EXHIBIT 10.1

 

SECURITIES PURCHASE AGREEMENT

 

This Securities Purchase Agreement (this “Agreement”) is dated as of August 24,
2004, among Apogee Technology, Inc., a Delaware corporation (the “Company”), and
each purchaser identified on the signature pages hereto (each, including its
successors and assigns, a “Purchaser” and collectively the “Purchasers”); and

 

WHEREAS, subject to the terms and conditions set forth in this Agreement and
pursuant to Section 4(2) of the Securities Act (as defined below), and Rule 506
promulgated thereunder, the Company desires to issue and sell to each Purchaser,
and each Purchaser, severally and not jointly, desires to purchase from the
Company in the aggregate, up to $4,000,000 of shares of Common Stock and
Warrants on the Closing Date.

 

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

 

ARTICLE I.

DEFINITIONS

 

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

 

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

 

“Affiliate” means any Person that, directly or indirectly through one or more
intermediaries, controls or is controlled by or is under common control with a
Person as such terms are used in and construed under Rule 144.  With respect to
a Purchaser, any investment fund or managed account that is managed on a
discretionary basis by the same investment manager as such Purchaser will be
deemed to be an Affiliate of such Purchaser.

 

“Closing” means the closing of the purchase and sale of the Common Stock and the
Warrants pursuant to Section 2.1.

 

“Closing Date” means the Trading Day when all of the Transaction Documents have
been executed and delivered by the applicable parties thereto, and all
conditions precedent to (i) the Purchasers’ obligations to pay the Subscription
Amount and (ii) the Company’s obligations to deliver the Securities have been
satisfied or waived.

 

“Closing Price” means on any particular date (a) the last reported closing bid
price per share of Common Stock on such date on the Trading Market (as reported
by Bloomberg L.P. at 4:15 PM (New York time) as the last reported closing bid
price for regular session trading on such day), or (b) if there is no such price
on such date, then the closing bid price on the Trading Market on the date
nearest preceding such date (as reported by Bloomberg L.P. at 4:15 PM (New York
time) as the closing bid price for regular session trading on such day), or (c) 
if the Common Stock is not then listed or quoted on

 

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the Trading Market and if prices for the Common Stock are then reported in the
“pink sheets” published by the National Quotation Bureau Incorporated (or a
similar organization or agency succeeding to its functions of reporting prices),
the most recent bid price per share of the Common Stock so reported, or (d) if
the shares of Common Stock are not then publicly traded the fair market value of
a share of Common Stock as determined by an appraiser selected in good faith by
the Purchasers of a majority in interest of the Shares then outstanding.

 

“Commission” means the Securities and Exchange Commission.

 

“Common Stock” means the common stock of the Company, par value $0.01 per share,
and any securities into which such common stock may hereafter be reclassified.

 

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

 

“Company Counsel” means Mintz, Levin, Cohn, Ferris, Glovsky and Popeo, P.C.

 

“Disclosure Schedules” means the Disclosure Schedules of the Company delivered
concurrently herewith.

 

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

 

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

 

“Exempt Issuance” means the issuance of (a) shares of Common Stock or options to
employees, officers or directors of the Company pursuant to any stock or option
plan duly adopted by a majority of the non-employee members of the Board of
Directors of the Company or a majority of the members of a committee of
non-employee directors established for such purpose, (b) securities upon the
exercise of or conversion of any securities issued hereunder, convertible
securities, options or warrants issued and outstanding on the date of this
Agreement, provided that such securities have not been amended since the date of
this Agreement to increase the number of such securities, and (c) securities
issued pursuant to acquisitions or strategic transactions, provided any such
issuance shall only be to a Person which is, itself or through its subsidiaries,
an operating company in the same or a similar industry to that of the Company
and in which the Company receives benefits in addition to the investment of
funds, but shall not include a transaction in which the Company is issuing
securities primarily for the purpose of raising capital or to an entity whose
primary business is investing in securities.

 

“FW” means Feldman Weinstein LLP with offices located at 420 Lexington Avenue,
Suite 2620, New York, New York 10170-0002.

 

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

 

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

 

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

 

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

 

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“Per Share Purchase Price” equals $4.75, subject to adjustment for reverse and
forward stock splits, stock dividends, stock combinations and other similar
transactions of the Common Stock that occur after the date of this Agreement.

 

“Person” means an individual or corporation, partnership, trust, incorporated or
unincorporated association, joint venture, limited liability company, joint
stock company, government (or an agency or subdivision thereof) or other entity
of any kind.

 

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

 

“Registration Rights Agreement” means the Registration Rights Agreement, dated
as of the date of this Agreement, among the Company and each Purchaser, in the
form of Exhibit A hereto.

 

“Registration Statement” means a registration statement meeting the requirements
set forth in the Registration Rights Agreement and covering the resale by the
Purchasers of the Shares and the Warrant Shares.

 

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

 

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

 

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

 

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

 

“Securities Act” means the Securities Act of 1933, as amended.

 

“Shares” means the shares of Common Stock issued or issuable to each Purchaser
pursuant to this Agreement.

 

“Subscription Amount” means, as to each Purchaser, the amounts set forth below
such Purchaser’s signature block on the signature page hereto, in United States
dollars and in immediately available funds.

 

“Subsidiary” shall mean the subsidiaries of the Company, if any, set forth on
Schedule 3.1(a).

 

“Trading Day” means a day on which the Common Stock is traded on a Trading
Market.

 

“Trading Market” means the following markets or exchanges on which the Common
Stock is listed or quoted for trading on the date in question: the American
Stock Exchange, the New York Stock Exchange, the Nasdaq National Market or the
Nasdaq SmallCap Market.

 

“Transaction Documents” means this Agreement, the Warrants, the Additional
Investment Rights and the Registration Rights Agreement and any other documents
or agreements executed in connection with the transactions contemplated
hereunder.

 

“Warrants” means the Common Stock Purchase Warrants, in the form of Exhibit B,
delivered to the Purchasers at the Closing in accordance with Section
2.2(a)(iii) hereof, which warrants shall be

 

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exercisable immediately upon issuance for a term of 5 years and have an exercise
price equal to $5.70(1), subject to adjustment as provided therein.

 

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

 

ARTICLE II.

PURCHASE AND SALE

 

2.1           CLOSING.  ON THE CLOSING DATE, EACH PURCHASER SHALL PURCHASE FROM
THE COMPANY, SEVERALLY AND NOT JOINTLY WITH THE OTHER PURCHASERS, AND THE
COMPANY SHALL ISSUE AND SELL TO EACH PURCHASER, (A) A NUMBER OF SHARES EQUAL TO
SUCH PURCHASER’S SUBSCRIPTION AMOUNT DIVIDED BY THE PER SHARE PURCHASE PRICE AND
(B) THE WARRANTS AS DETERMINED PURSUANT TO SECTION 2.2(A)(III).  THE AGGREGATE
SUBSCRIPTION AMOUNTS FOR THE SHARES SOLD HEREUNDER SHALL BE NO LESS THAN
$1,750,000 AND UP TO $4,000,000.  UPON SATISFACTION OF THE CONDITIONS SET FORTH
IN SECTION 2.2, THE CLOSING SHALL OCCUR AT THE OFFICES OF FW OR SUCH OTHER
LOCATION AS THE PARTIES SHALL MUTUALLY AGREE.

 

2.2           Deliveries.

 

(A)           ON THE CLOSING DATE, THE COMPANY SHALL DELIVER OR CAUSE TO BE
DELIVERED TO EACH PURCHASER THE FOLLOWING:

 

(I)            THIS AGREEMENT DULY EXECUTED BY THE COMPANY;

 

(II)           A COPY OF THE IRREVOCABLE INSTRUCTIONS TO THE COMPANY’S TRANSFER
AGENT INSTRUCTING THE TRANSFER AGENT TO DELIVER, ON AN EXPEDITED BASIS, A
CERTIFICATE EVIDENCING A NUMBER OF SHARES EQUAL TO SUCH PURCHASER’S SUBSCRIPTION
AMOUNT DIVIDED BY THE PER SHARE PURCHASE PRICE, REGISTERED IN THE NAME OF SUCH
PURCHASER;

 

(III)          WITHIN 3 TRADING DAYS OF THE DATE HEREOF, A WARRANT, REGISTERED
IN THE NAME OF SUCH PURCHASER, PURSUANT TO WHICH SUCH PURCHASER SHALL HAVE THE
RIGHT TO ACQUIRE UP TO THE NUMBER OF SHARES OF COMMON STOCK EQUAL TO 50% OF THE
SHARES TO BE ISSUED TO SUCH PURCHASER;

 

(IV)          INTENTIONALLY OMITTED;

 

(V)           THE REGISTRATION RIGHTS AGREEMENT DULY EXECUTED BY THE COMPANY;
AND

 

(VI)          A LEGAL OPINION OF COMPANY COUNSEL, IN THE FORM OF EXHIBIT C
ATTACHED HERETO.

 

(B)           ON THE CLOSING DATE, EACH PURCHASER SHALL DELIVER OR CAUSE TO BE
DELIVERED TO THE COMPANY THE FOLLOWING:

 

(I)            THIS AGREEMENT DULY EXECUTED BY SUCH PURCHASER;

 

(II)           SUCH PURCHASER’S SUBSCRIPTION AMOUNT BY WIRE TRANSFER TO THE
ACCOUNT AS SPECIFIED IN WRITING BY THE COMPANY; AND

 

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(1)           120% of the Per Share Purchase Price.

 

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(III)          THE REGISTRATION RIGHTS AGREEMENT DULY EXECUTED BY SUCH
PURCHASER.

 

2.3           CLOSING CONDITIONS.

 

(A)           THE OBLIGATIONS OF THE COMPANY HEREUNDER IN CONNECTION WITH THE
CLOSING ARE SUBJECT TO THE FOLLOWING CONDITIONS BEING MET:

 

(I)            THE ACCURACY IN ALL MATERIAL RESPECTS WHEN MADE AND ON THE
CLOSING DATE OF THE REPRESENTATIONS AND WARRANTIES OF THE PURCHASERS CONTAINED
HEREIN;

 

(II)           ALL OBLIGATIONS, COVENANTS AND AGREEMENTS OF THE PURCHASERS
REQUIRED TO BE PERFORMED AT OR PRIOR TO THE CLOSING DATE SHALL HAVE BEEN
PERFORMED; AND

 

(III)          THE DELIVERY BY THE PURCHASERS OF THE ITEMS SET FORTH IN SECTION
2.2(B) OF THIS AGREEMENT.

 

(B)           THE RESPECTIVE OBLIGATIONS OF THE PURCHASERS HEREUNDER IN
CONNECTION WITH THE CLOSING ARE SUBJECT TO THE FOLLOWING CONDITIONS BEING MET:

 

(I)            THE ACCURACY IN ALL MATERIAL RESPECTS ON THE CLOSING DATE OF THE
REPRESENTATIONS AND WARRANTIES OF THE COMPANY CONTAINED HEREIN;

 

(II)           ALL OBLIGATIONS, COVENANTS AND AGREEMENTS OF THE COMPANY REQUIRED
TO BE PERFORMED AT OR PRIOR TO THE CLOSING DATE SHALL HAVE BEEN PERFORMED;

 

(III)          THE DELIVERY BY THE COMPANY OF THE ITEMS SET FORTH IN SECTION
2.2(A) OF THIS AGREEMENT;

 

(IV)          THERE SHALL HAVE BEEN NO MATERIAL ADVERSE EFFECT WITH RESPECT TO
THE COMPANY SINCE THE DATE HEREOF; AND

 

(V)           FROM THE DATE HEREOF TO THE CLOSING DATE, TRADING IN THE COMMON
STOCK SHALL NOT HAVE BEEN SUSPENDED BY THE COMMISSION (EXCEPT FOR ANY SUSPENSION
OF TRADING OF LIMITED DURATION AGREED TO BY THE COMPANY, WHICH SUSPENSION SHALL
BE TERMINATED PRIOR TO THE CLOSING), AND, AT ANY TIME PRIOR TO THE CLOSING DATE,
TRADING IN SECURITIES GENERALLY AS REPORTED BY BLOOMBERG FINANCIAL MARKETS SHALL
NOT HAVE BEEN SUSPENDED OR LIMITED, OR MINIMUM PRICES SHALL NOT HAVE BEEN
ESTABLISHED ON SECURITIES WHOSE TRADES ARE REPORTED BY SUCH SERVICE, OR ON ANY
TRADING MARKET, NOR SHALL A BANKING MORATORIUM HAVE BEEN DECLARED EITHER BY THE
UNITED STATES OR NEW YORK STATE AUTHORITIES NOR SHALL THERE HAVE OCCURRED ANY
MATERIAL OUTBREAK OR ESCALATION OF HOSTILITIES OR OTHER NATIONAL OR
INTERNATIONAL CALAMITY OF SUCH MAGNITUDE IN ITS EFFECT ON, OR ANY MATERIAL
ADVERSE CHANGE IN, ANY FINANCIAL MARKET WHICH, IN EACH CASE, IN THE REASONABLE
JUDGMENT OF EACH PURCHASER, MAKES IT IMPRACTICABLE OR INADVISABLE TO PURCHASE
THE SHARES AT THE CLOSING.

 

ARTICLE III.

REPRESENTATIONS AND WARRANTIES

 

3.1           REPRESENTATIONS AND WARRANTIES OF THE COMPANY.

Except as set forth under the corresponding section of the Disclosure Schedules
which Disclosure Schedules shall be deemed a part hereof, the Company hereby
makes the representations and warranties set forth below to each Purchaser:

 

(A)           SUBSIDIARIES.  ALL OF THE DIRECT AND INDIRECT SUBSIDIARIES OF THE
COMPANY ARE SET FORTH ON SCHEDULE 3.1(A).  THE COMPANY OWNS, DIRECTLY OR
INDIRECTLY, ALL OF THE CAPITAL STOCK OR OTHER EQUITY INTERESTS OF EACH
SUBSIDIARY FREE AND CLEAR OF ANY LIENS, AND ALL THE ISSUED AND OUTSTANDING
SHARES OF CAPITAL STOCK OF EACH SUBSIDIARY ARE VALIDLY ISSUED AND ARE FULLY
PAID, NON-ASSESSABLE AND FREE OF

 

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PREEMPTIVE AND SIMILAR RIGHTS TO SUBSCRIBE FOR OR PURCHASE SECURITIES.  IF THE
COMPANY HAS NO SUBSIDIARIES, THEN REFERENCES IN THE TRANSACTION DOCUMENTS TO THE
SUBSIDIARIES WILL BE DISREGARDED.

 

(B)           ORGANIZATION AND QUALIFICATION.  EACH OF THE COMPANY AND THE
SUBSIDIARIES IS AN ENTITY DULY INCORPORATED OR OTHERWISE ORGANIZED, VALIDLY
EXISTING AND IN GOOD STANDING UNDER THE LAWS OF THE JURISDICTION OF ITS
INCORPORATION OR ORGANIZATION (AS APPLICABLE), WITH THE REQUISITE CORPORATE
POWER AND AUTHORITY TO OWN AND USE ITS PROPERTIES AND ASSETS AND TO CARRY ON ITS
BUSINESS AS CURRENTLY CONDUCTED.  NEITHER THE COMPANY NOR ANY SUBSIDIARY IS IN
VIOLATION OR DEFAULT OF ANY OF THE PROVISIONS OF ITS RESPECTIVE CERTIFICATE OR
ARTICLES OF INCORPORATION, BYLAWS OR OTHER ORGANIZATIONAL OR CHARTER DOCUMENTS. 
EACH OF THE COMPANY AND THE SUBSIDIARIES IS DULY QUALIFIED TO CONDUCT BUSINESS
AND IS IN GOOD STANDING AS A FOREIGN CORPORATION OR OTHER ENTITY IN EACH
JURISDICTION IN WHICH THE NATURE OF THE BUSINESS CONDUCTED OR PROPERTY OWNED BY
IT MAKES SUCH QUALIFICATION NECESSARY, EXCEPT WHERE THE FAILURE TO BE SO
QUALIFIED OR IN GOOD STANDING, AS THE CASE MAY BE, COULD NOT HAVE OR REASONABLY
BE EXPECTED TO RESULT IN (I) A MATERIAL ADVERSE EFFECT ON THE LEGALITY, VALIDITY
OR ENFORCEABILITY OF ANY TRANSACTION DOCUMENT, (II) A MATERIAL ADVERSE EFFECT ON
THE RESULTS OF OPERATIONS, ASSETS, BUSINESS OR FINANCIAL CONDITION OF THE
COMPANY AND THE SUBSIDIARIES, TAKEN AS A WHOLE, OR (III) A MATERIAL ADVERSE
EFFECT ON THE COMPANY’S ABILITY TO PERFORM IN ANY MATERIAL RESPECT ON A TIMELY
BASIS ITS OBLIGATIONS UNDER ANY TRANSACTION DOCUMENT (ANY OF (I), (II) OR (III),
A “MATERIAL ADVERSE EFFECT”) AND THE COMPANY HAS NOT RECEIVED NOTICE OF THE
INSTITUTION OF ANY PROCEEDING IN ANY SUCH JURISDICTION REVOKING, LIMITING OR
CURTAILING OR SEEKING TO REVOKE, LIMIT OR CURTAIL SUCH POWER AND AUTHORITY OR
QUALIFICATION.

 

(C)           AUTHORIZATION; ENFORCEMENT.  THE COMPANY HAS THE REQUISITE
CORPORATE POWER AND AUTHORITY TO ENTER INTO AND TO CONSUMMATE THE TRANSACTIONS
CONTEMPLATED BY EACH OF THE TRANSACTION DOCUMENTS AND OTHERWISE TO CARRY OUT ITS
OBLIGATIONS THEREUNDER.  THE EXECUTION AND DELIVERY OF EACH OF THE TRANSACTION
DOCUMENTS BY THE COMPANY AND THE CONSUMMATION BY IT OF THE TRANSACTIONS
CONTEMPLATED THEREBY HAVE BEEN DULY AUTHORIZED BY ALL NECESSARY ACTION ON THE
PART OF THE COMPANY AND NO FURTHER ACTION IS REQUIRED BY THE COMPANY IN
CONNECTION THEREWITH OTHER THAN IN CONNECTION WITH THE REQUIRED APPROVALS.  EACH
TRANSACTION DOCUMENT HAS BEEN (OR UPON DELIVERY WILL HAVE BEEN) DULY EXECUTED BY
THE COMPANY AND, WHEN DELIVERED IN ACCORDANCE WITH THE TERMS HEREOF, WILL
CONSTITUTE THE VALID AND BINDING OBLIGATION OF THE COMPANY ENFORCEABLE AGAINST
THE COMPANY IN ACCORDANCE WITH ITS TERMS EXCEPT (I) AS LIMITED BY APPLICABLE
BANKRUPTCY, INSOLVENCY, REORGANIZATION, MORATORIUM AND OTHER LAWS OF GENERAL
APPLICATION AFFECTING ENFORCEMENT OF CREDITORS’ RIGHTS GENERALLY, (II) AS
LIMITED BY LAWS RELATING TO THE AVAILABILITY OF SPECIFIC PERFORMANCE, INJUNCTIVE
RELIEF OR OTHER EQUITABLE REMEDIES AND (III) AS LIMITED BY PUBLIC POLICY.

 

(D)           NO CONFLICTS.  THE EXECUTION, DELIVERY AND PERFORMANCE OF THE
TRANSACTION DOCUMENTS BY THE COMPANY, THE ISSUANCE AND SALE OF THE SHARES AND
THE CONSUMMATION BY THE COMPANY OF THE OTHER TRANSACTIONS CONTEMPLATED THEREBY
DO NOT AND WILL NOT (I) CONFLICT WITH OR VIOLATE ANY PROVISION OF THE COMPANY’S
OR ANY SUBSIDIARY’S CERTIFICATE OR ARTICLES OF INCORPORATION, BYLAWS OR OTHER
ORGANIZATIONAL OR CHARTER DOCUMENTS, OR (II) CONFLICT WITH, OR CONSTITUTE A
DEFAULT (OR AN EVENT THAT WITH NOTICE OR LAPSE OF TIME OR BOTH WOULD BECOME A
DEFAULT) UNDER, RESULT IN THE CREATION OF ANY LIEN UPON ANY OF THE PROPERTIES OR
ASSETS OF THE COMPANY OR ANY SUBSIDIARY, OR GIVE TO OTHERS ANY RIGHTS OF
TERMINATION, AMENDMENT, ACCELERATION OR CANCELLATION (WITH OR WITHOUT NOTICE,
LAPSE OF TIME OR BOTH) OF, ANY AGREEMENT, CREDIT FACILITY, DEBT OR OTHER
INSTRUMENT (EVIDENCING A COMPANY OR SUBSIDIARY DEBT OR OTHERWISE) OR OTHER
UNDERSTANDING TO WHICH THE COMPANY OR ANY SUBSIDIARY IS A PARTY OR BY WHICH ANY
PROPERTY OR ASSET OF THE COMPANY OR ANY SUBSIDIARY IS BOUND OR AFFECTED, OR
(III) SUBJECT TO THE REQUIRED APPROVALS, CONFLICT WITH OR RESULT IN A VIOLATION
OF ANY LAW, RULE, REGULATION, ORDER, JUDGMENT, INJUNCTION, DECREE OR OTHER
RESTRICTION OF ANY COURT OR GOVERNMENTAL AUTHORITY TO WHICH THE COMPANY OR A
SUBSIDIARY IS SUBJECT (INCLUDING FEDERAL AND STATE SECURITIES LAWS AND
REGULATIONS), OR BY WHICH ANY PROPERTY OR ASSET OF THE COMPANY OR A SUBSIDIARY
IS BOUND OR AFFECTED; EXCEPT IN THE CASE OF EACH OF CLAUSES (II) AND (III), SUCH
AS COULD NOT HAVE OR REASONABLY BE EXPECTED TO RESULT IN A MATERIAL ADVERSE
EFFECT.

 

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(E)           FILINGS, CONSENTS AND APPROVALS.  THE COMPANY IS NOT REQUIRED TO
OBTAIN ANY CONSENT, WAIVER, AUTHORIZATION OR ORDER OF, GIVE ANY NOTICE TO, OR
MAKE ANY FILING OR REGISTRATION WITH, ANY COURT OR OTHER FEDERAL, STATE, LOCAL
OR OTHER GOVERNMENTAL AUTHORITY OR OTHER PERSON IN CONNECTION WITH THE
EXECUTION, DELIVERY AND PERFORMANCE BY THE COMPANY OF THE TRANSACTION DOCUMENTS,
OTHER THAN (I) FILINGS REQUIRED PURSUANT TO SECTION 4.4 OF THIS AGREEMENT, (II)
THE FILING WITH THE COMMISSION OF THE REGISTRATION STATEMENT, (III)
APPLICATION(S) TO EACH APPLICABLE TRADING MARKET FOR THE LISTING OF THE SHARES
AND WARRANT SHARES FOR TRADING THEREON IN THE TIME AND MANNER REQUIRED THEREBY,
AND (IV) THE FILING OF FORM D WITH THE COMMISSION AND SUCH FILINGS AS ARE
REQUIRED TO BE MADE UNDER APPLICABLE STATE SECURITIES LAWS (COLLECTIVELY, THE
“REQUIRED APPROVALS”).

 

(F)            ISSUANCE OF THE SECURITIES.  THE SHARES AND WARRANTS ARE DULY
AUTHORIZED AND, WHEN ISSUED AND PAID FOR IN ACCORDANCE WITH THE TRANSACTION
DOCUMENTS, WILL BE DULY AND VALIDLY ISSUED, FULLY PAID AND NONASSESSABLE, FREE
AND CLEAR OF ALL LIENS IMPOSED BY THE COMPANY OTHER THAN RESTRICTIONS ON
TRANSFER PROVIDED FOR IN THE TRANSACTION DOCUMENTS.  THE WARRANT SHARES, WHEN
ISSUED IN ACCORDANCE WITH THE TERMS OF THE TRANSACTION DOCUMENTS, WILL BE
VALIDLY ISSUED, FULLY PAID AND NONASSESSABLE, FREE AND CLEAR OF ALL LIENS
IMPOSED BY THE COMPANY.  THE COMPANY HAS RESERVED FROM ITS DULY AUTHORIZED
CAPITAL STOCK THE MAXIMUM NUMBER OF SHARES OF COMMON STOCK ISSUABLE PURSUANT TO
THIS AGREEMENT AND THE WARRANTS.

 

(G)           CAPITALIZATION.  THE CAPITALIZATION OF THE COMPANY IS AS DESCRIBED
IN THE COMPANY’S MOST RECENT PERIODIC REPORT FILED WITH THE COMMISSION.  THE
COMPANY HAS NOT ISSUED ANY CAPITAL STOCK SINCE SUCH FILING OTHER THAN PURSUANT
TO THE EXERCISE OF EMPLOYEE STOCK OPTIONS UNDER THE COMPANY’S STOCK OPTION
PLANS, AND PURSUANT TO THE CONVERSION OR EXERCISE OF OUTSTANDING COMMON STOCK
EQUIVALENTS.  NO PERSON HAS ANY RIGHT OF FIRST REFUSAL, PREEMPTIVE RIGHT, RIGHT
OF PARTICIPATION, OR ANY SIMILAR RIGHT TO PARTICIPATE IN THE TRANSACTIONS
CONTEMPLATED BY THE TRANSACTION DOCUMENTS.  EXCEPT AS A RESULT OF THE PURCHASE
AND SALE OF THE SECURITIES AND EXCEPT AS SET FORTH IN THE SEC REPORTS, THERE ARE
NO OUTSTANDING OPTIONS, WARRANTS, SCRIPT RIGHTS TO SUBSCRIBE TO, CALLS OR
COMMITMENTS OF ANY CHARACTER WHATSOEVER RELATING TO, OR SECURITIES, RIGHTS OR
OBLIGATIONS CONVERTIBLE INTO OR EXCHANGEABLE FOR, OR GIVING ANY PERSON ANY RIGHT
TO SUBSCRIBE FOR OR ACQUIRE, ANY SHARES OF COMMON STOCK, OR CONTRACTS,
COMMITMENTS, UNDERSTANDINGS OR ARRANGEMENTS BY WHICH THE COMPANY OR ANY
SUBSIDIARY IS OR MAY BECOME BOUND TO ISSUE ADDITIONAL SHARES OF COMMON STOCK, OR
SECURITIES OR RIGHTS CONVERTIBLE OR EXCHANGEABLE INTO SHARES OF COMMON STOCK. 
THE ISSUE AND SALE OF THE SECURITIES WILL NOT OBLIGATE THE COMPANY TO ISSUE
SHARES OF COMMON STOCK OR OTHER SECURITIES TO ANY PERSON (OTHER THAN THE
PURCHASERS) AND WILL NOT RESULT IN A RIGHT OF ANY HOLDER OF COMPANY SECURITIES
TO ADJUST THE EXERCISE, CONVERSION, EXCHANGE OR RESET PRICE UNDER SUCH
SECURITIES. ALL OF THE OUTSTANDING SHARES OF CAPITAL STOCK OF THE COMPANY ARE
VALIDLY ISSUED, FULLY PAID AND NONASSESSABLE, HAVE BEEN ISSUED IN COMPLIANCE
WITH ALL FEDERAL AND STATE SECURITIES LAWS, AND NONE OF SUCH OUTSTANDING SHARES
WAS ISSUED IN VIOLATION OF ANY PREEMPTIVE RIGHTS OR SIMILAR RIGHTS TO SUBSCRIBE
FOR OR PURCHASE SECURITIES.  NO FURTHER APPROVAL OR AUTHORIZATION OF ANY
STOCKHOLDER, THE BOARD OF DIRECTORS OF THE COMPANY OR OTHERS IS REQUIRED FOR THE
ISSUANCE AND SALE OF THE SHARES.  EXCEPT AS DISCLOSED IN THE SEC REPORTS, THERE
ARE NO STOCKHOLDERS AGREEMENTS, VOTING AGREEMENTS OR OTHER SIMILAR AGREEMENTS
WITH RESPECT TO THE COMPANY’S CAPITAL STOCK TO WHICH THE COMPANY IS A PARTY OR,
TO THE KNOWLEDGE OF THE COMPANY, BETWEEN OR AMONG ANY OF THE COMPANY’S
STOCKHOLDERS.

 

(H)           SEC REPORTS; FINANCIAL STATEMENTS.  THE COMPANY HAS FILED ALL
REPORTS REQUIRED TO BE FILED BY IT UNDER THE SECURITIES ACT AND THE EXCHANGE
ACT, INCLUDING PURSUANT TO SECTION 13(A) OR 15(D) THEREOF, FOR THE TWO YEARS
PRECEDING THE DATE HEREOF (OR SUCH SHORTER PERIOD AS THE COMPANY WAS REQUIRED BY
LAW TO FILE SUCH MATERIAL) (THE FOREGOING MATERIALS, INCLUDING THE EXHIBITS
THERETO, BEING COLLECTIVELY REFERRED TO HEREIN AS THE “SEC REPORTS”) ON A TIMELY
BASIS OR HAS RECEIVED A VALID EXTENSION OF SUCH TIME OF FILING AND HAS FILED ANY
SUCH SEC REPORTS PRIOR TO THE EXPIRATION OF ANY SUCH EXTENSION.  AS OF THEIR
RESPECTIVE DATES, THE SEC REPORTS COMPLIED IN ALL MATERIAL RESPECTS WITH THE
REQUIREMENTS OF THE SECURITIES ACT AND THE EXCHANGE ACT AND THE RULES AND
REGULATIONS OF THE COMMISSION PROMULGATED THEREUNDER, AND NONE OF THE SEC
REPORTS, WHEN FILED, CONTAINED ANY UNTRUE STATEMENT OF A MATERIAL FACT

 

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OR OMITTED 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.  THE FINANCIAL STATEMENTS OF THE COMPANY
INCLUDED IN THE SEC REPORTS COMPLY IN ALL MATERIAL RESPECTS WITH APPLICABLE
ACCOUNTING REQUIREMENTS AND THE RULES AND REGULATIONS OF THE COMMISSION WITH
RESPECT THERETO AS IN EFFECT AT THE TIME OF FILING.  SUCH FINANCIAL STATEMENTS
HAVE BEEN PREPARED IN ACCORDANCE WITH UNITED STATES GENERALLY ACCEPTED
ACCOUNTING PRINCIPLES APPLIED ON A CONSISTENT BASIS DURING THE PERIODS INVOLVED
(“GAAP”), EXCEPT AS MAY BE OTHERWISE SPECIFIED IN SUCH FINANCIAL STATEMENTS OR
THE NOTES THERETO AND EXCEPT THAT UNAUDITED FINANCIAL STATEMENTS MAY NOT CONTAIN
ALL FOOTNOTES REQUIRED BY GAAP, AND FAIRLY PRESENT IN ALL MATERIAL RESPECTS THE
FINANCIAL POSITION OF THE COMPANY AND ITS CONSOLIDATED SUBSIDIARIES AS OF AND
FOR THE DATES THEREOF AND THE RESULTS OF OPERATIONS AND CASH FLOWS FOR THE
PERIODS THEN ENDED, SUBJECT, IN THE CASE OF UNAUDITED STATEMENTS, TO NORMAL,
IMMATERIAL, YEAR-END AUDIT ADJUSTMENTS.

 

(I)            MATERIAL CHANGES.  SINCE THE DATE OF THE LATEST AUDITED FINANCIAL
STATEMENTS INCLUDED WITHIN THE SEC REPORTS, EXCEPT AS SPECIFICALLY DISCLOSED IN
THE SEC REPORTS, (I) THERE HAS BEEN NO EVENT, OCCURRENCE OR DEVELOPMENT THAT HAS
HAD OR THAT COULD REASONABLY BE EXPECTED TO RESULT IN A MATERIAL ADVERSE EFFECT,
(II) THE COMPANY HAS NOT INCURRED ANY LIABILITIES (CONTINGENT OR OTHERWISE)
OTHER THAN (A) TRADE PAYABLES AND ACCRUED EXPENSES INCURRED IN THE ORDINARY
COURSE OF BUSINESS CONSISTENT WITH PAST PRACTICE AND (B) LIABILITIES NOT
REQUIRED TO BE REFLECTED IN THE COMPANY’S FINANCIAL STATEMENTS PURSUANT TO GAAP
OR REQUIRED TO BE DISCLOSED IN FILINGS MADE WITH THE COMMISSION, (III) THE
COMPANY HAS NOT ALTERED ITS METHOD OF ACCOUNTING, (IV) THE COMPANY HAS NOT
DECLARED OR MADE ANY DIVIDEND OR DISTRIBUTION OF CASH OR OTHER PROPERTY TO ITS
STOCKHOLDERS OR PURCHASED, REDEEMED OR MADE ANY AGREEMENTS TO PURCHASE OR REDEEM
ANY SHARES OF ITS CAPITAL STOCK AND (V) THE COMPANY HAS NOT ISSUED ANY EQUITY
SECURITIES TO ANY OFFICER, DIRECTOR OR AFFILIATE, EXCEPT PURSUANT TO EXISTING
COMPANY STOCK OPTION PLANS.  THE COMPANY DOES NOT HAVE PENDING BEFORE THE
COMMISSION ANY REQUEST FOR CONFIDENTIAL TREATMENT OF INFORMATION.

 

(J)            LITIGATION.  EXCEPT AS SET FORTH IN THE SEC REPORTS, THERE IS NO
ACTION, SUIT, INQUIRY, NOTICE OF VIOLATION, PROCEEDING OR INVESTIGATION PENDING
OR, TO THE KNOWLEDGE OF THE COMPANY, THREATENED AGAINST OR AFFECTING THE
COMPANY, ANY SUBSIDIARY OR ANY OF THEIR RESPECTIVE PROPERTIES BEFORE OR BY ANY
COURT, ARBITRATOR, GOVERNMENTAL OR ADMINISTRATIVE AGENCY OR REGULATORY AUTHORITY
(FEDERAL, STATE, COUNTY, LOCAL OR FOREIGN) (COLLECTIVELY, AN “ACTION”) WHICH (I)
ADVERSELY AFFECTS OR CHALLENGES THE LEGALITY, VALIDITY OR ENFORCEABILITY OF ANY
OF THE TRANSACTION DOCUMENTS OR THE SECURITIES OR (II) COULD, IF THERE WERE AN
UNFAVORABLE DECISION, HAVE OR REASONABLY BE EXPECTED TO RESULT IN A MATERIAL
ADVERSE EFFECT.  NEITHER THE COMPANY NOR ANY SUBSIDIARY, NOR ANY CURRENT
DIRECTOR OR OFFICER THEREOF, IS OR HAS BEEN THE SUBJECT OF ANY ACTION INVOLVING
A CLAIM OF VIOLATION OF OR LIABILITY UNDER FEDERAL OR STATE SECURITIES LAWS OR A
CLAIM OF BREACH OF FIDUCIARY DUTY.  THERE HAS NOT BEEN, AND TO THE KNOWLEDGE OF
THE COMPANY, THERE IS NOT PENDING OR CONTEMPLATED, ANY INVESTIGATION BY THE
COMMISSION INVOLVING THE COMPANY OR ANY CURRENT DIRECTOR OR OFFICER OF THE
COMPANY.  THE COMMISSION HAS NOT ISSUED ANY STOP ORDER OR OTHER ORDER SUSPENDING
THE EFFECTIVENESS OF ANY REGISTRATION STATEMENT FILED BY THE COMPANY OR ANY
SUBSIDIARY UNDER THE EXCHANGE ACT OR THE SECURITIES ACT.

 

(K)           LABOR RELATIONS.  NO MATERIAL LABOR DISPUTE EXISTS OR, TO THE
KNOWLEDGE OF THE COMPANY, IS IMMINENT WITH RESPECT TO ANY OF THE EMPLOYEES OF
THE COMPANY WHICH COULD REASONABLY BE EXPECTED TO RESULT IN A MATERIAL ADVERSE
EFFECT.

 

(L)            COMPLIANCE.  NEITHER THE COMPANY NOR ANY SUBSIDIARY (I) IS IN
DEFAULT UNDER OR IN VIOLATION OF (AND NO EVENT HAS OCCURRED THAT HAS NOT BEEN
WAIVED THAT, WITH NOTICE OR LAPSE OF TIME OR BOTH, WOULD RESULT IN A DEFAULT BY
THE COMPANY OR ANY SUBSIDIARY UNDER), NOR HAS THE COMPANY OR ANY SUBSIDIARY
RECEIVED NOTICE OF A CLAIM THAT IT IS IN DEFAULT UNDER OR THAT IT IS IN
VIOLATION OF, ANY INDENTURE, LOAN OR CREDIT AGREEMENT OR ANY OTHER AGREEMENT OR
INSTRUMENT TO WHICH IT IS A PARTY OR BY WHICH IT OR ANY OF ITS PROPERTIES IS
BOUND (WHETHER OR NOT SUCH DEFAULT OR VIOLATION HAS BEEN WAIVED), (II) IS IN
VIOLATION OF ANY

 

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ORDER OF ANY COURT, ARBITRATOR OR GOVERNMENTAL BODY, OR (III) IS OR HAS BEEN IN
VIOLATION OF ANY STATUTE, RULE OR REGULATION OF ANY GOVERNMENTAL AUTHORITY,
INCLUDING WITHOUT LIMITATION ALL FOREIGN, FEDERAL, STATE AND LOCAL LAWS
APPLICABLE TO ITS BUSINESS EXCEPT IN EACH CASE AS COULD NOT HAVE A MATERIAL
ADVERSE EFFECT.

 

(M)          REGULATORY PERMITS.  THE COMPANY AND THE SUBSIDIARIES POSSESS ALL
CERTIFICATES, AUTHORIZATIONS AND PERMITS ISSUED BY THE APPROPRIATE FEDERAL,
STATE, LOCAL OR FOREIGN REGULATORY AUTHORITIES NECESSARY TO CONDUCT THEIR
RESPECTIVE BUSINESSES AS DESCRIBED IN THE SEC REPORTS, EXCEPT WHERE THE FAILURE
TO POSSESS SUCH PERMITS COULD NOT HAVE OR REASONABLY BE EXPECTED TO RESULT IN A
MATERIAL ADVERSE EFFECT (“MATERIAL PERMITS”), AND NEITHER THE COMPANY NOR ANY
SUBSIDIARY HAS RECEIVED ANY NOTICE OF PROCEEDINGS RELATING TO THE REVOCATION OR
MODIFICATION OF ANY MATERIAL PERMIT.

 

(N)           TITLE TO ASSETS.  THE COMPANY AND THE SUBSIDIARIES HAVE GOOD AND
MARKETABLE TITLE IN FEE SIMPLE TO ALL REAL PROPERTY OWNED BY THEM THAT IS
MATERIAL TO THE BUSINESS OF THE COMPANY AND THE SUBSIDIARIES AND GOOD AND
MARKETABLE TITLE IN ALL TANGIBLE PERSONAL PROPERTY OWNED BY THEM THAT IS
MATERIAL TO THE BUSINESS OF THE COMPANY AND THE SUBSIDIARIES, IN EACH CASE FREE
AND CLEAR OF ALL LIENS, EXCEPT FOR LIENS AS DO NOT MATERIALLY AFFECT THE VALUE
OF SUCH PROPERTY AND DO NOT MATERIALLY INTERFERE WITH THE USE MADE AND PROPOSED
TO BE MADE OF SUCH PROPERTY BY THE COMPANY AND THE SUBSIDIARIES AND LIENS FOR
THE PAYMENT OF FEDERAL, STATE OR OTHER TAXES, THE PAYMENT OF WHICH IS NEITHER
DELINQUENT NOR SUBJECT TO PENALTIES.  ANY REAL PROPERTY AND FACILITIES HELD
UNDER LEASE BY THE COMPANY AND THE SUBSIDIARIES ARE HELD BY THEM UNDER VALID,
SUBSISTING AND ENFORCEABLE LEASES WITH WHICH THE COMPANY AND THE SUBSIDIARIES
ARE IN MATERIAL COMPLIANCE.

 

(O)           PATENTS AND TRADEMARKS.  TO THE KNOWLEDGE OF THE COMPANY, THE
COMPANY AND THE SUBSIDIARIES HAVE, OR HAVE RIGHTS TO USE, ALL PATENTS, PATENT
APPLICATIONS, TRADEMARKS, TRADEMARK APPLICATIONS, SERVICE MARKS, TRADE NAMES,
COPYRIGHTS, LICENSES AND OTHER SIMILAR RIGHTS NECESSARY OR MATERIAL FOR USE IN
CONNECTION WITH THEIR RESPECTIVE BUSINESSES AS DESCRIBED IN THE SEC REPORTS AND
WHICH THE FAILURE TO SO HAVE COULD HAVE A MATERIAL ADVERSE EFFECT (COLLECTIVELY,
THE “INTELLECTUAL PROPERTY RIGHTS”).  NEITHER THE COMPANY NOR ANY SUBSIDIARY HAS
RECEIVED A WRITTEN NOTICE THAT THE INTELLECTUAL PROPERTY RIGHTS USED BY THE
COMPANY OR ANY SUBSIDIARY VIOLATES OR INFRINGES UPON THE RIGHTS OF ANY PERSON. 
TO THE KNOWLEDGE OF THE COMPANY, ALL SUCH INTELLECTUAL PROPERTY RIGHTS ARE
ENFORCEABLE AND THERE IS NO EXISTING INFRINGEMENT BY ANOTHER PERSON OF ANY OF
THE INTELLECTUAL PROPERTY RIGHTS OF THE COMPANY.

 

(P)           INSURANCE.  THE COMPANY AND THE SUBSIDIARIES ARE INSURED BY
INSURERS OF RECOGNIZED FINANCIAL RESPONSIBILITY AGAINST SUCH LOSSES AND RISKS
AND IN SUCH AMOUNTS AS ARE PRUDENT AND CUSTOMARY IN THE BUSINESSES IN WHICH THE
COMPANY AND THE SUBSIDIARIES ARE ENGAGED.  TO THE BEST OF COMPANY’S KNOWLEDGE,
SUCH INSURANCE CONTRACTS AND POLICIES ARE ACCURATE AND COMPLETE IN ALL MATERIAL
RESPECTS.  NEITHER THE COMPANY NOR ANY SUBSIDIARY HAS ANY REASON TO BELIEVE THAT
IT WILL NOT BE ABLE TO RENEW ITS EXISTING INSURANCE COVERAGE AS AND WHEN SUCH
COVERAGE EXPIRES OR TO OBTAIN SIMILAR COVERAGE FROM SIMILAR INSURERS AS MAY BE
NECESSARY TO CONTINUE ITS BUSINESS WITHOUT A SIGNIFICANT INCREASE IN COST.

 

(Q)           TRANSACTIONS WITH AFFILIATES AND EMPLOYEES.  EXCEPT AS SET FORTH
IN THE SEC REPORTS, NONE OF THE OFFICERS OR DIRECTORS OF THE COMPANY AND, TO THE
KNOWLEDGE OF THE COMPANY, NONE OF THE EMPLOYEES OF THE COMPANY IS PRESENTLY A
PARTY TO ANY TRANSACTION WITH THE COMPANY OR ANY SUBSIDIARY (OTHER THAN FOR
SERVICES AS EMPLOYEES, OFFICERS AND DIRECTORS), INCLUDING ANY CONTRACT,
AGREEMENT OR OTHER ARRANGEMENT PROVIDING FOR THE FURNISHING OF SERVICES TO OR
BY, PROVIDING FOR RENTAL OF REAL OR PERSONAL PROPERTY TO OR FROM, OR OTHERWISE
REQUIRING PAYMENTS TO OR FROM ANY OFFICER, DIRECTOR OR SUCH EMPLOYEE OR, TO THE
KNOWLEDGE OF THE COMPANY, ANY ENTITY IN WHICH ANY OFFICER, DIRECTOR, OR ANY SUCH
EMPLOYEE HAS A SUBSTANTIAL INTEREST OR IS AN OFFICER, DIRECTOR, TRUSTEE OR
PARTNER, IN EACH CASE IN EXCESS OF $60,000 OTHER THAN (I) FOR PAYMENT OF SALARY
OR CONSULTING FEES FOR SERVICES RENDERED, (II) REIMBURSEMENT FOR EXPENSES
INCURRED ON BEHALF OF THE COMPANY AND (III) FOR OTHER EMPLOYEE BENEFITS,
INCLUDING STOCK OPTION AGREEMENTS UNDER ANY STOCK OPTION PLAN OF THE COMPANY.

 

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(R)            SARBANES-OXLEY; INTERNAL ACCOUNTING CONTROLS.  THE COMPANY IS IN
MATERIAL COMPLIANCE WITH ALL PROVISIONS OF THE SARBANES-OXLEY ACT OF 2002 WHICH
ARE APPLICABLE TO IT AS OF THE CLOSING DATE.  THE COMPANY AND THE SUBSIDIARIES
MAINTAIN A SYSTEM OF INTERNAL ACCOUNTING CONTROLS SUFFICIENT TO PROVIDE
REASONABLE ASSURANCE THAT (I) TRANSACTIONS ARE EXECUTED IN ACCORDANCE WITH
MANAGEMENT’S GENERAL OR SPECIFIC AUTHORIZATIONS, (II) TRANSACTIONS ARE RECORDED
AS NECESSARY TO PERMIT PREPARATION OF FINANCIAL STATEMENTS IN CONFORMITY WITH
GAAP AND TO MAINTAIN ASSET ACCOUNTABILITY, (III) ACCESS TO ASSETS IS PERMITTED
ONLY IN ACCORDANCE WITH MANAGEMENT’S GENERAL OR SPECIFIC AUTHORIZATION, AND (IV)
THE RECORDED ACCOUNTABILITY FOR ASSETS IS COMPARED WITH THE EXISTING ASSETS AT
REASONABLE INTERVALS AND APPROPRIATE ACTION IS TAKEN WITH RESPECT TO ANY
DIFFERENCES. THE COMPANY HAS ESTABLISHED DISCLOSURE CONTROLS AND PROCEDURES (AS
DEFINED IN EXCHANGE ACT RULES 13A-15(E) AND 15D-15(E)) FOR THE COMPANY AND
DESIGNED SUCH DISCLOSURE CONTROLS AND PROCEDURES TO ENSURE THAT MATERIAL
INFORMATION RELATING TO THE COMPANY, INCLUDING ITS SUBSIDIARIES, IS MADE KNOWN
TO THE CERTIFYING OFFICERS BY OTHERS WITHIN THOSE ENTITIES, PARTICULARLY DURING
THE PERIOD IN WHICH THE COMPANY’S MOST RECENTLY FILED PERIODIC REPORT UNDER THE
EXCHANGE ACT WAS BEING PREPARED.  THE COMPANY’S CERTIFYING OFFICERS HAVE
EVALUATED THE EFFECTIVENESS OF THE COMPANY’S CONTROLS AND PROCEDURES AS OF THE
END OF THE PERIOD COVERED BY THE MOST RECENTLY FILED PERIODIC REPORT UNDER THE
EXCHANGE ACT (SUCH DATE, THE “EVALUATION DATE”).  THE COMPANY PRESENTED IN ITS
MOST RECENTLY FILED PERIODIC REPORT UNDER THE EXCHANGE ACT THE CONCLUSIONS OF
THE CERTIFYING OFFICERS ABOUT THE EFFECTIVENESS OF THE DISCLOSURE CONTROLS AND
PROCEDURES BASED ON THEIR EVALUATIONS AS OF THE EVALUATION DATE.  SINCE THE
EVALUATION DATE, THERE HAVE BEEN NO SIGNIFICANT CHANGES IN THE COMPANY’S
INTERNAL CONTROL OVER FINANCIAL REPORTING (AS SUCH TERM IS DEFINED IN EXCHANGE
ACT RULES 13A-15(E) AND 15D-15(E)) OR, TO THE COMPANY’S KNOWLEDGE, IN OTHER
FACTORS THAT COULD SIGNIFICANTLY AFFECT THE COMPANY’S INTERNAL CONTROL OVER
FINANCIAL REPORTING.

 

(S)           CERTAIN FEES.  NO BROKERAGE OR FINDER’S FEES OR COMMISSIONS ARE OR
WILL BE PAYABLE BY THE COMPANY TO ANY BROKER, FINANCIAL ADVISOR OR CONSULTANT,
FINDER, PLACEMENT AGENT, INVESTMENT BANKER, BANK OR OTHER PERSON OTHER THAN
JESUP & LAMONT SECURITIES CORPORATION (THE “PLACEMENT AGENT”) WITH RESPECT TO
THE TRANSACTIONS CONTEMPLATED BY THIS AGREEMENT.  THE PURCHASERS SHALL HAVE NO
OBLIGATION WITH RESPECT TO ANY FEES OR WITH RESPECT TO ANY CLAIMS MADE BY OR ON
BEHALF OF OTHER PERSONS FOR FEES OF A TYPE CONTEMPLATED IN THIS SECTION THAT MAY
BE DUE IN CONNECTION WITH THE TRANSACTIONS CONTEMPLATED BY THIS AGREEMENT.

 

(T)            PRIVATE PLACEMENT. ASSUMING THE ACCURACY OF THE PURCHASERS
REPRESENTATIONS AND WARRANTIES SET FORTH IN SECTION 3.2, NO REGISTRATION UNDER
THE SECURITIES ACT IS REQUIRED FOR THE OFFER AND SALE OF THE SECURITIES BY THE
COMPANY TO THE PURCHASERS AS CONTEMPLATED HEREBY. THE ISSUANCE AND SALE OF THE
SECURITIES HEREUNDER DOES NOT CONTRAVENE THE RULES AND REGULATIONS OF THE
TRADING MARKET.

 

(U)           INVESTMENT COMPANY. THE COMPANY IS NOT, AND IS NOT AN AFFILIATE
OF, AND IMMEDIATELY AFTER RECEIPT OF PAYMENT FOR THE SHARES, WILL NOT BE OR BE
AN AFFILIATE OF, AN “INVESTMENT COMPANY” WITHIN THE MEANING OF THE INVESTMENT
COMPANY ACT OF 1940, AS AMENDED.

 

(V)           REGISTRATION RIGHTS.  NO PERSON HAS ANY RIGHT TO CAUSE THE COMPANY
TO EFFECT THE REGISTRATION UNDER THE SECURITIES ACT OF ANY SECURITIES OF THE
COMPANY.

 

(W)          LISTING AND MAINTENANCE REQUIREMENTS.  THE COMPANY’S COMMON STOCK
IS REGISTERED PURSUANT TO SECTION 12(B) OF THE EXCHANGE ACT, AND THE COMPANY HAS
TAKEN NO ACTION DESIGNED TO, OR WHICH TO ITS KNOWLEDGE IS LIKELY TO HAVE THE
EFFECT OF, TERMINATING THE REGISTRATION OF THE COMMON STOCK UNDER THE EXCHANGE
ACT NOR HAS THE COMPANY RECEIVED ANY NOTIFICATION THAT THE COMMISSION IS
CONTEMPLATING TERMINATING SUCH REGISTRATION.  THE COMPANY HAS NOT, IN THE 12
MONTHS PRECEDING THE DATE HEREOF, RECEIVED NOTICE FROM ANY TRADING MARKET ON
WHICH THE COMMON STOCK IS OR HAS BEEN LISTED OR QUOTED TO THE EFFECT THAT THE
COMPANY IS NOT IN COMPLIANCE WITH THE LISTING OR MAINTENANCE REQUIREMENTS OF
SUCH TRADING MARKET. THE COMPANY IS, AND HAS NO REASON TO BELIEVE THAT IT WILL
NOT IN THE FORESEEABLE FUTURE CONTINUE TO BE, IN COMPLIANCE WITH ALL SUCH
LISTING AND MAINTENANCE REQUIREMENTS.

 

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(X)            APPLICATION OF TAKEOVER PROTECTIONS.  THE COMPANY AND ITS BOARD
OF DIRECTORS HAVE TAKEN ALL NECESSARY ACTION, IF ANY, IN ORDER TO RENDER
INAPPLICABLE ANY CONTROL SHARE ACQUISITION, BUSINESS COMBINATION, POISON PILL
(INCLUDING ANY DISTRIBUTION UNDER A RIGHTS AGREEMENT) OR OTHER SIMILAR
ANTI-TAKEOVER PROVISION UNDER THE COMPANY’S CERTIFICATE OF INCORPORATION (OR
SIMILAR CHARTER DOCUMENTS) OR THE LAWS OF ITS STATE OF INCORPORATION THAT IS OR
COULD BECOME APPLICABLE TO THE PURCHASERS AS A RESULT OF THE PURCHASERS AND THE
COMPANY FULFILLING THEIR OBLIGATIONS OR EXERCISING THEIR RIGHTS UNDER THE
TRANSACTION DOCUMENTS, INCLUDING WITHOUT LIMITATION THE COMPANY’S ISSUANCE OF
THE SECURITIES AND THE PURCHASERS’ OWNERSHIP OF THE SECURITIES.

 

(Y)           DISCLOSURE.  THE COMPANY CONFIRMS THAT, NEITHER THE COMPANY NOR
ANY OTHER PERSON ACTING ON ITS BEHALF HAS PROVIDED ANY OF THE PURCHASERS OR
THEIR AGENTS OR COUNSEL WITH ANY INFORMATION THAT CONSTITUTES OR MIGHT
CONSTITUTE MATERIAL, NON-PUBLIC INFORMATION.  THE COMPANY UNDERSTANDS AND
CONFIRMS THAT THE PURCHASERS WILL RELY ON THE FOREGOING REPRESENTATIONS AND
COVENANTS IN EFFECTING TRANSACTIONS IN SECURITIES OF THE COMPANY.  ALL
DISCLOSURE PROVIDED TO THE PURCHASERS REGARDING THE COMPANY, ITS BUSINESS AND
THE TRANSACTIONS CONTEMPLATED HEREBY, INCLUDING THE DISCLOSURE SCHEDULES TO THIS
AGREEMENT, FURNISHED BY OR ON BEHALF OF THE COMPANY WITH RESPECT TO THE
REPRESENTATIONS AND WARRANTIES MADE HEREIN ARE TRUE AND CORRECT WITH RESPECT TO
SUCH REPRESENTATIONS AND WARRANTIES AND DO NOT CONTAIN ANY UNTRUE STATEMENT OF A
MATERIAL FACT OR OMIT TO STATE ANY MATERIAL FACT NECESSARY IN ORDER TO MAKE THE
STATEMENTS MADE THEREIN, IN LIGHT OF THE CIRCUMSTANCES UNDER WHICH THEY WERE
MADE, NOT MISLEADING. THE COMPANY ACKNOWLEDGES AND AGREES THAT NO PURCHASER
MAKES OR HAS MADE ANY REPRESENTATIONS OR WARRANTIES WITH RESPECT TO THE
TRANSACTIONS CONTEMPLATED HEREBY OTHER THAN THOSE SPECIFICALLY SET FORTH IN
SECTION 3.2 HEREOF AND/OR ON THE PURCHASERS’ RESPECTIVE SIGNATURE PAGES TO THIS
AGREEMENT.

 

(Z)            NO INTEGRATED OFFERING. ASSUMING THE ACCURACY OF THE PURCHASERS’
REPRESENTATIONS AND WARRANTIES SET FORTH IN SECTION 3.2, 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, UNDER CIRCUMSTANCES THAT WOULD CAUSE THIS
OFFERING OF THE SECURITIES TO BE INTEGRATED WITH PRIOR OFFERINGS BY THE COMPANY
FOR PURPOSES OF THE SECURITIES ACT OR ANY APPLICABLE SHAREHOLDER APPROVAL
PROVISIONS, INCLUDING, WITHOUT LIMITATION, UNDER THE RULES AND REGULATIONS OF
ANY EXCHANGE OR AUTOMATED QUOTATION SYSTEM ON WHICH ANY OF THE SECURITIES OF THE
COMPANY ARE LISTED OR DESIGNATED.

 

(AA)         SOLVENCY.  BASED ON THE FINANCIAL CONDITION OF THE COMPANY AS OF
THE CLOSING DATE AFTER GIVING EFFECT TO THE RECEIPT BY THE COMPANY OF THE
PROCEEDS FROM THE SALE OF THE SECURITIES HEREUNDER, (I) THE COMPANY’S FAIR
SALEABLE VALUE OF ITS ASSETS EXCEEDS THE AMOUNT THAT WILL BE REQUIRED TO BE PAID
ON OR IN RESPECT OF THE COMPANY’S EXISTING DEBTS AND OTHER LIABILITIES
(INCLUDING KNOWN CONTINGENT LIABILITIES) AS THEY MATURE; AND (II) THE CURRENT
CASH FLOW OF THE COMPANY, TOGETHER WITH THE PROCEEDS THE COMPANY WOULD RECEIVE,
WERE IT TO LIQUIDATE ALL OF ITS ASSETS, AFTER TAKING INTO ACCOUNT ALL CURRENTLY
ANTICIPATED USES OF THE CASH, WOULD BE SUFFICIENT TO PAY ALL AMOUNTS ON OR IN
RESPECT OF ITS DEBT WHEN SUCH AMOUNTS ARE REQUIRED TO BE PAID.  THE COMPANY DOES
NOT INTEND TO INCUR DEBTS BEYOND ITS ABILITY TO PAY SUCH DEBTS AS THEY MATURE
(TAKING INTO ACCOUNT THE TIMING AND AMOUNTS OF CASH TO BE PAYABLE ON OR IN
RESPECT OF ITS DEBT).

 

(BB)         FORM S-3 ELIGIBILITY.  THE COMPANY IS ELIGIBLE TO REGISTER THE
RESALE OF ITS COMMON STOCK BY THE PURCHASERS UNDER FORM S-3 PROMULGATED UNDER
THE SECURITIES ACT AND THE COMPANY HEREBY COVENANTS AND AGREES TO USE ITS
COMMERCIALLY REASONABLE EFFORTS TO MAINTAIN ITS ELIGIBILITY TO USE FORM S-3
UNTIL THE REGISTRATION STATEMENT COVERING THE RESALE OF THE SHARES SHALL HAVE
BEEN FILED WITH, AND DECLARED EFFECTIVE BY, THE COMMISSION.

 

(CC)         TAXES.  EXCEPT FOR MATTERS THAT WOULD NOT, INDIVIDUALLY OR IN THE
AGGREGATE, HAVE OR REASONABLY BE EXPECTED TO RESULT IN A MATERIAL ADVERSE
EFFECT, THE COMPANY AND EACH SUBSIDIARY HAS FILED ALL NECESSARY FEDERAL, STATE
AND FOREIGN INCOME AND FRANCHISE TAX RETURNS, OR HAS FILED APPROPRIATE

 

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EXTENSIONS FOR THE FILING OF SUCH RETURNS, AND HAS PAID OR ACCRUED ALL TAXES
SHOWN AS DUE THEREON, AND THE COMPANY HAS NO KNOWLEDGE OF A TAX DEFICIENCY WHICH
HAS BEEN ASSERTED OR THREATENED AGAINST THE COMPANY OR ANY SUBSIDIARY.

 

(DD)         GENERAL SOLICITATION.  NEITHER THE COMPANY NOR ANY PERSON ACTING ON
BEHALF OF THE COMPANY HAS OFFERED OR SOLD ANY OF THE SHARES BY ANY FORM OF
GENERAL SOLICITATION OR GENERAL ADVERTISING.  THE COMPANY HAS OFFERED THE SHARES
FOR SALE ONLY TO THE PURCHASERS AND CERTAIN OTHER “ACCREDITED INVESTORS” WITHIN
THE MEANING OF RULE 501 UNDER THE SECURITIES ACT.

 

(EE)         FOREIGN CORRUPT PRACTICES.  NEITHER THE COMPANY, NOR TO THE
KNOWLEDGE OF THE COMPANY, ANY AGENT OR OTHER PERSON ACTING ON BEHALF OF THE
COMPANY, HAS (I) DIRECTLY OR INDIRECTLY, USED ANY CORRUPT FUNDS FOR UNLAWFUL
CONTRIBUTIONS, GIFTS, ENTERTAINMENT OR OTHER UNLAWFUL EXPENSES RELATED TO
FOREIGN OR DOMESTIC POLITICAL ACTIVITY, (II) MADE ANY UNLAWFUL PAYMENT TO
FOREIGN OR DOMESTIC GOVERNMENT OFFICIALS OR EMPLOYEES OR TO ANY FOREIGN OR
DOMESTIC POLITICAL PARTIES OR CAMPAIGNS FROM CORPORATE FUNDS, (III) FAILED TO
DISCLOSE FULLY ANY CONTRIBUTION MADE BY THE COMPANY (OR MADE BY ANY PERSON
ACTING ON ITS BEHALF OF WHICH THE COMPANY IS AWARE) WHICH IS IN VIOLATION OF
LAW, OR (IV) VIOLATED IN ANY MATERIAL RESPECT ANY PROVISION OF THE FOREIGN
CORRUPT PRACTICES ACT OF 1977, AS AMENDED.

 

(FF)           ACCOUNTANTS.  THE COMPANY’S ACCOUNTANTS ARE SET FORTH ON SCHEDULE
3.1(FF) OF THE DISCLOSURE SCHEDULE.  TO THE COMPANY’S KNOWLEDGE, SUCH
ACCOUNTANTS, WHO THE COMPANY EXPECTS WILL EXPRESS THEIR OPINION WITH RESPECT TO
THE FINANCIAL STATEMENTS TO BE INCLUDED IN THE COMPANY’S ANNUAL REPORT ON FORM
10-K FOR THE YEAR ENDING DECEMBER 31, 2004, ARE AN INDEPENDENT REGISTERED PUBLIC
ACCOUNTING FIRM AS REQUIRED BY THE SECURITIES ACT.

 

(GG)         ACKNOWLEDGMENT REGARDING PURCHASERS’ PURCHASE OF SHARES.  THE
COMPANY ACKNOWLEDGES AND AGREES THAT EACH OF THE PURCHASERS IS ACTING SOLELY IN
THE CAPACITY OF AN ARM’S LENGTH PURCHASER WITH RESPECT TO THE TRANSACTION
DOCUMENTS AND THE TRANSACTIONS CONTEMPLATED HEREBY.  THE COMPANY FURTHER
ACKNOWLEDGES THAT NO PURCHASER IS ACTING AS A FINANCIAL ADVISOR OR FIDUCIARY OF
THE COMPANY (OR IN ANY SIMILAR CAPACITY) WITH RESPECT TO THIS AGREEMENT AND THE
TRANSACTIONS CONTEMPLATED HEREBY AND ANY ADVICE GIVEN BY ANY PURCHASER OR ANY OF
THEIR RESPECTIVE REPRESENTATIVES OR AGENTS IN CONNECTION WITH THIS AGREEMENT AND
THE TRANSACTIONS CONTEMPLATED HEREBY IS MERELY INCIDENTAL TO THE PURCHASERS’
PURCHASE OF THE SHARES.  THE COMPANY FURTHER REPRESENTS TO EACH PURCHASER THAT
THE COMPANY’S DECISION TO ENTER INTO THIS AGREEMENT HAS BEEN BASED SOLELY ON THE
INDEPENDENT EVALUATION OF THE TRANSACTIONS CONTEMPLATED HEREBY BY THE COMPANY
AND ITS REPRESENTATIVES.

 

3.2           Representations and Warranties of the Purchasers.  Each Purchaser
hereby, for itself and for no other Purchaser, represents and warrants as of the
date hereof and as of the Closing Date to the Company as follows:

 

(A)           ORGANIZATION; AUTHORITY.  SUCH PURCHASER IS AN ENTITY DULY
ORGANIZED, VALIDLY EXISTING AND IN GOOD STANDING UNDER THE LAWS OF THE
JURISDICTION OF ITS ORGANIZATION WITH FULL RIGHT, CORPORATE OR PARTNERSHIP POWER
AND AUTHORITY TO ENTER INTO AND TO CONSUMMATE THE TRANSACTIONS CONTEMPLATED BY
THE TRANSACTION DOCUMENTS AND OTHERWISE TO CARRY OUT ITS OBLIGATIONS THEREUNDER.
THE EXECUTION, DELIVERY AND PERFORMANCE BY SUCH PURCHASER OF THE TRANSACTIONS
CONTEMPLATED BY THIS AGREEMENT HAVE BEEN DULY AUTHORIZED BY ALL NECESSARY
CORPORATE OR SIMILAR ACTION ON THE PART OF SUCH PURCHASER.  EACH TRANSACTION
DOCUMENT TO WHICH IT IS A PARTY HAS BEEN DULY EXECUTED BY SUCH PURCHASER, AND
WHEN DELIVERED BY SUCH PURCHASER IN ACCORDANCE WITH THE TERMS HEREOF, WILL
CONSTITUTE THE VALID AND LEGALLY BINDING OBLIGATION OF SUCH PURCHASER,
ENFORCEABLE AGAINST IT IN ACCORDANCE WITH ITS TERMS, EXCEPT (I) AS LIMITED BY
GENERAL EQUITABLE PRINCIPLES AND APPLICABLE BANKRUPTCY, INSOLVENCY,
REORGANIZATION, MORATORIUM AND OTHER LAWS OF GENERAL APPLICATION AFFECTING
ENFORCEMENT OF CREDITORS’ RIGHTS GENERALLY, (II) AS LIMITED BY LAWS RELATING TO
THE AVAILABILITY OF SPECIFIC PERFORMANCE, INJUNCTIVE RELIEF OR OTHER EQUITABLE
REMEDIES AND (III) INSOFAR AS INDEMNIFICATION AND CONTRIBUTION PROVISIONS MAY BE
LIMITED BY APPLICABLE LAW.

 

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(B)           INVESTMENT INTENT.  SUCH PURCHASER UNDERSTANDS THAT THE SECURITIES
ARE “RESTRICTED SECURITIES” AND HAVE NOT BEEN REGISTERED UNDER THE SECURITIES
ACT OR ANY APPLICABLE STATE SECURITIES LAW AND IS ACQUIRING THE SECURITIES AS
PRINCIPAL FOR ITS OWN ACCOUNT AND NOT WITH A VIEW TO OR FOR DISTRIBUTING OR
RESELLING SUCH SECURITIES OR ANY PART THEREOF, HAS NO PRESENT INTENTION OF
DISTRIBUTING ANY OF SUCH SECURITIES AND HAS NO ARRANGEMENT OR UNDERSTANDING WITH
ANY OTHER PERSONS REGARDING THE DISTRIBUTION OF SUCH SECURITIES (THIS
REPRESENTATION AND WARRANTY NOT LIMITING SUCH PURCHASER’S RIGHT TO SELL THE
SECURITIES PURSUANT TO THE REGISTRATION STATEMENT OR OTHERWISE IN COMPLIANCE
WITH APPLICABLE FEDERAL AND STATE SECURITIES LAWS).  SUCH PURCHASER IS ACQUIRING
THE SECURITIES HEREUNDER IN THE ORDINARY COURSE OF ITS BUSINESS. SUCH PURCHASER
DOES NOT HAVE ANY AGREEMENT OR UNDERSTANDING, DIRECTLY OR INDIRECTLY, WITH ANY
PERSON TO DISTRIBUTE ANY OF THE SECURITIES.

 

(C)           PURCHASER STATUS.  AT THE TIME SUCH PURCHASER WAS OFFERED THE
SECURITIES, IT WAS, AND AT THE DATE HEREOF IT IS, AND ON EACH DATE ON WHICH IT
EXERCISES ANY WARRANTS, IT WILL BE EITHER: (I) AN “ACCREDITED INVESTOR” AS
DEFINED IN RULE 501(A)(1), (A)(2), (A)(3), (A)(7) OR (A)(8) UNDER THE SECURITIES
ACT OR (II) A “QUALIFIED INSTITUTIONAL BUYER” AS DEFINED IN RULE 144A(A) UNDER
THE SECURITIES ACT.  SUCH PURCHASER IS NOT REQUIRED TO BE REGISTERED AS A
BROKER-DEALER UNDER SECTION 15 OF THE EXCHANGE ACT.

 

(D)           EXPERIENCE OF SUCH PURCHASER.  SUCH PURCHASER, EITHER ALONE OR
TOGETHER WITH ITS REPRESENTATIVES, HAS SUCH KNOWLEDGE, SOPHISTICATION AND
EXPERIENCE IN BUSINESS AND FINANCIAL MATTERS SO AS TO BE CAPABLE OF EVALUATING
THE MERITS AND RISKS OF THE PROSPECTIVE INVESTMENT IN THE SECURITIES, AND HAS SO
EVALUATED THE MERITS AND RISKS OF SUCH INVESTMENT.  SUCH PURCHASER IS ABLE TO
BEAR THE ECONOMIC RISK OF AN INVESTMENT IN THE SECURITIES AND, AT THE PRESENT
TIME, IS ABLE TO AFFORD A COMPLETE LOSS OF SUCH INVESTMENT.

 

(E)           GENERAL SOLICITATION.  SUCH PURCHASER IS NOT PURCHASING THE
SECURITIES AS A RESULT OF ANY ADVERTISEMENT, ARTICLE, NOTICE OR OTHER
COMMUNICATION REGARDING THE SECURITIES PUBLISHED IN ANY NEWSPAPER, MAGAZINE OR
SIMILAR MEDIA OR BROADCAST OVER TELEVISION OR RADIO OR PRESENTED AT ANY SEMINAR
OR ANY OTHER GENERAL SOLICITATION OR GENERAL ADVERTISEMENT.

 

(F)            SHORT SALES.  EACH PURCHASER REPRESENTS THAT FROM THE DATE THAT
IT WAS APPROACHED TO PARTICIPATE IN THE TRANSACTION CONTEMPLATED BY THIS
AGREEMENT THROUGH THE CLOSING DATE, NEITHER IT NOR ITS AFFILIATES HAVE ENGAGED
IN ANY TRADES WITH RESPECT TO, OR MADE ANY NET SHORT SALES OF, OR GRANTED ANY
OPTION FOR THE PURCHASE OF OR ENTERED INTO ANY HEDGING OR SIMILAR TRANSACTION
WITH THE SAME ECONOMIC EFFECT AS A NET SHORT SALE OF THE COMMON STOCK.

 

(G)           REGISTRATION REQUIRED.  EACH PURCHASER HEREBY COVENANTS WITH THE
COMPANY NOT TO MAKE ANY SALE OF THE SHARES OR WARRANT SHARES WITHOUT COMPLYING
WITH THE PROVISIONS HEREOF AND OF THE REGISTRATION RIGHTS AGREEMENT, AND WITHOUT
EFFECTIVELY CAUSING THE PROSPECTUS DELIVERY REQUIREMENT UNDER THE SECURITIES ACT
TO BE SATISFIED (UNLESS SUCH PURCHASER IS SELLING SUCH SHARES OR WARRANT SHARES
IN A TRANSACTION NOT SUBJECT TO THE PROSPECTUS DELIVERY REQUIREMENT), AND SUCH
PURCHASER ACKNOWLEDGES THAT THE CERTIFICATES EVIDENCING THE SHARES OR WARRANT
SHARES WILL BE IMPRINTED WITH A LEGEND THAT PROHIBITS THEIR TRANSFER EXCEPT IN
ACCORDANCE THEREWITH.

 

(H)           NO TAX OR LEGAL ADVICE.  SUCH PURCHASER UNDERSTANDS THAT NOTHING
IN THIS AGREEMENT, ANY OTHER TRANSACTION DOCUMENT OR ANY OTHER MATERIALS
PRESENTED TO SUCH PURCHASER IN CONNECTION WITH THE PURCHASE AND SALE OF THE
SECURITIES CONSTITUTES LEGAL, TAX OR INVESTMENT ADVICE.  SUCH PURCHASER HAS
CONSULTED SUCH LEGAL, TAX AND INVESTMENT ADVISORS AS IT, IN ITS SOLE DISCRETION,
HAS DEEMED NECESSARY OR APPROPRIATE IN CONNECTION WITH ITS PURCHASE OF
SECURITIES.

 

The Company acknowledges and agrees that each Purchaser does not make or has not
made any representations or warranties with respect to the transactions
contemplated hereby other than those specifically set forth in this Section 3.2.

 

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ARTICLE IV.

OTHER AGREEMENTS OF THE PARTIES

 

4.1           TRANSFER RESTRICTIONS.

 

(A)           THE SECURITIES MAY ONLY BE DISPOSED OF IN COMPLIANCE WITH STATE
AND FEDERAL SECURITIES LAWS.  IN CONNECTION WITH ANY TRANSFER OF SECURITIES
OTHER THAN PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT OR RULE 144, TO THE
COMPANY OR TO AN AFFILIATE OF A PURCHASER OR IN CONNECTION WITH A PLEDGE AS
CONTEMPLATED IN SECTION 4.1(B), THE COMPANY MAY REQUIRE THE TRANSFEROR THEREOF
TO PROVIDE TO THE COMPANY AN OPINION OF COUNSEL SELECTED BY THE TRANSFEROR AND
REASONABLY ACCEPTABLE TO THE COMPANY, THE FORM AND SUBSTANCE OF WHICH OPINION
SHALL BE REASONABLY SATISFACTORY TO THE COMPANY, TO THE EFFECT THAT SUCH
TRANSFER DOES NOT REQUIRE REGISTRATION OF SUCH TRANSFERRED SECURITIES UNDER THE
SECURITIES ACT.  AS A CONDITION OF TRANSFER, ANY SUCH TRANSFEREE SHALL AGREE IN
WRITING TO BE BOUND BY THE TERMS OF THIS AGREEMENT AND SHALL HAVE THE RIGHTS OF
A PURCHASER UNDER THIS AGREEMENT AND THE REGISTRATION RIGHTS AGREEMENT.

 

(B)           THE PURCHASERS AGREE TO THE IMPRINTING, SO LONG AS IS REQUIRED BY
THIS SECTION 4.1(B), OF A LEGEND ON ANY OF THE SECURITIES IN THE FOLLOWING FORM:

 

THESE SECURITIES HAVE NOT BEEN REGISTERED WITH THE SECURITIES AND EXCHANGE
COMMISSION OR THE SECURITIES COMMISSION OF ANY STATE IN RELIANCE UPON AN
EXEMPTION FROM REGISTRATION UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE
“SECURITIES ACT”), AND, ACCORDINGLY, MAY NOT BE OFFERED OR SOLD EXCEPT PURSUANT
TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT OR PURSUANT TO
AN AVAILABLE EXEMPTION FROM, OR IN A TRANSACTION NOT SUBJECT TO, THE
REGISTRATION REQUIREMENTS OF THE SECURITIES ACT AND IN ACCORDANCE WITH
APPLICABLE STATE SECURITIES LAWS AS EVIDENCED BY A LEGAL OPINION OF COUNSEL TO
THE TRANSFEROR TO SUCH EFFECT, THE SUBSTANCE OF WHICH SHALL BE REASONABLY
ACCEPTABLE TO THE COMPANY.  THESE SECURITIES MAY BE PLEDGED IN CONNECTION WITH A
BONA FIDE MARGIN ACCOUNT WITH A REGISTERED BROKER-DEALER OR OTHER LOAN WITH A
FINANCIAL INSTITUTION THAT IS AN “ACCREDITED INVESTOR” AS DEFINED IN RULE 501(a)
UNDER THE SECURITIES ACT.

 

The Company acknowledges and agrees that a Purchaser may from time to time
pledge pursuant to a bona fide margin agreement with a registered broker-dealer
or grant a security interest in some or all of the Securities to a financial
institution that is an “accredited investor” as defined in Rule 501(a) under the
Securities Act and who agrees to be bound by the provisions of this Agreement
and the Registration Rights Agreement and, if required under the terms of such
arrangement, such Purchaser may transfer pledged or secured Securities to the
pledgees or secured parties.  Such a pledge or transfer would not be subject to
approval of the Company and no legal opinion of legal counsel of the pledgee,
secured party or pledgor shall be required in connection therewith.  Further, no
notice shall be required of such pledge.  At the appropriate Purchaser’s
expense, the Company will execute and deliver such reasonable documentation as a
pledgee or secured party of Securities may reasonably request in connection with
a pledge or transfer of the Securities, including, if the Securities are subject
to registration pursuant to the Registration Rights Agreement, the preparation
and filing of any required prospectus supplement under Rule 424(b)(3) under the
Securities Act or other applicable provision of the Securities Act to
appropriately amend the list of Selling Stockholders thereunder.

 

(C)           CERTIFICATES EVIDENCING THE SHARES AND WARRANT SHARES SHALL NOT
CONTAIN ANY LEGEND (INCLUDING THE LEGEND SET FORTH IN SECTION 4.1(B)), (I) WHILE
A REGISTRATION STATEMENT (INCLUDING THE REGISTRATION STATEMENT) COVERING THE
RESALE OF SUCH SECURITY IS EFFECTIVE UNDER THE SECURITIES ACT, OR (II) FOLLOWING
ANY SALE OF SUCH SHARES OR WARRANT SHARES PURSUANT TO RULE 144, OR (III) IF SUCH
SHARES OR WARRANT SHARES ARE ELIGIBLE FOR SALE UNDER RULE 144(K), OR (IV) IF
SUCH LEGEND IS NOT REQUIRED UNDER APPLICABLE REQUIREMENTS OF THE SECURITIES ACT
(INCLUDING JUDICIAL INTERPRETATIONS AND

 

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PRONOUNCEMENTS ISSUED BY THE STAFF OF THE COMMISSION).  THE COMPANY SHALL CAUSE
ITS COUNSEL TO ISSUE A LEGAL OPINION TO THE COMPANY’S TRANSFER AGENT PROMPTLY
AFTER THE EFFECTIVE DATE IF REQUIRED BY THE COMPANY’S TRANSFER AGENT TO EFFECT
THE REMOVAL OF THE LEGEND HEREUNDER.  IF ALL OR ANY PORTION OF A WARRANT IS
EXERCISED AT A TIME WHEN THERE IS AN EFFECTIVE REGISTRATION STATEMENT TO COVER
THE RESALE OF THE WARRANT SHARES, SUCH WARRANT SHARES SHALL BE ISSUED FREE OF

 

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ALL LEGENDS.  THE COMPANY AGREES THAT FOLLOWING THE EFFECTIVE DATE OR AT SUCH
TIME AS SUCH LEGEND IS NO LONGER REQUIRED UNDER THIS SECTION 4.1(C), IT WILL, NO
LATER THAN THREE TRADING DAYS FOLLOWING THE DELIVERY BY A PURCHASER TO THE
COMPANY OR THE COMPANY’S TRANSFER AGENT OF A CERTIFICATE REPRESENTING SHARES OR
WARRANT SHARES, AS THE CASE MAY BE, ISSUED WITH A RESTRICTIVE LEGEND (SUCH DATE,
THE “LEGEND REMOVAL DATE”), DELIVER OR CAUSE TO BE DELIVERED TO SUCH PURCHASER A
CERTIFICATE REPRESENTING SUCH SECURITIES THAT IS FREE FROM ALL RESTRICTIVE AND
OTHER LEGENDS.  THE COMPANY MAY NOT MAKE ANY NOTATION ON ITS RECORDS OR GIVE
INSTRUCTIONS TO ANY TRANSFER AGENT OF THE COMPANY THAT ENLARGE THE RESTRICTIONS
ON TRANSFER SET FORTH IN THIS SECTION.

 

(D)           IN ADDITION TO SUCH PURCHASER’S OTHER AVAILABLE REMEDIES, THE
COMPANY SHALL PAY TO A PURCHASER, IN CASH, AS PARTIAL LIQUIDATED DAMAGES AND NOT
AS A PENALTY, FOR EACH $1,000 OF SHARES OR WARRANT SHARES (BASED ON THE CLOSING
PRICE OF THE COMMON STOCK ON THE DATE SUCH SECURITIES ARE SUBMITTED TO THE
COMPANY’S TRANSFER AGENT) SUBJECT TO SECTION 4.1(C), $10 PER TRADING DAY
(INCREASING TO $20 PER TRADING DAY FIVE (5) TRADING DAYS AFTER SUCH DAMAGES HAVE
BEGUN TO ACCRUE) FOR EACH TRADING DAY AFTER THE LEGEND REMOVAL DATE UNTIL SUCH
CERTIFICATE IS DELIVERED. NOTHING HEREIN SHALL LIMIT SUCH PURCHASER’S RIGHT TO
PURSUE ACTUAL DAMAGES FOR THE COMPANY’S FAILURE TO DELIVER CERTIFICATES
REPRESENTING ANY SECURITIES AS REQUIRED BY THE TRANSACTION DOCUMENTS, AND SUCH
PURCHASER SHALL HAVE THE RIGHT TO PURSUE ALL REMEDIES AVAILABLE TO IT AT LAW OR
IN EQUITY INCLUDING, WITHOUT LIMITATION, A DECREE OF SPECIFIC PERFORMANCE AND/OR
INJUNCTIVE RELIEF.

 

(E)           EACH PURCHASER, SEVERALLY AND NOT JOINTLY WITH THE OTHER
PURCHASERS, AGREES THAT THE REMOVAL OF THE RESTRICTIVE LEGEND FROM CERTIFICATES
REPRESENTING SECURITIES AS SET FORTH IN THIS SECTION 4.1 IS PREDICATED UPON THE
COMPANY’S RELIANCE THAT THE PURCHASER WILL SELL ANY SECURITIES PURSUANT TO
EITHER THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT, INCLUDING ANY
APPLICABLE PROSPECTUS DELIVERY REQUIREMENTS, OR AN EXEMPTION THEREFROM.

 

4.2           Furnishing of Information.  As long as any Purchaser owns
Securities, the Company covenants to timely file (or obtain extensions in
respect thereof and file within the applicable grace period) all reports
required to be filed by the Company after the date hereof pursuant to the
Exchange Act.  As long as any Purchaser owns Securities, if the Company is not
required to file reports pursuant to the Exchange Act, it will prepare and
furnish to the Purchasers and make publicly available in accordance with Rule
144(c) such information as is required for the Purchasers to sell the Securities
under Rule 144. The Company further covenants that it will take such further
action as any holder of Securities may reasonably request, all to the extent
required from time to time to enable such Person to sell such Securities without
registration under the Securities Act within the limitation of the exemptions
provided by Rule 144.

 

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

 

4.4           SECURITIES LAWS DISCLOSURE; PUBLICITY.  THE COMPANY SHALL, BY 8:30
A.M. EASTERN TIME ON THE TRADING DAY FOLLOWING THE DATE HEREOF, ISSUE A PRESS
RELEASE OR FILE A CURRENT REPORT ON FORM 8-K, IN EACH CASE REASONABLY ACCEPTABLE
TO THE PLACEMENT AGENT ON BEHALF OF THE PURCHASERS, DISCLOSING THE MATERIAL
TERMS OF THE TRANSACTIONS CONTEMPLATED HEREBY.  THE COMPANY AND THE PLACEMENT
AGENT SHALL CONSULT WITH EACH OTHER

 

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IN ISSUING ANY OTHER PRESS RELEASES WITH RESPECT TO THE TRANSACTIONS
CONTEMPLATED HEREBY, AND NEITHER THE COMPANY NOR THE PLACEMENT AGENT SHALL ISSUE
ANY SUCH PRESS RELEASE OR OTHERWISE MAKE ANY SUCH PUBLIC STATEMENT WITHOUT THE
PRIOR CONSENT OF THE COMPANY, WITH RESPECT TO ANY PRESS RELEASE OF THE PLACEMENT
AGENT, OR WITHOUT THE PRIOR CONSENT OF THE PLACEMENT AGENT, WITH RESPECT TO ANY
PRESS RELEASE OF THE COMPANY, WHICH CONSENT SHALL NOT UNREASONABLY BE WITHHELD,
EXCEPT IF SUCH DISCLOSURE IS REQUIRED BY LAW, IN WHICH CASE THE DISCLOSING PARTY
SHALL PROMPTLY PROVIDE THE OTHER PARTY WITH PRIOR NOTICE OF SUCH PUBLIC
STATEMENT OR COMMUNICATION.  NOTWITHSTANDING THE FOREGOING, THE COMPANY SHALL
NOT PUBLICLY DISCLOSE THE NAME OF ANY PURCHASER, OR INCLUDE THE NAME OF ANY
PURCHASER IN ANY FILING WITH THE COMMISSION OR ANY REGULATORY AGENCY OR TRADING
MARKET, WITHOUT THE PRIOR WRITTEN CONSENT OF SUCH PURCHASER, EXCEPT (I) AS
REQUIRED BY FEDERAL SECURITIES LAW IN CONNECTION WITH THE REGISTRATION STATEMENT
CONTEMPLATED BY THE REGISTRATION RIGHTS AGREEMENT AND (II) TO THE EXTENT SUCH
DISCLOSURE IS REQUIRED BY LAW OR TRADING MARKET REGULATIONS, IN WHICH CASE THE
COMPANY SHALL PROVIDE THE PURCHASERS WITH PRIOR NOTICE OF SUCH DISCLOSURE
PERMITTED UNDER SUBCLAUSE (I) OR (II).

 

4.5           SHAREHOLDER RIGHTS PLAN.  NO CLAIM WILL BE MADE OR ENFORCED BY THE
COMPANY OR, TO THE KNOWLEDGE OF THE COMPANY, ANY OTHER PERSON THAT ANY PURCHASER
IS AN “ACQUIRING PERSON” UNDER ANY SHAREHOLDER RIGHTS PLAN OR SIMILAR PLAN OR
ARRANGEMENT IN EFFECT OR HEREAFTER ADOPTED BY THE COMPANY, OR THAT ANY PURCHASER
COULD BE DEEMED TO TRIGGER THE PROVISIONS OF ANY SUCH PLAN OR ARRANGEMENT, BY
VIRTUE OF RECEIVING SECURITIES UNDER THE TRANSACTION DOCUMENTS OR UNDER ANY
OTHER AGREEMENT BETWEEN THE COMPANY AND THE PURCHASERS.

 

4.6           NON-PUBLIC INFORMATION.  THE COMPANY COVENANTS AND AGREES THAT
NEITHER IT NOR ANY OTHER PERSON ACTING ON ITS BEHALF WILL PROVIDE ANY PURCHASER
OR ITS AGENTS OR COUNSEL WITH ANY INFORMATION THAT THE COMPANY BELIEVES
CONSTITUTES MATERIAL NON-PUBLIC INFORMATION, UNLESS PRIOR THERETO SUCH PURCHASER
SHALL HAVE EXECUTED A WRITTEN AGREEMENT REGARDING THE CONFIDENTIALITY AND USE OF
SUCH INFORMATION.  THE COMPANY UNDERSTANDS AND CONFIRMS THAT EACH PURCHASER
SHALL BE RELYING ON THE FOREGOING REPRESENTATIONS IN EFFECTING TRANSACTIONS IN
SECURITIES OF THE COMPANY.

 

4.7           USE OF PROCEEDS.  EXCEPT AS SET FORTH ON SCHEDULE 4.7 ATTACHED
HERETO, THE COMPANY SHALL USE THE NET PROCEEDS FROM THE SALE OF THE SECURITIES
HEREUNDER FOR WORKING CAPITAL PURPOSES AND NOT FOR THE SATISFACTION OF ANY
PORTION OF THE COMPANY’S DEBT (OTHER THAN PAYMENT OF TRADE PAYABLES IN THE
ORDINARY COURSE OF THE COMPANY’S BUSINESS AND PRIOR PRACTICES), TO REDEEM ANY
COMPANY EQUITY OR EQUITY-EQUIVALENT SECURITIES OR TO SETTLE ANY OUTSTANDING
LITIGATION.

 

4.8           NO LIABILITY OF PURCHASER.  THE COMPANY AGREES THAT NEITHER THE
PURCHASERS NOR ANY SUCH AFFILIATES, PARTNERS, DIRECTORS, AGENTS, EMPLOYEES OR
CONTROLLING PERSONS OF A PURCHASER SHALL HAVE ANY LIABILITY TO THE COMPANY OR
ANY PERSON ASSERTING CLAIMS ON BEHALF OF OR IN RIGHT OF THE COMPANY SOLELY AS A
RESULT OF ACQUIRING THE SECURITIES UNDER THIS AGREEMENT.

 

4.9           INDEMNIFICATION OF PURCHASERS.  SUBJECT TO THE PROVISIONS OF THIS
SECTION 4.9, THE COMPANY WILL INDEMNIFY AND HOLD THE PURCHASERS AND THEIR
DIRECTORS, OFFICERS, SHAREHOLDERS, PARTNERS, EMPLOYEES AND AGENTS (EACH, A
“PURCHASER PARTY”) HARMLESS FROM ANY AND ALL LOSSES, LIABILITIES, OBLIGATIONS,
CLAIMS, CONTINGENCIES, DAMAGES, COSTS AND EXPENSES, INCLUDING ALL JUDGMENTS,
AMOUNTS PAID IN SETTLEMENTS, COURT COSTS AND REASONABLE ATTORNEYS’ FEES AND
COSTS OF INVESTIGATION THAT ANY SUCH PURCHASER PARTY MAY SUFFER OR INCUR AS A
RESULT OF OR RELATING TO (A) ANY BREACH OF ANY OF THE REPRESENTATIONS,
WARRANTIES, COVENANTS OR AGREEMENTS MADE BY THE COMPANY IN THIS AGREEMENT OR IN
THE OTHER TRANSACTION DOCUMENTS OR (B) ANY ACTION INSTITUTED AGAINST A
PURCHASER, OR ANY OF THEM OR THEIR RESPECTIVE AFFILIATES, BY ANY STOCKHOLDER OF
THE COMPANY WHO IS NOT AN AFFILIATE OF SUCH PURCHASER, WITH RESPECT TO ANY OF
THE TRANSACTIONS CONTEMPLATED BY THE TRANSACTION DOCUMENTS (UNLESS SUCH ACTION
IS BASED UPON A BREACH OF SUCH PURCHASER’S REPRESENTATIONS, WARRANTIES OR
COVENANTS UNDER THE TRANSACTION DOCUMENTS OR ANY AGREEMENTS OR UNDERSTANDINGS
SUCH PURCHASER MAY HAVE WITH ANY SUCH STOCKHOLDER OR ANY VIOLATIONS BY THE
PURCHASER OF STATE OR FEDERAL SECURITIES LAWS OR ANY CONDUCT BY SUCH PURCHASER
WHICH CONSTITUTES FRAUD, GROSS NEGLIGENCE, WILLFUL MISCONDUCT OR MALFEASANCE). 
IF ANY ACTION SHALL BE BROUGHT AGAINST ANY PURCHASER PARTY IN RESPECT OF WHICH
INDEMNITY MAY BE SOUGHT PURSUANT TO THIS AGREEMENT, SUCH PURCHASER PARTY SHALL
PROMPTLY NOTIFY THE COMPANY IN WRITING, AND THE COMPANY SHALL HAVE THE RIGHT TO

 

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ASSUME THE DEFENSE THEREOF WITH COUNSEL OF ITS OWN CHOOSING.  ANY PURCHASER
PARTY SHALL HAVE THE RIGHT TO EMPLOY SEPARATE COUNSEL IN ANY SUCH ACTION AND
PARTICIPATE IN THE DEFENSE THEREOF, BUT THE FEES AND EXPENSES OF SUCH COUNSEL
SHALL BE AT THE EXPENSE OF SUCH PURCHASER PARTY EXCEPT TO THE EXTENT THAT (I)
THE EMPLOYMENT THEREOF HAS BEEN SPECIFICALLY AUTHORIZED BY THE COMPANY IN
WRITING, (II) THE COMPANY HAS FAILED AFTER A REASONABLE PERIOD OF TIME TO ASSUME
SUCH DEFENSE AND TO EMPLOY COUNSEL OR (III) IN SUCH ACTION THERE IS, IN THE
REASONABLE OPINION OF SUCH SEPARATE COUNSEL, A MATERIAL CONFLICT ON ANY MATERIAL
ISSUE BETWEEN THE POSITION OF THE COMPANY AND THE POSITION OF SUCH PURCHASER
PARTY.  THE COMPANY WILL NOT BE LIABLE TO ANY PURCHASER PARTY UNDER THIS
AGREEMENT (I) FOR ANY SETTLEMENT BY A PURCHASER PARTY EFFECTED WITHOUT THE
COMPANY’S PRIOR WRITTEN CONSENT, WHICH SHALL NOT BE UNREASONABLY WITHHELD OR
DELAYED; OR (II) TO THE EXTENT, BUT ONLY TO THE EXTENT THAT A LOSS, CLAIM,
DAMAGE OR LIABILITY IS ATTRIBUTABLE TO ANY PURCHASER PARTY’S BREACH OF ANY OF
THE REPRESENTATIONS, WARRANTIES, COVENANTS OR AGREEMENTS MADE BY THE PURCHASERS
IN THIS AGREEMENT OR IN THE OTHER TRANSACTION DOCUMENTS.

 

4.10         RESERVATION OF COMMON STOCK. AS OF THE DATE HEREOF, THE COMPANY HAS
RESERVED AND THE COMPANY SHALL CONTINUE TO RESERVE AND KEEP AVAILABLE AT ALL
TIMES, FREE OF PREEMPTIVE RIGHTS, A SUFFICIENT NUMBER OF SHARES OF COMMON STOCK
FOR THE PURPOSE OF ENABLING THE COMPANY TO ISSUE SHARES PURSUANT TO THIS
AGREEMENT AND WARRANT SHARES PURSUANT TO ANY EXERCISE OF THE WARRANTS.

 

4.11         LISTING OF COMMON STOCK.  THE COMPANY HEREBY AGREES TO USE
COMMERCIALLY REASONABLE EFFORTS TO MAINTAIN THE LISTING OF THE COMMON STOCK ON A
TRADING MARKET, AND AS SOON AS REASONABLY PRACTICABLE FOLLOWING THE CLOSING (BUT
NOT LATER THAN THE EARLIER OF THE EFFECTIVE DATE AND THE FIRST ANNIVERSARY OF
THE CLOSING DATE TO LIST ALL OF THE SHARES AND WARRANT SHARES ON SUCH TRADING
MARKET. THE COMPANY FURTHER AGREES, IF THE COMPANY APPLIES TO HAVE THE COMMON
STOCK TRADED ON ANY OTHER TRADING MARKET, IT WILL INCLUDE IN SUCH APPLICATION
ALL OF THE SHARES AND WARRANT SHARES AND WILL TAKE SUCH OTHER ACTION AS IS
NECESSARY TO CAUSE ALL OF THE SHARES AND WARRANT SHARES TO BE LISTED ON SUCH
OTHER TRADING MARKET AS PROMPTLY AS POSSIBLE.  THE COMPANY WILL COMPLY IN ALL
MATERIAL RESPECTS WITH THE COMPANY’S REPORTING, FILING AND OTHER OBLIGATIONS
UNDER THE BYLAWS OR RULES OF THE TRADING MARKET.

 

4.12         EQUAL TREATMENT OF PURCHASERS.  NO CONSIDERATION SHALL BE OFFERED
OR PAID TO ANY PERSON TO AMEND OR CONSENT TO A WAIVER OR MODIFICATION OF ANY
PROVISION OF ANY OF THE TRANSACTION DOCUMENTS UNLESS THE SAME CONSIDERATION IS
ALSO OFFERED TO ALL OF THE PARTIES TO THE TRANSACTION DOCUMENTS.  FOR
CLARIFICATION PURPOSES, THIS PROVISION CONSTITUTES A SEPARATE RIGHT GRANTED TO
EACH PURCHASER BY THE COMPANY AND NEGOTIATED SEPARATELY BY EACH PURCHASER, AND
IS INTENDED TO TREAT THE PURCHASERS AS A CLASS AND SHALL NOT IN ANY WAY BE
CONSTRUED AS THE PURCHASERS ACTING IN CONCERT OR AS A GROUP WITH RESPECT TO THE
PURCHASE, DISPOSITION OR VOTING OF SECURITIES OR OTHERWISE.

 

4.13         Participation in Future Financing.  From the date hereof until 12
months after the Effective Date, upon any financing by the Company of its Common
Stock or Common Stock Equivalents (a “Subsequent Financing”), each Purchaser
shall have the right to participate in up to 100% of such Subsequent Financing
(the “Participation Maximum”).  At least 5 Trading Days prior to the closing of
the Subsequent Financing, the Company shall deliver to each Purchaser a written
notice of its intention to effect a Subsequent Financing (“Pre-Notice”), which
Pre-Notice shall ask such Purchaser if it wants to review the details of such
financing (such additional notice, a “Subsequent Financing Notice”).  Upon the
request of a Purchaser, and only upon a request by such Purchaser, for a
Subsequent Financing Notice, the Company shall promptly, but no later than 1
Trading Day after such request, deliver a Subsequent Financing Notice to such
Purchaser.  The Subsequent Financing Notice shall describe in reasonable detail
the proposed terms of such Subsequent Financing, the amount of proceeds intended
to be raised thereunder, the Person with whom such Subsequent Financing is
proposed to be effected, and attached to which shall be a term sheet or similar
document relating thereto.  If by 6:30 p.m. (New York City time) on the second
Trading Day after all of the Purchasers have received the Pre-Notice,
notifications by the Purchasers of their willingness to participate in the
Subsequent Financing (or to cause their designees to participate) is, in the
aggregate, less than the total amount of the Subsequent Financing, then the
Company may effect the remaining portion of such Subsequent Financing on the
terms and to the Persons set forth in the Subsequent Financing Notice.  If the
Company receives no notice from a Purchaser as of such 2nd Trading Day, such
Purchaser shall be deemed to have notified the Company that it does not elect to
participate.  The Company must provide the Purchasers with a second Subsequent
Financing Notice, and the Purchasers will again have the right of participation
set forth above in this Section 4.13, if the Subsequent Financing subject to the
initial Subsequent Financing Notice is not consummated for any reason on the
terms set forth in such Subsequent Financing Notice within 60 Trading Days after
the date of the initial Subsequent Financing Notice.  In the event the Company
receives responses to Subsequent Financing Notices from Purchasers seeking to
purchase more than the aggregate amount of the Subsequent Financing, each such
Purchaser shall have the right to purchase their Pro Rata Portion (as defined
below) of the Participation Maximum.  “Pro Rata Portion” is the ratio of (x) the
Subscription Amount of Securities purchased by a participating Purchaser and (y)
the sum of the aggregate Subscription Amount of all participating Purchasers. 
Notwithstanding the foregoing, this Section 4.13 shall not apply in respect of
an Exempt Issuance.

 

4.14         SUBSEQUENT EQUITY SALES.  FROM THE DATE HEREOF UNTIL 90 DAYS AFTER
THE EFFECTIVE DATE, NEITHER THE COMPANY NOR ANY SUBSIDIARY SHALL ISSUE SHARES OF
COMMON STOCK OR COMMON STOCK EQUIVALENTS; PROVIDED, HOWEVER, THE 90 DAY PERIOD
SET FORTH IN THIS SECTION 4.14 SHALL BE EXTENDED FOR THE NUMBER OF TRADING DAYS
DURING SUCH PERIOD IN WHICH (Y) TRADING IN THE COMMON STOCK IS SUSPENDED BY ANY
TRADING MARKET, OR (Z) FOLLOWING THE EFFECTIVE DATE, THE REGISTRATION STATEMENT
IS NOT EFFECTIVE OR THE PROSPECTUS INCLUDED IN THE REGISTRATION STATEMENT MAY
NOT BE USED BY THE PURCHASERS FOR THE RESALE OF THE SHARES AND WARRANT SHARES. 
NOTWITHSTANDING THE FOREGOING, THIS SECTION 4.14 SHALL NOT APPLY IN RESPECT OF
AN EXEMPT ISSUANCE. IN ADDITION TO THE LIMITATIONS SET FORTH HEREIN, FROM THE
DATE HEREOF UNTIL SUCH TIME AS NO PURCHASER HOLDS ANY OF THE SECURITIES, THE
COMPANY SHALL BE PROHIBITED FROM EFFECTING OR ENTERING INTO AN AGREEMENT TO
EFFECT ANY SUBSEQUENT FINANCING INVOLVING A “VARIABLE RATE TRANSACTION” OR AN
“MFN TRANSACTION” (EACH AS DEFINED BELOW).  THE TERM “VARIABLE RATE TRANSACTION”
SHALL MEAN A TRANSACTION IN WHICH THE COMPANY ISSUES OR SELLS (I) ANY DEBT OR
EQUITY SECURITIES THAT ARE CONVERTIBLE INTO, EXCHANGEABLE OR EXERCISABLE FOR, OR
INCLUDE THE RIGHT TO RECEIVE ADDITIONAL SHARES OF COMMON STOCK EITHER (A) AT A
CONVERSION,

 

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EXERCISE OR EXCHANGE RATE OR OTHER PRICE THAT IS BASED UPON AND/OR VARIES WITH
THE TRADING PRICES OF OR QUOTATIONS FOR THE SHARES OF COMMON STOCK AT ANY TIME
AFTER THE INITIAL ISSUANCE OF SUCH DEBT OR EQUITY SECURITIES, OR (B) WITH A
CONVERSION, EXERCISE OR EXCHANGE PRICE THAT IS SUBJECT TO BEING RESET AT SOME
FUTURE DATE AFTER THE INITIAL ISSUANCE OF SUCH DEBT OR EQUITY SECURITY OR UPON
THE OCCURRENCE OF SPECIFIED OR CONTINGENT EVENTS DIRECTLY OR INDIRECTLY RELATED
TO THE BUSINESS OF THE COMPANY OR THE MARKET FOR THE COMMON STOCK.  THE TERM
“MFN TRANSACTION” SHALL MEAN A TRANSACTION IN WHICH THE COMPANY ISSUES OR SELLS
ANY SECURITIES IN A CAPITAL RAISING TRANSACTION OR SERIES OF RELATED
TRANSACTIONS WHICH GRANTS TO AN INVESTOR THE RIGHT TO RECEIVE ADDITIONAL SHARES
BASED UPON FUTURE TRANSACTIONS OF THE COMPANY ON TERMS MORE FAVORABLE THAN THOSE
GRANTED TO SUCH INVESTOR IN SUCH OFFERING.

 

4.15         DELIVERY OF SECURITIES AFTER CLOSING.  THE COMPANY SHALL DELIVER,
OR CAUSE TO BE DELIVERED, THE RESPECTIVE SHARES AND WARRANTS PURCHASED BY EACH
PURCHASER TO SUCH PURCHASER WITHIN 3 TRADING DAYS OF THE CLOSING DATE.

 

ARTICLE V.

MISCELLANEOUS

 

5.1           FEES AND EXPENSES.  THE COMPANY SHALL REIMBURSE BONANZA CAPITAL
LTD. (“BONANZA”) THE SUM OF $10,000, OF WHICH RECEIPT IS ACKNOWLEDGED, AND THE
PLACEMENT AGENT, THE SUM OF $15,000 PLUS $500 PER STATE FOR BLUE SKY FILINGS,
FOR THEIR RESPECTIVE LEGAL FEES AND EXPENSES. BONANZA MAY PAY ITSELF SUCH FEES
BY SET-OFF FROM THE AMOUNT OF ITS INVESTMENT. THE COMPANY SHALL DELIVER, PRIOR
TO THE CLOSING, A COMPLETED AND EXECUTED COPY OF THE CLOSING STATEMENT, ATTACHED
HERETO AS ANNEX A. EXCEPT AS OTHERWISE SET FORTH IN THIS AGREEMENT, EACH PARTY
SHALL PAY THE FEES AND EXPENSES OF ITS ADVISERS, COUNSEL, ACCOUNTANTS AND OTHER
EXPERTS, IF ANY, AND ALL OTHER EXPENSES INCURRED BY SUCH PARTY INCIDENT TO THE
NEGOTIATION, PREPARATION, EXECUTION, DELIVERY AND PERFORMANCE OF THIS
AGREEMENT.  THE COMPANY SHALL PAY ALL STAMP AND OTHER TAXES AND DUTIES LEVIED IN
CONNECTION WITH THE SALE OF THE SECURITIES.

 

5.2           ENTIRE AGREEMENT.  THE TRANSACTION DOCUMENTS, TOGETHER WITH THE
EXHIBITS AND SCHEDULES THERETO, CONTAIN THE ENTIRE UNDERSTANDING OF THE PARTIES
WITH RESPECT TO THE SUBJECT MATTER HEREOF AND SUPERSEDE ALL PRIOR AGREEMENTS AND
UNDERSTANDINGS, ORAL OR WRITTEN, WITH RESPECT TO SUCH MATTERS, WHICH THE PARTIES
ACKNOWLEDGE HAVE BEEN MERGED INTO SUCH DOCUMENTS, EXHIBITS AND SCHEDULES.

 

5.3           NOTICES.  ANY AND ALL NOTICES OR OTHER COMMUNICATIONS OR
DELIVERIES REQUIRED OR PERMITTED TO BE PROVIDED HEREUNDER SHALL BE IN WRITING
AND SHALL BE DEEMED GIVEN AND EFFECTIVE ON THE EARLIEST OF (A) THE DATE OF
TRANSMISSION, IF SUCH NOTICE OR COMMUNICATION IS DELIVERED VIA FACSIMILE AT THE
FACSIMILE NUMBER SET FORTH ON THE SIGNATURE PAGES ATTACHED HERETO PRIOR TO 6:30
P.M. (NEW YORK CITY TIME) ON A TRADING DAY, (B) THE NEXT TRADING DAY AFTER THE
DATE OF TRANSMISSION, IF SUCH NOTICE OR COMMUNICATION IS DELIVERED VIA FACSIMILE
AT THE FACSIMILE NUMBER SET FORTH ON THE SIGNATURE PAGES ATTACHED HERETO ON A
DAY THAT IS NOT A TRADING DAY OR LATER THAN 6:30 P.M. (NEW YORK CITY TIME) ON
ANY TRADING DAY, (C) THE SECOND TRADING DAY FOLLOWING THE DATE OF MAILING, IF
SENT BY U.S. NATIONALLY RECOGNIZED OVERNIGHT COURIER SERVICE, OR (D) UPON ACTUAL
RECEIPT BY THE PARTY TO WHOM SUCH NOTICE IS REQUIRED TO BE GIVEN.  THE ADDRESS
FOR SUCH NOTICES AND COMMUNICATIONS SHALL BE AS SET FORTH ON THE SIGNATURE PAGES
ATTACHED HERETO.

 

5.4           AMENDMENTS; WAIVERS.  NO PROVISION OF THIS AGREEMENT MAY BE WAIVED
OR AMENDED EXCEPT IN A WRITTEN INSTRUMENT SIGNED, IN THE CASE OF AN AMENDMENT,
BY THE COMPANY AND EACH PURCHASER OR, IN THE CASE OF A WAIVER, BY THE PARTY
AGAINST WHOM ENFORCEMENT OF ANY SUCH WAIVER IS SOUGHT.  NO WAIVER OF ANY DEFAULT
WITH RESPECT TO ANY PROVISION, CONDITION OR REQUIREMENT OF THIS AGREEMENT SHALL
BE DEEMED TO BE A CONTINUING WAIVER IN THE FUTURE OR A WAIVER OF ANY SUBSEQUENT
DEFAULT OR A WAIVER OF ANY OTHER PROVISION, CONDITION OR REQUIREMENT HEREOF, NOR
SHALL ANY DELAY OR OMISSION OF EITHER PARTY TO EXERCISE ANY RIGHT HEREUNDER IN
ANY MANNER IMPAIR THE EXERCISE OF ANY SUCH RIGHT.

 

5.5           CONSTRUCTION.  THE HEADINGS HEREIN ARE FOR CONVENIENCE ONLY, DO
NOT CONSTITUTE A PART OF THIS AGREEMENT AND SHALL NOT BE DEEMED TO LIMIT OR
AFFECT ANY OF THE PROVISIONS HEREOF.  THE LANGUAGE USED IN THIS

 

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AGREEMENT WILL BE DEEMED TO BE THE LANGUAGE CHOSEN BY THE PARTIES TO EXPRESS
THEIR MUTUAL INTENT, AND NO RULES OF STRICT CONSTRUCTION WILL BE APPLIED AGAINST
ANY PARTY.

 

5.6           SUCCESSORS AND ASSIGNS.  THIS AGREEMENT SHALL BE BINDING UPON AND
INURE TO THE BENEFIT OF THE PARTIES AND THEIR SUCCESSORS AND PERMITTED ASSIGNS. 
THE COMPANY MAY NOT ASSIGN THIS AGREEMENT OR ANY RIGHTS OR OBLIGATIONS HEREUNDER
WITHOUT THE PRIOR WRITTEN CONSENT OF EACH PURCHASER.  ANY PURCHASER MAY ASSIGN
ANY OR ALL OF ITS RIGHTS UNDER THIS AGREEMENT TO ANY PERSON TO WHOM SUCH
PURCHASER ASSIGNS OR TRANSFERS ANY SECURITIES, PROVIDED SUCH TRANSFEREE AGREES
IN WRITING TO BE BOUND, WITH RESPECT TO THE TRANSFERRED SECURITIES, BY THE
PROVISIONS HEREOF THAT APPLY TO THE “PURCHASERS”.

 

5.7           NO THIRD-PARTY BENEFICIARIES.  THIS AGREEMENT IS INTENDED FOR THE
BENEFIT OF THE PARTIES HERETO AND THEIR RESPECTIVE SUCCESSORS AND PERMITTED
ASSIGNS AND IS NOT FOR THE BENEFIT OF, NOR MAY ANY PROVISION HEREOF BE ENFORCED
BY, ANY OTHER PERSON, EXCEPT AS OTHERWISE SET FORTH IN SECTION 4.9.

 

5.8           GOVERNING LAW.  ALL QUESTIONS CONCERNING THE CONSTRUCTION,
VALIDITY, ENFORCEMENT AND INTERPRETATION OF THE TRANSACTION DOCUMENTS SHALL BE
GOVERNED BY AND CONSTRUED AND ENFORCED IN ACCORDANCE WITH THE INTERNAL LAWS OF
THE STATE OF NEW YORK, WITHOUT REGARD TO THE PRINCIPLES OF CONFLICTS OF LAW
THEREOF.  EACH PARTY HEREBY IRREVOCABLY SUBMITS TO THE EXCLUSIVE JURISDICTION OF
THE STATE AND FEDERAL COURTS SITTING IN THE CITY OF NEW YORK, BOROUGH OF
MANHATTAN FOR THE ADJUDICATION OF ANY DISPUTE HEREUNDER OR IN CONNECTION
HEREWITH OR WITH ANY TRANSACTION CONTEMPLATED HEREBY OR DISCUSSED HEREIN
(INCLUDING WITH RESPECT TO THE ENFORCEMENT OF ANY OF THE TRANSACTION DOCUMENTS),
AND HEREBY IRREVOCABLY WAIVES, AND AGREES NOT TO ASSERT IN ANY SUIT, ACTION OR
PROCEEDING, ANY CLAIM THAT IT IS NOT PERSONALLY SUBJECT TO THE JURISDICTION OF
ANY SUCH COURT, THAT SUCH SUIT, ACTION OR PROCEEDING IS IMPROPER OR INCONVENIENT
VENUE FOR SUCH PROCEEDING.  EACH PARTY HEREBY IRREVOCABLY WAIVES PERSONAL
SERVICE OF PROCESS AND CONSENTS TO PROCESS BEING SERVED IN ANY SUCH SUIT, ACTION
OR PROCEEDING BY MAILING A COPY THEREOF VIA REGISTERED OR CERTIFIED MAIL OR
OVERNIGHT DELIVERY (WITH EVIDENCE OF DELIVERY) TO SUCH PARTY AT THE ADDRESS IN
EFFECT FOR NOTICES TO IT UNDER THIS AGREEMENT AND AGREES THAT SUCH SERVICE SHALL
CONSTITUTE GOOD AND SUFFICIENT SERVICE OF PROCESS AND NOTICE THEREOF.  NOTHING
CONTAINED HEREIN SHALL BE DEEMED TO LIMIT IN ANY WAY ANY RIGHT TO SERVE PROCESS
IN ANY MANNER PERMITTED BY LAW.  THE PARTIES HEREBY WAIVE ALL RIGHTS TO A TRIAL
BY JURY.  IF EITHER PARTY SHALL COMMENCE AN ACTION OR PROCEEDING TO ENFORCE ANY
PROVISIONS OF THE TRANSACTION DOCUMENTS, THEN THE PREVAILING PARTY IN SUCH
ACTION OR PROCEEDING SHALL BE REIMBURSED BY THE OTHER PARTY FOR ITS ATTORNEYS’
FEES AND OTHER COSTS AND EXPENSES INCURRED WITH THE INVESTIGATION, PREPARATION
AND PROSECUTION OF SUCH ACTION OR PROCEEDING.

 

5.9           SURVIVAL.  THE REPRESENTATIONS AND WARRANTIES HEREIN SHALL SURVIVE
THE CLOSING AND DELIVERY OF THE SHARES AND WARRANT SHARES.

 

5.10         EXECUTION.  THIS AGREEMENT MAY BE EXECUTED IN TWO OR MORE
COUNTERPARTS, ALL OF WHICH WHEN TAKEN TOGETHER SHALL BE CONSIDERED ONE AND THE
SAME AGREEMENT AND SHALL BECOME EFFECTIVE WHEN COUNTERPARTS HAVE BEEN SIGNED BY
EACH PARTY AND DELIVERED TO THE OTHER PARTY, IT BEING UNDERSTOOD THAT BOTH
PARTIES NEED NOT SIGN THE SAME COUNTERPART.  IN THE EVENT THAT ANY SIGNATURE IS
DELIVERED BY FACSIMILE TRANSMISSION, SUCH SIGNATURE SHALL CREATE A VALID AND
BINDING OBLIGATION OF THE PARTY EXECUTING (OR ON WHOSE BEHALF SUCH SIGNATURE IS
EXECUTED) WITH THE SAME FORCE AND EFFECT AS IF SUCH FACSIMILE SIGNATURE PAGE
WERE AN ORIGINAL THEREOF.

 

5.11         SEVERABILITY.  IF ANY PROVISION OF THIS AGREEMENT IS HELD TO BE
INVALID OR UNENFORCEABLE IN ANY RESPECT, THE VALIDITY AND ENFORCEABILITY OF THE
REMAINING TERMS AND PROVISIONS OF THIS AGREEMENT SHALL NOT IN ANY WAY BE
AFFECTED OR IMPAIRED THEREBY AND THE PARTIES WILL ATTEMPT TO AGREE UPON A VALID
AND ENFORCEABLE PROVISION THAT IS A REASONABLE SUBSTITUTE THEREFOR, AND UPON SO
AGREEING, SHALL INCORPORATE SUCH SUBSTITUTE PROVISION IN THIS AGREEMENT.

 

5.12         RESCISSION AND WITHDRAWAL RIGHT.  NOTWITHSTANDING ANYTHING TO THE
CONTRARY CONTAINED IN (AND WITHOUT LIMITING ANY SIMILAR PROVISIONS OF) THE
TRANSACTION DOCUMENTS, WHENEVER ANY PURCHASER EXERCISES A RIGHT, ELECTION,
DEMAND OR OPTION UNDER A TRANSACTION DOCUMENT AND THE COMPANY DOES NOT TIMELY
PERFORM ITS RELATED OBLIGATIONS WITHIN THE PERIODS THEREIN PROVIDED, THEN SUCH
PURCHASER MAY RESCIND OR WITHDRAW, IN ITS SOLE

 

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DISCRETION FROM TIME TO TIME UPON WRITTEN NOTICE TO THE COMPANY, ANY RELEVANT
NOTICE, DEMAND OR ELECTION IN WHOLE OR IN PART WITHOUT PREJUDICE TO ITS FUTURE
ACTIONS AND RIGHTS.

 

5.13         REPLACEMENT OF SECURITIES.  IF ANY CERTIFICATE OR INSTRUMENT
EVIDENCING ANY SECURITIES IS MUTILATED, LOST, STOLEN OR DESTROYED, THE COMPANY
SHALL ISSUE OR CAUSE TO BE ISSUED IN EXCHANGE AND SUBSTITUTION FOR AND UPON
CANCELLATION THEREOF, OR IN LIEU OF AND SUBSTITUTION THEREFOR, A NEW CERTIFICATE
OR INSTRUMENT, BUT ONLY UPON RECEIPT OF EVIDENCE REASONABLY SATISFACTORY TO THE
COMPANY OF SUCH LOSS, THEFT OR DESTRUCTION AND CUSTOMARY AND REASONABLE
INDEMNITY, IF REQUESTED.  THE APPLICANTS FOR A NEW CERTIFICATE OR INSTRUMENT
UNDER SUCH CIRCUMSTANCES SHALL ALSO PAY ANY REASONABLE THIRD-PARTY COSTS
ASSOCIATED WITH THE ISSUANCE OF SUCH REPLACEMENT SECURITIES.

 

5.14         REMEDIES.  IN ADDITION TO BEING ENTITLED TO EXERCISE ALL RIGHTS
PROVIDED HEREIN OR GRANTED BY LAW, INCLUDING RECOVERY OF DAMAGES, EACH OF THE
PURCHASERS AND THE COMPANY WILL BE ENTITLED TO SPECIFIC PERFORMANCE UNDER THE
TRANSACTION DOCUMENTS.  THE PARTIES AGREE THAT MONETARY DAMAGES MAY NOT BE
ADEQUATE COMPENSATION FOR ANY LOSS INCURRED BY REASON OF ANY BREACH OF
OBLIGATIONS DESCRIBED IN THE FOREGOING SENTENCE AND HEREBY AGREES TO WAIVE IN
ANY ACTION FOR SPECIFIC PERFORMANCE OF ANY SUCH OBLIGATION THE DEFENSE THAT A
REMEDY AT LAW WOULD BE ADEQUATE.

 

5.15         PAYMENT SET ASIDE.  TO THE EXTENT THAT THE COMPANY MAKES A PAYMENT
OR PAYMENTS TO ANY PURCHASER PURSUANT TO ANY TRANSACTION DOCUMENT OR A PURCHASER
ENFORCES OR EXERCISES ITS RIGHTS THEREUNDER, AND SUCH PAYMENT OR PAYMENTS OR THE
PROCEEDS OF SUCH ENFORCEMENT OR EXERCISE OR ANY PART THEREOF ARE SUBSEQUENTLY
INVALIDATED, DECLARED TO BE FRAUDULENT OR PREFERENTIAL, SET ASIDE, RECOVERED
FROM, DISGORGED BY OR ARE REQUIRED TO BE REFUNDED, REPAID OR OTHERWISE RESTORED
TO THE COMPANY, A TRUSTEE, RECEIVER OR ANY OTHER PERSON UNDER ANY LAW
(INCLUDING, WITHOUT LIMITATION, ANY BANKRUPTCY LAW, STATE OR FEDERAL LAW, COMMON
LAW OR EQUITABLE CAUSE OF ACTION), THEN TO THE EXTENT OF ANY SUCH RESTORATION
THE OBLIGATION OR PART THEREOF ORIGINALLY INTENDED TO BE SATISFIED SHALL BE
REVIVED AND CONTINUED IN FULL FORCE AND EFFECT AS IF SUCH PAYMENT HAD NOT BEEN
MADE OR SUCH ENFORCEMENT OR SETOFF HAD NOT OCCURRED.

 

5.16         INDEPENDENT NATURE OF PURCHASERS’ OBLIGATIONS AND RIGHTS.  THE
OBLIGATIONS OF EACH PURCHASER UNDER ANY TRANSACTION DOCUMENT ARE SEVERAL AND NOT
JOINT WITH THE OBLIGATIONS OF ANY OTHER PURCHASER, AND NO PURCHASER SHALL BE
RESPONSIBLE IN ANY WAY FOR THE PERFORMANCE OF THE OBLIGATIONS OF ANY OTHER
PURCHASER UNDER ANY TRANSACTION DOCUMENT.  NOTHING CONTAINED HEREIN OR IN ANY
TRANSACTION DOCUMENT, AND NO ACTION TAKEN BY ANY PURCHASER PURSUANT THERETO,
SHALL BE DEEMED TO CONSTITUTE THE PURCHASERS AS A PARTNERSHIP, AN ASSOCIATION, A
JOINT VENTURE OR ANY OTHER KIND OF ENTITY, OR CREATE A PRESUMPTION THAT THE
PURCHASERS ARE IN ANY WAY ACTING IN CONCERT OR AS A GROUP WITH RESPECT TO SUCH
OBLIGATIONS OR THE TRANSACTIONS CONTEMPLATED BY THE TRANSACTION DOCUMENT.  EACH
PURCHASER SHALL BE ENTITLED TO INDEPENDENTLY PROTECT AND ENFORCE ITS RIGHTS,
INCLUDING WITHOUT LIMITATION, THE RIGHTS ARISING OUT OF THIS AGREEMENT OR OUT OF
THE OTHER TRANSACTION DOCUMENTS, AND IT SHALL NOT BE NECESSARY FOR ANY OTHER
PURCHASER TO BE JOINED AS AN ADDITIONAL PARTY IN ANY PROCEEDING FOR SUCH
PURPOSE.  EACH PURCHASER HAS BEEN REPRESENTED BY ITS OWN SEPARATE LEGAL COUNSEL
IN THEIR REVIEW AND NEGOTIATION OF THE TRANSACTION DOCUMENTS.  FOR REASONS OF
ADMINISTRATIVE CONVENIENCE ONLY, PURCHASERS AND THEIR RESPECTIVE COUNSEL HAVE
CHOSEN TO COMMUNICATE WITH THE COMPANY THROUGH FW.  FW DOES NOT REPRESENT ALL OF
THE PURCHASERS BUT ONLY BONANZA, WHO HAS ACTED AS PLACEMENT AGENT TO THE
TRANSACTION.  THE COMPANY HAS ELECTED TO PROVIDE ALL PURCHASERS WITH THE SAME
TERMS AND TRANSACTION DOCUMENTS FOR THE CONVENIENCE OF THE COMPANY AND NOT
BECAUSE IT WAS REQUIRED OR REQUESTED TO DO SO BY THE PURCHASERS.

 

5.17         LIQUIDATED DAMAGES.  THE COMPANY’S OBLIGATIONS TO PAY ANY PARTIAL
LIQUIDATED DAMAGES OR OTHER AMOUNTS OWING UNDER THE TRANSACTION DOCUMENTS IS A
CONTINUING OBLIGATION OF THE COMPANY AND SHALL NOT TERMINATE UNTIL ALL UNPAID
PARTIAL LIQUIDATED DAMAGES AND OTHER AMOUNTS HAVE BEEN PAID NOTWITHSTANDING THE
FACT THAT THE INSTRUMENT OR SECURITY PURSUANT TO WHICH SUCH PARTIAL LIQUIDATED
DAMAGES OR OTHER AMOUNTS ARE DUE AND PAYABLE SHALL HAVE BEEN CANCELED.

 

(Signature Page Follows)

 

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

 

 

APOGEE TECHNOLOGY, INC.

Address for Notice:

 

 

By:

/s/ Herbert M. Stein

 

129 Morgan Drive

 

Name: Herbert M. Stein

Norwood, MA 02062

 

Title: President and Chief Executive Officer

 

 

 

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

 

 

 

Mintz, Levin, Cohn, Ferris, Glovsky and Popeo, P.C.
One Financial Center
Boston, MA 02111
Attn:  Megan N. Gates, Esq.
Tel:  617-348-4443
Fax: 617-542-2241

 

 

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

 

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[PURCHASER SIGNATURE PAGES TO ATA SECURITIES PURCHASE AGREEMENT]

 

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

 

Name of Investing Entity:

 

 

 

Signature of Authorized Signatory of Investing Entity:

 

 

 

Name of Authorized Signatory:

 

 

 

Title of Authorized Signatory:

 

 

Email Address of Authorized Entity:

 

 

 

 

 

Address for Notice of Investing Entity:

 

 

Address for Delivery of Securities for Investing Entity (if not same as above):

 

 

Subscription Amount:

Shares:

Warrant Shares:

EIN Number:  [PROVIDE THIS UNDER SEPARATE COVER]

 

[SIGNATURE PAGES CONTINUE]

 

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Annex A

 

CLOSING STATEMENT

 

Pursuant to the attached Securities Purchase Agreement, dated as of the date
hereto, the purchasers shall purchase up to $4,000,000 of Common Stock and
Warrants from Apogee Technology, Inc. (the “Company”).  All funds will be wired
into a trust account maintained by Continental Stock Transfer & Trust Company,
the escrow agent for the transaction.  All funds will be disbursed in accordance
with this Closing Statement.

 

Disbursement Date:           August ____, 2004

 

 

I. PURCHASE PRICE

 

 

 

 

 

 

 

Gross Proceeds to be Received in Trust

 

$

 

 

 

 

 

II. DISBURSEMENTS

 

 

 

 

 

$

 

 

 

$

 

 

 

$

 

 

 

$

 

 

 

$

 

 

 

 

 

Total Amount Disbursed:

 

$

 

 

WIRE INSTRUCTIONS:

 

To:

 

 

To:

 

 

 

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