Exhibit 10.1

SECURITIES PURCHASE AGREEMENT

This Securities Purchase Agreement (this “Agreement”) is dated as of December
19, 2018 (the “Agreement Date”), between Soleno Therapeutics, Inc., a Delaware
corporation (the “Company”), and each purchaser identified on Exhibit A hereto
(each, including its successors and assigns, a “Purchaser” and collectively, the
“Purchasers”).

RECITALS

WHEREAS, on the terms and subject to the conditions set forth in this Agreement
and pursuant to Section 4(a)(2) of the Securities Act of 1933, as amended, and
Rule 506 promulgated thereunder, the Company desires to issue and sell to each
Purchaser, and each Purchaser, severally and not jointly, desires to purchase
from the Company, securities of the Company as more fully described in this
Agreement;

WHEREAS, the Company has authorized, upon the terms and conditions stated in
this Agreement, the sale and issuance of an aggregate of 10,272,375 immediately
separable Units (each a “Unit” and collectively, the “Units”), with each Unit
consisting of: (i) one share of Common Stock (as hereinafter defined) and (ii) a
Warrant (as hereinafter defined) to acquire five percent (5%) of a share of
Common Stock;

WHEREAS, at the Closing (as hereinafter defined), each Purchaser, severally and
not jointly, wishes to purchase, and the Company wishes to sell, upon the terms
and conditions stated in this Agreement, the number of Units as hereafter
specified on Exhibit A annexed hereto; and

WHEREAS, the Company has engaged Roth Capital Partners, LLC as its exclusive
placement agent (the “Placement Agent”) for the offering of the Units on a “best
efforts” basis.

NOW, THEREFORE, IN CONSIDERATION of the mutual covenants contained in this
Agreement, and for other good and valuable consideration, the receipt and
adequacy of which are hereby acknowledged, the Company and each Purchaser agree
as follows:

ARTICLE 1

DEFINITIONS

1.1    Definitions. In addition to the terms defined elsewhere in this
Agreement, for all purposes of this Agreement, the following terms have the
meanings set forth in this Section 1.1:

“Abingworth” means Abingworth LLP.

“Action” means any action, suit, inquiry, notice of violation, proceeding or
investigation pending or, to the Company’s Knowledge, threatened against or
affecting the Company, or any of its properties before or by any court,
arbitrator, governmental or administrative agency or regulatory authority
(federal, state, county, local or foreign).

“Additional Effectiveness Deadline” means the date which is the earliest to
occur of (i) if the Additional Registration Statement does not become subject to
any review or comment process by the Commission, (a) ninety (90) days after the
filing of the Additional Registration Statement or, if such date is not a
Business Day, the next date that is a Business Day, or (b) five (5) Trading Days
after the Company receives written notification from the Commission that the
Additional Registration Statement will not become subject to any review or
comment process by the Commission and the Company fails to request to accelerate
the effectiveness of the Additional Registration Statement, or (ii) if the
Additional Registration Statement becomes subject to any review or comment
process by the Commission, one hundred and twenty (120) days after the filing of
the Additional Registration Statement, or, if such date is not a Business Day,
the next date that is a Business Day; provided, however, that in the event the
foregoing applicable deadline in any case falls within the Grace Period and the
Company has not yet filed with the Commission its Complete Form 10-K for the
preceding fiscal year by such deadline, then such deadline

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shall be extended until the Business Day following the date on which the
Complete Form 10-K for such preceding fiscal year is filed with the Commission;
provided further, however, that such deadline shall not be extended beyond the
date that is 120 days following the end of the Company’s most recent fiscal year
(or, if such date is not a Business Day, the next date that is a Business Day).
In any case where the Additional Effectiveness Deadline is extended pursuant to
the foregoing provisos, then the Additional Effectiveness Deadline, as so
extended, shall be deemed the Additional Effectiveness Deadline for all purposes
of this Agreement.

“Additional Filing Deadline” means the later to occur of (i) the date sixty
(60) days after the date substantially all of the Registrable Securities
registered under the immediately preceding effective Registration Statement are
sold and (ii) the date six (6) months from the Effective Date of such
immediately preceding effective Registration Statement, or, if such date is not
a Business Day, the next date that is a Business Day; provided, however, that in
the event the foregoing deadline in any case falls within the Grace Period and
the Company has not yet filed with the Commission its Complete Form 10-K for the
preceding fiscal year by such deadline, then such deadline shall be extended
until the Business Day following date on which the Complete Form 10-K for such
preceding fiscal year is filed with the Commission; provided further, however,
that such deadline shall not be extended beyond the date that is 120 days
following end of the Company’s most recent fiscal year (or, if such date is not
a Business Day, the next date that is a Business Day). In any case where the
Additional Filing Deadline is extended pursuant to the foregoing provisos, then
the Additional Filing Deadline, as so extended, shall be deemed the Additional
Filing Deadline for all purposes of this Agreement.

“Additional Registration Statement” shall have the meaning ascribed to such term
in Section 5.1(a).

“Affiliate” means any Person that, directly or indirectly through one or more
intermediaries, controls or is controlled by or is under common control with a
Person, as such terms are used in and construed under Rule 405 under the
Securities Act.

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

“Board of Directors” means the board of directors of the Company.

“Business Day” means any day except any Saturday, any Sunday, any day which is a
federal legal holiday in the United States or any day on which banking
institutions in the State of New York are authorized or required by law or other
governmental action to close.

“Buy-In” and “Buy-In Price” shall have the meanings ascribed to such terms in
Section 6.1(d).

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

“Closing Date” shall have the meaning ascribed to such term in Section 2.2.

“Code” shall have the meaning ascribed to such term in Section 3.16.

“Commission” means the United States Securities and Exchange Commission.

“Common Stock” means the common stock of the Company, par value $0.001 per
share, and any other class of securities into which such securities may
hereafter be reclassified or changed.

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

“Company’s Knowledge” means with respect to any statement made to the knowledge
of the Company, that statement is based upon the actual knowledge of an
executive officer of the Company (as disclosed in the Company’s SEC Reports), in
each case after making reasonable inquiry.

 

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“Complete Form 10-K” means the annual report on Form 10-K filed by the Company
with the Commission that includes, or incorporates by reference from the
Company’s most recent definitive proxy statement on Schedule 14A actually filed
with the Commission, the information and disclosures required by Part III of the
Commission’s Form 10-K. For the avoidance of doubt, if the Company files its
annual report on Form 10-K with the Commission and does not include therein all
of the information and disclosures required by Part III of the Commission’s Form
10-K, then such annual report on Form 10-K shall not be deemed a Complete Form
10-K for purposes of this Agreement until the Company either (i) files an
amendment to such annual report on Form 10-K to include the information and
disclosures required by Part III of the Commission’s Form 10-K or (ii) files its
definitive proxy statement on Schedule 14A with the Commission for its next
annual meeting of stockholders.

“Confidentiality Agreement” shall have the meaning ascribed to such term in
Section 3.32.

“Contingent Obligation” has the meaning set forth in Section 3.30.

“Cut Back Shares” shall have the meaning ascribed to such term in
Section 5.1(a).

“Disclosure Schedule” means the Disclosure Schedule, if any, delivered by the
Company concurrently with the execution and delivery of this Agreement and
referred to in the first paragraph of ARTICLE 3 of this Agreement.

“Effective Date” means the date that a Registration Statement is first declared
effective by the SEC.

“Effectiveness Deadline” means the Initial Effectiveness Deadline and the
Additional Effectiveness Deadline, as applicable.

“Effectiveness Period” shall have the meaning ascribed to such term in
Section 5.1(b).

“Environmental Laws” shall have the meaning ascribed to such term in
Section 3.15.

“ERISA” shall have the meaning ascribed to such term in Section 3.16.

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

“FCPA” means the Foreign Corrupt Practices Act of 1977, as amended.

“FDA” means the U.S. Food and Drug Administration.

“Filing Deadline” means the Initial Filing Deadline and the Additional Filing
Deadline, as applicable.

“GAAP” shall have the meaning ascribed to such term in Section 3.8.

“Grace Period” shall mean the period commencing on the date that is 134 days
following the end of the Company’s most recent fiscal third quarter and ending
on, and including, the date that is 120 days following the end of the Company’s
most recent fiscal year.

“Indebtedness” has the meaning set forth in Section 3.30.

“Indemnified Party” shall have the meaning ascribed to such term in
Section 5.4(c).

“Indemnifying Party” shall have the meaning ascribed to such term in
Section 5.4(c).

“Initial Registration Statement” has the meaning set forth in Section 5.1(a).

 

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“Initial Effectiveness Deadline” means the date which is the earliest of (i) if
the Initial Registration Statement does not become subject to any review or
comment process by the Commission, (a) sixty (60) days after the filing of the
Initial Registration Statement or (b) five (5) Trading Days after the Company
receives written notification from the Commission that the Initial Registration
Statement will not become subject to any review or comment process by the
Commission and the Company fails to request to accelerate the effectiveness of
the Initial Registration Statement, or (ii) if the Initial Registration
Statement becomes subject to any review or comment process by the Commission,
one hundred and twenty (120) days after the filing of the Initial Registration
Statement, or, if such date is not a Business Day, the next date that is a
Business Day.

“Initial Filing Deadline” means March 30, 2019, or if such date is not a
Business Day, the next date that is a Business Day.

“Insiders” means each director, executive officer, other officer of the Company
participating in the offering of the Units, any beneficial owner of 20% or more
of the Company’s outstanding voting equity securities, calculated on the basis
of voting power, and any promoter connected with the Company in any capacity on
the date hereof.

“Insolvent” has the meaning set forth in Section 3.9.

“Intellectual Property” means (i) worldwide patents, patent applications,
invention disclosures and other rights of invention, filed with any governmental
authority, and all reissues, divisions, renewals, extensions, provisionals,
continuations and continuations-in-part thereof and all reexamined patents or
other applications or patents claiming the benefit of the filing date of any of
the foregoing; (ii) worldwide (A) registered trademarks and service marks and
registrations and applications for such registrations, and (B) unregistered
trademarks and service marks, trade names, fictitious business names, corporate
names, trade dress, logos, product names and slogans, including any common law
rights; in each case together with the goodwill associated therewith;
(iii) worldwide (A) registered copyrights in published or unpublished works,
mask work rights and similar rights, including rights created under Sections
901-914 of Title 17 of the United States Code, mask work registrations, and
copyright applications for registration, including any renewals thereof, and
(B) any unregistered copyrightable works and other rights of authorship in
published or unpublished works; (iv) worldwide (A) internet domain names;
(B) website content; (C) telephone numbers; and (D) moral rights and publicity
rights; (v) any computer program or other software (irrespective of the type of
hardware for which it is intended), including firmware and other software
embedded in hardware devices, whether in the form of source code, assembly code,
script, interpreted language, instruction sets or binary or object code
(including compiled and executable programs), including any library, component
or module of any of the foregoing, including, in the case of source code, any
related images, videos, icons, audio or other multimedia data or files, data
files, and header, development or compilations tools, scripts, and files, and
(vi) worldwide confidential or proprietary information or trade secrets,
including technical information, inventions and discoveries (whether or not
patentable and whether or not reduced to practice) and improvements thereto,
know-how, processes, discoveries, developments, designs, techniques, plans,
schematics, drawings, formulae, preparations, assays, surface coatings,
diagnostic systems and methods, patterns, compilations, databases, database
schemas, specifications, technical data, inventions, concepts, ideas, devices,
methods, and processes; and includes any rights to exclude others from using or
appropriating any Intellectual Property rights, including the rights to sue for
or assets claims against and remedies against past, present or future
infringements or misappropriations of any or all of the foregoing and rights of
priority and protection of interests therein, and any other proprietary,
intellectual property or other rights relating to any or all of the foregoing
anywhere in the world.

“Issuer Covered Person” shall have the meaning ascribed to such term
Section 3.38.

“Legend Removal Date” shall have the meaning ascribed to such term in
Section 6.1(c).

“Losses” means any and all losses, liabilities, obligations, claims,
contingencies, damages, costs and expenses, including all judgments, amounts
paid in settlements, court costs and reasonable attorneys’ fees and costs of
investigation.

 

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“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 taken as a whole, (ii) the ability of the
Company to perform its obligations under the Transaction Documents or (iii) the
legality, validity or enforceability of any Transaction Document.

“Nasdaq” means The Nasdaq Stock Market, LLC.

“Occupational Laws” shall have the meaning ascribed to such term in
Section 3.16.

“OFAC” shall have the meaning ascribed to such term in Section 3.36.

“Person” means an individual or corporation, partnership, trust, incorporated or
unincorporated association, joint venture, limited liability company, joint
stock company, government (or an agency or subdivision thereof) or other entity
of any kind.

“Placement Agent” shall have the meaning ascribed to such term the Recitals to
this Agreement.

“Preferred Stock” shall have the meaning ascribed to such term in Section 3.3.

“Price Per Unit” shall have the meaning ascribed to such term in Section 2.1.

“Principal Purchasers” means, as of any time, the Purchaser or Purchasers
holding or having the right to acquire, as of such time, at least a
majority-in-interest of the total number of Unit Shares; provided that such
majority-in-interest must include Abingworth.

“Principal Trading Market” means the Trading Market on which the Common Stock is
primarily listed on and quoted for trading.

“Proceeding” means an action, claim, suit, investigation or proceeding
(including, without limitation, a partial proceeding, such as a deposition),
whether commenced or threatened in writing.

“Prospectus” means the prospectus included in a Registration Statement
(including, without limitation, a prospectus that includes any information
previously omitted from a prospectus filed as part of an effective registration
statement in reliance upon Rule 430A promulgated under the Securities Act), 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 such
Registration Statement, and all other amendments and supplements to the
Prospectus including post-effective amendments, and all material incorporated by
reference or deemed to be incorporated by reference in such Prospectus.

“Purchaser Party” shall have the meaning ascribed to such term in Section 6.6.

“Purchasers” shall have the meaning ascribed to such term in the preamble.

“Registration Statement” means each registration statement required to be filed
under ARTICLE 5, including the Initial Registration Statement, all Additional
Registration Statements, and, in each case, the Prospectus, amendments and
supplements to such registration statement or Prospectus, including pre- and
post-effective amendments, all exhibits thereto, and all material incorporated
by reference or deemed to be incorporated by reference in such registration
statement.

“Registrable Securities” means the Shares and any shares of Common Stock issued
as (or issuable upon the conversion or exercise of any warrant, right or other
security that is issued as) a dividend or other distribution with respect to, or
in exchange for, or in replacement of, the Shares, provided, that the holder of
such Shares has completed and delivered to the Company a Selling Stockholder
Questionnaire; and provided further, that the Shares shall cease to be
Registrable Securities upon the earliest to occur of the following: (A) sale by
any Person to the public either pursuant to a registration statement under the
Securities Act or under Rule 144 (in which case,

 

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only such Shares sold shall cease to be Registrable Securities) or (B) becoming
eligible for sale by the holder thereof pursuant to Rule 144 without volume or
manner of sale restrictions and without current public information pursuant to
Rule 144.

“Removal Request Date” shall have the meaning ascribed to such term in
Section 6.1(c).

“Rule 144,” “Rule 415,” and “Rule 424” means Rule 144, Rule 415 and Rule 424,
respectively, promulgated by the Commission pursuant to the Securities Act, as
such Rules may be amended from time to time, or any similar rule or regulation
hereafter adopted by the SEC having substantially the same effect as such Rule.

“SEC Guidance” means (i) any publicly-available written or oral guidance,
comments, requirements or requests of the Commission staff and (ii) the
Securities Act.

“SEC Restrictions” shall have the meaning ascribed to such term in
Section 5.1(a).

“SEC Reports” shall have the meaning ascribed to such term in Section 3.7.

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

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

“Selling Stockholder Questionnaire” shall have the meaning ascribed to such term
in Section 5.2(j).

“Shares” means, collectively, the Unit Shares and the Warrant Shares.

“Short Sales” means all “short sales” as defined in Rule 200 of Regulation SHO
under the Exchange Act (but shall not be deemed to include the location and/or
reservation of borrowable shares of Common Stock).

“Trading Day” means a day on which the Principal Trading Market is open for
trading.

“Trading Market” means any of the following markets or exchanges on which the
Common Stock is listed or quoted for trading on the date in question: the NYSE
American, the Nasdaq Capital Market, the Nasdaq Global Market, the Nasdaq Global
Select Market, or the New York Stock Exchange (or any successors to any of the
foregoing).

“Transaction Documents” means this Agreement, the Warrants, all exhibits and
schedules thereto and hereto and any other documents or agreements executed in
connection with the transactions contemplated hereunder.

“Transfer Agent” means American Stock Transfer & Trust Company, LLC, the current
transfer agent of the Company, with a mailing address of 6201 15th Avenue,
Brooklyn, NY 11219, and a telephone number of (718) 921-8200, and any successor
transfer agent of the Company.

“Units” has the meaning set forth in the Recitals to this Agreement. Units will
not be issued or certificated. The Unit Shares and the Warrants are immediately
separable and will be issued separately.

“Unit Purchase Price” shall have the meaning ascribed to such term in
Section 2.1.

“Unit Shares” shall have the meaning ascribed to such term the Recitals to this
Agreement.

“Voting Commitment” shall have the meaning ascribed to such term in
Section 4.2(a).

 

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“Warrant Exercise Price” shall mean $2.00.

“Warrants” shall have the meaning ascribed to such term in Section 2.3.

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

ARTICLE 2

PURCHASE AND SALE

2.1    Purchase and Sale. Subject to and upon the terms and conditions set forth
in this Agreement, at the Closing, the Company shall issue and sell to each
Purchaser, and each Purchaser shall, severally and not jointly, purchase from
the Company, such number of Units set forth opposite their respective names on
Exhibit A, at a price per Unit equal to $1.60625 (the “Price Per Unit” and the
total purchase price for the Units, the “Unit Purchase Price”).

2.2    Closing. The Company agrees to issue and sell to the Purchasers and, in
consideration of and in express reliance upon the representations, warranties,
covenants, terms and conditions of this Agreement, the Purchasers agree,
severally and not jointly, to purchase the Units. The closing of the purchase
and sale of the Units (the “Closing”) shall take place at the offices of Wilson
Sonsini Goodrich & Rosati, located at 650 Page Mill Road, Palo Alto, California,
94304, three Business Days following the satisfaction or waiver of the
conditions set forth in Section 2.5, or at such other time and place or on such
date as the Principal Purchasers and the Company may agree upon (such date is
hereinafter referred to as the “Closing Date”).

2.3    Payment. On the Closing Date, (a) each Purchaser shall pay to the Company
its Unit Purchase Price in United States dollars and in immediately available
funds, by wire transfer to the Company’s account as set forth in instructions
previously delivered to each Purchaser, (b) the Company shall irrevocably
instruct the Transfer Agent to deliver, on an expedited basis, to each
Purchaser, either in book entry form in the Direct Registration System or in the
form of a stock certificate, as set forth on the Stock Registration
Questionnaire included as Exhibit C, the number of Unit Shares set forth
opposite such Purchaser’s name on Exhibit A hereto, and (c) the Company shall
issue to each Purchaser a warrant substantially in the form attached hereto as
Exhibit B (each a “Warrant” and collectively, the “Warrants”) pursuant to which
such Purchaser shall have the right to acquire the number of Warrant Shares set
forth opposite such Purchaser’s name on Exhibit A hereto, and in the case of
clauses (b) and (c), duly executed on behalf of the Company and registered in
the name of such Purchaser as set forth on the Stock Registration Questionnaire
included as Exhibit C. The Warrants issued and sold at the Closing shall have an
initial exercise price equal to the Warrant Exercise Price.

2.4    Deliveries.

(a)    Company. On or prior to the Closing Date, the Company shall deliver or
cause to be delivered to each Purchaser the following:

(i)    this Agreement duly executed by the Company;

(ii)    a copy of the irrevocable instructions to the Transfer Agent instructing
the Transfer Agent to deliver, on an expedited basis, to such Purchaser, either
in book entry form in the Direct Registration System or in the form of a stock
certificate as indicated by such Purchaser on the Stock Registration
Questionnaire included as Exhibit C, the number of Unit Shares set forth
opposite such Purchaser’s name on Exhibit A hereto, registered in the name of
such Purchaser as set forth on the Stock Registration Questionnaire included as
Exhibit C;

(iii)    a Warrant, registered in the name of such Purchaser as set forth on the
Stock Registration Questionnaire included as Exhibit C, to purchase up to the
number of shares of Common Stock set forth opposite such Purchaser’s name on
Exhibit A hereto;

 

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(iv)    the Company shall have delivered a Certificate, executed on behalf of
the Company by its chief executive officer and its principal financial officer,
dated as of the Closing Date, certifying to the fulfillment of the conditions
specified in subsections (i), (ii), (iv), (v), (vi), (vii), (viii) and (ix) of
Section 2.5(b);

(v)    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 and a duly authorized committee
thereof approving the transactions contemplated by the Transaction Documents and
the issuance of the Securities, certifying the current versions of the
Certificate of Incorporation and Bylaws 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;

(vi)    a legal opinion of Wilson Sonsini Goodrich & Rosati, Professional
Corporation counsel for the Company, in substantially the form attached hereto
as Exhibit C, executed by Wilson Sonsini Goodrich & Rosati, Professional
Corporation and addressed to the Purchasers and to the Placement Agent;

(vii)    fully completed and duly executed Bad Actor Questionnaires for each
officer, director and beneficial owners of 20% or more of the issuer’s
outstanding equity securities, in the form attached hereto as Exhibit F; and

(viii)    A Nasdaq Listing of Additional Shares notification form.

(b)    Purchasers. On or prior to the Closing Date, each Purchaser shall deliver
or cause to be delivered to the Company the following:

(i)    this Agreement duly executed by such Purchaser;

(ii)    a fully completed and duly executed Stock Registration Questionnaire in
the form attached hereto as Exhibit C;

(iii)    unless such Purchaser is a director or an executive officer (as such
term is defined in Rule 501(f) promulgated by the Commission under the
Securities Act) of the Company as of the Closing Date, a fully completed and
duly executed Accredited Investor Qualification Questionnaire in the form
attached hereto as Exhibit E; and

(iv)    the Unit Purchase Price by wire transfer to the account specified by the
Company.

2.5    Closing Conditions.

(a)    The obligations of the Company hereunder with respect to any Purchaser in
connection with the Closing are subject to the following conditions being met:

(i)    the accuracy in all material respects on the Closing Date of the
representations and warranties of such Purchaser contained herein (unless as of
a specific date therein in which case they shall be accurate as of such date);

(ii)    all obligations, covenants and agreements of such Purchaser required to
be performed at or prior to the Closing Date shall have been performed in all
material respects;

(iii)    the delivery by such Purchaser of the items set forth in Section 2.4(b)
of this Agreement; and

(iv)    Nasdaq shall have raised no objection to the consummation of the
transactions contemplated by the Transaction Documents in the absence of
stockholder approval of such transactions.

 

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(b)    The respective obligations of the Purchasers hereunder in connection with
the Closing are subject to the following conditions being met:

(i)    the representations and warranties made by the Company in ARTICLE 3
hereof qualified as to materiality shall be true and correct as of the date
hereof and the Closing Date, except to the extent any such representation or
warranty expressly speaks as of an earlier date, in which case such
representation or warranty shall be true and correct as of such earlier date,
and, the representations and warranties made by the Company in ARTICLE 3 hereof
not qualified as to materiality shall be true and correct in all material
respects as of the date hereof and the Closing Date, except to the extent any
such representation or warranty expressly speaks as of an earlier date, in which
case such representation or warranty shall be true and correct in all material
respects as of such earlier date;

(ii)    all obligations, covenants and agreements of the Company required to be
performed at or prior to the Closing Date, whether under this Agreement or the
other Transaction Documents, shall have been performed in all material respects;

(iii)    the delivery by the Company of the items set forth in Section 2.4(a) of
this Agreement;

(iv)    the Company shall have obtained any and all consents, permits,
approvals, registrations and waivers necessary or appropriate for consummation
of the purchase and sale of the Units and the consummation of the other
transactions contemplated by the Transaction Documents, all of which shall be in
full force and effect, except for such that would not reasonably be expected to
have a Material Adverse Effect;

(v)    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,
enjoining or preventing the consummation of the transactions contemplated hereby
or in the other Transaction Documents;

(vi)    no stop order or suspension of trading shall have been imposed by
Nasdaq, the Commission or any other governmental or regulatory body with respect
to public trading in the Common Stock;

(vii)    Nasdaq shall have raised no objection to the consummation of the
transactions contemplated by the Transaction Documents in the absence of
stockholder approval of such transactions;

(viii)    there shall have been no Material Adverse Effect with respect to the
Company since the date hereof;

(ix)    the Company’s Board of Directors shall have approved the appointment of
Andrew Sinclair, Ph.D., the designee of Abingworth, to the Company’s Board of
Directors, and taken all action necessary to effect such appointment; and

(x)    from the date hereof to the Closing Date, trading in the Common Stock
shall not have been suspended by the Commission or the Company’s principal
Trading Market, and, at any time prior to the Closing Date, trading in
securities generally as reported by Bloomberg L.P. shall not have been suspended
or limited, or minimum prices shall not have been established on securities
whose trades are reported by such service, or on any Trading Market, nor shall a
banking moratorium have been declared either by the United States or New York
State authorities nor shall there have occurred any material outbreak or
escalation of hostilities or other national or international calamity of such
magnitude in its effect on, or any material adverse change in, any financial
market which, in each case, in the reasonable judgment of such Purchaser, makes
it impracticable or inadvisable to purchase the Securities at the Closing.

 

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ARTICLE 3

REPRESENTATIONS AND WARRANTIES OF THE COMPANY

The Company and all of its subsidiaries (and all references to the Company below
shall be deemed to also include its subsidiaries to the extent the context
requires) hereby represents and warrants to the Purchasers and to the Placement
Agent as of the date hereof (except for the representations and warranties that
speak as of a specific date, which shall be made as of such date) that, except
as otherwise set forth in the Disclosure Schedule, if any, delivered herewith:

3.1    Organization, Good Standing and Qualification. The Company is a
corporation duly organized, validly existing and in good standing under the laws
of the jurisdiction of its incorporation and has all requisite corporate power
and legal authority to own and use its properties and assets and carry on its
business as now conducted and to own its properties. The Company is not in
violation of any of the provisions of its Certificate of Incorporation or
Bylaws. The Company 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
leasing necessary unless the failure to so qualify has not had and could not
reasonably be expected to have a Material Adverse Effect and no Proceeding has
been instituted in any such jurisdiction revoking, limiting or curtailing or
seeking to revoke, limit or curtail such power and authority or qualification.
The Company has no direct or indirect subsidiaries other than those listed in
Schedule 3.1 hereto. Except as disclosed in Schedule 3.1 hereto, the Company
owns, directly or indirectly, all of the capital stock or comparable equity
interests of each subsidiary free and clear of any and all liens, and all the
issued and outstanding shares of capital stock or comparable equity interest of
each subsidiary are validly issued and are fully paid, non-assessable and free
of preemptive and similar rights to subscribe for or purchase securities.

3.2    Authorization; Enforcement. The Company has all corporate right, power
and authority to enter into this Agreement and each of the other Transaction
Documents and to consummate the transactions and otherwise carry out its
obligations contemplated hereby and thereby. All corporate action on the part of
the Company, its directors and stockholders necessary for the authorization,
execution, delivery and performance of the Transaction Documents by the Company,
the authorization, sale, issuance and delivery of the Securities contemplated
herein and the performance of the Company’s obligations hereunder and thereunder
has been taken. The Transaction Documents have been (or upon delivery will have
been) duly executed and delivered by the Company and constitute the legal, valid
and binding obligation of the Company, enforceable against the Company in
accordance with their terms, except: (i) as limited by general equitable
principles and applicable bankruptcy, insolvency, reorganization, moratorium and
other laws of general application affecting enforcement of creditors’ rights
generally, (ii) as limited by laws relating to the availability of specific
performance, injunctive relief or other equitable remedies and (iii) insofar as
indemnification and contribution provisions may be limited by applicable law.

3.3    Capitalization. The authorized capital stock of the Company consists of
100,000,000 shares of Common Stock and 10,000,000 shares of preferred stock, par
value $0.001 per share (the “Preferred Stock”), of which 21,435,241 shares of
Common Stock are outstanding as of the date hereof (prior to the issuance of the
Units) and no shares of Preferred Stock are outstanding as of the date
hereof. All of the issued and outstanding shares of the Company’s capital stock
have been duly authorized and validly issued and are fully paid and
non-assessable. The Company has not issued any shares of capital stock since its
most recently filed Quarterly Report on Form 10-Q. Except (i) for options to
purchase Common Stock or other equity awards (including restricted stock units)
issued to employees, consultants and members of the Board of Directors pursuant
to the equity compensation plans or arrangements disclosed in the SEC Reports,
(ii) for securities exercisable for, or convertible into or exchangeable for any
shares of capital stock of the Company disclosed in the SEC Reports,
(iii) shares issuable under any deferred compensation plan of the Company
disclosed in the SEC Reports, and (iv) as contemplated by this Agreement, there
are no existing options, warrants, calls, preemptive (or similar) rights,
subscriptions or other rights, agreements, arrangements or commitments of any
character obligating the Company to issue, transfer or sell, or cause to be
issued, transferred or sold, any shares of the capital stock of, or other equity
interests in, the Company or any securities convertible into or exchangeable for
such shares of capital stock or other equity interests, and there are no
outstanding contractual obligations of the Company to repurchase, redeem or
otherwise acquire any shares of its capital stock or other equity interests. No
Person has any right of first refusal, preemptive right, right of participation,
or any similar right to participate in the transactions contemplated by the
Transaction Documents. There are no outstanding securities or instruments of the
Company that contain any redemption or similar

 

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provisions, and there are no contracts, commitments, understandings or
arrangements by which the Company is or may become bound to redeem a security of
the Company. Except as disclosed in the SEC Reports, the Company does not have
any stock appreciation rights or “phantom stock” plans or any similar plan or
agreement. The issue and sale of the Units will not result in the right of any
holder of Company securities to adjust the exercise, conversion or exchange
price under such securities. Except for customary adjustments as a result of
stock dividends, stock splits, combinations of shares, reorganizations,
recapitalizations, reclassifications or other similar events, there are no
anti-dilution or price adjustment provisions contained in any security issued by
the Company (or in any agreement providing rights to security holders) and the
issuance and sale of the Securities will not obligate the Company to issue
shares of Common Stock or other securities to any Person (other than the
Purchasers) and will not result in a right of any holder of securities to adjust
the exercise, conversion, exchange or reset price under such securities. There
are no stockholders agreements, voting agreements or other similar agreements
with respect to the Company’s capital stock to which the Company is a party or,
to the Company’s Knowledge, between or among any of the Company’s stockholders.

3.4    Issuance; Reservation of Shares. The issuance of the Unit Shares has been
duly and validly authorized by all necessary corporate and stockholder action,
and the Unit Shares, when issued and paid for pursuant to this Agreement, will
be validly issued, fully paid and non-assessable, and shall be free and clear of
all encumbrances and restrictions (other than as provided in the Transaction
Documents). The issuance of the Warrants and the Warrant Shares has been duly
and validly authorized by all necessary corporate and stockholder action, and
the Warrant Shares, when issued upon the due exercise of the Warrants, will be
validly issued, fully paid and non-assessable, and shall be free and clear of
all encumbrances and restrictions (other than as provided in the Transaction
Documents). The Company will reserve, at all times that any of the Warrants
remain outstanding, such number of shares of Common Stock sufficient to enable
the full exercise of the then outstanding Warrants. Assuming (A) the accuracy of
the representations and warranties of the Purchasers set forth in ARTICLE 4
hereof, (B) none of the Insiders or the Placement Agent or its controlling
persons (within the meaning of Rule 506(d)(1) of the Securities Act) is subject
to any “bad actor” disqualification specified in Rule 506(d) of the Securities
Act that has not been waived pursuant to Rule 506(d)(2) of the Securities Act,
and (C) the Insiders and the Placement Agent and its controlling persons (within
the meaning of Rule 506(d)(1) of the Securities Act) have complied with the “bad
actor” disclosure requirements set forth in Rule 506(e) of the Securities Act
and any disclosure requirements in connection with any waiver of the
disqualification provisions of Rule 506(d) of the Securities Act, then the
offer, issuance and sale of the Shares to the Purchasers pursuant to the
Agreement, are exempt from the registration requirements of the Securities Act.

3.5    No Conflicts. The execution, delivery and performance of the Transaction
Documents by the Company 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 a default (or an event that with notice or lapse of
time or both would become a default) under, or give to others any rights of
termination, amendment, acceleration or cancellation (with or without notice,
lapse of time or both) of (i) the Company’s Certificate of Incorporation or the
Company’s Bylaws, both as in effect on the date hereof (true and complete copies
of which have been made available to the Purchasers through the EDGAR system),
(ii) any statute, rule, regulation or order, judgment, injunction, decree or
other restriction of any governmental agency or body or any court, domestic or
foreign, having jurisdiction over the Company or any of its respective assets or
properties, or (iii) any material agreement or instrument to which the Company
is a party or by which the Company is bound or to which any of their respective
assets or properties is subject, in each case except for any such conflict,
breach, violation or default that would not reasonably be expected to have a
Material Adverse Effect.

3.6    Filings, Consents and Approvals. The Company is not required to obtain
any consent, waiver, authorization or order of, give any notice to, or make any
filing or registration with, any court or other federal, state, local or other
governmental authority or other Person in connection with the execution,
delivery and performance by the Company of the Transaction Documents, other than
filings that have been made, or will be made, or consents that have been
obtained, or will be obtained, pursuant to the rules and regulations of Nasdaq,
including a Nasdaq Listing of Additional Shares notification form, applicable
state securities laws and post-sale filings pursuant to applicable state and
federal securities laws which the Company undertakes to file or obtain within
the applicable time periods and the filings required to be made pursuant to
Sections 5.1 and 6.4 of this Agreement.

 

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3.7    SEC Reports. The Company has filed all reports, schedules, forms,
registration statements and other documents required to be filed by the Company
under the Securities Act and the Exchange Act, including pursuant to
Section 13(a) or 15(d) thereof, for the twenty-four (24) months preceding the
date hereof (the foregoing materials, including the exhibits thereto and
documents incorporated by reference therein, being collectively referred to
herein as the “SEC Reports”) on a timely basis or has received a valid extension
of such time of filing and has filed any such SEC Reports prior to the
expiration of any such extension. As of their respective dates, the SEC Reports
complied in all material respects with the requirements of the Securities Act
and the Exchange Act, as applicable, and none of the SEC Reports, when filed,
contained any untrue statement of a material fact or omitted to state a material
fact required to be stated therein or necessary in order to make the statements
therein, in the light of the circumstances under which they were made, not
misleading. The Company has never been an issuer subject to Rule 144(i) under
the Securities Act. The Company has not received any letters of comment from the
staff of the Commission that have not been satisfactorily resolved as of the
date hereof. All material agreements to which the Company is a party or to which
the property or assets of the Company is subject are included as part of or
identified in the SEC Reports, to the extent such agreements are required to be
included or identified pursuant to the rules and regulations of the SEC.

3.8    Financial Statements. The financial statements of the Company included in
the SEC Reports comply in all material respects with applicable accounting
requirements and the rules and regulations of the Commission with respect
thereto as in effect at the time of filing. Such financial statements have been
prepared in accordance with United States generally accepted accounting
principles (“GAAP”), applied on a consistent basis during the periods involved,
except as may be otherwise specified in such financial statements or the notes
thereto and except that unaudited financial statements may not contain all
footnotes required by GAAP, and fairly present in all material respects the
financial position of the Company as of and for the dates thereof and the
results of operations and cash flows for the periods then ended, subject, in the
case of unaudited statements, to normal, immaterial, year-end audit adjustments.

3.9    Material Changes; Undisclosed Events, Liabilities or Developments. Since
the date of the latest audited financial statements included within the SEC
Reports, except as specifically disclosed in a subsequent SEC Report filed prior
to the date hereof: (i) there has been no event, occurrence or development that
has had or that could reasonably be expected to have a Material Adverse Effect,
(ii) the Company has not incurred any liabilities (contingent or otherwise)
other than (A) trade payables and accrued expenses incurred in the ordinary
course of business consistent with past practice and (B) liabilities not
required to be reflected in the Company’s financial statements pursuant to GAAP
or disclosed in filings made with the Commission, (iii) the Company has not
altered its method of accounting or changed its principal registered public
accounting firm, (iv) the Company has not declared or made any dividend or
distribution of cash or other property to its stockholders or purchased,
redeemed or made any agreements to purchase or redeem any shares of its capital
stock and (v) the Company has not issued any equity securities, except pursuant
to existing Company equity compensation plans. The Company does not have pending
before the Commission any request for confidential treatment of information. The
Company has not taken any steps to seek protection pursuant to any bankruptcy
law and the Company has not received any written notice that any Person intends
to initiate involuntary bankruptcy proceedings against the Company. The Company
is not as of the date hereof, and immediately after giving effect to the
transactions contemplated hereby to occur at the Closing, will not be Insolvent
(as defined below). For purposes of this Section 3.9, “Insolvent” means (i) the
present fair saleable value of the Company’s assets is less than the amount
required to pay the Company’s total Indebtedness, (ii) the Company is unable to
pay its debts and liabilities, subordinated, contingent or otherwise, as such
debts and liabilities become absolute and matured, (iii) the Company intends to
incur or believes that it will incur debts that would be beyond its ability to
pay as such debts mature, or (iv) the Company has unreasonably small capital
with which to conduct the business in which it is engaged as such business is
now conducted.

3.10    Internal Controls. The Company maintains a system of internal control
over financial reporting (as such term is defined in Rule 13a-15(f) of the
Exchange Act) that complies with the requirements of the Exchange Act and has
been designed by the Company’s principal executive officer and principal
financial officer, or under their supervision, to provide reasonable assurance
regarding the reliability of financial reporting and the preparation of
financial statements for external purposes in accordance with generally accepted
accounting principles; the Company’s internal control over financial reporting
is effective and the Company is not aware of any material weaknesses in its
internal control over financial reporting; there has been no fraud, whether or
not material, that involves management or other employees who have a significant
role in the Company’s internal control over

 

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financial reporting; since the date of the latest audited financial statements
included or incorporated by reference in the Company’s SEC Reports and except as
disclosed in the Company’s SEC Reports, there has been no change in the
Company’s internal control over financial reporting that has materially
affected, or is reasonably likely to materially affect, the Company’s internal
control over financial reporting. The Company maintains disclosure controls and
procedures (as such term is defined in Rule 13a-15(e) of the Exchange Act) that
comply with the requirements of the Exchange Act; such disclosure controls and
procedures have been designed to ensure that material information relating to
the Company is made known to the Company’s principal executive officer and
principal financial officer by others within those entities; such disclosure
controls and procedures are effective. The Company is in compliance in all
material respects with all applicable provisions of the Sarbanes-Oxley Act of
2002 and the rules and regulations promulgated by the Commission thereunder. The
Company maintains a system of internal accounting controls sufficient to provide
reasonable assurance that (i) transactions are executed in accordance with
management’s general or specific authorizations, (ii) transactions are recorded
as necessary to permit preparation of financial statements in conformity with
generally accepted accounting principles and to maintain asset accountability,
(iii) access to assets is permitted only in accordance with management’s general
or specific authorization, and (iv) the recorded accountability for assets is
compared with the existing assets at reasonable intervals and appropriate action
is taken with respect to any differences.

3.11    Accountant. To the Company’s Knowledge, Marcum LLP, which has expressed
its opinion with respect to the Company’s financial statements as of
December 31, 2017, 2016 and 2015, respectively, and included in the SEC Reports
(including the related notes), is an independent registered public accounting
firm as required by the Act and the Public Company Accounting Oversight Board
(United States). Marcum LLP has not been engaged by the Company to perform any
“prohibited activities” (as defined in Section 10A of the Exchange Act).

3.12    Litigation. Except as set forth in the SEC Reports, there is not pending
or, to the Company’s Knowledge, threatened or contemplated, any action, suit or
proceeding to which the Company is a party or of which any property or assets of
the Company is the subject before or by any court or governmental agency,
authority or body, or any arbitrator, which, individually or in the aggregate,
(i) adversely affects or challenges the legality, validity or enforceability of
any of the Transaction Documents or the Securities or (ii) could, if there were
an unfavorable decision, have or reasonably be expected to result in a Material
Adverse Effect. There are no current or pending legal, governmental or
regulatory actions, suits or proceedings that are required to be described in
the SEC Reports that have not been so described. Neither the Company nor any
director or officer of the Company is or has been the subject of any Action
involving a claim of violation of or liability under federal or state securities
laws or a claim of breach of fiduciary duty. There has not been, and to the
Company’s Knowledge, there is not pending or contemplated, any investigation by
the Commission involving the Company or any current or former director or
officer of the Company. The Commission has not issued any stop order or other
order suspending the effectiveness of any registration statement filed by the
Company under the Exchange Act or the Securities Act.

3.13    Tax Matters. The Company (i) has filed all federal, state, local and
foreign income, franchise tax and all other tax returns reports and declarations
required by any jurisdiction to which it is subject to be filed or has requested
extensions thereof (except in any case in which the failure so to file would not
have a Material Adverse Effect), except as set forth in the SEC Reports,
(ii) has paid all taxes required to be paid by it and any other assessment, fine
or penalty levied against it, to the extent that any of the foregoing is due and
payable, except for any such assessment, fine or penalty that is currently being
contested in good faith and (iii) has set aside on its books provision
reasonably adequate for the payment of all taxes for periods subsequent to the
periods to which such returns, reports or declarations apply, except in those,
in each of the cases described in clauses (i), (ii) and (iii) of this
Section 3.13, that would not singularly or in the aggregate have a Material
Adverse Effect, except as set forth in or contemplated in the SEC Reports.

3.14    Insurance. 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.

3.15    Environmental Matters. The Company (A) is in compliance in all material
respects with any and all applicable federal, state, local and foreign laws,
rules, regulations, decisions and orders relating to pollution or protection of
human health and safety, the environment (including, without limitation, ambient
air, surface water,

 

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groundwater, land surface or subsurface strata), including, without limitation,
laws relating to emissions, discharges, releases or threatened releases of
chemicals, hazardous or toxic substances or wastes, pollutants or contaminants
(collectively, “Environmental Laws”); (B) has received and is in material
compliance with all permits, licenses or other approvals required of it under
applicable Environmental Laws to conduct its business; and (C) has not received
notice of any actual or potential liability for the investigation or remediation
of any disposal or release of hazardous or toxic substances or wastes,
pollutants or contaminants, except in any such case for any such failure to
comply, or failure to receive required permits, licenses or approvals, or
liability as would not, individually or in the aggregate, have a Material
Adverse Effect.

3.16    Labor Relations. The Company (A) is in compliance, in all material
respects, with any and all applicable foreign, federal, state and local laws,
rules, regulations, treaties, statutes and codes promulgated by any and all
governmental authorities (including pursuant to the Occupational Health and
Safety Act) relating to the protection of human health and safety in the
workplace (“Occupational Laws”); (B) has received all material permits, licenses
or other approvals required of it under applicable Occupational Laws to conduct
their business as currently conducted; and (C) is in compliance, in all material
respects, with all terms and conditions of such permits, licenses or approvals.
No action, proceeding, revocation proceeding, writ, injunction or claim is
pending or, to the Company’s Knowledge, threatened against the Company relating
to Occupational Laws, and the Company does not have knowledge of any material
facts, circumstances or developments relating to its operations or cost
accounting practices that could reasonably be expected to form the basis for or
give rise to such actions, suits, investigations or proceedings. Each employee
benefit plan, within the meaning of Section 3(3) of the Employee Retirement
Income Security Act of 1974, as amended (“ERISA”), that is maintained,
administered or contributed to by the Company or any of its affiliates for
employees or former employees of the Company and has been maintained in material
compliance with its terms and the requirements of any applicable statutes,
orders, rules and regulations, including but not limited to, ERISA and the
Internal Revenue Code of 1986, as amended (the “Code”). No prohibited
transaction, within the meaning of Section 406 of ERISA or Section 4975 of the
Code, has occurred with respect to any such plan excluding transactions effected
pursuant to a statutory or administrative exemption; and for each such plan that
is subject to the funding rules of Section 412 of the Code or Section 302 of
ERISA, no “accumulated funding deficiency” as defined in Section 412 of the Code
has been incurred, whether or not waived, and the fair market value of the
assets of each such plan (excluding for these purposes accrued but unpaid
contributions) exceeds the present value of all benefits accrued under such plan
determined using reasonable actuarial assumptions. To the Company’s Knowledge,
no executive officer or key employee of the Company plans to terminate
employment with the Company. The Company is in compliance in all material
respects with all federal, state, local and foreign laws and regulations
respecting labor, employment and employment practices and benefits, terms and
conditions of employment and wages and hours, except where failure to be in
compliance would not, either individually or in the aggregate, reasonably be
expected to result in a Material Adverse Effect.

3.17    Certificates, Authorities and Permits. The Company holds, and is
operating in compliance in all material respects with, all registrations,
approvals, certificates, authorizations and permits of any governmental
authority or self-regulatory body required for the conduct of its business as
described in the SEC Reports, including without limitation, all such
registrations, approvals, certificates, authorizations and permits required by
the FDA or any other federal, state, local or foreign agencies or bodies engaged
in the regulation of pharmaceuticals or biohazardous substances or materials;
and the Company has not received notice of any revocation or modification of any
such registration, approval, certificate, authorization and permit or has reason
to believe that any such registration, approval, certificate, authorization and
permit will not be renewed in the ordinary course that could lead to, the
withdrawal, revocation, suspension, modification or termination of any such
registration, approval, certificate, authorization or permit, which, singly or
in the aggregate, if the subject of an unfavorable decision, ruling or finding,
could result in a Material Adverse Effect.

3.18    Title to Assets. The Company has good and marketable title to all
property (whether real or personal) owned by it that is material to the business
of the Company, in each case free and clear of all liens, claims, security
interests, other encumbrances or defects, except those that could not,
individually or in the aggregate, reasonably be expected to have a Material
Adverse Effect. The property held under lease by the Company is held under
valid, subsisting and enforceable leases of which the Company is in compliance
in all material respects, with only such exceptions with respect to any
particular lease as do not interfere in any material respect with the conduct of
the business of the Company.

 

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3.19    Intellectual Property. The Company owns, possesses, or can acquire on
reasonable terms, all Intellectual Property necessary for the conduct of its
business as now conducted or as described in the SEC Reports to be conducted in
all material respects, except as such failure to own, possess, or acquire such
rights would not have a Material Adverse Effect. To the Company’s Knowledge, all
Intellectual Property of the Company is valid and enforceable, except as would
not, singly or in the aggregate, have a Material Adverse Effect. The Company has
not received any opinion from its legal counsel concluding that any activities
of its respective businesses infringe, misappropriate, or otherwise violate,
valid and enforceable Intellectual Property of any other person. Except as set
forth in the SEC Reports, (A) to the Company’s Knowledge, there is no
infringement, misappropriation or violation by third parties of any such
Intellectual Property, except as such infringement, misappropriation or
violation would not have a Material Adverse Effect; (B) there is no pending or,
to Company’s Knowledge, threatened action, suit, proceeding or claim by others
challenging the Company’s rights in or to any such Intellectual Property, and
the Company is unaware of any material facts which would form a reasonable basis
for any such claim; (C) the Intellectual Property owned by the Company, and to
the Company’s Knowledge, the Intellectual Property licensed to the Company, have
not been adjudged invalid or unenforceable, in whole or in part, and there is no
pending or threatened action, suit, proceeding or claim by others challenging
the validity or scope of any such Intellectual Property, and the Company is
unaware of any material facts which would form a reasonable basis for any such
claim; (D) to the Company’s Knowledge, there is no pending or threatened action,
suit, proceeding or claim by others that the Company infringes, misappropriates
or otherwise violates any Intellectual Property or other proprietary rights of
others, the Company has not received any written notice of such claim and the
Company is unaware of any other material fact which would form a reasonable
basis for any such claim; and (E) to the Company’s Knowledge, no Company
employee is obligated under any contract (including licenses, covenants or
commitments of any nature) or other agreement, or subject to any judgment,
decree or order of any court or administrative agency, that would interfere with
the use of such employee’s best efforts to promote the interest of the Company
or that would conflict with the Company’s business; none of the execution and
delivery of this Agreement, the carrying on of the Company’s business by the
employees of the Company, and the conduct of the Company’s business as proposed,
will conflict with or result in a breach of terms, conditions, or provisions of,
or constitute a default under, any contract, covenant or instrument under which
any such employee is now obligated; and it is not and will not be necessary to
use any inventions, trade secrets or proprietary information of any of its
consultants, or its employees (or Persons it currently intends to hire) made
prior to their employment by the Company, except for technology that is licensed
to or owned by the Company. All licenses for the use of Company’s Intellectual
Property are valid, binding upon, and enforceable against the Company and, to
the Company’s Knowledge, the other parties thereto in accordance to its terms.
The Company has complied in all material respects with any intellectual property
license, and except as would not, singly or in the aggregate, have a Material
Adverse Effect, the Company is not in breach nor has received any written notice
asserting or threatening any claim of breach of any intellectual property
license, and to the Company’s Knowledge there is no breach or anticipated breach
by any other person to any intellectual property license. The Company has taken
reasonable steps to protect, maintain and safeguard its Intellectual Property,
including the execution of appropriate nondisclosure and confidentiality
agreements. The Company has not received a notice (written or otherwise) that
any of the Intellectual Property necessary for the conduct of its business as
now conducted or as described in the SEC Reports has expired, terminated or been
abandoned, or is expected to expire or terminate or be abandoned, within two
(2) years from the date of this Agreement.

3.20    FDA and Related Matters. The Company and, to the Company’s Knowledge,
others who perform services on the Company’s behalf have been and are in
compliance with all applicable federal, state, local and foreign laws, rules,
regulations, standards, orders and decrees governing their respective
businesses, including without limitation, all regulations promulgated by the FDA
or any other federal, state, local or foreign agencies or bodies engaged in the
regulation of pharmaceuticals or biohazardous substances or materials, except
where noncompliance would not, singly or in the aggregate, have a Material
Adverse Effect; and the Company has not received any notice citing action or
inaction by the Company or others who perform services on the Company’s behalf
that would constitute non-compliance with any applicable federal, state, local
or foreign laws, rules, regulations or standards excepting, however, such
actions that have heretofore been resolved to the satisfaction of such
governmental entity. All tests and preclinical and clinical studies conducted by
or on behalf of the Company were and, if still pending, are being, conducted in
all material respects in accordance with experimental protocols, procedures and
controls generally used by qualified experts in the preclinical and clinical
study of new drugs, and laws and regulations; the descriptions of the tests and
preclinical and clinical studies, and results thereof, conducted by or on behalf
of the Company are accurate in all material respects; except as disclosed in the
SEC Reports, the

 

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Company has not received any written notice or correspondence from the FDA or
any foreign, state or local governmental body exercising comparable authority or
any Institutional Review Board or comparable authority requiring the
termination, suspension, material modification or clinical hold of any tests or
preclinical or clinical studies being conducted by or on behalf of the Company,
which termination, suspension, material modification or clinical hold would
reasonably be expected to have a Material Adverse Effect; and the Company has
not received any written notices or correspondence from others concerning the
termination, suspension, material modification or clinical hold of any tests or
preclinical or clinical studies conducted by others on any active ingredient
contained in the existing products of the Company or the products described in
the SEC Reports as being under development, which termination, suspension,
material modification or clinical hold would reasonably be expected to have a
Material Adverse Effect.

3.21    Compliance with Nasdaq Continued Listing Requirements. Except as set
forth in the SEC Reports, the Company is, and has no reason to believe that it
will not, upon the issuance of the Securities hereunder, continue to be, in
compliance with the listing and maintenance requirements for continued listing
on Nasdaq in all material respects. Assuming the representations and warranties
of the Purchasers set forth in Section 4.2 are true and correct in all material
respects, the consummation of the transactions contemplated by the Transaction
Documents does not contravene the rules and regulations of Nasdaq. Except as set
forth in the SEC Reports, (i) there are no proceedings pending or, to the
Company’s Knowledge, threatened against the Company relating to the continued
listing of the Common Stock on Nasdaq and (ii) the Company has not received any
notice of, nor to the Company’s Knowledge is there any basis for, the delisting
of the Common Stock from Nasdaq.

3.22    Application of Takeover Protections. The Company and the Board of
Directors have taken all necessary action, if any, in order to render
inapplicable any control share acquisition, business combination, poison pill
(including any distribution under a rights agreement) or other similar
anti-takeover provision under the Company’s certificate of incorporation (or
similar charter documents) or the laws of its state of incorporation, including
Section 203 of the Delaware General Corporation Law, as well as other laws or
provisions that would prevent the Purchasers or the Company from fulfilling
their obligations or exercising their rights under the Transaction Documents,
including without limitation as a result of the Company’s issuance of the
Securities and the Purchasers’ ownership of the Securities and exercise in full
of the Warrants.

3.23    Fees. The Company shall be responsible for the payment of the Placement
Agent’s fees. No Person will have, as a result of the transactions contemplated
by the Transaction Documents, any valid right, interest or claim against or upon
any Purchaser for any commission, fee or other compensation pursuant to any
agreement, arrangement or understanding entered into by or on behalf of the
Company, and no Purchaser shall have any obligation with respect to any fees or
with respect to any claims made by or on behalf of other Persons for fees of a
type contemplated in this Section 3.23 that may be due in connection with the
transactions contemplated by the Transaction Documents and that arise out of any
agreement, arrangement or understanding entered into by or on behalf of the
Company. The Company shall pay, and hold each Purchaser harmless against, any
liability, loss or expense (including, without limitation, reasonable attorney’s
fees and out-of-pocket expenses) arising in connection with any such claim for
fees arising out of the issuance of the Securities pursuant to this Agreement.

3.24    No Directed Selling Efforts or General Solicitation. Neither the Company
nor, to the Company’s Knowledge, 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.

3.25    No Integrated Offering. Neither the Company nor any of its Affiliates,
nor, to the Company’s Knowledge, any Person acting on its or their behalf has,
directly or indirectly, made any offers or sales of any Company security or
solicited any offers to buy any security, under circumstances that would
adversely affect reliance by the Company on Section 4(a)(2) under the Securities
Act for the exemption from registration for the transactions contemplated hereby
or would require registration of the Shares under the Securities Act or cause
the offering of the Securities pursuant to the Transaction Documents to be
integrated with prior offerings by the Company for purposes of any applicable
law, regulation or stockholder approval provisions, including, without
limitation, under the rules and regulations of any Trading Market on which the
Common Stock is now listed or quoted. Assuming the satisfaction of all
conditions set forth in Section 2.5(b), the sale and issuance of the Securities
hereunder does not contravene the rules and regulation of any Trading Market on
which the Common Stock is now listed or quoted.

 

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3.26    Private Placement. Assuming the accuracy of the Purchasers’
representations and warranties set forth in ARTICLE 4, no registration under the
Securities Act is required for the offer and sale of the Securities by the
Company to the Purchasers as contemplated hereby.

3.27    Investment Company. The Company is not and, after giving effect to the
offering and sale of the Securities, will not be an “investment company,” as
such term is defined in the Investment Company Act of 1940, as amended.

3.28    Foreign Corrupt Practices. The Company, nor, to the best of the
Company’s Knowledge, any director, officer, agent, employee or other Person
associated with or acting on behalf of the Company has (A) used any corporate
funds for any unlawful contribution, gift, entertainment or other unlawful
expense relating to political activity; (B) made any direct or indirect unlawful
payment to any foreign or domestic government official or employee from
corporate funds; (C) violated or is in violation of any provision of the FCPA;
or (D) made any bribe, rebate, payoff, influence payment, kickback or other
unlawful payment.

3.29    Indebtedness. Except as disclosed in the SEC Reports, the Company does
not (i) have any outstanding Indebtedness (as defined below), (ii) is in
violation of any term of or in default under any contract, agreement or
instrument relating to any Indebtedness, except where such violations and
defaults would not result, individually or in the aggregate, in a Material
Adverse Effect, or (iii) is a party to any contract, agreement or instrument
relating to any Indebtedness, the performance of which, in the judgment of the
Company’s officers, has or is expected to have a Material Adverse Effect. For
purposes of this Agreement: (x) “Indebtedness” of any Person means, without
duplication (A) all indebtedness for borrowed money, (B) all obligations issued,
undertaken or assumed as the deferred purchase price of property or services
(other than trade payables entered into in the ordinary course of business), (C)
all reimbursement or payment obligations with respect to letters of credit,
surety bonds and other similar instruments, (D) all obligations evidenced by
notes, bonds, debentures or similar instruments, including obligations so
evidenced incurred in connection with the acquisition of property, assets or
businesses, (E) all indebtedness created or arising under any conditional sale
or other title retention agreement, or incurred as financing, in either case
with respect to any property or assets acquired with the proceeds of such
indebtedness (even though the rights and remedies of the seller or bank under
such agreement in the event of default are limited to repossession or sale of
such property), (F) all monetary obligations under any leasing or similar
arrangement which, in connection with generally accepted accounting principles,
consistently applied for the periods covered thereby, is classified as a capital
lease, (G) all indebtedness referred to in clauses (A) through (F) above secured
by (or for which the holder of such Indebtedness has an existing right,
contingent or otherwise, to be secured by) any mortgage, lien, pledge, charge,
security interest or other encumbrance upon or in any property or assets
(including accounts and contract rights) owned by any Person, even though the
Person which owns such assets or property has not assumed or become liable for
the payment of such indebtedness, and (H) all Contingent Obligations in respect
of indebtedness or obligations of others of the kinds referred to in clauses
(A) through (G) above; and (y) “Contingent Obligation” means, as to any Person,
any direct or indirect liability, contingent or otherwise, of that Person with
respect to any indebtedness, lease, dividend or other obligation of another
Person if the primary purpose or intent of the Person incurring such liability,
or the primary effect thereof, is to provide assurance to the obligee of such
liability that such liability will be paid or discharged, or that any agreements
relating thereto will be complied with, or that the holders of such liability
will be protected (in whole or in part) against loss with respect thereto.

3.30    Regulation M Compliance. The Company has not, and to the Company’s
Knowledge no one acting on its behalf has, (i) taken, directly or indirectly,
any action designed to cause or to result in the stabilization or manipulation
of the price of any security of the Company to facilitate the sale or resale of
any of the Securities, (ii) sold, bid for, purchased, or paid any compensation
for soliciting purchases of, any of the Securities, or (iii) paid or agreed to
pay to any Person any compensation for soliciting another to purchase any other
securities of the Company.

3.31    Disclosure. No representation or warranty by the Company in this
Agreement, including the Disclosure Schedules to this Agreement, if any, and no
statement contained in the SEC Reports or any certificate or other document
furnished or to be furnished to the Purchasers pursuant to this Agreement
contains any untrue statement of a material fact or omits to state a material
fact necessary in order to make the statements contained therein, in light of
the circumstances under which they were made, not misleading. The Company
confirms that neither it nor any officers or directors has provided any
Purchaser or its agents or counsel with any information that

 

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constitutes or might constitute material, nonpublic information, other than with
respect to the existence of, and the material terms and conditions of, the
transactions contemplated by the Transaction Documents. The Company understands
and confirms that each of the Purchasers will rely on the foregoing
representations in effecting transactions in securities of the Company. The
Company acknowledges and agrees that no Purchaser makes or has made any
representations or warranties with respect to the transactions contemplated
hereby other than those specifically set forth in ARTICLE 4 hereof.

3.32    Registration Rights. Except as described in the SEC Reports, the Company
has not granted or agreed to grant to any Person any rights (including
“piggy-back” registration rights) to have any securities of the Company
registered with the SEC or any other governmental authority. All such
registration rights have either been satisfied or waived so that no Person shall
have the right to demand the inclusion of any Company securities (other than the
Securities to be issued hereunder) in the Registration Statement.

3.33    Listing and Maintenance Requirements. The Common Stock is registered
pursuant to Section 12(b) or 12(g) of the Exchange Act, and the Company has
taken no action designed to, or which to its knowledge is likely to have the
effect of, terminating the registration of the Common Stock under the Exchange
Act nor has the Company received any notification that the Commission is
contemplating terminating such registration. Except as set forth in the SEC
Reports, the Company has not, in the 12 months preceding the date hereof,
received notice from any Trading Market on which the Common Stock is or has been
listed or quoted to the effect that the Company is not in compliance with the
listing or maintenance requirements of such Trading Market. The Common Stock is
currently eligible for electronic transfer through the Depository Trust Company
or another established clearing corporation (except for any restricted shares of
Common Stock) and the Company is current in payment of the fees to the
Depository Trust Company (or such other established clearing corporation) in
connection with such electronic transfer.

3.34    Transactions With Affiliates and Employees. Except as set forth in the
SEC Reports, 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 (other than for services as employees,
officers and directors), including any contract, agreement or other arrangement
providing for the furnishing of services to or by, providing for rental of real
or personal property to or from providing for the borrowing of money from or
lending of money to, or otherwise requiring payments to or from any officer,
director or such employee or, to the Company’s Knowledge, any entity in which
any officer, director, or any such employee has a substantial interest or is an
officer, director, trustee, stockholder, member or partner, in each case as such
that would be disclosable under Item 404 of the Commission’s Regulation S-K,
other than (i) for: (A) payment of salary or consulting fees for services
rendered, (B) payment of cash retainers for non-employee directors,
(C) reimbursement for expenses incurred on behalf of the Company and (D) other
employee, consultant and non-employee director benefits, including equity
compensation; and (ii) the transactions contemplated by the Transaction
Documents.

3.35    Office of Foreign Assets Control. Neither the Company nor, to the
Company’s knowledge, any director, officer, agent, employee or affiliate of the
Company is currently subject to any U.S. sanctions administered by the Office of
Foreign Assets Control of the U.S. Treasury Department (“OFAC”).

3.36    Money Laundering. The operations of the Company are and have been
conducted at all times in compliance with applicable financial record-keeping
and reporting requirements of the Currency and Foreign Transactions Reporting
Act of 1970, as amended, applicable money laundering statutes and applicable
rules and regulations thereunder (collectively, the “Money Laundering Laws”),
and no Action or Proceeding by or before any court or governmental agency,
authority or body or any arbitrator involving the Company with respect to the
Money Laundering Laws is pending or, to the Company’s Knowledge, threatened.

3.37    Defense Protection Act. The Company represents and warrants that it does
not engage in the design, fabrication, development, testing, production or
manufacture of critical technologies within the meaning of the Defense
Production Act of 1950, as amended, including all implementing regulations
thereof (the “DPA”) and that it has no current intention of engaging in such
activities in the future.

3.38    No Disqualification Events. With respect to the Securities to be offered
and sold hereunder in reliance on Rule 506 under the Securities Act, none of the
Company, any of its predecessors, any affiliated issuer,

 

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any director, executive officer, other officer of the Company participating in
the offering hereunder, any beneficial owner of 20% or more of the Company’s
outstanding voting equity securities, calculated on the basis of voting power,
nor any promoter (as that term is defined in Rule 405 under the Securities Act)
connected with the Company in any capacity at the time of sale (each, an “Issuer
Covered Person” and, together, “Issuer Covered Persons”) is subject to any of
the “Bad Actor” disqualifications described in Rule 506(d)(1)(i) to (viii) under
the Securities Act (a “Disqualification Event”), except for a Disqualification
Event covered by Rule 506(d)(2) or (d)(3). The Company has exercised reasonable
care to determine whether any Issuer Covered Person is subject to a
Disqualification Event. The Company has complied, to the extent applicable, with
its disclosure obligations under Rule 506(e), and has furnished to the
Purchasers a copy of any disclosures provided thereunder.

3.39    Other Covered Persons. Other than the Placement Agent, the Company is
not aware of any person (other than any Issuer Covered Person) that has been or
will be paid (directly or indirectly) remuneration for solicitation of
purchasers in connection with the sale of any Securities.

3.40    Notice of Disqualification Events. The Company will notify the
Purchasers and the Placement Agent in writing, prior to the Closing Date of
(i) any Disqualification Event relating to any Issuer Covered Person and
(ii) any event that would, with the passage of time, become a Disqualification
Event relating to any Issuer Covered Person.

ARTICLE 4

REPRESENTATIONS AND WARRANTIES OF THE PURCHASERS

Each Purchaser, for itself and for no other Purchaser, hereby represents and
warrants as of the date hereof and as of the Closing Date to the Company and to
the Placement Agent as follows (unless as of a specific date therein):

4.1    Organization; Authority. Such Purchaser is either an individual or an
entity duly incorporated or formed, validly existing and in good standing under
the laws of the jurisdiction of its incorporation or formation with full right,
corporate, partnership, limited liability company or similar power and authority
to enter into and to consummate the transactions contemplated by the Transaction
Documents and otherwise to carry out its obligations hereunder and thereunder.
The execution and delivery of the Transaction Documents and performance by such
Purchaser of the transactions contemplated by the Transaction Documents have
been duly authorized by all necessary corporate, partnership, limited liability
company or similar action, as applicable, on the part of such Purchaser. Each
Transaction Document to which it is a party has been duly executed by such
Purchaser, and when delivered by such Purchaser in accordance with the terms
hereof, will constitute the valid and legally binding obligation of such
Purchaser, enforceable against it in accordance with its terms, except: (i) as
limited by general equitable principles and applicable bankruptcy, insolvency,
reorganization, moratorium and other laws of general application affecting
enforcement of creditors’ rights generally, (ii) as limited by laws relating to
the availability of specific performance, injunctive relief or other equitable
remedies and (iii) insofar as indemnification and contribution provisions may be
limited by applicable law.

4.2    Purchaser Status. At the time such Purchaser was offered the Securities,
it was, and as of the date hereof it is, and on each date on which it exercises
the Warrants it will be, an “accredited investor” as defined in Rule 501 under
the Securities Act. Such Purchaser is not a broker-dealer registered under
Section 15 of the Exchange Act. Such Purchaser is acting alone in its
determination as to whether to invest in the Securities. Such Purchaser is not a
party to any voting agreements or similar arrangements with respect to the
Securities. Except as expressly disclosed in a Schedule 13D or Schedule 13G (or
amendments thereto) filed by such Purchaser with the Commission with respect to
the beneficial ownership of the Company’s Common Stock, such Purchaser is not a
member of a partnership, limited partnership, syndicate, or other group for the
purpose of acquiring, holding, voting or disposing of the Securities. Each
Purchaser represents and warrants that it (i) is not and will not become a party
to (A) any agreement, arrangement or understanding with, and has not given any
commitment or assurance to, any Person as to how such Person, if serving as a
director or if elected as a director of the Corporation, will act or vote on any
issue or question (a “Voting Commitment”) or (B) any Voting Commitment that
could limit or interfere with

 

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such Person’s ability to comply, if serving as or elected as a director of the
Company, with such Person’s fiduciary duties under applicable law; (ii) is not
and will not become a party to any agreement, arrangement or understanding with
any Person other than the corporation with respect to any direct or indirect
compensation, reimbursement or indemnification in connection with service or
action as a director of the Company.

4.3    Certain Transactions and Confidentiality. Other than consummating the
transactions contemplated hereunder, such Purchaser has not, nor has any Person
acting on behalf of or pursuant to any understanding with such Purchaser,
directly or indirectly executed any purchases or sales, including Short Sales,
of the securities of the Company during the period commencing as of the time
that such Purchaser was first contacted by the Company, the Placement Agent or
any other Person regarding the transactions contemplated hereby and ending
immediately prior to the date hereof. Notwithstanding the foregoing, in the case
of an Purchaser that is a multi-managed investment vehicle whereby separate
portfolio managers manage separate portions of such Purchaser’s assets and the
portfolio managers have no direct knowledge of the investment decisions made by
the portfolio managers managing other portions of such Purchaser’s assets, the
representation set forth above shall only apply with respect to the portion of
assets managed by the portfolio manager that made the investment decision to
purchase the Shares covered by this Agreement. The Purchasers, its Affiliates
and authorized representatives and advisors who are aware of the transactions
contemplated by the Transaction Documents, maintained the confidentiality of all
disclosures made to it in connection with such transactions (including the
existence and terms of such transactions). Notwithstanding the foregoing, for
avoidance of doubt, nothing contained herein shall constitute a representation
or warranty, or preclude any actions, with respect to the identification of the
availability of, or securing of, available shares to borrow in order to effect
Short Sales or similar transactions in the future.

4.4    General Solicitation; Pre-Existing Relationship. Such Purchaser is not
purchasing the Securities as a result of any advertisement, article, notice or
other communication regarding the Securities published in any newspaper,
magazine or similar media or broadcast over television or radio or presented at
any seminar or any other general solicitation or general advertisement. Such
Purchaser also represents that such Purchaser was contacted regarding the sale
of the Units by the Company or the Placement Agent (or an authorized agent or
representative of the Company or the Placement Agent) with which such Purchaser
had a substantial pre-existing relationship.

4.5    Purchase Entirely for Own Account. The Securities to be received by such
Purchaser hereunder will be acquired for such Purchaser’s own account, not as
nominee or agent, and not with a view to the resale or distribution of any part
thereof in violation of the Securities Act, and such Purchaser has no present
intention of selling, granting any participation in, or otherwise distributing
the same in violation of the Securities Act without prejudice, however, to such
Purchaser’s right at all times to sell or otherwise dispose of all or any part
of such Securities in compliance with applicable federal and state securities
laws. Nothing contained herein shall be deemed a representation or warranty by
such Purchaser to hold the Securities for any period of time.

4.6    Experience of Such Purchaser. Such Purchaser, either alone or together
with its representatives, has such knowledge, sophistication and experience in
business and financial matters so as to be capable of evaluating the merits and
risks of the prospective investment in the Securities, and has so evaluated the
merits and risks of such investment. Such Purchaser is able to bear the economic
risk of an investment in the Securities and, at the present time, is able to
afford a complete loss of such investment.

4.7    Disclosure of Information. Such Purchaser has had an opportunity to
receive all information related to the Company requested by it and to ask
questions of and receive answers from the Company and the Placement Agent
regarding the Company, its business and the terms and conditions of the offering
of the Securities. Such Purchaser acknowledges receipt of copies of the SEC
Reports (or access thereto via EDGAR). Neither such inquiries nor any other due
diligence investigation conducted by such Purchaser shall modify, limit or
otherwise affect such Purchaser’s right to rely on the Company’s representations
and warranties contained in this Agreement.

4.8    Placement Agent. Such Purchaser hereby acknowledges and agrees that it
has independently evaluated the merits of its decision to purchase the Shares,
and that (i) the Placement Agent is acting solely as placement agent in
connection with the execution, delivery and performance of the Transaction
Documents and is not acting as an underwriter or in any other capacity and is
not and shall not be construed as a fiduciary for such Purchaser, the Company or
any other Person in connection with the execution, delivery and performance of
the Transaction Documents, and (ii) such Purchaser has not relied on the
Placement Agent or its officers, directors,

 

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employees, attorneys or Affiliates with respect to the negotiation, execution or
performance of the Transaction Documents or any representation or warranty made
in, in connection with, or as an inducement to the Transaction Documents.

4.9    Interested Stockholders. Each Purchaser that is an “Interested
Stockholder” (as such term is defined in Section 203 of the General Corporation
Law of the State of Delaware) represents and warrants that either (a) it has
been an Interested Stockholder for at least three years prior to the date hereof
or (b) the transaction that resulted in such Purchaser becoming an Interested
Stockholder was approved by the Board of Directors or a duly authorized
committee thereof.

4.10    Restricted Securities. Such Purchaser understands that the Securities
are “restricted securities” and have not been registered under the Securities
Act and may not be offered, resold, pledged or otherwise transferred except
(i) pursuant to an exemption from registration under the Securities Act or
pursuant to an effective registration statement in compliance with Section 5
under the Securities Act and (ii) in accordance with all applicable securities
laws of the states of the United States and other jurisdictions.

4.11    No Rule 506 Disqualifying Activities. Such Purchaser has not taken any
of the actions set forth in, and is not subject to, the disqualification
provisions of Rule 506(d)(1) of the Securities Act.

4.12    Compliance. No part of the funds being used by such Purchaser to acquire
the Securities has been, or shall be, directly or indirectly derived from, or
related to, any activity that may contravene United States federal or state or
non-United States laws or regulations.

4.13    Commissions. No Person will have, as a result of the transactions
contemplated by the Transaction Documents, any valid right, interest or claim
against the Company or upon any other Purchaser for any commission, fee or other
compensation pursuant to any agreement, arrangement or understanding entered
into by or on behalf of such Purchaser. Such Purchaser shall pay, and hold the
Company and each other Purchaser harmless against, any liability, loss or
expense (including, without limitation, reasonable attorney’s fees and
out-of-pocket expenses) arising in connection with any such claim for fees
pursuant to any such agreement, arrangement or understanding entered into by or
on behalf of such Purchaser.

4.14    Residency. Such Purchaser is a resident of or an entity organized under
the jurisdiction specified below its address on Exhibit A hereto.

The Company acknowledges and agrees that the representations contained in
ARTICLE 4 shall not modify, amend or affect such Purchaser’s right to rely on
the Company’s representations and warranties contained in this Agreement or any
representations and warranties contained in any other Transaction Document or
any other document or instrument executed and/or delivered in connection with
this Agreement or the consummation of the transaction contemplated hereby.

ARTICLE 5

REGISTRATION RIGHTS

5.1    Registration Statement.

(a)    On or prior to the Initial Filing Deadline, the Company shall prepare and
file with the Commission a Registration Statement covering the resale of all
Registrable Securities for an offering to be made on a continuous basis pursuant
to Rule 415. The Registration Statement shall be on Form S-3 (except if the
Company is not then eligible to register for resale the Registrable Securities
on Form S-3, in which case such registration shall be on another appropriate
form in accordance with the Securities Act) and shall contain (except if
otherwise required pursuant to written comments received from the Commission
upon a review of such Registration Statement by the Commission) the “Plan of
Distribution” in substantially the form attached hereto as Exhibit G.
Notwithstanding any other provision of this ARTICLE 5, if the staff of the
Commission does not permit all of the Registrable Securities to be registered on
the initial Registration Statement filed pursuant to this Section 5.1(a) (the
“Initial Registration Statement”) or requires any Purchaser to be named as an
“underwriter”, then the Company shall use commercially

 

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reasonable efforts to persuade the staff of the Commission that the offering
contemplated by the Registration Statement is a valid secondary offering and not
an offering “by or on behalf of the issuer” as defined in Rule 415 and that none
of the Purchasers is an “underwriter”; provided, however, that in no event shall
the Company be required to continue discussions with the staff of the Commission
if the Company reasonably determines that doing so is reasonably likely to cause
the Company to incur liquidated damages pursuant to Section 5.1(d) because of a
failure to have the Initial Registration Statement declared effective prior to
the Initial Effectiveness Deadline. In the event that, despite the Company’s
commercially reasonable efforts to advocate with the Commission for the
registration of all of the Registrable Securities in accordance with the SEC
Guidance, including without limitation, Compliance and Disclosure Interpretation
612.09 and compliance with the terms of this Section 5.1(a), the staff of the
Commission refuses to alter its position, the Company shall (i) remove from the
Registration Statement such portion of the Registrable Securities (the “Cut Back
Shares”) as determined below and/or (ii) agree to such restrictions and
limitations on the registration and resale of the Registrable Securities as the
staff of the Commission may require to assure the Company’s compliance with the
requirements of Rule 415 (collectively, the “SEC Restrictions”); provided,
however, that the Company shall not agree to name any Purchaser as an
“underwriter” in such Registration Statement without the prior written consent
of such Purchaser; provided, further, that if any such Purchaser refuses to be
named as an underwriter as required by the SEC Restrictions, such Purchaser’s
Registrable Securities shall be removed from the Initial Registration Statement
and such Registrable Securities shall be deemed to constitute Cut Back Shares
and the provisions of this Section 5.1(a) shall apply to such Cut Back Shares.
Except as provided in the immediately preceding sentence, any cut-back imposed
pursuant to this Section 5.1(a) shall be allocated among the Purchasers on a pro
rata basis by (x) first removing Registrable Securities represented by Unit
Shares on a pro rata basis based on the total number of unregistered Unit Shares
held by such Purchasers and then (y) by removing Registrable Securities
represented by Warrant Shares on a pro rata basis based on the total number of
unregistered Warrant Shares held by such Purchasers, in each case unless the SEC
Restrictions otherwise require or provide or the Purchasers otherwise agree. In
the event of a cutback hereunder, the Company shall give the Holder at least
three (3) Trading Days prior written notice along with the calculations as to
such Holder’s allotment. In furtherance of the foregoing, each Purchaser shall
promptly notify the Company when it has sold substantially all of its
Registrable Securities covered by the Initial Registration Statement (or any
Additional Registration Statement (as defined below)) so as to enable the
Company to determine whether it can file one or more additional registration
statements covering the Cut Back Shares and the Company agrees that it shall
file one or more additional Registration Statements (each, an “Additional
Registration Statement”) as promptly as possible, and in any event on or prior
to the applicable Additional Filing Deadline, successively using its
commercially reasonable efforts to register on each such Additional Registration
Statement the maximum number of remaining Cut Back Shares that continue to
constitute Registrable Securities until all of the Cut Back Shares that continue
to constitute Registrable Securities have been registered with the SEC.

(b)    The Company shall use its commercially reasonable efforts to cause each
Registration Statement to be declared effective by the Commission as promptly as
possible after the filing thereof, but in any event prior to the applicable
Effectiveness Deadline, and shall use commercially reasonable efforts to keep
the Registration Statement continuously effective under the Securities Act until
the date that all Registrable Securities covered by such Registration Statement
have been sold or can be sold publicly without restriction or limitation under
Rule 144 (including, without limitation, the requirement to be in compliance
with Rule 144(c)(1)) (the “Effectiveness Period”). Not later than two Trading
Days after a Registration Statement is declared effective, the Company shall
file a prospectus supplement for any Registration Statement to the extent
required pursuant to Rule 424.

(c)    The Company shall notify the Purchasers in writing promptly (and in any
event within two Trading Days) after receiving notification from the Commission
that a Registration Statement has been declared effective.

(d)    Notwithstanding anything in this Agreement to the contrary, the Company
may, by written notice to the Purchasers, suspend sales under a Registration
Statement after the Effective Date thereof and/or require that the Purchasers
immediately cease the sale of shares of Common Stock pursuant thereto and/or
defer the filing of any Additional Registration Statement if the Company is
engaged in a material merger, acquisition or sale or any other pending
development that the Company believes may be material, and the Board of
Directors determines in good faith, by appropriate resolutions, that, as a
result of such activity, (A) it would be materially detrimental to the Company
(other than as relating solely to the price of the Common Stock) to maintain a

 

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Registration Statement at such time or (B) it is in the best interests of the
Company to suspend sales under such registration at such time. Upon receipt of
such notice, each Purchaser agrees to immediately discontinue any sales of
Registrable Securities pursuant to such Registration Statement until such
Purchaser is advised in writing by the Company that the current Prospectus or
amended Prospectus, as applicable, may be used. In no event, however, shall this
right be exercised to suspend sales beyond the period during which (in the good
faith determination of the Board of Directors) the failure to require such
suspension would be materially detrimental to the Company. The Company’s rights
under this Section 5.1(d) may be exercised for a period of no more than 20
Trading Days at a time with a subsequent permitted trading window of at least 90
Trading Days, and not more than two times in any twelve-month period.
Immediately after the end of any suspension period under this Section 5.1(d),
the Company shall take all necessary actions (including filing any required
supplemental prospectus) to restore the effectiveness of the applicable
Registration Statement and the ability of the Purchasers to publicly resell
their Registrable Securities pursuant to such effective Registration Statement.

5.2    Registration Procedures. In connection with the Company’s registration
obligations hereunder, the Company shall:

(a)    Not less than five Trading Days prior to the filing of a Registration
Statement or any related Prospectus or any amendment or supplement thereto,
furnish via email to those Purchasers or their counsels who have supplied the
Company with email addresses copies of all such documents proposed to be filed,
which documents (other than any document that is incorporated or deemed to be
incorporated by reference therein) will be subject to the review of such
Purchasers. The Company shall reflect in each such document when so filed with
the Commission such comments regarding the Purchasers and the plan of
distribution as the Purchasers may reasonably and promptly propose no later than
two Trading Days after the Purchasers have been so furnished with copies of such
documents as aforesaid.

(b)    (i) Subject to Section 5.1(d), prepare and file with the Commission such
amendments, including post-effective amendments, to each Registration Statement
and the Prospectus used in connection therewith as may be necessary to keep the
Registration Statement continuously effective, as to the applicable Registrable
Securities for the Effectiveness Period and prepare and file with the Commission
such additional Registration Statements in order to register for resale under
the Securities Act all of the Registrable Securities; (ii) cause the related
Prospectus to be amended or supplemented by any required Prospectus supplement,
and as so supplemented or amended to be filed pursuant to Rule 424; and
(iii) comply in all material respects with the provisions of the Securities Act
and the Exchange Act with respect to the disposition of all Registrable
Securities covered by the Registration Statement during the applicable period in
accordance with the intended methods of disposition by the Purchasers thereof
set forth in the Registration Statement as so amended or in such Prospectus as
so supplemented.

(c)    Notify the Purchasers as promptly as reasonably possible, and if
requested by the Purchasers, confirm such notice in writing no later than two
Trading Days thereafter, of any of the following events: (i) the Commission
notifies the Company whether there will be a “review” of any Registration
Statement; (ii) any Registration Statement or any post-effective amendment is
declared effective; (iii) the Commission issues any stop order suspending the
effectiveness of any Registration Statement or initiates any Proceedings for
that purpose; (iv) the Company receives notice of any suspension of the
qualification or exemption from qualification of any Registrable Securities for
sale in any jurisdiction, or the initiation or threat of any Proceeding for such
purpose; (v) the financial statements included in any Registration Statement
become ineligible for inclusion therein; or (vi) the Company becomes aware that
any Registration Statement or Prospectus or other document contains any untrue
statement of a material fact or omits to state any 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.

(d)    Use reasonable best efforts to avoid the issuance of or, if issued,
obtain the withdrawal of (i) any order suspending the effectiveness of any
Registration Statement, or (ii) any suspension of the qualification (or
exemption from qualification) of any of the Registrable Securities for sale in
any jurisdiction, as soon as possible.

(e)    If requested by a Purchaser, provide such Purchaser, without charge, at
least one conformed copy of each Registration Statement and each amendment
thereto, including financial statements and

 

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schedules, and all exhibits to the extent requested by such Person (including
those previously furnished or incorporated by reference) promptly after the
filing of such documents with the Commission; provided, that the Company shall
have no obligation to provide any document pursuant to this clause that is
available on the Commission’s EDGAR system.

(f)    Promptly deliver to each Purchaser, without charge, as many copies of the
Prospectus or Prospectuses (including each form of prospectus) and each
amendment or supplement thereto as such Persons may reasonably request. The
Company hereby consents to the use of such Prospectus and each amendment or
supplement thereto by each of the selling Purchasers in connection with the
offering and sale of the Registrable Securities covered by such Prospectus and
any amendment or supplement thereto to the extent permitted by federal and state
securities laws and regulations.

(g)    Prior to any resale of Registrable Securities by a Purchaser, use
commercially reasonable best efforts to register or qualify or cooperate with
the selling Purchasers in connection with the registration or qualification (or
exemption from such registration or qualification) of such Registrable
Securities for offer and sale under the securities or Blue Sky laws of such
jurisdictions within the United States as any Purchaser requests in writing, to
keep each such registration or qualification (or exemption therefrom) effective
for so long as required, but not to exceed the duration of the Effectiveness
Period, and to do any and all other acts or things reasonably necessary or
advisable to enable the disposition in such jurisdictions of the Registrable
Securities covered by a Registration Statement; provided, however, that the
Company shall not be obligated to file any general consent to service of process
or to qualify as a foreign corporation or as a dealer in securities in any
jurisdiction in which it is not so qualified or to subject itself to taxation in
respect of doing business in any jurisdiction in which it is not otherwise so
subject.

(h)    Use reasonable best efforts to cause all Registrable Securities covered
by a Registration Statement to be listed on the Trading Market;

(i)    If requested by the Purchasers, cooperate with the Purchasers to
facilitate the timely preparation and delivery of certificates representing
Registrable Securities to be delivered to a transferee pursuant to a
Registration Statement, which certificates shall be free, to the extent
permitted by this Agreement and under law, of all restrictive legends, and to
enable such Registrable Securities to be in such denominations and registered in
such names as any such Purchasers may reasonably request.

(j)    Upon the occurrence of any event described in Section 5.2(c)(iii)-(vi),
as promptly as reasonably practicable, prepare a supplement or amendment,
including a post-effective amendment, to the Registration Statement or a
supplement to the related Prospectus or any document incorporated or deemed to
be incorporated therein by reference, and file any other required document so
that, as thereafter delivered, neither the Registration Statement nor such
Prospectus will contain an untrue statement of a material fact or omit to state
a material fact required to be stated therein or necessary to make the
statements therein, in the light of the circumstances under which they were
made, not misleading.

(k)    It shall be a condition precedent to the obligations of the Company to
complete the registration pursuant to this Agreement with respect to the
Registrable Securities of any particular Purchaser that such Purchaser furnish
to the Company a completed Selling Stockholder Questionnaire in the form
proffered by the Company (the “Selling Stockholder Questionnaire”) and such
other information regarding itself, the Registrable Securities and other shares
of Common Stock held by it and the intended method of disposition of the
Registrable Securities held by it (if different from the Plan of Distribution
set forth on Exhibit G hereto) as shall be reasonably required to effect the
registration of such Registrable Securities and shall complete and execute such
documents in connection with such registration as the Company may reasonably
request.

(l)    The Company shall comply with all applicable rules and regulations of the
Commission under the Securities Act and the Exchange Act, including, without
limitation, Rule 172 under the Securities Act, file any final Prospectus,
including any supplement or amendment thereof, with the Commission pursuant to
Rule 424 under the Securities Act, promptly inform the Purchasers in writing if,
at any time during the Effectiveness Period, the Company does not satisfy the
conditions specified in Rule 172 and, as a result thereof, the Purchasers are
required to make available a Prospectus in connection with any disposition of
Registrable Securities and take such other actions as may be reasonably
necessary to facilitate the registration of the Registrable Securities
hereunder.

 

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(m)    Not identify any Purchaser as an underwriter without its prior written
consent in any public disclosure or filing with the Commission or any Trading
Market and any Purchaser being deemed an underwriter by the Commission shall not
relieve the Company of any obligations it has under this Agreement; provided,
however, that the foregoing shall not prohibit the Company from including the
disclosure found in the “Plan of Distribution” section attached hereto as
Exhibit G in the Registration Statement. In addition, and notwithstanding
anything to the contrary contained herein, if the Company has received a comment
by the Commission requiring an Purchaser to be named as an underwriter in the
Registration Statement (which notwithstanding the reasonable best efforts of the
Company is not withdrawn by the Commission) and such Purchaser refuses to be
named as an underwriter in the Registration Statement, such Purchaser’s
Registrable Securities shall be removed from the Registration Statement, such
Registrable Securities shall be deemed to constitute Cut Back Shares.

5.3    Registration Expenses. The Company shall pay all fees and expenses
incident to the performance of or compliance with ARTICLE 5 of this Agreement by
the Company, including without limitation (a) all registration and filing fees
and expenses, including without limitation those related to filings with the
Commission, any Trading Market, and in connection with applicable state
securities or Blue Sky laws, (b) printing expenses (including without limitation
expenses of printing certificates for Registrable Securities), (c) messenger,
telephone and delivery expenses, (d) fees and disbursements of counsel for the
Company, (e) fees and expenses of all other Persons retained by the Company in
connection with the consummation of the transactions contemplated by this
Agreement, (f) all listing fees to be paid by the Company to the Trading Market
and (g) reasonable and reasonably-documented fees and disbursements, not to
exceed $15,000 in the aggregate, of one counsel for the Purchasers. In no event
shall the Company be responsible for any underwriting, broker or similar fees or
commissions of any Purchaser or, except to the extent provided for above or in
the Transaction Documents, any legal fees or other costs of the Purchasers.

5.4    Indemnification.

(a)    Indemnification by the Company. The Company shall, notwithstanding any
termination of this Agreement, indemnify and hold harmless each Purchaser, the
officers, directors, partners, members, agents and employees of each of them,
each Person who controls any such Purchaser (within the meaning of Section 15 of
the Securities Act or Section 20 of the Exchange Act) and the officers,
directors, partners, members, agents and employees of each such controlling
Person, to the fullest extent permitted by applicable law, from and against any
and all Losses, as incurred, arising out of or relating to any violation or
alleged violation by the Company of the Securities Act, the Exchange Act, any
other law, including, without limitation, any state securities law, or any rule
or regulation thereunder relating to the offer or sale of the Registrable
Securities, any untrue or alleged untrue statement of a material fact contained
in the Registration Statement, any Prospectus or in any amendment or supplement
thereto, or arising out of or relating to any omission or alleged omission of a
material fact required to be stated therein or necessary to make the statements
therein (in the case of any Prospectus or form of prospectus or supplement
thereto, in the light of the circumstances under which they were made) not
misleading, except to the extent, but only to the extent, that (A) such untrue
statements, alleged untrue statements, omissions or alleged omissions are based
solely upon information regarding such Purchaser furnished in writing to the
Company by such Purchaser for use therein, or to the extent that such
information relates to such Purchaser or such Purchaser’s proposed method of
distribution of Registrable Securities and was reviewed and expressly approved
by such Purchaser expressly for use in the Registration Statement, or (B) with
respect to any Prospectus, if the untrue statement or omission of material fact
contained in such Prospectus was corrected on a timely basis in the Prospectus,
as then amended or supplemented, if such corrected prospectus was timely made
available by the Company to the Purchaser, and the Purchaser seeking indemnity
hereunder was advised in writing not to use the incorrect prospectus prior to
the use giving rise to Losses.

(b)    Indemnification by Purchasers. Each Purchaser shall, severally and not
jointly, indemnify and hold harmless the Company, its directors, officers,
agents and employees, each Person who controls the Company (within the meaning
of Section 15 of the Securities Act and Section 20 of the Exchange Act), and the
directors, officers, agents or employees of such controlling Persons, to the
fullest extent permitted by applicable law,

 

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from and against all Losses (as determined by a court of competent jurisdiction
in a final judgment not subject to appeal or review) arising solely out of any
untrue statement of a material fact contained in the Registration Statement, any
Prospectus, or any form of prospectus, or in any amendment or supplement
thereto, or arising out of or relating to any omission of a material fact
required to be stated therein or necessary to make the statements therein (in
the case of any Prospectus or form of prospectus or supplement thereto, in the
light of the circumstances under which they were made) not misleading, but only
to the extent that such untrue statement or omission is contained in any
information so furnished by such Purchaser in writing to the Company
specifically for inclusion in such Registration Statement or such Prospectus or
to the extent that (i) such untrue statements or omissions are based solely upon
information regarding such Purchaser furnished to the Company by such Purchaser
in writing expressly for use in the Registration Statement or Prospectus, or to
the extent that such information relates to such Purchaser or such Purchaser’s
proposed method of distribution of Registrable Securities and was reviewed and
expressly approved by such Purchaser expressly for use in the Registration
Statement (it being understood that the information provided by the Purchaser to
the Company in the Questionnaire and the Plan of Distribution set forth on
Exhibit G, as the same may be modified by such Purchaser constitutes information
reviewed and expressly approved by such Purchaser in writing expressly for use
in the Registration Statement), such Prospectus or such form of Prospectus or in
any amendment or supplement thereto. In no event shall the liability of any
selling Purchaser hereunder be greater in amount than the dollar amount of the
net proceeds received by such Purchaser upon the sale of the Registrable
Securities giving rise to such indemnification obligation.

(c)    Conduct of Indemnification Proceedings. If any Proceeding shall be
brought or asserted against any Person entitled to indemnity hereunder (an
“Indemnified Party”), such Indemnified Party shall promptly notify the Person
from whom indemnity is sought (the “Indemnifying Party”) in writing, and the
Indemnifying Party shall assume the defense thereof, including the employment of
counsel reasonably satisfactory to the Indemnified Party and the payment of all
fees and expenses incurred in connection with defense thereof; provided, that
the failure of any Indemnified Party to give such notice shall not relieve the
Indemnifying Party of its obligations or liabilities pursuant to this Agreement,
except (and only) to the extent that it shall be finally determined by a court
of competent jurisdiction (which determination is not subject to appeal or
further review) that such failure shall have proximately and materially
adversely prejudiced the Indemnifying Party.

An Indemnified Party shall have the right to employ separate counsel in any such
Proceeding and to participate in the defense thereof, but the fees and expenses
of such counsel shall be at the expense of such Indemnified Party or Parties
unless: (i) the Indemnifying Party has agreed in writing to pay such fees and
expenses; or (ii) the Indemnifying Party shall have failed within 15 days of
receiving notification of a Proceeding from an Indemnified Party to assume the
defense of such Proceeding and to employ counsel reasonably satisfactory to such
Indemnified Party in any such Proceeding; (iii) any counsel engaged by the
applicable Indemnifying Party shall fail to timely commence or diligently
conduct the defense of any such claim and such failure has materially prejudiced
(or, in the reasonable judgment of the Indemnified Party, is in danger of
materially prejudicing) the outcome of the applicable claim; or (iv) such
Indemnified Party shall have been advised by counsel that a conflict of interest
is likely to or may exist between the applicable Indemnifying Party and
Indemnified Party or that there may be one or more different or additional
defenses, claims, counterclaims or causes of action available to such
Indemnified Party (in which case, if such Indemnified Party notifies the
Indemnifying Party in writing that it elects to employ separate counsel at the
expense of the Indemnifying Party, the Indemnifying Party shall not have the
right to assume the defense thereof and the reasonable fees and expenses of
separate counsel shall be at the expense of the Indemnifying Party). It being
understood, however, that the Indemnifying Party shall not, in connection with
any one such Proceeding (including separate Proceedings that have been or will
be consolidated before a single judge) be liable for the fees and expenses of
more than one separate firm of attorneys at any time for all Indemnified
Parties, which firm shall be appointed by a majority of the Indemnified Parties.
The Indemnifying Party shall not be liable for any settlement of any such
Proceeding effected without its written consent, which consent shall not be
unreasonably withheld. No Indemnifying Party shall, without the prior written
consent of the Indemnified Party, effect any settlement of any pending
Proceeding in respect of which any Indemnified Party is a party, unless such
settlement includes an unconditional release of such Indemnified Party from all
liability on claims that are the subject matter of such Proceeding.

All reasonable fees and expenses of the Indemnified Party (including reasonable
fees and expenses to the extent incurred in connection with investigating or
preparing to defend such Proceeding in a manner not inconsistent with this
Section) shall be paid to the Indemnified Party, as incurred, within 20 Trading
Days of written

 

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notice thereof to the Indemnifying Party (regardless of whether it is ultimately
determined that an Indemnified Party is not entitled to indemnification
hereunder; provided, that the Indemnifying Party may require such Indemnified
Party to undertake to reimburse all such fees and expenses to the extent it is
finally judicially determined (not subject to appeal) that such Indemnified
Party is not entitled to indemnification hereunder).

(d)    Contribution. If a claim for indemnification under Section 5.4(a) or
(b) is unavailable to an Indemnified Party (by reason of public policy or
otherwise), then each Indemnifying Party, in lieu of indemnifying such
Indemnified Party, shall contribute to the amount paid or payable by such
Indemnified Party as a result of such Losses, in such proportion as is
appropriate to reflect the relative fault of the Indemnifying Party and
Indemnified Party in connection with the actions, statements or omissions that
resulted in such Losses 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 any action in question,
including any untrue or alleged untrue statement of a material fact or omission
or alleged omission of a material fact, has been taken or made by, or relates to
information supplied by, such Indemnifying Party or Indemnified Party, and the
parties’ relative intent, knowledge, access to information and opportunity to
correct or prevent such action, statement or omission. The amount paid or
payable by a party as a result of any Losses shall be deemed to include, subject
to the limitations set forth in Section 5.4(c), any reasonable attorneys’ or
other reasonable fees or expenses incurred by such party in connection with any
Proceeding to the extent such party would have been indemnified for such fees or
expenses if the indemnification provided for in this Section was available to
such party in accordance with its terms.

The parties hereto agree that it would not be just and equitable if contribution
pursuant to this Section 5.4(d) were determined by pro rata allocation or by any
other method of allocation that does not take into account the equitable
considerations referred to in the immediately preceding paragraph.
Notwithstanding the provisions of this Section 5.4(d), no Purchaser shall be
required to contribute, in the aggregate, any amount in excess of the amount by
which the proceeds actually received by such Purchaser from the sale of the
Registrable Securities subject to the Proceeding exceeds the amount of any
damages that such Purchaser has otherwise been required to pay by reason of such
untrue or alleged untrue statement or omission or alleged omission. 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 indemnity and contribution agreements contained in this Section are in
addition to any liability that the Indemnifying Parties may have to the
Indemnified Parties, including pursuant to Section 6.6 hereof.

5.5    Dispositions. Each Purchaser agrees that it will comply with the
prospectus delivery requirements of the Securities Act as applicable to it in
connection with sales of Registrable Securities pursuant to the Registration
Statement and shall sell its Registrable Securities that it sells pursuant to
the Registration Statement in accordance with the Plan of Distribution set forth
in the Prospectus. Each Purchaser further agrees that, upon receipt of a notice
from the Company of the occurrence of any event of the kind described in
Section 5.2(c)(iii)-(vi), such Purchaser will discontinue disposition of such
Registrable Securities under the Registration Statement until such Purchaser is
advised in writing by the Company that the use of the Prospectus, or amended
Prospectus, as applicable, may be used. The Company may provide appropriate stop
orders to enforce the provisions of this paragraph. Each Purchaser, severally
and not jointly with the other Purchasers, agrees that the removal of the
restrictive legend from certificated or uncertificated Shares as set forth in
the Section 6.1 is predicated upon the Company’s reliance that the Purchaser
will comply with the provisions of this subsection.

5.6    No Piggyback on Registrations. Neither the Company nor any of its
security holders (other than the Purchasers in such capacity pursuant hereto)
may include securities of the Company in the Registration Statement other than
the Registrable Securities. The Company shall not file any other registration
statements, other than any registration statements on Form S-4 or Form S-8 (each
as promulgated under the Securities Act), prior to the Effective Date of the
Initial Registration Statement, provided that this Section 5.6 shall not
prohibit the Company from filing amendments to registration statements filed
prior to the date of this Agreement.

5.7    Amendments; Waivers. Notwithstanding anything in this Agreement to the
contrary, the provisions of this ARTICLE 5 may be amended or waived (either
generally or in a particular instance, either retroactively or prospectively and
either for a specified period of time or indefinitely), with the written consent
of (i) the Company and (ii) the Purchaser or Purchasers holding at least a
majority of the then outstanding Registrable

 

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Securities. Notwithstanding the foregoing, a waiver or consent to depart from
the provisions of this ARTICLE 5 with respect to a matter that relates
exclusively to the rights of Purchasers and that does not directly or indirectly
affect the rights of other Purchasers may be given by Purchasers of all of the
Registrable Securities to which such waiver or consent relates; provided,
however, that the provisions of this sentence may not be amended, modified or
supplemented except in accordance with the provisions of the immediately
preceding sentence.

ARTICLE 6

OTHER AGREEMENTS OF THE PARTIES

6.1    Transfer Restrictions.

(a)    The Securities may only be disposed of in compliance with state and
federal securities laws, and each Purchaser agrees that it will sell, transfer
or otherwise dispose of the Securities only in compliance with all applicable
state and federal securities laws, and, as applicable, in accordance with the
requirements of Section 5.5 hereof. In connection with any transfer of
Securities other than pursuant to an effective registration statement under the
Securities Act or Rule 144, to the Company or to an Affiliate of a Purchaser,
the Company may require the transferor thereof to provide to the Company an
opinion of counsel selected by the transferor and reasonably acceptable to the
Company, the form and substance of which opinion shall be reasonably
satisfactory to the Company, to the effect that such transfer does not require
registration of such transferred Securities under the Securities Act.

(b)    The Purchasers agree to the imprinting, so long as is required by this
Section 6.1, of a legend on any of the Securities, whether in certificated or
uncertificated form, in substantially the following forms, as applicable:

NEITHER THIS WARRANT, NOR THE SECURITIES ISSUABLE UPON EXERCISE OF THIS WARRANT
(COLLECTIVELY, THE “SECURITIES”), HAVE BEEN REGISTERED UNDER THE SECURITIES ACT
OF 1933, AS AMENDED (THE “SECURITIES ACT”), OR UNDER ANY STATE SECURITIES OR
BLUE SKY LAWS. THE SECURITIES ARE SUBJECT TO RESTRICTIONS ON TRANSFERABILITY AND
RESALE AND MAY NOT BE OFFERED, SOLD, PLEDGED, HYPOTHECATED OR OTHERWISE
TRANSFERRED EXCEPT AS PERMITTED UNDER THE SECURITIES ACT AND APPLICABLE STATE
SECURITIES OR BLUE SKY LAWS, PURSUANT TO REGISTRATION OR QUALIFICATION OR
EXEMPTION THEREFROM. INVESTORS SHOULD BE AWARE THAT THEY MAY BE REQUIRED TO BEAR
THE FINANCIAL RISKS OF THIS INVESTMENT FOR AN INDEFINITE PERIOD OF TIME. THE
COMPANY MAY REQUIRE AN OPINION OF COUNSEL IN FORM AND SUBSTANCE REASONABLY
SATISFACTORY TO THE COMPANY TO THE EFFECT THAT ANY PROPOSED TRANSFER IS IN
COMPLIANCE WITH THE SECURITIES ACT AND ANY APPLICABLE STATE SECURITIES OR BLUE
SKY LAWS. THIS SECURITY MAY BE PLEDGED IN CONNECTION WITH A BONA FIDE MARGIN
ACCOUNT WITH A REGISTERED BROKER-DEALER OR OTHER LOAN WITH A FINANCIAL
INSTITUTION THAT IS AN “ACCREDITED INVESTOR” AS DEFINED IN RULE 501(a) UNDER THE
SECURITIES ACT OR OTHER LOAN SECURED BY SUCH SECURITIES.

THIS SECURITY HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS
AMENDED (THE “SECURITIES ACT”), OR UNDER ANY STATE SECURITIES OR BLUE SKY LAWS.
THIS SECURITY IS SUBJECT TO RESTRICTIONS ON TRANSFERABILITY AND RESALE AND MAY
NOT BE OFFERED, SOLD, PLEDGED, HYPOTHECATED OR OTHERWISE TRANSFERRED EXCEPT AS
PERMITTED UNDER THE SECURITIES ACT AND APPLICABLE STATE SECURITIES OR BLUE SKY
LAWS, PURSUANT TO REGISTRATION OR QUALIFICATION OR EXEMPTION THEREFROM.
INVESTORS SHOULD BE AWARE THAT THEY MAY BE REQUIRED TO BEAR THE FINANCIAL RISKS
OF THIS INVESTMENT FOR AN INDEFINITE PERIOD OF TIME. THE COMPANY MAY REQUIRE AN
OPINION OF COUNSEL IN FORM AND SUBSTANCE REASONABLY SATISFACTORY TO THE COMPANY
TO THE EFFECT THAT ANY

 

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PROPOSED TRANSFER IS IN COMPLIANCE WITH THE SECURITIES ACT AND ANY APPLICABLE
STATE SECURITIES OR BLUE SKY LAWS. THIS SECURITY MAY BE PLEDGED IN CONNECTION
WITH A BONA FIDE MARGIN ACCOUNT WITH A REGISTERED BROKER-DEALER OR OTHER LOAN
WITH A FINANCIAL INSTITUTION THAT IS AN “ACCREDITED INVESTOR” AS DEFINED IN RULE
501(a) UNDER THE SECURITIES ACT OR OTHER LOAN SECURED BY SUCH SECURITIES.

The Company acknowledges and agrees that a Purchaser may from time to time
pledge pursuant to a bona fide margin agreement with a registered broker-dealer
or grant a security interest in some or all of the Securities to a financial
institution that is an “accredited investor” as defined in Rule 501(a) under the
Securities Act and, if required under the terms of such arrangement, such
Purchaser may transfer pledged or secured Securities to the pledgees or secured
parties. Such a pledge or transfer would not be subject to approval of the
Company and no legal opinion of legal counsel of the pledgee, secured party or
pledgor shall be required in connection therewith. Further, no notice shall be
required of such pledge. At the applicable Purchaser’s expense, the Company
will, subject to Section 8.6 hereof, execute and deliver such reasonable
documentation as a pledgee or secured party of Securities may reasonably request
in connection with a pledge or transfer of the Securities, including, if the
Securities are subject to registration pursuant to ARTICLE 5, the preparation
and filing of any required prospectus supplement under Rule 424(b)(3) under the
Securities Act or other applicable provision of the Securities Act to
appropriately amend the list of Selling Stockholders thereunder; provided,
however, that nothing in this provision will require the Company to
post-effectively amend any Registration Statement to amend the list of Selling
Stockholders included therein.

(c)    Instruments, whether certificated or uncertificated, evidencing the Unit
Shares and Warrant Shares shall not contain any legend (including the legend set
forth in Section 6.1(b) hereof), (i) while a registration statement (including
the Registration Statement) covering the resale of such security is effective
under the Securities Act, (ii) if such Unit Shares or Warrant Shares are
eligible for sale under Rule 144, without the requirement for the Company to be
in compliance with the current public information required under Rule 144 as to
such Unit Shares and Warrant Shares and without volume or manner-of-sale
restrictions, (iii) following any sale of such Unit Shares or Warrant Shares
pursuant to Rule 144 or (iv) if such legend is not required under applicable
requirements of the Securities Act (including judicial interpretations and
pronouncements issued by the staff of the Commission). Upon request by any
Purchaser, following such time as a legend is no longer required under this
Section 6.1(c), the Company shall cause its counsel to issue a legal opinion to
the Transfer Agent (if required by the Transfer Agent) to effect the removal of
the legend hereunder from any Shares. If all or any portion of a Warrant is
exercised at a time when there is an effective registration statement to cover
the resale of the Warrant Shares, or if the Warrant Shares issuable upon
exercise of such Warrant may be sold under Rule 144 without limitation or
restriction and the Company is then in compliance with the current public
information required under Rule 144, or if such Warrant Shares may be sold under
Rule 144 without limitation or restriction and without the requirement for the
Company to be in compliance with the current public information required under
Rule 144 as to such Warrant Shares or if such legend is not otherwise required
under applicable requirements of the Securities Act (including judicial
interpretations and pronouncements issued by the staff of the Commission) then
such Warrant Shares shall be issued free of all legends. The Company agrees that
following such time as a legend is no longer required under this Section 6.1(c),
no later than three Trading Days following the delivery by a Purchaser to the
Company of all of (i) an instrument, whether certificated or uncertificated,
representing Unit Shares or Warrant Shares, as the case may be, issued with a
restrictive legend, (ii) a written request addressed to the Company that such
restrictive legend be removed, (iii) customary broker and representation letters
in form and substance reasonably satisfactory to the Company and (iv) with
respect to a legend removal request in reliance upon the availability of Rule
144, such further information as may be reasonably required by the Company and
its counsel that provides reasonable assurance that such Unit Shares or Warrant
Shares may be sold, assigned or transferred pursuant to Rule 144 as of the date
in question (the date that all of such foregoing information and documentation
is delivered to the Company by a Purchaser, the “Removal Request Date” and such
third Trading Day thereafter, the “Legend Removal Date”), the Company will
deliver or cause to be delivered to such Purchaser an instrument, certificated
or uncertificated as directed by such Purchaser, representing such Shares that
is free from all restrictive and other legends. The Company may not make any
notation on its records or give instructions to the Transfer Agent that enlarge
the restrictions on transfer set forth in this Section 6.1(c). Securities
subject to legend removal hereunder shall, unless otherwise directed by a
Purchaser, be transmitted by the Transfer Agent to the Purchaser by crediting
the account of the Purchaser’s prime broker with the Depository Trust Company
System as directed by such Purchaser.

 

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(d)    In addition to a Purchaser’s other available remedies, if the Company
shall fail for any reason (other than failure of such Purchaser to comply with
the provisions set forth in this Section 6.1) to deliver any Shares without a
restrictive legend by the Legend Removal Date, and if on or after the Legend
Removal Date such Purchaser purchases (in an open market transaction or
otherwise) shares of Common Stock to deliver in satisfaction of a sale by such
Purchaser of any portion of such Shares that such Purchaser anticipated
receiving without legend by the Legend Removal Date (a “Buy-In”), then the
Company shall, within two (2) Trading Days after such Purchaser’s request and in
such Purchaser’s discretion, either: (i) pay cash to such Purchaser in an amount
equal to such Purchaser’s total purchase price (including brokerage commissions,
if any) for the shares of Common Stock so purchased by such Purchaser (the
“Buy-In Price”), at which point the Company’s obligation to deliver such
unlegended Shares shall terminate, or (ii) promptly honor its obligation to
deliver to such Purchaser such unlegended Shares as provided above and pay cash
to such Purchaser in an amount equal to the excess (if any) of the Buy-In Price
over the product of (A) such number of Shares, times (B) the closing price on
the Principal Trading Market of one share of Common Stock as of the Removal
Request Date.

6.2    Furnishing of Information; Public Information. In order to enable the
Purchasers to sell Shares under Rule 144, for a period of one year from the
Closing, the Company covenants to use commercially reasonable efforts to timely
file (or obtain extensions in respect thereof and file within the applicable
grace period) all reports required to be filed by the Company after the date
hereof pursuant to Section 13(a) or 15(d) of the Exchange Act. During such one
year period, if the Company is not required to file reports pursuant to
Section 13(a) or 15(d) of the Exchange Act, it will prepare and furnish to the
Holders and make publicly available in accordance with Rule 144(c) promulgated
under the Securities Act annual and quarterly financial statements, together
with a discussion and analysis of such financial statements in form and
substance substantially similar to those that would otherwise be required to be
included in reports required by Section 13(a) or 15(d) of the Exchange Act, as
well as any other information required thereby, in the time period that such
filings would have been required to have been made under the Exchange Act.

6.3    Integration. The Company shall not sell, offer for sale or solicit offers
to buy or otherwise negotiate in respect of any security (as defined in
Section 2 of the Securities Act) that would be integrated with the offer or sale
of the Securities in a manner that would require the registration under the
Securities Act of the sale of the Securities or that would be integrated with
the offer or sale of the Securities for purposes of the rules and regulations of
Nasdaq such that it would require shareholder approval prior to the closing of
such other transaction unless shareholder approval is obtained before the
closing of such subsequent transaction. The Purchasers shall take no action to
become a group such that any transactions contemplated by this Agreement would
require shareholder approval prior to Closing.

6.4    Securities Laws Disclosure; Publicity. The Company shall (a) by 4:15 p.m.
(New York City time) on the Trading Day immediately following the date hereof,
issue a press release disclosing the material terms of the transactions
contemplated hereby, and (b) file a Current Report on Form 8-K, including the
Transaction Documents as exhibits thereto, with the Commission within the time
required by the Exchange Act. Each Purchaser, severally and not jointly with the
other Purchasers, covenants that until such time as the transactions
contemplated by this Agreement are publicly disclosed by the Company as
described in this Section 6.4, such Purchaser will maintain the confidentiality
of all disclosures made to it in connection with this transaction (including the
existence and terms of this transaction), except that such Purchaser may
disclose the terms to its financial, accounting, legal and other advisors. From
and after the issuance of such press release, the Company represents to the
Purchasers that it shall have publicly disclosed all material, non-public
information delivered to any of the Purchasers by the Company or any of its
officers, directors, employees or agents in connection with the transactions
contemplated by the Transaction Documents. In addition, effective upon the
issuance of such press release, the Company acknowledges and agrees that any and
all confidentiality or similar obligations under any agreement, whether written
or oral, between the Company or any of its officers, directors, agents,
employees or Affiliates on the one hand, and any of the Purchasers or any of
their Affiliates on the other hand, shall terminate. Notwithstanding the
foregoing, the Company shall not publicly disclose the name of any Purchaser, or
include the name of any Purchaser in any filing with the Commission or any
regulatory agency or Trading Market, without the prior written consent of such
Purchaser, except: (a) as required by federal securities laws in connection with
(i) any Registration Statement contemplated by this Agreement and (ii) the
filing of final Transaction Documents with the Commission and (b) to the extent
such disclosure is required by law or Trading Market regulations, in which case
the Company shall provide the Purchasers with prior notice of such disclosure
permitted under this clause (b).

 

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6.5    Use of Proceeds. The Company shall use the net proceeds from the sale of
the Securities hereunder for funding research and development and its other
operations, or for working capital and other general corporate purposes, and
shall not use any such proceeds in violation of FCPA or OFAC regulations.

6.6    Indemnification of Purchasers. Subject to the provisions of this
Section 6.6, the Company will indemnify and hold each Purchaser and its
directors, officers, shareholders, members, partners, employees and agents (and
any other Persons with a functionally equivalent role of a Person holding such
titles notwithstanding a lack of such title or any other title), each Person who
controls such Purchaser (within the meaning of Section 15 of the Securities Act
and Section 20 of the Exchange Act), and the directors, officers, shareholders,
agents, members, partners or employees (and any other Persons with a
functionally equivalent role of a Person holding such titles notwithstanding a
lack of such title or any other title) of such controlling Persons (each, a
“Purchaser Party”) harmless from any and all Losses that any such Purchaser
Party may suffer or incur as a result of or relating to (a) any breach of any of
the representations, warranties, covenants or agreements made by the Company in
this Agreement or in the other Transaction Documents or (b) any action
instituted against the Purchaser Parties in any capacity, or any of them or
their respective Affiliates, by any stockholder of the Company who is not an
Affiliate of such Purchaser Parties, with respect to any of the transactions
contemplated by the Transaction Documents (unless such action is based upon a
breach of such Purchaser Party’s representations, warranties or covenants under
the Transaction Documents or any agreements or understandings such Purchaser
Parties may have with any such stockholder or any violations by such Purchaser
Parties of state or federal securities laws or any conduct by such Purchaser
Parties which constitutes fraud, gross negligence, willful misconduct or
malfeasance of such Purchaser Party). If any action shall be brought against any
Purchaser Party in respect of which indemnity may be sought pursuant to this
Agreement, such Purchaser Party shall promptly notify the Company in writing,
and the Company shall have the right to assume the defense thereof with counsel
of its own choosing reasonably acceptable to the Purchaser Party. Any Purchaser
Party shall have the right to employ separate counsel in any such action and
participate in the defense thereof, but the fees and expenses of such counsel
shall be at the expense of such Purchaser Party except to the extent that
(i) the employment thereof has been specifically authorized by the Company in
writing, (ii) the Company has failed after a reasonable period of time to assume
such defense and to employ counsel or (iii) in such action there is, in the
reasonable opinion of counsel, a material conflict on any material issue between
the position of the Company and the position of such Purchaser Party, in which
case the Company shall be responsible for the reasonable fees and expenses of no
more than one such separate counsel. The Company will not be liable to any
Purchaser Party under this Agreement (y) for any settlement by a Purchaser Party
effected without the Company’s prior written consent, which shall not be
unreasonably withheld or delayed; or (z) to the extent, but only to the extent
that a loss, claim, damage or liability is attributable to any Purchaser Party’s
breach of any of the representations, warranties, covenants or agreements made
by such Purchaser Party in this Agreement or in the other Transaction Documents.
No Purchaser shall be liable for the indemnification obligations of any other
Purchaser and no Purchaser’s liability shall exceed the purchase price paid for
the Securities pursuant to this Agreement. The indemnification required by this
Section 6.6 shall be made by periodic payments of the amount thereof during the
course of the investigation or defense, as and when bills are received or are
incurred. The indemnity agreements contained herein shall be in addition to any
cause of action or similar right of any Purchaser Party against the Company or
others and any liabilities the Company may be subject to pursuant to law.

6.7    Reservation of Common Stock. The Company has reserved and the Company
shall continue to reserve and keep available at all times, free of preemptive
rights, a sufficient number of shares of Common Stock for the purpose of
enabling the Company to (i) issue the Unit Shares pursuant to this Agreement and
(ii) to issue the Warrant Shares upon exercise of the Warrants (the “Required
Minimum”). If, on any date, the number of authorized but unissued (and otherwise
unreserved) shares of Common Stock is less than the Required Minimum on such
date, then, not later than the Company’s next annual meeting of stockholders
occurring on or after the 60th day following such date, the Board of Directors
shall use its best efforts to amend the Company’s certificate of incorporation
to increase the number of authorized but unissued shares of Common Stock to at
least the Required Minimum at such time.

6.8    Listing of Common Stock. In the time and manner required by the Principal
Trading Market, the Company shall prepare and file (or shall have prepared and
filed) with such Trading Market an additional shares listing application
covering all of the Shares and shall use its commercially reasonable efforts to
take all steps necessary to maintain, so long as any other shares of Common
Stock shall be so listed, such listing or if no longer listed on the Principal
Trading Market, shall use its commercially reasonable efforts to take all steps
necessary to

 

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maintain a listing on another Trading Market. The Company will then use its
commercially reasonable efforts to continue the listing or quotation and trading
of its Common Stock on a Trading Market and will comply in all material respects
with the Company’s reporting, filing and other obligations under the bylaws or
rules of the Trading Market. In addition, the Purchasers and the Company agree
to cooperate in good faith, if necessary, to restructure the transactions
contemplated by the Transaction Documents such that they do not contravene the
rules and regulations of Nasdaq; provided, however, that such restructuring does
not impact the economic interests of the Purchasers contemplated by the
Transaction Documents. Each Purchaser agrees to provide information reasonably
requested by the Company to comply with this Section 6.8 and Section 3.21. The
provisions of Sections 6.8 shall terminate and be of no further force and effect
upon the expiration of the Effectiveness Period.

6.9    Equal Treatment of Purchasers. No consideration (including any
modification of any Transaction Document) shall be offered or paid to any Person
to amend or consent to a waiver or modification of any provision of this
Agreement unless the same consideration is also offered to all of the parties to
this Agreement. For clarification purposes, this provision constitutes a
separate right granted to each Purchaser by the Company and negotiated
separately by each Purchaser, and is intended for the Company to treat the
Purchasers as a class and shall not in any way be construed as the Purchasers
acting in concert or as a group with respect to the purchase, disposition or
voting of Securities or otherwise.

6.10    Form D; Blue Sky Filings. The Company agrees to timely file a Form D
with respect to the Securities as required under Regulation D and to provide a
copy thereof, promptly upon request of any Purchaser. The Company shall take
such action as the Company shall reasonably determine is necessary in order to
obtain an exemption for, or to qualify the Securities for, sale to the
Purchasers at the Closing under applicable securities or “Blue Sky” laws of the
states of the United States, and shall provide evidence of such actions promptly
upon request of any Purchaser. Each Purchaser shall provide any information
reasonably requested by the Company to comply with Section 6.10.

6.11    Acknowledgment of Dilution. The Company acknowledges that the issuance
of the Securities may result in dilution of the outstanding shares of Common
Stock, which dilution may be substantial under certain market conditions. The
Company further acknowledges that its obligations under the Transaction
Documents, including, without limitation, its obligation to issue the Unit
Shares and Warrant Shares pursuant to the Transaction Documents, are
unconditional and absolute and not subject to any right of set off,
counterclaim, delay or reduction, regardless of the effect of any such dilution
or any claim the Company may have against any Purchaser and regardless of the
dilutive effect that such issuance may have on the ownership of the other
stockholders of the Company.

6.12    Non-Public Information. The Company covenants and agrees that neither
it, nor any other Person acting on its behalf will provide any Purchaser or its
agents or counsel with any information that constitutes, or the Company
reasonably believes constitutes, material non-public information after the date
hereof, unless prior thereto such Purchaser shall have consented to the receipt
of such information and agreed with the Company to keep such information
confidential. The Company understands and confirms that each Purchaser shall be
relying on the foregoing covenant in effecting transactions in securities of the
Company. To the extent that the Company delivers any material, non-public
information to a Purchaser without such Purchaser’s consent, the Company hereby
covenants and agrees that such Purchaser shall not have any duty of
confidentiality to the Company or any of its officers, directors, agents,
employees or Affiliates, or a duty to the Company, or any of its respective
officers, directors, agents, employees or Affiliates not to trade on the basis
of, such material, non-public information, provided that the Purchaser shall
remain subject to applicable law. The Company understands and confirms that each
Purchaser shall be relying on the foregoing covenant in effecting transactions
in securities of the Company.

6.13    Acknowledgment Regarding Purchaser’s Trading Activity. Anything in this
Agreement or elsewhere herein to the contrary notwithstanding (except for
Section 4.3), it is understood and acknowledged by the Company that: (i) none of
the Purchasers has been asked by the Company to agree, nor has any Purchaser
agreed, to desist from purchasing or selling, long and/or short, securities of
the Company, or “derivative” securities based on securities issued by the
Company or to hold the Securities for any specified term, (ii) past or future
open market or other transactions by any Purchaser, specifically including,
without limitation, Short Sales or “derivative” transactions, before or after
the closing of this or future private placement transactions, may negatively
impact the market price of the Company’s publicly-traded securities, (iii) any
Purchaser, and counter-parties in “derivative”

 

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transactions to which any such Purchaser is a party, directly or indirectly, may
presently have a “short” position in the Common Stock and (iv) each Purchaser
shall not be deemed to have any affiliation with or control over any arm’s
length counter-party in any “derivative” transaction. The Company further
understands and acknowledges that (y) one or more Purchasers may engage in
hedging activities at various times during the period that the Securities are
outstanding, and (z) such hedging activities (if any) could reduce the value of
the existing stockholders’ equity interests in the Company at and after the time
that the hedging activities are being conducted. Except as contemplated by
Section 4.3 hereof, Company acknowledges that such aforementioned hedging
activities do not constitute a breach of any of the Transaction Documents.

6.14    Other Actions. Except as otherwise set forth in this Agreement, from the
date of this Agreement until the earlier to occur of the Closing or the
termination of this Agreement in accordance with the terms hereof, the Company
and the Purchasers shall not, and shall not permit any of their respective
Affiliates to, take, or agree or commit to take, any action that would
reasonably be expected to, individually or in the aggregate, prevent, materially
delay or materially impede the consummation of the transactions contemplated by
this Agreement.

6.15    Board Seat. Effective as of the Closing Date, the Company shall have
appointed Andrew Sinclair, Ph.D., as a designee of Abingworth, to the Company’s
Board of Directors. Thereafter, from the Closing Date, and for as long as
Abingworth holds at least five percent (5%) of the Company’s issued and
outstanding Common Stock, the Company will nominate and use its commercially
reasonable efforts (including, without limitation, soliciting proxies for the
Abingworth’s designee to the same extent as it does for any of its other
nominees to the Board of Directors) to have one (1) individual designated by
Abingworth elected to the Board of Directors. Subject to compliance with any
Trading Market’s rules on which the Common Stock is listed or quoted for trading
on the date in question, for as long as Abingworth is entitled to appoint one
persons to the Board of Directors, the Company shall appoint Abingworth’s
designee to serve on such committees of the Board of Directors as shall exist
from time to time as requested by Abingworth or the designee of Abingworth . If
at any time Abingworth (i) shall hold less than 5% of the Company’s issued and
outstanding Common Stock, and (ii) shall have a designee serving as a member of
the Board of Directors, then, upon the request of the Company, such designee
shall decline nomination for re-election at the next annual meeting of the
Company’s stockholders.

6.16    Subsequent Equity Sales. From the date hereof until the later of
(i) ninety (90) days following the Closing Date and (ii) thirty (30) days after
the Effective Date, neither the Company nor any subsidiary of the Company shall
issue shares of Common Stock or securities convertible into or exchangeable for
Common Stock; provided, however, the thirty (30) day period set forth in this
Section 6.15 shall be extended for the number of Trading Days during such period
in which (i) trading in the Common Stock is suspended by any Trading Market, or
(ii) following the Effective Date, the Registration Statement is not effective
or the prospectus included in the Registration Statement may not be used by the
Purchasers for the resale of the Securities. Notwithstanding anything to the
contrary contained herein, the foregoing restriction shall not apply to
(a) securities required to be issued pursuant to contractual obligations of the
Company in effect as of the date of this Agreement, (b) equity securities issued
or issuable pursuant to employee benefit or purchase plans in effect as of the
date of this Agreement or pursuant to bona fide employee benefit or purchase
plans established during the period described in the first sentence of this
Section 6.14, (c) the issuance of up to that number of shares equal to fifteen
(15) percent of the Company’s outstanding shares of Common Stock, calculated
following the sale of the Securities hereunder, in connection with mergers or
acquisitions of businesses, entities, property or other assets, joint ventures
or strategic alliances, or (d) securities issued by Capnia, Inc., a consolidated
partially-owned subsidiary of the Company, for the purpose of funding Capnia,
Inc.’s separate medical device business.

6.17    Defense Protection Act. To the extent that the Company engages in the
design, fabrication, development, testing, production or manufacture of critical
technologies within the meaning of the DPA, whether because of a new
categorization of technology by the U.S. government or otherwise, the Company
shall immediately provide notice to Abingworth.

 

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ARTICLE 7

TERMINATION

7.1    Termination. The obligations of the Company, on the one hand, and the
Purchasers, on the other hand, to effect the Closing shall terminate as follows:

(a)    Upon the mutual written consent of the Company and the Purchasers;

(b)    By the Company if any of the conditions set forth in Section 2.5(a) shall
have become incapable of fulfillment, and shall not have been waived by the
Company;

(c)    By a Purchaser (with respect to itself only) if any of the conditions set
forth in Section 2.5(b) shall have become incapable of fulfillment, and shall
not have been waived by such Purchaser; or

(d)    By either the Company or any Purchaser (with respect to itself only) if
the Closing has not occurred on or prior to January 15, 2019;

provided, however, that, except in the case of clause (a) above, the party
seeking to terminate its obligation to effect the Closing shall not then be in
breach of any of its representations, warranties, covenants or agreements
contained in this Agreement or the other Transaction Documents if such breach
has resulted in the circumstances giving rise to such party’s seeking to
terminate its obligation to effect the Closing.

7.2    Notice of Termination; Effect of Termination. In the event of termination
by the Company or any Purchaser of its obligations to effect the Closing
pursuant to this ARTICLE 7, written notice thereof shall forthwith be given to
the other Purchasers by the Company and the other Purchasers shall have the
right to terminate their obligations to effect the Closing upon written notice
to the Company and the other Purchasers. Nothing in this ARTICLE 7 shall be
deemed to release any party from any liability for any breach by such party of
the terms and provisions of this Agreement or the other Transaction Documents or
to impair the right of any party to compel specific performance by any other
party of its obligations under this Agreement or the other Transaction
Documents. For the avoidance of doubt, the obligation to reimburse Abingworth’s
documented expenses, including reasonable expenses of counsel, pursuant to
Section 8.1 shall survive the termination of this Agreement.

ARTICLE 8

MISCELLANEOUS

8.1    Fees and Expenses. The parties hereto shall pay their own costs and
expenses in connection herewith, including all attorneys’ fees; provided that
the Company shall reimburse Abingworth for reasonable and documented expenses
incurred in connection with the pre and post-closing due diligence, investment
documentation, detailed background searches on management, counsel expenses of
Latham & Watkins LLP and such other expenses incurred from time to time in
connection with this Agreement in an amount not to exceed $100,000. The Company
shall pay all Transfer Agent fees, stamp taxes and other taxes and duties levied
in connection with the sale and issuance of their applicable Securities.

8.2    Entire Agreement. The Transaction Documents, together with the exhibits
and schedules thereto, contain the entire understanding of the parties with
respect to the subject matter hereof and thereof and supersede all prior
agreements and understandings, oral or written, with respect to such matters,
which the parties acknowledge have been merged into such documents, exhibits and
schedules; provided, however, that any Confidentiality Agreements previously
entered into between the Company and any Applicable Purchasers shall remain in
full force and effect. At or after the Closing, and without further
consideration, the Company will execute and deliver to the Purchasers, and the
Purchasers will execute and deliver to the Company, such further documents as
may be reasonably requested in order to give practical effect to the intention
of the parties under the Transaction Documents.

8.3    Notices. Any and all notices or other communications or deliveries
required or permitted to be provided hereunder shall be in writing and shall be
deemed given and effective on the earliest of: (a) the date of

 

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transmission, if such notice or communication is delivered via facsimile at the
facsimile number or by electronic mail at the email address set forth on the
signature pages attached hereto at or prior to 5:30 p.m. (New York City time) on
a Trading Day, (b) the next Trading Day after the date of transmission, if such
notice or communication is delivered via facsimile at the facsimile number or by
electronic mail at the email address set forth on Exhibit A attached hereto on a
day that is not a Trading Day or later than 5:30 p.m. (New York City time) on
any Trading Day, (c) the second (2nd) Trading Day following the date of mailing,
if sent by U.S. nationally recognized overnight courier service or (d) upon
actual receipt by the party to whom such notice is required to be given. The
address for such notices and communications shall be as follows:

(i)    if to the Company, to Soleno Therapeutics, Inc., 1235 Radio Road, Suite
110, Redwood City, California 94065, Attention: Anish Bhatnagar, (email:
anish@soleno.life), with a copy to Wilson Sonsini Goodrich & Rosati,
Professional Corporation, 650 Page Mill Road, Palo Alto, California 94304
(e-mail: esatusky@wsgr.com), Attention: Elton Satusky; and

(ii)    if to the Purchasers, to their respective addresses as set forth on
Exhibit A attached hereto.

8.4    Amendments; Waivers. Subject to the provisions of Section 5.7, no
provision of this Agreement may be waived, modified, supplemented or amended
except in a written instrument signed, in the case of an amendment, by the
Company and the Principal Purchasers or, in the case of a waiver, by the party
against whom enforcement of any such waived provision is sought, provided,
however, that any proposed amendment or waiver that disproportionately,
materially and adversely affects the rights and obligations of any Purchaser
relative to the comparable rights and obligations of the other Purchasers shall
require the prior written consent of such adversely affected Purchaser. No
waiver of any default with respect to any provision, condition or requirement of
this Agreement shall be deemed to be a continuing waiver in the future or a
waiver of any subsequent default or a waiver of any other provision, condition
or requirement hereof, nor shall any delay or omission of any party to exercise
any right hereunder in any manner impair the exercise of any such right. Any
amendment effected in accordance with accordance with this Section 8.4 shall be
binding upon each Purchaser and the Company.

8.5    Headings. The headings herein are for convenience only, do not constitute
a part of this Agreement and shall not be deemed to limit or affect any of the
provisions hereof.

8.6    Successors and Assigns. This Agreement shall be binding upon and inure to
the benefit of the parties and their successors and permitted assigns. The
Company may not assign this Agreement or any rights or obligations hereunder
without the prior written consent of each Purchaser. With the consent of the
Company which will not be unreasonably withheld, any Purchaser may assign any or
all of its rights under this Agreement to any Person to whom such Purchaser
assigns or transfers any Securities, provided, that a Purchaser may assign any
or all rights under this Agreement to an Affiliate of such Purchaser without the
consent of the Company, and provided, further: (i) such transferor agrees in
writing with the transferee or assignee to assign such rights, and a copy of
such agreement is furnished to the Company after such assignment; (ii) the
Company is furnished with written notice of (x) the name and address of such
transferee or assignee and (y) if the transferor is assigning any registration
rights under ARTICLE 5 hereof, the Registrable Securities with respect to which
such registration rights are being transferred or assigned; (iii) following such
transfer or assignment, the further disposition of such securities by the
transferee or assignee is restricted under the Securities Act and applicable
state securities laws, unless such disposition was made pursuant to an effective
registration statement or an exemption under Rule 144 under the Securities Act;
(iv) such transferee agrees in writing to be bound, with respect to the
transferred Securities, by the provisions of the Transaction Documents that
apply to the “Purchasers” including, without limitation, all of representations,
warranties and agreements set forth in ARTICLE 4 hereof; and (v) such transfer
shall have been made in accordance with the applicable requirements of this
Agreement and with all laws applicable thereto.

8.7    No Third-Party Beneficiaries. This Agreement is intended for the benefit
of the parties hereto and their respective successors and permitted assigns and
is not for the benefit of, nor may any provision hereof be enforced by, any
other Person, except as otherwise set forth in Sections 5.4 and 6.6 and this
Section 8.7. In addition, the Placement Agent shall be an intended third party
beneficiary of (i) the Company’s representations and warranties set forth in
ARTICLE 3 hereof and (ii) each Purchaser’s representations, warranties and
agreements set forth in ARTICLE 4 hereof, including Section 4.8 hereof.

 

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8.8    Governing Law; Jurisdiction. This Agreement shall be governed by, and
construed in accordance with, the internal laws of the State of New York without
regard to the choice of law principles thereof. Each of the parties hereto
irrevocably submits to the exclusive jurisdiction of the state and federal
courts located in the State of New York for the purpose of any suit, action,
proceeding or judgment relating to or arising out of this Agreement and the
transactions contemplated hereby. Service of process in connection with any such
suit, action 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. Each of the parties hereto irrevocably consents to the jurisdiction
of any such court in any such suit, action or proceeding and to the laying of
venue in such court. Each party hereto irrevocably waives any objection to the
laying of venue of any such suit, action or proceeding brought in such courts
and irrevocably waives any claim that any such suit, action or proceeding
brought in any such court has been brought in an inconvenient forum.

8.9    WAIVER OF JURY TRIAL. IN ANY ACTION, SUIT, OR PROCEEDING IN ANY
JURISDICTION BROUGHT BY ANY PARTY AGAINST ANY OTHER PARTY, THE PARTIES EACH
KNOWINGLY AND INTENTIONALLY, TO THE GREATEST EXTENT PERMITTED BY APPLICABLE LAW,
HEREBY ABSOLUTELY, UNCONDITIONALLY, IRREVOCABLY AND EXPRESSLY WAIVES FOREVER
TRIAL BY JURY.

8.10    Survival. The representations and warranties contained herein shall
survive the Closing and the delivery of the Securities for a period of one
(1) year.

8.11    Execution. This Agreement may be executed in two or more counterparts,
all of which when taken together shall be considered one and the same agreement
and shall become effective when counterparts have been signed by each party and
delivered to each other party, it being understood that the parties need not
sign the same counterpart. In the event that any signature is delivered by
facsimile transmission or by e-mail delivery of a “.pdf” format data file, such
signature shall create a valid and binding obligation of the party executing (or
on whose behalf such signature is executed) with the same force and effect as if
such facsimile or “.pdf” signature page were an original thereof.

8.12    Severability. If any term, provision, covenant or restriction of this
Agreement 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 commercially reasonable 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.

8.13    Rescission and Withdrawal Right. Notwithstanding anything to the
contrary contained in (and without limiting any similar provisions of) any of
the other Transaction Documents, whenever any Purchaser exercises a right,
election, demand or option under a Transaction Document and the Company does not
timely perform its related obligations within the periods therein provided, then
such Purchaser may rescind or withdraw, in its sole discretion from time to time
upon written notice to the Company, any relevant notice, demand or election in
whole or in part without prejudice to its future actions and rights.

8.14    Replacement of Securities. If any certificate or instrument evidencing
any Securities is mutilated, lost, stolen or destroyed, the Company shall issue
or cause to be issued in exchange and substitution for and upon cancellation
thereof (in the case of mutilation), or in lieu of and substitution therefor, a
new certificate or instrument, but only upon receipt of evidence reasonably
satisfactory to the Company of such loss, theft or destruction. The applicant
for a new certificate or instrument under such circumstances shall also pay any
reasonable third-party costs (including customary indemnity) associated with the
issuance of such replacement Securities.

8.15    Remedies. In addition to being entitled to exercise all rights provided
herein or granted by law, including recovery of damages, each of the Purchasers
and the Company will be entitled to specific performance under the Transaction
Documents. The parties agree that monetary damages may not be adequate
compensation for any loss incurred by reason of any breach of obligations
contained in the Transaction Documents and hereby agree to waive and not to
assert in any action for specific performance of any such obligation the defense
that a remedy at law would be adequate.

 

36

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8.16    Independent Nature of Purchasers’ Obligations and Rights. The
obligations of each Purchaser under any Transaction Document are several and not
joint with the obligations of any other Purchaser, and no Purchaser shall be
responsible in any way for the performance or non-performance of the obligations
of any other Purchaser under any Transaction Document. Nothing contained herein
or in any other Transaction Document, and no action taken by any Purchaser
pursuant hereof or thereto, shall be deemed to constitute the Purchasers as a
partnership, an association, a joint venture or any other kind of entity, or
create a presumption that the Purchasers are in any way acting in concert or as
a group with respect to such obligations or the transactions contemplated by the
Transaction Documents. Each Purchaser shall be entitled to independently protect
and enforce its rights, including, without limitation, the rights arising out of
this Agreement or out of the other Transaction Documents, and it shall not be
necessary for any other Purchaser to be joined as an additional party in any
proceeding for such purpose. Each Purchaser has been represented by its own
separate legal counsel in its review and negotiation of the Transaction
Documents. The Company has elected to provide all Purchasers with the same terms
and Transaction Documents for the convenience of the Company and not because it
was required or requested to do so by any of the Purchasers.

8.17    Adjustments in Share Numbers and Prices. In the event of any stock
split, subdivision, dividend or distribution payable in shares of Common Stock
(or other securities or rights convertible into, or entitling the holder thereof
to receive directly or indirectly shares of Common Stock), combination or other
similar recapitalization or event occurring after the date hereof, each
reference in any Transaction Document to a number of shares or a price per share
shall be deemed to be amended to appropriately account for such event.

8.18    Liquidated Damages. The Company’s obligations to pay any partial
liquidated damages or other amounts owing under the Transaction Documents is a
continuing obligation of the Company and shall not terminate until all unpaid
partial liquidated damages and other amounts have been paid notwithstanding the
fact that the instrument or security pursuant to which such partial liquidated
damages or other amounts are due and payable shall have been canceled.

8.19    Waiver of Conflicts. Each party to this Agreement acknowledges that
Wilson Sonsini Goodrich & Rosati, Professional Corporation (“WSGR”), outside
general counsel to the Company, has in the past performed and is or may now or
in the future represent one or more Purchasers or their affiliates in matters
unrelated to the transactions contemplated by this Agreement (the “Offering”),
including representation of such Purchasers or their affiliates in matters of a
similar nature to the Offering. The applicable rules of professional conduct
require that WSGR inform the parties hereunder of this representation and obtain
their consent. WSGR has served as outside general counsel to the Company and has
negotiated the terms of the Offering solely on behalf of the Company. The
Company and each Purchaser hereby (a) acknowledge that they have had an
opportunity to ask for and have obtained information relevant to such
representation, including disclosure of the reasonably foreseeable adverse
consequences of such representation; (b) acknowledge that with respect to the
Offering, WSGR has represented solely the Company, and not any Purchaser or any
stockholder, director or employee of the Company or any Purchaser; and (c) gives
its informed consent to WSGR’s representation of the Company in the Offering.

[Remainder of Page Intentionally Left Blank; Signature Pages Follow]

 

37

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

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

 

SOLENO THERAPEUTICS, INC. By:  

 

Name:   Anish Bhatnagar Title:   Chief Executive Officer

 

(Signature page to Securities Purchase Agreement)

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

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

 

[PURCHASER]

By:  

 

Name:  

 

Title:  

 

Address for Notice:

 

 

 

Telephone No.:  

 

Facsimile No.:  

 

E-mail Address:  

 

Attention:  

 

 

(Signature page to Securities Purchase Agreement)

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

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

 

Abingworth Bioventures VII LP acting by

Its Manager Abingworth LLP

By:

 

 

Name:

 

 

Title:

 

 

Notice details (if needed):

c/o Abingworth LLP

Attn: General Counsel

38 Jermyn Street

London SW1Y 6DN

United Kingdom

Email: legal@abingworth.com

 

(Signature page to Securities Purchase Agreement)

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

EXHIBIT A

SCHEDULE OF PURCHASERS

 

Name of Purchaser

and Address/Contact Information

   Units
Purchased      Number of
Unit Shares
Separable from
Units
Purchased      Number of Warrant
Shares Exercisable
from Warrants
Separable from
Units Purchased      Unit Purchase Price                                      
                                   

TOTAL

           

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

EXHIBIT B

FORM OF WARRANT

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

EXHIBIT C

FORM OF WSGR OPINION

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

EXHIBIT D

STOCK REGISTRATION QUESTIONNAIRE

Pursuant to Section 2.3 of the Agreement, please provide us with the following
information:

 

The exact name that the Securities are to be registered in (this is the name
that will appear on the warrant(s) and common stock certificate(s) or Direct
Registration System advice(s)):  

 

The relationship between the Purchaser of the Securities and the Registered
Purchaser listed in response to Item 1 above:  

 

The mailing address, telephone and telecopy number of the Registered Purchaser
listed in response to Item 1 above:  

 

 

 

 

 

 

 

 

 

The Tax Identification Number (or, if an individual, the Social Security Number)
of the Registered Purchaser listed in response to Item 1 above:  

 

American Stock Transfer & Trust Company, LLC Account Number of the Registered
Purchaser listed in response to Item 1 above (indicate none if such Registered
Purchaser does not yet have one):  

 

Form of delivery of Unit Shares:  

Stock certificate(s):

 

Electronic book-entry in the Direct Registration System:

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

EXHIBIT E

ACCREDITED INVESTOR QUALIFICATION QUESTIONNAIRE

Each prospective holder of equity securities of Soleno Therapeutics, Inc. (the
“Company”) must meet certain requirements in order to comply with the nonpublic
offering exemption from the registration requirements under the U.S. Securities
Act of 1933, as amended (the “Act”), and applicable state securities laws under
which securities are to be issued in connection with the purchase of equity
securities of the Company (the “Purchase”). Before the Purchase can be effected,
the Company must be satisfied that you are an “accredited investor” (as such
term is defined in Rule 501(a) of Regulation D promulgated under the Act) or
that you, either alone or with your investment advisors, have sufficient
financial expertise to be able to evaluate the merits and risks of your proposed
purchase. You are requested to submit the following information in connection
with the Purchase.

By signing this Questionnaire you also confirm your understanding that the
Company will be relying on the accuracy and completeness of your responses to
establish the Company’s legal right to issue shares of capital stock to you
without registration under U.S. federal securities laws and applicable state
securities laws. YOUR ANSWERS WILL AT ALL TIMES BE KEPT STRICTLY CONFIDENTIAL.
However, you agree by signing this Questionnaire that the Company may present
this Questionnaire to such parties as it deems appropriate if called upon to
establish the legality of your participation.

Please answer all questions which are applicable to you.

 

[Remainder of page intentionally left blank]

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

A. THIS SECTION A IS TO BE COMPLETED BY PROSPECTIVE INVESTORS WHO ARE
INDIVIDUALS (also referred to as “natural persons” under the Act).

 

1.

State of Principal Residence:                      (if outside the U.S. please
also complete Section C).

 

2.

Accredited Investor Status:

For purposes of this Question 2, an individual stockholder is an “Accredited
Investor” if any of the following descriptions apply to the individual:

 

  (1)

The undersigned has a net worth (assets minus liabilities), individually or
jointly with his or her spouse, in excess of $1,000,000 at the time of the
investment.2 In calculating net worth of the undersigned, (a) the value of the
primary residence of the undersigned shall be excluded as an asset, (b) the
outstanding indebtedness secured by the primary residence of the undersigned up
to the fair market value of such primary residence at the time of investment
shall be excluded as a liability, provided, however, that if the amount of such
outstanding indebtedness at the time of investment exceeds the amount
outstanding 60 days before such time, other than as a result of the acquisition
of the primary residence, the amount of such excess shall be included as a
liability,3 and (c) the outstanding indebtedness secured by the primary
residence in excess of the fair market value of such primary residence at the
time of investment shall be included as a liability;4

 

  (2)

The undersigned had an individual income in excess of $200,000, or joint income
with spouse in excess of $300,000, in each of the two preceding years and
reasonably expects to reach the same income level in the current year; or

 

  (3)

The undersigned is a director, executive officer or general partner of the
Company.

Please check the appropriate box:

 

  [    ]

(a) The undersigned meets the definition of an “Accredited Investor.”

 

  [    ]

(b) The undersigned does not meet the definition of an “Accredited Investor.”

 

2 

Since the July 21, 2010 enactment of Section 413(a) of the Dodd-Frank Wall
Street Reform and Consumer Protection Act, the value of a person’s primary
residence must be excluded from his/her net worth. On December 21, 2011, the SEC
adopted amendments to Rule 501(a)(5) and Rule 215 to clarify treatment of
indebtedness secured by a person’s primary residence when calculating his or her
net worth (Release No. 33-9287 Net Worth Standard for Accredited Investors).
These amendments are effective February 27, 2012. It is important to follow
carefully the instructions set forth in this Questionnaire when calculating net
worth.

3 

Effective February 27, 2012, the net worth standard includes a 60-day look-back
requirement to identify any increase in mortgage debt incurred during the 60
days preceding the purchase of securities. The purpose of the look-back is to
deter individuals from manipulating their net worth by borrowing against any
positive equity in their primary residence shortly before seeking to qualify as
an accredited investor.

4 

Effective February 27, 2012, the net worth standard includes a limited
grandfathering exception for certain pre-existing investors who held rights to
purchase issuer’s securities (such as contractual pre-emptive rights or rights
of first offer) immediately prior to the effective date of the Dodd-Frank Act.
An investor may use the pre-Dodd-Frank Act net worth test (thereby including the
value of the individual’s primary residence and any corresponding mortgage
indebtedness in his or her net worth calculation) if all of the following
conditions are satisfied: (a) the individual is purchasing securities in
accordance with a right to purchase such securities; (b) the right was held by
the individual on July 20, 2010, (c) the individual qualified as an accredited
investor on the basis of net worth at the time that such right was acquired and
(d) the individual held securities of the same issuer, other than such right, on
July 20, 2010. If the undersigned believes that he or she may qualify for this
exception, please contact Brian Cuneo at Latham & Watkins LLP, email:
brian.cuneo@lw.com; phone: (650) 463-3014.

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

The undersigned hereby represents and warrants to the Company that (i) the
information contained herein is complete and accurate and may be relied upon by
the Company, (ii) the undersigned, together with his or her investment advisors,
has such knowledge and experience in financial matters that he, she or they are
capable of evaluating the merits and risks of the investment, and (iii) the
undersigned will notify the Company or its counsel immediately of any material
change in such information occurring prior to the acceptance or rejection of his
or her stock in the Company.

The undersigned has or have executed this Investor Questionnaire on this     
day of             , 2018.

 

 

     

 

  Print Name of Stockholder       Signature of Stockholder  

 

     

 

  Print name of Spouse       Signature of Spouse   (if the Shares are held in
joint name or are property)     (if the Shares are held in joint name or are
community community property)  

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

B.    THIS SECTION B IS TO BE COMPLETED BY ANY PROSPECTIVE INVESTOR THAT IS A
CORPORATION, PARTNERSHIP OR TRUST(INCLUDING GRANTOR TRUST).

 

1.

Type of Entity: [    ] General Partnership

 [    ] Limited Liability Partnership (LLP)

 [    ] Corporation

 [    ] Limited Liability Company (LLC)

 [    ] Trust

 [    ] Other Entity:                     (please describe type of entity)

 

2.

State in Which Organized or Incorporated:                     (if outside the
U.S. please also complete Section C).

 

3.

Accredited Investor Status:

For purposes of this Question 3, an entity is an “Accredited Investor” if any or
all of the following descriptions apply to the entity:

 

  (1)

Each partner (including general and limited partners), stockholder, grantor of a
revocable trust or other equity owner of the entity who is a natural person
(a) has a net worth, individually or jointly with his or her spouse, in excess
of $1,000,000 (such net worth shall be calculated in accordance with the
instructions set forth in Question A.2.(1) of this Questionnaire) or (b) had an
individual income in excess of $200,000, or joint income with that person’s
spouse in excess of $300,000, in each of the two preceding years and reasonably
expects to reach the same income level in the current year; or

 

  (2)

The undersigned is (a) a broker dealer registered pursuant to Section 15 of the
Securities Exchange Act of 1934, as amended; (b) a bank, as defined in
Section 3(a)(2) of the Act, or a savings and loan association or other
institution as defined in Section 3(a)(5)(A) of the Act, whether acting in its
individual or fiduciary capacity; (c) an insurance company, as defined in
Section 2(13) of the Act; (d) an investment company registered under the
Investment Company Act of 1940, as amended (the “1940 Act”) or a “business
development company,” as defined in Section 2(a)(48) of the 1940 Act; (e) a
Small Business Investment Company licensed by the U.S. Small Business
Administration under Section 301(c) or (d) of the Small Business Investment Act
of 1958; (f) a plan established and maintained by a state, its political
subdivisions, or any agency or instrumentality of a state or its political
subdivisions, for the benefit of its employees, if such plan has total assets in
excess of $5,000,000; or (g) an employee benefit plan within the meaning of the
Employee Retirement Income Security Act of 1974 (“ERISA”), if the investment
decision is made by a plan fiduciary, as defined in Section 3(21) of ERISA, that
is either a bank, savings and loan association, insurance company or registered
investment adviser, or if the employee benefit plan has total assets in excess
of $5,000,000, or if a self directed plan, with investment decisions made solely
by persons that are accredited investors; or

 

  (3)

The undersigned is a “private business development company” as defined in
Section 202(a)(22) of the Investment Advisers Act of 1940; or

 

  (4)

The undersigned is a corporation, an organization described in Section 501(c)(3)
of the Internal Revenue Code of 1986, as amended (the “Code”), a Massachusetts
or similar business trust, or a partnership, not formed for the specific purpose
of acquiring the securities offered, in each case with total assets in excess of
$5,000,000; or

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

  (5)

The undersigned is a trust with total assets in excess of $5,000,000, not formed
for the specific purpose of acquiring the securities offered, whose purchase is
directed by a sophisticated person as described in Rule 506(b)(2)(ii) under the
Act.

Please check the appropriate box:

 

  [    ]

(a) The undersigned meets the definition of an “Accredited Investor.”

 

  [    ]

(b) The undersigned does not meet the definition of an “Accredited Investor.”

 

4.

The undersigned hereby agrees to provide the Company upon request with a true
and correct list of the names of all partners, stockholders, grantors of an
irrevocable trust or other equity owners of the undersigned.

The undersigned has executed this Investor Questionnaire on this      day of
            , 2018.

 

 

     

 

   Print name of partnership       Print name of authorized    corporation,
trust or       representative    other entity          By:  

 

     

 

     Signature of authorized       Capacity of authorized      representative   
   representative   

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

C.

THIS SECTION C IS TO BE COMPLETED BY ANY PROSPECTIVE INVESTOR THAT IS AN
INTERNATIONAL INDIVIDUAL OR CORPORATION, PARTNERSHIP OR TRUST (INCLUDING GRANTOR
TRUST).

In connection with the Purchase of the Company’s securities pursuant to that
certain Securities Purchase Agreement by and among the Company and the investors
party thereto (the “Agreement”), the undersigned represents and warrants to the
Company as follows (which representation and warranty shall be in addition to
the undersigned’s representations and warranties in Section 3 of the Agreement
and shall have full force and effect as though it were a part of the Agreement):

If the undersigned is not a United States person (as defined by
Section 7701(a)(30) of the Internal Revenue Code of 1986, as amended), the
undersigned hereby represents that it has satisfied itself as to the full
observance of the laws of its jurisdiction in connection with any invitation to
subscribe for the Company’s securities or any use of the Agreement, including
(i) the legal requirements within its jurisdiction for the purchase of the
Company’s securities, (ii) any foreign exchange restrictions applicable to such
purchase, (iii) any governmental or other consents that may need to be obtained,
and (iv) the income tax and other tax consequences, if any, that may be relevant
to the purchase, holding, redemption, sale, or transfer of the Company’s
securities. The undersigned’s subscription and payment for and continued
beneficial ownership of the Company’s securities will not violate any applicable
securities or other laws of the undersigned’s jurisdiction.

The undersigned has executed this International Investor Representation on this
         day of             , 2018.

Individual Signature Block

 

 

   

 

  Print Name of Stockholder     Signature of Stockholder   Entity Signature
Block      

 

   

 

  Print name of partnership     Print name of authorized   corporation, trust or
    representative   other entity       By:  

 

   

 

    Signature of authorized     Capacity of authorized     representative    
representative  

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

EXHIBIT F

BAD ACTOR QUESTIONNAIRE

 

1)

During the past ten years, have you been convicted of any felony or misdemeanor
that is related to any securities matter?

 

Yes   ☐   (If yes, please continue to Question 1.a) No   ☐   (If no, please
continue to Question 2)

 

  a)

If your answer to Question 1 was “yes”, was the conviction related to: (i) the
purchase or sale of any security; (ii) the making of any false filing with the
Securities and Exchange Commission (the “SEC”); or (iii) the conduct of an
underwriter, broker, dealer, municipal securities dealer, investment adviser, or
paid solicitor of purchasers of securities?

 

Yes    ☐    No    ☐

 

2)

Are you subject to any court injunction or restraining order entered during the
past five years that is related to any securities matter?

 

Yes   ☐   (If yes, please continue to Question 2.a) No   ☐   (If no, please
continue to Question 3)

 

  a)

If your answer to Question 2 was “yes”, does the court injunction or restraining
order currently restrain or enjoin you from engaging or continuing to engage in
any conduct or practice related to: (i) the purchase or sale of any security;
(ii) the making of any false filing with the SEC; or (iii) the conduct of an
underwriter, broker, dealer, municipal securities dealer, investment adviser, or
paid solicitor of purchasers of securities?

 

Yes    ☐    No    ☐

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

3)

Are you subject to any final order5 of any governmental commission, authority,
agency or officer6 related to any securities, insurance, or banking matter?

 

Yes   ☐   (If yes, please continue to Question 3.a) No   ☐   (If no, please
continue to Question 4)

 

  a)

If your answer to Question 3 was “yes”:

 

  i)

Does the order currently bar you from: (i) associating with an entity regulated
by such commission, authority, agency or officer; (ii) engaging in the business
of securities, insurance or banking; or (iii) engaging in savings association or
credit union activities?

 

Yes    ☐    No    ☐

 

  ii)

Was the order (i) entered within the past ten years and (ii) based on a
violation of any law or regulation that prohibits fraudulent, manipulative, or
deceptive conduct?

 

Yes    ☐    No    ☐

 

4)

Are you subject to any SEC disciplinary order?7

 

Yes   ☐   (If yes, please continue to Question 4.a) No   ☐   (If no, please
continue to Question 5)

 

  a)

If your answer to Question 4 was “yes”, does the order currently: (i) suspend or
revoke your registration as a broker, dealer, municipal securities dealer, or
investment adviser; (ii) place limitations on your activities, functions, or
operations; or (iii) bar you from being associated with any particular entity or
class of entities or from participating in the offering of any penny stock?

 

Yes    ☐    No    ☐

 

5 

A “final order” is defined under Rule 501(g) as a written directive or
declaratory statement issued by a federal or state agency described in Rule
506(d)(1)(iii) under applicable statutory authority that provides for notice and
an opportunity for a hearing, and that constitutes a final disposition or action
by such federal or state agency.

6 

You may limit your response to final orders of: (i) state securities commissions
(or state agencies/officers that perform a similar function); (ii) state
authorities that supervise or examine banks, savings associations, or credit
unions; (iii) state insurance commissions (or state agencies/officers that
perform a similar function); (iv) federal banking agencies; (v) the U.S.
Commodity Futures Trading Commission; or (vi) the U.S. National Credit Union
Administration.

7 

You may limit your response to disciplinary orders issued pursuant to Sections
15(b) or 15B(c) of the Securities Exchange Act of 1934, as amended (the
“Exchange Act”) or Section 203(e) or (f) of the Investment Advisers Act of 1940
(the “Advisers Act”).

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

5)

Are you subject to any SEC cease and desist order entered within the past five
years?

 

Yes   ☐   (If yes, please continue to Question 5.a) No   ☐   (If no, please
continue to Question 6)

 

  a)

If your answer to Question 5 was “yes”, does the order currently require you to
cease and desist from committing or causing a violation or future violation of
(i) any knowledge-based anti-fraud provision of the U.S. federal securities
laws8 or (ii) Section 5 of the Securities Act?

 

Yes    ☐    No    ☐

 

6)

Have you been suspended or expelled from membership in, or suspended or barred
from association with a member of, a registered national securities exchange or
a registered national or affiliated securities association?

 

Yes   ☐   (If yes, please describe the basis of any such suspension or expulsion
and any related details in the space provided under Question 10 below)9 No   ☐  
(If no, please continue to Question 7)

 

8 

Including (but not limited to) Section 17(a)(1) of the Securities Act, Section
10(b) of the Exchange Act and Rule 10b-5 thereunder, Section 15(c)(1) of the
Exchange Act, and Section 206(1) of the Advisers Act or any other rule or
regulation thereunder.

9 

In providing additional information, please explain whether or not the
suspension or expulsion resulted from “any act or omission to act constituting
conduct inconsistent with just and equitable principles of trade.”

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

7)

Have you registered a securities offering with the SEC, made an offering under
Regulation A or been named as an underwriter in any registration statement or
Regulation A offering statement filed with the SEC?

 

Yes   ☐   (If yes, please continue to Question 5.a) No   ☐   (If no, please
continue to Question 6)

 

  a)

If your answer to Question 7 was “yes”:

 

  i)

During the past five years, was any such registration statement or Regulation A
offering statement the subject of a refusal order, stop order, or order
suspending the Regulation A exemption?

 

Yes    ☐    No    ☐

 

  ii)

Is any such registration statement or Regulation A offering statement currently
the subject of an investigation or proceeding to determine whether a stop order
or suspension order should be issued?

 

Yes    ☐    No    ☐

 

8)

Are you subject to a U.S. Postal Service false representation order entered
within the past five years?

 

Yes    ☐    No    ☐

 

9)

Are you currently subject to a temporary restraining order or preliminary
injunction with respect to conduct alleged by the U.S. Postal Service to
constitute a scheme or device for obtaining money or property through the mail
by means of false representations?

 

Yes    ☐    No    ☐

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

EXHIBIT G

PLAN OF DISTRIBUTION

We are registering the shares of common stock issued to the selling stockholders
and issuable upon exercise of the warrants issued to the selling stockholders to
permit the resale of these shares of common stock by the selling stockholders
from time to time from after the date of this prospectus. We will not receive
any of the proceeds from the sale by the selling stockholders of the shares of
common stock. We will bear all fees and expenses incident to our obligation to
register the shares of common stock.

Each selling stockholder may, from time to time, sell any or all of their shares
of common stock covered hereby on The Nasdaq Capital Market or any other stock
exchange, market or trading facility on which the shares are traded or in
private transactions. These sales may be at fixed prices, at prevailing market
prices at the time of the sale, at varying prices determined at the time of
sale, or privately negotiated prices. A selling stockholder may use any one or
more of the following methods when selling shares:

 

  •  

ordinary brokerage transactions and transactions in which the broker-dealer
solicits purchasers;

 

  •  

block trades in which the broker-dealer will attempt to sell the shares as agent
but may position and resell a portion of the block as principal to facilitate
the transaction;

 

  •  

purchases by a broker-dealer as principal and resale by the broker-dealer for
its account;

 

  •  

an exchange distribution in accordance with the rules of the applicable
exchange;

 

  •  

privately negotiated transactions;

 

  •  

settlement of short sales, to the extent permitted by law;

 

  •  

in transactions through broker-dealers that agree with the selling stockholders
to sell a specified number of such shares at a stipulated price per share;

 

  •  

through the writing or settlement of options or other hedging transactions,
whether through an options exchange or otherwise;

 

  •  

a combination of any such methods of sale; or

 

  •  

any other method permitted pursuant to applicable law.

The selling stockholders may also sell the shares of common stock under Rule 144
under the Securities Act, if available, rather than under this prospectus.

Broker-dealers engaged by the selling stockholders may arrange for other
brokers-dealers to participate in sales. Broker-dealers may receive commissions
or discounts from the selling stockholders (or, if any broker-dealer acts as
agent for the purchaser of shares, from the purchaser) in amounts to be
negotiated, but, except as set forth in a supplement to this prospectus, in the
case of an agency transaction not in excess of a customary brokerage commission
in compliance with FINRA Rule 2440; and in the case of a principal transaction a
markup or markdown in compliance with FINRA IM-2440-1.

In connection with the sale of the shares of common stock or interests therein,
the selling stockholders may enter into hedging transactions with broker-dealers
or other financial institutions, which may in turn engage in short sales of the
shares of common stock in the course of hedging the positions they assume. The
selling stockholders may also sell the shares of common stock short and deliver
these securities to close out their short positions or to return borrowed shares
in connection with such short sales, or loan or pledge the shares of common
stock to broker-dealers that in turn may sell these securities. The selling
stockholders may also enter into option or other transactions with
broker-dealers or other financial institutions or create one or more derivative
securities which require the delivery to such broker-dealer or other financial
institution of shares of common stock offered by this prospectus, which shares
such broker-dealer or other financial institution may resell pursuant to this
prospectus (as supplemented or amended to reflect such transaction).

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The selling stockholders and any broker-dealers or agents that are involved in
selling the shares of common stock may be deemed to be “underwriters” within the
meaning of the Securities Act in connection with such sales. In such event, any
commissions received by such selling stockholders, broker-dealers or agents and
any profit on the resale of the shares purchased by them may be deemed to be
underwriting commissions or discounts under the Securities Act. Selling
stockholders who are “underwriters” within the meaning of Section 2(11) of the
Securities Act will be subject to the prospectus delivery requirements of the
Securities Act and may be subject to certain statutory liabilities of, including
but not limited to, Sections 11, 12 and 17 of the Securities Act and Rule 10b-5
under the Exchange Act. Each selling stockholder has informed us that it is not
a registered broker-dealer or an affiliate of a registered broker-dealer. In no
event shall any broker-dealer receive fees, commissions and markups which, in
the aggregate, would exceed eight percent (8%).

We are required to pay certain fees and expenses incurred by us incident to the
registration of the shares. We have agreed to indemnify the selling stockholders
against certain losses, claims, damages and liabilities, including liabilities
under the Securities Act, and the selling stockholders may be entitled to
contribution. We may be indemnified by the selling stockholders against certain
losses, claims, damages and liabilities, including liabilities under the
Securities Act that may arise from any written information furnished to us by
the selling stockholders specifically for use in this prospectus, or we may be
entitled to contribution.

The selling stockholders will be subject to the prospectus delivery requirements
of the Securities Act including Rule 172 thereunder unless an exemption
therefrom is available.

We agreed to cause the registration statement of which this prospectus is a part
to remain effective until the earlier to occur of [●] or the date on which all
of the shares registered hereby are either sold pursuant to the registration
statement or sold or available for resale without restriction under Rule 144
under the Securities Act. The shares of common stock will be sold only through
registered or licensed brokers or dealers if required under applicable state
securities laws. In addition, in certain states, the shares of common stock
covered hereby may not be sold unless they have been registered or qualified for
sale in the applicable state or an exemption from the registration or
qualification requirement is available and is complied with.

Under applicable rules and regulations under the Exchange Act, any person
engaged in the distribution of the shares of common stock may not simultaneously
engage in market making activities with respect to the shares of common stock
for the applicable restricted period, as defined in Regulation M, prior to the
commencement of the distribution. In addition, the selling stockholders will be
subject to applicable provisions of the Exchange Act and the rules and
regulations thereunder, including Regulation M, which may limit the timing of
purchases and sales of shares of common stock by the selling stockholders or any
other person. We will make copies of this prospectus available to the selling
stockholders and have informed them of the need to deliver a copy of this
prospectus at or prior to the time of the sale (including by compliance with
Rule 172 under the Securities Act).

There can be no assurance that any selling stockholder will sell any or all of
the shares of common stock we registered on behalf of the selling stockholders
pursuant to the registration statement of which this prospectus forms a part.

Once sold under the registration statement of which this prospectus forms a
part, the shares of common stock will be freely tradable in the hands of persons
other than our affiliates.