exv10w1



 







Exhibit 10.1




SECURITIES PURCHASE AGREEMENT




     THIS SECURITIES PURCHASE AGREEMENT (the “Agreement”), dated as of July 21, 2006, by and among
Micromet, Inc., a Delaware corporation with headquarters located at 2110 Rutherford Road, Carlsbad,
CA 92008 (the “Company”), and the investors listed on the Schedule of Investors attached hereto as
Exhibit A (individually, an “Investor” and collectively, the “Investors”).



BACKGROUND




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



     B. Each Investor, 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 the Common Stock, par value $.00004 per share, of the Company (the “Common Stock”), set forth
opposite such Investor’s name in column two (2) on the Schedule of Investors in Exhibit A
(which aggregate amount for all Investors together shall be 2,222,222 shares of Common Stock and
shall collectively be referred to herein as the “Common Shares”) and (ii) warrants, in
substantially the form attached hereto as Exhibit F (the “Warrants”) to acquire up to that
number of additional shares of Common Stock set forth opposite such Investor’s name in column three
(3) on the Schedule of Investors (the shares of Common Stock issuable upon exercise of or otherwise
pursuant to the Warrants, collectively, the “Warrant Shares”).



     C. The Common Shares, the Warrants and the Warrant Shares issued pursuant to this Agreement
are 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 Investors agree as follows:



ARTICLE I

DEFINITIONS




     1.1. Definitions. In addition to the terms defined elsewhere in this Agreement, the
following terms have the meanings indicated:



     “Affiliate” means any Person that, directly or indirectly through one or more intermediaries,
controls or is controlled by or is under common control with a Person, as such terms are used in
and construed under Rule 144 under the Securities Act.



 









 





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



     “Agreement” has the meaning set forth in the Preamble.



     “Business Day” means any day other than Saturday, Sunday or other day on which commercial
banks in The City of New York are authorized or required by law to remain closed.



     “Closing” means the closing of the purchase and sale of the Securities pursuant to Section
2.1.



     “Closing Date” means the date and time of the Closing and shall be on such date and time as is
mutually agreed to by the Company and each Investor).



     “Closing Price” means, for any date, the closing price per share of the Common Stock for such
date (or the nearest preceding date) on the primary Eligible Market or exchange or quotation system
on which the Common Stock is then listed or quoted.



     “Company” has the meaning set forth in the Preamble.



     “Company Counsel” means Cooley Godward LLP, counsel to the Company.



     “Common Shares” means an aggregate of 2,222,222 shares of Common Stock, which are being issued
and sold by the Company to the Investors at the Closing.



     “Common Stock” means the common stock of the Company, par value $0.00004 per share.



     “Common Stock Equivalents” means, collectively, Options and Convertible Securities.



     “Convertible Securities” means any stock or securities (other than Options) convertible into
or exercisable or exchangeable for Common Stock.



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



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



     “Effectiveness Period” has the meaning set forth in Section 6.1(b).



     “8-K Filing” has the meaning set forth in Section 4.5.



     “Eligible Market” means any of the New York Stock Exchange, the American Stock Exchange, The
Nasdaq National Market and The Nasdaq Capital Market (and any successors thereto).



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



     “Event” has the meaning set forth in Section 6.1(d).



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     “Event Payments” has the meaning set forth in Section 6.1(d).



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



     “Excluded Events” has the meaning set forth in Section 6.1(d)(ii).



     “Excluded Investors” means Cowen & Co., LLC and its Affiliates.



     “Filing Date” means 45 days after the Closing Date.



     “GAAP” has the meaning set forth in Section 3.1(g).



     “Hazardous Materials” has the meaning set forth in Section 3.1(cc).



     “Indemnified Party” has the meaning set forth in Section 6.4(c).



     “Indemnifying Party” has the meaning set forth in Section 6.4(c).



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



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



     “Investor” has the meaning set forth in the Preamble.



     “Knowledge” means the actual knowledge of the directors and officers of a party to this
agreement.



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



     “Losses” means any and all losses, claims, damages, liabilities, settlement costs and
expenses, including, without limitation and reasonable attorneys’ fees.



     “Material Adverse Effect” means (i) a material adverse effect on the results of operations,
assets, business or financial condition of the Company and the Subsidiaries, taken as a whole on a
consolidated basis, or (ii) the material and adverse impairment of the Company’s ability to perform
its obligations under any of the Transaction Documents, provided, that none of the following shall
be deemed to constitute a Material Adverse Effect: (i) a change in the market price or trading
volume of the Common Stock or (ii) changes in general economic conditions or changes affecting the
industry in which the Company operates generally (as opposed to Company-specific changes) so long
as such changes do not have a disproportionate effect on the Company and its Subsidiaries taken as
a whole.



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



     “Options” means any outstanding rights, warrants or options to subscribe for or purchase
Common Stock or Convertible Securities.



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     “Person” means any individual or corporation, partnership, trust, incorporated or
unincorporated association, joint venture, limited liability company, or joint stock company.



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



     “Pro Rata Share” means, with respect to an Investor, the ratio (i) the numerator of which is
the number of Common Shares held by such Investor, and (ii) the denominator of which is the total
number of shares of the Company’s Common Stock outstanding, each as of the date of the Company’s
notice to the Investors in accordance with Section 4.8 below.



     “Prospectus” means the prospectus included in the Registration Statement (including, without
limitation, a prospectus that includes any information previously omitted from a prospectus filed
as part of an effective registration statement in reliance upon Rule 430A promulgated under the
Securities Act), as amended or supplemented by any prospectus supplement, with respect to the terms
of the offering of any portion of the Registrable Securities covered by the Registration Statement,
and all other amendments and supplements to the Prospectus including post-effective amendments, and
all material incorporated by reference or deemed to be incorporated by reference in such
Prospectus.



     “Registrable Securities” means the Common Shares and the Warrant Shares issued or issuable
pursuant to the Transaction Documents, together with any securities issued or issuable upon any
stock split, dividend or other distribution, recapitalization or similar event with respect to the
foregoing.



     “Registration Statement” means each registration statement required to be filed under Article
VI, including (in each case) the Prospectus, amendments and supplements to such registration
statement or Prospectus, including pre- and post-effective amendments, all exhibits thereto, and
all material incorporated by reference or deemed to be incorporated by reference in such
registration statement.



     “Regulation D” has the meaning set forth in the Preamble.



     “Related Person” has the meaning set forth in Section 4.6.



     “Repurchase Notice” has the meaning set forth in Section 6.1.



     “Repurchase Price” has the meaning set forth in Section 6.1.



     “Required Effectiveness Date” means either (i) if the Registration Statement does not become
subject to review by the SEC, seventy-five (75) days after the Closing Date, or (ii) if the
Registration Statement becomes subject to review by the SEC, one hundred thirty five (135) days
after the Closing Date.



     “Rule 144,” “Rule 415,” and “Rule 424” means Rule 144, Rule 415 and Rule 424, respectively,
promulgated by the SEC pursuant to the Securities Act, as such Rules may be



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amended from time to time, or any similar rule or regulation hereafter adopted by the SEC having substantially the same
effect as such Rule.



     “SEC” means the Securities and Exchange Commission.



     “SEC Reports” has the meaning set forth in Section 3.1(g).



     “Securities” has the meaning set forth in the Preamble.



     “Securities Act” has the meaning set forth in the Preamble.



     “Shares” means shares of the Company’s Common Stock.



     “Short Sales” has the meaning set forth in Section 3.2(h).



     “Subsidiary” means any direct or indirect subsidiary of the Company.



     “Trading Day” means (a) any day on which the Common Stock is listed or quoted and traded on
its primary Trading Market, (b) if the Common Stock is not then listed or quoted and traded on any
Eligible Market, then a day on which trading occurs on The Nasdaq National Market (or any successor
thereto), or (c) if trading ceases to occur on The Nasdaq National Market (or any successor
thereto), any Business Day.



     “Trading Market” means The Nasdaq National Market or any other Eligible Market, or any
national securities exchange, market or trading or quotation facility on which the Common Stock is
then listed or quoted.



     “Transaction Documents” means this Agreement, the schedules and exhibits attached hereto, the
Warrants and the Transfer Agent Instructions.



     “Transfer Agent” means Mellon Investor Services, or any successor transfer agent for the
Company.



     “Transfer Agent Instructions” means, with respect to the Company, the Irrevocable Transfer
Agent Instructions, in the form of Exhibit E, executed by the Company and delivered to and
acknowledged in writing by the Transfer Agent.



     “Warrants” has the meaning set forth in the Preamble.



     “Warrant Shares” has the meaning set forth in the Preamble.



ARTICLE II

PURCHASE AND SALE




     2.1.
Closing. Subject to the terms and conditions set forth in this Agreement, at the Closing the Company
shall issue and sell to each Investor, and each Investor shall, severally and not jointly, purchase
from the Company, such number of Common Shares and Warrants for the price set forth opposite such
Investor’s name on Exhibit A hereto under the headings “Common



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Shares” and “Warrants”. The date and time of the Closing and shall be 9:00 a.m., New York City Time, on the Closing Date. The
Closing shall take place at the offices of the Company’s Counsel.



     2.2. Closing Deliveries.



          (a) At the Closing, the Company shall deliver or cause to be delivered to each Investor the
following:





          (i) one or more stock certificates (or copies thereof provided by the Transfer Agent),
free and clear of all restrictive and other legends (except as expressly provided in
Section 4.1(b) hereof), evidencing such number of Common Shares set forth opposite
such Investor’s name on Exhibit A hereto under the heading “Common Shares,”
registered in the name of such Investor;




          (ii) a Warrant, issued in the name of such Investor, pursuant to which such Investor
shall have the right to acquire such number of Warrant Shares set forth opposite such
Investor’s name on Exhibit A hereto under the heading “Warrant Shares”;




          (iii) a legal opinion of Company Counsel, in the form of Exhibit C, executed by
such counsel and delivered to the Investors;




          (iv) duly executed Transfer Agent Instructions acknowledged by the Company’s transfer
agent; and




          (v) approval by each applicable Trading Market of an additional shares listing
application covering all of the Registrable Securities, if required.



          (b) At the Closing, each Investor shall deliver or cause to be delivered to the Company the
purchase price set forth opposite such Investor’s name on Exhibit A hereto under the heading
“Purchase Price” in United States dollars and in immediately available funds, by wire transfer to
an account designated in writing to such Investor by the Company for such purpose.




ARTICLE III

REPRESENTATIONS AND WARRANTIES




     3.1. Representations and Warranties of the Company. The Company hereby represents and
warrants to the Investors as follows (which representations and warranties shall be deemed to
apply, where appropriate, to each Subsidiary of the Company):



          (a) Subsidiaries. The Company has no 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 Lien and all the issued and outstanding shares of capital stock or
comparable equity interest of each Subsidiary are validly issued and are fully paid, nonassessable
and free of preemptive and similar rights.




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          (b) Organization and Qualification. Each of the Company and the Subsidiaries is an
entity duly organized, validly existing and in good standing under the laws of the jurisdiction of
its incorporation or organization (as applicable), with the requisite legal authority to own and
use its properties and assets and to carry on its business as currently conducted. Neither the
Company nor any Subsidiary is in violation of any of the provisions of its respective certificate
or articles of incorporation, bylaws or other organizational or charter documents. Each of the
Company and the Subsidiaries is duly qualified to do business and is in good standing as a foreign
corporation or other entity in each jurisdiction in which the nature of the business conducted or
property owned by it makes such qualification necessary, except where the failure to be so
qualified or in good standing, as the case may be, would not, individually or in the aggregate,
have or reasonably be expected to result in a Material Adverse Effect.




          (c) Authorization; Enforcement. The Company has the requisite corporate authority to
enter into and to consummate the transactions contemplated by each of the Transaction Documents to
which it is a party and otherwise to carry out its obligations hereunder and thereunder. The
execution and delivery of each of the Transaction Documents to which it is a party by the Company
and the consummation by it of the transactions contemplated hereby and thereby have been duly
authorized by all necessary action on the part of the Company and no further consent or action is
required by the Company, its Board of Directors or its stockholders. Each of the Transaction
Documents to which it is a party has been (or upon delivery will be) duly executed by the Company
and is, or when delivered in accordance with the terms hereof, will constitute, the valid and
binding obligation of the Company enforceable against the Company in accordance with its terms,
except as may be limited by (i) applicable bankruptcy, insolvency, reorganization or other laws of
general application relating to or affecting the enforcement of creditors rights generally, and
(ii) the effect of rules of law governing the availability of specific performance and other
equitable remedies.




          (d) No Conflicts. The execution, delivery and performance of the Transaction
Documents to which it is a party by the Company and the consummation by the Company of the
transactions contemplated hereby and thereby do not, and will not, (i) conflict with or violate any
provision of the Company’s or any Subsidiary’s certificate or articles of incorporation, bylaws or
other organizational or charter documents, (ii) conflict with, or constitute a default (or an event
that with notice or lapse of time or both would become a default) under, or give to others any
rights of termination, amendment, acceleration or cancellation (with or without notice, lapse of
time or both) of, any agreement, credit facility, debt or other instrument (evidencing a Company or
Subsidiary debt or otherwise) or other understanding to which the Company or any Subsidiary is a
party or by which any property or asset of the Company or any Subsidiary is bound, or affected,
except to the extent that such conflict, default, termination, amendment, acceleration or
cancellation right would not reasonably be expected to have a Material Adverse Effect, or (iii) result in a violation of any law, rule, regulation, order,
judgment, injunction, decree or other restriction of any court or governmental authority to which
the Company or a Subsidiary is subject (including, assuming the accuracy of the representations and
warranties of the Investors set forth in Section 3.2 hereof, federal and state securities laws and
regulations and the rules and regulations of any self-regulatory organization to which the Company
or its securities are subject, including all applicable Trading Markets), or by which any property
or asset of the Company or a Subsidiary is bound or affected, except to




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the extent that such violation would not reasonably be expected to have a Material Adverse Effect.




          (e) The Securities. The Common Shares and the Warrant Shares are duly authorized and,
when issued and paid for in accordance with the Transaction Documents, will be duly and validly
issued, fully paid and nonassessable, free and clear of all Liens and will not be subject to
preemptive or similar rights of stockholders (other than those imposed by the Investors). The
Company has reserved from its duly authorized capital stock the maximum number of shares of Common
Stock issuable upon exercise of the Warrants. The offer, issuance and sale of the Shares, the
Warrants and the Warrant Shares to the Investors pursuant to the Agreement, and in the case of the
Warrant Shares, pursuant to the Warrants, are exempt from the registration requirements of the
Securities Act.




          (f) Capitalization. As of July 20, 2006, the aggregate number of shares and type of
all authorized, issued and outstanding classes of 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) is set forth in Schedule 3.1(f) hereto. All outstanding
shares of capital stock are duly authorized, validly issued, fully paid and nonassessable and have
been issued in compliance in all material respects with all applicable securities laws. Except as
disclosed in Schedule 3.1(f) hereto, the Company did not have outstanding at July 20, 2006
any other options, warrants, scrip rights to subscribe to, calls or commitments of any character
whatsoever relating to, or securities, rights or obligations convertible into or exercisable or
exchangeable for, or entered into any agreement giving any Person any right to subscribe for or
acquire, any shares of Common Stock, or securities or rights convertible or exchangeable into
shares of Common Stock. Except as set forth on Schedule 3.1(f) hereto, and except for
customary adjustments as a result of stock dividends, stock splits, combinations of shares,
reorganizations, recapitalizations, reclassifications or other similar events, there are no
anti-dilution or price adjustment provisions contained in any security issued by the Company (or in
any agreement providing rights to security holders) and the issuance and sale of the Securities
will not obligate the Company to issue shares of Common Stock or other securities to any Person
(other than the Investors) and will not result in a right of any holder of securities to adjust the
exercise, conversion, exchange or reset price under such securities. To the Knowledge of the
Company, except as disclosed in the SEC Reports and any Schedules filed with the SEC pursuant to
Rule 13d-1 of the Exchange Act by reporting persons or in Schedule 3.1(f) hereto, no Person
or group of related Persons beneficially owns (as determined pursuant to Rule 13d-3 under the
Exchange Act), or has the right to acquire, by agreement with or by obligation binding upon the
Company, beneficial ownership of in excess of 5% of the outstanding Common Stock.




          (g) SEC Reports; Financial Statements. Except as set forth on Schedule
3.1(g), the Company has filed all reports and schedules required to be filed by it under the
Exchange Act, including pursuant to Section 13(a), 14(a) or 15(d) thereof,
for the 12 months preceding the date hereof 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 and has filed all reports and schedules required to be filed by it under the Exchange
Act, including pursuant to Section 13(a), 14(a) or 15(d) thereof, for the two years preceding the
date hereof. Such reports and schedules required to be filed by the Company under the Exchange
Act,




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including pursuant to Section 13(a), 14(a) or 15(d) thereof, together with any materials filed
or furnished by the Company under the Exchange Act, whether or not any such reports or schedules
were required, being collectively referred to herein as the “SEC Reports” and, together with this
Agreement and the Schedules to this Agreement, the “Disclosure Materials”. As of their respective
dates, the SEC Reports filed by the Company complied in all material respects with the requirements
of the Securities Act and the Exchange Act and the rules and regulations of the SEC promulgated
thereunder, and none of the SEC Reports, when filed by the Company, contained any untrue statement
of a material fact or omitted to state a material fact required to be stated therein or necessary
in order to make the statements therein, in the light of the circumstances under which they were
made, not misleading. The financial statements of the Company included in the SEC Reports comply
in all material respects with applicable accounting requirements and the rules and regulations of
the SEC with respect thereto as in effect at the time of filing. Such financial statements have
been prepared in accordance with United States generally accepted accounting principles applied on
a consistent basis during the periods involved (“GAAP”), except as may be otherwise specified in
such financial statements, the notes thereto and except that unaudited financial statements may not
contain all footnotes required by GAAP or may be condensed or summary statements, and fairly
present in all material respects the consolidated financial position of the Company and its
consolidated subsidiaries as of and for the dates thereof and the results of operations and cash
flows for the periods then ended, subject, in the case of unaudited statements, to normal, year-end
audit adjustments. All material agreements to which the Company or any Subsidiary is a party or to
which the property or assets of the Company or any Subsidiary are subject are included as part of
or identified in the SEC Reports, to the extent such agreements are required to be included or
identified pursuant to the rules and regulations of the SEC.




          (h) Since the date of the latest audited financial statements included within the SEC Reports,
except as disclosed in the SEC Reports or in Schedule 3.1(h) hereto, (i) there has been no
event, occurrence or development that, individually or in the aggregate, has had or that would
result in a Material Adverse Effect, (ii) the Company has not incurred any material liabilities
other than (A) trade payables and accrued expenses incurred in the ordinary course of business
consistent with past practice and (B) liabilities not required to be reflected in the Company’s
financial statements pursuant to GAAP or required to be disclosed in filings made with the SEC,
(iii) the Company has not altered its method of accounting or the changed its auditors, except as
disclosed in its SEC Reports, (iv) the Company has not declared or made any dividend or
distribution of cash or other property to its stockholders, in their capacities as such, or
purchased, redeemed or made any agreements to purchase or redeem any shares of its capital stock
(except for repurchases by the Company of shares of capital stock held by employees, officers,
directors, or consultants pursuant to an option of the Company to repurchase such shares upon the
termination of employment or services), and (v) the Company has not issued any equity securities to any officer, director or Affiliate, except pursuant to existing
Company stock-based plans. The Company has not taken any steps to seek protection pursuant to any
bankruptcy law nor does the Company have any Knowledge or reason to believe that its creditors
intend to initiate involuntary bankruptcy proceedings or any Knowledge of any fact which would
reasonably lead a creditor to do so. The Company is not as of the date hereof, and after giving
effect to the transactions contemplated hereby to occur at the applicable Closing, will not be
Insolvent (as defined below). For purposes of this Section 3.1(h), “Insolvent” means (i) the
present fair saleable value of the Company’s assets is less than the amount required to




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pay the Company’s total indebtedness, (ii) the Company is unable to pay its debts and liabilities,
subordinated, contingent or otherwise, as such debts and liabilities become absolute and matured,
(iii) the Company intends to incur or believes that it will incur debts that would be beyond its
ability to pay as such debts mature or (iv) the Company has unreasonably small capital with which
to conduct the business in which it is engaged as such business is now conducted and is proposed to
be conducted.




          (i) Absence of Litigation. Except as disclosed in the SEC Reports or Schedule 3.1(i),
there is no action, suit, claim, or proceeding, or, to the Company’s Knowledge, inquiry or
investigation, before or by any court, public board, government agency, self-regulatory
organization or body pending or, to the Knowledge of the Company, threatened against or affecting
the Company or any of its Subsidiaries that could, individually or in the aggregate, have a
Material Adverse Effect.




          (j) Compliance. Except as described in Schedule 3.1(j), neither the Company
nor any Subsidiary, except in each case as would not, individually or in the aggregate, reasonably
be expected to have or result in a Material Adverse Effect, (i) is in default under or in violation
of (and no event has occurred that has not been waived that, with notice or lapse of time or both,
would result in a default by the Company or any Subsidiary under), nor has the Company or any
Subsidiary received written notice of a claim that it is in default under or that it is in
violation of, any indenture, loan or credit agreement or any other agreement or instrument to which
it is a party or by which it or any of its properties is bound (whether or not such default or
violation has been waived), (ii) is in violation of any order of any court, arbitrator or
governmental body, or (iii) is or has been in violation of any statute, rule or regulation of any
governmental authority.




          (k) Title to Assets. The Company and the Subsidiaries have good and marketable title
to all real property owned by them that is material to the business of the Company and the
Subsidiaries and good and marketable title in all personal property owned by them that is material
to the business of the Company and the Subsidiaries, in each case free and clear of all Liens,
except for Liens that do not, individually or in the aggregate, have or result in a Material
Adverse Effect. Any real property and facilities held under lease by the Company and the
Subsidiaries are held by them under valid, subsisting and enforceable leases of which the Company
and the Subsidiaries are in material compliance.




          (l) No General Solicitation; Placement Agent’s Fees. Neither the Company, nor any of
its affiliates, nor any Person acting on its or their behalf, has engaged in any form of general
solicitation or general advertising (within the meaning of Regulation D) in connection with the
offer or sale of the Securities. The Company shall be responsible for the payment of
any placement agent’s fees, financial advisory fees, or brokers’ commission (other than for
persons engaged by any Investor or its investment advisor) relating to or arising out of the
issuance of the Securities pursuant to this Agreement. The Company shall pay, and hold each
Investor harmless against, any liability, loss or expense (including, without limitation,
reasonable attorney’s fees and out-of-pocket expenses) arising in connection with any such claim
for fees arising out of the issuance of the Securities pursuant to this Agreement. The Company
acknowledges that is has engaged Cowen & Co., LLC as its exclusive placement agent (the “Agent”) in
connection with the sale of the Securities. Other than the Agent, the




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Company has not engaged any placement agent or other agent in connection with the sale of the Securities.




          (m) Private Placement. Neither the Company nor any of its Affiliates nor, any Person
acting on the Company’s behalf has, directly or indirectly, at any time within the past six months,
made any offer or sale of any security or solicitation of any offer to buy any security under
circumstances that would (i) eliminate the availability of the exemption from registration under
Regulation D under the Securities Act in connection with the offer and sale by the Company of the
Securities as contemplated hereby or (ii) cause the offering of the Securities pursuant to the
Transaction Documents to be integrated with prior offerings by the Company for purposes of any
applicable law, regulation or stockholder approval provisions, including, without limitation, under
the rules and regulations of any Trading Market. The Company is not required to be registered as,
and is not an Affiliate of, an “investment company” within the meaning of the Investment Company
Act of 1940, as amended. The Company is not required to be registered as, a United States real
property holding corporation within the meaning of the Foreign Investment in Real Property Tax Act
of 1980.




          (n) Form S-3 Eligibility. The Company is eligible to register the Common Shares and
the Warrant Shares for resale by the Investors using Form S-3 promulgated under the Securities Act.




          (o) Listing and Maintenance Requirements. The Company has not, in the twelve months
preceding the date hereof, received notice (written or oral) from any Trading Market on which the
Common Stock is or has been listed or quoted to the effect that the Company is not in compliance
with the listing or maintenance requirements of such Trading Market. The Company is in compliance
with all such listing and maintenance requirements.




          (p) Registration Rights. Except as described in Schedule 3.1(p), the Company
has not granted or agreed to grant to any Person any rights (including “piggy-back” registration
rights) to have any securities of the Company registered with the SEC or any other governmental
authority that have not been satisfied or waived.




          (q) Application of Takeover Protections. Except as described in Schedule
3.1(q), there is no control share acquisition, business combination, poison pill (including any
distribution under a rights agreement) or other similar anti-takeover provision under the Company’s
charter documents or the laws of its state of incorporation that is or could become applicable to
any of the Investors as a result of the Investors 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 Investors’
ownership of the Securities.




          (r) Disclosure. The Company understands and confirms that each of the Investors will
rely on the foregoing representations in effecting transactions in securities of the Company (other
than Excluded Investors). All disclosure provided by the Company to the Investors regarding the
Company, its business and the transactions contemplated hereby, including the Schedules to this
Agreement, furnished by or on the behalf of the Company are true and correct in all material
respects and do not contain any untrue statement of a material




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fact or omit to state any material fact necessary in order to make the statements made therein, in the light of the circumstances
under which they were made, not misleading. To the Company’s Knowledge, except for the
transactions contemplated by this Agreement, 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. The Company acknowledges and agrees that no Investor (other than Excluded Investors)
makes or has made any representations or warranties with respect to the transactions contemplated
hereby other than those set forth in the Transaction Documents.




          (s) Acknowledgment Regarding Investors’ Purchase of Securities. Based upon the
assumption that the transactions contemplated by this Agreement are consummated in all material
respects in conformity with the Transaction Documents, the Company acknowledges and agrees that
each of the Investors (other than Excluded Investors) is acting solely in the capacity of an arm’s
length purchaser with respect to the Transaction Documents and the transactions contemplated hereby
and thereby. The Company further acknowledges that no Investor (other than Excluded Investors) is
acting as a financial advisor or fiduciary of the Company (or in any similar capacity) with respect
to this Agreement and the transactions contemplated hereby and any advice given by any Investor
(other than Excluded Investors) or any of their respective representatives or agents in connection
with the Transaction Documents and the transactions contemplated hereby and thereby is merely
incidental to the Investors’ purchase of the Securities. The Company further represents to each
Investor that the Company’s decision to enter into this Agreement has been based solely on the
independent evaluation of the transactions contemplated hereby by the Company and its
representatives.




          (t) Patents and Trademarks. Except as set forth in Schedule 3.1(t), to the Company’s
Knowledge, the Company and its Subsidiaries own, or possess adequate rights or licenses to use, all
trademarks, trade names, service marks, service mark registrations, service names, patents,
copyrights, licenses, trade secrets and other intellectual property rights (“Intellectual Property
Rights”) necessary to conduct their respective businesses now conducted. Except as set forth in
Schedule 3.1(t), none of the Company’s Intellectual Property Rights are expected to expire or
terminate within three years from the date of this Agreement. The Company does not have any
Knowledge of any infringement by the Company or its Subsidiaries of Intellectual Property Rights of
others. Except as disclosed in the SEC Reports, there is no claim, action or proceeding being made
or brought, or to the Knowledge of the Company, being threatened, against the Company or its
Subsidiaries regarding its Intellectual Property Rights.




          (u) Insurance. The Company and the Subsidiaries are insured by insurers of recognized
financial responsibility against such losses and risks and in such amounts as are prudent and
customary in the businesses and location in which the Company and the Subsidiaries are engaged.




          (v) Regulatory Permits. The Company and the Subsidiaries possess all certificates,
authorizations and permits issued by the appropriate federal, state, local or foreign regulatory
authorities necessary to conduct their respective businesses as described in the SEC




12









 




Reports (“Material Permits”), except where the failure to possess such permits does not, individually or in
the aggregate, have or reasonably be expected to result in a Material Adverse Effect, and neither
the Company nor any Subsidiary has received any written notice of proceedings relating to the
revocation or modification of any Material Permit.




          (w) Transactions With Affiliates and Employees. Except as set forth or incorporated
by reference in the Company’s SEC Reports, none of the officers, directors or employees of the
Company is presently a party to any transaction that would be required to be reported on Form 10-K
with the Company or any of its Subsidiaries (other than for ordinary course services as employees,
officers or 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 such officer, director or employee or, to the Company’s
Knowledge, any corporation, partnership, trust or other entity in which any such officer, director,
or employee has a substantial interest or is an officer, director, trustee or partner.




          (x) Internal Accounting Controls. The Company and the Subsidiaries maintain a system
of internal accounting controls sufficient to provide reasonable assurance that (i) transactions
are executed in accordance with management’s general or specific authorizations, (ii) transactions
are recorded as necessary to permit preparation of financial statements in conformity with
generally accepted accounting principles and to maintain asset accountability, (iii) access to
assets is permitted only in accordance with management’s general or specific authorization, and
(iv) the recorded accountability for assets is compared with the existing assets at reasonable
intervals and appropriate action is taken with respect to any differences.




          (y) Sarbanes-Oxley Act. The Company is in compliance in all material respects with
applicable requirements of the Sarbanes-Oxley Act of 2002 and applicable rules and regulations
promulgated by the SEC thereunder, except where such noncompliance would not have, individually or
in the aggregate, a Material Adverse Effect.




          (z) Foreign Corrupt Practices. Neither the Company nor any of its Subsidiaries nor,
to the Knowledge of the Company, any director, officer, agent, employee or other Person acting on
behalf of the Company or any of its Subsidiaries has, in the course of its actions for, or on
behalf of, the Company (i) used any corporate funds for any unlawful contribution, gift,
entertainment or other unlawful expenses relating to political activity; (ii) made any direct or
indirect unlawful payment to any foreign or domestic government official or employee from corporate
funds; (iii) violated or is in violation of any provision of the U.S. Foreign Corrupt Practices Act
of 1977, as amended; or (iv) made any unlawful bribe, rebate, payoff, influence payment, kickback or other unlawful payment to any foreign or domestic
government official or employee.




          (aa) Employee Relations. Neither Company nor any of its Subsidiaries is a party to
any collective bargaining agreement or, to the Knowledge of the Company, employs any member of a
union. The Company believes that its relations with its employees are as disclosed in the SEC
Reports. Except as disclosed in the SEC Reports, during the period covered by the SEC Reports, no
executive officer of the Company or any of its Subsidiaries (as




13









 




defined in Rule 501(f) of the 1933 Act) has notified the Company or any such Subsidiary that such officer intends to leave the Company
or any such Subsidiary or otherwise terminate such officer’s employment with the Company or any
such Subsidiary. To the Knowledge of the Company or any such Subsidiary, no executive officer of
the Company or any of its Subsidiaries is in violation of any material term of any employment
contract, confidentiality, disclosure or proprietary information agreement, non-competition
agreement, or any other contract or agreement or any restrictive covenant, and the continued
employment of each such executive officer does not subject the Company or any such Subsidiary to
any liability with respect to any of the foregoing matters.




          (bb) Labor Matters. The Company and its Subsidiaries are in compliance in all
material respects with all federal, state, local and foreign laws and regulations respecting labor,
employment and employment practices and benefits, terms and conditions of employment and wages and
hours, except where failure to be in compliance would not, either individually or in the aggregate,
reasonably be expected to result in a Material Adverse Effect.




          (cc) Environmental Laws. The Company and its Subsidiaries (i) are in compliance in
all material respects with any and all Environmental Laws (as hereinafter defined), (ii) have
received all permits, licenses or other approvals required of them under applicable Environmental
Laws to conduct their respective businesses and (iii) are in compliance in all material respects
with all terms and conditions of any such permit, license or approval where, in each of the
foregoing clauses (i), (ii) and (iii), the failure to so comply would be reasonably expected to
have, individually or in the aggregate, a Material Adverse Effect. The term “Environmental Laws”
means all federal, state, local or foreign laws relating to pollution or protection of human health
or the environment (including, without limitation, ambient air, surface water, groundwater, land
surface or subsurface strata), including, without limitation, laws relating to emissions,
discharges, releases or threatened releases of chemicals, pollutants, contaminants, or toxic or
hazardous substances or wastes (collectively, “Hazardous Materials”) into the environment, or
otherwise relating to the manufacture, processing, distribution, use, treatment, storage, disposal,
transport or handling of Hazardous Materials, as well as all authorizations, codes, decrees,
demands or demand letters, injunctions, judgments, licenses, notices or notice letters, orders,
permits, plans or regulations issued, entered, promulgated or approved thereunder.




          (dd) Subsidiary Rights. The Company or one of its Subsidiaries has the unrestricted
right to vote, and (subject to limitations imposed by applicable law) to receive dividends and
distributions on, all capital securities of its Subsidiaries as owned by the Company or such
Subsidiary.




          (ee) Tax Status. The Company and each of its Subsidiaries (i) has made or 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 and (iii) has set aside on its books
provision reasonably adequate for the payment of all taxes for periods subsequent to the periods to
which such returns, reports or declarations apply. There are no




14









 




unpaid taxes in any material amount claimed to be due by the taxing authority of any jurisdiction, and the officers of the
Company know of no basis for any such claim.




     3.2. Representations and Warranties of the Investors. Each Investor hereby, as to itself
only and for no other Investor, represents and warrants to the Company as follows:



          (a) Organization; Authority. Such Investor is an entity duly organized, validly
existing and in good standing under the laws of the jurisdiction of its organization with the
requisite corporate, partnership or other power and authority to enter into and to consummate the
transactions contemplated by the Transaction Documents and otherwise to carry out its obligations
hereunder and thereunder. The purchase by such Investor of the Securities hereunder has been duly
authorized by all necessary action on the part of such Investor. This Agreement has been duly
executed and delivered by such Investor and constitutes the valid and binding obligation of such
Investor, enforceable against it in accordance with its terms, except as may be limited by (i)
applicable bankruptcy, insolvency, reorganization or other laws of general application relating to
or affecting the enforcement of creditors rights generally, and (ii) the effect of rules of law
governing the availability of specific performance and other equitable remedies.




          (b) No Public Sale or Distribution. Such Investor is (i) acquiring the Common Shares
and the Warrants and (ii) upon exercise of the Warrants will acquire the Warrant Shares issuable
upon exercise thereof, in the ordinary course of business for its own account and not with a view
towards, or for resale in connection with, the public sale or distribution thereof, except pursuant
to sales registered under the Securities Act or under an exemption from such registration and in
compliance with applicable federal and state securities laws, and such Investor does not have a
present arrangement to effect any distribution of the Securities to or through any person or
entity; provided, however, that by making the representations herein, such Investor
does not agree to hold any of the Securities for any minimum or other specific term and reserves
the right to dispose of the Securities at any time in accordance with or pursuant to a registration
statement or an exemption under the Securities Act.




          (c) Investor Status. At the time such Investor 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 or a “qualified institutional buyer” as defined in Rule 144A(a) under the Securities
Act. Such Investor is not a registered broker dealer registered under Section 15(a) of the
Exchange Act, or a member of the NASD, Inc. or an entity engaged in the business of being a broker
dealer. Except as otherwise disclosed in writing to the Company on Exhibit B-2 (attached hereto) on or prior to the date of this Agreement, such Investor is not affiliated
with any broker dealer registered under Section 15(a) of the Exchange Act, or a member of the NASD,
Inc. or an entity engaged in the business of being a broker dealer.




          (d) Experience of Such Investor. Such Investor, 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 Investor




15









 




understands that it must bear the economic risk of this investment in the Securities indefinitely,
and is able to bear such risk and is able to afford a complete loss of such investment.




          (e) Access to Information. Such Investor acknowledges that it has reviewed 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 (other than material non-public 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 Investor or its representatives or counsel shall modify, amend or
affect such Investor’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 Investor acknowledges receipt of copies of the SEC Reports.




          (f) No Governmental Review. Such Investor 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.




          (g) No Conflicts. The execution, delivery and performance by such Investor of this
Agreement and the consummation by such Investor of the transactions contemplated hereby will not
(i) result in a violation of the organizational documents of such Investor or (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 Investor 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 Investor, except in the case of clauses (ii) and
(iii) above, for such that are not material and do not otherwise affect the ability of such
Investor to consummate the transactions contemplated hereby.




          (h) Illegal Transactions. No Investor, directly or indirectly, and no Person acting
on behalf of or pursuant to any understanding with any Investor, has engaged in any transactions in
the securities of the Company (including, without limitation, any Short Sales
involving any of the Company’s securities) since the time that such Investor was first
contacted by the Company, the Agent or any other Person regarding an investment in the Company.
Such Investor covenants that neither it nor any Person acting on its behalf or pursuant to any
understanding with such Investor will engage, directly or indirectly, in any transactions in the
securities of the Company (including Short Sales) prior to the time the transactions contemplated
by this Agreement are publicly disclosed. “Short Sales” include, without limitation, all “short
sales” as defined in Rule 200 promulgated under Regulation SHO under the Exchange Act and all types
of direct and indirect stock pledges, forward sale contracts,




16









 




options, puts, calls, short sales, swaps, derivatives and similar arrangements (including on a total return basis), and sales and
other transactions through non-U.S. broker-dealers or foreign regulated brokers.




          (i) Restricted Securities. The Investors understand that the Securities are
characterized as “restricted securities” under the U.S. federal securities laws inasmuch as they
are being acquired from the Company in a transaction not involving a public offering and that under
such laws and applicable regulations such securities may be resold without registration under the
Securities Act only in certain limited circumstances.




          (j) Legends. It is understood that, except as provided in Section 4.1(b) of this
Agreement, certificates evidencing such Securities may bear the legend set forth in Section 4.1(b).




          (k) No Legal, Tax or Investment Advice. Such Investor understands that nothing in
this Agreement or any other materials presented by or on behalf of the Company to the Investor in
connection with the purchase of the Securities constitutes legal, tax or investment advice. Such
Investor has consulted such legal, tax and investment advisors as it, in its sole discretion, has
deemed necessary or appropriate in connection with its purchase of the Securities. Such Investor
understands that the Agent has acted solely as the agent of the Company in this placement of the
Securities, and that the Agent makes no representation or warranty with regard to the merits of
this transaction or as to the accuracy of any information such Investor may have received in
connection therewith. Such Investor acknowledges that he has not relied on any information or
advice furnished by or on behalf of the Agent.




ARTICLE IV

OTHER AGREEMENTS OF THE PARTIES




     4.1. Transfer Restrictions.



          (a) The Investors covenant that the Securities will only be disposed of pursuant to an
effective registration statement under, and in compliance with the requirements of, the Securities
Act or pursuant to an available exemption from the registration requirements of the Securities Act,
and in compliance with any applicable state securities laws. In connection with any transfer of
Securities other than pursuant to an effective registration statement or to the Company, or
pursuant to Rule 144(k), the Company may require the transferor to provide to the Company an
opinion of counsel selected by the transferor, the form and substance of which opinion shall be
reasonably satisfactory to the Company, to the effect that such transfer does not
require registration under the Securities Act. Notwithstanding the foregoing, the Company
hereby consents to and agrees to register on the books of the Company and with its transfer agent,
without any such legal opinion, except to the extent that the transfer agent requests such legal
opinion, any transfer of Securities by an Investor to an Affiliate of such Investor, provided that
the transferee certifies to the Company that it is an “accredited investor” as defined in Rule
501(a) under the Securities Act and provided that such Affiliate does not request any removal of
any existing legends on any certificate evidencing the Securities.




17









 








          (b) The Investors agree to the imprinting, so long as is required by this Section
4.1(b), of the following legend on any certificate evidencing any of the Securities:





THESE SECURITIES HAVE NOT BEEN REGISTERED WITH THE SECURITIES AND EXCHANGE COMMISSION OR THE
SECURITIES COMMISSION OF ANY STATE IN RELIANCE UPON AN EXEMPTION FROM REGISTRATION UNDER THE
SECURITIES ACT OF 1933, AS AMENDED (THE “SECURITIES ACT”), OR ANY APPLICABLE STATE
SECURITIES LAWS AND, ACCORDINGLY, MAY NOT BE OFFERED OR SOLD EXCEPT PURSUANT TO AN EFFECTIVE
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OR PURSUANT TO AN AVAILABLE EXEMPTION FROM,
OR IN A TRANSACTION NOT SUBJECT TO, THE REGISTRATION REQUIREMENTS OF THE SECURITIES
ACT AND IN COMPLIANCE WITH APPLICABLE STATE SECURITIES LAWS OR BLUE SKY LAWS.


Certificates evidencing Securities shall not be required to contain such legend or any other legend
(i) while a registration statement (including the Registration Statement) covering the resale of
the Securities is effective under the Securities Act, (ii) following any sale of such Securities
pursuant to Rule 144 if the holder provides the Company with a legal opinion (and the documents
upon which the legal opinion is based) reasonable acceptance to the Company to the effect that the
Securities can be sold under Rule 144, (iii) if the holder provides the Company with a legal
opinion (and the documents upon which the legal opinion is based) reasonably acceptable to the
Company to the effect that the Securities are eligible for sale under Rule 144(k), or (iv) if the
holder provides the Company with a legal opinion (and the documents upon which the legal opinion is
based) reasonably acceptable to the Company to the effect that the legend is not required under
applicable requirements of the Securities Act (including controlling judicial interpretations and
pronouncements issued by the Staff of the SEC). The Company shall cause its counsel to issue the
legal opinion included in the Transfer Agent Instructions to the Transfer Agent on the Effective
Date. Following the Effective Date or at such earlier time as a legend is no longer required for
certain Securities, the Company will no later than three Trading Days following the delivery by an
Investor to the Company or the Transfer Agent of (i) a legended certificate representing such
Securities, and (ii) an opinion of counsel to the extent required by Section 4.1(a),
deliver or cause to be delivered to such Investor a certificate representing such Securities that
is free from all restrictive and other legends. The Company may not make any notation on its
records or give instructions to the Transfer Agent that enlarge the restrictions on transfer set
forth in this Section.




          (c) The Company will not object to and shall permit (except as prohibited by law) an Investor
to pledge or grant a security interest in some or all of the Securities in
connection with a bona fide margin agreement or other loan or financing arrangement secured by
the Securities, and if required under the terms of such agreement, loan or arrangement, the Company
will not object to and shall permit (except as prohibited by law) such Investor to transfer pledged
or secured Securities to the pledges or secured parties. Except as required by law, such a pledge
or transfer would not be subject to approval of the Company, no legal opinion of the pledgee,
secured party or pledgor shall be required in connection therewith, and no notice shall be required
of such pledge. Each Investor acknowledges that the Company shall not be responsible for any
pledges relating to, or the grant of any security interest in, any of the




18









 




Securities or for any agreement, understanding or arrangement between any Investor and its pledgee or secured party. At
the appropriate Investor’s expense, the Company will execute and deliver such reasonable
documentation as a pledgee or secured party of Securities may reasonably request in connection with
a pledge or transfer of the Securities, including the preparation and filing of any required
prospectus supplement under Rule 424(b)(3) of the Securities Act or other applicable provision of
the Securities Act to appropriately amend the list of Selling Stockholders thereunder. Provided
that the Company is in compliance with the terms of this Section 4.1(c), the Company’s
indemnification obligations pursuant to Section 6.4 shall not extend to any Proceeding or Losses
arising out of or related to this Section 4.1(c).




     4.2. Furnishing of Information. Until the date that any Investor owning Common Shares or
Warrant Shares may sell all of them under Rule 144(k) of the Securities Act (or any successor
provision), the Company covenants to use its commercially reasonable efforts 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.



     4.3. Integration. The Company shall not, and shall use its commercially reasonably efforts
to ensure that no Affiliate thereof shall, sell, offer for sale or solicit offers to buy or
otherwise negotiate in respect of any security (as defined in Section 2 of the Securities Act) that
would be integrated with the offer or sale of the Securities in a manner that would require the
registration under the Securities Act of the sale of the Securities to the Investors or that would
be integrated with the offer or sale of the Securities for purposes of the rules and regulations of
any Trading Market.



     4.4. Reservation of Securities. The Company shall maintain a reserve from its duly
authorized shares of Common Stock for issuance pursuant to the Transaction Documents in such amount
as may be required to fulfill its obligations to issue such Shares under the Transaction Documents.
In the event that at any time the then authorized shares of Common Stock are insufficient for the
Company to satisfy its obligations to issue such Shares under the Transaction Documents, the
Company shall promptly take such actions as may be required to increase the number of authorized
shares.



     4.5. Securities Laws Disclosure; Publicity. The Company shall, on or before 8:30 a.m., New
York time, on the first Trading Day following execution of this Agreement, issue a press release
reasonably acceptable to the Investors disclosing all material terms of the transactions contemplated hereby. Within two Business Days of
the Closing Date, the Company shall file a Current Report on Form 8-K with the SEC (the “8-K
Filing”) describing the terms of the transactions contemplated by the Transaction Documents and
including as exhibits to such Current Report on Form 8-K the Transaction Documents (including the
schedules and the names, and addresses of the Investors and the amount(s) of Securities
respectively purchased) and the form of Warrants, in the form required by the Exchange Act.
Thereafter, the Company shall timely file any filings and notices required by the SEC or applicable
law with respect to the transactions contemplated hereby and provide copies thereof to the
Investors promptly after filing. Except as herein provided, the Company shall not publicly
disclose the name of any Investor, or include the name of any Investor in any press release without
the prior written consent of such Investor, unless otherwise required by law. The Company shall
not, and shall cause each of its Subsidiaries and its and each of their respective officers,
directors, employees



19









 







and agents not to, provide any Investor with any material nonpublic
information regarding the Company or any of its Subsidiaries from and after the issuance of the
above referenced press release without the express written consent of such Investor.



     4.6. Use of Proceeds. The Company intends to use the net proceeds from the sale of the
Securities for working capital and general corporate purposes. The Company also may use a portion
of the net proceeds, currently intended for general corporate purposes, to acquire or invest in
technologies, products or services that complement its business, although the Company has no
present plans or commitments and is not currently engaged in any material negotiations with respect
to these types of transactions. Pending these uses, the Company intends to invest the net proceeds
from this offering in short-term, interest-bearing, investment-grade securities, or as otherwise
pursuant to the Company’s customary investment policies.



     4.7. S-3 Eligibility. The Company shall use its commercially reasonable efforts to
maintain its eligibility to register the resale of the Registrable Securities on Form S-3.



     4.8. Participation Rights. For a period of 12 months from the Closing Date, the
Company hereby grants to each Investor the right to purchase its Pro Rata Share of any securities
sold by the Company in a private placement transaction to one or more institutional investors (a
“Private Placement”). In the event that the Company proposes to undertake a Private Placement, it
shall give each Investor written notice of its intention, describing the price and the general
terms of the Private Placement. Each Investor shall have 5 days from the date of any such notice
to elect to participate in such Private Placement by giving written notice to the Company, and
thereafter at the closing of the Private Placement such Investor shall purchase securities in the
Private Placement on the same terms and conditions as the other investors in such Private
Placement. The Company shall have 60 days after the 5-day period described above to complete such
Private Placement. In the event the Company has not completed the proposed Private Placement
within such 60 day period, then the Company shall comply with the terms of this Section 4.8 with
respect to a Private Placement proposed to be completed after such 60 day period. Notwithstanding
the foregoing, an Investor will not be entitled to the participation rights set forth above in any
transaction in which the participation of such Investor would require approval by the shareholders
of the Company. Notwithstanding anything contained herein, no Investor shall have any obligation to participate in any Private Placement unless and until
such Investor has executed the definitive agreements for such Private Placement.



ARTICLE V

CONDITIONS




     5.1. Conditions Precedent to the Obligations of the Investors. The obligation of each
Investor to acquire Securities at the Closing is subject to the satisfaction or waiver by such
Investor, at or before the Closing, of each of the following conditions:



          (a) Representations and Warranties. The representations and warranties of the Company
contained herein shall be true and correct in all material respects as of the date when made and as
of the Closing as though made on and as of such date; and




20









 








          (b) Performance. The Company and each other Investor 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) Board Appointment. Peter Johann shall have been added as a Class II member of the
Company’s Board of Directors, effective as of the Closing.




     5.2. Conditions Precedent to the Obligations of the Company. The obligation of the Company
to sell the Securities at the Closing is subject to the satisfaction or waiver by the Company, at
or before the Closing, of each of the following conditions:



          (a) Representations and Warranties. The representations and warranties of the
Investors contained herein shall be true and correct in all material respects as of the date when
made and as of the Closing Date as though made on and as of such date; and




          (b) Performance. The Investors shall have performed, satisfied and complied in all
material respects with all covenants, agreements and conditions required by the Transaction
Documents to be performed, satisfied or complied with by the Investors at or prior to the Closing.




ARTICLE VI

REGISTRATION RIGHTS




     6.1. Registration Statement.




          (a) As promptly as possible, and in any event on or prior to the Filing Date, the Company
shall prepare and file with the SEC a Registration Statement covering the resale of all Registrable
Securities for an offering to be made on a continuous basis pursuant to Rule 415. The Registration Statement shall be on Form S-3 (except if the Company is not then eligible to
register for resale the Registrable Securities on Form S-3, in which case such registration shall
be on another appropriate form in accordance with the Securities Act and the Exchange Act) and
shall contain (except if otherwise directed by the Investors or requested by the SEC) the “Plan of
Distribution” in substantially the form attached hereto as Exhibit D.




          (b) The Company shall use its commercially reasonable efforts to cause the Registration
Statement to be declared effective by the SEC as promptly as possible after the filing thereof, but
in any event prior to the Required Effectiveness Date, and shall use its commercially reasonable
efforts to keep the Registration Statement continuously effective under the Securities Act until
the earlier of the date that all Common Shares and Warrant Shares covered by such Registration
Statement have been sold or can be sold publicly under Rule 144(k) (the “Effectiveness Period”);
provided that, upon notification by the SEC that a Registration Statement will not be reviewed or
is no longer subject to further review and comments, the Company shall request acceleration of such
Registration Statement within five (5) Trading Days after receipt of such notice and request that
it becomes effective on 4:00 p.m. New York City




21









 




time on the Effective Date and file a prospectus supplement for any Registration Statement, whether or not required under Rule 424 (or otherwise),
by 9:00 a.m. New York City time the day after the Effective Date. For the avoidance of doubt, the
Company shall use its commercially reasonable efforts to keep the Registration Statement
continuously effective until the earlier of (i) such date as the Investor is no longer deemed an
affiliate of the Company for purposes of Rule 144 or (ii) such date as the Investor no longer holds
any of the Common Shares or Warrant Shares.




          (c) The Company shall notify the Investors in writing promptly (and in any event within two
Trading Days) after receiving notification from the SEC that the Registration Statement has been
declared effective.




          (d) Should an Event (as defined below) occur, then upon the occurrence of such Event, and on
every monthly anniversary thereof until the applicable Event is cured, the Company shall pay to
each Investor an amount in cash, as liquidated damages and not as a penalty, equal to one percent
(1.0%) of (i) the number of Common Shares held by such Investor as of the date of such Event,
multiplied by (ii) the purchase price paid by such Investor for such Common Shares then held;
provided, however, that the total amount of payments pursuant to this Section 6.1(d) shall not
exceed, when aggregated with all such payments paid to all Investors, ten percent (10%) of the
aggregate purchase price. The payments to which an Investor shall be entitled pursuant to this
Section 6.1(d) are referred to herein as “Event Payments.” Any Event Payments payable
pursuant to the terms hereof shall apply on a pro rated basis for any portion of a month prior to
the cure of an Event. In the event the Company fails to make Event Payments in a timely manner,
such Event Payments shall bear interest at the rate of one percent (1.0%) per month (prorated for
partial months) until paid in full. All pro rated calculations made pursuant to this paragraph
shall be based upon the actual number of days in such pro rated month.




       For such purposes, each of the following shall constitute an “Event”:




          (i) the Registration Statement is not filed on or prior to the Filing Date or is not
declared effective on or prior to the Required Effectiveness Date;




          (ii) except as provided for in Section 6.1(e) (the “Excluded Events”), after
the Effective Date, an Investor is not permitted to sell Registrable Securities under the
Registration Statement (or a subsequent Registration Statement filed in replacement thereof)
for any reason (other than the fault of such Investor) for five or more Trading Days
(whether or not consecutive);




          (iii) except as a result of the Excluded Events, the Common Stock is not listed or
quoted, or is suspended from trading, on an Eligible Market for a period of three Trading
Days (which need not be consecutive Trading Days) during the Effectiveness Period;




          (iv) with respect to an Investor, the Company fails for any reason to deliver a
certificate evidencing any Securities to such Investor within five Trading Days after
delivery of such certificate is required pursuant to any Transaction Document or the
exercise rights of the Investors pursuant to the Warrants are otherwise suspended for any
reason; or



22









 






          (v) during the Effectiveness Period, except as a result of the Excluded Events, the
Company fails to have any Shares listed on an Eligible Market.



          (e) Notwithstanding anything in this Agreement to the contrary, after 60 consecutive Trading
Days of continuous effectiveness of the initial Registration Statement filed and declared effective
pursuant to this Agreement, the Company may, by written notice to the Investors, suspend sales
under a Registration Statement after the Effective Date thereof and/or require that the Investors
immediately cease the sale of shares of Common Stock pursuant thereto and/or defer the filing of
any subsequent Registration Statement if the Company is engaged in a material merger, acquisition
or sale and the Board of Directors determines in good faith, by appropriate resolutions, that, as a
result of such activity, (A) it would be materially detrimental to the Company (other than as
relating solely to the price of the Common Stock) to maintain a Registration Statement at such time
or (B) it is in the best interests of the Company to suspend sales under such registration at such
time. Upon receipt of such notice, each Investor shall immediately discontinue any sales of
Registrable Securities pursuant to such registration until such Investor is advised in writing by
the Company that the current Prospectus or amended Prospectus, as applicable, may be used. In no
event, however, shall this right be exercised to suspend sales beyond the period during which (in
the good faith determination of the Company’s Board of Directors) the failure to require such
suspension would be materially detrimental to the Company. The Company’s rights under this
Section 6(e) may be exercised for a period of no more than 20 Trading Days at a time and
not more than three times in any twelve-month period, without such suspension being considered as
part of an Event Payment determination. Immediately after the end of any suspension period under
this Section 6(e), the Company shall take all necessary actions (including filing any
required supplemental prospectus) to restore the effectiveness of the applicable Registration
Statement and the ability of the Investors to publicly resell their Registrable Securities pursuant
to such effective Registration Statement.




          (f) The Company shall not, from the date hereof until the Effective Date of the Registration
Statement, prepare and file with the SEC a registration statement or post-effective amendment to a
registration statement (or supplement thereto) relating to an offering for its own account under
the Securities Act of any of its equity securities, other than any registration statement or
post-effective amendment to a registration statement (or supplement thereto) relating to the
Company’s employee benefit plans registered on Form S-8.




     6.2. Registration Procedures. In connection with the Company’s registration obligations
hereunder, the Company shall:



          (a) Not less than three Trading Days prior to the filing of a Registration Statement or any
related Prospectus or any amendment or supplement thereto, furnish to the Agent copies of all such
documents proposed to be filed, which documents (other than any document that is incorporated or
deemed to be incorporated by reference therein) will be subject to the review of such Investors.
The Company shall reflect in each such document when so filed with the SEC such comments regarding
the Investors and the plan of distribution as the Agent may reasonably and promptly propose on
behalf of the Investors no later than two Trading Days after the Agent has been so furnished with
copies of such documents as aforesaid.




23









 








          (b) (i) Subject to Section 6.1(e), prepare and file with the SEC such amendments,
including post-effective amendments, to each Registration Statement and the Prospectus used in
connection therewith as may be necessary to keep the Registration Statement continuously effective,
as to the applicable Registrable Securities for the Effectiveness Period and prepare and file with
the SEC such additional Registration Statements in order to register for resale under the
Securities Act all of the Registrable Securities; (ii) cause the related Prospectus to be amended
or supplemented by any required Prospectus supplement, and as so supplemented or amended to be
filed pursuant to Rule 424; and (iii) respond as promptly as reasonably possible to any comments
received from the SEC with respect to the Registration Statement or any amendment thereto.




          (c) Notify each Investor as promptly as reasonably possible of any of the following events:
(i) the SEC notifies the Company whether there will be a “review” of any Registration Statement;
(ii) the SEC comments in writing on any Registration Statement; (iii) any Registration Statement or
any post-effective amendment is declared effective; (iv) the SEC or any other Federal or state
governmental authority requests any amendment or supplement to any Registration Statement or
Prospectus or requests additional information related thereto; (v) the SEC issues any stop order
suspending the effectiveness of any Registration Statement or initiates any Proceedings for that
purpose; (vi) the Company receives notice of any suspension of the qualification or exemption from
qualification of any Registrable Securities for sale in any jurisdiction, or the initiation or
threat of any Proceeding for such purpose; or (vii) the financial statements included in any
Registration Statement become ineligible for inclusion therein or any Registration Statement or
Prospectus or other document contains any untrue statement of a material fact or omits to state any
material fact required to be stated therein or necessary to make the statements therein, in the
light of the circumstances under which they were made, not misleading.




          (d) Use its commercially reasonable to avoid the issuance of or, if issued, obtain the
withdrawal of (i) any order suspending the effectiveness of any Registration Statement, or (ii) any
suspension of the qualification (or exemption from qualification) of any of the Registrable
Securities for sale in any jurisdiction, as soon as possible.




          (e) If requested by an Investor, provide such Investor and its counsel, without charge, at
least one conformed copy of each Registration Statement and each amendment thereto, including
financial statements and schedules, and all exhibits to the extent requested by such Person
(including those previously furnished or incorporated by reference) promptly after the filing of
such documents with the SEC.




          (f) Promptly deliver to each Investor, without charge, as many copies of the Prospectus or
Prospectuses (including each form of prospectus) and each amendment or supplement thereto as such
Persons may reasonably request. The Company hereby consents to the use of such Prospectus and each
amendment or supplement thereto by each of the selling Investors in connection with the offering
and sale of the Registrable Securities covered by such Prospectus and any amendment or supplement
thereto to the extent permitted by federal and state securities laws and regulations.




24









 








          (g) (i) In the time and manner required by each Trading Market, prepare and file with such
Trading Market an additional shares listing application covering all of the Registrable Securities;
(ii) take all steps necessary to cause such Common Shares to be approved for listing on each
Trading Market as soon as possible thereafter; (iii) provide to Investor Counsel evidence of such
listing; and (iv) except as a result of the Excluded Events, during the Effectiveness Period,
maintain the listing of such Common Shares on each such Trading Market or another Eligible Market.




          (h) Prior to any public offering of Registrable Securities, use its commercially reasonable
efforts to register or qualify or cooperate with the selling Investors in connection with the
registration or qualification (or exemption from such registration or qualification) of such
Registrable Securities for offer and sale under the securities or Blue Sky laws of such
jurisdictions within the United States as any Investor requests in writing, to keep each such
registration or qualification (or exemption therefrom) effective for so long as required, but not
to exceed the duration of the Effectiveness Period, and to do any and all other acts or things
reasonably necessary or advisable to enable the disposition in such jurisdictions of the
Registrable Securities covered by a Registration Statement; provided, however, that
the Company shall not be obligated to file any general consent to service of process or to qualify
as a foreign corporation or as a dealer in securities in any jurisdiction in which it is not so
qualified or to subject itself to taxation in respect of doing business in any jurisdiction in
which it is not otherwise so subject.




          (i) Cooperate with the Investors to facilitate the timely preparation and delivery of
certificates representing Registrable Securities to be delivered to a transferee pursuant to a
Registration Statement, which certificates shall be free, to the extent permitted by this Agreement
and under law, of all restrictive legends, and to enable such Registrable Securities to be in such
denominations and registered in such names as any such Investors may reasonably request.




          (j) Upon the occurrence of any event described in Section 6.2(c)(vii), as promptly as
reasonably possible, prepare a supplement or amendment, including a post-effective amendment, to
the Registration Statement or a supplement to the related Prospectus or any document incorporated
or deemed to be incorporated therein by reference, and file any other required document so that, as
thereafter delivered, neither the Registration Statement nor such Prospectus will contain an untrue
statement of a material fact or omit to state a material fact required to be stated therein or
necessary to make the statements therein, in the light of the circumstances under which they were
made, not misleading.




          (k) Cooperate with any reasonable due diligence investigation undertaken by the Investors in
connection with the sale of Registrable Securities, including, without limitation, by making
available documents and information; provided that the Company will not deliver or make available
to any Investor material, nonpublic information unless such Investor requests in advance in writing
to receive material, nonpublic information and agrees to keep such information confidential.




          (l) Comply with all rules and regulations of the SEC applicable to the registration of the
Securities.

25









 









          (m) It shall be a condition precedent to the obligations of the Company to complete the
registration pursuant to this Agreement with respect to the Registrable Securities of any
particular Investor or to make any Event Payments set forth in Section 6.1(c) to such Investor that
such Investor furnish to the Company the information specified in Exhibits B-1, B2 and B-3 hereto
and such other information regarding itself, the Registrable Securities and other shares of Common
Stock held by it and the intended method of disposition of the Registrable Securities held by it
(if different from the Plan of Distribution set forth on Exhibit D hereto) as shall be reasonably
required to effect the registration of such Registrable Securities and shall complete and execute
such documents in connection with such registration as the Company may reasonably request.




          (n) The Company shall comply with all applicable rules and regulations of the SEC under the
Securities Act and the Exchange Act, including, without limitation, Rule 172 under the Securities
Act, file any final Prospectus, including any supplement or amendment thereof, with the SEC
pursuant to Rule 424 under the Securities Act, promptly inform the Holders in writing if, at any
time during the Effectiveness Period, the Company does not satisfy the conditions specified in Rule
172 and, as a result thereof, the Holders are required to make available a Prospectus in connection
with any disposition of Registrable Securities and take such other actions as may be reasonably
necessary to facilitate the registration of the Registrable Securities hereunder.




     6.3. Registration Expenses. The Company shall pay all fees and expenses incident to the
performance of or compliance with Article VI of this Agreement by the Company, including without
limitation (a) all registration and filing fees and expenses, including without limitation those
related to filings with the SEC, any Trading Market and in connection with applicable state
securities or Blue Sky laws, (b) printing expenses (including without limitation expenses of
printing certificates for Registrable Securities), (c) messenger, telephone and delivery expenses, (d) fees and disbursements
of counsel for the Company, (e) fees and expenses of all other Persons retained by the Company in
connection with the consummation of the transactions contemplated by this Agreement, and (f) all
listing fees to be paid by the Company to the Trading Market. The Company shall also pay the
reasonable fees and expenses of a single counsel for the Investors in connection with such
transaction, up to a maximum of $10,000.



     6.4. Indemnification



          (a) Indemnification by the Company. The Company shall, notwithstanding any
termination of this Agreement, indemnify and hold harmless each Investor, the officers, directors,
partners, members, agents and employees of each of them, each Person who controls any such Investor
(within the meaning of Section 15 of the Securities Act or Section 20 of the Exchange Act) and the
officers, directors, partners, members, agents and employees of each such controlling Person, to
the fullest extent permitted by applicable law, from and against any and all Losses, as incurred,
arising out of or relating to (i) any misrepresentation or breach of any representation or warranty
made by the Company in the Transaction Documents or any other certificate, instrument or document
contemplated hereby or thereby, (ii) any breach of any covenant, agreement or obligation of the
Company contained in the Transaction Documents or any other certificate, instrument or document
contemplated hereby or thereby, or (iii) any untrue or alleged untrue statement of a material fact
contained in the Registration Statement, any




26









 




Prospectus or any form of Company prospectus or in any
amendment or supplement thereto or in any Company preliminary prospectus, or arising out of or
relating to any omission or alleged omission of a material fact required to be stated therein or
necessary to make the statements therein (in the case of any Prospectus or form of prospectus or
supplement thereto, in the light of the circumstances under which they were made) not misleading,
except to the extent, but only to the extent, that (A) such untrue statements, alleged untrue
statements, omissions or alleged omissions are based upon information regarding such Investor
furnished in writing to the Company by such Investor for use therein, or to the extent that such
information relates to such Investor or such Investor’s proposed method of distribution of
Registrable Securities and was reviewed and expressly approved by such Investor expressly for use
in the Registration Statement, or (B) with respect to any prospectus, if the untrue statement or
omission of material fact contained in such prospectus was corrected on a timely basis in the
prospectus, as then amended or supplemented, if such corrected prospectus was timely made available
by the Company to the Holder, and the Holder seeking indemnity hereunder was advised in writing not
to use the incorrect prospectus prior to the use giving rise to Losses.




          (b) Indemnification by Investors. Each Investor shall, severally and not jointly,
indemnify and hold harmless the Company, its directors, officers, agents and employees, each Person
who controls the Company (within the meaning of Section 15 of the Securities Act and
Section 20 of the Exchange Act), and the directors, officers, agents or employees of such
controlling Persons, to the fullest extent permitted by applicable law, from and against all Losses
(as determined by a court of competent jurisdiction in a final judgment not subject to appeal or
review) arising solely out of any untrue statement of a material fact contained in the Registration
Statement, any Prospectus, or any form of prospectus, or in any amendment or supplement thereto, or
arising out of or relating to any omission of a material fact required to be stated therein or
necessary to make the statements therein (in the case of any Prospectus or form of prospectus or supplement thereto, in the light of the circumstances
under which they were made) not misleading, but only to the extent that such untrue statement or
omission is contained in any information so furnished by such Investor in writing to the Company
specifically for inclusion in such Registration Statement or such Prospectus or to the extent that
(i) such untrue statements or omissions are based upon information regarding such Investor
furnished to the Company by such Investor in writing expressly for use therein, or to the extent
that such information relates to such Investor or such Investor’s proposed method of distribution
of Registrable Securities and was reviewed and expressly approved by such Investor expressly for
use in the Registration Statement (it being understood that the information provided by the
Investor to the Company in Exhibits B-1, B-2 and B-3 and the Plan of Distribution set forth on
Exhibit D, as the same may be modified by such Investor and other information provided by the
Investor to the Company in or pursuant to the Transaction Documents constitutes information
reviewed and expressly approved by such Investor in writing expressly for use in the Registration
Statement), such Prospectus or such form of Prospectus or in any amendment or supplement thereto.
In no event shall the liability of any selling Investor hereunder be greater in amount than the
dollar amount of the net proceeds received by such Investor upon the sale of the Registrable
Securities giving rise to such indemnification obligation.




          (c) Conduct of Indemnification Proceedings. If any Proceeding shall be brought or
asserted against any Person entitled to indemnity hereunder (an “Indemnified




27









 




Party”), such Indemnified Party shall promptly notify the Person from whom indemnity is sought (the “Indemnifying
Party”) in writing, and the Indemnifying Party shall assume the defense thereof, including the
employment of counsel reasonably satisfactory to the Indemnified Party and the payment of all fees
and expenses incurred in connection with defense thereof; provided, that the failure of any
Indemnified Party to give such notice shall not relieve the Indemnifying Party of its obligations
or liabilities pursuant to this Agreement, except (and only) to the extent that it shall be finally
determined by a court of competent jurisdiction (which determination is not subject to appeal or
further review) that such failure shall have proximately and materially adversely prejudiced the
Indemnifying Party.




     An Indemnified Party shall have the right to employ separate counsel in any such Proceeding
and to participate in the defense thereof, but the fees and expenses of such counsel shall be at
the expense of such Indemnified Party or Parties unless: (i) the Indemnifying Party has agreed in
writing to pay such fees and expenses; or (ii) the Indemnifying Party shall have failed promptly to
assume the defense of such Proceeding and to employ counsel reasonably satisfactory to such
Indemnified Party in any such Proceeding; or (iii) the named parties to any such Proceeding
(including any impleaded parties) include both such Indemnified Party and the Indemnifying Party,
and such Indemnified Party shall have been advised by counsel that a conflict of interest is likely
to exist if the same counsel were to represent such Indemnified Party and the Indemnifying Party
(in which case, if such Indemnified Party notifies the Indemnifying Party in writing that it elects
to employ separate counsel at the expense of the Indemnifying Party, the Indemnifying Party shall
not have the right to assume the defense thereof and the reasonable fees and expenses of separate
counsel shall be at the expense of the Indemnifying Party). It being understood, however, that the
Indemnifying Party shall not, in connection with any one such Proceeding (including separate
Proceedings that have been or will be consolidated before a single judge) be liable for the fees
and expenses of more than one separate firm of attorneys at any time for all Indemnified Parties, which firm shall be appointed by a majority
of the Indemnified Parties. The Indemnifying Party shall not be liable for any settlement of any
such Proceeding effected without its written consent, which consent shall not be unreasonably
withheld. No Indemnifying Party shall, without the prior written consent of the Indemnified Party,
effect any settlement of any pending Proceeding in respect of which any Indemnified Party is a
party, unless such settlement includes an unconditional release of such Indemnified Party from all
liability on claims that are the subject matter of such Proceeding.



     All reasonable fees and expenses of the Indemnified Party (including reasonable fees and
expenses to the extent incurred in connection with investigating or preparing to defend such
Proceeding in a manner not inconsistent with this Section) shall be paid to the Indemnified Party,
as incurred, within 20 Trading Days of written notice thereof to the Indemnifying Party (regardless
of whether it is ultimately determined that an Indemnified Party is not entitled to indemnification
hereunder; provided, that the Indemnifying Party may require such Indemnified Party to undertake to
reimburse all such fees and expenses to the extent it is finally judicially determined that such
Indemnified Party is not entitled to indemnification hereunder).



          (d) Contribution. If a claim for indemnification under Section 6.4(a) or (b)
is unavailable to an Indemnified Party (by reason of public policy or otherwise), then each
Indemnifying Party, in lieu of indemnifying such Indemnified Party, shall contribute to the amount
paid or payable by such Indemnified Party as a result of such Losses, in such proportion





28










 






as is appropriate to reflect the relative fault of the Indemnifying Party and Indemnified Party in
connection with the actions, statements or omissions that resulted in such Losses as well as any
other relevant equitable considerations. The relative fault of such Indemnifying Party and
Indemnified Party shall be determined by reference to, among other things, whether any action in
question, including any untrue or alleged untrue statement of a material fact or omission or
alleged omission of a material fact, has been taken or made by, or relates to information supplied
by, such Indemnifying Party or Indemnified Party, and the parties’ relative intent, knowledge,
access to information and opportunity to correct or prevent such action, statement or omission.
The amount paid or payable by a party as a result of any Losses shall be deemed to include, subject
to the limitations set forth in Section 6.4(c), any reasonable attorneys’ or other
reasonable fees or expenses incurred by such party in connection with any Proceeding to the extent
such party would have been indemnified for such fees or expenses if the indemnification provided
for in this Section was available to such party in accordance with its terms.




     The parties hereto agree that it would not be just and equitable if contribution pursuant to
this Section 6.4(d) were determined by pro rata allocation or by any other method of
allocation that does not take into account the equitable considerations referred to in the
immediately preceding paragraph. Notwithstanding the provisions of this Section 6.4(d), no
Investor shall be required to contribute, in the aggregate, any amount in excess of the amount by
which the proceeds actually received by such Investor from the sale of the Registrable Securities
subject to the Proceeding exceeds the amount of any damages that such Investor has otherwise been
required to pay by reason of such untrue or alleged untrue statement or omission or alleged
omission. No Person guilty of fraudulent misrepresentation (within the meaning of Section
11(f) of the Securities Act) shall be entitled to contribution from any Person who was not
guilty of such fraudulent misrepresentation.



     The indemnity and contribution agreements contained in this Section are in addition to any
liability that the Indemnifying Parties may have to the Indemnified Parties.



     6.5. Dispositions. Each Investor agrees that it will comply with the prospectus delivery
requirements of the Securities Act as applicable to it in connection with sales of Registrable
Securities pursuant to the Registration Statement and shall sell its Registrable Securities in
accordance with the Plan of Distribution set forth in the Prospectus. Each Investor further agrees
that, upon receipt of a notice from the Company of the occurrence of any event of the kind
described in Sections 6.2(c)(v), (vi) or (vii), such Investor will
discontinue disposition of such Registrable Securities under the Registration Statement until such
Investor is advised in writing by the Company that the use of the Prospectus, or amended
Prospectus, as applicable, may be used. The Company may provide appropriate stop orders to enforce
the provisions of this paragraph.



     6.6. No Piggyback on Registrations. With the exception of the former affiliates of
Micromet AG, neither the Company nor any of its security holders (other than the Investors in such
capacity pursuant hereto) may include securities of the Company in the Registration Statement other
than the Registrable Securities.



29









 





     6.7. Piggy-Back Registrations. If at any time during the Effectiveness Period there is not
an effective Registration Statement covering all of the Registrable Securities and the Company
shall determine to prepare and file with the SEC a registration statement relating to an offering
for its own account or the account of others under the Securities Act of any of its equity
securities, other than on Form S-4 or Form S-8 (each as promulgated under the Securities Act) or
their then equivalents relating to equity securities to be issued solely in connection with any
acquisition of any entity or business or equity securities issuable in connection with stock option
or other employee benefit plans, then the Company shall send to each Investor not then eligible to
sell all of their Registrable Securities under Rule 144 in a three-month period, written notice of
such determination and if, within ten days after receipt of such notice, any such Investor shall so
request in writing, the Company shall include in such registration statement all or any part of
such Registrable Securities such Investor requests to be registered. Notwithstanding the
foregoing, in the event that, in connection with any underwritten public offering, the managing
underwriter(s) thereof shall impose a limitation on the number of shares of Common Stock which may
be included in the Registration Statement because, in such underwriter(s)’ judgment, marketing or
other factors dictate such limitation is necessary to facilitate public distribution, then the
Company shall be obligated to include in such Registration Statement only such limited portion of
the Registrable Securities with respect to which such Investor has requested inclusion hereunder as
the underwriter shall permit; provided, however, that (i) the Company shall not exclude any
Registrable Securities unless the Company has first excluded all outstanding securities, the
holders of which are not contractually entitled to inclusion of such securities in such
Registration Statement or are not contractually entitled to pro rata inclusion with the Registrable
Securities and (ii) after giving effect to the immediately preceding proviso, any such exclusion of
Registrable Securities shall be made pro rata among the Investors seeking to include Registrable
Securities and the holders of other securities having the contractual right to inclusion of their
securities in such Registration Statement by reason of demand registration rights, in proportion to
the number of Registrable Securities or other securities, as applicable, sought to be included by
each such Investor or other holder. If an offering in connection with which an Investor is
entitled to registration under this Section 6.7 is an underwritten offering, then each Investor
whose Registrable Securities are included in such Registration Statement shall, unless otherwise
agreed by the Company, offer and sell such Registrable Securities in an underwritten offering using
the same underwriter or underwriters and, subject to the provisions of this Agreement, on the same
terms and conditions as other shares of Common Stock included in such underwritten offering and
shall enter into an underwriting agreement in a form and substance reasonably satisfactory to the
Company and the underwriter or underwriters. Upon the effectiveness the registration statement for
which piggy-back registration has been provided in this Section 6.7, any Event Payments payable to
an Investor whose Securities are included in such registration statement shall terminate.



ARTICLE VII




MISCELLANEOUS




     7.1. Termination. This Agreement may be terminated by the Company or any Investor, by
written notice to the other parties, if the Closing has not been consummated by the third Business
Day following the date of this Agreement; provided that no such termination will affect the right
of any party to sue for any breach by the other party (or parties).



30









 





     7.2. Fees and Expenses. Except as expressly set forth in the Transaction Documents to the
contrary, each party shall pay the fees and expenses of its advisers, counsel, accountants and
other experts, if any, and all other expenses incurred by such party incident to the negotiation,
preparation, execution, delivery and performance of this Agreement; provided that the Company shall
pay the reasonable fees and expenses of the Investors (including the fees and expenses of
Investor’s counsel), up to a maximum of $40,000. The Company shall pay all Transfer Agent fees,
stamp taxes and other taxes and duties levied in connection with the sale and issuance of their
applicable Securities.



     7.3. Entire Agreement. The Transaction Documents, together with the Exhibits and Schedules
thereto, contain the entire understanding of the parties with respect to the subject matter hereof
and supersede all prior agreements and understandings, oral or written, with respect to such
matters, which the parties acknowledge have been merged into such documents, exhibits and
schedules. At or after the Closing, and without further consideration, the Company will execute
and deliver to the Investors such further documents as may be reasonably requested in order to give
practical effect to the intention of the parties under the Transaction Documents.



     7.4. Notices. Any and all notices or other communications or deliveries required or permitted to be provided
hereunder shall be in writing and shall be deemed given and effective on the earliest of (a) the
date of transmission, if such notice or communication is delivered via facsimile or email at the
facsimile number or email address specified in this Section prior to 6:30 p.m. (New York City time)
on a Trading Day, (b) the next Trading Day after the date of transmission, if such notice or
communication is delivered via facsimile or email at the facsimile number or email address
specified in this Section on a day that is not a Trading Day or later than 6:30 p.m. (New York City
time) on any Trading Day, (c) the Trading Day following the date of deposit with a nationally
recognized overnight courier service, or (d) upon actual receipt by the party to whom such notice
is required to be given. The addresses, facsimile numbers and email addresses for such notices and
communications are those set forth on the signature pages hereof, or such other address or
facsimile number as may be designated in writing hereafter, in the same manner, by any such Person.



     7.5. Amendments; Waivers. No provision of this Agreement may be waived or amended except
in a written instrument signed, in the case of an amendment, by the Company and each of the
Investors or, in the case of a waiver, by the party against whom enforcement of any such waiver is
sought. No waiver of any default with respect to any provision, condition or requirement of this
Agreement shall be deemed to be a continuing waiver in the future or a waiver of any subsequent
default or a waiver of any other provision, condition or requirement hereof, nor shall any delay or
omission of either party to exercise any right hereunder in any manner impair the exercise of any
such right. Notwithstanding the foregoing, a waiver or consent to depart from the provisions
hereof with respect to a matter that relates exclusively to the rights of Investors under Article
VI may be given by Investors holding at least a majority of the Registrable Securities to which
such waiver or consent relates.



     7.6. Construction. The headings herein are for convenience only, do not constitute a part
of this Agreement and shall not be deemed to limit or affect any of the provisions hereof. The
language used in this Agreement will be deemed to be the language chosen by the parties to express
their mutual intent, and no rules of strict construction will be applied against any party.



31









 





     7.7. Successors and Assigns. This Agreement shall be binding upon and inure to the benefit
of the parties and their successors and permitted assigns. The Company may not assign this
Agreement or any rights or obligations hereunder without the prior written consent of the
Investors. Any Investor may assign its rights under this Agreement to any Person to whom such
Investor assigns or transfers any Securities, provided (i) such transferor agrees in writing with
the transferee or assignee to assign such rights, and a copy of such agreement is furnished to the
Company after such assignment, (ii) the Company is furnished with written notice of (x) the name
and address of such transferee or assignee and (y) the Registrable Securities with respect to which
such registration rights are being transferred or assigned, (iii) following such transfer or
assignment, the further disposition of such securities by the transferee or assignee is restricted
under the Securities Act and applicable state securities laws, (iv) such transferee agrees in writing to be
bound, with respect to the transferred Securities, by the provisions hereof that apply to the
“Investors” and (v) such transfer shall have been made in accordance with the applicable
requirements of this Agreement and with all laws applicable thereto.



     7.8. No Third-Party Beneficiaries. This Agreement is intended for the benefit of the
parties hereto and their respective successors and permitted assigns and is not for the benefit of,
nor may any provision hereof be enforced by, any other Person, except that each Indemnified Party
is an intended third party beneficiary of Section 6.4 and (in each case) may enforce the provisions
of such Sections directly against the parties with obligations thereunder.



     7.9. Governing Law; Venue; Waiver of Jury Trial. THE CORPORATE LAWS OF THE STATE OF
DELAWARE SHALL GOVERN ALL ISSUES CONCERNING THE RELATIVE RIGHTS OF THE COMPANY AND ITS
STOCKHOLDERS. ALL QUESTIONS CONCERNING THE CONSTRUCTION, VALIDITY, ENFORCEMENT AND INTERPRETATION
OF THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF
NEW YORK. THE COMPANY AND INVESTORS HEREBY IRREVOCABLY SUBMIT TO THE NON-EXCLUSIVE JURISDICTION OF
THE STATE AND FEDERAL COURTS SITTING IN THE CITY OF NEW YORK, BOROUGH OF MANHATTAN FOR THE
ADJUDICATION OF ANY DISPUTE BROUGHT BY THE COMPANY OR ANY INVESTOR HEREUNDER, IN CONNECTION
HEREWITH OR WITH ANY TRANSACTION CONTEMPLATED HEREBY OR DISCUSSED HEREIN (INCLUDING WITH RESPECT TO
THE ENFORCEMENT OF ANY OF THE TRANSACTION DOCUMENTS), AND HEREBY IRREVOCABLY WAIVE, AND AGREE NOT
TO ASSERT IN ANY SUIT, ACTION OR PROCEEDING BROUGHT BY THE COMPANY OR ANY INVESTOR, ANY CLAIM THAT
IT IS NOT PERSONALLY SUBJECT TO THE JURISDICTION OF ANY SUCH COURT, OR THAT SUCH SUIT, ACTION OR
PROCEEDING IS IMPROPER. EACH PARTY HEREBY IRREVOCABLY WAIVES PERSONAL SERVICE OF PROCESS AND
CONSENTS TO PROCESS BEING SERVED IN ANY SUCH SUIT, ACTION OR PROCEEDING BY MAILING A COPY THEREOF
VIA REGISTERED OR CERTIFIED MAIL OR OVERNIGHT DELIVERY (WITH EVIDENCE OF DELIVERY) TO SUCH PARTY AT
THE ADDRESS IN EFFECT FOR NOTICES TO IT UNDER THIS AGREEMENT AND AGREES THAT SUCH SERVICE SHALL
CONSTITUTE GOOD AND SUFFICIENT SERVICE OF PROCESS AND NOTICE THEREOF. NOTHING CONTAINED HEREIN
SHALL BE DEEMED TO LIMIT IN ANY WAY ANY RIGHT TO SERVE PROCESS IN ANY MANNER PERMITTED BY LAW. THE
COMPANY AND INVESTORS HEREBY WAIVE ALL RIGHTS TO A TRIAL BY JURY.



32









 





     7.10. Survival. The representations and warranties, agreements and covenants contained
herein shall survive until the second anniversary of the Closing Date.



     7.11. Execution. This Agreement may be executed in two or more counterparts, all of which
when taken together shall be considered one and the same agreement and shall become effective when
counterparts have been signed by each party and delivered to the other party, it being understood
that both parties need not sign the same counterpart. In the event that any signature is delivered
by facsimile transmission or email attachment, 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 or email-attached signature page were an original thereof.



     7.12. Severability. If any provision of this Agreement is held to be invalid or
unenforceable in any respect, the validity and enforceability of the remaining terms and provisions
of this Agreement shall not in any way be affected or impaired thereby and the parties will attempt
to agree upon a valid and enforceable provision that is a reasonable substitute therefor, and upon
so agreeing, shall incorporate such substitute provision in this Agreement.



     7.13. Rescission and Withdrawal Right. Notwithstanding anything to the contrary contained
in (and without limiting any similar provisions of) the Transaction Documents, whenever any
Investor exercises a right, election, demand or option owed to such Investor by the Company under a
Transaction Document and the Company does not timely perform its related obligations within the
periods therein provided, then, prior to the performance by the Company of the Company’s related
obligation, 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.



     7.14. Replacement of Securities. If any certificate or instrument evidencing any
Securities is mutilated, lost, stolen or destroyed, the Company shall issue or cause to be issued
in exchange and substitution for and upon cancellation thereof, or in lieu of and substitution
therefor, a new certificate or instrument, but only upon receipt of evidence reasonably
satisfactory to the Company of such loss, theft or destruction and 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 for any losses in connection therewith. The applicants for a new
certificate or instrument under such circumstances shall also pay any reasonable third-party costs
associated with the issuance of such replacement Securities.



     7.15. Remedies. In addition to being entitled to exercise all rights provided herein or
granted by law, including recovery of damages, each of the Investors and the Company will be
entitled to seek specific performance under the Transaction Documents. The parties agree that
monetary damages may not be adequate compensation for any loss incurred by reason of any breach of
obligations described in the foregoing sentence and hereby agrees to waive in any action for
specific performance of any such obligation (other than in connection with any action for temporary
restraining order) the defense that a remedy at law would be adequate.



     7.16. Payment Set Aside. To the extent that the Company makes a payment or payments to any
Investor hereunder or



33









 




any Investor enforces or exercises its rights hereunder or thereunder, and
such payment or payments or the proceeds of such enforcement or exercise or any part thereof are
subsequently invalidated, declared to be fraudulent or preferential, set aside, recovered from,
disgorged by or are required to be refunded, repaid or otherwise restored to the Company by a
trustee, receiver or any other person under any law (including, without limitation, any bankruptcy
law, state or federal law, common law or equitable cause of action), then to the extent of any such
restoration the obligation or part thereof originally intended to be satisfied shall be revived and
continued in full force and effect as if such payment had not been made or such enforcement or
setoff had not occurred.




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



     7.18. Independent Nature of Investors’ Obligations and Rights. The obligations of each
Investor under any Transaction Document are several and not joint with the obligations of any other
Investor, and no Investor shall be responsible in any way for the performance of the obligations of
any other Investor under any Transaction Document. The decision of each Investor to purchase
Securities pursuant to this Agreement has been made by such Investor independently of any other
Investor 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 which may have been made or given by any other
Investor or by any agent or employee of any other Investor, and no Investor or any of its agents or
employees shall have any liability to any other Investor (or any other person) relating to or
arising from any such information, materials, statements or opinions. Nothing contained herein or
in any Transaction Document, and no action taken by any Investor pursuant thereto, shall be deemed
to constitute the Investors as a partnership, an association, a joint venture or any other kind of
entity, or create a presumption that the Investors are in any way acting in concert or as a group
with respect to such obligations or the transactions contemplated by the Transaction Document.
Each Investor acknowledges that no other Investor has acted as agent for such Investor in
connection with making its investment hereunder and that no other Investor will be acting as agent
of such Investor in connection with monitoring its investment hereunder. Each Investor 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 Investor to be joined as an additional party in any proceeding for such purpose.



[SIGNATURE PAGES TO FOLLOW]




34









 








     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.



	 	 	 	 	 
	 	MICROMET, INC.

 	 
	 	By:  	 	 
	 	 	Name:  	Christian Itin, Ph.D. 	 
	 	 	Title:  	President and CEO 	 
	 



	 	 	 
	 

	 	Address for Notice:
	 
	 	 
	 

	 	Micromet, Inc.
	 

	 	2110 Rutherford Road
	 

	 	Carlsbad, CA 92008
	 

	 	Facsimile No.: (760) 494-4269
	 

	 	Telephone No.: (760) 494-4221
	 

	 	Attn: President






	 	 	 
	 

	 	With a copy to:
	 
	 	 
	 

	 	Christian E. Plaza, Esq.
	 

	 	Cooley Godward LLP
	 

	 	11951 Freedom Drive
	 

	 	Reston, VA 20190
	 

	 	Facsimile: (703) 456-8100
	 

	 	Telephone: (703) 456-8000






COMPANY SIGNATURE PAGE




35









 








Investor Signature Page




     By its execution and delivery of this signature page, the undersigned Investor hereby joins in
and agrees to be bound by the terms and conditions of the Securities Purchase Agreement dated as of
July 21, 2006 (the “Purchase Agreement”) by and among Micromet, Inc. and the Investors (as defined
therein), as to the number of shares of Common Stock and Warrants set forth below, and authorizes
this signature page to be attached to the Purchase Agreement or counterparts thereof.



	 	 	 	 	 
	 	 	NGN BIOMED OPPORTUNITY I, L.P.
	 
	 	 	 	 
	 	 	By: NGN BioMed I GP, L.P., its General Partner
	 
	 	 	 	 
	 	 	By: NGN Capital LLC, its General Partner
	 
	 	 	 	 
	 

	 	By:	 	 
	 

	 	 	 	 
	 

	 	 	 	Name:
	 

	 	 	 	Title:






	 	 	 	 	 
	 

	 	Address:
	 	369 Lexington Ave.
	 

	 	 	 	 
	 
	 	 	 	 
	 	 	17th Floor
	 	 	 
	 
	 	 	 	 
	 	 	New York, NY 10017
	 	 	 





	 	 	 	 	 
	 

	 	Telephone No.:
	 	(212) 972-0077
	 

	 	 	 	 
	 
	 	 	 	 
	 

	 	Facsimile No.:
	 	(212) 972-0080
	 

	 	 	 	 
	 
	 	 	 	 
	 

	 	Email Address:	 	 
	 

	 	 	 	 





	 	 	 	 	 
	 

	 	Number of Shares:	 	 
	 

	 	 	 	 





	 	 	 	 	 
	 

	 	Number of Warrants:	 	 
	 

	 	 	 	 





	 	 	 	 	 
	 

	 	Aggregate Purchase Price:
	 	     $
	 

	 	 	 	 





[SIGNATURE PAGES CONTINUE]




 









 








Investor Signature Page




     By its execution and delivery of this signature page, the undersigned Investor hereby joins in
and agrees to be bound by the terms and conditions of the Securities Purchase Agreement dated as of July 21, 2006 (the “Purchase Agreement”) by and among Micromet, Inc. and the Investors (as defined
therein), as to the number of shares of Common Stock and Warrants set forth below, and authorizes
this signature page to be attached to the Purchase Agreement or counterparts thereof.



	 	 	 	 	 
	 	 	NGN BIOMED OPPORTUNITY I GMBH & CO.

BETEILIGUNGS KG
	 
	 	 	 	 
	 	 	By: NGN Capital LLC, its Managing Limited

Partner
	 
	 	 	 	 
	 

	 	By:	 	 
	 

	 	 	 	 
	 

	 	 	 	Name:
	 

	 	 	 	Title:






	 	 	 	 	 
	 

	 	Address:
	 	369 Lexington Ave.
	 

	 	 	 	 
	 
	 	 	 	 
	 	 	17th Floor
	 	 	 
	 
	 	 	 	 
	 	 	New York, NY 10017
	 	 	 





	 	 	 	 	 
	 

	 	Telephone No.:
	 	(212) 972-0077
	 

	 	 	 	 
	 
	 	 	 	 
	 

	 	Facsimile No.:
	 	(212) 972-0080
	 

	 	 	 	 
	 
	 	 	 	 
	 

	 	Email Address:	 	 
	 

	 	 	 	 





	 	 	 	 	 
	 

	 	Number of Shares:	 	 
	 

	 	 	 	 





	 	 	 	 	 
	 

	 	Number of Warrants:	 	 
	 

	 	 	 	 





	 	 	 	 	 
	 

	 	Aggregate Purchase Price:
	 	     $
	 

	 	 	 	 





2









 






	 	 	 
	Exhibits:	 	 
	A

	 	Schedule of Investors
	B

	 	Instruction Sheet for Investors
	C

	 	Opinion of Company Corporate Counsel
	D

	 	Plan of Distribution
	E

	 	Company Transfer Agent Instructions
	F

	 	Form of Warrant







3









 








Exhibit A




Schedule of Investors




	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	Investor	 	Common Shares	 	 	Warrants	 	 	Warrant Shares	 	 	Purchase Price	 
	NGN BIOMED
OPPORTUNITY I, L.P.
	 	 	1,289,778	 	 	 	322,445	 	 	 	322,445	 	 	$	4,643,200	 
	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	NGN BIOMED
OPPORTUNITY I GMBH
& CO. BETEILIGUNGS
KG
	 	 	932,444	 	 	 	233,111	 	 	 	233,111	 	 	$	3,356,800	 
	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	 
	 	 	 	 	 	 	 	 	 	 	 	 
	TOTALS
	 	 	2,222,222	 	 	 	555,556	 	 	 	555,556	 	 	$	8,000,000	 

















 







Exhibit B




INSTRUCTION SHEET FOR INVESTOR




(to be read in conjunction with the entire Securities Purchase Agreement)





	A.	 	Complete the following items in the Securities Purchase Agreement:





     1. Complete and execute the Investor Signature Page. The Agreement must be executed by an
individual authorized to bind the Investor.



     2. Exhibit B-1 — Stock Certificate Questionnaire:



Provide the information requested by the Stock Certificate Questionnaire;




     3. Exhibit B-2 — Registration Statement Questionnaire:



Provide the information requested by the Registration Statement Questionnaire.




     4. Exhibit B-3 /B-4 — Investor Certificate:


Provide the information requested by the Certificate for Individual Investors (B-3) or the
Certificate for Corporate, Partnership, Trust, Foundation and Joint Investors (B-4), as applicable.




     5. Return, via facsimile, the signed Securities Purchase Agreement including the properly
completed Exhibits B-1 through B-4, to:


Facsimile: (703) 456-8100

Telephone: (703) 456-8006

Attn: Christian E. Plaza




     6. After completing instruction number five (5) above, deliver the original signed Securities
Purchase Agreement including the properly completed Exhibits B-1 through B-4 to:


Cooley Godward LLP

11951 Freedom Drive, 15th Floor

Reston, VA 20190

Attn: Christian E. Plaza





	B.	 	Instructions regarding the wire transfer of funds for the purchase of the Shares will be
telecopied to the Investor by the Company at a later date.






	C.	 	Upon the resale of any Shares by the Investor after the Registration Statement covering any
Shares is effective, as described in the Securities Purchase Agreement, the Investor must send
a letter in the form of Exhibit D to the Company and the Company’s transfer agent so that the
Shares may be properly transferred.





 









 





Exhibit B-1




MICROMET, INC.




STOCK CERTIFICATE QUESTIONNAIRE




     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)). You may use a nominee name if
appropriate:	 	 
	 

	 	 
	 	 

	2.

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

	 	 
	 	 

	3.

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

	 	 
	 	 

	 
	 	 	 	 
	 

	 	 
	 	 

	 
	 	 	 	 
	 

	 	 
	 	 

	 
	 	 	 	 
	 

	 	 
	 	 

	 
	 	 	 	 
	 

	 	 
	 	 

	4.

	 	The Tax Identification Number of the Registered Holder listed in response to
item 1 above:	 	 
	 

	 	 
	 	 







2









 






Exhibit B-2




MICROMET, INC.




REGISTRATION STATEMENT QUESTIONNAIRE




     In connection with the Registration Statement, please provide us with the following
information regarding the Investor.


1. Please state your organization’s name exactly as it should appear in the Registration Statement:





 





Except as set forth below, your organization does not hold any equity securities of the
Company on behalf of another person or entity.




State any exceptions here:

 



2. Address of your organization:




	 	 	 	 	 	 
	 	  

	 	 	 	 
	
 

	 	  

	 	Telephone:  	 	 
	 	 	 	 
	  

	 	Fax:  	 	 	 	 
	 	 	 





	 	 	 	 
	 	Contact Person:  
	 	 
	 	 

	 	 






3. Have you or your organization had any position, office or other material relationship within the
past three years with the Company or its affiliates? (Include any relationships involving you or
your affiliates, officers, directors, or principal equity holders (5% or more) that has held any
position or office or has had any other material relationship with the Company (or its predecessors
or affiliates) during the past three years.)




	 	 	 	 	 
	 

	 	                          Yes
	 	                          No
	 
	 	 	 	 
	 	 	If yes, please indicate the nature of any such relationship below:





4. Are you the beneficial owner of any other securities of the Company? (Include any equity
securities that you beneficially own or have a right to acquire within 60 days after the date
hereof, and as to which you have sole voting power, shared voting power, sole investment power or
shared investment power.)




3









 








	 	 	 	 	 
	 

	 	                          Yes
	 	                          No
	 
	 	 	 	 
	 	 	If yes, please describe the nature and amount of such ownership as of a recent date.





5. Except as set forth below, you wish that all the shares of the Company’s common stock
beneficially owned by you or that you have the right to acquire from the Company be offered for
your account in the Registration Statement.





State any exceptions here:


6. Have you made or are you aware of any arrangements relating to the distribution of the shares of
the Company pursuant to the Registration Statement?




	 	 	 	 	 
	 

	 	                          Yes
	 	                          No
	 
	 	 	 	 
	 	 	If yes, please describe the nature and amount of such arrangements.






     7. NASD Matters



     (a) State below whether (i) you or any associate or affiliate of yours are a member of the
NASD, a controlling shareholder of an NASD member, a person associated with a member, a direct or
indirect affiliate of a member, or an underwriter or related person with respect to the proposed
offering; (ii) you or any associate or affiliate of yours owns any stock or other securities of any
NASD member not purchased in the open market; or (iii) you or any associate or affiliate of yours
has made any outstanding subordinated loans to any NASD member. If you are a general or limited
partnership, a no answer asserts that no such relationship exists for you as well as for each of
your general or limited partners.



	 	 	 	 	 
	 

	 	                          Yes
	 	                          No






     If “yes,” please identify the NASD member and describe your relationship, including, in the
case of a general or limited partner, the name of the partner:



     If you answer “no” to Question 7(a), you need not respond to Question 7(b).



     (b) State below whether you or any associate or affiliate of yours has been an underwriter, or
a controlling person or member of any investment banking or brokerage firm which has been or might
be an underwriter for securities of the Corporation or any affiliate thereof including, but not
limited to, the common stock now being registered.



	 	 	 	 	 
	 

	 	                          Yes
	 	                          No






     If “yes,” please identify the NASD member and describe your relationship, including, in the
case of a general or limited partner, the name of the partner.



4









 





ACKNOWLEDGEMENT




     The undersigned hereby agrees to notify the Company promptly of any changes in the foregoing
information which should be made as a result of any developments, including the passage of time.
The undersigned also agrees to provide the Company and the Company’s counsel any and all such
further information regarding the undersigned promptly upon request in connection with the
preparation, filing, amending, and supplementing of the Registration Statement (or any prospectus
contained therein). The undersigned hereby consents to the use of all such information in the
Registration Statement.



     The undersigned understands and acknowledges that the Company will rely on the information set
forth herein for purposes of the preparation and filing of the Registration Statement.



     The undersigned understands that the undersigned may be subject to serious civil and criminal
liabilities if the Registration Statement, when it becomes effective, either contains an untrue
statement of a material fact or omits to state a material fact required to be stated in the
Registration Statement or necessary to make the statements in the Registration Statement not
misleading. The undersigned represents and warrants that all information it provides to the
Company and its counsel is currently accurate and complete and will be accurate and complete at the
time the Registration Statement becomes effective and at all times subsequent thereto, and agrees
during the Effectiveness Period and any additional period in which the undersigned is making sales
of Shares under and pursuant to the Registration Statement, and agrees during such periods to
notify the Company immediately of any misstatement of a material fact in the Registration
Statement, and of the omission of any material fact necessary to make the statements contained
therein not misleading.



	 	 	 
	Dated:                     
	 	 
	 
	 	 
	 

	 	 

	 

	 	Name
	 
	 	 
	 

	 	 

	 

	 	Signature
	 
	 	 
	 

	 	 

	 

	 	Name and Title of Signatory






5









 





Exhibit B-3




MICROMET, INC.




CERTIFICATE FOR CORPORATE, PARTNERSHIP,

LIMITED LIABILITY COMPANY,

TRUST, FOUNDATION AND JOINT INVESTORS




     If the investor is a corporation, partnership, limited liability company, trust, pension plan,
foundation, joint Investor (other than a married couple) or other entity, an authorized officer,
partner, or trustee must complete, date and sign this Certificate.



CERTIFICATE




     The undersigned certifies that the representations and responses below are true and accurate:



     (a) The investor has been duly formed and is validly existing and has full power and authority
to invest in the Company. The person signing on behalf of the undersigned has the authority to
execute and deliver the Securities Purchase Agreement on behalf of the Investor and to take other
actions with respect thereto.



     (b) Indicate the form of entity of the undersigned:



           Limited Partnership



           General Partnership



           Limited Liability Company



           Corporation



           Revocable Trust (identify each grantor and indicate under what circumstances the
trust is revocable by the grantor):                                                                                

     (Continue on a separate piece of paper, if necessary.)



           Other type of Trust (indicate type of trust and, for trusts other than pension trusts, name the grantors and beneficiaries):                                                                                


     (Continue on a separate piece of paper, if necessary.)



           Other form of organization (indicate form of organization (                                                                                                                        )



     (c) Indicate the approximate date the undersigned entity was formed:



     (d) In order for the Company to offer and sell the Units 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 an investor in the Company.



6









 





	 	 	 
	                    

	 	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 advisor, 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. Any partnership or corporation or any organization described in
Section 501(c)(3) of the Internal Revenue Code or similar business
trust, not formed for the specific purpose of acquiring the Shares, 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 Shares, whose purchase is directed
by a sophisticated person as described in Rule 506(b)(2)(ii) of the
Exchange Act;
	 
	 	 
	                    

	 	11. 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:                                                                                                                        

(continue on a separate piece of paper, if necessary.)






     Please set forth in the space provided below the (i) states, if any, in the U.S. in which
you maintained your principal office during the past two years and the dates during which you



7









 







maintained your office in each state, (ii) state(s), if any, in which you are incorporated or
otherwise organized and (iii) state(s), if any, in which you pay income taxes.


 



 



 




	 	 	 
	Dated:                                         , 2006
	 	 
	 
	 	 
	 


	 	 
	Print Name of Investor
	 	 
	 
	 	 
	 


	 	 
	Name:
	 	 
	Title:
	 	 
	(Signature and title of authorized officer, partner or trustee)
	 	 






8









 






SECURITIES DELIVERY INSTRUCTIONS




     Please instruct us as to where you would like the Securities delivered to at Closing:



	 	 	 
	Name:
	 	 
	 

	 	 







	 	 	 
	Company:
	 	 
	 

	 	 

	 
	 	 
	Address:
	 	 
	 

	 	 







      




	 	 	 
	Telephone:
	 	 
	 

	 	 







	 	 	 
	Other Special Instructions:
	 	 
	 

	 	 







      





9









 







Exhibit C




OPINION OF COMPANY CORPORATE COUNSEL




 









 





Exhibit D




PLAN OF DISTRIBUTION



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





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






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






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






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






	•	 	privately negotiated transactions;






	•	 	short sales;






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






	•	 	a combination of any such methods of sale; and






	•	 	any other method permitted pursuant to applicable law.





     The selling stockholders may also sell shares under Rule 144 under the Securities Act, if
available, rather than under this prospectus.



     Broker-dealers engaged by the selling stockholders may arrange for other brokers-dealers to
participate in sales. Broker-dealers may receive commissions or discounts from the selling
stockholders (or, if any broker-dealer acts as agent for the purchaser of shares, from the
purchaser) in amounts to be negotiated. The selling stockholders do not expect these commissions
and discounts to exceed what is customary in the types of transactions involved. Any profits on
the resale of shares of common stock by a broker-dealer acting as principal might be deemed to be
underwriting discounts or commissions under the Securities Act. Discounts, concessions,
commissions and similar selling expenses, if any, attributable to the sale of shares will be borne
by a selling stockholder. The selling stockholders may agree to indemnify any agent, dealer or
broker-dealer that participates in transactions involving sales of the shares if liabilities are
imposed on that person under the Securities Act.



     The selling stockholders may from time to time pledge or grant a security interest in some or
all of the shares of common stock owned by them and, if they default in the performance of their
secured obligations, the pledgees or secured parties may offer and sell the shares of common stock
from time to time under this prospectus after we have filed a supplement to this prospectus under
Rule 424(b)(3) or other applicable provision of the Securities Act of 1933 supplementing or
amending the list of selling stockholders to include the pledgee, transferee or other successors in
interest as selling stockholders under this prospectus.



 









 





     The selling stockholders also may transfer the shares of common stock in other circumstances,
in which case the transferees, pledgees or other successors in interest will be the selling
beneficial owners for purposes of this prospectus and may sell the shares of common stock from time
to time under this prospectus after we have filed a supplement to this prospectus under Rule
424(b)(3) or other applicable provision of the Securities Act of 1933 supplementing or amending the
list of selling stockholders to include the pledgee, transferee or other successors in interest as
selling stockholders under this prospectus.



     The selling stockholders and any broker-dealers or agents that are involved in selling the
shares of common stock may be deemed to be “underwriters” within the meaning of the Securities Act
in connection with such sales. In such event, any commissions received by such broker-dealers or
agents and any profit on the resale of the shares of common stock purchased by them may be deemed
to be underwriting commissions or discounts under the Securities Act.



     We are required to pay all fees and expenses incident to the registration of the shares of
common stock. We have agreed to indemnify the selling stockholders against certain losses, claims,
damages and liabilities, including liabilities under the Securities Act.



     The selling stockholders have advised us that they have not entered into any agreements,
understandings or arrangements with any underwriters or broker-dealers regarding the sale of their
shares of common stock, nor is there an underwriter or coordinating broker acting in connection
with a proposed sale of shares of common stock by any selling stockholder. If we are notified by
any selling stockholder that any material arrangement has been entered into with a broker-dealer
for the sale of shares of common stock, if required, we will file a supplement to this prospectus.
If the selling stockholders use this prospectus for any sale of the shares of common stock, they
will be subject to the prospectus delivery requirements of the Securities Act.



     The anti-manipulation rules of Regulation M under the Securities Exchange Act of 1934 may
apply to sales of our common stock and activities of the selling stockholders.



2









 





Exhibit E




COMPANY TRANSFER AGENT INSTRUCTIONS




Mellon Investor Services, LLC

400 S. Hope Street, 4th Floor

Los Angeles, CA 90071




Attention: Martha Mijango




Ladies and Gentlemen:




     Reference is made to that certain Securities Purchase Agreement, dated as of July 21, 2006
(the “Agreement”), by and among Micromet, Inc., a Delaware corporation (the “Company”), and the
investors named on the Schedule of Investors attached thereto (collectively, the “Holders”),
pursuant to which the Company is issuing to the Holders shares (the “Common Shares”) of Common
Stock of the Company, par value $.00004 per share (the “Common Stock”), and Warrants (the
“Warrants”), which are exercisable for shares of Common Stock.



     This letter shall serve as our irrevocable authorization and direction to you (provided that
you are the transfer agent of the Company at such time):



     (i) to issue shares of Common Stock upon transfer or resale of the Common Shares; and



     (ii) to issue shares of Common Stock upon the exercise of the Warrants (the “Warrant Shares”)
to or upon the order of a Holder from time to time upon delivery to you of a properly completed and
duly executed Exercise Notice, in the form attached hereto as Exhibit I, which has been
acknowledged by the Company as indicated by the signature of a duly authorized officer of the
Company thereon.



     You acknowledge and agree that so long as you have previously received (a) written
confirmation from the Company’s legal counsel that either (i) a registration statement covering
resales of the Common Shares and the Warrant Shares has been declared effective by the Securities
and Exchange Commission (the “SEC”) under the Securities Act of 1933, as amended (the “1933 Act”)
and that resales of the Common Shares and the Warrant Shares may be made thereunder, or (ii) sales
of the Common Shares and the Warrant Shares may be made in conformity with Rule 144 under the 1933
Act (“Rule 144”), (b) if applicable, a copy of such registration statement, and (c) notice from
legal counsel to the Company or any Holder that a transfer of Common Shares and/or Warrant Shares
has been effected either pursuant to the registration statement (and a prospectus delivered to the
transferee) or pursuant to Rule 144, then, unless otherwise required by law, within three (3)
business days of your receipt of the notice referred to in (c), you shall issue the certificates
representing the Common Shares and the Warrant Shares so sold to the transferees registered in the
names of such transferees, and such certificates shall not bear any legend restricting transfer of
the Common Shares and the Warrant Shares thereby and should not be subject to any stop-transfer
restriction.



 









 





     A form of written confirmation (to be used in connection with any sale) from the Company’s
outside legal counsel that a registration statement covering resales of the Common Shares and the
Warrant Shares has been declared effective by the SEC under the 1933 Act is attached hereto as
Exhibit II.



     Please be advised that the Holders are relying upon this letter as an inducement to enter into
the Agreement and, accordingly, each Holder is a third party beneficiary to these instructions.



     Please execute this letter in the space indicated to acknowledge your agreement to act in
accordance with these instructions. Should you have any questions concerning this matter, please
contact me at (703) 251-4420.



	 	 	 	 	 
	 	Very truly yours,



MICROMET, INC.

 	 
	 	By:  	 	 
	 	 	Name:  	Matthias Alder 	 
	 	 	Title:  	Senior Vice President and

General Counsel 	 
	 



	 	 	 	 	 
	THE FOREGOING INSTRUCTIONS ARE

ACKNOWLEDGED AND AGREED TO

this                      day of                     , 2006	 	 
	 
	 	 	 	 
	MELLON INVESTOR SERVICES, LLC 	 	 
	 
	 	 	 	 
	By:
	 	 	 	 
	 

	 	 

Name:
	 	 
	 

	 	Title:	 	 
	 
	 	 	 	 
	Enclosures	 	 






2









 






Exhibit F




FORM OF WARRANT




 









 





Schedule 3.1(a)




SUBSIDIARIES



The Company has the following direct or indirect Subsidiaries:



Micromet Holdings, Inc. (100% owned by the Company)



Cell Matrix, Inc. (100% owned by the Company)



Tarcanta, Inc. (100% owned by the Company)



Tarcanta, Limited (100% owned by the Company)



Micromet AG (100% owned by Micromet Holdings, Inc.)




2









 








Schedule 3.1(f)




CAPITALIZATION




	 	 	 	 	 
	 	 	Authorized	 	Issued and Outstanding
	Common Stock
	 	150,000,000	 	29,190,810
	 
	 	 	 	 
	Preferred Stock
	 	10,000,000	 	0
	 
	 	 	 	 
	Common Stock Warrants
	 	(83,852 shares of Common Stock are reserved for issuance)	 	(warrant rights exercisable for up to 83,852 shares of Common Stock are currently outstanding)
	 
	 	 	 	 
	Stock Plans (Options to Purchase Common Stock)
	 	(4,736,669 shares of Common Stock are reserved for issuance)	 	(options exercisable for up to 2,869,572 shares of Common Stock are currently outstanding)
	 
	 	 	 	 
	Employee Stock Purchase Plan
	 	(84,459 shares of Common Stock are reserved for issuance)	 	 
	 
	 	 	 	 
	Shareholder Rights Plan
	 	 	 	 






3









 






Schedule 3.1(h)




MATERIAL CHANGES



None.




4









 








Schedule 3.1(i)




ABSENCE OF LITIGATION



The Company received a letter from a former stockholder of Micromet AG regarding the Company’s
failure to file a registration statement registering the resale of the Company’s shares that were
issued to the stockholder in connection with the merger of the Company with Micromet AG.




5









 








Schedule 3.1(p)




REGISTRATION RIGHTS



In connection with the merger of the Company with Micromet AG, the Company granted resale
registration rights to the former affiliates of Micromet AG, representing in the aggregate
approximately 9,866,506 shares of the Company’s Common Stock.




6









 








Schedule 3.1(t)




PATENTS AND TRADEMARKS




	 	 	 	 	 	 	 	 	 
	Patent Number	 	Short Title	 	Filing date	 	Expiry date
	US 5,482,858

	 	Polypeptide linkers for production of
biosynthetic proteins/targeted multifunctional
proteins
	 	Oct. 19, 1993
	 	 	2009	 
	EP 0318554

	 	Polypeptide linkers for production of
biosynthetic proteins/targeted multifunctional
proteins
	 	May 19, 1988
	 	 	2008	 
	EP 0623679

	 	Polypeptide linkers for production of
biosynthetic proteins/targeted multifunctional
proteins
	 	May 19, 1988
	 	 	2008	 
	US 5,132,405

	 	Biosynthetic antibody binding sites
	 	June 30, 1988
	 	 	2009	 
	US 5,091,513

	 	Biosynthetic antibody binding sites
	 	Jan. 02, 1991
	 	 	2009	 
	US 5,476,786

	 	Biosynthetic antibody binding sites
	 	Oct. 19, 1993
	 	 	2009	 
	US 6,207,804

	 	Genetically engineered antibody analogues and
fusion proteins thereof
	 	Dec. 18, 1995
	 	 	2007	 
	US 5,013,653

	 	Product and process for the introduction of a
hinge region into a fusion protein to
facilitate cleavage
	 	Dec. 28, 1989
	 	 	2008	 
	US 4,946,778

	 	Single polypeptide chain binding molecules
	 	Jan. 19, 1989
	 	 	2007	 
	EP 0281604

	 	Single polypeptide chain binding molecules
	 	Sept. 02, 1987
	 	 	2007	 
	US 4,704,692

	 	Computer Based System And Method For
Determining And Displaying Possible Chemical
Structures For Converting Double or Multiple
Chain Polypeptides to Single Chain
Polypeptides
	 	Sept. 02, 1986
	 	 	2007	 
	EP 0349578

	 	Method for the preparation of binding molecules
	 	March 02, 1988
	 	 	2008	 
	US 5,078,998

	 	Hybrid ligand directed to activation of
cytotoxic T cells and target antigen
	 	Aug. 2, 1985
	 	 	2009	 





The commercialization of Company and its Subsidiaries’ products may require patent rights
customarily understood in the industry to pertain to antibody-related products. Accordingly, the
Company and its Subsidiaries may need to obtain licenses to patents and patent portfolios generally
applicable to the manufacture, development and commercialization of antibody-related products. In
addition, the Company and its Subsidiaries are aware of certain third parties who are conducting
activities that may infringe upon patents in their single-chain antibody patent portfolio.





7