibits and
the Disclosure Schedules, and the other Transaction Documents constitute the
entire agreement among the parties hereof with respect to the subject matter
hereof and thereof and supersede all prior agreements and understandings, both
oral and written, between the parties with respect to the subject matter hereof
and thereof. Prior drafts or versions of this Agreement shall not be used to
interpret this Agreement.

 

10.10. Further Assurances. The parties shall execute and deliver all such
further instruments and documents and take all such other actions as may
reasonably be required to carry out the transactions contemplated hereby and to
evidence the fulfillment of the agreements herein contained.

 

10.11. Governing Law; Consent to Jurisdiction. This Agreement and the other
Transaction Documents, and all matters arising directly or indirectly hereunder
or thereunder, shall be governed by, and construed in accordance with, the
internal laws of the State of New York, without reference to the choice of law
principles thereof. Any legal action, suit or proceeding arising out of or
relating to this Agreement, the other Transaction Documents or the transactions
contemplated hereby or thereby shall only be instituted, heard and adjudicated
(excluding appeals) in a state or federal court located in the Southern District
of New York, and each party hereto knowingly, voluntarily and intentionally
waives any objection which such party may now or hereafter have to the laying of
the venue of any such action, suit or proceeding, and irrevocably submits to the
non-exclusive personal jurisdiction of any such court in any such action, suit
or proceeding. Service of process in connection with any such action, suit or
proceeding may be served on each party hereto anywhere in the world by the same
methods as are specified for the giving of notices under this Agreement.

 

10.12 WAIVER OF JURY TRIAL. THE PARTIES HERETO DESIRE THAT THEIR DISPUTES BE
RESOLVED BY A JUDGE APPLYING ALL APPLICABLE LAWS. THEREFORE, THE PARTIES HERETO
WAIVE ALL RIGHTS TO TRIAL BY JURY IN ANY ACTION, SUIT, OR PROCEEDING BROUGHT TO
RESOLVE ANY DISPUTE, WHETHER ARISING IN CONTRACT, TORT, OR OTHERWISE BETWEEN OR
AMONG THEM ARISING OUT OF, CONNECTED WITH, RELATED OR INCIDENTAL TO THE
RELATIONSHIP ESTABLISHED AMONG THEM IN CONNECTION WITH THE TRANSACTION DOCUMENTS
OR THE TRANSACTIONS RELATED THERETO.

 

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10.13 Specific Performance. Notwithstanding anything in any of the Transaction
Documents to the contrary, with respect to the issuance of any Securities upon
exercise of, conversion of or otherwise pursuant to, any of the Transaction
Documents, as the case may be, the Investors, and their successors and assigns,
shall be entitled, in addition to all other rights and remedies that may be
available at law or in equity, to the remedy of specific performance in a
summary proceeding if the Company or other issuer of such Securities, as
applicable, shall fail to timely issue and deliver any such Securities in
accordance with the terms of the applicable Transaction Document.

 

[signature page follows]

 

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[Company Signature Page]

 

IN WITNESS WHEREOF, the undersigned has executed this Purchase Agreement or
caused its duly authorized officers to execute this Purchase Agreement as of the
date first above written.

 

INCARA PHARMACEUTICALS CORPORATION

By:

 

 

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Name:

   

Title:

   

 

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[Investor Signature Page]

 

IN WITNESS WHEREOF, the undersigned has executed this Purchase Agreement or
caused its duly authorized officers to execute this Purchase Agreement as of the
date first above written.

 

Date:

 

 

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IF AN INDIVIDUAL:

     

IF A CORPORATION, PARTNERSHIP, TRUST, ESTATE OR OTHER ENTITY:

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(Signature)

     

 

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Print name of entity

 

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(Printed Name)

     

By:

 

 

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Name:

 

 

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Title:

 

 

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Address:

     

Address:

 

 

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Aggregate dollar amount for shares of Common Stock and Investor Warrants
committed to be purchased pursuant to the terms of the Agreement:

 

[Insert dollar amount] $             (the “Aggregate Purchase Price”).

(Shares of Common Stock to be received = the Aggregate Purchase Price divided by
$0.25)

 

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