Exhibit 10.1

SECURITIES PURCHASE AGREEMENT

THIS SECURITIES PURCHASE AGREEMENT (the “Agreement”), dated as of June 15, 2016,
by and among CareDx, Inc., a Delaware corporation with headquarters located at
3260 Bayshore Boulevard, Brisbane, California 94005 (the “Company”), and the
investors listed on the Schedule of Investors attached hereto as Exhibit A
(individually, an “Investor” and collectively, the “Investors”).

BACKGROUND

A. Each Investor, severally and not jointly, wishes to purchase, and the Company
wishes to sell, upon the terms and conditions stated in this Agreement, the
number of units (“Units”) set forth opposite such Investor’s name on Exhibit A
hereto, each such Unit is comprised of the following securities of the Company:
(i) one share (the “Common Shares”) of common stock of the Company, par value
$0.001 per share (the “Common Stock”); (ii) five shares (the “Preferred Shares”)
Series A Mandatorily Convertible Preferred Stock of the Company, par value
$0.001 per share that is mandatorily convertible upon receipt by the Company of
Stockholder Approval into Common Stock in accordance with the terms and
conditions of the Certificate of Designation in the filed on April 13, 2016 (the
“Certificate of Designation”); and (iii) three warrants, in substantially the
form attached hereto as Exhibit E, each to purchase one share of Common Stock
(the “Warrants”), to acquire up to that number of additional shares of Common
Stock upon exercise of such Warrants set forth opposite such Investor’s name on
Exhibit A (the shares of Common Stock issuable upon mandatory conversion of the
Preferred Shares, collectively, the “Underlying Preferred Shares” and the shares
of Common Stock issuable upon exercise of or otherwise pursuant to the Warrants,
collectively, the “Warrant Shares”).

B. The Company and each Investor are executing and delivering this Agreement in
reliance upon the exemption from registration afforded by Section 4(a)(2) of the
Securities Act of 1933, as amended (the “Securities Act”), and Rule 506(b) of
Regulation D (“Regulation D”) as promulgated by the United States Securities and
Exchange Commission (the “SEC”) under the Securities Act.

C. The Common Shares, Preferred Shares, Underlying Preferred Shares, the
Warrants and the Warrant Shares issued to the Investors pursuant to this
Agreement are collectively referred to herein as the “Securities.”

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

ARTICLE I

DEFINITIONS

1.1 Definitions. In addition to the terms defined elsewhere in this Agreement,
the following terms have the meanings indicated:

“Additional Filing Date” means the later of (i) the date sixty (60) days after
the date substantially all of the Registrable Securities registered under the
immediately preceding Registration Statement are sold and (ii) the date six
(6) months from the Effective Date of the immediately preceding Registration
Statement, or, if such date is not a Business Day, the next date that is a
Business Day.

“Additional Registration Statement” has the meaning set forth in Section 6.1(a).

“Additional Required Effectiveness Date” means the date which is the earliest of
(i) if the Registration Statement does not become subject to review by the SEC,
(a) sixty (60) days after the Additional Filing Date or (b) five (5) Trading
Days after the Company receives notification from the SEC that the Additional
Registration Statement will not become subject to review and the Company fails
to request to accelerate the effectiveness of the Registration Statement, or
(ii) if the Additional Registration Statement becomes subject to review by the
SEC, ninety (90) days after the Additional Filing Date, or, if such date is not
a Business Day, the next date that is a Business Day.

“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.

“Agreement” has the meaning set forth in the Preamble.

“Business Day” means any day other than Saturday, Sunday or other day on which
commercial banks in the City of New York are authorized or required by law to
remain closed.

“Closing” means the closing of the purchase and sale of the Securities pursuant
to Section 2.1.

“Closing Date” means the date and time of the Closing and shall be 11:00 a.m.,
New York City time, on June 15, 2016 or such earlier date and time as all of the
conditions specified in Article 5 have been satisfied or waived.

“Closing Price” means, for any date, the closing price per share of the Common
Stock for such date (or, if such date is not a Trading Day, the nearest
preceding date that is a Trading Day) on the primary Eligible Market or exchange
or quotation system on which the Common Stock is then listed or quoted.

“Company” has the meaning set forth in the Preamble.

“Company Counsel” means Wilson Sonsini Goodrich & Rosati, Professional
Corporation, counsel to the Company.

 

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“Common Shares” has the meaning set forth in the Preamble.

“Common Stock” has the meaning set forth in the Preamble.

“Common Stock Equivalents” means, collectively, Options and Convertible
Securities.

“Contingent Obligation” has the meaning set forth in Section 3.1(cc).

“Convertible Securities” means any stock or securities (other than Options)
convertible into or exercisable or exchangeable for Common Stock.

“Disclosure Materials” has the meaning set forth in Section 3.1(g).

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

“Effectiveness Period” has the meaning set forth in Section 5.1(b).

“Eligible Market” means any of The New York Stock Exchange, Inc., The NYSE MKT
LLC, The NASDAQ Global Select Market, the NASDAQ Global Market or The NASDAQ
Capital Market.

“Enforceability Exceptions” means (i) applicable bankruptcy, insolvency,
reorganization, moratorium or other laws of general application relating to or
affecting the enforcement of creditors rights generally, and (ii) the effect of
rules of law governing the availability of specific performance, injunctive
relief and other equitable remedies.

“Environmental Laws” has the meaning set forth in Section 3.1(w).

“Event” has the meaning set forth in Section 5.1(d).

“Event Payments” has the meaning set forth in Section 5.1(d).

“Exchange Act” means the Securities Exchange Act of 1934, as amended.

“Excluded Events” has the meaning set forth in Section 5.1(d)(ii).

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

“GAAP” has the meaning set forth in Section 3.1(g).

“Hazardous Materials” has the meaning set forth in Section 3.1(w).

“Indebtedness” has the meaning set forth in Section 3.1(t).

“Indemnified Party” has the meaning set forth in Section 5.4(c).

“Indemnifying Party” has the meaning set forth in Section 5.4(c).

 

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“Initial Filing Date” means 45 days after the Closing Date or, if such date is
not a Business Day, the next date that is a Business Day.

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

“Initial Required Effectiveness Date” means the date which is the earliest of
(i) if the Registration Statement does not become subject to a full review by
the SEC, (a) ninety (90) days after the Closing Date or (b) five (5) Trading
Days after the Company receives notification from the SEC that the Registration
Statement will not become subject to review and the Company fails to request to
accelerate the effectiveness of the Registration Statement, or (ii) if the
Registration Statement becomes subject to a full review by the SEC, one hundred
and twenty (120) days after the Closing Date, or, if such date is not a Business
Day, the next date that is a Business Day.

“Intellectual Property Rights” has the meaning set forth in Section 3.1(l).

“Lien” means any lien, charge, claim, security interest, encumbrance, right of
first refusal or other restriction.

“Losses” means any and all losses, claims, damages, liabilities, settlement
costs and expenses, including, without limitation reasonable attorneys’ fees.

“Material Adverse Effect” means (i) a material adverse effect on the condition
(financial or otherwise), results of operations, assets, business or prospects
of the Company and the Subsidiaries, taken as a whole, or (ii) a material and
adverse impairment of the Company’s ability to perform its obligations under any
of the Transaction Documents, provided that none of the following alone shall be
deemed, in and of itself, to constitute a Material Adverse Effect: (i) a change
in the market price or trading volume of the Common Stock or (ii) changes in
general economic conditions or changes affecting the industry in which the
Company operates general (as opposed to Company-specific changes) so long as
such changes do not have a disproportionate effect on the Company and its
Subsidiaries, taken as a whole.

“Material Permits” has the meaning set forth in Section 3.1(n).

“Preferred Shares” has the meaning set forth in the Preamble.

“Options” means any outstanding rights, warrants or options to subscribe for or
purchase Common Stock or Convertible Securities.

“Person” has the meaning set forth in Section 3.1(t).

“Pledge” has the meaning set forth in Section 4.1(c).

“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.

 

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“Prospectus” means the prospectus included in the Registration Statement
(including, without limitation, a prospectus that includes any information
previously omitted from a prospectus filed as part of an effective registration
statement in reliance upon Rule 430A promulgated under the Securities Act), as
amended or supplemented by any prospectus supplement, with respect to the terms
of the offering of any portion of the Registrable Securities covered by 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.

“Registrable Securities” means the Common Shares, the Underlying Preferred
Shares and the Warrant Shares issued or issuable pursuant to the Transaction
Documents, without taking into account any securities issued or issuable upon
any stock split, dividend or other distribution, recapitalization or similar
event with respect to the foregoing.

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

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

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

“Schedules” has the meaning set forth in Section 3.1.

“SEC” has the meaning set forth in the Preamble.

“Securities” has the meaning set forth in the Preamble.

“Securities Act” has the meaning set forth in the Preamble.

“SEC Reports” has the meaning set forth in Section 3.1(g).

“Stockholder Approval” has the meaning set forth in Certificate of Designation.

“Subsidiary” means any Significant Subsidiary (which for purposes of this
Agreement has the meaning ascribed to such term in Regulation S-X under the
Exchange Act) of the Company.

“Trading Day” means (a) any day on which the Common Stock is listed or quoted
and traded on its primary Trading Market, or (b) if the Common Stock is not then
listed or quoted and traded on its primary Trading Market, then a day on which
trading of the Common Stock occurs on an Eligible Market, or (c) if the Common
Stock is not listed or quoted as set forth in clauses (a) or (b) hereof, any
Business Day.

 

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“Trading Market” means The NASDAQ Global Select Market or any other Eligible
Market, or any national securities exchange, market or trading or quotation
facility on which the Common Stock is then listed or quoted.

“Transaction Documents” means this Agreement, the schedules and exhibits
attached hereto, the Warrants and the Transfer Agent Instructions.

“Transfer Agent” means ComputerShare Trust Company, N.A. or any successor
transfer agent for the Company.

“Transfer Agent Instructions” means, with respect to the Company, the
Irrevocable Transfer Agent Instructions, in the form of Exhibit D, executed by
the Company and delivered to and acknowledged in writing by the Transfer Agent.

“Underlying Preferred Shares” has the meaning set forth in the Preamble.

“Units” has the meaning set forth in the Preamble.

“Warrants” has the meaning set forth in the Preamble.

“Warrant Shares” has the meaning set forth in the Preamble.

ARTICLE II

PURCHASE AND SALE

2.1 Closing. Subject to the terms and conditions set forth in this Agreement, at
the Closing the Company shall issue and sell to each Investor, and each Investor
shall, severally and not jointly, purchase from the Company, the number of Units
set forth opposite such Investor’s name on Exhibit A hereto under the heading
“Units” for the price set forth opposite such Investor’s name on Exhibit A
hereto under the heading “Purchase Price”. The date and time of the Closing and
shall be 11:00 a.m., New York City time, on the Closing Date. The Closing shall
take place at the offices of the Company Counsel.

2.2 Closing Deliveries.

(a) At the Closing, the Company shall deliver or cause to be delivered to each
Investor the following:

(i) one or more stock certificates (or copies thereof provided by the Transfer
Agent), free and clear of all restrictive and other legends (except as expressly
provided in Section 4.1(b) hereof), evidencing such number of Common Shares set
forth opposite such Investor’s name on Exhibit A hereto under the heading
“Common Shares”, registered in the name of such Investor (or its designee);

 

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(ii) one or more stock certificates (or copies thereof provided by the Transfer
Agent), free and clear of all restrictive and other legends (except as expressly
provided in Section 4.1(b) hereof), evidencing such number of Preferred Shares
set forth opposite such Investor’s name on Exhibit A hereto under the heading
“Preferred Shares”, registered in the name of such Investor (or its designee);

(iii) a Warrant, free and clear of all restrictive and other legends (except as
expressly provided in Section 4.1(b) hereof), pursuant to which such Investor
shall have the right to acquire such number of Warrant Shares set forth opposite
such Investor’s name on Exhibit A hereto under the heading “Warrant Shares,”
registered in the name of such Investor (or its designee);

(iv) approval by each applicable Trading Market of an additional shares listing
application covering all of the Registrable Securities;

(v) a certificate evidencing the good standing of the Company issued by the
Secretary of State of the State of Delaware, as of a date within three (3)
Business Days of the Closing Date;

(vi) a legal opinion of company Counsel, in the form of Exhibit G, executed by
such counsel and delivered to the Investors; and

(vii) a certificate of the Secretary of the Company, dated as of the Closing
Date, (a) certifying the resolutions adopted by the Board of Directors of the
Company or a duly authorized committee thereof approving the transactions
contemplated by this Agreement and the other Transaction Documents and the
issuance of the Securities, (b) certifying the current versions of the
certificate of incorporation, as amended, and by-laws of the Company and
(c) certifying as to the signatures and authority of persons signing the
Transaction Documents and related documents on behalf of the Company.

(b) At the Closing, the Company shall deliver or cause to be delivered to East
West Bank a request to release the aggregate purchase price set forth on
Exhibit A pursuant to the terms and conditions of that certain Escrow Agreement,
dated as of April 14, 2016, by and between the Company, the Investors, and East
West Bank.

ARTICLE III

REPRESENTATIONS AND WARRANTIES

3.1 Representations and Warranties of the Company. Except as disclosed in the
corresponding section of the Schedules hereto (the “Schedules”), which Schedules
shall be deemed a part hereof, the Company hereby represents and warrants to the
Investors and the Agents as follows (which representations and warranties shall
be deemed to apply, where appropriate, to each Subsidiary of the Company):

(a) Subsidiaries. The Company has no Subsidiaries other than those listed in
Schedule 3.1(a) hereto. Except as disclosed in Schedule 3.1(a) hereto, the
Company owns, directly or indirectly, all of the capital stock or comparable
equity interests of each Subsidiary free and clear of any Lien, all the issued
and outstanding shares of capital stock or comparable equity interest of each
Subsidiary are validly issued and are fully paid, non-assessable and free of
preemptive and similar rights.

 

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(b) Organization and Qualification. Except as disclosed in Schedule 3.1(b), each
of the Company and the Subsidiaries is an entity duly organized, validly
existing and in good standing under the laws of the jurisdiction of its
incorporation or organization (as applicable), with the requisite corporate
authority to own and use its properties and assets and to carry on its business
as currently conducted. Neither the Company nor any Subsidiary is in violation
of any of the provisions of its respective certificate or articles of
incorporation, bylaws or other organizational or charter documents. Except as
disclosed in Schedule 3.1(b), each of the Company and the Subsidiaries is duly
qualified to do business and is in good standing as a foreign corporation or
other entity in each jurisdiction in which the nature of the business conducted
or property owned by it makes such qualification necessary, except where the
failure to be so qualified or in good standing, as the case may be, would not,
individually or in the aggregate, have or reasonably be expected to result in a
Material Adverse Effect.

(c) Authorization; Enforcement of Transaction Documents and Commitment Letters.
The Company has the requisite corporate authority to enter into and to
consummate the transactions contemplated by each of the Transaction Documents to
which it is a party and otherwise to carry out its obligations hereunder and
thereunder. The execution and delivery of each of the Transaction Documents to
which it is a party by the Company and the consummation by it of the
transactions contemplated hereby and thereby have been duly authorized by all
necessary corporate action on the part of the Company and no further consent or
action is required by the Company, its Board of Directors or its stockholders
other than obtaining Stockholder Approval. Each of the Transaction Documents to
which it is a party has been (or upon delivery will be) duly executed by the
Company and is, or when delivered in accordance with the terms hereof, will
constitute, the valid and binding obligation of the Company enforceable against
the Company in accordance with its terms, except as may be limited by
Enforceability Exceptions. The Company has the requisite corporate authority to
enter into and to consummate the transactions contemplated by the Commitment
Letters and to carry out its obligations thereunder. The execution and delivery
of the Commitment Letters by the Company and the consummation of the
transactions contemplated by the Company have been duly authorized by all
necessary corporate action on the part of the Company and no further consent or
action is required by the Company, its Board of Directors or its stockholders.
The Commitment Letters will be duly executed by the Company and is, or when
delivered in accordance with the terms hereof, will constitute, the valid and
binding obligation of the Company enforceable against the Company in accordance
with its terms, except as may be limited by Enforceability Exceptions.

(d) No Conflicts. The execution, delivery and performance of the Transaction
Documents to which it is a party by the Company and the consummation by the
Company of the transactions contemplated hereby and thereby do not, and will
not, (i) conflict with or violate any provision of the Company’s or any
Subsidiary’s certificate or articles of incorporation, bylaws or other
organizational or charter documents, (ii) conflict

 

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with, or constitute a default (or an event that with notice or lapse of time or
both would become a default) under, or give to others any rights of termination,
amendment, acceleration or cancellation (with or without notice, lapse of time
or both) of, any agreement, credit facility, debt or other instrument
(evidencing a Company or Subsidiary debt or otherwise) or other understanding to
which the Company or any Subsidiary is a party or by which any property or asset
of the Company or any Subsidiary is bound, or affected, except to the extent
that such conflict, default, termination, amendment, acceleration or
cancellation right would not reasonably be expected to have a Material Adverse
Effect, or (iii) to the Company’s knowledge, result in a violation of any law,
rule, regulation, order, judgment, injunction, decree or other restriction of
any court or governmental authority to which the Company or any Subsidiary is
subject (including, assuming the accuracy of the representations and warranties
of the Investors set forth in Section 3.2 hereof, federal and state securities
laws and regulations and the rules and regulations of any self-regulatory
organization to which the Company or its securities are subject, including all
applicable Trading Markets), or by which any property or asset of the Company or
any Subsidiary is bound or affected, except to the extent that such violation
would not reasonably be expected to have a Material Adverse Effect.

(e) The Securities. The Securities are duly authorized and, when issued and paid
for in accordance with the Transaction Documents and upon receipt of Stockholder
Approval in the case of the Underlying Preferred Shares and Warrant Shares, will
be duly and validly issued, fully paid and nonassessable, free and clear of all
Liens and will not be subject to preemptive or similar rights of stockholders
(other than those imposed by the Investors). The Company has reserved from its
duly authorized capital stock the maximum number of shares of Warrant Shares
issuable upon exercise of the Warrants, without taking into account any
limitations on exercise of the Warrants and the maximum number of Underlying
Preferred Shares. The offer, issuance and sale of the Securities are exempt from
the registration requirements of the Securities Act.

(f) Capitalization. The aggregate number of shares and type of all authorized,
issued and outstanding classes of capital stock, options and other securities of
the Company (whether or not presently convertible into or exercisable or
exchangeable for shares of capital stock of the Company) is set forth in
Schedule 3.1(f) hereto. All outstanding shares of capital stock are duly
authorized, validly issued, fully paid and nonassessable and have been issued in
compliance in all material respects with all applicable securities laws. Except
as disclosed in Schedule 3.1(f) hereto, the Company did not have outstanding at
March 31, 2016 any other options, warrants, script rights to subscribe to, calls
or commitments of any character whatsoever relating to, or securities, rights or
obligations convertible into or exercisable or exchangeable for, or entered into
any agreement giving any Person any right to subscribe for or acquire, any
shares of Common Stock, or securities or rights convertible or exchangeable into
shares of Common Stock. Except as set forth on Schedule 3.1(f) hereto, and
except for customary adjustments as a result of stock dividends, stock splits,
combinations of shares, reorganizations, recapitalizations, reclassifications or
other similar events, there are no anti-dilution or price adjustment provisions
contained in any security issued by the Company (or in any agreement providing
rights to security holders) and the issuance and sale of the Securities will not
obligate the Company to issue shares of Common Stock or other securities to any
Person (other than the Investors) and will not result in a right of any holder
of securities to adjust the exercise, conversion, exchange or reset price under
such securities. To the knowledge of the Company, except as disclosed in the SEC
Reports and any Schedules filed with the SEC pursuant to Rule 13d-1 of the
Exchange Act by reporting persons or in Schedule 3.1(f) hereto, no Person or
group of related Persons beneficially owns (as determined pursuant to Rule 13d-3
under the Exchange Act), or has the right to acquire, by agreement with or by
obligation binding upon the Company, beneficial ownership of in excess of 5% of
the outstanding Common Stock.

 

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(g) SEC Reports. The Company has filed all reports required to be filed by it
under the Exchange Act, including pursuant to Section 13(a) or 15(d) thereof,
for the twenty-four (24) months preceding the date hereof on a timely basis or
has received a valid extension of such time of filing and has filed any such SEC
Reports prior to the expiration of any such extension and has filed all reports
required to be filed by it under the Exchange Act, including pursuant to
Section 13(a) or 15(d) thereof, for the twenty-four months preceding the date
hereof. Such reports required to be filed by the Company under the Exchange Act,
including pursuant to Section 13(a) or 15(d) thereof, together with any
materials filed or furnished by the Company under the Exchange Act, whether or
not any such reports were required being collectively referred to herein as the
“SEC Reports” and, together with this Agreement and the Schedules to this
Agreement, the “Disclosure Materials”. As of their respective dates, the SEC
Reports filed by the Company complied in all material respects with the
requirements of the Securities Act and the Exchange Act and the rules and
regulations of the SEC promulgated thereunder, and none of the SEC Reports, when
filed by the Company, contained any untrue statement of a material fact or
omitted to state a material fact required to be stated therein or necessary in
order to make the statements therein, in the light of the circumstances under
which they were made, not misleading. The financial statements of the Company
included in the SEC Reports comply in all material respects with applicable
accounting requirements and the rules and regulations of the SEC with respect
thereto as in effect at the time of filing. Such financial statements have been
prepared in accordance in all material respects with United States generally
accepted accounting principles applied on a consistent basis during the periods
involved (“GAAP”), except as may be otherwise specified in such financial
statements, the notes thereto and except that unaudited financial statements may
not contain all footnotes required by GAAP or may be condensed or summary
statements, and fairly present in all material respects the consolidated
financial position of the Company and its consolidated Subsidiaries as of and
for the dates thereof and the results of operations and cash flows for the
periods then ended, subject, in the case of unaudited statements, to normal,
year-end audit adjustments. All material agreements to which the Company or any
Subsidiary is a party or to which the property or assets of the Company or any
Subsidiary are subject are included as part of or identified in the SEC Reports,
to the extent such agreements are required to be included or identified pursuant
to the rules and regulations of the SEC.

(h) Financial Statements Since the date of the latest audited financial
statements included within the SEC Reports, except as disclosed in the SEC
Reports or in Schedule 3.1(h) hereto, (i) there has been no event, occurrence or
development that, individually or in the aggregate, has had or that would result
in a Material Adverse Effect, (ii) the Company has not incurred any material
liabilities other than (A) trade payables and accrued expenses incurred in the
ordinary course of business consistent with past practice and (B) liabilities
not required to be reflected in the Company’s financial statements pursuant to
GAAP or required to be disclosed in filings made with the SEC, (iii) the Company
has not altered its method of accounting or the changed its auditors, except as
disclosed in its SEC Reports, (iv) the Company has not declared or made any
dividend or distribution of cash or other property to its stockholders, in their
capacities as such, or purchased, redeemed or made any agreements to purchase or
redeem any shares of its capital stock (except for repurchases by the Company of
shares of capital stock held by employees, officers, directors, or consultants
pursuant to an option of the Company to repurchase such shares upon the
termination of employment or services), and (v) the Company has not issued any
equity securities to any officer, director or Affiliate, except pursuant to
existing Company stock-based plans. The Company has not taken any steps to seek
protection pursuant to any bankruptcy law nor does the Company have any
knowledge or reason to believe that its creditors intend to initiate involuntary
bankruptcy proceedings or any actual knowledge of any fact which would
reasonably lead a creditor to do so.

 

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(i) Absence of Litigation. Except as disclosed in the SEC Reports, there is no
action, suit, claim, or Proceeding, or, to the Company’s knowledge, inquiry or
investigation, before or by any court, public board, government agency,
self-regulatory organization or body pending or, to the knowledge of the
Company, threatened against or affecting the Company or any of its Subsidiaries
that could, individually or in the aggregate, have a Material Adverse Effect.

(j) Compliance. Except as described in Schedule 3.1(j), neither the Company nor
any Subsidiary, except in each case as would not, individually or in the
aggregate, reasonably be expected to have or result in a Material Adverse
Effect, (i) is in default under or in violation of (and no event has occurred
that has not been waived that, with notice or lapse of time or both, would
result in a default by the Company or any Subsidiary under), nor has the Company
or any Subsidiary received written notice of a claim that it is in default under
or that it is in violation of, any indenture, loan or credit agreement or any
other agreement or instrument to which it is a party or by which it or any of
its properties is bound (whether or not such default or violation has been
waived), (ii) is in violation of any order of any court, arbitrator or
governmental body, or (iii) is or has been in violation of any statute, rule or
regulation of any governmental authority.

(k) Title to Assets. The Company and the Subsidiaries have good and marketable
title to all real property owned by them that is material to the business of the
Company and the Subsidiaries have good and marketable title in all personal
property owned by them that is material to the business of the Company and the
Subsidiaries, in each case free and clear of all Liens, except for Liens that do
not, individually or in the aggregate, have or result in a Material Adverse
Effect. To the Company’s knowledge, any real property and facilities held under
lease by the Company and the Subsidiaries are held by them under valid,
subsisting and enforceable leases of which the Company and the Subsidiaries are
in material compliance.

 

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(l) Patents and Trademarks. The Company and its Subsidiaries own or possess or
can obtain on commercially reasonable terms adequate rights or licenses to use,
all trademarks, trade names, service marks, service mark registrations, service
names, patents, patent rights, copyrights, inventions, licenses, approvals,
governmental authorizations, trade secrets and other intellectual property
rights (“Intellectual Property Rights”) necessary to conduct their respective
businesses now conducted, except for such failures to own or possess as would
not be reasonably expected to have a Material Adverse Effect. Except as set
forth in Schedule 3.1(l), none of the Company’s Intellectual Property Rights
have expired or terminated, or are expected to expire or terminate, within three
years from the date of this Agreement, other than any expiration or termination
that would not reasonably be expected to result in a Material Adverse Effect.
The Company does not have any knowledge of any infringement by the Company or
its Subsidiaries of Intellectual Property Rights of others. Except as disclosed
in the SEC Reports, there is no claim, action or proceeding being made or
brought, or to the knowledge of the Company, being threatened, against the
Company or its Subsidiaries regarding its Intellectual Property Rights, except
for such claim, action or proceedings as would not reasonably be expected to
have a Material Adverse Effect. Neither the Company nor any of its Subsidiaries
is aware of any facts or circumstances which might give rise to any of the
foregoing infringements or claims, actions or proceedings, except for such facts
and circumstances as would not reasonably be expected to have a Material Adverse
Effect. The Company and its Subsidiaries have taken reasonable security measures
to protect the secrecy, confidentiality and value of all of their Intellectual
Property Rights.

(m) Insurance. The Company and the Subsidiaries are insured by insurers of
recognized financial responsibility against such losses and risks and in such
amounts as are prudent and customary in the businesses and location in which the
Company and the Subsidiaries are engaged.

(n) Regulatory Permits. The Company and the Subsidiaries possess all
certificates, authorizations and permits issued by the appropriate federal,
state, local or foreign regulatory authorities necessary to conduct their
respective businesses as presently conducted and described in the SEC Reports
(“Material Permits”), except where the failure to possess such permits does not,
individually or in the aggregate, have or reasonably be expected to result in a
Material Adverse Effect, and neither the Company nor any Subsidiary has received
any written notice of proceedings relating to the revocation or modification of
any Material Permit.

(o) Transactions With Affiliates and Employees. Except as set forth or
incorporated by reference in the Company’s SEC Reports, none of the officers,
directors or employees of the Company is presently a party to any transaction
that would be required to be reported on Form 10-K with the Company or any of
its Subsidiaries (other than for ordinary course services as employees, officers
or directors), including any contract, agreement or other arrangement providing
for the furnishing of services to or by, providing for rental of real or
personal property to or from, or otherwise requiring payments to or from any
such officer, director or employee or, to the Company’s knowledge, any
corporation, partnership, trust or other entity in which any such officer,
director, or employee has a substantial interest or is an officer, director,
trustee or partner.

 

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(p) Internal Accounting Controls. The Company and the Subsidiaries maintain a
system of internal accounting controls sufficient to provide reasonable
assurance that (i) transactions are executed in accordance with management’s
general or specific authorizations, (ii) transactions are recorded as necessary
to permit preparation of financial statements in conformity with generally
accepted accounting principles and to maintain asset accountability,
(iii) access to assets is permitted only in accordance with management’s general
or specific authorization, and (iv) the recorded accountability for assets is
compared with the existing assets at reasonable intervals and appropriate action
is taken with respect to any differences. During the twelve months prior to the
date hereof neither the Company nor any of its Subsidiaries have received any
notice or correspondence in writing from any accountant relating to any
potential material weakness in any part of the system of internal accounting
controls of the Company or any of its Subsidiaries.

(q) Disclosure Controls and Procedures. The Company maintains disclosure
controls and procedures (as such term is defined in Rule 13a-15 of the General
Rules and Regulations under the Exchange Act) that comply with the requirements
of the Exchange Act; such disclosure controls and procedures have been designed
to ensure that information required to be disclosed by the Company and its
Subsidiaries is accumulated and communicated to the Company’s management,
including the Company’s principal executive officer and principal financial
officer by others within those entities, such disclosure controls and procedures
are effective.

(r) Sarbanes-Oxley Act. The Company is in compliance in all material respects
with any and all applicable requirements of the Sarbanes-Oxley Act of 2002 that
are effective as of the date hereof, and any and all applicable rules and
regulations promulgated by the SEC thereunder that are effective as of the date
hereof.

(s) Foreign Corrupt Practices. Neither the Company nor any of its Subsidiaries
nor, to the knowledge of the Company, any director, officer, agent, employee or
other Person acting on behalf of the Company or any of its Subsidiaries has, in
the course of its actions for, or on behalf of, the Company (i) used any
corporate funds for any unlawful contribution, gift, entertainment or other
unlawful expenses relating to political activity; (ii) made any direct or
indirect unlawful payment to any foreign or domestic government official or
employee from corporate funds; (iii) violated or is in violation of any
provision of the U.S. Foreign Corrupt Practices Act of 1977, as amended; or
(iv) made any unlawful bribe, rebate, payoff, influence payment, kickback or
other unlawful payment to any foreign or domestic government official or
employee, except where such actions would not have, individually or in
aggregate, a Material Adverse Effect.

 

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(t) Indebtedness. Except as disclosed in Schedule 3.1(t), neither the Company
nor any of its Subsidiaries (i) has any outstanding Indebtedness (as defined
below), (ii) is in violation of any term of or in default under any contract,
agreement or instrument relating to any Indebtedness, except where such
violations and defaults would not result, individually or in the aggregate, in a
Material Adverse Effect, or (iii) is a party to any contract, agreement or
instrument relating to any Indebtedness, the performance of which, in the
judgment of the Company’s officers, has or is expected to have a Material
Adverse Effect. Schedule 3.1(t) provides a detailed description of the material
terms of any such outstanding Indebtedness. For purposes of this Agreement:
(x) “Indebtedness” of any Person means, without duplication (A) all indebtedness
for borrowed money, (B) all obligations issued, undertaken or assumed as the
deferred purchase price of property or services (other than trade payables
entered into in the ordinary course of business), (C) all reimbursement or
payment obligations with respect to letters of credit, surety bonds and other
similar instruments, (D) all obligations evidenced by notes, bonds, debentures
or similar instruments, including obligations so evidenced incurred in
connection with the acquisition of property, assets or businesses, (E) all
indebtedness created or arising under any conditional sale or other title
retention agreement, or incurred as financing, in either case with respect to
any property or assets acquired with the proceeds of such indebtedness (even
though the rights and remedies of the seller or bank under such agreement in the
event of default are limited to repossession or sale of such property), (F) all
monetary obligations under any leasing or similar arrangement which, in
connection with generally accepted accounting principles, consistently applied
for the periods covered thereby, is classified as a capital lease, (G) all
indebtedness referred to in clauses (A) through (F) above secured by (or for
which the holder of such Indebtedness has an existing right, contingent or
otherwise, to be secured by) any mortgage, lien, pledge, charge, security
interest or other encumbrance upon or in any property or assets (including
accounts and contract rights) owned by any Person, even though the Person which
owns such assets or property has not assumed or become liable for the payment of
such indebtedness, and (H) all Contingent Obligations in respect of indebtedness
or obligations of others of the kinds referred to in clauses (A) through (G)
above; (y) “Contingent Obligation” means, as to any Person, any direct or
indirect liability, contingent or otherwise, of that Person with respect to any
indebtedness, lease, dividend or other obligation of another Person if the
primary purpose or intent of the Person incurring such liability, or the primary
effect thereof, is to provide assurance to the obligee of such liability that
such liability will be paid or discharged, or that any agreements relating
thereto will be complied with, or that the holders of such liability will be
protected (in whole or in part) against loss with respect thereto; and
(z) “Person” means an individual, a limited liability company, a partnership, a
joint venture, a corporation, a trust, an unincorporated organization and a
government or any department or agency thereof.

(u) Employee Relations. Neither the Company nor any of its Subsidiaries is a
party to any collective bargaining agreement or, to the Company’s knowledge,
employs any member of a union. The Company believes that its relations with its
employees are as disclosed in the SEC Reports. Except as disclosed in the SEC
Reports, during the twenty-four month period covered by the SEC Reports, no
executive officer of the Company or any of its Subsidiaries (as defined in
Rule 501(f) of the Securities Act) has notified the Company or any such
Subsidiary that such officer intends to leave the Company or any such Subsidiary
or otherwise terminate such officer’s employment with the Company or any such
Subsidiary. To the knowledge of the Company or any such Subsidiary, no

 

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executive officer of the Company is in violation of any material term of any
employment contract, confidentiality, disclosure or proprietary information
agreement, non-competition agreement, or any other contract or agreement or any
restrictive covenant, and the continued employment of each such executive
officer does not subject the Company to any liability with respect to any of the
foregoing matters.

(v) Labor Matters. The Company and its Subsidiaries are in compliance in all
material respects with all federal, state, local and foreign laws and
regulations respecting labor, employment and employment practices and benefits,
terms and conditions of employment and wages and hours, except where failure to
be in compliance would not, either individually or in the aggregate, reasonably
be expected to result in a Material Adverse Effect.

(w) Environmental Laws. The Company and its Subsidiaries (i) are in compliance
in all material respects with any and all Environmental Laws (as hereinafter
defined), (ii) have received all permits, licenses or other approvals required
of them under applicable Environmental Laws to conduct their respective
businesses and (iii) are in compliance in all material respects with all terms
and conditions of any such permit, license or approval where, in each of the
foregoing clauses (i), (ii) and (iii), the failure to so comply would be
reasonably expected to have, individually or in the aggregate, a Material
Adverse Effect. The term “Environmental Laws” means all federal, state, local or
foreign laws relating to pollution or protection of human health or the
environment (including, without limitation, ambient air, surface water,
groundwater, land surface or subsurface strata), including, without limitation,
laws relating to emissions, discharges, releases or threatened releases of
chemicals, pollutants, contaminants, or toxic or hazardous substances or wastes
(collectively, “Hazardous Materials”) into the environment, or otherwise
relating to the manufacture, processing, distribution, use, treatment, storage,
disposal, transport or handling of Hazardous Materials, as well as all
authorizations, codes, decrees, demands or demand letters, injunctions,
judgments, licenses, notices or notice letters, orders, permits, plans or
regulations issued, entered, promulgated or approved thereunder.

(x) Tax Status. Except as disclosed in Schedule 3.1(hh), Company and each of its
Subsidiaries (i) has made or filed all foreign, federal and state income and all
other tax returns, reports and declarations required by any jurisdiction to
which it is subject, (ii) has paid all taxes and other governmental assessments
and charges that are material in amount, shown or determined to be due on such
returns, reports and declarations, except those being contested in good faith
and (iii) has set aside on its books provision reasonably adequate for the
payment of all taxes for periods subsequent to the periods to which such
returns, reports or declarations apply. There are no unpaid taxes in any
material amount claimed to be due by the taxing authority of any jurisdiction,
and the officers of the Company know of no basis for any such claim.

(y) Investment Act. The Company is not required to be registered as, and is not
an Affiliate of, an “investment company” within the meaning of the Investment
Company Act of 1940, as amended.

 

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(z) Form S-3 Eligibility. The Company is eligible to register the Common Shares,
the Underlying Preferred Shares and the Warrant Shares for resale by the
Investors using Form S-3 promulgated under the Securities Act.

(aa) Listing and Maintenance Requirements. The Company has not, in the
twenty-four (24) months preceding the date hereof, received notice (written or
oral) from any Trading Market on which the Common Stock is or has been listed or
quoted to the effect that the Company is not in compliance with the listing or
maintenance requirements of such Trading Market. The Company is in compliance in
all material respects with all such listing and maintenance requirements.

(bb) Disclosure. All disclosure provided by the Company to the Investors
regarding the Company, its business and the transactions contemplated hereby,
including the Schedules to this Agreement, furnished by or on the behalf of the
Company are true and correct in all material respects and do not contain any
untrue statement of a material fact or omit to state any material fact necessary
in order to make the statements made therein, in the light of the circumstances
under which they were made, not misleading. Except for the transactions
contemplated by this Agreement, no event or circumstance has occurred or
information exists with respect to the Company or any of its Subsidiaries or its
or their business, properties, operations or financial condition, which, under
applicable law, rule or regulation, requires public disclosure or announcement
by the Company but which has not been so publicly announced or disclosed.

3.2 Representations, Warranties and Covenants of the Investors. Each Investor
hereby, as to itself only and for no other Investor, represents, warrants and
covenants to the Company and the Agents as follows:

(a) Organization; Authority. Such Investor is an entity duly organized, validly
existing and in good standing under the laws of the jurisdiction of its
organization with the requisite corporate, partnership or other power and
authority to enter into and to consummate the transactions contemplated by the
Transaction Documents and otherwise to carry out its obligations hereunder and
thereunder. The purchase by such Investor of the Securities hereunder has been
duly authorized by all necessary corporate, partnership or other action on the
part of such Investor. This Agreement has been duly executed and delivered by
such Investor and constitutes the valid and binding obligation of such Investor,
enforceable against it in accordance with its terms, except as may be limited by
the Enforceability Exceptions.

(b) No Public Sale or Distribution. Such Investor is (i) acquiring the Common
Shares, the Preferred Shares and the Warrants and (ii) upon the Underlying
Preferred Shares conversion of such shares Preferred Shares and the Warrant
Shares upon exercise of the Warrants in the ordinary course of business for its
own account and not with a view towards, or for resale in connection with, the
public sale or distribution thereof, except pursuant to sales registered under
the Securities Act or under an exemption from such registration and in
compliance with applicable federal and state securities laws, and such Investor
does not have a present arrangement to effect any distribution of the

 

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Securities to or through any person or entity; provided, however, that by making
the representations herein, such Investor does not agree to hold any of the
Securities for any minimum or other specific term and reserves the right to
dispose of the Securities at any time in accordance with or pursuant to a
registration statement or an exemption under the Securities Act and pursuant to
the applicable terms of the Transaction Documents).

(c) Investor Status. Except as previously disclosed to the Company in writing,
at the time such Investor was offered the Securities, it was, and at the date
hereof it is, an “accredited investor” as defined in Rule 501(a) under the
Securities Act. Such Investor is not a registered broker dealer registered under
Section 15(a) of the Exchange Act, or a member of the Financial Industry
Regulatory Authority, Inc. or an entity engaged in the business of being a
broker dealer. Except as otherwise disclosed in writing to the Company on or
prior to the date of this Agreement, such Investor is not affiliated with any
broker dealer registered under Section 15(a) of the Exchange Act, or a member of
the Financial Industry Regulatory Authority, Inc. or an entity engaged in the
business of being a broker dealer.

(d) Experience of Such Investor. Such Investor, either alone or together with
its representatives has such knowledge, sophistication and experience in
business and financial matters so as to be capable of evaluating the merits and
risks of the prospective investment in the Securities, and has so evaluated the
merits and risks of such investment. Such Investor understands that it must bear
the economic risk of this investment in the Securities indefinitely, and is able
to bear such risk and is able to afford a complete loss of such investment.

(e) Access to Information. Such Investor acknowledges that it has reviewed the
Disclosure Materials and has been afforded: (i) the opportunity to ask such
questions as it has deemed necessary of, and to receive answers from, the
Company and its representatives concerning the terms and conditions of the
offering of the Securities and the merits and risks of investing in the
Securities; (ii) access to information (other than material non-public
information) about the Company and the Subsidiaries and their respective
financial condition, results of operations, business, properties, management and
prospects sufficient to enable it to evaluate its investment; and (iii) the
opportunity to obtain such additional information that the Company possesses or
can acquire without unreasonable effort or expense that is necessary to make an
informed investment decision with respect to the investment. Neither such
inquiries nor any other investigation conducted by or on behalf of such Investor
or its representatives or counsel shall modify, amend or affect such Investor’s
right to rely on the truth, accuracy and completeness of the Disclosure
Materials and the Company’s representations and warranties contained in the
Transaction Documents. Such Investor acknowledges that either it has access to
the SEC Reports or has received copies of the SEC Reports.

(f) No Conflicts. The execution, delivery and performance by such Investor of
this Agreement and the consummation by such Investor of the transactions
contemplated hereby will not (i) result in a violation of the organizational
documents of such Investor or (ii) conflict with, or constitute a default (or an
event which with notice or lapse of time or

 

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both would become a default) under, or give to others any rights of termination,
amendment, acceleration or cancellation of, any agreement, indenture or
instrument to which such Investor is a party, or (iii) result in a violation of
any law, rule, regulation, order, judgment or decree (including federal and
state securities laws) applicable to such Investor, except in the case of
clauses (ii) and (iii) above, for such that are not material and do not
otherwise affect the ability of such Investor to consummate the transactions
contemplated hereby.

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

(h) Legends. It is understood that, except as provided in Section 4.1(b) of this
Agreement, certificates evidencing such Securities shall bear the legend set
forth in Section 4.1(b).

(i) No Legal, Tax or Investment Advice. Such Investor understands that nothing
in this Agreement or any other materials presented by or on behalf of the
Company to the Investor in connection with the purchase of the Securities
constitutes legal, tax or investment advice. Such Investor has consulted such
legal, tax and investment advisors as it, in its sole discretion, has deemed
necessary or appropriate in connection with its purchase of the Securities. Such
Investor understands that Leerink Partners LLC, M.M. Dillon & Co. and Brookline
Capital Markets, a division of CIM Securities, LLC (the “Agents”) have acted
solely as the agent of the Company in this placement of the Securities and not
to the Investor, and that the Agents make no representation or warranty with
regard to the merits of this transaction or as to the accuracy of any
information such Investor may have received in connection therewith. Such
Investor acknowledges that he has not relied on any information or advice
furnished by or on behalf of the Agents.

(j) Brokers or Finders. Such Investor has not engaged any brokers, finders or
agents, and neither the Company nor any Investor has, nor will, incur, directly
or indirectly, as a result of any action by each Investor, any liability for
brokerage or finders’ fees or agents’ commissions or any similar charges in
connection with the Transaction Documents.

ARTICLE IV

OTHER AGREEMENTS OF THE PARTIES

4.1 Transfer Restrictions.

(a) The Investors covenant that the 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

 

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securities laws. In connection with any transfer of Securities other than
pursuant to an effective registration statement or Rule 144, 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, any transfer of
Securities by an Investor to an Affiliate of such Investor, 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 Affiliate
does not request any removal of any existing legends on any certificate
evidencing the Securities. The Company shall cause its counsel to provide any
legal opinions required by its transfer agent.

(b) The Investors agree to the imprinting, until no longer required by this
Section 4.1(b), of the following legend on any certificate evidencing any of the
Securities:

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 OR SOLD 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.

The legend set forth above shall be removed and the Company shall issue a
certificate without such legend to the holder of the Securities upon which it is
stamped or issue to such holder by electronic delivery at the applicable balance
account of The Depository Trust Company (“DTC”), if, unless otherwise required
by state securities laws, (i) such Securities are registered for resale under
the Securities Act and are transferred to the Investor pursuant to a
registration statement that is effective at the time of such transfer, (ii) in
connection with a sale, assignment or other transfer, such holder provides the
Company with an opinion of counsel, the form and substance of which opinion
shall be reasonably acceptable to the Company, that the sale, assignment or
transfer of the Securities may be made without registration under the applicable
requirements of the Securities Act or (iii) such holder provides the Company
with reasonable assurance that the Securities can be sold, assigned or
transferred pursuant to Rule 144 or have been sold under Rule 144. If the
Company shall fail for any reason or for no reason to issue to the holder of the
Securities within three (3) Trading Days after the holder has provided
reasonable evidence to the Company of the occurrence of any of (i) through
(iii) above (the date such evidence is provided to the Company, the “Removal
Date”), a certificate without such legend to the holder or to issue such
Securities to such holder by electronic delivery at the applicable balance
account at DTC (as defined below), and if on or after such Trading Day the
holder purchases (in an open market transaction or otherwise) the Common Stock
issued to the Investors pursuant to this Agreement to deliver in satisfaction of
a sale by the

 

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holder of such Securities that the holder anticipated receiving without legend
from the Company (a “Buy-In”), then the Company shall, within three (3) Business
Days after the holder’s request and in the holder’s discretion, either (i) pay
cash to the holder in an amount equal to the holder’s total purchase price
(including brokerage commissions, if any) for the Common Stock issued to
Investors so purchased (the “Buy-In Price”), at which point the Company’s
obligation to deliver such unlegended Securities shall terminate, or
(ii) promptly honor its obligation to deliver to the holder such unlegended
Securities as provided above and pay cash to the holder in an amount equal to
the excess (if any) of the Buy-In Price over the product of (A) such number of
shares of Common Stock, times (B) the Closing Price on the Removal Date.

(c) The Company will not object to and shall permit (except as prohibited by
law) an Investor to pledge or grant (“Pledge”) a security interest in some or
all of the Securities in connection with a bona fide margin agreement or other
loan or financing arrangement secured by the Securities, and if required under
the terms of such agreement, loan or arrangement, the Company will not object to
and shall permit (except as prohibited by law) such Investor to transfer pledged
or secured Securities to the pledges or secured parties; provided, that
following such Pledge, the Securities shall continue to have the restrictive
legends set forth in Section 4.1(b) above unless the legends may be removed
pursuant to the provisions of Sections 4.1(b)(i), (ii), or (iii). 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, and no notice shall be required of such
pledge. Each Investor acknowledges that the Company shall not be responsible for
any pledges relating to, or the grant of any security interest in, any of the
Securities or for any agreement, understanding or arrangement between any
Investor and its pledgee or secured party. The Company will execute and deliver
such reasonable documentation as a pledgee or secured party of Securities may
reasonably request in connection with a pledge or transfer of the Securities,
including 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 4.1(c), the Company’s indemnification obligations pursuant to
Section 5.4 shall not extend to any Proceeding or Losses arising out of or
related to this Section 4.1(c).

(d) The restrictions set forth in this Section 4.1 shall be in addition to the
applicable transfer restrictions or other requirements set forth in the
Certificate of Designation and the Investors acknowledge and agree to be bound
thereby.

4.2 Furnishing of Information. Until the date that any Investor owning the
shares of Common Shares, Preferred Shares, Underlying Preferred Shares, Warrants
or Warrant Shares may sell all of them without restriction or limitation under
Rule 144 of the Securities Act (or any successor provision) (including, without
limitation, the requirement to be in compliance with Rule 144(c)(1)), the
Company covenants to use its commercially reasonable efforts to timely file (or
obtain extensions in respect thereof and file within the applicable grace
period) all reports required to be filed by the Company after the date hereof
pursuant to the Exchange Act.

4.3 Integration. The Company shall not, and shall use its commercially
reasonably efforts to ensure that no Affiliate thereof shall, sell, offer for
sale or solicit offers to buy or otherwise negotiate in respect of any security
(as defined in Section 2 of the Securities Act) that would be integrated with

 

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the offer or sale of the Securities in a manner that would require the
registration under the Securities Act of the sale of the Securities to the
Investors or that would be integrated with the offer or sale of the Securities
for purposes of the rules and regulations of any Trading Market.

4.4 Reservation of Securities. The Company shall maintain a reserve from its
duly authorized shares of Common Stock for issuance pursuant to the Transaction
Documents in such amount as may be required to fulfill its obligations to issue
such shares under the Transaction Documents. In the event that at any time the
then authorized shares of Common Stock are insufficient for the Company to
satisfy its obligations to issue such shares of Common Stock under the
Transaction Documents, the Company shall use reasonable best efforts to promptly
take such actions as may be required to increase the number of authorized
shares.

4.5 Use of Proceeds. The Company intends to use the net proceeds from the sale
of the Securities for working capital and general corporate purposes.

4.6 Form D and Blue Sky. The Company agrees to file a Form D with respect to the
Securities as required under Regulation D. The Company, on or before the Closing
Date, shall take such action as the Company shall reasonably determine is
necessary in order to obtain an exemption for or to qualify the Securities for
sale to the Investors at the Closing pursuant to this Agreement under applicable
securities or “Blue Sky” laws of the states of the United States (or to obtain
an exemption from such qualification), and shall provide evidence of any such
action so taken to the Investors on or prior to the Closing Date. The Company
shall make all filings and reports relating to the offer and sale of the
Securities required under applicable securities or “Blue Sky” laws of the states
of the United States following the Closing Date.

ARTICLE V

REGISTRATION RIGHTS

5.1 Registration Statement.

(a) As promptly as possible, and in any event on or prior to the Initial 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) and shall contain (except if otherwise directed by the Investors or
requested by the SEC) the “Plan of Distribution” in substantially the form
attached hereto as Exhibit B and the “Selling Stockholders” in substantially the
form attached hereto as Exhibit C. To the extent the staff of the SEC does not
permit all of the Registrable Securities to be registered on the initial
Registration Statement filed pursuant to this Section 5.1(a) (the “Initial
Registration Statement”), the Company shall file additional Registration
Statements (each an “Additional Registration Statement”), as promptly as
possible, and in any event on or prior to the Additional Filing Date,
successively trying to register on each such Additional Registration Statement
the maximum number of remaining Registrable Securities until all of the
Registrable Securities have been registered with the SEC.

 

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(b) The Company shall use its commercially reasonable efforts to cause each
Registration Statement to be declared effective by the SEC as promptly as
possible after the filing thereof, but in any event prior to the applicable
Required Effectiveness Date, and shall use its commercially reasonable 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 without
restriction or limitation under Rule 144 (including, without limitation, the
requirement to be in compliance with Rule 144(c)(1)) (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 three (3) Trading Days after receipt of such notice and request that it
becomes effective on 4:00 p.m. New York City time on the Effective Dave and file
a prospectus supplement for any Registration Statement, whether or not required
under Rule 424 (or otherwise), by 9:00 a.m. New York City time the day after the
Effective Date.

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

(d) Should an Event (as defined below) occur, then upon the occurrence of such
Event, and on every monthly anniversary thereof until the applicable Event is
cured, the Company shall pay to each Investor an amount in cash, as liquidated
damages and not as a penalty, equal to two percent (2.0%) of the aggregate
Purchase Price of the Registrable Securities then held by the Investor;
provided, however, that the total amount of payments pursuant to this
Section 5.1(d) shall not exceed, when aggregated with all such payments paid to
all Investors, ten percent (10%) of the aggregate Purchase Price hereunder;
provided, further, that Events occurring pursuant to clause (iv) of such
definition shall not count toward, or be subject to such ten percent (10%) cap.
The payments to which an Investor shall be entitled pursuant to this
Section 5.1(d) are referred to herein as “Event Payments.” Any Event Payments
payable pursuant to the terms hereof shall apply on a pro-rated basis for any
portion of a month prior to the cure of an Event. In the event the Company fails
to make Event Payments in a timely manner, such Event Payments shall bear
interest at the rate of one and a half percent (1.5%) per month (prorated for
partial months) until paid in full. All pro-rated calculations made pursuant to
this paragraph shall be based upon the actual number of days in such pro-rated
month.

For such purposes, each of the following shall constitute an “Event”:

(i) a Registration Statement is not filed on or prior to its Filing Date or is
not declared effective on or prior to its Required Effectiveness Date or does
not register all Registrable Securities; provided that if the SEC, by written or
oral comment or otherwise, limits the Company’s ability to request
effectiveness, or prohibits the effectiveness of, a Registration

 

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Statement with respect to any or all the Registrable Securities pursuant to
Rule 415, it shall not be a breach or default by the Company under this
Agreement and shall not be deemed a failure by the Company to use reasonable
best efforts;

(ii) except as provided for in Section 5.1(e) (the “Excluded Events”), after the
Effective Date of a Registration Statement, an Investor is not permitted to sell
Registrable Securities under the Registration Statement (or a subsequent
Registration Statement filed in replacement thereof) for any reason (other than
the fault of such Investor) for five (5) or more Trading Days (whether or not
consecutive);

(iii) except as a result of the Excluded Events, the Common Stock is not listed
or quoted, or is suspended from trading, on an Eligible Market for a period of
three Trading Days (which need not be consecutive Trading Days) during the
Effectiveness Period; and

(iv) at any time during the period commencing from the six (6) month anniversary
of the Closing Date and ending at the termination of the Effectiveness Period,
if a Registration Statement is not available for the resale of all of the
Registrable Securities and the Company shall fail for any reason to satisfy the
current public information requirement under Rule 144(c);

provided, that Event Payments on the Registrable Securities may not accrue under
more than one of the foregoing clauses (i), (ii), (iii) and (iv), at any one
time; and provided further, that (1) upon the filing of the Registration
Statement as required hereunder (in the case of Section 5.1(i)), (2) upon the
effectiveness of a Registration Statement as required hereunder (in the case of
Section 5.1(ii)), (3) upon the resumed trading of the Common Stock (in the case
of Section 5.1(iii)), or (4) upon the resumption of an Investors ability to
resell the Registrable Securities under an effective Registration Statement or
the Company’s satisfaction of the current public information requirement under
Rule 144(c) of the Securities Act (in the case of Section 5.1(d)), Event
Payments on the Registrable Securities as a result of such clause shall cease to
accrue. It is understood and agreed that, notwithstanding any provision to the
contrary, no Event Payments shall accrue on any Registrable Securities that are
then covered by, and may be sold under, an Effective Registration Statement.

(e) Notwithstanding anything in this Agreement to the contrary:

(i) notwithstanding Section 5.1, the Company, upon written notice to the
Investors, shall be permitted to suspend the availability of a Registration
Statement covering the Registrable Securities for any bona fide reason
whatsoever for up to 15 consecutive days (the “Deferral Period”) in any 90-day
period without being obligated to pay liquidated damages; provided, that
Deferral Periods may not total more than 45 days in the aggregate in any
twelve-month period. The Company shall not be required to specify in the written
notice to the Investors the nature of the event giving rise to the Deferral
Period; and

(ii) the Company may, by written notice to the Investors, suspend sales under a
Registration Statement after the Effective Date thereof and/or require that the
Investors immediately cease the sale of shares of Common Stock pursuant thereto
and/or defer the filing of any subsequent Registration Statement if the Company
is engaged in a material merger, acquisition

 

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or sale and the Board of Directors determines in good faith, by appropriate
resolutions, that, as a result of such activity, (A) it would be materially
detrimental to the Company (other than as relating solely to the price of the
Common Stock) to maintain a Registration Statement at such time or (B) it is in
the best interests of the Company to suspend sales under such registration at
such time. Upon receipt of such notice, each Investor shall immediately
discontinue any sales of Registrable Securities pursuant to such registration
until such Investor 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 5(e) may be
exercised for a period of no more than 20 calendar days at a time and not more
than three times in any twelve-month period, without such suspension being
considered as part of an Event Payment determination. Immediately after the end
of any suspension period under this Section 5(e), 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 Investors to publicly resell their Registrable Securities
pursuant to such effective Registration Statement.

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

(a) Not less than 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 Investors who have supplied the Company with email
addresses copies of all such documents proposed to be filed (or at the request
of one or more Investors, only certain sections thereof), which documents (other
than any document that is incorporated or deemed to be incorporated by reference
therein) will be subject to the review of such Investors. The Company shall
reflect in each such document when so filed with the SEC such comments regarding
the Investors and the plan of distribution as the Investors may reasonably and
promptly propose no later than two Trading Days after the Investors have been so
furnished with copies of such documents as aforesaid.

(b) (i) Subject to Section 5.1(e), 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; and
(iii) comply in all material respects with the provisions of the Securities Act
and the Exchange Act with respect to the disposition of all Registrable
Securities covered by the Registration Statement during the applicable period in
accordance with the intended methods of disposition by the Investors thereof set
forth in the Registration Statement as so amended or in such Prospectus as so
supplemented.

 

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(c) Notify the Investors as promptly as reasonably possible, and if requested by
the Investors, 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) any
Registration Statement or any post-effective amendment is declared effective;
(iii) the SEC issues any stop order suspending the effectiveness of any
Registration Statement or initiates any Proceedings for that purpose; (iv) the
Company receives notice of any suspension of the qualification or exemption from
qualification of any Registrable Securities for sale in any jurisdiction, or the
initiation or threat of any Proceeding for such purpose; or (v) 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 its commercially reasonable efforts to avoid the issuance of or, if
issued, obtain the withdrawal of (i) any order suspending the effectiveness of
any Registration Statement, or (ii) any suspension of the qualification (or
exemption from qualification) of any of the Registrable Securities for sale in
any jurisdiction, as soon as possible.

(e) If requested by an Investor, provide such Investor and Counsel to the lead
investor, without charge, at least one conformed copy of each Registration
Statement and each amendment thereto, including financial statements and
schedules, and all exhibits to the extent requested by such Person (including
those previously furnished or incorporated by reference) promptly after the
filing of such documents with the SEC.

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

(g) (i) In the time and manner required by each Trading Market on which the
Common Stock is listed, prepare and file with such Trading Market an additional
shares listing application covering all of the Registrable Securities; (ii) take
all steps necessary to cause such Registrable Securities to be approved for
listing on each such Trading Market as soon as possible thereafter;
(iii) provide to each Investor evidence of such approval; and (iv) except as a
result of the Excluded Events, during the Effectiveness Period, maintain the
listing of such Registrable Securities on each such Trading Market or another
Eligible Market.

 

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

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

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

(k) Cooperate with any reasonable due diligence investigation undertaken by the
Investors in connection with the sale of Registrable Securities, including,
without limitation, by making available documents and information; provided that
the Company will not deliver or make available to any Investor material,
nonpublic information, unless such Investor requests in advance in writing to
receive material, nonpublic information and agrees to keep such information
confidential.

(l) Comply with all rules and regulations of the SEC applicable to the
registration of the Registrable Securities.

(m) 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 Investor or to make any Event Payments
set forth in Section 5.1(c) to such Investor that the intended method of
disposition of the Registrable Securities held by it (if different from the Plan
of Distribution set forth on Exhibit B hereto) as shall be reasonably required
to effect the registration of such Registrable Securities and shall complete and
execute such documents in connection with such registration as the Company may
reasonably request.

 

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(n) The Company shall 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 Investors in writing if, at any
time during the Effectiveness Period, the Company does not satisfy the
conditions specified in Rule 172 and, as a result thereof, the Investors are
required to make available a Prospectus in connection with any disposition of
Registrable Securities and take such other actions as may be reasonably
necessary to facilitate the registration of the Registrable Securities
hereunder.

(o) Not identify any Investor as an underwriter without its prior written
consent in any public disclosure or filing with the SEC, the Trading Market or
any Eligible Market and any Investor being deemed an underwriter by the SEC
shall not relieve the Company of any obligations it has under this Agreement;
provided, however, that the foregoing shall not prohibit the Company from
including the disclosure found in the “Plan of Distribution” section attached
hereto as Exhibit B in the Registration Statement. In addition, and
notwithstanding anything to the contrary contained herein, if the Company has
received a comment by the SEC requiring an Investor to be named as an
underwriter in the Registration Statement (which notwithstanding the reasonable
best efforts of the Company is not withdrawn by the SEC) and such Investor
elects in writing not to be named as a selling stockholder in the Registration
Statement, the Investor shall not be entitled to any Event Payments with respect
to such Registration Statement.

5.3 Registration Expenses. The Company shall pay all fees and expenses incident
to the performance of or compliance with Article VI of this Agreement by the
Company, including without limitation (a) all registration and filing fees and
expenses, including without limitation those related to filings with the SEC,
any Trading Market, any required filing with the Financial Industry Regulatory
Authority by the Agents (but not any Investor), 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.

5.4 Indemnification

(a) Indemnification by the Company. The Company shall, notwithstanding any
termination of this Agreement, indemnify and hold harmless each Investor, the
officers, directors, partners, members, agents and employees of each of them,
each Person who controls any such Investor (within the meaning of Section 15 of
the Securities Act or Section 20 of the Exchange Act) and the officers,
directors, partners, members, agents and employees of each such controlling
Person, to the fullest extent permitted by applicable law, from and against any
and all Losses, as incurred, arising out of or relating to (i) any
misrepresentation or breach of

 

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any representation or warranty made by the Company in the Transaction 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 Transaction Documents or any other certificate, instrument or
document contemplated hereby or thereby, (iii) any cause of action, suit or
claim brought or made against such Indemnified Party (as defined in
Section 5.4(c) below) by a third party (including for these purposes a
derivative action brought on behalf of the Company), arising out of or resulting
from (x) execution, delivery, performance or enforcement of the Transaction
Documents or any other certificate, instrument or document contemplated hereby
or thereby, (y) any transaction financed or to be financed in whole or in part,
directly or indirectly, with the proceeds of the issuance of the Securities, or
(z) the status of Indemnified Party as holder of the Securities or (iv) any
untrue or alleged untrue statement of a material fact contained in the
Registration Statement, any Prospectus or any form of Company prospectus or in
any amendment or supplement thereto or in any Company preliminary prospectus, or
arising out of or relating to any omission or alleged omission of a material
fact required to be stated therein or necessary to make the statements therein
(in the case of any Prospectus or form of prospectus or supplement thereto, in
the light of the circumstances under which they were made) not misleading,
except to the extent, but only to the extent, that (A) such untrue statements,
alleged untrue statements, omissions or alleged omissions are based solely upon
information regarding such Investor furnished in writing to the Company by such
Investor for use therein, or to the extent that such information relates to such
Investor or such Investor’s proposed method of distribution of Registrable
Securities and was reviewed and expressly approved by such Investor expressly
for use in the Registration Statement, or (B) with respect to any prospectus, if
the untrue statement or omission of material fact contained in such prospectus
was corrected on a timely basis in the prospectus, as then amended or
supplemented, if such corrected prospectus was timely made available by the
Company to the Holder, and the Holder seeking indemnity hereunder was advised in
writing not to use the incorrect prospectus prior to the use giving rise to
Losses.

(b) Indemnification by Investors. Each Investor shall, severally and not
jointly, indemnify and hold harmless the Company, its directors, officers,
agents and employees, each Person who controls the Company (within the meaning
of Section 15 of the Securities Act and Section 20 of the Exchange Act), and the
directors, officers, agents or employees of such controlling Persons, to the
fullest extent permitted by applicable law, from and against all Losses (as
determined by a court of competent jurisdiction in a final judgment not subject
to appeal or review) arising solely out of any untrue statement of a material
fact contained in the Registration Statement, any Prospectus, or any form of
prospectus, or in any amendment or supplement thereto, or arising out of or
relating to any omission of a material fact required to be stated therein or
necessary to make the statements therein (in the case of any Prospectus or form
of prospectus or supplement thereto, in the light of the circumstances under
which they were made) not misleading, but only to the extent that such untrue
statement or omission is contained in any information so furnished by such
Investor in writing to the Company specifically for inclusion in such
Registration Statement or such Prospectus or to the extent that (i) such untrue
statements or omissions are based solely upon information regarding such
Investor furnished to the Company by such Investor in writing expressly for use
therein, or to the extent that such information relates to such Investor or such
Investor’s proposed method of distribution of Registrable Securities and was
reviewed and expressly approved by such

 

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Investor expressly for use in the Registration Statement (it being understood
that the Plan of Distribution set forth on Exhibit B constitutes information
reviewed and expressly approved by such Investor in writing expressly for use in
the Registration Statement), such Prospectus or such form of Prospectus or in
any amendment or supplement thereto. In no event shall the liability of any
selling Investor hereunder be greater in amount than the dollar amount of the
net proceeds received by such Investor upon the sale of the Registrable
Securities giving rise to such indemnification obligation.

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

An Indemnified Party shall have the right to employ separate counsel in any such
Proceeding and to participate in the defense thereof, but the fees and expenses
of such counsel shall be at the expense of such Indemnified Party or Parties
unless: (i) the Indemnifying Party has agreed in writing to pay such fees and
expenses; or (ii) the Indemnifying Party shall have failed within 45 days of
receiving notification of a Proceeding from an Indemnified Party to assume the
defense of such Proceeding and to employ counsel reasonably satisfactory to such
Indemnified Party in any such Proceeding; 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 being understood, however, that the Indemnifying
Party shall not, in connection with any one such Proceeding (including separate
Proceedings that have been or will be consolidated before a single judge) be
liable for the fees and expenses of more than one separate firm of attorneys at
any time for all Indemnified Parties, which firm shall be appointed by a
majority of the Indemnified Parties. The Indemnifying Party shall not be liable
for any settlement of any such Proceeding effected without its written consent,
which consent shall not be unreasonably withheld. No Indemnifying Party shall,
without the prior written consent of the Indemnified Party, effect any
settlement of any pending Proceeding in respect of which any Indemnified Party
is a party, unless such settlement includes an unconditional release of such
Indemnified Party from all liability on claims that are the subject matter of
such Proceeding.

 

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

The parties hereto agree that it would not be just and equitable if contribution
pursuant to this Section 5.4(d) were determined by pro rata allocation or by any
other method of allocation that does not take into account the equitable
considerations referred to in the immediately preceding paragraph.
Notwithstanding the provisions of this Section 5.4(d), no Investor shall be
required to contribute, in the aggregate, any amount in excess of the amount by
which the net proceeds actually received by such Investor from the sale of the
Registrable Securities subject to the Proceeding exceeds the amount of any
damages that such Investor 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.

5.5 Dispositions. Each Investor 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

 

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accordance with the Plan of Distribution set forth in the Prospectus. Each
Investor further agrees that, upon receipt of a notice from the Company of the
occurrence of any event of the kind described in Sections 5.2(c)(v), (vi) or
(vii), such Investor will discontinue disposition of such Registrable Securities
under the Registration Statement until such Investor is advised in writing by
the Company that the use of the Prospectus, or amended Prospectus, as
applicable, may be used. The Company may provide appropriate stop orders to
enforce the provisions of this paragraph. Each Investor, severally and not
jointly with the other Investors, agrees that the removal of the restrictive
legend from certificates representing Securities as set forth in this
Section 4.1 is predicated upon the Company’s reliance that the Investor will
comply with the provisions of this subsection.

5.6 Piggy-Back Registrations. If at any time during the Effectiveness Period
there is not an effective Registration Statement covering all of the Registrable
Securities and the Company shall determine to prepare and file with the SEC a
registration statement relating to an offering for its own account or the
account of others under the Securities Act of any of its equity securities,
other than on Form S-4 or Form S-8 (each as promulgated under the Securities
Act) or their then equivalents relating to equity securities to be issued solely
in connection with any acquisition of any entity or business or equity
securities issuable in connection with stock option or other employee benefit
plans, then the Company shall send to each Investor not then eligible to sell
all of their Registrable Securities without restriction or limitation under
Rule 144 (including, without limitation, requirement to be in compliance with
Rule 144(c)(1)), written notice of such determination and if, within ten days
after receipt of such notice, any such Investor shall so request in writing, the
Company shall include in such registration statement all or any part of such
Registrable Securities such Investor requests to be registered. Notwithstanding
the foregoing, in the event that, in connection with any underwritten public
offering, the managing underwriter(s) thereof shall impose a limitation on the
number of shares of Common Stock which may be included in the Registration
Statement because, in such underwriter(s)’ judgment, marketing or other factors
dictate such limitation is necessary to facilitate public distribution, then the
Company shall be obligated to include in such Registration Statement only such
limited portion of the Registrable Securities with respect to which such
Investor has requested inclusion hereunder as the underwriter shall permit;
provided, however, that (i) the Company shall not exclude any Registrable
Securities unless the Company has first excluded all outstanding securities, the
holders of which are not contractually entitled to inclusion of such securities
in such Registration Statement or are not contractually entitled to pro rata
inclusion with the Registrable Securities and (ii) after giving effect to the
immediately preceding proviso, any such exclusion of Registrable Securities
shall be made pro rata among the Investors seeking to include Registrable
Securities and the holders of other securities having the contractual right to
inclusion of their securities in such Registration Statement by reason of demand
registration rights, in proportion to the number of Registrable Securities or
other securities, as applicable, sought to be included by each such Investor or
other holder. If an offering in connection with which an Investor is entitled to
registration under this Section 5.6 is an underwritten offering, then each
Investor whose Registrable Securities are included in such Registration
Statement shall, unless otherwise agreed by the Company, offer and sell such
Registrable Securities in an underwritten offering using the same underwriter or
underwriters and, subject to the provisions of this Agreement, on the same terms
and conditions as other shares of Common Stock included in such underwritten
offering and shall enter into an underwriting agreement in a form and substance
reasonably satisfactory to the Company and the underwriter or underwriters. Upon
the effectiveness the registration statement for which piggy-back registration
has been provided in this Section 5.6, any Event Payments payable to an Investor
whose Securities are included in such registration statement shall terminate.

 

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ARTICLE VI

MISCELLANEOUS

6.1 Termination. This Agreement may be terminated by the Company or any
Investor, by written notice to the other parties, if the Closing has not been
consummated by the third Business Day following the date of this Agreement;
provided that no such termination will affect the right of any party to sue for
any breach by the other party (or parties).

6.2 Fees and Expenses. Except as expressly set forth in the Transaction
Documents to the contrary, each party shall pay the fees and expenses of its
advisers, counsel, accountants and other experts, if any, and all other expenses
incurred by such party incident to the negotiation, preparation, execution,
delivery and performance of this Agreement. The Company shall pay all Transfer
Agent fees, stamp taxes and other taxes and duties levied in connection with the
sale and issuance of their applicable Securities.

6.3 Entire Agreement. The Transaction Documents, together with the Exhibits and
Schedules thereto, contain the entire understanding of the parties with respect
to the subject matter hereof and supersede all prior agreements and
understandings, oral or written, with respect to such matters, which the parties
acknowledge have been merged into such documents, exhibits and schedules. At or
after the Closing, and without further consideration, the Company will execute
and deliver to the Investors such further documents as may be reasonably
requested in order to give practical effect to the intention of the parties
under the Transaction Documents.

6.4 Notices. Any and all notices or other communications or deliveries required
or permitted to be provided hereunder shall be in writing and shall be deemed
given and effective on the earliest of (a) the date of transmission, if such
notice or communication is delivered via facsimile or email at the facsimile
number or email address specified in this Section prior to 6:30 p.m. (New York
City time) on a Trading Day, (b) the next Trading Day after the date of
transmission, if such notice or communication is delivered via facsimile or
email at the facsimile number or email address specified in this Section on a
day that is not a Trading Day or later than 6:30 p.m. (New York City time) on
any Trading Day, (c) the Trading Day following the date of deposit with a
nationally recognized overnight courier service, or (d) upon actual receipt by
the party to whom such notice is required to be given. The addresses, facsimile
numbers and email addresses for such notices and communications are those set
forth on the signature pages hereof, or such other address or facsimile number
as may be designated in writing hereafter, in the same manner, by any such
Person.

6.5 Amendments; Waivers. No provision of this Agreement may be waived or amended
except in a written instrument signed, in the case of an amendment, by the
Company and each of the Investors or, in the case of a waiver, by the party
against whom enforcement of any such waiver is sought. No waiver of any default
with respect to any provision, condition or requirement of this Agreement shall
be deemed to be a continuing waiver in the future or a waiver of any subsequent

 

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default or a waiver of any other provision, condition or requirement hereof, nor
shall any delay or omission of either party to exercise any right hereunder in
any manner impair the exercise of any such right. Notwithstanding the foregoing,
a waiver or consent to depart from the provisions hereof with respect to a
matter that relates exclusively to the rights of Investors under Article VI may
be given by Investors holding at least two-thirds (2/3) of the Registrable
Securities to which such waiver or consent relates.

6.6 Construction. The headings herein are for convenience only, do not
constitute a part of this Agreement and shall not be deemed to limit or affect
any of the provisions hereof. The language used in this Agreement will be deemed
to be the language chosen by the parties to express their mutual intent, and no
rules of strict construction will be applied against any party.

6.7 Successors and Assigns. This Agreement shall be binding upon and inure to
the benefit of the parties and their successors and permitted assigns. The
Company may not assign this Agreement or any rights or obligations hereunder
without the prior written consent of the Investors. Any Investor may assign its
rights under this Agreement to any Person to whom such Investor assigns or
transfers any Securities, provided (i) such transferor agrees in writing with
the transferee or assignee to assign such rights, and a copy of such agreement
is furnished to the Company after such assignment, (ii) the Company is furnished
with written notice of (x) the name and address of such transferee or assignee
and (y) the Registrable Securities with respect to which such registration
rights are being transferred or assigned, (iii) following such transfer or
assignment, the further disposition of such securities by the transferee or
assignee is restricted under the Securities Act and applicable state securities
laws, (iv) such transferee agrees in writing to be bound, with respect to the
transferred Securities, by the provisions hereof that apply to the “Investors”
and (v) such transfer shall have been made in accordance with the applicable
requirements of this Agreement and with all laws applicable thereto.

6.8 Persons Entitled to Benefit of Agreement. This Agreement shall inure to the
benefit of and be binding upon the Company and each Investor and their
respective successors and permitted assigns. Nothing expressed or mentioned in
this Agreement is intended or shall be construed to give any person, other than
those persons mentioned in the preceding sentence or otherwise explicitly
mentioned in this Agreement, any legal or equitable right, remedy or claim under
or in respect of this Agreement, or any provisions herein contained, this
Agreement and all conditions and provisions hereof being intended to be and
being for the sole and exclusive benefit of such persons and for the benefit of
no other person; except that (i) each Indemnified Party is an intended third
party beneficiary of Section 5.4 and Section 6.18 and (in each case) may enforce
the provisions of such Sections directly against the parties with obligations
thereunder and (ii) the Agents are intended third party beneficiaries of the
representations and warranties of the Company and the Investors in Article III.

6.9 Governing Law; Venue; Waiver of Jury Trial. ALL QUESTIONS CONCERNING THE
CONSTRUCTION, VALIDITY, ENFORCEMENT AND INTERPRETATION OF THIS AGREEMENT SHALL
BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW
YORK. THE COMPANY AND INVESTORS HEREBY IRREVOCABLY SUBMIT TO THE NON-EXCLUSIVE
JURISDICTION OF THE STATE AND FEDERAL COURTS SITTING IN THE CITY OF NEW YORK,
BOROUGH OF MANHATTAN

 

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FOR THE ADJUDICATION OF ANY DISPUTE BROUGHT BY THE COMPANY OR ANY INVESTOR
HEREUNDER, IN CONNECTION HEREWITH OR WITH ANY TRANSACTION CONTEMPLATED HEREBY OR
DISCUSSED HEREIN (INCLUDING WITH RESPECT TO THE ENFORCEMENT OF ANY OF THE
TRANSACTION DOCUMENTS), AND HEREBY IRREVOCABLY WAIVE, AND AGREE NOT TO ASSERT IN
ANY SUIT, ACTION OR PROCEEDING BROUGHT BY THE COMPANY OR ANY INVESTOR, ANY CLAIM
THAT IT IS NOT PERSONALLY SUBJECT TO THE JURISDICTION OF ANY SUCH COURT, OR THAT
SUCH SUIT, ACTION OR PROCEEDING IS IMPROPER. EACH PARTY HEREBY IRREVOCABLY
WAIVES PERSONAL SERVICE OF PROCESS AND CONSENTS TO PROCESS BEING SERVED IN ANY
SUCH SUIT, ACTION OR PROCEEDING BY MAILING A COPY THEREOF VIA REGISTERED OR
CERTIFIED MAIL OR OVERNIGHT DELIVERY (WITH EVIDENCE OF DELIVERY) TO SUCH PARTY
AT THE ADDRESS IN EFFECT FOR NOTICES TO IT UNDER THIS AGREEMENT AND AGREES THAT
SUCH SERVICE SHALL CONSTITUTE GOOD AND SUFFICIENT SERVICE OF PROCESS AND NOTICE
THEREOF. NOTHING CONTAINED HEREIN SHALL BE DEEMED TO LIMIT IN ANY WAY ANY RIGHT
TO SERVE PROCESS IN ANY MANNER PERMITTED BY LAW. THE COMPANY AND INVESTORS
HEREBY WAIVE ALL RIGHTS TO A TRIAL BY JURY.

6.10 Survival. The representations and warranties, agreements and covenants
contained herein shall survive the Closing.

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

6.12 Severability. If any provision of this Agreement is prohibited by law or
otherwise determined to be invalid or unenforceable by a court of competent
jurisdiction, the provision that would otherwise be prohibited, invalid or
unenforceable shall be deemed amended to apply to the broadest extent that it
would be valid and enforceable, and the invalidity or unenforceability of such
provision shall not affect the validity of the remaining provisions of this
Agreement so long as this Agreement as so modified continues to express, without
material change, the original intentions of the parties as to the subject matter
hereof and the prohibited nature, invalidity or unenforceability of the
provision(s) in question does not substantially impair the respective
expectations or reciprocal obligations of the parties or the practical
realization of the benefits that would otherwise be conferred upon the parties.
The parties will endeavor in good faith negotiations to replace the prohibited,
invalid or unenforceable provision(s) with a valid provision(s), the effect of
which comes as close as possible to that of the prohibited, invalid or
unenforceable provision(s).

6.13 Rescission and Withdrawal Right. Notwithstanding anything to the contrary
contained in (and without limiting any similar provisions of) the Transaction
Documents, whenever any Investor exercises a right, election, demand or option
owed to such Investor by the Company under a Transaction Document and the
Company does not timely perform its related obligations

 

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within the periods therein provided, then, prior to the performance by the
Company of the Company’s related obligation, such Investor may rescind or
withdraw, in its sole discretion from time to time upon written notice to the
Company, any relevant notice, demand or election in whole or in part without
prejudice to its future actions and rights.

6.14 Replacement of Securities. If any certificate or instrument evidencing any
Securities is mutilated, lost, stolen or destroyed, the Company shall issue or
cause to be issued in exchange and substitution for and upon cancellation
thereof, or in lieu of and substitution therefor, a new certificate or
instrument, but only upon receipt of evidence reasonably satisfactory to the
Company of such loss, theft or destruction and the execution by the holder
thereof of a customary lost certificate affidavit of that fact and an agreement
to indemnify and hold harmless the Company for any losses in connection
therewith. The applicants for a new certificate or instrument under such
circumstances shall also pay any reasonable third-party costs associated with
the issuance of such replacement Securities.

6.15 Remedies. In addition to being entitled to exercise all rights provided
herein or granted by law, including recovery of damages, each of the Investors
and the Company will be entitled to seek specific performance under the
Transaction Documents. The parties agree that monetary damages may not be
adequate compensation for any loss incurred by reason of any breach of
obligations described in the foregoing sentence and hereby agrees to waive in
any action for specific performance of any such obligation (other than in
connection with any action for temporary restraining order) the defense that a
remedy at law would be adequate.

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

6.17 Independent Nature of Investors’ Obligations and Rights. The obligations of
each Investor under any Transaction Document are several and not joint with the
obligations of any other Investor, and no Investor shall be responsible in any
way for the performance of the obligations of any other Investor under any
Transaction Document. The decision of each Investor to purchase Securities
pursuant to this Agreement has been made by such Investor independently of any
other Investor and independently of any information, materials, statements or
opinions as to the business, affairs, operations, assets, properties,
liabilities, results of operations, condition (financial or otherwise) or
prospects of the Company which may have been made or given by any other Investor
or by any agent or employee of any other Investor, and no Investor or any of its
agents or employees shall have any liability to any other Investor (or any other
person) relating to or arising from any such information, materials, statements
or opinions. Nothing contained herein or in any Transaction Document, and no
action taken by any Investor pursuant thereto, shall be deemed to constitute the
Investors as a partnership, an association, a joint venture or any other kind of
entity, or create a presumption that the Investors are in any way acting in
concert or as a group with respect to such obligations or the transactions
contemplated by the Transaction Document. Each Investor acknowledges that no
other Investor has acted as agent for such Investor in connection with making

 

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its investment hereunder and that no other Investor will be acting as agent of
such Investor in connection with monitoring its investment hereunder. Each
Investor shall be entitled to independently protect and enforce its rights,
including without limitation the rights arising out of this Agreement or out of
the other Transaction Documents, and it shall not be necessary for any other
Investor to be joined as an additional party in any proceeding for such purpose.

6.18 Indemnity of Agents. Each party hereto agrees for the express benefit of
the Agents, their affiliates and representatives that:

(a) the Agents or any of their respective affiliates or representatives
(i) shall not have any duties or obligations other than those specifically set
forth herein or in the engagement letter between the Company and the Agents (the
“Engagement Letter”), and (ii) shall not be liable (x) for any action taken,
suffered or omitted by the Agents in good faith and reasonably believed to be
authorized or within the discretion or rights or powers conferred upon them by
this Agreement or any Transaction Document or (y) for anything which the Agents
may do or refrain from doing in connection with this Agreement or any
Transaction Document, except for the Agent’s own willful misconduct or bad faith
or that of its affiliates or representatives.

(b) the Agents and any of their respective affiliates or representatives shall
be entitled to (i) rely on, and shall be protected in acting upon any
certificate, instrument, opinion, notice, letter or any other document or
security delivered to any of them by or on behalf of the Company and (ii) be
indemnified by the Company for acting as Agent hereunder pursuant to the
indemnification provisions set forth in the Engagement Letter, which are hereby
incorporated by reference herein.

[SIGNATURE PAGES TO FOLLOW]

 

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

 

CAREDX, INC. By:    

Name:   Peter Maag Title:   President and Chief Executive Officer

Address for Notice:

 

3260 Bayshore Blvd

Brisbane, CA 94005

 

Facsimile No.:

Telephone No.:

Attn:

 

With a copy to:

 

Wilson Sonsini Goodrich & Rosati, Professional Corporation

Facsimile: (650) 493-6811

Telephone: (650) 493.9300

Attn: Michael Danaher

COMPANY SIGNATURE PAGE

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Investor Signature Page

By its execution and delivery of this signature page, the undersigned Investor
hereby joins in and agrees to be bound by the terms and conditions of the
Securities Purchase Agreement dated as of June 15, 2016 (the “Purchase
Agreement”) by and among CareDx, Inc. and the Investors (as defined therein), as
to the number of Units set forth below, and authorizes this signature page to be
attached to the Purchase Agreement or counterparts thereof.

 

Name of Investor:   By:       Name:     Title:  

Address:                 Telephone No.:         Facsimile No.:        
Email Address:         Number of Units:         Purchase Price Per Unit: $23.94

Aggregate Purchase Price: $        

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Exhibits:

 

A    Schedule of Investors B    Plan of Distribution C    Selling Stockholders
D-1    Company Transfer Agent Instructions D-2    Form of Notice of
Effectiveness of Registration Statement E    Form of Warrant F    Schedules G   
Opinion of Company Corporate Counsel