Document:

EXHIBIT
10.30

 

AMENDMENT TO THE

XBOXÔ PUBLISHER LICENSING AGREEMENT

(Platinum Hits Family Program)

 

This Amendment (“Amendment”) is entered into and effective as of the
later of the two signature dates below (the “Effective Date”) by and between MICROSOFT LICENSING,
GP,  a Nevada general partnership (“Microsoft”), and THQ Inc.  (“Licensee”),
and supplements the XboxÔ Publisher License
Agreement  between
the parties dated as of  March 20, 2001
(“PLA”), and as previously amended.

 

RECITALS

 

A.            Whereas,
Microsoft and its affiliated companies develop and license a computer game
system, known as the XboxTM game system; and

 

B.            Whereas,
Licensee is an experienced publisher of software products and is developing and
publishing one or more software products to run on the XboxÔ
game system pursuant to the parties’ PLA; and

 

C.            Whereas,
the parties wish to amend the PLA to provide terms and conditions related to
the “Platinum Hits Family Program”.

 

Accordingly, for and in consideration of the mutual covenants and
conditions contained herein, and for other good and valuable consideration,
receipt of which each party hereby acknowledges, Microsoft and Licensee agree
as follows:

 

I.              DEFINITIONS; INTERPRETATION

 

a.             Except
as expressly provided otherwise in this Amendment, capitalized terms shall have
the same meanings ascribed to them in the PLA.

 

b.             The
terms of the PLA are incorporated by reference, and except and to the extent
expressly modified by this Amendment or any previous amendments, the PLA shall
remain in full force and effect and is hereby ratified and confirmed.   The parties acknowledge that except as
expressly set forth herein, this Amendment supersedes any prior amendments to
the PLA related to manufactured Finished Product Unit (“FPU”) royalty rates and
payments.

 

c.             “Platinum
Hits Family FPU” means an FPU of a Platinum Hits Family
Software Title, as such term is further defined in Section [7].1.8 of this
Amendment.

 

II.            PLATINUM HITS FAMILY PROGRAM

 

The following Section
[7].1.8 is added to the PLA:

 

“[7].1.8  Royalty Rates for Platinum Hits Family Program Software Titles.      If Licensee elects to publish a Software
Title under the “Xbox Platinum Hits Family Program” (as such program has been
established in the North American Sales Territory and the Asian Sales Territory
Excluding Japan and an analogous program has been established in the European
Sales Territory as part of the pre-existing “Classics Program”) (such Software
Title being referred to herein as a “Platinum Hits Family Software Title”),
Licensee shall pay to Microsoft the nonrefundable royalties set forth below, in
lieu of the royalties otherwise specified in this Section [7], for each
Platinum Hits Family FPU manufactured during the Term of this Agreement.  Software Titles shall be eligible for the Xbox
Platinum Hits Family Program commencing **** in the North American and European
Sales Territories and the Asian Sales Territory Excluding Japan.

 

* Confidential portion omitted and filed separately with the Securities
and Exchange Commission.

 

 

	
   

  	
   

  	
  Royalty Per Platinum FPU Manufactured for Regional

  Billing Basis

  	
   

  	
  Royalty Per Platinum FPU

  Manufactured for Worldwide

  Billing Basis

  	
   

  
	
  Sales

  Territory

  	
   

  	
  North American

  Manufacturing

  Region

  	
   

  	
  European

  Manufacturing

  Region

  	
   

  	
  Asian

  Manufacturing

  Region

  	
   

  	
  All Manufacturing Regions

  	
   

  
	
  All

  	
   

  	
  ****

  	
   

  	
  ****

  	
   

  	
  ****

  	
   

  	
  ****

  	
   

  

 

Notwithstanding the foregoing, no royalties will be
payable hereunder with respect to any Demo Versions.

 

[7].1.8.1  Qualifying Software Titles.   
In order for a Software Title to qualify as a Platinum
Hits Family Title in a Sales Territory, all of the following conditions must be
satisfied:

 

(i)            The Software Title must have been
Commercially Released and commercially available as a Standard FPU in the
applicable Sales Territory for at least **** and less than ****;

 

(ii)           The Software Title must have received
an “E” rating from the ESRB and/or a “PEGI 3+” rating in Europe and/or an
equivalent rating in the applicable Sales Territory(ies) (to the extent
Software Titles are rated by regulatory boards within the applicable Sales
Territory(ies)) and must be (a) character based and/or (b) principally appeal,
as determined by Microsoft in its sole good faith discretion, to children 12
years of age and younger; and

 

(iii)          The following minimum Standard FPU
manufacturing quantity for the applicable Sales Territory must have been met:

 

(a)           For a Software Title that becomes
eligible to be published as a Platinum Hit Family Title between **** and ****
for the applicable Sales Territory:

 

•              **** Standard FPUs must have been
manufactured for the North American Sales Territory.

 

•              **** Standard FPUs must have been
manufactured for the European Sales Territory.

 

•              For the Asian Sales Territory
Excluding Japan, either (a) **** Standard FPUs of the Software Title must have
manufactured or (b) the Software Title must have qualified for the Xbox
Platinum Hits Family Program in the North American Sales Territory.

 

(b)           For a Software Title that first
becomes eligible to be published as a Platinum Hit Family Title on or after
**** for the applicable Sales Territory, quantities as determined by Microsoft.

 

(iv)          In any calendar year in a Sales
Territory, Licensee may not publish more than **** Software Titles as part of
the Platinum Hits Family Program.

 

(v)           For purposes of clarification, sports
titles that are traditionally distributed on an annual cycle shall not qualify
as Platinum Family Hits.

 

(vi)          Software Titles that are published in
a territory as Tier 3 titles shall not be eligible for the Platinum Hits Family
program in such territory.

 

(vii)         Wholesale Price per Platinum Hits
Family FPU must not exceed **** in the North American Sales Territory, **** in
the European Sales Territory and the local currency

 

*
Confidential portion omitted and filed separately with the Securities and
Exchange Commission.

 

2

 

equivalent, at the
then-prevailing exchange rate, of  ****
in each country comprising the Asian Sales Territory Excluding Japan.

 

(viii)        All Marketing Materials for a Platinum Hits
Family Software Title must clearly indicate that the Software Title is an Xbox
Platinum Family Hit (or such other title that Microsoft designates for a
comparable program in applicable Territories), and Licensee shall submit all
such Marketing Materials to Microsoft for its approval in accordance with
Section 2.3.4 of the PLA.  Branding and
other requirements for Platinum Hits Family Software Title Marketing Materials
shall be set forth in the Xbox Guide.

 

(ix)          The Platinum Hits Family FPU version
of the Software Title must be the same or substantially equivalent to the
Standard FPU version of the Software Title. Notwithstanding the foregoing, all
known material bugs or errors in the Standard FPU version shall be corrected in
the Platinum Hits Family FPU version, and Licensee acknowledges that any such
corrections may require the Software Title to be re-Certified at Licensee’s
expense.  Licensee may modify or add
additional content or features to the Platinum Hits Family FPU version of the
Software Title (e.g., demos or game play changes) subject to Microsoft’s review
and approval, which approval shall not be unreasonably withheld, and Licensee
acknowledges that any such modifications or additions may, at Microsoft’s
discretion, require the Software Title to be re-Certified at Licensee’s sole
expense.

 

Provided that all of the foregoing conditions have been satisfied with
respect to a Software Title in a particular Sales Territory and Licensee
provides Microsoft with a completed Platinum Hits Family Program Publication
Form in the form annexed hereto as Exhibit 1  no later than **** prior to
the targeted Commercial Release of the Platinum Hits Family Software Title,
Licensee shall be authorized to manufacture and distribute Platinum Hits Family
FPUs in such Sales Territory.

 

IN WITNESS WHEREOF, the
parties hereto have caused this Amendment to be executed as of the Effective
Date on the dates indicated below.

 

	
  MICROSOFT
  LICENSING, GP

  	
  THQ
  Inc.

  
	
   

  	
   

  
	
   

  	
   

  
	
  /s/ Roxanne V. Spring

  	
   

  	
  /s/ James M. Kennedy

  	
   

  
	
  By (sign)

  	
  By (sign)

  
	
  Roxanne V. Spring

  	
   

  	
  James M. Kennedy

  	
   

  
	
  Name (Print)

  	
  Name (Print)

  
	
  SPM

  	
   

  	
  Sr. V.P. Business Legal Affairs

  	
   

  
	
  Title

  	
  Title

  
	
  15-Mar-2004

  	
   

  	
  3/8/04

  	
   

  
	
  Date

  	
  Date

  

 

* Confidential portion
omitted and filed separately with the Securities and Exchange Commission.

 

3

 

EXHIBIT 1

 

XBOXÔ PLATINUM HITS FAMILY PROGRAM PUBLICATION FORM

 

PLEASE
COMPLETE THE BELOW INFORMATION, SIGN THE FORM, AND FAX IT TO MICROSOFT
LICENSING, GP (“MSLIGP”) AT (425) 936-7329 TO THE ATTENTION OF
XBOXOPS@MICROSOFT.COM WITH A COPY SENT TO PUBLISHER’S XBOX ACCOUNT
MANAGER.  UPON RECEIPT OF THE COMPLETED
AND SIGNED FORM, MSLIGP SHALL E-MAIL AN ACKNOWLEDGEMENT OF RECEIPT TO THE
PUBLISHER AT THE E-MAIL ADDRESS SPECIFIED BY THE PUBLISHER BELOW.  THIS FORM WILL BE BINDING ONLY UPON
PUBLISHER’S RECEIPT OF THE E-MAIL ACKNOWLEDGEMENT.

 

NOTES:

•                  THIS FORM
MUST BE SUBMITTED BY A PUBLISHER IN ORDER TO PUBLISH A SOFTWARE TITLE AS PART
OF THE XBOX PLATINUM HITS FAMILY PROGRAM IN ANY SALES TERRITORY.

•                  A
SEPARATE FORM MUST BE SUBMITTED FOR EACH SALES TERRITORY IN WHICH THE PUBLISHER
WISHES TO PUBLISH A SOFTWARE TITLE AS PART OF THE PROGRAM.

 

1.     Publisher
name:                                                                                                                                       

 

1)              Xbox Software Title
Name:
                                                                                                                                       

 

2)              XMID Number:
                                                                                                                                       

 

3)              Sales Territory for
which Publisher wants to publish the Software Title as a Platinum Hits Family
title (check one):

 

o                    North
American Sales Territory

o                    Asian
Sales Territory Excluding Japan

o                    European
Sales Territory

 

4)              Date of Commercial
Release of Software Title in applicable Sales Territory:
                                    

 

5)              Number of Standard
FPUs manufactured to date for the Software Title for the applicable Sales
Territory:
                                    

 

6)              Projected Commercial
Release date of Software Title in the applicable Sales Territory as part of
Platinum Hits Family
Program:                                 

 

7)              Manufacturing Region
for Platinum Hits Family FPUs (check one)

 

o                    North
America

o                    Asia

o                    Europe

 

The undersigned represents that he/she has authority to submit this
form on behalf of the above publisher, and that the information contained
herein is true and accurate.

 

 

	
   

  	
   

  	
   

  
	
   

  	
  By (sign)

  
	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  Name (Print)

  
	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  Title

  
	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  E-Mail Address (for confirmation)

  
	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  Date

  

 

4EXHIBIT
4.1

 

SECURITIES
PURCHASE AGREEMENT

 

This Securities
Purchase Agreement (this “Agreement”)
dated June 7, 2004, among Valentis, Inc., a Delaware corporation (the “Company”), and the purchasers identified
on the signature pages and the Schedule of Purchasers attached hereto
(each, a “Purchaser” and
collectively, the “Purchasers”).

 

WHEREAS, subject
to the terms and conditions set forth in this Agreement and pursuant to
Section 4(2) of the Securities Act (as defined below) and Rule 506
promulgated thereunder, the Company desires to issue and sell to the
Purchasers, and the Purchasers, severally and not jointly, desire to purchase
from the Company certain securities of the Company, as more fully described in
this Agreement.

 

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

 

ARTICLE I.

DEFINITIONS

 

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

 

“Action”
means any action, suit, inquiry, notice of violation, proceeding (including any
partial proceeding such as a deposition) or investigation pending or threatened
in writing against or affecting the Company, any Subsidiary or any of their
respective properties before or by any court, arbitrator, governmental or
administrative agency, regulatory authority (federal, state, county, local or
foreign), stock market, stock exchange or trading facility.

 

“Affiliate”
means any Person that, directly or indirectly through one or more
intermediaries, controls or is controlled by or is under common control with a
Person, as such terms are used in and construed under Rule 144.

 

“Business
Day” means any day except Saturday, Sunday and any day which
shall be a federal legal holiday or a day on which banking institutions in the
State of California are authorized or required by law or other governmental
action to close.

 

“Closing”
means the closing of the purchase and sale of the Securities pursuant to Article II.

 

 

“Commission”
means the Securities and Exchange Commission.

 

“Common
Stock” means the common stock of the Company, $.001 par value
per share, and any securities into which such common stock may hereafter be
reclassified.

 

“Disclosure
Materials” has the meaning set forth in Section 3.1(h).

 

“Effective
Date” means the date that the Registration Statement required
by Section 2(a) of the Registration Rights Agreement is first declared
effective by the Commission.

 

“Exchange
Act” means the Securities Exchange Act of 1934, as amended.

 

“Investment
Amount” means, with respect to each Purchaser, the investment
amount indicated below such Purchaser's name on the signature page of this
Agreement.

 

“Lien”
means any lien, charge, encumbrance, security interest, right of first refusal
or other restrictions of any kind.

 

“Per
Unit Purchase Price” means $5.4075, which is the sum of (i)
the average of the closing bid prices per share of Common Stock during the five
(5) Trading Days immediately preceding the date of this Agreement as reported
on the NASDAQ SmallCap Market plus (ii) $0.0375.

 

“Person”
means an individual or corporation, partnership, trust, incorporated or
unincorporated association, joint venture, limited liability company, joint
stock company, government (or an agency or subdivision thereof) or other entity
of any kind.

 

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

 

“Registration
Statement” means a registration statement meeting the
requirements set forth in the Registration Rights Agreement and covering the
resale by the Purchasers of the Registrable Securities (as defined in the
Registration Rights Agreement).

 

“Registration
Rights Agreement” means the Registration Rights Agreement,
dated as of the date of this Agreement, among the Company and the Purchasers,
in the form of Exhibit B.

 

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

 

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

 

“Securities
Act” means the Securities Act of 1933, as amended.

 

2

 

“Shares”
means the shares of Common Stock issued to the Purchasers at the Closing.

 

“Subsidiary”
means any subsidiary of the Company that is required to be listed in Schedule 3.1(a).

 

“Trading
Day” means (i) a day on which the Common Stock is traded on a
Trading Market, or (ii) if the Common Stock is not listed on a Trading Market,
a day on which the Common Stock is traded in the over-the-counter market, as
reported by the OTC Bulletin Board or the National Quotation Bureau Incorporated,
or (iii) if the Common Stock is not quoted on the OTC Bulletin Board, a day on
which the Common Stock is quoted in the over-the-counter market as reported by
the National Quotation Bureau Incorporated (or any similar organization or
agency succeeding to its functions of reporting prices); provided, that in the
event that the Common Stock is not listed or quoted as set forth in (i), (ii)
and (iii) hereof, then Trading Day shall mean a Business Day.

 

“Trading
Market” means whichever of the New York Stock Exchange, the
American Stock Exchange, the NASDAQ National Market or the NASDAQ SmallCap
Market, on which the Common Stock is listed or quoted for trading on the date
in question.

 

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

 

“Warrants”
means the Common Stock purchase warrants in the form of Exhibit A, which
are issuable to the Purchasers at the Closing.

 

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

 

ARTICLE II.

PURCHASE
AND SALE

 

2.1                                 Closing.  Subject to the terms and
conditions set forth in this Agreement, at the Closing the Company shall issue
and sell to each Purchaser, and each Purchaser shall, severally and not
jointly, purchase from the Company, the Shares and the Warrants representing
such Purchaser's Investment Amount.  The
Closing shall take place at the offices of Latham & Watkins LLP, 135 Commonwealth
Drive, Menlo Park, California 94025-1105 or at such other location as the
parties may agree.

 

2.2                                 Closing Deliveries. 
(a)  At the Closing, the Company
shall deliver or cause to be delivered to each Purchaser the following:

 

(i)                                     a
certificate evidencing the number of Shares and the number of Warrants to
purchase Warrant Shares as set forth opposite such Purchaser's name on
Schedule of Purchasers attached hereto (the Shares and Warrants referred
to collectively herein as the

 

3

 

“Units”) for the Per Unit Purchase
Price.  For each ten (10) Shares
purchased by a Purchaser, such Purchaser shall receive a Warrant, registered in
the name of such Purchaser, pursuant to which such Purchaser shall have the right
to acquire three (3) Warrant Shares at an exercise price which represents 130%
of the average of the closing bid prices per share of Common Stock during the
five (5) Trading Days immediately preceding the date of this Agreement as
reported on the NASDAQ SmallCap Market in the form attached hereto as Exhibit
A;

 

(ii)                                  the
legal opinion of Latham & Watkins LLP, counsel to the Company, in agreed
form, addressed to the Purchasers;

 

(iii)                               the
Registration Rights Agreement duly executed by the Company.

 

(b)                                 At
the Closing, each Purchaser shall deliver or cause to be delivered to the
Company the following:

 

(i)                                     the
product of the Per Unit Purchase Price and the number of Units as set forth
opposite such Purchaser's name on Schedule of Purchasers attached hereto,
in United States dollars and in immediately available funds, by wire transfer
to an account designated in writing by the Company for such purpose; and

 

(ii)                                  the
Registration Rights Agreement duly executed by such Purchaser.

 

ARTICLE III.

REPRESENTATIONS
AND WARRANTIES

 

3.1                                 Representations and Warranties of the Company.  The
Company hereby makes the following representations and warranties to each
Purchaser and to the Placement Agent:

 

(a)                                  Subsidiaries.  The Company has no direct or indirect
Subsidiaries other than those listed in Schedule 3.1(a).  Except as disclosed in Schedule 3.1(a),
the Company owns, directly or indirectly, all of the capital stock of each
Subsidiary free and clear of any and all Liens, and all the issued and
outstanding shares of capital stock of each Subsidiary are validly issued and
are fully paid, non-assessable and free of preemptive and similar rights.

 

(b)                                 Organization
and Qualification.  Each of the
Company and each Subsidiary is an entity duly incorporated or otherwise
organized, validly existing and in good standing under the laws of the
jurisdiction of its incorporation or organization (as applicable), with the
requisite power and authority to own and use its properties and assets and to
carry on its business as currently conducted. 
Neither the Company nor any Subsidiary is in violation of any of the
provisions of its respective certificate or articles of incorporation, bylaws
or other organizational or charter documents. 
Each of the Company and each Subsidiary is duly qualified to conduct
business and is in good standing as a foreign corporation or other entity in
each jurisdiction in which the nature of the business conducted or property
owned by it makes such qualification necessary, except where the failure to be
so qualified or in good standing, as the case may be, could not, individually
or in the aggregate, have or reasonably be expected to result

 

4

 

in (i) an adverse effect
on the legality, validity or enforceability of any Transaction Document, (ii) a
material and adverse effect on the results of operations, assets, prospects,
business or condition (financial or otherwise) of the Company and the
Subsidiaries, taken as a whole, or (iii) an adverse impairment to the Company's
ability to perform on a timely basis its obligations under any Transaction
Document (any of (i), (ii) or (iii), a “Material
Adverse Effect”).

 

(c)                                  Authorization;
Enforcement.  The Company has the
requisite corporate power and authority to enter into and to consummate the
transactions contemplated by each of the Transaction Documents and otherwise to
carry out its obligations thereunder. 
The execution and delivery of each of the Transaction Documents by the
Company and the consummation by it of the transactions contemplated thereby
have been duly authorized by all necessary corporate action on the part of the
Company and no further corporate action is required by the Company in
connection therewith.  Each Transaction
Document has been (or upon delivery will have been) duly executed by the
Company and, when delivered in accordance with the terms hereof, will
constitute the valid and binding obligation of the Company enforceable against
the Company in accordance with its terms, except as rights to indemnity and
contribution may be limited by state or federal securities laws or the public
policy underlying such laws, except as enforceability may be limited by
applicable bankruptcy, insolvency, reorganization, moratorium or similar laws
affecting creditors' and contracting parties' rights generally and except as
enforceability may be subject to general principles of equity (regardless of
whether such enforceability is considered in a proceeding in equity or at law).

 

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

 

(e)                                  Filings,
Consents and Approvals.  The Company
is not required to obtain any consent, waiver, authorization or order of, give
any notice to, or make any filing or registration with, any court or other
federal, state, local or other governmental authority or other Person in
connection with the execution, delivery and performance by the Company of the
Transaction Documents, other than: (i) the filing with the Commission of one or
more Registration Statements in accordance with the requirements Registration
Rights Agreement, (ii)

 

5

 

the filings required by
state securities laws, (iii) the filings required in accordance with Sections
4.4 and 4.8, and (iv) those that have been made or obtained prior to the date
of this Agreement.

 

(f)                                    Issuance
of the Securities.  The Securities
shall have been duly authorized and, when issued and paid for in accordance
with the Transaction Documents, will be duly and validly issued, fully paid and
nonassessable, free and clear of all Liens. 
The Company shall have reserved from its duly authorized capital stock
the maximum number of shares of Common Stock issuable pursuant to this
Agreement and the Warrants in order to issue the Shares and the Warrant Shares.

 

(g)                                 Capitalization.  The number of shares and type of all
authorized, issued and outstanding capital stock of the Company as of May 14,
2004 is as described in the Company's Quarterly Report on Form 10-Q for the
Quarter ended March 31, 2004. 
Except as set forth in Schedule 3.1(g), no securities of the
Company are entitled to preemptive or similar rights, and no Person has any
right of first refusal, preemptive right, right of participation, or any
similar right to participate in the transactions contemplated by the
Transaction Documents.  Except as a
result of the purchase and sale of the Securities and except as disclosed in Schedule 3.1(g),
there are no outstanding options, warrants, scrip rights to subscribe to, calls
or commitments of any character whatsoever relating to, or securities, rights
or obligations convertible into or exchangeable for, or giving any Person any
right to subscribe for or acquire, any shares of Common Stock, or contracts,
commitments, understandings or arrangements by which the Company or any
Subsidiary is or may become bound to issue additional shares of Common Stock,
or securities or rights convertible or exchangeable into shares of Common
Stock.  Except under the Transaction
Documents or as set forth in Schedule 3.1(g), the issue and sale of
the Securities will not, immediately or with the passage of time, obligate the
Company to issue shares of Common Stock or other securities to any Person
(other than the Purchasers) and will not result in a right of any holder of
Company securities to adjust the exercise, conversion, exchange or reset price
under such securities.

 

(h)                                 SEC
Reports; Financial Statements.  The
Company has filed all reports required to be filed by it under the Securities
Act and the Exchange Act, including pursuant to Section 13(a) or 15(d)
thereof, for the twelve months preceding the date hereof (or such shorter
period as the Company was required by law to file such reports) (the foregoing
materials including all exhibits and schedules thereto, being collectively
referred to herein as the “SEC Reports” and, together with the Schedules to
this Agreement, the “Disclosure Materials”)
on a timely basis or has timely filed a valid extension of such time of filing
and has filed any such SEC Reports prior to the expiration of any such
extension.  As of their respective
dates, the SEC Reports complied in all material respects with the requirements
of the Securities Act and the Exchange Act and the rules and regulations of the
Commission promulgated thereunder, and none of the SEC Reports, when filed,
contained any untrue statement of a material fact or omitted to state a
material fact required to be stated therein or necessary in order to make the
statements therein, in light of the circumstances under which they were made,
not misleading.  The financial
statements of the Company included in the SEC Reports comply in all material
respects with applicable accounting requirements and the rules and regulations
of the Commission with respect thereto as in effect at the time of filing.  Such financial statements have

 

6

 

been prepared in
accordance with generally accepted accounting principles applied on a
consistent basis during the periods involved (“GAAP”), except as may be otherwise specified in such financial
statements or the notes thereto, and fairly present in all material respects
the financial position of the Company and its consolidated Subsidiaries as of
and for the dates thereof and the results of operations and cash flows for the
periods then ended, subject, in the case of unaudited statements, to normal,
immaterial, year-end audit adjustments or as otherwise disclosed in the SEC
Reports.

 

(i)                                     Material
Changes.  Since the date of the
latest audited financial statements included within the SEC Reports, except as
specifically disclosed in the SEC Reports, (i) there has been no event,
occurrence or development that has had or is reasonably likely to result in a
Material Adverse Effect, (ii) the Company has not incurred any liabilities
(contingent or otherwise) other than (A) trade payables and accrued expenses
incurred in the ordinary course of business consistent with past practice and
(B) liabilities not required to be reflected in the Company's financial
statements pursuant to GAAP or required to be disclosed in filings made with
the Commission, (iii) the Company has not altered its method of accounting or
the identity of its auditors, (iv) the Company has not declared or made any
dividend or distribution of cash or other property to its stockholders or
purchased, redeemed or made any agreements to purchase or redeem any shares of
its capital stock, and (v) the Company has not issued any equity securities to
any officer, director or Affiliate, except pursuant to existing Company stock
option or stock purchase plans.  Except
as specified in the SEC Reports, the Company does not have pending before the
Commission any request for confidential treatment of information.

 

(j)                                     Litigation.  Except as disclosed in the SEC Reports,
there is no Action which (i) adversely affects or challenges the legality,
validity or enforceability of any of the Transaction Documents or the Securities
or (ii) could, if there were an unfavorable decision, individually or in the
aggregate, have or reasonably be expected to result in a Material Adverse
Effect.  Neither the Company nor any
Subsidiary, nor any director or officer thereof, is or has been the subject of
any Action involving a claim of violation of or liability under federal or
state securities laws or a claim of breach of fiduciary duty.  There has not been, and to the knowledge of
the Company, there is not pending or contemplated, any investigation by the
Commission involving the Company or any current or former director or officer
of the Company.  The Commission has not
issued any stop order or other order suspending the effectiveness of any
registration statement filed by the Company or any Subsidiary under the
Exchange Act or the Securities Act.

 

(k)                                  Labor
Relations.  No material labor
dispute exists or, to the knowledge of the Company, is imminent with respect to
any of the employees of the Company.

 

(l)                                     Compliance.  Neither the Company nor any Subsidiary (i)
is in default under or in violation of (and no event has occurred that has not
been waived that, with notice or lapse of time or both, would result in a
default by the Company or any Subsidiary under), nor has the Company or any Subsidiary
received notice of a claim that it is in default under or that it is in
violation of, any indenture, loan or credit agreement or any other agreement or
instrument to which it is a party or by which it or any of its properties is
bound (whether or not such default or

 

7

 

violation has been
waived), (ii) is in violation of any order of any court, arbitrator or
governmental body, or (iii) is or has been in violation of any statute, rule or
regulation of any governmental authority, including without limitation all
foreign, federal, state and local laws relating to taxes, environmental
protection, occupational health and safety, product quality and safety and
employment, labor matters and gaming matters, except in each case as could not,
individually or in the aggregate, have or reasonably be expected to result in a
Material Adverse Effect.  The Company is
in compliance with the applicable requirements of the Sarbanes-Oxley Act of
2002 and the rules and regulations thereunder promulgated by the Commission,
except where such noncompliance could not have or reasonably be expected to
result in a Material Adverse Effect.

 

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

 

(n)                                 Title
to Assets.  The Company and the
Subsidiaries have good and marketable title in all personal property owned by
them that is material to their respective businesses, in each case free and
clear of all Liens, except for Liens as do not materially affect the value of
such property and do not materially interfere with the use made and proposed to
be made of such property by the Company and the Subsidiaries.  Any real property and facilities held under
lease by the Company and the Subsidiaries are held by them under valid,
subsisting and, to the Company's knowledge, enforceable leases of which the
Company and the Subsidiaries are in compliance, except as could not,
individually or in the aggregate, have or reasonably be expected to result in a
Material Adverse Effect.

 

(o)                                 Patents
and Trademarks.  The Company and the
Subsidiaries have, or have rights to use, all patents, patent applications,
trademarks, trademark applications, service marks, trade names, copyrights,
licenses and other similar rights that are necessary or material for use in
connection with their respective businesses as described in the SEC Reports and
which the failure to so have could, individually or in the aggregate, have or
reasonably be expected to result in a Material Adverse Effect (collectively,
the “Intellectual Property Rights”).  Except as set forth in the SEC Reports,
neither the Company nor any Subsidiary has received a written notice that the
Intellectual Property Rights used by the Company or any Subsidiary violates or
infringes upon the rights of any Person. 
Except as set forth in the SEC Reports, to the knowledge of the Company,
all such Intellectual Property Rights are enforceable and there is no existing
infringement by another Person of any of the Intellectual Property Rights.

 

(p)                                 Insurance.  The Company and the Subsidiaries are insured
by insurers of recognized financial responsibility against such losses and
risks and in such amounts as are prudent and customary in the businesses in
which the Company and the Subsidiaries are engaged.  The Company does not believe that it will be unable to renew its
existing insurance

 

8

 

coverage as and when such
coverage expires or to obtain similar coverage from similar insurers as may be
necessary to continue its business without a material increase in cost.

 

(q)                                 Transactions
With Affiliates and Employees. 
Except as set forth in the SEC Reports, none of the officers or
directors of the Company and, to the knowledge of the Company, none of the
employees of the Company is presently a party to any transaction with the
Company or any Subsidiary (other than for services as employees, officers and
directors), including any contract, agreement or other arrangement providing
for the furnishing of services to or by, providing for rental of real or
personal property to or from, or otherwise requiring payments to or from any
officer, director or such employee or, to the knowledge of the Company, any
entity in which any officer, director, or any such employee has a substantial
interest or is an officer, director, trustee or partner.

 

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

 

(s)                                  Solvency.  Based on the financial condition of the
Company as of the Closing (and assuming that the Closing shall have occurred),
(i) the Company's fair saleable value of its assets exceeds the amount that
will be required to be paid on or in respect of the Company's existing debts
and other liabilities (including known contingent liabilities) as they mature;
(ii) the Company's assets do not constitute unreasonably small capital to carry
on its business for the current fiscal year as now conducted and as proposed to
be conducted including its capital needs taking into account the particular
capital requirements of the business conducted by the Company, and projected
capital requirements and capital availability thereof; and (iii) the current
cash flow of the Company, together with the proceeds the Company would receive,
were it to liquidate all of its assets, after taking into account all
anticipated uses of the cash, would be sufficient to pay all amounts on or in
respect of its debt when such amounts are required to be paid.  The Company does not intend to incur debts
beyond its ability to pay such debts as they mature (taking into account the
timing and amounts of cash to be payable on or in respect of its debt).

 

(t)                                    Certain
Fees.  Except for dealings with the
Placement Agent (defined below), no brokerage or finder's fees or commissions
are or will be payable by the Company to any broker, financial advisor or
consultant, finder, placement agent, investment banker, bank or other Person
with respect to the transactions contemplated by this Agreement.  The Purchasers shall have no obligation with
respect to any fees or with respect to any claims (other than such fees or
commissions owed by a Purchaser pursuant to written agreements executed by such
Purchaser which fees or commissions shall be the sole responsibility of such
Purchaser) made by

 

9

 

or on behalf of other
Persons for fees of a type contemplated in this Section that may be due in
connection with the transactions contemplated by this Agreement.

 

(u)                                 Certain
Registration Matters.  Assuming the
accuracy of the Purchasers' representations and warranties set forth in
Section 3.2(b) to (e), no registration under the Securities Act is
required for the offer and sale of the Securities by the Company to the
Purchasers under the Transaction Documents. 
The Company is eligible to register the resale of its Common Stock for
resale by the Purchasers under Form S-3 promulgated under the Securities
Act.  Except as set forth in Schedule 3.1(u),
the Company has not granted or agreed to grant to any Person any rights
(including “piggy-back” registration rights) to have any securities of the
Company registered with the Commission or any other governmental authority that
have not been satisfied.

 

(v)                                 Listing
and Maintenance Requirements. 
Except as specified in the SEC Reports, the Company has not, in the two
years preceding the date hereof, received notice from any Trading Market on
which the Common Stock is or has been listed or quoted for trading to the
effect that the Company is not in compliance with the listing or maintenance
requirements thereof.  Except as
specified in the SEC Reports, the Company is, and has no reason to believe that
it will not in the foreseeable future continue to be, in compliance with the
listing and maintenance requirements for continued listing of the Common Stock
on the NASDAQ SmallCap Market. The issuance and sale of the Securities under
the Transaction Documents does not contravene the rules and regulations of the
Trading Market on which the Common Stock is currently listed or quoted, and no
approval of the shareholders of the Company thereunder is required for the
Company to issue and deliver to the Purchasers the maximum number of Securities
contemplated by Transaction Documents, including such as may be required
pursuant to Nasdaq Rule Filing SR-NASD-2003-40 (March 14, 2003) concerning
shareholder approval requirements when officers and directors participate in
discounted private placements.

 

(w)                               Investment
Company.  The Company is not, and is
not an Affiliate of, an “investment company” within the meaning of the
Investment Company Act of 1940, as amended.

 

(x)                                   Application
of Takeover Protections.  The
Company has taken all necessary action, if any, in order to render inapplicable
any control share acquisition, business combination, poison pill (including any
distribution under a rights agreement) or other similar anti-takeover provision
under the Company's Certificate of Incorporation (or similar charter documents)
or the laws of its state of incorporation that is or could reasonably be
expected to become applicable to the Purchasers as a result of the Purchasers
and the Company fulfilling their obligations or exercising their rights under
the Transaction Documents, including without limitation the Company's issuance
of the Securities and the Purchasers' ownership of the Securities.

 

(y)                                 No
Additional Agreements.  The Company
does not have any agreement or understanding with any Purchaser with respect to
the transactions contemplated by the Transaction Documents other than as
specified in this Agreement.

 

10

 

(z)                                   Disclosure.  The Company confirms that neither it, nor to
its knowledge, any other Person acting on its behalf has provided any of the
Purchasers or their agents or counsel with any information that the Company
believes constitutes material, non-public information.  The Company understands and confirms that
the Purchasers will rely on the foregoing representations and covenants in
effecting transactions in securities of the Company.  All disclosure provided to the Purchasers regarding the Company,
its business and the transactions contemplated hereby, furnished by or on
behalf of the Company (including the Company's representations and warranties
set forth in this Agreement) are true and correct in all material respects and
do not contain any untrue statement of a material fact or omit to state any
material fact necessary in order to make the statements made therein, in light
of the circumstances under which they were made, not misleading.

 

3.2                                 Representations and Warranties of the
Purchasers.  Each Purchaser hereby, for itself and for no
other Purchaser, represents and warrants to the Company and the Placement Agent
as follows:

 

(a)                                  Organization;
Authority.  Such Purchaser is an
entity duly organized, validly existing and in good standing under the laws of
the jurisdiction of its organization with the requisite corporate or
partnership power and authority to enter into and to consummate the
transactions contemplated by the applicable Transaction Documents and otherwise
to carry out its obligations thereunder. The execution, delivery and
performance by such Purchaser of the transactions contemplated by this
Agreement has been duly authorized by all necessary corporate or, if such
Purchaser is not a corporation, such partnership, limited liability company or
other applicable like action, on the part of such Purchaser.  Each of this Agreement and the Registration
Rights Agreement has been duly executed by such Purchaser, and when delivered
by such Purchaser in accordance with terms hereof, will constitute the valid
and legally binding obligation of such Purchaser, enforceable against it in
accordance with its terms, except as rights to indemnity and contribution may
be limited by state or federal securities laws or the public policy underlying
such laws, except as enforceability may be limited by applicable bankruptcy,
insolvency, reorganization, moratorium or similar laws affecting creditors' and
contracting parties' rights generally and except as enforceability may be
subject to general principles of equity (regardless of whether such enforceability
is considered in a proceeding in equity or at law).

 

(b)                                 Investment
Intent.  Such Purchaser is acquiring
the Securities as principal for its own account for investment purposes only
and not with a view to or for distributing or reselling such Securities or any
part thereof, without prejudice, however, to such Purchaser's right, subject to
the provisions of this Agreement and the Registration Rights Agreement, at all
times to sell or otherwise dispose of all or any part of such Securities pursuant
to an effective registration statement under the Securities Act or under an
exemption from such registration and in compliance with applicable federal and
state securities laws.  Subject to the
immediately preceding sentence, nothing contained herein shall be deemed a
representation or warranty by such Purchaser to hold the Securities for any
period of time.  Such Purchaser is
acquiring the Securities hereunder in the ordinary course of its business.  Such Purchaser does not have any

 

11

 

agreement or
understanding, directly or indirectly, with any Person to distribute any of the
Securities.

 

(c)                                  Purchaser
Status.  At the time such Purchaser
was offered the Securities, it was, and at the date hereof it is, and on each
date on which it exercises the Warrants it will be, an “accredited investor” as
defined in Rule 501(a) under the Securities Act.  Such Purchaser is not a registered broker-dealer under
Section 15 of the Exchange Act.

 

(d)                                 Experience
of such Purchaser.  Such Purchaser,
either alone or together with its representatives, has such knowledge,
sophistication and experience in business and financial matters so as to be
capable of evaluating the merits and risks of the prospective investment in the
Securities, and has so evaluated the merits and risks of such investment.  Such Purchaser is able to bear the economic
risk of an investment in the Securities and, at the present time, is able to
afford a complete loss of such investment.

 

(e)                                  General
Solicitation.  No Securities were
offered or sold to such Purchaser by means of any form of general solicitation
or general advertising, and in connection therewith such Purchaser did not: (A)
receive or review any advertisement, article, notice or other communication
published in a newspaper or magazine or similar media or broadcast over
television or radio whether closed circuit, or generally available; or (B)
attend any seminar meeting or industry investor conference whose attendees were
invited by any general solicitation or general advertising.

 

(f)                                    Access
to Information.  Such Purchaser
acknowledges that it has reviewed the Disclosure Materials and has been
afforded (i) the opportunity to ask such questions as it has deemed necessary
of, and to receive answers from, representatives of the Company concerning the
terms and conditions of the offering of the Securities and the merits and risks
of investing in the Securities; (ii) access to information about the Company
and the Subsidiaries and their respective financial condition, results of
operations, business, properties, management and prospects sufficient to enable
it to evaluate its investment; and (iii) the opportunity to obtain such
additional information that the Company possesses or can acquire without unreasonable
effort or expense that is necessary to make an informed investment decision
with respect to the investment.  Neither
such inquiries nor any other investigation conducted by or on behalf of such
Purchaser or its representatives or counsel shall modify, amend or affect such
Purchaser's right to rely on the truth, accuracy and completeness of the
Disclosure Materials and the Company's representations and warranties contained
in the Transaction Documents.

 

(g)                                 Reliance.  Such Purchaser understands and acknowledges
that: (i) the Securities are being offered and sold to it without registration
under the Securities Act in a private placement that is exempt from the
registration provisions of the Securities Act and (ii) the availability of such
exemption depends in part on, and the Company will rely upon the accuracy and
truthfulness of, the foregoing representations and such Purchaser hereby
consents to such reliance.

 

12

 

(h)                                 Residency.  Such Purchaser is a resident of the
jurisdiction set forth immediately below such Purchaser's name on the signature
pages hereto.

 

(i)                                     Certain
Trading Activities.  Such Purchaser
has not, directly or indirectly, nor has any Person acting on behalf of or
pursuant to any understanding with such Purchaser, engaged in (i) any Short
Sales (defined below) involving the Company's securities during the 30 Trading
Days immediately preceding the date hereof or (ii) any transactions in any
securities of the Company following the date on which such Purchaser was aware
of this Transaction (other than this Transaction, other than transactions among
Purchasers in compliance with federal and state securities laws and other than
transfers by a Purchaser to its affiliated funds which affiliated funds have
not engaged in any such transactions). 
For purposes of this Section, “Short Sales” include, without limitation,
all types of direct and indirect stock pledges, forward sale contracts,
options, puts, calls, short sales, swaps and similar arrangements (including on
a total return basis), and sales and other transactions through non-US broker
dealers or foreign regulated brokers having the effect of hedging the
securities or investment made under this Agreement.

 

(j)                                     Acknowledgements
Regarding Placement Agent.  Such
Purchaser acknowledges that Jefferies & Company, Inc. (the “Placement Agent”) is acting as the
Company's placement agent for the sale of the securities being offered hereby
and will be compensated solely by the Company in such capacity.

 

The Company acknowledges and agrees that each
Purchaser does not make or has not made any representations or warranties with
respect to the transactions contemplated hereby other than those specifically
set forth in this Section 3.2.

 

ARTICLE IV.

OTHER
AGREEMENTS OF THE PARTIES

 

4.1                                 (a)                                  Securities may only be disposed of pursuant
to an effective registration statement under the Securities Act, to the Company
or pursuant to an available exemption from or in a transaction not subject to
the registration requirements of the Securities Act, and in compliance with any
applicable state securities laws.  In
connection with any transfer of the Securities other than pursuant to an
effective registration statement, to the Company, to an Affiliate of a
Purchaser or in connection with a pledge as contemplated in
Section 4.1(b), the Company may require the transferor thereof to provide
to the Company an opinion of counsel selected by the transferor, the form and
substance of which opinion shall be reasonably satisfactory to the Company, to
the effect that such transfer does not require registration of such transferred
Securities under the Securities Act.

 

(b)                                 Certificates
evidencing the Securities will contain the following legend, so long as is
required by this Section 4.1(b) or Section 4.1(c):

 

[NEITHER THESE
SECURITIES NOR THE SECURITIES ISSUABLE UPON EXERCISE OF THESE SECURITIES HAVE
BEEN REGISTERED] [THESE SECURITIES HAVE NOT BEEN REGISTERED]WITH THE SECURITIES

 

13

 

AND EXCHANGE
COMMISSION OR THE SECURITIES COMMISSION OF ANY STATE IN RELIANCE UPON AN
EXEMPTION FROM REGISTRATION UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE
“SECURITIES ACT”), AND, ACCORDINGLY, MAY NOT BE OFFERED OR SOLD EXCEPT PURSUANT
TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT OR PURSUANT TO
AN AVAILABLE EXEMPTION FROM, OR IN A TRANSACTION NOT SUBJECT TO, THE
REGISTRATION REQUIREMENTS OF THE SECURITIES ACT AND IN ACCORDANCE WITH
APPLICABLE STATE SECURITIES LAWS AS EVIDENCED BY A LEGAL OPINION OF COUNSEL TO
THE TRANSFEROR TO SUCH EFFECT, THE SUBSTANCE OF WHICH SHALL BE REASONABLY
ACCEPTABLE TO THE COMPANY.  [THESE
SECURITIES AND THE SECURITIES ISSUABLE UPON EXERCISE OF THESE SECURITIES] [THESE
SECURITIES] MAY BE PLEDGED IN CONNECTION WITH A BONA FIDE MARGIN ACCOUNT
SECURED BY SUCH SECURITIES.

 

The Company acknowledges
and agrees that a Purchaser may from time to time pledge, and/or grant a
security interest in some or all of the Securities, in accordance with
applicable securities laws, pursuant to a bona fide margin agreement in
connection with a bona fide margin account and, if required under the terms of
such agreement or account, such Purchaser may transfer pledged or secured
Securities to the pledgees or secured parties. 
Such a pledge or transfer would not be subject to approval or consent of
the Company and no legal opinion of legal counsel to the pledgee, secured party
or pledgor shall be required in connection with the pledge, but such legal
opinion may be required in connection with a subsequent transfer following
default by the Purchaser transferee of the pledge.  No notice shall be required of such pledge.  At the appropriate Purchaser's expense, the
Company will execute and deliver such reasonable documentation as a pledgee or
secured party of Securities may reasonably request in connection with a pledge
or transfer of the Securities including the preparation and filing of any
required prospectus supplement under Rule 424(b)(3) of the Securities Act or
other applicable provision of the Securities Act to appropriately amend the
list of Selling Stockholders thereunder.

 

(c)                                  Certificates
evidencing the Shares and Warrant Shares shall not contain any legend
(including the legend set forth in Section 4.1(b)): (i) while a registration
statement (including the Registration Statement) covering the resale of such
Shares and Warrant Shares is effective under the Securities Act, or (ii)
following any sale of such Shares or Warrant Shares pursuant to Rule 144, or
(iii) while such Shares or Warrant Shares are eligible for sale under Rule
144(k), or (iv) if such legend is not required under applicable requirements of
the Securities Act (including judicial interpretations and pronouncements
issued by the Staff of the Commission). 
The Company shall cause its counsel to issue any legal opinion or
instruction required by the Company's transfer agent to comply with the
requirements set forth in this Section. 
Following the Effective Date or at such earlier time as a legend is no
longer required for the Shares and Warrant Shares under this
Section 4.1(c), the Company will, no later than three Trading Days
following the delivery by a Purchaser to the Company or the Company's

 

14

 

transfer agent of a certificate representing Shares or Warrant Shares
containing a restrictive legend, deliver or cause to be delivered to such
Purchaser a certificate representing such Shares or Warrant Shares that is free
from all restrictive and other legends. 
The Company may not make any notation on its records or give
instructions to any transfer agent of the Company that enlarge the restrictions
on transfer set forth in this Section except as it may reasonably
determine are necessary or appropriate to comply or to ensure compliance with
those applicable laws that are enacted or modified after the Closing.

 

4.2                                 Furnishing of Information.  As
long as any Purchaser owns the Securities, the Company covenants to timely file
(or obtain extensions in respect thereof and file within the applicable grace
period) all reports required to be filed by the Company after the date hereof
pursuant to the Exchange Act.  As long
as any Purchaser owns Securities, if the Company is not required to file
reports pursuant to such laws, it will prepare and furnish to the Purchasers
and make publicly available in accordance with Rule 144(c) such information as
is required for the Purchasers to sell the Shares and Warrant Shares under Rule
144. The Company further covenants that it will take such further action as any
holder of Securities may reasonably request, all to the extent required from
time to time to enable such Person to sell such Shares and Warrant Shares
without registration under the Securities Act within the limitation of the
exemptions provided by Rule 144.

 

4.3                                 Integration.  The Company shall not, and
shall use its best efforts to ensure that no Affiliate of the Company shall,
sell, offer for sale or solicit offers to buy or otherwise negotiate in respect
of any security (as defined in Section 2 of the Securities Act) that will
be integrated with the offer or sale of the Securities in a manner that would
require the registration under the Securities Act of the sale of the Securities
to the Purchasers, or that will be integrated with the offer or sale of the
Securities for purposes of the rules and regulations of any Trading Market.

 

4.4                                 Securities Laws Disclosure; Publicity.  The
Company shall issue a press release reasonably acceptable to the Purchasers
disclosing the consummation of the transactions contemplated hereby and file a
Current Report on Form 8-K disclosing the consummation of the transactions
contemplated hereby.  In addition, the
Company will make such other filings and notices in the manner and time
required by the Commission and the Trading Market on which the Common Stock is
listed.  Notwithstanding the foregoing,
the Company shall not publicly disclose the name of any Purchaser, or include
the name of any Purchaser in any filing with the Commission (other than the
Registration Statement and any exhibits to filings made in respect of this
transaction in accordance with periodic filing requirements under the Exchange
Act) or any regulatory agency or Trading Market, without the prior written
consent of such Purchaser, except to the extent such disclosure is required by
law or Trading Market regulations, in which case the Company shall provide the
Purchasers with prior notice of such disclosure.

 

4.5                                 Indemnification of Purchasers.  In
addition to the indemnity provided in the Registration Rights Agreement, the
Company will indemnify and hold the Purchasers and their directors, officers,
shareholders, partners, employees and agents (each, a “Purchaser Party”) harmless from any and
all losses, liabilities, obligations, claims, contingencies, damages, costs and
expenses, including all judgments, amounts paid in settlements, court costs and
reasonable

 

15

 

attorneys'
fees and costs of investigation (collectively, “Losses”) that any such Purchaser Party may suffer or incur as
a result of or relating to any misrepresentation, breach or inaccuracy of any
representation, warranty, covenant or agreement made by the Company in any
Transaction Document.  In addition to
the indemnity contained herein, the Company will reimburse each Purchaser Party
for its reasonable legal and other expenses (including the cost of any
investigation, preparation and travel in connection therewith) incurred in
connection therewith, as such expenses are incurred.

 

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

 

4.7                                 Use of Proceeds.  The
Company shall use the net proceeds from the sale of the Securities hereunder
for working capital purposes and not for the satisfaction of any portion of the
Company's debt (other than payment of trade payables and accrued expenses in
the ordinary course of the Company's business and prior practices), to redeem
any capital stock of the Company or to settle any outstanding Action.

 

4.8                                 Listing of Securities.  The
Company shall: (i) in the time and manner required by each Trading Market on
which the Common Stock is listed, prepare and file with such Trading Market an
additional shares listing application covering the Shares and Warrant Shares,
(ii) take all steps necessary to cause such shares to be approved for listing
on each Trading Market on which the Common Stock is listed as soon as possible
thereafter, (iii) provide to each Purchaser evidence of such listing, and (iv)
maintain the listing of such shares on each such Trading Market or another
eligible securities market.

 

ARTICLE V.

 

MISCELLANEOUS

 

5.1                                 Fees and Expenses.  At
the Closing, the Company shall reimburse the Placement Agent up to $75,000 of
reasonable fees and disbursements of Cooley Godward LLP in connection with the negotiation
of the Transaction Documents, it being understood that Cooley Godward LLP has
not rendered any legal advice to the Company in connection with the
transactions contemplated hereby and that the Company has relied for such
matters on the advice of its own counsel. 
Except as specified in the Registration Rights Agreement, each party
shall pay the fees and expenses of its advisers, counsel, accountants and other
experts, if any, and all other expenses incurred by such party incident to the
negotiation, preparation, execution, delivery and performance of the
Transaction Documents.  The Company
shall pay all stamp and other taxes and duties levied in connection with the
sale of the Securities.

 

16

 

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

 

5.3                                 Notices.  Any and all notices or other
communications or deliveries required or permitted to be provided hereunder
shall be in writing and shall be deemed given and effective on the earliest of
(a) the date of transmission, if such notice or communication is delivered via
facsimile at the facsimile number specified in this Section prior to 5:00
p.m. (California time) on a Business Day, (b) the next Business Day after the
date of transmission, if such notice or communication is delivered via
facsimile at the facsimile number specified in this Section on a day that
is not a Business Day or later than 5:00 p.m. (California time) on any date and
earlier than 11:59 p.m. (California time) on such date, (c) the Business Day
following the date of mailing, if sent by U.S. nationally recognized overnight
courier service, or (d) upon actual receipt by the party to whom such notice is
required to be given.  The address for
such notices and communications shall be as follows:

 

	
  If to the Company:

  	
   

  	
  Valentis, Inc.

  
	
   

  	
   

  	
  863A Mitten Road

  
	
   

  	
   

  	
  Burlingame, CA 94010

  
	
   

  	
   

  	
  Attn:  Benjamin F. McGraw III, Pharm. D.

  
	
   

  	
   

  	
   

  
	
  With a copy to:

  	
   

  	
  Patrick A. Pohlen

  
	
   

  	
   

  	
  Latham & Watkins
  LLP

  
	
   

  	
   

  	
  135 Commonwealth Drive

  
	
   

  	
   

  	
  Menlo Park, CA  94025

  
	
   

  	
   

  	
   

  
	
  If to a Purchaser:

  	
   

  	
  To the address set
  forth under such Purchaser's name on the signature pages hereof;

  

 

or such other address as
may be designated in writing hereafter, in the same manner, by such Person.

 

5.4                                 Amendments; Waivers.  No
provision of this Agreement may be waived or amended except in a written
instrument signed by the Company and Purchasers holding no less than two-thirds
of the Shares issued or issuable under this Agreement.  The Company shall provide prior notice to
all Purchasers of any proposed waiver or amendment.  No waiver of any default with respect to any provision, condition
or requirement of this Agreement shall be deemed to be a continuing waiver in
the future or a waiver of any subsequent default or a waiver of any other
provision, condition or requirement hereof, nor shall any delay or omission of
either party to exercise any right hereunder in any manner impair the exercise
of any such right.

 

17

 

5.5                                 Construction.  The
headings herein are for convenience only, do not constitute a part of this
Agreement and shall not be deemed to limit or affect any of the provisions
hereof.  The language used in this
Agreement will be deemed to be the language chosen by the parties to express
their mutual intent, and no rules of strict construction will be applied
against any party.  This Agreement shall
be construed as if drafted jointly by the parties, and no presumption or burden
of proof shall arise favoring or disfavoring any party by virtue of the
authorship of any provisions of this Agreement or any of the Transaction
Documents.

 

5.6                                 Successors and Assigns. 
This Agreement shall be binding upon and inure to the benefit of the
parties and their successors and permitted assigns.  The Company may not assign this Agreement or any rights or
obligations hereunder without the prior written consent of the Purchasers. Any
Purchaser may assign any or all of its rights under this Agreement to any
Person to whom such Purchaser assigns or transfers any Securities, provided
such transferee agrees in writing to be bound, with respect to the transferred
Securities, by the provisions hereof that apply to the “Purchasers.”

 

5.7                                 No Third-Party Beneficiaries. 
This Agreement is intended for the benefit of the parties hereto and
their respective successors and permitted assigns and is not for the benefit
of, nor may any provision hereof be enforced by, any other Person.

 

5.8                                 Governing Law.  All
questions concerning the construction, validity, enforcement and interpretation
of this Agreement shall be governed by and construed and enforced in accordance
with the internal laws of the State of California, without regard to the
principles of conflicts of law thereof. 
Each party agrees that all Proceedings concerning the interpretations,
enforcement and defense of the transactions contemplated by this Agreement and
any other Transaction Documents (whether brought against a party hereto or its
respective Affiliates, employees or agents) may be commenced in the state and
federal courts sitting in the City of San Francisco (the “California Courts”).  Each party hereto hereby irrevocably submits
to the non-exclusive jurisdiction of the California Courts for the adjudication
of any dispute hereunder or in connection herewith or with any transaction
contemplated hereby or discussed herein (including with respect to the
enforcement of the any of the Transaction Documents), and hereby irrevocably
waives, and agrees not to assert in any Proceeding, any claim that it is not
personally subject to the jurisdiction of any such California Court, or that
such Proceeding has been commenced in an improper or inconvenient forum.  Each party hereto hereby irrevocably waives
personal service of process and consents to process being served in any such
Proceeding by mailing a copy thereof via registered or certified mail or
overnight delivery (with evidence of delivery) to such party at the address in
effect for notices to it under this Agreement and agrees that such service
shall constitute good and sufficient service of process and notice
thereof.  Nothing contained herein shall
be deemed to limit in any way any right to serve process in any manner
permitted by law.  Each party hereto
hereby irrevocably waives, to the fullest extent permitted by applicable law,
any and all right to trial by jury in any legal proceeding arising out of or
relating to this Agreement or the transactions contemplated hereby.  If either party shall commence a Proceeding
to enforce any provisions of a Transaction Document, then the prevailing party
in such Proceeding shall be reimbursed by the other party for its attorney's
fees

 

18

 

and other costs and expenses incurred with the investigation,
preparation and prosecution of such Proceeding.

 

5.9                                 Survival.  The representations,
warranties, agreements and covenants contained herein shall survive the Closing
and the delivery of the Shares and Warrants.

 

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

 

5.11                           Severability.  If
any provision of this Agreement is held to be invalid or unenforceable in any
respect, the validity and enforceability of the remaining terms and provisions
of this Agreement shall not in any way be affected or impaired thereby and the
parties will attempt to agree upon a valid and enforceable provision that is a
reasonable substitute therefor, and upon so agreeing, shall incorporate such
substitute provision in this Agreement.

 

5.12                           Replacement of Securities.  If
any certificate or instrument evidencing any Securities is mutilated, lost,
stolen or destroyed, the Company shall issue or cause to be issued in exchange
and substitution for and upon cancellation thereof, or in lieu of and
substitution therefor, a new certificate or instrument, but only upon receipt
of evidence reasonably satisfactory to the Company of such loss, theft or
destruction and customary and reasonable indemnity, if requested.  The applicants for a new certificate or
instrument under such circumstances shall also pay any reasonable third-party
costs associated with the issuance of such replacement Securities.  If a replacement certificate or instrument
evidencing any Securities is requested due to a mutilation thereof, the Company
may require delivery of such mutilated certificate or instrument as a condition
precedent to any issuance of a replacement.

 

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

 

5.14                           Payment Set Aside.  To
the extent that the Company makes a payment or payments to any Purchaser
pursuant to any Transaction Document or a Purchaser enforces or exercises its
rights thereunder, and such payment or payments or the proceeds of such enforcement
or exercise or any part thereof are subsequently invalidated, declared to be
fraudulent or preferential, set aside, recovered from, disgorged by or are
required to be refunded, repaid or otherwise restored to the Company, a
trustee, receiver or any other person under any

 

19

 

law (including, without limitation, any bankruptcy law, state or
federal law, common law or equitable cause of action), then to the extent of
any such restoration the obligation or part thereof originally intended to be
satisfied shall be revived and continued in full force and effect as if such
payment had not been made or such enforcement or setoff had not occurred.

 

5.15                           Independent Nature of Purchasers' Obligations
and Rights.  The obligations of each Purchaser under any
Transaction Document are several and not joint with the obligations of any
other Purchaser, and no Purchaser shall be responsible in any way for the
performance of the obligations of any other Purchaser under any Transaction
Document.  The decision of each
Purchaser to purchase Securities pursuant to the Transaction Documents has been
made by such Purchaser independently of any other Purchaser.  Nothing contained herein or in any
Transaction Document, and no action taken by any Purchaser pursuant thereto,
shall be deemed to constitute the Purchasers as a partnership, an association,
a joint venture or any other kind of entity, or create a presumption that the
Purchasers are in any way acting in concert or as a group with respect to such
obligations or the transactions contemplated by the Transaction Document.  Each Purchaser acknowledges that no other
Purchaser has acted as agent for such Purchaser in connection with making its
investment hereunder and that no Purchaser will be acting as agent of such
Purchaser in connection with monitoring its investment in the Securities or
enforcing its rights under the Transaction Documents.  Each Purchaser shall be entitled to independently protect and
enforce its rights, including without limitation the rights arising out of this
Agreement or out of the other Transaction Documents, and it shall not be
necessary for any other Purchaser to be joined as an additional party in any
proceeding for such purpose.

 

[REMAINDER OF PAGE
INTENTIONALLY LEFT BLANK

SIGNATURE PAGES FOLLOW]

 

20

 

 

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

 

	
   

  	
  VALENTIS
  INC.

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
     /s/  
  Benjamin F. McGraw 

  
	
   

  	
  Name:

  	
  Benjamin F. McGraw,
  III, Pharm.D.

  
	
   

  	
  Title:

  	
  President and Chief
  Executive Officer

  

 

[REMAINDER OF PAGE
INTENTIONALLY LEFT BLANK

SIGNATURE PAGES FOR PURCHASERS FOLLOW]

 

 

SIGNATURE PAGE TO
VALENTIS, INC.

SECURITIES PURCHASE AGREEMENT

 

 

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

 

	
   

  	
  PURCHASER

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  	
   

  
	
   

  	
  Name:

  
	
   

  	
  Title:

  
	
   

  	
   

  
	
   

  	
  Address for Notice:

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  Facsimile No.:

  
	
   

  	
  Attn.:

  
	
   

  	
   

  
	
   

  	
  With a copy to:

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  Facsimile No.:

  
	
   

  	
  Attn:

  
	
   

  	
   

  
	
   

  	
  Jurisdiction: 

  
	
   

  	
   

  
	
   

  	
  Investment Amount:  $

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