Execution Version

COMMON STOCK PURCHASE AGREEMENT

by and between

KINGSBRIDGE CAPITAL LIMITED

and

CYCLACEL PHARMACEUTICALS, INC.

dated as of December 10, 2007

 

 

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TABLE OF CONTENTS

 

ARTICLE I

 

DEFINITIONS

 

1

 

 

 

 

 

ARTICLE II

 

PURCHASE AND SALE OF COMMON STOCK

 

5

Section 2.1

 

Purchase and Sale of Stock

 

5

Section 2.2

 

Closing

 

5

Section 2.3

 

Registration Statement and Prospectus

 

5

Section 2.4

 

Warrant On the Closing Date, the Company shall issue and deliver the Warrant to
the Investor

 

5

Section 2.5

 

Blackout Shares

 

5

ARTICLE III

 

DRAW DOWN TERMS

 

6

Section 3.1

 

Draw Down Notice

 

6

Section 3.2

 

Number of Shares

 

6

Section 3.3

 

Limitation on Draw Downs

 

6

Section 3.4

 

Trading Cushion

 

6

Section 3.5

 

Settlement

 

6

Section 3.6

 

Delivery of Shares; Payment of Draw Down Amount

 

7

Section 3.7

 

Failure to Deliver Shares

 

7

ARTICLE IV

 

REPRESENTATIONS AND WARRANTIES OF THE COMPANY

 

8

Section 4.1

 

Organization, Good Standing and Power

 

8

Section 4.2

 

Authorization; Enforcement

 

8

Section 4.3

 

Capitalization

 

8

Section 4.4

 

Issuance of Shares

 

9

Section 4.5

 

No Conflicts

 

9

Section 4.6

 

Commission Documents, Financial Statements

 

10

Section 4.7

 

No Material Adverse Change

 

11

Section 4.8

 

No Undisclosed Liabilities

 

11

Section 4.9

 

No Undisclosed Events or Circumstances

 

11

Section 4.10

 

Actions Pending

 

12

Section 4.11

 

Compliance with Law

 

12

Section 4.12

 

Certain Fees

 

12

Section 4.13

 

Disclosure

 

12

Section 4.14

 

Material Non-Public Information

 

12

Section 4.15

 

Exemption from Registration; Valid Issuances

 

12

Section 4.16

 

No General Solicitation or Advertising in Regard to this Transaction

 

13

Section 4.17

 

No Integrated Offering

 

13

Section 4.18

 

Acknowledgment Regarding Investor’s Purchase of Shares

 

13

ARTICLE V

 

REPRESENTATIONS, WARRANTIES AND COVENANTS OF THE INVESTOR

 

13

 

 

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Section 5.1

 

Organization and Standing of the Investor

 

13

Section 5.2

 

Authorization and Power

 

13

Section 5.3

 

No Conflicts

 

14

Section 5.4

 

Financial Capability

 

14

Section 5.5

 

Information

 

14

Section 5.6

 

Trading Restrictions

 

15

Section 5.7

 

Statutory Underwriter Status

 

15

Section 5.8

 

Not an Affiliate

 

15

Section 5.9

 

Manner of Sale

 

15

Section 5.10

 

Prospectus Delivery

 

15

ARTICLE VI

 

COVENANTS OF THE COMPANY

 

15

Section 6.1

 

Securities

 

15

Section 6.2

 

Reservation of Common Stock

 

16

Section 6.3

 

Registration and Listing

 

16

Section 6.4

 

Registration Statement

 

16

Section 6.5

 

Compliance with Laws

 

16

Section 6.6

 

Other Financing

 

17

Section 6.7

 

Prohibited Transactions

 

17

Section 6.8

 

Corporate Existence

 

17

Section 6.9

 

Non-Disclosure of Non-Public Information

 

18

Section 6.10

 

Notice of Certain Events Affecting Registration; Suspension of Right to Request
a Draw Down

 

18

Section 6.11

 

Amendments to the Registration Statement

 

18

Section 6.12

 

Prospectus Delivery

 

18

ARTICLE VII

 

CONDITIONS TO THE OBLIGATION OF THE INVESTOR TO ACCEPT A DRAW DOWN

 

19

Section 7.1

 

Accuracy of the Company’s Representations and Warranties

 

19

Section 7.2

 

Performance by the Company

 

19

Section 7.3

 

Compliance with Law

 

19

Section 7.4

 

Effective Registration Statement

 

19

Section 7.5

 

No Knowledge

 

19

Section 7.6

 

No Suspension

 

20

Section 7.7

 

No Injunction

 

20

Section 7.8

 

No Proceedings or Litigation

 

20

Section 7.9

 

Sufficient Shares Registered for Resale

 

20

Section 7.10

 

Warrant

 

20

Section 7.11

 

Opinion of Counsel

 

20

Section 7.12

 

Accuracy of Investor’s Representation and Warranties

 

20

ARTICLE VIII

 

TERMINATION

 

20

Section 8.1

 

Term

 

20

Section 8.2

 

Other Termination

 

20

Section 8.3

 

Effect of Termination

 

21

ARTICLE IX

 

INDEMNIFICATION

 

21

 

 

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Section 9.1

 

Indemnification

 

21

Section 9.2

 

Notification of Claims for Indemnification

 

22

ARTICLE X

 

MISCELLANEOUS

 

24

Section 10.1

 

Fees and Expenses

 

24

Section 10.2

 

Reporting Entity for the Common Stock

 

24

Section 10.3

 

Brokerage

 

25

Section 10.4

 

Notices

 

26

Section 10.5

 

Assignment

 

27

Section 10.6

 

Amendment; No Waiver

 

27

Section 10.7

 

Entire Agreement

 

27

Section 10.8

 

Severability

 

27

Section 10.9

 

Title and Subtitles

 

28

Section 10.10

 

Counterparts

 

28

Section 10.11

 

Choice of Law

 

28

Section 10.12

 

Specific Enforcement, Consent to Jurisdiction

 

28

Section 10.13

 

Survival

 

28

Section 10.14

 

Publicity

 

29

Section 10.15

 

Further Assurances

 

29

 

 

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This COMMON STOCK PURCHASE AGREEMENT (this “Agreement”) is entered into as of
the 10th day of December, 2007, by and between Kingsbridge Capital Limited, an
entity organized and existing under the laws of the British Virgin Islands,
whose registered address is Palm Grove House, 2nd Floor, Road Town, Tortola,
British Virgin Islands (the “Investor”) and Cyclacel Pharmaceuticals, Inc., a
corporation organized and existing under the laws of the State of Delaware (the
“Company”).

WHEREAS, the parties desire that, upon the terms and subject to the conditions
and limitations set forth herein, the Company may issue and sell to the
Investor, from time to time as provided herein, and the Investor shall purchase
from the Company, up to $60 million worth of shares of Common Stock (as defined
below); and

WHEREAS, such investments will be made in reliance upon the provisions of
Section 4(2) (“Section 4(2)”) and Regulation D (“Regulation D”) of the United
States Securities Act of 1933, as amended and the rules and regulations
promulgated thereunder (the “Securities Act”), and/or upon such other exemption
from the registration requirements of the Securities Act as may be available
with respect to any or all of the investments in Common Stock to be made
hereunder; and

WHEREAS, the parties hereto are concurrently entering into a Registration Rights
Agreement in the form of Exhibit A hereto (the “Registration Rights Agreement”)
pursuant to which the Company shall register the Common Stock issued and sold to
the Investor under this Agreement and issuable under the Warrant (as defined
below), upon the terms and subject to the conditions set forth therein; and

WHEREAS, in consideration for the Investor’s execution and delivery of, and its
performance of its obligations under, this Agreement, the Company is
concurrently issuing to the Investor a Warrant in the form of Exhibit B hereto
(the “Warrant”) pursuant to which the Investor may purchase from the Company up
to 175,000 shares of Common Stock, upon the terms and subject to the conditions
set forth therein;

NOW, THEREFORE, the parties hereto agree as follows:

ARTICLE I

DEFINITIONS

As used in this Agreement, the following terms shall have the meanings set forth
below:

“Alternative Draw Down Amount” means the product of (i) Average Trading Volume,
(ii) the VWAP on the Trading Day preceding the issuance of the Draw Down Notice,
(iii) the number of Trading Days during the Draw Down Pricing Period, and (iv)
the Liquidity Ratio.

“Average Trading Volume” means the average trading volume of the twenty (20)
Trading Days during the thirty (30) Trading Days prior to the issuance of the
Draw Down Notice that results from excluding the five (5) highest and five (5)
lowest Trading Days during such period.

“Blackout Amount” shall have the meaning assigned to such term in the
Registration Rights Agreement.

 

 

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“Blackout Shares” shall have the meaning assigned to such term in the
Registration Rights Agreement.

“Certificate” shall have the meaning assigned to such term in Section 4.3
hereof.

“Closing Date” shall have the meaning assigned to such term in Section 2.2
hereof.

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

“Commission Documents” shall have the meaning assigned to such term in
Section 4.6 hereof.

“Commitment Period” means the period commencing on the Effective Date and
expiring on the earliest to occur of (i) the date on which the Investor shall
have purchased Shares pursuant to this Agreement for an aggregate purchase price
equal to the Maximum Commitment Amount, (ii) the date this Agreement is
terminated pursuant to Article VIII hereof, and (iii) the date occurring
thirty-six (36) months from the Effective Date.

“Common Stock” means the common stock of the Company, par value $0.001 per
share.

“Condition Satisfaction Date” shall have the meaning assigned to such term in
Article VII hereof.

“Damages” means any loss, claim, damage, liability, costs and expenses
(including, without limitation, reasonable attorneys’ fees and expenses and
costs and reasonable expenses of expert witnesses and investigation).

“Draw Down” shall have the meaning assigned to such term in Section 3.1 hereof.

“Draw Down Amount” means the actual dollar amount of a Draw Down paid to the
Company.

“Draw Down Discount Price” means (i) 90% of the VWAP on any Trading Day during a
Draw Down Pricing Period when the VWAP equals or exceeds $2.50 but is less than
or equal to $6.50, (ii) 92% of the VWAP on any Trading Day during the Draw Down
Pricing Period when VWAP exceeds $6.50 but is less than or equal to $11.00, or
(iii) 94% of the VWAP on any Trading Day during the Draw Down Pricing Period
when VWAP exceeds $11.00.

“Draw Down Notice” shall have the meaning assigned to such term in Section 3.1
hereof.

“Draw Down Pricing Period” shall mean, with respect to each Draw Down, a period
of eight (8) consecutive Trading Days beginning on the first Trading Day
specified in a Draw Down Notice.

“DTC” shall mean the Depository Trust Company, or any successor thereto.

“Effective Date” means the first Trading Day immediately following the date on
which the Registration Statement is declared effective by the Commission.

 

 

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

“Excluded Merger or Sale” shall have the meaning assigned to such term in the
Warrant.

“FINRA” means the Financial Industry Regulatory Authority.

“Knowledge” means the actual knowledge of those officers of the Company required
to file statements pursuant to Section 16 of the Exchange Act.

“Liquidity Ratio” means eighty-five percent (85%).

“Make Whole Amount” shall have the meaning specified in Section 3.7.

“Market Capitalization” means, as of any Trading Day, the product of (i) the
closing sale price of the Company’s Common Stock as reported by Bloomberg L.P.
using the AQR function and (ii) the number of outstanding shares of Common Stock
of the Company as reported by Bloomberg L.P. using the DES function.

“Material Adverse Effect” means any effect that is not negated, corrected, cured
or otherwise remedied within a reasonable period of time on the business,
operations, properties or financial condition of the Company and its
consolidated subsidiaries that is material and adverse to the Company and such
subsidiaries, taken as a whole, and/or any condition, circumstance, or situation
that would prohibit or otherwise interfere with the ability of the Company to
perform any of its obligations under this Agreement, the Registration Rights
Agreement or the Warrant in any material respect; provided, however, that none
of the following shall constitute a “Material Adverse Effect”: (i) the effects
of conditions or events that are generally applicable to the capital, financial,
banking or currency markets or the biotechnology or pharmaceutical industries;
(ii) the effects of conditions or events that are reasonably expected to occur
in the Company’s ordinary course of business (such as, by way of example only,
failed clinical trials, serious adverse events involving the Company’s product
candidates, delays in product development, unfavorable regulatory
determinations, difficulties involving collaborators or intellectual property
disputes), except for purposes of Section 4.9 herein; (iii) any changes or
effects resulting from the announcement or consummation of the transactions
contemplated by this Agreement, including, without limitation, any changes or
effects associated with any particular Draw Down, and (iv) changes in the market
price of the Common Stock.

“Maximum Commitment Amount” means the lesser of (i) $60 million in aggregate
Draw Down Amounts or (ii) 4,084,590 shares of Common Stock (as adjusted for
stock splits, stock combinations, stock dividends and recapitalizations that
occur on or after the date of this Agreement).

“Maximum Draw Down Amount” means either (i) 2.0% of the Company’s Market
Capitalization at the time of the Draw Down, or (ii) the lesser of (A) 3.0% of
the Company’s Market Capitalization at the time of the Draw Down, and (B) the
Alternative Draw Down Amount.

 

 

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“Permitted Transaction” shall have the meaning assigned to such term in
Section 6.6 hereof.

“Person” means any individual, corporation, partnership, limited liability
company, association, trust or other entity or organization, including any
government or political subdivision or an agency or instrumentality thereof.

“Principal Market” means the NASDAQ Global Select Market, the NASDAQ Global
Market, the NASDAQ Capital Market, the American Stock Exchange or the New York
Stock Exchange, whichever is at the time the principal trading exchange or
market for the Common Stock.

“Prohibited Transaction” shall have the meaning assigned to such term in
Section 6.7 hereof.

“Prospectus” as used in this Agreement means the prospectus in the form included
in the Registration Statement, as supplemented from time to time pursuant to
Rule 424(b) of the Securities Act.

“Registrable Securities” means (i) the Shares, (ii) the Warrant Shares, and
(iii) any securities issued or issuable with respect to any of the foregoing by
way of exchange, stock dividend or stock split or in connection with a
combination of shares, recapitalization, merger, consolidation or other
reorganization or otherwise. As to any particular Registrable Securities, once
issued such securities shall cease to be Registrable Securities when (w) the
Registration Statement has been declared effective by the Commission and such
Registrable Securities have been disposed of pursuant to the Registration
Statement, (x) such Registrable Securities have been sold under circumstances
under which all of the applicable conditions of Rule 144 (or any similar
provision then in force) under the Securities Act (“Rule 144”) are met, (y) such
time as such Registrable Securities have been otherwise transferred to holders
who may trade such shares without restriction under the Securities Act, and the
Company has delivered a new certificate or other evidence of ownership for such
securities not bearing a restrictive legend or (z) in the opinion of counsel to
the Company such Registrable Securities may be sold without registration and
without any time, volume or manner limitations pursuant to Rule 144(k) (or any
similar provision then in effect) under the Securities Act.

“Registration Rights Agreement” shall have the meaning set forth in the recitals
of this Agreement.

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

“Regulation D” shall have the meaning set forth in the recitals of this
Agreement. “Section 4(2)” shall have the meaning set forth in the recitals of
this Agreement.

“Securities Act” shall have the meaning set forth in the recitals of this
Agreement.

“Settlement Date” shall have the meaning assigned to such term in Section 3.5
hereof.

 

 

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“Shares” means the shares of Common Stock of the Company that are and/or may be
purchased hereunder.

“Trading Day” means any day other than a Saturday or a Sunday on which the
Principal Market is open for trading in equity securities.

“VWAP” means the volume weighted average price (the aggregate sales price of all
trades of Common Stock during each Trading Day divided by the total number of
shares of Common Stock traded during such Trading Day) of the Common Stock
during any Trading Day as reported by Bloomberg, L.P. using the AQR function.

“Warrant” shall have the meaning set forth in the recitals of this Agreement.

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

ARTICLE II

PURCHASE AND SALE OF COMMON STOCK

Section 2.1 Purchase and Sale of Stock. Upon the terms and subject to the
conditions set forth in this Agreement, the Company shall to the extent it
elects to make Draw Downs in accordance with Article III hereof, issue and sell
to the Investor and the Investor shall purchase Common Stock from the Company
for an aggregate (in Draw Down Amounts) of up to the Maximum Commitment Amount,
consisting of purchases based on Draw Downs in accordance with Article III
hereof.

Section 2.2 Closing. In consideration of and in express reliance upon the
representations, warranties, covenants, terms and conditions of this Agreement,
the Company agrees to issue and sell to the Investor, and the Investor agrees to
purchase from the Company, that number of the Shares to be issued in connection
with each Draw Down. The execution and delivery of this Agreement (the
“Closing”) shall take place at the offices of Stroock & Stroock & Lavan LLP, 180
Maiden Lane, New York, NY 10038 at 5:00 p.m. local time on December 10, 2007, or
at such other time and place or on such date as the Investor and the Company may
agree upon (the “Closing Date”). Each party shall deliver at or prior to the
Closing all documents, instruments and writings required to be delivered at the
Closing by such party pursuant to this Agreement.

Section 2.3 Registration Statement and Prospectus. The Company shall prepare and
file with the Commission the Registration Statement (including the Prospectus)
in accordance with the provisions of the Securities Act and the Registration
Rights Agreement.

Section 2.4 Warrant. On the Closing Date, the Company shall issue and deliver
the Warrant to the Investor.

Section 2.5 Blackout Shares. The Company shall deliver any Blackout Amount or
issue and deliver any Blackout Shares to the Investor in accordance with
Section 1(e) of the Registration Rights Agreement.

 

 

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ARTICLE III

DRAW DOWN TERMS

Subject to the satisfaction of the conditions hereinafter set forth in this
Agreement, the parties agree as follows:

Section 3.1 Draw Down Notice. During the Commitment Period, the Company may, in
its sole discretion, issue a Draw Down Notice (as hereinafter defined) which
shall specify the dollar amount of Shares the Company elects to sell to the
Investor (each such election, a “Draw Down”) up to a Draw Down Amount equal to
the Maximum Draw Down Amount, which Draw Down the Investor shall be obligated to
accept. The Company shall inform the Investor in writing by sending a duly
completed Draw Down Notice (as hereinafter defined) in the form of Exhibit C
hereto by e-mail to the addresses set forth in Section 10.4, with a copy to the
Investor’s counsel, as to such Draw Down Amount before commencement of trading
on the first Trading Day of the related Draw Down Pricing Period (the “Draw Down
Notice”). In addition to the Draw Down Amount, each Draw Down Notice shall
designate the first Trading Day of the Draw Down Pricing Period. In no event
shall any Draw Down Amount exceed the Maximum Draw Down Amount. Each Draw Down
Notice shall be accompanied by a certificate, signed by the Chief Executive
Officer or Chief Financial Officer, dated as of the date of such Draw Down
Notice, in the form of Exhibit D hereof.

Section 3.2 Number of Shares. Subject to Section 3.6(b), the number of Shares to
be issued in connection with each Draw Down shall be equal to the sum of the
number of shares issuable on each Trading Day of the Draw Down Pricing Period.
The number of shares issuable on a Trading Day during a Draw Down Pricing Period
shall be equal to the quotient of one eighth (1/8th) of the Draw Down Amount
divided by the Draw Down Discount Price for such Trading Day.

Section 3.3 Limitation on Draw Downs. Only one Draw Down shall be permitted for
each Draw Down Pricing Period.

Section 3.4 Trading Cushion. Unless the parties agree in writing otherwise,
there shall be a minimum of three (3) Trading Days between the expiration of any
Draw Down Pricing Period and the beginning of the next succeeding Draw Down
Pricing Period.

Section 3.5 Settlement. The number of Shares purchased by the Investor in any
Draw Down shall be determined and settled on two separate dates. Shares
purchased by the Investor during the first four Trading Days of any Draw Down
Pricing Period shall be determined and settled no later than the sixth Trading
Day of such Draw Down Pricing Period. Shares purchased by the Investor during
the second four Trading Days of any Draw Down Pricing Period shall be determined
and settled no later than the second Trading Day after the last Trading Day of
such Draw Down Pricing Period. Each date on which settlement of the purchase and
sale of Shares occurs hereunder being referred to as a “Settlement Date.” The
Investor shall provide the Company with delivery instructions for the Shares to
be issued at each Settlement Date at least two Trading Days in advance of such
Settlement Date. The number of Shares actually issued shall be rounded down to
the nearest whole number of Shares.

 

 

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Section 3.6 Delivery of Shares; Payment of Draw Down Amount.

(a) On each Settlement Date, the Company shall deliver the Shares purchased by
the Investor to the Investor or its designees exclusively via book-entry through
the DTC to an account designated by the Investor, and upon receipt of the
Shares, the Investor shall cause payment thereof to be made to the Company’s
designated account by wire transfer of immediately available funds, if the
Shares are received by the Investor no later than 1:00 p.m. (Eastern Time), or
next day available funds, if the Shares are received thereafter.

(b) For each Trading Day during a Draw Down Pricing Period where the VWAP is
less than the greater of (i) 90% of the Closing Price of the Company’s Common
Stock on the Trading Day immediately preceding the commencement of such Draw
Down Pricing Period, or (ii) $2.50, such Trading Day shall not be used in
calculating the number of Shares to be issued in connection with such Draw Down,
and the Draw Down Amount in respect of such Draw Down Pricing Period shall be
reduced by one eighth (1/8th) of the initial Draw Down Amount specified in the
Draw Down Notice. If trading in the Company’s Common Stock is suspended for any
reason for more than three (3) consecutive or non-consecutive hours during any
Trading Day during a Draw Down Pricing Period, such Trading Day shall not be
used in calculating the number of Shares to be issued in connection with such
Draw Down, and the Draw Down Amount in respect of such Draw Down Pricing Period
shall be reduced by one eighth (1/8th) of the initial Draw Down Amount specified
in the Draw Down Notice.

Section 3.7 Failure to Deliver Shares. If on any Settlement Date, the Company
fails to take all actions within the reasonable control of the Company (other
than such actions and events occurring as a result of any delay, failure in
performance or interruption of service, resulting directly or indirectly from
events or occurrences that are beyond the Company’s control) to cause the
delivery of the Shares purchased by the Investor, and such failure is not cured
within ten (10) Trading Days following such Settlement Date, the Company shall
pay to the Investor on demand in cash by wire transfer of immediately available
funds to an account designated by the Investor the “Make Whole Amount;”
provided, however, that in the event that the Company is prevented from
delivering Shares in respect of any such Settlement Date in a timely manner by
any fact or circumstance that is reasonably within the control of, or directly
attributable to, the Investor, then such ten (10) Trading Day period shall be
automatically extended until such time as such fact or circumstance is cured. As
used herein, the Make Whole Amount shall be an amount equal to the sum of
(i) the Draw Down Amount actually paid by the Investor in respect of such Shares
plus (ii) an amount equal to the actual loss suffered by the Investor in respect
of sales to subsequent purchasers, pursuant to transactions entered into before
the Settlement Date, of the Shares that were required to be delivered by the
Company, which shall be based upon documentation reasonably satisfactory to the
Company demonstrating the difference (if greater than zero) between (A) the
price per share paid by the Investor to purchase such number of shares of Common
Stock necessary for the Investor to meet its share delivery obligations to such
subsequent purchasers minus (B) the average Draw Down Discount Price during the
applicable Draw Down Pricing Period. In the event that the Make Whole Amount is
not paid within two (2) Trading Days following a demand therefor from the
Investor, the Make Whole Amount shall accrue interest compounded daily at a rate
of five percent (5%) per annum up to and including the date on which the Make
Whole Amount is actually paid. Notwithstanding anything to the contrary set
forth in this Agreement, in the event that the Company pays the Make Whole

 

 

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Amount (plus interest, if applicable) in respect of any Settlement Date in
accordance with this Section 3.7, such payment shall be the Investor’s sole
remedy in respect of the Company’s failure to deliver Shares in respect of such
Settlement Date, and the Company shall not be obligated to deliver such Shares.

ARTICLE IV

REPRESENTATIONS AND WARRANTIES OF THE COMPANY

The Company hereby makes the following representations and warranties to the
Investor:

Section 4.1 Organization, Good Standing and Power. The Company is a corporation
duly organized, validly existing and in good standing under the laws of the
State of Delaware and has all requisite power and authority to own, lease and
operate its properties and assets and to carry on its business as now being
conducted. Except as set forth in the Commission Documents (as defined below),
the Company does not own more than fifty percent (50%) of the outstanding
capital stock of or control any other business entity, other than any
wholly-owned subsidiary that is not “significant” within the meaning of
Regulation S-X promulgated by the Commission. The Company is duly qualified as a
foreign corporation to do business and is in good standing in every jurisdiction
in which the nature of the business conducted or property owned by it makes such
qualification necessary, other than those in which the failure to be so
qualified or be in good standing would not have a Material Adverse Effect.

Section 4.2 Authorization; Enforcement. (i) The Company has the requisite
corporate power and authority to enter into and perform its obligations under
this Agreement, the Registration Rights Agreement and the Warrant and to issue
the Shares, the Warrant, the Warrant Shares and any Blackout Shares (except to
the extent that the number of Blackout Shares required to be issued exceeds the
number of authorized shares of Common Stock under the Certificate); (ii) the
execution and delivery of this Agreement and the Registration Rights Agreement,
and the execution, issuance and delivery of the Warrant, by the Company and the
consummation by it of the transactions contemplated hereby and thereby have been
duly and validly authorized by all necessary corporate action and no further
consent or authorization of the Company or its Board of Directors or
stockholders is required (other than as contemplated by Section 6.5); and
(iii) each of this Agreement and the Registration Rights Agreement has been duly
executed and delivered, and the Warrant has been duly executed, issued and
delivered, by the Company and constitutes a valid and binding obligation of the
Company enforceable against the Company in accordance with its terms, except as
such enforceability may be limited by applicable bankruptcy, securities,
insolvency, or similar laws relating to, or affecting generally the enforcement
of, creditors’ rights and remedies, or indemnification or by other equitable
principles of general application.

Section 4.3 Capitalization. The authorized capital stock of the Company and the
shares thereof issued and outstanding as of September 30, 2007 are set forth on
a schedule (the “Disclosure Schedule”) previously delivered to the Investor. All
of the outstanding shares of the Common Stock have been duly and validly
authorized and issued, and are fully paid and non-assessable. Except as set
forth in this Agreement or as previously disclosed on the Disclosure Schedule,
as of September 30, 2007, no shares of Common Stock were entitled to preemptive
rights or registration rights and there were no outstanding options, warrants,
scrip, rights to

 

 

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subscribe to, call or commitments of any character whatsoever relating to, or
securities or rights convertible into or exchangeable for or giving any right to
subscribe for, any shares of capital stock of the Company, except for stock
options issued by the Company to its employees, directors and consultants.
Except as set forth in this Agreement, the Commission Documents, or as
previously disclosed to the Investor in the Disclosure Schedule, as of September
30, 2007, there were no contracts, commitments, understandings, or arrangements
by which the Company is or may become bound to issue additional shares of the
capital stock of the Company or options, securities or rights convertible into
or exchangeable for or giving any right to subscribe for any shares of capital
stock of the Company. Except as described in the Commission Documents or as
previously disclosed to the Investor in the Disclosure Schedule, as of the date
hereof the Company is not a party to any agreement granting registration rights
to any Person with respect to any of its equity or debt securities. Except as
set forth in the Commission Documents or as previously disclosed to the Investor
in writing, as of the date hereof the Company is not a party to, and it has no
Knowledge of, any agreement restricting the voting or transfer of any shares of
the capital stock of the Company. The offer and sale of all capital stock,
convertible securities, rights, warrants, or options of the Company issued
during the twenty-four month period immediately prior to the Closing complied in
all material respects with all applicable federal and state securities laws, and
no stockholder has a right of rescission or damages with respect thereto that
could reasonably be expected to have a Material Adverse Effect. The Company has
furnished or made available to the Investor true and correct copies of the
Company’s Certificate of Incorporation, as amended and in effect on the date
hereof (the “Certificate”), and the Company’s Bylaws, as amended and in effect
on the date hereof (the “Bylaws”).

Section 4.4 Issuance of Shares. Subject to Section 6.5, the Shares, the Warrant
and the Warrant Shares have been, and any Blackout Shares will be, duly
authorized by all necessary corporate action (except to the extent that the
number of Blackout Shares required to be issued exceeds the number of authorized
shares of Common Stock under the Certificate) and, when issued and paid for in
accordance with the terms of this Agreement, the Registration Rights Agreement
and the Warrant, and subject to, and in reliance on, the representations,
warranties and covenants made herein by the Investor, the Shares and the Warrant
Shares shall be validly issued and outstanding, fully paid and non-assessable,
and the Investor shall be entitled to all rights accorded to a holder of shares
of Common Stock.

Section 4.5 No Conflicts. The execution, delivery and performance of this
Agreement, the Registration Rights Agreement, the Warrant and any other document
or instrument contemplated hereby or thereby, by the Company and the
consummation by the Company of the transactions contemplated hereby and thereby
do not and shall not in any material respect: (i) result in the violation of any
provision of the Certificate or Bylaws, (ii) conflict with, or constitute a
default (or an event which with notice or lapse of time or both would become a
default) under, or give rise to any rights of termination, amendment,
acceleration or cancellation of, any material agreement, mortgage, deed of
trust, indenture, note, bond, license, lease agreement, instrument or obligation
to which the Company is a party where such default or conflict would constitute
a Material Adverse Effect, (iii) create or impose a lien, charge or encumbrance
on any property of the Company under any agreement or any commitment to which
the Company is a party or by which the Company is bound or by which any of its
respective properties or assets are bound which would constitute a Material
Adverse

 

 

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Effect, (iv) result in a violation of any federal, state, local or foreign
statute, rule, regulation, order, writ, judgment or decree (including federal
and state securities laws and regulations) applicable to the Company or any of
its subsidiaries or by which any property or asset of the Company or any of its
subsidiaries are bound or affected where such violation would constitute a
Material Adverse Effect, or (v) require any consent of any third-party that has
not been obtained pursuant to any material contract to which the Company is
subject or to which any of its assets, operations or management may be subject
where the failure to obtain any such consent would constitute a Material Adverse
Effect. The Company is not required under federal, state or local law, rule or
regulation to obtain any consent, authorization or order of, or make any filing
or registration with, any court or governmental agency in order for it to
execute, deliver or perform any of its obligations under this Agreement, the
Registration Rights Agreement or the Warrant, or issue and sell the Shares, the
Warrant Shares or the Blackout Shares (except to the extent that the number of
Blackout Shares required to be issued exceeds the number of authorized shares of
Common Stock under the Certificate) in accordance with the terms hereof and
thereof (other than any filings that may be required to be made by the Company
with the Commission, the FINRA/NASDAQ or state securities commissions subsequent
to the Closing, and, any registration statement (including any amendment or
supplement thereto) or any other filing or consent which may be filed pursuant
to this Agreement, the Registration Rights Agreement or the Warrant); provided
that, for purposes of the representation made in this sentence, the Company is
assuming and relying upon the accuracy of the relevant representations and
agreements of the Investor herein.

Section 4.6 Commission Documents, Financial Statements.

(a) The Common Stock is registered pursuant to Section 12(b) or 12(g) of the
Exchange Act, and since November 7, 2007 the Company has timely filed all
reports, schedules, forms, statements and other documents required to be filed
by it with the Commission pursuant to the reporting requirements of the Exchange
Act, including material filed pursuant to Section 13(a) or 15(d) of the Exchange
Act (all of the foregoing, including filings incorporated by reference therein,
being referred to herein as the “Commission Documents”). Except as previously
disclosed to the Investor in writing, since November 7, 2007 the Company has
maintained all requirements for the continued listing or quotation of its Common
Stock, and such Common Stock is currently listed or quoted on the NASDAQ Global
Market. The Company has made available to the Investor true and complete copies
of the Commission Documents filed with the Commission since November 7, 2007 and
prior to the Closing Date. The Company has not provided to the Investor any
information which, according to applicable law, rule or regulation, should have
been disclosed publicly by the Company but which has not been so disclosed,
other than with respect to the transactions contemplated by this Agreement. As
of its date, the Company’s Annual Report on Form 10-K for the year ended
December 31, 2006 complied in all material respects with the requirements of the
Exchange Act and the rules and regulations of the Commission promulgated
thereunder applicable to such document, and, as of its date, after giving effect
to the information disclosed and incorporated by reference therein, to the
Company’s Knowledge such Annual Report on Form 10-K did not 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 were made, not misleading. As of their
respective dates, to the Company’s Knowledge the financial statements, together
with the related notes and schedules thereto, of the Company

 

 

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included in the Commission Documents filed with the Commission since November 7,
2007 complied as to form and substance in all material respects with all
applicable accounting requirements and the published rules and regulations of
the Commission or other applicable rules and regulations with respect thereto.
Such financial statements, together with the related notes and schedules
thereto, have been prepared in accordance with generally accepted accounting
principles (“GAAP”) applied on a consistent basis during the periods involved
(except (i) as may be otherwise indicated in such financial statements or the
notes thereto or (ii) in the case of unaudited interim statements, to the extent
they may not include footnotes or may be condensed or summary statements), and
fairly present in all material respects the financial condition of the Company
and its subsidiaries as of the dates thereof and the results of operations and
cash flows for the periods then ended (subject, in the case of unaudited
statements, to normal year-end audit adjustments).

(b) The Company has timely filed with the Commission or made available to the
Investor via EDGAR or otherwise all certifications and statements required by
(x) Rule 13a-14 or Rule 15d-14 under the Exchange Act or (y) 18 U.S.C. Section
1350 (Section 906 of the Sarbanes-Oxley Act of 2002 (“SOXA”)) with respect to
all relevant Commission Documents. The Company is in compliance in all material
respects with the provisions of SOXA applicable to it as of the date hereof. The
Company maintains disclosure controls and procedures required by Rule 13a-15 or
Rule 15d-15 under the Exchange Act; such controls and procedures are effective
to ensure that all material information concerning the Company and its
subsidiaries is made known on a timely basis to the individuals responsible for
the timely and accurate preparation of the Company’s filings with the Commission
and other public disclosure documents. As used in this Section 4.6(b), the term
“file” shall be broadly construed to include any manner in which a document or
information is furnished, supplied or otherwise made available to the
Commission.

Section 4.7 No Material Adverse Change. Except as disclosed in the Commission
Documents or a press release of the Company, since September 30, 2007 no event
or series of events has or have occurred that would, individually or in the
aggregate, have a Material Adverse Effect on the Company.

Section 4.8 No Undisclosed Liabilities. To the Company’s Knowledge, neither the
Company nor any of its subsidiaries has any liabilities, obligations, claims or
losses (whether liquidated or unliquidated, secured or unsecured, absolute,
accrued, contingent or otherwise) that would be required to be disclosed on a
balance sheet of the Company or any subsidiary (including the notes thereto) in
conformity with GAAP and are not disclosed in the Commission Documents, other
than those incurred in the ordinary course of the Company’s or its subsidiaries
respective businesses since September 30, 2007 or which, individually or in the
aggregate, do not or would not have a Material Adverse Effect on the Company.

Section 4.9 No Undisclosed Events or Circumstances. To the Company’s Knowledge,
no event or circumstance has occurred or exists with respect to the Company or
its subsidiaries or their respective businesses, properties, operations or
financial condition, which, under applicable law, rule or regulation, requires
public disclosure or announcement by the Company but which has not been so
publicly announced or disclosed and which, individually or in the aggregate,
would have a Material Adverse Effect on the Company.

 

 

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Section 4.10 Actions Pending. There is no action, suit, claim, investigation or
proceeding pending or, to the Knowledge of the Company, threatened against the
Company or any subsidiary which questions the validity of this Agreement or the
transactions contemplated hereby or any action taken or to be taken pursuant
hereto or thereto. Except as set forth in the Commission Documents or in the
Disclosure Schedule, there is no action, suit, claim, investigation or
proceeding pending or, to the Knowledge of the Company, threatened, against or
involving the Company, any subsidiary or any of their respective properties or
assets, or to the Knowledge of the Company involving any officers or directors,
in their capacity as officers or directors, of the Company or any of its
subsidiaries, including, without limitation, any securities class action lawsuit
or stockholder derivative lawsuit, that could be reasonably expected to have a
Material Adverse Effect on the Company. Except as set forth in the Commission
Documents or as previously disclosed to the Investor in writing, no judgment,
order, writ, injunction or decree or award has been issued by or, to the
Knowledge of the Company, requested of any court, arbitrator or governmental
agency which could be reasonably expected to result in a Material Adverse
Effect.

Section 4.11 Compliance with Law. The business of the Company and its
subsidiaries have been and are presently being conducted in accordance with all
applicable federal, state, local and foreign governmental laws, rules,
regulations and ordinances, except as set forth in the Commission Documents or
such that would not reasonably be expected to cause a Material Adverse Effect.
Except as set forth in the Commission Documents, the Company and each of its
subsidiaries have all franchises, permits, licenses, consents and other
governmental or regulatory authorizations and approvals necessary for the
conduct of its business as now being conducted by it, except for such
franchises, permits, licenses, consents and other governmental or regulatory
authorizations and approvals, the failure to possess which, individually or in
the aggregate, could not reasonably be expected to have a Material Adverse
Effect.

Section 4.12 Certain Fees. Except as expressly set forth in this Agreement, no
brokers, finders or financial advisory fees or commissions will be payable by
the Company or any of its subsidiaries in respect of the transactions
contemplated by this Agreement.

Section 4.13 Disclosure. To the Company’s Knowledge, neither this Agreement nor
any other documents, certificates or instruments furnished to the Investor by or
on behalf of the Company or any subsidiary in connection with the transactions
contemplated by this Agreement contain any untrue statement of a material fact
or omit to state a material fact necessary in order to make the statements made
herein or therein, in the light of the circumstances under which they were made
herein or therein, not misleading.

Section 4.14 Material Non-Public Information. Except for this Agreement and the
transactions contemplated hereby, neither the Company nor its employees have
disclosed to the Investor, any material non-public information that, according
to applicable law, rule or regulation, should have been disclosed publicly by
the Company prior to the date hereof but which has not been so disclosed.

Section 4.15 Exemption from Registration; Valid Issuances. Subject to, and in
reliance on, the representations, warranties and covenants made herein by the
Investor, the issuance and sale of the Shares, the Warrant, the Warrant Shares
and any Blackout Shares in accordance with

 

 

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the terms and on the bases of the representations and warranties set forth in
this Agreement, may and shall be properly issued pursuant to Section 4(2),
Regulation D and/or any other applicable federal and state securities laws.
Neither the sales of the Shares, the Warrant, the Warrant Shares or any Blackout
Shares pursuant to, nor the Company’s performance of its obligations under, this
Agreement, the Registration Rights Agreement, or the Warrant shall (i) result in
the creation or imposition of any liens, charges, claims or other encumbrances
upon the Shares, the Warrant Shares, any Blackout Shares or any of the assets of
the Company, or (ii) except as previously disclosed to the Investor in writing,
entitle the holders of any outstanding shares of capital stock of the Company to
preemptive or other rights to subscribe to or acquire the shares of Common Stock
or other securities of the Company.

Section 4.16 No General Solicitation or Advertising in Regard to this
Transaction. Neither the Company nor any of its affiliates or any Person acting
on its or their behalf (i) has conducted any general solicitation (as that term
is used in Rule 502(c) of Regulation D) or general advertising with respect to
any of the Shares, the Warrant, the Warrant Shares or any Blackout Shares or
(ii) has made any offers or sales of any security or solicited any offers to buy
any security under any circumstances that would require registration of the
Shares under the Securities Act.

Section 4.17 No Integrated Offering. Neither the Company, nor any of its
affiliates, nor any person acting on its or their behalf has, directly or
indirectly, made any offers or sales of any security or solicited any offers to
buy any security, other than pursuant to this Agreement and employee benefit
plans, under circumstances that would require registration under the Securities
Act of shares of the Common Stock issuable hereunder with any other offers or
sales of securities of the Company.

Section 4.18 Acknowledgment Regarding Investor’s Purchase of Shares. The Company
acknowledges and agrees that the Investor is acting solely in the capacity of an
arm’s length investor with respect to this Agreement and the transactions
contemplated hereunder. The Company further acknowledges that the Investor is
not acting as a financial advisor or fiduciary of the Company (or in any similar
capacity) with respect to this Agreement and the transactions contemplated
hereunder and any advice given by the Investor or any of its representatives or
agents in connection with this Agreement and the transactions contemplated
hereunder is merely incidental to the Investor’s purchase of the Shares.

ARTICLE V

REPRESENTATIONS, WARRANTIES AND COVENANTS OF THE INVESTOR

The Investor hereby makes the following representations, warranties and
covenants to the Company:

Section 5.1 Organization and Standing of the Investor. The Investor is a company
duly organized, validly existing and in good standing under the laws of the
British Virgin Islands.

Section 5.2 Authorization and Power. The Investor has the requisite power and
authority to enter into and perform its obligations under this Agreement, the
Warrant and the

 

 

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Registration Rights Agreement and to purchase the Shares, the Warrant and the
Warrant Shares in accordance with the terms hereof and thereof. The execution,
delivery and performance of this Agreement, the Warrant and the Registration
Rights Agreement by Investor and the consummation by it of the transactions
contemplated hereby or thereby have been duly authorized by all necessary
corporate action, and no further consent or authorization of the Investor, its
Board of Directors or stockholders is required. Each of this Agreement and the
Registration Rights Agreement has been duly executed and delivered by the
Investor and constitutes a valid and binding obligation of the Investor
enforceable against the Investor in accordance with its terms, except as such
enforceability may be limited by applicable bankruptcy, insolvency,
reorganization, moratorium, liquidation, conservatorship, receivership, or
similar laws relating to, or affecting generally the enforcement of creditor’s
rights and remedies or by other equitable principles of general application.

Section 5.3 No Conflicts. The execution, delivery and performance of this
Agreement, the Registration Rights Agreement, the Warrant and any other document
or instrument contemplated hereby, by the Investor and the consummation of the
transactions contemplated thereby do not (i) violate any provision of the
Investor’s charter documents or bylaws, (ii) conflict with, or constitute a
default (or an event which 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 of, any material agreement, mortgage, deed of
trust, indenture, note, bond, license, lease agreement, instrument or obligation
to which the Investor is a party, (iii) create or impose a lien, charge or
encumbrance on any property of the Investor under any agreement or any
commitment to which the Investor is a party or by which the Investor is bound or
by which any of its respective properties or assets are bound, (iv) result in a
violation of any federal, state, local or foreign statute, rule, regulation,
order, writ, judgment or decree (including federal and state securities laws and
regulations) applicable to the Investor or by which any property or asset of the
Investor are bound or affected, or (v) require the consent of any third-party
that has not been obtained pursuant to any material contract to which Investor
is subject or to which any of its assets, operations or management may be
subject. The Investor is not required under federal, state or local law, rule or
regulation to obtain any consent, authorization or order of, or make any filing
or registration with, any court or governmental agency in order for it to
execute, deliver or perform any of its obligations under this Agreement or to
purchase the Shares or the Warrant in accordance with the terms hereof, provided
that, for purposes of the representation made in this sentence, the Investor is
assuming and relying upon the accuracy of the relevant representations and
agreements of the Company herein.

Section 5.4 Financial Capability. The Investor has the financial capability to
perform all of its obligations under this Agreement, including the capability to
purchase the Shares, the Warrant and the Warrant Shares in accordance with the
terms hereof. The Investor has such knowledge and experience in business and
financial matters that it is capable of evaluating the merits and risks of an
investment in Common Stock. The Investor is an “accredited investor” as defined
in Regulation D. The Investor is a “sophisticated investor” as described in
Rule 506(b)(2)(ii) of Regulation D. The Investor acknowledges that an investment
in the Common Stock and the Warrant is speculative and involves a high degree of
risk.

Section 5.5 Information. The Investor and its advisors, if any, have been
furnished with all materials relating to the business, finances and operations
of the Company and materials

 

 

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relating to the offer and sale of the Shares, the Warrant and the Warrant Shares
which have been requested by the Investor. The Investor has reviewed or received
copies of the Commission Documents. The Investor and its advisors, if any, have
been afforded the opportunity to ask questions of the Company. The Investor has
sought such accounting, legal and tax advice as it has considered necessary to
make an informed investment decision with respect to its acquisition of the
Shares, the Warrant and the Warrant Shares. The Investor understands that it
(and not the Company) shall be responsible for its own tax liabilities that may
arise as a result of this investment or the transactions contemplated by this
Agreement.

Section 5.6 Trading Restrictions. The Investor covenants that neither the
Investor nor any of its affiliates nor any entity managed or controlled by the
Investor will, or cause or assist any Person to, enter into or execute any
“short sale” (as such term is defined in Rule 200 of Regulation SHO, or any
successor regulation, promulgated by the Commission under the Exchange Act) of
any securities of the Company, and that the Investor and its affiliates shall
comply with all other applicable law.

Section 5.7 Statutory Underwriter Status. The Investor acknowledges that,
pursuant to the Commission’s current interpretations of the Securities Act, the
Investor will be disclosed as an “underwriter” within the meaning of the
Securities Act in the Registration Statement (and amendments thereto) and in any
Prospectus contained therein to the extent required by applicable law.

Section 5.8 Not an Affiliate. The Investor is not an officer, director or
“affiliate” (as defined in Rule 405 of the Securities Act) of the Company.

Section 5.9 Manner of Sale. At no time was Investor presented with or solicited
by or through any leaflet, public promotional meeting, television advertisement
or any other form of general solicitation or advertising.

Section 5.10 Prospectus Delivery. The Investor agrees that unless the Shares and
Warrant Shares are eligible for resale pursuant to all the conditions of Rule
144, it will resell the Shares and Warrant Shares only pursuant to the
Registration Statement, in a manner described under the caption “Plan of
Distribution” in the Registration Statement, and in a manner in compliance with
all applicable securities laws, including, without limitation, any applicable
prospectus delivery requirements of the Securities Act and the insider trading
restrictions of the Exchange Act.

ARTICLE VI

COVENANTS OF THE COMPANY

The Company covenants with the Investor as follows, which covenants are for the
benefit of the Investor and its permitted assignees (as defined herein):

Section 6.1 Securities Compliance. The Company shall notify the Principal
Market, if and as applicable, in accordance with its rules and regulations, of
the transactions contemplated by this Agreement, and shall use commercially
reasonable efforts to take all other necessary action and proceedings as may be
required and permitted by applicable law, rule and regulation,

 

 

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for the legal and valid issuance of the Shares, the Warrant Shares and the
Blackout Shares, if any, to the Investor.

Section 6.2 Reservation of Common Stock. As of the date hereof, the Company has
available and the Company shall reserve and keep available at all times, free of
preemptive rights and other similar contractual rights of stockholders, shares
of Common Stock for the purpose of enabling the Company to satisfy any
obligation to issue the Shares in connection with all Draw Downs contemplated
hereunder and the Warrant Shares. The number of shares so reserved from time to
time, as theretofore increased or reduced as hereinafter provided, may be
reduced by the number of shares actually delivered hereunder.

Section 6.3 Registration and Listing. During the Commitment Period, the Company
shall use commercially reasonable efforts to: (i) take all action necessary to
cause its Common Stock to continue to be registered under Section 12(b) or 12(g)
of the Exchange Act, (ii) comply in all respects with its reporting and filing
obligations under the Exchange Act, (iii) prevent the termination or suspension
of such registration, or the termination or suspension of its reporting and
filing obligations under the Exchange Act or Securities Act (except as expressly
permitted herein). The Company shall use commercially reasonable efforts to
maintain the listing and trading of its Common Stock and the listing of the
Shares purchased by Investor hereunder on the Principal Market (including,
without limitation, maintaining sufficient net tangible assets) and will comply
in all material respects with the Company’s reporting, filing and other
obligations under the bylaws or rules of the FINRA and the Principal Market. The
Company will not be required to carry out any action pursuant to this Agreement,
the Registration Rights Agreement or the Warrant that would adversely impact the
listing of the Company’s securities on the Principal Market as now in effect,
and as may be changed by the Company in the future in the Company’s discretion.

Section 6.4 Registration Statement. Without the prior written consent of the
Investor, the Registration Statement shall be used solely in connection with the
transactions between the Company and the Investor contemplated hereby.

Section 6.5 Compliance with Laws.

(a) The Company shall comply, and cause each subsidiary to comply, with all
applicable laws, rules, regulations and orders, noncompliance with which could
reasonably be expected to have a Material Adverse Effect.

(b) Without the consent of its stockholders in accordance with FINRA and NASDAQ
Stock Market LLC rules, the Company will not be obligated to issue, and the
Investor will not be obligated to purchase, any Shares or Blackout Shares which
would result in the issuance under this Agreement, the Warrant and the
Registration Rights Agreement of Shares and Blackout Shares (collectively)
representing more than the applicable percentage under the rules of the FINRA
and The NASDAQ Stock Market LLC, including, without limitation, NASDAQ
Marketplace Rule 4350(i), that would require stockholder approval of the
issuance thereof.

 

 

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Section 6.6 Other Financing. Nothing in this Agreement shall be construed to
restrict the right of the Company to offer, sell and/or issue securities of any
kind whatsoever, provided such transaction is not a Prohibited Transaction (as
defined below) (any such transaction that is not a Prohibited Transaction is
referred to in this Agreement as a “Permitted Transaction”). Without limiting
the generality of the preceding sentence, the Company may, without the prior
written consent of the Investor, (i) establish stock option or award plans or
agreements (for directors, employees, consultants and/or advisors), and issue
securities thereunder, and amend such plans or agreements, including increasing
the number of shares available thereunder, (ii) issue equity securities to
finance, or otherwise in connection with, the acquisition of one or more other
companies, equipment, technologies or lines of business, (iii) issue shares of
Common Stock and/or Preferred Stock in connection with the Company’s option or
award plans, stock purchase plans, rights plans, warrants or options, (iv) issue
shares of Common Stock and/or Preferred Stock in connection with the acquisition
of products, licenses, equipment or other assets and strategic partnerships or
joint ventures; (v) issue shares of Common and/or Preferred Stock to consultants
and/or advisors as consideration for services rendered or to be rendered, (vi)
issue and sell equity or debt securities in a public offering, (vii) issue and
sell and equity or debt securities in a private placement (other than in
connection with any Prohibited Transaction), (viii) issue equity securities to
equipment lessors, equipment vendors, banks or similar lending institutions in
connection with leases or loans, or in connection with strategic commercial or
licensing transactions, (ix) issue securities in connection with any stock
split, stock dividend, recapitalization, reclassification or similar event by
the Company, and (x) issue shares of Common Stock to the Investor under any
other agreement entered into between the Investor and the Company.

Section 6.7 Prohibited Transactions. Except as set forth on Schedule 6.7 of the
Disclosure Schedule, during the term of this Agreement, the Company shall not
enter into any Prohibited Transaction without the prior written consent of the
Investor, which consent may be withheld at the sole discretion of the Investor.
For the purposes of this Agreement, the term “Prohibited Transaction” shall
refer to the issuance by the Company of any “future priced securities,” which
shall mean the issuance of shares of Common Stock or securities of any type
whatsoever that are, or may become, convertible or exchangeable into shares of
Common Stock where the purchase, conversion or exchange price for such Common
Stock is determined using any floating discount or other post-issuance
adjustable discount to the market price of Common Stock, including, without
limitation, pursuant to any equity line or other financing that is substantially
similar to the financing provided for under this Agreement.

Section 6.8 Corporate Existence. The Company shall take all steps necessary to
preserve and continue the corporate existence of the Company; provided, however,
that nothing in this Agreement shall be deemed to prohibit the Company from
engaging in any Excluded Merger or Sale with another Person provided that in the
event of an Excluded Merger or Sale, if the surviving, successor or purchasing
Person does not agree to assume the obligations under the Warrant, then the
Company shall deliver a notice to the Investor at least ten (10) days before the
consummation of such Excluded Merger or Sale, the Investor may exercise the
Warrant at any time before the consummation of such Excluded Merger or Sale (and
such exercise may be made contingent upon the consummation of such Excluded
Merger or Sale), and any portion of the Warrant that has not been exercised
before consummation of such Excluded Merger or Sale shall terminate and expire,
and shall no longer be outstanding.

 

 

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Section 6.9 Non-Disclosure of Non-Public Information. Subject to Section 6.10
below, except as otherwise expressly provided in this Agreement, the
Registration Rights Agreement or the Warrant, none of the Company, its officers,
directors, employees nor agents shall disclose material non-public information
to the Investor, its advisors or representatives.

Section 6.10 Notice of Certain Events Affecting Registration; Suspension of
Right to Request a Draw Down. The Company shall promptly notify the Investor
upon the occurrence of any of the following events in respect of the
Registration Statement or the Prospectus related to the offer, issuance and sale
of the Shares and the Warrant Shares hereunder: (i) receipt of any request for
additional information by the Commission or any other federal or state
governmental authority during the period of effectiveness of the Registration
Statement for amendments or supplements to the Registration Statement or the
Prospectus; (ii) the issuance by the Commission or any other federal or state
governmental authority of any stop order suspending the effectiveness of the
Registration Statement or the initiation of any proceedings for that purpose;
and (iii) receipt of any notification with respect to the suspension of the
qualification or exemption from qualification of any of the Registrable
Securities for sale in any jurisdiction or the initiation or threatening of any
proceeding for such purpose. If at any time the Commission shall issue any stop
order suspending the effectiveness of the Registration Statement, the Company
shall use commercially reasonable efforts to obtain the withdrawal of such order
at the earliest possible time. The Company shall not be required to disclose to
the Investor the substance or specific reasons of any of the events set forth in
clauses (i) through (ii) of the previous sentence, only that the event has
occurred. The Company shall not request a Draw Down during the continuation of
any of the foregoing events.

Section 6.11 Amendments to the Registration Statement. When the Registration
Statement is declared effective by the Commission, the Company shall (a) not
file any amendment to the Registration Statement or make any amendment or
supplement to the Prospectus of which the Investor shall not previously have
been advised, and (b) so long as, in the reasonable opinion of counsel for the
Investor, a Prospectus is required to be delivered in connection with sales of
the Shares by the Investor, if the Company files any information, documents or
reports that are incorporated by reference in the Registration Statement
pursuant to the Exchange Act, the Company shall, if requested in writing by the
Investor, deliver a copy of such information, documents or reports to the
Investor promptly following such filing.

Section 6.12 Prospectus Delivery. From time to time for such period as in the
reasonable opinion of counsel for the Investor a prospectus is required by the
Securities Act to be delivered in connection with sales by the Investor, the
Company will expeditiously deliver to the Investor, without charge, as many
copies of the Prospectus (and of any amendment or supplement thereto) as the
Investor may reasonably request. The Company consents to the use of the
Prospectus (and of any amendment or supplement thereto) in accordance with the
provisions of the Securities Act and state securities laws in connection with
the offering and sale of the Shares and the Warrant Shares and for such period
of time thereafter as the Prospectus is required by the Securities Act to be
delivered in connection with sales of the Shares and the Warrant Shares.

 

 

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ARTICLE VII

CONDITIONS TO THE OBLIGATION OF THE INVESTOR

TO ACCEPT A DRAW DOWN

The obligation of the Investor hereunder to accept a Draw Down Notice and to
acquire and pay for the Shares in accordance therewith is subject to the
satisfaction or waiver, at each Condition Satisfaction Date, of each of the
conditions set forth below. Other than those conditions set forth in Section
7.12 which are for the Company’s sole benefit and may be waived by the Company
at any time in its sole discretion, the conditions are for the Investor’s sole
benefit and may be waived by the Investor at any time in its sole discretion. As
used in this Agreement, the term “Condition Satisfaction Date” shall mean, with
respect to each Draw Down, the date on which the applicable Draw Down Notice is
delivered to the Investor and each Settlement Date in respect of the applicable
Draw Down Pricing Period.

Section 7.1 Accuracy of the Company’s Representations and Warranties. Each of
the representations and warranties of the Company shall be true and correct in
all material respects as of the date when made as though made at that time
except for representations and warranties that are expressly made as of a
particular date.

Section 7.2 Performance by the Company. The Company shall have, in all material
respects, performed, satisfied and complied with all covenants, agreements and
conditions required by this Agreement, the Registration Rights Agreement and the
Warrant to be performed, satisfied or complied with by the Company.

Section 7.3 Compliance with Law. The Company shall have complied in all respects
with all applicable federal, state and local governmental laws, rules,
regulations and ordinances in connection with the execution, delivery and
performance of this Agreement and the consummation of the transactions
contemplated hereby except for any failures to so comply which could not
reasonably be expected to have a Material Adverse Effect.

Section 7.4 Effective Registration Statement. Upon the terms and subject to the
conditions set forth in the Registration Rights Agreement, the Registration
Statement shall have previously become effective and shall remain effective and
(i) neither the Company nor the Investor shall have received notice that the
Commission has issued or intends to issue a stop order with respect to the
Registration Statement or that the Commission otherwise has suspended or
withdrawn the effectiveness of the Registration Statement, either temporarily or
permanently, or intends or has threatened to do so (unless the Commission’s
concerns have been addressed and the Investor is reasonably satisfied that the
Commission no longer is considering or intends to take such action), and (ii) no
other suspension of the use or withdrawal of the effectiveness of the
Registration Statement or the Prospectus shall exist.

Section 7.5 No Knowledge. The Company shall have no Knowledge of any event that
could reasonably be expected to have the effect of causing the Registration
Statement with respect to the resale of the Registrable Securities by the
Investor to be suspended or otherwise ineffective (which event is reasonably
likely to occur within eight Trading Days following the Trading Day on which a
Draw Down Notice is delivered) as of the Settlement Date.

 

 

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Section 7.6 No Suspension. Trading in the Company’s Common Stock shall not have
been suspended by the Commission, the Principal Market or the FINRA and trading
in securities generally as reported on the Principal Market shall not have been
suspended or limited.

Section 7.7 No Injunction. No statute, rule, regulation, order, decree, writ,
ruling or injunction shall have been enacted, entered, promulgated or endorsed
by any court or governmental authority of competent jurisdiction which prohibits
the consummation of or which would materially modify or delay any of the
transactions contemplated by this Agreement.

Section 7.8 No Proceedings or Litigation. No action, suit or proceeding before
any arbitrator or any court or governmental authority shall have been commenced,
and, to the Knowledge of the Company no investigation by any governmental
authority shall have been threatened, against the Company or any subsidiary, or
any of the officers, directors or affiliates of the Company or any subsidiary
seeking to enjoin, prevent or change the transactions contemplated by this
Agreement.

Section 7.9 Sufficient Shares Registered for Resale. The Company shall have
sufficient Shares, calculated using the closing trade price of the Common Stock
as of the Trading Day immediately preceding such Draw Down Notice, registered
under the Registration Statement to issue and sell such Shares in accordance
with such Draw Down Notice.

Section 7.10 Warrant. The Warrant shall have been duly executed, delivered and
issued to the Investor, and the Company shall not be in default in any material
respect under any of the provisions thereof, provided that any refusal by or
failure of the Company to issue and deliver Warrant Shares in respect of any
exercise (in whole or in part) thereof shall be deemed to be material for the
purposes of this Section 7.10.

Section 7.11 Opinion of Counsel. The Investor shall have received the form of
opinion mutually agreed to between the parties on the date of this Agreement.

Section 7.12 Accuracy of Investor’s Representation and Warranties. The
representations and warranties of the Investor shall be true and correct in all
material respects as of the date when made as though made at that time except
for representations and warranties that are made as of a particular date.

ARTICLE VIII

TERMINATION

Section 8.1 Term. Unless otherwise terminated in accordance with Section 8.2
below, this Agreement shall terminate upon the earlier to occur of (i) the
expiration of the Commitment Period or (ii) the issuance of Shares pursuant to
this Agreement in an amount equal to the Maximum Commitment Amount.

Section 8.2 Other Termination.

(a) The Investor may terminate this Agreement upon (x) one (1) business day’s
notice if the Company enters into any Prohibited Transaction as set forth in
Section 6.7 without the Investor’s prior written consent, or (y) one (1)
business day’s notice if the Investor

 

 

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provides written notice of a Material Adverse Effect to the Company, and such
Material Adverse Effect continues for a period of ten (10) Trading Days after
the receipt by the Company of such notice.

(b) The Investor may terminate this Agreement upon one (1) business day’s notice
to the Company at any time in the event that the Registration Statement is not
initially declared effective in accordance with the Registration Rights
Agreement, provided, however, that in the event the Registration Statement is
declared effective prior to the delivery of such notice, the Investor shall
thereafter have no right to terminate this Agreement pursuant to this Section
8.2(b).

(c) The Company may terminate this Agreement upon one (1) business day’s notice;
provided, however, that the Company shall not terminate this Agreement pursuant
to this Section 8.2(c) during any Draw Down Pricing Period; provided further,
that, in the event of any termination of this Agreement by the Company
hereunder, so long as the Investor owns Shares purchased hereunder and/or
Warrant Shares, unless all of such shares of Common Stock may be resold by the
Investor without registration and without any time, volume or manner limitations
pursuant to Rule 144(k) (or any similar provision then in effect) under the
Securities Act, the Company shall not suspend or withdraw the Registration
Statement or otherwise cause the Registration Statement to become ineffective,
or voluntarily delist the Common Stock from, the Principal Market without
listing the Common Stock on another Principal Market.

(d) Each of the parties hereto may terminate this Agreement upon one (1) day’s
notice if the other party has breached a material representation, warranty or
covenant to this Agreement and such breach is not remedied within ten (10)
Trading Days after notice of such breach is delivered to the breaching party.

Section 8.3 Effect of Termination. In the event of termination by the Company or
the Investor, written notice thereof shall forthwith be given to the other party
and the transactions contemplated by this Agreement shall be terminated without
further action by either party. If this Agreement is terminated as provided in
Section 8.1 or 8.2 herein, this Agreement shall become void and of no further
force and effect, except as provided in Section 10.13. Nothing in this Section
8.3 shall be deemed to release the Company or the Investor from any liability
for any breach under this Agreement occurring prior to such termination, or to
impair the rights of the Company and the Investor to compel specific performance
by the other party of its obligations under this Agreement arising prior to such
termination.

ARTICLE IX

INDEMNIFICATION

Section 9.1 Indemnification.

(a) Except as otherwise provided in this Article IX, unless disputed as set
forth in Section 9.2, the Company agrees to indemnify, defend and hold harmless
the Investor and its affiliates and their respective officers, directors,
agents, employees, subsidiaries, partners, members and controlling persons
(each, an “Investor Indemnified Party”), to the fullest extent permitted by law
from and against any and all Damages directly resulting from or directly arising

 

 

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out of any breach of any representation or warranty, covenant or agreement
(except as otherwise specifically provided) by the Company in this Agreement,
the Registration Rights Agreement or the Warrant; provided, however, that the
Company shall not be liable under this Article IX to an Investor Indemnified
Party to the extent that such Damages resulted or arose from the breach by an
Investor Indemnified Party of any representation, warranty, covenant or
agreement of an Investor Indemnified Party contained in this Agreement, the
Registration Rights Agreement or the Warrant or the negligence, recklessness,
willful misconduct or bad faith of an Investor Indemnified Party. The parties
intend that any Damages subject to indemnification pursuant to this Article IX
will be net of insurance proceeds (which the Investor Indemnified Party agrees
to use commercially reasonable efforts to recover). Accordingly, the amount
which the Company is required to pay to any Investor Indemnified Party hereunder
(a “Company Indemnity Payment”) will be reduced by any insurance proceeds
actually recovered by or on behalf of any Investor Indemnified Party in
reduction of the related Damages. In addition, if an Investor Indemnified Party
receives a Company Indemnity Payment required by this Article IX in respect of
any Damages and subsequently receives any such insurance proceeds, then the
Investor Indemnified Party will pay to the Company an amount equal to the
Company Indemnity Payment received less the amount of the Company Indemnity
Payment that would have been due if the insurance proceeds had been received,
realized or recovered before the Company Indemnity Payment was made.

(b) Except as otherwise provided in this Article IX, unless disputed as set
forth in Section 9.2, the Investor agrees to indemnify, defend and hold harmless
the Company and its affiliates and their respective officers, directors, agents,
employees, subsidiaries, partners, members and controlling persons (each, a
“Company Indemnified Party”), to the fullest extent permitted by law from and
against any and all Damages directly resulting from or directly arising out of
any breach of any representation or warranty, covenant or agreement by the
Investor in this Agreement, the Registration Rights Agreement or the Warrant;
provided, however, that the Investor shall not be liable under this Article IX
to a Company Indemnified Party to the extent that such Damages resulted or arose
from the breach by a Company Indemnified Party of any representation, warranty,
covenant or agreement of a Company Indemnified Party contained in this
Agreement, the Registration Rights Agreement or the Warrant or negligence,
recklessness, willful misconduct or bad faith of a Company Indemnified Party.
The parties intend that any Damages subject to indemnification pursuant to this
Article IX will be net of insurance proceeds (which the Company agrees to use
commercially reasonable efforts to recover). Accordingly, the amount which the
Investor is required to pay to any Company Indemnified Party hereunder (an
“Investor Indemnity Payment”) will be reduced by any insurance proceeds
theretofore actually recovered by or on behalf of any Company Indemnified Party
in reduction of the related Damages. In addition, if a Company Indemnified Party
receives an Investor Indemnity Payment required by this Article IX in respect of
any Damages and subsequently receives any such insurance proceeds, then the
Company Indemnified Party will pay to the Investor an amount equal to the
Investor Indemnity Payment received less the amount of the Investor Indemnity
Payment that would have been due if the insurance proceeds had been received,
realized or recovered before the Investor Indemnity Payment was made.

Section 9.2 Notification of Claims for Indemnification. Each party entitled to
indemnification under this Article IX (an “Indemnified Party”) shall, promptly
after the receipt of notice of the commencement of any claim against such
Indemnified Party in respect of which

 

 

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indemnity may be sought from the party obligated to indemnify such Indemnified
Party under this Article IX (the “Indemnifying Party”), notify the Indemnifying
Party in writing of the commencement thereof. Any such notice shall describe the
claim in reasonable detail. The failure of any Indemnified Party to so notify
the Indemnifying Party of any such action shall not relieve the Indemnifying
Party from any liability which it may have to such Indemnified Party (a) other
than pursuant to this Article IX or (b) under this Article IX unless, and only
to the extent that, such failure results in the Indemnifying Party’s forfeiture
of substantive rights or defenses or the Indemnifying Party is prejudiced by
such delay. The procedures listed below shall govern the procedures for the
handling of indemnification claims.

(a) Any claim for indemnification for Damages that do not result from a Third
Party Claim as defined in the following paragraph, shall be asserted by written
notice given by the Indemnified Party to the Indemnifying Party. Such
Indemnifying Party shall have a period of thirty (30) days after the receipt of
such notice within which to respond thereto. If such Indemnifying Party does not
respond within such thirty (30) day period, such Indemnifying Party shall be
deemed to have refused to accept responsibility to make payment as set forth in
Section 9.1. If such Indemnifying Party does not respond within such thirty (30)
day period or rejects such claim in whole or in part, the Indemnified Party
shall be free to pursue such remedies as specified in this Agreement.

(b) If an Indemnified Party shall receive notice or otherwise learn of the
assertion by a person or entity not a party to this Agreement of any threatened
legal action or claim (collectively a “Third Party Claim”), with respect to
which an Indemnifying Party may be obligated to provide indemnification, the
Indemnified Party shall give such Indemnifying Party written notice thereof
within twenty (20) days after becoming aware of such Third Party Claim.

(c) An Indemnifying Party may elect to defend (and, unless the Indemnifying
Party has specified any reservations or exceptions, to seek to settle or
compromise) at such Indemnifying Party’s own expense and by such Indemnifying
Party’s own counsel, any Third Party Claim. Within thirty (30) days after the
receipt of notice from an Indemnified Party (or sooner if the nature of such
Third Party Claim so requires), the Indemnifying Party shall notify the
Indemnified Party whether the Indemnifying Party will assume responsibility for
defending such Third Party Claim, which election shall specify any reservations
or exceptions. If such Indemnifying Party does not respond within such thirty
(30) day period or rejects such claim in whole or in part, the Indemnified Party
shall be free to pursue such remedies as specified in this Agreement. In case
any such Third Party Claim shall be brought against any Indemnified Party, and
it shall notify the Indemnifying Party of the commencement thereof, the
Indemnifying Party shall be entitled to assume the defense thereof at its own
expense, with counsel satisfactory to such Indemnified Party in its reasonable
judgment; provided, however, that any Indemnified Party may, at its own expense,
retain separate counsel to participate in such defense at its own expense.
Notwithstanding the foregoing, in any Third Party Claim in which both the
Indemnifying Party, on the one hand, and an Indemnified Party, on the other
hand, are, or are reasonably likely to become, a party, such Indemnified Party
shall have the right to employ separate counsel and to control its own defense
of such claim if, in the reasonable opinion of counsel to such Indemnified
Party, either (x) one or more significant defenses are available to the
Indemnified Party that are not available to the Indemnifying Party or (y) a
conflict or potential conflict exists between the Indemnifying Party, on the one
hand, and such Indemnified Party, on

 

 

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the other hand, that would make such separate representation advisable;
provided, however, that in such circumstances the Indemnifying Party (i) shall
not be liable for the fees and expenses of more than one counsel to all
Indemnified Parties and (ii) shall reimburse the Indemnified Parties for such
reasonable fees and expenses of such counsel incurred in any such Third Party
Claim, as such expenses are incurred, provided that the Indemnified Parties
agree to repay such amounts if it is ultimately determined that the Indemnifying
Party was not obligated to provide indemnification under this Article IX. The
Indemnifying Party agrees that it will not compromise or consent to the entry of
any judgment in any pending or threatened claim relating to the matters
contemplated hereby (if any Indemnified Party is a party thereto or has been
actually threatened to be made a party thereto) unless such settlement,
compromise or consent includes an unconditional release of such Indemnified
Party from all liability arising or that may arise out of such claim. The rights
accorded to an Indemnified Party hereunder shall be in addition to any rights
that any Indemnified Party may have at common law, by separate agreement or
otherwise; provided, however, that notwithstanding the foregoing or anything to
the contrary contained in this Agreement, nothing in this Article IX shall
restrict or limit any rights that any Indemnified Party may have to seek
equitable relief.

ARTICLE X

MISCELLANEOUS

Section 10.1 Fees and Expenses.

(a) Each of the Company and the Investor agrees to pay its own expenses incident
to the performance of its obligations hereunder, except that the Company shall
be solely responsible for (i) all reasonable attorneys fees and expenses
incurred by the Investor in connection with the preparation, negotiation,
execution and delivery of this Agreement, the Registration Rights Agreement and
the Warrant, and review of the Registration Statement, and in connection with
any amendments, modifications or waivers of this Agreement, including, without
limitation, all reasonable attorneys fees and expenses, (ii) subject in all
cases to Section 10.1(b) hereof, all reasonable fees and expenses incurred in
connection with the Investor’s enforcement of this Agreement, including, without
limitation, all reasonable attorneys fees and expenses, (iii) due diligence
expenses incurred by the Investor during the term of this Agreement equal to
$12,500 per calendar quarter, and (iv) all stamp or other similar taxes and
duties, if any, levied in connection with issuance of the Shares pursuant
hereto; provided, however, that in each of the above instances the Investor
shall provide customary supporting invoices or similar documentation in
reasonable detail describing such expenses (however, the Investor shall not be
obligated to provide detailed time sheets); and provided further, that the
maximum aggregate amount payable by the Company pursuant to clause (i) above
shall be $75,000 and the Investor shall bear all fees and expenses in excess of
$75,000 in connection with clause (i) above.

(b) If any action at law or in equity is necessary to enforce or interpret the
terms of this Agreement, the Registration Rights Agreement or the Warrant, the
prevailing party shall be entitled to reasonable fees, costs and necessary
disbursements in addition to any other relief to which such party may be
entitled.

Section 10.2 Reporting Entity for the Common Stock. The reporting entity relied
upon for the determination of the trading price or trading volume of the Common
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Trading Day for the purposes of this Agreement shall be Bloomberg, L.P. or any
successor thereto. The written mutual consent of the Investor and the Company
shall be required to employ any other reporting entity.

Section 10.3 Brokerage. Each of the parties hereto represents that it has had no
dealings in connection with this transaction with any finder or broker who will
demand payment of any fee or commission from the other party. The Company on the
one hand, and the Investor, on the other hand, agree to indemnify the other
against and hold the other harmless from any and all liabilities to any Persons
claiming brokerage commissions or finder’s fees on account of services purported
to have been rendered on behalf of the indemnifying party in connection with
this Agreement or the transactions contemplated hereby.

 

 

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Section 10.4 Notices. All notices, demands, requests, consents, approvals, and
other communications required or permitted hereunder shall be in writing and,
unless otherwise specified herein, shall be (i) personally served, (ii)
deposited in the mail, registered or certified, return receipt requested,
postage prepaid, (iii) delivered by reputable air courier service with charges
prepaid, or (iv) transmitted by hand delivery, telegram, or facsimile, addressed
as set forth below or to such other address as such party shall have specified
most recently by written notice given in accordance herewith, in each case with
a copy to the e-mail address set forth beside the facsimile number for the
addressee below. Any notice or other communication required or permitted to be
given hereunder shall be deemed effective (a) upon hand delivery or delivery by
facsimile, with accurate confirmation generated by the transmitting facsimile
machine, at the address or number designated below (if delivered on a business
day during normal business hours where such notice is to be received), or the
first business day following such delivery (if delivered other than on a
business day during normal business hours where such notice is to be received)
or (b) on the second business day following the date of mailing by express
courier service, fully prepaid, addressed to such address, or upon actual
receipt of such mailing, whichever shall first occur. The addresses for such
communications shall be:

 

If to the Company:

 

Cyclacel Pharmaceuticals, Inc.

200 Connell Drive

Suite 1500

Berkeley Heights, NJ 07922

Facsimile: (866) 271-3466

Attention: Assistant General Counsel

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

 

Mintz Levin Cohn Ferris Glovsky and Popeo P.C.

Chrysler Center

666 Third Avenue

New York, NY 10017

Facsimile: (212) 983-3115

Attention: Joel I. Papernik, Esq. – JIPapernik@mintz.com

if to the Investor:

 

Kingsbridge Capital Limited

Attention: Mr. Tony Hillman

P.O. Box 1075

Elizabeth House

9 Castle Street

St Helier

Jersey

JE42QP

Channel Islands

Telephone: 011-44-1534-636-041

Facsimile: 011-44-1534-636-042

Email: admin@kingsbridgecap.com; and adamgurney@kingsbridgecap.com

 

 

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

Kingsbridge Corporate Services Limited

Kingsbridge House

New Abbey

Kilcullen, County Kildare

Republic of Ireland

Telephone: 011-353-45-481-811

Facsimile: 011-353-45-482-003

Email: adamgurney@kingsbridge.ie; emmagalway@kingsbridge.ie; and
pwhelan@kingsbridge.ie

and another copy (which shall not constitute notice) to:

 

Stroock & Stroock & Lavan LLP

180 Maiden Lane

New York, NY 10038

Facsimile: (212) 806-5400

Attention: Keith M. Andruschak, Esq. – kandruschak@stroock.com

Either party hereto may from time to time change its address for notices under
this Section by giving at least ten (10) days’ prior written notice of such
changed address to the other party hereto.

Section 10.5 Assignment. Neither this Agreement nor any rights of the Investor
or the Company hereunder may be assigned by either party to any other Person.

Section 10.6 Amendment; No Waiver. No party shall be liable or bound to any
other party in any manner by any warranties, representations or covenants except
as specifically set forth in this Agreement, the Warrant and the Registration
Rights Agreement. Except as expressly provided in this Agreement, neither this
Agreement nor any term hereof may be amended, waived, discharged or terminated
other than by a written instrument signed by both parties hereto. The failure of
the either party to insist on strict compliance with this Agreement, or to
exercise any right or remedy under this Agreement, shall not constitute a waiver
of any rights provided under this Agreement, nor estop the parties from
thereafter demanding full and complete compliance nor prevent the parties from
exercising such a right or remedy in the future.

Section 10.7 Entire Agreement. This Agreement, the Registration Rights Agreement
and the Warrant set forth the entire agreement and understanding of the parties
relating to the subject matter hereof and supersedes all prior and
contemporaneous agreements, negotiations and understandings between the parties,
both oral and written, relating to the subject matter hereof.

Section 10.8 Severability. If any provision of this Agreement becomes or is
declared by a court of competent jurisdiction to be illegal, unenforceable or
void, this Agreement shall continue in full force and effect without said
provision; provided that, if the severance of such provision materially changes
the economic benefits of this Agreement to either party as such

 

 

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benefits are anticipated as of the date hereof, then such party may terminate
this Agreement on five (5) business days prior written notice to the other
party. In such event, the Registration Rights Agreement will terminate
simultaneously with the termination of this Agreement; provided that in the
event that this Agreement is terminated by the Company in accordance with this
Section 10.8 and the Warrant Shares either have not been registered for resale
by the Investor in accordance with the Registration Rights Agreement or are
otherwise not freely tradable (if and when issued) in accordance with applicable
law, then the Registration Rights Agreement in respect of the registration of
the Warrant Shares shall remain in full force and effect.

Section 10.9 Title and Subtitles. The titles and subtitles used in this
Agreement are used for the convenience of reference and are not to be considered
in construing or interpreting this Agreement.

Section 10.10 Counterparts. This Agreement may be executed in multiple
counterparts, each of which may be executed by less than all of the parties and
shall be deemed to be an original instrument which shall be enforceable against
the parties actually executing such counterparts and all of which together shall
constitute one and the same instrument.

Section 10.11 Choice of Law. This Agreement shall be construed under the laws of
the State of New York.

Section 10.12 Specific Enforcement, Consent to Jurisdiction.

(a) The Company and the Investor acknowledge and agree that irreparable damage
would occur in the event that any of the provisions of this Agreement were not
performed in accordance with their specific terms or were otherwise breached. It
is accordingly agreed that either party shall be entitled to an injunction or
injunctions to prevent or cure breaches of the provisions of this Agreement by
the other party and to enforce specifically the terms and provisions hereof or
thereof, this being in addition to any other remedy to which either party may be
entitled by law or equity.

(b) Each of the Company and the Investor (i) hereby irrevocably submits to the
jurisdiction of the United States District Court and other courts of the United
States sitting in the State of New York for the purposes of any suit, action or
proceeding arising out of or relating to this Agreement and (ii) hereby waives,
and agrees not to assert in any such suit, action or proceeding, any claim that
it is not personally subject to the jurisdiction of such court, that the suit,
action or proceeding is brought in an inconvenient forum or that the venue of
the suit, action or proceeding is improper. Each of the Company and the Investor
consents to process being served in any such suit, action or proceeding by
mailing a copy thereof 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 in this Section 10.12
shall affect or limit any right to serve process in any other manner permitted
by law.

Section 10.13 Survival. The representations and warranties of the Company and
the Investor contained in Articles IV and V and the covenants contained in
Article V and Article VI shall survive the execution and delivery hereof and the
Closing until the termination of this

 

 

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Agreement, and the agreements and covenants set forth in Article VIII and
Article IX of this Agreement shall survive the execution and delivery hereof and
the Closing hereunder.

Section 10.14 Publicity. Except as otherwise required by applicable law or
regulation, or NASDAQ rule or judicial process, prior to the Closing, neither
the Company nor the Investor shall issue any press release or otherwise make any
public statement or announcement with respect to this Agreement or the
transactions contemplated hereby or the existence of this Agreement. In the
event the Company is required by law, regulation, NASDAQ rule or judicial
process, based upon reasonable advice of the Company’s counsel, to issue a press
release or otherwise make a public statement or announcement with respect to
this Agreement prior to the Closing, the Company shall consult with the Investor
on the form and substance of such press release, statement or announcement.
Promptly after the Closing, each party may issue a press release or otherwise
make a public statement or announcement with respect to this Agreement or the
transactions contemplated hereby or the existence of this Agreement; provided
that, prior to issuing any such press release, making any such public statement
or announcement, the party wishing to make such release, statement or
announcement consults and cooperates in good faith with the other party in order
to formulate such press release, public statement or announcement in form and
substance reasonably acceptable to both parties.

Section 10.15 Further Assurances. From and after the date of this Agreement,
upon the request of the Investor or the Company, each of the Company and the
Investor shall execute and deliver such instruments, documents and other
writings as may be reasonably necessary or desirable to confirm and carry out
and to effectuate fully the intent and purposes of this Agreement.

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

 

 

 

 

KINGSBRIDGE CAPITAL LIMITED

 

 

By: 

/s/ Maria O'Donoghue

 

 

 

Maria O’Donoghue
Director

 

 

 

CYCLACEL PHARMACEUTICALS, INC.

 

 

By: 

/s/ Spiro Rombotis

 

 

 

Spiro Rombotis
President & Chief Executive Officer

 

 

[Signature Page to Purchase Agreement]

 

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Exhibit A

Form of Registration Rights Agreement

 

 

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Exhibit B

Form of Warrant

 

 

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Exhibit C

Form of Draw Down Notice

 

Kingsbridge Capital Limited

Attention: Mr. Tony Hillman

P.O. Box 1075

Elizabeth House

9 Castle Street

St Helier

Jersey

JE42QP

Channel Islands

Facsimile: 011-44-1534-636-042

Email: admin@kingsbridgecap.com; and adamgurney@kingsbridgecap.com

 

Kingsbridge Corporate Services Limited

Kingsbridge House

New Abbey

Kilcullen, County Kildare

Republic of Ireland

Facsimile: 011-353-45-482-003

Email: adamgurney@kingsbridge.ie; and pwhelan@kingsbridge.ie

 

Stroock & Stroock & Lavan LLP

180 Maiden Lane

New York, NY 10038

Facsimile: (212) 806-5400

Attention: Keith M. Andruschak, Esq. – kandruschak@stroock.com

Reference is hereby made to that certain Common Stock Purchase Agreement dated
as of December __, 2007 (the “Agreement”) by and between Cyclacel
Pharmaceuticals, Inc., a corporation organized and existing under the laws of
the State of Delaware (the “Company”), and Kingsbridge Capital Limited, an
entity organized and existing under the laws of the British Virgin Islands (the
“Investor”). Capitalized terms used and not otherwise defined herein shall have
the meanings given such terms in the Agreement.

In accordance with and pursuant to Section 3.1 of the Agreement, the Company
hereby issues this Draw Down Notice to the Investor pursuant to the terms set
forth below.

Draw Down Amount: $___________; and

First Trading Day of Draw Down Pricing Period: __________, 200[_].

Enclosed with this Draw Down Notice is an executed copy of the Officer’s
Certificate described in Section 3.1 of the Agreement, the base form of which is
attached to such Agreement as Exhibit D.

 

 

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Exhibit D

Officer’s Certificate

I, [NAME OF OFFICER], do hereby certify to Kingsbridge Capital Limited (the
“Investor”), with respect to the common stock of Cyclacel Pharmaceuticals, Inc.
(the “Company”) issuable in connection with the Draw Down Notice, dated
_______________ (the “Notice”) attached hereto and delivered pursuant to Article
III of the Common Stock Purchase Agreement, dated December __, 2007 (the
“Agreement”), by and between the Company and the Investor, as follows
(capitalized terms used but undefined herein have the meanings given to such
terms in the Agreement):

1. I am the duly elected [OFFICER] of the Company.

2. The representations and warranties of the Company set forth in Article IV of
the Agreement are true and correct in all material respects as though made on
and as of the date hereof (except for such representations and warranties that
are made as of a particular date).

3. The Company has performed in all material respects all covenants and
agreements to be performed by the Company on or prior to the date hereof related
to the Notice and has satisfied each of the conditions to the obligation of the
Investor set forth in Article VII of the Agreement.

4. The Shares issuable in respect of the Notice will be delivered without
restrictive legend via book entry through the Depositary Trust Company to an
account designated by the Investor.

The undersigned has executed this Certificate this _____ day of, 200[_].

 

 

 

Name:

 

 

 

Title:

 

 

 

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