Exhibit
10.31


 


EXECUTION COPY


 


IN MAKING AN INVESTMENT DECISION PURCHASERS MUST RELY ON
THEIR OWN EXAMINATION OF THE ISSUER AND THE TERMS OF THE OFFERING, INCLUDING
THE MERITS AND RISKS INVOLVED.  THESE
SECURITIES HAVE NOT BEEN RECOMMENDED BY ANY FEDERAL OR STATE SECURITIES
COMMISSION OR REGULATORY AUTHORITY. 
FURTHERMORE, THE FOREGOING AUTHORITIES HAVE NOT CONFIRMED THE ACCURACY
OR DETERMINED THE ADEQUACY OF THIS DOCUMENT. 
ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.


 


THESE
SECURITIES ARE SUBJECT TO RESTRICTIONS ON TRANSFERABILITY AND RESALE AND MAY
NOT BE TRANSFERRED OR RESOLD EXCEPT AS PERMITTED UNDER THE SECURITIES ACT OF
1933, AS AMENDED, AND THE APPLICABLE STATE SECURITIES LAWS, PURSUANT TO
REGISTRATION OR EXEMPTION THEREFROM. 
PURCHASERS SHOULD BE AWARE THAT THEY WILL BE REQUIRED TO BEAR THE
FINANCIAL RISKS OF THIS INVESTMENT FOR AN INDEFINITE PERIOD OF TIME.


 


 


 


PHARSIGHT CORPORATION


PREFERRED STOCK AND WARRANT


PURCHASE
AGREEMENT


June 25,
2002


 

















 


TABLE OF
CONTENTS


 


 


	
  SECTION
  1.

  	
   

  	
  AUTHORIZATION
  OF SALE OF THE SECURITIES

  
	
   

  	
   

  	
   

  
	
  SECTION
  2.

  	
   

  	
  AGREEMENT
  TO SELL AND PURCHASE THE SECURITIES

  
	
   

  	
   

  	
   

  
	
  2.1

  	
   

  	
  Sale
  of Units

  
	
   

  	
   

  	
   

  
	
  2.2

  	
   

  	
  Separate Agreement

  
	
   

  	
   

  	
   

  
	
  SECTION 3.

  	
   

  	
  CLOSING AND
  DELIVERY

  
	
   

  	
   

  	
   

  
	
  3.1

  	
   

  	
  Closing

  
	
   

  	
   

  	
   

  
	
  3.2

  	
   

  	
  Delivery of the
  Units at the Closing

  
	
   

  	
   

  	
   

  
	
  3.3

  	
   

  	
  Subsequent Sales of Shares

  
	
   

  	
   

  	
   

  
	
  SECTION
  4.

  	
   

  	
  REPRESENTATIONS,
  WARRANTIES AND COVENANTS OF THE COMPANY

  
	
   

  	
   

  	
   

  
	
  4.1

  	
   

  	
  Organization and
  Qualification

  
	
   

  	
   

  	
   

  
	
  4.2

  	
   

  	
  Capitalization

  
	
   

  	
   

  	
   

  
	
  4.3

  	
   

  	
  Authorization of
  Securities

  
	
   

  	
   

  	
   

  
	
  4.4

  	
   

  	
  Governmental Consents

  
	
   

  	
   

  	
   

  
	
  4.5

  	
   

  	
  Due
  Authorization, Execution and Delivery of Agreement

  
	
   

  	
   

  	
   

  
	
  4.6

  	
   

  	
  No
  Conflicts

  
	
   

  	
   

  	
   

  
	
  4.7

  	
   

  	
  Title
  to Assets

  
	
   

  	
   

  	
   

  
	
  4.8

  	
   

  	
  Permits

  
	
   

  	
   

  	
   

  
	
  4.9

  	
   

  	
  Legal
  Actions

  
	
   

  	
   

  	
   

  
	
  4.10

  	
   

  	
  Labor

  
	
   

  	
   

  	
   

  
	
  4.11

  	
   

  	
  No
  Violations

  
	
   

  	
   

  	
   

  
	
  4.12

  	
   

  	
  Insurance

  
	
   

  	
   

  	
   

  
	
  4.13

  	
   

  	
  Company
  Contracts

  
	
   

  	
   

  	
   

  
	
  4.14

  	
   

  	
  SEC
  Documents

  
	
   

  	
   

  	
   

  
	
  4.15

  	
   

  	
  Related Party Transactions

  
	
   

  	
   

  	
   

  
	
  4.16

  	
   

  	
  Financial Statements

  
	
   

  	
   

  	
   

  
	
  4.17

  	
   

  	
  Intellectual Property

  
	
   

  	
   

  	
   

  
	
  4.18

  	
   

  	
  Regulation

  
	
   

  	
   

  	
   

  
	
  4.19

  	
   

  	
  Nasdaq
  Listing

  
	
   

  	
   

  	
   

  
	
  4.20

  	
   

  	
  Taxes

  



 


i

















 


 


	
  4.21

  	
   

  	
  No Integration
  or General Solicitation

  
	
   

  	
   

  	
   

  
	
  4.22

  	
   

  	
  No
  Registration

  
	
   

  	
   

  	
   

  
	
  4.23

  	
   

  	
  No Material Changes

  
	
   

  	
   

  	
   

  
	
  4.24

  	
   

  	
  Accounting Controls

  
	
   

  	
   

  	
   

  
	
  4.25

  	
   

  	
  Form S-3 Qualification

  
	
   

  	
   

  	
   

  
	
  4.26

  	
   

  	
  No Anti-Dilution Event

  
	
   

  	
   

  	
   

  
	
  4.27

  	
   

  	
  Registration Rights

  
	
   

  	
   

  	
   

  
	
  4.28

  	
   

  	
  Complete Disclosure

  
	
   

  	
   

  	
   

  
	
  SECTION
  5.

  	
   

  	
  REPRESENTATIONS,
  WARRANTIES AND COVENANTS OF THE PURCHASERS

  
	
   

  	
   

  	
   

  
	
  SECTION
  6.

  	
   

  	
  SURVIVAL
  OF REPRESENTATIONS, WARRANTIES AND AGREEMENTS

  
	
   

  	
   

  	
   

  
	
  SECTION
  7.

  	
   

  	
  CONDITIONS
  TO COMPANY’S OBLIGATIONS AT THE CLOSING

  
	
   

  	
   

  	
   

  
	
  7.1

  	
   

  	
  Receipt of Payment

  
	
   

  	
   

  	
   

  
	
  7.2

  	
   

  	
  Representations
  and Warranties Correct

  
	
   

  	
   

  	
   

  
	
  7.3

  	
   

  	
  Covenants Performed

  
	
   

  	
   

  	
   

  
	
  7.4

  	
   

  	
  Nasdaq Notice Periods

  
	
   

  	
   

  	
   

  
	
  7.5

  	
   

  	
  Nasdaq or Stockholder
  Approval

  
	
   

  	
   

  	
   

  
	
  SECTION
  8.

  	
   

  	
  CONDITIONS
  TO PURCHASERS’ OBLIGATIONS AT THE CLOSING

  
	
   

  	
   

  	
   

  
	
  8.1

  	
   

  	
  Representations
  and Warranties Correct

  
	
   

  	
   

  	
   

  
	
  8.2

  	
   

  	
  Covenants Performed

  
	
   

  	
   

  	
   

  
	
  8.3

  	
   

  	
  Reservation
  of Conversion Shares and Warrant Shares

  
	
   

  	
   

  	
   

  
	
  8.4

  	
   

  	
  Legal
  Opinion

  
	
   

  	
   

  	
   

  
	
  8.5

  	
   

  	
  Officer’s Certificate

  
	
   

  	
   

  	
   

  
	
  8.6

  	
   

  	
  Secretary’s Certificate

  
	
   

  	
   

  	
   

  
	
  8.7

  	
   

  	
  Nasdaq or Stockholder
  Approval

  
	
   

  	
   

  	
   

  
	
  SECTION
  9.

  	
   

  	
  REGISTRATION
  OF THE SHARES; COMPLIANCE WITH THE SECURITIES ACT

  
	
   

  	
   

  	
   

  
	
  9.1

  	
   

  	
  Registration Procedures

  
	
   

  	
   

  	
   

  
	
  9.2

  	
   

  	
  Transfer
  of Shares After Registration; Suspension; Damages

  
	
   

  	
   

  	
   

  



 


ii

















 


	
  9.3

  	
   

  	
  Expenses of Registration

  
	
   

  	
   

  	
   

  
	
  9.4

  	
   

  	
  Delay
  of Registration; Furnishing Information

  
	
   

  	
   

  	
   

  
	
  9.5

  	
   

  	
  Indemnification

  
	
   

  	
   

  	
   

  
	
  9.6

  	
   

  	
  Agreement to Furnish
  Information

  
	
   

  	
   

  	
   

  
	
  9.7

  	
   

  	
  Assignment of
  Registration Rights

  
	
   

  	
   

  	
   

  
	
  9.8

  	
   

  	
  Rule 144 Reporting

  
	
   

  	
   

  	
   

  
	
  9.9

  	
   

  	
  S-3
  Eligibility

  
	
   

  	
   

  	
   

  
	
  9.10

  	
   

  	
  Termination of
  Registration Rights

  
	
   

  	
   

  	
   

  
	
  9.11

  	
   

  	
  Amendment of Registration Rights

  
	
   

  	
   

  	
   

  
	
  9.12 

  	
   

  	
  Legends

  
	
   

  	
   

  	
   

  
	
  SECTION
  10.

  	
   

  	
  BROKER’S FEE

  
	
   

  	
   

  	
   

  
	
  SECTION
  11.

  	
   

  	
  NOTICES

  
	
   

  	
   

  	
   

  
	
  SECTION 12. 

  	
   

  	
  MISCELLAEOUS

  
	
   

  	
   

  	
   

  
	
  12.1

  	
   

  	
  Waivers and Amendments

  
	
   

  	
   

  	
   

  
	
  12.2

  	
   

  	
  Agreement
  to Vote for Issuance of Subsequent Units

  
	
   

  	
   

  	
   

  
	
  12.3

  	
   

  	
  Headings

  
	
   

  	
   

  	
   

  
	
  12.4

  	
   

  	
  Severability

  
	
   

  	
   

  	
   

  
	
  12.5

  	
   

  	
  Governing
  Law

  
	
   

  	
   

  	
   

  
	
  12.6

  	
   

  	
  Counterparts

  
	
   

  	
   

  	
   

  
	
  12.7

  	
   

  	
  Successors and Assigns

  
	
   

  	
   

  	
   

  
	
  12.8

  	
   

  	
  Entire
  Agreement

  
	
   

  	
   

  	
   

  
	
  12.9

  	
   

  	
  Payment of Fees and
  Expenses

  
	
   

  	
   

  	
   

  
	
  12.10

  	
   

  	
  Waiver of Conflicts

  
	
   

  	
   

  	
   

  



ATTACHMENTS:


 


	
  Exhibit A

  	
   

  	
  —

  	
   

  	
  Schedule of Purchasers

  
	
  Exhibit B

  	
   

  	
  —

  	
   

  	
  Form of Warrant

  
	
  Exhibit C

  	
   

  	
  —

  	
   

  	
  Certificate of
  Designations of Series A Convertible Preferred Stock

  
	
  Exhibit D

  	
   

  	
  —

  	
   

  	
  Opinion of Cooley
  Godward LLP

  
	
  Exhibit E

  	
   

  	
  —

  	
   

  	
  Plan of Distribution

  
	
  Appendix I

  	
   

  	
  —

  	
   

  	
  Stock Certificate and
  Warrant Questionnaire

  
	
  Appendix II

  	
   

  	
  —

  	
   

  	
  Registration Statement
  Questionnaire

  
	
  Appendix III

  	
   

  	
  —

  	
   

  	
  Seller’s Certificate of
  Sale

  



 


 


iii

















 


An extra section break
has been inserted above this paragraph. Do not delete this section break if you
plan to add text after the Table of Contents/Authorities.  Deleting this break will cause Table of
Contents/Authorities headers and footers to appear on any pages following the
Table of Contents/Authorities.


 


 


iv

















 


PREFERRED STOCK AND WARRANT


PURCHASE AGREEMENT


THIS
AGREEMENT
(“Agreement”) is made as of the 25th day of June, 2002 (the “Effective Date”),
by and among PHARSIGHT CORPORATION, a Delaware corporation with its principal
place of business at 800 West El Camino Real, Suite 200, Mountain View,
California 94040, (the “Company”) and each of those persons and entities,
severally and not jointly, listed as a Purchaser on the Schedule of Purchasers
attached as Exhibit A hereto (each, a “Purchaser” and collectively, the
“Purchasers”).


AGREEMENT


In consideration of the mutual covenants contained in this Agreement,
and for other good and valuable consideration, the receipt of which is hereby
acknowledged, the Company and each Purchaser (severally and not jointly) hereby
agree as follows:


SECTION 1.         AUTHORIZATION
OF SALE OF THE SECURITIES.  Subject to the terms and conditions of this Agreement,
the Company has or before the Initial Closing Date (as defined in Section 3)
will have authorized (a) the sale and issuance of up to one million eight
hundred fourteen thousand six hundred sixty two (1,814,662) shares of its
Series A Convertible Preferred Stock (the “Preferred Stock”), (b) the issuance
of the shares of its Common Stock (the “Common Stock”) to be issued upon
conversion of the Preferred Stock (the “Conversion Shares”), and (c) the sale
and issuance of Warrants, each in substantially the form attached hereto as
Exhibit B (each a “Warrant” and collectively the “Warrants”), to purchase up to
one million eight hundred fourteen thousand six hundred sixty two (1,814,662)
shares (the “Warrant Shares”) of Common Stock, and the issuance of the Warrant
Shares upon exercise of the Warrants. 
The shares of Preferred Stock sold hereunder, the Conversion Shares and
the Warrant Shares shall be referred to herein as the “Shares.”  The Shares and the Warrants shall be
referred to herein as the “Securities.”


SECTION 2.                            AGREEMENT
TO SELL AND PURCHASE THE SECURITIES.  


2.1          Sale of Units.  At each Closing (as defined in Section 3), the Company will sell to
each Purchaser, and each Purchaser will purchase from the Company, at a
purchase price equal to $4.133 per “Unit,” the number of Units set forth next
to such Purchaser’s name on the Schedule of Purchasers attached hereto as
Exhibit A (the “Schedule of Purchasers”) with respect to such Closing.  As used herein, a Unit is comprised of (i)
one (1) share of Preferred Stock, and (ii) one warrant to purchase one share of
Common Stock.


2.2          Separate
Agreement.  Each Purchaser shall severally, and not
jointly, be liable for only the purchase of the Units that appear on Exhibit A
hereto and that relate to such Purchaser. 
The Company’s agreement with each of the Purchasers is a separate agreement,
and the sale of Units to each of the Purchasers is a separate sale.


 


1.

















 


SECTION 3.                            CLOSING
AND DELIVERY.  


3.1          Closing.  The closing of the purchase and sale of the first
Units to be sold pursuant to this Agreement (the “Initial Units”) shall be held
on June 26, 2002, at the offices of Cooley Godward LLP, 3715 Hanover Street,
Palo Alto, California, or on such other date and place as may be agreed to by
the Company and the Purchasers.  The
date of the closing of the purchase and sale of the Initial Units is referred
to herein as the “Initial Closing Date”, the closing of the purchase and sale
of the purchase and sale of the remaining Units (the “Subsequent Units”)
pursuant to Section 3.3 is referred herein as the “Subsequent Closing Date”,
and each such closing is referred to as a “Closing.”


3.2          Delivery of the Units at the Closing.  At each Closing, the Company shall deliver to each
Purchaser stock certificates and Warrants registered in the name of such
Purchaser, or in such nominee name(s) as designated by such Purchaser,
representing the number of shares of Preferred Stock and Warrants to be
purchased by such Purchaser at the respective Closing as set forth in the
Schedule of Purchasers.  The name(s) in
which the stock certificates and Warrants are to be issued to each Purchaser
are set forth in the Stock Certificate and Warrant Questionnaire in the form
attached hereto as Appendix I, as completed by each Purchaser.


3.3          Subsequent
Sales of Shares.  On the third business day following the
earlier to occur of (a) approval by The Nasdaq Stock Market of the sale of the
Subsequent Units or (b) approval by the stockholders of the Company in
accordance with the requirements of The Nasdaq Stock Market of the sale of the
Subsequent Units, the Purchasers shall purchase, and the Company shall sell,
the Subsequent Units as set forth on Exhibit A.  All such sales shall be made on the terms and conditions set
forth in this Agreement.  The Company
covenants and agrees to use it best efforts to cause such approval of the
stockholders of the Company for the issuance and sale of the Subsequent Units
to occur on or before September 15, 2002, and, if such approval is not obtained
by such date, the Company shall use its best efforts to cause such approval to
occur as soon thereafter as practicable.


SECTION 4.                            REPRESENTATIONS,
WARRANTIES AND COVENANTS OF THE COMPANY.  


Except as set
forth in the Schedule of Exceptions dated as of even date herewith and provided
to the Purchasers separately from this Agreement, the Company hereby represents
and warrants to, and covenants with, the Purchasers as follows:


4.1          Organization and Qualification.  Each of the Company and the Subsidiary (as defined
below) has been duly incorporated and is a validly existing corporation in good
standing under the laws of the State of Delaware, with requisite corporate
power and authority to own its properties and conduct its business as presently
conducted. The Company and the Subsidiary are duly qualified to do business as
foreign corporations in good standing in each jurisdiction in which their
ownership or lease of property or the conduct of their businesses require such
qualification, except where the failure to be so qualified would not have a
material adverse effect on transactions contemplated by this Agreement or the
condition (financial or other), business, properties or results of operations
of the Company (hereinafter, a “Material
Adverse Effect”). The Company has furnished representatives of the Purchasers
with correct and complete copies of the charter and by-laws of the Company,
both as amended and currently in effect. Except as 


2.

















 


set forth in the Schedule of Exceptions, the Company does not presently
own, directly or indirectly, any of the stock or other equity interests in any
entity  The “Subsidiary” shall mean
Pharsight International Co., a Delaware corporation.


4.2          Capitalization.  (a) The authorized capital stock of the Company
consists of: (i) one hundred twenty million (120,000,000) shares of common
stock, par value $0.001 per share (“Common
Stock”) and (ii) five million (5,000,000) shares of preferred stock.
As of May 31, 2002, 18,779,442 shares of Common Stock have been issued and are
outstanding and no shares of Preferred Stock are issued and outstanding. There
are no other outstanding shares of capital stock or voting securities of the
Company other than shares of Common Stock issued after May 31, 2002 under the
Company’s 2000 Employee Stock Purchase Plan and 2001 UK Employee Stock
Purchase Plan (the “ESPPs”) or upon the exercise of options
issued under the Company’s 2000 Equity Incentive Plan, 1997 Stock Option Plan,
1995 Stock Option Plan, the UK Company Share Option Plan or 2000 CEO Non-Qualified Stock Option
Plans (the “Plans”). All
outstanding shares of the Company have been duly authorized, validly issued,
fully paid and are non-assessable and free of any liens or encumbrances created
by the Company and are not subject to preemptive rights. As of the close of
business on May 31, 2002, the Company has reserved an aggregate of 4,354,423
shares of Common Stock for issuance to employees, directors and independent
contractors upon exercise of outstanding options to acquire shares of Common
Stock issued under the Company’s Plans, 3,472,995 shares of Common Stock
available for future grants of options under the Company’s Plans, and an
aggregate of 275,652 shares of Common Stock for issuance upon exercise of
outstanding warrants. Other than as contemplated by this Agreement or under the
ESPPs, and except as described in this Section 2.2, there are no other options,
warrants, calls, rights, commitments, preemptive rights, rights of first
refusal or other rights or agreements to which the Company is a party or by
which it is bound obligating the Company to issue, deliver, sell, repurchase or
redeem, or cause to be issued, delivered, sold, repurchased or redeemed, any
shares of the capital stock of the Company or obligating the Company to grant, extend
or enter into any such option, warrant, call, right, commitment or agreement.


                (b)           All of the issued and outstanding capital stock of the
Subsidiary has been duly authorized and validly issued and is fully paid and
nonassessable and is owned of record by the Company, free and clear of any
lien, charge, security interest, encumbrance or claim.


4.3          Authorization
of Securities.  The Securities, and all outstanding
shares of capital stock of the Company have been duly authorized; all
outstanding shares of capital stock of the Company are, and, when the
Securities have been delivered and paid for in accordance with this Agreement
on the applicable Closing Date, will have been validly issued, fully paid and
non-assessable. None of the Securities are or will be subject to any preemptive
right or any right of refusal.


4.4          Governmental
Consents.  No consent, approval, authorization, or
order of, or filing with, any governmental agency or body or any court is
required for the consummation of the transactions contemplated by this
Agreement in connection with the issuance and sale of the Offered Securities by
the Company, except for the filing of a Form D with the Securities and Exchange
Commission (the “SEC”) under the
Securities Act of 1933, as amended (the “Securities
Act”), and such as may be required under state securities laws and
except for the 


3.

















 


approval of the
Company’s stockholders to the issuance of the Subsequent Units pursuant to NASD
Rule 4350(i).


4.5          Due Authorization, Execution and
Delivery of Agreement.  This Agreement has been duly authorized,
executed and delivered by the Company. All corporate action on the part of the
Company and its stockholders, directors and officers necessary for the authorization,
execution and delivery of this Agreement, the performance of all the Company’s
obligations hereunder and for the authorization, issuance or reservation for
issuance, sale and delivery of the Securities has been taken, other than the
filing of the Certificate of Designations, the form of which is attached hereto
as Exhibit C (which will be filed prior to the sale of the Initial Units), and
except for the approval of the Company’s stockholders to the issuance of the
Subsequent Units pursuant to NASD Rule 4350(i).  This Agreement and the transactions
hereunder have also been approved by a majority of the disinterested directors
of the Company, within the meaning of Section 144 of the Delaware General
Corporation Law.  This Agreement
constitutes the legal, valid and binding obligation of the Company, enforceable
against the Company in accordance with its terms, subject to (i) laws of
general application relating to bankruptcy, insolvency and the relief of
debtors, (ii) rules of law governing specific performance, injunctive relief
and other equitable remedies, and (iii) the limitations imposed by applicable
federal or state securities laws on the indemnification provisions contained in
this Agreement.


 


4.6          No Conflicts.  The execution, delivery and performance of this
Agreement, and the issuance and sale of the Securities, will not conflict with,
or result in a breach or violation of (i) any of the terms and provisions of
the charter or bylaws of the Company or the Subsidiary, (ii) any statute, rule,
regulation or order of any governmental agency or body, any court, domestic or
foreign, or any self-regulatory organization having jurisdiction over the
Company or the Subsidiary or any of their respective properties, or (iii) any
of the terms and provisions of, or constitute a default (with or without notice
or lapse of time) under, or give to any third party a right of termination,
amendment, acceleration or cancellation (with or without notice or lapse of
time) of, any agreement or instrument to which the Company or the Subsidiary is
a party or by which the Company or the Subsidiary is bound or to which any of
the properties of the Company or the Subsidiary is subject. The Company has
full power and authority to authorize, issue and sell the Securities as contemplated
by this Agreement.


4.7          Title to
Assets.  The Company and the Subsidiary have good
and marketable title to all real properties and all other properties and assets
owned by it that are material to the operation of the business of the Company
or the Subsidiary, in each case free from liens and defects that would
materially affect the value thereof or materially interfere with the use made
or to be made thereof by them; and the Company and the Subsidiary hold all
leased real and personal property that are material to the operation of their
respective businesses under valid and enforceable leases with no exceptions
that would materially interfere with the use made or to be made thereof by
them.


4.8          Permits.  The Company and the Subsidiary possess all certificates,
authorizations and permits issued by appropriate governmental agencies or
bodies necessary to conduct the business now operated by them and to own,
lease, license and use their respective properties in the manner so owned,
leased, licensed and used, except to the extent that the failure to so possess 


 


4.

















 


would not
individually or in the aggregate have a Material Adverse Effect. Neither the
Company nor the Subsidiary has received any notice of proceedings relating to
the revocation or modification of any such certificate, authorization or permit
that, if determined adversely to the Company or the Subsidiary would
individually or in the aggregate have a Material Adverse Effect.


4.9          Legal Actions.  There are no pending legal, governmental or
administrative actions, suits or proceedings against or affecting the Company
or the Subsidiary or any of their respective properties or any director,
officer or employee (related to any such person’s services as a director,
officer or employee of the Company or the Subsidiary) that, if determined
adversely to the Company or the Subsidiary would individually or in the
aggregate have a Material Adverse Effect, or could materially and adversely
affect the ability of the Company to perform its obligations under this
Agreement, or which are otherwise material in the context of the sale of the
Securities and, to the actual knowledge of the Company’s executive officers, no
such actions, suits or proceedings are threatened or contemplated. Neither the
Company nor the Subsidiary has initiated and neither has any plan to initiate
any action, suit or proceeding that, if decided adversely to the Company or the
Subsidiary, could, individually or in the aggregate, result in a Material
Adverse Effect.


4.10        Labor.  No material labor dispute exists or, to the actual
knowledge of the Company’s executive officers, is imminent with respect to any
of the employees of the Company or the Subsidiary.


4.11        No Violations.  Neither the Company nor the Subsidiary is (i) in
default under or in violation of (and no event has occurred that has not been
waived that, with notice or lapse of time could reasonably be expected to
result in a default by the Company or the Subsidiary under), nor has the Company
or the Subsidiary received notice of a claim that it is in default under or
that it is in violation of, any agreement or instrument to which it is a party
or by which it or any of its properties is bound, (ii) in violation of any
order of any court, arbitrator, governmental body or self-regulatory
organization, or (iii) in violation of any statute, rule or regulation of any
governmental authority or self-regulatory organization, including without
limitation all foreign, federal, state and local laws relating to taxes,
environmental protection, occupational health and safety, product quality and
safety and employment and labor matters, except in each case as would not,
individually or in the aggregate, reasonably be expected to have or result in a
Material Adverse Effect.


4.12        Insurance.  The  Company maintains insurance and in such coverage
amounts as is customary in the business in which the Company is engaged. The
Company has no reason to believe that such insurance is not sufficient against
such losses and risks and not in such amounts as are reasonably customary in
the business in which the Company is engaged.


4.13        Company
Contracts.  Except as filed under the SEC Documents
(defined below), neither the Company nor the Subsidiary is a party to any material
contract, as such contracts are defined in Reg. § 601(a)(10) of Regulation S-K
under the Securities Act (each such contract, a “Company Contract”). To the actual knowledge of the
executive officers of the Company, each Company Contract is valid, binding and
in full force and effect and is enforceable by the Company or the Subsidiary in
accordance with its terms subject to applicable 


 


5.

















 


bankruptcy,
insolvency, fraudulent transfer, reorganization, moratorium and similar laws
affecting creditors’ rights generally and to general equitable principles and
except to the extent that the failure of a Company Contract to be valid,
binding and in full force and effect would not be reasonably likely to have a Material
Adverse Effect. As of the date hereof, no party to any such Company Contract
has notified the Company or the Subsidiary that it intends to terminate such
Company Contract. The Company and the Subsidiary have performed, in all
respects, all obligations required to be performed by it to date under the
Company Contracts, as amended, and neither the Company nor the Subsidiary is
(with or without the lapse of time or the giving of notice, or both) in breach
or default in any respect thereunder and, to the actual knowledge of the
executive officers of the Company, no other party to any of the Company
Contracts, as of the date hereof, is (with or without the lapse of time or the
giving of notice, or both) in breach or default in any respect thereunder, except
in each case to the extent that such breach or default would not be reasonably
likely to have a Material Adverse Effect.


4.14        SEC Documents.  The Company has made available to representatives of
the Purchasers all registration statements, proxy statements and other
statements, reports, schedules, forms and other documents filed by the Company
with the SEC since June 26, 2001, including copies of all the exhibits
referenced therein (the “SEC Documents”).
All statements, reports, schedules, forms and other documents required to have
been filed by the Company with the SEC since June 26, 2001 have been so timely
filed. As of their respective dates (or, if amended or superseded by a filing
prior to the date of this Agreement, then on the date of such amendment or
superseding filing): (i) each of the SEC Documents complied in all material
respects with the applicable requirements of the Securities Act or the
Securities Exchange Act of 1934, as amended (the “Exchange Act”), as the case may be, and the rules and regulations
thereunder; and (ii) none of the SEC Documents contained any untrue statement
of a material fact or omitted to state a material fact required to be stated
therein or necessary in order to make the statements therein, in the light of
the circumstances under which they were made, not misleading.


4.15        Related
Party Transactions.  Except as set forth in the SEC Documents,
none of the officers or directors of the Company and, to the actual knowledge
of the executive officers of the Company, none of the employees of the Company
is presently a party to any transaction with the Company (other than customary
transactions involving reasonable amounts for services as employees, officers
and directors), including any contract, agreement or other arrangement providing
for the furnishing of services to or by, providing for rental of real or
personal property to or from, or otherwise requiring payments to or from any
officer, director or such employee or, to the actual knowledge of the executive
officers of the Company, any entity in which any officer, director, or any such
employee has a substantial interest or is an officer, director, trustee or
partner.


4.16        Financial
Statements.  The financial statements included in the
SEC Documents present fairly the financial position of the Company as of the
dates shown and its results of operations and cash flows for the periods shown,
and such financial statements have been prepared in conformity with the
generally accepted accounting principles in the United States applied on a
consistent basis (except as may be indicated in the audit report or notes to
such financial statements or, in the case of unaudited statements, as permitted
by Form 10-Q of the SEC, and except that the unaudited financial statements may
not have contained footnotes and were subject to normal and recurring year-end
adjustments which were not, or are not reasonably 


 


 


6.

















 


expected to be,
individually or in the aggregate, material in amount), and complied as to form
in all material respects with the published rules and regulations of the SEC
applicable thereto at the time of filing.


4.17        Intellectual
Property.  The Company and the Subsidiary own or
possess, or can acquire on reasonable terms that would not individually or in
the aggregate have a Material Adverse Effect, sufficient legal rights to all
patents, patent rights, licenses, inventions, copyrights, know-how (including
trade secrets and other unpatented and/or unpatentable propriety or
confidential information, systems or procedures), trademarks, service marks and
trade names (collectively, “Intellectual
Property Rights”) necessary to conduct its business as now operated
by it and as currently proposed to be operated by it. To the actual knowledge
of the executive officers of the Company, 
the methods, products, services, works, technologies, systems and
processes employed by the Company to conduct its business do not infringe upon
or misappropriate any Intellectual Property Rights of any person or entity
anywhere in the world, except for Intellectual Property Rights which the
Company can acquire on reasonable terms that would not individually or in the
aggregate have a Material Adverse Effect. To the actual knowledge of the
executive officers of the Company, no claims or written notice (i) challenging
the validity, effectiveness or ownership by the Company or the Subsidiary of
any of the Intellectual Property Rights of the Company or the Subsidiary, or
(ii) to the effect that the use, distribution, licensing, sublicensing, sale or
any other exercise of rights in any product, service, work, technology or
process as now used or offered or proposed for use, licensing, sublicensing,
sale or other manner of commercial exploitation by the Company or the Subsidiary
infringes or will infringe on any Intellectual Property Rights of any person or
entity have been asserted or, to the actual knowledge of the executive officers
of the Company, are threatened by any person or entity, nor are there, to the
actual knowledge of the executive officers of the Company, any valid grounds
for any bona fide claim of any such kind except as can be cured by the Company
by procurement of Intellectual Property Rights which the Company can acquire on
reasonable terms that would not individually or in the aggregate have a
Material Adverse Effect. There has been no material default (nor does any set
of circumstances exist that will cause such a default) with respect to any
license granting Intellectual Property Rights to the Company or the Subsidiary.
To the actual knowledge of the executive officers of the Company, no employee
or third party is or has been infringing or using without authorization any
Intellectual Property Rights of the Company or the Subsidiary. The Company and
the Subsidiary use and have used, commercially reasonable efforts to maintain
the confidentiality of its trade secrets.


4.18        Regulation.  Neither the Company nor the Subsidiary is subject to
regulation by the U.S. Food and Drug Administration (“FDA”) under the Federal Food, Drug and
Cosmetic Act and the Regulations thereunder (“FDCA”).
Neither the Company nor the Subsidiary has received any written notices or
correspondence from the FDA or any other governmental authority requiring the
termination, suspension or material modification of any tests or evaluations
conducted on behalf of the Company or the Subsidiary.


4.19        Nasdaq Listing.
 The Company has not, in the 12 months preceding the
date hereof, received notice from The Nasdaq Stock Market to the effect that the
Company is not in compliance with the listing or maintenance requirements
thereof. The Company is, and has no reason to believe that it will not in the
foreseeable future continue to be, in compliance with all 


 


7.

















 


such listing and
maintenance requirements. The issuance and sale of the securities hereunder
does not contravene the rules and regulations of The Nasdaq Stock Market.


4.20         Taxes.  The Company and the Subsidiary have
timely made or filed all federal, state and foreign income and all other tax
returns, reports and declarations required by any jurisdiction to which it is
subject (unless and only to the extent that the Company and the Subsidiary have
set aside on their books provisions reasonably adequate for the payment of all
unpaid and unreported taxes) and have timely paid all taxes and other
governmental assessments and charges that are material in amount, shown or
determined to be due on such returns, reports and declarations, except those being
contested in good faith, and have set aside on their books provisions
reasonably adequate for the payment of all taxes for periods subsequent to the
periods to which such returns, reports or declarations apply. To the actual
knowledge of the executive officers of the Company, there are no unpaid taxes
in any material amount claimed to be due by the taxing authority of any
jurisdiction, and the officers of the Company know of no basis for any such
claim. The Company has not executed a waiver with respect to the statute of
limitations relating to the assessment or collection of any foreign, federal,
state or local tax. None of the Company’s or the Subsidiary’s tax returns is
presently being audited by any taxing authority.


4.21        No Integration or General Solicitation.  Neither the Company nor, to the actual knowledge of
the executive officers of the Company, any affiliate (as defined in Rule 501(b)
of Regulation D under the Securities Act) (an “Affiliate”)
of the Company has, directly, or through any agent, (a) sold, offered for sale,
solicited any offers to buy or otherwise negotiated in respect of, any security
(as defined in the Securities Act) which is or will be integrated with the
sales of the Securities in a manner that would require the registration under
the Securities Act of the Securities; or (b) offered, solicited offers to buy
or sold the Securities in any form of general solicitation or general
advertising (as those terms are used in Regulation D under the Securities Act)
or in any manner involving a public offering within the meaning of Section 4(2)
of the Securities Act; and the Company will not engage in any of the actions
described in subsections (a) and (b) of this paragraph.


4.22        No
Registration.  Subject to the accuracy of each of the
Purchaser’s representations herein, it is not necessary in connection with the
offer, sale and delivery of the Securities to the several Purchasers in the
manner contemplated by this Agreement to register the Securities under the
Securities Act.


4.23        No Material
Changes.  Except as disclosed in the SEC Documents,
since March 31, 2001, (i) there has been no event, occurrence or development
that has had or that could reasonably be expected to result in a Material
Adverse Effect, (ii) the Company has not incurred any liabilities (contingent
or otherwise) other than (A) trade payables and accrued expenses incurred in
the ordinary course of business consistent with past practice and (B)
liabilities not required to be reflected in the Company’s financial statements
pursuant to GAAP or required to be disclosed in filings made with the SEC,
(iii) the Company has not altered its method of accounting or the identity of
its auditors, (iv) the Company has not declared or made any dividend or
distribution of cash or other property to its stockholders or purchased,
redeemed or made any agreements to purchase or redeem any shares of its capital
stock, and (v) the Company has not issued any equity securities to any officer,
director or Affiliate, except pursuant to existing Company stock option and
stock purchase plans. Except as disclosed in the SEC 


 


8.

















 


 


Documents, since
March 31, 2001 no material off-balance sheet liabilities not required to be
reflected in the Company’s financial statements pursuant to GAAP or required to
be disclosed in filings made with the SEC which would individually or in the
aggregate have a Material Adverse Effect have been incurred. No material
default exists with respect to or under any obligations of the Company or any
Subsidiary to repay money borrowed (including, without limitation, all notes
payable and drafts accepted representing extensions of credit, all obligations
under letters of credit, all obligations evidenced by bonds, debentures, notes
or other similar instruments and all obligations upon which interest charges
are customarily paid) and all contractual obligations (whether absolute or
contingent) of such entity to repurchase goods sold and distributed or any
instrument or agreement relating thereto and no event or circumstance exists
with respect thereto that (with notice or the lapse of time or both) could give
rise to such a default.


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


4.25        Form S-3
Qualification.  The Company satisfies the requirements
for use of Form S-3 for registration of the resale of the Securities as
contemplated herein. To the actual knowledge of the executive officers of the
Company, there exist no facts or circumstances that could reasonably be
expected to prohibit or delay the preparation or initial filing of the
Registration Statement.


4.26        No
Anti-Dilution Event.  The issuance of the Securities does not
constitute an anti-dilution event for any existing security holders of the
Company, pursuant to which such security holders would be entitled to
additional securities or a reduction in the applicable conversion price or
exercise price of any securities due to any issuance proposed to be conducted
hereunder.


4.27        Registration
Rights.  The Company has not granted or agreed to
grant any person or entity any rights (including “piggy-back” registration
rights) to require the Company to file a registration statement under the
Securities Act with respect to any securities, or to include such securities
with the Securities in any registration statement, except for such as have been
satisfied or waived.


4.28        Investment
Company Act.  The Company is not, and upon the issuance
and sale of the Securities as herein contemplated and the application of the
net proceeds therefrom will not be an “investment company” as such term is
defined in the Investment Company Act of 1940, as amended (the “1940
Act”).  Furthermore, in the event that
the SEC shall inform the Company that the SEC believes that the Company is an
“investment company” as such term is defined in the 1940 Act, the Company shall
manage its investments and promptly take such other 


 


9.

















 


actions as is
reasonably necessary in order that the SEC shall no longer consider the Company
to be an “investment company” as such term is defined in the 1940 Act.


4.29        Complete Disclosure.  All information provided to the
Purchasers in connection with the transactions contemplated hereby, or
contained in this Agreement and the SEC Documents with respect to the business,
operations, assets, results of operations and financial condition of the
Company, and the transactions contemplated by this Agreement, are true and
complete in all material respects and do not omit to state any material fact or
facts necessary in order to make the statements therein, in light of the
circumstances under which they were made, not misleading.


SECTION 5.         REPRESENTATIONS,
WARRANTIES AND COVENANTS OF THE PURCHASERS.   


Each Purchaser,
severally and not jointly, represents and warrants to and covenants with the
Company that:


(a)           Purchaser, taking into account the personnel and
resources it can practically bring to bear on the purchase of the Securities
contemplated hereby, either alone or together with the advice of such
Purchaser’s purchaser representative, is knowledgeable, sophisticated and
experienced in making, and is qualified to make, decisions with respect to
investments in shares presenting an investment decision like that involved in
the purchase of the Securities, including investments in securities issued by
the Company, and has requested, received, reviewed and considered, either alone
or with such Purchaser’s purchaser representative, all information Purchaser
deems relevant in making an informed decision to purchase the Securities.


(b)           Purchaser is acquiring the Securities being acquired
by Purchaser pursuant to this Agreement in the ordinary course of its business
and for its own account for investment only and with no present intention of
distributing any of such Securities or any arrangement or understanding with
any other persons regarding the distribution of such Securities, except in
compliance with Section 5(c).


(c)           Purchaser will not, directly or indirectly, offer,
sell, pledge, transfer or otherwise dispose of (or solicit any offers to buy,
purchase or otherwise acquire or take a pledge of) any of the Securities purchased
hereunder except in compliance with the Securities Act of 1933, as amended (the
“Securities Act”), applicable blue sky laws, and the rules and regulations
promulgated thereunder.


(d)           Purchaser has completed or caused to be completed the
Stock Certificate and Warrant Questionnaire and the Registration Questionnaire,
attached hereto as Appendix I and Appendix II, respectively, for use in
preparation of the Registration Statements to be filed by the Company, and the
answers thereto are true and correct to the best knowledge of Purchaser as of
the date hereof and will be true and correct as of the effective date of the
applicable Registration Statement (provided that Purchaser shall be entitled to
update such information by providing notice thereof to the Company prior to the
effective date of such Registration Statement).


10.

















 


(e)           Purchaser has, in connection with its decision to
purchase the Securities, relied with respect to the Company and its affairs solely
upon the information delivered to Purchaser as described in Sections 4.4 and
5(a) above and the representations and warranties of the Company contained
herein.


(f)            is an “accredited Purchaser” within the meaning of
Rule 501 of Regulation D promulgated under the Securities Act or a Qualified
Institutional Buyer within the meaning of Rule 144A promulgated under the
Securities Act.


(g)           Purchaser has full right, power, authority and
capacity to enter into this Agreement and to consummate the transactions contemplated
hereby and has taken all necessary action to authorize the execution, delivery
and performance of this Agreement.  Upon
the execution and delivery of this Agreement by Purchaser, this Agreement shall
constitute a valid and binding obligation of Purchaser, enforceable in
accordance with its terms, except (i) as enforceability may be limited by
applicable bankruptcy, insolvency, reorganization, moratorium or similar laws
affecting creditors’ and contracting parties’ rights generally, (ii) as limited
by equitable principles generally, including any specific performance, and
(iii) as to those provisions of Section 9.5 relating to indemnity or
contribution.


(h)           The Alloy Entities (as defined below), and only the
Alloy Entities, represent and warrant that they, together with their
Affiliates, beneficially own (as such term is defined in Rule 13d-3 under the
Exchange Act), prior to the issuance of the Units, an aggregate of 3,216,242
shares of the Company’s Common Stock (including 91,646 shares issuable upon the
exercise of outstanding warrants).  The
Sprout Entities (as defined below), and only the Sprout Entities, represent and
warrant that they, together with their Affiliates, beneficially own (as such
term is defined in Rule 13d-3 under the Exchange Act), prior to the issuance of
the Units, an aggregate of 1,804,350 shares of the Company’s Common Stock.  The parties hereto
understand and agree that “beneficial ownership”, for the purposes of the
representations in this Section 5(h), shall not be deemed to include stock
options held by any director on the Board of Directors of the Company that is
affiliated with any of the Purchasers. 
The “Alloy Entities” shall mean: 
Alloy Partners 2000, L.P., Alloy Ventures 2000, L.P., Alloy Corporate
2000, L.P., and Alloy Investors 2000, L.P. 
The “Sprout Entities” shall mean: 
Donaldson, Lufkin & Jenrette Securities Corporation (as nominee for
DLJ First ESC L.P., EMA 2001 Plan, L.P., CSFB 2001 Investors, L.P., Credit
Suisse First Boston Private Equity, Inc., Docklands 2001 Plan, L.P. and
Paradeplatz 2001 Plan, L.P.), Sprout Entrepreneurs Fund, L.P., Sprout Capital
IX, L.P., Sprout Capital VII, L.P., Sprout CEO Fund, L.P., DLJ Capital Corp.,
and DLJ First ESC L.P.


SECTION
6.         SURVIVAL OF REPRESENTATIONS,
WARRANTIES AND AGREEMENTS.  Notwithstanding any investigation made by
any party to this Agreement, all covenants, agreements, representations and
warranties made by the Company and each Purchaser herein and in the
certificates for the Securities delivered pursuant hereto shall survive the
execution of this Agreement, the delivery to the Purchasers of the Securities
being purchased and the payment therefor.


SECTION
7.         CONDITIONS TO COMPANY’S
OBLIGATIONS AT THE CLOSING.  The Company’s obligation to complete the sale and issuance
of the Units and deliver shares of Preferred Stock and Warrants to each
Purchaser, individually, as set forth in the Schedule of 


 


11.

















 


Purchasers, at each
Closing shall be subject to the following conditions to the extent not waived
by the Company:


7.1          Receipt of
Payment.  The Company shall have received payment,
by check or wire transfer of immediately available funds, in the full amount of
the purchase price for the number of Units being purchased by such Purchaser at
the applicable Closing as set forth in the Schedule of Purchasers.


7.2          Representations and Warranties
Correct.  The representations and warranties made
by such Purchaser in Section 5 hereof shall be true and correct in all material
respects when made, and shall be true and correct in all material respects on
the date of the Closing.


7.3          Covenants
Performed.  All covenants, agreements and conditions
contained herein to be performed by such Purchaser on or prior to the Closing
shall have been performed or complied with in all material respects.


7.4          Nasdaq
Notice Periods.  Satisfaction of
any notice period required by Nasdaq and receipt of any necessary waivers from
Nasdaq. 


7.5          Nasdaq
or Stockholder Approval.  With respect to the sale of the
Subsequent Units only, the Company shall have obtained either (a) approval by
The Nasdaq Stock Market of the sale of the Subsequent Units or (b) approval by
the stockholders of the Company in accordance with the requirements of The
Nasdaq Stock Market of the sale of the Subsequent Units.


SECTION
8.         CONDITIONS TO PURCHASERS’
OBLIGATIONS AT THE CLOSING.  Each Purchaser’s obligation to accept delivery of the
Units and to pay for the Securities evidenced thereby at each Closing shall be
subject to the following conditions to the extent not waived by such Purchaser:


8.1          Representations and Warranties
Correct.   The representations and warranties made by the Company in Section
4 hereof shall be true and correct when made and shall be true and correct on
the Initial Closing Date and as of the date of this Agreement.


8.2          Covenants
Performed.  All covenants, agreements and conditions
contained herein to be performed by the Company shall have been performed or
complied with in all material respects.


8.3          Reservation of Conversion Shares and
Warrant Shares.   The Conversion Shares and the Warrant Shares shall have been duly
authorized and reserved for issuance upon such conversion.


8.4          Legal Opinion.
  With respect
to the sale of the Initial Units, each Purchaser must have
received a customary opinion, dated the Initial Closing Date, from Cooley
Godward LLP, counsel for the Company, substantially in the form attached hereto
as Exhibit D.


8.5          Officer’s
Certificate.   With respect to the sale of the Initial Units, each Purchaser
must have received a certificate, dated the Initial Closing Date, of an officer
of the 


 


12.

















 


Company in which such officer shall state that: the representations and
warranties of the Company in Section 4 of this Agreement are correct as of such
date; the Company has complied with all agreements and satisfied all conditions
on its part to be performed or satisfied hereunder at or prior to such Closing
Date; and there has been no event constituting a Material Adverse Effect since
the date of this Agreement.


8.6          Secretary’s Certificate.   With respect to the sale of the Initial
Units, each Purchaser must have received a certificate, dated the Initial
Closing Date, of the Secretary of the Company in customary form certifying as
to (i) the bylaws of the Company, (ii) the certificate of incorporation of the
Company, (iii) the resolutions of the Board of Directors of the Company and any
committee of the Board of Directors approving the transactions contemplated by
this Agreement.


8.7          Nasdaq or Stockholder Approval.  With respect to the sale of the Subsequent Units only,
the Company shall have obtained either (a) approval by The Nasdaq Stock Market
of the sale of the Subsequent Units or (b) approval by the stockholders of the
Company in accordance with the requirements of The Nasdaq Stock Market of the
sale of the Subsequent Units, and each Purchaser shall have
received a certificate, dated the Subsequent Closing Date, of an officer of the
Company in which such officer shall confirm receipt of such approval.


SECTION 9.         REGISTRATION OF THE SHARES; COMPLIANCE WITH THE SECURITIES
ACT.  


9.1          Registration Procedures.  The Company is obligated to do the following:


(a)           No later than 55 calendar days after the Initial Closing
Date (the “Filing Deadline”), the Company shall prepare and file with the SEC
one or more registration statements (collectively, the “Registration
Statement”) on Form S-3 (unless the Company is not then eligible to register
for resale on Form S-3, in which case on another appropriate form) in order to
register with the SEC the resale by the Purchasers, from time to time, of the
Conversion Shares and the Warrant Shares and a reasonable estimate of any
Common Stock to be issued as (or issuable upon the conversion or exercise of
any convertible preferred stock, warrant, right or other security that is
issued as) a dividend or other distribution with respect to, or in exchange for
or in replacement of, the Conversion Shares or the Warrant Shares (collectively,
the “Registrable Securities”) through Nasdaq or the facilities of any national
securities exchange on which the Companys Common Stock is then traded, or in
privately negotiated transactions. Unless otherwise directed by the Purchasers
or as required by the SEC or the rules and regulations of the SEC as then in
effect, the Registration Statement shall contain the Plan of Distribution
attached hereto as Exhibit E. The Company shall use its commercially reasonable
efforts to cause the Registration Statement to be declared effective as soon
thereafter as possible, but in any event prior to 105 days after Initial
Closing Date (the “Effectiveness Deadline”). Notwithstanding anything to the
contrary set forth above, if the Company is eligible to use Form S-3 for the
Conversion Shares and Warrant Shares issuable as a result of the issuance of
the Initial Units, but the SEC determines that the Company is not eligible to
use Form S-3 for the Conversion Shares and Warrant Shares issuable as a result
of 


 


13.

















 


the issuance of
the Subsequent Units until the Subsequent Units have been issued, then the
Company shall not be required to file a registration statement with respect to
the the Conversion Shares and Warrant Shares issuable as a result of the
issuance of the Subsequent Units until 45 days after the Subsequent Closing
Date, nor cause such registration statement to become effective until 105 days
after Subsequent Closing Date, and the terms “Filing Date” and “Effectiveness
Deadline,” and all calculations set forth in this Section 9 based upon the late
filing or effectiveness of the Registration Statement shall, with respect to
the registration statement relating to the Subsequent Units under these
circumstances refer to the dates set forth in this sentence.


(b)           Not less than five trading days prior to the filing of
a Registration Statement or any prospectus contained in a Registration
Statement (a “Prospectus”) or any amendment or supplement thereto, the Company
shall, (i) furnish to the Purchasers for their review copies of all such
documents proposed to be filed (including documents incorporated or deemed
incorporated by reference), and (ii) notify each Purchaser in writing of the
information the Company requires from each such Purchaser to be included in
such Registration Statement. The Company will cause its officers and directors,
counsel and independent certified public accountants to respond to such
inquiries as the Purchasers shall deem reasonably necessary as soon as
practicable after having received such inquiries.


(c)           The Company shall (i) prepare and file with the SEC
(x) such amendments and supplements to each Registration Statement and the
Prospectus used in connection therewith, and (y) such other filings required by
the SEC, and (ii) take such other actions, in each case as may be necessary to
keep the Registration Statement continuously effective and so that such
Registration Statement will not contain an untrue statement of a material fact
or omit to state a material fact required to be stated therein or necessary to
make the statements therein not misleading, and so that such Prospectus will
not contain an untrue statement of a material fact or omit to state a material
fact required to be stated therein or necessary to make the statements therein,
in light of the circumstances under which they were made, not misleading, until
the earlier of (A) the date that the Purchasers have completed the distribution
related to the Registrable Securities, (B) such time that all Registrable
Securities then held by the Purchasers can be sold without compliance with the
registration requirements of the Securities Act pursuant to Rule 144(k) under
the Securities Act, or (C) such time as all Purchasers shall hold less than one
percent of the Common Stock then outstanding as set forth under Rule 144(e)(1)
under the Securities Act (the “Effectiveness Period”). The Company shall not,
during such period, voluntarily take any action that would result in the
Purchasers not being able to offer and sell Registrable Securities during that
period, unless such action is taken by the Company in good faith in compliance
with Section 9.2(e) below.


(d)           (i) Furnish to the Purchasers with respect to the
Registrable Securities registered under the Registration Statement such number
of copies of the Registration Statement (including pre-effective and
post-effecive amendments), Prospectuses (including supplemental prospectuses)
and preliminary versions of the Prospectus filed with the SEC (“Preliminary
Prospectuses”) in conformity with the requirements of the Securities Act and
such other documents as the Purchasers may reasonably request, in order to
facilitate the public sale or other disposition of all or any of the
Registrable Securities by the Purchasers; and (ii) upon request, inform each
Purchaser who so requests that the Company has complied with its obligations in
Section 9.1(d)(i) (or that, if the Company has filed a post-effective amendment
to the Registration Statement which has not yet been declared effective, the
Company will notify the Purchaser to that effect, will use its reasonable
efforts to secure the effectiveness of such post-


 


14.

















 


effective
amendment as promptly as reasonably possible and will promptly notify the
Purchaser pursuant to Section 9.1(d)(i) hereof when the amendment has become
effective).


(e)           Notify the Purchasers as promptly as reasonably
possible and (if requested by any such Person) confirm such notice in writing
no later than one trading day following the day (i) (A) when the SEC notifies
the Company whether there will be a review of a Registration Statement and
whenever the SEC comments in writing on such Registration Statement (the
Company shall provide true and complete copies thereof and all written
responses thereto to each of the Purchasers); and (B) with respect to a
Registration Statement or any posteffective amendment, when the same has become
effective; (ii) of any request by the SEC for amendments or supplements to a
Registration Statement or Prospectus or for additional information; (iii) of
the issuance by the SEC of any stop order suspending the effectiveness of a
Registration Statement covering any or all of the Registrable Securities or the
initiation of any proceedings for that purpose; (iv) of the receipt by the
Company of any notification with respect to the suspension of the qualification
or exemption from qualification of any of the Registrable Securities for sale
in any jurisdiction, or the initiation or threatening of any proceeding for
such purpose; and (v) of the occurrence of any event or passage of time that
makes the financial statements included in a Registration Statement ineligible
for inclusion therein or any statement made in such Registration Statement or
Prospectus or any document incorporated or deemed to be incorporated therein by
reference untrue in any material respect or that requires any revisions to such
Registration Statement, Prospectus or other documents so that, in the case of a
Registration Statement, such Registration Statement will not contain an untrue
statement of a material fact or omit to state a material fact required to be
stated therein or necessary to make the statements therein not misleading, and
so that such Prospectus will not contain an untrue statement of a material fact
or omit to state a material fact required to be stated therein or necessary to
make the statements therein, in light of the circumstances under which they
were made, not misleading.


(f)            File documents required of the Company for normal blue
sky clearance in states reasonably specified in writing by the Purchasers prior
to the effectiveness of the Registration Statement; provided, however, that the Company shall not be required to
qualify to do business or consent to service of process in any jurisdiction in
which it is not now so qualified or has not so consented.


(g)           Use its commercially reasonable efforts to avoid the
issuance of, or, if issued, obtain the withdrawal of (i) any order suspending
the effectiveness of a Registration Statement, or (ii) any suspension of the
qualification (or exemption therefrom) of any of the Registrable Securities for
sale in any jurisdiction, at the earliest practicable moment.


(h)           Cooperate with the Purchasers to facilitate the timely
preparation and delivery of certificates representing Registrable Securities to
be delivered to any transferee pursuant to any Registration Statement free of
any restrictive legends and in such denominations and registered in such names
as the Purchasers may reasonably request.


(i)            In the event of any underwritten public offering,
enter into and perform its obligations under an underwriting agreement, in
usual and customary form, with the managing 


 


15.

















 


underwriter(s) of
such offering. Each Purchaser participating in such underwriting shall also
enter into and perform its obligations under such an agreement.


(j)            In the event of any underwritten public offering, use
its commercially reasonable efforts to furnish, on the date that such
Registrable Securities are delivered to the underwriters for sale, if such
securities are being sold through underwriters, (i) an opinion, dated as of
such date, of the counsel representing the Company for the purposes of such
registration, in form and substance as is customarily given to underwriters in
an underwritten public offering, addressed to the underwriters, if any, and
(ii) a letter, dated as of such date, from the independent certified public accountants
of the Company, in form and substance as is customarily given by independent
certified public accountants to underwriters in an underwritten public offering
addressed to the underwriters.


(k)           Cause all such Registrable Securities registered
pursuant hereto to be listed on Nasdaq, if the Common Stock is then listed on
Nasdaq, and each other securities exchange on which similar securities issued
by the Company are then listed.


(l)            The Company understands that each of the Purchasers
disclaims being an underwriter, but any Purchasers being deemed an underwriter
by the SEC shall not relieve the Company of any obligations it has hereunder.


9.2          Transfer of Shares After Registration;
Suspension; Damages.


(a)           Each Purchaser, severally and not jointly, agrees (i)
that it will not sell, offer to sell, solicit offers to buy, dispose of, loan,
pledge or grant any right with respect to the Registrable Securities or
otherwise take an action that would constitute a sale within the meaning of the
Securities Act, other than transactions exempt from the registration
requirements of the Securities Act, except as contemplated in the Registration
Statement referred to in Section 9.1 and as described below, (ii) that it shall
be a condition precedent to the obligations of the Company to complete the
registration pursuant to this Agreement with respect to the Registrable
Securities of a particular Purchaser that such Purchaser shall furnish to the
Company such information regarding itself, the Registrable Securities held by it
and the intended method of disposition of the Registrable Securities held by it
as shall be required to effect the registration of such Registrable Securities,
(iii) that it shall execute such documents in connection with such
registration, that are customary for resale registration statements, as the
Company may reasonably request, (iv) to cooperate with the Company as
reasonably requested by the Company in connection with the preparation and
filing of any Registration Statement hereunder, unless such Purchaser has
notified the Company in writing of such Purchasers election to exclude all of
such Purchasers Registrable Securities from such Registration Statement and (v)
that it will promptly notify the Company of any changes in the information set
forth in the Registration Statement regarding the Purchaser or its plan of
distribution. Any delay of a Purchaser in taking the actions set forth in
clauses (ii), (iii), (iv) and (v) of this Section 9.2(a), or caused solely as a
result of the use of the Plan of Distribution filed as Exhibit E hereto, shall
be deemed a “Purchaser Delay”  for
purposes of this Agreement.


(b)           Subject to paragraph (c) below, in the event: (i) of
any request by the SEC or any other federal or state governmental authority
during the period of effectiveness of the 


 


16.

















 


Registration
Statement for amendments or supplements to a Registration Statement or related
Prospectus or for additional information; (ii) of the issuance by the SEC or
any other federal or state governmental authority of any stop order suspending
the effectiveness of a Registration Statement or the initiation of any
proceedings for that purpose; (iii) of the receipt by the Company of any
notification with respect to the suspension of the qualification or exemption
from qualification of any of the Registrable Securities for sale in any
jurisdiction or the initiation of any proceeding for such purpose; or (iv) of
any event or circumstance which necessitates the making of any changes in the
Registration Statement or Prospectus, or any document incorporated or deemed to
be incorporated therein by reference, so that, in the case of the Registration
Statement, it will not contain any untrue statement of a material fact or any
omission to state a material fact required to be stated therein or necessary to
make the statements therein not misleading, and that in the case of the
Prospectus, it will not contain any untrue statement of a material fact or any
omission to state a material fact required to be stated therein or necessary to
make the statements therein, in the light of the circumstances under which they
were made, not misleading; then the Company shall promptly deliver a
certificate in writing to each Purchaser (a “Suspension Notice”) to the effect
of the foregoing and, upon receipt of such Suspension Notice, the Purchaser
will refrain from selling any Registrable Securities pursuant to the
Registration Statement (a “Suspension”) until the Purchasers receipt of copies
of a supplemented or amended Prospectus prepared and filed by the Company, or
until it is advised in writing by the Company that the current Prospectus may
be used, and has received copies of any additional or supplemental filings that
are incorporated or deemed incorporated by reference in any such Prospectus.


(c)           In the event of any Suspension, the Company will use
its commercially reasonable efforts to cause the use of the Prospectus so
suspended to be resumed as soon as reasonably practicable but in any event
within forty-five (45) days after delivery of a Suspension Notice to
Purchasers; provided, however,
that Purchasers shall not be prohibited from selling Registrable Securities
under the Registration Statement as a result of Suspensions on more than three
occasions of not more than forty-five (45) days each and not more than ninety
(90) days in the aggregate in any twelve month period.  Notwithstanding the foregoing, if the
Company ceases to be eligible to register the Registrable Securities on Form
S-3 and resolution of any Suspension requires the Company to file a
post-effective amendment on Form S-1, (i) the Company will use its commercially
reasonable efforts to cause the use of the Prospectus so suspended to be
resumed as soon as reasonably practicable but in any event within ninety (90)
days after delivery of a Suspension Notice to Purchasers, and (ii) the
Purchasers shall not be prohibited from selling Registrable Securities under
the Registration Statement as a result of Suspensions on or after the date that
the Company ceases to be eligible to register the Registrable Securities on
Form S-3 on more than three occasions of not more than sixty (60) days each in
any twelve month period.  In addition to
and without limiting any other remedies (including, without limitation, at law
or at equity) available to the Purchaser, the Purchaser shall be entitled to
specific performance in the event that the Company fails to comply with the
provisions of this Section 9.2(c).


(d)           Provided that a Suspension in accordance with
paragraphs (b) and (c) of this Section 9.2 is not then in effect a Purchaser
may sell Registrable Securities under the Registration Statement, provided that
it arranges for delivery of a current Prospectus to the transferee of such
Registrable Securities. Upon receipt of a request therefor, the Company will 


 


17.

















 


provide an
adequate number of current Prospectuses to the Purchaser and to any other
parties requiring such Prospectuses.


(e)           In the event of a sale of Registrable Securities by a
Purchaser, unless such requirement is waived by the Company in writing, such
Purchaser shall deliver to the Company’s transfer agent, with a copy to the
Company, of a Seller’s Certificate of Sale substantially in the form attached
hereto as Appendix III.


(f)            If (i) a Registration Statement covering all of the
Registrable Securities (a) is not filed with the SEC on or prior to the Filing
Deadline or (b) has not been declared effective by the SEC on or prior to the
Effectiveness Deadline, or (ii) a Registration Statement ceases to be effective
as to, or ceases to be available to the Purchasers with respect to, all
Registrable Securities to which it is required to relate at any time prior to
the expiration of the Effectiveness Period other than during the continuance
and for the enumerated time periods of any Suspension in accordance with
paragraphs (c) and (d) of this Section 9.2 (any such event, a “Registration
Default”), then the Company shall pay each Purchaser liquidated damages in an
amount equal to one percent (1.0%) of the aggregate purchase price paid by such
Purchaser for the Registrable Securities available for sale under the
Registration Statement at the time of the Registration Default per calendar
month, including a pro rata portion thereof for any partial calendar month,
that such Registration Default continues (Liquidated
Damages); provided, however,
that no Purchaser shall be entitled to Liquidated Damages with respect to any
Registrable Securities previously sold or then eligible to be sold within a
three (3) month period without compliance with the registration requirements of
the Securities Act under Rule 144 of the Securities Act. The Company shall not
in any event be required to pay Liquidated Damages for more than one
Registration Default at any given time, and upon cure of a Registration Default
(by the filing or the declaration of effectiveness of the Registration
Statement, as applicable) such Liquidated Damages shall cease to accrue. All
accrued Liquidated Damages shall be paid in cash to the Purchasers entitled
thereto, in proportion to the aggregate number of Registrable Securities
beneficially owned by each such Purchaser. Notwithstanding anything in the
foregoing to the contrary, all periods in clauses (i) and (ii) shall be tolled
to the extent of any delays caused solely by any Purchaser Delay.


9.3          Expenses of Registration.  Except as specifically provided herein,
all expenses incurred by the Company in complying with Section 9 hereof,
including, all registration and filing fees, printing expenses, fees and
disbursements of counsel for the Company, reasonable fees and expenses of one
counsel to the Purchasers (which shall be in addition to any fees pursuant to
Sections 12.9 but which shall not exceed, in the aggregate, $10,000), blue sky
fees and expenses, fees and the expense of any special audits incident to or
required by any such registration (but excluding the compensation of regular
employees of the Company which shall be paid in any event by the Company)
(collectively, the “Registration Expenses”) shall be borne by the Company. All
underwriting discounts and selling commissions applicable to a sale incurred in
connection with any registrations hereunder shall be borne by the holders of
the securities so registered pro rata on the basis of the number of shares so
sold.


9.4          Delay of Registration; Furnishing Information.  The Purchasers shall furnish to the
Company such information regarding themselves, the Registrable Securities held
by them and the intended method of disposition of such securities as shall be
required to effect the 


 


18.

















 


registration of
their Registrable Securities. Furthermore, each Purchaser, severally and not
jointly, agrees to promptly notify the Company of any changes in the
information set forth in a registration statement regarding such Purchaser or
its plan of distribution set forth in such registration statement.


9.5          Indemnification.  In the event any Registrable Securities
are included in a registration statement under this Section 9.


(a)           The Company will indemnify and hold harmless each
Purchaser, the partners, officers and directors of each Purchaser, any
underwriter (as defined in the Securities Act) for such Purchaser and each
person, if any, who controls such Purchaser or underwriter within the meaning
of the Securities Act or the Exchange Act, against any losses, claims, damages,
or liabilities (joint or several) to which they may become subject under the
Securities Act, the Exchange Act or otherwise, insofar as such losses, claims,
damages or liabilities (or actions in respect thereof) arise out of or are
based upon any of the following statements, omissions or violations
(collectively a “Violation”): (i) any untrue statement or alleged untrue
statement of a material fact contained in a Registration Statement, including
any preliminary prospectus or final prospectus contained therein or any
amendments or supplements thereto, (ii) the omission or alleged omission to
state therein a material fact required to be stated therein, or necessary to
make the statements therein not misleading, or (iii) any violation or alleged
violation by the Company of the Securities Act, the Exchange Act, any state
securities law or any rule or regulation promulgated under the Securities Act,
the Exchange Act or any state securities law in connection with the offering
covered by such Registration Statement; and the Company will pay as incurred to
each such Purchaser, partner, officer, director, underwriter or controlling
person for any legal or other expenses reasonably incurred by them in
connection with investigating or defending any such loss, claim, damage,
liability or action; provided, however,
that the indemnity agreement contained in this Section 9.5 shall not apply to
amounts paid in settlement of any such loss, claim, damage, liability or action
if such settlement is effected without the consent of the Company, which
consent shall not be unreasonably withheld, unless such settlement (x) includes
an unconditional release of the Company from all liability on any claims that
are the subject matter of such action, and (y) does not include a statement as
to or an admission of fault, culpability or a failure to act by or on behalf of
the Company; provided, further,
that the Company shall not be liable in any such case for any such loss, claim,
damage, liability or action to the extent that it arises out of or is based
upon a Violation which (i) occurs in reliance upon and in conformity with
written information furnished expressly for inclusion in such Registration
Statement, prospectus, amendment or supplement by such Purchaser, partner,
officer, director, underwriter or controlling person of such Purchaser or (ii)
based upon a claim that a Preliminary Prospectus contained an untrue statement
or alleged untrue statement of a material fact or omission or alleged omission
to state therein a material fact required to be stated therein, or necessary to
make the statements therein not misleading, if such person was not sent or
given a copy of the Prospectus (or the Prospectus as amended or supplemented)
at or prior to the written confirmation of the sale of such Registrable
Securities to such person and the untrue statement contained in or omission
from such Preliminary Prospectus was corrected in the final Prospectus (or the
Prospectus as amended or supplemented) unless such failure is the result of
noncompliance by the Company of Section 9.1(b) or (d) hereof; provided, further, that this
indemnification agreement will be in addition to any liability which the
Company may otherwise have to the Purchasers.


19.

















 


(b)           Each Purchaser will, if Registrable Securities held by
such Purchaser are included in the securities as to which such Registration
Statement, prospectus, amendment or supplement is being filed, severally and
not jointly, indemnify and hold harmless the Company, each of its directors,
its officers and each person, if any, who controls the Company within the
meaning of the Securities Act or Exchange Act, any underwriter and any other
Purchaser selling securities under such registration statement or any of such
other Purchasers partners, directors or officers or any person who controls
such Purchaser, against any losses, claims, damages or liabilities (joint or
several) to which the Company or any such director, officer, controlling
person, underwriter or other such Purchaser, or partner, director, officer or
controlling person of such other Purchaser may become subject under the
Securities Act, the Exchange Act or otherwise, insofar as such losses, claims,
damages or liabilities (or actions in respect thereto) arise out of or are
based upon any Violation, in each case to the extent (and only to the extent) that
such Violation occurs in reliance upon and in conformity with written
information furnished by such Purchaser specifically for use in connection with
such Registration Statement, prospectus, amendment or supplement; and each such
Purchaser will pay as incurred any legal or other expenses reasonably incurred
by the Company or any such director, officer, controlling person, underwriter
or other person registering shares under such registration, or partner,
officer, director or controlling person of such other person registering shares
under such Registration Statement in connection with investigating or defending
any such loss, claim, damage, liability or action if it is judicially
determined that there was such a Violation; provided,
however, that the indemnity agreement contained in this Section 9.5
shall not apply to amounts paid in settlement of any such loss, claim, damage,
liability or action if such settlement is effected without the consent of the
Purchaser, which consent shall not be unreasonably withheld, unless such
settlement (x) includes an unconditional release of such Purchaser from all
liability on any claims that are the subject matter of such action, and (y)
does not include a statement as to or an admission of fault, culpability or a
failure to act by or on behalf of such Purchaser; provided, further, that in no event shall any indemnity
under this Section 9.5 exceed the dollar amount of the proceeds to be received
by such Purchaser from the sale of such Purchasers Registrable Securities pursuant
to the Registration Statement.


(c)           Promptly after receipt by an indemnified party under
this Section 9.5 of notice of the commencement of any action (including any
governmental action), such indemnified party will, if a claim in respect
thereof is to be made against any indemnifying party under this Section 9.5,
deliver to the indemnifying party a written notice of the commencement thereof
and the indemnifying party shall have the right to participate in, and, to the
extent the indemnifying party so desires, jointly with any other indemnifying
party similarly noticed, to assume the defense thereof with counsel reasonably
satisfactory to the parties; provided,
however, that an indemnified party shall have the right to retain
its own counsel, with the fees and expenses to be paid by the indemnifying
party, if representation of such indemnified party by the counsel retained by
the indemnifying party would be inappropriate due to actual or potential
differing interests between such indemnified party and any other party
represented by such counsel in such proceeding. The failure to deliver written
notice to the indemnifying party within a reasonable time of the commencement
of any such action shall not relieve such indemnifying party of any liability
to the indemnified party under this Section 9.5, unless and to the extent that
such failure is materially prejudicial to the indemnifying party’s ability to
defend such action, but the omission so to deliver written notice to the
indemnifying party will not relieve it of any liability that it may have to any
indemnified party otherwise than under this Section 9.5.


20.

















 


(d)           If the indemnification provided for in this Section
9.5 is held by a court of competent jurisdiction to be unavailable to an
indemnified party with respect to any losses, claims, damages or liabilities
referred to herein, the indemnifying party, in lieu of indemnifying such
indemnified party thereunder, shall to the extent permitted by applicable law
contribute to the amount paid or payable by such indemnified party as a result
of such loss, claim, damage or liability (i) in such proportion as is
appropriate to reflect the relative benefits received by the indemnifying party
or parties on the one hand and the indemnified party on the other from the sale
of the Registrable Securities pursuant to the Registration Statement, or (ii)
if such allocation is not permitted by applicable law, in such proportion as is
appropriate to reflect not only the relative benefits but also the relative
fault of the indemnifying party or parties on the one hand and the indemnified
party on the other in connection with the Violation(s) that resulted in such
loss, claim, damage or liability, as well as any other relevant equitable
considerations. The relative fault of the indemnifying party and of the
indemnified party shall be determined by a court of law by reference to, among
other things, whether the untrue or alleged untrue statement of a material fact
or the omission to state a material fact relates to information supplied by the
indemnifying party or by the indemnified party and the parties relative intent,
knowledge, access to information and opportunity to correct or prevent such
statement or omission; provided, that in no event shall any contribution by a
Purchaser hereunder exceed the dollar amount of the proceeds to be received by
such Purchaser from the sale of such Purchasers Registrable Securities pursuant
to the Registration Statement.


(e)           The obligations of the Company and the Purchasers
under this Section 9.5 shall survive completion of any offering of Registrable
Securities in a Registration Statement and the termination of this Agreement.


9.6          Agreement
to Furnish Information.  In connection with an underwritten registration in
which such Purchaser is participating, each Purchaser agrees to execute and
deliver such other agreements as may be reasonably requested by the Company or
the underwriter. In addition, if requested by the Company or the representative
of the underwriters of Common Stock (or other securities) of the Company, each
Purchaser shall provide such information related to such Purchaser as may be
required by the Company or such representative in connection with the
completion of any public offering of the Companys securities pursuant to a
registration statement filed under the Securities Act.


9.7          Assignment
of Registration Rights.  The rights to cause the Company to register
Registrable Securities pursuant to this Section 9 may be assigned (but only
with the related obligations) by a Purchaser, provided (i) each transfer to
each transferee or designee involves either (X) all Registrable Securities held
by such Purchaser, (Y) not less than twenty-five thousand (25,000) shares of
Preferred Stock, or (Z) an affiliate, partner or former partner of such
Purchaser, (ii) the Company is, within a reasonable time after such transfer,
furnished with written notice of the name and address of such transferee or
assignee, (iii) such transferee or assignee agrees in writing to assume the
obligations of this Section 9 and (iv) such assignment shall be effective only
if immediately following such transfer the further disposition of such shares
by the transferee or assignee is restricted under the Securities Act (for
purposes of this statement, if the transferee (x) is able to sell all of the
Restricted Securities held by such transferee pursuant to Rule 144(k) or (y)
holds less than 1% of the Company’s Common Stock following such transfer and
has the ability to sell all of such Common Stock under Rule 144 


 


21.

















 


within a three
month period, then further disposition will not be deemed to be restricted
under the Securities Act).


9.8          Rule 144 Reporting.  With a view to making available to the
Purchasers the benefits of certain rules and regulations of the SEC which may
permit the sale of the Registrable Securities to the public without
registration, the Company agrees to use its commercially reasonable efforts to:


(a)           Make and keep public information available, as those
terms are understood and defined in SEC Rule 144 or any similar or analogous
rule promulgated under the Securities Act;


(b)           File with the SEC, in a timely manner, all reports and
other documents required of the Company under the Exchange Act; and


(c)           So long as a Purchaser owns any Registrable
Securities, furnish to such Purchaser forthwith upon request: a written
statement by the Company as to its compliance with the reporting requirements
of said Rule 144 of the Securities Act, and of the Exchange Act (at any time
after it has become subject to such reporting requirements); a copy of the most
recent annual or quarterly report of the Company; and such other reports and
documents as a Purchaser may reasonably request in availing itself of any rule
or regulation of the SEC allowing it to sell any such securities without
registration.


9.9          S-3 Eligibility.  The Company will use its commercially
reasonable efforts to meet the requirements for the use of Form S-3 for
registration of the resale by the Purchasers of the Registrable Securities. The
Company will use its commercially reasonable efforts to file all reports
required to be filed by the Company with the SEC in a timely manner and take
all other necessary action so as to maintain such eligibility for the use of
Form S-3.


9.10        Termination
of Registration Rights.  Subject to the rights of transferees under Section 9.7
hereof, the Company’s obligations pursuant to this Section 9 shall terminate
with respect to each Purchaser severally upon the earlier of (A) the date that
such Purchaser has completed the distribution related to such Purchaser’s
Registrable Securities, (B) such time that all Registrable Securities then held
by such Purchaser can be sold without compliance with the registration
requirements of the Securities Act pursuant to Rule 144(k) under the Securities
Act, or (C) such time as such Purchaser shall hold less than one percent of the
Common Stock then outstanding as set forth under Rule 144(e)(1) under the
Securities Act and has the ability to sell all of such Purchaser’s Registrable
Securities under Rule 144 within a three month period.  Following a termination of the Companys
obligations pursuant to the preceding sentence with respect to a Purchaser, any
Securities held by such Purchaser shall not be deemed to be Registrable
Securities thereafter, and the obligations of such Purchaser pursuant to this
Section 9 shall also terminate.


9.11        Amendment of Registration Rights.  Provisions of this Section 9 may be
amended and the observance thereof may be waived (either generally or in a
particular instance and either retroactively or prospectively), only with the
written consent of the Company and Purchasers who then hold not less than 75%
of the Registrable Securities. Any amendment or 


 


22.

















 


waiver effected in
accordance with this Section 9.11 shall be binding upon each Purchaser and the
Company. No such amendment shall be effective to the extent that it applies to
less than all of the holders of the Registrable Securities.


9.12        Legends.  Each certificate representing Shares
shall (unless such Shares are then eligible for transfer pursuant to Rule
144(k) under the Securities Act or as otherwise permitted under applicable law
or the provisions of the Agreement) be stamped or otherwise imprinted with a
legend substantially similar to the following (in addition to any legend
required under applicable state securities laws or as provided elsewhere in
this Agreement):


THE SECURITIES
REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER THE SECURITIES
ACT OF 1933 (THE “ACT”) AND MAY NOT BE OFFERED, SOLD OR OTHERWISE TRANSFERRED,
PLEDGED OR HYPOTHECATED UNLESS AND UNTIL REGISTERED UNDER THE ACT OR, IN THE
OPINION OF COUNSEL OR BASED ON OTHER WRITTEN EVIDENCE IN THE FORM AND SUBSTANCE
SATISFACTORY TO THE ISSUER OF THESE SECURITIES, SUCH OFFER, SALE OR TRANSFER,
PLEDGE OR HYPOTHECATION IS IN COMPLIANCE THEREWITH.


 


Nothing in this Section
9.12 or elsewhere in this Agreement shall be deemed to restrict the ability of
the holder of any Securities to transfer any such Securities to an affiliate,
partner or former partner of such holder in compliance with the Securities Act,
nor shall any legal opinion be required in connection therewith.


SECTION 10.               BROKER’S FEE.    The
Company and each Purchaser (severally and not jointly) hereby represent that
there are no brokers or finders entitled to compensation in connection with the
sale of the Units, and shall indemnify each other for any such fees for which
they are responsible.


SECTION
11.               NOTICES.  
All notices, requests, consents and other communications hereunder shall
be in writing, shall be sent by email, confirmed facsimile or mailed by
first-class registered or certified airmail, or nationally recognized overnight
express courier, postage prepaid, and shall be deemed given when so sent in the
case of email or facsimile transmission, or when so received in the case of
mail or courier, and addressed as follows:


(a)           if to the Company, to:


Pharsight Corporation


800 West El Camino Real, Suite 200


Mountain View, California 94040


Attention: 
General Counsel


Facsimile:  (650) 314-3731


Email:  lwright@pharsight.com


 


23.

















 


with a copy so
mailed to:


Cooley Godward LLP


Five Palo Alto
Square, 4th Floor


Palo Alto,
California 94306


Attention:  Brett D. White


Facsimile:  (650) 849-7400


or to such other
person at such other place as the Company shall designate to the Purchasers in
writing; and


(b)           if to the Purchasers, at the address as set forth at
the end of this Agreement, or at such other address or addresses as may have
been furnished to the Company in writing.


SECTION 12.               MISCELLANEOUS.  


12.1        Waivers
and Amendments.  Neither this Agreement nor any provision hereof may be
changed, waived, discharged, terminated, modified or amended except upon the
written consent of the Company and holders of at least 75% of the Shares (not
taking into account any Shares that have been sold and no longer bear the
restrictive legend referred to in Section 9.12).


12.2        Agreement to Vote for Issuance of
Subsequent Units.  Each Purchaser agrees to vote all shares
of voting capital stock the Company, registered in its respective name or for
which it is otherwise entitled to vote, in favor of the sale of the Subsequent
Units to be issued pursuant to Section 3.3 of this Agreement


12.3        Headings.   The headings
of the various sections of this Agreement have been inserted for convenience of
reference only and shall not be deemed to be part of this Agreement.


12.4        Severability.   In case any
provision contained in this Agreement should be invalid, illegal or
unenforceable in any respect, the validity, legality and enforceability of the
remaining provisions contained herein shall not in any way be affected or
impaired thereby.


12.5        Governing
Law.    This Agreement shall be
governed by and construed in accordance with the laws of the State of
California as applied to contracts entered into and performed entirely in California
by California residents, without regard to conflicts of law principles.


12.6        Counterparts.   This Agreement
may be executed in two or more counterparts, each of which shall constitute an
original, but all of which, when taken together, shall constitute but one
instrument, and shall become effective when one or more counterparts have been
signed by each party hereto and delivered to the other parties.


12.7        Successors
and Assigns.   Except as otherwise expressly provided herein, the provisions
hereof shall inure to the benefit of, and be binding upon, the successors,
assigns, heirs, executors and administrators of the parties hereto.


 


24.

















 


12.8        Entire
Agreement.  This Agreement and other documents
delivered pursuant hereto, including the exhibits, constitute the full and
entire understanding and agreement between the parties with regard to the
subjects hereof and thereof.


12.9        Payment
of Fees and Expenses.  Each of the Company and the Purchasers
shall bear its own expenses and legal fees incurred on its behalf with respect
to this Agreement and the transactions contemplated hereby; provided, however,
that the Company shall reimburse the reasonable fees of and expenses of one
special counsel for Purchasers, not to exceed $25,000; provided, further, that
the Company shall also reimburse the reasonable fees of and expenses of one
further special counsel for Purchasers in the preparation of such filings as
Purchasers may be required to make as a result of the transactions contemplated
hereby pursuant to Sections 13 and 16 of the Exchange Act, not to exceed $7,500
in the aggregate.  If any action at law
or in equity is necessary to enforce or interpret the terms of this Agreement,
the prevailing party shall be entitled to reasonable attorney’s fees, costs and
necessary disbursements in addition to any other relief to which such party may
be entitled.


12.10      Waiver of
Conflicts.  Each party to this Agreement acknowledges that Cooley
Godward LLP (“Cooley Godward”), outside general counsel to the Company, has in
the past performed and is or may now or in the future represent one or more
Purchasers or their affiliates in matters unrelated to the transactions
contemplated by this Agreement (the “Investment”), including representation of
such Purchasers or their affiliates in matters of a similar nature to the
Investment.  The applicable rules of
professional conduct require that Cooley Godward inform the parties hereunder
of this representation and obtain their consent.  Cooley has served as outside general counsel to the Company and
has negotiated the terms of the Investment solely on behalf of the
Company.  It is the belief of Cooley
Godward that these terms and conditions represent an arm’s length transaction
between the Company and Purchasers. Purchasers have been represented by
independent legal counsel regarding the terms of the Financing.  The Company and each Purchaser hereby (a)
acknowledge that they have had an opportunity to ask for and have obtained
information relevant to such representation, including disclosure of the
reasonably foreseeable adverse consequences of such representation; (b)
acknowledge that with respect to the Investment, Cooley Godward has represented
solely the Company, and not any Purchaser or any stockholder, director or
employee of the Company or any Purchaser; and (c) gives its informed consent to
Cooley Godward’s representation of the Company in the Investment.


 


25.

















 


IN WITNESS WHEREOF, the parties hereto have caused this
Agreement to be executed by their duly authorized representatives as of the day
and year first above written.


 


COMPANY:


PHARSIGHT CORPORATION


 


 


	
  By:

  	
   

  	
  /s/ Michael Perry

  	
   

  
	
   

  	
   

  	
  Michael Perry

  	
   

  
	
   

  	
   

  	
  President and Chief
  Executive Officer

  	
   

  



 


 


 


ALLOY PARTNERS 2000, L.P.


ALLOY VENTURES 2000, L.P.


ALLOY CORPORATE 2000, L.P.


ALLOY INVESTORS 2000, L.P.


By:  Alloy Ventures 2000, LLC, its General
Partner


 


 


	
  By:

  	
   

  	
  /s/ Tony DiBona

  	
   

  
	
   

  	
   

  	
  Managing Member

  	
   

  



 


 


	
  Address:

  	
   

  	
  480 Cowper
  Street

  
	
   

  	
   

  	
  Second Floor

  
	
   

  	
   

  	
  Palo Alto,
  California

  
	
   

  	
   

  	
  Attn:  Tony Di Bona

  
	
  Email:

  	
   

  	
  cfo@alloyventures.com

  
	
  Facsimile:

  	
   

  	
  (650) 687-5010

  



 


26.

















 


DONALDSON, LUFKIN & JENRETTE
SECURITIES CORPORATION, as nominee for DLJ First ESC, L.P., EMA 2001 Plan,
L.P., CSFB 2001 Investors, L.P., Credit Suisse First Boston Private Equity,
Inc., Docklands 2001 Plan, L.P., and Paradeplatz 2001 Plan, L.P.


 


 


	
  By:

  	
   

  	
  /s/ Kathleen D. LaPorte

  	
   

  
	
   

  	
   

  	
  Name: Kathleen D. La
  Porte

  	
   

  
	
   

  	
   

  	
  Its: Attorney-in-Fact

  	
   

  



 


 


	
  Address:

  	
  Sprout Group

  
	
   

  	
  11 Madison
  Avenue

  
	
   

  	
  13th
  Floor

  
	
   

  	
  New York, NY
  10010

  
	
  Email:

  	
  kathleen.laporte@sproutgroup.com

  
	
  Facsimile:

  	
  (646) 935-7094

  



 


 


SPROUT ENTREPRENEURS FUND, L.P.


By:  DLJ Capital Corp., its
General Partner


 


 


	
  By:

  	
   

  	
  /s/ Kathleen D. LaPorte

  	
   

  
	
   

  	
   

  	
  Name: Kathleen D. La
  Porte

  	
   

  
	
   

  	
   

  	
  Its: Managing Director

  	
   

  



 


 


	
  Address:

  	
  Sprout Group

  
	
   

  	
  11 Madison
  Avenue

  
	
   

  	
  13th
  Floor

  
	
   

  	
  New York, NY
  10010

  
	
  Email:

  	
  kathleen.laporte@sproutgroup.com

  
	
  Facsimile:

  	
  (646) 935-7094

  



 


 


27.

















 


SPROUT CAPITAL IX, L.P.


By:  DLJ
Capital Corp., its Managing General Partner


 


 


	
  By:

  	
   

  	
  /s/ Kathleen D. LaPorte

  	
   

  
	
   

  	
   

  	
  Name: Kathleen D. La
  Porte

  	
   

  
	
   

  	
   

  	
  Its: Managing Director

  	
   

  



 


 


	
  Address:

  	
  Sprout Group

  
	
   

  	
  11 Madison
  Avenue

  
	
   

  	
  13th
  Floor

  
	
   

  	
  New York, NY
  10010

  
	
  Email:

  	
  kathleen.laporte@sproutgroup.com

  
	
  Facsimile:

  	
  (646) 935-7094

  



 


SPROUT CAPITAL VII, L.P.


By:  DLJ Capital Corp., its Managing General
Partner


 


 


	
  By:

  	
   

  	
  /s/ Kathleen D. LaPorte

  	
   

  
	
   

  	
   

  	
  Name: Kathleen D. La
  Porte

  	
   

  
	
   

  	
   

  	
  Its: Managing Director

  	
   

  



 


 


	
  Address:

  	
  Sprout Group

  
	
   

  	
  11 Madison
  Avenue

  
	
   

  	
  13th
  Floor

  
	
   

  	
  New York, NY
  10010

  
	
  Email:

  	
  kathleen.laporte@sproutgroup.com

  
	
  Facsimile:

  	
  (646) 935-7094

  



 


 


28.

















 


SPROUT CEO FUND, L.P.


By:  DLJ
Capital Corp., its Managing General Partner


 


 


	
  By:

  	
   

  	
  /s/ Kathleen D. LaPorte

  	
   

  
	
   

  	
   

  	
  Name: Kathleen D. La
  Porte

  	
   

  
	
   

  	
   

  	
  Its: Managing Director

  	
   

  



 


 


	
  Address:

  	
  Sprout Group

  
	
   

  	
  11 Madison
  Avenue

  
	
   

  	
  13th
  Floor

  
	
   

  	
  New York, NY
  10010

  
	
  Email:

  	
  kathleen.laporte@sproutgroup.com

  
	
  Facsimile:

  	
  (646) 935-7094

  



 


DLJ CAPITAL CORP.


 


 


	
  By:

  	
   

  	
  /s/ Kathleen D. LaPorte

  	
   

  
	
   

  	
   

  	
  Name: Kathleen D. La
  Porte

  	
   

  
	
   

  	
   

  	
  Its: Managing Director

  	
   

  



 


 


	
  Address:

  	
  Sprout Group

  
	
   

  	
  11 Madison
  Avenue

  
	
   

  	
  13th
  Floor

  
	
   

  	
  New York, NY
  10010

  
	
  Email:

  	
  kathleen.laporte@sproutgroup.com

  
	
  Facsimile:

  	
  (646) 935-7094

  



 


DLJ FIRST ESC L.P.


By:  DLJ LBO
Plans Management Corporation, its General Partner


 


 


	
  By:

  	
   

  	
  /s/ Kathleen D. LaPorte

  	
   

  
	
   

  	
   

  	
  Name: Kathleen D. La
  Porte

  	
   

  
	
   

  	
   

  	
  Its: Managing Director

  	
   

  



 


 


	
  Address:

  	
  Sprout Group

  
	
   

  	
  11 Madison
  Avenue

  
	
   

  	
  13th
  Floor

  
	
   

  	
  New York, NY
  10010

  
	
  Email:

  	
  kathleen.laporte@sproutgroup.com

  
	
  Facsimile:

  	
  (646) 935-7094

  



 


 


29.

















 


EXHIBIT A


SCHEDULE OF PURCHASERS


	
  Name

  	
  No. of

  Initial Units

  	
  No. of 

  Subsequent Units

  
	
  Alloy Partners 2000, L.P.

  	
  8,644

  	
  25,113

  
	
  Alloy Ventures 2000, L.P.

  	
  168,644

  	
  489,974

  
	
  Alloy Corporate 2000, L.P.

  	
  20,268

  	
  58,887

  
	
  Alloy Investors 2000, L.P.

  	
  34,772

  	
  101,027

  
	
  Donaldson, Lufkin & Jenrette
  Securities Corporation1

  	
  19,404

  	
  13,841

  
	
  Sprout Entrepreneurs Fund, L.P.

  	
  1,519

  	
  1,084

  
	
  Sprout Capital IX, L.P.

  	
  385,495

  	
  274,959

  
	
  Sprout Capital VII, L.P.

  	
  107,149

  	
  76,426

  
	
  Sprout CEO Fund, L.P.

  	
  1,244

  	
  888

  
	
  DLJ Capital Corp.

  	
  2,464

  	
  1,757

  
	
  DLJ First ESC L.P.

  	
  12,317

  	
  8,786

  
	
   

   

  Total

  	
   

   

  761,920

  	
   

   

  1,052,742

  



 












1As nominee for: 
DLJ First ESC, L.P., EMA 2001 Plan, L.P., CSFB 2001 Investors, L.P.,
Credit Suisse First Boston Private Equity, Inc., Docklands 2001 Plan, L.P. and
Paradeplatz 2001 Plan, L.P.


 


 


A-1.

















EXHIBIT
B


FORM OF WARRANT


 


*** The form of warrant
has been separately filed as Exhibit 10.32 to Pharsight’s Form 10-K for the
fiscal year ended March 31, 2002.


 

















 


EXHIBIT C


FORM
OF CERTIFICATE OF DESIGNATIONS OF


SERIES
A AND SERIES B CONVERTIBLE PREFERRED STOCK


 


*** The form of
Certificate of Designations has been separately filed as Exhibit 3.4 to Pharsight’s
Form 10-K for the fiscal year ended March 31, 2002.


 


C-1

















 


EXHIBIT D


FORM
OF COOLEY GODWARD OPINION


 


June 26, 2002


 


VIA FEDERAL EXPRESS


 


TO THE PURCHASERS LISTED


ON EXHIBIT A HERETO


 


Ladies and Gentlemen:


We have acted as counsel
for Pharsight Corporation, a Delaware corporation (the “Company”), in
connection with the issuance and sale pursuant to the terms of the Preferred
Stock and Warrant Purchase Agreement dated as of June 25, 2002 (the “Agreement”),
by and among the Company and the purchasers named therein (each, a “Purchaser”
and collectively, the “Purchasers”), of an aggregate of 1,814,662 shares of the
Company’s Series A Convertible Preferred Stock (the “Preferred Shares”) and
warrants to purchase an aggregate of up to 1,814,662 shares of the Company’s
Common Stock (the “Warrants”).  We are
rendering this opinion pursuant to Section 8.4 of the Agreement.  Except as otherwise defined herein,
capitalized terms used but not defined herein have the respective meanings
given to them in the Agreement.


 


In connection with this
opinion, we have examined and relied upon the representations and warranties as
to factual matters contained in and made pursuant to the Agreement by the
various parties and originals or copies certified to our satisfaction, of such
records, documents, certificates, opinions, memoranda and other instruments as
in our judgment are necessary or appropriate to enable us to render the
opinions expressed below.  As to certain
factual matters, we have relied upon certificates of officers of the Company
and have not independently sought to verify such matters.  Where we render an opinion “to the best of
our knowledge” or concerning an item “known to us” or our opinion otherwise
refers to our knowledge, it is based solely upon (i) an inquiry of
attorneys within this firm who perform legal services for the Company,
(ii) receipt of a certificate executed by an officer of the Company
covering such matters, and (iii) such other investigation, if any, that we
specifically set forth herein.


 


In rendering this
opinion, we have assumed:  the
genuineness and authenticity of all signatures on original documents; the
authenticity of all documents submitted to us as originals; the conformity to
originals of all documents submitted to us as copies; the accuracy,
completeness and authenticity of certificates of public officials; and the due
authorization, execution and delivery of all documents (except the due
authorization, execution and delivery by the Company of the Agreement and the
Warrants (collectively, the “Transaction Documents”)), where authorization,
execution and delivery are prerequisites to the effectiveness of such
documents.  We have also assumed:  that all individuals executing and delivering
documents in their


 


 


D-1.

















 


individual legal
capacities had the legal capacity to so execute and deliver; that you have
received all documents you were to receive under the Transaction Documents;
that the Transaction Documents are obligations binding upon the parties thereto
other than the Company; if you or any Purchasers are a corporation or other
entity, that such entities have filed any required California franchise or
income tax returns and have paid any required California franchise or income
taxes; and that there are no extrinsic agreements or understandings among the
parties to the Transaction Documents that would modify or interpret the terms
of the Transaction Documents or the respective rights or obligations of the
parties thereunder.


 


Our opinion is expressed
only with respect to the federal laws of the United States of America and the
laws of the State of California and the General Corporation Law of
Delaware.  We express no opinion as to
whether the laws of any particular jurisdiction apply, and no opinion to the
extent that the laws of any jurisdiction other than those identified above are
applicable to the subject matter hereof. 
We are not rendering any opinion as to compliance with any antifraud
law, rule or regulation relating to securities, or to the sale or issuance
thereof.


 


With respect to the
Company’s qualification to do business in various states identified in
paragraph 1 below, we have relied exclusively on certificates of public officials;
we have made no further investigation.


 


With respect to our
opinions in paragraphs 7, 8 and 9, we have assumed:  (a) that with respect to the issuance of the Preferred Shares and
the Warrants to be issued as part of the Subsequent Units, that the requisite
vote of stockholders will be obtained under the rules of the National
Association of Securities Dealers, Inc.; (b) that except with respect to the
issuance of the Preferred Shares and the Warrants to be issued as part of the
Initial Units, there shall have been no change in law, facts or circumstances
from the date of the sale of the Initial Units; (c) that all Preferred Shares,
Warrants and other shares referred to in such opinions shall have been issued
in compliance with the terms of the Agreement; and (d) that the Preferred
Shares will convert or be redeemed within seven years of the date hereof.


 


On the basis of the
foregoing, in reliance thereon and with the foregoing qualifications, we are of
the opinion that:


 


1.            The Company has been duly incorporated and is a
validly existing corporation in good standing under the laws of the State of
Delaware.  The Company is qualified to
do business as a foreign corporation in the following states: Massachusetts,
North Carolina, Michigan, New Jersey, Pennsylvania, California and Connecticut.


2.            The Company has full
corporate power and corporate authority to execute and deliver the Agreement
and perform its obligations thereunder.


3.            The Transaction Documents
have been duly and validly authorized, executed and delivered by the Company
and constitute valid and binding obligations of the Company enforceable against
the Company in accordance with their respective terms, except as rights to
indemnity under Section 9 of the Agreement may be limited by applicable laws


 


 


D-2.

















 


and except as enforcement may be limited by applicable bankruptcy,
insolvency, reorganization, arrangement, moratorium or other similar laws
affecting creditors’ rights, and subject to general equity principles and to
limitations on availability of equitable relief, including specific
performance.


4.            The execution, delivery and
performance of the Transaction Documents by the Company and performance by the
Company of its obligations thereunder do not conflict with or violate any
provision of the certificate of incorporation or bylaws of the Company, do not
result in a material breach of or a material default under any of the
agreements set forth on Exhibit B hereto, except as have been waived in writing
or disclosed on the Schedule of Exceptions to the Agreement, and do not violate
or contravene any governmental statute, rule or regulation applicable to the
Company or any order, writ, judgment, injunction, decree, determination or
award which has been entered against the Company and of which we are aware.


5.            The execution, delivery and
performance of the Agreement by the Company and performance by the Company of
its obligations thereunder do not and will not require the Company to obtain
any consent, approval, authorization, license, waiver, qualification, order or
permit of, or require the Company to make any filing with or notification to,
any governmental authority, domestic or foreign, except (a) for compliance with
applicable requirements, if any, of the Securities Act, the Exchange Act,
applicable state securities laws and (b) any filings, registrations and
qualifications which if not made, would not be expected to have a material
adverse effect on the assets, financial condition or operations of the Company.


6.            To our knowledge, there is
no action, proceeding or investigation pending before any court or governmental
agency, nor has any such action been threatened in writing, against the Company
that questions the validity of the Agreement.


7.            The Preferred Shares and the
Warrants (collectively, the “Securities”) to be issued at each Closing have
been duly authorized by all necessary corporate proceedings on the part of the
Company and will be, when issued and delivered against payment therefor in
accordance with the terms of the Agreement, validly issued, fully paid and
nonassessable.  To our knowledge, the
issuance of the Securities, and the issuance of the shares of Common Stock
issuable upon conversion of the Preferred Shares (the “Conversion Shares”), and
the issuance of the shares of Common Stock issuable upon exercise of the
Warrants (the “Warrant Shares”), is not subject to any preemptive or similar
rights, or any rights of first refusal, options, warrants, conversion rights,
agreements or other rights for the purchase or acquisition from the Company of
any authorized but unissued shares of capital stock of the Company.


8.            The Conversion Shares have
been duly reserved and, when duly issued in accordance with the terms of the
Certificate of Designations, will be, validly issued, fully paid and
nonassessable.  The Warrant Shares have
been duly reserved, and when duly issued and delivered against payment
therefore in accordance with the terms of the respective Warrant, will be
validly issued, fully paid and nonassessable.


 


D-3.

















 


9.            Based in part upon the
representations of the Purchasers contained in the Agreement, the offer, sale
and issuance of the Securities, the Conversion Shares and the Warrant Shares to
be issued in accordance with the Agreement are or will be exempt from the
registration requirements of Section 5 of the Securities Act of 1933, as
amended, subject to the timely filing of a Form D pursuant to Securities and
Exchange Commission Regulation D and from the qualification requirements of the
California Securities Law of 1968, as amended.


This opinion is intended
solely for your benefit and is not to be made available to or be relied upon by
any other person, firm, or entity without our prior written consent; except
that each Purchaser may rely on this opinion as if it were addressed and
delivered to such Purchaser on the date hereof.


Very truly yours,


	
  Cooley Godward llp

  	
   

  
	
   

  	
   

  
	
  By:

  	
  /s/ Brett D.
  White

  	
   

  
	
   

  	
  BRETT D. WHITE

  	
   

  
	
   

  	
   

  



 


 


D-4.

















 


 


EXHIBIT
A




SCHEDULE OF PURCHASERS


	
  Name

  
	
   

  
	
   

  
	
  Alloy Partners 2000, L.P.

  
	
   

  
	
  Alloy Ventures 2000, L.P.

  
	
   

  
	
  Alloy Corporate 2000, L.P.

  
	
   

  
	
  Alloy Investors 2000, L.P.

  
	
   

  
	
  Donaldson, Lufkin & Jenrette Securities Corporation1

  
	
   

  
	
  Sprout Entrepreneurs Funds, L.P.

  
	
   

  
	
  Sprout Capital IX, L.P.

  
	
   

  
	
  Sprout Capital VII, L.P.

  
	
   

  
	
  Sprout CEO Fund, L.P.

  
	
   

  
	
  DLJ Capital Corp.

  
	
   

  
	
  DLJ First ESC L.P.

  



 


 


 












1 As nominee for:  DLJ First ESC, L.P., EMA 2001 Plan, L.P.,
CSFB 2001 Investors, L.P., Credit Suisse First Boston Private Equity, Inc.,
Docklands 2001 Plan, L.P. and Paradeplatz 2001 Plan, L.P.


 

















 


 


 EXHIBIT B




MATERIAL AGREEMENTS


 


1.             The agreements filed pursuant to
Regulation S-K 601(b)(10) of the Securities Act of 1933, as amended, referred
to in the Company’s Annual Report on Form 10-K and subsequent Quarterly Reports
on Form 10-Q (other than (a) the Loan and
Security Agreements to which MMC/GATX Partnership No. 1
is party, and (b) the Loan and Security Agreement, dated as of January 18, 2000,
between the Company and Silicon Valley Bank, in each case which we have been
informed by the Company that such agreements are no longer operative and
therefore no longer material).


 


2.             Loan and Security Agreement, dated
June 13, 2001, by and between Pharsight Corporation and Silicon Valley Bank.


 


3.             Export-Import Bank of the United
States Working Capital Guarantee Program Borrower Agreement, dated June 13,
2001, by and between Pharsight Corporation and Silicon Valley Bank.


 


4.             Negative Pledge Agreement, dated
June 13, 2001, by and between Pharsight Corporation and Silicon Valley Bank.


 


 

















 


EXHIBIT E


FORM
OF PLAN OF DISTRIBUTION


PLAN OF DISTRIBUTION


 


The selling
stockholders may sell the shares of common stock from time to time. When we use
the term “selling stockholders” in this prospectus, it includes donees,
distributees, pledgees and other transferees (including without limitation
pursuant to non-sale related transfers) who are selling shares received after
the date of this prospectus from a selling stockholder whose name appears in
“Selling Stockholders”. If we are notified by a selling stockholder that a
donee, distributee, pledgee or other transferee intends to sell more than 500
shares, we may file a supplement to the prospectus naming the successor-in-interest.  The selling stockholders will act
independently of us in making decisions regarding the timing, manner and size
of each sale. The selling stockholders may make these sales on the Nasdaq
National Market or otherwise, at prices and terms that are then-prevailing or
at prices related to the then-current market price, at fixed prices or in
privately negotiated transactions. The selling stockholders may use one or more
of the following methods to sell the shares of common stock:


 


•                                            a block trade in which a selling
stockholder’s broker or dealer will attempt to sell the shares as agent, but
may position and resell all or a portion of the block as a principal to
facilitate the transaction;


•                                            a broker or dealer may purchase the
common stock as a principal and then resell the common stock for its own
account pursuant to this prospectus;


•                                            an exchange or over-the-counter
distribution in accordance with the rules of the applicable exchange or Nasdaq;


 


•                                            a pledge to secure debt and other
obligations; and


•                                            ordinary brokerage transactions and
transactions in which the broker solicits purchasers.


 


The selling
stockholders may enter into hedging transactions with broker-dealers in
connection with distributions of the shares or otherwise. In these transactions,
broker-dealers may engage in short sales of the shares in the course of hedging
the positions they assume with the selling stockholders. The selling
stockholders also may sell shares short and redeliver the shares to close out
short positions. The selling stockholders may enter into option or other
transactions with broker-dealers that require the delivery to the broker-dealer
of the shares. The broker-dealer may then resell or otherwise transfer the
shares under this prospectus. The selling stockholders also may loan or pledge
the shares to a broker-dealer. The broker-dealer may sell the loaned shares, or
upon a default the broker-dealer may sell the pledged shares under this
prospectus.


 


In effecting
sales, broker-dealers engaged by the selling stockholders may arrange for other
broker-dealers to participate in the resales. To the extent required, this
Prospectus will be amended and supplemented from time to time to describe a
specific plan of distribution.


 


Broker-dealers or
agents may receive compensation in the form of commissions, discounts or
concessions from selling stockholders. Broker-dealers or agents may also
receive compensation from the purchasers of the shares for whom they act as
agents or to whom they sell 


 

















 


as principal, or both.
Compensation as to a particular broker-dealer might be in excess of customary
commissions and will be in amounts to be negotiated in connection with the
sale. Broker-dealers or agents and any other participating broker-dealers or
the selling stockholders may be deemed to be “underwriters” within the meaning
of section 2(a)(11) of the Securities Act in connection with sales of the
shares. Accordingly, any such commission, discount or concession received by
them and any profit on the resale of the shares purchased by them may be deemed
to be underwriting discounts or concessions under the Securities Act. Because
selling stockholders may be deemed “underwriters” within the meaning of section
2(a)(11) of the Securities Act, the selling stockholders will be subject to the
prospectus delivery requirements of the Securities Act.


 


Any shares covered
by this prospectus which qualify for sale pursuant to Rule 144 under the
Securities Act may be sold under Rule 144 rather than pursuant to this
prospectus.


 


The shares will be
sold only through registered or licensed brokers or dealers if required under
applicable state securities laws. In addition, in certain states the shares may
not be sold unless they have been registered or qualified for sale in the
applicable state or an exemption from the registration or qualification
requirement is available and is complied with.


 


We will bear all costs,
expenses and fees in connection with the registration of the shares. The
selling stockholders will bear all commissions and discounts, if any,
attributable to the sale of the shares. The selling stockholders may agree to
indemnify any broker-dealer or agent that participates in transactions
involving sales of the shares against certain liabilities, including
liabilities arising under the Securities Act. We have agreed to indemnify the
selling stockholders against certain liabilities in connection with their
offering of the shares, including liabilities arising under the Securities Act.


 

















 


APPENDIX I


PHARSIGHT CORPORATION


STOCK CERTIFICATE AND WARRANT
QUESTIONNAIRE


Pursuant to Section 3 of
the Agreement, please provide us with the following information:


	
  1.

  	
  The exact name that your Shares and Warrants are to
  be registered in (this is the name that will appear on your stock
  certificate(s) and warrant(s)). You may use a nominee name if appropriate:

  	
   

  
	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  2.

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

  	
   

  
	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  3.

  	
  The mailing address of the Registered Holder listed in
  response to item 1 above:

  	
   

  
	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  4.

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

  	
   

  
	
   

  	
   

  



 

















 


 


APPENDIX II


PHARSIGHT CORPORATION


REGISTRATION STATEMENT QUESTIONNAIRE


In connection with the preparation of the Registration Statement,
please provide us with the following information:


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


2.             Please provide the following information,
as of [    ], 2002:


	
  (1)

  	
   

  	
  (2)

  
	
   

  	
   

  	
   

  
	
  Number (or Percentage) of shares acquired which are
  being included 

  in the Registration Statement

  	
   

  	
  Number of shares, if any, which will be owned after
  completion of sale of Shares included in the  

  Registration Statement

  



3.     Have you or your organization had any
position, office or other material relationship within the past three years
with the Company or its affiliates other than as disclosed in the Proxy
Statement in connection with the Company’s 2001 Annual Meeting of Stockholders?


Yes____                No____


 


	
  If yes, please indicate the nature of any such
  relationships:

  	
   

  
	
   

  	
   

  
	
   

  	
   

  



 


 

















 


APPENDIX III


SELLER’S CERTIFICATE OF SALE


The undersigned, an
officer of, or other person duly authorized by


                                                                                                                                                                                                                                                


[fill in official name of


__________________________________________hereby certifies that he/she
[said institution] is the purchaser 


individual
or institution]


of the Shares evidenced
by the attached stock certificate(s) and as such, sold such Shares on 

_____________________ in accordance with registration statement


                [date]


 


number                                                                                                                                                    and the


                 [fill in the number of or otherwise identify
registration statement]


requirement of delivering
a current prospectus has been complied with in connection with such sale.


Print or Type:


Name of Seller (Individual or Institution):


Name of Individual representing Seller


(if an Institution):


Title of Individual representing Seller


(if an Institution):


Signature
by:


Individual Seller or Individual


representing Seller: