Unassociated Document


    
      SECURITIES
PURCHASE AGREEMENT

    

    


    This
Securities Purchase Agreement (this “Agreement”) is dated
as of April 7, 2010, between PharmAthene, Inc., a Delaware corporation (the
“Company”), and
the purchaser identified on the signature page hereto (including its successors
and assigns, the “Purchaser”).

    


    WHEREAS,
subject to the terms and conditions set forth in this Agreement and pursuant to
an effective registration statement under the Securities Act of 1933, as amended
(the “Securities
Act”), the Company desires to issue and sell to the Purchaser, and the
Purchaser desires to purchase from the Company, securities of the Company as
more fully described in this Agreement.

    


    NOW,
THEREFORE, IN CONSIDERATION of the mutual covenants contained in this Agreement,
and for other good and valuable consideration the receipt and adequacy of which
are hereby acknowledged, the Company and the Purchaser agree as
follows:

    


    ARTICLE
I.

    DEFINITIONS

    


    1.1           Definitions.  In
addition to the terms defined elsewhere in this Agreement, for all purposes of
this Agreement, the following terms have the meanings set forth in this Section
1.1:

    


    “Action” shall have
the meaning ascribed to such term in Section 3.1(j).

    


    “Affiliate” means any
Person that, directly or indirectly through one or more intermediaries, controls
or is controlled by or is under common control with a Person as such terms are
used in and construed under Rule 405 under the Securities Act.

    


    “Board of Directors”
means the board of directors of the Company.

    


    “Business Day” means
any day except any Saturday, any Sunday, any day which is a federal legal
holiday in the United States or any day on which banking institutions in the
State of New York are authorized or required by law or other governmental action
to close.

    


    “Closing” means the
closing of the purchase and sale of the  Shares and Warrants pursuant
to Section 2.1.

    


    “Closing Date” means
the Trading Day on which all of the Transaction Documents have been executed and
delivered by the applicable parties thereto, and all conditions precedent to (i)
the Purchaser’s obligations to pay the Subscription Amount and (ii) the
Company’s obligations to deliver the Shares and Warrants, in each case, have
been satisfied or waived.

    


    “Commission” means the
United States Securities and Exchange Commission.

    
 

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

       

    

    “Common Stock” means
the common stock of the Company, no par value per share, and any other class of
securities into which such securities may hereafter be reclassified or
changed.

     

    “Common Stock
Equivalents” means any securities of the Company or the Subsidiaries
which would entitle the holder thereof to acquire at any time Common Stock,
including, without limitation, preferred stock, rights, options, warrants or
other instrument that is at any time convertible into or exercisable or
exchangeable for, or otherwise entitles the holder thereof to receive, Common
Stock; provided, however, that “Common
Stock Equivalents” shall not include any indebtedness which is convertible into
or exchangeable for Common Stock.

     

    “Company Counsel”
means Sonnenschein Nath & Rosenthal, LLP.

    


    “Evaluation Date”
shall have the meaning ascribed to such term in Section 3.1(r).

    


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

    


    “Exempt Issuance”
means the issuance of (a) shares of Common Stock or options to employees,
officers or directors of (or, commencing 45 days after the Closing Date,
consultants to) the Company pursuant to any stock or option plan duly adopted
for such purpose, by a majority of the non-employee members of the Board of
Directors or a majority of the members of a committee of non-employee directors
established for such purpose, including, but not limited to, the Company’s 2007
Long-Term Incentive Compensation Plan (b) securities upon the exercise or
exchange of or conversion of any Securities issued hereunder and/or other
securities issued and outstanding on the date of this Agreement that are
exercisable or exchangeable for or convertible into shares of Common Stock,
provided that such securities have not been amended since the date of this
Agreement to increase the number of such securities or to decrease the exercise
price, exchange price or conversion price of such securities, and (c) securities
issued pursuant to acquisitions or strategic transactions approved by a majority
of the disinterested directors of the Company, provided that any such issuance
shall only be to a Person (or to the equityholders of a Person) which is, itself
or through its subsidiaries, an operating company or an asset in a business
synergistic with the business of the Company and shall provide to the Company
additional benefits in addition to the investment of funds, but shall not
include a transaction in which the Company is issuing securities primarily for
the purpose of raising capital or to an entity whose primary business is
investing in securities.

    


    “LS” means Lowenstein
Sandler PC with offices located at 1251 Avenue of the Americas, New York, New
York 10020.

    


    “GAAP” shall have the
meaning ascribed to such term in Section 3.1(h).

    


    “Indebtedness” shall
have the meaning ascribed to such term in Section 3.1(z).

    


    “Intellectual Property
Rights” shall have the meaning ascribed to such term in Section
3.1(o).

    
 

    
      
        
        

      

      
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    “Liens” means a lien,
charge, security interest, encumbrance, right of first refusal, preemptive right
or other restriction.

    


    “Material Adverse
Effect” shall have the meaning assigned to such term in Section
3.1(b).

    


    “Material Permits”
shall have the meaning ascribed to such term in
Section 3.1(m).

    


    “Per Share Purchase
Price” equals $1.50, subject to adjustment for reverse and forward stock
splits, stock dividends, stock combinations and other similar transactions of
the Common Stock that occur after the date of this Agreement.

    


    “Person” means an
individual or corporation, partnership, trust, incorporated or unincorporated
association, joint venture, limited liability company, joint stock company,
government (or an agency or subdivision thereof) or other entity of any kind,
including without limitation, any Trading Market.

    


    “Proceeding” means an
action, claim, suit, investigation or proceeding (including, without limitation,
an informal investigation or partial proceeding, such as a deposition), whether
commenced or threatened.

    


    “Prospectus” means the
prospectus filed with the Registration Statement.

    


    “Prospectus
Supplement” means any preliminary prospectus supplement relating to the
offer and sale of the  Shares, Warrants (and upon exercise of any
Warrant, the Warrant Shares), any free writing prospectus complying with Rule
433 under the Securities Act that is filed with the Commission and the final
supplement to the Prospectus complying with Rule 424(b) of the Securities Act
that is filed with the Commission and delivered by the Company to the Purchaser
at the Closing.

    


    “Purchaser Party”
shall have the meaning ascribed to such term in Section 4.7.

    


    “Registration
Statement” means the effective registration statement with Commission
file No. 333-156997 which registers the sale of the Shares, the Warrants and the
Warrant Shares to the Purchaser.

    


    “Required Approvals”
shall have the meaning ascribed to such term in
Section 3.1(e).

    


    “Rule 144” means Rule
144 promulgated by the Commission pursuant to the Securities Act, as such Rule
may be amended from time to time, or any similar rule or regulation hereafter
adopted by the Commission having substantially the same effect as such
Rule.

    


    “Rule 424” means Rule
424 promulgated by the Commission pursuant to the Securities Act, as such Rule
may be amended or interpreted from time to time, or any similar rule or
regulation hereafter adopted by the Commission having substantially the same
purpose and effect as such Rule.

     

    
      
        
        

      

      
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    “SEC Reports” shall
have the meaning ascribed to such term in Section 3.1(h).

    


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

    


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

    


    “Shares” means the
shares of Common Stock issued or issuable to the Purchaser pursuant to this
Agreement.

    


    “Short Sales” means
all “short sales” as defined in Rule 200 of Regulation SHO under the Exchange
Act (but shall not be deemed to include the location and/or reservation of
borrowable shares of Common Stock). 

    


    “Subscription Amount”
means the aggregate amount to be paid for Shares and Warrants purchased
hereunder as specified below the Purchaser’s name on the signature page of this
Agreement and next to the heading “Subscription Amount,” in United States
dollars and in immediately available funds.

    


    “Time of Sale
Prospectus” means the Prospectus together with any Prospectus Supplement
that is filed with the Commission, and any document incorporated by reference
into the Prospectus and any Prospectus Supplement, used in connection with the
sale of the Shares and Warrants.

    


    “Trading Day” means a
day on which the principal Trading Market is open for trading.

    


    “Trading Market” means
any of the following markets or exchanges on which the Common Stock is listed or
quoted for trading on the date in question: the NYSE Amex, the Nasdaq Capital
Market, the Nasdaq Global Market, the Nasdaq Global Select Market, the New York
Stock Exchange or the OTC Bulletin Board (or any successors to any of the
foregoing).

    


    “Transaction
Documents” means this Agreement, the Warrants and any other documents or
agreements executed in connection with the transactions contemplated
hereunder.

    


    “Transfer Agent” means
Continental Stock Transfer & Trust Company, the current transfer agent of
the Company, with a mailing address of 17 Battery Place, New York, NY 10004, and
any successor transfer agent of the Company.

    


    “Warrants” means,
collectively, the Common Stock purchase warrants delivered to the Purchaser at
the Closing in accordance with Section 2.2(a) hereof, which Warrants shall be
exercisable beginning six (6) months after the Closing Date and have a term of
exercise equal to five and one-half (5-1/2) years, in the form of Exhibit A attached
hereto.

     

    “Warrant Shares” means
the shares of Common Stock issuable upon exercise of the Warrants.

     

    
      
        
        

      

      
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    ARTICLE
II.

    PURCHASE
AND SALE

    


    2.1           Closing.  Upon
the terms and subject to the conditions set forth herein, the Company agrees to
sell, and the Purchaser agrees to purchase, on the Closing Date, 1,666,668
Shares and 500,000 Warrants.  The Purchaser shall deliver to the
Company, via wire transfer or a certified check, immediately available funds
equal to the Purchaser’s Subscription Amount as set forth on the signature page
hereto executed by the Purchaser and the Company shall deliver to the Purchaser
its respective Shares and a Warrant as determined pursuant to Section 2.2(a),
and the Company and the Purchaser shall deliver the other items set forth in
Section 2.2 deliverable at the Closing.  Upon satisfaction of the
covenants and conditions set forth in Sections 2.2 and 2.3, the Closing shall
occur at the offices of LS or such other location as the parties shall mutually
agree.

    


    2.2           Deliveries.

    


    (a)           On
or prior to the Closing Date, the Company shall deliver or cause to be delivered
to the Purchaser the following:

    


    (i)           a
legal opinion of Company Counsel, substantially in the form agreed to by the
parties;

    


    (ii)          this
Agreement duly executed and delivered by the parties hereto;

    


    (iii)         a
copy of the irrevocable instructions to the Company’s transfer agent, duly
executed and delivered by the Company, instructing the transfer agent to deliver
via the Depository Trust Company Deposit Withdrawal Agent Commission System
(“DWAC”) Shares
equal to the Purchaser’s Subscription Amount divided by the Per Share Purchase
Price, registered in the name of the Purchaser;

    


    (iv)          a
Warrant, duly executed by the Company, registered in the name of the Purchaser
to purchase up to a number of shares of Common Stock equal to one-third (1/3) of
the number of Shares purchased by the Purchaser, with an exercise price equal to
$1.89, subject to adjustment therein (such Warrant certificate may be delivered
within three Trading Days of the Closing Date); and

    


    (v)           the
final Prospectus Supplement (which may be delivered in accordance with Rule 172
under the Securities Act) if required under the Securities Act.

    


    (b)           On
or prior to the Closing Date, the Purchaser shall deliver or cause to be
delivered to the Company the following:

     

    
      
        
        

      

      
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    (i)           the
Purchaser’s Subscription Amount by wire transfer to the account as specified in
writing by the Company; and

    


    2.3           Closing
Conditions.

    


    (a)           The
obligations of the Company hereunder in connection with the Closing are subject
to the following conditions being met:

    


    (i)           all
obligations, covenants and agreements of the Purchaser required to be performed
at or prior to the Closing Date shall have been performed; and

    


    (ii)           the
delivery by the Purchaser of the items set forth in Section 2.2(b) of this
Agreement.

    


    (b)           The
respective obligations of the Purchaser hereunder in connection with the Closing
are subject to the following conditions being met:

    


    (i)           all
obligations, covenants and agreements of the Company required to be performed at
or prior to the Closing Date shall have been performed; and

    


    (ii)           the
delivery by the Company of the items set forth in Section 2.2(a) of this
Agreement.

    


    ARTICLE
III.

    REPRESENTATIONS
AND WARRANTIES

    


    3.1           Representations and
Warranties of the Company.  Except as set forth in the
Registration Statement, the Prospectus, the Prospectus Supplements or any
documents incorporated by reference therein, which such filings, writings and
documents shall qualify such representations and warranties to the extent of the
disclosures contained therein, the Company hereby makes the following
representations and warranties to the Purchaser:

    


    (a)           Subsidiaries.  The
Company owns, directly or indirectly, all of the capital stock or other equity
interests of each of its direct and indirect subsidiaries free and clear of any
Liens, and all of the issued and outstanding shares of capital stock of each
such subsidiary are validly issued and are fully paid, non-assessable and free
of preemptive and similar rights to subscribe for or purchase securities, except
as set forth on Schedule 3.1(a) hereto.  If the Company has no
subsidiaries, all other references to subsidiaries in the Transaction Documents
shall be disregarded.

    


    (b)           Organization and
Qualification.  The Company and each of its subsidiaries is an
entity duly incorporated or otherwise organized, validly existing and in good
standing under the laws of the jurisdiction of its incorporation or
organization, with the requisite power and authority to own and use its
properties and assets and to carry on its business as currently
conducted.  Neither the Company nor any subsidiary is in violation nor
default of any of the provisions of its respective certificate or articles of
incorporation, bylaws or other organizational or charter
documents.  Each of the Company and the Subsidiaries is duly qualified
to conduct business and is in good standing as a foreign corporation or other
entity in each jurisdiction in which the nature of the business conducted or
property owned by it makes such qualification necessary, except where the
failure to be so qualified or in good standing, as the case may be, could not
have or reasonably be expected to result in: (i) a material adverse effect on
the legality, validity or enforceability of any Transaction Document, (ii) a
material adverse effect on the results of operations, assets, business,
prospects or condition (financial or otherwise) of the Company and the
Subsidiaries, taken as a whole, or (iii) a material adverse effect on the
Company’s ability to perform in any material respect on a timely basis its
obligations under any Transaction Document (any of (i), (ii) or (iii), a “Material Adverse
Effect”) and no Proceeding has been instituted in any such jurisdiction
revoking, limiting or curtailing or seeking to revoke, limit or curtail such
power and authority or qualification.

     

    
      
        
        

      

      
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    (c)           Authorization;
Enforcement.  The Company has the requisite corporate power and
authority to enter into and to consummate the transactions contemplated by each
of the Transaction Documents and otherwise to carry out its obligations
hereunder and thereunder.  The execution and delivery of each of the
Transaction Documents by the Company and the consummation by it of the
transactions contemplated hereby and thereby have been duly authorized by all
necessary action on the part of the Company and no further action is required by
the Company, the Board of Directors or the Company’s stockholders in connection
therewith other than in connection with the Required Approvals.  Each
Transaction Document to which it is a party has been (or upon delivery will have
been) duly executed by the Company and, when delivered in accordance with the
terms hereof and thereof, will constitute the valid and binding obligation of
the Company enforceable against the Company in accordance with its terms, except
(i) as limited by general equitable principles and applicable bankruptcy,
insolvency, reorganization, moratorium and other laws of general application
affecting enforcement of creditors’ rights generally, (ii) as limited by laws
relating to the availability of specific performance, injunctive relief or other
equitable remedies and (iii) insofar as indemnification and contribution
provisions may be limited by applicable law.

    


    (d)           No
Conflicts.  The execution, delivery and performance by the
Company of the Transaction Documents, the issuance and sale of
the  Shares and Warrants and the consummation by it of the
transactions contemplated hereby and thereby to which it is a party do not and
will not (i) conflict with or violate any provision of the Company’s or any
subsidiary’s certificate or articles of incorporation, bylaws or other
organizational or charter documents, or (ii) result in the creation of any Lien
upon any of the properties or assets of the Company or any subsidiary, or give
to others any rights of termination, amendment, acceleration or cancellation
(with or without notice, lapse of time or both) of or conflict with, or
constitute a default (or an event that with notice or lapse of time or both
would become a default) under, any agreement, credit facility, debt or other
instrument (evidencing a Company or subsidiary debt or otherwise) or other
understanding to which the Company or any subsidiary is a party or by which any
property or asset of the Company or any subsidiary is bound or affected, or
(iii) subject to the Required Approvals, conflict with or result in a violation
of any law, rule, regulation, order, judgment, injunction, decree or other
restriction of any Trading Market, court or governmental authority to which the
Company or a subsidiary is subject (including federal and state securities laws
and regulations and the regulations of any Trading Market), or by which any
property or asset of the Company or a subsidiary is bound or affected; except in
the case of each of clauses (ii) and (iii), such as could not have or reasonably
be expected to result in a Material Adverse Effect.

     

    
      
        
        

      

      
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    (e)           Filings, Consents and
Approvals.  The Company is not required to obtain any consent,
waiver, authorization or order of, give any notice to, or make any filing or
registration with, any court or other federal, state, local or other
governmental authority or other Person in connection with the execution,
delivery and performance by the Company of the Transaction Documents, other
than: (i) the filings required pursuant to Section 4.3 of this Agreement, (ii)
the filing with the Commission of the Prospectus Supplement, (iii)
application(s) to each applicable Trading Market for the listing of the Shares
for trading thereon in the time and manner required thereby and (iv) such
filings as are required to be made under applicable state securities laws
(collectively, the “Required
Approvals”).

    


    (f)           Issuance of the Securities;
Registration.  The Shares and Warrants are duly authorized and,
when issued and paid for in accordance with the applicable Transaction Documents
(i) the Shares will be duly and validly issued, fully paid and nonassessable,
free and clear of all Liens imposed by the Company and (ii) the Warrants will be
duly and validly issued, free and clear of all Liens imposed by the Company
..  The Warrant Shares, when issued in accordance with the terms of the
Warrants, will be validly issued, fully paid and nonassessable, free and clear
of all Liens imposed by the Company.  The Company has reserved from
its duly authorized capital stock the maximum number of shares of Common Stock
issuable pursuant to this Agreement and the Warrants. The Company has prepared
and filed the Registration Statement in conformity with the requirements of the
Securities Act, which became effective on February 12, 2009 (the “Effective Date”),
including the Prospectus, and such amendments and supplements thereto as may
have been required to the date of this Agreement.  The Registration
Statement is effective under the Securities Act and no stop order preventing or
suspending the effectiveness of the Registration Statement or suspending or
preventing the use of the Prospectus has been issued by the Commission and no
proceedings for that purpose have been instituted or, to the knowledge of the
Company, are threatened by the Commission.  The Company, if required
by the rules and regulations of the Commission, proposes to file the final
Prospectus Supplement, with the Commission pursuant to Rule
424(b).  At the time the Registration Statement and any amendments
thereto became effective, at the date of this Agreement and at the Closing Date,
the Registration Statement and any amendments thereto conformed and will conform
in all material respects to the requirements of the Securities Act and did not
and will not contain any untrue statement of a material fact or omit to state
any material fact required to be stated therein or necessary to make the
statements therein not misleading; provided, however, that this representation
and warranty shall not apply to any statements or omissions made in reliance
upon information furnished to the Company by the Purchaser; and the Prospectus
and any amendments or supplements thereto, at time the Prospectus or any
amendment or supplement thereto was issued and at the Closing Date, conformed
and will conform in all material respects to the requirements of the Securities
Act and did not and will not contain an untrue statement of a material fact or
omit to state a material fact necessary in order to make the statements therein,
in light of the circumstances under which they were made, not misleading;
provided, however, that this representation and warranty shall not apply to any
statements or omissions made in reliance upon information furnished to the
Company by the Purchaser.

     

    
      
        
        

      

      
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    (g)           Capitalization.  The
Company has not issued any capital stock since its most recently filed periodic
report under the Exchange Act, other than pursuant to the exercise of stock
options under the Company’s stock option plans, the issuance of shares of Common
Stock to employees pursuant to the Company’s employee stock purchase plans and
pursuant to the conversion and/or exercise of Common Stock Equivalents
outstanding as of the date of the most recently filed periodic report under the
Exchange Act.  No Person has any right of first refusal, preemptive
right, right of participation, or any similar right to participate in the
transactions contemplated by the Transaction Documents.  Except as
described in the Company’s SEC Reports, there are no outstanding options,
warrants, scrip rights to subscribe to, calls or commitments of any character
whatsoever relating to, or securities, rights or obligations convertible into or
exercisable or exchangeable for, or giving any Person any right to subscribe for
or acquire, any shares of Common Stock, or contracts, commitments,
understandings or arrangements by which the Company or any subsidiary is or may
become bound to issue additional shares of Common Stock or Common Stock
Equivalents, other than as a result of the purchase and sale of
the  Shares and Warrants.  The issuance and sale of the
Shares and Warrants, and the issuance of Warrant Shares upon exercise of the
Warrants, will not obligate the Company to issue shares of Common Stock or other
securities to any Person (other than the Purchaser) and will not result in a
right of any holder of Company securities to adjust the exercise, conversion,
exchange or reset price under any of such securities. All of the outstanding
shares of capital stock of the Company are validly issued, fully paid and
nonassessable.  No further approval or authorization of any
stockholder, the Board of Directors or others is required for the issuance and
sale of the Securities.  There are no stockholders agreements, voting
agreements or other similar agreements with respect to the Company’s capital
stock to which the Company is a party or, to the knowledge of the Company,
between or among any of the Company’s stockholders that are not described in the
SEC Reports.

    


    (h)           SEC Reports; Financial
Statements.  The Company has filed all reports, schedules,
forms, statements and other documents required to be filed by the Company under
the Exchange Act, including pursuant to Section 13(a) or 15(d) thereof, for the
two years preceding the date hereof (or such shorter period as the Company was
required by law or regulation to file such material) (the foregoing materials,
including the exhibits thereto and documents incorporated by reference therein,
together with the Prospectus and any Prospectus Supplement, being collectively
referred to herein as the “SEC Reports”) on a
timely basis or has received a valid extension of such time of filing and has
filed any such SEC Reports prior to the expiration of any such
extension.  As of their respective dates, the SEC Reports complied in
all material respects with the requirements of the Exchange Act, as applicable,
and none of the SEC Reports, when 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 the light of the
circumstances under which they were made, not misleading; provided, however,
that this representation and warranty shall not apply to any statements or
omissions made in reliance upon information furnished to the Company by the
Purchaser. The financial statements of the Company included in the SEC Reports
comply in all material respects with applicable accounting requirements and the
rules and regulations of the Commission with respect thereto as in effect at the
time of filing.  Such financial statements have been prepared in
accordance with United States generally accepted accounting principles applied
on a consistent basis during the periods involved (“GAAP”), except as may
be otherwise specified in such financial statements or the notes thereto and
except to the extent that unaudited financial statements may not contain all
footnotes required by GAAP, and such statements fairly present in all material
respects the financial position of the Company and its consolidated Subsidiaries
as of and for the dates thereof and the results of operations and cash flows for
the periods then ended, subject, in the case of unaudited statements, to normal,
immaterial, year-end audit adjustments.

     

    
      
        
        

      

      
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    (i)           Material Changes;
Undisclosed Events, Liabilities or Developments.  Since the
date of the latest audited financial statements included within the SEC Reports,
except as specifically disclosed in a subsequent SEC Report filed prior to the
date hereof, (i) there has been no event, occurrence or development that has had
or that could reasonably be expected to result in a Material Adverse Effect,
(ii) the Company has not incurred any liabilities (contingent or otherwise)
other than (A) trade payables and accrued expenses incurred in the ordinary
course of business consistent with past practice and (B) liabilities not
required to be reflected in the Company’s financial statements pursuant to GAAP
or disclosed in filings made with the Commission, (iii) the Company has not
altered its method of accounting, (iv) the Company has not declared or made any
dividend or distribution of cash or other property to its stockholders or
purchased, redeemed or made any agreements to purchase or redeem any shares of
its capital stock and (v) the Company has not issued any equity securities to
any officer, director or Affiliate, except pursuant to existing Company stock
option plans.  The Company does not have pending before the Commission
any request for confidential treatment of information.  Except for the
issuance of the  Shares and Warrants contemplated by this Agreement,
no event, liability, fact, circumstance, occurrence or development has occurred
or exists or is reasonably expected to occur or exist with respect to the
Company or its Subsidiaries or their respective business, prospects, properties,
operations, assets or financial condition that would be required to be disclosed
by the Company under applicable securities laws at the time this representation
is made or deemed made that has not been publicly disclosed at least 1 Trading
Day prior to the date that this representation is made.

    


    (j)           Litigation.  There
is no action, suit, inquiry, notice of violation, proceeding or investigation
pending or, to the knowledge of the Company, threatened against or affecting the
Company, any subsidiary or any of their respective properties before or by any
court, arbitrator, governmental or administrative agency or regulatory authority
(federal, state, county, local or foreign) (collectively, an “Action”) which (i)
adversely affects or challenges the legality, validity or enforceability of any
of the Transaction Documents or the Securities or (ii) could, if there were an
unfavorable decision, have or reasonably be expected to result in a Material
Adverse Effect.  Neither the Company nor any subsidiary, nor any
director or officer thereof, is or has been the subject of any Action involving
a claim of violation of or liability under federal or state securities laws or a
claim of breach of fiduciary duty.  There has not been, and to the
knowledge of the Company, there is not pending or contemplated, any
investigation by the Commission involving the Company or any current or former
director or officer of the Company.

     

    
      
        
        

      

      
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    (k)           Labor
Relations.  No material labor dispute exists or, to the
knowledge of the Company, is imminent with respect to any of the employees of
the Company that could reasonably be expected to result in a Material Adverse
Effect.  None of the Company’s or its Subsidiaries’ employees is a
member of a union that relates to such employee’s relationship with the Company
or such subsidiary, and neither the Company nor any of its Subsidiaries is a
party to a collective bargaining agreement, and the Company and its Subsidiaries
believe that their relationships with their employees are good.  No
executive officer, to the knowledge of the Company, is, or is now expected to
be, in violation of any material term of any employment contract,
confidentiality, disclosure or proprietary information agreement or
non-competition agreement, or any other contract or agreement or any restrictive
covenant in favor of any third party, and the continued employment of each such
executive officer does not subject the Company or any of its Subsidiaries to any
liability with respect to any of the foregoing matters.  The Company
and its Subsidiaries are in compliance with all U.S. federal, state, local and
foreign laws and regulations relating to employment and employment practices,
terms and conditions of employment and wages and hours, except where the failure
to be in compliance could not, individually or in the aggregate, reasonably be
expected to have a Material Adverse Effect.

    


    (l)           Compliance.  Neither
the Company nor any subsidiary: (i) is in default under or in violation of (and
no event has occurred that has not been waived that, with notice or lapse of
time or both, would result in a default by the Company or any subsidiary under),
nor has the Company or any subsidiary received notice of a claim that it is in
default under or that it is in violation of, any indenture, loan or credit
agreement or any other agreement or instrument to which it is a party or by
which it or any of its properties is bound (whether or not such default or
violation has been waived), (ii) is in violation of any judgment, decree or
order of any court, arbitrator or governmental body or (iii) is or has been in
violation of any statute, rule, ordinance or regulation of any governmental
authority, including without limitation all foreign, federal, state and local
laws applicable to its business and all such laws that affect the environment,
except in each case as could not reasonably be expected to result in a Material
Adverse Effect.

    


    (m)           Regulatory
Permits.  The Company and the Subsidiaries possess all
certificates, authorizations and permits issued by the appropriate federal,
state, local or foreign regulatory authorities necessary to conduct their
respective businesses as described in the SEC Reports, except where the failure
to possess such permits could not reasonably be expected to result in a Material
Adverse Effect (“Material Permits”),
and neither the Company nor any subsidiary has received any notice of
proceedings relating to the revocation or modification of any Material
Permit.

     

    
      
        
        

      

      
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    (n)           Title to
Assets.  The Company and the Subsidiaries have good and
marketable title in fee simple to all real property owned by them and good and
marketable title to all personal property owned by them that is material to the
business of the Company and the Subsidiaries, in each case free and clear of all
Liens, except for Liens as do not materially affect the value of such property
and do not materially interfere with the use made and proposed to be made of
such property by the Company and the Subsidiaries and Liens for the payment of
federal, state or other taxes, the payment of which is neither delinquent nor
subject to penalties.  Any real property and facilities held under
lease by the Company and the Subsidiaries are held by them under valid,
subsisting and enforceable leases with which the Company and the Subsidiaries
are in compliance with such exceptions as are not material and do not materially
interfere with the use made and proposed to be made of such property and
facilities by the Company and its Subsidiaries.

    


    (o)           Patents and
Trademarks.  Except as set forth on Schedule 3.1(o) hereto, the Company and the
Subsidiaries have, or have rights to use, all patents, patent applications,
trademarks, trademark applications, service marks, trade names, trade secrets,
inventions, copyrights, licenses and other intellectual property rights and
similar rights necessary or material for use in connection with their respective
businesses as described in the SEC Reports and which the failure to so have
could reasonably be expected to have a Material Adverse Effect (collectively,
the “Intellectual
Property Rights”).  Neither the Company nor any subsidiary has
received a notice (written or otherwise) that any of the Intellectual Property
Rights used by the Company or any subsidiary violates or infringes upon the
rights of any Person.  To the knowledge of the Company, all such
Intellectual Property Rights are enforceable and there is no existing
infringement by another Person of any of the Intellectual Property
Rights.  The Company and its Subsidiaries have taken reasonable
security measures to protect the secrecy, confidentiality and value of all of
their intellectual properties, except where the failure to do so could not,
individually or in the aggregate, reasonably be expected to have a Material
Adverse Effect.

    


    (p)           Insurance.  The
Company and the Subsidiaries are insured by insurers of recognized financial
responsibility against such losses and risks and in such amounts as are prudent
and customary in the businesses in which the Company and the Subsidiaries are
engaged, including, but not limited to, directors and officers insurance
coverage at least equal to the aggregate Subscription Amount.  Neither
the Company nor any subsidiary has any reason to believe that it will not be
able to renew its existing insurance coverage as and when such coverage expires
or to obtain similar coverage from similar insurers as may be necessary to
continue its business without a significant increase in cost.

    


    (q)           Transactions With Affiliates
and Employees.  Except as set forth in the SEC Reports, none of
the officers or directors of the Company and, to the knowledge of the Company,
none of the employees of the Company is presently a party to any transaction
with the Company or any subsidiary (other than for services as employees,
officers and directors), including any contract, agreement or other arrangement
providing for the furnishing of services to or by, providing for rental of real
or personal property to or from, or otherwise requiring payments to or from any
officer, director or such employee or, to the knowledge of the Company, any
entity in which any officer, director, or any such employee has a substantial
interest or is an officer, director, trustee or partner, in each case in excess
of $120,000 other than for (i) payment of salary or consulting fees for services
rendered, (ii) reimbursement for expenses incurred on behalf of the Company and
(iii) other employee benefits, including stock option agreements under any stock
option plan of the Company.

     

    
      
        
        

      

      
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    (r)           Sarbanes-Oxley.  The
Company is in material compliance with all provisions of the Sarbanes-Oxley Act
of 2002 that are applicable to it as of the Closing Date.

    


    (s)           Certain
Fees.  Except as set forth in the Prospectus Supplement, no
brokerage or finder’s fees or commissions are or will be payable by the Company
to any broker, financial advisor or consultant, finder, placement agent,
investment banker, bank or other Person with respect to the transactions
contemplated by the Transaction Documents.  The Purchaser shall have
no obligation with respect to any fees or with respect to any claims made by or
on behalf of other Persons for fees of a type contemplated in this Section that
may be due in connection with the transactions contemplated by the Transaction
Documents.

    


    (t)           Investment Company.
The Company is not, and is not an Affiliate of, and immediately after receipt of
payment for the Shares and Warrants, will not be or be an Affiliate of, an
“investment company” within the meaning of the Investment Company Act of 1940,
as amended.

    


    (u)           Registration
Rights.  No Person has any right to cause the Company to effect
the registration under the Securities Act of any securities of the Company as a
result of the transactions contemplated by this Agreement.

    


    (v)           Listing and Maintenance
Requirements.  The Common Stock is registered pursuant to
Section 12(b) or 12(g) of the Exchange Act, and the Company has taken no action
designed to, or that to its knowledge is likely to have the effect of,
terminating the registration of the Common Stock under the Exchange Act nor has
the Company received any notification that the Commission is contemplating
terminating such registration.  The Company has not, in the 12 months
preceding the date hereof, received notice from any Trading Market on which the
Common Stock is or has been listed or quoted to the effect that the Company is
not in compliance with the listing or maintenance requirements of such Trading
Market. The Company is in compliance with all such listing and maintenance
requirements.

    


    (w)           Application of Takeover
Protections.  The Company and the Board of Directors have taken
all necessary action, if any, in order to render inapplicable any control share
acquisition, business combination, poison pill (including any distribution under
a rights agreement) or other similar anti-takeover provision under the Company’s
certificate of incorporation (or similar charter documents) or the laws of its
state of incorporation that is or could become applicable to the Purchaser as a
result of the Purchaser and the Company fulfilling their obligations or
exercising their rights under the Transaction Documents, including without
limitation as a result of the Company’s issuance of the Shares and Warrants and
the Purchaser’s ownership of the Shares and Warrants.

     

    
      
        
        

      

      
        - 13
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    (x)           Disclosure.  Except
with respect to the material terms and conditions of the transactions
contemplated by the Transaction Documents, the Company confirms that neither it
nor any other Person acting on its behalf has provided the Purchaser or its
agents or counsel with any information that it believes constitutes or might
constitute material, non-public information which is not otherwise disclosed in
the Prospectus Supplement.   The Company understands and confirms
that the Purchaser will rely on the foregoing representation in effecting
transactions in securities of the Company. The Company acknowledges and agrees
that the Purchaser does not make or has not made any representations or
warranties with respect to the transactions contemplated hereby other than those
specifically set forth in Section 3.2 hereof.

    


    (y)           Tax
Status.  Except for matters that would not, individually or in
the aggregate, have or reasonably be expected to result in a Material Adverse
Effect, the Company and each subsidiary has filed all necessary federal, state
and foreign income and franchise tax returns and has paid or accrued all taxes
shown as due thereon, and the Company has no knowledge of a tax deficiency which
has been asserted or threatened against the Company or any
subsidiary.

    


    (z)           Foreign Corrupt
Practices.  Neither the Company, nor to the knowledge of the
Company, any agent or other person acting on behalf of the Company, has (i)
directly or indirectly, used any funds for unlawful contributions, gifts,
entertainment or other unlawful expenses related to foreign or domestic
political activity, (ii) made any unlawful payment to foreign or domestic
government officials or employees or to any foreign or domestic political
parties or campaigns from corporate funds, (iii) failed to disclose fully any
contribution made by the Company (or made by any person acting on its behalf of
which the Company is aware) which is in violation of law, or (iv) violated in
any material respect any provision of the Foreign Corrupt Practices Act of 1977,
as amended.

    


    (aa)           Accountants.  The
Company’s independent registered public accounting firm is identified in the
Prospectus and such accounting firm is a registered public accounting firm as
required by the Exchange Act.

    


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

     

    
      
        
        

      

      
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    (cc)           Acknowledgement Regarding
Purchaser’s Trading Activity.  Anything in this Agreement or elsewhere
herein to the contrary notwithstanding (except for Sections 3.2(e) and 4.12
hereof), it is understood and acknowledged by the Company that: (i) the
Purchaser has not been asked by the Company to agree, nor has the Purchaser
agreed, to desist from purchasing or selling, long and/or short, securities of
the Company, or “derivative” securities based on securities issued by the
Company or to hold the Securities for any
specified term; (ii) past or future open market or other transactions by the
Purchaser, specifically including, without limitation, Short Sales or
“derivative” transactions, before or after the closing of this or future private
placement transactions, may negatively impact the market price of the Company’s
publicly-traded securities; (iii) the Purchaser, and counter-parties in
“derivative” transactions to which the Purchaser is a party, directly or
indirectly, presently may have a “short” position in the Common Stock, and (iv)
the Purchaser shall not be deemed to have any affiliation with or control over
any arm’s length counter-party in any “derivative”
transaction.  The Company further understands and acknowledges
that (y) the Purchaser may engage in hedging activities at various times during
the period that the Securities are outstanding, including, without limitation,
during the periods that the value of the Warrant Shares deliverable with respect
to Securities are being determined, and (z) such hedging activities (if any)
could reduce the value of the existing stockholders’ equity interests in the
Company at and after the time that the hedging activities are being
conducted.  The Company acknowledges that such aforementioned hedging
activities do not constitute a breach of any of the Transaction
Documents.

    


    (dd)           Regulation M
Compliance.  The Company has not, and to its knowledge no one acting
on its behalf has, (i) taken, directly or indirectly, any action designed to
cause or to result in the stabilization or manipulation of the price of any
security of the Company to facilitate the sale or resale of any of the
Securities, (ii) sold, bid for, purchased, or, paid any compensation for
soliciting purchases of, any of the Securities, or (iii) paid or agreed to pay
to any Person any compensation for soliciting another to purchase any other
securities of the Company, other than, in the case of clauses (ii) and (iii),
compensation paid to the Company’s placement agent in connection with the
placement of the Securities.

    


    3.2           Representations and
Warranties of the Purchaser.  The Purchaser hereby represents
and warrants as of the date hereof and as of the Closing Date to the Company as
follows (unless as of a specific date therein):

    


    (a)           Organization;
Authority.  The Purchaser is either an individual or an entity
duly organized, validly existing and in good standing under the laws of the
jurisdiction of its organization with full right, corporate or partnership power
and authority to enter into and to consummate the transactions contemplated by
this Agreement and otherwise to carry out its obligations hereunder and
thereunder. The execution and delivery of this Agreement and performance by the
Purchaser of the transactions contemplated by this Agreement have been duly
authorized by all necessary corporate, partnership, limited liability company or
similar action, as applicable, on the part of the Purchaser.  Each
Transaction Document to which it is a party has been duly executed by the
Purchaser, and when delivered by the Purchaser in accordance with the terms
hereof, will constitute the valid and legally binding obligation of the
Purchaser, enforceable against it in accordance with its terms, except:
(i) as limited by general equitable principles and applicable bankruptcy,
insolvency, reorganization, moratorium and other laws of general application
affecting enforcement of creditors’ rights generally, (ii) as limited by laws
relating to the availability of specific performance, injunctive relief or other
equitable remedies and (iii) insofar as indemnification and contribution
provisions may be limited by applicable law.

     

    
      
        
        

      

      
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    (b)           Certain Transactions and
Confidentiality.  Other than consummating the transactions
contemplated hereunder, the Purchaser has not, nor has any Person acting on
behalf of or pursuant to any understanding with the Purchaser, directly or
indirectly executed any purchases or sales, including Short Sales, of the
securities of the Company during the period commencing as of the time that the
Purchaser first became aware of by (written or oral) communication the specific
transaction involving the offer and sale of such Securities and ending
immediately prior to the execution hereof. Notwithstanding the foregoing, in the
case the Purchaser is a multi-managed investment vehicle whereby separate
portfolio managers manage separate portions of the Purchaser’s assets and the
portfolio managers have no direct knowledge of the investment decisions made by
the portfolio managers managing other portions of the Purchaser’s assets, the
representation set forth above shall only apply with respect to the portion of
assets managed by the portfolio manager that made the investment decision to
purchase the Securities covered by this Agreement.  Other than to
other Persons party to this Agreement, the Purchaser has maintained the
confidentiality of all disclosures made to it in connection with this
transaction (including the existence and terms of this
transaction). Notwithstanding the foregoing, for avoidance of doubt,
nothing contained herein shall constitute a representation or warranty, or
preclude any actions, with respect to the identification of the availability of,
or securing of, available shares to borrow in order to effect Short Sales or
similar transactions in the future.

    


    The
Company acknowledges and agrees that the representations contained in Section
3.2 shall not modify, amend or affect the Purchaser’s right to rely on the
Company’s representations and warranties contained in this Agreement or any
representations and warranties contained in any other Transaction Document or
any other document or instrument executed and/or delivered in connection with
this Agreement or the consummation of the transaction contemplated
hereby.

     

    
      
        
        

      

      
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    ARTICLE
IV.

    OTHER
AGREEMENTS OF THE PARTIES

    


    4.1           Warrant
Shares.  If all or any portion of a Warrant is exercised at a
time when there is an effective registration statement to cover the issuance or
resale of the Warrant Shares or if the Warrant is exercised via cashless
exercise, the Warrant Shares issued pursuant to any such exercise shall be
issued free of all legends.  If at any time following the date hereof
the Registration Statement (or any subsequent registration statement registering
the sale or resale of the Warrant Shares) is not effective or is not otherwise
available for the sale or resale of the Warrant Shares, the Company shall
immediately notify the holders of the Warrants in writing that such registration
statement is not then effective and thereafter shall promptly notify such
holders when the registration statement is effective again and available for the
sale or resale of the Warrant Shares (it being understood and agreed that the
foregoing shall not limit the ability of the Company to issue, or the Purchaser
to sell, any of the Warrant Shares in compliance with applicable federal and
state securities laws). The Company shall use its best efforts to keep a
registration statement (including the Registration Statement) registering the
issuance or resale of the Warrant Shares effective during the term of the
Warrants. Upon a cashless exercise of a Warrant, the holding period for purposes
of Rule 144 shall tack back to the original date of issuance of such Warrant, if
then permitted by Rule 144 or any successor rule, law, or policy.

    


    4.2           Furnishing of
Information.  Until the earliest of the time that (i) the
Purchaser no longer owns Securities, or (ii) the Warrants have expired, the
Company covenants to timely file (or obtain extensions in respect thereof and
file within the applicable grace period) all reports required to be filed by the
Company after the date hereof pursuant to the Exchange Act even if the Company
is not then subject to the reporting requirements of the Exchange
Act.  As long as the Purchaser owns Securities, if the Company is not
required to file reports pursuant to the Exchange Act, it will prepare and
furnish to the Purchaser and make publicly available in accordance with Rule
144(c) such information as is required for the Purchaser to sell the Securities,
including without limitation, under Rule 144. The Company further covenants that
it will take such further action as any holder of Securities may reasonably
request, to the extent required from time to time to enable such Person to sell
such Securities without registration under the Securities Act, including without
limitation, within the requirements of the exemption provided by Rule
144.

    


    4.3           Integration.  The
Company shall not 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 would be integrated with the offer or sale of the Securities for
purposes of the rules and regulations of any Trading Market such that it would
require shareholder approval prior to the closing of such other transaction
unless shareholder approval is obtained before the closing of such subsequent
transaction.

    


    4.4           Securities Laws Disclosure;
Publicity.  The Company shall (i) by 8:30 a.m. (New York City
time) on the Trading Day immediately following the date hereof, issue a press
release disclosing the material terms of the transactions contemplated hereby,
and (ii) within the time prescribed under the Exchange Act file a current report
on Form 8-K disclosing the material terms of the transaction and including the
Transaction Documents as exhibits thereto.  From and after the
issuance of such press release, the Company shall have publicly disclosed all
material, non-public information delivered to the Purchaser by the Company or
any of its subsidiaries, or any of their respective officers, directors,
employees or agents in connection with the transactions contemplated by the
Transaction Documents.  The Company and the Purchaser shall consult
with each other in issuing any other press releases with respect to the
transactions contemplated hereby, and neither the Company nor the Purchaser
shall issue any such press release nor otherwise make any such public statement
without the prior consent of the Company, with respect to any press release of
the Purchaser, or without the prior consent of the Purchaser, with respect to
any press release of the Company, which consent shall not unreasonably be
withheld or delayed, except if such disclosure is required by law, in which case
the disclosing party shall promptly provide the other party with prior notice of
such public statement or communication.  Notwithstanding the
foregoing, the Company shall not publicly disclose the name of the Purchaser, or
include the name of the Purchaser in any filing with the Commission or any
regulatory agency or Trading Market, without the prior written consent of the
Purchaser, except (a) as required by federal securities law in connection with
the filing of final Transaction Documents (including signature pages thereto)
with the Commission and (b) to the extent such disclosure is required by law or
Trading Market regulations, in which case the Company shall provide the
Purchaser with prior notice of such disclosure permitted under this clause
(b).  On or prior to 8:30 am on the Business Day following the Closing
Date, the Company shall file the Prospectus Supplement with the Commission in
accordance with Rule 424 under the 1933 Act.

     

    
      
        
        

      

      
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    4.5           Shareholder Rights
Plan.  No claim will be made or enforced by the Company or,
with the consent of the Company, any other Person, that the Purchaser is an
“Acquiring Person” under any control share acquisition, business combination,
poison pill (including any distribution under a rights agreement) or similar
anti-takeover plan or arrangement in effect or hereafter adopted by the Company,
or that the Purchaser could be deemed to trigger the provisions of any such plan
or arrangement, by virtue of receiving  Shares and Warrants under the
Transaction Documents or under any other agreement between the Company and the
Purchaser.

    


    4.6           Non-Public
Information.  Except with respect to the material terms and
conditions of the transactions contemplated by the Transaction Documents, the
Company covenants and agrees that neither it, nor any other Person acting on its
behalf will provide the Purchaser or its agents or counsel with any information
that the Company believes constitutes material non-public information, unless
prior thereto the Purchaser shall have executed a written agreement with the
Company regarding the confidentiality and use of such
information.  The Company understands and confirms that the Purchaser
shall be relying on the foregoing covenant in effecting transactions in
securities of the Company.

    


    4.7           Use of
Proceeds.  The Company shall use the net proceeds from the sale
of the Securities as described in the Prospectus and Prospectus
Supplements.

    


    4.8           Indemnification of
Purchaser.   Subject to the provisions of this Section
4.8, the Company will indemnify and hold the Purchaser and its directors,
officers, shareholders, members, partners, employees and agents (and any other
Persons with a functionally equivalent role of a Person holding such titles
notwithstanding a lack of such title or any other title), each Person who
controls the Purchaser (within the meaning of Section 15 of the Securities Act
and Section 20 of the Exchange Act), and the directors, officers, shareholders,
agents, members, partners or employees (and any other Persons with a
functionally equivalent role of a Person holding such titles notwithstanding a
lack of such title or any other title) of such controlling persons (each, a
“Purchaser
Party”) harmless from any and all losses, liabilities, obligations,
claims, contingencies, damages, costs and expenses, including all judgments,
amounts paid in settlements, court costs and reasonable attorneys’ fees and
costs of investigation that any such Purchaser Party may suffer or incur as a
result of or relating to (a) any breach of any of the representations,
warranties, covenants or agreements made by the Company in this Agreement or in
the other Transaction Documents or (b) any action instituted against the
Purchaser in any capacity, or any of them or their respective Affiliates, by any
stockholder of the Company who is not an Affiliate of the Purchaser, with
respect to any of the transactions contemplated by the Transaction Documents
(unless such action is based upon a breach of the Purchaser’s representations,
warranties or covenants under the Transaction Documents or any agreements or
understandings the Purchaser may have with any such stockholder or any
violations by the Purchaser of state or federal securities laws or any conduct
by the Purchaser which constitutes fraud, gross negligence, willful misconduct
or malfeasance).  If any action shall be brought against any Purchaser
Party in respect of which indemnity may be sought pursuant to this Agreement,
such Purchaser Party shall promptly notify the Company in writing, and the
Company shall have the right to assume the defense thereof with counsel of its
own choosing reasonably acceptable to the Purchaser Party.  Any
Purchaser Party shall have the right to employ separate counsel in any such
action and participate in the defense thereof, but the fees and expenses of such
counsel shall be at the expense of such Purchaser Party except to the extent
that (i) the employment thereof has been specifically authorized by the Company
in writing, (ii) the Company has failed after a reasonable period of time to
assume such defense and to employ counsel or (iii) in such action there is, in
the reasonable opinion of counsel, a material conflict on any material issue
between the position of the Company and the position of such Purchaser Party, in
which case the Company shall be responsible for the reasonable fees and expenses
of no more than one such separate counsel.  The Company will not be
liable to any Purchaser Party under this Agreement (y) for any settlement by a
Purchaser Party effected without the Company’s prior written consent, which
shall not be unreasonably withheld or delayed; or (z) to the extent, but only to
the extent that a loss, claim, damage or liability is attributable to any
Purchaser Party’s breach of any of the representations, warranties, covenants or
agreements made by such Purchaser Party in this Agreement or in the other
Transaction Documents.

     

    
      
        
        

      

      
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    4.9           Reservation of Common
Stock. As of the date hereof, the Company has reserved and the Company
shall continue to reserve and keep available at all times, free of preemptive
rights, a sufficient number of shares of Common Stock for the purpose of
enabling the Company to issue Shares pursuant to this Agreement and Warrant
Shares pursuant to any exercise of the Warrants.

    


    4.10           Listing of Common
Stock. The Company hereby agrees to use best efforts to maintain the
listing or quotation of the Common Stock on the Trading Market on which it is
currently listed, and concurrently with the Closing, the Company shall apply to
list or quote all of the Shares and the Warrant Shares on such Trading Market
and promptly secure the listing of all of the Shares and the Warrant Shares on
such Trading Market. The Company further agrees, if the Company applies to have
the Common Stock traded on any other Trading Market, it will then include in
such application all of the Shares and Warrant Shares, and will take such other
action as is necessary to cause all of the Shares and the Warrant Shares to be
listed or quoted on such other Trading Market as promptly as
possible.  The Company will then take all action reasonably necessary
to continue the listing and trading of its Common Stock on a Trading Market and
will comply in all respects with the Company’s reporting, filing and other
obligations under the bylaws or rules of the Trading Market.

     

    
      
        
        

      

      
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    4.11           Lock-Up; Subsequent Equity
Sales.

    


    (a)           From
the date hereof until 45 days after the Closing Date, neither the Company nor
any Subsidiary shall issue, enter into any agreement to issue or announce the
issuance or proposed issuance of any shares of Common Stock or Common Stock
Equivalents at an effective price per share less than $1.50.

    


    (b)           For
a period of one year from the date hereof (the “Participation
Period”), the Investor shall have the right to participate in any
subsequent offering (a “Subsequent
Financing”) of Common Stock or Common Stock Equivalents, other than an
Exempt Issuance, as provided herein.  At least twelve hours prior to
the execution of definitive documentation for a Subsequent Financing, the
Company shall deliver to the Investor a written notice of its intention to
effect a Subsequent Financing (“Pre-Notice”), which
Pre-Notice shall ask the Investor if it wants to review the details of such
financing (such additional notice, a “Subsequent Financing
Notice”).  Upon the written request of the Investor, and only
upon a request by the Investor, for a Subsequent Financing Notice, the Company
shall promptly, but no later two hours after the receipt of such request,
deliver a Subsequent Financing Notice to the Investor.  Such request
shall be delivered to the Company by the Investor not more than four hours after
its receipt of the Pre-Notice.  The Subsequent Financing Notice shall
describe in reasonable detail the proposed terms of such Subsequent Financing,
including a description of the material terms of any Common Stock Equivalents to
be offered, and the expected amount of gross proceeds of such Subsequent
Financing (the “Subsequent Financing Gross
Proceeds”).  The Investor shall notify the Company in writing
within four hours after its receipt of the Subsequent Financing Notice of its
willingness to participate in the Subsequent Financing on the terms described in
the Subsequent Financing Notice, subject to completion of mutually acceptable
documentation.  If the Investor fails to timely respond to a
Pre-Notice or Subsequent Financing Notice, the Investor shall have no right to
participate in the Subsequent Financing.  In the event that the
Investor timely notifies the Company that it wishes to participate in the
Subsequent Financing, the Investor shall have the right to participate in the
Subsequent Financing in an amount not to exceed 20% of the Subsequent Financing
Gross Proceeds.  The Company shall have the right to sell any amount
of the Subsequent Financing not purchased by the Investor to such investors as
it may determine in its sole discretion; provided, however, that any such sales
shall be on terms no more favorable to the investors than those described in the
Subsequent Financing Notice.  Notwithstanding the delivery of any
Pre-Notice or Subsequent Financing Notice, the Company shall have the right to
terminate or delay the Subsequent Financing as it may determine in its sole
discretion.  The Investor acknowledges and agrees that, upon its
receipt of a Subsequent Financing Notice, the Investor shall be deemed to be in
receipt of material non-public information regarding the Company and agrees to
hold such information in confidence and not to disclose such information to any
other person and not to effect any transactions in the Common Stock until the
earlier of (i) the public announcement of the Subsequent Financing or (ii) the
receipt of written notice from the Company that it has abandoned the Subsequent
Financing (which notice shall be given promptly following a determination by the
Company not to proceed with a Subsequent Financing).

     

    
      
        
        

      

      
        - 20
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    (c)           From
the date hereof until three (3) years from the Closing Date, the Company shall
be prohibited from effecting or entering into an agreement to effect any
issuance by the Company or any of its Subsidiaries of Common Stock or Common
Stock Equivalents for cash consideration (or a combination of units hereof)
involving a Variable Rate Transaction.  “Variable Rate
Transaction” means a transaction in which the Company (i) issues or sells
any debt or equity securities that are convertible into, exchangeable or
exercisable for, or include the right to receive additional shares of Common
Stock either (A) at a conversion price, exercise price or exchange rate or other
price that is based upon and/or varies with the trading prices of or quotations
for the shares of Common Stock at any time after the initial issuance of such
debt or equity securities, or (B) with a conversion, exercise or exchange price
that is subject to being reset at some future date after the initial issuance of
such debt or equity security or upon the occurrence of specified or contingent
events directly or indirectly related to the business of the Company or the
market for the Common Stock (but not including any routine anti-dilution
protections in any warrant or convertible security) or (ii) enters into any
agreement, including, but not limited to, an equity line of credit, whereby the
Company may sell securities at a future determined price.  The
Purchaser shall be entitled to obtain injunctive relief against the Company to
preclude any such issuance, which remedy shall be in addition to any right to
collect damages.

    


    (d)           Notwithstanding
the foregoing, Section 4.11(a) shall not apply in respect of an Exempt Issuance
and no Variable Rate Transaction shall be an Exempt Issuance.

    


    4.12           Certain Transactions and
Confidentiality. The Purchaser covenants that neither it nor any
Affiliate acting on its behalf or pursuant to any understanding with it will
execute any purchases or sales, including Short Sales of any of the Company’s
securities during the period commencing with the execution of this Agreement and
ending at such time that the transactions contemplated by this Agreement are
first publicly announced pursuant to the initial press release as described in
Section 4.3.  The Purchaser covenants that until such time as the
transactions contemplated by this Agreement are publicly disclosed by the
Company pursuant to the initial press release as described in Section 4.3, the
Purchaser will maintain the confidentiality of the existence and terms of this
transaction and the information included in the Disclosure Schedules. 
Notwithstanding the foregoing, and notwithstanding anything contained in this
Agreement to the contrary, the Company expressly acknowledges and agrees that
(i) the Purchaser makes no representation, warranty or covenant hereby that it
will not engage in effecting transactions in any securities of the Company after
the time that the transactions contemplated by this Agreement are first publicly
announced pursuant to the initial press release as described in Section 4.3,
(ii) the Purchaser shall not be restricted or prohibited from effecting any
transactions in any securities of the Company in accordance with applicable
securities laws from and after the time that the transactions contemplated by
this Agreement are first publicly announced pursuant to the initial press
release as described in Section 4.3 and (iii) the Purchaser shall have no duty
of confidentiality to the Company or its Subsidiaries after the issuance of the
initial press release as described in Section 4.3.  Notwithstanding the
foregoing, in the case the Purchaser is a multi-managed investment vehicle
whereby separate portfolio managers manage separate portions of the Purchaser’s
assets and the portfolio managers have no direct knowledge of the investment
decisions made by the portfolio managers managing other portions of the
Purchaser’s assets, the covenant set forth above shall only apply with respect
to the portion of assets managed by the portfolio manager that made the
investment decision to purchase the Securities covered by this
Agreement.

     

    
      
        
        

      

      
        - 21
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    ARTICLE
V.

    MISCELLANEOUS

    


    5.1           Termination. 
This Agreement may be terminated by the Purchaser, as to the Purchaser’s
obligations hereunder, by written notice to the other parties, if the Closing
has not been consummated on or before April 16, 2010; provided, however, that no such
termination will affect the right of any party to sue for any breach by the
other party (or parties).

    


    5.2           Fees and
Expenses.  Except as expressly set forth in the Transaction
Documents to the contrary, each party shall pay the fees and expenses of its
advisers, counsel, accountants and other experts, if any, and all other expenses
incurred by such party incident to the negotiation, preparation, execution,
delivery and performance of this Agreement.  The Company shall pay all
Transfer Agent fees, stamp taxes and other taxes and duties levied in connection
with the delivery of any Securities to the Purchaser.

    


    5.3           Entire
Agreement.  The Transaction Documents, together with the
exhibits and schedules thereto, the Prospectus and the Prospectus Supplement,
contain the entire understanding of the parties with respect to the subject
matter hereof and supersede all prior agreements and understandings, oral or
written, with respect to such matters, which the parties acknowledge have been
merged into such documents, exhibits and schedules.

    


    5.4           Notices.  Any
and all notices or other communications or deliveries required or permitted to
be provided hereunder shall be in writing and shall be deemed given and
effective on the earliest of: (a) the date of transmission, if such notice or
communication is delivered via facsimile at the facsimile number set forth on
the signature pages attached hereto prior to 5:30 p.m. (New York City time) on a
Trading Day, (b) the next Trading Day after the date of transmission, if such
notice or communication is delivered via facsimile at the facsimile number set
forth on the signature pages attached hereto on a day that is not a Trading Day
or later than 5:30 p.m. (New York City time) on any Trading Day, (c) the second
(2nd)Trading
Day following the date of mailing, if sent by U.S. nationally recognized
overnight courier service or (d) upon actual receipt by the party to whom such
notice is required to be given.  The address for such notices and
communications shall be as set forth on the signature pages attached
hereto.

    


    5.5           Amendments;
Waivers.  No provision of this Agreement may be waived,
modified, supplemented or amended except in a written instrument signed, in the
case of an amendment, by the Company and the Purchaser or, in the case of a
waiver, by the party against whom enforcement of any such waived provision is
sought.  No waiver of any default with respect to any provision,
condition or requirement of this Agreement shall be deemed to be a continuing
waiver in the future or a waiver of any subsequent default or a waiver of any
other provision, condition or requirement hereof, nor shall any delay or
omission of any party to exercise any right hereunder in any manner impair the
exercise of any such right.

     

    
      
        
        

      

      
        - 22
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    5.6           Headings.  The
headings herein are for convenience only, do not constitute a part of this
Agreement and shall not be deemed to limit or affect any of the provisions
hereof.

    


    5.7           Successors and
Assigns.  This Agreement shall be binding upon and inure to the
benefit of the parties and their successors and permitted
assigns.  The Company may not assign this Agreement or any rights or
obligations hereunder without the prior written consent of the Purchaser (other
than by merger).  The Purchaser may assign any or all of its rights
under this Agreement to any Person to whom the Purchaser assigns or transfers
any Securities, in which event such assignee shall be deemed to be the Purchaser
hereunder with respect to such assigned rights.

    


    5.8           No Third-Party
Beneficiaries.  This Agreement is intended for the benefit of
the parties hereto and their respective successors and permitted assigns and is
not for the benefit of, nor may any provision hereof be enforced by, any other
Person, except as otherwise set forth in Section 4.7.

    


    5.9           Governing
Law.  All questions concerning the construction, validity,
enforcement and interpretation of the Transaction Documents shall be governed by
and construed and enforced in accordance with the internal laws of the State of
New York, without regard to the principles of conflicts of law
thereof.  Each party agrees that all legal proceedings concerning the
interpretations, enforcement and defense of the transactions contemplated by
this Agreement and any other Transaction Documents (whether brought against a
party hereto or its respective affiliates, directors, officers, shareholders,
employees or agents) shall be commenced exclusively in the state and federal
courts sitting in the City of New York. Each party hereby irrevocably submits to
the exclusive jurisdiction of the state and federal courts sitting in the City
of New York, borough of Manhattan for the adjudication of any dispute hereunder
or in connection herewith or with any transaction contemplated hereby or
discussed herein (including with respect to the enforcement of any of the
Transaction Documents), and hereby irrevocably waives, and agrees not to assert
in any suit, action or proceeding, any claim that it is not personally subject
to the jurisdiction of any such court, that such suit, action or proceeding is
improper or is an inconvenient venue for such proceeding.  Each party
hereby irrevocably waives personal service of process and consents to process
being served in any such suit, action or proceeding by mailing a copy thereof
via registered or certified mail or overnight delivery (with evidence of
delivery) to such party at the address in effect for notices to it under this
Agreement and agrees that such service shall constitute good and sufficient
service of process and notice thereof.  Nothing contained herein shall
be deemed to limit in any way any right to serve process in any other manner
permitted by law.  If either party shall commence an action or
proceeding to enforce any provisions of the Transaction Documents, then, in
addition to the obligations of the Company under Section 4.7, the prevailing
party in such action or proceeding shall be reimbursed by the other party for
its reasonable attorneys’ fees and other costs and expenses incurred with the
investigation, preparation and prosecution of such action or
proceeding.

    


    5.10           Survival.  The
representations and warranties contained herein shall survive the Closing and
the delivery of the  Shares and Warrants.

     

    
      
        
        

      

      
        - 23
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    5.11           Execution.  This
Agreement may be executed in two or more counterparts, all of which when taken
together shall be considered one and the same agreement and shall become
effective when counterparts have been signed by each party and delivered to the
other party, it being understood that both parties need not sign the same
counterpart.  In the event that any signature is delivered by
facsimile transmission or by e-mail delivery of a “.pdf” format data file, such
signature shall create a valid and binding obligation of the party executing (or
on whose behalf such signature is executed) with the same force and effect as if
such facsimile or “.pdf” signature page were an original thereof.

    


    5.12           Severability.  If
any term, provision, covenant or restriction of this Agreement is held by a
court of competent jurisdiction to be invalid, illegal, void or unenforceable,
the remainder of the terms, provisions, covenants and restrictions set forth
herein shall remain in full force and effect and shall in no way be affected,
impaired or invalidated, and the parties hereto shall use their commercially
reasonable efforts to find and employ an alternative means to achieve the same
or substantially the same result as that contemplated by such term, provision,
covenant or restriction. It is hereby stipulated and declared to be the
intention of the parties that they would have executed the remaining terms,
provisions, covenants and restrictions without including any of such that may be
hereafter declared invalid, illegal, void or unenforceable.

    


    5.13           Rescission and Withdrawal
Right.  Notwithstanding anything to the contrary contained in
(and without limiting any similar provisions of) any of the other Transaction
Documents, whenever the Purchaser exercises a right, election, demand or option
under a Transaction Document and the Company does not timely perform its related
obligations within the periods therein provided, then the Purchaser may rescind
or withdraw, in its sole discretion from time to time upon written notice to the
Company, any relevant notice, demand or election in whole or in part without
prejudice to its future actions and rights.

    


    5.14           Replacement of
Securities.  If any certificate or instrument evidencing any
Securities is mutilated, lost, stolen or destroyed, the Company shall issue or
cause to be issued in exchange and substitution for and upon cancellation
thereof (in the case of mutilation), or in lieu of and substitution therefor, a
new certificate or instrument, but only upon receipt of evidence reasonably
satisfactory to the Company of such loss, theft or destruction.  The
applicant for a new certificate or instrument under such circumstances shall
also pay any reasonable third-party costs (including customary indemnity)
associated with the issuance of such replacement Securities.

    


    5.15           Remedies.  In
addition to being entitled to exercise all rights provided herein or granted by
law, including recovery of damages, each of the Purchaser and the Company will
be entitled to specific performance under the Transaction
Documents.  The parties agree that monetary damages may not be
adequate compensation for any loss incurred by reason of any breach of
obligations contained in the Transaction Documents and hereby agree to waive and
not to assert in any action for specific performance of any such obligation the
defense that a remedy at law would be adequate.

    


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

     

    
      
        
        

      

      
        - 24
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    5.17           Liquidated
Damages.  The Company’s obligations to pay any partial
liquidated damages or other amounts owing under the Transaction Documents is a
continuing obligation of the Company and shall not terminate until all unpaid
partial liquidated damages and other amounts have been paid notwithstanding the
fact that the instrument or security pursuant to which such partial liquidated
damages or other amounts are due and payable shall have been
canceled.

    


    5.18           Saturdays, Sundays,
Holidays,
etc.                                                                           If
the last or appointed day for the taking of any action or the expiration of any
right required or granted herein shall not be a Business Day, then such action
may be taken or such right may be exercised on the next succeeding Business
Day.

    


    5.19           Construction. The
parties agree that each of them and/or their respective counsel has reviewed and
had an opportunity to revise the Transaction Documents and, therefore, the
normal rule of construction to the effect that any ambiguities are to be
resolved against the drafting party shall not be employed in the interpretation
of the Transaction Documents or any amendments hereto. In addition, each and
every reference to share prices and shares of Common Stock in any Transaction
Document shall be subject to adjustment for reverse and forward stock splits,
stock dividends, stock combinations and other similar transactions of the Common
Stock that occur after the date of this Agreement.

    


    5.20           WAIVER OF
JURY TRIAL.  IN ANY
ACTION, SUIT, OR PROCEEDING IN ANY JURISDICTION BROUGHT BY ANY PARTY AGAINST ANY
OTHER PARTY, THE PARTIES EACH KNOWINGLY AND INTENTIONALLY, TO THE GREATEST
EXTENT PERMITTED BY APPLICABLE LAW, HEREBY ABSOLUTELY, UNCONDITIONALLY,
IRREVOCABLY AND EXPRESSLY WAIVES FOREVER TRIAL BY JURY.

    


    (Signature
Pages Follow)

     

    
      
        
        

      

      
        - 25
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    IN WITNESS WHEREOF, the parties hereto
have caused this Securities Purchase Agreement to be duly executed by their
respective authorized signatories as of the date first indicated
above.

    
 

    
      
        
          
            
              
                
                  
                    	
                            PHARMATHENE,
      INC.

                             

                             

                          	 	
                            Address for Notice:

                          
	By:	
                            /s/
      Eric I. Richman

                          	 	 
	 	
                            Name:
      Eric I. Richman

                            Title:
      President

                             

                             

                            With
      a copy to (which shall not constitute notice):

                          	 	
                            One
      Park Place

                            Suite
      450

                            Annapolis,
      MD 21401

                            Fax
      (410) 269-2601

                            Attention:
      General Counsel

                          
	 	
                             

                            Sonnenschein
      Nath & Rosenthal LLP

                            1221
      Avenue of the Americas

                            New
      York, New York  10020

                            Attention:
      Jeffrey A. Baumel

                             

                             

                             

                             

                             

                          	 	 
      


                  

                

              

            

          

        

      

    

     

    [REMAINDER
OF PAGE INTENTIONALLY LEFT BLANK

    SIGNATURE
PAGE FOR PURCHASER FOLLOWS]

     

    
      
        
        

      

      
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    [PURCHASER
SIGNATURE PAGES TO PIP SECURITIES PURCHASE AGREEMENT]

    


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

    


    
      
        
          
            	
                    Name
      of Purchaser:

                  	
                     

                  


          

          
            	
                    Signature of Authorized
      Signatory of Purchaser:

                  	
                     

                  


          

          
            	
                    Name
      of Authorized Signatory:

                  	
                     

                  


          

          
            	
                    Title
      of Authorized Signatory:

                  	
                     

                  


          

          
            	
                    Email
      Address of Authorized Signatory:

                  	
                     

                  


          

          
            	
                    Facsimile
      Number of Authorized Signatory:

                  	
                     

                  


          

          
            	
                    Address
      for Notice of Purchaser:

                  	 
      


          

        

      

    

    


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

    


    


    


    


    


    Subscription
Amount: $2,500,002

    


    Shares:
1,666,668

    


    Warrants:
500,000

    


    EIN
Number:  [PROVIDE
THIS UNDER SEPARATE COVER]

    


    


    [SIGNATURE
PAGES CONTINUE]

     

    
      
        
        

      

      
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