Exhibit 10.4


 


EXECUTION VERSION


 


COMMON STOCK SUBSCRIPTION
AGREEMENT


 


THIS COMMON STOCK SUBSCRIPTION AGREEMENT (the “Agreement”) is made as of January 27,
2009 by and between EXACT Sciences Corporation, a Delaware corporation (the “Company”),
and Genzyme Corporation, a Massachusetts corporation (the “Investor”).


 


WITNESSETH:


 


WHEREAS, the Company and the Investor are
contemporaneously entering into a Collaboration, License and Purchase Agreement
(the “CLP Agreement”), dated as of the date
hereof;


 


WHEREAS, the Company desires to issue and sell to the Investor and the Investor
desires to purchase from the Company 3,000,000 shares (the “Purchased Shares”) of Common Stock,
par value $0.01 per share, of the Company (the “Common Stock”)
at a price per share of $2.00  (the “Purchase Price”) for a
total purchase price of $6,000,000 (the “Total Purchase
Price”), pursuant to the terms of this Agreement; and


 


WHEREAS, the parties hereto desire to enter into this
Agreement for the purpose of setting forth certain representations, warranties
and covenants made by each to the other as an inducement to the execution and
delivery of this Agreement and the conditions precedent to the consummation of
the transactions set forth in this Agreement.


 


NOW, THEREFORE, in consideration of the premises and
of the mutual provisions, agreements and covenants contained herein and for
other good and valuable consideration, the receipt and sufficiency of which are
hereby acknowledged, the parties hereto agree as follows:


 


ARTICLE I


 


PURCHASE AND SALE OF THE PURCHASED SHARES


 


1.1           Authorization
and Sale of the Purchased Shares. 
Subject to the terms and conditions set forth in this Agreement, the
Company has authorized the issuance and sale
of up to 3,000,000 shares of Common Stock.


 


1.2           Agreement
to Sell and Purchase the Purchased Shares. 
Subject to the terms and conditions of this Agreement, the Investor
agrees to purchase at the Closing (as such term is defined in Section 1.3),
the Purchased Shares for the Total
Purchase Price.


 


1.3           Delivery
of the Purchased Shares at Closing.


 


(a)           The
completion of the purchase and sale of the Purchased Shares (the “Closing”) shall occur on the date on
which the last of the conditions required to be satisfied or waived pursuant to
Sections 1.3(b) and 1.3(c) is either satisfied or waived (other than
conditions which by their nature are to be satisfied or waived at the Closing
and are expected to be satisfied at the Closing) (the “Closing Date”),
at the offices of Ropes & Gray LLP, One International Place, Boston,
Massachusetts 02110 at 10:00 AM Eastern time, or at such other time and place


 





















 


as may be mutually agreed upon by the Company and the Investor.  At the Closing, the Company shall either:


 


(i)            deliver to
the Investor a stock certificate representing the Purchased Shares registered
in the name of the Investor or, if so indicated on the signature page hereto,
in the name of a nominee designated by the Investor; or


 


(ii)           direct its transfer agent to deliver such certificate to the Investor (at
the address of the Investor set forth on the signature page hereto) or to
the Investor’s designated custodian (at such address as is provided to the
Company prior to the Closing Date) within three business days after the Closing
Date.


 


(b)           The Company’s obligation to
issue the Purchased Shares to the Investor shall be subject to the following
conditions, any one or more of which may be waived by the Company in writing at
any time in its sole discretion:


 


(i)            the representations and warranties of
the Investor set forth herein shall be true and correct in all respects as of
the Closing Date (except for representations and warranties that speak as of a
specific date, which representations and warranties shall be true and correct
as of such date);


 


(ii)           no
proceeding challenging this Agreement or the transactions contemplated hereby,
or seeking to prohibit, alter, prevent or materially delay the Closing, shall
have been instituted or be pending before any court, arbitrator, governmental
body, agency or official;


 


(iii)          the
sale of the Purchased Shares by the Company will not be prohibited by any law
or governmental order or regulation; and


 


(iv)          the Company shall have received a
wire transfer of funds to the account
designated by the Company in Exhibit A in the
full amount of the Purchase Price for all of the Purchased Shares being
purchased hereunder.


 


(c)           The Investor’s obligation to
purchase the Purchased Shares shall be subject to the following conditions, any
one or more of which may be waived by the Investor in writing at any time in
its sole discretion:


 


(i)            the representations and warranties
of the Company set forth herein shall be true and correct as of the Closing
Date in all respects (except for representations and warranties that speak as
of a specific date, which representations and warranties shall be true and
correct as of such date);


 


(ii)           all covenants, agreements and
conditions contained in this Agreement to be performed by the Company on or
prior to the Closing Date shall have been performed or complied with in all
material respects;


 


(iii)          no
proceeding challenging this Agreement or the transactions contemplated hereby,
or seeking to prohibit, alter, prevent or materially delay the 


 


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Closing, shall have been instituted or be pending
before any court, arbitrator, governmental body, agency or official;


 


(iv)          the
purchase of the Purchased Shares by the Investor will not be prohibited by any
law or governmental order or regulation;


 


(v)           the
transactions contemplated by the CLP Agreement shall have been consummated on
or before the Closing Date; and


 


(vi)          the Company shall have delivered to
the Investor: (a) a certificate signed by its Chief Executive Officer
certifying that the conditions specified in Section 1.3(c) with
respect to the Company have been fulfilled; (b) a copy of a certificate
executed by the Secretary of the Company attesting and certifying to the truth
and correctness of the Certificate of Incorporation of the Company, the By-laws
of the Company and the resolutions adopted by the Company’s Board of Directors
in connection with the transactions contemplated by this Agreement; (c) a
good standing certificate of the Company from the Secretary of State for the
State of Delaware dated within five (5) business days of the Closing Date;
and (d) an opinion from counsel to the Company addressed to the Investor
in the form of Exhibit B.


 


ARTICLE II


 


REPRESENTATIONS AND WARRANTIES OF THE COMPANY


 


Except as disclosed by the Company in the Exchange Act
Documents (as defined below), the Company hereby represents, warrants and
covenants to the Investor, as follows:


 


2.1           Organization.  The Company is a corporation duly organized, validly existing
and in good standing under the laws of the State of Delaware.  The Company
has all requisite corporate power and authority to own, operate and occupy its
properties and to conduct its business as presently conducted and as described
in the documents filed or furnished by the Company under the Securities
Exchange Act of 1934, as amended, and the rules and regulations
promulgated thereunder (the “Exchange Act”),
including, without limitation, its most recent report on Form 10-K (all of
the foregoing filed at least two business days prior to the date hereof,
including all exhibits included therein and financial statements and schedules
thereto and documents (other than exhibits) incorporated by reference therein,
being hereinafter referred to as the “Exchange Act Documents”), and is
registered or qualified to do business and is in good standing  in each jurisdiction in which the nature of the
business conducted by it or the location of the properties owned or leased by
it requires such qualification, except
where the failure to be so authorized,
qualified or in good
standing would not have a Material Adverse Effect (as defined
below).  No proceeding to which the
Company is a party has been instituted in any such jurisdiction, revoking,
limiting or curtailing, or seeking to revoke, limit or curtail, such power and
authority or qualification.  The
Company’s sole subsidiary, as defined in Rule 405
under the Securities Act of 1933, as amended (the “Securities Act”), is EXACT Sciences Securities
Corporation, a Massachusetts securities corporation.  The Company’s Sixth Amended and Restated Certificate
of Incorporation, as in effect on the date hereof, and Amended and Restated 


 


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By-laws, as in effect on the date hereof, are each
filed as exhibits in the Exchange Act Documents.


 


(a)           For purposes of this Agreement:


 


(i)            “Person” shall mean an individual, corporation, limited liability company, joint
venture, partnership, trust, unincorporated organization, government or any
agency or political subdivision thereof or any other entity that may be treated
as a person under applicable law.


 


(ii)           “Material Adverse Effect” shall
mean any material adverse effect, or any development that would reasonably be
expected to result in a material adverse effect, on the business, properties,
assets, operations, results of operations or condition (financial or otherwise)
of the Company or on the transactions contemplated hereby.


 


(iii)          “Trading Market” shall
mean the NASDAQ Capital Market for so long as the Company’s shares of Common
Stock are listed on such market, and, if the Company’s shares of Common Stock
are no longer listed on the NASDAQ Capital Market, such other U.S.
national securities exchange or any other U.S. system of automated
dissemination of quotations of securities prices on which the Company’s shares
of Common Stock are then listed or quoted.


 


2.2           Due
Authorization and Valid Issuance. 
The Company has all requisite corporate power and authority to execute,
deliver and perform its obligations under this Agreement, and this Agreement has been duly
authorized, validly executed and delivered by the Company and constitutes the
legal, valid and binding agreement of the Company enforceable against the
Company in accordance with its terms, except (i) as rights to indemnity and contribution may be limited by state
or federal securities laws, (ii) as
enforceability may be limited by applicable bankruptcy, insolvency,
reorganization, moratorium or similar laws affecting creditors’ and contracting
parties’ rights generally, or (iii) as enforceability may be subject to
general principles of equity (regardless of whether such enforceability is
considered in a proceeding in equity or at law).  The issuance, sale and delivery of the
Purchased Shares in accordance with this Agreement has been duly authorized by
all necessary corporate action on the part of the Company.  The Purchased Shares when so issued, sold and
delivered against payment therefor in accordance with the provisions of this
Agreement will be duly and validly issued, fully paid and non-assessable and
will not be subject to preemptive rights or other similar rights of
stockholders of the Company.


 


2.3           Non-Contravention.  The execution and delivery of this Agreement,
the issuance and sale of the Purchased Shares under this Agreement, the fulfillment of the terms of this Agreement
and the consummation of the transactions contemplated hereby do not and will not (A) conflict
with or constitute a violation of, or default (with the passage of time or
otherwise) (including any covenant, restriction or provision with respect to
financial ratios or tests or any aspect of the financial condition or results
of operations of the Company) under, (i) any bond, debenture, note or
other evidence of indebtedness, lease, contract, indenture, mortgage, deed of
trust, loan agreement, joint venture or other agreement or instrument to which
the Company is a 


 


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party or by which it or its
properties are bound, (ii) the certificate
of incorporation, by-laws or other organizational
documents of the Company, or (iii) any law, regulation, ordinance or order
of any court or governmental agency, arbitration panel or authority or the rules of
the Trading Market applicable to the Company or its
properties, except in the case of clauses (i) and (iii) for any such
conflicts, violations or defaults which would not have a Material Adverse
Effect or (B) result in the creation or imposition of any lien,
encumbrance, claim, security interest or restriction whatsoever upon any of the
properties or assets of the Company or an acceleration of indebtedness pursuant
to any obligation, agreement or condition contained in any bond, debenture,
note or any other evidence of indebtedness or any indenture, mortgage, deed of
trust or any other agreement or instrument to which the Company is a party or
by which it is
bound or to which any of the property or assets of the Company is subject, except to the extent that
such acceleration would not have a Material Adverse Effect.  No consent,
approval, authorization or other order of, or registration, qualification or
filing with, any regulatory body, administrative agency, or other governmental
body or any other Person is required for the execution and delivery of this Agreement
by the Company, the valid issuance and sale of the Purchased Shares to be sold
pursuant to this Agreement
and the performance by the Company of its other obligations hereunder, other
than such as have been made or obtained, and except for any post-closing
securities filings or notifications required to be made under federal or state
securities laws.


 


2.4           Capitalization.  The authorized
capital stock of the Company consists of 100,000,000 shares of Common Stock and
5,000,000 shares of preferred stock, par value $0.01 per share.  As of November 3, 2008, 27,247,381
shares were issued and outstanding, consisting of 27,247,381 shares of Common
Stock and no shares of preferred stock.  The Company has not issued any capital stock
since the date above other
than pursuant to (i) employee benefit plans disclosed in the Exchange Act
Documents, or (ii) outstanding warrants, options or other securities
disclosed in the Exchange Act Documents. 
The outstanding shares of capital stock of the Company
have been duly authorized and validly issued, are fully paid and nonassessable, have
been issued in compliance with all federal and state securities laws, and were
not issued in violation of any preemptive rights or similar rights to subscribe
for or purchase securities.  Except
as set forth in or contemplated by the Exchange Act Documents, there are no
outstanding rights (including, without limitation, preemptive rights), warrants
or options to acquire, or instruments convertible into or exchangeable for, any
unissued shares of capital stock or other equity interest in the Company or any
contract, commitment, agreement, understanding or arrangement of any kind to
which the Company is a party or of which the Company has knowledge and relating
to the issuance or sale of any capital stock of the Company, any such convertible
or exchangeable securities or any such rights, warrants or options.  Without limiting the foregoing and except as
provided herein or as disclosed in the Exchange
Act Documents, no preemptive right, co-sale right,
right of first refusal, registration right, or other similar right exists with
respect to the Purchased Shares or the issuance and sale thereof.  No further approval or authorization of any
stockholder, the Board of Directors of the Company or others is required for
the issuance and sale of the Purchased Shares. 
Except as disclosed in the Exchange Act Documents, there are no
stockholders agreements, voting agreements or other similar agreements with
respect to the Common Stock to which the Company is a party or, to the
knowledge of the Company, between or among any of the Company’s stockholders.


 


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2.5           Legal
Proceedings.  There is no material
legal or governmental proceeding pending to which the Company is a party or of
which the business or property of the Company is subject other than the warning
letter from, and subsequent correspondence with, the U.S. Food and Drug
Administration with respect to the PreGen-Plus testing service.


 


2.6           No
Violations.  The Company is not (i) in
violation of its certificate of incorporation, by-laws, or other organizational
document; (ii) in violation of any law, administrative regulation,
ordinance or order of any court or governmental agency, arbitration panel or
authority applicable to the Company, which violation, individually or in the
aggregate, would have a Material Adverse Effect; or (iii) in default in
the performance of any bond, debenture, note or any other evidence of
indebtedness or any indenture, mortgage, deed of trust or any other agreement
or instrument to which the Company is a party or by which the Company is bound
or to which any property or assets of the Company is subject, which default,
individually or in the aggregate, would have a Material Adverse Effect.


 


2.7           Governmental
Permits, Etc.  With the
exception of the matters which are dealt with separately in Sections 2.1
(Organization), 2.8 (Intellectual Property), 
2.11 (Exchange Act Compliance), and 2.12 (Reporting Status), the Company
has all necessary franchises, licenses, certificates and other authorizations
from any foreign, federal, state or local government or governmental agency,
department, or body that are currently necessary for the operation of the
business of the Company as currently conducted and as described in the Exchange
Act Documents except where the failure to currently possess would not have a
Material Adverse Effect.  The Company has
not received any notice of any actual proceeding relating to revocation or
modification of any such franchise, license, certificate or other authorization
except where such revocation or modification would not have a Material Adverse
Effect.


 


2.8           Intellectual
Property.


 


(a)           The
Company owns or has valid, binding and enforceable licenses or other rights to
use the patents and patent applications, copyrights, trademarks, trade names,
service marks, service names, and know-how (including trade secrets and other
unpatented proprietary intellectual property rights) that are necessary to
conduct its business in the manner in which it is presently conducted or
contemplated to be conducted, except where the failure to have such ownership,
exercise or right to use would not, individually or in the aggregate, have a
Material Adverse Effect.


 


(b)           The
Company has complied with the required duty of candor and good faith in dealing
with the United States Patent and Trademark Office (the “PTO”)
with respect to all patents or patent applications owned by the Company or
licensed to the Company (the “Company Patents”),
and, to the Company’s knowledge, all individuals to whom the duty of candor and
good faith applies with respect to the Company Patents have complied with such
duty, including the duty to disclose to the PTO all information believed to be
material to the patentability of the Company Patents.  There are no legal or governmental
proceedings pending relating to Company Patents other than proceedings in the
PTO, or foreign patent office review of pending applications for patents, and,
other than PTO (or patent offices in other jurisdictions) review of pending
applications for patents, to the Company’s knowledge, no such proceedings are
threatened or contemplated by governmental authorities.


 


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(c)           There
are no pending or, to the Company’s knowledge, any threatened, nor has the
Company received any notice of any, actions, suits, proceedings, claims or
allegations by others that the Company, including through use of the Company
Patents, is or will be infringing any patent, trade secret, trademark, service
mark, copyright or other proprietary intellectual property rights.


 


(d)           The
Company is not in breach of, and has complied in all respects with, all terms
of, any of the license agreements under which
the Company licenses a patent or patent application
that covers technology necessary to conduct or used in the conduct of the
Company’s business in the manner in which it is currently conducted, except as would not, individually or
in the aggregate, have a Material Adverse Effect.


 


(e)           All
employees of the Company have executed and delivered to and in favor of the
Company an agreement regarding the protection of confidential and proprietary
information and the assignment to the Company of all intellectual property
rights arising from the services performed for the Company by such persons.


 


2.9           Financial
Statements; Solvency.


 


(a)           The
financial statements of the Company and the related notes contained in the
Exchange Act Documents filed with the Securities and Exchange Commission (the “SEC”) since January 1, 2008
present fairly, in accordance with generally accepted accounting principles,
the financial position of the Company and its subsidiaries as of the dates
indicated, and the results of its operations and cash flows for the periods
therein specified consistent with the books and records of the Company and its
subsidiaries except that the unaudited interim financial statements were or are
subject to normal and recurring year-end adjustments which are not expected to
be material in amount except as otherwise described in such Exchange Act
Documents.  Such financial statements
(including the related notes) have been prepared in accordance with generally
accepted accounting principles applied on a consistent basis throughout the
periods therein specified, except as may be disclosed in the notes to such
financial statements, or in the case of unaudited statements, as may be
permitted by the SEC and except as disclosed in the Exchange Act
Documents.  The other financial
information contained in such Exchange Act Documents has been prepared on a
basis consistent with the financial statements of the Company.


 


(b)           Except
as set forth in the Exchange Act Documents, the Company has no knowledge of any
facts or circumstances which lead it to believe that it will be required to
file for reorganization or liquidation under the bankruptcy or reorganization
laws of any jurisdiction, and has no present intention to so file.


 


2.10         No
Material Adverse Change.  Except as
disclosed in the Exchange Act Documents or contemplated by this Agreement or
the CLP Agreement, since September 30, 2008 there has not been (i) any
material adverse change in the financial condition or results of operations of
the Company, (ii) any event affecting the Company which has had or would
have a Material Adverse Effect, (iii) any obligation, direct or
contingent, that is material to the Company, incurred by the Company, except
obligations incurred in the ordinary course of 


 


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business or (iv) any dividend or distribution of any kind
declared, paid or made on the capital stock of the Company.


 


2.11         Compliance.  The Company’s Common Stock is registered
pursuant to Section 12(b) of the Exchange Act and is listed on the
Trading Market.  Except as disclosed in
the Exchange Act Documents, (i) the Company has taken no action designed
to, or likely to have the effect of, terminating such registration and listing
of the Common Stock, and (ii) the Company has not received any
notification that the SEC, the Trading Market or the Financial Industry
Regulatory Authority (“FINRA”) is
contemplating terminating such registration or listing.


 


2.12         Reporting
Status.  Since January 1, 2008,
the Company has filed or furnished with the SEC in a timely manner all of the
documents that the Company was required to file or furnish under the Exchange
Act.  As of the date of filing thereof,
each Exchange Act Document complied in all material respects with the
requirements of the Exchange Act and the rules and regulations of the SEC
applicable to such Exchange Act Document. 
None of the Exchange Act Documents, as of the date filed, 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 light of the circumstances under which they were made, not
misleading.


 


2.13         No
Manipulation of Stock.  The Company
has not taken, in violation of applicable law, any action designed to or that
might reasonably be expected to cause or result in stabilization or
manipulation of the price of the Common Stock to facilitate the sale or resale
of the Purchased Shares.


 


2.14         Company
Not an “Investment Company”.  The
Company has been advised of the rules and requirements under the
Investment Company Act of 1940, as amended (the “Investment
Company Act”).  The Company is
not, and immediately after receipt of payment for the Purchased Shares will not
be, an “investment company” within the meaning of the Investment Company Act.


 


2.15         Embargoed
Person.  The Company has no foreign
operations and (i) none of the funds or other assets of the Company
constitute or shall constitute property of, or shall be beneficially owned,
directly or indirectly, by any person with whom U.S. persons are restricted
from engaging in financial or other transactions under United States law,
including, but not limited to, the International Emergency Economic Powers Act,
50 U.S.C. § 1701 et seq., The Trading with the Enemy Act, 50 U.S.C. App. 1 et
seq., and any executive orders or regulations promulgated under any such United
States laws (each, an “Embargoed Person”),
with the result that the investments evidenced by the Purchased Shares are or
would be in violation of law; (ii) no Embargoed Person has any interest of
any nature whatsoever in the Company with the result that the investments
evidenced by the Purchased Shares are or would be in violation of law; and (iii) none
of the funds of the Company are derived from any unlawful activity with the
result that the investments evidenced by the Purchased Shares are or would be
in violation of law; provided, that with respect to the covenants
contained in this Section 2.15, the Company may assume that the Investor
is not an Embargoed Person.  The Company
certifies that, to the Company’s knowledge, the Company has not been
designated, and is not owned or controlled, by an Embargoed Person.


 


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2.16                           Accountants. 
To the Company’s knowledge, Ernst & Young LLP, which has
expressed its opinion with respect to the financial statements included in the
Company’s Annual Report on Form 10-K for the year ended December 31,
2007, are independent accountants as required by the Securities Act and the rules and
regulations promulgated thereunder.


 


2.17                           Contracts.  The contracts
filed as exhibits to the Exchange Act Documents filed with the SEC since January 1,
2008 are valid and enforceable against the Company in accordance with their
respective terms, and are in full force and effect on the date hereof, except
as to contracts whose term has expired. 
The Company is not in breach of or default under any such contract, except
as would not have a Material Adverse Effect. 
The Company has filed with the SEC all contracts and agreements required
to be filed by the Exchange Act prior to the Closing and the Company has not
received a notice of termination and is not otherwise aware of any threats to
terminate any contract or agreement required to be filed by the Exchange Act.


 


2.18                           Taxes.  The Company
has filed all material federal, state and foreign income and franchise tax
returns due to be filed as of the date hereof, taking into account all
extensions, and has paid or accrued all taxes shown as due thereon, and the
Company has no knowledge of a tax deficiency which has been or might be
asserted or threatened against it which would have a Material Adverse Effect.


 


2.19                           Transfer Taxes. 
On the Closing Date, all stock transfer or other taxes (other than
income taxes) which are required to be paid in connection with the sale and
transfer of the Purchased Shares to be sold to the Investor hereunder will be,
or will have been, fully paid or provided for by the Company and all laws
imposing such taxes will be or will have been fully complied with.


 


2.20                           Private Offering. 
Assuming the correctness of the representations and warranties of the
Investor set forth in Article IV  hereof, the offer and sale of the
Purchased Shares hereunder shall be exempt from registration under the
Securities Act.  The Company has not in
the past nor will it hereafter take any action to sell, offer for sale or
solicit offers to buy any securities of the Company which would bring the
offer, issuance or sale of the Purchased Shares as contemplated by this
Agreement within the provisions of Section 5 of the Securities Act, unless
such offer, issuance or sale was or shall be within the exemptions of Section 4
of the Securities Act.  Neither the
Company nor any Person acting on behalf of the Company has offered or sold any
of the Purchased Shares by any form of “general solicitation” or “general
advertising” (as those terms are used in Regulation D under the Securities
Act).


 


2.21                           Controls and Procedures. 
The Company is in material compliance with all provisions of the
Sarbanes-Oxley Act of 2002 which are applicable to it as of the Closing Date.
Except as provided in the Exchange Act Documents, the Company maintains a
system of internal control over financial reporting (as such term is defined in
the Exchange Act) sufficient to provide reasonable assurance that (i) transactions
are executed in accordance with management’s general or specific
authorizations, (ii) transactions are recorded as necessary to permit
preparation of financial statements in conformity with GAAP and to maintain
asset accountability, (iii) access to assets is permitted only in
accordance with management’s general or specific authorization, and (iv) the
recorded accountability for assets is compared with the existing assets at
reasonable intervals and appropriate action is taken with respect to any 


 


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differences.  The Company’s
certifying officers are responsible for establishing and maintaining disclosure
controls and procedures (as defined in Exchange Act) for the Company and they
have (a) designed such disclosure controls and procedures, or caused such
disclosure controls and procedures to be designed under their supervision, to ensure
that material information relating to the Company, including its subsidiaries,
is made known to the certifying officers by others within those entities,
particularly during the periods in which the Exchange Act Documents have been
prepared; (b) to the extent required by the Exchange Act, evaluated the
effectiveness of the Company’s disclosure controls and procedures and presented
in the Exchange Act Documents their conclusions about the effectiveness of the
disclosure controls and procedures, as of the end of the periods covered by the
Exchange Act Documents based on such evaluation; and (c) since the last
evaluation date referred to in (b) above, there have been no material
changes in the Company’s internal control over financial reporting (as such term
is defined in the Exchange Act) or, to the Company’s knowledge, in other
factors that could significantly affect the Company’s internal control over
financial reporting.


 


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


 


2.23                           Disclosure.  The
representations and warranties of the Company contained in this Article II
as of the date hereof and as of the Closing Date, do not and will not contain
any 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. The
Company understands and confirms that the Investor will rely on the foregoing
representations in purchasing the Purchased Shares.


 


ARTICLE
III


 


AFFIRMATIVE COVENANTS OF THE COMPANY


 


The Company hereby covenants as follows:


 


3.1                                 Participation Right.


 


(a)                                  Participation Right. 
Until December 31, 2010, the Investor shall have the right, but not
the obligation, to purchase up to an amount equal to the Basic Amount (as
defined below) of any sale, in a transaction not involving a public offering,
of any (i) shares of Common Stock, (ii) any other equity securities
of the Company, (iii) any debt securities which by their terms are convertible
into or exchangeable for any equity security of the Company, (iv) any
securities of the Company that are a combination of debt and equity, or (v) any
options, warrants or other rights to subscribe for, purchase or otherwise
acquire any such equity security or any such debt security of the Company (the
“Offered Securities”), except as
otherwise provided in this Section 3.1. 
The Investor shall have the right to purchase that portion of the
Offered Securities as the number of shares of Common Stock held by the Investor
bears to the number of shares of Common Stock outstanding as of the date of the
Offer (as defined below) (the “Basic Amount”), at a
price and on such other terms (which, with respect to both price and other
terms, 


 


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are no less
favorable than those offered to the other purchasers of the Offered Securities)
as shall have been specified by the Company in writing delivered to the
Investor (the “Offer”), which Offer by its terms
shall remain open and irrevocable for a period of fifteen (15) business days
from receipt of the Offer.  Notwithstanding the foregoing, if such
Offered Securities consist of (x) shares of Common Stock or (y) options,
warrants or other rights to subscribe for, purchase or otherwise acquire any
shares of Common Stock, the price per share of Common Stock (or exercise price
per share of Common Stock, as applicable) to the Investor shall be the greater
of (1) the closing price of the Company’s Common Stock on the Trading Market
on the business day immediately preceding the date that the Offer is delivered
to the Investor and (2) $2.00 per share of Common Stock.


 


(b)                                 Notice of Acceptance. 
Notice of the Investor’s intention to accept, in whole or in part, any
Offer made shall be evidenced by a writing signed by the Investor and delivered
to the Company prior to the end of the fifteen (15)-business day period of such
Offer,
setting forth such of the Basic Amount as the Investor elects to purchase and,
if the Investor shall elect to purchase all of the Basic Amount, such
additional Offered Securities as the Investor shall desire to purchase (the “Notice of Acceptance”).  The Investor shall be entitled to purchase
only that portion of the Offered Securities as is equal to the Basic Amount,
and if the Investor shall have indicated in the Notice of Acceptance a desire
to purchase additional Offered Securities above the Basic Amount, the Company
shall have the sole discretion as to the purchase by the Investor of any
Offered Securities above such Basic Amount. 
The purchase by the Investor of any Offered Securities is subject in all
cases to the preparation, execution and delivery by the Company and the
Investor of a purchase agreement relating to such Offered Securities reasonably
satisfactory in form and substance to the Company and the Investor and their
respective counsel.


 


(c)                                  Closing.  Upon the
closing of the sale of the Offered Securities to the Investor, which shall
occur on, or as soon as reasonably practicable after, the closing of the sale
of the Offered Securities not offered to the Investor (which shall include full
payment to the Company for the sale to such other Persons), the Investor shall
purchase from the Company and the Company shall sell to the Investor the number
of Offered Securities specified in the Notice of Acceptance upon the terms and
conditions specified in the Offer.


 


(d)                                 Exceptions.  The rights of
the Investor under this Section 3.1 shall not apply to:


 


(i)                                     any Common Stock issued as a stock
dividend to holders of Common Stock or upon any subdivision or combination of
shares of Common Stock;


 


(ii)                                  any capital stock or derivative thereof
granted to an employee, director or consultant under a stock plan approved by
the Board of Directors of the Company;


 


(iii)                               any securities issued as consideration
for the acquisition of another entity by the Company by merger or share
exchange (whereby the Company owns no less than fifty-one
percent (51%)
of the voting power of the surviving entity) or purchase of 


 


11

















 


substantially all of such entity’s stock or assets, if
such acquisition is approved by the Board of Directors;


 


(iv)                              any securities issued in connection with
a strategic partnership, joint venture or other similar arrangement, provided
that the purpose of such arrangement is not primarily the raising of capital
and that such arrangement is approved by the Board of Directors;


 


(v)                                 any securities issued to a financial
institution in connection with a bank loan or lease with such financial
institution provided that such issuance is approved by the Board of Directors;


 


(vi)                              any securities issuable upon the exercise
or conversion of options, warrants or other convertible or exercisable
securities outstanding as of the Closing Date; and


 


(vii)                           any securities that, if acquired by the
Investor pursuant to this Section 3.1, would result in the Investor
beneficially owning (together with any affiliated entities) more than 9.99% of
the Company’s then-outstanding Common Stock (taking into account the Offered
Securities).


 


3.2                                 Registration of the Shares; Compliance
with the Securities Act.


 


(a)                                  Registration Upon Request.


 


(i)                                     If, at any time after the Closing Date
and prior to the third anniversary of the Closing Date, the Investor is or is deemed to be an “affiliate” of the Company within
the meaning of Rule 144(a)(1) under the Securities Act,
upon the request of the Investor, the Company shall use its reasonable best
efforts to register under the Securities Act all or any portion of the
Purchased Shares and any shares acquired pursuant to Section 3.1, held by
the Investor for sale in the manner specified in such notice, provided that the
reasonably anticipated aggregate price to the public of such offering shall
exceed $1,000,000.  The Company shall
prepare a registration statement (a “Demand Registration
Statement”) on Form S-3 or such other appropriate or available
registration form of the SEC, utilizing Rule 415 to the extent possible
under the Securities Act if so requested, with respect to any Demand
Registration Statement.  The Company
shall not be required to effect more than one Demand Registration Statement, provided,
however that if the number of shares requested by the Investor to be
included in the Demand Registration Statement has been reduced by twenty-five
percent (25%) or more pursuant to Section 3.2(a)(iv), the Company shall be
required to effect one additional Demand Registration Statement if so requested
in accordance with this clause (i), provided, further, that in the
case of any such reduction, the Company shall not be required to effect more
than two (2) Demand Registration Statements in the aggregate.


 


(ii)                                  Following receipt of any notice under
paragraph (i) above, the Company may also register for sale for its own
account or that of other security holders such additional shares of the
Company’s capital stock as it shall desire, subject to paragraph (iv) below.


 


12

















 


(iii)                               In connection with any registration
pursuant to this Section 3.2(a), if and when the Company is required by
the provisions of paragraph (i) to register the Purchased Shares, the
Company shall:


 


(x)                                   subject to receipt of necessary
information from the Investor after prompt request from the Company to provide
such information, prepare and file with the SEC, within thirty (30) days after
receiving appropriate notice from the Investor as provided for in (i) above,
a Demand Registration Statement to enable the resale of the Purchased Shares by
the Investor; provided, that if the terms of the underwriting agreement
executed in connection with any registration pursuant to Section 3.2(a) or
3.2(b) prohibit the Company from filing any Demand Registration Statement,
the Company shall have the right to delay such filing for the required period,
which period shall not exceed ninety (90) days;


 


(y)                                 use its reasonable best efforts to cause
the Demand Registration Statement to become effective as promptly as
practicable after the initial filing thereof with the SEC and, in any event,
within seventy five (75) days of the request provided by the Investor to the
Company pursuant to Section 3.2(a)(i) or, in the event of a review of
the Demand Registration Statement by the SEC, within one hundred fifty (150)
days of the request provided by the Investor to the Company pursuant to Section 3.2(a)(i) (the
date such Demand Registration Statement is initially declared effective by the
SEC, the “Effective Date”), such efforts to
include, without limiting the generality of the foregoing, preparing and filing
with the SEC in such period any financial statements that are required to be
filed prior to the effectiveness of such Demand Registration Statement; and


 


(z)                                   use its reasonable best efforts to
prepare and file with the SEC such amendments and supplements to such Demand
Registration Statement, as appropriate, and the prospectus used in connection
therewith as may be necessary to keep such Demand Registration Statement
current, effective and free from any material misstatement or omission to state
a material fact for a period not exceeding, with respect to the Purchased
Shares, the earliest of (x) the date on which the Investor may sell all
Purchased Shares then held by the Investor without restriction by the volume
limitations of Rule 144(e) of the Securities Act, (y) the second
anniversary of the effective date of such Demand Registration Statement or (z) the
date on which there cease to be any Purchased Shares outstanding.


 


(iv)                              In connection with any registration
pursuant to this Section 3.2(a), the Investor may elect to sell Purchased
Shares in an underwritten offering in accordance with the conditions set forth
in this paragraph (iv).  In any such
underwritten offering, the investment bank that will manage the offering will
be selected by, and the underwriting arrangements with respect thereto will be
approved by, the Investor, subject to the consent of the Company, which consent
will not be unreasonably withheld.  The
Investor may not participate in any underwritten offering hereunder unless the
Investor (x) agrees to sell such Purchased Shares on the basis provided in
any underwriting arrangements approved pursuant hereto and (y) completes
and executes all other customary questionnaires, powers of attorney,
indemnities, underwriting agreements and other 


 


13

















 


documents required under the terms of such
underwriting arrangements.  In the case
of any such underwritten offering, if the managing underwriter for such
offering advises the Company in writing that in its good faith opinion the
amount of securities requested to be included therein exceeds the amount of
securities that can be sold in such offering such that the inclusion of such
Purchased Shares would adversely affect marketing of the securities to be sold
pursuant to the offering, the Purchased Shares held by the Investor shall have
priority over any securities to be sold by the Company or any additional
holders of the Company’s securities.


 


(v)                                 If the Investor determines, prior to the
effectiveness of the Demand Registration Statement, not to sell Purchased
Shares pursuant to such Demand Registration Statement, the Investor shall
provide written notice to the Company and the Company shall cease all efforts
in connection with such Demand Registration Statement; provided, however,
that, except where such notice of withdrawal is provided within thirty (30)
days of the occurrence of an event or circumstance that would result in a
Material Adverse Effect, the Investor shall bear the costs and expenses
incurred prior to such withdrawal and the Investor shall pay in full to the
Company, within thirty (30) days after presentation of an invoice by the
Company therefor, all reasonable costs and expenses incurred by the Company in
connection with such withdrawal, provided, however, that to the
extent that the Company and other holders exercising similar registration
demand registration rights include any shares of Common Stock in such
registration, the Company and such other holders shall pay their pro rata share
of any such expenses, on the basis of the shares being offered thereby.


 


(b)                                 Piggyback Registration.


 


(i)                                     If on or prior to December 31, 2010,
the Company at any time proposes to register any of its equity securities under
the Securities Act for sale to the public, whether for its own account or for
the account of other security holders or both on any registration form (other
than Forms S-4, S-8 or another form not available for registering the Purchased
Shares for sale to the public) which permits the inclusion of Purchased Shares
held by the Investor (a “Piggyback Registration”),
then each such time the Company will give written notice to the Investor of its
intention so to do.  Upon the written
request of the Investor, received by the Company within twenty (20) days after
the giving of any such notice by the Company, to register any of the Investor’s
Purchased Shares, the Company will use its reasonable best efforts to cause the
Purchased Shares as to which registration shall have been so requested to be
included in the securities to be covered by the registration statement proposed
to be filed by the Company, all to the extent requisite to permit the sale or
other disposition by the Investor of such Purchased Shares so registered.


 


(ii)                                  The Company shall have the right to
select the managing underwriter(s) for any underwritten Piggyback
Registration.  The Investor shall
(together with the Company) enter into an underwriting agreement in customary
form in connection with the registration of Purchased Shares in any such
underwritten Piggyback Registration.  If
such proposed Piggyback Registration is an underwritten offering and the
managing underwriter for such offering advises the Company in writing that in
its 


 


14

















 


good faith opinion the amount of securities requested
to be included therein exceeds the amount of securities that can be sold in
such offering such that the inclusion of such Purchased Shares would adversely
affect marketing of the securities to be sold by the Company, any securities to
be sold by the Company shall have priority over any Purchased Shares held by
the Investor, and the number of shares to be included by the Investor and other
holders of the Company’s securities exercising similar piggyback registration
rights shall be reduced pro rata on the basis of the percentage of the then
outstanding Purchased Shares held by the Investor and all such other holders
exercising similar piggyback registration rights.  Notwithstanding the provisions of this Section 3.2(b),
the Company shall have the right at any time after it shall have given written
notice to the Investor pursuant to Section 3.2(b)(i) (irrespective of
whether a written request for inclusion of any such securities shall have been
made) to elect not to file any such proposed registration statement, or to
withdraw the same after filing, but prior to effectiveness.


 


(c)                                  Registration Procedures and Other Matters. 
If and when the Company is required by the provisions of paragraphs (a) or
(b) to register Purchased Shares, the Company shall use its reasonable
best efforts to:


 


(i)                                     furnish to the Investor with respect to
the Purchased Shares registered under any registration statement filed by the
Company pursuant to Sections 3.2(a) or (b) hereof (a “Registration Statement”) such number of copies of the
Registration Statement, prospectuses and preliminary prospectuses in conformity
with the requirements of the Securities Act and such other documents as the
Investor may reasonably request, in order to facilitate the public sale or
other disposition of all or any of the Purchased Shares by the Investor;


 


(ii)                                  file documents required for compliance with
blue sky laws in
states specified
in writing by the Investor and use its reasonable
best efforts to maintain such blue sky qualifications during the period the
Company is required to maintain the effectiveness of such Demand Registration
Statement pursuant to Section 3.2(a) hereof; 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;


 


(iii)                               bear all reasonable expenses in
connection with the procedures in this Section 3.2 and the registration of
the Purchased Shares pursuant to the Registration Statement;


 


(iv)                              advise the Investor promptly after it
shall receive notice or obtain knowledge of the issuance of any stop order by
the SEC delaying or suspending the effectiveness of the Registration Statement
or of the initiation or threat of any proceeding for that purpose; and promptly
use its reasonable best efforts to prevent the issuance of any stop order or to
obtain its withdrawal at the earliest possible moment if such stop order should
be issued; and


 


15

















 


(v)                                 provide a “Plan of Distribution” section
of the Registration Statement substantially in a form reasonably acceptable to
the Investor (subject to the comments of the SEC).


 


(d)                                 The Company understands that the Investor
disclaims any classification as an underwriter; provided, however,
that the fact of the Investor being classified as an underwriter by the SEC
shall not relieve the Company of any obligations it has hereunder.


 


(e)                                  Within three (3) business days of
the effective date of the Registration Statement, the Company shall advise its
transfer agent that the Purchased Shares covered by such Registration Statement
are subject to an effective registration statement and can be reissued free of
restrictive legend upon notice of a sale by the Investor and confirmation by
the Investor that it has complied with the prospectus delivery requirements; provided
that the Company has not advised the transfer agent orally or in writing that
such Registration Statement has been suspended; provided, further,
that in the event the Company’s transfer agent requires an opinion of counsel
to the Company for any such reissuance, the Company shall cause its counsel to
issue an opinion to the transfer agent stating the foregoing within three
business days after any such request for an opinion by the transfer agent.


 


(f)                                    Transfer of Shares After Registration;
Suspension.


 


(i)                                     The Investor agrees that it will not
effect any disposition of the Purchased Shares that would constitute a sale
within the meaning of the Securities Act except (A) as contemplated in
Sections 3.2(a) and (b) or (B) as otherwise permitted by law,
including pursuant to the safe harbor provided by Rule 144 under the
Securities Act, and that it will promptly notify the Company of any material
changes in the information set forth in the Registration Statement regarding
the Investor or its plan of distribution.


 


(ii)                                  Except in the event that Section 3.2(b) or
paragraph (iii) below applies, the Company shall (x) if deemed
necessary by the Company, prepare and file from time to time with the SEC a
post-effective amendment to the Registration Statement or a supplement to the
related prospectus or a supplement or amendment to any document incorporated
therein by reference or file any other required document so that such
Registration Statement will not contain any 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, as thereafter delivered to
purchasers of the Purchased Shares
being sold thereunder, such prospectus
will not contain any
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; (y) provide
the Investor copies of any documents filed pursuant to clause (x) above; and (z) inform the Investor that the
Company has complied with its obligations in clause (x) above (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 Investor to that effect, will
use its reasonable best
efforts to secure the effectiveness of such post-effective amendment as
promptly as possible and will promptly notify the Investor pursuant to clause (x) above when
the amendment has become effective).


 


16
















 


(iii)          Except to the extent
that Section 3.2(b) applies, and subject to paragraph (iv) below,
in the event (w) of any request by the SEC or any other federal or state
governmental authority during the period of effectiveness of the Registration Statement
for amendments or supplements to a Registration Statement or related prospectus
or for additional information; (x) 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; (y) 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 Purchased
Shares for sale in any jurisdiction or the initiation
or threatening of any proceeding for such purpose; or (z) of any event or
circumstance which, upon the advice of its counsel, 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 light of the circumstances under
which they were made, not misleading; then the Company shall deliver a notice
in writing to the Investor (the “Suspension Notice”) to
the effect of the foregoing and, upon receipt of such Suspension Notice, the Investor
will refrain from selling any Purchased
Shares pursuant to the Registration Statement (a “Suspension”) until the Investor’s
receipt of copies of a supplemented or amended prospectus prepared and filed by
the Company, or until the Investor is advised in writing by the Company that
the current prospectus may be used, and the Investor has received copies of any
additional or supplemental filings that are incorporated or deemed incorporated
by reference in any such prospectus.  In
the event of any Suspension, the Company will use its reasonable best efforts
to cause the use of the prospectus so suspended to be resumed within thirty
(30) days after delivery of a Suspension Notice to the Investor.  In addition to and without limiting any other
remedies (including, without limitation, remedies available under applicable
law or in equity) available to the Investor, the Investor shall be entitled to
specific performance in the event that the Company fails to comply with the
provisions of this Section 3.2(f)(iii).


 


(iv)          The Company may require
the Investor participating in any registration to furnish to the Company such
information regarding the Investor as required under applicable law and the
Investor’s intended method of distribution of such Purchased Shares as the Company may from time to
time reasonably request in writing.  The
Investor agrees to promptly notify the Company of any inaccuracy or change in
information previously furnished by the Investor to the Company or of the
occurrence of any event in either case as a result of which any prospectus
relating to such registration contains or would contain an untrue statement of
a material fact regarding the Investor or its intended method of distribution
of such Purchased Shares
or omits to state any material fact regarding the Investor or its intended
method of distribution of such Purchased
Shares required to be stated therein or necessary to
make the statements therein not misleading in light of the circumstances then
existing, and promptly to furnish information so required so that such
prospectus shall not contain, with respect to the


 


17

















 


Investor or the distribution of such Purchased Shares,
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 in light of the circumstances then existing.


 


(v)           Notwithstanding the
foregoing paragraphs of this Section 3.2(f), the Investor shall not be prohibited from
selling Purchased Shares
covered by a Registration Statement initiated pursuant to Section 3.2(a) as
a result of Suspensions on more than two occasions of not more than 30 days
each in any twelve (12) month
period, unless, in the good faith judgment of the Company’s Board of Directors,
upon the advice of counsel, the sale of Purchased Shares under the Registration
Statement in reliance on this Section 3.2(f)(v) would be reasonably likely to cause a
violation of the Securities Act,
the Exchange Act or other applicable law.


 


(vi)          Provided that a
Suspension is not then in effect, the Investor may sell Purchased Shares under the Registration
Statement, provided that it arranges for delivery of a current prospectus
to the transferee of such Purchased
Shares in compliance with applicable law.  Upon receipt of a request therefor, the
Company has agreed to provide an adequate number of current prospectuses
to the Investor and to supply copies to any other parties requiring such prospectuses.


 


(g)           Indemnification.  For the purpose of this Section 3.2(g):


 


(x)            the term “Selling Stockholder” shall include the
Investor and any affiliate of the Investor;


 


(y)           the term “Registration Statement” shall include
the prospectus
in the form filed as part of the Registration Statement at the time of
effectiveness (or, in the case of an underwritten offering, at the time
immediately prior to the pricing of the offering), and each exhibit, supplement (including any free
writing prospectus as defined under Rule 405 of the Securities Act) or
amendment included in or relating to such
Registration Statement; and


 


(z)            the term “untrue statement” shall include any
untrue statement or alleged untrue statement of a material fact, or any
omission or alleged omission to state in the Registration Statement 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.


 


(i)            The Company agrees to
indemnify and hold harmless each Selling Stockholder from and against any
losses, claims, damages or liabilities to which such Selling Stockholder may
become subject (under the Securities Act or otherwise) insofar as such losses,
claims, damages or liabilities (or actions or proceedings in respect thereof) arise
out of, or are based upon, (x) any untrue statement contained in the
Registration Statement, as
amended at the time of effectiveness or (y) any failure by the Company to
fulfill any  undertaking
included in the Registration Statement as amended at the time of effectiveness. 
The Company will reimburse such Selling
Stockholder for any reasonable legal or other expenses reasonably incurred in
investigating, defending or preparing to


 


18

















 


defend any such action, proceeding or claim;  provided,
however, that the Company shall not be liable in any such case to the
extent that such loss, claim, damage or liability arises out of, or is based
upon, any
untrue statement made in such Registration Statement in reliance upon and in
conformity with written information furnished to the Company by or on behalf of
any Selling
Stockholder specifically for use in preparation of the Registration Statement
or the failure of such Selling Stockholder to comply with its covenants and
agreements contained in this Section 3.2
respecting the sale
of the Purchased Shares or any untrue
statement in any prospectus that is corrected in any subsequent prospectus that
was delivered to the Selling Stockholder prior to the pertinent sale or sales
by the Selling Stockholder.  The Company shall reimburse each Selling
Stockholder for the amounts provided for herein on demand as such expenses are
incurred.


 


(ii)           The Investor agrees to
indemnify and hold harmless the Company (and each person, if any, who controls
the Company within the meaning of Section 15 of the Securities Act, each
officer of the Company who signs the Registration Statement and each director
of the Company) from and against any losses, claims, damages or liabilities to
which the Company (or any such officer, director or controlling person) may
become subject (under the Securities Act or otherwise), insofar as such losses,
claims, damages or liabilities (or actions or proceedings in respect thereof)
arise out of, or are based upon, any untrue statement contained in the
Registration Statement if such untrue statement was made in reliance upon and
in conformity with written information furnished by or on behalf of a Selling
Stockholder specifically for use in preparation of the Registration
Statement.  The Investor will reimburse
the Company (or such officer, director or controlling person, as the case may
be) for any reasonable legal or other expenses reasonably incurred in
investigating, defending or preparing to defend any such action, proceeding or
claim; provided that the Investor’s obligation to indemnify the Company
shall be limited to the amount received by the Selling Stockholders from the
sale of the Purchased Shares
giving rise to such obligation.


 


(iii)          Promptly after receipt
by any indemnified person of a notice of a claim or the beginning of any action
in respect of which indemnity is to be sought against an indemnifying person
pursuant to this Section 3.2(g), such indemnified person shall notify the
indemnifying person in writing of such claim or of the commencement of such
action, but the omission to so notify the indemnifying person will not relieve such indemnifying person
from any liability which it may have to any indemnified person under this Section 3.2(g), except to
the extent that such omission materially and adversely affects the indemnifying
person’s ability to defend such action. 
Subject to the provisions hereinafter stated, in case any such action
shall be brought against an indemnified person, the indemnifying person shall
be entitled to participate therein, and, to the extent that it shall elect by
written notice delivered to the indemnified person promptly after receiving the
aforesaid notice from such indemnified person, shall be entitled to assume the
defense thereof, with counsel reasonably satisfactory to such indemnified
person.  After notice from the
indemnifying person to such indemnified person of its election to assume the
defense thereof, such indemnifying person shall not be liable to such indemnified
person for any legal expenses subsequently incurred by such indemnified person
in connection with the defense thereof;
provided, however, that if there exists or shall exist a conflict
of


 


19

















 


interest that would make it inappropriate, in the
opinion of counsel to the indemnified person, for the same counsel to represent
both the indemnified person and such indemnifying person or any affiliate or
associate thereof, the indemnified person shall be entitled to retain its own
counsel at the reasonable expense of such indemnifying person; provided,
however, that no indemnifying person shall be responsible for the fees
and expenses of more than one separate counsel (together with appropriate local
counsel) for all indemnified parties.  In
no event shall any indemnifying person be liable in respect of any amounts paid
in settlement of any action unless the indemnifying person shall have approved
the terms of such settlement; provided that such consent shall not be unreasonably
withheld.  No indemnifying person shall,
without the prior written consent of the indemnified person, effect any
settlement of any pending or threatened proceeding in respect of which any
indemnified person is or could have been a party and indemnification could have
been sought hereunder by such indemnified person, unless such settlement
includes an unconditional release of such indemnified person from all liability
on claims that are the subject matter of such proceeding.


 


(iv)          If the indemnification
provided for in this Section 3.2(g) is unavailable to or insufficient
to hold harmless an indemnified person under subsection (i) or (ii) above
in respect of any losses, claims, damages or liabilities (or actions or
proceedings in respect thereof) referred to therein, then each indemnifying
person shall contribute to the amount paid or payable by such indemnified
person as a result of such losses, claims, damages or liabilities (or actions
in respect thereof) in such proportion as is appropriate to reflect the
relative fault of the Company, on the one hand, and the Investor, as well as
any other Selling Stockholders under such registration statement, on the other,
in connection with the statements or omissions or other matters which resulted
in such losses, claims, damages or liabilities (or actions in respect thereof),
as well as any other relevant equitable considerations.  The relative fault shall be determined by
reference to, among other things, in the case of an untrue statement, whether
the untrue statement relates to information supplied by the Company, on the one
hand, or the Investor or other Selling Stockholder, on the other hand, and the
parties’ relative intent, knowledge, access to information and opportunity to
correct or prevent such untrue statement. 
The Company and the Investor agree that it would not be just and
equitable if contribution pursuant to this subsection (iv) were determined
by pro rata allocation (even if the Investor and other Selling Stockholders
were treated as one entity for such purpose) or by any other method of
allocation which does not take into account the equitable considerations
referred to above in this subsection (iv). 
The amount paid or payable by an indemnified person as a result of the
losses, claims, damages or liabilities (or actions in respect thereof) referred
to above in this subsection (iv) shall be deemed to include any legal or
other expenses reasonably incurred by such indemnified person in connection
with investigating or defending any such action or claim.  Notwithstanding the provisions of this
subsection (iv), the Investor shall not be required to contribute any amount in
excess of the amount by which the amount received by the Investor from the sale
of the Purchased Shares
to which such loss relates exceeds the amount of any damages which the Investor
has otherwise been required to pay by reason of such untrue statement.  No person guilty of fraudulent
misrepresentation (within the meaning of Section 11(f) of the
Securities Act) shall be entitled to contribution from any person who was not
guilty of such fraudulent misrepresentation. 
The Investor’s obligations in this subsection to


 


20

















 


contribute shall be in proportion to its sale of Purchased Shares
to which such loss relates and shall not be joint with any other Selling
Stockholders.


 


(v)           The parties to this
Agreement hereby acknowledge that they are sophisticated business persons who
were represented by counsel during the negotiations regarding the provisions
hereof, including, without limitation, the provisions of this Section 3.2(g),
and are fully informed regarding said provisions.  They further acknowledge that the provisions
of this Section 3.2(g) fairly allocate the risks in light of the ability
of the parties to investigate the Company and its business in order to assure
that adequate disclosure is made in the Registration Statement as required by
the Securities Act and the Exchange Act. 
The parties are advised that federal or state public policy as
interpreted by the courts in certain jurisdictions may be contrary to certain
of the provisions of this Section 3.2(g), and the parties hereto hereby
expressly waive and relinquish any right or ability to assert such public
policy as a defense to a claim under this Section 3.2(g) and further
agree not to attempt to assert any such defense.


 


(h)           Termination
of Conditions and Obligations.  The
conditions precedent imposed by Section 3.2 upon the transferability of
the Purchased Shares
shall cease and terminate as to any particular number of the Purchased Shares
when such Purchased Shares
shall have been effectively registered under the Securities Act and sold or
otherwise disposed of in accordance with the intended method of disposition set
forth in the Registration Statement covering such Purchased Shares, at the time such Purchased Shares
are eligible for sale pursuant to Rule 144(b)(1) or at such time as
an opinion of counsel reasonably satisfactory to the Company shall have been
rendered to the effect that such conditions are not necessary in order to
comply with the Securities Act.


 


(i)            Information
Available.  So long as the
Registration Statement is effective covering the resale of Purchased Shares
owned by the Investor, the Company will furnish to the Investor, upon
reasonable request, an adequate number of copies of the prospectuses to supply
to any other party requiring such prospectuses; and upon the reasonable request
of the Investor, the President or the Chief Financial Officer of the Company
(or an appropriate designee thereof) will meet with the Investor or a
representative thereof at the Company’s headquarters to discuss all information
relevant for disclosure in the Registration Statement covering the Purchased
Shares; provided, that the Company shall not be required to disclose any
confidential information to or meet at its headquarters with the Investor until
and unless the Investor shall have entered into a confidentiality agreement
with the Company in form and substance reasonably satisfactory to the Company
with respect thereto.


 


3.3           Issuance
and Quotation.  The Company shall
comply with all requirements of FINRA and the SEC with respect to the issuance
of the Purchased Shares and shall comply with the requirements of the Trading
Market with respect to the listing of the Purchased Shares on the Trading
Market.


 


3.4           No
Manipulation of Stock.  The Company
will not take, in violation of applicable law, any action designed to or that
might reasonably be expected to cause or result in stabilization or
manipulation of the price of the Common Stock to facilitate the sale or resale
of the Purchased Shares.


 


21

















 


3.5           Investment
Company.  The Company shall conduct
its business in a manner so that it will not become subject to the Investment
Company Act.


 


3.6           No
Integration.  The Company shall not,
and shall use its reasonable best efforts to ensure that no affiliate of the
Company shall, sell, offer for sale or solicit offers to buy or otherwise negotiate
in respect of any security (as defined in Section 2 of the Securities Act)
that will be integrated with the offer or sale of the Purchased Shares in a
manner that would require the registration under the Securities Act of the sale
of the Purchased Shares to the Investor, or that will be integrated with the
offer or sale of the Purchased Shares for purposes of the rules and
regulations of any Trading Market such that it would require stockholder
approval prior to the closing of such other transaction unless stockholder
approval is obtained before the closing of such transaction.


 


3.7           Rule 144.  The Company covenants that it will timely
file the reports required to be filed by it under the Securities Act and the rules and
regulations adopted by the SEC thereunder and the Exchange Act (or, if the
Company is not required to file such reports, it will, upon the request of the
Investor if such request is made after the first anniversary of the Closing
Date, make publicly available such information as necessary to permit sales
pursuant to Rule 144 under the Securities Act), and it will take such
further action as the Investor may reasonably request, all to the extent
required from time to time to enable the Investor to sell Purchased Shares
without registration under the Securities Act within the limitation of the
exemptions provided by (a) Rule 144 under the Securities Act, as such
Rule may be amended from time to time, or (b) any similar rule or
regulation hereafter adopted by the SEC. 
For the avoidance of doubt, the Investor may request that the Company
remove, and the Company agrees to authorize and instruct (including by causing
any required legal opinion to be provided) the removal of any legend from the
Purchased Shares promptly (x) following any sale of the Purchased Shares
pursuant to an effective Registration Statement or Rule 144, (y) if
the Purchased Shares are eligible for sale under Rule 144 without
reference to volume or manner of sale limitations, or (z) after the
Registration Statement becomes effective. 
Upon request, the Company will provide to the Investor written
certification of its compliance with the provisions of this Section 3.7.


 


3.8           Form D
and Blue Sky.  The Company agrees to
timely file a Form D with respect to the Purchased Shares as required
under Regulation D.  The Company, on or
before the Closing Date, shall take such action as the Company shall reasonably
determine is necessary in order to obtain an exemption for or to qualify the
Purchased Shares for sale to the Investor at the Closing pursuant to this
Agreement under applicable securities or “blue sky” laws of the states of the
United States (or to obtain an exemption from such qualification).  The Company shall make all filings and
reports relating to the offer and sale of the Purchased Shares required under
applicable securities or “blue sky” laws of the states of the United States
following the Closing Date.


 


3.9           Further
Assurances.  The Company hereby
agrees to take all further actions, execute all further documents and perform
all further things necessary to give effect to the provisions of this
Agreement.


 


3.10         Representations.  The Company and the Investor acknowledge and
agree that no party to this Agreement has made or makes any representations or
warranties with respect to the


 


22

















 


transactions
contemplated hereby other than those specifically set forth in Articles II and
IV herein.


 


ARTICLE IV


 


REPRESENTATIONS AND WARRANTIES OF THE
INVESTOR


 


The Investor represents and warrants to the Company
that:


 


4.1           Due
Authorization.  The Investor has all
requisite power and authority to execute, deliver and perform its obligations
under this Agreement.  The execution of
this Agreement and the consummation of the transactions contemplated hereby
have been duly authorized by all necessary action on the part of the Investor
and this Agreement has been validly executed and delivered and constitutes the
valid and binding obligation of the Investor enforceable against the Investor
in accordance with its terms, except as rights to indemnity and contribution
may be limited by state or federal securities laws; except as enforceability
may be limited by applicable bankruptcy, insolvency, reorganization, moratorium
or similar laws affecting creditors’ and contracting parties’ rights,
generally; and, except as enforceability may be subject to general principles
of equity (regardless of whether such enforceability is considered in a
proceeding in equity or at law).


 


4.2           Purchase
Entirely for Own Account.  The
Purchased Shares will be acquired for investment only for the Investor’s own
account, not as a nominee or agent, and not with a present view to the resale
or distribution of any part thereof in violation of the Securities Act, and the
Investor has no present intention of selling, granting any participation in, or
otherwise distributing the same.  The
Investor does not have any contract, undertaking, agreement, or arrangement
with any Person to sell, transfer, or grant participation to any Person with
respect to any of the Purchased Shares. 
Nothing contained herein shall be deemed a representation or warranty by
the Investor to hold the Purchased Shares for any period of time.


 


4.3           Disclosure
of Information.  The Investor
acknowledges that it has received all the information that it has requested
relating to the Company and the purchase of the Purchased Shares.  The Investor further represents that it has
had an opportunity to ask questions and receive answers from the Company
regarding the terms and conditions of the offering of the Purchased
Shares.  The Investor recognizes that an
investment in the Purchased Shares involves a high degree of risk, including
the risk of total loss of the Investor’s investment.  The Investor has knowledge and experience in
the financial and business matters such that it is capable of evaluating the
risks of the investment in the Purchased Shares.  The foregoing, however, does not limit or
modify the representations and warranties of the Company in this Agreement or
the right of the Investor to rely thereon. 
The Investor has, with respect to all matters relating to this Agreement
and the offer and sale of the Purchased Shares, not relied upon counsel to the
Company except for the legal opinion to be delivered to the Investor pursuant
to Section 1.3(c)(vi).


 


4.4           Accredited
Investor.  The Investor is an
“accredited investor” within the meaning of Rule 501 of Regulation D
promulgated under the Securities Act, as presently in effect and the


 


23

















 


Investor is also knowledgeable, sophisticated and experienced in
making, and is qualified to make decisions with respect to the transactions
contemplated hereby.


 


4.5           Restricted
Securities.  The Investor understands
that the Purchased Shares that it is purchasing are characterized as
“restricted securities” under the federal securities laws inasmuch as they are
being acquired from the Company in a transaction not involving a public
offering, and that under such laws and applicable regulations the Purchased
Shares may be resold without registration under the Securities Act, only in
certain limited circumstances.  In this
connection, the Investor represents that it is familiar with Rule 144, as
presently in effect, and understands the resale limitations imposed thereby and
by the Securities Act.


 


4.6           Legends.  It is understood that the certificates
evidencing the Purchased Shares shall bear a legend, reading substantially as
follows:


 


“THE
SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933, AS AMENDED (THE “ACT”), OR THE SECURITIES LAWS OF ANY
STATE AND ARE SUBJECT TO RESTRICTIONS ON TRANSFERABILITY AS SET FORTH IN THIS
CERTIFICATE.  THE SECURITIES REPRESENTED
HEREBY MAY NOT BE SOLD, TRANSFERRED, ASSIGNED, PLEDGED, HYPOTHECATED, OR
OTHERWISE DISPOSED OF IN THE ABSENCE OF AN EFFECTIVE REGISTRATION STATEMENT
WITH RESPECT THERETO UNDER THE ACT UNLESS SUCH SALE, TRANSFER, ASSIGNMENT,
PLEDGE, HYPOTHECATION OR OTHER DISPOSITION IS OTHERWISE EXEMPT FROM
REGISTRATION AND ANY APPLICABLE STATE SECURITIES LAWS OR PURSUANT TO AN OPINION
OF COUNSEL, REASONABLY ACCEPTABLE TO COUNSEL FOR EXACT SCIENCES CORPORATION, TO
THE EFFECT THAT THE PROPOSED SALE, TRANSFER ASSIGNMENT, PLEDGE, HYPOTHECATION
OR OTHER DISPOSITION MAY BE EFFECTUATED WITHOUT REGISTRATION UNDER THE ACT
AND APPLICABLE STATE SECURITIES LAWS.”


 


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


 


4.8           Disclosures
to the Company.  The Investor
understands that the Company is relying on the statements contained herein to
establish an exemption from registration under federal and state securities
laws.


 


24
















 


ARTICLE V


 


MISCELLANEOUS


 


5.1                                 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 herein shall survive the execution of this
Agreement, the delivery to the Investor of the Purchased Shares being purchased
and the payment therefor; provided, that the
representations and warranties of the parties hereunder shall only survive for
a period of one (1) year following the Closing Date.


 


5.2                                 Notices.  All notices, requests, consents and other
communications hereunder shall be in writing, shall be mailed (a) if
within the United States by first-class registered or certified airmail, or
nationally recognized overnight express courier, postage prepaid, or by
facsimile, or (b) if delivered from outside the United States, by
International Federal Express or facsimile, and shall be deemed given and
received (i) if delivered by first-class registered or certified mail, three
business days after so mailed, (ii) if delivered by nationally recognized
overnight carrier, one business day after so mailed, (iii) if delivered by
International Federal Express, two business days after so mailed, (iv) if
delivered by facsimile, upon electronic confirmation of receipt and shall be
delivered as addressed as follows:


 


(A)                              if
to the Company, to:


 


EXACT Sciences Corporation

100 Campus Drive

Marlborough, MA 01752

Attention: Chief Executive Officer

Fax: (508) 683-1201


 


with a copy to:


 


Goodwin Procter LLP


53 State Street


Boston, MA 02109


Attention: Edward A. King, Esq.


Fax: (617) 523-1231


 


(B)                                if
to the Investor, at its address below, or at such other address or addresses as
may have been furnished to the Company in writing:


 


Genzyme Genetics


1700 West Park Drive


Westborough, Massachusetts 01581


Attention: Sr. Vice President & General Manager

Fax: (508) 870-7504


 


with a copy to:


 


25

















 


Genzyme Corporation


500 Kendall Street


Cambridge, Massachusetts 02142

Attention: General Counsel

Fax: (617) 252-7553


 


5.3                                 Changes.  This Agreement may not be modified, waived or
amended except pursuant to an instrument in writing signed by the Company and
the Investor; provided
that the Investor may waive in writing any provision that is intended for its
benefit.


 


5.4                                 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.


 


5.5                                 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.


 


5.6                                 Governing
Law; Consent to Jurisdiction; Waiver of Jury Trial; Currency.  This Agreement shall be governed by, and
construed in accordance with, the internal laws of the Commonwealth of
Massachusetts, without regard to the choice of law principles thereof.  Each of the parties hereto irrevocably
submits to the exclusive jurisdiction of the courts of the Commonwealth of
Massachusetts and the United States District Court for the District of
Massachusetts for the purpose of any suit, action, proceeding or judgment relating
to or arising out of this Agreement and the transactions contemplated
hereby.  Each of the parties hereto
irrevocably consents to the jurisdiction of any such court in any such suit,
action or proceeding and to the laying of venue in such court.  Each party hereto irrevocably waives any
objection to the laying of venue of any such suit, action or proceeding brought
in such courts and irrevocably waives any claim that any such suit, action or
proceeding brought in any such court has been brought in an inconvenient forum.
EACH OF THE PARTIES HERETO WAIVES ANY RIGHT TO REQUEST A TRIAL BY JURY IN ANY
LITIGATION WITH RESPECT TO THIS AGREEMENT AND REPRESENTS THAT COUNSEL HAS BEEN
CONSULTED SPECIFICALLY AS TO THIS WAIVER.


 


5.7                                 Equitable
Relief.  The Company recognizes that,
if it fails to perform or discharge any of its obligations under this
Agreement, any remedy at law may prove to be inadequate relief to the Investor.
The Company therefore agrees that the Investor is entitled to seek temporary
and permanent injunctive relief in any such case. The Investor also recognizes
that, if it fails to perform or discharge any of its obligations under this
Agreement, any remedy at law may prove to be 
inadequate relief to the Company. 
The Investor therefore agrees that the Company is entitled to seek
temporary and permanent injunctive relief in any such case.


 


5.8                                 Counterparts.  This Agreement may be executed in two
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.


 


26

















 


5.9                                 Prior
Agreements.  This Agreement constitutes
the entire agreement between the parties and supersedes any prior
understandings or agreements (including without limitation oral agreements)
concerning the purchase and sale of the Purchased Shares.


 


5.10                           Costs,
Expenses and Taxes.  The Company
and the Investor shall each pay the fees and expenses of their respective
advisers, counsel, accountants and other experts, if any, and all other
expenses incurred by such party in connection with the negotiation,
preparation, execution, delivery and performance of this Agreement; provided,
that all fees and expenses incident to the Company’s performance of or
compliance with its obligations under Section 3.2(a), (b) and (c) 
of this Agreement (excluding any underwriting discounts and selling commissions
and all legal fees and expenses of legal counsel for the Investor) shall be
borne by the Company.  The Company shall
pay all stamp taxes and other taxes and duties levied in connection with the
sale and issuance of the Purchased Shares to the Investor.


 


5.11                           Transfer
of Rights.  All covenants and
agreements contained in this Agreement by or on behalf of any of the parties
hereto shall bind and inure to the benefit of the respective successors and
assigns of the parties hereto (including without limitation transferees of any
Purchased Shares), whether so expressed or not; provided, however,
that rights conferred to the Investor may be transferred to a transferee of
Purchased Shares only if the Company has been given written notice thereof,
such transfer complies with the requirements of applicable law and FINRA and
the SEC and such transferee is a purchaser of Purchased Shares from the
Investor representing at least fifty percent (50%) of the Purchased Shares.


 


[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK.]


 


27

















 


IN WITNESS
WHEREOF, the parties hereto have executed this Agreement as of the date first
above written.


 


EXACT
SCIENCES CORPORATION


 


 


	
  By:

  	
  /s/ Jeffrey R. Luber

  	
   

  
	
   

  	
  Name: Jeffrey R. Luber

  
	
   

  	
  Title:   President and Chief Executive Officer

  
	
   

  
	
   

  
	
  GENZYME CORPORATION

  
	
   

  
	
   

  
	
  By:

  	
  /s/ Earl M. Collier,
  Jr.

  	
   

  
	
   

  	
  Name: Earl M. Collier, Jr.

  
	
   

  	
  Title:   Executive Vice President

  
	
   

  	
   

  
	
  Nominee name for stock
  certificate (if any):

  	
   

  	
   

  
					



 


 


[Common Stock
Subscription Agreement]