Exhibit 10.1





Exhibit 10.1




PURCHASE AGREEMENT




THIS PURCHASE AGREEMENT (“Agreement”) is made as of the 4th day of October, 2010 by and among
Cyclacel Pharmaceuticals, Inc., a Delaware corporation (the “Company”), and the Investors set forth
on the signature pages affixed hereto (each an “Investor” and collectively the “Investors”).



Recitals




A. The Company and the Investors are executing and delivering this Agreement in reliance upon
the exemption from securities registration afforded by the provisions of Regulation D (“Regulation
D”), as promulgated by the U.S. Securities and Exchange Commission (the “SEC”) under the Securities
Act of 1933, as amended; and



B. The Investors wish to purchase from the Company, and the Company wishes to sell and issue
to the Investors, upon the terms and subject to the conditions stated in this Agreement, units (the
“Firm Units”) at a purchase price of $1.82625 per Unit (the “Per Unit Purchase Price”), each Firm
Unit consisting of (i) one (1) share (collectively, the “Firm Shares”) of the Company’s Common
Stock, par value $0.001 per share (together with any securities into which such shares may be
reclassified, whether by merger, charter amendment or otherwise, the “Common Stock”), and (ii) 0.5
of a warrant in the form attached hereto as Exhibit A (the “Firm Warrants”), each whole
Firm Warrant representing the right to purchase one (1) share (collectively, the “Firm Warrant
Shares”) of Common Stock (subject to adjustment) at an exercise price of $1.92 per share (subject
to adjustment) (the “Warrant Exercise Price”);



C. Upon the terms and subject to the conditions set forth herein, the Investors will have the
nontransferable option to acquire additional units (the “Option Units”) at a price of $1.67 (the
“Per Option Unit Purchase Price”), each Option Unit consisting of (i) one (1) share (collectively,
the “Option Shares”) of Common Stock, and (ii) 0.5 of a warrant in the form attached hereto as
Exhibit A (the “Option Warrants”), each whole Option Warrant representing the right to
purchase one (1) share (collectively, the “Option Warrant Shares”) of Common Stock (subject to
adjustment) at an exercise price equal to the Warrant Exercise Price.



D. Contemporaneous with the sale of the Firm Units, the parties hereto will execute and
deliver a Registration Rights Agreement, in the form attached hereto as Exhibit B (the
“Registration Rights Agreement”), pursuant to which the Company will agree to provide certain
registration rights under the Securities Act of 1933, as amended, and the rules and regulations
promulgated thereunder, and applicable state securities laws.




 


 









 





In consideration of the mutual promises made herein and for other good and valuable
consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto
agree as follows:


1. Definitions. In addition to those terms defined above and elsewhere in this
Agreement, for the purposes of this Agreement, the following terms shall have the meanings set
forth below:



“Affiliate” means, with respect to any Person, any other Person which directly or
indirectly through one or more intermediaries Controls, is controlled by, or is under common
Control with, such Person.



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




“Closing” means, collectively, the Firm Closing and any Option Closing.




“Closing Date” means, collectively, the Firm Closing Date and any Option Closing Date.



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



“Company’s Knowledge” means the actual knowledge of the executive officers (as defined
in Rule 405 under the 1933 Act) of the Company, after due inquiry.



“Confidential Information” means trade secrets, confidential information and know-how
(including but not limited to ideas, formulae, compositions, processes, procedures and techniques,
research and development information, computer program code, performance specifications, support
documentation, drawings, specifications, designs, business and marketing plans, and customer and
supplier lists and related information).



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



“Effective Date” means the date on which the Registration Statement covering the
Registrable Securities (as defined in the Registration Rights Agreement) is declared effective by
the SEC.



“Intellectual Property” means all of the following: (i) patents, patent applications,
patent disclosures and inventions (whether or not patentable and whether or not reduced to
practice); (ii) trademarks, service marks, trade dress, trade names, corporate names, logos,
slogans and Internet domain names, together with all goodwill associated with each of the
foregoing; (iii) copyrights and copyrightable works; (iv) registrations, applications and renewals
for any of the foregoing; and (v) proprietary computer software (including but not limited to data,
data bases and documentation).


 


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“Material Adverse Effect” means a material adverse effect on (i) the assets,
liabilities, results of operations, condition (financial or otherwise), business, or prospects of
the Company and its Subsidiaries taken as a whole, (ii) the legality or enforceability of any of
the Transaction Documents or (iii) the ability of the Company to perform its obligations under the
Transaction Documents.



“Material Contract” means any contract, instrument or other agreement to which the
Company or any Subsidiary is a party or by which it is bound which is material to the business of
the Company and its Subsidiaries, taken as a whole, including those that have been filed or were
required to have been filed as an exhibit to the SEC Filings pursuant to Item 601(b)(4) or Item
601(b)(10) of Regulation S-K.




“Nasdaq” means The Nasdaq Global Market.



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




“Preferred Stock” the Company’s 6% Convertible Exchangeable Preferred Stock.



“Registration Statement” has the meaning set forth in the Registration Rights
Agreement.




“Required Investors” has the meaning set forth in the Registration Rights Agreement.




“SEC Filings” has the meaning set forth in Section 4.6.




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




“Shares” means, collectively, the Firm Shares and the Option Shares.




“SSF Investors” means the Investors affiliated with AWM Investment Company, Inc.



“Subsidiary” of any Person means another Person, an amount of the voting securities,
other voting ownership or voting partnership interests of which is sufficient to elect at least a
majority of its Board of Directors or other governing body (or, if there are no such voting
interests, 50% or more of the equity interests of which) is owned directly or indirectly by such
first Person.


 


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“Transaction Documents” means this Agreement, the Warrants and the Registration Rights
Agreement.




“Units” means, collectively, the Firm Units and the Option Units.




“Warrants” means, collectively, the Firm Warrants and the Option Warrants.



“Warrant Shares” means, collectively, the Firm Warrant Shares and the Option Warrant
Shares.



“1933 Act” means the Securities Act of 1933, as amended, or any successor statute, and
the rules and regulations promulgated thereunder.



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




2. Purchase and Sale of the Units.



(a) Subject to the terms and conditions of this Agreement, on the Firm Closing Date (as
defined below), each of the Investors shall severally, and not jointly, purchase, and the Company
shall sell and issue to the Investors, the Firm Units in the respective amounts set forth opposite
the Investors’ names on the signature pages attached hereto in exchange for payment as specified in
Section 3 below of an aggregate purchase price equal to the Per Unit Purchase Price multiplied by
the number of Firm Units to be purchased by each Investor as set forth opposite the Investors’
names on the signature pages attached hereto. The Firm Units will not be certificated and the Firm
Shares and the Firm Warrants included therein shall be immediately separable and shall trade
separately.



(b) The Company hereby grants to each Investor the nontransferable option (the “Option”) to
acquire Option Units in an amount equal to 50% of the Firm Units acquired by such Investor on the
Firm Closing Date at the Per Option Unit Purchase Price. The Option may be exercised by an
Investor in whole or in part and from time to time at any time on or prior to 5:00 p.m., New York
time, on the date which is nine (9) months from the Firm Closing Date (as defined below) (the
“Expiration Time”). Any Investor exercising its Option is hereinafter referred to as an
“Exercising Investor.” Any Investor wishing to exercise its Option shall give written notice to
the Company of such exercise (an “Exercise Notice”) on or prior to the Expiration Time, which
Exercise Notice shall be irrevocable and shall specify the number of Option Units to be acquired by
such Investor and the date on which the Option exercise is to be consummated (an “Option Closing
Date”), which Option Closing Date shall not be less than three (3) Business Days or more than five
(5) Business Days after the date on which the Exercise Notice is given to the Company. Subject to
the terms and conditions of this Agreement, on any Option Closing Date, the Exercising Investor
shall purchase, and the Company shall sell and issue to such Exercising Investor, the Option Units
set forth in the Exercising Investor’s Exercise Notice in exchange for payment as specified in
Section 3 below of an aggregate purchase price equal to the Per Option Unit Purchase Price
multiplied by the number of Option Units to be purchased by the Exercising Investor on the Option
Closing Date. The Option Units will not be
certificated and the Option Shares and the Option Warrants included therein shall be immediately
separable and shall trade separately.


 


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(c) In the event that the Options granted to the Investors pursuant to Section 2(b) have not
been exercised in full on or prior to the Expiration Date, the Company shall provide written notice
thereof to the Investors that have exercised their Options in full on or prior to the Expiration
Date (the “Exercising Investors”) not later than 5:00 p.m., New York time, on the second Business
Day after the Expiration Time, which notice shall specify the number of Option Units that have not
been purchased by the other Investors (the “Remaining Option Units”). The Exercising Investors
shall have the nontransferable right, exercisable in whole or in part and from time to time on or
prior to 5:00 p.m., New York time, on the tenth Business Day following the Expiration Date (the
“Additional Expiration Time”), to purchase some or all of the Remaining Option Units not purchased
by the other Investors at the Per Option Unit Purchase Price. Any Participating Investor wishing
to exercise its right to acquire some or all of the Remaining Option Units shall provide an
Exercise Notice to the Company on or prior to the Additional Expiration Time, which Exercise Notice
shall be irrevocable and shall specify the number of Remaining Option Units the Participating
Investor wishes to acquire. An Exercising Investor delivering such an Exercise Notice with respect
to the Remaining Option Units is hereinafter referred to as a “Participating Investor.” In the
event that the number of Remaining Option Units available for sale exceeds the number of Remaining
Option Units set forth in the Exercise Notices of the Participating Investors, the Remaining Option
Units shall be allocated among the Participating Investors on a pro rata basis based on a fraction,
the numerator of which is the number of Remaining Option Units sought to be purchased by a
Participating Investor and the denominator of which is the number of Remaining Option Units sought
to be purchased by all of the Participating Investors. No later than two (2) Business Days after
the Additional Expiration Time, the Company shall notify each Participating Investor in writing of
the number of Remaining Option Units allocated to such Investor pursuant hereto. On the fifth
Business Day after the Additional Expiration Time (or such other time and date as the Company and
the Participating Investors may agree), each Participating Investor shall purchase, and the Company
shall sell and issue to such Participating Investor, the Remaining Option Units allocated to such
Participating Investor in exchange for payment as specified in Section 3 below of an aggregate
purchase price equal to the Per Option Unit Purchase Price multiplied by the number of Remaining
Option Units to be purchased by such Participating Investor on the date specified above (which
shall be deemed to be an Option Closing Date). The Remaining Option Units will not be certificated
and the Option Shares and the Option Warrants included therein shall be immediately separable and
shall trade separately.




3. Closing.



(a) Unless other arrangements have been made with a particular Investor, upon confirmation
that the other conditions to closing specified herein have been satisfied or duly waived by the
Investors, the Company shall deliver to Lowenstein Sandler PC, in trust, a certificate or
certificates, registered in such name or names as the Investors may designate, representing the
Firm Shares and Firm Warrants included in the Firm Units, with instructions that such certificates
are to be held for release to each Investor only upon payment in full by such Investor of the
purchase price to be paid by the Investor for the Firm Units acquired by it.
Unless other arrangements have been made with a particular Investor, upon such receipt by
Lowenstein Sandler PC of the certificates, each Investor shall promptly, but no more than one (1)
Business Day thereafter, cause a wire transfer in same day funds to be sent to the account of the
Company as instructed in writing by the Company, in an amount equal to the purchase price to be
paid by the Investor for the Firm Units acquired by it. On the date (the “Firm Closing Date”) the
Company receives payment for the purchase price from all of the Investors, the certificates
evidencing the Firm Shares and the Firm Warrants shall be released to the Investors (the “Firm
Closing”). The Firm Closing shall take place at the offices of Lowenstein Sandler PC, 1251 Avenue
of the Americas, 18th Floor, New York, New York 10020, or at such other location and on such other
date as the Company and the Investors shall mutually agree.


 


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(b) Unless other arrangements have been made with a particular Exercising Investor, upon
confirmation that the other conditions to closing specified herein have been satisfied or duly
waived by such Exercising Investor, prior to an Option Closing Date the Company shall deliver to
Lowenstein Sandler PC, in trust, a certificate or certificates, registered in such name or names as
the Exercising Investor may designate, representing the Option Shares and Option Warrants included
in the Option Units being acquired, with instructions that such certificates are to be held for
release to the Exercising Investor only upon payment in full by such Exercising Investor of the
purchase price to be paid by the Exercising Investor for the Option Units acquired by it. Unless
other arrangements have been made with a particular Exercising Investor, upon such receipt by
Lowenstein Sandler PC of the certificates, on the Option Closing Date the Exercising Investor shall
cause a wire transfer in same day funds to be sent to the account of the Company as instructed in
writing by the Company, in an amount equal to the purchase price to be paid by the Exercising
Investor for the Option Units acquired by it. Upon receipt by the Company of payment for the
purchase price from the Exercising Investor, the certificates evidencing the Option Shares and the
Option Warrants shall be released to the Exercising Investor (an “Option Closing”). Each Option
Closing shall take place at the offices of Lowenstein Sandler PC, 1251 Avenue of the Americas, 18th
Floor, New York, New York 10020, or at such other location and on such other date as the Company
and the Exercising Investor shall mutually agree.



4. Representations and Warranties of the Company. The Company hereby represents and
warrants to the Investors that, except as set forth in the schedules delivered herewith
(collectively, the “Disclosure Schedules”):



4. 1 Organization, Good Standing and Qualification. Each of the Company and its
Subsidiaries is a corporation duly organized, validly existing and in good standing under the laws
of the jurisdiction of its incorporation and has all requisite corporate power and authority to
carry on its business as now conducted and to own or lease its properties. Each of the Company and
its Subsidiaries is duly qualified to do business as a foreign corporation and is in good standing
in each jurisdiction in which the conduct of its business or its ownership or leasing of property
makes such qualification or leasing necessary unless the failure to so qualify has not had and
could not reasonably be expected to have a Material Adverse Effect. The Company’s Subsidiaries are
listed on Schedule 4.1 hereto.


 


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4.2 Authorization. The Company has full power and authority and has taken all
requisite action on the part of the Company, its officers, directors and stockholders necessary for
(i) the authorization, execution and delivery of the Transaction Documents, (ii) the authorization
of the performance of all obligations of the Company hereunder or thereunder, and (iii) the
authorization, issuance (or reservation for issuance) and delivery of the Securities. The
Transaction Documents constitute the legal, valid and binding obligations of the Company,
enforceable against the Company in accordance with their terms, subject to bankruptcy, insolvency,
fraudulent transfer, reorganization, moratorium and similar laws of general applicability, relating
to or affecting creditors’ rights generally and to general equitable principles.



4.3 Capitalization. Schedule 4.3 sets forth as of the date hereof (a) the
authorized capital stock of the Company; (b) the number of shares of capital stock issued and
outstanding; (c) the number of shares of capital stock issuable pursuant to the Company’s stock
plans; and (d) the number of shares of capital stock issuable and reserved for issuance pursuant to
securities (other than the Shares and the Warrants) exercisable for, or convertible into or
exchangeable for any shares of capital stock of the Company. All of the issued and outstanding
shares of the Company’s capital stock have been duly authorized and validly issued and are fully
paid, nonassessable and free of pre-emptive rights and were issued in compliance in all material
respects with applicable state and federal securities law and any rights of third parties. Except
as described on Schedule 4.3, all of the issued and outstanding shares of capital stock of
each Subsidiary have been duly authorized and validly issued and are fully paid, nonassessable and
free of pre-emptive rights, were issued in full compliance with applicable state and federal
securities law and any rights of third parties and are owned by the Company, beneficially and of
record, subject to no lien, encumbrance or other adverse claim. Except as described on
Schedule 4.3, no Person is entitled to pre-emptive or similar statutory or contractual
rights with respect to any securities of the Company. Except as described on Schedule 4.3,
there are no outstanding warrants, options, convertible securities or other rights, agreements or
arrangements of any character under which the Company or any of its Subsidiaries is or may be
obligated to issue any equity securities of any kind and except as contemplated by this Agreement,
neither the Company nor any of its Subsidiaries is currently in negotiations for the issuance of
any equity securities of any kind. Except as described on Schedule 4.3 and except for the
Registration Rights Agreement, there are no voting agreements, buy-sell agreements, option or right
of first purchase agreements or other agreements of any kind among the Company and any of the
securityholders of the Company relating to the securities of the Company held by them. Except as
described on Schedule 4.3 and except as provided in the Registration Rights Agreement, no
Person has the right to require the Company to register any securities of the Company under the
1933 Act, whether on a demand basis or in connection with the registration of securities of the
Company for its own account or for the account of any other Person.



Except as described on Schedule 4.3, the issuance and sale of the Securities hereunder
will not obligate the Company to issue shares of Common Stock or other securities to any other
Person (other than the Investors) and will not result in the adjustment of the exercise,
conversion, exchange or reset price of any outstanding security.


 


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Except as described on Schedule 4.3, the Company does not have outstanding stockholder
purchase rights or “poison pill” or any similar arrangement in effect giving any Person the right
to purchase any equity interest in the Company upon the occurrence of certain events.



4.4 Valid Issuance. The Shares have been duly and validly authorized and, when issued
and paid for pursuant to this Agreement, will be validly issued, fully paid and nonassessable, and
shall be free and clear of all encumbrances and restrictions (other than those created by the
Investors), except for restrictions on transfer set forth in the Transaction Documents or imposed
by applicable securities laws. The Warrants have been duly and validly authorized. Upon the due
exercise of the Warrants, the Warrant Shares will be validly issued, fully paid and non-assessable
free and clear of all encumbrances and restrictions, except for restrictions on transfer set forth
in the Transaction Documents or imposed by applicable securities laws and except for those created
by the Investors. The Company has reserved a sufficient number of shares of Common Stock for
issuance upon the exercise of the Warrants.



4.5 Consents. The execution, delivery and performance by the Company of the
Transaction Documents and the offer, issuance and sale of the Securities require no consent of,
action by or in respect of, or filing with, any Person, governmental body, agency, or official
other than filings that have been made pursuant to applicable state securities laws and post-sale
filings pursuant to applicable state and federal securities laws and the rules and regulations of
Nasdaq which the Company undertakes to file within the applicable time periods. Subject to the
accuracy of the representations and warranties of each Investor set forth in Section 5 hereof, the
Company has taken all action necessary to exempt (i) the issuance and sale of the Securities, (ii)
the issuance of the Warrant Shares upon due exercise of the Warrants, and (iii) the other
transactions contemplated by the Transaction Documents from the provisions of any stockholder
rights plan or other “poison pill” arrangement, any anti-takeover, business combination or control
share law or statute binding on the Company or to which the Company or any of its assets and
properties may be subject and any provision of the Company’s Certificate of Incorporation or Bylaws
that is or could reasonably be expected to become applicable to the Investors as a result of the
transactions contemplated hereby, including without limitation, the issuance of the Securities and
the ownership, disposition or voting of the Securities by the Investors or the exercise of any
right granted to the Investors pursuant to this Agreement or the other Transaction Documents.



4.6 Delivery of SEC Filings; Business. The Company has made available to the
Investors through the EDGAR system, true and complete copies of the Company’s most recent Annual
Report on Form 10-K for the fiscal year ended December 31, 2009 (as amended prior to the date
hereof, the “10-K”), and all other reports filed by the Company pursuant to the 1934 Act since the
filing of the 10-K and prior to the date hereof (collectively, the “SEC Filings”). The SEC Filings
are the only filings required of the Company pursuant to the 1934 Act for such period. The Company
and its Subsidiaries are engaged in all material respects only in the business described in the SEC
Filings and the SEC Filings contain a complete and accurate description in all material respects of
the business of the Company and its Subsidiaries, taken as a whole.


 


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4.7 Use of Proceeds. The net proceeds of the sale of the Shares and the Warrants
hereunder shall be used by the Company for working capital and general corporate purposes,
including, at the Company’s sole option, the payment of dividends on the Company’s outstanding
Preferred Stock in accordance with the terms thereof as in effect on the date hereof.



4.8 No Material Adverse Change. Since June 30, 2010, except as identified and
described in the SEC Filings or as described on Schedule 4.8, there has not been:



(i) any change in the consolidated assets, liabilities, financial condition or operating
results of the Company from that reflected in the financial statements included in the Company’s
Quarterly Report on Form 10-Q for the quarter ended June 30, 2010, except for changes in the
ordinary course of business which have not had and could not reasonably be expected to have a
Material Adverse Effect, individually or in the aggregate;



(ii) any declaration or payment of any dividend, or any authorization or payment of any
distribution, on any of the capital stock of the Company, or any redemption or repurchase of any
securities of the Company;



(iii) any material damage, destruction or loss, whether or not covered by insurance to any
assets or properties of the Company or its Subsidiaries;



(iv) any waiver, not in the ordinary course of business, by the Company or any Subsidiary of a
material right or of a material debt owed to it;



(v) any satisfaction or discharge of any lien, claim or encumbrance or payment of any
obligation by the Company or a Subsidiary, except in the ordinary course of business and which is
not material to the assets, properties, financial condition, operating results or business of the
Company and its Subsidiaries taken as a whole (as such business is presently conducted and as it is
proposed to be conducted);



(vi) any change or amendment to the Company’s Certificate of Incorporation or Bylaws, or
material change to any material contract or arrangement by which the Company or any Subsidiary is
bound or to which any of their respective assets or properties is subject;



(vii) any material labor difficulties or labor union organizing activities with respect to
employees of the Company or any Subsidiary;



(viii) any material transaction entered into by the Company or a Subsidiary other than in the
ordinary course of business;



(ix) the loss of the services of any key employee, or material change in the composition or
duties of the senior management of the Company or any Subsidiary;



(x) the loss or threatened loss of any customer which has had or could reasonably be expected
to have a Material Adverse Effect; or



(xi) any other event or condition of any character that has had or could reasonably be
expected to have a Material Adverse Effect.


 


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4.9 SEC Filings.



(a) At the time of filing thereof, the SEC Filings complied as to form in all material
respects with the requirements of the 1934 Act and did not contain any untrue statement of a
material fact or omit to state any material fact required to be stated therein or necessary in
order to make the statements made therein, in the light of the circumstances under which they were
made, not misleading.



(b) Each registration statement and any amendment thereto filed by the Company since January
1, 2007 pursuant to the 1933 Act and the rules and regulations thereunder, as of the date such
statement or amendment became effective, complied as to form in all material respects with the 1933
Act and did not contain any untrue statement of a material fact or omit to state any material fact
required to be stated therein or necessary in order to make the statements made therein not
misleading; and each prospectus filed pursuant to Rule 424(b) under the 1933 Act, as of its issue
date and as of the closing of any sale of securities pursuant thereto did not contain any untrue
statement of a material fact or omit to state any material fact required to be stated therein or
necessary in order to make the statements made therein, in the light of the circumstances under
which they were made, not misleading.



4.10 No Conflict, Breach, Violation or Default. The execution, delivery and
performance of the Transaction Documents by the Company and the issuance and sale of the Securities
will not (i) conflict with or result in a breach or violation of (a) any of the terms and
provisions of, or constitute a default under the Company’s Certificate of Incorporation or the
Company’s Bylaws, both as in effect on the date hereof (true and complete copies of which have been
made available to the Investors through the EDGAR system), or (b) any applicable statute, rule,
regulation or order of any governmental agency or body or any court, domestic or foreign, having
jurisdiction over the Company, any Subsidiary or any of their respective assets or properties, or
(ii) conflict with, or constitute a default (or an event that with notice or lapse of time or both
would become a default) under, result in the creation of any lien, encumbrance or other adverse
claim upon any of the properties or assets of the Company or any Subsidiary or give to others any
rights of termination, amendment, acceleration or cancellation (with or without notice, lapse of
time or both) of, any Material Contract. This Section does not relate to matters with respect to
tax status, which are the subject of Section 4.11, employee relations and labor matters, which are
the subject of Section 4.14, and environmental laws, which are the subject of Section 4.16



4.11 Tax Matters. The Company and each Subsidiary has timely prepared and filed all
tax returns required to have been filed by the Company or such Subsidiary with all appropriate
governmental agencies and timely paid all taxes shown thereon or otherwise owed by it. The
charges, accruals and reserves on the books of the Company in respect of taxes for all fiscal
periods are adequate in all material respects, and there are no material unpaid assessments against
the Company or any Subsidiary nor, to the Company’s Knowledge, any basis for the
assessment of any additional taxes, penalties or interest for any fiscal period or audits by any
federal, state or local taxing authority except for any assessment which is not material to the
Company and its Subsidiaries, taken as a whole. All taxes and other assessments and levies that
the Company or any Subsidiary is required to withhold or to collect for payment have been duly
withheld and collected and paid to the proper governmental entity or third party when due. There
are no tax liens or claims pending or, to the Company’s Knowledge, threatened against the Company
or any Subsidiary or any of their respective assets or property. Except as described on
Schedule 4.11, there are no outstanding tax sharing agreements or other such arrangements
between the Company and any Subsidiary or other corporation or entity.


 


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4.12 Title to Properties. Except as disclosed in the SEC Filings, the Company and
each Subsidiary has good and marketable title to all real properties and all other properties and
assets owned by it, in each case free from liens, encumbrances and defects that would materially
affect the value thereof or materially interfere with the use made or currently planned to be made
thereof by them; and except as disclosed in the SEC Filings, the Company and each Subsidiary holds
any leased real or personal property under valid and enforceable leases with no exceptions that
would materially interfere with the use made or currently planned to be made thereof by them.



4.13 Certificates, Authorities and Permits. The Company and each Subsidiary possess
adequate certificates, authorities or permits issued by appropriate governmental agencies or bodies
necessary to conduct the business now operated by it, and neither the Company nor any Subsidiary
has received any written notice of proceedings relating to the revocation or modification of any
such certificate, authority or permit that, if determined adversely to the Company or such
Subsidiary, could reasonably be expected to have a Material Adverse Effect, individually or in the
aggregate, on the Company and its Subsidiaries, taken as a whole.




4.14 Labor Matters.



(a) Except as set forth on Schedule 4.14, the Company is not a party to or bound by
any collective bargaining agreements or other agreements with labor organizations. The Company has
not violated in any material respect any laws, regulations, orders or contract terms, affecting the
collective bargaining rights of employees, labor organizations or any laws, regulations or orders
affecting employment discrimination, equal opportunity employment, or employees’ health, safety,
welfare, wages and hours.



(b) (i) There are no labor disputes existing, or to the Company’s Knowledge, threatened,
involving strikes, slow-downs, work stoppages, job actions, disputes, lockouts or any other
disruptions of or by the Company’s employees, (ii) there are no unfair labor practices or petitions
for election pending or, to the Company’s Knowledge, threatened before the National Labor Relations
Board or any other federal, state or local labor commission relating to the Company’s employees,
(iii) no demand for recognition or certification heretofore made by any labor organization or group
of employees is pending with respect to the Company and (iv) to the Company’s Knowledge, the
Company enjoys good labor and employee relations with its employees and labor organizations.


 


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(c) The Company is, and at all times has been, in compliance in all material respects with all
applicable laws respecting employment (including laws relating to classification of employees and
independent contractors) and employment practices, terms and conditions of employment, wages and
hours, and immigration and naturalization. There are no claims pending against the Company before
the Equal Employment Opportunity Commission or any other administrative body or in any court
asserting any violation of Title VII of the Civil Rights Act of 1964, the Age Discrimination Act of
1967, 42 U.S.C. §§ 1981 or 1983 or any other federal, state or local Law, statute or ordinance
barring discrimination in employment.



(d) Except as disclosed in the SEC Filings or as described on Schedule 4.14, the
Company is not a party to, or bound by, any employment or other contract or agreement that contains
any severance, termination pay or change of control liability or obligation, including, without
limitation, any “excess parachute payment,” as defined in Section 280G(b) of the Internal Revenue
Code.



(e) Except as specified in Schedule 4.14, each of the Company’s employees is a Person
who is either a United States citizen or a permanent resident entitled to work in the United
States. To the Company’s Knowledge, the Company has no liability for the improper classification
by the Company of such employees as independent contractors or leased employees prior to the
Closing.




4.15 Intellectual Property.



(a) All Intellectual Property of the Company and its Subsidiaries is currently in compliance
with all legal requirements (including timely filings, proofs and payments of fees) and, to the
Company’s Knowledge, is valid and enforceable. No Intellectual Property of the Company or its
Subsidiaries which is necessary for the conduct of Company’s and each of its Subsidiaries’
respective businesses as currently conducted or as currently proposed to be conducted has been or
is now involved in any cancellation, dispute or litigation, and, to the Company’s Knowledge, no
such action is threatened. Except as disclosed in the SEC Filings, no patent of the Company or its
Subsidiaries has been or is now involved in any interference, reissue, re-examination or opposition
proceeding.



(b) All of the licenses and sublicenses and consent, royalty or other agreements concerning
Intellectual Property which are necessary for the conduct of the Company’s and each of its
Subsidiaries’ respective businesses as currently conducted or as currently proposed to be conducted
to which the Company or any Subsidiary is a party or by which any of their assets are bound (other
than generally commercially available, non-custom, off-the-shelf software application programs
having a retail acquisition price of less than $10,000 per license) (collectively, “License
Agreements”) are valid and binding obligations of the Company or its Subsidiaries that are parties
thereto and, to the Company’s Knowledge, the other parties thereto, enforceable in accordance with
their terms, except to the extent that enforcement thereof may be limited by bankruptcy,
insolvency, reorganization, moratorium, fraudulent conveyance or other similar laws affecting the
enforcement of creditors’ rights generally, and there exists no event or condition which will
result in a material violation or breach of or
constitute (with or without due notice or lapse of time or both) a default by the Company or any of
its Subsidiaries under any such License Agreement.


 


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(c) The Company and its Subsidiaries own or have the valid right to use all of the
Intellectual Property that is necessary for the conduct of the Company’s and each of its
Subsidiaries’ respective businesses as currently conducted or as currently proposed to be conducted
and for the ownership, maintenance and operation of the Company’s and its Subsidiaries’ properties
and assets, free and clear of all liens, encumbrances, adverse claims or obligations to license all
such owned Intellectual Property and Confidential Information, other than licenses entered into in
the ordinary course of the Company’s and its Subsidiaries’ businesses. The Company and its
Subsidiaries have a valid and enforceable right to use all third party Intellectual Property and
Confidential Information used or held for use in the respective businesses of the Company and its
Subsidiaries.



(d) The conduct of the Company’s and its Subsidiaries’ businesses as currently conducted does
not infringe or otherwise impair or conflict with (collectively, “Infringe”) any Intellectual
Property rights of any third party or any confidentiality obligation owed to a third party, and, to
the Company’s Knowledge, the Intellectual Property and Confidential Information of the Company and
its Subsidiaries which are necessary for the conduct of Company’s and each of its Subsidiaries’
respective businesses as currently conducted or as currently proposed to be conducted are not being
Infringed by any third party. There is no litigation or order pending or outstanding or, to the
Company’s Knowledge, threatened or imminent, that seeks to limit or challenge or that concerns the
ownership, use, validity or enforceability of any Intellectual Property or Confidential Information
of the Company and its Subsidiaries and the Company’s and its Subsidiaries’ use of any Intellectual
Property or Confidential Information owned by a third party, and, to the Company’s Knowledge, there
is no valid basis for the same.



(e) The consummation of the transactions contemplated hereby and by the other Transaction
Documents will not result in the alteration, loss, impairment of or restriction on the Company’s or
any of its Subsidiaries’ ownership or right to use any of the Intellectual Property or Confidential
Information which is necessary for the conduct of Company’s and each of its Subsidiaries’
respective businesses as currently conducted or as currently proposed to be conducted.



(f) The Company and its Subsidiaries have taken reasonable steps to protect the Company’s and
its Subsidiaries’ rights in their Intellectual Property and Confidential Information. Each
employee, consultant and contractor who has had access to Confidential Information which is
necessary for the conduct of Company’s and each of its Subsidiaries’ respective businesses as
currently conducted or as currently proposed to be conducted has executed an agreement to maintain
the confidentiality of such Confidential Information and has executed appropriate agreements that
are substantially consistent with the Company’s standard forms thereof. Except under
confidentiality obligations, there has been no material disclosure of any of the Company’s or its
Subsidiaries’ Confidential Information to any third party.


 


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4.16 Environmental Matters. Neither the Company nor any Subsidiary is in violation of
any statute, rule, regulation, decision or order of any governmental agency or body or any court,
domestic or foreign, relating to the use, disposal or release of hazardous or toxic substances or
relating to the protection or restoration of the environment or human exposure to hazardous or
toxic substances (collectively, “Environmental Laws”), has released any hazardous substances
regulated by Environmental Law on to any real property that it owns or operates, has received any
written notice or claim it is liable for any off-site disposal or contamination pursuant to any
Environmental Laws which violation, release, notice, claim, or liability could reasonably be
expected to have a Material Adverse Effect, individually or in the aggregate; and to the Company’s
Knowledge, there is no pending or threatened investigation that might lead to such a claim.



4.17 Litigation. Except as disclosed in the SEC Filings, there are no pending
actions, suits or proceedings against or affecting the Company, its Subsidiaries or any of its or
their properties; and to the Company’s Knowledge, no such actions, suits or proceedings are
threatened or contemplated. Neither the Company nor any Subsidiary, nor any director or officer
thereof, is or since January 1, 2005 has been the subject of any action involving a claim of
violation of or liability under federal or state securities laws or a claim of breach of fiduciary
duty. There has not been, and to the Company’s Knowledge, there is not pending or contemplated,
any investigation by the SEC involving the Company or any current or former director or officer of
the Company. The SEC has not issued any stop order or other order suspending the effectiveness of
any registration statement filed by the Company or any Subsidiary under the 1933 Act or the 1934
Act.



4.18 Financial Statements. The financial statements included in each SEC Filing
comply in all material respects with applicable accounting requirements and the rules and
regulations of the SEC with respect thereto as in effect at the time of filing (or to the extent
corrected by a subsequent restatement) and present fairly, in all material respects, the
consolidated financial position of the Company as of the dates shown and its consolidated results
of operations and cash flows for the periods shown, and such financial statements have been
prepared in conformity with United States generally accepted accounting principles applied on a
consistent basis (“GAAP”) (except as may be disclosed therein or in the notes thereto, and, in the
case of quarterly financial statements, as permitted by Form 10-Q under the 1934 Act). Except as
set forth in the financial statements of the Company included in the SEC Filings filed prior to the
date hereof or as described on Schedule 4.18, neither the Company nor any of its
Subsidiaries has incurred any liabilities, contingent or otherwise, except those incurred in the
ordinary course of business, consistent (as to amount and nature) with past practices since the
date of such financial statements, none of which, individually or in the aggregate, have had or
could reasonably be expected to have a Material Adverse Effect.



4.19 Insurance Coverage. The Company and each Subsidiary maintains in full force and
effect insurance coverage that is customary for comparably situated companies for the business
being conducted and properties owned or leased by the Company and each Subsidiary, and the Company
reasonably believes such insurance coverage to be adequate against all liabilities, claims and
risks against which it is customary for comparably situated companies to insure.


 


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4.20 Compliance with Nasdaq Continued Listing Requirements. The Company is in
compliance with applicable Nasdaq continued listing requirements. There are no proceedings pending
or, to the Company’s Knowledge, threatened against the Company relating to the continued listing of
the Common Stock on Nasdaq and the Company has not received any notice of, nor to the Company’s
Knowledge is there any basis for, the delisting of the Common Stock from Nasdaq.



4.21 Brokers and Finders. No Person will have, as a result of the transactions
contemplated by the Transaction Documents, any valid right, interest or claim against or upon the
Company, any Subsidiary or an Investor for any commission, fee or other compensation pursuant to
any agreement, arrangement or understanding entered into by or on behalf of the Company, other than
as described in Schedule 4.21.



4.22 No Directed Selling Efforts or General Solicitation. Neither the Company nor any
Person acting on its behalf has conducted any general solicitation or general advertising (as those
terms are used in Regulation D) in connection with the offer or sale of any of the Securities.



4.23 No Integrated Offering. Neither the Company nor any of its Affiliates, nor any
Person acting on its or their behalf has, directly or indirectly, made any offers or sales of any
Company security or solicited any offers to buy any security, under circumstances that would
adversely affect reliance by the Company on Section 4(2) for the exemption from registration for
the transactions contemplated hereby or would require registration of the Securities under the 1933
Act.



4.24 Private Placement. Assuming the accuracy of the representations and warranties
of the Investors set forth in Section 5, the offer and sale of the Securities to the Investors as
contemplated hereby is exempt from the registration requirements of the 1933 Act.



4.25 Questionable Payments. Neither the Company nor any of its Subsidiaries nor, to
the Company’s Knowledge, any of their respective current or former directors, officers, employees,
agents or other Persons acting on behalf of the Company or any Subsidiary, has on behalf of the
Company or any Subsidiary or in connection with their respective businesses: (a) used any corporate
funds for unlawful contributions, gifts, entertainment or other unlawful expenses relating to
political activity; (b) made any direct or indirect unlawful payments to any governmental officials
or employees from corporate funds; (c) established or maintained any unlawful or unrecorded fund of
corporate monies or other assets; (d) made any false or fictitious entries on the books and records
of the Company or any Subsidiary; or (e) made any unlawful bribe, rebate, payoff, influence
payment, kickback or other unlawful payment of any nature.



4.26 Transactions with Affiliates. Except as disclosed in the SEC Filings or as
disclosed on Schedule 4.26, none of the officers or directors of the Company and, to the
Company’s Knowledge, none of the employees of the Company is presently a party to any transaction
with the Company or any Subsidiary (other than as holders of stock options and/or warrants, and for
services as employees, officers and directors), including any contract,
agreement or other arrangement providing for the furnishing of services to or by, providing for
rental of real or personal property to or from, or otherwise requiring payments to or from any
officer, director or such employee or, to the Company’s Knowledge, any entity in which any officer,
director, or any such employee has a substantial interest or is an officer, director, trustee or
partner.


 


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4.27 Internal Controls. The Company is in material compliance with the provisions of
the Sarbanes-Oxley Act of 2002 currently applicable to the Company. The Company and the
Subsidiaries maintain a system of internal accounting controls sufficient to provide reasonable
assurance that (i) transactions are executed in accordance with management’s general or specific
authorizations, (ii) transactions are recorded as necessary to permit preparation of financial
statements in conformity with GAAP and to maintain asset accountability, (iii) access to assets is
permitted only in accordance with management’s general or specific authorization, and (iv) the
recorded accountability for assets is compared with the existing assets at reasonable intervals and
appropriate action is taken with respect to any differences. The Company has established disclosure
controls and procedures (as defined in 1934 Act Rules 13a-15(e) and 15d-15(e)) for the Company and
designed such disclosure controls and procedures to ensure that material information relating to
the Company, including the Subsidiaries, is made known to the certifying officers by others within
those entities, particularly during the period in which the Company’s most recently filed periodic
report under the 1934 Act, as the case may be, is being prepared. The Company’s certifying
officers have evaluated the effectiveness of the Company’s controls and procedures as of the end of
the period covered by the most recently filed periodic report under the 1934 Act (such date, the
“Evaluation Date”). The Company presented in its most recently filed periodic report under the
1934 Act the conclusions of the certifying officers about the effectiveness of the disclosure
controls and procedures based on their evaluations as of the Evaluation Date. Since the Evaluation
Date, there have been no significant changes in the Company’s internal controls (as such term is
defined in Item 308 of Regulation S-K) or, to the Company’s Knowledge, in other factors that could
significantly affect the Company’s internal controls. The Company maintains and will continue to
maintain a standard system of accounting established and administered in accordance with GAAP and
the applicable requirements of the 1934 Act.



4.28 Disclosures. Neither the Company nor any Person acting on its behalf has
provided the Investors or their agents or counsel with any information that constitutes or might
constitute material, non-public information, other than the terms of the transactions contemplated
hereby. The written materials delivered to the Investors in connection with the transactions
contemplated by the Transaction Documents do not contain any untrue statement of a material fact or
omit to state a material fact necessary in order to make the statements contained therein, in light
of the circumstances under which they were made, not misleading.



4.29 Investment Company. The Company is not required to be registered as, and is not
an Affiliate of, and immediately following the Closing will not be required to register as, an
“investment company” within the meaning of the Investment Company Act of 1940, as amended.


 


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5. Representations and Warranties of the Investors. Each of the Investors hereby
severally, and not jointly, represents and warrants to the Company that:



5.1 Organization and Existence. Such Investor is a validly existing corporation,
limited partnership or limited liability company and has all requisite corporate, partnership or
limited liability company power and authority to invest in the Securities pursuant to this
Agreement.



5.2 Authorization. The execution, delivery and performance by such Investor of the
Transaction Documents to which such Investor is a party have been duly authorized and each will
constitute the valid and legally binding obligation of such Investor, enforceable against such
Investor in accordance with their respective terms, subject to bankruptcy, insolvency, fraudulent
transfer, reorganization, moratorium and similar laws of general applicability, relating to or
affecting creditors’ rights generally.



5.3 Purchase Entirely for Own Account. The Securities to be received by such Investor
hereunder will be acquired for such Investor’s own account, not as nominee or agent, and not with a
view to the resale or distribution of any part thereof in violation of the 1933 Act, and such
Investor has no present intention of selling, granting any participation in, or otherwise
distributing the same in violation of the 1933 Act without prejudice, however, to such Investor’s
right at all times to sell or otherwise dispose of all or any part of such Securities in compliance
with applicable federal and state securities laws. Nothing contained herein shall be deemed a
representation or warranty by such Investor to hold the Securities for any period of time. Such
Investor is not a broker-dealer registered with the SEC under the 1934 Act or an entity engaged in
a business that would require it to be so registered.



5.4 Investment Experience. Such Investor acknowledges that it can bear the economic
risk and complete loss of its investment in the Securities and has such knowledge and experience in
financial or business matters that it is capable of evaluating the merits and risks of the
investment contemplated hereby.



5.5 Disclosure of Information. Such Investor has had an opportunity to receive all
information related to the Company requested by it and to ask questions of and receive answers from
the Company regarding the Company, its business and the terms and conditions of the offering of the
Securities. Such Investor acknowledges receipt of copies of the SEC Filings. Neither such
inquiries nor any other due diligence investigation conducted by such Investor shall modify, limit
or otherwise affect such Investor’s right to rely on the Company’s representations and warranties
contained in this Agreement.



5.6 Restricted Securities. Such Investor understands 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
1933 Act only in certain limited circumstances.


 


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5.7 Legends. It is understood that, except as provided below, certificates evidencing
the Securities may bear the following or any similar legend:



(a) “The securities represented hereby 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, and, accordingly, may not be transferred
unless (i) such securities have been registered for sale pursuant to the Securities Act of 1933, as
amended, (ii) such securities may be sold pursuant to Rule 144, or (iii) the Company has received
an opinion of counsel reasonably satisfactory to it that such transfer may lawfully be made without
registration under the Securities Act of 1933, as amended.”



(b) If required by the authorities of any state in connection with the issuance of sale of the
Securities, the legend required by such state authority.



5.8 Accredited Investor. Such Investor is an accredited investor as defined in Rule
501(a) of Regulation D, as amended, under the 1933 Act.



5.9 No General Solicitation. Such Investor did not learn of the investment in the
Securities as a result of any general solicitation or general advertising.



5.10 Brokers and Finders. No Person will have, as a result of the transactions
contemplated by the Transaction Documents, any valid right, interest or claim against or upon the
Company, any Subsidiary or an Investor for any commission, fee or other compensation pursuant to
any agreement, arrangement or understanding entered into by or on behalf of such Investor.




6. Conditions to Closing.



6.1 Conditions to the Investors’ Obligations. The obligation of each Investor to
purchase Shares and Warrants at any Closing is subject to the fulfillment to such Investor’s
satisfaction, on or prior to the applicable Closing Date, of the following conditions, any of which
may be waived by such Investor (as to itself only):



(a) The representations and warranties made by the Company in Section 4 hereof qualified as to
materiality shall be true and correct at all times prior to and on the Closing Date, except to the
extent any such representation or warranty expressly speaks as of an earlier date, in which case
such representation or warranty shall be true and correct as of such earlier date, and, the
representations and warranties made by the Company in Section 4 hereof not qualified as to
materiality shall be true and correct in all material respects at all times prior to and on the
Closing Date, except to the extent any such representation or warranty expressly speaks as of an
earlier date, in which case such representation or warranty shall be true and correct in all
material respects as of such earlier date. The Company shall have performed in all material
respects all obligations and covenants herein required to be performed by it on or prior to the
Closing Date.


 


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(b) The Company shall have obtained any and all consents, permits, approvals, registrations
and waivers necessary or appropriate for consummation of the purchase and sale of the Securities
and the consummation of the other transactions contemplated by the Transaction Documents, all of
which shall be in full force and effect.




(c) The Company shall have executed and delivered the Registration Rights Agreement.



(d) With respect to the Firm Closing only, the Company shall have filed with Nasdaq a
Notification Form: Listing of Additional Shares for the listing of the Shares and the Warrant
Shares, a copy of which shall have been provided to the Investors.



(e) With respect to the Firm Closing only, the Company shall have received gross proceeds from
the sale of the Firm Shares and Firm Warrants as contemplated hereby of at least Fifteen Million
Dollars ($15,000,000).



(f) No judgment, writ, order, injunction, award or decree of or by any court, or judge,
justice or magistrate, including any bankruptcy court or judge, or any order of or by any
governmental authority, shall have been issued, and no action or proceeding shall have been
instituted by any governmental authority, enjoining or preventing the consummation of the
transactions contemplated hereby or in the other Transaction Documents.



(g) The Company shall have delivered a Certificate, executed on behalf of the Company by its
Chief Executive Officer or its Chief Financial Officer, dated as of the Closing Date, certifying to
the fulfillment of the conditions specified in subsections (a), (b), (d) (to the extent
applicable), (e) (to the extent applicable), (f) and (j) of this Section 6.1.



(h) The Company shall have delivered a Certificate, executed on behalf of the Company by its
Secretary, dated as of the Closing Date, 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, certifying the current versions of the
Certificate of Incorporation and Bylaws of the Company and certifying as to the signatures and
authority of persons signing the Transaction Documents and related documents on behalf of the
Company.



(i) The Investors shall have received an opinion from Mintz, Levin, Cohn, Ferris, Glovsky and
Popeo, P.C., the Company’s counsel, dated as of the Closing Date, in form and substance reasonably
acceptable to the Investors and addressing such legal matters as the Investors may reasonably
request.



(j) No stop order or suspension of trading shall have been imposed by Nasdaq, the SEC or any
other governmental or regulatory body with respect to public trading in the Common Stock.


 


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



(a) The representations and warranties made by the Investors in Section 5 hereof shall be true
and correct in all material respects when made, and shall be true and correct in all material
respects on the Closing Date with the same force and effect as if they had been made on and as of
said date. The Investors shall have performed in all material respects all obligations and
covenants herein required to be performed by them on or prior to the Closing Date.



(b) With respect to the Firm Closing only, the Investors shall have executed and delivered the
Registration Rights Agreement.



(c) Any Investor purchasing Shares or Warrants at such Closing shall have paid in full its
purchase price to the Company.




6.3 Termination of Obligations to Effect Closing; Effects.



(a) The obligations of the Company, on the one hand, and the Investors, on the other hand, to
effect the Closing shall terminate as follows:




(i) Upon the mutual written consent of the Company and the Investors;



(ii) By the Company if any of the conditions set forth in Section 6.2 shall have become
incapable of fulfillment, and shall not have been waived by the Company;



(iii) By an Investor (with respect to itself only) if any of the conditions set forth in
Section 6.1 shall have become incapable of fulfillment, and shall not have been waived by the
Investor; or



(iv) By either the Company or any Investor (with respect to itself only) if the Firm Closing
has not occurred on or prior to October 15, 2010;



provided, however, that, except in the case of clause (i) above, the party seeking to terminate its
obligation to effect the Closing shall not then be in breach of any of its representations,
warranties, covenants or agreements contained in this Agreement or the other Transaction Documents
if such breach has resulted in the circumstances giving rise to such party’s seeking to terminate
its obligation to effect the Closing.



(b) In the event of termination by the Company or any Investor of its obligations to effect
the Closing pursuant to this Section 6.3, written notice thereof shall forthwith be given to the
other Investors by the Company and the other Investors shall have the right to terminate their
obligations to effect the Closing upon written notice to the Company and the other Investors.
Nothing in this Section 6.3 shall be deemed to release any party from any
liability for any breach by such party of the terms and provisions of this Agreement or the other
Transaction Documents or to impair the right of any party to compel specific performance by any
other party of its obligations under this Agreement or the other Transaction Documents.


 


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7. Covenants and Agreements of the Company.



7.1 Reservation of Common Stock. The Company shall at all times reserve and keep
available out of its authorized but unissued shares of Common Stock, solely for the purpose of
providing for the exercise of the Warrants, such number of shares of Common Stock as shall from
time to time equal the number of shares sufficient to permit the exercise of the Warrants issued
pursuant to this Agreement in accordance with their respective terms.



7.2 Reports. The Company will furnish to the Investors and/or their assignees such
information relating to the Company and its Subsidiaries as from time to time may reasonably be
requested by the Investors and/or their assignees; provided, however, that the Company shall not
disclose material nonpublic information to the Investors, or to advisors to or representatives of
the Investors, unless prior to disclosure of such information the Company identifies such
information as being material nonpublic information and provides the Investors, such advisors and
representatives with the opportunity to accept or refuse to accept such material nonpublic
information for review and any Investor wishing to obtain such information enters into an
appropriate confidentiality agreement with the Company with respect thereto.



7.3 No Conflicting Agreements. The Company will not take any action, enter into any
agreement or make any commitment that would conflict or interfere in any material respect with the
Company’s obligations to the Investors under the Transaction Documents.



7.4 Insurance. The Company shall not materially reduce the insurance coverages
described in Section 4.19.



7.5 Compliance with Laws. The Company will comply in all material respects with all
applicable laws, rules, regulations, orders and decrees of all governmental authorities.



7.6 Listing of Underlying Shares and Related Matters. Promptly following the date
hereof, the Company shall take all necessary action to cause the Shares and the Warrant Shares to
be listed on Nasdaq no later than the Firm Closing Date. Further, if the Company applies to have
its Common Stock or other securities traded on any other principal stock exchange or market, it
shall include in such application the Shares and the Warrant Shares and will take such other action
as is necessary to cause such Common Stock to be so listed. The Company will use commercially
reasonable efforts to continue the listing and trading of its Common Stock on Nasdaq and, in
accordance, therewith, will use commercially reasonable efforts to comply in all respects with the
Company’s reporting, filing and other obligations under the bylaws or rules of such market or
exchange, as applicable.


 


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7.7 Termination of Covenants. The provisions of Sections 7.2 through 7.5 shall
terminate and be of no further force and effect on the date on which the Company’s
obligations under the Registration Rights Agreement to register or maintain the effectiveness of
any registration covering the Registrable Securities (as such term is defined in the Registration
Rights Agreement) shall terminate.



7.8 Removal of Legends. In connection with any sale or disposition of the Securities
by an Investor pursuant to Rule 144 or pursuant to any other exemption under the 1933 Act such that
the purchaser acquires freely tradable shares and upon compliance by the Investor with the
requirements of this Agreement, the Company shall or, in the case of Common Stock, shall cause the
transfer agent for the Common Stock (the “Transfer Agent”) to issue replacement certificates
representing the Securities sold or disposed of without restrictive legends. Upon the earlier of
(i) registration for resale of the Shares and the Warrant Shares
pursuant to the Registration Rights Agreement or (ii) the Shares
and Warrant Shares becoming freely tradable by a non-affiliate pursuant to Rule 144 the Company shall (A) deliver to
the Transfer Agent irrevocable instructions that the Transfer Agent shall reissue a certificate
representing shares of Common Stock without legends upon receipt by such Transfer Agent of the
legended certificates for such shares, and (B) cause its
counsel to deliver to the Transfer Agent one or more blanket opinions to the effect that the
removal of such legends in such circumstances may be effected under the 1933 Act. From and after
the earlier of such dates, upon an Investor’s written request, the Company shall promptly cause
certificates evidencing the Investor’s Securities to be replaced with certificates which do not
bear such restrictive legends, and Warrant Shares subsequently issued upon due exercise of the
Warrants shall not bear such restrictive legends provided the provisions of either clause (i) or
clause (ii) above, as applicable, are satisfied with respect to
such Warrant Shares. For purposes hereof, the Company agrees that the holding period pursuant to Rule 144 for any Warrant
 Shares purchased pursuant to a “cashless exercise” shall commence on the Firm Closing Date.  The Company shall be
 responsible for the fees of its transfer agent and all DTC fees associated with such issuance. When the
Company is required to cause an unlegended certificate to replace a previously issued legended
certificate, if: (1) the unlegended certificate is not delivered to an Investor within three (3)
Business Days of submission by that Investor of a legended certificate and supporting documentation
to the Transfer Agent as provided above and (2) prior to the time such unlegended certificate is
received by the Investor, the Investor, or any third party on behalf of such Investor or for the
Investor’s account, purchases (in an open market transaction or otherwise) shares of Common Stock
to deliver in satisfaction of a sale by the Investor of shares represented by such certificate (a
“Buy-In”), then the Company shall pay in cash to the Investor (for costs incurred either directly
by such Investor or on behalf of a third party) the amount by which the total purchase price paid
for Common Stock as a result of the Buy-In (including brokerage commissions, if any) exceeds the
proceeds received by such Investor as a result of the sale to which such Buy-In relates. The
Investor shall provide the Company written notice indicating the amounts payable to the Investor in
respect of the Buy-In.


 


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7.9 Subsequent Equity Sales.



(a) From the date hereof until ninety (90) days after the later of (i) the Firm Closing Date
or (ii) the last Option Closing Date, if any, without the consent of the Required Investors,
neither the Company nor any Subsidiary shall issue shares of Common Stock or Common Stock
Equivalents. Notwithstanding the foregoing, the provisions of this Section 7.9(a) shall not apply
to (i) the issuance of Common Stock or Common Stock Equivalents upon
the conversion or exercise of any securities of the Company or a Subsidiary outstanding on the date
hereof, provided that the terms of such security are not amended after the date hereof to decrease
the exercise price or increase the Common Stock or Common Stock Equivalents receivable upon the
exercise, conversion or exchange thereof, (ii) the issuance of any Common Stock or Common Stock
Equivalents pursuant to any Company equity incentive plan approved by the Company’s stockholders
and in place as of the date hereof, (iii), the issuance of Common Stock to holders of the Company’s
issued and outstanding Preferred Stock in exchange for outstanding shares of the Preferred Stock
from time to time, (iv) the issuance of any Common Stock pursuant to the terms of the Common Stock
Purchase Agreement entered into with Kingsbridge Capital Limited, dated as of December 10, 2007, as
amended on November 24, 2009 (the “Kingsbridge Line”) or any other Equity Line Arrangement (as
defined below) which occurs more than thirty (30) days after the Effective Date, or (v) the
issuance of any Common Stock or Common Stock Equivalents pursuant to the terms of any joint
venture, strategic alliance, collaboration or corporate partnering agreement with the Company or a
Subsidiary of the Company; provided, however, that with respect to clauses (iii), (iv) and (v), the
effective price per share of the Common Stock issued or issuable upon the exercise or conversion of
any Common Stock Equivalents shall be at least equal to the greater of (A) the Warrant Exercise
Price (appropriately adjusted for any stock split, reverse stock split, stock dividend or other
reclassification or combination of the Common Stock occurring after the date hereof) as in effect
at the time of such issuance or (B) the average of the closing bid prices of the Common Stock for
the five Business Days ending immediately prior to such issuance.



(b) From the date hereof until the earlier of (i) three years after the later of (A) the Firm
Closing Date or (B) the last Option Closing Date, if any, or (ii) such time as the Investors do not
beneficially own at least 10% of the Firm Shares in the aggregate (appropriately adjusted for any
stock split, reverse stock split, stock dividend or other reclassification or combination of the
Common Stock occurring after the date hereof), the Company shall not, without the consent of the
Required Investors, effect or enter into an agreement to effect any “Variable Rate Transaction”.
The term “Variable Rate Transaction” shall mean a transaction in which the Company issues or sells
(i) any debt or equity securities that are convertible into, exchangeable or exercisable for, or
include the right to receive additional shares of Common Stock either (A) at a conversion, exercise
or exchange rate or other price that is based upon and/or varies with the trading prices of or
quotations for the shares of Common Stock at any time after the initial issuance of such debt or
equity securities, or (B) with a conversion, exercise or exchange price that is subject to being
reset at some future date after the initial issuance of such debt or equity security or upon the
occurrence of specified or contingent events directly or indirectly related to the business of the
Company or the market for the Common Stock or (ii) enters into any agreement, including, but not
limited to, an equity line of credit or a distribution agreement relating to “at-the-market”
offerings, whereby the Company may sell securities at a future determined price (an “Equity Line
Arrangement”). For the avoidance of doubt, the issuance of a security which is subject to
customary anti-dilution protections, including where the conversion, exercise or exchange price is
subject to adjustment as a result of stock splits, reverse stock splits and other similar
recapitalization or reclassification events, shall not be deemed to be a “Variable Rate
Transaction.” Notwithstanding the foregoing, the Company shall have the right to enter into and to
issue and sell shares of Common Stock pursuant to the Kingsbridge Line or another Equity Line
Arrangement so long as such issuances and sales
comply with the terms of the proviso in Section 7.9(a) (regardless of whether the restrictions of
Section 7.9(a) remain in effect).


 


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(c) The Company shall not, and shall use its commercially reasonable efforts to ensure that no
Affiliate of the Company shall, sell, offer for sale or solicit offers to buy or otherwise
negotiate in respect of any security (as defined in Section 2 of the 1933 Act) that will be
integrated with the offer or sale of the Securities in a manner that would require the registration
under the 1933 Act of the sale of the Securities to the Investors, or that will be integrated with
the offer or sale of the Securities for purposes of the rules and regulations of any trading market
such that it would require stockholder approval prior to the closing of such other transaction
unless stockholder approval is obtained before the closing of such subsequent transaction.



7.13 Equal Treatment of Investors. No consideration shall be offered or paid to any
Person to amend or consent to a waiver or modification of any provision of any of the Transaction
Documents unless the same consideration is also offered to all of the parties to the Transaction
Documents. For clarification purposes, this provision constitutes a separate right granted to each
Investor by the Company and negotiated separately by each Investor, and is intended for the Company
to treat the Investors as a class and shall not in any way be construed as the Investors acting in
concert or as a group with respect to the purchase, disposition or voting of Securities or
otherwise.




8. Survival and Indemnification.



8.1 Survival. The representations, warranties, covenants and agreements contained in
this Agreement shall survive the Closing of the transactions contemplated by this Agreement.



8.2 Indemnification. The Company agrees to indemnify and hold harmless each Investor
and its Affiliates and their respective directors, officers, trustees, members, managers, employees
and agents, and their respective successors and assigns, from and against any and all losses,
claims, damages, liabilities and expenses (including without limitation reasonable attorney fees
and disbursements and other expenses incurred in connection with investigating, preparing or
defending any action, claim or proceeding, pending or threatened and the costs of enforcement
thereof) (collectively, “Losses”) to which such Person may become subject as a result of any breach
of representation, warranty, covenant or agreement made by or to be performed on the part of the
Company under the Transaction Documents, and will reimburse any such Person for all such amounts as
they are incurred by such Person.


 


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8.3 Conduct of Indemnification Proceedings. Any person entitled to indemnification
hereunder shall (i) give prompt notice to the indemnifying party of any claim with respect to which
it seeks indemnification and (ii) permit such indemnifying party to assume the defense of such
claim with counsel reasonably satisfactory to the indemnified party; provided that any
person entitled to indemnification hereunder shall have the right to employ separate counsel and to
participate in the defense of such claim, but the fees and expenses of such counsel shall be at the
expense of such person unless (a) the indemnifying party has agreed to pay such
fees or expenses, or (b) the indemnifying party shall have failed to assume the defense of
such claim and employ counsel reasonably satisfactory to such person or (c) in the reasonable
judgment of any such person, based upon written advice of its counsel, a conflict of interest
exists between such person and the indemnifying party with respect to such claims (in which case,
if the person notifies the indemnifying party in writing that such person elects to employ separate
counsel at the expense of the indemnifying party, the indemnifying party shall not have the right
to assume the defense of such claim on behalf of such person); and provided,
further, that the failure of any indemnified party to give notice as provided herein shall
not relieve the indemnifying party of its obligations hereunder, except to the extent that such
failure to give notice shall materially adversely affect the indemnifying party in the defense of
any such claim or litigation. It is understood that the indemnifying party shall not, in
connection with any proceeding in the same jurisdiction, be liable for fees or expenses of more
than one separate firm of attorneys at any time for all such indemnified parties. No indemnifying
party will, except with the consent of the indemnified party, consent to entry of any judgment or
enter into any settlement that does not include as an unconditional term thereof the giving by the
claimant or plaintiff to such indemnified party of a release from all liability in respect of such
claim or litigation.




9. Miscellaneous.



9.1 Successors and Assigns. This Agreement may not be assigned by a party hereto
without the prior written consent of the Company or the Investors, as applicable, provided,
however, that an Investor may assign its rights and delegate its duties hereunder in whole or in
part to an Affiliate or to a third party acquiring some or all of its Securities in a transaction
complying with applicable securities laws without the prior written consent of the Company or the
other Investors. The provisions of this Agreement shall inure to the benefit of and be binding
upon the respective permitted successors and assigns of the parties. Without limiting the
generality of the foregoing, in the event that the Company is a party to a merger, consolidation,
share exchange or similar business combination transaction in which the Common Stock is converted
into the equity securities of another Person, from and after the effective time of such
transaction, such Person shall, by virtue of such transaction, be deemed to have assumed the
obligations of the Company hereunder, the term “Company” shall be deemed to refer to such Person
and the term “Shares” shall be deemed to refer to the securities received by the Investors in
connection with such transaction. Nothing in this Agreement, express or implied, is intended to
confer upon any party other than the parties hereto or their respective successors and assigns any
rights, remedies, obligations, or liabilities under or by reason of this Agreement, except as
expressly provided in this Agreement.



9.2 Counterparts; Faxes; E-mail. This Agreement may be executed in two or more
counterparts, each of which shall be deemed an original, but all of which together shall constitute
one and the same instrument. This Agreement may also be executed via facsimile or e-mail, which
shall be deemed an original.


 


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9.3 Titles and Subtitles. The titles and subtitles used in this Agreement are used
for convenience only and are not to be considered in construing or interpreting this Agreement.



9.4 Notices. Unless otherwise provided, any notice required or permitted under this
Agreement shall be given in writing and shall be deemed effectively given as hereinafter described
(i) if given by personal delivery, then such notice shall be deemed given upon such delivery, (ii)
if given by facsimile, then such notice shall be deemed given upon receipt of confirmation of
complete transmittal, (iii) if given by mail, then such notice shall be deemed given upon the
earlier of (A) receipt of such notice by the recipient or (B) three days after such notice is
deposited in first class mail, postage prepaid, and (iv) if given by an internationally recognized
overnight air courier, then such notice shall be deemed given one Business Day after delivery to
such carrier. All notices shall be addressed to the party to be notified at the address as
follows, or at such other address as such party may designate by ten days’ advance written notice
to the other party:




If to the Company:




Cyclacel Pharmaceuticals, Inc.

200 Connell Drive, Suite 1500

Berkeley Heights, New Jersey 07922

Attention: Chief Executive Officer

Fax: (866) 271-3466




With a copy to:




Mintz, Levin, Cohn, Ferris, Glovsky and Popeo, P.C.

666 Third Avenue, New York, New York 10017

Attention: Joel I. Papernik, Esq.

Fax: (212) 983-3115




If to the Investors:



to the addresses set forth on the signature pages hereto.



9.5 Expenses. The parties hereto shall pay their own costs and expenses in connection
herewith, except that the Company shall pay the reasonable fees and expenses of Lowenstein Sandler
PC not to exceed $40,000, regardless of whether the transactions contemplated hereby are
consummated; it being understood that Lowenstein Sandler PC has only rendered legal advice to the
SSF Investors and not to the Company or any other Investor in connection with the transactions
contemplated hereby, and that each of the Company and each Investor has relied for such matters on
the advice of its own respective counsel. Such expenses shall be paid upon demand. The Company
shall reimburse the Investors upon demand for all reasonable out-of-pocket expenses incurred by the
Investors, including without limitation reimbursement of attorneys’ fees and disbursements, in
connection with any amendment, modification or waiver of this Agreement or the other Transaction
Documents requested by the Company. In the event that legal proceedings are commenced by any party
to this Agreement against another party to this Agreement in connection with this Agreement or the
other Transaction Documents, the party or parties which do not prevail in such proceedings shall
severally, but not jointly, pay their pro rata share of the reasonable attorneys’ fees and other
reasonable out-of-pocket costs and expenses incurred by the prevailing party in such proceedings.


 


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9.6 Amendments and Waivers. Any term of this Agreement may be amended and the
observance of any term of this Agreement may be waived (either generally or in a particular
instance and either retroactively or prospectively), only with the written consent of the Company
and the Required Investors. Any amendment or waiver effected in accordance with this paragraph
shall be binding upon each holder of any Securities purchased under this Agreement at the time
outstanding, each future holder of all such Securities, and the Company.



9.7 Publicity. Except as set forth below, no public release or announcement
concerning the transactions contemplated hereby shall be issued by the Company or the Investors
without the prior consent of the Company (in the case of a release or announcement by the
Investors) or the Investors (in the case of a release or announcement by the Company) (which
consents shall not be unreasonably withheld), except as such release or announcement may be
required by law or the applicable rules or regulations of any securities exchange or securities
market, in which case the Company or the Investors, as the case may be, shall allow the Investors
or the Company, as applicable, to the extent reasonably practicable in the circumstances,
reasonable time to comment on such release or announcement in advance of such issuance. By 8:30
a.m. (New York City time) on the trading day immediately following the Firm Closing Date, the
Company shall issue a press release disclosing all material terms of transactions contemplated by
this Agreement (the “Press Release”). No later than 5:30 p.m. (New York City time) on the first trading day following
the Firm Closing Date, the Company will file a Current Report on Form 8-K attaching the press
release described in the foregoing sentence as well as copies of the Transaction Documents. In
addition, the Company will make such other filings and notices in the manner and time required by
the SEC or Nasdaq. From and after the issuance of the Press Release, no Investor shall be in possession
 of any material, nonpublic information received from the Company, any of its Subsidiaries or any of its
 respective officers, directors, employees or agents, that is not disclosed in the Press Release.
The Company shall not, and shall cause each of its Subsidiaries and each of their respective officers, directors,
employees and agents, not to, provide any Investor with any material, nonpublic information regarding the Company
 or any of its Subsidiaries from and after the filing of the Press Release without the express written consent of
 such Investor.



9.8 Severability. Any provision of this Agreement that is prohibited or unenforceable
in any jurisdiction shall, as to such jurisdiction, be ineffective to the extent of such
prohibition or unenforceability without invalidating the remaining provisions hereof but shall be
interpreted as if it were written so as to be enforceable to the maximum extent permitted by
applicable law, and any such prohibition or unenforceability in any jurisdiction shall not
invalidate or render unenforceable such provision in any other jurisdiction. To the extent
permitted by applicable law, the parties hereby waive any provision of law which renders any
provision hereof prohibited or unenforceable in any respect.



9.9 Entire Agreement. This Agreement, including the Exhibits and the Disclosure
Schedules, and the other Transaction Documents constitute the entire agreement among the parties
hereof with respect to the subject matter hereof and thereof and supersede all prior agreements and
understandings, both oral and written, between the parties with respect to the subject matter
hereof and thereof.



9.10 Further Assurances. The parties shall execute and deliver all such further
instruments and documents and take all such other actions as may reasonably be required to
carry out the transactions contemplated hereby and to evidence the fulfillment of the agreements
herein contained.


 


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9.11 Governing Law; Consent to Jurisdiction; Waiver of Jury Trial. This Agreement
shall be governed by, and construed in accordance with, the internal laws of the State of New York
without regard to the choice of law principles thereof. Each of the parties hereto irrevocably
submits to the exclusive jurisdiction of the courts of the State of New York located in New York
County and the United States District Court for the Southern District of New York for the purpose
of any suit, action, proceeding or judgment relating to or arising out of this Agreement and the
transactions contemplated hereby. Service of process in connection with any such suit, action or
proceeding may be served on each party hereto anywhere in the world by the same methods as are
specified for the giving of notices under this Agreement. Each of the parties hereto irrevocably
consents to the jurisdiction of any such court in any such suit, action or proceeding and to the
laying of venue in such court. Each party hereto irrevocably waives any objection to the laying of
venue of any such suit, action or proceeding brought in such courts and irrevocably waives any
claim that any such suit, action or proceeding brought in any such court has been brought in an
inconvenient forum. EACH OF THE PARTIES HERETO WAIVES ANY RIGHT TO REQUEST A TRIAL BY JURY IN ANY
LITIGATION WITH RESPECT TO THIS AGREEMENT AND REPRESENTS THAT COUNSEL HAS BEEN CONSULTED
SPECIFICALLY AS TO THIS WAIVER.



9.12 Independent Nature of Investors’ Obligations and Rights. The obligations of each
Investor under any Transaction Document are several and not joint with the obligations of any other
Investor, and no Investor shall be responsible in any way for the performance of the obligations of
any other Investor under any Transaction Document. The decision of each Investor to purchase
Securities pursuant to the Transaction Documents has been made by such Investor independently of
any other Investor. 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 Documents. Each Investor acknowledges that no other
Investor has acted as agent for such Investor in connection with making its investment hereunder
and that no Investor will be acting as agent of such Investor in connection with monitoring its
investment in the Securities or enforcing its rights under the Transaction Documents. 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. The Company acknowledges that each of the Investors has been provided
with the same Transaction Documents for the purpose of closing a transaction with multiple
Investors and not because it was required or requested to do so by any Investor.



[signature page follows]



 


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IN WITNESS WHEREOF, the parties have executed this Agreement or caused their duly authorized
officers to execute this Agreement as of the date first above written.



	 	 	 	 	 
	The Company:	CYCLACEL PHARMACEUTICALS, INC.

 	 
	 	By:  	 	 
	 	 	Name:  	 	 
	 	 	Title:  	 	 


 


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	The Company: 	[INVESTOR NAME]

 	 
	 	By:  	 	 
	 	 	Name:  	 	 
	 	 	Title:  	 	 
	 




 


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