Exhibit 10.1

 

SECURITIES PURCHASE AGREEMENT

 

Xenogen Corporation

860 Atlantic Avenue

Alameda, CA 94501

 

Ladies & Gentlemen:

 

The undersigned,                              (the “Investor”), hereby confirms
its agreement with you as follows:

 

1. This Securities Purchase Agreement (the “Agreement”) is made as of August 11,
2005 between Xenogen Corporation, a Delaware corporation (the “Company”), and
the Investor.

 

2. The Company has authorized the sale and issuance of up to 5,154,639 shares
(the “Shares”) of common stock of the Company, $0.001 par value per share (the
“Common Stock”), and Warrants (the “Warrants”) to purchase up to 1,546,392
shares of Common Stock at an exercise price of $2.91 per share (the “Warrant
Shares”) to certain investors in a private placement (the “Offering”).

 

3. The Company and the Investor agree that the Investor will purchase from the
Company and the Company will issue and sell to the Investor                     
Shares and a Warrant to purchase                      Warrant Shares, for a
purchase price of $3.29 per share, or an aggregate purchase price of
$                    , pursuant to the Terms and Conditions for Purchase of
Shares and Warrants attached hereto as Annex I and incorporated herein by
reference as if fully set forth herein (the “Terms and Conditions”). This
Securities Purchase Agreement, together with the Terms and Conditions which are
incorporated herein by reference as if fully set forth herein, may hereinafter
be referred to as the “Agreement.” Unless otherwise requested by the Investor,
the Warrant and certificates representing the Shares purchased by the Investor
will be registered in the Investor’s name and address as set forth below. The
Warrant shall have the rights, preferences, privileges and restrictions as set
forth in the form of Warrant attached as Exhibit B.

 

4. The Investor represents that, except as set forth below, (a) it has had no
position, office or other material relationship within the past three years with
the Company or persons known to it to be affiliates of the Company, (b) neither
it, nor any group of which it is a member or to which it is related,
beneficially owns (including the right to acquire or vote) any securities of the
Company and (c) it has no direct or indirect affiliation or association with any
NASD member as of the date hereof. Exceptions:

 

 

                                                                               
                                        
                                        
                                                           .

(If no exceptions, write “none.” If left blank, response will be deemed to be
“none.”)

 

5. Please confirm that the foregoing correctly sets forth the agreement between
us by signing in the space provided below for that purpose. By executing this
Agreement, the Investor acknowledges that the Company may use the information in
paragraph 4 above and the name and address information below in preparation of
the Registration Statement (as defined in Annex 1). This Agreement may be
executed in separate counterparts, each of which shall be deemed to be an
original and all of which taken together shall constitute one and the same
instrument.

 

AGREED AND ACCEPTED:

            Xenogen Corporation      

Investor:

               

By:

   

By:

 

David Carter

     

Print Name:

   

Title:

 

Chairman and CEO

     

Title:

               

Address:

                                 

Tax ID No.: 

               

Contact name:

               

Telephone:

                Name in which shares should be registered (if different):      
       

 

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ANNEX I

 

TERMS AND CONDITIONS FOR PURCHASE OF SHARES AND WARRANTS

 

1. Authorization and Sale of the Shares and Warrants. Subject to these Terms and
Conditions, the Company has authorized the sale of up to 5,154,639 Shares and
Warrants to purchase up to 1,546,392 Warrant Shares. Subject to the other
provisions contained herein, the Company reserves the right to increase or
decrease this number.

 

2. Agreement to Sell and Purchase the Shares and Warrants; Subscription Date.

 

2.1 At the Closing (as defined in Section 3), the Company will sell to the
Investor, and the Investor will purchase from the Company, upon the terms and
conditions hereinafter set forth, the number of Shares and a Warrant to purchase
the number of Warrant Shares, each as set forth in Section 3 of the Securities
Purchase Agreement to which these Terms and Conditions are attached at the
purchase price set forth thereon.

 

2.2 The Company may enter into the same form of Securities Purchase Agreement,
including these Terms and Conditions, with other investors (the “Other
Investors”) and expects to complete sales of Shares and Warrants to them. (The
Investor and the Other Investors are hereinafter sometimes collectively referred
to as the “Investors,” and the Securities Purchase Agreement to which these
Terms and Conditions are attached and the Securities Purchase Agreements
(including attached Terms and Conditions) executed by the Other Investors are
hereinafter sometimes collectively referred to as the “Agreements.”) The Company
may accept executed Agreements from Investors for the purchase of Shares and
Warrants commencing upon the date on which the Company provides the Investors
with the proposed purchase price per Share and concluding upon the date (the
“Subscription Date”) on which the Company has (i) executed Agreements with
Investors for the purchase of at least [                    ] Shares and
Warrants to purchase at least [                    ] Warrant Shares, and (ii)
notified Thomas Weisel Partners LLC, in its capacity as placement agent for this
transaction (the “Placement Agent”), that it is no longer accepting additional
Agreements from Investors for the purchase of Shares and Warrants. The Company
may not enter into any Agreements after the Subscription Date.

 

2.3 The obligations of each Investor under any Agreement are several and not
joint with the obligations of any Other Investor, and no Investor shall be
responsible in any way for the performance of the obligations of any other
Investor under any Agreement. Nothing contained herein, and no action taken by
any Investor hereto, shall be deemed to constitute the Investors as a
partnership, an association, a joint venture or any other kind of entity, or
create a presumption that the Investors are in any way acting in concert or as a
group with respect to such obligations or the transactions contemplated hereby,
provided that such obligations or the transactions contemplated hereby may be
modified, amended or waived in accordance with Section 9 below. Each Investor
shall be entitled to independently protect and enforce its rights, including
without limitation the rights arising out of this Agreement (provided, that such
rights may be modified, amended or waived in accordance with Section 9 below),
and it shall not be necessary for any Other Investor to be joined as an
additional party in any proceeding for such purpose.

 

3. Delivery of the Shares and Warrants at Closing. The completion of the
purchase and sale of the Shares and Warrants (the “Closing”) shall occur on
August 15, 2005 (the “Closing Date”), at the offices of the Company’s counsel.
At the Closing, the Company shall deliver to the Investor one or more stock
certificates representing the number of Shares and a Warrant to purchase the
number of Warrant Shares, each as set forth pursuant to Section 3 of the
Securities Purchase Agreement, each such certificate to be registered in the
name of the Investor or, if so indicated on the signature page of the Securities
Purchase Agreement, in the name of a nominee designated by the Investor.

 

The Company’s obligation to issue and deliver the Shares and Warrant to the
Investor shall be subject to the following conditions, any one or more of which
may be waived by the Company: (a) receipt

 

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by Heller Ehrman LLP (the “Escrow Agent”) of a certified or official bank check
or wire transfer of funds in the full amount of the purchase price for the
Shares and Warrant being purchased hereunder as set forth in Section 3 of the
Securities Purchase Agreement; (b) completion of the purchases and sales under
the Agreements with the Other Investors; (c) receipt by the Company of a
completed Investor Questionnaire; and (d) the accuracy of the representations
and warranties made by the Investors and the fulfillment of those undertakings
of the Investors to be fulfilled prior to the Closing.

 

The Investor’s obligation to purchase the Shares and Warrant shall be subject to
the following conditions, any one or more of which may be waived by the
Investor: (a) Investors shall have executed Agreements for the purchase of at
least [                    ] Shares and Warrants to purchase at least
[                    ] Warrant Shares (the “Minimum Purchase Amount”); (b) the
representations and warranties of the Company set forth herein shall be true and
correct as of the Closing Date in all material respects (except for
representations and warranties that speak as of a specific date, which
representations and warranties shall be true and correct as of such date); and
(c) the Investor shall have received such documents as such Investor shall
reasonably have requested, including, a standard opinion of the Company’s
counsel as to the matters set forth in Section 4.2 and as to exemption from the
registration requirements of the Securities Act of 1933, as amended (the
“Securities Act”), of the sale of the Shares and Warrants.

 

4. Representations, Warranties and Covenants of the Company. The Company hereby
represents and warrants to, and covenants with, the Investor, as of the date
hereof and Closing Date, as follows:

 

4.1 Organization. The Company and each of its Subsidiaries (as defined in Rule
405 under the Securities Act) is duly organized and validly existing in good
standing under the laws of the jurisdiction of its organization. Each of the
Company and its Subsidiaries has full power and authority to own, operate and
occupy its properties and to conduct its business as presently conducted and as
described in the documents filed by the Company under the Securities Exchange
Act of 1934, as amended, and the rules and regulations promulgated thereunder
(the “Exchange Act”), since the end of its most recently completed fiscal year
through the date hereof, including, without limitation, its most recent report
on Form 10-K (the “Exchange Act Documents”) and, except for the state of
Missouri, is registered or qualified to do business and in good standing in each
jurisdiction in which the nature of the business conducted by it or the location
of the properties owned or leased by it requires such qualification and where
the failure to be so qualified would have a material adverse effect upon the
condition (financial or otherwise), earnings, business, properties or operations
of the Company and its Subsidiaries, considered as one enterprise (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.

 

4.2 Due Authorization and Valid Issuance. The Company has all requisite power
and authority to execute, deliver and perform its obligations under the
Agreements and the Warrants, and the Agreements and the Warrants have been duly
authorized and validly executed and delivered by the Company and constitute
legal, valid and binding agreements of the Company enforceable against the
Company in accordance with their terms, except as rights to indemnity and
contribution may be limited by state or federal securities laws or the public
policy underlying such laws, except as enforceability may be limited by
applicable bankruptcy, insolvency, reorganization, moratorium or similar laws
affecting creditors’ and contracting parties’ rights generally and except as
enforceability may be subject to general principles of equity (regardless of
whether such enforceability is considered in a proceeding in equity or at law).
The Shares and the Warrant being purchased by the Investor hereunder and the
Warrant Shares issuable pursuant to the Warrant will, upon issuance and payment
therefor pursuant to the terms hereof and thereof, be duly authorized, validly
issued, fully-paid and nonassessable.

 

4.3 Non-Contravention. The execution and delivery of the Agreements and the
Warrants, the issuance and sale of the Shares and the Warrants under the
Agreements and the Warrant

 

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Shares under the Warrant, the fulfillment of the terms of the Agreements and the
Warrants and the consummation of the transactions contemplated thereby will not
(A) conflict with or constitute a violation of, or default (with the passage of
time or otherwise) under, (i) any bond, debenture, note or other evidence of
indebtedness, lease, contract, indenture, mortgage, deed of trust, loan
agreement, joint venture or other agreement or instrument to which the Company
or any Subsidiary is a party or by which it or any of its Subsidiaries or their
respective properties are bound, (ii) the charter or by-laws of the Company or
any Subsidiary, or (iii) any law, administrative regulation, ordinance or order
of any court or governmental agency, arbitration panel or authority applicable
to the Company or any Subsidiary or their respective properties, except in the
case of clauses (i) and (iii) for any such conflicts, violations or defaults
which are not reasonably likely to have a Material Adverse Effect or (B) result
in the creation or imposition of any lien, encumbrance, claim, security interest
or restriction whatsoever upon any of the material properties or assets of the
Company or any Subsidiary or an acceleration of indebtedness pursuant to any
obligation, agreement or condition contained in any bond, debenture, note or any
other evidence of indebtedness or any material indenture, mortgage, deed of
trust or any other agreement or instrument to which the Company or any
Subsidiary is a party or by which any of them is bound or to which any of the
material property or assets of the Company or any Subsidiary is subject except
for any such creation or imposition which is not reasonably likely to have a
Material Adverse Effect. No consent, approval, authorization or other order of,
or registration, qualification or filing with, any regulatory body,
administrative agency, or other governmental body in the United States or any
other person (including, without limitation, the stockholders of the Company) is
required for the execution and delivery of the Agreements and the Warrants and
the valid issuance and sale of the Shares and Warrants to be sold pursuant to
the Agreements, and the valid issuance of the Warrant Shares under the Warrant,
other than such as have been made or obtained, and except for post-closing
securities filings or notifications required to be made under federal or state
securities laws.

 

4.4 Capitalization. The capitalization of the Company as of March 31, 2005 is as
set forth in the most recent applicable Exchange Act Documents, increased as set
forth in the next sentence. The Company has not issued any capital stock since
that date other than pursuant to (i) employee benefit plans disclosed in the
Exchange Act Documents, or (ii) outstanding warrants, options or other
securities disclosed in the Exchange Act Documents. The Shares and Warrants to
be sold pursuant to the Agreements, and the Warrant Shares to be issued pursuant
to the Warrant, have been duly authorized, and when issued and paid for in
accordance with the terms of the Agreements and the Warrants, as the case may
be, will be duly and validly issued, fully paid and nonassessable. The
outstanding shares of capital stock of the Company have been duly and validly
issued and are fully paid and nonassessable, have been issued in compliance with
all federal and state securities laws, and were not issued in violation of any
preemptive rights or similar rights to subscribe for or purchase securities.
Except as set forth in or contemplated by the Exchange Act Documents, there are
no outstanding rights (including, without limitation, preemptive rights),
warrants or options to acquire, or instruments convertible into or exchangeable
for, to obtain any unissued shares of capital stock or other equity interest
from the Company or any Subsidiary, or any contract, commitment, agreement,
understanding or arrangement of any kind to which the Company is a party or of
which the Company has knowledge and relating to the issuance or sale of any
capital stock of the Company or any Subsidiary, any such convertible or
exchangeable securities or any such rights, warrants or options. Without
limiting the foregoing, except as set forth in the Exchange Act Documents, no
preemptive right, co-sale right, right of first refusal, registration right, or
other similar right exists with respect to the Shares, the Warrants or the
Warrant Shares or the issuance and sale thereof. No further approval or
authorization of any stockholder, the Board of Directors of the Company or
others is required for the issuance and sale of the Shares, the Warrants and the
Warrant Shares, including under Nasdaq rules. The Company owns the entire equity
interest in each of its Subsidiaries, free and clear of any pledge, lien,
security interest, encumbrance, claim or equitable interest, other than as
described in the Exchange Act Documents. Except as disclosed in the Exchange Act
Documents, there are no stockholders agreements, voting agreements or other
similar agreements with respect to the Common Stock to which the Company is a
party or, to the knowledge of the Company, between or among any of the Company’s
stockholders.

 

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4.5 Legal Proceedings. There is no material legal or governmental proceeding
pending or, to the knowledge of the Company, threatened to which the Company or
any Subsidiary is or may be a party or of which the business or property of the
Company or any Subsidiary is subject that is not disclosed in the Exchange Act
Documents and which is required to be disclosed.

 

4.6 No Violations. Neither the Company nor any Subsidiary is (i) in violation of
its charter, bylaws, or other organizational document, or (ii) in violation of
any law, administrative regulation, ordinance or order of any court or
governmental agency, arbitration panel or authority applicable to the Company or
any Subsidiary, which violation, individually or in the aggregate, would be
reasonably likely to have a Material Adverse Effect, or (iii) in default (and
there exists no condition which, with the passage of time or otherwise, would
constitute a default) in the performance of any bond, debenture, note or any
other evidence of indebtedness in any indenture, mortgage, deed of trust or any
other material agreement or instrument to which the Company or any Subsidiary is
a party or by which the Company or any Subsidiary is bound or by which the
properties of the Company or any Subsidiary are bound, which would be reasonably
likely to have a Material Adverse Effect.

 

4.7 Governmental Permits, Etc. With the exception of the matters which are dealt
with separately in Sections 4.1, 4.12, 4.13 and 4.14, each of the Company and
its Subsidiaries has all necessary franchises, licenses, certificates and other
authorizations from any foreign, federal, state or local government or
governmental agency, department, or body that are currently necessary for the
operation of the business of the Company and its Subsidiaries as currently
conducted and as described in the Exchange Act Documents except where the
failure to currently possess could not reasonably be expected to have a Material
Adverse Effect.

 

4.8 Intellectual Property. Except as specifically disclosed in the Exchange Act
Documents, to the best knowledge of the Company (i) each of the Company and its
Subsidiaries owns or possesses sufficient rights to conduct its business in the
ordinary course, including, without limitation, rights to use all material
patents, patent rights, industry standards, trademarks, copyrights, licenses,
inventions, trade secrets, trade names and know-how (collectively, “Intellectual
Property”) described or referred to in the Exchange Act Documents as owned or
possessed by it or that are necessary for the conduct of its business as now
conducted or as proposed to be conducted except where the failure to currently
own or possess would not have a Material Adverse Effect and (ii) neither the
Company nor any of its Subsidiaries is infringing, or has received any notice
of, or has any knowledge of, any asserted infringement by the Company or any of
its Subsidiaries of, any rights of a third party with respect to any
Intellectual Property that, individually or in the aggregate, would have a
Material Adverse Effect.

 

4.9 Financial Statements. (a) The financial statements of the Company and the
related notes contained in the Exchange Act Documents present fairly, in
accordance with generally accepted accounting principles, the financial position
of the Company and its Subsidiaries as of the dates indicated, and the results
of its operations and cash flows for the periods therein specified except that
the unaudited interim financial statements were or are subject to normal and
recurring year-end adjustments which will not be material in amount. Such
financial statements (including the related notes) have been prepared in
accordance with generally accepted accounting principles applied on a consistent
basis throughout the periods therein specified, except as may be disclosed in
the notes to such financial statements, or in the case of unaudited statements,
as may be permitted by the Securities and Exchange Commission (“SEC”) on Form
10-Q under the Exchange Act and except as disclosed in the Exchange Act
Documents. The other financial information contained in the Exchange Act
Documents has been prepared on a basis consistent with the financial statements
of the Company.

 

(b) Except as set forth in any Exchange Act Documents, there are no obligations
of the Company to officers, directors, stockholders or employees of the Company
other than (i) for payment of salary for services rendered and for bonus
payments; (ii) reimbursements for reasonable expenses incurred on behalf of the
Company; (iii) for other standard employee benefits made generally available to
all employees (including stock option agreements outstanding under any stock
option plan approved by the Board of Directors of the Company); and (iv)
obligations listed in the Company’s financial statements.

 

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Except as described above or in any Exchange Act Filings, none of the officers,
directors or, to the best of the Company’s knowledge, key employees or
stockholders of the Company or any members of their immediate families, are
indebted to the Company, individually or in the aggregate, in excess of $60,000
or have any direct or indirect ownership interest in any firm or corporation
with which the Company is affiliated or with which the Company has a business
relationship, or any firm or corporation which competes with the Company, other
than passive investments in publicly traded companies (representing less than
one percent (1%) of such company) which may compete with the Company. Except as
described above, no officer, director or stockholder, or any member of their
immediate families, is, directly or indirectly, interested in any material
contract with the Company and no agreements, understandings or proposed
transactions are contemplated between the Company and any such person. Except as
set forth in any Exchange Act Documents, the Company is not a guarantor or
indemnitor of any indebtedness of any other person, firm or corporation.

 

4.10 No Material Adverse Change. Except as disclosed in the Exchange Act
Documents, since March 31, 2005, there has not been (i) any event which has had,
or would be reasonably expected to have, a Material Adverse Effect; (ii) any
obligation, direct or contingent, that is material to the Company and its
Subsidiaries considered as one enterprise, incurred by the Company, except
obligations incurred in the ordinary course of business, (iii) any dividend or
distribution of any kind declared, paid or made on the capital stock of the
Company or any of its Subsidiaries, or (iv) any loss or damage (whether or not
insured) to the physical property of the Company or any of its Subsidiaries
which has been sustained which has a Material Adverse Effect.

 

4.11 Disclosure. The representations and warranties of the Company contained in
this Section 4 as of the date hereof and as of the Closing Date, do not contain
any untrue statement of a material fact or omit to state a material fact
required to be stated therein or necessary to make the statements therein, in
light of the circumstances under which they were made, not misleading. Except
with respect to the material terms and conditions of the transaction
contemplated by the Agreements and the Warrants, which shall be publicly
disclosed by the Company pursuant to Section 16 hereof, the Company confirms
that neither it nor any person acting on its behalf has provided Investor with
any information that the Company believes constitutes material, non-public
information. The Company understands and confirms that Investor will rely on the
foregoing representations in effecting transactions in securities of the
Company.

 

4.12 NASDAQ Compliance. The Company’s Common Stock is registered pursuant to
Section 12(g) of the Exchange Act and is listed on The Nasdaq Stock Market, Inc.
National Market (the “Nasdaq National Market”), and the Company has taken no
action designed to, or likely to have the effect of, terminating the
registration of the Common Stock under the Exchange Act or de-listing the Common
Stock from the Nasdaq National Market, nor has the Company received any
notification that the SEC or the National Association of Securities Dealers,
Inc. (“NASD”) is contemplating terminating such registration or listing. The
Company is in compliance with all applicable Nasdaq maintenance requirements and
corporate governance requirements for continuing listing on Nasdaq National
Market. The issuance by the Company of the Shares, the Warrants, and the Warrant
Shares shall not have the effect of terminating the registration of the Common
Stock under the Exchange Act or delisting the Common Stock from the Nasdaq
National Market.

 

4.13 Reporting Status. The Company is eligible to use Form S-3 to register the
Shares and Warrant Shares to be offered for the account of the Investors. The
following documents complied in all material respects with the SEC’s
requirements as of their respective filing dates, and the information contained
therein as of the date thereof did not contain an untrue statement of a material
fact or omit to state a material fact required to be stated therein or necessary
to make the statements therein in light of the circumstances under which they
were made not misleading:

 

  (a) the Annual Report on Form 10-K for the fiscal year ended December 31,
2004, filed by the Company with the SEC on March 21, 2005;

 

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  (b) the Quarterly Report on Form 10-Q for the quarter ended March 31, 2005,
filed by the Company with the SEC on May 16, 2005; and

 

  (c) all other documents, if any, filed by the Company with the SEC during the
one-year period preceding the date of this Agreement pursuant to the reporting
requirements of the Exchange Act.

 

4.14 Listing. The Company shall comply with all requirements of the Nasdaq and
SEC with respect to the issuance of the Shares; the Company shall submit to the
Nasdaq National Market a Notification Form: Listing of Additional Shares related
to the Shares and the Warrant Shares.

 

4.15 No Manipulation of Stock. The Company has not taken and will not, in
violation of applicable law, take, any action designed to or that might
reasonably be expected to cause or result in stabilization or manipulation of
the price of the Common Stock to facilitate the sale or resale of the Shares or
the Warrant Shares.

 

4.16 Company not an “Investment Company”. The Company has been advised of the
rules and requirements under the Investment Company Act of 1940, as amended (the
“Investment Company Act”). To the best knowledge of the Company, the Company is
not, and immediately after receipt of payment for the Shares and Warrants will
not be, an “investment company” or an entity “controlled” by an “investment
company” within the meaning of the Investment Company Act and shall conduct its
business in a manner so that it will not become subject to the Investment
Company Act.

 

4.17 Foreign Corrupt Practices. Neither the Company, nor to the best knowledge
of the Company, any executive officer or director acting on behalf of the
Company, has (i) directly or indirectly, used any corrupt 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.

 

4.18 Accountants. To the Company’s knowledge Deloitte & Touche LLP, who the
Company expects will consent to the incorporation by reference of its report
dated March 18, 2005 with respect to the consolidated financial statements of
the Company included in the Company’s Annual Report on Form 10-K for the year
ended December 31, 2004 into the Registration Statement (as defined below) and
the prospectus which forms a part thereof, are independent accountants as
required by the Securities Act and the rules and regulations promulgated
thereunder.

 

4.19 Contracts. The contracts described in the Exchange Act Documents that are
material to the Company are in full force and effect on the date hereof, and
neither the Company nor, to the Company’s knowledge, any other party to such
contracts is in breach of or default under any of such contracts which would
have a Material Adverse Effect. The Company has filed with the SEC all contracts
and agreements required to be filed by the Exchange Act.

 

4.20 Taxes. The Company has filed all necessary federal, state and foreign
income and franchise tax returns when due (or obtained appropriate extensions
for filing) and has paid or accrued all taxes shown as due thereon, and the
Company has no knowledge of a tax deficiency which has been or might be asserted
or threatened against it which would have a Material Adverse Effect.

 

4.21 Transfer Taxes. On the Closing Date, all stock transfer or other taxes
(other than income taxes) which are required to be paid in connection with the
sale and transfer of the Shares and the Warrant to be sold to the Investor
hereunder will be, or will have been, fully paid or provided for by they Company
and all laws imposing such taxes will be or will have been fully complied with.
Upon the

 

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issuance of the Warrants Shares pursuant to the Warrant all stock transfer or
other taxes (other than income taxes) which are required to be paid in
connection therewith will be, or will have been, fully paid or provided for by
the Company and all laws imposing such taxes will be or will have been fully
complied with.

 

4.22 Private Offering. Assuming the correctness of the representations and
warranties of the Investors set forth in Section 5 hereof, the offer and sale of
Shares, the Warrants and the Warrant Shares is exempt from registration under
the Securities Act. The Company has not distributed and will not distribute
prior to the Closing Date any offering material in connection with this Offering
and sale of the Shares, the Warrants and the Warrant Shares other than the
documents of which this Agreement is a part or the Exchange Act Documents. The
Company has not in the past nor will it hereafter take any action independent of
the placement agent to sell, offer for sale or solicit offers to buy any
securities of the Company which would bring the offer, issuance or sale of the
Shares, the Warrants or the Warrant Shares within the provisions of Section 5 of
the Securities Act, unless such offer, issuance or sale was or shall be within
the exemptions of Section 4 of the Securities Act. Neither the Company nor any
person acting on behalf of the Company has offered or sold any of the Shares,
the Warrants or the Warrant Shares by any form of general solicitation or
general advertising. The Company has offered the Shares, the Warrants and the
Warrant Shares for sale only to the Investors and certain other “accredited
investors” within the meaning of Rule 501 under the Securities Act.

 

4.23 Controls and Procedures. The Company is in material compliance with all
provisions of the Sarbanes-Oxley Act of 2002 which are applicable to it as of
the Closing Date. The Company has established and maintains an effective system
of internal control over financial reporting (as such term is defined in the
Exchange Act ) regarding the reliability of financial reporting and preparation
of financial statements for external purposes in accordance with GAAP and
includes policies and procedures that (i) pertain to maintenance of records that
in reasonable detail accurately and fairly reflect the transactions and
dispositions of the assets of the issuer; (ii) provide reasonable assurance that
transactions are recorded as necessary to permit preparation of financial
statements in accordance with GAAP, and that receipts and expenditures of the
issuer are being made only in accordance with authorizations of management and
directors of the issuer; and (iii) provide reasonable assurance regarding
prevention or timely detection of unauthorized acquisition, use, or disposition
of the issuer’s assets that could have a material adverse effect on the
financial statements. The Company has established and maintains disclosure
controls and procedures (as defined in Exchange Act) that are effective in
ensuring that information required to be disclosed by the Company in the reports
that it files or submits under the Exchange Act is recorded, processed,
summarized and reported, within the time periods specified in the SEC’s rules
and forms, including, without limitation, controls and procedures designed to
ensure that information required to be disclosed by the Company in the reports
that it files or submits under the Act is accumulated and communicated to the
Company’s management, including its principal executive and principal financial
officers, or persons performing similar functions, as appropriate to allow
timely decisions regarding required disclosure. The Company’s certifying
officers have evaluated the effectiveness of the Company’s disclosure controls
and procedures and presented in the applicable Exchange Act Documents their
conclusions about the effectiveness of the disclosure controls and procedures,
as of the end of the periods covered by such Exchange Act Documents based on
such evaluation. Since the last such evaluation date, there has been no change
in the Company’s internal control over financial reporting that has materially
affected, or is reasonably likely to materially affect, the Company’s internal
control over financial reporting, and no significant deficiencies or material
weaknesses in internal controls over financial reporting, or other factors that
could significantly affect the Company’s internal control over financial
reporting, have been identified.

 

4.24 Transactions With Affiliates. Except as disclosed in the Exchange Act
Documents, none of the officers or directors of the Company is presently a party
to any transaction with the Company or any Subsidiary (other than for services
as employees, officers and directors), including any contract, agreement or
other arrangement providing for the furnishing of services to or by, providing
for rental of real or personal property to or from, or otherwise requiring
payments to or from any officer or

 

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director or, to the knowledge of the Company, any entity in which any officer or
director has a substantial interest or is an officer, director, trustee or
partner. Notwithstanding the foregoing, Investor acknowledges that certain
affiliates of the Company may participate in the transactions contemplated by
this Agreement.

 

4.25 No Registration Rights. Except as set forth in the Exchange Act Documents
and other than the registration rights granted to the Investors in Section 7 of
this Agreement, no person has the right, which right has not been waived, to
require the Company or any Subsidiary to register any securities for sale under
the Securities Act by reason of the filing of the Registration Statement with
the SEC or the issuance and sale of the Shares, the Warrants or the Warrant
Shares.

 

5. Representations, Warranties and Covenants of the Investor.

 

5.1 The Investor represents and warrants to, and covenants with, the Company
that: (i) (A) the Investor is an “accredited investor” as defined in Regulation
D under the Securities Act and the Investor is also 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 Shares and the Warrant, including investments in securities
issued by the Company and investments in comparable companies, and has
requested, received, reviewed and considered all information it deemed relevant
in making an informed decision to purchase the Shares and the Warrant and (B)
the Company has made available to the Investor, prior to the date hereof, the
opportunity to ask questions of and receive complete and correct answers from
representatives of the Company concerning the terms and conditions of the Shares
and the Warrant and to obtain any additional information relating to the
financial condition and business of the Company (provided that any investigation
conducted by the Investor shall not affect its right to rely on the
representations and warranties of the Company contained herein) and the Investor
has such knowledge and experience in financial and business matters that the
Investor is capable of evaluating the merits and risks of the investment in the
Shares and the Warrant; (ii) the Investor is acquiring the number of Shares and
the Warrant to purchase the number of Warrant Shares, each as set forth in
Section 3 of the Securities Purchase Agreement in the ordinary course of its
business and for its own account and with no present intention of distributing
any of such Shares, Warrant or Warrant Shares (other than pursuant to the
Registration Statement or any exemption from the registration requirements of
the Securities Act) or any arrangement or understanding with any other persons
regarding the distribution of such Shares, Warrant or Warrant Shares; (iii) the
Investor will not, directly or indirectly, offer, sell, pledge, transfer or
otherwise dispose of (or solicit any offers to buy, purchase or otherwise
acquire or take a pledge of) any of the Shares and the Warrant except in
compliance with the Securities Act, applicable state securities laws and the
respective rules and regulations promulgated thereunder; (iv) the Investor has
answered all questions on the Investor Questionnaire for use in preparation of
the Registration Statement and the answers thereto are true, correct and
complete in all material respects as of the date hereof and will be true,
correct and complete as of the Closing Date and the Filing Date; (v) the
Investor will notify the Company of any change in any of such information until
such time as the Investor has sold all of its Shares and Warrant Shares or until
the Company is no longer required to keep the Registration Statement effective;
and (vi) the Investor has, in connection with its decision to purchase the
number of Shares and the Warrant to purchase the number of Warrant Shares, each
as set forth in Section 3 of the Securities Purchase Agreement, relied only upon
the Exchange Act Documents, the information provided to it pursuant to clause
(i)(B) of this Section 5.1 and the representations and warranties of the Company
contained herein. The Investor understands that its acquisition of the Shares
and the Warrant has not been registered under the Securities Act or registered
or qualified under any state securities law in reliance on specific exemptions
therefrom, which exemptions may depend upon, among other things, the bona fide
nature of the Investor’s investment intent as expressed herein. Subject to
compliance with the Securities Act, applicable securities laws and the
respective rules and regulations promulgated thereunder, nothing contained
herein shall be deemed a representation or warranty by such Investor to hold the
Shares, Warrant or Warrant Shares for any period of time. The Investor has
completed or caused to be completed and delivered to the Company the Investor
Questionnaire, which questionnaire is true, correct and complete in all material
respects.

 

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5.2 The Investor acknowledges, represents and agrees that no action has been or
will be taken in any jurisdiction outside the United States by the Company that
would permit an offering of the Shares, Warrant or Warrant Shares, or possession
or distribution of offering materials in connection with the issue of the
Shares, Warrant or Warrant Shares, in any jurisdiction outside the United States
where legal action by the Company for that purpose is required. Each Investor
outside the United States will comply with all applicable laws and regulations
in each foreign jurisdiction in which it purchases, offers, sells or delivers
the Shares, Warrant or Warrant Shares or has in its possession or distributes
any offering material, in all cases at its own expense.

 

5.3 The Investor hereby covenants with the Company not to make any sale of the
Shares, Warrant or Warrant Shares without complying with the provisions of this
Agreement and, if applicable, without complying with any prospectus delivery
requirement then applicable to it, and the Investor acknowledges that the
Warrant and certificates evidencing the Shares will be imprinted with a legend
that prohibits their transfer except in accordance therewith. The Investor
acknowledges that there may occasionally be times when the Company determines
that it must suspend the use of the Prospectus forming a part of the
Registration Statement, as set forth in Section 7.2(c).

 

5.4 The Investor further represents and warrants to, and covenants with, the
Company that (i) the Investor has full right, power, authority and capacity to
enter into this Agreement and to consummate the transactions contemplated hereby
and has taken all necessary action to authorize the execution, delivery and
performance of this Agreement, and (ii) this Agreement constitutes a valid and
binding obligation of the Investor enforceable against the Investor in
accordance with its terms, except as enforceability may be limited by applicable
bankruptcy, insolvency, reorganization, moratorium or similar laws affecting
creditors’ and contracting parties’ rights generally and except as
enforceability may be subject to general principles of equity (regardless of
whether such enforceability is considered in a proceeding in equity or at law)
and except as the indemnification agreements of the Investors herein may be
legally unenforceable.

 

5.5 Neither the Investor nor any person acting on its behalf or at its direction
has engaged in any purchase or sale of Common Stock (including without
limitation any short sale), pledge, transfer, establish an open “put equivalent
position” within the meaning of Rule 16a-1(h) under the Exchange Act) during the
5 trading days immediately preceding the date of this Agreement. Investor will
not use any of the restricted Shares acquired pursuant to this Agreement, or the
Warrant Shares acquired pursuant to the Warrant, to cover any short position in
the Common Stock of the Company if doing so would be in violation of applicable
securities laws and otherwise will comply with federal securities laws in the
holding and sale of the Shares, Warrant and Warrant Shares.

 

5.6 The Investor understands that nothing in the Exchange Act Documents, this
Agreement, the Warrant or any other materials presented to the Investor in
connection with the purchase and sale of the Shares and the Warrant constitutes
legal, tax or investment advice. The Investor has consulted such legal, tax and
investment advisors as it, in its sole discretion, has deemed necessary or
appropriate in connection with its purchase of Shares and the Warrant.

 

5.7 The Company acknowledges and agrees that Investor 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 Sections 4 and 5
of this Agreement, Sections 5 and 16(a) of Annex 1 of this Agreement, or in the
Investor Questionnaire.

 

6. Survival of Representations, Warranties and Agreements. Notwithstanding any
investigation made by any party to this Agreement, all covenants, agreements,
representations and warranties made by the Company and the Investor herein shall
survive the execution of this Agreement, the delivery to the Investor of the
Shares and the Warrant being purchased and the payment therefor until the
expiration date of the Company’s obligation to keep the Registration Statement
effective pursuant to Section 7.1(c).

 

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7. Registration of the Shares and Warrant Shares; Compliance with the Securities
Act.

 

7.1 Registration Procedures and Other Matters. The Company shall:

 

(a) subject to receipt of necessary information from the Investor after prompt
request from the Company to the Investor to provide such information, prepare
and file with the SEC, within 30 calendar days after the Closing Date (the
“Filing Date”), a registration statement on Form S-3 (the “Registration
Statement”) to enable the resale of the Shares and the Warrant Shares by the
Investors from time to time through the automated quotation system of the Nasdaq
National Market or in privately-negotiated transactions;

 

(b) subject to receipt of necessary information from the Investor after prompt
request from the Company to the Investors to provide such information, use its
reasonable commercial efforts to cause the Registration Statement to become
effective on or prior to the 90th calendar day after the Closing Date (the
“Required Effective Date”). However, so long as the Company filed the
Registration Statement by the Filing Date, if the Registration Statement
receives Commission review, then the Required Effective Date will be the 120th
calendar day after the Closing Date;

 

(c) use its reasonable commercial efforts to prepare and file with the SEC such
amendments and supplements to the Registration Statement and the Prospectus used
in connection therewith as may be necessary to keep the Registration Statement
current, effective and free from any material misstatement or omission to state
a material fact for a period not exceeding, with respect to each Investor’s
Shares and Warrant Shares, the earlier of (i) the second anniversary of the
Closing Date, (ii) the date on which the Investor may sell all Shares and
Warrant Shares then held by the Investor without restriction by the volume
limitations of Rule 144(k) of the Securities Act, or (iii) such time as all
Shares, and Warrant Shares issuable pursuant to the Warrant, purchased by such
Investor in this Offering have been sold pursuant to a registration statement;

 

(d) comply with any prospectus publication requirement then applicable to it and
furnish to the Investor with respect to the Shares and Warrant Shares registered
under the Registration Statement such number of copies of the Registration
Statement, Prospectuses and Preliminary Prospectuses in conformity with the
requirements of the Securities Act and such other documents as the Investor may
reasonably request, in order to facilitate the public sale or other disposition
of all or any of the Shares and Warrant Shares by the Investor; provided,
however, that the obligation of the Company to deliver copies of Prospectuses or
Preliminary Prospectuses to the Investor shall be subject to the receipt by the
Company of reasonable assurances from the Investor that the Investor will comply
with the applicable provisions of the Securities Act and of such other
securities or blue sky laws as may be applicable in connection with any use of
such Prospectuses or Preliminary Prospectuses;

 

(e) file documents required of the Company for normal blue sky clearance in
states specified in writing by the Investor and use its reasonable commercial
efforts to maintain such blue sky qualifications during the period the Company
is required to maintain the effectiveness of the Registration Statement pursuant
to Section 7.1(c); provided, however, that the Company shall not be required to
qualify to do business or consent to service of process in any jurisdiction in
which it is not now so qualified or has not so consented;

 

(f) bear all expenses in connection with the procedures in paragraph (a) through
(e) of this Section 7.1 (other than underwriting discounts or commissions,
brokers’ fees and similar selling expenses, and any other fees or expenses
incurred by the Investor, including attorney fees of the Investor) and the
registration of the Shares and Warrant Shares pursuant to the Registration
Statement;

 

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(g) advise the Investor, promptly after it shall receive notice or obtain
knowledge of the issuance of any stop order by the SEC delaying or suspending
the effectiveness of the Registration Statement or of the initiation or threat
of any proceeding for that purpose; and it will promptly use its reasonable
commercial efforts to prevent the issuance of any stop order or to obtain its
withdrawal at the earliest possible moment if such stop order should be issued;
and

 

(h) provide a “Plan of Distribution” section of the Registration Statement in
the form attached hereto as Exhibit A.

 

Notwithstanding anything to the contrary herein, the Registration Statement
shall cover only the Shares and Warrant Shares. In no event at any time before
the expiration of the earlier of (i) 120 days after the date of this Securities
Purchase Agreement or (ii) the effective date of the Registration Statement with
respect to the Shares and Warrant Shares shall the Company publicly announce or
file any other registration statement, other than registrations on Form S-8,
without the prior written consent of a majority in interest of the Investors.

 

The Company understands that the Investor disclaims being an underwriter, but if
the SEC deems the Investor to be an underwriter the Company shall not be
relieved of any obligations it has hereunder; provided, however that if the
Company receives notification from the SEC that the Investor is deemed an
underwriter, then the period by which the Company is obligated to submit an
acceleration request to the SEC shall be extended to the earlier of (i) the 90th
day after such SEC notification, or (ii) 120 days after the initial filing of
the Registration Statement with the SEC.

 

7.2 Transfer of Shares and Warrant Shares After Registration; Suspension.

 

(a) The Investor agrees that it will not effect any disposition of the Shares or
Warrant Shares or its right to purchase the Shares or Warrant Shares that would
constitute a sale within the meaning of the Securities Act except as
contemplated in the Registration Statement referred to in Section 7.1 and as
described below or as otherwise permitted by law, and that it will promptly
notify the Company of any changes in the information set forth in the
Registration Statement regarding the Investor or its plan of distribution.

 

(b) Except in the event that paragraph (c) below applies, the Company shall (i)
if deemed necessary by the Company, prepare and file from time to time with the
SEC a post-effective amendment to the Registration Statement or a supplement to
the related Prospectus or a supplement or amendment to any document incorporated
therein by reference or file any other required document so that such
Registration Statement will not contain an untrue statement of a material fact
or omit to state a material fact required to be stated therein or necessary to
make the statements therein not misleading, and so that, as thereafter delivered
to purchasers of the Shares or Warrant Shares being sold thereunder, such
Prospectus will not contain an untrue statement of a material fact or omit to
state a material fact required to be stated therein or necessary to make the
statements therein, in light of the circumstances under which they were made,
not misleading; (ii) provide the Investor copies of any documents filed pursuant
to Section 7.2(b)(i) as the Investor may reasonably request; and (iii) inform
each Investor that the Company has complied with its obligations in Section
7.2(b)(i) (or that, if the Company has filed a post-effective amendment to the
Registration Statement which has not yet been declared effective, the Company
will notify the Investor to that effect, will use its reasonable commercial
efforts to secure the effectiveness of such post-effective amendment as promptly
as possible and will promptly notify the Investor pursuant to Section 7.2(b)(i)
hereof when the amendment has become effective).

 

(c) Subject to paragraph (d) below, in the event (i) of any request by the SEC
or any other federal or state governmental authority during the period of
effectiveness of the Registration Statement for amendments or supplements to a
Registration Statement or related Prospectus or for additional information; (ii)
of the issuance by the SEC or any other federal or state governmental authority
of any stop order suspending the effectiveness of a Registration Statement or
the initiation of any proceedings for that purpose; (iii) of the receipt by the
Company of any notification with respect to the

 

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suspension of the qualification or exemption from qualification of any of the
Shares or Warrant Shares for sale in any jurisdiction or the initiation or
threatening of any proceeding for such purpose; or (iv) of any event or
circumstance which, upon the advice of its counsel, necessitates the making of
any changes in the Registration Statement or Prospectus, or any document
incorporated or deemed to be incorporated therein by reference, so that, in the
case of the Registration Statement, it will not contain any untrue statement of
a material fact or any omission to state a material fact required to be stated
therein or necessary to make the statements therein not misleading, and that in
the case of the Prospectus, it will not contain any untrue statement of a
material fact or any omission to state a material fact required to be stated
therein or necessary to make the statements therein, in the light of the
circumstances under which they were made, not misleading; then the Company shall
deliver a certificate in writing to the Investor (the “Suspension Notice”) to
the effect of the foregoing and, upon receipt of such Suspension Notice, the
Investor will refrain from selling any Shares or Warrant Shares pursuant to the
Registration Statement (a “Suspension”) until the Investor’s receipt of copies
of a supplemented or amended Prospectus prepared and filed by the Company, or
until it is advised in writing by the Company that the current Prospectus may be
used, and has received copies of any additional or supplemental filings that are
incorporated or deemed incorporated by reference in any such Prospectus. In the
event of any Suspension, the Company will use its reasonable commercial efforts
to cause the use of the Prospectus so suspended to be resumed as soon as
reasonably practicable within 20 business days after the delivery of a
Suspension Notice to the Investor. In addition to and without limiting any other
remedies (including, without limitation, at law or at equity) available to the
Investor, the Investor shall be entitled to specific performance in the event
that the Company fails to comply with the provisions of this Section 7.2(c).

 

(d) Notwithstanding the foregoing paragraphs of this Section 7.2, the Investor
shall not be prohibited from selling Shares and Warrant Shares under the
Registration Statement as a result of Suspensions on more than two occasions of
not more than 30 days each in any twelve month period, unless, in the good faith
judgment of the Company’s Board of Directors, upon the written opinion of
counsel of the Company, the sale of Shares and Warrant Shares under the
Registration Statement in reliance on this paragraph 7.2(d) would be reasonably
likely to cause a violation of the Securities Act or the Exchange Act and result
in liability to the Company.

 

(e) Provided that a Suspension is not then in effect, the Investor may sell
Shares and Warrant Shares under the Registration Statement, provided that it
complies with any prospectus delivery requirement then applicable to it. Upon
receipt of a request therefor, the Company has agreed to provide an adequate
number of current Prospectuses to the Investor and to supply copies to any other
parties requiring such Prospectuses.

 

7.3 Indemnification. For the purpose of this Section 7.3:

 

(i) the term “Selling Stockholder” means the Investor and any affiliate of such
Investor;

 

(ii) the term “Registration Statement” shall include the Prospectus in the form
first filed with the SEC pursuant to Rule 424(b) of the Securities Act or filed
as part of the Registration Statement at the time of effectiveness if no Rule
424(b) filing is required, and any exhibit, supplement or amendment included in
or relating to the Registration Statement referred to in Section 7.1; and

 

(iii) the term “Untrue Statement” means any untrue statement or alleged untrue
statement, or any omission or alleged omission to state in the Registration
Statement a material fact required to be stated therein or necessary to make the
statements therein not misleading.

 

(a) The Company agrees to indemnify and hold harmless each Selling Stockholder
from and against any losses, claims, damages, liabilities, or expenses to which
such Selling Stockholder may become subject (under the Securities Act or
otherwise) insofar as such losses, claims, damages, liabilities or expenses (or
actions or proceedings in respect thereof) arise out of, or are based upon (i)
any breach of the representations or warranties of the Company contained herein
or failure to

 

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comply with the covenants and agreements of the Company contained herein, (ii)
any Untrue Statement, or (iii) any failure by the Company to fulfill any
undertaking included in the Registration Statement as amended or supplemented
from time to time, and the Company will reimburse such Selling Stockholder for
any reasonable legal or other expenses reasonably incurred in investigating,
defending or preparing to defend any such action, proceeding or claim, or
preparing to defend any such action, proceeding or claim, provided, however,
that the Company shall not be liable in any such case to the extent that such
loss, claim, damage or liability arises out of, or is based upon, an Untrue
Statement made in reliance upon and in conformity with written information
furnished to the Company by or on behalf of such Selling Stockholder
specifically for use in preparation of the Registration Statement, as amended or
supplemented from time to time (including, without limitation, information set
forth in the Investor Questionnaire as of its date), or the failure of such
Selling Stockholder to comply with its covenants and agreements contained in
Section 7.2 hereof respecting sale of the Shares or Warrant Shares or any
statement or omission in any Prospectus that is corrected in any subsequent
Prospectus that was published by the Company, if applicable, and delivered to
the Selling Stockholder prior to the pertinent sale or sales by the Selling
Stockholder. The Company shall reimburse each Selling Stockholder for the
indemnifiable amounts provided for herein on demand as such expenses are
incurred.

 

(b) The Investor agrees to indemnify and hold harmless the Company (and each
person, if any, who controls the Company within the meaning of Section 15 of the
Securities Act, each officer of the Company who signs the Registration Statement
and each director of the Company) from and against any losses, claims, damages
or liabilities to which the Company (or any such officer, director or
controlling person) may become subject (under the Securities Act or otherwise),
insofar as such losses, claims, damages or liabilities (or actions or
proceedings in respect thereof) arise out of, or are based upon, (i) any failure
of the Investor to comply with the covenants and agreements contained in Section
7.2 hereof respecting sale of the Shares and Warrant Shares, or (ii) any Untrue
Statement if such Untrue Statement was made in reliance upon and in conformity
with written information furnished by or on behalf of the Investor specifically
for use in preparation of the Registration Statement, as amended or supplemented
from time to time (including, without limitation, information set forth in the
Investor Questionnaire as of its date), and the Investor will reimburse the
Company (or such officer, director or controlling person), as the case may be,
for any legal or other expenses reasonably incurred in investigating, defending
or preparing to defend any such action, proceeding or claim. The Investor shall
reimburse the Company or such officer, director or controlling person, as the
case may be, for the indemnifiable amounts provided for herein on demand as such
expenses are incurred. Notwithstanding the foregoing, the Investor’s aggregate
obligation to indemnify the Company and such officers, directors and controlling
persons shall be limited to the net amount received by the Investor from the
sale of the Shares or Warrant Shares, as the case may be.

 

(c) Promptly after receipt by any indemnified person of a notice of a claim or
the beginning of any action in respect of which indemnity is to be sought
against an indemnifying person pursuant to this Section 7.3, such indemnified
person shall notify the indemnifying person in writing of such claim or of the
commencement of such action, but the omission to so notify the indemnifying
person will not relieve it from any liability which it may have to any
indemnified person under this Section 7.3 (except to the extent that such
omission materially and adversely affects the indemnifying person’s ability to
defend such action) or from any liability otherwise than under this Section 7.3.
Subject to the provisions hereinafter stated, in case any such action shall be
brought against an indemnified person, the indemnifying person shall be entitled
to participate therein, and, to the extent that it shall elect by written notice
delivered to the indemnified person promptly after receiving the aforesaid
notice from such indemnified person, shall be entitled to assume the defense
thereof, with counsel reasonably satisfactory to such indemnified person. After
notice from the indemnifying person to such indemnified person of its election
to assume the defense thereof, such indemnifying person shall not be liable to
such indemnified person for any legal expenses subsequently incurred by such
indemnified person in connection with the defense thereof, provided, however,
that if there exists or shall exist a conflict of interest that would make it
inappropriate, in the opinion of counsel to the indemnified person, for the same
counsel to represent both the indemnified person and such indemnifying person or
any affiliate or associate thereof, the indemnified person shall be entitled to
retain its own counsel at the expense of such indemnifying person;

 

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provided, however, that no indemnifying person shall be responsible for the fees
and expenses of more than one separate counsel (together with appropriate local
counsel) for all indemnified parties. In no event shall any indemnifying person
be liable in respect of any amounts paid in settlement of any action unless the
indemnifying person shall have approved the terms of such settlement; provided
that such consent shall not be unreasonably withheld or delayed. No indemnifying
person shall, without the prior written consent of the indemnified person,
effect any settlement of any pending or threatened proceeding in respect of
which any indemnified person is or could have been a party and indemnification
could have been sought hereunder by such indemnified person, unless such
settlement includes an unconditional release of such indemnified person from all
liability on claims that are the subject matter of such proceeding.

 

(d) If the indemnification provided for in this Section 7.3 is unavailable to or
insufficient to hold harmless an indemnified person under subsection (a) or (b)
above in respect of any losses, claims, damages or liabilities (or actions or
proceedings in respect thereof) referred to therein, then each indemnifying
person shall contribute to the amount paid or payable by such indemnified person
as a result of such losses, claims, damages or liabilities (or actions in
respect thereof) in such proportion as is appropriate to reflect the relative
fault of the Company on the one hand and the Investor, as well as any other
Selling Shareholders under such Registration Statement on the other in
connection with the statements or omissions or other matters which resulted in
such losses, claims, damages or liabilities (or actions in respect thereof), as
well as any other relevant equitable considerations. The relative fault shall be
determined by reference to, among other things, in the case of an Untrue
Statement, whether the Untrue Statement relates to information supplied by the
Company on the one hand or an Investor or other Selling Shareholder on the other
and the parties’ relative intent, knowledge, access to information and
opportunity to correct or prevent such Untrue Statement. The Company and the
Investor agree that it would not be just and equitable if contribution pursuant
to this subsection (d) were determined by pro rata allocation (even if the
Investor and other Selling Shareholders were treated as one entity for such
purpose) or by any other method of allocation which does not take into account
the equitable considerations referred to above in this subsection (d). The
amount paid or payable by an indemnified person as a result of the losses,
claims, damages or liabilities (or actions in respect thereof) referred to above
in this subsection (d) shall be deemed to include any legal or other expenses
reasonably incurred by such indemnified person in connection with investigating
or defending any such action or claim. Notwithstanding the provisions of this
subsection (d), the Investor shall not be required to contribute any amount in
excess of the amount by which the net amount received by the Investor from the
sale of the Shares or Warrant Shares, as the case may be to which such loss
relates exceeds the amount of any damages which such Investor has otherwise been
required to pay by reason of such Untrue Statement. No person guilty of
fraudulent misrepresentation (within the meaning of Section 11(f) of the
Securities Act) shall be entitled to contribution from any person who was not
guilty of such fraudulent misrepresentation. The Investor’s obligations in this
subsection to contribute shall be in proportion to its sale of Shares and
Warrant Shares to which such loss relates and shall not be joint with any other
Selling Shareholders.

 

(e) The parties to this Agreement hereby acknowledge that they are sophisticated
business persons who were represented by counsel during the negotiations
regarding the provisions hereof including, without limitation, the provisions of
this Section 7.3, and are fully informed regarding said provisions. They further
acknowledge that the provisions of this Section 7.3 fairly allocate the risks in
light of the ability of the parties to investigate the Company and its business
in order to assure that adequate disclosure is made in the Registration
Statement as required by the Securities Act and the Exchange Act. The parties
are advised that federal or state public policy as interpreted by the courts in
certain jurisdictions may be contrary to certain of the provisions of this
Section 7.3, and the parties hereto hereby expressly waive and relinquish any
right or ability to assert such public policy as a defense to a claim under this
Section 7.3 and further agree not to attempt to assert any such defense.

 

7.4 Termination of Conditions and Obligations. The conditions precedent imposed
by Section 5 or this Section 7 upon the transferability of the Shares and
Warrant Shares shall cease and terminate as to any particular number of the
Shares or Warrant Shares, as the case may be, when such Shares or Warrant Shares
shall have been effectively registered under the Securities Act and sold or

 

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otherwise disposed of in accordance with the intended method of disposition set
forth in the Registration Statement covering such Shares and Warrant Shares or
at such time as an opinion of counsel reasonably satisfactory to the Company
shall have been rendered to the effect that such conditions are not necessary in
order to comply with the Securities Act.

 

7.5 Information Available. So long as the Registration Statement is effective
covering the resale of Shares and Warrant Shares owned by the Investor, upon the
reasonable request of the Investor, the Company will furnish to the Investor:

 

(a) as soon as practicable after it is available, one copy of (i) its Annual
Report to Stockholders (which Annual Report shall contain financial statements
audited in accordance with generally accepted accounting principles by a
national firm of certified public accountants), (ii) its Annual Report on Form
10-K and (iii) its Quarterly Reports on Form 10-Q (the foregoing, in each case,
excluding exhibits);

 

(b) all exhibits excluded by the parenthetical to subparagraph (a) of this
Section 7.5 as filed with the SEC and all other information that is made
available to shareholders; and

 

(c) an adequate number of copies of the Prospectuses to supply to any other
party requiring such Prospectuses; and upon the reasonable request of the
Investor, the President or the Principal Financial Officer of the Company (or an
appropriate designee thereof) will meet with the Investor or a representative
thereof at the Company’s headquarters to discuss all information relevant for
disclosure in the Registration Statement covering the Shares and Warrant Shares
and will otherwise cooperate with any Investor conducting an investigation for
the purpose of reducing or eliminating such Investor’s exposure to liability
under the Securities Act, including the reasonable production of information at
the Company’s headquarters; provided, that the Company shall not be required to
disclose any confidential information to or meet at its headquarters with any
Investor until and unless the Investor shall have entered into a confidentiality
agreement in form and substance reasonably satisfactory to the Company with the
Company with respect thereto.

 

7.6 Legend; Restrictions on Transfer. The Warrant and certificate or
certificates for the Shares (and any securities issued in respect of or exchange
for the Shares or Warrant) shall be subject to a legend or legends restricting
transfer under the Securities Act and referring to restrictions on transfer
herein, such legend to be substantially as follows:

 

THE SECURITIES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED UNDER THE SECURITIES
ACT OF 1933 (THE “ACT”) AND MAY NOT BE OFFERED, SOLD OR OTHERWISE TRANSFERRED,
OR HYPOTHECATED UNLESS AND UNTIL REGISTERED UNDER THE ACT OR, IN THE OPINION OF
COUNSEL, IN FORM AND SUBSTANCE SATISFACTORY TO THE ISSUER OF THESE SECURITIES,
SUCH OFFER, SALE OR TRANSFER OR HYPOTHECATION IS IN COMPLIANCE THEREWITH.

 

The Company and the Investor acknowledge and agree that the Investor may, as
permitted by law, from time to time pledge pursuant to a bona fide margin
agreement or grant a security interest in some or all of the Shares, Warrant and
Warrant Shares and, if required under the terms of such arrangement, Investor
may, as permitted by law, transfer pledged or secured Shares, Warrant and
Warrant Shares to the pledgees or secured parties. So long as Investor is not an
affiliate of the Company, such a pledge or transfer would not be subject to
approval or consent of the Company, provided that, upon the request of the
Company, a legal opinion of legal counsel to the pledgee, secured party or
pledgor shall be obtained. At the Investor’s expense, so long as the Shares and
Warrant are subject to the legend required by this Section 7.6, the Company will
use its reasonable commercial efforts to execute and deliver such

 

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reasonable documentation as a pledgee or secured party of Shares and Warrant may
reasonably request in connection with a pledge or transfer of the Shares and
Warrant including such amendments or supplements to the Registration Statement
and Prospectus as may be reasonably required. The foregoing does not affect
Investor’s obligations pursuant to Section 7.2(a).

 

The Investor expressly agrees that any sale by the Investor of Shares and
Warrant Shares pursuant to the Registration Statement shall be sold in a manner
described under the caption “Plan of Distribution” in such Registration
Statement and, if then required to do so, the Investor will deliver a copy of
the Prospectus contained in the Registration Statement to the purchaser or
purchasers, directly or through the Investor’s broker, in connection with such
sale, in each case in compliance with the requirements of the Securities Act and
Exchange Act applicable to such sale. The Investor further agrees that the
Shares and Warrant Shares will only be sold while the Registration Statement is
effective, unless another exemption from registration is available. On the basis
of, and subject to, compliance by the Investor with the foregoing covenants,
upon the earlier of (i) the effectiveness of the Registration Statement, and
(ii) Rule 144(k) becoming available with respect thereto, the Company shall as
soon as practicable (but not later than five business days after surrender of
the legended certificates to the Company and notice of such surrender has been
provided pursuant to Section 8(b) below) cause certificates evidencing the
Shares and Warrant Shares previously issued to be replaced with certificates
which do not bear the restrictive legends specified above in this Section 7.6,
and all Shares and Warrant Shares subsequently issued shall not bear the
restrictive legend specified above in this Section 7.6. The Investor
acknowledges that the removal of the restrictive legends from certificates
representing Shares and Warrant Shares as provided in this Section 7.6 is
predicated upon the Company’s reliance on the Investor’s compliance with its
covenants in this Section 7.6.

 

7.7 Liquidated Damages. The Company and Investor agree that Investor will suffer
damages if the Company fails to fulfill its obligations pursuant to Section 7.1
and 7.2 hereof and that it would not be possible to ascertain the extent of such
damages with precision. Accordingly, the Company hereby agrees to pay liquidated
damages (“Liquidated Damages”) to Investor under the following circumstances:
(a) if the Registration Statement is not filed by the Company on or prior to 30
calendar days after the Closing Date (such an event, a “Filing Default”); (b) if
the Registration Statement is not declared effective by the SEC on or prior to
90 calendar days or, subject to the filing of the Registration Statement by the
Filing Date, in the event that the Registration Statement receives SEC review,
120 calendar days after the Closing Date (such an event, an “Effectiveness
Default”); or (c) if the Registration Statement (after its effectiveness date)
ceases to be effective and available to Investor for any continuous period that
exceeds 30 calendar days or for one or more period that exceeds in the aggregate
60 calendar days in any 12-month period (such an event, a “Suspension Default”
and together with a Filing Default and an Effectiveness Default, a “Registration
Default”). In the event of a Registration Default, the Company shall as
Liquidated Damages pay to Investor, for each 30 calendar day period of a
Registration Default, an amount in cash equal to 1% of the aggregate purchase
price paid by Investor pursuant to this Agreement up to a maximum of 10% of the
aggregate purchase price of the Shares and Warrants, provided that Liquidation
Damages in respect of a Suspension Default shall not be payable in relation to
any Shares or Warrant Shares not owned by the Investor at the time of the
Suspension Default. The Company shall pay the Liquidated Damages as follows: (i)
in connection with a Filing Default, on the 31st business day after the Closing
Date, and each 30th calendar day thereafter until the Registration Statement is
filed with the SEC; (ii) in connection with an Effectiveness Default, on the
90th calendar day (or, in the event that the Registration Statement receives SEC
review, the 120th calendar day) after the Closing Date and each 30th calendar
day thereafter until the Registration Statement is declared effective by the
SEC; or (iii) in connection with a Suspension Default, on either (x) the 31st
consecutive day of any Suspension or (y) the 61st calendar day (in the
aggregate) of any Suspensions in any 12-month period, and each 30th calendar day
thereafter until the Suspension is terminated in accordance with Section 7.2.
Notwithstanding the foregoing, the Company shall have no liability for
Liquidated Damages to any Investor who is not named in an effective Registration
Statement as a result of any action or inaction of such Investor. The Liquidated
Damages payable herein shall apply on a pro rata basis for any portion of a
30-day period of a Registration Default.

 

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8. Notices. All notices, requests, consents and other communications hereunder
shall be in writing, shall be mailed (A) if within the United States by
first-class registered or certified airmail, or nationally recognized overnight
express courier, postage prepaid, or by facsimile or electronic mail, or (B) if
delivered from outside the United States, by International Federal Express (or
other recognized international express courier) or facsimile, and shall be
deemed given (i) if delivered by first-class registered or certified mail, three
business days after so mailed, (ii) if delivered by nationally recognized
overnight carrier, one business day after so mailed, (iii) if delivered by
International Federal Express (or other recognized international express
courier), two business days after so mailed, or (iv) if delivered by facsimile
or electronic mail, upon electronic confirmation of receipt and shall be
delivered as addressed as follows:

 

  (a) if to the Company, to:

 

Xenogen Corporation

860 Atlantic Avenue

Alameda, CA 94501

Phone: (510) 291-6100

Attn: Jason Brady

 

  (b) with a copy to:

 

Heller Ehrman LLP

333 Bush Street

San Francisco, CA 94104

Phone: (415) 772-6000

Attn: Karen Dempsey

 

  (c) if to the Investor, at its address on the signature page hereto, or at
such other address or addresses as may have been furnished to the Company in
writing.

 

Notwithstanding anything in this Agreement to the contrary, (a) the Company may
deliver any documents, information or notices required to be delivered to an
Investor under this Agreement by email, in any recognized electronic format,
including Portable Document Format (PDF) or Microsoft Word document format, and
(b) with respect to any documents, exhibits, filings, furnishings or other
submissions (other than any Registration Statement, Prospectus, or Preliminary
Prospectus pursuant to Section 7 of this Agreement) publicly available on the
SEC’s EDGAR system (each, an “EDGAR Filing”), such EDGAR Filing shall be deemed
furnished by the Company to such Investor, in each case as of the date first
publicly available on the EDGAR system.

 

9. Changes. This Agreement may be modified, amended or waived only pursuant to a
written instrument signed by the Company and (a) Investors holding a majority of
the Shares issued and sold in the Offering, provided that such modification,
amendment or waiver is made with respect to all Agreements and does not
adversely affect the Investor without adversely affecting all Investors in a
similar manner; or (b) the Investor.

 

10. Headings. The headings of the various sections of this Agreement have been
inserted for convenience of reference only and shall not be deemed to be part of
this Agreement.

 

11. Severability. In case any provision contained in this Agreement should be
invalid, illegal or unenforceable in any respect, the validity, legality and
enforceability of the remaining provisions contained herein shall not in any way
be affected or impaired thereby.

 

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12. Governing Law. This Agreement shall be governed by, and construed in
accordance with, the internal laws of the State of New York, without giving
effect to the principles of conflicts of law.

 

13. Counterparts. This Agreement may be executed in two or more counterparts,
each of which shall constitute an original, but all of which, when taken
together, shall constitute but one instrument, and shall become effective when
one or more counterparts have been signed by each party hereto and delivered to
the other parties.

 

14. Entire Agreement. This Agreement and the Warrant constitute the entire
agreement between the parties hereto and supersedes any prior understandings or
agreements concerning the purchase and sale of the Shares and the Warrant and
the resale registration of the Shares and Warrant Shares; provided, however,
that any non-disclosure agreement signed by Investor shall survive the execution
of this Agreement.

 

15. Rule 144. The Company covenants that it will timely file the reports
required to be filed by it under the Securities Act and the Exchange Act and the
rules and regulations adopted by the SEC thereunder (or, if the Company is not
required to file such reports, it will, upon the request of any Investor holding
Shares purchased hereunder, or Warrant Shares purchased under any Warrant, made
after the first anniversary of the Closing Date, make publicly available such
information as necessary to permit sales pursuant to Rule 144 under the
Securities Act), and it will take such further action as any such Investor may
reasonably request, all to the extent required from time to time to enable such
Investor to sell such Shares and Warrant Shares without registration under the
Securities Act within the limitation of the exemptions provided by (a) Rule 144
under the Securities Act, as such Rule may be amended from time to time, or (b)
any similar rule or regulation hereafter adopted by the SEC. Upon the request of
the Investor, the Company will deliver to such holder a written statement as to
whether it has complied with such information and requirements.

 

16. Confidential Information. The Company shall within one business day of the
Closing Date issue a press release disclosing any information provided by the
Company or any person acting on its behalf that the Company believes constitutes
material and non-public information. The Company shall timely file with the SEC
a Form 8-K disclosing the material terms of the transactions contemplated hereby
(including at least the number of Shares and Warrants sold and proceeds
therefrom). The Company shall not publicly disclose the name of Investor or any
beneficial owner of Shares or Warrants held by Investor, or include the name of
Investor or such beneficial owner in any filing with the SEC or any state and
federal regulatory agency or the Nasdaq (other than the filing of the Agreements
with the SEC pursuant to the Exchange Act), without the prior written consent of
Investor, except to the extent such disclosure is required by law, regulation or
Nasdaq regulations.

 

17. 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.

 

18. Knowledge. The term “knowledge” in this Agreement shall mean the knowledge
of the directors and officers of the Company and the phrase “to the best of the
Company’s knowledge” in this Agreement shall mean the knowledge of the directors
and officers of the Company after due inquiry.

 

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