EX-10.1






SECURITIES PURCHASE

AGREEMENT

Dated as of May 24, 2010

by and among

LA JOLLA PHARMACEUTICAL COMPANY

and

THE PURCHASERS LISTED ON EXHIBIT A




SECURITIES PURCHASE AGREEMENT




This SECURITIES PURCHASE AGREEMENT dated as of May 24, 2010 (this “Agreement”) by and
among La Jolla Pharmaceutical Company, a Delaware corporation (the “Company”), and each of
the purchasers of (i) shares of common stock of the Company, (ii) shares of preferred stock of the
Company, (iii) warrants to purchase shares of preferred stock of the Company and (iv) warrants to
purchase units consisting of shares of preferred stock of the Company and warrants to purchase
additional shares of preferred stock of the Company, whose names are set forth on Exhibit A
attached hereto (each a “Purchaser” and collectively, the “Purchasers”).



The parties hereto agree as follows:



ARTICLE 1




PURCHASE AND SALE OF COMMON STOCK, PREFERRED STOCK AND WARRANTS




1.1 Purchase and Sale of Common Stock, Preferred Stock and Warrants. Upon the
following terms and conditions, the Company shall issue and sell to the Purchasers, and the
Purchasers shall purchase from the Company, securities for an aggregate purchase price of $
$6,003,113.04 at the Closing (as defined in Section 1.2(b)), consisting of: (i) 28,970,435 shares
of the Company’s common stock, par value $0.01 per share (the “Common Stock”), for an
aggregate purchase price of $869,113.05, at a price per share equal to $0.03; (ii) 5,134 shares of
the Company’s Series C-1 Preferred Stock, par value $0.01 per share (the “Series C-1
Preferred”), for an aggregate purchase price of $5,134,000, at a price per share equal to
$1,000; (iii) warrants, in substantially the form attached hereto as Exhibit B (the
“Cashless Warrants”), to purchase an aggregate amount of up to 5,134 shares of the
Company’s Series D-1 Preferred Stock, par value $0.01 per share (the “Series D-1
Preferred”), at an exercise price per share equal to $1,000; and (iv) warrants, in
substantially the form attached hereto as Exhibit C (the “Cash Warrants”), to
purchase an aggregate of 10,268 units, at an exercise price of $1,000 per unit, where each unit
consists of (A) one share of the Company’s Series C-2 Preferred Stock, par value $0.01 per share
(the “Series C-2 Preferred”); and (B) a warrant, in substantially the form attached as
Exhibit A to the Cash Warrants (the “Subsequent Cashless Warrants”), to purchase one share
of the Company’s Series D-2 Preferred Stock, par value $0.01 per share (the “Series D-2
Preferred” and, together with the Series C-1 Preferred, Series C-2 Preferred and Series D-1
Preferred, the “Preferred Stock”). The Cashless Warrants, Cash Warrants and Subsequent
Cashless Warrants shall be collectively referred to herein as the “Warrants.” At the
Closing, the Company shall deliver to each Purchaser: (i) a stock certificate registered in the
name of such Purchaser, or in the name(s) of such nominee(s) as designated by such Purchaser,
representing in the aggregate the number of shares of Common Stock set forth opposite such
Purchaser’s name on Exhibit A attached hereto; (ii) a stock certificate registered in the
name of such Purchaser, or in the name(s) of such nominee(s) as designated by such Purchaser,
representing in the aggregate the number of shares of Series C-1 Preferred set forth opposite such
Purchaser’s name on Exhibit A attached hereto; (iii) a Cashless Warrant to purchase the
number of shares of Series D-1 Preferred set forth opposite such Purchaser’s name on Exhibit
A attached hereto and (iv) a Cash Warrant to purchase the number of shares of Series C-2
Preferred set forth opposite such Purchaser’s name on Exhibit A attached hereto. The
Company and the Purchasers are executing and delivering this Agreement in accordance with and in
reliance upon the exemption from securities registration afforded by Section 4(2) of the U.S.
Securities Act of 1933, as amended, and the rules and regulations promulgated thereunder (the
“Securities Act”), including Regulation D (“Regulation D”), and/or upon such other
exemption from the registration requirements of the Securities Act as may be available with respect
to any or all of the investments to be made hereunder.



1.2 Purchase Price and Closing.



(a) Subject to the terms and conditions hereof, the Company agrees to issue and sell to the
Purchasers and, in consideration of and in express reliance upon the representations, warranties,
covenants, terms and conditions of this Agreement, the Purchasers, severally and not jointly, agree
to purchase the Securities (as defined in Section 1.3(b)) for an aggregate initial purchase price
of $6,003,113.04, without giving effect to the potential mandatory exercise of the Cash Warrants
(the “Purchase Price”). At the Closing, each Purchaser shall deliver the applicable
portion of the Purchase Price as indicated on Exhibit A hereto by wire transfer of
immediately available funds to the Company.



(b) The closing under this Agreement (the “Closing”) shall take place on or before May
28, 2010 (the “Closing Date”), provided, that all of the conditions set forth in Article 5
hereof and applicable to the Closing have been fulfilled or waived in accordance herewith. The
Closing shall take place at the offices of the Company, 4365 Executive Drive, 3rd Floor,
San Diego, California 92121 at 2:00 p.m. Pacific Standard Time, or at such other time and place as
the parties may agree. Subject to the terms and conditions of this Agreement, at the Closing, each
Purchaser shall purchase and the Company shall issue and deliver or cause to be delivered to each
Purchaser Securities in the amounts set forth opposite the name of such Purchaser on Exhibit
A hereto.



1.3 Conversion Shares; Reverse Stock Split.



(a) The Company shall (i) on or before the date that is three Weeks (as defined in the
Certificate of Designations as defined in Section 2.1(f)) following the Closing Date, file a
preliminary proxy statement on Schedule 14A with the Securities Exchange Commission (“SEC”)
relating to: (A) not less than two (2) separately proposed reverse stock splits of the Company’s
outstanding shares of Common Stock (each a “Reverse Split” and, together, the “Reverse
Splits”), (B) an amendment to the Company’s Certificate of Incorporation (the “Charter
Amendment”) to (y) increase the number of shares of authorized Common Stock (the
“Authorized Share Increase”), and (z) decrease the par value of the Common Stock, the
Company’s Series A Preferred Stock and the Preferred Stock to $0.0001 per share, (C) the election
of directors, and (D) the adoption of a new equity compensation plan and the amendment to the
Company’s existing employee stock purchase plan to increase the number of shares available
thereunder, provided that such new equity compensation plan and amended employee stock purchase
plan shall each have been approved by the Purchasers holding at least 66-2/3% of the then
outstanding Preferred Stock held by all holders of Preferred Stock other than any Defaulting
Purchaser (as defined in Section 4.3) (the “Requisite Holders”) (such proxy statement being
referred to herein as the “Required Proxy Statement” and such proposals being the
“Meeting Proposals”), and (ii) hold the stockholder meeting relating to the Reverse Splits
and the Charter Amendment (the “Requisite Meeting”) on or before the date that is (A) seven
Weeks following the determination that the Required Proxy Statement will not be reviewed by the SEC
or (B) seven Weeks following the completion of any review of the Required Proxy Statement by the
SEC, as applicable. The ratio of the Reverse Splits, the date upon which any Reverse Split shall
be effective and the amount of the Authorized Share Increase shall each be determined by the
Company’s Board of Directors and shall each be approved by the Requisite Holders. No Reverse Split
nor the Authorized Share Increase shall be effected without the approval of the Company’s Board of
Directors and the Requisite Holders as set forth in the preceding sentence. Each Purchaser holding
any securities of the Company as of the record date for the Requisite Meeting agrees: (a) with
respect to any shares held in record name, to appoint authorized representatives of the Company as
its proxies to vote all shares of Common Stock then held by such Purchaser that are eligible to
vote in favor of the Meeting Proposals, and (b) with respect to any shares of Common Stock held in
street name, to instruct the brokerage firm having custody of such shares of Common Stock to
appoint authorized representatives of the Company as its proxies to vote all shares of Common Stock
then beneficially held by such Purchaser that are eligible to vote in favor of the Meeting
Proposals.



(b) Any shares of Common Stock issuable upon conversion or otherwise in respect of the
Preferred Stock are herein referred to as the “Conversion Shares.” The Common Stock issued
or issuable under this Agreement, the Preferred Stock, the Warrants and the Conversion Shares are
sometimes collectively referred to herein as the “Securities.”



(c) Without limiting the other rights or remedies of the Purchasers under this Agreement or
the Certificate of Designations (as defined in Section 2.1(f)), in the event that the Company has
not for any reason held the Requisite Meeting on or prior to January 13, 2011 (the “Meeting
Deadline Date”), then the Company shall pay to each Purchaser, on (i) the Meeting Deadline Date
and (ii) the last day of each Week elapsed following the Meeting Deadline Date until the Requisite
Meeting is held, in each instance set forth in clauses (i) and (ii), a cash payment in an amount
equal to three percent (3%) of the purchase price paid by such Purchaser for shares of Series C-1
Preferred at the Closing.



ARTICLE 2




REPRESENTATIONS AND WARRANTIES




2.1 Representations and Warranties of the Company. The Company hereby represents and
warrants to the Purchasers, as of the Closing Date, except (a) as set forth in the Public Filings
(as defined in Section 2.1(g)) or (b) on the schedule of exceptions attached hereto with each
numbered schedule thereof corresponding to the section number herein (the “Schedule of
Exceptions”), as follows:



(a) Organization, Good Standing and Power. The Company is a corporation duly
incorporated, validly existing and in good standing under the laws of the State of Delaware and has
the requisite corporate power to own, lease and operate its properties and assets and to conduct
its business as it is now being conducted. The Company does not have any direct or indirect
Subsidiaries (as defined in Section 2.1(h)) or own securities of any kind in any other entity
except as set forth on Schedule 2.1(h) hereto. The Company and each such Subsidiary is
duly qualified as a foreign corporation to do business and is in good standing in every
jurisdiction in which the nature of the business conducted or property owned by it makes such
qualification necessary except for any jurisdiction(s) (alone or in the aggregate) in which the
failure to be so qualified will not have a Material Adverse Effect. For the purposes of this
Agreement, “Material Adverse Effect” means any material adverse effect on the business,
operations, properties, prospects, or financial condition of the Company and its Subsidiaries
and/or any condition, circumstance, or situation that would prohibit or otherwise materially
interfere with the ability of the Company to perform any of its material obligations under this
Agreement or any of the Transaction Documents (as defined in Section 2.1(b)) in any material
respect.



(b) Authorization; Enforcement. Each of the Company and its Subsidiaries (as
applicable) has the requisite corporate power and authority to enter into and perform this
Agreement, the Warrants and the Officer’s Certificate to be delivered by the Company, dated as of
the Closing Date, substantially in the form of Exhibit D attached hereto (the
“Officer’s Certificate” and collectively with this Agreement and the Warrants, the
“Transaction Documents”) and to issue and sell the Securities in accordance with the terms
hereof. The execution, delivery and performance of the Transaction Documents by the Company and
each Subsidiary of the Company party thereto and the consummation by it of the transactions
contemplated thereby have been duly and validly authorized by all necessary corporate action, and,
except as set forth on Schedule 2.1(b) or as otherwise contemplated herein, no further
consent or authorization of the Company, any Subsidiary or their respective Boards of Directors or
stockholders is required. When executed and delivered by the Company and each Subsidiary of the
Company party thereto, each of the Transaction Documents shall constitute a valid and binding
obligation of the Company and each Subsidiary, as applicable, enforceable against the Company and
each Subsidiary, as applicable, in accordance with its terms, except as such enforceability may be
limited by applicable bankruptcy, reorganization, moratorium, liquidation, conservatorship,
receivership or similar laws relating to, or affecting generally the enforcement of, creditor’s
rights and remedies or by other equitable principles of general application.



(c) Capitalization. The authorized capital stock of the Company and the issued and
outstanding shares of capital stock of the Company as of the Closing Date is set forth on
Schedule 2.1(c) hereto. All of the outstanding shares of the Common Stock and any other
outstanding security of the Company have been duly and validly authorized. Except as set forth in
this Agreement, the Public Filings or as set forth on Schedule 2.1(c) hereto, no shares of
Common Stock or any other security of the Company are entitled to preemptive rights or registration
rights and there are no outstanding options, warrants, scrip, rights to subscribe to, calls or
commitments of any character whatsoever relating to, or securities or rights convertible into, any
shares of capital stock of the Company. Furthermore, except as set forth in this Agreement and as
set forth on Schedule 2.1(c) hereto, there are no equity plans, contracts, commitments,
understandings, or arrangements by which the Company is or may become bound to issue additional
shares of the capital stock of the Company or options, securities or rights convertible into shares
of capital stock of the Company. Except for customary transfer restrictions contained in
agreements entered into by the Company in order to sell restricted securities or as provided on
Schedule 2.1(c) hereto, the Company is not a party to or bound by any agreement or
understanding granting registration or anti-dilution rights to any person with respect to any of
its equity or debt securities. Except as set forth on Schedule 2.1(c), the Company is not
a party to, and it has no knowledge of, any agreement or understanding restricting the voting or
transfer of any shares of the capital stock of the Company. Except as set forth on Schedule 8.18,
the Company has not made any representations regarding equity incentives to any officer, employee,
director or consultant that are not disclosed in the Public Filings.



(d) Issuance of Securities. The Common Stock, Preferred Stock and Warrants to be
issued at the Closing have been duly authorized by all necessary corporate action and, when paid
for or issued in accordance with the terms hereof, such Common Stock, Preferred Stock and Warrants
shall be validly issued and outstanding, fully paid and nonassessable, free and clear of all liens,
encumbrances and rights of refusal of any kind. When the Subsequent Cashless Warrants, Preferred
Stock issuable upon exercise of the Warrants and Conversion Shares are issued (following approval
of the Authorized Share Increase), such Subsequent Cashless Warrants, Preferred Stock and
Conversion Shares will be duly authorized by all necessary corporate action and validly issued and
outstanding, fully paid and nonassessable, free and clear of all liens, encumbrances and rights of
refusal of any kind. When the Conversion Shares are issued, the holders shall be entitled to all
rights accorded to a holder of Common Stock. Each share of Preferred Stock shall have the rights,
preferences, privileges and restrictions set forth in the Certificate of Designations. The
certificates to be used to evidence the Preferred Stock will comply in all material respects with
all applicable legal requirements, the requirements of the Company’s Certificate of Incorporation
and the Certificate of Designations (collectively, the “Certificate”) and the Bylaws of the
Company (the “Bylaws”).



(e) No Conflicts. The execution, delivery and performance of the Transaction
Documents by the Company and its Subsidiaries (as applicable), the performance by the Company of
its obligations under the Warrants, and the consummation by the Company and its Subsidiaries of the
transactions contemplated hereby and thereby, and the issuance of the Securities as contemplated
hereby and thereby, do not and will not (i) violate or conflict with any provision of the
Certificate or the Bylaws, each as amended to date, or any Subsidiary’s comparable charter
documents, subject to the filing of an amendment to the Certificate to increase the authorized
shares, (ii) conflict with, or constitute a default (or an event which with notice or lapse of time
or both would become a default) under, or give to others any rights of termination, amendment,
acceleration or cancellation of, any agreement, mortgage, deed of trust, indenture, note, bond,
license, lease agreement, instrument or obligation to which the Company or any of its Subsidiaries
is a party or by which the Company or any of its Subsidiaries’ respective properties or assets are
bound, (iii) result in a violation of any federal, state, local or foreign statute, rule,
regulation, order, judgment or decree (including federal and state securities laws and regulations)
applicable to the Company or any of its Subsidiaries or by which any property or asset of the
Company or any of its Subsidiaries are bound or affected, or (iv) create or impose a lien,
mortgage, security interest, charge or encumbrance of any nature on any property or asset of the
Company or its Subsidiaries under any agreement or any commitment to which the Company or any of
its Subsidiaries is a party or by which the Company or any of its Subsidiaries is bound or by which
any of their respective properties or assets are bound, except, in the case of clause (ii), for
such conflicts, defaults, terminations, amendments, acceleration, cancellations and violations as
would not, individually or in the aggregate, have a Material Adverse Effect. Neither the Company
nor any of its Subsidiaries is required under federal, state, foreign or local law, rule or
regulation to obtain any consent, authorization or order of, or make any filing or registration
with, any court or governmental agency in order for it to execute, deliver or perform any of its
obligations under the Transaction Documents, issue and sell the Securities in accordance with the
terms hereof (other than the filing of a Form D pursuant to Regulation D and counterpart filings
under applicable state securities laws, rules or regulations). The business of the Company and its
Subsidiaries is not being conducted in violation of any laws, ordinances or regulations of any
governmental entity.



(f) Authorization of Certificate of Designations. The Certificate of Designations,
Preferences and Rights of Series C-1 Convertible Preferred Stock, Series C-2 Convertible Preferred
Stock, Series D-1 Convertible Preferred Stock and Series D-2 Convertible Preferred Stock of La
Jolla Pharmaceutical Company, substantially in the form attached hereto as Exhibit E (the
“Certificate of Designations”), has been duly and validly authorized by the Company and,
when filed by the Company with the Secretary of State of the State of Delaware, will be legally
valid and effective and enforceable against the Company in accordance with its terms.



(g) Commission Documents, Financial Statements. The Common Stock of the Company is
registered pursuant to Section 12(b) or 12(g) of the Securities Exchange Act of 1934, as amended
(the “Exchange Act”), and, since January 1, 2009, the Company has timely filed all reports,
schedules, forms, statements and other documents required to be filed by it with the SEC pursuant
to the reporting requirements of the Exchange Act (all of the foregoing including filings
incorporated by reference therein being referred to herein as the “Commission Documents”).
At the times of their respective filings, the Form 10-K for the fiscal year ended December 31, 2009
(the “Form 10-K”) and any other report, schedule, form, statement or other document filed
by the Company with the SEC pursuant to the reporting requirements of the Exchange Act subsequent
to December 31, 2009 and prior to the Closing Date (collectively with the Form 10-K, the
“Public Filings”) complied in all material respects with the requirements of the Exchange
Act and the rules and regulations of the SEC promulgated thereunder and other federal, state and
local laws, rules and regulations applicable to such documents, and the Public Filings did not
contain any untrue statement of a material fact or omit to state a material fact required to be
stated therein or necessary in order to make the statements therein, in light of the circumstances
under which they were made, not misleading. As of their respective dates, the financial statements
of the Company included in the Commission Documents complied as to form in all material respects
with applicable accounting requirements and the published rules and regulations of the SEC or other
applicable rules and regulations with respect thereto. Such financial statements have been
prepared in accordance with generally accepted accounting principles (“GAAP”) applied on a
consistent basis during the periods involved (except (i) as may be otherwise indicated in such
financial statements or the notes thereto or (ii) in the case of unaudited interim statements, to
the extent they may not include footnotes or may be condensed or summary statements), and fairly
present in all material respects the financial position of the Company and its Subsidiaries as of
the dates thereof and the results of operations and cash flows for the periods then ended (subject,
in the case of unaudited statements, to normal year-end audit adjustments).



(h) Subsidiaries. Schedule 2.1(h) hereto sets forth each Subsidiary of the
Company, showing the jurisdiction of its incorporation or organization and showing the percentage
of each person’s ownership of the outstanding stock or other interests of such Subsidiary. For the
purposes of this Agreement, “Subsidiary” shall mean any corporation or other entity of
which at least a majority of the securities or other ownership interest having ordinary voting
power (absolutely or contingently) for the election of directors or other persons performing
similar functions are at the time owned directly or indirectly by the Company and/or any of its
other Subsidiaries. All of the outstanding shares of capital stock of each Subsidiary have been
duly authorized and validly issued, and are fully paid and nonassessable. Except as set forth on
Schedule 2.1(h) hereto, there are no outstanding preemptive, conversion or other rights,
options, warrants or agreements granted or issued by or binding upon any Subsidiary for the
purchase or acquisition of any shares of capital stock of any Subsidiary or any other securities
convertible into, exchangeable for or evidencing the rights to subscribe for any shares of such
capital stock. Neither the Company nor any Subsidiary is subject to any obligation (contingent or
otherwise) to repurchase or otherwise acquire or retire any shares of the capital stock of any
Subsidiary or any convertible securities, rights, warrants or options of the type described in the
preceding sentence except as set forth on Schedule 2.1(h) hereto. Neither the Company nor
any Subsidiary is party to, nor has any knowledge of, any agreement restricting the voting or
transfer of any shares of the capital stock of any Subsidiary. None of the Subsidiaries owns any
assets or conduct any operations.



(i) No Material Adverse Change. Since December 31, 2009, the Company has not
experienced or suffered any Material Adverse Effect, except as disclosed on Schedule 2.1(i)
hereto.



(j) No Undisclosed Liabilities. Since December 31, 2009, except as disclosed on
Schedule 2.1(j) hereto, neither the Company nor any of its Subsidiaries has incurred any
liabilities, obligations, claims or losses (whether liquidated or unliquidated, secured or
unsecured, absolute, accrued, contingent or otherwise) other than those incurred in the ordinary
course of the Company’s or its Subsidiaries’ respective businesses or which, individually or in the
aggregate, are not reasonably likely to have a Material Adverse Effect.



(k) No Undisclosed Events or Circumstances. Since December 31, 2009, except as
disclosed on Schedule 2.1(k) hereto, no event or circumstance has occurred or exists with
respect to the Company or its Subsidiaries or their respective businesses, properties, prospects,
operations or financial condition, which, under applicable law, rule or regulation, requires public
disclosure or announcement by the Company but which has not been so publicly announced or
disclosed.



(l) Indebtedness. Schedule 2.1(l) hereto sets forth as of the Closing Date
all outstanding secured and unsecured Indebtedness of the Company or any Subsidiary, or for which
the Company or any Subsidiary has commitments. For the purposes of this Agreement,
“Indebtedness” shall include, without limitation, (a) any liabilities for borrowed money;
(b) all guaranties, endorsements and other contingent obligations in respect of Indebtedness of
others, whether or not the same are or should be reflected in the Company’s balance sheet (or the
notes thereto), except guaranties by endorsement of negotiable instruments for deposit or
collection or similar transactions in the ordinary course of business; and (c) all leases required
to be capitalized in accordance with GAAP. Neither the Company nor any Subsidiary is in default
with respect to any Indebtedness.



(m) Title to Assets. Each of the Company and the Subsidiaries has good and valid
title to all of its real and personal property reflected in the Public Filings, free and clear of
any mortgages, pledges, charges, liens, security interests or other encumbrances, except for those
indicated on Schedule 2.1(m) hereto or such that, individually or in the aggregate, do not
cause a Material Adverse Effect. Any leases of the Company and each of its Subsidiaries are valid
and subsisting and in full force and effect.



(n) Actions Pending. There is no action, suit, claim, investigation, arbitration,
alternate dispute resolution proceeding or other proceeding pending or, to the knowledge of the
Company, threatened against the Company or any Subsidiary which questions the validity of this
Agreement or any of the other Transaction Documents or any of the transactions contemplated hereby
or thereby or any action taken or to be taken pursuant hereto or thereto. Except as set forth in
the Public Filings or on Schedule 2.1(n) hereto, there is no action, suit, claim,
investigation, arbitration, alternate dispute resolution proceeding or other proceeding pending or,
to the knowledge of the Company, threatened against or involving the Company, any Subsidiary or any
of their respective properties or assets, which individually or in the aggregate, would reasonably
be expected, if adversely determined, to have a Material Adverse Effect. There are no outstanding
orders, judgments, injunctions, awards or decrees of any court, arbitrator or governmental or
regulatory body against the Company or any Subsidiary or any officers or directors of the Company
or Subsidiary in their capacities as such, which individually or in the aggregate, could reasonably
be expected to have a Material Adverse Effect.



(o) Compliance with Law. The Company and its Subsidiaries have been and are presently
conducting their respective businesses in accordance with all applicable federal, state and local
governmental laws, rules, regulations and ordinances, except such that, individually or in the
aggregate, the noncompliance therewith could not reasonably be expected to have a Material Adverse
Effect. The Company and each of its Subsidiaries have all franchises, permits, licenses, consents
and other governmental or regulatory authorizations and approvals necessary for the conduct of its
business as now being conducted by it unless the failure to possess such franchises, permits,
licenses, consents and other governmental or regulatory authorizations and approvals, individually
or in the aggregate, could not reasonably be expected to have a Material Adverse Effect.



(p) Taxes. The Company and each of the Subsidiaries has accurately prepared and filed
all federal, state and other tax returns required by law to be filed by it, has paid or made
provisions for the payment of all taxes shown to be due and all additional assessments, and
adequate provisions have been and are reflected in the financial statements of the Company and the
Subsidiaries for all current taxes and other charges to which the Company or any Subsidiary is
subject and which are not currently due and payable. Except as disclosed on Schedule
2.1(p) hereto or in the Public Filings, to the Company’s knowledge, none of the federal income
tax returns of the Company or any Subsidiary have been audited by the Internal Revenue Service.
Except as disclosed on Schedule 2.1(p) hereto or in the Public Filings, the Company has no
knowledge of any additional assessments, adjustments or contingent tax liability (whether federal
or state) of any nature whatsoever, whether pending or threatened against the Company or any
Subsidiary for any period, nor of any basis for any such assessment, adjustment or contingency.



(q) Certain Fees. Except as set forth on Schedule 2.1(q) hereto, the Company
has not employed any broker or finder or incurred any liability for any brokerage or investment
banking fees, commissions, finders’ structuring fees, financial advisory fees or other similar fees
in connection with the Transaction Documents.



(r) Disclosure. Except for the information concerning the transactions contemplated
by this Agreement, the Company confirms that neither it nor any other person acting on its behalf
has provided any of the Purchasers or their agents or counsel with any information that constitutes
or might constitute material, nonpublic information. To the Company’s knowledge, neither this
Agreement or the Schedules hereto nor any other documents, certificates or instruments furnished to
the Purchasers by or on behalf of the Company or any Subsidiary in connection with the transactions
contemplated by this Agreement contain any untrue statement of a material fact or omit to state a
material fact necessary in order to make the statements made herein or therein, in the light of the
circumstances under which they were made herein or therein, not misleading.



(s) Environmental Compliance. To the Company’s knowledge, the Company and each of its
Subsidiaries are in compliance with all limitations, restrictions, conditions, standards,
requirements, schedules and timetables required or imposed under all applicable Environmental Laws.
“Environmental Laws” shall mean all applicable laws relating to the protection of the
environment including, without limitation, all requirements pertaining to reporting, licensing,
permitting, controlling, investigating or remediating emissions, discharges, releases or threatened
releases of hazardous substances, chemical substances, pollutants, contaminants or toxic
substances, materials or wastes, whether solid, liquid or gaseous in nature, into the air, surface
water, groundwater or land, or relating to the manufacture, processing, distribution, use,
treatment, storage, disposal, transport or handling of hazardous substances, chemical substances,
pollutants, contaminants or toxic substances, material or wastes, whether solid, liquid or gaseous
in nature. Except for such instances as would not individually or in the aggregate have a Material
Adverse Effect, there are, to the knowledge of the Company, no past or present events, conditions,
circumstances, incidents, actions or omissions by or on the part of the Company or its Subsidiaries
that violate or may violate any Environmental Law after the Closing Date or that may give rise to
any environmental liability, or otherwise form the basis of any claim, action, demand, suit,
proceeding, hearing, study or investigation (i) under any Environmental Law, or (ii) based on or
related to the manufacture, processing, distribution, use, treatment, storage (including without
limitation underground storage tanks), disposal, transport or handling, or the emission, discharge,
release or threatened release of any hazardous substance.



(t) Books and Records; Internal Accounting Controls. The records and documents of the
Company and its Subsidiaries accurately reflect in all material respects the information relating
to the business of the Company and the Subsidiaries, the location and collection of their assets,
and the nature of all transactions giving rise to the obligations or accounts receivable of the
Company or any Subsidiary. The Company is in material compliance with all provisions of the
Sarbanes-Oxley Act of 2002 which are applicable to it as of the Closing Date. The Company and its
Subsidiaries maintain a system of internal accounting controls sufficient to provide reasonable
assurance that (i) transactions are executed in accordance with management’s general or specific
authorizations, (ii) transactions are recorded as necessary to permit preparation of financial
statements in conformity with GAAP and to maintain asset accountability, (iii) access to assets is
permitted only in accordance with management’s general or specific authorization, and (iv) the
recorded accountability for assets is compared with the existing assets at reasonable intervals and
appropriate action is taken with respect to any differences. The Company has established
disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) for
the Company and designed such disclosure controls and procedures to ensure that information
required to be disclosed by the Company in the reports it files or submits under the Exchange Act
is recorded, processed, summarized and reported, within the time periods specified in the SEC’s
rules and forms. The Company’s certifying officers have evaluated the effectiveness of the
Company’s disclosure controls and procedures as of the end of the period covered by the Company’s
most recently filed periodic report under the Exchange Act (such date, the “Evaluation
Date”). The Company presented in its most recently filed periodic report under the Exchange
Act the conclusions of the certifying officers about the effectiveness of the disclosure controls
and procedures based on their evaluations as of the Evaluation Date. Since the Evaluation Date,
there have been no changes in the Company’s internal control over financial reporting (as such term
is defined in the Exchange Act) that has materially affected, or is reasonably likely to materially
affect, the Company’s internal control over financial reporting.



(u) Material Agreements. Except as disclosed in the Public Filings or as set forth
on Schedule 2.1(u) hereto, or as would not be reasonably likely to have a Material Adverse
Effect, (i) the Company and each of its Subsidiaries have performed all obligations required to be
performed by them to date under any written or oral contract, instrument, agreement, commitment,
obligation, plan or arrangement, filed or required to be filed with the SEC (the “Material
Agreements”), (ii) neither the Company nor any of its Subsidiaries has received any notice of
default under any Material Agreement which has not since been cured or settled and, (iii) to the
Company’s knowledge, neither the Company nor any of its Subsidiaries is in default under any
Material Agreement now in effect.



(v) Transactions with Affiliates. Except as set forth on Schedule 2.1(v)
hereto or in the Public Filings and otherwise contemplated by this Agreement, there are no loans,
leases, agreements, contracts, royalty agreements, management contracts or arrangements or other
continuing transactions between (a) the Company, any Subsidiary or any of their respective
customers or suppliers on the one hand, and (b) on the other hand, any officer, employee,
consultant or director of the Company, or any of its Subsidiaries, or any person owning at least 5%
of the outstanding capital stock of the Company or any Subsidiary or any member of the immediate
family of such officer, employee, consultant, director or stockholder or any corporation or other
entity controlled by such officer, employee, consultant, director or stockholder, or a member of
the immediate family of such officer, employee, consultant, director or stockholder which, in each
case, is required to be disclosed in the Commission Documents or in the Company’s most recently
filed definitive proxy statement on Schedule 14A, that is not so disclosed in the Commission
Documents or in such proxy statement.



(w) Securities Act of 1933. The Company has complied and will comply with all
applicable federal and state securities laws in connection with the offer, issuance and sale of the
Securities hereunder. Neither the Company nor anyone acting on its behalf, directly or indirectly,
has or will sell, offer to sell or solicit offers to buy any of the Securities or similar
securities to, or solicit offers with respect thereto from, or enter into any negotiations relating
thereto with, any person, or has taken or will take any action so as to bring the issuance and sale
of any of the Securities under the registration provisions of the Securities Act and applicable
state securities laws, and neither the Company nor any of its affiliates, nor any person acting on
its or their behalf, has engaged in any form of general solicitation or general advertising (within
the meaning of Regulation D under the Securities Act) in connection with the offer or sale of any
of the Securities.



(x) Employees. Neither the Company nor any Subsidiary has any collective bargaining
arrangements or agreements covering any of its employees, except as set forth on Schedule
2.1(x) hereto. Except as set forth on Schedule 2.1(x) hereto or in the Public Filings,
neither the Company nor any Subsidiary has any employment contract, agreement regarding proprietary
information, non-competition agreement, non-solicitation agreement, confidentiality agreement, or
any other similar contract or restrictive covenant, relating to the right of any officer, employee
or consultant to be employed or engaged by the Company or such Subsidiary required to be disclosed
in the Commission Documents that is not so disclosed. No officer, consultant or key employee of
the Company or any Subsidiary whose termination, either individually or in the aggregate, would be
reasonably likely to have a Material Adverse Effect, has terminated or, to the knowledge of the
Company, has any present intention of terminating his or her employment or engagement with the
Company or any Subsidiary.



(y) Absence of Certain Developments. Except as set forth in the Public Filings or
provided on Schedule 2.1(y) hereto or as otherwise contemplated by this Agreement, since
December 31, 2009, neither the Company nor any Subsidiary has:



(i) issued any stock, bonds or other corporate securities or any right, options or warrants
with respect thereto;



(ii) borrowed any amount in excess of $50,000 or incurred or become subject to any other
liabilities in excess of $50,000 (absolute or contingent) except current liabilities incurred in
the ordinary course of business which are comparable in nature and amount to the current
liabilities incurred in the ordinary course of business during the comparable portion of its prior
fiscal year, as adjusted to reflect the current nature and volume of the business of the Company
and its Subsidiaries;



(iii) discharged or satisfied any lien or encumbrance in excess of $50,000 or paid any
obligation or liability (absolute or contingent) in excess of $50,000, other than current
liabilities paid in the ordinary course of business;



(iv) declared or made any payment or distribution of cash or other property to stockholders
with respect to its stock, or purchased or redeemed, or made any agreements so to purchase or
redeem, any shares of its capital stock, in each case in excess of $5,000 individually or $10,000
in the aggregate;



(v) sold, assigned or transferred any other tangible assets, or canceled any debts or claims,
in each case in excess of $50,000, except in the ordinary course of business;



(vi) sold, assigned or transferred any patent rights, trademarks, trade names, copyrights,
trade secrets or other intangible assets or intellectual property rights in excess of $50,000, or
disclosed any proprietary confidential information to any person except to customers in the
ordinary course of business or to the Purchasers or their representatives;



(vii) suffered any material losses or waived any rights of material value, whether or not in
the ordinary course of business, or suffered the loss of any material amount of prospective
business;



(viii) made any changes in employee compensation except in the ordinary course of business and
consistent with past practices;



(ix) made capital expenditures or commitments therefor that aggregate in excess of $50,000;



(x) entered into any material transaction, whether or not in the ordinary course of business;



(xi) made charitable contributions or pledges in excess of $10,000;



(xii) suffered any material damage, destruction or casualty loss, whether or not covered by
insurance;



(xiii) experienced any material problems with labor or management in connection with the terms
and conditions of their employment; or



(xiv) entered into an agreement, written or otherwise, to take any of the foregoing actions.



(z) Investment Company Act Status. The Company is not, and as a result of and
immediately upon the Closing will not be, an “investment company” or a company “controlled” by an
“investment company,” within the meaning of the Investment Company Act of 1940, as amended.



(aa) Independent Nature of Purchasers. The Company acknowledges that the obligations
of each Purchaser under the Transaction Documents are several and not joint with the obligations of
any other Purchaser, and no Purchaser shall be responsible in any way for the performance of the
obligations of any other Purchaser under the Transaction Documents. The Company acknowledges that
the decision of each Purchaser to purchase Securities pursuant to this Agreement has been made by
such Purchaser independently of any other purchase and independently of any information, materials,
statements or opinions as to the business, affairs, operations, assets, properties, liabilities,
results of operations, condition (financial or otherwise) or prospects of the Company or of its
Subsidiaries which may have made or given by any other Purchaser or by any agent or employee of any
other Purchaser, and no Purchaser or any of its agents or employees shall have any liability to any
Purchaser (or any other person) relating to or arising from any such information, materials,
statements or opinions. The Company acknowledges that nothing contained herein, or in any
Transaction Document, and no action taken by any Purchaser pursuant hereto or thereto, shall be
deemed to constitute the Purchasers as a partnership, an association, a joint venture or any other
kind of entity, or create a presumption that the Purchasers are in any way acting in concert or as
a group with respect to such obligations or the transactions contemplated by the Transaction
Documents. The Company acknowledges that for reasons of administrative convenience only, the
Transaction Documents have been prepared by counsel for one of the Purchasers and such counsel does
not represent all of the Purchasers but only such Purchaser and the other Purchasers have retained
their own individual counsel with respect to the transactions contemplated hereby. The Company
acknowledges that it has elected to provide all Purchasers with the same terms and Transaction
Documents for the convenience of the Company and not because it was required or requested to do so
by the Purchasers. The Company acknowledges that such procedure with respect to the Transaction
Documents in no way creates a presumption that the Purchasers are in any way acting in concert or
as a group with respect to the Transaction Documents or the transactions contemplated hereby or
thereby. The Company acknowledges that each Purchaser shall be entitled to independently protect
and enforce its rights, including without limitation, the rights arising out of this Agreement or
out of the other Transaction Documents, and it shall not be necessary for any other Purchaser to be
joined as an additional party in any proceeding for such purpose.



(bb) 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
security or solicited any offers to buy any security under circumstances that would cause the
offering of the Securities pursuant to this Agreement to be integrated with prior offerings by the
Company for purposes of the Securities Act which would prevent the Company from selling the
Securities pursuant to Regulation D and Rule 506 thereof under the Securities Act nor will the
Company or any of its affiliates or subsidiaries take any action or steps that would cause the
offering of the Securities to be integrated with other offerings if to do so would prevent the
Company from selling Securities pursuant to Regulation D and Rule 506 thereof under the Securities
Act or otherwise prevent a completed offering of Securities hereunder. Except as set forth on
Schedule 2.1(bb) hereto, the Company does not have any registration statement pending
before the SEC or currently under the SEC’s review and since December 31, 2009, the Company has not
offered or sold any of its equity securities or debt securities convertible into shares of Common
Stock.



(cc) Dilutive Effect. The Company understands and acknowledges that its obligation to
issue Conversion Shares in accordance with this Agreement and the Preferred Stock is absolute and
unconditional regardless of the dilutive effect that such issuance may have on the ownership
interest of other stockholders of the Company.



(dd) DTC Status. Except as set forth on Schedule 2.1(dd) hereto, the
Company’s transfer agent is a participant in and the Common Stock is eligible for transfer pursuant
to the Depository Trust Company Automated Securities Transfer Program. The name, address,
telephone number, fax number, contact person and email of the Company transfer agent is set forth
on Schedule 2.1(dd) hereto.



(ee) Governmental Approvals. Except for (i) the filing of any notice prior or
subsequent to the Closing that may be required under applicable state and/or federal securities
laws (which if required, shall be filed on a timely basis), and (ii) required filings that must be
made with the Delaware Secretary of State to give effect to the Reverse Splits and the Charter
Amendment, no authorization, consent, approval, license, exemption of, filing or registration with
any court or governmental department, commission, board, bureau, agency or instrumentality,
domestic or foreign, is or will be necessary for, or in connection with, the execution or delivery
of the Conversion Shares, or for the performance by the Company of its obligations under the
Transaction Documents.



(ff) Insurance. The Company and each of its Subsidiaries are insured by insurers of
recognized financial responsibility against such losses and risks and in such amounts as management
of the Company believes to be prudent and customary in the businesses in which the Company and its
Subsidiaries are engaged. Neither the Company nor any such Subsidiary has been refused any
insurance coverage sought or applied for and neither the Company nor any such Subsidiary has any
reason to believe that it will not be able to renew its existing insurance coverage as and when
such coverage expires or to obtain similar coverage from similar insurers as may be necessary to
continue its business at a cost that would not have a Material Adverse Effect.



(gg) Trading Activities. Except as set forth herein or in the Warrants, it is
understood and acknowledged by the Company that none of the Purchasers have been asked to agree,
nor has any Purchaser agreed, to desist from purchasing or selling, long and/or short, securities
of the Company, or “derivative” securities based on securities issued by the Company or to hold the
Securities for any specified term. The Company further understands and acknowledges that one or
more Purchasers may engage in hedging and/or trading activities at various times during the period
that the Securities are outstanding and (b) such hedging and/or trading activities, if any, can
reduce the value of the existing stockholders’ equity interest in the Company both at and after the
time the hedging and/or trading activities are being conducted. The Company acknowledges that such
aforementioned hedging and/or trading activities, assuming such trading and hedging activities are
in compliance with all applicable securities laws and subject to the representations and warranties
set forth in Section 2.2(j), do not otherwise constitute a breach of this Agreement, the Warrants
or any of the documents executed in connection herewith.



(hh) Company Status. Since December 31, 2008, the Company has not been, and through
the consummation of a Strategic Transaction (as defined in the Certificate of Designations), the
Company will not be, a “shell company” or a “blank check company,” each as defined by the
applicable rules and regulations of the SEC.



2.2 Representations and Warranties of the Purchasers. Each of the Purchasers hereby
represents and warrants to the Company with respect solely to itself and not with respect to any
other Purchaser as follows as of the date hereof and as of the Closing Date:



(a) Organization and Standing of the Purchasers. If the Purchaser is an entity, such
Purchaser is a corporation, limited liability company or partnership duly incorporated or
organized, validly existing and in good standing under the laws of the jurisdiction of its
incorporation or organization.



(b) Authorization and Power. Each Purchaser has the requisite power and authority to
enter into and perform the Transaction Documents and to purchase the Securities being sold to it
hereunder. The execution, delivery and performance of the Transaction Documents by each Purchaser
and the consummation by it of the transactions contemplated hereby and thereby have been duly
authorized by all necessary corporate or partnership action, and no further consent or
authorization of such Purchaser or its Board of Directors, stockholders, or partners, as the case
may be, is required. When executed and delivered by the Purchasers, the Transaction Documents
shall constitute valid and binding obligations of each Purchaser enforceable against such Purchaser
in accordance with their terms, except as such enforceability may be limited by applicable
bankruptcy, insolvency, reorganization, moratorium, liquidation, conservatorship, receivership or
similar laws relating to, or affecting generally the enforcement of, creditor’s rights and remedies
or by other equitable principles of general application.



(c) Acquisition for Investment. Each Purchaser is purchasing the Securities solely
for its own account and not with a view to or for sale in connection with distribution. Each
Purchaser does not have a present intention to sell any of the Securities, nor a present
arrangement (whether or not legally binding) or intention to effect any distribution of any of the
Securities to or through any person or entity; provided, however, that by making the
representations herein, such Purchaser does not agree to hold the Securities for any minimum or
other specific term and reserves the right to dispose of the Securities at any time in accordance
with federal and state securities laws applicable to such disposition. Each Purchaser acknowledges
that it (i) has such knowledge and experience in financial and business matters such that Purchaser
is capable of evaluating the merits and risks of Purchaser’s investment in the Company, (ii) is
able to bear the financial risks associated with an investment in the Securities and (iii) has been
given full access to such records of the Company and the Subsidiaries and to the officers of the
Company and the Subsidiaries as it has deemed necessary or appropriate to conduct its due diligence
investigation.



(d) Rule 144. Each Purchaser understands that the Securities must be held
indefinitely unless such Securities are registered under the Securities Act (recognizing that the
Company has no obligation hereunder to effect such registration) or an exemption from registration
is available. Each Purchaser acknowledges that such person is familiar with Rule 144 of the rules
and regulations of the SEC, as amended, promulgated pursuant to the Securities Act (“Rule
144”), and that such Purchaser has been advised that Rule 144 permits resales only under
certain circumstances. Each Purchaser understands that to the extent that Rule 144 is not
available, such Purchaser will be unable to sell any Securities without either registration under
the Securities Act or the existence of another exemption from such registration requirement.



(e) General. Each Purchaser understands that the Securities are being offered and
sold in reliance on a transactional exemption from the registration requirements of federal and
state securities laws and the Company is relying upon the truth and accuracy of the
representations, warranties, agreements, acknowledgments and understandings of such Purchaser set
forth herein in order to determine the applicability of such exemptions and the suitability of such
Purchaser to acquire the Securities. Each Purchaser understands that no United States federal or
state agency or any government or governmental agency has passed upon or made any recommendation or
endorsement of the Securities.



(f) No General Solicitation. Each Purchaser acknowledges that the Securities were not
offered to such Purchaser by means of any form of general or public solicitation or general
advertising, or publicly disseminated advertisements or sales literature, including (i) any
advertisement, article, notice or other communication published in any newspaper, magazine, or
similar media, or broadcast over television or radio, or (ii) any seminar or meeting to which such
Purchaser was invited by any of the foregoing means of communications. Each Purchaser, in making
the decision to purchase the Securities, has relied upon independent investigation made by it and
has not relied on any information or representations made by third parties, and was not solicited
through any pending registration statement of the Company described on Schedule 2.1(bb).



(g) Accredited Investor. Except as set forth on Schedule 2.2(g), each Purchaser is an
“accredited investor” (as defined in Rule 501 of Regulation D), and such Purchaser has such
experience in business and financial matters that it is capable of evaluating the merits and risks
of an investment in the Securities. Such Purchaser is not required to be registered as a
broker-dealer under Section 15 of the Exchange Act and such Purchaser is not a broker-dealer. Each
Purchaser acknowledges that an investment in the Securities is speculative and involves a high
degree of risk.



(h) Certain Fees. The Purchasers have not employed any broker or finder or incurred
any liability for any brokerage or investment banking fees, commissions, finders’ structuring fees,
financial advisory fees or other similar fees in connection with the Transaction Documents.



(i) Independent Investment. No Purchaser has agreed to act with any other Purchaser
for the purpose of acquiring, holding, voting or disposing of the Securities purchased hereunder
for purposes of Section 13(d) under the Exchange Act, and each Purchaser is acting independently
with respect to its investment in the Securities.



(j) No Short Sales. Commencing on the date that the Purchasers were initially
contacted regarding an investment in the Securities, none of the Purchasers has engaged in any
Short Sale (defined below) of the Common Stock and will not engage in any Short Sale of the Common
Stock prior to public announcement of the transactions contemplated by this Agreement pursuant to
Section 3.9, nor has any Short Sale been executed by or on behalf of the Purchaser during the
period beginning 30 days before the date hereof.  For purposes of this Agreement, “Short Sale”
means all types of direct and indirect stock pledges, forward sale contracts, options, puts, calls,
short sales, swaps and similar arrangements (including on a total return basis), and sales and
other transactions through non-U.S. broker-dealers or foreign regulated brokers, but only if
executed at a time when the Purchaser has no equivalent offsetting long position in the common
stock of the Company.



2.3 Outstanding Securities and Purchase Rights. Each Purchaser represents and
warrants that as of the Closing, such Purchaser holds the Company securities in the principal
amounts set forth on such Purchaser’s signature page hereto.



ARTICLE 3




COMPANY COVENANTS




Unless otherwise specified in this Article, for so long as any Preferred Stock or Warrants
remain outstanding in whole or in part, the Company covenants with each Purchaser as follows, which
covenants are for the benefit of each Purchaser and their respective permitted assignees.



3.1 Securities Compliance. The Company shall notify the SEC in accordance with its
rules and regulations of the transactions contemplated by any of the Transaction Documents and
shall take all other necessary action and proceedings as may be required by applicable law, rule
and regulation, for the legal and valid issuance of the Securities to the Purchasers, or their
respective subsequent holders.



3.2 Registration and Listing. The Company shall (a) cause its Common Stock to
continue to be registered under Sections 12(b) or 12(g) of the Exchange Act, (b) comply in all
respects with its reporting and filing obligations under the Exchange Act and (c) not take any
action or file any document (whether or not permitted by the Securities Act or the rules
promulgated thereunder) to terminate or suspend such registration or to terminate or suspend its
reporting and filing obligations under the Exchange Act or Securities Act. The Company will use
reasonable best efforts to continue the listing or trading of its Common Stock on The OTC Bulletin
Board or the Pink Sheets (as applicable, the “Principal Market”). The Company further
covenants that it will take such further action as the Purchasers may reasonably request from time
to time to enable the Purchasers to sell the Securities without registration under the Securities
Act pursuant to the exemption provided by Rule 144, provided that the Company shall not be required
to consent to the service of process in any jurisdiction in connection with any such request. Upon
the request of the Purchasers, the Company shall deliver to the Purchasers a written certification
of a duly authorized officer as to whether it has complied with such requirements.



3.3 Compliance with Laws. The Company shall comply, and cause each Subsidiary to
comply, with all applicable laws, rules, regulations and orders, noncompliance with which would be
reasonably likely to have a Material Adverse Effect.



3.4 Keeping of Records and Books of Account. The Company shall keep and cause each
Subsidiary to keep adequate records and books of account, in which complete entries will be made in
accordance with GAAP consistently applied, (a) reflecting all financial transactions of the
Company and its Subsidiaries, and (b) for each fiscal year, all proper reserves for depreciation,
depletion, obsolescence, amortization, taxes, bad debts and other purposes in connection with its
business.



3.5 Reporting Requirements. If the Company ceases to file its periodic reports with
the SEC, or if the SEC and the Company both cease making these periodic reports available via the
Internet without charge, then, in addition to any other remedies that the Purchasers may have, the
Company shall, upon the written request of a Purchaser, furnish the following to each Purchaser so
long as such Purchaser shall be obligated hereunder to purchase the Securities or shall
beneficially own Securities:



(a) Quarterly Reports on Form 10-Q (or an equivalent form), including financial statements,
(i) promptly following the end of each quarter, and in any event within 45 days of the end of each
quarter (or such longer period of time as would have been allowed under Rule 12b-25 under the
Exchange Act), if such reports are no longer filed with the SEC or (ii) as soon as practical after
the document is filed with the SEC, and in any event within five days after the document is filed
with the SEC;



(b) Annual Reports on Form 10-K (or an equivalent form), including financial statements, (i)
promptly following the end of each year, and in any event within 90 days of the end of each year
(or such longer period of time as would have been allowed under Rule 12b-25 under the Exchange
Act), if such reports are no longer filed with the SEC or (ii) as soon as practical after the
document is filed with the SEC, and in any event within five days after the document is filed with
the SEC; and



(c) Copies of all notices, information and proxy statements in connection with any meetings,
that are, in each case, provided to holders of shares of Common Stock, contemporaneously with the
delivery of such notices or information to such holders of Common Stock.



3.6 Other Agreements. The Company shall not enter into any agreement in which the
terms of such agreement would be reasonably expected to restrict or impair the right or ability of
the Company or any Subsidiary to perform under any Transaction Document.



3.7 Use of Proceeds; Net Cash Schedules. So long as (i) at least 1,000 shares of
Preferred Stock (as adjusted for any stock dividends, combinations, splits, recapitalizations and
the like with respect to such shares) are outstanding and (ii) no Strategic Transaction has been
consummated:



(a) The proceeds from the sale of the Securities hereunder shall be used by the Company for
general corporate purposes in accordance with the Net Cash Schedules (as defined below) and the
Company shall not make any payment, or incur any obligation or liability that may be settled in
cash, that causes the balance of the Net Cash (as defined in Section 3.7(c)(i)) as of any date set
forth in the most recently approved Net Cash Schedule to be less than the Net Cash reflected for
such date on such Net Cash Schedule.



(b) Other than redemptions of unvested Common Stock issued pursuant to equity compensation
plans or agreements, in no event shall the proceeds be used to redeem any Common Stock or
securities convertible, exercisable or exchangeable into Common Stock (other than the Preferred
Stock) or to settle any outstanding litigation.



(c) The Company shall manage and periodically report its Net Cash as follows:



(i) For a period of six months from the Closing Date (the “Disclosure Period”), the
Company shall send to the Purchasers within 15 calendar days of the end of each month during the
Disclosure Period, subject to each such Purchaser’s agreement to hold such information in strict
confidence and to not trade in Company securities on the basis of such information, a statement
showing the amount, as of the end of each such calendar month, determined according to the
following formula (such amount, the “Net Cash”): (i) the sum of the Company’s unrestricted,
consolidated (x) cash, (y) cash equivalents and (z) short term investments, available for sale,
less (ii) the amount of the Company’s liabilities that may be settled in cash, including any
off-balance sheet obligations that may be settled in cash;



(ii) On or prior to the last day of the Disclosure Period, the Company shall file with the SEC
a Form 8-K or Form 10-Q disclosing: (i) the Initial Net Cash Schedule (as defined in Section 5.2(n)
below) for each calendar month commencing with October 2010 through March 2011 and (ii) the Net
Cash balance as of September 30, 2010; and



(iii) Following the expiration of the Disclosure Period, the Company shall:



(1) In each of the Company’s annual reports on Form 10-K, disclose a schedule showing, as of
the end of each of the twelve (12) calendar months April through March following the filing of such
Form 10-K (commencing with April 2011 to March 2012), the Company’s anticipated Net Cash balance
for such dates (the “Subsequent Net Cash Schedules” and, together with the Initial Net Cash
Schedule, each, a “Net Cash Schedule”);



(2) In each quarterly or annual report on Form 10-Q or Form 10-K, report its Net Cash as of
the end of the latest quarter covered by such report; and



(3) In the event that the Company’s Net Cash as of the end of a calendar month is less than
the corresponding amount set forth in the applicable Net Cash Schedule, then the Company shall,
within 15 calendar days following the end of such calendar month (or 30 calendar days if it is the
last month of a fiscal year) file a Current Report on Form 8-K disclosing the amount of such
variance and the actual Net Cash balance of the Company as of such date.



(iv) Each Subsequent Net Cash Schedule must be approved, in writing, by the Requisite Holders
prior to its disclosure. The Company shall deliver to the Purchasers written notice at least one
Week prior to the delivery of any Subsequent Cash Schedule to the Purchasers for approval pursuant
to this section notifying the Purchasers of the expected date of such delivery. The Company shall
publicly disclose each approved Subsequent Net Cash Schedule through a Current Report on Form 8-K,
Annual Report on Form 10-K or Quarterly Report on Form 10-Q, in each case no later than two (2)
Trading Days (as defined in the Certificate of Designations) following the approval of such
Subsequent Net Cash Schedule.



3.8 Reporting Status. So long as a Purchaser beneficially owns any of the Securities,
the Company shall timely file all reports required to be filed with the SEC pursuant to the
Exchange Act, and the Company shall not terminate its status as an issuer required to file reports
under the Exchange Act even if the Exchange Act or the rules and regulations thereunder would
permit such termination.



3.9 Disclosure of Transaction. The Company shall issue a press release describing the
material terms of the transactions contemplated hereby (the “Press Release”) no later than
9:00 A.M. Eastern Time on the first Trading Day following the effective date of this Agreement.
The Company shall also file with the SEC a Form 8-K describing the material terms of the
transactions contemplated hereby as soon as practicable following the effective date of this
Agreement but in no event more than the fourth Trading Day following the effective date of this
Agreement, which Press Release and Form 8-K shall be subject to prior review and approval by the
Lead Purchaser (as defined in Section 8.15 below).



3.10 Disclosure of Material Information. Except with respect to information that may
be provided during the Disclosure Period or information disclosed to any Purchaser who is also an
officer, director or employee of the Company, the Company covenants and agrees that neither it nor
any other person acting on its behalf has provided or will provide any Purchaser or its agents or
counsel with any information that the Company believes constitutes material non-public information,
unless prior thereto such Purchaser shall have executed a written agreement regarding the
confidentiality and use of and specifically identifying such information as material and
non-public. The Company understands and confirms that each Purchaser shall be relying on the
foregoing representations in effecting transactions in securities of the Company. In the event of
a breach of the foregoing covenant by the Company, or any of its Subsidiaries, or any of its or
their respective officers, directors, employees and agents, in addition to any other remedy
provided herein or in the Transaction Documents, the Company shall notify the Purchasers
immediately upon learning of such breach and thereafter publicly disclose any material, non-public
information in a Form 8-K within one business day of the date that it discloses such information to
any Purchaser. In the event that the Company discloses any material, non-public information to a
Purchaser in violation of this Section 3.10 and fails to publicly file a Form 8-K in accordance
with the above, a Purchaser shall have the right, upon providing the Company with 48 hours prior
written notice, to make a public disclosure, in the form of a press release, public advertisement
or otherwise, of such material, non-public information without the prior approval by the Company,
its Subsidiaries, or any of its or their respective officers, directors, employees or agents. No
Purchaser shall have any liability to the Company, its Subsidiaries, or any of its or their
respective officers, directors, employees, stockholders or agents, for any such disclosure in
connection with which such Purchaser has complied with this Section 3.10 and the Company has failed
to act as required under this Section 3.10.



3.11 Pledge of Securities. The Company acknowledges that the Securities may be
pledged by a Purchaser in connection with a bona fide margin agreement or other
loan or financing arrangement that is secured by the Securities. The pledge of Securities shall
not be deemed to be a transfer, sale or assignment of the Securities hereunder, and no Purchaser
effecting a pledge of the Securities shall be required to provide the Company with any notice
thereof or otherwise make any delivery to the Company pursuant to this Agreement or any other
Transaction Document; provided that a Purchaser and its pledgee shall be required to comply with
the provisions of Article 6 hereof in order to effect a sale, transfer or assignment of Securities
to such pledgee. At the Purchasers’ expense, the Company hereby agrees to execute and deliver such
documentation as a pledgee of the Securities may reasonably request in connection with a pledge of
the Securities to such pledgee by a Purchaser.



3.12 Other Covenants. For so long as at least 1,000 shares of Preferred Stock, or at
least 3,000 shares of Preferred Stock if all Cash Warrants have been fully exercised, are
outstanding, the Company shall:



(a) maintain, and cause each of its Subsidiaries to maintain insurance with responsible and
reputable insurance companies or associations (including comprehensive general liability) with
respect to its properties (including all real properties leased or owned by it) and business, in
such amounts and covering such risks as is (i) required by any governmental authority having
jurisdiction with respect thereto and (ii) as is carried generally in accordance with sound
business practice by companies in similar businesses similarly situated;



(b) not, without the prior approval (by vote or by written consent, as provided in the
Delaware General Corporation Law) of the Requisite Holders, transfer any assets to any Subsidiary
or to otherwise cause any Subsidiary to acquire any assets or commence operations;



(c) not, without the prior approval (by vote or by written consent, as provided in the
Delaware General Corporation Law) of the Requisite Holders, take any of the actions enumerated in
Article XII of the Certificate of Designations (whether by merger, consolidation, conversion or
otherwise); and



(d) provided the same would not be in violation of Regulation FD, permit, during normal
business hours and upon reasonable request and reasonable notice, each Purchaser or any employees,
agents or representatives thereof, so long as such Purchaser shall be obligated hereunder to
purchase the Securities or shall beneficially own any Conversion Shares, for purposes reasonably
related to such Purchaser’s interests as a stockholder, to visit the Company to discuss the
publicly available, non-confidential affairs, finances and accounts of the Company and any
Subsidiary with any of its executive officers.



ARTICLE 4

PURCHASER COVENANTS




4.1 Unless otherwise specified in this Article, for so long as any Preferred Stock or Warrants
remain outstanding in whole or in part, each Purchaser covenants with the Company as follows, which
covenants are for the benefit of the Company and its permitted assignees.



(a) Transfer Restrictions on Series C-1 Preferred, Cashless Warrants and Series D-1
Preferred. The Series C-1 Preferred, Cashless Warrants and Series D-1 Preferred, and all
rights thereunder, shall not be sold or transferred prior to the date that is six months and
forty-one (41) Weeks following the Closing Date. Any purported sale or transfer effected in
violation of this Section 4.1(a) shall be null and void.



(b) Transfer Restrictions on Series C-2 Preferred, Cash Warrants, Subsequent Cashless
Warrants and Series D-2 Preferred. The Series C-2 preferred, Cash Warrants, Subsequent
Cashless Warrants and Series D-2 Preferred, and all rights thereunder, shall not be sold or
transferred prior to the date that is six months and forty (40) Weeks following, with respect to a
particular Purchaser, the first date of exercise, in whole or part, of the Cash Warrant held by
such Purchaser. Any purported sale or transfer effected in violation of this Section 4.1(b) shall
be null and void.



(c) Conversion Limitations. For so long as any Securities remain outstanding, each
Purchaser covenants and agrees that it will not convert any Securities into Common Stock in
contravention of Article IV.C. of the Certificate of Designations.



4.2 Each Purchaser covenants that the Securities shall only be disposed pursuant to an
effective registration statement under, and in compliance with the requirements of, the Securities
Act, or pursuant to an available exemption from, or in a transaction not subject to, the
registration requirements of the Securities Act, and in compliance with any applicable state and
federal securities laws.



4.3 Upon the consummation of an approved Strategic Transaction, each Purchaser shall exercise
the Cash Warrant in full within the time period and in the manner set forth in Section 1(d) of the
Cash Warrant. If a Purchaser fails to timely exercise the Cash Warrant (such purchaser, a
“Defaulting Purchaser”), interest shall thereafter accrue on the sums due to the Company
under such Cash Warrant at a rate equal to the lesser of 18% per annum and the highest interest
rate permitted by applicable law. Additionally, until such Cash Warrant is exercised in full:



(a) all covenants and obligations owed by the Company to such Defaulting Purchaser under the
Transaction Documents shall be suspended until such Cash Warrant is exercised in full, and all
defaults by the Company under the Transaction Documents shall, solely with respect to the
Defaulting Purchaser, be deemed irrevocably waived by such Defaulting Purchaser; and



(b) the Defaulting Purchaser shall be required to pay the Company (i) on the consummation of
the Strategic Transaction and (ii) on the last day of each Week elapsed following the consummation
of the Strategic Transaction until the Cash Warrant is exercised in full, a cash payment in an
amount, in each instance set forth in clauses (i) and (ii), equal to three percent (3%) of the
aggregate exercise price for such Cash Warrant.



For clarification, the remedies set forth in Section 4.3 shall apply only with respect to the
particular Defaulting Purchaser and not to any other Purchaser and shall not affect the voting
rights of the Defaulting Purchaser under the Transaction Documents or the Certificate of
Designations.



ARTICLE 5




CONDITIONS




5.1 Conditions Precedent to the Obligation of the Company to Close and to Sell the
Securities. The obligation hereunder of the Company to close and issue and sell the Securities
to the Purchasers at the Closing is subject to the satisfaction or waiver, at or before the
Closing, of the conditions set forth below. These conditions are for the Company’s sole benefit
and may be waived by the Company at any time in its sole discretion.



(a) Accuracy of the Purchasers’ Representations and Warranties. The representations
and warranties of each Purchaser shall be true and correct in all material respects as of the date
when made and as of the Closing Date as though made at that time, except for representations and
warranties that are expressly made as of a particular date, which shall be true and correct in all
material respects as of such date.



(b) Performance by the Purchasers. Each Purchaser shall have performed, satisfied and
complied in all material respects with all covenants, agreements and conditions required by this
Agreement to be performed, satisfied or complied with by the Purchasers at or prior to the Closing
Date.



(c) No Injunction. No statute, rule, regulation, executive order, decree, ruling or
injunction shall have been enacted, entered, promulgated or endorsed by any court or governmental
authority of competent jurisdiction which prohibits the consummation of any of the transactions
contemplated by this Agreement or any other Transaction Document.



(d) Delivery of Purchase Price. The Purchase Price for the Securities shall have been
delivered to the Company on or before the Closing Date.



(e) Delivery of Transaction Documents. The Transaction Documents shall have been duly
executed and delivered by the Purchasers to the Company.



(f) Letter Agreement. The letter agreement in substantially the form attached hereto
as Exhibit G shall have been signed by the Purchasers identified therein and delivered to
the Company.



5.2 Conditions Precedent to the Obligation of the Purchasers to Close and to Purchase the
Securities. The obligation hereunder of the Purchasers to purchase the Securities and
consummate the transactions contemplated by this Agreement is subject to the satisfaction or
waiver, at or before the Closing, of each of the conditions set forth below. These conditions are
for the Purchasers’ sole benefit and may be waived by the Requisite Holders at any time in their
sole discretion.



(a) Accuracy of the Company’s Representations and Warranties. Each of the
representations and warranties of the Company and its Subsidiaries in this Agreement and the other
Transaction Documents shall be true and correct in all material respects as of the Closing Date,
except for representations and warranties that speak as of a particular date, which shall be true
and correct in all material respects as of such date.



(b) Performance by the Company and Subsidiaries. Each of the Company and its
Subsidiaries shall have performed, satisfied and complied in all material respects with all
covenants, agreements and conditions required by this Agreement to be performed, satisfied or
complied with by the Company and its Subsidiaries at or prior to the Closing Date.



(c) No Suspension, Etc. The shares of Common Stock: (i) shall be designated for
quotation or listed on the Principal Market and (ii) shall not have been suspended, as of the
Closing Date, by the SEC or the Principal Market from trading on the Principal Market nor shall
suspension by the SEC or the Principal Market have been threatened, as of the Closing Date, either
(A) in writing by the SEC or the Principal Market or (B) by falling below the minimum listing
maintenance requirements of the Principal Market.



(d) No Injunction. No statute, rule, regulation, executive order, decree, ruling or
injunction shall have been enacted, entered, promulgated or endorsed by any court or governmental
authority of competent jurisdiction which prohibits the consummation of any of the transactions
contemplated by this Agreement or any other Transaction Document.



(e) No Proceedings or Litigation. No action, suit or proceeding before any arbitrator
or any governmental authority shall have been commenced, and no investigation by any governmental
authority shall have been threatened, against the Company or any Subsidiary, or any of the
officers, directors or affiliates of the Company or any Subsidiary which, in either such case, (i)
seeks to restrain, prevent or change the transactions contemplated by this Agreement, or (ii) seeks
damages in connection with such transactions.



(f) Opinion of Counsel. The Purchasers shall have received an opinion of counsel to
the Company, dated the date of the Closing Date, substantially in the form of Exhibit H
hereto, with such exceptions and limitations as shall be reasonably acceptable to counsel to the
Purchasers.



(g) Common Stock, Series C-1 Preferred Stock and Warrants. At or prior to the
Closing, the Company shall have delivered to the Purchasers the Series C-1 Preferred Stock, Cash
Warrants and Cashless Warrants and shall have arranged for the Company’s transfer agent to
electronically deliver to the Purchasers the Common Stock to be held in street name, in each case
in accordance with the terms of this Agreement.



(h) Secretary’s Certificate. The Company and each Subsidiary of the Company shall
have delivered to the Purchasers a secretary’s certificate, dated as of the Closing Date, as to (i)
the resolutions adopted by its Board of Directors approving the transactions contemplated hereby,
(ii) its certificate of incorporation, (iii) its bylaws, each as in effect at the Closing Date, and
(iv) the authority and incumbency of the officers executing the Transaction Documents and any other
documents required to be executed or delivered in connection therewith.



(i) Officer’s Certificate. On the Closing Date, the Company and each Subsidiary shall
have delivered to the Purchasers a certificate signed by an executive officer on behalf of the
Company and each Subsidiary, dated as of the Closing Date, confirming the accuracy of the Company’s
and each Subsidiary’s representations, warranties and covenants as of the Closing Date and
confirming the compliance by the Company with the conditions precedent set forth in paragraphs
(a)-(e) and (j) of this Section 5.2 as of the Closing Date (provided that, with respect to the
matters in paragraphs (d) and (e) of this Section 5.2, such confirmation shall be based on the
knowledge of the executive officer after due inquiry).



(j) Material Adverse Effect. No Material Adverse Effect shall have occurred.



(k) Change in Purchasers. There shall have been no changes to Exhibit A (List
of Purchasers) since the execution of this Agreement.



(l) Delivery of Transaction Documents. Each of the Transaction Documents to which the
Company is a party shall have been duly executed and delivered by the Company to the Purchasers.



(m) Filing of Certificate of Designation. The Certificate of Designations shall have
been adopted and approved by the Company’s Board of Directors as required by applicable law
(including without limitation the Delaware General Corporation Law), the Certificate and Bylaws and
any agreements to which the Company is a party or is bound, and the Company shall have filed the
Certificate of Designations with the Secretary of State of the State of Delaware who shall have
accepted the Certificate of Designations for filing, and the Certificate of Designations shall be
in full force and effect as of the Closing.



(n) Delivery of Initial Cash Schedule. Exhibit F attached hereto contains a
schedule showing, as of the last day of each calendar month commencing with May 2010 and continuing
through March 2011 the Company’s anticipated Net Cash balance for such dates (the “Initial Net
Cash Schedule”).



ARTICLE 6




CERTIFICATE LEGENDS




6.1 Legends. Except as set forth herein, each certificate representing shares of
Preferred Stock shall be stamped or otherwise imprinted with legends substantially in the following
form (in addition to any legend required by applicable state securities or “blue sky” laws):



THE SECURITIES REPRESENTED BY THIS CERTIFICATE (THE “SECURITIES”) HAVE NOT BEEN REGISTERED UNDER
THE SECURITIES ACT OF 1933, AS AMENDED (THE “SECURITIES ACT”) OR ANY STATE SECURITIES LAWS AND MAY
NOT BE SOLD, TRANSFERRED OR OTHERWISE DISPOSED OF UNLESS EITHER (A) REGISTERED UNDER THE SECURITIES
ACT AND UNDER APPLICABLE STATE SECURITIES LAWS OR (B) THE COMPANY HAS RECEIVED A REASONABLY
ACCEPTABLE OPINION OF COUNSEL STATING THAT THE REGISTRATION OF SUCH SECURITIES UNDER THE SECURITIES
ACT AND UNDER THE PROVISIONS OF APPLICABLE STATE SECURITIES LAWS IS NOT REQUIRED FOR SUCH SALE,
TRANSFER OR OTHER DISPOSITION.



THE SALE, PLEDGE, HYPOTHECATION OR TRANSFER OF THE SECURITIES REPRESENTED BY THIS CERTIFICATE IS
SUBJECT TO THE TERMS AND CONDITIONS OF A CERTAIN SECURITIES PURCHASE AGREEMENT BY AND AMONG THE
CORPORATION AND CERTAIN ORIGINAL PURCHASERS OF THESE SECURITIES. COPIES OF SUCH AGREEMENT MAY BE
OBTAINED UPON WRITTEN REQUEST TO THE SECRETARY OF THE CORPORATION.



The Company agrees to issue or reissue certificates representing any of the Conversion Shares
without legends if, in the case of any holder or acquiror of such Conversion Shares (x) the
Conversion Shares can be sold by such holder pursuant to Rule 144 without any restriction as to the
number of securities or (y) the holder is selling such Conversion Shares in compliance with the
provisions of Rule 144. In addition, if the Company’s transfer agent is participating in a
program, including without limitation the Depository Trust Company (“DTC”) Fast Automated
Securities Transfer program or any equivalent program, that permits the transfer agent to
electronically transmit the Conversion Shares, and if the Conversion Shares can then be sold
pursuant to Rule 144 without any restriction as to the number of securities, then in such case the
Company shall cause its transfer agent, by the end of the Delivery Period (as defined in the
Certificate of Designations), to electronically transmit the Conversion Shares (not in physical
certificate form), without legends, to the holder, by crediting the account of the holder or its
nominee with DTC through the Deposit Withdrawal Agent Commission system or through such other
equivalent program. In connection with the issuance of the Conversion Shares as set forth herein,
each Purchaser acknowledges that the Company is relying on the representations and warranties of
such Purchaser set forth in Section 2.2 and the covenants of such Purchaser set forth in Section
4.2.



6.2 Purchaser Indemnity. Each Purchaser shall severally, but not jointly, indemnify,
defend and hold harmless the Company (and its directors, officers, affiliates, employees, agents,
successors and assigns) (each a “Company Indemnified Party”) from and against any and all
losses, liabilities, deficiencies, costs, damages and expenses (including, without limitation,
reasonable attorneys’ fees, charges and disbursements) incurred by any Company Indemnified Party as
a result of claims brought by third parties arising out of or relating to any breach of the
covenants made by such Purchaser in Section 4.2. In the event that a Company Indemnified Party
shall seek indemnification under this Section 6.2, the provisions of Section 7.2 (mutatis mutandis)
shall apply to any such claim.



ARTICLE 7




INDEMNIFICATION




7.1 General Indemnity. The Company agrees to indemnify and hold harmless the
Purchasers (and their respective directors, officers, affiliates, members, managers, employees,
agents, successors and assigns) from and against any and all losses, liabilities, deficiencies,
costs, damages and expenses (including, without limitation, reasonable attorneys’ fees, charges and
disbursements) incurred by the Purchasers as a result of claims brought by third parties arising
out of or relating to any inaccuracy in or breach of the representations, warranties or covenants
made by the Company herein.



7.2 Indemnification Procedure. Any party entitled to indemnification under this
Article 7 (an “indemnified party”) will give written notice to the indemnifying party of
any matter giving rise to a claim for indemnification; provided, that the failure of any party
entitled to indemnification hereunder to give notice as provided herein shall not relieve the
indemnifying party of its obligations under this Article 7 except to the extent that the
indemnifying party is actually prejudiced by such failure to give notice. In case any such action,
proceeding or claim is brought against an indemnified party in respect of which indemnification is
sought hereunder, the indemnifying party shall be entitled to participate in and, unless in the
reasonable judgment of the indemnifying party a conflict of interest between it and the indemnified
party exists with respect to such action, proceeding or claim (in which case the indemnifying party
shall be responsible for the reasonable fees and expenses of one separate counsel for the
indemnified parties), to assume the defense thereof with counsel reasonably satisfactory to the
indemnified party. In the event that the indemnifying party advises an indemnified party that it
will contest such a claim for indemnification hereunder, or fails, within 30 days of receipt of any
indemnification notice (the “Defense Period”) to notify, in writing, such person of its
election to defend, settle or compromise, at its sole cost and expense, any action, proceeding or
claim (or discontinues its defense at any time after it commences such defense), then the
indemnified party may, at its option, defend, settle or otherwise compromise or pay such action or
claim. In any event, unless and until the indemnifying party elects in writing to assume and does
so assume the defense of any such claim, proceeding or action, the indemnified party’s costs and
expenses arising out of the defense, settlement or compromise of any such action, claim or
proceeding, only to the extent incurred after the expiration of the Defense Period, shall be losses
subject to indemnification hereunder. The indemnified party shall cooperate fully with the
indemnifying party in connection with any negotiation or defense of any such action or claim by the
indemnifying party and shall furnish to the indemnifying party all information reasonably available
to the indemnified party which relates to such action or claim. The indemnifying party shall keep
the indemnified party fully apprised at all times as to the status of the defense or any settlement
negotiations with respect thereto. If the indemnifying party elects to defend any such action or
claim, then the indemnified party shall be entitled to participate in such defense with counsel of
its choice at its sole cost and expense. The indemnifying party shall not be liable for any
settlement of any action, claim or proceeding effected without its prior written consent.
Notwithstanding anything in this Article 7 to the contrary, the indemnifying party shall not,
without the indemnified party’s prior written consent, settle or compromise any claim or consent to
entry of any judgment in respect thereof which imposes any future obligation on the indemnified
party or which does not include, as an unconditional term thereof, the giving by the claimant or
the plaintiff to the indemnified party of a release from all liability in respect of such claim.
The indemnification obligations to defend the indemnified party required by this Article 7 shall be
made by periodic payments of the amount thereof during the course of investigation or defense, as
and when bills are received or expense, loss, damage or liability is incurred, so long as the
indemnified party shall refund such moneys if it is ultimately determined by a court of competent
jurisdiction that such party was not entitled to indemnification. The indemnity agreements
contained herein shall be in addition to (a) any cause of action or similar rights of the
indemnified party against the indemnifying party or others, and (b) any liabilities the
indemnifying party may be subject to pursuant to the law.



7.3 Exclusivity of Remedy. With the exception of the indemnification provisions set
forth above in Section 7.1 and the right of redemption set forth in Article VII.A.(v) of the
Certificate of Designations, the Purchasers shall not have the right to recover for any damages or
claims arising out of or relating to any inaccuracy in or breach of the representations or
warranties made by the Company herein.



ARTICLE 8




MISCELLANEOUS




8.1 Fees and Expenses. Each party shall pay the fees and expenses of its advisors,
counsel, accountants and other experts, if any, and all other expenses, incurred by such party
incident to the negotiation, preparation, execution, delivery and performance of this Agreement and
the transactions contemplated hereby; provided, however, that the Company shall pay all fees and
expenses, including without limitation attorneys’ fees and expenses (including disbursements and
out-of-pocket expenses), incurred by the Purchasers in connection with the preparation,
negotiation, execution and delivery of the Transaction Documents and the transactions contemplated
thereunder, which payment shall be made at the Closing (which payments shall not exceed in the
aggregate $50,000 and may be withheld from the amounts delivered to the Company by the Purchasers
at the Closing).



8.2 Specific Performance; Consent to Jurisdiction; Venue.



(a) The Company and the Purchasers acknowledge and agree that irreparable damage would occur
in the event that any of the provisions of this Agreement or the other Transaction Documents were
not performed in accordance with their specific terms or were otherwise breached. It is
accordingly agreed that the parties shall be entitled to an injunction or injunctions to prevent or
cure breaches of the provisions of this Agreement or the other Transaction Documents and to enforce
specifically the terms and provisions hereof or thereof without the requirement of posting a bond
or providing any other security, this being in addition to any other remedy to which any of them
may be entitled by law or equity.



(b) The parties agree that venue for any dispute arising under this Agreement will lie
exclusively in the state or federal courts located in New York County, New York, and the parties
irrevocably waive any right to raise forum non conveniens or any other argument that New York is
not the proper venue. The parties irrevocably consent to personal jurisdiction in the state and
federal courts of the state of New York. The Company and each Purchaser consent to process being
served in any such suit, action or proceeding by mailing a copy thereof to such party at the
address in effect for notices to it under this Agreement and agrees that such service shall
constitute good and sufficient service of process and notice thereof. Nothing in this Section 8.2
shall affect or limit any right to serve process in any other manner permitted by law. The parties
hereby waive all rights to a trial by jury. In addition, the prevailing party in any dispute
arising under this Agreement shall be entitled to recover its fees and expenses, including,
without limitation, all reasonable attorneys’ fees and expenses.



8.3 Entire Agreement; Amendment. This Agreement and the Transaction Documents contain
the entire understanding and agreement of the parties with respect to the matters covered hereby
and, except as specifically set forth herein or in the other Transaction Documents, neither the
Company nor any Purchaser make any representation, warranty, covenant or undertaking with respect
to such matters, and they supersede all prior understandings and agreements with respect to said
subject matter, all of which are merged herein. No provision of this Agreement may be waived or
amended on behalf of all Purchasers other than by a written instrument signed by the Company and
the Requisite Holders. In addition to the foregoing, no provision of this Agreement may be amended
to increase the financial obligations of any Purchaser under this Agreement other than by a written
instrument signed by such Purchaser. Nothing provided in this Section 8.3 shall limit an
individual Purchaser’s right to waive or amend any provision of this Agreement on its own behalf.
The Purchasers acknowledge that any waiver effected in accordance with this Section 8.3 shall be
binding upon each Purchaser (and their permitted assigns) and the Company, including, without
limitation, a waiver that has an adverse effect on any or all Purchasers.



8.4 Notices. Any notice, demand, request, waiver or other communication required or
permitted to be given hereunder shall be in writing and shall be effective (a) upon hand delivery
or by telecopy, electronic mail or facsimile at the address or number designated below (if
delivered on a business day during normal business hours where such notice is to be received), or
the first business day following such delivery (if delivered other than on a business day during
normal business hours where such notice is to be received) or (b) on the second business day
following the date of mailing by express courier service, fully prepaid, addressed to such address,
or upon actual receipt of such mailing, whichever shall first occur. The addresses for such
communications shall be:




	 	 	If to the Company or its Subsidiaries:





La Jolla Pharmaceutical Company


4365 Executive Drive, Suite 300


San Diego, CA 92121


Attention: Deirdre Gillespie


Telephone No.: (858) 452-6600


Telecopy No.: (858) 626-2851


Email address: deirdre.gillespie@ljpc.com




	 	 	with copies to:





Goodwin Procter LLP


4365 Executive Drive, Suite 300


San Diego, CA 92121


Attention: Ryan Murr


Telephone No.: (858) 202-2727


Telecopy No.: (858) 546-4464


Email address: rmurr@goodwinprocter.com




	 	 	If to any Purchaser:





At the address of such Purchaser set forth on the signature page to this Agreement, with copies to
Purchaser’s counsel, if any, as set forth on the signature page or as specified in writing by such
Purchaser.




	 	 	With a copy to:





Cooley LLP


4401 Eastgate Mall


San Diego, CA 92121


Attention: Ethan Christensen


Telephone No.: (858) 550-6076


Telecopy No.: (858) 550-6420


Email address: echristensen@cooley.com



Any party hereto may from time to time change its address for notices by giving written notice
of such changed address to the other party hereto.



8.5 Waivers. No waiver by either party of any default with respect to any provision,
condition or requirement of this Agreement shall be deemed to be a continuing waiver in the future
or a waiver of any other provision, condition or requirement hereof, nor shall any delay or
omission of any party to exercise any right hereunder in any manner impair the exercise of any such
right accruing to it thereafter.



8.6 Headings. The article, section and subsection headings in this Agreement are for
convenience only and shall not constitute a part of this Agreement for any other purpose and shall
not be deemed to limit or affect any of the provisions hereof.



8.7 Successors and Assigns. This Agreement shall be binding upon and inure to the
benefit of the parties and their successors and assigns. Subject to the limitations set forth in
Article 4 of this Agreement, the Purchasers may assign the Securities and its rights under this
Agreement and the other Transaction Documents and any other rights hereto and thereto without the
consent of the Company.



8.8 No Third Party Beneficiaries. This Agreement is intended for the benefit of the
parties hereto and their respective permitted successors and assigns and is not for the benefit of,
nor may any provision hereof be enforced by, any other person.



8.9 Governing Law. This Agreement shall be governed by and construed in accordance
with the internal laws of the State of New York, without giving effect to any of the conflicts of
law principles which would result in the application of the substantive law of another
jurisdiction. This Agreement shall not be interpreted or construed with any presumption against
the party causing this Agreement to be drafted.



8.10 Survival. The representations and warranties of the Company and the Purchasers
shall terminate upon the Closing Date; provided, however, that such termination shall have no
affect on the rights of the Purchasers under Section 7 or Article VII of the Certificate of
Designations. The agreements and covenants set forth in Articles 1, 3, 4, 6, 7 and 8 of this
Agreement shall survive the Closing hereunder indefinitely.



8.11 Counterparts. This Agreement may be executed in any number of counterparts, all
of which taken together shall constitute one and the same instrument and shall become effective
when counterparts have been signed by each party and delivered to the other parties hereto, it
being understood that all parties need not sign the same counterpart.



8.12 Publicity. The Company agrees that it will not disclose, and will not include in
any public announcement, the names of the Purchasers without the consent of the Purchasers, or
unless and until such disclosure is required by law, rule or applicable regulation, and then only
to the extent of such requirement. Notwithstanding the foregoing, the Purchasers consent to being
identified in any filings the Company makes with the SEC to the extent required by law or the rules
and regulations of the SEC.



8.13 Severability. The provisions of this Agreement are severable and, in the event
that any court of competent jurisdiction shall determine that any one or more of the provisions or
part of the provisions contained in this Agreement shall, for any reason, be held to be invalid,
illegal or unenforceable in any respect, such invalidity, illegality or unenforceability shall not
affect any other provision or part of a provision of this Agreement and this Agreement shall be
reformed and construed as if such invalid or illegal or unenforceable provision, or part of such
provision, had never been contained herein, so that such provisions would be valid, legal and
enforceable to the maximum extent possible.



8.14 Further Assurances. From and after the date of this Agreement, upon the request
of the Purchasers or the Company, the Company and each Purchaser shall execute and deliver such
instruments, documents and other writings as may be reasonably necessary or desirable to confirm
and carry out and to effectuate fully the intent and purposes of this Agreement and the other
Transaction Documents



8.15 Representation of Lead Purchaser. It is acknowledged by each Purchaser that the
purchaser listed as the Lead Purchaser on Exhibit A hereto (the “Lead Purchaser”)
has retained Cooley LLP to act as its counsel in connection with the transactions contemplated by
the Transaction Documents and that Cooley LLP has not acted as counsel for any Purchaser, other
than the Lead Purchaser, in connection with the transactions contemplated by the Transaction
Documents and that none of such Purchasers has the status of a client for conflict of interest or
any other purposes as a result thereof.



8.16 Independent Nature of Purchasers’ Obligations and Rights. The obligations of
each Purchaser under any Transaction Document are several and not joint with the obligations of any
other Purchaser, and no Purchaser shall be responsible in any way for the performance of the
obligations of any other Purchaser under any Transaction Document. Nothing contained herein or in
any other Transaction Document, and no action taken by any Purchaser pursuant hereto or thereto,
shall be deemed to constitute the Purchaser as a partnership, an association, a joint venture or
any other kind of entity, or create a presumption that the Purchasers are in any way acting in
concert or as a group with respect to such obligations or the transactions contemplated by the
Transaction Documents. Each Purchaser confirms that it has independently participated in the
negotiation of the transaction contemplated hereby with the advice of its own counsel and advisors.
Each Purchaser shall be entitled to independently protect and enforce its rights, including,
without limitation, the rights arising out of this Agreement or out of any other Transaction
Documents, and it shall not be necessary for any other Purchaser to be joined as an additional
party in any proceeding for such purpose.



8.17 Force Majeure. Notwithstanding any provision herein to the contrary, the failure
of any party to timely satisfy obligations hereunder shall be excused to the extent that (i) such
failure follows the occurrence of a Force Majeure Event (defined below), and (ii) such Force
Majeure Event has materially adversely affected the ability of such party (or its agents, including
banks, transfer agents, and clearinghouses) to perform hereunder. A failure to perform shall be
excused only for so long as the Force Majeure Event continues to materially adversely affect such
person’s ability to perform. For purposes of this Section, “Force Majeure Event” shall
mean the occurrence of any of the following events: (a) trading in securities generally on either
the Nasdaq Stock Market or the New York Stock Exchange shall have been suspended or limited, or
minimum or maximum prices shall have been generally established on any of such stock exchanges by
the SEC or FINRA; (b) a general banking moratorium shall have been declared by any of federal, New
York or California authorities; (c) an act of war, terrorism or hostility shall have occurred, or
(d) a strike, fire, flood, earthquake, accident or other calamity or Act of God shall have
occurred.



8.18 Approval of Equity Awards. Within 2 Trading Days following the Closing Date, the
Company shall grant the equity compensation awards set forth on Schedule 8.18 attached hereto.
Upon execution of this Agreement, each Purchaser shall be deemed to be consenting, as of the
Closing Date, to the granting of such awards for purposes of Article XII under the Certificate of
Designations.



[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]





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




LA JOLLA PHARMACEUTICAL COMPANY




By: /s/ Deirdre Gillespie

Name: Deirdre Gillespie

Title: President and Chief Executive Officer




[SIGNATURE PAGES CONTINUE]




[PURCHASER SIGNATURE PAGES TO SECURITIES PURCHASE AGREEMENT]




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



Name of Purchaser: Tang Capital Partners, LP



Signature of Authorized Signatory of Purchaser: /s/ Kevin Tang



Name of Authorized Signatory: Kevin C. Tang

Title of Authorized Signatory: Managing Director



Email Address of Purchaser: kevin@tangcapital.com



Fax Number of Purchaser: (858) 200-3837



Address for Notice of Purchaser:



4401 Eastgate Mall



San Diego, California 92121



Address for Delivery of Securities for Purchaser (if not same as address for notice):



SAME



EIN Number: [PROVIDE THIS UNDER SEPARATE COVER]



[SIGNATURE PAGES CONTINUE]





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[PURCHASER SIGNATURE PAGES TO SECURITIES PURCHASE AGREEMENT]




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



Name of Purchaser: The Haeyoung and Kevin Tang Foundation, Inc.



Signature of Authorized Signatory of Purchaser: /s/ Kevin Tang



Name of Authorized Signatory: Kevin C. Tang

Title of Authorized Signatory: President



Email Address of Purchaser: kevin@tangcapital.com



Fax Number of Purchaser: (858) 200-3837



Address for Notice of Purchaser:



4401 Eastgate Mall



San Diego, California 92121



Address for Delivery of Securities for Purchaser (if not same as address for notice):



SAME



EIN Number: [PROVIDE THIS UNDER SEPARATE COVER]



[SIGNATURE PAGES CONTINUE]





3






[PURCHASER SIGNATURE PAGES TO SECURITIES PURCHASE AGREEMENT]




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



Name of Purchaser: Boxer Capital, LLC



Signature of Authorized Signatory of Purchaser: /s/ Chris Fuglesang



Name of Authorized Signatory: Chris Fuglesang



Title of Authorized Signatory: Member



Email Address of Purchaser: cfuglesang@tavistock.com



Fax Number of Purchaser: (858) 400-3101



Address for Notice of Purchaser:



445 Marine View Ave., Suite 100



Del Mar, California 92014



Address for Delivery of Securities for Purchaser (if not same as address for notice):



SAME



EIN Number: [PROVIDE THIS UNDER SEPARATE COVER]



[SIGNATURE PAGES CONTINUE]





4






[PURCHASER SIGNATURE PAGES TO SECURITIES PURCHASE AGREEMENT]




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



Name of Purchaser: MVA Investors, LLC



Signature of Authorized Signatory of Purchaser: /s/ Chris Fuglesang



Name of Authorized Signatory: Chris Fuglesang

Title of Authorized Signatory: President



Email Address of Purchaser: cfuglesang@tavistock.com



Fax Number of Purchaser: (858) 400-3101



Address for Notice of Purchaser:



445 Marine View Ave., Suite 100



Del Mar, California 92014



Address for Delivery of Securities for Purchaser (if not same as address for notice):



SAME



EIN Number: [PROVIDE THIS UNDER SEPARATE COVER]



[SIGNATURE PAGES CONTINUE]





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[PURCHASER SIGNATURE PAGES TO SECURITIES PURCHASE AGREEMENT]




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



Name of Purchaser: RTW Investments, LLC



Signature of Authorized Signatory of Purchaser: /s/ Roderick Wong



Name of Authorized Signatory: Roderick Wong



Title of Authorized Signatory: Managing Member



Email Address of Purchaser: rwong@rtwfunds.com



Fax Number of Purchaser: (646) 597-6998



Address for Notice of Purchaser:



1350 Avenue of the Americas, 28th Floor



New York, New York 10019



Address for Delivery of Securities for Purchaser (if not same as address for notice):



EIN Number: [PROVIDE THIS UNDER SEPARATE COVER]



[SIGNATURE PAGES CONTINUE]





6






[PURCHASER SIGNATURE PAGES TO SECURITIES PURCHASE AGREEMENT]




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



Name of Purchaser: Deirdre Y. Gillespie



Signature of Authorized Signatory of Purchaser: /s/ Deirdre Gillespie



Name of Authorized Signatory: Deirdre Y. Gillespie

Title of Authorized Signatory: President and Chief Executive Officer of La Jolla Pharmaceutical
Company



Email Address of Purchaser: deirdre.gillespie@ljpc.com



Fax Number of Purchaser: (858) 626-2851



Address for Notice of Purchaser:



c/o La Jolla Pharmaceutical Company



4365 Executive Drive, Suite 300



San Diego, California 92121



Address for Delivery of Securities for Purchaser (if not same as address for notice):



EIN Number: [PROVIDE THIS UNDER SEPARATE COVER]



[SIGNATURE PAGES CONTINUE]






7






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



Name of Purchaser: Gail A. Sloan



Signature of Authorized Signatory of Purchaser: /s/ Gail A. Sloan



Name of Authorized Signatory: Gail A. Sloan

Title of Authorized Signatory: Vice President, Finance of La Jolla Pharmaceutical Company



Email Address of Purchaser: gail.sloan@ljpc.com



Fax Number of Purchaser: (858) 626-2851



Address for Notice of Purchaser:



c/o La Jolla Pharmaceutical Company



4365 Executive Drive, Suite 300



San Diego, California 92121



Address for Delivery of Securities for Purchaser (if not same as address for notice):



EIN Number: [PROVIDE THIS UNDER SEPARATE COVER]



[SIGNATURE PAGES CONTINUE]





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



Name of Purchaser: Daniel J. Bryson



Signature of Authorized Signatory of Purchaser: /s/ Daniel J. Bryson



Name of Authorized Signatory: Daniel J. Bryson



Title of Authorized Signatory: Controller of La Jolla Pharmaceutical Company



Email Address of Purchaser: dan.bryson@ljpc.com



Fax Number of Purchaser: (858) 626-2851



Address for Notice of Purchaser:



c/o La Jolla Pharmaceutical Company



4365 Executive Drive, Suite 300



San Diego, California 92121



Address for Delivery of Securities for Purchaser (if not same as address for notice):



EIN Number: [PROVIDE THIS UNDER SEPARATE COVER]



SCHEDULE I

SCHEDULE OF EXCEPTIONS




EXHIBIT A

LIST OF PURCHASERS

EXHIBIT B

FORM OF CASHLESS WARRANT





9






EXHIBIT C

FORM OF CASH WARRANT





10






EXHIBIT D

FORM OF OFFICER’S CERTIFICATE





11






EXHIBIT E

CERTIFICATE OF DESIGNATIONS





12






EXHIBIT F

INITIAL NET CASH SCHEDULE





13






EXHIBIT G

SIDE LETTER





14






EXHIBIT H

OPINION OF COUNSEL TO COMPANY





15