Exhibit 10.1

 

EXECUTION COPY

 

SECURITIES PURCHASE AGREEMENT

 

This Securities Purchase Agreement (this “Agreement”) is dated as of
September 15, 2009, by and among Helicos BioSciences Corporation, a Delaware
corporation (the “Company”), and the several purchasers identified on the
signature pages hereto (each, including its successors and assigns, a
“Purchaser” and collectively, the “Purchasers”).

 

RECITALS

 

A.            The Company and each Purchaser is executing and delivering this
Agreement in reliance upon the exemption from securities registration afforded
by Section 4(2) of the Securities Act of 1933, as amended (the “Securities
Act”), and Rule 506 of Regulation D (“Regulation D”) as promulgated by the
United States Securities and Exchange Commission (the “Commission”) under the
Securities Act.

 

B.            Each Purchaser, severally and not jointly, wishes to purchase, and
the Company wishes to sell, upon the terms and conditions stated in this
Agreement, (i) that aggregate number of shares of common stock, par value $0.001
per share (the “Common Stock”), of the Company, set forth below such Purchaser’s
name on the signature page of this Agreement (which aggregate amount for all
Purchasers together shall be 4,311,280 shares of Common Stock and shall be
collectively referred to herein as the “Shares”) and (ii) warrants, in
substantially the form attached hereto as Exhibit A (the “Warrants”), to acquire
up to that number of additional shares of Common Stock equal to fifty percent
(50%) (or sixty-six and two-tenths percent (66.2%) for the Inside Investors) of
the number of Shares purchased by such Purchaser (rounded up to the nearest
whole share) (the shares of Common Stock issuable upon exercise of or otherwise
pursuant to the Warrants collectively are referred to herein as the “Warrant
Shares”).

 

C.            The Shares, the Warrants and the Warrant Shares collectively are
referred to herein as the “Securities”.

 

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

 

ARTICLE I

DEFINITIONS

 

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

 

“Action” means any action, suit, inquiry, notice of violation, proceeding
(including any partial proceeding such as a deposition) or investigation pending
or, to the Company’s Knowledge, threatened in writing against the Company, any
Subsidiary or any of their respective properties or any officer, director or
employee of the Company or any Subsidiary acting in his or her capacity as an
officer, director or employee before or by any federal, state, county, local or
foreign court, arbitrator, governmental or administrative agency, regulatory
authority, stock market, stock exchange or trading facility.

 

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

 

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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.

 

“Agreement” shall have the meaning ascribed to such term in the Preamble.

 

“Business Day” means a day, other than a Saturday or Sunday, on which banks in
New York City are open for the general transaction of business.

 

“Closing” means the closing of the purchase and sale of the Shares and the
Warrants pursuant to this Agreement.

 

“Closing Date” means the Trading Day when all of the Transaction Documents have
been executed and delivered by the applicable parties thereto, and all of the
conditions set forth in Sections 2.1, 2.2, 5.1 and 5.2 hereof are satisfied, or
such other date as the parties may agree.

 

“Commission” has the meaning set forth in the Recitals.

 

“Common Stock” has the meaning set forth in the Recitals, and also includes any
securities into which the Common Stock may hereafter be reclassified or changed.

 

“Common Stock Equivalents” means any securities of the Company or any Subsidiary
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 or other securities that entitle the holder to receive, directly or
indirectly, Common Stock.

 

“Company Counsel” means Goodwin Procter LLP.

 

“Company Deliverables” has the meaning set forth in Section 2.2(a).

 

“Company’s Knowledge” means with respect to any statement made to the knowledge
of the Company, that the statement is based upon the actual knowledge of the
executive officers of the Company having responsibility for the matter or
matters that are the subject of the statement.

 

“Control” (including the terms “controls”, “controlling”, “controlled by” or
“under common control with”) means the possession, direct or indirect, of the
power to direct or cause the direction of the management and policies of a
Person, whether through the ownership of voting securities, by contract or
otherwise.

 

“Disclosure Materials” has the meaning set forth in Section 3.1(h).

 

“Environmental Laws” has the meaning set forth in Section 3.1(l).

 

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

 

“GAAP” means U.S. generally accepted accounting principles, as applied by the
Company.

 

“Indemnified Person” has the meaning set forth in Section 4.7(b).

 

“Inside Investors” means (i) each of Atlas Venture, Flagship Ventures, Highland
Capital Partners and Versant Ventures and their affiliated investment funds that
are Purchasers hereunder (collectively, the “VC Investors”) and (ii) each of the
executive officers and directors of the Company that are Purchasers hereunder.

 

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“Intellectual Property” has the meaning set forth in Section 3.1(r).

 

“Lien” means any lien, charge, claim, encumbrance, security interest, right of
first refusal, preemptive right or other restrictions of any kind.

 

“Material Adverse Effect” means any of (i) a material and adverse effect on the
legality, validity or enforceability of any Transaction Document, (ii) a
material and adverse effect on the results of operations, assets, business,
prospects or financial condition of the Company and the Subsidiaries, or
(iii) any adverse impairment to the Company’s ability to perform in any material
respect on a timely basis its obligations under any Transaction Document.

 

“Material Contract” means any contract of the Company that was filed or required
to be filed as an exhibit to the SEC Reports pursuant to Item 601(b)(4) or Item
601(b)(10) of Regulation S-K.

 

“Material Permits” has the meaning set forth in Section 3.1(p).

 

“Outside Date” means the fifteenth day following the date of this Agreement;
provided that if such day is not a Business Day, the first day following such
day that is a Business Day.

 

“Person” means an individual, corporation, partnership, limited liability
company, trust, business trust, association, joint stock company, joint venture,
sole proprietorship, unincorporated organization, governmental authority or any
other form of entity not specifically listed herein.

 

“Press Release” has the meaning set forth in Section 4.6.

 

“Principal Trading Market” means the Trading Market on which the Common Stock is
primarily listed on and quoted for trading, which, as of the date of this
Agreement and the Closing Date, shall be the NASDAQ Global Market.

 

“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.

 

“Purchase Price” means $2.24 per unit (or $2.57275 per unit for the Inside
Investors).

 

“Purchaser Deliverables” has the meaning set forth in Section 2.2(b).

 

“Purchaser Party” has the meaning set forth in Section 4.7(a).

 

“Registration Rights Agreement” means the registration rights agreement dated
the date hereof and attached hereto as Exhibit D.

 

“Registration Statement” means a registration statement covering the resale by
the Purchasers of the Shares and Warrant Shares.

 

“Required Approvals” has the meaning set forth 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” has the meaning set forth in Section 3.1(h).

 

“Secretary’s Certificate” has the meaning set forth in Section 2.2(a)(v).

 

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

 

“Short Sales” means all “short sales” as defined in Rule 200 of Regulation SHO
under the Exchange Act (but shall not be deemed to include the location and/or
reservation of borrowable shares of Common Stock).

 

“Subscription Amount” means with respect to each Purchaser, the aggregate amount
to be paid for the Shares and the related Warrants purchased hereunder as
indicated on such Purchaser’s signature page to this Agreement next to the
heading “Aggregate Purchase Price (Subscription Amount)”.

 

“Subsidiary” means any entity in which the Company, directly or indirectly, owns
sufficient capital stock or holds a sufficient equity or similar interest such
that it is consolidated with the Company in the financial statements of the
Company.

 

“Trading Affiliate(s)” has the meaning set forth in Section 3.2(h).

 

“Trading Day” means (i) a day on which the Common Stock is listed or quoted and
traded on its Principal Trading Market (other than the OTC Bulletin Board), or
(ii) if the Common Stock is not listed on a Trading Market (other than the OTC
Bulletin Board), a day on which the Common Stock is traded in the
over-the-counter market, as reported by the OTC Bulletin Board, or (iii) if the
Common Stock is not quoted on any Trading Market, a day on which the Common
Stock is quoted in the over-the-counter market as reported in the “pink sheets”
by Pink Sheets LLC (or any similar organization or agency succeeding to its
functions of reporting prices); provided , that in the event that the Common
Stock is not listed or quoted as set forth in (i), (ii) and (iii) hereof, then
Trading Day shall mean a Business Day.

 

“Trading Market” means whichever of the New York Stock Exchange, the American
Stock Exchange, the NASDAQ Global Select Market, the NASDAQ Global Market, the
NASDAQ Capital Market or the OTC Bulletin Board on which the Common Stock is
listed or quoted for trading on the date in question.

 

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

 

“Transfer Agent” means Computershare Shareholder Services, Inc., or any
successor transfer agent for the Company.

 

ARTICLE II

PURCHASE AND SALE

 

2.1           Closing.

 

(A)           AMOUNT.  SUBJECT TO THE TERMS AND CONDITIONS SET FORTH IN THIS
AGREEMENT, AT THE CLOSING THE COMPANY SHALL ISSUE AND SELL TO EACH PURCHASER,
AND EACH PURCHASER SHALL, SEVERALLY AND NOT JOINTLY, PURCHASE FROM THE COMPANY,
SUCH NUMBER OF SHARES EQUAL TO THE QUOTIENT RESULTING FROM DIVIDING (I) THE
SUBSCRIPTION AMOUNT FOR SUCH PURCHASER BY (II) THE PURCHASE PRICE, ROUNDED UP TO
THE NEAREST WHOLE SHARE.  IN ADDITION, EACH PURCHASER SHALL RECEIVE A WARRANT TO
PURCHASE A NUMBER OF WARRANT SHARES EQUAL TO FIFTY PERCENT (50%) (OR SIXTY-SIX
AND TWO-TENTHS PERCENT (66.2%) FOR THE INSIDE INVESTORS) OF THE NUMBER OF
SHARES, ROUNDED UP TO THE NEAREST WHOLE WARRANT SHARE, PURCHASED BY SUCH
PURCHASER, AS INDICATED BELOW SUCH PURCHASER’S NAME ON THE SIGNATURE PAGE TO
THIS AGREEMENT. THE WARRANTS SHALL HAVE AN EXERCISE PRICE EQUAL TO $2.61 PER
WARRANT SHARE, SUBJECT TO APPLICABLE ADJUSTMENTS.

 

(B)           CLOSING.  THE CLOSING OF THE PURCHASE AND SALE OF THE SHARES AND
WARRANTS SHALL TAKE PLACE AT THE OFFICES OF GOODWIN PROCTER LLP, EXCHANGE PLACE,
53 STATE STREET, BOSTON, MASSACHUSETTS, ON THE

 

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CLOSING DATE OR AT SUCH OTHER LOCATIONS OR REMOTELY BY FACSIMILE TRANSMISSION OR
OTHER ELECTRONIC MEANS AS THE PARTIES MAY MUTUALLY AGREE.

 

(C)           FORM OF PAYMENT.  EXCEPT AS MAY OTHERWISE BE AGREED TO AMONG THE
COMPANY AND ONE OR MORE OF THE PURCHASERS, ON OR PRIOR TO THE BUSINESS DAY
IMMEDIATELY PRIOR TO THE CLOSING DATE, EACH PURCHASER SHALL WIRE ITS
SUBSCRIPTION AMOUNT, IN UNITED STATES DOLLARS AND IN IMMEDIATELY AVAILABLE
FUNDS, TO A NON-INTEREST BEARING ESCROW ACCOUNT ESTABLISHED BY THE COMPANY AS
SET FORTH ON EXHIBIT C HERETO.  ON THE CLOSING DATE, THE COMPANY SHALL
IRREVOCABLY INSTRUCT THE TRANSFER AGENT TO DELIVER TO EACH PURCHASER ONE OR MORE
STOCK CERTIFICATES, FREE AND CLEAR OF ALL RESTRICTIVE AND OTHER LEGENDS (EXCEPT
AS EXPRESSLY PROVIDED IN SECTION 4.1(B) HEREOF), EVIDENCING THE NUMBER OF SHARES
SUCH PURCHASER IS PURCHASING AS IS SET FORTH ON SUCH PURCHASER’S SIGNATURE
PAGE TO THIS AGREEMENT NEXT TO THE HEADING “NUMBER OF SHARES TO BE ACQUIRED”,
WITHIN THREE (3) BUSINESS DAYS AFTER THE CLOSING.

 

2.2           Closing Deliveries.

 

(A)           ON OR PRIOR TO THE CLOSING, THE COMPANY SHALL ISSUE, DELIVER OR
CAUSE TO BE DELIVERED TO EACH PURCHASER THE FOLLOWING (THE “COMPANY
DELIVERABLES”):

 

(I)            THIS AGREEMENT, DULY EXECUTED BY THE COMPANY;

 

(II)           FACSIMILE COPIES OF ONE OR MORE STOCK CERTIFICATES, FREE AND
CLEAR OF ALL RESTRICTIVE AND OTHER LEGENDS (EXCEPT AS PROVIDED IN
SECTION 4.1(B) HEREOF), EVIDENCING THE SHARES SUBSCRIBED FOR BY PURCHASER
HEREUNDER, REGISTERED IN THE NAME OF SUCH PURCHASER AS SET FORTH ON THE STOCK
CERTIFICATE QUESTIONNAIRE INCLUDED AS EXHIBIT B-2 HERETO (THE “STOCK
CERTIFICATES”), WITH THE ORIGINAL STOCK CERTIFICATES SENT TO THE PURCHASERS
WITHIN THREE (3) BUSINESS DAYS OF CLOSING;

 

(III)          A WARRANT, EXECUTED BY THE COMPANY AND REGISTERED IN THE NAME OF
SUCH PURCHASER AS SET FORTH ON THE STOCK CERTIFICATE QUESTIONNAIRE INCLUDED AS
EXHIBIT B-2 HERETO, PURSUANT TO WHICH SUCH PURCHASER SHALL HAVE THE RIGHT TO
ACQUIRE SUCH NUMBER OF WARRANT SHARES EQUAL TO FIFTY PERCENT (50%) (OR SIXTY-SIX
AND TWO-TENTHS PERCENT (66.2%) FOR THE INSIDE INVESTORS) OF THE NUMBER OF SHARES
ISSUABLE TO SUCH PURCHASER, ROUNDED UP TO THE NEAREST WHOLE SHARE, ON THE TERMS
SET FORTH THEREIN;

 

(IV)          A LEGAL OPINION OF COMPANY COUNSEL, DATED AS OF THE CLOSING DATE,
EXECUTED BY SUCH COUNSEL AND ADDRESSED TO THE PURCHASERS;

 

(V)           A CERTIFICATE OF THE SECRETARY OF THE COMPANY (THE “SECRETARY’S
CERTIFICATE”), DATED AS OF THE CLOSING DATE, (A) CERTIFYING THE RESOLUTIONS
ADOPTED BY THE BOARD OF DIRECTORS OF THE COMPANY OR A DULY AUTHORIZED COMMITTEE
THEREOF APPROVING THE TRANSACTIONS CONTEMPLATED BY THIS AGREEMENT AND THE OTHER
TRANSACTION DOCUMENTS AND THE ISSUANCE OF THE SECURITIES, (B) CERTIFYING THE
CURRENT VERSIONS OF THE CERTIFICATE OR ARTICLES OF INCORPORATION, AS AMENDED,
AND BY-LAWS OF THE COMPANY AND (C) CERTIFYING AS TO THE SIGNATURES AND AUTHORITY
OF PERSONS SIGNING THE TRANSACTION DOCUMENTS AND RELATED DOCUMENTS ON BEHALF OF
THE COMPANY;

 

(VI)          THE COMPLIANCE CERTIFICATE REFERRED TO IN SECTION 5.1(G);

 

(VII)         A CERTIFICATE EVIDENCING THE FORMATION AND GOOD STANDING OF THE
COMPANY IN ITS JURISDICTION OF FORMATION ISSUED BY THE SECRETARY OF STATE (OR
COMPARABLE OFFICE) OF SUCH JURISDICTION, AS OF A DATE WITHIN FIVE (5) BUSINESS
DAYS OF THE CLOSING DATE;

 

(VIII)        A CERTIFICATE EVIDENCING THE COMPANY’S QUALIFICATION AS A FOREIGN
CORPORATION AND GOOD STANDING ISSUED BY THE COMMONWEALTH OF MASSACHUSETTS, AS OF
A DATE WITHIN TEN (10) BUSINESS DAYS OF THE CLOSING DATE;

 

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(IX)           A CERTIFIED COPY OF THE CERTIFICATE OF INCORPORATION, AS
CERTIFIED BY THE SECRETARY OF STATE OF THE STATE OF DELAWARE, AS OF A DATE
WITHIN TEN (10) BUSINESS DAYS OF THE CLOSING DATE; AND

 

(X)            A FULLY EXECUTED REGISTRATION RIGHTS AGREEMENT.

 

(B)           ON OR PRIOR TO THE CLOSING, EACH PURCHASER SHALL DELIVER OR CAUSE
TO BE DELIVERED TO THE COMPANY THE FOLLOWING (THE “PURCHASER DELIVERABLES”):

 

(I)            THIS AGREEMENT, DULY EXECUTED BY SUCH PURCHASER;

 

(II)           ITS SUBSCRIPTION AMOUNT, IN UNITED STATES DOLLARS AND IN
IMMEDIATELY AVAILABLE FUNDS, IN THE AMOUNT SET FORTH AS THE “PURCHASE PRICE”
INDICATED BELOW SUCH PURCHASER’S NAME ON THE APPLICABLE SIGNATURE PAGE HERETO
UNDER THE HEADING “AGGREGATE PURCHASE PRICE (SUBSCRIPTION AMOUNT)” BY WIRE
TRANSFER TO THE ESCROW ACCOUNT SET FORTH ON EXHIBIT C ATTACHED HERETO; AND

 

(III)          A FULLY COMPLETED AND DULY EXECUTED ACCREDITED INVESTOR
QUESTIONNAIRE, REASONABLY SATISFACTORY TO THE COMPANY, AND STOCK CERTIFICATE
QUESTIONNAIRE IN THE FORMS ATTACHED HERETO AS EXHIBITS B-1 AND B-2 ,
RESPECTIVELY.

 

ARTICLE III

REPRESENTATIONS AND WARRANTIES

 

3.1           Representations and Warranties of the Company.  The Company hereby
represents and warrants as of the date hereof and the Closing Date (except for
the representations and warranties that speak as of a specific date, which shall
be made as of such date), to each of the Purchasers that the following
representations and warranties are true and complete, except as set forth in the
Schedules delivered herewith or disclosed in the SEC Reports.  The Schedules
shall be arranged in sections corresponding to the lettered subsections
contained in this Section 3.1, and the disclosures in any subsection of the
schedules shall qualify other subsections in this Section 3.1 to the extent it
is reasonably apparent from a reading of the disclosure that such disclosure is
applicable to such other subsections.

 

(A)           SUBSIDIARIES.  THE COMPANY HAS NO DIRECT OR INDIRECT SUBSIDIARIES
OTHER THAN THOSE LISTED IN SCHEDULE 3.1(A) HERETO.  EXCEPT AS DISCLOSED IN
SCHEDULE 3.1(A) HERETO, THE COMPANY OWNS, DIRECTLY OR INDIRECTLY, ALL OF THE
CAPITAL STOCK OR COMPARABLE EQUITY INTERESTS OF EACH SUBSIDIARY FREE AND CLEAR
OF ANY AND ALL LIENS WHICH WOULD REASONABLY BE EXPECTED TO HAVE A MATERIAL
ADVERSE EFFECT, AND ALL THE ISSUED AND OUTSTANDING SHARES OF CAPITAL STOCK OR
COMPARABLE EQUITY INTEREST OF EACH SUBSIDIARY ARE VALIDLY ISSUED AND ARE FULLY
PAID, NON-ASSESSABLE AND FREE OF PREEMPTIVE AND SIMILAR RIGHTS TO SUBSCRIBE FOR
OR PURCHASE SECURITIES.

 

(B)           ORGANIZATION AND QUALIFICATION.  THE COMPANY AND EACH OF ITS
SUBSIDIARIES IS AN ENTITY DULY INCORPORATED OR OTHERWISE ORGANIZED, VALIDLY
EXISTING AND IN GOOD STANDING UNDER THE LAWS OF THE JURISDICTION OF ITS
INCORPORATION OR ORGANIZATION (AS APPLICABLE), WITH THE REQUISITE CORPORATE
POWER AND AUTHORITY TO OWN OR LEASE AND USE ITS PROPERTIES AND ASSETS AND TO
CARRY ON ITS BUSINESS AS CURRENTLY CONDUCTED.  NEITHER THE COMPANY NOR ANY
SUBSIDIARY IS IN VIOLATION OF ANY OF THE PROVISIONS OF ITS RESPECTIVE
CERTIFICATE OR ARTICLES OF INCORPORATION, BYLAWS OR OTHER ORGANIZATIONAL OR
CHARTER DOCUMENTS.  THE COMPANY AND EACH OF ITS SUBSIDIARIES IS DULY QUALIFIED
TO CONDUCT BUSINESS AND IS IN GOOD STANDING AS A FOREIGN CORPORATION OR OTHER
ENTITY IN EACH JURISDICTION IN WHICH THE NATURE OF THE BUSINESS CONDUCTED OR
PROPERTY OWNED BY IT MAKES SUCH QUALIFICATION NECESSARY, EXCEPT WHERE THE
FAILURE TO BE SO QUALIFIED OR IN GOOD STANDING, AS THE CASE MAY BE, WOULD NOT
HAVE A MATERIAL ADVERSE EFFECT.

 

(C)           AUTHORIZATION; ENFORCEMENT; VALIDITY.  THE COMPANY HAS THE
REQUISITE CORPORATE POWER AND AUTHORITY TO ENTER INTO AND TO CONSUMMATE THE
TRANSACTIONS CONTEMPLATED BY EACH OF THE

 

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TRANSACTION DOCUMENTS TO WHICH IT IS A PARTY AND OTHERWISE TO CARRY OUT ITS
OBLIGATIONS HEREUNDER AND THEREUNDER.  THE COMPANY’S EXECUTION AND DELIVERY OF
EACH OF THE TRANSACTION DOCUMENTS TO WHICH IT IS A PARTY AND THE CONSUMMATION BY
IT OF THE TRANSACTIONS CONTEMPLATED HEREBY AND THEREBY (INCLUDING, BUT NOT
LIMITED TO, THE SALE AND DELIVERY OF THE SHARES AND THE WARRANTS AND THE
RESERVATION FOR ISSUANCE AND THE  SUBSEQUENT ISSUANCE OF THE WARRANT SHARES UPON
EXERCISE OF THE WARRANTS) HAVE BEEN DULY AUTHORIZED BY ALL NECESSARY CORPORATE
ACTION ON THE PART OF THE COMPANY, AND NO FURTHER CORPORATE ACTION IS REQUIRED
BY THE COMPANY, ITS BOARD OF DIRECTORS OR ITS STOCKHOLDERS IN CONNECTION
THEREWITH OTHER THAN IN CONNECTION WITH THE REQUIRED APPROVALS.  EACH OF THE
TRANSACTION DOCUMENTS TO WHICH IT IS A PARTY HAS BEEN (OR UPON DELIVERY WILL
HAVE BEEN) DULY EXECUTED BY THE COMPANY AND IS, OR WHEN DELIVERED IN ACCORDANCE
WITH THE TERMS HEREOF, WILL CONSTITUTE THE LEGAL, VALID AND BINDING OBLIGATION
OF THE COMPANY ENFORCEABLE AGAINST THE COMPANY IN ACCORDANCE WITH ITS TERMS,
EXCEPT (I) AS SUCH ENFORCEABILITY MAY BE LIMITED BY APPLICABLE BANKRUPTCY,
INSOLVENCY, REORGANIZATION, MORATORIUM, LIQUIDATION OR SIMILAR LAWS RELATING TO,
OR AFFECTING GENERALLY THE ENFORCEMENT OF, CREDITORS’ RIGHTS AND REMEDIES OR BY
OTHER EQUITABLE PRINCIPLES OF GENERAL APPLICATION, (II) AS LIMITED BY LAWS
RELATING TO THE AVAILABILITY OF SPECIFIC PERFORMANCE, INJUNCTIVE RELIEF OR OTHER
EQUITABLE REMEDIES AND (III) INSOFAR AS INDEMNIFICATION AND CONTRIBUTION
PROVISIONS MAY BE LIMITED BY APPLICABLE LAW.

 

(D)           NO CONFLICTS.  THE EXECUTION, DELIVERY AND PERFORMANCE BY THE
COMPANY OF THE TRANSACTION DOCUMENTS TO WHICH IT IS A PARTY AND THE CONSUMMATION
BY THE COMPANY OF THE TRANSACTIONS CONTEMPLATED HEREBY OR THEREBY (INCLUDING,
WITHOUT LIMITATION, THE ISSUANCE OF THE SHARES AND WARRANTS AND THE RESERVATION
FOR ISSUANCE AND ISSUANCE OF THE WARRANT SHARES) DO NOT AND WILL NOT
(I) CONFLICT WITH OR VIOLATE ANY PROVISIONS OF THE COMPANY’S OR ANY SUBSIDIARY’S
CERTIFICATE OR ARTICLES OF INCORPORATION, BYLAWS OR OTHERWISE RESULT IN A
VIOLATION OF THE ORGANIZATIONAL DOCUMENTS OF THE COMPANY, (II) CONFLICT WITH, OR
CONSTITUTE A DEFAULT (OR AN EVENT THAT WITH NOTICE OR LAPSE OF TIME OR BOTH
WOULD RESULT IN A DEFAULT) UNDER, RESULT IN THE CREATION OF ANY LIEN UPON ANY OF
THE PROPERTIES OR ASSETS OF THE COMPANY OR GIVE TO OTHERS ANY RIGHTS OF
TERMINATION, AMENDMENT, ACCELERATION OR CANCELLATION (WITH OR WITHOUT NOTICE,
LAPSE OF TIME OR BOTH) OF, ANY MATERIAL CONTRACT, 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 IS SUBJECT (INCLUDING
FEDERAL AND STATE SECURITIES LAWS AND REGULATIONS AND THE RULES AND REGULATIONS,
ASSUMING THE CORRECTNESS OF THE REPRESENTATIONS AND WARRANTIES MADE BY THE
PURCHASERS HEREIN, OF ANY SELF-REGULATORY ORGANIZATION TO WHICH THE COMPANY OR
ITS SECURITIES ARE SUBJECT, INCLUDING ALL APPLICABLE TRADING MARKETS), OR BY
WHICH ANY PROPERTY OR ASSET OF THE COMPANY IS BOUND OR AFFECTED, EXCEPT IN THE
CASE OF CLAUSES (II) AND (III) SUCH AS WOULD NOT, INDIVIDUALLY OR IN THE
AGGREGATE, HAVE A MATERIAL ADVERSE EFFECT.

 

(E)           FILINGS, CONSENTS AND APPROVALS.  NEITHER THE COMPANY NOR ANY OF
ITS SUBSIDIARIES IS 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 (INCLUDING, WITHOUT LIMITATION, THE ISSUANCE OF THE
SECURITIES), OTHER THAN (I) THE FILING WITH THE COMMISSION OF ONE OR MORE
REGISTRATION STATEMENTS, (II) FILINGS REQUIRED BY APPLICABLE STATE SECURITIES
LAWS, (III) THE FILING OF A NOTICE OF SALE OF SECURITIES ON FORM D WITH THE
COMMISSION UNDER REGULATION D OF THE SECURITIES ACT, (IV) THE FILING OF ANY
REQUISITE NOTICES AND/OR APPLICATION(S) TO THE PRINCIPAL TRADING MARKET FOR THE
ISSUANCE AND SALE OF THE COMMON STOCK AND THE WARRANTS AND THE LISTING OF THE
COMMON STOCK FOR TRADING OR QUOTATION, AS THE CASE MAY BE, THEREON IN THE TIME
AND MANNER REQUIRED THEREBY, (V) THE FILINGS REQUIRED IN ACCORDANCE WITH
SECTION 4.6 OF THIS AGREEMENT AND (VI) THOSE THAT HAVE BEEN MADE OR OBTAINED
PRIOR TO THE DATE OF THIS AGREEMENT (COLLECTIVELY, THE “REQUIRED APPROVALS”).

 

(F)            ISSUANCE OF THE SECURITIES.  THE SHARES HAVE BEEN DULY AUTHORIZED
AND, WHEN ISSUED AND PAID FOR IN ACCORDANCE WITH THE TERMS OF THE TRANSACTION
DOCUMENTS, WILL BE DULY AND VALIDLY ISSUED, FULLY PAID AND NONASSESSABLE AND
FREE AND CLEAR OF ALL LIENS, OTHER THAN RESTRICTIONS ON TRANSFER PROVIDED FOR IN
THE TRANSACTION DOCUMENTS OR IMPOSED BY APPLICABLE SECURITIES LAWS, AND SHALL
NOT BE SUBJECT TO PREEMPTIVE OR SIMILAR RIGHTS.  THE WARRANTS HAVE BEEN DULY
AUTHORIZED AND, WHEN ISSUED AND PAID FOR IN ACCORDANCE WITH

 

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THE TERMS OF THE TRANSACTION DOCUMENTS, WILL BE DULY AND VALIDLY ISSUED, FREE
AND CLEAR OF ALL LIENS, OTHER THAN RESTRICTIONS ON TRANSFER PROVIDED FOR IN THE
TRANSACTION DOCUMENTS OR IMPOSED BY APPLICABLE SECURITIES LAWS, AND SHALL NOT BE
SUBJECT TO PREEMPTIVE OR SIMILAR RIGHTS OF STOCKHOLDERS. THE WARRANT SHARES
ISSUABLE UPON EXERCISE OF THE WARRANTS HAVE BEEN DULY AUTHORIZED AND, WHEN
ISSUED AND PAID FOR IN ACCORDANCE WITH THE TERMS OF THE TRANSACTION DOCUMENTS
AND THE WARRANTS WILL BE DULY AND VALIDLY ISSUED, FULLY PAID AND NONASSESSABLE,
FREE AND CLEAR OF ALL LIENS, OTHER THAN RESTRICTIONS ON TRANSFER PROVIDED FOR IN
THE TRANSACTION DOCUMENTS OR IMPOSED BY APPLICABLE SECURITIES LAWS, AND SHALL
NOT BE SUBJECT TO PREEMPTIVE OR SIMILAR RIGHTS OF STOCKHOLDERS.  ASSUMING THE
ACCURACY OF THE REPRESENTATIONS AND WARRANTIES OF THE PURCHASERS IN THIS
AGREEMENT, THE SHARES AND THE WARRANT SHARES WILL BE ISSUED IN COMPLIANCE WITH
ALL APPLICABLE FEDERAL AND STATE SECURITIES LAWS.  AS OF THE CLOSING DATE, THE
COMPANY SHALL HAVE RESERVED FROM ITS DULY AUTHORIZED CAPITAL STOCK THE NUMBER OF
SHARES OF COMMON STOCK ISSUABLE UPON EXERCISE OF THE WARRANTS (WITHOUT TAKING
INTO ACCOUNT ANY LIMITATIONS ON THE EXERCISE OF THE WARRANTS SET FORTH IN THE
WARRANTS).  THE COMPANY SHALL, SO LONG AS ANY OF THE WARRANTS ARE OUTSTANDING,
TAKE ALL ACTION NECESSARY TO RESERVE AND KEEP AVAILABLE OUT OF ITS AUTHORIZED
AND UNISSUED CAPITAL STOCK, SOLELY FOR THE PURPOSE OF EFFECTING THE EXERCISE OF
THE WARRANTS, 100% OF THE NUMBER OF SHARES OF COMMON STOCK ISSUABLE UPON
EXERCISE OF THE WARRANTS (WITHOUT TAKING INTO ACCOUNT ANY LIMITATIONS ON THE
EXERCISE OF THE WARRANTS SET FORTH IN THE WARRANTS).

 

(G)           CAPITALIZATION.  THE NUMBER OF SHARES AND TYPE OF ALL AUTHORIZED,
ISSUED AND OUTSTANDING CAPITAL STOCK, OPTIONS AND OTHER SECURITIES OF THE
COMPANY (WHETHER OR NOT PRESENTLY CONVERTIBLE INTO OR EXERCISABLE OR
EXCHANGEABLE FOR SHARES OF CAPITAL STOCK OF THE COMPANY) HAS BEEN SET FORTH IN
THE SEC REPORTS AND, EXCEPT AS OTHERWISE PROVIDED IN SCHEDULE 3.1(G) HERETO, HAS
CHANGED SINCE THE DATE OF SUCH SEC REPORTS ONLY DUE TO STOCK GRANTS OR OTHER
EQUITY AWARDS OR STOCK OPTION AND WARRANT EXERCISES THAT DO NOT, INDIVIDUALLY OR
IN THE AGGREGATE, HAVE A MATERIAL EFFECT ON THE ISSUED AND OUTSTANDING CAPITAL
STOCK, OPTIONS AND OTHER SECURITIES.  ALL OF THE OUTSTANDING SHARES OF CAPITAL
STOCK OF THE COMPANY ARE DULY AUTHORIZED, VALIDLY ISSUED, FULLY PAID AND
NON-ASSESSABLE, HAVE BEEN ISSUED IN COMPLIANCE IN ALL MATERIAL RESPECTS WITH ALL
APPLICABLE 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 ANY CAPITAL STOCK OF THE COMPANY.  THE COMPANY HAS NO
LIABILITIES OR OBLIGATIONS REQUIRED TO BE DISCLOSED IN THE SEC REPORTS BUT NOT
SO DISCLOSED IN THE SEC REPORTS, OTHER THAN THOSE INCURRED IN THE ORDINARY
COURSE OF THE COMPANY’S BUSINESS AND WHICH, INDIVIDUALLY OR IN THE AGGREGATE, DO
NOT OR WOULD NOT HAVE A MATERIAL ADVERSE EFFECT.  THE ISSUANCE AND SALE OF THE
SHARES AND WARRANTS WILL NOT OBLIGATE THE COMPANY TO ISSUE SHARES OF COMMON
STOCK OR OTHER SECURITIES TO ANY PERSON (OTHER THAN THE PURCHASERS) AND WILL NOT
RESULT IN A RIGHT OF ANY HOLDER OF COMPANY SECURITIES TO ADJUST THE EXERCISE,
CONVERSION, EXCHANGE OR RESET PRICE UNDER ANY OF SUCH SECURITIES.

 

(H)           SEC REPORTS; DISCLOSURE MATERIALS.  THE COMPANY HAS FILED ALL
REPORTS, SCHEDULES, FORMS, STATEMENTS AND OTHER DOCUMENTS REQUIRED TO BE FILED
BY IT UNDER THE EXCHANGE ACT, INCLUDING PURSUANT TO SECTION 13(A) OR
15(D) THEREOF, FOR THE TWELVE MONTHS PRECEDING THE DATE HEREOF (OR SUCH SHORTER
PERIOD AS THE COMPANY WAS REQUIRED BY LAW OR REGULATION TO FILE SUCH MATERIAL)
(THE FOREGOING MATERIALS, INCLUDING THE EXHIBITS THERETO AND DOCUMENTS
INCORPORATED BY REFERENCE THEREIN, BEING COLLECTIVELY REFERRED TO HEREIN AS THE
“SEC REPORTS” AND TOGETHER WITH THIS AGREEMENT AND THE SCHEDULES TO THIS
AGREEMENT, THE “DISCLOSURE MATERIALS”), ON A TIMELY BASIS OR HAS RECEIVED A
VALID EXTENSION OF SUCH TIME OF FILING AND HAS FILED ANY SUCH SEC REPORTS PRIOR
TO THE EXPIRATION OF ANY SUCH EXTENSION.  AS OF THEIR RESPECTIVE FILING DATES,
OR TO THE EXTENT CORRECTED BY A SUBSEQUENT RESTATEMENT OR SUBSEQUENT FILINGS,
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.  THE COMPANY HAS NEVER BEEN AN ISSUER SUBJECT
TO RULE 144(I) UNDER THE SECURITIES ACT.

 

(I)            FINANCIAL STATEMENTS.  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 (OR TO THE EXTENT CORRECTED
BY A SUBSEQUENT RESTATEMENT).  SUCH FINANCIAL STATEMENTS HAVE BEEN PREPARED IN
ACCORDANCE WITH GAAP APPLIED ON A CONSISTENT BASIS DURING THE PERIODS INVOLVED,
EXCEPT AS MAY BE OTHERWISE SPECIFIED IN SUCH FINANCIAL STATEMENTS OR THE NOTES
THERETO AND EXCEPT THAT UNAUDITED FINANCIAL STATEMENTS MAY NOT CONTAIN ALL

 

8

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footnotes required by GAAP, and fairly present in all material respects the
financial position of the Company and its consolidated subsidiaries taken as a
whole as of and for the dates thereof and the results of operations and cash
flows for the periods then ended, subject, in the case of unaudited statements,
to normal, year-end audit adjustments.

 

(J)            TAX MATTERS.  EXCEPT AS OTHERWISE PROVIDED IN SCHEDULE
3.1(J) HERETO, THE COMPANY (I) HAS PREPARED AND FILED ALL FOREIGN, FEDERAL AND
STATE INCOME AND ALL OTHER TAX RETURNS, REPORTS AND DECLARATIONS REQUIRED BY ANY
JURISDICTION TO WHICH IT IS SUBJECT, (II) HAS PAID ALL TAXES AND OTHER
GOVERNMENTAL ASSESSMENTS AND CHARGES THAT ARE MATERIAL IN AMOUNT, SHOWN OR
DETERMINED TO BE DUE ON SUCH RETURNS, REPORTS AND DECLARATIONS, EXCEPT THOSE
BEING CONTESTED IN GOOD FAITH, WITH RESPECT TO WHICH ADEQUATE RESERVES HAVE BEEN
SET ASIDE ON THE BOOKS OF THE COMPANY AND (III) HAS SET ASIDE ON ITS BOOKS
PROVISIONS REASONABLY ADEQUATE FOR THE PAYMENT OF ALL TAXES FOR PERIODS
SUBSEQUENT TO THE PERIODS TO WHICH SUCH RETURNS, REPORTS OR DECLARATIONS APPLY,
EXCEPT, IN THE CASE OF CLAUSES (I) AND (II) ABOVE, WHERE THE FAILURE TO SO PAY
OR FILE ANY SUCH TAX, ASSESSMENT, CHARGE OR RETURN WOULD NOT HAVE A MATERIAL
ADVERSE EFFECT.

 

(K)           MATERIAL CHANGES.  SINCE THE DATE OF THE LATEST FINANCIAL
STATEMENTS INCLUDED WITHIN THE SEC REPORTS, EXCEPT AS SPECIFICALLY DISCLOSED IN
THE SEC REPORTS, (I) THERE HAVE BEEN NO EVENTS, OCCURRENCES OR DEVELOPMENTS THAT
HAVE HAD OR WOULD REASONABLY BE EXPECTED TO HAVE, EITHER INDIVIDUALLY OR IN THE
AGGREGATE, A MATERIAL ADVERSE EFFECT, AND (II) THERE HAS NOT BEEN ANY MATERIAL
CHANGE OR AMENDMENT TO, OR ANY WAIVER OF ANY MATERIAL RIGHT BY THE COMPANY
UNDER, ANY MATERIAL CONTRACT.

 

(L)            ENVIRONMENTAL MATTERS.  TO THE COMPANY’S KNOWLEDGE, NEITHER THE
COMPANY NOR ANY OF ITS SUBSIDIARIES (I) IS IN VIOLATION OF ANY STATUTE, RULE,
REGULATION, DECISION OR ORDER OF ANY GOVERNMENTAL AGENCY OR BODY OR ANY COURT,
DOMESTIC OR FOREIGN, RELATING TO THE USE, DISPOSAL OR RELEASE OF HAZARDOUS OR
TOXIC SUBSTANCES OR RELATING TO THE PROTECTION OR RESTORATION OF THE ENVIRONMENT
OR HUMAN EXPOSURE TO HAZARDOUS OR TOXIC SUBSTANCES (COLLECTIVELY, “ENVIRONMENTAL
LAWS”), (II) OWNS OR OPERATES ANY REAL PROPERTY CONTAMINATED WITH ANY SUBSTANCE
THAT IS IN VIOLATION OF ANY ENVIRONMENTAL LAWS, (III) IS LIABLE FOR ANY OFF-SITE
DISPOSAL OR CONTAMINATION PURSUANT TO ANY ENVIRONMENTAL LAWS, OR (IV) IS SUBJECT
TO ANY CLAIM RELATING TO ANY ENVIRONMENTAL LAWS; WHICH VIOLATION, CONTAMINATION,
LIABILITY OR CLAIM HAS HAD OR WOULD HAVE, INDIVIDUALLY OR IN THE AGGREGATE, A
MATERIAL ADVERSE EFFECT; AND, TO THE COMPANY’S KNOWLEDGE, THERE IS NO PENDING OR
THREATENED INVESTIGATION THAT MIGHT LEAD TO SUCH A CLAIM.

 

(M)          LITIGATION.  TO THE COMPANY’S KNOWLEDGE, THERE IS NO ACTION WHICH
(I) ADVERSELY AFFECTS OR CHALLENGES THE LEGALITY, VALIDITY OR ENFORCEABILITY OF
ANY OF THE TRANSACTION DOCUMENTS OR THE SECURITIES OR (II) EXCEPT AS
SPECIFICALLY DISCLOSED IN THE SEC REPORTS, IS REASONABLY LIKELY TO HAVE A
MATERIAL ADVERSE EFFECT, INDIVIDUALLY OR IN THE AGGREGATE, IF THERE WERE AN
UNFAVORABLE DECISION.  THE COMMISSION HAS NOT ISSUED ANY STOP ORDER OR OTHER
ORDER SUSPENDING THE EFFECTIVENESS OF ANY REGISTRATION STATEMENT FILED BY THE
COMPANY OR ANY OF ITS SUBSIDIARIES UNDER THE EXCHANGE ACT OR THE SECURITIES ACT.

 

(N)           EMPLOYMENT MATTERS.  NO MATERIAL LABOR DISPUTE EXISTS OR, TO THE
COMPANY’S KNOWLEDGE, IS IMMINENT WITH RESPECT TO ANY OF THE EMPLOYEES OF THE
COMPANY WHICH WOULD HAVE A MATERIAL ADVERSE EFFECT.  TO THE COMPANY’S KNOWLEDGE,
IT IS IN COMPLIANCE WITH ALL U.S. FEDERAL, STATE, LOCAL AND FOREIGN LAWS AND
REGULATIONS RELATING TO EMPLOYMENT AND EMPLOYMENT PRACTICES, TERMS AND
CONDITIONS OF EMPLOYMENT AND WAGES AND HOURS, EXCEPT WHERE THE FAILURE TO BE IN
COMPLIANCE WOULD NOT, INDIVIDUALLY OR IN THE AGGREGATE, HAVE A MATERIAL ADVERSE
EFFECT.

 

(O)           COMPLIANCE.  NEITHER THE COMPANY NOR ANY OF ITS SUBSIDIARIES
(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 OF ITS SUBSIDIARIES UNDER), NOR HAS THE COMPANY OR
ANY OF ITS SUBSIDIARIES RECEIVED WRITTEN NOTICE OF A CLAIM THAT IT IS IN DEFAULT
UNDER OR THAT IT IS IN VIOLATION OF, ANY MATERIAL CONTRACT (WHETHER OR NOT SUCH
DEFAULT OR VIOLATION HAS BEEN WAIVED), (II) IS IN VIOLATION OF ANY ORDER OF
WHICH THE COMPANY HAS BEEN MADE AWARE IN WRITING OF ANY COURT, ARBITRATOR OR
GOVERNMENTAL BODY HAVING JURISDICTION OVER THE COMPANY OR ITS PROPERTIES OR
ASSETS, OR (III) IS IN VIOLATION OF, OR IN RECEIPT OF WRITTEN

 

9

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NOTICE THAT IT IS IN VIOLATION OF, ANY STATUTE, RULE OR REGULATION OF ANY
GOVERNMENTAL AUTHORITY APPLICABLE TO THE COMPANY, EXCEPT IN EACH CASE AS WOULD
NOT, INDIVIDUALLY OR IN THE AGGREGATE, HAVE A MATERIAL ADVERSE EFFECT.

 

(P)           REGULATORY PERMITS.  THE COMPANY POSSESSES OR HAS APPLIED FOR ALL
CERTIFICATES, AUTHORIZATIONS AND PERMITS ISSUED BY THE APPROPRIATE FEDERAL,
STATE, LOCAL OR FOREIGN REGULATORY AUTHORITIES NECESSARY TO CONDUCT ITS BUSINESS
AS CURRENTLY CONDUCTED AND AS DESCRIBED IN THE SEC REPORTS, EXCEPT WHERE THE
FAILURE TO POSSESS SUCH PERMITS, INDIVIDUALLY OR IN THE AGGREGATE, HAS NOT AND
WOULD NOT HAVE, INDIVIDUALLY OR IN THE AGGREGATE, A MATERIAL ADVERSE EFFECT
(“MATERIAL PERMITS”), AND (I) NEITHER THE COMPANY NOR ANY OF ITS SUBSIDIARIES
HAS RECEIVED ANY NOTICE IN WRITING OF PROCEEDINGS RELATING TO THE REVOCATION OR
MATERIAL ADVERSE MODIFICATION OF ANY SUCH MATERIAL PERMITS AND (II) THE COMPANY
IS UNAWARE OF ANY FACTS OR CIRCUMSTANCES THAT WOULD GIVE RISE TO THE REVOCATION
OR MATERIAL ADVERSE MODIFICATION OF ANY MATERIAL PERMITS.

 

(Q)           TITLE TO ASSETS.  THE COMPANY AND ITS SUBSIDIARIES DO NOT OWN ANY
REAL PROPERTY. THE COMPANY AND ITS SUBSIDIARIES HAVE GOOD AND MARKETABLE TITLE
TO ALL TANGIBLE PERSONAL PROPERTY OWNED BY THEM WHICH IS MATERIAL TO THE
BUSINESS OF THE COMPANY AND ITS SUBSIDIARIES, TAKEN AS A WHOLE, IN EACH CASE
FREE AND CLEAR OF ALL LIENS EXCEPT SUCH AS DO NOT MATERIALLY AFFECT THE VALUE OF
SUCH PROPERTY AND DO NOT INTERFERE WITH THE USE MADE AND PROPOSED TO BE MADE OF
SUCH PROPERTY BY THE COMPANY AND ANY OF ITS SUBSIDIARIES OR AS OTHERWISE SET
FORTH IN THE SEC REPORTS.  EXCEPT AS SET FORTH ON SCHEDULE 3.1(Q), ANY REAL
PROPERTY AND FACILITIES HELD UNDER LEASE BY THE COMPANY AND ANY OF ITS
SUBSIDIARIES ARE HELD BY THEM UNDER VALID, SUBSISTING AND ENFORCEABLE LEASES
WITH SUCH EXCEPTIONS AS ARE NOT MATERIAL AND DO NOT INTERFERE WITH THE USE MADE
AND PROPOSED TO BE MADE OF SUCH PROPERTY AND BUILDINGS BY THE COMPANY AND ITS
SUBSIDIARIES.

 

(R)            PATENTS AND TRADEMARKS.  EXCEPT AS OTHERWISE PROVIDED IN SCHEDULE
3.1(R) HERETO, THE COMPANY AND ITS SUBSIDIARIES OWN, POSSESS, LICENSE OR HAVE
OTHER RIGHTS TO USE ALL FOREIGN AND DOMESTIC PATENTS, PATENT APPLICATIONS, TRADE
AND SERVICE MARKS, TRADE AND SERVICE MARK REGISTRATIONS, TRADE NAMES,
COPYRIGHTS, INVENTIONS, TRADE SECRETS, TECHNOLOGY, INTERNET DOMAIN NAMES,
KNOW-HOW AND OTHER INTELLECTUAL PROPERTY (COLLECTIVELY, THE “INTELLECTUAL
PROPERTY”) NECESSARY FOR THE CONDUCT OF THEIR RESPECTIVE BUSINESSES AS NOW
CONDUCTED, AS DESCRIBED IN THE SEC REPORTS (THE “COMPANY INTELLECTUAL
PROPERTY”).  EXCEPT AS SET FORTH IN THE SEC REPORTS OR AS OTHERWISE PROVIDED IN
SCHEDULE 3.1(R) HERETO, (A) TO THE COMPANY’S KNOWLEDGE, THERE ARE NO RIGHTS OF
THIRD PARTIES TO ANY SUCH COMPANY INTELLECTUAL PROPERTY; (B) TO THE COMPANY’S
KNOWLEDGE, THERE IS NO PENDING OR THREATENED ACTION, SUIT, PROCEEDING OR CLAIM
BY OTHERS CHALLENGING THE COMPANY’S AND ITS SUBSIDIARIES’ RIGHTS IN OR TO ANY
SUCH COMPANY INTELLECTUAL PROPERTY; AND (C) TO THE COMPANY’S KNOWLEDGE, THERE IS
NO PENDING OR THREATENED ACTION, SUIT, PROCEEDING OR CLAIM BY OTHERS THAT THE
COMPANY AND/OR ANY SUBSIDIARY INFRINGES OR OTHERWISE VIOLATES ANY INTELLECTUAL
PROPERTY OF OTHERS, EXCEPT, IN THE CASE OF CLAUSES (A), (B) OR (C) ABOVE, TO THE
EXTENT SUCH RIGHTS, VIOLATIONS OR INFRINGEMENTS WOULD NOT HAVE, EITHER
INDIVIDUALLY OR IN THE AGGREGATE, A MATERIAL ADVERSE EFFECT.

 

(S)           INTERNAL ACCOUNTING CONTROLS; DISCLOSURE CONTROLS.  EXCEPT AS HAS
NOT HAD OR WOULD NOT REASONABLY BE EXPECTED TO HAVE, INDIVIDUALLY OR IN THE
AGGREGATE, A MATERIAL ADVERSE EFFECT, THE COMPANY (I) HAS ESTABLISHED AND
MAINTAINED DISCLOSURE CONTROLS AND PROCEDURES AND INTERNAL CONTROL OVER
FINANCIAL REPORTING (AS SUCH TERMS ARE DEFINED IN PARAGRAPHS (E) AND (F),
RESPECTIVELY, OF RULE 13A-15 UNDER THE EXCHANGE ACT) AS REQUIRED BY RULE 13A-15
UNDER THE EXCHANGE ACT, AND (II) HAS DISCLOSED BASED ON ITS MOST RECENT
EVALUATIONS, TO ITS OUTSIDE AUDITORS AND THE AUDIT COMMITTEE OF THE BOARD OF
DIRECTORS OF THE COMPANY (A) ALL SIGNIFICANT DEFICIENCIES AND MATERIAL
WEAKNESSES IN THE DESIGN OR OPERATION OF INTERNAL CONTROLS OVER FINANCIAL
REPORTING (AS DEFINED IN RULE 13A-15(F) OF THE EXCHANGE ACT) THAT ARE REASONABLY
LIKELY TO ADVERSELY AFFECT THE COMPANY’S ABILITY TO RECORD, PROCESS, SUMMARIZE
AND REPORT FINANCIAL DATA, AND (B) ANY FRAUD, WHETHER OR NOT MATERIAL, THAT
INVOLVES MANAGEMENT OR OTHER EMPLOYEES WHO HAVE A SIGNIFICANT ROLE IN THE
COMPANY’S INTERNAL CONTROLS OVER FINANCIAL REPORTING.

 

(T)            SARBANES-OXLEY.  THE COMPANY IS IN COMPLIANCE IN ALL MATERIAL
RESPECTS WITH ALL OF THE PROVISIONS OF THE SARBANES-OXLEY ACT OF 2002 WHICH ARE
APPLICABLE TO IT, EXCEPT WHERE SUCH NONCOMPLIANCE WOULD NOT HAVE, INDIVIDUALLY
OR IN THE AGGREGATE, A MATERIAL ADVERSE EFFECT.

 

10

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(U)           CERTAIN FEES.  EXCEPT AS IDENTIFIED IN SCHEDULE 3.1(U) HERETO, NO
PERSON OR ENTITY WILL HAVE, AS A RESULT OF THE TRANSACTIONS CONTEMPLATED BY THIS
AGREEMENT, ANY VALID RIGHT, INTEREST OR CLAIM AGAINST OR UPON THE COMPANY OR A
PURCHASER FOR ANY COMMISSION, FEE OR OTHER COMPENSATION PURSUANT TO ANY
AGREEMENT, ARRANGEMENT OR UNDERSTANDING ENTERED INTO BY OR ON BEHALF OF THE
COMPANY.  THE COMPANY SHALL INDEMNIFY, PAY, AND HOLD EACH PURCHASER HARMLESS
AGAINST, ANY LIABILITY, LOSS OR EXPENSE (INCLUDING, WITHOUT LIMITATION,
ATTORNEYS’ FEES AND OUT-OF-POCKET EXPENSES) ARISING IN CONNECTION WITH ANY SUCH
RIGHT, INTEREST OR CLAIM.

 

(V)           PRIVATE PLACEMENT.  ASSUMING THE ACCURACY OF THE PURCHASERS’
REPRESENTATIONS AND WARRANTIES SET FORTH IN SECTION 3.2 OF THIS AGREEMENT AND
THE ACCURACY OF THE INFORMATION DISCLOSED IN THE ACCREDITED INVESTOR
QUESTIONNAIRES, NO REGISTRATION UNDER THE SECURITIES ACT IS REQUIRED FOR THE
OFFER AND SALE OF THE SHARES AND WARRANTS BY THE COMPANY TO THE PURCHASERS UNDER
THE TRANSACTION DOCUMENTS.

 

(W)          REGISTRATION RIGHTS.  OTHER THAN AS SET FORTH IN SCHEDULE
3.1(W) AND OTHER THAN EACH OF THE PURCHASERS, NO PERSON HAS ANY RIGHT TO CAUSE
THE COMPANY TO EFFECT THE REGISTRATION UNDER THE SECURITIES ACT OF ANY
SECURITIES OF THE COMPANY OTHER THAN THOSE SECURITIES WHICH ARE CURRENTLY
REGISTERED ON AN EFFECTIVE REGISTRATION STATEMENT ON FILE WITH THE COMMISSION.

 

(X)           NO INTEGRATED OFFERING.  ASSUMING THE ACCURACY OF THE PURCHASERS’
REPRESENTATIONS AND WARRANTIES SET FORTH IN SECTION 3.2, NONE OF THE COMPANY,
ITS SUBSIDIARIES NOR, TO THE COMPANY’S KNOWLEDGE, ANY OF ITS AFFILIATES OR ANY
PERSON ACTING ON ITS BEHALF HAS, DIRECTLY OR INDIRECTLY, AT ANY TIME WITHIN THE
PAST SIX MONTHS, MADE ANY OFFERS OR SALES OF ANY COMPANY SECURITY OR SOLICITED
ANY OFFERS TO BUY ANY SECURITY UNDER CIRCUMSTANCES THAT WOULD (I) ELIMINATE THE
AVAILABILITY OF THE EXEMPTION FROM REGISTRATION UNDER REGULATION D UNDER THE
SECURITIES ACT IN CONNECTION WITH THE OFFER AND SALE BY THE COMPANY OF THE
SHARES AND WARRANTS AS CONTEMPLATED HEREBY OR (II) CAUSE THE OFFERING OF THE
SHARES AND WARRANTS PURSUANT TO THE TRANSACTION DOCUMENTS TO BE INTEGRATED WITH
PRIOR OFFERINGS BY THE COMPANY FOR PURPOSES OF ANY APPLICABLE LAW, REGULATION OR
STOCKHOLDER APPROVAL PROVISIONS, INCLUDING, WITHOUT LIMITATION, UNDER THE
RULES AND REGULATIONS OF ANY TRADING MARKET ON WHICH ANY OF THE SECURITIES OF
THE COMPANY ARE LISTED OR DESIGNATED.

 

(Y)           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 TERMINATE 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 WRITTEN NOTICE FROM ANY
TRADING MARKET ON WHICH THE COMMON STOCK IS LISTED OR QUOTED TO THE EFFECT THAT
THE COMPANY IS NOT IN COMPLIANCE WITH THE LISTING OR MAINTENANCE REQUIREMENTS OF
SUCH TRADING MARKET.  THE COMPANY IS IN COMPLIANCE IN ALL MATERIAL RESPECTS WITH
THE LISTING AND MAINTENANCE REQUIREMENTS FOR CONTINUED TRADING OF THE COMMON
STOCK ON THE PRINCIPAL TRADING MARKET.

 

(Z)            DISCLOSURE.  TO THE COMPANY’S KNOWLEDGE, NO EVENT OR CIRCUMSTANCE
HAS OCCURRED OR INFORMATION EXISTS WITH RESPECT TO THE COMPANY OR ANY OF ITS
SUBSIDIARIES OR ITS OR THEIR BUSINESS, PROPERTIES, OPERATIONS OR FINANCIAL
CONDITIONS, WHICH, UNDER APPLICABLE LAW, RULE OR REGULATION, REQUIRES PUBLIC
DISCLOSURE OR ANNOUNCEMENT BY THE COMPANY BUT WHICH HAS NOT BEEN SO PUBLICLY
ANNOUNCED OR DISCLOSED (ASSUMING FOR THIS PURPOSE THAT THE COMPANY’S REPORTS
FILED UNDER THE EXCHANGE ACT ARE BEING INCORPORATED INTO AN EFFECTIVE
REGISTRATION STATEMENT FILED BY THE COMPANY UNDER THE SECURITIES ACT), EXCEPT
FOR THE ANNOUNCEMENT OF THIS AGREEMENT AND RELATED TRANSACTIONS AND AS MAY BE
DISCLOSED ON THE FORM 8-K FILED PURSUANT TO SECTION 4.6.   ANY WRITTEN MATERIALS
FURNISHED BY OR ON BEHALF OF THE COMPANY TO THE PURCHASERS REGARDING THE
COMPANY, ITS BUSINESS AND THE TRANSACTIONS CONTEMPLATED HEREBY, INCLUDING THE
DISCLOSURE SCHEDULES TO THIS AGREEMENT, ARE TRUE AND CORRECT IN ALL MATERIAL
RESPECTS AND DO NOT CONTAIN ANY UNTRUE STATEMENTS OF A MATERIAL FACT OR OMIT TO
STATE ANY MATERIAL FACTS NECESSARY IN ORDER TO MAKE THE STATEMENTS MADE THEREIN,
IN LIGHT OF THE CIRCUMSTANCES UNDER WHICH THEY WERE MADE, NOT MISLEADING.  THE
COMPANY

 

11

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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.

 

(AA)         NO GENERAL SOLICITATION.  THE COMPANY DID NOT OFFER THE SECURITIES
AS A GENERAL SOLICITATION IN THE FORM OF AN 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 ADVERTISEMENT.

 

(BB)         USE OF FORM S-3.  THE COMPANY MEETS THE REGISTRATION AND
TRANSACTION REQUIREMENTS FOR USE OF FORM S-3 FOR THE REGISTRATION OF THE SHARES
AND THE WARRANT SHARES FOR RESALE BY THE PURCHASERS.

 

(CC)         INSURANCE.  THE COMPANY AND THE SUBSIDIARIES ARE INSURED BY
INSURERS OF RECOGNIZED FINANCIAL RESPONSIBILITY AGAINST SUCH LOSSES AND RISKS
AND IN SUCH AMOUNTS AS THE COMPANY BELIEVES ARE PRUDENT AND CUSTOMARY IN THE
BUSINESSES IN WHICH THE COMPANY AND THE SUBSIDIARIES ARE ENGAGED, INCLUDING, BUT
NOT LIMITED TO, DIRECTORS AND OFFICERS INSURANCE COVERAGE.  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.

 

(DD)         TRANSACTIONS WITH AFFILIATES AND EMPLOYEES.  EXCEPT AS SET FORTH IN
THE SEC REPORTS AND EXCEPT FOR THE ISSUANCE OF SECURITIES PURSUANT TO THIS
AGREEMENT, 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 $120,000 OTHER THAN FOR (I) PAYMENT OF SALARY
OR CONSULTING FEES FOR SERVICES RENDERED, (II) REIMBURSEMENT FOR EXPENSES
INCURRED ON BEHALF OF THE COMPANY AND (III) OTHER EMPLOYEE BENEFITS, INCLUDING
STOCK OPTION AGREEMENTS UNDER ANY STOCK OPTION PLAN OF THE COMPANY.

 

(EE)         INVESTMENT COMPANY. THE COMPANY IS NOT, AND IS NOT AN AFFILIATE OF,
AND IMMEDIATELY AFTER RECEIPT OF PAYMENT FOR THE SECURITIES, WILL NOT BE OR BE
AN AFFILIATE OF, AN “INVESTMENT COMPANY” WITHIN THE MEANING OF THE INVESTMENT
COMPANY ACT OF 1940, AS AMENDED.  THE COMPANY SHALL CONDUCT ITS BUSINESS IN A
MANNER SO THAT IT WILL NOT BECOME AN “INVESTMENT COMPANY” SUBJECT TO
REGISTRATION UNDER THE INVESTMENT COMPANY ACT OF 1940, AS AMENDED.

 

(FF)           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 ANY APPLICABLE SHAREHOLDER APPROVAL PROVISIONS OF ANY TRADING
MARKET ON WHICH ANY OF THE SECURITIES OF THE COMPANY ARE LISTED OR DESIGNATED.

 

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

 

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(HH)         ACKNOWLEDGMENT REGARDING PURCHASERS’ PURCHASE OF SECURITIES.  THE
COMPANY ACKNOWLEDGES AND AGREES THAT EACH OF THE PURCHASERS IS ACTING SOLELY IN
THE CAPACITY OF AN ARM’S LENGTH PURCHASER WITH RESPECT TO THE TRANSACTION
DOCUMENTS AND THE TRANSACTIONS CONTEMPLATED THEREBY.  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 THE TRANSACTION
DOCUMENTS AND THE TRANSACTIONS CONTEMPLATED THEREBY AND ANY ADVICE GIVEN BY ANY
PURCHASER OR ANY OF THEIR RESPECTIVE REPRESENTATIVES OR AGENTS IN CONNECTION
WITH THE TRANSACTION DOCUMENTS AND THE TRANSACTIONS CONTEMPLATED THEREBY IS
MERELY INCIDENTAL TO THE PURCHASERS’ PURCHASE OF THE SECURITIES.  THE COMPANY
FURTHER REPRESENTS TO EACH PURCHASER THAT THE COMPANY’S DECISION TO ENTER INTO
THIS AGREEMENT AND THE OTHER TRANSACTION DOCUMENTS HAS BEEN BASED SOLELY ON THE
INDEPENDENT EVALUATION OF THE TRANSACTIONS CONTEMPLATED HEREBY BY THE COMPANY
AND ITS REPRESENTATIVES.

 

(II)           ACKNOWLEDGEMENT REGARDING PURCHASER’S TRADING ACTIVITY.  ANYTHING
IN THIS AGREEMENT OR ELSEWHERE HEREIN TO THE CONTRARY NOTWITHSTANDING (EXCEPT
FOR SECTIONS 3.2(H) AND 4.15 HEREOF), IT IS UNDERSTOOD AND ACKNOWLEDGED BY THE
COMPANY THAT: (I) NONE OF THE PURCHASERS HAVE BEEN ASKED BY THE COMPANY TO
AGREE, NOR HAS ANY PURCHASER AGREED, TO DESIST FROM PURCHASING OR SELLING, LONG
AND/OR SHORT, SECURITIES OF THE COMPANY, OR “DERIVATIVE” SECURITIES BASED ON
SECURITIES ISSUED BY THE COMPANY OR TO HOLD THE SECURITIES FOR ANY SPECIFIED
TERM; (II) PAST OR FUTURE OPEN MARKET OR OTHER TRANSACTIONS BY ANY PURCHASER,
SPECIFICALLY INCLUDING, WITHOUT LIMITATION, SHORT SALES OR “DERIVATIVE”
TRANSACTIONS, BEFORE OR AFTER THE CLOSING OF THIS OR FUTURE PRIVATE PLACEMENT
TRANSACTIONS, MAY NEGATIVELY IMPACT THE MARKET PRICE OF THE COMPANY’S
PUBLICLY-TRADED SECURITIES; (III) ANY PURCHASER, AND COUNTER-PARTIES IN
“DERIVATIVE” TRANSACTIONS TO WHICH ANY SUCH PURCHASER IS A PARTY, DIRECTLY OR
INDIRECTLY, PRESENTLY MAY HAVE A “SHORT” POSITION IN THE COMMON STOCK, AND
(IV) EACH PURCHASER SHALL NOT BE DEEMED TO HAVE ANY AFFILIATION WITH OR CONTROL
OVER ANY ARM’S LENGTH COUNTER-PARTY IN ANY “DERIVATIVE” TRANSACTION.  THE
COMPANY FURTHER UNDERSTANDS AND ACKNOWLEDGES THAT (Y) ONE OR MORE PURCHASERS MAY
ENGAGE IN HEDGING ACTIVITIES AT VARIOUS TIMES DURING THE PERIOD THAT THE
SECURITIES ARE OUTSTANDING, INCLUDING, WITHOUT LIMITATION, DURING THE PERIODS
THAT THE VALUE OF THE WARRANT SHARES DELIVERABLE WITH RESPECT TO SECURITIES ARE
BEING DETERMINED, AND (Z) SUCH HEDGING ACTIVITIES (IF ANY) COULD REDUCE THE
VALUE OF THE EXISTING STOCKHOLDERS’ EQUITY INTERESTS IN THE COMPANY AT AND AFTER
THE TIME THAT THE HEDGING ACTIVITIES ARE BEING CONDUCTED.  THE COMPANY
ACKNOWLEDGES THAT SUCH AFOREMENTIONED HEDGING ACTIVITIES DO NOT CONSTITUTE A
BREACH OF ANY OF THE TRANSACTION DOCUMENTS.

 

(JJ)           REGULATION M COMPLIANCE.  THE COMPANY HAS NOT, AND TO ITS
KNOWLEDGE NO ONE ACTING ON ITS BEHALF HAS, (I) TAKEN, DIRECTLY OR INDIRECTLY,
ANY ACTION DESIGNED TO CAUSE OR TO RESULT IN THE STABILIZATION OR MANIPULATION
OF THE PRICE OF ANY SECURITY OF THE COMPANY TO FACILITATE THE SALE OR RESALE OF
ANY OF THE SECURITIES, (II) SOLD, BID FOR, PURCHASED, OR, PAID ANY COMPENSATION
FOR SOLICITING PURCHASES OF, ANY OF THE SECURITIES, OR (III) PAID OR AGREED TO
PAY TO ANY PERSON ANY COMPENSATION FOR SOLICITING ANOTHER TO PURCHASE ANY OTHER
SECURITIES OF THE COMPANY, OTHER THAN, IN THE CASE OF CLAUSES (II) AND (III),
COMPENSATION PAID TO THE COMPANY’S PLACEMENT AGENT IN CONNECTION WITH THE
PLACEMENT OF THE SECURITIES.

 

(KK)         APPLICATION OF TAKEOVER PROTECTIONS.  THE COMPANY AND THE BOARD OF
DIRECTORS HAVE TAKEN ALL NECESSARY ACTION, IF ANY, IN ORDER TO RENDER
INAPPLICABLE ANY CONTROL SHARE ACQUISITION, BUSINESS COMBINATION, POISON PILL
(INCLUDING ANY DISTRIBUTION UNDER A RIGHTS AGREEMENT) OR OTHER SIMILAR ANTI
TAKEOVER PROVISION UNDER THE COMPANY’S CERTIFICATE OF INCORPORATION (OR SIMILAR
CHARTER DOCUMENTS) OR THE LAWS OF ITS STATE OF 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 AS A RESULT OF THE COMPANY’S
ISSUANCE OF THE SECURITIES AND THE PURCHASERS’ OWNERSHIP OF THE SECURITIES.

 

(LL)           INDEBTEDNESS.  THE SEC REPORTS SET FORTH AS OF THE DATES
SPECIFIED THEREIN ALL OUTSTANDING SECURED AND UNSECURED INDEBTEDNESS OF THE
COMPANY OR ANY SUBSIDIARY, OR FOR WHICH THE COMPANY OR ANY SUBSIDIARY HAS
COMMITMENTS. FOR THE PURPOSES OF THIS AGREEMENT, “INDEBTEDNESS” MEANS (A) ANY
LIABILITIES FOR BORROWED MONEY OR AMOUNTS OWED IN EXCESS OF $50,000 (OTHER THAN
TRADE ACCOUNTS PAYABLE INCURRED IN THE ORDINARY COURSE OF BUSINESS) AND (B) ALL
GUARANTIES, ENDORSEMENTS AND OTHER

 

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CONTINGENT OBLIGATIONS IN RESPECT OF INDEBTEDNESS OF OTHERS, WHETHER OR NOT THE
SAME ARE OR SHOULD BE REFLECTED IN THE COMPANY’S BALANCE SHEET (OR THE NOTES
THERETO), EXCEPT GUARANTIES BY ENDORSEMENT OF NEGOTIABLE INSTRUMENTS FOR DEPOSIT
OR COLLECTION OR SIMILAR TRANSACTIONS IN THE ORDINARY COURSE OF BUSINESS.
NEITHER THE COMPANY NOR ANY SUBSIDIARY IS IN MATERIAL DEFAULT WITH RESPECT TO
ANY INDEBTEDNESS.

 

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 THE REQUISITE CORPORATE OR PARTNERSHIP
POWER AND AUTHORITY TO ENTER INTO AND TO CONSUMMATE THE TRANSACTIONS
CONTEMPLATED BY THE APPLICABLE TRANSACTION DOCUMENTS AND OTHERWISE TO CARRY OUT
ITS OBLIGATIONS HEREUNDER AND 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, IF SUCH PURCHASER IS
NOT A CORPORATION, SUCH PARTNERSHIP, LIMITED LIABILITY COMPANY OR OTHER
APPLICABLE LIKE ACTION, ON THE PART OF SUCH PURCHASER.  THIS AGREEMENT 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 AS SUCH ENFORCEABILITY MAY BE LIMITED BY APPLICABLE BANKRUPTCY,
INSOLVENCY, REORGANIZATION, MORATORIUM, LIQUIDATION OR SIMILAR LAWS RELATING TO,
OR AFFECTING GENERALLY THE ENFORCEMENT OF, CREDITORS’ RIGHTS AND REMEDIES OR BY
OTHER EQUITABLE PRINCIPLES OF GENERAL APPLICATION.

 

(B)           NO CONFLICTS.  THE EXECUTION, DELIVERY AND PERFORMANCE BY SUCH
PURCHASER OF THIS AGREEMENT AND THE CONSUMMATION BY SUCH PURCHASER OF THE
TRANSACTIONS CONTEMPLATED HEREBY WILL NOT (I) RESULT IN A VIOLATION OF THE
ORGANIZATIONAL DOCUMENTS OF SUCH PURCHASER, (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 AGREEMENT, INDENTURE OR INSTRUMENT TO WHICH
SUCH PURCHASER IS A PARTY, OR (III) RESULT IN A VIOLATION OF ANY LAW, RULE,
REGULATION, ORDER, JUDGMENT OR DECREE (INCLUDING FEDERAL AND STATE SECURITIES
LAWS) APPLICABLE TO SUCH PURCHASER, EXCEPT IN THE CASE OF CLAUSES (II) AND
(III) ABOVE, FOR SUCH CONFLICTS, DEFAULTS, RIGHTS OR VIOLATIONS WHICH WOULD NOT,
INDIVIDUALLY OR IN THE AGGREGATE, REASONABLY BE EXPECTED TO HAVE A MATERIAL
ADVERSE EFFECT ON THE ABILITY OF SUCH PURCHASER TO PERFORM ITS OBLIGATIONS
HEREUNDER.

 

(C)           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 AND,
UPON EXERCISE OF THE WARRANTS, WILL ACQUIRE THE WARRANT SHARES ISSUABLE UPON
EXERCISE THEREOF AS PRINCIPAL FOR ITS OWN ACCOUNT AND NOT WITH A VIEW TO, OR FOR
DISTRIBUTING OR RESELLING SUCH SECURITIES OR ANY PART THEREOF IN VIOLATION OF
THE SECURITIES ACT OR ANY APPLICABLE STATE SECURITIES LAWS, PROVIDED, HOWEVER,
THAT BY MAKING THE REPRESENTATIONS HEREIN, SUCH PURCHASER DOES NOT AGREE TO HOLD
ANY OF THE SECURITIES FOR ANY MINIMUM PERIOD OF TIME AND RESERVES THE RIGHT,
SUBJECT TO THE PROVISIONS OF THIS AGREEMENT, AT ALL TIMES TO SELL OR OTHERWISE
DISPOSE OF ALL OR ANY PART OF SUCH SECURITIES OR WARRANT SHARES PURSUANT TO AN
EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT OR UNDER AN EXEMPTION
FROM SUCH REGISTRATION AND 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 PRESENTLY HAVE ANY
AGREEMENT, PLAN OR UNDERSTANDING, DIRECTLY OR INDIRECTLY, WITH ANY PERSON TO
DISTRIBUTE OR EFFECT ANY DISTRIBUTION OF ANY OF THE SECURITIES (OR ANY
SECURITIES WHICH ARE DERIVATIVES THEREOF) TO OR THROUGH ANY PERSON OR ENTITY;
SUCH PURCHASER IS NOT A REGISTERED BROKER-DEALER UNDER SECTION 15 OF THE
EXCHANGE ACT OR AN ENTITY ENGAGED IN A BUSINESS THAT WOULD REQUIRE IT TO BE SO
REGISTERED AS A BROKER-DEALER.

 

(D)           PURCHASER STATUS.  AT THE TIME SUCH PURCHASER WAS OFFERED THE
SECURITIES, IT WAS, AND AT THE DATE HEREOF IT IS, AN “ACCREDITED INVESTOR” AS
DEFINED IN RULE 501(A) UNDER THE SECURITIES ACT.  SUCH PURCHASER IS NOT REQUIRED
TO BE REGISTERED AS A BROKER-DEALER UNDER SECTION 15 OF THE EXCHANGE ACT.

 

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(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 ADVERTISEMENT.

 

(F)            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.

 

(G)           ACCESS TO INFORMATION.  SUCH PURCHASER ACKNOWLEDGES THAT IT HAS
HAD THE OPPORTUNITY TO REVIEW THE DISCLOSURE MATERIALS AND HAS BEEN AFFORDED
(I) THE OPPORTUNITY TO ASK SUCH QUESTIONS AS IT HAS DEEMED NECESSARY OF, AND TO
RECEIVE ANSWERS FROM, REPRESENTATIVES OF THE COMPANY CONCERNING THE TERMS AND
CONDITIONS OF THE OFFERING OF THE SECURITIES AND THE MERITS AND RISKS OF
INVESTING IN THE SECURITIES; (II) ACCESS TO INFORMATION ABOUT THE COMPANY AND
THE SUBSIDIARIES AND THEIR RESPECTIVE FINANCIAL CONDITION, RESULTS OF
OPERATIONS, BUSINESS, PROPERTIES, MANAGEMENT AND PROSPECTS SUFFICIENT TO ENABLE
IT TO EVALUATE ITS INVESTMENT; AND (III) THE OPPORTUNITY TO OBTAIN SUCH
ADDITIONAL INFORMATION THAT THE COMPANY POSSESSES OR CAN ACQUIRE WITHOUT
UNREASONABLE EFFORT OR EXPENSE THAT IS NECESSARY TO MAKE AN INFORMED INVESTMENT
DECISION WITH RESPECT TO THE INVESTMENT.  NEITHER SUCH INQUIRIES NOR ANY OTHER
INVESTIGATION CONDUCTED BY OR ON BEHALF OF SUCH PURCHASER OR ITS REPRESENTATIVES
OR COUNSEL SHALL MODIFY, AMEND OR AFFECT SUCH PURCHASER’S RIGHT TO RELY ON THE
TRUTH, ACCURACY AND COMPLETENESS OF THE DISCLOSURE MATERIALS AND THE COMPANY’S
REPRESENTATIONS AND WARRANTIES CONTAINED IN THE TRANSACTION DOCUMENTS.  SUCH
PURCHASER HAS SOUGHT SUCH ACCOUNTING, LEGAL AND TAX ADVICE AS IT HAS CONSIDERED
NECESSARY TO MAKE AN INFORMED DECISION WITH RESPECT TO ITS ACQUISITION OF THE
SECURITIES.

 

(H)           CERTAIN TRADING ACTIVITIES.  OTHER THAN WITH RESPECT TO THE
TRANSACTIONS CONTEMPLATED HEREIN, SINCE THE TIME THAT SUCH PURCHASER WAS FIRST
CONTACTED BY THE COMPANY OR ANY OTHER PERSON REGARDING THE TRANSACTIONS
CONTEMPLATED HEREBY, NEITHER THE PURCHASER NOR ANY AFFILIATE OF SUCH PURCHASER
WHICH (X) HAD KNOWLEDGE OF THE TRANSACTIONS CONTEMPLATED HEREBY, (Y) HAS OR
SHARES DISCRETION RELATING TO SUCH PURCHASER’S INVESTMENTS OR TRADING OR
INFORMATION CONCERNING SUCH PURCHASER’S INVESTMENTS, INCLUDING IN RESPECT OF THE
SHARES AND WARRANTS, AND (Z) IS SUBJECT TO SUCH PURCHASER’S REVIEW OR INPUT
CONCERNING SUCH AFFILIATE’S INVESTMENTS OR TRADING (COLLECTIVELY, “TRADING
AFFILIATES”), HAS DIRECTLY OR INDIRECTLY, NOR HAS ANY PERSON ACTING ON BEHALF OF
OR PURSUANT TO ANY UNDERSTANDING WITH SUCH PURCHASER OR TRADING AFFILIATE,
EFFECTED OR AGREED TO EFFECT ANY PURCHASES OR SALES OF THE SECURITIES OF THE
COMPANY (INCLUDING, WITHOUT LIMITATION, ANY SHORT SALES INVOLVING THE COMPANY’S
SECURITIES).  NOTWITHSTANDING THE FOREGOING, IN THE CASE OF A PURCHASER AND/OR
TRADING AFFILIATE THAT IS, INDIVIDUALLY OR COLLECTIVELY, A MULTI-MANAGED
INVESTMENT BANK OR VEHICLE WHEREBY SEPARATE PORTFOLIO MANAGERS MANAGE SEPARATE
PORTIONS OF SUCH PURCHASER’S OR TRADING AFFILIATE’S ASSETS AND THE PORTFOLIO
MANAGERS HAVE NO DIRECT KNOWLEDGE OF THE INVESTMENT DECISIONS MADE BY THE
PORTFOLIO MANAGERS MANAGING OTHER PORTIONS OF SUCH PURCHASER’S OR TRADING
AFFILIATE’S ASSETS, THE REPRESENTATION SET FORTH ABOVE SHALL APPLY ONLY WITH
RESPECT TO THE PORTION OF ASSETS MANAGED BY THE PORTFOLIO MANAGER THAT HAVE
KNOWLEDGE ABOUT THE FINANCING TRANSACTION CONTEMPLATED BY THIS AGREEMENT.

 

(I)            BROKERS AND FINDERS.  NO PERSON WILL HAVE, AS A RESULT OF THE
TRANSACTIONS CONTEMPLATED BY THIS AGREEMENT, ANY VALID RIGHT, INTEREST OR CLAIM
AGAINST OR UPON THE COMPANY OR ANY PURCHASER FOR ANY COMMISSION, FEE OR OTHER
COMPENSATION PURSUANT TO ANY AGREEMENT, ARRANGEMENT OR UNDERSTANDING ENTERED
INTO BY OR ON BEHALF OF THE PURCHASER.

 

(J)            INDEPENDENT INVESTMENT DECISION.  SUCH PURCHASER HAS
INDEPENDENTLY EVALUATED THE MERITS OF ITS DECISION TO PURCHASE SHARES AND
WARRANTS PURSUANT TO THE TRANSACTION DOCUMENTS, AND SUCH PURCHASER CONFIRMS THAT
IT HAS NOT RELIED ON THE ADVICE OF ANY OTHER PURCHASER’S BUSINESS AND/OR LEGAL
COUNSEL IN MAKING SUCH DECISION.  SUCH PURCHASER UNDERSTANDS THAT NOTHING IN
THIS AGREEMENT OR ANY OTHER MATERIALS PRESENTED BY OR ON BEHALF OF THE COMPANY
TO THE PURCHASER IN CONNECTION WITH THE PURCHASE OF THE SHARES AND

 

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WARRANTS 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 THE
SHARES AND WARRANTS.

 

(K)           RELIANCE ON EXEMPTIONS.  SUCH PURCHASER UNDERSTANDS THAT THE
SHARES AND WARRANTS BEING OFFERED AND SOLD TO IT IN RELIANCE ON SPECIFIC
EXEMPTIONS FROM THE REGISTRATION REQUIREMENTS OF UNITED STATES FEDERAL AND STATE
SECURITIES LAWS AND THAT THE COMPANY IS RELYING IN PART UPON THE TRUTH AND
ACCURACY OF, AND SUCH PURCHASER’S COMPLIANCE WITH, THE REPRESENTATIONS,
WARRANTIES, AGREEMENTS, ACKNOWLEDGEMENTS AND UNDERSTANDINGS OF SUCH PURCHASER
SET FORTH HEREIN IN ORDER TO DETERMINE THE AVAILABILITY OF SUCH EXEMPTIONS AND
THE ELIGIBILITY OF SUCH PURCHASER TO ACQUIRE THE SHARES AND WARRANTS.

 

(L)            NO GOVERNMENTAL REVIEW.  SUCH PURCHASER UNDERSTANDS THAT NO
UNITED STATES FEDERAL OR STATE AGENCY OR ANY OTHER GOVERNMENT OR GOVERNMENTAL
AGENCY HAS PASSED ON OR MADE ANY RECOMMENDATION OR ENDORSEMENT OF THE SECURITIES
OR THE FAIRNESS OR SUITABILITY OF THE INVESTMENT IN THE SECURITIES NOR HAVE SUCH
AUTHORITIES PASSED UPON OR ENDORSED THE MERITS OF THE OFFERING OF THE
SECURITIES.

 

(M)          REGULATION M.  SUCH PURCHASER IS AWARE THAT THE ANTI-MANIPULATION
RULES OF REGULATION M UNDER THE EXCHANGE ACT MAY APPLY TO SALES OF COMMON STOCK
AND OTHER ACTIVITIES WITH RESPECT TO THE COMMON STOCK BY THE PURCHASERS.

 

(N)           RESIDENCY.  SUCH PURCHASER’S RESIDENCE (IF AN INDIVIDUAL) OR
OFFICE IN WHICH ITS INVESTMENT DECISION WITH RESPECT TO THE SHARES AND WARRANTS
WAS MADE (IF AN ENTITY) ARE LOCATED AT THE ADDRESS IMMEDIATELY BELOW SUCH
PURCHASER’S NAME ON ITS SIGNATURE PAGE HERETO.

 

The Company and each of the Purchasers acknowledge and agree that no party to
this Agreement has made or makes any representations or warranties with respect
to the transactions contemplated hereby other than those specifically set forth
in this Article III and the Transaction Documents.  The Company acknowledges and
agrees that the representations contained in Section 3.2 shall not modify, amend
or affect such Purchaser’s right to rely on the Company’s representations and
warranties contained in this Agreement or any representations and warranties
contained in any other Transaction Document or any other document or instrument
executed and/or delivered in connection with this Agreement or the consummation
of the transaction contemplated hereby.

 

ARTICLE IV
OTHER AGREEMENTS OF THE PARTIES

 

4.1           Transfer Restrictions.

 

(A)           COMPLIANCE WITH LAWS.  NOTWITHSTANDING ANY OTHER PROVISION OF THIS
ARTICLE IV, EACH PURCHASER COVENANTS THAT THE SECURITIES MAY BE DISPOSED OF ONLY
PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER, AND IN COMPLIANCE WITH
THE REQUIREMENTS OF, THE SECURITIES ACT, OR PURSUANT TO AN AVAILABLE EXEMPTION
FROM, OR IN A TRANSACTION NOT SUBJECT TO, THE REGISTRATION REQUIREMENTS OF THE
SECURITIES ACT, AND IN COMPLIANCE WITH ANY APPLICABLE STATE, FEDERAL OR FOREIGN
SECURITIES LAWS.  IN CONNECTION WITH ANY TRANSFER OF THE SECURITIES OTHER THAN
(I) PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT, (II) TO THE COMPANY, OR
(III) PURSUANT TO RULE 144 (PROVIDED THAT THE PURCHASER PROVIDES THE COMPANY
WITH REASONABLE ASSURANCES (IN THE FORM OF SELLER AND BROKER REPRESENTATION
LETTERS) THAT THE SECURITIES MAY BE SOLD PURSUANT TO SUCH RULE), THE COMPANY MAY
REQUIRE THE TRANSFEROR THEREOF TO PROVIDE TO THE COMPANY AND THE TRANSFER AGENT,
AT THE TRANSFEROR’S EXPENSE, AN OPINION OF COUNSEL SELECTED BY THE TRANSFEROR
AND REASONABLY ACCEPTABLE TO THE COMPANY AND THE TRANSFER AGENT, THE FORM AND
SUBSTANCE OF WHICH OPINION SHALL BE REASONABLY SATISFACTORY TO THE COMPANY AND
THE TRANSFER AGENT, TO THE EFFECT THAT SUCH TRANSFER DOES NOT REQUIRE
REGISTRATION OF SUCH TRANSFERRED SECURITIES UNDER THE SECURITIES ACT.  AS A
CONDITION OF TRANSFER (OTHER THAN PURSUANT TO CLAUSES (I), (II) OR (III) OF THE
PRECEDING SENTENCE), ANY SUCH TRANSFEREE SHALL AGREE IN WRITING TO BE BOUND BY
THE TERMS OF

 

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THIS AGREEMENT AND SHALL HAVE THE RIGHTS OF A PURCHASER UNDER THIS AGREEMENT
WITH RESPECT TO SUCH TRANSFERRED SECURITIES.

 

(B)           LEGENDS.  CERTIFICATES EVIDENCING THE SECURITIES SHALL BEAR ANY
LEGEND AS REQUIRED BY THE “BLUE SKY” LAWS OF ANY STATE AND A RESTRICTIVE LEGEND
IN SUBSTANTIALLY THE FOLLOWING FORM, UNTIL SUCH TIME AS THEY ARE NOT REQUIRED
UNDER SECTION 4.1(C) OR APPLICABLE LAW:

 

[NEITHER THESE SECURITIES NOR THE SECURITIES ISSUABLE UPON EXERCISE OF THESE
SECURITIES HAVE BEEN REGISTERED] [THESE SECURITIES HAVE NOT BEEN REGISTERED]
UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE “SECURITIES ACT”), OR
APPLICABLE STATE SECURITIES LAWS.  THE SECURITIES MAY NOT BE OFFERED FOR SALE,
SOLD, TRANSFERRED OR ASSIGNED (I) IN THE ABSENCE OF (A) AN EFFECTIVE
REGISTRATION STATEMENT FOR THE SECURITIES UNDER THE SECURITIES ACT OR (B) 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 OR BLUE SKY LAWS AS EVIDENCED BY A LEGAL OPINION OF COUNSEL
REASONABLY SATISFACTORY TO THE COMPANY AND ITS TRANSFER AGENT OR (II) UNLESS
SOLD PURSUANT TO RULE 144 UNDER SAID ACT.  NO REPRESENTATION IS MADE BY THE
ISSUER AS TO THE AVAILABILITY OF THE EXEMPTION PROVIDED BY RULE 144 UNDER THE
SECURITIES ACT FOR RESALES OF THESE SECURITIES.

 

(C)           REMOVAL OF LEGENDS.  THE RESTRICTIVE LEGEND SET FORTH IN
SECTION 4.1(B) ABOVE SHALL BE REMOVED AND THE TRANSFER AGENT OR THE COMPANY, AS
THE CASE MAY BE, SHALL ISSUE A CERTIFICATE WITHOUT SUCH RESTRICTIVE LEGEND OR
ANY OTHER RESTRICTIVE LEGEND TO THE HOLDER OF THE APPLICABLE SECURITIES UPON
WHICH IT IS STAMPED OR ISSUE TO SUCH HOLDER BY ELECTRONIC DELIVERY AT THE
APPLICABLE BALANCE ACCOUNT AT THE DEPOSITORY TRUST COMPANY (“DTC”), IF (I) SUCH
SECURITIES ARE REGISTERED FOR RESALE UNDER THE SECURITIES ACT (PROVIDED THAT, IF
THE PURCHASER IS SELLING PURSUANT TO THE EFFECTIVE REGISTRATION STATEMENT
REGISTERING THE SECURITIES FOR RESALE, THE PURCHASER AGREES TO ONLY SELL SUCH
SECURITIES DURING SUCH TIME THAT SUCH REGISTRATION STATEMENT IS EFFECTIVE AND
NOT WITHDRAWN OR SUSPENDED, AND ONLY AS PERMITTED BY SUCH REGISTRATION
STATEMENT), (II) SUCH SECURITIES ARE SOLD OR TRANSFERRED PURSUANT TO RULE 144
(IF THE TRANSFEROR IS NOT AN AFFILIATE OF THE COMPANY), OR (III) SUCH SECURITIES
ARE ELIGIBLE FOR SALE UNDER RULE 144, WITHOUT THE REQUIREMENT FOR THE COMPANY TO
BE IN COMPLIANCE WITH THE CURRENT PUBLIC INFORMATION REQUIRED UNDER RULE 144 AS
TO SUCH SECURITIES AND WITHOUT VOLUME OR MANNER-OF-SALE RESTRICTIONS. 
CERTIFICATES FOR SECURITIES SUBJECT TO LEGEND REMOVAL HEREUNDER MAY BE
TRANSMITTED BY THE TRANSFER AGENT TO THE PURCHASERS BY CREDITING THE ACCOUNT OF
THE PURCHASER’S PRIME BROKER WITH DTC AS DIRECTED BY SUCH PURCHASER.  ANY
TRANSFER AGENT FEES ASSOCIATED WITH THE REMOVAL OF SUCH LEGEND SHALL BE BORNE BY
THE COMPANY.

 

(D)           ACKNOWLEDGEMENT.  EACH PURCHASER HEREUNDER ACKNOWLEDGES ITS
PRIMARY RESPONSIBILITIES UNDER THE SECURITIES ACT AND ACCORDINGLY WILL NOT SELL
OR OTHERWISE TRANSFER THE SHARES, THE WARRANTS OR THE WARRANT SHARES OR ANY
INTEREST THEREIN WITHOUT COMPLYING WITH THE REQUIREMENTS OF THE SECURITIES ACT. 
EXCEPT AS OTHERWISE PROVIDED BELOW, WHILE ANY REGISTRATION STATEMENT REMAINS
EFFECTIVE, EACH PURCHASER HEREUNDER MAY SELL THE SHARES AND WARRANT SHARES IN
ACCORDANCE WITH THE PLAN OF DISTRIBUTION CONTAINED IN SUCH REGISTRATION
STATEMENT AND IF IT DOES SO IT WILL COMPLY THEREWITH AND WITH THE RELATED
PROSPECTUS DELIVERY REQUIREMENTS UNLESS AN EXEMPTION THEREFROM IS AVAILABLE. 
EACH PURCHASER, SEVERALLY AND NOT JOINTLY WITH THE OTHER PURCHASERS, AGREES THAT
IF IT IS NOTIFIED BY THE COMPANY IN WRITING AT ANY TIME THAT THE REGISTRATION
STATEMENT REGISTERING THE RESALE OF THE SHARES OR THE WARRANT SHARES IS NOT
EFFECTIVE OR THAT THE PROSPECTUS INCLUDED IN SUCH REGISTRATION STATEMENT NO
LONGER COMPLIES WITH THE REQUIREMENTS OF SECTION 10 OF THE SECURITIES ACT, THE
PURCHASER WILL REFRAIN FROM SELLING SUCH SHARES AND WARRANT SHARES UNTIL

 

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SUCH TIME AS THE PURCHASER IS NOTIFIED BY THE COMPANY THAT SUCH REGISTRATION
STATEMENT IS EFFECTIVE OR SUCH PROSPECTUS IS COMPLIANT WITH SECTION 10 OF THE
SECURITIES ACT, UNLESS SUCH PURCHASER IS ABLE TO, AND DOES, SELL SUCH SHARES OR
WARRANT SHARES PURSUANT TO AN AVAILABLE EXEMPTION FROM THE REGISTRATION
REQUIREMENTS OF SECTION 5 OF THE SECURITIES ACT.  BOTH THE COMPANY AND ITS
TRANSFER AGENT, AND THEIR RESPECTIVE DIRECTORS, OFFICERS, EMPLOYEES AND AGENTS,
MAY RELY ON THIS SECTION 4.1(D).

 

(E)           BUY-IN.  IF THE COMPANY SHALL FAIL FOR ANY REASON OR FOR NO REASON
TO ISSUE TO A PURCHASER UNLEGENDED CERTIFICATES WITHIN THREE (3) TRADING DAYS OF
RECEIPT OF ALL DOCUMENTS NECESSARY FOR THE REMOVAL OF THE LEGEND SET FORTH ABOVE
(THE “DEADLINE DATE”), THEN, IN ADDITION TO ALL OTHER REMEDIES AVAILABLE TO SUCH
PURCHASER, IF ON OR AFTER THE TRADING DAY IMMEDIATELY FOLLOWING SUCH THREE
(3) TRADING DAY PERIOD, SUCH PURCHASER PURCHASES (IN AN OPEN MARKET TRANSACTION
OR OTHERWISE) SHARES OF COMMON STOCK TO DELIVER IN SATISFACTION OF A SALE BY THE
HOLDER OF SHARES OF COMMON STOCK THAT SUCH PURCHASER ANTICIPATED RECEIVING FROM
THE COMPANY WITHOUT ANY RESTRICTIVE LEGEND (A “BUY-IN”), THEN THE COMPANY SHALL,
WITHIN THREE (3) TRADING DAYS AFTER SUCH PURCHASER’S REQUEST AND IN SUCH
PURCHASER’S SOLE DISCRETION, EITHER (I) PAY CASH TO THE PURCHASER IN AN AMOUNT
EQUAL TO SUCH PURCHASER’S TOTAL PURCHASE PRICE (INCLUDING BROKERAGE COMMISSIONS,
IF ANY) FOR THE SHARES OF COMMON STOCK SO PURCHASED (THE “BUY-IN PRICE”), AT
WHICH POINT THE COMPANY’S OBLIGATION TO DELIVER SUCH CERTIFICATE (AND TO ISSUE
SUCH SHARES OF COMMON STOCK) SHALL TERMINATE, OR (II) PROMPTLY HONOR ITS
OBLIGATION TO DELIVER TO SUCH PURCHASER A CERTIFICATE OR CERTIFICATES
REPRESENTING SUCH SHARES OF COMMON STOCK AND PAY CASH TO THE PURCHASER IN AN
AMOUNT EQUAL TO THE EXCESS (IF ANY) OF THE BUY-IN PRICE OVER THE PRODUCT OF
(A) SUCH NUMBER OF SHARES OF COMMON STOCK, TIMES (B) THE CLOSING BID PRICE ON
THE DEADLINE DATE.

 

4.2           Acknowledgment of Dilution.  The Company acknowledges that the
issuance of the Securities may result in dilution of the outstanding shares of
Common Stock.  The Company further acknowledges that its obligations under the
Transaction Documents, including without limitation its obligation to issue the
Securities pursuant to the Transaction Documents, are unconditional and absolute
and not subject to any right of set off, counterclaim, delay or reduction,
regardless of the effect of any such dilution or any claim the Company may have
against any Purchaser and regardless of the dilutive effect that such issuance
may have on the ownership of the other stockholders of the Company.

 

4.3           Furnishing of Information.  In order to enable the Purchasers to
sell the Securities under Rule 144 of the Securities Act, for a period of one
year from the Closing, the Company shall use its commercially reasonable efforts
to maintain the registration of the Shares and Warrant Shares under
Section 12(b) or 12(g) of the Exchange Act and 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.  During such one year period, if the Company is not required
to file reports pursuant to such laws, it will prepare and furnish to the
Purchasers and make publicly available in accordance with Rule 144(c) such
information as is required for the Purchasers to sell the Securities under
Rule 144.

 

4.4           Form D and Blue Sky.  The Company agrees to timely file a Form D
with respect to the Securities as required under Regulation D.  The Company, on
or before the Closing Date, shall take such action as the Company shall
reasonably determine is necessary in order to obtain an exemption for or to
qualify the Securities for sale to the Purchasers at the Closing pursuant to
this Agreement under applicable securities or “Blue Sky” laws of the states of
the United States (or to obtain an exemption from such qualification).  The
Company shall make all filings and reports relating to the offer and sale of the
Securities required under applicable securities or “Blue Sky” laws of the states
of the United States following the Closing Date.

 

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4.5           No Integration.  The Company shall not, and shall use its
commercially reasonable efforts to ensure that no Affiliate of the Company
shall, sell, offer for sale or solicit offers to buy or otherwise negotiate in
respect of any security (as defined in Section 2 of the Securities Act) that
will 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 will be integrated with the offer or sale
of the Securities for purposes of the rules and regulations of any Trading
Market such that it would require stockholder approval prior to the closing of
such other transaction unless stockholder approval is obtained before the
closing of such subsequent transaction.

 

4.6           Securities Laws Disclosure; Publicity.  By 9:00 a.m., New York
City time, on the Trading Day immediately following the execution of this
Agreement, the Company shall issue a press release (“Press Release”) disclosing
all material terms of the transactions contemplated hereby.  On or before
9:00 a.m., New York City time, on the fourth Trading Day immediately following
the execution of this Agreement, the Company will file a Current Report on
Form 8-K with the Commission describing the terms of the Transaction Documents
(and including as exhibits to such Current Report on Form 8-K the material
Transaction Documents (including, without limitation, this Agreement)). 
Notwithstanding the foregoing, the Company shall not publicly disclose the name
of any Purchaser or an Affiliate of any Purchaser, or include the name of any
Purchaser or an Affiliate of any Purchaser in any press release or filing with
the Commission (other than the Registration Statement) 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 (A) any
Registration Statement and (B) the filing of final Transaction Documents (which
may include conformed signatures, but not originals) with the Commission and
(ii) to the extent such disclosure is required by law, request of the Staff of
the Commission or Trading Market regulations, in which case the Company shall
provide the Purchasers with prior written notice of such disclosure permitted
under this subclause (ii).  From and after the issuance of the Press Release, no
Purchaser shall be in possession of any material, non-public information
received from the Company, any Subsidiary or any of their respective officers,
directors, employees or agents, that is not disclosed in the Press Release
unless a Purchaser shall have executed a written agreement regarding the
confidentiality and use of such information Each Purchaser, severally and not
jointly with the other Purchasers, covenants that until such time as the
transactions contemplated by this Agreement are publicly disclosed by the
Company pursuant to this Section 4.6, such Purchaser will maintain the
confidentiality of all disclosures made to it in connection with this
transaction (including the existence and terms of this transaction).

 

4.7           Indemnification.

 

(A)           INDEMNIFICATION OF PURCHASERS.  THE COMPANY WILL INDEMNIFY AND
HOLD EACH PURCHASER AND ITS DIRECTORS, OFFICERS, STOCKHOLDERS, MEMBERS,
PARTNERS, EMPLOYEES AND AGENTS (AND ANY OTHER PERSONS WITH A FUNCTIONALLY
EQUIVALENT ROLE OF A PERSON HOLDING SUCH TITLES NOTWITHSTANDING A LACK OF SUCH
TITLE OR ANY OTHER TITLE), EACH PERSON WHO CONTROLS SUCH PURCHASER (WITHIN THE
MEANING OF SECTION 15 OF THE SECURITIES ACT AND SECTION 20 OF THE EXCHANGE ACT),
AND THE DIRECTORS, OFFICERS, STOCKHOLDERS, AGENTS, MEMBERS, PARTNERS OR
EMPLOYEES (AND ANY OTHER PERSONS WITH A FUNCTIONALLY EQUIVALENT ROLE OF A PERSON
HOLDING SUCH TITLES NOTWITHSTANDING A LACK OF SUCH TITLE OR ANY OTHER TITLE) OF
SUCH CONTROLLING PERSON (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 ANY BREACH OF ANY OF THE
REPRESENTATIONS, WARRANTIES, COVENANTS OR AGREEMENTS MADE BY THE COMPANY IN THIS
AGREEMENT OR IN THE OTHER TRANSACTION DOCUMENTS.  THE COMPANY WILL NOT BE LIABLE
TO ANY PURCHASER PARTY UNDER THIS AGREEMENT 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 SUCH PURCHASER PARTY IN THIS AGREEMENT OR IN THE OTHER
TRANSACTION DOCUMENTS.

 

(B)           CONDUCT OF INDEMNIFICATION PROCEEDINGS.  PROMPTLY AFTER RECEIPT BY
ANY PERSON (THE “INDEMNIFIED PERSON”) OF NOTICE OF ANY DEMAND, CLAIM OR
CIRCUMSTANCES WHICH WOULD OR MIGHT GIVE RISE TO A

 

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CLAIM OR THE COMMENCEMENT OF ANY ACTION, PROCEEDING OR INVESTIGATION IN RESPECT
OF WHICH INDEMNITY MAY BE SOUGHT PURSUANT TO SECTION 4.7(A), SUCH INDEMNIFIED
PERSON SHALL PROMPTLY NOTIFY THE COMPANY IN WRITING AND THE COMPANY SHALL ASSUME
THE DEFENSE THEREOF, INCLUDING THE EMPLOYMENT OF COUNSEL REASONABLY SATISFACTORY
TO SUCH INDEMNIFIED PERSON, AND SHALL ASSUME THE PAYMENT OF ALL FEES AND
EXPENSES; PROVIDED, HOWEVER , THAT THE FAILURE OF ANY INDEMNIFIED PERSON TO SO
NOTIFY THE COMPANY SHALL NOT RELIEVE THE COMPANY OF ITS OBLIGATIONS HEREUNDER
EXCEPT TO THE EXTENT THAT THE COMPANY IS ACTUALLY AND MATERIALLY AND ADVERSELY
PREJUDICED BY SUCH FAILURE TO NOTIFY.  IN ANY SUCH PROCEEDING, ANY INDEMNIFIED
PERSON SHALL HAVE THE RIGHT TO RETAIN ITS OWN COUNSEL, BUT THE FEES AND EXPENSES
OF SUCH COUNSEL SHALL BE AT THE EXPENSE OF SUCH INDEMNIFIED PERSON UNLESS:
(I) THE COMPANY AND THE INDEMNIFIED PERSON SHALL HAVE MUTUALLY AGREED TO THE
RETENTION OF SUCH COUNSEL; (II) THE COMPANY SHALL HAVE FAILED PROMPTLY TO ASSUME
THE DEFENSE OF SUCH PROCEEDING AND TO EMPLOY COUNSEL REASONABLY SATISFACTORY TO
SUCH INDEMNIFIED PERSON IN SUCH PROCEEDING; OR (III) IN THE REASONABLE JUDGMENT
OF COUNSEL TO SUCH INDEMNIFIED PERSON, REPRESENTATION OF BOTH PARTIES BY THE
SAME COUNSEL WOULD BE INAPPROPRIATE DUE TO ACTUAL OR POTENTIAL DIFFERING
INTERESTS BETWEEN THEM.  THE COMPANY SHALL NOT BE LIABLE FOR ANY SETTLEMENT OF
ANY PROCEEDING EFFECTED WITHOUT ITS WRITTEN CONSENT, WHICH CONSENT SHALL NOT BE
UNREASONABLY WITHHELD, DELAYED OR CONDITIONED UNLESS THE COMPANY FAILS TO DEFEND
ANY PROCEEDING OR FAILS TO PROMPTLY RESPOND TO A SETTLEMENT OFFER.  WITHOUT THE
PRIOR WRITTEN CONSENT OF THE INDEMNIFIED PERSON, WHICH CONSENT SHALL NOT BE
UNREASONABLY WITHHELD, DELAYED OR CONDITIONED, THE COMPANY SHALL NOT EFFECT ANY
SETTLEMENT OF ANY PENDING OR THREATENED PROCEEDING IN RESPECT OF WHICH ANY
INDEMNIFIED PERSON IS OR COULD HAVE BEEN A PARTY AND INDEMNITY COULD HAVE BEEN
SOUGHT HEREUNDER BY SUCH INDEMNIFIED PARTY, UNLESS SUCH SETTLEMENT INCLUDES AN
UNCONDITIONAL RELEASE OF SUCH INDEMNIFIED PERSON FROM ALL LIABILITY ARISING OUT
OF SUCH PROCEEDING.

 

4.8           Listing of Common Stock.  The Company hereby agrees to use best
efforts to maintain the listing or quotation of the Common Stock on the
principal Trading Market on which it is currently listed, and concurrently with
the Closing, the Company shall apply to list or quote all of the Shares and
Warrant Shares on such Trading Market and promptly secure the listing of 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 then include in such application all of the Shares and
Warrant Shares, and will take such other action as is necessary to cause all of
the Shares and Warrant Shares to be listed or quoted on such other Trading
Market as promptly as possible.  The Company will then take all action
reasonably necessary to continue the listing and trading of its Common Stock on
a Trading Market and will comply in all respects with the Company’s reporting,
filing and other obligations under the bylaws or rules of the Trading Market.

 

4.9           Use of Proceeds.  The Company intends to use the net proceeds from
the sale of the Securities hereunder for working capital and general corporate
purposes.

 

4.10         Short Sales After The Date Hereof.  Such Purchaser shall not, and
shall cause its Trading Affiliates not to, engage, directly or indirectly, in
any transactions in the Company’s securities (including, without limitation, any
Short Sales involving the Company’s securities) during the period from the date
hereof until the earlier of such time as (i) the transactions contemplated by
this Agreement are first required to be publicly announced as described in
Section 4.6 or (ii) this Agreement is terminated in full pursuant to
Section 6.17.  Each Purchaser severally and not jointly with the other
Purchasers covenants that until such time as the transactions contemplated by
this Agreement are publicly disclosed by the Company as described in
Section 4.6, such Purchaser will maintain the confidentiality of the existence
and terms of this Agreement and the transactions contemplated hereby. 
Notwithstanding the foregoing, no Purchaser makes any representation, warranty
or covenant hereby that it will not engage in Short Sales in the securities of
the Company after the time that the transactions contemplated by this Agreement
are publicly disclosed by the Company as described in Section 4.6. 
Notwithstanding the foregoing, in the event that a Purchaser is a multi-managed
investment vehicle whereby separate portfolio managers manage separate portions
of such Purchaser’s assets and the portfolio managers have no direct knowledge
of the investment decisions made by the portfolio managers managing other
portions of such Purchaser’s assets, the representation set forth above shall
apply only with respect to the portion of assets managed by the portfolio
manager that have knowledge

 

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about the financing transaction contemplated by this Agreement.  Each Purchaser
understands and acknowledges, severally and not jointly with any other
Purchaser, that the Commission currently takes the position that covering a
short position established prior to effectiveness of a resale registration
statement with shares included in such registration statement would be a
violation of Section 5 of the Securities Act, as set forth in Item 65, Section 5
under Section A, of the Manual of Publicly Available Telephone Interpretations,
dated July 1997, compiled by the Office of Chief Counsel, Division of
Corporation Finance.

 

4.11         Reservation of Common Stock.  The Company shall, so long as any of
the Warrants are outstanding, take all action necessary to at all times have
authorized and unissued capital stock, and reserved solely for the purpose of
effecting the exercise of the Warrants from and after the Closing Date, the
number of shares of Common Stock issuable upon exercise of the Warrants (without
taking into account any limitations on exercise of the Warrants set forth in the
Warrants).

 

4.12         Disclosure of Material Information.  From and after the issuance of
the Press Release, no Purchaser shall be in possession of any material, non
public information received from the Company, any Subsidiary or any of their
respective officers, directors, employees or agents, that is not disclosed in
the Press Release unless a Purchaser shall have executed a written agreement
regarding the confidentiality and use of such information.  The Company and its
Subsidiaries covenant and agree that neither it nor any other person acting on
its or their behalf has provided or, from and after the filing of the Press
Release, will provide any Purchaser or its agents or counsel with any
information that the Company believes constitutes material non-public
information (other than with respect to the transactions contemplated by this
Agreement), unless prior thereto such Purchaser shall have executed a specific
written agreement regarding the confidentiality and use of such information. 
The parties agree that any confidentiality and nondisclosure agreements entered
into prior to the Closing Date shall not be deemed to be a valid consent to
receive any material non-public information that shall be disclosed to any
Purchaser subsequent to the Closing Date.  The Company understands and confirms
that each Purchaser shall be relying on the foregoing covenants in effecting
transactions in securities of the Company. The Company shall not disclose the
identity of any Purchaser in any filing with the SEC except as required by the
rules and regulations of the SEC thereunder.  In the event of a breach of the
foregoing covenant by the Company, any of its subsidiaries, or any of its or
their respective officers, directors, employees and agents, in addition to any
other remedy provided herein or in the Transaction Documents, a Purchaser may
notify the Company, and the Company shall make public disclosure of such
material nonpublic information within two (2) Trading Days of such
notification.  Notwithstanding anything to the contrary set forth herein, this
Section 4.12 shall not prohibit the Company from notifying the Purchasers in
connection with such Purchasers’ rights set forth in Section 4.13 herein.

 

4.13         Limited Participation Right.  Until one (1) year from the Closing
Date, such Purchaser shall have the right, but not the obligation, to purchase
up to an amount equal to its Participation Percentage (as defined below) of any
sale by the Company of any of its securities other than in connection with a
Strategic Transaction (as defined below).  The Company shall provide at least
two (2) Business Days’ prior notice of such transaction to such Purchaser and
shall give such Purchaser the right to participate in such transaction.  For
purposes of this Section 4.13, the term “Participation Percentage” shall mean
such Purchaser’s pro rata portion of the aggregate Shares purchased hereunder. 
For purposes of this Section 4.13, the term “Strategic Transaction” shall mean
securities issued by the Company pursuant to a strategic transaction including,
without limitation, an acquisition, joint venture, alliance, collaboration or
investment transaction, provided that any such issuance is to a person which is,
itself or through its subsidiaries or affiliates, an operating company and in
which the Company receives strategic benefits that are in addition to the
investment of funds.

 

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

 

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Securities under the Transaction Documents or under any other agreement between
the Company and the Purchasers.

 

4.15         Subsequent Equity Sales.  From the date hereof until 30 days after
the Closing Date, neither the Company nor any Subsidiary shall issue shares of
Common Stock or Common Stock Equivalents other than in connection with an Exempt
Issuance.   For purposes of this Section 4.15, an “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 in effect on the
date of this Agreement, and (b) securities upon the exercise or exchange of or
conversion of any Securities issued hereunder and/or other securities (including
options and warrants) exercisable or exchangeable for or convertible into shares
of Common Stock 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 or to decrease the exercise, exchange or
conversion price of such securities.

 

ARTICLE V
CONDITIONS PRECEDENT TO CLOSING

 

5.1           Conditions Precedent to the Obligations of the Purchasers to
Purchase Shares and Warrants.  The obligation of each Purchaser to acquire
Shares and Warrants at the Closing is subject to the fulfillment to such
Purchaser’s satisfaction, on or prior to the Closing Date, of each of the
following conditions, any of which may be waived by such Purchaser (as to itself
only):

 

(A)           REPRESENTATIONS AND WARRANTIES.  THE REPRESENTATIONS AND
WARRANTIES OF THE COMPANY CONTAINED HEREIN SHALL BE TRUE AND CORRECT IN ALL
MATERIAL RESPECTS AS OF THE DATE WHEN MADE AND AS OF THE CLOSING DATE, AS THOUGH
MADE ON AND AS OF SUCH DATE, EXCEPT FOR SUCH REPRESENTATIONS AND WARRANTIES THAT
SPEAK AS OF A SPECIFIC DATE.

 

(B)           PERFORMANCE.  THE COMPANY SHALL HAVE PERFORMED, SATISFIED AND
COMPLIED IN ALL MATERIAL RESPECTS WITH ALL COVENANTS, AGREEMENTS AND CONDITIONS
REQUIRED BY THE TRANSACTION DOCUMENTS TO BE PERFORMED, SATISFIED OR COMPLIED
WITH BY IT AT OR PRIOR TO THE CLOSING.

 

(C)           NO INJUNCTION.  NO STATUTE, RULE, REGULATION, EXECUTIVE ORDER,
DECREE, RULING OR INJUNCTION SHALL HAVE BEEN ENACTED, ENTERED, PROMULGATED OR
ENDORSED BY ANY COURT OR GOVERNMENTAL AUTHORITY OF COMPETENT JURISDICTION THAT
PROHIBITS THE CONSUMMATION OF ANY OF THE TRANSACTIONS CONTEMPLATED BY THE
TRANSACTION DOCUMENTS.

 

(D)           CONSENTS.  THE COMPANY SHALL HAVE OBTAINED IN A TIMELY FASHION ANY
AND ALL CONSENTS, PERMITS, APPROVALS, REGISTRATIONS AND WAIVERS NECESSARY FOR
CONSUMMATION OF THE PURCHASE AND SALE OF THE SHARES AND WARRANTS AT THE CLOSING,
ALL OF WHICH SHALL BE AND REMAIN SO LONG AS NECESSARY IN FULL FORCE AND EFFECT.

 

(E)           NO SUSPENSIONS OF TRADING IN COMMON STOCK; LISTING .  THE COMMON
STOCK (I) SHALL BE DESIGNATED FOR QUOTATION OR LISTED ON THE PRINCIPAL TRADING
MARKET AND (II) SHALL NOT HAVE BEEN SUSPENDED, AS OF THE CLOSING DATE, BY THE
COMMISSION OR THE PRINCIPAL TRADING MARKET FROM TRADING ON THE PRINCIPAL TRADING
MARKET NOR SHALL SUSPENSION BY THE COMMISSION OR THE PRINCIPAL TRADING MARKET
HAVE BEEN THREATENED, AS OF THE CLOSING DATE, EITHER (A) IN WRITING BY THE
COMMISSION OR THE PRINCIPAL TRADING MARKET OR (B) BY FALLING BELOW THE MINIMUM
LISTING MAINTENANCE REQUIREMENTS OF THE PRINCIPAL TRADING MARKET.

 

(F)            COMPANY DELIVERABLES .  THE COMPANY SHALL HAVE DELIVERED THE
COMPANY DELIVERABLES IN ACCORDANCE WITH SECTION 2.2(A).

 

(G)           COMPLIANCE CERTIFICATE .  THE COMPANY SHALL HAVE DELIVERED TO EACH
PURCHASER A CERTIFICATE, DATED AS OF THE CLOSING DATE AND SIGNED BY ITS CHIEF
EXECUTIVE OFFICER OR ITS CHIEF FINANCIAL

 

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OFFICER, DATED AS OF THE CLOSING DATE, CERTIFYING TO THE FULFILLMENT OF THE
CONDITIONS SPECIFIED IN SECTIONS 5.1(A) AND (B).

 

(H)           TERMINATION .  THIS AGREEMENT SHALL NOT HAVE BEEN TERMINATED AS TO
SUCH PURCHASER IN ACCORDANCE WITH SECTION 6.17 HEREIN.

 

(I)            MARKET EVENTS.  FROM THE DATE HEREOF TO THE CLOSING DATE, TRADING
IN THE COMMON STOCK SHALL NOT HAVE BEEN SUSPENDED BY THE COMMISSION OR THE
COMPANY’S PRINCIPAL TRADING MARKET (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 L.P. 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 THE COMPANY’S PRINCIPAL 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,
THE FINANCIAL MARKETS OF THE UNITED STATES WHICH, IN EACH CASE, IN THE
REASONABLE JUDGMENT OF EACH PURCHASER, MAKES IT IMPRACTICABLE OR INADVISABLE TO
PURCHASE THE SECURITIES AT THE CLOSING.

 

5.2           Conditions Precedent to the Obligations of the Company to sell
Shares and Warrants.  The Company’s obligation to sell and issue the Shares and
Warrants at the Closing is subject to the fulfillment to the satisfaction of the
Company on or prior to the Closing Date of the following conditions, any of
which may be waived by the Company:

 

(A)           REPRESENTATIONS AND WARRANTIES.  THE REPRESENTATIONS AND
WARRANTIES MADE BY THE PURCHASER IN SECTION 3.2 HEREOF SHALL BE TRUE AND CORRECT
IN ALL MATERIAL RESPECTS AS OF THE DATE WHEN MADE, AND AS OF THE CLOSING DATE AS
THOUGH MADE ON AND AS OF SUCH DATE, EXCEPT FOR REPRESENTATIONS AND WARRANTIES
THAT SPEAK AS OF A SPECIFIC DATE.

 

(B)           PERFORMANCE.  SUCH PURCHASER SHALL HAVE PERFORMED, SATISFIED AND
COMPLIED IN ALL MATERIAL RESPECTS WITH ALL COVENANTS, AGREEMENTS AND CONDITIONS
REQUIRED BY THE TRANSACTION DOCUMENTS TO BE PERFORMED, SATISFIED OR COMPLIED
WITH BY SUCH PURCHASER AT OR PRIOR TO THE CLOSING DATE.

 

(C)           NO INJUNCTION.  NO STATUTE, RULE, REGULATION, EXECUTIVE ORDER,
DECREE, RULING OR INJUNCTION SHALL HAVE BEEN ENACTED, ENTERED, PROMULGATED OR
ENDORSED BY ANY COURT OR GOVERNMENTAL AUTHORITY OF COMPETENT JURISDICTION THAT
PROHIBITS THE CONSUMMATION OF ANY OF THE TRANSACTIONS CONTEMPLATED BY THE
TRANSACTION DOCUMENTS.

 

(D)           CONSENTS.  THE COMPANY SHALL HAVE OBTAINED IN A TIMELY FASHION ANY
AND ALL CONSENTS, PERMITS, APPROVALS, REGISTRATIONS AND WAIVERS NECESSARY FOR
CONSUMMATION OF THE PURCHASE AND SALE OF THE SHARES AND WARRANTS, ALL OF WHICH
SHALL BE AND REMAIN SO LONG AS NECESSARY IN FULL FORCE AND EFFECT.

 

(E)           PURCHASERS DELIVERABLES.  SUCH PURCHASER SHALL HAVE DELIVERED ITS
PURCHASER DELIVERABLES IN ACCORDANCE WITH SECTION 2.2(B).

 

(F)            TERMINATION.  THIS AGREEMENT SHALL NOT HAVE BEEN TERMINATED AS TO
SUCH PURCHASER IN ACCORDANCE WITH SECTION 6.17 HEREIN.

 

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ARTICLE VI
MISCELLANEOUS

 

6.1           Fees and Expenses.  At the Closing, the Company shall reimburse
the VC Investors for the legal fees of one counsel representing all of the
Insider Investors in an amount not to exceed $15,000 in the aggregate in
connection with the transactions contemplated by the Transaction Documents. 
Other than the VC Investors’ legal fees provided above, the Company and the
Purchasers shall each pay the fees and expenses of their respective advisers,
counsel, accountants and other experts, if any, and all other expenses incurred
by such party in connection with the negotiation, preparation, execution,
delivery and performance of this Agreement.  The Company shall pay all Transfer
Agent fees, stamp taxes and other taxes and duties levied in connection with the
sale and issuance of the Securities to the Purchasers.

 

6.2           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,
understandings, discussions and representations, oral or written, with respect
to such matters, which the parties acknowledge have been merged into such
documents, exhibits and schedules.  At or after the Closing, and without further
consideration, the Company and the Purchasers will execute and deliver to the
other such further documents as may be reasonably requested in order to give
practical effect to the intention of the parties under the Transaction
Documents.

 

6.3           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
(provided the sender receives a machine-generated confirmation of successful
transmission) at the facsimile number specified in this Section prior to
5:00 p.m., New York City time, on a Trading Day, (b) the next Trading Day after
the date of transmission, if such notice or communication is delivered via
facsimile at the facsimile number specified in this Section on a day that is not
a Trading Day or later than 5:00 p.m., New York City time, on any Trading Day,
(c) the Trading Day following the date of mailing, if sent by U.S. nationally
recognized overnight courier service with next day delivery specified, 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 follows:

 

If to the Company:               Helicos BioSciences Corporation
One Kendall Square
Building 700
Cambridge, Massachusetts 02139
Telephone No.:  (617) 264-1800
Facsimile No.:  (617) 264-1700
Attention:  General Counsel

 

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

 

Goodwin Procter LLP
Exchange Place
53 State Street
Boston, Massachusetts 02109
Telephone No.:  (617) 570-1000
Facsimile No.:  (617) 523-1231
Attention:      Stuart M. Cable, Esq.

James A. Matarese, Esq.

 

If to a Purchaser:                                                      To the
address set forth under such Purchaser’s name on the signature page hereof;

 

24

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or such other address as may be designated in writing hereafter, in the same
manner, by such Person.

 

6.4           Amendments; Waivers; No Additional Consideration.  No provision of
this Agreement may be waived or amended except in a written instrument signed,
in the case of an amendment, by the Company and each of the Purchasers holding
or having the right to acquire a majority of the Securities on a fully-diluted
basis at the time of such amendment, 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.  No consideration shall be
offered or paid to any Purchaser to amend or consent to a waiver or modification
of any provision of any Transaction Document unless the same consideration is
also offered to all Purchasers who then hold Securities.

 

6.5           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 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. 
This Agreement shall be construed as if drafted jointly by the parties, and no
presumption or burden of proof shall arise favoring or disfavoring any party by
virtue of the authorship of any provisions of this Agreement or any of the
Transaction Documents.

 

6.6           Successors and Assigns.  The provisions of this Agreement shall
inure to the benefit of and be binding upon the parties and their successors and
permitted assigns.  This Agreement, or any rights or obligations hereunder, may
not be assigned by the Company without the prior written consent of the
Purchasers.  Any Purchaser may assign its rights hereunder in whole or in part
to any Person to whom such Purchaser assigns or transfers any Securities in
compliance with the Transaction Documents and applicable law, provided such
transferee shall agree in writing to be bound, with respect to the transferred
Securities, by the terms and conditions of this Agreement that apply to the
“Purchasers”.

 

6.7           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.

 

6.8           Governing Law.  All questions concerning the construction,
validity, enforcement and interpretation of this Agreement shall be governed by
and construed and enforced in accordance with the internal laws of the State of
New York, without regard to the principles of conflicts of law thereof.  Each
party agrees that all Proceedings concerning the interpretations, enforcement
and defense of the transactions contemplated by this Agreement and any other
Transaction Documents (whether brought against a party hereto or its respective
Affiliates, employees or agents) shall be commenced exclusively in the
applicable courts located in the State of New York.  Each party hereto hereby
irrevocably submits to the exclusive jurisdiction of the applicable courts
located in the State of New York 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 Proceeding, any claim that it is not personally subject to the
jurisdiction of any such courts located in the State of New York, or that such
Proceeding has been commenced in an improper or inconvenient forum.  Each party
hereto hereby irrevocably waives personal service of process and consents to
process being served in any such 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.  EACH
PARTY HERETO HEREBY IRREVOCABLY WAIVES, TO THE FULLEST EXTENT PERMITTED BY
APPLICABLE LAW, ANY AND ALL RIGHT TO TRIAL BY JURY IN ANY LEGAL PROCEEDING
ARISING OUT OF

 

25

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OR RELATING TO THIS AGREEMENT OR THE TRANSACTIONS CONTEMPLATED HEREBY.

 

6.9           Survival.  Subject to applicable statute of limitations, the
representations, warranties, agreements and covenants contained herein shall
survive the Closing and the delivery of the Shares and Warrants, except that the
representations and warranties contained herein shall terminate upon the
five-year anniversary of the Closing Date.

 

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

 

6.11         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.

 

6.12         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 and the Transfer Agent of such loss, theft or destruction and the
execution by the holder thereof of a customary lost certificate affidavit of
that fact and an agreement to indemnify and hold harmless the Company and the
Transfer Agent for any losses in connection therewith or, if required by the
Transfer Agent, a bond in such form and amount as is required by the Transfer
Agent.  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.  If a replacement certificate or
instrument evidencing any Securities is requested due to a mutilation thereof,
the Company may require delivery of such mutilated certificate or instrument as
a condition precedent to any issuance of a replacement.

 

6.13         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 agree to waive in any
action for specific performance of any such obligation (other than in connection
with any action for a temporary restraining order) the defense that a remedy at
law would be adequate.

 

6.14         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.

 

26

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6.15         Adjustments in Common Stock Numbers and Prices.  In the event of
any stock split, subdivision, dividend or distribution payable in shares of
Common Stock (or other securities or rights convertible into, or entitling the
holder thereof to receive directly or indirectly shares of Common Stock),
combination or other similar recapitalization or event occurring after the date
hereof and prior to the Closing, each reference in any Transaction Document to a
number of shares or a price per share shall be deemed to be amended to
appropriately account for such event.

 

6.16         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.  The decision of each Purchaser to
purchase Securities pursuant to the Transaction Documents has been made by such
Purchaser independently of any other Purchaser and independently of any
information, materials, statements or opinions as to the business, affairs,
operations, assets, properties, liabilities, results of operations, condition
(financial or otherwise) or prospects of the Company or any Subsidiary which may
have been made or given by any other Purchaser or by any agent or employee of
any other Purchaser, and no Purchaser and any of its agents or employees shall
have any liability to any other Purchaser (or any other Person) relating to or
arising from any such information, materials, statement or opinions.  Nothing
contained herein or in any Transaction Document, and no action taken by any
Purchaser pursuant thereto, shall be deemed to constitute the Purchasers as a
partnership, an association, a joint venture or any other kind of entity, or
create a presumption that the Purchasers are in any way acting in concert or as
a group with respect to such obligations or the transactions contemplated by the
Transaction Documents.  Each Purchaser acknowledges that no other Purchaser has
acted as agent for such Purchaser in connection with making its investment
hereunder and that no Purchaser will be acting as agent of such Purchaser in
connection with monitoring its investment in the Securities or enforcing its
rights under the Transaction Documents.  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 had the
opportunity to obtain its own separate legal counsel in its review and
negotiation of the Transaction Documents.  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 any
Purchaser.

 

6.17         Termination.  This Agreement may be terminated and the sale and
purchase of the Shares and Warrants abandoned at any time prior to the Closing
by either the Company or any Purchaser (with respect to itself only) upon
written notice to the other, if the Closing has not been consummated on or prior
to 5:00 p.m., New York City time, on the Outside Date; provided, however , that
the right to terminate this Agreement under this Section 6.17 shall not be
available to any Person whose failure to comply with its obligations under this
Agreement has been the cause of or resulted in the failure of the Closing to
occur on or before such time.  Nothing in this Section 6.17 shall be deemed to
release any party from any liability for any breach by such party of the terms
and provisions of this Agreement or the other Transaction Documents or to impair
the right of any party to compel specific performance by any other party of its
obligations under this Agreement or the other Transaction Documents.  In the
event of a termination pursuant to this Section, the Company shall promptly
notify all non-terminating Purchasers.  Upon a termination in accordance with
this Section, the Company and the terminating Purchaser(s) shall not have any
further obligation or liability (including arising from such termination) to the
other, and no Purchaser will have any liability to any other Purchaser under the
Transaction Documents as a result therefrom.

 

27

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6.18         Waiver of Conflicts.  Each party to this Agreement acknowledges
that Company Counsel, outside general counsel to the Company, may have in the
past performed and may now or in the future represent one or more Purchasers or
their affiliates in matters unrelated to the transactions contemplated by the
Transaction Documents, including representation of such Purchasers or their
affiliates in matters of a similar nature to the transactions contemplated by
the Transaction Documents.  The applicable rules of professional conduct require
that Company Counsel inform the parties hereunder of this representation and
obtain their consent.  Company Counsel has served as outside general counsel to
the Company and has negotiated the terms of the transactions contemplated by the
Transaction Documents solely on behalf of the Company.  The Company and each
Purchaser hereby (a) acknowledge that they have had an opportunity to ask for
and have obtained information relevant to such representation, including
disclosure of the reasonably foreseeable adverse consequences of such
representation; (b) acknowledge that with respect to the transactions
contemplated by the Transaction Documents, Company Counsel has represented
solely the Company, and not any Purchaser or any stockholder, director or
employee of the Company or any Purchaser; and (c) gives its informed consent to
Company Counsel’s representation of the Company in the transactions contemplated
by the Transaction Documents.

 

6.19         Rescission and Withdrawal Right.  Notwithstanding anything to the
contrary contained in (and without limiting any similar provisions of) the
Transaction Documents, whenever any Investor 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 Investor
may rescind or withdraw, in its sole discretion from time to time upon written
notice to the Company, any relevant notice, demand or election in whole or in
part without prejudice to its future actions and rights.

 

6.20         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 this Agreement or the Warrants unless the same consideration is
also offered to all of the parties to this Agreement.  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 for
the Company 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.

 

6.21         Aggregation of Stock.  All Securities held or acquired by
affiliated Persons under common management or control shall be aggregated
together for the purpose of determining the availability of any rights under
this Agreement and the Transaction Documents.

 

6.22         Limitation of Liability.  Notwithstanding anything herein to the
contrary, the Company acknowledges and agrees that the liability of a Purchaser
arising directly or indirectly under any of the Transaction Documents of any and
every nature whatsoever shall be satisfied solely out of the assets of such
Purchaser, and that no trustee, officer, other investment vehicle or any other
affiliate of such Purchaser  or any investor, shareholder or holder of shares of
beneficial interest of such a Purchaser shall be personally liable for any
liabilities of such Purchaser.

 

6.23         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.

 

28

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

 

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.

 

 

HELICOS BIOSCIENCES CORPORATION

 

 

 

 

 

  By:

 

 

 

Name:

 

 

Title:

 

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

 

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

 

 

NAME OF PURCHASER:

 

 

 

 

 

 

By:

 

 

Name:

 

Title:

 

 

 

 

 

Aggregate Purchase Price (Subscription Amount): $

 

 

 

Number of Shares to be Acquired:

 

 

 

Underlying Shares Subject to Warrant:

 

(        % of the number of Shares to be acquired)

 

 

 

Tax ID No.:

 

 

 

Address for Notice:

 

 

 

 

 

Telephone No.:

 

 

 

Facsimile No.:

 

 

 

E-mail Address:

 

 

 

Attention:

 

 

 

 

Delivery Instructions:

 

 

 

(if different than above)

 

 

 

c/o

 

 

 

Street:

 

 

 

City/State/Zip:

 

 

 

Attention:

 

 

 

Telephone No.:

 

 

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

 

 

EXHIBITS

 

A:

Form of Warrant

B-1:

Accredited Investor Questionnaire

B-2:

Stock Certificate and Warrant Questionnaire

C:

Wire Instructions

D:

Form of Registration Rights Agreement

 

SCHEDULES

 

3.1(a) Subsidiaries

3.1(g) Capitalization

3.1(j) Tax Matters

3.1(q) Title to Assets

3.1(r) Patents and Trademarks

3.1(u) Certain Fees

3.1(w) Registration Rights

 

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

 

EXHIBIT A

 

Form of Warrant

 

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

 

EXHIBIT B-1

 

ACCREDITED INVESTOR QUESTIONNAIRE

 

(ALL INFORMATION WILL BE TREATED CONFIDENTIALLY)

 

To:          Helicos BioSciences Corporation

 

This Investor Questionnaire (“Questionnaire”) must be completed by each
potential investor in connection with the offer and sale of shares of common
stock, par value $0.001 per share, and shares of common stock that may be issued
upon exercise of certain warrants (collectively, the “Securities”), of Helicos
BioSciences Corporation, a Delaware corporation (the “Corporation”).  The
Securities are being offered and sold by the Corporation without registration
under the Securities Act of 1933, as amended (the “Act”), and the securities
laws of certain states, in reliance on the exemptions contained in
Section 4(2) of the Act and on Regulation D promulgated thereunder and in
reliance on similar exemptions under applicable state laws.  The Corporation
must determine that a potential investor meets certain suitability requirements
before offering or selling Securities to such investor.  The purpose of this
Questionnaire is to assure the Corporation that each investor will meet the
applicable suitability requirements.  The information supplied by you will be
used in determining whether you meet such criteria, and reliance upon the
private offering exemptions from registration is based in part on the
information herein supplied.

 

This Questionnaire does not constitute an offer to sell or a solicitation of an
offer to buy any security.  Your answers will be kept strictly confidential. 
However, by signing this Questionnaire, you will be authorizing the Corporation
to provide a completed copy of this Questionnaire to such parties as the
Corporation deems appropriate in order to ensure that the offer and sale of the
Securities will not result in a violation of the Act or the securities laws of
any state and that you otherwise satisfy the suitability standards applicable to
purchasers of the Securities.  All potential investors must answer all
applicable questions and complete, date and sign this Questionnaire.  Please
print or type your responses and attach additional sheets of paper if necessary
to complete your answers to any item.

 

PART A.                BACKGROUND INFORMATION

 

Name of Beneficial Owner of the Securities:

 

 

Business Address:

 

 

 

(Number and Street)

 

 

 

 

 

 

 

(City)

 

(State)

 

(Zip Code)

 

Telephone Number: (      )

 

 

If a corporation, partnership, limited liability company, trust or other entity:

 

Type of entity:

 

 

State of formation:

 

 

Approximate Date of formation:

 

 

Were you formed for the purpose of investing in the securities being offered?

 

Yes o          No o

 

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

 

If an individual:

 

Residence Address:

 

 

 

(Number and Street)

 

 

 

 

 

 

 

(City)

 

(State)

 

(Zip Code)

 

Telephone Number: (      )

 

 

Age:

 

 

Citizenship:

 

 

Where registered to vote:

 

 

Set forth in the space provided below the state(s), if any, in the United States
in which you maintained your residence during the past two years and the dates
during which you resided in each state:

 

Are you a director or executive officer of the Corporation?

 

Yes o          No o

 

Social Security or Taxpayer Identification No.

 

 

PART B.                ACCREDITED INVESTOR QUESTIONNAIRE

 

In order for the Company to offer and sell the Securities in conformance with
state and federal securities laws, the following information must be obtained
regarding your investor status.  Please initial each category applicable to you
as a Purchaser of Securities of the Company.

 

(1)

 

A bank as defined in Section 3(a)(2) of the Securities Act, or any savings and
loan association or other institution as defined in Section 3(a)(5)(A) of the
Securities Act whether acting in its individual or fiduciary capacity;

 

 

 

(2)

 

A broker or dealer registered pursuant to Section 15 of the Securities Exchange
Act of 1934;

 

 

 

(3)

 

An insurance company as defined in Section 2(13) of the Securities Act;

 

 

 

(4)

 

An investment company registered under the Investment Company Act of 1940 or a
business development company as defined in Section 2(a)(48) of that Act;

 

 

 

(5)

 

A Small Business Investment Company licensed by the U.S. Small Business
Administration under Section 301(c) or (d) of the Small Business Investment Act
of 1958;

 

 

 

(6)

 

A plan established and maintained by a state, its political subdivisions, or any
agency or instrumentality of a state or its political subdivisions, for the
benefit of its employees, if such plan has total assets in excess of $5,000,000;

 

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

 

(7)

 

An employee benefit plan within the meaning of the Employee Retirement Income
Security Act of 1974, if the investment decision is made by a plan fiduciary, as
defined in Section 3(21) of such act, which is either a bank, savings and loan
association, insurance company, or registered investment adviser, or if the
employee benefit plan has total assets in excess of $5,000,000 or, if a
self-directed plan, with investment decisions made solely by persons that are
accredited investors;

 

 

 

(8)

 

A private business development company as defined in Section 202(a)(22) of the
Investment Advisers Act of 1940;

 

 

 

(9)

 

An organization described in Section 501(c)(3) of the Internal Revenue Code, a
corporation, Massachusetts or similar business trust, or partnership, not formed
for the specific purpose of acquiring the Securities, with total assets in
excess of $5,000,000;

 

 

 

(10)

 

A trust, with total assets in excess of $5,000,000, not formed for the specific
purpose of acquiring the Securities, whose purchase is directed by a
sophisticated person who has such knowledge and experience in financial and
business matters that such person is capable of evaluating the merits and risks
of investing in the Company;

 

 

 

(11)

 

A natural person whose individual net worth, or joint net worth with that
person’s spouse, at the time of his purchase exceeds $1,000,000;

 

 

 

(12)

 

A natural person who had an individual income in excess of $200,000 in each of
the two most recent years, or joint income with that person’s spouse in excess
of $300,000, in each of those years, and has a reasonable expectation of
reaching the same income level in the current year;

 

 

 

(13)

 

An executive officer or director of the Company;

 

 

 

(14)

 

An entity in which all of the equity owners qualify under any of the above
subparagraphs. If the undersigned belongs to this investor category only, list
the equity owners of the undersigned, and the investor category which each such
equity owner satisfies.

 

A.

FOR EXECUTION BY AN INDIVIDUAL:

 

 

 

 

By

 

 

Date

 

 

 

Print Name:

 

 

 

 

B.

FOR EXECUTION BY AN ENTITY:

 

 

 

 

 

Entity Name:

 

 

 

 

 

 

 

 

 

By

 

 

Date

 

 

 

Print Name:

 

 

 

Title:

 

 

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

 

C.

ADDITIONAL SIGNATURES (if required by partnership, corporation or trust
document):

 

 

 

 

Entity Name:

 

 

 

 

 

 

By

 

 

Date

 

 

 

Print Name:

 

 

 

Title:

 

 

 

 

 

 

 

 

Entity Name:

 

 

 

 

 

 

 

 

 

By

 

 

Date

 

 

 

Print Name:

 

 

 

Title:

 

 

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

 

EXHIBIT B-2

 

Stock Certificate Questionnaire

 

Pursuant to Section 2.2(b) of the Agreement, please provide us with the
following information:

 

1.

 

The exact name that the Securities are to be registered in (this is the name
that will appear on the stock certificate(s) and warrant(s)). You may use a
nominee name if appropriate:

 

 

 

 

 

2.

 

The relationship between the Purchaser of the Securities and the Registered
Holder listed in response to Item 1 above:

 

 

 

 

 

3.

 

The mailing address, telephone and telecopy number of the Registered Holder
listed in response to Item 1 above:

 

 

 

 

 

4.

 

The Tax Identification Number (or, if an individual, the Social Security Number)
of the Registered Holder listed in response to Item 1 above:

 

 

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

 

EXHIBIT C

 

Wire Instructions

 

JPMorgan Chase Bank

ABA # 021000021

Account No.:  806027405

Account Name:  Helicos BioScience Corp. Subscription

 

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

 

EXHIBIT D

 

Form of Registration Rights Agreement

 

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

 

Schedule 3.1(a)

 

Subsidiaries

 

Name

 

Jurisdiction of Organization

 

 

 

Helicos BioSciences Securities Corporation

 

Massachusetts

 

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

 

Schedule 3.1(g)

 

Capitalization

 

The Company recently issued approximately 3.1 million shares pursuant to the
exercise of outstanding warrants issued in connection with the Company’s
December 2008 private placement transaction.

 

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

 

Schedule 3.1(j)

 

Tax Matters

 

The Company filed it’s Federal tax return on Form 1120 for calendar year 2008 on
September 12, 2009 without a valid extension from the original filing due date
of March 15, 2009 due to an inadvertent communication issue.  The Company
generated a loss for the period and no tax was due with the return.  The Company
believes that potential penalties for this late filing will be immaterial.

 

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

 

Schedule 3.1(q)

 

Title to Assets

 

The term of the lease for the Company’s premises located at One Kendall Square,
Building 700, Cambridge, MA 02139 expired on August 31, 2009 and the Company and
its landlord are actively finalizing the documentation of a lease amendment
which would extend the term of the lease.

 

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

 

Schedule 3.1(r)

 

Patents and Trademarks

 

In August 2006, the Company filed with the European Patent Office an opposition
against European Patent No. EP 1 105 529 B1 (“the ‘529 Patent”).  On January 24,
2007, the patent owner sought to amend certain claims of the ‘529 Patent, and on
February 11, 2008 the European Patent Office issued a preliminary non-binding
opinion regarding various arguments made by the parties and set the matter for
oral hearing.  The Company elected not to participate in the oral hearing, which
occurred on October 16, 2008.  On November 4, 2008, the European Patent Office
issued a decision stating that the patent was maintained as amended.  On
January 13, 2009, the Company filed a Notice of Appeal with the European Patent
Office, and on March 12, 2009 the Company filed its reasoned Grounds of Appeal
with the European Patent Office including a request that the ‘529 Patent be
revoked. The Company believes that it has meritorious defenses should the patent
claims be asserted against it in Europe.  Nevertheless, patent litigation is
complex and the Company cannot guarantee that any case involving the ‘529 Patent
would be resolved in a manner favorable to the Company.  If the owner of the
‘529 Patent were to assert the patent against the Company in Europe, and the
Company’s defenses were unsuccessful, the patent could materially adversely
affect the Company’s ability to market and sell its products in Europe, which in
turn could have a material adverse effect on the Company’s business, operating
results, or financial conditions.

 

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Schedule 3.1(w)

 

Registration Rights

 

The Company is obligated to file a new resale registration statement to register
the remaining 58,791,617 shares of common stock, which includes the 25,652,333
shares issuable upon exercise of the warrants, issued in connection with the
December 2008 PIPE financing at such time as the SEC permits and otherwise
pursuant to the terms of the registration rights agreement executed in
connection with such financing.  Certain shares held by the Inside Investors are
subject to these registration rights.

 

In addition to the above, pursuant to the terms of an Amended and Restated
Investor Rights Agreement, dated March 1, 2006, the Company is obligated to
register approximately 13.5 million outstanding shares held by the Inside
Investors.  These rights expire on May 24, 2012.

 

Pursuant to Section 2(g) of the Registration Rights Agreement to be entered into
in connection with the Offering, the Inside Investors will agree to waive the
registration rights set forth above with respect to a new registration statement
to be filed to register for resale the shares issued in the Offering.

 

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Schedule 3.1(u)

 

Certain Fees

 

The Company will be obligated to pay certain fees to Thomas Weisel Partners LLC

 

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