exv4w1






Exhibit 4.1




SECURITIES PURCHASE AGREEMENT




     THIS SECURITIES PURCHASE AGREEMENT (this “Agreement”), dated as of June 24, 2008, by and among
RXi Pharmaceuticals Corporation, a Delaware corporation with headquarters located at 60 Prescott
Street, Worcester, Massachusetts 01605 (the “Company”), and each investor identified on the
signature pages hereto (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 “Securities Act”), and Rule 506 of Regulation D (“Regulation D”) as promulgated by the United
States Securities and Exchange Commission (the “SEC”) under the Securities 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 $0.0001 per share, of the Company (the “Common Stock”), set forth on
such Investor’s signature page to this Agreement (which aggregate amount for all Investors together
shall be 1,073,299 shares of Common Stock and shall collectively be referred to herein as the
“Common Shares”).



     C. The Common Shares issued or issuable 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.



 









 





     “Best Efforts” means the efforts that a prudent person desirous of achieving a result would
use in similar circumstances to ensure that such result is achieved as expeditiously as practical;
provided, however, that an obligation to use Best Efforts under this Agreement does not require the
Company to dispose of or make any change to its business, expend any material funds or incur any
other material burden.



     “Business Day” means any day other than Saturday, Sunday, any day which shall be a federal
legal holiday in the United States or any day on which banking institutions in The State of New
York are authorized or required by law or other governmental action to close.



     “Certificates” has the meaning set forth in Section 2.2(i).



     “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, if not a Trading Day, the nearest preceding date that is a Trading Day) 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 Ropes & Gray, LLP, counsel to the Company.



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



     “Common Stock” has the meaning set forth in the Preamble.



     “Contingent Obligation” has the meaning set forth in Section 3.1(aa).



     “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 Global Select Market, the NASDAQ Global Market, the NASDAQ Capital Market or OTC Bulletin
Board.



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



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



     “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 Jefferies & Company, Inc. and its Affiliates.



     “Filing Date” means the date that is thirty (30) days after the Closing Date or, if such
date is not a Business Day, the next date that is a Business Day.



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



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



     “Indebtedness” has the meaning set forth in Section 3.1(aa).



     “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. 



     “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, reasonable attorneys’ fees.



     “Material Adverse Effect” means (i) a material adverse effect on the results of operations,
assets, business, prospects or financial condition of the Company or (ii) 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 alone shall be deemed, in and of itself, 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 materially disproportionate effect on the Company.



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



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



     “Person” has the meaning set forth in Section 3.1(aa).



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



     “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 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.



     “Required Effectiveness Date” means (i) if the Registration Statement does not become subject
to review by the SEC, the date which is the earliest of (a) ninety (90) days after the Closing Date
or (b) two (2) Trading Days after the Company receives notification from the SEC that the
Registration Statement will not become subject to review, or (ii) if the Registration Statement
becomes subject to review by the SEC, the date which is the earliest of (a) one hundred and twenty
(120) days after the Closing Date or (b) five (5) Trading Days after the Company receives
notification from the SEC that the SEC has no further comment to the Registration Statement.



     “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 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” has the meaning set forth in the Preamble.



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



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



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     “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).



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



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



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



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



     “Transfer Agent” means Computershare 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.



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 for the price set forth on
such Investor’s signature page to this Agreement. The date and time of the Closing and shall be
11:00 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:



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               (i) a copy of the Company’s irrevocable instructions to the Transfer Agent instructing the
Transfer Agent to deliver, on an expedited basis, one or more stock certificates (the
“Certificates”), 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 on such
Investor’s signature page to this Agreement, registered in the name of such Investor;




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




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




               (v) a certificate of the Secretary of the Company, dated as of the Closing Date,
(a) certifying the resolutions adopted by the Board of Directors of the Company approving the
transactions contemplated by this Agreement and the other Transaction Documents and the issuance of
the Securities, (b) certifying the current versions of the certificate of incorporation, as amended
and by-laws of the Company and (c) certifying as to the signatures and authority of persons signing
the Transaction Documents and related documents on behalf of the Company; and




               (vi) a certificate of the Chief Executive Officer or Chief Financial Officer of the Company,
dated as of the Closing Date, certifying to the fulfillment of the conditions specified in Section
5.1(a) and (b).




          (b) At the Closing, each Investor shall deliver or cause to be delivered to the Company the
purchase price set forth on such Investor’s signature page to this Agreement 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. Notwithstanding the foregoing, payment of the
purchase price may be made promptly after receipt by the Investor’s custodian of the Certificates,
provided that such order of transmission is required by such Investor’s established internal policy
or procedure.



ARTICLE III

REPRESENTATIONS AND WARRANTIES




     3.1 Representations and Warranties of the Company. The Company hereby represents and
warrants to the Investors on and as of the date hereof as follows, except as disclosed in the SEC
Reports:




          (a) Organization and Qualification. The Company is an entity duly organized,
validly existing and in good standing under the laws of the jurisdiction of its incorporation,
with the requisite legal authority to own and use its properties and assets and to carry on its
business as currently conducted. The Company is not in violation of any of the provisions of
its certificate or articles of incorporation, bylaws or other organizational or charter
documents. The Company 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



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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.




          (b) 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 corporate 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 (i) as limited by general equitable
principles and applicable bankruptcy, insolvency, reorganization, moratorium and other laws of
general application relating to or affecting the enforcement of creditors’ rights generally,
(ii) as limited by laws or rules of law relating to the availability of specific performance,
injunctive relief or other equitable remedies and (iii) insofar as indemnification and
contribution provisions may be limited by applicable law.




          (c) 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 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
debt or otherwise) or other understanding to which the Company is a party or by which any
property or asset of the Company 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 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 is bound or affected, except
to the extent that such violation would not reasonably be expected to have a Material Adverse
Effect.




          (d) The Securities. The Securities 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 as
of the Closing Date.



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          (e) Capitalization. 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(e) 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(e) hereto, the Company did not have outstanding at June 23,
2008 any other Options, script rights to subscribe to, calls or commitments of any character
whatsoever relating to, or securities, rights or obligations convertible into or exercisable or
exchangeable for, or 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(e) 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 13D or 13G
filed with the SEC pursuant to Rule 13d-1 of the Exchange Act by reporting persons or in
Schedule 3.1(e) 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.




          (f) SEC Reports; Financial Statements. Except as set forth on Schedule
3.1(f), the Company has filed all reports required to be filed by it under Exchange Act
Sections Section 13(a) or 15(d), 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 required to be filed by
it under the Exchange Act Sections 13(a) or 15(d) thereof, for the two years preceding the date
hereof. Such reports required to be filed by the Company under the Exchange Act Sections 13(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 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 (or, if amended or
superseded by a filing prior to the Closing Date, then on the date of such filing), the SEC
Reports filed by the Company complied in all material respects with the requirements of the
Exchange Act and the rules and regulations of the SEC promulgated thereunder, and none of the
SEC Reports, when filed (or, if amended or superseded by a filing prior to the Closing Date,
then on the date of such filing) 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 as to
form 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 (or, if amended
or superseded by a filing prior to the Closing Date,



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then on the date of such 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 financial position of the Company 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 is a party or to which the property or assets of the Company 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.




          (g) Material Changes; Undisclosed Events, Liabilities or Developments; Solvency.
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(g) hereto, (i) there has been
no event, occurrence or development that, individually or in the aggregate, has had or that
would reasonably be expected to result in a Material Adverse Effect, (ii) the Company has not
incurred any material liabilities other than (A) trade payables, accrued expenses and other
liabilities incurred in the ordinary course of business consistent with past practice,
(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 and (C) other liabilities that
would not, individually or in the aggregate, have a Material Adverse Effect, (iii) the Company
has not altered its method of accounting or 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 actual 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 pay the Company’s
total Indebtedness (as defined in Section 3.1(aa)), (ii) the Company is unable to pay its debts
and liabilities, subordinated, contingent or otherwise, as such debts and liabilities become
absolute and matured or (iii) 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.




          (h) Absence of Litigation. Except as disclosed in the SEC Reports, 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



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pending or, to the knowledge of the Company, threatened against or affecting the Company
that could, individually or in the aggregate, to have a Material Adverse Effect.




          (i) Compliance. Except as would not, individually or in the aggregate, reasonably
be expected to have or result in a Material Adverse Effect, (i)  the Company is not 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 under), nor has the Company
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) the Company is not in violation of any order of any court, arbitrator or
governmental body, or (iii)  the Company is not and has not been in violation of any statute,
rule or regulation of any governmental authority.




          (j) Title to Assets. The Company owns no real property. The Company has good and
marketable title in all personal property owned by it that is material to the business of the
Company, 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 is held by it under valid, subsisting and enforceable leases of
which the Company is in material compliance.




          (k) 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 Jefferies & Company, Inc. as its exclusive placement agent (the
“Agent”) in connection with the sale of the Securities. Other than the Agent, the Company has
not engaged any placement agent or other agent in connection with the sale of the Securities.




          (l) Private Placement; Investment Company; U.S. Real Property Holding Corporation.
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. Assuming the accuracy of the representations and
warranties of the Investors set forth in Section 3.2, no registration under the
Securities Act is



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required for the offer and sale of the Securities by the Company to the Investors as
contemplated hereby. The sale and issuance of the Securities hereunder does not contravene the
rules and regulations of any Trading Market on which the Common Stock is listed or quoted. The
Company is not, and after receipt of payment for the Securities will not be, 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.




          (m) Form S-1 Eligibility. The Company is eligible to register the Common Stock for
resale by the Investors using Form S-1 promulgated under the Securities Act.




          (n) 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.




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




          (p) Application of Takeover Protections. The Company and its Board of Directors
have taken all necessary action, if any, to render inapplicable any control share acquisition,
business combination, poison pill (including any distribution under a rights agreement) or other
similar anti-takeover provision under the Company’s 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.




          (q) Disclosure. The Company confirms that neither it nor any officers, directors
or Affiliates, has provided any of the Investors (other than Excluded Investors or those certain
investors who signed a confidentiality agreement with the Company) or their agents or counsel
with any information that constitutes material, nonpublic information (other than the existence
and terms of the issuance of Securities, as contemplated by this Agreement). The Company
understands and confirms that each of the Investors (other than Excluded Investors or those
certain investors who signed a confidentiality agreement with the Company) will rely on the
foregoing representations in effecting transactions in securities of the Company. 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
behalf of the Company, are true and correct in all material respects and do not contain any
untrue statement of a material fact or omit to state any material fact necessary in order to
make the statements made therein, in the light of the circumstances under which they were made,
not misleading. To the Company’s knowledge, except for the transactions contemplated by this



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Agreement, no event or circumstance has occurred or information exists with respect to the
Company or its business, properties, operations or financial condition, which, under applicable
law, rule or regulation, required public disclosure or announcement by the Company prior to the
date hereof 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.




          (r) 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 advisors and representatives.




          (s) Patents and Trademarks. To the Company’s knowledge, the Company owns, or
possesses adequate rights or licenses to use, all trademarks, trade names, service marks,
service mark registrations, service names, patents, patent rights, copyrights, inventions,
licenses, approvals, governmental authorizations, trade secrets and other intellectual property
rights (“Intellectual Property Rights”) necessary to conduct its business as now conducted.
Except as disclosed in the SEC Reports, none of the Company’s Intellectual Property Rights have
expired or terminated, or 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
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 regarding its Intellectual Property Rights.




          (t) Insurance. The Company is insured by insurers of recognized financial
responsibility against such losses and risks and in such amounts as, in the judgment of the
Company’s management, are prudent and customary in the businesses and locations in which the
Company is engaged.




          (u) Regulatory Permits. The Company possesses all certificates, authorizations and
permits issued by the appropriate federal, state, local or foreign regulatory authorities
necessary to conduct its respective business as presently conducted and described in the SEC
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



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Effect, and the Company has not received any written notice of proceedings relating to the
revocation or modification of any Material Permit.




          (v) 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 with the Company that would be
required to be reported on Form 10-KSB by Item 12 thereof pursuant to Regulation SB Item 404(a)
(other than for ordinary course services as employees, officers or directors).




          (w) Internal Accounting Controls. The Company maintains 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.




          (x) 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.




          (y) Foreign Corrupt Practices. Neither the Company nor, to the knowledge of the
Company, any director, officer, agent, employee or other Person acting on behalf of the Company
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 or to any foreign or domestic political parties or campaigns
from corporate funds; (iii) violated or is in violation in any material respect 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.




          (z) Indebtedness. Except as disclosed in the SEC Reports, the Company (i) has no
outstanding Indebtedness (as defined below), (ii) is not in violation of any term of and is not
in default under any contract, agreement or instrument relating to any Indebtedness, except
where such violations and defaults would not result, individually or in the aggregate, in a
Material Adverse Effect, and (iii) is not a party to any contract, agreement or instrument
relating to any Indebtedness, the performance of which, in the judgment of the Company’s
officers, has or is reasonably expected to have a Material Adverse Effect. For purposes of this
Agreement: (x) “Indebtedness” of any Person means, without duplication (A) all indebtedness for
borrowed money, (B) all obligations issued, undertaken or assumed as the deferred purchase price
of property or services (other than trade payables entered into in the ordinary course of
business), (C) all reimbursement or payment obligations with respect to letters of credit,
surety bonds and other similar instruments, (D) all obligations evidenced by notes, bonds,
debentures or similar



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instruments, including obligations so evidenced incurred in connection with the acquisition
of property, assets or businesses, (E) all indebtedness created or arising under any conditional
sale or other title retention agreement, or incurred as financing, in either case with respect
to any property or assets acquired with the proceeds of such indebtedness (even though the
rights and remedies of the seller or bank under such agreement in the event of default are
limited to repossession or sale of such property), (F) all monetary obligations under any
leasing or similar arrangement which, in connection with generally accepted accounting
principles, consistently applied for the periods covered thereby, is classified as a capital
lease, (G) all indebtedness referred to in clauses (A) through (F) above secured by (or for
which the holder of such Indebtedness has an existing right, contingent or otherwise, to be
secured by) any mortgage, lien, pledge, charge, security interest or other encumbrance upon or
in any property or assets (including accounts and contract rights) owned by any Person, even
though the Person which owns such assets or property has not assumed or become liable for the
payment of such indebtedness, and (H) all Contingent Obligations in respect of indebtedness or
obligations of others of the kinds referred to in clauses (A) through (G) above, provided that
for the indebtedness referred to in clauses (A) through (H), the indebtedness is in each case in
excess of $1 million; (y) “Contingent Obligation” means, as to any Person, any direct or
indirect liability, contingent or otherwise, of that Person with respect to any indebtedness,
lease, dividend or other obligation of another Person if the primary purpose or intent of the
Person incurring such liability, or the primary effect thereof, is to provide assurance to the
obligee of such liability that such liability will be paid or discharged, or that any agreements
relating thereto will be complied with, or that the holders of such liability will be protected
(in whole or in part) against loss with respect thereto; and (z) “Person” means an individual, a
limited liability company, a partnership, a joint venture, a corporation, a trust, an
unincorporated organization and a government or any department or agency thereof.




          (aa) Employee Relations. The Company is not a party to any collective bargaining
agreement or does not employ any member of a union. Except as disclosed in the SEC Reports,
during the period covered by the SEC Reports, no executive officer of the Company has notified
the Company that such officer intends to leave the Company or otherwise terminate such officer’s
employment with the Company. To the knowledge of the Company, (i) no executive officer of the
Company 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 with any other party or any restrictive covenant reasonably likely to have
an Material Adverse Effect on the Company, and (ii) the continued employment of each such
executive officer does not subject the Company to any liability with respect to any of the
foregoing matters.




          (bb) Labor Matters. The Company is 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 (i) is in compliance in all material respects
with any and all Environmental Laws (as hereinafter defined), (ii) has received



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all permits, licenses or other approvals required of them under applicable Environmental
Laws to conduct their respective businesses and (iii) is 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) Tax Status. The Company (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, to the extent the final deadlines for which were on or before the date
hereof, (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 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, Warranties and Covenants of the Investors. Each Investor hereby,
as to itself only and for no other Investor, represents, warrants and covenants 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 corporate, partnership or other 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 (i) as limited by general equitable principles and applicable
bankruptcy, insolvency, reorganization, moratorium and other laws of general application
relating to or affecting the enforcement of creditors’ rights generally, (ii) as limited by laws
relating to the availability of specific performance, injunctive relief or other equitable
remedies and (iii) insofar as indemnification and contribution provisions may be limited by
applicable law.




          (b) No Public Sale or Distribution. Such Investor is acquiring the Common Shares
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



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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. Each Investor has completed or
caused to be completed the Registration Statement Questionnaire attached hereto as Exhibit
B-2 for use in preparation of the Registration Statement, and the responses provided therein
shall be true and correct in all material respects as of the Closing Date and, unless such
Registration Statement Questionnaire has been otherwise amended and/or supplemented, will be
true and correct as of the effective date of the Registration Statement.




          (c) Investor Status. At the time such Investor was offered the Securities, it was,
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 Financial Industry Regulatory Authority (“FINRA”) 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 FINRA or an entity engaged in the business of being a broker
dealer.




          (d) General Solicitation. Such Investor is not purchasing the Securities as a
result of any advertisement, article, notice or other communication regarding the Securities
published in any newspaper, magazine or similar media, broadcast over television or radio,
disseminated over the Internet or presented at any seminar or any other general solicitation or
general advertisement.




          (e) 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
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.




          (f) 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 for those
certain investors who did not enter into a confidentiality agreement with the Company) about the
Company and its 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



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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.




          (g) 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.




          (h) 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.




          (i) Prohibited Transactions; Confidentiality. No Investor, directly or indirectly,
and no Person acting on behalf of or pursuant to any understanding with any Investor, has
engaged in any purchases or sales in the securities, including derivatives, of the Company
(including, without limitation, any Short Sales (a “Transaction”) 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 the sale of Securities as contemplated under the Transaction
Documents. 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, 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.




          (j) 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.



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          (k) 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).




          (l) 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, 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.




          (b) The Investors agree to the imprinting, so long as it 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



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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. THESE SECURITIES MAY BE
PLEDGED IN CONNECTION WITH A BONA FIDE MARGIN ACCOUNT WITH A REGISTERED
BROKER-DEALER OR OTHER LOAN WITH A FINANCIAL INSTITUTION THAT IS AN “ACCREDITED
INVESTOR” AS DEFINED IN RULE 501(a) UNDER THE SECURITIES ACT OR OTHER LOAN SECURED
BY SUCH SECURITIES.



     Certificates evidencing the Common Shares 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 Common Shares 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) reasonably acceptable
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(b)(i), 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). Subject to receipt of the undertakings referred to above, the Company shall
use its Best Efforts to 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
and provided the registration statement referred to in clause (i) above is then in effect, 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 (if delivery is made to the Transfer Agent a copy shall be contemporaneously
delivered to the Company) of (i) a legended certificate representing such Securities (and, in
the case of a requested transfer, endorsed or with stock powers attached, signatures
guaranteed, and otherwise in form necessary to affect transfer), 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.



     If within three Trading Days after the Company’s receipt of a legended certificate and the
other documents as specified in Clauses (i) and (ii) of the paragraph immediately above, the
Company shall fail to cause to be issued and delivered to such Investor a certificate
representing such Securities that is free from the legend referred to above, and if on or after
such Trading Day the Investor purchases (in an open market transaction) shares of Common Stock
to deliver in satisfaction of a sale by the Investor of shares of Common Stock that the
Investor anticipated receiving from the Company without any restrictive legend (the “Covering
Shares”), then the Company shall, within three Trading Days after the Investor’s request, pay
cash to the Investor in an amount equal to the excess (if any) of the Investor’s total purchase
price (including



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reasonable brokerage commissions, if any) for the Covering Shares, over the product of (A)
the number of Covering Shares, times (B) the closing sale price on the date of delivery of such
certificate and the other documents as specified in Clauses (i) and (ii) of the paragraph
immediately above.




          (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 with a registered broker-dealer or grant a security interest in some or all
of the Securities to a financial institution that is an “accredited investor” as defined in Rule
501(a) under the Securities Act and who agrees to be bound by the provisions of this Agreement, and
if required under the terms of such 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
pledgees 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 (but such legal opinion shall be required in connection with a
subsequent transfer or foreclosure following default by the Purchaser transferee of the pledge),
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 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. During the time that the Registration Statement is
required to be effective, 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 reasonable
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.



-20-









 





     4.5 Securities Laws Disclosure; Publicity. The Company shall, at or before 9:00 a.m.,
New York time, on the first Trading Day following execution of this Agreement, issue a press
release disclosing all material terms of the transactions contemplated hereby. On 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 names, and
addresses of the Investors and the amount(s) of Securities respectively purchased) 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. 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
(which consent shall not be unreasonably withheld or delayed), unless otherwise required by law,
regulatory authority or Trading Market. The Company shall not, and shall cause each of its
officers, directors, employees and agents not to, provide any Investor with any material nonpublic
information regarding the Company 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, services or businesses that complement its business, although the Company
has no present commitments 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.



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




          (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) No Suspensions of Trading in Common Stock; Listing. Trading in the Common Stock
shall not have been suspended by the SEC or any Trading Market (except for any suspensions of
trading of not more than one Trading Day solely to permit dissemination of material information
regarding the Company) at any time since the date of execution of this



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Agreement, and the Common Stock shall have been at all times since such date listed for
trading on a Trading Market.




          (d) Absence of Litigation. No action, suit or proceeding by or before any court or
any governmental body or authority, against the Company and pertaining to the transactions
contemplated by this Agreement or their consummation, shall have been instituted on or before
the Closing Date, which action, suit or proceeding would, if determined adversely, have a
Material Adverse Effect.



     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) Receipt of Payment. The Investors shall have delivered payment of the purchase
price to the Company for the Securities being issued hereunder. Notwithstanding the foregoing,
payment of the purchase price may be made promptly after receipt by the Investor’s custodian of
the Certificates, provided that such order of transmission is required by such Investor’s
established internal policy or procedure.




          (b) 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




          (c) 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.




          (d) Delivery of Registration Statement Questionnaire. The Company shall have
received from each Investor a fully completed Registration Statement Questionnaire in the form
attached hereto as Exhibit B-2 at the Closing for the Company’s use in preparing the
Registration Statement pursuant to Article VI below.



ARTICLE VI

REGISTRATION RIGHTS




     6.1 Registration Statement.




          (a) 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; provided that, if the Company is required by
the SEC to reduce the number of Registrable Shares covered by the Registration Statement as a
result of a characterization by the SEC of the transaction described by the Registration
Statement as a primary offering by the Company, then (i) the Company shall use its Best Efforts
to have as many Registrable Shares as possible covered by the Registration Statement, (ii) any
Registrable Shares not able to be included in the Registration Statement shall reduce the number
of Registrable Shares of each Investor covered by the Registration Statement on a pro rata basis



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based on the number of Registrable Shares purchased by each Investor and (iii) the Company
shall have no liability to any Investor pursuant to Section 6.1(d) or otherwise as a result of
the Registration Statement covering less than all of the Registrable Shares under circumstances
described in this proviso. 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 Best Efforts to cause the Registration Statement to be
declared effective by the SEC as promptly as practicable after the filing thereof, but in any
event prior to the Required Effectiveness Date, and shall use its Best Efforts to keep the
Registration Statement continuously effective under the Securities Act until the earlier of (i)
date that all Common Shares covered by such Registration Statement have been sold or can be sold
publicly under Rule 144(b) or (ii) the seventh anniversary of the Closing Date (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 two (2) Trading Days
after receipt of such notice and request that it become effective on 4:00 p.m. New York City
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.




          (c) The Company shall notify the Investors in writing promptly (and in any event within one
(1) Trading Day) 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, as relief for the
damages suffered therefrom by the Investors (the parties hereto agreeing that the liquidated
damages provided for in this Section 6.1(d) constitute a reasonable estimate of the damages that
may be incurred by the Investors by reason of the Event and that such liquidated damages
represent the exclusive monetary remedy for the Investors for damages suffered due to an Event),
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. 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”:




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



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



               (iii) except (A) as provided for in Section 6.1(e), (B) if the Company is involved in
a “Rule 13e-3 transaction” as defined in Rule 
13e-3 under the Exchange Act, or (C) in the event of
a merger or consolidation of the Company or a sale of more than fifty percent (50%) of the assets
of the Company in one or a series of related transactions, unless following such transaction or
series of transactions, the holders of the Company’s securities prior to the first such transaction
continue to hold at least fifty percent (50%) of the voting rights and equity interests of the
surviving entity or acquirer (clauses (B) and (C), collectively, 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 (5) or more Trading Days (whether or not
consecutive);



               (iv) 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;



               (v) 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



               (vi) during the Effectiveness Period, except as a result of the Excluded Events, the Company
fails to have any Shares listed or quoted 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 Board of Directors of
the Company determines in good faith, by appropriate resolutions, that the Company would, in the
absence of such delay or suspension hereunder, be required under state or federal securities
laws to disclose any corporate development, a potentially significant transaction or event
involving the Company, or any negotiations, discussions, or proposals directly relating thereto,
in either case the disclosure of which would reasonably be expected to have a negative effect
upon the Company or its stockholders; provided further, that the Company may suspend the use of
any Prospectus to the extent necessary to file any post-effective amendment to the Registration
Statement in order (i) to amend the table of selling stockholders within the Registration
Statement to reflect transfers of the Securities by Investors to their Affiliates as permitted
under Section 4.1(a) or (ii) to amend the Registration Statement pursuant to the Company’s
undertakings as set forth in the Registration Statement and in Item 512 of Regulation S-K under
the Securities Act. 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



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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
twenty (20) Trading Days at a time and not more than three (3) times in any twelve (12) 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 commercially reasonable 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 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 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) (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 during the Effectiveness Period;
(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; (iii) respond as
promptly as reasonably practical, and in any event within 12 Trading Days (except to the extent
that the Company reasonably requires additional time to respond to accounting comments), to any
comments received from the SEC with respect to the Registration Statement or any amendment
thereto; and (iv) comply in all material respects with the provisions of the Securities Act and
the Exchange Act applicable to the Company with respect to the disposition of all Registrable
Securities covered by the Registration Statement during the applicable period in accordance with
the intended methods of disposition by the Investors thereof set forth in the Registration
Statement as so amended or in such Prospectus as so supplemented.




          (b) Notify the Investors as promptly as reasonably practical, and (if requested by the
Investors confirm such notice in writing no later than two Trading Days thereafter, of any of
the following events: (i) any Registration Statement or any post-effective amendment is
declared effective; (ii) the SEC issues any stop order suspending the effectiveness of any
Registration Statement or initiates any Proceedings for that purpose; (iii) 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 (iv) the



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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.




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




          (d) If requested by an Investor, provide such Investor 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.




          (e) 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.




          (f) (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 each Investor 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.




          (g) Prior to any public offering of Registrable Securities, use its reasonable Best 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.



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          (h) 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.




          (i) 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.




          (j) 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.




          (k) Comply with all rules and regulations of the SEC applicable to the Company in
connection with the registration of the Securities.




          (l) 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, B-2 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.




          (m) 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 Investors 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 Investors 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.



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     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
incurred by the Company, (d) fees and disbursements of counsel for the Company, (e) fees and
expenses of all other Persons retained by the Company in connection with the consummation of the
transactions contemplated by this Agreement, and (f) all listing fees to be paid by the Company to
the Trading Market.



     6.4 Indemnification




          (a) Indemnification by the Company. The Company shall, notwithstanding any
termination of this Agreement, indemnify and hold harmless each 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, (iii) any cause of
action, suit or claim brought or made against such Indemnified Party (as defined in Section
6.4(c) below) by a third party (including for these purposes a derivative action brought on
behalf of the Company), arising out of or resulting from (x) the execution, delivery,
performance or enforcement of the Transaction Documents or any other certificate, instrument or
document contemplated hereby or thereby, (y) any transaction financed or to be financed in whole
or in part, directly or indirectly, with the proceeds of the issuance of the Securities, or (z)
the status of Indemnified Party as holder of the Securities (unless, and only to the extent
that, such action, suit or claim is based, including in part, upon a breach of such Investor’s
representations, warranties or covenants under the Transaction Documents or any conduct by such
Investor that constitutes fraud, gross negligence or willful misconduct) or (iv) any untrue or
alleged untrue statement of a material fact contained in the Registration Statement, any
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 solely 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 in writing 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,



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if such corrected prospectus was timely made available by the Company to the Investor, and
the Investor seeking indemnity hereunder was advised in writing not to use the incorrect
prospectus prior to the use giving rise to Losses..




          (b) Conduct of Indemnification Proceedings. If any Proceeding shall be brought or
asserted against any Person entitled to indemnity hereunder (an “Indemnified Party”), such
Indemnified Party shall promptly notify the Person from whom indemnity is sought (the
“Indemnifying Party”) in writing, and the Indemnifying Party shall assume the defense thereof,
including the employment of counsel reasonably satisfactory to the Indemnified Party and the
payment of all fees and expenses incurred in connection with defense thereof; provided, that the
failure of any Indemnified Party to give such notice shall not relieve the Indemnifying Party of
its obligations or liabilities pursuant to this Agreement, except (and only) to the extent that
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; 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 shall be 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 or delayed. 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).



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          (c) Contribution. If a claim for indemnification under Section 6.4(a) is
unavailable to an Indemnified Party (by reason of public policy or otherwise), then such
Indemnifying Party, in lieu of indemnifying such Indemnified Party, shall contribute to the
amount paid or payable by such Indemnified Party as a result of such Losses, in such proportion
as is appropriate to reflect the relative fault of the Indemnifying Party and Indemnified Party
in connection with the actions, statements or omissions that resulted in such Losses as well as
any other relevant equitable considerations. The relative fault of such Indemnifying Party and
Indemnified Party shall be determined by reference to, among other things, whether any action in
question, including any untrue or alleged untrue statement of a material fact or omission or
alleged omission of a material fact, has been taken or made by, or relates to information
supplied by, such Indemnifying Party or Indemnified Party, and the parties’ relative intent,
knowledge, access to information and opportunity to correct or prevent such action, statement or
omission. The amount paid or payable by a party as a result of any Losses shall be deemed to
include, subject to the limitations set forth in Section 6.4(b), 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(c) 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. 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.



     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 resumed. The Company may provide appropriate stop orders to
enforce the provisions of this paragraph. Each Investor, severally and not jointly with the other
Investors, agrees that the removal of the restrictive legend from certificates representing
Securities as set forth in this Section 4.1 is predicated upon the Company’s reliance that the
Investor will comply with the provisions of this subsection. Both the Company and the Transfer
Agent, and their respective directors, officers, employees and agents, may rely on this subsection.



     6.6 No Piggyback on Registrations. Neither the Company nor any of its security
holders (other than the Investors in such capacity pursuant hereto and the Excluded Investors) may
include securities of the Company in the Registration Statement other than the Registrable
Securities.



     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



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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 and no longer be payable.



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 Trading
Day following the date of this Agreement; provided that no such termination will affect the right
of any party to sue for any breach by the other party (or parties).



     7.2 Fees and Expenses. 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,



-31-









 







execution, delivery and performance of this Agreement. The Company shall pay all Transfer
Agent fees, stamp taxes and other taxes and duties levied in connection with the sale and issuance
of the 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 the holders
of at least 80% of the Registrable Securities held on the date of such amendment or, in the case of
a waiver, by the party against whom enforcement of any such waiver is sought. No waiver of any
default with respect to any provision, condition or requirement of this Agreement shall be deemed
to be a continuing waiver in the future or a waiver of any subsequent default or a waiver of any
other provision, condition or requirement hereof, nor shall any delay or omission of any 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, and any such amendment shall be binding upon the Company and all holders of Registrable
Securities. No consideration shall be offered or paid to any Person to amend or consent to a
waiver or modification of any provision of any of this Agreement unless the same consideration is
also offered to all of the Investors.



     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.



-32-









 





     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 Section 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.



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     7.10 Survival. The representations and warranties, agreements and covenants contained
herein shall survive the Closing.



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



     7.16 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



-34-









 







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.



     7.17 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 Documents. 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]




-35-









 









     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.



	 	 	 	 	 	 	 
	 	 	RXi PHARMACEUTICALS CORPORATION	 	 
	 
	 	 	 	 	 	 
	 

	 	By:	 	 	 	 
	 

	 	 	 	 

	 	 
	 

	 	Name:	 	 	 	 
	 

	 	Title:	 	 	 	 
	 
	 	 	 	 	 	 
	 	 	Address for Notice:	 	 
	 
	 	 	60 Prescott Street	 	 
	 	 	Worcester, Massachusetts 01605	 	 
	 	 	Facsimile No.: 508-767-3862	 	 
	 	 	Telephone No.: 508-767-3861	 	 
	 	 	Attn: Stephen J. DiPalma, CFO and Secretary	 	 
	 
	 	 	 	 	 	 
	 	 	With a copy to:	 	 
	 
	 	 	 	 	 	 
	 	 	Ropes & Gray LLP	 	 
	 	 	One International Place	 	 
	 	 	Boston, MA 02110-2624	 	 
	 	 	Facsimile: (617) 951-7050	 	 
	 	 	Telephone: (617) 951-7000	 	 
	 	 	Attn: Marc Rubenstein, Esq.	 	 






COMPANY SIGNATURE PAGE





 









 












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
June [___], 2008 (the “Purchase Agreement”) by and among RXi Pharmaceuticals Corporation and the
Investors (as defined therein), as to the number of shares of Common Stock set forth below, and
authorizes this signature page to be attached to the Purchase Agreement or counterparts thereof.



	 	 	 	 	 	 	 	 	 	 	 
	 	 	Name of Investor:
	 
	 	 	 	 	 	 	 	 	 	 
	 	 	 
	 
	 	 	 	 	 	 	 	 	 	 
	 

	 	By:	 	 	 	 	 	 	 	 
	 	 	 	 	 
	 

	 	 	 	Name:	 	 	 	 	 
	 

	 	 	 	Title:	 	 	 	 	 
	 
	 	 	 	 	 	 	 	 	 	 
	 	 	Address:	 	 	 	 	 	 
	 	 	 	 	 	 
	 
	 	 	 	 	 	 	 	 	 	 
	 	 	 
	 
	 	 	 	 	 	 	 	 	 	 
	 	 	 
	 
	 	 	 	 	 	 	 	 	 	 
	 	 	Telephone No.:	 	 	 	 
	 	 	 	 	 	 	 	 
	 	 	Facsimile No.:	 	 	 	 
	 	 	 	 	 	 	 	 
	 	 	Email Address:	 	 	 	 
	 	 	 	 	 	 	 	 
	 	 	Number of Shares:	 	 	 	 
	 	 	 	 	 	 	 	 	 
	 	 	Aggregate Purchase Price: $	 	 
	 

	 	 	 	 	 	 	 	 	 	 




Delivery Instructions (if different than above):




	 	 	 	 	 	 	 
	c/o:
	 	 	 	 	 	 
	 	 	 	 	 
	 
	 	 	 	 	 	 
	Address:	 	 	 	 
	 

	 	 	 	 

	 	 
	 
	 	 	 	 	 	 
	 

	 	 	 	 

	 	 






	 	 	 	 	 
	Telephone No.:
	 	 	 	 
	 

	 	 

	 	 
	 
	 	 	 	 
	Facsimile No. :
	 	 	 	 
	 

	 	 

	 	 






 









 





	 	 	 	 	 
	Other Special Instructions:
	 	 	 	 
	 

	 	 

	 	 






	 	 	 	 	 
	 	 	Exhibits:
	 
	 	 	 	 
	 

	 	A
	 	Instruction Sheet for Investors
	 

	 	B-1
	 	Stock Certificate Questionnaire
	 

	 	B-2
	 	Registration Statement Questionnaire
	 

	 	B-3
	 	Investor Certificate
	 

	 	C
	 	Opinion of Company Corporate Counsel
	 

	 	D
	 	Plan of Distribution
	 

	 	E
	 	Company Transfer Agent Instructions






 









 






Exhibit A




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 — Investor Certificate:






Provide the information requested by the Investor Certificate.




	 	5.	 	Return, via facsimile, the signed Securities Purchase Agreement including the
properly completed Exhibits B-1 through B-3, to:




Facsimile:

Telephone:

Attn:





	 	6.	 	After completing instruction number five (5) above, deliver the original signed
Securities Purchase Agreement including the properly completed Exhibits  B-1 through
B-3 to:




Address:





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




 









 













Exhibit B-1




RXi PHARMACEUTICALS CORPORATION




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:	 	 
	 

	 	 	 	 






 









 








Exhibit B-2




RXi PHARMACEUTICALS CORPORATION




REGISTRATION STATEMENT QUESTIONNAIRE




[NOTE: Fidelity Funds to provide own form of 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:


 





If the Investor is not a natural person, please identify the natural person or persons who
will have voting and investment control over the Securities owned by the Investor:


 



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 any of 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.)




                         
     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. FINRA Matters




     (a) State below whether (i) you or any associate or affiliate of yours are a member of the
FINRA, a controlling shareholder of a FINRA 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
FINRA 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 FINRA 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 FINRA 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 FINRA member and describe your relationship, including, in the
case of a general or limited partner, the name of the partner.



 









 





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	 	 






 









 






Exhibit B-3




RXi PHARMACEUTICALS CORPORATION




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 Securities in conformance with state and
federal securities laws, the following information must be obtained regarding your investor status.
Please initial each category applicable to you as an investor in the Company.



	 	 	 
	                    

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

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

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

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

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

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

	 	7. An employee benefit plan within the meaning of the Employee Retirement
Income Security Act of 1974, if the investment decision is made by a plan fiduciary, as
defined in Section 3(21) of such Act, which is either a bank, savings and loan
association, insurance company, or registered investment 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
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:

	 	 	 	, 2008	 	 
	 

	 	 

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






 









 






Exhibit C




OPINION OF COMPANY 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.




 









 












Exhibit E




COMPANY TRANSFER AGENT INSTRUCTIONS




Computershare Investor Services

250 Royall Street

Canton, MA 02021




Attention: [                    ], Account Representative



Ladies and Gentlemen:




     Reference is made to that certain Securities Purchase Agreement, dated as of June [___], 2008
(the “Agreement”), by and among RXi Pharmaceuticals Corporation, 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 $0.0001 per share (the “Common Stock”).



     In connection with the consummation of the transactions contemplated by the Agreement, this
letter shall serve as our irrevocable authorization and direction to you:



     (i) to issue an aggregate of [___] shares of our Common Stock in the names and
denominations set forth on Annex I attached hereto. The certificates should bear the legend set
forth on Annex II attached hereto and “stop transfer” instructions should be placed against their
subsequent transfer. Kindly deliver the certificates to the respective delivery addresses set
forth on Annex I via hand delivery or overnight courier. We confirm that these shares will be
validly issued, fully paid and non-assessable upon issuance; and



     (ii)  to issue (provided that you are the transfer agent of the Company at such time)
certificates for shares of Common Stock upon transfer or resale of the Common Shares and receipt by
you of certificate(s) for the Common Shares so transferred or sold (duly endorsed or accompanied by
stock powers duly endorsed, in each case with signatures guaranteed and otherwise in form eligible
for transfer).



     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 has been declared effective by the Securities and Exchange Commission
(the “SEC”) under the Securities Act of 1933, as amended (the “Securities Act”), or (ii) the Common
Shares are eligible for sale in conformity with Rule 144(b) (or any successor provision) under the
Securities Act (“Rule 144”) and (b) if applicable, a copy of such registration statement, then,
unless otherwise required by law, within three (3) business days of your receipt of certificates
representing the Common Shares, you shall issue the certificates representing the Common Shares to
the Holders or their transferees, as the case may be, registered in the names of



 









 







such Holders or transferees, as the case may be, and such certificates shall not bear any
legend restricting transfer of the Common Shares thereby and should not be subject to any
stop-transfer restriction. Any certificates tendered for transfer shall be endorsed or with stock
powers attached, signatures guaranteed, and otherwise in form necessary to affect transfer.



     A form of written confirmation from the Company’s outside legal counsel that a registration
statement covering resales of the Common Shares has been declared effective by the SEC under the
Securities Act is attached hereto as Annex III.



     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 our counsel, Marc Rubenstein, Esq., at (617) 951-7000.



	 	 	 	 	 
	 	Very truly yours,




RXI PHARMACEUTICALS CORPORATION

 	 
	 	By:  	 	 
	 	 	Name:  	 	 
	 	 	Title:  	 	 
	 



	 	 	 	 	 	 	 
	THE FOREGOING INSTRUCTIONS ARE	 	 
	ACKNOWLEDGED AND AGREED TO	 	 
	this ___ day of June, 2008	 	 
	 
	 	 	 	 	 	 
	COMPUTERSHARE INVESTOR SERVICES	 	 
	 
	 	 	 	 	 	 
	By:
	 	 	 	 	 	 
	 	 	 	 	 
	 

	 	Name:	 	 	 	 
	 

	 	 	 	 

	 	 
	 

	 	Title:	 	 	 	 
	 

	 	 	 	 

	 	 






Enclosures




ANNEX I




SCHEDULE OF INVESTORS




 









 





ANNEX II




RESTRICTIVE LEGEND



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. THESE SECURITIES MAY BE PLEDGED IN CONNECTION WITH A BONA
FIDE MARGIN ACCOUNT WITH A REGISTERED BROKER-DEALER OR OTHER LOAN WITH A FINANCIAL INSTITUTION THAT
IS AN “ACCREDITED INVESTOR” AS DEFINED IN RULE 501(a) UNDER THE SECURITIES ACT OR OTHER LOAN
SECURED BY SUCH SECURITIES.




 









 








ANNEX III




FORM OF NOTICE OF EFFECTIVENESS OF REGISTRATION STATEMENT




Computershare Investor Services

250 Royall Street

Canton, MA 02021



Attention: [                    ], Account Representative



Re: RXi Pharmaceuticals Corporation




     Ladies and Gentlemen:



     We are counsel to RXi Pharmaceuticals Corporation, a Delaware corporation (the “Company”), and
have represented the Company in connection with that certain Securities Purchase Agreement, dated
as of June [___], 2008 (the “Securities Purchase Agreement”), entered into by and among the Company
and the buyers named therein (collectively, the “Purchasers”) pursuant to which the Company issued
to the Purchasers shares of Common Stock of the Company, par value $0.0001 per share (the “Common
Shares”). Pursuant to the Securities Purchase Agreement, the Company agreed to register the resale
of the Common Shares (the “Registrable Securities”) under the Securities Act of 1933, as amended
(the “Securities Act”). In connection with the Company’s obligations under the Securities Purchase
Agreement, on [                ], 2008, the Company filed a Registration Statement on [Form
S-3] (File No. 333-[            ]) (the “Registration Statement”) with the Securities and
Exchange Commission (the “Commission”) relating to the Registrable Securities which names each of
the Purchasers as a selling shareholder thereunder.



     In connection with the foregoing, we advise you that a member of the SEC’s staff has advised
us by telephone that the SEC has entered an order declaring the Registration Statement effective
under the Securities Act at               [a.m.][p.m.] on                      ,
2008, and we have no knowledge, after telephonic inquiry of a member of the staff, that any stop
order suspending its effectiveness has been issued or that any proceedings for that purpose are
pending before, or threatened by, the Commission and the Registrable Securities are available for
resale under the Securities Act pursuant to the Registration Statement.



     This letter shall serve as our standing notice to you that the Common Shares may be freely
transferred by the Purchasers pursuant to the Registration Statement so long as the Holders certify
they will comply with the plan of distribution description in connection with sales or transfers of
the Common Shares set forth in the Registration Statement and with the prospectus delivery
requirements of the Securities Act, to the extent such delivery requirement are applicable. You
need not require further letters from us to effect any future legend-free issuance or reissuance of
shares of the Common Shares to the Purchasers or the transferees of the Purchasers, as the case may
be, as contemplated by the Company’s Irrevocable Transfer Agent Instructions dated ___, 2008.