Exhibit 10.1


 


EXECUTION


 


 


STOCK PURCHASE AGREEMENT


 


by and among


 


CLARIENT, INC.


 


and


 


OAK INVESTMENT PARTNERS XII, LIMITED PARTNERSHIP


 


March 25, 2009


 


 





















 


TABLE OF CONTENTS


 


	
   

  	
   

  	
   

  	
  Page

  
	
   

  	
   

  	
   

  
	
  1.

  	
  PURCHASE
  AND SALE OF PREFERRED SHARES.

  	
  2

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  (A)

  	
  PURCHASE OF PREFERRED SHARES.

  	
  2

  
	
   

  	
  (B)

  	
  THE CLOSING DATES.

  	
  2

  
	
   

  	
  (C)

  	
  FORM OF PAYMENT

  	
  3

  
	
   

  	
   

  	
   

  	
   

  
	
  2.

  	
  REPRESENTATIONS
  AND WARRANTIES OF THE PURCHASER

  	
  3

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  (A)

  	
  INVESTMENT PURPOSE

  	
  3

  
	
   

  	
  (B)

  	
  ACCREDITED INVESTOR STATUS

  	
  3

  
	
   

  	
  (C)

  	
  RELIANCE ON EXEMPTIONS

  	
  3

  
	
   

  	
  (D)

  	
  INFORMATION

  	
  3

  
	
   

  	
  (E)

  	
  NO GOVERNMENTAL REVIEW

  	
  4

  
	
   

  	
  (F)

  	
  TRANSFER OR RESALE

  	
  4

  
	
   

  	
  (G)

  	
  LEGENDS

  	
  4

  
	
   

  	
  (H)

  	
  AUTHORIZATION; ENFORCEMENT; VALIDITY

  	
  5

  
	
   

  	
  (I)

  	
  RESIDENCY

  	
  5

  
	
   

  	
  (J)

  	
  OWNERSHIP

  	
  5

  
	
   

  	
   

  	
   

  	
   

  
	
  3.

  	
  REPRESENTATIONS
  AND WARRANTIES OF THE COMPANY

  	
  6

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  (A)

  	
  ORGANIZATION AND QUALIFICATION

  	
  6

  
	
   

  	
  (B)

  	
  AUTHORIZATION; ENFORCEMENT; VALIDITY

  	
  7

  
	
   

  	
  (C)

  	
  EQUITY CAPITALIZATION.

  	
  7

  
	
   

  	
  (D)

  	
  INDEBTEDNESS AND OTHER CONTRACTS

  	
  8

  
	
   

  	
  (E)

  	
  ISSUANCE OF SECURITIES

  	
  9

  
	
   

  	
  (F)

  	
  NO CONFLICTS.

  	
  9

  
	
   

  	
  (G)

  	
  SEC DOCUMENTS; FINANCIAL STATEMENTS.

  	
  10

  
	
   

  	
  (H)

  	
  ABSENCE OF LITIGATION

  	
  11

  
	
   

  	
  (I)

  	
  ACKNOWLEDGMENT REGARDING THE PURCHASER’S PURCHASE OF PREFERRED SHARES

  	
  11

  
	
   

  	
  (J)

  	
  NO GENERAL SOLICITATION

  	
  11

  
	
   

  	
  (K)

  	
  NO INTEGRATED OFFERING

  	
  12

  
	
   

  	
  (L)

  	
  EMPLOYEE RELATIONS; BENEFIT PLANS.

  	
  12

  
	
   

  	
  (M)

  	
  INTELLECTUAL PROPERTY RIGHTS

  	
  13

  
	
   

  	
  (N)

  	
  TITLE

  	
  14

  
	
   

  	
  (O)

  	
  INSURANCE

  	
  14

  
	
   

  	
  (P)

  	
  REGULATORY PERMITS; COMPLIANCE WITH LAW

  	
  14

  
	
   

  	
  (Q)

  	
  DISCLOSURE CONTROLS

  	
  15

  
	
   

  	
  (R)

  	
  TAX STATUS

  	
  15

  
	
   

  	
  (S)

  	
  TRANSACTIONS WITH AFFILIATES

  	
  15

  
	
   

  	
  (T)

  	
  CONTRACTS

  	
  16

  
	
   

  	
  (U)

  	
  APPLICATION OF TAKEOVER PROTECTIONS

  	
  17

  
	
   

  	
  (V)

  	
  POISON PILL

  	
  17

  
	
   

  	
  (W)

  	
  INVESTMENT COMPANY

  	
  17

  



 


 


i





















 


	
   

  	
  (X)

  	
  NO MARKET MANIPULATION

  	
  17

  
	
   

  	
  (Y)

  	
  SPECIAL REGULATORY AND OTHER MATTERS

  	
  17

  
	
   

  	
  (Z)

  	
  SOLVENCY

  	
  19

  
	
   

  	
  (AA)

  	
  FOREIGN CORRUPT PRACTICES

  	
  19

  
	
   

  	
   

  	
   

  	
   

  
	
  4.

  	
  COVENANTS.

  	
  19

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  (A)

  	
  CERTAIN PRE-CLOSING COVENANTS

  	
  19

  
	
   

  	
  (B)

  	
  INFORMATION STATEMENT

  	
  20

  
	
   

  	
  (C)

  	
  FORM D AND BLUE SKY

  	
  20

  
	
   

  	
  (D)

  	
  USE OF PROCEEDS

  	
  21

  
	
   

  	
  (E)

  	
  ACCESS

  	
  21

  
	
   

  	
  (F)

  	
  RESERVATION OF SHARES

  	
  21

  
	
   

  	
  (G)

  	
  LISTING

  	
  21

  
	
   

  	
  (H)

  	
  EXPENSES

  	
  21

  
	
   

  	
  (I)

  	
  FILING OF FORM 8-K; PRESS RELEASES

  	
  22

  
	
   

  	
  (J)

  	
  TRANSACTIONS WITH AFFILIATES

  	
  22

  
	
   

  	
  (K)

  	
  LOCK-UP AGREEMENT.

  	
  22

  
	
   

  	
  (L)

  	
  CERTAIN TRADING ACTIVITIES

  	
  23

  
	
   

  	
  (M)

  	
  OWNERSHIP DISCLOSURE

  	
  24

  
	
   

  	
  (N)

  	
  BOARD SEATS

  	
  24

  
	
   

  	
   

  	
   

  	
   

  
	
  5.

  	
  TRANSFER
  AGENT INSTRUCTIONS

  	
  25

  
	
   

  	
   

  	
   

  	
   

  
	
  6.

  	
  CONDITIONS
  TO THE COMPANY’S OBLIGATION TO SELL ON THE CLOSING DATES.

  	
  25

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  (A)

  	
  CONDITIONS TO THE COMPANY’S OBLIGATION TO SELL ON THE INITIAL CLOSING
  DATE

  	
  25

  
	
   

  	
  (B)

  	
  CONDITIONS TO THE COMPANY’S OBLIGATION TO SELL ON THE SECOND CLOSING
  DATE

  	
  26

  
	
   

  	
  (C)

  	
  CONDITIONS TO THE COMPANY’S OBLIGATION TO SELL ON EACH SUBSEQUENT
  CLOSING DATE

  	
  27

  
	
   

  	
   

  	
   

  	
   

  
	
  7.

  	
  CONDITIONS
  TO THE PURCHASER’S OBLIGATION TO PURCHASE ON THE CLOSING DATES.

  	
  28

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  (A)

  	
  CONDITIONS TO THE PURCHASER’S OBLIGATION TO PURCHASE ON THE INITIAL
  CLOSING DATE

  	
  28

  
	
   

  	
  (B)

  	
  CONDITIONS TO THE PURCHASER’S OBLIGATION TO PURCHASE ON THE SECOND
  CLOSING DATE

  	
  30

  
	
   

  	
  (C)

  	
  CONDITIONS TO THE PURCHASER’S OBLIGATION TO PURCHASE ON EACH SUBSEQUENT
  CLOSING DATE

  	
  31

  
	
   

  	
   

  	
   

  	
   

  
	
  8.

  	
  TERMINATION.

  	
  32

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  (A)

  	
  TERMINATION.

  	
  32

  
	
   

  	
  (B)

  	
  EFFECT OF TERMINATION

  	
  34

  
	
   

  	
   

  	
   

  	
   

  
	
  9.

  	
  GOVERNING
  LAW; MISCELLANEOUS.

  	
  34

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  (A)

  	
  GOVERNING LAW; JURISDICTION; JURY TRIAL

  	
  34

  
	
   

  	
  (B)

  	
  COUNTERPARTS

  	
  35

  



 


 


ii





















 


	
   

  	
  (C)

  	
  HEADINGS

  	
  35

  
	
   

  	
  (D)

  	
  SEVERABILITY

  	
  35

  
	
   

  	
  (E)

  	
  ENTIRE AGREEMENT; AMENDMENTS

  	
  35

  
	
   

  	
  (F)

  	
  NOTICES

  	
  35

  
	
   

  	
  (G)

  	
  SUCCESSORS AND ASSIGNS

  	
  37

  
	
   

  	
  (H)

  	
  NO THIRD PARTY BENEFICIARIES

  	
  37

  
	
   

  	
  (I)

  	
  SURVIVAL

  	
  37

  
	
   

  	
  (J)

  	
  PUBLICITY

  	
  38

  
	
   

  	
  (K)

  	
  FURTHER ASSURANCES

  	
  38

  
	
   

  	
  (L)

  	
  PLACEMENT AGENT

  	
  38

  
	
   

  	
  (M)

  	
  NO STRICT CONSTRUCTION

  	
  38

  
	
   

  	
  (N)

  	
  REMEDIES

  	
  38

  
	
   

  	
  (O)

  	
  RELIANCE

  	
  38

  
	
   

  	
  (P)

  	
  PAYMENT SET ASIDE

  	
  39

  
	
   

  	
  (Q)

  	
  FORM, REGISTRATION, TRANSFER AND EXCHANGE OF PREFERRED STOCK; LOST
  PREFERRED STOCK

  	
  39

  
	
   

  	
  (R)

  	
  DEFINITIONS

  	
  39

  



 


 


iii





















 


SCHEDULES


 


	
  Schedule 3(a)

  	
  Subsidiaries of the Company

  
	
  Schedule 3(c)

  	
  No Preemptive Rights, Outstanding Warrants, Etc.

  
	
  Schedule 3(d)

  	
  Indebtedness

  
	
  Schedule 3(f)

  	
  No Violation

  
	
  Schedule 3(h)

  	
  Litigation

  
	
  Schedule 3(l)

  	
  Employee Relations; Benefits Plans

  
	
  Schedule 3(m)

  	
  Intellectual Property Claims

  
	
  Schedule 3(n)

  	
  Title Matters

  
	
  Schedule 3(s)

  	
  Transactions With Affiliates

  
	
  Schedule 3(t)

  	
  Contracts

  
	
  Schedule 3(y)

  	
  Regulatory Matters

  



 


EXHIBITS


 


	
  Exhibit A

  	
  Form of Certificate of Designations, Preferences and Rights of
  Series A Convertible Preferred Stock

  
	
  Exhibit B

  	
  Form of Registration Rights Agreement

  
	
  Exhibit C

  	
  Form of Irrevocable Transfer Agent Instructions

  
	
  Exhibit D

  	
  Form of Company Counsel Opinion

  
	
  Exhibit E

  	
  Form of Safeguard Agreement

  



 


 


iv










 












 


STOCK
PURCHASE AGREEMENT


 


STOCK
PURCHASE AGREEMENT (the “Agreement”),
dated as of March 25, 2009, by and among CLARIENT, INC., a Delaware
corporation, with headquarters located at 31 Columbia, Aliso Viejo, California
92656 (the “Company”), and OAK
INVESTMENT PARTNERS XII, LIMITED PARTNERSHIP, a Delaware limited partnership,
with headquarters located at One Gorham Island, Westport, Connecticut 06880
(the “Purchaser”).  Capitalized terms used herein and not
otherwise defined shall have the meanings ascribed thereto in Section 9(r) hereof.


 


RECITALS


 


The Company and the
Purchaser are executing and delivering this Agreement in reliance upon the
exemption from securities registration afforded by Rule 506 of Regulation
D (“Regulation D”) as promulgated
by the United States Securities and Exchange Commission (the “SEC”) under the Securities Act of 1933, as
amended (the “Securities Act”).  (Unless otherwise indicated, capitalized
terms used in this Agreement shall have the meanings ascribed to such terms
herein.)


 


The Company’s Board of
Directors has authorized 6,578,948  shares of its
preferred stock, par value $0.01 per share to be denominated as the Company’s Series A
Convertible Preferred Stock (the “Series A
Preferred Stock”), which shall be convertible into shares of the
Company’s common stock, par value $0.01 per share (the “Common Stock”), in accordance with the
terms of the Company’s Certificate of Designations, Preferences and Rights of Series A
Convertible Preferred Stock, substantially in the form attached hereto as Exhibit A
(the “Certificate of Designations”).


 


Subject to the terms and
conditions set forth in this Agreement, the Purchaser wishes to purchase an
aggregate of up to 5,263,158 shares of the Series A Preferred Stock in the
Initial Closing and Second Closing, and up to an additional 1,315,790 shares of
the Series A Preferred Stock in one or more Subsequent Closings (the “Preferred Shares”), at a purchase price
per share of $7.60 (the “Purchase Price”).  All of the shares of Common Stock which are potentially
issuable upon conversion of the Preferred Shares are referred to herein as the “Conversion Shares.”


 


Contemporaneously with the
execution and delivery of this Agreement, the Company and the Purchaser are
executing and delivering a Registration Rights Agreement substantially in the
form attached hereto as Exhibit B (the “Registration Rights Agreement”) pursuant to which the Company
has agreed to provide certain registration rights under the Securities Act and
the rules and regulations promulgated thereunder, and applicable state
securities laws.


 


NOW
THEREFORE, the Company and the Purchaser hereby agree as
follows:


 


 

















 


1.             PURCHASE
AND SALE OF PREFERRED SHARES.


 


(a)           Purchase
of Preferred Shares.


 


(i)            Subject to the terms and conditions of this Agreement,
including, without limitation, the satisfaction (or waiver) of the conditions
set forth in Sections 6(a) and 7(a) below, the Company
shall issue and sell to the Purchaser, and the Purchaser agrees to purchase
from the Company, at a purchase price per share equal to the Purchase Price, a
number of Preferred Shares such that the number of Conversion Shares issuable
upon conversion thereof equals 19.9% of the Company’s outstanding shares
calculated in accordance with NASDAQ rules and regulations (the “Initial Closing”).


 


(ii)           Subject to the terms and conditions of this Agreement,
including, without limitation, the satisfaction (or waiver) of the conditions
set forth in Sections 6(b) and 7(b) below, the Company shall issue
and sell to the Purchaser, and the Purchaser agrees to purchase from the
Company, at a purchase price per share equal to the Purchase Price, a number of
Preferred Shares equal to 5,263,158 minus the number of Preferred Shares
purchased and sold at the Initial Closing (the “Second Closing”).  The
Initial Closing and the Second Closing collectively are referred to in this
Agreement as the “Closings”).


 


(iii)          Following the Second Closing, subject to the mutual
agreement of the Company and the Purchaser, the Purchaser will purchase, and
the Company shall issue and sell, up to an additional $10,000,000 of Preferred
Shares (which amount may be allocated between up to two subsequent $5,000,000
closings), subject to the terms and conditions of this Agreement, including,
without limitation, the satisfaction (or waiver) of the conditions set forth in
Sections 6(c) and 7(c) below (each, a “Subsequent Closing”).


 


(b)           The
Closing Dates.


 


(i)            The Initial Closing shall occur as soon as practicable,
but in no event later than the second Business Day after the satisfaction or
waiver of the conditions to the Initial Closing set forth herein (excluding
conditions, that, by their terms, cannot be satisfied until the Initial
Closing) or such later date as is mutually agreed to by the Company and the
Purchaser (the “Initial  Closing Date”).


 


(ii)           Only if the Initial Closing has previously occurred, the
Second Closing shall occur as soon as practicable, but in no event later than
the second Business Day after the satisfaction or waiver of the conditions to
the Second Closing set forth herein (excluding conditions, that, by their
terms, cannot be satisfied until the Second Closing) or such later date as is
mutually agreed to by the Company and the Purchaser (the “Second  Closing
Date”).


 


(iii)          In the event that the parties elect to hold a Subsequent
Closing, each Subsequent Closing shall occur on such date mutually determined
by the parties (the “Subsequent Closing Date”).  Each of the Closing Date, the Second Closing
Date and the Subsequent Closing Date may also be referred to in this Agreement
as the “Closing Date”.


 


 


2





















 


(iv)          Each Closing shall occur on the applicable Closing Date at
the offices of Stradling, Yocca, Carlson & Rauth located at 660
Newport Center Drive Suite 1600, Newport Beach, California 92660, or at
such other location as the Company and the Purchaser may mutually agree.


 


(c)           Form of Payment.  On the applicable Closing Date, (i) the
Purchaser shall pay the Purchase Price to the Company for the applicable
Preferred Shares by wire transfer of immediately available funds in accordance
with the Company’s written wire instructions (to be delivered not less than two
(2) Business Days prior to the applicable Closing) and (ii) the
Company shall deliver to the Purchaser stock certificates (in the denominations
as the Purchaser shall request) (the “Preferred
Stock Certificates”) representing such number of the Preferred
Shares which the Purchaser is then purchasing hereunder, duly executed on
behalf of the Company and registered in the name of the Purchaser.


 


2.             REPRESENTATIONS
AND WARRANTIES OF THE PURCHASER.  The Purchaser represents and
warrants, as of the date hereof, as follows:


 


(a)           Investment Purpose.  The Purchaser is acquiring (i) the
Preferred Shares and (ii) upon conversion of the Preferred Shares, the
Conversion Shares (the Preferred Shares and the Conversion Shares collectively
are referred to herein as the “Securities”),
for its own account and not with a view towards, or for resale in connection
with, the distribution thereof, provided, however, that by making
the representations herein, the Purchaser does not agree to hold any of the
Securities for any minimum or other specific term and reserves the right to
dispose of the Securities at any time in accordance with the Securities
Act,  the Exchange Act and state
securities laws.


 


(b)           Accredited Investor Status.  The Purchaser is an “accredited investor” as
that term is defined in Rule 501(a) of Regulation D and a “qualified
institutional buyer” as that term is defined in Rule 144A promulgated
under the Securities Act.


 


(c)           Reliance on Exemptions.  The Purchaser understands that the Securities
are being offered and sold to it in reliance on specific exemptions from the
registration requirements of the United States federal and state securities
laws and that the Company is relying in part upon the truth and accuracy of,
and the Purchaser’s compliance with, the representations, warranties,
agreements, acknowledgments and understandings of the Purchaser set forth
herein in order to determine the availability of such exemptions and the
eligibility of the Purchaser to acquire the Securities.


 


(d)           Information.  The Purchaser and its advisors, if any, have
been furnished with all materials relating to the business, finances and
operations of the Company and materials relating to the offer and sale of the
Securities which have been requested by the Purchaser.  The Purchaser and its advisors, if any, have
been afforded the opportunity to ask questions of the Company.  The Purchaser understands that its investment
in the Securities involves a high degree of risk.  The Purchaser has sought such accounting,
legal and tax advice as it has considered necessary to make an informed
investment decision with respect to its acquisition of the Securities.  Nothing contained in this Section 2(d) (nor
any of the inquiries described herein nor any other due diligence
investigations conducted by the Purchaser or its advisors, if any, or its
representatives) shall modify, amend or affect the Purchaser’s right to rely on
the Company’s representations and warranties contained in Sections 3 and
9(l) below or in any certificate delivered hereunder.


 


 


3

















 


(e)           No Governmental Review.  The Purchaser understands that no court,
administrative agency or commission or other governmental or quasi-governmental
authority or instrumentality, domestic or foreign, Federal, state, county or
local (each a “Governmental Entity”)
has passed on or made any recommendation or endorsement of the Securities or
the fairness or suitability of the investment in the Securities nor have such
authorities passed upon or endorsed the merits of the offering of the
Securities.


 


(f)            Transfer or Resale.  The Purchaser understands that: (i) the
Securities have not been and are not being registered under the Securities Act
or any state securities laws, and may not be offered for sale, sold, assigned
or transferred unless (A) subsequently registered thereunder, (B) the
Purchaser shall have delivered to the Company an opinion of counsel (or such
other evidence reasonably acceptable to the Company), in a generally acceptable
form, to the effect that such Securities to be sold, assigned or transferred
may be sold, assigned or transferred pursuant to an exemption from such
registration, or (C) the Purchaser provides the Company with evidence
satisfactory to the Company that such Securities may be sold, assigned or
transferred pursuant to Rule 144 promulgated under the Securities Act, as amended
(or a successor rule thereto) (“Rule 144”);
and (ii) except as provided in the Registration Rights Agreement, neither
the Company nor any other person is under any obligation to register the
Securities under the Securities Act or any state securities laws or to comply
with the terms and conditions of any exemption thereunder.  Notwithstanding the foregoing, no such
registration statement or opinion of counsel shall be necessary for a transfer
by the Purchaser (A) that is a partnership to a liquidating trust for the
benefit of its partners, to its partners or former partners in accordance with
partnership interests or to the estate of any such partner or former partner, (B) that
is a limited liability company to its members or former members in accordance
with their interest in the limited liability company, (C) that is a
corporation to its shareholders in connection with a distribution of the shares
without value or (E) that is an individual to the Purchaser’s family
member or trust for the benefit of the Purchaser or his or her family members
or an entity whose equity owners consist solely of the Purchaser and his or her
family members in a transfer by gift, will or intestate succession, provided
that in each case the transferee will be subject to the terms of this Agreement
to the same extent as if he, she or it were the original Purchaser hereunder.


 


(g)           Legends.


 


(i)            The Purchaser understands that the certificates or other
instruments representing the Preferred Shares and, until such time as the sale
of the Conversion Shares have been registered under the Securities Act as
contemplated by the Registration Rights Agreement, the stock certificates
representing the Conversion Shares, except as set forth below, shall bear a
restrictive legend in substantially the following form (in addition to any
legend required under applicable state securities laws):


 


 


4





















 


THE SECURITIES REPRESENTED
BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933,
AS AMENDED, OR APPLICABLE STATE SECURITIES LAWS.  THE SECURITIES MAY NOT BE OFFERED FOR
SALE, SOLD, TRANSFERRED OR ASSIGNED (I) IN THE ABSENCE OF (A) AN
EFFECTIVE REGISTRATION STATEMENT FOR THE SECURITIES UNDER THE SECURITIES ACT OF
1933, AS AMENDED, OR (B) AN EXEMPTION FROM THE REGISTRATION REQUIREMENTS
UNDER SAID ACT AND (II) IN COMPLIANCE WITH APPLICABLE STATE SECURITIES
LAWS.


 


The
legend set forth above shall be removed and the Company shall issue a
certificate without such legend to the holder of the Securities, if, unless
otherwise required by state securities laws, (i) such Securities are
registered for resale under the Securities Act, (ii) in connection with a
sale transaction, such holder provides the Company with an opinion of counsel,
in form to the reasonable satisfaction of the Company, to the effect that a
public sale, assignment or transfer of the Securities may be made without
registration under the Securities Act, or (iii) such holder provides the
Company with evidence satisfactory to the Company that the Securities may be
sold pursuant to Rule 144 without any restriction as to the number of
securities sold or the manner of sale.


 


(ii)           The Purchaser understands that the certificates or other
instruments representing the Preferred Shares and the Conversion Shares, except
as set forth below, shall bear a restrictive legend in substantially the
following form:


 


THE SECURITIES REPRESENTED
BY THIS CERTIFICATE ARE SUBJECT TO CERTAIN RESTRICTIONS ON TRANSFER AS SET
FORTH IN A STOCK PURCHASE AGREEMENT DATED ON OR ABOUT MARCH 25, 2009
BETWEEN THE ISSUER AND THE ORIGINAL HOLDER OF THE SECURITIES.


 


The
legend set forth above shall be removed and the Company shall issue a
certificate without such legend to the holder of the Securities, upon written
request by the holder thereof following the expiration of the restrictions on
transfer set forth in Section 4(k) hereof.


 


(h)           Authorization; Enforcement;
Validity.  Purchaser has full power
and authority to enter into this Agreement and the Registration Rights
Agreement.  This Agreement and the
Registration Rights Agreement have been duly and validly authorized, executed
and delivered on behalf of the Purchaser and are valid and binding agreements
of the Purchaser enforceable against the Purchaser in accordance with their
terms, subject as to enforceability to general principles of equity and to
applicable bankruptcy, insolvency, reorganization, moratorium, liquidation and
other similar laws relating to, or affecting generally, the enforcement of
applicable creditors’ rights and remedies.


 


(i)            Residency.  The Purchaser is a resident of, and has its
principal executive offices located in, the State of Connecticut.


 


(j)            Ownership.  The Purchaser does not own any Common Stock
or any other securities of the Company.


 


 


5

















 


3.             REPRESENTATIONS
AND WARRANTIES OF THE COMPANY.  The Company represents and warrants to the
Purchaser as follows in this Section 3, except to the extent (i) disclosed
with reasonable specificity on the schedules to this Agreement, and (ii) with
respect to all subsections in this Section 3, other than Sections
3(b), 3(f) and 3(n), disclosed or incorporated by
reference in the Company’s Annual Report on Form 10-K for the fiscal year
ended December 31, 2007, Quarterly Reports on Form 10-Q and current
reports on Form 8-K filed since December 31, 2007 and the Company’s
Annual Report on Form 10-K for the fiscal year ended December 31,
2008 (the “2008 Filings”) filed by
the Company (other than (x) those sections of the 2008 Filings entitled or
captioned “Risk Factors”, (y) any disclosure of risks included in any
forward-looking statements disclaimer or other statements that are similarly
non-specific and are predictive or forward-looking in nature and (z) specific
disclosures contained in those documents which are filed as exhibits to such
2008 Filings).  Without limiting the
generality of the foregoing clause (z), the mere filing or incorporation
by reference of an exhibit to such 2008 Filings shall not be deemed to
adequately disclose an exception to a representation or warranty made herein
(unless the representation or warranty has to do with the existence of the
exhibit itself, as opposed to the contents thereof).


 


(a)           Organization and Qualification.  The Company and its “Subsidiaries” (which for purposes of this
Agreement means any Person in which the Company, directly or indirectly, owns
fifty percent (50%) or more of the outstanding voting securities) are
corporations, limited partnerships, limited liability companies or foreign
business entities duly organized and validly existing in good standing under
the laws of the jurisdiction in which they are incorporated or formed, as
applicable, and have the requisite corporate, limited partnership, limited
liability company or respective foreign entity power and authorization to own
their respective properties and to carry on their respective business as now
being conducted.  Each of the Company and
its Subsidiaries is duly qualified to do business and is in good standing in
every jurisdiction in which its ownership of property or the nature of the
business conducted by it makes such qualification necessary, except to the
extent that the failure to be so qualified or be in good standing would not
have a Material Adverse Effect.  As used
in this Agreement, “Material Adverse Effect”
means any material adverse effect on the business, properties, assets,
operations, prospects, results of operations or financial condition of the
Company and its Subsidiaries, if any, taken as a whole, or on the authority or
ability of the Company to perform its obligations under the Transaction
Documents (as hereinafter defined) or the Certificate of Designations, other
than such changes, effects or circumstances demonstrably attributable to: (i) economic
conditions generally in the United States, or conditions in general in the
industry and markets in which the Company and its Subsidiaries conducts its
businesses, except to the extent such changes materially and disproportionately
affect, in an adverse manner, the Company and its Subsidiaries considered as a
whole, (ii) any change in the laws or regulations generally applicable to
the industry or markets in which such Person and its Subsidiaries operate,
except to the extent such changes materially and disproportionately affect, in
an adverse manner, the Company and its Subsidiaries considered as a whole, or (iii) the
entry into and consummation of this Agreement or any of the Transaction
Documents or Certificate of Designations. 
The Company has no Subsidiaries except as set forth on Schedule 3(a).


 


 


6

















 


(b)           Authorization; Enforcement;
Validity.  The Company has the
requisite corporate power and authority to enter into and perform its
obligations under this Agreement, the Registration Rights Agreement, the
Irrevocable Transfer Agent Instructions and each of the other agreements
entered into by the parties hereto in connection with the transactions
contemplated by this Agreement (collectively, the “Transaction Documents”), to execute and file the Certificate
of Designations, and, with respect of the Preferred Shares to be issued at the
Second Closing, after receipt of the NASDAQ Stockholder Approval, to issue the
Securities in accordance with the terms hereof and thereof.  The execution and delivery of the Transaction
Documents by the Company and the execution and filing of the Certificate of
Designations by the Company and the consummation by it of the transactions
contemplated hereby and thereby, including, without limitation, the issuance of
the Preferred Shares and the reservation for issuance and the issuance of all
Conversion Shares issuable upon conversion of the Preferred Shares, have been
duly authorized by the Company’s Board of Directors and no further consent or
authorization is required by the Company, its Board of Directors or its
stockholders, except the NASDAQ Stockholder Approval, which shall be obtained
prior to the Second Closing.  The
Transaction Documents have been duly executed and delivered by the Company, and
constitute the valid and binding obligations of the Company enforceable against
the Company in accordance with their terms, except that any rights to indemnity
or contribution under the Registration Rights Agreement may be subject to
limitation by public policy under federal securities laws, subject as to
enforceability to general principles of equity and to applicable bankruptcy,
insolvency, reorganization, moratorium, liquidation and other similar laws
relating to, or affecting generally, the enforcement of applicable creditors’
rights and remedies.  The Certificate of
Designations will be filed as promptly as practicable with the Secretary of
State of the State of Delaware and will be in full force and effect as of the
Initial Closing Date, enforceable against the Company in accordance with its
terms.  Neither the Certificate of
Incorporation nor the Certificate of Designations shall have been amended prior
to any Closing Date.


 


(c)           Equity
Capitalization.


 


(i)            As of the date hereof, the authorized capital stock of
the Company consists of (A) 150,000,000 shares of Common Stock, of which
as of March 10, 2009, 77,195,120 shares are issued and outstanding and (B) 8,000,000
shares of Preferred Stock, of which no shares are issued and outstanding.  All of such outstanding shares have been
validly issued and are fully paid and nonassessable.  Immediately prior to the Initial Closing
Date, no shares of Preferred Stock shall be outstanding and as of each Closing
Date the Series A Preferred Stock shall be the sole authorized or
designated series of Preferred Stock.


 


(ii)           Except as set forth in Schedule 3(c), no shares of
the Company’s capital stock are subject to preemptive rights or any other
similar rights.  Except as set forth in Schedule
3(c), and except for (a) contingent warrants issuable pursuant to that
certain Second Amended and Restated Senior Subordinated Revolving Credit
Agreement, dated February 27, 2009, by and between the Company and
Safeguard Delaware, Inc., including the Continuance Warrant and the
Monthly Warrants (each as defined therein), (b) options to purchase
2,330,849 shares of Common Stock issued or issuable pursuant to the Company’s
1996 Equity Incentive Plan, (c) options to purchase 3,705,325 shares of
Common Stock issued or issuable pursuant to the Company’s 2007 Incentive Award
Plan, and (d) options to purchase 1,350,000 shares of Common Stock issued
or issuable outside of the Company’s 1996 Equity Incentive Plan and


 


 


7





















 


2007 Incentive Award Plan, (A) 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 or exercisable for, any shares of capital stock of the Company
or any of its Subsidiaries, or contracts, commitments, understandings or
arrangements by which the Company or any of its Subsidiaries is or may become
bound to issue additional shares of capital stock of the Company or any of its Subsidiaries
or options, warrants, scrip, rights to subscribe to, calls relating to, or
securities or rights convertible into or exercisable for, any shares of capital
stock of the Company or any of its Subsidiaries; (B) there are no
outstanding securities or instruments of the Company or any of its Subsidiaries
which contain any redemption or similar provisions, and there are no contracts,
commitments, understandings or arrangements by which the Company or any of its
Subsidiaries is or may become bound to redeem a security of the Company or any
of its Subsidiaries; (C) there are no securities or instruments containing
anti-dilution or similar provisions that will be triggered by the issuance of
the Securities as described in this Agreement; and (D) the Company does
not have any stock appreciation rights or “phantom stock” plans or agreements
or any similar plan or agreement.


 


(iii)          The Company has furnished or made available to each
Purchaser true and correct copies of the Company’s Certificate of Incorporation,
as amended and as in effect on the date hereof (the “Certificate of Incorporation”) and the Company’s Bylaws, as
amended and as in effect on the date hereof and as of the applicable Closing
(the “Bylaws”).  The Company does not have any certificate of
designations in effect as of the date hereof or as of any Closing Date (other
than the Certificate of Designations, which will be effective prior to the
Initial Closing Date).


 


(d)           Indebtedness and Other Contracts.  Except as set forth on Schedule 3(d),
neither the Company not any of its Subsidiaries (i) has any outstanding
Indebtedness (as defined below), (ii) is in violation of any term of or in
default under any contract, agreement or instrument relating to any
Indebtedness, except where such violations and defaults would not result,
individually or in the aggregate, in a Material Adverse Effect, or (iii) is
a party to any contract, agreement or instrument relating to any Indebtedness,
the performance of which, in the judgment of the Company’s officers, has or is
expected to have a Material Adverse Effect. 
For purposes of this agreement “Indebtedness”
means, with respect to any Person, whether recourse is secured by or is
otherwise available against all or only a portion of such Person’s assets, and
whether or not contingent, (A) all obligations for borrowed money, whether
current, funded, secured or unsecured, and every obligation of such Person
evidenced by bonds, debentures, notes or similar instruments, (B) all
indebtedness of such Person for the deferred purchase price of property or
services (other than trade payables incurred in the ordinary course of
business), (C) all indebtedness of such Person created or arising under
any conditional sale or other title retention agreement with respect to
property acquired by such Person (even though the rights and remedies of the
seller or lender under such agreement in the event of default are limited to
repossession or sale of such property), (D) all indebtedness of such
Person secured by a Lien to secure all or part of the purchase price of the
property subject to such mortgage or Lien, (E) all obligations under
leases which have been or must be, in accordance with GAAP, recorded as capital
leases in respect of which such Person is liable as lessee, (F) any liability
of such Person in respect of banker’s acceptances or letters of credit, (G) all
interest, fees and other expenses owed with respect to the indebtedness
referred to above, and (H) all indebtedness referred to above which is
directly or indirectly guaranteed by such Person or which such Person has
agreed (contingently or otherwise) to purchase or otherwise acquire or in
respect of which it has otherwise assured a creditor against loss.


 


 


8

















 


(e)           Issuance of Securities.  Upon the filing of the Certificate of
Designations with the Secretary of State of the State of Delaware, as of each
Closing, the applicable Preferred Shares will be duly authorized and, upon
issuance in accordance with the terms hereof, shall be (i) validly issued,
fully paid and non-assessable, (ii) free from all taxes, Liens and charges
with respect to the issuance thereof and (iii) entitled to the rights and
preferences set forth in the Certificate of Designations.  Upon the filing of the Certificate of
Designations with the Secretary of State of the State of Delaware, and as of
each Closing, a sufficient number of shares of Common Stock to permit the
conversion in full of such Preferred Shares shall be duly authorized and
reserved for issuance upon conversion of the Preferred Shares.  Upon conversion in accordance with the
Certificate of Designations, the Conversion Shares will be validly issued,
fully paid and nonassessable and free from all taxes, Liens and charges with
respect to the issue thereof, with the holders being entitled to all rights
accorded to a holder of Common Stock. 
Subject only to accuracy of the representations set forth in Section 2,
the issuance by the Company of the Securities is exempt from registration under
the Securities Act and all applicable state securities laws.


 


(f)            No
Conflicts.


 


(i)            Except as set forth on Schedule 3(f), the
execution, delivery and performance of the Transaction Documents by the
Company, the performance by the Company of its obligations under the
Certificate of Designations and the consummation by the Company of the
transactions contemplated hereby and thereby (including, without limitation,
the reservation for issuance and issuance of the Conversion Shares) will not:


 


(A)          result in a violation of the Certificate of Incorporation
(after giving effect to the Certificate of Designations), or the Bylaws;


 


(B)           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,
or incremental, additional or varied rights under, any material agreement,
indenture or instrument (including, without limitation, any stock option,
employee stock purchase or similar plan or any employment or similar agreement)
to which the Company or any of its Subsidiaries is a party (including, without
limitation, triggering the application of any change of control or similar
provision (whether “single trigger” or “double trigger”)); or


 


(C)           result in a violation of any law, rule, regulation, order,
judgment or decree (including federal and state securities laws and regulations
and the rules and regulations of the Principal Market (as hereinafter
defined)) applicable to the Company or any of its Subsidiaries or by which any
property or asset of the Company or any of its Subsidiaries is bound or
affected.


 


 


9





















 


(ii)           Neither the Company nor its Subsidiaries is in violation
of any term of its Certificate of Incorporation or Bylaws or, in the case of
Subsidiaries, their organizational charter or bylaws, respectively.


 


(iii)          The business of the Company and its Subsidiaries is not
being conducted, in violation of any law, ordinance or regulation of any
Governmental Entity, except where such violations would not result, either
individually or in the aggregate, in a Material Adverse Effect.


 


(iv)          Except for (A) the filing of an information statement
relating to the NASDAQ Stockholder Approval as required under the Securities
Exchange Act of 1934, as amended (the “Exchange
Act”) and the rules and regulations promulgated thereunder, (B) with
respect to the Second Closing and any Subsequent Closings, the NASDAQ
Stockholder Approval, (C) as may be required by any applicable state
securities laws, or (D) the filing of the Certificate of Designations with
the Secretary of State of the State of Delaware, the Company is not required to
obtain any consent, authorization or order of, or make any filing or registration
with, any Governmental Entity in order for it to execute, deliver or perform
any of its obligations under or contemplated by the Transaction Documents or to
perform its obligations under the Certificate of Designations, in each case in
accordance with the terms hereof or thereof. 
All consents, authorizations, orders, filings and registrations which
the Company is required to obtain as described in the preceding sentence shall
have been obtained or effected on or prior to each Closing Date and shall not
be the subject of any pending or, to the knowledge of the Company, threatened
proceeding or other action.  The Company
is not, and as of each Closing Date will not be, in violation of the listing
requirements of the NASDAQ, and the Conversion Shares shall be authorized for
listing thereon.


 


(g)           SEC
Documents; Financial Statements.


 


(i)            Since December 31, 2008, the Company has 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 all exhibits included therein and financial
statements and schedules thereto and documents incorporated by reference
therein) and all forms, documents and instruments filed by the Company with the
SEC pursuant to the Securities Act (including all exhibits included therein and
financial statements and schedules thereto and documents incorporated by
reference therein) being hereinafter referred to as the “SEC Documents”).  As of their respective dates, the SEC
Documents complied in all material respects with the requirements of the
Securities Act or Exchange Act and the rules and regulations of the SEC
promulgated thereunder applicable to the SEC Documents.  None of the SEC Documents, at the time they
were or are filed with the SEC, contained or will contain any untrue statement
of a material fact or omitted or will 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.


 


(ii)           As of their respective dates, the financial statements of
the Company included in the SEC Documents complied as to form (and will comply
as to form) in all material respects with U.S. generally accepted accounting
principles (“GAAP”) and the
published rules and regulations of the SEC with respect thereto.  Such financial statements have been prepared
in accordance with GAAP, consistently applied, during the periods involved
(except (A) as may be


 


 


10






 












 


otherwise specifically indicated in such
financial statements or the notes thereto, or (B) in the case of unaudited
statements, to the extent they may exclude footnotes or may be condensed or
summary statements or as otherwise, in each case, may be permitted by the SEC
under the Exchange Act) and fairly present in all material respects the
consolidated financial position of the Company as of the dates thereof and the
consolidated results of its operations and cash flows for the periods then
ended (subject, in the case of unaudited statements, to normal year-end audit
adjustments).  KPMG LLP, which has
examined certain of such financial statements, is an independent certified
public accounting firm within the meaning of the Securities Act.  As of the date of this Agreement and as of
each Closing Date, the Company meets the requirements for use of Form S-3
for registration of the resale of Registrable Securities (as defined in the
Registration Rights Agreement).


 


(iii)          Since December 31, 2008, except as specified in the
2008 Filings, the Company has not incurred or suffered any liability or
obligation of any nature (absolute, accrued, contingent or otherwise) which are
not properly reserved against in the Company’s financial statements to the
extent required to be so reflected or reserved against in accordance with GAAP,
except in the ordinary course of business and except any such liability or
obligation that has not had and could not reasonably be expected to have,
individually or in the aggregate, a Material Adverse Effect.


 


(h)           Absence of Litigation.  There is no action, suit, proceeding, inquiry
or investigation before or by any court, public board, Governmental Entity or
self-regulatory organization or body pending or, to the knowledge of the
Company or any of its Subsidiaries, threatened against or affecting the
Company, the Common Stock or any of its Subsidiaries, except where any of the
foregoing would not reasonably be expected to result, either individually or in
the aggregate, in a Material Adverse Effect and except as set forth on Schedule
3(h).


 


(i)            Acknowledgment Regarding the
Purchaser’s Purchase of Preferred Shares. 
The Company acknowledges and agrees that the Purchaser is acting solely
in the capacity of an arm’s length purchaser with respect to the Company in
connection with the Transaction Documents and the Certificate of Designations
and the transactions contemplated hereby and thereby.  The Company further acknowledges that the
Purchaser is not acting as a financial advisor or fiduciary of the Company (or
in any similar capacity) with respect to the Transaction Documents and the
Certificate of Designations and the transactions contemplated hereby and
thereby and any advice given by the Purchaser or any representative or agent in
connection with the Transaction Documents and/or the Certificate of
Designations and the transactions contemplated hereby and thereby is merely
incidental to the Purchaser’s purchase of the Securities.  The Company further represents to the
Purchaser that the Company’s decision to enter into the Transaction Documents
has been based solely on the independent evaluation by the Company and its
representatives.


 


(j)            No General Solicitation.  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
the Securities.


 


 


11

















 


(k)           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 require registration of any of
the Securities under the Securities Act or cause this offering of the
Securities to be integrated with prior offerings by the Company for purposes of
the Securities Act or any applicable stockholder approval provisions,
including, without limitation, under the rules and regulations of NASDAQ,
nor will the Company or any of its Subsidiaries take any action or steps (other
than by compliance with the Registration Rights Agreement) that would require
registration of any of the Securities under the Securities Act or cause the
offering of the Securities to be integrated with other offerings.


 


(l)            Employee Relations; Benefit Plans.  Neither the Company nor any of its
Subsidiaries is involved in any union labor dispute nor, to the knowledge of
the Company or any of its Subsidiaries, is any such dispute threatened.  Except as set forth on Schedule 3(l),
none of the Company’s or its Subsidiaries’ employees is a member of a union
which relates to such employee’s relationship with the Company, and neither the
Company nor any of its Subsidiaries is a party to a collective bargaining
agreement.  Except as set forth on Schedule  3(l), no executive officer of
the Company or any of its Subsidiaries has notified the Company or any such
Subsidiary that such executive officer intends to leave the Company or any such
Subsidiary or otherwise terminate such executive officer’s employment with the
Company or any such Subsidiary.  To the
knowledge of the Company, no executive officer of the Company or any of its
Subsidiaries is in violation of any material term of any employment contract,
confidentiality, disclosure or proprietary information agreement,
non-competition agreement, or any other contract or agreement or any
restrictive covenant, and the continued employment of each such executive
officer does not subject the Company or any of its Subsidiaries to any
liability with respect to any of the foregoing matters.


 


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


 


(iii)          There are no material employee benefit plans, as defined in
Section 3(3) of ERISA, maintained by the Company or any Subsidiary,
or with respect to which the Company or any Subsidiary has incurred or has
reason to expect that it will incur any direct or indirect material liability,
other than those described in the 2008 Filings or as described in Schedule 3(l) (“Benefit Plans”).


 


(iv)          No Benefit Plan is subject to Title IV of ERISA or section
412 of the Code.  Except as set forth on
Schedule 3(l), no Benefit Plan is a “Multiple Employer Plan” within the meaning
of the Code or ERISA.


 


(v)           With respect to each Benefit Plan:  (A) if it is intended to qualify under
section 401(a) or 403(a) of the Code, the Company has no knowledge of
any circumstance that could be reasonably expected to result in such Benefit
Plan’s failure to be so qualified; (B) such Benefit Plan has been
maintained and administered at all times in substantial compliance with its
terms and applicable laws and regulations, except where the failure to comply
would not have a Material Adverse Effect; (C) to the Company’s knowledge
no event has occurred and there exists


 


 


12





















 


no circumstances under which the Company or
any Subsidiary could be reasonably expected to incur material liability under
ERISA, the Code or otherwise (other than routine claims for benefits) with
respect to such Benefit Plan or with respect to any other entity’s employee
benefit plan; and (D) all contributions and premiums that are due have
been paid with respect to such Benefit Plan.


 


(vi)          With respect to each Benefit Plan which is an “employee
welfare benefit plan” (as defined in ERISA section 3(1)) which is maintained or
contributed to by the Company or any Subsidiary or with respect to which the
Company or any Subsidiary has or could have any direct or indirect liability as
of a Closing Date: (A) no such plan provides medical or death benefits
with respect to current or former employees of the Company or any Subsidiary
beyond their termination of employment (other than as required to avoid an
excise tax under Code section 4980B); and (B) to the Company’s knowledge
the Company and each Subsidiary has substantially complied with the
requirements of Code section 4980B.


 


(vii)         The consummation of the transactions contemplated by this
Agreement and the other Transaction Documents will not: (A) entitle any
employee of the Company to severance or termination pay; (B) accelerate
the time of payment or vesting, or increase the amount of compensation due to
any employee of the Company; or (C) result in the payment that will be
taken into account in determining whether there is an “excess parachute payment”
under Code section 280G(b)(1).


 


(viii)        Schedule 3(l) lists every
benefit plan, policy, agreement or arrangement, covering two or more employees
or service providers, sponsored or contributed to by either the Company or any
of its Subsidiaries, which constitutes a “nonqualified deferred compensation
plan” (as defined in Section 409A(d)(1) of the Code and regulations
promulgated thereunder) with respect to any service provider to either the
Company or any Subsidiary.  Neither the
Company nor any Subsidiary is obligated to make any payment or payments and is
not a party to (or a participating employer in) any plan, policy, agreement or
arrangement that it has reason to expect would give rise to additional taxes or
interest under Section 409A of the Code (or any similar provision of
state, local or foreign Law), whether or not such plan, policy, agreement or
arrangement is required to be listed on Schedule 3(l).


 


(m)          Intellectual Property Rights.  The Company and its Subsidiaries own or
possess adequate rights or licenses to use all trademarks, trade names, service
marks, service mark registrations, service names, patents, patent rights,
copyrights, inventions, licenses, approvals, governmental authorizations, trade
secrets and all other intellectual property rights necessary to conduct their
respective businesses as now, or as contemplated to be, conducted, except where
the failure to own or possess such rights would not result, either individually
or in the aggregate, in a Material Adverse Effect.  Neither the Company nor its Subsidiaries has
infringed trademarks, trade names, service marks, service mark registrations,
service names, copyrights, inventions, licenses, trade secrets or, to its
knowledge (after consultation with the Company’s senior officer in charge of
patents and patent applications), patents, patent rights or other intellectual
property rights of others, or of any development of similar or identical trade
secrets or technical information by others and, except as set forth on Schedule
3(m), there is no claim, action or proceeding being made or brought
against, the Company or its Subsidiaries regarding its trademarks, trade names,
service marks, service mark registrations, service names, patents,


 


 


13

















 


patent rights, copyrights, inventions, licenses, trade secrets, or
infringement of other intellectual property rights, except where any of the
foregoing would not result, either individually or in the aggregate, in a
Material Adverse Effect.  The Company and
its Subsidiaries have taken reasonable security measures to protect the
secrecy, confidentiality and value of all of their intellectual properties.


 


(n)           Title.  The Company and its Subsidiaries have good
and marketable title to the leasehold estate in all real property described in
the 2008 Filings as being leased by them and good and marketable title to all
personal property owned by them which is material to the business of the
Company and its Subsidiaries, in each case free and clear of all Liens (other
than Permitted Liens) except (i) such as are set forth on Schedule 3(n),
(ii) such as do not materially affect the value of such property and do
not interfere with the use made and proposed to be made of such property by the
Company and any of its Subsidiaries, (iii) such Liens against any landlord’s
or owner’s interest in any leased property, and (iv) for taxes not yet due
and payable.  Any real property and
facilities held under lease by the Company and any of its Subsidiaries are held
by them under valid, subsisting and enforceable leases with such exceptions as
are not material and do not interfere with the use made and proposed to be made
of such property and facilities by the Company and its Subsidiaries.


 


(o)           Insurance.  All of the insurance policies covering the
Company and its Subsidiaries are in full force and effect, neither the Company
nor any of its Subsidiaries is in material default with respect to its
obligations under any of such insurance policies and neither the Company nor
any of its Subsidiaries has received any notification of cancellation or
modification of any of such insurance policies. 
The Company and its Subsidiaries maintain insurance coverage of a type
and amount customary for entities of similar size engaged in similar lines of
business.  Neither the Company nor any of
its Subsidiaries is or ever has been a party to, or a beneficiary of, any other
policy, insurance pool or sharing agreement whereby any other Person(s) maintains
or maintained insurance covering the business of the Company.


 


(p)           Regulatory Permits; Compliance
with Law.  Except the absence of
which would not result or be expected to result, either individually or in the
aggregate, in a Material Adverse Effect, (i) the Company and its
Subsidiaries possess all licenses, certificates, authorizations, permits,
consents, orders and approvals issued by, and have made all filings,
applications and registrations with, the appropriate Governmental Entities
necessary to own or lease their respective properties and assets and to conduct
their respective businesses as conducted and as contemplated to be conducted,
and (ii) neither the Company nor any such Subsidiary has received any
notice of proceedings relating to the revocation or modification of any such
license, certificate, authorization, permit, consent, order or approval.  The Company and each of its Subsidiaries has
complied in all material respects and is not in default or violation in any
material respect of, and none of them is, to the knowledge of the Company,
under investigation with respect to or, to the knowledge of the Company, has
been threatened to be charged with or given notice of any material violation
of, any applicable material domestic (federal, state or local) or foreign law,
statute, ordinance, license, rule, regulation, policy or guideline, order,
demand, writ, injunction, decree or judgment of any Governmental Entity, other
than such noncompliance, defaults or violations that would not reasonably be
expected to have a Material Adverse Effect. 
Except for statutory or regulatory restrictions of general application,
no Governmental Entity has placed any material restriction on the business or
properties of the Company or any of its Subsidiaries.


 


 


14

















 


(q)           Disclosure Controls.  The Company (A) has implemented and
maintains disclosure controls and procedures (as defined in Rule 13a-15(e) of
the Exchange Act) to ensure that material information relating to the Company
and its Subsidiaries, is made known to the chief executive officer and the
chief financial officer of the Company by others within those entities, and (B) has
disclosed, based on its most recent evaluation prior to the date hereof, to the
Company’s outside auditors and the audit committee of the Board of Directors
that there were no (x) significant deficiencies or material weaknesses in
the design or operation of internal controls over financial reporting (as
defined in Rule 13a-15(f) of the Exchange Act) that are reasonably
likely to adversely affect the Company’s ability to record, process, summarize
and report financial information and (y) fraud, whether or not material,
that involves management or other employees who have a significant role in the
Company’s internal controls over financial reporting.  Since December 31, 2008 and until the
date of this Agreement, (A) to the knowledge of the Company, none of the
Company, any Company Subsidiary, or any director or executive officer of the
Company or any Company Subsidiary has received or otherwise been made aware of
any written material complaint, allegation, assertion or claim, regarding the
accounting or auditing practices, procedures, methodologies or methods of the
Company or any Company Subsidiary or their respective internal accounting
controls, and (B) to the Company’s knowledge, no attorney representing the
Company or any Company Subsidiary, whether or not employed by the Company or
any Company Subsidiary, has reported evidence of a material violation of
securities laws, breach of fiduciary duty or similar violation by the Company
or any of its executive officers, directors, employees or agents to the Board
of Directors or any committee thereof or to any director or executive officer
of the Company.


 


(r)            Tax Status.  The Company and each of its Subsidiaries (i) has
timely made or filed all federal and state income and all other tax returns,
reports and declarations required by any jurisdiction to which it is subject
and all such tax returns, reports and declarations were complete and correct in
all material respects and were prepared in substantial compliance with all
applicable laws and regulations, (ii) other than taxes that in an
aggregate amount would not be material (and the nonpayment of which would not
have a Material Adverse Effect), has paid all taxes and other governmental
assessments owed, except those being contested in good faith and for which the
Company has made appropriate reserves on its books and financial statements,
and (iii) other than accruals for taxes in an aggregate amount that would
not be material (and the nonpayment of which would not have a Material Adverse
Effect), has set aside on its books provisions reasonably adequate for the
payment of all taxes for periods subsequent to the periods to which such
returns, reports or declarations (referred to in clause (i) above)
apply.


 


(s)           Transactions With Affiliates.  Except (i) as set forth on Schedule
3(s), (ii) in the SEC Documents filed with the SEC prior to the date
of this Agreement, (iii) routine compensation to directors in accordance
with policies duly adopted by the Company’s Board of Directors, (iv) the
grant of incentive equity issued under duly adopted incentive equity plans, and
(v) transactions between the Company and its Subsidiaries and parent
companies, as of the date hereof, to the knowledge of the Company, none of the
executive officers or directors of the Company is presently a party to any
transaction with the Company (other than for services as 


 


 


15

















 


employees, officers and directors), including any contract, agreement
or other arrangement providing for the furnishing of services to or by,
providing for rental of real or personal property to or from, or otherwise
requiring payments to or from any such executive officer or director or, to the
knowledge of the Company, any Person in which any such executive officer or
director has a substantial interest or is an officer, director, trustee or
partner.


 


(t)            Contracts.  Except for the contracts, agreements and
commitments, whether written or oral, described on Schedule 3(t), or
filed as exhibits to the SEC Documents filed with the SEC prior to the date of
this Agreement (other than with respect to the contracts described in Section 3(t)(ii),
if any, which shall be described on Schedule 3(t)), neither the Company
nor any Subsidiary is a party to or bound by any of the following contracts,
agreements or commitments, whether written or oral (the “Material
Contracts”):


 


(i)            any contract or agreement which is a “material contract”
within the meaning of Item 601(b)(10) of Regulation S-K to be performed in
whole or in part after the date of this Agreement;


 


(ii)           any contract which limits or purports to limit the freedom
of the Company or any Subsidiary to engage in any line of business or to compete
with any other Person;


 


(iii)          any agreement of guarantee, support, indemnification,
assumption or endorsement of, or any similar commitment with respect to, the
obligations, liabilities (whether accrued, absolute, contingent or otherwise)
or Indebtedness of any other Person;


 


(iv)          any contract or agreement that grants any person a right of
first refusal, right of first offer or similar right with respect to any
material properties, assets or business of the Company or any of its
Subsidiaries;


 


(v)           any contract relating to the acquisition or disposition or
any material business or material assets (whether by merger, sale of stock or
assets or otherwise), which acquisition or disposition is not yet complete or
where such contract contains continuing material obligations, including
continuing material indemnity obligations, of the Company or any of its
Subsidiaries; and


 


(vi)          any contract with any Affiliate of the Company (A) with
a value in excess of $50,000, (B) which provides any Person with material
consent rights or material control rights, or (C) which was not entered
into in the ordinary course of business or was entered into on terms less
favorable than would have been obtainable by the Company or it Subsidiaries in
a comparable arm’s length transaction with an unrelated Person.


 


All of the Material
Contracts are in full force and effect and binding upon the parties thereto in
accordance with their terms.  Neither the
Company nor any Subsidiary, nor, to the knowledge of the Company, any other
party to such Material Contracts, is in default thereunder, nor to the
knowledge of the Company does any condition exist that with notice or lapse of
time or both would constitute a default thereunder.  Except as set forth on Schedule 3(t),
the Company has no knowledge of any proposed or pending cancellation or
termination of any such Material Contract.


 


 


16

















 


(u)           Application of Takeover
Protections.  The Company and its
Board of Directors have taken all necessary action, if any, in order to render
inapplicable any control share acquisition, business combination, poison pill
(including any distribution under a rights agreement), interested shareholder
or other similar anti-takeover provision under the Certificate of Incorporation
or the laws of the State of Delaware (including, without limitation, Section 203
of the Delaware General Corporation Law, or any successor statute thereto) or
the State of California (collectively, “Takeover Provisions”)
which is or could become applicable to the Purchaser as a result of the
transactions contemplated by this Agreement, including, without limitation, the
Company’s issuance of the Securities, the Purchaser’s ownership of the
Securities and/or the Purchaser’s acquisition of the Conversion Shares.


 


(v)           Poison Pill.  The Company’s Rights Agreement, dated as of
February, 10, 1999, between the Company and Harris Trust Company of California,
as amended, expired by its terms on February 19, 2009.


 


(w)          Investment Company.  The Company is not, and after giving effect
to the offering and sale of the Securities hereunder and the application of the
proceeds thereof as described in this Agreement will not be, an “investment
company” as such term is defined in the Investment Company Act of 1940, as
amended.


 


(x)            No Market Manipulation.  Neither the Company nor its Subsidiaries nor,
to the knowledge of the Company, any of such entities’ directors, officers,
employees, agents or controlling persons have taken, directly or indirectly,
any action designed, or that might reasonably be expected, to cause or result
in, under the Securities Act or otherwise, or that has constituted,
stabilization or manipulation of the price of the Common Stock.


 


(y)           Special Regulatory and Other
Matters.  Except as set forth in Schedule
3(y), the Company represents and warrants to the Purchaser as follows:


 


(i)            The Company and each of its Subsidiaries (collectively,
the  “Regulated
Companies,” and each, a “Regulated
Company”) each hold all licenses and other rights, accreditations,
permits, approvals and authorizations (“Permits”)
required by law, ordinance, regulation, ruling, guidance or manual of any
Governmental Entity necessary to operate each line of business or facility
presently conducted and presently proposed to be conducted by each of the
Regulated Companies (each such line or facility, a “Business” and collectively, the “Businesses”), except for Permits, the absence of which would
not reasonably be expected to have a Material Adverse Effect. All Permits are
in full force and effect and will remain so immediately after the Closing and
no suspension or cancellation of any Permit is pending or, to the knowledge of
any Regulated Company, threatened.  None
of the Regulated Companies has received any notice or other communication from
any Governmental Entity regarding (i) any actual or possible violation of
or failure to comply with any term or requirement of any Permit, or (ii) any
actual or possible revocation, withdrawal, suspension, cancellation,
termination or modification of any Permit.


 


 


17





















 


(ii)           Each Regulated Company that directly receives
reimbursement or payments under Title XVIII or XIX of the Social Security Act
(the “Medicare And Medicaid Programs”)
is enrolled for participation and reimbursement under the Medicare and Medicaid
programs.  Each Regulated Company that
directly or indirectly receives reimbursement or payments under the Medicare
and Medicaid Programs, the  TRICARE
program and such other similar federal, state or local reimbursement or
governmental programs (collectively the “Government
Programs”) has current provider numbers and provider enrollments and
agreements required for each of such Government Programs.  Each Regulated Company that receives direct
payments under any non-governmental program, including without limitation any
private insurance program (collectively, the “Private
Programs”) has all provider agreements and provider numbers that are
required under such Private Programs.


 


(iii)          Each Regulated Company has not claimed or received
reimbursements from Government Programs or Private Programs in excess of
amounts permitted by law or applicable contract, and has no liability under any
Government Program or Private Program (known or unknown, contingent or
otherwise) for any refund, overpayment, discount or adjustment, except for any
of the foregoing that would not reasonably be expected to have a Material
Adverse Effect on the business, results of operations or prospects of any
particular Regulated Company or group thereof, including by virtue of having a
Material Adverse Effect on the ability to operate in the ordinary course or by
virtue of resulting in a material liability. 
Except as described on Schedule 3(y), no Regulated Company has
any reimbursement or payment rate appeals, disputes or contested positions
currently pending before any Governmental Entity or any administrator of any
Private Programs with respect to any Business.


 


(iv)          All activities of each Business of each Regulated Company
and of any officers, directors, agents and employees of any of the Regulated
Companies undertaken on behalf of any Business, have been, and are currently
being, conducted in compliance in all respects with all applicable legal
requirements, permits, licenses, certificates, governmental requirements,
Government Program manuals and guidance, orders and other similar items of any
Governmental Entity including, without limitation, requirements under laws
administered by the Food and Drug Administration, requirements under the
Clinical Laboratory Improvement Amendments, and all legal requirements
currently in effect pertaining to confidentiality of patient information,
occupational safety and health, workers’ compensation, unemployment, building
and zoning codes (collectively, “Regulations”),
other than any non-compliance that does not or would not have a Material
Adverse Effect on the assets, business, properties, prospects, operations or
financial or other condition of any Business. 
None of the Businesses of any of the Regulated Companies has violated or
become liable for, or received any unresolved notice or charge asserting any
such violation or liability with respect to, any Regulation, nor are there any
facts or circumstances that are known or that reasonably should be known to the
Regulated Companies that could form the basis for any such violation or
liability, which violation or liability would reasonably be expected to have a
Material Adverse Effect on the business, results of operations or prospects of
any particular Regulated Company or group thereof, including by virtue of
having a Material Adverse Effect on the ability to operate in the ordinary
course or by virtue of resulting in a material liability.


 


(v)           None of the Regulated Companies, or any officer, director
or managing employee of any of the Regulated Companies, and, to the knowledge
of the Regulated Companies after due and reasonable inquiry, no person or
entity providing professional services in connection with any Business, has
engaged with respect to the Regulated Companies in any


 


 


18





















 


activities that are prohibited, or cause for
the imposition of penalties or mandatory or permissive exclusion, under 42
U.S.C. §§ 1320a-7, 1320a-7a, 1320a-7b, 1395nn, or 1396b, 31 U.S.C. §§
3729-3733, or the federal TRICARE statute (or other federal or state statutes
related to false or fraudulent claims) or the regulations promulgated
thereunder pursuant to such statutes, or similar state or local statutes or regulations,
or under any criminal laws, statutes, ordinances, regulations, rulings or
manuals of any Governmental Entity relating to health care services or
payments, or that are prohibited by rules of professional conduct, other
than any of the foregoing that would not reasonably be expected to have a
Material Adverse Effect.


 


(z)            Solvency.  Immediately after the consummation of the
transactions contemplated by this Agreement and the other Transaction
Documents, the fair value and present fair saleable value of the assets of each
of the Company and its Subsidiaries will exceed the sum of their stated
liabilities and identified contingent liabilities.  The Company and its Subsidiaries are not, nor
will they be, after giving effect to the execution, delivery and performance of
this Agreement and the other Transaction Documents, and the consummation of the
transactions contemplated hereby and thereby, (i) left with unreasonably
small capital with which to carry on their business as it is proposed to be
conducted, (ii) unable to pay their debts (contingent or otherwise) as
they mature or (iii) otherwise insolvent.


 


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


 


4.             COVENANTS.


 


(a)           Certain Pre-Closing Covenants.  The parties agree as follows with respect to
the period between the execution of this Agreement and each Closing:


 


(i)            General.  Each of the parties will use its commercially
reasonable efforts to take all action and to do all things necessary, proper,
or advisable in order to consummate and make effective the transactions
contemplated by this Agreement (including satisfaction, but not waiver, of the
conditions to each Closing set forth in Sections 6(a) and/or 6(b) and
Sections 7(b) and/or 7(c), as applicable; provided, however,
that nothing in this Section 4(a) shall be deemed to require
the Purchaser to purchase, or the Company to sell, the Preferred Shares unless
and until the conditions set forth in Sections 6(a) and/or 6(b) and
Section 7(b) and/or 7(c), respectively, are satisfied
or, in the sole discretion of the Company or Purchaser, as the case may be,
waived.


 


(ii)           Notices and Consents.  The Company will give any notices to third
parties and Governmental Entities and shall use commercially reasonable efforts
to obtain any third party consents that the Purchaser may reasonably request in
connection with the matters referred to in Section 3(f) hereof.  Each of the parties will give any notices to,
make any filings with, and use its commercially reasonable efforts to obtain
any authorizations, consents, and approvals of Government Entities in
connection with the matters referred to in Section 3(f) hereof.


 


 


19





















 


(iii)          Full Access.  The Company will permit representatives of
the Purchaser to have reasonable access at reasonable times to its premises,
properties, personnel and other third parties whose consent is required in
order to consummate the transactions contemplated hereby, and to the books and
documents of or pertaining to the Company.


 


(iv)          Notice of Developments.  The Company will give prompt written notice
to the Purchaser of any development causing a breach of any of the
representations and warranties in Section 3.  The Purchaser shall give prompt written
notice to the Company of any development causing a breach of any of its own
representations and warranties in Section 2.  No disclosure by any party pursuant to this Section 4(a)(iv),
however, shall be deemed to amend or supplement the schedules hereto or to
prevent or cure any misrepresentation, breach of warranty, or breach of
covenant, unless the other parties consent to the incorporation of such
amendment or supplement or disclosure by consummating the transactions
contemplated hereby.


 


(v)           Board of Directors;
Indemnification Agreement.  Effective
upon the Initial Closing the Company will cause Ann H. Lamont and Andrew Adams
(or other designees of the Purchaser) (the “Purchaser
Designees”) to be appointed to fill such vacancies.  Concurrently with the appointment of the
Purchaser Designees, the Company, the Purchaser and the Purchaser Designees
shall enter into an indemnification agreement in form and substance mutually
agreeable to the Purchaser and its counsel on the one hand, and the Company and
its counsel, on the other hand, for the benefit of the Purchaser Designees (the
“Indemnification Agreement”).  It is understood that the appointment of
Andrew Adams as a director will be subject to satisfaction of the “independent
director” requirements as such term is defined in the rules and
regulations promulgated by NASDAQ, as well as all legal and governance
requirements regarding service as a director of the Company and to the
reasonable approval of the Nominating and Governance Committee of the Board of
Directors, all of which shall occur prior to the Initial Closing.


 


(b)           Information Statement.  Promptly following
the written consent of Safeguard to the transactions contemplated hereby, the
Company shall use its commercially reasonable efforts to (i) promptly
prepare and file with the SEC an information statement in conformance with the rules and
regulations under the Exchange Act and in accordance with Delaware law, and
mail such information statement to its stockholders of record and (ii) obtain
the NASDAQ Stockholder Approval, each within 45 days of the Initial
Closing.  The Company shall inform the
Purchaser upon the completion of the information statement and shall distribute
a copy of the information statement to the Purchaser.


 


(c)           Form D and Blue Sky.  The Company agrees to file a Form D with
respect to the Securities as required under Regulation D.  The Company shall, on or before each Closing
Date, take such action as the Company shall reasonably determine is necessary
in order to obtain an exemption for or to qualify the Securities for sale to
the Purchaser at the Closings pursuant to this Agreement under applicable
securities or “Blue Sky” laws of the state of residence of Purchaser as
disclosed by the Purchaser in this Agreement, and shall provide evidence of any
such action so taken to the Purchaser on or prior to each Closing Date.  The Company shall make all filings and
reports relating to the offer and sale of the Securities to the Purchaser
required under applicable securities or “Blue Sky” laws of the states of the
United States following each Closing Date.


 


 


20

















 


(d)           Use of Proceeds.  The Company will use the proceeds from the
sale of the Preferred Shares (i) to
repay in full the outstanding Indebtedness of the Company under that certain Amended
and Restated Loan Agreement, dated as of February 28, 2008 (as modified
and amended from time to time), by and between Comerica Bank and the Company
(the “Comerica Loan” and that certain Second
Amended and Restated Senior Subordinated Revolving Credit Agreement, dated as
of February 27, 2009, by and between the Company and Safeguard Delaware, Inc.
(the “Safeguard Loan”) and (ii) for
general working capital.  In addition,
the Company may use the proceeds from the sale of the Preferred Shares to repay
all or part of the Indebtedness of the Company under that certain Credit
Agreement, dated as of July 31, 2008 (as modified and amended from time to
time, by and among Gemino Healthcare Finance, LLC and the Company, Clarient
Diagnostic Services, Inc. and ChromaVision International, Inc. (the “Gemino Loan”).  No
portion of the proceeds from the issuance of Preferred Shares shall be used in
any manner which would violate Regulation U, T or X of the Board of Governors
of the Federal Reserve System or any other regulation of such Board or to
violate the Exchange Act, as in effect on the date or dates of such use of
proceeds.


 


(e)           Access.  So long as the Purchaser holds at least
2,105,263 shares of Preferred Stock (as adjusted for any stock split,
consolidation, reorganization, merger, dissolution and the like with respect to
such shares), and subject to customary confidentiality terms, the Company shall
permit the Purchaser and its designated representatives, upon reasonable
notice, to visit and inspect any of the properties of the Company or any of its
Subsidiaries, to examine the books of account of the Company and its
Subsidiaries (and to make copies thereof and extracts therefrom), and to
discuss the affairs, finances and accounts of the Company and its Subsidiaries
with, and to be advised as to the same by, their officers and accountants, all
at such reasonable times and intervals during normal business hours as any the
Purchaser may reasonably request.


 


(f)            Reservation of Shares.  The Company shall take all action necessary
to at all times have authorized, and reserved for the purpose of issuance, no
less than 100% of the number of shares of Common Stock needed to provide for
the issuance of the Conversion Shares upon full conversion of all outstanding
Preferred Shares.


 


(g)           Listing.  The Company shall use its best efforts to
maintain the Common Stock’s authorization for quotation of the Common Stock on
NASDAQ or to obtain and maintain a listing on The New York Stock Exchange, Inc.
or another national securities exchange (collectively, as applicable, the “Principal Market”).  The Company shall pay all fees and expenses
in connection with satisfying its obligations under this Section 4(g).


 


(h)           Expenses.  At each Closing, and, if applicable, upon
termination of this Agreement or termination of the obligation to consummate
the Second Closing (but, in the case of either such termination, only if the
termination is not a result of a material breach by the Purchaser), the Company
shall reimburse the Purchaser for its reasonable legal fees and expenses
actually incurred in due diligence and negotiating and preparing the
Transaction Documents and all related documents and consummating the
transactions contemplated hereby and thereby, up to 


 


 


21

















 


an aggregate of $100,000 for all payments pursuant to this sentence; provided,
however, if the Closing (or Initial Closing, as applicable) does not
occur for any reason, the aforementioned aggregate cap shall be reduced to
$50,000.  In the event of litigation
related to this Agreement, if a court of competent jurisdiction determines in a
final, non-appealable order in favor of a party, the non-prevailing party shall
reimburse the prevailing party for all reasonable costs and expenses (including
legal fees) incurred in connection with such litigation.  In the event the court order results in both
parties prevailing in part, the court shall determine the appropriate
allocation of fees and expenses to be reimbursed by the parties or may determine
to instead have each party bear their own respective fees and costs if such
result is the most equitable in light of the court order.


 


(i)            Filing of Form 8-K; Press
Releases.  On or before the third (3rd) Business Day following the
date hereof, the Company shall file a Form 8-K with the SEC (the “Initial 8-K”) describing the terms of the
transactions contemplated by the Transaction Documents and including as
exhibits to such Form 8-K this Agreement, the Certificate of Designations
and the Registration Rights Agreement, in the form required by the Exchange
Act.  The Company shall file a press
release or other announcement of this Agreement or the transactions
contemplated hereby concurrently with the filing of the Initial 8-K with the
SEC.  On or before the third (3rd) Business Day following the
Second Closing Date, the Company shall file a Form 8-K with the SEC
describing the transaction consummated on such date.


 


(j)            Transactions With Affiliates.  So long as at least 2,105,263 shares of Series A
Preferred Stock remain outstanding (as adjusted for stock splits, reverse stock
splits, stock dividends and similar transactions with respect to the Series A
Preferred Stock), the Company shall not, and shall cause each of its
Subsidiaries not to, enter into, amend, modify or supplement any material
agreement, transaction, commitment or arrangement that is an interested party
transaction (A) having a value in excess of $50,000, (B) which
provides a Person with material consent rights or material control rights, or (C) is
outside the ordinary course of business or contains terms less favorable that
would be obtained by the Company or its Subsidiaries in a comparable arm’s
length transaction with an unrelated Person, in each case unless such
agreement, transaction, commitment or arrangement is approved by a majority of
the disinterested directors of the Company.


 


(k)           Lock-Up
Agreement.


 


(i)            (A)          The
Purchaser hereby agrees that from the Closing Date (or the Initial Closing
Date, as applicable) until the date which is one year after the Closing Date
(or the Initial Closing Date, as applicable), the Purchaser will not offer,
sell, contract to sell, pledge, transfer, or otherwise dispose of, directly or
indirectly, any of the Preferred Shares or the Conversion Shares actually
issued upon conversion thereof (collectively, the “Restricted
Securities”), enter into a transaction that would have the same
effect, or enter into any swap, hedge or other arrangement that transfers, in
whole or in part, any of the economic consequences of ownership of the
Restricted Securities, without, in each case, the prior written consent of the
Company.


 


 


22






 












 


(B)           As of the 12-month anniversary of the Closing Date (or the
Initial Closing Date, as applicable), the restrictions in Section 4(k)(i)(A) shall
lapse and be of no further effect as to the Restricted Securities.


 


(ii)           The restrictions in Section 4(k)(i) shall
not apply to (A) transactions relating to any securities of the Company
acquired by any the Purchaser or any of its Affiliates (1) prior to the
execution of this Agreement or (2) in the open market after the date of
this Agreement, or (B) with respect to transfers to immediate family
members, Affiliates, partners, members, former partners or members or
shareholders of the Purchaser in private transactions in which the transferee
agrees to be bound by the provisions of this Section 4(k) as
if such transferee were the Purchaser.


 


(iii)          The restrictions in this Section 4(k) shall
expire in their entirety:


 


(A)          immediately before the acquisition of a majority of the
outstanding voting securities of the Company by another person or entity,
whether by merger, asset sale or otherwise, excluding any strategic transaction
previously disclosed to the Purchaser by the Company or its advisors and
affirmatively accepted by the Purchaser on or before the Initial Closing (the “Strategic Transaction”).


 


(B)           immediately (1) upon the breach by the Company of any
material obligation to the Purchaser in the Transaction Documents or the
Certificate of Designations, unless such breach is capable of being and is
cured within twenty (20) Business Days after written notice to the Company of
such breach from any Purchaser, (2) upon the failure to elect either
Purchaser nominee to the Board of Directors of the Company in accordance with Section 9(d) of
the Certificate of Designations (if the Purchaser has exercised its right to
elect either such director) unless such failure is cured within twenty (20)
Business Days after written notice to the Company of such failure from the
Purchaser, (3) upon evidence that any representation or warranty set forth
in Section 3 was materially untrue when made or deemed made, and
such breach has had or is reasonably likely to have a materially adverse effect
on the value of the Purchaser’s investment in the Company pursuant to this
Agreement, and the Purchaser has notified the Company in writing of such event
and evidence and (4) upon a material breach by the Company of any of the
protective provisions in Section 9(b) of the Certificate of
Designations, unless such breach is capable of being and is cured within
fifteen (15) Business Days after written notice to the Company of such breach
from the Purchaser.


 


(l)            Certain Trading Activities.  Other than signing this Agreement, the
Purchaser nor any Affiliate of the Purchaser which (x) had knowledge of
the transactions contemplated hereby, (y) has or shares discretion
relating to the Purchaser’s investments or trading or information concerning
the Purchaser’s investments, including in respect of the Securities, and (z) is
subject to the Purchaser’s review or input concerning such Affiliate’s
investments or trading (collectively, “Trading Affiliates”)
has directly or indirectly, nor has any Person acting on behalf of or pursuant
to any understanding with the Purchaser or Trading Affiliate, effected or
agreed to effect any sales or purchases of the securities of the Company or
derivatives of the Company’s securities (including, without limitation, any
Short Sales (as defined below) involving the Company’s securities, but not
including the location and/or reservation of 


 


 


23

















 


borrowable shares of Common Stock). Notwithstanding the foregoing, in
the case of the Purchaser and/or Trading Affiliate that is, individually or
collectively, a multi-managed investment vehicle whereby separate portfolio
managers manage separate portions of the Purchaser’s or Trading Affiliate’s
assets and the portfolio managers have no direct knowledge of the investment
decisions made by the portfolio managers managing other portions of the
Purchaser’s or Trading Affiliate’s assets, the representation set forth above
shall apply only with respect to the portion of assets managed by the portfolio
manager that have knowledge about the financing transaction contemplated by
this Agreement.  Until the Second Closing
hereunder or the earlier termination of this Agreement prior to the Second
Closing, Purchaser shall not effect any sales or purchases of the securities of
the Company or derivatives of the Company’s securities (including, without
limitation, any Short Sales (as defined below) involving the Company’s
securities, but not including the location and/or reservation of borrowable
shares of Common Stock). For purposes of this Section 4(l), “Short
Sales” include, without limitation, (i) all “short sales” as defined in Rule 200
promulgated under Regulation SHO under the Exchange Act, whether or not against
the box, and all types of direct and indirect stock pledges, forward sale
contracts, options, puts, calls, short sales, “naked” short sales, swaps, “put
equivalent positions” (as defined in Rule 16a-1(h) under the Exchange
Act) and similar arrangements (including on a total return basis), and (ii) sales
and other transactions through non-U.S. broker dealers or foreign regulated
brokers, but, with respect to clause (i) and (ii) above, not including
the location and/or reservation of borrowable shares of Common Stock.


 


(m)          Ownership Disclosure.  At the time of each Closing, Purchaser shall
disclose in writing to the Company its holdings of any of the Company’s
securities, including its Common Stock.


 


(n)           Board Seats.  In the event that all of the shares of Series A
Preferred Stock are converted into Common Stock, (A) the Company shall not
increase the number of members of the Board of Directors in excess of nine (9) members
and (B) to the extent not inconsistent with the fiduciary duties of the
Board of Directors upon the request of Purchaser in a writing signed by
Purchaser and referencing this Section 4(n) (a “Designation Notice”), the Company will
request that the Board of Directors appoint (in the case of vacancies) or
nominate for election by the stockholders to the Board of Directors, up to two (2) nominees
designated by Purchaser in the Designation Notice (as well as replacement
nominees for vacancies created by the death, resignation or removal of any
director serving as a result of such a nomination).


 


(ii)           After the earlier of the expiration
of the lock-up period set forth in Section 4(k) and the Second
Closing, at such time as the Purchaser and its Affiliates sell or otherwise
transfer securities of the Company causing them to own less than 16.67% of the
voting power of all outstanding securities of the Company entitling the holders
thereof to vote generally in the election of directors, Purchaser shall
negotiate in good faith with the Company an appropriate amendment to the terms
of this Section 4(n) and, if applicable, the Certificate of
Designations in light of such diminished ownership.


 


(iii)          So long as Safeguard is entitled to
elect at least one director of the Company pursuant to the Securities Purchase
Agreement, dated as of June 13, 2002, between the Company and Safeguard,
as amended, this Section 4(n) may not be amended without the prior
written consent of Safeguard.


 


 


24





















 


(iv)          This Section 4(n) shall
terminate on the date that Purchaser and its Affiliates own less than 5% of the
voting power of all outstanding securities of the Company entitling the holders
thereof to vote generally in the election of directors.


 


5.             TRANSFER AGENT
INSTRUCTIONS.  As of the
date hereof, and conditioned only upon the issuance of the applicable Preferred
Shares at each Closing, the Company shall issue irrevocable instructions to its
transfer agent in the form attached hereto as Exhibit C (the “Irrevocable Transfer Agent Instructions”),
and any subsequent transfer agent, to promptly issue certificates, registered
in the name of the Purchaser or its respective nominee(s), for the Conversion
Shares in such amounts as specified from time to time by the Purchaser to the
Company upon conversion of the Preferred Shares.


 


6.             CONDITIONS TO
THE COMPANY’S OBLIGATION TO SELL ON THE CLOSING DATES.


 


(a)           Conditions to the Company’s
Obligation to Sell on the Initial Closing Date.  The obligation of the Company to issue and sell
the applicable Preferred Shares to the Purchaser at the Initial Closing is
subject to the satisfaction, at or before the Initial Closing Date, of each of
the following conditions, provided these conditions are for the Company’s sole
benefit and may be waived by the Company at any time in its sole discretion by
providing the Purchaser with prior written notice thereof:


 


(i)            The Purchaser shall have executed and delivered each of
the Transaction Documents to which it is a party and delivered the same to the
Company.


 


(ii)           The Certificate of Designations shall have been filed with
the Secretary of State of the State of Delaware.


 


(iii)          The Purchaser shall have delivered to the Company the
Purchase Price for the Preferred Shares being purchased by the Purchaser at the
Initial Closing by wire transfer of immediately available funds pursuant to the
wire instructions provided by the Company.


 


(iv)          The representations and warranties of the Purchaser shall
be true and correct in all material respects as of the date when made and as of
the Initial Closing Date as though made at that time (except for
representations and warranties that speak as of a specific date), and the
Purchaser shall have performed, satisfied and complied in all material respects
with the covenants, agreements and conditions required by the Transaction
Documents to be performed, satisfied or complied with by the Purchaser at or
prior to the Initial Closing Date.


 


(v)           All Governmental Entity, third party and self-regulatory
organizations approvals (or notices or filings therewith) listed on Schedule
3(f) or otherwise required in connection with the transactions
contemplated by the Transaction Documents shall have been obtained or made on
terms reasonably satisfactory to the Company and shall be in full force and
effect, and all applicable waiting periods shall have expired without any
action being taken or threatened by any competent authority that would
materially restrain, prevent or otherwise impose material adverse conditions on
the transactions contemplated by this Agreement or any other Transaction
Documents.


 


 


25





















 


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


 


(vii)         No action, suit or proceeding before any arbitrator or any
Governmental Entity shall have been commenced, and no investigation by any
Governmental Entity shall have been threatened, against the Company, or any of
the officers, directors or Affiliates of the Company seeking to restrain,
prevent or change the transactions contemplated by this Agreement or any other
Transaction Documents, or seeking damages in connection with such transactions.


 


(b)           Conditions to the Company’s
Obligation to Sell on the Second Closing Date.  The obligation of the Company to issue and
sell the applicable Preferred Shares to the Purchaser at the Second Closing is
subject to the satisfaction, at or before the Second Closing Date, of each of
the following conditions, provided these conditions are for the Company’s sole
benefit and may be waived by the Company at any time in its sole discretion by
providing the Purchaser with prior written notice thereof:


 


(i)            The Purchaser shall have delivered to the Company the
Purchase Price for the Preferred Shares being purchased by the Purchaser at the
Second Closing by wire transfer of immediately available funds pursuant to the
wire instructions provided by the Company.


 


(ii)           The representations and warranties of the Purchaser shall
be true and correct in all material respects as of the date when made and as of
the Second Closing Date as though made at that time (except for representations
and warranties that speak as of a specific date), and the Purchaser shall have
performed, satisfied and complied in all material respects with the covenants,
agreements and conditions required by the Transaction Documents to be
performed, satisfied or complied with by the Purchaser at or prior to the
Second Closing Date.


 


(iii)          The Company shall have received the NASDAQ Stockholder
Approval.


 


(iv)          All Governmental Entity, third party and self-regulatory
organizations approvals (or notices or filings therewith) listed on Schedule
3(f) or otherwise required in connection with the transactions
contemplated by the Transaction Documents shall have been obtained or made on
terms reasonably satisfactory to the Company and shall be in full force and
effect, and all applicable waiting periods shall have expired without any
action being taken or threatened by any competent authority that would
materially restrain, prevent or otherwise impose material adverse conditions on
the transactions contemplated by this Agreement or any other Transaction
Documents.


 


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


 


 


26





















 


(vi)          No action, suit or proceeding before any arbitrator or any
Governmental Entity shall have been commenced, and no investigation by any
Governmental Entity shall have been threatened, against the Company, or any of
the officers, directors or Affiliates of the Company seeking to restrain,
prevent or change the transactions contemplated by this Agreement or any other
Transaction Documents, or seeking damages in connection with such transactions.


 


(c)           Conditions to the Company’s
Obligation to Sell on each Subsequent Closing Date.  The obligation of the Company to issue and
sell the applicable Preferred Shares to the Purchaser at each Subsequent
Closing is subject to the satisfaction, at or before such Subsequent Closing
Date, of each of the following conditions, provided these conditions are for
the Company’s sole benefit and may be waived by the Company at any time in its
sole discretion by providing the Purchaser with prior written notice thereof:


 


(i)            The Purchaser shall have delivered to the Company the
Purchase Price for the Preferred Shares being purchased by the Purchaser at
such Subsequent Closing by wire transfer of immediately available funds
pursuant to the wire instructions provided by the Company.


 


(ii)           The representations and warranties of the Purchaser shall
be true and correct in all material respects as of the date when made and as of
such Subsequent Closing Date as though made at that time (except for
representations and warranties that speak as of a specific date), and the
Purchaser shall have performed, satisfied and complied in all material respects
with the covenants, agreements and conditions required by the Transaction
Documents to be performed, satisfied or complied with by the Purchaser at or
prior to such Subsequent Closing Date.


 


(iii)          The Company shall have received the NASDAQ Stockholder
Approval.


 


(iv)          All Governmental Entity, third party and self-regulatory
organizations approvals (or notices or filings therewith) listed on Schedule
3(f) or otherwise required in connection with the transactions
contemplated by the Transaction Documents shall have been obtained or made on
terms reasonably satisfactory to the Company and shall be in full force and
effect, and all applicable waiting periods shall have expired without any
action being taken or threatened by any competent authority that would
materially restrain, prevent or otherwise impose material adverse conditions on
the transactions contemplated by this Agreement or any other Transaction
Documents.


 


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


 


(vi)          No action, suit or proceeding before any arbitrator or any
Governmental Entity shall have been commenced, and no investigation by any
Governmental Entity shall have been threatened, against the Company, or any of
the officers, directors or Affiliates of the Company seeking to restrain,
prevent or change the transactions contemplated by this Agreement or any other
Transaction Documents, or seeking damages in connection with such transactions.


 


 


27





















 


(vii)         Such other conditions as are mutually agreeable between the
Purchaser and the Company.


 


7.             CONDITIONS TO
THE PURCHASER’S OBLIGATION TO PURCHASE ON THE CLOSING DATES.


 


(a)           Conditions to the Purchaser’s
Obligation to Purchase on the Initial Closing Date.  The obligation of the Purchaser hereunder to
purchase the applicable Preferred Shares from the Company at the Initial
Closing is subject to the satisfaction, at or before the Initial Closing Date,
of each of the following conditions. 
These conditions are for the Purchaser’s sole benefit and may be waived
by the Purchaser at any time in its sole discretion:


 


(i)            The Purchaser shall have received a facsimile copy of a
form of stock certificate representing the Series A Preferred Stock to be
issued to the Purchaser on the Initial Closing Date, with the original
certificate held in trust by counsel for the Company until delivery thereof on
the fourth (4th) Business Day
following the Initial Closing.


 


(ii)           The Certificate of Designations shall have been filed with
the Secretary of State of the State of Delaware, and copies thereof shall have
been certified by such Secretary of State shall have been delivered to the
Purchaser.


 


(iii)          The representations and warranties of the Company shall be
true and correct in all material respects as of the date when made and as of
the Initial Closing Date (both before and after giving effect to the Initial
Closing) as though made at that time (except to the extent that any of such
representations and warranties is already qualified as to materiality or
Material Adverse Effect in Section 3 above, in which case, such
representations and warranties shall be true and correct in all respects).


 


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


 


(v)           The Purchaser shall have received a certificate, executed
by both the Chief Executive Officer and Chief Financial Officer of the Company,
dated as of the Initial Closing Date and including an update as of such Closing
Date, certifying as to the matters in clauses (i) and (ii) of
the representation contained in Section 3(c) and certifying as
to the satisfaction of Sections 7(b)(iii) and 7(b)(iv) (subject
to update of clauses (i) and (ii) of Section 3(c)).


 


(vi)          The Purchaser shall have received the opinion of Stradling,
Yocca, Carlson & Rauth, counsel to the Company, dated as of the
Initial Closing Date, in form, scope and substance reasonably satisfactory to
the Purchaser and in substantially the form of Exhibit D attached
hereto.


 


(vii)         The Company shall have executed and delivered to the Purchaser
the Preferred Stock Certificates (in such denominations as the Purchaser shall
request) for the Preferred Shares being purchased by the Purchaser at the
Initial Closing.


 


 


28





















 


(viii)        The Purchaser shall have received a
certificate, executed by the Secretary of the Company, certifying the
following:


 


(A)          A copy of the resolutions of the Board of Directors of the
Company approving the transactions contemplated by this Agreement (the “Resolutions”),


 


(B)           The Company’s Certificate of Incorporation, together with
all amendments thereof and restatements thereto, and


 


(C)           A copy of its Bylaws, as then in full effect and force.


 


(ix)           As of the Initial Closing Date, the Company shall have
reserved out of its authorized and unissued Common Stock, solely for the
purpose of effecting the conversion of the Preferred Shares, at least
21,052,623 shares of Common Stock (subject to adjustment for splits, reverse
splits, stock dividends, combinations and the like).


 


(x)            The Company shall have delivered to the Purchaser a copy
of the Irrevocable Transfer Agent Instructions, executed by each of the Company
and its transfer agent.  The Company
shall have delivered to the Purchaser a letter from the Company’s transfer
agent certifying the number of shares of Common Stock outstanding as of a date
within five (5) days of the Initial Closing Date.


 


(xi)           The Company shall have delivered to the Purchaser a
certificate evidencing the incorporation and good standing of the Company in
Delaware issued by the Secretary of State of the State of Delaware as of a date
within ten (10) days of the Initial Closing Date.


 


(xii)          The Company shall have delivered to the Purchaser evidence
reasonably acceptable to the Purchaser that the Company has taken appropriate
corporate action to render inapplicable any Takeover Provision which is or
could become applicable to the Purchaser as a result of the transactions
contemplated by this Agreement, including, without limitation, the Company’s
issuance of Securities, the Purchaser’s ownership of the Securities and/or the
issuance of the Conversion Shares.


 


(xiii)         Safeguard shall have entered into the
Safeguard Agreement.


 


(xiv)        With respect to Indebtedness of the Company under the
Comerica Loan (including, for the avoidance of doubt, any guarantees or
indemnification obligations of the Company related to the Comerica Loan), the
Purchaser shall have received such pay-off letters, termination agreements,
termination statements, releases of funded mortgages and other releases to be
delivered against repayment by the Company at or prior to the Initial Closing
as the Purchaser shall have reasonably requested, all in form and substance
satisfactory to the lender(s) to the Company (in their sole discretion)
and reasonably satisfactory to the Purchaser. 
The Purchaser shall have received duly executed releases (including
UCC-3 termination statements) of all Liens (other than Permitted Liens) on the
assets of the Company relating to the Comerica Loan in form and substance
reasonably satisfactory to the Purchaser and its counsel.


 


 


29





















 


(xv)         There shall not have occurred any events or changes (A) since
December 31, 2008 that, individually or in the aggregate, have had or could
reasonably be expected to have a Material Adverse Effect, before and after
giving effect to the transactions contemplated by the Transaction Documents or (B) that
have had or could reasonably be expected to have an adverse effect on the
rights or remedies of the Purchaser, or on the ability of the Company to
perform its obligations to the Purchaser; and trading in any securities of the
Company shall not have been suspended or materially limited by the SEC or the
Principal Market.


 


(xvi)        All Governmental Entity, third party and self-regulatory
organizations approvals (or notices or filings therewith) listed on Schedule
3(f) or otherwise required in connection with the transactions
contemplated by the Transaction Documents shall have been obtained or made on
terms reasonably satisfactory to the Purchaser and shall be in full force and
effect, and all applicable waiting periods shall have expired without any
action being taken or threatened by any competent authority that would
materially restrain, prevent or otherwise impose material adverse conditions on
the transactions contemplated by this Agreement or any other Transaction
Documents.


 


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


 


(xviii)      No action, suit or proceeding before any
arbitrator or any Governmental Entity shall have been commenced, and no
investigation by any Governmental Entity shall have been threatened, against
the Company, or any of the officers, directors or Affiliates of the Company
seeking to restrain, prevent or change the transactions contemplated by this
Agreement or any other Transaction Documents, or seeking damages in connection
with such transactions.


 


(xix)         The Purchaser Designees shall have been appointed to serve
on the Company’s Board of Directors effective as of the Initial Closing Date,
and the Company shall have executed and delivered to the Purchaser the
Indemnification Agreement for each Purchaser Designee, effective as of the
Initial Closing Date.


 


(xx)          Safeguard and the Company shall have entered into that
certain Amendment to Securities Purchase Agreement in form and substance
reasonably acceptable to Purchaser.


 


(b)           Conditions to the Purchaser’s
Obligation to Purchase on the Second Closing Date.  The Obligation of the Purchaser hereunder to
purchase the applicable Preferred Shares from the Company at the Second Closing
is subject to the satisfaction, at or before the Second Closing, of each of the
following conditions.  These conditions
are for the Purchaser’s sole benefit and may be waived by the Purchaser at any
time in its sole discretion:


 


(i)            The Company shall have obtained the NASDAQ Stockholder
Approval prior to the date that is forty-five (45) days after the Initial
Closing.


 


 


30





















 


(ii)           There shall not have occurred or become known to the
Purchaser any events or changes since the Initial Closing Date that,
individually or in the aggregate, (A) have had or could reasonably be
expected to have a Material Adverse Effect, before and after giving effect to
the transactions contemplated by the Transaction Documents or (B) that
have had or could reasonably be expected to have a material adverse effect on
the rights or remedies of the Purchaser, or on the ability of the Company to
perform its obligations to the Purchaser; and trading in any securities of the
Company shall not have been suspended or materially limited by the SEC or the
Principal Market.


 


(iii)          The representations and warranties of the Company shall be
true and correct in all material respects as of the date when made and as of
the Second Closing Date as though made at that time (except to the extent that
any of such representations and warranties is already qualified as to
materiality or Material Adverse Effect in Section 3 above, in which
case, such representations and warranties shall be true and correct in all
respects).


 


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


 


(v)           The Purchaser shall have received a certificate, executed
by both the Chief Executive Officer and Chief Financial Officer of the Company,
dated as of the Second Closing Date and including an update as of such Second
Closing Date, certifying as to the matters in clauses (i) and (ii) of
the representation contained in Section 3(c) and certifying as
to the satisfaction of Sections 7(b)(iii) and 7(b)(iv) (subject
to update of clauses (i) and (ii) of Section 3(c)).


 


(vi)          The Company shall not have breached any material provision
of any of the Transaction Documents or the Certificate of Designations.


 


(vii)         With respect to Indebtedness of the Company under the
Safeguard Loan (including, for the avoidance of doubt, any guarantees or
indemnification obligations of the Company related to the Safeguard Loan), the
Purchaser shall have received such pay-off letters, termination agreements,
termination statements, releases of funded mortgages and other releases to be
delivered against repayment by the Company at or prior to the Second Closing as
the Purchaser shall have reasonably requested, all in form and substance
satisfactory to the lender(s) to the Company (in their sole discretion)
and reasonably satisfactory to the Purchaser. 
The Purchaser shall have received duly executed releases (including
UCC-3 termination statements) of all Liens (other than Permitted Liens) on the assets
of the Company relating to the Safeguard Loan in form and substance reasonably
satisfactory to the Purchaser and its counsel.


 


(c)           Conditions to the Purchaser’s
Obligation to Purchase on each Subsequent Closing Date.  The Obligation of the Purchaser hereunder to
purchase the applicable Preferred Shares from the Company at each Subsequent
Closing is subject to the satisfaction, at or before each Subsequent Closing,
of each of the following conditions. 
These conditions are for the Purchaser’s sole benefit and may be waived
by the Purchaser at any time in its sole discretion:


 


 


31

















 


(i)            There shall not have occurred or become known to the
Purchaser any events or changes since the Initial Closing Date that,
individually or in the aggregate, (A) have had or could reasonably be
expected to have a Material Adverse Effect, before and after giving effect to
the transactions contemplated by the Transaction Documents or (B) that
have had or could reasonably be expected to have a material adverse effect on
the rights or remedies of the Purchaser, or on the ability of the Company to
perform its obligations to the Purchaser; and trading in any securities of the
Company shall not have been suspended or materially limited by the SEC or the
Principal Market.


 


(ii)           The representations and warranties of the Company shall be
true and correct in all material respects as of the date when made and as of
such Subsequent Closing Date as though made at that time (except to the extent
that any of such representations and warranties is already qualified as to
materiality or Material Adverse Effect in Section 3 above, in which
case, such representations and warranties shall be true and correct in all
respects).


 


(iii)          The Company shall have performed, satisfied and complied in
all material respects with the covenants, agreements and conditions required by
the Transaction Documents to be performed, satisfied or complied with by the
Company at or prior to such Subsequent Closing Date.


 


(iv)          The Purchaser shall have received a certificate, executed
by both the Chief Executive Officer and Chief Financial Officer of the Company,
dated as of such Subsequent Closing Date and including an update as of such
Subsequent Closing Date, certifying as to the matters in clauses (i) and
(ii) of the representation contained in Section 3(c) and
certifying as to the satisfaction of Sections 7(b)(iii) and 7(b)(iv) (subject
to update of clauses (i) and (ii) of Section 3(c)).


 


(v)           The Company shall not have breached any material provision
of any of the Transaction Documents or the Certificate of Designations.


 


(vi)          Such other conditions as are mutually agreeable between the
Purchaser and the Company.


 


8.             TERMINATION.


 


(a)           Termination.


 


(i)            The Purchaser and the Company may terminate this
Agreement by mutual written consent at any time prior to the Initial Closing.


 


(ii)           The Purchaser may terminate this Agreement by giving
written notice to the Company at any time prior to the Initial Closing:


 


(A)          in the event that the Company has breached any representation,
warranty, or covenant contained in this Agreement or in any other Transaction
Document in any material respect, the Purchaser has notified the Company of the
breach, and the breach has continued without cure for a period of fifteen (15)
days after the notice of breach, or


 


 


32





















 


(B)           if the Initial Closing shall not have occurred on or
before the Initial Closing Date, by reason of the failure of any condition
precedent under Section 7(b) hereof or if satisfaction of any
such condition by such date is or becomes impossible (unless the failure
results primarily from any Purchaser itself breaching any representation,
warranty, or covenant contained in this Agreement or any other Transaction
Document).


 


(iii)          The Company may terminate this Agreement by giving written
notice to the Purchaser at any time prior to the Initial Closing:


 


(A)          in the event that the Purchaser has breached any
representation, warranty, or covenant contained in this Agreement or in any other
Transaction Document in any material respect, the Company has notified the
Purchaser of the breach, and the breach has continued without cure for a period
of fifteen (15) days after the notice of breach, or


 


(B)           if the Initial Closing shall not have occurred on or
before the Initial Closing Date, by reason of the failure of any condition
precedent under Section 6(b) hereof or if satisfaction of any
such condition by such date is or becomes impossible (unless the failure
results primarily from the Company breaching any representation, warranty, or
covenant contained in this Agreement or any other Transaction Document).


 


(iv)          After the Initial Closing, the Purchaser may terminate its
obligation to purchase the applicable Preferred Shares at the Second Closing by
giving written notice to the Company at any time prior to the Second Closing:


 


(A)          in the event that the Company has breached any
representation, warranty, or covenant contained in this Agreement or in any
other Transaction Document in any material respect, the Purchaser has notified
the Company of the breach, and the breach has continued without cure for a
period of fifteen (15) days after the notice of breach, or


 


(B)           if the Second Closing shall not have occurred on or before
the Second Closing Date, by reason of the failure of any condition precedent
under Section 7(c) hereof or if satisfaction of any such condition by such date
is or becomes impossible (unless the failure results primarily from any
Purchaser itself breaching any representation, warranty, or covenant contained
in this Agreement or any other Transaction Document).


 


(v)           After the Initial Closing, the Company may terminate its
obligation to sell the applicable Preferred Shares at the Second Closing by
giving written notice to the Purchaser at any time prior to the Second Closing:


 


 


33










 












 


(A)          in the event that the Purchaser has breached any
representation, warranty, or covenant contained in this Agreement in any
material respect, the Company has notified the Purchaser of the breach, and the
breach has continued without cure for a period of fifteen (15) days after the
notice of breach, or


 


(B)           if the Second Closing shall not have occurred on or before
the Second Closing Date, by reason of the failure of any condition precedent
under Section 6(c) hereof or if satisfaction of any such
condition by such date is or becomes impossible (unless the failure results
primarily from the Company breaching any representation, warranty, or covenant
contained in this Agreement or any other Transaction Document).


 


(b)           Effect of Termination.  Each party’s right of termination under Section 8(a) is
in addition to any other rights it may have under this Agreement or otherwise,
and the exercise of such right of termination will not be an election of
remedies.  If:


 


(i)            this Agreement is terminated pursuant to Sections
8(a)(i), (ii) or (iii), all obligations of the parties
under this Agreement will terminate, except that the obligations of the parties
in Section 4(h) (including with respect to legal fees and
expenses) and Section 9 will survive; or


 


(ii)           the Purchaser’s obligation to purchase, or the Company’s
obligation to sell, as the case may be, Preferred Shares at the Second Closing
is terminated pursuant to Section 8(a)(iv) or (v), (A) the
Second Closing shall not occur, and (B) otherwise, this Agreement, will
survive provided  however that the representations and warranties
of the Company shall only survive for a period of one (1) year following
the date this Agreement at which time such representations and warranties shall
terminate.


 


Notwithstanding
clauses (i) or (ii) above, if this Agreement (or the
Purchaser’s obligation to purchase, or the Company’s obligation to sell,
Preferred Shares at the Second Closing, as the case may be) is terminated
because of a breach of this Agreement by the non-terminating party or because
one or more of the conditions of the terminating party’s obligations under this
Agreement is not satisfied as a result of the non-terminating party’s failure
to comply with its obligations under this Agreement, the terminating party’s
right to pursue all legal remedies will survive such termination unimpaired.


 


9.             GOVERNING
LAW; MISCELLANEOUS.


 


(a)           Governing Law; Jurisdiction; Jury
Trial.  The corporate laws of the
State of Delaware shall govern all issues concerning the relative rights of the
Company and its stockholders.  All other
questions concerning the construction, validity, enforcement and interpretation
of this Agreement shall be governed by the internal laws of the State of
Delaware, without giving effect to any choice of law or conflict of law
provision or rule (whether of the State of Delaware or any other
jurisdiction) that would cause the application of the laws of any jurisdiction
other than the State of Delaware.  Each
party hereby irrevocably submits to the non-exclusive jurisdiction of the state
and federal courts sitting in Delaware, for the adjudication of any dispute
hereunder or in connection herewith or with any transaction contemplated hereby
or discussed herein, and hereby irrevocably waives, and agrees not to assert in
any suit, action or


 


 


34

















 


proceeding, any claim that it is not personally subject to the
jurisdiction of any such court, that such suit, action or proceeding is brought
in an inconvenient forum or that the venue of such suit, action or proceeding
is improper.  Each party hereby
irrevocably waives personal service of process and consents to process being
served in any such suit, action or proceeding by mailing a copy thereof to such
party at the address for such notices to it under this Agreement and agrees
that such service shall constitute good and sufficient service of process and
notice thereof.  Nothing contained herein
shall be deemed to limit in any way any right to serve process in any manner
permitted by law.  EACH PARTY HEREBY
IRREVOCABLY WAIVES ANY RIGHT IT MAY HAVE, AND AGREES NOT TO REQUEST, A
JURY TRIAL FOR THE ADJUDICATION OF ANY DISPUTE HEREUNDER OR IN CONNECTION
HEREWITH OR ARISING OUT OF THIS AGREEMENT OR ANY TRANSACTION CONTEMPLATED
HEREBY.


 


(b)           Counterparts.  This Agreement may be executed in two or more
identical counterparts, all of which shall be considered one and the same
agreement and shall become effective, with respect to a particular party, when
counterparts have been signed by such party and delivered to the other party;
provided that a facsimile signature shall be considered due execution and shall
be binding upon the signatory thereto with the same force and effect as if the
signature were an original, not a facsimile signature.


 


(c)           Headings.  The headings of this Agreement are for
convenience of reference and shall not form part of, or affect the
interpretation of, this Agreement.


 


(d)           Severability.  If any provision of this Agreement shall be
invalid or unenforceable in any jurisdiction, such invalidity or
unenforceability shall not affect the validity or enforceability of the
remainder of this Agreement in that jurisdiction or the validity or
enforceability of any provision of this Agreement in any other jurisdiction.


 


(e)           Entire Agreement; Amendments.  This Agreement and the instruments referenced
herein supersede all other prior oral or written agreements, negotiations or
correspondence between Purchaser, the Company, their Affiliates and persons
acting on their behalf with respect to the matters discussed herein (including
the term sheet related hereto), and this Agreement and the instruments
referenced herein contain the entire understanding of the parties with respect
to the matters covered herein and therein and, except as specifically set forth
herein or therein, neither the Company nor Purchaser makes any representation,
warranty, covenant or undertaking with respect to such matters.  This Agreement may only be amended, waived or
modified by an instrument in writing signed by the Company and (i) prior
to the Initial Closing, the Purchaser and (ii) from and after the Initial
Closing, the holders of at least a majority of the then-outstanding Preferred
Shares, or, if no Preferred Shares are then outstanding, those Purchasers who
hold at least a majority of the Conversion Shares still entitled to
registration rights under the Registration Rights Agreement.


 


(f)            Notices.  Any notices, consents, waivers or other
communications required or permitted to be given under the terms of this
Agreement must be in writing and will be deemed to have been delivered:  (i) upon receipt, when delivered
personally; (ii) upon receipt, when sent by facsimile (provided
confirmation of transmission is mechanically or electronically generated and
kept on file by the sending party); (iii) one (1) Business Day after
deposit with a nationally 


 


 


35

















 


recognized overnight delivery service, in each case properly addressed
to the party to receive the same; or (iv) three (3) days after
deposit in the U.S. Mail.  The addresses
and facsimile numbers for such communications shall be:


 


If to the Company:


 


Clarient, Inc.


31 Columbia


Aliso Viejo, California 92656


Facsimile: 
(949) 425-5701


Attention: 
Chief Executive Officer


 


With a copy to:


 


Stradling, Yocca, Carlson & Rauth


660 Newport Center Drive


Suite 1600


Newport Beach, California 92660


Facsimile: (949) 725-4100


Attention: 
Shivbir S. Grewal, Esq.


 


With a further copy to:


 


Safeguard Scientifics, Inc.


435 Devon Park Drive


Building 800


Wayne, Pennsylvania 19087


Attention:  General Counsel


Facsimile:  (610) 293-0601


 


If to the Purchaser:


 


Oak Investment Partners XII, Limited
Partnership


One Gorham Island


Westport, Connecticut 06880


Facsimile: (203) 227-0327


Attention: 
Annie H. Lamont


 


With a copy to:


 


Finn Dixon & Herling LLP


177 Broad Street


Stamford, Connecticut 06901


Facsimile: (203) 325-5001


Attention: 
Michael J. Herling, Esq.


 


If to the Transfer Agent:


 


Mellon Investor Services


400 South Hope Street, 4th
Floor


Los Angeles, CA 90071


Facsimile: (501) 760-1538


Attention: Ronald Lug


 


 


36

















 


or
at such other address and/or facsimile number and/or to the attention of such
other person as the recipient party has specified by written notice given to
each other party three (3) days prior to the effectiveness of such
change.  Written confirmation of receipt (A) given
by the recipient of such notice, consent, waiver or other communication, (B) mechanically
or electronically generated by the sender’s facsimile machine containing the
time, date, recipient facsimile number and an image of the first page of
such transmission or (C) provided by a nationally recognized overnight
delivery service shall be rebuttable evidence of personal service, receipt by
facsimile or receipt from a nationally recognized overnight delivery service in
accordance with clause (i), (ii) or (iii) above,
respectively.


 


(g)           Successors and Assigns.  This Agreement shall be binding upon and
inure to the benefit of the parties and their respective successors and
assigns, including any purchasers of the Preferred Shares.  The Company shall not assign this Agreement
or any rights or obligations hereunder without the prior written consent of (i) prior
to the Initial Closing, the Purchaser in its sole discretion and (ii) from
and after the Initial Closing, the holders of a majority of the Conversion
Shares issued or issuable upon conversion of the Preferred Shares still
entitled to registration rights under the Registration Rights Agreement) then
outstanding, including by merger or consolidation in which the Company is not
the surviving corporation, except pursuant to a deemed liquidation, dissolution
or winding up (as defined in Section 5(c) of the Certificate of
Designations) with respect to which the Company is in compliance with the
Certificate of Designations and except pursuant to a transaction in which there
is no change in control of the Company. 
From and after the date that no holders of Conversion Shares are entitled
to registration rights under the Registration Rights Agreement, the Company may
assign this Agreement without the consent of any party. The Purchaser shall not
assign their rights to purchase Preferred Shares at any Closing to any third
party without the prior written consent of the Company, and the consent of the
other Purchasers.


 


(h)           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.


 


(i)            Survival.  Unless this Agreement is terminated under Section 8(a) without
the consummation of the Initial Closing, the representations and warranties of
the Company and the Purchaser contained in Sections 2 and 3, and
the agreements and covenants set forth in Sections 4, 5 and 8
shall survive the Closings for a period of one (1) year following the date
this Agreement at which time such representations and warranties shall terminate.  If this Agreement is terminated under Section 8(a) after
the consummation of the Initial Closing but without consummation of the Second
Closing, the representation and warranties of the Company and the Purchaser
contained in Sections 2 and 3, and the agreements and covenants
set forth in Sections 4, 5 and 8 shall nevertheless
survive the Initial Closing.  The
representations and warranties of the Company shall in no way be affected by
any investigation of the subject matter thereof made by or on behalf of the
Purchaser and their respective representatives and agents.  The Purchaser and the Company shall be
responsible only for their own respective representations, warranties,
agreements and covenants hereunder.


 


 


37

















 


(j)            Publicity.  The Company and the Purchaser shall have the
right to approve before issuance any press releases or any other public
statements with respect to the transactions contemplated hereby; provided,
however, that the Company shall be entitled, without the prior approval
of the Purchaser, to make any press release or other public disclosure with
respect to such transactions as is required by applicable law and regulations
(although the Purchaser shall be consulted by the Company (and be given a
reasonable opportunity to comment) in connection with any such press release or
other public disclosure prior to its release and shall be provided with a copy
thereof).


 


(k)           Further Assurances.  Each party shall do and perform, or cause to
be done and performed, all such further acts and things, and shall execute and
deliver all such other agreements, certificates, instruments and documents, as
the other party may reasonably request in order to carry out the intent and
accomplish the purposes of this Agreement and the consummation of the
transactions contemplated hereby.


 


(l)            Placement Agent.  The Company acknowledges that it has engaged
RBC Capital Markets (the “Placement Agent”)
as its placement agent or broker in connection with the sale of the Preferred
Shares.  The Company shall be responsible
for the payment of any placement agent’s fees or broker’s commissions payable
to RBC Capital Markets or otherwise relating to or arising out of the
transactions contemplated hereby.  The
Company shall pay, and indemnify, defend and hold Purchaser harmless against,
any liability, loss or expense (including, without limitation, reasonable
attorneys’ fees and out-of-pocket expenses) arising in connection with any such
claim.


 


(m)          No Strict Construction.  The language used in this Agreement will be
deemed to be the language chosen by the parties to express their mutual intent,
and no rules of strict construction will be applied against any party.


 


(n)           Remedies.  The Purchaser and each holder of the
Securities shall have all rights and remedies set forth in the Transaction
Documents and the Certificate of Designations and all rights and remedies which
such holders have been granted at any time under any other agreement or
contract and all of the rights which such holders have under any law.  Any person having any rights under any
provision of this Agreement shall be entitled to enforce such rights
specifically (without posting a bond or other security), to recover damages by
reason of any breach of any provision of this Agreement and to exercise all
other rights granted by law.


 


(o)           Reliance.  The Purchaser acknowledges that it is relying
upon the representations and covenants of the Company contained in this
Agreement, and is not relying upon any person, firm, or corporation, in making
its investment or decision to invest in the Company.


 


 


38

















 


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


 


(q)           Form, Registration, Transfer and
Exchange of Preferred Stock; Lost Preferred Stock.  The Company shall keep at its principal
office a register in which the Company shall provide for the registration of Series A
Preferred Stock and of transfers of Series A Preferred Stock. Upon
surrender for registration of transfer of any share of Series A Preferred
Stock at the principal office of the Company, the Company shall, at its
expense, promptly execute and deliver one or more new certificates for shares
of Series A Preferred Stock of the like tenor and number, registered in
the name of such transferee or transferees. 
At the option of the holder of any share of Series A Preferred
Stock, such share may be exchanged for other Series A Preferred Stock of
like tenor and of a like number, upon surrender of the certificate for the
shares of Series A Preferred Stock to be exchanged at the principal office
of the Company. Whenever any shares of Series A Preferred Stock are so
surrendered for exchange, the Company shall, at its expense, execute and
deliver the certificate for the shares of Series A Preferred Stock which
the holder making the exchange is entitled to receive.  Every certificate of Series A Preferred
Stock surrendered for registration of transfer or exchange shall be duly
endorsed, or be accompanied by a written instrument of transfer duly executed
by the holder of such certificate of Series A Preferred Stock or such
holder’s attorney duly authorized in writing. Any share of Series A
Preferred Stock issued in exchange for any share of Series A Preferred
Stock or upon transfer thereof shall carry the rights to unpaid dividends to
accrue which were carried by the share of Series A Preferred Stock so
exchanged or transferred, so that neither gain nor loss of interest shall
result from any such transfer or exchange. 
Upon receipt of written notice from the holder of any certificate of Series A
Preferred Stock of the loss, theft, destruction or mutilation of such
certificate share of Series A Preferred Stock and, in the case of any such
loss, theft or destruction, upon receipt of such holder’s affidavit and
indemnity as may be reasonably required by the Company, or in the case of any
such mutilation upon surrender and cancellation of such certificate of Series A
Preferred Stock, the Company will make and deliver a new certificate of Series A
Preferred Stock, of like tenor, in lieu of the lost, stolen, destroyed or
mutilated certificate of Series A Preferred Stock.


 


(r)            Definitions.  In addition to the words and terms defined
elsewhere in this Agreement, the following words and terms shall have the
following meanings, respectively, unless the context clearly requires
otherwise:


 


“2008 Filings” has
the meaning assigned to such term in Section 3.


 


 


39

















 


“Affiliate” means,
with respect to any Person, another Person that, directly or indirectly, (i) has
a 5% or more equity interest in that Person, (ii) has 5% or more common
ownership with that Person, (iii) controls that Person, or (iv) shares
common control with that Person.


 


“Agreement” has the
meaning assigned to such term in the preface above.


 


“Benefit Plans” has
the meaning assigned to such term in Section 3(l).


 


“Business” has the
meaning assigned to such term in Section 3(y).


 


“Business Day” means
any day except Saturday, Sunday and any day which shall be a legal holiday or a
day on which banking institutions in Los Angeles, California generally are
authorized or required by law or other governmental actions to close.


 


“Businesses” has the
meaning assigned to such term in Section 3(y).


 


“Bylaws” has the
meaning assigned to such term in Section 3(c).


 


“Certificate of
Designations” has the meaning assigned to such term in the Recitals.


 


“Certificate of
Incorporation” has the meaning assigned to such term in Section 3(c).


 


“Closing” has the
meaning assigned to such term in Section 1(a).


 


“Closing Date” has
the meaning assigned to such term in Section 1(b).


 


“Closings” has the
meaning assigned to such term in Section 1(a).


 


“Code” means the
Internal Revenue Code of 1986, as amended, and the rules and regulations
promulgated thereunder.


 


“Comerica Loan” has
the meaning assigned to such term in Section 4(c).


 


“Common Stock” has
the meaning assigned to such term in the Recitals.


 


“Company” has the
meaning assigned to such term in the preface above.


 


 “Control” or “controls” for
purposes hereof means that a Person has the power, direct or indirect, to
conduct or govern the policies of another Person.


 


“Conversion Shares”
has the meaning assigned to such term in the Recitals.


 


“Designation Notice”
has the meaning assigned to such term in Section 4(n).


 


“ERISA” means the
Employee Retirement Income Security Act of 1974, as amended.


 


“Exchange Act” has
the meaning assigned to such term in Section 3(f).


 


“GAAP” has the
meaning assigned to such term in Section 3(g).


 


 


40

















 


“Gemino Loan” has the
meaning assigned to such term in Section 4(d).


 


“Government Programs”
has the meaning assigned to such term in Section 3(y).


 


“Governmental Entity”
has the meaning assigned to such term in Section 2(e).


 


“Indebtedness” has
the meaning assigned to such term in Section 3(d).


 


“Indemnification
Agreement” has the meaning assigned to such term in Section 4(a).


 


“Initial 8-K” has the
meaning assigned to such term in Section 4(h).


 


“Initial Closing” has
the meaning assigned to such term in Section 1(a).


 


“Initial Closing Date”
has the meaning assigned to such term in Section 1(b).


 


“Irrevocable Transfer
Agent Instructions” has the meaning assigned to such term in Section 5.


 


“Liens” means liens,
charges, claims, licenses, pledges, options, security interests, mortgages,
leases, subleases, easements, covenants, rights-of-way or other similar
encumbrances or other similar restrictions.


 


“Material Adverse Effect”
has the meaning assigned to such term Section 3(a).


 


“Material Contracts”
has the meaning assigned to such term in Section 3(t).


 


 “Medicare and Medicaid Programs” has
the meaning assigned to such term in Section 3(y).


 


“NASDAQ” means the
NASDAQ Capital Market.


 


“NASDAQ Stockholder
Approval” means stockholder approval required by NASDAQ in connection with
the transactions contemplated by the Transaction Documents (as defined herein)
and the Certificate of Designation (including, without limitation, the issuance
or potential issuance of a number of shares of Common Stock which is greater
than or equal to 20% of the number of shares outstanding on the date of this
Agreement and/or any potential change of control (as currently defined under
the rules and regulations of NASDAQ)).


 


“Permits” has the
meaning assigned to such term in Section 3(y).


 


“Permitted Liens”
means (A) Liens set forth in Schedule 3(o), (B) inchoate
mechanics’, carriers’, workmen’s, repairmen’s or other like Liens arising or
incurred in the ordinary course of business for amounts not yet due and payable
(provided that such items are properly reserved for on the books of the
Company), (C) Liens for governmental taxes and other charges that are not
due and payable (provided that such items are properly reserved for on the
books of the Company), (D) as to real property leased or occupied by the
Company, recorded easements, covenants, rights-of-way and other similar
recorded restrictions of record (including zoning, building and other similar
restrictions).


 


 


41

















 


“Person” means any
individual, partnership, joint venture, limited liability company, corporation,
trust, unincorporated organization, group or government or other department or
agency thereof, or other entity.


 


“Placement Agent” has
the meaning assigned to such term in Section 9(l).


 


“Preferred Shares”
has the meaning assigned to such term in the Recitals.


 


“Preferred Stock” has
the meaning assigned to such term in the Recitals.


 


“Preferred Stock
Certificates” has the meaning assigned to such term in Section (1)(c).


 


“Principal Market”
has the meaning assigned to such term in Section (4)(f).


 


“Private Programs”
has the meaning assigned to such term in Section 3(y).


 


“Purchase Price” has
the meaning assigned to such term in the Recitals.


 


“Purchaser” has the
meanings assigned to such terms in the preface above.


 


“Purchaser Designees”
has the meaning assigned to such term in Section 4(a).


 


“Registration Rights
Agreement” has the meaning assigned to such term in the Recitals.


 


“Regulated Company”
and “Regulated Companies” have the meanings assigned to such terms in Section 3(y).


 


“Regulation D” has
the meaning assigned to such term in the Recitals.


 


“Regulations” has the
meaning assigned to such term in Section 3(y).


 


“Related Party” has
the meaning assigned to such term in Section 4(i).


 


“Reporting Period”
has the meaning assigned to such term in Section 4(c).


 


“Resolutions” has the
meaning assigned to such term in Section 7(a).


 


“Restricted Securities”
has the meaning assigned to such term in Section 4(j).


 


“Rights Agreement”
has the meaning assigned to such term in Section 3(v).


 


“Rule 144” has
the meaning assigned to such term in Section 2(f).


 


“Safeguard” means
Safeguard Delaware, Inc., Safeguard Scientifics, Inc., and Safeguard
Scientifics (Delaware), Inc.


 


 


42

















 


“Safeguard Agreement”
means that certain agreement (or agreements, as the case may be) between the
Purchaser and Safeguard, relating to (A) the NASDAQ Stockholder Approval, (B) waiver
of certain anti-dilution protection that may be triggered as a result of the consummation
of the transactions contemplated by the Transaction Documents and (C) certain
“change of control” transactions, in the form attached hereto as Exhibit E.


 


“Safeguard Loan” has
the meaning assigned to such term in Section 4(c).


 


“SEC” has the meaning
assigned to such term in the Recitals.


 


“SEC Documents” has
the meaning assigned to such term in Section 3(g).


 


“Second Closing” has
the meaning assigned to such term in Section 1(a).


 


“Second Closing Date”
has the meaning assigned to such term in Section 1(b).


 


“Securities” has the
meaning assigned to such term in Section 2(a).


 


“Securities Act” has
the meaning assigned to such term in the Recitals.


 


“Series A Preferred
Stock” has the meaning assigned to such term in the Recitals.


 


“Strategic Transaction”
has the meaning assigned to such term in Section 4(k).


 


“Subsidiaries” has
the meaning assigned to such term in Section 3(a).


 


“Takeover Provisions”
has the meaning assigned to such term in Section 3(u).


 


“Trading Affiliates”
has the meaning assigned to such term in Section 4(k).


 


“Transaction Documents”
has the meaning assigned to such term in Section 3(b).


 


*  * 
*  *  *  *


 


 


43

















 


[Signature
Page to Clarient, Inc. Series A Purchase Agreement]


 


IN WITNESS
WHEREOF, the Purchaser and the Company have caused this
Stock Purchase Agreement to be duly executed as of the date first written
above.


 




	
   

  	
  COMPANY:

  
	
   

  	
   

  	
   

  
	
   

  	
  CLARIENT,
  INC.

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
  /s/
  Ronald A. Andrews

  
	
   

  	
   

  	
  Name:
  

  	
  Ronald
  A. Andrews

  
	
   

  	
   

  	
  Title:
  

  	
  Chief
  Executive Officer

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  PURCHASER:

  
	
   

  	
   

  	
   

  
	
   

  	
  OAK
  INVESTMENT PARTNERS XII, LIMITED PARTNERSHIP

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  /s/
  Ann H. Lamont

  
	
   

  	
   

  	
  Ann
  H. Lamont

  
	
   

  	
   

  	
  Managing
  Member of Oak Associates XII, LLC

  
	
   

  	
   

  	
  The
  General Partner of Oak Investment Partners XII, Limited Partnership