Exhibit 10.1


 


PLACEMENT
AGENT AGREEMENT


 


August 27, 2009


 


B.
Riley & Co., LLC


11100
Santa Monica Blvd.


Suite 800


Los Angeles, CA 90025


 


Ladies and Gentlemen:


 


1.             Introduction. 
Kratos Defense & Security Solutions, Inc., a Delaware
corporation (the “Company”),
proposes, pursuant to the terms of this Placement Agent Agreement (this “Agreement”) to sell to certain
institutional investors (the “Purchasers”) up
to an aggregate of 26,000,000 shares (the “Shares”) of
common stock, $0.001 par value per share (the “Common Stock”), of the Company. The Company hereby confirms
that B. Riley & Co., LLC is acting as the exclusive placement agent
(the “Placement Agent”) in accordance with
the terms and conditions hereof.


 


2.             Agreement to
Act as Placement Agent; Placement of Shares.  On the basis of the representations,
warranties and agreements of the Company herein contained, and subject to all
the terms and conditions of
this Agreement:


 


(a)           The
Company hereby authorizes the Placement Agent to act as its exclusive agent to
solicit offers for the purchase of all or part of the Shares from the Company
in connection with the proposed offering of the Shares (the “Offering”). 
Until the Closing Date (as defined in Section 4 hereof), the
Company shall not, without the prior written consent of the Placement Agent,
solicit or accept offers to purchase Shares otherwise than through the
Placement Agent.


 


(b)           The
Company hereby acknowledges that the Placement Agent, as an agent of the
Company, shall use its reasonable best efforts to solicit offers from potential
purchasers to purchase the Shares from the Company on the terms and subject to
the conditions set forth in the Prospectus (as defined below).  The Placement Agent has no authority to bind
the Company with respective to any prospective offer to purchase the
Shares.  The Placement Agent shall use
commercially reasonable efforts to assist the Company in obtaining performance
by each Purchaser whose offer to purchase Shares was solicited by the Placement
Agent and accepted by the Company, but the Placement Agent shall not, except as
otherwise provided in this Agreement, be obligated to disclose the identity of
any potential purchaser or have any liability to the Company in the event any
such purchase is not consummated for any reason.  Under no circumstances will the Placement
Agent be obligated to underwrite or purchase any Shares for its own accounts
and, in soliciting offers to purchase the Shares, the Placement Agent shall act
solely as the Company’s agent and not as a principal.  Notwithstanding the foregoing, it is
understood and agreed that the Placement Agent (or its affiliates) may, solely
at their discretion and without any obligation to do so, purchase Shares as a
principal.


 

















 


(c)           Subject
to the provisions of this Section 2, offers for the purchase of
Shares shall be solicited by the Placement Agent as agent for the Company at
such times and in such amounts as the Placement Agent deems advisable.  The Placement Agent shall communicate to the
Company, orally or in writing, each reasonable offer to purchase Shares
received by it as agent of the Company. 
The Company shall have the sole right to accept offers to purchase the
Shares and may reject any such offer, in whole or in part.  The Placement Agent shall have the right, in
its discretion reasonably exercised, without notice to the Company, to reject
any offer to purchase Shares received by it, in whole or in part, and any such
rejection shall not be deemed a breach of this Agreement.


 


(d)           The
Shares are being sold to the Purchasers at a price of $0.72 per share.


 


(e)           As
compensation for services rendered, on the Closing Date, the Company shall pay
to the Placement Agent by wire transfer of immediately available funds to an
account or accounts designated by the Placement Agent, an aggregate amount
equal to 5% of the aggregate gross proceeds received by the Company from the
sale of the Shares on such Closing Date.


 


(f)            No
Shares which the Company has agreed to sell pursuant to this Agreement shall be
deemed to have been purchased and paid for, or sold by the Company, until such
Shares shall have been delivered to the Purchaser thereof against payment by
such Purchaser.  If the Company shall
default in its obligations to deliver Shares to a Purchaser whose offer it has
accepted, the Company shall indemnify and hold the Placement Agent harmless
against any loss, claim, damage or expense arising from or as a result of such
default by the Company in accordance with Section 8 herein.


 


3.             Representations
and Warranties of the Company.  The Company represents and warrants to, and
agrees with, the Placement Agent that:


 


(a)           The
Company has prepared and filed in conformity with the requirements of the
Securities Act of 1933, as amended (the “Securities
Act”), and published rules and regulations thereunder (the “Rules and Regulations”) adopted by the
Securities and Exchange Commission (the “Commission”)
a “shelf” Registration Statement (as hereinafter defined) on Form S-3
(File No. 333-161340), which was declared effective by the Commission as
of August 21, 2009 (the “Effective Date”),
including a base prospectus relating to the securities registered pursuant to
such Registration Statement (the “Base
Prospectus”), and such amendments and supplements thereto as may
have been required to the date of this Agreement.  The term “Registration
Statement” as used in this Agreement means the registration
statement (including all exhibits, financial schedules and all documents and
information deemed to be a part of the Registration Statement pursuant to Rule 430A
of the Rules and Regulations), as amended and/or supplemented to the date
of this Agreement, including the Base Prospectus.  The Registration Statement is effective under
the Securities Act and no stop order preventing or suspending the effectiveness
of the Registration Statement or suspending or preventing the use of the
Prospectus (as defined below) has been issued by the Commission and no
proceedings for that purpose have been instituted or are threatened by the
Commission.  


 


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The Company, if required by the Rules and Regulations of the
Commission, will file the Prospectus, with the Commission pursuant to Rule 424(b) of
the Rules and Regulations.  The term
“Prospectus” as used in this Agreement
means the prospectus, in the form in which it is to be filed with the
Commission pursuant to Rule 424(b) of the Rules and Regulations,
or, if the prospectus is not to be filed with the Commission pursuant to Rule 424(b),
the prospectus in the form included as part of the Registration Statement as of
the Effective Date, except that if any revised prospectus or prospectus
supplement shall be provided to the Placement Agent by the Company for use in
connection with the Offering and sale of the Shares which differs from the
Prospectus (whether or not such revised prospectus or prospectus supplement is
required to be filed by the Company pursuant to Rule 424(b) of the Rules and
Regulations), the term “Prospectus”
shall refer to such revised prospectus or prospectus supplement, as the case
may be, from and after the time it is first provided to the Placement Agent for
such use.  Any reference herein to the
Registration Statement or the Prospectus shall be deemed to refer to and
include the documents incorporated by reference therein pursuant to
Item 12 of Form S-3 which were filed under the Securities Exchange
Act of 1934, as amended (the “Exchange Act”),
on or before the last to occur of the Effective Date, or the date of the
Prospectus, and any reference herein to the terms “amend,” “amendment,” or “supplement”
with respect to the Registration Statement or the Prospectus shall be deemed to
refer to and include (i) the filing of any document under the Exchange Act
after the Effective Date or the date of the Prospectus, as the case may be,
which is incorporated by reference and (ii) any such document so
filed.  If the Company has filed an
abbreviated registration statement to register additional securities pursuant
to Rule 462(b) under the Rules and Regulations (the “462(b) Registration Statement”), then
any reference herein to the Registration Statement shall also be deemed to
include such 462(b) Registration Statement.


 


(b)           As
of the Applicable Time (as defined below) and as of the Closing Date, neither (i) any
General Use Free Writing Prospectus (as defined below) issued at or prior to
the Applicable Time, and the Pricing Prospectus (as defined below), all
considered together (collectively, the “General
Disclosure Package”), (ii) any individual Limited Use Free Writing
Prospectus (as defined below) issued at or prior to the Applicable Time, nor (iii) the
bona fide electronic road show, if any, (as defined in Rule 433(h)(5) of
the Rules and Regulations), that has been made available without
restriction to any person, when considered together with the General Disclosure
Package, included or will include, any untrue statement of a material fact or
omitted or as of the Closing Date will omit, to state a material fact necessary
in order to make the statements therein, in the light of the circumstances
under which they were made, not misleading; provided,
however, that the Company makes no representations or warranties as
to information contained in or omitted from any Issuer Free Writing Prospectus,
in reliance upon, and in conformity with, written information furnished to the
Company by or on behalf of the Placement Agent specifically for inclusion
therein, which information the parties hereto agree is limited to the “Placement Agent’s Information” which
is defined as the information set forth in Section 16.  As used in this paragraph (b) and
elsewhere in this Agreement:


 


“Applicable Time” means 8:30 P.M., New
York time, on the date of this Agreement.


 


“General Use Free Writing Prospectus” means
any Issuer Free Writing Prospectus.


 


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“Issuer Free Writing Prospectus” means any “issuer free writing prospectus,” as defined in Rule 433 of the Rules and
Regulations relating to the Shares in the form filed or required to be filed
with the Commission or, if not required to be filed, in the form retained in
the Company’s records pursuant to Rule 433(g) of the Rules and
Regulations.


 


“Limited Use Free Writing Prospectuses” means
any Issuer Free Writing Prospectus that is not a General Use Free Writing
Prospectus.


 


“Pricing Prospectus” means the Base Prospectus
as amended and supplemented immediately prior to the Applicable Time, including
any document incorporated by reference therein and any prospectus supplement
deemed to be a part thereof.


 


(c)           No
order preventing or suspending the use of any Issuer Free Writing Prospectus or
the Prospectus relating to the Offering has been issued by the Commission, and
no proceeding for that purpose or pursuant to Section 8A of the Securities
Act has been instituted or threatened by the Commission.


 


(d)           At
the time the Registration Statement became effective, at the date of this
Agreement and at the Closing Date, the Registration Statement conformed and
will conform in all material respects to the requirements of the Securities Act
and the Rules and Regulations and did not and will not contain any untrue
statement of a material fact or omit to state any material fact required to be
stated therein or necessary to make the statements therein not misleading; the
Prospectus, at the time the Prospectus became effective and at the Closing
Date, conformed and will conform in all material respects to the requirements
of the Securities Act and the Rules and Regulations and did not and will
not contain an untrue statement of a material fact or omit to state a material
fact necessary in order to make the statements therein, in light of the
circumstances under which they were made, not misleading; provided, however, that the foregoing
representations and warranties in this paragraph (d) shall not
apply to information contained in or omitted from the Registration Statement or
the Prospectus in reliance upon, and in conformity with, written information
furnished to the Company by or on behalf of the Placement Agent specifically
for inclusion therein, which information the parties hereto agree is limited to
the Placement Agent’s Information.


 


(e)           Each
Issuer Free Writing Prospectus, if any, as of its issue date and at all
subsequent times through the completion of the public offer and sale of the
Shares or until any earlier date that the Company notified or notifies the
Placement Agent as described in Section 5(c), did not, does not and
will not include any information that conflicted, conflicts or will conflict
with the information contained in the Registration Statement, Pricing
Prospectus or the Prospectus, including any document incorporated by reference
therein and any prospectus supplement deemed to be a part thereof that has not
been superseded or modified, or includes an untrue statement of a material fact
or omitted or would omit to state a material fact required to be stated therein
or necessary in order to make the statements therein, in the light of the
circumstances under which they were made, not misleading.  The foregoing sentence does not apply to
statements in or omissions from any Issuer Free Writing Prospectus in reliance
upon, and in conformity with, written information furnished to the Company by
or on behalf of the Placement 


 


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Agent specifically for inclusion therein, which information the parties
hereto agree is limited to the Placement Agent’s Information.


 


(f)            The
documents incorporated by reference in the Prospectus, when they became
effective or were filed with the Commission, as the case may be, conformed in
all material respects to the requirements of the Securities Act or the Exchange
Act, as applicable, the Rules and Regulations and the rules and
regulations of the Commission under the Exchange Act and none of such documents
contained any untrue statement of a material fact or omitted to state any
material fact required to be stated therein or necessary to make the statements
therein, in light of the circumstances under which they were made, not
misleading; and any further documents so filed and incorporated by reference in
the Prospectus, when such documents become effective or are filed with the
Commission, as the case may be, will conform in all material respects to the
requirements of the Securities Act or the Exchange Act, as applicable, the Rules and
Regulations and the rules and regulations of the Commission under the
Exchange Act and will not contain any untrue statement of a material fact or
omit to state any material fact required to be stated therein or necessary to
make the statements therein, in light of the circumstances under which they
were made, not misleading.


 


(g)           The
Company is not an “ineligible issuer” in connection with the Offering pursuant
to Rules 164, 405 and 433 under the Securities Act.  The Company has not, directly or indirectly,
distributed and will not distribute any offering material in connection with
the Offering other than the Prospectus and other materials, if any, permitted
under the Securities Act and consistent with Section 5(b).  The Company will file with the Commission all
Issuer Free Writing Prospectuses (other than a “road show,” as defined in Rule 433(d)(8) of
the Rules and Regulations), if any, in the time and manner required under Rules 163(b)(2) and
433(d) of the Rules and Regulations.


 


(h)           Each
of the Company and its Subsidiaries has been duly organized and is validly
existing as a corporation or other legal entity in good standing (or the
foreign equivalent thereof) under the laws of its jurisdiction of incorporation
or organization.  Each of the Company and
its Subsidiaries is duly qualified to do business and is in good standing as a
foreign corporation or other legal entity in each jurisdiction in which its ownership
or lease of its properties or the conduct of its business requires such
qualification and has all power and authority (corporate or other) necessary to
own or hold its properties and to conduct the businesses in which each is
engaged, except where the failure to so qualify or have such power or authority
would not (i) have, singularly or in the aggregate, a material adverse
effect on the condition (financial or otherwise), results of operations, assets
or business of the Company and its Subsidiaries, taken as a whole, or (ii) impair
in any material respect the ability of the Company to perform its obligations
under this Agreement or to consummate any transactions contemplated by this
Agreement, the General Disclosure Package or the Prospectus (any such effect as
described in clauses (i) or (ii), a “Material
Adverse Effect”). The Company owns or controls, directly or
indirectly, only the corporations, partnerships, or other entities listed on Schedule
A attached hereto (each a “Subsidiary”
and, collectively, the “Subsidiaries”)


 


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(i)            The
Company has the full right, power and authority to enter into this Agreement
and to perform and to discharge its obligations hereunder; and this Agreement
has been duly authorized, executed and delivered by the Company, and
constitutes a valid and binding obligation of the Company enforceable in
accordance with its terms.


 


(j)            The
shares of Common Stock to be issued and sold by the Company to the Purchasers
have been duly and validly authorized and the shares of Common Stock, when
issued and delivered against payment therefor as provided herein will be duly
and validly issued, fully paid and non-assessable and free of any preemptive or
similar rights and will conform to the description thereof contained in the General
Disclosure Package and the Prospectus.


 


(k)           The
authorized capital stock of the Company conforms as to legal matters to the
description thereof contained in each of the General Disclosure Package and the
Prospectus.  The shares of Common Stock
outstanding prior to the issuance of the Shares have been duly authorized and
are validly issued, fully paid and non-assessable.  Since the date provided in the General
Disclosure Package, the Company has not issued any equity securities, other
than Common Stock issued pursuant to the exercise of stock options or
settlement of restricted stock units previously outstanding under the Company’s
equity compensation plans or the issuance of Common Stock pursuant to employee
stock purchase plans.  All of the Company’s
options, warrants and other rights to purchase or exchange any securities for
shares of the Company’s capital stock have been duly authorized and validly
issued and were issued in compliance in all material respects with United
States federal and applicable state securities laws.  None of the outstanding shares of Common
Stock was issued in violation of any preemptive rights, rights of first refusal
or other similar rights to subscribe for or purchase securities of the Company.


 


(l)            The
membership interests, capital stock, partnership interests or other
similar equity interests, as applicable, of each Subsidiary have been duly
authorized and validly issued, are fully paid and nonassessable and, except to
the extent set forth in the General Disclosure Package, are owned by the
Company directly, free and clear of any claim, lien, encumbrance, security
interest, restriction upon voting or transfer or any other claim of any third
party.


 


(m)          The
execution, delivery and performance of this Agreement by the Company, the issue
and sale of the Shares by the Company and the consummation of the transactions
contemplated hereby and thereby will not (with or without notice or lapse of
time or both) conflict with or result in a breach or violation of any of the
terms or provisions of, constitute a default under, give rise to any right of
termination or other right or the cancellation or acceleration of any right or
obligation or loss of a benefit under or pursuant to, any indenture, mortgage,
deed of trust, loan agreement or other agreement or instrument to which the
Company or any of its Subsidiaries is a party or by which the Company or any of
its Subsidiaries is bound or to which any of the property or assets of the
Company or any of its Subsidiaries is subject, nor will such actions result in
any violation of the provisions of the charter or by-laws (or analogous
governing instruments, as applicable) of the Company or any of its Subsidiaries
or any law, statute, 


 


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rule, regulation, judgment, order or decree of any court or
governmental agency or body, domestic or foreign, having jurisdiction over the
Company or any of its Subsidiaries or any of their properties or assets.


 


(n)           The
execution and delivery by the Company of, and the performance by the Company of
its obligations under, this Agreement will not contravene any provision of (i) applicable
law; (ii) the certificate of incorporation or by-laws (or analogous
organizational documents) of the Company or any of its Subsidiaries; (iii) any
agreement or other instrument binding upon the Company or any of its
Subsidiaries that is material to the Company and its Subsidiaries, taken as a
whole; or (iv) any judgment, order or decree of any governmental body,
agency or court having jurisdiction over the Company or any of its Subsidiaries
except, in the cases of clauses (i) and (iii) above for any such
contravention that would not have a Material Adverse Effect, and no consent,
approval, authorization or order of, or qualification with, any governmental
body or agency is required for the performance by the Company of its
obligations under this Agreement, except such as may be required by the
securities or Blue Sky laws of the various states or the by-laws, rules and
regulations of the Financial Industry Regulatory Authority (“FINRA”) and the NASDAQ Global Market in
connection with the offer and sale of the Shares.


 


(o)           Grant
Thornton LLP, who have audited certain financial statements and related
schedules included or incorporated by reference in the Registration Statement,
the General Disclosure Package and the Prospectus, is an independent registered
public accounting firm as required by the Securities Act and the Rules and
Regulations and the Public Company Accounting Oversight Board (United States)
(the “PCAOB”).  Except as pre-approved in accordance with the
requirements set forth in Section 10A of the Exchange Act, Grant Thornton
LLP has not been engaged by the Company to perform any “prohibited activities”
(as defined in Section 10A of the Exchange Act).


 


(p)           The
financial statements, together with the related notes and schedules, included
or incorporated by reference in the General Disclosure Package, the Prospectus
and in the Registration Statement fairly present the financial position and the
results of operations and changes in financial position of the Company and its
consolidated Subsidiaries and other consolidated entities at the respective
dates or for the respective periods therein specified.  Such statements and related notes and
schedules have been prepared in accordance with the generally accepted
accounting principles in the United States (“GAAP”)
applied on a consistent basis throughout the periods involved except as may be
set forth in the related notes included or incorporated by reference in the
General Disclosure Package.  The
financial statements, together with the related notes and schedules, included
or incorporated by reference in the General Disclosure Package and the Prospectus
comply in all material respects with the Securities Act, the Exchange Act, and
the Rules and Regulations and the rules and regulations under the
Exchange Act.  No other financial
statements or supporting schedules or exhibits are required by the Securities
Act or the Rules and Regulations to be described, or included or
incorporated by reference in the Registration Statement, the General Disclosure
Package or the Prospectus.  There is no
pro forma or as adjusted financial information which is required to be included
in the Registration Statement, the General Disclosure Package, or the 


 


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Prospectus or a document incorporated by reference therein in
accordance with the Securities Act and the Rules and Regulations which has
not been included or incorporated as so required.


 


(q)           There
has not occurred any material adverse change, or any development involving a
prospective material adverse change, in the condition, financial or otherwise,
or in the earnings, business or operations of the Company and its Subsidiaries,
taken as a whole, otherwise than as set forth or contemplated in the General
Disclosure Package.


 


(r)            There
is no legal or governmental proceeding, action, suit or claim pending or, to
the Company’s knowledge, threatened to which the Company or any of its
Subsidiaries is a party or to which any of the properties or assets of the
Company or any of its Subsidiaries is subject (i) other than proceedings
accurately described in all material respects in the General Disclosure Package
or proceedings that would not have a Material Adverse Effect on the Company and
its Subsidiaries, taken as a whole, or (ii) that are required to be
described in the Registration Statement, the General Disclosure Package or the
Prospectus and are not so described; and there are no statutes, regulations,
contracts or other documents to which the Company or any of its Subsidiaries is
subject or by which the Company or any of its Subsidiaries is bound that are
required to be described in the Registration Statement, the General Disclosure
Package or the Prospectus or to be filed as exhibits to the Registration
Statement that are not described or filed as required.


 


(s)           Neither
the Company nor any of its Subsidiaries is or, after giving effect to the
Offering of the Shares and the application of the proceeds thereof as described
in the General Disclosure Package and the Prospectus, will become an “investment
company” within the meaning of the Investment Company Act of 1940, as amended,
and the rules and regulations of the Commission thereunder.


 


(t)            Neither
the Company, its Subsidiaries nor any of the Company’s or its Subsidiaries’
officers, directors or affiliates has bid for or purchased, for any account in
which it or any of its affiliated purchasers has a beneficial interest, any
Shares, or attempted to induce any person to purchase any Shares; and has not,
and has not caused its affiliated purchasers to, make bids or purchased for the
purpose of creating actual, or apparent, active trading in or of raising the price
of the Shares.


 


(u)           Neither the
Company nor its Subsidiaries own any real property.  The Company and its Subsidiaries have good
and marketable title to all personal property owned by them which is material
to the business of the Company and its Subsidiaries, taken as a whole, in each
case free and clear of all liens, encumbrances and defects of title except such
as are described in the General Disclosure Package would not individually or in
the aggregate have a Material Adverse Effect; and any real property and
buildings held under lease by the Company and its Subsidiaries are held by them
under valid, subsisting and enforceable leases except such as are described in
the General Disclosure Package or would not have a Material Adverse Effect.


 


(v)           Except as
disclosed in the General Disclosure Package, neither the Company nor any of its
Subsidiaries is in violation of any statute, rule, regulation, 


 


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decision or order of any governmental agency or body or any court,
relating to the use, disposal or release of hazardous or toxic substances or
relating to the protection or restoration of the environment or human exposure
to hazardous or toxic substances (collectively, “Environmental
Laws”), operates any real property contaminated with any substance
that is subject to any Environmental Laws, is liable for any off-site disposal
or contamination pursuant to any Environmental Laws, or is subject to any claim
relating to any Environmental Laws, which violation, contamination, liability
or claim would individually or in the aggregate have a Material Adverse Effect;
and the Company is not aware of any pending investigation which might lead to
such a claim.


 


(w)          The
Company and its Subsidiaries own or possess, or have the right to use, adequate
trademarks, trade names and other rights to inventions, know-how, patents,
copyrights, confidential information and other intellectual property
(collectively, “Intellectual Property Rights”)
necessary to conduct the business now operated by them, or presently employed
by them, and have not received any notice of infringement of or conflict with
asserted rights of others with respect to any Intellectual Property Rights,
except such as will not individually or in the aggregate have a Material
Adverse Effect.


 


(x)            Neither
the Company nor any of its Subsidiaries, nor to its knowledge, any director,
officer, employee or other person associated with or acting on behalf of the
Company or any of its Subsidiaries has:  (i) used
any corporate funds for any unlawful contribution, gift, entertainment or other
unlawful expense 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) caused the Company or any of its
Subsidiaries to be in violation of any provision of the United States Foreign
Corrupt Practices Act of 1977; or (iv) made any bribe, rebate, payoff,
influence payment, kickback or other unlawful payment other than with respect to
the activities set forth in that certain press release issued by the Company on
July 7, 2009, as to which the Company makes no representation.


 


(y)           The
Company and its Subsidiaries maintain a system of internal accounting and other
controls sufficient to provide reasonable assurances that (i) transactions
are executed in accordance with management’s general or specific
authorizations; (ii) transactions are recorded as necessary to permit
preparation of financial statements in conformity with GAAP and to maintain
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.  Except as described in the
General Disclosure Package, since the end of the Company’s most recent audited
fiscal year, there has been (A) no material weakness in the Company’s
internal control over financial reporting (whether or not remediated) and (B) no
change in the Company’s internal control over financial reporting that has
materially affected, or is reasonably likely to materially affect, the Company’s
internal control over financial reporting.


 


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(z)            No
relationship, direct or indirect, exists between or among the Company and any
of its Subsidiaries, on the one hand, and the directors, officers, stockholders
(or analogous interest holders), customers or suppliers of the Company or any
of its Subsidiaries or any of their affiliates, on the other hand, which is
required to be described in the General Disclosure Package or the Prospectus or
a document incorporated by reference therein and which is not so described.


 


(aa)         No
person or entity has the right to require registration of shares of Common
Stock or other securities of the Company or any of its Subsidiaries under the
Securities Act because of the filing or effectiveness of the Registration Statement
or otherwise.


 


(bb)         Neither
the Company nor any of its Subsidiaries is a party to any contract, agreement
or understanding with any person (other than this Agreement and any letter of
understanding between the Company and the Placement Agent) that would give rise
to a valid claim against the Company or the Placement Agent for a brokerage
commission, finder’s fee or like payment in connection with the offering and
sale of the Shares or any transaction contemplated by this Agreement, the
Registration Statement, the General Disclosure Package or the Prospectus.


 


(cc)         No
forward-looking statement (within the meaning of Section 27A of the
Securities Act and Section 21E of the Exchange Act) contained in either
the General Disclosure Package or the Prospectus has been made or reaffirmed
without a reasonable basis or has been disclosed other than in good faith.


 


(dd)         The
Company is subject to and in compliance in all material respects with the
reporting requirements of Section 13 or Section 15(d) of the
Exchange Act. As of the filing date of the Registration Statement, the Company
was eligible to file a “shelf” Registration Statement on Form S-3 with the
Commission.  The Common Stock is
registered pursuant to Section 12(b) of the Exchange Act and is
listed on the NASDAQ Global Select Market, and the Company has taken no action
designed to, or reasonably likely to have the effect of, terminating the
registration of the Common Stock under the Exchange Act or delisting the Common
Stock from the NASDAQ Global Select Market, nor has the Company received any
notification that the Commission or FINRA is contemplating terminating such
registration or listing.  No consent,
approval, authorization or order of, or filing, notification or registration
with, the NASDAQ Global Select Market is required for the listing and trading
of the shares of Common Stock on the NASDAQ Global Select Market, except such
as will have been obtained on or prior to the Closing Date.


 


(ee)         The
Company is in compliance in all material respects with all applicable
provisions of the Sarbanes-Oxley Act of 2002 and all applicable rules and
regulations promulgated thereunder or implementing the provisions thereof that
are then in effect.


 


(ff)           The
statistical and market related data included in the General Disclosure Package
are based on or derived from sources that the Company believes to be reliable
and accurate, and such data agree with the sources from which they are derived.


 


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(gg)         Neither
the Company nor any Subsidiary directly or indirectly controls, is controlled
by, or is under common control with, or is an associated person (within the
meaning of Article I, Section 1(ee) of the By-laws of FINRA) of, any
member firm of FINRA.


 


(hh)         No
approval of the stockholders of the Company under the rules and
regulations of NASDAQ (including Rule 5635 of the NASDAQ Global
Marketplace Rules) is required for the Company to issue and deliver the Shares
to the Purchasers.


 


(ii)           Except
as described in the General Disclosure Package, the Company has not sold,
issued or distributed any shares of Common Stock during the six-month period
preceding the date hereof, including any sales pursuant to Rule 144A
under, or Regulation D or S of, the Securities Act, other than shares issued
pursuant to employee benefit plans, qualified equity compensation plans or
other employee compensation plans or pursuant to outstanding options, rights or
warrants.


 


Any
certificate signed by or on behalf of the Company and delivered to the
Placement Agent or to counsel for the Placement Agent shall be deemed to be a
representation and warranty by the Company to the Placement Agent and the
Purchasers as to the matters covered thereby.


 


4.             The Closing.  The time and date of closing and delivery of
the documents required to be delivered to the Placement Agent pursuant to Sections
5 and 7 hereof shall be at 7:00 A.M., Pacific time, on September 2,
2009 (the “Closing Date”) at the
offices of Paul, Hastings, Janofsky & Walker LLP, 4747 Executive
Drive, 12th Floor, San Diego, CA 92121.


 


5.             Further
Covenants and Agreements of the Company.  The Company covenants and agrees with the
Placement Agent and, as applicable, with the Purchasers as follows:


 


(a)           To prepare the Rule 462(b) Registration
Statement, if necessary, in a form approved by the Placement Agent and file
such Rule 462(b) Registration Statement with the Commission on the
date hereof; to prepare the Prospectus in a form approved by the Placement
Agent containing information previously omitted at the time of effectiveness of
the Registration Statement in reliance on rules 430A, 430B and 430C and to
file such Prospectus pursuant to Rule 424(b) of the Rules and
Regulations not later than the second business day following the execution and
delivery of this Agreement or, if applicable, such earlier time as may be
required by Rule 430A of the Rules and Regulations; to notify the
Placement Agent promptly of the Company’s intention to file or prepare any
supplement or amendment to any Registration Statement or to the Prospectus in
connection with this Offering and to provide a draft of any such amendment or
supplement to the Registration Statement, the General Disclosure Package or to
the Prospectus to the Placement Agent for review within an amount of time that
is reasonably practical under the circumstances and prior to filing; to advise
the Placement Agent, promptly after it receives notice thereof, of the time
when any amendment to any Registration Statement has been filed in connection
with the Offering or becomes effective or any supplement to the General
Disclosure Package or the Prospectus or any amended Prospectus has been filed
and to furnish the Placement Agent with copies 


 


11

















 


thereof; to file within the time periods prescribed by the Exchange
Act, including any extension thereof, all material required to be filed by the
Company with the Commission pursuant to Rule 433(d) or 163(b)(2), as
the case may be; to advise the Placement Agent, promptly after it receives
notice thereof, of the issuance by the Commission of any stop order or of any
order preventing or suspending the use of any Issuer Free Writing Prospectus or
the Prospectus, of the suspension of the qualification of the Shares for
offering or sale in any jurisdiction, of the initiation or threatening of any
proceeding for any such purpose, or of any request by the Commission for the
amending or supplementing of the Registration Statement, the General Disclosure
Package or the Prospectus or for additional information; and, in the event of
the issuance of any stop order or of any order preventing or suspending the use
of any Issuer Free Writing Prospectus or the Prospectus or suspending any such
qualification, and promptly to use its best efforts to obtain the withdrawal of
such order.


 


(b)           That,
unless it obtains the prior consent of the Placement Agent, it has not made and
will not make any offer relating to the Shares that would constitute a “free
writing prospectus” as defined in Rule 405 of the Rules and
Regulations unless the prior written consent of the Placement Agent has been
received (each, a “Permitted Free Writing
Prospectus”).  The Company
represents that it has treated and agrees that it will treat each Permitted
Free Writing Prospectus as an Issuer Free Writing Prospectus, and that it has
and will comply with the requirements of Rules 164 and 433 of the Rules and
Regulations applicable to any Issuer Free Writing Prospectus, including the
requirements relating to timely filing with the Commission, legending and
record keeping.


 


(c)           If
at any time prior to the expiration of nine (9) months after the date when
a Prospectus relating to the Shares is required to be delivered under the
Securities Act, any event occurs or condition exists as a result of which the
Prospectus, as then amended or supplemented, would include any untrue statement
of a material fact or omit to state a material fact necessary in order to make
the statements therein, in light of the circumstances under which they were
made, not misleading, or the Registration Statement, as then amended or
supplemented, would include any untrue statement of a material fact or omit to
state a material fact necessary to make the statements therein not misleading,
or if for any other reason it is necessary at 
any time to amend or supplement any Registration Statement or the
Prospectus to comply with the Securities Act or the Exchange Act, the Company
will promptly notify the Placement Agent, and upon the Placement Agent’s
request, the Company will promptly prepare and file with the Commission, at the
Company’s expense, an amendment to the Registration Statement or an amendment
or supplement to the Prospectus that corrects such statement or omission or
effects such compliance.  The Company
consents to the use of the Prospectus or any amendment or supplement thereto by
the Placement Agent.


 


(d)           To
the extent not available on the Commission’s EDGAR system, to make generally
available to its stockholders as soon as practicable, but in any event not
later than eighteen (18) months after the effective date of each Registration
Statement (as defined in Rule 158(c) of the Rules and
Regulations), an earnings statement of the Company and its consolidated
Subsidiaries (which need not be audited) complying with 


 


12

















 


Section 11(a) of the Securities Act and the Rules and
Regulations (including, at the option of the Company, Rule 158).


 


(e)           To
take promptly from time to time such actions as the Placement Agent may
reasonably request to qualify the Shares for offering and sale under the
securities or Blue Sky laws of such jurisdictions (domestic or foreign) as the
Placement Agent may designate and to continue such qualifications in effect,
and to comply with such laws, for so long as required to permit the offer and
sale of Shares in such jurisdictions; provided
that the Company and its Subsidiaries shall not be obligated to
qualify as foreign corporations in any jurisdiction in which they are not so
qualified or to file a general consent to service of process in any
jurisdiction.


 


(f)            That
the Company will not, for a period of one hundred eighty (180) days from the
date of the Prospectus, (the “Lock-Up Period”)
without the prior written consent of the Placement Agent, directly or
indirectly offer, sell, assign, transfer, pledge, contract to sell, or
otherwise dispose of, any shares of Common Stock or any securities convertible
into or exercisable or exchangeable for Common Stock, other than (i) the
Company’s sale of the Shares hereunder, (ii) the issuance of Common Stock
or any equity awards (including the issuance of Common Stock upon exercise or
settlement of such equity awards) pursuant to the Company’s employee benefit
plans, stock option and employee stock purchase plans or other employee
compensation plans as such plans are in existence on the date hereof and
described in the Prospectus, (iii) the issuance of Common Stock pursuant
to the vesting or exercises of options, restricted stock units, warrants or
rights outstanding on the date hereof, and (iv) the issuance of Common
Stock or securities convertible into or exercisable or exchangeable for Common
Stock (and the issuance of Common Stock pursuant to the terms of such
securities convertible into or exercisable or exchangeable for Common Stock) in
connection with strategic transactions involving the Company and other
entities, including without limitation, merger, acquisition, joint venture,
licensing, collaboration, manufacturing, development, marketing, co-promotion
or distribution arrangements.  The
Company will cause each executive officer listed in Schedule B to
furnish to the Placement Agent, prior to the Closing Date, a letter,
substantially in the form of Exhibit A hereto, pursuant to which
each such person shall agree, among other things, not to directly or indirectly
offer, sell, assign, transfer, pledge, contract to sell, or otherwise dispose
of, any shares of Common Stock or any securities convertible into or
exercisable or exchangeable for Common Stock, not to engage in any swap or
other agreement or arrangement that transfers, in whole or in part, directly or
indirectly, the economic risk of ownership of Common Stock or any such
securities, during the period  of ninety
(90) days from the date of the Prospectus, without the prior written consent of
the Placement Agent.  The Company also
agrees that during such period, the Company will not file any registration
statement, preliminary prospectus or prospectus, or any amendment or supplement
thereto, under the Securities Act for any such transaction or which registers,
or offers for sale, Common Stock or any securities convertible into or
exercisable or exchangeable for Common Stock, except for registration
statements on Form S-8 relating to employee benefit plans and registration
statements registering securities issued by the Company pursuant to (iv) above.  The Company hereby agrees that (A) if it
issues an earnings release or material news, or if a material event relating to
the Company occurs, during the last seventeen 


 


13

















 


days of the Lock-Up Period, or (B) if prior to the expiration of
the Lock-Up Period, the Company announces that it will release earnings results
during the sixteen-day period beginning on the last day of the Lock-Up Period,
the restrictions imposed by this paragraph (f) shall continue to
apply until the expiration of the eighteen-day period beginning on the issuance
of the earnings release or the occurrence of the material news or material
event.


 


(g)           To
supply the Placement Agent with copies of all correspondence to and from, and
all documents issued to and by, the Commission in connection with the
registration of the Shares under the Securities Act or the Registration
Statement or the Prospectus, or any amendment or supplement thereto or document
incorporated by reference therein.


 


(h)           Prior
to the Closing Date, not to issue any press release or other communication
directly or indirectly or hold any press conference without the prior consent
of the Placement Agent.


 


(i)            Until
the Placement Agent shall have notified the Company of the completion of the
Offering of the Shares, that the Company will not, and will cause its
affiliated purchasers (as defined in Regulation M under the Exchange Act) not
to, either alone or with one or more other persons, bid for or purchase, for
any account in which it or any of its affiliated purchasers has a beneficial
interest, any Shares, or attempt to induce any person to purchase any Shares;
and not to, and to cause its affiliated purchasers not to, make bids or
purchase for the purpose of creating actual, or apparent, active trading in or
of raising the price of the Shares.


 


(j)            Not
to take any action prior to the Closing Date which would require the Prospectus
to be amended or supplemented pursuant to Section 5.


 


(k)           To
apply the net proceeds from the sale of the Shares as set forth in the
Registration Statement, the General Disclosure Package and the Prospectus under
the heading “Use of Proceeds.”


 


(l)            To
use its best efforts to list, effect and maintain, subject to notice of
issuance, the Common Stock on the NASDAQ Global Select Market.


 


(m)          To
use its best efforts to assist the Placement Agent with any filings with FINRA
and obtaining any required clearance from FINRA as to the amount of
compensation allowable or payable to the Placement Agent.


 


(n)           To
use its best efforts to do and perform all things required to be done or
performed under this Agreement by the Company prior to the Closing Date and to
satisfy all conditions precedent to the delivery of the Shares.


 


6.             Payment of
Expenses.  The Company
agrees to pay, or reimburse if paid by the Placement Agent, whether or not the
transactions contemplated hereby are consummated or this Agreement is
terminated: (a) the costs incident to the authorization, issuance, sale
and delivery of the Shares to the Purchasers and any taxes payable in that
connection; (b) the costs incident to 


 


14

















 


the registration of the
Shares under the Securities Act; (c) the costs incident to the
preparation, printing and distribution of the Registration Statement, the Base
Prospectus, any Issuer Free Writing Prospectus, the General Disclosure Package,
the Prospectus, any amendments, supplements and exhibits thereto or any
document incorporated by reference therein; (d) the reasonable and
documented fees and expenses incurred in connection with securing any required
review by FINRA and any filings made with FINRA; (e) any applicable
listing, quotation or other fees; (f) the fees and expenses (including
related fees and expenses of counsel for the Placement Agent) of qualifying the
Shares under the securities laws of the several jurisdictions as provided in Section 5(e) and
of preparing, printing and distributing wrappers and blue sky memoranda; (g) all
fees and expenses of the registrar and transfer agent of the Shares; and (h) all
other costs and expenses of the Company and the Placement Agent incident to the
Offering of the Shares by, or the performance of the obligations of, the
Company and the Placement Agent under this Agreement (including, without
limitation, the fees and expenses of the Company’s counsel, Placement Agent’s
counsel and the Company’s independent accountants and the travel and other
reasonable expenses incurred by Company and the Placement Agent’s personnel in
connection with any “road show” including, without limitation, any expenses
advanced by the Placement Agent on the Company’s behalf (which will be promptly
reimbursed)). For the avoidance of doubt, the Company agrees to reimburse the
Placement Agent’s reasonable out-of-pocket expenses, including the reasonable
legal fees of Paul, Hastings, Janofsky & Walker, LLP, counsel to the
Placement Agent, whether or not the Offering is consummated; provided that, with the exception of
reasonable legal fees, the Company shall not be liable to the Placement Agent
for amounts in excess of $50,000 without prior written consent of the Company.


 


7.             Conditions
to the Obligations of the Placement Agent and the Purchasers, and the Sale of
the Shares.  The
respective obligations of the Placement Agent hereunder, and the closing of the
sale of the Shares, are subject to the accuracy, when made and as of the Applicable
Time and on the Closing Date, of the representations and warranties of the
Company contained herein, to the accuracy of the statements of the Company made
in any certificates pursuant to the provisions hereof, to the performance by
the Company of its obligations hereunder, and to each of the following
additional terms and conditions:


 


(a)           No
stop order suspending the effectiveness of the Registration Statement or any
part thereof, preventing or suspending the use of any Base Prospectus, the
Prospectus or any Permitted Free Writing Prospectus or any part thereof shall
have been issued and no proceedings for that purpose or pursuant to Section 8A
under the Securities Act shall have been initiated or threatened by the
Commission, and all requests for additional information on the part of the
Commission (to be included or incorporated by reference in the Registration
Statement or the Prospectus or otherwise) shall have been complied with to the
reasonable satisfaction of the Placement Agent; the Rule 462(b) Registration
Statement, if any, each Issuer Free Writing Prospectus, if any, and the
Prospectus shall have been filed with the Commission within the applicable time
period prescribed for such filing by, and in compliance with, the Rules and
Regulations and in accordance with Section 5(a), and the Rule 462(b) Registration
Statement, if any, shall have become effective immediately upon its filing with
the Commission; and FINRA shall have raised no objection to the fairness and
reasonableness of the terms of this Agreement or the transactions contemplated
hereby.


 


15

















 


(b)           The
Placement Agent shall not have discovered and disclosed to the Company on or
prior to the Closing Date that the Registration Statement or any amendment or
supplement thereto contains an untrue statement of a fact which, in the opinion
of counsel for the Placement Agent, is material or omits to state any fact
which, in the opinion of such counsel, is material and is required to be stated
therein or is necessary to make the statements therein not misleading, or that
the General Disclosure Package, any Issuer Free Writing Prospectus or the
Prospectus or any amendment or supplement thereto contains an untrue statement
of fact which, in the opinion of such counsel, is material or omits to state
any fact which, in the opinion of such counsel, is material and is necessary in
order to make the statements, in the light of the circumstances in which they
were made, not misleading.


 


(c)           All
corporate proceedings and other legal matters incident to the authorization,
form and validity of each of this Agreement, the Shares, the Registration
Statement, the General Disclosure Package, each Issuer Free Writing Prospectus,
if any, and the Prospectus and all other legal matters relating to this
Agreement and the transactions contemplated hereby shall be reasonably
satisfactory in all material respects to counsel for the Placement Agent, and
the Company shall have furnished to such counsel all documents and information
that they may reasonably request.


 


(d)           Morrison &
Foerster LLP shall have furnished to the Placement Agent, such counsel’s
written opinion, as counsel to the Company, addressed to the Placement Agent
and dated the Closing Date, in the form agreed as of the date hereof.


 


(e)           The
Company shall have furnished to the Placement Agent and the Purchasers a
certificate, dated the Closing Date, of its Chief Executive Officer and its
Chief Financial Officer stating that (i) since the effective date of the
Registration Statement, no event has occurred which should have been set forth
in a supplement or amendment to the Registration Statement, the General
Disclosure Package or the Prospectus, (ii) to the best of their knowledge
after reasonable investigation, as of the Closing Date, the representations and
warranties of the Company in this Agreement are true and correct in all
material respects, except that any such representation or warranty shall be
true and correct in all respects where such representation or warranty is
qualified with respect to materiality, and the Company has complied with all
agreements and satisfied all conditions on its part to be performed or
satisfied hereunder at or prior to the Closing Date, and (iii) there has
not been, subsequent to the date of the most recent unaudited financial
statements included or incorporated by reference in the General Disclosure
Package, any material adverse change in the financial position or results of
operations of the Company and its Subsidiaries, taken as a whole, or any change
or development that, singly or in the aggregate, would involve a material
adverse change or a prospective material adverse change, in or affecting the
condition (financial or otherwise), results of operations, business, assets or
prospects of the Company and its Subsidiaries taken as a whole, except as set
forth in the Prospectus.


 


(f)            Since
the date of the latest audited financial statements included in the General
Disclosure Package or incorporated by reference in the General Disclosure
Package as of the date hereof, (i) neither the Company nor any of its
Subsidiaries shall 


 


16

















 


have sustained any loss or interference with its business from fire,
explosion, flood or other calamity, whether or not covered by insurance, or
from any labor dispute or court or governmental action, order or decree,
otherwise than as set forth in the General Disclosure Package, and (ii) there
shall not have been any change in the capital stock or long-term debt of the
Company nor any of its Subsidiaries, or any change, or any development
involving a prospective change, in or affecting the business, general affairs,
management, financial position, stockholders’ equity, results of operations or
prospects of the Company and its Subsidiaries, taken as a whole, otherwise than
as set forth in the General Disclosure Package, the effect of which, in any
such case described in clause (i) or (ii) of this paragraph (f),
is, in the judgment of the Placement Agent, so material and adverse as to make
it impracticable or inadvisable to proceed with the sale or delivery of the
Shares on the terms and in the manner contemplated in the General Disclosure
Package.


 


(g)           No
action shall have been taken and no law, statute, rule, regulation or order
shall have been enacted, adopted or issued by any governmental agency or body
which would prevent the issuance or sale of the Shares or materially and
adversely affect the business or operations of the Company and its
Subsidiaries, taken as a whole; and no injunction, restraining order or order
of any other nature by any United States federal or state court of competent
jurisdiction shall have been issued which would prevent the issuance or sale of
the Shares or materially and adversely affect the business or operations of the
Company or its Subsidiaries, taken as a whole.


 


(h)           Subsequent
to the execution and delivery of this Agreement there shall not have occurred
any of the following: (i) trading in securities generally on the New York
Stock Exchange or the NASDAQ Stock Market or in the over-the-counter market, or
trading in any securities of the Company on any exchange or in the
over-the-counter market, shall have been suspended or materially limited, or
minimum or maximum prices or maximum range for prices shall have been
established on any such exchange or such market by the Commission, by such
exchange or market or by any other regulatory body or governmental authority
having jurisdiction; (ii) a banking moratorium shall have been declared by
United States federal or state authorities or a material disruption has
occurred in commercial banking or securities settlement or clearance services
in the United States; (iii) the United States shall have become engaged in
hostilities, or the subject of an act of terrorism, or there shall have been an
outbreak of or escalation in hostilities involving the United States, or there
shall have been a declaration of a national emergency or war by the United
States; or (iv) there shall have occurred such a material adverse change
in general economic, political or financial conditions (or the effect of
international conditions on the financial markets in the United States shall be
such) as to make it, in the judgment of the Placement Agent, impracticable or inadvisable
to proceed with the sale or delivery of the Shares on the terms and in the
manner contemplated in the General Disclosure Package and the Prospectus.


 


(i)            The
Company shall have filed a listing of additional shares notification with the
NASDAQ Global Select Market in connection with the Offering, and shall have
received no objections thereto from the NASDAQ Global Select Market.


 


17

















 


(j)            The
Placement Agent shall have received the written agreements, substantially in
the form of Exhibit A hereto, of the executive officers of the
Company listed in Schedule B to this Agreement.


 


(k)           Prior
to the Closing Date, the Company shall have furnished to the Placement Agent
such further information, opinions, certificates, letters or documents as the
Placement Agent shall have reasonably requested, including a Secretary’s
Certificate.


 


All opinions, letters, evidence and certificates
mentioned above or elsewhere in this Agreement shall be deemed to be in
compliance with the provisions hereof only if they are in form and substance
reasonably satisfactory to counsel for the Placement Agent.


 


8.             Indemnification
and Contribution.


 


(a)           The
Company shall indemnify and hold harmless the Placement Agent, each of its
affiliates and each of its and their respective directors, officers, members,
employees, representatives and agents and their respective affiliates, and each
person, if any, who controls such Placement Agent within the meaning of Section 15
of the Securities Act or Section 20 of the Exchange Act (collectively the “Placement Agent Indemnified Parties,” and
each a “Placement Agent Indemnified Party”)
against any loss, claim, damage, expense or liability whatsoever (or any
action, investigation or proceeding in respect thereof), joint or several, to
which such Placement Agent Indemnified Party may become subject, under the
Securities Act or otherwise, insofar as such loss, claim, damage, expense,
liability, action, investigation or proceeding arises out of or is based upon (A) any
untrue statement or alleged untrue statement of a material fact contained in
any Issuer Free Writing Prospectus, any “issuer information” filed or required
to be filed pursuant to Rule 433(d) of the Rules and
Regulations, any Registration Statement or the Prospectus, or in any amendment
or supplement thereto or document incorporated by reference therein, (B) the
omission or alleged omission to state in any Issuer Free Writing Prospectus,
any “issuer information” filed or required to be filed pursuant to Rule 433(d) of
the Rules and Regulations, any Registration Statement or the Prospectus,
or in any amendment or supplement thereto or document incorporated by reference
therein, a material fact required to be stated therein or necessary to make the
statements therein not misleading, or (C) any breach of the
representations and warranties of the Company contained herein or failure of
the Company to perform its obligations hereunder or pursuant to any law, and
shall reimburse the Placement Agent Indemnified Party promptly upon demand for
any legal fees or other expenses reasonably incurred by such Placement Agent
Indemnified Party in connection with investigating, or preparing to defend, or
defending against, or appearing as a third party witness in respect of, or
otherwise incurred in connection with, any such loss, claim, damage, expense,
liability, action, investigation or proceeding, as such fees and expenses are
incurred; provided, however, that
the Company shall not be liable in any such case to the extent that any such
loss, claim, damage, expense or liability arises out of or is based upon an
untrue statement or alleged untrue statement in, or omission or alleged
omission from, any Registration Statement or the Prospectus, or any such amendment
or supplement thereto, or any Issuer Free Writing Prospectus made in reliance
upon and in conformity with written information furnished to the Company by or
on behalf of the Placement Agent 


 


18

















 


specifically for use therein, which information the parties hereto
agree is limited to the Placement Agent’s Information.  This indemnity agreement is not exclusive and
will be in addition to any liability, which the Company may otherwise have and
shall not limit any rights or remedies which may otherwise be available at law
or in equity to each Placement Agent Indemnified Party.


 


(b)           The
Placement Agent shall indemnify and hold harmless the Company and its
directors, its officers who signed 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 (collectively the “Company Indemnified Parties” and each a “Company Indemnified Party”) against any
loss, claim, damage, expense or liability whatsoever (or any action,
investigation or proceeding in respect thereof), joint or several, to which
such Company Indemnified Party may become subject, under the Securities Act or
otherwise, insofar as such loss, claim, damage, expense, liability, action,
investigation or proceeding arises out of or is based upon (i) any untrue
statement or alleged untrue statement of a material fact contained in any
Issuer Free Writing Prospectus, any “issuer information” filed or required to be
filed pursuant to Rule 433(d) of the Rules and Regulations, any
Registration Statement or the Prospectus, or in any amendment or supplement
thereto, or (ii) the omission or alleged omission to state in any Issuer
Free Writing Prospectus, any “issuer information” filed or required to be filed
pursuant to Rule 433(d) of the Rules and Regulations, any
Registration Statement or the Prospectus, or in any amendment or supplement
thereto, a material fact required to be stated therein or necessary to make the
statements therein not misleading, but in each case only to the extent that the
untrue statement or alleged untrue statement or omission or alleged omission
was made in reliance upon and in conformity with written information furnished
to the Company by or on behalf of the Placement Agent specifically for use
therein, which information the parties hereto agree is limited to the Placement
Agent’s Information, and shall reimburse the Company Indemnified Parties for
any legal or other expenses reasonably incurred by such party in connection
with investigating or preparing to defend or defending against or appearing as
third party witness in connection with any such loss, claim, damage, liability,
action, investigation or proceeding, as such fees and expenses are incurred.  This indemnity agreement is not exclusive and
will be in addition to any liability which the Placement Agent might otherwise
have and shall not limit any rights or remedies which may otherwise be
available under this Agreement, at law or in equity to the Company Indemnified
Parties.  Notwithstanding the provisions
of this Section 8(b), in no event shall any indemnity by the
Placement Agent under this Section 8(b) exceed the total
compensation received by such Placement Agent in accordance with Section 2(e).


 


(c)           Promptly
after receipt by an indemnified party under this Section 8 of
notice of the commencement of any action, the indemnified party shall, if a
claim in respect thereof is to be made against an indemnifying party under this
Section 8, notify such indemnifying party in writing of the
commencement of that action; provided,
however, that the failure to notify the indemnifying party shall not
relieve it from any liability which it may have under this Section 8
except to the extent it has been materially prejudiced by such failure; and, provided, further, that the failure to
notify an indemnifying party shall not relieve it from any liability which it
may have to an 


 


19

















 


indemnified party otherwise than under this Section 8.  If any such action shall be brought against
an indemnified party, and it shall notify the indemnifying party thereof, the
indemnifying party shall be entitled to participate therein and, to the extent
that it wishes, jointly with any other similarly notified indemnifying party,
to assume the defense of such action with counsel reasonably satisfactory to
the indemnified party (which counsel shall not, except with the written consent
of the indemnified party, be counsel to the indemnifying party).  After notice from the indemnifying party to
the indemnified party of its election to assume the defense of such action,
except as provided herein, the indemnifying party shall not be liable to the
indemnified party under Section 8 for any legal or other expenses
subsequently incurred by the indemnified party in connection with the defense
of such action other than reasonable costs of investigation; provided, however, that any indemnified
party shall have the right to employ separate counsel in any such action and to
participate in the defense of such action but the fees and expenses of such
counsel (other than reasonable costs of investigation which shall remain the
expense of the Company) shall be at the expense of such indemnified party
unless (i) in the case of a Placement Agent Indemnified Party, the
employment thereof has been specifically authorized in writing by the Company
in the case of a claim for indemnification under Section 8(a) or
Section 2(f), or (ii) such indemnified party shall have been
advised by its counsel that there may be one or more legal defenses available
to it which are different from or additional to those available to the
indemnifying party, or (iii) the indemnifying party has failed to assume
the defense of such action and employ counsel reasonably satisfactory to the
indemnified party within a reasonable period of time after notice of the
commencement of the action or the indemnifying party does not diligently defend
the action after assumption of the defense, in which case, if such indemnified
party notifies the indemnifying party in writing that it elects to employ
separate counsel at the expense of the indemnifying party, the indemnifying
party shall not have the right to assume the defense of (or, in the case of a
failure to diligently defend the action after assumption of the defense, to
continue to defend) such action on behalf of such indemnified party and the
indemnifying party shall be responsible for legal or other expenses
subsequently incurred by such indemnified party in connection with the defense
of such action; provided, however,
that the indemnifying party shall not, in connection with any one such action
or separate but substantially similar or related actions in the same
jurisdiction arising out of the same general allegations or circumstances, be
liable for the reasonable fees and expenses of more than one separate firm of
attorneys at any time for all such indemnified parties (in addition to any
local counsel), which firm shall be designated in writing by the Placement
Agent if the indemnified parties under this Section 8 consist of
any Placement Agent Indemnified Party or by the Company if the indemnified
parties under this Section 8 consist of any Company Indemnified
Parties.  Subject to this Section 8(c),
the amount payable by an indemnifying party under Section 8 shall
include, but not be limited to, (x) reasonable legal fees and expenses of
counsel to the indemnified party and any other expenses in investigating, or
preparing to defend or defending against, or appearing as a third party witness
in respect of, or otherwise incurred in connection with, any action,
investigation, proceeding or claim, and (y) all amounts paid in settlement
of any of the foregoing.  No indemnifying
party shall, without the prior written consent of the indemnified parties,
settle or compromise or consent to the entry of judgment with respect to any
pending or threatened action or any claim


 


20
















 


whatsoever, in respect of which indemnification or contribution could
be sought under this Section 8 (whether or not the indemnified
parties are actual or potential parties thereto), unless such settlement,
compromise or consent (i) includes an unconditional release of each
indemnified party in form and substance reasonably satisfactory to such
indemnified party from all liability arising out of such action or claim and (ii) does
not include a statement as to or an admission of fault, culpability or a failure
to act by or on behalf of any indemnified party.  Subject to the provisions of the following
sentence, no indemnifying party shall be liable for settlement of any pending
or threatened action or any claim whatsoever that is effected without its
written consent (which consent shall not be unreasonably withheld or delayed),
but if settled with its written consent, or if its consent has been
unreasonably withheld or delayed, or if there be a judgment for the plaintiff
in any such matter, the indemnifying party agrees to indemnify and hold
harmless any indemnified party from and against any loss or liability by reason
of such settlement or judgment.  In
addition, if at any time an indemnified party shall have requested that an
indemnifying party reimburse the indemnified party for reasonable fees and
expenses of counsel, such indemnifying party agrees that it shall be liable for
any settlement of the nature contemplated herein effected without its written
consent if (i) such settlement is entered into more than forty-five (45)
days after receipt by such indemnifying party of the request for reimbursement,
(ii) such indemnifying party shall have received notice of the terms of
such settlement at least thirty (30) days prior to such settlement being
entered into and (iii) such indemnifying party shall not have reimbursed
such indemnified party in accordance with such request prior to the date of
such settlement.


 


(d)           If
the indemnification provided for in this Section 8 is unavailable
or insufficient to hold harmless an indemnified party under Section 8(a) or
Section 8(b), then each indemnifying party shall, in lieu of
indemnifying such indemnified party, contribute to the amount paid, payable or
otherwise incurred by such indemnified party as a result of such loss, claim,
damage, expense or liability (or any action, investigation or proceeding in
respect thereof), as incurred, (i) in such proportion as shall be
appropriate to reflect the relative benefits received by the Company on the one
hand and the Placement Agent on the other hand from the ) Offering of the
Shares, or (ii) if the allocation provided by clause (i) of this Section 8(d) is
not permitted by applicable law, in such proportion as is appropriate to
reflect not only the relative benefits referred to in clause (i) of this Section 8(d) but
also the relative fault of the Company on the one hand and the Placement Agent
on the other with respect to the statements, omissions, acts or failures to act
which resulted in such loss, claim, damage, expense or liability (or any
action, investigation or proceeding in respect thereof) as well as any other
relevant equitable considerations.  The
relative benefits received by the Company on the one hand and the Placement
Agent on the other with respect to such Offering shall be deemed to be in the
same proportion as the total net proceeds from the Offering of the Shares
purchased under this Agreement (before deducting expenses) received by the
Company bear to the total compensation received by the Placement Agent in connection
with the Offering, in each case as set forth in the table on the cover page of
the Prospectus.  The relative fault of
the Company on the one hand and the Placement Agent on the other shall be
determined by reference to, among other things, whether the untrue or alleged
untrue statement of a material fact or the omission or alleged omission to
state a material fact 


 


21

















 


relates to information supplied by the Company on the one hand or the
Placement Agent on the other, the intent of the parties and their relative
knowledge, access to information and opportunity to correct or prevent such
untrue statement, omission, act or failure to act; provided that the parties
hereto agree that the written information furnished to the Company by or on
behalf of the Placement Agent for use in any Registration Statement or the
Prospectus, or in any amendment or supplement thereto, consists solely of the
Placement Agent’s Information.  The
Company and the Placement Agent agree that it would not be just and equitable
if contributions pursuant to this Section 8(d) were to be
determined by pro rata allocation or by any other method of allocation that
does not take into account the equitable considerations referred to herein.  The amount paid or payable by an indemnified
party as a result of the loss, claim, damage, expense, liability, action,
investigation or proceeding referred to above in this Section 8(d) shall
be deemed to include, for purposes of this Section 8(d), any legal
or other expenses reasonably incurred by such indemnified party in connection
with investigating, preparing to defend or defending against or appearing as a
third party witness in respect of, or otherwise incurred in connection with,
any such loss, claim, damage, expense, liability, action, investigation or
proceeding.  Notwithstanding the
provisions of this Section 8(d), the Placement Agent shall not be
required to contribute any amount in excess of the total compensation received
by the Placement Agent in accordance with Section 2(e) less
the amount of any damages which the Placement Agent has otherwise paid or
become liable to pay by reason of any untrue or alleged untrue statement,
omission or alleged omission, act or alleged act or failure to act or alleged
failure to act.  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.


 


9.             Termination.  The obligations of the
Placement Agent and the Purchasers hereunder may be terminated by the Placement
Agent, in its absolute discretion by notice given to the Company prior to
delivery of and payment for the Shares if, prior to that time, any of the
events described in Section 7(f), Section 7(g) or Section 7(h) have
occurred or if the Purchasers shall decline to purchase the Shares for any
reason permitted under this Agreement.


 


10.          Absence of
Fiduciary Relationship.  The Company acknowledges and agrees that:


 


(a)           the Placement Agent’s responsibility to the Company is
solely contractual in nature, the Placement Agent has been retained solely to
act as placement agent in connection with the Offering and no fiduciary,
advisory or agency relationship between the Company and the Placement Agent has
been created in respect of any of the transactions contemplated by this
Agreement, irrespective of whether the Placement Agent has advised or is
advising the Company on other matters;


 


(b)           the
price of the Shares set forth in this Agreement was established by the Company
following discussions and arms-length negotiations with the Placement Agent,
and the Company is capable of evaluating and understanding, and understands and
accepts, the terms, risks and conditions of the transactions contemplated by
this Agreement;


 


22

















 


(c)           it
has been advised that the Placement Agent and its affiliates are engaged in a
broad range of transactions which may involve interests that differ from those
of the Company and that the Placement Agent has no obligation to disclose such
interests and transactions to the Company by virtue of any fiduciary, advisory
or agency relationship; and


 


(d)           it
waives, to the fullest extent permitted by law, any claims it may have against
the Placement Agent for breach of fiduciary duty or alleged breach of fiduciary
duty and agrees that the Placement Agent shall have no liability (whether
direct or indirect) to the Company in respect of such a fiduciary duty claim or
to any person asserting a fiduciary duty claim on behalf of or in right of the
Company, including stockholders, employees or creditors of the Company.


 


11.          Successors;
Persons Entitled to Benefit of Agreement.  This Agreement shall inure
to the benefit of and be binding upon the Placement Agent, the Company, and
their respective successors and assigns. 
Nothing expressed or mentioned in this Agreement is intended or shall be
construed to give any person, other than the persons mentioned in the preceding
sentence, any legal or equitable right, remedy or claim under or in respect of
this Agreement, or any provisions herein contained, this Agreement and all
conditions and provisions hereof being intended to be and being for the sole
and exclusive benefit of such persons and for the benefit of no other person;
except that the representations, warranties, covenants, agreements and
indemnities of the Company contained in this Agreement shall also be for the
benefit of the Placement Agent Indemnified Parties and the indemnities of the
Placement Agent shall be for the benefit of the Company Indemnified Parties.


 


12.          Survival of
Indemnities, Representations, Warranties, Etc.  The respective indemnities,
covenants, agreements, representations, warranties and other statements of the
Company and the Placement Agent, as set forth in this Agreement or made by them
respectively, pursuant to this Agreement, shall remain in full force and
effect, regardless of any investigation made by or on behalf of the Placement Agent,
the Company, the Purchasers or any person controlling any of them and shall
survive delivery of and payment for the Shares. 
Notwithstanding any termination of this Agreement, including without
limitation any termination pursuant to Section 9, the indemnity and
contribution agreements contained in Section 8 and the covenants,
representations, warranties set forth in this Agreement shall not terminate and
shall remain in full force and effect at all times.


 


13.          Notices.  All statements, requests,
notices and agreements hereunder shall be in writing, and:


 


(a)           if
to the Placement Agent, shall be delivered or sent by mail, facsimile
transmission, overnight courier or email to B. Riley & Co., LLC,
Attention: Tom Kelleher, 11100 Santa Monica Blvd., Suite 800, Los Angeles,
CA, 90025; and


 


(b)           if
to the Company, shall be delivered or sent by mail, facsimile transmission,
overnight courier or email to Kratos Defense & Security Solutions, Inc.,
Attention: Chief Financial Officer, 4810 Eastgate Mall, San Diego, CA 92121.


 


23

















 


14.          Definition of
Certain Terms.  For purposes of this
Agreement “business day” means any
day on which the NASDAQ Stock Market is open for trading.


 


15.          Governing Law,
Agent for Service and Jurisdiction.  This
Agreement shall be governed by and construed in accordance with the laws of the
State of New York, including without limitation Section 5-1401 of the New
York General Obligations Law.  No
legal proceeding may be commenced, prosecuted or continued in any court other
than the courts of the State of New York located in the City and County of New
York or in the United States District Court for the Southern District of New
York, which courts shall have jurisdiction over the adjudication of such matters,
and the Company and the Placement Agent each hereby consent to the jurisdiction
of such courts and personal service with respect thereto.  The Company and the Placement Agent each
hereby consent to personal jurisdiction, service and venue in any court in
which any legal proceeding arising out of or in any way relating to this
Agreement is brought by any third party against the Company or the Placement
Agent.  The Company and the Placement
Agent each hereby waive all right to trial by jury in any legal proceeding
(whether based upon contract, tort or otherwise) in any way arising out of or
relating to this Agreement.  The Company
agrees that a final judgment in any such legal proceeding brought in any such
court shall be conclusive and binding upon the Company and the Placement Agent
and may be enforced in any other courts in the jurisdiction of which the
Company is or may be subject, by suit upon such judgment.


 


16.          Placement Agent’s Information.  The parties hereto
acknowledge and agree that, for all purposes of this Agreement, the Placement
Agent’s Information consists solely of the following information in the
Prospectus: the second sentence of the third paragraph on the front cover of
the Prospectus Supplement and the second and fourth sentences in the section
entitled “Plan of Distribution.”


 


17.          Partial Unenforceability.  The invalidity or
unenforceability of any section, paragraph, clause or provision of this
Agreement shall not affect the validity or enforceability of any other section,
paragraph, clause or provision hereof. 
If any section, paragraph, clause or provision of this Agreement is for
any reason determined to be invalid or unenforceable, there shall be deemed to
be made such minor changes (and only such minor changes) as are necessary to
make it valid and enforceable.


 


18.          General.  This Agreement constitutes
the entire agreement of the parties to this Agreement and supersedes all prior
written or oral and all contemporaneous oral agreements, understandings and
negotiations with respect to the subject matter hereof.  In this Agreement, the masculine, feminine
and neuter genders and the singular and the plural include one another.  The section headings in this Agreement are
for the convenience of the parties only and will not affect the construction or
interpretation of this Agreement.  This
Agreement may be amended or modified, and the observance of any term of this
Agreement may be waived, only by a writing signed by the Company and the
Placement Agent.


 


19.          Counterparts.  This Agreement may be signed
in any number of counterparts, each of which shall be an original, with the
same effect as if the signatures thereto and hereto were upon the same
instrument and such signatures may be delivered by facsimile.


 


24

















 


If the foregoing is in accordance with your
understanding of the agreement between the Company and the Placement Agent,
kindly indicate your acceptance in the space provided for that purpose below.


 


	
   

  	
  Very truly yours,

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  KRATOS DEFENSE &
  SECURITY SOLUTIONS, INC.

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Laura L. Siegal

  
	
   

  	
  Name:

  	
  Laura L. Siegal

  
	
   

  	
  Its:

  	
  Vice President,
  Corporate Controller and Secretary

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  Accepted as of the date
  first above written:

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  B. RILEY & CO., LLC

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  By:

  	
  /s/ Tom Kelleher

  	
   

  	
   

  
	
  Name:

  	
  Tom Kelleher

  	
   

  	
   

  
	
  Its:

  	
  Chief Executive Officer

  	
   

  	
   

  



 

















 


SCHEDULE A


 


List of Subsidiaries


 


	
  Subsidiary Name

  	
   

  	
  Jurisdiction of

  Organization

  	
   

  	
  Type of Entity

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Digital
  Fusion, Inc.

  	
   

  	
  Delaware

  	
   

  	
  Corporation

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Kratos Commercial
  Solutions, Inc.

  	
   

  	
  Delaware

  	
   

  	
  Corporation

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Kratos Government
  Solutions, Inc.

  	
   

  	
  Delaware

  	
   

  	
  Corporation

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  SYS

  	
   

  	
  California

  	
   

  	
  Corporation

  



 

















 


SCHEDULE B


 


List of
Officers Subject to Section 5(f)


 


Eric DeMarco


 


Deanna Lund


 

















 


EXHIBIT A


 


Form of
Lock-Up Agreement


 


September 2, 2009


 


B. Riley & Co., LLC

11100 Santa Monica Blvd.


Suite 800


Los
Angeles, CA 90025


 


	
   

  	
  Re:

  	
  Kratos
  Defense & Security Solutions, Inc. - Public Offering of Shares

  



 


Ladies and Gentlemen:


 


In order to induce B. Riley & Co., LLC (“B. Riley”) to enter into a placement agent
agreement with Kratos Defense & Security Solutions, Inc., a
Delaware corporation (the “Company”),
with respect to the public offering (the “Offering”)
of shares of the Company’s common stock, par value $0.001 per share (“Common Stock”), the undersigned hereby
agrees that for a period (the “lock-up period”)
of ninety (90) days following the date of the final prospectus supplement filed
by the Company with the Securities and Exchange Commission in connection with
such Offering (the “Prospectus Supplement”),
the undersigned will not, without the prior written consent of B. Riley,
directly or indirectly, (i) offer, sell, assign, transfer, pledge,
contract to sell, or otherwise dispose of, any shares of Common Stock or
securities convertible into or exercisable or exchangeable for Common Stock
(including, without limitation, shares of Common Stock or any such securities
which may be deemed to be beneficially owned by the undersigned in accordance
with the rules and regulations promulgated under the Securities Exchange
Act of 1934, as the same may be amended or supplemented from time to time (such
shares or securities, the “Beneficially Owned
Shares”)), (ii) enter into any swap, hedge or other agreement
or arrangement that transfers in whole or in part, the economic risk of
ownership of any Beneficially Owned Shares, Common Stock or securities
convertible into or exercisable or exchangeable for Common Stock, or (iii) engage
in any short selling of any Beneficially Owned Shares, Common Stock or
securities convertible into or exercisable or exchangeable for Common
Stock.  The foregoing sentence shall not
apply to (a) transactions relating to any Beneficially Owned Shares,
Common Stock or securities convertible into or exercisable or exchangeable for
Common Stock acquired from the Company in the Offering or in open market
transactions after the completion of the Offering, (b) transfers of any
Beneficially Owned Shares, Common Stock or securities convertible into or
exercisable or exchangeable for Common Stock as a bona fide gift, (c) in the case of a natural person,
transfers of any Beneficially Owned Shares, Common Stock or securities
convertible into or exercisable or exchangeable for Common Stock by will or
intestate succession or to any trust or partnership for the direct or indirect
benefit of the undersigned or any member of the immediate family of the
undersigned, (d) in the case of a non-natural person, distributions of any
Beneficially Owned Shares, Common Stock or securities convertible into or
exercisable or exchangeable for Common Stock to general or limited partners or
stockholders or members of the undersigned, (e) in the case of a
non-natural person, transfers of any Beneficially Owned Shares, Common Stock or
securities convertible into or exercisable or exchangeable for Common Stock (A) in



 

















 


connection with the sale or
other bona fide transfer in a
single transaction of all or substantially all of the undersigned’s capital
stock, partnership interests, membership interests or other similar equity
interests, as the case may be, or all or substantially all of the undersigned’s
assets, in any such case not undertaken for the purpose of avoiding the
restrictions imposed by this Agreement or (B) to another corporation,
partnership, limited liability company or other business entity so long as the
transferee is an affiliate of the undersigned and such transfer is not for
value, (f) the “net” exercise of outstanding options or warrants to
purchase Common Stock in accordance with their terms, or (g) transfers
pursuant to a sale or an offer to purchase 100% of the outstanding Common
Stock, whether pursuant to a merger, tender offer or otherwise, to a third
party or group of third parties; provided
that in the case of any transfer or distribution pursuant to clause
(b), (c), (d) or (e), each donee, pledgee, distributee or transferee shall
sign and deliver a lock-up agreement substantially in the form of this
Agreement; and provided, further, that any Common Stock acquired
upon the net exercise of options or warrants described in clause (f) above
shall be subject to the restrictions imposed by this Agreement.  For the purposes of this paragraph, “immediate family” shall mean spouse,
domestic partner, lineal descendant (including adopted children), father, mother,
brother or sister of the transferor.


 


If (i) the Company issues an earnings release
or material news or a material event relating to the Company occurs during the
last seventeen days of the lock-up period, or (ii) prior to the expiration
of the lock-up period, the Company announces that it will release earnings
results during the sixteen-day period beginning on the last day of the lock-up
period, the restrictions imposed by this Agreement shall continue to apply
until the expiration of the eighteen-day period beginning on the issuance of
the earnings release or the occurrence of the material news or material event.


 


In addition, the undersigned hereby waives, from the
date hereof until the expiration of the ninety (90) day period following the
date of the Prospectus Supplement, any and all rights, if any, to request or
demand registration pursuant to the Securities Act of 1933, as amended, of any
shares of Common Stock or securities convertible into or exercisable or
exchangeable for Common Stock that are registered in the name of the
undersigned or that are Beneficially Owned Shares.  In order to enable the aforesaid covenants to
be enforced, the undersigned hereby consents to the placing of legends and/or
stop transfer orders with the transfer agent of the Common Stock with respect
to any shares of Common Stock, securities convertible into or exercisable or
exchangeable for Common Stock or Beneficially Owned Shares.


 


If (i) the Company notifies B. Riley in writing
that it does not intend to proceed with the Offering, (ii) for any reason
the Offering is terminated prior to the payment for and delivery of the Common
Stock or (iii) the Offering shall not have been completed by October 31,
2009, then upon the occurrence of any such event, this Agreement shall immediately
be terminated and the undersigned shall be released from its obligations
hereunder.


 


	
   

  	
  [Signatory]

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
   

  
	
   

  	
  Name:

  	
   

  
	
   

  	
  Its:

  	
   

  



 


2