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Exhibit 10.1
 
 
SECURITIES PURCHASE AGREEMENT
 
This Securities Purchase Agreement (this “Agreement”) is dated as of October 18,
2006 among SIGA Technologies, Inc., a Delaware corporation (the “Company”), and
the purchasers identified on the signature pages hereto (each, a “Purchaser” and
collectively, the “Purchasers”).
 
WHEREAS, subject to the terms and conditions set forth in this Agreement and
pursuant to Section 4(2) of the Securities Act of 1933, as amended (the
“Securities Act”), the Company desires to issue and sell to each Purchaser, and
each Purchaser, severally and not jointly, desires to purchase from the Company,
certain securities of the Company as more fully described in this Agreement.
 
NOW, THEREFORE, IN CONSIDERATION of the mutual covenants contained in this
Agreement, and for other good and valuable consideration the receipt and
adequacy of which are hereby acknowledged, the Company and each of the
Purchasers, severally and not jointly, agree as follows:
 
ARTICLE I
DEFINITIONS
 
1.1  Definitions. In addition to the terms defined elsewhere in this Agreement,
the following terms have the meanings indicated:
 
“Affiliate” means any Person that, directly or indirectly through one or more
intermediaries, controls or is controlled by or is under common control with a
Person, as such terms are used in and construed under Rule 144 under the
Securities Act. With respect to a Purchaser, any investment fund or managed
account that is managed on a discretionary basis by the same investment manager
as such Purchaser will be deemed to be an Affiliate of such Purchaser.
 
“Business Day” means any day other than Saturday, Sunday or other day on which
commercial banks in The City of New York are authorized or required by law to
remain closed.
 
“Change of Control” means the occurrence of any of the following in one or a
series of related transactions: (i) an acquisition after the date hereof by an
individual or legal entity or “group” (as described in Rule 13d-5(b)(1) under
the Exchange Act) of more than one-third of the voting rights or equity
interests in the Company; (ii) a replacement of more than one-third of the
members of the Company's board of directors that is not approved by those
individuals who are members of the board of directors on the date hereof (or
other directors previously approved by such individuals); (iii) a merger or
consolidation of the Company or any significant Subsidiary or a sale of more
than one-third of the assets of the Company in one or a series of related
transactions, unless following such transaction or series of transactions, the
holders of the Company's securities prior to the first such transaction continue
to hold at least two-thirds of the
 

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voting rights and equity interests in the surviving entity or acquirer of such
assets; (iv) a recapitalization, reorganization or other transaction involving
the Company or any significant Subsidiary that constitutes or results in a
transfer of more than one-half of the voting rights or equity interests in the
Company; (v) consummation of a “Rule 13e-3 transaction” as defined in Rule 13e-3
under the Exchange Act with respect to the Company, or (vi) the execution by the
Company or its controlling shareholders of an agreement providing for or
reasonably likely to result in any of the foregoing events.
 
“Closing” means the closing of the purchase and sale of the Shares and Warrants
pursuant to Section 2.1.
 
“Closing Date” means the date of the Closing.
 
“Closing Price” means, for any date, the price determined by the first of the
following clauses that applies: (a) if the Common Stock is then listed or quoted
on an Eligible Market or any other national securities exchange, the closing
price per share of the Common Stock for such date (or the nearest preceding
date) on the primary Eligible Market or exchange on which the Common Stock is
then listed or quoted; (b) if prices for the Common Stock are then quoted on the
OTC Bulletin Board, the closing bid price per share of the Common Stock for such
date (or the nearest preceding date) so quoted; (c) if prices for the Common
Stock are then reported in the “Pink Sheets” published by the National Quotation
Bureau Incorporated (or a similar organization or agency succeeding to its
functions of reporting prices), the most recent closing bid price per share of
the Common Stock so reported; or (d) in all other cases, the fair market value
of a share of Common Stock as determined by an independent appraiser selected in
good faith by Purchasers holding a majority of the Securities.
 
“Commission” means the Securities and Exchange Commission.
 
“Common Stock” means the common stock of the Company, par value $0.0001 per
share.
 
"Common Stock Equivalents" means, collectively, Options and Convertible
Securities. 
 
“Company Counsel” means Kramer Levin Naftalis & Frankel LLP, counsel to the
Company.
 
"Convertible Securities" means any stock or securities (other than Options)
convertible into or exercisable or exchangeable for Common Stock. 
 
“Effective Date” means the date that the Registration Statement is first
declared effective by the Commission.
 
“Eligible Market” means any of the New York Stock Exchange, the American Stock
Exchange, the NASDAQ Global Select Market, NASDAQ Global Market or the NASDAQ
Capital Market.
 

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“Exchange Act” means the Securities Exchange Act of 1934, as amended.
 
“Excluded Stock” means the issuance of Common Stock (A) upon exercise or
conversion of any options or other securities described in Schedule 3.1(f)
(provided that such exercise or conversion occurs in accordance with the terms
thereof, without amendment or modification, and that the applicable exercise or
conversion price or ratio is described in such schedule) or otherwise pursuant
to any employee benefit plan described in Schedule 3.1(f) or hereafter adopted
by the Company and approved by its shareholders or (B) in connection with any
issuance of shares or grant of options to employees, officers, directors or
consultants of the Company pursuant to a stock option plan or other incentive
stock plan duly adopted by the Company’s board of directors or in respect of the
issuance of Common Stock upon exercise of any such options.
 
“Filing Date” means the 30th day following the Closing Date with respect to the
initial Registration Statement required to be filed hereunder, and, with respect
to any additional Registration Statements that may be required pursuant to
Section 6.1(f), the 10th day following the date on which the Company first
knows, or reasonably should have known, that such additional Registration
Statement is required under such Section.
 
“Lien” means any lien, charge, claim, security interest, encumbrance, right of
first refusal or other restriction.
 
“Losses” means any and all losses, claims, damages, liabilities, settlement
costs and expenses, including, without limitation, costs of preparation and
reasonable attorneys’ fees.
 
“Options” means any rights, warrants or options to subscribe for or purchase
Common Stock or Convertible Securities (including all Warrants that can be
issued under the Transaction Documents).
 
“Person” means any 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 any court or
other federal, state, local or other governmental authority or other entity of
any kind.
 
“Per Unit Purchase Price” means $4.54.
 
“Proceeding” means an action, claim, suit, investigation or proceeding
(including, without limitation, an investigation or partial proceeding, such as
a deposition), whether commenced or threatened.
 
“Prospectus” means the prospectus included in the Registration Statement
(including, without limitation, a prospectus that includes any information
previously omitted from a prospectus filed as part of an effective registration
statement in reliance upon Rule 430A promulgated under the Securities Act), as
amended or supplemented by any prospectus supplement, with respect to the terms
of the offering of any portion of the Registrable Securities covered by the
Registration Statement, and all other amendments
 

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and supplements to the Prospectus including post effective amendments, and all
material incorporated by reference or deemed to be incorporated by reference in
such Prospectus.
 
“Purchaser Counsel” has the meaning set forth in Section 6.2(a).
 
“Registrable Securities” means any Common Stock (including Underlying Shares)
issued or issuable pursuant to the Transaction Documents, together with any
securities issued or issuable upon any stock split, dividend or other
distribution, recapitalization or similar event with respect to the foregoing.
 
“Registration Statement” means each registration statement required to be filed
under Article VI, including (in each case) the Prospectus, amendments and
supplements to such registration statement or Prospectus, including pre- and
post-effective amendments, all exhibits thereto, and all material incorporated
by reference or deemed to be incorporated by reference in such registration
statement.
 
“Required Effectiveness Date” means (i) with respect to the initial Registration
Statement required to be filed hereunder, the 90th day following the Closing
Date and (ii) with respect to any additional Registration Statements that may be
required pursuant to Section 6.1(f), the 30th day following the date on which
the Company first knows, or reasonably should have known, that such additional
Registration Statement is required under such Section.
 
“Rule 144,” “Rule 415,” and “Rule 424” means Rule 144, Rule 415 and Rule 424,
respectively, promulgated by the Commission pursuant to the Securities Act, as
such Rules may be amended from time to time, or any similar rule or regulation
hereafter adopted by the Commission having substantially the same effect as such
Rule.
 
“Securities” means the Shares, Warrants and the Underlying Shares.
 
“Shares” means the shares of Common Stock, which are being issued and sold to
the Purchasers at the Closing.
 
“Subsidiary” means any Person in which the Company, directly or indirectly, owns
capital stock or holds an equity or similar interest.
 
“Trading Day” means (a) any day on which the Common Stock is listed or quoted
and traded on its primary Trading Market, or (b) if the Common Stock is not then
listed or quoted and traded on its primary Trading Market, then a day on which
trading occurs on an Eligible Market (or any successor thereto), or (c) if
trading ceases to occur on an Eligible Market (or any successor thereto), any
Business Day.
 
“Trading Market” means the NASDAQ Capital Market or any other Eligible Market,
or any national securities exchange, market or trading or quotation facility on
which the Common Stock is then listed or quoted.
 

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“Transaction Documents” means this Agreement, the Warrants, the Transfer Agent
Instructions and any other documents or agreements executed in connection with
the transactions contemplated hereunder.
 
"Transfer Agent Instructions" means the Irrevocable Transfer Agent Instructions,
in the form of Exhibit D, executed by the Company and delivered to and
acknowledged in writing by the Company's transfer agent.
 
“Underlying Shares” means the shares of Common Stock issuable upon exercise of
the Warrants.
 
“Unit” means one Share and a Warrant to acquire 0.50 shares of Common Stock.
 
“Warrant” means each Common Stock purchase warrant in the form of Exhibit A,
collectively the “Warrants”.

 
ARTICLE II
PURCHASE AND SALE
 
2.1  Subject to the terms and conditions set forth in this Agreement, at the
Closing the Company shall issue and sell to each Purchaser, and each Purchaser
shall, severally and not jointly, purchase from the Company, such number of
Units indicated below such Purchaser’s name on the signature page of this
Agreement at the Per Unit Purchase Price. The Closing shall take place at the
offices of Malhotra & Associates LLP immediately following the execution hereof,
or at such other location or time as the parties may agree.
 
2.2  Closing Deliveries.
 
(a)  At the Closing, the Company shall deliver or cause to be delivered to each
Purchaser the following:
 
(i)  one or more stock certificates, free and clear of all restrictive and other
legends (except as expressly provided in Section 4.1(b) hereof), evidencing such
number of Shares equal to the number of Units indicated below such Purchaser's
name on the signature page of this Agreement, registered in the name of such
Purchaser;
 
(ii)  a Warrant, registered in the name of such Purchaser, pursuant to which
such Purchaser shall have the right to acquire such number of Underlying Shares
indicated below such Purchaser’s name on the signature page of this Agreement
under the heading “Warrant Shares”;
 
(iii)  a legal opinion of Company Counsel, in the form of Exhibit B, executed by
such counsel and delivered to the Purchasers;
 
(iv)  duly executed Transfer Agent Instructions; and
 
 
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(v)  a certificate from a duly authorized officer certifying on behalf of the
Company that each of the conditions set forth in Section 5.1 has been satisfied;
 
(b)  At the Closing, each Purchaser shall deliver or cause to be delivered an
amount equal to the Per Unit Purchase Price multiplied by the number of Units
indicated below such Purchaser’s name on the signature page of this Agreement
under the heading "Units Purchased", in United States dollars and in immediately
available funds, by wire transfer to an account designated in writing to such
Purchaser by the Company for such purpose. The total purchase price payable by
each Purchaser shall be set forth under such Purchaser’s name on the signature
page of this Agreement under the heading “Purchase Price.”

ARTICLE III
REPRESENTATIONS AND WARRANTIES
 
3.1  Representations and Warranties of the Company. The Company hereby
represents and warrants to each of the Purchasers as follows:
 
(a)  Subsidiaries. The Company has no direct or indirect Subsidiaries other than
those listed in Schedule 3.1(a). Except as disclosed in Schedule 3.1(a), the
Company owns, directly or indirectly, all of the capital stock or comparable
equity interests of each Subsidiary free and clear of any Lien and all the
issued and outstanding shares of capital stock or comparable equity interest of
each Subsidiary are validly issued and are fully paid, non-assessable and free
of preemptive and similar rights.
 
(b)  Organization and Qualification. Each of the Company and the Subsidiaries is
an entity duly organized, validly existing and in good standing under the laws
of the jurisdiction of its incorporation or organization (as applicable), with
the requisite 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 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 the Subsidiaries is duly qualified to
do business and is in good standing as a foreign corporation or other entity in
each jurisdiction in which the nature of the business conducted or property
owned by it makes such qualification necessary, except where the failure to be
so qualified or in good standing, as the case may be, could not, individually or
in the aggregate, (i) adversely affect the legality, validity or enforceability
of any Transaction Document, (ii) have or result in a material adverse effect on
the results of operations, assets, prospects, business or condition (financial
or otherwise) of the Company and the Subsidiaries, taken as a whole on a
consolidated basis, or (iii) adversely impair the Company's ability to perform
fully on a timely basis its obligations under any of the Transaction Documents
(any of (i), (ii) or (iii), a “Material Adverse Effect”).
 
(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
 
 
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authorized by all necessary action on the part of the Company and no further
consent or action is required by the Company, its Board of Directors or its
shareholders. Each of the Transaction Documents has been (or upon delivery will
be) duly executed by the Company and, assuming the due authorization, execution
and delivery by the other parties thereto, is, or when delivered in accordance
with the terms hereof, will constitute, the valid and binding obligation of the
Company enforceable against the Company in accordance with its terms.
 
(d)  No Conflicts. The execution, delivery and performance of the Transaction
Documents by the Company and the consummation by the Company of the transactions
contemplated hereby and thereby do not and will not (i) conflict with or violate
any provision of the Company’s or any Subsidiary’s certificate or articles of
incorporation, bylaws or other organizational or charter documents, (ii)
conflict with, or constitute a default (or an event that with notice or lapse of
time or both would become a default) under, or give to others any rights of
termination, amendment, acceleration or cancellation (with or without notice,
lapse of time or both) of, any agreement, credit facility, debt or other
instrument (evidencing a Company or Subsidiary debt or otherwise) or other
understanding to which the Company or any Subsidiary is a party or by which any
property or asset of the Company or any Subsidiary is bound or affected, or
(iii) result in a violation of any law, rule, regulation, order, judgment,
injunction, decree or other restriction of any court or governmental authority
to which the Company or a Subsidiary is subject (including federal and state
securities laws and regulations and the rules and regulations of any
self-regulatory organization to which the Company or its securities are
subject), or by which any property or asset of the Company or a Subsidiary is
bound or affected.
 
(e)  Issuance of the Securities. The Securities (including the Underlying
Shares) are duly authorized and, when issued and paid for in accordance with the
Transaction Documents, will be duly and validly issued, fully paid and
nonassessable, free and clear of all Liens and shall not be subject to
preemptive rights or similar rights of shareholders. The Company has reserved
from its duly authorized capital stock the maximum number of shares of Common
Stock issuable upon exercise of the Warrants.
 
(f)  Capitalization. The number of shares and type of all authorized, issued and
outstanding capital stock, options and other securities of the Company (whether
or not presently convertible into or exercisable or exchangeable for shares of
capital stock of the Company), as of September 30, 2006, is set forth in
Schedule 3.1(f). All outstanding shares of capital stock are duly authorized,
validly issued, fully paid and nonassessable and have been issued in compliance
with all applicable securities laws. Except as disclosed in Schedule 3.1(f),
there are no outstanding options, warrants, script rights to subscribe to, calls
or commitments of any character whatsoever relating to, or securities, rights or
obligations convertible into or exercisable or exchangeable for, or 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 securities or rights convertible or exchangeable into shares of Common
Stock. There are no anti-dilution or price adjustment provisions contained in
any security issued by the Company (or in any agreement providing rights to
security holders) and the issue and sale of the Securities (including the
Underlying Shares) 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
 
 

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price under such securities. To the knowledge of the Company, except as
specifically disclosed in Schedule 3.1(f), no Person or group of related Persons
beneficially owns (as determined pursuant to Rule 13d-3 under the Exchange Act),
or has the right to acquire, by agreement with or by obligation binding upon the
Company, beneficial ownership of in excess of 5% of the outstanding Common
Stock, ignoring for such purposes any limitation on the number of shares of
Common Stock that may be owned at any single time.
 
(g)  SEC Reports; Financial Statements. The Company has filed all reports
required to be filed by it under the Exchange Act, including pursuant to Section
13(a) or 15(d) thereof, for the two years preceding the date hereof (or such
shorter period as the Company was required by law to file such material) (the
foregoing materials (together with any materials filed by the Company under the
Exchange Act, whether or not required) being collectively referred to herein as
the “SEC Reports” and, together with this Agreement and the Schedules to this
Agreement, the “Disclosure Materials”) 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. The Company has delivered to each Purchaser
true, correct and complete SEC Reports filed by the Company within the 10 days
preceding the date hereof. As of their respective dates, the SEC Reports
complied in all material respects with the requirements of the Securities Act
and the Exchange Act and the rules and regulations of the Commission promulgated
thereunder, 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 as may be otherwise specified in
such financial statements or the notes thereto, and 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, immaterial, year-end audit adjustments. All material
agreements to which the Company or any Subsidiary is a party or to which the
property or assets of the Company or any Subsidiary are subject are included as
part of or specifically identified in the SEC Reports.
 
(h)  Material Changes. Since the date of the latest audited financial statements
included within the SEC Reports, except as specifically disclosed in the SEC
Reports or in Schedule 3.1(h), (i) there has been no event, occurrence or
development that, individually or in the aggregate, has had or that could 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 required to be disclosed in filings made with the
Commission, (iii) the Company has not altered its method of accounting or the
identity of its auditors, except as disclosed in its SEC Reports, (iv) the
Company has not declared or made any dividend or distribution of cash or other
property to its shareholders or purchased, redeemed or made any agreements to
purchase or
  
 

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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-based plans.
 
(i)  Absence of Litigation. There is no action, suit, claim, proceeding, inquiry
or investigation before or by any court, public board, government agency,
self-regulatory organization or body pending or, to the knowledge of the
Company, threatened against or affecting the Company or any of its Subsidiaries
that could, individually or in the aggregate, have a Material Adverse Effect.
Schedule 3.1(i) contains a complete list and summary description of any pending
or, to the knowledge of the Company, threatened proceeding against or affecting
the Company or any of its Subsidiaries, without regard to whether it could,
individually or in the aggregate, have a Material Adverse Effect.
 
(j)  Compliance. Neither the Company nor any Subsidiary (i) is in default under
or in violation of (and, to the knowledge of the Company, no event has occurred
that has not been waived that, with notice or lapse of time or both, would
result in a default by the Company or any Subsidiary under), nor has the Company
or any Subsidiary received written notice of a claim that it is in default under
or that it is in violation of, any indenture, loan or credit agreement or any
other agreement or instrument to which it is a party or by which it or any of
its properties is bound (whether or not such default or violation has been
waived), (ii) is in violation of any order of any court, arbitrator or
governmental body, or (iii) is or has been in violation of any statute, rule or
regulation of any governmental authority, including without limitation all
foreign, federal, state and local laws relating to taxes, environmental
protection, occupational health and safety, product quality and safety and
employment and labor matters, except in each case as could not, individually or
in the aggregate, have or result in a Material Adverse Effect.
 
(k)  Title to Assets. The Company and the Subsidiaries have good and marketable
title in fee simple to all real property owned by them that is material to the
business of the Company and the Subsidiaries and good and marketable title in
all personal property owned by them that is material to the business of the
Company and the Subsidiaries, in each case free and clear of all Liens, except
for Liens 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 the Subsidiaries. Any real property and facilities held under
lease by the Company and the Subsidiaries are held by them under valid,
subsisting and enforceable leases of which the Company and the Subsidiaries are
in compliance.
 
(l)  Certain Fees. Except for the fees described in Schedule 3.1(l), all of
which are payable to registered broker-dealers, 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 this Agreement, and the
Company has not taken any action that would cause any Purchaser to be liable for
any such fees or commissions.
 
(m)  Private Placement. Neither the Company nor any Person acting on the
Company’s behalf has sold or offered to sell or solicited any offer to buy the
Securities by means of any form of general solicitation or advertising. Neither
the Company nor any of its Affiliates nor any Person acting on the Company's
behalf has, directly or indirectly, at any time within the
 

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past six months, made any offer or sale of any security or solicitation of any
offer to buy any security under circumstances that would (i) eliminate the
availability of the exemption from registration under Regulation D under the
Securities Act in connection with the offer and sale of the Securities as
contemplated hereby or (ii) cause the offering of the Securities pursuant to the
Transaction Documents to be integrated with prior offerings by the Company for
purposes of any applicable law, regulation or stockholder approval provisions,
including, without limitation, under the rules and regulations of any Trading
Market. The Company is not, and is not an Affiliate of, an “investment company”
within the meaning of the Investment Company Act of 1940, as amended. The
Company is not a United States real property holding corporation within the
meaning of the Foreign Investment in Real Property Tax Act of 1980.
 
(n)  Listing and Maintenance Requirements. Except as set forth in the SEC
Reports, the Company has not, in the two years preceding the date hereof,
received notice (written or oral) from any Trading Market on which the Common
Stock is or has been listed or quoted to the effect that the Company is not in
compliance with the listing or maintenance requirements of such Trading Market.
The Company is, and has no reason to believe that it will not in the foreseeable
future continue to be, in compliance with all such listing and maintenance
requirements.
 
(o)  Registration Rights. Except as described in Schedule 3.1(o), the Company
has not granted or agreed to grant to any Person any rights (including
“piggy-back” registration rights) to have any securities of the Company
registered with the Commission or any other governmental authority that have not
been satisfied.
 
(p)  Application of Takeover Protections. There is no control share acquisition,
business combination, poison pill (including any distribution under a rights
agreement) or other similar anti-takeover provision under the Company’s charter
documents or the laws of its state of incorporation that is or could become
applicable to any of the Purchasers as a result of the Purchasers 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 Purchasers' ownership of the
Securities.
 
(q)  Disclosure. The Company confirms that neither it nor any other Person
acting on its behalf has provided any of the Purchasers or their agents or
counsel with any information that constitutes or might constitute material,
nonpublic information. The Company understands and confirms that each of the
Purchasers will rely on the foregoing representations in effecting transactions
in securities of the Company. All disclosure materials provided to the
Purchasers regarding the Company, its business and the transactions contemplated
hereby, including the Schedules to this Agreement, furnished by or on behalf of
the Company are true and correct in all material respects and do not contain any
untrue statement of a material fact or omit to state any material fact necessary
in order to make the statements made therein, in the light of the circumstances
under which they were made, not misleading. No event or circumstance has
occurred or information exists with respect to the Company or any of its
Subsidiaries or its or their business, properties, prospects, operations or
financial conditions, which, under applicable law, rule or regulation, requires
public disclosure or announcement by the Company but which has not been so
publicly announced or disclosed. The Company acknowledges and agrees that (i) no
Purchaser makes or has made any representations or
 

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warranties with respect to the transactions contemplated hereby other than those
specifically set forth in Section 3.2 or (ii) any statement, commitment or
promise to the Company or, to its knowledge, any of its representatives which is
or was an inducement to the Company to enter into this Agreement or otherwise.
 
(r)  Acknowledgment Regarding Purchasers' Purchase of Securities. The Company
acknowledges and agrees that each of the Purchasers is acting solely in the
capacity of an arm's length purchaser with respect to this Agreement and the
transactions contemplated hereby. The Company further acknowledges that no
Purchaser is acting as a financial advisor or fiduciary of the Company (or in
any similar capacity) with respect to this Agreement and the transactions
contemplated hereby and any advice given by any Purchaser or any of their
respective representatives or agents in connection with this Agreement and the
transactions contemplated hereby is merely incidental to the Purchasers'
purchase of the Securities. The Company further represents to each Purchaser
that the Company's decision to enter into this Agreement has been based solely
on the independent evaluation of the transactions contemplated hereby by the
Company and its representatives.
 
(s)  Patents and Trademarks. The Company and the Subsidiaries have, or have
rights to use, all patents, patent applications, trademarks, trademark
applications, service marks, trade names, copyrights, licenses and other similar
rights that are 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 have a Material Adverse Effect (collectively, the "Intellectual
Property Rights"). Neither the Company nor any Subsidiary has received a written
notice that 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.
 
(t)  Insurance. The Company and the Subsidiaries are insured by insurers of
recognized financial responsibility against such losses and risks and in such
amounts as are prudent and customary in the businesses in which the Company and
the Subsidiaries are engaged. 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.
 
(u)  Regulatory Permits. The Company and the Subsidiaries possess all
certificates, authorizations and permits issued by the appropriate federal,
state, local or foreign regulatory authorities necessary to conduct their
respective businesses as described in the SEC Reports, except where the failure
to possess such permits could not, individually or in the aggregate, have or
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.
 
(v)  Transactions With Affiliates and Employees. Except as set forth in SEC
Reports filed at least ten days prior to the date hereof, none of the officers
or directors of the Company and, to the knowledge of the Company, none of the
employees of the Company is
 

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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, 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.
 
(w)  Form S-3 Eligibility. The Company is eligible to register the resale of its
Common Stock for resale by the Purchasers under Form S-3 promulgated under the
Securities Act.
 
(x)  Solvency. Based on the financial condition of the Company as of the Closing
Date, (i) the Company’s fair saleable value of its assets exceeds the amount
that will be required to be paid on or in respect of the Company’s existing
debts and other liabilities (including known contingent liabilities) as they
mature; (ii) the Company’s assets do not constitute unreasonably small capital
to carry on its business for the current fiscal year as now conducted and as
proposed to be conducted including its capital needs taking into account the
particular capital requirements of the business conducted by the Company, and
projected capital requirements and capital availability thereof; and (iii) the
current cash flow of the Company, together with the proceeds the Company would
receive, were it to liquidate all of its assets, after taking into account all
anticipated uses of the cash, would be sufficient to pay all amounts on or in
respect of its debt when such amounts are required to be paid. The Company does
not intend to incur debts beyond its ability to pay such debts as they mature
(taking into account the timing and amounts of cash to be payable on or in
respect of its debt).
 
(y)  Internal Accounting Controls. The Company and the Subsidiaries maintain a
system of internal accounting controls sufficient to provide reasonable
assurance that (i) transactions are executed in accordance with management’s
general or specific authorizations, (ii) transactions are recorded as necessary
to permit preparation of financial statements in conformity with generally
accepted accounting principles and to maintain asset accountability, (iii)
access to assets is permitted only in accordance with management’s general or
specific authorization, and (iv) the recorded accountability for assets is
compared with the existing assets at reasonable intervals and appropriate action
is taken with respect to any differences.
 
(z)  Sarbanes-Oxley Act. The Company is in compliance with applicable
requirements of the Sarbanes-Oxley Act of 2002 and applicable rules and
regulations promulgated by the Commission thereunder in effect as of the date of
this Agreement, except where such noncompliance could not be reasonably expected
to have, individually or in the aggregate, a Material Adverse Effect.
 
3.2  Representations and Warranties of the Purchasers. Each Purchaser hereby, as
to itself only and for no other Purchaser, represents and warrants to the
Company as follows:
(a)  Organization; Authority. Such Purchaser is an entity duly organized,
validly existing and in good standing under the laws of the jurisdiction of its
organization with the requisite corporate or partnership power and authority to
enter into and to consummate the  
 

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transactions contemplated by the Transaction Documents and otherwise to carry
out its obligations hereunder and thereunder. The purchase by such Purchaser of
the Shares and the Warrants hereunder has been duly authorized by all necessary
action on the part of such Purchaser. This Agreement has been duly executed and
delivered by such Purchaser and constitutes the valid and binding obligation of
such Purchaser, enforceable against it in accordance with its terms.
 
(b)  Purchaser Status. At the time such Purchaser was offered the Shares and the
Warrants, it was, and at the date hereof it is, an “accredited investor” as
defined in Rule 501(a) under the Securities Act.
 
(c)  Experience of such Purchaser. Such Purchaser, either alone or together with
its representatives, has such knowledge, sophistication and experience in
business and financial matters so as to be capable of evaluating the merits and
risks of the prospective investment in the Securities, and has so evaluated the
merits and risks of such investment. Such Purchaser is able to bear the economic
risk of an investment in the Securities and, at the present time, is able to
afford a complete loss of such investment.
 

ARTICLE IV
OTHER AGREEMENTS OF THE PARTIES
 
4.1  Transfer Restrictions.
 
(a)  Securities may only be disposed of pursuant to an effective registration
statement under the Securities Act or pursuant to an available exemption from
the registration requirements of the Securities Act, and in compliance with any
applicable state securities laws. In connection with any transfer of Securities
other than pursuant to an effective registration statement or to the Company or
pursuant to Rule 144(k), except as otherwise set forth herein, the Company may
require the transferor to provide to the Company an opinion of counsel selected
by the transferor, the form and substance of which opinion shall be reasonably
satisfactory to the Company, to the effect that such transfer does not require
registration under the Securities Act. Notwithstanding the foregoing, the
Company hereby consents to and agrees to register on the books of the Company
and with its transfer agent, without any such legal opinion, any transfer of
Securities by a Purchaser to an Affiliate of such Purchaser, provided that the
transferee certifies to the Company that it is an “accredited investor” as
defined in Rule 501(a) under the Securities Act. For so long as any Purchaser
owns Securities, the Company will not effect or publicly announce its intention
to effect any exchange, recapitalization or other transaction that effectively
requires or rewards physical delivery of certificates evidencing the Common
Stock.
 
(b)  The Purchasers agree to the imprinting, so long as is required by this
Section 4.1(b), of the following legend on any certificate evidencing
Securities:
 
[NEITHER] THESE SECURITIES [NOR THE SECURITIES INTO WHICH THESE SECURITIES ARE
EXERCISABLE] HAVE [NOT] BEEN REGISTERED WITH THE SECURITIES AND EXCHANGE
COMMISSION OR THE SECURITIES COMMISSION OF ANY STATE IN RELIANCE UPON
 

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AN EXEMPTION FROM REGISTRATION UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE
“SECURITIES ACT”), AND, ACCORDINGLY, MAY NOT BE OFFERED OR SOLD EXCEPT PURSUANT
TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT OR PURSUANT TO
AN AVAILABLE EXEMPTION FROM, OR IN A TRANSACTION NOT SUBJECT TO, THE
REGISTRATION REQUIREMENTS OF THE SECURITIES ACT AND IN COMPLIANCE WITH
APPLICABLE STATE SECURITIES LAWS OR BLUE SKY LAWS. NOTWITHSTANDING THE
FOREGOING, THESE SECURITIES AND THE SECURITIES ISSUABLE UPON EXERCISE OF THESE
SECURITIES MAY BE PLEDGED IN CONNECTION WITH A BONA FIDE MARGIN ACCOUNT OR OTHER
LOAN OR FINANCING ARRANGEMENT SECURED BY SUCH SECURITIES.
 
Certificates evidencing Securities shall not be required to contain such legend
or any other legend (i) while a Registration Statement covering the resale of
such Securities is effective under the Securities Act, or (ii) following any
sale of such Securities pursuant to Rule 144, or (iii) if such Securities are
eligible for sale under Rule 144(k), or (iv) if such legend is not required
under applicable requirements of the Securities Act (including judicial
interpretations and pronouncements issued by the Staff of the Commission). The
Company shall cause its counsel to issue the legal opinion included in the
Transfer Agent Instructions to the Company's transfer agent on the Effective
Date. Following the Effective Date or at such earlier time as a legend is no
longer required for certain Securities, the Company will use reasonable best
efforts to cause its transfer agent, no later than three Trading Days following
the delivery by a Purchaser to the Company or the Company’s transfer agent of a
legended certificate representing such Securities, deliver or cause to be
delivered to such Purchaser a certificate representing such Securities that is
free from all restrictive and other legends. The Company may not make any
notation on its records or give instructions to any transfer agent of the
Company that enlarge the restrictions on transfer set forth in this Section.
 
(c)  The Company acknowledges and agrees that a Purchaser may from time to time
pledge or grant a security interest in some or all of the Securities in
connection with a bona fide margin agreement or other loan or financing
arrangement secured by the Securities and, if required under the terms of such
agreement, loan or arrangement, such Purchaser may transfer pledged or secured
Securities to the pledgees or secured parties. Such a pledge or transfer would
not be subject to approval of the Company and no legal opinion of the pledgee,
secured party or pledgor shall be required in connection therewith. Further, no
notice shall be required of such pledge. At the appropriate Purchaser’s expense,
the Company will execute and deliver such reasonable documentation as a pledgee
or secured party of Securities may reasonably request in connection with a
pledge or transfer of the Securities, including the preparation and filing of
any required prospectus supplement under Rule 424(b)(3) of the Securities Act or
other applicable provision of the Securities Act to appropriately amend the list
of Selling Stockholders thereunder.
 
4.2  Furnishing of Information. As long as any Purchaser owns Securities, the
Company covenants to timely file (or obtain extensions in respect thereof and
file within the applicable grace period) all reports required to be filed by the
Company after the date hereof
 

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pursuant to the Exchange Act. Upon the request of any Purchaser, the Company
shall deliver to such Purchaser a written certification of a duly authorized
officer as to whether it has complied with the preceding sentence. As long as
any Purchaser owns Securities, if the Company is not required to file reports
pursuant to such laws, it will prepare and furnish to the Purchasers and make
publicly available in accordance with paragraph (c) of Rule 144 such information
as is required for the Purchasers to sell the Securities under Rule 144. The
Company further covenants that it will take such further action as any holder of
Securities may reasonably request to satisfy the provisions of Rule 144
applicable to the issuer of securities relating to transactions for the sale of
securities pursuant to Rule 144.
 
4.3  Integration. The Company shall not, and shall use its best efforts to
ensure that no Affiliate of the Company shall, sell, offer for sale or solicit
offers to buy or otherwise negotiate in respect of any security (as defined in
Section 2 of the Securities Act) that would be integrated with the offer or sale
of the Securities in a manner that would require the registration under the
Securities Act of the sale of the Securities to the Purchasers or that would be
integrated with the offer or sale of the Securities for purposes of the rules
and regulations of any Trading Market.
 
4.4  Reservation and Listing of Securities. The Company shall maintain a reserve
from its duly authorized shares of Common Stock for issuance pursuant to the
Transaction Documents in such amount as may be required to fulfill its
obligations in full under the Transaction Documents. In the event that at any
time the then authorized shares of Common Stock are insufficient for the Company
to satisfy its obligations in full under the Transaction Documents, the Company
shall promptly take such actions as may be required to increase the number of
authorized shares. The Company shall in the time and manner required by its
Trading Market, prepare and file with such Trading Market an additional shares
listing application covering the number of shares of Common Stock issuable under
the Transaction Documents and shall take all steps necessary to cause such
shares of Common Stock to be approved for listing on its Trading Market as soon
as possible.
 
4.5  Subsequent Placements.
 
(a) From the date hereof until the 60th Trading Day following the Effective
Date, the Company will not, directly or indirectly, offer, sell, grant any
option to purchase, or otherwise dispose of (or announce any offer, sale, grant
or any option to purchase or other disposition of) any of its or the
Subsidiaries’ equity or equity equivalent securities, including without
limitation any debt, preferred stock or other instrument or security that is, at
any time during its life and under any circumstances, convertible into or
exchangeable or exercisable for Common Stock or Common Stock Equivalents (any
such offer, sale, grant, disposition or announcement being referred to as a
“Subsequent Placement”).
 
(b) The restrictions set forth in paragraph (a) of this Section 4.5 shall not
apply to Excluded Stock. 
 
4.6  Securities Laws Disclosure; Publicity. The Company shall, on or before 8:30
a.m., New York City time on October 19, 2006, issue a press release acceptable
to the Purchasers disclosing all material terms of the transactions contemplated
hereby. Prior to the second
 

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business day after the Closing Date, the Company shall file a Current Report on
Form 8-K with the Commission (the “8-K Filing”) describing the terms of the
transactions contemplated by the Transaction Documents and including as exhibits
to such Current Report on Form 8-K this Agreement, the form of Warrant, in the
form required by the Exchange Act. Thereafter, the Company shall timely file any
filings and notices required by the Commission or applicable law with respect to
the transactions contemplated hereby and provide copies thereof to the
Purchasers promptly after filing. Except with respect to the 8-K Filing and the
press release referenced above (a copy of which will be provided to the
Purchasers for their review as early as practicable prior to its filing), the
Company shall, at least two Trading Days prior to the filing or dissemination of
any disclosure required by this paragraph that does not contain any material
non-public information, provide a copy thereof to the Purchasers for their
review. The Company and the Purchasers shall consult with each other in issuing
any press releases or otherwise making public statements or filings and other
communications with the Commission or any regulatory agency or Trading Market
with respect to the transactions contemplated hereby, and neither party shall
issue any such press release or otherwise make any such public statement, filing
or other communication without the prior consent of the other, 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, filing or
other communication. Notwithstanding the foregoing, the Company shall not
publicly disclose the name of any Purchaser, or include the name of any
Purchaser in any filing with the Commission or any regulatory agency or Trading
Market, without the prior written consent of such Purchaser, except to the
extent such disclosure (but not any disclosure as to the controlling Persons
thereof) is required by law or Trading Market regulations, in which case the
Company shall provide the Purchasers with prior notice of such disclosure. The
Company shall not, and shall cause each of its Subsidiaries and its and each of
their respective officers, directors, employees and agents not to, provide any
Purchaser with any material nonpublic information regarding the Company or any
of its Subsidiaries from and after the filing of the 8-K Filing without the
express written consent of such Purchaser. In the event of a breach of the
foregoing covenant by the Company, any of its Subsidiaries, or any of its or
their respective officers, directors, employees and agents, in addition to any
other remedy provided herein or in the Transaction Documents, a Purchaser shall
have the right to make a public disclosure, in the form of a press release,
public advertisement or otherwise, of such material nonpublic information
without the prior approval by the Company, its Subsidiaries, or any of its or
their respective officers, directors, employees or agents. No Purchaser shall
have any liability to the Company, its Subsidiaries, or any of its or their
respective officers, directors, employees, shareholders or agents for any such
disclosure. Subject to the foregoing, neither the Company nor any Purchaser
shall issue any press releases or any other public statements with respect to
the transactions contemplated hereby; provided, however, that the Company shall
be entitled, without the prior approval of any Purchaser, to make any press
release or other public disclosure with respect to such transactions (i) in
substantial conformity with the 8-K Filing and contemporaneously therewith and
(ii) as is required by applicable law and regulations (provided that in the case
of clause (i) each Purchaser shall be consulted by the Company in connection
with any such press release or other public disclosure prior to its release).
Each press release disseminated during the 12 months preceding the date of this
Agreement did not at the time of release contain any untrue statement of a
material fact or omit to state a material fact required to be stated therein or
necessary in order to make the statements therein, in light of the circumstances
under which they are made, not misleading.
  
 

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4.7  Use of Proceeds. Except as set forth on Schedule 4.7, the Company shall use
the net proceeds from the sale of the Securities hereunder for working capital
purposes and not (i) for the satisfaction of any portion of the Company’s debt
(other than payment of trade payables and accrued expenses in the ordinary
course of the Company’s business and consistent with past practice), (ii) to
redeem any Company equity or equity-equivalent securities, or (iii) to settle
any outstanding litigation.
 
4.8  Reimbursement. If any Purchaser or any of its Affiliates or any officer,
director, partner, controlling Person, employee or agent of a Purchaser or any
of its Affiliates (a “Related Person”) becomes involved in any capacity in any
Proceeding brought by or against any Person in connection with or as a result of
the transactions contemplated by the Transaction Documents, the Company will
indemnify and hold harmless such Purchaser or Related Person for its reasonable
legal and other expenses (including the costs of any investigation, preparation
and travel) and for any Losses incurred in connection therewith, as such
expenses or Losses are incurred, excluding only Losses that result directly from
such Purchaser’s or Related Person’s gross negligence or willful misconduct. In
addition, the Company shall indemnify and hold harmless each Purchaser and
Related Person from and against any and all Losses, as incurred, arising out of
or relating to any breach by the Company of any of the representations,
warranties or covenants made by the Company in this Agreement or any other
Transaction Document, or any allegation by a third party that, if true, would
constitute such a breach. The conduct of any Proceedings for which
indemnification is available under this paragraph shall be governed by Section
6.4(c) below. The indemnification obligations of the Company under this
paragraph shall be in addition to any liability that the Company may otherwise
have and shall be binding upon and inure to the benefit of any successors,
assigns, heirs and personal representatives of the Purchasers and any such
Related Persons. The Company also agrees that neither the Purchasers nor any
Related Persons shall have any liability to the Company or any Person asserting
claims on behalf of or in right of the Company in connection with or as a result
of the transactions contemplated by the Transaction Documents, except to the
extent that any Losses incurred by the Company result from the gross negligence
or willful misconduct of the applicable Purchaser or Related Person in
connection with such transactions. If the Company breaches its obligations under
any Transaction Document, then, in addition to any other liabilities the Company
may have under any Transaction Document or applicable law, the Company shall pay
or reimburse the Purchasers on demand for all costs of collection and
enforcement (including reasonable attorneys fees and expenses). Without limiting
the generality of the foregoing, the Company specifically agrees to reimburse
the Purchasers on demand for all costs of enforcing the indemnification
obligations in this paragraph.
 
4.9  Amendment to November Purchase Agreement. The Company and the Purchasers
entered into a Securities Purchase Agreement dated as of November 1, 2005 (the
“November Purchase Agreement”) pursuant to which the Company (i) had certain
participations rights under Section 4.5 thereof relating to Subsequent
Placements, and (ii) would incur liquidated damages under Section 6.1(d) thereof
upon a breach of certain events stated therein (a “Event Payments”). The Company
and the Purchasers hereby waive their rights (i) under Section 4.5 of the
November Purchase Agreement and (ii) to receive any Event Payments in connection
with any breach under Section 6.1(d) of the November Purchase Agreement..
Nothing herein shall be deemed a waiver or amendment to any other provision of
the November Purchase Agreement and such agreement shall remain in full force.
 
 
 
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ARTICLE V
CONDITIONS

5.1  Conditions Precedent to the Obligations of the Purchasers. The obligation
of each Purchaser to acquire Securities at the Closing is subject to the
satisfaction or waiver by such Purchaser, at or before the Closing, of each of
the following conditions:
 
(a)  Representations and Warranties. The representations and warranties of the
Company contained herein shall be true and correct in all material respects as
of the date when made and as of the Closing as though made on and as of such
date; and
 
(b)  Performance. The Company and each other Purchaser shall have performed,
satisfied and complied in all material respects with all covenants, agreements
and conditions required by the Transaction Documents to be performed, satisfied
or complied with by it at or prior to the Closing.
 
(c)  No Injunction. 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;
 
(d)  Adverse Changes. Since the date of execution of this Agreement, no event or
series of events shall have occurred that reasonably would be expected to have
or result in a Material Adverse Effect; and
 
(e)  No Suspensions of Trading in Common Stock; Listing. Trading in the Common
Stock shall not have been suspended by the Commission or any Trading Market
(except for any suspensions of trading of not more than three Trading Days
(whether or not consecutive) solely to permit dissemination of material
information regarding the Company) at any time since the date of execution of
this Agreement, and the Common Stock shall have been at all times since such
date listed for trading on an Eligible Market;

5.2  Conditions Precedent to the Obligations of the Company. The obligation of
the Company to sell Securities at the Closing is subject to the satisfaction or
waiver by the Company, at or before the Closing, of each of the following
conditions:
 
(a)  Representations and Warranties. The representations and warranties of the
Purchasers contained herein shall be true and correct in all material respects
as of the date when made and as of the Closing Date as though made on and as of
such date; and
 
(b)  Performance. The Purchasers shall have performed, satisfied and complied in
all material respects with all covenants, agreements and conditions required by
the Transaction Documents to be performed, satisfied or complied with by the
Purchasers at or prior to the Closing.
 
 
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ARTICLE VI
REGISTRATION RIGHTS
 
6.1  Shelf Registration
 
(a)  As promptly as possible, and in any event on or prior to the Filing Date,
the Company shall prepare and file with the Commission a “Shelf” Registration
Statement covering the resale of all Registrable Securities for an offering to
be made on a continuous basis pursuant to Rule 415. The Registration Statement
shall be on Form S-3 (except if the Company is not then eligible to register for
resale the Registrable Securities on Form S-3, in which case such registration
shall be on another appropriate form in accordance herewith as the Purchasers
may consent) and shall contain (except if otherwise directed by the Purchasers)
the “Plan of Distribution” attached hereto as Exhibit C.
 
(b)  The Company shall use its best efforts to cause the Registration Statement
to be declared effective by the Commission as promptly as possible after the
filing thereof, but in any event prior to the Required Effectiveness Date, and
shall use its best efforts to keep the Registration Statement continuously
effective under the Securities Act until the fifth anniversary of the Effective
Date or such earlier date when all Registrable Securities covered by such
Registration Statement have been sold publicly (the “Effectiveness Period”).
 
(c)  The Company shall notify each Purchaser in writing promptly (and in any
event within one Trading Day) after receiving notification from the Commission
that the Registration Statement has been declared effective.
 
(d)  If: (i) any Registration Statement is not filed on or prior to the Filing
Date (if the Company files such Registration Statement without affording the
Purchasers the opportunity to review and comment on the same as required by
Section 6.2(a) hereof, the Company shall not be deemed to have satisfied this
clause (i)), or (ii) the Company fails to file with the Commission a request for
acceleration in accordance with Rule 461 promulgated under the Securities Act,
within five Trading Days after the date that the Company is notified (orally or
in writing, whichever is earlier) by the Commission that a Registration
Statement will not be “reviewed,” or will not be subject to further review, or
(iii) the Company fails to respond to any comments made by the Commission within
10 Trading Days after the receipt of such comments, or (iv) a Registration
Statement filed hereunder is not declared effective by the Commission by the
Required Effectiveness Date, or (v) an amendment to a Registration Statement is
not filed by the Company with the Commission within ten Trading Days after the
Commission’s having notified the Company that such amendment is required in
order for such Registration Statement to be declared effective,(any such failure
or breach being referred to as an “Event,” and for purposes of clause (i) the
date on which such Event occurs, or for purposes of clause (ii) the date on
which such five Trading Day period is exceeded, or for purposes of clauses (iii)
the date which such ten Trading Day-period is exceeded, , being referred to as
“‘Event Date”), then: (x) on each such Event Date the Company shall pay to each
Purchaser an amount in cash, as partial liquidated damages and not as a penalty,
equal to 1% of the aggregate purchase price
 
 
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paid by such Purchaser pursuant to the Purchase Agreement; and (y) on each
monthly anniversary of each such Event Date thereof (if the applicable Event
shall not have been cured by such date) until the applicable Event is cured, the
Company shall pay to each Purchaser an amount in cash, as partial liquidated
damages and not as a penalty, equal to 1% of the aggregate purchase price paid
by such Purchaser pursuant to the Purchase Agreement (the “Event Payments”).
Such payments shall be in partial compensation to the Purchasers and shall not
constitute the Purchaser’s exclusive remedy for such events. If the Company
fails to pay any liquidated damages pursuant to this Section in full within
seven days after the date payable, the Company will pay interest thereon at a
rate of 18% per annum (or such lesser maximum amount that is permitted to be
paid by applicable law) to the Purchaser, accruing daily from the date such
liquidated damages are due until such amounts, plus all such interest thereon,
are paid in full. Notwithstanding anything to the contrary, the maximum amount
of Event Payments payable to a Purchaser by the Company under this Section
6.1(d) shall not exceed 18% of the aggregate purchase price paid by such
Purchaser.
 
(e)  The Company shall not, prior to the Effective Date of the Registration
Statement, prepare and file with the Commission a registration statement
relating to an offering for its own account or the account of others (other than
as contemplated in the Transaction Documents) under the Securities Act of any of
its equity securities.
 
(f)  If the Company issues to the Purchasers any Common Stock pursuant to the
Transaction Documents that is not included in the initial Registration
Statement, then the Company shall file an additional Registration Statement
covering such number of shares of Common Stock on or prior to the Filing Date
and shall use its best efforts, but in no event later than the Required Filing
Date, to cause such additional Registration Statement to become effective by the
Commission.

6.2  Registration Procedures. In connection with the Company's registration
obligations hereunder, the Company shall:
 
(a)  Not less than three Trading Days prior to the filing of a Registration
Statement or any related Prospectus or any amendment or supplement thereto
(including any document that would be incorporated or deemed to be incorporated
therein by reference), the Company shall (i) furnish to each Purchaser and any
counsel designated by any Purchaser (each, a “Purchaser Counsel”, and Iroquois
Master Fund Ltd. has initially designated Malhotra & Associates LLP “LP
Counsel”) copies of all such documents proposed to be filed, which documents
(other than those incorporated or deemed to be incorporated by reference) will
be subject to the review of each Purchaser and Purchaser Counsel, and (ii) cause
its officers and directors, counsel and independent certified public accountants
to respond to such inquiries as shall be necessary, in the reasonable opinion of
respective counsel, to conduct a reasonable investigation within the meaning of
the Securities Act. The Company shall not file a Registration Statement or any
such Prospectus or any amendments or supplements thereto to which Purchasers
holding a majority of the Registrable Securities shall reasonably object.
 
(b)  (i) Prepare and file with the Commission such amendments, including
post-effective amendments, to each Registration Statement and the Prospectus
used in connection therewith as may be necessary to keep the Registration
Statement continuously effective as to the applicable Registrable Securities for
the Effectiveness Period and prepare and file with the Commission such
additional Registration Statements in order to register for resale under the
Securities Act all of the Registrable Securities; (ii) cause the related
Prospectus to be
 
 
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amended or supplemented by any required Prospectus supplement, and as so
supplemented or amended to be filed pursuant to Rule 424; (iii) respond as
promptly as reasonably possible, and in any event within ten days, to any
comments received from the Commission with respect to the Registration Statement
or any amendment thereto and as promptly as reasonably possible provide the
Purchasers true and complete copies of all correspondence from and to the
Commission relating to the Registration Statement; and (iv) comply in all
material respects with the provisions of the Securities Act and the Exchange Act
with respect to the disposition of all Registrable Securities covered by the
Registration Statement during the applicable period in accordance with the
intended methods of disposition by the Purchasers thereof set forth in the
Registration Statement as so amended or in such Prospectus as so supplemented
 
(c)  Notify the Purchasers of Registrable Securities to be sold and Purchaser
Counsel as promptly as reasonably possible, and (if requested by any such
Person) confirm such notice in writing no later than one Trading Day thereafter,
of any of the following events: (i) the Commission notifies the Company whether
there will be a “review” of any Registration Statement; (ii) the Commission
comments in writing on any Registration Statement (in which case the Company
shall deliver to each Purchaser a copy of such comments and of all written
responses thereto); (iii) any Registration Statement or any post-effective
amendment is declared effective; (iv) the Commission or any other Federal or
state governmental authority requests any amendment or supplement to any
Registration Statement or Prospectus or requests additional information related
thereto; (v) the Commission issues any stop order suspending the effectiveness
of any Registration Statement or initiates any Proceedings for that purpose;
(vi) the Company receives notice of any suspension of the qualification or
exemption from qualification of any Registrable Securities for sale in any
jurisdiction, or the initiation or threat of any Proceeding for such purpose; or
(vii) the financial statements included in any Registration Statement become
ineligible for inclusion therein or any statement made in any Registration
Statement or Prospectus or any document incorporated or deemed to be
incorporated therein by reference is untrue in any material respect or any
revision to a Registration Statement, Prospectus or other document is required
so that it will not contain any untrue statement of a material fact or omit to
state any material fact required to be stated therein or necessary to make the
statements therein, in the light of the circumstances under which they were
made, not misleading.
 
(d)  Use its best efforts to avoid the issuance of or, if issued, obtain the
withdrawal of (i) any order suspending the effectiveness of any Registration
Statement, or (ii) any suspension of the qualification (or exemption from
qualification) of any of the Registrable Securities for sale in any
jurisdiction, as soon as possible.
 
(e)  Furnish to each Purchaser and Purchaser Counsel, without charge, at least
one conformed copy of each Registration Statement and each amendment thereto,
including financial statements and schedules, all documents incorporated or
deemed to be incorporated therein by reference, and all exhibits to the extent
requested by such Person (including those previously furnished or incorporated
by reference) promptly after the filing of such documents with the Commission.
 
(f)  Promptly deliver to each Purchaser and Purchaser Counsel, without charge,
as many copies of the Prospectus or Prospectuses (including each form of
prospectus) and each amendment or supplement thereto as such Persons may
reasonably request. The
 
 
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Company hereby consents to the use of such Prospectus and each amendment or
supplement thereto by each of the selling Purchasers in connection with the
offering and sale of the Registrable Securities covered by such Prospectus and
any amendment or supplement thereto.
 
(g)   (i) In the time and manner required by each Trading Market, prepare and
file with such Trading Market an additional shares listing application covering
all of the Registrable Securities; (ii) take all steps necessary to cause such
Registrable Securities to be approved for listing on each Trading Market as soon
as possible thereafter; (iii) provide to the Purchasers evidence of such
listing; and (iv) maintain the listing of such Registrable Securities on each
such Trading Market or another Eligible Market.
 
(h)  Prior to any public offering of Registrable Securities, use its reasonable
best efforts to register or qualify or cooperate with the selling Purchasers and
each applicable Purchaser Counsel in connection with the registration or
qualification (or exemption from such registration or qualification) of such
Registrable Securities for offer and sale under the securities or Blue Sky laws
of such jurisdictions within the United States as any Purchaser requests in
writing, to keep each such registration or qualification (or exemption
therefrom) effective during the Effectiveness Period and to do any and all other
acts or things necessary or advisable to enable the disposition in such
jurisdictions of the Registrable Securities covered by a Registration Statement.
 
(i)  Cooperate with the Purchasers to facilitate the timely preparation and
delivery of certificates representing Registrable Securities to be delivered to
a transferee pursuant to a Registration Statement, which certificates shall be
free, to the extent permitted by this Agreement, of all restrictive legends, and
to enable such Registrable Securities to be in such denominations and registered
in such names as any such Purchasers may request.
 
(j)  Upon the occurrence of any event described in Section 6.2(c)(vii), as
promptly as reasonably possible, prepare a supplement or amendment, including a
post-effective amendment, to the Registration Statement or a supplement to the
related Prospectus or any document incorporated or deemed to be incorporated
therein by reference, and file any other required document so that, as
thereafter delivered, neither the Registration Statement nor such Prospectus
will contain an untrue statement of a material fact or omit to state a material
fact required to be stated therein or necessary to make the statements therein,
in the light of the circumstances under which they were made, not misleading.
 
(k)  Cooperate with any due diligence investigation undertaken by the Purchasers
in connection with the sale of Registrable Securities, including, without
limitation, by making available any documents and information; provided that the
Company will not deliver or make available to any Purchaser material, nonpublic
information unless such Purchaser specifically requests in advance to receive
material, nonpublic information in writing.
 
(l)  If Holders of a majority of the Registrable Securities being offered
pursuant to a Registration Statement select underwriters for the offering, the
Company shall enter into and perform its obligations under an underwriting
agreement, in usual and customary form, including, without limitation, by
providing customary legal opinions, comfort letters and indemnification and
contribution obligations.
 
 
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(m)  Comply with all applicable rules and regulations of the Commission.

6.3  Registration Expenses. The Company shall pay (or reimburse the Purchasers
for) all fees and expenses incident to the performance of or compliance with
this Agreement by the Company, including without limitation (a) all registration
and filing fees and expenses, including without limitation those related to
filings with the Commission, any Trading Market and in connection with
applicable state securities or Blue Sky laws, (b) printing expenses (including
without limitation expenses of printing certificates for Registrable Securities
and of printing prospectuses requested by the Purchasers), (c) messenger,
telephone and delivery expenses, (d) fees and disbursements of counsel for the
Company, (e) fees and expenses of all other Persons retained by the Company in
connection with the consummation of the transactions contemplated by this
Agreement, and (f) all listing fees to be paid by the Company to the Trading
Market.
 
6.4  Indemnification
 
(a)  Indemnification by the Company. The Company shall, notwithstanding any
termination of this Agreement, indemnify and hold harmless each Purchaser, the
officers, directors, partners, members, agents, brokers (including brokers who
offer and sell Registrable Securities as principal as a result of a pledge or
any failure to perform under a margin call of Common Stock), investment advisors
and employees of each of them, each Person who controls any such Purchaser
(within the meaning of Section 15 of the Securities Act or Section 20 of the
Exchange Act) and the officers, directors, partners, members, agents and
employees of each such controlling Person, to the fullest extent permitted by
applicable law, from and against any and all Losses, as incurred, arising out of
or relating to any untrue or alleged untrue statement of a material fact
contained in the Registration Statement, any Prospectus or any form of
prospectus or in any amendment or supplement thereto or in any preliminary
prospectus, or arising out of or relating to any omission or alleged omission of
a material fact required to be stated therein or necessary to make the
statements therein (in the case of any Prospectus or form of prospectus or
supplement thereto, in the light of the circumstances under which they were
made) not misleading, except to the extent, but only to the extent, that (i)
such untrue statements, alleged untrue statements, omissions or alleged
omissions are based solely upon information regarding such Purchaser furnished
in writing to the Company by such Purchaser expressly for use therein, or to the
extent that such information relates to such Purchaser or such Purchaser's
proposed method of distribution of Registrable Securities and was reviewed and
expressly approved in writing by such Purchaser expressly for use in the
Registration Statement, such Prospectus or such form of Prospectus or in any
amendment or supplement thereto or (ii) in the case of an occurrence of an event
of the type specified in Section 6.2(c)(v)-(vii), the use by such Purchaser of
an outdated or defective Prospectus after the Company has notified such
Purchaser in writing that the Prospectus is outdated or defective and prior to
the receipt by such Purchaser of the Advice contemplated in Section 6.5. The
Company shall notify the Purchasers promptly of the institution, threat or
assertion of any Proceeding of which the Company is aware in connection with the
transactions contemplated by this Agreement.
 
(b)  Indemnification by Purchasers. Each Purchaser shall, severally and not
jointly, indemnify and hold harmless the Company, its directors, officers,
agents and employees, each Person who controls the Company (within the meaning
of Section 15 of the Securities Act
 
 
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and Section 20 of the Exchange Act), and the directors, officers, agents or
employees of such controlling Persons, to the fullest extent permitted by
applicable law, from and against all Losses (as determined by a court of
competent jurisdiction in a final judgment not subject to appeal or review)
arising solely out of any untrue statement of a material fact contained in the
Registration Statement, any Prospectus, or any form of prospectus, or in any
amendment or supplement thereto, or arising solely out of any omission of a
material fact required to be stated therein or necessary to make the statements
therein (in the case of any Prospectus or form of prospectus or supplement
thereto, in the light of the circumstances under which they were made) not
misleading to the extent, but only to the extent, that such untrue statement or
omission is contained in any information so furnished in writing by such
Purchaser to the Company specifically for inclusion in such Registration
Statement or such Prospectus or to the extent that (i) such untrue statements or
omissions are based solely upon information regarding such Purchaser furnished
in writing to the Company by such Purchaser expressly for use therein, or to the
extent that such information relates to such Purchaser or such Purchaser's
proposed method of distribution of Registrable Securities and was reviewed and
expressly approved in writing by such Purchaser expressly for use in the
Registration Statement, such Prospectus or such form of Prospectus or in any
amendment or supplement thereto or (ii) in the case of an occurrence of an event
of the type specified in Section 6.2(c)(v)-(vii), the use by such Purchaser of
an outdated or defective Prospectus after the Company has notified such
Purchaser in writing that the Prospectus is outdated or defective and prior to
the receipt by such Purchaser of the Advice contemplated in Section 6.5. In no
event shall the liability of any selling Purchaser hereunder be greater in
amount than the dollar amount of the net proceeds received by such Purchaser
upon the sale of the Registrable Securities giving rise to such indemnification
obligation.
 
(c)  Conduct of Indemnification Proceedings. If any Proceeding shall be brought
or asserted against any Person entitled to indemnity hereunder (an “Indemnified
Party”), such Indemnified Party shall promptly notify the Person from whom
indemnity is sought (the “Indemnifying Party”) in writing, and the Indemnifying
Party shall assume the defense thereof, including the employment of counsel
reasonably satisfactory to the Indemnified Party and the payment of all fees and
expenses incurred in connection with defense thereof; provided, that the failure
of any Indemnified Party to give such notice shall not relieve the Indemnifying
Party of its obligations or liabilities pursuant to this Agreement, except (and
only) to the extent that it shall be finally determined by a court of competent
jurisdiction (which determination is not subject to appeal or further review)
that such failure shall have proximately and materially adversely prejudiced the
Indemnifying Party.
 
An Indemnified Party shall have the right to employ separate counsel in any such
Proceeding and to participate in the defense thereof, but the fees and expenses
of such counsel shall be at the expense of such Indemnified Party or Parties
unless: (i) the Indemnifying Party has agreed in writing to pay such fees and
expenses; or (ii) the Indemnifying Party shall have failed promptly to assume
the defense of such Proceeding and to employ counsel reasonably satisfactory to
such Indemnified Party in any such Proceeding; or (iii) the named parties to any
such Proceeding (including any impleaded parties) include both such Indemnified
Party and the Indemnifying Party, and such Indemnified Party shall have been
advised by counsel that a conflict of interest is likely to exist if the same
counsel were to represent such Indemnified Party and the Indemnifying Party (in
which case, if such Indemnified Party notifies the Indemnifying Party in writing
that it elects to employ separate counsel at the expense of the Indemnifying
 
 
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Party, the Indemnifying Party shall not have the right to assume the defense
thereof and such counsel shall be at the expense of the Indemnifying Party). The
Indemnifying Party shall not be liable for any settlement of any such Proceeding
effected without its written consent, which consent shall not be unreasonably
withheld. No Indemnifying Party shall, without the prior written consent of the
Indemnified Party, effect any settlement of any pending Proceeding in respect of
which any Indemnified Party is a party, unless such settlement includes an
unconditional release of such Indemnified Party from all liability on claims
that are the subject matter of such Proceeding.
 
All fees and expenses of the Indemnified Party (including reasonable fees and
expenses to the extent incurred in connection with investigating or preparing to
defend such Proceeding in a manner not inconsistent with this Section) shall be
paid to the Indemnified Party, as incurred, within ten Trading Days of written
notice thereof to the Indemnifying Party (regardless of whether it is ultimately
determined that an Indemnified Party is not entitled to indemnification
hereunder; provided, that the Indemnifying Party may require such Indemnified
Party to undertake to reimburse all such fees and expenses to the extent it is
finally judicially determined that such Indemnified Party is not entitled to
indemnification hereunder).
 
(d)  Contribution. If a claim for indemnification under Section 6.4(a) or (b) is
unavailable to an Indemnified Party (by reason of public policy or otherwise),
then each Indemnifying Party, in lieu of indemnifying such Indemnified Party,
shall contribute to the amount paid or payable by such Indemnified Party as a
result of such Losses, in such proportion as is appropriate to reflect the
relative fault of the Indemnifying Party and Indemnified Party in connection
with the actions, statements or omissions that resulted in such Losses as well
as any other relevant equitable considerations. The relative fault of such
Indemnifying Party and Indemnified Party shall be determined by reference to,
among other things, whether any action in question, including any untrue or
alleged untrue statement of a material fact or omission or alleged omission of a
material fact, has been taken or made by, or relates to information supplied by,
such Indemnifying Party or Indemnified Party, and the parties' relative intent,
knowledge, access to information and opportunity to correct or prevent such
action, statement or omission. The amount paid or payable by a party as a result
of any Losses shall be deemed to include, subject to the limitations set forth
in Section 6.4(c), any reasonable attorneys' or other reasonable fees or
expenses incurred by such party in connection with any Proceeding to the extent
such party would have been indemnified for such fees or expenses if the
indemnification provided for in this Section was available to such party in
accordance with its terms.
 
The parties hereto agree that it would not be just and equitable if contribution
pursuant to this Section 6.4(d) were determined by pro rata allocation or by any
other method of allocation that does not take into account the equitable
considerations referred to in the immediately preceding paragraph.
Notwithstanding the provisions of this Section 6.4(d), no Purchaser shall be
required to contribute, in the aggregate, any amount in excess of the amount by
which the proceeds actually received by such Purchaser from the sale of the
Registrable Securities subject to the Proceeding exceeds the amount of any
damages that such Purchaser has otherwise been required to pay by reason of such
untrue or alleged untrue statement or omission or alleged omission. No Person
guilty of fraudulent misrepresentation (within the meaning of Section 11(f) of
the Securities Act) shall be entitled to contribution from any Person who was
not guilty of such fraudulent misrepresentation.
 
 
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The indemnity and contribution agreements contained in this Section are in
addition to any liability that the Indemnifying Parties may have to the
Indemnified Parties.
 
6.5  Dispositions. Each Purchaser agrees that it will comply with the prospectus
delivery requirements of the Securities Act as applicable to it in connection
with sales of Registrable Securities pursuant to the Registration Statement.
Each Purchaser further agrees that, upon receipt of a notice from the Company of
the occurrence of any event of the kind described in Sections 6.2(c)(v), (vi) or
(vii), such Purchaser will discontinue disposition of such Registrable
Securities under the Registration Statement until such Purchaser's receipt of
the copies of the supplemented Prospectus and/or amended Registration Statement
contemplated by Section 6.2(j), or until it is advised in writing (the “Advice”)
by the Company that the use of the applicable Prospectus may be resumed, and, in
either case, has received copies of any additional or supplemental filings that
are incorporated or deemed to be incorporated by reference in such Prospectus or
Registration Statement. The Company may provide appropriate stop orders to
enforce the provisions of this paragraph.
 
6.6  No Piggyback on Registrations. Neither the Company nor any of its security
holders (other than the Purchasers in such capacity pursuant hereto) may include
securities of the Company in the Registration Statement other than the
Registrable Securities, and the Company shall not after the date hereof enter
into any agreement providing any such right to any of its security holders.
 
6.7  Piggy-Back Registrations. If at any time during the Effectiveness Period
there is not an effective Registration Statement covering all of the Registrable
Securities and the Company shall determine to prepare and file with the
Commission a registration statement relating to an offering for its own account
or the account of others under the Securities Act of any of its equity
securities, other than on Form S-4 or Form S-8 (each as promulgated under the
Securities Act) or their then equivalents relating to equity securities to be
issued solely in connection with any acquisition of any entity or business or
equity securities issuable in connection with stock option or other employee
benefit plans, then the Company shall send to each Purchaser written notice of
such determination and if, within fifteen days after receipt of such notice, any
such Purchaser shall so request in writing, the Company shall include in such
registration statement all or any part of such Registrable Securities such
Purchaser requests to be registered.
 
ARTICLE VII
MISCELLANEOUS
 
7.1  Termination. This Agreement may be terminated by the Company or any
Purchaser, by written notice to the other parties, if the Closing has not been
consummated by the third Trading Day following the date of this Agreement;
provided that no such termination will affect the right of any party to sue for
any breach by the other party (or parties).
 
7.2  Fees and Expenses. At the Closing, the Company shall pay to Iroquois Master
Fund Ltd. an aggregate of $20,000 for their legal fees and expenses incurred in
connection with the preparation and negotiation of this Agreement. In lieu of
the foregoing remaining payment, Iroquois Capital LP may retain such amount at
the Closing. Except as expressly set forth in the
 
 
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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 issuance of the Securities.
 
7.3  Entire Agreement. The Transaction Documents, together with the Exhibits and
Schedules thereto, contain the entire understanding of the parties with respect
to the subject matter hereof and supersede all prior agreements and
understandings, oral or written, with respect to such matters, which the parties
acknowledge have been merged into such documents, exhibits and schedules. At or
after the Closing, and without further consideration, the Company will execute
and deliver to the Purchasers such further documents as may be reasonably
requested in order to give practical effect to the intention of the parties
under the Transaction Documents. Notwithstanding anything to the contrary
herein, Securities may be assigned to any Person in connection with a bona fide
margin account or other loan or financing arrangement secured by such Company
Securities.
 
7.4  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
specified in this Section prior to 6:30 p.m. (New York City time) on a Trading
Day, (b) the next Trading Day after the date of transmission, if such notice or
communication is delivered via facsimile at the facsimile number specified in
this Section on a day that is not a Trading Day or later than 6:30 p.m. (New
York City time) on any Trading Day, (c) the Trading Day following the date of
deposit with a nationally recognized overnight courier service, or (d) upon
actual receipt by the party to whom such notice is required to be given. The
addresses and facsimile numbers for such notices and communications are those
set forth on the signature pages hereof, or such other address or facsimile
number as may be designated in writing hereafter, in the same manner, by any
such Person.
 
7.5  Amendments; Waivers. No provision of this Agreement may be waived or
amended except in a written instrument signed, in the case of an amendment, by
the Company and each of the Purchasers or, in the case of a waiver, by the party
against whom enforcement of any such waiver is sought. No waiver of any default
with respect to any provision, condition or requirement of this Agreement shall
be deemed to be a continuing waiver in the future or a waiver of any subsequent
default or a waiver of any other provision, condition or requirement hereof, nor
shall any delay or omission of either party to exercise any right hereunder in
any manner impair the exercise of any such right. Notwithstanding the foregoing,
a waiver or consent to depart from the provisions hereof with respect to a
matter that relates exclusively to the rights of Purchasers under Article VI and
that does not directly or indirectly affect the rights of other Purchasers may
be given by Purchasers holding at least a majority of the Registrable Securities
to which such waiver or consent relates.
 
7.6  Construction. The headings herein are for convenience only, do not
constitute a part of this Agreement and shall not be deemed to limit or affect
any of the provisions hereof. The language used in this Agreement will be deemed
to be the language chosen by the parties to express their mutual intent, and no
rules of strict construction will be applied against any party.
 
 
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7.7  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 Purchasers. Any Purchaser may assign
its rights under this Agreement to any Person to whom such Purchaser assigns or
transfers any Securities, provided such transferee agrees in writing to be
bound, with respect to the transferred Securities, by the provisions hereof that
apply to the “Purchasers.” Notwithstanding anything to the contrary herein,
Securities may be assigned to any Person in connection with a bona fide margin
account or other loan or financing arrangement secured by such Securities.
 
7.8  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 that each Related Person is an intended third party beneficiary
of Section 4.8 and each Indemnified Party is an intended third party beneficiary
of Section 6.4 and (in each case) may enforce the provisions of such Sections
directly against the parties with obligations thereunder.
 
7.10  Governing Law; Venue; Waiver Of Jury Trial. ALL QUESTIONS CONCERNING THE
CONSTRUCTION, VALIDITY, ENFORCEMENT AND INTERPRETATION OF THIS AGREEMENT SHALL
BE GOVERNED BY AND CONSTRUED AND ENFORCED IN ACCORDANCE WITH THE LAWS OF THE
STATE OF NEW YORK. THE COMPANY AND PURCHASERS HEREBY IRREVOCABLY SUBMIT 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 BROUGHT BY
THE COMPANY OR ANY PURCHASER HEREUNDER, IN CONNECTION HEREWITH OR WITH ANY
TRANSACTION CONTEMPLATED HEREBY OR DISCUSSED HEREIN (INCLUDING WITH RESPECT TO
THE ENFORCEMENT OF ANY OF THE TRANSACTION DOCUMENTS), AND HEREBY IRREVOCABLY
WAIVE, AND AGREE NOT TO ASSERT IN ANY SUIT, ACTION OR PROCEEDING BROUGHT BY THE
COMPANY OR ANY PURCHASER, ANY CLAIM THAT IT IS NOT PERSONALLY SUBJECT TO THE
JURISDICTION OF ANY SUCH COURT, OR THAT SUCH SUIT, ACTION OR PROCEEDING IS
IMPROPER. EACH PARTY HEREBY IRREVOCABLY WAIVES PERSONAL SERVICE OF PROCESS AND
CONSENTS TO PROCESS BEING SERVED IN ANY SUCH SUIT, ACTION OR PROCEEDING BY
MAILING A COPY THEREOF VIA REGISTERED OR CERTIFIED MAIL OR OVERNIGHT DELIVERY
(WITH EVIDENCE OF DELIVERY) TO SUCH PARTY AT THE ADDRESS IN EFFECT FOR NOTICES
TO IT UNDER THIS AGREEMENT AND AGREES THAT SUCH SERVICE SHALL CONSTITUTE GOOD
AND SUFFICIENT SERVICE OF PROCESS AND NOTICE THEREOF. NOTHING CONTAINED HEREIN
SHALL BE DEEMED TO LIMIT IN ANY WAY ANY RIGHT TO SERVE PROCESS IN ANY MANNER
PERMITTED BY LAW. THE COMPANY AND PURCHASERS HEREBY WAIVE ALL RIGHTS TO A TRIAL
BY JURY.
 
7.10  Survival. The representations, warranties, agreements and covenants
contained herein shall survive the Closing and the delivery and/or exercise of
the Securities, as applicable.
 
 
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7.11  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, 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 signature page
were an original thereof.
 
7.12  Severability. If any provision of this Agreement is held to be invalid or
unenforceable in any respect, the validity and enforceability of the remaining
terms and provisions of this Agreement shall not in any way be affected or
impaired thereby and the parties will attempt to agree upon a valid and
enforceable provision that is a reasonable substitute therefor, and upon so
agreeing, shall incorporate such substitute provision in this Agreement.
 
7.13  Rescission and Withdrawal Right. Notwithstanding anything to the contrary
contained in (and without limiting any similar provisions of) the Transaction
Documents, whenever any Purchaser exercises a right, election, demand or option
under a Transaction Document and the Company does not timely perform its related
obligations within the periods therein provided, then such Purchaser may rescind
or withdraw, in its sole discretion from time to time upon written notice to the
Company, any relevant notice, demand or election in whole or in part without
prejudice to its future actions and rights.
 
7.14  Replacement of Securities. If any certificate or instrument evidencing any
Securities is mutilated, lost, stolen or destroyed, the Company shall issue or
cause to be issued in exchange and substitution for and upon cancellation
thereof, or in lieu of and substitution therefor, a new certificate or
instrument, but only upon receipt of evidence reasonably satisfactory to the
Company of such loss, theft or destruction and customary and reasonable
indemnity, if requested. The applicants for a new certificate or instrument
under such circumstances shall also pay any reasonable third-party costs
associated with the issuance of such replacement Securities.
 
7.15  Remedies. In addition to being entitled to exercise all rights provided
herein or granted by law, including recovery of damages each of the Purchasers
and the Company will be entitled to specific performance under the Transaction
Documents. The parties agree that monetary damages may not be adequate
compensation for any loss incurred by reason of any breach of obligations
described in the foregoing sentence and hereby agrees to waive in any action for
specific performance of any such obligation the defense that a remedy at law
would be adequate.

7.16  Payment Set Aside. To the extent that the Company makes a payment or
payments to any Purchaser hereunder or pursuant to the Warrants or any Purchaser
enforces or exercises its rights hereunder or 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 by 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
 
 
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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.
 
7.17  Adjustments in Share Numbers and Prices. In the event of any stock split,
subdivision, dividend or distribution payable in shares of Common Stock (or
other securities or rights convertible into, or entitling the holder thereof to
receive directly or indirectly shares of Common Stock), combination or other
similar recapitalization or event occurring after the date hereof, each
reference in any Transaction Document to a number of shares or a price per share
shall be amended to appropriately account for such event.
 
7.18  Independent Nature of Purchasers' Obligations and Rights. The obligations
of each Purchaser under any Transaction Document are several and not joint with
the obligations of any other Purchaser, and no Purchaser shall be responsible in
any way for the performance of the obligations of any other Purchaser under any
Transaction Document. The decision of each Purchaser to purchase Securities
pursuant to this Agreement has been made by such Purchaser independently of any
other Purchaser and independently of any information, materials, statements or
opinions as to the business, affairs, operations, assets, properties,
liabilities, results of operations, condition (financial or otherwise) or
prospects of the Company or of the Subsidiary which may have been made or given
by any other Purchaser or by any agent or employee of any other Purchaser, and
no Purchaser or any of its agents or employees shall have any liability to any
other Purchaser (or any other Person) relating to or arising from any such
information, materials, statements or opinions. Nothing contained herein or in
any Transaction Document, and no action taken by any Purchaser pursuant thereto,
shall be deemed to constitute the Purchasers as a partnership, an association, a
joint venture or any other kind of entity, or create a presumption that the
Purchasers are in any way acting in concert or as a group with respect to such
obligations or the transactions contemplated by the Transaction Document. The
Company hereby confirms that it understands that the Purchasers are not acting
as a “group” as that term is used in Section 13(d) of the Exchange Act. Each
Purchaser acknowledges that no other Purchaser has acted as agent for such
Purchaser in connection with making its investment hereunder and that no other
Purchaser will be acting as agent of such Purchaser in connection with
monitoring its investment hereunder. Each Purchaser shall be entitled to
independently protect and enforce its rights, including without limitation the
rights arising out of this Agreement or out of the other Transaction Documents,
and it shall not be necessary for any other Purchaser to be joined as an
additional party in any proceeding for such purpose. Each Purchaser represents
that it has been represented by its own separate legal counsel in its review and
negotiations of this Agreement and the Transaction Documents and each party
represents and confirms that Malhotra & Associates LLP represents only Iroquois
Master Fund Ltd. in connection with this Agreement and the other Transaction
Documents.
 
 
[SIGNATURE PAGES TO FOLLOW]

 

 
30

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IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly
executed by their respective authorized signatories as of the date first
indicated above.
 
                    SIGA Technologies, Inc.
 
                    By: /s/ Thomas N. Konatich
                    Name: Thomas N. Konatich
                    Title: Vice President and Chief Financial Officer
 
                    Address for Notice:
 
                    420 Lexington Avenue
                    Suite 408
                    New York, NY 10170
                    Facsimile No.: (212) 697-3130
                    Telephone No.: (212) 672-9100
                    Attn: Thomas N. Konatich
 
 
With a copy to:                            Kramer Levin Naftalis & Frankel LLP
                    1177 Avenue of the Americas
                    New York, NY 10036
                    Facsimile No.: (212) 715-8000
                    Telephone No.: (212) 715-9100
                    Attn: James A. Grayer, Esq.

[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK
SIGNATURE PAGES FOR PURCHASERS FOLLOW]
 

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                    IROQUOIS MASTER FUND LTD.
 
                    By: /s/ Joshua Silverman
                    Name: Joshua Silverman
                    Title: Authorized Signatory
 
                    Purchase Price                $4.54
 
                    Units Purchased:        477,974
 
                    Warrant Shares:          238,987
 
                    Address for Notice:

                    Iroquois Master Fund Ltd.
                641 Lexington Ave, 26th Floor
                    New York, NY 10022
                    Facsimile No.: (212) 207-3452
                    Telephone No.: (212) 974-3070
                    Attn: Joshua Silverman

With a copy to:                            Malhotra & Associates LLP
                        11 Penn Plaza, 5th Floor
                    New York, New York 10001
                    Facsimile No.: (212) 504-0863
                    Telephone No.: (212) 593-2284
                    Attn: Gary Malhotra, Esq.
 
 
 

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                    Cranshire Capital, L.P.
                    (Name of Purchaser)      
 
                    By: /s/ Mitchell Kopin
                    Name: Mitchell Kopin
                    Title: President - Downsview Capital
                  The General Partner

 
                    Purchase Price        $2,170,002
 
                    Units Purchased:        477,974
 
                    Warrant Shares:          238,987
 
                    Address for Notice:

                    3100 Dundee Road
                    Suite 703
                    Northbrook, IL 60062
                    Facsimile No.: 847-562-9031
                    Telephone No.: 847-562-9030
                    Attn: Mitchell Kopin
 

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                    Omicron Master Trust
                    (Name of Purchaser)
      
                                       OMICRON MASTER TRUST
 
                                       By: Omicron Capital L.P., as adviser
 
                                    By: Omicron Capital Inc.,
                                           its general partner
 
 
                    By: /s/ Olivier Morali
                    Name: Olivier Morali
                    Title: Authorized Signatory

 
                    Purchase Price              $4.54
 
                    Units Purchased:        88,104
 
                    Warrant Shares:          44,052
 
                    Address for Notice:

                    c/o Omicron Capital, L.P.
                    650 Fifth Ave.
                    24th Fl
                    New York, NY 10019
                    Facsimile No.: 212-246-9409
                    Telephone No.: 212-246-9406
                    Attn: Olivier Morali
 

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

 
                    Rockmore Investment Master Fund, Ltd.
 
                    By: /s/ Bruce Bernstein
                    Name: Bruce Bernstein
                    Title: Managing Partner

 
                    Purchase Price                $4.54
 
                    Units Purchased:        477,974
 
                    Warrant Shares:          238,987
 
                    Address for Notice:

                    150 East 58th Street
                    28th Fl
                    New York, NY 10155
                    Facsimile No.: 212-258-2315
                    Telephone No.: 212-258-2301
                    Attn: Anya Sigalow
 

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

                    SMITHFIELD FIDUCIARY LLC
 
                    By: /s/ Adam J. Chill
                    Name: Adam J. Chill
                    Title: Authorized Signatory

 
                    Purchase Price        $2,170,002
 
                    Units Purchased:        477,974
 
                    Warrant Shares:          238,987
 
                    Address for Notice:

                    c/o Highbridge Capital Management, LLC
                    9 West 57th Street, 27th Floor
                    New York, New York 10019
                    Facsimile No.: (212) 751-0755
                    Telephone No.: (212) 287-4720
                    Attn: Ari J. Storch/Adam J. Chill
 

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Exhibits:
 
A Form of Warrant
B Form of Opinion of Company Counsel
C Plan of Distribution
D Form of Transfer Agent Instructions

 
 

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

 
EXHIBIT A
 
NEITHER THESE SECURITIES NOR THE SECURITIES FOR WHICH THESE SECURITIES ARE
EXERCISABLE HAVE BEEN REGISTERED WITH THE SECURITIES AND EXCHANGE COMMISSION OR
THE SECURITIES COMMISSION OF ANY STATE IN RELIANCE UPON AN EXEMPTION FROM
REGISTRATION UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE “SECURITIES
ACT”), AND, ACCORDINGLY, MAY NOT BE OFFERED OR SOLD EXCEPT PURSUANT TO AN
EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT OR PURSUANT TO AN
AVAILABLE EXEMPTION FROM, OR IN A TRANSACTION NOT SUBJECT TO, THE REGISTRATION
REQUIREMENTS OF THE SECURITIES ACT AND IN COMPLIANCE WITH APPLICABLE STATE
SECURITIES OR BLUE SKY LAWS. THESE SECURITIES AND THE SECURITIES ISSUABLE UPON
EXERCISE OF THESE SECURITIES MAY BE PLEDGED IN CONNECTION WITH A BONA FIDE
MARGIN ACCOUNT OR OTHER LOAN SECURED BY SUCH SECURITIES.
 

 
SIGA TECHNOLOGIES, INC.
 
WARRANT
 
Warrant No. [ 
]                                                                                    Dated:
October 19, 2006
 
SIGA Technologies, Inc., a Delaware corporation (the “Company”), hereby
certifies that, for value received, [Name of Holder] or its registered assigns
(the “Holder”), is entitled to purchase from the Company up to a total of [ ]1 
shares of common stock, $0.0001 par value per share (the “Common Stock”), of the
Company (each such share, a “Warrant Share” and all such shares, the “Warrant
Shares”) at an exercise price equal to $4.99 per share (as adjusted from time to
time as provided in Section 9, the “Exercise Price”), at any time and from time
to time from and after the date hereof (the “Initial Exercise Date”) and through
and including the seventh anniversary of the date hereof (the “Expiration
Date”), and subject to the following terms and conditions. This Warrant (this
“Warrant”) is one of a series of similar warrants issued pursuant to that
certain Securities Purchase Agreement, dated as of the date hereof, by and among
the Company and the Purchasers identified therein (the “Purchase Agreement”).
All such warrants are referred to herein, collectively, as the “Warrants.”
 
1.  Definitions. In addition to the terms defined elsewhere in this Warrant,
capitalized terms that are not otherwise defined herein have the meanings given
to such terms in the Purchase Agreement.
 
2.  Registration of Warrant. The Company shall register this Warrant, upon
records to be maintained by the Company for that purpose (the “Warrant
Register”), in the name of the
 
-----------------------
1 Equal to 50% (aggregate) warrant coverage
  
 

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

record Holder hereof from time to time. The Company may deem and treat the
registered Holder of this Warrant as the absolute owner hereof for the purpose
of any exercise hereof or any distribution to the Holder, and for all other
purposes, absent actual notice to the contrary.
 
3.  Registration of Transfers. The Company shall register the transfer of any
portion of this Warrant in the Warrant Register, upon surrender of this Warrant,
with the Form of Assignment attached hereto duly completed and signed, to the
Transfer Agent or to the Company at its address specified herein. Upon any such
registration or transfer, a new warrant to purchase Common Stock, in
substantially the form of this Warrant (any such new warrant, a “New Warrant”),
evidencing the portion of this Warrant so transferred shall be issued to the
transferee and a New Warrant evidencing the remaining portion of this Warrant
not so transferred, if any, shall be issued to the transferring Holder. The
acceptance of the New Warrant by the transferee thereof shall be deemed the
acceptance by such transferee of all of the rights and obligations of a holder
of a Warrant.
 
4.  Exercise and Duration of Warrants. Subject to Section 11:
 
(a)  This Warrant shall be exercisable by the registered Holder at any time and
from time to time on or after the date hereof to and including the Expiration
Date. At 6:30 P.M., New York City time on the Expiration Date, the portion of
this Warrant not exercised prior thereto shall be and become void and of no
value; provided that, if the average of the Closing Prices for the five Trading
Days immediately prior to (but not including) the Expiration Date exceeds the
Exercise Price on the Expiration Date, then this Warrant shall be deemed to have
been exercised in full (to the extent not previously exercised) on a “cashless
exercise” basis at 6:30 P.M. New York City time on the Expiration Date if a
“cashless exercise” may occur at such time pursuant to Section 10 below.
Notwithstanding anything to the contrary herein, the Expiration Date shall be
extended for each day following the Effective Date that the Registration
Statement is not effective.
 
(b)  A Holder may exercise this Warrant by delivering to the Company (i) an
exercise notice, in the form attached hereto (the “Exercise Notice”),
appropriately completed and duly signed, and (ii) payment of the Exercise Price
for the number of Warrant Shares as to which this Warrant is being exercised
(which may take the form of a “cashless exercise” if so indicated in the
Exercise Notice and if a “cashless exercise” may occur at such time pursuant to
this Section 10 below), and the date such items are delivered to the Company (as
determined in accordance with the notice provisions hereof) is an “Exercise
Date.” The Holder shall not be required to deliver the original Warrant in order
to effect an exercise hereunder. Upon the execution and delivery of the Exercise
Notice, the Company shall issue a New Warrant to the Holder evidencing the right
to purchase the remaining number of Warrant Shares.
 
5.  Delivery of Warrant Shares.
 
(a)  Upon exercise of this Warrant, the Company shall promptly (but in no event
later than three Trading Days after the Exercise Date) issue or cause to be
issued and cause to be delivered to or upon the written order of the Holder and
in such name or names as the Holder may designate, a certificate for the Warrant
Shares issuable upon such exercise, free of restrictive legends unless a
registration statement covering the resale of the Warrant Shares and
 
 
2

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

 
 
naming the Holder as a selling stockholder thereunder is not then effective and
the Warrant Shares are not freely transferable without volume restrictions
pursuant to Rule 144 under the Securities Act. The Holder, or any Person so
designated by the Holder to receive Warrant Shares, shall be deemed to have
become holder of record of such Warrant Shares as of the Exercise Date. The
Company shall, upon request of the Holder, use its best efforts to deliver
Warrant Shares hereunder electronically through the Depository Trust Corporation
or another established clearing corporation performing similar functions.
 
(b)  This Warrant is exercisable, either in its entirety or, from time to time,
for a portion of the number of Warrant Shares. Upon surrender of this Warrant
following one or more partial exercises, the Company shall issue or cause to be
issued, at its expense, a New Warrant evidencing the right to purchase the
remaining number of Warrant Shares.
 
(c)  In addition to any other rights available to a Holder, if the Company fails
to deliver to the Holder a certificate representing Warrant Shares by the third
Trading Day after the date on which delivery of such certificate is required by
this Warrant, and if after such third Trading Day the Holder purchases (in an
open market transaction or otherwise) shares of Common Stock to deliver in
satisfaction of a sale by the Holder of the Warrant Shares that the Holder
anticipated receiving from the Company (a “Buy-In”), then the Company shall,
within three Trading Days after the Holder’s request and in the Holder's
discretion, either (i) pay cash to the Holder in an amount equal to the Holder’s
total purchase price (including brokerage commissions, if any) for the shares of
Common Stock so purchased (the “Buy-In Price”), at which point the Company’s
obligation to deliver such certificate (and to issue such Common Stock) shall
terminate, or (ii) promptly honor its obligation to deliver to the Holder a
certificate or certificates representing such Common Stock and pay cash to the
Holder in an amount equal to the excess (if any) of the Buy-In Price over the
product of (A) such number of shares of Common Stock, times (B) the Closing
Price on the date of the event giving rise to the Company’s obligation to
deliver such certificate.
 
(d)  The Company’s obligations to issue and deliver Warrant Shares in accordance
with the terms hereof are absolute and unconditional, irrespective of any action
or inaction by the Holder to enforce the same, any waiver or consent with
respect to any provision hereof, the recovery of any judgment against any Person
or any action to enforce the same, or any setoff, counterclaim, recoupment,
limitation or termination, or any breach or alleged breach by the Holder or any
other Person of any obligation to the Company or any violation or alleged
violation of law by the Holder or any other Person, and irrespective of any
other circumstance which might otherwise limit such obligation of the Company to
the Holder in connection with the issuance of Warrant Shares. Nothing herein
shall limit a Holder’s right to pursue any other remedies available to it
hereunder, at law or in equity including, without limitation, a decree of
specific performance and/or injunctive relief with respect to the Company’s
failure to timely deliver certificates representing shares of Common Stock upon
exercise of the Warrant as required pursuant to the terms hereof.
 
6.  Charges, Taxes and Expenses. Issuance and delivery of certificates for
shares of Common Stock upon exercise of this Warrant shall be made without
charge to the Holder for any issue or transfer tax, withholding tax, transfer
agent fee or other incidental tax or expense in respect of the issuance of such
certificates, all of which taxes and expenses shall be paid by the
 
 
3

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 Company; provided, however, that the Company shall not be required to pay any
tax which may be payable in respect of any transfer involved in the registration
of any certificates for Warrant Shares or Warrants in a name other than that of
the Holder or an Affiliate thereof. The Holder shall be responsible for all
other tax liability that may arise as a result of holding or transferring this
Warrant or receiving Warrant Shares upon exercise hereof.
 
7.  Replacement of Warrant. If this Warrant is mutilated, lost, stolen or
destroyed, the Company shall issue or cause to be issued in exchange and
substitution for and upon cancellation hereof, or in lieu of and substitution
for this Warrant, a New Warrant, but only upon receipt of evidence reasonably
satisfactory to the Company of such loss, theft or destruction and customary and
reasonable bond or indemnity, if requested. Applicants for a New Warrant under
such circumstances shall also comply with such other reasonable regulations and
procedures and pay such other reasonable third-party costs as the Company may
prescribe.
 
8.  Reservation of Warrant Shares. The Company covenants that it will at all
times reserve and keep available out of the aggregate of its authorized but
unissued and otherwise unreserved Common Stock, solely for the purpose of
enabling it to issue Warrant Shares upon exercise of this Warrant as herein
provided, the number of Warrant Shares which are then issuable and deliverable
upon the exercise of this entire Warrant, free from preemptive rights or any
other contingent purchase rights of persons other than the Holder (taking into
account the adjustments and restrictions of Section 9). The Company covenants
that all Warrant Shares so issuable and deliverable shall, upon issuance and the
payment of the applicable Exercise Price in accordance with the terms hereof, be
duly and validly authorized, issued and fully paid and nonassessable. The
Company will take all such actions as may be necessary to assure that such
shares of Common Stock may be issued as provided herein without violation of any
applicable law or regulation, or of any requirements of any securities exchange
or automated quotation system upon which the Common Stock may be listed.
 
9.  Certain Adjustments. The Exercise Price and number of Warrant Shares
issuable upon exercise of this Warrant are subject to adjustment from time to
time as set forth in this Section 9.
 
(a)  Stock Dividends and Splits. If the Company, at any time while this Warrant
is outstanding, (i) pays a stock dividend on its Common Stock or otherwise makes
a distribution on any class of capital stock that is payable in shares of Common
Stock, (ii) subdivides outstanding shares of Common Stock into a larger number
of shares, or (iii) combines outstanding shares of Common Stock into a smaller
number of shares, then in each such case the Exercise Price shall be multiplied
by a fraction of which the numerator shall be the number of shares of Common
Stock outstanding immediately before such event and of which the denominator
shall be the number of shares of Common Stock outstanding immediately after such
event. Any adjustment made pursuant to clause (i) of this paragraph shall become
effective immediately after the record date for the determination of
stockholders entitled to receive such dividend or distribution, and any
adjustment pursuant to clause (ii) or (iii) of this paragraph shall become
effective immediately after the effective date of such subdivision or
combination.
 
(b)  Pro Rata Distributions. If the Company, at any time while this Warrant is
outstanding, distributes to all holders of Common Stock (i) evidences of its
indebtedness, (ii) any
 
 
4

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security (other than a distribution of Common Stock covered by the preceding
paragraph), (iii) rights or warrants to subscribe for or purchase any security,
or (iv) any other asset (in each case, “Distributed Property”), then in each
such case the Exercise Price in effect immediately prior to the record date
fixed for determination of stockholders entitled to receive such distribution
shall be adjusted (effective on such record date) to equal the product of such
Exercise Price times a fraction of which the denominator shall be the average of
the Closing Prices for the five Trading Days immediately prior to (but not
including) such record date and of which the numerator shall be the average of
the Closing Prices for the five Trading Days immediately after (but not
including) such record date. As an alternative to the foregoing adjustment to
the Exercise Price, at the request of the Holder delivered no later than three
days prior to such distribution, the Company will deliver to such Holder on the
effective date of such distribution, the Distributed Property that such Holder
would have been entitled to receive in respect of the Warrant Shares for which
this Warrant could have been exercised immediately prior to such record date. If
such Distributed Property is not delivered to a Holder pursuant to the preceding
sentence, then upon expiration of or any exercise of the Warrant that occurs
after such record date, such Holder shall remain entitled to receive, in
addition to the Warrant Shares otherwise issuable upon such exercise (if
applicable), such Distributed Property.
 
(c)  Fundamental Transactions. If, at any time while this Warrant is
outstanding, (i) the Company effects any merger or consolidation of the Company
with or into another Person, (ii) the Company effects any sale of all or
substantially all of its assets in one or a series of related transactions,
(iii) any tender offer or exchange offer (whether by the Company or another
Person) is completed pursuant to which holders of Common Stock are permitted to
tender or exchange their shares for other securities, cash or property, or (iv)
the Company effects any reclassification of the Common Stock or any compulsory
share exchange pursuant to which the Common Stock is effectively converted into
or exchanged for other securities, cash or property (other than as a result of a
subdivision or combination of shares of Common Stock covered by Section 9(a)
above) (in any such case, a “Fundamental Transaction”), then the Holder shall
have the right thereafter to receive, upon exercise of this Warrant, the same
amount and kind of securities, cash or property as it would have been entitled
to receive upon the occurrence of such Fundamental Transaction if it had been,
immediately prior to such Fundamental Transaction, the holder of the number of
Warrant Shares then issuable upon exercise in full of this Warrant (the
“Alternate Consideration”). The aggregate Exercise Price for this Warrant will
not be affected by any such Fundamental Transaction, but the Company shall
apportion such aggregate Exercise Price among the Alternate Consideration in a
reasonable manner reflecting the relative value of any different components of
the Alternate Consideration. If holders of Common Stock are given any choice as
to the securities, cash or property to be received in a Fundamental Transaction,
then the Holder shall be given the same choice as to the Alternate Consideration
it receives upon any exercise of this Warrant following such Fundamental
Transaction. In the event of a Fundamental Transaction, the Company or the
successor or purchasing Person, as the case may be, shall execute with the
Holder a written agreement providing that:

(x)  this Warrant shall thereafter entitle the Holder to purchase the Alternate
Consideration in accordance with this section 9(c),
 
 
5

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(y) in the case of any such successor or purchasing Person, upon such
consolidation, merger, statutory exchange, combination, sale or conveyance such
successor or purchasing Person shall be jointly and severally liable with the
Company for the performance of all of the Company's obligations under this
Warrant and the Purchase Agreement, and

(z) if registration or qualification is required under the Exchange Act or
applicable state law for the public resale by the Holder of shares of stock and
other securities so issuable upon exercise of this Warrant, all rights
applicable to registration of the Common Stock issuable upon exercise of this
Warrant shall apply to the Alternate Consideration.

If, in the case of any Fundamental Transaction, the Alternate Consideration
includes shares of stock, other securities, other property or assets of a Person
other than the Company or any such successor or purchasing Person, as the case
may be, in such Fundamental Transaction, then such written agreement shall also
be executed by such other Person and shall contain such additional provisions to
protect the interests of the Holder as the Board of Directors of the Company
shall reasonably consider necessary by reason of the foregoing. At the Holder’s
request, any successor to the Company or surviving entity in such Fundamental
Transaction shall issue to the Holder a new warrant consistent with the
foregoing provisions and evidencing the Holder’s right to purchase the Alternate
Consideration for the aggregate Exercise Price upon exercise thereof. The terms
of any agreement pursuant to which a Fundamental Transaction is effected shall
include terms requiring any such successor or surviving entity to comply with
the provisions of this paragraph (c) and insuring that the Warrant (or any such
replacement security) will be similarly adjusted upon any subsequent transaction
analogous to a Fundamental Transaction. If any Fundamental Transaction
constitutes or results in a Change of Control, the Company (or any such
successor or surviving entity) will purchase the Warrant from the Holder for a
purchase price, payable in cash within five Trading Days after such request (or,
if later, on the effective date of the Fundamental Transaction), equal to the
Black-Scholes value of the remaining unexercised portion of this Warrant on the
date of such request.

(d)  Subsequent Equity Sales.
 
(i) If, at any time while this Warrant is outstanding, the Company or any
Subsidiary issues additional shares of Common Stock or rights, warrants, options
or other securities or debt convertible, exercisable or exchangeable for shares
of Common Stock or otherwise entitling any Person to acquire shares of Common
Stock (collectively, “Common Stock Equivalents”) at an effective net price to
the Company per share of Common Stock (the “Effective Price”) less than the
Exercise Price (as adjusted hereunder to such date), then the Exercise Price
shall be reduced to equal the Effective Price. If, at any time while this
Warrant is outstanding, the Company or any Subsidiary issues Common Stock or
Common Stock Equivalents at an Effective Price greater than the Exercise Price
(as adjusted hereunder to such date) but less than the average Closing Price
over the five Trading Days prior to such issuance (the “Adjustment Price”), then
the Exercise Price shall be reduced to equal the product of (A) the Exercise
Price in effect
 
 
6

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immediately prior to such issuance of Common Stock or Common Stock Equivalents
times (B) a fraction, the numerator of which is the sum of (1) the number of
shares of Common Stock outstanding immediately prior to such issuance, plus (2)
the number of shares of Common Stock which the aggregate Effective Price of the
Common Stock issued (or deemed to be issued) would purchase at the Adjustment
Price, and the denominator of which is the aggregate number of shares of Common
Stock outstanding or deemed to be outstanding immediately after such issuance.
For purposes of this paragraph, in connection with any issuance of any Common
Stock Equivalents, (A) the maximum number of shares of Common Stock potentially
issuable at any time upon conversion, exercise or exchange of such Common Stock
Equivalents (the “Deemed Number”) shall be deemed to be outstanding upon
issuance of such Common Stock Equivalents, (B) the Effective Price applicable to
such Common Stock shall equal the minimum dollar value of consideration payable
to the Company to purchase such Common Stock Equivalents and to convert,
exercise or exchange them into Common Stock (net of any discounts, fees,
commissions and other expenses), divided by the Deemed Number, and (C) no
further adjustment shall be made to the Exercise Price upon the actual issuance
of Common Stock upon conversion, exercise or exchange of such Common Stock
Equivalents. The Effective Price of Common Stock or Common Stock Equivalents
issued in any transaction in which more than one type of securities are issued
shall give effect to the allocation by the Company of the aggregate amount paid
for such securities issued in such transaction.
 
(ii) If, at any time while this Warrant is outstanding, the Company or any
Subsidiary issues Common Stock Equivalents with an Effective Price or a number
of underlying shares that floats or resets or otherwise varies or is subject to
adjustment based (directly or indirectly) on market prices of the Common Stock
(a “Floating Price Security”), then for purposes of applying the preceding
paragraph in connection with any subsequent exercise, the Effective Price will
be determined separately on each Exercise Date and will be deemed to equal the
lowest Effective Price at which any holder of such Floating Price Security is
entitled to acquire Common Stock on such Exercise Date (regardless of whether
any such holder actually acquires any shares on such date).
 
(iii) Notwithstanding the foregoing, no adjustment will be made under this
paragraph in respect of any Excluded Stock.
 
(e)  Number of Warrant Shares. Simultaneously with any adjustments to the
Exercise Price pursuant to paragraphs (a), (b) or (d) of this Section, the
number of Warrant Shares that may be purchased upon exercise of this Warrant
shall be increased or decreased proportionately, so that after such adjustment
the aggregate Exercise Price payable hereunder for the increased or decreased
number of Warrant Shares shall be the same as the aggregate Exercise Price in
effect immediately prior to such adjustment.
 
(f)  Calculations. All calculations under this Section 9 shall be made to the
nearest cent or the nearest 1/100th of a share, as applicable. The number of
shares of Common Stock outstanding at any given time shall not include shares
owned or held by or for the account of the Company, and the disposition of any
such shares shall be considered an issue or sale of Common Stock.
 
 
 
7

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(g)  Notice of Adjustments. Upon the occurrence of each adjustment pursuant to
this Section 9, the Company at its expense will promptly compute such adjustment
in accordance with the terms of this Warrant and prepare a certificate setting
forth such adjustment, including a statement of the adjusted Exercise Price and
adjusted number or type of Warrant Shares or other securities issuable upon
exercise of this Warrant (as applicable), describing the transactions giving
rise to such adjustments and showing in detail the facts upon which such
adjustment is based. Upon written request, the Company will promptly deliver a
copy of each such certificate to the Holder and to the Company’s Transfer Agent.
 
(h)  Notice of Corporate Events. If the Company (i) declares a dividend or any
other distribution of cash, securities or other property in respect of its
Common Stock, including without limitation any granting of rights or warrants to
subscribe for or purchase any capital stock of the Company or any Subsidiary,
(ii) authorizes or approves, enters into any agreement contemplating or solicits
stockholder approval for any Fundamental Transaction or (iii) authorizes the
voluntary dissolution, liquidation or winding up of the affairs of the Company,
then the Company shall deliver to the Holder a notice describing the material
terms and conditions of such transaction, at least 20 calendar days prior to the
applicable record or effective date on which a Person would need to hold Common
Stock in order to participate in or vote with respect to such transaction, and
the Company will take all steps reasonably necessary in order to insure that the
Holder is given the practical opportunity to exercise this Warrant prior to such
time so as to participate in or vote with respect to such transaction; provided,
however, that the failure to deliver such notice or any defect therein shall not
affect the validity of the corporate action required to be described in such
notice.
 
10.  Payment of Exercise Price. The Holder shall pay the Exercise Price in
immediately available funds; provided, however, if at anytime after the Required
Effectiveness Date there is no effective Registration Statement registering, or
no current prospectus available for, the resale of the Warrant Shares by the
Holder, the Holder may satisfy its obligation to pay the Exercise Price through
a “cashless exercise,” in which event the Company shall issue to the Holder the
number of Warrant Shares determined as follows:
 

 
X = Y [(A-B)/A]
where:
   
X = the number of Warrant Shares to be issued to the Holder.
     
Y = the number of Warrant Shares with respect to which this Warrant is being
exercised.
     
A = the arithmetic average of the Closing Prices for the five Trading Days
immediately prior to (but not including) the Exercise Date.
     
B = the Exercise Price.

For purposes of Rule 144 promulgated under the Securities Act, it is intended,
understood and acknowledged that the Warrant Shares issued in a cashless
exercise transaction shall be deemed to have been acquired by the Holder, and
the holding period for the Warrant
 
 
8

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

 
 
Shares shall be deemed to have commenced, on the date this Warrant was
originally issued pursuant to the Purchase Agreement.
 
11.  Limitation on Exercise. (a) Notwithstanding anything to the contrary
contained herein, the number of shares of Common Stock that may be acquired by
the Holder upon any exercise of this Warrant (or otherwise in respect hereof)
shall be limited to the extent necessary to insure that, following such exercise
(or other issuance), the total number of shares of Common Stock then
beneficially owned by such Holder and its Affiliates and any other Persons whose
beneficial ownership of Common Stock would be aggregated with the Holder’s for
purposes of Section 13(d) of the Exchange Act, does not exceed 4.999% (the
“Threshold Percentage”) or 9.999% (the “Maximum Percentage”) of the total number
of issued and outstanding shares of Common Stock (including for such purpose the
shares of Common Stock issuable upon such exercise). For such purposes,
beneficial ownership shall be determined in accordance with Section 13(d) of the
Exchange Act and the rules and regulations promulgated thereunder. Each delivery
of an Exercise Notice hereunder will constitute a representation by the Holder
that it has evaluated the limitations set forth in this paragraph and determined
that issuance of the full number of Warrant Shares requested in such Exercise
Notice is permitted under this paragraph. The Company’s obligation to issue
shares of Common Stock in excess of the limitation referred to in this Section
shall be suspended (and shall not terminate or expire notwithstanding any
contrary provisions hereof) until such time, if any, as such shares of Common
Stock may be issued in compliance with such limitation. By written notice to the
Company, the Holder shall have the right (x) at any time and from time to time
to reduce its Maximum Percentage immediately upon notice to the Company in the
event and only to the extent that Section 16 of the Exchange Act or the rules
promulgated thereunder (or any successor statute or rules) is changed to reduce
the beneficial ownership percentage threshold thereunder to a percentage less
than 9.999% and (y) at any time and from time to time, to waive the provisions
of this Section insofar as they relate to the Threshold Percentage or to
increase or decrease its Threshold Percentage (but not in excess of the Maximum
Percentage) unless the Holder shall have, by written instrument delivered to the
Company, irrevocably waived its rights to so increase or decrease its Threshold
Percentage, but (i) any such waiver, increase or decrease will not be effective
until the 61st day after such notice is delivered to the Company, (ii) any such
waiver or increase or decrease will apply only to the Holder and not to any
other holder of Warrants, and (iii) in no event shall the Holder own, directly
or beneficially, more than 19.99% of the outstanding shares of Common Stock
unless the Company obtains shareholder approval in accordance with the rules and
regulations of the NASDAQ Stock Market.
 
(b) Notwithstanding anything to the contrary contained herein the maximum number
of shares of Common Stock that the Company may issue pursuant to the Transaction
Documents at an effective purchase price less than the Closing Price on the
Trading Day immediately preceding the Closing Date equals 19.99% of the
outstanding shares of Common Stock immediately preceding the Closing Date (the
“Issuable Maximum”), unless the Company obtains shareholder approval in
accordance with the rules and regulations of the NASDAQ Stock Market. If, at the
time any Holder requests an exercise of any of the Warrants, the Actual Minimum
(excluding any shares issued or issuable at an effective purchase price in
excess of the Closing Price on the Trading Day immediately preceding the Closing
Date) exceeds the Issuable Maximum (and if the Company has not previously
obtained the required shareholder approval), then the Company shall issue to the
Holder requesting such exercise a number of shares of
 
 
9

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

 
Common Stock not exceeding such Holder’s pro-rata portion of the Issuable
Maximum (based on such Holder’s share (vis-à-vis other Holders) of the aggregate
purchase price paid under the Purchase Agreement and taking into account any
Warrant Shares previously issued to such Holder). For the purposes hereof,
“Actual Minimum” shall mean, as of any date, the maximum aggregate number of
shares of Common Stock then issued or potentially issuable in the future
pursuant to the Transaction Documents, including any Underlying Shares issuable
upon exercise in full of all Warrants, without giving effect to any limits on
the number of shares of Common Stock that may be owned by a Holder at any one
time.

12.  Fractional Shares. The Company shall not be required to issue or cause to
be issued fractional Warrant Shares on the exercise of this Warrant. If any
fraction of a Warrant Share would, except for the provisions of this Section, be
issuable upon exercise of this Warrant, the number of Warrant Shares to be
issued will be rounded up to the nearest whole share.
 
13.  Notices. Any and all notices or other communications or deliveries
hereunder (including without limitation any Exercise Notice) shall be in writing
and shall be deemed given and effective on the earliest of (i) the date of
transmission, if such notice or communication is delivered via facsimile at the
facsimile number specified in this Section prior to 6:30 p.m. (New York City
time) on a Trading Day, (ii) the next Trading Day after the date of
transmission, if such notice or communication is delivered via facsimile at the
facsimile number specified in this Section on a day that is not a Trading Day or
later than 6:30 p.m. (New York City time) on any Trading Day, (iii) the Trading
Day following the date of mailing, if sent by nationally recognized overnight
courier service, or (iv) upon actual receipt by the party to whom such notice is
required to be given. The address for such notices or communications shall be as
set forth in the Purchase Agreement.
 
14.  Warrant Agent. The Company shall serve as warrant agent under this Warrant.
Upon 30 days' notice to the Holder, the Company may appoint a new warrant agent.
Any corporation into which the Company or any new warrant agent may be merged or
any corporation resulting from any consolidation to which the Company or any new
warrant agent shall be a party or any corporation to which the Company or any
new warrant agent transfers substantially all of its corporate trust or
shareholders services business shall be a successor warrant agent under this
Warrant without any further act. Any such successor warrant agent shall promptly
cause notice of its succession as warrant agent to be mailed (by first class
mail, postage prepaid) to the Holder at the Holder's last address as shown on
the Warrant Register.
 
15.  Miscellaneous.
 
(a)  Subject to the restrictions on transfer set forth on the first page hereof,
this Warrant may be assigned by the Holder. This Warrant may not be assigned by
the Company except to a successor in the event of a Fundamental Transaction.
This Warrant shall be binding on and inure to the benefit of the parties hereto
and their respective successors and assigns. Subject to the preceding sentence,
nothing in this Warrant shall be construed to give to any Person other than the
Company and the Holder any legal or equitable right, remedy or cause of action
under this Warrant. This Warrant may be amended only in writing signed by the
Company and the Holder and their successors and assigns.
  
 

10

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

 
(b)  The Company will not, by amendment of its governing documents or through
any reorganization, transfer of assets, consolidation, merger, dissolution,
issue or sale of securities or any other voluntary action, avoid or seek to
avoid the observance or performance of any of the terms of this Warrant, but
will at all times in good faith assist in the carrying out of all such terms and
in the taking of all such action as may be necessary or appropriate in order to
protect the rights of the Holder against impairment. Without limiting the
generality of the foregoing, the Company (i) will not increase the par value of
any Warrant Shares above the amount payable therefor on such exercise, (ii) will
take all such action as may be reasonably necessary or appropriate in order that
the Company may validly and legally issue fully paid and nonassessable Warrant
Shares on the exercise of this Warrant, and (iii) will not close its shareholder
books or records in any manner which interferes with the timely exercise of this
Warrant.
 
(c)  GOVERNING LAW; VENUE; WAIVER OF JURY TRIAL. ALL QUESTIONS CONCERNING THE
CONSTRUCTION, VALIDITY, ENFORCEMENT AND INTERPRETATION OF THIS WARRANT 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 ANY
OF THE 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, BOROUGH OF MANHATTAN. EACH PARTY HERETO 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 THIS
WARRANT), AND HEREBY IRREVOCABLY WAIVES, AND 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. EACH PARTY HERETO 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 WARRANT AND AGREES THAT SUCH SERVICE SHALL
CONSTITUTE GOOD AND SUFFICIENT SERVICE OF PROCESS AND NOTICE THEREOF. NOTHING
CONTAINED HEREIN SHALL BE DEEMED TO LIMIT IN ANY WAY ANY RIGHT TO SERVE PROCESS
IN ANY MANNER PERMITTED BY LAW. EACH PARTY HERETO HEREBY IRREVOCABLY WAIVES, TO
THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW, ANY AND ALL RIGHT TO TRIAL BY
JURY IN ANY LEGAL PROCEEDING ARISING OUT OF OR RELATING TO THIS WARRANT OR ANY
OF THE TRANSACTION DOCUMENTS OR THE TRANSACTIONS CONTEMPLATED HEREBY OR THEREBY.
IF EITHER PARTY SHALL COMMENCE AN ACTION OR PROCEEDING TO ENFORCE ANY PROVISIONS
OF THIS WARRANT OR ANY TRANSACTION DOCUMENT, THEN THE PREVAILING PARTY IN SUCH
ACTION OR PROCEEDING SHALL BE REIMBURSED BY THE OTHER PARTY FOR ITS REASONABLE
ATTORNEYS FEES AND OTHER REASONABLE COSTS AND EXPENSES INCURRED WITH THE
INVESTIGATION, PREPARATION AND PROSECUTION OF SUCH ACTION OR PROCEEDING.
 

11

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

 
(d)  The headings herein are for convenience only, do not constitute a part of
this Warrant and shall not be deemed to limit or affect any of the provisions
hereof.
 
(e)  In case any one or more of the provisions of this Warrant shall be invalid
or unenforceable in any respect, the validity and enforceability of the
remaining terms and provisions of this Warrant shall not in any way be affected
or impaired thereby and the parties will attempt in good faith to agree upon a
valid and enforceable provision which shall be a commercially reasonable
substitute therefor, and upon so agreeing, shall incorporate such substitute
provision in this Warrant.
 
(f) Except as set forth in Section 9, as applicable, the holder of this Warrant
shall have no rights as a stockholder of the Company by virtue of holding this
Warrant.

[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK,
SIGNATURE PAGE FOLLOWS]
 
 
 
 
 
 
 
 
12
 
 

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

 

IN WITNESS WHEREOF, the Company has caused this Warrant to be duly executed by
its authorized officer as of the date first indicated above.
 

 
                                            SIGA TECHNOLOGIES, INC.
   
                                            By:_______________________________
                                            Name:_____________________________
                                            Title:______________________________

 
 
 
 

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

 
 

 
FORM OF EXERCISE NOTICE
 
(To be executed by the Holder to exercise the right to purchase shares of Common
Stock under the foregoing Warrant)
 
To: SIGA Technologies, Inc.
 
The undersigned is the Holder of Warrant No. _______ (the “Warrant”) issued by
SIGA Technologies, Inc., a Delaware corporation (the “Company”). Capitalized
terms used herein and not otherwise defined have the respective meanings set
forth in the Warrant.
 
1.
The Warrant is currently exercisable to purchase a total of ______________
Warrant Shares.

 
2.
The undersigned Holder hereby exercises its right to purchase _________________
Warrant Shares pursuant to the Warrant.

 
3.
The Holder intends that payment of the Exercise Price shall be made as (check
one):

 
____ “Cash Exercise” under Section 10
 
____ “Cashless Exercise” under Section 10 (if permitted)
 
4.
If the holder has elected a Cash Exercise, the holder shall pay the sum of
$____________ to the Company in accordance with the terms of the Warrant.

 
5.
Pursuant to this exercise, the Company shall deliver to the holder
_______________ Warrant Shares in accordance with the terms of the Warrant.

 
6. The Holder hereby certifies to the Company (and acknowledges that the Company
and its counsel will rely upon this certification for purposes of determining
compliance with the registration provisions of the Securities Act of 1933, as
amended ("The Act")) that the Holder is an "accredited investor" as that term is
defined in Rule 501 under The Act.

7. Following this exercise, the Warrant shall be exercisable to purchase a total
of ______________ Warrant Shares.

     
Dated:___________ , _______ 
 
Name of Holder:
         
(Print)____________________________
         
By:______________________________
   
Name:____________________________
   
Title:_____________________________
         
(Signature must conform in all respects to name of holder as specified on the
face of the Warrant)

 

 

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

FORM OF ASSIGNMENT
 
[To be completed and signed only upon transfer of Warrant]
 
FOR VALUE RECEIVED, the undersigned hereby sells, assigns and transfers unto
________________________________ the right represented by the within Warrant to
purchase ____________ shares of Common Stock of SIGA Technologies, Inc. to which
the within Warrant relates and appoints ________________ attorney to transfer
said right on the books of SIGA Technologies, Inc. with full power of
substitution in the premises.
 

       
Dated:__________ , _________ 
         ___________________________________________  
(Signature must conform in all respects to name of holder
 as specified on the face of the Warrant)
       ___________________________________________  
Address of Transferee
 
__________________________________________________
    ___________________________________________        
In the presence of:
      _____________________________       

 

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K R A M E R  L E V I N  N A F T A L I S & F R A N K E L LLP

                                                                                                EXHIBIT
B
 
                    October __, 2006
 
Purchasers set forth on Annex A

Ladies and Gentlemen:
 
We have acted as counsel to SIGA Technologies, Inc., a Delaware corporation (the
“Company”), in connection with the Securities Purchase Agreement, dated as of
October 18, 2006, by and among the Company and the Purchasers named therein (the
“Purchasers”) (the “Purchase Agreement”). This opinion is delivered pursuant to
Section 2.2 (a)(iii) of the Purchase Agreement. Capitalized terms used herein
but not otherwise defined herein have the meanings assigned to them in the
Purchase Agreement.
 
In rendering this opinion, we have examined executed copies of the following
documents:
 
(A) the Purchase Agreement; and
 
(B) the Warrant Agreement, dated the date hereof, by the Company in favor of the
Purchasers.
 
We have also reviewed such other documents and made such other investigations as
we have deemed appropriate. As to various questions of fact material to this
opinion, we have relied upon the representations and warranties of the Company
contained in the Transaction Documents (as defined below) and upon the
statements, representations and certificates of officers or representatives of
the Company, public officials and others. We have not independently verified the
facts so relied on.
 
Based on the foregoing, and subject to the qualifications, limitations and
assumptions set forth herein, we are of the opinion that:
 
1.
The Company is validly existing and in good standing under the laws of the State
of Delaware and has the corporate power to own its properties and to conduct its
business as now conducted (all as described in the Company’s Annual Report on
Form 10-K for its fiscal ended December 31, 2005).

 
2.
The Company has the corporate power necessary to execute, deliver and perform
its obligations under the Purchase Agreement and the Warrant Agreement
(collectively, the “Transaction Documents”).

 
 

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

KRAMER LEVIN NAFTALIS & FRANKEL LLP 
Purchasers set forth on Annex A
October __, 2006
Page 2

 
 
3.
The Transaction Documents have been duly authorized, executed and delivered by
the Company and constitute the legal, valid and binding obligation of the
Company, enforceable against the Company in accordance with their terms.

 
4.
The shares of common stock of the Company to be issued pursuant to the
Transaction Documents have been duly authorized and will be validly issued,
fully paid and nonassessable when such shares have been duly delivered against
payment therefore as contemplated by the Transaction Documents.

 
5.
Assuming that each Purchaser of Shares is an “accredited investor” within the
meaning of Rule 501(a) of Regulation D promulgated under the Act, that there
have been no sales of any securities of the Company during the past six months,
that no general solicitation or advertising (within the meaning of Rule 502(c)
of Regulation D) was used in connection with the sale of the Shares by the
Company to the Purchasers thereof and that the representations and warranties of
the Purchasers contained in Sections 3.2 of the Purchase Agreement are true and
correct, no registration under the Act is required in connection with the sale
and issuance of the Shares to the Purchasers.

 
6.
The execution and delivery by the Company of the Transaction Documents and the
consummation by the Company of the transactions contemplated thereby do not (a)
result in a violation of the certificate of incorporation or by-laws of the
Company or (b) result in violation of any Relevant Law (as defined herein).

 
7.
To our knowledge without the searching of any docket and except as otherwise
disclosed pursuant to the Purchase Agreement or any SEC Report, there is no
claim, action, suit, proceeding, arbitration, investigation or inquiry, pending
before any court or governmental or administrative body or agency, against the
Company.

 
8.
The execution and delivery by the Company of the Transaction Documents to which
the Company is a party, and the consummation by the Company of the transactions
contemplated thereby, do not require approval from or any filings with any
governmental authority under any Relevant Law (as hereinafter defined).

 
9.
The Company is not an “investment company” within the meaning of the Investment
Company Act of 1940, as amended.

 
The opinion set forth herein is subject to and limited by the following:
 

 
a)
With respect to the opinion expressed in paragraph 1, we have relied solely on
certificates of good standing and bring-down good standing telegrams, copies of
which have been furnished to you.

 

 
 
 

 

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

KRAMER LEVIN NAFTALIS & FRANKEL LLP 
Purchasers set forth on Annex A
October __, 2006
Page 3

b)
The opinion set forth in paragraph 3 is qualified (i) by the effects of
applicable laws relating to bankruptcy, insolvency, fraudulent conveyance or
transfer, and other similar laws relating to or affecting the rights and
remedies of creditors generally, (ii) with respect to the remedies of specific
performance and injunctive and other forms of equitable relief, by the
availability of equitable defenses and the discretion of the court before which
any enforcement thereof may be brought and (iii) by general principles of
equity, including, without limitation, concepts of materiality, reasonableness,
good faith and fair dealing (regardless of whether considered in a proceeding in
equity or at law).

 

 
c)
We express no opinion as to the validity, binding effect or enforceability of
(i) provisions that purport to establish evidentiary standards, (ii) provisions
relating to severability, indemnity, contribution, set off, delay or omission of
enforcement of rights or remedies, (iii) provisions purporting to waive rights
or defenses, (iv) provisions that purport to restrict available remedies or
establish remedies, (v) provisions relating to consent to jurisdiction, choice
of forum or choice of law, or (vi) any provision if and to the extent that such
provision (x) is a liquidated damages provision or (y) provides a remedy for
breach that may be deemed to be disproportionate to actual damages or may be
deemed to be a penalty.

 

 
d)
We have assumed that each party to the Transaction Documents (other than the
Company): (i) has the requisite power to execute, deliver and perform their
respective obligations under the Transaction Documents to which it is a party;
and (ii) has duly authorized, executed and delivered each of the Transaction
Documents to which it is a party; and (iii) each of the Transaction Documents
constitutes the valid and binding obligation of such party, enforceable against
such party in accordance with its terms.

 

 
e)
As used in this opinion letter, “to our knowledge,” or “known to us” or any
phrase or similar import shall mean the current, actual knowledge (without
independent investigation or verification) of those attorneys in our firm who
are currently members or associates of, or counsel to, our firm who have
directly participated in this engagement.

 
We express no opinion as to any laws other than the laws of the State of New
York, the General Corporation Law of the State of Delaware, and the federal laws
of the United States of America, that in each case, in our experience, we
recognize are normally applicable to transactions of the type contemplated by
the Transaction Documents and are not applicable as a result of the particular
business, identity or ownership of any of the parties (the “Relevant Laws”).
Without limiting the foregoing, we express no opinion with respect to federal or
state securities laws or antitrust laws, except with respect to the opinion
expressed in paragraph 5.
 

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

KRAMER LEVIN NAFTALIS & FRANKEL LLP 
Purchasers set forth on Annex A
October __, 2006
Page 4

The opinion expressed herein is based upon the Relevant Laws and interpretations
thereof in effect on the date hereof, and the facts and circumstances in
existence on the date hereof, and we assume no obligation to revise or
supplement this opinion letter should any such law or interpretation be changed
by legislative action, judicial decision or otherwise or should there be any
change in such facts or circumstances.
 
This opinion letter is being delivered to you in connection with the
transactions described in the Transaction Documents and may not be relied on or
otherwise used by any other Person or by you for any other purpose.
 
 
                    Very truly yours,
 

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

KRAMER LEVIN NAFTALIS & FRANKEL LLP 
Purchasers set forth on Annex A
October __, 2006
Page 5

ANNEX “A”

Cranshire Capital, L.P.

Iroquois Master Fund LTD.

Omicron Master Trust

Rockmore Investment Master Fund, Ltd.

Smithfield Fiduciary LLC
 

 

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

 
Exhibit C
 
Plan of Distribution
 
The selling stockholders may, from time to time, sell any or all of their shares
of common stock on any stock exchange, market or trading facility on which the
shares are traded or in private transactions. These sales may be at fixed or
negotiated prices. The selling stockholders may use any one or more of the
following methods when selling shares:
 

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

 

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

 

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

 

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

 

·  
privately negotiated transactions;

 

·  
short sales;

 

·  
broker-dealers may agree with the selling stockholders to sell a specified
number of such shares at a stipulated price per share;

 

·  
a combination of any such methods of sale; and

 

·  
any other method permitted pursuant to applicable law.

 
The selling stockholders may also sell shares under Rule 144 under the
Securities Act, if available, rather than under this prospectus.
 
The selling stockholders may also engage in short sales against the box, puts
and calls and other transactions in our securities or derivatives of our
securities and may sell or deliver shares in connection with these trades.
 
Broker-dealers engaged by the selling stockholders may arrange for other
brokers-dealers to participate in sales. Broker-dealers may receive commissions
or discounts from the selling stockholders (or, if any broker-dealer acts as
agent for the purchaser of shares, from the purchaser) in amounts to be
negotiated. The selling stockholders do not expect these commissions and
discounts to exceed what is customary in the types of transactions involved. Any
profits on the resale of shares of common stock by a broker-dealer acting as
principal might be deemed to be underwriting discounts or commissions under the
Securities Act. Discounts, concessions, commissions and similar selling
expenses, if any, attributable to the sale of shares will be borne by a selling
stockholder. The selling stockholders may agree to indemnify any agent, dealer
or broker-dealer that participates in transactions involving sales of the shares
if liabilities are imposed on that person under the Securities Act.
 

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

The selling stockholders may from time to time pledge or grant a security
interest in some or all of the shares of common stock owned by them and, if they
default in the performance of their secured obligations, the pledgees or secured
parties may offer and sell the shares of common stock from time to time under
this prospectus after we have filed an amendment to this prospectus under Rule
424(b)(3) or other applicable provision of the Securities Act of 1933 amending
the list of selling stockholders to include the pledgee, transferee or other
successors in interest as selling stockholders under this prospectus.
 
The selling stockholders also may transfer the shares of common stock in other
circumstances, in which case the transferees, pledgees or other successors in
interest will be the selling beneficial owners for purposes of this prospectus
and may sell the shares of common stock from time to time under this prospectus
after we have filed an amendment to this prospectus under Rule 424(b)(3) or
other applicable provision of the Securities Act of 1933 amending the list of
selling stockholders to include the pledgee, transferee or other successors in
interest as selling stockholders under this prospectus.
 
The selling stockholders and any broker-dealers or agents that are involved in
selling the shares of common stock may be deemed to be "underwriters" within the
meaning of the Securities Act in connection with such sales. In such event, any
commissions received by such broker-dealers or agents and any profit on the
resale of the shares of common stock purchased by them may be deemed to be
underwriting commissions or discounts under the Securities Act.
 
We are required to pay all fees and expenses incident to the registration of the
shares of common stock. We have agreed to indemnify the selling stockholders
against certain losses, claims, damages and liabilities, including liabilities
under the Securities Act.
 
The selling stockholders have advised us that they have not entered into any
agreements, understandings or arrangements with any underwriters or
broker-dealers regarding the sale of their shares of common stock, nor is there
an underwriter or coordinating broker acting in connection with a proposed sale
of shares of common stock by any selling stockholder. If we are notified by any
selling stockholder that any material arrangement has been entered into with a
broker-dealer for the sale of shares of common stock, if required, we will file
a supplement to this prospectus. If the selling stockholders use this prospectus
for any sale of the shares of common stock, they will be subject to the
prospectus delivery requirements of the Securities Act.
 
The anti-manipulation rules of Regulation M under the Securities Exchange Act of
1934 may apply to sales of our common stock and activities of the selling
stockholders.
 
 
 

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

 
 
                                                                                                EXHIBIT
D
 
IRREVOCABLE TRANSFER AGENT INSTRUCTIONS
 

American Stock Transfer & Trust Company
6201 15th Avenue
Brooklyn, NY 11219

Ladies and Gentlemen:

Reference is made to the Securities Purchase Agreement (the “Purchase
Agreement”), dated as of October 18, 2006, among SIGA Technologies, Inc., a
Delaware corporation (the “Company”) and the purchasers named therein (the
“Holders”) pursuant to which the Company is issuing the Company’s common stock,
par value $0.0001 per share (the “Common Stock”).
 
The Company has agreed with the Holders that it will instruct you to: (A) issue
the Common Stock free of all restrictive and other legends if, at the time of
such issue, (i) a registration statement covering the resale of such Common
Stock has been declared and is effective by the Commission under the Securities
Act, (ii) such Common Stock are eligible for sale under Rule 144(k) or (iii)
such legend is not required under applicable requirements of the Securities Act
(including judicial interpretations and pronouncements issued by the Staff of
the Commission); or (B) reissue the Common Stock (if such shares were originally
issued with a restrictive legend) free of all restrictive and other legends (i)
upon the effectiveness of a registration statement covering the resale of the
Common Stock or (ii) following any sale of such Common Stock pursuant to Rule
144 or (iii) such Common Stock are eligible for sale under Rule 144(k) or (iv)
if such legend is not required under applicable requirements of the Securities
Act (including judicial interpretations and pronouncements issued by the Staff
of the Commission).
 
In furtherance of this instruction, upon the effectiveness of the Registration
Statement (as defined in the Purchase Agreement) we have instructed our counsel
to deliver to you their opinion letter in the form attached hereto as Exhibit I
to the effect that the Registration Statement has been declared effective by the
Commission and that Common Stock are freely transferable by the Holders and
accordingly may be issued (or reissued, as applicable) and delivered to the
Holders free of all restrictive and other legends.
 
You need not require further letters from us or our counsel to effect any future
issuance or reissuance of shares of Common Stock to the Holders as contemplated
by the Purchase Agreement and this letter. This letter shall serve as our
standing irrevocable instructions with regard to this matter.
 

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Please be advised that the Holders have relied upon this instruction letter as
an inducement to enter into the Purchase Agreement. Please execute this letter
in the space indicated to acknowledge your agreement to act in accordance with
these instructions.
 
                Very truly yours,

                SIGA TECHNOLOGIES, INC.

                By: _____________________________________
                Name: __________________________________
                Title: ___________________________________
 
 
 
 
 

 
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                                                                                    Exhibit
I

K R A M E R   L E V I N   N A F T A L I S  &  F R A N K E L  LLP

__________________, 2006

American Stock Transfer & Trust Company
6201 15th Avenue
Brooklyn, NY 11219
 

 
Re:
SIGA Technologies, Inc.

 
Dear Ladies and Gentlemen:
 
We are counsel to SIGA Technologies, Inc., a Delaware corporation (the
“Company”). We are writing to inform you that the Company’s Registration
Statement on Form S-3, File No. 333-________ (the “Registration Statement”), was
declared effective by the Securities and Exchange Commission at _________ on
___________ 2006. The Registration Statement registers the resale of (a) certain
outstanding shares of the Company’s common stock, .0001 per value per share (the
“Common Stock”), and (b) shares of Common Stock issuable upon the exercise of
certain outstanding warrants to purchase shares of Common Stock.
 
Upon (a) the sale by any stockholder listed in the first column of Schedule I
attached hereto of shares of Common Stock listed in the second column of
Schedule I in accordance with the section entitled “Plan of Distribution” in the
then current prospectus (the “Prospectus”) forming a part of the Registration
Statement (a copy of the current Prospectus is enclosed with this letter), (b)
delivery of a copy of the Prospectus to the purchaser of such shares, and (c)
delivery to you of a certificate in the form attached to this letter as Annex A
certifying to the foregoing executed by such stockholder, you may then issue one
or more certificates representing the shares of Common Stock so sold in
accordance with the instructions of such stockholder without any restrictive
legend.
 
However, any certificates re-issued in the name of such stockholder representing
any unsold shares must have affixed thereto any legend that appears on the
certificate delivered to you for transfer.
 
 
                Very truly yours,
 
                Kramer Levin Naftalis & Frankel LLP

cc: Thomas Konatich

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SCHEDULE I

 
Number of Shares of
Common Stock Offered
Pursuant to Registration
Name of Beneficial Owner
Statement
       

 
 
 
 
 
 
4
 

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CERTIFICATE OF SELLING STOCKHOLDER
 

SIGA Technologies, Inc.
420 Lexington Avenue, Suite 408
New York, NY 10170

-and-

American Stock Transfer and Trust Company
6201 15th Avenue
Brooklyn, NY 11219

The undersigned does hereby certify that the undersigned is listed as a selling
securityholder under the Registration Statement on Form S-3 (Registration No.
333-______) (the “Registration Statement”), of SIGA Technologies, Inc., a
Delaware corporation (the “Company”) and that Kramer Levin Naftalis & Frankel
LLP is entitled to rely upon this Certificate in rendering an opinion to the
transfer agent for the Company with respect to my sale of shares (the “Shares”)
of the Company’s common stock, .0001 per value per share (“Common Stock”),
covered by the Registration Statement.
 
The undersigned does hereby further certify that:
 
1. The undersigned has sold ____________________ Shares and is delivering
herewith to the Company one or more certificates representing such Shares.
 
2. The undersigned has delivered a copy of the prospectus dated _________, 2006
forming a part of the Registration Statement (the “Prospectus”) to each person
to whom the undersigned sold such Shares.
 
3. The undersigned sold the Shares in compliance with the section entitled “Plan
of Distribution” in the Prospectus.
 
4. The undersigned shall notify the Company immediately of any occurrence which
would render the foregoing statements inaccurate.
 
5. If this Certificate is executed on behalf of an entity, the undersigned is
the duly appointed representative of such entity and, as such, has all requisite
power and authority to execute this Certificate of behalf of, and to bind, such
entity.
 
The Company and its agents and representatives (including, without limitation,
the Company’s respective counsel) may rely on this representation letter. The
undersigned will indemnify all such persons and hold them harmless from and
against any and all loss, damage, claim, liability and expense resulting from
the breach of any representation herein.
 
 
5
 

 

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

 

 
IN WITNESS WHEREOF, the undersigned has duly executed this Certificate as of
___________________, 200___.
 
            Name of Selling Stockholder:

            Signature:_____________________    
            Title (if applicable):

            Total Number of
            Shares Sold:___________________    

 
 
 
 
 
 
 
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