Exhibit 10.1

SUBSCRIPTION AGREEMENT

This Subscription Agreement (the “Agreement”) is dated as of December
[            ], 2011 (the “Effective Date”), between ARCA biopharma, Inc., a
Delaware corporation (the “Company”), and the purchaser identified on the
signature page hereto (including its successors and assigns, the “Purchaser”).

WHEREAS, subject to the terms and conditions set forth in this Agreement and
pursuant to an exemption from registration under Section 4(2) of the Securities
Act of 1933, as amended (the “Securities Act”), the Company has authorized the
sale and issuance to certain investors of up to an aggregate of
                     units (the “Units”), with each Unit consisting of: (1) one
share of the Common Stock (each a “Share, and, collectively, the “Shares”) and
(2) one warrant (each a “Warrant” and, collectively, the “Warrants”) to purchase
                         shares of Common Stock, in the form attached hereto as
Exhibit A, for a purchase price of $1.05 per Unit.

WHEREAS, the Company desires to issue and sell to the Purchaser, and the
Purchaser desires to purchase from the Company, Units as more fully described in
this Agreement.

WHEREAS, at the Closing, the parties hereto shall execute and deliver a
Registration Rights Agreement, in the form attached hereto as Exhibit B (the
“Registration Rights Agreement”), pursuant to which the Company has agreed to
provide certain registration rights with respect to the Registrable Securities
(as defined in the Registration Rights Agreement), under the Securities Act and
the rules and regulations promulgated thereunder, and applicable state
securities laws.

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 Purchaser agree
as follows:

ARTICLE I.

DEFINITIONS

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

“Action” shall have the meaning ascribed to such term in Section 3.1(j).

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

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

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

 

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

“Common Stock” means (i) the Company’s shares of common stock, $0.001 par value
per share, and (ii) any capital stock into which such common stock shall have
been changed or any share capital resulting from a reclassification of such
common stock.

“Common Stock Equivalents” means any securities of the Company or its
subsidiaries which would entitle the holder thereof to acquire at any time
Common Stock, including, without limitation, any debt, preferred stock, rights,
options, warrants or other instrument that is at any time convertible into or
exercisable or exchangeable for, or otherwise entitles the holder thereof to
receive, Common Stock.

“Company Counsel” means Cooley LLP.

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

“Exempt Issuance” means the issuance of (a) shares of Common Stock or options to
employees, officers or directors of, or consultants to, the Company pursuant to
any stock or option plan duly adopted by the Board of Directors for such
purpose, including, but not limited to, the Company’s Amended and Restated 2004
Equity Incentive Plan and the Company’s Non-Employee Director Stock Option Plan,
(b) shares of Common Stock issued upon the conversion or exercise of Common
Stock Equivalents issued prior to the Effective Date, provided that the
conversion or exercise (as the case may be) of any such Common Stock Equivalent
is made solely pursuant to the conversion or exercise (as the case may be)
provisions of such Common Stock Equivalent that were in effect on the date
immediately prior to the Effective Date, the conversion or exercise price of any
such Common Stock Equivalents is not lowered, none of such Common Stock
Equivalents are (nor is any provision of any such Common Stock Equivalents)
amended or waived in any manner (whether by the Company or the holder thereof)
to increase the number of shares issuable thereunder and none of the terms or
conditions of any such Common Stock Equivalents are otherwise materially changed
or waived (whether by the Company or the holder thereof) in any manner that
adversely affects the Purchaser and (c) securities issued pursuant to
acquisitions or strategic transactions approved by a majority of the
disinterested directors of the Company, provided that any such issuance shall
only be to a Person (or to the equityholders of a Person) which is, itself or
through its subsidiaries, an operating company or an asset in a business
synergistic with the business of the Company and shall provide to the Company
additional benefits in addition to the investment of funds, but shall not
include a transaction in which the Company is issuing securities primarily for
the purpose of raising capital or to any Person whose primary business is
investing in securities or providing capital.

“GAAP” shall have the meaning ascribed to such term in Section 3.1(h).

“Intellectual Property Rights” shall have the meaning ascribed to such term in
Section 3.1(o).

 

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“Liens” means a lien, charge, security interest, encumbrance, right of first
refusal, preemptive right or other restriction.

“Material Adverse Effect” shall have the meaning assigned to such term in
Section 3.1(b).

“Material Permits” shall have the meaning ascribed to such term in
Section 3.1(m).

“Person” means an individual or corporation, partnership, trust, incorporated or
unincorporated association, joint venture, limited liability company, joint
stock company, government (or an agency or subdivision thereof) or other entity
of any kind, including, without limitation, any Trading Market.

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

“Purchaser Party” shall have the meaning ascribed to such term in Section 4.8.

“Registration Statement” shall have the meaning ascribed to such term in the
Registration Rights Agreement.

“Required Approvals” shall have the meaning ascribed to such term in
Section 3.1(e).

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

“SEC Reports” shall have the meaning ascribed to such term in Section 3.1(h).

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

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

“Short Sales” means all “short sales” as defined in Rule 200 of Regulation SHO
under the Exchange Act.

“Subscription Amount” means the aggregate amount to be paid for Shares and
Warrants purchased hereunder as specified below the Purchaser’s name on the
signature page of this Agreement and next to the heading “Subscription Amount,”
in United States dollars and in immediately available funds.

“Trading Day” shall have the meaning ascribed to such term in the Warrant.

 

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

“Transaction Documents” means, collectively, this Agreement, the Warrant, the
Registration Rights Agreement, the Irrevocable Transfer Agent Instructions (as
defined below) and each of the other agreements and instruments entered into or
delivered by any of the parties in connection with the transactions contemplated
hereby and thereby, as may be amended from time to time.

“Transfer Agent” means Computershare Trust Company, N.A., the current transfer
agent of the Company, with a mailing address of PO Box 43070 Providence, RI
02940-3070, and any successor transfer agent of the Company.

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

ARTICLE II.

PURCHASE AND SALE

2.1 Closing. Subject to the satisfaction (or waiver) of the conditions set forth
in Sections 2.3(a) and 2.3(b), the Company shall issue and sell to the
Purchaser, and the Purchaser shall purchase from the Company on the Closing Date
(as defined below), the number of Units set forth on the Purchaser’s signature
page hereto. At the Closing, the Purchaser shall deliver to the Company, via
wire transfer of immediately available funds equal to the Purchaser’s
Subscription Amount as set forth on the signature page hereto executed by the
Purchaser and the Company shall deliver to the Purchaser its respective Shares
and a Warrant as determined pursuant to Section 2.2(a), and the Company and the
Purchaser shall deliver the other items set forth in Section 2.2 deliverable at
the Closing. The closing (the “Closing”) of the sale by the Company to the
Purchaser, and the purchase by the Purchaser from the Company, of the number of
Units set forth on the Purchaser’s signature page hereto shall occur at the
offices of Company Counsel. The date and time of the Closing (the “Closing
Date”) shall be 8:30 a.m., New York time, on the first (1st) Business Day on
which the conditions to the Closing set forth in Sections 2.3(a) and 2.3(b)
below are satisfied or waived (or such later date as is mutually agreed to by
the Company and the Purchaser).

2.2 Deliveries.

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

(i) its duly executed signature page to each of the other Transaction Documents
to which it is a party;

 

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(ii) one or more stock certificates, free and clear of all restrictive and other
legends (except as expressly provided in Section 3.5 hereof), evidencing the
Shares;

(iii) a Warrant, duly executed by the Company, registered in the name of the
Purchaser to purchase up to the number of Warrant Shares set forth on the
signature page hereto, with an exercise price equal to $[*], subject to
adjustment therein (such Warrant certificate may be delivered within three
Trading Days of the Closing Date);

(iv) the opinion of Company’s Counsel, dated as of the Closing Date, in the form
previously provided to the Company;

(v) a copy of the Irrevocable Transfer Agent Instructions, in the form
acceptable to the Purchaser, which instructions shall have been delivered to and
acknowledged in writing by the Company’s transfer agent;

(vi) a certificate evidencing the formation and good standing of the Company
issued by the Secretary of State of Delaware as of a date within ten (10) days
of the Closing Date;

(vii) a certified copy of the certificate of incorporation as certified by the
Secretary of State of Delaware within ten (10) days of the Closing Date;

(viii) a certificate, in the form acceptable to the Purchaser, executed by the
Secretary of the Company and dated as of the Closing Date, as to (i) the
resolutions consistent with Section 3.1(c) as adopted by the Company’s board of
directors in a form reasonably acceptable to the Purchaser, (ii) the certificate
of incorporation of the Company and (iii) the bylaws of the Company, each as in
effect at the Closing;

(ix) a letter from the Company’s transfer agent certifying the number of shares
of Common Stock outstanding on the Closing Date immediately prior to the
Closing; and

(x) such other documents, instruments or certificates relating to the
transactions contemplated by this Agreement as the Purchaser or its counsel may
reasonably request.

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

(i) its duly executed signature page to each of the other Transaction Documents
to which it is a party;

(ii) the Purchaser’s Subscription Amount by wire transfer to the account as
specified in writing by the Company; and

 

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(iii) a fully completed Purchaser Questionnaire, in the form attached hereto as
Exhibit C, for the Company’s use in preparing the initial Registration Statement
required to be filed by the Company under the Registration Rights Agreement.

2.3 Closing Conditions.

(a) The obligation of the Company hereunder to issue and sell the Shares and the
Warrants to the Purchaser at the Closing is subject to the satisfaction, at or
before the Closing Date, of each of the following conditions, provided that
these conditions are for the Company’s sole benefit and may be waived by the
Company at any time in its sole discretion by providing the Purchaser with prior
written notice thereof:

(i) the representations and warranties made by the Purchaser in Section 3.2
hereof qualified as to materiality shall be true and correct at all times prior
to and on the Closing Date, except to the extent any such representation or
warranty expressly speaks as of an earlier date, in which case such
representation or warranty shall be true and correct as of such earlier date,
and, the representations and warranties made by the Purchaser in Section 3.2
hereof not qualified as to materiality shall be true and correct in all material
respects at all times prior to and on the Closing Date, except to the extent any
such representation or warranty expressly speaks as of an earlier date, in which
case such representation or warranty shall be true and correct in all material
respects as of such earlier date;

(ii) all obligations, covenants and agreements of the Purchaser under this
Agreement required to be performed at or prior to the Closing Date shall have
been performed; and

(iii) the delivery by the Purchaser of the items set forth in Section 2.2(b) of
this Agreement.

(b) The obligation of the Purchaser hereunder to purchase the Shares and the
Warrant at the Closing is subject to the satisfaction, at or before the Closing
Date, of each of the following conditions, provided that these conditions are
for the Purchaser’s sole benefit and may be waived by the Purchaser at any time
in its sole discretion by providing the Company with prior written notice
thereof:

(i) each and every representation and warranty of the Company that is qualified
by a materiality standard or Material Adverse Effect, in each case, shall have
been true and correct when made and shall be true and correct as of the Closing
Date as if originally made on and as of the Closing Date and each and every
representation and warranty of the Company that is not qualified by a
materiality standard or Material Adverse Effect, in each case, shall have been
true and correct when made and shall be true and correct in all material
respects as of the Closing Date as if originally made on and as of such Closing
Date, and the Company shall have performed, satisfied and complied in all
respects with the

 

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covenants, agreements and conditions required to be performed, satisfied or
complied with by the Company at or prior to the Closing Date, and the Purchaser
shall have received a certificate, executed by the Chief Executive Officer or
Chief Financial Officer of the Company, dated as of the Closing Date, to the
foregoing effect and as to such other matters as may be reasonably requested by
the Purchaser in the form acceptable to the Purchaser;

(ii) the delivery by the Company of the items set forth in Section 2.2(a) of
this Agreement;

(iii) the Common Stock (I) shall be designated for quotation or listed on the
Principal Market (as defined in the Warrant) and (II) shall not have been
suspended, as of the Closing Date, by the Commission or the Principal Market
from trading on the Principal Market nor shall suspension by the Commission or
the Principal Market have been threatened, as of the Closing Date, either (A) in
writing by the Commission or the Principal Market or (B) by falling below the
minimum maintenance requirements of the Principal Market;

(iv) the Company shall have obtained all governmental, regulatory or third party
consents and approvals, if any, necessary for the sale of the Securities,
including without limitation, those required by the Principal Market;

(v) no statute, rule, regulation, executive order, decree, ruling or injunction
shall have been enacted, entered, promulgated or endorsed by any court or
governmental authority of competent jurisdiction that prohibits the consummation
of any of the transactions contemplated by the Transaction Documents;

(vi) since the date of execution of this Agreement, no event or series of events
shall have occurred that reasonably would have or result in a Material Adverse
Effect;

(vii) none of the other Subscription Agreements have been terminated; and

(viii) the Company shall have filed with Nasdaq a Notification Form: Listing of
Additional Shares for the listing of the Shares and the Warrant Shares, a copy
of which shall have been made available to the Purchaser.

2.4 Subscription Agreements; Purchasers. The Company proposes to enter into
subscription agreements in substantially the form of this Agreement
(collectively with this Agreement, the “Subscription Agreements”) with certain
other investors (collectively with the Purchaser, the “Purchasers”) and expects
to complete sales of Units to them.

2.5 Placement Agent. The Purchaser acknowledges that the Company has agreed to
pay Roth Capital Partners, LLC (the “Placement Agent”) in respect of the sales
of the Units to the Purchaser.

 

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ARTICLE III.

REPRESENTATIONS AND WARRANTIES

3.1 Representations and Warranties of the Company. The Company represents and
warrants to the Purchaser as follows:

(a) Subsidiaries. The Company owns, directly or indirectly, all of the capital
stock or other equity interests of each of its direct and indirect subsidiaries
free and clear of any Liens, and all of the issued and outstanding shares of
capital stock of each such subsidiary are validly issued and are fully paid,
non-assessable and free of preemptive and similar rights to subscribe for or
purchase securities, except as set forth on Schedule 3.1(a) hereto. The Company
or one of its subsidiaries has the unrestricted right to vote, and (subject to
limitations imposed by applicable law) to receive dividends and distributions
on, all capital securities of its subsidiaries as owned by the Company or such
subsidiary. If the Company has no subsidiaries, all other references to
subsidiaries in the Transaction Documents shall be disregarded.

(b) Organization and Qualification. The Company and each of its subsidiaries is
an entity duly incorporated or otherwise organized, validly existing and in good
standing under the laws of the jurisdiction of its incorporation or
organization, with the requisite power and 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 nor default of any of the
provisions of its respective certificate or articles of incorporation, bylaws or
other organizational or charter documents. Each of the Company and its
subsidiaries is duly qualified to conduct 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, could not have or reasonably be expected to result in: (i) a
material adverse effect on the legality, validity or enforceability of any
Transaction Document, (ii) a material adverse effect on the results of
operations, assets, business, prospects or condition (financial or otherwise) of
the Company and its subsidiaries, taken as a whole, or (iii) a material adverse
effect on the Company’s ability to perform in any material respect on a timely
basis its obligations under any Transaction Document (any of (i), (ii) or (iii),
a “Material Adverse Effect”) and no Proceeding has been instituted in any such
jurisdiction revoking, limiting or curtailing or seeking to revoke, limit or
curtail such power and authority or qualification.

(c) Authorization; Enforcement. The Company has the requisite corporate power
and authority to enter into and to consummate the transactions contemplated by
each of the Transaction Documents and otherwise to carry out its obligations
hereunder and thereunder. The execution and delivery of each of the Transaction
Documents by the Company and the consummation by it of the transactions
contemplated hereby and thereby have been duly authorized by all necessary
action on the part of the Company and no further action is required by the
Company, the Board of Directors or the Company’s stockholders in connection
therewith other than in connection with the Required Approvals. Each Transaction
Document to which it is a party has been (or upon delivery will have been) duly
executed by the Company and, when delivered in

 

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accordance with the terms hereof and thereof, will constitute the valid and
binding obligation of the Company enforceable against the Company in accordance
with its terms, except (i) as limited by general equitable principles and
applicable bankruptcy, insolvency, reorganization, moratorium and other laws of
general application affecting enforcement of creditors’ rights generally,
(ii) as limited by laws relating to the availability of specific performance,
injunctive relief or other equitable remedies and (iii) insofar as
indemnification and contribution provisions may be limited by applicable law.

(d) No Conflicts. The execution, delivery and performance by the Company of the
Transaction Documents, the issuance and sale of the Shares and Warrants and the
consummation by it of the transactions contemplated hereby and thereby to which
it is a party 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, or (ii) result in the
creation of any Lien upon any of the properties or assets of the Company or any
subsidiary, or give to others any rights of termination, amendment, acceleration
or cancellation (with or without notice, lapse of time or both) of or conflict
with, or constitute a default (or an event that with notice or lapse of time or
both would become a default) under, 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, or
(iii) subject to the Required Approvals, conflict with or result in a violation
of any law, rule, regulation, order, judgment, injunction, decree or other
restriction of any Trading Market, court or governmental authority to which the
Company or a subsidiary is subject (including federal and state securities laws
and regulations and the regulations of any Trading Market), or by which any
property or asset of the Company or a subsidiary is bound or affected; except in
the case of each of clauses (ii) and (iii), such as could not reasonably be
expected to result in a Material Adverse Effect.

(e) Filings, Consents and Approvals. The Company is not required to obtain any
consent, waiver, authorization or order of, give any notice to, or make any
filing or registration with, any court or other federal, state, local or other
governmental authority or other Person in connection with the execution,
delivery and performance by the Company of the Transaction Documents, other
than: (i) the filing with the Commission of the initial Registration Statement,
(iii) the filing with the Commission of a Form D; (iv) application(s) to each
applicable Trading Market for the listing or designation for quotation (as the
case may be) of the Shares and Warrant Shares for trading thereon in the time
and manner required thereby and (iv) such filings as are required to be made
under applicable state securities laws (collectively, the “Required Approvals”).
All consents, authorizations, orders, filings and registrations which the
Company is required to obtain at or prior to the Closing have been obtained or
effected on or prior to the Closing Date, and neither the Company nor any of its
subsidiaries are aware of any facts or circumstances which might prevent the
Company from obtaining or effecting any of the registration, application or
filings contemplated by the Transaction Documents.

 

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(f) Issuance of the Securities. The Shares and Warrants are duly authorized and,
when issued and paid for in accordance with the applicable Transaction Documents
(i) the Shares will be duly and validly issued, fully paid and nonassessable,
free and clear of all Liens imposed by the Company and (ii) the Warrants will be
duly and validly issued, free and clear of all Liens imposed by the Company. The
Warrant Shares, when issued in accordance with the terms of the Warrants, will
be validly issued, fully paid and nonassessable, free and clear of all Liens
imposed by the Company. The Company has reserved from its duly authorized
capital stock the maximum number of shares of Common Stock issuable pursuant to
this Agreement and the Warrants.

(g) Capitalization. The Company has not issued any capital stock since its most
recently filed periodic report under the Exchange Act, other than pursuant to
the exercise of stock options under the Company’s stock option plans, the
issuance of shares of Common Stock to employees pursuant to the Company’s
employee stock purchase plans and pursuant to the conversion and/or exercise of
Common Stock Equivalents outstanding as of the date of the most recently filed
periodic report under the Exchange Act. No Person has any right of first
refusal, preemptive right, right of participation, or any similar right to
participate in the transactions contemplated by the Transaction Documents except
as described in the Company’s SEC Reports. Except as described in the Company’s
SEC Reports, there are no outstanding options, warrants, scrip 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 giving any Person any right to subscribe for or acquire,
any shares of Common Stock, or contracts, commitments, understandings or
arrangements by which the Company or any subsidiary is or may become bound to
issue additional shares of Common Stock or Common Stock Equivalents, other than
as a result of the purchase and sale of the Shares and Warrants or the exercise
of the Warrants. The issuance and sale of the Shares and Warrants, and the
issuance of Warrant Shares upon exercise of the Warrants, will not obligate the
Company to issue shares of Common Stock or other securities to any Person (other
than the Purchasers) and will not result in a right of any holder of Company
securities to adjust the exercise, conversion, exchange or reset price under any
of such securities. All of the outstanding shares of capital stock of the
Company are validly issued, fully paid and nonassessable. No further approval or
authorization of any stockholder, the Board of Directors or others is required
for the issuance and sale of the Securities. There are no stockholders
agreements, voting agreements or other similar agreements with respect to the
Company’s capital stock to which the Company is a party or, to the knowledge of
the Company, between or among any of the Company’s stockholders that are not
described in the SEC Reports.

(h) SEC Reports; Financial Statements. The Company has filed all reports,
schedules, forms, statements and other documents required to be filed by the
Company under the Exchange Act, including pursuant to Section 13(a) or 15(d)
thereof, for the two years preceding the Effective Date (or such shorter period
as the Company was required by law or regulation to file such material) (all of
the foregoing filed prior to the date hereof and all exhibits included therein
and financial statements, notes and schedules thereto and documents incorporated
by reference therein being hereinafter referred to collectively as the “SEC
Reports”) on a timely basis or has received a valid extension of such time of
filing and has filed any such SEC Reports prior to the expiration of any such
extension. As of their respective dates, the SEC Reports complied in all
material respects

 

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with the requirements of the Exchange Act, as applicable, and the rules and
regulations of the Commission promulgated thereunder applicable thereto, and
none of the SEC Reports, when filed, contained any untrue statement of a
material fact or omitted to state a material fact required to be stated therein
or necessary in order to make the statements therein, in the light of the
circumstances under which they were made, not misleading. The financial
statements of the Company included in the SEC Reports comply in all material
respects with applicable accounting requirements and the rules and regulations
of the Commission with respect thereto as in effect at the time of filing. Such
financial statements have been prepared in accordance with United States
generally accepted accounting principles applied on a consistent basis during
the periods involved (“GAAP”) (except (i) as may be otherwise indicated in such
financial statements or the notes thereto, or (ii) in the case of unaudited
interim statements, to the extent they may exclude footnotes or may be condensed
or summary statements), and such financial statements fairly present in all
material respects the 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, which will not be material,
either individually or in the aggregate.

(i) Material Changes; Undisclosed Events, Liabilities or Developments. Since the
date of the latest audited financial statements included within the SEC Reports,
except as specifically disclosed in a subsequent SEC Report filed prior to the
Effective Date, (i) there has been no event, occurrence or development that has
had, or that could reasonably be expected to result in, a Material Adverse
Effect, (ii) the Company has not incurred any liabilities (contingent or
otherwise) other than (A) trade payables and accrued expenses incurred in the
ordinary course of business consistent with past practice and (B) liabilities
not required to be reflected in the Company’s financial statements pursuant to
GAAP or disclosed in filings made with the Commission, (iii) the Company has not
altered its method of accounting, (iv) the Company has not declared or made any
dividend or distribution of cash or other property to its stockholders or
purchased, redeemed or made any agreements to purchase or redeem any shares of
its capital stock and (v) the Company has not issued any equity securities to
any officer, director or Affiliate, except pursuant to existing Company stock
option plans. Except for the issuance of the Shares and Warrants contemplated by
this Agreement, no event, liability, fact, circumstance, occurrence or
development has occurred or exists or is reasonably expected to occur or exist
with respect to the Company or its subsidiaries or their respective business,
prospects, properties, operations, assets or financial condition that would be
required to be disclosed by the Company under applicable securities laws at the
time this representation is made or deemed made that has not been publicly
disclosed on or before the date that this representation is made. Neither the
Company nor any of its subsidiaries has taken any steps to seek protection
pursuant to any law or statute relating to bankruptcy, insolvency,
reorganization, receivership, liquidation or winding up, nor does the Company or
any subsidiary have any knowledge or reason to believe that any of their
respective creditors intend to initiate involuntary bankruptcy proceedings or
any actual knowledge of any fact which would reasonably lead a creditor to do
so. The Company and its subsidiaries, on a consolidated basis, are not as of the
date hereof, and after giving effect to the transactions contemplated hereby to
occur at the Closing, will

 

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not be Insolvent (as defined below). “Insolvent” means, with respect to the
Company and its subsidiaries, on a consolidated basis, (i) the present fair
saleable value of the Company’s and its subsidiaries’ assets is less than the
amount required to pay the Company’s and its subsidiaries’ total Indebtedness
(as defined below), (ii) the Company and its subsidiaries are unable to pay
their debts and liabilities, subordinated, contingent or otherwise, as such
debts and liabilities become absolute and matured or (iii) the Company and its
subsidiaries intend to incur or believe that they will incur debts that would be
beyond their ability to pay as such debts mature Neither the Company nor any of
its subsidiaries has engaged in any business or in any transaction, and is not
about to engage in any business or in any transaction, for which the Company’s
or such subsidiary’s remaining assets constitute unreasonably small capital.
“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 (including, without limitation,
“capital leases” in accordance with generally accepted accounting principles)
(other than trade payables entered into in the ordinary course of business),
(C) all reimbursement or payment obligations with respect to letters of credit,
surety bonds and other similar instruments, (D) all obligations evidenced by
notes, bonds, debentures or similar instruments, including obligations so
evidenced incurred in connection with the acquisition of property, assets or
businesses, (E) all indebtedness created or arising under any conditional sale
or other title retention agreement, or incurred as financing, in either case
with respect to any property or assets acquired with the proceeds of such
indebtedness (even though the rights and remedies of the seller or bank under
such agreement in the event of default are limited to repossession or sale of
such property), (F) all monetary obligations under any leasing or similar
arrangement which, in connection with generally accepted accounting principles,
consistently applied for the periods covered thereby, is classified as a capital
lease, (G) all indebtedness referred to in clauses (A) through (F) above secured
by (or for which the holder of such indebtedness has an existing right,
contingent or otherwise, to be secured by) any mortgage, lien, pledge, charge,
security interest or other encumbrance upon or in any property or assets
(including accounts and contract rights) owned by any Person, even though the
Person which owns such assets or property has not assumed or become liable for
the payment of such indebtedness, and (H) all Contingent Obligations in respect
of indebtedness or obligations of others of the kinds referred to in clauses
(A) through (G) above; and “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.

(j) Litigation. (i) There is no action, suit, inquiry, notice of violation,
proceeding or investigation pending or, to the knowledge of the Company,
threatened against or affecting the Company, any subsidiary or any of their
respective properties before or by any court, arbitrator, governmental or
administrative agency or regulatory authority (federal, state, county, local or
foreign) (collectively, an “Action”); (ii) neither the Company nor any
subsidiary, nor any director or officer thereof, is or has been the

 

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subject of any Action involving a claim of violation of or liability under
federal or state securities laws or a claim of breach of fiduciary duty and
(iii) there has not been, and to the knowledge of the Company, there is not
pending or contemplated, any investigation by the Commission involving the
Company or any current or former director or officer of the Company, which, in
any case of clauses (i), (ii) or (iii), (A) adversely affects or challenges the
legality, validity or enforceability of any of the Transaction Documents or the
Securities or (B) could, if there were an unfavorable decision, have or
reasonably be expected to result in a Material Adverse Effect.

(k) Labor Relations. No material labor dispute exists or, to the knowledge of
the Company, is imminent with respect to any of the employees of the Company
that could reasonably be expected to result in a Material Adverse Effect. None
of the Company’s or its subsidiaries’ employees is a member of a union that
relates to such employee’s relationship with the Company or such subsidiary, and
neither the Company nor any of its subsidiaries is a party to a collective
bargaining agreement, and the Company and its Subsidiaries believe that their
relationships with their employees are good. No executive officer, to the
knowledge of the Company, is, or is now expected to be, in violation of any
material term of any employment contract, confidentiality, disclosure or
proprietary information agreement or non-competition agreement, or any other
contract or agreement or any restrictive covenant in favor of any third party,
and the continued employment of each such executive officer does not subject the
Company or any of its subsidiaries to any liability with respect to any of the
foregoing matters. The Company and its subsidiaries are in compliance with all
U.S. federal, state, local and foreign laws and regulations relating to
employment and employment practices, terms and conditions of employment and
wages and hours, except where the failure to be in compliance could not,
individually or in the aggregate, reasonably be expected to have a Material
Adverse Effect.

(l) Compliance. Neither the Company nor any subsidiary: (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 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
judgment, decree or order of any court, arbitrator or governmental body or
(iii) is or has been in violation of any statute, rule, ordinance or regulation
of any governmental authority, including, without limitation all foreign,
federal, state and local laws applicable to its business and all such laws that
affect the environment, except in each case as could not reasonably be expected
to result in a Material Adverse Effect.

(m) Regulatory Permits. Except as set forth in the SEC Reports, the Company and
its 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 described in the SEC
Reports, except where the failure to possess such permits could not reasonably
be expected to result in a Material Adverse Effect (“Material Permits”), and
neither the Company nor any subsidiary has received any notice of proceedings
relating to the revocation or modification of any Material Permit.

 

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(n) Title to Assets. The Company and its subsidiaries have good and marketable
title in fee simple to all real property owned by them and good and marketable
title to all personal property owned by them that is material to the business of
the Company and its subsidiaries, in each case free and clear of all Liens,
except for Liens as do not materially affect the value of such property and do
not materially interfere with the use made and proposed to be made of such
property by the Company and its subsidiaries and Liens for the payment of
federal, state or other taxes, the payment of which is neither delinquent nor
subject to penalties. Any real property and facilities held under lease by the
Company and its subsidiaries are held by them under valid, subsisting and
enforceable leases with which the Company and its subsidiaries are in compliance
with such exceptions as are not material and do not materially interfere with
the use made and proposed to be made of such property and facilities by the
Company and its subsidiaries.

(o) Patents and Trademarks. The Company and its subsidiaries have, or have
rights to use, all patents, patent applications, trademarks, trademark
applications, service marks, trade names, trade secrets, inventions, copyrights,
licenses and other intellectual property rights and similar rights necessary or
material for use in connection with their respective businesses as described in
the SEC Reports and which the failure to so have could reasonably be expected to
have a Material Adverse Effect (collectively, the “Intellectual Property
Rights”). Neither the Company nor any subsidiary has received a notice (written
or otherwise) that any of the Intellectual Property Rights used by the Company
or any subsidiary violates or infringes upon the rights of any Person. To the
knowledge of the Company, all such Intellectual Property Rights are enforceable
and there is no existing infringement by another Person of any of the
Intellectual Property Rights. The Company and its subsidiaries have taken
reasonable security measures to protect the secrecy, confidentiality and value
of all of their intellectual properties, except where the failure to do so could
not, individually or in the aggregate, reasonably be expected to have a Material
Adverse Effect.

(p) Insurance. The Company and its 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 in which the Company and
its subsidiaries are engaged, including, but not limited to, directors and
officers insurance coverage at least equal to the aggregate Subscription Amount.
Neither the Company nor any subsidiary has any reason to believe that it will
not be able to renew its existing insurance coverage as and when such coverage
expires or to obtain similar coverage from similar insurers as may be necessary
to continue its business without a significant increase in cost.

(q) Transactions With Affiliates and Employees. Except as set forth in the SEC
Reports, none of the officers or directors of the Company and, to the knowledge
of the Company, none of the employees of the Company is presently a party to any
transaction with the Company or any subsidiary (other than for services as
employees,

 

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officers and directors), including any contract, agreement or other arrangement
providing for the furnishing of services to or by, providing for rental of real
or personal property to or from, or otherwise requiring payments to or from any
officer, director or such employee or, to the knowledge of the Company, any
entity in which any officer, director, or any such employee has a substantial
interest or is an officer, director, trustee or partner, in each case in excess
of $120,000 other than for (i) payment of salary or consulting fees for services
rendered, (ii) reimbursement for expenses incurred on behalf of the Company and
(iii) other employee benefits, including stock option agreements under any stock
option plan of the Company.

(r) Sarbanes-Oxley. The Company is in material compliance with all provisions of
the Sarbanes-Oxley Act of 2002 that are applicable to it as of the Closing Date.

(s) Certain Fees. Except as contemplated by this Agreement, no brokerage or
finder’s fees or commissions are or will be payable by the Company to any
broker, financial advisor or consultant, finder, placement agent, investment
banker, bank or other Person with respect to the transactions contemplated by
the Transaction Documents. The Purchaser shall have no obligation with respect
to any fees or with respect to any claims made by or on behalf of other Persons
for fees of a type contemplated in this Section that may be due in connection
with the transactions contemplated by the Transaction Documents.

(t) Investment Company. The Company is not, and immediately after receipt of
payment for the Shares and Warrants, will not be an “investment company” within
the meaning of the Investment Company Act of 1940, as amended.

(u) Registration Rights. Except as set forth in the SEC Reports, no Person has
any right to cause the Company to effect the registration under the Securities
Act of any securities of the Company as a result of the transactions
contemplated by this Agreement.

(v) Listing and Maintenance Requirements. The Common Stock is registered
pursuant to Section 12(b) or 12(g) of the Exchange Act, and the Company has
taken no action designed to, or that to its knowledge is likely to have the
effect of, terminating the registration of the Common Stock under the Exchange
Act nor has the Company received any notification that the Commission is
contemplating terminating such registration. Except as set forth in the SEC
Reports, the Company has not, in the 12 months preceding the Effective Date,
received notice from any Trading Market on which the Common Stock is or has been
listed or quoted to the effect that the Company is not in compliance with the
listing or maintenance requirements of such Trading Market. The Company is in
compliance with all such listing and maintenance requirements.

(w) Application of Takeover Protections. The Company and the Board of Directors
have taken all necessary action, if any, in order to render inapplicable any
control share acquisition, business combination, poison pill (including any
distribution under a rights agreement) or other similar anti-takeover provision
under the Company’s certificate of incorporation (or similar charter documents)
or the laws of its state of

 

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incorporation that is or could become applicable to the Purchaser as a result of
the Purchaser and the Company fulfilling their obligations or exercising their
rights under the Transaction Documents, including, without limitation as a
result of the Company’s issuance of the Securities and the Purchaser’s ownership
of the any of the Securities.

(x) Disclosure. Except with respect to the material terms and conditions of the
transactions contemplated by the Transaction Documents, the Company confirms
that neither it nor any other Person acting on its behalf has provided the
Purchaser or its agents or counsel with any information that it believes
constitutes or might constitute material, non-public information. The Company
understands and confirms that the Purchaser will rely on the foregoing
representation in effecting transactions in securities of the Company. The
Company acknowledges and agrees that the Purchaser does not make or has not made
any representations or warranties with respect to the transactions contemplated
hereby other than those specifically set forth in Section 3.2 hereof.

(y) Tax Status. Except for matters that would not, individually or in the
aggregate, have or reasonably be expected to result in a Material Adverse
Effect, the Company and each subsidiary has timely filed all necessary federal,
state and foreign income and franchise tax returns and has timely paid or
accrued all taxes shown as due thereon, and the Company has no knowledge of a
tax deficiency which has been asserted or threatened against the Company or any
subsidiary.

(z) Foreign Corrupt Practices. Neither the Company, nor to the knowledge of the
Company, any agent or other person acting on behalf of the Company, has
(i) directly or indirectly, used any funds for unlawful contributions, gifts,
entertainment or other unlawful expenses related to foreign or domestic
political activity, (ii) made any unlawful payment to foreign or domestic
government officials or employees or to any foreign or domestic political
parties or campaigns from corporate funds, (iii) failed to disclose fully any
contribution made by the Company (or made by any person acting on its behalf of
which the Company is aware) which is in violation of law, or (iv) violated in
any material respect any provision of the Foreign Corrupt Practices Act of 1977,
as amended.

(aa) Accountants. The Company’s independent registered public accounting firm is
identified in the SEC Reports and such accounting firm is a registered public
accounting firm as required by the Exchange Act.

(bb) Acknowledgment Regarding Purchaser’s Purchase of Securities. The Company
acknowledges and agrees that the Purchaser is acting solely in the capacity of
an arm’s length purchaser with respect to the Transaction Documents and the
transactions contemplated thereby. The Company further acknowledges that the
Purchaser is not acting as a financial advisor or fiduciary of the Company (or
in any similar capacity) with respect to the Transaction Documents and the
transactions contemplated thereby and any advice given by the Purchaser or any
of its respective representatives or agents in connection with the Transaction
Documents and the transactions contemplated thereby is merely incidental to the
Purchaser’s purchase of the Securities. The Company further represents to the
Purchaser that the Company’s decision to enter into this Agreement and the other
Transaction Documents has been based solely on the independent evaluation of the
transactions contemplated hereby by the Company and its representatives.

 

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(cc) Acknowledgement Regarding Purchaser’s Trading Activity. Anything in this
Agreement or elsewhere herein to the contrary notwithstanding (except for
Section 3.2(e) hereof and the first sentence of Section 4.12), it is understood
and acknowledged by the Company that: (i) the Purchaser has not been asked by
the Company to agree, nor has the Purchaser agreed, to desist from purchasing or
selling, long and/or short, securities of the Company, or “derivative”
securities based on securities issued by the Company or to hold the Securities
for any specified term; (ii) past or future open market or other transactions by
the Purchaser, specifically including, without limitation, Short Sales or
“derivative” transactions, before or after the closing of this or future private
placement transactions, may negatively impact the market price of the Company’s
publicly-traded securities; (iii) the Purchaser, and counter-parties in
“derivative” transactions to which the Purchaser is a party, directly or
indirectly, presently may have a “short” position in the Common Stock, and
(iv) the Purchaser shall not be deemed to have any affiliation with or control
over any arm’s length counter-party in any “derivative” transaction. The Company
further understands and acknowledges that (y) the Purchaser may engage in
hedging activities at various times during the period that the Securities are
outstanding, including, without limitation, during the periods that the value of
the Warrant Shares deliverable with respect to Securities are being determined,
and (z) such hedging activities (if any) could reduce the value of the existing
stockholders’ equity interests in the Company at and after the time that the
hedging activities are being conducted. The Company acknowledges that such
aforementioned hedging activities do not constitute a breach of any of the
Transaction Documents.

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

(ee) No Integrated Offering. None of the Company, its subsidiaries or any of
their affiliates, nor any Person acting on their behalf has, directly or
indirectly, made any offers or sales of any security or solicited any offers to
buy any security, under circumstances that would cause this offering of the
Securities to require approval of stockholders of the Company under any
applicable stockholder approval provisions, including, without limitation, under
the rules and regulations of any exchange or automated quotation system on which
any of the securities of the Company are listed or designated for quotation.

(ff) Securities Act Exemption. Assuming the accuracy of the representations and
warranties of the Purchaser contained in Section 3.2 hereof, the offer and sale
of the Securities to the Purchaser as contemplated hereby is exempt from the
registration requirements of the Securities Act.

 

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(gg) No Undisclosed Events, Liabilities, Developments or Circumstances. To the
knowledge of the Company’s executive officers (as such term is defined in Rule
501 promulgated under the Securities Act), no event, liability, development or
circumstance has occurred or exists, or is reasonably expected to occur or exist
with respect to the Company, any of its subsidiaries or any of their respective
businesses, properties, liabilities, prospects, operations (including results
thereof) or condition (financial or otherwise), that would be required to be
disclosed by the Company under applicable securities laws on a registration
statement on Form S-1 filed with the Commission relating to an issuance and sale
by the Company of its Common Stock and which has not been publicly announced.

(hh) Shell Company Status. The Company is not, and has never been, an issuer
identified in Rule 144(i), and Rule 144(i) has never applied to the Company.

(ii) Indebtedness and Other Contracts. Neither the Company nor any of its
subsidiaries (i) except as disclosed in the SEC Reports, has any outstanding
Indebtedness, (ii) is a party to any contract, agreement or instrument, the
violation of which, or default under which, by the other party(ies) to such
contract, agreement or instrument could reasonably be expected to result in a
Material Adverse Effect, (iii) 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 (iv) 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.

3.2 Representations and Warranties of the Purchaser. The Purchaser represents
and warrants to the Company as follows:

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

 

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(b) Investment Experience. The Purchaser (i) is knowledgeable, sophisticated and
experienced in making, and is qualified to make decisions with respect to,
investments in shares presenting an investment decision like that involved in
the purchase of the Units, including investments in securities issued by the
Company and investments in comparable companies and (ii) subject to Section 3.3,
in connection with its decision to purchase the number of Shares and Warrants
set forth on the Purchaser’s signature page, Purchaser has relied solely upon
the SEC Reports and the representations and warranties of the Company contained
in this Agreement. Purchaser acknowledges its opportunity to review copies of
the SEC Reports. At the time the Purchaser was first offered the Securities, it
was, and as of the date hereof it is, either (i) an “accredited investor” as
defined in Rule 501(a)(1), (a)(2), (a)(3), (a)(7) or (a)(8) under the Securities
Act or (ii) a “qualified institutional buyer” as defined in Rule 144A(a) under
the Securities Act.

(c) No Legal or Tax Advice. The Purchaser understands that nothing in this
Agreement or any other materials presented to the Purchaser in connection with
the purchase and sale of the Units constitutes legal, tax or investment advice.
The Purchaser has consulted such legal, tax and investment advisors and made
such investigation as it, in its sole discretion, has deemed necessary or
appropriate in connection with its purchase of Units. The Purchaser also
understands that there is no established public trading market for the Warrants
being offered pursuant to this Agreement, and that the Company does not expect
such a market to develop. In addition, the Company does not intend to apply for
listing the Warrants on any securities exchange. Without an active market, the
liquidity of the Warrants will be limited.

(d) Investment Intent. The Purchaser (i) is acquiring the Shares and Warrant,
and (ii) upon exercise of the Warrant will acquire the Warrant Shares issuable
upon exercise thereof, in each case, for its own account and not with a view
towards, or for resale in connection with, the public sale or the distribution
thereof in violation of applicable securities laws, except pursuant to sales
registered or exempted under the Securities Act; provided, however, by making
the representations herein, the Purchaser does not agree, or make any
representation or warranty, 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. The Purchaser does not presently have any agreement or
understanding, directly or indirectly, with any Person to distribute any of the
Securities in violation of applicable securities laws.

(e) Transfer or Resale. The Purchaser understands that except as provided in the
Registration Rights Agreement: (i) the Securities have not been and are not
being registered under the Securities Act or any state securities laws, and may
not be, and the Purchaser hereby agrees that the Securities may not be, offered
for sale, sold, assigned or transferred unless (A) subsequently registered
thereunder, (B) the Purchaser shall have delivered to the Company (if requested
by the Company) an opinion of counsel to the Purchaser, in a form reasonably
acceptable to the Company, to the effect that such Securities to be sold,
assigned or transferred may be sold, assigned or transferred pursuant to an
exemption from such registration, or (C) the Purchaser provides the Company with
reasonable assurance that such Securities can be sold, assigned or transferred
pursuant to

 

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Rule 144 or Rule 144A promulgated under the Securities Act (or a successor rule
thereto) (collectively, “Rule 144”); (ii) any sale of the Securities made in
reliance on Rule 144 may be made only in accordance with the terms of Rule 144,
and further, if Rule 144 is not applicable, any resale of the Securities under
circumstances in which the seller (or the Person through whom the sale is made)
may be deemed to be an underwriter (as that term is defined in the Securities
Act) may require compliance with some other exemption under the Securities Act
or the rules and regulations of the Commission promulgated thereunder; and
(iii) neither the Company nor any other Person is under any obligation to
register the Securities under the Securities Act or any state securities laws or
to comply with the terms and conditions of any exemption thereunder. The Company
shall be entitled to give stop transfer instructions to its Transfer Agent with
respect to the Securities in order to enforce the foregoing restrictions.

3.3 Acknowledgement. The Company acknowledges and agrees that the
representations contained in Section 3.2, including, without limitation,
Section 3.2(b), shall not modify, amend or affect the Purchaser’s right to rely
on the Company’s representations and warranties contained in this Agreement or
any representations and warranties contained in any other Transaction Document
or any other document or instrument executed and/or delivered in connection with
this Agreement or the consummation of the transaction contemplated hereby.

3.4 Residency. The investment decision was made for Purchaser in the
jurisdiction indicated below such Purchaser’s name on the applicable signature
page hereto.

3.5 Legend. The Purchaser understands that the Securities have been issued (or
will be issued in the case of the Warrant Shares) pursuant to an exemption from
registration or qualification under the 1933 Act and applicable state securities
laws, and except as set forth below, the Securities shall bear any legend as
required by the “blue sky” laws of any state and a restrictive legend in
substantially the following form (and a stop-transfer order may be placed
against transfer of such stock certificates):

[NEITHER THE ISSUANCE AND SALE OF THE SECURITIES REPRESENTED BY THIS CERTIFICATE
NOR THE SECURITIES INTO WHICH THESE SECURITIES ARE [EXERCISABLE] HAVE BEEN][THE
SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN] REGISTERED UNDER THE
SECURITIES ACT OF 1933, AS AMENDED, OR APPLICABLE STATE SECURITIES LAWS. THE
SECURITIES MAY NOT BE OFFERED FOR SALE, SOLD, TRANSFERRED OR ASSIGNED (I) IN THE
ABSENCE OF (A) AN EFFECTIVE REGISTRATION STATEMENT FOR THE SECURITIES UNDER THE
SECURITIES ACT OF 1933, AS AMENDED, OR (B) AN OPINION OF COUNSEL TO THE HOLDER
(IF REQUESTED BY THE COMPANY), IN A FORM REASONABLY ACCEPTABLE TO THE COMPANY,
THAT REGISTRATION IS NOT REQUIRED UNDER SAID ACT OR (II) UNLESS SOLD OR ELIGIBLE
TO BE SOLD PURSUANT TO RULE 144 OR RULE 144A UNDER SAID ACT. NOTWITHSTANDING THE
FOREGOING, THE SECURITIES MAY BE PLEDGED IN CONNECTION WITH A BONA FIDE MARGIN
ACCOUNT OR OTHER LOAN OR FINANCING ARRANGEMENT SECURED BY THE SECURITIES.

 

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ARTICLE IV.

OTHER AGREEMENTS OF THE PARTIES

4.1 Legend Removal; Buy-In.

(a) Removal of Legends. Certificates evidencing Securities shall not be required
to contain the legend set forth in Section 3.5 above or any other legend
(i) while a registration statement (including a Registration Statement) covering
the resale of such Securities is effective under the Securities Act, (ii) if
such Securities are, or are eligible to be sold, assigned or transferred under
Rule 144 (provided that the Purchaser provides the Company with reasonable
assurances that such Securities are eligible for sale, assignment or transfer
under Rule 144 which shall not include an opinion of counsel) or (iii) in
connection with a sale, assignment or other transfer (other than under Rule
144), provided that the Purchaser provides the Company with an opinion of
counsel to the Purchaser, in a form acceptable to the Company, to the effect
that such sale, assignment or transfer of the Securities may be made without
registration under the applicable requirements of the Securities Act. If a
legend is not required pursuant to the foregoing, the Company shall no later
than two (2) Trading Days following the delivery by a the Purchaser to the
Company or the transfer agent (with notice to the Company) of a legended
certificate representing such Securities (endorsed or with stock powers
attached, signatures guaranteed, and otherwise in form necessary to affect the
reissuance and/or transfer, if applicable), together with any other deliveries
from the Purchaser as may be required above in this Section 4.1(a), as directed
by the Purchaser, either: (A) provided that the Transfer Agent is participating
in the DTC Fast Automated Securities Transfer Program and such Securities are
Shares or Warrant Shares, credit the aggregate number of shares of Common Stock
to which such the Purchaser shall be entitled to the Purchaser’s or its
designee’s balance account with DTC through its Deposit/Withdrawal at Custodian
system or (B) if the Transfer Agent is not participating in the DTC Fast
Automated Securities Transfer Program, issue and deliver (via reputable
overnight courier) to the Purchaser, a certificate representing such Securities
that is free from all restrictive and other legends, registered in the name of
the Purchaser or its designee (the date by which such credit is so required to
be made to the balance account of the Purchaser’s or the Purchaser’s nominee
with DTC or such certificate is required to be delivered to the Purchaser
pursuant to the foregoing is referred to herein as the “Required Delivery
Date”).

(b) Failure to Timely Deliver; Buy-In. If (x) the Company fails to (i) issue and
deliver (or cause to be delivered) to the Purchaser by the Required Delivery
Date a certificate representing the Securities so delivered to the Company by
the Purchaser that is free from all restrictive and other legends or (ii) credit
the balance account of the Purchaser’s or the Purchaser’s nominee with DTC for
such number of Shares or Warrant Shares so delivered to the Company and (y) if
on or after the Required Delivery Date the Purchaser (or any other Person in
respect, or on behalf, of the Purchaser) purchases (in an open market
transaction or otherwise) shares of Common Stock to deliver in satisfaction of a
sale by the Purchaser of all or any portion of the number of shares of Common
Stock, or a sale of a number of shares of Common Stock equal to all or any
portion of the number of shares of Common Stock, that the

 

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Purchaser so anticipated receiving from the Company without any restrictive
legend, then, in addition to all other remedies available to the Purchaser, the
Company shall, within three (3) Trading Days after the Purchaser’s written
request either (i) pay cash to the Purchaser in an amount equal to the
Purchaser’s total purchase price (including brokerage commissions and other
out-of-pocket expenses, if any) for the shares of Common Stock so purchased
(including brokerage commissions and other out-of-pocket expenses, if any) (the
“Buy-In Price”), at which point the Company’s obligation to so deliver such
certificate or credit the Purchaser’s balance account shall terminate and such
shares shall be cancelled, or (ii) promptly honor its obligation to so deliver
to the Purchaser a certificate or certificates or credit the Purchaser’s DTC
account representing such number of shares of Common Stock that would have been
so delivered if the Company timely complied with its obligations hereunder and
pay cash to the Purchaser in an amount equal to the excess (if any) of the
Buy-In Price minus the product of (A) such number of Shares or Warrant Shares
(as the case may be) that the Company was required to deliver to the Purchaser
by the Required Delivery Date multiplied by (B) the Closing Sale Price (as
defined in the Warrant) of the Common Stock on the date the Company has so
issued such delivered and made such payment in each case under this clause (ii).

(c) Transfer Agent Instructions. The Company shall issue irrevocable
instructions to its Transfer Agent in a form acceptable to the Purchaser (the
“Irrevocable Transfer Agent Instructions”) to issue certificates or credit
shares to the applicable balance accounts at The Depository Trust Company
(“DTC”), registered in the name of the Purchaser or its respective nominee(s),
for the Shares and the Warrant Shares in such amounts as specified from time to
time by the Purchaser to the Company upon delivery of the Shares or the exercise
of the Warrants (as the case may be). The Company represents and warrants that
no instruction other than the Irrevocable Transfer Agent Instructions referred
to in this Section 4.1, and stop transfer instructions to give effect to
Section 3.2(e) hereof, will be given by the Company to its Transfer Agent with
respect to the Securities, and that the Securities shall otherwise be freely
transferable on the books and records of the Company, as applicable, to the
extent provided in this Agreement and the other Transaction Documents. If the
Purchaser effects a sale, assignment or transfer of the Securities in accordance
with Section 3.2(e), the Company shall permit the transfer and shall promptly
instruct its Transfer Agent to issue one or more certificates or credit shares
to the applicable balance accounts at DTC in such name and in such denominations
as specified by the Purchaser to effect such sale, transfer or assignment. In
the event that such sale, assignment or transfer involves Shares or Warrant
Shares sold, assigned or transferred pursuant to an effective Registration
Statement or in compliance with Rule 144, the transfer agent shall issue such
shares to the Purchaser, assignee or transferee (as the case may be) without any
restrictive legend in accordance with Section 3.5(c) below. The Company
acknowledges that a breach by it of its obligations hereunder will cause
irreparable harm to the Purchaser. Accordingly, the Company acknowledges that
the remedy at law for a breach of its obligations under this Section 3.5(a) will
be inadequate and agrees, in the event of a breach or threatened breach by the
Company of the provisions of this Section 3.5(a), that the Purchaser shall be
entitled, in addition to all other available remedies, to an order and/or
injunction restraining any breach and requiring immediate issuance and transfer,
without the necessity of showing economic loss and without any bond or other
security being

 

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required. The Company shall cause its counsel to issue the legal opinion
referred to in the Irrevocable Transfer Agent Instructions to the Company’s
transfer agent on each Effective Date (as defined in the Registration Rights
Agreement). Any fees (with respect to the Transfer Agent, counsel to the Company
or otherwise) associated with the issuance of such opinion or the removal of any
legends on any of the Securities shall be borne by the Company.

4.2 Best Efforts. The Purchaser shall use its best efforts to timely satisfy
each of the conditions to be satisfied by it as provided in Section 2.3(a)
hereof. The Company shall use its best efforts to timely satisfy each of the
conditions to be satisfied by it as provided in Section 2.3(b) of this
Agreement.

4.3 Form D and Blue Sky. The Company shall file a Form D with respect to the
Securities as required under Regulation D and to provide a copy thereof to the
Purchaser promptly after such filing. The Company shall, on or before the
Closing Date, 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 Purchaser 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 Purchaser on or prior to the Closing Date. Without
limiting any other obligation of the Company under this Agreement, the Company
shall timely make all filings and reports relating to the offer and sale of the
Securities required under all applicable securities laws (including, without
limitation, all applicable federal securities laws and all applicable “Blue Sky”
laws), and the Company shall comply with all applicable federal, foreign, state
and local laws, statutes, rules, regulations and the like relating to the
offering and sale of the Securities to the Purchaser.

4.4 Reporting Status; Integration; Use of Proceeds.

(a) Until the date on which no Warrants are outstanding, the Company shall
timely file all reports required to be filed with the Commission pursuant to the
Exchange Act, and the Company shall not terminate its status as an issuer
required to file reports under the Exchange Act even if the Exchange Act or the
rules and regulations thereunder would no longer require or otherwise permit
such termination.

(b) The Company shall not sell, offer for sale or solicit offers to buy or
otherwise negotiate in respect of any security (as defined in Section 2 of the
Securities Act) that would be integrated with the offer or sale of the
Securities for purposes of the rules and regulations of any Trading Market such
that it would require stockholder approval prior to the closing of such other
transaction unless the stockholder approval required under such rules and
regulations is actually obtained before the closing of such subsequent
transaction that gives rise to the integration.

(c) The Company shall use the proceeds from the sale of the Securities solely
for general working capital purposes.

4.5 Securities Laws Disclosure; Publicity. The Company shall by 8:30 a.m. (New
York City time) on the Effective Date, (i) issue a press release disclosing the
material terms of the transactions contemplated hereby and (ii) file a Current
Report on Form

8-K disclosing the

 

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material terms of the transaction and including the Transaction Documents as
exhibits thereto. From and after the issuance of such press release, the Company
shall have publicly disclosed all material, non-public information delivered to
the Purchaser by the Company or any of its subsidiaries, or any of their
respective officers, directors, employees or agents (including, without
limitation, the Placement Agent) in connection with the transactions
contemplated by the Transaction Documents. The Company and the Purchaser shall
consult with each other in issuing any other press releases with respect to the
transactions contemplated hereby, and neither the Company nor the Purchaser
shall issue any such press release nor otherwise make any such public statement
without the prior consent of the Company, with respect to any press release of
the Purchaser, or without the prior consent of the Purchaser, with respect to
any press release of the Company, which consent shall not unreasonably be
withheld or delayed, except if such disclosure is required by law, in which case
the disclosing party shall promptly provide the other party with prior notice of
such public statement or communication. Notwithstanding the foregoing, the
Company shall not publicly disclose the name of the Purchaser or any of its
Affiliates, or include the name of the Purchaser or any of its Affiliates in any
filing with the Commission or any regulatory agency or Trading Market, without
the prior written consent of the Purchaser, except (a) as required by federal
securities law in connection with the filing of final Transaction Documents
(including signature pages thereto) with the Commission and (b) to the extent
such disclosure is required by law or Trading Market regulations, in which case
the Company shall provide the Purchaser with prior notice of such disclosure
permitted under this clause (b).

4.6 Shareholder Rights Plan. No claim will be made or enforced by the Company
or, with the consent of the Company, any other Person, that the Purchaser is an
“Acquiring Person” under any control share acquisition, business combination,
poison pill (including any distribution under a rights agreement) or similar
anti-takeover plan or arrangement in effect or hereafter adopted by the Company,
or that the Purchaser could be deemed to trigger the provisions of any such plan
or arrangement, by virtue of receiving any of the Securities under the
Transaction Documents or under any other agreement between the Company and the
Purchaser.

4.7 Non-Public Information. From and after the time that the transactions
contemplated by this Agreement are first publicly announced by the Company, the
Company covenants and agrees that neither it, nor any other Person acting on its
behalf will provide the Purchaser or its agents or counsel with any material
non-public information regarding the Company or any of its subsidiaries, unless
prior thereto the Purchaser shall have executed a written agreement with the
Company regarding the confidentiality and use of such information. The Company
understands and confirms that the Purchaser shall be relying on the foregoing
covenant in effecting transactions in securities of the Company. If the
Purchaser believes it has received any material, non-public information
regarding the Company or any of its subsidiaries in breach of the immediately
preceding sentence, the Purchaser shall provide the Company with written notice
thereof in which case the Company shall, within two (2) Trading Days of the
receipt of such notice, either (x) make a public disclosure of all material,
non-public information so provided or (y) deliver a certification to the
Purchaser that confirms that no material, non-public information was provided to
the Purchaser. In the event of a breach of any of the foregoing covenants or any
of the covenants contained in Section 4.5 by the Company, any of its
subsidiaries, or any of its or their respective

 

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officers, directors, employees and agents (as determined in the reasonable good
faith judgment of the Purchaser), in addition to any other remedy provided
herein or in the Transaction Documents, the Purchaser shall have the right to
make a public disclosure, in the form of a press release, public advertisement
or otherwise, of such material, non-public information without the prior
approval by the Company, any of its subsidiaries, or any of its or their
respective officers, directors, employees or agents. The Purchaser shall not
have any liability to the Company, any of its subsidiaries, or any of its or
their respective officers, directors, employees, stockholders or agents, for any
such disclosure. For avoidance of doubt, if the Purchaser was a party to an
April Agreement (as defined below), neither the Company’s delivery of a
Pre-Notice (as defined in the April Agreement) to the Purchaser in accordance
with Section 4.13 of its April Agreement nor the Pre-Notice itself will be
considered to be a disclosure of, or constitute, material, non-public
information with respect to the Company.

4.8 Indemnification. Subject to the provisions of this Section 4.8, the Company
will indemnify and hold the Purchaser and its directors, officers, shareholders,
members, partners, employees and agents (and any other Persons with a
functionally equivalent role of a Person holding such titles notwithstanding a
lack of such title or any other title), each Person who controls the Purchaser
(within the meaning of Section 15 of the Securities Act and Section 20 of the
Exchange Act), and the directors, officers, shareholders, agents, members,
partners or employees (and any other Persons with a functionally equivalent role
of a Person holding such titles notwithstanding a lack of such title or any
other title) of such controlling persons (each, a “Purchaser Party”) harmless
from any and all losses, liabilities, obligations, claims, contingencies,
damages, costs and expenses, including all judgments, amounts paid in
settlements, court costs and reasonable attorneys’ fees and costs of
investigation (collectively, “Losses”) that any such Purchaser Party may suffer
or incur as a result of or relating to (a) any material breach of any
representation or warranty made by the Company in any of the Transaction
Documents, (b) any breach of any covenant, agreement or obligation of the
Company contained in any of the Transaction Documents or (c) any action, suit or
claim instituted against a Purchaser Party in any capacity, or any of them or
their respective Affiliates, by any stockholder of the Company or other third
party, in each case who is not an Affiliate of the applicable Purchaser Party,
resulting from or relating to any of the transactions contemplated by any of the
Transaction Documents (except to the extent, and only to the extent, such action
is based upon a material breach of the Purchaser’s representations, warranties
or covenants under the Transaction Documents, a material breach of any
agreements or understandings the Purchaser may have with any such stockholder or
material violations by the Purchaser of state or federal securities laws, or any
conduct by the Purchaser which constitutes fraud, gross negligence, willful
misconduct or malfeasance). To the extent that the foregoing undertaking by the
Company may be unenforceable for any reason, the Company shall make the maximum
contribution to the payment and satisfaction of each of the Losses which is
permissible under applicable law and is consistent with the standards for
contribution set forth in Section 6 of the Registration Rights Agreement as if
they applied to the foregoing. Except as otherwise set forth herein, the
mechanics, procedures, standards and limitations with respect to the rights and
obligations under this Section 4.8 (including, without limitation, any
requirements for giving of notices, the right to control defense and settlement
of any proceeding, the ability to participate in any defense, and limitations on
settlement of actions and the effects of unauthorized settlement) shall be the
same as those set forth in Section 6 of the Registration Rights Agreement.

 

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4.9 Reservation of Common Stock. As of the Effective Date, the Company has
reserved and the Company shall continue to reserve and keep available at all
times, free of preemptive rights, a sufficient number of shares of Common Stock
for the purpose of enabling the Company to issue Shares pursuant to this
Agreement and Warrant Shares pursuant to any exercise of the Warrants (without
regard to any limitations on the exercise of the Warrants set forth therein).

4.10 Listing of Common Stock. The Company hereby agrees to use best efforts to
maintain the listing or quotation of the Common Stock on the Trading Market on
which it is currently listed, and the Company shall promptly secure the listing
of all of the Shares and the Warrant Shares on such Trading Market (but in no
event later than the Closing Date). The Company further agrees, if the Company
applies to have the Common Stock traded on any other Trading Market, it will
then include in such application all of the Shares and Warrant Shares, and will
take such other action as is necessary to cause all of the Shares and the
Warrant Shares to be listed or quoted on such other Trading Market as promptly
as possible. The Company will then take all action reasonably necessary to
continue the listing and trading of its Common Stock on a Trading Market and
will comply in all respects with the Company’s reporting, filing and other
obligations under the bylaws or rules of the Trading Market.

4.11 Company Lock-Ups.

(a) During the period commencing on the date hereof and ending on the date
immediately following the forty-five (45) day anniversary of the Effective Date
(the “Restricted Period”), neither the Company nor any of its subsidiaries shall
directly or indirectly issue, offer, sell, grant any option or right to
purchase, or otherwise dispose of (or announce any issuance, offer, sale, grant
of any option or right to purchase or other disposition of) any equity security
or any equity-linked or related security (including, without limitation, any
“equity security” (as that term is defined under Rule 405 promulgated under the
Securities Act), any Common Stock Equivalents, any debt, any preferred stock or
any purchase rights) (any such issuance, offer, sale, grant, disposition or
announcement (whether occurring during the Restricted Period or at any time
thereafter) is referred to as a “Subsequent Placement”).

(b) During the period commencing on the date hereof and ending on the date
immediately following the third anniversary of the Closing Date, the Company
shall be prohibited from effecting or entering into an agreement to effect any
Subsequent Placement involving a Variable Rate Transaction. “Variable Rate
Transaction” means a transaction in which the Company (i) issues or sells any
debt or equity securities that are convertible into, exchangeable or exercisable
for, or include the right to receive additional shares of Common Stock either
(A) at a conversion price, exercise price or exchange rate or other price that
is based upon and/or varies with the trading prices of or quotations for the
shares of Common Stock at any time after the initial issuance of such debt or
equity securities, or (B) with a conversion, exercise or exchange price that is
subject to being reset at some future date after the initial issuance of such
debt or equity security or upon the occurrence of specified or contingent events
directly or indirectly related to the business of the Company or the market for
the Common Stock (but not including any routine anti-dilution protections in any
warrant or convertible security) or

 

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(ii) enters into any agreement (including, without limitation, an “equity line
of credit” or an “at-the-market offering” (as defined in Rule 415(a)(4)
promulgated under the Securities Act)) whereby the Company or any subsidiary may
sell securities at a future determined price (other than standard and customary
“preemptive” or “participation” rights), provided that notwithstanding the
foregoing, the Company may effect either of the following transactions without
restriction hereunder: (A) after the six month anniversary of the Closing Date,
the Company may conduct an “at-the-market offering” (as defined in Rule
415(a)(4) promulgated under the Securities Act) so long as no shares of Common
Stock are sold in such offering for less than $3.50 per share (as adjusted for
stock splits, stock combinations and other similar transactions occurring after
the date of this Agreement) and (B) after the one year anniversary of the
Closing Date, the Company may conduct an “at the market offering” (as defined in
Rule 415(a)(4) promulgated under the Securities Act) so long as no shares of
Common Stock are sold in such offering for price per share that is less than the
Exercise Price (as defined in the Warrant) (as adjusted for stock splits, stock
combinations and other similar transactions occurring after the date of this
Agreement). The Purchaser shall be entitled to obtain injunctive relief against
the Company to preclude any such issuance, which remedy shall be in addition to
any right to collect damages.

(c) Notwithstanding the foregoing, (i) Sections 4.11(a) and (b) shall not apply
in respect of an Exempt Issuance and (ii) no Variable Rate Transaction shall be,
or shall be deemed to constitute, an Exempt Issuance.

(d) Until the Applicable Date (as defined below) and at any time thereafter
while any Registration Statement is not effective or any prospectus contained
therein is not available for use, the Company shall not file any registration
statement under the Securities Act relating to securities that are not the
Registrable Securities. “Applicable Date” means the first date on which the
resale by the Purchaser of all its Registrable Securities is covered by one or
more effective Registration Statements (as defined in the Registration Rights
Agreement) (and each prospectus contained therein is available for use on such
date).

4.12 Certain Transactions and Confidentiality. The Purchaser covenants that
neither it nor any Affiliate acting on its behalf or pursuant to any
understanding with it will execute any purchases or sales, including Short Sales
of any of the Company’s securities during the period commencing with the
execution of this Agreement and ending at such time that the transactions
contemplated by this Agreement are first publicly announced (it being understood
and agreed that for all purposes of this Agreement, and without implication that
the contrary would otherwise be true, transactions, purchases and sales shall
not include the location and/or reservation of borrowable shares of Common
Stock). The Purchaser covenants that until such time as the transactions
contemplated by this Agreement are publicly disclosed, the Purchaser will
maintain the confidentiality of the existence and terms of this
transaction. Notwithstanding the foregoing, and notwithstanding anything
contained in this Agreement to the contrary, the Company expressly acknowledges
and agrees that (i) the Purchaser makes no representation, warranty or covenant
hereby that it will not engage in effecting transactions in any securities of
the Company after the time that the transactions contemplated by this Agreement
are first publicly announced by the Company, (ii) the Purchaser shall not be
restricted or prohibited from

 

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effecting any transactions in any securities of the Company in accordance with
applicable securities laws from and after the time that the transactions
contemplated by this Agreement are first publicly announced by the Company and
(iii) the Purchaser shall have no duty of confidentiality to the Company or its
subsidiaries after the transactions contemplated by this Agreement are first
publicly announced by the Company. Notwithstanding the foregoing, in the case
the Purchaser is a multi-managed investment vehicle whereby separate portfolio
managers manage separate portions of the Purchaser’s assets and the portfolio
managers have no actual knowledge of the investment decisions made by the
portfolio managers managing other portions of the Purchaser’s assets, the
covenant set forth above shall only apply with respect to the portion of assets
managed by the portfolio manager that made the investment decision to purchase
the Securities covered by this Agreement. Notwithstanding anything contained in
this Agreement to the contrary and without implication that the contrary would
otherwise be true, the Company expressly acknowledges and agrees that the
Purchaser shall not have (unless expressly agreed to by the Purchaser after the
date hereof in a written definitive and binding agreement executed by the
Company and the Purchaser or, solely with respect to the period commencing with
the execution of this Agreement and ending at such time that the transactions
contemplated by this Agreement are first publicly announced by the Company, as
expressly contemplated by the provisions of this Section 4.12), any duty of
confidentiality with respect to, or a duty not to trade on the basis of, any
information regarding the Company or any of its subsidiaries.

4.13 Other Terms. The Company represents, warrants and covenants that the
Company has not entered into, and will not enter into, any agreement or
instrument with, or for the benefit of, any of the other Purchasers or any other
third party purchaser of securities of the Company substantially concurrent with
the Closing on terms or conditions which are more favorable to any such other
Purchaser or third party purchaser than the terms and conditions provided to, or
for the benefit of, the Purchaser (other than the Company agreed to pay to
Cranshire Capital Master Fund, Ltd. a non-accountable amount equal to $25,000
for various costs and expenses, which may be withheld by Cranshire Capital
Master Fund, Ltd. from its subscription amount to be paid at Closing). To the
extent the Company enters into any agreement or instrument with, or for the
benefit of, any of such other Purchasers or any such third party purchaser that
contains any terms or conditions which are more favorable to any of such other
Purchasers or any such third party purchaser than the terms and conditions
provided to, or for the benefit of, the Purchaser, then the Purchaser, at its
option, shall be entitled to the benefit of such more favorable terms or
conditions (as the case may be) and this Agreement shall be automatically
amended to reflect such more favorable terms or conditions (as the case may be).

ARTICLE V.

MISCELLANEOUS

5.1 Termination. This Agreement may be terminated by the Purchaser or the
Company upon written notice to the other party if the Closing has not been
consummated on or before the fifth (5th) Trading Day following the Effective
Date, provided that a party shall not have the right to so terminate this
Agreement if it breaches any of its obligations under this Agreement. Nothing
contained in this Section 5.1 shall be deemed to release any party from any
liability for any breach by such party of the terms and provisions of this
Agreement or the other Transaction Documents or to impair the right of any party
to compel specific performance by any other party of its obligations under this
Agreement or the other Transaction Documents.

 

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5.2 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
delivery of any Securities to the Purchaser. [The Company shall reimburse the
Purchaser or its designee(s) for all costs and expenses incurred by it or its
affiliates in connection with the transactions contemplated by the Transaction
Documents (including, without limitation, all legal fees and disbursements in
connection therewith, structuring, documentation and implementation of the
transactions contemplated by the Transaction Documents and due diligence and
regulatory filings in connection therewith) in a non-accountable amount equal to
$25,000, which amount shall be withheld by the Purchaser from its Subscription
Amount at the Closing or paid by the Company on demand by the Purchaser if the
Purchaser terminates its obligations under this Agreement in accordance with
Section 5.1 (as the case may be).]1

5.3 Entire Agreement. This Agreement, the Transaction Documents, together with
the exhibits and schedules thereto, contain the entire understanding of the
parties solely with respect to the subject matter hereof and supersede all prior
agreements and understandings, oral or written, solely with respect to such
subject matter, which the parties acknowledge have been merged into such
documents, exhibits and schedules; provided, however, nothing contained in this
Agreement or any other Transaction Document shall (or shall be deemed to)
(i) have any effect on any agreements the Purchaser has entered into with, or
any instruments the Purchaser has received from, the Company or any of its
subsidiaries prior to the date hereof with respect to any prior investment made
by the Purchaser in the Company or (ii) waive, alter, modify or amend in any
respect any obligations of the Company or any of its subsidiaries, or any rights
of or benefits to the Purchaser or any other Person, in any agreement entered
into prior to the date hereof between or among the Company and/or any of its
subsidiaries and the Purchaser, or any instruments the Purchaser received from
the Company and/or any of its subsidiaries prior to the date hereof, and all
such agreements and instruments shall continue in full force and effect. As a
material inducement for the Purchaser to enter into this Agreement, the Company
expressly acknowledges and agrees that (i) no due diligence or other
investigation or inquiry conducted by the Purchaser, any of its advisors or any
of its representatives shall affect the Purchaser’s right to rely on, or shall
modify or qualify in any manner or be an exception to any of, the Company’s
representations and warranties contained in this Agreement or any other
Transaction Document and (ii) unless a provision of this Agreement or any other
Transaction Document is expressly preceded by the phrase “except as disclosed in
the SEC Reports,” nothing contained in any of the SEC Reports shall affect the
Purchaser’s right to rely on, or shall modify or qualify in any manner or be an
exception to any of, the Company’s representations and warranties contained in
this Agreement or any other Transaction Document.

5.4 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 at the facsimile number set
forth on the signature pages attached hereto prior to 5:30 p.m. (New York City
time) on a Trading Day, (b) the next Trading Day after the date of

 

1  To be deleted for all purchasers other than Cranshire Capital Master Fund,
Ltd.

 

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

5.5 Amendments; Waivers. Except as expressly contemplated by Section 4.13,
provisions of this Agreement and each other Subscription Agreement may be
amended only with the written consent of the Company and the Required Investors
(as defined in the Registration Rights Agreement). Any amendment effected in
accordance with this Section 5.5 shall be binding upon the Purchaser, each of
the other Purchasers and the Company, provided that no such amendment shall be
effective to the extent that it (a) applies to less than all of the Purchasers,
(b) imposes any obligation or liability on the Purchaser without the Purchaser’s
prior written consent (which may be granted or withheld in the Purchaser’s sole
discretion) or (c) applies retroactively. No waiver shall be effective unless it
is in writing and signed by an authorized representative of the waiving party,
provided that the Required Investors (in a writing signed by all of the Required
Investors) may waive any provision of this Agreement and each of the other
Subscription Agreements, and any waiver of any provision of this Agreement and
the other Subscription Agreements made in conformity with the provisions of this
Section 5.5 shall be binding on the Purchaser and each of the other Purchasers,
provided further that no such waiver shall be effective to the extent that it
(1) applies to less than all of the Purchasers (unless a party gives a waiver as
to itself only) or (2) imposes any obligation or liability on the Purchaser
without the Purchaser’s prior written consent (which may be granted or withheld
in the Purchaser’s sole discretion). No consideration shall be offered or paid
to any Person to amend or consent to a waiver or modification of any provision
of this Agreement or any of the other Subscription Agreements unless the same
consideration also is offered to all of the parties to all of the Purchasers. No
waiver of any default with respect to any provision, condition or requirement of
this Agreement shall be deemed to be a continuing waiver in the future or a
waiver of any subsequent default or a waiver of any other provision, condition
or requirement hereof, nor shall any delay or omission of any party to exercise
any right hereunder in any manner impair the exercise of any such right.

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

5.7 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 Purchaser (other than by merger). The
Purchaser may assign any or all of its rights under this Agreement to any Person
to whom the Purchaser assigns or transfers any Securities in accordance with
Section 3.2(e) as long as such Person agrees in writing prior to such transfer
to be bound with respect to the transferred Securities as a Purchaser hereunder,
in which event such assignee shall be deemed to be the Purchaser hereunder with
respect to such assigned rights.

5.8 No Third-Party Beneficiaries. This Agreement is intended for the benefit of
the parties hereto and their respective successors and permitted assigns and is
not for the benefit of, nor may any provision hereof be enforced by, any other
Person, except as otherwise set forth in Section 4.8.

5.9 Governing Law. All questions concerning the construction, validity,
enforcement and interpretation of the Transaction Documents shall be governed by
and construed and enforced in accordance with the internal laws of the State of
New York, without regard to the principles of conflicts of law thereof. Each
party agrees that all legal proceedings concerning the interpretations,
enforcement and defense of the transactions contemplated by this Agreement and
any other Transaction Documents (whether brought against a party hereto or its
respective affiliates, directors, officers, shareholders, employees or agents)
shall be commenced exclusively in the state and federal courts sitting in the
City of New York. Each party hereby irrevocably submits to the exclusive
jurisdiction of the state and federal courts sitting in the City of New York,
borough of Manhattan for the adjudication of any dispute hereunder or 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 waives, and

 

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agrees not to assert in any suit, action or proceeding, any claim that it is not
personally subject to the jurisdiction of any such court, that such suit, action
or proceeding is improper or is an inconvenient venue for such proceeding. 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 other manner permitted by
law. If either party shall commence an action or proceeding to enforce any
provisions of the Transaction Documents, then, in addition to the obligations of
the Indemnifying Parties under Section 4.8, the prevailing party in such action
or proceeding shall be reimbursed by the other party for its reasonable
attorneys’ fees and other costs and expenses incurred with the investigation,
preparation and prosecution of such action or proceeding. Nothing contained in
this Section 5.9 shall limit any provision of Section 13 of the Warrant.

5.10 Survival. The representations, warranties and covenants contained herein
shall survive the Closing and the delivery of the Shares and Warrants.

5.11 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 by e-mail delivery of a “.pdf” format data file, such
signature shall create a valid and binding obligation of the party executing (or
on whose behalf such signature is executed) with the same force and effect as if
such facsimile or “.pdf” signature page were an original thereof.

5.12 Severability. If any term, provision, covenant or restriction of this
Agreement is held by a court of competent jurisdiction to be invalid, illegal,
void or unenforceable, the remainder of the terms, provisions, covenants and
restrictions set forth herein shall remain in full force and effect and shall in
no way be affected, impaired or invalidated, and the parties hereto shall use
their commercially reasonable efforts to find and employ an alternative means to
achieve the same or substantially the same result as that contemplated by such
term, provision, covenant or restriction. It is hereby stipulated and declared
to be the intention of the parties that they would have executed the remaining
terms, provisions, covenants and restrictions without including any of such that
may be hereafter declared invalid, illegal, void or unenforceable.

5.13 Rescission and Withdrawal Right. Notwithstanding anything to the contrary
contained in (and without limiting any similar provisions of) any of the other
Transaction Documents, whenever the Purchaser exercises a right, election,
demand or option under a Transaction Document and the Company does not timely
perform its related obligations within the periods therein provided, then the
Purchaser may rescind or withdraw, in its sole discretion from time to time upon
written notice to the Company, any relevant notice, demand or election in whole
or in part without prejudice to its future actions and rights; provided,
however, that in the case of a rescission of an exercise of a Warrant, the
Purchaser shall be required to return any shares of Common Stock subject to any
such rescinded exercise notice concurrently with the return to the Purchaser of
the aggregate exercise price paid to the Company for such shares and the
restoration of the Purchaser’s right to acquire such shares pursuant to the
Purchaser’s Warrant (including, issuance of a replacement warrant certificate
evidencing such restored right).

 

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

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

5.16 Payment Set Aside. To the extent that the Company makes a payment or
payments to the Purchaser pursuant to any Transaction Document or the Purchaser
enforces or exercises its rights thereunder, and such payment or payments or the
proceeds of such enforcement or exercise or any part thereof are subsequently
invalidated, declared to be fraudulent or preferential, set aside, recovered
from, disgorged by or are required to be refunded, repaid or otherwise restored
to the Company, a trustee, receiver or any other person under any law
(including, without limitation, any bankruptcy law, state or federal law, common
law or equitable cause of action), then to the extent of any such restoration
the obligation or part thereof originally intended to be satisfied shall be
revived and continued in full force and effect as if such payment had not been
made or such enforcement or setoff had not occurred.

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

5.18 Saturdays, Sundays, Holidays, etc. If the last or appointed day for the
taking of any action or the expiration of any right required or granted herein
shall not be a Business Day, then such action may be taken or such right may be
exercised on the next succeeding Business Day.

5.19 Construction. The parties agree that each of them and/or their respective
counsel has reviewed and had an opportunity to revise the Transaction Documents
and, therefore, the normal rule of construction to the effect that any
ambiguities are to be resolved against the drafting party shall not be employed
in the interpretation of the Transaction Documents or any amendments hereto. No
specific representation or warranty shall limit the generality or

 

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applicability of a more general representation or warranty. In addition, each
and every reference to share prices and shares of Common Stock in any
Transaction Document shall be subject to adjustment for reverse and forward
stock splits, stock dividends, stock combinations and other similar transactions
of the Common Stock that occur after the Effective Date.

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

5.21 Independent Nature of Purchaser’s Obligations and Rights. The obligations
of the Purchaser under this Agreement and the other Transaction Documents are
several and not joint with the obligations of any other Purchaser, and the
Purchaser shall not be responsible in any way for the performance of the
obligations of any other Purchaser under any other Transaction Document. The
decision of the Purchaser to purchase Securities pursuant to this Agreement has
been made by the Purchaser independently of any other Purchaser. Nothing
contained herein or in any other Transaction Document, and no action taken by
the Purchaser pursuant hereto or thereto, shall be deemed to constitute the
Purchaser and the other Purchasers as, and the Company acknowledges that the
Purchaser and the other Purchasers do not so constitute, a partnership, an
association, a joint venture or any other kind of group or entity, or create a
presumption that the Purchaser or any of the other Purchasers are in any way
acting in concert or as a group or entity with respect to such obligations or
the transactions contemplated by the Transaction Documents or any matters, and
the Company acknowledges that the Purchaser and the other Purchasers are not
acting in concert or as a group, and the Company shall not assert any such
claim, with respect to such obligations or the transactions contemplated by this
Agreement or any of the other the Transaction Documents. The Purchaser
acknowledges that no other Purchaser has acted as agent for the Purchaser in
connection with making its investment hereunder and that no other Purchaser will
be acting as agent of the Purchaser in connection with monitoring its investment
hereunder. The Purchaser shall be entitled to independently protect and enforce
its rights, including, without limitation, the rights arising out of this
Agreement or out of any other Transaction Documents, and it shall not be
necessary for any other Purchaser to be joined as an additional party in any
proceeding for such purpose. The use the same form of agreement with respect to
the obligations of the Company contained herein was done solely for the
convenience of the Company and not because it was required or requested to do so
by the Purchaser or any other Purchaser. It is expressly understood and agreed
that each provision contained in this Agreement and in each other Transaction
Document is between the Company and the Purchaser, solely, and not between the
Company and the Purchasers collectively and not between and among Purchasers.
The Purchaser represents that it has been represented by its own separate legal
counsel in its review and negotiations of this Agreement and the Transaction
Documents.

 

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5.22 Consent. If the Purchaser was a party to a subscription agreement with the
Company dated April 18, 2011 (the “April Agreement”) or is an assignee and/or
transferee of the rights of a party thereto, then the Purchaser agrees that the
Company shall not have to comply with Section 4.13 of the April Agreement solely
with respect to the issuance and sale of the Shares, the Warrants and the
Warrant Shares contemplated by this Agreement and the other Subscription
Agreements. [In connection with the foregoing, (x) the Company hereby
acknowledges that (i) Cranshire Capital, L.P. assigned and transferred all of
its rights under its April Agreement to the Purchaser on October 1, 2011, in
connection with its assignment and transfer of its Warrant (as defined in the
April Agreement) to the Purchaser and (ii) the Purchaser has all rights of a
“Purchaser” thereunder and (y) the Purchaser hereby agrees to be bound by the
provisions of the April Agreement as a “Purchaser” thereunder with respect to
such Warrant.]2

(Signature Pages Follow)

 

 

2 

To be deleted for all purchasers other than Cranshire Master Fund, Ltd.

 

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

 

ARCA BIOPHARMA, INC.     Address for Notice:    

8001 Arista Place, Suite 430

Broomfield, CO 80021

Fascimile: (720) 208-9261

By:          

Patrick M. Wheeler, Chief Financial Officer

             

With a copy to (which shall not constitute notice):

               

Cooley LLP

Attention: Brent D. Fassett

380 Interlocken Crescent, Suite 900

Broomfield, CO 80021-8023

     

[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK

SIGNATURE PAGE FOR PURCHASER FOLLOWS]

 

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IN WITNESS WHEREOF, the undersigned have caused this Subscription Agreement to
be duly

executed by their respective authorized signatories as of the date first
indicated above.

Name of Purchaser:                                          
                                         
                                                   

Signature of Authorized Signatory of Purchaser:
                                         
                                              

Name of Authorized Signatory:                                          
                                                                        

Title of Authorized Signatory:                                          
                                                                          

Email Address of Authorized Signatory:                                       
                                                            

Facsimile Number of Authorized Signatory:
                                         
                                                            

Address for Notice of Purchaser:

Exact Name in which the Shares and Warrants Should be Registered:
                                         
                                            

 

 

Relationship to Purchaser:                                       
                                         
                                                                         

Address for Delivery of Securities for Purchaser (if not same as address for
notice):

              

Subscription Amount:                      Units consisting of:

 

Shares: ________________________________

  

Warrant Shares: __________________________

   Aggregate Purchase Price: __________________________   

EIN Number: [PROVIDE THIS UNDER SEPARATE COVER]

Contact information for legal counsel to investor:

               Email:_______________________    Fax:_________________________   

 

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[For purposes of Acknowledging Section 5.22:

CRANSHIRE CAPITAL, L.P.

 

By:  

Cranshire Capital Advisors, LLC

   Its:  

Investment Manager

   By:        Its:  

                                                 ]3

  

 

 

3  To be deleted for all purchasers other then Cranshire Capital Master Fund,
Ltd.

 

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