Exhibit 10.1


 


PURCHASE AGREEMENT


 


THIS AGREEMENT is made as of the 27th day of July 2005
by and between Pharmacopeia Drug Discovery, Inc. (the “Company”), a
corporation organized under the laws of the State of Delaware, with its
principal offices at P.O. Box 5350, Princeton, New Jersey 08543-5350, and
the purchaser whose name and address is set forth on the signature page hereof
(the “Purchaser”).


 


IN CONSIDERATION of the mutual covenants contained in
this Agreement, the Company and the Purchaser agree as follows:


 


SECTION 1.           Authorization of Sale of the Shares. Subject to the
terms and conditions of this Agreement, the Company has authorized the issuance
and sale of up to 2,470,000 shares (the “Shares”) of common stock, par value
$.01 per share (the “Common Stock”), of the Company. The Company reserves the
right to increase or decrease the number of shares of Common Stock sold in this
private placement prior to the Closing Date.


 


SECTION 2.           Agreement to Sell and Purchase the Shares. At the
Closing (as defined in Section 3), the Company will issue and sell to the
Purchaser, and the Purchaser will buy from the Company, upon the terms and
conditions hereinafter set forth, the number of Shares (at the purchase price)
shown below:


 


	
  Number to Be

  Purchased

  	
   

  	
  Price Per

  Share In

  Dollars

  	
   

  	
  Aggregate

  Price

  	
   

  
	
   

  	
   

  	
  $

  	
  3.43

  	
   

  	
  $

  	
   

  	
   

  
								



 


The Company proposes to enter into the same form of
purchase agreement with certain other investors (the “Other Purchasers”) and
expects to complete sales of the Shares to them. The Purchaser and the Other
Purchasers are hereinafter sometimes collectively referred to as the “Purchasers,”
and this Agreement and the agreements executed by the Other Purchasers are
hereinafter sometimes collectively referred to as the “Agreements.”  The term “Placement Agent” shall mean
Jefferies & Company, Inc.


 


SECTION 3.           Delivery of the Shares at the Closing. The completion
of the purchase and sale of the Shares (the “Closing”) shall occur at the
offices of Morrison & Foerster LLP, 1290 Avenue of the Americas, New
York, New York 10104 as soon as practicable and as agreed to by the parties
hereto, within three business days following the execution of the Agreements,
or on such later date or at such different location as the parties shall agree
in writing, but not prior to the date that the conditions for Closing set forth
below have been satisfied or waived by the appropriate party (the “Closing Date”).


 





















 


At the Closing, the Company shall deliver to the
Purchaser one or more stock certificates registered in the name of the
Purchaser, or, if so indicated on the Stock Certificate Questionnaire attached
hereto as Appendix I, in such nominee name(s) as designated by the Purchaser,
representing the number of Shares set forth in Section 2 above and bearing
an appropriate legend referring to the fact that the Shares were sold in
reliance upon the exemption from registration under the Securities Act of 1933,
as amended (the “Securities Act”) provided by Section 4(2) thereof
and Rule 506 thereunder. The name(s) in which the stock certificates are
to be registered are set forth in the Stock Certificate Questionnaire attached
hereto as Appendix I. The Company’s obligation to complete the purchase and
sale of the Shares and deliver such stock certificate(s) to the Purchaser at
the Closing shall be subject to the following conditions, any one or more of
which may be waived by the Company:  (a) receipt
by the Company of same-day funds in the full amount of the purchase price for
the Shares being purchased hereunder; (b) completion of the purchases and
sales under the Agreements with the Purchasers; (c) the accuracy of the
representations and warranties made by the Purchasers (as if such
representations and warranties were made on the Closing Date) and the
fulfillment of those undertakings of the Purchasers to be fulfilled prior to
the Closing.; and (d) a minimum aggregate purchase price by all Purchasers
of $6,651,248 for the Shares. The Purchaser’s obligation to accept delivery of
such stock certificate(s) and to pay for the Shares evidenced thereby shall be
subject to the following conditions, any one or more of which may be waived by
the Purchaser in writing: (a) each of the representations and warranties
of the Company made herein shall be accurate as of the Closing Date; (b) the
delivery to the Purchaser by Dechert LLP of a legal opinion in a form
reasonably satisfactory to counsel to the Placement Agent; (c) the
fulfillment of those undertakings of the Company to be fulfilled prior to
Closing; and (d) a minimum aggregate purchase price by all Purchasers of
$6,651,248 for the Shares. The Purchaser’s obligations hereunder are expressly
not conditioned on the purchase by any or all of the Other Purchasers of the
Shares that they have agreed to purchase from the Company.


 


SECTION 4.           Representations, Warranties and Covenants of the Company. The Company hereby represents and warrants to, and covenants with, the
Purchaser as follows:


 


4.1      Organization
and Qualification. The Company is a corporation duly incorporated, validly
existing and in good standing under the laws of the State of Delaware and the
Company is qualified to do business as a foreign corporation in each
jurisdiction in which qualification is required, except where failure to so
qualify would not reasonably be expected to have a Material Adverse Effect (as
defined herein). The Company has no subsidiaries. For purposes of this
Agreement, the term “Material Adverse Effect” shall mean a material adverse
effect upon the business, financial condition, properties or results of
operations of the Company.


 


4.2      Authorized
Capital Stock. The Company had outstanding the capital stock set forth
under the heading “Capitalization” in the Confidential Private Placement
Memorandum, dated July 14, 2005 prepared by the Company, including all
exhibits, supplements and amendments thereto (the “Private Placement Memorandum”),
as of the date set forth therein; the issued and outstanding shares of the
Company’s Common Stock have been duly authorized and validly issued, are fully
paid and nonassessable, have been issued in compliance with all federal and
state securities laws, were not issued in violation of or subject


 


2





















 


to
any preemptive rights or other rights to subscribe for or purchase securities,
and conform to the description thereof contained in the Private Placement
Memorandum. Except as disclosed in the Private Placement Memorandum, the
Company does not have outstanding any options to purchase, or any preemptive
rights or other rights to subscribe for or to purchase, any securities or
obligations convertible into, or any contracts or commitments to issue or sell,
shares of its capital stock or any such options, rights, convertible securities
or obligations. The description of the Company’s stock, stock bonus and other
stock plans or arrangements and the options or other rights granted and
exercised thereunder, set forth in the Private Placement Memorandum accurately
and fairly presents all material information with respect to such plans,
arrangements, options and rights.


 


4.3      Issuance,
Sale and Delivery of the Shares.


 


(a)           The Shares have been duly authorized and, when issued,
delivered and paid for in the manner set forth in this Agreement, will be duly
authorized, validly issued, fully paid and nonassessable and free and clear of
all pledges, liens, restrictions and encumbrances (other than restrictions on
transfer under state and/or federal securities laws), and will conform to the
description thereof set forth in the Private Placement Memorandum. No preemptive
rights or other rights to subscribe for or purchase exist with respect to the
issuance and sale of the Shares by the Company pursuant to this Agreement. No
stockholder of the Company has any right (which has not been waived or has not
expired by reason of lapse of time following notification of the Company’s
intent to file the registration statement to be filed by it pursuant to Section 7.1
(the “Registration Statement”)) to require the Company to register the sale of
any shares owned by such stockholder under the Securities Act of 1933, as
amended (the “Securities Act”) in the Registration Statement. No further
approval or authority of the stockholders or the Board of Directors of the
Company will be required for the issuance and sale of the Shares to be sold by
the Company as contemplated herein.


 


(b)           The Company shall not take any action that will cause the
offering of the Shares pursuant to the Private Placement Memorandum and this
Agreement to be integrated with prior offerings by the Company for purposes of
any applicable law, regulation or stockholder approval provisions, including,
without limitation, under the rules and regulations of the Nasdaq National
Market. The Company shall not, and shall use its 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 would be integrated with the offer or sale of the
Shares in a manner that would require the registration under the Securities Act
of the sale of the Shares to the Purchasers or that would be integrated with
the offer or sale of the Shares for purposes of the rules and regulations
of the Nasdaq National Market.


 


4.4      Due
Execution, Delivery and Performance of this Agreement. The Company has full
legal right, corporate power and authority to enter into this Agreement and
perform the transactions contemplated hereby. This Agreement has been duly
authorized, executed and delivered by the Company. The execution, delivery and
performance of this Agreement by the Company and the consummation of the
transactions herein contemplated will not violate any provision of the
certificate of incorporation or bylaws of the Company and will not result in the
creation of any lien, charge, security interest or encumbrance upon any assets
of the Company pursuant to the terms or provisions of, and will not (i) conflict
with,


 


3





















 


result in the breach or violation of, or
constitute, either by itself or upon notice or the passage of time or both, a
default under (A) any agreement, lease, franchise, license, permit or
other instrument to which the Company is a party or by which the Company or any
of its properties may be bound or affected and in each case which would
reasonably be expected to have a Material Adverse Effect, or (B) any
statute or any judgment, decree, order, rule or regulation of any court or
any regulatory body, administrative agency or other governmental body
applicable to the Company or any of its properties where such conflict, breach,
violation or default is likely to result in a Material Adverse Effect. No
consent, approval, authorization or other order of any court, regulatory body,
administrative agency or other governmental body is required for the execution
and delivery of this Agreement or the consummation of the transactions
contemplated by this Agreement, except for compliance with the blue sky laws
and federal securities laws applicable to the offering of the Shares. Upon the
execution and delivery of this Agreement, and assuming the valid execution
thereof by the Purchaser, this Agreement will constitute a valid and binding
obligation of the Company, enforceable in accordance with its terms, 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) and except as the
indemnification agreements of the Company in Section 7.3 hereof may be
limited by federal or state securities laws or the public policy underlying
such laws.


 


4.5      Accountants.
The firm of Ernst & Young LLP, which has expressed its opinion with
respect to the consolidated financial statements to be included or incorporated
by reference in the Registration Statement and the prospectus which forms a
part thereof (the “Prospectus”), is an independent accountant as required by
the Securities Act and the rules and regulations promulgated thereunder
(the “Rules and Regulations”).


 


4.6      No
Defaults. The Company is not in violation or default of any provision of
its certificate of incorporation or bylaws, or in breach of or default with
respect to any provision of any agreement, judgment, decree, order, lease,
franchise, license, permit or other instrument to which it is a party or by
which it or any of its properties are bound which could reasonably be expected
to have a Material Adverse Effect and there does not exist any state of facts
which, with notice or lapse of time or both, would constitute an event of
default on the part of the Company as defined in such documents and which would
reasonably be expected to have a Material Adverse Effect.


 


4.7      Contracts.
Except as disclosed in the Private Placement Memorandum, the Company has no
material contracts. Any contracts described in the Private Placement Memorandum
that are material to the Company are in full force and effect on the date
hereof; and neither the Company nor, to the Company’s knowledge, is any other
party in breach of or default under any of such contracts which would
reasonably be expected to have a Material Adverse Effect.


 


4.8      No
Actions. (1) There are no legal or governmental actions, suits or
proceedings pending and (2) there are no inquiries or investigations, nor,
to the Company’s knowledge, are there any legal or governmental actions, suits,
or proceedings threatened to which the Company is or may be a party or of which
property owned or leased


 


4





















 


by the Company is or may be the subject, or
related to discrimination matters, which actions, suits or proceedings,
individually or in the aggregate, might reasonably be expected to have a
Material Adverse Effect; and no labor disturbance by the employees of the
Company exists or, to the Company’s knowledge, is imminent which might
reasonably be expected to have a Material Adverse Effect. The Company is not
party to or subject to the provisions of any injunction, judgment, decree or
order of any court, regulatory body, administrative agency or other
governmental body which might reasonably be expected to have a Material Adverse
Effect.


 


4.9      Properties.
The Company has good and marketable title to all properties and assets
reflected as owned in the financial statements included in the Private
Placement Memorandum, subject to no lien, mortgage, pledge, charge or
encumbrance of any kind except (i) those, if any, reflected in the
financial statements included in the Private Placement Memorandum or otherwise
in the Private Placement Memorandum, or (ii) those which are not material
in amount and do not adversely affect the use of such property by the Company. The
Company holds its leased properties under valid and binding leases, with such
exceptions as are not materially significant in relation to its business taken
as a whole. The Company leases all such properties as are necessary to its
operations as now conducted.


 


4.10    No
Material Change. Since December 31, 2004, and except as described in
the Private Placement Memorandum (i) the Company has not incurred any
material liabilities or obligations, indirect, or contingent, or entered into
any material oral or written agreement or other transaction which is not in the
ordinary course of business or which could reasonably be expected to result in
a material reduction in the future earnings of the Company; (ii) the
Company has not sustained any material loss or interference with its businesses
or properties from fire, flood, windstorm, accident or other calamity not
covered by insurance; (iii) the Company has not paid or declared any
dividends or other distributions with respect to its capital stock and the
Company is not in default in the payment of principal or interest on any
outstanding debt obligations; (iv) there has not been any change in the
capital stock of the Company other than the sale of the Shares hereunder or
shares contributed as a matching contribution to participants’ accounts under
the Company’s 401(k) plan, shares or options issued pursuant to employee equity
incentive plans or purchase plans approved by the Company’s Board of Directors
and repurchases of shares or options pursuant to repurchase plans already
approved by the Company’s Board of Directors, or indebtedness not incurred in
the ordinary course of business that is material to the Company; and (v) there
has not been any other event which has caused, or is likely to cause, a
Material Adverse Effect.


 


4.11    Intellectual
Property. (i) The Company owns or has obtained licenses or options for
the inventions, patent applications, patents, trademarks (both registered and
unregistered), trade names, copyrights and trade secrets necessary for the
conduct of the Company’s business as currently conducted (collectively, the “Intellectual
Property”); and (ii) (a) to the knowledge of the Company, there are
no third parties who have any ownership rights to any Intellectual Property
that is owned by, or has been licensed to, the Company for the products
described in the Private Placement Memorandum that would preclude the Company
from conducting its business as currently conducted and have a Material Adverse
Effect, except for the ownership rights of the owners of the Intellectual
Property licensed or optioned by the Company; (b) there is no pending or,
to the Company’s knowledge, threatened action, 


 


5





















 


suit, proceeding or claim by others
challenging the rights of the Company in or to any Intellectual Property owned,
licensed or optioned by the Company, other than claims which would not
reasonably be expected to have a Material Adverse Effect; (c) there is no
pending or, to the Company’s knowledge, threatened action, suit, proceeding or
claim by others challenging the validity or scope of any Intellectual Property
owned, licensed or optioned by the Company, other than non-material actions,
suits, proceedings and claims; and (d) there is no pending or, to the
Company’s knowledge, threatened action, suit, proceeding or claim by others
that the Company infringes or otherwise violates any patent, trademark,
copyright, trade secret or other proprietary right of others, other than
non-material actions, suits, proceedings and claims.


 


4.12    Compliance.
The Company has not been advised, nor does the Company have reason to believe,
that it is not conducting its business in compliance with all applicable laws, rules and
regulations of the jurisdictions in which it is conducting its business, except
where failure to be so in compliance would not reasonably be expected to have a
Material Adverse Effect.


 


4.13    Taxes.
The Company 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 or might be
asserted or threatened against it which might reasonably be expected to have a
Material Adverse Effect.


 


4.14    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 Shares to be sold to the Purchaser 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 complied with.


 


4.15    Investment
Company. The Company is not an “investment company” or an “affiliated
person” of, or “promoter” or “principal underwriter” for an investment company,
within the meaning of the Investment Company Act of 1940, as amended.


 


4.16    Offering
Materials. The Company has not distributed and will not distribute prior to
the Closing Date any offering material in connection with the offering and sale
of the Shares other than the Private Placement Memorandum or any amendment or
supplement thereto. Neither the Company nor any person acting on its behalf has
in the past or will hereafter take any action independent of the Placement
Agent to sell, offer for sale or solicit offers to buy any securities of the
Company which would subject the offer, issuance or sale of the Shares, as
contemplated by this Agreement, to the registration requirements of Section 5
of the Securities Act.


 


4.17    Insurance.
The Company maintains insurance of the types and in the amounts that the
Company reasonably believes is adequate for its business, including, but not
limited to, insurance covering all real and personal property leased by the
Company


 


6





















 


against theft, damage, destruction, acts of vandalism
and all other risks customarily insured against by similarly situated
companies, all of which insurance is in full force and effect.


 


4.18    Price
of Common Stock. The Company has not taken, and will not take, directly or
indirectly, any action designed to cause or result in, or which has constituted
or which might reasonably be expected to constitute, the stabilization or
manipulation of the price of the shares of the Common Stock to facilitate the
sale or resale of the Shares.


 


4.19    Corporate
Legal Opinion. As a condition to the Purchasers’ obligation to purchase the
Shares, Dechert LLP will deliver one or more legal opinions to the Placement
Agent in a form reasonably satisfactory to the Placement Agent and its counsel.
Such opinions also shall state that each of the Purchasers may rely thereon as
though it were addressed directly to such Purchaser.


 


4.20    Certificate.
At the Closing, the Company will deliver to Purchaser a certificate executed by
the chief executive officer and the chief financial or accounting officer of
the Company, dated as of the Closing Date, in form and substance reasonably
satisfactory to the Purchasers, to the effect that the representations and
warranties of the Company set forth in this Section 4 are true and correct
as of the date of this Agreement and as of the Closing Date and that the
Company has complied with all the agreements and satisfied all the conditions
herein on its part to be performed or satisfied on or prior to such Closing
Date.


 


4.21    Reporting
Company; Form S-3.


 


(a)           The Company is subject to the reporting requirements of the
Exchange Act and has filed all reports required thereby. In the Company’s
quarterly report on Form 10-Q for the period ended March 31, 2005,
the line item “Net cash used in investing activities” for the three months
ended March 31, 2005 under “Item 2. Management’s
Discussion and Analysis of Financial Condition and Results of Operation–The
Company—Liquidity and Capital Resources” should have been “2,872” instead of “(2,872)”.


 


(b)           The Company is eligible to register the Shares for resale by
the Purchaser on a registration statement on Form S-3 under the Securities
Act. There exist no facts or circumstances (including without limitation any
required approvals or waivers or any circumstances that may delay or prevent
the obtaining of accountant’s consents) that reasonably could be expected to
prohibit or delay the preparation and filing of a registration statement on Form S-3
that will be available for the resale of the Shares by the Purchaser.


 


4.22    Use
of Proceeds. The Company shall use the proceeds from the sale of Shares as
described under “Use of Proceeds” in the Private Placement Memorandum.


 


4.23    Non-Public
Information. The Company has not disclosed to the Purchaser, whether in the
Private Placement Memorandum or otherwise, information that would constitute
material non-public information as of the Closing Date.


 


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4.24    Use
of Purchaser Name. Except as may be required by applicable law or
regulation, the Company shall not use the Purchaser’s name or the name of any
of its affiliates in any advertisement, announcement, press release or other
similar public communication unless it has received the prior written consent
of the Purchaser for the specific use contemplated or as otherwise required by
applicable law or regulation.


 


4.25    Related
Party Transactions. No transaction has occurred between or among the
Company and its affiliates, officers or directors or any affiliate or
affiliates of any such officer or director that is required to have been
described under applicable securities laws in its Exchange Act filings and is
not so described in such filings.


 


4.26    Off-Balance
Sheet Arrangements. There is no transaction, arrangement or other
relationship between the Company and an unconsolidated or other off-balance
sheet entity that is required to be disclosed by the Company in its Exchange
Act filings and is not so disclosed or that otherwise would be reasonably
likely to have a Material Adverse Effect. To the Company’s knowledge, there are
no such transactions, arrangements or other relationships with the Company that
may create contingencies or liabilities.


 


4.27    Governmental
Permits, Etc. The Company has all franchises, licenses, certificates and
other authorizations from such federal, state or local government or
governmental agency, department or body that are currently required for the
operation of the business of the Company as currently conducted, except where
the failure to posses currently such franchises, licenses, certificates and
other authorizations is not reasonably expected to have a Material Adverse
Effect. The Company has not received any notice of proceedings relating to the
revocation or modification of any such permit which, if the subject of an
unfavorable decision, ruling or finding, could reasonably be expected to have a
Material Adverse Effect.


 


4.28    Financial
Statements. The financial statements of the Company and the related notes
contained in its Exchange Act filings present fairly, in accordance with
generally accepted accounting principles, the financial position of the Company
as of the dates indicated, and the results of its operations, cash flows and
the changes in stockholders’ equity for the periods therein specified, subject,
in the case of unaudited financial statements for interim periods, to normal
year-end audit adjustments. 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 that unaudited financial statements may not contain all
footnotes required by generally accepted accounting principles.


 


4.29    Listing.
Since May 3, 2004, the Company has not received any written notice from
the Nasdaq National Market, any stock exchange, market or trading facility on
which the Common Stock is or has been listed (or on which it has been quoted)
to the effect that the Company is not in compliance with the listing or
maintenance requirements of such exchange, market or trading facility. The
Company shall comply with all requirements of the Nasdaq National Market with
respect to the issuance of Shares and shall use its best efforts to have the
Shares listed on the Nasdaq National Market on or before the


 


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first
date that the Registration Statement is declared effective by the Commission. The
Common Stock is presently listed on the Nasdaq National Market.


 


4.30    Sarbanes-Oxley
Act; Accounting Controls. The Company is, and at the Closing Date will be,
in compliance with all provisions of the Sarbanes-Oxley Act of 2002 which are
applicable to it. The Company maintains a system of internal accounting
controls sufficient to provide reasonable assurance that (i) transactions
are executed in accordance with management’s general or specific authorization;
(ii) transactions are recorded as necessary to permit preparation of
financial statements in conformity with generally accepted accounting
principles and to maintain accountability for assets; (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 existing assets at reasonable intervals and appropriate action is taken
with respect to any differences. The Company has disclosure controls and
procedures (as defined in Rules 13a-14 and 15d-14 under the Exchange Act)
that are designed to ensure that material information relating to the Company
is made known to the Company’s principal executive officer and the Company’s
principal financial officer or persons performing similar functions.


 


4.31    ERISA
Compliance. Each employee benefit plan, within the meaning of Section 3(3) of
the Employee Retirement Income Security Act of 1974, as amended (“ERISA”), that
is maintained, administered or contributed to by the Company or any entity that
is considered a “single employer” with the Company in accordance with Section 414
of the Internal Revenue Code of 1986, as amended (the “Code”), for employees or
former employees of the Company has been maintained in compliance with its
terms (except that in any case in which any plan is currently required to
comply with a provision of ERISA or of the Code, but is not yet required to be
amended to reflect such provision, it has been maintained, operated and
administered in accordance with such provision) and the requirements of any
applicable statutes, orders, rules and regulations, including but not
limited to ERISA and the Code; no prohibited transaction, within the meaning of
Section 406 of ERISA or Section 4975 of the Code, has occurred which
would result in a material liability to the Company with respect to any such
plan excluding transactions effected pursuant to a statutory or administrative
exemption; and for each such plan that is subject to the funding rules of Section 412
of the Code or Section 302 of ERISA, no “accumulated funding deficiency”
as defined in Section 412 of the Code has been incurred, whether or not
waived, and the fair market value of the assets of each such plan (excluding
for these purposes accrued but unpaid contributions) exceeds the present value
of all benefits accrued under such plan determined using reasonable actuarial
assumptions.


 


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


 


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4.33    Employee
Relations. The Company is not a party to any collective bargaining
agreement or employs any member of a union. The Company has no knowledge that
its relations with its employees are other than satisfactory. No executive
officer of the Company (as defined in Rule 501(f) of the Securities
Act) has notified the Company that such officer intends to leave the Company or
otherwise terminate such officer’s employment with the Company. No executive
officer of the Company, 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,
non-competition agreement, or any other contract or agreement or any
restrictive covenant, and the continued employment of each such executive
officer does not subject the Company to any liability with respect to any of
the foregoing matters.


 


4.34    Environmental
Matters. There has been no storage, disposal, generation, manufacture,
transportation, handling or treatment of toxic wastes, hazardous wastes or
hazardous substances by the Company (or, to the knowledge of the Company, any
of its predecessors in interest) at, upon or from any of the property now or
previously owned or leased by the Company in violation of any applicable law,
ordinance, rule, regulation, order, judgment, decree or permit or which would
require remedial action under any applicable law, ordinance, rule, regulation,
order, judgment, decree or permit, except where such violation or requirement,
as the case may be, would not reasonably be expected to have a Material Adverse
Effect; there has been no material spill, discharge, leak, emission, injection,
escape, dumping or release of any kind into such property or into the
environment surrounding such property of any toxic wastes, medical wastes, solid
wastes, hazardous wastes or hazardous substances due to or caused by the
Company or with respect to which the Company has knowledge, except where such
spill, discharge, leak, emission, injection, escape, dumping or release would
not reasonably be expected to have a Material Adverse Effect; the terms “hazardous
wastes”, “toxic wastes”, “hazardous substances”, and “medical wastes” shall
have the meanings specified in any applicable local, state, federal and foreign
laws or regulations with respect to environmental protection.


 


4.35    Reimbursement. If any Purchaser or any of its
affiliates or any officer, director, partner, controlling Person, employee or
agent of a Purchaser or any of its affiliates (a “Related Person”) becomes involved in any capacity in any
Proceeding (as defined below) brought by or against any Person in connection
with or as a result of the transactions contemplated by the Agreements, the
Company will indemnify and hold harmless such Purchaser or Related Person for
its reasonable legal and other expenses (including the costs of any
investigation, preparation and travel) and for any Losses (as defined below)
incurred in connection therewith, as such expenses or Losses are incurred,
excluding only Losses that result directly from such Purchaser’s or Related
Person’s gross negligence, willful misconduct or violation of applicable
securities laws. In addition, the Company shall indemnify and hold harmless
each Purchaser and Related Person from and against any and all Losses, as
incurred, arising out of or relating to any breach by the Company of any of the
representations, warranties or covenants made by the Company in this Agreement.
The conduct of any Proceedings for which indemnification is available under
this paragraph shall be governed by Section 7.3(c) below. The
indemnification obligations of the Company under this paragraph shall be in
addition to any liability that the Company may otherwise have and shall be
binding upon and inure to the benefit of any successors, assigns, heirs and
personal representatives of


 


10





















 


the
Purchasers and any such Related Persons. If the Company breaches its
obligations under this Agreement, then, in addition to any other liabilities
the Company may have under this Agreement or applicable law, the Company shall
pay or reimburse the Purchasers on demand for all costs of collection and
enforcement (including reasonable attorneys fees and
expenses). The Company specifically agrees to reimburse the Purchasers on demand
for all costs of enforcing the indemnification obligations in this paragraph. As
used in this Section, (i) ”Losses”
means any and all losses, claims, damages, liabilities, settlement costs and
expenses, including, without limitation, costs of preparation and reasonable
attorneys’ fees; and (ii) ”Proceeding”
means an action, claim, suit, investigation or proceeding (including, without
limitation, an investigation or partial proceeding, such as a deposition),
whether commenced or threatened.


 


SECTION 5.           Representations, Warranties and Covenants of the Purchaser.
(a) The Purchaser represents and warrants to, and covenants with, the
Company that:  (i) the Purchaser is
knowledgeable, sophisticated and experienced in making, and is qualified to
make, decisions with respect to investments in shares representing an
investment decision like that involved in the purchase of the Shares, including
investments in securities issued by the Company and comparable entities, and
has had the opportunity to request, receive, review and consider all
information it deems relevant in making an informed decision to purchase the
Shares; (ii) the Purchaser is acquiring the number of Shares set forth in Section 2
above in the ordinary course of its business and for its own account for
investment only and with no present intention of distributing any of such
Shares or any arrangement or understanding with any other persons regarding the
distribution of such Shares (this representation and warranty not limiting the
Purchaser’s right to sell pursuant to the Registration Statement or in
compliance with the Securities Act and the Rules and Regulations, or,
other than with respect to any claims arising out of a breach of this
representation and warranty, the Purchaser’s right to indemnification under Section 7.3);
(iii) the Purchaser will not, directly or indirectly, offer, sell, pledge,
transfer or otherwise dispose of (or solicit any offers to buy, purchase or
otherwise acquire or take a pledge of) any of the Shares, nor will the
Purchaser engage in any short sale that results in a disposition of any of the
Shares by the Purchaser, except in compliance with the Securities Act and the Rules and
Regulations and any applicable state securities laws; (iv) the Purchaser
has completed or caused to be completed the Registration Statement
Questionnaire attached hereto as part of Appendix I, for use in preparation of
the Registration Statement, and the answers thereto are true and correct as of
the date hereof and will be true and correct as of the effective date of the
Registration Statement and the Purchaser will notify the Company immediately of
any material change in any such information provided in the Registration
Statement Questionnaire until such time as the Purchaser has sold all of its
Shares or until the Company is no longer required to keep the Registration
Statement effective; (v) the Purchaser has, in connection with its
decision to purchase the number of Shares set forth in Section 2 above,
relied solely upon the Private Placement Memorandum and the documents included
therein or incorporated by reference and the representations and warranties of
the Company contained herein; (vi) the Purchaser has had an opportunity to
discuss this investment with representatives of the Company and ask questions
of them; (vii) the Purchaser is an “accredited investor” within the
meaning of Rule 501(a) of Regulation D promulgated under the
Securities Act; and (viii) the Purchaser agrees to notify the Company
immediately of any change in any of the foregoing information until such time
as the Purchaser has sold all of its Shares or the Company is no longer
required to keep the Registration Statement effective.


 


11





















 


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


 


(c)           For
the benefit of the Company, the Purchaser previously agreed with the Placement
Agent to keep confidential all information concerning this private placement.
The Purchaser understands that the information contained in the Private
Placement Memorandum is strictly confidential and proprietary to the Company
and has been prepared from the Company’s publicly available documents and other
information and is being submitted to the Purchaser solely for such Purchaser’s
confidential use. The Purchaser agrees to use the information contained in the
Private Placement Memorandum for the sole purpose of evaluating a possible
investment in the Shares and the Purchaser hereby acknowledges that it is
prohibited from reproducing or distributing the Private Placement Memorandum,
this Agreement, or any other offering materials or other information provided
by the Company in connection with the Purchaser’s consideration of its
investment in the Company, in whole or in part, or divulging or discussing any
of their contents, except to its financial, investment or legal advisors in
connection with its proposed investment in the Shares. Further, the Purchaser
understands that the existence and nature of all conversations and
presentations, if any, regarding the Company and this offering must be kept
strictly confidential. The Purchaser understands that the federal securities
laws impose restrictions on trading based on information regarding this
offering. In addition, the Purchaser hereby acknowledges that unauthorized
disclosure of information regarding this offering may result in a violation of
Regulation FD. The Purchaser’s obligations under this Section 5(c) will
terminate upon the filing by the Company of a press release or press releases
or a Current Report on Form 8-K describing this offering. The foregoing
agreements shall not apply to any information that is or becomes publicly
available through no fault of the Purchaser, or that the Purchaser is legally
required to disclose; provided, however, that if the Purchaser is requested or ordered to disclose any such information
pursuant to any court or other government order or any other applicable legal
procedure, it shall provide the Company with prompt notice of any such request
or order in time sufficient to enable the Company to seek an appropriate
protective order.


 


(d)           The
Purchaser understands that its investment in the Shares involves a significant
degree of risk, including a risk of total loss of the Purchaser’s investment,
and the Purchaser has full cognizance of and understands all of the risk
factors related to the Purchaser’s purchase of the Shares, including, but not
limited to, those set forth under the caption “Risk Factors” in the Private
Placement Memorandum. The Purchaser understands that the market price of the
Common Stock has been volatile and that no representation is being made as to
the future value of the Common Stock. The Purchaser has the knowledge and
experience in financial and business matters as to be capable of evaluating the
merits and risks of an investment in the Shares and has the ability to bear the
economic risks of an investment in the Shares.


 


12





















 


(e)           The
Purchaser understands that no United States federal or state agency or any
other government or governmental agency has passed upon or made any
recommendation or endorsement of the Shares.


 


(f)            The
Purchaser understands that, until such time as the Registration Statement has
been declared effective or the Shares may be sold pursuant to Rule 144
under the Securities Act without any restriction as to the number of securities
as of a particular date that can then be immediately sold, the Shares will bear
a restrictive legend in substantially the following form:


 


“The Shares evidenced by this certificate
have not been registered under the Securities Act of 1933, as amended (the “Securities
Act”), or the securities laws of any state or other jurisdiction. The Shares
may not be offered, sold, pledged or otherwise transferred except (1) pursuant
to an exemption from registration under the Securities Act or (2) pursuant
to an effective registration statement under the Securities Act, in each case
in accordance with all applicable securities laws of the states and other
jurisdictions, and in the case of a transaction exempt from registration,
unless the Company has received an opinion of counsel reasonably satisfactory
to it that such transaction does not require registration under the Securities
Act and such other applicable laws.”


 


Notwithstanding the foregoing, certificates evidencing
Shares shall not be required to contain such legend or any other legend (i) while
a Registration Statement covering the resale of such Shares is effective under
the Securities Act, or (ii) following any sale of such Shares pursuant to Rule 144
of the Securities Act (“Rule 144”) to a non-affiliate of the Company, as
defined under Rule 144, or (iii) if such Shares are eligible for sale
under Rule 144(k), or (iv) if such legend is not required under
applicable requirements of the Securities Act (including judicial
interpretations and pronouncements issued by the staff of the Commission). The
Company shall cause its counsel to issue a legal opinion to this effect to the
Company’s transfer agent on the effective date of the Registration Statement. Following
the effective date of the Registration Statement or at such earlier time as a
legend is no longer required for certain Shares, the Company will, no later
than three trading days following the delivery by a Purchaser to the Company or
the Company’s transfer agent of a legended certificate representing such
Shares, deliver or cause to be delivered to such Purchaser a certificate
representing such Shares that is free from all restrictive and other legends. The
Company may not make any notation on its records or give instructions to any
transfer agent of the Company that enlarge the restrictions on transfer set
forth in this Section.


 


(g)           The
Purchaser’s principal executive offices are in the jurisdiction set forth
immediately below the Purchaser’s name on the signature pages hereto.


 


(h)           The
Purchaser hereby covenants with the Company not to make any sale of the Shares
under the Registration Statement without complying with the provisions of this
Agreement and without effectively causing the prospectus delivery requirement
under the Securities Act to be satisfied. The Purchaser will notify the Company
promptly after the sale of


 


13





















 


all of its Shares.
The Purchaser acknowledges that there may occasionally be times when the
Company must suspend the use of the Prospectus forming a part of the
Registration Statement (a “Suspension”) until such time as an amendment to the
Registration Statement has been filed by the Company and declared effective by
the Commission, or until such time as the Company has filed an appropriate
report with the Commission pursuant to the Exchange Act. The Purchaser hereby
covenants that it will not sell any Shares pursuant to said Prospectus during
the period commencing at the time at which the Company gives the Purchaser
written notice of the Suspension of the use of said Prospectus and ending at
the time the Company gives the Purchaser written notice that the Purchaser may
thereafter effect sales pursuant to said Prospectus. Notwithstanding the
foregoing, the Company agrees that no Suspension shall be for a period of
longer than 30 consecutive days, and no Suspension shall be for a period of an
aggregate in any 365-day period of longer than 60 days.


 


(i)            The
Purchaser further represents and warrants to, and covenants with, the Company
that (i) the Purchaser has full right, power, authority and capacity to
enter into this Agreement and to consummate the transactions contemplated
hereby and has taken all necessary action to authorize the execution, delivery
and performance of this Agreement, (ii) the making and performance of this
Agreement by the Purchaser and the consummation of the transactions herein
contemplated will not violate any provision of the organizational documents of
the Purchaser or conflict with, result in the breach or violation of, or
constitute, either by itself or upon notice or the passage of time or both, a
default under any material agreement, mortgage, deed of trust, lease,
franchise, license, indenture, permit or other instrument to which the
Purchaser is a party, or any statute or any authorization, judgment, decree,
order, rule or regulation of any court or any regulatory body,
administrative agency or other governmental body applicable to the Purchaser, (iii) no
consent, approval, authorization or other order of any court, regulatory body,
administrative agency or other governmental body is required on the part of the
Purchaser for the execution and delivery of this Agreement or the consummation of
the transactions contemplated by this Agreement, (iv) upon the execution
and delivery of this Agreement, this Agreement shall constitute a legal, valid
and binding obligation of the Purchaser, enforceable in accordance with its
terms, 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) and except to
the extent enforcement of the indemnification provisions, set forth in Section 7.3
of this Agreement, may be limited by federal or state securities laws or the public
policy underlying such laws, and (v) there is not in effect any order
enjoining or restraining the Purchaser from entering into or engaging in any of
the transactions contemplated by this Agreement.


 


SECTION 6.           Survival of Representations, Warranties and Agreements.
Notwithstanding any investigation made by any party to this Agreement or by the
Placement Agent, all covenants, agreements, representations and warranties made
by the Company and the Purchaser herein and in the certificates for the Shares
delivered pursuant hereto shall survive the execution of this Agreement, the
delivery to the Purchaser of the Shares being purchased and the payment
therefore.


 


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SECTION 7.           Registration of the Shares; Compliance with the Securities Act.


 


7.1      Registration
Procedures and Expenses. The Company shall:


 


(a)           as
soon as reasonably practicable, but in no event later than ten days following
the Closing Date, prepare and file with the Commission the Registration Statement
on Form S-3 relating to the sale of the Shares by the Purchaser and the
Other Purchasers from time to time on the Nasdaq National Market or the
facilities of any national securities exchange on which the Common Stock is
then traded or in privately-negotiated transactions, which Registration
Statement shall have a “Plan of Distribution” section substantially in the
form set forth in Exhibit A attached hereto;


 


(b)           use
its best efforts, subject to receipt of necessary information from the
Purchasers, to cause the Commission to declare the Registration Statement
effective within sixty (60) days after the Closing Date or, in the event of a
review of the Registration Statement by the Commission, within one hundred
twenty (120) days after the Closing Date (the “Required Effectiveness Date”);


 


(c)           use
its best efforts, subject to receipt of necessary information from the
Purchasers, to promptly prepare and file with the Commission such amendments
and supplements to the Registration Statement and the prospectus used in
connection therewith as may be necessary to keep the Registration Statement
effective until the earliest of (i) two years after the effective date of
the Registration Statement, or (ii) such time as the Shares become
eligible for resale by non-affiliates pursuant to Rule 144(k) under the
Securities Act of 1933, as amended (the “Effectiveness Period”);


 


(d)           furnish
to the Purchaser with respect to the Shares registered under the Registration
Statement (and to each underwriter, if any, of such Shares) such number of
copies of prospectuses and such other documents as the Purchaser may reasonably
request, in order to facilitate the public sale or other disposition of all or
any of the Shares by the Purchaser;


 


(e)           file
documents required of the Company for normal Blue Sky clearance in states
specified in writing by the Purchaser; 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;


 


(f)            bear
all expenses in connection with the procedures in paragraphs (a) through (e) of
this Section 7.1 and the registration of the Shares pursuant to the
Registration Statement, other than fees and expenses, if any, of counsel or other
advisers to the Purchaser or the Other Purchasers or underwriting discounts,
brokerage fees and commissions incurred by the Purchaser or the Other
Purchasers, if any;


 


(g)           file a Form D with respect to the Shares as required
under Regulation D and to provide a copy thereof to the Purchaser promptly
after filing;


 


(h)           issue a press release describing the transactions
contemplated by this Agreement on the Closing Date; and


 


15





















 


(i)            make
available, while the Registration Statement is effective and available for
resale, its Chief Executive Officer and Chief Financial Officer for questions
regarding information which the Purchaser may reasonably request in order to
fulfill any due diligence obligation on its part.


 


The Company understands that the Purchaser disclaims
being an underwriter, but the Purchaser being deemed an underwriter shall not
relieve the Company of any obligations it has hereunder. A questionnaire
related thereto to be completed by the Purchaser is attached hereto as Appendix
I.


 


If (i) the Registration Statement is not filed on or prior to ten
days following the Closing Date or the Company fails to file with the
Commission a request for acceleration in accordance with Rule 461
promulgated under the Securities Act, within five trading days after the date
that the Company is notified (orally or in writing, whichever is earlier) by
the Commission that the Registration Statement will not be “reviewed,” or will
not be subject to further review, (ii) the Registration Statement filed
hereunder is not declared effective by the Commission by the Required
Effectiveness Date, or (iii) after the Registration Statement is filed
with and declared effective by the Commission, such Registration Statement
ceases to be effective as to all the Shares to which it is required to relate
at any time prior to the expiration of the Effectiveness Period without being
succeeded within ten trading days by an amendment to such Registration
Statement or by a subsequent Registration Statement filed with and declared
effective by the Commission, or (iv) the Common Stock is not listed or
quoted, or is suspended from trading on, the Nasdaq National Market or the
facilities of any national securities exchange on which the Common Stock is
then traded for a period of three trading days (which need not be consecutive
trading days) (any such failure or breach being referred to as an “Event,” and
the date on which such Event occurs being referred to as “Event Date”), then:
(x) on each such Event Date the Company shall pay to each Purchaser an amount
in cash, as partial liquidated damages and not as a penalty, equal to 1% of the
aggregate purchase price paid by such Purchaser pursuant to the Purchase
Agreement; and (y) on each monthly anniversary of each such Event Date thereof
(if the applicable Event shall not have been cured by such date) until the
applicable Event is cured, the Company shall pay to each Purchaser an amount in
cash, as partial liquidated damages and not as a penalty, equal to 1% of the
aggregate purchase price paid by such Purchaser pursuant to the Purchase
Agreement. Such payments shall be in partial compensation to the Purchasers and
shall not constitute the Purchaser’s exclusive remedy for such events. If the
Company fails to pay any liquidated damages pursuant to this Section in
full within seven days after the date payable, the Company will pay interest
thereon at a rate of 10% per annum (or such lesser maximum amount that is
permitted to be paid by applicable law) to the Purchaser, accruing daily from
the date such liquidated damages are due until such amounts, plus all such
interest thereon, are paid in full.


 


7.2      Transfer
of Shares After Registration. The Purchaser agrees
that it will not effect any disposition of the Shares, except as contemplated
in the Registration Statement referred to in Section 7.1 or as otherwise
permitted by law, and that it will promptly notify the Company of any changes
in the information set forth in the Registration Statement regarding the Purchaser
or its plan of distribution.


 


16





















 


7.3      Indemnification.
For the purpose of this Section 7.3:


 


(i)       the term “Purchaser/Affiliate”
shall mean any affiliate of the Purchaser, including a transferee who is an
affiliate of the Purchaser, and any person who controls the Purchaser or any
affiliate of the Purchaser within the meaning of Section 15 of the
Securities Act or Section 20 of the Exchange Act; and


 


(ii)      the term “Registration Statement” shall include any
preliminary prospectus, final prospectus, exhibit, supplement or amendment
included in or relating to, and any document incorporated by reference in, the
Registration Statement referred to in Section 7.1.


 


(a)           The
Company agrees to indemnify and hold harmless each Purchaser and each
Purchaser/Affiliate against any losses, claims, damages, liabilities or
expenses, joint or several, to which such Purchaser or Purchaser/Affiliate may
become subject, under the Securities Act, the Exchange Act, or any other
federal or state statutory law or regulation, or at common law or otherwise
(including in settlement of any litigation, if such settlement is effected with
the prior written consent of the Company), insofar as such losses, claims,
damages, liabilities or expenses (or actions in respect thereof as contemplated
below) arise out of or are based upon any untrue statement of any material fact
contained in the Registration Statement, including the Prospectus, financial
statements and schedules, and all other documents filed as a part thereof, as
amended at the time of effectiveness of the Registration Statement, including
any information deemed to be a part thereof as of the time of effectiveness
pursuant to paragraph (b) of Rule 430A, or pursuant to Rule 434,
of the Rules and Regulations, or the Prospectus, in the form first filed
with the Commission pursuant to Rule 424(b) of the Regulations, or
filed as part of the Registration Statement at the time of effectiveness if no Rule 424(b) filing
is required, or any amendment or supplement thereto, or arise out of or are
based upon the omission to state in any of them a material fact required to be
stated therein or necessary to make the statements in any of them, in light of
the circumstances under which they were made, not misleading, or arise out of
or are based in whole or in part on any inaccuracy in the representations or
warranties of the Company contained in this Agreement, or any failure of the
Company to perform its obligations hereunder or under law, and will promptly
reimburse each such Purchaser and each such Purchaser/Affiliate for any legal
and other expenses as such expenses are reasonably incurred by such Purchaser
or such Purchaser/Affiliate in connection with investigating, defending or
preparing to defend, settling, compromising or paying any such loss, claim,
damage, liability, expense or action not to exceed the proceeds from the
purchase and sale of the Shares paid by such Purchaser; provided, however,
that the Company will not be liable in any such case to the extent, but only to
the extent, that any such loss, claim, damage, liability or expense arises out
of or is based upon (i) an untrue statement or omission made in the
Registration Statement, the Prospectus or any amendment or supplement thereto
in reliance upon and in conformity with written information furnished to the
Company by or on behalf of the Purchaser expressly for use therein, or (ii) any
statement or omission in any Prospectus that is corrected in any subsequent
Prospectus that was delivered to the Purchaser prior to the pertinent sale or
sales by the Purchaser.


 


(b)           Each
Purchaser will severally indemnify and hold harmless the Company, each of its
directors, each of its executive officers, including such officers who signed


 


17





















 


the Registration
Statement, and each person, if any, who controls the Company within the meaning
of Section 15 of the Securities Act or Section 20 of the Exchange
Act, against any losses, claims, actual damages, liabilities or reasonable expenses
to which the Company, each of its directors, each of its executive officers,
including such officers who signed the Registration Statement, or controlling
person may become subject, under the Securities Act, the Exchange Act, or any
other federal or state statutory law or regulation, or at common law or
otherwise (including in settlement of any litigation, if such settlement is
effected with the written consent of such Purchaser) insofar as such losses,
claims, damages, liabilities or expenses (or actions in respect thereof as
contemplated below) arise out of or are based upon any untrue statement of any
material fact contained in the Registration Statement, the Prospectus, or any
amendment or supplement thereto, or arise out of or are based upon the omission
to state therein a material fact required to be stated therein or necessary to
make the statements therein not misleading, in each case to the extent, but
only to the extent, that such untrue statement or omission was made in the
Registration Statement, the Prospectus, or any amendment or supplement thereto,
in reliance upon and in conformity with written information furnished to the
Company by or on behalf of any Purchaser expressly for use therein, and will
reimburse the Company, each of its directors, each of its executive officers,
including such officers who signed the Registration Statement, or controlling
person for any legal and other expense reasonably incurred by the Company, each
of its directors, each of its executive officers, including such officers who
signed the Registration Statement, or controlling person in connection with
investigating, defending, settling, compromising or paying any such loss,
claim, damage, liability, expense or action.


 


(c)           Promptly
after receipt by an indemnified party under this Section 7.3 of notice of
the threat or commencement of any action, such indemnified party will, if a
claim in respect thereof is to be made against an indemnifying party under this
Section 7.3, promptly notify the indemnifying party in writing thereof;
but the omission so to notify the indemnifying party will not relieve it from
any liability which it may have to any indemnified party for contribution or
otherwise under the indemnity agreement contained in this Section 7.3 to
the extent it is not prejudiced as a result of such failure. In case any such
action is brought against any indemnified party and such indemnified party
seeks or intends to seek indemnity from an indemnifying party, the indemnifying
party will be entitled to participate in, and, to the extent that it may wish,
jointly with all other indemnifying parties similarly notified, to assume the
defense thereof with counsel reasonably satisfactory to such indemnified party;
provided, however, if the defendants in any such action include
both the indemnified party and the indemnifying party and the indemnified party
shall have reasonably concluded, based on an opinion of counsel reasonably
satisfactory to the indemnifying party, that there may be a conflict of
interest between the positions of the indemnifying party and the indemnified
party in conducting the defense of any such action or that there may be legal
defenses available to it and/or other indemnified parties which are different
from or additional to those available to the indemnifying party, the
indemnified party or parties shall have the right to select separate counsel to
assume such legal defenses and to otherwise participate in the defense of such
action on behalf of such indemnified party or parties. Upon receipt of notice
from the indemnifying party to such indemnified party of its election to assume
the defense of such action and approval by the indemnified party of counsel,
the indemnifying party will not be liable to such indemnified party under this Section 7.3
for any legal or other expenses subsequently incurred by such indemnified party
in connection with the defense thereof unless (i) the indemnified party
shall have employed such counsel in connection with the assumption of legal
defenses in


 


18





















 


accordance with the proviso to the preceding sentence (it being
understood, however, that the indemnifying party shall not be liable for the
expenses of more than one separate counsel, reasonably satisfactory to such
indemnifying party, representing all of the indemnified parties who are parties
to such action) or (ii) the indemnifying party shall not have employed
counsel reasonably satisfactory to the indemnified party to represent the indemnified
party within a reasonable time after notice of commencement of action, in each
of which cases the reasonable fees and expenses of counsel shall be at the
expense of the indemnifying party. In no event shall any indemnifying party be
liable in respect of any amounts paid in settlement of any action unless the
indemnifying party shall have approved in writing the terms of such settlement;
provided that such consent shall not be unreasonably withheld. No
indemnifying party shall, without the prior written consent of the indemnified
party, effect any settlement of any pending or threatened proceeding in respect
of which any indemnified party is or could have been a party and
indemnification could have been sought hereunder by such indemnified party from
all liability on claims that are the subject matter of such proceeding.


 


(d)           If
the indemnification provided for in this Section 7.3 is required by its
terms but is for any reason held to be unavailable to or otherwise insufficient
to hold harmless an indemnified party under paragraphs (a), (b) or (c) of
this Section 7.3 in respect to any losses, claims, damages, liabilities or
expenses referred to herein, then each applicable indemnifying party shall
contribute to the amount paid or payable by such indemnified party as a result
of any losses, claims, damages, liabilities or expenses referred to herein (i) in
such proportion as is appropriate to reflect the relative benefits received by
the Company and the Purchaser from the private placement of Common Stock
hereunder or (ii) if the allocation provided by clause (i) above is
not permitted by applicable law, in such proportion as is appropriate to
reflect not only the relative benefits referred to in clause (i) above but
the relative fault of the Company and the Purchaser in connection with the
statements or omissions or inaccuracies in the representations and warranties
in this Agreement and/or the Registration Statement which resulted in such
losses, claims, damages, liabilities or expenses, as well as any other relevant
equitable considerations. The respective relative benefits received by the
Company on the one hand and each Purchaser on the other shall be deemed to be
in the same proportion as the amount paid by such Purchaser to the Company
pursuant to this Agreement for the Shares purchased by such Purchaser that were
sold pursuant to the Registration Statement bears to the difference (the “Difference”)
between the net amount such Purchaser paid for the Shares that were sold
pursuant to the Registration Statement and the amount received by such
Purchaser from such sale. The relative fault of the Company, on the one hand,
and each Purchaser on the other shall be determined by reference to, among
other things, whether the untrue statement of a material fact or the omission
to state a material fact or the inaccurate representation and/or warranty
relates to information supplied by the Company or by such Purchaser and the
parties’ relative intent, knowledge, access to information and opportunity to
correct or prevent such statement or omission. The amount paid or payable by a
party as a result of the losses, claims, damages, liabilities and expenses
referred to above shall be deemed to include, subject to the limitations set
forth in paragraph (c) of this Section 7.3, any legal or other fees
or expenses reasonably incurred by such party in connection with investigating
or defending any action or claim. The provisions set forth in paragraph (c) of
this Section 7.3 with respect to the notice of the threat or commencement
of any threat or action shall apply if a claim for contribution is to be made
under this paragraph (d); provided, however, that no additional
notice shall be required with respect to any threat or action for which notice
has been given under 


 


19





















 


paragraph (c) for
purposes of indemnification. The Company and each Purchaser agree that it would
not be just and equitable if contribution pursuant to this Section 7.3
were determined solely by pro rata allocation (even if the Purchaser were
treated as one entity for such purpose) or by any other method of allocation
which does not take account of the equitable considerations referred to in this
paragraph. Notwithstanding the provisions of this Section 7.3, no
Purchaser shall be required to contribute any amount in excess of the amount by
which the Difference exceeds the amount of any damages that such Purchaser has
otherwise been required to pay by reason of such untrue statement or omission. 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 Purchasers’ obligations to
contribute pursuant to this Section 7.3 are several and not joint.


 


7.4      Termination
of Conditions and Obligations. The restrictions imposed by Section 5
or this Section 7 upon the transferability of the Shares shall cease and
terminate as to any particular number of the Shares upon the passage of two
years from the effective date of the Registration Statement covering such
Shares or at such time as an opinion of counsel satisfactory in form and
substance to the Company shall have been rendered to the effect that such
conditions are not necessary in order to comply with the Securities Act.


 


7.5      Information
Available. So long as the Registration Statement is effective covering the
resale of Shares owned by the Purchaser, the Company will furnish to the
Purchaser:


 


(a)           other
than any such reports or communications filed with the Commission pursuant to
the Commission’s EDGAR system, as soon as practicable after available (but in
the case of the Annual Report to the Stockholders, within 150 days after the
end of each fiscal year of the Company), one copy of (i) its Annual Report
to Stockholders (which Annual Report shall contain financial statements audited
in accordance with generally accepted accounting principles by a national firm
of certified public accountants), (ii) if not included in substance in the
Annual Report to Stockholders, upon the request of Purchaser, its Annual Report
on Form 10-K, (iii) upon request of Purchaser, its quarterly reports
on Form 10-Q, and (iv) a full copy of the particular Registration
Statement covering the Shares (the foregoing, in each case, excluding
exhibits); and


 


(b)           upon the reasonable request of the Purchaser, a reasonable
number of copies of the Prospectuses, and any supplements thereto, to supply to
any other party requiring such Prospectuses.


 


SECTION 8.           Broker’s
Fee. The Purchaser acknowledges that the Company intends to pay to the
Placement Agent a fee in respect of the sale of the Shares to the Purchaser. The
Purchaser and the Company hereby agree that the Purchaser shall not be
responsible for such fee and that the Company will indemnify and hold harmless
the Purchaser and each Purchaser/Affiliate against any losses, claims, damages,
liabilities or expenses, joint or several, to which such Purchaser or
Purchaser/Affiliate may become subject with respect to such fee. Each of the
parties hereto hereby represents that, on the basis of any actions and
agreements by it, there are no other brokers or finders entitled to
compensation in connection with the sale of the Shares to the Purchaser.


 


20





















 


SECTION 9.           Notices. All notices required or permitted hereunder
shall be in writing and shall be deemed effectively given: (i) upon
delivery to the party to be notified; (ii) when received by confirmed
facsimile or (iii) one (1) business day after deposit with a
nationally recognized overnight carrier, specifying next business day delivery,
with written verification of receipt. All communications shall be sent to the
Company and the Purchaser as follows or at such other addresses as the Company
or the Purchaser may designate upon ten (10) days’ advance written notice
to the other party:


 


 


(a)           if to the
Company, to:


 


Pharmacopeia
Drug Discovery, Inc.


P.O. Box
5350


Princeton, New
Jersey 08543-5350


Attn: General
Counsel


Facsimile:
(609) 452-3777


 


with a copy to:


James A.
Lebovitz, Esq.


Dechert LLP


4000 Bell
Atlantic Tower


1717 Arch
Street


Philadelphia,
PA 19103


Facsimile:
(215) 994-2222


 


(b)           if to the Purchaser, at its address as set forth at the end
of this Agreement.


 


SECTION 10.         Changes. This Agreement may not be modified or
amended except pursuant to an instrument in writing signed by the Company and
the Purchaser. No provision hereunder may be waived other than in a written
instrument executed by the waiving party.


 


SECTION 11.         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.


 


SECTION 12.         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.


 


SECTION 13.         Governing Law and Jurisdiction. This Agreement shall
be governed by and construed in accordance with the laws of the State of New
York and the federal law of the United States of America. THE COMPANY AND THE
PURCHASER HEREBY IRREVOCABLY SUBMIT 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 BROUGHT BY THE


 


21





















 


COMPANY OR THE PURCHASER
HEREUNDER, IN CONNECTION HEREWITH OR WITH ANY TRANSACTION CONTEMPLATED HEREBY
OR DISCUSSED HEREIN (INCLUDING WITH RESPECT TO THE ENFORCEMENT OF THIS
AGREEMENT), AND HEREBY IRREVOCABLY WAIVE, AND AGREE NOT TO ASSERT IN ANY SUIT,
ACTION OR PROCEEDING BROUGHT BY THE COMPANY OR THE PURCHASER, ANY CLAIM THAT IT
IS NOT PERSONALLY SUBJECT TO THE JURISDICTION OF ANY SUCH COURT, OR THAT SUCH
SUIT, ACTION OR PROCEEDING IS IMPROPER. EACH PARTY HEREBY IRREVOCABLY WAIVES
PERSONAL SERVICE OF PROCESS AND CONSENTS TO PROCESS BEING SERVED IN ANY SUCH
SUIT, ACTION OR PROCEEDING BY MAILING A COPY THEREOF 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 MANNER PERMITTED BY LAW. THE COMPANY AND THE PURCHASER
HEREBY WAIVE ALL RIGHTS TO A TRIAL BY JURY.


 


SECTION 14.         Counterparts. This Agreement may be executed in two
or more counterparts, each of which shall constitute an original, but all of
which, when taken together, shall constitute but one instrument, and shall
become effective when one or more counterparts have been signed by each party
hereto and delivered (including by facsimile) to the other parties.


 


SECTION 15.         Entire Agreement. This Agreement and the instruments
referenced herein contain the entire understanding of the parties with respect
to the matters covered herein and therein and, except as specifically set forth
herein or therein, neither the Company nor the Purchaser makes any
representation, warranty, covenant or undertaking with respect to such matters.


 


SECTION 16.         Parties. This agreement is made solely for the benefit
of and is binding upon the Purchaser and the Company and to the extent provided
in Section 7.3, any person controlling the Company or the Purchaser, the
officers and directors of the Company, and their respective executors,
administrators, successors and assigns and subject to the provisions of Section 7.3,
no other person shall acquire or have any right under or by virtue of this
Agreement. The term “successors and assigns” shall not include any subsequent
purchaser, as such purchaser, of the Shares sold to the Purchaser pursuant to
this Agreement.


 


SECTION 17.         Assignment. Except as otherwise expressly provided
herein, the provisions hereof shall inure to the benefit of, and be binding
upon, the parties hereto and their respective permitted successors, assigns,
heirs, executors and administrators. This Agreement and the rights of the
Purchaser hereunder may be assigned by the Purchaser with the prior written
consent of the Company, except such consent shall not be required in cases of
assignments by an investment adviser to a fund for which it is the adviser or
by or among funds that are under common control, provided that such assignee
agrees to be bound by the terms of this Agreement.


 


22





















 


SECTION 18.         Further Assurances. Each party agrees to cooperate
fully with the other parties and to execute such further instruments, documents
and agreements and to give such further written assurance as may be reasonably
requested by any other party to evidence and reflect the transactions described
herein and contemplated hereby and to carry into effect the intents and
purposes of this Agreement.


 


SECTION 19.         Independent Nature of Purchasers’ Obligations
and Rights. The obligations and rights of each
Purchaser under the Agreements are several and not joint with the obligations
and rights of any other Purchaser, and no Purchaser
shall be responsible in any way for the performance of the obligations of any
other Purchaser under any Agreement. The decision of each Purchaser to purchase
Shares pursuant to the Agreements has been made by such Purchaser independently
of any other Purchaser and independently of any information, materials,
statements or opinions as to the business, affairs, operations, assets,
properties, liabilities, results of operations, condition (financial or
otherwise) or prospects of the Company which may have been made or given by any
other Purchaser or by any agent or employee of any other Purchaser, and no
Purchaser or any of its agents or employees shall have any liability to any
other Purchaser (or any other Person) relating to or arising from any such
information, materials, statements or opinions. Nothing contained herein or in
other Agreements, and no action taken by any Purchaser pursuant thereto, shall
be deemed to constitute the Purchasers as a partnership, an association, a
joint venture or any other kind of entity, or create a presumption that the
Purchasers are in any way acting in concert or as a group with respect to such
obligations or the transactions contemplated by the Agreements. The Company
hereby confirms that it understands and agrees that the Purchasers are not
acting as a “group” as that term is used in Section 13(d) of the
Exchange Act. The Purchaser acknowledges that no other Purchaser has acted as
agent for such Purchaser in connection with making its investment hereunder and
that no other Purchaser will be acting as agent of such Purchaser in connection
with monitoring its investment hereunder. Each Purchaser shall be entitled to
independently protect and enforce its rights, including without limitation the
rights arising out of the Agreements, and it shall not be necessary for any
other Purchaser to be joined as an additional party in any proceeding for such
purpose.


 


[Remainder of Page Left
Intentionally Blank]


 


23





















 


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


 


	
   

  	
  PHARMACOPEIA DRUG DISCOVERY, INC.

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  	
   

  
	
   

  	
   

  	
  Leslie J. Browne

  
	
   

  	
   

  	
  President and Chief Executive Officer

  
	
   

  	
   

  
	
   

  	
  Print or
  Type:

  	
   

  
	
   

  	
   

  
	
   

  	
  Name of Purchaser

  
	
   

  	
  (Individual or Institution):

  
	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  Name of Individual representing

  
	
   

  	
  Purchaser (if an Institution):

  
	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  Title of Individual representing

  
	
   

  	
  Purchaser (if an Institution):

  
	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  Signature
  by:

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  Individual Purchaser or Individual

  
	
   

  	
  representing Purchaser:

  
	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  Address:

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  Telephone:

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  Telecopier:

  	
   

  	
   

  
											



 





















 


SUMMARY INSTRUCTION SHEET FOR PURCHASER


 


(to be read in
conjunction with the entire

Purchase Agreement which this follows)


 


A.            Complete
the following items on BOTH
Purchase Agreements (Please sign two originals):


 


1.             Page 22
- Signature:


 


(i)                                     Name
of Purchaser (Individual or Institution)


 


(ii)                                  Name
of Individual representing Purchaser (if an Institution)


 


(iii)                               Title
of Individual representing Purchaser (if an Institution)


 


(iv)                              Signature
of Individual Purchaser or Individual representing Purchaser


 


2.                                       Appendix
I - Stock Certificate Questionnaire/Registration Statement Questionnaire:


 


Provide the information requested by the Stock
Certificate Questionnaire and the Registration Statement Questionnaire.


 


3.                                       Return
BOTH properly completed and signed
Purchase Agreements including the properly completed Appendix I to (initially
by facsimile with hand copy by overnight delivery):


 




	
  Jefferies & Company, Inc.

  
	
  520 Madison Avenue, 10th Floor

  
	
  New York, NY 10022

  
	
  Attention: Annette Grimaldi

  
	
  Facsimile:
  (212) 284-8158

  






 


B.            Instructions
regarding the transfer of funds for the purchase of Shares will be sent by
facsimile to the Purchaser by the Placement Agent at a later date.


 


C.            Upon
the resale of the Shares by the Purchasers after the Registration Statement
covering the Shares is effective, as described in the Purchase Agreement, the
Purchaser:


 


(i)                                     must
deliver a current prospectus of the Company to the buyer (prospectuses must be
obtained from the Company at the Purchaser’s request); and


 


(ii)                                  must send a letter in the form of Appendix II to the Company
so that the Shares may be properly transferred.


 





















 


Appendix I


 


Pharmacopeia Drug Discovery, Inc.

STOCK CERTIFICATE QUESTIONNAIRE


 


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


 


	
  1.

  	
   

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

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  2.

  	
   

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

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  3.

  	
   

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

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  4.

  	
   

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

  	
   

  	
   

  	
   

  



 


1





















 


Pharmacopeia Drug Discovery, Inc.

REGISTRATION STATEMENT QUESTIONNAIRE


 


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


 


SECTION 1.           Pursuant
to the “Selling Stockholder” section of the Registration Statement, please
state your or your organization’s name exactly as it should appear in the
Registration Statement:


 


 


SECTION 2.           The
number of shares being purchased and the purchase price being paid by you:


 


	
  Number to Be

  Purchased

  	
   

  	
  Price Per

  Share In

  Dollars

  	
   

  	
  Aggregate

  Price

  	
   

  
	
   

  	
   

  	
  $

  	
   

  	
   

  	
  $

  	
   

  	
   

  
								



 


SECTION 3.           Please
provide the number of shares that you, your organization or any affiliates will
own immediately after Closing, including those Shares purchased by you or your
organization pursuant to this Purchase Agreement and those shares purchased by
you or your organization through other transactions:


 




	
  Your Name (or name of

  Affiliated Entity)

  	
   

  	
  Number Of Shares

  Owned

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  






 


2





















 


SECTION 4.           Have
you or your organization had any position, office or other material
relationship within the past three years with the Company or its affiliates?


 


o Yes       o
No


 


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


 


 


 


SECTION 5.           Are
you (i) an NASD Member (see definition), (ii) a Controlling (see
definition) shareholder of an NASD Member, (iii) a Person Associated with
a Member of the NASD (see definition), or (iv) an Underwriter or a Related
Person (see definition) with respect to the proposed offering; or (b) do
you own any shares or other securities of any NASD Member not purchased in the
open market; or (c) have you made any outstanding subordinated loans to any
NASD Member?


 


Answer:  o Yes   o 
No        If “yes,” please describe
below


 


 


 





















 


NASD Member. The term “NASD member”
means either any broker or dealer admitted to membership in the National
Association of Securities Dealers, Inc. (“NASD”). (NASD Manual, By-laws Article I,
Definitions)


 


Control.
The term “control” (including the terms “controlling,” “controlled by” and “under
common control with”) means the possession, direct or indirect, of the power,
either individually or with others, to direct or cause the direction of the
management and policies of a person, whether through the ownership of voting
securities, by contract, or otherwise. (Rule 405 under the Securities Act
of 1933, as amended)


 


Person Associated with a member of the NASD.
The term “person associated with a member of the NASD” means every sole
proprietor, partner, officer, director, branch manager or executive
representative of any NASD Member, or any natural person occupying a similar
status or performing similar functions, or any natural person engaged in the
investment banking or securities business who is directly or indirectly
controlling or controlled by a NASD Member, whether or not such person is
registered or exempt from registration with the NASD pursuant to its bylaws. (NASD
Manual, By-laws Article I, Definitions)


 


Underwriter or a Related
Person. The term “underwriter or a related person”
means, with respect to a proposed offering, underwriters, underwriters’
counsel, financial consultants and advisors, finders, members of the selling or
distribution group, and any and all other persons associated with or related to
any of such persons. (NASD Interpretation)


 


3





















 


EXHIBIT A


 


Plan
of Distribution


 


We are registering the shares of our common stock on
behalf of the selling stockholders. A selling stockholder is a person named in
the section entitled “Selling Stockholders” and also includes any donee,
pledgee, transferee or other successor-in-interest selling shares received
after the date of this prospectus from a selling stockholder as a gift or other
non-sale related transfer.


 


We do not know of any
plan of distribution for the resale of our common stock by the selling
stockholders. We will not receive any of the proceeds from the sale by the
selling stockholders of any of the resale shares.


 


The selling stockholders
may, from time to time, sell any or all of their shares of common stock on any
stock exchange, market or trading facility on which the shares are traded or in
private transactions. These sales may be at fixed or negotiated prices. The
selling stockholders may use any one or more of the following methods when
selling shares:


 


•                  ordinary
brokerage transactions and transactions in which the broker-dealer solicits
purchasers;


 


•                  block
trades in which the broker-dealer will attempt to sell the shares as agent but
may position and resell a portion of the block as principal to facilitate the
transaction;


 


•                  purchases
by a broker-dealer as principal and resale by the broker-dealer for its
account;


 


•                  an
exchange distribution in accordance with the rules of the applicable
exchange;


 


•                  privately
negotiated transactions;


 


•                  short
sales;


 


•                  broker-dealers
may agree with the selling stockholders to sell a specified number of such
shares at a stipulated price per share;


 


•                  a
combination of any such methods of sale; and


 


•                  any other method permitted pursuant to applicable law.


 


The selling stockholders
may also sell shares under Rule 144 under the Securities Act, if
available, rather than under this prospectus.


 


The selling stockholders
may also engage in short sales against the box, puts and calls and other
transactions in our securities or derivatives of our securities and may sell or
deliver shares of our common stock in connection with these trades.


 


Broker-dealers engaged by
the selling stockholders may arrange for other brokers-dealers to participate
in sales. Broker-dealers may receive commissions or discounts from the


 





















 


selling
stockholders (or, if any broker-dealer acts as agent for the purchaser of
shares, from the purchaser) in amounts to be negotiated. The selling
stockholders do not expect these commissions and discounts to exceed what is
customary in the types of transactions involved. Any profits on the resale of
shares of common stock by a broker-dealer acting as principal might be deemed
to be underwriting discounts or commissions under the Securities Act. Discounts,
concessions, commissions and similar selling expenses, if any, attributable to
the sale of shares will be borne by a selling stockholder. The selling
stockholders may agree to indemnify any agent, dealer or broker-dealer that
participates in transactions involving sales of the shares if liabilities are
imposed on that person under the Securities Act.


 


The selling stockholders
may from time to time pledge or grant a security interest in some or all of the
shares of common stock owned by them and, if they default in the performance of
their secured obligations, the pledgees or secured parties shall be deemed
selling stockholders who may offer and sell the shares of common stock from time
to time under this prospectus.


 


The selling stockholders
also may transfer the shares of common stock in other circumstances, in which
case the transferees, pledgees or other successors in interest will be deemed the
selling beneficial owners for purposes of this prospectus and may sell the
shares of common stock from time to time under this prospectus.


 


The selling stockholders
and any broker-dealers or agents that are involved in selling the shares of
common stock may be deemed to be “underwriters” within the meaning of the
Securities Act in connection with such sales. In such event, any commissions
received by such broker-dealers or agents and any profit on the resale of the
shares of common stock purchased by them may be deemed to be underwriting
commissions or discounts under the Securities Act.


 


We are required to pay
all fees and expenses incident to the registration of the shares of common
stock. We have agreed to indemnify the selling stockholders against certain
losses, claims, damages and liabilities, including liabilities under the
Securities Act.


 


The selling stockholders
have advised us that they have not entered into any agreements, understandings
or arrangements with any underwriters or broker-dealers regarding the sale of
their shares of common stock, nor is there an underwriter or coordinating
broker acting in connection with a proposed sale of shares of common stock by
any selling stockholder. If we are notified by any selling stockholder that any
material arrangement has been entered into with a broker-dealer for the sale of
shares of common stock, if required, we will supplement this prospectus. If the
selling stockholders use this prospectus for any sale of the shares of common
stock, they will be subject to the prospectus delivery requirements of the
Securities Act.


 


The anti-manipulation rules of
Regulation M under the Securities Exchange Act of 1934 may apply to sales of
our common stock and activities of the selling stockholders.