Exhibit 10.1
THIRD AMENDED AND RESTATED CONVERTIBLE PROMISSORY NOTE
PURCHASE AGREEMENT
     This THIRD AMENDED AND RESTATED CONVERTIBLE PROMISSORY NOTE PURCHASE
AGREEMENT, dated as of March 18, 2008 is made between the purchaser listed on
the signature pages hereto (the “$5 Million Note Purchaser”) and the
“Purchasers” (as defined below), and ALSERES PHARMACEUTICALS, INC., a Delaware
corporation (the “Company”).
RECITALS
     WHEREAS, the Company entered into that certain Convertible Promissory Note
Purchase Agreement, dated as of March 22, 2007 (the “Original Agreement”) by and
among the Company and the purchasers listed therein (the “Original Convertible
Note Purchasers”) pursuant to which the Company issued to each of the Original
Convertible Note Purchasers a convertible promissory note (collectively, the
“Original Notes”), and the Company obtained the right to borrow up to
$15,000,000 from the Original Convertible Note Purchasers;
     WHEREAS, the Company entered into that certain Amended and Restated
Convertible Promissory Note Purchase Agreement, dated as of May 1, 2007 by and
among the Company and the purchasers listed therein, pursuant to which the
Original Convertible Note Purchasers agreed not to request any additional
Advances (as defined in the Original Agreement) under the Original Agreement,
and Highbridge International LLC (“Highbridge”) was added as a Purchaser (as
defined in the Original Agreement) and was issued a convertible promissory note
(the “Highbridge Note”);
     WHEREAS, the Company entered into that certain Second Amended and Restated
Convertible Promissory Note Purchase Agreement, dated as of August 13, 2007 by
and among the Company and the purchasers listed therein (the “Amended Note
Purchasers”), pursuant to which the Company obtained the right to borrow up to
$25,000,000 (the “Advance Amount”) from the Amended Note Purchasers and Ingalls
& Snyder Value Partners L.P. (“ISVP”) was added as a Purchaser (as defined in
the Original Agreement) and was issued a convertible promissory note in the
principal amount of $10,000,000 (the “ISVP Note”);
     WHEREAS, as of the date hereof, the Company has borrowed $25,000,000 of the
Advance Amount;
     WHEREAS, the Company requires certain funds for the operation of its
business; and
     WHEREAS, the $5 Million Note Purchaser is willing to provide the Company
with such funds through the increase of the Advance Amount by $5 million to an
aggregate of $30 million and the purchase of the New Note (defined below) on the
terms and conditions hereafter provided, including certain registration rights
relating to the Common Stock issued and issuable upon the conversion of the
Convertible Notes (defined below);
     NOW, THEREFORE, in order to induce the $5 Million Note Purchaser to
purchase the New Note and for other good and valuable consideration, the receipt
and adequacy of which are hereby acknowledged, and intending to be legally
bound, the $5 Million Note Purchaser, the Amended Note Purchasers, ISVP and the
Company hereby agree as follows:

 

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     1. DEFINED TERMS. When used in this Agreement the following terms shall
have the following meanings (such meanings being equally applicable to both the
singular and plural forms of the terms defined):
     “$5 Million Note Purchaser” shall have the meaning set forth in the
preamble.
     “Advance Amount” shall have the meaning set forth in the preamble.
     “Affiliates” shall mean any corporation, company, partnership, joint
venture and/or firm that controls, is controlled by, or is under common control
with the Company. For purposes of this definition, “control” shall mean (a) in
the case of corporate entities, direct or indirect ownership of at least fifty
percent (50%) of the stock or shares having the right to vote for the election
of directors and (b) in the case of non-corporate entities, direct or indirect
ownership of at least fifty percent (50%) of the equity interest with the power
to direct the management and policies of such non-corporate entities.
     “Agreement” means this Second Amended and Restated Convertible Promissory
Note Purchase Agreement, as it may be amended or modified and in effect from
time to time.
     “Amended Note Purchasers” shall have the meaning set forth in the preamble.
     “Business Day” means any day other than a Saturday, Sunday, or other day on
which commercial banks in the Commonwealth of Massachusetts are authorized or
required to close.
     “Commitment Percentage” shall have the meaning set forth in Section 2.1
hereof.
     “Common Stock” means the common stock, $0.01 par value per share, of the
Company.
     “Convertible Notes” shall mean, collectively, the Original Notes, the
Highbridge Note, the ISVP Note and the New Note.
     “Cut Back Shares” has the meaning set forth in Section 9.1(d).
     “Effective Date” means the date that the Registration Statement is first
declared effective by the SEC.
     “Effectiveness Period” has the meaning set forth in Section 9.1(b).
     “Electing Purchaser” shall have the meaning set forth in Section 4.2
     “Event of Default” shall have the meaning assigned to such term in
Section 11 hereof.
     “Exchange Act” means the Securities Exchange Act of 1934, as amended.
     “First Commercial Sale” shall mean, with respect to each Molecular Imaging
Product, the first commercial sale in a country as part of a nationwide
introduction by the Company, its Affiliates or its or its Affiliates’ licensees
or sublicensees.
     “Highbridge Note” shall have the meaning set forth in the preamble.
     “Highest Lawful Rate” means the maximum lawful interest rate, if any, that
at any time or from time to time may be contracted for, charged, or received
under the laws applicable to the Purchasers which are presently in effect or, to
the extent allowed by law, under such applicable laws which allow a higher
maximum nonusurious interest rate than applicable laws now allow.
     “Indemnified Party” has the meaning set forth in Section 9.4(c).
     “Indemnifying Party” has the meaning set forth in Section 9.4(c).

 

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     “ISVP” has the meaning set forth in the preamble.
     “ISVP Note” has the meaning set forth in the preamble.
     “Loan Documents” means collectively, this Agreement and the Convertible
Notes.
     “Losses” means any and all losses, claims, damages, liabilities, settlement
costs and expenses, including, without limitation, reasonable attorneys’ fees.
     “Maturity Date” means the earliest to occur of (a) December 31, 2010 and
(b) the date on which a Purchaser declares a Default (as defined in Section 11
below) to have occurred.
     “Molecular Imaging Products” shall mean products approved for sale by the
appropriate U.S. and/or foreign regulatory body containing as the active
ingredient the Company’s radio-labeled molecular imaging agents, currently in
development or developed by the Company in the future, including, without
limitation, the ALTROPANE® and FLUORATEC molecular imaging agents, for the
diagnosis and monitoring of Parkinson’s Disease and Attention Deficit
Hyperactivity Disorder using SPECT or PET camera imaging techniques.
     “Net Sales” shall mean the gross amount received by the Company, its
Affiliates and/or its or its Affiliates’ licensees or sublicensees on sales or
other dispositions of Molecular Imaging Products to Third Parties (other than
licensees or sublicensees) in bona fide, arm’s-length transactions, less the
following deductions:
     (a) Trade, cash and/or quantity discounts actually allowed and taken
directly with respect to such sales, as reflected in the amount invoiced;
     (b) Tariffs, duties, excises, sales taxes or other taxes imposed upon and
paid directly by the Company with respect to the production, sale, delivery or
use of the Molecular Imaging Product (excluding national, state or local taxes
based on income), as reflected in the amount invoiced;
     (c) Amounts repaid or credited by reason of rejections, defects, recalls or
returns, or because of chargebacks, refunds, rebates, retroactive price
reductions or delayed ship orders;
     (d) Amounts credited for uncollectible amounts on previously sold products;
     (e) Freight, insurance and other transportation charges incurred in
shipping a Molecular Imaging Product to Third Parties, as reflected in the
amount invoiced;
     (f) Deduction of one percent (1%) for distribution and warehousing
expenses; and
     (g) Any other reduction or specifically identifiable amounts included in
the gross invoice that are creditable for reasons substantially equivalent to
those listed above.
     Notwithstanding anything in this Agreement to the contrary, “Net Sales”
shall exclude any sales or other disposition of Molecular Imaging Products for
test marketing, clinical trial purposes or compassionate or similar use.
     Net Sales amounts shall be determined from the books and records of the
Company, its Affiliates and/or its or its Affiliates’ licensees or sublicensees,
maintained in accordance with generally accepted accounting principles,
consistently applied.
     Sales between or among the Company, its Affiliates or their respective
licensees and sublicensees shall be disregarded for purposes of calculating Net
Sales. In the case of any sale or other disposal of a Molecular Imaging Product
between or among the Company and its Affiliates,

 

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licensees and sublicensees, for resale, Net Sales shall be calculated as above
only on the value charged or invoiced on the first arm’s-length sale thereafter
to a Third Party.
     In the case of any sale or other disposal for value, such as barter or
counter-trade, of any Molecular Imaging Product, or part thereof, other than in
an arm’s-length transaction exclusively for money, Net Sales shall be calculated
as above on the value of the non-cash consideration received or the fair market
price (if higher) of the Molecular Imaging Product in the country of sale or
disposal.
     In the event the Molecular Imaging Product is sold in a finished dosage
form in combination with one or more other active ingredients (a “Combination
Product”), the Net Sales of the Molecular Imaging Product, for the purposes of
determining royalty payments, shall be determined by multiplying the Net Sales
(as defined above) of the Combination Product by the fraction, ‘A/(A+B)’ where
‘A’ is the weighted (by sales volume) average sale price in the relevant country
of the Molecular Imaging Product when sold separately in finished form and ‘B’
is the weighted average sale price in that country of the other product(s) sold
separately in finished form. In the event that such average sale price cannot be
determined for both the Molecular Imaging Product and the other product(s) in
the Combination Product, Net Sales for purposes of determining royalty payments
shall be agreed by the Parties based on the relative value contributed by each
component, such agreement not to be unreasonably withheld.
     “New Note” shall have the meaning set forth in Section 2.1 hereof.
     “Obligations” means all unpaid principal of and accrued and unpaid interest
on the Convertible Notes, and all other obligations, interest, fees, charges and
expenses of the Company to the Purchasers arising under the Loan Documents.
     “Original Convertible Note Purchasers” shall have the meaning set forth in
the preamble.
     “Person” means an individual, a limited liability company, a partnership, a
joint venture, a corporation, a trust, an unincorporated organization, a
government or any department or agency thereof.
     “Pre-Commercial Income” shall mean, with respect to each Molecular Imaging
Product, all license fees, milestone payments and other amounts received by the
Company and/or its Affiliates from Third Parties in connection with or related
to the licensing or sublicensing to such Third Parties of the Company’s and/or
its Affiliate’s rights under the intellectual property covering the Molecular
Imaging Product. Notwithstanding anything in the foregoing to the contrary,
“Pre-Commercial Income” shall exclude (a) any royalty payments or milestone
payments based upon commercial sales levels, (b) amounts received for research
and development activities undertaken for, or in collaboration with, such Third
Parties, (c) amounts received for debt or equity securities of the Company
and/or its Affiliates, provided that any amounts received in excess of the then
current fair market value of such debt or equity securities shall, to the extent
of such excess, be deemed to be Pre-Commercial Income, and (d) transfer pricing
amounts paid in respect of Molecular Imaging Products supplied to such Third
Parties.
     “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 the Registration Statement
(including, without limitation, a prospectus that includes any information
previously omitted from a

 

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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 the 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.
     “Purchasers” means the Original Convertible Note Purchasers, the Amended
Note Purchasers, ISVP and the $5 Million Note Purchaser.
     “Registrable Securities” means the shares of Common Stock issued or
issuable on the conversion of any Convertible Notes pursuant to Section 9,
except the New Note.
     “Registration Statement” means each registration statement required to be
filed under Section 9, including (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.
     “Registration Statement Questionnaire” means a questionnaire in the form
attached hereto as Exhibit B.
     “Required Effectiveness Date” means (i) if a Registration Statement does
not become subject to review by the SEC, the date which is the earlier of
(a) ninety (90) days after the Required Filing Date or (b) five (5) Trading Days
after the Company receives notification from the SEC that such Registration
Statement will not become subject to review, or (ii) if a Registration Statement
becomes subject to review by the SEC, the date which is the earlier of (a) one
hundred and twenty (120) days after the Required Filing Date or (b) five
(5) Trading Days after the Company receives notification from the SEC that the
SEC has no further comment to such Registration Statement.
     “Required Filing Date” has the meaning set forth in Section 9.1(a).
     “Restriction Termination Date” has the meaning set forth in Section 9.1(d).
     “Rule 144 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 144
under the Securities Act.
     “SEC” means the United States Securities and Exchange Commission.
     “SEC Reports” means all documents required to be filed by the Company under
the Exchange Act, including pursuant to Section 13(a) or 15(d) thereof, for the
two years preceding the date hereof, together with any other materials filed or
furnished by the Company under the Exchange Act, whether or not any such
materials were required.
     “SEC Restrictions” has the meaning set forth in Section 9.1(d).
     “Securities Act” means the Securities Act of 1933, as amended.
     “Stockholder Approval” shall have the meaning set forth in Section 4.1(b).
     “Third Party” shall mean any person or entity other than the Company or any
of its Affiliates.

 

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     “Total Converted Balance” shall have the meaning set forth in Section 4.2
     “Trading Day” means (i) a day on which the Common Stock is traded on a
Trading Market (other than the OTC Bulletin Board), or (ii) if the Common Stock
is not listed or quoted on a Trading Market (other than the OTC Bulletin Board),
a day on which the Common Stock is traded in the over-the-counter market, as
reported by the OTC Bulletin Board, or (iii) if the Common Stock is not listed
or quoted on any Trading Market, a day on which the Common Stock is quoted in
the over-the-counter market as reported by the Pink Sheets LLC (or any similar
organization or agency succeeding to its functions of reporting prices);
provided, that in the event that the Common Stock is not listed or quoted as set
forth in (i), (ii) and (iii) hereof, then Trading Day shall mean a Business Day.
     “Trading Market” means whichever of the New York Stock Exchange, the
American Stock Exchange, the NASDAQ Global Select Market, the NASDAQ Global
Market, the NASDAQ Capital Market or the OTC Bulletin Board on which the Common
Stock is listed or quoted for trading on the date in question.
     “Transfer Agent” means Continental Stock Transfer & Trust Company, or any
successor transfer agent for the Company.
     “Valid Claim” means a claim of any issued, unexpired United States or
foreign patent, which shall not be disclaimed, nor held invalid or unenforceable
by a court of competent jurisdiction in an unappealed or unappealable decision.
     2. CONVERTIBLE NOTE FACILITY.
          2.1 Purchase and Sale of New Note. At each Closing (as defined below),
the $5 Million Note Purchaser agrees on the terms of and subject to the
conditions specified in this Agreement, to purchase from the Company, according
to the $5 Million Note Purchaser’s pro rata share (based upon the respective
“Commitment Percentage” of the $5 Million Note Purchaser as set forth on
Schedule 2.1 attached hereto), and the Company agrees to sell to the $5 Million
Note Purchaser listed on Schedule 2.1, convertible promissory notes dated as of
the date of such Closing in the form attached to this Agreement as Exhibit A
(the “New Note”); provided, however, that in no event shall the $5 Million Note
Purchaser be obligated hereunder to purchase, in the aggregate, more than a
principal amount of $5 million in New Notes.
          2.2 Closing. The closing of the issuance and sale of the New Note
issued hereunder shall be held at the offices of counsel to the Company at 5:00
p.m. on the date and place as the Company and the $5 Million Note Purchaser
mutually agree in writing (each such date, a “Closing”).
          2.3 Payment of New Note Purchase Price. At each Closing, (i) the
Company shall deliver to the $5 Million Note Purchaser a New Note at such
Closing, and (ii) as payment in full for the New Note being purchased by the $5
Million Note Purchaser at such Closing, the $5 Million Note Purchaser shall pay
its purchase amount to the Company by wire transfer of immediately available
funds to an account designated by the Company.
          2.4 Interest. Interest shall accrue on each Convertible Note from the
date of issuance until such Convertible Note is paid in full or otherwise
converted pursuant to Section 4 hereof. The Company promises to pay interest on
the outstanding principal amount of each Convertible Note (i) until the Maturity
Date, or if earlier, conversion pursuant to Section 4 hereof, at a per annum
interest rate equal to five percent (5%), (ii) from and after the Maturity Date,
or during the

 

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continuance of an Event of Default, at a per annum rate equal to ten percent
(10%) or (iii) if less than the rates applicable under both clauses (i) and
(ii), the Highest Lawful Rate. Interest shall be calculated on the basis of a
360-day year for the actual number of days elapsed. Interest shall accrue until
paid in full and all unpaid interest shall be due and payable on the Maturity
Date, unless otherwise converted pursuant to Section 4 hereof.
          2.5 Method of Payment. All payments of principal, interest, and fees
hereunder shall be made on the date when due in immediately available funds in
United States Dollars to the Purchasers at each Purchaser’s address specified on
the signature page hereof, or at such other address as shall be directed by the
applicable Purchaser in a writing received by the Company.
          2.6 Prepayments. The Company may not prepay any amounts under any
Convertible Notes whether principal or interest.
          2.7 Usury Savings Clause. Notwithstanding any other provision herein,
the aggregate interest rate charged with respect to any of the Obligations,
shall not exceed the Highest Lawful Rate. If the rate of interest (determined
without regard to the preceding sentence) under this Agreement at any time
exceeds the Highest Lawful Rate, the outstanding amount under the Convertible
Notes issued hereunder shall bear interest at the Highest Lawful Rate until the
total amount of interest due hereunder equals the amount of interest which would
have been due hereunder if the stated rates of interest set forth in this
Agreement had at all times been in effect. In addition, if when the Convertible
Notes issued hereunder are repaid in full the total interest due hereunder is
less than the total amount of interest which would have been due hereunder if
the stated rates of interest set forth in this Agreement had at all times been
in effect, then to the extent permitted by law, the Company shall pay to the
Purchasers an amount equal to the difference between the amount of interest paid
and the amount of interest which would have been paid if the Highest Lawful Rate
had at all times been in effect. Notwithstanding the foregoing, it is the
intention of the Purchasers and the Company to conform strictly to any
applicable usury laws. Accordingly, if the Purchasers contract for, charge, or
receive any consideration which constitutes interest in excess of the Highest
Lawful Rate, then any such excess shall be cancelled automatically and, if
previously paid, shall be applied to the outstanding principal amount of the
Convertible Notes issued hereunder or be refunded to the Company.
     3. CONDITIONS PRECEDENT. The obligations of the $5 Million Note Purchaser
to purchase the New Note shall be subject to the following conditions precedent
that on the date of the Closing:
          3.1 Each of the representations and warranties of the Company
contained in this Agreement and the New Note shall be true and correct in all
material respects; and
          3.2 At the time of, and immediately after giving effect to, the
issuance of such New Note, no Event of Default shall have occurred and be
continuing.
     4. OPTIONAL CONVERSION.
          4.1 Conversion to Equity.
                 (a) After December 31, 2007, at any time during which
Convertible Notes remain outstanding, up to all of the outstanding principal and
accrued interest under any particular Convertible Note then outstanding may be
converted, at the sole option of the holder thereof and by written notice to the
Company, into shares of Common Stock of the Company at a conversion price equal
to $2.50 per share.

 

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                 (b) Notwithstanding anything to the contrary contained herein,
each Purchaser shall be prohibited from effecting a conversion pursuant to this
Section 4.1 if at the time of such conversion (i) the Common Stock issuable to a
Purchaser pursuant to such conversion or as a result of such conversion, when
taken together with all shares of Common Stock then held or otherwise
beneficially owned by a Purchaser exceeds 19.9% of the total number of issued
and outstanding shares of Common Stock of the Company immediately prior to such
conversion, (ii) the Common Stock issuable to a Purchaser pursuant to such
conversion or as a result of such conversion, exceeds 19.9% of the total number
of issued and outstanding shares of Common Stock of the Company immediately
prior to such conversion, in each case unless the stockholders of the Company
have approved the conversion of all of the shares of Common Stock issuable
hereunder and the transactions contemplated hereby pursuant to Nasdaq
Marketplace Rule 4350(i)(1)(D)(ii) and any other applicable rules and
regulations (“Stockholder Approval”). The foregoing provision however shall not
restrict the number of shares of Common Stock which a Purchaser may receive or
beneficially own in order to determine the amount of securities or other
consideration that a Purchaser may receive in the event of a merger, sale or
other business combination involving the Company.
                 (c) The Company hereby covenants and agrees that in the event a
Purchaser is prohibited from effecting a conversion of Convertible Notes
pursuant to this Section 4.1, then upon receipt of written notice of such event
from such Purchaser, the Company shall use its best efforts to seek Stockholder
Approval.
                 (d) Notwithstanding anything to the contrary contained herein,
the Company shall not effect any conversion of the Highbridge Note or the ISVP
Note, and neither Highbridge nor ISVP, nor any of their respective affiliates
shall have the right to effect any conversion pursuant to this Section 4.1, to
the extent that after giving effect to such conversion, Highbridge (together
with its affiliates and any other person or entity acting as a group together
with Highbridge) on the one hand, or ISVP (together with its affiliates and any
other person or entity acting as a group together with ISVP) on the other hand,
would beneficially own in excess of 9.99% of the number of shares of the Common
Stock outstanding immediately after giving effect to the issuance of shares of
Common Stock issuable upon any such conversion. For purposes of the foregoing
sentence, the number of shares of Common Stock beneficially owned by Highbridge
or ISVP shall include the number of shares of Common Stock issuable upon the
conversion with respect to which such determination is being made, but shall
exclude the number of shares of Common Stock which would be issuable upon (A)
exercise of the remaining, nonexercised portion of the Highbridge Note or the
ISVP Note beneficially owned by Highbridge or ISVP or any of their respective
affiliates and (B) exercise or conversion of the unexercised or nonconverted
portion of any other securities of the Company (including, without limitation,
any other convertible notes or warrants) subject to a limitation on conversion
or exercise analogous to the limitation contained herein beneficially owned by
Highbridge or ISVP or any of their respective affiliates. Except as set forth in
the preceding sentence, for purposes of this Section 4.1(d), beneficial
ownership shall be calculated in accordance with Section 13(d) of the Exchange
Act and the rules and regulations promulgated thereunder. For purposes of this
Section 4(d), in determining the number of outstanding shares of Common Stock,
Highbridge and ISVP may rely on the number of outstanding shares of Common Stock
as reflected in the later dated of (x) the Company’s most recent Form 10-K (y) a
more recent public announcement by the Company or (z) any other notice by the
Company or the Transfer Agent setting forth the number of shares of Common Stock
outstanding. Upon the written or oral request of Highbridge or ISVP, the Company
shall

 

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within two Trading Days confirm orally and in writing to Highbridge the number
of shares of Common Stock then outstanding. In any case, the number of
outstanding shares of Common Stock shall be determined after giving effect to
the conversion or exercise of securities of the Company, including the
Highbridge Note or the ISVP Note, since the date as of which such number of
outstanding shares of Common Stock was reported.
          4.2 Conversion to Royalty Stream.
                 (a) At any time all or any of the Purchasers may elect (as
such, collectively, the “Electing Purchasers”, and, individually, an “Electing
Purchaser”), at their sole option and by written notice to the Company, to
convert, in $1 million increments, up to the entire amount of the principal and
accrued interest then outstanding on all Convertible Notes then held by such
Electing Purchaser (the “Total Converted Balance”), into the right to receive
from the Company the following payments related to the Company’s Molecular
Imaging Products:
                              (i) For each One Million ($1,000,000) of Total
Converted Balance,
                              (A) 2% of Pre-Commercial Income; plus
                              (B) a royalty at a rate of one half of one percent
(0.5%) of Net Sales of Molecular Imaging Products.
                         By way of example only, if the Total Converted Balance
being converted by the Electing Purchaser is $3.5 million, the Company would be
required to pay 7% of Pre-Commercial Income (2% x 3.5) to such Electing
Purchaser plus a royalty of 1.75% on Net Sales of Molecular Imaging Products
(0.5% x 3.5).
                              (ii) The Company agrees to provide each Purchaser
with at least 30 days prior written notice of the execution of a partnership
agreement for the Molecular Imaging products to enable them to make an election
to convert under this Section 4.2. Upon receipt of such notice, each Purchaser
will have 30 days to elect such conversion. For purposes of clarity, any amounts
which may be owed by the Company under Section 4.2(a)(i) above after proper
notice is given and no election is made, shall be owed on a going-forward basis
and shall not apply retroactively to any Pre-Commercial Income received by the
Company and/or its Affiliates or Net Sales of Molecular Imaging Products prior
to the date of such election to convert.
                 (b) The Company shall make the payments set forth in
Section 4.2(a)(i) above on a calendar quarterly basis to each Electing
Purchaser.
                 (c) The Company shall deliver to each Electing Purchaser within
sixty (60) days after the end of each calendar quarter following such Electing
Purchaser’s election to convert, reasonably detailed written accountings of
Pre-Commercial Income and Net Sales of Molecular Imaging Products that are
subject to payments due to such Electing Purchaser hereunder for such calendar
quarter. When the Company delivers such accountings to such Electing Purchaser,
the Company shall also deliver all payments due under Section 4.2(a)(i) for such
calendar quarter.
                 (d) On a country-by-country and Molecular Imaging
Product-by-Molecular Imaging Product basis, the royalty obligation of the
Company hereunder shall cease at the expiration of the last-to-expire Valid
Claim covering a Molecular Imaging Product in said country or, in the case of
countries where no Valid Claims covering a Molecular Imaging Product have been
granted, ten (10) years after the First Commercial Sale of a Molecular Imaging
Product in said country. In no event will the Company’s royalty obligation
hereunder cease so long as royalties

 

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in excess of those owed hereunder are paid to the Company by its licensee of any
or all of the Molecular Imaging Products.
     5. REPRESENTATIONS AND WARRANTIES. The Company represents and warrants to
each Purchaser that on the date hereof:
          5.1 The Company is duly organized, validly existing, and in good
standing under the laws of its jurisdiction of incorporation and is duly
qualified and in good standing in every other jurisdiction where the nature of
its business or the location or ownership of its properties requires such
qualification and where the failure to be so qualified would reasonably be
expected to have a material adverse effect on the Company’s business,
operations, properties, assets or condition (financial or otherwise).
          5.2 The Company has the corporate power and authority to execute and
deliver this Agreement and the Convertible Notes and to perform all of the
obligations hereunder, and all necessary corporate action has been taken to
execute and deliver this Agreement and the Convertible Notes and to issue and
sell the Convertible Notes hereunder.
          5.3 This Agreement and the Convertible Notes constitute the legal,
valid, and binding obligations of the Company, enforceable against the Company
in accordance with their respective terms, subject to applicable bankruptcy,
insolvency, reorganization or similar laws generally affecting the enforcement
of the rights of creditors.
          5.4 The execution, delivery and performance by the Company of this
Agreement and the Convertible Notes does not (i) violate any provisions of the
Company’s Certificate of Incorporation, as amended, bylaws, as amended, or any
material contract, agreement, law, regulation, order, decree or writ to which
the Company or any of its properties are subject or (ii) require the consent or
approval of any person, entity or authority, including, without limitation, any
regulatory authority or governmental body of the United States of America or any
state thereof or any political subdivision of any of the foregoing.
     6. REPRESENTATIONS AND WARRANTIES OF THE PURCHASERS. Each Purchaser
represents and warrants, severally and not jointly, to the Company as follows:
          6.1 Investment Intent. Such Purchaser understands that the Convertible
Notes have not been registered under the Securities Act or any applicable state
securities law and is acquiring the Convertible Notes as principal for its own
account for investment purposes only and not with a view to or for distributing
or reselling such Convertible Notes, has no present intention of distributing
the Convertible Notes and has no arrangement or understanding with any other
persons regarding the distribution of the Convertible Notes. Such Purchaser is
acquiring the Convertible Notes hereunder in the ordinary course of its
business. Such Purchaser does not have any agreement or understanding, directly
or indirectly, with any person to distribute the Convertible Notes.
          6.2 Purchaser Status. At the time such Purchaser was offered the
Convertible Notes, it was, and at the date hereof it is an “accredited investor”
as defined in Rule 501(a) under the Securities Act. Such Purchaser (if not
already a registered broker-dealer under Section 15 of the Exchange Act) is not
required to be registered as a broker-dealer under Section 15 of the Exchange
Act.
          6.3 Experience of 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

 

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Convertible Notes, 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
Convertible Notes and, at the present time, is able to afford a complete loss of
such investment.
          6.4 General Solicitation. Such Purchaser is not purchasing the
Convertible Notes as a result of any advertisement, article, notice or other
communication regarding the Convertible Notes 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.
          6.5 Certain Fees. No brokerage or finder’s fees or commissions are or
will be payable by such Purchaser to any broker, financial advisor or
consultant, finder, placement agent, investment banker, bank or other person
with respect to the transactions contemplated by this Agreement. The Company
shall have no 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 6.5 that may be due in connection with the transactions contemplated by
this Agreement.
          6.6 Acquiring Person. Such Purchaser, after giving effect to the
transactions contemplated hereby, will not, either individually or with a group
(as defined in Section 13(d)(3) of the Exchange Act), become the beneficial
owner of 20% or more of the Company’s outstanding Common Stock. For purposes of
this Section 6.6, beneficial ownership shall be determined pursuant to
Rule 13d-3 under the Exchange Act.
     7. AFFIRMATIVE COVENANTS. During the term of this Agreement and while the
Convertible Notes remain outstanding, unless each Purchaser consents thereto in
writing:
          7.1 The Company shall maintain its corporate existence, business and
assets, keep its business and assets adequately insured and comply in all
material respects with all requirements of applicable law.
          7.2 The Company (a) shall provide each Purchaser at least 10 days
prior written notice of the Company’s intent to change its name or its mailing
address and (b) shall not change its type of organization or jurisdiction of
organization.
     8. NEGATIVE COVENANTS. So long as any principal and interest remains
outstanding under the Convertible Notes, the Company shall not:
          8.1 Create, incur, assume, guaranty, become liable with respect to
(contingently or otherwise), or permit to be outstanding any indebtedness for
money borrowed (including, without limitation, any indebtedness evidenced by any
notes, instruments or agreements or in connection with any capitalized lease),
except for (i) obligations under this Agreement and the Convertible Notes and
(ii) up to an additional $5 million of indebtedness solely from Purchasers
hereunder and upon the same terms and conditions as those contained herein;
          8.2 (i) Declare or pay any cash dividend, or make a distribution on,
repurchase, or redeem, any class of stock of the Company, other than pursuant to
repurchase obligations under existing employee stock purchase or option plans or
(ii) Sell, lease, transfer or otherwise dispose of any material assets or
property of the Company; or
          8.3 Dissolve or liquidate.
     9. REGISTRATION RIGHTS.
          9.1 Registration Statement.

 

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                 (a) Subject to the receipt of necessary information from the
Purchasers, including the information requested in the Registration Statement
Questionnaire, within 60 calendar days following the date hereof (the “Required
Filing Date”), the Company shall prepare and file with the SEC 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
the Exchange Act).
                 (b) The Company shall use reasonable best efforts to cause the
Registration Statement to be declared effective by the SEC as promptly as
possible after the filing thereof, but in any event prior to the Required
Effectiveness Date, and shall use reasonable best efforts to keep the
Registration Statement continuously effective under the Securities Act until the
earlier of the date that all Registrable Securities covered by such Registration
Statement have been sold or can be sold publicly under Rule 144(k) (the
“Effectiveness Period”); provided that, upon notification by the SEC that a
Registration Statement will not be reviewed or is no longer subject to further
review and comments, the Company shall request acceleration of such Registration
Statement within five (5) Trading Days after receipt of such notice and request
that it become effective on 4:00 p.m. New York City time on the Effective Date
and file a prospectus supplement for any Registration Statement, if required
under Rule 424 (or otherwise), by 9:00 a.m. New York City time the day after the
Effective Date.
                 (c) Notwithstanding anything in this Agreement to the contrary,
after 60 consecutive Trading Days of continuous effectiveness of the initial
Registration Statement filed and declared effective pursuant to this Agreement,
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 subsequent Registration Statement if (i) the
Company is engaged in a merger, acquisition or sale and the Board of Directors
of the Company 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
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, (ii) requested by
the SEC or any other federal or state governmental authority during the
Effectiveness Period of the Registration Statement for amendments or supplements
to a Registration Statement or related Prospectus or for additional information;
(iii) the SEC or any other federal or state governmental authority issued any
stop order suspending the effectiveness of a Registration Statement or the
initiation of any proceedings for that purpose; (iv) the Company receives any
notification with respect to the suspension of the qualification or exemption
from qualification of any of the Registrable Securities for sale in any
jurisdiction or the initiation or threatening of any proceeding for such
purpose, (v) the Company elected to delay the disclosure of material non-public
information concerning the Company, the disclosure of which at the time is not,
in the good faith judgment of the Board of Directors of the Company, in the best
interest of the Company; or (vi) any event or circumstance which necessitates
the making of any changes in the Registration Statement or Prospectus, or any
document incorporated or deemed to be incorporated therein by reference, so
that, in the case of the Registration Statement, it will not contain any untrue
statement of a material fact or omit to state a material fact required to be
stated therein or necessary to make the statements therein not misleading, or
that in the case of the Prospectus, it will not contain any

 

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untrue statement of a material fact or omit to state a material fact necessary
to make the statements therein, in the light of the circumstances under which
they were made, not misleading. Upon receipt of such notice, each Purchaser
shall immediately discontinue any sales of Registrable Securities pursuant to
such registration 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 Company’s Board of
Directors) the failure to require such suspension would be materially
detrimental to the Company. The Company’s rights under this Section 9.1(c) may
be exercised for a period of no more than 20 Trading Days at a time and not more
than three times in any twelve-month period. Immediately after the end of any
suspension period under this Section 9.1(c), 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.
                 (d) Notwithstanding the other provisions of this Agreement, if
at any time the SEC takes the position that some or all of the Registrable
Securities may not be included in the Registration Statement because (i) the
inclusion of such Registrable Securities violates the provisions of Rule 415 as
a result of the number of shares included in such Registration Statement, and/or
(ii) the Registrable Securities cannot be sold as an “at the market offering,”
the Company shall (A) remove from the Registration Statement such portion of the
Registrable Securities (the “Cut Back Shares”) and/or (B) agree to such
restrictions and limitations on the registration and resale of the Registrable
Securities as the SEC may require to assure the Company’s compliance with the
requirements of Rule 415 (collectively, the “SEC Restrictions”). Any cut-back
imposed pursuant to this Section 9.1(d) shall be allocated among the Purchasers
on a pro rata basis. From and after such time as the Company is able to effect
the registration of the Cut Back Shares in accordance with any SEC Restrictions
(such date, the “Restriction Termination Date”), all of the provisions of this
Section 9.1 shall again be applicable to the Cut Back Shares; provided, however,
that for such purposes the Required Filing Date shall be deemed to be the
Restriction Termination Date. Notwithstanding the foregoing, the Company shall
not be required to register any shares of Common Stock issuable upon conversion
of the New Note.
          9.2 Registration Procedures. In connection with the Company’s
registration obligations hereunder, the Company shall:
                 (a) Not less than three 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 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 (but not
approval) of such Purchaser; provided that, the failure of any Purchaser or his,
her or its counsel to respond to such proposed documents within two Trading Days
after the Purchasers have been so furnished with copies of such documents shall
be deemed approval of same; and provided, further, that no such review and
comment shall inhibit the Company from filing the Registration Statement, any
Prospectus or any such amendment or supplement within five Business Days after
such notice has been provided or otherwise from complying with its obligations
hereunder.

 

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                 (b) (i) Subject to Section 9.1(c), prepare and file with the
SEC 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 SEC 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;
(iii) respond as promptly as reasonably possible to any comments received from
the SEC with respect to the Registration Statement or any amendment thereto; and
(iv) 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) During the Effectiveness Period, 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 SEC notifies the Company whether there will be a
“review” of any Registration Statement; (ii) the SEC comments in writing on any
Registration Statement; (iii) any Registration Statement or any post-effective
amendment is declared effective; (iv) the SEC or any other federal or state
governmental authority requests any amendment or supplement to any Registration
Statement or Prospectus or requests additional information related thereto;
(v) the SEC issues any stop order suspending the effectiveness of any
Registration Statement or initiates any Proceedings for that purpose; (vi) 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; or (vii) the financial
statements included in any Registration Statement become ineligible for
inclusion therein or 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 the 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) Prior to any public offering of Registrable Securities, use
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

 

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respect of doing business in any jurisdiction in which it is not otherwise so
subject or provide any undertaking that causes the Company undue expense or
burden.
                 (f) Upon any sale of Registrable Securities pursuant to the
Registration Statement for the account of a Purchaser, cooperate with the
Purchasers to facilitate the timely preparation and delivery of certificates
representing such 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 certificates to be in such denominations and registered in
such names as any such Purchaser may reasonably request; provided, that, the
delivery of such certificates shall be subject to the payment by the Purchasers
of any transfer taxes, if applicable.
                 (g) The Company, as promptly as reasonably possible, shall
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.
                 (h) Comply in all material respects with all rules and
regulations of the SEC with respect to the Registration Statement and the
disposition of all Registrable Securities covered by the Registration Statement.
                 (i) 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 Registration Statement 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 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. Upon the Company’s reasonable written request, such Purchaser will
promptly notify the Company of any changes in the information set forth in the
Registration Statement or the Registration Statement Questionnaire regarding
such Purchaser or its plan of distribution or other information as the Company
may reasonably request in connection with any registration referred to in
Section 9. The Company shall not be required to include any Registrable
Securities held by a Purchaser in the Registration Statement if such Purchaser
fails to complete or update the Registration Statement Questionnaire or provide
the information requested in the Registration Statement Questionnaire in
accordance with this Section 9.2(i).
                 (j) The Company shall use reasonable best efforts to comply
with all applicable rules and regulations of the SEC 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 SEC 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(c)
and, as a result thereof, the Purchasers are required to deliver a Prospectus in
connection with any disposition of Registrable Securities

 

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and take such other actions as may be reasonably necessary to facilitate the
registration of the Registrable Securities hereunder.
          9.3 Registration Expenses. The Company shall pay all fees and expenses
incident to the performance of or compliance with Section 9 by the Company,
including without limitation (a) all registration and filing fees and expenses,
including without limitation those related to filings with the SEC, 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, and (f) all
listing fees to be paid by the Company to the Trading Market.
          9.4 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 determined by a court of competent jurisdiction
in a final judgment not subject to appeal or review), as incurred, arising out
of or relating to (i) any misrepresentation or breach of any representation or
warranty made by the Company in the Loan Documents or any other certificate,
instrument or document contemplated hereby or thereby, (ii) any breach of any
covenant, agreement or obligation of the Company contained in the Loan Documents
or any other certificate, instrument or document contemplated hereby or thereby
or (iii) any untrue or alleged 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
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; provided however that the Company will not
be liable in any such case 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
in writing expressly for use in the Registration Statement (including without
limitation the information set forth in the Registration Statement
Questionnaire), (B) the failure of the Purchaser to comply with the covenants
and agreements contained in Section 10.3 or 9.2(j) with respect to resale of
Registrable Securities, or (C) with respect to any prospectus used by a
Purchaser, an untrue statement or omission of material fact contained in such
prospectus that 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 the Purchasers. Each Purchaser shall,
severally and not jointly, indemnify and hold harmless the Company and its
directors and officers, and each Person, if any,

 

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that controlled the Company within the meaning of Section 15 of the Securities
Act or Section 20 of the Exchange Act, to the fullest extent permitted by
applicable law, from and against all Losses (as determined by a court of
competent jurisdiction in a final judgment not subject to appeal or review), as
incurred, arising out of or relating to 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
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. 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 promptly to assume the defense of such Proceeding and to employ counsel
reasonably satisfactory to such Indemnified Party in any such Proceeding; or
(iii) the named parties to any such Proceeding (including any impleaded parties)
include both such Indemnified Party and the Indemnifying Party, and such
Indemnified Party shall have been advised by counsel that a conflict of interest
is likely to exist if the same counsel were to represent such Indemnified Party
and the Indemnifying 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 shall be
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 or delayed. No Indemnifying Party shall, without the prior
written consent of the Indemnified Party, effect any settlement of any pending
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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 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
that such Indemnified Party is not entitled to indemnification hereunder).
                 (d) Contribution. If a claim for indemnification under
Section 9.4(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 9.4(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 9.4(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 9.4(d), a Purchaser
shall not be required to contribute, in the aggregate, any amount in excess of
the amount by which the net proceeds actually received by a Purchaser from the
sale of the Registrable Securities subject to the Proceeding exceed the amount
of any damages that a 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.
          9.5 Dispositions. Each of the Purchasers 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 in accordance
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Purchasers further agrees that, upon receipt of a notice from the Company of the
occurrence of any event of the kind described in Sections 9.2(c)(v), (vi) or
(vii), 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 resumed. The Company may provide appropriate stop orders to
enforce the provisions of this paragraph. Each of the Purchasers, severally and
not jointly with the other Purchasers, agrees that the removal of the
restrictive legend from certificates representing Registrable Securities as set
forth in Section 10.1 is predicated upon the Company’s reliance that each
Purchaser will comply with the provisions of this subsection. Both the Company
and the Transfer Agent, and their respective directors, officers, employees and
agents, may rely on this Section.
          9.6 Registration of Other Securities. Notwithstanding anything
contained herein to the contrary and for the avoidance of doubt, the parties
hereto acknowledge that (a) the Company has granted registration rights to other
security holders, and (b) any Registration Statement prepared, filed and made
effective under this Section 9 may also cover the resale of securities held by
such security holders to the extent that the Company has an obligation to
register such securities under any of the agreements listed in the SEC Reports.
          9.7 Withdrawal of Registration Statement. After the termination of the
Effectiveness Period, the Company shall be entitled to withdraw the Registration
Statement, and Purchasers shall have no further right to offer or sell any of
the Registrable Securities pursuant to the Registration Statement.
     10. OTHER AGREEMENTS OF THE PARTIES
          10.1 Transfer Restrictions.
                 (a) Each of the Purchasers, severally but not jointly, covenant
to the Company that the Registrable Securities will only be disposed of pursuant
to an effective registration statement under, and in compliance with the
requirements of, the Securities Act or pursuant to an available exemption from
the registration requirements of the Securities Act, and in compliance with any
applicable state securities laws. In connection with any transfer of Registrable
Securities other than pursuant to an effective registration statement or to the
Company, or pursuant to Rule 144(k), the Company may require the transferor to
provide to the Company an opinion of counsel selected by the transferor, the
form and substance of which opinion shall be reasonably satisfactory to the
Company, to the effect that such transfer does not require registration under
the Securities Act. Notwithstanding the foregoing, the Company hereby consents
to and agrees to register on the books of the Company and with its Transfer
Agent, without any such legal opinion, except to the extent that the Transfer
Agent requests such legal opinion, any transfer of Registrable Securities by a
Purchaser to a Rule 144 Affiliate of such Purchaser, provided that the
transferee certifies to the Company that it is an “accredited investor” as
defined in Rule 501(a) under the Securities Act and provided that such Rule 144
Affiliate does not request any removal of any existing legends on any
certificate evidencing the Registrable Securities.
                 (b) Each of the Purchasers, severally but not jointly, agrees
to the imprinting, until no longer required by this Section 10.1(b), of the
following legend on any certificate evidencing any of the Registrable
Securities:

 

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THESE SECURITIES HAVE NOT BEEN REGISTERED WITH THE SECURITIES AND EXCHANGE
COMMISSION OR THE SECURITIES COMMISSION OF ANY STATE IN RELIANCE UPON AN
EXEMPTION FROM REGISTRATION UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE
“SECURITIES ACT”), OR ANY APPLICABLE STATE SECURITIES LAWS AND, ACCORDINGLY, MAY
NOT BE OFFERED, SOLD, TRANSFERRED, ASSIGNED, PLEDGED OR HYPOTHECATED EXCEPT
PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT OR
PURSUANT TO AN AVAILABLE EXEMPTION FROM, OR IN A TRANSACTION NOT SUBJECT TO, THE
REGISTRATION REQUIREMENTS OF THE SECURITIES ACT AND IN COMPLIANCE WITH
APPLICABLE STATE SECURITIES LAWS OR BLUE SKY LAWS. THESE SECURITIES 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.
                 Certificates evidencing the Registrable Securities shall not be
required to contain such legend or any other legend (i) while a registration
statement (including the Registration Statement) covering the Registrable
Securities is effective under the Securities Act and a prospectus meeting the
requirements of Section 10 of the Securities Act is available with respect to
such Registrable Securities, (ii) following any sale of such Registrable
Securities pursuant to Rule 144 if the holder provides the Company with a legal
opinion (and the documents upon which the legal opinion is based) reasonably
acceptable to the Company to the effect that the Registrable Securities can be
sold under Rule 144, (iii) if the Registrable Securities are eligible for sale
under Rule 144(k), or (iv) if the holder provides the Company with a legal
opinion (and the documents upon which the legal opinion is based) reasonably
acceptable to the Company to the effect that the legend is not required under
applicable requirements of the Securities Act (including controlling judicial
interpretations and pronouncements issued by the Staff of the SEC). Following
the Effective Date and provided the registration statement referred to in clause
(i) above is then in effect, or at such earlier time as a legend is no longer
required for certain Registrable Securities, the Company will no later than
three Trading Days following the delivery by a Purchaser to the Company or the
Transfer Agent (if delivery is made to the Transfer Agent a copy shall be
contemporaneously delivered to the Company) of (i) a legended certificate
representing such Registrable Securities (and, in the case of a requested
transfer, endorsed or with stock powers attached, signatures guaranteed, and
otherwise in form necessary to affect transfer), and (ii) an opinion of counsel
to the extent required by Section 10.1(a), deliver or cause to be delivered to
such Purchaser a certificate representing such Registrable Securities 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 10.1(b).
                 (c) The Company will not object to and shall permit (except as
prohibited by law) a Purchaser to pledge or grant a security interest in some or
all of the Registrable Securities in connection with a bona fide margin
agreement with a registered broker-dealer or grant a security interest in some
or all of the Registrable Securities to a financial institution that is an
“accredited investor” as defined in Rule 501(a) under the Securities Act and who
agrees to be bound by the provisions of this Agreement, and if required under
the terms of such arrangement, the Company will not object to and shall permit
(except as prohibited by law) such Purchaser to transfer

 

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pledged or secured Registrable Securities to the pledgees or secured parties.
Except as required by law, such a pledge or transfer would not be subject to
approval of the Company, no legal opinion of the pledgee, secured party or
pledgor shall be required in connection therewith (but such legal opinion shall
be required in connection with a subsequent transfer or foreclosure following
default by the Purchaser transferee of the pledge), and no notice shall be
required of such pledge. Each of the Purchasers acknowledges that the Company
shall not be responsible for any pledges relating to, or the grant of any
security interest in, any of the Registrable Securities or for any agreement,
understanding or arrangement between any Purchaser and its pledgee or secured
party. At the appropriate Purchaser’s expense, the Company will execute and
deliver such reasonable documentation as a pledgee or secured party of
Registrable Securities may reasonably request in connection with a pledge or
transfer of the Registrable Securities, including the preparation and filing of
any required prospectus supplement under Rule 424(b)(3) of the Securities Act or
other applicable provision of the Securities Act to appropriately amend the list
of Selling Stockholders thereunder. Provided that the Company is in compliance
with the terms of this Section 10.1(c), the Company’s indemnification
obligations pursuant to Section 9.4 shall not extend to any Proceeding or Losses
arising out of or related to this Section 10.1(c).
          10.2 Registration Questionnaire. Each of the Purchasers will complete
or cause to be completed the Registration Statement Questionnaire attached
hereto as Exhibit B (or has otherwise provided in a written form the information
requested in such Registration Statement Questionnaire) for use in preparation
of the Registration Statement, and the information contained in such completed
Registration Statement Questionnaire (or such other form provided by the
Purchaser) will be true and correct on the effective date of the Registration
Statement. Each of the Purchasers covenants that, upon the Company’s reasonable
written request, it will promptly notify the Company of any changes in such
information or other information as the Company may reasonably request in
connection with any registration referred to in Section 9.
          10.3 No Sale of Registrable Securities. Each of the Purchasers hereby,
severally but not jointly, covenants with the Company not to make any sale of
the Registrable Securities without (i) complying with the provisions of this
Agreement and (ii) satisfying the requirements of the Securities Act and the
rules and regulations promulgated thereunder, including, without limitation,
causing the prospectus delivery requirement under the Securities Act to be
satisfied if the Purchaser is notified by the Company pursuant to Section 9.2(j)
hereof that the conditions specified in Rule 172(c) of the Securities Act were
not satisfied and, as a result thereof, the Purchasers are required to deliver a
Prospectus in connection with any disposition of Registrable Securities. Each of
the Purchasers acknowledges that there may occasionally be times when the
Company determines that, subject to the limitations of Section 9.1, it must
suspend the use of the prospectus forming a part of the Registration Statement
until such time as an amendment to the Registration Statement has been filed by
the Company and declared effective by the SEC, an appropriate report has been
filed by the Company with the SEC pursuant to the Exchange Act or until the
Company has amended or supplemented such prospectus. Each of the Purchasers
hereby, severally but not jointly, covenants that it will not sell any
Registrable Securities pursuant to the Registration Statement during the period
commencing at the time at which the Company gives each Purchaser written notice
of any suspension of the use of the Registration Statement and ending at the
time the Company gives each Purchaser written notice that each Purchaser may
thereafter effect sales pursuant to the Registration Statement.

 

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     11. DEFAULTS. The occurrence of any one or more of the following events
shall constitute a “Default” or an “Event of Default”:
          11.1 The Company fails to pay any of the principal, interest or any
other amounts payable under this Agreement or any of the Convertible Notes when
and as the same becomes due and payable;
          11.2 The Company files any petition or action for relief under any
bankruptcy, reorganization, insolvency or moratorium law or any other law for
the relief of, or relating to, Company, now or hereafter in effect, or seeks the
appointment of a custodian, receiver, trustee (or other similar official) of the
Company or all or any substantial portion of the Company’s assets, or makes any
assignment for the benefit of creditors or takes any action in furtherance of
any of the foregoing, or fails to generally pay its debts as they become due;
          11.3 An involuntary petition is filed, or any proceeding or case is
commenced, against the Company (unless such proceeding or case is dismissed or
discharged within ninety (90) days of the filing or commencement thereof) under
any bankruptcy, reorganization, arrangement, insolvency, adjustment of debt,
liquidation or moratorium statute now or hereafter in effect, or a custodian,
receiver, trustee, assignee for the benefit of creditors (or other similar
official) is applied for, appointed for the Company or to take possession,
custody or control of any property of the Company, or an order for relief is
entered against the Company in any of the foregoing; or
          11.4 Any representation or warranty made by the Company under this
Agreement shall have been false or misleading in any material respect when made
or deemed made.
     12. REMEDIES.
          12.1 Upon the occurrence and during the continuance of an Event of
Default hereunder, the Purchasers may, without notice or demand upon the
Company, do any or all of the following:
                 (a) Declare all unpaid principal and accrued interest owing
under the Convertible Notes held by a Purchaser, and, in the case of an Event of
Default pursuant to Section 11.2 or 11.3 above, automatically, to be immediately
due, payable and collectible by a Purchaser pursuant to applicable law;
                 (b) Declare any and all unpaid principal and accrued interest
due under the Convertible Notes held by a Purchaser to thereafter bear interest
at the maximum rate set forth in Section 2.4 hereof;
                 (c) Terminate any and all of such Purchaser’s obligations to
purchase any additional Convertible Notes hereunder; and
                 (d) Exercise any and all rights and remedies it may have under
this Agreement, under the Convertible Notes held by any Purchaser or under
applicable law.
          12.2 All of the foregoing rights and remedies shall be cumulative and
not exclusive. The failure to exercise all or any rights, remedies, powers or
privileges hereunder, under the Convertible Notes or under applicable law, in
any instance shall not constitute a waiver thereof in that or any other
instance.
     13. WAIVERS, AMENDMENTS AND OTHER PROVISIONS.
          13.1 Entire Agreement; Amendments; Invalidity. This Agreement and the
Convertible Notes constitute the entire agreement and understanding of the
parties, and supercedes and

 

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replaces in their entirety any prior discussions or agreements, all of which are
merged herein and therein. None of the terms of this Agreement or any
Convertible Note may be amended or otherwise modified except by an instrument
executed by the Company and each Purchaser. If any term of this Agreement or any
Convertible Notes shall be held to be invalid, illegal or unenforceable, the
validity of all other terms hereof shall in no way be affected thereby, and this
Agreement and the Convertible Notes shall be construed and be enforceable as if
such invalid, illegal or unenforceable term had not been included herein.
          13.2 Expenses. The Company agrees to and shall pay to the Purchasers
on demand, any and all expenses, including, without limitation, reasonable
attorney’s fees and disbursements, incurred or paid by the Purchasers in
connection with the collection on or enforcement of amounts outstanding
hereunder, for protecting, preserving or enforcing the Purchaser’s rights or
remedies (including fees, costs and expenses relating to any proceedings with
respect to the bankruptcy, reorganization, insolvency, readjustment of debt,
dissolution or liquidation of the Company).
          13.3 Nonliability of the Purchasers; Several Obligation. The
relationship between the Company, on the one hand, and the Purchasers, on the
other hand, shall be solely that of Company and the Purchasers. The Purchasers
shall have no fiduciary responsibilities to the Company as holders of
Convertible Notes.
          13.4 Governing Law; Consent to Jurisdiction. THIS AGREEMENT AND THE
CONVERTIBLE NOTES ARE INTENDED TO TAKE EFFECT AS A SEALED INSTRUMENT AND SHALL
BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAWS (AND NOT THE LAWS OF
CONFLICT) OF THE COMMONWEALTH OF MASSACHUSETTS. THE COMPANY HEREBY IRREVOCABLY
SUBMITS TO THE JURISDICTION OF THE COURTS OF THE COMMONWEALTH OF MASSACHUSETTS
AND THE UNITED STATES DISTRICT COURT FOR THE COMMONWEALTH OF MASSACHUSETTS FOR
THE PURPOSE OF ANY SUIT, ACTION OR OTHER PROCEEDING ARISING OUT OF OR RELATING
TO THIS AGREEMENT AND THE CONVERTIBLE NOTES AND THE COMPANY HEREBY IRREVOCABLY
AGREES THAT ALL CLAIMS IN RESPECT OF SUCH ACTION OR PROCEEDING MAY BE HEARD AND
DETERMINED IN ANY SUCH COURT AND IRREVOCABLY WAIVES ANY OBJECTION IT MAY NOW OR
HEREAFTER HAVE AS TO THE VENUE OF ANY SUCH SUIT, ACTION OR PROCEEDING BROUGHT IN
ANY SUCH COURT OR THAT SUCH COURT IS AN INCONVENIENT FORUM. NOTHING HEREIN SHALL
LIMIT THE RIGHT OF THE PURCHASERS TO BRING PROCEEDINGS AGAINST THE COMPANY IN
THE COURTS OF ANY OTHER JURISDICTION. ANY JUDICIAL PROCEEDING BY THE COMPANY
AGAINST ANY PURCHASER OR ANY AFFILIATE OF ANY PURCHASER UNDER OR INVOLVING,
DIRECTLY OR INDIRECTLY, ANY MATTER IN ANY WAY ARISING OUT OF, RELATED TO, OR
CONNECTED WITH THIS AGREEMENT OR ANY CONVERTIBLE NOTE SHALL BE BROUGHT ONLY IN A
COURT IN THE COMMONWEALTH OF MASSACHUSETTS.
          13.5 Waiver of Jury Trial and Certain Damages. THE COMPANY, EACH
PURCHASER WAIVES ITS RIGHT TO A JURY TRIAL WITH RESPECT TO ANY ACTION OR CLAIM
ARISING OUT OF ANY DISPUTE IN CONNECTION WITH THIS AGREEMENT OR ANY CONVERTIBLE
NOTE, ANY RIGHTS OR OBLIGATIONS HEREUNDER OR THEREUNDER OR THE PERFORMANCE OF

 

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ANY SUCH RIGHTS OR OBLIGATIONS. Except as prohibited by law, the Company waives
any right which it may have to claim or recover in any litigation referred to in
the preceding sentence any special, exemplary, punitive or consequential damages
or any damages other than, or in addition to, actual damages. The Company
(i) certifies that neither the Purchaser nor any representative, agent or
attorney of the Purchaser has represented, expressly or otherwise, that the
Purchaser would not, in the event of litigation, seek to enforce the foregoing
waivers and (ii) acknowledges that, in entering into this Agreement and the
Convertible Notes, the Purchasers are relying upon, among other things, the
foregoing waivers and certifications.
          13.6 Successors and Assigns. This Agreement and the other Loan
Documents and all obligations of the Company hereunder and thereunder shall be
binding upon the successors and assigns of the Company, and shall, together with
the rights and remedies of the Purchasers hereunder, inure to the benefit of the
Purchasers, any future holder of this Agreement or any other Loan Document and
their respective successors and assigns, provided, however, the Company may not
transfer or assign its rights or obligations hereunder or thereunder without the
express written consent of each Purchaser, and any purported transfer or
assignment by the Company without the approval of each Purchaser shall be null
and void. Each Purchaser may assign, transfer, participate or endorse its rights
under this Agreement or any of the other Loan Documents without the consent or
approval of the Company, and all such rights shall inure to the Purchasers’
successors and assigns; provided, that such transferee agrees in writing to be
bound by all of the terms of this Agreement. No sales of participations, other
sales, assignments, transfers, endorsements or other dispositions of any rights
hereunder or thereunder or any portion hereof or thereof or interest herein or
therein shall in any manner affect the obligations of the Company under this
Agreement or the other Loan Documents. The Company agrees that in connection
with any such assignment, to execute and deliver such additional documents or
agreements, including, without limitation, new Convertible Notes, as may be
reasonably requested.
          13.7 Counterparts. This Agreement may be executed in any number of
separate counterparts, all of which, when taken together, shall constitute one
and the same instrument, notwithstanding the fact that all parties did not sign
the same counterpart.
          13.8 No Reliance. Each of the Purchasers hereby acknowledge (i) that
Wilmer Cutler Pickering Hale and Dorr LLP has served as counsel solely to the
Company in connection with entering into this Agreement and the Convertible
Notes and the transactions contemplated hereby and thereby and not as counsel to
any of the Purchasers, and (ii) that each Purchaser (a) has sought the advice of
his own legal counsel and has not relied upon Wilmer Cutler Pickering Hale and
Dorr LLP, (b) has had an opportunity to fully discuss and review the terms of
this Agreement and the Convertible Notes and the transactions contemplated
hereby and thereby with such Purchaser’s counsel, and (c) understands the
contents herein and freely and voluntarily assents to all of the terms and
conditions hereof and the transactions contemplated hereby.
          13.9 Independent Nature of Purchaser’s Obligations and Rights. The
obligations of each Purchaser under this Agreement are several and not joint
with the obligations of any other Purchaser, and no Purchaser shall be
responsible in any way for the performance of the obligations of any other
Purchaser under this Agreement. Nothing contained herein, and no action taken by
any Purchaser pursuant hereto or thereto, shall be deemed to constitute the
Purchaser 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

 

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such obligations or the transactions contemplated hereby and the Company
acknowledges that the Purchasers are not acting in concert or as a group with
respect to such obligations or the transactions contemplated by hereby. Each of
the Purchasers confirms that it has independently participated in the
negotiation of the transaction contemplated hereby with the advice of its own
counsel and advisors. Each of the Purchasers shall be entitled to independently
protect and enforce its rights, including, without limitation, the rights
arising out of this Agreement, and it shall not be necessary for any other
Purchaser to be joined as an additional party in any proceeding for such
purpose.
[Remainder of Page Intentionally Left Blank]

 

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     IN WITNESS WHEREOF, this Agreement has been duly executed as an instrument
under seal as of the date first set forth above.

              COMPANY:   PURCHASER:
 
            ALSERES PHARMACEUTICALS, INC.   ROBERT GIPSON
 
           
By:
  Kenneth L. Rice, Jr.   Signature:   Robert L. Gipson
 
           
 
            Printed Name: Kenneth L. Rice, Jr.   Address:   c/o Ingalls & Snyder
LLC Title: EVP & CFO       61 Broadway, NY, NY 10006
 
           
Address:
  85 Main Street        
 
  Hopkinton, Massachusetts 01748        
 
                    AMENDED NOTE PURCHASERS:
 
                    ROBERT GIPSON
 
           
 
      Signature:   Robert L. Gipson
 
           
 
           
 
      Address:   c/o Ingalls & Snyder LLC
 
          61 Broadway, NY, NY 10006
 
                    THOMAS GIPSON
 
           
 
      Signature:   Thomas O. Boucher Jr.
 
           
 
           
 
      Address:   By Thomas O. Boucher Jr.
 
          His Attorney In Fact
 
          c/o Ingalls & Snyder LLC
 
          61 Broadway, NY, NY 10006

 

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                      ARTHUR KOENIG
 
           
 
      Signature:   Thomas O. Boucher Jr.
 
           
 
           
 
      Address:   By Thomas O. Boucher Jr.
 
          His Attorney In Fact
 
          c/o Gipson Ingalls & Snyder LLC
 
          61 Broadway, NY, NY 10006

 

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            HIGHBRIDGE INTERNATIONAL LLC
      By:   Highbridge Capital Management, LLC    

            Its Trading Manager

      By:   /s/ Adam J. Chill    

            Printed Name: Adam J. Chill

Title: Managing Director

INGALLS & SNYDER VALUE PARTNERS, L.P.

      By:   Thomas O. Boucher Jr.                    

            By Thomas O. Boucher Jr.
General Partner
c/o Ingalls & Snyder LLC
61 Broadway, NY, NY 10006
                       

Schedule 2.1

      Purchaser Name   Commitment Percentage
Robert Gipson
  100%

 

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EXHIBIT A
THIS CONVERTIBLE PROMISSORY NOTE AND THE SECURITIES ISSUABLE UPON CONVERSION OF
THIS NOTE HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED
(THE “ACT”), NOR UNDER ANY STATE SECURITIES LAWS AND MAY NOT BE PLEDGED, SOLD,
ASSIGNED OR OTHERWISE TRANSFERRED UNTIL A (1) REGISTRATION STATEMENT UNDER THE
ACT AND ANY APPLICABLE STATE SECURITIES LAW HAS BECOME EFFECTIVE WITH RESPECT
THERETO, OR (2) RECEIPT BY THE COMPANY OF AN OPINION OF COUNSEL TO THE COMPANY
TO THE EFFECT THAT REGISTRATION UNDER THE ACT OR APPLICABLE STATE SECURITIES LAW
IS NOT REQUIRED IN CONNECTION WITH THE PROPOSED TRANSFER.
CONVERTIBLE PROMISSORY NOTE

     
$[                    ]
          , 2008
 
   
 
  Hopkinton, Massachusetts

     FOR VALUE RECEIVED, on the Maturity Date, Alseres Pharmaceuticals, Inc., a
Delaware corporation having a principal place of business at 85 Main Street,
Hopkinton, Massachusetts 01748 (the “Company”), hereby unconditionally promises
to pay to [Purchaser] (the “Purchaser”), or order, at [        ], or such other
place as Purchasers or any holder hereof may from time to time designate, the
principal sum of [        ] Dollars [($        )], in United States Dollars and
in immediately available funds as provided in the Convertible Promissory Note
Purchase Agreement of even date among the Company and the Purchasers (the
“Agreement”), together with interest on the unpaid principal amount hereof from
time to time outstanding at the rate and on the dates set forth in the
Agreement. This Convertible Promissory Note is one of a series of Convertible
Promissory Notes issued pursuant to the Agreement and each such Convertible
Promissory Note shall rank pari passu in right of repayment to such other
Convertible Promissory Note.
     This Convertible Promissory Note is issued pursuant to, and is entitled to
the benefits of, the Agreement, as it may be amended from time to time.
Reference is hereby made thereto for a statement of the terms and conditions
under which this Convertible Promissory Note may be converted, prepaid or its
maturity date accelerated. This Convertible Promissory Note is convertible at
the election of the Purchaser pursuant to Sections 4.1 and 4.2 of the Agreement.
Capitalized terms used herein and not otherwise defined herein are used with the
meanings attributed to them in the Agreement.
     No delay or omission on the part of the Purchaser in exercising any right
hereunder shall operate as a waiver of such right or of any other right of
Purchaser, nor shall any delay, omission or waiver on any one occasion be deemed
a bar to or waiver of the same or any other right on any future occasion. The
Company and every endorser or guarantor of this Convertible Promissory Note
regardless of the time, order or place of signing waives presentment, demand,
protest and notices of every kind and assents to any extension or postponement
of the time of payment or any other indulgence, and to the addition or release
of any other party or person primarily or secondarily liable.

 

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     The terms and provisions of this Convertible Promissory Note may be
excluded, modified, or amended only as set forth in the Agreement. This
Convertible Promissory Note shall be binding upon the successors and assigns of
the Company and inure to the benefit of Purchaser and its successors, endorsees
and assigns as set forth in the Agreement. If any term or provision of this
Convertible Promissory Note shall be held to be invalid or unenforceable, in
whole or in part in any jurisdiction, then such invalidity or unenforceability
shall only effect such term or provision, and shall not effect such term or
provision in any other jurisdiction or any other term or provision of this
Convertible Promissory Note.
     The Company hereby waives its right to a jury trial with respect to any
action or claim arising out of any dispute in connection with this Convertible
Promissory Note or any of the other Loan Documents, any rights or obligations
hereunder or thereunder or the performance of such rights and obligations.
     All rights and obligations hereunder shall be governed by the laws of the
Commonwealth of Massachusetts (without giving effect to principles of conflicts
or choice of laws) and this Convertible Promissory Note shall be deemed to be
made under seal.

                  Alseres Pharmaceuticals, Inc.    
 
           
 
  By        
 
           
 
           
 
  Name:        
 
           
 
           
 
  Title:        
 
           

 

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EXHIBIT B
ALSERES PHARMACEUTICALS, INC.
REGISTRATION STATEMENT QUESTIONNAIRE
In connection with the Registration Statement, please provide us with the
following information regarding the Purchaser.

     
1.
  Please state your organization’s name exactly as it should appear in the
Registration Statement:
 
   
 
   
 
   
 
   
 
  Except as set forth below, your organization does not hold any equity
securities of the Company on behalf of another person or entity.
 
   
 
  State any exceptions here:
 
   
 
   
 
   
 
   
 
  If the Purchaser is not a natural person, please identify the natural person
or persons who will have voting and investment control over the Securities owned
by the Purchaser:
 
   
 
   
 
   

         
2.
  Address of your organization:    
 
       
 
       
 
       
 
       
 
       
 
       
 
       
 
  Telephone:    
 
       
 
       
 
  Fax:    

 

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  Contact Person:    
 
       
 
  Email:    
 
        3.   Have you or your organization had any position, office or other
material relationship within the past three years with the Company or its
affiliates? (Include any relationships involving you or any of your affiliates,
officers, directors, or principal equity holders (5% or more) that has held any
position or office or has had any other material relationship with the Company
(or its predecessors or affiliates) during the past three years.)

                 
 
  Yes       No    
 
               

If yes, please indicate the nature of any such relationship below:

 

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4.
  Are you the beneficial or registered owner of any other securities of the
Company? (Include any equity securities that you beneficially own or have a
right to acquire within 60 days after the date hereof, and as to which you have
sole voting power, shared voting power, sole investment power or shared
investment power.)

                 
 
  Yes       No    
 
               
 
                If yes, please describe the nature and amount of such ownership
as of a recent date.

     
5.
  Except as set forth below, you wish that all the shares of the Company’s
common stock beneficially owned by you or that you have the right to acquire
from the Company be offered for your account in the Registration Statement.
 
   
 
  State any exceptions here:
 
   
6.
  Do you intend to distribute the Registrable Securities in accordance with the
“Plan of Distribution” section set forth in the Registration Statement?

                 
 
  Yes       No    
 
               
 
                If yes, please describe the nature and amount of such
arrangements.

     
7.
  NASD Matters
 
   
(a)
  State below whether (i) you or any associate or affiliate of yours are a
member of the NASD, a controlling shareholder of an NASD member, a person
associated with a member, a direct or indirect affiliate of a member, or an
underwriter or related person with respect to the proposed offering; (ii) you or
any associate or affiliate of yours owns any stock or other securities of any
NASD member not purchased in the open market; or (iii) you or any associate or
affiliate of yours has made any outstanding subordinated loans to any NASD
member. If you are a general or limited partnership, a no answer asserts that no
such relationship exists for you as well as for each of your general or limited
partners.

                 
Yes:
      No:        
 
               

If “yes,” please identify the NASD member and describe your relationship,
including, in the case of a general or limited partner, the name of the partner:
If you answer “no” to Question 7(a), you need not respond to Question 7(b).

 

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(b) State below whether you or any associate or affiliate of yours has been an
underwriter, or a controlling person or member of any investment banking or
brokerage firm which has been or might be an underwriter for securities of the
Corporation or any affiliate thereof including, but not limited to, the common
stock now being registered.

                 
Yes:
      No:        
 
               

If “yes,” please identify the NASD member and describe your relationship,
including, in the case of a general or limited partner, the name of the partner.

8.   Selling Stockholder Affiliations

(a) Is the Selling Stockholder a registered broker-dealer?

                 
Yes:
      No:        
 
               

(b) Is the Selling Stockholder an affiliate of a registered broker-dealer(s)?

                 
Yes:
      No:        
 
               

(c) If the answer to Item (8)(b) is yes, identify the registered
broker-dealer(s) and describe the nature of the affiliation(s): _______________
(d) If the answer to Item (6)(b) is yes, did the Selling Stockholder acquire the
Registrable Securities in the ordinary course of business (if not, please
explain)?
(e) If the answer to Item (8)(b) is yes, did the Selling Stockholder, at the
time of purchase of the Registrable Securities, have any agreements, plans or
understandings, directly or indirectly, with any person to distribute the
Registrable Securities (if yes, please explain)?

 

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ACKNOWLEDGEMENT
The undersigned hereby agrees to notify the Company promptly of any changes in
the foregoing information which should be made as a result of any developments,
including the passage of time. The undersigned also agrees to provide the
Company and the Company’s counsel any and all such further information regarding
the undersigned promptly upon request in connection with the preparation,
filing, amending, and supplementing of the Registration Statement (or any
prospectus contained therein). The undersigned hereby consents to the use of all
such information in the Registration Statement.
The undersigned understands and acknowledges that the Company will rely on the
information set forth herein for purposes of the preparation and filing of the
Registration Statement. The undersigned understands that the undersigned may be
subject to serious civil and criminal liabilities if the Registration Statement,
when it becomes effective, either contains an untrue statement of a material
fact or omits to state a material fact required to be stated in the Registration
Statement or necessary to make the statements in the Registration Statement not
misleading. The undersigned represents and warrants that all information it
provides to the Company and its counsel is currently accurate and complete and
will be accurate and complete at the time the Registration Statement becomes
effective and at all times subsequent thereto, and agrees during the
Effectiveness Period and any additional period in which the undersigned is
making sales of Shares under and pursuant to the Registration Statement, and
agrees during such periods to notify the Company immediately of any misstatement
of a material fact in the Registration Statement, and of the omission of any
material fact necessary to make the statements contained therein not misleading.

         
Dated:
       
 
       

     
 
   
 
   
Name
   
 
   
 
   
 
   
Signature
   
 
   
 
   
 
   
Name and Title of Signatory